•273

for to the inventor, or any other person interested in said invention; and no patent shall be held to be invalid by reason of such purchase, sale, or use prior to the application for a patent as aforesaid, except on proof of abandonment of such invention to the public; or that such purchase, sale, or prior use has been for more than two years prior to such application for a patent."

The act of July 8, 1870, repealed the act of 1839, but provided (section 111) that such repeal should not affect, impair, or take away any right existing under the act of 1839. Section 24 of the act of 1870, now embodied in section 4886, Rev. St., was in these words: "That any person who has invented or discovered any new and useful art, machine, manufacture, or composition of matter, or any new and useful improvement thereof, not known or used by others in this country, and not patented, or described in any printed publication, in this or any foreign country, before his invention or discovery thereof, and not in public use or on sale for more than two years prior to his application, unless the same is proved to have been abandoned, may, upon payment of the duty required by law, and other due proceedings had, obtain a patent therefor. Section 37 of the act of 1870, now embodied in section 4899, Rev. St., provided as follows: "That every person who may have purchased of the inventor, or, with his knowledge and consent, may have constructed, any newly invented or discovered machine, or other patentable article, prior to the application by the inventor or discoverer for a patent, or sold or used one so constructed, shall have the right to use, and vend to others to be used, the specific thing so made or purchased, without liability therefor." In section 61 of the act of 1870 it was enacted that, in any action for infringement, the defendant might prove on the trial, as a defense, among other things, that the thing patented "had been in public use or on sale in this country for more than two years before his application for a patent, or had been abandoned to the public," and that, if such special matter alleged should be found for the defendant, judgment should be rendered for him. This provision is now found in section 4920, Rev. St.

It is very plain that under the act of 1836, if the thing patented had been in public use or on sale, with the consent or allowance of the applicant, for any time, however short, prior to his application, the patent issued to him was invalid. Then came section 7 of the act of 1839, which was intended as an amelioration in favor of the inventor, in this respect, of the strict provisions of the act of 1836. The first clause of that section provides for the protection of a person who, prior to the application for the patent, purchases or constructs a specific machine or article, and declares that he may use and sell such specific machine or article after the patent is issued, without liability to the patentee. The section does not require, in order to this protection, that the purchase or construction shall have been with the consent or allowance of the person who afterwards obtains the patent, and seeks to enforce it against such purchaser or constructor. The words "consent or allowance" are not found in the provision. The only requirement is that the specific machine or article shall have been purchased or constructed at some time prior to the application for a patent. The second clause of the section then passes to consider the effect upon the validity of the patent "of such purchase, sale, or use prior to the application" for the patent, and declares that "no patent shall be held to be invalid by reason of such purchase, sale, or use prior to the application for a patent as aforesaid, except on proof of abandonment of such invention to the public, or that such purchase, sale, or prior use has been for more than two years prior to such application for a patent." The expression "such purchase" clearly means the purchase from any person, and not merely from the person who becomes the patentee of the machine or article. The expression "such sale or use" clearly refers to the use or sale by the person who has purchased or constructed the machine or article, the right to use and sell which is given to him by the first part of the section. That right is

given to a person who has constructed the machine or article, as well as to one who has purchased it; and the plain declaration of the second part of the section is that, where the purchase or construction of the machine or article took place more than two years prior to the application for the patent, or wherc the use or sale by the person who so purchased or constructed the machine or article took place at a time more than two years prior to the application, the patent becomes invalid. It is not possible in any other way to give full effect to the word "constructed" in the first part of the section. The word "purchased" and the word "constructed" are used in the same connection, and in connection with the words "so made or purchased," which occur afterwards; and the word "purchased” cannot be limited to a purchase from the applicant for the patent, nor can the word "constructed" be limited to a construction with the consent and allowance of such applicant, without interpolating into the statute the words "consent or allowance." We can find no warrant for doing this. The evident purpose of the section was to fix a period of limitation which should be certain, and require only a calculation of time, and should not depend upon the uncertain question of whether the applicant had consented to or allowed the sale or use. Its object was to require the inventor to see to it that he filed his application within two years from the completion of his invention, so as to cut off all question of the defeat of his patent by a use or sale of it by others more than two years prior to his application, and thus leave open only the question of priority of invention. The evident intention of congress was to take away the right (which existed under the act of 1836) to obtain a patent after an invention had for a long period of time been in public use, without the consent or allowance of the inventor; it limited that period to two years, whether the inventor had or had not consented to or allowed the public use. The right of an inventor to obtain a patent was in this respect narrowed, and the rights of the public as against him were enlarged, by the act of 1839. The language of section 24 of the act of 1870, now section 4886, Rev. St., is to the same effect, and carries out the policy inaugurated by the act of 1839. It allows a patent to be granted only for an invention which was not in public use or on sale for more than two years prior to the application for the patent, subject to the defense of abandonment within such two years, which is also the requirement of section 61 of the same act; while section 37 of that act requires that a person, in order to have the right to use and sell, without liability, a specific thing made or purchased prior to the application for the patent, shall have purchased it of the inventor, or constructed it with his knowledge and consent.

