Syllabus.

CINCINNATI SIEMENS-LUNGREN GAS ILLUMINAT

ING COMPANY v. WESTERN SIEMENS-LUNGREN COMPANY.

ERROR TO THE CIRCUIT COURT OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF OHIO.

No. 193. Argued January 5, 8, 1894. Decided March 5, 1894.

The owner of an exclusive right to sell, place, and operate a patented invention within the limits of a State, conveyed to another party the like exclusive right in certain specified counties in that State, and agreed that during the period covered by the licenses and patents, the grantor would not knowingly sell or permit others to sell the patented goods within those counties, and further, that the grantor would supply the patented articles to the grantee on specified terms and conditions. The contract also guaranteed that the patented articles so supplied should have a life service of five years, and the grantor agreed to defray the expense of incidental repairs necessary thereto. The grantor then assigned all its rights and interest in this contract to a third party. The grantee continued to order the patented articles, as wanted, from the grantor, and the assignee supplied the goods as ordered and they were accepted. The assignee sued the grantee to recover the value of the goods so delivered. The grantee denied all liability and set up as counter claim, a claim for damage by reason of sales of the patented article in the territory covered by the license. Held,

(1) That the defendant, having accepted the goods from the plaintiff, was bound to pay for them;

(2) That his liability for them was to be measured by the contract price, and not by the market rate;

(3) That with reference to the sale of the patented articles in the licensed territory, the scienter was an essential part of the agreement, and, in the absence of proof of actual knowledge of the sale, by the plaintiff, the defendant could not recover on his counter claim;

(4) That as to sales which were shown to have been made with the plaintiff's knowledge, the measure of damages was the plaintiff's profits, and not the profits which the defendant might have made; (5) That the defendant could recover, under the agreement as to the life service of the patented articles supplied to him, only for such repairs as he had been obliged to make, and not for estimated repairs during the remainder of the period.

Opinion of the Court.

On February 25, 1889, the defendant in error, a corporation of the State of Illinois, commenced its action in the Circuit Court of the United States for the Southern District of Ohio to recover from the defendant, a corporation created under the laws of Ohio, the sum of $6922.64 for goods and merchandise. The defendant appeared and filed an answer and cross petition. A trial was had before a jury, which, on February 10, 1890, returned a verdict for the plaintiff in the sum of $5752.34. This amount was reduced by the plaintiff, in accordance with the opinion of the court, by the sum of $127.90, and for the balance, with interest, a judgment was entered. To reverse such judgment defendant sued out a writ of error from this court.

Mr. J. W. Warrington for plaintiff in error.

Mr. Lowrey Jackson for defendant in error.

MR. JUSTICE BREWER delivered the opinion of the court.

On November 9, 1887, the Siemens-Lungren Gas Illuminating Company of Chicago, a corporation of Illinois, which had acquired by contract from the Siemens-Lungren Company, of the State of Pennsylvania, the exclusive right and privilege of selling, placing, and operating in the State of Ohio the patented regenerative and other gas lamps, appliances, and fixtures, made, owned, or controlled by the Pennsylvania corporation, entered into a contract with certain individuals, which contract was immediately thereafter transferred by them to the defendant company, giving the like exclusive rights for the counties of Hamilton, Butler, and Montgomery, in the State of Ohio. This contract specified the terms and conditions on which the Chicago company would supply the articles for sale and use in those counties. The Chicago corporation afterwards transferred all its franchises and property, including its rights and interest in this contract, to the plaintiff. The Ohio company carried on its correspondence, and sent its orders for goods to the Gas Illuminating Com

Opinion of the Court.

pany, and, though notified of the transfer to the plaintiff, declined in its letters to recognize such transfer. At the same time it received the goods, and did not return them; and received them knowing that they were sent by the plaintiff. Upon this the defendant invokes the rule laid down in Arkansas Valley Smelting Co. v. Belden Mining Co., 127 U. S. 379, and insists that the contract was of such a nature that it could not be assigned by the Gas Illuminating Company to plaintiff without the consent of defendant, which consent was positively refused. But that doctrine has no application under the circumstances of this case. Defendant could not accept these goods from the plaintiff, and then refuse to pay for them. It is immaterial whether there was an assignment from the Gas Illuminating Company to the plaintiff or not, or whether, if there was one, it was ever assented to by the defendant or not. When the defendant ordered the goods from the Gas Illuminating Company, and the plaintiff forwarded the goods upon that order, the defendant might have returned them, and declined to have any dealings with the plaintiff; but it could not accept the goods and use them, and then say it never ordered the goods from the plaintiff, never had any contract with it, and never assented to any assignment to the plaintiff of its contract with the Illuminating Company.

