Opinion
01-22-1895
STANTON MANUF'G CO. v. McFARLAND et al.
Francis C. Lowthorp, for complainant. James Buchanan, for defendants.
(Syllabus by the Court.)
Bill by the Stanton Manufacturing Company against William McFarland and others. Decree for complainant.
Francis C. Lowthorp, for complainant.
James Buchanan, for defendants.
BIRD, V. C. The bill in this case is filed by the complainant to restrain the defendant McFarland from the use of a patent for manufacturing what is called "naphtha soap." The complainant shows that on the 1st day of December, 1891, one of the defendants (E. W. Stanton) was the owner of a patent, which he had obtained from the government, securing to him a secret formula for the manufacture of naphtha soap, and that on that day a company was formed, of which Stanton was a member, and that such company was formed for the express purpose of manufacturing and vending this soap. Such company was styled "The Stanton Manufacturing Company." One of the conditions upon which the company was formed was the offer upon the part of Stanton to sell and assign to the company his said patent. It does not appear that there was any other purpose in view than the manufacture of this soap. He at once made such an assignment. The assignment so made by Stanton to the company contained a very sweeping clause, as follows: "AH rights and formulas which I have, or may have, pertaining to or about the combination or article now known as 'Stanton's naphtha soap,' and the making, mixture, and composition thereof, and any and all parts thereof, Including all letters patent of the United States now granted or applied for the same, or that may hereafter be applied for in the United States of America, including any and all improvements for or about or in the same, or pertaining to the art of naphtha soap making." The company at once leased premises, and commenced the manufacture of soap, with the use of the appliances, and according to the formulas, of the Stanton patent. On the 31st of October, 1893, Stanton filed an application or claim for an improvement in his patent, or for a patent for an additional or other discovery. Whatever this may be,—whether an improvement or otherwise,—in my judgment, it is included in the assignment above referred to. In May, 1893, a further patent was granted to him, upon the application last referred to. This last patent, Stanton assigned to the defendant McFarland. The assignment of the original patent to the Stanton Manufacturing Company was not recorded at the time of the assignment of the last patent to McFarland. But the complainant claims that McFarland had notice of the assignment to the company, or of such facts as deprive him of the rights of a bona fide purchaser. This statement involves the principal point in controversy.
McFarland and Stanton had married cousins, and were intimately acquainted for over 40 years. They frequently visited each other,—so often as two or three times a year. Stanton was so poorly supplied with funds that he was unable to pay the fees of the patent office, and the charges of his solicitor for procuring the last patent. These, being $000.15, were paid by McFarland as the entire consideration for the assignment to him. Besides this financial embarrassment, Stanton was, and had been for some time, physically disabled, to such an extent as to induce McFarland to make the charge that when the original patent was assigned to the company he was disqualified or incapacitated to such an extent as to render the transaction voidable. This feature of the case is worthy of no little consideration. Although not very much is said re specting it, yet I think it cannot be controverted but that it was Mr. Stanton's condition that brought him into nearer relations, with respect to these patents, to McFarland, than he otherwise would have come. McFarland's testimony alone is sufficient to make this clear. Hence, besides their intimanyfor many years, McFarland's sympathy was aroused in behalf of Stanton, and Stanton's necessities quickened his confidence in McFarland. These thoughts will help us to a better understanding of what transpired between Stanton and McFarland. As the application for the improvement in the patent was filed in October, 1892, according to McFarland's testimony, Stanton opened negotiations with him for the sale and assignment of the Improvement to him in March, 1893, which negotiations were pending until the 25th day of May following. The circumstances and facts which go to establish notice upon the part of McFarland are the relations between him and Stanton, the knowledge that McFarland had of the use which the company was making of the machinery, tools, implements, and formula first invented by Stanton, and the direct admission of McFarland himself of knowledge of the original assignment. While it is difficult to believe that persons so intimate as McFarland and Stanton were, met as often as they did, considering the financial stress under which the latter was laboring, without his freely communicating to the former the fact that he had obtained a patent which he regarded as valuable, and that he had formed a company for the purpose of determining that fact, yet perhaps no judgment has ever been pronounced where such a condition alone has been presented to the court. However, this consideration may properly have an important bearing, when other facts are brought under review.