In view of the fact that section 37 of the act of 1870 re-enacts the first part of section 7 of the act of 1839, with the addition, ex industria, of the requirement, in order to confer the right to use the specific thing in question, that the purchase of it should have been from the inventor or the construction of it should have been with his knowledge and consent, and of the further fact that section 24 of the act of 1870 re-enacts the second part of section 7 of the act of 1839, and does not contain a requirement that the public use or sale for more than two years prior to the application shall have been with the consent or allowance of the patentee, in order to invalidate the patent, it may fairly be said that it was the view of congress that section 7 of the act of 1839 did not require, as an element, the knowledge, consent, or allowance of the applicant. Views are to be found in decisions of circuit courts not in harmony with the construction we have thus put upon section 7 of the act of 1839. That construction was upheld in the very full opinion given by Judge Love, one of the judges who sat in the present case in the circuit court. 5 McCrary, 204, 16 Fed. Rep. 387. It was indicated as the proper construction in the opinion of this court in Elizabeth v. Pavement Co., 97 U. S. 126, 134, which was the case of a patent issued under the act of 1839, and where this court, speaking by Mr. Justice BRADLEY, said, in regard to that act “An aban

274

donment of an invention to the public may be evinced by the conduct of the inventor at any time, even within the two years named in the law. The effect of the law is that no such consequence will necessarily follow from the invention being in public use or on sale, with the inventor's consent and allowance, at any time within two years before his application; but that, if the invention is in public use or on sale prior to that time, it will be conclusive evidence of abandonment, and the patent will be void."

The decree of the circuit court is affirmed.

(123 U. S. 233)

RICHTER . JEROME, Survivor, etc.1

(November 7, 1887.)

EQUITY-FRAUD-LAND-GRANT-TRUSTS.

A grant of land made by congress to Michigan, to aid in building a canal, was transferred to the Portage Lake & Lake Superior Ship-Canal Company. Another grant to build a wagon road was transferred to F. W. Anthony, a certain number of acres being payable on the completion of every two miles. Anthony transferred, for a sum agreed upon, through trustees, to the canal company, the land he had already earned, and his contract rights. The company then executed a trust deed to the Union Trust Company to secure an issue of bonds. A certain amount of money was borrowed on the bonds, the proceeds going to Anthony. Previous to the arrangement with Anthony, the company had given mortgages on its canal grant. These mortgages were foreclosed, and the company declared bankrupt. The trust company filed a bill to foreclose its mortgage. The decree found that the mortgages covered, in addition to the canal grant, the earned land purchased from Anthony, but that as to the residue of the road lands they had only a possible equity. Under this decree, the mortgaged property was sold and the sale duly confirined. Afterwards the vendees released to J. C. Ayer the equity they had acquired to the unearned wagon-road lands. Ayer arranged with Anthony, and so acquired title to the balance of the road lands. One of the holders of the bonds issued under the deed to the Union Trust Company brought a bill in equity against the assignees in bankruptcy, the heirs of Ayer and the Union Trust Company, charging that the transactions related above had happened through fraud and collusion, and that Ayer consequently held the road lands in trust for the benefit of holders of the bonds. Held, that a demurrer filed by the assignees and heirs of Ayer was properly sustained.

