Charles Pfizer & Co. v. FTC
| Decision Date | 30 September 1968 |
| Docket Number | 18337.,No. 18336,18336 |
| Citation | 401 F.2d 574 |
| Parties | CHARLES PFIZER & CO., Inc., Petitioner, v. FEDERAL TRADE COMMISSION, Respondent. AMERICAN CYANAMID COMPANY, Petitioner, v. FEDERAL TRADE COMMISSION, Respondent. |
| Court | U.S. Court of Appeals — Sixth Circuit |
COPYRIGHT MATERIAL OMITTED
Arthur G. Connolly, Wilmington, Del., for Chas. Pfizer & Co., Inc., Connolly, Bove & Lodge, Wilmington, Del., John E. F. Wood, Dewey, Ballantine, Bushby, Palmer & Wood, New York City, Frost & Jacobs, Cincinnati, Ohio, on the brief, Thomas S. Lodge, Arthur G. Connolly, Jr., F. L. Peter Stone, Wilmington, Del., of counsel.
Richard Y. Holcomb, New York City, for American Cyanamid Co., Ralstone, R. Irvine, Roy W. McDonald, Kenneth N. Hart, Donovan, Leisure, Newton & Irvine, New York City, on the brief, Thomas S. Calder, Dinsmore, Shohl, Barrett, Coates & Deupree, Cincinnati, Ohio, of counsel.
Frederick H. Mayer, Federal Trade Commission, Washington, D. C., James McI. Henderson, Gen. Counsel, J. B. Truly, Asst. Gen. Counsel, Jerold D. Cummins, Atty., Federal Trade Commission, Washington, D. C., on the brief, for respondent.
Before O'SULLIVAN, PHILLIPS and CELEBREZZE, Circuit Judges.
These consolidated cases involving the "wonder drug" tetracycline are before this Court a second time. In our earlier opinion, reported at 363 F.2d 757, this Court vacated the decision and order of the Commission and remanded the entire proceeding for a de novo hearing without the participation of the Chairman, who was held to be disqualified to sit in this case. Upon remand we directed that the Commission consider any evidence previously taken and additional admissible and relevant evidence on any issues raised by the complaint. Any party was authorized to require the presence of any previously sworn witness for additional testimony either on direct or cross-examination.
For the assistance of the Commission on remand this Court passed upon two additional questions which were presented by the petitions for review at the former hearing:
(a) That, assuming the facts as found by the Commission to be supported by substantial evidence, the Commission had jurisdiction to require as a remedy the compulsory licensing of the tetracycline and aureomycin patents on a reasonable royalty basis; and
(b) That the record considered as a whole did not contain substantial evidence to support the decision of the Commission that the tetracycline patent was issued as a result of misrepresentations to the Patent Office and improper conduct on the part of Pfizer and Cyanamid.
In our former opinion this Court reached no decision on the issue of whether the petitioners fixed and maintained the price of tetracycline in substantial markets through a price fixing conspiracy.
Upon remand the Commission reopened the proceeding and remanded it to the "Chief Hearing Examiner for an assignment to an examiner to begin expeditious hearings." The remand proceeding was assigned to Hearing Examiner Abner E. Lipscomb.1
In its remand order the Commission specified that it was for the sole and limited purpose of receiving the testimony of Patent Examiner H. J. Lidoff2 and of any other witness who had testified previously, with respect to "the issue as to whether Pfizer and Cyanamid made misrepresentations to the Patent Office and withheld essential information, thereby deceiving Lidoff into granting a patent which otherwise never would have been approved."
In addition to the testimony of Examiner Lidoff, two witnesses for Pfizer testified at the new hearing. In his decision on remand the Hearing Examiner found that representatives of both Pfizer and Cyanamid made false and misleading statements to officials of the Patent Office and suppressed and withheld information, all of which were relevant and material to the consideration of the application by the officials of the Patent Office for a patent on tetracycline. Therefore, said the Hearing Examiner, officials of the Patent Office were misled into granting a patent on tetracycline which otherwise never would have been issued. The Hearing Examiner concluded that the acts and practices of Pfizer and Cyanamid constituted unfair methods of competition in commerce within the intent and meaning of the Federal Trade Commission Act.
