American Rapid Telegraph Co. v. Connecticut Telephone Co.

vested in the American Bell Telephone Company, a Massachusetts corporation; and that after the grant of said. letters-patent to Bell, other inventors made various improvements in his apparatus, and in apparatus and appliances, such as call-bells, switches, switch-boards, etc., to be used therewith, which were duly patented to them, which patents have also been assigned to and are vested in the American Bell Telephone Company.

That subsequently, on the 8th day of February, 1881, the American Bell Telephone Company granted to the defendant the license under said patents, which is hereinafter more fully stated; in pursuance of which license the American Bell Telephone Company has leased to the defendant electric speaking telephone instruments made under said patents, and which in their operation conform to the method described in said Bell patent; and that the defendant has the right to use them in accordance with the terms of said license and not otherwise, but the exclusive grant contained in said patents makes it unlawful for the defendant to use them except so far as permitted by said license.

That in order to use the right so granted and the instruments so hired for such limited uses, the defendant has, at an expense of many thousand dollars, constructed a central office with a suitable switch-board, made and licensed under some of said patents, and has constructed lines of wire therefrom to a large number of private residences and private offices in said Bridgeport, and has placed in such residences and offices, and connected with said wires, telephone instruments so obtained from and licensed by the American Bell Telephone Company, and also, to be used therewith, call-bells and switches made and licensed under other patents in said license referred to, and has granted to the occupants of such premises the license and right to use them under a written contract, prescribed by the American Bell Telephone Company; by means of which instruments and connections, and by the patented method of said Bell, the said various licensed occupants are enabled

American Rapid Telegraph Co. v. Connecticut Telephone Co.

to communicate with each other and with said central office, and are licensed so to do to the extent and for the purposes in said sub-license specified.

That the defendant admits that the plaintiff is a telegraph company, and has a public office in Bridgeport, and is engaged in the business of transmitting for hire between said office and its other public offices outside of Connecticut, general business telegraph messages for all persons who may bring them to any of said offices for that purpose; that the practice of the plaintiff and other telegraph companies is, and for many years has been, to transmit such messages between its public offices and the private offices and residences of its customers by messenger boys, or by telegraphic wires constructed at the expense of itself or its customers for that purpose, and that the price it charges its customers includes a compensation for so doing; and the defendant admits that it would be greatly to the convenience and pecuniary profit of the plaintiff, if it could obtain the use of the defendant's system of wires, instruments, central office and the service of its servants to operate the same and keep them in repair, without cost to itself, or at a sum which would be nominal and inconsiderable, in comparison with the cost of performing the same service, entirely at its own expense; also that the facilities which would be afforded by the use of the defendant's wires, instruments, central office and operators, would increase the business of the plaintiff, and afford it greatly increased revenues and profits.

That under and by its lease and license, the American Bell Telephone Company did not grant to the defendant, but has retained the sole and exclusive right to use within the territory to which said license extends, the said patented inventions, and the leased instruments and other appliances to perform any and all part of the work of transmitting messages by electricity from the private offices and residences of the subscribers, to points outside said territory; that in order to perform said service in a manner more economical, more efficient, and more beneficial to the

American Rapid Telegraph Co. v. Connecticut Telephone Co.

subscribers, the American Bell Telephone Company has appointed the Western Union Telegraph Company (a telegraph company having a public office in Bridgeport, and whose lines reach to or connect with all parts of the world), to perform part of said work; that the lines and operators of said telegraph company do perform part of said work, and that the American Bell Telephone Company receives a portion of the compensation paid by the public for said service; that furthermore it has in and by said license been agreed between the American Bell Telephone Company and the defendant that the lines, apparatus, central office and operators of the defendant, shall be employed to perform part of said service of transmitting messages to extra-territorial points, and that a line built and owned by the American Bell Telephone Company, extending from the central office of the defendant to the office of said Western Union Telegraph Company in said Bridgeport, shall be employed for another part of said service, and that the American Bell Telephone Company will pay to the defendant therefor a certain portion out of the total compensation which it receives for each such message.

