Carter-Wallace, Inc. v. The United States

Judge, and COWEN, Chief Before DAVIS, DURFEE, COL- LARAMORE, Judg- NICHOLS, SKELTON, and LINS, es. Judge.

DAVIS, para- has moved to strike graphs through or, in the alterna- opening pat- This is an skirmish in a tive, summary judgment dismissing ent suit under 28 U.S.C. 1498 to § paragraphs. opposed compensa- cover “reasonable and entire both halves of the motion before the trial by tion” for unauthorized use the United commissioner. He allowed the motion States of the invention described and entirety, summary judg- its as one for 2,724,720, claimed in “Di- U. S. Patent seeking judges, ment. review Propane carbamates Substituted acquiesces defendant in some of the com- patent Diols.” Plaintiff owns and challenges missioner’s conclusions but petition charging infringement filed its plaintiff’s others. Because motion relies representa- of claims 1 and 4. Claim 4 is on affidavits and documents outside the 1-1,3- “2-methyl-2-n-propy tive and reads pleadings, we treat it as motion for propane dicarbamate,” diol which is summary judgment (as did the trial com- compound drug gen- chemical with the missioner) rather as a than motion to “meprobamate.” Meproba- eric name strike.1 mate, drug products and combination containing meprobamate, have been sold I by plaintiff and others under various trademarks, including and “Miltown” Background “Equanil,” many years and have for been patent The issued to leading drugs tranquilizer for treatment plaintiff Shortly thereafter, in 1955. neurosis, anxiety and tension. plaintiff licensing entered into a ar- asserting filed an answer rangement with American Home Prod- patent invalidity the usual defenses of Company (“American”) ucts noninfringement. and The also answer granted which American exclu- alleged patent that unenforceable right (except plaintiff) sive use to because and con- “combined meprobamate. and sell spired” “monopolize” to “restrain” given right meproba- to make trade violation §§ right mate. Plaintiff retained Act, 1 and 2 of the Sherman 15 U.S.C. §§ agreed supply itself and American’s and that “misued its has requirements prices mu- “at monopoly secure tually agreed upon.” Plaintiff also re- beyond scope tained the to sell Later, defendant filed amended a first pharmaceutical other manufacturers adding through answer making drug prod- through Paragraphs set out ucts, discussing after first alleged in detail certain viola- proposed li- sales with American. patent misuse; par- tions and and those provi- cense contained restrictive agraphs present aré dis- the basis sions, need not be set the details of which pute. allegations challenge some F.Supp. (they are set out at out here plaintiff’s licensing, marketing pric- infra), deemed at 146 which were ing practices mepro- respect violations of anti- Government patent. bamate Accordingly, anti- trust laws. extensively We have borrowed fom the commissioner was that as a result opinion go of Trial Commissioner James F. adequately informed. We do not Davis, although we come to different con- the merits of claim into the details aspects clusions on agrees certain of the case. it has now since fair chance to make a full and had such 1. On review of the trial commissioner’s arguments documen- ruling, urged strongly the Government that motion. The tation or affidavits opportunity it had not a fair before being legal, them respond we consider plain issues commissioner summary judgment, tiffs motion for de novo. (C.A. 3,1956); Kins, Dissipation States of Pat- filed the United trust suit was Misuse, against as code- ent and American Wis.L.Rev. for the District Court fendants question The main the con is whether Before New York. Southern District of existing sequences negotiations, trial after extensive prior to the consent decree 1962 were judg- settled a consent the suit was dissipated judgment. a result v. Carter States ment entered. agreed only judgment after entered keting pricing practices and have no in the it was court was satisfied post-1962 relevance.2 The affidavit 147, public 211 interest. See represented attorney (Ross) who judgment requires essence, the 148. litigation plaintiff in the antitrust lead any qual- meprobamate plaintiff to sell ing up judgment to the declares consent at no pharmaceutical manufacturer ified complied company promptly that the with price for specified maximum than a more judgment it un and that has manu- and sale such use unrestricted swervingly adhered to its terms ever other conditions There facturer. dispute since. Defendant this judgment some in the qualifications and (at present stage statement least at the noted later. will be of which litigation) and we must assume whether, it is so. issue is will that courts is settled nevertheless, proper defense litigation infringement patentee aid a sepa misuse rately been stated. treat has We pat dealing patentee, with if types with defense various engages sales, product ent licenses or challenged paragraphs. raised in the laws in conduct violative of the antitrust equity. principles Salt or the Morton II 488, Suppiger Co., v. G. 314 U.S. Co. S. 402, 788, 363 315 86 L.Ed. U.S. Paragraphs 25, 26, 29 (1942). Such conduct come has Paragraphs 25, 26, and 29 application

called and misuse agree amended answer relate to license equitable who that he doctrine plaintiff ments and American between equity 1959; seeks must come court Cyanamid, into entered into 1957 and plaintiff Merck, and and its and entered into clean hands. When agreements provide consequences 1956. The dissipated, how been meprobamate respec ever, patentee again sell free is once against pursue statutory tive which in turn will resell the remedy his in licensees only meprobamate, fringers. Disintegrating in combination v. Metals Co. 3 drugs. Reynolds 885, other certain F.2d 889 Metals 228 Co. patented petition Sep-

