where the economics of the industry is such, perhaps, that the invention is not sold in the form in which it is claimed in the patent; it is sold in a slightly incomplete form like the lamp without the chimney, so that there is a technical defense based on the omission of something mentioned in the claim. As in this O'Donnell Moulding Material case, the stuff was sold in the package as a dry powder which the dentist mixed up with water, but the water was included in the claim. So it was not an attempt by anybody to avoid infringement, it was a situation in which the patentee found it practically impossible to enforce this patent unless he could proceed against somebody who was not technically a direct infringer, but who was a person who did everything calculated to bring about the infringement.

Mr. ROGERS. In that instance he would be a direct infringer and not contributory. Is that not the case that you illustrated?

Mr. RICH. Not under the technical interpretation of the patent law. The reason is that the defendant who is doing these acts is not making or using or selling the invention claimed in the patent, but something different.

Mr. ROGERS. Some part of it.

Mr. RICH. And the minute there is any difference between what he is selling or making or using and the claim language, then it becomes something other than a direct infringement and you have to put a different label on it, and it is called contributory infringement. And the important thing that the courts all seize upon and the thing that makes all the trouble is that the thing which does not meet the terms of the claim becomes "an unpatented thing."

Mr. ROGERS. I am not sure I follow you.

Mr. RICH. It is not covered by the claim, the claim doesn't fit. It is like a puzzle, you cannot put the one down on the other, and make them fit, there is a difference. The minute there is a difference, there is no infringement, therefore, you have to go after them under this doctrine of contributory infringement.

Mr. ROGERS. Have you seen them go after the one who, according to this definition, knowingly, prepares the article-and this article is a material part of it-for the special purpose of using it to infringe the patent. You make all those requirements necessary in order that he may be guilty as a contributor.

Now, were you present yesterday when the Justice Department man testified?

Mr. RICH. I was not present, but I know the testimony.

Mr. ROGERS. You know the testimony?

Mr. RICH. I have read it.

Mr. ROGERS. You know their thinking in the matter. It might lead to further antitrust violations, or monopolies. Have you any comments in that regard?

Mr. RICH. I do have comments on the statement, with which I do not agree with respect to its conclusions.

I do not agree that this section, if enacted, would extend the law of contributory infringement.

There again we have a point of view. If you take the point of view that there is no such things as contributory infringement today, then this bill would extend the doctrine by bringing it back into force to a certain extent. But as I remember the testimony of the representative of the Department of Justice on the second contributory infringe

ment bill, it was to the effect that the Supreme Court had not abolished the doctrine of contributory infringement, that it was still there for application in a proper case, and that is what we are trying to do in the bill, make sure it is there for application in the proper case.

Mr. ROGERS. Then I take it from your statements, that there is some difference of opinion among those engaged in the practice of patent law as to whether or not the Supreme Court in its decisions has done away with contributory infringement.

Mr. RICH. There is a great difference of opinion.

Mr. ROGERS. There is a great difference.

Mr. RICH. There is a great difference of opinion on the part of the bar and also apparently on the part of the judiciary, because down in the fourth circuit, in the case of Florence-Mayor Nuway v. Hardy (77 USPQ 439), the court held the defendant liable for contributory infringement and said the Mercoid case did not apply, and that the proper rule was that of Henry v. Dick, which was the case which the Supreme Court overruled in the Motion Picture Patent case, when it reversed itself as I mentioned earlier.

That is what they did there, and in correspondence with the attorney for the winning party in that case, he said to me flatly, "Obviously the circuit court did not properly apply the Mercoid case, and I am sure that if we had gone up we would have been reversed."

Mr. ROGERS. Then in effect this recodification, particularly as to section 231, would point out to the court, at least that it was the sense of Congress that we remove this question of confusion as to whether contributory infringement existed at all, and state in positive law that there is such a thing as contributory infringement, or at least it be the sense of Congress by the enactment of this law that if you have in the Mercoid case done away with contributory infringement, then we reinstate it as a matter of substantive law of the United States and that you shall hereafter in a proper case recognize or hold liable one who has contributed to the infringement of a patent.

That is the substantive law that we would write if we adopted this section 231 as it now exists. Is that not about right?

Mr. RICH. That is a very excellent statement, and I am very glad that you made it, because the opinion of all of us in the patent bar is that this is a situation in which the decisions of the court have left us so much at sea that only Congress can solve the problem.

