Petition — Dawson Chemical Co. v. Rohm & Haas Co.

Supreme Court brief1980

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In THE

Supreme Court of the United States

Octrosper Term 1979

No. AE Opa G 6 9

Dawson CHEMICAL COMPANY,

CrystaL MANUFACTURING CORPORATION,

CrysTaL CHEMICAL CoMPANY,

AND HELENA CHEMICAL COMPANY

Petitioners,

Vv.

Roum Aanp Haas Company,

Respondent.

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

Of Counsel: Nep L. ConLey

1700 Esperson Bldgs.

Butter, Bruton, Ricz, Houston, Texas 77002

Cook & Kynapp (713) 237-3195

1100 Esperson Building

Houston, Texas 77002 B. R. Praven

1177 West Loop South

PRAVELL, GAMBRELL, Hewitt Houston, Texas 77027

Kirk, Kimpatit & Dopcr (713) 850-0909

1177 West Loop South

Houston, Texas 77027 October 26, 1979

PAGE

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CONSTITUTIONAL AND STATUTORY

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CITATIONS

5 Table of Cases

Abbott Labs v. Portland Retail Druggists, 425 U.S. 1, 5-6

Neen en ere cr scsepksdssskenntseusenevccncsssonte cove 18

Ansul Company v. Uniroyal, Inc., 448 F.2d 872 (1971) ........ 7

Ansul Company v. Uniroyal, Inc., 306 F. Supp. 541

sas sedan cutsiachovsntenctenssecsoscocences 13, 14

Aro Manufacturing Co. v. Convertible Top Replacement Co.,

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Aro Manufacturing Co. v. Convertible Top Replacement Co.,

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Blonder-Tongue Labs, Ine. v. University of Il]. Foundation,

Ne sc scasenasnidaneasdenansencseuncescosecess 13

Carbice Corp. v. American Patents Development Corp., 283

aia scat satanetsenscoonsasasinasocnccesnesees 8

Deep South Packing Co. v. Laitram Corp., 406 U.S. 518

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semey ¥. SB. Thek Go., SOE OG. 1 CIBER) ccisecsscscscccrvcccsoremercs 7

Leitch Manufacturing Co. v. Barber Co., 302 U.S. 458 (1937) 8

McCullough Tool Company v. Well Surveys, Inc., 343 F.2d

ae mI UIUND sa lentiiessciosdinisvsunids ninsceectiathnbitsinkonpinccleanadieeca 14

Mercoid Corp. y. Mid-Continent Investment Co., 320 U.S.

SP Ae SE citastin ante nasbiebdrhetiherieniicaincdiiitistetihadia Naiisnghavatlgbelisusceniun passim

Mercoid Corp. v. Minneapolis-Honeywell Regulator Co., 320

SO RINE dendccesiedintinihcsnesenactgerteaennaitalditdastiidinddditaicinas passim

Monsanto Company v. Dawson Chemical Company et al.,

Sa ee ING hifi ecAeecscise hb ticassthescimeesnascecntvadasessanesduusihes 4

Monsanto Company v. Rohm and Haas Company, 312 F.

RG ee CRs CMR, TITOY occcciscicesiinadesdssthcdcbchensdbancbbiasdence 4

Motion Picture Patents Co. v. Universal Film Manufacturing

I AEE AI, SOUR CMIPELT F saishsictiovsspsvviaindas iesazaVesdsehebiabicdckecssedsurs 8

National Foam Systems, Inc. v. Urquhart, 202 F.2d 659,

I A IN II sisson csnssniminscieliebigcseanMebeabehouiateoduldens 13

Performed Line Products Co. v. Fanner Mfg. Co., 328 F.2d

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United States v. Loew’s Inc., 371 U.S. 38, 9 L. Ed. 2d 11, 83

Be ee OO CID See he chs“ nectdesdcsensdpaithinceniateomisiilobbiésdcénacsteie bats 12

Zenith Radio Corp. v. Hazeltine Research, Inc., 395 U.S. 100,

23 L. Ed. 2d 120, 89 S. Ct. 1562 (1969) o.n..cccccccccecescsesssecces 12

Statutes

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In THE

Supreme Court of the United Dtates

Ocroser TERM 1979

Pts cenicsaiebiteaiuieds

Dawson CHEMICAL COMPANY,

CrystaL MANUFACTURING CoRPORATION,

CrystaL CHEMICAL CoMPANY,

anp Hetena CHEMICAL CoMPANY,

Petitioners,

Roum anp Haas CoMpany,

Respondent.

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

Dawson CHEmiIcAL Company, Inc., CrystaL MANUFACTUR-

inc Corporation, CrystaL CuemicaL Company, Ino. and

Hetena CuemicaL Company, hereby petition that a writ of

certiorari be issued to review the Judgment and Opinion of

the United States Court of Appeals for the Fifth Circuit,

entered July 30, 1979.

OPINIONS BELOW

The Opinion of the United States Court of Appeals for

the Fifth Circuit is reported at 599 F2d. 685, and is printed

in the Appendix at page A.1.1 The Opinion of the United

States District Court for the Southern District of Texas,

Houston Division, is reported at 191 USPQ 691, and printed

in the Appendix at page A. 87, and a Supplemental Opinion,

unreported, is printed in the Appendix at page A. 129.

JURISDICTION

The Judgment of the Court of Appeals for the Fifth

Circuit was entered on July 30, 1979. This petition for writ

of certiorari is being filed within ninety (90) days of that

date. The jurisdiction of this Court is invoked under 28

U.S.C. § 1254(1).

QUESTION PRESENTED

Does § 271(d) of the Patent Laws permit the owner of

a method patent to monopolize and reserve to himself the

sale of an unpatented non-staple product which is used

in the practice of the patented method?

CONSTITUTIONAL AND STATUTORY

PROVISIONS INVOLVED

Constitution of the United States, Article I, Section

VIII, Clause 8:

The Congress shall have power...

To promote the progress of science and useful arts,

by securing for a limited time to authors and inventors

the exclusive right to their respective writings and

discoveries, ...

35 U.S.C. § 271

(a) Except as otherwise provided in this title,

whoever without authority makes, uses or sells any

1 “A” followed by a number indicates a page in the appendix.

patented invention, within the United States during the.

term of the patent therefor, infringes the patent.

(b) Whoever actively induces infringement of a

patent shall be liable as an infringer.

chine, manufacture, combination or composition, or a

material or apparatus for use in practicing a patented

process, constituting a material part of the invention,

knowing the same to be especially made or especially

adapted for use in an infringement of such patent, and

not a staple article or commodity of commerce suit-

able for substantial noninfringing use, shall be liable

as a contributor infringer.

(d) No patent owner otherwise entitled to relief

for infringement or contributory infringement of a

patent shall be denied relief or deemed guilty of mis-

use or illegal extension of the patent right by reason of

his having done one or more of the following: (1)

derived revenue from acts which if performed by an-

other without his consent would constitute contribu-

tory infringement of the patent; (2) licensed or au-

thorized another to perform acts which if performed

without his consent would constitute contributory in-

fringement of the patent; (3) sought to enforce his

patent rights against infringement or contributory in-

fringement.

STATEMENT OF THE CASE

This is a suit for patent infringement brought by Re-

spondent Rohm and Haas against Petitioners, the Court

having jurisdiction under 35 U.S.C. § 1338(a), which suit

was dismissed on Motion for Summary judgment, based

solely on facts admitted or stipulated by the parties, (R.

43)? the District Court holding that Rohm and Haas had

misused its patent. The United States Court of Appeals

2“R” followed by a number indicates a page of the Record on

Appeal filed in the Court of Appeals.

for the Fifth Circuit reversed and remanded for a trial on

the merits, holding that the activities of Rohm and Haas

did not amount to patent misuse, being permitted by the

provisions of 35 U.S.C. § 271(d).

The patent in suit, United States Patent No. 3,816,092

(hereinafter the Wilson Patent) describes and claims a

Fide by applying” to the weeds and cr ops the~éhemical

‘compound 3,4~dichloropropionanalide (hereinafter “pro-

panil”). Propanil itself is not patented, the patent on it,

No. 3,382,280, belonging to Monsanto Company, having

been held invalid, in litigation with Rohm and Haas, inter

alia because propanil was described in or taught by the

prior art (Monsanto Company v. Rohm and Haas Company,

312 F. Supp. 778 (E.D. Penn. 1970) affirmed 456 F.2d 592

(3 Cir.) cert. denied 407 U.S. 934 (1972)).3

} Rohm and Haas does not itself practice the patented

|| Process, but makes propanil and sells it in containers b bear-

SO ae

ing instructions for farmers and others to_ perform the

pretess. By operation of law, purchasers of propanil thus

_ ae implied licenses to use the patented method. No

separate payment is received by Rohm and Haas for the

license; it derives its profit solely from the sale of pro-

panil. Rohm and Haas has refused to grant any other

licenses under its patent, so that the only way it has been

possible for users to obtain a license to perform the

patented process has been to buy propanil from Rohm and

Haas. The license is thus tied to the purchase of the un-

patented material.

eget

3 Petitioners Dawson Chemical Company and Crystal Chemical

Company were also sued by Monsanto for infringement of the

propanil patent. The Fifth Cireuit Court of Appeals, in Mon-

santo Company v. Dawson Chemical Company, et al., 443 F.2d

1035 (1971), cert. denied 405 U.S. 934 (1972), reversed the

District Court’s holding of validity of the patent.

method of selectively controlling weeds in crops such as

Hy)

Petitioners sold propanil for application to rice crops

before Rohm and Haas received its patent. When the Wil-

son Patent was issued, Rohm and Haas brought this suit,

charging Petitioners with inducing infringement in viola-

tion of 35 U.S.C. § 271(b) and with contributory infringe-

ment in violation of 35 U.S.C. § 271(c). Petitioners asked

Rohm and Haas for permission to grant licenses under the

patent to purchasers from Petitioners, but Rohm and Haas

refused, stating that licenses would be granted only with

purchases of propanil from Rohm and Haas. Recognizing

this ¢ attempt to monopolize propanil as a misuse of the

Wilson patent which rendered it unenforceable, Petitioners

have continued to sell propanil in containers which bear

recommendations and instructions for application to rice

2 ee aed eA BE ARI es TF Rs

2. pat SAAT ES. Ree ERT Ew

alee aot TNS

( “It _is undisputed that if propanil is a staple material,

\ having a | substantial non-infringing use, requiring patent

‘ie ligensees to purchase the unpatented material from Rohm

and Haas is a misuse of the Wilson Patent. However,

Rohm and Haas asserts that it has the right to do this

because propanil is a non-staple, having no substantial non-

infringing use, and forms a material part of the patented

\' invention. Such right is alleged to have been established

by the enactment, in 1952, of 35 US. C. §27 1(d). Yates awl

Rohm and Haas says it is only idee that which is per-

mitted by § 271(d):

(1) deriving revenue from acts which if performed

without its consent would constitute contributory

infringement, (i.e., selling propanil),

(2) licensing others (its distributors) to sell propanil,

and

(3) enforcing its patent rights against those who sell

propanil,

and therefore it is not guilty of misuse.

Petitioners point out, however, that Rohm and Haas is

not “otherwise entitled to relief”, as required by § 271(d),

because, in addition to the three activities authorized by

§ 271(d), it is doing something else not authorized — com-

pelling those who wish to practice“the patented invention

to purchase propanil from Rohm and Haas, thereby tying

a license under the patent to the purchase of the unpatented

material.

Rohm and Haas contends, and the Court of Appeals

agreed, that the legislative history of §271(d) supports

their position that it was the intent of Congress to allow

such a tying arrangement in the case of non-staple ma-

terials.

Petitioners submit that the legislative history does not

support this view, and that this Court has on numerous

occasions ruled to the contrary. Moreover, such a view

fails to deal with the objectives of both the patent and

the antitrust laws.

REASONS RELIED ON FOR THE

ALLOWANCE OF THE WRIT

1. The Court of Appeals’ construction of § 271(d) of

the Patent Laws as allowing the owner of a method patent

to require, as a condition for a license under the patent,

the purchase from the owner of a non-staple material used

in the practice of the method, is in conflict with this Court’s

repeated condemnation of tying arrangements.

2. The specific question of whether Congress, by enact-

ment of § 271(d) of the Patent Laws, extended the scope

of patents to cover unpatented non-staple materials has

not been, but should be, decided by this Court.

3. The holding of the Fifth Circuit Court of Appeals

is in conflict with the holding of the Second Circuit Court

BNI mr

of Appeals in Answl Company v. Uniroyal, Inc., 448 F.2d

872 (1971).

The essence of the holding by the Court of Appeals is

that 35 USC § 271(d) permits the owner of a method patent

to monopolize the sale of an unpatented non-staple product

with the same effect and to the same extent as if the patent

were on the product rather than on the method or process

involving its use.

Petitioners submit that this Court and other federal

courts have on numerous .occasions ruled that the use of

a patent to effect a monopoly in either staple or non-staple

unpatented products is unlawful. Petitioner further sub-

mits that § 271(d) of the Patent Act is not now (more than

25 years after its enactment) to be construed as having

made an heretofore judicially unrecognized change in the

law spelled out so explicitly by this Court in the Mercoid

cases* in 1944. The decision by the Court of Appeals would

fundamentally extend the scope of exclusive rights that

are conferred by the patent grant and is in conflict with

the opinions of this Court after the enactment of § 271(d),

as they relate to the misuse of patents.

HISTORY OF THE MISUSE LAW

The law of patent misuse came about as a limitation on

the doctrine of contributory infringement, which had its

origin perhaps 100 years ago as court-made law, giving

patent owners a right to bring suit against those who

eoniributed to an infringement by furnishing to infringers

unpatented goods used in the invention. The contributory

infringement doctrine reached its broadest scope in Henry

v. A. Be Dick Co., 224 U.S. 1 (1912), when the Court enun-

4 Mercoid Corp. v. Mid-Continent Investment Co., 320 U.S. 661

(1944) and Mercoid Corp. v. Minneapolis-Honeywell Regulator

Co., 320 U.S. 680 (1944).

ciated principles enabling a patentee to tie the right to

use a patented machine to the purchase of unpatented

supplies. Five years later, however, in Motion Picture

Patents Co. v. Universal Film Manufacturing Co., 243 U.S.

502 (1917), the Court reversed itself, and denied relief to

a patentee who required the purchaser of a patented mo-

tion picture machine to use in the machine only the pat-

entee’s unpatented film, holding that this was an attempt

to create a monopoly outside of the patent (243 U.S. at

518).

Then in Carbice Corp. v. American Patents Development

Corp., 283 U.S. 27 (1980), the Court applied the patent

misuse doctrine to bar a suit for contributory infringement

by a patentee who had expressly required, as a condition

for a license under the patent, that licensees purchase a

product from the patentee which was a necessary but

unpatented component of the invention, holding that the

patent owner had no right to be free from competition in

the sale of the unpatented component.

The rule of Carbice was found equally applicable in

Leitch Manufacturing Co. v. Barber Co., 302 U.S. 458

(1937), to attempts by patentees to achieve the same re-

sult without an express restriction, by giving an implied

license to those who purchased the components from the

patentees and suing all others as well as their suppliers.

In holding that the patent monopoly could not be ex-

tended to unpatented goods, neither these nor other deci-

sions by the Supreme Court before the Mercoid cases made

any distinction as to whether the unpatented goods were a

staple, i.e., had uses other than in the invention, or were

a non-staple, having no substantial use except in an in-

fringement of the patent. It was not until the Mercoid

cases that the Court specifically addressed this question.

PRR ee emcee rosa nw?

The patent in the Mercoid cases covered a heating system,

one element of which was a switch which had no use except

in the patented system, and which was itself unpatented.

The patent owner, Mid-Continent, granted an exclusive

license to Minneapolis-Honeywell to make, use and sell, and

to sublicense others to make, use and sell, the system

covered by the patent. Minneapolis-Honeywell did not sell

the system, but sold only the stoker switches, and granted

licenses to make and use systems covered by the patent

only with the switches purchased from Minneapolis-Honey-

well. Royalty payments were based upon sales of switches.

Mercoid was charged with contributory infringement be-

cause it manufactured and sold switches specially adapted

for use in the patented heating system. The Court denied

relief, holding that it was misuse to require those who

wished to make the patented system to buy the switch

from the patentee’s exclusive licensee. The Court noted

that the switch was a non-staple and that, but for the

misuse, Mercoid could have been enjoined as a contributory

infringer. Then, in dictum, the Court commented that the

result of its decision was to limit substantially the doctrine

of contributory infringement and to raise the question

as to whether any residuum may have been left (320 U.S.

at 669).

The consternation created by this dictum resulted in

efforts to enact a statutory law of contributory infringe-

ment. However, it was recognized that such a law would

be ineffective in the absence of provisions expressly exempt-

ing certain activities from the antitrust laws and the law

of patent misuse; thus, § 271(d) was enacted.®

5 Hearings before Subcommittee No. 3 of the Committee on the

Judiciary, House of Representatives, 82nd Cong. 1st Sess. 173

(1951), a copy of pp. 150-176 being attached hereto at A.142-176.

