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Colonial Cases

Mustard and Bennett v. Wright and others, 1897

[breach of contract]


Mustard and Bennett v. Wright and others

United States Consular Court, Shanghai
Jernigan, 28 April 1897
Source: North China Herald, 7 May,1897



Shanghai, 28th April.

Before T. R. Jernigan, Esq., Consul-General, Acting Judicially.

   His Honour delivered judgment on the demurrer in the suit instituted by R. W. Mustard and C. C. Bennett against R. H. Wright, the American Cigarette Co., and the American Trading Co. Mr. W. A. C. Platt (Messrs. Johnson, Stokes & Master) appearing for the plaintiffs and Mr. H. S. Wilkinson for the defendants. By consent of parties the American Cigarette Co. was struck out as defendant.

   His Honour said - The plaintiffs, in their petition allege, that in the spring of 1890 the defendant Wright came to Shanghai and offered to sell to the plaintiffs the exclusive right of working the Bonsack Cigarette Machine in China, and that subsequent negotiations resulted in the plaintiffs buying of the defendant Wright the exclusive right of working the said Bonsack Cigarette Machine in China, and for the precise terms and condition of the contract between the plaintiffs and defendant Wright, the plaintiffs refer to the correspondence between them on the subject. The plaintiffs further allege that notwithstanding the exclusive sale to them, as aforesaid, the defendant Wright afterwards came to Shanghai, and without the plaintiffs' consent, and in breach of his contract with them, sold for use in Shanghai and China, to the American Trading Company, one of the defendants, are General Agents, five of the Bonsack Cigarette Machines, similar in all respects to the Bonsack Cigarette Machines  sold by the defendant Wright to the plaintiffs in the spring of 1890; and at the time of this sale both the American Cigarette Company and their agents, the American Trading Company, were fully aware of the contract the defendant Wright had made with the plaintiffs, and that the five Bonsack Cigarette Machines thus sold by defendant Wright to the American Trading Company, as agents aforesaid, have been landed at Shanghai, and the defendant companies have now under construction a building in which they intend to work and operate them.

   The plaintiffs therefore pray judgment: First, against the defendant R. H. Wright, as damages for breach of said contract, the sum of twenty thousand taels, Shanghai Sycee, and  that he may be restrained in future from selling in Shanghai and China Bonsack Cigarette Machines; Second, that the defendant companies be restrained from working and operating in Shanghai and China the five Bonsack Cigarette Machines purchased by them from the defendant Wright or selling said machines to any person or company whose intention it is to operate and work the same in Shanghai or China; that each of defendant companies be retrained from acting as agents or managers in Shanghai or China or having any business relation with any person or company whose business it is to so operate and work the Bonsack Cigarette Machines in Shanghai and for China; that all monies now due or accruing due from either of the defendant companies to the defendant R. H. Wright may not be paid over to him, or to anyone claiming under him, but be paid into Court to be dealt with as the Court shall direct, and for cost.

   The defendants demur to the petition of the plaintiffs in that it is bad in law; that the plaintiffs claim a monopoly contrary to company law; that the plaintiffs claim a monopoly without showing any title thereto; that the claim of the plaintiffs, made in the petition, is alleged to be grounded upon an exclusive right acquired from R. H. Wright therein named, without showing any lawful title of the said R. H. Wright to such exclusive right; that the petition does not disclose any cause of action against the American Trading Company; and on other grounds sufficient in law to sustain the demurrer.

   By the laws of the United States inventors have an exclusive right to their inventions, the limitations as to time being also provided by law, and during the existence of such right the exclusive privilege of disposing of the inventions is expressly guaranteed to inventors by the statute law of the United States. The protection thus afforded inventors in no sense violates any organic or stature law of the United States that may define what monopolies are or provide against them. It is the protection justly afforded intellectual skill and genius, encouraging useful citizenship, and saying to the citizen that the achievements of his industry and ability shall be protected and guaranteed to him and his family for a reasonable time.

   All civilised codes contain provisions protecting inventors, and a most enlightened feature of the administration of the Taotai of China was a recent proclamation by him forbidding under penalty, the infringement or counterfeiting of the foreign patents by Chinese. The Court is unable to understand, from the allegations in the petition that when the defendant Wright sold to the plaintiffs the Bonsack Cigarette Machines as alleged, or when the plaintiffs purchased the Bonsack Cigarette Machines, as alleged, that in either case a monopoly, in the legal interpretation of a patent and the rights and privileges thereto belonging, was claimed or sought to be established, but that the seller and purchaser were exercising rights allowed by law.

