In Re Yarn Process Pat. Valid. & Anti-Trust Litigation

• Decision Date: 27 February 1975
• Docket Number: M.D.L. No. 82.
• Citation: 398 F. Supp. 31
• Parties: In re YARN PROCESS PATENT VALIDITY AND ANTI-TRUST LITIGATION.
• Court: U.S. District Court — Southern District of Florida

398 F. Supp. 31

In re YARN PROCESS PATENT VALIDITY AND ANTI-TRUST LITIGATION.

M.D.L. No. 82.

United States District Court, S. D. Florida.

April 25, 1974.

Supplemental Opinion February 27, 1975.

COPYRIGHT MATERIAL OMITTED

Edwards, Irons, Irons, Sears & Santorelli, Washington, D. C., McNeill Smith, Smith, Moore, Smith, Schell & Hunter, Greensboro, N. C., William W. Beckett, Schuyler, Birch, Swindler, McKie & Beckett, William K. West, Jr., Cushman, Darby & Cushman, Washington, D. C., David Klingsberg, Kaye, Scholer, Fierman, Hayes & Handler, New York City, Paul B. Bell, Parrott, Bell, Seltzer, Park & Gibson, Charlotte, N. C., Anthony F. Phillips, Willkie, Farr & Gallagher, New York City, Fowler, White, Humkey, Burnett, Hurley & Banick, P. A., Miami, Fla., Gerald Kurland, Cleveland, Ohio, Friedman, Britton & Stettin, Miami, Fla., David Rabin, Greensboro, N. C., John J. McAleese, Jr., Cunniff, Bray & McAleese, Plymouth Meeting, Pa., William R. Alvin, Miami, Fla., Hugh Latimer, Bergson, Brokland, Margolis & Adler, Kirkland, Ellis & Rowe, Washington, D. C., S. M. Clark, Akron, Ohio, Alvin K. Hellerstein, Strook & Strook & Lavan, New York City, Walton, Lantaff, Schroeder, Carson & Wahl, Laurence A. Schroeder, Mershon, Sawyer, Johnston, Donwody & Cole, Aubrey V. Kendall, Miami, Fla., Swan, Keeney, Jenckes & Asquith, Harry W. Asquith, Providence, R. I., Robert G. Lubbers, Andrews, Lubbers & Obrig, Robert F. Conrad, Fort Lauderdale, Fla., Frederick C. Tecce, Cuniff, Bray & McAleese, Plymouth Meeting, Pa., Michael J. Striker, Striker, Striker, Contler & Stenby, New York City, Daniel Neal Heller, Heller & Kaplan, Daniel Neal Retter, Miami, Fla., Ralph C. Nelson, Hialeah, Fla., Davis W. Duke, Jr., McCune, Hiaasen, Crum, Ferris & Gardner, Fort Lauderdale, Fla., Seymour D. Lewis, Rosenman, Colin, Kaye, Petschek, Freund & Emil, New York City, Blum, Moscovitz, Friedman & Kaplan, New York City, John F. Leviness, III, Otterbourg, Steindler, Houston & Rosen, New York City, Stanley Arthur Beiley, Blackwell, Walker, Gray, Powers, Flick & Hoehl, Smathers & Thompson, Bradford, Williams, McKay, Kimbrell, Hamann & Jennings, Charles A. Kimbrell, Miami, Fla.

ATKINS, District Judge.

During the pendency of discovery proceedings in these 51 actions consolidated in the United States District Court for the Southern District of Florida, certain summary judgment motions have been filed and briefed by various parties opposing the patents here in suit. Following the conclusion of the bulk of the discovery in December 1973, the patentee parties were requested to respond to those motions in an attempt to decide them in an orderly fashion before a final trial date is set. The responses so requested have been filed with the Court and between April 11 and April 18 the Court has heard some twelve hours of argument on the various motions. The time for decision has arrived and this Order will attempt to set forth the Court's rulings and reasonings in a brief, but hopefully adequate fashion. The history of this litigation has previously been discussed by the Judicial Panel on Multidistrict Litigation in its opinion ordering the transfer, In Re Yarn Processing Patent Validity Litigation, 341 F.Supp. 376 (Jud.Pan.Mult. Lit.1972), and in this Court's orders published at 360 F.Supp. 74 (S.D.Fla. 1973) and 56 F.R.D. 648 (S.D.Fla.1972). To the extent the background information contained therein is helpful to an understanding of this Order, they are incorporated by reference. Additionally, the Court reviewed the law relating to Rule 56 of the Federal Rules of Civil Procedure before rendering a summary judgment of invalidity of the single heater patents In Re Yarn Processing Patent Validity Litigation, 360 F.Supp. 74, 78-79 (S.D.Fla.1973), and that law is equally applicable here and need not be repeated. The motions will be discussed below in the order in which they were argued, although that order might not necessarily be the most logical.

