Dole Valve Company v. Perfection Bar Equipment, Inc.

• Decision Date: 03 April 1970
• Docket Number: No. 67 C 1126.,67 C 1126.
• Citation: 311 F. Supp. 459
• Parties: The DOLE VALVE COMPANY, Plaintiff, v. PERFECTION BAR EQUIPMENT, INC., Defendant.
• Court: U.S. District Court — Northern District of Illinois

311 F. Supp. 459

The DOLE VALVE COMPANY, Plaintiff, v. PERFECTION BAR EQUIPMENT, INC., Defendant.

No. 67 C 1126.

United States District Court, N. D. Illinois, E. D.

April 3, 1970.

Bell, Boyd, Lloyd, Haddad & Burns and Hill, Sherman, Meroni, Gross & Simpson, Chicago, Ill., for plaintiff.

George E. Hale, George W. K. Snyder, Jr., and Gary H. Kline, Wilson & McIlvaine, and Hume, Clement, Hume & Lee, Chicago, Ill., for defendant.

MEMORANDUM OPINION

DECKER, District Judge.

The Dole Valve Company (plaintiff and counterdefendant) filed suit for infringement of its patent covering an invention of a method and apparatus for carbonating, cooling and dispensing beverages. Perfection Bar Equipment, Inc. (defendant and counterclaimant) answered, alleging invalidity and non-infringement, and counterclaimed for treble damages and equitable relief for Dole's alleged violation of Section 7 of the Clayton Act, 15 U.S.C. § 18. The patent was tried and found invalid for obviousness and anticipation, 298 F. Supp. 401; the Court of Appeals affirmed on the obviousness ground, 419 F.2d 968. Cross motions for summary judgment on Perfection's counterclaim, which were denied without prejudice during the pendency of the appeal, have now been renewed.

The plaintiff is a corporation engaged in the manufacture and sale of beverage dispensing equipment. Defendant is in the business of marketing similar products.¹ Its counterclaim is based on two transactions: plaintiff's acquisition of the common stock of Temprite Products Corporation in June of 1965, and Temprite's acquisition of all of the voting shares of K-Way Dispensing Equipment Company in March of 1967. Because the pleadings, depositions, affidavits and answers to interrogatories on file conclusively show that defendant has not been injured by reason of these alleged violations of Section 7, as required by Section 4 of the Clayton Act, 15 U.S.C. § 15,² the plaintiff's motion for summary judgment is granted and the defendant's cross motion is denied.

Perfection alleges that the acquisition of Temprite, which manufactures components for beverage dispensing equipment, foreclosed it and other competitors of Dole from obtaining these components from Temprite. Assuming that the effect of this acquisition "may be substantially to lessen competition, or tend to create a monopoly" within the meaning of Clayton § 7, it is axiomatic that Perfection can only recover if it can prove that it was damaged by this violation. See, e. g., Sam S. Goldstein Industries, Inc. v. Botany Industries, Inc., 301 F.Supp. 728 (S.D.N.Y. 1969).

Defendant's president, Marshall Strenger, Jr., conceded at his deposition that Perfection never sought to buy anything from Temprite, and that Temprite never refused to sell anything to defendant. There is no other injury alleged or disclosed, and defendant is therefore entitled to no relief as to this transaction. Lawlor v. National Screen Service Corporation, 270 F.2d 146, 154 (3d Cir. 1959), cert. den. 362 U.S. 922, 80 S.Ct. 676, 4 L.Ed.2d 742; Billy Baxter, Inc. v. Coca-Cola Co., 47 F.R.D. 345 (S.D.N.Y. 1969).³

The counterclaim also charges that the subsequent acquisition of K-Way, a manufacturer and seller of beverage dispensing equipment since 1962, greatly increased Dole's share of this market and tended to substantially lessen competition.⁴ Perfection was injured, it states, "by the employment of plaintiff's market share and resources."