   It was stated in the argument that although the right of a patentee or inventor under United States law might be enforced in the United States, such rights could not be enforced outside of the United States.  The comity obtaining between some nations on the subject is so thoroughly entrenched in public approval as to encourage the belief that ere long the principle of international copyright will be a more generally approved principle of international law, but this cause is before a United States Court, and, although sitting in the Empire of China, its proceedings are the proceedings of a United States Court sitting within the territorial limits thereof, and suitors must rely upon United States law for the protection of their wrongs. The demurrer is overruled.

Source: North China Herald, 14 May,1897


Shanghai, 13th May.

Before T. R. Jernigan, Esq., Consul-General, Sitting Judicially, and Messrs,. F. E. Jaskell and A. W. Danforth, Assessors.

  This was a suit instituted by R. W. Mustard and Co., and C. C. Bennett against R. H. Wrioght and the American Trading Company, claiming damages for breach of contract in regard to the sale of certain Bonsack Cigarette Machines, and an injunction against the defendants.

[Not transcribed.]

Source: North China Herald, 21 May, 1897.

[as above.]

His Honor reserved judgment.


Source: North China Herald, 2 July,1897


Shanghai, 1st July

Before T. R. Jernigan, Esq., Consul-General, Acting Judicially, and Messrs. F. E. Haskell and A. W. Danforth, Assessors.


  Judgment was today delivered in this suit instituted by R. W. Mustard and C. C. Bennett against R. H. Wright and the American Trading Company, claiming damages for breach of contract in regard to the sale of certain Bonsack Cigarette Machines, and an injunction against defendants.

   Mr. W. A. C. Platt (Messrs. Johnson, Stokes and Master) appeared for the plaintiffs, Mr. H. P. Wilkinson, counsel for the defendant Wright, and the defendant company being absent on account of indisposition.

   Upon the Court assembling -

   His Honour said - When this case was before the Court, on demurrer, it was argued that if the contentions of the plaintiffs were sustained a monopoly would be given them, and that monopolies were contrary to the common law. In over-ruling the demurrer the Court held that the plaintiffs based their right to a judgment against the defendants upon a contract made with the defendant Wright and against the other defendants for being a party to the violation of that contract with Wright. It was not held that there had been or that there was a contract, because that question was not then before the Court, but the principle which based the over-ruling of the demurrer related to the patent laws of the United States and not to the doctrine of monopolies, for if the plaintiffs could claim the exclusive right to the use of the Bonsack Cigarette Machines, in Shanghai and in China, the right to such exclusive use was the right sold them by the defendant Wright, and this defendant could only sell the privileges and rights guaranteed by the laws under which the Bonsack Cigarette Machine was patented. 

  If there had been no patent granted for the machine, it followed that there could be no exclusive rights, and whatever exclusive rights and privileges Wright did have to sell to the plaintiffs must, therefore, have been the rights and privileges which the patent laws give and protect, and there were such only as the plaintiffs could have bought. It is logical that the plaintiffs could only buy what Wright had the authority to sell and that no one can sell an exclusive right to a machine for a longer period than the patent laws giver existence to that right.

  And the fact that a United States Court, as this is, sits in China can, in no way, though intimated in the argument to the contrary, depart from a strict enforcement of United States law. Wherever a United States Court suits the law of the United States governs its proceedings and influences its decisions; and though holding its session within the territorial limits of China, the treaty between the United States and China provides that no American citizen residing in China can have his rights adjudicated except in the consular courts of his country sitting in the Empire of China, such Courts being United States Courts and governed by laws passed by the Congress of the United States.

  The case is now before the Court on the amended pleadings, presenting in full the allegations and answers of the parties, and the evidence relied upon to sustain each, and having for Associates gentlemen of well-known business capacity, the natural embarrassment of passing upon conflicting evidence has been relieved by their discerning judgment, keeping in view, at the same time, the elementary principles which must govern in reaching a conclusion.

  If either party to this case was asked what defence he most relied upon as a protection to the full enjoyment of his home against any claimant, he would doubtless answer the paper writing in which was conveyed to him the title to the house and the notice which the recording of such paper writing gave to all the world that the title therein conveyed was his.

