Appendix — Farbenfabriken Bayer A. G. v. Sterling Drug, Inc.

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- APPENDIX A

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

No. 13,807.

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FARBENFABRIKEN Bayer A.G., Appellants

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Srer.ixe Drve, Ixc.

APPEAL From tHe Usirep Srates Nishi Courr ror

THE District.or NEw JERSEY

Argued Max. 7, 1962

Before McLavcuus, Srarey and Ganey, Circuit Judges.

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Opinion of the Court

(Filed August 9, 1962)

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By Srarey, Circuit Judge.

This is a civil action commenced under the antitrust laws,

$1 of the Sherman Antitrust Act, 15 U.S.C.A. €1, and

$$4 and 6 of the Clayton Aet, 15 U sc A. $815 and 26.

In its“¢omplaint, plaintiff alleged that defendant has with-

out. right asserted trademark rights inathe word ‘* Bayer’

and the Bayer Cross, as a means of Mippressing competi-

tion, and that such assertion constitutes a violation of the

antitrust laws. Plaintiff requested injunctive relief and

treble damages. The essence of the prayer for injunctive

‘relief was that défendant be directed to give all necessary

consents and licenses, without cost, te permit plaintiff to

import into or manufacture in the United States, products

under the name Bayer and the use of the Bayer Cross trade-

mark, and that the district court prescribe a procedure

permitting the products of both plaintiff and defendant to

be offered and sold under thatname. and trademark hut in

such a manner as to distinguisk the source of the product.

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In 1953, plaintiff, Farbenfabriken Bayer, A.G., a cor-

poration organized under the laws of the Federal Republic:

of Germany, took over a part ofthe business formerly con-

ducted by IT. G, Fadrbenindystrie, A.G. (“« then’’). In

1925, Farben succeeded Farbenfabriken vorm. Friedrich

‘Bayer & Company (‘‘Farbenfabriken’’). Farbenfabriken

formed two New York corporations in 1913, Synthetic

Patents Company, Inc., and The Bayer Company, Ine.

(‘ ‘Bayer ?),

Defendant, Sterling Drugs, Inc., a Delaware corpora-

—~ Aion, is. like plaintiff, engaged in the development, manu-

facture and sale of drugs and pharmaceuticals. After the

United States entered the First World War, the Alien

Property Custodian seized Farbenfabriken’s assets in the

United States, includjng the stock of Bayer, and in 1918

sold them to defendant. Thereafter, Bayer’s ethical drug

business was transferred to its newly organized subsidiary,

Winthrop Chemical Company, Inc., and in 1923, the capital

~ stock of Winthrop was transferred to defendant.

In 1923, Farbenfabriken and Bayer entered into a

cartel agreement. involving a world division of markets. It

was admitted in the district court that the agreement was

violative of the antitrust laws.’

Concluding that "id statute of limitations had expired,

the ‘district court dismissed plaintiff's claim for damages,

153 F. Supp. 589 (DLN.J., 1957),? and denied the request

for injunctive relief on the basis ‘‘that the equitable remedy

1 The agreement was adjudged violative of the antitrust laws by

the United States District Court for the Southern District of New

York on September 5, 1941; in United States v. The Bayer Co.,

Civil Action No. 15-364. be

* The district court originally relied on the New Jersey six year

statute of limitations contained in NJSA 2A:14-1. Thereafter, the

district court, following-our decision in Gordon v. Loew’s, Inc., 247

F. 2d 451 (1957), modified its order and applied the two year

limitation contained in NJSA 2A:14-10. ao

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available under Section 16 is predicated upon the legal

cause of action created by Section 4,7’ and that inasmuch

as the legal claim for damages was barred, the equitable

remedy would be denied. % i

Although the parties have raised numerous questions’

on this appeal, we shall limit our diséussion to the. disposi-

tive one. ,

Pa a

The defendant contends that by purchasing the stock

of Bayer from the Alien Property Custodian in 1918, it

acquired the trademarks in question as they were assets

of Bayer. Plaintiff says that defendant’s continued use

of the trademarks is based exclusively on the illegal 1928

agreements.* Plaintiff admits that the purchase of Bayer

stock by defendant gave it all the rights Bayer had in the

trademarks, but says that the right to use the trademarks

wwas restricted to pharmaceuticals ‘‘manufactured and (or)

controlled’’ by Farbenfabriken. In any event, it says that

it has a right to concurrent use of the trademarks and cites

Ameriean Bosch Magneto Corp. V. Robert Bosch Magneto

(‘o,, 215 N.Y.Supp. 387 (Sup. Ct. 1926).