The intimate relations of these parties being considered, it becomes quite impossible to say that McFarland did not have actual information from Stanton himself of all the principal facts which resulted in the formation of the company, and the assignment of the patent to him, after his admission that he went with a son of Stanton to the plant where they were manufacturing their soap, and where all the machinery was, examining the plant and the machinery, though this examination may have been ever so slight. I think every one would reject the assertion of ignorance upon this point on the part of McFarland, from the circumstances surrounding this branch of the case, if he himself had not positively sworn that he never knew anything of such an assignment And one is almost inclined to believe that his statement under oath must have been made with some technical reservation under which he justifies the statement, for he has been engaged in manufacturing operations all his business life. This company was styled "The Stanton Manufacturing Company." I think no one would believe him for an instant if he were to say that he did not know that Stanton, his friend, was the patentee, nor if he were to say that he did not know that the company who owned this plant and who was manufacturing this soap was not the Stanton Manufacturing Company, of which his friend was a member, nor if he should say that the other members of this company had engaged in this enterprise without in some way securing an interest in the patent which protected them in their investment, and in the enjoyment of the manufactured product His visit to the plant with a son of Stanton, and the other circumstances above narrated, together with what follows, I think, show that he had notice of such facts as to put him on his guard, and to bring this case fully within that of Auburn Button Co. v. Silvester, 79 Hun, 611, 29 N. Y. Supp. 1140. The conclusion just arrived at is especially enforced in the light of the statement of McFarland that this company had imposed upon Stanton. His own language is that "I thought Mr. Stanton had been ill treated,— that the parties he was with had not kept the contract." He also says that he went into this business for his own benefit, "but that incidentally it would help Stanton some." Fell says: "I said to him then that we had an agreement which I thought entitled my company to the patent,—an agreement with Mr. Stanton,—and he said he knew all about the agreement; that that was one of the principal reasons he had gone into the business at all; that he had plenty business of his own, and it was only because he thought Mr. Stanton had been treated wrongly he had gone into the soap business. He said Mr. Stanton had applied to him many times before to take hold of the business, but that he had always refused, but that when this agreement, and the reasons, were laid before him, he had a talk with Mr. Stanton; he came to the conclusion that Mr. Stanton ought to be protected, and that he was going to protect him. He said he had the matter fully looked into by competent legal authority, and that he had been advised that the patent was all right" With this full admission of McFarland, and the broad statement of Fell as to the manner in which McFarland enlarged upon the matter, before me, I cannot avoid deciding that McFarland had such clear, full, and direct information of circumstances, facts, and existing conditions as to put him upon inquiry, and that he could not neglect such inquiry, and claim to be a purchaser in good faith.
But, in addition to this, that which took place between McFarland and one Woodruff and one Fell, when regarded in the light of what has already been said, strongly corroborates the conclusions already expressed. As McFarland took this assignment on the 25th day of May, 1893, he moved to his summer home, at Point Pleasant, on the Atlantic coast, about the 1st of July. There he met Stanton and his wife, who remained with McFarland until about the 1st of October. A very few days after their so meeting, Stanton handed to McFarland a bundle of papers, saying, in the language of McFarland, "He thought I ought to have them." Hesays that they were having an Interview, but that nothing was said in the interview which led Stanton to go for the papers, and give them to him. The inference is, from his statement, that he was not enough concerned at this time to examine the papers so handed to him, or to inquire as to their nature or contents until a day or two afterwards. He then discovered that in the bundle of papers was a copy of the assignment of the original patent to the complainant. He swears that this was the first that he knew of such an assignment. I cannot but remark that this delay, for a day or two, in ascertaining the contents of the bundle of papers so handed to him, is not agreeable to the habits of ordinarily prudent or cautious business men. I cannot explain this indifference in any other way than by the conclusion that McFarland well understood, in a general way, the contents of the papers so handed to him, although he might never have seen the identical papers before that time. And it is of no small consequence that, while the defendant McFarland was called upon to produce all of the papers in that bundle, his counsel answered the call by saying that they had been so mingled with other papers by him that he was unable to produce them. Besides these observations, a reference to this bundle of papers is here made for the purpose of showing more clearly the reason that McFarland gives for the language which he made use of in his interview with Woodruff and Fell. Woodruff called upon McFarland, at Point Pleasant, for the purpose of learning from him what knowledge he had of the rights of the complainant when he took the assignment of the improvement from Stanton. He says: "I asked Mr. McFarland if he knew of this agreement between Mr. Stanton and the company, and he said he did. He said, before he had anything to do with it, he sent a man to Washington, to see if it was recorded there, but he found no record of any agreement there; so after that he went ahead, and got the patent." In answer to a direct question, the witness says that McFarland told him he knew of it before he took the assignment. The witness Fell testifies to the same, in substance. The explanation by McFarland of these direct and emphatic statements above made to the witnesses Woodruff and Fell is that he knew of the agreement or assignment to the company of the original patent at the time of his interview with them, because of having read a copy of such agreement or assignment, which was in the bundle of papers referred to before his interview with them. Having read such copy, he was enabled to say that he did know all about it, not meaning thereby to say that he knew all about it before he had taken the assignment of the improvement. I am constrained to think that If McFarland had such knowledge of the rights of other parties, and of the necessity, for his own protection, of seeing that the record was free, when he said, "Yes, I knew all about it," he would have added, "but I have just learned of it from reading a copy of such agreement handed me by Stanton since the 1st of July." But there is no expression of surprise upon the part of McFarland, to any one, when he learned the contents of this copy of the agreement or assignment to the complainant, which would have been most natural upon the part of every business man. But the absence of any expression of surprise upon his part when he reads for the first time, as he says, a copy of this assignment, or of dissatisfaction with the conduct of Stanton, in concealing from him the fact of the assignment, is all accounted for by his unequivocal admission, as well as by the testimony of both Woodruff and Fell, that he engaged in this enterprise for the purpose of helping Mr. Stanton, and because he thought that the company had treated Stanton badly, and had broken their contract with him.
