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FARBENFABRIKEN BAYER, A.G. v. STERLING DRUG

July 15, 1957

FARBENFABRIKEN BAYER, A.G., a corporation, Plaintiff,
v.
STERLING DRUG, Inc., a corporation, Defendant



The opinion of the court was delivered by: SMITH

This is a civil action under the anti-trust laws, and particularly Section 1 of the Sherman Act, as amended, 69 Stat. 282, 15 U.S.C.A. § 1, and Sections 4 and 16, of the Clayton Act, 38 Stat. 731 and 737, 15 U.S.C.A. §§ 15 and 26. The action is brought by the plaintiff, a corporation organized under the laws of Germany, as the 'legal successor in interest' to certain rights of Farbenfabriken vorm v. Friedrich Bayer and Company, et als. The latter is hereinafter identified as 'Friedrich Bayer and Company.' The Complaint charges that the defendant and others, not named as defendants, are, and have been since 1918, engaged in a conspiracy in restraint of trade to the injury of the plaintiff. The plaintiff seeks to enjoin the alleged illegal restraint of trade and to enforce its claim for treble damages.

The defendant filed an answer in which it interposed as affirmative defenses: first, the bar of the statute of limitations, and second, the failure of the complaint to state a claim upon which relief can be granted. The defenses are raised at this time on the dual motion of the defendant, to wit, a motion for judgment on the pleadings under Rule 12(c) of the Federal Rules of Civil Procedure, 28 U.S.C.A., and a motion for summary judgment under Rule 56(b) of the Federal Rules of Civil Procedure, supra. The arguments advanced by the defendant in support of the motion are directed primarily to the allegations of the complaint.

 These motions, although cast in the form of motions for judgment under the said rules, we shall treat as appropriate motions to dismiss the complaint on the grounds stated.

 Complaint

 The complaint alleges generally that the defendant, and others not named, are, and have been, engaged in a conspiracy in restraint of trade in violation of the antitrust laws to the injury of the plaintiff. This general allegation, which pervades the complaint, is supported by specific allegations contained in 51 paragraphs. It should be noted that many of the paragraphs contain nothing more than a recital of the history of the plaintiff and its predecessors; this recital is relatively unimportant at this time. The essential allegations of the complaint may be briefly summarized. The references hereinafter made to the plaintiff and defendant may be regarded as including their predecessors, except where it is otherwise noted.

 The complaint alleges that: (1) The plaintiff and defendant are, and have been, engaged in the manufacture, sale and distribution of similar drugs and pharmaceutical products; (2) the defendant is, and has been, so engaged within the United States and in various other parts of the world; (3) the defendant is, and has been, directly and indirectly engaged in interstate and foreign commerce; (4) the plaintiff is, and has been, similarly engaged, except to the extent that its commerce within the United States is, and has been, limited by the alleged illegal restraints imposed upon it by the conduct of the defendant; (5) the defendant, by its conduct restrains, and has restrained, the plaintiff's entry into such commerce within the United States 'to the extent necessary to permit a commercially feasible operation in the field of drugs and pharmaceuticals'; (6) the defendant, pursuant to and in furtherance of a conspiracy in restraint of trade, has gained complete control of a 'substantial segment of the * * * market in the products' developed and produced by the predecessors of the plaintiff, to wit, Friedrich Bayer and Company and its subsidiary Bayer Co., Inc., of New York; (7) the defendant, in violation of the antitrust law, excludes, and has excluded, the plaintiff from the commercial market within the United States. The allegations herein summarized, couched in the most general terms and not particularized, are contained in paragraphs 1 to 12, inclusive, of the complaint.

 The complaint further alleges that: (1) with the advent of the First World War, the Alien Property Custodian seized the assets of Friedrich Bayer and Company, including the stock of its wholly owned subsidiary Bayer Co., Inc., of New York; (2) these assets, including the aforesaid stock, were sold to Sterling Products, Inc., a predecessor of the present defendant; (3) the predecessor of the present defendant thus acquired the ownership and control of certain trademarks, including the well-known 'Bayer Cross' and the trade name 'Bayer'; (4) thereafter, between 1920 and 1923, the predecessors of the present litigants negotiated and executed certain contracts under which the predecessor of the defendant acquired certain rights, including trademarks, patents and secret processes not identified in the complaint; (5) these contracts, concluded in 1923, were negotiated and executed by the predecessors of the plaintiff under 'economic duress'; (6) the predecessor of the defendant registered the trademarks, acquired from the Alien Property Custodian, in the United States and in other countries.

 The complaint further alleges that: (1) the contracts of 1923 were illegal and an imposition on the plaintiff's predecessors; (2) the defendant's predecessor acquired under these contracts complete control of trademarks, patents and secret processes theretofore owned by the plaintiff's predecessors; (3) the defendant and its predecessor, by its ownership and use of the trademarks, patents and secret processes thus acquired, are, and have been, in such control as to exclude the plaintiff and its predecessors from the commercial market within the United States; (4) the exclusion is, and was, 'as effective as it had been under the illegal agreements of 1923.' The specific charge, as we construe the allegations of the complaint, is that the defendant, having gained control of the commercial market by its acquisition of trademarks, patents and secret processes, continues to exercise that control, and, by the exercise of that control, excludes, and has excluded, the plaintiff and its predecessors from the commercial market within the United States.

 We shall assume for the purpose of discussion, but without deciding the general issue raised by the pleadings, that the conspiracy in restraint of trade, as charged in the complaint, existed, and that the conduct of the defendant and its predecessor, prior to 1941, was in furtherance of that conspiracy. This assumption is necessary if the allegations of the complaint are to be viewed in the light most favorable to the plaintiff, a course which must be adopted at this stage of the proceedings.

 There is no specific allegation in the complaint that subsequent to 1941 the defendant committed any overt act in furtherance of the alleged conspiracy. There is a general allegation that the plaintiff and its predecessors have been excluded from the commercial market within the United States since 1949 but this alleged exclusion, as we view it, cannot be regarded as an overt act; it must be regarded as the consequence of the earlier conduct of the defendant and its predecessor, the injury of which the plaintiff complains and for which it seeks redress in this action.

 If the exclusion of the plaintiff and its predecessors from the commercial market in the United States is ascribable to the conduct of the defendant and its predecessor, it is ascribable solely to the conduct of the defendant and its predecessor between 1918 and 1941. The exclusion, if it existed, became effective in 1923, when the agreements were concluded, and continued thereafter without any affirmative act by the defendant or its predecessor. It is not without significance that the plaintiff itself charges that the restraint of trade is, and was, occasioned by the earlier conduct of the defendant and its predecessor, particularly the acquisition of the trademarks, patents and secret processes, under the alleged illegal contracts.

 There is a further allegation which should be considered. It is alleged in paragraph 47 that: 'During 1954 and 1955 Sterling attempted by threats and intimidation to obtain from Bayer a waiver of its legal rights.' It is further alleged 'Bayer resisted all pressures. It refused to accede to demands to exclude it. It refused to acquiesce in the continuance of Sterling's monopoly and restraint against it.' There is no allegation that the intimidation was the proximate cause of any injury to the plaintiff. Therefore, even if we regard it as an overt act, it is not such an overt act as will support ...


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