the market for the same number of pumps more than they did sell, as the defendants furnished, to wit, 298 pumps. The plaintiffs were, by their agent, in the field furnishing pumps in those oil regions, and would have supplied the market demand had not the defendants intervened and supplied to the market these 298 pumps." This finding as to the facts is, in its general effect, supported by the evidence. Notwithstanding this, however, the Court still adhering to its holding as to the rule of estimating profits, set aside the report, and inasmuch as the company had, on the second reference, failed to show what had been realized upon the principles of accounting prescribed, a final decree was entered in its favor for nominal damages only and costs. From that decree this appeal was taken by the company. The rule applicable to this class of cases was well stated by Mr. Justice STRONG, speaking for the whole Court, in Mowry v. Whitney, 14 Wall. 620. The subject-matter of that suit was a patent for an improvement in the process of manufacturing car-wheels, and in respect to the profits resulting to an infringer from the use of the patented process, it was said, p. 651: "The question to be determined. . . is, what advantage did the defendant derive from using the complainant's invention over what he had in using the other processes then open to the public, and adequate to enable him to obtain an equally beneficial result. The fruits of that advantage are his profits." It does not necessarily follow from this that where the patent is for one of the constituent parts, and not for the whole of a machine, the profits are to be confined to what can be made by the manufacture and sale of the patented part separately. If, without the improvement, a machine adapted to the same uses can be made which will be valuable in the market, and salable, then, as was further said in that case, the inquiry is, "What was the advantage in cost, in skill required, in convenience of operation, or marketability," gained by the use of the patented improvement? If the improvement is required to adapt the machine to a particular use, and there is no other way open to the public of supplying the demand for that use, then it is clear the infringer has by his infringement secured the advantage of a market he would not otherwise have had, and that the fruits of this advantage are the entire profits he has made in that market. Such, we think, is this case. Pumps for all ordinary, and many extraordinary, uses were very old; but, in the new developments of business, something was wanted to take the gas from the casing of an cil-well, and conduct it safely to the furnace of the engine. "With that special purpose in view," this inventor took the well-known parts of an ordinary double-action pump, changed some of them slightly in form, added a new device, and produced something which would do what was wanted. While nominally he only made an improvement in pumps, he actually made an improved pump. For ordinary uses the improvement added nothing to the value of the old pump, but for the new and special purpose in view, the old pump was useless without the improvement. The testimony shows that there was no market for pumps adapted to this particular use, except in the oil-producing regions of Pennsylvania and Canada. The demand was limited, as well as local. Less than a thousand pumps actually supplied all who wanted them. But for that particular use no other pump could at the time be sold. If the appellant kept the control of its monopoly under the patent, it alone had the advantage of this market. Unless the appellees got the improved pump, they could not become competitors in that field; and just to the extent they got into the field they drove the appellant out. Through their infringement they got the advantage of selling the pumps that had upon them the patented improvement. Without it no such sales would have been effected. The fruits of the advantage they gained by their infringement were, therefore, necessarily the profits they made on the entire sale. This is an exceptional case. A limited locality required a particular kind of pump, to be used only in that locality for a special purpose. The market was not only limited to a particular locality, but it was unusually limited in demand. A single manufacturer, possessing the facilities the appellant had, could easily, and with reasonable promptness, fill every order that was made. There was no other pump that could successfully compete with that controlled by the patent. Under these circumstances it is easy to see that what has been the appellees' gain in this business must necessarily have been the appellant's loss, and consequently the appellant's damages are to be measured by the appellees' profits derived from their business in that special and limited market. This, as it seems to us, is the logical result of the rule which has been stated. By infringing on the appellant's rights, the appellees obtained the advantage of the increased marketability of their pumps. The action of the Court below, therefore, limiting the field of inquiry as to damages, cannot be sustained. . . . The decree will be reversed, and the cause remanded with instructions to sustain the fifth exception to the report of the master, and enter a decree against the appellees for $4,470 and costs; and it is 1 [NOTES: So ordered.1 "Infringement: Possession of infringing articles." (H. L. R., XIV, 625.) "Infringement: Accounting for profits not due in whole or in part to infringement." (H. L. R., XX, 631–632.) "Infringement: Statutory compensatory damages measured by owner's license fees without interest, regardless of infringer's profits." (H. L. R., XXI, 293.)] (3) Relation between Common-Law Trade-Secret Right and Statutory Patent-Right 228. HARTMAN v. JOHN D. PARK & SONS COMPANY UNITED STATES CIRCUIT COURT, EASTERN DISTRICT OF KENTUCKY. 1906 145 Fed. 358 IN EQUITY. On demurrer to bill. F. W. Hinkle, F. F. Reed, and E. S. Rogers, for plaintiff. W. J. Shroder, Alton B. Parker, Morris & Fay, for defendant. COCHRAN, District Judge. This case is before me on demurrer to the bill for want of equity. The bill alleges in substance that complainant is the manufacturer and seller amongst other medicines of one known as "Peruna"; that the formula by which it is made was discovered by him, and is known only to him and his trusted employees; that he puts it up in bottles, each of which is inclosed in a loose white wrapper bearing the words "Peruna the Great Tonic" and has pasted on it a label giving its history, the theory upon which it is based, the ailments for which it is recommended, and the directions for taking it, and is serially numbered, the number being stamped both on the wrapper and label in several places; that he sells the medicine to wholesale druggists only, who in turn sell to retail druggists, who in turn sell to consumers; that the wholesalers to whom he sells contract with him not to resell except to retailers designated by him and