Petition for Writ of Certiorari — McCullough v. Kammerer Corp. (No. 755)

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Opinions Below P

SUPISMICCION oe ceceecceee

Questions Prosfted 2 nt

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Conelusion. .......... scthain dete tlaasagectaodlsiad Sherk \18

Statutes fInvolved_ ...... Titers RDA : | eammnne B

RGTES 9 es cccitentinonas Pint , i’

iaintiff’s Exhibit No. 7, License Agreement... ss

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e # Table of Authorities*Cited |

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mnemenae” are ? ee Pades

yt ae a‘ ' CASES

American Grain n Separstor Co. v, ‘Twin City Separator {o.,

202,,Fed. 202 (C.C.A.8th, 1912) SO PONE, EMIS. Ne aM

: . si ; ~, .

Bothwell v. Fitegersid 219 Fed. 408 (C.C.A.9th, 1915). 12

Brick v. A. I. Namm & Sons, Ine., 21 F. ia 179 (E.D. N C2

-Carbiee Corporation of America. v. American -Patents De-

velopment Corporation, 283 Ub. 27 oe OD

Catlin v. United States, 324 U.S. 229.0000, 13, 14, 15

> 3 Ethyl ‘Gasoline Corporation et al. v. United States, 309

, hse Os. 436, 456.4. 16°

"Inland opus District Comal v. Millis, 325 U.S. 697 17

" . a e 3

John Simmons Co, v. Grier teks Co., 258 U.S. 82 13

Ne Keystone®Driller Co. ¥. General Exeavator Co., 29) US. 240 9 :

. Liberty Oil Co. ‘. Copdon National = 260 US. 235, 245 17

* Marconi Wireless Telegraph Company of America v. United -

\ States, 320 U.S. 1,° 47... vies 13

*Michigan Carton Co. v. Sutherland Paper Co. 29 Fi (2d) .

179 (C.C_A.6th, 1928). as 13

Mississippi Valley Trust Co. i gil ay Steel Snsj ing Co,” :

258 Fed. 346 (C.C.A8th, 1919) 13

Morton Salt. Co. v. G. S. Suppiger Co., 314 US. 88... 9

National Lockwasher Company v: George K. Garrett Com-

_ pany, Ine., 137 F.(2d) 255 ty 16

* . Rivers v. Miller, 112 F.(2d) 439 (C.CLA.Sth, 19400 13

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‘ Se OF AUTHORITIES Crrep?

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Se ‘Hifrin: v. Chenille, Mfg-€02 7 F.(2d) 92 AU od A. 2d,

* 4061).-.< *s 13

Swan Carburetor. Co. v, “Nash Motors Co., gue F.2d) 115

iow UE | Saar tame Ge RSE eae Ree AT >

United States v.-General Electric Co., 272 U.S. 4760000. 6, 16

United States v. Line Material @o., Oct. Term, 1946, No. 64 16

_ dWnited States v. Vehicular Parking, 54 F.Supp. 828 (D-

. Rel. 1944)... mon he i WR Se

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Ward Baking Ce. v, Weber See, 230 Fed. 142 (COAS 3d,

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ae “air Dee _.. . STATUTES .

Judicial Code: _ ae : of

Section 128 (28 U.S.C _ 622: >). ay 14.

Section 129 (43 arg 9: 037, 44 Sjat. yl 28 USC. -§§227, .

NR sae icicicenroaion 5, 8, “10, 11, 12, 13, 14, 15

Sertion 240(a) (as aaasaa he ess of Fed 13, 1925)... 2

ieee | Act of July 2, 1890, e«. 647, ‘6 Stat. 209, as

erumended, 15 U.S.C. §§1,, 2 nti 4

, OrneR AUTHORITIES :

H. Rep. No. 1890, 69th Cong., 2d. Sess., 1-2 ...52.:..............11, 12

S. Rep. No, 1319, 69th Cong. 2d Sess... Aa Vested 11

Woodward,. ‘‘A Rectmaideration of the PRY Systeg, as a

Problem of Administrative haw” , 0 Harv. L. Bab 950,

mm ton. 18) 5 OE 10

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is the Supreme Court of the

_ United States. Soe

October Term, 1946

No. -s ial ay

Tra J. McCvnLoven, :

Petitioner,

e ‘ vs. .

KamMerer Corporation, a corporation,

and Baasu-Ross Too. Company, a cor-

poration, a i

Respondent.

Petition for Writ of Certiorari to the United States.

Circuit Court of Appeals for the Ninth Circuit _

To the Honorable Chief Justice and Associate Justices of

the Supreme Court of the United States:

Petitioner prays that,a writ of certiorari taste to review

the judgment of the United States Circuit Court of Ap-

peals for the Ninth Cireuit entered June 29, pres (R. Vol.

If, pp. 66-67). ;

"St <: OPINIONS BEEOW

The opinion of the Circuit Court of Appeals and dis-

_ senting opinion of Judge Denman (R. Vol. II, pyr 58-65)

ae Vi

are reported in 156 F. (2a) 343, 345, The oral opinion of. -

the District Court will be found in the record at Vol. I,

Pp. 46-50. A -

For earlier opitions. in this: wh see 823 U.S. 327, 148 °

F. ae) 525, 138 F.(2d) 482; 39 F. Supp. 213.

” . JURISDICTION ee

- The judgment of the Circuit Court of Appeals was en-—

tered June 29, 1946 (R. Vol. II, pp. 57,.66-67). A petition’

for rehearing was denied on Sept. 9,.1946 (R. Vol. II, p. 86).

