Walker Process Equipment, Inc. v. Food Machinery & Chemical Corporation – Oral Argument – October 13, 1965

Media for Walker Process Equipment, Inc. v. Food Machinery & Chemical Corporation

Audio Transcription for Oral Argument – October 12, 1965 in Walker Process Equipment, Inc. v. Food Machinery & Chemical Corporation


Earl Warren:

Number 13, Walker Process Equipment Incorporated, Petitioner, versus Food Machinery & Chemical Corporation.

Mr. Collen you may continue with your argument.

Sheldon O. Collen:

Mr. Chief Justice, may it please the Court.

In the time available yesterday I undertook to demonstrate to the Court that the only claim Walker really asserts is the claim of monopolization per se so to say.

In Walker’s view, recourse to the relevant market is unnecessary to establish — excuse me, to establish monopolization.

Moreover, even if at this late date they should take the position that it is open to them to now establish a relevant market in support of a definition of monopolization.

Our position is, as I indicated yesterday, that after three counterclaims it would come too late.

I would like, as a point of departure this morning, to review very briefly the stricken pleading so that we will have it in front of us and so that it will be clear to everyone if the Court please that they claim nothing other than monopolization because there — our points in our brief which suggests some kind of analogy to illegal tying arrangements which are proscribed of course by Section 3 of the Clayton Act or by Section 1 of the Sherman Act.

There is nothing to support any such claim in their pleading.

Now, if the Court please, the stricken pleading appears on page 60 of the record.

They state in paragraph 15 that plaintiff including its predecessor illegally monopolized interstate and foreign commerce, that is their initial point of departure.

They then say that the plaintiff used its patent to restrict and impede competition in interstate and foreign commerce in the sale of equipment not covered by the patent in suit thereby monopolizing trade in the said commerce.

I might say parenthetically that to the extent of that paragraph which is paragraph 20 of the complaint appearing at page 62 of the record, may purport to set forth some kind of claim of illegal tie-ins.

They have abandoned any such claim.

That is not before the Court.

There is no question presented to the Court of illegal tie-ins.

I quoted that paragraph only to indicate that the — the final bottom line of it is that the assertion is FMC is monopolizing.

Finally, in paragraph 2, they talk about plaintiff’s unlawful monopoly.

And the proper relief, if the Court please, is that this constitutes a fraud, that is the unclean hands that they’re asserting, that this constitutes a fraud in the Patent Office and on this Court, a violation of antitrust laws and unjust enrichment of plaintiff.

Finally, in their brief at page 2 they say and I quote, “A lawful patent monopoly is a recognized exception to the monopolies prohibited by Section 2 of the Sherman Act”.

I suggest, if the Court please, as Mr. Justice Fortas proceeded yesterday, that the Walker argument proves much too much.

The argument is based on the proposition that a patent affords a monopoly and that upon removal of the protection of the patent was we are left with an illegal monopoly within the scope of Section 2 of the Sherman Act, then I suggest would mean that any patent invalid for any reason whether it’s by reason or fraudulent procurement or whether its by reasonable act of invention, or by reason of any other defect would have exactly the same consequence that Walker suggest in this case.

So the entire premise that the fraudulent procurement of patent amounts without more, prima facie or per se to monopolization under Section 2 really attempts to prove much more than they begin to find necessary to prove.

And because it proves much more than as necessary it shows I think the essential insufficiency of the concept.

Now, the Government however comes to their aid in a sense by producing a more discriminating argument.

The Government really directly defines the offensive monopolization.

At the Government’s brief at page 12, they say that the offensive monopolization under Section 2 is established by proof, one that the defendant possess the power to exclude competitors from the relevant market and that the powers deliberately obtained or maintained.

However, the Government rather than showing out its definition and applying it to the situation and asking where is the relevant market with respect to the patent which is suppose to constitute illegal monopolization under Section 2, takes the position for purposes of this case or I take it for purposes of any attack on the patent based on fraudulent procurement that the very scope of the patent’s claims somehow presumes market control.

So the Government by that kind of prestidigitation, by that kind of presumption with one fell swoop as it were eliminates the necessity of looking to the relevant market.

Whereas the Court has in case after case after case, in the various Government agencies in case after case have carefully examined in monopolization cases a question of what constitutes the relevant market because the talk of monopolization or a controllable market without talking about the prescribed market is really to talk about one side of a point without the other.

Is this the first case in which a claim of this kind, antitrust claim of this kind has been asserted in the lower courts?

Sheldon O. Collen:

Oh yes, Your Honor.

If —

There are no cases in the lower courts where this claim has been —

Sheldon O. Collen:

There are certain —

— either passed upon or commented upon?

Sheldon O. Collen:

No, there are not Your Honor.

There are no cases where the claim is that the fraudulent procurement of a patent is such.

The only attempted enforcement leaves you with the violation of Section 2 of the Sherman Act as illegal monopolization per se.

There is no case of that kind.

Now, there are cases if the Court please which is — are to be expected, where some kind of fraudulent procurement of a patent has been involved in a whole scheme or conspiracy or an attempted monopoly under Section 1 and Section 2 where like anything else, the fraudulent procurement of the patent comprises part of an overall plan to monopolize or part of an overall restraint of trade under Section 1.

Is that what you read the dictum of the Gypsum case to suggest?

Sheldon O. Collen:

Well, the Gypsum case, if the Court please —

Those are — you refer to that, doesn’t it?

Sheldon O. Collen:

No, I would say the Gypsum case — although the Court acknowledged and I believe it was Mr. Justice Reed who wrote the opinion that the decision at that point was not necessary for a decision of the case.

Well, its dictum — the Government admits that?

