MacGREGOR v. WESTINGHOUSE ELECTRIC & MANUFACTURING CO.
No. 28.
Reargued November 14, 1946.
Decided January 6, 1947.
William B. Jaspert reargued the cause and filed a brief for petitioner.
Jo. Baily Brown reargued the cause and filed a brief for respondent.
Acting Solicitor General Washington, Assistant Attorney General Berge, Charles H. Weston and Philip Marcus filed a brief for the United States, as amicus curiae.
Mr. Justice Black
delivered the opinion of the Court.
This case, like that of Edward Katzinger Co. v. Chicago Metallic Mfg. Co., ante, p. 394, this day decided, involves the right of a patent licensee to defend a suit for royalties only under a licensing agreement which contains a price-fixing provision. Certain subsidiary questions are also raised.
Westinghouse Electric & Manufacturing Company owned Jones’ Patent No. 1,651,709. The invention claimed was a brazing “solder comprising copper and phosphorus as the main and essential constituents.” Westinghouse sued MacGregor for infringement. The litigation was settled, and MacGregor took a license from Westinghouse authorizing MacGregor to make, use, and sell solder containing the constituents described in Westinghouse’s patent claim. MacGregor agreed to pay 10% royalties on the net selling price of the solder. Sections 5 and 6 of the license agreement, set out below, required MacGregor to sell the solder for no less than the price Westinghouse charged its own customers. MacGregor paid royalties on solder he made and sold which contained only phosphorus and copper. Later he began to make and sell solders composed of phosphorus, copper, and tin, or phosphorus, copper, and silver. For a time he paid royalties on these. But he also applied for and obtained patents on these two latter solders which added tin and silver respectively to the phosphorus-copper combination. MacGregor then declined to pay royalties on these solders on the ground that they were not covered by Westinghouse’s patent. Westinghouse brought this suit for an accounting and payment of unpaid royalties in a Pennsylvania state court. Mac-Gregor filed an answer denying liability and asserting a counterclaim. His answer asserted that the solders which were described in his patents were not covered by Westinghouse’s patent. He alleged that the effort of Westinghouse to make him pay royalties on these solders constituted an unlawful exercise of Westinghouse’s patent monopoly and that Westinghouse should not be allowed to recover in the courts for this reason. In a counterclaim, he maintained that by inadvertence and mistake he had paid royalties on solders covered by his own patents. He charged that if the Westinghouse patent should be construed to cover these latter solders, it was invalid. He further contended that the price-fixing provision was a violation of the Sherman Act and the Clayton Act and constituted an unlawful use of Westinghouse’s patent monopoly which rendered the whole license agreement illegal. In his counterclaim MacGregor asked, not only for judgment for refund of the royalties alleged to have been inadvertently paid, but also for damages on account of the illegal restraint imposed upon him by the agreement.
The state trial court declined to consider the validity of the patent, holding that it was presumed to be valid, and that MacGregor as a licensee had no right to challenge it. Assuming the patent and all the claims in it to be valid on this theory, the state court found the claims broad enough in scope to cover all the solders manufactured and sold by MacGregor. The trial court did not give a like presumption to the validity of the patents issued to MacGregor, but held that the solders covered by those patents infringed the presumptively valid patents of Westinghouse. The state supreme court affirmed. 350 Pa. 333, 38 A. 2d 244. It agreed with the trial court that MacGregor was estopped to attack the validity of Westinghouse's patent. It recognized that there could be no estoppel in the present case under our decision in Sola Electric Co. v. Jefferson Electric Co., 317 U. S. 173, but for its interpretation of the Sola decision as applying only to suits in which the licensor sought affirmative relief to enforce compliance with the price-fixing provision. Since no such relief was asked in this case, the state supreme court felt that there was no existing controversy which involved the price-fixing provision- — that the questions of their effect and validity were “moot.” Thus it assumed, as did the petitioner in Katzinger Co. v. Chicago Metallic Mfg. Co., supra, that a royalty agreement was severable from price-fixing covenants.