CONFLICT WITH SUPREME COURT DECISIONS

The Court of Appeals observed that “the legislative his-

tory is not crystal clear”, that petitioners’ reading of it is

plausible (A. 77-78), and that this Court’s Opinions in the

Aro cases® “probably cut against” its view (A. 84), but

nevertheless concluded that the intent of Congress in en-

acting §271(d) was to “provide for a patentee’s right to

exclude others and reserve to itself, if it chooses, the right

to sell nonstaples used substantially only in its invention”

(A. 80).

This Court, in the Aro cases, while not explicitly con-

struing § 271(d), made it very clear that it still considers

that the use of a patent to monopolize unpatented non-staple

components is illegal.

In Aro Il, twelve years after the enactment of § 271(d),

this Court was presented with the argument that the patent

owner could tie the right to use a patented convertible top

to the purchase of the unpatented non-staple and specially

adapted fabric replacement parts from a licensee under

the patent. The Court held that such provisions ‘‘stand

condemned by a long line of this Court’s decisions delimit-

ing the scope of the patent grant” (377 U.S. at 497).

In Aro I, on the authority of Mercoid, the Court rejected

the argument that patent protection should be extended to

the ‘‘essential’’ or ‘‘distinguishing’”’ part of the patented

combination, stating:

“We cannot agree. For if anything is settled in the

patent law, it is that the combination patent covers

only the totality of the elements in the claim and that

no element, separately viewed, is within the grant.

® Aro Manufacturing Co. v. Convertible Top Replacement Co.,

365 U.S. 336 (1961) (Aro I), and Aro Manufacturing Co. v.

Convertible Top Replacement Co., 377 U.S. 476 (1964) (Aro II).

EE TT |

See the Mercoid Cases, supra (320 U.S. at 667; 320 U.S.

at 684). The basic fallacy in respondent’s position is

that it requires the ascribing to one element of the

patented combination the status of patented invention

in itself. Yet this Court has made it clear in the two

Mercoid Cases that there is no legally recognizable or

protected ‘essential’ element, ‘gist’ or ‘heart’ of the

invention in a combination patent.” (365 U.S. at 344-

345).

In his concurring opinion in dro 1, Justice Black, in

reference to § 271, stated (365 U.S. at 347-350) :

‘The language and history of that Act show plainly:

(1) that Congress wanted to continue in force, but not

expand, the judge-made doctrine of contributory in-

fringement under which a person who knowingly aids,

encourages or abets the direct infringement of a patent

is to be held liable as a contributory infringer; (2) that

Congress did not want patentees to be barred from

prosecuting their claims for direct infringement merely

because they exercised their right to assert a claim in

or out of court for contributory infringement;* (3)

that the long-eaisting scope of a patentee’s monopoly

righis was not to be expanded beyond what it had

always been, that is, the exclusive right to make, use

or sell a patented invention during the life of the

patent” (emphasis added).

and in referring specifically to § 271(d), Justice Black stated

(fn. 4):

‘This provision was designed specifically to prevent

the Mercoid case from being interpreted to mean that

any effort to enforce a patent against a contributory

infringer in itself constitutes a forfeiture of patent

rights.’’

Although the specific question, of whether § 271(d) over-

‘uled the Mercoid case on the use of a patent to tie un

patented goods, was not actually presented to the Court

for decision in the Aro cases, it is plain that the Court

would have struck down any scheme for monopolizing an

unpatented non-staple product by conditioning licenses to

use the patented method involving such product upon the

purchase of the unpatented product from the patent owner.

To have sanctioned the exercise of such exclusive rights in

a unpatented product would have been to expand the long-

existing scope of the exclusive rights conferred by the

patent, but that, as stated by Justice Black, was precisely

what had not been provided for by § 271. Although the

opinion of the Court by Justice Whittaker contains no

reference to § 271(d), it was in full accord that the exclusive

rights conferred by a patent do not extend to exclusive

rights in an unpatented element, however essential it may

be to the patented combination, and however difficult it may

be for a patentee to profit from his invention.

This doctrine is also made clear in four other cases

decided since 1952. This Court, in United States v. Loew’s

Inc., 371 U.S. 38, 9 L. Ed. 2d 11, 83 S. Ct. 97 (1962) cited

Mercoid and like cases in support of its reiteration of the

doctrine that a patentee who utilizes tying arrangements

will be denied relief against infringements of its patent:

“These cases reflect a hostility to use of the statu-

torily granted patent monopoly to extend the patentee’s

economic control to unpatented products. The patentee

is protected as to his invention, but may not use his

patent rights to exact tribute for other articles.’’ 371

U.S. at 46, 9 L. Ed. 2d at 18-19.

More recently in Zenith Radio Corp. v. Hazeltine Re-

search, Inc., 395 U.S. 100, 23 L. Ed. 2d 120, 89 S. Ct. 1562

(1969) the Court stated:

“Among other restrictions on him, he [the patentee]

may not condition the right to use his patent on the

licensee’s agreement to purchase, use, or sell, or not

to purchase, use, or sell, another article of commerce

not within the scope of his patent monopoly.” 395 U.S.

at 136, 23 L. Ed. 2d at 155.

In Deep South Packing Co. v. Laitram Corp., 406 U.S.

518 (1971), the Court held that a defendant who exported

unpatented parts of a patented combination was not guilty

of infringement. Citing Mercoid, the Court premised its

reversal on the “unassailable” rule that “a patent on a

combination is a patent on the assembled or functioning

whole, not on the separate parts”. (406 U.S. at 528.)

In Blonder-Tongue Labs, Inc. v. University of Ill. Founda-

tion, 402 U.S. 313 (1970), the Court, while “recognizing the

patent system’s desirable stimulus to invention,” cited Mer-

coid as one of a “series of decisions in which the Court has

condemned attempts to broaden the physical or temporal

scope of the patent monopoly”. (402 U.S. at 343.)

The direct conflict between the holding of the Court of

Appeals and the repeated declarations of this Court as to

the scope of protection to be afforded a patent demands

the attention of this Court.

CONFLICT BETWEEN COURTS OF APPEAL

No court of appeals decision since the enactment of § 271

has specifically discussed whether §271(d) allows the

owner of a method patent to monopolize non-staples used

in the practice of the method. However, the courts have

repeatedly condemned as patent misuse situations where

a patent license could be obtained only by purchasing the

unpatented materials from the patent owner. See National

Foam System, Inc. v. Urquhart, 202 F.2d 659, 663-664 (3

Cir. 1953); Ansul Company v. Uniroyal, Inc., 306 F. Supp.

541 (S.D.N.Y. 1969), aff’d on misuse issue 448 F.2d 872

(2 Cir. 1971) ; Preformed Line Products Co. v. Fanner M fo.

Co., 328 F.2d 265 (6 Cir. 1964) ; and McCullough Tool Com-

pany v. Well Surveys, Inc., 343 F.2d 381 (10 Cir. 1965).

Presumably the patent owners in these cases did not

take the position which Rohm and Haas has taken in this

case, for the court decisions make no mention of the effect

of § 271(d), nor of whether the unpatented goods are staples

or non-staples. The rule which Petitioners here seek was

applied uniformly, even when the unpatented goods clearly

were non-staples, as in McCullough and Ansul.

Ansul is particularly pertinent, since the patent claim

was to a method for applying a chemical to plants to control

their growth, and the patent owner Uniroyal was found

guilty of misuse in using the method patent to reserve to

itself the sales of the unpatented chemical. The chemical

had no commercial use other than in the patented method.

Ansul Company v. Uniroyal, Inc., 301 F.Supp. 273, 277

(S.D.N.Y. 1969). The Court of Appeals stated:

“Since Uniroyal could no longer lawfully use its

method (use) patent monopoly to secure a monopoly

over sales of the unpatented product, it came under

an obligation (if it wished to avoid the charge of

patent misuse) to license its patented use of the un-

patented product for those who wished to buy the

product from other manufacturers.” (448 F.2d at 882,

fn. 4).

There is therefore a clear conflict between the Second

Circuit’s Ansul decision and the decision of the Fifth Cir-

cuit in the present case.

LEGISLATIVE HISTORY

The Court of Appeals in the present ease thought the

weight of the legislative history of § 271 favors Rohm and

Haas’ reading of the statute. It is apparent that neither

this Court nor the courts of appeal cited above reached

this conclusion. Petitioners submit that a careful reading

of the transcript of the Hearings leads one to the inevitable

conclusion that it was the intent of Congress to insure

that patentees could sue contributory infringers, could

license others to sell unpatented non-staple components of

the invention, and could themselves sell the unpatented

non-staple components, and that these acts would not be

construed to be misuse. However, Mr. Rich, upon whose

testimony the Court of Appeals principally relied, expressly

stated that

“If he has gone beyond those and done other acts

which could be misuse, then the misuse doctrine would

be applicable.” (p. 175 of Hearings, A. 192).

In the present case Rohm and Haas has gone beyond

the express permission of § 271(d) in tying the grant of

a license to the purchase of propanil. Nothing in the Hear-

ings indicates that it was the intent of Congress to legiti-

mize any kind of tying arrangement.

As this Court emphasized in Deep South, supra, 406 U.S.

930-531, patent rights should not be expanded by the courts

“unless the argument for expansion is based on more than

mere inference from ambiguous statutory language”, and

such arguments must be considered “in light of this Na-

tion’s historical antipathy to monopoly and of repeated

congressional efforts to preserve and foster competition.”

IMPORTANCE OF THE QUESTION

The question presented here is one of utmost importance

to the patent laws of the United States, for the decision

of the Court of Appeals, if allowed to stand, expands the

protection of the patent laws beyond the coverage of the

patent claims, a scope never contemplated by the Congress,

and never sanctioned by this Court since the decision in

Henry v. A. B. Dick Co., supra, which was overruled five

years later in Motion Pictures Patents Co. v. Untversat

Films Manufacturing Co., supra. Since Dick, this Court

has never approved any arrangement which extended the

patent monopoly beyond the scope of the invention claimed;

to the contrary, the Court has consistently held that a

patent cannot be used to control unpatented components

or materials. Nevertheless, the Court has never explicitly

ruled as to the effect of § 271(d). In the present case, the

Court of Appeals has construed it as broadening the scope

of patent protection. The Court should review this im-

portant question.

The question has importance far beyond the rights of

the parties to this litigation, or even of the rights of

farmers and others who practice the method covered by

the Wilson Patent. This is demonstrated by the fact that

two large associations of chemical manufacturers, the Man-

ufacturing Chemists Association (201 chemical companies)

and the National Agricultural Chemicals Association (120

companies), filed amicus briefs in the Court of Appeals.

As indicated in those amicus briefs, the decision of this

Court on the issue presented will have a widespread effect

on patents on the use of chemicals. One source relied upon

states that of the approximately 33,600 major new chemical

developments each year, 8,400 represent new applications

for existing chemicals.”

The question is equally as relevant to patents on other

processes, as well as those covering machines. In fact, for

the large majority of patents, the question can be asked

whether the patent owner is entitled to monopolize ele-

ments of the patented invention, or only the invention as

a whole.

7 Foster D. Snell, Ine. Survey of the Chemical Industry 6 (June

26, 1975).

The importance of the question presented is further

demonstrated by the attention that it has drawn from com-

mentators throughout the years since the enactment of 35

U.S.C. § 271(e) and (d).® It is notable that these commen-

tators almost unanimously support Petitioner’s position

that a patentee may not condition the grant of a license

on the purchase from him of unpatented non-staple com-

ponents. As previously noted, the Court of Appeals itself

recognized the plausibility of Petitioners’ position, and

the indications of this Court’s contrary view in the Aro

cases, thereby virtually inviting review by this Court.

Finally, this Court has itself recognized the importance

of clarifying the law on the scope of monopoly to which

patent owners are entitled by deciding at least ten cases

in which this was the central issue. This case presents an

opportunity to, for the first time, decide one of the thorniest

problems emerging from the 1952 patent statute. If the

Court declines to face the question now, the public will

necessarily be left in confusion, created by the present case,

as to the rights patent owners have against those who sell

elements or materials for use in patented combinations or

processes.

® Note, Regulation of Business-Patents-Effect of Section 271 on

the Doctrine of Contributory Infringement, 55 Mich. L. Rev.

909 (1953) ; Note, Combination Patents: The Right to Prohibit

the Sales of Replacement Parts, 70 Yale L.J. 649 (1961); J.

Scafetta, Ten Years After Aro II: The Effect of Patent Act

$271 on the Patent Misuse Doctrine, 26 S. Ca. L. Rev. 539

(1975), reprinted in 58 J. Pat. Off. Soe’y 69 (1976) ; J. Scafetta,

The Constitutionality/Unconstitutionality of the Patent In-

fringement Statute, 59 J. Pat. Off. Soe’y 665 (1977) ; Giles S.

Rich, Infringement Under Section 271 of the Patent Act of

1952, 35 J. Pat. Off. Soc’y 476 (1953); Note, Section 271(b)

of the Patent Act of 1952: Confusion Codified, 66 Yale L. J.

132 (1956); Note, Contributory Infringement and Misuse—The

Effect of Section 271 of the Patent Act of 1952, 66 Harv. L.

Rev. 909 (1953); and M.D. Nelson, Mercoid-Type Misuse is

Alive, 56 J. Pat. Off. Soe’y 69 (1976).

q =

This issue is presented here following a reversal of the

granting of a motion for summary judgment by the district

court, and a remand for a trial on the merits. However,

because of the importance of the issue and because of the

obvious need for a definitive construction of language in

the Patent Laws, this issue should be decided now. Abboit

Labs v. Portland Retail Druggists, 425 U.S. 1, 5-6 (1976).

Moreover, this case is already over five years old. It may

well take another five years, at a cost to these small com-

panies of hundreds of thousands of dollars, to go through

a trial on the merits and another appeal. A decision on this

controlling question at this time will avoid that delay and

cost.

More importantly, farmers groups, the chemical industry,

the patent bar and many other segments of the public have

anxiously followed the progress of this case over the past

five years, awaiting a final determination of the question

presented in order to guide them in their future business

dealings. Another five years delay will merely extend the

uncertainty, and, since the facts here are stipulated, a trial

record would be of no value in deciding the Question

presented.

CONCLUSION

For the foregoing reasons, a writ of certiorari should

issue to review the judgment and opinion of the Fifth

Circuit.

Respectfully submitted,

Ned L. Conley (713) 237-3195

B. R. Pravel (713) 850-0909

Attorneys for Petitioners

Of Counsel:

Buter, Binion, Ricz, Cook & Knapp

1100 Esperson Building

Houston, Texas 77002

PRavEL, GAMBRELL, HEewitr

Kirk, Kimpaui & Dopcr

1177 West Loop South

Houston, Texas 77027

AT641

APPENDIX

A-1

APPENDIX

[6535]

Roum anv Haas Company,

Plaintiff-A ppellant

Cross-Appellee,

Dawson CHEMICAL ComPANY,

CrystaL MaNnuractTuRING CorpPoraTIoN,

Crystat CHEMICAL CoMPANY, AND

Heiena CuHemicaL Company,

Defendants-Appellees

Cross-Appellants.

No. 76-4511.

Unirep States Court or APPEALS,

Fiera Circuit.

July 30, 1979.

Suit was brought for infringement of patent describing a

method of applying the unpatented chemical compound

“propanil,” a nonstaple having no substantial noninfringing

use, to established crops such as rice so as to inhibit the

growth of weeds selectively. The United States District

Court for the Southern District of Texas, at Houston,

Carl O. Bue, Jr., J., granted summary judgment dismissing

plaintiff’s claim, and plaintiff appealed. The Court of Ap-

peals, Gee, Circuit Judge, held that subsection (d) of

patent infringement statute, providing that “No patent

owner otherwise entitled to relief for infringement or con-

tributory infringement * * * shall be denied relief or deemed

guilty of misuse * * * by reason of his having done one

or more of the following * * *,” reversed the Mercoid misuse

doctrine when the unpatented component sold is a non-

staple, with no substantial market apart from its use in

the patented process.

Reversed and remanded.

A-2

1. Patents — 181

Right to exclude is created by patent grant.

2. Patents — 182

An inventor cannot sue anyone for using his invention

before the patent is issued.

3. Monopolies — 21.2(3)

In suit for infringement of patent describing a method

of applying the unpatented chemical compound “propanil,”

a nonstaple having no substantial noninfringing use, to

established crops so as to inhibit the growth of weeds selec-

tively, subsection (d) of patent infringement statute, pro-

viding that “No patent owner otherwise entitled to relief

for infringement or contributory infringement * * shall

be denied relief or deemed guilty of misuse * * * by reason

of his having done one or more of the following * *,”

reversed the Mercoid misuse doctrine when the unpatented

component sold is a nonstaple, with no substantial market

apart from its use in the patented process. 35 U.S.C.A.

§ 271(d).

4. Patents — 191

There is no general policy requiring a patentee to grant

explicit licenses in addition to those that arise by operation

of law.

5. Patents — 191

A patentee may sell unpatented components while refus-

ing to license others to do the same conduct, sell the un-

patented component, without thereby being deemed guilty

of misuse. 35 U.S. C.A. §§ 271, 271(d).

