Chesapeake & Potomac Telephone Co. v. Baltimore & Ohio Telegraph Co.

7 A. 809, 66 Md. 399, 1887 Md. LEXIS 39

• Court: Court of Appeals of Maryland
• Decided: January 5, 1887
• Status: Published

Opinion

Alvey, C. J.,

delivered the opinion of the Court.

This was an application by the appellee, a telegraph company, to the Court below for a mandamus, which was accordingly ordered, against the appellant, another telegraph company, but doing a general telephone business.

Both the appellant and appellee are corporations formed under the general incorporation law of this State, (Act 1868, ch. 471,) and-both were organized “for constructing, owning, leasing and operating telegraph lines within this State, or from or to any point or points within this State, or upon the boundaries thereof.” The appellee was incorporated on the 7th day of January, 1882, by the name of the Baltimore and Ohio Telegraph Company of Baltimore City, and the appellant was incorporated on the 10th day of March, 1834, by the name of the Chesapeake and Potomac Telephone Company of Baltimore City. The principal offices of both companies are in Baltimore City; the appellee doing a large and extensive general telegraph business, and the appellant doing a general telephone business.

Section 138 of the General Incorporation Law declares that “ Any person, association or corporation, owning any telegraph line doing business within the State, shall receive despatches from and for other telegraph lines, associations and companies, and from and for any individual, and shall transmit such despatches in the manner established by the rules and regulations of such telegraph lines, and in the order in which they are received, with impartiality and good faith, under the penalty of one hundred dollars for every neglect or refusal so to do, to be recovered, with costs of suit, in the name and for the benefit of the person or persons sending or desiring to send such despatch; provided, however, that arrangements may be made with the proprietors or publishers of newspapers for transmission of intelligence of general and public interest, for the purpose of publication out of its order.” And by the amendatory Act of 1884, ch. 360, the general incorporation law is made in terms to confer authority to form corporations to construct, own or operate telephone as well as telegraph lines ; and by the sam,e amendatory Act, it is provided that the several sections of the general incorporation law relating to telegraph companies, “shall likewise apply to and have full force and effect in respect to telephone companies created under the provisions of this Act.”

This latter Act is supposed to have been passed in order to remove all possible doubt as to the authority, under the general incorporation law, for incorporating telephone companies. But it is clear, if we take the term “ telegraph ” to mean and include any apparatus or adjustment of instruments for transmitting messages or other communications by means of electric currents, and signals, that term is comprehensive enough to embrace the telephone. And that the telephone is so embraced within the definition of the telegraph has been expressly decided in England, after the most careful analysis and comparison of the different instrumentalities, and the manner of using thepi, in the two systems. Att’y-Gen. vs. Edison Telph. Co., 6 Q. B. Div., 244. Therefore, notwithstanding the appellant was organized as a telegraph company, under the general incorporation law before the passage of the Act of 1884, ch. 360, it was, and still is, fully authorized to do a general telephone business; and, in doing such business, it is subject to the provisions of the general incorporation law that apply to telegraph companies.

The appellant appears to he an auxiliary company, operating the telephone Exchange under the patents known as the Bell patents. Those patents, formerly held by the Rational Bell Telephone Company, are now held by the American Bell Telephone Company, a corporation created under the law of the State of Massachusetts. The patents, with the contracts relating thereto, were assigned by the former to the latter company, prior to the 23rd of May, 1882; and it is under a contract, of the date just mentioned, that the appellant acquired a right to use the patented devices in the operation of its system of telephonic exchanges.

In the agreed statement of facts, it is admitted that all the telephones used by the Chesapeake and Potomac Telephone Company, (a company to which the appellant is an auxiliary organization,) and also all the telephones used by the appellant in its Exchange in the City of Baltimore, and elsewhere in the State, are the property of the American Bell Telephone Company. It is alleged by the appellee and admitted by the appellant, that the offices of the Western Union Telegraph Company of Baltimore City are connected with the Telephone Exchange of the appellant, and that when a subscriber to the Telephone Exchange wishes to send a message by way of the lines of the Western Union Telegraph Company, the subscriber calls up the Telephone Exchange, and the agent there connects him with the office of the Western Union Telegraph Company, and the subscriber thereupon telephones his message over the lines of the appellant, to the Western Union Telegraph office; and a like process is repeated when a message is received by the Western Union Telegraph Company for a subscriber to the Telephone Exchange of the appellant. The appellee is a competing company, in the general telegraph business, with the Western Union Telegraph Company. And being such, it made application to the appellant to have a telephone instrument placed in its receiving room in Baltimore, and that the same might he connected with the Central Exchange of the appellant in that city ; so that the appellee might he placed upon the same and equal footing with the Western Union Telegraph Company, in conducting its business. This request was refused, unless the connection be accepted under certain conditions and restrictions, to be specially embodied in a contract between the two companies, and which conditions and restrictions do not apply in the case of the Western Union Telegraph Company.