I Celanese and FII Motion for Partial Summary Judgment that Double Heater Patents 3,077,224, 3,091,912 and 3,472,011 are Unenforceable in the Hand of Defendant Lex-Tex

This motion seeking dismissal of the patent owner Lex-Tex's counterclaims for infringement against Celanese and FII was filed on November 26, 1973 in case number 71-1026-CIV-CA, a part of MDL 82. On December 3, 1973, Sauquoit and Rohm & Haas, defendants in case under 72-938-CIV-CA, joined in the Celanese motion to the extent that it sought a declaration that the '912 patent was unenforceable; all of the Celanese pleadings relating to this motion were adopted in that joinder.

The motion as filed relies on Section 7 of The Clayton Act, 15 U.S.C.A., ? 18, which provides in part:

No corporation engaged in commerce shall acquire, directly or indirectly, the whole or any part of the stock or other share capital and no corporation subject to the jurisdiction of the Federal Trade Commission shall acquire the whole or any part of the assets of another corporation engaged also in commerce, where in any line of commerce in any section of the country, the effect of such acquisition may be substantially to lessen competition, or to tend to create a monopoly.

Lex-Tex, pursuant to a transfer from Leesona Corporation, acquired the '912 and '724 patents in 1967. In June of 1971 Lex-Tex acquired from Ernest Scragg & Sons, Ltd., of England, the United States Patent No. 3,472,011.¹ All three of these patents were described in the Agreement of June 16, 1971 as "relating . . . to machines, apparatus and methods for the production of modified torque stretch yarn."

It is the contention of Celanese that the acquisition of the '011 patent by Lex-Tex, a corporation engaged in commerce and subject to the jurisdiction of the FTC, 15 U.S.C.A., ? 21, was the acquisition of "any part of the assets patents of another corporation engaged also in commerce Scragg" that had as a necessary effect the lessening of competition "in any line of commerce licensing of the three double heater patents" "in any section of the country the entire United States." Thirteen material facts are recited in the moving papers, with the assertion that they are not in dispute. Only fact number four is really in dispute and that is because it alleges that an important purpose of the acquisition of the '011 "was to significantly lessen competition between that patent" and the '912 and '724 patents. As stated, the question is factual, but immaterial. The statute is concerned with the result of the acquisition, not the purpose. If the purpose was to substantially lessen competition, but no possibility of such a lessening existed, the statute would not be violated.

Lex-Tex, in resisting the granting of the motion, recites two facts that are allegedly material and evidently in dispute. Only the first need concern the court here.²

LEX-TEX FACT NO. 1

There never was any possibility of a competitive licensing program between Lex-Tex and Scragg as to '912, '724 and '011

This material fact in dispute derives from the Lex-Tex assertion that the '011 patent on the one hand and the '912 and '724 patents on the other are blocking, or complementary, patents. A definition of "blocking" patents was provided by the Supreme Court in Standard Oil Co. v. United States, 283 U.S. 163, 171, 51 S.Ct. 421, 424, 75 L.Ed. 926 (1931):

. . . An interchange of patent rights and a division of royalties according to the value attributed by the parties to their respective patent claims is frequently necessary if technical advancement is not to be blocked by threatened litigation.5

5. This is often the case where patents covering improvements of a basic process, owned by one manufacturer, are granted to another. A patent may be rendered quite useless, or "blocked", by another unexpired patent which covers a vitally related feature of the manufacturing process. . . . (emphasis supplied)³

If the patents could be considered "blocking" within the meaning of this definition, Lex-Tex argues, there could be no competition under Clayton Act section 7 to be lessened by the acquisition.

No authority has been cited by either party to this motion in an effort to show whether the classifying of several patents as either competing or blocking is a factual determination. After this question was posed by the Court, Celanese took the position in oral argument that if the determination was factual, the Agreement between Lex-Tex and Scragg virtually admitted that the two would have been competitors in the licensing of double-heater technology ?€” why else would Lex-Tex agree to a rebate of 12?% of the royalties?⁴ That deduction is too facile and does not necessarily follow. If that reasoning were correct, the only blocking patents would be those that were given away by their owners. Celanese has also argued that if the categorization of the three patents as blocking required a factual decision, Lex-Tex has failed to show any underlying facts that support its position that the patents were, and are, blocking. An affidavit of Nicholas J. Stoddard, one of the Permatwist partners, was relied on by Lex-Tex for the proposition that "the operation of any of these machines Leesona, ARCT, Barmag and Scragg to produce a set yarn would infringe claims of each of '724, '912 and '011." Paragraph 27 of that affidavit stated: "'912, '724 and '011 are complimentary sic blocking patents." This affidavit was attacked on several grounds under Rule 56, and Celanese feels that it should not be used for any purpose.

Counsel for Lex-Tex argued that a decision relating to the blocking or competitive character of several patents was factual in nature and should not be decided on summary judgment. No case law was cited to support this conclusion however, Nevertheless, it is clear that summary judgment should only be granted when the material facts are not in dispute and the moving party is entitled to judgment as a matter of law. Even if the characterization of the relevant...