2. States of Because here tlie United was filed 1967, plaintiff prior to November 1962.” tember invention would ordinar- ily be entitled recover for unauthor- permit agreements 1959 3. The 1957 six-year previous period ized use for the meproba- Cyanamid to resell American September thereto, e, i. back only tridihexe- in combination with mate See § 2501 and 35 U.S.C. § U.S.C. d-amphetamine sulfate, thyl iodide However, of con- memorandum permits agreement spectively. ference of December reads meprobamate in com- Merck to resell part: predniso- prednisone bination with and/or agreed “3. recov- lone. to waive ery license-agreements, Carter- rea- Under States payment compensation for both receives sonable and entire for Wallaee says practice contracts, because Merck shall not invalidated unlawful “ * * * they provide “payments free to the extent restricted the roy- compound and of use and alienation of Carter, impose United States after sold alties otherwise * * * limitations, obligations parted product restrictions * however, person; provided, dominion such and control thereover g., cases, person citing, among American other United States [e. Co., qualified pharmaceutical v. Univis Lens S.Ct. Merck] (1942) eligible purchase me- and United 86 L.Ed. house shall be * * Arnold, probamate 388 U. from Carter in ac- States Schwinn & provisions S. L.Ed.2d 1249 Fi- cordance with the S.Ct. Judgment purposes nal other provided than those such con- judg- Under Article IV the consent tracts; ment, plaintiff “ordered and direct- upshot (1) is this: meproba- ed to offer to sell Merck, compounds as well as quan- mate qualified pharmaceutical houses, tity discounts, and on unrestricted buy free conditions, after nondiscriminatory terms plaintiff on every qualified pharmaceutical nondis- to. house criminatory use, placing therefor,” terms for unrestricted a written order the except (2) Cyanamid that selling “Twenty American price and maximum by ($20.00) Merck were pound” bound the (adjusted terms a Dollars earlier licenses to sell Index). combination increases the Consumer Price drugs they bought Further, meproba- plaintiff insofar as was “ordered and di- agreed price mate every at the to in li- rected the to make reasonable effort to cense, considerably which supply meprobamate was lower than assure com- per pound. If, pound however, adequate discharge obliga- $20 American to its ” Cyanamid bought meproba- or Merck Also, tion under IV. Article by price mate VI, at the set out in the consent Articles V and “en- was joined (i. e., no more than conditionally and $20 restrained” from pound), agreed selling meprobamate “entering into, rather than that to or licenses, adhering to, they the maintaining enforcing then were free to make or any contract,” unrestricted use and sale of it. As al- the effect of was which to ready noted, (on “prevent, limit, designate we must assume restrict or motion) any following: that manner” Carter-Wallace has the the to uses to meprobamate adhered put; which this scheme since We could be the assume, sug- nothing being must also meprobamate by anyone sale of gested qualified contrary, pharmaceutical house; the the $20 the figure by price, set the decree fair and or is a vi- terms conditions at which me- probamate one, regu- drugs companies able at by any which other could be sold larly buy meprobamate. person; the persons to whom or areas in which or combina- Accepting post-1962 this as the situa- drugs tion by anyone; could be sold tion, and urges the continu- publication by any or dissemination price, ance of the its old license pharmaceutical house of the use, results restriction be held violative of by research conducted it. Article IX Act, the Sherman or at U.S.C. §§ (H) provided, however, that “contracts inequitable least so suit on the as bar 1, 1962,” existence as March patent. made clear us at and Cyanamid includes American argument and that, after the oral royalties bulk and drugs bination and make available to drugs. licensees’ sales new-drug-applications required The licensees are also drugs to make the combination covered specified outlays promote agreements. the com- Cyana regard —without to American spect amend- to these whole, answer, and Merck’s as a not ask for mid’s business defendant does ed dealings Carter- opportunity or the whole of its trial, an or for is, per se, view, de- On there Wallace. evidence materials. further disposition it, fendant, does not de- unlawful restriction we understand drug particular proof of those units additional show- to make sire by plaintiff are post-1962 sold lower ing situation either price. not think that Univis But do (with we to American setting, per se in their Merck) and Schwinn understood constitutes viola- rigid procrustean stand Act or is barred tion of Sherman existing proposition, case- an im- nor that the rule-of-reason establishes supports any No decision competition. law such rule. proper The sole restraint on the mere ex system we aware calls described of which defense is that practices pricing illegal face, improper on istence differential above comparable now us a to those vio more without further before showing. rul- lation of the decline make such a Sherman Act.5 We ing. Company, corpora- In Univis Lens covering tion, patents lens which owned practice plaintiff’s A. If grinding processes blanks round, it is decree seen in the polishing eyeglass lenses, de- into them plain imposes restric- absolute licensing system under an elaborate vised tion the use of bulk which one licensee authorized Merck since and to them manufacture blanks companies, quali- two other licensees. There three houses, purchase pharmaceutical can fied categories (whole- purchaser-licensees drug non-discrimina- at the decree’s finishing salers, retailers, prescrip- (and tory fair) price for unrestricted retailers) patentee specified tion disposition. What Carter-Wallace prices permissible resale both classes price to a at is set lower which each. Licensees were customers buy and Merck can other, required police to each viola- they the if it to use wish price of the tions and customer restraints particular However, combinations. punished by of the li- cancellation were firms, the vendee if one looks at their Supreme censes. Court struck down whole, prohibited business as a are not violating licensing scheme as the entire making any they deterred from wish pat- Act, and held that the the Sherman meprobamate.4 Nor disad- is prices legally the could not control entee vantage (as compared competi- their to were sold. the finished lenses at which tors) placed upon they if them do. li- quite case different. That is perhaps There are sen some individual could not Univis censees tences in United Lens States v. Univis persons prices other than to and at lenses Co., 316 62 L.Ed. S.Ct. 86 by Univis, specified while Ameri- (1942), 1408 Ar and United States v. contrast, Merck, can nold, Co., Schwinn & S. 87 388 U.S. they drug as dispose of the can sell which, (1967), Ct. 18 L.Ed.2d 1249 they price will, pay decree provided isolation, saying taken in can read as be done, everyone pays; Car- else is that each right unit of the must control use to ter-Wallace by disposition. independently be considered itself and Clayton problem assume, nothing Act under even reasonable 5. The VII, infra, appearing, Part change else discussed if the vendees purchasing drug 31 the amended minds after differential-pricing price they deci- answer. at lower make can unre- after paying were decided full cited there stricted use of it sions the difference hearing. price between that lower and the con- price. sent-decree

