Source: https://casetext.com/case/mercoid-corporation-v-inv-co
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Mercoid Corp. v. Mid-Continent Co, 320 U.S. 661 | Casetext
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Mercoid Corp.v.Mid-Continent Co.
320 U.S. 661•64 S. Ct. 268•
Argued December 9, 1943. Decided January 3, 1944.
1. The owner of a system patent may not use it to secure a limited monopoly of an unpatented device employed in practicing the invention, even though the unpatented device is itself an integral part of the patented system. P. 665. 2. In a suit for infringement of a combination patent, misuse of the patent to protect an unpatented element from competition is a defense available to a contributory infringer. Leeds Catlin Co. v. Victor Talking Machine Co. (No. 2), 213 U.S. 325, limited. P. 668. 3. Exercise by an equity court of its discretion to withhold relief from a patentee who has misused his patent to secure a limited monopoly of unpatented material, can not be foreclosed by the failure of the defendant to interpose that defense in earlier litigation to which the alleged infringer was privy. P. 670. 4. A judgment in a suit for infringement of a patent does not bar a claim based on § 4 of the Clayton Act which could have been, but was not, asserted as a counterclaim in the prior suit. P. 671. Where the second cause of action between the parties is upon a different claim, the prior judgment is res judicata not as to issues which might have been tendered but only as to those upon the determination of which the finding or verdict was rendered. P. 671. 5. A counterclaim based on § 4 of the Clayton Act may, under the Rules of Civil Procedure, be asserted in a patent infringement suit. P. 671. 133 F.2d 803, reversed.
CERTIORARI, 319 U.S. 737, to review a decree which affirmed in part and reversed in part a decree of the District Court, 43 F. Supp. 692, in a patent infringement suit.
This suit was brought by respondent, Mid-Continent Investment Co., against petitioner, Mercoid Corporation, for contributory infringement of the Cross combination patent No. 1,758,146, issued May 13, 1930, for a domestic heating system. Mercoid in its answer denied contributory infringement and alleged that Mid-Continent should be barred from relief because it was seeking to extend the grant of the patent to unpatented devices. The alleged improper use of the patent was also the basis of a counterclaim filed by Mercoid in which it was averred that Mid-Continent and its exclusive licensee under the patent, respondent Minneapolis-Honeywell Regulator Co., who was brought in as a party plaintiff, had conspired to expand the monopoly of the patent in violation of the antitrust laws. Mercoid asked not only for declaratory relief but for an accounting and treble damages as well. The District Court found that Mercoid did not contribute to the infringement of the Cross patent; that respondents had conspired to establish a monopoly in an unpatented appliance beyond the scope of the patent and in violation of the anti-trust laws; and that respondents were in no position to maintain the suit because of that conspiracy. Mercoid was granted an injunction but its prayer for damages was denied. The Circuit Court of Appeals affirmed the judgment of the District Court in disallowing damages under the counterclaim. In all other respects it reversed that judgment, holding that Mercoid was guilty of contributory infringement under the rule of Leeds Catlin Co. v. Victor Talking Machine Co. (No. 2), 213 U.S. 325, and that Carbice Corp. v. American Patents Corp., 283 U.S. 27 and Leitch Mfg. Co. v. Barber Co., 302 U.S. 458, did not bar recovery as the District Court had thought. 133 F.2d 803. The case is here on a petition for a writ of certiorari which we granted because of the public importance of the questions presented.