The jurisdiction ofsthis Court is in’ ‘olved under. Section

240(a) of the Judicial Code, as ameuded by the Act of

February 13, 1925: ce

_ QUESTIONS PRESENTED : 3

1. Whether after a Federal District Court, at the direc-

tion of thé Circuit. Court of Appeals, has reopened’ a pat-

ent suit to permit full consideration on the merits of an

asserted defense of patent misuse, and has’ entered gn

order denying a motion to modify a previous decree és

to dismiss the complaint, ‘such order is appealable under .

Section 129 -of the Judicial Code -prov iding for appeals

from any decree which is final except for an accounting?

2. Whether respondent. licensor ‘and lic ‘ensee by execut-—

ing and carrying out a series of cov enants contained in

the exclusive patent licen3e, prohibitirfg both. the licensor

and licensee from making, using, or ‘renting’ any existing

or future ‘tools competitive with the patented tool, pro-

c hibiting the sale of the patented tool by either licensor or

5.8 ay

licensee, and_ prescribing the price which -licensee must

charge “as rental” for the use of the patented tool, ille-

‘ | : : :

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Mcpscets

‘

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_ <7 ee peal

gally misused the. patent grant £0 as to bat an account

in this suit? 7 : err. S.

| tieta INVOLVED

Section 129 of the Judicial Re, 43 Stat. 937, 44 Stat.

1261, 28 U SC, §§ 2 227 .227a, provides i in part:

ow here, upon a hearing in a district court, or by

a judge thereof: in vacation, an injunction is granted,

continued; modified, refused, or dissolved by an inter- -

locutory order or decree, or an application to dissolve

or modify an injunction is refiised, or an interlocutory

order or decree is made appointing.a.receiver, or re-

fusing an order to wind up a pending receivership or

‘to take the appropriate steps to accomplish the pur-

poses thereof, such as directing a sale or other dis-

posal of property held thereunder, an appeal may be

taken from such interlocutory erder or.décree to the-

cireuit court of appeals; and sections two hundred and.

thirty-nine and two hundred*and forty shall apply -to

such cases in the circuit courts of appeals as to other

cases therein : Provided, That the appeal to the circuit

court of appeals must be applied for within thirty days

fromthe entry of such order or decree, and shall take

_ precedence in the appellate court; and —

in other respects in the district. court shall not be

stayed during the pendency of such appeal | unless

otherwise ordered by the «court, or. the appellate

court, or a judge thereof: Provided, however, That.

the district’ court may, in its discretion, require an

“additional bond as a_condition of the appeal. .* * *

“When in any suit in equity for the infringement

of letters patent for inventions, a decree is rendered

‘which is final except for the ordering of an account-

‘ing, an appeal may be taken from such deeree to the

eifeuit court of appeals: Provided, That such appeal

be taken within thirty days from the entry of such

Kee

. . ze 4 , N

decree or from the date of this act; and the proceed-

ings upon the accounting in the court below shall not

: be-stayed unless so ordered by. that court during the.

eee of such appeal.” 7

Sections J and-2 of the Sherman Act of ,July 2, 1890,

' ¢. 647, 26 Stat. 209, as amended, 15 USC, §$ 1, 2, provide

‘int pertinent part: ; me soe

“See. 1. nv contract, combination in the form’

-of trust or otherwise, or conspiracy, in restraint’ of

trade or commerce among tlie several States, or with

foreigwnations, i is hereby declared to be illegal * * *.’”

“Sec. 2. Every person who shall monopolize, or

attempt’ to monopolize, or combine or conspire with :

any other person or persons, to monopolize any part

» Of the trade or commerce among the several States,

or With foreign nations, shall, be deemed. guilty of a-

'. misdemeanor * oe 2

“STATEMENT -

—

Though phrased in terms of a ‘jurisdictional issue, the.

first question raised by the present petition is relatively

‘simple: In the course of patent litigation, the defendant pre-

sented an issue of patent abuse becausé of illegal restric-

_ tive covenants ‘in the license agreement (R. Vol. T, pp.

5-11; also reproduced, for- convenience, as @n appendix

hereto). ‘These restrictive covenants, in an earlier cer-

tiorari in this same case, had induced the grant.of the

writ, and had been’ characterized ‘by. the Department of

Justice, in an amicus brief, to ‘‘constitute an Abuse of the

. patent privilege, contravene the Sherman ‘Antitrust Act,

and: render the patent here: unenforceable’-and invalid”

The trial court, in direct opposition tp decisions of, this

Court and of several circuit courts of appeal, held ‘against

_ the: ‘defendant, and. refused to modify its previous _dq cree

and to dismiss the complaint, The defendant appealed to .

the Ninth Cireuit Court of Appeals, which, by a divided”

court, - ‘determined that the order was not appez ilable de-

‘spite the provisions of Section 129 of the Judicial Code.

_ In effect, the defendant cannot have a decision| on a basie¢

issué controlling the merits ‘of the controversy until after

—a prolonged ‘accounting, which may last several years, has

-been completed. ‘The- action of the Circuit Court of Ap-

peals,-in supposedly determining a mére question, of juris-

pee was characterized by the dissenting judge as a

“clear ease of obscuring in the form the essence of whit,

under our order, the lower court undertook and: did. ” 156

F.(2d) at 346.

