Court Opinion

ID: 9638345
Source: CourtListenerOpinion
Date Created: 2023-08-22 15:41:45.281687+00
Date Added: 2024-06-11T18:10:05.788078
License: Public Domain

STEPHENS, Chief Judge,
dissenting:
I am unable to agree with the disposition o'f this case made by the majority. It is conceded in the case that the representations made by the petitioners- in their advertisements are a substantially accurate description of the utility of the patented device, Vacudex, as portrayed in the speci*465fication of the petitioners’ patent.1 In granting a patent the Commissioner of Patents in effect finds to be true the .portrayal in the specification, that is to say, the assertions therein concerning the nature and method of operation and effect of the claimed invention. The Letters Patent incorporate and make a part thereof a copy of the specification in which the invention is described. Nevertheless the Federal Trade Commission contends that it has power, upon evidence considered by it, to find that the representations in the petitioners’ advertisements are misleading and deceptive to the purchasing public, and power, therefore, to order the petitioners to cease and desist from making such representations.2 Its cease and desist order, if valid, will render the grant of the patent in substantial part of no effect. The patent grants for the term of seventeen years the exclusive right “to make, use and vend the said invention . . ..” If the utility of the invention as portrayed in the specification which is made a part of the Letters Patent cannot be advertised, then the invention, as a practical matter, cannot be sold. In effect, therefore, the Trade Commission, in issuing its cease and desist order, is asserting power to review and render in part nugatory the action of the Commissioner of Patents in granting the patent to the device in question. If the Trade Commission has such power in this case, it has it in all cases in which it may, upon evidence considered by it, reach a conclusion contrary to that of the Commissioner of Patents as to the correctness of the representations in the specification of a patent application. Thus the Trade Commission may assume to review and in practical effect to set aside, so far as the right of a patentee to vend an invention is concerned, the action of the Commissioner of Patents in respect of any or all outstanding patents. I think the Trade Commission has no such power.
The rule for infringement cases that an issued patent has but “prima facie” or “presumptive” validity (cf. Gebhard v. General Motor Sales Corp., 1943, 77 U.S. App.D.C. 331, 332, 135 F.2d 248, 249; Allison Coupon Co. v. Bank of Commerce & Savings, 1940, 72 App.D.C. 82, 111 F.2d 664; Callison v. Dean, 10 Cir., 1934, 70 F.2d 55, 58; Cleveland Automatic Mach. Co. v. National Acme Co., 6 Cir., 1931, 52 F.2d 769, 770) lends, I think, no support to the position of the majority and the Trade Commission. The power of a United States court to determine the validity of a patent in an infringement suit arises from the statutory right of one accused of infringement to assert as a defense the invalidity of the patent which is the predicate of the action. 35 U.S.C. § 69 (1946). The justification for this statutory right is that, as to the accused in an infringement case, the patent has been issued ex parte; he has never had a hearing in respect of its validity. But the determination by the Commissioner of Patents that a claimed invention is patentable is not ex parte as to the United States. It is the action of the United States, i. e., of the Commissioner of Patents, that is, in practical effect — as said above — called into question by the Trade Commission, also an agency of the United States, in the instant proceeding.
I am aware of, the ruling in Sola Electric Co. v. Jefferson Electric Co., 1942, 317 *466U.S. 173, 63 S.Ct. 172, 87 L.Ed. 165; that since the price-fixing provisions of a patent license agreement are, if not within the protection of a lawfully granted patent monopoly, violations of the Sherman Act, a patent licensee sued for royalties may offer evidence of invalidity of the patents upon which the license agreement is founded, notwithstanding rules of estoppel, whether local or federal, which would otherwise forbid him, because of his license agreement, to do so. But this ruling is of ho.force in the instant case because, again, the patent licensee, like the accused in an infringement case, was a private person and not'a party to the issuance of the patent as was the United States herein.
