Pope Manufacturing Company v. Gormully (144 U.S. 224)

United States Supreme Court

144 U.S. 224

Pope Manufacturing Company  v.  Gormully (144 U.S. 224)

STATEMENT BY MR. JUSTICE BROWN.

This was an appeal from a decree dismissing a bill in equity, wherein the plaintiff sought an accounting upon a contract, and an injunction prohibiting the defendant from manufacturing and selling bicycles and tricycles containing certain patented devices, in violation of a contract entered into between the parties on December 1, 1884. A copy of this contract is printed in the margin. ^[1]

The bill alleged that the plaintiff was engaged in the manufacture and sale of bicycles and tricycles of superior quality; that these machines embodied in their construction inventions covered by letters patent owned by the plaintiff; that, in pursuance of a plan adopted by it, it reserved to itself the right to manufacture and sell the highest grades, and among others a style of bicycle known as the 'Standard Columbia Bicycle;' that under the agreement entered into with the defendant the latter was granted the right to make, use, and sell bicycles 52 inches in size and upwards, and of certain style and finish, and embodying the inventions set forth in certain patents named; and that he should not manufacture bicycles embodying the features of certain other patents specified in the agreement; that said defendant expressly agreed that he would not manufacture or sell, directly or indirectly, bicycles, etc., containing any of the inventions or claims in either of said letters patent, nor make, use, or sell, directly or indirectly, certain parts of bicycles specified in the contract, other than according to the conditions and terms in said license.

That it was provided by the eleventh clause of said contract that the defendant might surrender the license at any time by written notice, but it was provided in the same clause that no revocation, surrender, or termination of said license, or any part of it, should release or discharge said Gormully from any liability which might have accrued, become due, or arisen prior to, or at the date of, said surrender, or from the obligations, admissions, and agreements contained in sections 6, 7, 8, 9, and 11; that such admissions and agreements were a part of the consideration for the granting of the license, and were irrevocable except by the written consent of the licensor; that it was provided in said clause 11 that if the licensee should continue, after the termination of said license, to make, sell, or use any of the machines or parts thereof containing either of the parts referred to in section 9, plaintiff should have the right to treat the defendant as a party to, and in breach of, the contract; and that defendant, by said section 9, consented that if he did make, use, or sell any machine containing such parts, an injunction might issue in favor of the plaintiff restraining him from so doing.

After setting forth an immaterial modification of such contract subsequently agreed upon, it further averred that the defendant entered upon the manufacture of bicycles under said license, made returns thereof, and paid royalties to plaintiff in accordance with the same, and that said license in respect to the clause claimed to have been violated is still in full force and effect. The bill further charged that since March 1, 1886, defendant has violated the ninth clause of the contract in constructing bicycles of a kind prohibited by the contract, in violation of the first and ninth clauses of said contract.

For which reasons the plaintiff prayed for an account of the machines made in violation of the agreement, and for an injunction.

The court below found that there was no contest between the parties as to the execution of the instrument set out in the bill; that the terms of the contract were such as to prohibit the defendant from making the high-grade styles and kinds of bicycles and tricycles complained of; that, if the contract was valid and in force, it was being violated by the defendant; but that the contract was not of such a nature as to entitle the plaintiff to any relief in a court of equity. 34 Fed. Rep. 877. From a decree dismissing the bill for the want of equity, the plaintiff appealed to this court.

L. L. Coburn and Edmund Wetmore, for appellant.

C. K. Offield and W. C. Goudy, for appellee.

Mr. Justice BROWN, after stating the facts in the forgoing language, delivered the opinion of the court.

Notes

1. 'This agreement, made this first day of December, 1884, by and between the Pope Manufacturing Company, a corporation established under the laws of Connecticut and having a place of business in boston, Massachusetts,

party of the first part, and R. Philip Gormully, of Chicago, Illinois, party of the second part, witnesseth:

'That whereas letters patent of the United States, numbered and dated as in the following list, were duly granted for the inventions therein set forth, and by certain good and valid assignments the same are now owned by the party of the first part:

[Here follows a descriptive list of sixty-five patents.]