For the reasons stated in today's Katzinger opinion we hold that the covenant to pay royalties was'not severable from the covenant to sell at fixed prices. Since Mac-Gregor invoked federal law to sustain his challenge to the validity of the patent, the alleged misuse of the patent, and the price-fixing covenant, his contentions raised federal questions not governed by state estoppel or contract severability rules. Sola Electric Co. v. Jefferson Electric Co., supra, 176-177; Scott Paper Co. v. Marcalus Co., 326 U. S. 249. Accordingly, we hold as a matter of federal law that the state supreme court was wrong in affirming the judgment in this cause on the ground that the licensee, MacGregor, was estopped to offer proof of his allegation of invalidity. This error will require, as the state court anticipated, that the cause be remanded for a new trial to determine the validity of Westinghouse’s patent. For we do not think that the present state of this record justifies acceptance of MacGregor’s contention that we should now pass on validity of the patent. If it be determined on remand that the patent is invalid, there is no question but that, as MacGregor contends, the price-fixing agreement violates the anti-trust laws. Katzinger Co. v. Chicago Metallic Co., supra; Sola Electric Co. v. Jefferson Electric Co., supra, at 175; Scott Paper Co. v. Marcalus Co., supra.
But there are alternative federal questions raised here by MacGregor upon which decision might turn even though Westinghouse’s patent be held valid. MacGregor pleaded that the price-fixing agreement so effectively wiped out all competition to Westinghouse in the manufacture and sale of these solders that the whole license contract should be held illegal as a violation of the Sherman and Clayton Acts. MacGregor also contended that the license contract should be held unenforceable in the courts on the ground that Westinghouse had attempted to use it to extend the patent’s scope beyond its lawful coverage. But since the cause must again be tried in the state court we shall not pass on either of these contentions at this time.
The judgment is reversed and the case remanded to the Supreme Court of Pennsylvania for proceedings not inconsistent with this opinion.
Reversed and remanded.
“5. Westinghouse grants this license on the express condition that the prices, terms and conditions of sale for use or sale in the United States of America, its territories and possessions of brazing solders embodying the invention covered by said Letters Patent and so long as such brazing solders continue to be covered by said patent, shall be no more favorable to the customer than those which from time to time Westinghouse establishes and maintains for its own sales of similar or competing brazing solders under such patent to such or other similarly situated customer purchasing in like quantities. Mac-Gregor shall be notified of all such prices, terms and conditions of sale fixed by Westinghouse.
“The prices, terms and conditions of sale of Westinghouse may be changed by Westinghouse from time to time, notice being given MacGregor, but not less than five days’ notice shall be given before any such change shall go into effect.
“6. It is agreed that it shall be regarded as an evasion of this agreement amounting to a breach thereof for MacGregor to reduce Westinghouse’s sale price or alter Westinghouse’s selling terms and conditions of sale directly or indirectly either through its own organization, its agents or others by any device, subterfuge or evasion or by any means whatever or to make the prices lower or the terms or conditions more favorable than those set forth by Westinghouse.”
Copper, phosphorus and tin solder is Patent No. 2,125,680; copper, phosphorus and silver solder is Patent No. 2,162,627.
The agreement to fix prices, if unlawful at all, was so whether it was executed or not. United States v. Socony-Vacuum Oil Co., 310 U. S. 150; American Tobacco Co. v. United States, 328 U. S. 781, 810. But this agreement by MacGregor to sell at fixed prices was no mere token, for the trial court found that on July 11, 1940, Westinghouse called MacGregor’s attention to his obligation to observe user and distributor prices, and that on October 23, 1940, Westinghouse, through one of its attorneys, wrote MacGregor’s attorney that “if MacGregor sells direct to the user, he should conform to the user prices established, and when he sells direct to the dealer, he should conform to the dealer prices established.” The oral testimony of Westinghouse’s representatives construed the contract as requiring Mac-Gregor to maintain the prices. Moreover, the record before us shows that MacGregor positively testified that he had maintained the Westinghouse prices on the copper-phosphorus combination because he considered himself bound to do so under the license contract.
Since the case is to be remanded for trial of the validity of the patent, we find it unnecessary to consider the propriety in any event of indulging a presumption of validity in favor of Westinghouse’s patent without giving a presumption of a patentable difference to those of MacGregor. See Miller v. Eagle Manufacturing Co., 151 U. S. 186, 208.