The grant of a patent is the grant of a special privilege "to promote the Progress of Science and useful Arts." Const., Art. I, § 8. It carries, of course, a right to be free from competition in the practice of the invention. But the limits of the patent are narrowly and strictly confined to the precise terms of the grant. Ethyl Gasoline Corp. v. United States, 309 U.S. 436, 456; United States v. Univis Lens Co., 316 U.S. 241, 251. It is the public interest which is dominant in the patent system. Pennock v. Dialogue, 2 Pet. 1; Kendall v. Winsor, 21 How. 322, 329; Adams v. Burke, 17 Wall. 453; Motion Picture Co. v. Universal Film Co., supra, pp. 510-511; Morton Salt Co. v. G.S. Suppiger Co., supra; United States v. Masonite Corp., 316 U.S. 265, 278. It is the protection of the public in a system of free enterprise which alike nullifies a patent where any part of it is invalid ( Marconi Wireless Co. v. United States, 320 U.S. 1, 58; and see General Electric Co. v. Wabash Corp., 304 U.S. 364, 372) and denies to the patentee after issuance the power to use it in such a way as to acquire a monopoly which is not plainly within the terms of the grant. The necessities or convenience of the patentee do not justify any use of the monopoly of the patent to create another monopoly. The fact that the patentee has the power to refuse a license does not enable him to enlarge the monopoly of the patent by the expedient of attaching conditions to its use. United States v. Masonite Corp., supra, p. 277. The method by which the monopoly is sought to be extended is immaterial. United States v. Univis Lens Co., supra, pp. 251-252. The patent is a privilege. But it is a privilege which is conditioned by a public purpose. It results from invention and is limited to the invention which it defines. When the patentee ties something else to his invention, he acts only by virtue of his right as the owner of property to make contracts concerning it and not otherwise. He then is subject to all the limitations upon that right which the general law imposes upon such contracts. The contract is not saved by anything in the patent laws because it relates to the invention. If it were, the mere act of the patentee could make the distinctive claim of the patent attach to something which does not possess the quality of invention. Then the patent would be diverted from its statutory purpose and become a ready instrument for economic control in domains where the anti-trust acts or other laws not the patent statutes define the public policy.
That result may not be obviated in the present case by calling the combustion stoker switch the "heart of the invention" or the "advance in the art." The patent is for a combination only. Since none of the separate elements of the combination is claimed as the invention, none of them when dealt with separately is protected by the patent monopoly. Leeds Catlin Co. v. Victor Talking Machine Co. (No. 1), 213 U.S. 301, 318. Whether the parts are new or old, the combination is the invention and it is distinct from any of them. See Schumacher v. Cornell, 96 U.S. 549, 554; Rowell v. Lindsay, 113 U.S. 97, 101. If a limited monopoly over the combustion stoker switch were allowed, it would not be a monopoly accorded inventive genius by the patent laws but a monopoly born of a commercial desire to avoid the rigors of competition fostered by the anti-trust laws. If such an expansion of the patent monopoly could be effected by contract, the integrity of the patent system would be seriously compromised.
Leeds Catlin Co. v. Victor Talking Machine Co. (No. 2), supra, is authority for the conclusion that he who sells an unpatented part of a combination patent for use in the assembled machine may be guilty of contributory infringement. The protection which the Court in that case extended to the phonograph record, which was an unpatented part of the patented phonograph, is in substance inconsistent with the view which we have expressed in this case. The rule of the Leeds Catlin case (No. 2) accordingly must no longer prevail against the defense that a combination patent is being used to protect an unpatented part from competition. That result obtains here though we assume for the purposes of this case that Mercoid was a contributory infringer and that respondents could have enjoined the infringement had they not misused the patent for the purpose of monopolizing unpatented material. Inasmuch as their misuse of the patent would have precluded them from enjoining a direct infringement ( Morton Salt Co. v. G.S. Suppiger Co., supra) they cannot stand in any better position with respect to a contributory infringer. Where there is a collision between the principle of the Carbice case and the conventional rules governing either direct or contributory infringement, the former prevails.
The Court in that case did not refer to the doctrine of misuse of a patent. That doctrine indeed was developed in this Court some years later as shown by the Motion Picture case. The record in the Leeds Catlin case indicates that the point which we deem crucial in the instant case was adverted to only obliquely in the briefs. The Court was chiefly concerned with the proposition that a substitution or renewal of an unpatented element of a combination patent, as distinguished from its repair, is a "reconstruction" of the combination 213 U.S. pp. 333, 336.
