Before L. HAND, SWAN, and FRANK, Circuit Judges.
Defendant, in its brief on appeal, argues that, if the patent is invalid, the agreement is void as in restraint of trade, and that therefore we must inquire into the validity of the patent. This contention was not made in the court below; but we do not reject in on that account, since Muncie Gear Co. v. Outboard Co., 315 U.S. 759. 766, 768, 62 S. Ct. 865, 870, 86 L. Ed. 1171, seems to us to hold that regard for "the public interest sought to be safeguarded by the patent statutes, and so frequently present but so seldom adequately represented in patent litigation" requires that an upper court should consider important defenses in such litigation even though not raised in the court below.*fn1
In Sola Electric Co. v. Jefferson Electric Co., 317 U.S. 173, 63 S. Ct. 172, 87 L. Ed. 165, the court (to the surprise of the patent bar generally) held that the so-called implied estoppel of a patent licensee, to question the validity of the patent under which he is licensed, is inoperative, even if the estoppel would otherwise be effective under federal or state law, when the license agreement contains a provision fixing prices, since such a provision, should the patent be not valid, will violate the Sherman Act, 15 U.S.C.A. §§ 1-7, 15 note. In American Cutting Alloys, Inc. v. General Electric Co., 2 Cir., 135 F.2d 502, 504-505, we recently applied the Sola doctrine where a license agreement contained both a price-fixing clause and an express covenant not to question the validity of the patent.
In the instant case, too, the covenant is express. But here we find it in an agreement, containing no price-fixing clause, which was made by one not a licensee or assignor. That the defendant is not a licensee or assignor may strengthen its defensive position, for reasons we shall note later. It is suggested, however, that the Sola doctrine is inapplicable to an agreement which unreasonably restrains competition but does not fix prices. We cannot agree. True, the court in the Sola case [317 U.S. 173, 63 S. Ct. 173, 87 L. Ed. 165] specifically referred to "the doctrine of estoppel" as being "in conflict with the Sherman Act's prohibition of price-fixing." But the rationale of the opinion is that there can be no valid estoppel to deny the validity of a patent if the estoppel will result in a contravention of federal anti-trust laws. The court concluded its opinion with the statement that "rules of estoppel which would fasten upon the public as well as the petitioner the burden of an agreement in violation of the Sherman Act must yield to the Act's declaration that such agreements are unlawful, and to the public policy of the Act which in the public interest precludes the enforcement of such unlawful agreement. Cf. Morton Salt Co. v. G. S. Suppiger Co., 314 U.S. 488, 492, 493, 62 S. Ct. 402, 405, 86 L. Ed. 363." As that act renders unlawful not merely price-fixing agreements but all agreements which, in any way, unreasonably restain competition in interstate commerce, the conclusion is inescapable that the Sola case doctrine applies to any such agreement. The citation in the Sola opinion of the Morton Salt case is significant; for, in the latter case, the court refused to enjoin infringement of a patent the owner of which, the plaintiff, was restraining competition not through pricefixing but by requiring its licensees (the defendant not being one of them) to buy non-patented articles from plaintiff.*fn1a We are fully aware that our conclusion may gravely affect many patent licenses, that it may, in many instances remove one of the principal motives inducing the grant of a license. But we think that the logic of the Sola case compels that conclusion.
The agreement here is one by which defendant agreed with plaintiff, a competitor. to cease making and selling, throughout the United States and for thirteen years, a commodity which both parties had theretofore been making and selling. If, disregarding the patent, the effect of the agreement would be unreasonably to restrain competition,*fn1b then only the validity of the patent can rescue the agreement from the jaws of the anti-trust laws. Accordingly defendant's covenant acknowledging the patent's validity constitutes, in effect, an undertaking that, if sued by plaintiff for enforcement of that agreement, defendant will not assert the defense that the agreement is illegal. Such a raising-by-one's-boot's-straps undertaking, of course, cannot be enforced.*fn2
In the Sola case, the court said that, in its earlier decisions concerning the estoppel of a patent licensee to contest the patent's validity, the rule of estoppel had been applied without discussion, and suggested that, absent a Sherman Act situation, the question may be one of state law.*fn3 This would seem to mean that such an agreement as that before us is illegal, unless the patent is valid, if, regarding the agreement as one relating to an unpatented commodity, it would be illegal according to State law. By the common law of most jurisdictions, an agreement restricting competition is illegal unless it is "ancillary" to the sale of a business or the like.*fn3a In the instant case, the agreement is not thus "ancillary." Accordingly, even if it does not violate the Sherman Act, it may, under the Sola doctrine, be unenforceable, unless the patent is valid.
The agreement here perhaps confronts another difficulty. In most of the cases, decided before Sola, which sustained an estoppel, whether implied or based on an express covenant, the estoppel ran against either an assignor of the patent or a licensee thereunder, and those decisions seemed to have relied on analogies of conveyances or leases of land.*fn4 But as here the defendant is neither an assignor nor a licensee, the patent-estoppel cases, even as they stood in pre-Sola day, may not be protective of the agreement, and, even assuming that the Sola doctrine is limited to pricefixing agreements, the agreement here may be illegal under the common-law rule as to contracts, not "ancillary," in restraint of trade.
