# Appendix — Dawson Chemical Co. v. Rohm & Haas Co. > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385006_1147%3A05 ## Record - **Collection:** Supreme Court brief - **Document type:** Appendix - **Published:** January 1, 1980 - **Citation:** 448 U.S. 176 ## Text a an , 5 FILED FP tire Court, U. ny FEB 6 j9Q@9 APPENDIX IN THE Supreme Court of the United States OoroseR TERM 1979 No. 79-669 Dawson CHeEmiIcaL ComMPANy, CrysTaL MANUFACTURING CORPORATION AND CrystaL CHEMICAL CoMPANY, Petitioners, V. Roum anp Hass Company, Respondent. On Writ or CERTIORARI TO THE Unrrep States Court or APPEALS FoR THE Firra Crrovir PETITION FOR CERTIORARI FILED OCTOBER 24, 1979 CERTIORARI GRANTED JANUARY 7, 1980 Caries Docainet TRWGGEGS ccocccecscvsccrsttssstictcbensvissslenviniamanansnncinniin Plaintiff's First Amended and Supplemental Complaint, FOE SURG BA, ROTG ccvcnscessessccssnsssscssevecscvwsereaniavinitinnenntebensantadee First Amended Answer and Counterclaim of Defendants Dawson Chemical Co., et al, Filed July 17, 1974 ............... Plaintiff’s Reply to Counterclaim of Defendant Crystal Chemical Co., Filed July 25, 1974 wo... eccssccscsessssescseeees Answer by Defendant Helena Chemical Co. to Interrogatory No. 12 of Plaintiff’s Interrogatories (First Set), Filed CRabebed’ FG, BOGE. siccossivsssesaustiscntiincsiinhindimsdadaseeapunivamedieanats Answers by Defendants Dawson Chemical Co., et al to Inter- rogatories No. 20, 21 and 22 of Plaintiff’s Interrogatories (First Set), Filed October 17, 1974 occ ceceeteetseeeeeeteees Plaintiff’s Response to Defendant Crystal Chemical Co.’s In- terrogatories (First Set), Filed October 18, 1974 ................ Stipulation by all Parties, without Exhibits, Filed October 31, 1974 (Exhibits reproduced in separate volume) ............ Defendants Dawson Chemical Co., et al’s Motion for Sum- mary Judgment, Filed November 11, 1974 .................ccccesee a Motion for Summary Judgment, Filed December ©, TPR. winrenstihictncdanateaenbaan ee Reply Memorandum by Defendants Dawson Chemical Co., et al in Support of Their Motion for Summary Judgment and in Opposition to Plaintiff’s Motion for Summary Judgment, Without Attachment, Filed December 16, BOE .:cersscessentniensenininnahsinniightslianitisneenieadanstinadamadeainmeemaaens Reply Memorandum by Defendant Helena Chemical Co. in Support of Defendants’ Motions for Summary Judgment and in Opposition to Plaintiff’s Motion for Summary Judgment, Without Attachment, Filed December 30, 1974 Supplemental Memorandum by Defendant Helena Chemical o. in Support of Motion for Summary Judgment, Filed RUT BE, BPO sieicisisnnsnicctesiusitinnsvsniebisiaaiiiiaiinia aaa aaa —— and Opinion of District Court, Filed August WD, TUG ccecssssecocnsneasosouninerssvstnenecusessousnansstiognesseessahiosesesshinaatotioun Defendants Dawson Chemical Co., et al’s Motion for Re- consideration of the Court’s Decision Not to Dismiss Plain- tiff’s Complaint, Filed September 3, 1976 OOOO eee eee eens neee 17 46 55 Defendants Dawson Chemical Co., et al’s Memorandum in Support of Motion for Reconsideration, Filed September 8, 1976 ......00008 suveecccensboscnecnensaneoseseqeneinceveeuianeedeseecses sessuusseesususeners BB, 1DTC rrccrcororeresscserssercsvessvssovoesvosseneosonovenenbonecceseaacessosensessosonses Final Judgment, Filed November 23, 1976 .........sscsssssssesseees Plaintiff’s Notice of Appeal, Filed December 16, 1976 ............ Defendants Dawson Chemical Co., et al’s Joint Notice of Appeal, Filed December 28, 1976 ........:sccccseseseneneeeteeneeenenes Opinion of Court of Appeals, Filed July 30, 1979 ............04 Judgment of Court of Appeals, Filed July 30, 1979 ............... Pa@E 114 4 ° on Pa Pere, a Te LP ; we Ay oe ae itetin + ' ° ny > } . -: ° ° * s S @..° ~ oRs ow rite. . . 5 Ua LY dag? ase 223, FiO » “= po SOEUR perio eas oi SEE PROTECTIVE ORDER FILED li-is-—74. -tItA JURY ReQuesTed Jury demand date: Hele . Givin Docker CRITED STATES DISTRICT COURT peft. erts. GOee C Ferm Ne. 106A Rev. TITLE OF CASE 74-H-799 - CARE 0. DUD, rp igdenar de2irds, 2h | rs 72 zg . rp ee ne. Crystal Gnemical Co. 2B=2=AITORNEYS Ce eee ROHN AND HAAS COMPANY VS. DAWSON CHEMICAL COMPANY, INC., .CRYSTAL MANUFACTURING CORP., BRYSTAL CHEMICAL CO., INC., and HELENA CHEMICAL COMPANY For plaintiff: ‘ James C. Winters . CRAIN, WINTERS, DEATON, JAMES iGGS & BRIGGS 3300 Two Houston Center Houston, Texas 77002 654-1616 _— re —_ m+ eo Se a ed Dawson Chem. Co.; Cryst21 Mfc. Cors.:! For defendant:Crvstal Chemical: a alohn Li. Neconn, sr. BUTLER, 3INION,RICE,CCOK & KNAPP 1100 Esperson Buildings Houston, Texas 77002 - Helena Chemical Co.: rave PRAVEL AND WILSON 2010 Marathon Bldg. 224-6711, 288 Houston, Texas 77002 224-2020 | * STATISTICAL RECORD COSTS DaTE | phAME OF. ] REC. DISB. : 3.5 mailed Clerk hag CiDcaz jf «S15 00 | | [Ent ¥-7y| 210 10357 /s\e0 S. 6 mailed Marshal 12/16/76 $15537 jN.A.| 5.06 ck deans toiled as 12/23/76 #15639 IN.A.| $.0D een reeatory judgment; , ent infringement : USC 2 4o0(r) . Witness fees sae ‘tlon arose at: Depositions a t : ; ‘ © saa Py 2 +9 ‘ ™ Vamsi. ; " . C-eeum so® @& Bilal JURY REQUESTED NORMAN %. BLACK yw season, Date 01 DATE PROCEEDINGS Sudgmen | 2-11-74 |ORIGINAL COMPLAINT, filed. No summons copies available at this ss i. $lte.'s REPLY to Counterclaim of Deft. Crystal Chemical Co., aa Gi 3— 1-74 | STIPULATION, pltf. and Defts. agree that the time for answeling, | objecting o= otherwise gleading to each of the fcllewing 13 | extended for 30 days, filed: : hoe | SLe€.'s Request to Bests. for Production of Doerments (ist cies i pitS.'s interrcgatoriee to Usits. (1st Request) hs | [nterrocztories of Crystal TRemical Co. td elte. (lst Set) Crvstai Chemical Co.'s Request to Pitt. for Procuction o€ Socr-- ments (lst Request) (Entry conmciaued =o top cf next peg) TP Pa TY Ue 9 AO Ng SP NS oS ee OT ee eT re ae ES Ie, eee ying - - . : - ee +. oF LO ee - _ ste 2, = oy SS oe eee > Te ee ot A + ‘ ee hewn a” EN es ter Sg ee ee a Be Ms08s g ° s ‘CA 74={8-790 >. C 1204 Rev. Civil Docket Continuation =a 8=-1-74 8~2-74 S=- 9-74 S= 9-74 ~ \ 8-13-74 Gm 4-74 10-17-74 10-17-74 15-17-74 Baan Entry continued from previous page: Pltft.'s Request for Preduction cf Pltf.’s Interrogatories to Defts. Dawson Chemical Co., Crystal Manufacturing Corp. and Crystal Chemical Co. (2nd Set) Defts. Dawson Chemical Co., Crystal Manufacturing Corp. and Crystal Chemical Co. DEMAND FOR JURY TRIAL, filed. ! Pltf£.‘s INTERROGATORIES to Deft. Helena Chemical Co. (3rd Set),file Pltt.'s REQUEST FOR PRODUCTION OF DOCUMENTS (3rd Request) to Deft. Belena Chemical GOce filed. 4 Pltf.'s REPLY to COUNTERCLAIMS of Helena Chemical Co., filed. STIPULATION, Pltf. and Defts. stipulate that the time for answer Pe x objecting or otherwise pleading to each of the following is extended to and including 10-15-74, filed: Pltt.'s Request to Defts. for production of documents (lst Req.) piltt.'s Interrogatories to Defts. (lst Req.) Interrogatories of Crystal Chemical to Pitt. (lat Set) Crystal Chemical Co.'s Request to Pltf. for Production of Documents (lst Req.) : Pltt.'s Request for Production of Documents (2nd Req.) Plt=.'’s Interrogatories to Defts. Dawson Chemical Co., Crystal MSg. Corp. and Crystal Chemical Co. (2nd Set) . Pitt.’s Interrogatories to Dert. Helena Chemical Co. (3rd Set) Pitt.*s Request for Production of Documents (3rd Req.) : Dociments (2nd Request) aT une ANSWEFS by Deft. Helena Chemical Co. to Pltf.'s INTERROGATORIES (FIRST SET), filed. ANSVWEPS by Deft. Helena Chemical Co. to Pltf.'s INTERROGATORIES (THIRD SET), filed. ANSWERS by Defts. Dawson Chemical Co., Crystal Manufacturing Corp., ane Crystal Chemical Co. to Pltf.‘'s INTERROGATORIES to Defts. (FIRST SET), filed. eper ANSWERS to Pitf.‘s INTERROGATORIES to Defts. Dawson Chemical Co., _ Cxystal Manufacturing Corp. and Crystal Chemical Co. (SECOND SET). filed. 4F 10-15-74 | Pltft.'s NCTICE of Taking Depositions to Defts. Dawson Chemical Co., Crystal Chemical Co. and Crystal Manufacturing Corp. tnru Joe C. Eller, President and various other unnamed officers on 11-13-74, filed. a 10-15-74 | Pitf.'s NCTICE of Taking Depositions to Deft. Helene Chemical Co. | thru Jerry A. Williams, J. C. Blue and various other unnamed officers on 11-21-74, filed. b3 €5)1o-18-7er1t2. 's RESPONSE to Deft. Crystal Chemical Co.'s Request for Production of Documents (First Request), filed. AS 20-13-74 | Pltf.'s RESPONSE to Deft. Crystal Chemical Co.'s Interrogutories | (Pirse Set), filed. ae 10=29-74 } pee Xe Deft. Helena Chemical Co.'s RESPONSY to Pitf.'s Requests for Documents (First Sst) and (Second Set?, filed. 12-16-74 12-30-74 Summary Judgment, filed. REPLY MEMORANDUM by Defts. Dawscn Chemical Co., Crystal 42g - Coro. and Crystal Chemical Co. in Suncort of Their Motion for Summary . Judgment and in OPPOSITION to Pltt.'’s Motion for Summary Jucgment, filed. Deft. Helena Chemical Co. MEMCRANDUM IN SUPPORT of defts. cotions for Summary Judgment and IN CPPOSITION of pltf. motion for summary judgment, filed. yt = as --- : ae Ss Sa eee ee we Sas sia ie nioeehcasctai atin . .° CA 74-H-790 ; = ee NORMAN W. BLACK CARL 0. SUE, JR. — or * PROCEEDINGS Po nig Ba 10-31-74 STIPULATION by all parties, filed. 10 31-74 |Pite. AMENDED NOTICE FOR TAKING OF DEPOSITIONS of deft. Helena -" Chemical Co., filed. ° 10-31-74 | PROCEDURAL STIPULATION by all parties, filed. a) 2 11-11-74 Defts. Dawson Chemical Co., Inc., Crystal Manufacturing ee ican M/D: tt=2s=74 12-16-74 (Stipulation filed 11-19-74) - 40 11-11-74 Defts. Dawson Chemical Co., Inc., Crystal Manufacturing eee and Crystal Chemical Co., Inc. MEMORANDUM in Support of Motion for in rotective Order, filed. -: - 11-11-74 nadine. Dawson Chemical Co., Crystal Manufacturing Corp.'s and : Crystal Chemical Co.‘s MOTION FOR SUMMARY na ae ge oo 11-19) ae Tt=75=74 Oral hearing requested. 12-16-74 (Stip.file srs | 42 11-11-74 '\Defts. Dawson Chemical Co., Crystal Mfg. Corp.'s and Crystal | ze Co.'s MEMORANDUM in Support of Motion for Summary Judgment, ° 1-15-74 |(COB) PROTECTIVE ORDER, filed. Directions and guidelines given — recarding the handling of confidential material to be ma desisnated by counsel. Parties ntfd. by copy. pt | j : to and including i rc for Extension of Time, Pltf. has : teat wre *o resvond to Defts. Dawson Chemical Co.'s, Crystal Mfg. Corp.'s and Crystal Chemical Co.'s Motion for Summary Judgment and Motion for Protective Order; Defts. have to and oe 12-16-74 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 § 271(c) was recognized in the early ease 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. [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- eluded 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 broad tort of infringement by inducement is not re- stricted in any way to unpatented component articles which lack any substantial non-infringing use. Liability for con- 83 ributory 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- infringing 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 [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 against infringement or contributory infringement.” 84 The plaintiff takes the position that the language of this provision expressly sanctions its licensing policy. The Court notes three aspects of this provision which are immediately apparent before turning to legislative history or judicial construction. First, presuming actionable in- fringement, § 271(d) focuses solely on the conduct of the patent owner, and not the alleged infringer. Second, § 271(d) does not define conduct which equates to patent misuse; this paragraph simply sets out certain conduct which does not constitute patent misuse. Finally, § 271(d) does not limit or condition the conduct it describes on the staple or nonstaple nature of component articles of a com- bination patent. The only reference in § 271 to the staple or nonstaple nature of component articles can be found in paragraph (c), which focuses solely on conduct of an infringer that gives rise to an action for contributory infringement. [424] The Revisory Notes to § 271 state that paragraph (d) is ancillary to paragraphs (b) and (c). Provided that the patent owner successfully establishes that the defendant is guilty of either actively inducing or contributing to in- fringement, “[he] is not deemed to have misused his patent solely by reason of doing anything authorized by the sec- tion.” Id. No combination of one or more of the three patent owner acts set out in § 271(d) can form the sole basis for a finding of patent misuse. 