A-3

[6536]

6. Patents — 259(1)

Doctrine of contributory infringement was a judicial in-

vention designed to give effective protection to patentees,

perhaps oceasioned by a narrow judicial definition of direct

infringement whereby one does not infringe unless he, for

example, assembles or practices every element claimed in

a patent. 35 U.S.C.A. § 271.

7. Patents — 259(1)

Contributory infringement doctrine focuses on conduct

of patent infringers, rather than on that of the patentee.

35 U.S.C.A. § 271.

8. Monopolies — 21.2(3)

Patents — 259(1)

Although the doctrines of contributory infringement and

patent misuse are technically the same, one focusing solely

on the patentee’s conduct and other focusing solely on that

of the alleged infringer, they rest on antithetical under-

pinnings; they clearly conflict concerning the permissible

means by which a patentee may extract from the buying

public the full monetary measure of his invention’s com-

petitive superiority.

9. Patents — 259(1)

Doctrine of contributory infringement in its classical

exposition admits that a patentee may temporarily extend

his monopolistic market power to unpatented items used in

or with his invention since he is able to do this only to the

extent the public values his invention and since he is not

given a patent in terms over the unpatented items.

A-4

10. Monopolies — 21.2(3)

Doctrine of patent misuse categorically denies that the

value of the patented good can properly be sounded by

sales of unpatented goods used in or with it, however unique

or important to the invention they may be; any attempt,

for the sake of convenience or otherwise, to capitalize on

the invention except by dealing in the invention as a whole

is beyond the scope of the patent and against public policy.

11. Monopolies — 21.2(3)

The patentee who is attempting to completely foreclose

competitors is safe from a misuse defense only in selling

products that are nonstaple, material parts of his inven-

tion, and capable of no substantial noninfringement use.

35 U.S.C.A. § 271(¢, d).

12. Patents — 191

Once an item has been conveyed, it passes beyond the

patentee’s monopoly power and the buyer can use it or

sell it as he wishes.

Appeals from the United States District Court for the

Southern District of Texas.

Before GEE and VANCE, Circuit Judges, and HUNT-

ER,* District Judge.

GEE, Circuit Judge:

This is an appeal from a grant of summary judgment

dismissing plaintiff’s claim in a patent infringement suit.

It is stipulated that plaintiff-appellant Rohm & Haas Com-

pany is sole owner of a patent that describes a method of ap-

[6537]

plying a chemical compound, 3, 4-dichloropropionanilide

(hereinafter ‘‘propanil’’), to established crops such as rice

* District Judge of the Western District of Louisiana, sitting by

designation.

A-5

so as to inhibit the growth of weeds selectively. Propanil

itself is not patented; Rohm & Haas succeeded in having a

Monsanto patent on the chemical declared invalid in an

earlier suit against it by Monsanto.?

Rohn & Haas currently makes propanil and sells it in

containers bearing instructions for performing the patented

process. By operation of law, purchasers of propanil thus

receive implied license to use the patented method. Rohm

& Haas does not intend either to license other propanil

manufacturers to enable them also to license customers to

use the patented method or to license customers to use the

method with propanil bought from sources other than Rohm

& Haas.

The defendants Helena Chemical Company, Dawson

Chemical Company, Crystal Manufacturing Corporation,

and Crystal Chemical Company, sold propanil for applica-

tion to rice crops before Rohm & Haas received its patent.

Thereafter they continued to sell propanil, knowing of the

patent, and their customers have directly infringed the

patent by following the method described on defendants’

containers of propanil. Defendants intend to continue mak-

ing and selling propanil with the same recommendations

and instructions.

[1,2] Alleging most of these facts in its complaint and

the additional fact that propanil is a nonstaple that has

no substantial noninfringing use,? Rohm & Haas brought

1 Monsanto Co. v. Rohm & Haas Co., 312 F.Supp. 778 (E.D.Pa.

1970), aff’d. 456 F.2d 592 (3d Cir.), cert. dented. 407 U.S. 934,

92 S.Ct. 2463, 32 L.Ed.2d 817 (1972).

2 Defendants Helena and Crystal, at least, seem to have conceded

this factual matter for the purpose of the present motions.

Two crucial terms in section 271(¢), set out fully in the text

below, are “staple article” and “commodity of commerce suit-

able for substantial noninfringing use.” The chief draftsman of

the provision, Mr. Giles S. Rich, now Associate Judge of the

A-6

suit against the defendants for injunctive and declaratory

relief. It alleged that the defendants were actively inducing

infringement of the patent and that their sales amounted

to contributory infringement since they knew that propanil

is a material part of the patented invention, is especially

made or adapted for use in the patent, and has no substantial

noninfringing use. In their answers, defendants alleged

that Rohm & Haas was not entitled to relief because its

licensing program amounted to patent misuse and because

its patent was invalid for various reasons. They also counter-

claimed, alleging that the Rohm & Haas licensing scheme

and oth-

[6538]

er behavior violated the antitrust laws.* The licensing pro-

United States Court of Customs and Patent Appels, has indi-

cated that the terms are not synonymous. See Infringement

Under Section 271 of the Patent Act of 1952, 35 U. Pat. Off.

Soe’y 476, 493 (1953).

For the sake of simplicity in the technical discussions that

follow, however, we have used “staple” to mean a commodity

or product with substantial uses apart from the patented inven-

tion. By “nonstaple” we have meant to denote a product or

material lacking substantial uses other than infringing uses.

This is not necessarily the sense in which similar terms were

used by the Supreme Court in early contributory infringement

or misuse cases.

Section 271 contains one other requirement—that the compo-

nent or material “constitut[e] a material part of the invention.”

We here assume that propanil will also meet this test, since

it is the active ingredient in producing weed-inhibiting effect

of the patented method.

8 Some of the additional allegations are rather serious. Defendants

charge that for at least two years prior to the issuance of the

method patent, Rohm & Haas representatives coerced distribu-

tors into refusing to purchase propanil from anyone else by

threatening that uncooperative distributors would be cut off

from a supply of propanil after the method patent issued. Since

the right to exclude is created by the patent grant and an inven-

tor cannot sue anyone for using his invention before the patent is

issued. Gayler v. Wilder, 51 U.S. (10 How.) 477, 493, 13 L.Ed.

A-7

gram was specifically attacked as an impermissible tying

of purchase of a license under the patent to purchase from

Rohm & Haas of the unpatented propanil.

[3] All the parties agree that Rohm & Haas’ conduct

can be characterized as an attempt to “extend the patent”

and thus monopolize the market for the unpatented com-

ponent — conduct deemed patent misuse under the doctrine

of Mercoid Corp. v. Mid-Continent Investment Co., 320 U.S.

661, 64 S.Ct. 268, 88 L.Ed. 376 (1944). The main point of

disagreement for purposes of this appeal is whether 35

U.S.C. § 271(d) reverses the Mercoid misuse doctrine when

the unpatented component sold is a nonstaple, with no

substantial market apart from its use in the patented pro-

cess. In an able and carefully considered opinion, the dis-

trict court below concluded that section 271(d) does not

immunize Rohm & Haas from charges of patent misuse,

and thus he granted the defendants’ motion for summary

judgment and dismissed the complaint until Rohm & Haas

has purged itself of the misuse. Our consideration of the

matter has led us to the contrary conclusion; thus, we

reverse.

We begin by placing in clear view the statute we con-

strue. The simplicity and ostensible clarity of its words

belie the complex and delicate questions of interpretation

it has spawned —.to the delight of commentators. It reads

as follows:

Section 271. Infringement of patent

(a) Except as otherwise provided in this title, who-

504 (1850), such coercive attempts to gain exclusivity before

a patent issues may well constitute misuse. Since the court

below has not addressed these contentions, we leave them for

another day, observing, on the one hand, that such conduct is

not purportedly immunized by § 271(d) and, on the other hand,

that misuse traditionally bars an infringement suit only until

the misuse has been purged.

A-8

ever without authority makes, uses or sells any pat-

ented invention, within the United States during the

term of the patent therefor, infringes the patent.

(b) Whoever actively induces infringement of a

patent shall be liable as an infringer.

chine, manufacture, combination or composition, or a

material or apparatus for use in practicing a patented

process, constituting a material part of the invention,

knowing the same to be especially made or especially

adapted for use in an infringement of such patent, and

not a staple article or commodity of commerce suitable

for substantial noninfringing use, shall be liable as

a contributory infringer.

(d) No patent owner otherwise entitled to relief

for infringement or contributory infringement of a

pacent shall be denied relief-or deemed guilty of mis-

use or illegal extension of the patent right by reason

of his having done one or more of the following: (1)

derived revenue from acts which if performed by an-

other without his consent would constitute contribu-

tory in-

[6539]

fringement of the patent; (2) licensed or authorized

another to perform acts which if performed without his

consent would constitute contributory infringement of

the patent; (3) sought to enforce his patent rights

against infringement on contributory infringement.

35 U.S.C. § 271 (1952).

By a very plausible construction of these passages,

assuming the patent is valid, defendants are contributory

infringers because they have sold propanil for use in prac-

ticing a patented process, knowing that the chemical, a

material part of the inventive method, is not a staple or

commodity of commerce, has no substantial noninfringing

A-9

use, and is especially made or adapted for use in infringing

the patent.

[4,5] By a further tenable reading of the statute, the

plaintiff Rohm & Haas has done only acts which under

(d) may no longer be deemed patent misuse or illegal ex-

tension of the patent. It has ‘‘derived revenue’’ from sales

of propanil, conduct that, under (c), constitutes contribu-

tory infringement when done by those who, like defendants,

act without consent. And it now ‘‘seeks to enforce’’ its

patent rights by suit against defendants’ contributory in-

fringement. That it has refused to give licenses either to

customers or manufacturers of propanil is of no consequence

under this analysis since there is no general policy requiring

a patentee to grant explicit licenses in addition to those

that arise by operation of law. Moreover, the introductory

portion of (d) provides that a patentee may do ‘‘one or

more’’ of the enumerated practices. This reinforces the

view that a patentee may sell unpatented components while

refusing to license others to do the same conduct — sell the

unpatented component — without thereby being deemed

guilty of misuse.

Assessing plaintiff’s conduct through a different lens,

defendants argue that what Rohm & Haas has done is tie

sale of patent rights to purchase of an unpatented element

used in carrying out the process. This coercive conditioning

of one sale upon another is not mentioned in subsection (d)

and therefore survives as a type of misuse sufficient to

cause dismissal of plaintiff’s suit. Under this analysis,

Rohm & Haas is not, in the statutory language, “otherwise

entitled to relief,’’ and thus the statute does not immunize

its sale of propanil so long as it refuses to license com-

petitors. The statute does not ratify tying of any sort, they

claim, and it is even more reprehensible that plaintiff claims

such rights regarding a nonstaple. If plaintiff’s view pre-

A-10

vails, defendants will be entirely foreclosed from any do-

mestie outlet for their product, unlike those who sell mere

staples.

Each of these positions is a plausible reading of the bare

statute, and each side can cite commentary supporting its

particular view.* The proper starting

[6540]

place for resolving the conflict is with the statute’s history.

Before beginning, however, a review of the doctrines of

contributory infringement and patent misuse will be helpful

in understanding the terms of the debate waged in congres-

sional hearings on the proposed statute.

[6] The doctrine of contributory infringement was a

judicial invention designed to give effective protection to

patentees, perhaps occasioned by a narrow judicial defini-

tion of direct infringement whereby one does not infringe

unless he, for example, assembles or practices every element

claimed in a patent. Prouty v. Draper, 41 U.S. (16 Pet.)

336, 10 L.Ed. 985 (1842).

Under the latter construction, it soon became apparent

that one could appropriate the competitive advantages of

a patent by, for instance, selling all the parts of a patented

device save one and relying on the purchaser, the direct

infringer, to supply the final element and thus complete

the device. Permitting such conduct would have effectively

*Commentary supporting Rohm & Haas’ interpretation of § 271

includes, e. g., Note, Combination Patents: The Right to Pro-

hibit the Sales of Replacement Parts, 70 Yale L. J. 649 (1961) ;

J. Scafetta, Ten Years After Aro II: The Effect of Patent Act

§ 271i on the Patent Misuse Doctrine, 26 S. Ca. L. Rev. 539

(1975), reprinted in 58 J. Pat. Off. Soe’y 69 (1976).

Commentary tending to support defendants’ view of the

statute includes, e. g., Note, Section 271(b) of the Patent Act

of 1952: Confusion Codified. 66 Yale L.J. 182 (1956). Note,

Contributory Infringement and Misuse — The Effect of Section

271 of the Patent Act of 1952, 66 Harv. L. Rev. 909 (1953).

A-11

immunized both the buyer and the seller, since suits against

the many direct infringers were difficult and often un-

economical. Applying general tort principles, the courts

provided a remedy for the patentee against such sellers by

deeming them joint tortfeasors with their customers, the

direct infringers. To avoid ensnaring innocent merchants

who sold goods that later and without their knowledge were

fashioned into infringing combinations by buyers, the

courts required proof that a merchant had intended to

encourage infringement. The requisite intent was presumed,

however, when the items sold had no use except in the

infringing combination.°

[7] As will be observed from the above discussion,

the contributory infringement doctrine focuses on the con-

duct of patent infringers, rather than on that of the

patentee. The theoretical basis for the doctrine was more

general, however. The doctrine rested on particular views

about the manner in which patentees should be able to

extract full economic value from their inventions. This can

be seen by reflecting on the result of a successful suit for

contributory infringement. The prevailing patentee tra-

ditionally could secure an injunction against the contribu-

tory infringer and thereby drive him from the relevant

market. See, e. g., Thomson-Houston Electric Co. v. Kelsey

Electric R. Specialty Co., 72 F. 1016 (2nd Cir. 1896). The

result, especially when the contributory goods sold were

not useful for other purposes, was that the patentee effec-

tively gained control over the market for mere elements of

his patent — elements that might be, but more probably

were not, patented in themselves. In effect, therefore, a

5 Further discussion of the early cases can be found in C. Miller,

Some Views on the Law of Patent Infringement by Inducement,

53 J. Pat. Off. Soe’y 86 (1971); Note, Regulation of Business

— Patents — Effect of Section 271 on the Doctrine of Con-

tributory Infringement, 55 Mich. L. Rev. 909 (1953).

A-12

patentee could force anyone who wished to practice his

patented process or use his patented machine to purchase

the necessary unpatented components from him.

This state of affairs did not bother many courts in the

early days of contributory infringement. Against objections

that these injunctions in essence extended the scope of the

patent so as to give the patentee the same advantage as if

[6541]

the element had also been patented, courts answered that

a patentee had not been given an additional patent in terms

and that they would not prohibit the use of the unpatented

element in some other combination if another ingenious

use for it could be discovered. See opinion of Judge Putnam

in Davis Electrical Works vy. Edison Electite Light Co.,

60 F. 276, 280 (1st Cir. 1894). And focusing on the ana-

lytically similar problem of a patentee’s right explicitly

to condition use of his patented product or process upon an

agreement to buy from him its unpatented elements or

unpatented items used with it, courts observed that any

monopolistic tendencies would be the legitimate consequence

of the meritorious character of the patentee’s invention. A

patentee would be able to impose restrictive conditions for

use of concomitant elements only to the extent of the buyer’s

valuation of the patented invention itself. Heaton-Peninsu-

lar Button-Fastener Co. v. Eureka Speciality Co., 77 F. 288

(6th Cir. 1896), exhibits the classic analysis. Observing that

patentees had always been accorded the right to retain

exclusive use of their inventions, even to the point of sup-

pressing them entirely for the statutory period of monopoly,

Judge Lurton hypothesized the case of an invention that so

reduced the cost of making shoes, an unpatentable end

product, that by underselling his competitor manufacturers

the patentee was able to drive them from the shoe market.

He then reasoned :

A-13

[I]f the patentees, by retaining to themselves the ex-

clusive use of their invention, are able, legitimately and

lawfully, to acquire a monopoly of the manufacture of

shoes and destroy the shoe market for those who before

had shared it, why may they not, by a system of

restricted licenses, permit cthers to use their devices

on condition that only some minor part of the shoe,

— the pegs, the tips, the thread, or the buttons, or the

button fasteners, — shall be bought from them. If these

concessions were such as to enable others to compete

though their use of the mechanism was restricted by

the terms of the license, who could justly complain if

the inventors, content with a monopoly of the market

for the article named in their license surrendered the

opportunity for a monopoly of the manufacture of the

complete shoe.

Id at 295.

Initially the Supreme Court showed hesitation when asked

to recognize a patentee’s derivative power regarding un-

patented elements. In Morgan Envelope Co. v. Albany Per-

forated Wrapping Co. 152 U.S. 425, S.Ct. 627, 38 L. Ed. 500

(1894), the patentee-plaintiff held two patents. One, found

invalid by the Court, covered toilet paper rolled into an

oval configuration; the other was a combination patent

covering the oval roll of paper and a dispenser that together

delivered the paper in premeasured lengths. In ruling that

the defendant’s sale of oval paper rolls for use with the

plaintiff’s dispenser was not an infringement, the Court

employed two entwined but distinguishable strands of

analysis. It first determined that the principle of contribu-

tory infringement should not apply when the item sold was

‘‘an article of manufacture, perishable in its nature, which

it is the object of the mechanism to deliver, and which must

be renewed periodically, whenever the device is put to use.”’

