1. In this suit for infringement of patents and breach of
contracts related thereto, the District Court's findings of fact
and conclusions of law sustained its judgment of dismissal on the
ground of the complainant's "unclean hands," and the Circuit Court
of Appeals' reversal of the judgment was erroneous. Pp.
324 U. S. 807,
324 U. S.
820.
2. The maxim "he who comes into equity must come with clean
hands" closes the doors of a court of equity to one tainted with
inequitableness or bad faith relative to the matter in which he
seeks relief, however improper may have been the behavior of the
defendant. P.
324 U. S.
814.
3. The "clean hands" doctrine is rooted in the historical
concept of a court of equity as a vehicle for affirmatively
enforcing the requirements of conscience and good faith. P.
324 U. S.
814.
4. While equity does not require that its suitors shall have led
blameless lives as to other matters, it does require that they
shall have acted without fraud or deceit as to the matter in issue.
P.
324 U. S.
814.
5. One's misconduct need not have been of such a nature as to be
punishable as a crime or as to justify legal proceedings, in order
to warrant invocation of the maxim. P.
324 U. S.
815.
6. Where a suit in equity concerns the public interest as well
as the private interests of the litigants, the "clean hands"
doctrine assumes greater significance, for if the equity court in
such case properly applies the maxim to withhold its assistance, it
not only prevents a wrongdoer from enjoying the fruits of his
transgression, but averts an injury to the public. P.
324 U. S.
815.
7. A suit to enforce patents and related contracts involves the
public interest, as well as interests of the adverse parties. P.
324 U. S.
815.
8. The far-reaching social and economic consequences of a patent
give the public a paramount interest in seeing that patent
monopolies spring from backgrounds free from fraud or other
inequitable conduct, and that such monopolies are kept within their
legitimate scope. P.
324 U.S.
816.
Page 324 U. S. 807
9. Those who have applications pending in the Patent Office or
who are parties to Patent Office proceedings have an uncompromising
duty to report to it all facts concerning possible fraud or
inequitableness underlying the applications in issue. Failure in
this duty is not excused by reasonable doubts as to the sufficiency
of the proof of the inequitable conduct, nor by resort to
independent legal advice. P.
324 U. S.
818.
10. A settlement of interference proceedings which is grounded
upon knowledge or reasonable belief of perjury, not revealed to the
Patent Office or to any other public representative, lacks that
equitable nature which entitles it to be enforced and protected in
a court of equity. P.
324 U. S.
819.
143 F.2d 332 reversed.
Certiorari, 323 U.S. 695, to review the reversal of a judgment
dismissing the complaints and counterclaims in two suits for
infringement of patents and breach of contracts.
MR. JUSTICE MURPHY, delivered the opinion of the Court.
The respondent, Automotive Maintenance Machinery Company,
charged in two suits that the various petitioners had infringed
three patents owned by it relating to torque wrenches. [
Footnote 1] It was further asserted
that the allegedly infringing acts also breached several contracts
related to the patents. In defense, the petitioners claimed,
inter alia, that Automotive possessed such "unclean
hands"
Page 324 U. S. 808
as to foreclose its right to enforce the patents and the
contracts.
The District Court, at the close of a consolidated trial on the
sole issue of Automotive's alleged inequitable conduct, delivered
an oral opinion holding that Automotive's hands were soiled to such
an extent that all relief which it requested should be denied. This
opinion was subsequently withdrawn at the request of one of the
witnesses, and is not a part of the record. At the same time,
however, the court entered written findings of fact and conclusions
of law forming the basis for a judgment dismissing the various
complaints and counterclaims "for want of equity." On appeal, the
Circuit Court of Appeals reviewed the facts at length and concluded
that the District Court's findings of fact were not supported by
substantial evidence and that its conclusions of law were not
supported by its findings. The judgment was accordingly reversed.
143 F.2d 332. We brought the case here because of the public
importance of the issues involved.
The basic facts necessary to a determination of the vital issues
are clear and without material dispute. In chronological order,
they may be summarized as follows:
In 1937 and prior thereto, Automotive manufactured and sold
torque wrenches developed by one of its employees, Herman W.