1380 way. Schwinn is the same sumers. The Third Circuit held that dissimilar bicycle imposed had a com- That manufacturer customer-restraint Wella plan in it not prehensive violation of the distribution se Sherman geographic Saying territories Act. be allocated exclusive that “Schwinn must persons read, cases, fixed the to whom dealers and as must its they context,” apply could The Court found factual it resell. refused to beyond particular territorial to be Schwinn and customer restraints territorial Act, per se violations Sherman customers restraints there involved. saying his that once a manufacturer sold F.2d at 936. In a rule-of-reason 425 (as product opposed inquiry, majority con- to a dealer banc of the en basis), signing agency an and had court found be rea- restraints to Wella’s dominion, thereby parted title, sonable, emphasizing products it, dangerous over “he not improper- risk reserve control could have results if destiny ly of its or the over its conditions used and that the motivation of basic appeared pro- resale.” at 1865. 388 U.S. 87 S.Ct. manufacturer Again, public injury vendor exercised absolute tect from and itself right liability product and across-the-board control actions. The dis- use, thought not which the dealer could senters that a trial should readily avoid can here. vendees been held see whether restraints warranted, fact but none distinguishable, Equally same on the participating judges felt that the mere general ground, are the lower court cases existence vendor controls might parallel. be invoked Bald enough, itself, prove restraint Corp. win-Lima-Hamilton suring Mea v. Tatnall competition. argues The defendant Systems F.Supp. (E.D. specific here that the im- factors which Pa.1958), aff’d, (C.A. 3), 268 F.2d 395 pelled the Third Circuit resolve denied, cert. 361 U.S. inquiry in the manufacturer’s favor (1959); Hensley Equip 4 L.Ed.2d 151 case, in Carter-Wallace’s (C. Corp., ment Co. v. Esco F.2d considerably that contention is off-tar- 5, 1967); A. Glaxo States v. get; point Tripoli court, Group, Ltd., (D.D.C.1969); embarking analy- aon “rule-of-reason” id., U.S.P.Q. (D.D.C.1969). cognizant Schwinn, sis after thought Those decisions all involved absolute Supreme opin- that the Court’s use, unavoidable restrictions automatically ion did not outlaw special price product differential if the post-sale Indeed, and all restrictions. particular is purpose, used for a Tripoli the restrictions in were much purchaser buy the free to the stronger and more than the burdensome commodity pays end if he the readily avoidable limitation involved higher general buy price paid by other here. ers. conclude, therefore, existing We that Closer to our situation recent the is case-law does not sustain the Govern- holding Tripoli Corp., Co. v. Wella ment’s defense that antitrust violation (C.A. 3), denied, F.2d 932 cert. 400 U. presented is made out what been S. S.Ct. L.Ed.2d respect to with us Wella a manufactured line of cosmetics answer, and 29 of the amended even in professional intended for use which it showing.6 the absence of further Tripoli sold for wholesale distribution to barbers and beauticians. termi B. If we consider the matter Tripoli upon learning afresh, nated taught by sales to postu the fundamental selling directly the latter was law, also to con- lates of we reach the same infra, paragraph 6. We discuss urge, 31 of the ment to that particular answer as to defense, which the defendant asks that a case is made proceedings prove for further pleadings a viola- out now-admit- Clayton tion of the Act. The Govern- ted facts. conceivably of that action. the factual context can which Conduct result.7 advantages per a se rule track those may ex- be Act violate Sherman provide clear rules elements: absolute variables: three basic in terms of amined legal guidance (fur- and their positive for businessmen effects, (1) economic advisers, inquiry the limitation of performance eco- thering efficient protracted or can often be negative (anti- what avoids functions) nomic delving unnecessary judicial into factual play of impact on the free competitive causation, areas, economic power such as forces); (2) market difficult, serve; complex, speculative. they can be parties in the markets which disadvantage “margin prime underlying is (3) con- the motives error,” is, the likelihood standard A full rule-of-reason duct. imposed presumption will odds with be at scrutiny be- quires three variables of all particular case. given “[I]t facts a is reached fore a them to make use of (permissible [such desirable practice un- is “reasonable” presumptions] the harm that when Act) (pro- “unreasonable” der clearly may out- from error result scribed). inquiry A rule-of-reason savings weighed cost social one or also eliminate examination presumptions Blake afford.” instance, which the elements, that, anti- more so (1967), at Pitofsky, Law & Antitrust competitive but effect will be assessed motive excluded as immaterial. “margin possible An assessment spectrum end of the At persuades us in this error” case test from the full rule-of-reason against characterizing existence the mere rule, strict se which characterizes differential, face, price a on its practice as vio the mere existence of a a an im violation Act or Sherman rendering Act, lation of the irrelevant proper competition. Under restraint inquiry circum further into the actual scheme, licensing as we Carter-Wallace’s stances and effect. rule estab Such a stressed, pharma qualified presumption a

