VOL. XIII.] EXCII1 QUER COURT REPORTS. 507 BETWEEN THE IMPERIAL SUPPLY COMPANY, LIMITED, - 19 12 PLAINTIFFS; Feb. 14, AND GRAND TRUNK RAILWAY COMPANY OF CANADA DEFENDANTS. Patent of invention—License to Manufacture same—Instrument not executed by Licensee—Validity—Estoppel. B. and D. were employees of the Grand Trunk Railway Company. Under the instructions of R., superintendent of the motive power of the railway, they experimented on lubricators for use on the railway, and eventually succeeded in making a triple sight feed lubricator for which they obtained a patent in Canada. Following the usual custom of the railway company in such cases, R. sought to obtain a license from the inventors which would enable the company to use the invention not only on its own line. but also on its allied lines. B. and D. refused to do more than license the use of the invention by the defendant company on their own line of railway. Subsequently, an instrument purporting to be a license to the company to use the said invention on their own line of railway only was prepared under the instructions of an officer of the railway subordinate to R., and was executed by B. and D. This instrument was not executed, by the defendant company, and did not provide for the payment of any royalties for the use of the invention; the express consideration being the nominal sum of one dollar. It also contained a covenant on the part of the inventors that theywould maintain the validity of any patents to be thereafter granted to them for such invention. s- When this instrument was communicated to R., he wrote to the official who had obtained the same, objecting to the license being limited to the defendant company's line of railway and directing a new license to be drawn up extending the use of the invention to the Grand Trunk Pacific Railway as well as the Grand Trunk Railway. R's letter was communicated to B. and D. who knew that R. was the proper officer of the Company to make agreements of this nature. The instrument in question was in the possession of the defendant company at the time of action brought. Held, upon the facts, that the instrument was not binding upon the defendant company as a license. Semble, that in an action for infringement the company would not be estopped from asserting the invalidity of the title.
508 EXCHEQUER COURT REPORTS. [VOL XIII. 1912 THIS was an action arising out of an alleged breach THE IMPERIAL of a license to use the invention covered by SUPPLY Co. v. Canadian patents numbered 98330 and 129053, re-GRAND spectively. The facts are stated in the reasons for TRUNK RWAY. CO. judgment. Argument of Counsel. January 11th, 1912. The case came on for hearing at Montreal. V. E. Mitchell, K.C., and G. Stairs, for the plaintiff, contended that there had been established by the evidence a relationship of licensor and licensee between the inventors and the Grand Trunk Railway Company; and in consequence of that relationship the defendant company could not set up the invalidity of the patents in suit. The following authorities were relied on :— Halsbury's Laws of England (1) ; Nicolas on Patents (2) ; Crossley v. Dixon (3) ; Clark y. Adie (4) ; Redges v. Mulliner (5); Frost on Patents (6); Ashworth v. Law (7) ; Useful Patents v. Rylands (8) ; Mills v. Carson (9); Africa Gold Co. v. Sheba Gold Co. (10); Bassett v. Graydon (11); Post Card Automatic Supply Co. v. Samuel (12). They also relied on Art. 1730 of the Civil Code. E. Lafleur, K.C. and W. H. Biggar, K.C., for the defendant company, argued that inasmuch as the defendant company had not executed their license it was not binding on them nor could estoppel be raised upon it. The instrument contained no recitals and no covenants binding upon the defendant. Moreover, it was expressly repudiated by Mr. Robb, the only official of the company having authority to bind the (1) Vol. 1, p. 201. (7) 7 R.P.C. 234 (2) p. 99. (8) 2 R.P.C. 261. (3) 10 H.L.C. 293. (9) 10 R.P.C. 17. (4) L.R. 2 A.C. 423. (10) 14 R.P.C. 663. (5) 10 R.P.C. 27. (11) 14 R.P.C. 711. (6) 3rd ed. Vol. 2, pp. 115. 148, 152. (12) 6 R.P.C. 560.
