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in any arrangement to prevent Zenith from exporting electronic equipment into any foreign market. Relying on the "one entity" stipulation, the court entered the judgments for treble damages and injunctive relief against Hazeltine as well as HRI. The Court of Appeals set aside the judgments against Hazeltine, ruling that the lower court lacked jurisdiction over that company and that the stipulation was an insufficient basis for entering judgment against Hazeltine. On the patent misuse claim, the treble damage award against HRI was affirmed, but the injunction against further misuse was modified. The conspiracy treble damage award was reversed, the Court of Appeals holding that Zenith had failed to prove it had, in fact, been injured during the relevant four-year period preceding the filing of its counterclaim. That court also struck down the injunction against HRI's participation in conspiracies restricting Zenith's foreign trade.
1. 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. Pp. 395 U. S. 108-112.
(a) The judgments against Hazeltine were properly vacated, as Hazeltine was not named as a party or served, and did not formally appear at the trial, and the stipulation executed by HRI was not an adequate substitute for the normal means of obtaining jurisdiction over Hazeltine. P. 395 U. S. 110.
(b) It was error to enter an injunction against Hazeltine without determining that it was "in active concert or participation" with HRI in a proceeding in which Hazeltine was a party. P. 395 U. S. 112.
(a) The evidence was sufficient to sustain a finding that the Canadian patent pool refused to license imported goods, thus excluding foreign manufacturers like Zenith from the Canadian market for radio and television products. P. 395 U. S. 118.
(b) The evidence clearly warrants the inference that the Canadian patent pool's past conduct interfered with and made more difficult the distribution of Zenith products in the relevant 1959-1963 period, and it could rationally be found that Zenith suffered damage during the pertinent period from having a smaller share of the market than it would have had if the pool had never existed. Pp. 395 U. S. 118-119.
(c) The evidence is sufficient to support a finding of damage resulting from events occurring after the damage period began. Pp. 395 U. S. 119-123.
(d) In applying the clearly erroneous standard of Fed.Rule Civ.Proc. 52(a) to the findings of a district court sitting without a jury, the appellate court must determine whether, "on the entire evidence, [it] is left with the definite and firm conviction that a mistake has been committed," and not whether it would have made the same findings the trial court did. P. 395 U. S. 123.
"conclude as a matter of just and reasonable inference from the proof of defendants' wrongful acts and their tendency to injure plaintiffs' business, and from the evidence of the decline in prices, profits and values, not shown to be attributable to other causes, that defendants' wrongful acts had caused damage to the plaintiffs."
Bigelow v. RKO Radio Pictures, Inc., 327 U. S. 251, 327 U. S. 264. Pp. 395 U. S. 123-124.
(f) The trial court was entitled to infer from the circumstantial evidence that the necessary causal relation between the Canadian patent pool's conduct and the claimed damage existed. Pp. 395 U. S. 124-125.
3. The Court of Appeals properly set aside the District Court's judgment with respect to injury to Zenith by the English patent pool, as the only permissible inference from the record is that Zenith did not enter the English television market because it was awaiting a change in the English line-scanning signal and not because of the activities of the patent pool. Pp. 395 U. S. 125-128.
4. The Court of Appeals correctly reversed the lower court's damages award with respect to the Australian market, as nothing in the record permits the inference that Zenith either intended or was prepared to enter the Australian market during the relevant period. Pp. 395 U. S. 128-129.
5. Injunctive relief under § 16 of the Clayton Act is available even though the plaintiff has not suffered actual injury, as long as he demonstrates a significant threat of injury from an impending antitrust violation or from a contemporary violation likely to continue or recur. Pp. 395 U. S. 129-133.
and others from the Canadian market, and there was nothing to indicate that this clear violation of the antitrust laws had terminated or that the threat to Zenith would cease in the foreseeable future. Pp. 395 U. S. 131-132.
(b) The injunction which barred HRI from conspiring with others to restrict or prevent Zenith from entering any other foreign markets is also reinstated in light of HRI's antitrust violation by its conspiring with the Canadian pool, its participation in similar pools in England and Australia, and Zenith's interest in expanding its foreign markets. Pp. 395 U. S. 132-133.
6. Conditioning the grant of a patent license upon payment of royalties on products which do not use the teaching of the patent amounts to patent misuse. Pp. 395 U. S. 133-140.
(a) If convenience of the parties, rather than patent power, dictates a "percentage of total sales" royalty provision, there is no misuse of the patents. Automatic Radio Mfg. Co. v. Hazeltine Research, Inc., 339 U. S. 827. Pp. 395 U. S. 137-138.
(b) A licensee, who obtains the privilege of using the patent and insurance against infringement suits, must anticipate some minimum charge for the license, enough to insure the patentee against loss in negotiating and administering his monopoly, even if, in fact, the patent is not used at all, but the patentee's statutory monopoly cannot be used to coerce an agreement to pay a percentage royalty on goods not using the patent. Pp. 395 U. S. 139-140.
7. The matter is remanded to the Court of Appeals for it to consider whether the trial court correctly determined that HRI conditioned the grant of licenses upon the payment of royalties on unpatented products, and, if so, whether such misuse embodies the ingredients of a violation of either § 1 or § 2 of the Sherman Act, or whether Zenith was threatened by a violation so as to entitle it to an injunction under § 16 of the Clayton Act. Pp. 395 U. S. 140-141.
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.
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 American-made radios and televisions into those foreign markets.
amount was awarded Zenith, along with injunctive relief against further participation in any arrangement to prevent Zenith from exporting electronic equipment into an 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.
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. [Footnote 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, 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."
. THE JUDGMENTS AGAINST HAZELTINE.
stipulated that, "for purposes of this litigation, Plaintiff and its parent Hazeltine Corporation will be considered to be one and the same company."
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."