Sheldon O. Collen:

Yes, I would say that.

And likewise of course it’s a suit by the Government.

It isn’t a private suit where an individual is alleging injury.

However there is nothing in their case Your Honor which would suggest that the procurement of the patent by fraudulent means would ergo without more or constitute illegal monopolization under Section 2.

There we have a scheme of concert, a plan of action.

Now, the Government yesterday made no real efforts to support the proposition that a patent somehow is prima facie support for or evidence of market control.

I would like to suggest to the Court and I think there is no question about it that the case which they rely on, the Standard Stations case and the subsequent cases where the Court has in passing talked about a patent evidencing market control are strictly cases of tie-in agreements.

These are cases either under Section 3 of the Clayton Act or under Section 1 of the Sherman Act.

The question in those cases with respect to the patent is simply how much leverage is available to the patent holder as a means to accomplish his illegal tie-in.

For example, the inquiry really under Section 3 and that was the inquiry, in the Standard Stations case where the Court was comparing the perniciousness of requirements contracts to tying agreements.

The inquiry really is whether there is sufficient dominance over the tie-in product to have the leverage to be able to force the sale of the other products.

Now in that context, in the context of a tying arrangement where the question is really whether in fact there is actual power to accomplish a tying arrangement whether there’s actual power to force the customer to take something besides the tying product.

It — for illustrative purposes was said in the Standard Stations case and subsequently in Times-Picayune, that yes, for that purpose a patent may be prima facie evidence of market control.

But I suggest to the Court that although for that purpose, a patent may suggest some kind of market control or dominance, that does not mean that for purposes of Section 2 of the Sherman Act that a patent all by itself completely defines a relevant market and constitutes monopolization under Section 2 of the Sherman Act if it should turn out to be an unlawfully obtained patent.

Sheldon O. Collen:

I would like to quote in that connection and to summarize that suggestion to the Court from Times-Picayune, 345 U.S. at page 611.

There the Court said that Section 2 outlaws monopolization of any appreciable part of interstate commerce and by Section 1 unreasonable restraints are banned irrespective of the amount of commerce involved.

But the essence of illegality in tying agreements is the wielding of monopolistic leverage, a seller exploits his dominant position in one market to expand his empire into the next.

So I suggest to the Court finally that for purposes of understanding the basic nature of a tying agreement and the kind of control that had defended may have been such a situation.

Yes, for that purpose, control to a patent may suggest the capacity, the ability prima facie to force a tying arrangement.

But again, I suggest that has nothing to do with the definition of monopolization under Section 2 of the Sherman Act.

Now, I suggest if the Court please that that approach, that argument that the Government advances to relieve itself from the necessity of making a market investigation and to arrive at the concept of per se illegality is completely specious —

Has the patent expired?

Sheldon O. Collen:

Yes, the patent has expired.

In what year has it expired?

Sheldon O. Collen:

In 1961 — 1960, Your Honor.

I might say, in response to Miranda’s question, the suit was filed about six months before this patent expired.

It was the only known infringement by this defendant.

Now, for purposes of the counterclaim Your Honor and for purposes of the amendments to the counterclaim, under the Federal Rules of Civil Procedure, the amendments relate back to the date of filing of those counterclaims.

So for purposes of analysis of the case, the counterclaim speaks as of the date it was filed during which time the patent was still enforce in effect.

Abe Fortas:

Counsel, may I ask you a question?

Suppose that paragraph 20 were not abandoned, paragraph 20 in the counterclaims were not abandoned by the petitioner, you claim that it has been abandoned?

Sheldon O. Collen:

Yes sir.

Abe Fortas:

That’s the allegation of tie-in.

Is it your position that if that paragraph is still alive and not abandoned, nevertheless this counterclaim does not state a cause of action?

Sheldon O. Collen:

Yes it is Your Honor.

I think by the terms of paragraph 20, it — on its face it’s not sufficient to state a claims for illegal tie-ins.

I would like Your Honor if you please to read paragraph 17 of their previous amended counterclaim.

In that paragraph which was the father so to say of paragraph 20.

Byron R. White:

What page is that?

Sheldon O. Collen:

That’s at page 73, if the Court please.

There, on page 73 is the effort in their predecessor counterclaim to set forth some kind of claim of illegal tie-ins.

By their paragraph A and B, I think it will be perfectly apparent to the Court that all they were suggesting was that in connection with it’s offer of — a subject swing, refusal of units, FMC was off also selling a considerable amount of other equipment.

There was nothing in the predecessor paragraph 17 or those subparagraphs to suggest that they were tying or forcing and indeed they were not Your Honor and that is why when they finally framed it, the new paragraph 20, they eliminated the subparagraphs A and B because under its face, they did not a show a tie-in.

They did not brief this question in the Court of Appeals even though 20 was still in there.

Sheldon O. Collen:

We took the position then that they had abandoned it and there just — is not any tying situation in this case, if the Court please.

Abe Fortas:

Well, that may or may not be premature at this stage.

But let me ask you another question, suppose the counterclaim alleged in general terms that the plaintiff had monopolized trade in commerce, proposition one.

Proposition 2, that plaintiff had done this by use of a patent.

Proposition three, that the patent was fraudulently obtained.

Suppose the counterclaim had said that or couldn’t be construed to say that, would it still be your position that it would not state a valid cause of action?

Sheldon O. Collen:

No, I think Your Honor.

Under no circumstances, it would be open to them to establish monopolization.

But our position in this case is that they make it perfectly clear that that is not what they intend to do that they —

That would be a rather (Inaudible)

Sheldon O. Collen:

Yes, thank you Your Honor, I think it would.

