the original claims are repeated in the reissue, the licensee may have them construed as broadly as they would have been in the original. 4. PATENTS ~211(3)—LICENSE-CONSTRUCTION.

When applicant and licensee have dealt upon the theory that pending claims, if allowed, would cover the licensee's product, the licensee may not, after the patent issues with these claims, deny liability thereunder. 5. PATENTS 211(2)-LICENSE-SUIT FOR ROYALTIES-DEFENSES.

Where a license contract required the payment of royalties, such royalties to cease and determine in the event the patent should be adjudged invalid, the licensee cannot set up the invalidity of the patent as a defense o a suit for royalties.

6. PATENTS

211(1)—LICENSE CONTRACT-CONSTRUCTION-ROYALTIES. At a time when an application for a patent was in interference with others, the applicant made a contract to grant an exclusive license thereunder, which provided that "upon the issue of the final award of priority in favor of" the applicant the licensee should pay a royalty on such of its manufactures "as are covered by said patent." After the patent issued a reissue was applied for and obtained. Held that no royalties became due and payable until the date of the reissue, since until that time it could not be determined what was covered by the patent, but that the royalty period dated back to the specified final award.

7. PATENTS 219(4)-LICENSES-SUIT FOR ROYALTIES-CROSS-SUIT.

*

In a suit brought to recover royalties under a contract for an exclusive license, which provided that the royaity should "cease and determine in the event that a court of competent jurisdiction shall declare said patent null and void," the defendant may properly be permitted by answer, under equity rule 30 (198 Fed. xxvi, 115 C. C. A. xxvi), to raise the issue of validity, not for the purpose of avoiding payment of royalties accrued, but of obtaining a decree terminating the contract.

Appeal from the District Court of the United States for the Western Division of the Southern District of Ohio; Howard C. Hollister, Judge.

Suit in equity by William Robinson against the Miami Cycle & Manufacturing Company. Decree for complainant, and defendant appeals. Reversed.

July 6, 1908, Robinson, the appellee, was the owner of three patents, and of the inventions covered by six pending applications for patent, all relating to coaster brakes for bicycles or other more or less analogous features. The appellant, hereinafter called the company, was manufacturing coaster brakes pursuant to the O'Horo patent, No. 860,234, of July 16, 1907 (reissued September 28, 1909, No. 13,023). Robinson's earliest application (hereinafter called the basic one) had been pending since October 8, 1897. The company's attorneys saw, in one of the issued Robinson patents, some reference to this early application, and so were led into communication with him. It was found that this invention was of such character as to make it likely that he would be entitled to claims broad enough to dominate the entire coaster brake art and to reach all the forms then being put on the market by several manufacturers; but that application was tied up in interferences. Negotiations were had, which resulted in the execution of a written contract between the company and Robinson, made July 6, 1908. Certain specially important provisions are copied in the margin; but the substance of the whole contract was that Robinson was to assign to the company all his patents and inven

18. Upon the formal transfer by Robinson of the title of all of Robinson's inventions, applications and patents, as recited above (with the exception of application serial No. 654,532, filed October 8, 1897), and the formal transfer of an exclusive license under the application filed October 8, 1897, the Cycle Company will pay to Robinson the following considerations, to wit: (a) Two thousand five hundred dollars ($2,500) cash; (b) a formal order for the

tions, except the basic application, and under that one he was to give the company an exclusive license; that the company, by its attorneys, should take over the prosecution of the pending applications and interference cases, and prosecute them all at its expense; that the company should presently pay Robinson $12,500 in stock and cash; that when Robinson was awarded the broad invention, as was expected, the company should pay him a license fee of 10 cents per brake, with minimum annual payments of $5,000, until he should receive $20,000 in royalties, whereupon the title to the broad patent should be assigned to the company, subject to further royalty payments and certain contingencies. The patent upon the basic application issued on July 8, 1913, No. 1,067,230, and reissued February 17, 1914, No. 13,690. Controversies between the parties finally resulted in the filing of this bill in the court

transfer to Robinson by the Cycle Company of 100 shares of the stock of the Cycle Company, which stock has a par value of $100 per share.

9. Upon the issue of the final award of priority in favor of Robinson in interference proceedings in the matter of the application of October 8, 1897, serial No. 654,532, in which Robinson is involved with other contestants, the Cycle Company agrees to pay to Robinson under the terms of the exclusive license recited in paragraph 8, a royalty fee of ten (10) cents upon such coaster brakes made by or for the Cycle Company as are covered by said patent, such royalty to cease and determine in the event that a court of competent jurisdiction shall declare said patent to be obtained null and void.

