Handgards, Inc. v. Johnson & Johnson

• Decision Date: 16 April 1975
• Docket Number: No. C-49451 WHO.,C-49451 WHO.
• Citation: 413 F. Supp. 921
• Court: U.S. District Court — Northern District of California
• Parties: HANDGARDS, INC., a corporation, Plaintiff, v. JOHNSON & JOHNSON, a corporation, and Ethicon, Inc., a corporation, Defendants.

413 F. Supp. 921

HANDGARDS, INC., a corporation, Plaintiff, v. JOHNSON & JOHNSON, a corporation, and Ethicon, Inc., a corporation, Defendants.

No. C-49451 WHO.

United States District Court, N. D. California.

April 16, 1975.

Maxwell M. Blecher, Blecher, Collins & Hoecker, Joel R. Bennett, Nancy M. Bennett, Kendrick, Netter, Orr & Bennett, Los Angeles, Cal., for plaintiff.

David F. Dobbins, Rogers & Wells, New York City, George S. Frazza, Robert M. Dunne, Dunne, Phelps & Mills, San Francisco, Cal., for defendants.

MEMORANDUM OPINION AND ORDER

ORRICK, District Judge.

Defendants, Johnson & Johnson ("J & J") and Ethicon, Inc. ("Ethicon"), moved for summary judgment in this seven year old antitrust action, and plaintiff, Handgards, Inc. ("Handgards"), moved for an order compelling the production of documents. Upon consideration of the lengthy memoranda filed in support of and in opposition to said motions, and the oral argument heard on March 6, 1975, I have concluded that although certain of the predatory acts alleged by Handgards are unsupported in fact, there are genuine issues of material fact as to others. Accordingly, defendants' motion for summary judgment is granted in part and denied in part. Federal Rules of Civil Procedure, Rule 56(d). Plaintiff's motion to compel the production of documents is granted subject to an in camera inspection of the documents.

Preliminarily, it should be noted that summary judgment in antitrust actions should be employed sparingly, particularly where motive and intent are at issue. Poller v. Columbia Broadcasting System, Inc., 368 U.S. 464, 473, 82 S.Ct. 486, 491, 7 L.Ed.2d 458, 464 (1962). If, under any reasonable construction of the facts in evidence and under any acceptable theory of law, the party opposing the motion would be entitled to prevail, summary judgment is improper. Anderson v. American Automobile Association, 454 F.2d 1240, 1242 (9th Cir. 1972); Scooper Dooper, Inc. v. Kraftco Corp., 494 F.2d 840, 848 (3d Cir. 1974). If, however, the trial of the matter would develop no additional evidence which would in any way serve to alter the Court's resolution of the case, a disposition under Rule 56 is not only proper, but is mandated. Peter J. Allen Corp. v. California Furniture Shops, Ltd., 344 F.Supp. 437, 441 (N.D.Cal. 1972).

Handgards represented at oral argument on the motion and in its post-hearing reply memorandum that it was not proceeding as though this case were governed by Walker Process Equipment, Inc. v. Food Machinery & Chemical Corp., 382 U.S. 172, 86 S.Ct. 347, 15 L.Ed.2d 247 (1965). This abandonment by plaintiff of its prior primary theory of recovery based on the Orsini patent is no surprise. Walker Process stands for the proposition that "the enforcement of a patent procured by fraud on the Patent Office may be violative of § 2 of the Sherman Act provided the other elements necessary to a § 2 case are present." Id. at 174, 86 S.Ct. at 349, 15 L.Ed.2d at 249. The Supreme Court stopped short of ruling that a fraudulently obtained patent could be the basis of per se illegality under Section 2 of the Sherman Act, deferring such a decision until the proper vehicle arrived. Id., 382 U.S. at 178, 86 S.Ct. at 350, 15 L.Ed.2d at 251. Mr. Justice Harlan, concurring, stressed that "deliberate fraud" was required by the majority, and noted that a reading of the opinion which would permit an antitrust violation to be premised on a patentee's failure to comply with one or more of the numerous technicalities inherent in the patent process "might well chill the disclosure of inventions through the obtaining of a patent because of fear of the vexations or punitive consequences of treble-damage suits." Id. at 180, 86 S.Ct. at 352, 15 L.Ed.2d at 253.

Handgards alleged a Walker Process violation in regard to the procurement of the Orsini patent, but, as noted supra, this contention has been abandoned. In passing, it should be noted that the Orsini infringement suit was not prosecuted in violation of Walker Process. Much has been said about the information contained in the various Patent Office files and whether or not the patent examiner should have been aware of certain representations to be found therein. But, a party's failure to inform the Patent Office of information in its own files does not amount to the extremely circumscribed "intentional fraud" necessary to prove an action under Walker Process (Id. 382 U.S. at 176, 86 S.Ct. at 349, 15 L.Ed.2d at 250; Cataphote Corporation v. DeSoto Chemical Coatings, Inc., 450 F.2d 769, 772-773 (9th Cir. 1971)), and thus the Orsini claim would have to fall even in the absence of the express abandonment.

The complaint in this case has never contained a Walker Process allegation in regard to the Gerard patent. Such a contention was sought to be added in May of 1974, but Judge Wollenberg denied leave to so amend the complaint on June 25, 1974.

