ELGIN WIND POWER & PUMP CO. v. NICHOLS et al., 65 F. 215

WOODS, Circuit Judge (after making the foregoing statement). The objection was raised at the hearing, by counsel for the appellant, that under the ruling in Hartell v. Tilghman, 99 U. S. 547, the case is one of which a federal court cannot take jurisdiction — the parties being of the same shite, and the pleas being to the effect that the appellant had a license to use the inventions covered by the plaintiff’s letters patent, the validity of which is not denied.

The bill in this ease is in the customary form for infringement of letters patent, and the proposition contended for necessarily implies that the jurisdiction invoked by the filing of such a bill — of which, it is to be observed, no court except a federal court can take cognizance — may be defeated by a plea of license which admits the use and validity of the patent sued on. If the decision in Hartel v. Tilghman ever meant that much, it has been explained and limited by later decisions, which leave no doubt of the federal jurisdiction in cases like the present. White v. Rankin, 144 U. S. 628, 12 Sup.

Ct. 768; Manufacturing Co. v. Hyatt, 125 U. S. 46, 8 Sup. Ct. 756; Marsh v. Nichols, Shepard & Co., 140 U. S. 344, 11 Sup. Ct. 798. In respect to the merits of the appeal, much stress has been laid upon the rule that a replication to a plea admits its validity, and that, if the particular facts stated in the plea be proved to be true, the bill must be dismissed, without reference to the equity arising from any other facts stated in the bill. Farley v. Kittson, 120 U. S. 303, 314, 7 Sup. Ct 534; U. S. v. California & O. Land Co., 148 U. S. 31, 13 Sup. Ct. 458.

A necessary corollary is that strict proof must be made of “the particular facts stated in the plea,” and it will not be enough to prove less than, or something different from, what is averred. In the federal practice, however, the rule itself has been modified by equity rule 33, which provides that “if upon an issue the facts stated in a plea are determined for the defendant, they shall avail him as far as in law and equity they ought to avail him.” In respect to that rule, the supreme court, in Pearce v. Rice, 142 U. S. 28, 42, 12 Sup.

Ct. 130, said: “It clearly takes from the establishment of the plea the effect it had under the old law. When, by filing a replication, issue is taken upon a plea, the facts, if proven, will now avail the defendant only so far as, in law and equity, they ought to avail him.

Under the existing rule, the court may, upon final hearing, do at least what, under the old rule, might have been done when the benefit of a plea was saved to the hearing. ‘When,' says Cooper, ‘the benefit of the plea is saved to the hearing, the decision of the cause does not rest upon' the truth of the matter of the plea, but the plaintiff may avoid it by other matter, which he is at liberty to adduce.’ ” However, of the pleas in question there are substantial averments' which, are not proved.

It is alleged in the first three of the pleas, for instance, that Nichols gave to Nichols & Murphy an exclusive license to use his patents for the period of 10 years, the term of the partnership; while the proof shows that the agreement was that the license should continue “during the life of the partnership,” and that any invention made by either party, in the “prosecution of the company’s business,” should be “the joint property of both parties.” Again, it is true that Nichols & Murphy contributed to the copartnership of Nichols, Murphy & Geister “the assets and resources of the late firm of Nichols & Murphy,” mentioned in the inventory and

schedule attached to the contract; but it is not true, as averred and contended, that the new firm thereby became possessed of a license to use the inventions, or any of them, for the remainder of the term of 10 years, for which the partnership of Nichols & Murphy had been designed to continue. The utmost that can justly be asserted is that the new firm acquired an exclusive license for the term of its own existence, during which it was stipulated that no right, title, interest, permit, or license should be granted to any other person or corporation to. use, manufacture, or sell under the patents mentioned in the

schedule attached to the contract. In the

schedule referred to, particular patents were not specified, but simply, “Patents and business, $6,000,” followed by this statement: “The above patents include all patents and improvements on the wind mill,’ feed mill, and all other machinery and implements used in connection with said manufacture, and on articles manufactured in the said business.” While this language shows that patent interests were treated as a part of the assets and resources of Nichols & Murphy, it does not, in terms or by fair implication, include inventions or improvements not then in existence, and which, when brought into being, were to be, according to the agreement, not partnership property, but “the joint property of the parties,” which is a very dilferent thing.

If the firm of Nichols & Murphy ceased to exist when that of Nichols, Murphy & Geister was organized, ipso facto the license to the first firm to use the patents ceased, and, strictly speaking, constituted no part of its transferable assets or resources.

