UNITED STATES v. UNITED STATES GYPSUM CO. et al.
Civ. A. No. 8017.
District Court of the United States for the District of Columbia.
Nov. 15, 1943.
53 F. Supp. 889
Roscoe T. Steffen and Edward Knuff, Sp. Assts. to Atty. Gen., for plaintiff.
Bruce Bromley, of New York City, and Hugh Lynch, Jr., of Washington, D. C., for defendants United States Gypsum Co., Sewell L. Avery and Oliver M. Knode.
Nicholas J. Chase, of Washington, D. C., and Elmer E. Finck, of Buffalo, N. Y., for defendants National Gypsum Co., and Melvin H. Baker.
Harold F. McGuire and F. W. H. Adams, both of New York City, and Leonard B. Ettelson and Stephen Allie, both of Chicago, Ill., for defendants Certain-teed Products Corporation and Henry J. Hartley.
Walter G. Moyle and Ernest H. Oliver, both of Washington, D. C., and Andrew J. Dallstream and Norman Waite, both of Chicago, Ill., for defendants Celotex Corporation and Bror G. Dahlberg.
James O‘Donnell, Jr., of Washington, D. C., and Benjamin P. DeWitt, of New York City, for defendants Newark Plaster Co. and Frederick Tomkins.
George E. H. Goodner and Scott P. Crampton, both of Washington, D.C., and D. I. Johnston, Roy C. Lytle, James R. Keaton, and Frank Wells, all of Oklahoma City, Okla., for defendant Samuel M. Gloyd, doing business under trade name of Texas Cement Plaster Co.
Before STEPHENS, Associate Justice, United States Court of Appeals for District of Columbia (Presiding), and BLAND and GARRETT, Judges, United States Court of Customs and Patent Appeals, designated as Justices of the District Court of United States for District of Columbia.1
STEPHENS, Associate Justice.
This action, commenced by the United States, hereafter for convenience referred to as the Government, on August 15, 1940, is for equitable relief under Section 4 of the Sherman Act. The complaint charges that the defendants have been engaged in a combination and conspiracy in restraint of trade and commerce in gypsum products in violation of Sections 1, 2 and 3 of the Act.2 It is alleged that the combination and conspiracy have been carried out in connection with certain patent license agreements based on patents owned by the United States Gypsum Company covering the manufacture of gypsum board. Upon these license agreements the defendants themselves rely as properly establishing prices and terms of sale of gypsum board within the doctrine of United States v. General Electric Company, 1926, 272 U.S. 476, 47 S.Ct. 192, 71 L.Ed. 362. On March 12, 1943, the Government was permitted by an order of this court to amend its complaint by adding a paragraph 46(a) attacking the validity of the patents upon which the license agreements are based. The paragraph is in the following terms:
“46a. Many of the patents mentioned and described in said license agreements by which the said combination has been, and is being carried out in part, are process or machine patents. The article and product claims of Roos patents No. 2,017,022, No. 2,079,338, No. 2,080,009, No. 1,914,345, and No. 1,938,354 mentioned and described in said license agreements, and said patents, are each invalid and void for each of the following reasons: (a) there is no real invention or novelty in the claims of said patents; (b) the claims of said patents disclose no patentable invention in view of the prior art at the time the respective applications were filed; (c) the alleged inventions described in the claims of said patents were shown and described in printed publications in the United States more than two years prior to the filing of the respective applications; (d) the alleged inventions described in the claims of said patents are inoperative and devoid of novelty or utility; (e) the alleged inventions described in the claims of said patents were abandoned by the inventor and he was guilty of laches before the respective applications were filed; (f) the alleged inventions described in the claims of said patents were not reduced to practice until after other inventors had invented and reduced the same to practice and applied for patents thereon; (g) the said alleged inventions are described in ambiguous and not in properly clear, concise and exact terms and; (h) the defendants have been informed of the invalidity of the claims of the said patents and have unreasonably failed to file in the United States Patent Office any disclaimer of such claims. The said patents mentioned and described in the said license agreements, even assuming they are valid, are not basic article or product patents and do not singly or all together cover completely the business of mining and selling gypsum, or cover completely gypsum board, which is one of the forms in which unpatented gypsum is sold by the defendants, but at most constitute minor additions to the established and unpatented art of making gypsum board and afford no legal justification for the said combination.”
The order allowing this paragraph to be added to the complaint was made expressly without prejudice to the right of
the oral argument. And the Government‘s prayer asks cancelation of the provisions of the license agreements, asks that the defendants be perpetually enjoined from entering into any license agreements containing similar provisions, and that the defendants be enjoined from bringing any action for infringement of any of the patents now owned or controlled by them, and from attempting to collect royalties or license fees or profits for the use of the patents now owned or controlled by them, until it is made to appear to the court that all improper practices have been abandoned and the consequences of all misuses of the patents have been dissipated, and that the defendants be enjoined from entering into any license agreements relating to gypsum products without first obtaining the consent of the court. Accordingly, so far as the effect upon the defendants and the patents is concerned, the distinction between this suit and an independent cancelation proceeding is not substantial.
