1. Through a system of contracts between a company which owned
the patents for electric lamps with tungsten filaments and
manufactured most of those sold and a large number of wholesale and
retail dealers in electrical supplies, the dealers were appointed
agents of the company to sell, on commission, the lamps, which were
to be consigned to them by the company, transportation prepaid; the
sales were to be at prices fixed by the company, the dealers to pay
all expenses except the original transportation and to account to
the company periodically for the amount, less commission, of all
sales, cash or credit, and all the stock entrusted to the dealers
was to remain the property of the company until sold, and to be
accounted for by the dealers.
Page 272 U. S. 477
Held, that the dealers were genuine agents, not
purchasers in disguise, and that the plan was not a device to fix
prices after sale and to restrain trade and exercise monopoly in
the lamps in violation of the Anti-Trust Act. P.
272 U. S.
484.
2. The circumstance that the agents were in their regular
business merchants, and, under a prior arrangement, had bought the
lamps and sold them as their own did not prevent this change in
their relation to the company. P.
272 U. S.
484.
3. Nor did the size and comprehensiveness of the scheme bring it
within the Anti-Trust Law. P.
272 U. S.
485.
4. As a patentee has a statutory monopoly of the right to make,
use, and sell the patented article, the comprehensiveness of his
control of the business of selling is not necessarily an evidence
of illegality in method. P.
272 U. S.
485.
5. As long as a patentee makes no effort to fasten upon
ownership of the articles he sells control of the prices at which
his purchaser shall sell, it makes no difference how widespread his
monopoly. P.
272 U. S.
485.
6. The owner of articles, patented or otherwise, is not
violating the common law or the Anti-Trust law by seeking to
dispose of his articles directly to the consumer and fixing the
price by which his agents transfer the title from him directly to
such consumer. P.
272 U. S.
488.
7. A patentee, in licensing another person to make, use, and
vend, may lawfully impose the condition that sales by the licensee
shall be at prices fixed by the licensor and subject to change at
his discretion. P.
272 U. S.
488.
15 F.2d 715
affirmed.
Appeal from a decree of the district court dismissing, for want
of equity, a bill brought by the United States to enjoin the
General Electric Company, Westinghouse Electric and Manufacturing
Company, and Westinghouse Lamp Company, appellees herein, from
prosecuting a plan for the distribution and sale of patented
electric lamps, which was alleged to be a restraint and monopoly of
interstate commerce.
Page 272 U. S. 478
MR. CHIEF JUSTICE TAFT delivered the opinion of the Court.
This is a bill in equity, brought by the United States in the
District Court for the Northern District of Ohio to enjoin the
General Electric Company, the Westinghouse Electric &
Manufacturing Company, and the Westinghouse Lamp Company from
further violation of the Anti-Trust Act of July 2, 1890. 26 Stat.
209, c. 647. The bill made two charges, one that the General
Electric Company, in its business of making and selling
incandescent electric lights, had devised and was carrying out a
plan for their distribution throughout out the United States by a
number of so-called agents, exceeding 21,000, to restrain
interstate trade in such lamps and to exercise a monopoly of the
sale thereof, and, second, that it was achieving the same illegal
purpose through a contract of license with the defendants, the
Westinghouse Electric & Manufacturing Company and the
Westinghouse house Lamp Company. As the Westinghouse Lamp Company
is a corporation all of whose stock is owned by the Westinghouse
Electric & Manufacturing Company, and is but its selling agent,
we may treat the two as one, and reference hereafter will be only
to the defendants the General Electric
Page 272 U. S. 479
Company, which we shall call the Electric Company, and the
Westinghouse Company.
The government alleged that the system of distribution adopted
was merely a device to enable the Electric Company to fix the
resale prices of lamps in the hands of purchasers, that the
so-called agents were in fact wholesale and retail merchants, and
the lamps passed through the ordinary channels of commerce in the
ordinary way, and that the restraint was the same and just as
unlawful as if the so-called agents were avowed purchasers handling
the lamps under resale price agreements. The Electric Company
answered that its distributors were
bona fide agents, that
it had the legal right to market its lamps and pass them directly
to the consumer by such agents, and at prices and by a system
prescribed by it and agreed upon between it and its agents, there
being no limitation sought as to resale prices upon those who
purchased from such agents.
