*1 v. HAZELTINE CORP. RADIO ZENITH RESEARCH, INC., et al. May January 19, 1969. Argued 22, 1969. Decided
No. 49. *4 Thomas C. McConnell argued the cause petitioner. for With him on the briefs were Philip J. Curtis and Francis J. McConnell.
John T. Chadwell Victor and P. Kay ser argued the cause for respondents. With them on the briefs for re- spondent Hazeltine Research, Jr., were C. Lee Inc., Cook, B. Rathburn, Laurence and M. Hudson Giffin,
Joseph V. on brief Kayser and Chadwell Messrs. With Dodds. Cook and Messrs. were Corp. Giffin. Hazeltine for General Attorney Griswold, Assistant General Solicitor for a filed brief Weinstein Zimmerman, Harris and curiae. amicus States United Court. opinion delivered White Mr. Justice ais (Zenith) Corporation Radio Zenith Petitioner been has many years which Corporation Delaware manufacturing in business engaged successfully States United in the sale sets and television radio of Zenith’s necessary incident A foreign countries. and to use licenses acquisition been has operations manu- it televisions and radios in the devices patented licensing included have transactions and its factures, Inc. Research, Hazeltine respondent agreements licenses owns which corporation Illinois an (HRI), and television radio in the principally patents, domestic subsidiary respond- wholly owned is HRI fields. substantially a (Hazeltine), Corporation Hazeltine ent among its has company diversified more larger and foreign foreign patents including numerous assets — patents domestic of HRI’s counterparts —which foreign countries. for use licenses all right use had obtained Zenith Until standard HRI’s so-called under patents HRI domestic expira- however, with year, In that license. package declinеd to Zenith imminent, license Zenith’s tion longer asserting that it no renew, offer to accept HRI’s proceeded Negotiations from HRI. a required brought HRI November stalemate, claiming Illinois, District Northern suit patents HRI’s infringed sets television answer system. Zenith’s control automatic particular nonin- asserted invalidity alleged *5 fringement, and further alleged that HRI’s claim unenforceable because of patent misuse as well as unclean through hands conspiracy with foreign patent pools. On May 22, 1963, years more than three after its answer had been filed, Zenith filed a against counterclaim HRI for damages treble injunctive relief, alleging violations of the Sherman byAct misuse of HRI patents, including the one in suit, as well by conspiracy among HRI, Hazeltine, patent pools in Canada, England, and Australia. Zenith contended that these three patent pools had refused to license patents placed within their exclusive licensing authority, including Hazeltine patents, to Zenith and others seeking export American- made radios and televisions into foreign those markets.
The District Court, sitting without a jury, ruled for
the infringement action,
with the Act, Sherman §of violation States, United liable and was 1,§ S. C. 15 U. amended, 209, 26 Stat. opera- by the foreign business Zenith’s caused for injury dam- Total 77-78. Supp., at F. pools. tion trebled, when markets, the three to respect ages with in this Judgment nearly $35,000,000.1 amounted 1965, January 25, down findings, handed initial 1 In its had that Zenith concluded Court District Supp., at F. restraints a result $16,238,872 as damages of actual suffered during the export business upon Zenith’s pools three imposed period: four-year damage
Canada: $5,826,896 Television. 470,495 . Radio England: 8,079,859 Television. 1,169,067 . Radio Australia: 625,786 Television. 66,769 . Radio 16,238,872 .
Total partial judgment, entered Court District April 5, 1965, the On dam- and treble damages patent misuse awarding treble further reserving jurisdiction for Canada, but respect ages with markets. Australian English and damages in the hearings on 1965, after and November in October held proceedings were further damages for findings on amended District Court which the England and Australia:
England: $4,312,924 . Television 745,102
Radio . Australia: 223,508 . Television 24,952 Radio . 5,306,486
Total . proceedings, proof at the further submitted reflect the These revisions England Australia, embargoes in showing governmеnt amount was awarded Zenith, along with injunctive relief participation further in any arrangement pre- vent Zenith from exporting electronic equipment into foreign market.
Relying upon its finding that HRI and Zenith had stipulated before trial that HRI and Hazeltine were be considered as entity one for purposes of the litigation, see 239 F. Supp., the court entered judgments for treble damages and injunctive relief, both with respect to patent misuse and conspiracy, against Hazeltine as *7 well as against the named counter-defendant, HRI.
On appeal by HRI and Hazeltine, the
of Appeals
Court
set aside entirely
judgments
the
for damages and injunc-
tive relief
against
entered
ruling
Hazeltine,
the
that
District Court lacked jurisdiction over that company and
the stipulation
upon by
relied
the District Court
was an insufficient basis for entering judgment against
Hazeltine.
388 F.
2d,
28-30. With respect to Zenith’s
patent misuse claim, the Court of Appeals affirmed the
treble-damage
against
award
HRI, but modified in cer-
tain respects the District Court’s injunction against
further misuse.
The Court of Appeals also reversed the treble-damage award conspiracy to restrain Zenith’s export trade. Without reaching any of the other issues presented by the appeal on this phase of the case, the court held that Zenith had failed to sustain its burden under 4§ of the effect until 1959 and 1960 respectively, precluded entry by Zenith into English the and Australian markets. The found, District Court with respect to England, because embargoes, the Zenith’s damages were zero for year the first of the damage period, 50% of the figure initially accepted by the court for the second yeаr, for the third, and 75% for the fourth. respect 100% With Australia, the District adopted Court a similar re- 0-50-75-100% vision of original figures used the court in computing the damage findings of January 25, 1965. prove 15,§ C. S. 731, U. 38 Stat. Act, Clayton rele its business —within injury fact — date 1963, the May preceding period four-year vant Court Finally, filed.2 was counterclaim Zenith’s participa HRI’s injunction struck Appeals foreign trade Zenith’s restricting conspiracies tion markets. among consider S. 391 U. certiorari, granted
We of Appeals Court whether things question other Rule under function appellate its discharged properly which Procedure, Civil Rules Federal (a) aby made of fact district findings specifies unless aside be set not to are jury without sitting Court erroneous.” “clearly Against Judgments Hazeltine.