The essential question raised by the motion is whether or not the Government, in an antitrust proceeding prosecuted by its Department of Justice, can seek a determination that the Commissioner erred in issuing patents relied on by the defendants as a foundation for license agreements, and that the patents are therefore invalid, it not being charged that the action of the Commissioner was obtained by fraud.5 The question involves inquiry into the authority of the Government to question its own action, and into the power of the court to review an administrative determination.
I.
No statute answers the question. The Act of June 25, 1910, 36 Stat. 851,
II.
There is no controlling judicial decision directly in point. In United States v. Porcelain Appliance Corp., unreported (N.D. Ohio E.D. Sept. 9, 1926), an antitrust proceeding to dissolve an allegedly illegal combination, the court denied a motion to strike from the Government‘s bill allegations pertaining to the validity and scope of patents. The court reasoned that, while the suit was not one to cancel patents and it was probably beyond the scope of all possible issues to decree patents or patent claims to be void, it was conceivable that patents invalid or limited in nature, in view of the prior art, might be wrongfully used in building up an illegal combination, and that whether the case was of such nature as to permit or require inquiry into questions of validity or scope of patents could not be determined adversely to the plaintiff on a motion to strike out. The court did not, however, discuss the essence of the matter, i.e., the question whether the Government can raise an issue as to the validity of its own action in granting patents, and the case is not, therefore, of persuasive value; and, as it is a District Court decision, and is from another jurisdiction, it is not controlling.
Other cases principally relied upon by the Government are the following, which are here enumerated, for convenience, in the order in which they will be discussed: United States v. Standard Oil Co., D.C. N.D.Ill.1929, 33 F.2d 617, reversed on other grounds, 1931, 283 U.S. 163, 51 S.Ct. 421, 75 L.Ed. 926; Crosby Steam Gage & Valve Co. v. Manning, Maxwell & Moore, Inc., D.C.D.Mass.1943, 51 F.Supp. 972; Sola Electric Co. v. Jefferson Electric Co., 1942, 317 U.S. 173, 63 S.Ct. 172; United States v. Socony-Vacuum Oil Co., 1940, 310 U.S. 150, 60 S.Ct. 811;
United States v. Univis Lens Co., 1942, 316 U.S. 241, 62 S.Ct. 1088, 86 L.Ed. 1408; Ethyl Gasoline Corp. v. United States, 1940, 309 U.S. 436, 60 S.Ct. 618, 84 L.Ed. 852; United States v. Masonite Corp., 1942, 316 U.S. 265, 62 S.Ct. 1070, 86 L.Ed. 1461; United States v. American Bell Telephone Company, 1897, 167 U.S. 224, 17 S.Ct. 809, 42 L.Ed. 144.
In United States v. American Bell Telephone Company, [167 U.S. 224, 17 S.Ct. 820, 42 L.Ed. 144] the Government relies in particular upon the following language in the opinion of Mr. Justice Brewer:
“Suits may be maintained by the Government in its own courts to set aside one of its patents not only when it has a proprietary and pecuniary interest in the result, but also when it is necessary in order to enable it to discharge its obligations to the public, and sometimes when the purpose and effect are simply to enforce the rights of an individual. In the former cases it has all the privileges and rights of a sovereign. The statutes of limitation do not run against it. The laches of its own officials does not debar its right. Van Brocklin v. Tennessee, 117 U.S. 151 [6 S.Ct. 670, 29 L.Ed. 845]; United States v. Nashville, Chattanooga &c. Railway, 118 U.S. 120 [6 S.Ct. 1006, 30 L.Ed. 81];
United States v. Insley, 130 U.S. 263 [9 S.Ct. 485, 32 L.Ed. 968]. But when it has no proprietary or pecuniary result in the setting aside of the patent; is not seeking to discharge its obligations to the public; when it has brought the suit simply to help an individual; making itself, as it were, the instrument by which the right of that individual against the patentee can be established, then it becomes subject to the rules governing like suits between private litigants. ***” (167 U.S. at pages 264, 265, 17 S.Ct. at pages 819, 820, 42 L.Ed. 144).
When read alone this language seems to lend aid to the Government‘s contentions in support of paragraph 46(a), but when read in the context of the opinion and decision as a whole it is clear that it is not in conflict with the holding of the Supreme Court in the case. The holding is that while the Government may, in a direct cancelation proceeding, attack a patent on the ground that it was obtained by fraud, it may not secure a determination that it was issued in error. This case is discussed in greater detail below.
III.
In addition to relying on the cases discussed above, the Government in support of its right to attack the validity of the patents referred to in paragraph 46 (a) makes four contentions of law. The first of these is that the Government when prosecuting an antitrust suit is acting in a sovereign as distinguished from a proprietary capacity and is hence not subject to local rules of estoppel. It is true that the Government is suing in sovereign capacity. But to say this does not answer the question before the court. The question is not really one of estoppel, which assumes a right but forbids its exercise. The question is a deeper one—whether the Government, having once issued these patents through the Commissioner of Patents, has any authority founded upon statute, case or principle to repudiate its own action in so doing, or whether the courts have power, at the instance of the Government, to review the action of the Commissioner, in issuing the patents, in the absence of a charge of fraud in the obtaining of the same. It is to be noted in this connection that the grant of a patent is as much a sovereign act as the prosecution of an antitrust suit.