The second question in the case involves the validity of a
license granted March 1, 1912, by the Electric Company to the
Westinghouse Company to make, use, and sell lamps under the patents
owned by the former. It was charged that the license in effect
provided that the Westinghouse Company would follow prices and
terms of sale from time to time fixed by the Electric Company and
observed by it, and that the Westinghouse Company would, with
regard to lamps manufactured by it under the license, adopt and
maintain the same conditions of sale as observed by the Electric
Company in the distribution of lamps manufactured by it.
The district court, upon a full hearing, dismissed the bill for
want of equity, and this is an appeal under § 2 of the Act of
February 11, 1903, known as the Expediting Act. 32 Stat. 823, c.
544, § 2.
There had been a prior litigation between the United States and
the three defendants and 32 other corporations,
Page 272 U. S. 480
in which the government sued to dissolve an illegal combination
in restraint of interstate commerce in electric lamps, in violation
of the Anti-Trust Act, and to enjoin its further violation. A
consent decree was entered in that cause by which the combination
was dissolved, the subsidiary corporations surrendered their
charters, and their properties were taken over by the General
Electric Company. The defendants were all enjoined from fixing
resale prices for purchasers, except that the owner of the patents
were permitted to fix the prices at which a licensee should sell
lamps manufactured by it under the patent. After the decree was
entered, a new sales plan, which was the one here complained of,
was submitted to the Attorney General. The Attorney General
declined to express an opinion as to its legality. The plan was
adopted, and has been in operation since 1912.
The government insists that these circumstances tend to support
the government's view that the new plan was a mere evasion of the
restrictions of the decree, and was intended to carry out the same
evil result that had been condemned in the prior litigation. There
is really no conflict of testimony in the sense of a variation as
to the facts, but only a difference as to the inference to be drawn
therefrom. The evidence is all included in a stipulation as to
certain facts as to what certain witnesses for the defendants would
testify and as to the written contracts of license and agency made
by the General Electric Company and the Westinghouse Company.
The General Electric Company is the owner of three patents --
one of 1912 to Just & Hanaman, the basic patent for the use of
tungsten filaments in the manufacture of electric lamps; the
Coolidge patent of 1913, covering a process of manufacturing
tungsten filaments by which their tensile strength and endurance is
greatly increased; and, third, the Langmuir patent of 1916, which
is for the use of gas in the bulb by which the intensity of the
Page 272 U. S. 481
light is substantially heightened. These three patents cover
completely the making of the modern electric lights with the
tungsten filaments, and secure to the General Electric Company the
monopoly of their making, using, and vending.
The total business in electric lights for the year 1921 was
$68,300,000, and the relative percentages of business done by the
companies were: General Electric, 69 percent; Westinghouse, 16
percent; other licensees, 8 percent, and manufacturers not
licensed, 7 percent. The plan of distribution by the Electric
Company divides the trade into three classes. The first class is
that of sales to large consumers readily reached by the General
Electric Company, negotiated by its own salaried employees, and the
deliveries made from its own factories and warehouses. The second
class is of sales to large consumers under contracts with the
General Electric Company, negotiated by agents, the deliveries
being made from stock in the custody of the agents, and the third
is of the sales to general consumers by agents under similar
contracts. The agents under the second class are called B agents,
and the agents under the third class are called A agents. Each B
agent is appointed by the General Electric Company by the execution
and delivery of a contract for the appointment, which lasts a year
from a stated date, unless sooner terminated. It provides that the
company is to maintain on consignment in the custody of the agent a
stock of lamps, the sizes, types, classes, and quantity of which
and the length of time which they are to remain in stock to be
determined by the company. The lamps consigned to the agents are to
be kept in their respective places of business, where they may be
readily inspected and identified by the company. The consigned
stock, or any part of it, is to be returned to the company as it
may direct. The agent is to keep account books and records giving
the complete information as to his dealings for the inspection
Page 272 U. S. 482
of the company. All of the lamps in such consigned stock are to
be and remain the property of the company until the lamps are sold,
and the proceeds of all lamps are to be held in trust for the
benefit and for the account of the company until fully accounted
for. The B agent is authorized to deal with the lamps on
consignment with him in three ways -- first, to distribute the
lamps to the company's A agents as authorized by the company;
second, to sell lamps from the stock to any consumer to the extent
of his requirements for immediate delivery at prices specified by
the company; third, to deliver lamps from the stock to any
purchaser under written contract with the company to whom the B
agent may be authorized by the company to deliver lamps at the
prices and on the terms stated in the contract. The B agent has no
authority to dispose of any of the lamps except as above provided,
and is not to control or attempt to control prices at which any
purchaser shall sell any of such lamps. The agent is to pay all
expenses in the storage, cartage, transportation, handling, sale,
and distribution of lamps, and all expenses incident thereto and to
the accounting therefor, and to the collection of accounts created.
