United States v. LD Caulk Company

• Decision Date: 02 December 1954
• Docket Number: Civ. 1372.
• Citation: 126 F. Supp. 693
• Parties: UNITED STATES of America, Plaintiff, v. The L. D. CAULK COMPANY, Coe Laboratories, Inc., Dental Perfection Company, and Stanley E. Noyes, Defendants.
• Court: U.S. District Court — District of Delaware

126 F. Supp. 693

UNITED STATES of America, Plaintiff, v. The L. D. CAULK COMPANY, Coe Laboratories, Inc., Dental Perfection Company, and Stanley E. Noyes, Defendants.

Civ. 1372.

United States District Court, D. Delaware.

December 2, 1954.

COPYRIGHT MATERIAL OMITTED

Leonard G. Hagner, U. S. Atty., Wilmington, Del., Stanley N. Barnes, Asst. Atty. Gen., Julius C. Renninger, James J. Coyle, Marcus A. Hollabaugh and William L. Maher, Sp. Assts. to Atty. Gen., for the United States.

Aaron Finger, Richards, Layton & Finger, Wilmington, Del., and Charles M. Thomas, Washington, D. C., for the L. D. Caulk Co.

Hugh M. Morris, Morris, Steel, Nichols & Arsht, Wilmington, Del., and Charles V. Hildebrecht, Brown, Jackson, Boettcher & Dienner, Chicago, Ill., for Coe Laboratories, Inc.

Arthur G. Connolly and Thomas Cooch, Connolly, Cooch & Bove, Wilmington, Del., H. Calvin White, Los Angeles, Cal., and C. Willard Hayes, Cushman, Darby & Cushman, Washington, D. C., for Dental Perfection Co. and Stanley E. Noyes.

RODNEY, District Judge.

This is a civil action brought by the United States of America under Section 4 of the Sherman Anti-Trust Act, 15 U.S.C. §§ 1, 2 and 4.

The complaint charges the defendants and a co-conspirator with combining and conspiring to restrain and monopolize trade and commerce in the manufacture and sale of alginate dental impression material, in violation of Sections 1 and 2 of the Sherman Act.

As a result of a pre-trial conference it was seen that there existed no substantial controverted questions of fact, but the issue consisted in the conclusions to be drawn from the admitted facts. Stipulation of facts was agreed upon by the parties and all parties have moved for summary judgment. It is agreed that the matter shall be disposed of upon consideration of the stipulated facts with the documents comprising a part thereof and the original pleadings in the case.

It is clear and admitted that an antitrust case is an appropriate proceeding for the application of summary judgment proceedings where the parties have stipulated the facts and the documents on which they respectively rely.¹

The case concerns the use of alginate impression material used by the dental profession in obtaining impressions for use in connection with the manufacture and fitting of false or substituted teeth. The three defendants, L. D. Caulk Company, Coe Laboratories, Inc. and Dental Perfection Co., are among the largest producers of alginate impression material. The individual defendant, Stanley E. Noyes, was the predecessor of Dental Perfection Co. Prior to April, 1948, Noyes was engaged in business in an unincorporated capacity as Dental Perfection Company. Since it does not appear that his interests are distinct from that company since its incorporation, he will not herein be separately discussed.

Prior to 1930 various materials such as bees-wax, plaster of Paris and some so-called "compounds" were used for the taking of dental impressions. These were inelastic and unsatisfactory. In the early 1930's a type of impression material formed by the use of agar-agar was developed. This was manufactured from a sea-weed found almost exclusively in the coastal waters of Japan. This in turn was not entirely satisfactory for the alternate transmutation from a gelatinous to a solid condition could only be brought about by the application of heat and cold resulting in discomfort and danger to the patient. When World War II compelled the Government to limit the use of agar-agar to military uses the search for an alternate — a better and a cheaper material — was accentuated.

The search for the new, better and cheaper impression material resulted in the granting of several patents, the first and most important of which was issued July 15, 1941 to Sidney William Wilding, an Englishman, on an application filed September 18, 1939. Around this patent, and its use, cluster most of the contentions of the parties. The Wilding patent was assigned to Amalgamated Dental Manufacturing Company, Limited, of England, and an alleged co-conspirator in this case. The alginate impression material resulting from the Wilding and other patents is also developed from a species of sea-weed, but one which is found in plentiful quantities in a number of places. It had certain advantages over the agar-agar product in that by an ordinary mixture with water a material could be placed in the patient's mouth and then removed, retaining its shape and accuracy and without liability for suffering and of danger.