I. The com- infringement in the plaintiff named parent, HRI, not litigation began this which plaint as HRI named counterclaim Zenith’s Hazeltine; Hazeltine HRI identifying “counter-defendant,” had After parent.” and its “counter-defendant counter- of its a draft had delivered its answer filed the answer attorneys to HRI’s claim —both *8 conspired unlawfully had HRI that alleging counterclaim Zenith and pools foreign patent and Hazeltine —HRI 2 all below the HRI, and courts Zenith, that discloses record date prior to years the four be the period considered that was argument made No filed its counterclaim. on which an earlier back part, related counterclaim, in whole or years include damage period to thereby expanding the pleading, 247, States, 295 U. S. 262 v. United Bull Cf. prior to 1959. Co., 285 F. W. Bliss v. E. Process Metal Co. (1935); Cold n. denied, S. 366 U. 1960), cert. (C. 6th Cir. A. 2d 231 back relates (amended pleading (c) Civ. Proc. Rule Fed. Cf. in the asserted or defense the “claim original pleading if to date transaction, occur conduct, out pleading arose amended pleading”). original forth be attempted set forth or rence set stipulated “for purposes of this litigation Plaintiff parent Hazeltine Corporation will be considered to be one same company.” May
On 22, 1963, two weeks after the stipulation had been signed, Zenith filed its counterclaim, seeking money damages from HRI and injunction an against HRI and those “in privity” with it. Hazeltine was not served with the counterclaim and was not named aas party, although it alleged to be a coconspirator with HRI and the foreign patent pools. Hazeltine made no ap- pearance in litigation until Zenith proposed that judgment be entered it, at which time Hazeltine a “special filed appearance.” Insofar as the record reveals, Hazeltine did not formally participate in the proceedings until after the District Court had entered its initial findings of fact and conclusions of law. April On 1965, after special Hazeltine’s appearance, judge trial entered judgment against Hazeltine as well as HRI, thereby rejecting Hazeltine’s objection that the court was without jurisdiction over it. Apparently, trial court based its decision on the pretrial stipulation3 and its earlier finding that:
“The parties stipulated the purposes of this litigation Hazeltine Research, Inc. and its parent, 3 During the proceedings before the District April 2, Court on judge the trial “Well, noted: of course, Corporation Hazeltine party wasn’t a tо the lawsuit.” The upon court’s reliance stipu lation as a basis for its decision to judgment against enter Hazeltine as well as HRI is reflected interchanges between the court and counsel for during Hazeltine proceedings. those An example is the following: Kayser “Mr. [counsel . . anyone . Could Hazeltine]: really believe for a minute if he had thought bringing parent into this lawsuit that he would not have named them and that he relying would be stipulation which was intended to *9 simplify expedite the trial? any lawyer Would who has been practicing years expect two to somebody hold liable on judg- a (T— o one as considered would be Corporation,
Hazeltine licensing holding and patent aas entity operating of exploitation in engaged company, United in the industry electronics in the rights 69. Supp., at 239 F. foreign countries.” States vacating right quite Appeals of The Court one elementary It is Hazeltine. against judgments resulting from personam aby judgment not bound is toor party as a designated ishe not which litigation in process. by service party amade not been he has which con- The (1940). 40-41 Lee, U. S. Hansberry v. no has a court been has rule constitutional sistent unless obligation claim or personal a adjudicate power defendant. person over has jurisdiction Vanderbilt (1878); S. Neff, 95 U. Pennoyer v. g., E. Vanderbilt, S. 354 U. v. was never party, a named as was not
Here, Hazeltine Nor the trial. formally appear at did not served and normal substitute adequate an stipulation was the or person over obtaining jurisdiction methods agree- HRI’s represented stipulation The corporation. of its for thе acts by and be liable bound to be ment through its attor- only by HRI, signed it was parent, but stipulation, execute did Hazeltine ney, Dodds. pur- Hazeltine, did not an officer Dodds, although appar- court trial on its behalf. signing to be port Hazeltine, as binding stipulation ently viewed as consent entry appearance, an equivalent stipulation on it. The judgment entry of if construction, and warrants this hardly however, face, the trial justified which other circumstances were there findings do not reveal them. conclusion, court’s pretrial relied on some name them? He even he didn't when ment stipulation. pretrial stipulations are worthless?” You mean
“The Court:
Ill Perhaps proved could have trial and the court might have found that HRI and Hazeltine were alter egos; jurisdiction but absent over deter- that Hazeltine, mination only would bind If alter ego HRI. issue had been if litigated, and the trial court had decided that HRI and entity Hazeltine were one the same that jurisdiction over HRI gave jurisdic- the court tion over Hazeltine, perhaps appearance Hazeltine’s before judgment with full opportunity to contest juris- diction entry would of judgment against warrant it. But that is not what occurred here. The trial court’s judgment against wholly Hazeltine was based on HRI’s stipulation. may HRI have stipulation executed the litigating ego avoid the alter issue,4 but this fact cannot Hazeltine, foreclose which day has never had its court on the question of subsidiary whether it and its should be entity considered same for purposes of this litigation.
Likewise, were it shown that through Hazeltine its officer, Dodds, in litigation fact controlled the on behalf HRI, and if thе claim were made judgment against HRI judicata would be res against Hazeltine because of control, this that claim itself be finally could adjudicated against only Hazeltine in a court with juris- over company.5 diction See C. G. Merriam Co. & 4There is some genesis indication stipulation that the was pretrial conference, question when a was raised as to whether or subpoena upon served HRI could reach certain records relating Hazeltine foreign to the patents. latter’s Hazeltine, of course, argues stipulation’s only that the purpose and effect were to discovery facilitate and trial obviating necessity of litigating whether or “pierce not Zenith could corporate veil” between parent. HRI and 5In its brief in Court, argue Zenith seems to that Hazeltine estopped deny is stipulation. is bound only Not counsel, Dodds, was HRI’s an Hazeltine, officer of but also Ruestow Westermann, general patent Hazeltine’s general counsel and
h—a Peter Eckrich Schnell v. (1916); Saalfield, 241 S.U. v. Sons, Inc., & 365 U. S. injunction damages nor judgment
Neither Although injunctions proper. Hazeltine parties bind not by federal courts issued “in persons active also those suit, in a but defendant receive actual them who participation concert *11 otherwise,” or by personal service of the order notice can- with notice nonparty 65 (d), Rule Civ. Proc. Fed. or to be contempt until shown concert be held injunction the error to enter It was participation. having made this determina- without against Hazeltine, party.6 was a to which Hazeltine proceeding in a tion “repudiate” the prеsent during failed to counsel, were trial and by parties allegedly given stipulation the at trial the construction any adjudication on the to the effect that bound Hazeltine to it theory find untenable on the record of this counterclaim. We equally during stipulation case, for trial to the are the references by interpretation advanced Hazeltine that consistent necessity merely perform stipulation eliminated the Zenith to time-consuming piercing corporate proving veil in task of its Also, HRI. Ruestow and Westermann were counterclaim they during assuming present trial, and were called as witnesses proved disproved throughout the trial —a fact which is neither nor by repudiate proposed the record—their failure to Zenith’s construc- entirely stipulation proposition is consistent with the tion they present witnesses, representa- were and not as authorized by person might litigation. tives for a who be bound ego litigated alter Just as the issue was not after Hazeltine had special appearance opportunity made its and while it had an be supra, evidently rely heard, see so the District Court did not upon anything stipulation entering more than the as a basis for injunction against Hazeltine as well as HRI. The record does not support contention, implicit brief, Zenith's that when Hazeltine appeared jurisdiction by to contest it was found the District Court participation” by “in concert that, be active with HRI and entering special appearance, by Hazeltine consented be bound finding. generally Dobbs, such a See The Validation of Vоid Judgments: Bootstrap Principle (pts. 2), The 53 Va. L. Rev. 1003, 1241 Foreign