With the Chairman not participating, the Commission adopted the findings and conclusions contained in the decision of Hearing Examiner Lipscomb as supplemented by its own opinion.3
The price-fixing aspect of the case is no longer before this Court. By an equally divided vote of two to two the Commission dismissed that portion of the complaint charging respondents with fixing and maintaining the price of tetracycline through a price-fixing conspiracy.
The Commission entered a final order on September 29, 1967, pertinent parts of which are set forth as Appendix A to this opinion. This order requires that Pfizer grant to any domestic applicant making written request therefor a nonexclusive, non-discriminatory license to make, use and sell tetracycline under all claims of Patent 2,699,054 (Conover patent); and that Cyanamid likewise grant a license under Patent 2,609,329 (Niedercorn "improved" patent for aureomycin).4 The order provides for collection of royalties of two and one-half per cent under both patents.
The issue now before this Court is whether the findings of fact of the Commission are supported by substantial evidence. We answer this question in the affirmative and affirm and enforce the order of the Commission.
Much of the previous uncertainty in the record is eliminated by the testimony of H. J. Lidoff, the Patent Examiner who handled the Pfizer Conover application which ultimately resulted in the issuance of the tetracycline patent. At the time of the application Lidoff was an Assistant Examiner. Prior to the time when he testified as a witness, he had been promoted to membership on the Board of Patent Appeals. He is a career employee, having served with the Patent Office continuously since 1937.
Lidoff's testimony contradicts the inferences and findings of fact of Hearing Examiner Robert L. Piper in his initial decision and supports the initial findings of the Commission as well as the findings on remand.
The factual issues are discussed in some detail in the former opinion of this Court, 363 F.2d 757. The basic question is whether Pfizer and Cyanamid made misrepresentations to Lidoff and withheld essential information from him, thereby deceiving him into granting a patent on tetracycline which otherwise would never have been approved. The testimony of Lidoff, together with the Patent Office records, substantially support the affirmative findings of the Commission to this effect.
As pointed out in our earlier opinion, tetracycline has been described as "currently the best selling wonder drug in the United States." The complaint in this proceeding stated that the antibiotics industry is one of dynamic growth, with sales exceeding $330 million per year, and that tetracycline enjoys the largest sale by dollar volume, aggregating more than $100 million in 1957.
At the time the application for a patent on tetracycline was pending before the Patent Office, Pfizer and Cyanamid were in a posture to establish a monopoly in the production and sale of this drug which is of vital and unique importance in the treatment and cure of many diseases and of considerable impact upon the public health.
Penicillin was never patented. Nobody obtained a monopoly on it. Its production and sale proved to be fiercely competitive and profits were marginal.5
On September 13, 1949, Cyanamid obtained its patent on aureomycin (Duggar patent No. 2,482,055). On September 2, 1952, Cyanamid obtained an improvement patent on the Duggar process for producing aureomycin (Niedercorn patent No. 2,609,329). On July 19, 1950, Pfizer obtained a patent on terramycin (Sobin patent No. 2,516,080). As a result of these patents, Cyanamid and Pfizer have had a legal monopoly on the production and sale of aureomycin and terramycin, respectively.
On October 23, 1952, Pfizer filed its Conover application for a patent on tetracycline. This was followed on March 16, 1953, by Cyanamid's Boothe-Morton application for a patent on tetracycline. On October 29, 1953, Lidoff declared an interference for the purpose of determining priority of invention between these two applications.
In the meantime Heyden Chemical Company filed its Minieri application for a patent on tetracycline. On November 4, 1953, Cyanamid made a contract to acquire the Antibiotic Division of Heyden, including the rights to the Minieri patent application.
Thereupon Pfizer and Cyanamid executed a cross-licensing agreement.6 Under this agreement, and with Heyden's Minieri application now owned by Cyanamid, these two companies were assured of sharing a monopoly on tetracycline if the Patent Office could be persuaded to grant a patent to either of them. Cyanamid then conceded that Pfizer's Conover application had priority in time and withdrew its Boothe-Morton application. This resulted in termination of the first interference on February 9, 1954, and removal of one obstacle from the pathway to obtaining a patent.
Another obstacle was an application filed by Bristol-Myers Company for a patent on tetracycline. As a result of Bristol's application, Lidoff declared a second interference, which continued from March 2, 1954, until October 14, 1954. The proceedings during this interference, its subsequent dissolution and the events following dissolution leading up to the ultimate granting of the patent to Pfizer encompass the issues of fact now before this Court.
The Patent Office, not having testing facilities of its own, must rely upon information...
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