lishes conclusive house, including Cy ceutical American anticompeti improper kind of action has Merck, purchase anamid and can bulk gov effects, presumption tive meprobamate at fair and nondiscrimina regardless particular of whether erns tory prices use, unrestricted conduct in its actual been context has drug also lower sells consequences. proved to have price to and Merck impose presumptions Courts these where particular in for a use. If a factual prior (1) they ex- have had sufficient might had, quiry were be Carter-Wallaee perience type feel of action to price differential able to show that justified concluding previously anticompetitive has in fact no effects on n anticompetitive al- discerned effects will Judge meprobamate. the market ways nearly always once suggested opinion in Mansfield so in his practice the existence of a is shown Carter-Wallace, Inc. v. Davis-Edwards (2) experience even that actual Corp., (C.A. Pharmacal 443 F.2d 894 conclusion the court reaches the same 1971). is no He noted that “[t]here through analysis. key of a The elements suggestion that others want lower per (or like) are, accordingly, se rule prices use in on the same for com basis prohibition absolute of certain conduct drugs, that be bination or others would judicial inquiry into and a on limitation such terms.”8 Carter-Wallaee refused analysis Pitofsky, Blake & follows tlie antitrust misuse defenses Our (1967), majority, reverses, at did not Antitrust Law 492-493. because it me as defenses strike reacl1- These opinion part Judge Mansfield’s of Assuming arguendo having merit. dealing is as follows: misuse post-sale in restrictions Carter’s the district court’s I affirm “Since would decision, agreement and its with Merck 1957 made some reference should be alleges outset, also facts that are relevant to its ask for making price inquiry par- in trial or motive the lower avail- further meprobamate for of in able com- ticular defense. use drugs. says bination the li- Finally, that, point we should out al- obligations Cyanamid impose censes though are, meprobamate patented, we Merck, pay- in addition to the initial possible in this discussion of a Sherman drug, plain- for ment which inure to Act violation or clear restraint com- royalties tiff’s benefit —it receives based petition drugs sales combination 29, treating drug were un- as if it thereby given new-drug-applications, patented, since it is our view that there avoiding expense de- effort and or on-the-face violation veloping them itself. licensees are principle straint vis, even if the TJni- required specified expendi- also to make applies Schwinn, and like cases drugs. promotion for tures What patentees patented full force to and to arguing Carter-Wallace seems therefore, occasion, articles. We have no connection is that it the ini- lowers to consider the mooted issue of whether price meprobamate tial purchased goods exceptions patented there are drugs combination because coverage from the ing relat- the doctrine obligations placed these other censees, on the li- post-sale restrictions enumerat- obligations and that are those (and Univis), ed in so Schwinn and if part compensation drug; qualifications what those are are. We charge type the initial would be that, meprobamate satisfied even payment down purchase price. rather than entire unpatented, paragraphs dealt with as course, Of all these 26, and 29 of the amended do not answer propositions hypotheses, are still themselves, show—in and of and without they may fact, not be accurate in actual proper more—a defense of antitrust vio- enough possibility but there is plaintiff’s of a competition. lation or restraint of justified (or actions could be noninjurious) shown to be to counsel Ill presumption a conclusive of anti- Paragraph competitive taint which would warrant unqualified the automatic and de- rule asserts proposes.9 And, fendant as we noted at plaintiff charges “un- its customers agreements Cyanamid, charging companies un- continue meprobamate der which it prices specified sold for use lower theretofore particular drugs, agreements combination vio- used executed, lated the drugs. sugges- antitrust when laws There is no proposition best, which is a doubtful at prices tion that others want lower any illegality eliminated the same basis for use in combination obligated drugs, Consent Decree. latter that others be refused would Carter to sell bulk to all such terms. Thus qualified pharmaceutical houses, long purged dissipated.” includ- since been ing Cyanamid Merck, Judge Friendly, Judge the maxi- at for himself and non-discriminatory price mum Feinberg, unnecessary of $20 found it to reach pound (plus increases on the question. based Con- or consider this Index) sumer Price mindful, too, frequent 9. We agreements and Merck were amended ac- (of types) sales vendors lower cordingly permit require rather than prices organizations, to charitable minis be in the com- used ters, teachers, etc., implicit with the often drugs. bination Thereafter requirement express item not Merck, pharmaceuti- like some profit. Singer at a Co. v. resold Cf. purchased meproba- cal houses which bulk States, Ct.Cl., 449 413. F.2d (Sigerson p. 5), mate from Carter Aff. buy meprobamate free the bulk and Trial Commissioner held de- Davis alleged in- resell restraint. earlier fense agreements, amended, valid, not seek as thus were con- does Government holding. portion permit of tinued effect of that Carter review This oppres- Products Carter and American high, [Home and reasonably exorbitant Company], profit meprobamate,” make a handsome and prices for bulk sive substantially at reduce fixed the same time plaintiff has “established price tranquilizing and com- the the of agreement the by customers with its drugs consuming public.” bination these customers price which below floor thinking given economically We for manufacture reason cannot * * * changed. any event, an is conduct situation meprobamate which arrangement pricing of set to a attack inequitable and amounts g., judgment, patent out in e. as no longer public of in the because interest merit for is This defense without circumstances, changed some factual general First, rule as a two reasons. directly in the should be District made overriding con unlawful and absent of New Court for District Southern charge pat duct, patentees for can York, and not in this court. The products licenses whatever ented XIII) judgment provides (Article Thys Brulotte bear. market will jurisdiction retains District Court 13 L.Ed.2d enabling any purpose “for of Rasor, (1964); v. Tinker & Stearns * * * * * * parties apply at 1957); (C.A.9, Nor 252 F.2d further orders time States, 164 v. United Co. wich Pharmacal necessary ap- may and directions as aff’d, (Ct.Cl.Comm’r.1968), USPQ 91 carry- propriate the construction unreported December order dated in an ing Judgment, of Final out this [or] 6, 1968. any of the amendment or of modification ** provisions thereof Second, impor particular here, price which tance the maximum IV charge pharmaceutical- can house $20 customers Paragraph per pound, adjusted time from time to By January a dated contract changes in the Price Index Consumer granted plaintiff Merck a license over the last index for the month of June (the 2,784,141 under U.S. Patent “ben arrangement pricing was ex 1962. This “make, actyzine patent”) use and sell” pressly agreed the Government containing drug products litiga earlier chemical called tion, adopted by District and was challenges benactyzine. one Defendant IV(C) of the consent Court as Article provision contract, viz, a clause judgment. said, As we have plaintiff agreed