Earl Warren: United States Gypsum (Inaudible) Company et al. Judge Rosenman.
Samuel I. Rosenman: When the Court recessed yesterday, I believe I had completed discussing the -- the jurisdiction of the court below to do what it did in this case, the power of the court below. I should now like -- like to address myself to the merits of what the court below did. The first thing that the court below did was to strike down Counts I and II of the Iowa suits. We think that there -- that there can be no doubt about the proper use of discretion in doing that. The Court did it on the ground that those two Counts clearly violate Article IV of the decree which had to judge these patent licenses to be illegal, null and void. And being illegal, null and void, the Court said that you could not bring suit upon them. The Court did not say as Judge Bromley intimated yesterday or said yesterday that these two Counts were struck down because of fresh misuse. They were not, and I shall ask Your Honors to look at the conclusion in a few moments with respect to those two Counts, they were struck down not because they were brought, they were struck down because they flew directly in the face of the decree. And the United States Government is very much interested in this and said below contrary to what Judge Bromley said -- said below and repeat here that they are very much interested in protecting the decree and therefore, they joined with us not only in sustaining the jurisdiction of the Court but in the exercise of its discretion.
Harold Burton: Did I -- did I understand you to say that this Court had held this practice were invalid?
Samuel I. Rosenman: The patent licenses -- the patent licenses, the license agreement.
Harold Burton: The license agreement?
Samuel I. Rosenman: Yes, sir, under which Counts I and II were brought, not the patents -- the patent -- the patent agreements. All that this Court held was that the United States couldn't contest the patents if it wished to but that does not involve in this appeal. What the Court said was --
Harold Burton: Then we're to assume that they are the -- of course, there are valid patents under that statement.
Samuel I. Rosenman: Well --
Harold Burton: At least they haven't been --
Samuel I. Rosenman: -- those are in dispute.
Harold Burton: -- they haven't been declared invalid.
Samuel I. Rosenman: They have not. That is correct, sir. They have not been declared invalid. But the license agreements have been declared to be illegal, null and void. And the United States Government is very much interested in protecting its decree which adjudged these patent licenses, these patent licenses to be illegal, null and void and did not take the position that they would not interfere or intervene in the case below because this was a private litigation.
Felix Frankfurter: Let me -- let me put what you've just said into different or unequivocal language. You're saying that even though the suit that had been brought by the USG (Inaudible) had explicitly disavowed any right under the -- under the assignment under the license and said they merely sue for quantum meruit, you say that the decree would have been just affixed.
Samuel I. Rosenman: Yes, sir.
Felix Frankfurter: We -- I'm -- I'm --
Samuel I. Rosenman: There is no doubt about that, and I -- I want to come to that with respect to the conclusions in a few moments.
Felix Frankfurter: I just want to be sure that I understood --
Samuel I. Rosenman: Not only do I say so, Your Honor, but --
Felix Frankfurter: Well, I'm -- I mean that's your position.
Samuel I. Rosenman: That's right, not only my position, that was the position of the court below.
Felix Frankfurter: But it has to be in order --
Samuel I. Rosenman: Yes, sir.
Felix Frankfurter: -- for you to maintain your --
Samuel I. Rosenman: The court -- the court below did the -- took the same position. But with respect to Counts I and II, the position that it took was that they were to be barred for reasons of -- by reason of the fact that they had been specifically barred by the decree below. They also barred them on other Counts, as I shall show. Now, there can be no ambiguity about what the declaration illegal, null and void means. And all of the exposition of Judge Bromley yesterday and in his brief talking about what the lawyers claimed when -- before the decree was finally signed, what illegal, null and void meant is entirely beside the point. This was not a consent decree. This was a litigated decree. And every lawyer there was speaking for his own client. Dallstream was talking for his client Celotex who isn't here before the Court. Mr. Finck was talking for National Gypsum. And what these lawyers said about what was going to be in the decree was something which the Court listened to and then made up its own mind what was going to be put into the decree and what the Court put into the decree was that language that each and every one of these patent licenses is illegal, null and void. There can be nothing less ambiguous than that declaration, and USG is hard put to it toward to explain it. In the court below and in fact, during the entire course of this original litigation through the various courts, it took the position that these patent license agreements were perfectly legal each in itself. And what they said was that all that this Court had determined was that the plurality of the licenses, the fact that there were so many is what made them illegal. That isn't what this Court said. It isn't what the District Court said originally, and it isn't what the District Court says now. It said that every one of this was illegal. Now, in the court below, as I say, Judge Bromley made the argument that they were legal. And in page 78 of our brief, we quote him as to what he said below. In the footnote, in the brief answering the petitioner's briefs, he said that each individual license agreement in this case constituted a valid and binding contract. That was his position below. Obviously, he doesn't make the same flat assertion here but what he has tried to argue yesterday that all illegal, null and void meant was that the license agreements were going to be canceled. Now, it's quite clear that illegal, null and void does not mean that sometime in the future we're going to cancel. They mean illegal, null and void, and I might add that it wasn't until the reply brief in this case that USG shifted its ground from the saying that each of them was illegal and shifted its ground to say that all they meant was that they were to be canceled. So I think we need not carry much longer on Counts I and II. When we come to Counts III, IV and V, Judge Bromley advances a novel proposition. Count III was described by the court below as an indebitatus assumpsit count, Count IV was a quantum meruit, and Count V is the action for infringement. Now, what did the court below do with respect to these Counts? It definitely and unequivocally barred them all. It barred them on three separate grounds, not on one ground, as Judge Bromley what had you -- have you believed. It barred them on three separate grounds. Each one was an alternative ground, each one, we maintain, was a proper ground, and each one was sufficient on which they found its conclusion that these Iowa suits should be barred. Now, Judge Bromley in his argument yesterday, as I say, advanced this proposition, which he has never advanced before to the effect, and I quote him on page 14 in response to Mr. Justice Brennan's question. Justice Brennan, "Did it have any other basis than this ground, that is the fresh misuse involved in bringing the Iowa action?" Mr. Bromley, "I think -- I don't think it did. I think it asserted that some of the allegations of misuse had been proved although they had not been." There is a conflict, I think, and a little doubt as to what they did decide. But my position is all they decided, as a matter of law, was the bringing of the suit was enough. Justice Frankfurter at that point said -- I'm sorry, I withdraw that. On page 30, he was even more unequivocal than that. What he said was, "Now, therefore, it is clear from conclusions 7 and 13 of the court below, which appear at record 1156, conclusions 7 and 13, if, in 1953, we had not pleaded Counts on the old licenses -- on the old license agreement, the 1951 decree," I think he meant 1954 decree, "would not have barred compensation suits based on the other Counts". That is the second paragraph of the Conclusion 7." If we had not pleaded those Counts, then the Court, as it did, would hold that the other Counts were not barred by the decree. I further think it is clear that if we had not pleaded those Counts, we would not have been deemed to have misused our patents from 1948 to 1953," referring again to the same record. And finally, "If we had not pleaded those Counts, I think it is clear from those conclusions, the Court would not have modified the final decree." At which point, Justice Frankfurter said, "It strikes me a strange." And it also strikes us a strange because it just isn't true. That is not true as to what the Court did. It involves a misconception of what the court below did of so fundamental in nature that I would ask Your Honors' indulgence to turn to the conclusions of law in this case which we --
Harold Burton: In this case?