The second contention is that the present action, including the relief sought under paragraph 46(a), is not a collateral attack upon the action of the Commissioner in granting the patents but a direct attack upon price fixing, in which the fact of invalidity of the patents may incidentally be shown and determined. But again, to demonstrate that the attack is incidental to a direct attack upon price fixing does not any more answer the question raised by the present motion than to say that the attack is sovereign. The fundamental question still remains: Where does the Government find the authority to question, even in an antitrust proceeding and incidentally, its own action once taken through the Commissioner of Patents, there being no charge of fraud in the obtaining of the patents; or where does a Federal court find its power to review the action of the Commissioner at the instance of the Government.
The cases principally relied upon by the Government under this aspect of its argument—Pratt v. Paris Gas Light & Coke Co., 1897, 168 U.S. 255, 18 S.Ct. 62, 42 L.Ed. 458; Becher v. Contoure Laboratories, Inc., 1929, 279 U.S. 388, 49 S.Ct. 356, 73 L.Ed. 752; United States v. Bradford, C.C.E.D.La. 1905, 148 F. 413, affirmed per curiam, 5 Cir., 1906, 152 F. 616, certiorari denied 1907, 206 U.S. 563, 27 S.Ct. 795, 51 L.Ed. 1190—do not answer these questions. The first two of these three cases correctly hold that, although a court does not have primary authority to deal with a question of patent invalidity, it may nevertheless determine such a question in a case in which it otherwise has power over the subject matter and parties. And all three of the cases correctly decide, stating their holding in general terms, that a court may incidentally determine a question of fact in a case in which the court has primary jurisdiction of the subject matter and parties even though it might not have authority to make such determination in a direct suit for that purpose. But obviously these cases do not decide the question involved in the instant motion to strike because in none of them was the incidental question raised by the very person whose action was being questioned. In Pratt v. Paris Gas Light & Coke Company the attack upon the validity of the plaintiff‘s patent was made by the defendant, a private party, and the same is true in Becher v. Contoure Laboratories, Inc. In neither case was the Government seeking to repudiate and asking the court to review the
The Government asserts, third, that patents for invention are only prima facie valid and the courts have always permitted a party “in a proper case” to show their actual invalidity in the respects mentioned in paragraph 46(a) of the complaint. This is of course well established for private infringement cases. One accused of infringement may defend upon the ground that the accuser‘s patent is invalid for lack of invention. Reckendorfer v. Faber, 1875, 92 U.S. 347, 23 L.Ed. 719; Dunbar v. Myers, 1876, 94 U.S. 187, 24 L.Ed. 34. In Reckendorfer v. Faber, where the plaintiff accuser contended that the Commissioner‘s decision was conclusive upon the point of invention and that that question was not open to the judgment of the court, the Court rejected the contention. The Government relies on the following statement of the Court:
“Before the commissioner is authorized to issue a patent, it must appear to him that the claimant is justly entitled to a patent; i.e., that his art, machine, or manufacture, possesses all the qualities before mentioned. The commissioner must also be satisfied, that, if it possesses these qualities, it is sufficiently useful and sufficiently important to justify him in investing it with the prima facie respect arising from the governmental approval. ***
“It is nowhere declared in the statute that the decision of the commissioner, as to the extent of the utility or importance of the improvement, shall be conclusive upon that point ***” (92 U.S. at page 351, 23 L.Ed. 719).
In Dunbar v. Myers, again an infringement suit between private parties, the question of the validity of the patent was raised by the defendant. The Supreme Court, reversing a ruling of the trial court that on the facts the plaintiff‘s patent was valid, said:
“Persons seeking redress for the unlawful use of letters-patent must allege and prove that they, or those under whom they claim, are the original and first inventors of the alleged improvement, and that the letters-patent have been infringed by the party against whom the suit is brought. Prima facie support to the first requirement is derived from the patent, if it is introduced in evidence and is in due form, provided the alleged improvement is one which in its nature is patentable. Evidence to overcome that presumption, however, is always admissible, if due notice is given by the opposite party, as required by law; and the question is now well settled, that the question whether the alleged improvement is or is not patentable, is, in an equity suit, a question for the court.” (94 U.S. at page 196, 24 L.Ed. 34).
In Slawson v. Grand Street R. R. Co., 1882, 107 U.S. 649, 2 S.Ct. 663, 27 L.Ed. 576, the Court took the position that lack of invention could be urged in an infringement suit even though not specifically pleaded.
But the defendants in the instant case are not accused of infringement and the Government is not so accused. The assertion of the Government and the cases cited still leave open the question whether or not the instant case is “a proper case” for determination by the court of invalidity of the patents upon which the defendants’ license agreements rest. That is to say, neither the proposition stated by the Government nor the cases cited answer the question whether the Government which issued the patents can, even in an antitrust suit, attack and the court review the validity of the Government‘s own action in issuing them. No such question was presented in the cases cited, for in those cases the attack upon the validity of the patents was made by a private party.