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, 311 U. S. 40-41 (1940). The consistent constitutional rule has been that a court has no power to adjudicate a personal claim or obligation unless it has jurisdiction over the person of the defendant. E.g., Pennoyer v. Neff, 95 U. S. 714 (1878); Vanderbilt v. Vanderbilt, 354 U. S. 416 418 (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 which justified the trial court's conclusion, the findings do not reveal them.
Perhaps Zenith could have proved and the trial court might have found that HRI and Hazeltine were alter egos; but, absent jurisdiction over Hazeltine, that determination would bind only HRI. If the alter ego issue had been litigated, and if the trial court had decided that HRI and Hazeltine were one and the same entity and that jurisdiction over HRI gave the court jurisdiction over Hazeltine, perhaps Hazeltine's appearance before judgment with full opportunity to contest jurisdiction would warrant entry of judgment against it. But that is not what occurred here. The trial court's judgment against Hazeltine was based wholly on HRI's stipulation. HRI may have executed the stipulation to avoid litigating the alter ego issue, [Footnote 4] but this fact cannot foreclose Hazeltine, which has never had its day in court on the question of whether it and its subsidiary should be considered the same entity for purposes of this litigation.
Likewise, were it shown that Hazeltine, through its officer, Dodds, in fact controlled the litigation on behalf of HRI, and if the claim were made that the judgment against HRI would be res judicata against Hazeltine because of this control, that claim itself could be finally adjudicated against Hazeltine only in a court with jurisdiction over that company. [Footnote 5] See G. & C. Merriam Co.
v. Saalfield, 241 U. S. 22 (1916); Schnell v. Peter Eckrich & Son,Inc., 365 U. S. 260 (1961).
We have concluded that the Court of Appeals erred in setting aside the District Court's decision with respect to the fact of damage in Canada. Zenith's evidence, although by no means conclusive, was sufficient to sustain the inference that Zenith had, in fact, been injured to some extent [Footnote 9] by the Canadian pool's restraints upon imports of radio and television sets. On the other hand, we agree with the Court of Appeals that the District Court erred as to the English and Australian markets.
by Westinghouse through its Canadian subsidiary. The pool was made up largely of Canadian manufacturers, most of which were subsidiaries of American companies. The pool for many years had the exclusive right to sublicense the patents of its member companies and also those of Hazeltine and a number of other foreign concerns. About 5,000 patents were available to the pool for licensing, and only package licenses were granted, covering all patents in the pool and strictly limited to manufacture in Canada. No license to importers was available. The chief purpose of the pool was to protect the manufacturing members and licensees from competition by American and other foreign companies seeking to export their products into Canada.
For many years, Zenith attempted to establish distribution in Canada, but distributors were warned off by the pool, and Zenith's efforts to secure a license for American-made goods were unsuccessful. Zenith then brought an antitrust suit against RCA, General Electric, and Western Electric. [Footnote 10] This litigation was favorably settled, Zenith receiving, among other things, worldwide licenses on patents owned by the named defendants.
Armed with these and other licenses, Zenith, in 1958, began exporting radio and television products to Canada. It was promptly informed by CRPL that, to continue business in Canada, Zenith would be required to sign CRPL's standard license, which did not permit importation, and that, to sell in Canada, it must manufacture there. Zenith was notified at the time that it was infringing at least one of Hazeltine's patents which had been placed with CRPL for licensing in Canada. Soon after this demand by CRPL, HRI began its infringement suit against Zenith.
was that Zenith had not been damaged after May 22, 1959, by any act of the pool, whether occurring before or after that date. The Court of Appeals' overriding judgment -- as it had to be if its no-injury rationale were to meet claims of damage period injury from pre-damage period conduct -- was that Zenith would have done no more business in Canada after May 22, 1959, had the patent pool never operated in that country.
The Court of Appeals was clearly in error. The evidence was quite sufficient to sustain a finding that competing business concerns and patentees joined together to pool their Canadian patents, granting only package licenses and refusing to license imported goods. Their clear purpose was to exclude concerns like Zenith from the Canadian market unless willing to manufacture there. Zenith, consequently, was never able to obtain a license. This fact and the pool's vigorous campaign to discourage importers, distributors, dealers, and consumers from selling, handling, or using unlicensed foreign merchandise effectively prevented Zenith from making any headway in the Canadian market until after the 1957 settlement with RCA and its codefendants. And even in 1968, when Zenith undertook in earnest to establish its distribution system in Canada and to market its merchandise, Zenith was met with further pool advertisements threatening action against imported goods and further notifications, continuing past May 22, 1959, that its products were infringing pool patents and that no license was available unless Zenith manufactured in Canada.
be found from the evidence that Zenith, beginning in 1958, could not have reached its maximum potential by May 22, 1959, that the pool had effectively prevented an earlier beginning, and that Zenith therefore suffered damage during the damage period from having a smaller share of the market than it would have had if the pool had never existed.
We also conclude that the record evidence is sufficient to support a finding of damage resulting from events occurring after the beginning of the damage period. We need not merely assume that the Canadian pool continued throughout the period of this suit, as we are entitled to do in the absence of clear evidence of its termination. See, e.g., Local 167 v. United States, 291 U. S. 293, 291 U. S. 297-298 (1934); United States v. Oregon State Medical Society, 343 U. S. 326, 343 U. S. 333 (1952). HRI frankly conceded the continuation of the pool before the District Court, [Footnote 14] and it appears sufficiently clear that, throughout this time, Zenith was deprived of what had always been refused it -- a license on pool patents permitting it to sell American-made merchandise in Canada.
but that licenses were granted only for local manufacture. This was followed on June 5, 1959, by a letter stating without reservation that Zenith receivers were infringing, and enclosing the pool's standard license form. This was nothing more nor less than a demand during the damage period that Zenith either manufacture in Canada and take the standard package license or cease its activities in that country. [Footnote 15] There is no evidence that the pool ever retreated from that position during the next four years.
