Opinion of the Court.

MR. JUSTICE MATTHEWS delivered the opinion of the court.

The appellants, complainants below, on the 28th February, 1880, filed their bill in equity to restrain the alleged infringement by the defendant of letters-patent No. 166,950, granted August 24, 1875, to John A. Topliff, for a new and useful improvement in bow-sockets for buggy-tops. As stated in the specification, "This invention has relation to bowsockets for buggy-tops, and consists in placing a filling of wood in the tubes of the bow-sockets to strengthen the same; also in extending the strip of steel which is inserted in the wood filling far enough down to enable it to be welded or otherwise fastened to the slat-iron."

Among other grounds of defence, the defendant in his answer sets out the following: He alleges that some time prior to the 27th day of December, 1870, he invented a new and useful invention denominated an improvement in carriagebows, consisting in the main in constructing the straight part of carriage-bows out of tapering tubes made of sheet-iron with soldered seams and lower ends flattened. forming a part of the hinge, in conjunction with the bows made of wood, shaped and fitted into the upper ends of the tubes; that this invention was secured to him by letters-patent dated December 27, 1870, No. 110,513; that this patent was reissued as reissued letters patent No. 9026, January 6, 1880; and that he obtained another patent, No. 114,885, dated May 16, 1871, for a new and improved carriage-bow cover and slat-iron combined. That soon after he invented his first improvement in carriage-bows, for which he obtained the patent dated December 27, 1870, and pending the application therefor, a contract in writing was entered into on or about the 1st day of September, 1870, between himself and the complainants, as follows:

"This agreement, made and concluded this

day of

A.D. 1870, by and between Isaac N. Topliff, of the first part, and John A. Topliff and George H. Ely, of the second part, witnesseth: 1st. The said party of the first part is the sole owner of a certain patent for tubular iron bows used

Opinion of the Court.

in manufacturing carriage and buggy tops, which patent was issued the- day of, A.D. Now, in consideration of the agreements of said party of the second part to be by them performed, the said party of the first part hereby gives, grants, sells and conveys to the said party of the second part, the exclusive right of manufacturing and of selling the abovementioned article throughout the United States for five years from the date of this agreement; it being understood that, at the expiration of five years, the said party of the first part shall have the right to have the above-named articles manufactured at not more than two other places, to be sold at prices adopted by said party of the second part, but in all other respects the rights and privileges of the said party of the second part shall continue during the entire life of the patent.

"2. The parties mutually agree that they will share the expense of maintaining the right of the patent against infringements and other patents in the following proportion: The first party to pay one-third and the second party to pay twothirds. It is also further agreed that any improvement made on these articles by either party shall be for the mutual benefit of the parties.

"3. In consideration of the above grant, the said party of the second part hereby agrees to pay to the said party of first part fifteen per cent on the wholesale selling prices of above-named articles as royalty on all sold by them, it being understood that these prices shall at all times be settled by mutual agreement between both parties. The said party of the second part further agree that they will advertise thoroughly the abovenamed article in such ways as may seem best, and do all in their power to introduce and extend the sale of said articles. They also agree that they will make them of quality and finish to meet the approbation of said party of the first part.

"In witness whereof the parties have set their hands and seals to duplicates the day and year first above written.

Opinion of the Court.

That, in pursuance of the agreement, the complainants entered upon the manufacture and sale of carriage-bows, the defendant being in their employment as travelling salesman, and as such devoted his time largely to the introduction and sale of said carriage-bows throughout the United States, and also his time, thought, and attention to making improvements therein, knowledge of which was communicated by him to the complainants from time to time. That some of these improvements made by him were covered by the patent bearing date May 16, 1871. That the business was carried on by the complainants in this way under said contract for more than eight years to their great gain and profit.

