United States v. Line Material Co.

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United States v. Line Material Co.
Seal of the United States Supreme Court.svg
Supreme Court of the United States
Argued April 29, 1947
Reargued November 12–13, 1947
Decided March 8, 1948
Full case nameUnited States v. Line Material Co.
Citations333 U.S. 287 ( more )
68 S. Ct. 550; 92 L. Ed. 2d 701; 1948 U.S. LEXIS 2732; 76 U.S.P.Q. 399
Case history
Prior64 F. Supp. 970 (E.D. Wis. 1946)
Court membership
Chief Justice
Fred M. Vinson
Associate Justices
Hugo Black  · Stanley F. Reed
Felix Frankfurter  · William O. Douglas
Frank Murphy  · Robert H. Jackson
Wiley B. Rutledge  · Harold H. Burton
Case opinions
MajorityReed, joined by Black, Douglas, Murphy, Rutledge
ConcurrenceDouglas, joined by Black, Murphy, Rutledge
DissentBurton, joined by Vinson, Frankfurter
Jackson took no part in the consideration or decision of the case.

United States v. Line Material Co., 333 U.S. 287 (1948), [1] is a decision of the United States Supreme Court limiting the doctrine of the 1926 General Electric decision, excusing price fixing in patent license agreements. [2] The Line Material Court held that cross-licenses between two manufacturer competitors, providing for fixing the prices of the licensed products and providing that one of the manufacturers would license other manufacturers under the patents of each manufacturer, subject to similar price fixing, violated Sherman Act § 1. The Court further held that the licensees who, with knowledge of such arrangements, entered into the price-fixing licenses thereby became party to a hub-and-spoke conspiracy in violation of Sherman Act § 1.

Contents

Background

This is the patented Schultz dropout fuse cutout Schultz dropout fuse cutout.jpg
This is the patented Schultz dropout fuse cutout

All of the defendants in this case are manufacturers of electrical devices, the most important of which for purposes of this case are dropout fuse cutouts, which are devices for breaking electrical power circuits. The defendants engaged in a conspiracy to fix the prices of these devices. Defendant Southern States Equipment Corporation (Southern) acquired Lemmon U.S. Pat. No. 2,150,102, which the dropout fuse cutouts the defendants manufacture are said to infringe. Defendant Line Materials (Line) acquired Schultz U.S. Pat. No. 2,176,227, which is an improvement on the Lemmon patent (it is simpler and cheaper), but its use infringes the Lemmon patent. [3] Line and Southern settled a patent dispute by entering into an agreement under which Southern licensed Line royalty-free under the Lemmon patent, and Line licensed Southern royalty-free under the Schultz patent and authorized Southern to grant sublicenses under the Schultz patent. The agreement also provided that all sublicenses granted by Southern under Line's patents were required to include provisions for minimum prices to be established by Line, and all sublicenses under the Lemmon patent were to include provisions for minimum prices to be fixed by Southern. [4]

After various disputes over the licensing terms, Line, Southern, Kearney, General Electric, Westinghouse, Matthews, Schweitzer and Conrad, and Pacific had a meeting in 1940 at which they agreed upon a "standard" license. Several defendants, particularly General Electric, attempted to design around the patents and thus avoid infringement, but these efforts were unsuccessful. At a further meeting, the defendants concluded that it would be more feasible if Line would be the licensor rather than Southern. Under a new agreement, Line was granted a license under Southern's patents but only for cutouts in which the circuit interruption is caused by a fuse melting. Line also was authorized to grant licenses to third persons to make and sell electrical equipment embodying the inventions of Southern's patents. The new agreement provided that Southern received a license under the Line patents on condition that "the prices, terms and conditions of sale of the Southern Corporation for electric fuse equipment, made and sold under the licenses herein granted, shall . . . be not more favorable to the customer than those established from time to time and followed by the Line Company in making its sales." [5]