This transportation does not include the freight for the lamps in
the consignment from the company to the agent. The agent guarantees
the return to the company of all unsold lamps in the custody of the
agent within a certain time after the termination of his agency.
The agent is to pay over to the company not later than the 15th of
each month an amount equal to the total sales value, less the
agent's compensation, of all of the company's lamps sold by him --
that is, first, of the collections that have been made; second, of
those customers' accounts which are past due. This is to comply
with the guaranty of the agent of due and prompt payment for all
lamps sold by him from his stock. Third, the agent is to pay to the
company the value of all of the company's
Page 272 U. S. 483
lamps lost or missing from or damaged in the stock in his
custody.
There is a basic rate of commission payable to the agent, and
there are certain special supplemental and additional compensations
for prompt and efficient service. If the agent becomes insolvent,
or fails to make reports and remittances, or fails in any of his
obligations, the appointment may be terminated, and, when
terminated, either at the end of the year or otherwise, the
consigned lamps remaining unsold are to be delivered to the
manufacturer. It appears in the evidence that, since 1915, although
there is no specific agreement to this effect, the company has
assumed all risk of fire, flood, obsolescence, and price decline,
and carries whatever insurance is carried on the stocks of lamps in
the hands of its agents and pays whatever taxes are assessed. This
is relevant as a circumstances to confirm the view that the
so-called relation of agent to the company is the real one. There
are 400 of the B agents, the large distributors. They recommend to
the company efficient and reliable distributors in the localities
with which they are respectively familiar, to act as A agents, whom
the company appoints. There are 21,000 or more of the A agents.
They are usually retail electrical supply dealers in smaller
places. The only sales which the A agent is authorized to make are
to consumers for immediate delivery and to purchasers under written
contract with the manufacturer, just as in the case of the B
agents. The plan was, of course, devised for the purpose of
enabling the company to deal directly with consumers and
purchasers, and doubtless was intended to avoid selling the lamps
owned by the company to jobbers or dealers, and prevent sale by
these middlemen to consumers at different and competing prices. The
question is whether, in view of the arrangements made by the
company with those who ordinarily and usually would be merchants
buying from the manufacturer and selling to the public, such
persons
Page 272 U. S. 484
are to be treated as agents or as owners of the lamps consigned
to them under such contracts. If they are to be regarded really as
purchasers, then the restriction as to the prices at which the
sales are to be made is a restraint of trade and a violation of the
Anti-Trust Law.
We find nothing in the form of the contracts and the practice
under them which makes the so-called B and A agents anything more
than genuine agents of the company, or the delivery of the stock to
each agent anything more than a consignment to the agent for his
custody and sale as such. He is not obliged to pay over money for
the stock held by him until it is sold. As he guarantees the
account when made, he must turn over what should have been paid
whether he gets it or not. This term occurs in a frequent form of
pure agency known as sale by
del credere commission. There
is no conflict in the agent's obligation to account for all lamps
lost, missing, or damaged in the stock. It is only a reasonable
provision to secure his careful handling of the goods intrusted to
him. We find nothing in his agreement to pay the expense of
storage, cartage, transportation (except the freight on the
original consignment), handling and the sale and distribution of
the lamps, inconsistent with his relation as agent. The expense of
this is, of course, covered in the amount of his fixed commission.
