Acme Precision Products, Inc. v. American Alloys Corp., Civ. A. No. 14196-2.

• Decision Date: 10 August 1972
• Docket Number: Civ. A. No. 14196-2.
• Citation: 347 F. Supp. 376
• Parties: ACME PRECISION PRODUCTS, INC. and William F. Jobbins, Incorporated, Plaintiffs, v. AMERICAN ALLOYS CORPORATION, Defendant.
• Court: U.S. District Court — Western District of Missouri

347 F. Supp. 376

ACME PRECISION PRODUCTS, INC. and William F. Jobbins, Incorporated, Plaintiffs, v. AMERICAN ALLOYS CORPORATION, Defendant.

Civ. A. No. 14196-2.

United States District Court, W. D. Missouri, W. D.

July 28, 1972.

As amended August 10, 1972.

Richart T. Brewster, Slaughter & Brewster, Kansas City, Mo., Theodore R. Scott, McDougall, Hersh, Scott & Ladd, Herman J. Gordon, Dressler, Goldsmith, Clement & Gordon, Chicago, Ill., for plaintiffs.

Thomas M. Scofield, Kansas City, Mo., George N. Hibben, Hibben, Noyes & Bicknell, Chicago, Ill., for defendant.

MEMORANDUM AND JUDGMENT

COLLINSON, District Judge.

Stated briefly, defendant filed an anti-trust counterclaim in this patent infringement suit. The counterclaim was based on the teachings of Walker Process Equip., Inc. v. Food Machinery & Chem. Corp., 382 U.S. 172, 86 S.Ct. 347, 15 L.Ed.2d 247 (1965). That case held that a Section 2 Sherman Act violation could be maintained for monopolistic practices based on a patent procured by fraud. The case further laid down the rule that if the party attempting to enforce the patent had acquired the patent from the original applicant, the antitrust claimant must prove that the acquiring party had knowledge of the fraudulent manner in which the patent was obtained.

This Court found the patent invalid, but dismissed the counterclaim on the sole ground that the defendant had failed to sustain the burden of proof that these plaintiffs (who were not the original applicant) had any knowledge of fraud in the procurement of the patent.

The plaintiffs did not appeal from the judgment finding the patent invalid. The defendant appealed, first from the denial of allowance of attorneys' fees in the defense of the infringement suit (Section 285 of Title 35, United States Code), and also from the dismissal of the anti-trust counterclaim.

The Court of Appeals found that these plaintiffs did have full knowledge of all the circumstances surrounding the securing of the patent, and remanded the case with directions to this Court to determine (1) if there was fraud in the procurement of the patent, and, if so, (2) to determine if plaintiffs' actions in attempted enforcement of the patent constituted a Section 2 Sherman Act violation, and, if so, (3) to determine defendant's damages. The Court held that all these issues "should be fully briefed and reargued before the district court under the principles set forth herein." Acme Precision Products et al. v. American Alloys Corp., 422 F.2d 1395 (C.A.8, 1970).

These issues have been fully briefed and some facts (pertaining to attorneys' fees) have been stipulated by the parties.

This Court finds, from the overwhelming evidence in the case, that there was fraud in the procurement of the patent. The evidence disclosed that the applicant concealed material facts as to prior art and commercial use well known to the applicant; that deliberate misrepresentations were made as to new art in limiting impurities. It is clear that under all the cases deception or concealment of material facts from the Patent Office constitutes fraud in the procurement of the patent Precision Instrument Mfg. Co. v. Automotive Maintenance Machinery Co., 324 U.S. 806, 65 S.Ct. 993, 89 L.Ed. 1381 (1945).

The opinion of the Court of Appeals directed this Court, if it found fraud in the procurement of the patent, to determine if "the other elements of a charged Section 2 Sherman Act violation, relating to the relevant market for this product involved, the dominant position of the party charged in the market, and damages, if any," had been proved.

There can be no question about the relevant market and the dominant position of the plaintiffs. All of the primary producers of aluminum in the United States were forced by notices of infringement and threats of suit to take licenses under this patent and pay a royalty of Two Cents a pound on every pound produced under the patented formula. Plaintiffs advertised their patent widely in trade magazines and unquestionably made every effort to stifle all competition, which culminated in this infringement lawsuit against the defendant.

The relevant market was clearly shown. There was no substitute in existence for this high-strength aluminum alloy. Government specifications called for it. It seems obvious that the giant aluminum producers would not have paid the royalty if there were effective substitutes which did not infringe the patent. And it is further obvious that plaintiffs did dominate the market and take every conceivable means to eliminate competition.

The sole remaining factual question to be decided is whether or not defendant suffered damages by reason of these monopolistic practices. The simple answer to this is that the expenses, including attorneys' fees, of defending an infringement suit brought as part of an illegal attempt to monopolize and to restrain trade are properly assessable damages in an anti-trust action for such attempt to monopolize. American Infra-Red Radiant Co. v. Lambert Industries, Inc., 360 F.2d 977 (C.A.8, 1966). Most substantial attorneys' fees incurred and paid by defendant in defending the infringement suit have been proved.

But, in addition to the attorneys' fees, the defendant is claiming very substantial damages from loss of sales due to the plaintiffs' attempt to monopolize the market. Defendant's evidence was basically that all the salesmen for the patented product, Almag 35 (salesmen of primary sources, of secondary sources, and of the plaintiff Jobbins), called on all the customers of the defendant. These customers were foundries. At the time this suit was instituted these salesmen told all of defendant's customers of the institution of the suit, and told them that when the suit was over they would no longer have a supply of defendant's product, Amalloy. The defendant introduced a series of exhibits, which showed a substantial decline in its Amalloy sales commencing about the time of the filing of this suit. If this substantial loss of sales was, in fact, attributable to the filing of the infringement suit, which obviously was an attempt to monopolize the market, the defendant would be entitled to very substantial damages on this ground. The difficulty with the defendant's position is, however, that there is no direct evidence of any kind to demonstrate that the loss in sales was due in any way to the filing of the infringement suit, or the representation of the salesmen about the suit. The defendant called the representatives of two of its foundry customers, who testified that salesmen for Almag had told them about the suit and urged them to buy Almag because it would soon be the only such product available. However, they both testified that they had not decreased their Amalloy orders in any way because of this information. The plaintiffs then called nine witnesses, representing eight of the foundry customers listed in plaintiffs' exhibits, all of whom testified that they had either not known about the suit or that they did know about it, but it did not affect their orders of Amalloy in any way. One, in fact, testified he had gone out of the foundry business, which was the reason he had not purchased any more Amalloy. The testimony of all of these witnesses was most convincing and credible.

This is not the type of a situation in which the courts have held that, if the victim of an anti-trust conspiracy has undoubtedly been damaged, he shall not be...