152 USS. at 433, 15 S.Ct. at 630-631.

A-14

Of seemingly equal importance, however, was its second

observation that, when the item sold was not itself patent-

able, the contrary outcome would be

[6542]

“oiving to the patentee of the machine the benefit of a

patent upon the product, by requiring such product to be

bought of him.” Jd. The brief opinion shifts back and forth

between these two thoughts, and it is difficult to determine

whether the Court’s concerns about extending the patent

were aroused only when the item dealt in was a perishable

staple requiring replacement or might also extend to non-

staple or uniquely active elements of a patent. Aspects of

what came to be known as “patent misuse” were involved

in Morgan Envelope,’ but the Court, though it refused to

ratify the plaintiff's right to these tactics as regards the

rolls of paper, did not seem to consider the conduct as

independently wrongful. Rather, certain language suggests

that such conduct would be an appropriate concomitant of

holding a patent whose elements were not mere staples.’

6 The plaintiff’s practice had been to sell its dispensers only in

connection with its oval rolls. Purchasers were required to buy

a given quantity of paper for a given number of fixtures, and

certain institutional buyers were required to buy subsequent

roll supplies from the patentee. 152 U.S. at 431-32, 14 S.Ct. 627.

7 For instance, immediately after noting that holding for plaintiff

would be giving the patentee of “the machine” the benefit of

a patent on the product as well, the Court added:

To repeat an illustration already put. If a log were an

element of a patentable mechanism for sawing such log, it

would, upon the construction claimed by the plaintiff, re-

quire the purchaser of the sawing device to buy his logs

of the patentee of the mechanism, or subject himself to a

charge of infringement. This exhibits not only the impos-

sibility of this construction of the patent, but the difficulty

of treating the paper as an element of the combination at all.

152 U.S. at 433, 14 S.Ct. at 631. Moreover, it is interesting to

note that the plaintiff did not hold a patent on the dispenser,

“the machine,” in itself — but only on the combined dispenser

with paper — yet the Court seems to speak as if he did.

A-15

In the leading case of Leeds & Catlin Co. v. Victor Talking

Machine Co., 213 U.S. 325, 29 S.Ct. 503, 53 L.Ed. 816 (1909),

the Court retreated from its ambiguous reluctance to give

protection to unpatented elements of a combination patent.

Plaintiff Victor, whose patent covered dise records and a

stylus that combiiied to reproduce the sound recorded on

the dises, had sued Leeds & Catlin to prevent its sale of

other recorded discs that were to be used by owners of

Victor machines in an alleged infringement. Leeds’ primary

defense was that use of its records with the Victor stylus

accomplished permissible “repair” of the patented device

rather than a prohibited “reconstruction.” Reviewing “some

rudimentary principles” regarding combination patents

before assessing this contention, the Court observed that,

whether constituted of new or old elements, it is the com-

bination that is the relevant invention and is protected by

law as a unit. The Court reiterated, however, that who-

ever contributes to the use of the combination absent per-

mission also infringes the patent and, in words striking

close to the position enunciated in Morgan Envelope, con-

tinued :

It may be well here to get rid of a misleading considera-

tion. It can make no difference as to the mfringement

or noninfringement of a combination that one of its

elements or all of its elements are unpatented. For

instance, in the case at bar the issue between the

parties would be exactly the same, even if the record

disc were a patented article which petitioner had a

license to use or to which respondent had no rights

independent of his right to its

[6543]

use in the combination. In other words, the fact that

the dise sold by petitioner is unpatented does not affect

the question involved except to give an appearance of

a limitation of the rights of an owner of a Victor

machine other than those which attach to him as a

NR 2

—_— en — ——s ee! KC Ce tem 6 ee ee

A-16

purchaser. The question is, What is the relation of the

purchaser to the Victor Company? What rights does

he derive from it? To use the machine, of course, but

it is the concession of the argument of petitioner that

he may not reconstruct it. Has he a license to repair

deterioration, and when does repair become recon-

struction?

213 U.S. at 333, 29 S.Ct. at 505 (emphasis added). With

this language, the Court seemed to reject the notion that the

patent status of mere elements is a source of limits on

the rights of patentees against their licensees, customers

or alleged infringers. The inquiry is shifted instead to an

examination of the contractual relationship between the

purchaser and the patentee. Morgan Envelope, on which

the defendants had relied heavily, was distinguished. As

contrasted with the paper rolls that stood in relation to

the dispenser as “a machine and its product” and that

perish in use, requiring periodic renewal, the disc and

stylus were each active elements in producing the result,

distinguishing the invention and advancing upon the prior

art. Id. 213 U.S. at 333-36, 29 S.Ct. 503.

The Court also rejected the defendant’s attempt to

characterize its discs as a staple item of manufacture,

noting that the trial court had found that the allegedly

noninfringing device in which the defendant’s. records could

be used was not commercially viable. Defendants therefore

knew that the only use their records would receive would

be in connection with the patented machine. The Court

also noted, however, that the injunction forbade only the

use of the records in connection with the patent. Id. at 337,

29 S.Ct. 503.

Following Leeds ¢ Catlin, the Court allowed patentees

even greater latitude in reaping economie benefits from

their inventions through license restrictions or notice.

Henry v. A. B. Dick Co., 224 U.S. 1, 32 S.Ct. 364, 56 L.Ed.

A-17

645 (1912), written by Justice Lurton, who had earlier

penned the Button-Fastener opinion for the Sixth Circuit,

marks the high water in this area. The principles enun-

ciated in Dick effectively enabled a patentee to “tie” ordi-

nary staples of commerce, none of which was even an

element of the patented device, to a purchaser’s right to

use the device. This result was achieved by enforcing

through the patent law instead of general contract law a

notice attached to each patented machine at sale that re-

quired the purchaser to use the machine only with stencil

paper, ink, or other supplies made by the patent holder,

A. B. Dick. The majority ruled that any breach of these

conditions by the buyer constituted infringement of the

underlying patent and that any conduct aiding the breach

was contributory infringement.

On the question whether, thus applied, the doctrine of

contributory infringement operates to extend the monopoly

of the patent to subjects not within it, Justice Lurton

stated:

If a patentee says, “I may suppress my patent if I

will. I may make and have made devices under my

patent, but I will neither sell nor permit anyone to

use the patented things,” he is within his right, and

none can complain. But if he says, “I will sell with

the right to use only with other things proper for

[6544]

using with the machines, and I will sell at the actual

cost of the machines to me, provided you will agree

to use only such articles as are made by me in connec-

tion therewith,” —if he chooses to take his profit in

this way, instead of taking it by a higher price for

the machines, has he exceeded his exclusive right to

make, sell, and use his patented machines? The market

for the sale of such articles to the users of his machine,

which, by such a condition, he takes to himself, was a

A-18

market which he alone created by the making and sell-

ing of a new invention. Had he kept his invention to

himself, no ink could have been sold by others for use

upon machines embodying that invention. By selling it

subject to the restriction, he took nothing from others

and in no wise restricted their legitimate market.

224 U.S. at 32, 32 S.Ct. at 373 (emphasis added). Observing

that a like objection had been made against injunctions

restraining the sale for infringing purposes of a single

element in a patented combination, the majority then an-

swered the contention in the language of Judge Putnam in

Davis Electric, discussed above.

Justice White, for the minority, voiced conflicting reason-

ing that later became prevalent in patent misuse cases:

[T]he ruling now made in effect is that the patentee

has the power, by contract, to extend his patent rights

so as to bring with the claims of his patent things

which are not embraced therein, thus virtually legislat-

ing by causing the patent laws to cover subjects to

which, without the exercise of the right of contract,

they could not reach, the result not only to multiply

monopolies at the will of an interested party, but also

to destroy the jurisdiction of the state courts over

subjects which, from the beginning, have been within

their authority.

Id. at 53, 32 S.Ct. at 381.

Two years later in partial response to Dick, Congress

passed section 3 of the Clayton Act and the Federal Trade

Commission Act. New members of the Court joined with the

Dick minority to form a new majority, and thereafter the

Court begari.a retreat from the principles just reviewed.

Their vehicle was the new doctrine of patent misuse.

In Motion Picture Patents Co. v. Universal Film Mamu-

facturing Co., 243 U.S. 502, 37 S.Ct. 416, 61 L.Ed. 871

A-19

(1917), Mr. Justice Clarke, for the new majority, held that

a patentee may not, as a function of general patent law,°

require by notice a purchaser to limit use of patented movie

machine to unpatented films that do not form part of the

patented machine. With the attempted restriction ruled

invalid, there was no further basis for a charge of direct

or contributory infringement, and the plaintiff was denied

relief.

The Court rested its decision, which of course required

reversing Dick, on an analysis of “fundamental” principles

embodied in the patent statute. From the basic proposition

that the scope of a patent is limited to the invention de-

scribed in its claims, coupled with the rule that the statutory

policy of benefitting the public outweighs the policy of

benefitting inventors, the Court concluded that

[6545]

the monopoly granted by law should not extend to, and thus

cannot sanction a patentee’s control of, mere materials

‘‘with which or on which the machine operates.’’ 243 U.S.

at 509-13, 37 S.Ct. at 419. The majority further reasoned

that a reward based on the entire invention was a fair

measure of an inventor’s creativity and that ‘‘he should not

be permitted by legal devices to impose an unjust charge

upon the public in return for the use of it.” Id. at 513, 37

S.Ct. at 419. The Dick majority had thought well of the

patentee’s system of selling a machine at practically cost

and making its entire profit from the sale of supplies because

the intention was thereby made widely available to the

public. The new majority thought such facts ‘‘the clearest

8 The Court left open the question whether the patentee and

purchaser could agree to a similar restriction by “special con-

tract,” but its language about the public policies implicated

by such arrangements cast some doubt on the validity of such

tacties as well. 243 U.S. at 509, 513, 37 S.Ct. at 419.

A-20

possible condemnation of [the patentee’s system].’’ Echoing

the Dick dissent, Justice Clarke explained:

[T]t proves that, under color of its patent, the owner

intends to and does derive its profit, not from the in-

vention on which the law gives it a monopoly, but from

the unpatented supplies with which it is used, and which

are wholly without the scope of the patent monopoly,

thus in effect extending the power to the owner of the

patent to fix the price to the public of the unpatented

supplies as effectively as he may fix the price on the

patented machine.

243 U.S. at 517, 37 S.Ct. at 412.

In Carbice Corp. v. American Patents Development Corp.,

283 U.S. 27, 51 S.Ct. 334, 75 L.Ed. 819 (1931), the Court

reviewed a merchandising system in which the patentee and

its licensee sold solid carbon dioxide and by notice, without

extra charge, extended to each customer an implied license

to use the dry ice in patented cardboard transportation

packages. Neither the plaintiff nor other licensees actually

sold these carboard packages. The Court relied on Motion

Picture’s reasoning to categorize the conduct as ‘‘abuse of

the patent monopoly’’ and a bar to relief against a con-

tributory infringer. The system was considered the equiva-

lent of conditioning grant of a patent license on the purchase

of unpatented materials used in connection with the in-

vention.

The plaintiffs tried to distinguish Motion Picture by

arguing that the unpatented item sold here was a necessary

element of the patented combination, as opposed to a mere

supply used with the invention. They also sought to distin-

guish themselves from Morgan Envelope by arguing that,

unlike the passive toilet paper there involved, the carbon

dioxide was the dynamic element that produced refrigera-

Ce ead

A-21

tion. Justice Brandeis, for the majority, rejected these

distinctions as lacking legal significance.

Infringement, whether direct or contributory, is essen-

tially a tort, and implies invasion of some right of the

patentee. . . . The Dry Ice Corporation has no right

to be free from competition in the sale of solid carbon

dioxide. Control over the supply of such unpatented

material is beyond the scope of the patentee’s mono-

poly; and this limitation, inherent in the patent grant,

is not dependent upon the peculiar function or charac-

ter of the unpatented material or on the way in which it

is used. Relief is denied because the Dry Ice Corporation

is attempting, without sanction of law, to employ the

patent to secure a limited monopoly of unpatented

material used in applying the invention.

283 U.S. at 33, 34, 51 S.Ct. at 336. He next analogized the

patentee’s conduct to antitrust violations in which patents

[6546]

had been used as instruments for restraining commerce.®

Finally, the principle of Leeds & Cathn was distinguished

since “[t]here was no suggestion that the Victor Company,

which itself manufactured and sold the patented product,”

9 Building on the previous construction of Clayton Act, Section

3, in United Shoe Machinery Corp. v. United States, 258 U.S.

451, 41 S.Ct. 363, 66 L.Ed. 708 (1922), and on this reference

in Carbice, analysis of conduct constituting patent misuse as

an independent violation of antitrust laws proceeded apace in

later years. In IBM v. United States, 298 U.S. 131, 56 S.Ct.

701, 80 L.Ed. 1085 (1936), the Justice Department won a sec-

tion 3 suit against IBM for leasing its patented tabulating ma-

chines upon condition that lessees use with the machines only

tabulating cards sold by IBM. Though both the machines and

the cards, at least once they had been punched to encode infor-

mation, were separately patented, the Court ruled that the

tying clause was prohibited by section 3. The effect of the con-

dition, the Court stated, “may be to substantially lessen compe-

tition.” The Court thought such a clause necessarily tended to

create a monopoly and had in fact been an important and

effective step in creating an IBM monopoly.

A-22

sought to derive its profits from unpatented element, as

opposed to the invention as a whole.

In Leitch Manufacturing Co. v. Barber Co., 302 U.S. 458,

58 S.Ct. 288, 82 L.Ed. 371 (1938), the Court assessed the

mode of business used now by Rohm & Haas. The patentee

thought it might foreclose a misuse defense by carefully

avoiding use of notices or explicit contract restrictions. It

merely sold materials used in carrying out the patented

process, thereby granting an implied license to use the

patented invention. The Court, however, had no trouble

identifying its conduct as prohibited tying, despite the lack

of an explicit condition that the license was granted only

upon purchase of the materials used in the process.

In Leitch, as in all the earlier misuse cases to reach the

Court, the patentee had been profiting by sale of staple

elements or concomitants of the patent. It was still possible

for the bar to think that a patentee might not be deemed

guilty of misuse for attempting to control the market in

unpatented elements that had no use at all outside his

patented invention.’°®

Though such a distinction between staples and nonstaples

was rejected at the appellate level in one of the next pair

of cases to reach the Court, Morton Salt Co. v. G. S. Sup-

pger Co., 314 U.S. 488, 62 S.Ct. 402, 86 L.Ed. 363 (1942),

and B. B. Chemical Co. v. Ellis, 314 U.S. 495, 62 S.Ct. 406,

86 L.Ed. 367 (1942), the various Supreme Court opinions

do not address the question. In Morton Salt, the Court for

the first time upheld a summary judgment dismissing a

patentee’s suit against a direct infringer on misuse grounds,

In addition to the customary language about the anti-

10 Broad statements of the Carbice rule, however, like that in

Leitch, “every use of a patent as a means of obtaining a limited

monopoly of unpatented material is prohibited,” 302 U.S. at

463, 58 S.Ct. at 290, should have counseled caution.

A-23

competitive effects of misuse, the Court’s opinion included

a new attention to the effect on competition of a successful

infringement suit itself:

Where the patent is used as a means of restraining

competition with the patentee’s sale of an unpatented

product, the successful prosecution of an infringement

suit even against one who is not a competitor in such

sale is a powerful aid to the maintenance of the at-

tempted monopoly of the unpatented article, and is

thus a contributing factor in thwarting the public pol-

[6547]

icy underlying the grant of the patent. Maintenance

and enlargement of the attempted monopoly of the

unpatented article are dependent to some extent upon

persuading the public of the validity of the patent,

which the infringement suit is intended to establish.

314 U.S. at 493, 62 S.Ct. at 405.

b, B. Chemical, the case involving the possible staple/

nonstaple distinetion, is noteworthy here primarily because

in it the Court rejected the potential defense of commercial

practicability. The patentee had argued that he should be

allowed to sell tne unpatented materials with an implied

license to practice the patented method because he could not

practicably exploit the particular patent rights by granting

licenses. The Court replied that the patent monopoly is not

to be enlarged simply because it would be more convenient

for the patentee to have it so or because he ‘‘cannot avail

himself of its benefits within the limits of the grant,” 314

USS. at 498, 62 S.Ct. at 408.

The culmination of the developing misuse theory occurred

in companion decisions in 1944. Mercoid Corp. v. Mid-Con-

tinent Investment Co., 320 U.S. 661, 64 S.Ct. 268, 88 L. ld.