Samuel I. Rosenman: In this case, in this record, what the court below decided and the conclusions of law begin at page 1155 of the record, the second volume. There are 16 conclusions of law, as Your Honors will see beginning on page 1155. The first 10 of them have to do mainly with the jurisdiction of the court below and with Counts I and II. The final six of them beginning with number 11, set forth the basis of the Court's decision below. May I respectfully direct your attention to number 11 in which the Court said that the course of conduct of USG has clearly shown by the proceedings of record in the antitrust case, that's the case in which Your Honors passed on twice. And then these suits by USG established that USG did not purge itself of its patent misuse at any time prior to May 15th, 1951. Now, that was the date of the decree so that the Court here was talking about the prior misuse, which was the basis of the 1951 decree, the unpurged misuse. It wasn't talking about the misuse which had alleged occurred when the Iowa suits were brought. And the Court went on to say that the acts -- the five acts claimed by USG to constitute acts of purge prior to May 15th do not constitute purge. Now, whenever they talk about purge, they are talking about the old misuse. They couldn't be talking about purge, as Justice Frankfurter pointed out yesterday with respect to the new actions because obviously, there's no purge there. Those actions are still pending. There need be no evidence about that so that whenever the court below was talking about purge and misuse prior to May 15th, 1951, they were unquestionably talking about the misuse which this Court found in two opinions to pervade this entire industry by misuse of the patents.
Speaker: What post-1941 evidence is there to support that finding?
Samuel I. Rosenman: I -- I was coming to that, Your Honor, but I -- I was perkily willing to answer Your Honor's question now.
Speaker: Well, any way you want.
Samuel I. Rosenman: Judge Bromley yesterday said that the record was closed to 1941 and there could be no possible claim of misuse between 1941 and 1951. Your Honors will recall that so far as my client and the other defendant here, Certain-teed, our concern, we are only concerned with misuse up to 1951. Now, this Court had found that speaking in 1948, in its first opinion, that there was vast pervasive misuse in this industry. It is true, as Judge Bromley said and as the brief said, they were talking as of 1941 when the evidence was closed. Now, we say that this misuse continued until 1951, first, because of the presumption that this misuse will continue unless it's shown to have been purged that was -- that's what this case has held many times particularly in the B.B. Chemical case that once the misuse is shown, it is not dissipated until it is shown to have been terminated and the evil effects dissipated, not until then is a --
Felix Frankfurter: Shown -- shown where and how? Shown where and how?
Samuel I. Rosenman: It must --
Felix Frankfurter: Unless, it's shown. If the testimony closed as of 1941, where would the showing be, from the course of argument?
Samuel I. Rosenman: The showing would have to be if -- if anything were alleged to show a purge. The showing would have to be in the court below.
Felix Frankfurter: You mean in this Court, in this case, you mean?
Samuel I. Rosenman: In this case, yes, sir. And that's what this Court held, "Instead of showing it in Iowa, let's show it here. Mr. USG, will you show it here where all the parties are involved where we --
Felix Frankfurter: We were told -- we were told you're coming to that but they weren't allowed to show it.
Samuel I. Rosenman: I'm coming to that, Your Honor.
Felix Frankfurter: All right.
Samuel I. Rosenman: And the reason they weren't allowed to show it is that they proffered nothing to be shown. I -- I will come to that. The answer -- the second -- the second part of the answer to Mr. Justice Harlan's question is that we do not have to rely entirely upon the continuance of this misuse which was clearly found by this Court because it is clear from this record, and it cannot be disputed by any kind of a hearing, that this misuse continued until 1948 for the following reason. We -- they collected royalties from us right up until the time when this Court told us that it would be illegal to pay royalties. They collected royalties from us on their license agreement. This license agreement was at -- in at least two respects, unlawful. And these unlawful license agreements misused their patents right up until 1948 when we made our last payment. But why would they be unlawful?
Harold Burton: How -- how did they misuse the patents?
Samuel I. Rosenman: Because --
Harold Burton: I understand that the license agreement --
Samuel I. Rosenman: -- they misused the patents --
Harold Burton: (Voice Overlap) invalid and improperly brought together.
Samuel I. Rosenman: They misused --
Harold Burton: But that was in the -- they could have licensed those patents prior to the decision of this Court.
Samuel I. Rosenman: By a lawful license, yes, sir. And a lawful license of those patents would not have been a misuse of the patents but they licensed those patents by an agreement which contained these two elements of illegality apart from anything else. The first thing that was illegal was that it fixed prices, it fixed the resale price.
