174 Opinion of the Court. 1960 domestic sales of multicam machines amounted to approximately $46 million per year, in each of which years such sales accounted for about 45% of all its domestic sewing machine sales. C. It appears that Singer by April 29, 1953, through its experimental department, had completed a design of a multiple cam zigzag mechanism in what it calls the Singer "401" machine. It is disclosed in Singer's Johnson Patent. In 1953 Singer was also developing its Perla Patent as used in its "306" replaceable cam machine and in 1954 its "319" machine-carried multiple cam machine. In September of 1953 Vigorelli, an Italian corporation, introduced in the United States a sewing machine incorporating a stack of cams with a single follower. Singer concluded that Vigorelli had on file applications covering its machine in the various patent offices in the world and that the Singer design would infringe. On June 10, 1955, Singer bought for $8,000 a patent disclosing a plurality of cams with a single cam follower from Carl Harris, a Canadian. It was believed that this patent, filed June 9, 1952, might be reissued with claims covering the Singer 401 as well as its 319 machine, and that the reissued patent would dominate the Vigorelli machine as well as a Japanese one introduced into the United States in September 1954 by Brother International Corporation. Thereafter Singer concluded that litigation would result between it and Vigorelli unless a cross-licensing agreement could be made, and this was effected on November 17, 1955. The license was nonexclusive, world-wide and royalty free. The trial court found that Singer's only purpose was to effect a cross-licensing, but certain correspondence does cast some shadow upon these negotiations. The agree 2 "Unless we are able to come to some agreement with Vigorelli, we will of course institute proceedings in Italy in due time, seeking to invalidate such patent as Vigorelli has received and we will do the same thing in France and other countries in accordance with the Opinion of the Court. 374 U.S. ment also contained provisions by which each of the parties agreed not to bring any infringement action against the other "in any country" or institute against the other any opposition, nullity or invalidation proceedings in any country. In accordance with this agreement Singer withdrew its opposition to Vigorelli's patent application in Brazil and Vigorelli later (1958) abandoned a United States interference to the Johnson application which cleared the way for the Johnson Patent to issue on December 2 of that year. D. While Singer was negotiating the cross-license agreement with Vigorelli it learned that Gegauf, a Swiss corporation, had a patent covering a multiple cam mechanism. This placed an additional cloud over Singer's Harris reissue plan because the Gegauf patent enjoyed an effective priority date in Italy of May 31, 1952. This was nine days earlier than Singer's Harris patent filing date in the United States. In December 1955 Singer learned that Gegauf and Vigorelli had entered a cross-licensing agreement covering their multiple cam patents similar to the Vigorelli-Singer agreement. In January 1956 Singer found that Gegauf had pending an application in the United States Patent Office and assumed that it was based on the same priority date, i. e., proper procedure in each country. This litigation will undoubtedly result either in the cancelling of their patent and patent applications, or at any rate, severely limit the claims. On the other hand, if we were to refrain from instituting such proceedings and if we were to withdraw the Brazilian opposition, their applications might develop into rather broad patents which would have a dominating position in the industry. We ourselves hold some patents and have patent applications pending which would make trouble for Vigorelli if we were engaged in litigation with them, or which would greatly strengthen and broaden the patent situation if our position and theirs could be pooled by some mutual agreement." Letter from M. C. Lightner, Singer President, to W. P. Evans of Singer's Italian Corporation, September 12, 1955. 174 Opinion of the Court. May 31, 1952. If this was true Singer could use its Harris reissue patent only to oppose through interference the allowance of broad claims to Gegauf. It therefore made preparation to negotiate with Gegauf, first approaching Vigorelli in order to ascertain how the latter had induced Gegauf to grant him a royalty-free license and drop any claim of infringement. Singer made direct arrangements for a conference with Gegauf for April 12, 1956, and the license agreement was made April 14, 1956. The setting for this meeting was that Gegauf had a dominant Swiss patent with applications in Germany, Italy, and the United States all prior to Singer. In addition, Singer's counsel had examined Gegauf's Swiss patent and advised that it was valid. Singer opened conversation