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8. TELEPHONE COMPANIES-LICENSOR AND LICENSEE-BELL TELEPHONE COM
The contracts between the American Bell Telephone Company and the local telephone corporations create the relation of licensor and lessor on the one side, and licensee and lessee on the other, and not a relation of agency.
9. CORPORATIONS-FOREIGN CORPORATIONS-DOING BUSINESS IN A STATE.
Whether a foreign corporation is carrying on business in a state must be determined by what it has done, or is doing, rather than by what it may hereafter do, under powers reserved to it in existing contracts, but not yet exercised. For one person to supply the means to another to do business with or on is not the doing of that business by the former. 10. SAME-MANAGING AGENTS-BELL TELEPHONE COMPANIES.
Transactions such as the American Bell Telephone Company has had with the licensee corporations of Ohio, at its place of business in Boston, and not elsewhere, is not the carrying on of business by it in Ohio; nor are such licensee corporations its "managing agents. 11. SAME-SERVICE ON AGENT.
An agent of a foreign corporation upon whom service can be made, must be one actually appointed by or representing the corporation as a matter of fact, not one created by implication or constr ction, contrary to the intention of the parties. 12. SAME-MANAGING AGENTS.
The term "managing agent" implies the carrying on of the corporate business, or some substantial part thereof, by means of an agent who manages and conducts the same within the limits of the state, for and on account of the foreign corporation.
13. PATENTS FOR INVENTIONS-LICENSE-PATENT-HOLDING CORPORATION-NATIONALIZING.
The right of the patent owner to permit or license the use of the invention is not the creature of the federal franchise or statute, but of the common law; and in exercising this common-law right of licensing others to use its patent, the corporation owner is no more nationalized than a private owner would be under the same circumstances; nor does the fact that a patent-holding corporation licenses others to use its patent in a particular state have any more effect and operation in domesticating it within such state than the same act on the part of a private owner would have in rendering him a citizen and resident of every state in which his patent might be used. 14. SAME-JURISDICTION-PRACTICE.
Neither the patent law, nor the privileges secured to patentees thereunder, in any way enlarge, modify, or change the judiciary acts in respect to either the territorial jurisdiction of the federal courts, or the proper service of process upon defendants.
15. ACTION-ENTRY OF APPEARANCE.
Allegations in a plea in abatement showing that the cause of action, and the subject-matter of the suit, did not have its origin in Ohio, such plea being presented solely to object to the jurisdiction of the court, and to quash the return of service, do not amount to an appearance of the defendant.
In Equity. Hearing on motion of the American Bell Telephone Company to set aside the marshal's return, and on plea in abatement to the jurisdiction of the court over said company.
A. G. Thurman, Grosvenor Lowry, Jeff. Chandler, and P. H. Kumler, Dist. Atty., for the United States.
Joseph E. McDonald, Richard A. Harrison, and J. J. Storrow, for American Bell Telephone Co.
Perry & Jenney, for local telephone companies.
JACKSON, J. Proceeding upon the general theory that a patent is a contract between the inventor on the one side, and the government on the other, founded on conditions or considerations prescribed by law, those moving from the former being the production of some new invention or discovery beneficial to the public, in consideration of
which the government grants to the patentee the exclusive privilege, for a limited period, to make, vend, and use the invention throughout the United States, with the right to invoke the aid of its courts for the protection and enforcement of these rights or franchises, the complainants seek, by their bill in this case, to have certain letters. patent, numbered 174,465 and 186,787, embodying the electric speaking telephone, issued to Alexander Graham Bell, March 7, 1876, and January 30, 1877, respectively, declared void, set aside, and annulled, on the ground that they were fraudulently, surreptitiously, and improperly obtained on the part of said Bell, by means of alleged false statements, on which the government relied, and on the faith of which it was induced to issue said patents. In the event said letters patent should not be declared wholly invalid and void, because of the alleged fraud of said Bell in procuring their issuance, the bill further seeks to have said letters patent treated as contracts, "reformed, and modified, as in law and equity and good conscience they ought to be,” for the reason that, by inadvertence, accident, and mistake, they embrace more than said Bell was entitled to claim, etc. Alexander Graham Bell, who is averred to be a resident of the District of Columbia, is made a party defendant; but having neither appeared, nor been served with process, he is not before the court.