Harold Burton: Yes.
Samuel I. Rosenman: The second thing that was illegal was that it demanded and collected royalties on unpatented as well as patented products. This Court has held that both of those collections, both of those exceptions are illegal, and it is our contention that they collected royalties right down until 1948, right down until this Court spoke on a patent agreement which was so unlawful that it ipso facto constituted a misuse of the patents.
Harold Burton: Well, maybe you could recover for that improper payment. If that isn't here, what they're doing now is -- is suing you in the other courts or you're -- for the quantum meruit on what was the use of -- worth of the use of those patents to you outside of the agreements.
Samuel I. Rosenman: Yes, sir.
Harold Burton: Now --
Samuel I. Rosenman: I'm --
Harold Burton: -- what is it -- what is it makes such a quantum meruit suit invalid?
Samuel I. Rosenman: I was answering the question. I will -- I will come to that, sir. I was answering the question of Mr. Justice Harlan and, I believe, Your Honor's own question as to what there was up to 1948 which was a misuse of the patents, and I say that what misuse of the patents was a collection year by year from 1941, a month-by-month from 1941 right down until March 1948. Every month, they collected royalties from us under a license agreement which was so illegal that it constituted a misuse of the patents, and this Court said so. This Court said that you couldn't collect -- you couldn't collect on unpatented products that extended the monopoly of the patent. This Court had said that a number of times, so that when -- when they forced us to pay royalties, 1942, 1943, 1944 or 1945, right down to March 1948, when this Court -- when this Court struck it all down, they were exacting royalties from us under license agreements which were illegal. That has been held time and again to constitute a misuse of the patents, and that is my answer to Mr. Justice Harlan asking me what there was in the record which constituted misuse after 1941.
Speaker: Now, up to 1948.
Samuel I. Rosenman: Up to 1948, yes, sir.
Speaker: Yes, but my point is that so far as quantum meruit is concerned, that is eliminating Counts I and II, you have to stand on the proposition, I take it, that there was a fresh misuse between 1948 and 1941 -- 1948 and 1951 or that if the pre-1948 use -- misuse pervaded the post-1948 situation that there was no purge after 1948.
Samuel I. Rosenman: That's right.
Speaker: Now, the two things that you referred to, namely, the price fixing arrangements, certainly those were not involved in the post-1948 situation because they have been eliminated. And so far as the other element is concerned to wit the charging of royalties on unpatented products, I did not understand that the claim for the interval for 1948 to 1951 included a claim for such royalties.
Samuel I. Rosenman: That's right. You're right.
Speaker: Well, therefore, where -- is there any evidence of -- of patent abuse or any evidence of lack of purge between 1948 and 1951?
Samuel I. Rosenman: The evidence, sir, is that in 1948, this abuse, this misuse continued. We rely upon the presumption in the absence of a showing to the contrary that said whatever misuse this Court found continued. And the cases hold, sir, that we are entitled to rely on that presumption. And this Court had said time and again that the misuse of patents prevents the recovery upon them until two things happened. One, that the misuse has terminated, and two, that the evil effects of the misuse have been dissipated. Now, we said below, "Mr. U.S. Gypsum, the burden is now upon you. This Court has held in two lengthy opinions that you misused these -- these patents. The burden upon you is now to bring yourself within the B.B. Chemical case which says, 'You must now proceed to show, you must now proceed to show that your misuse has terminated as one thing, not only terminated but been abandoned which is much more than terminated as B.B. Chemical said. You must now show. You have the burden of showing that your misuse has been abandoned and two, that the evil effects of that misuse have been terminated."
Speaker: Yes, but they say --
Samuel I. Rosenman: Now, we show, sir --
Speaker: -- they say that they offered to do that and that the Court denied them an opportunity.
Samuel I. Rosenman: Now, they didn't offer to do it, sir. And in answer to Justice Frankfurter's question, Judge Bromley admitted that we proffered nothing there because they took the position that we, the defendant, would have to go ahead and not only -- not only reprove all of the misuse but we would have to prove that there was no purge. Now, the cases are to the contrary, the cases are that the misuse was found by this Court and until that misuse is abandoned and that the evil effects dissipated and they have the burden to showing it, they cannot recover on those patents. Now --
Felix Frankfurter: Did -- did your -- would you clear up my mind (Inaudible) to make up my mind? If, in 1948, they had sent you a letter saying, hereafter, he merely want a quantum meruit return for your use of our patent, we eliminate in 1948, this is a hypothetical case but not conformed to what I understand in the record, we eliminate a claim of price fixing. We eliminate a claim on the unpatented articles. We asked for quantum meruit on the patent -- for the use of the patent. If that had been shown, the situation would be very different, would it not?
Samuel I. Rosenman: No, sir. Our -- our result --
Felix Frankfurter: This issue would be the same?
Samuel I. Rosenman: The issue would be the same for the following reason. What this Court found was not merely, not merely those two items of misuse which I referred to, which continued until 1948 clearly, this Court found at least five other items of misuse, at least three other items of misuse. One was that jobbers were eliminated. Secondly, that the prices of unpatent products -- unpatented products were fixed. Third, that there were such a regulation and regimentation of trade practices that this entire industry was within the grip of USG. What were these trade practices? They did and they insisted upon basing point price delivered system. They insisted that stand to substandard wall board. They saw that the same price as standard. They insisted that there be no commission salesman. And this Court in its opinions went right through the various items of misuse and pointed out how vast was the conspiracy which held this industry in a regimented form. And therefore, Your Honor, to answer your question, what must be shown here by USG is not merely that they stop fixing prices. They must show, said this Court in B.B. Chemical and in Morton Salt and in the long line of cases, they must show that every item of misuse, which was found by this Court, has been dissipated -- has been abandoned. And not only that, but they must show after the abandonment that its evil effects had been terminated. It is our position that they could not possibly show that the evil effects of this conspiracy had been terminated until the final decree was signed, at least until the final decree was signed because this Court said that any prior decree was insufficient to meet that test of dissipating the evil effects. The original decree of 1949 came up here on appeal by the Government to expand. And the Government said, "Your Honors, this decree is not sufficient to meet the test in Morton Salt and B.B. Chemical. We wanted to expand it. We want the evil effects of this decree dissipated." And Your Honors agreed with them.
