Opposition Brief — Ethicon, Inc. v. Handgards, Inc.

No. 84-830

Office - Supreme Court, US.

FILED

DEC 29 1984

ALEXANDER L STEVAS.

CLERK

In the Supreme Court mK

OF THE

United States

Ocroser Term, 1984

Ernicos, Ixc.,

Petitioner,

vB.

Hawpoarps, Ixc.,

Respondent.

BRIEF OF RESPONDENT HANDGARDS, INC.,

IN OPPOSITION TO PETITION FOR

WRIT OF CERTIORARI

Of Counsel:

James A. Ran

357 East Chicago Avenue

Chicago, Illinois 60611

E. Banzetr Pretrymas, Jz.

Hooaw & Hazrsow

815 Connecticut Avenue

Washington, D.C. 20006

Maxwet M. Bizecuer®

Biecuer, Cotiins &

WEINSTEIN

611 West Sixth Street,

Suite 2800

Los Angeles, Calif. 90017

Telephone : (213) 622-4222

Joe. R. Bennerr

Nancy Mriizer Bernerr

Kewprick, Netter &

Bewnett

612 South Flower Street,

Suite 600

Los Angeles, Calif. 90017

Telephone : (213) 626-7792

Attorneys for

Respondent

Handgards, Inc.

* Counsel of Record

Bowne of Los Angeles, Inc., Law Printers.

(213) 742-6600.

QUESTIONS PRESENTED

1. Whether the “sham exception” to the Noerr-Penning-

ton doctrine applies where a jury has found by clear and

convincing evidence (and both courts below agree) that

petitioner deliberately brought a lawsuit to enforce a pa-

tent it knew to be invalid, coupled with one or more pred-

atory or anticompetitive acts in furtherance of an attempt

to monopolize the relevant market.

2. Whether the District Court and the Court of Appeals

properly applied the substantial evidence test to the jury’s

findings where petitioner itself asserted such a test below,

and each court independently reviewed the evidence even

under the test now urged for the first time by petitioner.

3. Whether jurisdiction on appeai properly lay in the

Ninth Circuit Court of Appeals where petitioner itself urged

jurisdiction on that court and where the case arose entirely

under the Clayton and Sherman Acts.

il

STATEMENT REQUIRED BY RULE 28.1

Respondent Handgards, Inc., has no parents, subsidiaries

or affiliates.

ili

TABLE OF CONTENTS

Questions Presented

Statement Required by Rule 28.1

I

Statement of the Case

A. History of the Litigation

B. Operative Facts

IT

Reasons For Denying the Writ

A. Ethicon’s Petition is an Attack on the Jury

Verdict and is Without Merit

B. The Prosecution of a Single Lawsuit in Bad

Faith Falls Within the Sham Exception

C. The Ninth Cireuit Applied the Appropriate

Standard of Review

D. The Ninth Cireuit Found All of the Necessary

Elements of a Section 2 Attempt to Monopolize

Claim

E. Jurisdiction Properly Lay in the Ninth Circuit

Court of Appeals

IIT

The Decisions in Handgards I and II Apply This

Court’s Rulings on the “Sham Exception” to Noerr-

Pennington and There Is No Confusion or Conflict

Among the Circuits

IV

Ethicon’s Alternetive Argument That It Was Denied

An Independent Evaluation of the Evidence is

Without Merit

A. Ethicon Did Not Request, and Has Waived, a

De Novo Review Standard Applied to the Bad

Faith Finding

Page

11

11

11

18

iv

TABLE OF CONTENTS

Page

B. Ethicon Itself Proposed the Substantial Evi-

dence Test to That Court 19

C. In Any Event, The Courts Below Independently

Reviewed the Evidence 20

V

The Decision Below Creates No New Per Se Monop-

olization Doctrine and is in Harmony With This

Court’s Monopoly Decisions

VI

Ethicon Itself Urged Jurisdiction Upon the Ninth

Circuit, and in Any Event Jurisdiction Properly Lay

With That Court 24

bo

—

Conclusion °26

v

TABLE OF AUTHORITIES

Cases —

Atari, Inc. v. JSA & Co. Group, Inc., Appeal No. 84-742

(CAFC) Appeal denied Nov. 8, 1984, fe

(CAFC, 1984) __. | . Bees

American Tobacco Co. v. United States, 308 v. S. 781

(1946) 24

Amerivan Well Works Co. v. tim & orn Co., 241

U.S. 257 (1916) . aoe 26

Associated Radio Service Co. v. Page Airways, Inc.,

624 F.2d 1342 (Sth Cir. 1980) cert. denied 450 U.S.

1030 (1981) i .. 15, 16

Aydin Corp. v. Loral Corp., 718 F.2d 897 (9th Cir.

1983) 16

Bill Johnson’s Restaurants v. N.L.R.B., 103 S. Ct. 2161

(1983) | 12, 13, 14, 17

Blanton v. Mobil Oil Corp., 721 F. 2d 1207 (9th Cir. 1983)

pet. for cert. filed, 52 U.S.L.W. 3875 (U.S. May 18,

1984) (No. 83-1896) stig 23

Bose v. Consumer Union of U.S., Inc., 104 S.Ct. 1949

(1984) : Se ter ra. a

California Cheese adie v. IBM, 613 F.2d 727

4, Go Ab) | Se ected ren: 19

California Motor Transport Co. v. Trucking Unlimited,

406 1.5. 508 (10Ta) .......-... | 15

Clipper Exxpress v. “ren Mountain eee Tariff Bu-

reau, Inc., 690 F.2d 1240 (9th Cir. 1982) cert. denied,

a es See Ge i ieee . 8

Delta Air Lines, Inc. v. August, 450 U.S. 346 (1981) - 20

Energy Conservation, Inc. v. Heliodyne, Inc., 698 F. 2d

386 (9th Cir. 1983) ......... Re oe ay ee eee

vi

TABLE OF AUTHORITIES

CasEs

Feminist Women’s Health Center v. Mohammad, 586

F.2d 530 (5th Cir. 1978), cert. denied, 444 U.S. 924

(1970) | eRe 35 ee Ne

First National Bank of Omaha v. Marquette National

Bank, 482 F.Supp. 514 (D. Minn. 1979) aff’d 636 F.2d

195 (8th Cir. 1980), cert. denied, 450 U.S. 1042 (1981) 15

Forro Precision Ine. v. IBM, 673 F.2d 1045 (9th Cir.