Woe think that defendant tequired absolute rights to,

the exclusive use of the trademarks in question by its pur-

chase of Bayer.

The power vested in the Aiien ‘Property Custodian was

clearly spelled out in the Trading with the Enemy Act

(**Aect’’), originally passed on October. 6, 1917, 40 Stat. 411,

4 In addition to the 1923 agreement with Bayer, plaintiff in-that

year executed an agreement with Winthrop wherein plaintiff

agreed not to contest title to the trademarks Bayer and the Bayer

Cross.

+ Of course, this court can affirm based on the Mcord before it,

oven though the grounds be different than, those of the district

court. Continental Ore Co. v. Union Cgrfide & Carbon Corp.

oan F. 2d 86 (C.A. 9, 1961); Ginsburg v. Black, 237 F. 2a 790

(CA. 7, 1956), cert. denied, 353 U.S. 911 (¥957).

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— ad amended on March 28, 1918, 40 Stat. 460, 50 App.

*ELS.C.A. $12. It provided in pertinent part:

‘‘The alien property custodian shall be vested with

all of the powers of a common-law trustee in respect

of all property, other than money, which has been or

shall be, or which has been or shall be required to be,

conveyed, transferred, assigned, delivered, or paid

over to him in pugsuance of the provisions of this Act,

and, in addition thereto, acting under the supervision

ail direction of the President, and under such rules

‘and regulations as The President shall preseribe, shall

‘have power to manage such property and do any act or

things in respect thereof, or make any disposition

thereof, or of any part thereof, by sale or otherwise,

a and exercise any rights or powers which may be or

become appurtenant thereto or to the ownership thereof

-in like manner as though he were the absolute owner

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As the statute unmistakably shows, it was the intention

of Congress to enable the Alien Property Custodian to sell

property as fully as the owner could, and a sale b¥ the

Custodian is as complete as if it were a voluntary convey-

ance by the foreign corporation (Farbenfabriken) whose

assets were seized. Koppel Industrial Car & Equipment:

Co. vy. ger & Koppel Artiengesellschaft,, 289 Fed. 446

(C.A,.2, 1923). That Congress intended to give finality to

ra, the Custodian is best shown by a 1918 amendment

to the Act, which provided that

he sole relief and remedy of any person having

any claim to any money or other property heretofore

or hereafter conveyed, transferred, assigned, delivered,

or paid over to the Alien Property Custodian, or re-

quired so to be, or seized by him shall be that provided

by the terms of this Act, and in the event of sale or

other disposition of such property*by the Alien Prop-

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erty Custodian, shall-be limited to and enforced against

the net proceeds reevived therefrom and held by the

Alien Property Custodian or by. the Treasurer.of re

United States.’’ 40 Stat. 1020, 50 App. U.S.C.A.

It hecomes imperative, therefore, to determine what

rights Bayer had in the trademarks Bayer and Bayer Cross,

for ‘admittedly the Alien Property Custodian transfer Fed %.

all of Bayer’s rights to defendant. In 1908, Farbenfabriken

of Elberfeld Company, a New York corporation wholly

owned by Farbenfabriken, registered the trademarks in the

United States. The trademarks were registered on the

basis that Farbenfabriken of Elberfeld had used them since

1895. Im 1913, Farbenfabriken dissolved Farbenfabriken .

of Elberfeld. In, the same year, Bayer was incorporated .

nnder New York law, wherenpon certain assets, including

the trademarks in question, were transferred to it. At its

first Board of Directors meeting, Bayer authorized and di-

rected its officers to enter into-certain contracts with

Farbenfabriken. One of them, dated June 12, 19138, pro-

vided:

‘Bayer Co. agrees, and binds itself hereby, to pay |

unto Leverkusen [Farbenfabriketi], the sum of Seven

Hundred and Fifty Thousand Dollars ($750,000) in

tawful money of the United States on ar before the

th day of June, 1916. And Leverkusen hereby con-

f sents to and ratifies the : sale, transfer and assignment

to Bayer Co. by the New York corporation “Farben-

fabriken of Elberfeld Co. of the right for the sale in

the United States and ( ‘anada of the drugs, chemicals,

pharmaceuticals and any’ ‘and alfvother products and

artiales manufactured, and (or) controlled. by Lever-

= kusens and Leverkusen also. hereby consents to and

_ratifies the sale, transfer and assignment by -said

-Farbenfabriken of Elberfeld Co. to Bayer Co, of its

(said Farbenfabriken of Elberfeld Co.’s} trade-marks,

good will and other assets and property.”’

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* Use of those trademarks by, Bayer and its successor,

defendant, has been exclusive since 1917. The agreement,

execution of which has never been denied, was fully per-

formed by Bayer. It was absolute and neither imposed any

limitation on use of the trademarks nor retained any inter-

est therein in favor of Farbenfabriken. The agreement

presents no problem of construction, and all that is left to

us is to give force to the plain words.

Furthermore, in its eomplaint, plaintiff alleged that

defendant, as a result of the sale by the Alien Property

Custodian ‘‘obtained control in the United States of the

trademark Bayer, and the Bayer Cross and the name

Aspirin (then a valid trademark in the United States), as

well as a host of other valuable tirade names,"* and in para-

graph 18, as follows: Ms

‘“‘Thus Sterling found itself in possession of the in

valuable Bayer trademarks-in the United States, prob-

ably the most important single market in the world.

At that time, Bayer which was the original and true

owner of the name, was in a weak and defenseless

position.” |

Plaintiff says, however, that the conveyance of trade-

‘mark rights to Bayer was not absolute but was restricted

to use of the trademarks to pharmaceuticals ‘* manufactured

and (or) controlled’? by Farbenfabriken, It points to a

distributorship contract executed between Bayer and

Farbenfabriken in 1913. But the agreement of purchase

of trademarks was not so limited. For us to so conelude

would require a rewriting of the trademark agreement.

This we are not free-to do. Each agreement was a sepa-

rate one, individually executed, and in no way making refer

ence to’the other. The distributorship contract was lim-

ited in time, while the other was absolute and contained

no time limitation. |

Having shown that defendant had full and -compiete

ownership of the trademarks in question, the plaintiff neces-

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sarily does not have a right to concurrent ase of them, in

n° regard, it refers us to American Bosch Magneto Corp.

- Robert Bosch Magneto Co., 215 N.Y.Supp. 387 (Sup. Ct.

naa). There, the Company whose assets the Alien Prop-

erty Custodian seized and sold had only limited righgs iti

_the trademark.

Since we have determined that defendant acquired the

trademarks without restriction as to use, defendant's mere

exereise of “its full rights therein cannot constitute such a

misuse as to be the basis fer an action under the antitrust

laws. ‘' It would be a paradox to say that the exere ise ofa

right, ex we granted by law, is unlawful.’ Coea-Cola

Co. v. J. G. Butler & Sons, 229 Fed. 224, 282 CB.DLArk.

1916). 4?

She judgment of the district court will be afimaed.

. A True Copy:

Teste:

Clerk of the United State s Court of Appe als

for the Third Circuit.

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- APPENDIX B

FARBENFABRIKEN Bayer, A. G., a corporation, Plaintiff,

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Sreruinc Drug Ixc.. a corporation, Defendant

Civ. A. Noy08-50. .

United States District Court

D. New Jersey.

July 27, 1961.

WituanM F. Sairu, Chief Judge.

This is a civil action under the anti-trust laws, and par-

ticularly Section 1 of the Sherman Act, as amended. 69

Stat, 282, 15 U.S.C.A. $1, and Sections 4¢and 16, of the

Clayton Act, 38 Stat. 731 and 737, 15-U.S.C.A. §$ 15 and

26. The action is brought by the plaintiff, a corporation

organized under the laws of Germany, as the ‘‘legal sue-

cessor, in interest’? to certain rights of Farbenfabriken

vorm.. Friedrich Bayer and Company, et als. The essen-

tial allegations of the ‘complaint are summarized in the

earlier opinion of this Court. Farbenfabriken Bayer, A. G.

v. Sterling Drug, 153 F. Supp. 589. There is no reason to

repeat fhe summary in this opinion.

