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D.L. AULD CO. v. PARK ELECTROCHEMICAL CORP.

August 28, 1986

The D.L. AULD COMPANY, Plaintiff and Counterclaim Defendant,
v.
PARK ELECTROCHEMICAL CORPORATION, Defendant and Counterclaim Plaintiff.



The opinion of the court was delivered by: GLASSER

GLASSER, District Judge.

This action began in 1981 as a patent infringement suit brought by the D.L. Auld Co. ("Auld") against Park Electrochemical Corp. ("Park Electrochemical") and its subsidiary, Park Nameplate Co., Inc. ("Park Nameplate"). The action is now before the Court on Auld's motion to dismiss Park Electrochemical's counterclaims against it and thereby put an end to this litigation. For the reasons stated below, the motion will be granted.

 Background

 Before turning to the issues presented in this motion, it is useful first to review some of the prior history of the litigation. In 1982, Park Electrochemical moved for dismissal of the complaint against it on the basis of uncontroverted affidavits "indicating that it does not manufacture, sell, or use the allegedly infringing product." D.L. Auld Co. v. Park Electrochemical Corp., 553 F. Supp. 804, 806 (E.D.N.Y.1982). In addition, "Park Electrochemical . . . submitted affidavits indicating that although Park Nameplate is a wholly-owned subsidiary, it is operated as a fully independent entity." Id. Treating the motion as one for summary judgment, the Court granted it in part and denied it in part. The Court granted the motion insofar as Auld's complaint attempted to impose liability on Park Electrochemical on the theory that Park Nameplate, which did manufacture the allegedly infringing product, "was a 'mere instrumentality' of Park Electrochemical." 553 F. Supp. at 806. Having considered the "various indicia of control" documented by Auld, the Court concluded that:

 the elements identified by [Auld], when considered in the light of the uncontroverted factors of independence established by Park Electrochemical, are insufficient as a matter of law to establish the degree of domination necessary to disregard Park Nameplate's corporate identity.

 Id. at 807. The Court denied the motion insofar as disputed material issues of fact prevented the Court from resolving the validity of Auld's theory that:

 Park Electrochemical . . . played such a major role in business discussions with [Auld] attempting to resolve the patent dispute involved here that it became an actor directly in the transaction, and therefore is jointly liable with Park Nameplate.

 Id. at 808.

 Following the Court's decision, Park Electrochemical filed an answer to Auld's complaint which asserted three counterclaims against it. In the first counterclaim, Park Electrochemical sought a declaratory judgment invalidating several of Auld's patents. The second counterclaim alleged that Auld has engaged in unfair competition and unfair trade practices by bringing lawsuits on patents which are invalid and have not been infringed. The third counterclaim alleged that Auld's actions constitute attempts to restrain trade and to monopolize in violation of §§ 1 and 2 of the Sherman Act.

 While this litigation was progressing, the key patent underlying Auld's lawsuit was being invalidated in another forum. In August 1983, the Court of Appeals for the Federal Circuit upheld a decision of the Eastern District of Tennessee declaring Auld's patent No. 4,100,010 to be invalid. D.L. Auld Co. v. Chroma Graphics Corp., 714 F.2d 1144 (Fed.Cir.1983). *fn1" In the wake of this decision, it was stipulated in December 1983 that all claims by Auld against Park Nameplate and all of Park Nameplate's counterclaims should be dismissed with prejudice. In May 1984, Auld and Park Electrochemical stipulated that Auld's claims would be dismissed and "the sole issue remaining to be tried is defendant's Counterclaim based upon the charge of fraud on the Patent Office during the prosecution of U.S. Patent No. 4,100,010 and the misuse and antitrust assertions arising therefrom."

 The Antitrust Claim

 Park Electrochemical's antitrust claim is founded on two theories. First, its Walker Process theory asserts that the patent on which Auld sued was obtained through fraud on the Patent Office. See Walker Process Equipment, Inc. v. Food Machinery & Chemical Corp., 382 U.S. 172, 174, 86 S. Ct. 347, 348-49, 15 L. Ed. 2d 247 (1965) ("[T]he enforcement of a patent procured by fraud on the Patent Office may be violative . . . of the Sherman Act . . ."). Park Electrochemical's second theory is that even absent fraud on the Patent Office, Auld is liable for bringing an infringement action on a patent it knew to be invalid. See generally Handgards, Inc. v. Ethicon, Inc., 601 F.2d 986 (9th Cir.1979), cert. denied, 444 U.S. 1025, 100 S. Ct. 688, 62 L. Ed. 2d 659, 100 S. Ct. 689 (1980). Both of these theories require proof that in bringing this action, Auld was attempting to restrain trade in or to monopolize the relevant market.

 Without addressing the merits of either of these two theories, Auld's motion to dismiss rests solely on the argument that Park Electrochemical lacks standing, in the antitrust sense, to assert them. Antitrust standing derives from § 4 of the Clayton Act. 15 U.S.C. § 15. That section provides in pertinent part:

 Any person who shall be injured in his business or property by reason of anything forbidden in the antitrust laws may sue therefor . . . and shall recover threefold the damages by him sustained, and the ...


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