VOL. X1TI.] EXCHEQUER COURT REPORTS. 509 defendant. Such repudiation was expressly communi- ' 1912 cated to the inventors. THE IMPERIAL SUI'PLY CO. CASSELS, J.' now (February 14th., 1912) delivered v. GRAND judgment. TRUNK In this case a statement of claim was filed on behalf RWAY. Co. of the Plaintiffs who claim to be assignees of two Jud gment. certain patents, one numbered 98330, bearing date the 3rd April, 1906, and . the other numbered 129053, bearing date the 1st November, 1910. The case came on for trial before me in Montreal on the 22nd May, 1911, when it was on application adjourned with leave to the defendants to amend their pleadings so as to raise other defences. In their statement of claim the plaintiffs allege that by an instrument in writing executed on the 2nd June, 1906, Thomas Akin Dalrymple and Robert Burnside, Jr., 'who were the patentees Under the .first -patent, and who are alleged to be the inventors o z the invention described in the second patent, licensed the Grand Trunk Railway Company for the' consideration of one dollar, ' to use the inventions in _question. As the document is short, I set it out verbatim " KNOW ALL MEN BY THESE PRESENTS, that we, Thomas Akin Dalrymple, and Robert Burnside, both of the City of Montreal, Province of Quebec, Dominion of Canada, Machinists, for and in consideration of the premises, and of the sum of one dollar ($1.00) to us paid by the Grand Trunk Railway Company of Canada (the receipt whereof is acknowledged) do hereby empower and license the said Grand Trunk Railway Company of Canada, their servants and agents and the servants or agents of any company whose line or lines of railway is or_ are known as part of the Grand Trunk Railway System, to manufacture at any of the shops or works of any of the said
510 EXCHEQUER COURT REPORTS. [VOL. XIII. 1912 Companies, for the use by the said Companies, their THE servants or employees, and each of them, but not IM PER IAL SUPPLY Co. for sale, the articles and appliances; to wit :—a Triple GRAND Sight Feed Lubricator, letters patent for which have TRUNK been applied for in the Dominion of Canada and the RWAY. Co. United States of America on the 12th and 13th days Reasons for Jad inenf. of December, 1905, respectively, together with any and all modifications and further improvements of which the said invention or improvement or any part thereof is susceptible. The said license and authority to continue to the full end of the terms for which the said patents in either Canada or United States, or any of them, covering the said invention or improvements, or patents for any and all modifications and further improvements thereof is or are shall be granted renewed or extended. " And we, the said Thomas Akin Dalrymple and Robert Burnside, do hereby agree with the Grand Trunk Railway Company of Canada that the right to manufacture and use the said improvements, articles and appliances and modifications or improvements thereof herein granted shall not be subject to any royalty or payment whatever by . the said Companies or any of them other than the said sum of One dollar ($1.00) hereby acknowledged. " And we further covenant and agree with the said Company, that we will do all and every act and thing necessary to protect and preserve our interest in and right to the said inventions and the said letters patent when granted, and also in and to any patents hereafter granted for any modification or further improvement of said inventions, and will at all times fully protect the said Companies and each of them in the enjoyment of the privileges hereby granted to manufacture and use the said inventions or improvement, or