Appeal from the Circuit Court of the United States for the Western District of Michigan.

J P. Whittemore and Don M. Dickinson, for appellant. E. W. Meddaugh and W. D. Davidge, for appellee.

The

WAITE, C. J. *This is a suit in equity brought by Morris Richter, the appellant, and the case made by the bill and its exhibits is, in substance, this: In 1864 the Portage Lake & Lake Superior Ship-Canal Company was organized as a corporation under the laws of Michigan to build a ship-canal from the most westerly point of Portage lake through a neck of land called "The Portage," to Lake Superior. In 1865 and 1866, congress made two grants of land to the state of Michigan, of 2,000,000 acres each, to aid in this work, and both these grants were transferred by the state to the canal company. company afterwards executed three mortgages on the lands so granted, to secure bonds amounting in all to $2,000,000. On the third of March, 1863, congress granted the state other lands, containing in the aggregate 220,000 acres and upward, to aid in building a military road, called in the pleadings a "wagon road, from Fort Wilkinson, Copper Harbor, Michigan, to Fort Howard, Green Bay, Wisconsin. By the terms of this grant 30 sections could be sold at once, and thereafter 30 sections as each 10 miles of road was completed. If the road was not completed in five years, no further sales could be made, and the unsold lands were to revert to the United States. 12 St.

1Affirming 25 Fed. Rep. 679.

798, c. 104, § 3. On the sixth of May, 1870, this time was extenued until January 1, 1872. 16 St. 121, c. 93.

In 1868, Francis W. Anthony contracted with the state to build the road, and in consideration thereof was to receive "all the benefits, emoluments rights, and interests arising from" the land grant. He was to have at once the first 30 sections authorized to be sold, and as any continuous 10 miles (afterwards changed to 2 miles) was completed he was "entitled to apply for and receive a certificate for the number of sections granted to aid in the construction" thereof. In August, 1870, 30 miles of the road had been completed, and 47,958.85 acres of land were conveyed to him therefor in fee.

In November, 1870. as is alleged in the bill, about 80 miles of the road had been completed, and 153,000 acres of land earned, including that which had been patented, but Anthony had exhausted his financial resources and credit,* and was in debt to the amount of $30,000. Being in this condition he went to New York to get money. While there, as is alleged, he entered into a verbal arrangement with the stockholders and directors of the canal company to raise the necessary funds to complete both the canal and the road, by which he was to transfer to Perez J. Avery, Alfred Wild, J. Edwin Conant, and William L. Avery all his rights under the road contract, including the 47,958.85 acres patented lands; the canal company was to change its name to the Lake Superior Ship-Canal, Railroad & Iron Company; the directors of the canal company, as individuals, were to subscribe $2,000,000 to its capital stock, and pay their subscription by their warranty deed of 200,000 acres of the road lands; and thereupon the canal company was to issue bonds to the amount of $3,500,000, secured by a mortgage to the Union Trust Company of New York, "to raise money for the Portage lake canal enterprise, and for the wagon road enterprise."

On the twenty-fifth of April, 1871, Anthony entered into a contract with Perez J. Avery, Alfred Wild, J Edwin Conant, and William L. Avery, by which he agreed to sell to them, and they agreed to buy from him, all the wagonroad lands at 75 cents an acre, to be paid for as follows: “Thirty-six thousand (836,000) dollars within thirty days from this date; eight thousand ($8,000) dollars by the fifth day of June; eight thousand ($8,000) dollars by the fifth day of July; eight thousand ($8,000) dollars by the fifth day of August; eight thousand ($8,000) dollars by the fifth day of September; eight thousand ($8,000) dollars by the fifth day of October; eight thousand ($8,000) dollars by the fifth day of November,-all in the year 1871; and the balance in three payments, one of one-quarter of the whole amount in six months from November 1, 1871; and one of like amount, payable on the first of November, 1872; and the other of one-half the whole amount, payable on the first day of November, 1873; the last three payments to be secured by the joint and several notes of the parties of the second part, with the bonds of the Lake Superior Ship-Canal, Railroad & Iron Company, at sixty per cent., assigned as collateral to said notes."