  Although in the early periods of English law the conveyance of land was usually without writing, the delivery was nevertheless accompanied with overt acts equivalent in point of formality and certainty, to deeds. The ancient policy was in favour of the entire publicity of the conveyance, and is evidence by the old doctrine of the fine of record, the livery under the feoffment, the enrolment of a bargain and sale, and the attainment under a grant; and in the laws of Scotland the principle is practically illustrated by symbolic delivery. The "earth and stone" or "clap and happer" or "net and cable" were, in Scotland, the emblematical symbols of the field, or mill, or fishery.  But as knowledge increased conveyance by writing became more prevalent resulting in the enactment of laws describing the muniments of a valid title, and thus substituting the more enlightened method for the primitive one indicated.

  A written conveyance, properly executed and registered, is notice to all the world of the rights of the owner, and is the valid muniment of title substituted for the charter which the Saxon exhibited as proof of the right to possess his castle. And not to recognise such a principle would unsettle business and reduce society to the state of nature compared by Cicero to a great theatre wherein the place occupied by each individual was, for the time, his own.

  It is believed that the object of the legal principle which gave certainty and safety to business affairs by registration laws is not materially different from the object of the legal principle, which has provided patent laws in order to promote science and the useful arts, for letters patent are not granted as a restriction upon the rights of the community, nor can they be held to be a restraint of trade. A patent right is the right granted by the public for the skill and ingenuity of the inventor, and in an age distinguished  by an active and ardent spirit of achievement in the arts of agriculture and manufacture, and in the machinery of every kind applied to their use, the spirit of public justice has produced in the patent laws a protecting shield for industry and genius, as well as an encouragement by securing to inventors the exclusive rights to their patents for a certain period, during which time they may assign the same in whole or in part or make testamentary disposition as of other property.

  In the case of Bonsack Mach. Co. and others versus Smith and others, it was decided by the United States Circuit Court for the Western District of North Carolina, that the Bonsack Cigarette Machine had been legally patented and that the patentee was entitled to all the protection guaranteed by law, and, consequently, that the patent so granted and recorded was notice to the world of the right of the patentee. And when the defendant Wright came to Shanghai and sold to the plaintiffs the exclusive right for Shanghai and China to use the Bonsack Cigarette Machine he could only sell what rights the law allowed under the patent and no other, and as the patent had been properly recorded, it was notice to the plaintiffs of the extent and duration of said rights.  The Court holds that the defendant Wright did make a contract with the plaintiffs as alleged in their petition, but the fact that the plaintiffs resided in China cannot except them from the legal principle announced as securing business certainty and safety, nor would this principle permit the defendant Wright to become an exception by selling what, under the law of patents, did not belong to him. The principle is applicable, and with equal force, to both the plaintiffs and the defendant Wright.

 It was in evidence, and admitted as a provision of the contract, upon the insistence of the defendant Wright that for a period of ten years, from the date of contract, the plaintiffs were to be restricted in certain particulars in the disposition or use of the Bonsack Cigarette Machine. The maximum period of limitation thus imposed exceeded by seven years the period within which the law gave life to the patent, and while the answer of the defendant Wright, that he could not sell rights, under the patent, longer than the life of the patent, is true, why then should he have insisted in having a provision in the contract, which, under the patent, there was no authority for? 

  In his answer the defendant Wright says that the provision was "designedly introduced for the special purpose of reserving to himself the privilege of selling the machine to other parties after the expiration of the rights under the patent and before the ten years should expire." There is ingenuity in the answer, but justice cannot reconcile, in this regard, the consistency of the answer of the defendant Wright, for after the expiration of the patent he would have been  no more at liberty, by the reservation, to sell the machine than others, and it was not equity to impose upon the plaintiffs, who had, in good faith, bought his machine, a restriction denying to them a privilege enjoyed by all others after the expiration of the patent. If there could be an exception to the notice that must be taken of a patent duly recorded, it appears that the restriction "designedly introduced" by Wright would make the plaintiffs an exception. And under the circumstances, the Court feels justice in awarding the plaintiffs their proper costs against the defendant Wright.

  As it was admitted that the defendant American Cigarette Co., was a British Corporation and therefore not amenable to the jurisdiction of this Court, and it being proved that the other defendant American Trading Co. were the agents only of the American Cigarette Co., there is nothing in the evidence to bring the agency within the provisions of any law imposing a separate responsibility from the principals. If the agency had not been proven, the evidence shows that the purchase of the machines from the defendant Wright was made after the patent had expired, and when anyone was free to buy or sell.

  In view of the elementary principle which has guided the Court to the conclusion reached, the damages claimed by the plaintiffs against the defendant Wright, if any have been proved, as well as the injunction asked for against the defendant American Trading Co., need not be considered.

T. R. Jernigan, &c.

Published by Centre for Comparative Law, History and Governance at Macquarie Law School