VOL. XIII.] EXCHEQUER COURT REPORTS. 511 any modification and improvement thereof, and that 1912 any license or right to manufacture, use or sell the THE PS ca IA7. said invention or improvement or any modification SUPPLY Co. or improvement thereof, or any of them which shall GRAND at anytime begranted byus to anyotherperson or TRUNK RwAY. Co. corporation shall be made expressly subject to the Reasons for rights hereby conferred upon the said Companies Judgment. and each of them. • It is understood that the above agreement does not include the Grand Trunk Pacific Railway or the Central Vermont Railway. WITNESS our hands and seals this Second day of June in the year of our Lord one thousand nine hundred and six. Signed, sealed and delivered 1 in presence of (Sgd.) • (Sgd.) Jno. A. Duffie. THOMAS AKIN DALRYMPLE (SEAL) (Sgd.) ROBERT BURNSIDE, JR. (SEAL)" In this document the words are inserted, "It is ` understood that the above agreement does not `include the Grand Trunk Pacific Railway or the "Central Vermont .Railway". The 'plaintiffs claim that under this agreement the defendants became licensees under the patentees. They also claim that the Grand Trunk Ra•lway Company had been making lubricators for the Grand Trunk Pacific Railway Company. The latter fact is not disputed. The Grand Trunk Railway Company set up several defences. They first set up that the document of the • 2nd June referred to, was never in fact so accepted, regarded, treated or acted upon by the defendants as to constitute an agreement. They further assert that 33
512 EXCHEQUER COURT REPORTS. [VOL, XIII. 1912 if the document in question is an agreement binding TAIE upon the Grand Trunk Railway Company, the doctrine IMPERIAL SUPPLY CO. of estoppel cannot be held as applicable to the case in V. GRAND hand. They furthermore set up that the patentees TRUNK RWAY. Co. obtained the patents in trust for the railway company, and in the alternative they allege that there was no Rem onss for Judgment. invention disclosed by the patents, and in any event that these patents are void having regard to the state of the art, and for other reasons. _ On the first hearing I suggested to counsel that if the law of estoppel was not applicable to the case in hand, the Grand Trunk Railway Company would be in a better position if the document were held to be binding on them. If the document of the 2nd June, 1906, is as contended for by the Grand Trunk Railway Company, then the Grand Trunk Railway Company would become infringers of the patented inventions. assuming the patents to be eventually upheld as-valid patents. On the other hand, f the alleged agreement of the 2nd June, 1906, were held valid, but that there was no estoppel preventing the Grand-Trunk Railway Company from disputing the validity of the patents so far as their sales to the Grand Trunk Pacific are concerned, then the Grand Trunk Railway Company would have the right to attack the validity of the patents in this action, and if they failed they would still have the right under the alleged license to continue manufacturing for their own uses. I suggested to counsel at the trial that it would be better ° to determine the two points—First, is the alleged document of the 2nd June, 1906, an existing and valid license binding upon the Grand Trunk Railway Company; and, Secondly, if it were held to be a valid and existing license,.are the Grand Trunk Railway Company at liberty to endeavour to impeach the patents, or are.
VOL. XIII.] EXCHEQUER COURT REPORTS. 513. they estopped from denying the validity of the patents? 1212. If these two issues were held against the Grand Trunk THE' IMPERIAL Railway Company, then there would be nothing left SUPPLY co. but a reference as to the damages for the infringe- r xnxx ment of the patent--and in this latter event a pro- Rw irr i . longed litigation affecting the validity of the patents Reasons tor would be avoided. This course, subsequent to the Judgment. trial, seemed to meet with the approval of the counsel; and an order was made that these issues should be first tried. It was also directed that the issue as to whether or not the patentees were trustees for the-Grand Trunk Railway should also .be tried. At the subsequent trial which took place on the 11th January, 1912, both counsel for the plaintiffs and for the • defendants agreed that it would be better that this last. issue should be held. over to be tried, if the case came down to trial on the defences as to the validity of the patents. I have considered carefully the question of estoppel, and have arrived at the conclusion that if the agreement of the 2nd June, 1906, be a valid and a binding agreement, the Grand Trunk Railway Company are estopped. In the view I take of the case, namely that the agreement is not a binding agreement