Mercoid Corp. v. Mid-Continent Investment Co.
320 U.S. 661 (1944)

Annotate this Case

U.S. Supreme Court

Mercoid Corp. v. Mid-Continent Investment Co., 320 U.S. 661 (1944)

Mercoid Corporation v. Mid-Continent Investment Co.

Nos. 54 and 55

Argued December 9, 1943

Decided January 3, 1944

320 U.S. 661

CERTIORARI TO THE CIRCUIT COURT OF APPEALS

FOR THE SEVENTH CIRCUIT

Syllabus

1. The owner of a system patent may not use it to secure a limited monopoly of an unpatented device employed in practicing the invention, even though the unpatented device is itself an integral part of the patented system. P. 320 U. S. 665.

2. In a suit for infringement of a combination patent, misuse of the patent to protect an unpatented element from competition is a defense available to a contributory infringer. Leeds & Catlin Co. v. Victor Talking Machine Co. (No. 2),213 U. S. 325, limited. P. 320 U. S. 668.

3. Exercise by an equity court of its discretion to withhold relief from a patentee who has misused his patent to secure a limited monopoly of unpatented material cannot be foreclosed by the failure of the defendant to interpose that defense in earlier litigation to which the alleged infringer was privy. P. 320 U. S. 670.

4. A judgment in a suit for infringement of a patent does not bar a claim based on § 4 of the Clayton Act which could have been, but was not, asserted as a counterclaim in the prior suit. P. 320 U. S. 671.

Where the second cause of action between the parties is upon a different claim, the prior judgment is res judicata not as to issues which might have been tendered, but only as to those upon the determination of which the finding or verdict was rendered. P. 320 U. S. 671.

5. A counterclaim based on § 4 of the Clayton Act may, under the Rules of Civil Procedure, be asserted in a patent infringement suit. P. 320 U. S. 671.

133 F.2d 803 reversed.

Certiorari, 319 U.S. 737, to review a decree which affirmed in part and reversed in part a decree of the District Court, 43 F.Supp. 692, in a patent infringement suit.

Page 320 U. S. 662

MR. JUSTICE DOUGLAS delivered the opinion of the Court.

This suit was brought by respondent, Mid-Continent Investment Co., against petitioner, Mercoid Corporation, for contributory infringement of the Cross combination patent No. 1,758, 146, issued May 13, 1930, for a domestic heating system. Mercoid, in its answer, denied contributory infringement and alleged that Mid-Continent should be barred from relief because it was seeking to extend the grant of the patent to unpatented devices. The alleged improper use of the patent was also the basis of a counterclaim filed by Mercoid in which it was averred that Mid-Continent and its exclusive licensee under the patent, respondent Minneapolis Honeywell Regulator Co., who was brought in as a party plaintiff, had conspired to expand the monopoly of the patent in violation of the antitrust laws. Mercoid asked not only for declaratory relief, but for an accounting and treble damages as well. The District Court found that Mercoid did not contribute to the infringement of the Cross patent; that respondents had conspired to establish a monopoly in an unpatented appliance beyond the scope of the patent and in violation of the antitrust laws, and that respondents were in no position to maintain the suit because of that conspiracy. Mercoid was granted an injunction, but its prayer for damages was denied. The Circuit Court of Appeals affirmed the judgment of the District Court in disallowing damages

Page 320 U. S. 663

under the counterclaim. In all other respects, it reversed that judgment, holding that Mercoid was guilty of contributory infringement under the rule of Leeds & Catlin Co. v. Victor Talking Machine Co., No. 2,213 U. S. 325, and that Carbice Corp. v. American Patents Corp.,283 U. S. 27, and Leitch Mfg. Co. v. Barber Co.,302 U. S. 458, did not bar recovery as the District Court had thought. 133 F.2d 803. The case is here on a petition for a writ of certiorari which we granted because of the public importance of the questions presented.

The controversy centers around the license agreement between Mid-Continent and Minneapolis Honeywell. By that agreement Minneapolis Honeywell received an exclusive license to make, use, sell, and to sub-license others to make, use, and sell the Cross combination patent No. 1,758,146. The royalty payments under the license, however, were to be based only upon sales of the combustion stoker switch which was an element of the combination patent embodied in the patented article, but which was itself unpatented. The license agreement was construed by the Circuit Court of Appeals to mean that the royalty payments were to be made only on switches used for fire maintenance purposes under the Cross patent. And Minneapolis Honeywell in advertising its stoker switches stated that the "right to use" the Cross system patent was "only granted to the user" when the stoker switches of Minneapolis Honeywell were purchased from it and used in the system. Neither Mid-Continent nor Minneapolis Honeywell manufactures or installs heating systems under the Cross combination patent. There was ample evidence to sustain the findings of the District Court that respondents endeavored to use the license agreement so as to prevent the sale or use of combustion stoker switches in these heating systems unless they were the switches made by Minneapolis Honeywell and purchased from it or its sub-licensees.

Page 320 U. S. 664

The patent is a combination or system patent, covering a domestic heating system which comprises three main elements -- a motor driven stoker for feeding fuel to the combustion chamber of a furnace, a room thermostat for controlling the feeding of fuel, and a combustion stoker switch to prevent extinguishment of the fire. The room thermostat functions to supply, or discontinue the supply of, heat by closing or then opening the circuit to the stoker motor at the required temperatures. The combustion stoker switch, or holdfire control, is responsive to a low temperature in the furnace causing the stoker to feed fuel so as to prevent the furnace fire from going out. The control of the combustion stoker switch is said to be effective in mild weather when the room thermostat may not call for heat for a considerable period.

Mercoid, like Mid-Continent and Minneapolis Honeywell, does not sell or install the Cross heating system. But the Circuit Court of Appeals found that Mercoid manufactured and sold combustion stoker switches for use in the Cross combination patent. And we may assume that Mercoid did not act innocently. Indeed, the Circuit Court of Appeals said that it could find no use for the accused devices other than in the Cross combination patent. And it assumed, as was held in Smith v. Mid-Continent Inv. Co., 106 F.2d 622, that the Cross patent was valid. But, though we assume the validity of the patent and accept fully the findings of the Circuit Court of Appeals, we think the judgment below should be reversed.

Ever since Henry v. A. B. Dick Co.,224 U. S. 1, was overruled by Motion Picture Co. v. Universal Film Co.,243 U. S. 502, this Court has consistently held that the owner of a patent may not employ it to secure a limited monopoly of an unpatented material used in applying the invention. Carbice Corp. v. American Patents Corp., supra; Leitch Mfg. Co. v. Barber Co., supra; 314 U. S. S. 665

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