10. From and after the final award recited in paragraph 9, and unless the application and patent is declared invalid as recited in paragraph 9, the Cycle Company covenants and agrees to pay to Robinson, as a minimum yearly royalty, the sum of five thousand dollars ($5,000), payable quarterly.

15. The exclusive license given the Cycle Company by Robinson under the application of October 8, 1897, and patent to be obtained, is to continue so long as the Cycle Company complies faithfully with the terms of this agreement.

16. Upon the payment by the Cycle Company to Robinson of royalty fees under the application of October 8, 1897, and patent to be obtained, amounting to a total sum of twenty thousand dollars ($20,000), then Robinson hereby agrees to assign to the Cycle Company the entire title therein, subject, however, to the continuance of royalties thereunder as recited in paragraph 9.

17. The Cycle Company has the right to license others under any of the Robinson inventions, applications and patents upon the payment by the Cycle Company to Robinson of half the license fee so exacted.

18. Robinson agrees to join the Cycle Company in any action in or out of the Patent Office or in the courts which may be necessary to enforce the payment of royalties by others, or for the accounting for past profits or damages, at the expense of the company.

20. The Cycle Company agrees to use its best endeavors to collect all royalties which are or may be due under the Robinson inventions, applications and patents at the expense of the Cycle Company, and such net sums or their equivalent as may be collected thereunder shall be equally divided by Robinson and the Cycle Company.

21. The Cycle Company agrees to engage counsel at its own expense to conduct all proceedings under the Robinson patents, inventions and applications in the Patent Office and before the courts, and Robinson agrees to the retaining of such counsel in securing and maintaining their validity at the expense of the Cycle Company.

22. If the Cycle Company shall at any time cease to manufacture with due diligence marketable hubs covered by any of the Robinson patents, or shall discontinue, through failure or other cause, to do business, then the Robinson patents shall be reconveyed to Robinson without compensation or prejudice. 23. The Cycle Company shall be empowered to enter into trade relations with other manufacturers looking toward the establishment of satisfactory prices and the control of the coaster brake business of the United States, with a view of securing to both parties to this agreement the maximum amount of royalty fees attainable.

below. It prayed disclosure of the number of brakes manufactured by the company or its licensees and asked a decree for the minimum royalties due, and also certain other relief. The company answered, proofs were taken, and, on final hearing, a decree was made finding minimum royalties and interest thereon due, and directing immediate payment thereof, amounting to about $20,000, and making a reference to a master to ascertain the number of brakes made which were within the contract, and thus to learn whether royalties were due in excess of the minimum. The company brings this appeal. Walter B. Grant, of Boston, Mass., and Fenelon B. Brock, of Washington, D. C., for appellant.

Leonard Garver, Jr., of Cincinnati, Ohio, and John M. Coit, of Washington, D. C., for appellee.

Before WARRINGTON, KNAPPEN, and DENISON, Circuit Judges.

DENISON, Circuit Judge (after stating the facts as above). 1. Whether the bill states a case for which there is no adequate remedy at law may be matter of grave doubt. However, it undertakes to rest upon certain established grounds of equitable jurisdiction; and although the defendant challenged that jurisdiction below, it has assigned no error upon the overruling of its objection. Under these circumstances, we find no occasion to look into the question.

[1] 2. The first defense, in order of presentation, is that Robinson cannot enforce the contract, because he has never granted the exclusive license which he agreed to give. Further statement of facts here becomes necessary. Robinson was an inventor and patent solicitor of large experience. He had been conducting his own cases. After his original application had been long tied up in interferences, he devised the plan of filing what he called a divisional application, thinking, apparently, that he could thereby proceed, free in some respects from the complications which the interferences had brought about. Accordingly, in June, 1905, he filed this divisional application. It consisted of a copy of the specification and drawing and some of the claims of the original. In July, 1908, the Patent Office had repeatedly refused to give consideration on the merits, such refusal being for the reason that there was nothing truly divisional about it; and Robinson was insisting, both that it did contain claims not allowable under the basic application, and that the claims common to it and the former might eventually be assigned to one or the other, as the Office might direct. The contract of July 6, 1908, included this divisional application among the list of eight patents and applications which were to be assigned to the company. Immediately upon the signing of the contract, an assignment was prepared covering these eight, and the paper was executed and delivered. The contemplated exclusive license under the basic application not being entirely finished that day, it was arranged that Robinson would go home, and this paper would be sent to him the next day, and he would sign and return it. It was so prepared and sent. He declined to execute it, saying that, the moment the company's attorneys were in charge of the applications, they could transfer the broad claims from the basic to the divisional, to which the complete title had already passed, and so could defeat. the purpose of the contract; he therefore asked that the divisional

be reassigned to him, whereupon he would include both the original and divisional in his license. This request was neither granted nor refused, but consideration was postponed. During all the years while the application was pending, and after the patent issued, there were occasional references by both parties to their respective positions on this subject, but there never was a positive demand for the license made as a condition of continuing the contract in force nor was there an absolute refusal to give it; but the company proceeded with the prosecution of the matter in a manner wholly inconsistent with any intention to claim forfeiture for lack of this instrument.