A brief. review of the previous course of: Ahis litigation

serves to bring into focus the i issues presented. '

These patent: infringement suits, consolidated for. trial,

were previously | before this ( ‘ourt on the question of pat- |

ent misuse by virtue of restrictive covenants in a license

agreement between the respondents. After certiorari had

been granted and a full hearing had been held. ‘this Cc ourt.

dismissed the writ without decision on the merits, ypecause *

the “only question! for which we granted certiorari is one

not: properly raised, litigated or passed upon below,” and, .

, the “orounds asserted for the allowance of Certiorari. are.

inadequately supported by the record.” 323 U.S. 327. *

The record wf the case thén before the Court revealed

that Respondent Kammerer Corporation was the owner

and lice nsor of Reilly and § Stone Patent No. 1,625,391, cov-

erinig a tool for cutting ‘and remov ing stuck drill pipe frqm ~

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oil well holes. Recinadens Baash-Ross Tvol Company was

the exblusive | licensee under the patent. Suits were jointly

brought and Consolidated for trial in the federal District

Court for infringement by petitioner. Petitioner, in his

aiiswers, denied both infringement and the yalidity of the

patents,and i in addition set. up the def fense that “the plain-

tiffs cannot maintain this suit because they do not come

.into this. court with clean hands and are therefore estopped

from enforcing any, right of actfin agaiiist the answering

defendant.” (R: Vol. III,. pp. 51-52, 78). Dae

The Kammerer Cotporation, the owner of the patent by

hcioiinnt was ‘simply organized to hold the patent .and ¢

license it: (R. Vol. I, pp. 6, a¥; Vol. II, p. 163). It neither

manufactured, sold, used, or leased tools. This eérporation

granted an exclusive license to Baash- Ross , Which ds, in the

business éf manufacturing, selling, apd renting oil-well

“fishing and other tools. The License Agreement (see

appendix) Wound the ligensor’ and licensee not to manu-

facture, use or rent any “devices which, will come or be .

in competition with the device or deyices covered * * *.”"

. The agreement furthef provided that the licensee ‘might

*. manufacture and use, but not sell? the patented tool. The

use was-confined to “rental” on a prescribed job basis for

a. prescribed rental of $190 per: use. In ‘practice the

“rental” of the “tool was inade: to the oil well owner, but

1. As pointed; out both by the petitioner and by the Depart:

ment of Justice, in briefs filed in the. previous heaping in this

Court, the’ provisions of the: License Agreement which precluded

the ‘parties: from making or using devices competitive, with the | °

patented artiéle were clearly unlawful; and the prov icf making

the ‘trenmtal’! for the patented device embrace services not covered

by the patent necessarily distinguish the case fro United States

v. General Electric Co., 272 «US. 476. ,

2. Italics throughout are supplied Unless otherwise indicated.

‘ ‘ fe

‘ te ; . f

- Li ~™

ef ‘ -

- the licensee provided its own experienced operators to

Further, ‘the licensor also was bound by the agr cement not

direct its employment (R. Vol.ciI}, pp. 288, 290, 291). The .

$190 was charged for the entire operation. As “royalty,”

the licensor was to receive fifty per cent of ‘gthe gross earn. |

ings ace ruing by the use of said devices by “the Licensee.

to sell the patented tool to anyone.®

Although the issue of patent misuse was present, it was

not pressed by petitioner and was not picked up by the

lower courts sua sponte, After an interlocutor, 1.2) suction

had been entered and an ac coanting for profit s ana dam-

ages ordered, but postponed pending appeal, the Court of

Appeals affirmed by a divided vote. 158 f.(2d) 482. This .

Court, after granting | review because of the patent misuse

issue, dismissed ceétiorari for the reasons already out-

lined.’ .

On remand, the Circuit Cont of Appe: ils, Was petitioned

to deny the accounting because of the patent misuse, or

permit the petitioner to litigate the matte: before the trial

court. The Court of Appeals amended its former judgment

of affirmance to permit dhe matter to be tried before the

District Court. 148 F- (2d) 525. .

In accordance with this ordef reopeniug the case, peti-

tioner moved the District Court to-modify the interlocutory

judgmént by eliminating the provision for an accounting’

and also asked for a “nal judgment dismissing the original

complaints... Thé only issue presented was that of patent

misuse, which this, Court had determined had not been

_previously. tried, below. The trial court devoted a ‘day to

ee a eet

3. The patent expired pending. review, so that injunctive relief

no longer was of comBequence. “a

Ee eS Seen eS ee

argument, afforded an opportunity to introduce further

eviderice if either party deemed fhaT necessary, and ulti-

mately” rendered an oral opinion (R. Vol. I; pp. 46-50)

and entered many new findings of faeteand conclusions of

law. (R. Voi. I, pp. 16-26). Petitioner's motion was denied.