It is contended upon the part of the defendant McFarland that, if the point above discussed be decided against him, nevertheless the judgment of the court must be in his favor, because, under the law, the invention which was secured by the letters patent to McFarland by virtue of the agreement and assignment of Stanton, dated May 25, 1893, is not embraced in the agreement and assignment to the complainant company, dated December 1, 1891. This argument proceeds upon the theory that the last invention is entirely distinct from the first, and has nothing whatever to do with it, in principle or practice, except in name. It is admitted that the authorities are very comprehensive in their scope in this respect; so much so, indeed, that, whenever the invention produced may be regarded as at all being reasonably connected with or flowing from that which already had practical form and substance, it will pass under such an agreement or assignment. Manufacturing Co. v. Gill, 32 Fed. 697; Littlefield v. Perry, 21 Wall. 226; Annin v. Wren, 44 Hun, 352; Continental Windmill Co. v. Empire Windmill Co., 4 Fish. Pat. Cas. 428, Fed. Cas. No. 3,142; Manufacturing Co. v. Dice, 105 Ill. 649. On the other hand, it is urged that when the invention is an entirely new production of the mind, and in no way springing from or embraced in the thoughts or conceptions which have already been put in shape or form, and recognized by the government as the separate property of the individual, they cannot or will not pass by any previous assignment. This very reasonable view, I think, is admitted by counsel for the complainant. Manufacturing Co. v. Stebbins, 4 Fed. 445; Bunker v. Stevens, 26 Fed. 245; Appleton v. Bacon, 2 Black, 699; Collar Co. v. Van Dusen, 23 Wall. 530. Admitting the law to be as stated, I am spared the necessity of following counsel in his very able argument, in his efforts to convince thecourt that the last patent comes within the exception, from the language employed by Stanton in his application, and in his assignment to McFarland, which is binding upon McFarland. Stanton calls the last application an "improvement." I am bound by their judgment and understanding. It is most evident that they regarded the conception which Stanton was laboring to put in some useful and practical shape as essential to the completion or perfection of something which already existed.
McFarland also makes resistance on the ground of laches. The assignment to McFarland was put upon record May 26, 1893. It does not appear that McFarland expended any money towards making a practical test of the value of the patent, prior to the interview between himself and Woodruff, in July following. He was then apprised of the claim of the complainant. According to his own admissions, he had then read the copy of the assignment of the original patent to the complainant, which had been given to him by Stanton. The bill in this case was filed on the 27th day of September following. It was in that month that Fell, who was interested in the company, understood that a building was being erected in Trenton for the purpose of manufacturing naphtha soap. He made repeated efforts to have an interview with McFarland upon the subject; but, McFarland being in Kansas, Fell failed to meet him until the latter part of September. It seems to me that McFarland, having learned of the interest of the complainant company in the manufacture of this soap, was quite as guilty of unseemly haste as the company was of laches. There may be unreasonable haste as well as unreasonable delay.
It is urged that the claim of the complainant is unconscionable, since whatever title it has was acquired for a very small consideration. I cannot understand that McFarland enjoys any higher equity in this respect, especially since, as I have found, he made his investment in the face of the fact that his purchase would be of no value unless he could rid himself of any demands upon the part of the complainant. I think the complainant is entitled to the relief prayed for, with costs. I will so advise.