Felix Frankfurter: Judge Rosenman, my (Inaudible) perhaps, but most of the times, I don't read the briefs. I'd like to have the impact of action but I don't know what you mean. In view of the argument that you've just made, I wonder if you could discuss in your brief the -- going on in an old (Inaudible) case in which this Court held that although you got a seller who is to confess monopoly and have violated the Sherman law, if you buy goods from him, you can or the defense say, he has violated the Sherman law. Now, that -- that case seemed to be now irrelevant to this problem.
Samuel I. Rosenman: If we -- if -- if the case holds, sir, I'm not familiar with that. Even if the case holds --
Felix Frankfurter: (Inaudible) if I'm not mistaken.
Samuel I. Rosenman: If the case holds the same as the Connolly case. We discussed the Connolly case. There, there was a case of a --
Felix Frankfurter: -- and the -- (Inaudible)
Samuel I. Rosenman: That's -- there was a case there of two or three conspirators and one of the conspirators sold some merchandise to someone outside and the person outside defended on the suit for purchase price saying that "We don't have to pay, you -- you conspired and -- and what you did was a violation to antitrust laws." And this Court held you're right, you're right. You have an obligation to one of the conspirators and the fact that a conspiracy in restrain of trade took place outside of your transaction. It does not absolve you from liability. And in our brief, we point out how clearly that is distinguishable from this case. This is a case where the claim for royalties is so bound up with the conspiracy. The Katzinger case points out that the claim for royalties is a part of a -- of a price fixing scheme.
Felix Frankfurter: I understand your claim for royalty but I'm talking -- I assume that your position here, you put on one side. You -- I assume from what you've said -- I'm referring from what you said that the fact that they sued in one of their accounts or two of their accounts in the Iowa suit on the original license does not dispose of as such the claim on quantum meruit that that is not a misuse of the patent. Did -- did I correctly understand that? You rejected the -- the suggestion -- it seems to me strange that because a count is invalid because it would be an enforcement of an invalid license, therefore, that necessarily proves that a count for -- on quantum meruit is bad. You rejected that, didn't you?
Samuel I. Rosenman: If I did, I misspoke myself. What I say was that even -- even if they hadn't brought I and II --
Felix Frankfurter: Yes --
Samuel I. Rosenman: I thought I was saying that the balance of the Counts III, IV and V would still be invalid.
Felix Frankfurter: I understand. That's your position.
Samuel I. Rosenman: That's right.
Felix Frankfurter: But the fact that they brought Counts I and II doesn't -- doesn't dispose of the other Counts. The fact that they --
Samuel I. Rosenman: The court below said that it does, sir. The court below said that the mere bringing of Counts I and II is what it called a “fresh misuse”.
Felix Frankfurter: But I thought you -- you rejected that? Do you say --
Samuel I. Rosenman: I'm sorry if I did. What --
Felix Frankfurter: I misunderstood you.
Samuel I. Rosenman: I'm -- I'm sorry.
Felix Frankfurter: All right.
Samuel I. Rosenman: What the court below did, and I was going through these conclusions, was, as one of its grounds, urged this completely novel position that the mere bringing of the suit was --
Felix Frankfurter: Was a misuse of the patent.
Samuel I. Rosenman: Was a misuse of the patent.
Felix Frankfurter: And then you -- you do not reject that ground.
Samuel I. Rosenman: I do not, sir.
Felix Frankfurter: (Voice Overlap)
Samuel I. Rosenman: This -- this is something which I -- I wish to argue but what I am now trying to show is that that was not the sole basis --
Felix Frankfurter: Apart from that, even if that were not in the case --
Samuel I. Rosenman: That's right.
Felix Frankfurter: -- your position is there is a -- there's an organic invalidity which -- which continued.
Samuel I. Rosenman: That's right. And it's my position and it's the position of the court below in Number 11 because it said Number 11, and I was in the midst of going through this when Your Honors began to question it, Number 11 is clearly one of those unpurged misuses which has nothing to do with the bringing of the suit. Number 12 is to the same effect. In view of the misuse by USG of its patents as a matter of law on the facts here which has not been purged. Now, they're talking about the misuse which this Court found. They couldn't have been talking about this suit because they cover the suit in Number 13 as Judge Bromley said.
William J. Brennan, Jr.: Judge Rosenman, on Number 12, the decree was 1951?
Samuel I. Rosenman: Yes, sir.
William J. Brennan, Jr.: And in it is the declaration of -- that the agreements were illegal, null and void?
Samuel I. Rosenman: Yes, sir.
William J. Brennan, Jr.: Does 12 mean anything like this that the declaration as of May 15, 1951, the illegality of the contracts, embraces as well the period up to the date, May 15, 1951, and that no claims can be founded upon those illegal agreements whether directly as with the case with Counts I and II? Or since the use of your client was based originally on those contracts, was it not --
Samuel I. Rosenman: Yes, sir.
William J. Brennan, Jr.: -- by way of quantum meruit and debitatus assumpsit or otherwise?
Samuel I. Rosenman: Yes, sir. It --
William J. Brennan, Jr.: Is that what that means?
Samuel I. Rosenman: -- it means not because of the declaration of illegality or the old part that it -- that -- that is not so, Your Honor. What it means --
William J. Brennan, Jr.: Well, my question was whether it --
Samuel I. Rosenman: -- includes that --
William J. Brennan, Jr.: -- whether this has to be read as based upon the declaration of illegality.
