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applicants for or grantees of a patent may each separately work

it (c).

4. The sale of a patent or share therein (before or after grant) for cash payable at once or by instalments, or shares in a com

pany (d).

5. The employment (by way of licence) of the vendor of a patent

a to manufacture or sell the patent articles for the purchaser (e).

6. The supply by the vendor to the purchaser of the raw material for manufacture of the patent articles or commodities (f).

7. The sale of a patent on the hire system (so to speak) that is, where an exclusive licence is granted until payment of the whole consideration (fixed sums or royalties) and then (if necessary) a formal assignment is to be executed (9).

8. An arrangement of the terms and conditions on which a licence is to be granted (h).

9. The formation of a syndicate to purchase a patent and re-sell it to a company or otherwise (i).

10. The appointment of an exclusive agent for a district to sell patent articles (j).

As the chapters on assignments and licences, post, and the footnotes to the various clauses in the precedents of these agreements deal with much of the subject matter contained in the latter, the observations in this chapter are intended to be mostly of a general nature, and applicable not only to agreements so called, but also to other instruments dealing with patents.

In an agreement for the advance of moneys to an inventor in Disclosure relation to the invention, it is usually provided, in case the other the invention party has not already satisfied himself as to the probable worth or Confidential

communicasuccess of the invention that a full disclosure and trial of it shall be tions of a made before any money is advanced. Such a provision, though tion, inserted as part of the agreement, is, of course, only introductory to the agreement proper, and, in the case of an intended loan

and trial of

secret inven

(c) Agreements IV. and VIII., pp. 70, 82.
(d) Agreements IV., V., VI., and VII., pp. 70–79.
(e) Agreement IV., p. 70.

(f) Agreement IX., p. 84.
(9) Agreements XI. and XII., pp. 89, 93.
(h) Agreements IX. and X., pp. 84, 87.
i (1) Agreement XIII., p. 96.
(j) Agreement XV., p. 104.

merely, would not be binding (k). This provision is generally supplemented by another to the effect that the person to whom the invention is thus to be disclosed, shall not, except for the purposes of the agreement, make use of the invention, and also (in case the complete specification has not been accepted) (1) communicate the secret of it to any one, without the written consent of the inventor. This reference to communication is not, however, strictly essential, although its insertion will form evidence of the intention of the parties. The true ground on which the inventor would be entitled to restrain the other party from unnecessarily divulging the secret of the invention, is that the communication of it was made to the other party strictly in confidence. The law on the subject of the ownership and communication of an unpatented invention may be shortly stated as follows. An inventor has no right, independent of a grant made to him by the authority of a positive law, to prevent other persons from using an article or making any particular application of the laws of nature, merely because he was the first person to discover the article or application; therefore the law does not recognize any right or property whatsoever in an invention which is not made the subject of a grant by patent (m).

Thus, in Neubery v. James (n), the court refused to decree specific performance of a contract to sell a secret invention which had been the subject of a patent long since expired, or to grant an injunction to restrain its disclosure. Where, however, under an agreement by the defendant with the inventor not to avail himself of communications made to him respecting the invention which was to be made the subject of experiments by the two parties with the view of obtaining a patent for the invention, the defendant fraudulently obtained the patent in his own name, the inventor was held entitled to damages for the breach (6). An exception to the rule against the existence of a right of proprietorship in a mere secret invention, not (as a matter of course at least) intended to be patented, occurs in any case where the disclosure of the secret would involve a

(k) That is from want of consideration, unless the agreement were under seal. See post, pp. 40, 41, as to simple contracts and contracts under seal.

(1) See sect. 10 of the new act, post, p. 310, as to publication by the office after the acceptance; also ante, p. 14.

(m) Hindmarch, 228.
(n) 1 Carp. P. C. 368.
(0) Smith v. Dickenson, 3 Bos. & Pull. 630.

breach of faith or trust. Thus, in Morison v. Moat (P), a party who has a secret in trade, and employs persons under contract or duty, express or implied, can restrain them from setting up their knowledge against the employer. The employers may have no title against the world in general, and yet a good title against the defendant (1) The next provision to be noticed, in any case where the patent Amendment

of application has not been obtained, is that for obtaining it in the joint names by making of the parties. It is an undoubted advantage to a purchaser or a purchaser a lender, pending the application for the patent, to be made an co-applicant. applicant and afterwards a grantee jointly with the inventor, as thereby he is, to a great extent, protected from dealings with the patent behind his back (r). As before mentioned (s) the application can be amended, by adding the names of other persons as co-applicants. In the case of an agreement for a loan the lender, on the first advance being made, would properly claim to be made a co-applicant at once (t). In the case of a purchase, however, a vendor (the inventor) can hardly be advised to make the purchaser a co-applicant, so long as any considerable part of the purchasemoney remains unpaid, especially as it might take time, trouble and expense to oust him from the position, in case be should fail in his engagement. As the acceptance of the complete specification is the crucial point in the proceedings, after which the patent can, unless there is opposition (u), be easily obtained, it seems advisable that provision should be made for the payment of a considerable portion of the purchase-money shortly after the fact of acceptance is notified to the purchaser, and that, on such payment, the purchaser should be made a co-applicant.

The amount of interest on money lent to an inventor who gives Interest on a no security, except the patent itself, is generally made to depend, to net profits

of a patent. to some extent at least, on the amount of the net profits derivable

(p) 20 L. J. Ch. 513; affirmed on appeal in 21 L. J. Ch. 248.