II. Patent Pools.
A. The Treble-Damage Award. HRI’s major points in the Court of Appeals were that injury no to Zenith’s business during damage period had been proved; if Zenith had suffered injury, wholly resulted or partly from prior conduct May 1959, and to this extent was barred the statute of limitations Zenith’s 1957 settlement certain antitrust litigation against RCA, General Electric, and Western Electric, which had the effect of releasing HRI from all liability pre-settlement acts of the foreign patent pools;7 that the Hazeltine companies had not illegally conspired with foreign pools; and that dam- age award was excessive. Passing the other issues pressed by HRI, including the limitations defense, the Court of Appeals held that Zenith had failed to prove any injury to its export during business *12 period which pool resulted from activities either before the after beginning of the damage and period, that the District finding Court’s to contrary the clearly was erroneous.8 7 Although and HRI Hazeltine parties were prior not to this
litigation and did not enter the agreement, settlement urged HRI joint that tortfeasors, all including Hazeltine, HRI and were released liability injuries flowing pre-settlement from the acts of the pools. The 1957 release appears only to be relevant to Zenith’s injury claim for to its trade; Canadian embargoes England the in and thought by Australia were the District preclude any Court injury from English acts of the and pools, Australian and the em bargoes were not lifted until well after the settlement was executed. 8 The Appeals Court of disturb, did not we, nor do findings the of the District Court that HRI and Hazeltine conspired with the pool deny Canadian patent companies Acenses to seeking to export goods American-made to Canada. Accepting these findings, we have no that doubt g., Sherman Act was See, violated. e. Timken Bearing Roller Co. v. United States, 341 S.U. 599 T-(
T-H an erred Appeals Court of concluded
We have respect with decision Court’s District setting aside evidence, Zenith’s damage Canada. of fact to the sus- sufficient conclusive, was means by no although injured been had in fact inference tain the upon restraints pool’s Canadian by the extent9 to some hand, other sets. On television of radio imports District Appeals of the Court agree we markets. Australian English as to the erred Court Pool. The Canadian 1. respect Court with the District findings sum- briefly may be pool the Canadian
operations Radio pool, Canadian patent The Canadian marized. 1926 formed (CRPL), Ltd. Patents, through States United of the Company Electric General Company, Electric General subsidiary, Canadian its Corp., 370 Carbon & Carbide v. Union Ore Co. Continental (1951); exports from that its Zenith demonstrated (1962). Once 690, 704 S.U. treble- activities, the by pool restrained been had States United con participating company liability domestic damage v. Carbide Co. Ore Union question. Continental beyond spiracy was Fruit United Co. v. Banana supra. American Corp., Cf. Carbon & Co. Aluminum States v. (1909); United Co., U. S. 347 Although 1945). (C. A. 2d Cir. 416, 443 America, 148 F. 2d See, follow. involved, conclusions the same rights here are Co., S. 305-315 333 U. Material v. Line example, States United 174, 196-197 Singer Mfg. Co., U. S. v. States (1948); United damage under fact of § proving burden Zenith’s flowing from proof of some Clayton is satisfied Act goes point inquiry beyond minimum conspiracy; the unlawful enough that damage. It is the fact amount and to the *13 injury; plaintiff cause of the material to be a illegality is shown fulfilling injury sources possible alternative all not exhaust need injury Continental 4. compensable under proving § his burden (1962); supra, Corp., Carbon & v. Union Carbide Co. Ore Corp., S. 392 U. Parts Mufflers, Inc. v. International Perma Life opinion). (concurring (1968) 143-144 subsidiary. by Westinghouse through its Canadian The pool up largely manufacturers, was made Canadian companies. most of which were subsidiaries American pool for many years right had the exclusive to sub- patents license the companies its member and also those of Hazeltine and a number of other foreign concerns. 5,000 patents pool About were available to the and licensing, only package licenses were cover- granted, ing patents all pool limited to manu- strictly facture in Canada. No license to importers was available. The chief purpose pool protect was to manufacturing members and competition licensees from by American and companies other foreign seeking to export products their into Canada. prevent
CRPL’s efforts to importation of radio and television sets the United States were highly organized and Agents, effective. investigators, manufacturer and distributor system- trade associations atically policed market; warning notices and advertisements advised distributors, dealers, and even consumers against selling using equipment. unlicensed Infringement suits or threats thereof were regularly effectively employed to dissuade dеalers from handling American-made sets.
For many years attempted to establish dis- tribution in Canada, but distributors were warned off pool, and Zenith’s efforts to secure a American-made goods were unsuccessful. Zenith then an brought antitrust suit against RCA, General Electric, and Western Electric.10 litigation This favorably settled, Zenith receiving, among other things, worldwide patents licenses on owned named defendants. 10Zenith’s antitrust claim was asserted aas counterclaim in a infringement brought by suit RCA Zenith and its subsidiary, Corporation. the Rauland
116 in Zenith licenses, other and these with
Armed to Canada. products television radio and exporting began to continue CRPL by informed promptly was It sign to required be would Zenith Canada, in business im- permit did which license, standard CRPL’s manufacture it must in Canada sell that to and portation, was the time at notified there. had which patents of Hazeltine’s one least at infringing Soon in Canada. licensing CRPL placed been its infringement began CRPL, HRI by demand after Zenith. suit describing findings trial court’s of the
Some impact its “drastic” and pool Canadian operations the events did not date commerce foreign Zenith’s upon May or after before occurred they had whether or state injuries to was confined award damage The 1959. 22, court the trial statutory period, but during the sustained damage- whether it immaterial deemed apparently the start or after before acts occurred causing assump- on the were awarded Damages period. damage had have would conspiracy, Zenith, absent tion that 1959, May 22, market television the Canadian 16% its actual than rather damage period throughout of the market have the failure to Since share.11 16% 3% to was ascribed period day first on the have occurred must operations those operations, pool damages part of 1959. 22, Some prior May experts Zenith’s damages, prepared computation reflects Court, Supp., 239 F. see District accepted States the United percentage share of Zenith’s comparison between in 1959 ranging market, television 21.7% 15.6% during same market the Canadian share of Zenith’s actual 1961 and down ranging from period, 5.2% 3.1% damages the measure Although discuss in 1963. we 3.2% injury in the television Canadian computing Zenith’s utilized employed Zenith’s to determine method was market, comparable sales. lost radio
awarded, therefore, necessarily resulted from pre-damage period conduct.12
The Court of Appeals reversed the District Court *15 because it considered the evidence to insufficient prove of any fact damage to Zenith May after 22, 1959. Having put aside HRI’s statute of limitations defense, belatedly raised in the pressed District Court and in the Appeals,13 Court of the import of the court’s decision 22, 1965, On during November proceedings further held to damages England consider Australia, and Zenith’s vice- executive president and treasurer, Kaplan, testified: Canada, “In assumption our was that we period commenced the starting 1, June 1959 as if we a full organization, had blown and enjoyed had doing of years benefits prior business there for to that date.” 13HRI’s answer to plead Zenith’s counterclaim did not a statute of However, limitations defense. in the proceedings course of after entry of the findings District Court’s initial of and fact conclusiоns law, of judgment, but before granted the trial court the oral motion of HRI’s new counsel for “leave to file” defenses based the statute of limitations and given by on the release pursuant Zenith to the agreement. settlement The primarily thrust of the former was findings that as to Canada had erroneously damages included resulting from occurring prior May 22, conduct to 1959. The trial court, without further mention of defenses, these forthwith refused to set aside or damage amend the Canada, award as to thus either rejecting the statute of limitations defense or considering it to have been waived under Fed. Rule (h), Civ. Proc. 12 urged by Zenith in both the District and Court Appeals. Court of Zenith requested itself had only damages four-year for the period prior filing to the of counterclaim, findings of the District Court expressly the damages limited awarded occurring to those “during 4-year statutory damage period.” Supp., 239 F. at 76. The Appeals, Court of although purporting not pass to on the statute of defense, limitations referred year to the “four damage period” and years identified it as prior May 22, “[f]our 1963, to the filing date of Zenith’s counterclaim. 15 U. S. C. Sec. 15b.” 388 2d, F. 35 and parties n. 4. The have argued not the matter here, and we make no further penetrate effort to the confusion surrounding this issue to question deal with the whether period injury pre-damage from period conduct is recoverable where an unwaived statute of limitations defense properly is asserted. 22, May after damaged been had Zenith that
was before occurring whether pool, act 1959, by overriding Appeals’ The Court date. or аfter were rationale no-injury if its be to it had judgment —as pre-damage injury from damage period claims meet to no done have would Zenith conduct —was period had the May after in Canada business more country. in that operated never pool The in error. clearly was Appeals Court finding sustain sufficient quite evidence to- joined patentees concerns business competing granting patents, Canadian their pool gether imported refusing licenses package like concerns exclude was to purpose clear Their goods. willing unless market Canadian *16 never was consequently, Zenith, there. manufacture vig- pool’s fact and This a license. obtain able to distributors, importers, discourage campaign orous using handling, selling, from and consumers dealers, prevented effectively merchandise foreign unlicensed market in the headway Canadian making any from Zenith co- its and RCA with 1957 settlement after the until 1958, Zenith undertook when in And even defendants. Canada system distribution its establish in earnest met with was Zenith merchandise, its market and to against action threatening advertisements pool further past continuing notifications, further and goods imported pool infringing were products 1959, that 22, May Zenith unless available no that and patents in Canada. manufactured that the inference warrants clearly evidence
This more made interfered past conduct CRPL’s products distribution difficult reasonably could District Court years. later pool’s cam- effects the cumulative that conclude lasting consequences goods had imported paign rationally It also period. could damage into well be found from the evidence that Zenith, beginning 1958, could not have reached potential its maximum by- May 22, 1959, pool had prevented effectively an earlier beginning, and that Zenith therefore suffered damage during period the damage from a smaller having share of the market than it would have pool had if the had never existed.