with indications of coming litigation on the Harris patent, concealing the Johnson and Perla applications. Gegauf felt secure in his patent claims but insecure with reference to the inroads the Japanese machines were making on the United States market. It was this "lever" which Singer used to secure the license, pointing out that without an agreement Gegauf and Singer might litigate for a protracted period; that they should not be fighting each other as that would only delay the issue of their respective patents; and, finally, that they should license each other and get their respective patents "so they could be enforced by whoever would own the particular patent." Singer in the discussions worked upon these Gegauf fears of Japanese competition "because one of the strong points" of its argument was that an agreement should be made "in order to fight against this Japanese competition in their building a machine that in any way reads on the patents of ourselves and of Bernina [Gegauf] which are in conflict." The trial judge found that the only pur 3 Memorandum from M. L. Waterman, Singer Vice President, to M. C. Lightner, April 13, 1956. Opinion of the Court. 374 U.S. pose "disclosed to Gegauf, and in fact the very one used to convince Gegauf of the advisability of entering into an agreement" was to "obtain protection against the Japanese machines which might be made under the Gegauf patent; this sprang from a fear which Singer had good reason to believe to be well founded." 205 F. Supp., at 413. While he found Singer's "underlying, dominant and sole purpose. . . was to settle the conflict in priority between the Gegauf and Harris patents and to secure for Singer a license right under the earlier patent," ibid., it is significant that no such overriding purpose was found to have been disclosed to Gegauf. The license agreement covered (1) the Singer-Harris patent and its reissue application in the United States and nine corresponding foreign ones, and (2) the Gegauf Swiss, Italian and German patents, as well as the United States and German applications covering the same. The parties agreed in the first paragraph of the agreement "not to do anything, either directly or indirectly and in any country, the result of which might restrict the scope of the claims of the other party relating to the subject matter of the above mentioned patents and patent applications." In addition "each undertakes, in accordance with the laws and regulations of the Patent Office concerned, to facilitate the allowance in any country of claims as broad as possible, as regards the subject matter of the patents and patent applications referred to above." The parties also agreed not to sue one another on the basis of any of the patents or applications. Singer agreed not to make a "slavish" copy of Gegauf's machine and to give Gegauf "the amical assistance of its patent attorneys for the defense of any of the above mentioned Gegauf patents or patent applications against an action in cancellation." The agreement made no mention of Singer's Perla or Johnson applications, the existence of which Singer did not wish Gegauf to know. 174 Opinion of the Court. E. Approximately one week after the Gegauf crosslicense agreement Singer met with Vigorelli at Milan, Italy, at the latter's request. Vigorelli at this meeting suggested that Singer, Gegauf and Vigorelli, having arrived at their respective agreements, should act in concert in prosecuting their patents against all others in the field. This was out of the question, Singer immediately replied, advising that "what appeared to us to be proper action was for each one to prosecute his own patents and take care of any cases of infringement that might appear." The subsequent conversations at the meeting are reported from the same source as follows: "Upon learning that there could be no joint action by the three companies who have been mentioned in prosecuting patents against all others in the field, that subject was dropped . . "At this point, it should perhaps be mentioned that Mr. Stanford and I have discussed between ourselves whether we should say anything to Mr. Gegauf about our feeling that we could prosecute his patents that will be issued sometime within the next few months in the United States better than perhaps he could if we owned them, but we had decided not to say anything to Mr. Gegauf about this at this time. "In talking with Mr. Vigorelli's lawyer, Mr. Stanford dropped this view to him. The point was immediately understood, and the question was raised if we would have any objection if they were to pass the word on to Mr. Gegauf that they were raising this point. We said that, of course, we would have no objection but that we ourselves did not wish to do this, and we would not want the suggestion coming to Mr. Gegauf at this time as from us. If they wanted to suggest it, it was all right. We would, of M. L. Waterman, notes dictated at Milan, April 20, 1956. |