An agreement by which the owner of a patent for an invention
grants to another person "the sole and exclusive right and license
to manufacture and sell" the patented article throughout the United
States, not expressly authorizing him to use it, is not an
assignment, but a license, and gives the licensee no right in his
own name to sue a third person at law or in equity for an
infringement of the patent.
The mortgagee of a patent by assignment recorded within three
months from its date in the Patent Office, is the party entitled
(unless otherwise provided in the mortgage) to maintain a bill in
equity against an infringer of the patent.
This was a bill in equity, filed April 24, 1886, against James
A. Mackenzie and Samuel R. Murphy by Lewis E. Waterman, claiming to
be the sole and exclusive owner of a patent granted to him by the
United States on February 12, 1884, for an improvement in fountain
pens, and of the invention thereby secured, alleging an
infringement thereof by the defendants and praying for an
injunction, a discovery, an account of profits, and damages.
The defendants filed a plea which alleged that the plaintiff at
the time of filing the bill was not possessed either of the patent
or of an exclusive right under it to the whole or any specified
part of the United States, for that certain assignments in writing
under seal of the patent and invention from the plaintiff to Sarah
E. Waterman, his wife, from her to the firm of Asa L. Shipman's
Sons, and from that firm to Asa L. Shipman, were made by the
parties thereto, and were recorded in the Patent Office at the
dates stated below, and that Shipman continued to be possessed of
the patent and invention until and including the time of the filing
of the bill.
The plaintiff filed a general replication. At the hearing on the
issue thus joined, the following instruments, executed in
Page 138 U. S. 253
New York by and between citizens of that state, were duly
proved:
1st. An assignment, made February 13, 1884, and recorded March
27, 1884, from Lewis E. Waterman, the plaintiff, to Sarah E
Waterman, his wife, of the whole patent and invention.
2d. A "license agreement" made between Mr. and Mrs. Waterman on
November 20, 1884, and never recorded, by which she granted to him
"the sole and exclusive right and license to manufacture and sell
fountain pen-holders, containing the said patented improvement
throughout the United States," and he agreed to pay her "the sum of
twenty-five cents as a license fee upon every fountain pen-holder
so manufactured by him."
3d. An assignment, made November 25, 1884, and recorded November
29, 1884, from Mrs. Waterman to the firm of Asa L. Shipman's Sons,
of the whole patent and invention, expressed to be made in
consideration of the payment of the sum of $6,500 and containing
this provision:
"The consideration of this assignment is that whereas the said
Lewis E. Waterman and the said Sarah E. Waterman have on this 25th
day of November, 1884, made a joint note of hand for the sum of
$6,500, payable to the said Asa L. Shipman's Sons three years from
this date, with interest at six percent, now if the said Lewis E.
Waterman and myself, or either of us, shall well and truly pay the
said note, according to its tenor, then this assignment and
transfer shall be null and void, otherwise to be and remain in full
force and effect."
It also contained covenants of full right to assign, and against
all encumbrances, "except a license to the said Lewis E. Waterman
to manufacture and sell pens" under the patent, being the license
above mentioned.
4th. An assignment, made November 25, 1884, in consideration of
the payment of the sum of $6,500, and recorded November 29, 1884,
from the firm of Asa L. Shipman's Sons to Asa L. Shipman, of all
the right and title acquired by the assignment made to them by Mrs.
Waterman, as well as the promissory note thereby secured.
Page 138 U. S. 254
"5th. An assignment, made April 16, 1886, and recorded April 22,
1886, from Mrs. Waterman to the plaintiff of all her right, title,
and interest in the patent and invention, and all her claims or
causes of action for the infringement of the patent, and rights to
damages or profits by reason thereof."