It appears that there were conflicting claims existing as to priority of invention, and alleged infringement of patent rights, which were involved in a controversy between the Western Union Telegraph Company and others, and the National Bell Telephone Company, to whose rights the American Bell Telephone Company succeeded; and in order to adjust those conflicting pretensions, the contract of the 10th of Nov., 1879, was entered into by the several parties concerned. The contract is very elaborate, and contains a great variety of provisions. By this agreement, with certain exceptions, the National Bell Telephone Company was to acquire and become owner of all the patents relating to telephones, or patents for the transmission of articulate speech by means of electricity. But while it was expressly stipulated, (Art. 13, cl. 1,) that the right, to connect district or exchange systems, and the right to use telephones on all lines, should remain exclusively with the National Bell Telephone Company, (subsequently the American Bell Telephone Company,) and those licensed by it for the purpose, it rvas in terms provided, that “such connecting and other lines are not to be used for the transmission of general business messages, market quotations, or news, for sale or publication, in competition with the business of the Western Union Telegraph Company, or with that of the Gold and Stock Telegraph Company. And the party of the second part, [National Bell Teleph. Co.] so far as it lawfully and properly can prevent it, will not permit the transmission of such general business messages, market quotations, or news, for sale or publication, over lines owned by it, or by corporations in which it owns a controlling interest, nor license the use of its telephones, or patents, for the transmission of such general business messages, market quotations, or news, for sale or publica-. tion, in competition with such telegraph biisiness of the Western Union Telegraph Company, or that of the Gold and Stock Telegraph Company.” The contract of the 23rd of May, 1882, under which the appellant derives its right to the use of the patented instruments, was made in subordination to the prior contract of the 10th of Rov., 18T9, and contains a provision to conform' to the restrictions and conditions just quoted. In that subordinate contract, it is provided, that “no telegraph company, unless specially permitted by the licensor, can be a subscriber, or use the system to collect and deliver messages from and to its customers,” &c.

These contracts are pleaded and relied on by the appellant as affording a full justification, for exacting from the-appellee a condition in the contract of subscription to the Exchange, that the latter should observe the restrictions in favor of the Western Union Telegraph Company. The appellant contends that these restrictive conditions in the contracts recited are binding upon it, and that it is not at liberty to furnish to the appellant, being a telegraph company, the instruments applied for and place them in connection with the Exchange, unless it be subject- to the restrictive conditions prescribed. And if this be so, the Court below was in error in ordering the mandamus to is-sure. But is the contention of the appellant well founded, in view of the .nature of the service that it has undertaken to perform?

The appellant is in the exercise of a public employment, and has assumed the duty of serving the public while in that employment. In this case, the appellant is an incorporated body, but it makes no difference whether the party owning and operating a telegraph line or a telephone exchange be a corporation or an individual, the duty imposed, in respect to the public, is the same. It is the nature of the service undertaken to be performed that creates the duty to the public, and in which the public have an interest, and not simply the body that may be invested with power. The telegraph and telephone are important instruments of commerce, and their service as such has become indispensable to the commercial and business public. They are public vehicles of intelligence, and they who own or control them, can no more refuse to perform impartially the functions that they have ássumed to discharge, than a railway company, as a common carrier, can rightfully refuse to perform its duty to the public. They may make and establish all reasonable and proper rules and regulations for the government of their offices and those who deal with them; but they have no power to discriminate, and while offering ready to serve some, refuse to serve others. The law requires them to be impartial, and to serve all alike, upon compliance with their reasonable rules and regulations. This the statute expressly requires in respect to telegraph lines, and, as we have seen, the same provision is made applicable to -telephone lines and exchanges. The law declares that it shall be the duty of any person or corporation owning and operating any telegraph line within this State (which, as we have seen, includes a telephone exchange,) “to receive dispatches from and for any telegraph lines, associations or companies, and from and for any individual,” and to transmit the same in the manner established by the rules and regulations of the office, “and in the order in which they are received, with impartiality and good faith.” And such being the plain duty of those owning or operating telegraph lines, or telephone lines and exchanges, within this State, they cannot he exonerated from the performance of that duty, hy any conditions or restrictions imposed hy contract with the owner of the invention applied in the exercise of the employment. The duty prescribed hy law is paramount to that prescribed by contract.

Eor can it be any longer controverted that the'Legislature of the State has full power to regulate and control, within reasonable limits at least, public employments and property used in connection therewith. As we have said, the telegraph and telephone both being instruments in constant use in conducting the commerce, and the affairs, both public and private, of the country, their operation therefore, in doing a general business, is a public employment, and the instruments and appliances used are property devoted to public use, and in which the public have an interest. And such being the case, the owner of the property thus devoted to public use, must submit to have that use and employment regulated by public authority for the common good. . This is the principle settled hy the case of Munn vs. Illinois, 94 U. S., 113, and which has been followed by subsequent cases. In the recent case of Hockett vs. State, 105 Ind., 250, where the cases upon this subject are largely collected, it was held, applying the principle of Munn vs. Illinois, that it was competent to the State to limit the price which telephone companies might charge for their patented facilities afforded to their customers. And if the price'of the service can he lawfully regulated by State authority, there is no perceptible reason for denying such authority for the regulation of the service as to the parties to whom facilities should be furnished.