Neither United States v. Masonite Corp., 1942, 316 U.S. 265, 62 S.Ct. 1070, 86 L.Ed. 1461, nor Standard Sanitary Mfg. Col v. United States, 1912, 226 U.S. 20; 33 S.Ct. 9, 57 L.Ed. 107, which are relied upon in the majority opinion, appears to me to lend any force to the contention of the "Trade Commission and th.e decisión of the majority in the instant case. ' In réspect' of the Masonite caseThe Masonite Corporation owned patents on a product known as “hardboard” and itself manufáctured and sold the same. It constituted competing manufacturers of building materials its del credere “agents” for the vending of hardboard, through their respective sales ' organizations, at.prices and under terms "and conditions fixed by Masonite ánd to be .followed by it. Masonite also agreed to issue to the “agents” at th^ir request’ “a licensé to manufacture and sell hard boards” under its patents upon specified terms and conditions ‘ and for a cash consideration, but this option was not exercised by the “agents.” The Court, treating the, “agencies” for the purpose of the decision- as bona fide- del credere agencies, nevertheless held that the form" in which the parties chose to cast the transaction was .not to govern and that the “agency” arrangements in reality presented a Bloomer v. McQuewan,* 3 Adams v. Burke,4 Hobbie v. Jennison5 pattern, wherein when a patented product “ 'passes to the hands of the purchaser, it is no longer within the limits of the monopoly. It passes outside of it, and is no longer' under the protection of the act of Congress.’ ” ' (316, U.S. at page 278, 62 S.Ct. 1070, 86 L.Ed. 1461, quoting from Bloomer v. McQuewan, 14 How. at page 549, 14 L.Ed. 532). The Court said:
...Doubtless there is a proper area for utilization by a patentee of a del credere agent in the sale or disposition of the patented article. A patentée who employs such- an agent to distribute his product certainly is not enlarging the scope of his .patent privilege if it may fairly be said that that distribution is part of the patentee’s own business and operates only to secure to him the reward for his invention which Congress has provided. But where he utilizes the sales organization of another business — a business with which he has n.o intimate relationship — quite different problems are posed since such a regimentation of a marketing- system is peculiarly susceptible to the restraints of trade which the Sherman Act condemns. And when it is dear, as it is in this case, that the marketing systems utilized by means of the del credere agency agreements are those of competitors of - the patentee, and that the purpose ,is to fix prices at which the competitors may market the product, the device is, without more, an enlargement of the limited patqnt privilege and a violation of the Sherman Act. In such a case the patentee exhausts his limited privilege when he disposes of the product to the del credere agent. He then has, so far as the Sherman Act is concerned, .no greater rights to. price maintenance than file owner of unpatented commodity would have. Dr. Miles Medical Co. v. John D. Parks & Sons Co., 220 U.S. 373, 31 S.Ct. 376, 55 L.Ed, 502 [316 U.S. at pages 279-280, 62 S.Ct. at page 1078, 86 L.Ed. 1461].
In the Standard Sanitary case, one Way-man, a defendant, but not himself' a manufacturer, on condition of the elimination of unpatented hard enameled “seconds,” secured from Standard Sanitary and other manufacturers options upon process- patents for enameling iron sanitary utensils. A committee of six, including Wayman and five manufacturers’ representatives, worked out, .to be incorporated in license contracts, a plan for manufacturers’ prices.and jobbers’ and dealers’ resale prices. Under *467the plan the manufacturers were not to sell to jobbers who did not also take a license and submit to a price schedule. Royalties were a given sum per day for furnace use, but 80% was returnable as “cash bail” if a licensee abided by all of the provisions of its license. Having obtained approval of this plan by a sufficient number in the industry, Wayman exercised his options, became the owner of the patents, and issued the licenses as planned. Eighty-five percent of the manufacturers and ninety percent of the jobbers were parlies to the arrangements. In answer to a charge that these arrangements were in violation of the Sherman Act, it was sought to justify them under Bement v. National Harrow Co., 1902, 186 U.S. 70, 22 S.Ct. 747, 46 L.Ed. 1058, and upon the ground that an undue number of the (unpatented) seconds were being produced, with consequent harm to the reputation of the superior patented product and to the consumer — since the seconds were “palmed off” as not defective. The seconds were said to be “ ‘discrediting the ware and demoralizing the market and business.’ ” (226 U.S. at page 42, 33 S.Ct. at page 12, 57 L.Ed. 107). The Court held that the licensing arrangements were illegal. Quoting from the Bement case, it recognized that the Sherman Act “ ‘clearly does not refer to that kind of a restraint of interstate commerce which may arise from reasonable and legal conditions imposed upon the assignee or licensee of a patent by the owner thereof, restricting the terms upon which the article may be used and the price to be demanded therefor. Such a construction of the act we have no doubt was never contemplated by its framers.’” (226 U.S. at page 40, 33 S.Ct. at page 11) But the Court held that the Way-man license agreements “transcended what was necessary to protect the use of the patent or the monopoly which the law conferred upon it. They passed to the purpose and accomplished a restraint of trade condemned by the Sherman law. . . .” (226 U.S. at page 48, 33 S.Ct. at page 14)
