by the general public by reason of a violation of the anti-trust laws. It asserts that this exception is recognized impliedly by the following authorities: General Electric Company v. Minneapolis Electric Lamp Company (D.C.) 10 F.2d 851; Radio Corporation v. United Radio & Electric Corp. (D.C.) 50 F.2d 206; Western Electric Company v. Pacent Reproducer Corporation (D.C.) 53 F.2d 639; Radio Corporation v. Majestic Distributors (D.C.) 53 F.2d 641; Radio Corporation v. Duovac Radio Tube Corporation (D.C.) 6 F. Supp. 275.
In those cases, excepting that of the United Radio & Electric Co., there were no allegations that suggest any special injury to the defendants by reason of illegal violations of the anti-trust laws. The defendant does not point to any specific statement of the principle on which he relies. The strongest language, in the cases cited to sustain the defendant, is that found in Radio Corporation v. Majestic Distributors, supra (D.C.) 53 F.2d 641, 643, in which the court said: "If the defendant could plead some equity special to itself and not generally a violation of certain laws of the United States, not affecting title but merely in connection with the use made of the patents, we would have a different question presented."
It may be reasonable to suppose that if a defendant could allege a direct injury by reason of a violation of the anti-trust laws by the plaintiff, it would constitute a defense on general equitable principles. Georgetown v. Alexandria Canal Company, 12 Pet. (37 U.S.) 91, 97, 9 L. Ed. 1012; General Electric Company v. Minneapolis Electric Lamp Company (D.C.) 10 F.2d 851, 854; Bisphanes Principles of Equity, § 439. It is safe to assume that such may be the law for the purpose of deciding the question of the validity of the defenses here; for the defendant is unable to show that he has sustained any special damage.
The defendant is being sued for infringement of the plaintiffs' patents. The defendant had no rights, granted by the plaintiffs, to use these patents; although it asserts that it made every effort to obtain licensing agreements on reasonable terms. The defendant alleges that the sole reason for refusing to grant licenses to it was because of the existence of the plaintiffs' illegal agreement A-1, of November 21, 1932, which provides:
"2. In all cases of infringement of a patent of any party hereto in a field in which the licenses herein granted to another party include the general right to grant sub-licenses, if the party holding title to such patent shall not bring suit within thirty days after receipt from the other party of written notice and full information of such infringement together with a written offer from such party to pay half the cost and expenses of such suit, that (a) the party having given such notice, information and offer may at its own expense bring suit against the infringer in question in the name of the party holding legal title to the patent and (b) such party holding title to the patent shall assign to the other party all claims, demands and rights of action against the particular infringer designated in such notice on account of any and all past and future infringements of such patent in said field.
"3. If, however the party holding title to such patent shall bring suit against the infringer within thirty days after receipt of said notice and information from the other party, or independently thereof, then, any recoveries from the infringer shall be applied first toward the reimbursement of the costs and expenses of such suit and the remainder, if any, shall be divided between the parties as their interests appear. In any such case the party holding title to the patent shall not, without the consent of the party having the general right to grant sub-licenses, release or license the infringer or otherwise settle or dismiss the suit so far as concerns infringement in the fields in which such other party has the right to grant sub-licenses."
That agreement the defendant contends is in violation of the decree of the District Court for the district of Delaware, entered against the plaintiffs on November 21, 1932. Therein, the defendant says that it has suffered special damage apart from the general public. The fact is that the government approved agreement A-1 as lawful and consented to its execution. See quotation from said decree found on page 64 of defendant's amendments to answer and counterclaim filed herein.
The defects in the defendant's argument appear to be obvious, more or less. There are two reasons why it is unable to establish its defense. The patents are the plaintiffs' property, and, that being the fact, they may refuse to license or license as they choose. The owner of a patent has a limited monopoly. Radio Corporation v. United Radio & Electric Co., supra; United States v. American Bell Telephone Company, 167 U.S. 224, 17 S. Ct. 809, 42 L. Ed. 144; Paper Bag Patent Case (Continental Paper Bag Co. v. Eastern Paper Bag Co.), 210 U.S. 405, 28 S. Ct. 748, 52 L. Ed. 1122. Whether the refusal to license is based on a commendable or odious reason is immaterial. The law allows the inventor absolute property in his invention.
If it is assumed that the court has power to order an owner of a patent not to refuse to license an individual because the reason for the refusal involves the violation of the anti-trust laws, what would be accomplished? The decree would be worthless. The holder of the patent can refuse to grant a license arbitrarily. That is the privilege granted him by the patent law. That being so, the alleged illegality of the agreement cannot affect the defendant individually.
Nor does the court overlook the possible implication of the defendant's allegations that the owner of the patents involved is willing to grant the license but is unable to do so because of its alleged illegal agreement to restrain licensing with third persons. The same reasoning used above disposes of this position. Moreover, if the answer alleged such a fact and if infringement is conceded, the defendant itself is responsible for being unable to obtain licensing agreements. Under agreement A-1, the owner of a patent in the so-called pool is apparently entitled to license a person on mutually satisfactory terms until the owner has been notified by a party to the agreement that such person is an infringer and that a suit should be brought against the person. Should the defendant be an infringer, it must have been aware of the terms of the agreement, when it began to use the plaintiffs' property. Consequently, its position in equity ought not to be better than that in which it seeks to place the plaintiffs.
