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May 26, 1936

GIBBS et al.

The opinion of the court was delivered by: BYERS

BYERS, District Judge.

This is a patent infringement suit in which the patentee and an exclusive licensee to use are the plaintiffs, and a corporation and four of its individual stockholders are the defendants.

The patent is No. 1,906,260 issued to the individual plaintiff, Gibbs, on May 2, 1933, on application filed February 16, 1931.

 The device is a game suitable for operation in an amusement park or other public place, and is composed of a selected number of identical units each one of which is operated by an individual player; each unit consists of a board supported in a horizontal position and, connected thereto, a vertical part called an annunciator.

 The player is seated at the end opposite the annunciator, and rolls a ball toward the other end of the board over or around an obstacle, in the direction of the annunciator; the object is to cause the ball to fall successively into a vertical, horizontal or diagonal row of five of the twenty-five holes which are symmetrically arranged in five rows, equally spaced apart. The hole pockets are connected electrically with the annunciator, which contains twenty-five electric light signals aligned to correspond with the arrangement of the holes on the playing surface of the table; as the ball enters one of the holes, it falls into a pocket and energizes an electric circuit whereby the corresponding signal is illuminated in the annunciator; the ball returns to the player through an inclined surface provided under the playing board for that purpose, but the light which it has kindled, i.e., the circuit which it has closed, is not affected by the return of the ball to the player.

 The object of the player, as stated, is to cause the ball successively to enter five holes in a vertical, horizontal or diagonal row. When he has done this, the annunciator indicates the success of his efforts by displaying five lights in such a row.

 The simultaneous operation of a number of boards, at which different players are seated, affords the element of competition and the playing units are so connected by a scheme of electric wiring that the first player who succeeds in achieving the result indicated becomes the winner over his competitors; his success is indicated by the lighting of a light over his annunciator, i.e., the closing of a supplementary circuit, and the ringing of a bell, and the simultaneous cutting off of all illumination in the annunciators connected with competitive boards.

 A game which terminates when a player has completed a row of five units bearing numbers and played with cards, is not new; a game which involves rolling a ball into one or more holes and a consequent visible signal in an annunciator is not new, but this particular combination of playing board, annunciator, and cut-off of competing boards when a winning combination of five in a vertical, horizontal or diagonal row has been achieved, is new; a considerable commercial success has attended the introduction and operation of this game in amusement parks during the years 1931 to 1935, inclusive, and such commercial success in connection with the plaintiffs' patented device is found.

 The defendants' device is so like the plaintiffs' that little or no contention is made on the subject of infringement; such argument as the defendants make, goes to the system of wiring only and, as that does not form an element of any of the claims, an exit from the litigation is not thus rendered available to the defendants.

 Much of the testimony has to do with the nature of the defendants' conduct in putting their game into operation after they had been afforded an opportunity to examine the plaintiffs' game in the concession operated by the corporate licensee at Coney Island during the month of June, 1935, which was later than the success of the Gibbs game had become well known in public amusement circles.

 The defendants insist that one or more of them independently conceived the idea of putting such a game into operation and that they consulted a practical electrician during the month of May, 1935, and asked him to devise the wiring, and that at that time they had no knowledge of the plaintiffs' patent or of the game itself. It is possible, of course, that the defendants' activity in 1935 along these lines was purely fortuitous and, as the questions of infringement and validity do not turn upon this subject, no finding will be made; the testimony of certain of the defendants created serious misgivings as to their good faith; they might better have frankly said that they did not regard the plaintiff's patent as valid and that they were willing to risk a possible infringement suit in order to test the question, than to depose as they did in certain respects.

 Certain contentions urged on behalf of the defendants require consideration before taking up the question of validity:

 First, it is urged that there is a defect in the parties plaintiff, in that the Cannon Electric Development Company, Inc., of Los Angeles, California, is not so joined, and that it should be because "the patentee has granted an exclusive license to manufacture under the patent" to that corporation. Reference is made to an agreement bearing date December 19, 1930 -- nearly two months prior to the filing of the application for the patent. That agreement is in evidence and is plainly not the work of an attorney; it is written on the letter-head of the Cannon Company and is described by Mr. James H. Cannon, the president, as the original agreement which he had at the time he built the first games: "The games were actually started under construction before this was written due to the fact that I produced them with an unknown cost element; and the understanding was that we would finish the games and then determine the cost afterwards. And the contract was delayed until the completion of the units. The units were started in October some time and the contract was signed in December, as I recall it."

 The document is called an agreement between J.R. Prosser, John T. Gibbs and the Cannon Electric Development Co. based on a memorandum of October 29, 1930, and adapted to subsequent developments. It reads:

 "First, that the Cannon Electric Development Co., is entering into this agreement as a sales promotional measure believing that the game, if successfully designed and perfected, will offer a substantial piece of manufacturing business to the company.

 "For and in consideration of the Cannon Company perfecting the game and the design of the equipment and helping to finance the first unit in its preliminary stages, they are to receive the exclusive manufacturing rights to same.

 "That they are to build the game at a price based on cost plus a nominal overhead expense and a reasonable profit. This price being subject to change from time to time to meet the conditions that develop in the improving and marketing of the game, it being tentatively set at the present time for resale purposes at $217.00 net cash per unit in lots of thirty or more. Lots of twenty to thirty an increase of 5% and lots of less than twenty and not less than twelve, 10% additional to this figure. As a starting price it is understood that $50.00 per unit will be added to these figures as commission to Gibbs and Prosser.

 "Second, Gibbs and Prosser are to hold the exclusive selling privileges on the game and the sales will only be made under mutual agreement of all parties to this contract.

 "Third, that the price on the original game as now built is $202.50 net per unit.

 "Fourth, The established cost on the completed first game is $6,090.35 of this Gibbs & Prosser are to pay in cash $2,400.00 and an additional $600.00 represented by a ninety day promissory note bearing seven per cent interest. The remaining $3,090.35 is to be derived from the sale of the game by adding to the net price, as before mentioned, such amount as may be mutually agreed from time to time.

 "Fifth, That the Cannon Company holds exclusive title to the games consecutively numbered from 21 to 30, inclusive, and is to retain such title until the promissory note herein involved is paid in full. Partial payments on the note applying toward the purchase of the first 20 games.

 "Sixth, It is understood that within a reasonable time Gibbs & Prosser will apply for patent protection on the game for the mutual protection of all parties concerned.


 "Cannon Electric Development Co.

 "By James H. Cannon, Pres.

 "John T. ...

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