1982) cert. denied 103 S.Ct. 1234 (1983) , 16

Grip-Pak, Ince. v. Illinois Tool Works, Inc., 694 F.2d 466

(7th Cir. 1982), cert. denied 103 S.Ct. 2480 (1983) 6, 16

OE LONE GOCE SR aC Ee

Handgards, Ine. v. Ethicon, Inc., 601 F.2d 993 21, 22

Hoover v. Ronwin, 104 S.Ct. 1989 (1984) 20

Hydro-Tech Corp. v. Sundstrand Corp., 673 F.2d 1171

(10th Cir. 1982) . . 16, 17

J. I. Case Co. v. Borak, 377 U.S. 426 (1964) 20

Koratron Co. v. Deering Milliken, Inc.. 418 F.2d 1314

(9th Cir. 1969), cert. denied, 398 U.S. 909 (1970) 26

Landmarks Holding Corp. v. W. Bermant, 664 F.2d 891

(2d Cir. 1981) | Pe ae ae Oe

Litton ‘Systems, Inc. v. American Telephone & Tele-

graph Co., 700 F.2d 785 (2d Cir. 1983), cert. denied,

SORE .CE BOE (TOBE) ... .. 0 ok oe oo es:

Lorain Journal Company v. United States, 42 U.S. 143

a a. sic db py dra, dehy Gaps aaa Oe eee ae ena 23, 24

MCI Communications Corp. v. American Telephone &

Telegraph Co., 708 F.2d 1081 (7th Cir.), cert. denied,

oe yk he CHE OG. x dale 15, 16

Messenger v. Anderson, 225 U.S. 346 (1912) .......... 20

Michel v. Louisiana, 350 U.S. 91 (1955) .............. 19

vil

TaBLE oF AUTHORITIES

CasEs

Miree v. De Kalb County Georgia, 433 U.S. 25 (1977) .. 21

Neely v. Martin K. Eby Construction Co., 386 U.S. 317

(1967) . Rae atehe goat a oe Ae oe 20

New Marshall Engine Co. v. Marshall Engine Co., 2.3

U.S. 473 (1912) _. | ? . 12, 26

Omni Resource Development Corp. v. Conoco, Inc., 739

F.2d 1412 (9th Cir. 1984) cee 15, 16, 23

Pacific Stationery & Printing Co. v. Northwest Whole-

sale Stationery, 715 F.2d 1393 (9th Cir. 1983), cert.

granted, 53 U.S.L.W. 3235 (U.S. Oct. 1, 1984) (No.

1368) 23, 24

State of California v. Taylor, 353 U.S. 553 (1957) 20

Swift & Co. v. United States, 196 U.S. 375 (1905) 24

United States v. Ortiz, 422 U.S. 891 (1975) 20

Vendo Co. v. Lektro-Vend Corp., 483 U.S. 623 (1977) 14

Walker Process Equipment, Inc. v. Food Machinery &

Chemical Corp., 382 U.S. 172 (1965) 10, 14, 17, 22

Miscellaneous

S. Rep. No. 275, 97th Cong., 1st Sess. 19, 20 (1981), re-

printed in U.S. Code Cong. & Ad. News No. 2 (Apr.

1982) re wee 25, 26

Statutes

English Statute of Monopolies of 1623, 21 Jac. I, ch. 3,

RI 68 sh Stn i Pas 14

Sherman Act, Sec. 2... 6, 11, 14, 15, 21, 22, 23

United States Code, Title 28, Sec. 1338(a) 1}, 25

United States Code, Title 35, Sec. 102(b) 4

United States Code, Title 35, Sec. 102(g) 4

Vili

Textbooks —

Areeda, P., and D. Turner, ITI, Antitrust Law, Sec. 836,

p. 355 (1978) | 18

Balmer, Sham Litigation and The Antitrust Laws, 29

Buffalo L. Rev., p. 39 (1980) 18

Bork, Robert H., The Antitrust Paradox, pp. 352-353,

354 (1978) 14, 17, 18

Fischel, Antitrust Liability For Attempts to 'nfluence

Government Action: The Basis and Limits of the

Noerr-Pennington Dectrine, 45 U.Chi. L. Rev., pp.

80, 108 (1977) 18

Prosser & Keeton, Torts (Sth Ed. 1984) p. 898

or

es ee

No. 84-830

In the Supreme Court

OF THE

United States

Ocroser TERM, 1984

Erutcon, Inc.,

Petitioner,

VS.

Hanpearns, Inc.,

Respondeni.

BRIEF OF RESPONDENT HANDGARDS, INC.,

IN OPPOSITION TO PETITION FOR

WRIT OF CERTIORARI

I

STATEMENT OF THE CASE

A. History of the Litigation

In 1962 Ethicon sued Handgards for infringement of the

Gerard patent.’ Applying a “beyond a reasonable doubt

standard” the trial judge found the patent invalid based on

1In 1964, Ethicon added a claim for infringement of the Orsini

patent, but that claim was abandoned on the second day of the

patent t iu and Handgards was given a covenant not to sue.

3

denied Ethicon’s petition for writ of certiorari. 444 U.S.

1025 (1980).

In 1982, Judge Stanley A. Weigel presided over the

second jury trial in which he, in the language of the Ninth

Cireuit, “properly adhered to our decision in Handgards I.”

App. 32a. The second jury also found that Ethicon had

prosecuted the Gerard patent infringement suit knowing

that the patent was invalid and with the purpose of monop-

olizing the hair care plastic glove market. It assessed

damages consisting of the attorneys’ fees paid to defend the

Gerard infringement suit and the profits lost because of

Ethicon’s unlawful use of the invalid patent in the market-

place. Judge Weigel, satisfied that these findings were

supported by evidence meeting the clear and convincing

standard, denied all post-tvial motions. 552 F.Supp. 820

(N.D. Cal. 1982). App. 63a.

The Ninth Cirenit, after meticulous review of the evi-

dence, unanimously affirmed the judgment. 743 F.2d 1282

(9th Cir. 1984). Two of the Ninth Circuit judges (Judges

Sneed and Fennedy) on the second appeal panel were also

on the first appeal panel, and Judge Sneed wrote both

opinions.

Accordingly, two experienced district judges and three

appeals court judges were satisfied, after a review of the

record as a whole, that Ethicon had prosecuted the Gerard

patent in bad faith on the basis of “knowingly falsified”

facts and with knowledge that the patent was invalid. App.

léa.

B. Operative Facts

This case rests on unique and compelling evidence. The

undisputed evidence shows that the patentee, Gerard, told

his patent lawyer, in a letter responding to questions relat-

4

ing to conception and reduction to practice, that his date

of invention was May 24, 1957, 8 months /ater than the date

given by Ethicon in interrogatory answers in the patent

litigation, and 10 months after the date he swore to in an

interference proceeding in the Patent Office. Gerard re-

peated the later date, with detailed explanation, in his

deposition taken in a trade secret case, terminated before

he sold his patent rights to petitioner. This crucial conflict

between Gerard's earlier writing and sworn declarations,

on the one hand, and petitioner’s false interrogatory

answers on the other, was — and is — devastating to Ethi-

con. Ethicon and its lawyers during pretrial discovery

in the patent case learned that Shabram and not Gerard

was the first inventor and that the patent was therefore

invalid under 35 U.S.C. § 102(g).