376 (1944) (Mercoid I), and Mercoid Corp. v. Mimneapolis-

Honeywell Regulator Co., 320 U.S. 680, 64 S.Ct. 278, 88

A-24

L.Ed. 396 (1944) (Mercoid II). In these cases the Court

definitively entered Leeds & Catlin turf and held it misuse

for a patentee to attempt to control the market for un-

patented elements that had no use at all outside the patented

invention. The combination patent at issue in Mercoid

covered a furnace stoker system. Mid-Continent held the

patent and had granted an exclusive license to Minneapolis-

Honeywell to make, use, or sell the patent and/or to sub-

license others. Neither company made or installed the entire

patented system; Minneapolis-Honeywell merely sold the

stoker switches which, when installed with a thermostat

and a motor-driven stoker, formed the patented combina-

tion. ‘The right to construct the combination was granted

only to those who bought Minneapolis-Honeywell switches ;

royalties from Minneapolis-Honeywell to Mid-Continent

were based on the sales of the unpatented stoker switches.

The defendant Mereoid Corporation was an unlicensed

competitor in the business of selling the switches, and a

lower court opinion reveals that Mercoid had earlier refused

an offer of a license.

In Mercoid I, though the Court assumed that Mercoid

was a contributory infringer and could have been enjoined

by an innocent patentee, it barred Mid-Continent from

enforcing the patent because its licensing system constituted

an attempt to extend the grant of the patent to unpatented

devices. Admitting that the earlier cases had involved the

use of a patent to secure partial monopoly ‘‘in supplies

consumed in its operation or unpatented materials em-

ployed in it,’’ the Court, through Justice Douglas, could

see no difference in principle where the unpatented material

or device ‘‘is itself an integral part of the structure em-

bodving the patent’’ and was not useful in any other manner.

320 U.S. at 665, 64 S.Ct. at 271. The Court saw in the

patentee’s conduct not a struggle to protect its rights re-

A-25

garding the combination patent, but rather a contest ‘‘solely

over unpatented wares which go into the patented product.’’

Id. at 666, 64 S.Ct. at 271-272. Thus, the patent was being

impermissibly employed to protect the

[6548]

market for a device on which no patent had been granted.

Irrespective of whether the stoker switch was “the heart of

the invention” or the “advance in the art,” since the separate

element had not been claimed as the invention, it is not

protected by the patent monopoly “when dealt with sepa-

rately” Id. at 667, 64 S.Ct. 268.

In language thought by many to have abolished the doc-

trine of contributory infringement, Justice Douglas pro-

ceeded :

The protection which the Court in [Leeds & Catlin]

extended to the phonograph record, which was an un-

patented part of the patented phonograph, is in sub-

stance inconsistent with the view which we have ex-

pressed in this case. The rule of the Leeds & Catlin

Co. ease (No. 2) accordingly must no longer prevail

against the defense that a combination patent is being

used to protect an unpatented part from competition.

Where there is a collision between the principle of the

Carbice Case and the conventional rules governing

either direct or contributory infringement, the former

prevails.

The result of this decision, together with those which

have preceded it, is to limit substantially the doctrine

of contributory infringement. What residuum may be

left we need not stop to consider,

320 U.S. at 668-69, 64 S.Ct. at 272-273.

In Mercoid II, Mr. Justice Douglas went even further

and ruled that the legality of any attempt to bring unpat-

ented goods within the protection of the patent is mea-

A-26

sured by the antitrust laws, not by the patent law. Further,

he ruled, the effort there made to control competition in

the unpatented switch plainly violated the antitrust laws,

and he remanded the case for further proceedings on the

alleged infringer’s antitrust counterclaim."!

In the aftermath of Mercoid, strange to say, there was

great confusion in the courts and among the patent bar re-

garding the proper scope of contributory infringement.

Some courts, carrying the Court’s reasoning and dictum to

the extreme, held that merely filing a suit for contributory

infringement constituted an attempt to control the market

in unpatented goods and dismissed the suit for misuse. See,

e. g., Stroco Products v. Mullenbach, 67 U.S.P.Q. 168

(S.D.Cal. 1944). A movement arose among the bar to put

some effective measure of contributory infringement hack

into the law, and various committees came forward to draft

proposed legislation for consideration by the congressional

committee then codifying the general patent law. The

ultimate result was section 271.

[6549]

[8-10] Before turning to the legislative history of that

provision, we offer a few reflections on the two doctrines

it touches. In addition to briefly recounting the develop-

11 Despite the broad language in Mercoid II, there has continued

to be a distinction drawn between acts that will cause an equity

court to withhold its aid — the defense of patent misuse — and

the often overlapping range of conduct prohibited by the anti-

trust laws and thus the potential basis for a treble damage

cause of action. See, e.g., T. Maffei, The Patent Misuse Doctrine:

A Balance of Patent Rights and the Public Interest, 52

J.Pat.Off.Soe’y 178 (1970).

The developing antitrust assessment of tying conduct came

to fruition in International Salt Co. v. United States, 332 U.S.

392, 68 S.Ct. 12, 92 L.Ed. 20 (1947), and Northern Pacific

Railway Co. v. United States, 356 U.S. 1, 78 S.Ct. 514, 2 L.Ed.2d

545 (1958), patent and nonpatent cases respectively. Such

business schemes were held to be per se violations of section 1

of the Sherman Act and section 3 of the Clayton Act.

A-27

ment of contributory infringement and misuse, it has been

a purpose of the above review to demonstrate that, though

the doctrines are technically distinct — one focusing solely

on the patentee’s conduct and the other focusing solely on

that of the alleged infringer— they rest on antithetical

underpinnings. The doctrines clearly conflict concerning

the permissible means by which a patentee may extract

from the buying public the full monetary measure of his

invention’s competitive superiority. The doctrine of con-

tributory infringement in its classical exposition admits

that a patentee may temporarily extend his monopolistic

market power to unpatented items used in or with his

invention since he is able to do this only to the extent the

public values his invention and since he is not given a

patent in terms over the unpatented iteins. In other words,

the public will never pay more for use of the invention

and its necessary concomitants than it thinks the full in-

vention is worth. And since the patentee is not given a

formal patent right regarding unpatented elements, com-

petitors may freely sell them for any uses except in con-

nection with the patented device — they are foreclosed only

from the markets for their goods that exist because of the

patented invention. The doctrine of patent misuse, on the

other hand, categorically denies that the value of the pat-

ented good can properly be sounded by sales of unpatented

goods used in or with it, however unique or important to

the invention they may be. Any attempt, for the sake of

convenience or otherwise, to capitalize on the invention

except by dealing in the invention as a whole is beyond

the scope of the patent and against public policy.

Seen in this light, there was more than a grain of truth

in Justice Douglas’ much maligned “dictum” in Mercoid

that the result in that case, together with the other patent

misuse cases, “limits substantially the contributory in-

fringement doctrine” — to the extent that only some unex-

A-28

plored “residuum” might be left. Theoretically, the two

doctrines can hardly coexist. The protection of unpatented

elements granted in Leeds & Catlin is inconsistent with

pro-consumer and pro-competitor values protected by

thoroughgoing misuse principles. This can be demonstrated

by considering the hypothetical case of the “good pat-

entee.” Posit a patentee who is exploiting his invention

totally within the bounds of its claimed scope. He has the

capability to produce and market a sufficient supply of

the patented combination to reap his legitimate monopoly

profits. Thus, he declines, as is his right, to license others

to manufacture and sell the invention. He learns that his

patent is being infringed by consumers with the aid of

Mr. D, who has been making and selling, with instructions

for completing the invention, the unique elements of his

patent, elements that have no use outside the invention.

Since the patentee is marketing the whole of his invention,

he cannot be charged with wrongfully extending his pat-

ent.?? His suit against

[6550]

Mr. D. for contributory infringement is therefore successful,

and he is granted the traditional injunction that forces Mr.

D to cease the challenged conduct. It seems evident from

this scenario that, by use of the contributory infringement

doctrine, the patentee has foreclosed competitors in the

unpatented item, ‘‘leveraging’’ his one lawful monopoly

into the market for an unpatented item where he now has

no competition. What difference can it possibly make either

12 Of course, if, as the Stroco court thought, the mere bringing of

a contributory infringement suit is misuse, the patentee is

barred. But this extreme definition of misuse would succeed in

totaily destroying contributory infringement principles, a result

that, though logically consistent, apparently was not contem-

plated by Justice Douglas. He explicitly assumed that Mercoid

was susceptible to an injunction at the hands of the proper

plaintiff, 320 U.S. at 668-69, 64 S.Ct. 268.

A-29

to consumers or to competitors in the market for the un-

patented item that the patentee has made his profits by

selling the entire combination instead of the unique element?

Competition in the submarket has been destroyed.

Despite the anomaly, caused, we think, by the conflicting

bases of the doctrines, all sorts of prudential lines might

be drawn to demarcate the doctrines and save for each

some “appropriate” scope. Indeed, this was done in each

successive patent misuse case before Mercoid. For instance,

when the Court in Motion Picture disapproved a patentee’s

right to tie unpatented staple supplies used with the inven-

tion, it seemed carefully to imply that a different rule might

apply when the unpatented item was used in, as a part of,

the invention. When it took the next step down the road in

Carbice, disapproving a tie of the unpatented staple element

to use of the patented invention, it was possible to think

that an element with no noninfringing use might be treated

differently, especially since the Court went out of its way

to approve the Leeds & Catlin holding. Mercoid only carried

the misuse doctrine a logical step further in wiping out a

patentee’s right to profit from an unpatented element with

no use at all outside the patented item. That the misuse

doctrine had really triumphed over the contributory in-

fringement doctrine seems evident in Justice Douglas’ dis-

approval of Leeds & Catlin, a move unnecessary to the

narrow Mercoid holding since the Court had previously

described the Leeds patentee as a patentee profiting only

by sale of the entire combination.’®

18 The Carbice Court had so described the Leeds patentee. 283 U.S.

at 34, 51 S.Ct. 334. Query, though, whether the description was

accurate. Woud the Victor Company have had much incentive

to sue Leeds unless Victor itself desired to capture the market

for both replacing broken records and supplementing the buyer’s

collection with new tunes? Surely the suit would have been

unnecessary if Victor merely intended to sell only a single

record for use with the more durable stylus.

A-30

It is possible that this Mercoid ‘‘dictum’’ casting doubt

on the entire contributory infringement doctrine is all that

was overruled by the enactment of section 271. It is possible

that section 271, as defendants and several commentators

urge, merely codifies the Mercoid result along with other

patent misuse law. If so, then plaintiff Rohm & Haas cannot

be allowed to foreclose the defendants from the propanil

market, though, were Rohm & Hass merely practicing its

exclusive right to spray farmers’ fields with propanil, it

could successfully sue to prevent the defendants from con-

tinuing their present practices. It is therefore with special

care that we turn to the statute’s legislative history so that

we may interpret its words in light of the purposes Congress

sought to serve by its enactment.

There was apparently no debate on the House floor re-

garding the 1952 codifica-

[6551]

tion and scant public debate in the Senate. An interchange

in the Senate shortly before the bill was passed has often

been cited as evidence that section 271 did not overturn the

result in Mercoid.'* In response to a question by Senator

Saltonstall about the purpose of the bill, whether it changed

the law in any way or merely codified it, Senator McCarran,

Chairman of the Judiciary Committee that had been in

charge of the bill in the Senate, stated: “It codifies the

present patent laws.” 98 Cong. Rec. 9323 (July 4, 1952). The

force of this exchange is mitigated, however, by Senator

McCarran’s introduction a few moments later of a short

prepared statement that in part states: '

14 See, e.g., Aro Manufacturing Co. v. Convertible Top Replacement

Co., 365 U.S. 336, 347 n. 2, 81 S.Ct. 599, 5 L.Ed.2d 592 (1961)

(Black, J., concurring). See, however, the discussion of this

passage in the court below. Rohm & Haas Co. v. Dawson Chem.

Co., 191 U.S.P.Q. 691, 701 n. 9 (S.D.Tex. 1976).

A-31

In view of the decisions of the Supreme Court and

others as well as trial by practice and error there have

been some changes in the laws of patents as it now

exists and some new terminology used.

Id. To one familiar with the rest of the legislative history,

that sentence seems almost certainly a reference to section

271 and the Mercoid case, among others.

The reports on the bill issued by the House and Senate

Committees on the Judiciary each contain language similar

to McCarran’s in discussing section 271. The reports and,

indeed, the title of the bill indicate its general purpose to

be the revision, as well as the codification of the patent law,

which had largely developed in the courts to supplement

earlier and more sparse patent statutes. The reports explain

that section 271 was designed to remove the “considerable

doubt and confusion” engendered by “a number of decisions

of the courts in recent years” and that paragraphs (b), (c),

and (d) were to provide “clarification and stabilization.’

15 As general description of the bill, each report states:

Although the principal purpose of the bill is the codifica-

tion of title 35, United States Code, and involves simplifica-

tion and clarification of language and arrangement, and

elimination of obsolete and redundant provisions there are a

number of changes in substantive statutory law. These will

be explained in some detail in the revision notes keyed to

each section which appear in the appendix of this report. The

major changes or innovations in the title consist of incorpo-

rating a requirement for invention in § 103 and the judicial

doctrine of contributory infringement in § 271.

H.R.Rep.No.1023, 82d Cong., 2d Sess. 5 (1952) ; S.Rep.No.1979,

82d Cong., 2d Sess. 4 (1952).

The summary of section 271 more specifically states :

Section 271, paragraph (a), is a declaration of what con-

stitutes infringement. There is no declaration of what con-

stitutes infringement in the present statute. It is not actually

necessary because the granting clause creates certain ex-

clusive rights and infringement would be any violation of

those rights.

A-32

Though other portions

[6552]

of the reports state that only changes ‘‘deemed substantially

noncontroversial and desirable’’ were made in the then

current patent law principles,’® the transcript of hearings

held by the House Judiciary Committee indicates that the

Paragraphs (b), (¢), and (d) relate to the subject referred

to as contributory infringement. The doctrine of contribu-

tory infringement has been part of our law for about 80

years. It has been applied to enjoin those who sought to cause

infringement by supplying someone else with the means and

directions for infringing a patent. One who makes a special

device constituting the heart of a patented machine and sup-

plies it to others with directions (specific or implied) to com-

plete the machine is obviously appropriating the benefit of

the patented invention. It is for this reason that the doctrine

of contributory infringement, which prevents appropriating

another man’s patented invention, has been characterized as

“an expression both of law and morals.” Considerable doubt

and confusion as to the scope of contributory infringement

has resulted from a number of decisions of the courts in

recent years. The purpose of this section is to codify in sta-

tutory form principles of contributory infringement and at

the same time eliminate this doubt and confusion. Paragraph

(b) recites in broad terms that one who aids and abets an

infringement is likewise an infringer. The principle of con-

tributory infringement is set forth in the provisons of the

next paragraph which is concerned with the usual situation

in which contributory infringement arises. This latter para-

graph is much more restricted than many proponents of

contributory infringement believe should be the case. The

sale of a component of a patented machine, ete., must con-

stitute a material part of the invention and must be known

to be especially made or especially adapted for use in the

infringement before there can be contributory infringement,

and likewise the sale of staple articles of commerce suitable

for non-fringement use does not constitute contributory in-

fringement. The last paragraph of this section provides that

one who merely does what he is authorized to do by statute

is not guilty of misuse of the patent. These paragraphs have

as their main purpose clarification and stabilization.

H.R.Rep.No.1923, 82d Cong., 2d Sess. 9 (1952) ; S.Rep.No.1979,

82d Cong., 2d Sess. 8 (1952).

16 See e. g., H.R.Rep.No.1923, 82d Cong., 2d Sess. 3 (1952).

A-33

decision to consider section 271 ‘‘noncontroversial’’ was in

itself a controversial issue.!”

The most important portions of those hearings, for our

purposes, involve the various appearances of Mr. Giles S.

Rich, the chief draftsman of the contributory infringement

provisions, The tenor of his explanations indicates that

section 271 was designed to immunize behavior like that

in issue here.

Kividence of this can be found, for instance, in his dis-

cussion of an unreported case, Amalgamated Dental Co. v.

William Getz Corp., in the Eastern District of Illinois. 1951

Hearings at 154-56. The plaintiff-inventor had secured a

patent on a method of making dental impressions by mixing

four chemicals in an aqueous solution that dried into a stiff

elastic gel. The patentee was retailing his invention by

selling the four chemicals as a unit, with directions for com-

pleting the mixture by adding water before the material

was to be applied. The alleged infringers were marketing

the invention in identical fashion. The district court, which

had originally decided the Mercoid case and had easily per-

ceived misuse there and in other cases, balked at deeming

the patentee guilty of misuse simply because, along with his

four chemicals, he had not included a little water.

17 Hearings were held by successive Congresses to consider the com-

plex question of revising and codifying the patent law and par-

ticularly the contributory infringement problem. Patent Law

Codification and Revision: Hearings on H.R.3760 Before Sub-

comm. No. 3 of the House Comm. on the Judiciary, 82d Cong.,

Ist Sess. 1951) [hereinafter 1951 Hearings] ; Contributory In-

fringement: Hearings on H.R.3866. Before Subcomm. No. 4 of

the House Comm. on the Judiciary, 81st Cong., Ist Sess. (1949)

[hereinafter 1949 Hearings]. Contributory Infringement in Pat-

ents — Definition of Invention: Hearings on H.R.5988, H.R.

