Marsh v. Nichols Shepard Company/Opinion of the Court

The bill was filed in the circuit court of Calhoun county for the specific performance by defendants below of an alleged contract between Marsh and the plaintiff below, by which the latter was to be permitted, if Marsh obtained a patent on the improvement in question, to make, use, vend, and employ said device on any or all engines made at its shops without molestation or interference, and to restrain the defendants below from asserting that plaintiff did not have the full and complete right to make, use, sell, or operate the device, or that they had any right in the device to the exclusion of plaintiff; and the decree granted the relief accordingly, which decree was subsequently amended by the supreme court of Michigan so as to require the defendants below to make, execute, and deliver to plaintiff a release from all claim, right, or demand on their part, by reason of the manufacture, use, or sale of the said invention by the plaintiff theretofore or thereafter. The supreme court held that the agreement set up by the plaintiff was convincingly established by the evidence; and that the suit, not being brought to determine any question arising under the patent laws, but merely to enforce a contract to transfer an inventor's right, was not one in which the courts of the United States had particular jurisdiction; that the bill filed in the United States circuit court, March 21, 1885, being later than the one in hand, needed not to be considered; that as to the bill filed June 9, 1881, in the United States circuit court, and which had been dismissed before this suit was brought, but was afterwards taken to this court on appeal, which appeal was then pending, there was nothing in it to prevent the maintenance of this suit, since it was strictly a bill under the patent laws, and nothing else, while this bill could not have been filed in that court between these parties, who were citizens of Michigan, and it was very questionable whether it could have been framed as a proper cross-bill in that case; and the court further held that the plaintiff was not estopped by that litigation, for, if the defendants had not a good patent, plaintiff was not called upon to put in any defense which admitted one, and could not be deprived of the right to vindicate in another suit such right as could not have been adequately enforced in that litigation. It is settled that, in order to justify a writ of error from this court to review the judgment of a state court, the record must show that the judgment rested upon the disposition of a federal question. In this case the state court did not decide any question arising under the patent laws, nor did the judgment require, to sustain it, any such decision. Neither the validity of the patent, nor its construction, nor the patentability of the device, was brought under consideration, even collaterally. In the language of Mr. Chief Justice TANEY, (Wilson v. Sandford, 10 How, 99, 100,) the dispute '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.' Under such circumstances, the correctness of a decision of the highest court of a state upon the merits, based upon the existence and effect of an agreement such as that set up in this case, and not necessarily passing upon any question under the patent laws, cannot be reviewed by this court on writ of error. Tile Manuf'g Co. v. Hyatt, 125 U.S. 46, 8 Sup. Ct. Rep. 756, In that case it was held that an action upon an agreement in writing, by which, in consideration of a license from the patentee to make and sell the invention, the licensee acknowledges the validity of the patent, stipulates that the patentee may obtain the reissue thereof, and promises to pay certain royalties so long as the patent shall not have been adjudged invalid, is not a case arising under the patent laws of the United States, and is within the jurisdiction of the state courts; and reference is made by Mr. Justice GRAY, delivering the opinion of the court, to a series of decisions sustaining that conclusion. Thus in Brown v. Shannon, 20 How. 55, it was 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, and in Wilson v. Sandford, 10 How. 99, to set aside such a contract because the defendant had not complied with its terms, was not within the acts of congress by which an appeal to this court was allowable in cases arising under the patent laws, without regard to the value of the matter in controversy. So in Albright v. Teas, 106 U.S. 613, 1 Sup. Ct. Rep. 550, where a suit was brought in a state court, the parties thereto being citizens of the same state, for moneys alleged to be due to the plaintiff under a contract, whereby certain letters patent granted to him were transferred to the defendant, it was held that the suit, not involving the validity or the construction of the patents, was not one arising under a law of the United States, and could not be removed to the circuit court. In Machine Co. v. Skinner, 139 U.S. 293, ante, 528, in an action for breach of contract in refusing to account and pay for a certain patented invention, the supreme court of New York adjudged upon the trial that plaintiff in error had agreed to use defendant in error's device upon all its machines, and also that it had in fact used them or their mechanical equivalent; but the court in general term, in affirming the judgment, found it unnecessary to determine whether the plaintiff in error had actually made use of the device or its equivalent, and held it to be liable upon the ground that it had agreed to use it upon all the machines, and was therefore bound to pay its value as fixed by the referee. The judgment was affirmed by the court of appeals without an opinion, and the writ of error from this court was dismissed, because it was apparent that the case might properly have been determined on a ground broad enough to sustain the judgment without resort to a federal question. It has also been decided that an actin i n the circuit court by a patentee for breach of an agreement of the licensee to make and sell the patented article and to pay royalties, in which the validity and the infringement of the patent are controverted, is a case 'touching patent-rights,' of which this court has appellate jurisdiction, under section 699 of the Revised Statutes, without regard to the sum or value in dispute. Plow-Works v. Starling, 127 U.S. 376, 8 Sup. Ct. Rep. 1327. And attention was in that case called to the fact that the language applied to this subject in the patent act of 1836, under which the cases of Wilson v. Sandford and Brown v. Shannon, supra, were decided, was that used in that act in defining the jurisdiction of the circuit court in patent cases, namely, 'actions, suits, controversies, and cases arising under any law of the United States granting or confirming to inventors the exclusive rights to their inventions or discoveries,' (5 St. 124,) while by the act of 1870 the words were, 'in any action, suit, controversy, or case, at law or in equity, touching PATENT-RIGHTS,' (16 ST. 207,) AND THAt this language was carrieD forward into the corresponding section of the Revised Statutes.