Respondents point out that Mercoid knew of Mid-Continent's actions and the license agreement prior to 1935 when the earlier suit involving the validity of the Cross patent ( Smith v. Mid-Continent Investment Co., supra) was instituted. They state, and the District Court found, that although Mercoid was not made a party to the earlier suit it provided the defense. The contention therefore is that the doctrine of res judicata binds Mercoid as respects issues which were actually litigated and all issues which might have been raised in that earlier suit. And it is pointed out that among the defenses which might have been interposed were those relating to the misuse of the patent and the violations of the anti-trust laws. It is argued, moreover, that although Minneapolis-Honeywell was not a party to the earlier litigation, it is entitled to the benefit of the judgment since its title or claim derives from the patentee. We do not stop to examine the premises on which the argument is based; for though we assume that they are correct, it does not follow that the doctrine of res judicata forecloses the defense which is tendered.
Respondents ask the equity court for an injunction against infringement by petitioner of the patent in question and for an accounting. Should such a decree be entered, the Court would be placing its imprimatur on a scheme which involves a misuse of the patent privilege and a violation of the anti-trust laws. It would aid in the consummation of a conspiracy to expand a patent beyond its legitimate scope. But patentees and licensees cannot secure aid from the court to bring such an event to pass, "unless it is in accordance with policy to grant that help." Beasley v. Texas Pacific Ry. Co., 191 U.S. 492, 497. And the determination of that policy is not "at the mercy" of the parties ( id., p. 498) nor dependent on the usual rules governing the settlement of private litigation. "Courts of equity may, and frequently do, go much farther both to give and withhold relief in furtherance of the public interest than they are accustomed to go when only private interests are involved." Virginian Ry. Co. v. System Federation, 300 U.S. 515, 552. "Where an important public interest would be prejudiced," the reasons for denying injunctive relief "may be compelling." Harrisonville v. Dickey Clay Co., 289 U.S. 334, 338. And see United States v. Morgan, 307 U.S. 183, 194. That is the principle which has led this Court in the past to withhold aid from a patentee in suits for either direct or indirect infringement where the patent was being misused. Morton Salt Co. v. G.S. Suppiger Co., supra, p. 492. That principle is controlling here. The parties cannot foreclose the courts from the exercise of that discretion by the failure to interpose the same defense in an earlier litigation. Cf. Sola Electric Co. v. Jefferson Electric Co., 317 U.S. 173.
What we have just said does not, of course, dispose of Mercoid's counterclaim for damages. That was based on § 4 of the Clayton Act which provides: "Any person who shall be injured in his business or property by reason of anything forbidden in the anti-trust laws may sue therefor in any district court of the United States in the district in which the defendant resides or is found or has an agent, without respect to the amount in controversy, and shall recover threefold the damages by him sustained, and the cost of suit, including a reasonable attorney's fee." 38 Stat. 731, 15 U.S.C. § 15. Though Mercoid were barred in the present case from asserting any defense which might have been interposed in the earlier litigation, it would not follow that its counterclaim for damages would likewise be barred. That claim for damages is more than a defense; it is a separate statutory cause of action. The fact that it might have been asserted as a counterclaim in the prior suit by reason of Rule 13(b) of the Rules of Civil Procedure does not mean that the failure to do so renders the prior judgment res judicata as respects it. Virginia-Carolina Chemical Co. v. Kirven, 215 U.S. 252; Larsen v. Northland Transportation Co., 292 U.S. 20. And see Scott, Collateral Estoppel by Judgment, 56 Harv. L. Rev. 1, 26-28; Restatement of the Law of Judgments, § 58. The case is then governed by the principle that where the second cause of action between the parties is upon a different claim the prior judgment is res judicata not as to issues which might have been tendered but "only as to those matters in issue or points controverted, upon the determination of which the finding or verdict was rendered." Cromwell v. County of Sac, 94 U.S. 351, 353. And see Russell v. Place, 94 U.S. 606. It was held in Fleitmann v. Welsbach Street Lighting Co., 240 U.S. 27, that the statutory liability in question may be enforced only through the verdict of a jury in a court of common law. But there is no reason under the Rules of Civil Procedure why that may not be done under this counterclaim. Rules 12(h), 13, 38, 42(b). Whether the evidence will show damages within the rule of Story Parchment Co. v. Paterson Co., 282 U.S. 555, is of course a distinct question on which we intimate no opinion.
First. I agree that the patentee may not extend his exclusive statutory right to make, use, and vend by forbidding one practicing the invention from using in such practice an unpatented article susceptible to such use. He may not obtain an injunction against such user for infringement. This is a pure question of the extent of the right of exclusion conferred by the patent statute. It nowise involves the antitrust acts. A patent is property and it may, like other property, be so used as to violate those acts, but that is not this case.
