Farbenfabriken Bayer AG v. Sterling Drug, Inc.

• Decision Date: 09 August 1962
• Docket Number: No. 13807.,13807.
• Citation: 307 F.2d 210
• Parties: FARBENFABRIKEN BAYER A.G., Appellant, v. STERLING DRUG, INC.
• Court: U.S. Court of Appeals — Third Circuit

307 F.2d 210 (1962)

FARBENFABRIKEN BAYER A.G., Appellant, v. STERLING DRUG, INC.

No. 13807.

United States Court of Appeals Third Circuit.

Argued May 7, 1962.

Decided August 9, 1962.

Thurman Arnold, Washington, D. C. (Milton V. Freeman, Edgar H. Brenner, Werner J. Kronstein, Arnold, Fortas & Porter, Washington, D. C., Jay E. Bailey, Bailey & Schenck, Newark, N. J., on the brief), for appellant.

Robert G. Zeller, New York City (John T. Cahill, New York City, Cahill, Gordon, Reindel & Ohl, New York City, Rogers, Hoge & Hills, New York City, O'Mara, Schumann, Davis & Lynch, Jersey City, N. J., on the brief), for appellee.

Before McLAUGHLIN, STALEY and GANEY, Circuit Judges.

STALEY, Circuit Judge.

This is a civil action commenced under the antitrust laws, § 1 of the Sherman Anti-Trust Act, 15 U.S.C.A. § 1, and §§ 4 and 6 of the Clayton Act, 15 U.S.C.A. §§ 15 and 26. In its complaint, plaintiff alleged that defendant has without right asserted trademark rights in the word "Bayer" and the Bayer Cross, as a means of suppressing competition, and that such assertion constitutes a violation of the antitrust laws. Plaintiff requested injunctive relief and treble damages. The essence of the prayer for injunctive relief was that defendant be directed to give all necessary consents and licenses, without cost, to permit plaintiff to import into or manufacture in the United States, products under the name Bayer and the use of the Bayer Cross trademark, and that the district court prescribe a procedure permitting the products of both plaintiff and defendant to be offered and sold under that name and trademark but in such a manner as to distinguish the source of the product.

In 1953, plaintiff, Farbenfabriken Bayer, A.G., a corporation organized under the laws of the Federal Republic of Germany, took over a part of the business formerly conducted by I. G. Farbenindustrie, A.G. ("Farben"). In 1925, Farben succeeded Farbenfabriken vorm. Freidrich Bayer & Company ("Farbenfabriken"). Farbenfabriken formed two New York corporations in 1913, Synthetic Patents Company, Inc., and The Bayer Company, Inc. ("Bayer").

Defendant, Sterling Drugs, Inc., a Delaware corporation, is, like plaintiff, engaged in the development, manufacture and sale of drugs and pharmaceuticals. After the United States entered the First World War, the Alien Property Custodian seized Farbenfabriken's assets in the United States, including the stock of Bayer, and in 1918 sold them to defendant. Thereafter, Bayer's ethical drug business was transferred to its newly organized subsidiary, Winthrop Chemical Company, Inc., and in 1923, the capital stock of Winthrop was transferred to defendant.

In 1923, Farbenfabriken and Bayer entered into a cartel agreement involving a world division of markets. It was admitted in the district court that the agreement was violative of the antitrust laws.¹

Concluding that the statute of limitations had expired, the district court dismissed plaintiff's claim for damages, 153 F.Supp. 589 (D.N.J., 1957),² and denied the request for injunctive relief on the basis "that the equitable remedy available under Section 16 is predicated upon the legal cause of action created by Section 4," and that inasmuch as the legal claim for damages was barred, the equitable remedy would be denied.

Although the parties have raised numerous questions on this appeal, we shall limit our discussion to the dispositive one.

The defendant contends that by purchasing the stock of Bayer from the Alien Property Custodian in 1918, it acquired the trademarks in question as they were assets of Bayer. Plaintiff says that defendant's continued use of the trademarks is based exclusively on the illegal 1923 agreements.³ Plaintiff admits that the purchase of Bayer stock by defendant gave it all the rights Bayer had in the trademarks, but says that the right to use the trademarks was restricted to pharmaceuticals "manufactured and (or) controlled" by Farbenfabriken. In any event, it says that it has a right to concurrent use of the trademarks and cites American Bosch Magneto Corp. v. Robert Bosch Magneto Co., 127 Misc. 119, 215 N.Y.S. 387 (1926).

We think that defendant acquired absolute rights to the exclusive use of the trademarks in question by its purchase of Bayer.⁴

The power vested in the Alien Property Custodian was clearly spelled out in the Trading with the Enemy Act ("Act"), originally passed on October 6, 1917, 40 Stat. 411, and amended on March 28, 1918, 40 Stat. 460, 50 Appendix U.S.C.A. § 12. It provided in pertinent part:

"The alien property custodian shall be vested with all of the powers of a common-law trustee in respect of all property, other than money, which has been or shall be, or which has been or shall be required to be, conveyed, transferred, assigned, delivered, or paid over to him in pursuance of the provisions of this Act, and, in addition thereto, acting under the supervision and direction of the President, and under such rules and regulations as the President shall prescribe, shall have power to manage such property and do any act or things in respect thereof, or make any disposition thereof, or of any part thereof, by sale or otherwise, and exercise any rights or powers which may be or become appurtenant thereto or to the ownership thereof in like manner as though he were the absolute owner thereof * * *."

As the statute unmistakably shows, it was the intention of Congress to enable the Alien Property Custodian to sell property as fully as the owner could, and a sale by the Custodian is as complete as if it were a voluntary conveyance by the foreign corporation (Farbenfabriken) whose assets were seized. Koppel Industrial Car & Equipment Co. v. Orenstein & Koppel Aktiengesellschaft, 289 F. 446 (C.A.2, 1923). That Congress intended to give finality to sales by the Custodian is best shown by a 1918 amendment to the Act, which provided that

"The sole relief and remedy of any person having any claim to any money or other property heretofore or hereafter conveyed, transferred, assigned, delivered, or paid over to the Alien Property Custodian, or required so to be, or seized by him shall be that provided by the terms of this Act, and in the event of sale or other disposition of such property by the Alien Property Custodian, shall be limited to and enforced against the net proceeds received therefrom and held by the Alien Property Custodian or by the Treasurer of the United States." 40 Stat. 1020, 50 Appendix U.S.C.A. § 7.

It becomes imperative, therefore, to determine what rights Bayer had in the trademarks Bayer and Bayer Cross, for admittedly the Alien Property Custodian transferred all of Bayer's rights to defendant. In 1908, Farbenfabriken...