IN BE BOSTON & FAIRHAVEN IRON-WORKS.
& F AIRBAVEN
(Di8trict Oourt, D. Ma88achu8ettll. November 18,1884.)
BANKRUPTCy-DEBTS PROVABLB-!BFRINGEHENT OJ!' PATEBT-PROFlTS-Rl!lv.
ST. U. 8. § 5067. A claim for an account' of profits against an infringer of a patent-right · provable against his estate in bankruptcy, under Rev. St. U. 8. § 5067.1
In Bankruptcy. O. E. WaBhbum, for the creditor. F. B. Greene, for the assignees.
NEI.SON, J. Cyril C. Child offered for proof against the estate of the Boston & Fairhaven Iroll-works, in bankruptcy, a decree for $5,640.26, recently rendered in his favor by the circuit court ofthe United States for this district, in a suit in equity for the infringement of a patent pending against the bankrupt corporation at the commencementofthe bankIt was admitted at the hearing that the decree was solely for profits actually received by the corporation before the bankrnptcy from the wrongful use of the invention secured by the plaintiff's 'patent, without any addition for damages; also that the decree might 'be admitted to proof under Rev. St. § 5106,if the court sh:ouldbeof 'opinion that such profits constituted a debt provable under the bankrupt
The bankrupt act allows proof of "all debts due and bankrupt at the time of the commencement of proceedings in bankruptcy, and all debts then existing, but not payable until a future day;'" 'and further provides that "all demands against the bankrupt, for' or onaecount of any goods or chattels wrongfully taken, converted, or withheld by him, may be proved and allowed as debts;"ttnd also provides that 4'whenthe bankrupt is liable for unliquidated damages arising' out of any 'COntract' or promise, or on account of any goods or chattels, wrongfully 1aken;converted, or withheld, the court may cause such danillgestobe .assessed in such mode as it may deem best, and the sum so assessed may 1>e proved against the estate." Rev. St. § 5067. The language of this 'Section is broad enough and was intended to include all debtiHounded ·on'contract, express or implied, and all wrongful appropriations 'of personal property of every description,for which an action at law or in eqility could be maintained against the ,
lNoTBBY TUB CoUBT. Reversed on appeal in. the circuit court by CoLT 1.,6n the 'ground that a claim for profitBfor the infringement oC a patent is a claitil forunliqui·dated, damages for a tort, and not provable; cli1ng, as a\lthorities Cor this. I'll re Schnchardt, 15 N. B. R. 161; Black ,.McClelland, 12 N.B. R. 481; In Hennocks'1 N. B. R.S7l.,Child v.Boston & Fairhaven Ilon-workiJ,187 M8sif.' 516, and Root 'Y. Co., lOS ",. S. 189. See 23 Fed..;J;tep. 880. . }:, .
It can be no valid objection to the proof that infringement of a patent is in the nature ora tort. Damages for mere personal torts, such as false imprisonment, (In re Henn'ocksburgh. 7 N. B. R. 37,) assault and battery, (Black v. McClelland, 12 N. B. R.481,) deceit, (In re Schuchardt, 15 N. B. R. 161,)slander, (Zimmer v. SchleehauJ, 115 Mass. 52,) are not provable, unless reduced to judgment or otherwise liquidated before bankruptcy. But wherever an action of trover, or trespass, or money had and received, will lie at common law for the conversion of property, the cause of action is provable. . has unlawfully converted to his own use personal propeity:;, or has committed trespass' on land by cutting and carrying away growing trees, or removing fixtures; or has obtained money or property by fraud, forgery,or embezzlement-the cause of action is provable as a debt. "Debts created by the fraud or embezzlement of the bankrupt" are provable. Section 5117. The wrongful conversion by the husband of the. wife's separate property is provable as an equitable debt. In re Blandin, .. Low. 543. These are all cases of tort, yet they are provable ,nevertheless. To the objection,that the claim is for unliquidated damages for a tort, there a,re tWQ anSWers: First, the act allows proof of unliquidated damages for the wrongful conversion, of all kinds of person81 property, and provides for their assessment; and, second, profits of an infringer of a patent ,are not unliquidated damages. They are as capable of being ascertained by simple computation, as the amount due on a promissory note. Courts of equity do not award unliquidated damages except in cases where there is no possible remedyatJaw. The right to damages in addition to profits given by Rev. St. § 4921, is a statute remedy, and does not affect the question. Nor is it an objection that such pronts are only recoverable in equity. Equitable debts are provable on the same footing as legal debts. It was said by Judge LoWELL in Re Buckha'?l8e, 2 Low. 331: "I have often decided that equitable debts may be proved under our bankrupt act, and I am not aware that a contrary decision has been made." See, also, In re Blandin, 8upra. It is a rule that any debt for which the creditor could have maintained a bill in equity against the bankrupt at the date of the bankruptcy can be proved; ancithe right to sue in equity is conclusive in favor of the right to iq bankruptcy. The only exception is when the claitnis barred by some. conflicting equity as between different classes of creditors. In re Lane, 2 Low. 333. In such cases the Aebtmay be proved against a surplus, and is released by the discharge. ,Th!l district court is possessed, of. ample powers as a court of equity to ascertl1.iQthe amount due on: a:nyequitable debt. The theory on which couJ:1sof. equity award pronts against an infringEt is stated and explained with great force and clearness in the elaboJ.:ateJuogment of Mr. Justice MATTHEWS in Root v. Railway 00.,105 U. S. 189. It is only necessary to refer to that case for all the learning and aU the leading on the supject. It was decided in that case ·that a bill for an account of pronts 0111y; filed after the expiration of the patent, when the right to an injunction no longer remained, could not
IN RE BOSTON &: FAIRHAVEN IRON-WORKS.