'And whereas said party of the second part is desirous of making, using, and selling to others to be used, bicycles embodying in their construction and modes of operation certain of the said inventions, and of securing license thereof under certain of said letters patent: Now, therefore, in consideration of one dollar, paid by the party of the second part to the party of the first part, the receipt whereof is hereby acknowledged, and in further consideration of the covenants, agreements, and stipulations hereinafter contained, said parties have consented and agreed as follows:

'First. The party of the first part agrees to license, and does hereby license, the party of the second part, subject to the conditions and provisions herein named, to manufacture at the shop or factory of the party of the second part, in Chicago, in the state of Illinois, and in no other place or places, bicycles of fifty-two-inch size and upwards, of such quality, construction, grade, and finish as to be sold in the market at retail prices not greater than eighty per cent. of the retail list prices of the Standard Columbia bicycles of same or nearest similar sizes and styles, severally embodying the inventions set forth in those of the said letters patent numbered, [here follow the numbers of fifteen patents,] or either of them, or either claim thereof, and no others, so far as applicable within the conditions and restrictions herein contained, and to sell said bicycles to others to be used, and to use the same, within and throughout the United States and the territories thereof. This license is not to be understood or construed as a license to import, manufacture, buy, sell, or deal in bicycles or tricycles, or in pedals, saddles, springs, rims, bearings, or other patented parts thereof, otherwise than as herein expressly stipulated. This license is not transferable, and is in addition to and not to modify or supersede previous ones except as herein expressed.

'Second. The party of the second part hereby agrees to maintain a suitable place of business in said Chicago, and to keep there on hand a stock of bicycles as above referred to, and to promote and aid in extending the interest in bicycling and tricycling and the use of bicycles among those not already wheelmen, and to advertise the business by occupying and paying for one-page space continuously during the term of this license in the monthly magazine published by the Wheelman Company of Boston, Massachusetts, and to a reasonable extent to other publications of general circulation, and to advertise that it is licensed by the Pope Manufacturing Company.

'Third. The party of the second part agrees to keep at its place of business full, true, and correct books of account, open at all reasonable times to the party of the first part and to its delegate, in which shall be set down all bicycles made or sold by the party of the second part, with the name or description, size, style, and number thereof, and the names and addresses of the parties to whom sold.

'Fourth. The party of the second part agrees to make full and true returns in writing to the party of the first part on or before the tenth day of each calendar month in each year, beginning with the 10th day of January, A. D. 1885, of all bicycles (and whether any or not) made, used, or sold in the United States by the party of the second part during the preceding calendar month, with the size, style, number, name or description, and make of the said machines, and the names and addresses of the purchasers, and also of such machines held in stock by the party of the second part at the end of the said preceding month, said returns to be made under oath whenever required by the party of the first part, and to pay the royalties or license fees as herein stipulated, on or before the said tenth day of each of said months, on all said bicycles used or sold by them or removed from their said factory or place of business in the preceding month.

'Fifth. The party of the second part agrees to pay to the party of the first part the sum of ten dollars upon and for each and every bicycle in whole or in part made by or for it at any time prior to the 1st day of April, A. D. 1886, or the termination of this license, as part license fees or part royalties under said several letters patent or such or either claim thereof as may be used, and as part of the consideration for this agreement; and it is agreed that the party of the second part shall so pay to the party of the first part, under this license and agreement, at least the sum of one thousand dollars within and for each and any consecutive twelve calendar months during the continuance of this license.

'Sixth. The party of the second part agrees to sell said bicycles at retail, and not to sell the same or any of them to any person or party, either directly or indirectly, except upon such terms and at such prices as shall be satisfactory to the party of the first part, and as shall first be submitted to and approved by the said party of the first part, such written submission of rates, terms, and prices, with the said approval, to be taken as and to form a part of this agreement, and not to have or sell through any agent or agents in any other place than the said Chicago, nor pay or allow freight beyond the said Chicago, nor any bonus, rebate, allowance, or commission on sales or from prices, except as expressly agreed in writing between the parties hereto.