We also conclude
record evidence is sufficient
to support a finding
damage
resulting
events
occurring
after
beginning of the
period.
We
need not merely assume that the
pool
Canadian
continued
throughout
period
of this suit, as we are entitled
to do in the absence of clear evidence of its termination.
e.
See,
g., Local 167 v.
States,
United
291 U.
293,
S.
297-
298 (1934); United
Oregon
States v.
State Medical So-
ciety,
On May pool manager conferred with him, Zenith’s vice president, informing that Zenith was infringing pool patents require would license, 14 April 1, 1965, On during proceedings the further held District Court judgment, before counsel for HRI stated: *17 “Now, what really for trying is [counsel to Zenith] sell this court is the idea if that he can pools show that these continued after and, 1957 as he pools, defines yes, yes, they the did. no There is question it, about arrangements that these in patents— relation to that necessarily characterized as he them, characterizes but that arrangements these have and, continued far know, so as I in are today. existence question There is no about that.” HRI does contend, however, that the ties between the Canadian pool and the companies Hazeltine were broken in 1965, December when Hazeltine early secured an termination of licensing agree- its ment with 25, CRPL. See n. infra. manufacture. for local granted were licenses
but that stating a letter by 1959, 5, June on followed This was infringing, were receivers that Zenith reservation without form. This license standard pool’s enclosing and during demand than a less more nor nothing was in Canada manufacture either Zenith that period its or cease license package standard take and that evidence is no There country.15 in that activities during position that retreated ever pool years. next four a operate without continued thus
Zenith granted and conduct conspiratorial unburdened license This laws. the antitrust satisfy which would terms on on Zenith impact had an necessarily itself in deprivation findWe its business. injury an and constituted was Zenith that argument unpersuasive singularly is little This one. license as off without well from which licenses, pool assertion an more than income, enjoyed substantial participants and its CRPL business doing license, Without value. without were Zenith risks weighty involved obviously in Canada it trade to convince requiring itself, besides clearance do business without effectively legally could from CRPL.16 request a CRPL formal make a failed Zenith That be properly attributed can damage period during the futile. have been request would recоgnition such Zenith’s these clear, under entirely position had made pool to Zenith’s request not fatal is of a formal the absence circumstances Corp., & Carbon Carbide v. Union Co. Ore See Continental case. Shoe, United Shoe Inc. v. (1962); Hanover 690, 699-702 370 U. S. n. Corp., S. Machinery 392 U. Patents, Royal Commission Report of the 1960, the In Report de This Designs published. Copyright and Industrial distributors and its risk taken magnitude of the scribed in Canada: products imported selling grant right to had the CRPL respect of which portfolio “The licence of a absence patents, 5,000 consisted licences *18 course,
Of Zenith determined to risks, take these serious they HRI Although brought litiga- were. the instant tion claiming infringement patent, an HRI domestic foreign counterpart of which had been made available pool to the by Hazeltine, persevered Canadian in its Canadian efforts. The claim pressed, is now Appeals held, pool Court of that the bothered neither Zenith nor its distributors after mid-1959 and that Zenith gantlet successfully ran the so that not a license having no difference made whatsoever. is true that specific
It record discloses no instance of subsequent infringement suits or threats potential Zenith’s existing distributors or But dealers. there is evidence that the pool was not after dormant May The record pool 1959. contains a letter from the to a distributor of products Motorola containing clear warnings against handling imported mer- unlicensed, chandise.17 More fair significant, import of the testi- anyone from CRPL it if is doubtful could sell in Canada a radio or television receiver. grant any
“CRPL indicated that importer it dоes not a licence to of radio or television particularly respect receivers .... It is policy precluding importers of CRPL in bringing into Canada radio and complaint television receivers that the was made to this Commission. policy
“It was stated
to be the
of CRPL to enforce its
rights against any person who
imported
sells Canada an
radio or
infringes any
television receiver which
patents
one or more of the
portfolio
in its
. . .
letter, brought
This
dealer,
to Zenith’s attention
an ex-Zenith
warned the Motorola dealer
importation
that his
of American-made
probably
television sets and FM
infringed pool patents.
radios
dealer not
willing
cautioned that CRPL
litigate
remained
infringements, describing
suits,
two recent and successful
but also was
policy against
reminded of
licensing imports:
CRPL’s
closing,
you
“In
I wish to inform
that we
happy
would be most
you
issue a license to
to make or have
equip-
made
Canada
coming
ment
patents.”
within the
of our
ambit
*19
active
remained
pool
that the
officers was
by Zenith
mony
Zenith
prevented
and
period
during
throughout
system
effective distribution
establishing an
dis-
independent
obtain
to
was able
Zenith
Canada.
to
unable
but it was
Provinces,
in the Western
tributors
where
Provinces,
Maritime
and
in the
do so
Central
for distribu-
on its
subsidiaries
relied
own
necessarily
also testi-
businessmen,
experienced
officers,
These
tion.
and
the Canadian
between
the similarities
fied to
poorer
Zenith’s much
attributing
markets,
American
repressive
and
discouraging
to the
performance
Canadian
did not
Appeals
refuse
of
pool. The Court
effeсts
do,18
should
insists we
as HRI
testimony,
this
to credit
damage, considered
of
it as some evidence
accepting
but
busi-
to Zenith’s
injury
weight
prove
insufficient
it of
gave
Appeals
of
both
the Court
respect
In this
ness.
trial
findings
judge
of
to the
insufficient deference
18
testimony
of each
two
urges
as to Canada
the trial
HRI
his own
Wright
Kaplan,
with
officers,
was inconsistent
testimony
other,
testimony
recall,
with
inconsistent
documentary evidence, and that we should there
inconsistent
judge’s
testimony.
the trial
views
disregard
It is true that
fore
their
(a)
impervious,
52
ad
credibility
completely
but Rule
are not
as to
opportunity to assess the
regard for the trial court’s
due
monishes
clearly
credibility
Appeals
took into
of witnesses.
Court
adequate
evidence,
the record
and we
no
basis
this
see
account
testimony
Zenith officers
refusing
accept the
of the two
Machinery
v. United Shoe
See United States
probative evidence.
Co.,
Walling
(1918);
v.
Industries
Co.,
32,
General
247 U. S.
37-38
Mfg.
(1947);
v. Linde Air
Tank &
Co.
545,
Graver
330 U. S.
550
(1950);
v.
Co.,
605,
United States
Products
U. S.
609-612
339
Society,
326,
(1952);
v.
Oregon
332
Orvis
Medical
U. S.
State
343
(C.
Cir.),
denied,
Higgins,
2d
2d
539-540
A.
cert.
340
F.
Mining Co.,
(1950); Ruth v. Utah Construction &
U. S.
1965).
heavily
(C.
respect
HRI
2d 952
10th Cir.
relies
F.