The contract of Anthony for building the road was transferred by him to the purchasers, "with all the rights, privileges, powers, and claims arising from the same," and he agreed to convey all the lands for which he then held patents as soon as the $36,000 were paid. The lands which had been earned, and not patented, amounting, with those patented, to 150,000 acres, "more or less," were to be conveyed as soon as title should be obtained, and Anthony was to go on and complete the road, and convey the remainder of the lands as fast as they were earned, and he got title thereto. Upon the execution of a deed for the lands which had already been earned, but not then patented, the purchasers were to assign to Anthony, as security for the six monthly payments of $8,000 each, $72,000, at par, of the bonds of the canal company, he agreeing to surrender $12,000 of them as each monthly payment of $8,000 was made. Upon the conveyance of the lands which had not then been earned, but

*237

887.

which were to be earned by the completion of the road, the purchasers were to execute notes for the price, in accordance with the terms of their agreemen, and secure them with the bonds of the canal company, at 60 per cent. on the face value of such bonds.

On the first of May, 1871, Perez J. Avery, Alfred Wild, and J. Edwin Conant, three out of the four purchasers of the lands from Anthony under this contract, executed a deed to the canal company; in which, after reciting that they were the owners in fee of 220,000 acres of land granted to the state of Michigan to build the road, and had subscribed for 500 shares of the capital stock of the company, to be paid for by a conveyance of 200,000 acres of such land, they did, in consideration of the stock, convey to the company in fee-simple, with full covenants of warranty, "all and singular those two hundred and twenty thousand acres of land, being the same granted by act of congress of the United States, entitled 'An act granting lands to the states of Michigan and Wisconsin to aid in the construction of a military road from Fort Wilkinson, Copper Harbor, Keweenaw county, in the state of Michigan, to Fort Howard, Green Bay, in the state of Wisconsin,' approved March 3, 1863: which said lands are fully described and designated on the maps and record books of the office of the register of the land-office at Marquette, Michigan, and to which records and maps reference is hereby made for a fuller and more perfect description of said lands, saving and reserving from the operation of this deed twenty thousand acres of land, to be selected by taking the sections reserved in their order as they come, commencing at the Wisconsin state line, and taking the sections on both sides of said road far enough north to get twenty thousand acres of land."

On the same day that this deed was delivered, the company executed to the Union Trust Company of New York a deed of trust covering the two land grants to the canal company, "and also two hundred thousand acres of land situate, lying, and being in said state of Michigan, subscribed to the capital stock of the party of the first part, and fully and particularly described in a full covenant deed made by Perez J. Avery, Alfred Wild, and J. Edwin Conant, and their wives, dated on the first day of May, A. D. 1871, conveying said lastmentioned two hundred thousand acres of land" to secure a proposed issue of bonds to the amount of $3,500,000. Of this amount of bonds, $1,300,000 were issued by the trustee to the directors of the canal company with the usual certificate of security thereon. The bill then alleges that the directors of the canal company and Anthony, upon the faith and credit of these bonds, raised in open market $36,000 in money, which was paid over to Anthony on his contract for the sale of the lands. and afterwards $16,000 more, which was used in the same way. The remainder of the $1,300,000 "were sold or pledged in the open market of New York and elsewhere, and money raised thereupon and applied to the use and benefit of said Lake Superior Ship-Canal, Railroad & Iron Company."

On the twenty-fifth of May, 1872, a bill was filed against the canal company for the foreclosure of its mortgage on the lands embraced in the first congressional grant, and on the third of July, 1872, for the foreclosure of that on the lands in the second grant. On the fifth of July, 1872, another bill was filed for the foreclosure of the third mortgage executed by the company, which covered all the lands in both grants. Then, on the nineteenth of June, 1875, the Union Trust Company filed its bill to foreclose the mortgage which was executed to that company May 1, 1871, and covered both the land grants and the 200,000 acres embraced in the conveyance of Avery, Wild, and Conant. The same solicitor appeared for the plaintiff in each of the several foreclosure suits. On the twenty-seventh of August, 1872, the canal company was declared a bankrupt, and thereafter George Jerome and Fernando C. Beaman, its assignees, became parties to the litigation.

In the bill filed by the Union Trust Company for the foreclosure of