Of course, if the plaintiff undertook to furnish goods on the order of the defendant- an order based upon a contract between the defendant and the Gas Illuminating Company it furnished them subject to all the terms of that contract, and the defendant may rightfully invoke any stipulation thereof as a defence in whole or in part to the action.

Another question arises on these facts. The contract hereinbefore referred to contained this clause:

"That during the entire period covered by the licenses and patents now owned by the said Siemens-Lungren Company, or which may hereafter be acquired on improvements and reissues, the said Siemens-Lungren Gas Illuminating Company will sell exclusively to said parties of the second part for use in the counties before named all the burners, fixtures, and

Opinion of the Court.

appliances, made by said Siemens-Lungren Company and will not knowingly sell or permit other parties to sell for use in said territory any burners, lamps, or goods made, owned or controlled by said Siemens-Lungren Company, but will, upon the contrary, to the best of their ability, prevent the sale of any such articles for use within the territory named to any other than the parties of the second part, their successors or assigns."

There was testimony showing that after the execution of this contract the Middletown Gas Company purchased nine lamps from the plaintiff, and one hundred and twenty-two lamps from the Pennsylvania corporation. Middletown, where this gas company was located, is in Butler County, Ohio, and within the limits of the territory sold to the Cincinnati parties. There was no testimony tending to show that the original Chicago corporation, or this plaintiff, knew of the sale by the Pennsylvania corporation to the Middletown Gas Company. On the contrary, the testimony of plaintiff's two principal officers was that such sale was wholly unknown. Upon this failure to show any knowledge of the sales made by the Pennsylvania corporation the court struck out all the testimony as to such sales. In reference to the sale of the nine lamps by the plaintiff, the court ruled that it was a technical breach of the contract, and charged the jury to allow to the defendant as damages, the profits received by the plaintiff from such sales. There was no direct testimony that the plaintiff was aware at the time of the sales of these nine lamps. that Middletown was within the territory which had been sold to the Cincinnati parties, and the letters of the secretary and president of the plaintiff company state that the sales were made inadvertently and in ignorance of that fact, yet the sales were held by the court to be in direct violation of the terms of the contract, and, therefore, giving a right to the defendant to damages. The contention now is, that the court erred in restricting the damages to the profits made by the plaintiff, and it is insisted that the defendant was entitled to recover what it would have made had it sold and placed the lamps in Middletown at the prices at which it was so selling.

Opinion of the Court.

and placing them, if not to a larger sum which the jury might estimate were the damages resulting from this interference with its monopoly in the purchased territory.

We cannot concur in these views, and are of opinion that the rulings of the trial court were correct. With reference to the sale by the Pennsylvania corporation, the stipulation in the contract is that the Chicago company "will not knowingly sell, or permit other parties to sell, for use in said territory, any burners, lamps," etc. The scienter is an essential term in this covenant. There is no presumption and no evidence that the original Chicago corporation or the plaintiff knew what the Pennsylvania company was doing, and if they did not know of such a sale, the fact that one was made involved no breach of the contract.

Neither was the defendant entitled to any other damages by reason of the sale by the plaintiff than the profits which the latter received. There is no presumption that the Cincinnati company would have been able to sell or place any lamps in Middletown at the prices it demanded. On the contrary, the testimony of the president of the defendant company is that the Middletown company refused to deal with it, and it is against all the rules in respect to damages for a breach of contract to give to the defendant the profits of a sale which it did not make, and which there is no reason to believe it ever would have made. There is no pretence of any wanton and wilful breach by the plaintiff; nothing that suggests punitive damages, or that shows wherein the defendant was damnified other than by the loss of the profits which the plaintiff received. Pass beyond that, and there is only a domain of speculation — a mere guess as to what might have happened. The case of Seymour v. McCormick, 16 How. 480, 486, 490, is in point. In that case the trial court, among other things, charged the jury as follows:

"The general rule is, that the plaintiff, if he has made out his right to recover, is entitled to the actual damages he has sustained by reason of the infringement, and those damages may be determined by ascertaining the profits which, in judgment of law, he would have made, provided the defendants had not interfered with his rights.