It is alleged in the bill that prior to the institution of this suit said Alexander Graham Bell had divested himself of all right, title, and interest in the said letters patent, which, together with the grants. therein contained, he had transferred to the American Bell Telephone.. Company, a corporation chartered and duly organized by and under the laws of the state of Massachusetts. The American Bell Telephone Company, as the owner of said letters patent, together with several corporations chartered by the laws of Illinois, Pennsylvania, and Ohio, designated in the pleadings as the "local or licensee" companies, "associates," "copartners," "representatives," and "agents" of the American Bell Telephone Company, are made defendants. There has been no service upon or appearance by the Illinois or Pennsylvania companies. The "local or licensee" corporations of Ohio are before the court by regular service of process and appearance. The averments of the bill touching the jurisdiction of the court over the several defendants are as follows:
"Your orator further shows that the said defendants, the American Bell Telephone Company, duly incorporated under the laws of Massachusetts; and the Central Union Telephone & Telegraph Company, a corporation duly chartered under the laws of Illinois; and the Erie Telephone & Telegraph Company, incorporated under the laws of the state of Massachusetts; and the Central District & Printing Telegraph Company, incorporated under the laws of the state of Pennsylvania; and the Cleveland Telephone Company, the City & Suburban Telegraph Company, the Miami Telephone Company, and the Buckeye Telephone Company, the latter four incorporated under the laws of Ohio; and the defendant, Alexander Graham Bell,-all of whom are made defendants to this bill,-are present, and are found and have property within the jurisdiction of this court, and are now engaged in carrying on the business of telephony, and maintaining a close monopoly thereof, in the
said district, that is to say, in said Eastern and Western division of said Southern district, and in said Northern district of Ohio,—under and by virtue of said patents to said Bell, and by the means and in the manner hereinafter set forth. Your orator further shows that the defendant the American Bell Telephone Company owns all the telephone instruments used in the business of telephony in the United States conducted under the authority of its patents, and especially all those used by said defendants, or any or either of them, in the state of Ohio; the said instruments that are used by them in said state being in number over 20,000. Its local associates and copartners, the said companies, respectively, own their wires and poles, and contribute the same as their shares, respectively, of the capital of the business, while the American Bell Telephone Company furnishes the franchise and exclusive right of said patents, and the telephone instruments, together with a contract stipulation with each of said local companies that the American Bell Telephone Company will also supply counsel, and maintain all such suits, and do all things, to make the business an exclusive and close monopoly, without charge or burden to the local company or corporation; that the local association, copartnership, or joint stock company thus formed, divides the profits of the business between the American Bell Telephone Company and the said local association, on terms agreed upon between the parties, and the share of the American Bell Telephone Company, as your orator is informed and believes, is set apart weekly, and accounted for by said local company, and is collected by agents of the American Bell Telephone Company, who visit said local company for that purpose, or otherwise paid to said American Bell Telephone Company; that the telephone being a necessary agent in conducting commercial business affairs, the said business is carried on in the manner hereinbefore stated in every city and town of importance in the United States, and between cities, towns, and places in different states, and is so carried on by said defendants in the Eastern division of the Southern district aforesaid, and in the Western division thereof, and the Northern district of said state; and that the said other defendants or sub-companies are part owners and copartners, agents, and representatives of the said American Bell Telephone Company within each of the divisions and districts aforesaid of the state of Ohio, and that the said American Bell Telephone Company is entitled to, and has an interest in, all and singular the property, rights, and business of the other said defendants; that the said American Bell Telephone Company does business in each of said divisions and districts by the sale and grant of licenses to use said patents, by the renting or lease of said telephone instruments, by sharing in the earnings and profits of each of said local companies, by holding stock in the same, by having an interest in the rights, property, and business thereof, by supporting and maintaining each of said companies in litigation, by the employment of officers, agents, and servants in each of said divisions and districts, and by divers other means and devices."
Subpoenas were issued to the marshals of the Southern and Northern districts of Ohio for the American Bell Telephone Company, and the local companies resident therein, reciting that the American Bell Telephone Company (impleaded with others) was "a corporation doing business and found in the state of Ohio."
The returns of the marshals thereon were as follows:
"Received this writ at Columbus, Ohio, on the twenty-third day of March, 1886, and on the twenty-fourth day of March, 1886, I served this writ on the defendant the American Bell Telephone Company (which is a corporation doing business and found within the Eastern and Western divisions of the Southern district of the state of Ohio) by reading the same to A. D. Bullock, the president of the City & Suburban Telegraph Company, and delivering him a duly-attested copy thereof, (the said City & Suburban Telegraph Company
being an agent and partner of the said the American Bell Telephone Company, within said Southern district of the state of Ohio.) on March 24, 1886; also served this writ on said defendant the City & Suburban Telegraph Company by reading the same to A. D. Bullock, its president, and delivering to him a duly-attested copy thereof, on March 24, 1886.
"H. C. URNER, U. S. Marshal. "By RICHARD C. ROHNER, Deputy." On the writ sent to the Northern district this return was made, viz.:
"Northern District of Ohio-ss.: Served this writ on the defendant the American Bell Telephone Company (which is a corporation doing business within said district) by delivering a true and certified copy thereof to James P. McKinstry, vice-president of the Cleveland Telephone Company, the said Cleveland Telephone Company being an agent and partner of the said the American Bell Telephone Company, within said Northern district of Ohio, on March 31, 1886; also served this writ on said defendant the Erie Telephone & Telegraph Company by delivering a true and duly-certified copy thereof to James M. McKinstry, its general superintendent, on March 31, 1886.