3. Legislative History The intent of Congress with regard to the effect that § 271 should have on the result in the Mercoid decisions has been the subject of numerous commentaries.’ During 85 the Senate debate, just before the bill Was passed, Senator Saltonstall asked on the floor, “Does the bill change the law in any way or only codify the present patent laws?” Sena- tor MeCarran, Chairman of the Judiciary Committee which had been in charge of the bill for the Senate, responded, “It codifies the present patent laws.” 98 Cong. Rec. 9323 (July 4, 1952). To the extent that this exchange represents a knowledgeable consideration of the substance of § 271, it would support the conclusion that the only purpose of this section was to prevent the total emasculation of the law of contributory infringement threatened by the dictwn in Mercoid. This otherwise innocuous exchange bears repeti- tion in this ruling not because of the insight that it repre- sents or reveals, but rather, because this colloquy between Senators has been quoted by the Supreme Court on at least two separate occasions.® A statement made by Mr. Giles S. Rich, the chief drafts- man of the provisions on contributory infringement in § 271, was somewhat more reflective on the scope of patent [425] misuse contemplated or intended by Congress: ‘Shir. Oca. ‘Other decisions following Mercoid have made it quite clear that at least some courts are going to say that any effort whatever to enforce a patent against a con- tributory infringer is in itself misuse .... Therefore, we have always felt—we who study this subject particularly — that to put any measure of contributory infringement into the law, you must, to that extent and to that extent only, specifically make exceptions to the misuse doctrine, and that is the purpose of paragraph (d).’’ (Emphasis added) 86 Hearings before the Subcommittee of House Judiciary Committee on H.R. 3760, 82d Cong. 1st Sess. 161-162 (1951), cited in Aro Mfg. Co. v. Convertible Top Co., 365 US. 336, 349, note 4 (1961) (Black, J., concurring) (Aro J).'° ‘‘To that extent and to that extent only,’’ this Court would concur that any dictum in Mercoid which can be construed to condemn as misuse ‘‘any effort whatever to enforce a patent against a contributory infringer’’ has been pre- empted by § 271(d). Section 271 assures the viability of contributory infringement actions, but it does not compel the overruling of the result in Mercoid. 4. Conduct of Rohm and Haas Perceived Through the Lens of Section 271(d) As noted earlier, in enacting § 271(d), Congress, rather than attempting to define the parameters of the defense of misuse, sought instead to delineate three exceptions to this doctrine. It is not disputed that the first exception set out in § 271(d)(1) sanctions plaintiff’s right to sell propanil, an act which this Court assumes for purposes of this ruling, would constitute contributory infringement if performed by another without plaintiff’s consent. This act in and of itself therefore cannot constitute patent misuse, by statutory definition. Nor is it disputed that plaintiff, [426] under § 271(d)(2), has the right to authorize a third party by virtue of an implied license to resell the propanil for use in plaintiff’s patented method. Finally, it is clear that §271(d)(3) eliminates the fear created by Mercoid, that the mere filing of a law suit alleg- ing indirect infringement in and of itself constitutes misuse. See Note, 66 HARV. L. REV. 909, 917 (1953). Cf. W. ZL. 87 Gore & Assoc., Inc. v. Carlisle Corp., 529 F.2d 614 (3d Cir. 1976). It is plain from the language of §271(d) that no ‘fone or more’’ of the three foregoing acts will give rise to the defense of patent misuse. Defendants argue, how- ever, that plaintiff has gone beyond the sum of the acts rendered permissible by § 271(d). They further maintain that while § 271(d)permits plaintiff to sell the unpatented propanil, the act does not permit plaintiff to monopolize such sales. Defendants also maintain that they are and have at all times been willing to pay royalties to plaintiff for licenses to sell propanil for use in plaintiff’s patented method. It is plaintiff’s refusal to license which defendants maintain is the act not sanctioned by any of the exceptions to the misuse doctrine set out in § 271(d). Defendants submit that § 271(d) does not require this Court to legitimize a scheme by which a patent owner licenses others on the explicit con- dition that the licensee purchase an unpatented component from the patent owner. This refusal to grant licenses to the defendants, coupled with plaintiff’s acts which are specific- ally sanctioned by § 271(d), results in the scheme which the defendants argue would impermissibly extend the Wil- son patent. Plaintiff’s response to this contention is that it enjoys an unrestricted right to refuse licenses to defendants which would permit defendants contributorily to infringe the Wil- son patent.’! In support of this contention plaintiff [427] maintains that a patent owner “is neither bound to use his discovery himself nor permit others to use it,” citing Contmental Paper Bag Co. v. Eastern Paper Bag Co., 210 U.S. 405, 425 (1908), and Cataphote Corp. v. DeSoto Chemi- 88 cal Coatings, Inc., 450 F.2d 769, 744 (9th Cir. 1972), cert. denied, 408 U.S. 929 (1972). Neither of these cases involved the attempted extension of a patent right to monopolize the sales of unpatented components. The context of this rule in Continental Paper Bag involved a patentee’s right to hoard his discovery. In Cataphote the Court simply upheld a patent owner’s right to restrict the marketing of his patent to one exclusive licensee. The plaintiff sub judice is neither hoarding his patent nor limiting its monopolistic effects to the actual claims of its patented method. More- over, “(t]he fact that the patentee has the power to refuse a license does not enable him to enlarge the monopoly of the patent by the expedient of attaching conditions to its use.” Blonder-Tongue v. University Foundation, 402 U.S. 313, 344 (1970). Still focusing on the conduct of plaintiff as it bears on the defense of patent misuse, defendants advert to a brief portion of the history of litigation pertaining to propanil in federal courts. In 1970 plaintiff, as defendant in Monsanto Co. v. Rohm & Haas Co., 312 F. Supp. 778 (H.D. Pa. 1970), aff'd, 456 F.2d 592 (3d Cir. 1972), suecessfully argued that a patent which had been issued for the chemical compound propanil should be declared invalid. Plaintiff succeeded in pursuading the court in Monsanto that propanil: “was for all purposes in the public domain and cannot be patented as a compound....[T]he inventor of the novel property of the compound is not without recourse since he may patent the use of 3,4-DCPA [propanil] as a selective post-emergence herbicide.” Id. at 790. Therefore, prior to the issuance of the Wilson [428] patent, propanil was declared “for all purposes in the public 89 domain”. With regard to matters belonging to the public, the Supreme Court has held that: “a patent is not, accurately speaking, a monopoly.... The term “monopoly” connotes the giving of an ex- clusive privilege for buying, selling, working or using a thing which the public freely enjoyed prior to the grant. Thus a monopoly takes something from the people. An inventor deprives the public of nothing which it enjoyed before his discovery, but gives some- thing of value to the community by adding to the sum of human knowledge.” United States v. Dubilier Condenser Corp., 289 U.S. 178, 186 (1933). Plaintiff seeks in this lawsuit to monopolize the sale of propanil by taking it from the public domain. This Court is aware of no decision wherein the patent laws have been construed to permit such a taking. Construed broadly, § 271(d) could be read to embrace the plaintiff’s efforts to corner the market on all sales of un- patented and unpatentable propanil. However, the language of this provision is hardly a “clear and certain signal from Congress” that prior cases should be overruled. Deep- south Packing Co. v. Laitram Corp., 406 U.S. 518, 530 (1971). The language of §271(d) simply does not encom- pass the totality of plaintiffs’ conduct in this ease. Neither the Supreme Court nor the United States Court of Appeals for the Fifth Circuit has construed § 271(d) to overrule the result in the Mercoid decisions. Section II1.C.1.-3., fra. Although neither of these Courts has confronted this question in the precise context of a Mercoid- type misuse, both have continued to cite Mercoid as good authority.’* Certainly the enactment of § 271 quelled the broad dictum in Mercoid. However, if it likewise overruled the result in Mercoid, it is incongruous that Mercoid is nevertheless still cited as good law. 90 [429] C. Mercoid-Type Misuse Subsequent to the Patent Act of 1952 1. The Supreme Court’s Decision in Aro II Plaintiff contends that the Supreme Court’s holding in Aro Mfg. Co. v. Convertible Top Replacement Co., 377 U.S. 476, 492 (1964) (hereafter Aro IT), demonstrates that §271(d) was clearly intended to and did reverse the Mercoid rulings: “.. Congress enacted § 271 for the express purpose of reinstating the doctrine of contributory infringement as it had been developed by decisions prior to Mercord, and of overruling any blanket invalidation of the doc- trine that could be found in the Mercotd opinions.” 377 U.S. at 476. This contention is without merit for several reasons. First, as noted previously by the Court, Section III.A., supra, the B. B. Chemical Co, v. Ellis opinion ren- dered three years before Mercoid held that an action for contributory infringement was defeated by the application of patent misuse on facts very similar to the cause here pending. Therefore, “contributory infringement as it had been developed by decisions prior to Mercoid” did not authorize or sanction patent extensions which effected a monopoly over unpatented components. Also, “prior to Mercoid” the doctrine of contributory infringement did not suffer from the sweeping language used by Justice Douglas which cast a doubt on the surviving “residuum” of this tort in any context. Moreover, in construing § 271 to overrule “any blanket invalidation of [contributory in- fringement],” the Supreme Court chose language which carefully avoided overruling the Mercoid result in toto. Finally, the language which is relied upon by plaintiff in 91 Aro II was not intended by the Supreme Court to signal the complete demise of Mercoid because the Court resur- rects Mercoid some five pages later in the opinion, 377 U.S. at 497, by stating in reference to a patent owner seeking to monopolize the sale [430] of an unpatented, nonstable fabric component: “In particular, the patent owner cannot impose con- ditions concerning the unpatented supplies, ancillary materials, or components with which the [patented] use is to be effected.” Aro II, supra, 377 U.S. at 497.18 2. Supreme Court Rulings Subsequent to Aro II Decisions rendered by the Supreme Court since Aro II which address the question of the permissible scope of a combination patent demonstrate that Mercoid continues to retain vitality. Deep South Packing Co. v. Laitram Corp., 406 U.S. 518 (1971); Blonder-Tongue v. University Foun- dation, 402 U.S. 313 (1970); Zenith Radio Corp. v. Hazel- tine Research, Inc., 395 U.S. 100 (1969). In Deep South Packing Co. v. Laitram Corp., supra, the Supreme Court reversed a decision by the United States Court of Appeals for the Fifth Circuit which had held that a defendant who exported unpatented parts of an easy-to- assemble, patented combination, was guilty of direct in- fringement for “making, using, or selling any patented invention within the United States”. 