United States Gypsum Company v. National Gypsum Company/Dissent Black

by Hugo Black

United States Supreme Court

352 U.S. 457

United States Gypsum Company  v.  National Gypsum Company

 Argued: Nov. 5 and 6, 1956. --- Decided: Feb 25, 1957

Mr. Justice BLACK, with whom The CHIEF JUSTICE and Mr. Justice DOUGLAS, join, dissenting.

I would affirm the judgment of the United States District Court.

For many years appellees used patents belonging to the appellant, United States Gypsum Company, under certain license agreements. On March 8, 1948, this Court decided that on the record before it these license agreements constituted a conspiracy between Gypsum and its licensees to violate the Sherman Act. United States v. United States Gypsum Co., 333 U.S. 364, 68 S.Ct. 525, 92 L.Ed. 746. Appellees then ceased paying royalties under their license agreement until May 15, 1951, on which date the United States District Court rendered a final decree holding the license agreements null and void. On this latter date new patent licenses were obtained from Gypsum which did not contain the illegal provisions and were not part of a conspiracy to violate the Sherman Act. This is a suit to make appellees pay for the use of Gypsum's patents during the period of February 1, 1948, to May 1951. Gypsum seeks payment in five separate counts. Counts one and two assert claims under the old outlawed license agreements. I agree with the Court's holding that Gypsum cannot recover on these counts. I also agree that the patent misuse rule which bars recovery 'is an extension of the equitable doctrine of 'unclean hands' to the patent field.' I disagree with the Court's holding that Gypsum is not barred from attempting to recover for the use of its patents during the period on the other three counts of 'quantum meruit,' 'indebitatus assumpsit,' and 'infringement.'

In declining to permit Gypsum to recover under the license agreements the Court here necessarily does so on the ground that the licenses were a part of an unlawful conspiracy to violate the Sherman Act. That conspiracy existed as long as the illegal agreements remained in existence. ^[1] And the agreements could and did continue to exist whether or not their inseparable parts, ^[2] such as the price-fixing provisions, were enforced from time to time. Any attempt to enforce directly or indirectly any part of the illegal agreements shows that the agreements and the conspiracy were still in existence. The present holding suit clearly indicates their continuing existence during this period in question. The majority appears to recognize the coexistence of the license agreements and the conspiracy when it bars a recovery for the use of the patents so long as the suits are for 'royalties' under the contracts. But under the Court's holding persons who misuse their patents hereafter, and who could not, under our prior cases, recover compensation for patent use because of their illegal agreements, may now, in some instances, be able to recover full compensation by labeling their causes of action 'indebitatus assumpsit' or 'quantum meruit.' To permit a Sherman Act conspirator to recover for patent use under any label from a co-conspirator where the licensing agreement for that patent was held void as an integral part of the conspiracy runs counter to the doctrine of 'unclean hands.' That doctrine rests basically on the idea that the law leaves wrong-doers where it finds them. The Court does not do so here. Appellant and appellees have been found guilty of an unlawful conspiracy to violate the Sherman Act. Gypsum's patents were an essential part of that conspiracy. But by giving its lawsuits appropriate labels it has obtained an opportunity to seek compensation for the use of tools it supplied to violate the law. I agree with the District Court that to allow recovery on these differently labeled counts 'is but a left-handed, indirect method for recovering the royalties provided in the illegal license agreements.' As I see it this permits 'a licensor to be protected on an illegal contract merely because he chose one remedy rather than another on the same substantive issue.' Edward Katzinger Co. v. Chicago Metallic Mfg. Co., 329 U.S. 394, 399-400, 67 S.Ct. 416, 419, 91 L.Ed. 374. I think the Court's holding seriously weakens the patent misuse doctrine and thereby makes enforcement of the Sherman Act far more difficult. ^[3]

Notes

1. 'It is the 'contract, combination * * * or conspiracy, in restraint of trade or commerce' which § 1 of the Act strikes down, whether the concerted activity be wholly nascent or abortive on the one hand, or successful on the other.' United States v. Socony-Vacuum Oil Co., 310 U.S. 150, 225, 60 S.Ct. 811, 845, note 59, 84 L.Ed. 1129.
2. MacGregor v. Westinghouse Electric & Mfg. Co., 329 U.S. 402, 407, 67 S.Ct. 421, 423, 91 L.Ed. 380.
3. Some of the cases in which courts have utilized the doctrine to break up illegal combinations and practices are Morton Salt Co. v. G. S. Suppiger Co., 314 U.S. 488, 315 U.S. 788, 62 S.Ct. 402, 86 L.Ed. 363; B. B. Chemical Co. v. Ellis, 314 U.S. 495, 62 S.Ct. 406, 86 L.Ed. 367; United States v. National Lead Co., 332 U.S. 319, 67 S.Ct. 1634, 91 L.Ed. 2077; Hartford-Empire Co. v. United States, 324 U.S. 570, 65 S.Ct. 815, 89 L.Ed. 1198.