Handgards now largely bases its monopolization charge on the various patent infringement and other lawsuits brought on behalf of Ethicon by J & J house patent counsel. The claim is rooted in Kobe, Inc. v. Dempsey Pump Co., 198 F.2d 416 (10th Cir. 1952), cert. denied 344 U.S. 837, 73 S.Ct. 46, 97 L.Ed. 651 (1952), and its progeny— particularly Mach-Tronics, Incorporated v. Zirpoli, 316 F.2d 820 (9th Cir. 1963), Rex Chainbelt, Inc. v. Harco Products, Inc., 512 F.2d 993 (9th Cir. 1975), and Prelin Industries, Inc. v. G & G Crafts, Inc., 357 F.Supp. 52 (W.D.Okl.1972). The Ethicon suits were purportedly brought as integral ingredients of a scheme to monopolize the disposable glove market. Other alleged aspects of the monopoly plan are defendants' misuse of the Gerard patent through an attempt to enlarge its scope beyond that granted by the Patent Office; the accumulation by Ethicon of a series of patents; price-cutting; and, finally, full-line enforcing. The latter contention was abandoned by plaintiff prior to the hearing on the instant motion.

Handgards also alleges that Ethicon, a wholly-owned subsidiary of J & J, conspired with Sam Porter ("Porter"), a former distributor of disposable gloves, in violation of Section 1 of the Sherman Act. Finally, Handgards raised, but has since abandoned (in its memorandum opposing the motion for summary judgment), the contention that the acquisition of the Scott Company by Ethicon violated Section 7 of the Clayton Act.

Plaintiff charges that defendants attempted to create a monopoly in the disposable glove industry by accumulating a number of the relevant patents—no matter how weak or narrow—and then instituting a series of lawsuits in order to slowly litigate the competition out of business. In Kobe, Inc. v. Dempsey Pump Co., supra, the plaintiff obtained a monopoly in the rodless pump industry by buying up all the relevant patents. It then instituted a patent infringement action against its sole competitor, Dempsey, without ever having examined the alleged infringing product. The company then proceeded to inform its customers about the pending litigation. The Tenth Circuit affirmed the district court's finding of an antitrust violation, but noted that the result would be otherwise "if there was nothing more than the bringing of the infringement action". 198 F.2d at 425; Rex Chainbelt, Inc. v. Harco Products, Inc., supra at 1003.

The Kobe court carefully characterized its holding as one not intended to impede "free and unrestricted access to the courts". Id. at 424. Later decisions have sought to resolve the tension between encouraging lawsuits brought to enforce patents—monopolies sanctioned by the Constitution to encourage aggressive competition—and discouraging persons from bringing suits on those patents in an attempt to squelch potential competitors. See, e. g., Walker Process Equipment, Inc. v. Food Machinery & Chemical Corp., supra; Cole v. Hughes Tool Company, 215 F.2d 924 (10th Cir. 1954), cert. denied, 348 U.S. 927, 75 S.Ct. 339, 99 L.Ed. 726 (1955); Bolt Associates, Inc. v. Rix Industries, 1973-1 Trade Cases, ¶ 74,474 (N.D.Cal.1973); Crown Machine & Tool Co. v. KVP-Sutherland Paper Co., 297 F.Supp. 542 (N.D.Cal.1968), aff'd 409 F.2d 1307 (9th Cir. 1969); Report of the Attorney General's National Committee to Study the Antitrust Laws (1955) at 247-248.

Despite Kobe, there exists a good deal of confusion over the requisite intent of the initiator of a patent infringement or related action. The problem is exacerbated in relation to this case since most of the relevant precedents feature an antitrust contention raised as a defense to a challenged patent infringement action. Walker Process Equipment, Inc. v. Food Machinery & Chemical Corp., supra; Kobe, Inc. v. Dempsey Pump Co., supra; Rex Chainbelt, Inc. v. Harco Products, Inc., supra; Bolt Associates, Inc. v. Rix Industries, supra.

The law, however, is not totally unsettled. Thus, when a lawsuit or a series of lawsuits is an integral part of a scheme to monopolize an industry, the damage the defendant in the infringement action(s) incurs in defending such action(s) is recoverable under Section 4 of the Clayton Act, even if such actions were brought with a goodfaith belief in the validity of the patent. Rex Chainbelt, Inc. v. Harco Products, Inc., supra, at 1003; Dairy Foods Incorporated v. Dairy Maid Products Coop., 297 F.2d 805, 809 (7th Cir. 1961). Kobe serves to stress the need for an overall scheme to monopolize with the litigation serving only as one of the predatory acts.

The bringing of a series of ill-founded patent infringement actions, in bad faith, can constitute an antitrust violation in and of itself if such suits are initiated or pursued with an intent to monopolize a particular industry (and, of course, the other elements of a Section 2 violation are present). Otter Tail Power Co. v. United States, 410 U.S. 366, 93 S.Ct. 1022, 35 L.Ed.2d 359 (1973); California Motor Transport Co. v. Trucking Unlimited, 404 U.S. 508, 92 S.Ct. 609, 30 L.Ed.2d 642 (1972); Kellogg...