Opinion ID: 326215
Heading Depth: 2
Heading Rank: 2

Heading: The Antitrust Violation and Patent Misuse Claims

Text: 50 We next review the district court's determination that Rex's label licensing program constituted a tying arrangement, per se violative of § 1 of the Sherman Act, and consequently, a misuse of its patent. (Cf. Ansul Co. v. Uniroyal, Inc., 448 F.2d 872, 879-81 (2d Cir. 1971), cert. denied 404 U.S. 1018, 92 S.Ct. 680, 30 L.Ed.2d 666 (1972).) 51 We agree with the court below that it did. 52 The findings of the court below relevant to this portion of the appeal are quoted in the margin. 1 53 Rex sells its unpatented epoxy crusher backing material (Nordbak) with a can label license authorizing the purchaser thereof to use the contents in the practice of Rex's Cheyette Patent No. 2,970,783. Rex has never issued a direct license (i. e., one apart from the can label license) to a crusher user to practice the patent, and Rex has no company policy in connection with the issuance of such licenses. (C.T. 1017 # 62) 2 54 At the oral argument it seemed to me that the method of business adopted by the plaintiff in the case at bar could not be considered objectionable in the absence of a finding that the plaintiff had refused or would refuse to grant an unrestricted license to any shoe manufacturer who chose to buy from some other source the materials used in reinforcing the insoles by the patented process. That is, if the plaintiff is prepared to grant an unrestricted license on a royalty basis to any shoe manufacturers who prefer to obtain the unpatented precoated duck and top coat elsewhere, it is difficult at first blush to see how the plaintiff would be doing anything wrong in furnishing the unpatented materials and incidental services at so much per web yard of duck to those shoe manufacturers who prefer to do business with the plaintiff on that basis. But this point was urged in Leitch Mfg. Co. v. Barber Co., supra, and it was pointed out in the plaintiff's brief before the Supreme Court that the plaintiff was 'not shown to have refused to grant any license under the patent, much less granted any license conditioned on purchase of emulsion from it.' The argument was to no avail. The court considered it sufficient to condemn the plaintiff's method of doing business, that, as matters stood, no road contractor had a license to practice the patented process except those contractors who bought their bituminous emulsion from the plaintiff. 55 Given the fact that the label license is the only apparent way that a crusher user can obtain a license to exercise the Cheyette process, and because no other licensing program for the patent was visibly available, we have little difficulty in holding that there was sufficient evidence from which the trial judge could conclude that a tying agreement was implicit in the label license. (C.T. 1094-95 # 40) and that such an arrangement constituted a misuse of the patent. See Leitch Mfg. Co. v. Barber Co., 302 U.S. 458, 58 S.Ct. 288, 82 L.Ed. 371 (1938); B. B. Chemical Co. v. Ellis, 314 U.S. 495, 62 S.Ct. 406, 86 L.Ed. 367 (1942). 56 This court in Stearns v. Tinker & Rasor, 252 F.2d 589 (9th Cir. 1957), cert. denied 350 U.S. 830, 76 S.Ct. 62, 100 L.Ed. 741 (1955), long ago noted in the patent misuse context: 57 The mere fact that an owner of a patented article combines the article with an unpatented article and sells or leases the unit as a whole does not per se prove misuse. The holder of a patent can exploit his legally protected monopoly in the patent as best he sees fit, so long as in doing so he does not restrain competition in the unpatented article. Probably the best way for an owner of such a patent to protect himself from a charge of misuse would be to offer or stand ready to offer the patented item alone.13  58 Footnote 13. If 35 U.S.C.A § 271 is applicable, perhaps the owner need not even offer or stand ready to sell the unpatented article. This would be where the unpatented part is a non-staple material part of the invention, which is not capable of substantial non-infringing uses. (Id. 252 F.2d at 604.) 59 (4-9) A patentee, such as appellant, who does not affirmatively offer, or express a willingness to offer, a licensing program separate from the label license attached to a staple article of commerce, 3 runs the risk that the court may, in conjunction with the particularized evidence in the case, conclude that a tying arrangement is implicit, and that a misuse of the patent has occurred. 3a Our holding is certainly not intended to rule out or otherwise affect the certain narrow packaging component or total product justifications previously enunciated by the courts for certain marketing techniques which may appear to have the technical appearance of a tying arrangement without the economic coercion. See, e. g., United States v. Jerrold Electronics Corp., 187 F.Supp. 545 (E.D.Penn. 1960), aff'd 365 U.S. 567, 81 S.Ct. 755, 5 L.Ed.2d 806 (1961). We merely indicate that any patentee who sells the patented item only in conjunction with some other unpatented staple good raises serious suspicions of tying behavior and misuse. The users of such marketing programs bear a heavy burden in overcoming this suspicion and in bringing themselves within one of the aforementioned justifications. Additionally we note, that as in the instant case, where there has been a factual determination by the trial court that such an arrangement is indeed coercive tying, that determination will not be easily reviewable, nor likely to be reversed, in this court. 60 The record discloses that Rex has had a consistent program of bringing patent infringement suits against all other sellers of epoxy resin to be used as backing material for crushers. In doing so Rex has effectively dried up any source of supply which a crusher user might look to, except for Rex and its licensees. 4 (C.T. 1094 # 39.) 61 Admittedly, Rex has acted attendant to a bona fide belief that it was done in protection of their patent, but the effect upon the tied market has been to restrain commerce in epoxy resins nonetheless. Tying is still a pro se violation of § 1. 62 In short, Rex has exercised the market power attendant to its rights under the Cheyette patent (the tying product) in the epoxy resin market (the tied product). Such power is significant and the amount of commerce affected is not de minimis. 63 The facts in this case are controlled as to its antitrust aspects by International Salt Co., Inc. v. United States, 332 U.S. 392, 68 S.Ct. 12, 92 L.Ed. 20 (1947); and as to the patent misuse claim by Leitch Mfg. Co. v. Barber Co., 302 U.S. 458, 58 S.Ct. 288, 82 L.Ed. 371 (1938). 64 The district court did not err in holding that Rex's can label licensing program violated § 1 of the Sherman Act and constituted a misuse of its patent.