International Carbonic Eng. Co. v. Natural Carb. Prod.

Decision Date15 July 1944
Docket NumberCivil Action No. 1851-RJ.
Citation57 F. Supp. 248
CourtU.S. District Court — Southern District of California
PartiesINTERNATIONAL CARBONIC ENGINEERING CO. et al. v. NATURAL CARBONIC PRODUCTS, Inc., et al.

COPYRIGHT MATERIAL OMITTED

Hugh M. Morris, of Wilmington, Del., Lyon & Lyon, by Leonard S. Lyon, and R. E. Caughey, all of Los Angeles, Cal., and Allen E. Peck, of Washington, D. C., for plaintiffs.

Casimir A. Miketta, of Los Angeles, Cal., for defendants Natural Carbonic Products, L. H. Polderman, W. L. Benson, and C. B. Benson.

Harris, Kiech, Foster & Harris, by Ward D. Foster, all of Los Angeles, Cal., for defendant George Pepperdine Foundation.

JENNEY, District Judge.

I shall be most informal in giving this memorandum opinion. This case took seven weeks to try, and there have been pre-trial discussions and motions at one time and another, since the 21st day of October, 1941. Many hundreds of pages of pleadings and briefs have been filed, and literally hundreds of decisions have been cited.

My objective will be to indicate, as briefly as is possible after such a lengthy trial, my views on some of the many points which have been raised by counsel; and to give to counsel the reasoning behind my conclusions on these various points.

The original Complaint, filed on October 21, 1941, was amended by an Amended and Supplemental Complaint filed on February 28, 1944, and by a Further Amended and Supplemental Complaint filed on the same day.

The First and Amended Answer to Further Amended Complaint filed by defendants Natural Carbonic Products, Inc., L. H. Polderman, W. L. Benson, C. B. Benson and Natural Carbonic Products, a copartnership, and the answer of the George Pepperdine Foundation, were both slightly amended during the trial.

The Answer of Natural Carbonic contains a counterclaim against the plaintiffs, alleging unfair trade practices and violation of the anti-trust laws of the United States.

The Pepperdine answer contains a similar counterclaim couched in somewhat different language but containing substantially the same general allegations.

You are all familiar with these allegations in these counterclaims, and I shall not take the time here even to paraphrase them.

Counsel for plaintiffs herein have contended that the counterclaim does not plead special damages to defendant, and, therefore, that it should be dismissed.

This court felt that it should be governed by the decision of the Second Circuit on April 3, 1944, in Package Closure Corp. v. Sealright Co., Inc., et al., 141 F.2d 972, 978. In that case Judge Frank said in effect that in an action for treble damages for violation of the anti-trust laws, no unusual degree of "definiteness and particularity" is required in pleading the causal relationship between defendant's violation of the act and plaintiff's injury; and that particulars can be obtained under the discovery procedure. Similarly, he said, that exactness and precision in pleading damages is not required, especially where the defendant was responsible for creating a situation in which damages could not be measured with precision.

In Hancock Oil Co. v. Universal Oil Products Co., 9 Cir., 115 F.2d 45, at page 47, the court said:

"The transactions or occurrences that are the subject matter of the complaint need not describe the new and separate cause of action in violation of the Clayton Act in order to secure relief by way of counterclaim. Their true character may be disclosed by a counterclaim supplementing the facts, showing the entire transaction of the plaintiff to constitute such a violation." Supplementing opinion, 9 Cir., 120 F.2d 959, certiorari denied 314 U.S. 666, 62 S.Ct. 127, 86 L.Ed. 533.

See Lynch v. Magnavox Co., 94 F.2d 883, a Ninth Circuit Court of Appeals case; cf. C. E. Stevens Co. v. Foster & Kleiser Co., 9 Cir., 109 F.2d 764, reversed 311 U.S. 255, 61 S.Ct. 210, 85 L.Ed. 173.