be maintained, for the reason that the right to an account of profits was incident to the right to an injunction, and the fact of infringement alone ::reated no such fiduciary relation between the patentee and the infringer as to confer jurisdiction on a court of equity to administer the trust,. and compel the trustee to account. But in deciding this the court was careful to reaffirm with emphasis the well-established rule that, having once acquired jurisdiction upon the equitable ground of relief by injunction, the court would retain the cause for the purpose of administering a complete remedy; that, not being permitted by the principles and practice in equity to award damages, it would treat the infringer as though he were a trustee· for the patentee in respect to profits, and would give profits as a Elubstitute for damages; and in taking the account it would apply the same rule which l.t adopts in cases of trustees who have committed breaches of trust by an unlawful use of the trust property for their own advantage, and require the infringer to refund the amount of profit which he has actually realized. Pages 214, 215. The court cited with approval the language of Mr. Justice MILLER in BurdeU v. Denig, 92 U. S.716:, "ProfitsllJ.'e not the primary or true criterion of damages for infringement in an al:ltion .at law. That rule applies eminently and mainly to cases in eqUity, and is based on the idea that the infringer shall be converted into a trustee as to those profits, for the owner of the patent which he infringes." ,What or all things in the world the court did not decide in Root v. Railway Co', was that, having jurisdictiop. to grant relief by injunction, it would not treat the infringer as a trustee for the patentee as to profits, and. that profits are unliquidated damages. When the right to an injunction exists, the infringer's liability for profits is the same as that of a trustee who has misapplled the trust property to his own advantage; and he is held liable to account on the just and equitable principle applied in so many cases, hath by courts of law and equity, that the wrongful use of the property of another raises on the part of the wrongdoer an implied contract to account to the owner for what has been gained by the use. If the patent has expired before the commencement of the proceedings, without suit brought, profits would not be provable in bankruptcyany more than they would be recoverable in equity. Root v. Railway Co. is authority for that. They are a debt in bankruptcy when they are a debt in equity, and no less or more a debt in one case than in the other. Profits are frequently decreed against an infringer where no injunction is or can be grl\nted. Clark v. Wooster, 119 U. S. 322, 7 Sup. Ct. Rep. 217; Hoev. Boston Daily Ad?J. Co.,14 Fed. Rep. 914. Whether damages for infringement are provable, it is not necessary to inquire, that question not now being before the court. Under the late English bankruptcy act of 1869, which differed from our act in expressly excluding from proof all demands in the nature of unliquidated damages founded on tort, and in not permitting proof of demands for goods and chattels wrongfully taken. converted, or withheld by the bankrupt, but which as to other provable debts was the same, profits for the infringement of a patent were provable as a debt arising in v.29F.no.15-50
contract. Watson v. HoUiday, 20 Ch. Div. 780. In this respect the present English bankruptcy act of 1883 is the same as that of1869. Robs. Banks, (4th Ed.) 258; Id. (5th Ed.) 281, 282; 32 & 33 Viet. c. 71, § 31;46 & 47 Viet. c. 52, § 37. Watson v. HoUiday was affirmed in the Court of Appeal; Sir GEORGE J EaSEL, M. R., in pronouncing the judgment of the court, remarking: "The only fault I have to find with the judgment of the court below is that it is too long. The case is very plain, and beyond argument." 31 W; R. 536; 48 Law T. (N. S.) 545; or, as reported in 52 Law J. Ch. 543: "The answer to that objection is that it is not a demand for damages, and is provable; the point is simply unarguable."S. C. Jessel, Dec. 489. The case is not to be found with the Court Appeal cases in the Law Reports, having been left out apparently as not presenting a questitm ofenough difficulty and uncertainty to justifY its" being printed. By the law of England, as by ours, profits for infringement are given onlY'a8 incident to the remedy by injunction. Root v. Ral1/way Co., 105 U. S.207-213. It was held by Judge STORY that damages for the infringement of a patent were a debt within the meaning of a statute making the members of a manufacturing corporation liable for its debts in certain cases. (hrver v. Brailntree Manu!g 00.,2 StorY, 432. The supreme jUdicial court of Massachusetts has recently decided that profits of ari iljlfringer were not a debt, within the meaning of a similar statute. (Jhild v. B08fnn « Fairhaven IrfYilt-work$, 137 Mass. 516. But these cases can have but little bearing in construing the provisions of a statute establishing an elaborate and comprehensive system of laws, such as the bankrupt act. The case shows that the bankrupt corporation has received money from the wrongful use of property belonging to this creditor, for which it was liable to account, and at the date of 'the proceedings he was prosecuting his remedy for its recovery.'