But as I started out yesterday and as I’ll say again in passing and as I will finally conclude, the question they present to this Court, the position they’ve always asserted is this per se position.

And there was nothing else —

Byron R. White:

Well, is that the — except yesterday, the answer was that they are asserting the other position.

They may not have before, I don’t know about that.

But yesterday, the assertion was that if we do not agree with them that this is a per se matter that the — that they think the case should be remanded for the proceedings in the trial court.

Sheldon O. Collen:

If Your Honor please, I don’t believe counsel for Walker said that.

I think the Government mind that suggestion gratuitously as you press them to ascertain whether their position was for per se illegality.

I do acknowledge of course in the reply brief of Walker, they do with a wave of their hand say, “Well, if relevant, Walker has anything to do with it, we could always supply that.”

I suggest in that connections Your Honor that — and I suppose it’s only a truism, there must be an end to litigation at some point.

These people have taken this position twice in the District Court, once in the Court of Appeals.

They have successfully petitioned this Court to get a determination of the per se question, that they have insisted is what they’re asking for.

It should not be open to them under any circumstances after the filing of three counterclaims, after putting everybody in the judicial processes to work — to get an adjudication of that to decide they don’t need an adjudication of that.

They can just go back and set off with a new complaint.

They could have done that after we filed our motion to strike their first counterclaim and to dismiss it.

We said then and there, this is not —

Byron R. White:

That — they wouldn’t have done them any good in the lower courts.

In the theory of the lower court, they’ve applied anything they wanted to and it wouldn’t have got them to first pay?

Sheldon O. Collen:

Oh no, I don’t think that is correct if the Court please.

Byron R. White:

Well, what the — this Court of Appeals, it seems to me would’ve have thrown them out no matter what they plead.

Byron R. White:

This was an effort to cancel the patent and only the United States had the right to cancel it.

Sheldon O. Collen:

They — that is correct.

I think on that basis, the Court of Appeals would have thrown them out but that is —

Byron R. White:

Oh, the District Court.

Sheldon O. Collen:

I think on the same basis, the District Court were to throw them out.

But notwithstanding that that is not the question that they present at this point.

I would like to say Your Honor too, that when they file their original counterclaims, there was no suggestion of what they were really complaining about.

They did not refer to Section 1.

They didn’t refer to Section 2.

They didn’t refer to Clayton Act Section 3.

They just said this violates the antitrust laws, and in addition, as I’ve suggested to the Court —

Byron R. White:

(Inaudible) position of the District Court and the Court of Appeals.

It was that this was — that this couldn’t be made an antitrust case at all, wasn’t it?

Sheldon O. Collen:

That’s — that is correct Your Honor, on the basis of the way —

Byron R. White:

Yours was the same position that the Court took?

Sheldon O. Collen:


That is correct.

On the basis of the Court of Appeals decision, it could not be made into an antitrust case.

I suggest to the Court that that is probably an inaccurate position to take.

I think the Court of Appeals opinion is cryptic.

It’s impossible in some ways to determine when the Court is describing the position of the parties and when it’s reaching this conclusion.

But I would like to suggest to the Court that there was —


Sheldon O. Collen:

Well, that is certainly correct Your Honor.

That is certainly correct.


Sheldon O. Collen:

That’s correct Your Honor, no.

If the Court please — in returning to your inquiry Mr. Justice White, besides talking about antitrust violation they talked about unfair competition, they talked about unjust enrichment.

They argued to the Court of Appeals that they did not have the obligation to provide a legal category on the basis on which relief was available, that they were hurt in some way by the so-called fraudulent procurement.

They must have some remedy.

Sheldon O. Collen:

And the response to the proposition that they must have some remedy was the proposition finally adopted by the Court but not expressed if the Court please, in a very artistic fashion.

That there was no automatic conversion feature between this defense of unclean hands or fraudulent procurement and the availability of any kind of affirmative relief.

Now, that had been the law in the Seventh Circuit and the District Courts had followed that.

I agree that the problem of the opinion of the Court of Appeals would leave them if the Court of Appeals’ opinion stood in a position where under no circumstances they could — they plead a good and valid monopolization case under Section 2.

But I also suggest that the most that’s involved in the Court of Appeals’ opinion in — on that basis is a hypothetical question.

What the Court of Appeals in effect says and what bothers the Government in the Court of Appeals’ opinion is that the Gov — the Court of Appeals suggest that fraud in the Patent Office can never be part of a showing of violation of the antitrust laws.

Now if all that this Court were concerned with were the opinion of the Court of Appeals, then this Court would say, I suggest, that that is inaccurate.

That certainly, under appropriate circumstances, fraud on the Patent Office could be a violation of Section 1 or of Section 2.

But if we are left with only that hypothetical consideration, that cannot dispose of the litigation and I suggest very emphatically that that is not the question as they presented to this Court.

And what attracted the Government to this case, I suggest, and the reason they came in was an opportunity to find a new area of per se illegality.

Here where you have a patent allegedly procured by fraud.

You have Section 2 monopolization without more.

The relevant market is presumed and if the Court please, now the Justice Department should go out and get a summary judgment without any market investigation, without any study of the relevant factors.

If it can just establish that the patent was procured by fraud and then enforced, I suggest that is why the Justice Department came into this case.

If there were only the question of the correctness of the Court of Appeals’ opinion, the Justice Department would be unable to take the position it does by its question in this case.

In question two, which is the question for certiorari presented by Walker, would not really be controlling.

Now the Court, as I understand it, in the exercise of the certiorari jurisdiction is concerning itself with the question presented by the party and it is their question that they presented and we are undertaking as best as we can to show the insufficiency of their solution to the question.