This court therefore refused to dismiss the counterclaim and granted permission to defendants to introduce evidence in support thereof. We felt, and feel now, that the criterion above indicated by which the counterclaim is to be tested, as a pleading, is quite different from the criterion to be applied to proof. I do not propose to analyze the evidence introduced in support of the counterclaim, sketchy as it was. Suffice it to say that early in the course of the trial the court called defendants' counsel's attention to the foregoing decisions and warned them that they must be prepared to put on specific proof, not only of alleged illegal acts, but of the damage suffered by defendants.

Defendants have relied to a great extent upon the theory that where there is so much smoke there must be some fire. They cite the large number of patents owned or controlled by plaintiffs or their associates; the licensing by the parent corporation to wholly-owned subsidiaries; the great wealth of plaintiffs; their highly specialized patent lawyers and well-trained engineers; their shrewdness in business organization and operations; the fact that so-called victims cannot ordinarily afford to fight, and must therefore agree to pay a royalty; the suppression and abandonment of certain inventions and patent applications to extend the ostensible monopoly afforded by the patent in suit, etc.

The counterclaim asks for an injunction and for damages not only because of violation of the anti-trust laws, but also because of the committing of acts by plaintiffs which it is alleged amount to unfair competition. The evidence in support of these allegations of the counterclaim is commingled with the evidence offered in support of the allegations of the answer that plaintiffs do not come into court with clean hands, and should therefore be denied relief. The allegations in the pleadings are somewhat confused in that regard also. In this connection defendants contend, in effect, among other things, the following:

1. That plaintiffs have formed a patent pool, having garnered some 40 patents for the purpose of attempting to intimidate, overwhelm and coerce the entire solid carbon dioxide industry to deal exclusively with plaintiffs.

2. That plaintiffs have granted licenses to wholly-owned or partially-owned subsidiaries with interlocking directorates in order that these companies might act as bellwethers and induce other small or independent units in the industry to believe that plaintiffs' patents were sound and that they should take licenses rather than fight.

3. That plaintiffs have offered and granted to others, and subsequent to the filing of the complaint, offered to one of the defendants a license contract under plaintiffs' patents obligating the licensee to pay to plaintiffs royalty upon all solid carbon dioxide (an unpatented commodity) sold by the licensee, whether or not such products were produced by the apparatus subject to or in accordance with the method of the patents involved.

4. That plaintiffs have made false representations as to the scope of their patents in order to induce the taking of licenses.

5. That plaintiffs have suppressed and abandoned certain applications in an attempt to extend unjustly the asserted monopoly of the patent in suit until December 24, 1952.

6. That plaintiffs have suppressed the so-called Martin application for United States patent.

7. That defendants have been forced by plaintiff to either

(a) discontinue the manufacture of solid carbon dioxide and lose their large investment in plant and wells, or

(b) take a license from plaintiffs, or

(c) bear the tremendously heavy expense of litigation.

These are but illustrations of the contentions of defendants on this point, which must necessarily be given careful consideration. Charges of fraud or of over-reaching should be established by clear and convincing proof. Just because one is proved to be clever, adroit, resourceful and successful does not mean that he has been proved to be dishonest—that he is guilty of more than being mistaken as to the law or the fact. If illegality, fraud or dishonesty, and legal damage therefrom, exist, that must be shown by the evidence to the satisfaction of the court. If a court of equity is to close its doors to a litigant, the facts upon which such action is predicated must be established by the alleging party, and the quantum of proof is well known to all of you and need not be repeated.

Only one of these contentions of defendants (3 above) requires additional consideration in connection with this matter of the position of the plaintiffs in this litigation.

Plaintiffs admit that they offered a license to defendant, which license provides for payment to plaintiffs of a royalty, "whether or not such solid carbon dioxide has been manufactured in accordance with the methods, processes and apparatus of any one of the licensed patents."

That a court of equity may refuse aid to a patentee when it has been shown to be using the patent contrary to public policy is well established. As said by the Supreme Court in Morton Salt Co. v. G. S. Suppiger Co., 314 U.S. 488, at page 492, 62 S.Ct. 402, at page 405, 86 L. Ed. 363:

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