Matthews, Railway and Kearney then deposited signed license agreements in escrow. The agreement was not to be effective until three out of five named cutout manufacturers in addition to Line, Southern and General Electric had entered into substantially identical license agreements. The condition of the escrow was satisfied and the license agreements became effective in July 1940. Porcelain and Pacific signed license agreements in November 1940, Schweitzer and Conrad in January 1941, Westinghouse also in January 1941, Johnson in June 1943, and Royal in March 1944. The defendants then adhered to a common price schedule. [5]

It was conceded that each signer of the agreements was aware of the price provisions of the various agreements. Some of the licensees opposed or tried to limit the scope of the price-fixing provisions, but they all, even if reluctantly, acquiesced. The Supreme Court observed:

Undoubtedly, one purpose of the arrangements was to make possible the use by each manufacturer of the Lemmon and Schultz patents. These patents, in separate hands, produced a deadlock. Lemmon, by his basic patent, "blocked" Schultz' improvement. Cross-licenses furnished appellees a solution. [6]

The Government sued the defendants for violation of Sherman Act § 1, but the district court dismissed the complaint as to all defendants, concluding that the doctrine of United States v. General Electric Co. (1926) was controlling.

Ruling of the Supreme Court

Justice Stanley Reed delivered the judgment of a closely divided Court Stanley Reed.jpg
Justice Stanley Reed delivered the judgment of a closely divided Court

Justice Stanley F. Reed delivered the judgment of a closely divided Court, in an opinion in which he spoke principally for himself. Justice William O. Douglas, with whom Justices Hugo Black, Frank Murphy, and Wiley Rutledge joined, concurred in finding a violation of Sherman Act § 1, but they favored total overruling of the 1926 General Electric case. Justice Harold Burton dissented, joined by Chief Justice Fred Vinson and Justice Felix Frankfurter. Justice Robert H. Jackson having approved the filing of the case when in the Department of Justice took no part in the consideration or decision of the case.

Main opinion (Justice Reed)

Justice Reed began by observing, "General Electric is a case that has provoked criticism and approval," and it received "only bare recognition in Ethyl Gasoline Corp. v. United States." In United States v. Masonite Corp. , he noted, the Court found it 'unnecessary to reconsider the rule" because the price fixing occurred on the sale of goods after "the patent privilege was exhausted by a transfer of the articles to certain agents who were part of the sales organization of competitors." Now, in this case the Government asks the Court "to reexamine the rule of the General Electric case." [7]

But there are problems of stare decisis . For example, "business arrangements have been repeatedly, even though hesitatingly, made in reliance upon the contractors' interpretation of [General Electric's] meaning." Moreover, "Congress has taken no steps to modify the rule." That legislative inaction "is to be weighed with the counterbalancing fact that the rule of the General Electric case grew out of a judicial determination." [8]

Reed continued:

The writer accepts the rule of the General Electric case as interpreted by the third subdivision of this opinion. [9] As a majority of the Court does not agree with that position, the case cannot be reaffirmed on that basis. Neither is there a majority to overrule General Electric. In these circumstances, we must proceed to determine the issues on the assumption that General Electric continues as a precedent. Furthermore, we do not think it wise to undertake to explain, further than the facts of this case require, our views as to the applicability of patent price limitation in the various situations listed by the Government. On that assumption, where a conspiracy to restrain trade or an effort to monopolize is not involved, a patentee may license another to make and vend the patented device with a provision that the licensee's sale price shall be fixed by the patentee. The assumption is stated in this way so as to leave aside the many variables of the General Electric rule that may arise. For example, there may be an aggregation of patents to obtain dominance in a patent field, broad or narrow. . . . [10]

Justice Reed therefore considered it appropriate to explain what points "are not contested or are not decided in this case," so that the necessarily narrow nature of the ruling will be understood. First, this is not a monopolization case under Sherman Act § 2; it is a restraint of trade case under Sherman Act § 1. Second, the validity of the patents is not in issue. Nor is the aggregation of patents, by pooling or purchase. [11]

This left the question for the Court to decide as:

Whether, in the light of the prohibition of § 1 of the Sherman Act, two or more patentees in the same patent field may legally combine their valid patent monopolies to secure mutual benefits for themselves through contractual agreements between themselves and other licensees, for control of the sale price of the patented devices. [11]

Line owned the Schultz patent and had the sole right to sublicense Southern's Lemmon patent, and the Schultz patent could not be practiced without infringing the Lemmon patent. As a result:

The agreement between Southern and Line for Line's sublicensing of the Lemmon patent [combined] in Line's hands the authority to fix the prices of the commercially successful devices embodying both the Schultz and Lemmon patents. Thus, though the sublicenses in terms followed the pattern of General Electric in fixing prices only on Line's own patents, the additional right given to Line by the license agreement . . . between Southern and Line, to be the exclusive licensor of the dominant Lemmon patent, made its price-fixing of its own Schultz devices effective over devices embodying also the necessary Lemmon patent. By the patentees' agreement the dominant Lemmon and the subservient Schultz patents were combined to fix prices. In the absence of patent or other statutory authorization, a contract to fix or maintain prices in interstate commerce has long been recognized as illegal per se under the Sherman Act. [12]

Justice Reed saw this as creating a dilemma. "Thus, we have a statutory monopoly by the patent, and by the Sherman Act a prohibition not only of monopoly or attempt to monopolize, but of every agreement in restraint of trade. Public policy has condemned monopolies for centuries." [12] These conflicting principles meet in this case:

We are thus called to make an adjustment between the lawful restraint on trade of the patent monopoly and the illegal restraint prohibited broadly by the Sherman Act. That adjustment has already reached the point, as the precedents now stand, that a patentee may validly license a competitor to make and vend with a price limitation under the General Electric case and that the grant of patent rights is the limit of freedom from competition. . . . . [13]

The Court recognized that the General Electric case holds that a patentee may, under certain conditions, lawfully control the price the licensee of his patent may charge for the patented device, but "no case of this Court has construed the patent and anti-monopoly statutes to permit separate owners of separate patents, by cross-licenses or other arrangements, to fix the prices to be charged by them and their licensees for their respective products." Here, where two patentees combine their patents and fix prices on all devices produced under any of the patents, "competition is impeded to a greater degree than where a single patentee fixes prices for his licensees." That effect makes the case like one in which manufacturers of unpatented goods combine to fix prices. [14]

The General Electric case gives a patentee a right to license another person to make and sell at a fixed price. It does not confer on a patentee "authority to combine with other patent owners to fix prices on articles covered by the[ir] respective patents," and because "the Sherman Act prohibits agreements to fix prices, any arrangement between patentees [to fix prices] runs afoul of that prohibition, and is outside the patent monopoly." [15]

Furthermore, there is a hub-and-spoke conspiracy here: "Licensees under the contract who, as here, enter into license arrangements, with price-fixing provisions, with knowledge of the contract, are equally subject to the prohibitions [of the Sherman Act]." [16]

Concurring opinion (Douglas)

Justice Douglas, with whom Justices Black, Murphy, and Rutledge joined, agreed that the defendants had violated the Sherman Act, but found Justice Reed's "discussion of the problem ... not adequate for a full understanding of the basic issue presented." They "would be rid of United States v. General Electric Co." entirely. [17]

In the 1926 General Electric case, the Court followed Bement v. National Harrow Co., [18] decided in 1902, and it sustained a price-fixing provision of a license to make and vend the patented invention. "By that decision, price-fixing combinations which are outlawed by the Sherman Act . . . were held to be lawful when the property involved was a patent, Douglas said and the asked, "By what authority was this done?" He said it was not by the patent statutes, for they do not give a right to make "price-fixing combinations." Patents should be treated like any other property. The reason for making an exception for patented good is unsound, he argued:

The Court made an exception in the case of these price-fixing combinations in order to make the patent monopoly a more valuable one to the patentee. It was concerned with giving him as high a reward as possible. It reasoned that, if the patentee could not control the price at which his licensees sold the patented article, they might undersell him; that a price-fixing combination would give him protection against that contingency, and therefore was a reasonable device to secure him a pecuniary reward for his invention. Thus, the General Electric case inverted Cl. 8 of Art. I, § 8 of the Constitution, and made the inventor's reward the prime, rather than an incidental, object of the patent system. In that manner, the Court saddled the economy with a vicious monopoly. [19]

