General Electric Co. v. Hygrade Sylvania Corporation

• Decision Date: 29 May 1942
• Citation: 45 F. Supp. 714
• Parties: GENERAL ELECTRIC CO. v. HYGRADE SYLVANIA CORPORATION (RAYTHEON MFG. CO., Intervener).
• Court: U.S. District Court — Southern District of New York

45 F. Supp. 714

GENERAL ELECTRIC CO. v. HYGRADE SYLVANIA CORPORATION (RAYTHEON MFG. CO., Intervener).

District Court, S. D. New York.

May 29, 1942.

Alexander C. Neave, of New York City (Harrison F. Lyman and Thomas D. Thacher, both of New York City, of counsel), for plaintiff.

Gifford, Scull & Burgess, of New York City (Newton A. Burgess, of New York City, of counsel), for defendant Hygrade Sylvania Corporation.

Dean S. Edmonds, of New York City, for defendant Raytheon Manufacturing Co.

Thurman Arnold, Asst. Atty. Gen. (Samuel S. Isseks, Ernest S. Meyers and Edward F. Butler, Sp. Assts. to Atty. Gen., of counsel), for the United States.

LEIBELL, District Judge.

The United States of America moves for leave to intervene as a defendant in this patent suit in order to assert certain defenses set forth in a proposed answer annexed to the notice of motion, "on the ground that the patents alleged in the complaint to be infringed by articles manufactured, used and sold by the defendant Hygrade Sylvania Corporation, have been used illegally by the plaintiff, General Electric Company in violation of the Federal anti trust laws and in a manner contrary to public policy". It is asserted that "these defenses to the plaintiff's claim present questions of law and of fact common to the main action".

The application is made under Rule 24 (b) of the Federal Rules of Civil Procedure, 28 U.S.C.A. following section 723c, which reads as follows: "(b) Permissive Intervention. Upon timely application anyone may be permitted to intervene in an action: (1) when a statute of the United States confers a conditional right to intervene; or (2) when an applicant's claim or defense and the main action have a question of law or fact in common. In exercising its discretion the court shall consider whether the intervention will unduly delay or prejudice the adjudication of the rights of the original parties."

The patent suit presents the following issues: (1) the validity of certain claims of two patents owned by General Electric Company; (2) the infringement of the General Electric patents by Hygrade Sylvania Corporation; (3) the validity of the claims of three patents either owned by Hygrade Sylvania Corporation or of which Hygrade holds the exclusive license from the patent owner, Raytheon Manufacturing Company, also a defendant; (4) the infringement of the Hygrade patents by the General Electric Company. All these patents are alleged to involve certain basic principles on which fluorescent lights operate.

The United States through its Special Assistant Attorney General contends that the Court should, pursuant to Rule 24 (b) (2), exercise its discretion in favor of granting the Government's motion for leave to intervene in this patent suit; that the plaintiff comes into Court with unclean hands, having exploited its patents in a fashion contrary to the antitrust laws and to public policy; and that therefore this court of equity should "withhold its assistance from such a use of the patent by declining to entertain a suit for infringement". Morton Salt Co. v. G. S. Suppiger Co., 314 U.S. 488, 493, 62 S.Ct. 402, 405, 86 L.Ed. ___.

The allegations of the Government's proposed answer charge that General Electric Company by a licensing agreement of December 30, 1937 (Ex. 1) has made an arrangement with Westinghouse Electric Manufacturing Company which "has required, and requires, Westinghouse to maintain the prices of fluorescent lamps manufactured by Westinghouse under such agreement at the prices fixed and followed by General Electric; and Westinghouse and General Electric have maintained, and now maintain, the prices so fixed by General Electric in connection with fluorescent lamps manufactured by Westinghouse and General Electric". (Par. 4.) The proposed answer further alleges that Westinghouse maintains a system of distribution of fluorescent lamps through some 30,000 agents and that General Electric maintains a similar system through 83,000 agents, and that through these two large distribution systems "the prices of particular fluorescent lamps sold by General Electric and Westinghouse to their respective distributors and sold by such distributors to other distributors or to the consuming public are identical". (Pars. 5, 6 and 7.)

The Government alleges that the licensing agreement between General Electric and Westinghouse also provides that the amount of fluorescent lamps and incandescent lamps that may be manufactured by Westinghouse under its license agreement with General Electric "would not exceed 25.44% of the aggregate net sales (in dollars) of fluorescent and incandescent lamps sold by General Electric and Westinghouse"; and that Westinghouse agreed not to sell fluorescent lamps for export "except to those countries where General Electric had the right to export lamps". (Par. 8.)