The Government contends, fourth, that, assuming that in an ordinary antitrust proceeding the Government would be estopped to question the validity of the defendants’ patents, nevertheless, on the facts of the instant case, the defendants are themselves estopped to insist upon the point.
But we think that the Government is itself “estopped” to make this contention in this case. The contention is in effect a charge that the Roos patent referred to was obtained by fraudulent misrepresentation on the part of the applicant. It is hence in conflict with the concession of the Government that there is no issue of fraud in this case in respect of the obtaining of the patents which it seeks to attack under paragraph 46(a). At no point in the complaint, even in paragraph 46(a), does the Government charge that the patents were obtained by fraud. And it is expressly stated at another point in the Government‘s brief presented under the instant motion to strike that fraud is a matter not in issue in the case. Commonwealth v. Bierly, 1908, 37 Pa.Super.Ct. 496, cited by the Government in this aspect of the case, was a case in which a patent had been issued by the Commonwealth of Pennsylvania for land on an application for a warrant (to be followed by a patent) alleging a vacancy when in fact no vacancy existed. Subsequently the Commonwealth took title to the same land for forestry purposes by mesne conveyances from the holder of an older title. It was held that one claiming under the junior patent could not allege that as the junior patent was issued by the Commonwealth for a valuable consideration the Commonwealth was estopped from afterwards acquiring by purchase the older title and setting it up to defeat its own later grant. Two considerations distinguish the case from the instant case. One is that the land laws of the Commonwealth neither required nor authorized, upon the filing of an application for a warrant, an independent investigation by the land office to ascertain the truth of the basic fact asserted in it. The warrant issued as of course, and the responsibility for the result that, if the land had been previously appropriated no title
The second proposition of the Government under its fourth contention of law is this: It is provided in each of the license agreements involved in the instant case that the licensees, who with the United States Gypsum Company comprise all of the manufacturers east of the Rocky Mountains, will not contest the validity of the United States Gypsum Company‘s patents; and in certain agreements of October, 1929, the licensees in acknowledging the validity of patents already issued purport also to acknowledge the validity of any letters patent which may be granted or issued upon pending applications. In effect, therefore, the Government urges, the United States Gypsum Company has not only asked the Government through the Commissioner to issue the patents in suit upon its representations of fact but also it has combined with the licensee defendants to stop any normal test of their validity. Ordinarily, the Government asserts, the check upon the determinations of the Commissioner is the infringement suit; an invalid patent will either not be used at all by the inventor or if used will be quickly challenged by others interested in the art, since Rev.Stat. § 4920 (1875),
IV.
The answer to the question presented by the motion to strike or for partial judgment dismissing paragraph 46(a) lies not in the contentions made, and authorities cited, by the Government, but in considerations of a more fundamental nature:
1. The United States is an entity of conferred, not inherent, powers. Its authority is found in the objective law set up by the people in the Constitution, in statutes, in judicially recognized principles. What is true of the United States in this respect is true of its governmental departments and agencies. The Constitution, Art. I, § 8, Clause 8, gives Congress power “To promote the Progress of Science and useful Arts, by securing, for limited Times to Authors and Inventors, the exclusive Right to their respective Writings and Discoveries.” The statute authorizing the issuance of patents provides that:
“Any person who has invented or discovered any new and useful art, machine, manufacture, or composition of matter, or any new and useful improvements thereof *** not known or used by others in this country, before his invention or discovery thereof, and not patented or described in any printed publication in this or any foreign country, before his invention or discovery thereof, or more than one year prior to his application, and not in public use or on sale in this country for more than one year prior to his application, unless the same is proved to have been abandoned, may, upon payment of the fees required by law, and other due proceeding had, obtain a patent therefor.”
(Rev.Stat. § 4886 (1875), amended 29 Stat. 692 (1897), 46 Stat. 376 (1930), 53 Stat. 1212 (1939), 35 U.S.C.A. § 31) .
The United States acts in its sovereign capacity in issuing patents under these constitutional and statutory provisions. There is nothing in them or in the Sherman Act or in judicially recognized principles that permits it to repudiate patents or to ask the courts to do so after their issuance, except for fraud in the obtaining of the patents. The right to cancel for fraud is mentioned below.
2. The attack upon the validity of the patents under paragraph 46(a) involves a breach, as between the Government and the patentees and those dealing with the patentees, of the Government‘s grant. In issuing the patents through the Commissioner the Government “upon due examination *** adjudged [the claimants] to be justly entitled to a patent under the Law” and thereupon made a solemn grant. When an alleged infringer attacks the validity of a patent under Rev. Stat. § 4920 (1875),
In ruling that the Government cannot attack, nor the court review, in this proceeding the validity of the patents, the court does not assume to justify any misuse of the patents as a cloak for illegal restraints of trade or price fixing beyond the proper limits of a patent monopoly. If such conduct be shown, as charged, it is amenable to law. But that is a different aspect of this case; and two wrongs do not make a right. That the defendants may be shown to have misused the patents is no warrant for the Government‘s repudiating its own assurance that they were issued upon due examination and according to law and conferred an exclusive right for a given period of years. As pointed out above, in the present aspect of the Government‘s case, i.e., that arising under paragraph 46(a), the patents are not attacked as invalid because illegally used; on the contrary illegal use is predicated upon their invalidity, and this is not charged in the complaint as due to any fraud or overreaching, but only to erroneous action of the Commissioner in issuing the patents.