It is no answer, Douglas insisted, to say "in reply that he, the patentee, has that monopoly anyway—that his exclusive right to make, use, and vend would give him the right to exclude others and manufacture the invention and market it at any price he chose." While that is so, the patentee gets more from a price-fixing agreement than his original patent monopoly. "He then gets not a benefit inherent in the right of exclusion, but a benefit which flows from suppression of competition by combination with his competitors." Douglas explained that he gets the benefit of a license to conspire in restraint of trade:

In short, he and his associates get the benefits of a conspiracy or combination in restraint of competition. That is more than an "exclusive right" to an invention; it's an "exclusive right" to form a combination with competitors to fix the prices of the products of invention. The patentee creates by that method a powerful inducement for the abandonment of competition, for the cessation of litigation concerning the validity of patents, for the acceptance of patents no matter how dubious, for the abandonment of research in the development of competing patents. Those who can get stabilized markets, assured margins, and freedom from price-cutting will find a price-fixing license an attractive alternative to the more arduous methods of maintaining their competitive positions. Competition tends to become impaired not by reason of the public's preference for the patented article, but because of the preference of competitors for price-fixing and for the increased profits which that method of doing business promises. [20]

Since the Supreme Court, not Congress, created the General Electric doctrine, this Court, "should take the initiative in eliminating it." [21]

Dissenting opinion (Burton)

Justice Burton, together with Justices Vinson and Frankfurter, "impelled by regard for the soundness, authority, and applicability to this case of the unanimous decisions of this Court in Bement v. National Harrow Co. and General Electric, dissented. In their view, the defendants did not violate the Sherman Act. [22]

The dissent argued that the licenses in this case were "the only reasonable means for releasing to the public the benefits intended for the public by the patent laws," and this "cross-license between mutually deadlocked complementary patents is, per se, a desirable procedure." In fact, the dissent observed, the price-fixing license in the General Electric case was a cross-license that "contained agreements even more restrictive than the price protection provisions of the cross-licenses involved in the case at bar." [23] The dissent concluded that there was "neither adequate reason nor authority for overruling" the General Electriuc case or for distinguishing it. [24]

Commentary

● The 1955 Report of the Attorney General's National Committee to Study the Antitrust Laws stated that most members of the committee believed, based on the Line Material case and similar decisions, [25] that use of price-fixing clauses in patent licenses would be illegal if the result of "any concert or arrangement aimed at or resulting in industry-wide price fixing." [26] The Report amplified this comment:

A number of efforts have been made to overrule the General Electric case. These culminated in the Line Material decision where no majority of the Supreme Court could be obtained either to affirm or overrule General Electric. We are not unmindful of this decision nor the vigorous dissent of four justices in favor of overruling General Electric. We think, however, that in the absence of horizontal agreement among licensees, or any plan aimed at or resulting in industry wide price fixing, licenses with price fixing provisions fall within the orbit of the patent and need not run afoul of the antitrust laws. [27]

● Chicago patent lawyer James Wetzel questioned "whether Line Material has any real meaning," given the subsequent 4-4 failure to overrule General Electric in United States v. Huck Mfg. Co. [28] He argues that, in any case, Line Material and Huck failed to rule out patent price fixing or "the right to use that which is reasonably within the reward of the grant of the patent." He therefore recommends that "there should not be any reluctance to use" price-fixing clauses in patent licenses. [29]

Related Research Articles

In United States patent law, patent misuse is a patent holder's use of a patent to restrain trade beyond enforcing the exclusive rights that a lawfully obtained patent provides. If a court finds that a patent holder committed patent misuse, the court may rule that the patent holder has lost the right to enforce the patent. Patent misuse that restrains economic competition substantially can also violate United States antitrust law.