This statement of the Masonite and Standard Sanitary cases shows, I think, that they are irrelevant to the question in the instant case. They stand only for the general rule that a patentee’s contractual arrangements must be limited in operation to the proper field of trade belonging to the patentee; or, otherwise stated, that the contractual arrangements may include any condition the performance of which is reasonably within the reward which the patentee •by the grant of a patent is entitled to secure, but no other. Putting it still otherwise, these cases hold that if the subject matter of a contract which otherwise would be illegal because in restraint of trade is a patented article, this takes away the illegality only to the extent to which the field of trade controlled through the contract is coextensive with the field within which exclusive control has been granted by the patent law. This is well established, but it is not relevant to the question in the instant case as to the power of the Trade Commission to review collaterally the correctness of the decision of the Commissioner of Patents in respect of the utility of Vacudex as described in the petitioners’ patent specification. There is no charge in the instant case that the petitioners were by contract or otherwise operating beyond the field of trade defined in the Letters Patent.
I am aware of the dictum of the Supreme Court in United States v. United States Gypsum Co., 1948, 333 U.S. 364, 386-8, 68 S.Ct. 525, 92 L.Ed. 746, to the effect that in an action brought by the United States to restrain alleged violation of the Sherman Act through patent licensing arrangements which included price-fixing provisions, the United States may attack and the court determine the validity of the patents upon which the licensing arrangements were predicated. But this has only the force of a dictum. In addition, the dictum is limited by the nature of the action and of the tribunal in which the action is brought. • It warrants inquiry into the validity of patents by a United States court sitting in an equity proceeding to restrain an alleged violation of the Sherman Act through price-fixing provisions in patent license agreements. The ambit of this dictum is not so •broad as to permit an indirect attack by the Trade Commission, an executive agen*468cy, upon the correctness, o-f the action of the Commissioner of-Patents'in determining the utility of a claimed invention.
It is true-that where a patent has-been obtained by fraud imposed upon the'issuing officer, or where such officer may have' erred as to' his power or made a mistake in the patent instrument itself, the United States may obtain cancellation of the patent in a judicial proceeding against t-he patentee. United States v. American Bell Telephone Co., 1888, 128 U.S. 315, 9 S.Ct. 90, 32 L.Ed. 450. But the ’reach of this case is not great enough to permit collateral attack by an executive agency 'such'as the Trade 'Commission upon' th'é 'correctness of the--action of the Commissioner of Patents. Moreover, there is no assertion in the instant case 'that the representations in the specification of the patent with'• respect to the utility of Vacudex were fraudulently made and the patent thereby fraudulently obtained, and' there is no allegation that the Commissioner of Patents exceeded his power in issuing the Letters Patent or that •thére is a mistake in the patent instrument itself.
It is to be noted that in the instances in which Congress has authorized a court to review, either ¡collaterally or directly,' the action ¡of the Patent -Office in granting-or denying a patent, it has done so explicitly. Fhus it has given the Court of Customs and-Patent Appeals jurisdiction of appeals from.decisions of the,Board of Appeals and the Board o-f Interference Examiners- of the Patent Office as to patent applications and interferences, at the instance of an applicant for a patent or any party to a patent interference. 28 U.S.C. § 1542 (1948). Again, Congress -has provided ¡that whenever a patent' on application is refused by the Board off Appeals of the Patent Office, or whenever any applicant is dissatisfied with the decision of the Board of Interference Examiners-, the applicant, unless appeal has been. taken to the United States Court of Customs and Patent Appeals and such appeal is pending or has been decided, may have remedy by a bill in equity in a United States District Court. Rev.Stat. § 4915 (1878), 35 U.S.C. § 63 (1946). In the infringement cases in which the courts collaterally review the action of the Patent Office in issuing a patent, the right of the accused to set up invalidity as a defense is .conferred by the statutory provision explicitly providing that the accused may plead the .general issue. 35 U.S.C. § 69 (1946). See also 28 U.S.C. § 1498 .(1948).