3. It is settled law that although the Federal courts may compel an officer or agency in the executive branch of the Government to perform a ministerial duty or to refrain from threatened action clearly beyond legal authority and may, under the due process clause of the Constitution, examine upon a bill in equity into governmental action alleged to have been taken wholly without jurisdiction, or to have been arbitrary or induced by fraud, the courts
“In United States v. Telephone Co., supra, [the reference is to the first of the two cases just mentioned] it was decided that where a patent for a grant of any kind issued by the United States has been obtained by fraud, by mistake or by accident, a suit by the United States against the patentee is the proper remedy for relief, and that in this country, where there is no kingly prerogative, but where patents for land and inventions are is-
sued by the authority of the Government, and by officers appointed for that purpose, who may have been imposed upon by fraud or deceit, or may have erred as to their power, or made mistakes in the instrument itself, the appropriate remedy is by proceedings by the United States against the patentee. “But while there was thus rightfully affirmed the power of the Government to proceed by suit in equity against one who had wrongfully obtained a patent for land or for an invention, there was no attempt to define the character of the fraud, or deceit or mistake, or the extent of the error as to power which must be established before a decree could be entered canceling the patent. It was not affirmed that proof of any fraud, or deceit, or the existence of any error on the part of the officers as to the extent of their power, or that any mistake in the instrument was sufficient to justify a decree of cancellation. Least of all was it intended to be affirmed that the courts of the United States, sitting as courts of equity, could entertain jurisdiction of a suit by the United States to set aside a patent for an invention on the mere ground of error of judgment on the part of the patent officials. That would be an attempt on the part of the courts in collateral attack to exercise an appellate jurisdiction over the decisions of the Patent Office, although no appellate jurisdiction has been by the statutes conferred. We are of opinion, therefore, that the question, as stated, is not open for consideration in this case. ***” (167 U.S. at pages 269, 270, 17 S.Ct. at pages 821, 822, 42 L.Ed. 144). (Italics supplied)
The Court said also in the course of the opinion:
“*** the Government is as much bound by the laws of Congress as an individual, and when Congress has created a tribunal to which it has given exclusive determination in the first instance of certain questions of fact and has specifically provided under what circumstances that determination may be reviewed by the courts, the argument is a forcible one that such determination should be held conclusive upon the Government, subject to the same limitations as apply in suits between individuals.” (167 U.S. at page 268, 17 S.Ct. at page 821, 42 L.Ed. 144).
The decision of course does not constitute a direct ruling that the Government cannot seek in an antitrust proceeding, incidental to determination of the primary question of violation of the Sherman Act, a judicial determination of the invalidity of patents relied upon by the defendants as a basis of license agreements themselves urged in defense of the charge of Sherman Act violation. But the case does reflect the general principle that the Federal courts sitting in equity do not have power in the absence of statute to set aside at the instance of the Government a determination made by a tribunal or officer in the executive branch of the Government except when such determination has been induced by fraud. And the reasoning of the Court in the case is as apt for incidental attack upon the validity of patents as for direct attack.
There are similar rulings by the United States Supreme Court in respect of determinations of the Land Office. In United States v. Coronado Beach Co., 1921, 255 U.S. 472, 41 S.Ct. 378, 65 L.Ed. 736, the Government sought by a bill in equity to ascertain the rights of private parties in an island in the harbor of San Diego, California, and to condemn the island for public purposes. The Government contended that private ownership went only to the shore line, the Beach Company that it included tide lands. The title of the Beach Company was derived from a Mexican grant of 1846 to one Carrillo, a Mexican citizen, to whose rights the Beach Company had succeeded. Intermediate holders of the title had in 1852 petitioned Commissioners to settle Private Land Claims appointed under an Act of March 3, 1851, 9 Stat. 631, to confirm to them the land in question, and although this petition was rejected by the Commissioners, on appeal to the United States District Court the title was declared good and confirmed, the decree stating the boundaries on the north, east and south as in the original grant, and “west by the anchorage for ships, according to the documents of title and map to which reference is had.” In 1869 a patent was issued reciting this decree, a return with a plat of a survey approved under the Act of 1851, and giving and granting the land described in the survey. The Government attempted to show that the extent of the land patent as thus confirmed was erroneous. The Court held that this was not allowable. Speaking for the Court Mr. Justice Holmes said:
“*** The grant to Carrillo was bounded ‘west by the anchorage for ships’ and although it well may be that in view of the purpose set out in his petition and the circumstances the grant could have been construed more narrowly, that was a matter to be passed upon and when the decree and the patent went in favor of the grantee it is too late to argue that they are not conclusive against the United States. It is said that the field notes, not put in evidence at the trial, show that the deep water line was not surveyed, but was taken from the Coast Survey maps. But however arrived at it was adopted by the United States for its grant and it cannot now be laterally impeached. ***” (255 U.S. at page 488, 41 S.Ct. at page 379, 65 L.Ed. 736).