The contract in controversy did not involve the existence nor the scope of the monopoly conferred by the letters patent. The decree might indeed furnish a defense to an action for the unauthorized appropriation of the in vention, but that would not bring a case lying purely in contract within the rule applicable when the validity or extent of the patent is directly in issue. The restraint granted by the decree was the consequence of sustaining the contract, and the effect it might have did not in itself deprive the state court of jurisdiction over the subject-matter. But it is argued that the writ of error should be maintained in view of the original litigation in the circuit court and the pendency of the appeal in this court when the decree of the state court was rendered. It is said that the interference sought to be enjoined was the suit which, though then determined, was afterwards appealed, and the prosecution of the appeal itself, and that the state court had no jurisdiction to compel a settlement of an infringement case brought in a United States court prior to the action of the state court, or to enjoin further proceedings in the nature of an appeal to this court, and that the validity of an authority exercised under the United States was decided against, or a right claimed under the laws of the United States was denied, by the decree. We do not think the position tenable. At the time this bill was filed it had been decided by the circuit court of the United States that the alleged patent was void, and no appeal had then been taken. We do not understand that Nichols, Shepard & Co. set up the fact of the institution and disposal of the prior suit as a ground on which it sought relief, but that it claimed that, whether the patent was or was not valid, it had bought and paid for the right to use the device in question. The subject-matter of this suit differed from the subject-matter of that suit, and nothing in this suit prevented plaintiffs in error from prosecuting their appeal, which they did with the result that this court held their patent to be void. Marsh v. Nichols, 128 U.S. 605, 9 Sup. Ct. Rep. 168. And it was not only held that the patent was void, because of the omission of the signature of the secretary of the interior, but, as the signature was attached after the commencement of the suit, that no accounting for profits earned subsequently could be claimed therein, as such accounting could be demanded only where the infringement complained of took place previously and continued afterwards. The bill in the circuit court had been dismissed. So long as that decree stood, the bill could have no operation upon the suit in the state court. If the decree were vacated by reason of the appeal, the pendency of the latter could not in itself exclude the state court from the right to adjudicate upon the matters over which it had jurisdiction, and award the relief it was competent to administer. What the state of case might have been if this court had reversed the decision of the circuit court, sustained the patent, and directed an accounting, we are not called upon to consider, nor to define the extent of the risk incurred by the appellee in proceeding to a decree before the appeal was disposed of. Plaintiffs in error had the right to take their appeal from the final decree of the circuit court, and this right was not denied or attempted to be denied by the state court, although it is ingeniously argued that the decree of that tribunal may be so construed as to produce that result. But, so far from this being intended, the supreme court of Michigan held that the subject-matter of the two suits was so different that the prosecution of the one did not interfere with the prosecution of the other. The view thus entertained was wholly inconsistent with any attempt to interfere with the plaintiffs in error in the prosecution of their appeal, or any denial of their rights in respect thereof. Whether or not a release given by plaintiffs in error under the state court decree, before the appeal had been heard, would have been allowed to operate as a release of errors, is a question that does not arise. That decree was not brought forward on the hearing of the appeal, and was not considered by the court in arriving at its conclusions. If such would have been the effect of this release would have been the effect of this release if given as directed, and if in the opinion of this court that effect could properly have been recognized, then the appeal might have been disposed of on that ground; but, if the contention of counsel were correct, it is not to be doubted that the judgment of this court would have been such as the circumstances and the law required. Undoubtedly, Nichols, Shepard & Co. might have set up the contract as a defense to the charge of infringement, and it was for the state court to determine what weight the circumstance that it did not do so had upon the question whether any such contract had ever been made. Moreover, it is claimed by defendant in error that to use the license as a defense would not have given it the affirmative relief to which it was entitled, because the contract covered a subject-matter broader in its scope than either the first or second patent. At all events, it was not set up and was not passed upon by the circuit court or by this court, and requires no further mention, as we are not considering the case upon the merits. And the same remark may be made as to the interference proceedings, which are referred to in argument as not showing the assertion of the alleged contract. In our judgment this suit was not one arising under the patent laws of the United States, nor did the decree involve the denial of an authority exercised, or of any title, right, privilege, or immunity claimed, under the constitution or laws of the United States; and therefore, there being no federal question, the writ of error must be dismissed.