Zenith Radio Corporation v. Hazeltine Research, Inc, 49

• Decision Date: 22 January 1969
• Docket Number: No. 49,49
• Citation: 23 L.Ed.2d 129,89 S.Ct. 1562,395 U.S. 100
• Parties: ZENITH RADIO CORPORATION, Petitioner, v. HAZELTINE RESEARCH, INC., et al
• Court: U.S. Supreme Court

395 U.S. 100

89 S.Ct. 1562

23 L.Ed.2d 129

ZENITH RADIO CORPORATION, Petitioner,

v HAZELTINE RESEARCH, INC., et al.

No. 49.

Argued Jan. 22, 1969.

Deciding May 19, 1969.

[Syllabus from pages 100-103 intentionally omitted]

Thomas C. McConnell, Chicago, Ill., for petitioner.

John T. Chadwell and Victor P. Kayser, Chicago, Ill., for respondents.

[The balance of this page intentionally left blank] Mr. Justice WHIT delivered the opinion of the Court.

Petitioner Zenith Radio Corporation (Zenith) is a Delaware Corporation which for many years has been successfully engaged in the business of manufacturing radio and television sets for sale in the United States and foreign countries. A necessary incident of Zenith's operations has been the acquisition of licenses to use patented devices in the radios and televisions it manufactures, and its transactions have included licensing agreements with respondent Hazeltine Research, Inc. (HRI), an Illinois corporation which owns and licenses domestic patents, principally in the radio and television fields. HRI is the wholly owned subsidiary of respondent Hazeltine Corporation (Hazeltine), a substantially larger and more diversified company that has among its assets numerous foreign patents—including the foreign counterparts of HRI's domestic patents—which it licenses for use in foreign countries.

Until 1959, Zenith had obtained the right to use all HRI domestic patents under HRI's so-called standard package license. In that year, however, with the expiration of Zenith's license imminent, Zenith declined to accept HRI's offer to renew, asserting that it no longer required a license from HRI. Negotiations proceeded to a stalemate, and in November 1959, HRI brought suit in the Northern District of Illinois, claiming that Zenith television sets infringed HRI's patents on a particular automatic control system. Zenith's answer alleged invalidity of the patent asserted and nonin- fringement, and further alleged that HRI's claim was unenforceable because of patent misuse as well as unclean hands through conspiracy with foreign patent pools. On May 22, 1963, more than three years after its answer had been filed, Zenith filed a counterclaim against HRI for treble damages and injunctive relief, alleging violations of the Sherman Act by misuse of HRI patents, including the one in suit, as well as by conspiracy among HRI, Hazeltine, and patent pools in Canada, England, and Australia. Zenith contended that these three patent pools had refused to license the patents placed within their exclusive licensing authority, including Hazeltine patents to Zenith and others seeking to export Americanmade radios and televisions into those foreign markets.

The District Court, sitting without a jury, ruled for Zenith in the infringement action, 239 F.Supp. 51, 68—69, and its judgment in that respect, which was affirmed by the Court of Appeals, 388 F.2d 25, 30—33, is not in issue here. On the counterclaim, the District Court ruled, first that HRI had misused its domestic patents by attempting to coerce Zenith's acceptance of a five-year package license, and by insisting on extracting royalties from unpatented products. 239 F.Supp., at 69—72, 76—77. Judgment was entered in Zenith's favor for treble the amount of its actual damages of approximately $50,000, and injunctive relief against further patent misuse was awarded. Second, HRI and Hazeltine were found to have conspired with the foreign patent pools to exclude Zenith from the Canadian, English, and Australian markets. Hazeltine had granted the pools the exclusive right to license Hazeltine patents in their respective countries and had shared in the pools' profits, knowing that each pool refused to license its patents for importation and that each enforced its ban on imports with threats of infringement suits. HRI, along with its coconspirator, Hazeltine, was therefore held to have conspired with the pools to restrain the trade or commerce of the United States, in violation of § 1 of the Sherman Act, 26 Stat. 209, as amended, 15 U.S.C. § 1, and was liable for injury caused Zenith's foreign business by the operation of the pools. 239 F.Supp., at 77 78. Total damages with respect to the three markets, when trebled, amounted to nearly $35,000,000.¹ Judgment in this amount was awarded Zenith, along with injunctive relief against further participation in any arrangement to prevent Zenith from exportig electronic equipment into any foreign market.

Relying upon its finding that HRI and Zenith had stipulated before trial that HRI and Hazeltine were to be considered as one entity for purposes of the litigation, see 239 F.Supp., at 69, the court entered judgments for treble damages and injunctive relief, both with respect to patent misuse and conspiracy, against Hazeltine as well as against the named counter-defendant, HRI.

