Rohm and Haas Co. v. Dawson Chemical Co.

• Decision Date: 30 July 1979
• Docket Number: No. 76-4511,76-4511
• Citation: 599 F.2d 685,203 USPQ 1
• Parties: , 1979-2 Trade Cases 62,780 ROHM AND HAAS COMPANY, Plaintiff-Appellant Cross-Appellee, v. DAWSON CHEMICAL COMPANY, Crystal Manufacturing Corporation, Crystal Chemical Company, and Helena Chemical Company, Defendants-Appellees Cross-Appellants.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 685

599 F.2d 685

203 U.S.P.Q. 1, 1979-2 Trade Cases 62,780

ROHM AND HAAS COMPANY, Plaintiff-Appellant Cross-Appellee, v. DAWSON CHEMICAL COMPANY, Crystal Manufacturing Corporation,

Crystal Chemical Company, and Helena Chemical

Company, Defendants-Appellees Cross-Appellants.

No. 76-4511.

United States Court of Appeals,

Fifth Circuit.

July 30, 1979.

James C. Winters, Winters, Deaton, Briggs & Britton, Houston, Tex., Januar D. Bove, Jr., Rudolf E. Hutz, Wilmington, Del., George W. F. Simmons, Rohm & Haas Co., William Lambert, Philadelphia, Pa., for plaintiff-appellant.

John L. McConn, Jr., Ned L. Conley, Houston, Tex., for Dawson and Crystal.

B. R. Pravel, Houston, Tex., John R. McCarroll, Jr., Memphis, Tenn., for Helena Chemical Co.

John H. Pickering, Robert A. Hammond, III, A. Stephen Hut, Jr., Washington, D. C., Donald F. Turner, Lexington, Mass., for Manufacturing Chemists Association.

Eugene L. Bernard, John D. Conner, Washington, D. C., for National Agricultural Chemicals Association.

Appeals from the United States District Court for the Southern District of Texas.

Before GEE and VANCE, Circuit Judges, and HUNTER, District Judge. ^*

GEE, Circuit Judge:

This is an appeal from a grant of summary judgment dismissing plaintiff's claim in a patent infringement suit. It is stipulated that plaintiff-appellant Rohm & Haas Company is sole owner of a patent that describes a method of applying a chemical compound, 3, 4-dichloropropionanilide (hereinafter "propanil"), to established crops such as rice so as to inhibit the growth of weeds selectively. Propanil itself is not patented; Rohm & Haas succeeded in having a Monsanto patent on the chemical declared invalid in an earlier suit against it by Monsanto. ¹

Rohm & Haas currently makes propanil and sells it in containers bearing instructions for performing the patented process. By operation of law, purchasers of propanil thus receive implied license to use the patented method. Rohm & Haas does not intend either to license other propanil manufacturers to enable them also to license customers to use the patented method or to license customers to use the method with propanil bought from sources other than Rohm & Haas.

The defendants Helena Chemical Company, Dawson Chemical Company, Crystal Manufacturing Corporation, and Crystal Chemical Company, sold propanil for application to rice crops before Rohm & Haas received its patent. Thereafter they continued to sell propanil, knowing of the patent, and their customers have directly infringed the patent by following the method described on defendants' containers of propanil. Defendants intend to continue making and selling propanil with the same recommendations and instructions.

Alleging most of these facts in its complaint and the additional fact that propanil is a nonstaple that has no substantial noninfringing use, ² Rohm & Haas brought suit against the defendants for injunctive and declaratory relief. It alleged that the defendants were actively inducing infringement of the patent and that their sales amounted to contributory infringement since they knew that propanil is a material part of the patented invention, is especially made or adapted for use in the patent, and has no substantial noninfringing use. In their answers, defendants alleged that Rohm & Haas was not entitled to relief because its licensing program amounted to patent misuse and because its patent was invalid for various reasons. They also counterclaimed, alleging that the Rohm & Haas licensing scheme and other behavior violated the antitrust laws. ³ The licensing program was specifically attacked as an impermissible tying of purchase of a license under the patent to purchase from Rohm & Haas of the unpatented propanil.