Sheldon O. Collen:

I don’t believe so Your Honor because they contend that a component of the cause of action or the claim is that FMC undertook to enforce its patent against them.

So we filed a patent infringement suit back in 1960 while as of today there would be a problem because four years have expired since the last act in connection with the original cause of action.

But at that time they filed their counterclaim, there was no statutory limitations defense available to us.


Sheldon O. Collen:

As of today, I believe they would be barred, if the Court please.

Yesterday in response to questions from the bench and so to say the relevance of the relevant market to the concept of monopoly, counsel for the Government took the position that, well, sometimes we need relevant market and sometimes we have situations that are illegal per se and we don’t need a relevant market.

I would like if I can and if the Court please to try to underscore the situations where relevant market is necessarily and universally a requirement and I think it takes a very little analysis to get to that point.

When we’re talking about per se violations ordinarily we are in the realm of Section 1.

Section 1 of course as for its ultimate criterion the question of reasonableness, reasonableness of the restraint and the Court has held in a handful of situations price fixing, through boycotts perhaps unlawful tie-ins and horizontal divisions of market that in those situations the restraint is per se prima facie if it were illegal because it has no justification whatsoever.

It obviously and patently forecloses competition between competitors.

It’s only question under Section 1.

When we get to Section 2 however, we are not talking about foreclosing the competition of an individual competitor or suppressing the competition of an individual.

Sheldon O. Collen:

We are talking about either monopolization, attempted monopolization, or a combination or conspiracy to monopolize.

Now if the Court please, the act nowhere talks about a monopoly as Mr. Justice Holmes observed many years ago in the Northern Securities case having a monopoly is not the same thing by any means as the offensive monopolization.

The monopolization that the Court is talking about which for many, many seasons so to speak and in many, many cases, it is carefully defined relevant market.

The monopolization under Section 2 that it is talking about relates to some control, some capacity to exclude competition in some kind of a relevant market coupled with either an historical effort and intent to obtain that control or other unlawful conduct in that connection.

To eliminate from the concept of Section 2 monopolization, the feature of what is monopolized is, if the Court please, I think completely untenable.

Likewise, when we get into the area of Section 7 of the Clayton Act, again we are talking about the relevant market because we are talking about the possible adverse effect on competition or tendency to create a monopoly.

So when we look at a merger case as the Court did in Brown Shoe and seven rate merger cases since then, or when we look at a monopolization case under Section 1, we are looking to the market effects.

We are looking to the broad scope of the probability that competition will or will not be affected in some specified and relevant area.

That however is not the case under Section 1 where we’re just looking for suppression of competition as to an individual competitor.

And generally speaking, it is not the case as to Section 3 of the Clayton Act where we were likewise looking to the position of an individual upon whom products have been forced by reason of the control of the seller over some kind of a tie-in product.

So, it is not a question that the Court may sometimes say, “Well, we have to look to the relevant market in some other times.”

Say, “Well, we won’t look to the relevant market,” it’s purely and simply, if the Court please, a question of understanding the operation of the various provisions of the Sherman Act and of the Clayton Act.

And once again, I underscore and reemphasize that as far as monopolization under Section 2 is concerned, the result of what I say is that without a relevant market, there can’t be any monopolization.

I suggest too, as a matter of policy if the Court please, that we have in our society very few absolutes.

We have, as I have indicated, very few categories of per se liability.

In the complexity and the richness of our social and economic fabric, there are always distinctions.

There are always facts and circumstances.

There are always special situations that have to be considered.

Every time we establish some new category of per se liability, whether it’s under the Sherman Act or under any other provision of law, we are losing something of value because in the final analysis, there is no substitute for concrete investigation of the concrete facts and circumstances of a particular situation.

Now, if the Court please, I would like to consider, if I may, the apparent inappropriateness of this particular case for the Court to undertake to make any kind of pronouncements that might be construed by the lower court’s and the bar to be (Inaudible) or far reaching or constitute the development of a new category of liability under the antitrust laws.

Counsel for Walker yesterday elaborated at length and the alleged fraud in this case attempting to tar FMC Corporation with the black brush of bad conduct.

I would like to suggest to the Court that of course the conclusions of fraud for purposes of testing the sufficiency of the pleading are accepted, that is a necessary point in order to work off of a motion to dismiss.

However, I invite the Court’s rotation to the way Walker pleaded the question of fraud in its amended counterclaims, the predecessor to the stricken pleading.

There Walker said the plaintiff committed at least a technical fraud on the Patent Office by representing that the patent that not be on sale or in public use for more than a year.

At that time, when Walker was so pleading, it did not regard the fraud as some kind of vicious and horrendous and indefensible situation.

In addition, I would like to suggest to the Court and this is apparent from the record, the plaint — the original complaint shows that the patent is the Lannert Patent.

And FMC Corporation is a subsequent assignee of that patent.

Lannert was an employee of Chicago Pump Company.

The patent was applied for in 1942.

In 1954, FMC Corporation acquired all the assets of Chicago Pump Company.

Sheldon O. Collen:

Now, I think most likely from the standpoint of the rights of creditors and others, FMC company is of course liable for the acts of its predecessor although we have that situation from the standpoint of attributing to FMC Corporation most of the elements necessary to create the offense of monopolization namely, the monopoly power coupled with the monopolistic intent which is supposed to be evidenced by the fraudulent procurement of the patent.

From that standpoint, the case presents a peculiar wrinkle because it was a remote individual predecessor of FMC who applied for the patent and it was that individual if there was a fraud committed on the Patent Office who was guilty of that fraud.