4061 and H.R.5248. Before Subcomm. on Patents, Trademarks

and Copyrights of the House Comm. on the Judiciary, 80th

Cong., 2d Sess. (1949) [hereinafter 1949 hearings].

A-34

After quoting the court’s gyrations in allowing the suit

over the asserted defense (‘‘the water just constitutes the

environment in which these chemicals per-

[6553]

form”), Rich remarked that “[llogically, he cannot get

around the Mercoid case.” Rich noted that courts faced the

same problem regularly in fact situations of this kind and

that they were deciding inconsistently. He then went on to

explain that the statutory solution was designed to avoid

restricting competition in items that were staples, while

at the same time allowing patentees to deal in certain

materially important unpatented elements and to sue com-

petitors therein without being thrown out of court on

grounds of misuse. Jd. at 157-59. He was especially con-

cerned with a situation where the economics of the industry

is such, perhaps, that the invention is not sold in the form

in which it is claimed in the patent; it is sold in a slightly

incomplete form like the lamp without the chimney, so

that there is a technical defense based on the omission of

something mentioned in the claim.

Id, at 158.18

Another telling feature of Mr. Rich’s remarks is his

observation that the new statutory rule cannot be compared

to any definite era in the history of the contributory in-

fringement and patent misuse doctrines.’® Jd. at 161.

18 Such a concern for economical distribution of inventions is of

course at odds with the Supreme Court’s earlier views in B. B.

Chemical, supra.

19 This view was also presented by Mr. P. J. Federico of the U. S.

Patent Office, who, in giving a quasi-official overview of the bill

except for section 271, remarked that

paragraph (¢) which is the key section, was devised by the

groups working on it as an attempt to state in statutory form

the theory of what has been called contributory infringement

of patents in a manner which, looked at from certain points

A-35

Rather, the line drawn by paragraphs (c) and (d) repre-

sents a careful compromise between the public policy of

encouraging competition, vindicated by exempting sales of

staples from the definition of contributory infringement,

and a patentee’s desire to market his device in the most

practical manner possible and to protect it against piracy.

Under paragraphs (c) and (d), the patentee has no right

to sue anyone who is merely marketing a staple, or even a

nonstaple that does not amount to a material part of his

invention. Such conduct by unlicensed competitors is not

defined as contributory infringement. Thus, as long as a

competitor is not actively inducing infringement (as by

advertising or giving detailed instructions for practicing

the invention with his products — conduct prohibited by

paragraph (b)), a seller may even know or intend that his

products will be used in an infringement, and a patentee

will not be able to foreclose him from the market. See

generally id. at 159-62.°

of view, might be considered restrictive of what has been held

in the past and looked at from some other points of view

might be considered broader.

20 Mr. Rich emphasized this narrow but important shift in doctrine

by noting the result in the Carbice decision would not be

changed :

There would be no possibility under this section of utiliz-

ing the patent to monopolize the sale of dry ice whch was a

staple article of commerce, or a commodity of commerce

which had been known 80 years. It would still be misuse as

in the Carbice case, even though this section were enacted.

Td. at 161.

In the context, the negative implication of these remaks is

clear: patentees who market unpatented nonstaples might pos-

sibly monopolize such sales. And in his remarks at earlier hear-

ings, to which he referred the committee at several points, he

made this explicit:

The exception which we wish to make to the misuse doctrine

would reverse the result in the Mercoid case; it would not

reverse the result in the Carbice case.

1949 Hearings at 67, 68-69.

A-36

[6554]

This understanding of the joint effect of paragraphs

opponents, most prominently the Justice Department. T.

Hayward Brown, Chief of the Patent Litigation Unit,

showed especial opposition to paragraph (d), which the

Justice Department deemed a major and controversial

change in the current misuse principles and, as such,

inappropriate for inclusion in a codification.”?

21 Part of Mr. Brown’s assessment is as follows:

These provisions would result in writing into the patent

statutes for the first time the strictly judicial doctrine of con-

tributory infringement, a doctrine which has been the subject

of considerable controversy and has been properly limited

by the courts in recent years. This Department is opposed

to extending the law of contributory infringement. The re-

vision would clearly extend it in several respects. In the first

place, paragraph (b) would put the contributory infringer

in the same vategory as a direct infringer, thereby subjecting

him to the limitations and liabilities of the latter.

Paragraph (d) would greatly impair the salutary doc-

trine that a patentee who has misused his patents may not

recover in a-suit for either direct or contributory infringe-

ment. The Supreme Court has held that a requirement by a

patentee that users purchase from him or his exclusive

licensee unpatented part not within the scope of the patent,

was a misuse of the patent and barred recovery even though

contributory infringement was assumed to exist. This doc-

trine is a most important factor in the enforcement of the

antitrust laws with respect to tying arrangements and the

Department is opposed to any impairment thereof.

It is not clear to what extent paragaph (b) is intended

to enlarge the present law on contributory infringement. The

phrase, “actively induces infringement” might cover many

situations which are not now considered to be contributory

infringement. Paragraph (¢) also appears to enlarge the

scope of contributory infringement. While some cases have

indicated that one who sells an article not capable of use

except in an infringing manner is liable for contributory

infringement even in the absence of actual knowledge of the

infringement, the sounder approach would seem to be that

such facts merely give rise to a rebuttable presumption of

intent to infringe.

A-37

One who read section 271 differently from Mr. Rich, and

is thus often cited to support a narrow interpretation of it,

is Representative Crumpacker, a member of the House sub-

committee conducting the hearings on the bill. When Mr.

Fugate of the Justice Department railed against the pro-

vision because of its ostensible legitimation of certain types

of misuse, Crumpacker’s response indicates he read the

language as applying to innocent conduct not previously

deemed misuse or ‘‘monopolistic practices’’ by the courts.”

1951 Hearings at 165-64 and following. Mr. Rich was brought

back to clarify matters. Mr. Rogers then summarized Rich’s

position as follows:

Now, due to what many members of the patent bar

believe, that it did away with contributory infringe-

ment cases, you feel that we should now state as a

positive law a cause of action against contributory

infringement

[6555]

as set forth in section (c), and that if he has done one

of the three things in section [(d)], that shall not be

considered a misuse of his patent, and thereby re-

establish what you thought you had before the Mercoid

case, Isn’t that about what the situation is?

Id, at 173 (emphasis added).

1951 Hearings at 96-97. See also the remarks of Mr. Wilber L.

Fugate, an attorney of the Justice Department’s Antitrust Divi-

sion, 1951 Hearings at 162-69.

22 Mr. Crumpacker seemed incredulous at Mr. Fugate’s suggestion

that, if applied generally, paragraph (d) would immunize con-

duct which the courts had found to be misuse. He countered:

It says that he shall not be deemed guilty of misuse because

he has done one of these three things. It doesn’t say that

he shall be deemed not guilty of misuse because he has done

this. I think you are reading it backward. That is, he may

have done all three of these things and still be guilty of

misuse, as I interpret the language.

1951 Hearings at 167.

A-38

Mr. Rich agreed and further explained that to recover

full complement of contributory infringement meant

something had to be done about misuse.

So attached to paragraph (c) we have a paragraph

(d) that says that the recovery, the enforcement against

contributory infringers, the holding out of the patent

against contributory infringers, and granting them

licenses, the use of it to protect the business and making

money out of it, and getting your reward as a patentee,

all of these things shall not be misuse, and then con-

tributory infringement, which we have had all the

time, would become effective again to the extent that

they wish to have it so.

Id,

In a final clarification, Mr. Rogers revived an earlier

line of inquiry: whether the enumerated rights were inno-

cent in themselves or whether the courts had previously

deemed each one of them patent misuse#As the final com-

prehensive discussion of section 271(d), and as a treat-

ment that seemed to satisfy Representative Crumpacker

sufficiently so that he turned to another matter, this ex-

change, set out in the margin, is worthy of study.?*

Mr. Rogers. May I ask this further question? Do you know of

any case where the plaintiff was denied relief because he had

accepted revenue from acts which, if perfomed by another with-

out his consent, would constitute contributory infringement of

the patent? That is number one.

Mr. Rich. The Barber Asphalt case, I think is typical of that,

and to some extent the Carbice case. In the Carbice case there

was a form of license on the invoice. In the Barber Asphalt

case they tried to distinguish on the ground that they had no

agreements with anybody, so that what they were doing was

deriving revenue in the form of profits from the sale of the

unpatented staple commodity for use in the invention.

A-39

Though because of stray passages like those involving

Senator Saltonstall and Representative Crumpacker the

legislative history is not crystal clear, we think the weight

Mr. Rogers. So the court then said that that act constituted

something leading toward monopoly or contrary to public policy,

and for that reason denied relief to the plantiff ?

Mr. Rich. That is correct.

Mr. Rogers. Now, as to No. 2, are there any cases where

licensed authorized persons performed acts which, if performed

without their consent, would constitute contributory infringe-

ment of the patents?

Mr. Rich. Well, that is the Mercoid type of situation.

Mr. Rogers. Yes.

Mr. Rich. It must, of course, be realized that if we had had

a statute like this, the Mercoid case might have been tried dif-

ferently, on a different theory. But it deals with granting licenses

to people who would otherwise be contributory infringers, not

direct infringers, because they are only making part or less than

the whole of the invention.

Mr. Rogers. Well now, do you know of any case where they

denied relief to the plaintiff where he had sought to enforce

his patents rights against infringement or contributory infringe-

ment on this section 3?

Mr. Rich. Do you mean section 2, licensing?

Mr. Rogers. No, section 3 of (d).

Mr. Rich. That is sought to enforce?

Mr. Rogers. Yes.

Mr. Rich. That is the Stroco Products v. Mullenbach case.

Mr. Rogers. Then the effect of (d) with the (3) in there

would be to say to the Supreme Court that it is the sense of

this Congress that where you have heretofore denied relief to

the plaintiff, you shall henceforth grant him relief if he has

only performed one, two, or three of these acts in (d), and

that is why the Department of Justice is objecting to it?

Mr. Fugate. Yes, sir.

Mr. Rogers. And it would therefore necessarily follow that

by taking (c) and (d) together we are asking the Supreme

Court to not follow the line of reasoning of declaring that a

man shall be denied his day or damages if he has done any one

of these three acts. Isn’t that what it amounts to?

Mr. Rich. That he shall not be denied his day or damages

merely because he has done one, two, or three, or all of these

acts if the contributory infringement referred to in (d) is of a

type which falls within the specific terms of (c).

A-40

[6556]

of it favors Rohm & Haas’ reading of the statute. We are

further confirmed in our view of section 271 by observing

that the extremely narrow reading favored by defendants,

though plausible, does not rest especially well on the word-

ing of the provision.

[11, 12] All the parties seem to agree that subsection

(d)(1) means that a patentee may sell unpatented elements

of his invention. We add that, because of the explicit limita-

tion of the right to “acts constituting contributory infringe-

ment,” a term defined in paragraph (c) immediately before,

apparently a patentee who is attempting to completely

foreclose competitors is safe from a misuse defense only

in selling products that are nonstaples, material parts of

Now, a suggestion has come to me during this discussion

which may bring the views of Justice and of the patent bar

together. That would be to insert in the third line of paragaph

(d) before the last word “by” the word “solely” so that he shall

not be deemed guilty of misuse or illegal extension of patent

rights solely by reason of his having done one or more of the

following.

If he has gone beyond those and done other acts which could

be misuse, then the misuse doctrine would be applicable.

Mr. Rogers. But then even with the word “solely” we would

still say to the Court that if he had done one of these, he could

now be permitted to recover?

Mr. Rich. If he has not misused it otherwise. If it comes

within the terms of (c). If he tries to license somebody, for in-

stance, to manufacture a staple article of commerce, to be sold

in a patented invention and collect royalties, let us say, for

manufacturing of salt tablets to be used in a patented vending

machine or dry ice to be used in a patented shipping container,

pe ae be misuse because it doesn’t come within the terms

of (ce).

1951 Hearings at 174-75.

A-41

his invention, and capable of no substantial noninfringing

use.*4 Subsection (d) (2)

[6557]

additionally allows a patentee to ‘‘license’’ another to do

those same sorts of acts — that is, acts that would be con-

tributory infringement (the selling of appropriate non-

staples) if done without permission.”> As a commentator

24 The district court, in concluding that the rights specified in (d)

are completely unrelated to the practices described in (¢), over-

looked the plain wording of the statute. Moreover, the intended

incorporation of the limitations in (¢) into the conduct allowed

in (d) is, we think, clear from the legislative history set out at

length in n. 23, supra.

The official Revisory Notes to section 271, relied on below,

state that paragraph (d) is “ancillary to” paragraphs (b) and

(ce). But we do not read this linkage of sections (d) and (b),

which contains no limitation to nonstaple material parts of the

invention, as allowing a patentee to sell staples and to sue under

(d) to completely foreclose competing sellers.

Since case law does not presently consider a patentee’s mere

sale of staples used in his invention to be “misuse” (as long as

he does not tie use of the invention to purchase of the staple),

we view the linkage as allowing such an innocent patentee to sue

under (d) (3), without thereby being deemed a misuser, a com-

peting seller of staples who is “actively inducing” infringement.

The patentee’s relief, however, would not be an injunction for-

biddng the defendants’ sale of staples, since mere sale is not

wrongful under either (b) or (c). Appropriate relief might ex-

tend to an injunction against continuing to “actively induce”

infringement, conduct forbidden by (b).

Reading (d) and (b) together more broadly so as to allow

a patentee to tie mere staples to use of the invention would

conflict with the clear legislative intent of preserving Carbice,

while altering the Mercoid rule in favor of those who are not

marketing their entire invention but are marketing material,

nonstaple parts thereof. The broader reading would destroy the

careful compromise of the drafters by endangering much more

competition than the relatively small amount implicated in the

markets for nonstaples uniquely attributable to a patented in-

vention.

25 This limitation parallels our interpretation in n. 24 supra and

accords with the statements by Mr. Rich quoted in n. 23 that

A-42

has noticed, the rights to license another to sell such un-

patented items would be rendered worthless if the only right

conferred by (d)(1) were the right to sell the item as one

competitor among many freely competing. Who would take

a license, and on what terms, if anyone were free to compete,

and the patentee had no legitimate right to exclude others

from the market?? When one adds to this the realization

that in (d)(3) Congress has also given the patentee the

cumulative right to enforce its patent against those doing

without permission — without ‘‘license’’ — what the paten-

tee itself is doing, the impression becomes almost overpower-

ing that Congress did clearly provide for a patentee’s right

to exclude others and reserve to itself, if it chooses, the

right to sell nonstaples used substantially only in its in-

vention.*?

[6558]

The Supreme Court cases discussing section 271 are few

and, as the able district court below recognized, none of

them controls. Of the cases decided in this area since 1952,

an attempt by a patentee to license a competitor to sell mere

staples for use in the invention would survive as misuse and

thus bar a suit to enforce the patent.

26 The statute permits the patentee to “license” or “authorize others

to do the same acts which he himself is permitted to do by sub-

section (1). If the only act permitted by subsection (1) is the

sale of components in competition with unlicensed suppliers, the

“license” language is meaningless. Of what possible use is a

“license” to compete when anyone can compete without a license ?

In order to give significance to the word “license,” it must be

assumed that the right of the patentee being licensed is some-

how exclusive — that another supplier could not sell the com-

ponent without the patentee’s permission. If this is the case,

both subsections must allow the patentee an exclusive right to

sell components, precisely the type monopoly struck down in

Mercoid.

Note, Combination Patents: The Right to Prohibit the Sales of

Replacement Parts, 70 Yale L.J. 649, 656 (161).

27 The district court read (d)(2) as giving Rohm & Haas “the

right to authorize a third party by virtue of an implied license

to resell the propanil for use in the patented method.” This

seems to refer to the right of one who buys propanil from Rohm

A-43

most are either silent regarding the effect of section 271

on Mercoid, probably because they involve staple items, or

else they simply cite with approval Mercoid’s various sum-

mations of the misuse doctrine. And indeed, apart from the

& Haas to resell it to someone else. But if so, (d)(2) simply

restates what has always been the right of any purchaser of an

item, patented or not. Once an item has been conveyed, it passes

beyond the patentee’s monopoly power and the buyer can use it

or sell it as he wishes. See, e. g., Adams v. Burke, 84 U.S. (17

Wall.) 453, 21 L.Ed. 700 (1873), and, more recently, Aro Manu-

facturing Co. v. Convertibe Top Replacement Co., 377 U.S. 476,

497, 84 S.Ct. 1526, 12 L.Ed.2d 457 (1964). Surely no statute

was required to save a license that operates as a matter of law

from being deemed patent misuse.

Defendants would have us impose a requirement that a paten-

tee like Rohm & Haas offer erstwhile competitors licenses, avail-

able to all comers at a reasonable royalty rate. Then, they say, it

would be permissible for Rohm & Haas to sell propanil under

(d)(1) in competition with its licensees and under (d)(3) to

sue all competitors who refuse to accept a license and pay roy-

alties. And along similar lines, the district court deemed Rohm

& Haas’ marketing program as even greater misuse than that

accomplished by Mid-Continent in Mercoid. Mid-Continent of-

fered licenses and sued only the manufacturer Mercoid, which

refused to take a license, whereas Rohm & Haas has refused to

license competitors.