General Talking Pictures Corp. v. Western Electric Co., 304 U.S. 175 (1938), was a case that the Supreme Court of the United States decided in 1938. The decision upheld so-called field-of-use limitations in patent licenses: it held that the limitations were enforceable in a patent infringement suit in federal court against the licensee and those acting in concert with it—for example, a customer that knowingly buys a patented product from the licensee that is outside the scope of the license.

<i>Mallinckrodt, Inc. v. Medipart, Inc.</i>

Mallinckrodt, Inc. v. Medipart, Inc., 976 F.2d 700, is a decision of the United States Court of Appeals for the Federal Circuit, in which the court appeared to overrule or drastically limit many years of U.S. Supreme Court precedent affirming the patent exhaustion doctrine, for example in Bauer & Cie. v. O'Donnell.

Quanta Computer, Inc. v. LG Electronics, Inc., 553 U.S. 617 (2008), is a case decided by the United States Supreme Court in which the Court reaffirmed the validity of the patent exhaustion doctrine. The decision made uncertain the continuing precedential value of a line of decisions in the Federal Circuit that had sought to limit Supreme Court exhaustion doctrine decisions to their facts and to require a so-called "rule of reason" analysis of all post-sale restrictions other than tie-ins and price fixes. In the course of restating the patent exhaustion doctrine, the Court held that it is triggered by, among other things, an authorized sale of a component when the only reasonable and intended use of the component is to engage the patent and the component substantially embodies the patented invention by embodying its essential features. The Court also overturned, in passing, that the exhaustion doctrine was limited to product claims and did not apply to method claims.

United States v. General Electric Co., 272 U.S. 476 (1926), is a decision of the United States Supreme Court holding that a patentee who has granted a single license to a competitor to manufacture the patented product may lawfully fix the price at which the licensee may sell the product.

A post-sale restraint, also termed a post-sale restriction, as those terms are used in United States patent law and antitrust law, is a limitation that operates after a sale of goods to a purchaser has occurred and purports to restrain, restrict, or limit the scope of the buyer's freedom to utilize, resell, or otherwise dispose of or take action regarding the sold goods. Such restraints have also been termed "equitable servitudes on chattels".

Standard Sanitary Mfg. Co. v. United States, 226 U.S. 20 (1912), also known as the Bathtub Trust case, was a United States Supreme Court decision in which the Court held unanimously that ownership of patent rights does not immunize the owner from the antitrust laws prohibiting combinations in unreasonable restraint of trade. The Court famously said that the Sherman Act "is its own measure of right and wrong, of what it permits or forbids, and the judgment of the courts cannot be set up against it in a supposed accommodation of its policy with the good intention of parties, and, it may be, of some good results." A 1917 commentary said, "This decision has become the leading case on the subject of the relation of the patent law and Sherman law to each other."

Motion Picture Patents Co. v. Universal Film Mfg. Co., 243 U.S. 502 (1917), is United States Supreme Court decision that is notable as an early example of the patent misuse doctrine. It held that, because a patent grant is limited to the invention described in the claims of the patent, the patent law does not empower the patent owner, by notices attached to the patented article, to extend the scope of the patent monopoly by restricting the use of the patented article to materials necessary for their operation but forming no part of the patented invention, or to place downstream restrictions on the articles making them subject to conditions as to use. The decision overruled The Button-Fastener Case, and Henry v. A.B. Dick Co., which had held such restrictive notices effective and enforceable.

Ethyl Gasoline Corp. v. United States, 309 U.S. 436 (1940), was a decision of the United States Supreme Court that limited the doctrine of the Court's 1938 decision in General Talking Pictures Corp. v. Western Electric Co. Beginning with the 1926 decision in United States v. General Electric Co., the Supreme Court made a sharp distinction between (i) post-sale restraints that a patentee imposed on purchasers of a patented product and (ii) restrictions (limitations) that a patentee imposed on a licensee to manufacture a patented product: the former being illegal and unenforceable under the exhaustion doctrine while the latter were generally permissible under a lenient "rule of reason." Thus, under the General Talking Pictures doctrine, a patent holder may permissibly license others to manufacture and then sell patented products in only a specified field (market), such as only a particular type of product made under the patent or only a particular category of customer for the patented product. The Ethyl decision held, however, that a patent licensing and distribution program based on both the sale of a patented product and licenses to manufacture a related product was subject to ordinary testing under the antitrust laws, and accordingly was illegal when its effect was to "regiment" an entire industry.