A.
years 1957-1962,
reports for the
but aside from
on Zenith’s annual
except
reports,
were
admitted
fact that
never
into
these
quite
evidence,
credibility
we
them
insufficient
undermine the
find
Wright
Kaplan.
and failed
adhere to
teachings
Bigelow
v. RKO
Pictures,
Radio
Inc.,
In applying the clearly erroneous standard to the findings of a sitting district court without a jury, appellate courts constantly must have in mind that their function is not to decide factual issues de novo. The authority appellate an court, when reviewing find of a ings judge as well as those of a jury, is circumscribed by the deference it must give to decisions of the trier *20 of the fact, who usually is in superior a position to appraise and weigh the The question evidence. appellate court under Rule 52 is not (a) whether it would have made findings the trial did, court but whether “on the entire evidence is left with the [it] definite firm and conviction that a mistake has been committed.” United States v. United Gypsum States Co., 333 364, U. (1948). S. 395 See also United States v. National Assn. Boards, Real Estate 485, U. S. 495- of (1950); Duberstein, Commissioner v. U. S. (1960). 289-291
Trial appellate courts alike must also observe practical limits the burden of proof which may be demanded of a treble-damage plaintiff who seeks recovery injuries from partial a or total exclusion from a market; damage issues these cases are rarely susceptible of the kind of concrete, proof detailed injury which is available in other contexts. The Court held repeatedly has the absence of precise more proof, may factfinder “conclude a as matter of just and reasonable inference from proof of defend- wrongful ants’ and their tendency acts to injure plaintiffs’ business, from the evidence of the decline prices, profits and values, not shown to be attributable to other causes, that defendants’ wrongful acts had caused damage Pictures, Inc., supra, RKO Bigelow v. plaintiffs.”
to the Photo v. Southern Co. Kodak Eastman also at 264. See Story (1927); 359, 377-379 Co., 273 U. S. Materials Co., 282 Paper Parсhment Paterson Co. v. Parchment 561-566 S.U. injury plaintiff claimed treble-damage a Bigelow,
In him deny distributors among film conspiracy a his comparing evidence He offered pictures. first-run first-run granted theater competing those profits profits against his current measuring also showings and available films had been first-run when those earned Appeals, the Court Court, reversing to him. This award to sustain an sufficient the evidence found is entitled the factfinder Although damages. speculation guesswork, base a judgment reasonable estimate may just make jury “the data, and render relevant based on circumstances, In accordingly. such its verdict infer- upon probable and allowed to act ‘juries are Story proof.’ positive as direct and well ential, as Co., supra, 561-4; Paterson East- Co. v. Parchment Co., supra, Photo 377-9. v. Southern man Kodak Co. wrongdoer profit Any other rule would enable *21 his victim. It wrongdoing expense at the his wrongdoing an inducement to make so would be every preclude in complete case effective by rendering damages the any recovery, measure apply Failure it would mean that the uncertain. wrong the grievous done, less likelihood more recovery.” S., be of there would U. 264-265. a valuable license and sub-
Here, denied testimony that it had en- mitted without which distribution difficulties its prevented countered comparable market securing share to that which States, in and which its business enjoyed the United States, in the United dictated proficiency, demonstrated an in CRPL was estab it should have obtained Canada. history successfully organization long with a lished excluding merchandise; аnd view its con imported injury during damage period, tinued existence type of that alleged precisely Zenith was loss likely violations of the laws would be claimed antitrust infer to cause. The trial court was entitled from necessary causal relation circumstantial evidence that the damage pool’s between the conduct and the claimed & See Continental Ore Co. v. Union Carbide existed. Carbon Corp., 370 U. 696-701 S. English
2. The Pool. patents English Hazeltine were made available to the pool pool in 1930. The package licenses, issued Although restricted to local pool manufacture. radio patents had expired prior beginning damage to the of the the trial court period, assume, and we that found, pool patents held television which would not be licensed for television sets made in the United States.19 Zenith English was interested market and made exclusive arrangements with one distributor desiring to handle its during merchandise. At no time or before the period, however, did Zenith make available or offer for sale a substantial number of television sets suitable for the English market make other serious efforts to
19Wright representative testified that in mid-1955 a English pool had understanding confirmed his policy that “the required Pool . . . that sets be made [radio television] England, and nothing imported would be licensed if it was Wright abroad.” pool further testified representative “saw possibility” no policy changed this restrictive would be in the Subsequently, during deahngs future. English with its radio distributor, “given Zenith was to understand that television was just question.” out of the *22 position appreciable no It attained mаrket. enter that market. English television in the over responsible initially patent pool the found Having English in the participate failure to for Zenith’s years held proceedings, after further court, trial market, was patent pool, government embargo, that English entering the Zenith’s not reason for the sole period damage beginning of prior to the market pool found, Court then, the District 1959; until type of conduct to exercise the upon not called “[was] not, however, did It that exercised in Canada.” [it] by the imposed restraints conclusion that retreat from its damage period.20 during Zenith pool foreclosed had that Appeals agree with the Court respect In this we examina- clearly erred. Based on our own the trial court with the convinced that even record, we are tion Zenith faced other ending embargo mid-1959, of the entry into the effectively discouraged its obstacles which responsible. was not English pool market and for which from the Positing get Zenith could not license not enter the British market English pool and did whether, the issue is during period, before or embargo was Zenith wanted and intended lifted, once the capacity so, prevented had the do and was enter, entering by inability patent secure a its English pool. Sec- operations other Clayton show an required 4 of the Act Zenith tion property anything to its “business or reason of injury in the laws.” If Zenith’s failure to forbidden antitrust to its lack of English enter the market attributable production its limited other desire, capabilities, any recovery by embargo precluded Because the year damage period, the first the trial court modified its damages measure of to reflect the time it would have taken initial starting embargo, up Zenith, with the removal to build supra. n. market share. See
127 independent factors of HRFs unlawful conduct, would not have met its burden under § 4.21
Zenith was interested in
English
market;
much is clear. But its standard domestic television set
was
operate
manufactured to
on 525-
625-line-per-
and
scanning
second
signals, whereas the
signal
405-line
was
standard in England until after
period.
the damage
Sim-
ilarly, while FM transmission was utilized in the United
for the
portion,
States
audio
AM signals were used in
England.
product
Zenith’s regular
thus
salable
in the English market. To
all,
succeed at
Zenith had
either to
produce
differently equipped
provide
set or to
for the mass conversion of its standard receivers. Un-
questionably,
company had the facilities and the
ability
follow
either
But
course.
it is equally clear
pursued
change
neither.22 A
in the standard
British broadcast
signal
include a 625-line
was under
21See American Banana Co. v. United Fruit
261,
Co. 166 F.
(C.
1908),
A. 2d
specific
Cir.
affirmed without
reference to this
issue,
(1909);
consideration, have sold event would merchandise Zenith’s in the prevailing than those substantially higher prices tended to widen costs freight market; tariffs English English set for the a new Producing the differential. large-scale on a models existent modifying market, costs. involved substantial have basis, would the corre- including us, before the evidence Based on *24 representative, its British Zenith between and spondence the correctly rejected Appeals think the Court we to prepared intended to and was that “Zenith inference damage the during market television English enter the in fact was concluded that Zenith correctly and period,” to a 625-line English standards “waiting change a from emerges It clearly 2d, 388 F. 37. system.” promote to every intention that Zenith the evidence had signal if and when the of its television sets the sale event, neither the absence Given that change occurred. or its pool nor threats pool of a license effort major deterred Zenith from have a customers would Why British market. the existence the penetrate quiescent as far as the record shows was pool, which should be credited with the damage period, during before the discourage entry signal Zenith’s power to grasp. is But the ques- not after difficult change but if whether, Zenith had decided to is tion at hand a pool would have deterrent market, been enter Zenith damage. Rather, it whether was is inflicted stay pool England fact constrained out damage whether during period or Zenith’s own busi- led it to await more favorable ness calculus conditions. only permissible is in- said, As we the latter have from this record. ference Pool. The Australian
3. had pool, rights The which exclusive Australian patents, granted license Hazeltine also licenses HRI Hazeltine’s con- manufacture. Had local kept pool effectively spiracy with the Australian of the anti- compensable violation market, But have occurred. unquestionably trust laws would wholly are silent findings of the District Court impact on Zenith’s pool to how the Australian had Zenith had An officer of Zenith revealed that business. no to Australia since the 1920’s exported products pool requested 1930’s. Zenith had not early A the trial. during 20-year period preceding Court was found the District government embargo American-made merchandise to have foreclosed Zenith’s damage period. High until well into the tariffs as well as the shipping barriers, costs were additional in the record prospect competition. Nothing of vigorous permit us would the inference that Zenith either before prepared or was to enter the Australian market intended period. Appeals Court during damages reversing the District Court’s award correct to the Australian market. respect *25 Injunction. B. grant injunctive of setting
In aside the District Court’s Hazel- participation HRI and against relief continued restricting any pool or similar association patent tine in stated, Appeals of export trade,23 Zenith’s the Court without more: respect follows from our conclusion
“It with against relief foreign patent pools injunctive 23 injunction prohibits Paragraph C of the District Court’s HRI from any
“Entering into, adhering to, enforcing claiming rights or under any contract, agreement, understanding, plan program, any or person, company, pool, organization, association, cor- other entity directly indirectly prevents or poration or which restricts or any defendant-counterclaimant, Corporation, Zenith Radio or of its exporting any apparatus subsidiaries, electronic from the foreign any into market.” United States CO o pools, those at damage' directed or loss
‘threatened cannot conspiracies, be unlawful by Zenith to alleged C Paragraph 26. S. C. Sec. 15 U. under justified be F. 388 be stricken.” must granted injunction 39. 2d, at C was that striking Paragraph premise
The evident injunc- injury barred of the fact prove Zenith’s failure unsound, This damages. was as treble as well relief tive which was 26,§ 15 U. S. C. Clayton Act, 16 of § equitable available to make Congress enacted tra- parties, invokes private denied previously remedies injunctive authorizes equity and principles ditional injury.24 of “threatened” demonstration upon the relief though characteristically available even remedy is That actual see yet injury, suffered has not plaintiff Cutters’ Journeymen Stone Co. v. Cut Stone Bedford need demon- Assn., (1927); he 37, 54-55 274 U. S. impending from an injury threat significant strate contеmporary or from a laws the antitrust violation & Co. v. See likely or recur. to continue violation Swift Cut States, (1905); 375, 196 S. 396 U. United Bedford Assn., supra, Cutters’ Journeymen Stone Co. v. Stone Society, Medical Oregon State States v. 54; United Co., W. T. Grant States v. United (1952); U. S. S.U. private parties treble- purpose giving Moreover, merely pro- remedies injunctive provides: 24 Section16 entitled to corporation, or shall be
“Any person, firm, association injunctive relief, in States court United for and have sue threatened loss jurisdiction parties, having over the laws, and under damage by the antitrust . . . violation when *26 injunctive principles relief conditions and as the same by granted cause loss is that will threatened conduct proceedings governing such rules . . . .” equity, under the courts of added.) 15 S. C. (Emphasis U. §26.