The circuit court allowed the plea, for reasons stated in its
opinion, as follows:
"The transfer to Asa L. Shipman is in language so emphatic and
exact that there is little opportunity for misapprehension. It
matters not what the instrument is called. It matters not that it
may be defeated by the payment of $6,500 on November 25, 1887. The
fact remains that by virtue of this assignment or mortgage, the
title to the patent was on April 24, 1886, when this action was
commenced, outstanding in Asa L. Shipman. If it was not absolute,
it was a present, existing title, defeasible upon a condition
subsequent. On April 16, therefore, when Sarah E. Waterman assigned
all her right, title, and interest to the complainant, she had
nothing to assign which could at all change the legal status of the
parties. She could not vest a clear title to the patent in the
complainant for the obvious reason that she had previously disposed
of it, and did not own it. The agreement of November 20, 1884,
being a license and nothing more, does not enable the complainant
to maintain this action without joining the holder of the legal
title. The suggestion that, irrespectively of the Shipman
assignment, the complainant is entitled to prosecute for
infringements alleged to have occurred between February 12 and
November 25, 1884, is equally unavailing, for assuming such a right
of action to exist, it could only be maintained on the law and not
on the equity side of the court. The plea is allowed. The
complainant may amend, upon payment of costs, within ten days."
29 F. 316.
The plaintiff not having filed an amended bill within the ten
days, a final decree was entered dismissing his bill, with costs,
and he appealed to this Court.
Page 138 U. S. 255
MR. JUSTICE GRAY, after stating the facts as above, delivered
the opinion of the Court.
Every patent issued under the laws of the United States for an
invention or discovery contains
"a grant to the patentee, his heirs and assigns, for the term of
seventeen years, of the exclusive right to make, use, and vend the
invention or discovery throughout the United States and the
territories thereof."
Rev.Stat. § 4884. The monopoly thus granted is one entire
thing, and cannot be divided into parts except as authorized by
those laws. The patentee or his assigns may, by instrument in
writing, assign, grant, and convey, either, 1st, the whole patent,
comprising the exclusive right to make, use, and vend the invention
throughout the United States, or, 2d, an undivided part or share of
that exclusive right, or, 3d, the exclusive right under the patent
within and throughout a specified part of the United States.
Rev.Stat. § 4898. A transfer of either of these three kinds of
interests is an assignment, properly speaking, and vests in the
assignee a title in so much of the patent itself, with a right to
sue infringers; in the second case, jointly with the assignor. In
the first and third cases, in the name of the assignee alone. Any
assignment or transfer short of one of these is a mere license,
giving the licensee no title in the patent and no right to sue at
law in his own name for an infringement. Rev.Stat. § 4919;
Gayler v.
Wilder, 10 How. 477,
51 U. S.
494-495;
Moore v.
Marsh, 7 Wall. 515. In equity, as at law, when the
transfer amounts to a license only, the title remains in the owner
of the patent, and suit must be brought in his name, and never in
the name of the licensee alone unless that is necessary to prevent
an absolute failure of justice, as where the patentee is the
infringer, and cannot sue himself. Any rights of the licensee must
be enforced through or in the name of the owner of the patent, and
perhaps, if necessary to protect the rights of all parties, joining
the licensee with him as a plaintiff. Rev.Stat. § 4921;
Littlefield v.
Perry, 21 Wall. 205,
88 U. S. 223;
Paper Bag Cases, 105 U. S. 766,
105 U. S. 771;
Birdsell v. Shaliol, 112 U. S. 485,
112 U. S. 487,
and see Renard v. Levinstein, 2 Hem. & M. 628.
Page 138 U. S. 256
Whether a transfer of a particular right or interest under a
patent is an assignment or a license does not depend upon the name
by which it calls itself, but upon the legal effect of its
provisions. For instance, a grant of an exclusive right to make,
use, and vend two patented machines within a certain district is an
assignment, and gives the grantee the right to sue in his own name
for an infringement within the district, because the right,
although limited to making, using, and vending two machines,
excludes all other persons, even the patentee, from making, using,
or vending like machines within the district.
Wilson v.
