Radio Corporation v. Hygrade Sylvania Corporation

• Decision Date: 09 July 1934
• Docket Number: 4754,4757.,No. 4753,4753
• Parties: RADIO CORPORATION OF AMERICA v. HYGRADE SYLVANIA CORPORATION (two cases). GENERAL ELECTRIC CO. v. SAME.
• Court: U.S. District Court — District of New Jersey

10 F. Supp. 879

RADIO CORPORATION OF AMERICA v. HYGRADE SYLVANIA CORPORATION (two cases).

GENERAL ELECTRIC CO. v. SAME.

Nos. 4753, 4754, 4757.

District Court, D. New Jersey.

July 9, 1934.

Edward W. Vaill, of New York City (Thomas G. Haight, of Jersey City, N. J., and Stephen Philbin and Abel E. Blackmar, Jr., both of New York City, of counsel), for plaintiffs.

Harry B. Rook, of Newark, N. J. (George F. Scull, Newton A. Burgess, and John J. Rogan, all of New York City, and Hugh M. Morris, of Wilmington, Del., of counsel), for defendant.

FORMAN, District Judge.

The plaintiffs, the General Electric Company and the Radio Corporation of America, brought three suits in equity against the defendant, the Hygrade Sylvania Corporation, for infringement of certain patents of which the plaintiffs are the owners. The defendant filed answers. The plaintiffs moved that several paragraphs of the answers, constituting part of the defendant's alleged defense and a counterclaim or setoff, be struck out. The motions were heard by the court. The defendant obtained permission from the court and filed amended answers. The plaintiffs moved that the court strike paragraphs 14 to 18 in suit number 4757; paragraphs 19 to 23 in number 4753; and paragraphs 13 to 17 in number 4754, all inclusive. Under agreement, there has been no further argument and the court is to dispose of the motions on the oral arguments, before the amendments, and the several briefs submitted by the parties.

It is necessary to consider only paragraphs 14 to 18 in suit number 4757 in disposing of the motions. The paragraphs attacked by the motions in the other two suits are substantially similar.

The allegations of the parts of the answer and the counterclaim, as amended, to which the motions are directed, are, so far as they are material, as follows:

The General Electric Company and the Radio Corporation of America, the plaintiffs in the suits and others, acquired and continue to acquire numerous patents and patent rights in the radio field, including the patents in suit. By several agreements in writing they have combined and conspired to acquire all the patents in the radio art, and by cross-licensing and exclusive licensing agreements to restrain and prevent all competition. They have combined and pooled the patents and have agreed to license only those in the combination and conspiracy to manufacture under the patents, and refused to grant the rights to others, for the purpose of restraining competition and creating a monopoly in interstate commerce. They have combined and conspired to prevent the manufacture and sale of competing apparatus not manufactured under their patents; refused to license any one but those who will not manufacture, sell, or use competing apparatus, fixed prices, and refused to grant rights under patents of the pool to those who refuse to join in the conspiracy. They have refused to place competing apparatus, covered by patents which they own, on the market. They control the development of the radio art by restricting the supply of tubes available, and have refused to supply apparatus to competing persons not operating under the plaintiffs' patents and have begun frequent suits against them for infringement. The plaintiffs have no standing in a court of equity because they entered and continue to enter into illegal combinations and agreements in violation of a consent decree in a suit between the United States and the Radio Corporation of America (Equity No. 793), in the District Court for the district of Delaware. They interfere with the defendant's business and prevent the licensing of the defendant under certain patents in violation of the decree. They illegally conspired and continue to conspire to restrict competition and recognize certain licenses as exclusive in violation of the decree, and therefore have no standing in a court of equity. They compel a licensee to accept licenses under all the patents controlled by the pool. They have refused to license the defendant on reasonable or any terms, and, therefore, the defendant has a license implied in law to operate under the patents in suit. The suit, No. 4757, is prosecuted by the Radio Corporation in the name of the General Electric Company under an illegal agreement between the plaintiff and third persons, and, therefore, the suit cannot be maintained or a decree entered for the plaintiff unless the agreement is adjudged to be valid.

By way of counterclaim, the defendant asks for a decree that the plaintiffs hold the patents in suit in trust for the public, and that the plaintiffs be restrained from prosecuting this suit until it is ready and willing to grant express licenses to competitors on reasonable terms and until it ceases violating the decree of the District Court for the district of Delaware.