The defendant contends that the plaintiffs have come into this court with unclean hands. Keystone Driller Company v. General Excavator Company, 290 U.S. 240, 54 S. Ct. 146, 78 L. Ed. 293. That doctrine of equity is applicable only to cases where the plaintiff's unconscionable conduct is directly connected with the subject-matter of the suit. General Electric Company v. Minneapolis Electric Lamp Company (D.C.) 10 F.2d 851. In the Keystone Driller Company Case, supra, on which the defendant relies, the inequitable conduct of the plaintiff related to the validity of one of the patents in suit. The defendant is attempting to apply the doctrine of unclean hands to the alleged unlawful agreement A-1. As the court has pointed out, this agreement has no bearing on the issues of the validity or infringement of the patents in suit and does not touch the defendant individually.
The defendant insists that it has a license implied in law upon reasonable terms under the patents in suit because the plaintiffs have unlawfully restrained interstate commerce and, therefore, that the plaintiffs must hold their patents in trust for the public. The authority for this unusual contention is found in a sentence extracted from the opinion in the case of the Standard Oil Company v. United States, 283 U.S. 163, 51 S. Ct. 421, 425, 75 L. Ed. 926, which reads: "Unless the industry is dominated, or interstate commerce directly restrained, the Sherman Act [ 15 USCA §§ 1-7, 15 note] does not require cross-licensing patentees to license at reasonable rates others engaged in interstate commerce."
The meaning of the extract is so clear that it seems unnecessary to resort to the context of the opinion to find that the court was discussing whether or not onerous fees charged for licensing by cross-patentees violated the Sherman Anti-Trust Act (15 USCA §§ 1-7, 15 note). The remedies of the anti-trust laws are exclusive. Harms v. Cohen (D.C.) 279 F. 276; Witmark & Sons v. Pastime Company (D.C.) 298 F. 470; United States v. Babcock, 250 U.S. 328, 331, 39 S. Ct. 464, 63 L. Ed. 1011. There is no law that one who restrains trade forfeits one's property to any person who chooses to take it.
In relation to No. 4757, the defendant asserts that the suit is based on an illegal contract since it is being prosecuted by the Radio Corporation in the name of the General Electric Company under agreement A-1. The suit is based on the patents belonging to the General Electric Company. It is immaterial to the defendant as to how the costs of the suit are paid. The court has no power to pass on the legality of agreement A-1. The issues joined by the pleadings and before the court are the validity and infringement of the patents in suit.
Coming to the counterclaims, the defendant evidently attempts to state a cause of action based on section 16 of the Clayton Act (15 USCA § 26), which provides in part: "Any * * * corporation * * * shall be entitled to sue for and have injunctive relief * * * against threatened loss or damage by a violation of the antitrust laws, * * * when and under the same conditions and principles as injunctive relief against threatened conduct that will cause loss or damage is granted by courts of equity."
The defendant's position on the counterclaims involves largely a repetition of the discussion heretofore. It is established that the defendant must show a threatened loss or damage to itself to obtain relief under the statute. Connecticut Telephone & Electric Co. v. Automotive Equipment Company (D.C.) 14 F.2d 957, 967; Radio Corporation v. United Radio & Electric Corporation (D.C.) 50 F.2d 206. This the defendant is unable to do for the reason that it does not show as a matter of right that it is entitled to be licensed by the plaintiffs and the allegations of the pleadings will not support the argument that it could have obtained a license but for the alleged unlawful agreement A-1.
The defendant's pleadings do not, in fact, allege that if the agreement A-1 falls, it can obtain a license. His allegations are based on the statements in certain correspondence, principally in two letters, that were written by an officer of the General Electric Company to an officer of the defendant and by a firm which was apparently the General Electric Company's counsel to the president of the company. The two letters referred to are cogent enough to set out in part:
"Regarding transmitters, you are now being sued under our patents relating to them and therefore, under the opinion outlines in Mr. Neave's letter, mentioned above, we have no right, even should we desire to do so, to license you under these patents."
"Referring to our conversation of this morning, the rights of G.E. as to granting radio receiving tube licenses under its own patents are those fixed in the agreements of November 21, 1932 which were approved by the Government at the time when the decree was entered in the Government suit.
"G.E. now has the right to grant licenses to others under its own patents, except that it can grant no licenses to Hygrade Sylvania under the following patents: Langmuir 1244217, 1558437, Langmuir Re. 15278, Pike 1758803 and Hull 1855885.
"The reason for this exception is that, in accordance with one of the agreements of November 21, 1932, if RCA asks G.E. to bring suit under G.E. patents under which RCA has licenses with right to grant licenses to others, and G.E. does not do so, RCA may do so in the name of G.E.; in any such case G.E. cannot, without the consent of RCA, license the infringer so far as concerns infringement in radio fields. In accordance with this, suit has been brought against Hygrade Sylvania on the above mentioned G.E. patents, so the latter has no right to grant radio tubes licenses to Hygrade Sylvania under those patents, without the consent of RCA."
The allegations of the counterclaims in these suits are much like those in the United Radio & Electric Co. Case, supra, wherein this court struck the counterclaim. The defendant here has endeavored to go further in its allegations than heretofore attempted, but a close analysis of the pleadings filed in the United Radio & Electric Co. Case discloses considerable similarity.
It is unnecessary to discuss the question whether or not the counterclaims conform to the requirements of Equity Rule 30, 28 USCA following section 723. The grounds on which the court has disposed of the motions make it clear that the allegations of the counterclaims neither arise out of the transaction which is the subject-matter of the suit nor form the subject of an independent suit in equity against the plaintiffs. Texas Company v. Borne Scrymser (C.C.A.) 68 F.2d 104.
The motions to strike should be granted.
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