In dénying ya motion the, trial court appreved the restric-

tive feat “ures of the license irrespective of whether “we

call ita joint venttire or not,” since the license involved a

single licensor, and a single licensee: St Ne

* * If we say that a man cannot agree with an

: dmebusive licensee that he shall not handle other arti-

eles that might compfe with it, we really prevent the

patent owner from the benefit of the monopoly which

his discovery entitles him to, under the Constitution,

and the law, and fhe law of the ‘Btate. ” (RK. Vol. I,

©p. 48) ;

«* © © the covenants themselves are of a character

which the owner of a.patent has a right to entér into

° with one whom he makes an exclusive licensee, aim-

-ing at’ the exploitation ‘of the invention.” (R. Vol. I,

p.. 49) , 4

This denial of the defense of patent misuse terminated

- the ‘litigation, with the exception of te accounting which ~

is-proceeding and may continue to proteed for some years..4

Petitioner then appealed to the Cirenit Court of Appeals.

The majority of - that Court held’ that it was without

jurisdiction under $129 of the: Judicial Code, since. the

order denying the motion, to thedify the Xe for an

accounting and to dismis: the suits was not a ‘‘decree, »

- final or otherwise.”’ The ’ ajority held that $129, in per- *

2 mitting -ppeals in patent cases where -‘‘a dectee is

rendered which is final except for. the ordéring of an

ancountinn”® still required that an accounting be held be- |

fore the newly- litigated and now controlling issue of patent

abuse could be reviewed, Reliance for this conclusion was |

placed on this Court's event no in Cathn, v. United

States, 324 U.S. 229, a suit invol ing land contiemnation

under the. eminent domain power. 156_F.(2d) 343. Judge: ~

Denman, dissenting, pointed out the impropriety of resort-

ing to cases foreign to the patent field to sustain lack. of.

jurisdiction. He deemed the order below ‘‘a final decision

* on the dominant issue’’, and the opinion of the majoritv-

tha clear case of - obscuring in the form the essence’ of

’ what, under our order, the lower court undertook and did.”’

156 F.(2d), at 346. oe

REASONS FOR GRANTING THE WRIT

1. The Cireuit Court of Appeals for the Ninth, Cirenit .

has decided an important question of féderal law, which

- has not, but should be- settled by this Court. In deciding.

this jurisdictional. question, the majority below not only a

"has defeuied the policy.of this Court in facilitating resis-

tance to patent abuse, but has misinterpeted and misap-

plied this Cou¥t’s recent decision in Catlin v. United States,

$4US. 29. - — |

_ In the:patent field, this Court has long been concerned

with the monopolistic consequences of patent misuse. ‘It

has done what it has been able to do, to withhold the |

fruits of such abuse from persons acting contrary to the

pubtie interest or in violation of the anti-trust laws. Cf.,

e.g. Keystone Driller Co. v.-General Excavator Co., 290

“US, 2 Carbice Corporation of America v, Americ

Pate: Vp aortas Corporation, 283 US. 27; Morton

Salt Co. v. G. S. Suippiger €o., 314 US. 488, The policy of

‘

this Court in recent ‘years, it:is submitted, has been to:

encdurage and implement resistance to unlawful extengion.

of -the privileges conferred by the patent law. The object

has been to prevent unlawful and unwar ranted interference

with normal competitive forces. '

- Resistance to improper claims of monopoly in a eofn-

petitive field by virtue of patent proteg

-and often. rendered impassible by

is hampered

thef/great expense in-*

“volved in contesting the validity of Nee patent said to dom-

“inate the field, or to attack~its use on, public policy and

Sherman Act grounds. It aR generally conceded that:

- patent litigation is expensive and that compensation for .

even a successful defendant in an: infringement suit is

- wholly inadequate. Woodward, ‘A Reconsideration of the.

.Patent System as a Problem of Administrative Law’’, 55.

Harv. L. Rev. 950, 969 et seq. (1942). The. line’ 6f least

resistancé is to accept a license on whatever terms one may

\ be tendered or retire from the field, rather than undertake

‘suett an onerous burden of vindieating public poliev.

Phe policy of this Court in aiding what is essentially

defense of the public interest at private expense can be

implemented only by. a futheranee of “the Congressional

effort to eliminate needless expense in patent. litigation.

The majority opinion below has struck a blow against that.

poliey.

Section 129. of the Judicial Code has sanctioned inter-

locutory appeals i in a number of situations. The granting of

an ‘interlocutory injunetion- or the refusal to modify ‘or

dissolve such a decree affords the basis for an immediate

appeal. Thus in a patent case the entry ofan order for

. an interlocutory injunction against infringement an re-

quiring an accounting is appealable. In fact such an- appeal

; wg

of a

rte | at

was taken in the instant case and the accounting was

stay ed pending its outeome. Likewise an unsuccessful mo-

- tion; which was actually consider ed by the court, to (dissolve -

an injunction would result in an appealable order. In the

- instant easé, however, the injunction became non- operative

by virtue of expiration df the patent.

. Prior to 1927, the expiration of the patent in suit and

‘the resulting mootness of the injunction phase of the .in-

fringement proceeding, had resulted i in an anomalous-situa-

tion. Although the policy of the: law was to permit im-

mediate and interlocutory appeals in patent suits, the

elimination of the injunction prevented appeal prior to-

— completion of the accounting. This led to the 1 27 amend-

‘ment providing for appeals in patent infringement cases

when ‘‘a deeree is rendered which is final except for the

ordering of ep/heconating. 1% :

The bill’ which resulted in this amendment was intro-

Pare at the request of Judge Evans of the "Seventh Cir-

cuit Court of Appeals, had the approval of the ‘Commis-

sioner of Patents, the entire patent bar, and all of the

lederal Judges. S. Rep. No. 1319, 69th Cong., 2d .*

In support of the bill Judge Evans wrote:

“* * * Some years ago the owner of a very im-

portant patent brought *suit in ‘one of the district

courts of Illinois, and the defendant interposed . the

defense of invalidity. The case @#as very well con-

tested, and-the cotirt was in doubt, as to Whe validity

of the patent. The court finally upheld the patent and

found infringement. The defendant had for a long

a ‘

'4. For the history of this and prior. amendments to Se ection 129,

see Brick v. A. I. Namm d& Sons, Inc., 21 F.(2d) W9 (E.D.NLY::

1927); Ward Baking Co. y Ww eber i Fed. 142 ic .C.A.3d,

1916).