on the Grand Trunk Railway Company, it may be unnecessary to deal with thè question of estoppel. Later on r however, I will deal with this question; as if I am in_ error in the conclusion I have arrived at in regard to. the agreement being one not binding on the Grand Trunk Railway Company, then the question of whether there is estoppel or not may become material.. The case is a peculiar one, and I have been very much. impressed by the able argument presented by Mr.. Mitchell, K.C., in support of the plaintiffs' contention. After the best consideration I can give to the case. I have come to the conclusion that the agreement of' 33
514 EXCHEQUER COURT REPORTS. [VOL. XIII.. 1912 the 2nd June, 1906, was never assented to or accepted THE by the defendants, the Grand Trunk Railway Com-IMPERIAL SUPPLY CO. pany. It must be borne in mind that the patentees, V. GRAN D Robert Burnside, Jr., and Thomas Akin Dalrymple, TRUNK RWAY. Co. were employees of the Grand Trunk Railway Com-Reasons for pany. It was admitted that Mr. Robb was the Judgment. superintendent of motive power employed by the Grand Trunk Railway Company. Mr. Mayer was the master mechanic. I do not wish at the present stage of the proceedings to pass upon the question as- to whether or not the invention was an invention by these two mechanics or whether the invention belonged to the Grand Trunk Railway Company. Two cases, one in the United States, and one in Eng-land, deal with the question when an invention becomes the property of the employer or when it becomes the property of the workman. (1) It is material, however, in considering the evidence as to whether the alleged document of the 2nd June, 1906, was accepted by the Grand Trunk Railway Company, to take into account the facts as to how the alleged inventions were arrived at. Mr. Robb states that the lubricators that the Grand Trunk Railway Company were using were not satisfactory; and he told his master mechanic, Mr. Mayer, "to get up a lubricator ourselves in our own shop". "Q.—Which "would be more satisfactory? A—A lubricator which "would suit our requirements." He goes on to say "that "the lubricator we had was too small, and it "was weak, and it lacked a bulls-eye glass. I told "him to embody all these features, and have a lubri- cator which would hold more oil, which would take ` care of the larger engines, and which would have a '(1) See Worthington v. Moore, 64 L. T. N. S. 338 and Hapgood y. -Hewitt, 119 U.S. 226.
VOL. XIII.] EXCHEQUER COURT REPORTS. 515+ 19 "bulls-eye glass. I told him to embody all these "features from the old lubricators, and to make one THE IMPERI AL, "that would be our own lubricator. These were the SUPPLY Co.. v. "instructions I gave". GRAND It appears that pursuant to these instructions the RwA YN Co. work in question was performed. It would appear. also before or after the patents were granted, the Judgment account for the expenses of obtaining the patents, certainly the earlier patent, was sent to the Grand Trunk Railway Company. Mr. Robb . refused to pay this on the ground that the patentees had declined to grant the license asked by the Grand Trunk Railway Company. It also appears that in cases where the Grand Trunk Railway permitted their workmen to experiment at their expense, that a form of license was always executed which . permitted not merely . the Grand Trunk Railway Company to use the inventions, but their allied lines—and the Grand Trunk Pacific Railway was an allied line of the Grand Trunk Railway Company. In the first place both Robert Burnside, Jr., and T. A. Dalrymple, knew that Mr. Robb was the official representing the Grand _ Trunk Railway Company • who had the authority to make agreements of this nature. Dalrymple in his evidence states as follows :— "THE COURT:—As I understand from your evi-"dence, your previous communication between you "and Mr. Robb for this license was prior to this "document being signed of the 2nd of June? A—Yes. "Q—Mr. Robb was. insisting that the Grand Trunk "Pacific should be included in the license? A—Yes-. "Q—Did he ever recede from that position prior "to this document being signed? A—He never told " me if he did. "Q—And you knew that Mr. Robb was the senior "man? A—Yes.