U.S. Court of Customs and Patent Appeals U.S. Court of International Trade U.S. Court of Claims, Court of Federal Claims U.S. Court of Military Appeals, renamed as Court of Appeals for the Armed Forces U.S. Court of Military Review U.S. Court of Veterans Appeals U.S. Customs Court U.S. Court of Appeals, Federal Circuit U.S. Tax Court Temporary Emergency U.S. Court of Appeals U.S. Court for China U.S. Consular Courts U.S. Commerce Court Territorial Supreme Court Territorial Appellate Court Territorial Trial Court Emergency Court of Appeals Supreme Court of the District of Columbia Bankruptcy Court U.S. Court of Appeals, First Circuit U.S. Court of Appeals, Second Circuit U.S. Court of Appeals, Third Circuit U.S. Court of Appeals, Fourth Circuit U.S. Court of Appeals, Fifth Circuit U.S. Court of Appeals, Sixth Circuit U.S. Court of Appeals, Seventh Circuit U.S. Court of Appeals, Eighth Circuit U.S. Court of Appeals, Ninth Circuit U.S. Court of Appeals, Tenth Circuit U.S. Court of Appeals, Eleventh Circuit U.S. Court of Appeals, District of Columbia Circuit (includes the Court of Appeals for the District of Columbia but not the District of Columbia Court of Appeals, which has local jurisdiction) Alabama Middle U.S. District Court Alabama Northern U.S. District Court Alabama Southern U.S. District Court Alaska U.S. District Court Arizona U.S. District Court Arkansas Eastern U.S. District Court Arkansas Western U.S. District Court California Central U.S. District Court California Eastern U.S. District Court California Northern U.S. District Court California Southern U.S. District Court Colorado U.S. District Court Connecticut U.S. District Court Delaware U.S. District Court District Of Columbia U.S. District Court Florida Middle U.S. District Court Florida Northern U.S. District Court Florida Southern U.S. District Court Georgia Middle U.S. District Court Georgia Northern U.S. District Court Georgia Southern U.S. District Court Guam U.S. District Court Hawaii U.S. District Court Idaho U.S. District Court Illinois Central U.S. District Court Illinois Northern U.S. District Court Illinois Southern U.S. District Court Indiana Northern U.S. District Court Indiana Southern U.S. District Court Iowa Northern U.S. District Court Iowa Southern U.S. District Court Kansas U.S. District Court Kentucky Eastern U.S. District Court Kentucky Western U.S. District Court Louisiana Eastern U.S. District Court Louisiana Middle U.S. District Court Louisiana Western U.S. District Court Maine U.S. District Court Maryland U.S. District Court Massachusetts U.S. District Court Michigan Eastern U.S. District Court Michigan Western U.S. District Court Minnesota U.S. District Court Mississippi Northern U.S. District Court Mississippi Southern U.S. District Court Missouri Eastern U.S. District Court Missouri Western U.S. District Court Montana U.S. District Court Nebraska U.S. District Court Nevada U.S. District Court New Hampshire U.S. District Court New Jersey U.S. District Court New Mexico U.S. District Court New York Eastern U.S. District Court New York Northern U.S. District Court New York Southern U.S. District Court New York Western U.S. District Court North Carolina Eastern U.S. District Court North Carolina Middle U.S. District Court North Carolina Western U.S. District Court North Dakota U.S. District Court Northern Mariana Islands U.S. District Court Ohio Northern U.S. District Court Ohio Southern U.S. District Court Oklahoma Eastern U.S. District Court Oklahoma Northern U.S. District Court Oklahoma Western U.S. District Court Oregon U.S. District Court Pennsylvania Eastern U.S. District Court Pennsylvania Middle U.S. District Court Pennsylvania Western U.S. District Court Puerto Rico U.S. District Court Rhode Island U.S. District Court South Carolina U.S. District Court South Dakota U.S. District Court Tennessee Eastern U.S. District Court Tennessee Middle U.S. District Court Tennessee Western U.S. District Court Texas Eastern U.S. District Court Texas Northern U.S. District Court Texas Southern U.S. District Court Texas Western U.S. District Court Utah U.S. District Court Vermont U.S. District Court Virgin Islands U.S. District Court Virginia Eastern U.S. District Court