Now, to take in a case where the facts have not been tried, where the facts are merely speculative and based on the allegations of the pleader and couple that remote intention with the subsequent activity of FMC Corporation in enforcing the patent and say that those two fit together to subject FMC Corporation to the offensive monopolization, that presents a problem which I think properly, if that were the question in the case, would have to be tried, the defenses would have to be tried out and the facts would have to be ascertained.

Those difficulties plus the very difficulty of the nature of their pleading and the ultimate confusion that they expressed in their briefs and in their proper relief suggesting really that what their complaining about is analogous to a tying situation which of course it really is not because this is not a leverage situation.

FMC has not used the patent to force anyone, let alone Walker, to acquire something in addition to the patent and product.

There is no tie-in.

There is no forcing of any kind.

So that the analogy really, if the Court please, simply has no bearing on the situation, couple that with the factor that when they say in their suggestion of damages that they were deprived of the opportunity to compete with Walker — excuse me, with FMC.

What they’re saying by that really is that if it were a Sherman Act Section 1 case, they had been injured, their competition were suppressed.

And accordingly because it looks like a Sherman Section 1 from that standpoint, they ought to have some kind of cause of action under the antitrust laws which of course they cannot allege because there’s no element of combination or conspiracy or contract which is requisite to Section 1.

And the finding in their previous pleadings and in their briefs, an effort is set forth some kind of common law fraud claim, some kind of claim of unfair competition.

It was seen really that if an action to a private party were available under Section 5 of the Federal Trade Commission Act, that that is really what their complaining about.

Some kind of unfair method of competition that Walker — excuse me, that FMC had this patent an item that they were unable to successfully compete with it.

And that FMC had fraudulently procured it that might be some method of unfair competition interdicted by Section 5 of the Federal Trade Commission Act.

We have all of these difficulties in this case.

It does not seem to lend itself to a definitive pronouncement by the Court in this state of the facts.

Nonetheless, I would like to make this perfectly clear once again if I may.

I am not suggesting that this case should go back to the District Court with an opportunity for them to amend this thing once more and to figure out if there is in some way now after having presented this per se question to this Court, isn’t there some way now that they can go ahead and state their claims for relief under Section 2 of the Sherman Act.

I am not suggesting that, if the Court please.

I’m suggesting only in the first instance that on the question presented, they have not stated a claim for relief.

Their legal theory leaves them up against the blind wall because they cannot simply equate the fraudulent procurement of the patent or a patent monopoly with Sherman Act monopolization.

And secondly, that they have had their day in court.

If every time a party were to lose on the basis of illegal theory, that it’s made three efforts to carry through the District Court and the Court of Appeals, and then up to the Supreme Court, if every time they could do that and start out all over again, we would never finish with the processes of litigation.

What was (Inaudible)

Sheldon O. Collen:

Complaint was filed in 1960, if the Court please.


Sheldon O. Collen:

There was an original counterclaim, which was twice amended, so they made three efforts to plead this counterclaim.

I suggest that the question of the discretion of the District Court not to grant a fourth opportunity to amend is really not something with respect to which this Court on certiorari would be particularly concerned with.


Sheldon O. Collen:

No, no, there was not Your Honor.

Sheldon O. Collen:

It was dismissed with prejudice so that they would have an opportunity to appeal or I think if they wanted to they could have wanted and asked for leave to amend whether it was dismissed with prejudice or not.

I think that’s just surplus verbiage when a counterclaim is dismissed.

It’s always open to a pleader to ask the Court for a leave to amend its pleading.

The Court obviously would have denied it because the Court had had several opportunities to review Walker’s theory.

Is there a stay or a legal (Inaudible)

Sheldon O. Collen:

No, there was not Your Honor because as Mr. Justice White has observed the nature of the Court of Appeal’s opinion was such that it foreclosed the possibility of relief under early circumstances.

I think if the Court please whatever remains of the position that we want to take that I have not touched on is adequately touched upon in our briefs and that bring the case I shall conclude.

Earl Warren:

Mr. Merriam.

Charles J. Merriam:

Mr. Chief Justice, Members of the Court.

I’ll start out by answering Mr. Justice White’s question as to whether we do say that if the Court decides this is not a per se violation we would like to go back and replay it and we would.

I thought I said it before but I’ll say it now.

Two, I’d like —

Byron R. White:

You never say it before?

Charles J. Merriam:

Alright, you mean in the lower court?

Earl Warren:


Charles J. Merriam:

No, I wasn’t in the lower court and I don’t know that anybody ever said it through the (Voice Overlap) —

Byron R. White:

Was it ever raised by anybody in the lower court as to the —

Charles J. Merriam:

I don’t —

Byron R. White:

— as to whether this pleading was sufficient in terms of the relevant market business.

Charles J. Merriam:

It’s my understanding that it was not.

The record doesn’t show that it was, but as Mr. Collen said, I wasn’t there so I can say no more than that.

I came into this case only after when taken by this Court.

Do you (Inaudible)

Charles J. Merriam:

I wouldn’t like to.

I’d like —


Charles J. Merriam:

I’d like to amend the pleading.

It’s not the kind of a —


Charles J. Merriam:

It’s not the kind of pleading I would have drawn.


Charles J. Merriam:

Second, I don’t know of any abandonment of the tie-in clause and I understand that there have been tie-ins.

Now, Mr. Collen says that was done.

I’ve talked to our people and they say it was not.

It’s not on the record that there was any withdrawal.

Mr. Collen said there are no cases in the lower courts passing on the point which is here.

There are in fact two of them cited in our brief which he never answered.

They are the Clinton case and the (Inaudible) case cited on pages 9 and 13 of our brief.

Off of which is squarely implied in which they — monopolization count was upheld against the motion to strike.