35 U.S.C. § 271(a). The Supreme Court reversed. Citing Mercoid II, the Supreme Court premised its reversal on the “unassailable” 92 rule that “a patent on a combination is a patent on the assembled or functioning whole, not on the separate parts”. 320 U.S. at 684.14 The Supreme Court proceeded to set out a rigorous test for advocates who would urge that the Patent Act modified or overruled prior cases. “!'Wle should not expand patent rights by overruling or modifying our prior cases construing the patent statute, unless the argument for expansion of privilege is based on more than mere inference from ambiguous statutory language. We would require a clear and cer- tain signal from Congress before approving the posi- tion of a litigant who, ... argues that the beachhead of privilege is wider, and the area of public use [431] “narrower, than Courts had previously thought. No such signal legitimizes respondents’ position in this litigation.” 406 U.S. at 530. In Blonder Tongue v. University Foundation, 402 U.S. 313 (1970), the Supreme Court, while “recognizing the patent system’s desirable stimulus to invention,” cited Mercoid as one of a “series of decisions in which the [Supreme] Court has condemned attempts to broaden the physical or temporal scope of the patent monopoly”.*® Id. at 343. Zenith Radio Corp. v. Hazeliine Research, Inc., supra, and United States v. Loew’s, Inc., 371 U.S. 38, 46 (1962). do not deal with § 271(d) or its effect on the Mercord rule,'® but it is nevertheless evident that the language in these opinions reveals a great reluctance on the part of the Supreme Court to aid a patentee seeking to extend the 93 scope of his property rights beyond the claims of his patent.?” 3. Lower Court Decisions a. The Fifth Circuit The United States Court of Appeals for the Fifth Circuit has not construed § 271 in the context of a Mercoid-type misuse, although it has indicated in dictum that the result in Mercoid still maintains some vitality..* In Fromberg, Inc. v. Thornhill, 315 F.2d 407 (5th Cir. 1967), the Court of Appeals cited Mercoid for the general rule that any effort to extend a combination patent to monopolize an. unpatented component would be patent misuse, 315 F.2d at 412, but acknowledged that the enactinent of ‘‘§ 271 was intended to work some changes in these concepts’’. 315 F.2d at 412, n.13. The Court expressly reserved judgment on the reach or purpose of such changes. Id. at 414, n.18, The law in this Cireuit [432] as to whether patent owners can monopolize the sale of nonstaplc components of their patent is therefore unsetttled. b. Other Lower Court Decisions Plaintiff cites two post-1952 decisions which it maintains are the only authorities squarely on point with the case at bar. Harte & Co., Inc. v. L. E. Carpender Co., 138 U.S.P.O. 538 (S.D.N.Y. 1963); Sola Electric Co. v. General Electric Co., 146 F. Supp. 625 (N.D. Ill. 1956). In Sola the plaintiff owned a patent on a combination of unpatented components to be used in an alternating current supply system. Like the patentee in Mercoid, and the patent owner sub judice, the plaintiff and his licensees derived their income from 94 sales of unpatented, nonstaple components. Licenses were granted only to customers who purchased the unpatented components sold by the plaintiff or his licensees. The court held that the patent was invalid and therefore unenforce- able. 146 F. Supp. at 646. Although it was wholly unnecessary to do so in light of the court’s ruling on the invalidity of the patent, the court went on to consider the defendant’s allegation of patent misuse, concluding that 4271 had indeed overruled the result in the Mercoid decisions. This Court does not agree with this conclusion. However, it is more important to note that the licensing policy in Sola, unlike the policy sub judice, did not effect a monopoly in unpatented components — licensed use of the Sola patent was not conditioned exclu- sively on purchases of the unpatented component from the patent owner. The patent owner in Sola exploited its patent in two ways. First, it collected royalties from licensees who in turn manufactured and marketed the unpatented component. Second, it derived profits from the sale of unpatented components, 433 which were presumably Be compete with the plain- tiff’s competitor-licensees. Section 271(d)(1) clearly per- mits an owner of a combination patent to compete with other manufacturers in the sale of unpatented components. Plaintiff Rohm and Haas, on the other hand, is urging its right to eliminate competition wholly by monopolizing the sale of unpatented and now unpatentable propanil. The patent in Harte involved an ornamental design for resinous plastic material used in raincoats, shower curtains and upholstery. The defendant patent owner required its licensees to purchase from the defendant all embossing rollers used in the patent design. These rollers were used 95 exclusively in the defendant’s design and thus were non- staple items. In its findings the court held that the ‘‘rollers were sold by [the patent owner] at cost, and without intent to restrain competition in or monopolize the production of the rollers.’’ 138 U.S.P.O. at 583. The court concluded that sales of the rollers did not constitute patent misuse since such sales were based on the defendant’s skills and experi- ence in the design field, and hence not conditioned on the defendant’s ownership of the patented design. Unlike the Harte plaintiff, the plaintiff at bar does not contend that it sells its propanil at cost in order to secure licenses for its patented method; nor does it make any pre- tense as to its intent to eliminate competition by monopo- lizing the sale of propanil. There is also no contention here that plaintiffs propanil is in any way superior to the prop- anil sold by the defendants. Notwithstanding plaintiff's reliance on this opinion, the Court is unable to agree that the rationale of Harte applies in the present context. Post-1952 authority cited by defendants supports the broad proposition that a patent on a combination [434] does not secure a monopoly on any of the unpatented com- ponents of that combination, and whether those components are staple or nonstaple is a factor which the courts have simply ignored in applying this principle. See M. Nelson, Mercoid-Type Misuse is Alive, 56 J. PAT. OFF. COC’Y 134 (1974), and cases cited therein. See also McCullough Tool Co. v. Welis Surveys, Inc., 343 F.2d 381 (10th Cir. 1965). Plaintiff distinguishes defendants’ cases on various grounds, including the fact that some do not deal with non- staple components. /.g., Calhoun v. United States, 339 F.2d 665 (Ct. Cl. 1964), Sonobond Corp. v. Uthe Technolo- 96 gy, 314 F. Supp. 878 (N.D. Cal. 1970). For example, it is urged that the unpatented component at issue in Sonobond possessed many uses outside of the patent in dispute. Plain- tiff concludes that § 271(d) was therefore inapplicable in Sonobond because the condition precedent to its applica- bility—the existence of a nonstaple article whose sale would constitute contributory infringement—simply could not be satisfied. As noted in Section III.B.1., supra, the Revisory Notes to § 271 belie this interrelation between the four par- agraphs of § 271. Only the tort of contributory infringe- ment, as defined in paragraph (c) is limited to the sale of nonstaple articles. Neither direct infringement under para- graph (a), nor induced infringement under paragraph (b) limits the applicability of these respective torts to non- staple components. Paragraph (d) is ancillary to all three of the paragraphs which precede it. Therefore, regardless of whether the infringing article is staple or nonstaple, patent misuse may be an appropriate defense. Plaintiff also argues that cases in which royalty rates are determined to be discriminatory because they are based on whether the licensee purchased unpatented components from the patent owner are not apposite to the present facts.’® [435] However, in the context of patent misuse it is clear that discriminatory royalty rate cases are applicable at least to the limited extent that the discriminatory rate unduly stifles or effectively destroys competition in the sale of unpatented components. In the present context, if plaintiff had offered at a prohibitive cost to license defendants, the stifling effect might well be functionally indistinguishable from a refusal to license at any price. 97 It is not necessary to consider all of the authority cited by defendants. The Supreme Court in B. B. Chemical Co., supra, and Mercoid I and II, supra, characterized efforts to effect a monopoly over unpatented components as patent misuse, whether the component was nonstaple or otherwise. Neither the legislative history nor the language of § 271 indicates that this rule has been modified. In determining whether such a modification has transpired, it is sufficient to conclude that the Court is aware of no authority that construes § 271 to sanction, on grounds that the monopoly sought extended to a nonstaple component, patent owner conduct which would otherwise constitute patent misuse. IV. DEFENDANTS’ COUNTERCLAIM FOR ANTITRUST VIOLATIONS Defendants have filed counterclaims in this action alleg- ing violations of the antitrust laws, 15 U.S.C. §$1, 2 and 14. Defendants also seek declaratory relief under 28 U.S.C. § 2201, pronouncing the Wilson patent invalid and unen- forceable. Nothing in this ruling should be construed to be determinative of any of the matters raised by defendants in their counterclaims. While conduct of a patent owner which constitutes a violation of the antitrust laws would usnally, if not always, constitute patent misuse as a matter of law, the congruence of patent misuse and violations of antitrust laws [436] has long been an unsettled question. It was unclear until recently whether a finding of patent misuse required proof of an antitrust violation. See Hensley Equipment Co. v. ESCO Corp., 383 F.2d 252, note 19 (5th Cir. 1967). In Zenith Radio Corp. v. Hazeltine Research, Inc.. 395 U.S. 98 100, 140 (1969), the Supreme Court removed all lingering doubts in holding that a finding of patent misuse did not necessarily constitute an antitrust violation under the Sher- man or the Clayton Acts. See also T. Maffei, The Patent Misuse Doctrine: Balance of Patent Rights and the Public Interest, 52 J. PAT. OFF. SOC’Y 178 (1970). The ruling sub judice is limited to the question of patent misuse. V. CONCLUSION A. Plaintiff’s Motion for Partial Summary Judgment to Strike Defendants’ Allegations of Patent Misuse The Court in this ruling has determined first that the result in the Mercoid decisions dictates a finding of patent misuse in this action as a matter of law, based upon stipu- lated facts. Additionally, the Court has concluded that plaintiff’s attempt to monopolize the sale of propanil in this case by refusing to license under any circumstances constitutes an extension and exploitation of its patent ex- ceeding the patent exploitation condemned by the Supreme Court in the Mercoid decisions. Neither the legislative history, nor the subsequent judicial construction of § 271 supports the plaintiff’s contention that the test for patent misuse is in any manner dependent upon the staple or non- staple nature of the infringing article. Patent misuse is an equitable defense which, if established, bars a patent owner seeking equitable relief for direct infringement under § 271(a), active inducement of infringement under § 271(b), or contributory infringement under § 271(c). [437] Section 271(d) patent misuse is expressly ancillary to these three codified torts of patent infringement. Revisory Notes, 35 U.S.C. § 271 (1952). 99 Section 271(d) does not create a cause of action against a mala fide patent owner. Patent misuse arises only as a defense to an action for infringement. It becomes germane only after the court determines or assumes that there has been an infringement under paragraphs (a), (b) or (c) of § 271. Congress could easily enough have provided that any owner of a combination patent is permitted to monopolize the sales of unpatented, nonstaple components which lack any substantial noninfringing use. It did not do so. Plain- tiff, by seeking to incorporate the staple-nonstaple issue into the construction of § 271(d), confuses analysis of the patent owner’s conduct with that of the infringer. This finding of patent misuse in no way resolves the question of validity of the Wilson patent; moreover, once the patentee has purged itself of the effects of its patent misuse, it may seek once more to enforce its patented method by reasserting its allegation of contributory in- fringement. Hensley Co. v. ESCO Corp., 383 F.2d 252, 261 (5th Cir. 1967). For reasons set out in this ruling, however, the Court holds that plaintiff’s present policies constitute patent misuse.?