Zimmerman. During this period, Snap-On Tools Corporation was one of
its customers for these wrenches. Automotive also had in its employ
at this time one George B. Thomasma, who worked with Zimmerman and
who was well acquainted with his ideas on torque wrenches. In
November, 1937, Thomasma secretly gave information to an outsider,
Kenneth R. Larson, concerning torque wrenches. Together, they
worked out plans for a new wrench, although Thomasma claimed that
it was entirely his own idea.
After unsuccessfully trying to interest other distributors,
Larson made arrangements to supply Snap-On with
Page 324 U. S. 809
the new torque wrench. On October 1, 1938, Larson filed an
application for a patent on the newly developed wrench, which
application had been assigned to Snap-On several days prior
thereto. [
Footnote 2] Then in
December, 1938, Larson, Thomasma and one Walter A. Carlsen
organized the Precision Instrument Manufacturing Company to make
the wrenches to supply Snap-On's requirements. All three received
stock, and were elected officers and directors of the new company.
Manufacture of the wrenches began in January, 1939, and Precision
succeeded in taking away from Automotive all of Snap-On's business.
Thomasma continued to work for Automotive until the latter
discovered his connection with Precision and discharged him in
June, 1939. Thomasma's connection with Precision was also concealed
from Snap-On during most of this period.
Subsequently, on October 11, 1939, the Patent Office declared an
interference between certain claims in Larson's pending patent
application and those in one filed by Zimmerman. Automotive was the
owner of Zimmerman's application. Shortly after the interference
was declared, R. E. Fidler, Automotive's attorney, wrote to the
president of the company that the "whole situation confronting your
opponents in this interference is quite messy, and I will be
somewhat surprised if they fight the matter." He further wrote
that, if there was a contest "they surely will have a lot of
explaining to do."
In August, 1940, Larson filed his preliminary statement in the
Patent Office proceedings. In it, he gave false dates as to the
conception, disclosure, drawing, description, and reduction to
practice of his claimed invention. These dates were designed to
antedate those in Zimmerman's
Page 324 U. S. 810
application by one to three years. Larson also claimed that he
was the sole inventor of his wrench. When Fidler learned of this
preliminary statement, he immediately suspected that "there must be
something wrong with this picture," and suggested to Automotive's
president that a "very careful and thorough investigation" be made
of the situation. The president agreed. Fidler then employed
several investigators, who made oral reports to him from time to
time. According to Fidler's memoranda of these reports, Fidler
learned in great detail, in August and September, 1940, the part
that Thomasma played in the development of the Larson wrench and in
the organization of Precision. He discovered that Thomasma claimed
to have invented the wrench and that Larson "was now trying to
freeze him out."
From October 24 to November 4, 1940, Larson and eight witnesses
testified in the interference proceedings in support of his claims,
corroborating his statements as to dates despite cross-examination.
The day before this testimony ended Thomasma met with Fidler and
Automotive's president and stated that he had developed Larson's
wrench and that Larson's patent application was a "frame-up."
Fidler then procured from Thomasma an eighty-three page statement
concerning these matters, which Thomasma swore to on November 15.
As the District Court found, this statement or affidavit
"related in extensive detail the statements of Thomasma with
respect to Larson's early work and disclosed such intimate
knowledge thereof as to leave little doubt of the author's
knowledge of the facts."
With these facts before him, Fidler admitted that he "personally
was inclined to take the position that I should do something
drastic" in the form of taking the matter up with the Patent Office
or the District Attorney. He resolved his problem, however, by
submitting it to an outside
Page 324 U. S. 811
attorney. The latter advised him that his evidence was
insufficient to establish Larson's perjury, that the Patent Office
would not consider the matter until all proofs in the interference
proceedings were in, and that the District Attorney probably would
not touch the situation while the interference proceedings were
pending. Fidler followed his advice.
