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Hazeltine Research Inc. v. Zenith Radio Corp.

October 27, 1969


Castle, Chief Judge, Kiley and Cummings, Circuit Judges.

Author: Kiley

KILEY, Circuit Judge:

This court, on December 19, 1967, filed its decision, 388 F.2d 25 (7th Cir. 1967), in the above causes and, so far as pertinent now, affirmed the judgment awarding $150,000, treble damages, to Zenith Radio Corporation for misuse by Hazeltine Research, Inc. (HRI) of its domestic patents, but struck paragraph A of the related injunction, issued to restrain HRI from imposing unlawful conditions on those patents. We reversed the judgment in Zenith's favor for $38,000,000, treble damages, based on HRI's unlawful participation in the Canadian, English and Australian patent pools, and ipso facto set aside an injunction restraining HRI's further unlawful antitrust activity in these foreign patent pools.

On appeal to the Supreme Court, the treble damage award with respect to the domestic patents was not challenged. The Court, 395 U.S. 100, 23 L. Ed. 2d 129, 89 S. Ct. 1562 (1968), reversed our decision striking paragraph A of the injunction and remanded that part of this court for further consideration. The Court also reversed our decision setting aside the award of damages flowing from the unlawful activity of the Canadian pool and remanded that issue to us to consider the effect of HRI's affirmative release and statute of limitations defenses on the award. In addition, the Court reinstated the related injunction which this court had set aside with that treble damage judgment for Zenith.*fn1 The Supreme Court reversed our decision with respect to the Canadian patent pool because it concluded we erred in our determination that Zenith had failed to prove the "fact" of damage in Canada.

After the Supreme Court mandate was filed in this court, we gave leave to HRI and Zenith to file supplemental authorities. Zenith thereupon "abandon[ed] its request" originally made in this court to reinstate paragraph A which this court had struck. The following questions are before us: (1) whether Zenith's injury during the statutory damage period resulted to any extent from HRI's conduct preceding that period and, if so, what effect releases given by Zenith in 1957 had on Zenith's recovery; (2) what effect the statute of limitations had on HRI's liability; and (3) whether the award of damages was excessive. These points had been raised before us by HRI in the first appeal, but we saw no need of passing on them in view of our reversal of the judgment for Zenith.

We have examined the issues now before us in the light of the Supreme Court opinion and the supplemental authorities cited to us. We vacate the judgment for Zenith with respect to the Canadian pool in the amount of $6,297,391, trebled, and remand for further proceedings with respect to the award of damages.

The Affirmative Defenses

After the evidence at the trial was closed HRI moved for leave to file the affirmative defenses in bar of Zenith's recovery. Zenith's counsel objected to the filing of the defenses on the ground that they came too late and were waived. The district court, however, permitted the defenses to be filed and thereafter denied HRI's motion for judgment based on the defenses. The Supreme Court noted that the district court's refusal to disturb the findings it had already made with respect to the Canadian pool was a rejection of the defenses either on the merits or on the ground that the defenses had been waived under FED. R. Civ. P. 12(h). 395 U.S. at 117 n.13. It is our view that the court's ruling was not on the basis of waiver, but because the defenses on their merits did not bar Zenith's recovery. We turn therefore to consideration of the correctness of the district court's ruling.

The relevant four year damage period was measured from May 22, 1963, when Zenith filed its counterclaim.*fn2 The cutoff date therefore was May 22, 1959. HRI relies upon releases given September 27, 1957, by Zenith to RCA, General Electric, and Western Electric in settlement of Zenith's counterclaim in the case of RCA v. The Rauland Corp. and Zenith Radio Corp., No. 48 C 1818 (N.D. Ill. 1957), in contending that Zenith's claim is now barred.

The Supreme Court in noting that the district court did not date the events as occurring before or after the May 22, 1959 start of the damage period, said "the damage award was confined to injuries sustained during the statutory period, but the trial court apparently deemed it immaterial whether the damage-causing acts occurred before or after the start of the damage period." 395 U.S. at 116 (1968). Damages were awarded, the Court said, on the assumption that were it not for the conspiracy, Zenith would have had sixteen per cent of the Canadian market instead of its actual three per cent on May 22, 1959 and throughout the damage period. The Court then stated that since the district court attributed the deficient share on May 22, 1959 to the conduct of the pool, that conduct necessarily preceded the deficiency, and therefore pre-damage period conduct necessarily resulted in some part of the damages awarded.

Since HRI was an unnamed joint tortfeasor, as admitted by Zenith at trial, with its co-conspirators in the Canadian pool who were named in the Rauland case, and Zenith did not reserve its right against HRI, the releases given by Zenith clearly barred recovery from HRI of past, present and future damages flowing from any misconduct of HRI prior to the dates of the releases. Twentieth Century-Fox Film Corp. v. Winchester Drive-In Theatre, 351 F.2d 925, 931 (9th Cir. 1965), cert. denied, 382 U.S. 1011, 15 L. Ed. 2d 526, 86 S. Ct. 620 (1966); Dura Electric Lamp Co. v. Westinghouse Electric Corp., 249 F.2d 5 (3d Cir. 1957). Our inquiry therefore is narrowed to the question of the effect of the statute of limitations on Zenith's right of recovery for post-release misconduct.

It is "well settled . . . that no civil action lies for a conspiracy unless there be an overt act that results in damage to the plaintiff." Nalle v. Oyster, 230 U.S. 165, 182, 57 L. Ed. 1439, 33 S. Ct. 1043 (1913). Consequently, in the case before us the mere existence of the conspiracy following the 1957 releases does not itself give rise to Zenith's cause of action. The law with respect to the statute of limitations in Sec. 15b of the Clayton Act is that the period commences to run from the last overt act of the conspiracy. Crummer Co. v. DuPont, 223 F.2d 238, 247-48 (5th Cir.), cert. denied, 350 U.S. 848, 100 L. Ed. 755, 76 S. Ct. 85 (1955); Momand v. Universal Film Exchange, 43 F. Supp. 996, 1007 (D. Mass. 1942), aff'd, 172 F.2d 37, 47 (1948); Steiner v. Twentieth Century-Fox Film Corp., 232 F.2d 190, 194 (9th Cir. 1956); Century Hardware Corp. v. Powernail Co., 282 F. Supp. 223, 227 (E.D. Wis. 1968). In Century Hardware, the district court construed this court's decisions in Emich Motors Co. v. General Motors Corp., 229 F.2d 714 (7th Cir. 1956), and Baldwin v. Loew's, Inc., 312 F.2d 387 (7th Cir. 1963), as stating the law of this Circuit to be in accordance with the foregoing decisions.

In Hanover Shoe, Inc. v. United Shoe Machinery Corp., 377 F.2d 776 (3d Cir. 1967) (supplemental opinion at 793-95), the following rule was applied:

Where the repeated and measurable invasion of a plaintiff's rights occurs both outside the statutory period and also within it, the fact that some of the injury and damage occurred outside the statutory period does not affect the plaintiff's right to recover for ...

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