Virginia Western U.S. District Court Washington Eastern U.S. District Court Washington Western U.S. District Court West Virginia Northern U.S. District Court West Virginia Southern U.S. District Court Wisconsin Eastern U.S. District Court Wisconsin Western U.S. District Court Wyoming U.S. District Court Louisiana U.S. District Court Washington U.S. District Court West Virginia U.S. District Court Illinois Eastern U.S. District Court South Carolina Eastern U.S. District Court South Carolina Western U.S. District Court Alabama U.S. District Court U.S. District Court for the Canal Zone Georgia U.S. District Court Illinois U.S. District Court Indiana U.S. District Court Iowa U.S. District Court Michigan U.S. District Court Mississippi U.S. District Court Missouri U.S. District Court New Jersey Eastern U.S. District Court (East Jersey U.S. District Court) New Jersey Western U.S. District Court (West Jersey U.S. District Court) New York U.S. District Court North Carolina U.S. District Court Ohio U.S. District Court Pennsylvania U.S. District Court Tennessee U.S. District Court Texas U.S. District Court Virginia U.S. District Court Norfolk U.S. District Court Wisconsin U.S. District Court Kentucky U.S. Distrcrict Court New Jersey U.S. District Court California U.S. District Court Florida U.S. District Court Arkansas U.S. District Court District of Orleans U.S. District Court State Supreme Court State Appellate Court State Trial Court Eastern Circuit (of the United States) Middle Circuit (of the United States) Southern Circuit (of the United States) Alabama U.S. Circuit Court for (all) District(s) of Alabama Arkansas U.S. Circuit Court for (all) District(s) of Arkansas California U.S. Circuit for (all) District(s) of California Connecticut U.S. Circuit for the District of Connecticut Delaware U.S. Circuit for the District of Delaware Florida U.S. Circuit for (all) District(s) of Florida Georgia U.S. Circuit for (all) District(s) of Georgia Illinois U.S. Circuit for (all) District(s) of Illinois Indiana U.S. Circuit for (all) District(s) of Indiana Iowa U.S. Circuit for (all) District(s) of Iowa Kansas U.S. Circuit for the District of Kansas Kentucky U.S. Circuit for (all) District(s) of Kentucky Louisiana U.S. Circuit for (all) District(s) of Louisiana Maine U.S. Circuit for the District of Maine Maryland U.S. Circuit for the District of Maryland Massachusetts U.S. Circuit for the District of Massachusetts Michigan U.S. Circuit for (all) District(s) of Michigan Minnesota U.S. Circuit for the District of Minnesota Mississippi U.S. Circuit for (all) District(s) of Mississippi Missouri U.S. Circuit for (all) District(s) of Missouri Nevada U.S. Circuit for the District of Nevada New Hampshire U.S. Circuit for the District of New Hampshire New Jersey U.S. Circuit for (all) District(s) of New Jersey New York U.S. Circuit for (all) District(s) of New York North Carolina U.S. Circuit for (all) District(s) of North Carolina Ohio U.S. Circuit for (all) District(s) of Ohio Oregon U.S. Circuit for the District of Oregon Pennsylvania U.S. Circuit for (all) District(s) of Pennsylvania Rhode Island U.S. Circuit for the District of Rhode Island South Carolina U.S. Circuit for the District of South Carolina Tennessee U.S. Circuit for (all) District(s) of Tennessee Texas U.S. Circuit for (all) District(s) of Texas Vermont U.S. Circuit for the District of Vermont Virginia U.S. Circuit for (all) District(s) of Virginia West Virginia U.S. Circuit for (all) District(s) of West Virginia Wisconsin U.S. Circuit for (all) District(s) of Wisconsin Wyoming U.S. Circuit for the District of Wyoming Circuit Court of the District of Columbia Nebraska U.S. Circuit for the District of Nebraska Colorado U.S. Circuit for the District of Colorado Washington U.S. Circuit for (all) District(s) of Washington Idaho U.S. Circuit Court for (all) District(s) of Idaho Montana U.S. Circuit Court for (all) District(s) of Montana Utah U.S. Circuit Court for (all) District(s) of Utah South Dakota U.S. Circuit Court for (all) District(s) of South Dakota North Dakota U.S. Circuit Court for (all) District(s) of North Dakota Oklahoma U.S. Circuit Court for (all) District(s) of Oklahoma Court of Private Land Claims