Samuel I. Rosenman: No, sir. When you take this in conjunction with the opinion and with the other findings, what the Court was saying here was that all of the misuse that I have enumerated and that this Court has enumerated including the illegality of the license agreements, but all of the misuse that I have set forth, all of that misuse occurred, he says unpurged up to 1951.
William J. Brennan, Jr.: Meaning inclusive of the date, May 15, 1951.
Samuel I. Rosenman: Yes, sir. What this Court said was that up until 1951, you haven't shown any purge and therefore, you cannot recover.
William J. Brennan, Jr.: Well now, if that's what it means, isn't that precisely one of the questions which USG endeavored at least by its answer in this proceeding to put in issue whether there had been a misuse inclusive of the date May 15, 1951?
Samuel I. Rosenman: They did by their pleadings but they didn't by anything to justify the court below in granting them a hearing.
William J. Brennan, Jr.: Well, are you suggesting that in addition to the pleading because apparently I gather your concession embraces as well the issue of purge which by the pleading they attempted to put in issue?
Samuel I. Rosenman: Yes, sir.
William J. Brennan, Jr.: Your point is that the pleading alone and the effort by the pleading to put those two questions in issue was not enough that they had affirmatively to proffer proofs?
Samuel I. Rosenman: Yes, sir, and we cover that very -- very carefully in our brief. We say that the court below should not have been put to the necessity of having a hearing on the question of purge unless something was indicated to them to indicate to -- to show what a hearing was to be held about. Now, all that they did below was to say that there are some five facts, which apparently I do not have time to go into, there were some five facts, not new facts, but five facts in the old record which we claim constitute purge. The court below said they do not constitute purge even if they're true, even if you can prove those five facts. They are not adequate in law to constitute purge. We agree with that. And if I had time, I would discuss each of these five facts to show that even if proved, they do not meet the test of purge. So then, we contend that it was up to USG to say, "If you don't think those constitute purge, then we have the following evidence which we would like to submit to you to have a hearing on because we think we can prove purge." Now, this Court said in its second opinion in this case that the court below didn't have to waste its time that it could regulate the procedure. I have the quote here at some place. It could regulate its own procedure so it wouldn't waste time. Now, this is very much like a summary judgment action and Your Honors know that in the federal courts as well as in the state court, if I come in to the Court and say, "I would like a summary judgment because I have a note and it's very clear on its face, I am entitled to a judgment on this note." Now, if you say, "I've got some defenses on this note, Your Honor, I'd like to be heard on it," you'd be left out of Court. The Court will say, "Well, tell me what you want to prove and --
William J. Brennan, Jr.: But you have to --
Samuel I. Rosenman: -- I'll determine whether there's a defense."
William J. Brennan, Jr.: Am I in error in dealing that there at least some federal decisions dealing with summary judgment which suggest that it's a bar to the allowance of summary judgment if any material fact is called an issue merely by the pleading?
Samuel I. Rosenman: I -- I think, Your Honor, that they have to be more than pleading.
William J. Brennan, Jr.: I'm not suggesting that those decisions are right --
Samuel I. Rosenman: Certainly, in --
William J. Brennan, Jr.: -- but I think --
Samuel I. Rosenman: -- the state court, a pleading isn't enough. There must be some affidavit indicating that there is some defense. But even if it's on the pleadings, at least the pleadings must show what you rely upon and the pleadings below didn't show what Judge Bromley relies upon. Judge Bromley didn't disclose to the court below what he relied on, and he hasn't disclosed here what he relies on. As a matter of fact, he offered nothing, and he said so in answer to Judge -- Justice Frankfurter's question, "What did you proffer below?" And he said nothing. He relied upon the record. He also relied upon the fact that we have the verdict, and he said so that he relied on the fact that we have the burden again to prove misuse in spite of what Your Honors said in two opinions that we have the burden of proving it and that we have the burden of going further and saying you didn't purge it. Now, the court below said, following the B.B. Chemical case, "The burden is on you, USG, to show that the misuse has been abandoned, that the evil effects have been dissipated, and you must show that. Tell me what you want to prove to show it." And all that USG could say is that there are five facts in the record here which we discussed very fully in our brief, which the Court discussed very fully below to indicate, to indicate that there was no purge. If I may just be permitted to go through these conclusions again, Number 13, Number 13 is the only one. It's the only one on which Judge Bromley can rely to show that the court below was depending upon the new actions, so I'll pass that. But if you look at 14, when the Court disposes of Count III, they don't do it on any basis of new misuse. They do it on the ground that -- that Count is only a left-handed indirect method for recovering the royalties produced about. Look at the next Count when they discussed the quantum meruit. They don't put it on the new misuse of the patents, they put it on two grounds.
Harold Burton: What period of time does 14 cover?
Samuel I. Rosenman: The -- the critical period --
Harold Burton: Well --
Samuel I. Rosenman: 1948 to 1951.
Harold Burton: 1948 to 1951.
Samuel I. Rosenman: Yes, sir. And what the Court saying here is, "You've misused this. The Supreme Court has said so, now it's up to you to show -- it's up to you to show that this misuse has been abandoned and the evil effects dissipated and you haven't done it." But my point here is this is not relying on the Iowa action as a misuse, it says the misuse of the patents which were involved in this antitrust suit as a matter of law to have existed and not to have been purged. That's the basis for their throwing out of Count IV, not --
Harold Burton: What you're -- what you are arguing here, Judge Rosenman, is it not that if there has been an improper use of patent --
Samuel I. Rosenman: Yes, sir.
Harold Burton: -- that then you can't recover on a quantum meruit that he used of those patents?
Samuel I. Rosenman: You can't -- yes, sir, I go further and say you can't recover on any ground. You cannot recover for --
Harold Burton: (Inaudible)
Samuel I. Rosenman: -- use or infringement or any ground. This Court had said so time and again, the Hartford-Empire case, the National Lead case. And as a matter of fact, this is now such a routine remedy, sir. This is such a routine remedy. The remedy that you cannot sue on a patent for use before the final decree, decree to pre-period, which is what this Court said. This has become so routine a penalty, so routine a remedy rather that as we pointed out in our brief in the vast majority of consent decrees, this is now a part of the consent decrees. And in innumerable lower court cases, it's a part of the remedy.