Rousseau, 4 How. 646,
45 U. S. 686.
On the other hand, the grant of an exclusive right under the patent
within a certain district which does not include the right to make
and the right to use and the right to sell is not a grant of a
title in the whole patent right within the district, and is
therefore only a license. Such, for instance, is a grant of "the
full and exclusive right to make and vend" within a certain
district, reserving to the grantor the right to make within the
district, to be sold outside of it.
Gayler v. Wilder,
above cited. So is a grant of "the exclusive right to make and
use," but not to sell, patented machines within a certain district.
Mitchell v.
Hawley, 16 Wall. 544. So is an instrument granting
"the sole right and privilege of manufacturing and selling"
patented articles, and not expressly authorizing their use,
because, though this might carry by implication the right to use
articles made under the patent by the licensee, it certainly would
not authorize him to use such articles made by others.
Hayward
v. Andrews, 106 U. S. 672.
See also Oliver v. Chemical Works, 109 U. S.
75.
An assignment of the entire patent, or of an undivided part
thereof, or of the exclusive right under the patent for a limited
territory, may be either absolute or by way of mortgage, and liable
to be defeated by nonperformance of a condition subsequent, as
clearly appears in the provision of the statute that
"an assignment, grant, or conveyance shall be void as against
any subsequent purchaser or mortgagee for a valuable consideration
without notice unless it is recorded in the Patent Office within
three months from the date thereof."
Rev.Stat. § 4898.
Page 138 U. S. 257
Before proceeding to consider the nature and effect of the
various instruments given in evidence at the hearing in the circuit
court, it is fit to observe that, as was assumed in the argument
for the plaintiff, by the law of the State of New York, where all
the instruments were made and all the parties to them resided,
husband and wife are authorized to make conveyances and contracts
of and concerning personal property to and with each other in the
same manner and to the same effect as if they were strangers.
Armitage v. Mace, 96 N.Y. 538;
Adams v. Adams, 91
N.Y. 381.
By the deed of assignment of February 13, 1884, the plaintiff
assigned to Mrs. Waterman the entire patent right. That assignment
vested in her the whole title in the patent, and the exclusive
right to sue, either at law or in equity, for its subsequent
infringement.
The next instrument in order of date is the "license agreement"
between them of November 20, 1884, by which she granted to him "the
sole and exclusive right and license to manufacture and sell
fountain pen-holders containing the said patented improvement
throughout the United States." This did not include the right to
use such pen-holders, at least if manufactured by third persons,
and was therefore a mere license, and not an assignment of any
title, and did not give the licensee the right to sue alone, at law
or in equity, for an infringement of the patent.
Gayler v.
Wilder, Paper Bag Cases, and
Hayward v. Andrews,
above cited. The plaintiff not having amended his bill, pursuant to
the leave granted by the circuit court, by joining the licensor as
a plaintiff, this point requires no further notice. Nor is it
doubted that the circuit court rightly held that if the plaintiff
was entitled to recover only for infringements occurring between
February 12 and November 25, 1884, his remedy was at law.
Root
v. Railway Co., 105 U. S. 189.
The remaining question in the case, distinctly presented by the
plea, and adjudged by the circuit court, is of the effect of the
deed of November 25, 1884, by which Mrs. Waterman assigned to the
firm of Asa L. Shipman's Sons all her right, title and interest in
the invention and the patent, with an
Page 138 U. S. 258
express provision that the assignment should be null and void if
she and her husband, or either of them, should pay at maturity a
certain promissory note of the same date made by them, and payable
to the grantees. This instrument, being a conveyance made to secure
the payment of a debt, upon condition that it should be avoided by
the subsequent payment of that debt at a time fixed, was a
mortgage, in apt terms, and in legal effect.
Conard v.
Atlantic Ins. Co., 1 Pet. 386,
26 U. S.
446-447. On the same day, the mortgagees assigned by
deed to Asa L. Shipman all their title under the mortgage, and the
promissory note thereby secured. Both assignments were recorded in
the Patent Office within three months after their date, and the
title thereby acquired by Shipman was outstanding in him at the
times of the subsequent assignment of the patent right by Mrs.
