Edison Electric Light Co. v. Sawyer-Man Electric Co.

53 F. 592, 3 C.C.A. 605, 1892 U.S. App. LEXIS 1486

• Court: Court of Appeals for the Second Circuit
• Decided: December 15, 1892
• Status: Published

Opinion

PEE CURIAM.

This is an appeal from an order of the circuit court granting an injunction pendente lite restraining the defendant from making, using, or vending the incandescent electric lamps of the patent granted to Thomas A. Edison, January 27, 1880, No. 223,898, of which the complainants are the owners. The order was granted pro forma, in the view that a final. disposition of the questions involved might be promptly made by the decision of this court. The validity of the patent, and the infringement of its second claim by such lamps as the defendant makes, were adjudged by the circuit court for the southern district of New York, July 14, 1891, in a decree at final hearing. That suit was brought against the United States Electric Lighting Company, and was defended by the Westinghouse Electric Company, a corporation which since October 10, 1888, has been the owner of the business carried on in the name of the present defendant. The business of the defendant consists exclusively in the manufacture of the infringing lamps. The decree of the circuit court adjudging the validity of the second claim of the patent, and its infringement by lamps such as are made by the defendant, was upon an appeal affirmed by this court October 4, 1892. See 52 Fed. Rep. 300. That decree, among other things, awarded the complainants a perpetual injunction. The present suit was brought subsequently to that affirmance.

It is apparent that the order for the present injunction is, in effect, one to extend the terms of an injunction already granted in a suit determined by the court of last resort between the same parties, or their privies, so as to include a new infringement. For an understanding of the grounds upon which the defendant contends the injunction ought not to have been granted, the following narrative is necessary: For several years subsequent to 1880, the Edison Company and the United States Electric Lighting Company were the only manufacturers of incandescent lighting apparatus in this country doing any considerable business. The United States Electric Lighting Company began manufacturing incandescent lighting apparatus, including the lamps which have been held to be an infringement of the Edison patent, in the summer of 1880, and continued in such business until a recent period. In May, 1885, a suit was brought against it upon the present patent. Another corporation, the Consolidated Electric Lighting Company, was organized in September, 1882, and began the manufacture of incandescent lighting apparatus. This company was the owner of and operated under what are known as the “Sawyer-Man Patents” for electric lighting apparatus; and under these patents it assumed that it had the exclusive right to make - and sell the lamp claimed in the patent in suit. In May, 1885, suit was brought against it by the Edison Electric Light Company upon the patent in suit, and about the same time it brought suit against the Edison Company for infringement of its own patent. In 1883 a corporation known as the “Tliomson-IIouston Company” began the manufacture and sale of electric apparatus for lighting and power. As the result of negotiations between the Consolidated Electric Lighting Company and the Thomson-Houston Company, the Sawyer-Man Company, the present defendant, was organized in September, 3886. Mae tenths of its stock was owned by the Thomson-Houston Company. It received from the Consolidated Company a license to manufacture lamps under the Sawyer-Man patents, and thereupon began the business of manufacturing the infringing lamp, and has continued in tliis business to the present time. In August, 1887, all the stock of the defendant, including that owned by the Thomson-Houston Company, vva,s sold to the Consolidated Company for 8120,000 in bonds, and the same amount at par of its- stock. In December, 1888, the Thomson-Houston Company sold its stock in the Consolidated Company to the Wesiinghouse Electric Company. At the same time, by an agreement between the Consolidated Company and the Thomson-Houston Company, the fulfillment of which on the part of the Consolidated Company was guarantied by the Westinghouse Company, the Thomson-Houston Company was licensed under the patents of the Consolidated Company to make incandescent lamps for export and use with, generating apparatus of its own manufacture in this country; and the Westinghouse Company was prohibited from selling incandescent lamps for use with the Thomson-Houston generating apparatus for a period which might, at the option of the Thomson-Houston Company, extend to 1902. This agreement recognized the fact that the Thomson-Houston Company could, during the continuance of the agreement, make and sell lamps not covered by the Consolidated Company’s patent; and, in the event of such manufacture and sale, the latter company was relea,sed from its obligation not to sell lamps for use in connection with the Thomson-Hous(on generating apparatus. Pending th© suit against the United ¡átales Electric Lighting Company, the Westinghouse Company succeeded to the business of the United States Company, the Consolidated Company, and the defendant; and since September, 1888, the defendant has been the manufacturer of lamps for the Westinghouse system. Each of I,he various companies engaged in the manufacture and sale of electric lighting apparatus has, as a rule, manufactured all (he different pieces of apparatus which are necessary for making up a complete “plant,” the different parts being constructed with reference to use with, each other, and not so as to be adapted for use in the systems of apparatus made by other manufacturers. For the purpose of public lighting from central stations, local companies, known as “illuminating companies,” have been organized in various cities and towns, which have purchased plants from one or (be oilier of the manufacturing companies, and the central stations of such illuminating companies have, as a rule, been equipped wholly with the electrical apparatus made by some one manufacturing company. In many cities and towns there are competing illuminating companies using the system of different manufacturer's, some being equipped with the Edison system, some with the Westinghouse system, and some with the Thomson-Houston system. The United States Company has installed about 1,050 plants, with a lamp capacity of about 350,000 lamps. About 300 of these plants were installed before the suit upon the patent was brought against it. The Consolidated Company also installed a large number of plants. After the Westinghouse Company succeeded to the business of the United States Company and the Consolidated Company, it also installed a large number of plants. It is said that the aggregate lamp capacity of the incandescent lighting plants installed with generating apparatus supplied by the Westinghouse Company at the present time represents a capital of about $25,000,000, and a lamp capacity of over 1,300,000 lamps. The lamps themselves represent but a small part of the cost of the plants, the greater part being represented by the electric apparatus supplied by the Westinghouse Company and its predecessors; but the lamps are essential for the continued operation of the plants. Unless the lamps can be replaced as they are worn out, and can be procured when needed, these plants will be crippled, and the greater part of the investment in them will be lost! The central station plants supply lights to consumers as gas companies supply gas; and, if their operation should be stopped, great inconvenience to the public would ensue. The various companies give employment' to a large number of men who might be thrown out; of employment if the lamps could not be obtained. In 1889 the Edison General Electric Company was organized for the purpose of combining the Edison Electric Light Company with various other corporations engaged in the manufacture and sale of electric apparatus, the organization of the subordinate corporations being retained. Prior to April, 1892, the Thomson-Houston Company had acquired the stocks of various other companies engaged in the business of manufacturing and selling electrical apparatus, and these companies were carrying on the business in combination with the Thomson-Houston Company and under its control. In April, 1892, these two combinations, the Edison General Electric Company and the Thomson-Houston Company, included substantially all the companies which had heretofore been competing in this kind of business, excepting the Westinghouse Company; and in that month the General Electric Company was organized for the purpose of combining these two combinations in one which should include all the concerns in this country, except the Westinghouse Company, which formerly were competing in the business of making and selling electric light and power apparatus, but the separate organization of the constituent companies was still retained.