In the Briggs case, it was specifically because there had been an alleged fraud on the Patent Office in connection with the prior use, which is not revealed to it.

Those two cases have never been referred to at all by my opponent and they are there.

Hugo L. Black:

What was the name of the case?

Charles J. Merriam:

The Clinton against Briggs & Stratton on page 9 and the (Inaudible) case which I believe is on the same page.

They’re also cited on page 13 of our brief.

Mr. Justice Harlan asked about the effect of the statute’s limitations.

In that connection, I would like again to refer to the Hartford-Empire against Shawkee which is recited in our brief on the same page 9 and the subsequent case in the District — in the Court of Appeals where the patent had been set aside by fraud 11 years after the event.

And they held that while the statute of limitations was gone, I mean, had passed and expired, a recovery would be allowed simply on the ground of improper use of the patent.

And among those was attorneys fees, they refused to allow a business recovery not on the ground of statute of limitations but on the ground that it had not been proved properly.

The matter of relevant market, it’s really — has come up here for the first time.

I think as Mr. Justice Black says doesn’t belong here for discussion at all.

As to Mr. Justice Black’s question, I wouldn’t say however that — I think that we have a tendency, I’m primarily a patent lawyer and not an antitrust lawyer, we have a tendency to make secondary rules of construction of revenues and then forget that they are secondary such as change or form doesn’t amount to invention.

That’s only in its evidence, it isn’t, the ultimate fact is whether or not there was invention, there was unobvious.

So here, the ultimate fact is whether or not the plaintiff had — was able to control prices in the industry.

If he was able to control prices, relevant market is not of importance at all.

It’s only important as it was in the Cellophane case to show because controlling prices is not normally an easy thing to do.

You have to take the eloquent evidence on it and in that case, there were plenty of other wrapping materials that indicated that there was no ability to control prices even though it had a monopoly, (Inaudible) of monopoly.

So here, the — it was left out of our second counterclaim, I would have put it in, in better form.

But on page 78 of the record the statement was made in paragraph 24 that before the patent expired, the prices were $150 a lineal foot and sometimes higher possibly and that after the patent expired there were $50 a running foot which certainly shows right off there that there was a controlled price.

Furthermore, Mr. Forrest, their man, said on page 50 that they had to control not only of the action lifter, but they had virtually no computation throughout the life of the patent in swing diffusers.

Not just a patent of swing diffusers but any swing diffusers.

Charles J. Merriam:

So that there are facts in this record which show not only there was control of prices and control of competition, but that the relevant — what the relevant market was.

Byron R. White:

What was it, swing diffusion?

Charles J. Merriam:

I would say diffusion equipment including the swing diffusers.

And on page 76 and 77 there’s quite a discussion of that a very poor form showing —

Byron R. White:

There’s no evidence.

There’s not — there’s no evidence constructed to show what other things besides swing diffusers could do the job that swing diffusers do.

Charles J. Merriam:

Well, the record shows that when we bid on diffusers per se, and this is on 77, and got the award that the municipality was persuaded unless we have their swing diffuser, we shouldn’t be even allowed to put in our diffusers.

Byron R. White:

Well, it doesn’t reach it quite, doesn’t it?

Charles J. Merriam:

No, the case is not gone to evidence yet.

There has been no real evidence taken on the point of the monopolization.

The evidence was taken on the issue of fraud.

Byron R. White:

Are there licensees of the patentee or —

Charles J. Merriam:

That isn’t in the record and I know of none on this patent, of course the patent has expired.

Byron R. White:

So the patentee made and sold them all himself?

Charles J. Merriam:

That’s my understanding.

That would — the record would so indicate.

Byron R. White:

Is this a — is this kind of fraud a — if it were proved, is it a criminal, is it a violation of any criminal law?

Charles J. Merriam:

Oh, I would take it would be.

Byron R. White:

But if the general — is this the general fraudulent misrepresentation?

Charles J. Merriam:

Well, the — in order to file —

Byron R. White:

(Voice Overlap)

Charles J. Merriam:

— the patent there must be an old file representing that there was no prior public use more than a year before.

That oath was filed in accordance with the Patent Office rules and it’s my understanding that there is a criminal statute which would apply.

Of course the statue would be — the statute limitations has long passed on it.

Byron R. White:

Well, would that start to run when they opened this file or when somebody learns it was wrong?

Charles J. Merriam:

I don’t know.

I should — there are some cases that I can’t held in my fingertips that might — would indicate it starts when the oath is made.

We didn’t find out about it for sure until well into 1962, and our motion for summary judgment was not filed until September of 1962.

And up to that time, there was no definite proof of it in our opinion.


Charles J. Merriam:

Well, I think they would have to show that there was some damage.


Charles J. Merriam:

I think they’d have to show that somebody was harmed by reason of it.


Charles J. Merriam:

In order to recover any damages or to —


Charles J. Merriam:

Into criminal —


Charles J. Merriam:

Yes, I think they could.

I think they could.

And if I could answer it in that same connection Mr. Justice Fortas’ question to Mr. Friedman as to the matter of whether we claim that this should apply to more than fraud, whether a state should be, justify such an action.

It’s my position that anything that can be shown to be bad faith and that’s what some of these cases have held that I cited, should be the basis for such an action.

In other words, if the patent have — if the patent infringement suit is brought in bad faith for the purpose of obtaining monopolization, I think there might be an action.

But just on a simple mistake, I do not think so and there’s a reason which I don’t know that Mr. Friedman would have like to have set forth because the person who issues the patent is the Government.

And if the Government issued the patent period by a mistake, there might be a question of Government liability or sovereign immunity comes in but isn’t what it used to be and —

Abe Fortas:

But sir, when you look at it from a point of view the antitrust law, does it make any difference why the patent is invalid?