Waterman to the plaintiff, and of the filing of this bill. This
last assignment was therefore subject to the mortgage, though not
in terms so expressed.
By a mortgage of personal property, differing in this respect
from a pledge, it is not merely the possession or a special
property that passes, but, both at law and in equity, the whole
title is transferred to the mortgagee, as security for the debt,
subject only to be defeated by performance of the condition or by
redemption on bill in equity within a reasonable time, and the
right of possession, when there is no express stipulation to the
contrary, goes with the right of property. Story on Bailments
§ 287; 2 Story, Eq.Jur. §§ 1030, 1031;
Conard v. Atlantic Ins.
Co., 1 Pet. 386,
26 U. S. 441;
Casey v. Cavaroc, 96 U. S. 467,
96 U. S. 477;
Boise v. Knox, 10 Met. 40, 43;
Brackett v.
Bullard, 12 Met. 308, 310.
A mortgage of real estate has gradually, partly by the adoption
of rules of equity in courts of common law, and partly by express
provisions of statute, come to be more and more considered as a
mere security for the debt, creating a lien or encumbrance only,
and leaving the title in the mortgagor, subject to alienation, levy
on execution, dower, and other incidents of a legal estate; but the
rules upon the subject vary in different states, and a mortgage is
everywhere considered as passing the title in the land, so far as
may be
Page 138 U. S. 259
necessary for the protection of the mortgagee, and to give him
the full benefit of his security.
Stelle v.
Carroll, 12 Pet. 201;
Van Ness
v. Hyatt, 13 Pet. 294;
Hutchins v.
King, 1 Wall. 53,
68 U. S. 58;
Brobst v.
Brock, 10 Wall. 519,
77 U. S.
529-530. After the mortgagee has taken possession, the
mortgagor has no power to lease, and the mortgagee is entitled to
have, and is bound to account for, the accruing rents and profits,
damages against trespassers, timber cut on the premises, and
growing crops.
Keech v. Hall, 1 Doug. 21;
Turner v.
Coal Co., 5 Exch. 932;
Dawson v. Johnson, 1 Fost.
& Finl. 656;
Fairclough v. Marshall, 4 Ex.D. 37,
47-49;
Scruggs v. Memphis &c. Railroad, 108 U.
S. 368,
108 U. S. 375;
Teal v. Walker, 111 U. S. 242;
Hutchins v. King, above cited;
Gore v. Jenness,
19 Me. 53;
Bagnall v. Villar, 12 Ch.D. 812. Even against a
mortgagor in possession, the mortgagee may obtain an injunction or
damages for such cutting of timber as tends to impair the value of
the mortgage security, or as is not allowed by good husbandry or by
express or implied license from the mortgagee.
Robinson v.
Litton, 3 Atk. 209, 210;
Farrant v. Lovel, 3 Atk.
723;
Hampton v. Hodges, 8 Ves. 105;
Humphreys v.
Harrison, 1 Jac. & Walk. 581;
King v. Smith, 2
Hare, 239;
Kountze v. Omaha Hotel Co., 107 U.
S. 378,
107 U. S. 395;
Verner v. Betz, 46 N.J.Eq. 256, 267-268;
Page v.
Robinson, 10 Cush. 99;
Searle v. Sawyer, 127 Mass.
491;
Waterman v. Matteson, 4 R.I. 539.
A mortgagee of a leasehold or other personal property has the
like right to an injunction to stay waste by the mortgagor.
Farrant v. Lovel, above cited;
Brown v. Stewart,
1 Md.Ch. 87;
Parsons v. Hughes, 12 Md. 1. The right of
action against a stranger for an injury to goods mortgaged,
generally, though not always, depends upon the right of possession.
When the right of possession is in the mortgagor, he is usually the
proper party to sue.
Sellick v. Smith, 11 J.B.Moore 459,
475;
Brierly v. Kendall, 17 Q.B. 937;
Luse v.