Also listed in the case are a Vallandingham patent now owned by Coe and four Noyes patents and a Lochridge patent owned by Dental Perfection.

Because, however, the contentions of the Government grow out of the circumstances connected with the Wilding patent, so chief consideration will be given to that patent. That such patent, its use and matters flowing from it constitute the basis of the plaintiff's case is clearly apparent. I shall briefly state the facts as they appear to me.

Early in 1940 Caulk, struggling for want of agar-agar or of a satisfactory substitute, and hearing of Wilding's patent application, started negotiations with Amalgamated, looking toward a license under the Wilding patent. These negotiations culminated on February 5, 1942 in Caulk's receiving an exclusive, non-assignable license on a 10% royalty basis. Such license was operative throughout the United States, Canada and three countries of South America, together with the right to sell in other countries of the Western Hemisphere upon a royalty basis. This license from Amalgamated to Caulk, while exclusive in nature, did not give to Caulk the right to sublicense. The license required Amalgamated to exercise reasonable diligence "in the institution and prosecution of suits for infringement."

Coe comes now into the picture. Since February 17, 1941 Coe had had an exclusive license from one Shaw and one Lineer to manufacture a dental impression material according to a formula or patent of Shaw and Lineer. The Government was facing a critical shortage of agar-agar and requested Coe to procure an alginate substitute. Coe then learned of the Wilding patent, and on April 10, 1942 inquired of Amalgamated as to the terms of a license which it desired. Coe in that inquiry stated that it knew Amalgamated might consider the process then used by Coe as an infringement of the Wilding patent held by Amalgamated. Without waiting for a reply to its inquiry, Coe wrote to Shaw concerning the Wilding patent and its possibly narrow coverage and intimating that Coe could provide substitutes for certain ingredients of the Wilding patent. So the Government in its brief states that at the very outset of the development of a new industry Coe attempted to pre-empt the alginate dental impression filed to itself. This is only important to the extent that it is the first intimation of the Government's claim that a single individual's desire to attain the exclusive right to manufacture a given article is either illegal or questionable.

In answer to the request of Coe to Amalgamated for a license, Caulk, which then had an exclusive license as to the Wilding patent, and with the approval of Amalgamated, granted a non-exclusive, non-assignable license to Coe dated October 27, 1942. This license was exercisable "throughout the United States of America" and provided a royalty basis of 15% of the wholesale selling price, or an overriding royalty of 5%. The license was expressly limited as to time and by its terms became null and void "at a date six months after cessation of hostilities between the United States and Germany, Italy and Japan." In passing it may be noted that by this sub-license of October 27, 1942, there was voluntarily given by Caulk to Coe a strongly competitive use of the Wilding patent where none had theretofore existed and where no competition could be required of Caulk. It rather clearly appears that this license to Coe was traceable to a request of the United States War Production Board.

To this point there is no evidence of any conspiracy to violate any law nor of any matter of an unusual nature covering a patent.

After the granting of the sub-license to Coe on October 27, 1942, nothing worthy of comment transpired for some time. Coe, acting under its sub-license and paying substantial royalties for the coverage of the patent, was becoming restive as to the alleged infringements of the Wilding patent by third parties who thus were placed in favorable competition by the use of the coverage of the patent with no expense of royalties. In June, 1944 the alleged infringements of the Wilding patent by Dental Perfection were forcibly presented and it was stated by Coe to Caulk that Dental Perfection's output exceeded the combined output of Caulk and Coe. These suggestions culminated in an action in the Southern District of California on May 11, 1945, brought by Amalgamated against Stanley E. Noyes, doing business as Dental Perfection Co. Caulk was made an involuntary plaintiff owing to its understanding of a prejudice against patents in the dental profession.

At this chronological stage the Government says in its brief that the facts to this point "clearly show that the conspiracy was actually in the process of formation." The Government says, "The conspiracy arose as a result of the attempts of each of the defendants to individually control the alginate dental impression material industry." To me, to this point, there is not the slightest evidence or suggestion of an unlawful conspiracy unless it be found in the zeal to commercially use a lawfully issued patent and a desire of a royalty-paying licensee to confine the use of a patent to others similarly situated as to the payment of royalties and thus avoid unfair competition by those unlawfully using the patent without payment of royalties.

Mention is made of this chronological status merely because such status at this point was urged by the...