131 high private relief, vide but was serve as well the purpose g., the antitrust laws. E. United enforcing Co., v. Borden 514, (1954). States 347 U. Sec- S. applied tion 16 be with purpose should construed and in mind, knowledge remedy and with the that affords, equitable remedies, like other is flexible and capable of nice “adjustment and reconciliation between public private interest and needs as well between competing private Bowles, claims.” Hecht Co. v. 321, availability U. S. 329-330 Its should be public “conditioned the necessities of the interest Id., Congress sought which has to protect.” at 330. Judged proper standard, record before us injunction respect warranted the with to Canada. The findings of the District Court were that HRI and CRPL conspiring were to exclude Zenith and others from the market; Canadian nothing there was indicating that this clear violation the antitrust laws had terminated or the threat inherent the conduct would cease the foreseeable future. Neither the relative quiescence pool during the litigation nor claims objectionable conduct would cease with the judg- negated ment the threat foreign Zenith’s trade.25 25HRI Hazeltine, having informs us that early obtained an licensing agreement termination of CRPL, prepared is now to license patents one or more of its Canadian “with no re imports.” strictions on Since Hazeltine’s partic abandonment of its ipation in pool the Canadian and, occurred apparently, after — response judgment to—the District Court’s decree, we cannot agree suggestion injunctive with the relief as to Canada has unnecessary been inappropriate. rendered See United States v. Oregon Society, State Medical (1952); 343 U. S. United States Phosphate Export v. Concentrated Assn., 393 U. S. 202- (1968). Although attempt HRI is free to to demonstrate injunctive in the future that the need for respect relief with eliminated, to Canada has change been or that a of circumstances justifies elsewhere additional injunction, modifications of see, *27 132 injunctive and argument, clear for too was
That threat market the Canadian respect to with HRI against relief wholly proper. District by the entered injunction reinstate We also HRI from barred broadly more Court insofar from prevent to restrict others conspiring with its exercising In market. foreign other any entering power broad federal court has jurisdiction, equitable “[a] un- or class as type of the same which are acts to restrain been com- found to have court has acts which lawful enjoined, unless future, in the commission or whose mitted in conduct defendant’s anticipated from the may fairly be Co., U. Publishing S. Express v. past.” NLRB Lead National v. also United States (1941). See 426, 435 Given Co., and n. 319, 328-335 332 U. S. pool, with the conspiring HRI was Canadian findings its viola- exclude Zenith Canada purpose its to clearly Its established. Sherman Act were tion was also sort arrangements propensity in participation its revealing by findings indicated England and Australia.26 operating in pools similar foreign in its expanding interested company a Zenith, HRI and having suffered at hands commerce was entitled market, coconspirators the Canadian its in other by HRI relief like conduct injunctive Co., 629, 633-636 v. W. T. 345 U. S. g., United Grant e. States reappraisal willing (1953), at this time undertake we not are light post-trial developments. injunction in findings that HRI Having disturbed the Court’s District patent pools conspiring English with and Australian Hazeltine were imports, Appeals in event the Court of which refused to injunction English respect to the have should sustained together with Zenith’s findings, and Australian markets. These expand export business, were sufficient demonstrated intent participation continued HRI foundation for the conclusion that significant English pools posed and Australian and Hazeltine in the threat of loss or to Zenith’s business. courts,
world markets. We see no reason that the federal equitable powers extended exercising traditional “salutary to them respond § should not principle that when one has been found to have com- mitted he may acts violation a law be restrained *28 NLRB v. committing from other related unlawful acts.” Co., Express Publishing supra, Althоugh a dis- at 436. may enjoin illegal court not all future conduct of the trict defendant, or even all future of violations the antitrust laws, by however unrelated to the violation found the g., York, ICC, e. New N. H. & R. Co. v. H. court, 200 S. U. (1906), purpose 401 the to restrain trade “[w]hen appears necessary from a law, clear violation of it is not open that all of the untraveled to that end be left roads the worn one be closed.” International and only States, Salt Co. v. United 332 U. S.
This is in particularly cases, true which treble-damage are brought private ends, but which also serve public interest in that “they effectively pry open competition a by market has been closed defendants’ Id., illegal restraints.” at 401.
III. Patent-Misuse Issue. Since the District Court’s treble damage award for patent misuse was affirmed of Appeals, Court challenged HRI has in that award Court, length misuse issue we need consider at is whether the Court of was Appeals striking correct the last Paragraph clause from A of the injunction,27 which enjoined HRI from
“A. Conditioning directly indirectly grant or of a license defendant-counterclaimant, Zenith Radio any Corporation, or of its subsidiaries, under injunction The District paragraph Court’s also included a bar ring continuing acceptance HRI package to coerce of license through offering royalty the mechanism of a much lower rate for under a license taking of upon patent
domestic on royalties paying upon patent any other of not covered apparatus or sale use manufacture, of added.) (Emphasis patent.” such HRI’s was directed injunсtion of paragraph This five- its standard of acceptance insisting upon policy 500-odd covering the agreement, license year package reserv- licensing portfolio its domestic within patents television radio total licensee’s royalties ing were patents licensed whether the irrespective sales, manufactured.28 products actually used A. the Paragraph clause the last striking In determinations. made two effect, Appeals, Court v. Mfg. Co. Radio Automatic view of under its First, condi- Inc., (1950), Research, 339 U. S. Hazeltine upon payment of a grant tioning the not misuse products *29 unpatented royalties on constitute not did since such conduct Second, patent. patents package of entire on the a license who take licensees those enjoined Paragraph B merely of a few them. a on than license rather from HR.I any indirectly grant license of directly “Conditioning or any Corporation, or of
defendant-counterclaimant, Zenith Radio payment of the patent upon the any subsidiaries, domestic under have licenses which royalty the rate at greater than or rate same patents group of domestic under a offered to others granted or been patent.” includes said which respects, paragraph in certain Appeals of modified
The Court these modifications. 2d, 39, but we not disturb at do 388 F. Court concluded: The District admittedly unpatented paid on royalties be demands that “Plaintiff’s plaintiff patent rights and cannot of its apparatus constitute misuse by arguing monopolies patents, of its justify such use рarties policy. a While to it such and convenience necessities any royalty base to select arms-length are free transaction in an right no convenience, patentee has may suit mutual their products.” royalties unpatented payment of on or force the to demand Supp., 77. F. patent misuse, neither be could it violative of anti- meaning Clayton Act, § trust laws within the of 16 of the sought under which Zenith had and the Court District granted had the injunction. respect With to the first Appeals. we reverse the We determination, Court conditioning grant patent upon hold that of a license payment royalties products on which do not use the teaching patent does amount to misuse.