To keep its lawsuit alive, Ethicon fabricated false

answers to interrogatories claiming an invention date

earlier than Shabram. The motive for maintaining the law-

suit was, in part, demonstrated by Gerard’s letter circulated

throughout the marketplace referring to the suit and

stating that Ethicon intended to stop anyone from manu-

facturing plastic gloves. The Ninth Cireuit characterized

this letter as the “most damaging” evidence of Ethicon’s

specific intent to monopolize. App. 18a.

These same interrogatories in the patent case sought

facts regarding Gerard's first sale of a glove made by his

invention. Ethicon filed answers which are inconsistent

with the facts told under oath by Gerard in the trade secret

deposition and the invention dates claimed by Ethicon in

the same set of interrogatory answers. Truthful answers

would quickly have demonstrated the invalidity of the

patent under 35 U.S. 4 102(b).

5

Finally, “Handgards presented a former employee of

Ethicon, Mr. Babb, who testified that Gerard, an employee

of Ethicon, had told him that the Gerard patent was in-

valid **°°” App. 12a-13a.

At trial, Gerard’s attempt to reconcile the conflicting

dates exposed him as hopelessly incredible and provided

clear and convincing evidence of petitioner’s bad faith.

Ethicon’s outside patent lawyers also failed at the trial to

explain the conflicting dates in the interrogatory answers.

But, instead of recognizing the truth — that the Gerard

patent was invalid—and withdrawing the suit, Ethicon

pressed on through trial, appeal and petition for certiorari.

And it did more. Knowing that his patent was invalid,

Gerard wrote the aforementioned letter dated March 16,

1965 to a major purchaser of Handgards gloves who was

then contemplating a joint venture with Handgards which

would have assured Handgards of 50% of the home hair

care glove market. The letter, copies of which were widely

disseminated in the industry, threatened suit under the

Gerard patent, causing the termination of Handgards’ sales

to that customer and killing the proposed joint venture.

Moreover, it also prevented Handgards from raising out-

side capital necessary to remain technologically current.

Finally, Ethicon repeatedly during the patent lawsuit tried

to force Handgards into signing an anti-competitive, re-

strictive and confiscatory license agreement (App. 18a)

which would necessarily have limited Handgards to less

than 5% of the U.S. market and excluded it from foreign

markets, thereby sealing its fate permanently as an im-

potent competitor.’

*Using a single suit, even if filed with probable cause, to obtain

through negotiation an ulterior or collateral objective is abuse of

process at common law, Prosser & Keeton, Torts (5th Ed., 1964)

898, and thus a predatory act in the antitrust sense when donc ‘or

6

Ethicon’s deliberate pattern of anti-competitive conduct

caused Handgards serious “antitrust injury” in the form

of lost sales and profits over the period 1964-1973.

IT

REASONS FOR DENYING THE WRIT

A. Ethicon’s Petition is an Attack on the Jury Verdict

and is Without Merit

We emphasize that this case rests on a unique set of

facts. . Ethicon, in its petition, has seriously misstated many

facts and circumstances. For example, it states that the jury

which found against it was allowed to infer, speculate and

second-guess as to bad faith from the mere relitigation of a

prior claim and that the finding of bad faith in turn was

allowed to support a virtual per se violation of the anti-

trust laws.* These statements have no resemblance what-

ever to what happened in this lawsuit.

In the course of detailed and careful instructions, the

trial judge told the jury that in order for it to find against

an anticompetitive purpose. Grip-Pak, Inc. v. Illinois Tool Works,

Inc., 694 F.2d 466 (7th Cir., 1982), cert. denied, 103 S.Ct. 2430

(1983).

‘Ethicon states, for example, that under the opinion below, “ “bad

faith’ can be established simply by relitigating the merits of a prior

action” (Pet. at 7), “*** bad faith may be inferred merely from the

evidence in the prior suit, and °**® this bad faith finding results in

a virtual per se violation of section 2 of the Sherman Act *°*” (id.),

“e** 4 single suit may be determined to be a sham merely by re-

litigating the merits to establish whether the plaintiff thought he

would lose” (id. at 10), “*** a subsequent antitrust jury” was

allowed “to infer from that same contrary evidence or legal authority

that the litigant ‘knew’ he would lose” (id.), “®*°*® ‘bad faith’ thus

boils down to a trial lawyer's judgment that one patent, and not the

other, was Ethicon’s best chance to win the lawsuit” (id. at 11),

7

Ethicon, Handgards had to prove “by clear and conviucing

evidence” that the Gerard patent was prosecuted “in bad

faith”. Trial Transcript (T.T.) 2951. Under the “bad faith

theory”, the jury was instructed that the issue was whether

Ethicon knew that the Gerard patent was invalid, as Hand-

gards contended, or whether the litigation was “prosecuted

in good faith with the belief that the Gerard patent was

valid and enforceable, as [Ethicon] contends. *** [M]Jore-

over, you must decide whether the suits, if brought or

maintained in bad faith, were brought for the purpose of

eliminating Handgards as a competitor in the relevant

market”. T.T. 2977. If Ethicon had “a specific intent to

monopolize”, Handgards still had to establish “by a pre-

ponderance of the evidence that [Ethicon] engaged in one

or more predatory or anti-competitive acts in furtherance

of that intent” and that “there was a dangerous probability

that [Ethicon] would succeed in monopolization”. T.T. 2997.

There is a “legal presumption”, the jury was told, “that

Ethicon brought the (Gerard] patent infringement suit in

good faith”, and this presumption could be overcome only

by “clear and convincing evidence”, T.T. 2977-2978, which

was specifically defined. T.T. 2978. The jury had to deter-

mine whether Ethicon “brought or prosecuted the suit with

knowledge that the patent it sued upon was invalid” —

whether its agents, officers and directors “were in posses-

sion of facts which prevented them from holding a good-

the jury engaged in “second-guessing” the litigants (id.), the jury

was allowed to make “inferences based solely on hypothetical patent

defenses” (id. at 12), and the significance of the opinion below is

that “no business can ever sue a competitor, at least on a patent,

without the threat that a subsequent antitrust jury will impose treble

damage liability wherever there is any evidence from which a jury

could subsequently speculate as to bad faith” (id.; emphasis in

original).