'Seventh. The party of the second part agrees to mark or stamp in a legible manner the word jof said patent 85,834 in the broke mechanism of this license, together with the date or dates of the patents under which each

machine is made or sold, a list of such patents to be furnished by the party of the first part.

'Eighth. The party of the second part hereby expressly admits the validity of the several letters patent hereinbefore mentioned, and of each and every claim thereof, and the title of the party of the first part thereto; and further admits specifically that the following inventions are embodied in the 'Ideal' bicycle and the 'Standard Columbia' bicycle and the 'Expert Columbia' bicycle, as follows, to-wit: (a) the invention claimed in the second clause of claim of said patent, R. 3,297, in the saddles of said bicycle, and their connection therewith; (b) the invention claimed in the third clause of claim of the last-named patent in the cranks of said bicycles; (c) the invention claimed in the fourth clause of claim of said last-named patent in the backbones and rear forks of bicycles; (d) the invention claimed in third clause of claim of said patent No. 85,527 in the leg-guard of said bicycle; (f) the invention claimed in second clause of claim of said patent 86, 834 in the brake mechanism of said bicycles and its connections; (g) the invention claimed in the third clause of claim of said patent 86,834 in the steering head of the said bicycles and its connections; (h) the invention claimed in the fifth clause of claim of said patent 87,713 in the tires of the wheels of said bicycles; (i) the inventions claimed in the third clause of claim of said patent No. 88,507 in the front forks of said 'Expert;' (j) the inventions claimed in the fourth clause of claim of said last-named patent in the pedals of said bicycles; (k) the inventions claimed in the claim of letters patent No. 194,980 in the balance gear and its connections in the 'Columbia' and 'Victor' tricycles; (l) the invention claimed in the second clause of claim of said patent No. 197,289 as embodied in the ball bearings of said 'Expert' bicycle and 'Victor' tricycle and in 'AEolus' ball pedals; and further admits that any machines or parts of machines constructed in a substantially similar manner are or would be infringements of said claims, respectively; and these admissions are unqualified, and may at any time hereafter be pleaded or proved in estoppel of the party of the second part.

'Ninth. The party of the second part agrees that it will not import, manufacture, or sell, either directly or indirectly, any bicycle, tricycle, or other velocipede, or the pedals, saddles, bearings, rims, or other patented parts or devices containing any of the inventions or claims in either of the hereinbefore recited letters patent, nor make, use, or sell, directly or indirectly, either (a) backbones bifurcated for a rear wheel, or (b) balance gear allowing two wheels abreast, differing speeds on curves, or (c) bearings containing balls or rollers, and laterally adjustable, or (d) brakes combined with the handle bars and front wheel, or (e) cranks adjustable to different lengths of throw, or (f) forks of tubular construction, or (g) mud-shield for steering wheels, constructed to turn within the wheel, or (h) pedals that are polygonal, or offering two or more sides for the foot, or (i) round contrac-

tile rubber tires in grooved rims or rims containing or adapted for rubber or elastic tires, or (j) saddles adjustable fore and aft, or (k) saddles having a flexible seat and means of taking up the slack, or (l) steering heads, open or cylindrical, with stop for complete turning, or (m) leg-guards over front wheel, or (n) rims of wrought metal tubing and adapted to receive a tire, or (o) rims composed of sheet metal, with overlapping edges, or (p) wheels containing hollow metallic rim and rubber tires, or (q) steering spindle and fork inclined to each other at an angle, or (r) two speed or power gears, or (s) 'Tangent' spokes or 'Warwick' rims, or (t) any other device or invention secured by either of these patents, other than according to the permission, conditions, and description in paragraph numbered 'first' in this agreement, or as otherwise agreed in writing with the party of the first part, nor in any way, either directly or indirectly, dispute or contest the validity of the letters patent hereinbefore mentioned, or either of them, or the title thereto of the party of the first part, but will aid and morally assist the party of the first part in maintaining public respect for, and preventing infringements upon, the same.