516 E)CBEQL'ER COI. BT REi'Oil'J . (\ ()L XIII 1912 " Q—And that the document in question was drawn THE "by a junior in his office. As far as you know IMPERIAL ;SUPPLY CO. "Mr. Robb had never changed his mind? A.—As GR z A ' N f D a r as I know". TRUNK RWAY. CO. ap I p t e w a o r u l t d h at the document in question was Reason s for apparently drawn up under the instructions of Mr. -Judgment. Mayer. The document itself is not signed by the Grand Trunk Railway Company. It was forwarded by Mr. Mayer to Mr. Robb on the 4th June, 1906. Mr. Robb returned it at once to Mr. Mayer in a letter of the 7th June, in which he states :— "Referring to your letter of June 4th and attached agreement. As I explained to Messrs. Dalrymple and Burnside whi'e in my office, the right to manufacture and use this lubricator must apply to the Grand Trunk Pacific as well as the Grand Trunk. I shall be glad if you will have the papers made out and signed in this way. " This letter was communicated by Mr. Mayer to Mr. Dalrymple by a letter of the 12th June, 1906,— and it is admitted that a copy of Mr. Robb's letter was sent with the letter of the 12th of June. Dalrymple and Burnside, who had previously been negotiating with Mr. Robb were aware of his position in the railway—they were aware that he had charge of that portion of the railway relating to the patents for invention; and they were aware that Mr. Robb had never receded from the position which he took, as shewn by the evidence of Dalrymple quoted above. They knew that Mr. Robb required that a new agreement should be drawn. It would have been better had the document in question been returned. It seems to have been filed away like other papers in the pigeon holes of the Grand Trunk Railway Company. It was not registered. Both Burnside and Dalrymple
VOL. XIII.] EXCIIEQUER COURT REPORTS. 51'7 knew that Mr. Robb who represented the Grand 1912 Trunk Railway Company,- was _the proper officer to THL IMPERIA r. accept it on behalf of the Grand Trunk Railway SUPPLY Co. Company. • • V. GRAND ' . Ingenious arguments are based upon the examina-TRUNK RWAY. Co. tion of Mr. Robb for discovery, and certain admissions Reasons for said to have been made by him. I have no doubt Judgment. whatever that Mr. Robb was truthfully relating the facts, as he understood them, when examined in the witness box in Montreal. And this is corroborated . by his letter, which I have quoted, to Mr. Mayer of the 7th June. I do not think that I can find that the agreement was ever accepted by the Grand Trunk Railway Company. Nor do I think that Burnside and Dalrymple were in any way misled by the act of Mr. Mayer. At all events Mayer had no power to bind the Grand Trunk Railway Company. I must therefore find this issue in favour of the Grand Trunk Railway Company. On the question of estoppel, . as I have mentioned above, it may not be necessary for me to deal with this question; but as the parties argued the case at full length, and as it may be helpful to have my views in case a higher court were of opinion that I have collie to, a wrong conclusion on the question as to whether the document is binding or not, I will give my views. The clause in the so called agreement— ' "It is understood that the above agreement does not "include the Grand Trunk Pacific Railway or the "Central Vermont Railway" might as well have been omitted from the document. The license ' without these words, if it were in force, would have been sufficiently explicit. It is not a covenant on the part of the Grand Trunk Railway Co., nor as I have stated, have the Grand Trunk Railway Company signed. the
518 EXCHEQUER COURT REPORTS. [VOL. XIII. 1912 document. I have found' no case where a form of THE license is identical with the one in question. The IMPERIA L SUPPLY CO. nearest case is the case of The Magic Ruffle Company v. V. GRAND El m City Co. (1) In that case the license was to TRUN K manufacture portions of four patents. There was Reasons for Judgment. a covenant and there were recitals. The court at page 156 concluded that the defendants might have been sued for breach of their contract. It also pointed out that the alternative remedy might have been adopted of treating them as infringers in an action for infringement brought. The facts are not the same. I think, however, on principle that if this document were a binding agreement on the Grand Trunk Railway Co., that estoppel would extend so as to prevent the Grand Trunk Railway Co., when being sued as infringers for manufacturing the patented inventions and selling to the Grand Trunk Pacific, from setting up as against the claim of the patentees the invalidity of the patents. I think there is a good deal of force also in the contention of Mr. Mitchell, that the latter part of the document which states,— "And we further covenant and agree with the said Company, that we will do all and every act and thing necessary to protect and preserve our interest in and right to the said inventions and the said letters patent when granted, and also in and to any patents hereafter granted for any modification or further improvement of said inventions, and will at all times fully protect the said companies and each of them in the enjoyment of the privileges hereby granted to manufacture and use the said inventions or improvements," etc. (1 ) 13 Blatch. 151.