. Fs a.

am. .

period: of time® bgt infringing the patent. It took

‘veothe position that.At had-a right to do so and was so

~~ advised by cognsel. ‘The account was a very long’ one,

and [ am satisfied that it dst the litigants $50,000, .

Finally the report of the matter was confirmed by the

district court and judgmeft was entered — the

' infringer for something like’a million dollars:

**The-case has how reachéd our court, and there are

- al 15,000 pages of testimony. The appellant insists

ane Rig is invalid, although its apyeal is both

* from the award and from that part of the deeree

\ which sustains the patent and holds the appellant .

in infringer. ies , a

‘If the patent showld be declared invalid, all of

this expense on this account will have been for naught.

Mot only will it have been a useless expense to the

litigants, but it, has taken much of the court’s time.

7 Appeals may now be taken from.the Jjvterlocutory *

injunctional degree upholding the ,pat tont when a

patent is granted. HH, however, the patent Jas expired

when the decree iS8 entered, theugh it was in force

when the suit was begun, an appeal can not, be taken ©

until a full account has been had:

‘*It is to remedy this situation that your bill H. B.

“11840 has been “introduced. IT sincerely trust ‘that it

will pass at this session of Congress.’? (H. Rep, No.

» 1890, 69th Cong., 2d Sess., 1-2). %

The policy of Congress was thus to eliminate the pend-

ency of the injunetion in an infringement suit as a factor

‘in immediate appealability, Congress recognized the. de-

sirability of interlocutory appeals. And both before: and

‘after the 1927 amendment the court: Thade it cher how

broadlw Section 129 sanctioned appealk from interlocutory

* orders, especi ‘ially’ in patent CASES,

oe.

This Court has entertained a patent case appealed under.

Section M9 to the Court of Apeals for a second time prior

to an accounting. John Simmons Co. v. Grier. Bros.

258 U.S. SJ. Conipare Marconi Wireless ‘Telegraph Com-.

‘pany of America v. United States, 320 U.S. 1, 47; In the

(rier ease, the interloeutor® decision on‘a request for in-

junction, affirmed on appeal, was reopened on a request

_for rehearing, and the resulting order was likewise ap-

‘pealed, :

Both successful and ‘unsuccessful motions te vacate or

... dissolve injunctions ‘have beey-teld appealable under Sec-

ve Schifiin -v.hewflle, Mfg. Co.. 147 F.2d) 92

(C.C.A.2d, 1941) (motion to vacate granted); Rivers v.

Miller, 112 F.(2d) 439 (C.C.A.5th, 1940) (motion to dis-

solve denied); Mississippi Valleg Trust Go. v. Railway

Stel Spring Co., 258 Fed. 346-(C.C.A.8th, 1919) (motion .

“S to vaeate denied) ; Bothwell v: Fitzgeralw, 219 Fed

Ye CA 9th, 1915) (motion to vacate granted); American

« tion 129,

_- Grain Separator Co, v. Twin City Separator Co., 202 Fed.- *

22 (C.C.A.8th, 1912). (motion to dissolve denied).

A denial ofa motion to strike an answer has:been held .*

I.(2d) 115 (C.C.A.4th, 1938). And both under the earlier

text of the Section and the 1927 addition an order denyiffg

a motion to amend a complaint with respect to a patent

claim-—-a claim which had been held unenforceable by gn

earlier order in the case-\ was hah consailable. -Michinen

- Carton Co. v Sutherland Pdher Co., 29 F.(2d) 179 (C.C.A,

6th, FOS). zs - .

This india policy in patent cases is‘ negatived by the

majority of the eourt ‘below by applying this Court's

opinion in Catlin v. United States, 324 U.S. 229. This is

’

% aiNdeaiicatil of the Catlin case, it is submitted, ‘contrary .

to the intent of this Court. The Court, through Mr. Justice ~

RytledBe, Was ° interpreting policy -in a wholly. unrelated

field’ Mivolving different : statutory provisions. The .con-

— démnation of Jand under the eminent domain power will

seldom result’ in an illegal condemnation, but will fre-,- :

ngeney result in hotly eontested questions of just com- -

pensation. In such circumstances it ee eacious to post-

pone’ review until-a final judgment on/ll matters has been

entered. In keeping with this policy, = a $128 of the

Judicial Code, gly ‘‘final decisions’? fn-such cases are |

reviewable. Eve in this field,. the Court ‘recognized that’

\ in the District Columbia interlocutory decrees in con-

7“? eaation suits are reviewable by. virtue of the statute

.. there prevailing passing revigy, of interlocutory orders.