The defendant insists that the preliminary injunction should not have been granted because, (1) owing to the laches of the owners of the patent in asserting their claims and enforcing them, a large capital has been invested in the manufacture and sale, not only of the lamps, but also in electric lighting apparatus, which will be greatly depreciated in value unless the lamps can be used with it, and that an injunction will cripple and perhaps ruin the local ilhiminating companies who have invested in the plants of the Westinghouse Companies if they are prevented from using the lamp of the patent, and thereby subject to great inconvenience those whom these plants furnish with light, and displace a large number of persons who are employed in operating the plants; (2) because the complainants and the other corporations with whom the complainants are associated, the competitors of the Westinghouse Company in the business of making and supplying electric power and lighting, have entered into an unlawful combination to stifle competition in that busiuess, and an injunction will be used unconscionably to further the objects of the combi nation; and (9) because by reason of the affiliation of the Thomson-IIouston Company with that combination, and the prior dealings of that company with the defendant, the Consolidated Company, and the Westinghouse Company, an equitable estoppel lias arisen, by force of which the complainants, as parties to the combination, ought not to be permitted to liare an injunction.

The question whether there has been any laches in asserting the patent was considered by the circuit, court of appeals upon the appeal from the decree of the circuit court, and that court declared that no case was shown to authorize the refusal of an injunction on any theory of laches or equitable estoppel by reason of undue delay in bringing suit, or acquiescence in known infringement. If the owners of the patent proceeded with due diligence as respects the United States Lighting Company, no cither infringers of the patent can he heard to complain with reason that suit was not brought against them upon the patent previous to the adjudication of its validity in the circuit court, it is a matter of notoriety that that litigation vas a very expensive and arduous one; and its progress must have been familiar to all tliose who were extensively interested in having the patent defeated. As regards the present defendant, there are no new' facts of importance bearing upon the question of laches to distinguish the case from that shown in the former suit. We see no reason for changing the opinion expressed by this court in the former case, and do not deem it necessary, because the same defense has again been urged upon substantially the same state of facts, to add anything to that opinion. Every one of the manufacturing corporations. tlie competitors of the Edison Companies, commenced their operations with a knowledge of the existence of the patent in suit. They were controlled by business men of intelligence and experience. Their promoters and managers may have believed, and probably did, that, the patent could not he successfully maintained; but they entered upon the business with an understanding of its risks, and of the consequences which would befall them as infringers, if the patent should he sustained. "None of them can now he justly heard to say that an injunction which is essential, if not indispensable, to the protection of the owners of the patent and their licensees ought not to he granted because of the great pecuniary loss which may result. If, in consequence of being deprived of the use of the lamps, their investments in other electric apparatus will he greatly depreciated, they must take the consequences.