The Government‘s attack in United States v. Coronado Beach Co. upon the land patent for error in issuing it was direct. A fortiori an indirect or collateral attack is not allowable. In Burke v. Southern Pacific R. R. Co., 1914, 234 U.S. 669, 34 S.Ct. 907, 58 L.Ed. 1527, there was a bill in equity to establish a right to lands. The plaintiff claimed under a clearly junior title but asserted that the grant to the defendant Railroad Company was invalid because the lands contained minerals. Mineral land was excepted by statute from grants. The District Court dismissed the bill and upon certification by the Circuit Court of Appeals of questions to the Supreme Court that Court said:
“The exclusion of mineral lands is not confined to railroad land grants, but appears in the homestead, desert-land, timber and stone, and other public-land laws, and the settled course of decision in respect of all them has been that the character of the land is a question for the Land Department, the same as are the qualifications of the applicant and his performance of the acts upon which the right to receive the title depends, and that when a patent issues it is to be taken, upon a collateral attack, as affording conclusive evidence of the non-mineral character of the land and of the regularity of the acts and proceedings resulting in its issue, and, upon a direct attack, as affording such presumptive evidence thereof as to require plain and convincing proof to overcome it. Smelting Co. v. Kemp, 104 U.S. 636, 641 [26 L.Ed. 875]; Steel v. Smelting Co., 106 U.S. 447 [1 S.Ct. 389, 27 L.Ed. 226]; Land Grant Case [United States v. Maxwell Land-Grant Co.], 121 U.S. 325, 379-381 [7 S.Ct. 1015, 30 L.Ed. 949]; Heath v. Wallace, 138 U.S. 573, 585 [11 S.Ct. 380, 34 L.Ed. 1063]; Noble v. Union River Logging Railroad, 147 U.S. 165, 174 [13 S.Ct. 271, 37 L.Ed. 123]; Burfenning v. Chicago, &c. Railway Co., 163 U.S. 321, 323 [16 S.Ct. 1018, 41 L.Ed. 175]. In this respect no distinction is recognized between patents issued under railroad land grants and those issued under other laws; nor is there any reason for such a distinction.
“Of course, if the land officers are induced by false proofs to issue a patent for mineral lands under a non-mineral-land law, or if they issue such a patent fraudulently or through a mere inadvertence, a bill in equity, on the part of the government, will lie to annul the patent and regain the title, or a mineral claimant who then had acquired such rights in the land as to entitle him to protection may maintain a bill to have the patentee declared a trustee for him; but such a patent is merely voidable, not void, and cannot be successfully attacked by strangers who had no interest in the land at the time the patent was issued, and were not prejudiced by it. [Citing cases]” (234 U.S. at pages 691, 692, 34 S.Ct. at page 916, 58 L.Ed. 1527).
4. The Government‘s contentions in respect of the right to attack the validity of the patents under paragraph 46(a) of the complaint really amount to an assertion not that it is, but that it ought to be, the law that notwithstanding the grant of a patent by the Commissioner of Patents the Government may test the validity of the patent in the courts. The Commissioner and his staff are asserted to be incapable, because of press of business and the conditions under which the Patent Office operates, including unavoidable ignorance of anticipation, of reaching conclusively dependable determinations in respect of the right to a patent; hence recourse to the courts to correct the Commissioner‘s action should be allowed, so it is urged. It is to be noted that this argument is as valid for direct attack as for incidental. If the assertions of the Government in respect of the limitations of the Patent Office are correct—upon this the court does not assume to pass—and if such limitations cannot otherwise be corrected, a case may perhaps be made for the devising of some test outside the Patent Office of the validity of patents. But it does not follow that it is within the proper
V.
There is authority to the effect that motions under Rule 12(f) are not an appropriate means of testing the legal sufficiency of a pleading. Hartford-Empire Co. v. Glenshaw Glass Co., D.C.W. D. Pa. 1942, 47 F.Supp. 711; Dysart v. Remington Rand, D.C.D.Conn. 1939, 31 F.Supp. 296. Therefore the motion now before the court is ruled on in terms of the alternative motion for a partial judgment, and the court will order a dismissal of that portion of the Government‘s complaint contained in paragraph 46(a) except the first and last sentences of that paragraph. It is true that, as suggested by the defendants, the last sentence is in somewhat conclusional terms, but the court thinks not objectionably so under the broad allowances of the Federal Rules of Civil Procedure with respect to pleadings.
In deciding as the court does that the Government cannot properly attack the validity of patents as it seeks to do under paragraph 46(a) of the complaint, it is not ruled that all evidence on the topics mentioned in those portions of paragraph 46(a) other than the first and last sentences is necessarily inadmissible on some issue in the case other than that of the validity of the patents. It occurs from time to time in the trial of cases that evidence inadmissible in respect of one issue is admissible in respect of another. So far as the right of the Government to attack the validity of the patents is concerned the court rules definitely that it has no such right, and the court no authority to pass on the same; that the patentees and those dealing with them had and have a right to assume the validity of the patents so far as any attack by the Government on its own grant is concerned. But in respect of other issues the relevancy, materiality and competency of evidence offered, whether or not it touches the topics mentioned in paragraph 46(a), will be passed upon at the time of the offer.