Of course, Zenith determined to take these risks, serious as they were. Although HRI brought the instant litigation claiming infringement of an HRI domestic patent, the foreign counterpart of which had been made available to the Canadian pool by Hazeltine, Zenith persevered in its Canadian efforts. The claim is now pressed, and the Court of Appeals held, that the pool bothered neither Zenith nor its distributors after mid-1959, and that Zenith ran the gauntlet so successfully that not having a license made no difference whatsoever.
and failed to adhere to the teachings of Bigelow v. RKO Radio Pictures, Inc., 327 U. S. 251 (1946), and other cases dealing with the standard of proof in treble damage actions.
In applying the clearly erroneous standard to the findings of a district court sitting without a jury, appellate courts must constantly have in mind that their function is not to decide factual issues de novo. The authority of an appellate court, when reviewing the findings of a judge as well as those of a jury, is circumscribed by the deference it must give to decisions of the trier of the fact, who is usually in a superior position to appraise and weigh the evidence. The question for the appellate court under Rule 52(a) is not whether it would have made the findings the trial court did, but whether, "on the entire evidence, [it] is left with the definite and firm conviction that a mistake has been committed." United States v. United States Gypsum Co., 333 U. S. 364, 333 U. S. 395 (1948). See also United States v. National Assn. of Real Estate Boards, 339 U. S. 485, 339 U. S. 495-496 (1950); Commissioner v. Duberstein, 363 U. S. 278, 363 U. S. 289-291 (1960).
Bigelow v. RKO Pictures, Inc., supra, at 327 U. S. 264. See also Eastman Kodak Co. v. Southern Photo Materials Co., 273 U. S. 359, 273 U. S. 377-379 (1927); Story Parchment Co. v. Paterson Parchment Paper Co., 282 U. S. 555, 282 U. S. 561-566 (1931).
"the jury may make a just and reasonable estimate of the damage based on relevant data, and render its verdict accordingly. In such circumstances, 'juries are allowed to act upon probable and inferential, as well as direct and positive, proof.' Story Parchment Co. v. Paterson Co., supra, 282 U. S. 561; Eastman Kodak Co. v. Southern Photo Co., supra, 273 U. S. 377-379. Any other rule would enable the wrongdoer to profit by his wrongdoing at the expense of his victim. It would be an inducement to make wrongdoing so effective and complete in every case as to preclude any recovery, by rendering the measure of damages uncertain. Failure to apply it would mean that the more grievous the wrong done, the less likelihood there would be of a recovery."
it enjoyed in the United States, and which its business proficiency, demonstrated in the United States, dictated it should have obtained in Canada. CRPL was an established organization with a long history of successfully excluding imported merchandise, and in view of its continued existence during the damage period, the injury alleged by Zenith was precisely the type of loss that the claimed violations of the antitrust laws would be likely to cause. The trial court was entitled to infer from this circumstantial evidence that the necessary causal relation between the pool's conduct and the claimed damage existed. See Continental Ore Co. v. Union Carbide & Carbon Corp., 370 U. S. 690, 370 U. S. 696-701 (1962).
enter that market. It attained no appreciable position in the English television market.
Having initially found the patent pool responsible over the years for Zenith's failure to participate in the English market, the trial court, after further proceedings, held that a government embargo, not the patent pool, was the sole reason for Zenith's not entering the English market prior to the beginning of the damage period in 1959; until then, the District Court found, the pool "[was] not called upon to exercise the type of conduct that [it] exercised in Canada." It did not, however, retreat from its conclusion that restraints imposed by the pool had foreclosed Zenith during the damage period. [Footnote 20] In this respect, we agree with the Court of Appeals that the trial court clearly erred. Based on our own examination of the record, we are convinced that, even with the ending of the embargo in mid-1959, Zenith faced other obstacles which effectively discouraged its entry into the English market and for which the pool was not responsible.
consideration, even imminent, during the damage period. Zenith's merchandise would, in any event, have sold at prices substantially higher than those prevailing in the English market; tariffs and freight costs tended to widen the differential. Producing a new set for the English market, or modifying existent models on a large-scale basis, would have involved substantial costs.
Based on the evidence before us, including the correspondence between Zenith and its British representative, we think the Court of Appeals correctly rejected the inference that "Zenith intended to and was prepared to enter the English television market during the damage period," and correctly concluded that Zenith was, in fact, "waiting for a change in English standards to a 625-line system." 388 F.2d at 37. It clearly emerges from the evidence that Zenith had every intention to promote the sale of its television sets if and when the signal change occurred. Given that event, neither the absence of a pool license nor pool threats against it or its customers would have deterred Zenith from a major effort to penetrate the British market. Why the existence of the pool, which, as far as the record shows, was quiescent during the damage period, should be credited with the power to discourage Zenith's entry before the signal change but not after is difficult to grasp. But the question at hand is not whether, if Zenith had decided to enter the market, the pool would have been a deterrent and inflicted damage. Rather, it is whether Zenith was in fact constrained by the pool to stay out of England during the damage period, or whether Zenith's own business calculus led it to await more favorable conditions. As we have said, the latter is the only permissible inference from this record.
for local manufacture. Had HRI and Hazeltine's conspiracy with the Australian pool effectively kept Zenith from that market, a compensable violation of the antitrust laws unquestionably would have occurred. But the findings of the District Court are wholly silent as to how the Australian pool had any impact on Zenith's business. An officer of Zenith revealed that Zenith had exported no products to Australia since the 1920's or early 1930's. Zenith had not requested a pool license during the 20-year period preceding the trial. A government embargo was found by the District Court to have foreclosed Zenith's American-made merchandise until well into the damage period. High tariffs and shipping costs were additional barriers, as well as the prospect of vigorous competition. Nothing in the record before us would permit the inference that Zenith either intended or was prepared to enter the Australian market during the damage period. The Court of Appeals was correct in reversing the District Court's award of damages with respect to the Australian market.