Jones, 39 N.J.Law 707;
Copp v. Williams, 135 Mass.
401. But even a mortgagee out of possession may sometimes maintain
an action for an injury to his interest.
Gooding v. Shea,
103 Mass. 360;
Manning v. Monaghan, 23
Page 138 U. S. 260
N.Y. 539, and 28 N.Y. 585;
Woodside v. Adams, 40
N.J.Law 417, 421-422. And when the right of possession, as well as
the general right of property, is in the mortgage, the suit must be
brought by the mortgagee, and not by the mortgagor or anyone
claiming under a subsequent conveyance from him.
Conard v.
Atlantic Ins. Co., 1 Pet. 386;
Wood v.
Weimar, 104 U. S. 786;
Clapp v. Campbell, 124 Mass. 50;
Watson v.
Macquire, 5 C.B. 836, 844. When it is provided by statute that
a mortgage of personal property shall not be valid against third
persons unless the mortgage is recorded, a recording of the
mortgage is a substitute for, and (unless in case of actual fraud)
equivalent to, a delivery of possession, and makes the title and
the possession of the mortgagee good against all the world.
Aldrich v. Aetna Ins.
Co., 8 Wall. 491,
75 U. S. 497;
Robinson v.
Elliott, 22 Wall. 513,
89 U. S. 521;
Bullock v. Williams, 16 Pick. 33;
Coles v. Clark,
3 Cush. 399, 401.
A patent right is incorporeal property, not susceptible of
actual delivery or possession, and the recording of a mortgage
thereof in the Patent Office, in accordance with the act of
Congress, is equivalent to a delivery of possession, and makes the
title of the mortgagee complete toward all other persons, as well
as against the mortgagor. The right conferred by letters patent for
an invention is limited to a term of years, and a large part of its
value consists in the profits derived from royalties and license
fees. In analogy to the rules governing mortgages of lands and of
chattels, and with even stronger reason, the assignee of a patent
by a mortgage duly recorded, whose security is constantly wasting
by the lapse of time, must by held (unless otherwise provided in
the mortgage) entitled to grant licenses, to receive license fees
and royalties, and to have an account of profits or an award of
damages against infringers. There can be no doubt that he is "the
party interested, either as patentee, assignee, or grantee," and as
such entitled to maintain an action at law to recover damages for
an infringement, and it cannot have been the intention of Congress
that a suit in equity against an infringer to obtain an injunction
and an account of profits, in which the court is authorized to
award damages, when necessary to fully
Page 138 U. S. 261
compensate the plaintiff, and has the same power to treble the
damages as in an action at law, should not be brought by the same
person. Rev.Stat. §§ 4919, 4921;
Root v. Railway
Co., 105 U. S. 189,
105 U. S.
212.
The necessary conclusion appears to us to be that Shipman, being
the present owner of the whole title in the patent under a mortgage
duly executed and recorded, was the person, and the only person,
entitled to maintain such a bill as this, and that the plea
therefore was rightly adjudged good.
In the light of our legislation and decisions, no weight can be
given to the case of
Van Gelder v. Society, 44 Ch.D. 374,
in which, upon pleadings and facts similar to those now before us,
the mortgagor of a patent was treated as a mortgagor in possession
and was allowed to maintain a suit for infringement, under the
provisions of the English Judicature Act of 1873 and Patent Act of
1883. Stats. 36 & 37 Vict. c. 66, § 25; 46 & 47 Vict.
c. 57, §§ 23, 46, 87.
Whether, in a suit brought by the mortgagee, the court at the
suggestion of the mortgagor or of the mortgagee or of the
defendants might, in its discretion and for the purpose of
preventing multiplicity of suits or miscarriage of justice, permit
or order the mortgagor to be joined either as a plaintiff or as a
defendant need not be considered, because no such question is
presented by this record.
Decree affirmed.
MR. JUSTICE BROWN, not having been a member of the Court when
this case was argued, took no part in its decision.