(9) Per Turner, V.-C., in same case. See also Morgan v. Seaward, 2 Mees. & Wels. 541; Patterson v. Gas Light &c. Co., L. R. 3 App. Cas. 239.

(r) As to the powers of each co-owner of a patent working separately, see Chapter on “Assignments," post, pp. 118, 119. As to licences before grant, see p. 24.

(8) Ante, p. 12.

(t) As to the specific performance of contracts for lending and borrowing money, see post, pp. 43, 44.

(u) See sect. 11 of the new act. By that section, notice of opposition must be given within two months of the date of the advertisement of the accept


Effect of bankruptcy of inventor.

from working the patent. It may not, perhaps, be desirable to give the mortgagee a fixed share of the net profits as interest, as the latter may, when portions of the loan have been repaid, be of excessive amount compared with that of the principal moneys remaining unpaid. It therefore seems best to provide for the payment of a fixed percentage of interest, and a further interest (also at a percentage) which shall not exceed a fixed share of the profits for the time being (v). The mortgagee, by receiving interest dependent on the amount of net profits, is not rendered liable as a partner with the inventor in the business of working the patent, although he may be held so liable on the construction of the agreement as a whole (w).

On the bankruptcy of a mortgagor, the rights of the mortgagee as to his security are in no way affected by sect. 5 of the Partnership Law Amendment Act, which forbids competition by a creditor, the interest on whose debt has been made payable out of or by reference to the net profits of the business, with the general creditors (x).

If, therefore, the interest provided to be paid be of the double nature above mentioned the mortgagee can, on the bankruptcy of the inventor, recover as far as may be out of the mortgaged patent his principal and the first above-mentioned fixed interest, and also, it is presumed, the arrears (if any) up to the commencement of bankruptcy of both kinds of interest. By sect. 5 of the Partnership Law Amendment Act (y), as read with the decision in Ex parte Shiel (see above), the mortgagee cannot compete with the other creditors, as to the assets not comprised in his security, in respect of any principal or interest. It seems hopeless to contend, however, that under the above-mentioned arrangement as to the payment of two kinds of interest, the total interest is not one varying with the profits.

(v) See Agreement I., Clause 7, post, p. 61.

(w) See Partnership Law Amendment Act, 28 & 29 Vict. c. 86 (1865), Appendix, post, p. 368; and on the general question of liability as a partner by a person sharing the net profits of a business, see Lindley on Partnership (4th ed. pp. 33—54); Mollwo, March & Co. v. Court of Wards, L. R. 4 P. C. 419; the observations of Jessel, M.R., in Pooley v. Driver, L. R. 4 Ch. D. 458; and Ex parte Tennant, In re Howard, L. R. 6 Ch. D. 303; In re Stone, L. R. 33 Ch. D. 541 (Kay, J.); and Badeley v. Consolidated Bank (1886), L. R. 34 Ch. D. 536 (Stirling, J.). See also Ex parte Macmillan, In re Whittaker, 24 L. T. N. S. 143; Elsie v. Webster, 5 Mees. & Wels. 518.

() Ex parte Shiel, In re Lonergan, L. R. 4 Ch. D. 789. See sect. 5 of the Partnership Law Amendment Act, post, p. 368.

(y) 28 & 29 Vict. c. 86, Appendix, post, p. 368.

In view of the construction which the court might, adversely to Interest equal

to share in net a lender, put upon an agreement so as to hold him liable as a profits, and partner, it seems safer, in his interest at least, not to give him as not in specie. interest a share of the net profits in specie, but some percentage on the principal moneys dependent on the amount of net profits, as above mentioned (>).

Cases of loans to persons in business, who are only to repay the Loan to pa. moneys out of the net profits of the business without otherwise repayable out

of net profits, incurring any personal liability, are probably of little occurrence. and not perWhere the sums advanced are also charged on the assets of sonally. the business, the limitation of the responsibility of the borrowers is somewhat similar to that of a limited joint stock company (not its members) with regard to its creditors. In framing an agreement for a loan of this kind, the risk of the lender being declared a partner must, of course, in his interest be provided against. The inability of the lender to obtain payment except out of his security, that is, the patent and the net profits (its fruits) will not, it is clear, of itself make the transaction other than a loan, so as to prevent the application of sect. 1 of the Partnership Law Amendment Act, 1865 (a). The lender should, therefore, see that no provisions in the agreement will be likely to put him in the position of a person carrying on business by the borrowers as his agents (6). Accordingly, no provision should be inserted binding the borrowers to carry on the business at all, or (except for the purposes of inspection of the books, and obtaining and verifying the accounts) enabling the lender to have any voice in the conduct of the business. In the further interest of the lender, the advance of the money beyond perhaps an immediate sum (a small one) might be made by instalments conditionally as to each instalment on the results to him in respect of the previous advances having been satisfactory. A precedent of the above kind of an agreement for a loan to a firm, joint patentees of an invention, is inserted

(z) See on this the cases of Mollwo, March & Co. v. Court of Wards, and Ex parte Tennant, In re Howard, supra.

(a) This act is set out in the Appendix, post, p. 368.

(b) See Cox v. Hickman, 8 Ho. L. Cas. 268, where scheduled creditors to a deed of arrangement, who were to be paid their debts out of the profits of the debtor's business, were held not liable to debts contracted by the trustees in carrying on the business pursuant to the deed. See also Mollwo, March & Co. v. Court of Wards, supra; and Lindley, Book I., Chap. I., Sect. II., “Quasi-Partnership."

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