'threatened loss or damage' directed at those pools, alleged by Zenith to be unlawful conspiracies, cannot be justified under 15 U.S.C. Sec. 26. Paragraph C of the injunction granted must be stricken."
The evident premise for striking Paragraph C was that Zenith's failure to prove the fact of injury barred injunctive relief as well as treble damages. This was unsound, for § 16 of the Clayton Act, 15 U.S.C. § 26, which was enacted by the Congress to make available equitable remedies previously denied private parties, invokes traditional principles of equity and authorizes injunctive relief upon the demonstration of "threatened" injury. [Footnote 24] That remedy is characteristically available even though the plaintiff has not yet suffered actual injury, see Bedford Cut Stone Co. v. Jorneymen Stone Cutters' Assn., 274 U. S. 37, 274 U. S. 54-55 (1927); he need only demonstrate a significant threat of injury from an impending violation of the antitrust laws or from a contemporary violation likely to continue or recur. See Swift % Co. v. United States, 196 U. S. 375, 196 U. S. 396 (1905); Bedford Cut Stone Co. v. Journeymen Stone Cutters' Assn., supra, at 274 U. S. 54; United States v. Oregon State Medical Society, 343 U. S. 326, 343 U. S. 333 (1952); United States v. W. T. Grant Co., 345 U. S. 629, 345 U. S. 633 (1953).
private relief, but was to serve as well the high purpose of enforcing the antitrust laws. E.g., United States v. Borden Co., 347 U. S. 514, 347 U. S. 518 (1954). Section 16 should be construed and applied with this purpose in mind, and with the knowledge that the remedy it affords, like other equitable remedies, is flexible, and capable of nice "adjustment and reconciliation between the public interest and private needs as well as between competing private claims." Hecht Co. v. Bowles, 321 U. S. 321, 321 U. S. 329-330 (1944). Its availability should be "conditioned by the necessities of the public interest which Congress has sought to protect." Id. at 321 U. S. 330.
That threat was too clear for argument, and injunctive relief against HRI with respect to the Canadian market was wholly proper.
"[a] federal court has broad power to restrain acts which are of the same type or class as unlawful acts which the court has found to have been committed or whose commission in the future, unless enjoined, may fairly be anticipated from the defendant's conduct in the past."
"salutary principle that, when one has been found to have committed acts in violation of a law, he may be restrained from committing other related unlawful acts."
"[w]hen the purpose to restrain trade appears from a clear violation of law, it is not necessary that all of the untraveled roads to that end be left open, and that only the worn one be closed."
International Salt Co. v. United States, 332 U. S. 392, 332 U. S. 400 (1947). This is particularly true in treble damage cases, which are brought for private ends but which also serve the public interest in that "they effectively pry open to competition a market that has been closed by defendants' illegal restraints." Id. at 332 U. S. 401.
. THE PATENT MISUSE ISSUE.
domestic patent upon the taking of a license under any other patent or upon the paying of royalties on the manufacture, use or sale of apparatus not covered by such patent."
patent misuse, neither could it be violative of the antitrust laws within the meaning of § 16 of the Clayton Act, under which Zenith had sought and the District Court had granted the injunction. With respect to the first determination, we reverse the Court of Appeals. We hold that conditioning the grant of a patent license upon payment of royalties on products which do not use the teaching of the patent does amount to patent misuse.
The trial court's injunction does not purport to prevent the parties from serving their mutual convenience by basing royalties on the sale of all radios and television sets, irrespective of the use of HRI's inventions. The injunction reaches only situations where the patentee directly or indirectly "conditions" his license upon the payment of royalties on unpatented products -- that is, where the patentee refuses to license on any other basis, and leaves the licensee with the choice between a license so providing and no license at all. Also, the injunction takes effect only if the license is conditioned upon the payment of royalties "on" merchandise not covered by the patent -- where the express provisions of the license or their necessary effect is to employ the patent monopoly to collect royalties not for the use of the licensed invention, but for using, making, or selling an article not within the reach of the patent.
e.g., Waterman v. Mackenzie, 138 U. S. 252, 138 U. S. 255 (1891). But there are established limits which the patentee must not exceed in employing the leverage of his patent to control or limit the operations of the licensee. Among other restrictions upon him, he may not condition the right to use his patent on the licensee's agreement to purchase, use, or sell, or not to purchase, use, or sell, another article of commerce not within the scope of his patent monopoly. E.g., Ethyl Gasoline Corp. v. United States, 309 U. S. 436, 309 U. S. 455-459 (1940); International Salt Co. v. United States, 332 U. S. 392, 332 U. S. 395-396 (1947). His right to set the price for a license does not extend so far, whatever privilege he has "to exact royalties as high as he can negotiate." Brulotte v. Thys Co., 379 U. S. 29, 379 U. S. 33 (1964). And just as the patent's leverage may not be used to extract from the licensee a commitment to purchase, use, or sell other products according to the desires of the patentee, neither can that leverage be used to garner as royalties a percentage share of the licensee's receipts from sales of other products; in either case, the patentee seeks to extend the monopoly of his patent to derive a benefit not attributable to use of the patent's teachings.
not use the power of his patent to levy a charge for making, using, or selling products not within the reach of the monopoly granted by the Government.
"[s]ound business judgment could indicate that such payment represents the most convenient method of fixing the business value of the privileges granted by the licensing agreement."
of patents, "it is not per se a misuse of patents to measure the consideration by a percentage of the licensee's sales." Ibid.