Felix Frankfurter: I'm not questioning you, Judge Rosenman, but where we said precisely what you now saying he says.
Samuel I. Rosenman: In the Hartford-Empire case and in the National Lead case --
Felix Frankfurter: I'm not -- I'm not questioning you.
Samuel I. Rosenman: -- and in the National Lead case. You have said in both cases, you have approved decrees below, and you've definitely stated in the Hartford-Empire case, you have said, and I know that Judge Bromley will get up and talk about the receiver in that case which is an entirely unique situation.
Felix Frankfurter: I'm just asking you to refer me to the page in which I could find the (Inaudible) of what the judge (Inaudible)
Samuel I. Rosenman: In Hartford-Empire, yes, sir.
Felix Frankfurter: Don't take your time --
Samuel I. Rosenman: Sir?
Felix Frankfurter: -- searching your brief. That is fine.
Samuel I. Rosenman: It's discussed in the brief.
Felix Frankfurter: All right.
Samuel I. Rosenman: The quotation is there. All of the facts are set forth in Hartford-Empire. Your Honors held that where there's a misuse of the patents, and Your Honors compared and -- and our brief compares --
Felix Frankfurter: I can understand -- I can understand that the proper issuing of law if you didn't have the complicating factor of this case, namely, that the fact is -- circumstances may have entered that bring a new time of it. I'm not saying it's true in this case.
Samuel I. Rosenman: I don't quite --
Felix Frankfurter: I'm not in the position to say that.
Samuel I. Rosenman: I don't quite understand, Your Honor.
Felix Frankfurter: What I'm just saying is that -- that if a decree -- if what -- if we dealt here with a decree directive to a period condemning conduct within a hearing in which there was an illegality, I can well understand if you'd said, "You can't get quantum meruit if you can't get the contract price," even that is a (Inaudible)
Samuel I. Rosenman: It is our --
Felix Frankfurter: -- questions of a quasi contract that are not so clear to me.
Samuel I. Rosenman: It is our contention, sir, that what Your Honors said in the Hartford-Empire case and in the National Lead case and which lower courts have said time and again is that the inability to recover for infringement, quantum meruit or any ground runs right up to the decree, the final decree in the case because until that decree is made, there can be no purge. Your Honors, I have agreed to let -- Mr. Miller and I have agreed that he may have the concluding five minutes unless there are any questions. I bound by --
William J. Brennan, Jr.: (Inaudible) Judge Rosenman.
Samuel I. Rosenman: I -- I don't mind. I just (Voice Overlap) --
William J. Brennan, Jr.: I just want to be sure that I understand you. It is that on the issues of purge and misuse as put in issue by the pleading, they were not, as a matter of law, sufficiently put an issue to withstand a determination that the Counts must fail or is it that as a matter of fact or both?
Samuel I. Rosenman: It's both, sir.
William J. Brennan, Jr.: Now --
Samuel I. Rosenman: We -- we contend that what they did put in issue, namely, these five facts are, as a matter of law, insufficient. And then we say they offered nothing else and it was up to them to offer something else if they want us -- the Court to give them a hearing because unless they do, there's nothing to have a hearing about.
Harold Burton: But it was you're part of the U.S. versus U.S. Gypsum case?
Samuel I. Rosenman: Yes, sir. It was one of the -- it was one of the defendants.
Harold Burton: One of the parties?
Samuel I. Rosenman: Yes, sir.
Harold Burton: Whatever wrong there was your client was involved in it.
Samuel I. Rosenman: Yes, sir.
Harold Burton: And yet they would get the use free.
Samuel I. Rosenman: That -- that's not an unusual remedy. That's not unusual remedy, Your Honor. That occurs in every case where, as I say, this Court has forbidden infringement actions up to the time of the final decree. These are joint tortfeasors and the law -- the law leaves them where they find them. And Your Honors have said, particularly your -- could call your attention if I could find this but my time is up. Your Honors have said time and again that patent misuse involves the public interest, and we are going to defend the public interest. We don't care whether this redounds to the benefit of any individual. That's not our concern. It is our concern to see that this paramount interest of the public is protected against patent misuse that the good effects of the Sherman Act are to be obtained no matter if a co-conspirator does get benefit from it. Your Honors have said that time and again. We quote those in -- in the brief, and I think it's -- it's elementary that the -- the paramount interest of the public is what prevails here. It said it in the Morton Salt case. Your Honors have said it in Katzinger case and MacGregor case.
Earl Warren: Mr. Miller, you may have your five minutes. Judge Bromley may have two or three minutes extra also.