On appeal by HRI and Hazeltine, the Court of Appeals set aside entirely the judgments for damages and injunctive relief entered against Hazeltine, ruling that the District Court lacked jurisdiction over that company and that the stipulation relied upon by the District Court was an insufficient basis for entering judgment against Hazeltine. 388 F.2d, at 28—30. With respect to Zenith's patent misuse claim, the Court of Appeals affirmed the treble-damage award against HRI, but modified in certain respects the District Court's injunction against further misuse. 388 F.2d, at 33—35, 39.

The Court of Appeals also reversed the treble-damage award for conspiracy to restrain Zenith's export trade. Without reaching any of the other issues presented by the appeal on this phase of the case, the court held that Zenith had failed to sustain its burden under § 4 of the Clayton Act, 38 Stat. 731, 15 U.S.C. § 15, to prove the fact of damage—injury to its business-within the relevant four-year period preceding May 22, 1963, the date Zenith's counterclaim was filed.² Finally, the Court of Appeals struck the injunction against HRI's participation in conspiracies restricting Zenith's trade in foreign markets.

We granted certiorari, 391 U.S. 933, 88 S.Ct. 1844, 20 L.Ed.2d 853, to consider among other things the question whether the Court of Appeals properly discharged its appellate function under Rule 52(a) of the Federal Rules of Civil Procedure, which specifies that the findings of fact made by a District Court sitting without a jury are not to be set aside unless 'clearly erroneous.'

I. THE JUDGMENTS AGAINST HAZELTINE

The named plaintiff in the patent infringement complaint which began this litigation was HRI, not its parent, Hazeltine; Zenith's counterclaim named only HRI as the 'counter-defendant,' identifying HRI and Hazeltine as 'counter-defendant and its parent.' After Zenith had filed its answer and had delivered a draft of its counterclaim to HRI's attorneys—both the answer and the counterclaim alleging that HRI had unlawfully conspired with Hazeltine and foreign patent pools—HRI and Zenith stipulated that 'for purposes of this litigation Plaintiff and its parent Hazeltine Corporation will be considered to be one and the same company.'

On May 22, 1963, two weeks after the stipulation had been signed, Zenith filed its counterclaim, seeking money damages from HRI and an injunction against HRI and those 'in privity' with it. Hazeltine was not served with the counterclaim and was not named as a party, although it was alleged to be a coconspirator with HRI and the foreign patent pools. Hazeltine made no appearance in the litigation until Zenith proposed that judgment be entered against it, at which time Hazeltine filed a 'special appearance.' Insofar as the record reveals, Hazeltine did not formally participate in the proceedings until after the District Court had entered its initial findings of fact and conclusions of law. On April 5, 1965, after Hazeltine's special appearance, the trial judge entered judgment against Hazeltine as well as HRI, thereby rejecting Hazeltine's objection that the court was without jurisdiction over it. Apparently, the trial court based its decision on the pretrial stipulation³ and its earlier finding that:

'The parties stipulated that for the purposes of this litigation Hazeltine Research, Inc. and its parent Hazeltine Corporation, would be considered as one entity operating as a patent holding and licensing company, engaged in the exploitation of patent rights in the electronics industry in the United States and in foreign countries.' 239 F.Supp., at 69.

The Court of Appeals was quite right in vacating the judgments against Hazeltine. It is elementary that one is not bound by a judgment in personam resulting from litigation in which he is not designated as a party or to which he has not been made a party by service of process. Hansberry v. Lee, 311 U.S. 32, 40—41, 61 S.Ct. 115, 117, 85 L.Ed. 22 (1940). The consistent constitutional rule has been that a court has no power to adjudict e a personal claim or obligation unless it has jurisdiction over the person of the defendant. E.g., Pennoyer v. Neff, 95 U.S. 714, 24 L.Ed. 565 (1878); Vanderbilt v. Vanderbilt, 354 U.S. 416, 418, 77 S.Ct. 1360, 1362, 1 L.Ed.2d 1456 (1957).

Here, Hazeltine was not named as a party, was never served and did not formally appear at the trial. Nor was the stipulation an adequate substitute for the normal methods of obtaining jurisdiction over a person or a corporation. The stipulation represented HRI's agreement to be bound by and to be liable for the acts of its parent, but it was signed only by HRI, through its attorney, Dodds. Hazeltine did not execute the stipulation, and Dodds, although an officer of Hazeltine, did not purport to be signing on its behalf. The trial court apparently viewed the stipulation as binding Hazeltine, as equivalent to an entry of appearance, or as consent to entry of judgment against it. The stipulation on its face, however, hardly warrants this construction, and if there were other circumstances...