° B. Defendants’ Motion for Partial Summary Judgment Urging Dismissal of Plaintiff’s Complaint Defendants’ motions for summary judgment to strike the plaintiff’s allegations of indirect infringement on the grounds that such allegations are barred by the misuse of plaintiff’s patent confronts this Court with a problem not wholly resolved by the denial of plaintiff’s motion for par- tial summary judgment. The Supreme Court in Morton Salt Co. v. G. S. Suppiger, 314 U.S. 100 [438] 488 (1942), indicated that when misuse of the patent is established as a matter of law prior to trial, the patent owner’s complaint should be dismissed without prejudice to purge the misuse and thereafter seek relief. In this ruling the Court has concluded that the plaintiff cannot market propanil, refuse to license others to compete in such sales, and then file a suit with the object of securing a monopoly over the sale of propanil. This Court, by enjoining defen- dants from selling propanil, would effectuate this monopoly. On the other hand, plaintiff has alleged both contribu- tory infringement and active inducement of infringement. Appropriate relief for active inducement of infringement could conceivably be fashioned to avert this wrongdoing and at the same time avoid an impermissible extension of plaintiff’s patent to an unpatented combination. If defen- dants’ labels and advertising are ultimately proven to con- stitute active inducement of infringement of the Wilson patent, defendants, in urging dismissal of this suit, in effect seek ‘‘a continuing immunity from suit, . . . blithely con- tinu[{ing] to practice the arts of piracy, . . . while pointing ... finger[s] at plaintiff as unclean, [and are] not Daniel[s] come to judgment, but Satan[s] quoting the Scripture to [their] purpose.”’ Gray Tool Co. v. Humble Oil & Refining Co., 186 F.2d 365, 368 (5th Cir. 1951), cert. demed, 941 U.S. 934 (1951). This piracy, if proven, can and should be prohibited by the Court. Issues remaining to be resolved in this case include the validity of the Wilson patent and whether it has in fact been infringed by the defendants, as well as the various anti-trust allegations raised in the defendants’ counter- 101 claims. This ruling is only a pre-trial, interlocutory adjudi- cation of the question of patent misuse in the context of plaintiff’s present licensing policies. It is based entirely on facts stipulated by the parties. Like infringement, patent misuse | [439] involves ongoing conduct. If appropriate, this ruling is subject to revision by this Court since it has no res judicata effect. 6. J. Moore, Federal Practice {{ 56.20 [3-4] (2d ed. 1976) ; see also Bon Air Hotel, Inc. v. Time, Inc., 426 F.2d 862 (5th Cir. 1970); Rule 54 (b) Fed. R. Civ. P. In a case of this complexity, both with respect to the resolution of the pending motions, as well as the ultimate decree entered in this cause, this Court will be guided by the wisdom of Chief Judge Hutcheson, who was confronted by similar facts in Gray Tool Co. v. Humble Oil & Refining Co., supra.* Defendants’ motions for partial summary judgment are granted at this time insofar as they seek an injunction of the legality of plaintiff’s monopolization of the sale of propanil, but are denied to the extent that they seek dismissal of plaintiff’s complaint. C. Pending Motions for Protective Orders Under Rule 26(c), Fed. R. Civ. P. Defendants have filed motions for protective orders under Rule 26(c), Fed. R. Civ. P., seeking to stay discovery pending resolution of the three outstanding motions for summary judgment. With the exception of a motion for protective order filed by defendant Helena Chemical Cor- poration, which seeks to quash notices of depositions given to a Mr. Jerry A. Williams and a Mr. J. C. Blue, the sole basis submitted for the requested orders was the pendency 102 of arguably dispositive motions for summary judgment. This ground no longer applies; therefore, all motions for protective orders related thereto are denied. 1. Proper Situs for Deposing a Corporate Official Mr. Williams, who is presently chairman of the board of defendant Helena, resides in Billings, Montana. Although this lawsuit was filed in the Southern District of Texas, the defendant Helena does not have a principal place of business [440] here in this District. Helena submits that only the proper locations in which to take the deposition of Mr. Williams are either at Helena’s principal place of business in Mem- phis, Tennessee, or at the residence of Mr. Williams in Billings, Montana. Although defendant Helena is doing business in the Southern District of Texas, the Court agrees that the plaintiff should be required to choose between Mr. Williams’ residence and defendant’s principal place of busi- ness for taking a deposition. Application of Johnson and Johnson, 59 F.R.D. 174, 178 (D. Del. 1973); Joseph F. Less v. Taber Inst. Corp., 53 F.R.D. 645, 646 (W.D.N.Y. 1970). 2. Parties Deposable as Corporate Officials Mr. Blue was a past president of defendant Helena. He is no longer president or otherwise employed by Helena. The Court agrees with the defendant that Mr. Blue, who is a resident of Houston, would be subject to a deposition as an individual, but only hy subpoena. “A corporation may not be examined [by a deposition] through one who was formerly an officer thereof but is no longer in its employ.” 103 Kolb v. Bull Steamship Co., 13 F.R.D., 252 254 (E.D.N.Y. 1962). See also J. MOORE, FEDERAL PRACTICE, ] 30.51, n.10 (2d ed. 1975). Plaintiff's motion for partial summary judgment is de- nied. Defendant’s motions for partial summary judgment are granted in part and denied in part. Defendants’ motions for protective orders are denied with the exception of de- fendant Helena’s motion to quash notices of deposition given to Jerry A. Williams and J. C. Blue, which is granted. 104 DONE at Houston, Texas, this 10th day of August, 1976. Carl O. Bue, Jr. United States District Judge [441] FOOTNOTES 1 See also B. B. Chemical Co. v. Ellis, 314 U.S. 495, 498 (1942). Licenses to use the plaintiff’s patented method of reinforcing shoe insoles were granted to plaintiff’s customers who purchased a pre-coated fabric used in the method. The Supreme Court rejected the argument that this licensing method was the only practicable way to exploit the patent, holding that the plaintiff S attempt to establish a monopoly in an unpatented article con- stituted misuse of its patent. The Chief Justice indicated that if the plaintiff was willing to grant unconditional licenses to manufacturers on a royalty basis, reconsideration of its right to relief would be appropriate. “Section 271. Infringement of patent. “(a) Except as otherwise provided in this title [§ 1 et sey. of this title], whoever without authority makes, uses or sells any 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. “(¢@) 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 made or especially adapted for use in an infringement of such patent, and not a staple article or commodity of com- merce suitable for substantial noninfringing use, shall be liable as a contributory infringer. “(d) No 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 without his consent would constitute contributory infringement of the patent; (2) licensed or authorized another i] 105 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 or contribu- tory infringement.” 3 £.g., J. Seafetta, Ten Years After Aro II: The Effect of Patent Act § 271 on the Patent Misuse Doctrine, 26 S. CAR. L. REV. 039, 548 (1975) ; C. Miller, Some Views on the Law of Patent Infringement by Inducement, 53 J. PAT. OFF. SOC’Y. 86, 95 (1971) ; Note, Combination Patents: the Right to Prohibit Sales of Replacement Parts, 70 Yale LJ. 649, 655 (1961; Note, Con- tributory Infringement and Misuse — the Effect of Section 271 of the Patent Act of 1952, 66 HARV. L. REV. 909, 914 (1953). 4 Of the authorities cited in note 3, supra, the authors of Comment, 53 J. PAT. OFF. SOC’Y 86, 95-96 (1971) ; Note, 70 YALE L. J. 649, 655 (1961); and Note, 66 HARV. L. REV. 909, 914 (1959), conclude that the enactment of § 271 [442] sought to eliminate the uncertainty created by Mr. Justice Douglas’ dictum in Mercoid. See also A. Areeda, Antitrust Analysis J 534(a), n.89 (2d ed. 1974). 5 For example, in instances where a large number of consumers directly infringing a combination patent are supplied with components or otherwise aided by a small number of “accom- plices”, the most effective method to halt the infringement is to permit the patent owner to sue the “accomplices”. Cf. D. Moseley, The Knowledge Requirement of Contributory Infringe- ment and the Aro Case, 47 J. PAT. OFF SOC’Y 98, 103 (1965). ° The first case to actually use the term “contributory infringe- ment” was Snyder v. Burnell, 29 F. Cas. 47 (C.C. S.D.N.Y. 1886). 7 Plaintiff in arguing that § 271(d) expressly sanctions its licens- ing policies, maintains that “[i]n the event that at some future time a substantial commercial use for propanil should arise in this country which does not infringe the patent at bar, Rohm and Haas then would modify its licensing policy since the Section 271(d) exception would no longer apply”. In its com- plaint plaintiff charges defendants with actively inducing in- fringement, under § 271(d), as well as contributory infringe- ment, under § 271(c). Throughout its memorandum filed in opposition to defendants’ motion for partial summary judgment, plaintiff urges that its own conduct vis-a-vis patent misuse under § 271(d) should be sanctioned or condemned depending solely upon whether propanil is determined to be a staple or non- staple article. Nowhere in the language of § 271(d) has Congress a 106 limited or otherwise defined patent misuse by reference to — staple or nonstaple nature of an unpatented component. For reasons set out in Fromberg, Inc. v. Thornhill, 315 F.2d 407, 414-415 note 20 (5th Cir. 1967), and Section III.B.2., infra, this Court has concluded that the nature of a component article of a patented combination is germane only to the pccapioere of a contributory infringer under § 271(c) ; it should not confuse analysis of the patentee’s conduct under § 271(d) for purposes of determining patent misuse vel non. 8 E. g., J. Seafetta, Ten Years After Aro II: The Effect of Patent ye § 271 on the Patent Misuse Doctrine, 26 S. CAR. L. a. 539 (1975), reprinted in 58 J. PAT. OFF. SOC’Y 69 (1976) (hereinafter Scafetta) ; C. Miller, Some Views on the Law of Patent Infringement by Inducement, 53 J. PAT. OFF. SOC’Y 86, 94-97 (1971); Note, 70 YALE L. J. 649, 656-660 (1961) ; Comment, Note, 66 HARV. L. REV. 909 (1953). 