Opinion
05-31-1899
COURTER v. CRESCENT SEWING-MACH. CO. et al.
Coult & Howell, for complainant. Charles L. Corbin, for defendants.
Bill by Albert C. Courter against the Crescent Sewing-Machine Company and others. Defendants demur. Demurrer overruled.
The bill sets out that the complainant is engaged in the manufacture of small pieces of paper, prepared with adhesive backs, to paste on the leather linings or sweat bands of hats, and upon which paper is printed the size of the hat; that one Welcome P. Gammons, Jr., invented a system of sewing the sweat bands into hats by machinery, for which letters patent were issued to him to secure his rights, to which letters patent it became necessary to indicate to the public that the work of sewing in the hat bands was done by a patented method, and that Gammons applied to the complainant to assist him in relation thereto, and complainant, at his request, devised a size mark, which included the information required, by including, not only the size of the hat, but also the date of the patent granted to Gammons; that complainant and Gammons entered into an agreement which provided that complainant agreed to make such size marks, and to have the exclusive sale of such size marks to users of machines covered by said patent, at 5 cents per 1000 during the period the said patent is to run, free and clear of any expense to Gammons for making drawings, plates, electrotypes, etc.; that Gammons, his heirs, assigns, or lessees, covenanted, in consideration of the said agreement of complainant, not to permit any one to use the said machines for sewing leather into hats without using and applying the said size marks made by complainant or his assigns or lessees, as above specified, to all hats manufactured by the users of said machines; and Gammons further agreed to protect complainant, his assigns or lessees, in the sale of the said size marks to users of his patented method, and to allow and authorize his patent date to be applied to all size marks made by said Gammons, his assigns or lessees, but that Gammons would save harmless the complainant, his assigns and lessees, by reason of any infringement that might be imposed or raised on said patent respecting the right or interest of the said complainant, his assigns or lessees; that this agreement was recorded in the patent office; that complainant caused a large number of plates for printing such size marks to be made; that shortly after this Gammons caused to be organized, under the statutes of New Jersey, a corporation known as the Crescent Sewing-Machine Company, and assigned to it his invention and letters patent; that Gammons was made president and one of the directors of said corporation, and is still such; that in the assignment made by Gammous to the defendants, which, by amendment, is made a part of the bill, Gammons warrants that he is the sole patentee, and will defend the title of the assignee against any person whomsoever, excepting the rights of one Courter, pursuant to an agreement between himself and Gammons, dated December 9, 1892; that said corporation had notice of the complainant's rights; that said company has licensed manufacturers of hats to use the said method, and has been in receipt of a large annual income therefrom; that said company has in its possession the books showing the number of hats sewed by its licensees, to which books the complainant has no access; that neither Gammons nor the company has ever obligated any of its lessees to use the said size marks, and that they have refused to give complainant information of the amount of hats so sold, or any accounting. The prayer of the bill is that Gammons and the company may discover the names of their licensees, the number of hats sewed by such licensees, the amount of royalties received, and that they may exhibit their books to the complainant, and that an account may be taken, and that complainant may be paid the amount found due to him from Gammons and the company. To this bill the defendants have interposed a demurrer.
Coult & Howell, for complainant.
Charles L. Corbin, for defendants.
REED, V. C. (after stating the facts). The demurrant the Crescent Sewing-Machine Company insists that, Inasmuch as the company never entered into any agreement with the complainant, or assumed the agreement into which their assignor had entered, therefore there is no privity between them and the complainant. They insist that, in the "absence of any expressed agreement with the complainant or with the assignor for the benefit of the complainant, the latter must stand upon the theory that the covenant of Gammons with Courter runs with the patent rights transferred to the company; and they insist that, inasmuch as the burden of a covenant only runs with the transfer of real property, and this being personalty, its assignment did not transfer to the assignee the burden of the assignor's covenant. If the complainant's right to relief rested solely upon the existence of a privity between the parties, it may be conceded that it would bedifficult to find a foundation to support his claim. Equity, however, does not withhold its hand because no privity exists between the parties, but will protect rights growing out of covenants upon the ground that they raise an equity in favor of a party. The right of one purchaser to enforce against another purchaser from a common vendor the restrictive covenant concerning the use of land contained in a deed from such vendor is a sample of the exertion of this equitable power. "These decisions," says the chief justice in Brewer v. Marshall, 19 N. J. Eq. 537, "proceed upon the principle of preventing a party having knowledge of the just rights of another from defeating such rights, and not upon the idea that the engagement created easements, or are of a nature to run with the land." Of course, this line of cases is confined to covenants concerning realty, but I see no reason why the equitable principle underlying them should not be applied wherever justice calls for their use. In the present case the patentee tied to his property a burden, namely, the duty of its owner to use, in conjunction with the sweat-band device, the size labels of the complainant, at a certain cost. His title to this property, therefore, was limited by this right of Courter. When Gammons sold his property in the patent to the corporation which he had organized, and of which he was the president, with full notice to the latter of this limitation, the corporation took the property in the same condition and with the same limitations as Gammons had held it. If the consideration was fixed with the expectation that this covenant would be executed by the assignee, then it is inequitable to permit the assignee to rid himself of the burden. If the consideration was fixed upon the theory that the assignee was free from the assignor's agreement, then it was guilty of a fraud upon the complainant. The rule that a purchaser of property, with notice of a contract relating to its use, is bound by the contract, was recognized as applicable to personal property in the case of De Mattos v. Gibson, 4 De Gex & J. 276. See, also, the case of Werderman v. Society, 19 Gh. Div. 246, and remarks of Jessel, M. R., on page 252. There are, moreover, particular features in the transfer of the property in the patent right which appeal to the interposition of this court. In the assignment itself the assignor warrants that he will defend the title of the assignee against any person except the rights of Courter under his agreement with the assignor. The acceptance of this assignment was a release of the assignor from any liability to the assignee growing out of the rights of Courter, and it is to be regarded as an implied assumption by the assignee of Gammons' duty to Courter. Again, in the agreement, Gammons covenants not to permit any one to use the said machines without using the size marks, and agrees to protect Courter in the sale of the size marks to the users of the patented method. Gammons should have incorporated in his assignment a covenant upon the part of the assignee to use the size marks. The duty of Gammons to protect Courter was thus brought to the notice of the defendants, and, upon accepting the assignment, it is a fraud upon their part to become a party to a scheme to defeat this agreement. To foil the success of such a scheme, equity will regard the assignment as made in accordance with this understanding. I think the facts stated make a case for equitable relief.