The trial injunction court’s does purport prevent the parties serving their mutual convenience basing royalties on the sale of all radios television sets, irrespective of the use of HRI’s inventions. The injunction only reaches patentee situations where the directly indirectly or “conditions” upon his license payment royalties unpatented products is, —that patentee where the refuses to license on other basis and leaves the licensee with the choice between all; providing so and no license at Also, injunction takes effect if the license is upon conditioned payment royalties “on” merchandise not covered the patent the express provisions of the license or —where necessary their effect is employ the patent monopoly royalties, collect not for the use of the licensed inven- tion, but for using, making, selling an article not patent. within reach of the patentee A has the right exclusive to manufacture, use, and sell his See, g., invention. e. Bement v. National Co., Harrow U. S. 88-89 (1902). The heart of legal his monopoly right is the to invoke the State’s *30 power prevent to others from utilizing his discovery without his g., consent. See, e. Continental Paper Bag Co., Co. Paper Bag v. Eastern 210 U. S. 405 (1908); Crown Die & Tool Nye Co. v. Tool Works, & Machine 261 24 (1923). U. S. The law recognizes also that he may to assign another his patent, whole or in part, and may practice license others to his See, invention. Mackenzie, (1891). 252, 138 U. S. g., e. Waterman v. must patentee the limits which are established But there to patent leverage of his employing the exceed in not Among the licensee. operations the or limit control the may not condition him, he upon restrictions other to agreement the licensee’s patent his to use right sell, or use, purchase, or not to sell, use, purchase, scope within not the of commerce article another Ethyl Corp. Gasoline v. E. g., monopoly. patent his Interna- States, (1940); 436, 455-459 309 U. S. United States, 395-396 v. United 332 U. S. Salt Co. tional a does price for set the right His (1947). royal- “to he has exact privilege whatever far, so extend Co., Thys Brulotte v. negotiate.” he can high as ties as lev- patent’s as the just And S.U. licensee a the to extract may not be used erage products or sell other purchase, use, commitment neither can patentee, desires according to the royalties percentage a garner as leverage be used to that prod- from sales of other receipts of the licеnsee’s share seeks extend the patentee case, in either ucts; a attribut- benefit not his derive monopoly of teachings. patent’s to use able Co., Thys supra, licensed In Brulotte v. patentee the license for patented machine, providing of a the use royalty using invention after, of a payment expiration patent. date of the before, as well lawfully charge could a Recognizing patentee practicing patented prior invention to its royalty for payment royalty expiration date beyond that postponed time, we noted that could be royalties were not use but post-expiration prior nothing were less an use, for current than effort of his monopoly beyond to extend the term patentee by law. Brulotte thus granted articulated that a principle patentee may context particularized *31 power patent levy charge not use the of his selling products making, using, not within the reach monopoly granted by the Government. Automatic Radio is not to the is not contrary; authority for proposition patentees carte have blanche authority patent condition the of licenses grant upon payment royalties of unpatented articles. In that Automatic acquired privilege Radio case, of all using present and future patents by promis- HRI ing pay a percentage royalty selling based on the price of its radio receivers, royalty with a minimum $10,000 per year. HRI sued for the royalty minimum and other sums. Automatic Radio asserted mis- agreement use royalties extracted whether or not patents were in any way used in Automatic Radio receivers. District Court and the Appeals Court of approved the agreement as a convenient designed method parties to avoid determining whether each radio receiver embodied an HRI patent. The percentage royalty was deemed an acceptable alter- native a lump-sum payment privilege to use patents. This Court affirmed.
Finding the tie-in cases such as International Salt Co. States, v. United 392 (1947), U. S. inapposite, and distinguishing Co., United States v. United Gypsum States (1948), involving U. S. 364 a conspiracy between patentee and licensees to eliminate competition, Court considered reasonable “payment royalties according agreed to an percentage of the licensee’s sales,” since judgment business could “[s]ound indicate that payment represents such the most convenient method of fixing the business value of the privileges granted by the licensing agreement.” 339 U. S., at 834. It found nothing “inherent” such a royalty provision which would the patent monopoly. extend Finally, the holding by the Court was stated to be that in licensing the use
CO00 to measure patents per se a misuse is “it patents *32 sales.” licensee’s of the a by percentage the consideration Ibid. Dis- with the inconsistent foregoing is
Nothing the conditioning a license injunction trict Court’s products royalties unpatented on payment the upon em- leverage may not be patent that principle with the not merchandise royalties producing for to collect ployed opinion The Court’s invention. patented the employing nego- Radio did not deal with the in Automatic royalty formula at issue the spawned which tiations leverage to patent that HRI used not indicate did practicing royalties on radios not pay promise coerce a inference follows No such patent. of the learning by measuring royalties provision from a mere license things out, work if, even total sales licensee’s employs patented none of the merchandise some or if foreseeable or even it was that some process, idea or would not contain the invention. portion undetermined in Automatic easily be, as the Court indicated It could Radio, would patentee that the licensee as well as the and efficient from several stand- find it more convenient face royalties on total sales than to points base royalties actual If figuring burden of based on use.29 patent power of the rather dic- parties convenience than royalty provision, there are no misuse tates total-sales patents and no forbidden conditions attached to the license. Automatic Radio that
The Court also said if the bargains for privilege using patent licensee products agrees lump all of his to a sum or a percentage-of-total-sales royalty, escape pay- he cannot argument The record and oral in Automatic Radio disclose no basis the conclusion that Automatic Radio was forced into accepting royalty by patent the total-sales rate HRI’s use of its leverage.
ment this basis by demonstrating longer he is no using the invention disclosed patent. We neither disagree nor think such transactions are barred injunction. trial court’s If the negotiates licensee “the privilege to use or all of the patents and devel- opments as [he] use them,” desire[s] S.,U. he cannot complain he pay royalties must if he chooses to use none of them. He could not then charge patentee had refused license except on the basis of a royalty. total-sales
But we read Automatic Radio to authorize the do patentee to use the power of his to insist on a total-sales royalty and to protestations override *33 licensee that some products of his are unsuited to the patent or that for some lines of his merchandise he has no need or desire purchase to the privileges of the patent. In such event, only not royalties would be col- lected on unpatented merchandise, but the obligation to pay for nonuse would clearly have its source in the leverage of the patent.
We also think patent misuse in inheres patentee’s a insistence on a percentage-of-sales royalty, regardless of use, rejection his of licensee proposals to pay for actual use. Unquestionably, licensee must pay if he patent. uses the Equally, however, he may insist upon paying only for use, and on not the basis of sales, total including products in which he may use a competing patent or in which no patented ideas are used at all. There is in nothing the right granted the patentee to keep others from using, selling, manufacturing his invention which empowers him to insist on payment not only for use but also for producing products which do not employ his discoveries at all.