The agent has no power to deal with the lamps in any way
inconsistent with the retained ownership of the lamps by the
company. When they are delivered by him to the purchasers, the
title passes directly from the company to those purchasers. There
is no evidence that any purchaser from the company or any of its
agents is put under any obligation to sell at any price, or to deal
with the lamps purchased except as an independent owner. The
circumstance that the agents were, in their regular business,
wholesale or retail merchants, and, under a prior arrangement, had
bought the lamps and sold them as
Page 272 U. S. 485
their owners, did not prevent a change in their relation to the
company. We find no reason in this record to hold that the change
in this case was not in good faith and actually maintained.
But it is said that the system of distribution is so complicated
and involves such a very large number of agents, distributed
throughout the entire country, that the very size and
comprehensiveness of the scheme brings it within the Anti-Trust
Law. We do not question that, in a suit under the Anti-Trust Act,
the circumstance that the combination effected secures domination
of so large a part of the business affected as to control prices is
usually most important in proof of a monopoly violating the Act.
But, under the patent law, the patentee is given by statute a
monopoly of making, using, and selling the patented article. The
extent of his monopoly in the articles sold and in the territory of
the United States where sold is not limited in the grant of his
patent, and the comprehensiveness of his control of the business in
the sale of the patented article is not necessarily an indication
of illegality of his method. As long as he makes no effort to
fasten upon ownership of the articles, he sells control of the
prices at which his purchaser shall sell, it makes no difference
how widespread his monopoly. It is only when he adopts a
combination with others by which he steps out of the scope of his
patent rights and seeks to control and restrain those to whom he
has sold his patented articles in their subsequent disposition of
what is theirs that he comes within the operation of the Anti-Trust
Act. The validity of the Electric Company's scheme of distribution
of its electric lamps turns, therefore, on the question whether the
sales are by the company through its agents to the consumer, or are
in fact by the company to the so-called agents at the time of
consignment. The distinction in law and fact between an agency and
a sale is clear. For the reasons already stated, we find no
Page 272 U. S. 486
ground for inference that the contracts made between the company
and its agents are, or were intended to be, other than what their
language makes them.
The government relies in its contention for a different
conclusion on the case of
Dr. Miles Medical Co. v. John D. Park
& Sons Co., 220 U. S. 373.
That case was a bill in equity brought by the Miles Medical Company
to enjoin Park & Sons Company from continuing an alleged
conspiracy with a number of wholesale and retail dealers in
proprietary medicines, to induce the persons who had entered into
certain agency contracts, to the number of 21,000 through the
country, to break their contracts of agency with the Medical
Company, to the great injury of that company. The agency concerned
the sale of proprietary medicines prepared by secret methods and
formulas and identified by distinctive packages and trademarks. The
company had an extensive trade throughout the United States and
certain foreign countries. It had been its practice to sell its
medicines to jobbers and wholesale druggists, who in turn sold to
retail druggists for sale to the customer. It had fixed not only
the price of its own sales to jobbers and wholesale dealers, but
also the prices of jobbers and small dealers. The defendants had
inaugurated a cut-rate or cut-price system which had caused great
damage to the complainants' business, injuriously affected its
reputation, and depleted the sales of its remedies. The bill was
demurred to on the ground that the methods set forth in the bill,
by which attempt was made to control the sales of prices to
consumers, was illegal both at common law and under the Anti-Trust
Act, and deprived the bill of any equity. This was the issue
considered by the Court.
The plan of distribution of the Miles Medical Company resembled
in many details the plan of distribution in the present case,
except that the subject matter there was medicine by a secret
formula, and not a patented article.