which not to “contest suggest has vio does validity MERCK requirement. pertinent this lated be licensed hereunder note that the Government’s brief benactyzine patent. includes the antitrust case stated that “Gov benactyzine Defendant contends that ernment maximum is satisfied that “plaintiff is “invalid” and that price pound meproba $20.00 knew and believed this encourage compound per mate will prior accepting li invalid and void entry competitors mit the here 1958,” January cense thereunder pre-empted Also, tofore market.” which, says defendant, amounts to a opinion, District Court meprobamate patent.” “misuse of the price noted that “the maximum e., twenty dollars them will enable [t. law, As matter of defendant’s houses], benacty- pharmaceutical position as well as without merit. The opinion part incorporates our relevant not ask review of the opinion ruling commissioner’s with some trial commissioner’s adverse changes. opinion incorporates paragraph. minor Our opinion. part of the commissioner’s germane patent is not to this suit. zine with them the for their Merck, plaintiff, Cyanamid] owns the ben not sale under our [American infringement patent rights actyzine patent of and in countries * * * alleged patent States, or could has been be other than the United Canada, you directed must notify here. Misuse defenses shall cus- alleged patents you to the in tomers Tablets [Em- fringed. McCullough phasis supplied.] Tool Co. v. See (C.A. Inc., Surveys, Well 395 F.2d 230 says that, by provision, such 10), denied, 925, cert. S.Ct. U.S. “agreed compete not 257, (1968), * L.Ed.2d 261 and cases * * Cyanamid American outside allegation cited every therein. Not Canada, United States and to divide part plaintiff, on misconduct Cyanamid with American the interna- true, even if constitutes a bar to suit tional market combination tablets under the The mis clean-hands doctrine. meprobamate tridihexethyl iodide, * * conduct be “in relation to or must illegal which conduct events connected with matter in liti (15 1), the Sherman Act U.S.C. § ** gation v. See Ohio Oil Co. meprobamate to a amounts misuse of the Sharp, (C.A.10, 1943). 135 F.2d Furthermore, January says judg- unilaterally disputed Merck deleted (Article (H)) expressly ment IX sanc- provision contract, noting from the provision, tions the quot- contract above Lear, Supreme Court's decision However, ed. for the same dis- reasons Adkins, v. Inc. 89 S.Ct. respect paragraph cussed infra (1969), “suggests 23 L.Ed.2d 610 supply 32 and the con- provisions such unenforceable tracts, is not clear on this record case, now on.” Prior the Lear IX(H) whether Article was intended provisions proper. deemed Auto- Summary cover the instant contract. Mfg. matic Radio Co. Hazeltine Re- judg- basis search, Inc., 339 U.S. appropriate. ment 94 L.Ed. 1312 Summary judgment however, is, appro V priate grounds. First, on other the con Paragraph provision tract deals with restrictions placed plaintiff by Cyana American 1,May 1957, plaintiff On and Ameri- Cyanamid patents. mid under American Cyanamid can entered into a contract provision deal with restric agreed Cyanamid under which American imposed by plaintiff tions on others un prepare tablets contain- Thus, patent. der the ing meprobamate tridihexethyl par noted reasons earlier with mepro- iodide. Plaintiff furnished bulk agraph allegations paragraph Cyanamid bamate American 27 do not make out a misuse of the me American furnished probamate patent but, most, relate tridihexethyl iodide, on which it held possible Cyana patent. turn, plaintiff paid Ameri- patents, mid of here none covering can a fee the tri- McCullough supra; in suit. See Tool dihexethyl processing iodide and costs. Co., supra. Ohio Oil alleged by provision contract be misuse event, Second, provides in suit follows: that, by Ross states his affidavit prepared you selling stopped Sales of Tablets had drugs [plaintiff] comprising carry hereunder will not tri incorporates part 12. Defendant does not seek review the commis opinion holding treating trial commissioner’s adverse sioner’s aspect opinion of the case. Our iodide;13 outside tract would be “manufactured dihexethyl in that States;” pro- 1, 1957, in- and it also amended to the United May was contract chloride; plaintiff tridihexethyl “cause our vided that would and clude you foreign sell and that 1959, plaintiff sold combina- subsidiaries has since purchase your drug meprobamate and will from comprising and sublicensees tion * * * quantities me- tridihexethyl rather than our subsidiaries chloride you powder tridihexethyl meprobamate and Fur- of probamate iodide. and contract, they may and require to make sell thermore, pursuant another throughout product 15, 1959, plaintiff so made combination dated December *** Austria, drug except in permitted the combination the world tridihexethyl Vietnam, Japan, and Thai- meprobamate Taiwan chloride South and existing commit- where have the United land we “outside States Canada.” stated, [Emphasis supplied.] Simply al- ments.” this means leged ar- of' the unlawful effect sales the re contends that Defendant challenged rangement paragraph in Cyanamid’s quirement American assuming exists; thus, longer and, even foreign and sublicensees subsidiaries arguendo patent meprobamate drug prod combination sell the licensed misused, dis- such misuse been Vietnam, Japan, Austria, South uct sipated. Taiwan, of § Thailand violation constitutes Act and 1 of Sherman VI Paragraph patent in suit. misuse of the says that 28 of the amended answer Paragraph 2814 “plaintiff do not and its subsidiaries 28, 1964, July By dated contract coverage meprobamate in have 10, 1965, February amended plain the aforesaid territories” granted Cyanamid and its to American illegally markets” tiff “has divided world roy- foreign “non-exclusive subsidiaries a “prevented alty-free under CAR- and license * * * competing with patents foreign [meprobamate] TER’S * * * * territories the aforesaid * sell, *, to use and to * * * ** illegal which conduct make, to the extent mepro- amounts to misuse product quired to make the combination * * Plaintiff, bamate [meprobamate tridihexethyl chlor- allega- says hand, defendant’s * the other * * \_foreign] ide] as a matter * * * tions insufficient A listed Schedule countries * agreements al- law. notes that and to use and sell in illegal leged Sherman product country made so foreign solely pat- * Act are based supplied.] [Emphasis *.” Schedule ents, only operations and trans- relate foreign A in which listed 48 countries States, and the United actions outside rights granted patent had been nothing States to do pending or had mepro- or the United commerce States applications. The 1965 amendment says plain- patent. Accordingly, bamate provision that the 1964 contract added a agreements tiff, constitute cannot Canada included with countries meproba- of the United States agreement A listed in A. letter Schedule patent. mate July accompanied dated Analysis dispute, supplemented the basic contract contracts light supports date, provided judgment, me- the same that all probamate plaintiff’s position. The contracts deal eon- made and sold under the request challenge review does not Defendant does not Ross holding pursuant affidavit, 101(f). adverse Its the trial commissioner’s Rule incorpo- opinion allegations factual are therefore 28. Our deemed part commissioner’s true. rates change. opinion, minor a unjustified royalty dif- between made outside rates machines, foreign corpora- patented ferent lessees United States by patentee, foreign patents amount- tions under made leased sale position its As ed Unlike misuse.