This line of reasoning certainly states an attractive possi-

bility. It allows a patentee economically to market his invention,

yet preserves competition in propanil, which is, after all, not

patented. As attractive as this compromise is, however, we can-

not discern it in the statute. On the contrary, the statute ex-

plicitly allows a patentee to do “one or more of the following”—

and merely coupling (d)(1) with (d)(3) allows the result we

ratify here. Opponents of the bill saw this clearly. In the 1949

Hearings, Mr. John C. Stedman, Chief of the Justice Depart-

ment’s Legislation & Clearance Section, Antitrust Division,

stated :

[ (da) ] sounds reasonable and innocuous enough. Its effect,

however, is to permit a patentee to sell unpatented parts for

a device or composition covered by his patent or sell un-

patented materials or apparatus for us with a process pat-

ented to him, and at the same time prohibit his competitors,

by suit for infringement, from selling such unpatented ma-

terials in competition with him.

A-44

very narrow exception as to material nonstaples immunized

by section 271, Mercoid remains an excellent summation of

misuse considerations. Nevertheless, we cannot overlook

the importance to our issue of two cases decided closely

after section 271 was enacted, in which several members

of the Court expressed the view that section 271 merely

codifies patent law, including Mercoid and its result, and

made no changes in the law such as those contended for by

Rohm & Haas.

In Aro Manufacturing Co. v. Convertible Top Replace-

ment Co., 365 U.S. 336, 81 S.Ct. 599, 5 L.Ed.2d 592 (1961)

(Aro I), and Aro Manufacturing Co. v. Convertible Top

Replacement Co., 377 U.S. 476, 84 S.Ct. 1526, 12 L.Ed.2d 457

(1964) (ro IT), the Court faced actions for contributory

infringement based on a claim that defendant’s cloth tops

for convertibles aided an infringing reconstitution of the

patented mechanical top, rather than a noninfringing repair

of the item. In dro J, in the course of rejecting the claim,

the majority cited Mercoid for the principle that the separate

unpatented elements of a combination patent are not pro-

tected by the patent monopoly. The technical ground of the

opinion, however, seemed to be the determination that the

purchaser of an auto with a convertible top gains, along

with the right to use the top, the right to replace its worn

out parts. Unless his actions are so extensive as to become

a prohibited reconstruction, his action in replacing, for

example, fabric portions of the top, does not constitute an

This is exactly the type of practice which the courts have

unequivocally and consistently condemned, both under the

patent laws and under the antitrust laws.

1949 Hearings at 52.

We decline to rule that a patentee must license under (d) (2)

in order to use his rights under (d)(1) and (d) (3). A general

licensing obligation is foreign to a statutory scheme in which

patentees are free to suppress entirely or reserve for themselves

their inventions.

A-45

infringing action. Without someone’s committing of a direct

infringement, there was of course no predicate for contribu-

tory infringement: there was no tort being committed in

wich the seller of replacement tops could participate. Justice

Harlan, joined by two others, dissented, arguing that the

majority’s reliance on Mercoid destroyed the significance

of cases such as Leeds & Catlin that gave relief against

contributory infringement on principles approved by Con-

gress in section 271.

In Aro II Justice Srennan wrote for a different majority.

In Aro I he had

[6559]

agreed with Justice Harlan’s view of section 271 but had

concurred with the majority on the simple ground that with-

out a direct infringement no contributory liability was

possible. The new majority now distinguished Aro I as

involving only car buyers from manufacturers who had been

licensed to make the patented convertible top in auto con-

struction. In Aro IJ, by contrast, the replacement tops were

also designed to renew the covering on cars manufactured

by a company that had refused a patent license. The Court

held in part that because this unlicensed manufacturer had

no right to construct or convey the invention, buyers of these

cars received no right even to use the invention, much less

the right to repair it. Because the Court deemed each such

repair by those buyers an independent direct infringement,

the knowing seller of replacement tops was open to liability

‘as a contribs ‘ry infringer.

Justice Black, who had specially concurred in Aro IJ in

part to emphasize his view that section 271 merely codified

the Mercoid result, spoke for himself and three other dis-

senters. The real basis for Aro I, he argued, was not merely

the lack of a direct infringement but also the recognition

A-46

grounded in the misuse cases that the scope of a patent can

never properly extend to unpatented elements. He vehem-

ently disapproved the majority’s result, charging that the

pattentee was being allowed to expand its monopoly, an

unconstitutional result not within congressional patent

clause power.”®

Had this been all there was to the Are II case, it would

have been strong support for our reading of section 271.

Unfortunately, however. the extraordinarily complex opin-

ions, on balance, probably cut against our view.?® Because

the poli-

[6560]

cies involved in our factual situation—a primary use

market — differ so from the policies involved in protecting

competition in a market for unpetented elements to be used

as mere replacement parts at the hands of one with a

legitimate right to tinker with a patented device by reason

28 The majority responded to this point by simply stating that they

had “no doubt that § 271(¢) as so construed and applied, within

the limitations set forth in the succeeding portions of this opin-

ion, is constitutional.” 377 U.S. at 492 n.10, 84 S.Ct. at 1535

n. 10.

Defendants herein also challenge the constitutionality of

the interpretation of the statute we have adopted. We believe,

however, that it is well within congressional power to allow

certain patentees incidental market power over items not tech-

nically withn the patent grant when this is necessary to effec-

tively market and protect a patented invention.

29 For instance, the majority left open the possibility that the

patentee and its licensee might have been barred by the patent

misuse doctrine had the issue been properly preserved by the

defendant. 377 U.S. at 491-92, including n.9 84 S.Ct. 1526.

Moreover, the majority spoke of the congressional purpose

in enacting section 271 as the desire to “reinstat[e] the doctrine

of contributory infringement as it had been developed by deci-

sions prior to Mercoid, and [to] overul[e] any blanket invali-

dation of the doctrine that could be found in the Mercoid

opinions.” Id. Any correlative effect upon the misuse doctrine

was not alluded to.

A-47

of his absolute ownership thereof, we consider the Aro

opinions as not controlling the result of our case.*° In line

with an earlier panel that concluded in dictum that section

271 “was intended to work some changes” in the concepts

of patent misuse and that section 271 was “a congressional

disapproval and legislative modification of the court-

fashioned Mercoid principles,” we do not feel that our

At another point the Court cited Carbice and Mercoid for

the general proposition that a patentee cannot impose conditions

concerning the unpatented supplies, ancillary materials or com-

ponents with which the use is to be effected. 377 U.S. at 497, 84

S.Ct. 1526. The context of these remarks is quite different from

the situation before us, since the attempt in Aro to restrict the

sources of supplies for future repairs violated the long-standing

patent principle that when a patentee has sold a patented article

he has granted the purchaser an implied license to use, and he

cannot thereafter restict that use. “So far as the use of it was

concerned, the patentee had received his consideration, aud it

was no longer within the monopoly of the patent.” Adams v.

Burke, 84 U.S. (17 Wall) 453, 456, 21 L.Ed. 700 (1873). This

principle is not involved in our situation. Nevertheless, there

remains a suggestion that perhaps the majority would have

considered any conditoning or tying as misuse, still prohibited

irrespective of section 271(d).

And finally, though the majority upheld the plaintiff’s right

to recover damages from the contributory infringer, it prac-

tically instructed the district court not to award more than

nominal damages. In addition to a reluctance to let a patentee

bypass a ready target — the direct infringer auto manufacturer

— to reach the contributory infringer who competes in the sub-

market, the policies behind this measure of damages were firmly

based on misuse principles:

[A different measure of damages] would enable the patentee

to derive a profit not merely on unpatented rather than

patented goods — an achievement proscribed by the Motion

Picture Patents and Mercoid Cases. supra — but on unpat-

ented and patented goods.

377 U.S. at 510, 84 S.Ct. at 1544 (original emphasis). The Court

also stated that such a result “would be at war with virtually

every policy consideration in this area of the law.”

Id.

80 In addition to the Aro cases, the defendants cite Deepsouth Pack-

ing Co. v. Laitrem Corp., 406 U.S. 516, 92 S.Ct. 1700, 32 L.Ed.2d

A-48

independent consideration of section 271 is precluded by

the “varying views” expressed by the justices in Aro.

Fromberg Inc. v. Thornhill, 315 F.2d 407, 414 n.18 (5th Cir.

1963).

With this, we have about exhausted our present capacity

for rational thinking on patent matters. As we noted during

the oral argument of this case, patent cases are the only

cases argued by professionals and decided by amateurs. We

take some comfort in noting that any shortcomings of our

effort can safely be laid to the difficulty of the subject

matter. Mr. Giles 8. Rich observed on several occasions

during the hearings on section 271 that patent law is “the

metaphysics” of the law and that contributory infringe-

ment/patent misuse issues are the metaphysics of patent

law. In remanding this matter for further proceedings

consistent with the above views, we gratefully leave un-

touched a correlative issue not technically before us:

whether our analysis, coupled with the statutory command

that patentees doing activities mentioned in (d) cannot

be “deemed guilty of misuse or illegal extension of the

patent right,” affects the antitrust counterclaim filed herein

by the defendants.

REVERSED and REMANDED.

ost

273 (1972), Blonder-Tongue Laboratories, Inc. v. University of

Illinois Foundation, 402 U.S. 313, 91 S.Ct. 1434, 28 L.Ed.2d

788 (1971), and Zenith Radio Corp. v. Hazeltine Research, Inc.,

395 U.S. 100, 89 S.Ct. 1562, 23 L.Ed.2d 129 (1969), as evidence

of the continued validity of Mercoid. It is true that these cases

contain ringing endorsements of patent misuse theory concern-

ing the proper scope of a patent. However, we decline to rely

on their general statements, made in context far afield from a

patentee’s effort economically to market his invention by sale of

its unique, nonstaple elements, to reach a result contrary to the

one we see so clearly in the statutory words and its legislative

history.

A-49

[408]

In THE

UNITED STATES DISTRICT COURT

For Tue SourHern Disrricr or TExas

Hovston Division

_—_—_

Civi Action No. 74-H-790

Roum AND Haas Co.,

Plaintiff,

Dawson CHEMICAL Co.;

CrystaL MANUFACTURING CoRP.;

CrystaL CuemicaL Co.;

and HeLtena CHEMICAL Co.;

Defendants.

James C. Winters, Crain, Winters, Deaton, James

& Briggs, Houston, Texas for plaintiff.

John L. MecConn Jr., Butler, Binion, Rice, Cook &

Knapp, Houston, Texas, for defendants Dawson

Chemical Co., Crystal Manufacturing Corp. and

Crystal Chemical Co.

B. R. Pravel, Pravel and Wilson, Houston, Texas,

for defendant Helena Chemical Co.

MEMORANDUM AND OPINION

I. INTRODUCTION

In this suit for patent infringement of a combination

patent plaintiff Rohm and Haas Company, as patent owner,

alleges that defendant corporations have actively induced

and otherwise contributed to the direct infringement of a

A-50

method or combination patient implemented in controlling

weeds in rice crops. Defendants challenge plaintiff’s right

to relief contending that regardless of whether they have

committed acts of infringement, Rohm and Haas is not

entitled to relief because it has committed patent misuse

in exploiting its patent.

Defendants Dawson Chemical Company, Crystal Manu-

facturing Corporation and Crystal Chemical Company have

pursued the

[409]

defense of this action independently from defendant Helena

Chemical Company. The Court is thus confronted with two

sets of motions and briefs on every contention raised by

the parties. For purposes of this interlocutory order, unless

otherwise noted, the Court has concluded that the relative

positions of the four defendants coincide.

Three motions presently are pending before this Court.

Specifically, defendants move for dismissal of plaintiff’s

complaint on the ground that the undisputed facts in this

cause establish patent misuse as a matter of law, since this

defense acts as a complete bar to plaintiff’s action. Plain-

tiff moves that the Court enter a partial summary judgment

ruling that its conduct does not constitute patent misuse

under 35 U.S.C. § 271(d). The parties submit, and the Court

agrees, that sufficient undisputed facts exist to permit an

interlocutory ruling as to whether plaintiff's exploitation

of its combination patent constitutes patent misuse.

The Court concludes after carefully analyzing the undis-

puted facts, the briefs submitted by the parties and the

wealth of authority pertinent to this perplexing interface

between the patent laws and the public policy notions

undergirding our antitrust laws, that Plaintiff’s present

licensing policy, if sanctioned by this Court, would consti-

A-51

tute patent misuse. However, for reasons set out in Section

V.B., infra, the Court has determined that the defendants’

motions for partial summary judgment should be granted

at this time only insofar as they seek an adjudication of the

legality of plaintiff’s monopolization of the sale of propanil,

but should be denied to the extent that they seek dismissal

of plaintiff’s complaint. With the exception of the limita-

tions set out in Section V.C., infra, defendants’ motions for

protective orders are denied at this time.

[410]

II. MATERIAL FACTS

The following matters in this suit are not controverted:

1. Jurisdiction and venue are proper in this Court as

to all parties and subject matter. 28 U.S.C. §§1338(a) ;

1400(b) and 35 U.S.C. § 271.

2. On June 11, 1974, United States Patent 3,816,092

issued to Harold F. Wilson and Dougal H. McRae (here-

after the “Wilson patent”). Rohm and Haas is and has

been the sole owner of the Wilson pa.cnt since its issuance.

The Wilson patent contains the following claims which are

pertinent to this action:

a. A method for selectively inhibiting growth of un-

desirable plants in an area containing growing undesir-

able planis in an established crop, which comprises

applying to said area, 3, 4-dichloropropionanilide at a

rate of application which inhibits growth of said un-

desirable plants and which does not adversely affect

the growth of said established crop.

b. The method according to claim 1 wherein the 3,

4-dichloropropionanilide is applied in a composition

comprising 3, 4-dichloropropionanilide and an inert di-

luent therefor at a rate of between 0.5 and 6 pounds of

3, 4-dichloropropionanilide per acre.

A-52

e. The method according to claim 1 wherein most

of the undesirable plants are destroyed by 3, 4-dichloro-

propionanilide applied thereto without substantial ad-

verse effect on crop growing therewith.

d. The method according to claim 2 wherein the

established crop is monocotyledonous.

e. The method according to claim 2 wherein the

undesirable plants include monocotyledonous plants.

f. The method according to claim 2 wherein the un-

desirable plants include dicotyledenous plants.

g. The method according to claim 2 wherein the

established crop is a grain crop.

h. The method according to claim 2 wherein the

undesirable plants include barnyard grass.

[411]

i. A method of selectivity inhibiting the growth of

growing, tender, undesirable annual plants which are

susceptible to 3, 4-dichloropropionanilide, said unde-

sirable plants growing in an area contaning an estab-

lished monocotyledonous crop which is resistant to 3,

4-dichloropropionanilide, which comprises applying to

said undesirable plants a composition comprising 3,

4-dichloropropionanilide and an inert carrier therefor

at a rate of application which inhibits growth of said

undesirable plants and which does not substantially

affect the growth of said established monocotyledonous

crop.

3. Both before and after June 11, 1974, the issue date

of the Wilson patent, defendants have sold formulations

containing 3, 4-dichloropropionanilide, which is also known

as “propanil”. After they were served with the Complaint

in this suit, such sales were with knowledge of the Wilson

patent. Both before and after June 11, 1974, purchasers of

defendants’ propanil formulations have carried out in this

country the method described on attached labels. Defen-

A-53

dants knew when they sold their propanil formulations that

such formulations would be used by purchasers in carrying

out the methods described on those labels. Defendants are

continuing and intend to continue the making, selling and

offering of propanil formulations in this country with the

same recommendations and instructions. Defendants, how-

ever, contend that the Wilson patent is invalid and unen-

forceable, and that defendants are not liable as infringers

or contributory infringers.

4. Based upon the representations of defendants that

they have recommended the use of their propanil products

only for controlling weeds in rice crops, plaintiff does not

charge infringement of either claim 4, 5 or 7 of the Wilson

patent.

5. Plaintiff makes and sells the chemical compound, 3,

4-dichloropropionanilide, known as propanil, in various

[412]

formulations in this country with instructions to use the

propanil in carrying out the steps of the Wilson patent.

Purchasers of the plaintiff’s propanil formulations in this

country are impliedly licensed by operation of law to use

the method of the Wilson patent. Each of defendants has

requested a license under the Wilson patent. In reply to

these requests, plaintiff maintains that it has no present

intention of granting a license under the Wilson patent to

any of the defendants, or to any propanil users except

purchasers of propanil from plaintiff, who enjoy implied

licenses by operation of law. To date, plaintiff has not

granted a written license to anyone under the Wilson

patent, and it does not presently intend to grant such a

license. Plaintiff has never received any payment other

than the purchase price from its propanil customers who

employ the Wilson patent method.

A-54

6. In asuit by Monsanto Company against plaintiff for

patent infringement, Monsanto’s Patent 3,382,280 claiming

the chemical compound, 3, 4-dichloropropionanilide per se,

was held invalid. Propanil and the various formulations

of it presently sold by plaintiff are therefore unpatented

chemicals.