—————————————

8

faith belief that the Gerard patent was valid and infringed”.

T.T. 2979.

The jury was specifically told that “Ethicon was entitled

to-rely upon the advice of its outside counsel”, provided

that all material facts were disclosed to him and that “the

advice was sought in good faith and acted upon honestly”.

T.T. 2980. Handgards had to establish by clear and con-

vincing evidence that Ethicon knew of “a prior public use

or a prior invention which would have invalidated the

patent” or knew that the product made by Gerard’s process

“was on sale *** more than a year prior to the filing” of

the application. T.T. 2981. The fact that the patent had

been adjudged invalid was “not sufficient to show that the

infringement suit was brought in bad faith” — Ethicon had

to have initiated or pursued the suit “knowing the patent

was invalid”. T.T. 2981. The bringing or maintaining of

“one or more illfounded patent infringement actions in bad

faith” constituted an antitrust violation only if the litigation

involved “an intent to monopolize a particular market or

industry”, and bad faith was again defined as “knowing

either at the time the lawsuit is filed or during its pendency

that the particular patent sued upon is invalid”. T.T. 2982.

Even if the jury found that the delivery or the taking of

an order in May 1957 constituted a public use or sale, it

still had to consider whether Ethicon held “a good faith

belief that there was no public use or on sale more than

one year prior to the date of the filing of the Gerard applica-

tion”. For example, if Ethicon had “a good faith belief”

that the transactions “were experimental”, or “a good faith

belief” that the law was “different than the law as I have

stated it”, and thus “a good faith belief” that there was no

such public use or sale, Handgards had not proven its case.

T.T. 2985.

Q

Handgards, in fact, had to prove the Shabram prior pub-

lic use “beyond a reasonable doubt”, and “Ethicon was en-

titled to prosecute suit on the Gerard patent if it could in

good faith entertain a reasonable doubt as to whether or

not Handgards could prove an alleged prior public use

before June 2, 1957, “beyond a reasonable doubt’. T.T. 2986,

emphasis added. Once again the jury was told that bad

faith meant knowing that the patent sued upon was invalid,

and further that “[t]he prosecution of a patent infringe-

ment suit in good faith, though the patent was held invalid,

does not, standing alone, violate the antitrust laws”. T.T.

2988. The jury was even told: “(t]he mere fact, if it is

established, that Ethicon’s answers [to interrogatories]

were false will not support a finding of bad faith”; instead,

for this issue even to have relevance, Handgards had to

show that Ethicon “intentionally gave false interrogatory

answers in an attempt to deceive” Handgards or was “guilty

of gross negligence or recklessness in misrepresenting the

truth”. T.T. 2991.

Thus, this jury was not permitted, under the instructions,

to make the improper inferences suggested by Ethicon, to

speculate about anything or to second-guess anyone. The

burden upon Handgards was a heavy one to prove, based

upon specific facts supported by evidence, that Ethicon

knew precisely what it was doing when it pressed a totally

baseless lawsuit. And even this was not enough. Its bad

faith had to be part of a specific intent to monopolize ac-

companied by one or more predatory or anticompetitive

acts.

B. The Prosecution of a Single Lawsuit in Bad Faith

Falls Within the Sham Exception

The Ninth Circuit decisions in this litigation have not

had, and do not threaten to have, a chilling effect upon

patentees’ prosecution in good faith of their legitimate

10

patent rights. Arguing that a single bad faith infringement

suit should be completely immune from antitrust scrutiny,

Ethicon ignores the Ninth Circuit’s direct determination

that bad faith patent litigation “contribute(s] nothing to

the furtherance of the policies of either the patent law or

the antitrust law.” App. 48a.

The Ninth Circuit fashioned a scholarly and analytical

compromise between these conflicting policies. In doing so,

it erected barriers, consisting of the requirement that proof

of bad faith be established by clear and convincing evidence

(intentional falsehood or a knowingly frivolous claim) and

that plaintiff be required to overcome a presumption of

good faith. These formidable obstacles serve to protect

the honest patentee who genuinely seeks the vindication of

his private interest in pursuit of his patent. And the

mere fact that an honest patentee loses will not, standing

alone, create antitrust liability. But at the same time, the

Ninth Circuit rule permits, in those rare and exceptional

cases such as this, a remedy for the victim of patent litiga-

tion which should not have been pursued.

The Ninth Circuit decisions in this litigation have care-

fully followed the requirements of this Court’s Noerr-

Pennington doctrine with its “sham” exception.

Moreover, there is no conflict or confusion in the lower

courts concerning Noerr-Pennington or the sham exception.

Petitioner repeatedly states that there is doubt whether a

single suit, even though it is conceded to be in bad faith,

would lose Noerr-Pennington immunity. Xet there is no

decision which allows immunity to a single suit brought in

bad faith such as this one, and the rationale of this Court’s

decision in Walker Process Equipment, Inc. v. Food Ma-

chinery & Chemical Corp., 382 U.S. 172 (1965), fully sup-

ports the loss of Noerr-Pennington immunity.

11

C. The Ninth Circuit Applied the Appropriate Standard

of Review

Ethicon’s argument based on Bose v. Consumers Union of

7.S., Inc., 104 S.Ct. 1949 (1984), is without merit.

In presenting this case on appeal to the Ninth Circuit,

Ethicon told that court that the standard of review was

“substantial evidence to support the jury’s verdict” and

the Ninth Circuit adopted Ethicon’s proposed standard.

App. 9a.

Moreover, the Ninth Circuit did independently review the

record on the key issue of Ethicon’s bad faith in order to

assure itself that the bad faith had been shown by “clear

and convincing evidence.” App. 17a and 32a.

D. The Ninth Circuit Found All of the Necessary Ele-

ments of a Section 2 Attempt to Monopolize Claim

The Claim that the Ninth Circuit found a per se violation

of Section 2 is utterly false. Bad faith litigation intended

to destroy competition is predatory conduct and when

coupled with the other elements of the offense constitutes

an antitrust violation. Those other elements were re-

quired by the Court of Appeals to be proven. (App. 48a),

and the court carefully reviewed the evidence to insure

that they were proven.

E. Jurisdiction Properly Lay in the Ninth Circuit Court

of Appeals

The Ninth Circuit has jurisdiction to decide this appeal,

as Ethicon itself assertéd to the Court of Appeals in Hana-

gards II. App. 5a. Moreover, the plain fact is that this

case did not arise under 28 U.S.C. § 1338(a) as required

for jurisdiction of the Court of Appeals for the Federal

Circuit, and did not litigate the issue of patent validity.

Accordingly, the CAFC has no jurisdiction over this appeal.

