Dale Tile Manufacturing Company v. Hyatt/Opinion of the Court

The defendant contended in the courts of New York that those courts had no jurisdiction, because the plaintiff's right to maintain her action depended upon the question whether the second reissue of her patent was valid or invalid under the patent laws of the United States, and that of that question the courts of the United States had exclusive jurisdiction. The judgments or each court of the state, holding that the question of the validity of that reissue could not be contested in this action, and assuming jurisdiction to render judgment against the defendant, necessarily involved a decision against the immunity claimed by the defendant under the constitution and laws of the United States, which this court has jurisdiction to review. The motion to dismiss must therefore be denied; but the decision was so clearly right, that the motion to affirm is granted. The action was upon an agreement in writing, by which the plaintiff, as owner of letters patent already once reissued, granted to the defendant an exclusive license to make and sell the patented articles within a certain territory, during the term of the patent and of any extension or renewal thereof; and the defendant expressly acknowledged the validity of the letters patent, and stipulated that the plaintiff might, without prejudice to this agreement, obtain further reissues, and promised to pay to the plaintiff certain royalties so long as no decision adverse to the validity of the patent should have been rendered. The defendant contended that this was a case arising under the patent laws, of which the courts of the United States have exclusive jurisdiction. Rev. St. § 629, cl. 9; § 711, cl. 5. But it is clearly established, by a series of decisions of this court, that an action upon such an agreement as that here sued on is not a case arising under the patent laws. It has been decided that a bill in equity in the circuit court of the United States by the owner of letters patent, to enforce a contract for the use of the patent right, or to set aside such a contract because the defendant has not complied with its terms, is not within the acts of congress, by which an appeal to this court is allowable in cases arising under the patent laws, without regard to the value of the matter in controversy. Act of July 4, 1836, c. 357, § 17, (5 St. 124;) Rev. St. § 699; Wilson v. Sandford, 10 How. 99; Brown v. Shannon, 20 How. 55. Following those decisions, it was directly adjudged in Hartell v. Tilghman, 99 U.S. 547, that a bill in equity by a patentee, alleging that the defendants had broken a contract by which they had agreed to pay him a certain royat y for the use of his invention, and to take a license from him, and thereupon he forbade them to use it, and they disregarded the prohibition, and he filed this bill charging them as infringers, and praying for an injunction, an account of profits, and damages, was not a case arising under the patent laws, and therefore, the parties being citizens of the same state, not within the jurisdiction of the circuit court of the United States; and the judges who dissented from that conclusion admitted it to be perfectly well settled 'that where a suit is brought on a contract of which a patent is the subject-matter,-either to enforce such contract, or to annul it,-the case arises on the contract, or out of the contract, and not under the patent laws.' 99 U.S. 558. In the still later case of Albright v. Teas, 106 U.S. 613, 1 Sup. Ct. Rep. 550, a patentee filed a bill in equity in a state court, setting up a contract by which he agreed to assign his patent to the defendants, and they agreed to pay him certain royalties, and alleging that the defendants had refused to account for or pay such royalties to him, and had fraudulently excluded him from inspecting their books of account. The defendants answered that the plaintiff had been paid all the royalties to which he was entitled, and that if he claimed more, it was because he insisted that goods made under another patent were an infringement of his. This court held that it was not a case arising under the constitution or laws of the United States, removable as such into the circuit court, under the act of March 3, 1875, c. 137, § 2, (18 St. 470.) It was said by Chief Justice TANEY in Wilson v. Sandford, and repeated by the court in Hartell v. Tilghman, and in Albright v. Teas: 'The dispute in this case does not arise under any act of congress; nor does the decision depend upon the construction of any law in relation to patents. It arises out of the contract stated in the bill; and there is no act of congress providing for or regulating contracts of this kind. The rights of the parties depend altogether upon common-law and equity principles.' 10 How. 101, 102, 99 U.S. 552, 106 U.S. 619, 1 Sup. Ct. Rep. 555. Those words are equally applicable to the present case, except that, as it is an action at law, the principles of equity have no bearing. This action, therefore, was within the jurisdiction, and, the parties being citizens of the same state, within the exclusive jurisdiction of the state courts; and the only federal question in the case was rightly decided. Upon the merits of the case it follows from what has been already said that no question is presented of which this court, upon this writ of error, has jurisdiction. Murdock v. Memphis, 20 Wall. 590. The grounds of the judgment below appear in the opinion of the court of appeals, to which, under the existing acts of congress, this court is at liberty to refer.

Fire Ass'n v. New York, 119 U.S. 110, 7 Sup. Ct. Rep. 108; Kreiger v. Railroad, ante, 752. Whether that court was right in its suggestion that it would have no jurisdiction to determine the validity of the second reissue if incidentally drawn in question in an action upon an agreement between the parties, we need not consider; inasmuch as it expressly declined to pass upon any such question, because it held that, in this action to recover royalties due under the agreement, the defendant, while continuing to enjoy the privileges of the license, was estopped to deny the validity of the patent or of any reissue thereof. The decision was based upon the contract between the parties; and the court did not decide, nor was it necessary for the determination of the case that it should decide, any question depending on the construction or effect of the patent laws of the United States. Kinsman v. Parkhurst, 18 How. 289; Brown v. Atwell, 92 U.S. 327. Judgment affirmed.