## Facts

- Congoleum Corporation held U.S. patents for chemically embossed vinyl floor coverings and corresponding patents in approximately 26 foreign countries.
- Mannington Mills, Inc., a competing flooring manufacturer, was licensed to use Congoleum’s U.S. patents.
- Mannington alleged Congoleum fraudulently procured certain foreign patents and used those patents—through foreign licensing and infringement litigation—to restrain trade and monopolize in violation of Sherman Act § 2.
- Mannington sought treble damages and injunctive relief under federal antitrust law and asserted a pendent state-law unfair competition claim.
- In related prior litigation, Mannington had pursued antitrust challenges to Congoleum’s foreign licensing; summary judgment was entered against Mannington on that antitrust claim, and the matter was on appeal.
- After being denied leave in the earlier case to add a fraud-in-foreign-patents theory, Mannington filed a separate action advancing that theory.
- The district court dismissed the federal complaint for failure to state a claim, treating the act of state doctrine as a principal basis, and declined to hear the pendent state claim.

## Issues

1. Whether the act of state doctrine categorically bars a Sherman Act § 2 claim predicated on allegations that a private party fraudulently obtained foreign patents.
2. Whether, and under what limits, a U.S. court should exercise extraterritorial antitrust jurisdiction over conduct involving foreign patents, foreign markets, and foreign enforcement proceedings.
3. Whether dismissal at the pleading stage was proper without developing a factual record bearing on comity and potential conflicts with foreign sovereign interests.

## Decision

- The Third Circuit held that the act of state doctrine did not, by itself, bar consideration of Mannington’s antitrust claim.
- The court vacated the dismissal to the extent it treated act of state as an absolute bar.
- The court remanded for development of an adequate record and for the district court to decide whether jurisdiction should be exercised after weighing U.S. antitrust enforcement interests against comity and international relations concerns.
- Because the federal claim might proceed on remand, the district court would also need to reconsider whether to entertain the pendent state-law claim.

## Legal Principles

- The act of state doctrine is not an automatic prohibition on adjudicating domestic claims merely because foreign governmental acts (such as patent grants) form part of the factual background; the inquiry turns on whether the court is being asked to invalidate or pass judgment on a foreign sovereign’s act.
- Allegations of private fraud connected to obtaining foreign rights can be evaluated in a U.S. antitrust case without necessarily treating the claim as a forbidden review of foreign sovereign action.
- Even when statutory jurisdiction exists to apply U.S. antitrust law to foreign conduct, courts should consider comity and foreign-relations concerns before exercising jurisdiction, based on a developed factual record.
- The comity analysis may include the directness of effects on U.S. commerce, the nationality of parties, the locus of conduct and markets, and the risk of conflict with foreign law and foreign states’ interests in their patent systems and enforcement mechanisms.

## Conclusion

The Third Circuit rejected the act of state doctrine as a categorical basis for dismissing a Sherman Act monopolization claim tied to allegedly fraudulently obtained foreign patents, but required the district court on remand to build a factual record and decide whether to exercise jurisdiction after balancing U.S. antitrust enforcement interests against comity and international relations concerns.


Mannington Mills, Inc. v. Congoleum Corp., 595 F.2d 1287 (3d Cir. 1979)