The defendant further alleges, that "after the issuing to him of the last-mentioned letters-patent, he made some slight changes and improvements in the manufacture of carriagebows, and communicated the same to said complainants, especially to said John, and requested that, in the manufacture of carriage-bows under his patent aforesaid, that the said complainants should construct and manufacture them in accordance with his said suggestions and improvements, which improvements were communicated by this defendant to the said complainants on or about the first day of June, 1873. That thereupon his said suggestion and invention was adopted by the said complainants in the manufacture of carriage-bows by the said complainants; and afterwards the said John A. Topliff, for the purpose of securing the same to the complainants and to this defendant for their mutual use and benefit, in accordance with the terms of said contract, made application for a patent thereon, and secured the alleged patent in the complainants' bill of complaint described. And this defendant alleges and says, that, if in reality there is anything new or useful embraced in the said letters-patent, issued to the said John A. Topliff, that he was and is the true inventor and rightful owner thereof, and that the said John A. Topliff was not and is not the true and original inventor and discoverer thereof. And this defendant alleges, that, whether said patent, so issued in the name of said complainants, is or is not valid, that he, by the terms of his said contract entered into

Opinion of the Court.

with said complainants, is entitled to use the same to the same extent that the complainants are entitled to use the same. That, by the terms of said contract, such right is expressly granted and conveyed to him, and that the complainants have so interpreted said contract, and have had upon their part the free use and benefit of the invention, discovery, and improvement made by this defendant and secured to him by letterspatent dated May 16, 1871, as aforesaid, and other considerations therefor, as agreed; and that, relying upon said contract, he communicated to the said complainants the information. and instructions in regard to manufacturing under his said patents and other improvements above named, upon which the said John A. Topliff made the application and secured to the said complainants the letters-patent said to be owned by them. And this defendant denies that he has made other use of the letters-patent issued to the complainants than such as he was authorized to make by the terms of the contract aforesaid between the complainants and himself."

The defendant further says, that he has established a manufactory of carriage-bows in the city of Cleveland, but not in any other place or places; and that by the terms of his contract with the complainants he is entitled so to do, and in said business to use the alleged improvements covered by the patent described in the bill.

The case was heard on the pleadings and proofs, when the Circuit Court being satisfied that under the contract set up in the answer each party had a right to use, without the payment of royalty, the patent issued to the complainants, a decree was entered dismissing the bill. The complainants took the present appeal.

It is now contended, on the part of the appellants, 1st, that at the time when the bill was filed the contract set up in the answer was not in force, having been previously rescinded by the parties; and, 2d, that if the contract is in force, it does not secure to the appellee the right to the use of the improvement covered by the patent to John A. Topliff of August 24, 1875, belonging to the appellants.

The circumstances which, according to the contention of

Opinion of the Court.

the appellants, constitute the rescission of the contract are claimed to be as follows:

They allege that when the contract in question was entered into, the application of the appellee for his patent was pending; that a sample specimen of the carriage-bow intended to be covered by the patent was shown by the appellee to the appellants; that the appellee represented to them that the patent would cover the use of tubular carriage-bows; that in point of fact the original application made the following claims:

"1. The upright part of carriage-bows, constructed of tubular sheet metal A, in combination with the wooden bow B, put together in the manner and for the purposes set forth and described.

"2. The tube A, with elongated flat portion c, to form a solid joint with the bow-socket D in the manner described.

"3. The scallop-edged sheet-iron bow-socket D to be used in connection with the tubes A and A', in the manner described." That these claims were rejected in the Patent Office, and in lieu of them the claim of the patent as issued on December 27, 1870, was substituted, as follows:

"The straight part of the bow A, tubular and flattened at the lower end, the bow-socket D, consisting of two concave scalloped pieces, and the bent part of the bow B, all combined, constructed, and arranged as and for the purposes set forth.”

That the appellants were not aware of the rejection of the original claims until some time in the year 1879; that during that period they acted under the impression that they were secured in the exclusive right to use carriage-bows containing the tubular uprights; that they had no knowledge to the contrary until the fact was disclosed by an examination of the records of the Patent Office; that immediately upon discovering it they gave notice to the appellee that the consideration for the contract between them had thus failed, the patent being of no avail to them, and that they would no longer regard it as obligatory, and that thereupon the appellee acquiesced in this rescission of the contract by them, and resumed his ownership of the original patent, surrendered the same, and obtained a reissue thereof on January 6, 1880, the claims of which are as follows: