United States Gypsum Company v. National Gypsum Company

• Decision Date: 25 February 1957
• Docket Number: No. 11,11
• Citation: 1 L.Ed.2d 465,77 S.Ct. 490,352 U.S. 457
• Parties: UNITED STATES GYPSUM COMPANY, Appellant, v. NATIONAL GYPSUM COMPANY et al
• Court: U.S. Supreme Court

352 U.S. 457

77 S.Ct. 490

1 L.Ed.2d 465

UNITED STATES GYPSUM COMPANY, Appellant,

v NATIONAL GYPSUM COMPANY et al.

No. 11.

Argued Nov. 5 and 6, 1956.

Decided Feb. 25, 1957.

Rehearing Denied April 8, 1957.

See 353 U.S. 932, 77 S.Ct. 716.

[Syllabus from pages 457-458 intentionally omitted] Mr. Bruce Bromley, New York, City, for appellant.

Mr. Samuel I Rosenman, New York City, for appellee National Gypsum Company.

Mr.Norman A. Miller, Chicago, Ill., for appellee Certain-Teed Products Corporation.

Mr. Justice HARLAN delivered the opinion of the Court.

United States Gypsum Company appeals from a decree of a three-judge court of the United States District Court for the District of Columbia, entered December 9, 1954. This decree modified a final decree of that court, entered May 15, 1951, against Gypsum, the appellees National Gypsum Company and Certain-teed Products Corporation, and others, in a civil antitrust proceeding instituted by the Government in 1940.¹ The modification was a provision ordering Gypsum to dismiss with prejudice four suits which it had brought in three different federal district courts against National, Certain-teed, and two other codefendants in the antitrust proceeding, to recover compensation or damages for the pendente lite use of certain of its patents during the period February 1, 1948, to May 15, 1951.²

At the outset some mention of the prolonged antitrust proceeding is required to put the present post-decree controversy in context. In that proceeding the Government charged Gypsum, National, certain-teed, and a number of other corporate and individual defendants with conspiracy to restrain and monopolize interstate commerce in gypsum board and other gypsum products in violation of §§ 1, 2 and 3 of the Sherman Act.³ The crux of the Government's charges was the alleged illegality of Gypsum's system of industry-wide uniform patent licensing agreements containing clauses giving Gypsum the right to fix prices on gypsum board and products. In 1946, at the close of the Government's case, the District Court dismissed the complaint.⁴ On appeal this Court, on March 8, 1948, reversed and remanded the case for further proceedings.⁵ Thereafter the District Court, with one dissent,⁶ interpreting this Court's decision to mean that Gypsum's multiple uniform price fixing patent licenses were illegal per se under the anti-trust laws, granted the Government's motion for summary judgment, accepting as true the defendants' proffer of proof. On November 7, 1949, the District Court entered a decree which, among other things, adjudged Gypsum's patent licensing agreements illegal, null and void, enjoined the performance of such agreements, provided for limited compulsory non-exclusive licensing of Gypsum's patents on a reasonable royalty basis, and reserved jurisdiction over the case and parties for certain purposes. On appeals by both the Government and Gypsum, this Court, in 1950, dismissed Gypsum's appeal,⁷ affirmed the summary judgment below,⁸ and held the Government entitled to broader relief in certain respects, remanding the case for that purpose.⁹ Meanwhile, in noting probable jurisdiction on the Government's appeal, this Court enjoined the defendants from carrying out the price fixing provisions of their current license agreements, and from entering into any agreements or engaging in concerted action in restraint of trade.¹⁰ This preliminary injunction, entered May 29, 1950, remained in force until the new final decree of the District Court was entered on May 15, 1951.¹¹

After this Court's 1948 reversal of the District Court's original order of dismissal, National, Certain-teed, and Gypsum's other co-defendant licensees ceased paying royalties under their license agreements.¹² Following the May 15, 1951, decree, National and Certain-teed, as authorized by Article VI of that decree, entered into new license agreements, effective May 15, for the future use of Gypsum's patents, such licenses containing no price fixing clauses; the royalty rate was the same as under the old licenses, except that the licensee's returns on unpatented gypsum products did not enter into its measure. The new licenses were without prejudice to Gypsum's claim for compensation for the use of the patents during the period February 1, 1948, to May 15, 1951. The respondents not having paid for that period, Gypsum, in 1953, brought suit against them in the Iowa federal court. The complaints in these suits asserted three separate grounds for recovery: (a) the royalty provisions of the old license agreements (Counts I and II); (b) quantum meruit for the reasonable value of the use of the patents (Counts III and IV);¹³ and (c) damages for patent infringement (Count V).

Thereafter, National and Certain-teed, claiming that the institution of the Iowa actions violated the 1951 decree, and that in any event Gypsum was barred from recovery by reason of unpurged misuse of the patents involved, petitioned the antitrust court to enjoin further prosecution of the actions.¹⁴ The Government also filed a separate petition to enjoin Gypsum from maintaining any action based on the illegal license agreements, but took no position on Gypsum's right to recover for the period in question on the grounds of quantum meruit or patent infringement.¹⁵ Gypsum's answers to these petitions in substance alleged that the District Court was without jurisdiction to grant the relief sought by the petitioners, and put in issue all of the allegations on which the right to relief was predicated.

The District Court decided that it had jurisdiction to grant relief (one judge dissenting), and, after hearing the parties through briefs and oral argument, but without taking any evidence beyond that already of record in the antitrust proceeding, concluded that the 1951 decree should be modified so as to enjoin the prosecution of Gypsum's suits.¹⁶ The court held that prosecution of Counts I and II which declared upon the illegal license agreements, could not be maintained under the terms of the 1951 decree. Although finding that the other three Counts were not barred by that decree, it further held that the suits should be prohibited in their entirety because of Gypsum's unpurged misuse of its patents.¹⁷ There followed the modifying decree of December 9, 1954,¹⁸ from which this appeal was taken. We noted probable jurisdiction. 350 U.S. 946, 76 S.Ct. 321, 100 L.Ed. 825. For the reasons given hereafter we conclude that, except as it related to the two causes of action based on the illegal license agreements (Counts I and II), this proscriptive modification of the 1951 decree was not justified by the record before the District Court.

I.

Preliminarily, we conclude that three aspects of the lower court's holding must be upheld. First, we think that Article X of the 1951 decree, reserving to the antitrust court jurisdiction, upon application of 'any of the parties' to the decree, to make such 'directions' and 'modifications' as may be appropriate to the 'carrying out' and 'enforcement' of the decree, provided a fully adequate basis for the jurisdiction exercised below.¹⁹ United States v. Swift & Co., 286 U.S. 106, 114, 52 S.Ct. 460, 462, 76 L.Ed. 999; Missouri-Kansas Pipe Line Co. v. United States, 312 U.S. 502, 665, 61 S.Ct. 666, 85 L.Ed. 975. See also Chrysler Corp. v. United States, 316 U.S. 556, 62 S.Ct. 1146, 86 L.Ed. 1668. Gypsum argues that insofar as the relief granted below was rested upon patent misuse, instead of a construction of the 1951 decree which was the basis of enjoining the presecution of Counts I and II of Gypsum's suits, the lower court's decision involved a determination of a collateral private controversy between this group of antitrust defendants, rather than a 'carrying out' or 'enforcement' of the terms of that decree. But we think that whether Gypsum was barred from recovery in these suits by reason of the abuse of its patent rights was a problem sufficiently related to the rationale of the 1951 decree to bring it within the reserved jurisdiction clause. This is especially so because patent misuse was the essence of the old antitrust litigation, and its continuance or renewal were thus issues peculiarly within the province of the antitrust court, whose determination would avoid multiple litigation and possibly conflicting decisions on that issue among the courts in which Gypsum had brought suit.

Likewise we conclude that there is no basis for disturbing the District Court's determinations that prosecution of Counts I and II, based on the old license agreements, was not permissible under the 1951 decree,²⁰ but that its terms did not reach the quantum meruit and infringement Counts.²¹

The outcome of this appeal then turns on whether the District Court was right in holding as a matter of law that Gypsum was barred from any kind of recovery for the pendente lite use of its patents because of their unpurged misuse. It is now, of course, familiar law that the courts will not aid a patent owner who has misused his patents to recover any of their emoluments accruing during the period of misuse or thereafter until the effect of such misuse have been dissipated, or 'purged' as the conventional saying goes. Morton Salt Co. v. G. S. Suppiger Co., 314 U.S. 488, 315 U.S. 788, 62 S.Ct. 402, 86 L.Ed. 363; B. B. Chemical Co. v. Ellis, 314 U.S. 495, 62 S.Ct. 406, 86 L.Ed. 367; Edward Katzinger Co. v. Chicago Metallic Mfg. Co., 329 U.S. 394, 67 S.Ct. 416, 91 L.Ed. 374; MacGregor v. Westinghouse Electric & Mfg. Co., 329 U.S. 402, 67 S.Ct. 421, 91 L.Ed. 380; Mercoid Corp. v. Minneapolis Honeywell Regulator Co., 320 U.S. 680, 64 S.Ct. 278, 88 L.Ed. 396. The rule is an extension of the equitable doctrine of 'unclean hands' to the patent field. In terms of this case this means that Gypsum may not recover from these appellees for their use of its patents between February 1, 1948, and May 15, 1951, if Gypsum has been guilty of misuse of the patents since 1948, or...