As I understand you now, you’re asserting the proposition that if someone uses a patent and if that patent is invalid because it was fraudulently obtained, there follows automatically a cause of action under the antitrust laws regardless of what the patent is or what it covers, regardless of general market conditions.

Charles J. Merriam:

Yes, Your Honor.

Abe Fortas:

It’s my understanding that that is your position.

Charles J. Merriam:

It’s my position.

Abe Fortas:

Now if that is so, from the point of view of the antitrust laws, what difference does it make whether the invalidity of the patent was due to fraudulent procurement or to some other reason?

Charles J. Merriam:

Because so long as the patent owner is operating in good faith, under the basis of a Government grant of the patent, I don’t think he could possibly commit a wrong.

It’s only when he’s not operating in good faith that I think any wrong could be done.


Abe Fortas:

So that in terms of antitrust doctrine, it’s my understanding that good faith or bad faith is inconsequential.

Charles J. Merriam:

On the question of intent, I would agree.

But I think that this Court, as well as other courts, I don’t have the citations here, has always held that a patent issue is a shield against the antitrust laws and it has been so considerate.

I don’t think that shield should be asserted where the thing is a — where the patent has been obtained in bad faith and that’s my position here.

The matter of the FMC as against Chicago Pump has never been raised before, fraud as a matter will have to prove if we get them when we go back.

Mr. Collen did not answer my statement earlier what I made in my opening that in 1956, on page 16 of the record, we wrote them a letter saying that it had come to our attention that there was a possible fraud in this connection.

Charles J. Merriam:

And record 62 shows that they — while they replied, they denied any duty to look into the matter.

And certainly, from that time on, I think we have no problem that the papers that which showed fraud were all in their possession as it turned out and that’s a matter of proof we’ll have to face when the time comes but it isn’t here.

Potter Stewart:

I wonder if I could ask Mr. Friedman a question Mr. Collen.


Potter Stewart:

Because — perhaps I misunderstood it, but if as I understood it, it seemed to me there was some disparity between your brief and your oral argument and I’d like to be straightened out.

As I read that part B of your brief, it’s the Government’s position that the use of a patent fraudulently procured regardless of the nature of the patent, and without more, constitutes a monopoly under the antitrust laws.

That’s what B seems to say to me and is that — do I understand that position correctly?

Daniel M. Friedman:

Yes Mr. Justice that is our position that they procure the enforcement of a patent procured by fraud without more is enough to establish the legal monopolization under Section 2.

As I’ve tried to indicate yesterday, if the Court is unwilling to accept that argument, we suggest that in any event, in any event, a case maybe grounded upon the enforcement of a patent procured by fraud in the sense that if that patent is deemed to give monopoly power in the relevant market, if the relevant market is a critical consideration, that the obtaining of the power through the procurement of the patent by fraud that is enough to show (Voice Overlap) —

Potter Stewart:

And you therefore exactly equate the meaning of the word “monopoly” as we know it in the patent law even though it’s a little gadget with the meaning of the word monopoly under the Sherman Act?

Daniel M. Friedman:

In —

Potter Stewart:

Do you exactly equate the two?

Daniel M. Friedman:

Well, we say this Mr. Justice.

We do it in limited case for the reasons I have given.

Now of course we recognize that in terms of the market and as I think this Court is self-recognized in the footnote in the Northern Pacific opinion that not every patent in the classical sense necessarily gives a monopoly and that it has complete power to exclude from all competing substitutes.

I mean some patents by definition may have a very small increment of advancement over other patents but we suggest basically two things.

I think, one, as I attempted to argue yesterday, when you deal with a special case of a patent that is procured by a fraud, the considerations which normally apply to defining a market don’t apply.

And then the second point I tried to make was — which I just made a moment — trying to make a moment ago to you, if it was — if that argument is to be rejected, if in fact even in this case the market need be defined, still the case should go back as we do think that even if the market has to be defined, the market power that rest on a fraudulent procured patent is enough in that situation to ground illegal monopoly if the requisite market position is sustained.

Going back to Justice Fortas’ question (Inaudible)

Daniel M. Friedman:

Well, I think Mr. Justice the distinction is that there is nothing fundamentally improper in attempting to assert your rights under a patent that the Government has given you were in good faith, you have obtained it, believing you have an invention.

If it turns out you’re wrong later on, if it turns out that contrary to your views, this is not a valid patent, there’s nothing odious about that.

But it seems this is a quite different case where you knowingly obtained from the Government the power to exclude people from the product covered by the patent, it seems —

The antitrust (Inaudible)

Daniel M. Friedman:

Well, I think —


Daniel M. Friedman:

But I think that there are areas Mr. Justice where you do look, you do look to the basic intention with which the power was acquired.

Byron R. White:

That’s for maybe for attempts to monopolize, but I’m not — I thought was sort of an — I agree with Mr. Justice Fortas, that was irrelevant, it was actually monopolization which you say it is.

Daniel M. Friedman:


Now, I would suggest incidentally Mr. Justice.

May I make one suggestion here that I don’t know conceivably on the basis of the facts alleged, it might be appropriate in the course of amending the pleading to amend it to suggest and attempt, I suppose if in fact that is what is shown here.

Byron R. White:

(Inaudible) I was — could understand that.But your general rule of — the general question is, why wouldn’t this apply for invalidity for lack of invention.

Daniel M. Friedman:

And when we — we suggest that this is a special case.

This is a special case.

I mean here what you have, here what you have is the monopoly power or the power, the power to exclude which patent gives is procured improperly.