A few days later, Fidler informed Larson's patent attorney,
Harry C. Alberts, of the information disclosed in the Thomasma
affidavit. Alberts admitted that "it looked very much like Larson
had given false testimony," and asked that further examination of
Thomasma be made in his presence. Accordingly, on November 28,
Thomasma was examined orally before Alberts, Fidler, and officials
of Automotive and Snap-On. Thomasma repeated substantially the same
story as in his affidavit. Snap-On's president said that, if the
story were true, "the whole thing smells to the high heavens." And
Alberts remarked that, under the circumstances, he felt he would
have to withdraw as Larson's attorney.
On the same day, Alberts and Snap-On's president confronted
Larson and Carlsen with the Thomasma story and demanded an
explanation. Larson refused to commit himself on the truth of
Thomasma's account, but finally admitted that "my testimony is
false, and the whole case is false." Alberts then withdrew as their
attorney, [
Footnote 3] giving
them the names of three other lawyers, including M. K. Hobbs. The
fact that Alberts withdrew was communicated by him to Fidler.
Larson and Carlsen called on Hobbs the next day, November 29.
They told him they were willing to concede
Page 324 U. S. 812
priority in Zimmerman, and wanted Hobbs to settle the
interference proceedings. [
Footnote
4] Hobbs took the case on that basis, making no effort to
inquire into the reasons for the concession, since he considered
that matter immaterial. Even when Fidler tried to tell him later
about the perjury, Hobbs stopped him, for he "didn't want to hear
the conflict in testimony."
Hobbs immediately undertook to settle the interference
proceedings. On December 2, he proposed a settlement which included
a concession of priority by Larson, but this proposal was
apparently not satisfactory to all those concerned. Meanwhile,
Fidler presented the facts to another disinterested lawyer and
asked him whether he thought there was enough evidence to bring a
conspiracy suit for damages or a criminal action. The lawyer, after
admitting that he did not have the slightest doubt but that
Thomasma was telling the truth, replied in the negative.
On December 13, Fidler submitted a draft agreement that he had
prepared. This draft contained a recital that
"it has been determined by the parties hereto and their
respective counsel that the party Zimmerman is the prior inventor
of the subject matter involved in said Interference No. 77,565, as
well as all other subject matter commonly disclosed in said
Zimmerman and Larson applications."
But this draft was likewise unacceptable.
Page 324 U. S. 813
For a time, negotiations were broken off, and resumption of the
interference proceedings seemed imminent. One of the other
attorneys for Automotive wrote a letter on December 19 to Alberts,
who was still acting as attorney for Snap-On, stating that "you
must recognize that a large part of the testimony taken on behalf
of Snap-On and Larson is, to put it mildly, not the whole truth,"
and that "you are holding up the issuance of the Zimmerman patent
without the slightest justification." Fidler, who had approved this
letter, justified these remarks on the ground that "they had told
us Zimmerman was the prior inventor, and we hadn't yet received a
concession of priority." In reply to this letter, Alberts charged
that Automotive's attorneys were using "threatening accusations"
and "duress," and that they were threatening to "unloose the dogs"
unless they got everything they requested in the settlement.
Suddenly, on the next day, December 20, negotiations were
resumed and the parties quickly entered into three contracts, the
first two of which are involved in this suit. These contracts, in
the relevant parts, provided as follows:
(1) Under the Automotive and Precision-Larson agreement, Larson
conceded priority in Zimmerman and Larson's application was to be
assigned to Automotive. Automotive agreed to license Larson and
Precision to complete their unfilled order from Snap-On to the
extent of about 6,000 wrenches, with a royalty to be paid on the
excess. Automotive released Precision, Larson, and their customers
from liability for any past infringement and gave Precision and
Larson a general release as to all civil damages. Finally,
Precision and Larson acknowledged the validity of the claims of the
patents to issue on the Larson and Zimmerman applications.
(2) Under the Automotive and Snap-On agreement, Snap-On agreed
to reassign the Larson application to Precision
Page 324 U. S. 814
and acknowledged the validity of the claims of the patents to
issue on the Larson and Zimmerman applications. Automotive also
gave Snap-On the right to sell the 6,000 wrenches then on order
from Precision and released Snap-On from any past liability or
damages.