The manifest intention, however, was that the new firm, during ils life, should have the same license which the other firm had had; and whether it be considered that the original license was transferred, or that the legal effect of the second contract of partnership was a grant by Nichols, with the consent of Murphy, of a uew license to the new firm, it is not important to determine. The new firm acquired no right which could run beyond its term of lift; and be sold as a part of its assets. So the supreme court of Illinois seems to have held in the cast; of Nichols v. Murphy, 136 Ill. 380, 26 N. E. 509.

Being between the same par tit's, the judgment in that case, if it had been pleaded, would perhaps be a strict estoppel; but whether, being in proof without objection, it should be given that effect, we need not inquire, as our conclusion upon (he evidence, outside of the judgment, would be the same.

It has been suggested that, the copartnership of Nichols & Murphy was not merged in the new firm and was never otherwise dissolved, and that if the right in the patents acquired by Nichols, Murphy & Geister ended in 1887, the license for the remainder of the original term of 10 years still belonged to Nichols & Murphy, and that the use of the inventions by the appellant, having been with the consent and authority of Murpliy, was rightful and affords no ground for a suit for infringement. If conceded to be true, the proposition is nof, available, because no such right is set up in any of the,pleas.

No right or license under the patents is asserted, except as derived from the firm of Nichols, Murphy & Geister, through the receiver’s sale of the partnership assets. The fourth plea differs from the others, in that it counts not on an express but upon an implied license, arising out of the sale by the receiver, and purchase by the appellant, of the tools and patterns used in manufacturing wind mills of ilie kind covered by tin; psitents. The averments of this plea are not all proved as laid.

No reference is made to the agreement between Nichols and Murphy, or to the fact of their partnership; but it is alleged that by the partnership contract of Nichols, Murpliy & Geister, Nichols agreed to put into the firm, and afterwards did put into the firm, as a, part of its assets, all machines, patterns, wind-mill stock, and tools owned by him.

The proof, on the contrary, shows no individual contract by Nichols in respect to individual property, but a contract, by which Nichols & Murphy, as partners under their previous contract, entered into a contract, of copartnership with Geister, wherein it is recited that, “the said Nichols & Murpliy have contributed jointly to the capital slock of said copartnership the assets and resources of the late firm of Nichols & Murphy/' and that “tin* said Nichols & Murphy will be the owners of two-thirds interest, jointly, and the said Geister the owner of a one-third interest, in said copartnership.” The plea, therefore, fails for want of proof; but, if the averments were all true, it ought not to prevail.

The tools and patterns belonged to Mehols, Murphy & Geister, and were necessarily included in the order for the sale by the receiver of the assets of that firm; but a sale of tools and patterns which are used solely for the manufacture of a patented device, even if the sale be made by the owner of the patent, does not necessarily imply a license to the purchaser to manufacture and sell the device. That depends on the intention of the parties, and is a question of fact. In Anderson v. Eiler, 1 C. C.

A. 659, 50 Fed. 775, where the owner of a new design for mantels sold one of the mantels to a manufacturer, who avowed his purpose to use it as a pattern, the court says: - “The inference is therefore, we think, irresistible, that he consented to this use. Whether he actually consented or not, however, the circumstances estop his denial. His silence at the time closes his mouth.” That is, his silence proved his consent. The appellee in this case was not silent.

His assertion of individual ownership of the patents, and denial of any right of Murphy and Geister to the use of them, was distinctly made in the suit which he brought against them, and otherwise; and the proof is clear that the parties composing the appellant company, for whom the purchase was made, were not ignorant of the fact and extent of his assertion of right. The receiver, Hoagland, as one of the prganizers of the appellant company, was himself interested in the purchase.

His testimony is in the record, and in answer to the question whether Mehols did not claim the ownership of the patents, and that the purchaser at the receiver’s sale would not acquire any interest in them by the purchase, he said: “I think Mr. Mehols never let up on that.

He always claimed that.” It is shown, moreover, that the parties concerned in organizing the appellant company negotiated with Mehols, before the purchase, with a view to the acquiring of his rights in the patents, and the circuit judge was clearly justified in concluding that “they were purchasers with notice of his rights.” It is not shown what estimate was put upon the patterns by the appellant when the purchase was made, and, if any considerable sum, it must be presumed to have been with the purpose of acquiring the patents, or a license to use them. The decree of the circuit court is affirmed.