# Appendix — Farbenfabriken Bayer A. G. v. Sterling Drug, Inc. > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385601_0763%3A3 ## Record - **Collection:** Supreme Court brief - **Document type:** Appendix - **Published:** January 1, 1963 - **Citation:** 372 U.S. 929 ## Text wv A & - APPENDIX A UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT No. 13,807. >. FARBENFABRIKEN Bayer A.G., Appellants Ws ° 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. eo Opinion of the Court (Filed August 9, 1962) . 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. ¢ 4 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 ? . oa : . ‘ © 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). 4a — 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 Rare tS , 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- & " ¥ ne : 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.”’ 4 bald - ba ~ 6a €) * 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- e \ 7a ; 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. - Sa - APPENDIX B FARBENFABRIKEN Bayer, A. G., a corporation, Plaintiff, . | 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 a . 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. adie B) 10a 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: € - ‘hol) its remedy if the legal right is ber lla 2 - gs A . . . . . . 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. ‘Ne > PN _l2a 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. * --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385601_0763%3A3. Public record. Not legal advice.