Mr. ROGERS. Now, I, like Mr. Crumpacker have had some letters and pose this question: They place an interpretation on this to this effect: Suppose I were the manufacturer either through a special order or I had it in my regular order of business, maybe a staple article. Of course, if it is a staple article then it would not apply. But suppose he came in on a special order and told me that he would be using it, and by the use in a certain machine then I would have an obligation to go and ascertain whether or not it violated this patent or this machine that had been patented, and that that is an obligation that is placed upon me as the manufacturer and that never existed in the law before. Now, could you enlighten us as to what obligation the manufacturer may have had to make an investigation of that situation prior to the Mercoid case or afterward?

What I mean by that is: Did he, prior to that time, lay himself liable as a contributory infringer prior to the Mercoid case or had his status changed any by the Mercoid case, or would that depend upon

the interpretation that you have illustrated here, that one set of the members of the bar say that it has done away with contributory infringement and the other says that it has not. And this is just merely for the purpose of trying to clarify it. But in the clarification, does it place the manufacturer of these articles under any greater handicap than he had before if this was passed as a law?

Mr. RICH. I don't think it places him under any greater handicap than he was under for a long time.

As I suggested, in the old days, back before 1917, say, there was a contributory infringement doctrine which really flourished. Almost anybody who made any part of a patented invention, especially an element of a combination, might be held liable. And business lived with this for 25 years without much trouble. I don't think he is under any greater handicap than every businessman is under in taking the risk of infringement every time he makes anything.

There are ways of finding out, and he is certainly not terribly handicapped when he has to go and do this knowingly. He has to know what he is doing this for, and then if he is doing it knowingly, he only has to consult his counsel as to whether what he is supplying constitutes a material part of the invention, and so on, complying with the rest of (c). And this is an ultra conservative type of contributory infringement. You have to balance the equities in this situation. It puts a little hardship on some businessmen to find out what their patent was. But on the other hand, remember this: there may be twenty or thirty percent of all the patents that are granted that cannot practically be enforced against direct infringers because of the nature of the invention and the way it is claimed in the patent.

Like this dental compound, it is simply not feasible to go around the country suing every dentist who buys a package of this stuff, and the practical way to give the patentee some way to enforce this patent right that he has been given is to let him go after the brains of the enterprise, the person who is really responsible and not the innocent end user.

Mr. ROGERS. Well, I take it, then, that this would include the chemicals that you are talking about, that are necessary in a dental case, that if I manufactured one of them, and Mr. Crumpacker manufactured another and the chairman manufactured another, and you manufactured the fourth ingredient necessary to make this up, we are engaged in a business, probably making that particular chemical which we call a staple article.

Now, by virtue of the fact that the man has the patent on it, the rest of the world, if they want to, can go down here to the Patent Office and see that combination, and suppose that Mr. X then sees that combination and he then comes to me and the other manufacturers and buys in large quantities and proceeds to infringe the man's patent, and we know that when he buys it, that he is going to use it for that purpose.

Mr. RICH. You and each of you, it seems to me, are beyond question, specifically excluded by the language of paragraph (c).

Mr. ROGERS. Because we have a staple article or

Mr. RICH. Yes; because what you are selling is not a material part of the thing which was invented, which was a combination of chemicals which has to be brought together from the ordinary sources of those chemicals.

Mr. ROGERS. But here, I as the manufacturer-it may be a staple article and it may not but I as a manufacturer of a certain part, have it to sell, and as I have pointed out the other four would have certain parts of it to sell, and in fact the man comes in and tells us what he is going to use it for. We then would knowingly sell him a component part of a thing that we know he is going to use to infringe a patent.

Mr. RICH. But you are still excluded because it is a staple. Either it is a staple or it is just a commodity of commerce, which has some other substantial noninfringing use.

Mr. ROGERS. Yes.

Well, then, you feel, when we sell a staple article or commodity of commerce, that any who have engaged in the business of handling those things, although we know the individual who purchased it is going to infringe a patent, that there would not be any liability on us, although we may have especially prepared that, or knew that it would be especially adapted for that purpose, that that would relieve the manufacturer from it?