Carbice Corp. v. American Patents Corp., 283 U.S. 27; Leitch Mfg. Co. v. Barber Co., 302 U.S. 458.
Standard Sanitary Mfg. Co. v. United States, 226 U.S. 20; United States v. Masonite Corp., 316 U.S. 265.
Second. I think the opinion may create confusion respecting contributory infringement. The court below, thinking the doctrine of the Carbice and Leitch cases inapplicable, necessarily concluded that the user of the system infringed the patent if he used any thermostat other than that manufactured by respondent's exclusive licensee. But those cases show that so to do would not constitute infringement of the patent. And if the purchaser and user could not be amerced as an infringer certainly one who sold to him with the purpose that he should use the thermostat cannot be amerced for contributing to a non-existent infringement. One may disagree with the decision of this court in Leeds Catlin Co. v. Victor Talking Machine Co. (No. 2), 213 U.S. 325, that the substitution by the user of the talking machine of a record not made by the licensor constituted an infringement of the patent, but, accepting the premise that such conduct was infringement, one who participated in it by knowingly and intentionally selling records to the user became an aider and participant in the infringement and, as such, liable to the owner of the patent. I cannot believe that the court's opinion is intended to lay down a different principle.
Bryant Electric Co. v. Marshall, 169 F. 426; affirmed 185 F. 499. Compare Souffront v. La Compagnie, 217 U.S. 475. And see cases collected 139 A.L.R. 41.
But in the series of cases in which that doctrine has heretofore been applied ( Motion Picture Co. v. Universal Film Co., 243 U.S. 502; Carbice Corp. v. American Patents Corp., supra; Morton Salt Co. v. Suppiger Co., 314 U.S. 488; B.B. Chemical Co. v. Ellis, 314 U.S. 495), not once has this Court found it relevant to reject, either explicitly or by indirection, another doctrine of the law, that of contributory infringement, nor has it seen fit to make animadversions upon it. This is so doubtless for the simple reason that appropriate occasions for relief against contributory infringement are unrelated to the circumstances which bring the Carbice doctrine into play. In a word, if there is no infringement of a patent there can be no contributory infringer.
Within its true limits the idea of contributory infringement was woven into the fabric of our law and has been part of it for now more than seventy years. See Roberts, Contributory Infringement of Patent Rights, 12 Harv. L. Rev. 35, and e.g. Thomson-Houston Electric Co. v. Ohio Brass Co., 80 F. 712. The doctrine has been put perhaps most simply by Judge Shepley: "Different parties may all infringe, by respectively making or selling, each of them, one of the elements of a patented combination, provided those separate elements are made for the purpose, and with the intent, of their being combined by a party having no right to combine them. But the mere manufacture of a separate element of a patented combination, unless such manufacture be proved to have been conducted for the purpose, and with the intent of aiding infringement, is not, in and of itself, infringement." Saxe v. Hammond, Fed. Cas. No. 12,411, 1 Ban. A. 629, 632. So understood, the doctrine of contributory infringement is an expression both of law and morals. It is but one phase of a more comprehending doctrine of legal liability enforced by this Court both in civil and criminal cases. See, for instance, American Bank Trust Co. v. Federal Reserve Bank, 256 U.S. 350, and Direct Sales Co. v. United States, 319 U.S. 703. Indeed, the opinion in the Carbice case explicitly recognizes a proper scope for the doctrine of contributory infringement as a phase of the law of torts: "Infringement, whether direct or contributory, is essentially a tort, and implies invasion of some right of the patentee." Carbice Corp. v. American Patents Corp., 283 U.S. 27, 33.
"A patent," said Mr. Justice Holmes, "is property carried to the highest degree of abstraction — a right in rem to exclude, without a physical object or content." Here the patent covers a combination — a system — a sequence — which is said to be new, although every element and factor in it is old and unpatentable. Thus we have an abstract right in an abstruse relationship between things in which individually there is no right — a legal concept which either is very profound or almost unintelligible, I cannot be quite sure which.