,

———

12

The mere fact that questions of patent law arose in the

course of the controversy does not convert the case “to one

arising under” the patent laws. New Marshall Engine Co.

v. Marshall Engine Co., 223 U.S. 473 (1912). See also Atari,

Inc. v. JSA & Co. Group, Inc., Appeal No. 84-742 (CAFC),

appeal denied Nov. 8, 1984, (CAFC, 1984).

ITI

THE DECISIONS IN HANDGARDS I AND II APPLY

THIS COURT’S RULINGS ON THE “SHAM EXCEP-

TION” TO NOERR-PENNINGTON AND THERE IS

NO CONFUSION OR CONFLICT AMONG THE CIR-

CUITS

This Court’s decision in Bill Johnson’s Restaurants v.

N.L.R.B., 103 S.Ct. 2161 (1983), has clearly delineated the

scope of the “sham exception” in the context of litigation

brought in bad faith. The Court stated:

Although it is not unlawful under the Act to prose-

cute a meritorious action, the same is not true of suits

based on insubstantial claims — suits that lack, to use

the term coined by the Board, a “reasonable basis.”

Such suits are not within the scope of First Amend-

ment protection:

The first amendment interests involved in private

litigation — compensation for violated rights and in-

terests, the psychological benefits of vindication, public

airing of disputed facts — are not advanced when the

litigation is based on intentional falsehoods or on

knowingly frivolous claims. Furthermore, since sham

litigation by definition does not involve a bona fide

grievance, it does not come within the first amendment

right to petition.

Just as false statements are not immunized by the

First Amendment right to freedom of speech, see

13

s

Herbert v. Lando, 441 U.S. 153, 171, 99 S.Ct. 1635,

1646, 60 L.Ed.2d 115 (1979); Gertz v. Robert Welch,

Inc., 418 U.S. 323, 340, 94 S.Ct. 2997, 3007, 41 L.Ed.2d

789 (1974), baseless litigation is not immunized by the

First Amendment right to petition.

* * *

Considerations analogous to these led us in the anti-

trust context to adopt the “mere sham” exception in

California Motor Transport, supra. [103 S.Ct. at

2170-71.]

Ethicon admits that the “sham exception” is properly

invoked “where the challenged lawsuit is coupled with other

anticompetitive conduct designed to interfere directly and

unlawfully with the business of a competitor.” Pet. p. 8.

That is exactly the case here.

In Handgards II, the court found “substantial evidence’”’’

supporting Handgards’ contention that:

*** Ethicon took steps to eliminate competition from

the relevant market. The most damaging evidence in-

troduced was a letter written by Gerard, an Ethicon

employee, to Sam Porter, a major distributor and

. potential joint venturer of hair care gloves. This letter

asserted the validity of Ethicon’s Gerard patent and

| the company’s intent to enforce the patent. After the

letter was received, Porter stopped purchasing gloves

from Handgard and refused to negotiate any joint

venture with Handgards. Ethicon also sent a similar

letter to several other purchasers of hair care gloves.

This evidence along with the prosecution of a bad faith

patent suit provides a sufficient basis for a jury’s find-

ing of specific intent to monopolize. Ethicon’s argu-

ment that its repeated license offers negated this intent

was presented to and rejected by the jury. The mere

existence of license offers does not require that we

14

ignore the strong evidence presented by Handgards

which supports the jury’s finding. [App. 18a; empha-

sis added; footnote omitted].

There is no basis, as Ethicon seems to assert, for holding

that a single bad faith predatory infringement suit, when

coupled with all the other elements of a Sherman Act Section

2 violation, would not constitute “sham” litigation. This

Court settled the question insofar as infringement suits are

concerned in Walker Process Equipment, Inc. v. Food

Machinery and Chemical Corp., 382 U.S. 172, (1965). There

a patentee brought a single infringement suit to enforce

a patent obtained by fraud. Defendant filed an antitrust

ecunterclaim for this conduct, and this Court sustained the

legal validity of such a claim if supported by proof of the

other elements of a violation. The case “stands for the

proposition that pressing claims known to be without foun-

dation for the purpose of stifling competition is a violation

of Section 2 of the Sherman Act.” Bork, The Antitrust

Paradox 353 (1978).° R

‘®

And, the point is made even more emphatically in Bill

Johnson’s Restaurants, supra, 103 S.Ct. at p. 2171, where

the Court refers to “a baseless lawsuit” in the context of

bad faith litigation. (Emphasis added).

Moreover, a close reading of this Court’s decision in

Vendo Co. v. Lektro-Vend Corp., 433 U.S. 623 (1977), sup-

ports the applicability of the sham exception to a single

lawsuit. In a footnote, the plurality opinion implie? ‘hat

the filing of a single lawsuit might provide a sufficient basis

for invoking the sham exception (id. at 635-636 n.6) and

the dissent expressly adopted that position. Jd. at 661-662

5Precedent for a treble damage remedy against enforcement of an

illegally obtained patent goes back to the English Statute of Mono-

polies of 1623, 21 Jac. I, c. 3, section IV.

15

(Stevens, J., dissenting). Lower courts are in agreement

on the single “sham” suit question.°

If the plaintiff's motives are in doubt where the question

of a “sham” is whether defendants were deliberately trying

to bar access to an administrative agency, a multiplicity of

suits may be more persuasive, as in California Motor Trans-

port Co. v. Trucking Unlimited, 404 U.S. 508 (1972). But

where bad faith is shown by extrinsic evidence, coupled with

the other elements of Sectior 2 violation as here, it would

defeat both antitrust policy and justice to say that the

mailefactor should receive a pass until it becomes a recidi-

vist and does it again to some other victim. The first victim

would thu: be left remediless. Where only one competitor

exists — as is the case here —-a single lawsuit would ac-

complish the monopolistic goals.

The decisions of the Circuits are uniform that baseless

litigation brought for an anticompetitive purpose falls with-

in the “sham exception” doctrine. The Second Circuit, in

Landmarks Holding Corp. v. W. Bermant, 664 F.2d 891,

896-897 (2d Cir. 1981), held that the “sham exception” ap-

plies when the litigation is brought “solely to harass and

hinder a competitor.” Accord: Litton Systems, Inc. v.

American Telephone & Telegraph Co., 700 F.2d 785 (2d

Cir. 1983), cert. denied, 104 S.Ct. 984 (1984).

The Fifth Cireuit, in Associated Radio Service Co. v.