Nothing in the foregoing is inconsistent with the District Court's injunction against conditioning a license upon the payment of royalties on unpatented products or with the principle that patent leverage may not be employed to collect royalties for producing merchandise not employing the patented invention. The Court's opinion in Automatic Radio did not deal with the license negotiations which spawned the royalty formula at issue, and did not indicate that HRI used its patent leverage to coerce a promise to pay royalties on radios not practicing the learning of the patent. No such inference follows from a mere license provision measuring royalties by the licensee's total sales even if, as things work out, only some or none of the merchandise employs the patented idea or process, or even if it was foreseeable that some undetermined portion would not contain the invention. It could easily be, as the Court indicated in Automatic Radio, that the licensee as well as the patentee would find it more convenient and efficient from several standpoints to base royalties on total sales than to face the burden of figuring royalties based on actual use. [Footnote 29] If convenience of the parties, rather than patent power, dictates the total sales royalty provision, there are no misuse of the patents and no forbidden conditions attached to the license.
on this basis by demonstrating that he is no longer using the invention disclosed by the patent. We neither disagree nor think such transactions are barred by the trial court's injunction. If the licensee negotiates for "the privilege to use any or all of the patents and developments as [he] desire[s] to use them," 339 U.S. at 339 U. S. 834, he cannot complain that he must pay royalties if he chooses to use none of them. He could not then charge that the patentee had refused to license except on the basis of a total sales royalty.
But we do not read Automatic Radio to authorize the patentee to use the power of his patent to insist on a total sales royalty and to override protestations of the licensee that some of his products are unsuited to the patent or that for some lines of his merchandise he has no need or desire to purchase the privileges of the patent. In such event, not only would royalties be collected on unpatented merchandise, but the obligation to pay for nonuse would clearly have its source in the leverage of the patent.
We also think patent misuse inheres in a patentee's insistence on a percentage of sales royalty, regardless of use, and his rejection of licensee proposals to pay only for actual use. Unquestionably, a licensee must pay if he uses the patent. Equally, however, he may insist upon paying only for use, and not on the basis of total sales, including products in which he may use a competing patent or in which no patented ideas are used at all. There is nothing in the right granted the patentee to keep others from using, selling, or manufacturing his invention which empowers him to insist on payment not only for use, but also for producing products which do not employ his discoveries at all.
expenses in dealing with him. He cannot insist upon paying on use alone and perhaps, as things turn out, pay absolutely nothing because he finds he can produce without using the patent. If the risks of infringement are real and he would avoid them, he must anticipate some minimum charge for the license -- enough to insure the patentee against loss in negotiating and administering his monopoly, even if, in fact, the patent is not used at all. But we discern no basis in the statutory monopoly granted the patentee for his using that monopoly to coerce an agreement to pay a percentage royalty on merchandise not employing the discovery which the claims of the patent define.
Although we have concluded that Automatic Radio does not foreclose the injunction entered by the District Court, it does not follow that the injunction was otherwise proper. Whether the trial court correctly determined that HRI was conditioning the grant of patent licenses upon the payment of royalties on unpatented products has not yet been determined by the Court of Appeals. And if there was such patent misuse, it does not necessarily follow that the misuse embodies the ingredients of a violation of either § 1 or § 2 of the Sherman Act, or that Zenith was threatened by a violation, so as to entitle it to an injunction under § 16 of the Clayton Act. See, e.g., Morton Salt Co. v. G. S. Suppiger Co., 314 U. S. 488, 314 U. S. 490 (1942); Transparent-Wrap Machine Corp. v. Stokes & Smith Co., 329 U. S. 637, 329 U. S. 641 (1947); Laitram Corp. v. King Crab, Inc., 245 F.Supp. 1019 (D.C. Alaska 1965). See also Report of the Attorney General's National Committee to Study the Antitrust Laws 254 (1955); R. Nordhaus & E. Jurow, Patent-Antitrust Law 122-123 (1961); Frost, Patent Misuse As A Per Se Antitrust Violation, in Conference on the Antitrust Laws and the Attorney General's Committee Report 113-123 (J. Rahl & E. Zaidins ed., 1955).
Cf. Staff of Antitrust Subcommittee of House Committee on the Judiciary, 84th Cong., 2d Sess., Antitrust Problems in the Exploitation of Patents 23 (Comm.Print.1956); Schueller, The New Antitrust Illegality Per Se: Forestalling and Patent Misuse, 50 Col.L.Rev. 170, 18200 (1950). Whether the findings and the evidence are sufficient to make out an actual or threatened violation of the antitrust laws so as to justify the injunction issued by the District Court has not been considered by the Court of Appeals, and we leave the matter to be dealt with by that court in the first instance.
These revisions reflect the proof submitted at the further proceedings, showing that government embargoes in England and Australia, in effect until 1959 and 1960, respectively, precluded entry by Zenith into the English and Australian markets. The District Court found, with respect to England, that, because of the embargoes, Zenith's damages were zero for the first year of the damage period, 50% of the figure initially accepted by the court for the second year, 75% for the third, and 100% for the fourth. With respect to Australia, the District Court adopted a similar 0-50-75-100% revision of the original figures used by the court in computing the damage findings of January 25, 1965.
The record discloses that Zenith, HRI, and the courts below all considered the damage period to be the four years prior to the date on which Zenith filed its counterclaim. No argument was made that the counterclaim, in whole or in part, related back to an earlier pleading, thereby expanding the damage period to include years prior to 1959. Cf. Bull v. United States, 295 U. S. 247, 295 U. S. 262 and n. 10 (1935); Cold Metal Process Co. v. E. W. Bliss Co., 285 F.2d 231 (C.A. 6th Cir.1960), cert. denied, 366 U.S. 911 (1961). Cf. Fed.Rule Civ.Proc. 15(c) (amended pleading relates back to date of original pleading if the "claim or defense asserted in the amended pleading arose out of the conduct, transaction, or occurrence set forth or attempted to be set forth in the original pleading").
