53 F.Supp. 889 (D.D.C. 1943), Civ. A. 8017, United States v. United States Gypsum Co.

Docket Nº:Civ. A. 8017
Citation:53 F.Supp. 889
Party Name:United States v. United States Gypsum Co.
Case Date:November 15, 1943
Court:United States District Courts, District of Columbia

Page 889

53 F.Supp. 889 (D.D.C. 1943)

59 U.S.P.Q. 318

UNITED STATES

v.

UNITED STATES GYPSUM CO. et al.

Civ. A. No. 8017.

United States District Court, District of Columbia.

Nov. 15, 1943

Page 890

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 Certainteed 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.

Page 891

Joseph P. Tumulty and Joseph P. Tumulty, Jr., both of Washington, D.C., and Alfred W. Varian and Herbert M. Simon, both of New York City, for defendants Ebsary Gypsum Co., Inc., and Frederick G. Ebsary.

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

Page 892

the defendants to question the legal sufficiency of the allegations, and it was urged by counsel for all parties that a ruling upon this question should be made prior to the commencement of trial in order that counsel might be advised as to the necessity of preparation for attack upon, or defense of, the validity of the patents. The defendants accordingly filed this motion to strike or for partial judgment. The motion is one, pursuant to Rule 12(f) of the Federal Rules of Civil Procedure, 28 U.S.C.A.following section 723c, to strike paragraph 46(a) upon the ground that the allegations thereof are immaterial and impertinent to the issues in the case; and the motion is made, in the alternative, under Rules 12(b) and 56(b) for partial judgment dismissing that part of the Government's claim contained in paragraph 46(a) upon the ground that as a matter of law the Government may not attack the validity of the patents in this proceeding in the manner attempted. It is conceded that the five patents mentioned in the paragraph were issued by the Commissioner of Patents, sometimes hereafter referred to as the Commissioner, and that none of them has heretofore been held invalid by any court. The dates of application and issuance of the Roos patents are: No. 2,017,022, application filed August 20, 1924, pattent issued October 8, 1935; No. 2,079,338, application filed January 19, 1925, patent issued May 4, 1937; No. 2,080,009, application filed October 16, 1926, 3 patent issued May 11, 1937; No. 1,914,345, application filed July 7, 1932, patent issued June 13, 1933; No. 1,938,354, application filed March 15, 1933, patent issued December 5, 1933. The patents are each in the usual form, set forth in the margin. 4 It is not charged by the Government in its complaint that the issuance of the patents was obtained by fraud or any other wrongful act. What the Government asserts, in essence, is that, for the reasons set out in paragraph 46(a), the Commissioner erred in issuing the patents. It is to be noted further that the attack upon the validity of the patents, in this aspect of the case, is not upon the ground that they are invalid because being used in violation of the Sherman Act; it is the converse, that the Sherman Act is being violated, through the license agreements, because the patents upon which the agreements are based are invalid. It is also to be borne in mind that, while this is not an independent cancelation proceeding, but an antitrust suit in which the Government contends that the patents are invalid, nevertheless the Government is seeking a judicial determination that the Patent Office erred in issuing the patents and that they are for that reason invalid. This was conceded in

Page 893

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, 35 U.S.C.A. § 68, providing that whenever an invention covered by a United States patent is used or manufactured by the United States itself without license of the owner, or lawful right, the owner's remedy shall be by a suit against the United States in the Court of Claims for compensation...

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