use outside United States. (and paragraphs para- and 29 earlier discussed with Act), graphs does defenses Sherman Government seek 27 and illegal paragraph inequitable proceedings must or further stem from Act) (relating Clayton patents in and does patent or to the conduct under favor, litigation. agreements Clearly, at here the court to hold in its ask dispute way stage, in as a matter of law. relate in no Unit- meprobamate patent, ed States but rather already out, pointed consent As foreign patents. deal judgment permits plaintiff me- to sell probamate Cyanamid pertinent that, to American It is also to note prices Cyanamid Merck at other than decree, $20 consent American pound (the consent maximum under the qualified pharmaceutical and all other judgment), buy sales mepro- extent such are free manufacturers pre- are pursuant to the conditions of the plaintiff or bamate from for use resale judgment Article IX license contracts. VI restriction. Under Article says: judgment, plaintiff of the consent can- “prevent, limit, designate restrict or Nothing contained in Final ** (4) per- in manner: Judgment shall be construed to:'" sons to whom or the areas in me- which *(cid:127)#*#** probamate tranquilizing drugs or com- (B) Enjoin restrain Carter drugs may any per- bination be sold making from sales of son; [Emphasis supplied.] compound persons other than Quite simply, this means that American American Com- [Home Products Cyanamid Austria, is free to pany], for the duration of its con- Japan, Vietnam, Taiwan, South agreements per- tracts with such drugs Thailand combination made from sons, agree- if such contracts meprobamate purchased from ments on March existence reality, therefore, the United States. price provided for in restriction American sales agreements, such contracts or even Cyanamid world does not markets though price may differ exist. price at which Carter shall sell compound under Sec- VII e., per pound tion herein IV $20 \i. maximum]; Paragraph Furthermore, (H) clause of Article IX charges Defendant supplements (B), provides, clause 31 that misused the noted, earlier that restrictive conditions among suit because it “discriminates its prejudgment in the license contracts meproba customers sale of bulk they shall not be invalidated insofar as by charging mate provide arrangements pricing prices substantially Merck lower Cyana- sales to American charges than it the remainder making mid and Merck for use in com- customers conduct drug products. bination inequitable, illegal 2(a) under Section Clayton (15 13(a)) Act argue U.S.C. § not now ** parts relies on Laitram these of the consent decree col- Corp. King Crab, Inc., F.Supp. laterally estop the Government from at- (D.Alaska), modified, tacking, proceeding, in the current (D.Alaska 1965), among held, lawfulness of the American things, discriminatory agreements, and Merck license or of the press the Since does not now price-differential sanctioned technically point es- para- introductory agreements. topped by judgment, and provides consent graph explicitly that estoppel the decree states since not constitute will accept estoppel, that view. there is no we party: either supra, As with Plaintiff, of America United States however, question remains, whether having complaint herein filed its 1962 has result- the new after situation January Car- the defendant purge any prior vio- ed in a having Products, Inc., appeared and ter Here, however, the lation. Government deny complaint filed the its answer hold, argue now as not that we can allegations ing there- the substantive Clayton law, Act has that the matter of of, plaintiff and defend- said price- since 1962 that the been violated ant, respective attorneys, hav- their patent misuse. differential constitutes ing entry Final the of the consented to merely request that not we strike Judgment adjudication trial or without permit time, the the at defense herein, law issue fact pursue fur- matter Government estoppel by or admission ther. party issue either as to such of * * instance, agree de In we (Emphasis supplied.) *. right have the fendant that it should Department of Justice Since 1940 the go important factor is that forward. An publicly interpreted its antitrust past decade there have been cases barring the decrees not Gov- consent as to, which at even least lend color attacking ex- activities ernment from directly po support, the Government’s exception judgment; cluded from the royalties differing prices sition that those activities does the decree of improper and discrim can be licensees signify they not that authorized but King inatory. Corp. v. Laitram See simply they as vulnerable remain Crab, Inc., supra; LaPeyre Federal v. if decree had not been attack as 117, Comm’n, 118-121 Trade F.2d 366 entered.15 C.A.5, 1966); Wendt, v. 260 Peelers Co. (W.D.Wash.1966). F.Supp. 193 Such understanding, Pursuant to this development law would defendant maintains inclusion con judgment account even the 1962 taken into if in the consent IX of Section judgment es did (B) supra, sent raise a technical (H) did not constitute toppel. approval of Internal legality plaintiff’s Commissioner See 591, Sunnen, agreements 599- Cyanamid Revenue 333 v. U.S. with American 600, 606, 715, 898 92 Merck, 68 simply a S.Ct. L.Ed. but was caveat (1948). hold if, All more so practices we pro- show that these concedes, estoppel in judgment and, there hibited if contin- ued, law from this consent decree. Unit would not render liable Cf. Bldg. Co., 345 ed v. International contempt violating judg- States 502, 807, 1182 73 97 L.Ed. says U.S. S.Ct. ment. The defendant that the also (1953). Supreme em judgment Court has proceedings consent did not phasized prior consent that a legality involve of the litiga judgment normally agreements does not bar Merck license which were not occurring prior tion of after the conduct in issue there. policy ney Dabney, stated on De- General’s See Antitrust Consent De- press 16, 1940, in a release issued crees : cember How Protective an Umbrella? judgment (1959) ; connection with 68 Yale L.J. n. 31 Isenberg Rubin, National Container in Assoc., States v. & Antitrust Enforce- 56,028, Through Decrees, 1940-43 Trade Cas. ment Consent 53 Harv. fl policy (S.D.N.Y.1940). (1940) ; Note, state- This Modi- L.Rev. 394-395 widely publicized. Decrees, ment was of Consent 63 Harv.L. fication (1949). Attor- Rev. 327-328