9 Deep South Packing Co. v. Laitram Corp., 406 U.S. 518, 530 (A811) a Mfg. Co, Inc. v .Convertible Top Replacement Co., Inc., 365 U.S. 336, 347, n.2 (1961) (Black, J., concurring). Mr. Crumpacker, a congressman who participated in the hear- ings as a member of the patent subcommittee of the House, is purported to have stated that: [443] “ . this colloquy is almost entirely meaningless, it being merely an exchange of pleasantries by some senators having little, if any familiarity with the subject matter they were discussing.2! [21 .... Any senator or representative who got as far as reading the title of the bill would see it was a bill to revise and codify the laws. ]” . Seafetta, note 8, supra at 558. While the Court agrees that title weight should be tae te to this colloquy between senators on the floor, great weight must be accorded to the presumption that, in citing this exchange on at least two occasions, the Supreme Court has concluded that the result in Mercoid has not been overruled. The Court has closely studied the Scafetta article, note 8, supra, for two reasons. First, it is the most recent as well as the most comprehensive commentary published on the doctrine of patent misuse. Second, it has been graced by the Robert C. Watson Award for 1975 from the American Patent Law Association for the best publication prepared by an author, while a student, on a “subject of primary importance to the patent system’. See 58 J. PAT. OFF. SOC’Y, 69 (1976). The collision in this case of 107 the policies underpinning the patent laws and the antitrust laws is graphically illuminated by Scafetta’s assault on the views of the Justice Department and the American Bar Association Section on Antitrust Law, which coincide with this Court’s finding of patent misuse. Seafetta, supra at 589. See ABA ANTI- TRUST SECTION 339-41 (1975). Based primarily on his interpretation of the Supreme Court’s opinion in Aro Mfg. Co. v. Convertible Top Replacement Co., 377 U.S. 476 (1964), Mr. Seafetta concluded in his article that the enactment of § 271 effectively overruled the result as well as the broad dictum in the Mercoid decisions. For reasons set out in Section III.C., infra, this Court disagrees. Moreover, the exploitation pursued in the present case transcends the conduct which confronted the Supreme Court in Mercoid. Section ILLA., supra. 10 Mr. Rich also stated before the committee that it was his opinion that § 271 covered “the Mercoid type of situation”, Hearings, supra at 174, which tends to support the conclusion that the results in Mercoid would be changed by § 271(d). This Court has determined that § 271(d) sanctions the conduct of a patent owner only if the three provisions of this paragraph compre- hensively define that conduct. Any conduct of patent exploita- tion which falls outside of §271(d) requires the Court to determine whether the judicial doctrine of patent misuse is appropriate. Mr. Rich’s construction of § 271(d) to senators prior to its enactment supports this analysis. For reasons set out in the following paragraphs, the Court has concluded that the plaintiff in this case has exploited its method patent in a manner exceeding the acts specifically set out in § 271(d). More- over, a settled public policy against extending patents to [444] unpatented articles should not be overridden by the general terms of a statute which do not establish with certainty a legisla- tive intent to depart from that policy. See United States v. Sweet, 245 U.S. 563, 572 (1918). See also Deep South Packing Co. v. Laitram Corp., 406 U.S. 518, 531 (1971) 11 Of course, if defendants were licensed by plaintiff to label con- tainers of propanil with instructions setting out plaintiff’s patent, as are plaintiff's propanil customers, defendants would not be contributory infringers. 12 E.g., Deepsouth Packing v. Laitram, 406 U.S. 518, 528 (1972) ; Blonder-Tongue v. University Foundation, 402 U.S. 313, 343- 44 (1970) ; Fromberg, Inc. v. Thornhill, 315 F.2d 407, 412 (5th 108 Cir. 1963) (“[The effort to] extend [the patent monopoly | to unpatented materials which are used in, or consumed by, the patented machine, process or device. . . constitutes patent misuse”). Cf. M. Nelson, Mercoid-Type Misuse 1s Alive, 56 d. PAT. OFF. SOC’Y 134 passim (1974). 13 The context of this statement in the Aro II opinion is somewhat confusing; in the midst of a discussion of the elements of con- tributory infringement, the Court digresses briefly to touch on an element of patent misuse. It is clear from this passage, how- ever, that the Supreme Court in Aro IT did not interpret § 271 to overrule the result in the Mercoid decisions. 14“ [Wle find the Fifth Circuit’s definition unacceptable be- cause it collides head on with a line of decisions so firmly embedded in our patent law as to be unassailable absent a congressional recasting of the statute. “We cannot endorse the view that the ‘substantial manufacture of the constituent parts of [a] machine’ constitutes direct in- fringement when we have so often held that a combination patent protects only against the operable assembly of the whole and not the manufacture of its parts. ‘For as we pointed out in Mercoid v. Mid-Continent Investment Co., [320 U.S. 661, 676] a patent on a combination is a patent on the assembled or fune- tioning whole, not on the separate parts.’ Mercoid Corp. v. Minneapolis-Honeywell Regulator Co., 320 U.S. 680, 684 (1944). See also Leeds & Catlin Co. v. Victor Talking Machine Co., 213 U.S. 301: ‘A combination is a union of elements, which may be partly old and partly new, or wholly old or wholly new. But whether new or old, the combination is a means — an inven- tion — distinct from them.’ Id. at 318. [445] “«'Q]ne element is not the combination. Indeed, all of the elements are not. To be that—to be identical with the invention of the combination — they must be united by the same operative law.’ Id. at 320. - And see Brown v. Guild, 23 Wall. 181 (1874). In sum, ‘{i]jf 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 Mfg. Co. v. Convertible Top Replace- ment Co., 365 U.S. at 344.” 406 U.S. at 528. — = - eT eee ae 109 15 The Supreme Court in Blonder-Tongue quoted the following passage from Mercoid I, supra, 320 U.S. at 666: ““The necessities or convenience of the patentee do not justify any use of the monopoly of the patent to create another monopoly. The fact that the patentee has the power to refuse a license does not enable him to enlarge the monopoly of the patent by the expedient of attaching con- ditions to its use.’ ” 402 U.S. at 343-344. 16 It should be noted, however, that plaintiff’s heavy reliance on Aro II suffers from the same infirmity. 17 “These cases reflect a hostility to use of the statutorily granted patent monopoly to extend the patentee’s economic control to unpatented products. The patentee is protected as to his inven- tion, but may not use his patent rights to exact tribute for other articles.” United States v. Loew’s, Inc., 371 U.S. 38, 46 (1962). “Among other restrictions on him, he [the patentee] may not condition the right to use his patent on the licensed’s agree- ment to purchase, use, or sell, or not to purchase, use or sell, another article of commerce not within the scope of his patent monopoly.” Zenith Radio Corp. v. Hazeltine Research, Inc., 395 U.S. 100, 1386 (1969). 18“... [OJ]ne must begin with the rule that a patent protects only the [patented] machine in its totality and not its individual unassembled elements .... The purpose behind the Brown, Aro, Mercoid rule is to prevent the patentee from exercising exclusive control over the constituent elements of his patented machine. The public has a right to these elements. . . .” Laitram Corp. v. Deep South Packing Co., Inc., 443 F.2d 936 (5th Cir. 1971), rev'd on other grounds, 406 U.S. 318 (1971). [446] 19 Ansul Co. v. Uniroyal, Inc., 306 F. Supp. 541 (S.D.N.Y. 1969), aff'd 448 F.2d 872 (2d Cir. 1971), cert. denied, 404 U.S. 1018 (1972); National Foam System v. Urquhart, 202 F.2d 659 (3d Cir. 1953). 20 As the Court noted in Section III.A.3., supra, plaintiff with its licensing policy attempts to exploit the Wilson patent in a manner not wholly analogous to the efforts of the patent owner in Mercoid. Also, it 1s not entirely clear to what extent the Supreme Court in arriving at its conclusions in Mercoid scrutinized the reasonableness of the patent owner’s licensing efforts. The Court has determined that the enactment of § 271 110 111 does not now permit a patent owner to monopolize the sale of unpatented articles, whether they are nonstaple components or [453] otherwise. The effect of this order compels the patent owner marketing unpatented, nonstaple components of his combination In Tue atent to first offer licenses to others marketing that component 9m it seeks equitable relief for contributory infringement. UNITED STATES DISTRICT COURT Although the act of bringing the suit is expressly sanctioned by § 271(d) (3), and therefore cannot serve as the basis for a finding For Tue Souruern District or Texas of patent misuse, it does not follow that every patent owner Houston Division who brings a suit for infringement is thereby immunized against this defense. Rather, the patent owner’s acts antecedent to the filing of the suit constitute the basis for a finding of patent misuse vel non. Crviz Action No. 74-H-790 It would be premature for this Court to now consider reason- able royalty rates or the number of offers necessary in order to Roum anp Haas Compa nt: dissipate the misuse arising from attempts to monopolize the COMPANY, & corporation, ae sale of propanil. It is sufficient in this interlocutory order to Plaintf, conclude simply that § 271 does not legitimize the monopoly. V. 21““‘Such a decree should, of course, be so framed as that it will . . . . Da C » } >A? ah not permit an unreformed and unrepentant plaintiff to obtain wson CHEMICAL Company, Crysra the fruits of bringing a defendant to book for his wrong doing, Manvuracturine Corporation, CrystaL CHEMICAL unless and until proper amends are made by plaintiff for his own Company, AND Hetena CuemicaL Company, wrong doing. Equally, of course, [the Court shoud not counten- corporations, ance] a defendant’s wrong doing in deliberately stealing the Defendant fruits of plaintiff’s invention by permitting him, by the simple ee device of the pot calling the kettle black, to continue to escape accountability. In short, the decree should, if at all possible, be so drawn as to protect the public from the continuing wrong DEFENDANTS DAWSON CHEMICAL COMPANY ’S, doing of the plaintiff in misusing its patents and the plaintiff CRYSTAL MANUFACTURING CORPORATION’S and the public from the continuing wrong doing of defendant AND CRYSTAL CHEMICAL COMPANY’S in deliberately pirating plaintiff’s invention.” 186 F.2d at 369. MOTION FOR RECONSIDERATION OF THE * . * * COURT’S DECISION NOT TO DISMISS PLAINTIFF’S COMPLAINT Defendants Dawson Chemical Company, Crystal Manu- facturing Corporation, and Crystal Chemical Company, hereinafter referred to as Defendants, respectfully request the Court to reconsider its decision not to dismiss Count 1 of Plaintiff’s complaint. In support thereof, Defendants would show the following: a 1. On November 11, 1974, Defendants moved for sum- mary judgment dismissing Plaintiff’s complaint on the ground that the undisputed facts in this case establish 4 112 patent misuse as a matter of law. In its decision filed August 10, 1976, the Court found, as a matter of law, that Plaintiff has misused and is misusing its patent. Because of allegations relating to Defendants’ conduct, however, the Court declined to dismiss Plaintiff’s complaint as requested. 