That the defendant is entirely willing and hereby offers to furnish to the plaintiff its patented instruments and suitable connections with its central office under the same license which is granted to other customers to be used as therein expressed, but not otherwise; but that the plaintiff wishes to use them for transmitting such extra-territorial telegraphic messages, and for a toll or consideration to be paid by persons other than itself, and for performing part of the work of collecting, transmitting and delivering messages in respect of which toll or consideration is to be paid to persons other than the exchange and for transmitting market quotations and news for sale or publication, and for performing services in competition with the services which the exchange undertakes to perform; some of which uses are not included in the right granted to the defendant by the American Bell Telephone Company, and all of which are forbidden to the customers of the defendant; and that

American Rapid Telegraph Co. v. Connecticut Telephone Co.

the plaintiff desires to use said instruments for its own profit; and that such uses so desired and intended differ in character from and in amount far exceed the use made by other licensees and customers of the defendant and defined in its license.

So the defendant says-1st. That it has no power to furnish the patented instruments, facilities and connections asked for by the plaintiff.-2d. That if said instruments, facilities and connections shall be so furnished upon the same terms as are paid by private and individual customers, the American Bell Telephone Company will lose the profits and revenues which it is entitled to receive for the use of its patented inventions for the transmission of extra-territorial messages, and the defendant will lose the compensation agreed to be paid to it by the American Bell Telephone Company for the part of said service performed by it as aforesaid, the right to earn which was one of the causes which led it to expend its money in the erection of this exchange system.-3d. That the plaintiff will obtain all the advantages and benefits which private subscribers have, for the same price usually paid by them for such advantages and rights, and further and different advantages and profits of great value from the use of the patented inventions, and the apparatus and wires, and central office, and employment of operators there, without paying any compensation whatever therefor.

The contract between the American Bell Telephone Company and the Connecticut Telephone Company, set up in the answer of the defendant, contained among others the following clauses:

(2.) The rights hereby granted shall remain in force until the first day of May, 1888, unless sooner determined as hereinafter provided, and shall extend to all exchanges established and owned by the licensee within the present municipal limits of the city of Bridgeport, in the county of Fairfield, and state of Connecticut." (Extended by a later clause to sundry towns in Fairfield county.)

"(3.) For the purpose of this contract a telephonic ex

American Rapid Telegraph Co. v. Connecticut Telephone Co.

change system means a system, entirely within said territory, in which different circuits are connected with a central or branch office of the exchange, attended by an agent of the exchange, for the purpose of placing subscribers or other parties by such circuits in telephonic communication. with such central or branch exchange office, or with each other, either directly or through the agents of the system. No office or line of an exchange can be connected with any point outside of said territory, nor with any telegraph cómpany's office or line, except by lines of the licensor or parties. specially designated by it for this purpose, and no telegraph company, unless specially permitted by the licensor, can be a subscriber or use the system to collect and deliver messages from and to its customers."

"(7.) The contract between the exchange and those who are to use telephones under it shall express in such form as the lessor shall from time to time approve, that the telephone is the property of the licensor; that it is leased and licensed by it only as herein expressed; that all use of it otherwise is an injury to and invasion of the rights of the licensor as owner thereof and of the patent rights used therein and thereby, entitling it to all the remedies herein provided and to an injunction, and other legal redress, in a suit by it in its name and behalf."

The act of the legislature of Massachusetts, incorporating the American Bell Telephone Company, was passed in the year 1880, and contained the following clauses:

[The corporators named] may associate themselves and organize a corporation according to the provisions of chapter 224 of the acts of the year 1870, and the acts in amendment thereof and addition thereto, for the purpose of manufacturing, owning, selling, using and licensing others to use, electric speaking telephones and other apparatus and appliances pertaining to the transmission of intelligence by electricity, and for that purpose constructing and maintaining by itself and its licensees public and private lines and district exchanges, with a capital stock exceeding one million of dollars, and not exceeding ten millions of dollars.