Other allegations in the proposed answer relate to an agreement, dated July 1, 1939 (Ex. 2), between General Electric and Consolidated Electric Lamp Company, under which Consolidated was licensed to manufacture fluorescent lamps under the two patents in suit, but limited to an amount equal to 3.09% of the net yearly sales of General Electric or in the amount of $100,000 whichever might be the greater. The royalties payable by Consolidated to General Electric were fixed at 3 1/3 % of General Electric's list price for the lamps. It is charged that in this way General Electric "in effect controls the price of fluorescent lamps manufactured and distributed by Consolidated". The agreement also provides that Consolidated is not licensed to export fluorescent lamps from the United States. (Par. 9.) Other allegations of the proposed answer (Par. 10) charge in effect that General Electric by another short agreement of July 1, 1933 (Ex. 3) has used its fluorescent patents "for the purpose of extending the period of its monopoly in respect of incandescent lamps", by a tie-up between the fluorescent lamp agreement with Consolidated (Ex. 2) and an incandescent lamp agreement with Consolidated, dated July 1, 1933 (Ex. 4) (Par. 10).

International General Electric Company, Inc., is a wholly owned subsidiary of General Electric. The proposed answer charges that through this subsidiary General Electric has entered into various agreements with the principal lamp companies in foreign countries not to export fluorescent lamps to those countries, and that in turn the foreign companies have agreed not to export fluorescent lamps to the United States. A list of the foreign companies involved is set forth in paragraph 11 of the proposed answer.

The proposed answer also charges that under certain agreements dated December 30, 1937, General Electric, the Claude Paz et Silva (a French corporation) and Claude Neon Lights, Inc., they have agreed to divide the field for the manufacture and distribution of fluorescent lights in the United States, the General Electric taking the "indoor" field and Claude Neon Lights the "outdoor" field. (Par. 12.)

There are some general allegations of the proposed answer, such as those in paragraph 13 that the two patents in suit are part of an aggregation of hundreds of patents and patent rights which General Electric has acquired for the purpose of dominating the electric lamp field, including fluorescent lamps, and are being used for that purpose; that General Electric is the only manufacturer and seller of bases for the fluorescent lamps and of automatic machinery used in making fluorescent lamps, and that the Corning Glass Works, with which General Electric has agreements, controls and dominates the licensing of machinery for the making of glass tubing used in the manufacture of fluorescent lamps and controls and dominates the sale of such glass tubing (Par. 14). It is also alleged that General Electric controls and dominates the manufacture and sale of auxiliary equipment for the operation of fluorescent lamps, such as ballasts and starting switches, and by that means General Electric controls the marketing of fluorescent lamps (Par. 15). There is a further allegation that because fluorescent lighting uses less electrical energy than incandescent lighting, the General Electric Company has suppressed the use of fluorescent lighting "for the purpose of aiding the principal public utility companies". (Par. 16.)

All of the acts complained of against the General Electric Company in the proposed answer of the United States are alleged to constitute "an illegal use of such patents in violation of the Act of Congress of July 2, 1890, c. 647, 26 Stat. 209, as amended, 15 U.S.C.A. § 1, entitled `An act to protect trade and commerce against unlawful restraints and monopolies', said act being commonly known as the `Sherman Antitrust Act', and the Act of Congress of October 15, 1914, c. 323, 38 Stat. 730, as amended, entitled `An act to supplement existing laws against unlawful restraints and monopolies and for other purposes', said act being commonly known as the `Clayton Act', and is contrary to public policy."

The relief sought by the Government under its proposed answer is "that the Complaint herein of General Electric Company be dismissed".

It has been held by the United States Supreme Court in two decisions, in January of this year, that if a plaintiff patentee suing an alleged infringer has used the patent for illegal purposes or contrary to a public policy, then the patentee comes into a court of equity with unclean hands and the Court is justified in denying the patentee any relief against the alleged infringer.

In Morton Salt Co. v. G. S. Suppiger Co., supra, the Court had before it the question of "whether a court of equity will lend its aid to protect the patent monopoly when respondent the patentee is using it as the effective means of restraining competition with its sale of an unpatented article. * * *" In connection with the sale of salt tablets by a subsidiary, the patentee licensed its patented machines to canners "to...