Eastman Kodak Co. v. GAF Corp.

• Court: New York Supreme Court Appellate Division
• Writing for the Court: Before SIMONS
• Citation: 419 N.Y.S.2d 372,71 A.D.2d 833
• Parties: , 205 U.S.P.Q. 1140, 1980-1 Trade Cases P 63,189 EASTMAN KODAK COMPANY, Respondent, v. GAF CORPORATION, Appellant.
• Decision Date: 13 July 1979

Page 372

419 N.Y.S.2d 372 71 A.D.2d 833, 205 U.S.P.Q. 1140,
1980-1 Trade Cases P 63,189 EASTMAN KODAK COMPANY, Respondent,
v.
GAF CORPORATION, Appellant. Supreme Court, Appellate Division, Fourth Department. July 13, 1979.

Page 373

Skadden, Arps, Slate, Meagher & Flom, New York City, Goldstein, Goldman, Kessler & Underberg, Rochester, by Edwin E. McAmis, New York City, for appellant.

Nixon, Hargrave, Devans & Doyle, Rochester, by William H. Morris, Rochester, for respondent.

Before SIMONS, J. P., and HANCOCK, CALLAHAN, DOERR, and MOULE, JJ.

MEMORANDUM:

Plaintiff sues defendant in contract to recover royalties allegedly due pursuant to several licensing agreements permitting use of various products and processes owned and patented by plaintiff. Relevant to this appeal are two affirmative defenses dismissed by Special Term. The first affirmative defense alleges that the patent license agreements are unenforceable because of plaintiff's monopolization of relevant markets in the photographic industry contrary to federal antitrust laws, a claim which is the subject of a pending antitrust action in federal court. The fourth affirmative defense alleges patent invalidity.

Special Term properly dismissed the first affirmative defense. The alleged antitrust violations are not inherent in the licensing agreements but only collateral to them. That being so, they may not be asserted as a defense to the contract action (see Kelly v. Kosuga, 358 U.S. 516, 79 S.Ct. 429, 3 L.Ed.2d 475; New York Stock Exch. v. Goodbody & Co., 42 A.D.2d 556, 345 N.Y.S.2d 58; Western Electric Co., v. Solitron Devices, Inc., 1967 Trade Cases (CCH) P 72,057 (Sup.Ct.N.Y. Co., 1967), affd. 28 A.D.2d 1211, 285 N.Y.S.2d 269; cf. Continental Wall Paper Co. v. Louis Voight and Sons Co., 212 U.S. 227, 29 S.Ct. 280, 53 L.Ed. 486). Cases to the contrary cited by defendant are cases in which the contract itself was the basis for an arrangement which violated the antitrust laws. In this case, plaintiff's alleged antitrust violation is not the product of the licensing agreement but rather of plaintiff's domination of the photographic industry and its alleged misuse of patents.

Special Term erred, however, in dismissing the fourth affirmative defense because assuming the factual allegations of the pleading to be true, as we must, patent invalidity is a valid defense to a state court contract action (CPLR 3211; Lear, Inc. v. Adkins, 395 U.S. 653, 89 S.Ct. 1902, 23 L.Ed.2d 610; see, also,...