Robinson's original refusal to execute the license was unjustified. It amounted to saying that, although he had executed a contract in which there was neither fraud nor mutual mistake, he would not carry it out because he had later observed that he had left open one possible door by which the other party, if so disposed, might attempt to defraud him. All must agree that to transfer the broad claims to the divisional application, for the purpose and with the effect he feared, would have been to attempt a fraud upon him of which no reputable attorney would have been guilty, which he had no reason to apprehend, and which could not have been successfully carried out. It is true that the attorneys continued Robinson's efforts to get some broad claims allowed in the divisional case, but there is no reason to think that this was with any fraudulent intention; and it is true, also, that after Robinson ousted them from management of the basic case, in June, 1913, they threatened to misuse their power over the divisional; but they never tried to do so, and the threat was measurably, if not quite, justified as a matter of self-defense against Robinson's misconduct. Further, in so far as the divisional application, in July, 1908, supported or could thereafter be made to support details of form rightly separable from the basic claims, it was within the fair intent of the parties that such divisional matter should be included in that which was being absolutely transferred to the company. The substance of the arrangement was that the company presently became absolute owner of all subsidiary inventions 2 and exclusive licensee of the basic one. The company could rightfully have insisted upon the immediate execution of the license as agreed. However, the divisional application then contained nothing which the Patent Office considered properly divisional. Whether it might thereafter be made to do so was wholly contingent and rather improbable, and there is apparently no very substantial reason why the company might not have complied with Robinson's request. Both parties were content to let the matter of reassignment to Robinson drift along. It was not important while the interference made everything contingent; and later, after the patent issued, there was no possibility that the broad claims could be transferred to the divisional, and the latter was either negligible, because there was nothing left in it, or else it belonged to the company, because containing something rightly separable from the basic appli

2 Subject to a reverter clause (paragraph 22), which is rather incomprehensible, if it is intended to apply to the inventions assigned and in the use of which by the company Robinson had no apparent interest.

cation. Probably there was nothing left, because it was allowed to die. Certainly since the patent issued, the existence of legal title in the company to the divisional application has not afforded even a plausible pretext for not executing the formal license for the basic invention.

Merely as between the parties, and until the patent issued, there was no particular necessity for the formal license nor any prejudice to the company from its nonexecution. The contract of July 8th fixed the rights of the parties; and not until the patent issued could such a formal instrument have been of any value to the company for the purpose of enabling it to license others. Any such licenses to others could not be effectively granted before the issuing of the patent, and if the company desired to make contracts that it would license others when the patent was obtained, it could make those contracts as well on the basis of the contract of July 8th as upon a more technical basis. It follows that Robinson's conduct, in not giving the formal license up to the time when the patent issued, cannot be considered a substantial or material breach which justifies the company in denying its contract liability. After the patent originally issued, the company never took the position that the failure to give the license had ended its rights and liabilities under the contract. When Robinson, in October, 1913, claimed that the company had broken the contract and forfeited all rights, and so demanded a reassignment of everything, the company responded:

"If you propose to treat the agreement as having been broken, we will be compelled to take proper steps to put us in the position we both were in prior to the date of the agreement. Has the reissue been granted?"

Robinson then dropped the subject until, in December, 1913, he demanded royalty. The attorneys for the company replied that the contract had been broken by Robinson by his personal interference in the issue of the original patent and by his application for reissue, and that, because of this repudiation by Robinson in these two particulars, they had advised the company to turn everything back to him, if certain compensations could be agreed upon; but this termination. of contract rights was tentative, and based expressly on grounds other than the failure to execute the license. The company made no demand for this formal license until and unless by its letter of April 1, 1914 (after the reissue), in which it said, in reply to a further demand for royalty payments:

"Dr. Robinson's contract has not yet been executed upon his part. He has failed to execute and forward to us the exclusive license under the 1897 application, including the right to license others. Are you ready to forward that license?"

To this Robinson's attorneys replied that the original contract itself sufficiently gave the license. After further correspondence, and demands to know the number of the coaster brakes manufactured, etc., the company's attorney answered, on April 27, 1914:

"I cannot well answer the questions raised by your letter, until we ascertain from you whether you are ready to turn over to us an exclusive license under the 1897 application and in accordance with the terms of the contract."