All the parties agree that Rohm & Haas' conduct can be characterized as an attempt to "extend the patent" and thus monopolize the market for the unpatented component conduct deemed patent misuse under the doctrine of Mercoid Corp. v. Mid-Continent Investment Co., 320 U.S. 661, 64 S.Ct. 268, 88 L.Ed. 376 (1944). The main point of disagreement for purposes of this appeal is whether 35 U.S.C. § 271(d) reverses the Mercoid misuse doctrine when the unpatented component sold is a nonstaple, with no substantial market apart from its use in the patented process. In an able and carefully considered opinion, the district court below concluded that section 271(d) does not immunize Rohm & Haas from charges of patent misuse, and thus he granted the defendants' motion for summary judgment and dismissed the complaint until Rohm & Haas has purged itself of the misuse. Our consideration of the matter has led us to the contrary conclusion; thus, we reverse.

We begin by placing in clear view the statute we construe. The simplicity and ostensible clarity of its words belie the complex and delicate questions of interpretation it has spawned to the delight of commentators. It reads as follows:

Section 271. Infringement of patent

(a) Except as otherwise provided in this title, whoever without authority makes, uses or sells any patented invention, within the United States during the term of the patent therefor, infringes the patent.

(b) Whoever actively induces infringement of a patent shall be liable as an infringer.

(c) Whoever sells a component of a patented machine, manufacture, combination or composition, or a material or apparatus for use in practicing a patented process, constituting a material part of the invention, knowing the same to be especially made or especially adapted for use in an infringement of such patent, and not a staple article or commodity of commerce suitable for substantial noninfringing use, shall be liable as a contributory infringer.

(d) No patent owner otherwise entitled to relief for infringement or contributory infringement of a patent shall be denied relief or deemed guilty of misuse or illegal extension of the patent right by reason of his having done one or more of the following: (1) derived revenue from acts which if performed by another without his consent would constitute contributory infringement of the patent; (2) licensed or authorized another to perform acts which if performed without his consent would constitute contributory infringement of the patent; (3) sought to enforce his patent rights against infringement or contributory infringement.

35 U.S.C. § 271 (1952).

By a very plausible construction of these passages, assuming the patent is valid, defendants are contributory infringers because they have sold propanil for use in practicing a patented process, knowing that the chemical, a material part of the inventive method, is not a staple or commodity of commerce, has no substantial noninfringing use, and is especially made or adapted for use in infringing the patent.

By a further tenable reading of the statute, the plaintiff Rohm & Haas has done only acts which under (d) may no longer be deemed patent misuse or illegal extension of the patent. It has "derived revenue" from sales of propanil, conduct that, under (c), constitutes contributory infringement when done by those who, like defendants, act without consent. And it now "seeks to enforce" its patent rights by suit against defendants' contributory infringement. That it has refused to give licenses either to customers or manufacturers of propanil is of no consequence under this analysis since there is no general policy requiring a patentee to grant explicit licenses in addition to those that arise by operation of law. Moreover, the introductory portion of (d) provides that a patentee may do "one or more" of the enumerated practices. This reinforces the view that a patentee may sell unpatented components while refusing to license others to do the same conduct sell the unpatented component without thereby being deemed guilty of misuse.

Assessing plaintiff's conduct through a different lens, defendants argue that what Rohm & Haas has done is Tie sale of patent rights to purchase of an unpatented element used in carrying out the process. This coercive conditioning of one sale upon another is not mentioned in subsection (d) and therefore survives as a type of misuse sufficient to cause dismissal of plaintiff's suit. Under this analysis, Rohm & Haas is not, in the statutory language, "otherwise entitled to relief," and thus the statute does not immunize its sale of propanil so long as it refuses to license competitors. The statute does not ratify tying of any sort, they claim, and it is even more reprehensible that plaintiff claims such rights regarding a nonstaple. If plaintiff's view prevails, defendants will be entirely foreclosed from any domestic outlet for their product, unlike those who sell mere staples.

Each of these positions is a plausible reading of the bare statute, and each side can cite commentary supporting its particular view. ⁴ The proper starting place for resolving the conflict is with the statute's legislative history. Before beginning, however, a review of the doctrines of contributory infringement and patent misuse will be helpful in understanding the terms of the debate waged in congressional hearings on the proposed statute.

The doctrine of contributory infringement was a judicial invention designed to give effective protection to patentees, perhaps occasioned by a narrow judicial definition of Direct infringement whereby one does not infringe unless he, for example, assembles or practices Every element claimed in a patent. Prouty v. Draper, 41 U.S. (16 Pet.) 336, 10 L.Ed. 985 (1842).

Under the latter construction, it soon became apparent that one could appropriate the competitive advantages of a patent by, for instance, selling all the parts of a patented device save one and relying on the purchaser, the direct infringer, to supply the final element and thus complete the device. Permitting such conduct would have effectively immunized both the buyer and the seller, since suits against the many direct infringers were...