2. As the attached memorandum will demonstrate, by virtue of its finding that the Plaintiff has misused its patent on which this suit is based, the Court should dismiss [454] the suit, without regard to the conduct of the Defendants. Should the Court conclude, however, that, based on De- fendants’ conduct, it has discretion to retain this suit even though it has found the Plaintiff to have misused the patent in suit, movant nonetheless would show that Defendants’ conduct, viewed most favorably to the Plaintiff, is not of a nature that would warrant such retention, but instead con- stitutes nothing more than a sale of an unpatented chemi- cal with instructions for proper use of the chemical printed on the chemical’s package as required by the Federal Envi- ronmental Pesticide Control Act of 1972. Respectfully submitted, By /s/ Jonn L. McOonn, Jr. John L. McConn, Jr. Attorney in Charge for Defendants Dawson Chemical Company, Crystal Manufactur- ing Corporation and Crystal Chemical Company 1100 Esperson Building Houston, Texas 77002 (713) 237-3188 113 Of Counsel: Burter, Binion, Rice, Coox & KNapp Ned L. Conley Elliott Cox 1100 Esperson Building Houston, Texas 77002 (713) 237-3195 [455] CERTIFICATE OF SERVICE (OMITTED) 114 [456] In THE UNITED STATES DISTRICT COURT For Tue SourHern District or Texas Hovston Drvision Crvi Action No. 74-H-790 Roum anp Haas Company, a corporation, = Plaintiff, Vv. Dawson CHEMICAL CoMPANY, CRYSTAL Manuracturine Corporation, CrystaL CHEMICAL Company, AND Hetena CHEmicaL CoMPany, corporations wi Defendants. MEMORANDUM IN SUPPORT OF DEFENDANTS’ MOTION FOR RECONSIDERATION OF THE COURT’S DECISION NOT TO DISMISS PLAINTIFF’S COMPLAINT Introduction In the decision filed August 10, 1976, the Court held that the plaintiff, as a matter of law, has misused and is mis- using the patent in suit (Memorandum and Opinion at 2 and 29). Yet the Court did not dismiss the plaintiff's com- plaint as requested by Defendants in their motion for partial summary judgment. The apparent basis for the Court’s decision not to dismiss is the allegation of Plaintiff Rohm and Haas that Defend- ants have both induced infringement of and contributorily 115 infringed plaintiff’s patent. The Court indicates that such conduct, if it exists, would constitute “piracy” of plain- tiffs invention. Defendants first submit that a court should dismiss a patent infringement suit if it finds the plaintiff is misusing the patent, regardless of the defendant’s con- duct. Defendants further submit that conduct in selling an unpatented and unpatentable chemical compound which has been [457] labelled as required by the Federal Environmental Pesti- cide Control Act of 1972 cannot be regarded as wrongful. I. The Court Should Dismiss Plaintiff’s Patent Infringement Action Upon Finding that the Plaintiff has Misused the Patent in Suit The Court in the present case notes that Morton Salt Co. v. G. S. Suppiger Co., 314 U.S. 488, 493, 86 L.Ed 363 (1941), “indicated that when misuse is established as a matter of law prior to trial, the patent owner’s complaint should be dismissed without prejudice to purge the misuse and thereafter seek relief’’. (Memorandum and Opinion at 31). The Court then distinguishes the present case from Morton Salt by stating “plaintiff has alleged both contribu- tory infringement and active inducement of infringement”. Id. The facts of the present case, however, are not similarly distinguishable from B. B. Chemical Co. v. Ellis, 314 U.S. 495, 86 L.Ed. 367 (1941). In B. B. Chemical the patent owner argued that the defendant’s “acts of infringement... were not limited to the sale of material for use by the patented method ..., but amounted to active inducement of infringe- ment....’’? 314 U.S. at 497-98; 8 L.Ed. at 370. In direct response to this argument, the Supreme Court stated: 116 “(I]n view of petitioner’s use of the patent as the means of establishing a limited monopoly in its un- patented materials, and for the reasons given in the Morton Salt Co. Case, we hold that the maintenance of this suit to restrain any form of infringement is contrary to public policy, and that the district court rightly dismissed it.” Jd. (emphasis added). The Court in the present case has stated that the action in B. B. Chemical “was defeated by the application of [458] patent misuse on facts very similar to the cause here pend- ing”. (Memorandum and Opinion at 11). It was on such “similar facts” that the Supreme Court held the patent owner’s suit to restrain “any form of infringement” to be “eontrary to public policy”. Under such firm direction of the Supreme Court, the court in the present case is obli- gated to dismiss plaintiff’s complaint. See Rex Chainbelt Inc. v. Harco Products, Inc., 512 F.2d 998 (9 Cir. 1975), cert. denied, 46 L.Ed. 2d 49 (1975), aff'g Rea Chainbelt Inc. v. DFC Co., 1974 Trade Cases P75,152 (C.D. Cal. 1974). In the present case, the court has relied to a great extent upon the opinion of the Fifth Circuit in Gray Tool Co. v. Humble Oil & Refining Co., 186 F.2d 365 (5 Cir 1951), cert. denied, 341 U.S. 934. Gray, however, should not be inter- preted as holding that where a defendant is guilty of wrong- doing in relation to the patent, the court may retain the infringement suit of a patent owner that has misused its patent. Such an interpretation is not justified for several reasons. First, such a holding would go against the clear dictates of the Supreme Court in B. B. Chemical. Second, the actual holding in Gray was that a judge may not draw fact inferences on a motion for summary judgment and 117 that, because the lower court’s finding of misuse required making fact inferences, such finding was improper. There- fore, the statements in Gray referring to procedures to fol- low if misuse is properly found to exist are clearly dictum. Third, the Gray court relied heavily upon Paul E. Hawkin- son Co. v. Dennis, 166 F.2d 61 (5 Cir 1948), an opinion au- thored by the judge who wrote the Gray opinion, where the court stated: [459] “If, therefore, the district judge was right in the con- clusion that it was established as matter not of fact but of law, that is by undisputed evidence and the ines- capable inferences to be;drawn therefrom, that plain- tiff had been and still was misusing its patent, the judg- ment ought to be affirmed, without prejudice, of course, to plaintiff’s right to again sue when it can show that it has purged itself of wrongful uses and practices.” 166 F.2d at 63. The “judgment” to which the court was referring was dis- missal of plaintiff’s complaint. 166 F.2d at 62. Fourth, the Gray court notes that Morton Salt and another case dis- posed of on summary judgment applied the principle that: “no patentee can license or refuse to license upon a con- dition that the licensee will, in the use of the unpat- ented materials, use only such materials as it pur- chased from the patentee...” 186 F.2d at 368. The Gray court does not dispute the propriety of a sum- mary judgment dismissal based on such facts, but merely distinguishes the Gray facts by noting, “it has never been... justly decided that the mere effort, as here, to pre- vent a direct infringement was in itself a misuse”. 186 F.2d at 369. Thus, Gray does not hold that such a summary judg- ment dismissal is improper. Fifth, the facts in Gray indi- 118 cate that the defendant’s conduct was of a completely dif- ferent nature than that of Defendants in the present case: the ‘‘defendant has itself obtained a monopoly in the field covered by plaintiff’s patent’. 186 F.2d at 367. The Supreme Court in B. B. Chemical has directed that a patent that has been misused will not be enforced unless the misuse has been purged. The Fifth Circuit in Gray does not direct otherwise. Therefore, Plaintiff Rohm & Haas’ complaint must be dismissed regardless of Defendants’ conduct. [460] Il. Defendant’s Conduct Cannot Be Regarded as Wrongful In its opinion, the Court notes that Plaintiff Rohm & Haas has charged the Defendants with both contributory infringement due to Defendants’ sales of propanil, and active inducement of infringement due to Defendants’ instructing purchasers through labels to use the propanil in an infringing manner. The court has characterized the totality of such conduct, if it exists, as a ‘‘wrongdoing”’ which may be averted by ‘‘[a]ppropriate relief’’, despite Plaintiff Rohm & Haas’ misuse of the patent. (Memorandum and Opinion at 31). Defendants submit that there is nothing wrongful in their instructing purchasers of propanil, by means of labels attached to the propanil containers, how to use the propanil. It would be illegal for Defendants to sell the propanil without such instructions on the labels. The Federal Environmental Pesticide Control Act of 1972 makes it unlawful to: ++ ss 119 ‘‘distribute, sell, offer for sale, hold for sale, ship, deliver for shipment ... to any person... any pesti- cide which is adulterated or misbranded.’’ 7 U.S.C. § 136 (a) (1)(E) A ‘‘pesticide’’ includes ‘‘any substance or mixture of sub- stances intended for use as a plant regulator ...’’ 7 U.S.C. § 136(u). ‘*Plant regulator’’ means: ‘fany substance or mixture of substances intended, through physiological action, for accelerating or re- tarding the rate of growth or rate of maturation, or for otherwise altering the behavior of plants or the produce thereof, but shall not include substances to the extent that they are intended as plant nutrients, trace elements, nutritional chemicals, plant inoculants, and soil amendments.’’ 7 U.S.C. § 136 (v). [461] A pesticide is misbranded if: ‘‘the labelling accompanying it does not contain diree- tions for use which are necessary for effecting the purpose for which the product is intended and if com- plied with .. . are adequate to protect health and the environment.’’ 7 U.S.C. § 136 (q). Under this language it is clear that sale of propanil is unlawful unless the propanil is accompanied with a label containing directions for intended use. The only commercial use for propanil that is known to the Defendants is in the practice of plaintiff’s patented method. Therefore, ‘‘direc- tions for use which are necessary for effecting the purpose for which the product is intended’? will necessarily instruct the user to infringe plaintiff’s patent. If Defendants were to sell propanil and not so instruct the purchaser, they would be liable for civil penalties of as much as $5,000 for each offense and criminal penalties of as much as $25,000 and one year imprisonment. 7 U.S.C. § 136 1. 120 In view of such a statute and Plaintiff Rohm & Haas’ refusal to license others to use its patented method unless they purchase propanil from Rohm & Haas, Defendants’ only alternative to their present course of action is to abstain entirely from the sale of propanil, thereby estab- lishing Plaintiff’s monopoly which the Court refused ‘to effectuate. Defendants should not be penalized for follow- ing their present practice when they have no acceptable option available. By the same token, Plaintiff Rohm & Haas Co. should not be allowed to maintain its complaint merely by virtue of Defendants’ conduct when, by virtue of such plaintiff’s own conduct, such defendant has been foreclosed from a more acceptable course of conduct. [462] TI. If Plaintiff Is Unable to Enforce Its Patent, No Remedy Is Available to It The deeision of B. B. Chemical, cited in Part I of this memorandum, shows that Plaintiff Rohm & Haas is not entitled to enforce its patent. Because the plaintiff does not have the protection of the patent laws, no decree may be fashioned prohibiting Defendants’ conduct. Sears, Roe- buck & Co. v. Stiffel Co., 376 U. S. 225, 229-32, 11 L.Ed. 2d 661, 665-57 (1964); Compico Corp. v. Day-Brite Lighting, Inc., 376 U.S. 234, 237-38, 11 L.Ed. 2d 669,672 (1964). There- fore, plaintiff’s complaint must be dismissed. WHEREFORH, Defendants respectively requests that the Court to reconsider its decision not to dismiss plaintiff's complaint. By /s/ Joun L. McConn, Jr. John L. McConn, Jr. 121 Attorney in Charge for Defend- ants Dawson Chemical Company, Crystal Manufacturing Corporation and Crystal Chemical Company 1100 Eisperson Building Houston, Texas 77002 (713) 237-3188 Of Counsel: Burizr, Binton, Rice, Coox & Knapp Ned L. Conley Elliott Cox 1100 Esperson Building Houston, Texas 77002 (713) 237-3195 [463] CERTIFICATE OF SERVICE (OMITTED) j ‘ ¥ | te — a Seen —— 122 [506] In THE UNITED STATES DISTRICT COURT For Tue SoutHerRN DIstTRICT OF TEXAS Hovston Dtvision Crvm Action No. 74-H-790 Haas Co., RouM AND pom Vv. Dawson CuemicaL Company, Inc., CRYSTAL MANUFACTURING pay anion CRYSTAL revo OMPANY, ANY, INc., AND HELENA CHEMICAL olan Defendants. James C. Winters, Crain, Winters, Deaton, James & Briggs, Houston, Texas, for plaintiff. Se John L. McConn, Jr., Butler, Binion, i ook & Knapp, Houston, Texas, ay Boe tac cl Chemical Co., Inc., Crystal Manufacturing Corp. and Crystal Chemical Co., Inc. B. R. Pravel, Pravel and Wilson, Houston Texas, for defendant Helena Chemical Co. MEMORANDUM AND ORDER I. INTRODUCTION This is a suit for patent infringement of a patent owned by plaintiff Rohm and Haas Company. The suit was filed on the day the patent was issued, June i, 1974, and the parties thereafter entered into a stipulation of the facts in 123 the hope of presenting to the Court for summary judg- ment a clear-cut question of law. On November 11, 1974, defendants moved for partial summary judgment on the ground that the stipulated facts established patent misuse as a matter of law. The Court in its Memorandum and Opinion of August 10, 1976, found as a matter of law that plaintiff had in the past misused and continued to misuse its patent and therefore [507] granted summary judgment as to the defense of misuse. Despite the finding of misuse, the Court at that time de- clined to dismiss the action. II. PENDING MOTIONS Defendants now urge the Court by way of motions to reconsider its decision not to dismiss plaintiff’s complaint. In the alternative, defendants seek an order for immediate appeal under 28 U.S.C. § 1292(b). Defendants Dawson Chemical Company, Crystal Manufacturing Company and Crystal Chemical Company have joined in one such mo- tion. Defendant Helena Chemical Company has submitted a separate motion. In view of the substantial likeness of these motions, they will be treated together by the Court for purposes of this opinion. Helena Chemical Company has also filed a motion for stay of depositions until this Court has resolved the pending motions for reconsidera- tion. Plaintiff opposes the motions for reconsideration of the refusal to dismiss, but joins defendant Helena Chemi- cal Company by way of cross-motion in requesting an order permitting an immediate appeal under 28 U.S.C. § 1292(b). Based upon the reasons and analysis that follow, defend- ants’ motion to reconsider is granted, and the ease is dis- missed. All other motions are denied as moot. a III. THE APPLICABLE CASE LAW A. Defendant’s Contentions Defendants urge that in view of the Court’s previous finding of misuse in its opinion of August 10, 1976, the Court is now required to dismiss plaintiffs action for in- fringement. 