Norman A. Miller: May it please the Court. Certain-teed, like National Gypsum, was a petitioner in the District Court and is an appellee here. We filed a separate brief in this Court but the position of Certain-teed on this appeal is in all respects the same as National. We agreed to the use of all but a few minutes of the time by Judge Rosenman who would present the views of National which naturally because of our position as licensees of USG also defendants originally, petitioners below and appellees here is the same. There'd be no purpose served in my repeating the matters which Judge Rosenman has presented in his argument and which are fully covered in the briefs filed by Certain-teed and National. However, I'd like to devote a few minutes I have to emphasizing the following points. The first have to do with the reference of Mr. Bromley to the fact that all that we had below was two days of argument. Now, in examination of the District Court's opinion of July 1954, which was entered a month and something, a year and three months after the first petition had been filed in that Court and after lengthy argument after many briefs had been filed would indicate quite clearly that the District Court had made a painstaking examination of the whole antitrust litigation and the record in those cases, and a voluminous record it was, had made an examination of the numerous authority cited to it, had listened to all the arguments, and had passed upon the matters presented to it. Again, it did that similar thing in the motion for a new trial and for rehearing so that it would seem that the -- the statement that all that Mr. Bromley's client had was two days of argument would be refuted by the facts. Now, nowhere during all of that time did Mr. Bromley, on behalf of his client, make any proffer of the various matters he offered to prove which brings me to the next point and that is that letter of July 8, 1941. The letter first came into this -- the hearing before the District Court as result of the five so-called facts of purge urged by Mr. Bromley. He referred to the facts that there has been a finding that they had ceased fixing prices in July 8, 1941 but had failed inadvertently, I assume, to the reach -- to say that that same letter or that same notice had contained this reservation that they retain the right to fix the prices at any time they desire. In the District Court, no argument was ever made by Mr. Bromley in reply to our reference to that letter and that reservation of right. In fact, his argument before the District Court shows clearly that he admitted it but said that as a matter of law that reservation didn't change their position. Now, with regard to Mr. Dallstream's statement, I believe Judge Rosenman has answered that completely except for one -- one point which I wish to point out. The fact that lawyer has said great many things before the decree was entered wouldn't affect the determination by this Court of what the decree meant and by the District Court of what its own decree meant. However, as the footnotes in our brief and in Mr. -- and in National's brief at pages 48 and 49 and 50, respectively, show Mr. Dallstream specifically stated there were differences of opinion between counsel for the various petitioners and licensees and that he spoke for himself and that's also evidenced by Mr. Bromley's quotation from what Mr. Dallstream had to say when he said that in order that USG will have no misunderstanding of my position that my suggestion is in no way based on the desire or hope on my part to avoid these royalty payments. Finally, I would like to say that it is not true and Mr. Bromley intimated that the Government said as to Counts III, IV & V, it was a private affair between private parties. Therefore, the Government's petition in its brief clearly showed that it considered this matter of great interest that it felt as to Counts I and II, the -- and the suits filed by USG that they were applauding of this Court's decree and though they took no position, they never made any further statement. And I just wish to add finally that in this Court, the Government's position has changed to refute that remark completely, and I think it's a fair statement to say that the Government is now neutral on our side.
Earl Warren: [Laughter] Judge Bromley.
Bruce Bromley: May it please the Court. Yesterday, in answer to a question by Mr. Justice Frankfurter, I may have given the impression that this appeal involves a bottom only an interpretation of Article IV of the 1951 final decree. That is not the case. Now that Article IV of that decree has been construed by the court below as nullifying the old license agreements as sources of rights, as I understand it, for either party in the compensation suits either by way of affirmative claim or defense, USG can accept and rely upon that adjudication. That adjudication is the first paragraph of Conclusion 7 at record 1156. But as I said yesterday, the court below has also concluded that the 1951 decree did not expressly or by implication bar suits by USG for quantum meruit or infringement. That is the second paragraph of Conclusion 7 at record 1156. Thus, in those areas, neither the judgment below enjoining the USG suits for quantum meruit or infringement nor this appeal are concerned with interpreting the 1951 decree. This appeal is directed to the conclusion of the court below that we misused our patents in the 1948-1951 period, and that therefore, the right of USG to seek compensation on any theory should be enjoined by supplementing the injunctive reach of the 1951 decree. Now, I should like to refer to those alleged misuses that Judge Rosenman yesterday and today asserts and tell the court below to make the modification of the decree that it did make. He says the court below found two basic misuses, the fresh misuse, that is the bringing of the compensation suits, and secondly, and now more importantly, he says, and I quote him, "The misuse which Your Honors have twice found pervaded this entire industry and had been used by USG to regimen and organize the industry to refrain production." And he gives illustrations of price fixing on unpatented goods and the elimination of jobbers and so forth. Now, I submit that such a definition of this alleged second misuse makes it clear that Judge Rosenman is speaking of a misuse which on this record can have occurred no later than 1941. This Court's rulings related to a complaint filed in 1940. As I've said repeatedly, there was no evidence concerning anything after 1941. That's why I said yesterday, he must rely upon a legal fiction to bring that down to the 1948-1951 period. And as has been said many times, we denied that in our answers at record 788 and 789. Now, even if misuse proved to have been a fact in or before 1940 can as a matter of law be presumed to have continued into the 1948-1951 period. The fact remains that we've never been allowed an opportunity to rebut that presumption by the submission of evidence extrinsic of the record in the old antitrust case. It was in connection with this claim which we made for an opportunity to be heard that we call to the Court's attention certain facts already of record before it which we contended not only prevented any summary ruling of unpurged misuse but transferred the burden to the corporate appellees of proving prima facie at least that the patent misuses which they alleged had been indulged in by us -- us during the question.
Felix Frankfurter: May I trouble you to refer me to the doctrine in which you made that claim before the court below in which you asked that Court to give you a chance to approve what you just said you wanted. What is the doctrine? Is it the answer?
Bruce Bromley: It is the answer. It is record 1046 and 1047. Would -- would Your Honors be good enough to note these figures down? I'd give just four of them.
Felix Frankfurter: What it -- what it -- what, that the document is entitled (Inaudible)?
Bruce Bromley: That was a motion for a new trial. That was objections to the -- to the proposed findings, I guess, in the first instance.
Speaker: Brief?
Felix Frankfurter: 1046, 1047?
Bruce Bromley: 1046, 1047.
Felix Frankfurter: This is after the opinion as to the conclusions of the findings came down?
Bruce Bromley: Yes, sir. No, no, not -- that -- that was our -- no, it was our objections and suggestions with -- to -- with respect the proposed findings of fact and that title appears on 1037.
Felix Frankfurter: May I ask you? Did both sides submit proposed findings? And the Government (Voice Overlap) --
Bruce Bromley: Just National.
Felix Frankfurter: National submitted the proposed findings.
Bruce Bromley: Yes, and we object --
Felix Frankfurter: I'll say that it reflected in the present findings that in substance to present findings?
Bruce Bromley: Well, yes, we've changed it but in substance.