. See 324 U.S.,.at 232, footnote 6. ;

In the patent rite there is a practical: necessity, as has

been ‘seen, to avoid the expense of unnecessary account-

+ ings. In this entirely «lifferent . setting, the application of

the Catlin case-is unwarranted and this Court van clarify

the law by granting certiorari and, reviewing the instant

case. 08

_There\would seem to be little question that the order ¢

4 in. the instant. case was final except for the accounting,

within the meaning of Section 4:29. It is not. ,important

‘whether a refusal. even to entertain a rehearing is non-

appealable. In the instant case, because of the public -

interest involved, ‘the proceeding in the trial court was

reopened to entertain evidence and make findings with

respect to the heretofore dormant-issttt of patert misuse.

The reopening &as nat evidenced by vacating the previous

decree, That was not necessary unless on ,the merits the

_ 2 ‘

15 73 a,

petitioner proved to be successful in establishing patent

“misuse in violation of public policy or the Sherman Act. -

After full hearing, the trial court decided that the license

agreement on its face was valid, making many new findings

of fact, and entered an order refusing. to dismiss the com-

plait or modify the requirement for an accounting. Since

infringement and validity had already beer determined,

and for the fir st. lime the issue of patént misuse had been

‘heard and disposed. of, the ease had* become final, except

for the accounting.: a

-It is submitted Section 129 at that stage sneak: an .

‘aoe If the trial court: had vacated its previous decree

-while it heard. the. patent misuse question and had “then

reinstated it, ‘there w ould secin to be no question yf appeal-

ability. Different consequences should mot flowgfrom the

'. full hearing accorded, without this technical step, under

the Court of Appeals’ decision to permit the vital question

of patent misuse’ to be litigated for the first time below.

® ‘ @ ‘ . sponge

Once that-issue, was entertained by the trial court, which

devoted a day to its exploration, it was clear that the case

was reopened, that no accounting would ever be had unless

the igsue presented — were resolved. in, favor of the re-

. spondents. When that issue was resolyed the order entered

was a final one, except for the accounting. The application

oO the Catlin case to this situation, _and the defeat of Con-

_gressional and public policy involved, would require that

certiorari be granted.

2. (Qf the substantive issue of patent misuse—the sec-

ond question presented—the reasons which led this Court’:

to grant certiorari when, this case was last before it would

seem to compel similar treatment-now-that the record has

heen perfected. The issue of patent misuse by virtue of

the license agreement betw een respondents has now been

raised’ gn the trial court, and that.court has said :

“* * * analyzing the instrument on its face, the. ‘cove-

nants themselves are, of a character whie h the owner

of a patent fas a right to enter into With one whom

hey makes an exclusive licensee, aiming at the ex-

ploitation of the invention.’’ (R. Vol. I, p. 49)

Since both respondents covenanted not: to deal in com-

petitive devices, and “since’ the ‘Cireuit Court of Appeals

o the ‘Third Circuit, in National Lockwasher Company

», George K. Garrett C ompany, Inc., 137 F.(2d) 255, held

eu an arrangement in ‘restraint of tradé, review by this

Court would seem necessary.

In, addition, the rigid restrictions of the licemsé on what

the licensee may do and what it may charge ‘or renting

the patented tool, together with the necessary operating

crew, raise a Serious question as to whether the license ‘

has not been so conditioned ‘as ‘to control ‘conduct by the

licensee. not embraced in the patent monopoly, ” Ethyl

Gasoline Corporation et al. v. United States, 309 US.

436, 456. oe re 7

Insofar as the trial court sanctioned price-fixing by a

non-manufacturing licensor, the court was extending U mited

States v. General Electric ‘Co., 272 U.S. 476, beyond its

legitimate scope. Stich an extension is in conflict with

United States v. Vehicular Parking, d+ F. Supp. 828 (D. pel.

1944), where the Court ruled that the ““General Electric

ase is predicated upon the patentee making and vending

the patented device. ’’ The continued validity of the General

Electric case, even. when confined to the facts there pre-

sented, has not gone without “challenge. United States v.

Line Material Co., Oct. ‘Term, 1946, No. 464. Its@xtension

ial

. / e \

~ . 7 ‘ : ‘ bi 3

. ° ‘ .

7 .

in the instant case would seem to call for review ‘by this’

Court. This is particularly so in the setting of the re- :

strictive instrument involved, forbidding sales’ by ‘¢ither

party and, providing for rentals under narrowly defined

circumstances, ATl this the trial court sanctioned to prevent

. “*the patent right” from becoming ‘fan: illusory right.”’

(R. Voi. I, p. 48) |

Although this Court could confine its grant of certiorari

_to the jurisdictional question determinative of the case -

in the Court of- Appeals, it is respectfully urged that the ~

review granted be not so limped. This Court, in Liberiy °

Oil Co. v. Condon National Bank, 260 U.S. 235, 245, stated:

‘“* * * we could consider and decide the issue which

the Circuit: Court of Appeals erroneously ‘refused to

consider. On. such an issue alone, however, we would

not have granted the writ, because except for the-im-

portant question of practice, the case was not -of

sufficient public interest to justify it.””