Page 272 U. S. 487
But there were certain vital differences. These led the circuit
court of appeals (164 F. 803) to declare that the language of the
so-called contracts of agency were false in their purport, and were
merely used to conceal what were really sales to the so-called
agents. This conclusion was sustained by certain allegations in the
bill inconsistent with the contracts of agency, to the effect that
the Medical Company did sell to these so-called agents the medical
packages consigned. This Court, however, without reference to these
telltale allegations of the bill, found in the contracts themselves
and their operation plain provision for purchases by the so-called
agents which necessarily made the contracts as to an indefinite
amount of the consignments to them contracts of sale, rather than
of agency. The Court therefore held that the showing made was of an
attempt by the Miles Medical Company, through its plan of
distribution, to hold its purchasers after the purchase at full
price to an obligation to maintain prices on a resale by them. This
is the whole effect of the
Miles Medical case. That such
it was is made plain in the case of
Boston Store v. American
Graphophone Co., 246 U. S. 8,
246 U. S. 21, in
which then Chief Justice White reviewed the various cases on this
general subject and spoke of the
Miles Medical case as
follows:
"In
Dr. Miles Medical Co. v. Park & Sons Co.,
220 U. S.
373, it was decided that, under the general law, the
owner of movables (in that case, proprietary medicines compounded
by a secret formula) could not sell the movables and lawfully by
contract fix a price at which the product should afterwards be
sold, because to do so would be, at one and the same time, to sell
and retain, to part with and yet to hold, to project the will of
the seller so as to cause it to control the movable parted with
when it was not subject to his will because owned by another, and
thus to make the will of the seller unwarrantedly take the place of
the law of the land as to such movables.
Page 272 U. S. 488
It was decided that the power to make the limitation as to price
for the future could not be exerted consistently with the
prohibitions against restraint of trade and monopoly contained in
the Anti-Trust Law."
Nor does the case of
Standard Sanitary Manufacturing Co. v.
United States, 226 U. S. 20,
sustain the contention of the government on the first question.
There, a number of manufacturers, one of whom owned a patent for
enameled iron ware for plumbing fixtures, made a combination to
accept licenses to make the patented commodities and to sell them
in interstate trade to jobbers and to refuse to sell to jobbers who
would not agree to maintain fixed prices in sales to plumbers. This
was an attempt, just like that in the
Miles Medical Co.
case, to control the trade in the articles sold and fasten upon
purchasers who had bought at full price and were complete owners an
obligation to maintain resale prices.
We are of opinion therefore that there is nothing as a matter of
principle or in the authorities which requires us to hold that
genuine contracts of agency like those before us, however
comprehensive as a mass or whole in their effect, are violations of
the Anti-Trust Act. The owner of an article, patented or otherwise,
is not violating the common law or the Anti-Trust Act by seeking to
dispose of his articles directly to the consumer and fixing the
price by which his agents transfer the title from him directly to
such consumer. The first charge in the bill cannot be
sustained.
Second. Had the Electric Company as the owner of the
patents, entirely controlling the manufacture, use, and sale of the
tungsten incandescent lamps, in its license to the Westinghouse
Company, the right to impose the condition that its sales should be
at prices fixed by the licensor and subject to change according to
its discretion? The contention is also made that the license
required the Westinghouse Company not only to conform in the
matter
Page 272 U. S. 489
of the prices at which it might vend the patented articles, but
also to follow the same plan as that which we have already
explained the Electric Company adopted in its distribution. It does
not appear that this provision was express in the license, because
no such plan was set out therein, but even if the construction
urged by the government is correct, we think the result must be the
same.
The owner of a patent may assign it to another and convey (1)
the exclusive right to make, use, and vend the invention throughout
the United States; or (2) an undivided part or share of that
exclusive right; or (3) the exclusive right under the patent within
and through a specific part of the United States. But any
assignment or transfer short of one of these is a license giving
the licensee no title in the patent and no right to sue at law in
his own name for an infringement.
Waterman v. Mackenzie,
138 U. S. 252,
138 U. S. 255;
Gayler v.
Wilder, 10 How. 477,
51 U. S.
494-495;
Moore v.