(3) Under the Snap-On and Precision-Larson agreement, Snap-On
reassigned to Larson and Precision whatever title Snap-On had to
the Larson application. Precision agreed to manufacture and deliver
to Snap-On the 6,000 wrenches then on order. Snap-On also assented
to the Automotive and Precision-Larson agreement.
The Larson application was accordingly assigned to Automotive on
December 20, 1940. Automotive subsequently received patents on both
the Larson and Zimmerman applications after making certain changes.
Then Precision began to manufacture and Snap-On began to sell a new
wrench. Automotive claimed that this was an infringement of its
patents and a breach of the contracts of December 20, 1940. Thus,
the suit arose which is now before us.
The guiding doctrine in this case is the equitable maxim that
"he who comes into equity must come with clean hands." This maxim
is far more than a mere banality. It is a self-imposed ordinance
that closes the doors of a court of equity to one tainted with
inequitableness or bad faith relative to the matter in which he
seeks relief, however improper may have been the behavior of the
defendant. That doctrine is rooted in the historical concept of
court of equity as a vehicle for affirmatively enforcing the
requirements of conscience and good faith. This presupposes a
refusal on its part to be "the abetter of iniquity."
Bein v. Heath,
6 How. 228,
47 U. S. 247.
Thus, while "equity does not demand that its suitors shall have led
blameless lives,"
Loughran v. Loughran, 292 U.
S. 216,
292 U. S. 229,
as to other matters, it does require that they shall have acted
fairly and
Page 324 U. S. 815
without fraud or deceit as to the controversy in issue.
Keystone Driller Co. v. General Excavator Co.,
290 U. S. 240,
290 U. S. 245;
Johnson v. Yellow Cab Transit Co., 321 U.
S. 383,
321 U. S. 387;
2 Pomeroy, Equity Jurisprudence (5th Ed.) ยงยง 397-399.
This maxim necessarily gives wide range to the equity court's
use of discretion in refusing to aid the unclean litigant. It is
"not bound by formula or restrained by any limitation that tends to
trammel the free and just exercise of discretion."
Keystone
Driller Co. v. General Excavator Co., supra, 290 U. S.
245-246. Accordingly, one's misconduct need not
necessarily have been of such a nature as to be punishable as a
crime or as to justify legal proceedings of any character. Any
willful act concerning the cause of action which rightfully can be
said to transgress equitable standards of conduct is sufficient
cause for the invocation of the maxim by the chancellor.
Moreover, where a suit in equity concerns the public interest,
as well as the private interests of the litigants, this doctrine
assumes even wider and more significant proportions. For if an
equity court properly uses the maxim to withhold its assistance in
such a case, it not only prevents a wrongdoer from enjoying the
fruits of his transgression, but averts an injury to the public.
The determination of when the maxim should be applied to bar this
type of suit thus becomes of vital significance.
See Morton
Salt Co. v. Suppiger Co., 314 U. S. 488,
314 U. S.
492-494.
In the instant case, Automotive has sought to enforce several
patents and related contracts. Clearly these are matters concerning
far more than the interests of the adverse parties. The possession
and assertion of patent rights are "issues of great moment to the
public."
Hazel-Atlas Glass Co. v. Hartford-Empire Co.,
322 U. S. 238,
322 U. S. 246.
See also Mercoid Corp. v. Mid-Continent Investment Co.,
320 U. S. 661,
320 U.S. 665;
Morton
Salt Co. v. Suppiger Co., supra; 316 U. S. Masonite
Corp., 316 U.S.
Page 324 U. S. 816
265,
316 U. S. 278.
A patent, by its very nature, is affected with a public interest.
As recognized by the Constitution, it is a special privilege
designed to serve the public purpose of promoting the "Progress of
Science and useful Arts." At the same time, a patent is an
exception to the general rule against monopolies, and to the right
to access to a free and open market. The far-reaching social and
economic consequences of a patent therefore give the public a
paramount interest in seeing that patent monopolies spring from
backgrounds free from fraud or other inequitable conduct, and that
such monopolies are kept within their legitimate scope. The facts
of this case must accordingly be measured by both public and
private standards of equity. And, when such measurements are made,
it becomes clear that the District Court's action in dismissing the
complaints and counterclaims "for want of equity" was more than
justified.