"Mr. Kayser [counsel for Hazeltine]: . . . Could anyone really believe for a minute that, if he had any thought of bringing the parent into this lawsuit, that he would not have named them, and that he would be relying on this stipulation, which was intended to simplify and expedite the trial? Would any lawyer who has been practicing for two years expect to hold somebody liable on a judgment when he didn't even name them? He relied on some pretrial stipulation."
There is some indication that the genesis of the stipulation was a pretrial conference, when a question was raised as to whether or not a subpoena served upon HRI could reach certain records of Hazeltine relating to the latter's foreign patents. Hazeltine, of course, argues that the stipulation's only purpose and effect were to facilitate discovery and trial by obviating the necessity of litigating whether or not Zenith could "pierce the corporate veil" between HRI and its parent.
In its brief in this Court, Zenith seems to argue that Hazeltine is estopped to deny that it is bound by the stipulation. Not only was HRI's counsel, Dodds, an officer of Hazeltine, but also Ruestow and Westermann, Hazeltine's general patent counsel and general counsel, were present during trial and failed to "repudiate" the construction allegedly given the stipulation by the parties at trial to the effect that it bound Hazeltine to any adjudication on the counterclaim. We find this theory untenable on the record of this case, for the references during trial to the stipulation are equally consistent with the interpretation advanced by Hazeltine that the stipulation merely eliminated the necessity for Zenith to perform the time-consuming task of piercing the corporate veil in proving its counterclaim against HRI. Also, Ruestow and Westermann were called as witnesses during trial, and, assuming they were present throughout the trial -- a fact which is neither proved nor disproved by the record -- their failure to repudiate Zenith's proposed construction of the stipulation is entirely consistent with the proposition that they were present only as witnesses, and not as authorized representatives for a person who might be bound by the litigation.
Just as the alter ego issue was not litigated after Hazeltine had made its special appearance and while it had an opportunity to be heard, see supra at 395 U. S. 111, so the District Court evidently did not rely upon anything more than the stipulation as a basis for entering the injunction against Hazeltine as well as HRI. The record does not support the contention, implicit in Zenith's brief, that, when Hazeltine appeared to contest jurisdiction, it was found by the District Court to be "in active concert or participation" with HRI, and that, by entering its special appearance, Hazeltine consented to be bound by such a finding. See generally Dobbs, The Validation of Void Judgments: The Bootstrap Principle (pts. 1 and 2), 53 Va.L.Rev. 1003, 1241 (1967).
Although HRI and Hazeltine were not parties to this prior litigation and did not enter the settlement agreement, HRI urged that all joint tortfeasors, including HRI and Hazeltine, were released from liability for injuries flowing from the pre-settlement acts of the pools. The 1957 release appears to be relevant only to Zenith's claim for injury to its Canadian trade; the embargoes in England and Australia were thought by the District Court to preclude any injury from acts of the English and Australian pools, and the embargoes were not lifted until well after the settlement was executed.
The Court of Appeals did not disturb, nor do we, the findings of the District Court that HRI and Hazeltine conspired with the Canadian pool to deny patent licenses to companies seeking to export American-made goods to Canada. Accepting these findings, we have no doubt that the Sherman Act was violated. See, e.g., Timken Roller Bearing Co. v. United States, 341 U. S. 593, 341 U. S. 599 (1951); Continental Ore Co. v. Union Carbide & Carbon Corp., 370 U. S. 690, 370 U. S. 704 (1962). Once Zenith demonstrated that its exports from the United States had been retrained by pool activities, the treble damage liability of the domestic company participating in the conspiracy was beyond question. Continental Ore Co. v. Union Carbide & Carbon Corp., supra. Cf. American Banana Co. v. United Fruit Co., 213 U. S. 347 (1909); United States v. Aluminum Co. of America, 148 F.2d 416, 443 (C.A.2d Cir.1945). Although patent rights are here involved, the same conclusions follow. See, for example, United States v. Line Material Co., 333 U. S. 287, 333 U. S. 305-315 (1948); United States v. Singer Mfg. Co., 374 U. S. 174, 374 U. S. 196-197 (1963).
Zenith's burden of proving the fact of damage under § 4 of the Clayton Act is satisfied by its proof of some damage flowing from the unlawful conspiracy; inquiry beyond this minimum point goes only to the amount and not the fact of damage. It is enough that the illegality is shown to be a material cause of the injury; a plaintiff need not exhaust all possible alternative sources of injury in fulfilling his burden of proving compensable injury under § 4. Continental Ore Co. v. Union Carbide & Carbon Corp., supra, at 370 U. S. 702 (1962); Perma Life Mufflers, Inc. v. International Parts Corp., 392 U. S. 134, 392 U. S. 143-144 (1968) (concurring opinion).
The computation of damages, prepared by Zenith's experts and accepted by the District Court, see 239 F.Supp. at 76, reflects a comparison between Zenith's percentage share of the United States television market, ranging from 15.6% in 1959 to 21.7% in 1963, and Zenith's actual share of the Canadian market during the same period, ranging from 3.1% in 1959 to 5.2% in 1961 and down to 3.2% in 1963. Although we discuss only the measure of damages utilized for computing Zenith's injury in the Canadian television market, a comparable method was employed to determine Zenith's lost radio sales.
"In Canada, our assumption was that we commenced the period starting June 1, 1959, as if we had a full blown organization, and had enjoyed the benefits of doing business there for years prior to that date."
HRI's answer to Zenith's counterclaim did not plead a statute of limitations defense. However, in the course of proceedings after entry of the District Court's initial findings of fact and conclusions of law, but before judgment, the trial court granted the oral motion of HRI's new counsel for "leave to file" defenses based on the statute of limitations and on the release given by Zenith pursuant to the 1957 settlement agreement. The thrust of the former was primarily that the findings as to Canada had erroneously included damages resulting from conduct occurring prior to May 22, 1959. The trial court, without further mention of these defenses, forthwith refused to set aside or amend the damage award as to Canada, thus either rejecting the statute of limitations defense or considering it to have been waived under Fed.Rule Civ.Proc. 12(h), as urged by Zenith in both the District Court and the Court of Appeals.