Page Airways, Inc., 624 F.2d 1342, 13858 (Sth Cir. 1980),

8See, e.g., Omni Resource Development Corp. v. Conoco, Inc.,

739 F.2d 1412, 1414 (9th Cir. 1984); MCI Communications Corp. v.

American Telephone & Telegraph Co., 708 F.2d 1081, 1155 (7th

Cir.), cert. denied, 104 S. Ct. 234 (1983); Feminist Women’s Health

Center v. Mohammad, 586 F.2d 530, 543 n.6 (5th Cir. 1978), cert.

denied, 444 U.S. 924 (1979); First National Bank of Cmaha v.

Marquette National Bank, 482 F. Supp. 514, 519-521 (D. Minn.

1979), affd, 636 F.2d 195 (8th Cir. 1980), cert. depied, 450 U.S.

1042 (1981).

ARENA EEE» SAREE OA

16

cert, denied, 450 U.S. 1030 (1981), held that a complaint

comes within the “sham exception” when it alleges that

the suit was brought “not for a proper purpose, but for

the purpose of achieving an unlawful objective.”

The Seventh Circuit is in accord. Judge Posner, writing

for that Cireuit in Grip-Pak, Inc. v. Illinois Tool Works,

Inc., 694 F.2d 466 (7th Cir. 1982), cert. denied, 103 S.Ct.

2430 (1983), held that even litigation brought with probable

cause but with the “purpose *** not to win a favorable judg-

ment against a competitor but to harass him and to deter

others, by the process itself — regardless of outcome”

would violate the antitrust laws. Accord: MCI Commumica-

tions Corp. v. American Teiephone & Telegraph Co., 708

F.2d 1081 (7th Cir. 1983), cert. denied, 104 S.Ct. 234 (1983).

A line of Ninth Cireuit decisions, including Handgards I,

is in accord with that proposition: Forro Precision Ince. v.

IBM, 673 F.2d 1045, 1060-61 (9th Cir. 1982), cert. demed,

103 S.Ct. 1234 (1983). Clipper Exrpress v. Rocky Mountain

Motor Tariff Bureau, Inc., 690 F.2d 1240, 1254 (9th Cir.

1982), cert. denied, 459 U.S. 1227 (1983); Energy Conser-

vation, Inc. v. Heliodyne, Inc., 698 F.2d 386 (9th Cir. 1983) ;

Aydin Corp. v. Loral Corp., 718 F.2d 897 (9th Cir. 1983) ;

and Omni Resources Development Corp. v. Conoco, Inc., 739

F.2d 1412 (9th Cir. 1984).

Only the Tenth Circuit decision in Hydro-Tech Corp. v.

Sundstrand Corp., 673 F.2d 1171, 1175 (10th Cir. 1982),

appears to require something more than the sham litigation

itself. In that case, the court stated: “A sham action is

one which tends to be abusive of judicial process and, there-

fore, is something more than an action instituted without

probable cause.” Jd. at 1177. But, even if that were the

controlling principle of law we would, as demonstrated

earlier, satisfy a more stringent test, This would then be

an inappropriate case in which to review that issue. More-

over, because Hydro-Tech was decided a year before this

17

Court’s decision in Bill Johnsons’ Restaurants, it is ap-

parent that to the extent it deviates from the otherwise

uniform decisions of the circuits it is of dubious validity.

Finally, the passage quoted above is dictum because the

court found that nowhere in its complaint had the plaintiff

alleged that the first suit had been a “sham” Id. at 1175.

The court further noted that the business dealings between

the two defendants “tend themselves to negate the proposi-

tion” that the prior suit was a sham. Jd. The court was

careful to note that if the plaintiff had alleged that the

first suit had been “vexatious” or “spurious,” the result

might have been different. Id. at 1177.

There is, therefore, no confusion among the lower courts

nor is there any significant disparity of opinion with respect

to the scope of the “sham exception.” 4

The commentators are also in accord. Judge Bork in

“The Antitrust Paradox,” after discussing Walker Process

Equipment, Inc. v. Food Machinery & Chemical Corp..

supra, stated:

Antitrust sanctions can hardly be applied to one

who litigates his patent in good faith, even though the

patent is ultimately held to be invalid. That would chill

legitimate patent litigation.

The antitrust significance of the fraud, therefore, is

simply that it showed Food Machinery to be litigating

in bad faith. Walker is thus not a mere patent deci-

sion but an antitrust precedent of general applicability.

It stands for the proposition that pressing claims known

to be without foundation for the purpose of stifling

competition is a violation of Section 2 of the Sherman

Act. -

Certainly, in a proper case, a proved intent not to

bar competitors from the courtroom but, by the litiga-

tion of baseless claims, to bar them from a market or

to delay their entry should suffice for violation of the

18

Sherman Act. The Walker decision holds as much, and

there is no indication that Trucking Unlimited repre-

sents a retreat from Walker. On the contrary, the

concurring Justices seemed to feel that the Trucking

Unlimited majority was opening up broad new areas

of liability. [Bork, Robert H., The Antitrust Paradox

(1978), pp. 352-353, 354.]

Professors’ Areeda and Turner are in accord.

In light of the serious potential damage inflicted

by reckless infringement suits or threats thereof, par-

ticularly against the alleged infringer’s customers, we

think an attempt claim based on that conduct alone is

warranted for its deterrent effect. [P. Areeda & D.

Turner, JJ] Antitrust Law, § 836, p. 355 (1978).]

See also Balmer, Sham Litigation and The antitrust Laws,

29 Buffalo L. Rev. 39 (1980), and Fischel, Antitrust Liability

For Attempts To Influence Government Action: The Basis

and Limits of the Noerr-Pennington Doctrine, 45 U.Chi. L.

Rev. 80, 108 (1977).

IV

ETHICON’S ALTERNATIVE ARGUMENT THAT IT

WAS DENIED AN INDEPENDENT EVALUATION

OF THE EVIDENCE IS WITHOUT MERIT

A. Ethicon Did Not Request, and Has Waived, a De Novo

Review Standard Applied to the Bad Faith Finding

As noted earlier, Ethicon in Handgards II urged on the

Ninth Circuit a “substantial evidence” standard of review

even with respect to bad faith fact-finding. And Ethicon

adopted the same standard of review in Handgards I.

At no_time in any of its post-trial motions in either Hand-

gards I or Handgards II did Ethicon characterize the de-

19

termination of bad faith as a “constitutionai fact” requiring

de novo review. That suggestion emerges for the first time

in its Petition to this Court. Although the request, for the

reason set forth below, is without merit, it comes too late

to be considered. Michel v. Louisiana, 350 U.S. 91, 99

(1955).?

B. Ethicon Itself Proposed the Substantial Evidence Test

to That Court

Under the caption “Standard of Review”, Ethicon’s Open-

ing Brief in the Ninth Circuit recited in part:

Points I and IJ* present questions of law which this

Court may review de novo. Transport Indemnity Co. v.