I am authorized to state that Judge GARRETT concurs in the foregoing opinion and decision.
BLAND, Judge (dissenting).
In my view, it makes little difference whether or not paragraph 46(a) of the complaint is stricken, but the implication drawn from the striking of it requires that I briefly express my views in dissenting.
The Sherman Anti-Trust Law forbids illegal combinations or monopolies which restrain interstate trade. It is well-settled that an inventor or his assignee has the right to a monopoly in the manufacture and sale of his patented article. United States v. General Electric Co. et al., 1926, 272 U.S. 476, 47 S.Ct. 192, 71 L.Ed. 362. However, such a monopoly has been declared to be a “limited monopoly.” Oxford Varnish Corporation et al. v. Ault & Wiborg Corporation, 6 Cir., 1936, 83 F.2d 764; see also Bement v. National Harrow Co., 1902, 186 U.S. 70, 91, 22 S.Ct. 747, 46 L.Ed. 1058. Thus it is seen that when Congress passed the Sherman Act, we had two conflicting laws on the subject of monopoly. It is the duty of the courts, if possible, to harmonize the two statutes in such a way as to give force and effect to both and arrive at the true intent of Congress in the enactment of the anti-trust law.
“Suits may be maintained by the Government in its own courts to set aside one of its patents not only when it has a proprietary and pecuniary interest in the assault, but also when it is necessary in order to enable it to discharge its obligations to the public, and sometimes when the purpose and effect are simply to enforce the rights of an individual. In the former cases it has all the privileges and rights of a sovereign. The statutes of limitation do not run against it. The laches of its own officials does not debar its right. Van Brocklin v. Tennessee, 117 U.S. 151 [6 S.Ct. 670, 29 L.Ed. 845]; United States v. Nashville, Chattanooga &c. Railway, 118 U.S. 120 [6 S.Ct. 1006, 30 L.Ed. 81]; United States v. Insley, 130 U.S. 263 [9 S.Ct. 485, 32 L.Ed. 968]. But when it has no proprietary or pecuniary result in the setting aside of the patent; is not seeking to discharge its obligations to the public; when it has brought the suit simply to help an individual; making itself, as it were, the instrument by which the right of that individual against the patentee can be established, then it becomes subject to the rules governing like suits between private litigants. ***” [Italics mine.]
This case is not authority for a holding that the Government in the instant action, when acting for the public through the Department of Justice, being duly empowered by Congress to enforce the anti-trust laws as against what it alleges is a combination built around certain invalid patents, is estopped from challenging the validity of said patents. On the contrary, the mandate of the Sherman Act is that, under the direction of the Attorney General by appropriate officers, proceedings shall be instituted to remedy the wrongs brought about by a violation of the Sherman Act. The statute calls into action and authorizes proceedings in which it may be determined whether the Sherman Act is being violated or “valid patent rights” are being exercised.
The exact question presented here has never been directly presented before as far as I know; and since I am convinced that there must be some new declaration of law made by our highest court as to where the line of demarcation rests between the exercise of valid patent rights and acts that are in violation of the anti-trust laws, I feel that such cases as Sola Electric Co. v. Jefferson Electric Co., 1942, 317 U.S. 173, 63 S.Ct. 172, 174, should be given more consideration than has been accorded them by the majority. In that case (a royalty suit) the defendant-licensee was, under the decisions, when the case came to the Supreme Court, barred from pleading the invalidity of the patent, but it pleaded that the agreement was in violation of the anti-trust laws and that therefore it had a right to say that the agreement was unlawful if the patent was invalid. The Supreme Court upheld this contention and stated:
“Local rules of estoppel which would fasten upon the public as well as the petitioner the burden of an agreement in violation of the Sherman Act must yield to the Act‘s declaration that such agreements are unlawful, and to the public policy of the Act which in the public interest precludes the enforcement of such unlawful agreements. ***”
It also stated:
“*** We granted certiorari *** the question being of importance to the administration of the patent laws and the Sherman Anti-Trust Act.”