The users who ha,ve supplied themselves with electric lighting plants from the infringers, which required for their operation lamps of the patent, are of course infringers; bub those who did so before the decision of the circuit court sustaining the patent, and at a time when judicial decisions in foreign countries interpreting the patent wore in conflict, and who are now willing to accept their lamps from the complainants upon reasonable terms, have much stronger equities than the manufacturing infringers. These equities the court will not disregard; but what would he reasonable terms, if an application were made to the court on behalf of these users, is a question which can only be determined in each case upon its particular circumstances. As to those users, however, who have acquired these plants subsequent to the decision of the circuit court, if they are deprived of the use of the lamps, and as a consequence the value of their plants may be greatly impaired, they must accept the result as a consequence of their own imprudence.

We are not disposed to investigate upon the present case the character of the combination which has been formed under the name of the “General Electric Company.” Whether that combination is intended to fetter competition, and is illegal as one in restraint of trade, is a question which we should not undertake to decide upon the evidence before us and in a suit to which it is not a party. The present complainants are entitled by the patent laws to a monopoly, for the term of the patent, of the manufacture and sale of the lamps made under it. The right to this monopoly is the very foundation of the patent system. They do not lose that right merely because they may have joined in a combination with others, holding other patents securing similar monopolies, which combination may, when judicially examined in a proper forum, be held to be unlawful. We do not feel justified in assuming upon the facts before us in the present suit that the use which the complainants propose to make of the injunction — an injunction which seems necessary to secure their monopoly and make'their patent fruitful — will be such as to promote any other monopoly. When it shall be made to appear that some one, to whom in fairness and good conscience these complainants should sell their lamps, has been arbitrarily refused them, save upon oppressive and unreasonable terms, it will be time to consider whether the complainants should be allowed to continue in possession of the injunction.

The alleged estoppel seems to be farfetched and shadowy. The history which has been given shows that, before the Sawyer-Man Company was organized, litigation upon the patent in suit and upon the Sawyer-Man patents had commenced; that in 1887 the stock in the Sawyer-Man Company owned by the Thomson-Houston Company was sold to the Consolidated Company, a party to the suits; and that subsequently, in 1888, the Westinghouse Company, an actual party to the litigation, bought that portion of the stock from the Consolidated Company which had been owned by the Thomson-Houston Company. The estoppel lacks the elements which ordinarily create an estoppel in pais, namely, an injury or a harm to one person, resulting from a reliance upon the acts, conduct, or declarations of another, in which there was an element of bad faith or willful neglect of duty. The history of the connection of the Thomson-Houston Company from 1886 to 1888 with the Consolidated Company, and with the Sawyer-Man Company, the defendant, shows that all these companies knew of the existence of the litigations in which the life of the present patent and of the Sawyer-Man patent was at stake. There can be no charge of concealment or constructive fraud. When the sale and the agreement of 1888 were made, there was no implied obligation upon the Thomson-Houston Company to remain in alliance with the Westinghouse system. The contingency that it might enter upon the manufacture of competing .lamps was contemplated. Its union with the Edison interests has neither hastened nor facilitated the application for the present injunction. We perceive no adequate reason from the facts why the complainants should not obtain the ordinary results which attend a complainant’s success in a suit in equity for the infringement of a patent.

The injunction order appealed from should be modified so as to cover only lamps made in infringement of the second claim of the patent, the other claims not having been infringed, according to the adjudication of the circuit court or of this court. It should also contain a provision reserving the light to the defendant to move hereafter for the vacation, suspension, or modification of the injunction upon proof of specific instances of refusal on the part of the complainants, or either of them, to supply the lamps of the patent upon terms reasonable, under the circumstances of the particular case, to the owners of electric lighting plants which were Installed before the rendition of the interlocutory decree of the circuit court sustaining the validity of the patent.