<i>Button-Fastener case</i>

The Button-Fastener Case, Heaton-Peninsular Button-Fastener Co. v. Eureka Specialty Co., also known as the Peninsular Button-Fastener Case, was for a time a highly influential decision of the United States Court of Appeals for the Sixth Circuit. Many courts of appeals, and the United States Supreme Court in the A.B. Dick case adopted its "inherency doctrine"—"the argument that, since the patentee may withhold his patent altogether from public use, he must logically and necessarily be permitted to impose any conditions which he chooses upon any use which he may allow of it." In 1917, however, the Supreme Court expressly overruled the Button-Fastener Case and the A.B. Dick case, in the Motion Picture Patents case.

Impression Products, Inc. v. Lexmark International, Inc., 581 U.S. ___ (2017), is a decision of the Supreme Court of the United States on the exhaustion doctrine in patent law in which the Court held that after the sale of a patented item, the patent holder cannot sue for patent infringement relating to further use of that item, even when in violation of a contract with a customer or imported from outside the United States. The case concerned a patent infringement lawsuit brought by Lexmark against Impression Products, Inc., which bought used ink cartridges, refilled them, replaced a microchip on the cartridge to circumvent a digital rights management scheme, and then resold them. Lexmark argued that as they own several patents related to the ink cartridges, Impression Products was violating their patent rights. The U.S. Supreme Court, reversing a 2016 decision of the Federal Circuit, held that the exhaustion doctrine prevented Lexmark's patent infringement lawsuit, although Lexmark could enforce restrictions on use or resale of its contracts with direct purchasers under regular contract law. Besides printer and ink manufacturers, the decision of the case could affect the markets of high tech consumer goods and prescription drugs.

<i>National Lockwasher Co. v. George K. Garrett Co.</i>

National Lockwasher Co. v. George K. Garrett Co., 137 F.2d 255, is one of the earliest or the earliest federal court decision to hold that it is patent misuse for a patentee to require licensees not to use a competitive technology. Such provisions are known as "tie-outs."

<i>United States v. Vehicular Parking Ltd.</i>

United States v. Vehicular Parking Ltd. is a patent–antitrust case in which the United States Government eroded the doctrine of United States v. General Electric Co. permitting patentees to fix licensee prices, but failed to persuade the court to decree royalty-free licensing as a remedy.

United States v. New Wrinkle, Inc., 342 U.S. 371 (1952), is a 1952 Supreme Court decision in which the Court held that a claim of conspiracy to fix uniform minimum prices and to eliminate competition throughout substantially all of the wrinkle finish industry of the United States by means of patent license agreements was, if proved, a violation of § 1 of the Sherman Act. That one of the defendants, a patent-holding company, abstained from manufacturing activities, did not ship goods in commerce, and engaged solely in patent licensing did not insulate its activity from § 1. Making these license contracts for the purpose of regulating distribution and fixing prices of commodities in interstate commerce is subject to the Sherman Act, even though the isolated act of contracting for the licenses occurs within a single state. Patents give no protection from the prohibitions of the Sherman Act when the patent licensing agreements are used to restrain interstate commerce and fix prices of goods shipped in commerce.

United States v. United States Gypsum Co. was a patent–antitrust case in which the United States Supreme Court decided, first, in 1948, that a patent licensing program that fixed prices of many licensees and regimented an entire industry violated the antitrust laws, and then, decided in 1950, after a remand, that appropriate relief in such cases did not extend so far as to permit licensees enjoying a compulsory, reasonable–royalty license to challenge the validity of the licensed patents. The Court also ruled, in obiter dicta, that the United States had standing to challenge the validity of patents when a patentee relied on the patents to justify its fixing prices. It held in this case, however, that the defendants violated the antitrust laws irrespective of whether the patents were valid, which made the validity issue irrelevant.