• It is to be supposed that Congress recognizes that one of the first objectives in the essentials of good government is order and Certainty in relations between government and citizen, and. that this cannot be secured if the government itself is not to be depended upon to abide by-its-grants. The grant of a patent is a formal .and solemn- governmental act, reciting that “Whereas upon due examination made the said Claimant is adjudged to be justly ■ entitled to a patent under the Law. Now therefore these Letters -Patent aré to grant unto the said [claimant], its successors or assigns'for the term of Seventeen years from the date of this grant the exclusive right to make, use and vend the said invention throughout the ■'■United States and the Territories thereof.” It must be presumed,’ I think, that the Congress did not intend that the Government itself, through an executive agency other than the Patent Office, might attack the Government’s own grant except in the instances explicitly provided for by statute as above recited. I find nothing in the Federal Trade Commission Act, 15 U.S.C. §§ 41 et seq. (194-6), which indicates that Congress contemplated that the Trade Commission, in exercising its power to restrain dissemination of false advertising, should , make a redetermination of a factual finding of the Commissioner of Patents.
It is pointed out by the majority that although the complaint of the Trade Commission attacked as false, among other advertised assertions as to the utility of Vacudex, those that Vacudex “saves mufflers” •and “saves tail pipes,” nevertheless- in its cease and desist order, which listed the assertions of utility which the petitioners are to be restrained from making, the Trade Commission omitted the assertions “saves mufflers” and “saves tail pipes.” This, it is contended, means that the Trade Com*469mission in effect found that Vacudex “saves mufflers” and “saves tail pipes.” It is then said that since the Commissioner of Patents in order properly to issue Letters Patent for the petitioners’ claimed invention need not have found correct all of the assertions of utility made in the specification,, it can be assumed that he issued the patent after finding to be correct the very assertions found to be correct by the Trade. Commission, i. e., that Vacudex “saves mufflers” and “saves tail pipes,” and that he did this without determining the correctness of the other assertions of utility in the specification. It is concluded that the Trade Commission, in passing upon other assertions of utility and finding them to be not correct, is not necessarily collaterally attacking a finding of the Commissioner of Patents.
But this argument is based upon a mere assumption as to what the Commissioner of Patents, in considering the application and issuing the Letters Patent, determined in respect of the utility of Vacudex. It is no less logical to assume that the Commissioner of Patents found correct the very assertions of utility found to be incorrect by the Trade Commission, and that the latter, therefore, is collaterally attacking the finding of the Commissioner of Patents. Either assumption is speculative. The record of the Patent Office proceeding is not before the court. Speculation is hardly a sound support for the claimed power of the Trade Commission to determine the correctness of the assertions of utility as made in the petitioners’ patent specification and advertising. It is to be noted, moreover, that even if the assumption made by the majority— that the Commissioner of Patents determined and found to be correct only the assertions of utility which the Trade Commission itself found to be correct — is true, nevertheless the Trade Commission, in sustaining that finding of the Commissioner of Patents, is assuming to review it. It is the question of the power of the Trade Commission to review the action of the Commissioner of Patents that is the paramount issue in this case. For the reasons set forth above, I think the Trade Commission has no such power.

 The Federal Trade Commission states the question thus: ' “Does the Federal Trade Commission as a matter of law lack jurisdiction to ban false and misleading advertising if the misleading representations concern a patented -device and are within the scope of representartions made to the Patent Office in connection with the application for the patent.” [Italics supplied],

 Specifically, the order of the Trade Commission requires the petitioners to cease and desist from representing that the device, or any substantially similar device, Will:
1. Eliminate or reduce back pressure.
2. Save gasoline or oil.
3. Increase the power of the motor or cause it to give bettor performance.
4. Draw carbon, oil, or moisture from the muffler.
5. Reduce the .vibration of the motor.
6. Give the motor greater acceleration or cause it to run more smoothly or more quietly.
7. Save tires.

 14 How. 539, 14 L.Ed. 532 (U.S. 1852).

 17 Wall. 453, 21 L.Ed. 700 (U.S. 1873).

 149 U.S. 355, 13 S.Ct. 879, 37 L.Ed. 766 (1893).