In the instant case, the substantive question ‘alone amply

" justifies review, as witness the prevjous grant of certiorari

by this Court on the substantive. question. Only further’

pray would ensue from remanding the case to the Court

Appeals for determination of the public policy issue -

a: = of eat abuse which anust ultimately be- determined by

this Court. Even unresolved doubts as to the jurisdiction

of the courts below have not prevented this Court’ from

passing -on thé merits. pf cases before it. Cf. ‘Inland Empire

District. Council v. Millis, 32. U.S. 697. It is therefore

urged that this case be reviewed in its entirety. so that all-

queations may be determined.

of certiorari should be granted.

| ae

CONCLUSION

It is respectfully submitted that this petition for ‘a writ -

Dated, San. Francisco, California, . ‘ 7

December 9, 1946, :

R. Wueiton Wann

A. W. Bovken ~

_ Rosert M. McManican

° Attorneys for Petitioner

W. Bruce Beckutey’ —_

BoykeN, Mounier & BECKLEY é ~~

‘Of Counsel —

_ (APPENDIX FOLLOWS) ~ |

Ge.

P Appendix |

PLAINTIFF’S EXHIBIT No. 7

LICENSE AGREEMENT ~~

Tuts, Acreement, made and entered into this 18th day

of Oc tober, 1923, by and between Kammerer. Corporatien,

a corporation organized and existing under and by virtue

of the laws of the State of California, with its principal .

place of business at Santa Fe‘ Springs, County of Leos

Angeles, State of California, hereinafter referred. to as

the Licensor, and L. F. Baash Perforating Company, a

corporation, organized and existing under and by virture

of the laws of the State of Ca:ifornia, with its principal

place of business’ at Brea, County of, Orange, State of

California, hereinafter referred to as the Licensee:

‘7 r WITNESSETH :

Tuat, Wuenreas, the Licensor i: the sole owner of Letters

Patent No. 1,277,660," covering Tools for Cutting and Re-

moving Pipe From Wells, and of that certain application

for Letters Patent of the United States, Serial No. 652,511,

covering Tools for Cutting- ‘and Removing Pipe From

Wells, which said applitation was filed on the 19th day of

July, 1993 ;+ and

Wuereas, the Licensor has and ‘does hereby warrant :

that it is the sole owner of the aforesaid inventifns and

all rights ‘thereto; and ;

oot

*Probably misprint in reeord as correct number of Kammerer

Patent is 1,277,600,

‘This is the application forthe Reifly and Stone Patent in suit.

; SP:

é <a le

wil ¢ . a

. - . , 2 g

Wuereas, the Licensee.is desirous of obtaining a license

.to and for the said inventions and any Letters Patent

which may be granted on said application to the Licensor ;

Now, THEREFORS, for and ip ¢ consideration of their re-

‘spective covenants and agreeme nts hereinafter contained,

and of the full and faithful performance of each and -

every thereof, the parties hereto have and do hereby mu-

— agree as follows:

‘1. The Licensor hereby grants to the Licensee the ex-

elusive Tight and license to manyfacture and use, but not

to sell, devices embodying the aforesaid inyentions under

any Letters Patent now granted or. which may. hereafter .

be granted or any applications now pending» or any

patents hereafter obtained on improvements on the device

or devices above mentioned, throughout the United States

of “America and the Aerritories thereof, said license to

continue for the full /term of any Letters Patent granted

for said inventions or, improvements thereon. /

2. The Licensee cévenants and agrees during the term

of this license to pay the Licensor hereunder upon all de-

vices embodying the aforesaid inventions, a royalty ot

fifty percent (50%) of the gross earnings accruing by

the use of said devices by the Licensee. |

3. The Licensee covenants and agrees during the term

of this license to charge as a rental for thie use of said:

device or devices the sum of One Hundred and Ninety. -

Dollars ($190.00) per cut made by said devi ice or devices.

4. The Licensee agrees to keep true and accurate books

of account showing in detail the number of devices em-

bodying the aforesaid inveatign manufactured by the

. yO i ili

Licensee, together with the dates of the use thereof and

the names of the parties to whom the same were rented

, or upon whose property the same were used; which books

of account shall be open at all usual business hours:

for the inspection of the Licensor or its duly authorized

dagents.# The Licensee fugther agrees to render to the.

Licensor on or before the fifteenth day of each and every

calendar month during the term—of this license, a true

wd correct statement in writing, setting. forth the quan-

_ tity of said devices manufactured by the Licensee during

the preceding calendar ‘month, together with a statement :

showing the dates of the use or rental thereof and the

number of ents made and the parties for whem the de-

vice or deviees were used during the preceding calendar

month.

5. The Licensee covenants and agrees to pay’ to the

Lidnsot at its office at Santa Fe Springs, Los Angeles.

‘County, California, the. royalties on ‘the cuts reported in@

the statements hereinabove provided within thirty-six days ‘

after the statements are reydered.

‘6. It is iereby mutually covehanted and agreed by and :

between the parties hereto that any accounts of business

done under this agreement by the Licensee, which,are not

paid within six (6) months from ‘the time the statements

of such business are rendered to the Licensor as herein- “a

before provided, shall be considered bad accounts and any 3

reyalties which may have heen paid on such business shall

be deducted from the royalty acegufit of the Licensor.

It is further agreed that at the time of making any auch

deduétion the Licensor shall have the right to take over

ee Nad on

the collection of such account on “accounts by s@ notify’ ing - .

‘the Licensee and that fob the purpose of collection. the

Licensor may use the ‘Licensee’s name and that for every

such account éollec ‘ted by the Licensor, the Licensor may

retain in addition to its roy alty, all,costs of. callantinn:

It is, further, understood and agreed that w hetiever the |

* dicen has refunded the royalty onyany non- collectible

-, account and the Licerisee thereafter niakes collection “of

_ said account, that the Licensee shall repay the royalty .

theretofore refunded. . .