at certain prices, and the retailers whom he designates contract with him not to resell to consumers except at certain prices; that his prices to the wholesalers are uniform and so are the prices fixed by him of wholesalers to retailers and of retailers to consumers; that he alone advertises the medicine and creates the demand for it; that with each package of medicine is furnished a card containing the serial numbers of the bottles therein, and the wholesalers are required to note thereon the retailers to whom same is sold, and to return it to complainant; that the defendant, a Kentucky corporation, is a wholesale druggist; that it obtains said medicine from complainant's wholesalers and retailers by false and fraudulent representations, surreptitious and dishonest methods and persuading them to break their contracts with him, and sells same to retailers operating "cut rate drug stores" at less than the wholesale prices fixed by him, who in turn sell to consumers at less than the retail prices so fixed; that before the medicine is so sold to consumers the wrappers are removed and the labels are defaced so as to obliterate the serial numbers stamped thereon and the information thereby given; and that defendant gives out and announces that he will continue so to obtain said medicine and so dispose of it. The relief sought is an injunction against his so doing. The defendant's contention is that complainant has no right to sell his medicine outright to the wholesalers, and at the same time retain a control over the subsequent trade therein as to the retailers to whom and prices at which the wholesalers may resell and as to the prices at which the retailers may resell to the consumers, and that, hence, the system of contracts by which he is attempting to retain such control is unlawful. It concedes that if this contention is not correct the complainant is entitled to the relief he seeks. The demurrer, therefore, presents for determination the single question as to whether this contention is correct. Its counsel advance two arguments in support thereof. The first one presupposes that the owner of a patent or copyright has the right to sell the things patented or copyrighted outright, and, at the same time by such system of contracts, retain such control over the subsequent trade therein. It is that such owner has such right by virtue alone of the federal statutes as to patents and copyrights, and that as there is no statute giving any rights to the owner of a secret process he does not have such right. The argument has some plausibility and has bothered me somewhat less, however, in concluding that it is not sound than in demonstrating that it is not in a lucid and convincing way, which I have aimed to do. In order to determine its validity it should be ascertained first what rights the owner of a patent or copyright has by virtue alone of the statutes as to patents and copyrights. They in express terms confer the exclusive right to make, use, and sell the things patented or copyrighted. Unquestionably the owner of a patent or copyright has this right by virtue alone of said statutes. It arises solely therefrom. If it were not for them he would not have the right. No other person has any such right in relation to any other articles. Complainant's counsel hesitate to concede this, if they do not actually dispute it. They contend, in effect, that an inventor or author who has not obtained a patent or copyright has, before publication, such right in relation to articles embodying his invention or authorship, and that the owner of a secret process who may be an inventor and entitled to a patent, and who is in exactly the same position as an inventor or author who has not obtained a patent or copyright before publication has such right in relation to articles embodying his secret process. As to the former they say that he has precisely the same rights which an inventor or author who has obtained a patent has. To make sure of this I quote from their brief. They say: "It is therefore proposed to show that in cases of inventors and authors - precisely the same exclusive monopolistic and all controlling property rights in inventions and literary products subsisted at common law before publication as are given by statute after publication. The right given by the federal copyright statute is the exclusive right to print, publish and sell the production. The right given by the patent statutes is the exclusive right to make, use and vend the invention. At common law and by natural right the author of a book or the discoverer of an improvement in machinery, art or manufacture has precisely the same rights before publication." Again they say: "The common-law right and the statutory right are identical in their natures." As against these views many expressions from learned judges can be quoted. As for instance, in the case of Wheaton v. Peters, 8 Pet. (U. S.) 591, 8 L. Ed. 1055, Mr. Justice McLean, in referring to the federal statutes as to copyrights, said: "Congress then by this Act instead of sanctioning an existing right as contended for created it." And in the case of Gayler v. Wilder, 10 How. (U. S.) 477, 13 L. Ed. 504, Mr. Chief Justice Taney said: "The inventor of a new and useful improvement certainly has no exclusive right to it until he obtains a patent. This right is created by the patent." And again in the case of In re Brosnahan (C. C.) 18 Fed. 62, Mr. Justice Miller said: "The sole object and purpose of the laws which constitute the patent and copyright systems is to give to the author and inventor a monopoly of what he has written or discovered, so that no one else shall make or use or sell his writings or his invention without his permission; and what is granted to him is the exclusive right; not the abstract right but the right in him exclusive of everybody else." Concerning these expressions complainant's counsel say. "All that is meant or intended to be meant, when various courts have said that copyright and patent laws create new rights, must be simply that these statutes have continued and extended the old rights after publication or disclosure." In this line they frequently speak of the rights of an inventor or author who has obtained a patent or copyright as being an extension, protraction, continuance, or prolongation of the rights he had in the absence of publication before he obtained his patent or copyright. Counsel for defendant, though taking issue here with complainant's counsel, at times use language implying what they contend. They speak of an inventor or author losing his exclusive right by publication and of his preserving it by obtaining a patent or copyright. I cannot concur in this contention. An inventor or author who has not obtained a patent or copyright does not have before publication the exclusive right to make, use, and sell articles embodying his invention or authorship. Nor does the owner of a secret process have exclusive right to make, use, and sell articles embodying his secret process. The |