Of course, a licensee cannot expect to obtain a license, him giving the privilege use and insurance against infringement suits, without at least footing the patentee’s upon insist cannot He with him. dealing
expenses out, things turn perhaps, alone use on paying produce he can finds he nothing because absolutely pay infringement risks If the patent. the using without anticipate he must them, avoid would and he real are insure enough for the charge minimum some license— administering negotiating loss patentee the used not is patent the if in fact even monopoly, his statutory no basis discern But we all. that using his patentee granted monopoly percentage pay agreement an coerce monopoly discovery employing not on merchandise royalty define. patent claims which Radio Automatic concluded have Although we District by the entered injunction foreclose not does other was injunction not follow does Court, it deter correctly court trial Whether proper. wise patent conditioning grant was that HRI mined unpatented royalties payment upon the licenses Court by the determined been yet not has products it does misuse, such if was there And Appeals. embodies misuse follow necessarily 2§ 1 or § of either violation of a ingredients a viola threatened or that Act, Sherman 16 of § under injunction it to an entitle so as tion S. v. G. Co. Salt Morton g., e. *34 See, Act. Clayton Transpаrent- (1942); 490 Co., U. S. 314 Suppiger Co., U. S. 329 Smith & Corp. v. Stokes Wrap Machine Inc., Crab, King v. Corp. Laitram (1947); 637, 641 Report also 1965). See Alaska C. (D. Supp. F. Study the Committee National Attorney General's Jurow, & E. R. (1955); Nordhaus Laws Antitrust Patent Frost, 122-123 (1961); Law Patent-Antitrust in Conference Violation, Antitrust A Per Se As Misuse Com Attorney General’s Laws Antitrust 1955). ed., Zaidins E.& (J. Rahl 113-123 Report mittee Cf. Staff Antitrust Subcommittee of House Com- mittee on the 84th Judiciary, Cong., 2d Sess., Antitrust Problems Exploitation (Comm. Patents 23 1956); Print. Schueller, The New Illegality Antitrust Per Forestalling Se: Misuse, Patent 50 Col. L. Rev. 184r-200 Whether the findings and the evidence are sufficient to make out an or actual threat- ened violation of the antitrust laws so justify as to injunction by issued the District Court has not been considered the Court of Appeals, and we leave the matter to be dealt with court the first instance.
Accordingly, judgment of the Court of Appeals is in part affirmed and reversed in part, and the case is remanded that court for further proceedings consistent opinion. this
It is so ordered. Mr. Harlan, Justice concurring in part and dissenting part. I concur in I II Parts of the Court’s opinion. I However, join do not Part III, in which the Court holds that a provision license which measures royalties by a percentage of the total licensee’s is sales lawful if included for the of both “convenience” parties but if unlawful upon” by “insisted the patentee.
My first difficulty with part opinion is that its test for validity of such royalty provisions is likely prove exceedingly to apply difficult and consequently apt is engender uncertainty in this area of business dealing, certainty where in the law is particularly desir- able. In it often will practice, very be hard to tell whether a provision was included at the instance of both parties at the will of the licensor. District courts will have the unenviable task of deciding whether negotiations course of establishes “insistence” upon the suspect provision. Because of the uncertainty in-
h-‘ to existing to parties determinations, in such
herent agree- their that assurance little have will licenses future that may predicted be it And be enforced. ments will em- to careful will be licensor today’s decision after proposal, alternative an negotiations bellish much that the situation unravelling of court’s making more difficult. rule that view me to lead considerations
Such royalty validity percentage-of-sales of causes which examina- judicial subsequent depend upon provisions than rather will disserve negotiations parties’ tion of the I think Hence, all concerned. of the interests further address failing short has fallen that the Court such of employment whether question to the itself patent invariably amount should provisions royalty misuse.1 Court’s part difficulty with this
My second prior aspect of an reality overrules it that is opinion Mfg. Co. v. Automatic Radio Court, decision without (1950), Research, Inc., S.U. Hazeltine in law eco of a reason a shadow more than offering Despite ruling. earlier departing from nomics Radio, it Automatic distinguish efforts the Court’s there sustained the Court denied that be cannot tenor as the same precisely Hazeltine royalty ground “[t]his on the here, one involved it creates monopoly; another does not create provision grant legitimate beyond competition no restraint S., at 833. 339 U. patent.” in some present purposes finding significance In Radio, I believe in Automatic language the qualifying A opinion. misconstrued that today has Court me that as a whole satisfies opinion reading of the question unnecessary whether to consider the further 1 I find violate the antitrust provision should be held to such a inclusion laws.
Automatic Radio Court did not consider it relevant whether Hazeltine Research upon had “insisted” inclu- sion of the disputed in provision, and that emphasizing royalty the terms had no tendency “inherent” to extend patent the monopoly and were a “per not se” mis- use of the patents, Court simply endeavoring to distinguish prior decisions which patent misuse was found when patent monopoly had been employed to “create another monopoly or restraint of competition.” S., at U. 832.2 (Emphasis added.) now Until no subsequent decision has in way impaired aspect this of Automatic Radio.3
Since the Court’s decision if finds little any support in prior case one law, expect would from the Court an exposition of economic reasons for doing away with the Automatic Radio doctrine. However, the thing nearest to an economic rationale is the Court’s declaration that:
“just patent’s as the leverage may be used not to extract from the licensee a commitment to purchase, use, or products sell other according to desires of the patentee, neither can that be leverage used to garner as royalties a percentage share of the licensee’s receipts from sales other products; either сase, patentee seeks to extend the monopoly of his patent to derive a benefit not attributable to use of patent’s Ante, teachings.” at 136.
The Court then finds in the patentee a heretofore non- existent right to upon “insist paying only for use, and not on the basis total Ante, sales . . ..” at 139.
2 The Automatic Radio
explicitly
Court
distinguished a number of
kind,
cases of
including
United States v.
Gypsum
United States
Co.,
One exception the Court’s of view likely in especially seems “con- for the included provision the where for cases licensees protect ais desire parties, both of venience” cite, not does Court the But overreaching. any evidence presented, not have parties the Moreover, the proteсtion.4 need such a class licensees upon simply based royalty awhy explain not does Court overreaching. equally be not could use result for the Court’s justification possible Another of the use upon directly based royalty a be that might to “invent around” licensee the spur tend will patent costs which a substitute acquire otherwise or patent no such can have royalty percentage-of-sales a less, while he must knowledge that licensee’s because effect hint use. No patent of actual regardless royalty pay the More- opinion. Court’s in the appears of rationale such royalty percentage-of-sales theory over, under resulting dam- because largely objectionable be would less efficient through economy, rest of age to possible because than rather resources, allocation not theory might Hence, to the licensee. harm 2d 359 F. Rovico, Equip. Co. v. Photocopy American Cf. exception admit of the provisions Court’s included for parties. “convenience” of both explain Because its failure to reasons for the result reached in Part III, opinion the Court’s is little assistance I answering question which con sider to be the part crux of this of the case: whether percentage-of-sales provisions royalty should be held exception without patent to constitute A misuse. recent economic analysis argues provisions that such have may two consequences. already undesirable First, as has been noted, employment of provisions such tend may to reduce the licensee’s incentive to cheaper substitute other, “inputs” for patented item in producing unpat- an ented end-product. Failure of the licensee to substitute will, said, it is the price end-product cause to be higher its output lower than if would be the case substitution had occurred.6 suggested it is Second, under certain percentage-of-sales conditions a royalty arrangement may enable patentee garner him self elements of profit, above norm industry for the economy, which are properly attributable to the licensee’s use of the but other factors which *38 cause the licensee’s situation to differ from “per one of fect competition,” and that this cannot occur when royalties are upon based use.7
If accepted, analysis economic would indicate that percentage-of-sales royalties entirely should be outlawed. far I However, so as have been able to there has find, yet as been little discussion of these matters either lawyers byor economists. And I find illumination scant on this score in the arguments briefs and parties this case. The pointed Court has out today both and in 5Baxter, Legal Exploitation Restrictions on of the Patent Mo nopoly: An Analysis, Economic 76 Yale L. J. 267 id., 299-301, See at 302-306. id., 300-301, See 302-306, 331-332. may royalties percentage-of-sales Radio
Automatic patentee for both advantageous administratively be I be- confronted, circumstances, In these licensee. royalty holding such choice are, with we lieve I board, across or invalid valid either provisions adhere Court, member anas individual would, Radio. Automatic rule to the present