Liberty Mutual Insurance Co., 620 F.2d 1368 (9th Cir.

1980). They also raise the question whether there is

substanftal evidenee to support the jury’s verdict. Cal-

ifornia Computer Products v. IBM, 613 F.2d 727, 732-34

(9th Cir. 1979). [Appellant’s Brief, p. 10; emphasis

added. |

Having failed to urge a de novo standard of review for

“constitutional facts” and having affirmatively urged a “sub-

stantial evidence” test, Ethicon is now precluded from urg-

ing error on the ground that the court below applied the

wrong standard of review. This Court has repeatedly and

"It is ironic that Ethicon, which rejected Handgards’ offer to waive

the jury on the retrial, now suggests that it was entitled to de novo

review by the same judge to whom it refused to submit the case

initially.

$Point I in the Brief was captioned, “There was no Clear and Con-

vincing Evidence that Ethicon Prosecuted the Patent Suit in Bad

Faith”, and Point II was captioned “There was No Substantial Evi-

dence That Ethicon Violated the Antitrust laws.”

pe ee

consistently held that it will not consider an issue which

is raised for the first time in the Petition for Certiorari.’

C. In Any Event, The Courts Below Independently Re-

viewed the Evidence

Assuming, arguendo, that the lower courts had a duty to

independently examine the evidence in order to satisfy the

constitutional standard reiterated by this Court in Bose v.

Consumer’s Union, 104 S.Ct. 1949 (1984), it is plain that

they discharged that responsibility.

Even if some independent review was required to “cross

the constitutional threshold” (7d. at 1965), the intensity of

that review varies in the circumstances of the case. Jd. at

1959. There is a “presumption of correctness that attaches

to factual findings [which] is stronger in some cases than

in others” (id.). Here, numerous factors support that “pre-

sumption of correctness” for the findings of the lower court:

1. Handgards had to overcome a presumption of good

faith by clear and convincing evidence;

2. The critical evidence of the intentional falsehoods was

largely documentary ;

3. The litigation was extraordinarily lengthy and com-

plex involving facts dating back 27 years. In this context,

the courts below each expressed “independent” satisfaction

that the result was consistent with the evidence as a whole.

District Judge Stanley A. Weigel in denying Ethicon’s

post-trial motions concluded: “The record in this case rea-

sonably supports the jury’s verdict. Consequently, defend-

°E.g., J. I. Case Co. v. Borak, 377 U.S. 426, 428-429 (1964);

State of California v. Taylor, 353 U.S. 553, 556-557 n.2 (1957);

Neely v. Martin K. Eby Construction Co., 386 U.S. 317, 330 (1967);

United States v. Ortiz, 422 U.S. 891, 898 (1975); Delta Air Lines,

Inc. v. August, 450 U.S. 346, 362 (1981); Hoover v. Ronwin, 104

S.Ct. 1989, 1998 n. 25 (1984).

21

ant is entitled to neither judgment notwithstanding the

verdict nor a new trial.” 552 F.Supp. at 821.

The Ninth Circuit also conducted an independent review

of the factual record below, stating “we shall evaluate the

evidence” on each of Handgards’ theories of bad faith.

After repeated references to the evidence in the record, the

Court coneluded :

Conclusion As To The Clear And Convincing Evi-

dence of Bad Faith

Our examination of the record convinces us that the

district court properly instructed the jury in accor-

dance with our opinion in Handgards I. The jury was

instructed that a patent is presumptively valid and

that presumption can only be rebutted with clear and

convincing evidence. See 601 F.2d at 996. Substantial

evidence exists to support a finding by the jury that

Handgards established sucha rebuttal and that Ethicon

prosecuted its plitent suit in bad faith. [App. 17a;

emphasis added.]...

And “Here, Ethicon brought a bad faith infringement suit.”

app. 23a. Just as in Miree v. DeKalb County, Georgia, 433

U.S. 25, 34 (1977), the Bose argument is an “afterthought”.

7

THE DECISION BELOW CREATES NO NEW PER SE

MONOPOLIZATION DOCTRINE AND IS IN HAR.-

MONY WITH THIS COURT’S MONOPOLY DECI-

SIONS

The Ninth Cireuit did not create any per se antitrust

doctrine under Section 2 of the Sherman Act for the prose-

' eution of a bad faith patent suit. It was careful to point

out in Handgards I that “an antitrust plaintiff pursuing

a bad faith patent prosecution theory must still prove the

other requisites of a Section 2 offense.” Handgards, Inc. v.

22

Ethicon, Inc., 601 F.2d at 993 n.13. See also Walker Process

Equipment, Inc. v. Food Machinery & Chemical Corp.,

supra. Far from creating a new per se category of monopo-

lization claim under Section 2, the Ninth Circuit imposed a

high barrier, holding that a patentee’s infringement suit

is presumptively in good faith and that this presumption

can be overcome only by clear and convincing evidence.

Contrary to Ethicon’s arguments, Handgards proved the

existence of a separate and distinct relevant market con-

stituting hair care gloves. Ethicon was shown to have

possessed a 90% share of that market. The Ninth Circuit

found that substantial evidence existed to support the jury’s

finding on this relevant market and market share (App. 19a-

20a) as well as on dangerous probability of success. Id.

Moreover, the Ninth Circuit found evidence of specific

intent to monopolize, characterizing the threatening Gerard

letter as the “most damaging evidence” to support this

element. App. 17a-18a. And it also found evidence sufficient

to support a finding of anticompetitive effect causing “anti-

trust injury.” App. 24a. Thus, the court reviewed the

record and found the jury’s finding on each element of an

attempt to monopolize claim to be supported by substantial

evidence. The court concluded:

Our review of the record leads us to conclude that

the district court properly adhered to our decision in

Handgards I. Ethicon’s arguments on appeal primarily

are an attack on the verdict of the jury. *** [T]he

verdict is supported by substantial evidence. * * * Thus,

we affirm the entirety of the antitrust verdict against

Ethicon. *** [App. 32a].

It is gross hyperbole to assert that the Ninth Circuit

adopted a “per se” rule of attempted monopolization under

Section 2. The decision by two judges of the Handgards II

23

panel only three days later in Omni Resource Development

Corp. v. Conoco, Inc., 739 F.2d 1412 (9th Cir. 1984), affirmed

summary judgment for the defendant in an antitrust case

alleging bad faith use of litigation. That case cogently

demonstrates that the Ninth Circuit has not adopted an

expansive or new interpretation of Section 2 of the Sherman

Act.”

And, the Ninth Circuit’s holding that actual exclusion

from the market is not necessary in an attempt to monopo-

lize case is consistent with this Court’s prior holdings.