"W. F. GOODSPEED, U. S. Marshal.
These returns, while varying slightly in form, recite that the American Bell Telephone Company is doing business and found within each of said districts, and that the writ was served upon it by reading the same, or delivering a certified copy thereof, to the president or vicepresident of the local corporation, with the statement, parenthetically made, that such local company was "the partner and agent" of said American Bell Telephone Company.
On May 3, 1886, the day said defendants were required to enter their appearance in the suit, the American Bell Telephone Company, by its solicitors, entered a special appearance, as follows:
“(No. 229.) In Equity. The United States of America v. The American Bell Telephone Company and others.
"To the Clerk of said Court: Please enter our appearance for the American Bell Telephone Company specially for the purpose of objecting to the jurisdiction and power in said court to compel said corporation, the American Bell Telephone Company, named as defendant herein, to appear or answer in the above cause, and of objecting to the returns of the marshal upon the subpoenas issued in the cause, so far as the same relate to said corporation, and for no other purpose. At the same time we file this paper we file a motion to set aside said returns, and we shall also file a plea to the jurisdiction of the court when the same reaches Columbus, to-morrow.
"HARRISON, OLDS & MARSH, Solicitors." Thereupon the said defendants filed the following motion, viz.: "The American Bell Telephone Company, named defendant herein, appearing specially for the purposes only herein set forth, hereby moves the honorable court to set aside so much of the return of the marshal on the several subpœnas issued herein as relates to the American Bell Telephone Company, for the reason that said return is untrue in fact, and to disregard it for the reason that it is insufficient in law; and hereby prays the judgment of this court whether it shall be compelled to appear herein or answer thereto, for the reason that it has not been served with process herein, and is not compellable to appear in response thereto, and has not accepted and does not accept service
thereto, and has not accepted and does not accept service, nor waive due service of process upon it."
The motion then proceeds to set forth the same statement of facts as is contained in the plea in abatement to the jurisdiction of the court over said defendants, filed at the same time. Affidavits were filed in support of said motion, which, together with all the allegations of fact contained therein, are sworn to by the president and general manager of the American Bell Telephone Company.
The plea in abatement to the jurisdiction of the court, containing the same recital of facts as the motion to set aside the marshal's return, is as follows:
"In Equity. The United States of America v. The American Bell Telephone Company et al. Plea to the Jurisdiction.
"The American Bell Telephone Company, named as defendant herein, appearing specially and solely to object to the jurisdiction and power of this court to compel it to appear and answer in the aforesaid action, by protestation, not confessing or admitting all or any of the matters and things in the said bill of complaint contained to be true in such manner and form as the same are therein and thereby set forth and alleged, pleads to the jurisdiction of this court over it, and for plea says that this court ought not to compel it to appear or to answer in the aforesaid action, because at the time of the commencement of the said suit, and at the times when service of the several writs of subpoena issued therein was attempted or pretended to be made upon it, this defendant was not an inhabitant nor found in the state of Ohio, nor in either of the judicial districts thereof established by the United States, and has not been served with process herein, (although service has been attempted to be made, and a pretended return made upon said subpœna;) and this defendant is not compellable to appear in response to said writs, and does not accept or waive service thereof."
And this defendant further says:
"The American Bell Telephone Company is a corporation established under the general laws of the commonwealth of Massachusetts, and particularly by virtue of chapter 117 of the Acts of 1880, and acts in amendment thereof, to which reference is hereby made. It has always had its place of business and maintained its office in Massachusetts. It was not, at the time of the filing of the bill in this case, nor of the attempted service of the subpœna herein, nor at any time since the filing of the bill, nor before, an inhabitant of, nor a resident of, nor present, nor found, in the state of Ohio, nor the Southern district of Ohio. It was not at either of said times doing business in the state of Ohio, nor engaged in carrying on the business of telephony in the state of Ohio. It had not, at either of said times, any place of business, office, officer, or managing agent, nor any partner, in the state of Ohio. It has not been served with process in the state of Ohio, nor has service been accepted or waived by it, or by any one thereto authorized.
"Neither of the other corporations defendant was, at any of said times, a partner, nor a managing agent, of the American Bell Telephone Company, in the state of Ohio, nor elsewhere.
"The bill seeks to annul, cancel, tear the seal from, and destroy the two patents No. 174,465 and No. 186,787-referred to in the bill, and to destroy the property therein of the owner thereof. The American Bell Telephone Company now is, and at all times since the year 1881 has been, the sole owner and possessor of said patents. Said other corporations defendant have never been owners or co-owners or part owners thereof, in law or in equity,