VOL. XIII.] EXCHEQUER COURT REPORTS. 519 adds strength to the contention put forward on behalf 1912. of the plaintiffs.. .THE, IMPERIAL There is in this case no estoppel by recital unless suIPLY co. that part of the document which I have just referred GI i D to would amount to it. But estoppel may exist from Rw TARyu.gto. the relative positions of the parties even without iLeasone for recital. On this point I would refer to Terrell on Judgment. Patents, (1) ; Fulton on . Patents, (2) ; Nicolas on Patents, (3) ; Frost on Patents, (4) ; and Thornton on Patents British and Foreign, 1910, p. 324. In these text-books nearly all the later cases have been considered. I have examined a large number of them, but find no case in which a license is similar to the terms of the one in question. ' In most cases the licensee had agreéd to pay royalties. In Crossley v. Dixon, (5) ; it is pointed out that a license may be verbal and the licensee estopped from disputing the validity of the patents, so long as he uses them. (6). The question was raised by Mr. Lafleur at the trial that it would be open to the licensees to show the invalidity of the patents in order to show a failure of consideration. I think a consideration of the cases indicate that this could only be done where there was fraud in obtaining a license. There is no warranty • of the validity of the patents. There is no contention of that nature under these pleadings. A case that might be looked at which discusses a considerable number of the cases, is Vermilyea v. Canif, (7). It is a decision that the Chancellor of Ontario gave in 1886, and • deals with the question of attacking the patents. Before closing the judgment I think it advisable (1) 5th ed. 1909, 205. (5) 10 H: L. Cas. p. 293. (2) 4th ed. 1910, pp. 280, 283. (6) Clark v. Ady, 2 App. Cas. p. 425. (3) 1904, o. 99. (7) 12 Ont. R. 164. (4) 3rd ed. 1906, Vol. 2, pp. 115 and 158.
520 EXCHEQUER COURT REPORTS. [VOL. XIII. 1912 that I should give leave to the plaintiffs to • amend THE their pleadings and also their proof in one respect. IMPERIAL SUPPLY Co. I do not find in their proof of title as made at the trial GRIND any copy of the assignment from Herbert H. Brad- TRI Rwnr M . Co. field and Charles A. Myers of the earlier patent. In the agreement of the 5th of October, 1910, it is recited Reasons for Judgment, that " Whereas the said Herbèrt H. Bradfield and "Charles A. Myers by agreement in writing dated "April 6, 1910, did assign to the Imperial Supply Co., Limited, " etc. This assignment of the 6th April, 1910 has not been put in. If the plaintiffs so desire they are at liberty to put in a certified copy from the Patent Office of this assignment. I also do not find on the record any plea of estoppel. It seems to me that the plaintiffs should have such plea upon the record, if it is their intention to re'y upon it. Such a plea may also be filed. The Grand Trunk Railway Co., set up by counterclaim that the patent is void. There is no defence to this counterclaim. As I . understand it, the counterclaim is equivalent to a substantive action. Had the defendants applied for judgment on the counterclaim for default, it may be that they would have been entitled to judgment. If the plaintiffs so desire in order to make the record complete they can file whatever defence they deem necessary to the counterclaim. I would refer the solicitors of the parties to Rule 41 of the Exchequer Court, which has the force of a statute. The costs of this portion of.the trial are reserved to be dealt with when the case comes on subsequently to be tried, or if there is no further trial then they can be spoken to before me in Chambers. Solicitors for plaintiff: Casgrain, Mitchell, McDou-gall & Creelman. Solicitor for defendant: A. E. Beckett.
You are being directed to the most recent version of the statute which may not be the version considered at the time of the judgment.