As a basis for my conclusion, I rely also upon the following authorities: Morton Salt Co. v. G. S. Suppiger Co., 1942, 314 U.S. 488, 62 S.Ct. 402, 86 L.Ed. 363; United States v. Univis Lens Co., Inc., et al., 1942, 316 U.S. 241, 62 S.Ct. 1088, 86 L.Ed. 1408; United States v. Masonite Corporation et al., 1942, 316 U.S. 265, 62 S.Ct. 1070, 86 L.Ed. 1461; and Becher v. Contoure Laboratories, Inc., et al., 1929, 279 U.S. 388, 49 S.Ct. 356, 357, 73 L.Ed. 752. In the last-cited case the following is found:
“*** Again, even if the logical conclusion from the establishing of Oppenheimer‘s claim is that Becher‘s patent is void, that is not the effect of the judgment. Establishing a fact and giving a specific effect to it by judgment are quite distinct. A judgment in rem binds all the world, but the facts on which it necessarily proceeds are not established against all the world, Manson v. Williams, 213 U.S. 453, 455 [29 S.Ct. 519, 53 L.Ed. 869], and con-
versely establishing the facts is not equivalent to a judgment in rem. “That decrees validating or invalidating patents belong to the Courts of the United States does not give sacrosanctity to the facts that may be conclusive upon the question in issue. A fact is not prevented from being proved in any case in which it is material, by the suggestion that if it is true an important patent is void—and, although there is language here and there that seems to suggest it, we can see no ground for giving less effect to proof of such a fact than to any other. ***”
The last-cited authority is important in view of my conclusion that the fact of invalidity is pertinent to the issue here involved aside from the question of the declaration of a patent‘s invalidity. The invalidity of defendants’ patents, if any of them are invalid, is of concern here only in so far as it goes to the determination of the right of defendants to rely upon a patent monopoly for acts which would otherwise, admittedly, be contrary to the Sherman Act.
When the Department of Justice attempts to take action against a monopoly, it frequently occurs that the defendants contend that they have a right to have a monopoly and to restrain trade because their conduct is nothing more than the exercise of their rights under the patent laws. So, defendants file an answer, as they did in the instant case, showing that they rely upon the ownership of “valid patents” as an excuse for their contracts of price-fixing and trade-restraining. When such a defense is interposed, it is my view that, whether or not the Government has pleaded that the patents are invalid and regardless of the fact that they are to be regarded as prima facie valid, the Government has the right to show, if it can, that the patents relied upon are either invalid (concerning which the defendants would probably have more knowledge than anyone else) or are of such character in their relation to the prior art as to be no justification for violating the Sherman Act.
It seems to me that any other conclusion is anomalous. Can a defendant say, “Yes, I would be violating the Sherman Act if I were not acting under my valid patent rights,” and then close the mouth of the Government to show that the patents are such as to be no justification for such a violation? In attacking the validity of the patents, as the Government seeks to do in the instant case, it is not attempting to establish invalidity for the purpose of cancellation or for the purpose of protecting any other inventor or anyone who wishes to manufacture defendants’ products. It is attempting to show, in “discharge of its obligations to the public” under statutory mandate, the nature of the patents for the purpose of showing that they are no justification for the alleged monopoly and restraint of trade, whether valid or invalid.
In this view, it seems to me that the decisions relied upon by the majority are no authority for holding that the Government, under such circumstances, has no right to question the validity of the patents for the purposes stated. The result of the ascertainment of invalidity in the instant case is not the result sought in any decided case relied upon by the majority. It is the fact of invalidity which goes to the question as to whether or not the defendants in the instant case are using the patents as a smoke-screen (and I am not implying that they are) in order to carry on what the Government charges is a violation of the law.
If the striking of paragraph 46(a), which alleges that the patents relied upon are invalid, implies that the court does not have the right to accept evidence as to the nature of the patents relied upon, even though it shows them to be invalid, I think the striking would be erroneous. If the paragraph is stricken because it is unnecessary, or if the evidence of invalidity could be accepted for other purposes, then it is of little consequence what happens to paragraph 46(a).
I need not here discuss the broader aspect of the question as to whether or not the General Electric case (which, unlike the instant case, involved the conduct of principal and agent) should be modified where competitors and not bona fide agents are concerned, in the light of the present trend of decisions, and as to whether a valid patent monopoly should be held not to be one which encompasses the scope contained in the allegations of the Government. I have matured no view on this phase of the case.
For reasons hereinbefore stated, I feel compelled to dissent from the conclusion reached by the majority on the motion to strike and for partial judgment.
Notes
No. 2017022
The United States of America
To All To Whom These Presents Shall Come:
Whereas Carlisle K. Roos, of Fort Dodge, Iowa, assignor to United States Gypsum Company, of Chicago, Illinois, a corporation of Illinois, presented to the Commissioner of Patents a petition praying for the grant of Letters Patent for an alleged new and useful improvement in Cementitious Materials, a description of which invention is contained in the specification of which a copy is hereunto annexed and made a part hereof, and complied with the various requirements of law in such cases made and provided, and
Whereas upon due examination made the said Claimant is adjudged to be justly entitled to a patent under the Law.
Now therefore these Letters Patent are to grant unto the said United States Gypsum Company, its successors or assigns for the term of Seventeen years from the date of this grant the exclusive right to make, use and vend the said invention throughout the United States and the Territories thereof.
[Seal]
In testimony whereof I have hereunto set my hand and caused the seal of the Patent Office to be affixed at the City of Washington this eighth day of October, in the year of our Lord one thousand nine hundred and thirty-five, and of the Independence of the United States of America the one hundred and sixtieth.
Conway P. Coe
Commissioner of Patents
Attest:
H. S. Miller
Law Examiner.
Roos patent No. 2,079,338 is in haec verba, as are the other patents except that No. 2,080,009 is for an improvement in plaster wallboards and methods of making them; No. 1,914,345 for an improvement in wall construction; and No. 1,938,354 for an improvement in fire-resistant wall and ceiling structures.