LONGWOOD MFG. v. WHEELABRATOR CLEAN WATER SYSTEMS, Civil No. 96-204-P-H.

• Decision Date: 23 September 1996
• Docket Number: Civil No. 96-204-P-H.
• Citation: 40 USPQ 2d 1683,937 F. Supp. 63
• Parties: LONGWOOD MANUFACTURING CORP., Plaintiff, v. WHEELABRATOR CLEAN WATER SYSTEMS, INC., Defendant.
• Court: U.S. District Court — District of Maine

937 F. Supp. 63

40 USPQ 2d 1683

LONGWOOD MANUFACTURING CORP., Plaintiff, v. WHEELABRATOR CLEAN WATER SYSTEMS, INC., Defendant.

Civil No. 96-204-P-H.

United States District Court, D. Maine.

September 23, 1996.

Charles A. Harvey, Harvey & Frank, Portland, ME, for Plaintiff.

Robert H. Stier, Kenneth W. Lehman, Bernstein, Shur, Sawyer & Nelson, Portland, ME, for Defendant.

ORDER ON DEFENDANT'S MOTION TO DISMISS

HORNBY, District Judge.

A 1944 Supreme Court decision and a 1957 First Circuit decision require me to deny this motion to dismiss, although there appears to be no good reason for any continued vitality to those holdings.

In a separate action, Wheelabrator Clean Water Systems, Inc. has sued Longwood Manufacturing Corp. for patent infringement. Among its affirmative defenses in that other action, Longwood has claimed that Wheelabrator's patent is invalid because it was fraudulently procured. Now in this separate action Longwood has sued Wheelabrator under the federal antitrust laws, 15 U.S.C. § 2 et seq., claiming that Wheelabrator's patent litigation in the other lawsuit, where it is allegedly trying to enforce a fraudulently procured patent, is an unlawful attempt to monopolize the relevant market. Wheelabrator has moved to dismiss this antitrust lawsuit, claiming that it should have been raised as a compulsory counterclaim in the other lawsuit.

In Fowler v. Sponge Products Corp., 246 F.2d 223, 227 (1st Cir.1957), the First Circuit Court of Appeals stated: "The Supreme Court has clearly stated that a counterclaim for treble damages under the antitrust laws is permissive in nature so that failure by a defendant to plead it in a prior patent suit does not bar a subsequent independent suit by him under the anti-trust laws." The First Circuit cited Mercoid Corp. v. Mid-Continent Investment Co., 320 U.S. 661, 64 S.Ct. 268, 88 L.Ed. 376 (1944), in support of its statement. In Mercoid, Justice Douglas stated that an antitrust counterclaim for damages in a patent lawsuit "is more than a defense; it is a separate statutory cause of action. The fact that it might have been asserted as a counterclaim in the prior patent validity suit by reason of Rule 13(b) permissive counterclaims of the Rules of Civil Procedure, 28 U.S.C.A. following section 723(c), does not mean that the failure to do so renders the prior judgment res judicata as respects it." Id. at 671, 64 S.Ct. at 273. Mercoid has been roundly criticized for its reading of the permissive/compulsory counterclaim rules, see 3 Moore's Federal Practice § 13.13, at 13-76-77 n. 23 (1994); 6 Charles Alan Wright, Arthur R. Miller and Mary Kay Kane, Federal Practice and Procedure § 1412, at 90-94 (1990), and many lower courts have limited it to its facts in light of their distaste for Justice Douglas's pronouncement. See, e.g., American Packaging Corp. v. Golden Valley Microwave Foods, No. 94-1839, 1995 WL 262522, at *4 (E.D.Pa. May 1, 1995); Rohm & Haas Co. v. Brotech Corp., 770 F.Supp. 928, 931-32 (D.Del.1991). Nonetheless, Mercoid has never been overruled and recent decisions have recognized its ongoing vitality. See, e.g., Hydranautics v. Filmtec Corp., 70 F.3d 533, 536 (9th Cir.1995) ("A claim that patent infringement litigation violated an antitrust statute is a permissive, not a mandatory, counterclaim in a patent infringement case, and is not barred in a subsequent suit by failure to raise it in the infringement suit.").

It is hard to identify any logical support for the Mercoid pronouncement except perhaps a later development in federal appellate jurisdiction. Specifically, it is now the case under 28 U.S.C. § 1295 that the Federal Circuit Court of Appeals resolves issues of patent law rather than the individual circuits, whereas the individual circuits have jurisdiction over appeals in antitrust cases pursuant to 15 U.S.C. § 15. Arguably, this could furnish a post-hoc justification for the Mercoid statement. See Hydranautics, supra, at 536. Alternatively, some courts have attempted to limit Mercoid to a particular category of antitrust/patent claims. See, e.g., Insultherm v. Tank Insulation Int'l, 909 F.Supp. 465, 470-71 (S.D.Texas 1995), aff'd, 95 F.3d 1166 (Fed.Cir. Aug. 7, 1996) (per curiam). Specifically, these courts distinguish antitrust claims that challenge patent validity because of fraudulent procurement (not recognized by the Supreme Court until after Mercoid in Walker Process Equipment, Inc. v. Food Machinery & Chemical Corp., 382 U.S. 172, 86 S.Ct. 347, 15 L.Ed.2d 247 (1965)) from those that claim patent misuse. See, e.g., Rohm & Haas Co., supra, at 934. The argument goes that in the latter category the patent itself may be valid while its use is improper and that the counterclaim therefore can be treated as permissive in such cases. See id. at 932 (explaining the rationale of Mercoid and why it is inapplicable to Walker Process claims). When the validity of the patent itself is in dispute, the argument continues, the...