decree, meprobamate, of the the conduct source secured even type. patent. para- National Screen to Lawlor v. virtue same 327-329, graph 32, challenges Corp., 349 Service U.S. certain (1955); see, sup- 99 L.Ed. 1122 terms and 5.Ct. conditions Creamery ply constituting also, Top v. Dean Cream contracts as “a misuse (C.A. rendering meprobamate patent Milk 6, 1967) ; 383 F.2d Exchange, it Among Exhibitors Poster unenforceable defendant.” Corp., things, pro- Inc. National Service Screen contracts (C.A.5, denied, 1970), suppliers cert. 400 vide con- F.2d maintain in 439 fidence all S.Ct. L.Ed.2d “confidential technical infor- argues by plaintiff 1962 mation” made known to them meprobamate produc- should at least be viewed furtherance reflecting provide then tion. The view Government’s further contracts suppliers require employees, that the Merck on that as whom contracts were lawful. Even confidential information is made known, sumption, passage nine such almost disclose information years’ changes time, persons; possible in cir unauthorized employees agree employed of ex cumstances accumulation to “be * * * perience together by under the own or behalf others [their] decree— making product, pe- the new to which we have re of such decisions for a giving prevent (2) years riod of two ferred —would us from after termination present employment.” conclusive of this, effect to All [their] the Government’s past position says defendant, inquiry so as to all is be- bar unlawful post-1962 “unreasonably into the cause it or the current restricts facts rights situation. manufacturers employeesto utilize such information and reasons, reject plaintiff’s For these we knowledge by not covered valid summary judgment motion for on the competition plaintiff, claims in paragraph defense set forth in unreasonably restricts the freedom the of answer, permit the defendant employees employ- aforesaid to seek new go forward that defense. in-We ment timate no views at on the merits of all defense, or whether the Government summary judg- answers will be able to sustain it. All dowe dismissing appro- ment is32 is rule that a issue triable has been priate on one or both of alternative raised and refuse strike down grounds: (1) judgment the consent ex- early stage defense at this when we have pressly the terms and condi- sanctions insufficient information as to the rele- supply contracts; (2) tions of the vant facts and circumstances. defense is insufficient as matter law. ground, plain- With to the first VIII points IX(H) tiff to Article of the con- noted, which, sent as earlier Paragraph 32 nothing says judg- contained in the 1962, plain Between 1955 and any provisions ment shall “[invalidate supply tiff entered into six contracts for contracts in as March existence production meprobamate. Under 1, any person 1962 between Carter and contracts, suppliers16 me made other than American [Home Products probamate turn, solely plaintiff. In Company] provisions insofar as such sold to the trade. provide payments way, only this remained the April 6, 1956, Machinery suppliers Food & Chemi- the dates of the con- Onyx 4, 1956; Corp., tracts are as follows: Millmaster cal Co., June Chemical Dow 13, 1956; Laboratories, Corp. (Chemical July Division), 27, Abbott June 1955; September Co., 26, J. T. Baker Chemical Decem- 7, 1955; Co., ber Crestwood Chemical (1940). Conversely, impermissible Carter, it or other- compound attempt restrict, limitations, patentee for a restrictions impose any wise ** restrict, informa person dissemination obligations on such public domain. Despite all- is within the tion which [Emphasis supplied.] Mfg. IX(H) Paper Scott Co. v. language Marcalus embracing Article Cf. 101, Co., 256-257, 249, 66 S.Ct. “any 326 U.S. in existence as contracts include Kellogg (1945); v. Na L.Ed. 47 Co. 1962,” 1, not clear it is March 117-118, Co., tional Biscuit intended Article was that such record (1938); Sears, as well supply S.Ct. apply L.Ed. to the contracts & v. Stiffel 376 U.S. Roebuck Co. license contracts 231-232, 11 L.Ed.2d 661 84 S.Ct. to others sold (1964); Adkins, drug products. 395 U.S. Lear making Inc. ap- IX(H) 23 L.Ed.2d appear Article would (1969).18 plies because license contracts to the plain- payments speaks in terms it that, difficulty here is buy plain- persons who tiff and of showing motion, we on this defendant’s plain- (licensees) than sell rather tiff say time that the contract cannot at this Also, not clear (suppliers). tiff actually applied provisions, supply contracts record whether legitimate parties, bounds. are all within parties and considered were even Enough doubt been cast raise formulating District Court issue fact. triable entering judgment. Plain- that, by says supply starting point were so- common contracts tiff relevant, However, consent, proc- even is not a in suit considered. fact, process and. question of material not cover and does is ess summary judgment accordingly, technology. part processes dismiss- Some ing of the con- paragraph suppliers may on basis 32 have been used the six appropriate.17 confidentially developed sent is Carter-Wal- suppliers as lace and transmitted ground is Plaintiff’s alternative yet secret, as there is trade re question are the contracts showing, present to be- and no reason proprietary information stricted to lieve, technology is process that all the public information cover do not as proprietary So far information. such improper a con is not domain. part know, we now a substantial in require proprietary tractor public lies in the domain. manufacturing disclosed formation points out that least four long confidential, kept as suppliers so be agreements (Abbott, supply of the six public do is not in the such information Millmaster) Baker, Fairfield, necessary for related to main is supplier quire to hold confidence See performance of the contract. granted) (until permission disclose is 16, Ulrich, Ill.App. 95 N.E. Jones v. 342 concerning product information (1950); v. Holden A. F. Co. 2d 113 information” all “technical (E.D.Pa.1947); O’Brien, USPQ 481 73 supplied supplied be been Gursky, Sup., regardless, 558 apparently, 21 N.Y.S.2d Rubner of wheth- v. Carter — wholly apart 1960) ; Corp. (C.A. 6, is from v. 17. This discussion Wheelabrator 1970) supra (W.D.La., ; point, Fogle, F.Supp. discussed 317 633 31, George paragraph decree K. v. National Lockwaslier Co. (C.A. 3, Co., 255, estop That 256 the Government. 137 F.2d Garrett why ground 1943) ; Theatres, point sum- Inc. v. Para another Park-In furnishes Inc., improper Theatres, mary judgment 90 F. is mount-Richards curiam, (D.Del.), per 727, 32. Supp. aff’d 730 (C.A. 3, 1950), de F.2d cert. 185 407 Frutchey also, Bickley See, Bean nied, L. 71 S.Ct. (E.D.Mich. (1951). 