Appeals from the District Court of the United States for the Northern District of Illinois, Eastern Division; John P. Barnes, Judge.
Before SPARKS, MAJOR and MINTON, Circuit Judges.
In cause No. 8019, the Mercoid Corporation (hereafter referred to as Mercoid) asked for a declartory judgment holding United States Patent No. 1,813.732 to Freeman, owned by Minneapolis-Honeywell Regulator Company (hereafter referred to as Honeywell) void and not infringed, and that that patent was being used to extend the patent monopoly beyond the bounds of its claims in violation of the Anti-Trust laws. In cause No. 8020, Honeywell, before it was notified of Mercoid's suit, charged Mercoid with infringement of claims 1, 4, 6 and 9 of the Freeman patnet, by its sale of Mercoid's Combination Fan Limit Control with wiring diagrams showing how to install it. The patent was issued on July 7, 1931, upon an application filed January 16, 1931, and assigned to Honeywell.
Honeywell, answering Mercoid's complaint, averred validity and infringement by Mercoid, and denied any alleged improper use of its patent. Mercoid, in answering Honeywell's complaint, denied validity and infringement, alleged the same improper use of the patent, and counterclaimed for damages for violation of the Anti-Trust laws.
The cases were consolidated for trial before the District Court, which held the patent valid and infringed, and that Honeywell was not guilty of laches, but further held that Honeywell could not maintain a suit for infringement because it had used the patent to control the sales of articles beyond its scope. The court disallowed damages against Honeywell for violation of the Anti-Trust laws and dismissed both complaints. From this decree both parties have appealed.
Freeman's combination relates to control apparatus for use with a hot air furnace. Its principal object is to provide a control for the rate of combustion and for the operation of an accelerating device, such as a fan, blower or similar apparatus, used for accelerating the rate of supply of the heat-conducting medium, such as air, to be heated by a furnace, said control being such as to permit the operation of the accelerating device and to check combustion in case the furnance becomes overheated, and such as to interrupt the operation of such accelerating device while increasing the rate of combustion if the furnance has not been heated above a predetermined temperature. In addition, a control feature is added by means of which both the combustion and the supply of the heat-conducting medium are checked when the temperature of the room or object to be heated is above a predetermined degree.
Mercoid's device, which was held to infringe the patent, is referred to by the parties as M-80. The District Court wrote an opinion in these cases (Mercoid Corporation v. Minneapolis-Honeywell Regulator Co., 43 F.Supp. 878) in which it set forth the patent claims in issue and discussed the issues including prior art, prior uses and laches, and they will not be repeated here. It is sufficient to say that the finding could not well have been othrwise under the evidence presented, and we approve that court's reasoning and conclusions with respect to validity, infringement and laches. This brings us to what we regard as the vital questions in this case, - whether Honeywell has so misused the Freeman system of furnace control as to bar is suit for infringement, and whether its misuse, if any, constitutes a violation of the Anti-Trust laws. Both the answer in bar and the charge of violation of the Anti-Trust laws are based upon the same allegations of misuser.
The District Court based its decision as to Honeywell's misuse upon the rule referred to in Morton Salt Co. v. Suppiger Co., 314 U.s. 488, 62 s.Ct. 402, 86 L. Ed. 363. That rule, which is equitable in its nature and of general application, asserts that courts, and especially courts of equity, may appropriately withhold their aid where the plaintiff is using the right asserted contrary to the public interest. The Morton case involved a patented mechanism for depositing salt tablets, a device said to be useful in the canning industry for adding predetermined amounts of salt in tablet form to the contents of the cans. The patent was on the mechanism, not on the salt nor on its configuration. Salt is an article of commerce, quite generally used from time immemorail. It is unpatented and is not an element of the patent upon which Morton relied. However, Morton sought to compel the purchasers of its patented mechanism to use only the salt purchased from it, which was in no sense a part of the patent. The Supreme Court held that Morton could not do this because to do so woould constitute a contributing factor in thwarting the public policy underlying the grant of the patent. The Court stated quite generally that a patent could not be used as a means of restraining competion with the patentee's sale of an unpatented product. It is to be noted that the Court carefully refrained from using the word element instead of the word product, because in that case salt was not an element of that patent, nor did that patent cover a product. The salt tablets in no sense could be considred as the "advance in the art" in the patent there in suit.
The patent here covers a furnace control system having a combustion control apparatus, a fan to force hot air from the furnance to the rooms, a theremostatic apparatus for controlling the combustion control apparatus and fan. It discloses a hand-fired furnance with dampers and also a furnace with a stoker.
With respect to the stoker-operated furnace, a room thermostat normally starts the stoker. There is also a thermostat which breaks the stoker circuit when the air in the furnance reaches a predetermined high temperature, even though the room thermostat is calling for heat.This is for the purpose of preventing unsafe overheated conditions. Another thermostat is also placed in the furnace which does not permit the fan to start until the air in the furnance reaches a certain heat. It then starts the fan which continues to run so long as the furnance is hot and the room theremostat calls for heat, even if the stoker is stopped by the limit switch.
Honeywell urges that Freeman's advance in the art is the arrangement of thermostat switches, subject to furnace heat, in connection with other parts, to secure a sequence of operations whereby combustion is stopped before excessive heat is reached in the furnance, but the fan continues to run and take the heated air from the furnace and deliver it to the rooms. The claims, it will be noticed, include the necessary combustion control and fan, and, in some cases, the room thermostat, together with the thermostatic fan and limit switch connected to secure sequence of operations.
Mercoid's M-80 is a combination fan and limit control. It has two thermostatically operated switches in a single casing so arranged as to permit the fan to operate when the limit switch has opened the circuit of the stoker motor for stopping combustion when a dangerous and excessive temperature has arisen in the furnace. It provides for the sequence of operations which is the precise essence of Freeman's advance in the art. With each M-80, Mercoid provides certain wiring diagrams for installation. The accused device has no other use than for accomplishing the sequence of operations of the Freeman patent. Mercoid's expert testified that when installed accroding to Mercoid's diagram it infringed the Freeman patent. The District Court was warranted in relying on this evidence and we are convinced tht it is true.
Honeywell has granted licenses to others and offered a license to Mercoid on the same terms and conditions, which was refused. Mercoid contends that these licenses involve use of the patent to monopolize the sale and control of devices not covered by the patent and this, it urges, bars Honeywell's right to maintain an infringement suit and also violates the AntiTrust laws. These licenses call for payment of a royalty on the defined combination furnace control which embodies the essence of Freeman's patent. Each of such controls brings about one complete Freeman installation, and the record does not disclose any attempt on the part of Honeywell to collect a royalty on such control unless it is used or attempted to be used in a system which would ...