In Pope Mfg. Co. v. Gormully, 144 U.S. 224, page 233, 12 S. Ct. 632, 636, 36 L. Ed. 414 (in a case to which the Sherman Act was inapplicable because the agreement before the court was made and the litigation began prior to the enactment of that statute), the court construed the agreement as one by which the defendant, in consideration of the grant to it by plaintiff of licenses under fifteen patents, agreed not to dispute the validity of or plaintiff's title to, and not to infringe, not only those but fifty other patents;*fn5 the plaintiff filed a bill seeking an injunction restraining defendant from breaching the agreement asto certain of those patents under which defendant was not licensed; that court affirmed a decree dismissing the bill. Stating that "the real question is whether the defendant can estop himself from disputing patents which may be wholly void, or to which the plaintiff may have no shadow of title," the court went on to hold that, on grounds of public policy, equity must refuse to give specific enforcement (by wasy of injunction) of such a contract because "it is important to the public that competition should notbe repressed by worthless patents." It is true that the court referred to possible overreaching by plaintiff in the making of the contract, but it did not rest its decision on that ground.*fn6 True, too, the court described the contract as one "not to set up any defense whatever to any suit that may be begun upon 50 different causes of action"; so that it is arguable that the doctrine of that case has no relevance where, as here, the contract relates to but a single patent. Yet that is by no means clear. For the court discussed at length (pages 235, 236 of 144 U.S., page 636 of 12 S. Ct., 36 L. Ed. 414) cases holding that one may not legally in a contract agree not to avail himself of a defense, "secured to him on grounds of public policy." even as to a single cause of action arising under that contract.*fn7 Moreover, the court in the Pope Mfg. case, in stressing the public policy of preventing suppression of competition by "worthless patents," articulated an attitude recently voiced, in even more emphatic terms, by the Supreme Court as presently constituted, in Morton Salt v. Suppiger, supra, B.B. Chemical Co. v. Ellis, supra, and Muncie Gear Co. v. Outboard Co., supra. In Philadelphia Creamery Supply Co. v. Davis & Rankin Bldg. & M. Co., C.C.N.D. Ill., 77 F. 879, 881, the defendant, when granted a license under certain patents, agreed not to contest the validity of certain other patents; there was no suggestion of overreaching, but the court, referring to the Pope Mfg. case, said, in a dictum, that such an agreement "would not possibly be enforceable," with respect to the patents under which the defendant was not licensed.*fn8
In United Lens Corp. v. Doray Lamp Co., 7 Cir., 93 F.2d 969, the defendant, in connection with the grant to it of a license under on patent, agreed not to contest the validity of, and not to infringe, another patent;*fn9 suit was brought to restrain infringement of this latter patent and to enforce the agreement with respect thereto. The court, apparently recognizing the inapplicability of the patent-estoppel doctrine, regarding the contract as one to refrain from competition in making or selling an unpatented article, decided that it was not illegal, citing cases relating to "ancillary" agreements, which are obviously not pertinent,*fn10 and not noting the Pope Mfg. case. In American Specialty Stamping Co. v. New England Enameling Co., 2 Cir., 176 F. 557, 558, and H. D. Smith & Co. v. Southington Mfg. Co., 2 Cir., 247 F. 342, 343, it was said, without discussion, that where, threatened with an infringement suit, a defendant, not obtaining a license, agrees to admit the validity of a patent and not to infringe, he is bound by his agreement; but in neither of those cases was the Pope Mfg. case noted. It may be that, even aside from the Sola doctrine, the agreement, in the instant case, under the doctrine of the Pope Mfg. case, is unenforceable, at least in equity.*fn11
On one theory or another, it may be that the agreement here cannot bar an inquiry into the validity of the patent. Yet, as this issue was not raised in the trial court, there was no adequate opportunity to present evidence as to whether (a) the agreement does or does not violate the antitrust laws and is legal under State law; or (b) the facts are such that, if violative of neither the anti-trust laws nor any other federal law nor the State law, the agreement does or does not come within the doctrine of the Pope Mfg. case; or (c) if plaintiff fails as to (a) and (b), the patent is or is not valid; or (d) if the patent is invalid and if the agreement is not illegal but comes within the Pope Mfg. Co. doctrine, still plaintiff is entitled to damages at law. Accordingly, we shall not now pass on the question of the patent's validity or that of recovery on the contract, but, "to the end the injustice may not be done," we shall now remand the case to the trial court with directions to vacate the decree and to hear evidence of the kind we have just described.*fn12
The case, however, had been fully heard, here and below, on the issue of infringement and breach of agreement, and it will save time if we now decide that issue, assuming for the moment that the patent is valid or, if not, that the agreement is not illegal. The trial court correctly held for plaintiff on that issue of infringement. So crowded is this field that, in the light of the prior art now appearing in the record, the claims must be markedly narrowed, for they disclose a combination, at best not startlingly ingenious, of elements byno means novel in the art. (For that reason, our decision as to the scope of the claims can be of little interest to anyone except the parties to the suit, and we need not enlarge on the details of the claims or those of defendant's device.) However, no matter how narrowly the claims are construed, the defendant may not avoid infringement and breach of its agreement by an absurdly literal interpretation of words which, in ordinary usage, have a broad meaning. Consequently "cord loops" must be interpreted to include wire loops, since "cord" ordinarily includes wire as we speak of "picture cord". Moreover, while, with respect to such a patent as this, the doctrine of equivalence must be most cautiously employed, it is not, even here, so completely without efficacy that defendant can, as it had tried to do, escape infringement and the obligations of its agreement, by adopting contrivances which any mechanic skilled in the act would recognize at a glance to be obvious substitutes for those disclosed in the claims. Defendant's wires are straight throughout the major portion of their length and are therefore "substantially straight." In the patent, the cords or cord loops pass through the "eyes" of the wires, while, in the defendant's device, "hog rings" pass through the "eyes." These differentiated means used by the defendant are of the kind well-known in the art to be almost the precise equivalent of those in the patent. Defendant plainly infringed and violated its agreement (which, for the purposes of this discussion and for the time being, we assume to be valid).
There was no error in the refusal of the trial court to compel plaintiff to elect as between its two causes of action. The two were not inconsistent. The elements of damage for breach of the contract (if valid) and for infringement of the patent (if valid) may well be different; to the extent that ...