Zenith Radio Corporation v. Hazeltine Research, Inc.

PETITIONER: Zenith Radio Corporation
RESPONDENT: Hazeltine Research, Inc.
LOCATION: United States District Court for the Northern District of Illinois

DOCKET NO.: 80
DECIDED BY: Burger Court (1970-1971)
LOWER COURT: United States Court of Appeals for the Seventh Circuit

CITATION: 401 US 321 (1971)
ARGUED: Nov 10, 1970
DECIDED: Feb 24, 1971

Facts of the case

After refusing to renew a patent licensing agreement, Zenith Radio Corp., a radio and television manufacturer, was sued by Hazeltine Research, Inc., for patent infringement in United States District Court for the Northern District of Illinois. Zenith counterclaimed, alleging anti-trust violations, misuse of patents, and a conspiracy to restrain trade in Canada, England, and Australia. Zenith asked for treble damages and injunctive relief. Zenith contended that Hazeltine's license forced them to pay for use of unpatented products and that Hazeltine had illegally conspired with foreign patent pools to prevent Zenith from expanding into those markets.

Before trial, Zenith had stipulated that Hazeltine and its parent corporation were one entity for the purposes of litigation. The District Court entered judgment against Hazeltine and its parent corporation, awarding Zenith treble damages and injunctive relief. The Court of Appeals for the Seventh Circuit affirmed the damages award, but otherwise reversed the District Court's judgment. The Court of Appeals vacated all judgments against Hazeltine's parent corporation because Zenith's pretrial stipulation did not properly designate the parent corporation as a party to the litigation.

Question

Should Hazeltine's parent corporation be bound by the District Court's judgment? Was Zenith injured by Hazeltine's conspiracy with foreign patent pools?

Media for Zenith Radio Corporation v. Hazeltine Research, Inc.

Audio Transcription for Oral Argument - November 10, 1970 in Zenith Radio Corporation v. Hazeltine Research, Inc.

Warren E. Burger:

80, Zenith Radio Corporation against Hazeltine Research.

Mr. McConnell, you may proceed whenever you’re ready.

Thomas C. Mcconnell:

Mr. Chief Justice --

Warren E. Burger:

Mr. McConnell.

Thomas C. Mcconnell:

-- and may it please the Court.

I appear here on behalf of the Zenith Radio Corporation, the petitioner in this case.

It comes here by way -- the case comes here by way of certiorari to review an order of the court below, the Seventh Circuit Court of Appeals, which vacated an award of damages in favor of the Zenith Radio against Hazeltine Research Inc., the respondent.

The single damages were $6,297,391.00, which tripled, in a damage award and judgment of $19,077,173.00.

This is a second time this case has been before this Court on certiorari and to understand the present issue, I believe that it’s necessary for me to briefly review the prior proceedings.

In November of 1959, the respondent sued the petitioner in the United States District Court in Chicago for the infringement of an electronic patent.

The petitioner filed an answer setting up that the patent was invalid and that it was misused because its counterpart was placed in a patent pool in Canada known as Canadian Radio Patents Limited.

In May of -- May 22nd of 1963, the petitioner filed a counterclaim under the antitrust laws setting up that it had been interfered with in its business in attempting to export radio and television sets from the United States into the Canadian market.

Its business had been seriously damaged and asked for treble damages.

On a trial, the Trial Court found that Zenith had been damaged and in the Canadian market had been damaged to the extent of over $6 million, and on April 5, 1965 entered a judgment in favor of the petitioner and against the respondent in that amount of money.

After findings had been made and after the Court -- I mean a year after the case had been tried and the court had entered its findings and conclusions against the contentions of the respondent, the respondent appearing with new counsel attempted to bring into the case two new defenses, affirmative defenses so called, namely an attempt to plead the statute of limitations and an attempt to bring in a release, which had been executed in a prior proceeding against RCA, General Electric and Western Electric, a proceeding to which the respondent was not a part.

Are those issues not been raised in any way in the trial itself?

Thomas C. Mcconnell:

Those issues had not been raised in the trial itself because no pleading of the affirmative defenses was ever made at the time of the trial, and the first time they appeared was a year after the case had been tried and the proofs have been closed.

The Trial Court refused to reopen its findings and conclusions so far as the Canadian damage case was concerned and affirmed its judgment.

On appeal, the court below reversed the Canadian damage award on the ground that it said there was no fact of damage shown by the proofs in the case.

The case then came here by certiorari and this Court reversed the court below on the Canadian damage issue, and held that there was abundant proof of the fact of damage and held that the case should be sent back and remanded for further proceedings in accord with the opinion of this Court.

Now, I want to quote one paragraph from this Court’s prior opinion because it seems to me it really summarizes the whole case as it existed at that time.

This Court said in its prior opinion, “We conclude that the record evidence is sufficient to support a finding of damage resulting from events occurring after the beginning of that damage.

HRI frankly conceded the continuation of the pool before the District Court and it appears sufficiently clear that throughout the time Zenith was deprived, was always had been refused a license on pool patents preventing it to sell American-made merchandise in Canada.

And here, Zenith was denied a valuable license and submitted testimony that without the license, it had encountered distribution difficulties, which prevented it securing a share of the market, comparable to that which it had enjoyed in the United States and which its business proficiency demonstrated in the United States dictated it should have obtained in Canada.

CRPO was an established organization with a long history of successfully excluding imported merchandise and in view of its continued existence, during the damage period, the injury alleged by Zenith was precisely the type of loss that the claimed violations of the antitrust laws would be likely to cause.

The Trial Court was entitled to infer from this circumstantial evidence that the necessary cause or relation between the pool’s conduct and the claimed damage existed.

Now the claim damage was or may hear of damages, which has been approved by every Court that’s dealt with it here in this case, even the court below, with a comparison between what Zenith made in the way of profit in the American market against comparable competition to which it had in Canada.

And during the same period of time, and the theory of that was that we were comparing what Zenith could do in an open market as compared with what it couldn’t do -- could do in an absolutely closed and restricted market.

That computation showed that the best Zenith could do in Zenith during the damage period which is a definite four-year period from May 22, 1959 to June 1, 1963, the best that Zenith could do was 3%m well, there was one year that it went up I think 5%, but it started at 3% and it ended at 3% faced with the opposition of the pool.

In the United States on the other hand, it had 16% of the radio and television market.