Lorain Journal Company v. United States, 342 U.S. 143

(1951).

Finally, Petitioner’s argument that the instant case

should be either combined for review with, or held for dis-

position in light of the Court’s eventual decisions in, Blan-

ton v. Mobil Oil Corp., 721 F.2d 1207 (9th Cir. 1983), petition

for cert. filed, 52 U.S.L.W. 3875 (U.S. May 18, 1984) (No.

83-1896), and Pacific Stationery ¢& Printing Co. v. North-

west Wholesale Stationery, 715 F.2d 1393 (9th Cir. 1983),

cert. granted, 53 U.S.L.W. 3235 (U.S. Oct. 1, 1984) (No. 83-

1368), Pet. at 26-27, is utterly without merit. In the instant

case, in contrast to Blanton, the Ninth Circuit found an

attempt to monopolize based on the showing of a specific

intent to monopolize and a dangerous probability of success

1°The Orsini patent, which Ethicon voluntarily withdrew from

the original patent infringement suit because its lawyers recognized

it to be the weaker of the two patents, is legally irrelevant because

Ethicon gave Handgards a covenant not to sue when it made the

decision ‘to withdraw it. Hence, Ethicon was powerless to enforce

Orsini. Moreover, as the Ninth Circuit noted:

* °° Ethicon argues that the injury caused by the Orsini

patent is not antitrust injury. We agree. However, this does

not help Ethicon. There is no showing that Handgards’ lost

profits are attributable to the Orsini patent. Ethicon did not

attempt to prove that the Orsini patent caused any of the

damages. [App. 23a.]

24

in the relevant market, the elements this Court requires to

be proven before finding an attempt to monopolize. See,

e.g., Lorain Journal v. United States, supra; America.

Tobacco Co. v. United States, 328 U.S. 781 (1946); Swift

& Co. v. United States, 196 U.S. 375 (1905). And Pacific

Stationery & Printing Co. involved an application of the

per se rule to an alleged group boycott by a trade associa-

tion and did not involve an attempt to monopolize claim as

in the instant case.

vi

ETHICON ITSELF URGED JURISDICTION UPON THE |

NINTH CIRCUIT, AND IN ANY EVENT JURISDIC-

TION PROPERLY LAY WITH THAT COURT

Ethicon now questions the Ninth Cireuit’s jurisdiction,

but buries in a footnote the fact that “both parties sug-

gested that that court had jurisdiction.” Pet. at 28 n. 13.

In point of fact, Ethicon did not merely make a suggestion ;

it affirmatively urged at every stage that jurisdiction prop-

erly lay with the Ninth Circuit:

(a) In its opening brief, Ethicon told the Ninth Circuit

that it, and not the Court of Appeals for the Federal Cir-

euit (CAFC), had jurisdiction to decide this appeal. (See

App. 9a).,

~

(b) Ethicon specifically and successfully seught —.over

the objection of Handgards —to have the second appeal

heard by the original panel of judges who decided Hand-

gards I.

(c) During the course of oral argument, Judge Sneed

raised the issue of jurisdiction and specifically asked the

parties to file supplemental briefs on that issue. Ethicon

in its supplemental brief continued to assert that the Ninth

Circuit was the correct court to decide this appeal.

25

It was only after it lost on appeal that Ethicon suddenly,

and for the first time, claimed a lack of jurisdiction. Ethi-

con should not be allowed to raise this point for the first

time before this Court. Having fought and lost, Ethicon

now wants a second bite of the apple. But, there must be

some end to this litigation. This case is now 16 years old.

These parties have already been through three trials, one

patent infringement trial, two antitrust trials, and five

appellate procedures to reach this state. The decision of

the Ninth Cireuit Court of Appeals should therefore be

entitled to great deference under the doctrine that; ‘‘courts

generally “** refuse to reopen what already has been de-

cided. ***” Messenger v. Anderson, 225 U.S. 436, 444 (1912).

The consistent position of the parties asserting that

the Ninth Cireuit, and not the CAFC, has jurisdiction

of the appeal derives from the universal recognition that

absolutely no issue of patent validity or invalidity was

raised or decided in the second trial and second appeal. Be-

cause the proceedings of the District Court from which the

appeal was taken did not arise under 28 U.S.C. § 1338(a),

the CAFC had no jurisdiction over the appeal. The stipu-

lated pretrial orders in this case governing both the first

and second trial uniformly recited that the federal court’s

jurisdiction was premised entirely on Section 4 of the

Clayton Act and one er more sections of the Sherman Act.

It is self-evident that the antitrust laws and not the pat-

ent laws constitute the predicate of this action and that the

CAFC’s jurisdiction extends only to those cases “arising

under” the patent laws. The mere fact that the underlying

litigation was a baseless patent infringement suit forming

part of an attempt to monopolize does not turn the case

into one “‘arising under the patent laws.” Both the Senate

and House reports establishing the CAFC preclude it from

deciding cases if the “gravamen is antitrust.” E.g., S. Rep.

26

No. 275, 97th Cong., lst Sess. 19, 20 (1981), reprinted in

U.S. Code Cong. & Ad. News No. 2 (Apr. 1982). And the

fact that questions of patent law arise in the course of a

controversy does not convert the case “to one arising under”

the patent laws: New Marshall Engine Co. v. Marshall

Engine Co., 223 U.S. 473 (1912) ; American Well Works Co.

v. Layne & Bowler Co., 241 U.S. 257 (1916) ; Koratron Co. v.

Deering Milliken, Inc., 418 F.2d 1314, 1316-18 (9th Cir.

1969), cert. denied, 398 U.S. 909 (1970).

The Court of Appeals for the Federal Circuit recog-

nizes this rule. In Atari, Inc. v. JS€A Group, Inc., supra,

that court held:

Achievement of increased unformity in the substan-

tive law of patents does not require that this court

get its hands on every appeal involving an allegation

that a patent law issue is somehow involved *** [A]

mere allegation that patent law is ir olved will not

give this court jurisdiction when that of the district

court did not rest at least in part on a continuing claim

arising under the patent *** laws.

27

CONCLUSION

For the reasons set forth herein, the Petition for Certio-

rari should be denied.

Dated: December 28, 1984

Respectfully submitted,

MaxweEti M. BLecHER*

BuecHer, Couuiys &

WEINSTEIN

Jort R. BENNETT

Nancy Minter BENNETT

Kenprick, Netrer &

BENNETT

Attorneys for

Respondent

Handgards, Inc.

* Counsel of Record

Of Counsel:

JaMES A. RawL

K. Barrett PREtTYMAN, JR.

Hocan & Hartson