The defenses and counterclaim under attack may be summed up as follows:

The plaintiffs violated the anti-trust laws and continued to do so for a period of years. In a suit brought against them by the United States for those violations, a decree was entered against the plaintiffs, enjoining and restraining the plaintiffs from combining or agreeing to restrain interstate commerce, and, in particular, to limit or restrict persons from granting licenses under its own patents. The plaintiffs continue to violate the anti-trust laws and are violating the decree of the court. They refuse to grant the defendant a license on reasonable terms because of an agreement between them restricting licensing in violation of the anti-trust laws. For that reason, the plaintiffs have no standing in equity, and furthermore the defendant has a license implied in law and is entitled to affirmative relief by way of counterclaim against the plaintiffs.

The plaintiffs contend that the defendant's case does not fall outside of the general rule that the fact the plaintiffs may be members of an unlawful combination in restraint of trade does not give the defendant the right to appropriate the property of the plaintiffs by infringing its patents, and that the counterclaim must fail as it does not state a cause of action.

The gist of the defendant's position has been stated as well as could be in its own conclusion: "The basis of defendant's affirmative defenses and counterclaims is that plaintiffs in these suits together with others who are parties to the Agreement A-1 have thereby entered into an illegal combination for the joint exercise of their several lawful individual monopolies and have thereby been enabled to create and enforce a monopoly and domination of the radio industry which far exceeds and transcends any monopoly contemplated or authorized by the patent laws and that defendant by the denial to it of a license under the patents sued upon in said suit No. 4757 and by the institution of these suits, which depends upon the illegal Agreement A-1, has suffered a direct, special and unique injury and damage which is both substantial and irreparable and which does not affect the public generally."

This form of the defenses relied on by the defendant is not unusual; but the courts have invariably struck them from the pleadings. General Electric Company v. Minneapolis Electric Lamp Company (D. C.) 10 F. (2d) 851; Radio Corporation v. United Radio & Electric Corporation (D. C.) 50 F. (2d) 206; Radio Corporation v. Majestic Distributors (D. C.) 53 F.(2d) 641.

The law is too well settled to question the general rule that an allegation in a suit for infringement of a patent, trade-mark, or copyright to the effect that the plaintiff is a party to an unlawful combination does not constitute a defense. Brown Saddle Company v. Troxel (C. C.) 98 F. 620; Motion Picture Patents Company v. Eclair Film Company (D. C.) 208 F. 416; Independent Baking Powder Company v. Boorman (C. C.) 130 F. 726; Virtue v. Creamery Package Manufacturing Company (C. C. A.) 179 F. 115. The defendant admits the general rule, but contends that an exception arises when the defendant shows that it suffers special damage apart from the damage suffered by the general public by reason of a violation of the anti-trust laws. It asserts that this exception is recognized impliedly by the following authorities: General Electric Company v. Minneapolis Electric Lamp Company (D. C.) 10 F.(2d) 851; Radio Corporation v. United Radio & Electric Corp. (D. C.) 50 F.(2d) 206; Western Electric Company v. Pacent Reproducer Corporation (D. C.) 53 F.(2d) 639; Radio Corporation v. Majestic Distributors (D. C.) 53 F.(2d) 641; Radio Corporation v. Duovac Radio Tube Corporation (D. C.) 6 F. Supp. 275.

In those cases, excepting that of the United Radio & Electric Co., there were no allegations that suggest any special injury to the defendants by reason of illegal violations of the anti-trust laws. The defendant does not point to any specific statement of the principle on which he relies. The strongest language, in the cases cited to sustain the defendant, is that found in Radio Corporation v. Majestic Distributors, supra (D. C.) 53 F.(2d) 641, 643, in which the court said: "If the defendant could plead some equity special to itself and not generally a violation of certain laws of the United States, not affecting title but merely in connection with the use made of the patents, we would have a different question presented."

It may be reasonable to suppose that if a defendant could allege a direct injury by reason of a violation of the anti-trust laws by the plaintiff, it would constitute a defense on general equitable principles. Georgetown v. Alexandria Canal Company, 12 Pet. (37 U. S.) 91, 97, 9 L. Ed. 1012; General Electric Company v. Minneapolis Electric Lamp Company (D. C.) 10 F.(2d) 851, 854; Bisphanes Principles of Equity, § 439. It is safe to assume that such may be the law for the purpose of deciding the question of the validity of the defenses here; for the defendant is unable to show that he has sustained any special damage.

The defendant...