It is further understood and agreed ‘that the ry oer

will cooperate with the Licensor by durnishing the neces-

sary evidence to prove the account on such claims as the

Licensor undertakes to. collect purs rae to this agree- —

ment. :

7. The Licensee covenants and agrées that in the

_ manufacture: of devices under this license agreement it

will stamp on all such devi ices so Manufactured. the. word

“Patented,” together with the date of said patent or

patents.

8. The Licensor agreess ti "diligently prosecute the

aforesaid application for Letters Patent, Serial No. 652,-

511, and procur: Letters Patent covering said invention,

if possible, at the earliest date, and the Licensor agrees’

to indemnify and save harmless the Licengee against any

and all liability, damage, loss or injury adjudged or sus-

tained by reason of any claim or suit that said device

constitutes an infringement upon ahy Letters Patent here-

tofore or hereafter granted; prov ided, however, that in

case suit is brougnt against the Licensee; the Licensor

shall be given ngtice thereef and shall have o yportunity

to intervene ‘and e. said élaim or suit! ;

9, The Licenkee Hereby covenants and agrees that fhe *

Licensor shall have, and it is hereby given, a first lien.on

alb detiees manufactured under this agreement as and for

security for the payment to the Licensor of all unpaid

_ royalties which may accrue during the term of this agree-~

: wy Areal ot ;

ment. ;

10. is hereby mutually covenanted and agreed by

“and mnie the parties hereto that should the Licensee

become ba ikrupt or be thrown ‘into the hands of:a re-

ceiver or receivers, then and it that event the Lieensor *

_shall have the option to purchase all of the devices manu-

factured by the Licensee under the terms of this agree-

ment_at the agreed price of three. ) undred ($300.00) Dol- “Sa

lars, for each and every such device, and in payment for

such devices the Licensor shall deduct from the purchase

price the amount of its lien or-liens for ufpaid royalties

and pay the remainder, if any there oles to the Licensee's

trustee in bankruptey or reesiver or receivers.

: 11. The Licensee cov enants and agrees during ghe term

of this license agreement not to ‘manufacture or use or

rent any device which will ‘be. in competition with he

device or devices coy ered by this license agreement.,

12. The Licensor coverants and agrees: that during the

term a thi

- license, use, o

in any way do business With the device or

peta eS shinai DY this reinnanes or with devi ices when

< agr reement, not to manufagture, setl, rent, ar

oor areas 2 i.

all of -

factur

13. It is mutually covenanted d agreed that this

license shall ‘be assignable by the Licensqe only upon the

written consent of the Licensor, its suctdssors or assigns.

Ne It is further covenanted and agreed that the ,

Licensee shall manufacture and use the required number

of rete) necessary to take care of the demand for gaid

devices amongst the operators if the oil-fields of the

Unite States of America. And in the event the Licensee

spall fail or neglect to tfurpish’ the devices necessary to

take care of the demand of the oil operators in any or

1e oil- fields of the United States of America, the

Licens¢r may serve notice on the said Licensee t2. manu.

> and: fdrnish devices to the operators of any or of

all of the oil-fields of the United States.and if within one

hundred\twenty (120) days after suc ‘h noticé has been

served upon the Licensee, the Licensee still fails or neg-

“ in’ each six ae) sgt of this agreemen

lects to furnish devices in-any or al! of the oil-fields of

tke United States where there is demand: therefor, then

and in that event, the Licensor may: manufacture and

use, or license others to manufacture and use, the de-

vices cove i. by this license agreement, in such oil-fields

where the-Licensee shall have failed to supply the demand

for such devi ices, provided, however#that nothing in this’

paragraph contained shall give ‘he Licensor or its licensee

or licensees the permission to alter the prices fixed by this

license agreement for the use of the devices covered liere-

by; and prov ided further that nothing herein contained

shall require the licensee to enter more *tR one oil-field ”

vii

upon, a breach cf the terms of this agreement by the

Licensee, which notice shall specify the breacli and shall

give the Licensee a right and option ‘to remedy the breach

within — thirty (30) days -after said notice. In he event

that this license agreement shall be terminated’ in ac-

cordance , with this paragraph when the said Licensee

agrees t hay all royalties on ‘cuts made prior to the date

4 upon wiich this agreement becomes terminated and-agrees —

fo sell

‘deliver to the Licensor all the devices in.

existence at\such time at the agreed price of three hun- -

In Witness Wueretor, the Licensor has .caused this

agreement to be executed by its President and Secretary,

«luly authorized, and has caused its corporate seal to be

affixed, and the Licensee has caused, this agreement to be

executed by its President - -and Secretary, duly authorized,

and has caused its- -corporate seal to be affixed, all on ‘the

day and year first ‘above written.

(Seal):

4 .

KAMMERER C ORPORATION,

. ee By are. naa, President,

Attest: :

Berpena V. Frrzceranp,

Assistant Secretary.

(Seal) L. F. Baasu Perroratixe Compayy,

2 By .L. F. Baasu, President.

Attest:

¥ |B. Refay, - 1 e

- 2

Seer tary. E

a; an rae ) Y ..

| Endorsed] :. Pitff. Exhibit No. 7. Filed 578/41. +

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.