1. Morton Salt Co. v. G. S. Suppiger Co. [508] Defendants contend that dismissal is required under the holdings in Morton Salt Co. v. G. S. Suppiger Co., 314 U.S. 488, 86 L.Ed. 363 (1942) (hereinafter Morton Salt), and B. B. Chemical Co. v. Ellis, 314 U.S. 495, 86 L.Ed. 367 (1942) (hereinafter B. B. Chemical), which are the leading cases in this area of the law. In Morton Salt, supra, the G. S. Suppiger Company held a patent on a mechine for depositing salt tablets, a device used in the canning industry to add predetermined amounts of salt in tablet form to the contents of cans. The G. S. Suppiger Company leased these patented machines to com- mercial canners under licenses that specified that only the subsidiary’s salt tablets could be used with the leased machines. The Supreme Court agreed with the trial court that the company in so doing was making use of the patent to restrain competition in the marketing of unpatented articles and was creating a limited monopoly in salt tablets that was not within the monopoly granted by the patent. Morton Salt, supra, 314 U.S. at 491, 86 L.Ed. at 365. The trial court, after its finding of misuse, dismissed the cause without resolving the remaining issues of validity and in- fringement. The Supreme Court held the maintenance of a suit under such circumstances was contrary to public 125 policy and that the district court had rightly dismissed for want of equity. 314 U.S. at 494, 86 L.Ed. at 367. The Court’s reasoning in approving such dismissal was ex- pressed thus: “Where the patent is used as a means of restraining competition with the patentee’s sale o! an unpatented product, the successful prosecution of an infringe- ment suit... is a powerful aid to the maintenance of the attempted monopoly of the unpatented article, and is thus a contributing factor in thwarting the public policy underlying the grant of the patent... Equity may rightly withhold its assistance from such a use of the patent by declining to entertain a suit for infringement, and should do so at least until it is [509] “made to appear that the improper practice has been abandoned and that the consequences of the misuse of the patent have been dissipated.” Morton Salt, 314 U.S. at 493, 86 L.Ed. at 366. Morton Salt thus makes it clear that where misuse of a patent is found to exist, equitable and public policy considerations dictate the withholding of relief while such misuse continues extant. 2. B.B.Chemical Co. v. Ellis The companion case to Morton Salt, supra, is B. B. Chemical Co. v. Ellis, 314 U.S. 495, 86 L.Ed. 367 (1942), decided the same day. Petitioner in that case was the owner of a method patent for reinforcing insoles in shoe manu- facture. Petitioner sought an injunction prohibiting in- fringement, alleging that the acts of infringement amounted to active inducement of infringement by the shoe manu- facturers and to cooperation with their infringing acts. Respondents set up as a defense petitioner’s misuse of the patent by permitting its use only with the unpatented ma- 4 ee i 4 ee aa ee a ie = (as 126 terials sold by petitioner. The Supreme Court affirmed the district court’s dismissal, saying: “(I]n view of petitioner’s use of the patent as the means of establishing a limited monopoly in its un- patented materials, and for the reasons given in our opinion in the Morton Salt Co. case, we hold that the maintenance of this suit to restrain any form of infringement is contrary to public policy, and that the district court rightly dismissed it.” (emphasis added) Id. at 497-98. The result in B. B. Chemical thus indicates that the type of infringement alleged, whether contributory infringement or active inducement of infringement, is of no consequence where misuse exists, So long as there is an existing patent misuse, the courts will withhold relief on claims of infringement, regardless of the type of infringe- ment alleged. Thus, under B. B. Chemical, plaintiff's alle- gation [510] of active inducement of infringement by defendants will have no effect in the context of deciding whether dismissal is appropriate in the instant case. 3. Gray Tool Co. v. Humble Oil & Refining Co. Defendants contend that the case of Gray Tool Co. v. Humble Oil & Refining Co., 186 F.2d 365 (5th Cir. 1951) is distinguishable from the instant case and from the decision of the Supreme Court in Morton Salt Co., supra, and B. B. Chemical Co., swpra. (Memorandum in Support of De- fendant’s Motion for Reconsideration of the Court’s De- cision Not to Dismiss Plaintiff’s Complaint, p. 3). The Court is in agreement. A careful reading of the Gray case discloses a different situation from that existing in the in- > i. Sees 127 stant case. In Gray, the district court in an action for patent infringement made a finding of patent misuse and dis- missed the action on summary judgment. On appeal the Fifth Circuit found that the record did not support the dis- trict court’s conclusion that the defense of misuse had been established as a matter of law. The Court of Appeals said (p. 367): “Nothing in the pleadings, in the evidence given, or in the admissions made by plaintiff, established as matter of law that it was misusing its patents in an attempt to obtain a monopoly in violation of the applicable rule.” In essence, the Court of Appeals in Gray overturned the district court’s finding of misuse.’ Because the misuse find- ing was rejected in Gray, the Gray court’s refusal to dis- miss in no way conflicts with the decisions of the Supreme Court in Morton Salt, supra, and B. B. Chemical, supra, both of which decisions were made in light of findings of misuse. Thus, the holding in Gray in no way diminishes or modifies the effect of the holdings in Morton Salt and B. B. Chemical on the present case. [511] B. Plaintiff’s Contentions Plaintiff urges that it be allowed to litigate the remain- ing issues of validity and infringement in this case, despite the findings of misuse. In so urging plaintiff cites to the Court several cases which plaintiff contends entitle it to maintain its action for validity and infringement. The au- thorities so cited are reviewed below. 1. W.L. Gore & Associates v. Carlisle Corp. In the case of W. L. Gore & Associates, Inc. v. Carlisle Corp., 381 F. Supp. 680 (D. Del. 1974), the plaintiff was the owner of a patent relating to the manufacture of a flat mul- 128 ticonductor ribbon cable used to transmit electrical signals. The court there found that plaintiff’s attempted reciprocal dealing in relation to the patent constituted patent misuse. Id. at 706. However, the court then found that plaintiff’s unlawful conduct had ended no later than January 8, 1973, when all pending license offers were withdrawn. Thus, the misuse had ceased over a year and a half before the court rendered its decision on September 9, 1974. The court found one of the patents at issue to be valid and infringed, and concluded that the plaintiff was entitled to an injunction prohibiting further infringement, despite the initial finding of misuse. The Court articulated its reasoning as follows: ‘ . . 1 4 Commentary supporting Rohm & Haas’ interpretation of § 27: apr rey Note, Combination Patents: The Right to Prohibit the Sales of Replacement Parts, 70 Yale LJ. 649 (1961), J. kite LAE CP whe inh a3 oe AIS 145 the conflict is with the statute’s legislative history. Before beginning, however, a review of the doctrines of contribu- tory infringement and patent misuse will be helpful in understanding the terms of the debate waged in congres- sional hearings on the proposed statute. The doctrine of contributory infringement was a judi- cial 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 ele- ment claimed in a patent. Prowty 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 immunized both the buyer and the seller, since suits against the many direct infringers were difficult and often uneco- nomical. Applying general tort principles, the courts pro- vided 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 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.Soc’y 69 (1976). Commentary tending to support defendants’ view of the statute includes, e.g., Note, Section 271(b) of the Patent Aci 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). 146 encourage infringement, The requisite intent was presumed, however, when the items sold had no use except in the in- fringing combination.® As will be observed from the above discussion, the con- tributory infringement doctrine focuses on the conduct 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 infringe- ment. The prevailing patentee traditionally could secure an injunction against the contributory 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 effectively gained control over the market for mere elements of his patent —elements that might be, but more probably were not, patented in them- selves. In effect, therefore, a patentee could force anyone who wished to practice his patented process or use his pat- ented machine to purchase the necessary unpatented com- ponents 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 the element had also been patented, courts answered that 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.Soc’y 86 (1971); Note, Regulation of Business — Patents — Effect of Section 271 on the Doctrine of Contributory Infringement, 55 Mich.L.Rev. 909 (1953). 147 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 J udge Putnam in Davis Electrical Works v. Edison Electric Light Co. 60 F. 276, 280 (1st Cir. 1894). And focusing on the analyti- cally similar problem of a patentee’s right explicitly to con- dition 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 conse- quence of the meritorious character of the patentee’s in- vention. A patentee would be able to impose restrictive conditions for use of concomitant elements only to the ex- tent of the buyer’s valuation of the patented invention itself. Heaton-Peninsular Button-Fastener Co. v. Eureka Speciality Co. 77 F. 288 (6th Cir. 1896), exhibits the classic analysis. Observing that patentees had always been ac- corded the right to retain exclusive use of their inventions, even to the point of suppressing 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: [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 manufacturer 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 others 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 re- 148 stricted 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 299. Initially the Supreme Court showed hesitation when asked to recognize a patentee’s derivative power regarding unpatented elements. In Morgan Envelope Co. v. Albany Perforated Wrapping Co., 152 U.S. 425, 14 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 contributory 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 U.S. at 433, 14 S.Ct. at 630-631. Of seemingly equal importance, however, was its second observation that, when the item sold was not itself patentable, the contrary outcome would be “giving to the patentee of the machine the benefit of a patent upon the product, by requiring such product to be bought of him.” Id. 