Zenith itself had requested damages only for the four-year period prior to the filing of its counterclaim, and the findings of the District Court expressly limited the damages awarded to those occurring "during the 4-year statutory damage period." 239 F.Supp. at 76. The Court of Appeals, although not purporting to pass on the statute of limitations defense, referred to the "four-year damage period" and identified it as "[f]our years prior to the May 22, 1963, filing date of Zenith's counterclaim. 15 U.S.C. Sec. 15b." 388 F.2d at 35 and n. 4. The parties have not argued the matter here, and we make no further effort to penetrate the confusion surrounding this issue or to deal with the question of whether damage period injury from pre-damage period conduct is recoverable where an unwaived statute of limitations defense is properly asserted.
"Now, what [counsel for Zenith] is really trying to sell this court is the idea that, if he can show that these pools continued after 1957 and, as he defines the pools, yes, yes, they did. There is no question about it, that these arrangements in relation to patents -- that characterized necessarily as he characterizes them, but that these arrangements have continued and, so far as I know, are in existence today. There is no question about that."
HRI does contend, however, that the ties between the Canadian pool and the Hazeltine companies were broken in December, 1965, when Hazeltine secured an early termination of its licensing agreement with CRPL. See n 25, infra.
That Zenith failed to make a formal request for a CRPL license during the damage period can properly be attributed to Zenith's recognition that such a request would have been futile. The pool had made its position entirely clear, and, under these circumstances, the absence of a formal request is not fatal to Zenith's case. See Continental Ore Co. v. Union Carbide & Carbon Corp., 370 U. S. 690, 370 U. S. 699-702 (1962); Hanover Shoe, Inc. v. United Shoe Machinery Corp., 392 U. S. 481, 392 U. S. 487, n. 5 (1968).
"The portfolio in respect of which CRPL had the right to grant licences consisted of 5,000 patents, and, in the absence of a licence from CRPL it is doubtful if anyone could sell in Canada a radio or television receiver."
"CRPL indicated that it does not grant a licence to any importer of radio or television receivers. . . . It is particularly in respect of the policy of CRPL in precluding importers from bringing into Canada radio and television receivers that the complaint was made to this Commission."
"It was stated to be the policy of CRPL to enforce its patent rights against any person who sells in Canada an imported radio or television receiver which infringes any one or more of the patents in its portfolio. . . ."
HRI urges that the trial testimony as to Canada of each of two Zenith officers, Wright and Kaplan, was inconsistent with his own testimony on recall, inconsistent with the testimony of the other, and inconsistent with documentary evidence, and that we should therefore disregard their testimony. It is true that the trial judge's views as to credibility are not completely impervious, but Rule 52(a) admonishes due regard for the trial court's opportunity to assess the credibility of witnesses. The Court of Appeals clearly took into account this evidence, and we see no adequate basis in the record for refusing to accept the testimony of the two Zenith officers as probative evidence. See United States v. United Shoe Machinery Co., 247 U. S. 32, 247 U. S. 37-38 (1918); Walling v. General Industries Co., 330 U. S. 545, 330 U. S. 550 (1947); Graver Tank & Mfg. Co. v. Linde Air Products Co., 339 U. S. 605, 339 U. S. 609-612 (1950); United States v. Oregon State Medical Society, 343 U. S. 326, 343 U. S. 332 (1952); Orvis v. Higgins, 180 F.2d 537, 539-540 (C.A.2d Cir.), cert. denied, 340 U.S. 810 (1950); Ruth v. Utah Construction & Mining Co., 344 F.2d 952 (C.A. 10th Cir.1965). HRI relies heavily in this respect on Zenith's annual reports for the years 1957-1962, but, aside from the fact that these reports, except for 1962, were never admitted into evidence, we find them quite insufficient to undermine the credibility of Wright and Kaplan.
"the policy of the Pool . . . required that [radio and television] sets be made in England, and that nothing would be licensed if it was imported from abroad."
Wright further testified that the pool representative "saw no possibility" that this restrictive policy would be changed in the future. Subsequently, during its dealings with its English radio distributor, Zenith was "given to understand that television was just out of the question."
Because the embargo precluded any recovery by Zenith for the first year of the damage period, the trial court modified its initial measure of damages to reflect the time it would have taken Zenith, starting with the removal of the embargo, to build up its market share. See n 1, supra.
See American Banana Co. v. United Fruit Co., 166 F. 261, 264 (C.A.2d Cir.1908), affirmed without specific reference to this issue, 213 U. S. 347 (1909); Stearns v. Tinker & Rasor, 252 F.2d 589, 606 (C.A. 9th Cir.1958); Volasco Products Co. v. Lloyd A. Fry Roofing Co., 308 F.2d 383, 395-396 (C.A. 6th Cir.1962), cert. denied, 372 U.S. 907 (1963). Cf. Pennsylvania Sugar Rfg. Co. v. American Sugar Rfg. Co., 166 F. 254, 260 (C.A.2d Cir.1908).
During trial, Wright and Kaplan testified that adjustments could be made by Zenith's English distributor in his shop to adapt Zenith television sets to the English transmission system. However, the fair import of their testimony, both during trial and in November 1965 on recall, was that conversion of Zenith sets to the English system, whether done before shipment to England or in the distributor's shop, had in fact, been carried out only occasionally in the past, and was of questionable utility on a commercial basis. Wright and Kaplan stated that Zenith could have manufactured a television set suitable for English use without appreciably more difficulty than Zenith faced in producing a new model for the American market, but the record does not indicate that Zenith took any steps in this direction before the end of the damage period, except in anticipation of the British changeover to the 625-line-per-second transmission system.