1959), curiam, Ed. 1373 F.2d 685 aff’d paragraphs, a trade tiff. Under those defend- constitutes er such information pursue discovery domain. That ant is free to to make public or is in secret defenses, appropriate out in- the documents seem as and not what terms is saying. regarding opinion, say, read least consistent with this or at can (1) any addition, noncompliance by plaintiff shows (2) any agreements suppliers extract these four decree and activi- employees (pursuant entry subsequent ties of to the agreement plaintiff) consent decree contractual which are relevant two-year period allegations to the for a forbid disclosure go though should “even information public into the domain.”19 The case is remanded to the trial com- proceedings of con- missioner of both these further terms sets con- agreements enough opinion. raise are sistent with tractual the restrictions a triable whether issue Judge, NICHOLS, concurring: are confined to confidential data true also whether information non-secret is plaintiff’s action the Unit- not, being suppressed. question That States, maintainable, ed one be, resolved on the and cannot the Fifth Amendment and 28 U.S.C. § skeleton record. amended, just to recover com- two-year To this must be added the pensation taking power for a under the period post-employment non-disclosure of Eminent Domain. Richmond Screw required employees. lim- Reasonable States, Anchor Co. v. United 275 U.S. truly itations confiden- allowable (1928); 72 L.Ed. 303 information, say, tial but we cannot Irving States, Air Chute Co. v. United proof, further or not whether F.Supp. 633, 117 Ct.Cl. 799 years two circum- reasonable role therefore en- States is here, especially since the stances tirely ordinary different from expires in little more November infringer, which it is not. nothing year away. than a We originally The statute recited tangible testing go on in the valid- general United States had ity two-year period. factual Some special defense available a defend- inquiry is therefore called for. patent infringement ant in a suit. This grant Accordingly, plain- we cannot later omitted because the Code re- summary tiff’s motion for on impression viser had the it was unneces- paragraph 32. Issues of fact must first sary; however, this court has attached be threshed out. meaning change despite to such a the re- effecting change. viser’s belief he was States, v. Schmid United 436 CONCLUSION F.2d (1971). change, 193 Ct.Cl. 780 para- motion Plaintiff’s to dismiss however, my part has but a minor in graphs through 25 of defendant’s first thinking, major being the factor the U. para- amended answer is allowed as to S. Constitution. graphs 25, 26, 27, 28, 29, 30, My is, simply, paragraphs question those can the are dismissed. The this: infringer motion can have the denied as to 31 and doctrine that charge had, proceedings and further use of the free of will be including discovery, patentee proper patent, whether on de- abused infringer’s alleged (see paragraphs. fenses detriment in not to the Moreover, Greenberg, Defense there still exist in Unclean Hands as a defendant’s answer, Infringement, 29, 1968, para- filed Patent Off. March Pat. J. graph Soc’y (Jan. 1968)), incorporated allege, generally, 20 and 21 which be inequitable bodily by plain- to main- unlawful conduct into a suit such as this agreement slightly wording 19. The Millmaster differs in but is to the same effect. of to him of relief available when the denial a tain constitutional patentees. in- taker, to other not an a States United origin in fringer? defense had its This the usual case division This reflects hands unclean equitable doctrine of watertight practice of in court into this against patentees seek- invoked and was ideatight compartments. and sometimes In- g., ing Precision equitable E. relief. they by patent lawyers, put init Tried Mfg. Main- Automotive Co. v. strument the, them, in- mold of an familiar tenance Mach. 324 U.S. though fringement action, principle not (1945). I am 89 L.Ed. in- It have is different. would been any where such aware of situation lawyers teresting to have seen how for- equitable is invoked an doctrine background primarily eminent domain just Amendment feit claim for Fifth a case. This would have handled course, compensation, is, of given past effect court has law side of the court. of in a defense misuse § Anchor in I note that Richmond Screw totally forfeited the claim. case and has supra,, States, defendant Co. Urquhart States, 109 v. United Act, Assignment Claims relied on the of It not Ct.Cl. court, to avoid then R.S. § appear problem constitutional constitutionality, serious doubts as urged or considered. creating 1498 as construed the § equitable doc- invokes Assignment of exception to the long though of its trine unclean hands appears me that Claims Act. It light knowledge quiescence in its part a of the Richmond case raises for- contracts, and Merck constitutionality tiori a to the doubt as case, New York involvement any supposed of law that forfeits rule hardly equitable constitute behavior just compensation on account claim to estoppel. part, I not an even if own claimant, alleged misconduct only would assume it could now not to the detriment. taker’s alleged patent when misuse as a shield urged, suppose, how- I sued, case it is and not as a sword origin, equitable ever doctrine bearing brought by it. This has a misuse reflects flaw now plaintiff’s title the extent to which legal misbehaving patentee, title aof Emi- in fact But for its act of flawed. taker kind that eminent domain might Domain, nent might in- property other kind of litigate position in a issue been resisting just com- voke a claim for alleged patent anywhere all. is, think, pensation. I The answer remanding patent mis- the issues properly complete flaw is para- so as raised use for trial far go recovery. quantum of should an- graphs amended 31 and 32 of the infringer, private As swer, have the court I believe should out, patentee points court can cease did misuse indicated that equitable his misconduct and then have particulars, the issues by injunction. relief relief Since such infringement validity nec- not available 1498 claimant § mooted, compen- essarily just power Eminent because the Domain de- awarded sation would away, “rea- been used take light circumstances, in- nied in of all the compensation,” and entire if de- sonable cluding misuse, in- well as light termined in of the claimant’s title validity. fringement light flaw should also be determined notes Inc, Prod. recovery waive the United States many terms contains consent any infringement prior to November relating plaintiff’s li- and conditions censing, judg (the date of marketing pricing practices argues ment), that, accordingly, pre meprobamate; licensing, relating 1962 activities mar

Case Details

Case Name: Carter-Wallace, Inc. v. The United States

Court Name: United States Court of Claims

Date Published: Oct 15, 1971

Citation: 449 F.2d 1374

Docket Number: 322-67

Court Abbreviation: Ct. Cl.