'Tenth. If and whenever the party of the first part shall reduce the royalties on bicycles of similar sizes, construction, and grade, to any other licensee, the above-named royalties shall be reduced in like manner and proportion to the party of the second part, and the party of the first party will immediately notify the party of the second part of any such reduction of royalties. The party of the second part may sell said herein-licensed bicycles to regular agents and dealers in the trade, and doing business as such in any part of the United States, at discounts from the said retail list prices, not exceeding twenty-five per cent. in any case, and to the smaller agents, not exceeding fifteen per cent., it being understood and agreed that said discount of not exceeding twenty-five per cent. may be allowed only to our (one?) dealer in each or either of the following cities: New York, N. Y.; Philadelphia, Pennsylvania; Boston, Massachusetts; Baltimore, Maryland; St. Louis, Missouri; San Francisco, California; St. Paul, Minnesota; and one city in the southern states, and to two dealers in Chicago, Illinois. Said party of the second part also agrees to keep the retail list prices fixed, and not to allow said licensed bicycles to be sold at retail at less than said retail prices, either by his own concern or by agents or dealers. The party of the second part may sell the said licensed bicycles outside of the United States, for actual use in foreign parts, without the herein-contained restrictions as to prices and discounts, and upon satisfactory evidence of such export and foreign sale of said bicycles there shall be allowed a rebate or credit of one-half of said royalties thereon.

'Eleventh. If and whenever the party of the second part shall fail to make returns or to make payments as herein provided, or shall violate or

fail to keep and perform the terms, conditions, promises, or agreements, or either of them, herein mentioned on his part to be kept and performed, the party of the first part may withdraw and terminate this license and the agreements on its part mentioned to be kept and performed, by notifying the party of the second part in writing that the license herein contained has been revoked, and the party of the first part may in like manner revoke this license whenever the reported sales by the party of the second part for any consecutive twelve calendar months shall be less than one hundred machines. The party of the second part may surrender the license herein contained at any time by written notice to that effect and the returning of this contract to the party of the first part; but no such revocation or surrender, and no termination of this contract, or any part of it, shall release or discharge the party of the second part from any payment, return, liability, or performance which may have accrued, become due, or arisen hereunder, prior to or at the date of such revocation or surrender, or from the obligations, admissions, and agreements contained in the sections hereof numbered 'sixth,' 'seventh,' 'eighth,' 'ninth,' and 'eleventh' hereof, which are a part of the consideration for the granting of the license herein, and are irrevocable, except by written consent of the party of the first part; and it is agreed that at the termination of the license herein contained at any time, by expiration, revocation, or surrender, the party of the second part shall pay the within-named royalty on all said herein-licensed machines or parts of machines, whether wholly finished or not, or purchased or on hand, or ordered by or for said party of the second part at the date of said termination, and that the party of the second part will not sell the same except by first paying the full amount of said royalty and by complying with all the terms and conditions of this contract; and, further, that if the party of the second part shall continue after such termination of the license to make, sell, or use any machine or substantial part thereof containing either of the parts specifically referred to in section 'ninth' hereof, or in any invention in any form set forth and claimed in the letters patent aforesaid, or any of them, the said party of the first part shall have the right to treat the party of the second part either as a party to, and in breach of, this contract, or as a mere infringer, and the said party of the second part consents that in such case, upon any suit brought by the said party of the first part against the said party of the second part in any court, either upon this contract or for an infringement of the said letters patent, or any of them, an injunction may issue, without notice to the said party of the second part, restraining him from making, selling, or using the said part of devices, or the invention or inventions in said letters patent or any of them set forth.

'Witness our hands and seals the day and the year first above written.

'THE POPE MANUFACTURING COMPANY.

'R. PHILIP GORMULLY.

'THE POPE MFG. CO.,

'BY CHARLES E. PRATT, ATTY.'