In support of this allegation of injury, Perfection has submitted the affidavit of its salesman, David O. Klett, to the effect that Perfection has "lost" eight specified sales⁵ to K-Way or its distributors.⁶ In addition, defendant's president stated with regard to the acquisition:

"I think it not only caused me to stop agressive sales, I think it put me at a great disadvantage profit-wise and otherwise, engineering-wise * * * not only does K-Way now have the advantage of Temprite's engineering staff, they probably also have the advantage now of Dole's, so that it's possible with the combined efforts * * * it's going to supersede mine now." (Strenger deposition, p. 204)

This evidence, even when viewed in the light most favorable to the defendant, United States v. Diebold, Inc., 369 U.S. 654, 655, 82 S.Ct. 993, 8 L.Ed.2d 176 (1962), fails to show any causal connection between the acquisition and Perfection's injury. At best, the Klett affidavit shows only that K-Way made eight sales for which Perfection was competing. There is a total absence of evidence that the acquisition was in any way responsible for these lost sales. Nor does the Strenger deposition add anything, for it amounts to no more than conjecture as to efficiencies which might have resulted, or could result, from the acquisition.⁷

To recover damages under Section 7 of the Clayton Act, a complainant must be able to show that he "suffered some special damage to his business as a direct and proximate result of the acquisition. * * * the injury must result from the lessened competition or monopoly itself." Rayco Manufacturing Co. v. Dunn, 234 F.Supp. 593, 597 (N.D.Ill. 1964). And see Blaski v. Inland Steel Co., 271 F.2d 853 (7th Cir. 1959); Beegle v. Thompson, 138 F.2d 875, 881 (7th Cir. 1943); Peterson v. Borden Co., 50 F.2d 644 (7th Cir. 1931). Proof that a competitor made sales after it was unlawfully acquired by another, even if the complainant competed for those sales, is not evidence that the sales were the "direct and proximate result" of the unlawful acquisition.⁸ If such were the rule, corporations violating Section 7 would become insurers of the commercial success of their competitors. This is not the law.

The counterclaim further alleges that Perfection was injured by the prosecution of this lawsuit. It argues that the patent in suit was obtained by a fraud on the patent office, and that this action was instituted in bad faith to suppress competition. The relationship of this suit to Section 7 is said to arise from the fact that the patent was acquired by Dole from K-Way as part of Temprite's acquisition of K-Way.

No case has been found which holds that suit for infringement of a patent acquired by an acquisition unlawful under Section 7 is an injury "by reason" of that acquisition. A bad faith infringement suit may constitute a Sherman Act violation, e. g., an attempt to monopolize, Walker Process Equipment, Inc. v. Food Machinery & Chemical Corp., 382 U.S. 172, 86 S.Ct. 347, 15 L.Ed.2d 247 (1965), or part of a conspiracy to restrain trade by participants in a patent pool, Dairy Foods Inc. v. Dairy Maid Products Co-op., 297 F.2d 805 (7th Cir. 1961). In such cases the injury is caused by the very behavior which is prohibited by the Sherman Act. But in this case, under Section 7, the injury is caused by prosecution of the infringement suit, not by the merger prohibited by the Clayton Act.⁹ The necessary causal link is therefore absent.

Of course, a patent may be "any part of the assets of another corporation" within the meaning of Section 7. United States v. Lever Bros. Co., 216 F.Supp. 887 (S.D.N.Y.1963). Perfection does not challenge the legality of the acquisition of the patent, however; it challenges its subsequent bad faith enforcement. A case quite similar to this is Western Geophysical Co. of America, Inc. v. Bolt Assoc., Inc., 305 F.Supp. 1251 (D.Conn. 1969). The antitrust counterclaimant in that action had licensed counterdefendant to use and sublicense a particular device. Counterclaimant alleged, inter alia, that counterdefendant acquired the license with the intent to suppress competition. The court granted counterdefendant's summary judgment motion, insofar as a Section 7 cause of action was alleged, because the purported anticompetitive effect stemmed "not from the acquisition * * * but from a misuse (breach of the agreement to sublicense) of the asset once acquired." 305 F.Supp. at 1255. See also Bailey's Bakery, Ltd. v. Continental Baking Company, 235 F. Supp. 705, 716-717 (D.Haw.1964):

"That, after the moment of acquisition, subsequent business practices do injure competitors in that market does not, because of those subsequent injurious acts, give rise to a claim for treble damages under Clayton § 7."

And see Rayco Manufacturing Co....