But while not controverting the general principle stated, it has been strongly urged in argument for the appellant, that the ownership of the American Bell Telephone Company of all telephone apparatus, constructed by that company or its agents, being absolute and exclusive, it had the right in granting any license to use this apparatus to limit such use by any conditions which it saw proper to impose upon the licensee. That in this case the licensee acquired but a limited right, and that it could impart no greater right to a subscriber to the Exchange than that possessed by the licensee itself.

It is certainly true, as contended by the appellant, that the letters patent granted to Bell conferred upon him, his heirs and assigns, for a limited time, a monopoly in the invention or discovery patented, and the exclusive right to mate, use and .vend the tangible property brought into existence by the application of the principle of the discovery or invention, for which the patent issued. But it does not follow that those letters patent conferred upon him, or his assignees, any such exclusive right to apply or use the tangible property produced in a maner that other property could not be lawfully used. The license to use the telephone instruments in conducting and operating a telephone exchange,at once dedicated or devoted the instruments, to the extent of the requirements of that system or exchange, to public use ; and so soon as the office of exchange was opened to the public, the instruments employed became instruments of public service, and like all other property employed in the service, became subject to public regulation and control. And the fact that those instruments were the product of a patented invention or discovery, and the licensee had agreed to use them in serving the public with certain restrictions, inconsistent with the public regulation, can in no way, nor to any extent, relieve the party in control of the Exchange from the full discharge of his duty under the law.

In the case of Patterson vs. Kentucky, 97 U. S., 501, it was held that where, by the application of the invention or discovery for which letters patent had been granted, tangible property had come into existence, its use was, to the same extent as that of any other species of property, subject to State control and regulation. In delivering the opinion of the Court in that case, Mr. Justice Harlan said: “These considerations, gathered from the former decisions of this Court, would seem to justify the conclusion that the right which the patentee or his assignee possesses in the property created hy the application of a patented discovery must he enjoyed subject to the complete and salutary power with which the States have never parted, of so defining and regulating the sale and use of property within their respective limits as to afford protection to the many against the injurious conduct of the few. The right of property in the physical substance, which is the fruit of the discovery, is altogether distinct from ,the right in the discovery itself, just as the property in the instruments or plate by which copies of •a map are multiplied is distinct from the copyright of the map itself.” The same doctrine was reiterated in the case of Webber vs. Virginia, 103 C. S., 344, 348.

How, applying to the case the principles stated, it would seem to be clear that there is nothing in the rights secured by the letters patent to Bell, and now held by the American Bell Telephone Company, nor in the contracts referred to, that justified the appellant in attempting to impose upon the proposed subscription to the Exchange by the appellee, the restrictive conditions to which we have referred. By insisting upon such restrictive conditions there was an unjust discrimination made against the appellee and in favor of a competing company. It was to prevent such discrimination that the law was enacted to which reference has been fully made.

The question presented in this case, and which we have decided, has been presented and decided by other Courts of the country, though not with entire unanimity. In Ohio, under a statute very similar to our own, the question was presented in the case of the State vs. The Telephone Co., 36 Ohio St., 296. In that case the Supreme Court held, that under the statute requiring that telegraph companies should receive dispatches from and for other telegraph lines and from and for individuals, and transmit them with impartiality and good faith, a contract between the telephone company and the owner of telephone instruments, providing that the company in the use of the instruments should discriminate as between telegraph companies, was void, and therefore could furnish no justification for the attempted discrimination.

In Connecticut, however, under a statute somewhat similar to our own and that of Ohio, a different conclusion was reached, in the case of the Am. Rapid Teleg. Co. vs. Conn. Telephone Co., 49 Conn., 352. In that case the Court denied the force of the statute, as applied to the owner of the patented instruments, although such instruments were licensed to be used by the local telephone company. That case was strongly pressed in the argument before us, hut we have not been able _ to yield to its authority, though certainly entitled to great respect.

In Pennsylvania, where a statute similar to ours exists, it has been recently held by the Supreme Court of that State, in the case of Bell Telep. Co. vs. Comm., ex rel. Balto. & Ohio Teleg. Co., (Cent. Reporter, Vol. 3, No. 19, p. 907,) affirming the judgment of the Court below for the reason assigned by it that the restrictive or discriminating clause in the contract of the 10th of Nov., 1879, was simply void as against public right: That the telephone company, holding a license for the use of patented devices, could not discriminate against a telegraph company, seeking to use the telephone system in its business of receiving and delivering telegraphic messages. In the opinion adopted by the Supreme Court, there are several other well reasoned opinions referred to, maintaining the same conclusion as to the right of the public, upon principles of the common law, irrespective of statute. Those decisions are founded upon the doctrine of Munn vs. Illinois, supra, referred to in a previous part of this opinion.

(Decided 5th January, 1887.)

There were some objections taken to the sufficiency of the allegations in the petition for mandamus, and they ■were ingeniously pressed in argument before this Court. But we do not think the objections well founded. It is clear that mandamus is the proper remedy in a case like the present, and we think there is sufficient ground shown for it in the petition.

With the views expressed, this Court is of opinion, that the order of the Court below, directing the writ of mandamus to issue, should he affirmed, with costs.

Order affirmed.