Marsh, 7 Wall. 515, and
Crown Co. v. Nye Tool
Works, 261 U. S. 24, 30
[argument of counsel -- omitted]. Conveying less than title to the
patent or part of it, the patentee may grant a license to make,
use, and vend articles under the specifications of his patent for
any royalty, or upon any condition the performance of which is
reasonably within the reward which the patentee by the grant of the
patent is entitled to secure. It is well settled, as already said,
that, where a patentee makes the patented article and sells it, he
can exercise no future control over what the purchaser may wish to
do with the article after his purchase. It has passed beyond the
scope of the patentee's rights.
Adams v.
Burks, 17 Wall. 453;
Bloomer v.
McQuewan, 14 How. 539;
Mitchell
v. Hawley, 16 Wall. 544;
Hobbie v.
Jennison, 149 U. S. 355;
Keeler v. Standard Folding Bed Co., 157 U.
S. 659. But the question is a different one which arises
when we consider what a patentee who grants a license to one to
make and vend the patented article may do in limiting the licensee
in the
Page 272 U. S. 490
exercise of the right to sell. The patentee may make and grant a
license to another to make and use the patented articles, but
withhold his right to sell them. The licensee in such a case
acquires an interest in the articles made. He owns the material of
them, and may use them. But if he sells them, he infringes the
right of the patentee, and may be held for damages and enjoined. If
the patentee goes further and licenses the selling of the articles,
may he limit the selling by limiting the method of sale and the
price? We think he may do so provided the conditions of sale are
normally and reasonably adapted to secure pecuniary reward for the
patentee's monopoly. One of the valuable elements of the exclusive
right of a patentee is to acquire profit by the price at which the
article is sold. The higher the price, the greater the profit,
unless it is prohibitory. When the patentee licenses another to
make and vend and retains the right to continue to make and vend on
his own account, the price at which his licensee will sell will
necessarily affect the price at which he can sell his own patented
goods. It would seem entirely reasonable that he should say to the
licensee, "Yes, you may make and sell articles under my patent, but
not so as to destroy the profit that I wish to obtain by making
them and selling them myself." He does not thereby sell outright to
the licensee the articles the latter may make and sell, or vest
absolute ownership in them. He restricts the property and interest
the licensee has in the goods he makes and proposes to sell.
This question was considered by this Court in the case of
Bement v. National Harrow Co., 186 U. S.
70. A combination of manufacturers owning a patent to
make float spring tool harrows licensed others to make and sell the
products under the patent on condition that they would not, during
the continuance of the license, sell the products at a less price
or on more favorable terms of payment and delivery to purchasers
than were set forth
Page 272 U. S. 491
in a schedule made part of the license. That was held to be a
valid use of the patent rights of the owners of the patent. It was
objected that this made for a monopoly. The Court, speaking by Mr.
Justice Peckham, said (p.
186 U. S.
91):
"The very object of these laws is monopoly, and the rule is,
with few exceptions, that any conditions which are not in their
very nature illegal with regard to this kind of property, imposed
by the patentee and agreed to by the licensee for the right to
manufacture or use or sell the article, will be upheld by the
courts. The fact that the conditions in the contracts keep up the
monopoly or fix prices does not render them illegal."
Speaking of the contract, he said (p.
186 U. S.
93):
"The provision in regard to the price at which the licensee
would sell the article manufactured under the license was also an
appropriate and reasonable condition. It tended to keep up the
price of the implements manufactured and sold, but that was only
recognizing the nature of the property dealt in, and providing for
its value so far as possible. This the parties were legally
entitled to do. The owner of a patented article can, of course,
charge such price as he may choose, and the owner of a patent may
assign it or sell the right to manufacture and sell the article
patented upon the condition that the assignee shall charge a
certain amount for such article."
The question which the Court had before it in that case came to
it on a writ of error to the Court of Appeals of New York, and
raised the federal issue whether a contract of license of this
kind, having a wide operation in the sales of the harrows, was
invalid because a violation of the Anti-Trust law. This Court held
that it was not.
It is argued, however, that
Bement v. National Harrow
Co. has been in effect overruled. The claim is based on the
fact that one of the cases cited by Mr. Justice Peckham in that
case was
Heaton-Peninsular Button-Fastener Co. v. Eureka
Specialty Co., 77 F.