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 re- quiring replacement or might also extend to nonstaple or ime 149 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.’ 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 combined to reproduce the sound recorded on the discs, 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 a permissible “repair” of the patented device 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 ele- ment of a patentable mechanism for sawing such log, it would, upon the construction claimed by the plaintiff, require 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 impossibility 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. 150 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 and is protected by law as a unit. The Court reiterated, however, that whoever con- tributes to the use of the combination absent permission also infringes the patent and, in words striking close to the position enunciated in Morgan Envelope, continued: It may be well here to get rid of a misleading considera- tion. It can make no difference as to the infringement or noninfringement of a combination that one of tis elements or all of its elements are unpatented. For instance, in the case at bar the issue between the par- ties would be exactly the same, even if the record dise were a patented article which petitioner had a license to use or to which respondent had no rights independent of his right to its use in the combination. In other words, the fact that the dise sold by petitioner 1s un- patented 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 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 ma- chine, of course, but it is the concession of the argu- ment of petitioner that he may not reconstruct it. Has he a license to repair deterioration and when does repair become reconstruction? 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 bai LER ww AC De isin WN itn Lagat wes cate IOP VTE ee ae eS eee > 4 151 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 dise and stylus were each active elements in producing the result, distinguishing the invention and advancing upon the prior art. Jd. 213 U.S. at 333-36, 29 S.Ct. 503. The Court also rejected the defendant’s attempt to char- acterize its discs as a staple item of manufacture, noting that the trial court had found that the allegedly noninfring- ing 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. Jd. at 337, 29 S.Ct. 503. Following Leeds & Catlin, the Court allowed patentees even greater latitude in reaping economic 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. 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 enunciated in Dick effectively enabled a patentee to “tie” ordinary staples of commerce, none of which was even an element of the pat- ented device, to a purchaser’s right to use the device. This result was achieved by enforcing through the patent law in- stead of general contract law a notice attached to each pat- ented machine at sale that required 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. 152 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 using with the machines, and I will sell at the actual cost of the ma- chines to me, provided you will agree to use only such articles as are made by me in connection 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 market which he alone created by the making and selling of a new in- vention. 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. 924 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 ele- ment in a patented combination, the majority then answered 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 within the claims of his patent things which are not embraced therein, thus virtually legislat- 153 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 sub- jects 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 began a retreat from the principles just reviewed. Their vehicle was the new doctrine of patent misuse. In Motion Picture Patents Co. v. Universal Film Manu- facturing Co., 243 U.S. 502, 37 S.Ct. 416, 61 L.Ed. 871 (1917), Mr. Justice Clarke, for the new majority, held that a paten- tee may not, as a function of general patent law,® require by notice a purchaser to limit use of a patented movie ma- chine 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 proposi- tion that the scope of a patent is limited to the invention described in its claims, coupled with the rule that the sta- ®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 tactics as well. 243 U.S. at 509, 513, 37 S.Ct. at 419. 154 tutory policy of benefitting the public outweighs the policy of benefitting inventors, the Court concluded that the mo- nopoly granted by law should not extend to, and thus can- not 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 re- ward based on the entire invention was a fair measure of an inventor’s creativity and that “he should not be per- mitted by legal devices to impose an unjust charge upon the public in return for the use of it.” Zd. at 513, 37 S.Ct. at 419. The Dick majority had thought well of the paten- tee’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 possible condemnation of [the patentee’s system].” Echo- ing the Dick dissent, Justice Clarke explained: [I]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 421. In Carbice Corp. v. American Patents Development Corp., 983 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 — Bei WR, ete OS 155 sold these cardboard packages. The Court relied on Motion Picture’s reasoning to categorize this conduct as “abuse of the patent monopoly” and a bar to relief against a contributory infringer. The system was considered the equivalent of conditioning grant of a patent license on the purchase of unpatented materials used in connection with the invention. The plaintiffs tried to distinguish Motion Picture by argu- ing 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 dis- tinguish themselves from Morgan Envelope by arguing that, unlike the passive toilet paper there involved, the carbon dioxide was the dynamic element that produced refrigera- tion. Justice Brandeis, for the majority, rejected these dis- tinctions 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 monop- oly ; and this limitation, inherent in the patent grant, is not dependent upon the peculiar function or character 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 ma- terial 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 had been used as instruments for restraining commerce.® ® Building on the previous construction of Cla i yton Act, Section 3, in Untted Shoe Machinery Corp. v. United States, 258 U.S. 156 Finally, the principle of Leeds & Catlin was distinguished since “[t]here was no suggestion that the Victor Company, which itself manufactured and sold the patented product,” sought to derive its profits from the 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 451, 42 S.Ct. 363, 66 L.Ed. 708 (1922), and on this reference in Carbice, analysis of ae hermits in oP po ne - independent violation of antitrust laws proceeded a artes es In IBM vy. 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 machines 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 information, were separately patented, the Court ruled that the tying clause was prohibited by section 3. The effect of the condition, the Court stated, “may be to substantially lessen competition.” 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. 157 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. 8. Suppiger 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 paten- tee’s suit against a direct infringer on misuse grounds. In addition to the customary language about the anti- 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- 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 distinction, is noteworthy here primarily because in it the Court rejected the potential defense of commercial 1° Broad statements of the Carbice rule, however, like that in Lettch, “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. 158 practicability. The patentee had argued that he should be allowed to sell the 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 monop- oly 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 U.S. at 498, 62 S.Ct. at 408. The culmination of the developing misuse theory occurred in companion decisions in 1944, Mercoid Corp. v. Mid- Continent Investment Co., 320 U.S. 661, 64 S.Ct. 268, 88 L.Ed. 376 (1944) (Mercoid I), and Mercoid Corp. v. Minr- eapolis-Honeywell Regulator Co., 320 U.S. 680, 64 S.Ct. 278, 88 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 unpatented 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 sublicense others. Neither company made or installed the entire patented system; Minneapolis-Honey- well merely sold the stoker switches which, when installed with a thermostat and a motor-driven stoker, formed the patented combination. The right to construct the combina- tion was granted only to those who bought Minneapolis- Honeywell switches; royalties from Minneapolis-Honey- well to Mid-Continent were based on the sales of the un- patented stoker switches. The defendant Mercoid Corpo- ration 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. a : ? t ¢ : ; & 159 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 consti- tuted an attempt to extend the grant of the patent to un- patented devices. Admitting that the earlier eases had involved the use of a patent to secure partial monopoly ‘fin supplies consumed in its operation or unpatented ma- terials employed 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 embodying 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 regarding 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 impermissably employed to protect the market for a device on which no patent had been granted. Irrespec- tive 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. Tn language thought by many to have abolished the doc- trine of contributory infringement, Justice Douglas proceeded : 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 expressed in this case. The rule of the Leeds & Catlin Co. case (No. 2) accordingly must no longer prevail against the defense that a combination patent is being used to protect an unpatented part from competition. 160 ... Where there is a collision between the principle of the Carbice Case and the conventional rules govern- ing 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 unpatented goods within the protection of the patent is measured by the antitrust laws, not by the patent law. Further, he ruled, the effort there made to control competition in the unpat- ented 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 regarding 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 back 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 ulti- mate result was section 271. 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 — 161 Before turning to the legislative history of that provi- sion, we offer a few reflections on the two doctrines it touches. In addition to briefly recounting the development 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 pat- ent im terms over the unpatented items. 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 and the often overlapping range of conduct prohibited by the antitrust 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 non-patent 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. 162 the other hand, 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. 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 d [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385006_1147%3A05. Public record. Not legal advice.