. The amount due has since been ascertained by the decree of the Cil'Guit court in the manner prescribed by law. The. estate has been augmented at his expense to the full amount of the decree. That the .patent had not expired before suit brought is testified by the decree itself. The debt does not seem to lack a single element necessary to make it provable. The same fault that was found by court of appeal with the opinion ofK.AY,J., in Wat. 80n v. HoUiday might also with equal justice be found with this; and for the same reason. The point is altogether too plain for argument. In my judglIlent it would be a pernicious as well as unreasonable interpretation of the ,act to hold that debts like this are not to shiue in the distribution oithe bankrupt's Proof allowed.
EASTERN PAPER-BAG CO. tI. STA.NDARD PAPER-BAG 00.
787 Co. and
CO. and others 1J. others.
D. Ma88achU8eft8. January 26, 1887.j
In reissued letters patent No. 9,202, of May 18, 1880, to Margaret E. Knight, for improvements in machines for making satchel-bottom paper bags, the sence of the improvement is the employment, in the makinf of the diamond fold. of a finger to push back a portion of the open end 0 the tube in connection with a blade or tucking-knife, which moves under the finger. In defendants' machine the diamond fold is only partially formed by means of pincers or nippers mounted on a moving roller, which takes hold of the upper ply of the tube, and draws it a proper distance over the roller, while the under ply of the tube is held down by a spear-pointed separator. Held no infringement, the nippers mounted on the movmg roller not being the equivalent of the tinger, nor the moving roller the equivalent of the tucking-blade. 2. SAllE-ADJUSTABLE MACHINEs-DISCLAIMER. The Chandler invention (letters \latent No. 267,774, of November 21,1882, to Clarence A. Chandler) is for an Improvement on the Knight machine, by means of which different sizes of bagsca.n be made a.djustable on the same machine. This is done by makinq; one portion of the machine adjustable to the other. Held, in view of the dIsclaimers in the specifications, that the invention does not cover all mechanisms for making satchel-bottom paper bags, in which the tube-forming, feeding, and cutting mechanism, and the diamondfQld la-ying mechanism, are in a fixed frame, and the bottom-folding and past· ing mechanisms are in an adjustable frame, which is adjustable backward ana forward with relation to the fixed frame.
PATENTS FOR lNvENTIONll-SATCHEL-BoTTOM PArER BAGS-1NFRINGEMEN'l'EQUIVALENT MECHANISMS.
In Equity. bill for infringement. B. F. Thurston and Livermore &: Fi8h, for complainants. Cha:wlIu/g Smith, for defendants.
CoLT,J. The defendants are charged with infringement of the fifth claim of reissued letters patent No. 9,202, dated May 18, 1880, granted to Margaret E. Knight, and of letters patent No. 267,774, granted November21, 1882,to Clarence A. Chandler. Both patents are for improvements in machines for making satchel-bottom paper bags. The fifth claim ofthe Knighheissue reads as follows: "Tbe finger, N, or device, whetber fixed or movable, to operate upon the inner side of the tube, and bold or push back a portion of tbe open end of the tube wbile the diamond fold is being forined." In the patent the patentee says that she believes herself to be the first to invent a device to hold back or push back a point or portion of one edge o(the paper tube while the blade or tucking-knife forms the first fold. The essence ofthe Knight improvement is the employment, in the making of the diamond fold, of a finger to .push back a portion of open end of the tube in connection with a blade or tucking-knife which moves under the finger. It is manifest that the finger alone could not make the diamond fold, but it is the finger co-operating with the blade which produces the result. In defendants' machine the diamond fold. is formed, or partially fOlmed, by means of pincers or nippers, mounted on a moving'. roller,