Page 272 U. S. 492
288. This was a decision by the Circuit Court of Appeals of the
Sixth Circuit, the opinion being written by Circuit Judge Lurton,
afterwards a Justice of this Court. The question there considered
was whether the owner of a patent for a machine for fastening
buttons to shoes with metallic fasteners might sell such machines
subject to the condition that they should be used only with
fasteners manufactured by the seller, the patented machine to
revert on the breach of the condition. The purchaser of the machine
was held to be a licensee, and the use by him of the unpatented
fasteners contrary to the condition to be a breach of contract of
the license, and an infringement of the patent monopoly.
A similar case came before this Court and is reported in
Henry v. Dick Co., 224 U. S. 1, the
opinion in which was also delivered by Mr. Justice Lurton. In that
case, a complainant sold his patented machine embodying his
invention. It was called the "rotary mimeograph." The claims of the
patent did not embrace ink or other materials used in working it.
Upon the machine, however, was inscribed a notice, styled a license
restriction, reciting that the machine might be used only with the
stencil paper, ink, and other supplies made by the A. B. Dick
Company. The Henry Company, dealers in ink, sold to the purchaser,
for use in working her machine, ink not made by the Dick Company.
This Court held by a majority that the use of such ink by the
purchaser was a prohibited use, and rendered her liable to an
action under the patent law for infringement, and that the seller
of the ink was liable as a contributory infringer.
The case was overruled by this Court in
Motion Picture
Patents Co. v. Universal Film Co., 243 U.
S. 502. The patent in that case covered a part of the
mechanism used in motion picture exhibiting machines for feeding a
film through the machine with a regular uniform and accurate
movement so as not to expose
Page 272 U. S. 493
the film to excessive strain or wear. The license agreement
contained a covenant on the part of the licensee that every machine
sold by it should be sold under the restriction and condition that
such exhibiting or projecting machines should be used solely for
exhibiting or projecting motion pictures of the Motion Picture
Patents Company. The overruling of the
Dick case was based
on the ground that the grant of the patent was of the exclusive
right to use the mechanism and produce the result with any
appropriate material, and that the materials or pictures upon which
the machine was operated were no part of the patented machine or of
the combination which produced the patented result.
The overruling of the
Dick case and the disapproval of
the
Button-Fastener case by the
Motion Picture
Film case did not carry with it the overruling of
Bement
v. Harrow Co. The
Button-Fastener case was cited in
the case of
Bement v. Harrow Co. to sustain the decision
there by what was an
a fortiori argument. The ruling in
the former case was much broader than was needed for the decision
in the latter. The price at which a patented article sells is
certainly a circumstance having a more direct relation and is more
germane to the rights of the patentee than the unpatented material
with which the patented article may be used. Indeed, as already
said, price-fixing is usually the essence of that which secures
proper reward to the patentee.
Nor do we think that the decisions of this Court holding
restrictions as to price of patented articles invalid apply to a
contract of license like the one in this case. Those cases are:
Boston Store v. American Graphophone Co., 246 U. S.
8;
Straus v. Victor Talking Machine Co.,
243 U. S. 490;
Bauer v. O'Donnell, 229 U. S. 1;
Standard Sanitary Manufacturing Co. v. United States,
226 U. S. 20;
Bobbs-Merrill Co. v. Straus, 210 U.
S. 339. These cases really are only instances of
Page 272 U. S. 494
the application of the principle of
Adams v.
Burks, 17 Wall. 453,
84 U. S. 456,
already referred, to that a patentee may not attach to the article
made by him or with his consent a condition running with the
article in the hands of purchasers limiting the price at which one
who becomes its owner for full consideration shall part with it.
They do not consider or condemn a restriction put by a patentee
upon his licensee as to the prices at which the latter shall sell
articles which he makes, and only can make legally, under the
license. The authority of
Bement v. Harrow Co. has not
been shaken by the cases we have reviewed.
For the reasons given, we sustain the validity of the license
granted by the Electric Company to the Westinghouse Company. The
decree of the district court dismissing the bill is
Affirmed.