The Court is aware of no opinion involving conduct

which was factually congruent to the stipulated conduct

of the parties to this action. Resolution of the question

of patent misuse in this dispute is further complicated

by broad language in the seminal opinion of Mercoid Corp.

v. Mid-Continent Investment Co., 320 U.S. 661 (1944),

which went beyond the facts confronting the Supreme

Court in that opinion and threatened the continued vitality

of the tort of contributory infringement in any context.

In 1952 Congress enacted a new Patent Act codifying the

three torts of patent infringement.

[413]

35 U.S.C. § 217(a-c) (1952). Paragraph (d) of § 271 sets

out certain acts of a patent owner which are not barred by

the doctrine of patent misuse.

None of the parties dispute the general rule that a

patent cannot be exploited to monopolize unpatented arti-

eles. Plaintiff argues, however, that a narrow exception

to this rule lies whenever the unpatented article is a

nonstaple component possessing no substantial, noninfring-

ing uses. Plaintiff supports this contention on four grounds.

First, it argues that Congress, in enacting § 271(d), in-

tended to overrule completely the Supreme Court’s opinion

in Mercoid, supra. Second, it argues that the clear lan-

guage used in § 271(d) expressly sanctions the conduct

of the plaintiff in this action. Third, it contends that the

A-55

Supreme Court in Aro Mfg. Co. v. Convertible Top Replace-

ment Co., 377 U.S. 476 (1964), expressly concluded that

§ 271(c-d) overruled the result in Mercoid. Finally, plain-

tiff maintains that the only two opinions squarely on point

which were decided subsequent to the enactment of § 271

both sanctioned extensions of patented combinations to un-

patented, nonstaple components.

In addressing these contentions the Court first examines

the doctrine of patent misuse as it was applied prior to

the Supreme Court’s decision in Mercoid, supra. Section

I1.A.1, infra. The Court next considers the facts in Mercoid

as they compare to the facts sub judice, as well as the

broad language in that opinion which has spawned con-

siderable controversy. Section ITI.A.2-4, infra. In Section

III.B., infra, the Court examines the language and the

legislative history of § 271. Finally, theCourt examines

Mercoid-type misuse as it has been construed by the courts

in the aftermath of § 271. Section III.C., infra.

III. THE PATENT MISUSE DOCTRINE

[414]

Defendants support their contention that plaintiff has

misused its method patent in seeking to monopolize sales

of unpatented components by relying primarily on a line

of Supreme Court decisions culminating with Mercoid

Corp. v. Mid-Continent Investment Co., 320 U.S. 661

(1944), and Mercoid Corp. v. Honeywell Co., 320 U.S. 680

(1944) (hereinafter Mercoid I and Mercoid II, respec-

tively). In arriving at the conclusion reached in this inter-

locutory ruling, the Court has found it necessary to study

carefully this line of decisions.

A-56

A. Patent Misuse Prior to the Enactment of § 271(d)

1. Supreme Court Decisions Antedating Mercoid

The Supreme Court, in Motion Picture Patents Co. v.

Umversal Film Mfg. Co., 243 U. S. 520 (1917), relying for

the first time on a rationale which was subsequently to

form the basis of the misuse defense, denied relief to a

patentee who tried to enforce a tying arrangement which

required the purchaser of a patented motion picture ma-

chine to limit use of the machine to unpatented film pur-

chased from the patentee. Without considering the scope

of the defendant’s infringement, the Court denied relief

wholly on the basis of the inequitable conduct of the pat-

entee.

In 1931, and again without ever reaching the questions

of patent validity or infringement, the Supreme Court

applied the patent misuse doctrine to bar a suit for con-

tributory infringement filed by a patentee which had ex-

plicitly required that users purchase from its exclusive

licensee dry ice used in its combination patent. Carbice

Corp. of America v. American Patents Dev. Corp., 283 U.S.

27 (1931). In his opinion for the unanimous Court Mr.

Justice Brandeis stated:

“(The patent owner] has no right to be free from

competition in the sale of [refrigerant]. Control over

the supply of

[415]

such unpatented material is beyond the scope of pat-

entee’s monopoly; and this limitation, inherent in the

patent grant is not dependent upon the peculiar func-

tion or character of the unpatented material or on the

way in which it is used.” 283 U.S. 27, 33.

In Leitch Mfg. Co. v. Barber Co., 302 U.S. 458 (1938),

the Court extended the patent misuse doctrine to apply

in a situation wherein the owner of a process patent limited

A-57

the right to use the process to implied licensees who pur-

chased unpatented bituminous emulsion from the patentee ;

no expressed licenses were granted. The Court character-

ized this attempt to monopolize the sale of an unpatented

component as an “unauthorized extension of the [patent]

monopoly.” 302 U.S. at 463, which constituted misuse

“whether the patent be for a machine, a product, or a pro-

cess.” Id.

In Morton Salt Co. v. G. 8S. Suppiger Co., 314 U.S.

488 (1941), the Supreme Court upheld the trial court’s

action in granting summary judgement dismissing the

complaint, without ruling on the issues of validity and in-

fringement, holding that the patent owner’s attempt to

suppress competition in the marketing of unpatented salt

tablets, specially made to fit the patented dispenser, was

a misuse of the patent.

In B. B. Chemical Co. v. Ellis, 314 U.S. 495 (1941),

decided the same day as Morton Salt Co., supra, the rule

of Carbice and Leitch was applied to bar relief from in-

direct infringement by a defendant who sold unpatented

component products specially made for use in a patented

process for reinforcing shoe insoles; the component had no

other substantial commercial use. The patentee sought to

ovoid Carbice and Leitch by arguing that the patent misuse

doctrin’: should be limited to. situations in which the com-

ponents supplied by the alleged contributory infringer were

staple articles of commerce. It argued that dry ice and

bituminous coal were staple articles. The First Circuit

Court of Appeals expressly

[416]

considered and rejected this argument, 177 F.2d 829, at

834, 835, holding that “[t]here is every indication that the

Carbice and Leitch cases apply to specially designed arti-

A-58

cles”. Id. In a unanimous opinion the Supreme Court

affirmed; without discussing the staple versus non-staple

component question, the Court simply held that “in view

of petitioner’s use of the patent as the means of establish-

ing a limited monopoly in its unpatented materials, ... the

maintenance of this suit to restrain any form of infringe-

ment is contrary to public policy .. .” 314 U.S. at 498. It is

not clear whether the staple versus non-staple distinction

was ever raised before the Supreme Court, or whether it

was considered and rejected as legally insufficient to justify

extending the patented process to monopolize the supply

of unpatented components.

Although implicitly sanctioned in B. B. Chemical, supra,

patent misuse in the context of non-staple and unpatented

components of a patented combination did not enjoy the

expressed imprimatur of the Supreme Court until 1944,

when it decided Mercoid I and Mercoid II, supra.

2. The Mercoid Decisions

The patentee in Mercoid I held a combination patent for

a furnace stoker system; its exclusive licensee manufac-

tured one essential component of the unit, a stoker switch,

and the right to assemble and install the patented system

was conditioned upon the purchase of this stoker switch.

The defendant, Mercoid Corporation, also manufactured

these stoker switches which were exclusively designed for

and usable in the patentee’s stoker system. The defendant’s

customers were guilty of direct infringement whenever they

installed the stoker system, and the Supreme Court assumed

for purposes of its opinion that the defendant’s stoker

switch sales constituted contributory

[417]

infringement. Relief was denied, however, on the ground

that the patentee’s licensing scheme constituted patent

A-59

misuse. The facts in Mercoid II were similar to those in

Mercoid I except for the absence of any policy of granting

express licenses exclusively to purchasers of the unpatented

stoker switch. The Supreme Court held that the effect was

the same, however, since restrictions on implied licenses

constituted misuse, barring equitable relief.

Although the doctrine of patent misuse was firmly

embedded in the jurisprudence of patent law well before

the Supreme Court was confronted with the issues pre-

sented by the Mercoid cases, this equitable variation of

“unclean hands” had never before been analyzed in a con-

text wherein the Court focused on the fact that the

“unpatented material or device [was] itself an integral

part of the structure embodying the patent,” 320 U.S. at

665, and “no use for the accused devices other than in the

. combination patent” existed. Id. at 664. The Supreme

Court concluded that “no difference in principle” existed

between misusing a patent to monopolize materials em-

ployed or consumed in a machine or process, (such as dry

ice, bituminous coal, salt tablets, or shoe insole materials),

and misusing it to monopolize the supply of integral, albeit

unpatented components. Jd.

3. Mercoid Contrasted with the Facts in this Action

Two significant distinctions should be noted between the

parties’ conduct in Mercoid and the conduct at issue in the

present case. First, the patent owner in Mercoid initially

“granted and offered licenses to companies that would take

them, including Mercoid, who refused”. Mid-Continent Inv.

Co. v. Mercoid Corp., 133 F.2d 803, 810 (7th Cir. 1942).

See also Mercoid II, supra, 320 U.S. at 683. Parties in the

present case have stipulated that defendants

[418]

have requested licenses under the Wilson patent, and plain-

tiff has unequivocally stated that it has no intention of

A-60

granting such licenses.' For this reason the patent misuse

found in Mercoid applies a fortiori in the present context.

The second distinction lies in the conduct of the alleged

infringers. The defendant in Mercoid was charged with

selling stoker switches which contributed to the direct in-

fringement of users of the plaintiff’s patented combination.

The defendants in this action are charged not only with

contributing to direct infringement by its customers by

supplying nonstaple propanil; they are also charged with

the specific intent to induce direct infringement by labelling

containers of propanil and otherwise actively encouraging

others to infringe the Wilson patent. Although these two

separate torts of indirect infringement are in many in-

stances overlapping, see C. Miller, Some Views on the Law

of Patent Infringement by Inducement, 53 J. PAT. OFF.

SOC’Y 86, 98 (1971), the specific intent to cause direct in-

fringement which is required in order to establish induce-

ment is not a necessary element of contributory infringe-

ment. Likewise, the sale of a nonstaple article having no

known noninfringing uses is not a necessary element of

the tort of inducement. Jd. Thus, the total infringing effect

if ali of the elements of both of these torts are established

is potentially greater in the present case than it was in

Mercoid. Although defendants’ conduct does not illume

the question of whether plaintiff’s conduct constitutes pat-

ent misuse, the Court has concluded, Section V.B., that the

defendants’ conduct might well affect the ultimate relief

granted in this case.

4. The Dictum in Mercoid I

The Mercoid decisions severely restricted the well-estab-

lished doctrine of contributory infringement. To the

A-61

[419]

extent that the Court had not previously acknowledged

expressly that the principle in Carbice applied in the con-

text of a non-staple component possessing no known non-

infringing use, the defense of patent misuse reached a new

milestone in the Mercoid decisions. Beyond that, however,

the Supreme Court in sweeping dictum also cast a pale on

the doctrine of contributory infringement in any context,

regardless of whether the patentee’s conduct constituted

patent misuse.

“The result of this decision, together with those which

have preceded it, is to limit substantially the doctrine

of contributory infringement. What residuum may be

left we need not stop to consider.” 320 U.S. at 669.

This Court has concluded that when Congress enacted the

Patent Act of 1952, the inclusion of § 271 was intended to

mollify the potential effect that this dictum could have on

the patent owner’s ability to protect his property against

contributory infringers in any context, whether or not he

was seeking to monopolize the sale of unpatented articles.

The interpretation simply restores the remedy of contrib-

utory infringement as it was applied prior to Mercoid.

B. 35 U.S.C. § 271

Section 271? represents the first congressional effort to

codify the parameters of the common law doctrines of pat-

ent infringement. As stated before, it is generally accepted

that § 271 was prompted by the Mercoid decisions.’ How-

ever, it is somewhat more difficult to determine whether

the substantive holding of Mercoid— that a combination

patent may not be enforced against sellers of unpatented

non-staple components possessing no known non-infring-

ing uses —or whether the broad dictum in that decision

precipitated the enactment

A-62

[420]

of § 271‘. Based on a consideration of (1) the language

of this section, (2) its legislative history, (3) its applica-

tion by the courts, and (4) the post-1952 vitality of Mercoid

in numerous opinions, this Court has concluded that the

facts addressed by the Supreme Court in Mercoid would

not mandate a different conclusion under § 271. This Court

is further of the opinion that the patentee sub judice, by

seeking to monopolize the sale of an unpatented component

of its protected method without even attempting to license

other manufacturers, is exploiting its patent in a manner

which is less legitimate than the exploitation condemned

by the Supreme Court in Mercoid. Section III. A. 3., supra.

Plaintitf submits that until substantial uses for propanil

are discovered other than in plaintiff’s patented method,

plaintiff is entitled to monopolize the supply of this un-

patented chemical compound. Plaintiff further contends

that it has no obligation to alter its present “no licensing”

policy until and unless such noninfringing uses for propanil

are discovered. Although defendants’ direct or indirect

infringement of plaintiffs patent presents no threshold

inquiry in resolving the patent misuse issue, see Morton

Salt Co. v. G. 8. Suppiger Co., supra, 314 U.S. at 490, a

brief consideration of the interrelation of the four para-

graphs of § 271 is nevertheless necessitated by the plain-

tiff’s contention. |

Paragraph (a) of § 271 defines “direct infringement” as

the using, making or selling of a patented invention. Para-

graphs (b) and (c) codify two doctrines of indirect in-

fringement; active inducement of direct infringement, and

contributory infringement. Paragraph (d) sets out

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three acts the commission of any one or more of which

by a patentee seeking to protect and exploit his patent

cannot be relied upon by an infringer as the sole basis

for its defense of patent misuse.

1. Emergence of the Doctrines of Indirect Infringe-

ment Embodied in Paragraphs (b) and (c) of 35

U.S.C. § 271

The Constitution provides for Congress to promiote “the

Progress of Science and Useful Arts, by securing for

limited Times to Authors and Inventors the exclusive Right

to their respective Writings and Discoveries.” U.S, CONST.

art. I, § 8. In accordance with this provision of the Con-

stitution, Congress enacted the first patent act in 1790

which established the exclusive right of inventors to exploit

their discovery. Patent Act of April 10, 1790, ch. 7, 1 Stat.

109. See also 35 U.S.C. § 154 (1952).

An early principle of the law of combination patents

established that direct infringement would not lie unless

the combination in its entirety was used. See Prouty v.

Draper Ruggles & Co., 41 U.S. 335 (16 Pet.) ( 1841). It soon

became apparent, however, that the doctrine of direct in-

fringement was inadequate to protect effectively the paten-

tee’s invention.® Two distinct doctrines of indirect infringe-

ment therefore were developed to protect the inventor.

The doctrine of contributory infringement as it pres-

ently is codified in 4 271(c) was recognized in the early

case of Wallace v. Holmes, 29 F. Cas. 74 (No. 17,100) (C.C.

Conn. 1871).° In this case, the defendant sold burners which

had no known use except in the patentee’s invention. The

court concluded that the act of selling these burners con-

stituted a ‘‘virtual’’ infringement of the protected patent.

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[422]

In Bowker v. Dows, 3 F. Cas. 1070 (No. 1734) (C. C.

Mass. 1878), the court found liability for infringement in

a context foreshadowing the indirect infringement doctrine

of inducement. The defendant sold an unpatented com-

ponent of the patentee’s patented chemical compound. Un-

like the burners in Wallace, supra, this chemical component

had various commercial uses; however, the defendant ad-

vertised that the compound could be used in the particular

manner claimed in the plaintiff’s patent. The Court con-

cluded that the defendant’s act of encouraging infringe-

ment rendered him a joint tortfeasor.

Section 271(b) provides that “[w]hoever actively induces

infringement of a patent shall be liable as an infringer”.

It is quite clear from the language of this provision that

the board tort of infringement by inducement is not re-

stricted in any way to unpatented component articles v hich

lack any substantial non-infringing use. Liability for con-

tributory infringement under section 271(c), on the other

hand, is far more restrictive:

“Whoever sells a component of a patented machine,

manufacture combination or composition, or a material

or apparatus for use in practicing a patented process,

constituting a material part of the invention, knowing

the same to be especially adapted for use in an in-

fringement of such patent and not a staple article or

commodity of commerce suitable for substantial non-

mfringing use, shall be liable as a contributory in-

fringer.” (Emphasis added)

Paragraphs (b) and (c) of § 271 codify the type of conduct

which will give rise to a cause of action for indirect in-

fringement of a patent. Neither of these paragraphs delin-

eates or refers to conduct of a patentee that constitutes

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[423]

patent misuse, which is the essence of the defendants’ mo-

tion for partial summary judgment. Paragraph (d) is the

only paragraph of § 271 which addresses the conduct of a

patentee.’

2. Patent Misuse Under § 271(d) of 35 U.S.C.

Section 271(d) provides that:

“(N]o patent owner otherwise entitled to relief for in-

fringement or contributory infringement of a patent

shall be denied relief or deemed guilty of misuse or

illegal extension of the patent right by reason of his

having done one or more of the following: (1) derived

revenue from acts which if performed by another with-

out his consent would constitute contributory infringe-

ment of the patent; (2) licensed or authorized another

to perform acts which if performed without his consent

would constitute contributory infringement of the

patent; (3) sought to enforce his patent rights

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