Felix Frankfurter: And you -- you entered objections --
Bruce Bromley: Yes, sir.
Felix Frankfurter: -- to those findings that there's -- and --
Bruce Bromley: And it --
Felix Frankfurter: (Inaudible)
Bruce Bromley: Objections and suggestions with respect to the proposed findings.
Felix Frankfurter: All right.
Bruce Bromley: Then on --
Felix Frankfurter: (Voice Overlap) --
Bruce Bromley: -- page 1046, we -- we said that it was error to deny us the right to be heard. We started off by saying, in the middle on the page under A, the question of purging a patent misuse necessarily involves a factual inquiry in these circumstances, and the opinion has overlooked this principle, and we want to be heard. Now, that's the first one.
Felix Frankfurter: USG brief in pages 131 and 134, where -- is that the USG brief in this page under this report?
Bruce Bromley: No.
Felix Frankfurter: On page 1046-2A?
Bruce Bromley: Yes, sir.
Felix Frankfurter: (Inaudible)
Bruce Bromley: That's the brief below.
Felix Frankfurter: That's the brief below.
Bruce Bromley: Brief below, yes, sir.
Felix Frankfurter: All right.
Bruce Bromley: Now, secondly, record 1161, Item Number 2, here, again, we were making a motion for a new trial, as appears on 1160. And we specified the grounds. And then Item Number 2 of 1161, the Court erred in ruling without the taking of any evidence that USG has not purged its patent misuse. And on 1170, once again, in a -- in points and authorities in support of our motion which, under the District Court rules, we have to follow, we say the Court erred in ruling without the taking of any evidence that we've not purged, and we again assert that we -- that we were denied the right to be heard at the bottom of page 1170.
Speaker: (Inaudible)
Bruce Bromley: What?
Speaker: (Inaudible)
Bruce Bromley: Five. What?
Hugo L. Black: Is that all of them?
Bruce Bromley: No, sir, there -- there's another reference at page 1252 and 1253.
Felix Frankfurter: These are motions after the opinion of the District Court came down.
Bruce Bromley: Yes, sir. Now, I'll -- I'll go forward and -- and advance it before the opinion came down, not only did we raise this issue in our pleadings, that is denial to the allegations against us, but in the preliminary hearing of June 9, 1953 that preceded all of this argument and -- at which Judge Stevens presided and of course, the Court changed thereafter so we had three judges thereafter. We've never heard of this case. But when this -- when these petitions were filed, Judge Stevens and his brother were still there and we had a hearing -- discussion beginning at record 673 and lasting over to 709. And in -- in that connection, the ground rules were laid down, I submit, that it was made perfectly clear and made clear by Judge Rosenman himself that the Court was to approach the matter to see if it could be decided as a matter of law and then we were to be given a hearing if it felt it couldn't because on page 676 of the record, if you please, Judge Rosenman said this to the Court at the very outset before we'd had any discussion, "We brought this petition, sirs, in two claims." One, concern solely a question of law, which I've just stated and if Your Honors agree with our contention under claim number one of our petition, there would be no need for going into claim two. Claim number two is based upon a misuse of the patents and upon a contention that the conduct of USG has precluded it from bringing any action for royalties. Under claim number two, there will be questions of fact perhaps. Now, he says "perhaps". He explains on the next page, 678, what he means by "perhaps". We haven't answered yet. And he said, of course, if we answer, then there will be questions of fact because Judge Stevens, on page 678 of the record, said to him, "In determining these questions of fact, will there be witnesses or documentary evidence or what?" And Judge Rosenman's answer said that that would depend upon whether we deny the alleged misuse in the 1948-1951 period set forth in paragraph (21) of the National petition. I -- I think he conceded that if we denied it, there would be questions of fact upon which testimony went farther. And of course, we did deny it. Now, one final question --
Hugo L. Black: But is that all?
Bruce Bromley: Is that all, sir? Yes, sir.
Hugo L. Black: That's all the references?
Bruce Bromley: Yes, sir.
Hugo L. Black: Did you ever file any answer or any kind of paper which told the Court that the foregoing things will show that we have purged ourselves and we wished to have a chance to prove them?
Bruce Bromley: In the -- in the answer, sir, I think we did that --
Hugo L. Black: Where is that?
Bruce Bromley: And in these documents, that --
Hugo L. Black: But where is it?
Bruce Bromley: -- that answer is at 6 --
Hugo L. Black: What I want to see is if you offer us, if you tended to the Court issues of facts concretely stating that you wanted to have a chance to prove those issues of facts.
Bruce Bromley: I submit we did that in our answer, sir, and in our motion for a new trial and in our repeated statements before the Court.
Hugo L. Black: Now, that -- these that you have are not the type of statements that I'm talking about. I understand this -- the claim of the other side is that you never did tender any issues of fact concretely and offer to show that you had purged yourself by the following -- by reasons or the following things that Gypsum had done.
Bruce Bromley: We did not put it in a form of an offer of proof because there was no evidence against us.
Hugo L. Black: I'm talking about offer of proof.
Bruce Bromley: All right.
Hugo L. Black: Where did you ever, during this time, state that we want to show that we purged ourselves? We've dissipated the misuse of the patents by the following -- by a proof of the following circumstances or we offered a -- offered a -- we want to show facts of this kind.
Bruce Bromley: Only in the record references to which -- which I have given Your Honors.
Hugo L. Black: Those that I've looked at did not tender such an issue.
Bruce Bromley: To me, they do, sir.
Hugo L. Black: You think they do.
Bruce Bromley: But at least they are all. May I say one thing to -- to Mr. Justice Harlan? I said yesterday, Mr. Justice Harlan, you read the wrong opinion. That wasn't so. I want to make it clear. There was not a second opinion below changing what was there stated with respect to the Newark and Ebsary suits, but when the court below entered its findings in decree on December 9, 1954, it ignored and deviated from what it said in that opinion and enjoined the suits in toto.