The history of the relationship between the parties and

their predecessors i is’ recited in the opinion filed in the com-

panion case. Farbenfabriken Bayer, A. G..v. Sterling

Drug Inc., 197 F. Supp. 613. The recital is based upon the

Stipulation of Facts and the undisputed allegations of the™

complaint. It appears therefrom that the predecessors of

the plaintiff and the defendant and its predecessors had

been engaged in an unlawful combination and conspiracy

in restraint of trade and commerce in pharmaceutical prod-

ucts prior to September 5, 1941. It also appears that the

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illegal contracts of 1920, 1923 and. 1926 were in furtherance

of the said conspiracy.

The action is before the Court at this time on a motion

for summary judgment and a counter-motion for summary

judgment, filed by the defendant and plaintiff, respectively,

under Rules 56(b) and 56(a) of ty Federal Rules of Civil

Procedure, 28 ULS.C.A. The motions are based upon the

record thus far made, which includes the pleadings, stipula-

tion, exhibits, and affidavits. r

_ Ear. IER PRrocEEDING

The action was Gaara en before the Court on a motion

for judgment on the pleadings filed by the defendant mgr

Rule 12(¢) of the Federal Rules of Civil Procedufe, 2S

U.S.C._A. We then treated the motion as one to dismiss

the complaint. The defendant argued in support of the

motion that the action was ba¢tred by Seetfon 2A:14-1 of

the New Jersey Revised Statutes, N.IS. A224 :14-1, whieh

preseribes a six vear period of limitation.

The plaintiff and the defendant at that time agreed that

iy the absence of a federal statute of limitation the local

statute of limitation was applicable. It should be noted

that the present action was commenced on September 2s,

1955, before the effective date of Section 4B of the Clayton

Act, 15 U.S.CLA. $15b.) The parties were also in agreement -

us to the applicability of Section 2A :14-1 of the New Jersey

Revised Statutes, supra. :

The opinion of the Court was filed on July To, 1957.° The

question as to when the statute of limitation commenced to

run was therein decided and we held that the ‘‘statute of

limitations runs from the commission of the last overt act

alleged to have cansed damage** and net from the time of

the consequent injury. Farbenfabriken Bayer, A.~G2-v—

Sterling Dray, supra, 153 F. Supp. 592-3#:, inclusive. We

adhere to this view for the reasons stated in the opinion.

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We held further that fhe provisiéns of Seefion 2A :14-1,

supra, were applicable and that thereunder\the claim for

treble damages was barred by the six year period af limita-

tion therein prescribed. It has since been decided by the

United States Court of Appeals for this Cireuit'that the

provision’ of the said section are not applicable. Gordon

v. Loew’s Incorporated, 247 F. 2d 451.

The precise question as to which of two local statutes

was applicable was carefully considered in the case of

Gordon vy. Loew’s, Incorporated, supra. It was therein

decided that Section 2A :14- 1 was not applicable to an action

for treble damages under Section 4 of the Clayton Act,

. supra. It was held that such an action is essentially one

for a penalty within the meaning of Section 2A :14-10 of

the New Jersey Revised Statutes, N.LS.A. 2A :14-10, and

is barred by the two year period of limitation therein pre-

scribed. The rule of the citéd case has been followed in

two later cases, to wit, Carlton Lamp Corporation v. Gen-

eral Electric Company, 3 Cir., 254 F. 2d 815;°Dean Oil

Company v. American Oil Company, 254 F. 2d 816, 3 Cir.,

certiorari denied 358 U.S. 835, 79 $. Ct. 58,3 L. Ed. 2d 72.

We are of the opinion that the claim for treble damages

was properly dismissed on the earlier motion of the de-

fendant; however, the opinion of the Court is modified to

reflect the applicability of Section 2A :14-10, supra. The

earlier-dismissal of the claim for damages was ‘without

prejudice to the right.of the plaintiff to apply to the Court

for leave to file an amended complaint.’’ Since the plain-

tiff has failed to avail itself of this right, the dismissal of

the action is herein made final.