"Any person, firm, corporation, or association shall be entitled to sue for and have injunctive relief, in any court of the United States having jurisdiction over the parties, against threatened loss or damage by a violation of the antitrust laws, . . . when and under the same conditions and principles as injunctive relief against threatened conduct that will cause loss or damage is granted by courts of equity, under the rules governing such proceedings. . . ."
(Emphasis added.) 15 U.S.C. § 26.
HRI informs us that Hazeltine, having obtained an early termination of its licensing agreement with CRPL, is now prepared to license any one or more of its Canadian patents "with no restrictions on imports." Since Hazeltine's abandonment of its participation in the Canadian pool occurred only after -- and, apparently, in response to -- the District Court's judgment and decree, we cannot agree with the suggestion that injunctive relief as to Canada has been rendered unnecessary and inappropriate. See United States v. Oregon State Medical Society, 343 U. S. 326, 343 U. S. 333 (1952); United States v. Concentrated Phosphate Export Assn., 393 U. S. 199, 393 U. S. 202-203 (1968). Although HRI is free to attempt to demonstrate in the future that the need for injunctive relief with respect to Canada has been eliminated, or that a change of circumstances elsewhere justifies additional modifications of the injunction, see, e.g., United States v. W. T. Grant Co., 345 U. S. 629, 345 U. S. 633-636 (1953), we are not willing at this time to undertake a reappraisal of the injunction in light of post-trial developments.
Having not disturbed the District Court's findings that HRI and Hazeltine were conspiring with English and Australian patent pools which refused to license imports, the Court of Appeals, in any event, should have sustained the injunction with respect to the English and Australian markets. These findings, together with Zenith's demonstrated intent to expand its export business, were sufficient foundation for the conclusion that continued participation by HRI and Hazeltine in the English and Australian pools posed a significant threat of loss or damage to Zenith's business.
The Court of Appeals modified this paragraph in certain respects, 388 F.2d at 39, but we do not disturb these modifications.
"Plaintiff's demands that royalties be paid on admittedly unpatented apparatus constitute misuse of its patent rights, and plaintiff cannot justify such use of the monopolies of its patents by arguing the necessities and convenience to it of such a policy. While parties in an arms-length transaction are free to select any royalty base that may suit their mutual convenience, a patentee has no right to demand or force the payment of royalties on unpatented products."
The record and oral argument in Automatic Radio disclose no basis for the conclusion that Automatic Radio was forced into accepting the total sales royalty rate by HRI's use of its patent leverage.
I concur in Parts I and II of the Court's opinion. However, I do not join 395 U. S. in which the Court holds that a patent license provision which measures royalties by a percentage of the licensee's total sales is lawful if included for the "convenience" of both parties but unlawful if "insisted upon" by the patentee.
in such determinations, parties to existing and future licenses will have little assurance that their agreements will be enforced. And it may be predicted that, after today's decision, the licensor will be careful to embellish the negotiations with an alternative proposal, making the court's unravelling of the situation that much more difficult.
My second difficulty with this part of the Court's opinion is that, in reality, it overrules an aspect of a prior decision of this Court, Automatic Radio Mfg. Co. v. Hazeltine Research, Inc., 339 U. S. 827 (1950), without offering more than a shadow of a reason in law or economics for departing from that earlier ruling. Despite the Court's efforts to distinguish Automatic Radio, it cannot be denied that the Court there sustained a Hazeltine patent license of precisely the same tenor as the one involved here, on the ground that "[t]his royalty provision does not create another monopoly; it creates no restraint of competition beyond the legitimate grant of the patent." 339 U.S. at 339 U. S. 833.
"just as the patent's leverage may not be used to extract from the licensee a commitment to purchase, use, or sell other products according to the desires of the patentee, neither can that leverage be used to garner as royalties a percentage share of the licensee's receipts from sales of other products; in either case, the patentee seeks to extend the monopoly of his patent to derive a benefit not attributable to use of the patent's teachings."
Ante at 395 U. S. 136. The Court then finds in the patentee a heretofore nonexistent right to "insist upon paying only for use, and not on the basis of total sales. . . ." Ante at 395 U. S. 139.
What the Court does not undertake to explain is how insistence upon a percentage of sales royalty enables a patentee to obtain an economic "benefit not attributable to use of the patent's teachings," thereby involving himself in patent misuse. For it must be remembered that all the patentee has to license is the right to use his patent. It is solely for that right that a percentage of sales royalty is paid, and it is not apparent from the Court's opinion why this method of determining the amount of the royalty should be any less permissible than the other alternatives, whether or not it is "insisted" upon by the patentee.
One possible explanation for the Court's result, which seems especially likely in view of the Court's exception for cases where the provision was included for the "convenience" of both parties, is a desire to protect licensees against overreaching. But the Court does not cite, and the parties have not presented, any evidence that licensees as a class need such protection. [Footnote 2/4] Moreover, the Court does not explain why a royalty based simply upon use could not be equally overreaching.
admit of the Court's exception for provisions included for the "convenience" of both parties.
Automatic Radio that percentage of sales royalties may be administratively advantageous for both patentee and licensee. In these circumstances, confronted, as I believe we are, with the choice of holding such royalty provisions either valid or invalid across the board, I would, as an individual member of the Court, adhere for the present to the rule of Automatic Radio.
The Automatic Radio Court explicitly distinguished a number of cases of that kind, including United States v. United States Gypsum Co., 333 U. S. 364 (1948), and Mercoid Corp. v. Mid-Continent Investment Co., 320 U. S. 661 (1944). See 339 U.S. at 339 U. S. 832-833.
Brulotte v. Thys Co., 379 U. S. 29 (1964), involved a different question: whether a royalty based solely upon use of the invention could be collected for use occurring after the patent's expiration.
Cf. American Photocopy Equip. Co. v. Rovico, 359 F.2d 745 (1966).
See id. at 299-301, 302-306.
See id. at 300-301, 302-306, 331-332.

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