The history of the patents and contracts in issue is steeped in
perjury and undisclosed knowledge of perjury. Larson's application
was admittedly based upon false data which destroyed whatever just
claim it might otherwise have had to the status of a patent. Yet
Automotive, with at least moral and actual certainty, if not
absolute proof of the facts concerning the perjury, chose to act in
disregard of the public interest. Instead of doing all within its
power to reveal and expose the fraud, it procured an outside
settlement of the interference proceedings, acquired the Larson
application itself, turned it into a patent, and barred the other
parties from ever questioning its validity. Such conduct does not
conform to minimum ethical standards, and does not justify
Automotive's present attempt to assert and enforce these
perjury-tainted patents and contracts.
Automotive contends that it did not have positive and conclusive
knowledge of the perjury until the pleadings
Page 324 U. S. 817
in the instant proceedings were filed and until Larson admitted
his perjury on pretrial examination. It claims that, prior thereto,
it only had Thomasma's affidavit and statements, which were
uncorroborated and likely to carry little weight as against Larson
and his eight witnesses. It is further pointed out that Fidler
submitted what he knew of the facts to at least two independent
attorneys, both of whom advised him that the evidence of perjury
that he possessed was insufficient. From this it is argued, as the
Circuit Court of Appeals held, that, while Automotive was "morally
certain that Thomasma's story was true" there was no duty to report
this uncorroborated information to either the District Attorney or
the Patent Office.
But Automotive's hands are not automatically cleansed by its
alleged failure to possess sufficiently trustworthy evidence of
perjury to warrant submission of the case to the District Attorney
or to the Patent Office during the pendency of the interference
proceedings. The important fact is that Automotive had every reason
to believe, and did believe, that Larson's application was
fraudulent and his statements perjured. Yet it acted in complete
disregard of that belief. Never for a moment did Automotive or its
representatives doubt the existence of this fraud. Fidler suspected
it soon after he knew of Larson's claims. His suspicions were
confirmed by his hired investigators. Then Thomasma revealed such
intimate and detailed facts concerning the perjury as to convince
all who heard him, despite certain reservations entertained by some
persons concerning his trustworthiness. Moreover, Fidler was well
aware that Alberts threatened to withdraw as Larson's counsel if he
discovered from Larson that Thomasma's story was true, and that
Alberts in fact did so withdraw. The suspected perjury was further
confirmed by Larson's sudden willingness to concede priority after
he learned of
Page 324 U. S. 818
Thomasma's story, and by the admissions by Alberts and Snap-On
that Zimmerman "was the prior inventor." And the very fact that
Fidler saw fit to submit his proof to outside attorneys for advice
is an indication of the substantiality of his belief as to Larson's
perjury. With all this evidence before it, however, Automotive
pursued the following course of action:
1. It chose to keep secret its belief and allegedly
unsubstantial proof of the facts concerning Larson's perjury. We
need not speculate as to whether there was sufficient proof to
present the matter to the District Attorney. But it is clear that
Automotive knew and suppressed facts that, at the very least,
should have been brought in some way to the attention of the Patent
Office, especially when it became evident that the interference
proceedings would continue no longer. Those who have applications
pending with the Patent Office or who are parties to Patent Office
proceedings have an uncompromising duty to report to it all facts
concerning possible fraud or inequitableness underlying the
applications in issue.
Cf. Crites, Inc. v. Prudential Ins.
Co., 322 U. S. 408,
322 U. S. 415.
This duty is not excused by reasonable doubts as to the sufficiency
of the proof of the inequitable conduct, nor by resort to
independent legal advice. Public interest demands that all facts
relevant to such matters be submitted formally or informally to the
Patent Office, which can then pass upon the sufficiency of the
evidence. Only in this way can that agency act to safeguard the
public in the first instance against fraudulent patent monopolies.