Paseant PROCEEDING

The defendant’s present motion for summary_judgment

is directed to the claim for injunctive relief under Section

16 of the Clayton Act,-supra._It_ is argued that this claim

is barred by the lapse of time under the dogtrine of laches:

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‘hol) its remedy if the legal right is ber

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We are of the opinion that this motion must be sustained

for the reasons hereinafter disdussed.

- [1] Section 4 of the Clayton Act, supra, grants to ‘Sany

person * * * injured in his business or property by reason

of anything forbidden in the antitrust laws’” a right to

maintain an action for treble damages. Section 16 of the

Act, supra, grants an additional right to maintain an action

for injunctive relief ‘‘against threatened loss or damage.”"

We are of the opinion that the equitable remedy available

under Section 16 is predicated upon the legal cause of action

created by Section 4. It is-essertially an.equitable remedy

in aid of a legal right created by the statute.

The statute of limitations, by its express terms, applies

only to actions at law and may not be invoked ag a defense

against a claim exclusively equitable. However, wher? the

equity jurisdiction is invoked in aid of v Jegal right, or ‘is

predicated upon a legal calise of action, equity “will with-

Pole by the pthcskaes

styfute of limitations.’’ Russell v. Tedd, 309 U.S. 280, 289,

66 S. Ct. 527, 482, 84 LL. Ed. 754; see also Tobacco ‘end

Allied Stocks v. Transamerica Cory, D.C. 148 FP. Supp

323, 325, et seq., affirmed on other grounds 3 Cir., 244 F. 2d

902. c &

» The relevant rule is stated ‘by the Supreme Court in.

Russell v. Todd, supra, as follows: **Even though thére is

no state statute applicable: to similar equitable demands,

when the jurisdiction of the federal court is concurrent with

that_at law, or the suit is brought in aid of a legal right,

eqtity will withhold its remedy if the legal right is barred

_by the local statute of limitations."’ See also Cope v.

Anderson, 331 U.S. 461, 465° et seq., 67S. Ct. 1340291 L. Ed.

1602. We are of the épinion that the rule is applicable

here and should be invoked to bar the claim for injunctive

relief.

‘The rule was applied in the case of United West Coast

Theatres, Corp. v. South Side Theatres, D.C., 96 F. Supp.

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109, at page 111, wherein it Was held: “The local statute

of limitations applicable to actions for damages will also be

adopted and applied, in exercise of the equity jurisdictio

of [the] court, to the injunctive relief sought pursuant to

$16 of the Clayton Act, 15 U.S.C. A. ‘§ 26.°°

The plaintiff admits the existence of a conspiracy in

estraint of trade in violation of the antitrust laws prior

—_B september 5, 1941, but alleges that its predecessor he-

came a party to the conspiracy under economic duress and

the contemporary coercion ot the defendant's predecessors.

The allegation is denied by the defendant, but for the pur-

g Poses of the present motion we shdil,accept it as true.

[2] An aggrieved party who joins in existing conspiracy

‘under such circumstances is-not im pari delicto and there-

fore may maintain an action for damages and for injunc-

tive relief under Sections 4 and 16 of the ¢ ‘layton Act. Ring

v. Spina, 2 Cir., 148 F. 24°647, 652 et seq. See also Fast-

man Kodak Co. v.eSouthern Photo Materials Co. 278 US.

359, 377 et seq., 47 S. Ct. 400, 71 L. Ed. 684. The prede-

cessor to the plaintiff brought no such action. It continued

performance under the illegal contracts for a period of

eighteen vears and continued to enjoy the benefits of the

unlawful enterprise.

[3] The present action is brought by the plaintiff as the

‘legal successor in interest’? to the-rights of Farbenfab-

riken vorm: Friedrich Bayer and Company, Leverkusen,

and I. G. Farbenindustrie, I. G. Farben. We are of the

opinion that if the present action for injunctive relief were

one brought by either of the named predecessors of the

plaintiff it would be barred by the lapse of time under the

doctrine of laches. The position of the plaintiff is no

better than that-of its predecessors. We are of the opinion

that the equities favor the defendant.

The motion for summary judgment is granted. The de.

fendant shall submit to the Court, on notice to the plaintiff..

an appropriate order.

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