Mr. RICH. I definitely do so feel. We definitely wrote this language to take care of the very situation which you have given us as an example: The chemical manufacturer who makes chemicals to order, knowing what is going to be done with them or not knowing what is going to be done with them. One of the worries of the chemical manufacturer is that his customers come in and say, "Make us up soand-so, according to this description, and we won't tell you what we are going to do with it; it is none of your business."

Mr. ROGERS. Well, then, changing the subject for a moment, do you think that the adoption of section (c) of this section 231 will lead back to the practice that existed as I believe you said, back in 1914?

Mr. RICH. Well, not that far back. You cannot compare it to a definite era, but it would alleviate the confusion which has arisen as a result of the Mercoid case. This whole misuse doctrine began in 1932, I believe, in the Carbice case, where the dry ice was involved, and it would not touch the result of the Carbice decision.

There would be no possibility under this section of utilizing the patent to monopolize the sale of dry ice which was a staple article of commerce, or a commodity of commerce which had been known 80 years. It would still be misuse as in the Carbice case, even though this section were enacted.

Mr. BRYSON. Have you finished, Mr. Rich?

Mr. RICH. I was about to make one remark on paragraph (d) when we became involved in this last discussion, and all I want to say about it is this: It deals with the misuse doctrine, and the reason it is necessary is that the Supreme Court has made it abundantly clear that there exist in the law today two doctrines, contributory infringement on the one hand, and misuse on the other, and that, where there is a conflict, the misuse doctrine must prevail because of the public interest inherently involved in patent cases.

Other decisions following Mercoid have made it quite clear that at least some courts are going to say that any effort whatever to enforce a patent against a contributory infringer is in itself misuse. The cases are cited in the old hearings. Therefore, we have always feltwe who study this subject particularly-that to put any measure of contributory infringement into law you must, to that extent and to

that extent only, specifically make exceptions to the misuse doctrine, and that is the purpose of paragraph (d).

It goes with, supports, and depends upon paragraph (c).

Mr. BRYSON. We are very much obliged to you, Mr. Rich, thank you. Mr. RICH. Thank you, Mr. Chairman.

Mr. BRYSON. We will next hear from Mr. Fugate, of the Department of Justice. Will you come forward, please, and identify yourself for the record?

STATEMENT OF WILBUR L. FUGATE, TRIAL ATTORNEY, ANTITRUST DIVISION, UNITED STATES DEPARTMENT OF JUSTICE

Mr. FUGATE. Mr. Chairman, my name is Wilbur L. Fugate, and I am a trial attorney in the Antitrust Division of the Department of Justice.

Mr. BRYSON. Do you have a prepared statement?

Mr. FUGATE. No, sir; I do not.

I just wish to amplify some of what Mr. Brown said yesterday. Mr. BRYSON. Do you contemplate requiring much time?

Mr. FUGATE. No, sir; I do not believe so, particularly in view of Mr. Rich's comments.

I will address my remarks specifically to section 231, which he has just commented upon.

Mr. BRYSON. All right, you may proceed.

Mr. FUGATE. First, I wish to refer to the statement of the Department of Justice at the hearings on H. R. 3866 of the Eighty-first Congress,a former bill to enact this doctrine of contributory infringement into law, and in substantially the same form as this bill.

The doctrine of contributory infringement arose out of a commonlaw doctrine that one who aids another in committing a tortious act may find himself guilty of a tort.

One case, at least, has defined "contributory infringement" as the intentional aiding of one person by another in the unlawful making, using, or selling of a patented invention.

It has been settled that there is no contributory infringement without direct infringement. It has also been settled, as Mr. Rich stated, that the sale of a staple article of commerce to a direct infringer does not constitute contributory infringement, even though the seller of a staple article knows that it is to be used in direct infringement. So much for contributory infringement on the one hand.

The other doctrine which Mr. Rich mentioned is that of misuse of patents which has a long history. It was perhaps given body in the Mercoid decision. The "misuse of patents," insofar as it has anything to do with contributory infringement, is the doctrine that one who has a patent may not license that patent upon condition that the purchaser may not deal in goods of another; or, in other words, that the purchaser purchase unpatented supplies exclusively from the patentee. A similar doctrine has been written into law in section 3 of the Clayton Act.

Now, the Mercoid case merely held that the practice in that case was substantially similar to this "misuse" doctrine, or this "tie-in clause" doctrine which the court had formerly announced. In the Mercoid case the patentee and his exclusive licensee had engaged in