Only in that way can the Patent Office and the public escape from
being classed among the "mute and helpless victims of deception and
fraud."
Hazel-Atlas Glass Co. v. Hartford-Empire Co.,
supra, 322 U.S.
322 U. S.
246.
2. Instead of pursuing the interference proceedings and proving
the fact that Zimmerman's claims had priority
Page 324 U. S. 819
over those asserted by Larson, Automotive chose to enter into an
outside settlement with Larson, Precision, and Snap-On whereby
Larson conceded priority. Outside settlements of interference
proceedings are not ordinarily illegal. But where, as here, the
settlement is grounded upon knowledge or reasonable belief of
perjury which is not revealed to the Patent Office or to any other
public representative, the settlement lacks that equitable nature
which entitles it to be enforced and protected in a court of
equity.
3. By the terms of the settlement, Automotive secured the
perjured Larson application and exacted promises from the other
parties never to question the validity of any patent that might be
issued on that application. Automotive then made numerous changes
and expansions as to the claims in the application and eventually
secured a patent on it without ever attempting to reveal to the
Patent Office or to anyone else the facts it possessed concerning
the application's fraudulent ancestry. Automotive thus acted to
compound and accentuate the effects of Larson's perjury.
These facts all add up to the inescapable conclusion that
Automotive has not displayed that standard of conduct requisite to
the maintenance of this suit in equity. That the actions of Larson
and Precision may have been more reprehensible is immaterial. The
public policy against the assertion and enforcement of patent
claims infected with fraud and perjury is too great to be
overridden by such a consideration. Automotive knew of and
suspected the perjury, and failed to act so as to uproot it and
destroy its effects. Instead, Automotive acted affirmatively to
magnify and increase those effects. Such inequitable conduct
impregnated Automotive's entire cause of action, and justified
dismissal by resort to the unclean hands doctrine.
Keystone
Driller Co. v. General Excavator Co., supra.
Page 324 U. S. 820
We conclude therefore that the evidence clearly supported the
District Court's findings of fact and that these findings justified
its conclusions of law. The court below erred in reversing its
judgment.
Reversed.
[
Footnote 1]
The three patents involved are No. 2,279,792, issued on April
14, 1942, to Kenneth R. Larson; No. 2,283,888, issued on May 19,
1942, to H. W. Zimmerman, and reissue No. 22,219, issued on
November 3, 1942, to H. W. Zimmerman, based on original No.
2,269,503.
[
Footnote 2]
Snap-On agreed to file the patent application for Larson, who
was without funds, and took an assignment of the Larson application
as security for performance of the agreement to supply
wrenches.
[
Footnote 3]
Alberts apparently never withdrew formally as Larson's attorney
in the interference proceedings by filing a document to that effect
in the Patent Office.
[
Footnote 4]
Both Larson and Carlsen testified that they told Hobbs of the
perjury and of the predicament they were in, stating to him that
they did not want to be turned over to the District Attorney.
Hobbs, however, denied that they informed him of these matters. It
was at the request of Hobbs that the District Court's oral opinion
was withdrawn in order that, in the words of the District Court, it
would not be "construed as implying that Mr. Hobbs had willfully
given false testimony or had been guilty of professional
misconduct." The court further said that the record demonstrated
"that the witness Hobbs did not testify falsely." Assuming that
Hobbs gave no false testimony, however, we do not consider that
fact to be of controlling significance in this case.
MR. JUSTICE ROBERTS.
I think the writ should be dismissed or the judgment of the
Circuit Court of Appeals affirmed. The case ought not to have been
taken by this Court. It involves merely the application of
acknowledged principles of law to the facts disclosed by the
record. Decision here settles nothing save the merits or demerits
of the conduct of the respective parties. In my view, it is not the
function of this court to weigh the facts for the third time in
order to choose between litigants, where appraisal of the conduct
of each must affect the result.
MR. JUSTICE JACKSON is of the opinion that the judgment should
be affirmed, as he takes the view of the facts set forth in the
opinion of the court below. 143 F.2d 332,
supra.