Zenith Laboratories, Inc. v. Carter-Wallace, Inc.

64 F.R.D. 159, 183 U.S.P.Q. (BNA) 684, 19 Fed. R. Serv. 2d 85, 1974 U.S. Dist. LEXIS 7080
CourtDistrict Court, D. New Jersey
DecidedAugust 20, 1974
DocketCiv. A. No. 368-72
StatusPublished
Cited by9 cases

This text of 64 F.R.D. 159 (Zenith Laboratories, Inc. v. Carter-Wallace, Inc.) is published on Counsel Stack Legal Research, covering District Court, D. New Jersey primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Zenith Laboratories, Inc. v. Carter-Wallace, Inc., 64 F.R.D. 159, 183 U.S.P.Q. (BNA) 684, 19 Fed. R. Serv. 2d 85, 1974 U.S. Dist. LEXIS 7080 (D.N.J. 1974).

Opinion

OPINION

STERN, District Judge.

This is a class action, originally instituted by Zenith Laboratories, Inc. against Carter-Wallace, Inc. in a one-count complaint, on behalf of “all purchasers of licensed bulk powder of the drug meprobamate from Defendant [161]*161Carter during the period from the grant of the meprobamate patent by the United States Patent Office to Defendant’s assignors on November 22, 1955, to the invalidation of said patent by the United States District Court for the Eastern District of New York on February 18, 1972.” (Emphasis added). The complaint sought damages in the amount of $130,000,000.00.

On November 7, 1973, the Honorable Lawrence A. Whipple granted Plaintiff’s petition certifying this suit as a class action pursuant to Rule 23. On May 28, 1974 argument was heard before this Court pursuant to a motion by Plaintiff to amend its complaint by adding four additional counts. On June 11, 1974, leave to amend was granted with the express stipulation that a new determination as to the representative capacity of the Plaintiff be made. Argument on Plaintiff’s representative capacity was held on July 22, 1974.

An understanding of this suit requires that related litigation between the identical parties be set forth with some detail.

Carter-Wallace (hereinafter “Carter”) was granted a patent on November 22, 1955 for the drug meprobamate, also known as 2, 2 methyl-n-propyl 1, 3-pro-panediol diearbamate. Meprobamate has various medical properties as an anti-convulsant and tranquilizer, and when combined with other drugs is useful in a variety of medical applications. It was sold commercially by pharmacies to the general public under the name of Milltown, among other names.

Following the issuance of the patent, Carter entered into licensing agreements with three firms: American Home Products Corp.; Merck and Co., Inc.; and the Lederle Division of American Cyanamid.

Pursuant to these agreements, the licensees were permitted to manufacture bulk meprobamate, and to resell the same to Carter. Carter then sold bulk meprobamate to purchasers, among them Zenith Laboratories (hereinafter “Zenith”).

In 1960 the Department of Justice filed suit against Carter for alleged violations of §§ 1 and 2 of the Sherman Act arising out of the sale of this bulk meprobamate. The lawsuit resulted in a consent judgment in 1962 which required Carter to sell meprobamate to purchasers, without post-sale restrictions, for the price of $20.00 per pound, with a provision for escalation to meet rising costs.

Following the Consent Decree, Carter supplied bulk meprobamate, through a variety of agreements, both to purchasers, including Zenith, under the consent judgment, and to licensees whose agreements antedated the consent judgment.

Zenith thereafter abandoned its bulk purchases of meprobamate at the price set by the consent judgment, and sought and obtained other sources of supply, apparently on the international market. Zenith was met with a patent infringement suit by Carter, filed in 1968 in this District.

Zenith responded with a three-count counterclaim. The first count alleged that Zenith had purchased meprobamate from Carter at $23.00 per pound at a time when the world market price in meprobamate was approximately 900 per pound. Zenith asked for damages of $7,500,000.00, alleging violations of the Sherman Act, §§ 1 and 2 (Title 15 U.S.C. §§ 1 and 1px solid var(--green-border)">2); and the Clayton Act, § 4 (Title 15 U.S.C. § 15), alleging price discrimination by Carter against Zenith, and in favor of the licensees—American Home, Merck and Lederle—with whom Carter had, according to Zenith, “illegal agreements.”

The second count of the counterclaim focused on two licensing agreements between Carter and Lederle. The first agreement provided that Lederle would supply Carter’s need for tridihexethyl iodide and tridihexethyl chloride, while Carter would supply Lederle’s need for meprobamate. These drugs would be [162]*162combined by Lederle to form Pathibamate, and by Carter to form Milpath. The second agreement provided that Lederle would supply Carter with dextro amphetamine sulfate, and Carter would supply Lederle with meprobamate. This would permit Lederle to produce Bamadex, and Carter to produce Appetrol.

This second count charged gross price discrimination, and violation of § 1 of the Sherman Act by Carter, in concert with Lederle, against Zenith. The claim sought declaration of the invalidity of the patent, money damages, injunctive relief, and other relief.

The third count of the counterclaim alleged two agreements between Carter and Merck. First, it was alleged, Merck provided Carter with benactyzine, and Carter provided Merck with meprobamate, in order that Merck could produce Suavitil and Carter could produce Deprol. Second, it was alleged, Merck would provide Carter with hydrochlorothiazide and Carter would provide meprobamate to enable Merck to produce Cyclex and Carter to produce Caplaril or Miluretic.

This licensing arrangement, Zenith claimed, violated § 1 of the Sherman Act in that each side agreed not to sue the other for patent invalidity and that Merck was granted discriminatory price reduction in meprobamate.

While the Carter claim for patent infringement and the Zenith counterclaim were still pending here, the patent for meprobate was declared invalid for obviousness in light of the state of the prior art (35 U.S.C. § 103),'in an unrelated case in the Eastern District of New York on February 18, 1972. Carter-Wallace, Inc. v. Davis Edwards Pharmacal Corp., 341 F.Supp. 1303 (E.D.N.Y.1972), aff’d sub nom, Carter-Wallace, Inc. v. Otte, 474 F.2d 529 (2nd Cir. 1972), cert. denied 412 U.S. 929, 93 S.Ct. 2753, 37 L.Ed.2d 156 (1973). Carter’s suit against Zenith was thereafter dismissed here, leaving only Zenith’s antitrust claims which were predicated on the illegal agreements between Carter and its licensees.

On February 25, 1972, one week after the declaration of patent invalidity, Zenith commenced a new and separate action, the case sub judice, in the form of a class action alleging that “by reason of the invalidity of Defendant Carter’s meprobamate patent, Plaintiff Zenith and the members of the class represented by Plaintiff are entitled to recover the payments made to Defendant for the use of its invalid patent in the purchase of licensed bulk meprobamate powder from Defendant . . . ” (Emphasis added).

Included as members of the class by Zenith were the three licensees, American Home Products, Merck and Lederle, whom Zenith had alleged as being part of illegal price discrimination agreements with Carter in Zenith’s counterclaim to the first action, then still pending. Zenith, although itself not a licensee of Carter,1 claimed to be an appropriate representative of that class.

If Carter-Wallaee, Inc. v.

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64 F.R.D. 159, 183 U.S.P.Q. (BNA) 684, 19 Fed. R. Serv. 2d 85, 1974 U.S. Dist. LEXIS 7080, Counsel Stack Legal Research, https://law.counselstack.com/opinion/zenith-laboratories-inc-v-carter-wallace-inc-njd-1974.