It’s obtained, the power to exclude whatever it is excluding from, the power to exclude is obtained by virtue of making a (Voice Overlap) —

Byron R. White:

You feel that the patent is lost through that basis and nothing else?

Daniel M. Friedman:

I’m sorry I didn’t get it.

Byron R. White:

The shield that the patent affords you from the antitrust laws is lost for bad faith but nothing else, that’s your position.

Daniel M. Friedman:

I think yes, Mr. Justice, where you obtain it.

Where you obtain it — where you obtain it to misrepresenting the facts to the Government, you cannot then rely on it as a basis for excluding others.

I think that is our position.

Hugo L. Black:

(Inaudible) on the basis of the knowledge that the man has at the time he gets the patent, that its there whatever it is.

Are you drawing a distinction between an ordinary patent which nobody can tell whether it’s valid or not until they try it out and may be then they won’t know.

And you’d say there that the man can’t be held guilty of violating the monopoly law or intending to do it because all he intended to do was to use what he considers to be a valid patent.

Are you drawing a distinction between that and when where the man who gets the patent, gets it with knowledge, it’s no good, he is getting it in the way that he’d perjure himself in order to get it.

Therefore you say that in that instant, he has gotten the monopoly as the benefits of a monopoly out of the patent, or is trying to and if he is guilty of monopolizing or intending to monopolize?

Daniel M. Friedman:

That is precisely —

Hugo L. Black:

You do not say that if the patent might later be found to be invalid that necessarily means that a man violates the antitrust laws?

Daniel M. Friedman:

That is correct.

Hugo L. Black:

But here you claim that — your basic — whether right or wrong, as I understand it, on the premise.

This, as you charge, if this man committed perjury to get it, stating it was patentable when he knew it wasn’t, that he knew from the very beginning it was not patentable, and he was trying to use it for the purpose that the man can use a legitimate patent, which is to monopolize, fix prices, and fix the term of sale of the commodity?

Daniel M. Friedman:

That is correct.

Byron R. White:

Well, what the — was it the big argument about what a prior use is too, isn’t there?

Daniel M. Friedman:

There is, there is certainly Mr. Justice, but it —

Byron R. White:

And you may — a fellow might in a very good faith think he had — there hasn’t been a prior use.

Daniel M. Friedman:

That is correct, it may well be —

Byron R. White:

Why is that?

Daniel M. Friedman:

It may well be if this case goes —

Byron R. White:

Because he may — you may prove he’s wrong too and if there was a “fraud’ on the Patent Office (Voice Overlap) —

Daniel M. Friedman:

Well, I think —

Byron R. White:

— to disclose a prior use for this perfectly good faith?

Daniel M. Friedman:

Well, if and — if — I would suggest Mr. Justice, the allegation here is that they knowingly — they know it.

They obtained this patent knowing there had been a prior use, that they have made a full statement.

If this particular affidavit turns out not to satisfy those standards, I think there’s no case.

Potter Stewart:

Well, is that to say Mr. Friedman, that all distinction between a so-called legal fraud and equitable fraud, you limit this to legal fraud —

Daniel M. Friedman:

Well, I —

Potter Stewart:

— the actual knowledge of the —

Daniel M. Friedman:

I would suppose — I just haven’t gone in to that extent.

I think that there has to be some knowledge, something — so put it this way Mr. Justice.

I would say something that would shock the conscience of the Court that would make the Court believe it was improper.

They had obtained a patent improperly in a sense that they knowingly were getting monopoly, they had no right to get it.

Tom C. Clark:


Daniel M. Friedman:

It did.

No, I’m sorry.

This case did not go off on the pleading Mr. Justice.

Tom C. Clark:

So the —

Daniel M. Friedman:

As —

Tom C. Clark:

The allegation was that the — he fraudulently and intentionally (Inaudible)?

Daniel M. Friedman:


In that sense it went off on the pleading —

Tom C. Clark:

On the pleading —

Daniel M. Friedman:

In the sense that —

Tom C. Clark:


Daniel M. Friedman:

Yes, well that’s of course, correct.

I mean the case went off on the assumption that he could prove what he had alleged, that that didn’t allege a violation of the Sherman Act.

Is that allegation (Inaudible)?

Daniel M. Friedman:

I believe the allegation speaks of the plaintiff.

It says at page 60 of the record paragraph 15.

It says plaintiff including its predecessor.

Including its predecessor?

Daniel M. Friedman:

Including its predecessor.


Daniel M. Friedman:

I wouldn’t think so Mr. Justice.

But I do point out this to you that there’s again a dispute that it was a letter which was written in 1956 calling the attention of FMC to the fact of prior use, so that it may be that in effect they could be — I don’t know, again, this would be a question for the —

(Inaudible) a matter of proof?

Daniel M. Friedman:

Of proof, they might say that in fact having continue to enforce the patent and brought this suit after this knowledge, they are now — the knowledge of their predecessor may be imputed.

And in the comment, I did state in referring at page 60 to the obtaining the patent well knowing that it — that is the plaintiff had no basis for, this again it seem to — will be a question of proof.

Hugo L. Black:

I hope I didn’t understand you to (Inaudible) in order for us to decide even in whole or in part on your side, we have assume that it’s law that when a man gets the patent (Inaudible) conviction of the court, he thereby violates the antitrust law.

Daniel M. Friedman:

No, no.

Hugo L. Black:

That’s an extension of the (Inaudible) Doctrine —

Daniel M. Friedman:


Hugo L. Black:

— that I wouldn’t want to read.

Daniel M. Friedman:

No, I did not intend to suggest that Mr. Justice.

Hugo L. Black:

I’m sorry to take (Inaudible)