<i>United States v. Krasnov</i>

United States v. Krasnov, 143 F. Supp. 184, was a 1956 district court patent–antitrust decision that the United States Supreme Court affirmed per curiam without opinion. The district court granted the Government's summary judgment motion because it concluded:

That the defendants in combination controlled the market and had the ability to and did drive competitors from the business of manufacturing knitted fabric slip covers is abundantly clear from the record. That the defendants in combination fixed and maintained prices is likewise crystal clear. That the defendants in combination and cross-licensing created a situation in the industry which, particularly by agreement for joint action respecting the patents, effectively hindered newcomers in the field, is also established beyond peradventure of doubt. That the harassing suits against competitors, previously discussed in some detail, were designed as and were actually only harassing suits is clear from an examination of the correspondence between the parties and the Court feels that such conclusion in inescapable from an objective analysis of the documents. All of these actions taken in concert constitute a clear violation of the Sherman Anti-Trust Act and the Government has established to the satisfaction of the Court that the combination and conspiracy above referred to represents an unreasonable restraint of trade and commerce among the several states of the United States in the manufacture and sale of ready-made furniture slip covers, is unlawful, and in violation of Section 1 of the Sherman Anti-Trust Act. Further, the Government, in the opinion of the Court, has effectively demonstrated that the defendants combined and conspired not only to restrain trade unreasonably but also to monopolize trade and commerce among the several states of the United States in the manufacture and sale of ready-made furniture slip covers, in direct violation of Section 2 of the Sherman Anti-Trust Act. The Court also feels that by documentary proof the Government has established that the defendants have used patent rights unlawfully in instituting, effectuating and maintaining the aforesaid combination and conspiracy which likewise constitutes a clear violation of the Sherman Anti-Trust Act.

United States v. Masonite Corp., 316 U.S. 265 (1942), is a United States Supreme Court decision that limited the scope of the 1926 Supreme Court decision in the General Electric case that had exempted patent licensing agreements from antitrust law's prohibition of price fixing. The Court did so by applying the doctrine of the Court's recent Interstate Circuit hub-and-spoke conspiracy decision.

United States v. Huck Mfg. Co., 382 U.S. 197 (1965), is the most recent patent-license price-fixing case to reach the United States Supreme Court. It was inconclusive, as the Court split 4–4 and affirmed the decision of the lower court without opinion.

Pope Mfg. Co. v. Gormully, 144 U.S. 224 (1892), was an early United States Supreme Court decision refusing, on public policy grounds, to enforce an agreement not to contest patent validity. The Supreme Court later relied on Pope in Lear, Inc. v. Adkins as authority in support of overruling the doctrine of licensee estoppel. That doctrine had prohibited patent licensees from challenging the validity of patents under which they had been licensed.

Hartford-Empire Co. v. United States, 323 U.S. 386 (1945), was a patent-antitrust case that the Government brought against a cartel in the glass container industry. The cartel, among other things, divided the fields of manufacture of glass containers, first, into blown glass and pressed glass, which was subdivided into: products made under the suction process, milk bottles, and fruit jars. The trial court found the cartel violative of the antitrust laws and the Supreme Court agreed that the market division and related conduct were illegal. The trial court required royalty-free licensing of present patents and reasonable royalty licensing of future patents. A divided Supreme Court reversed the requirement for royalty-free licensing as "confiscatory," but sustained the requirement for reasonable royalty licensing of the patents.

References

The citations in this article are written in Bluebook style. Please see the talk page for more information.

  1. ↑ United States v. Line Material Co., 333 U.S. 287 (1948). PD-icon.svg This article incorporates public domain material from this U.S government document.
  2. ↑ United States v. General Electric Co. , 272 U.S. 476 (1926).
  3. ↑ The defendants' respective market shares of the patented dropout fuse cutouts are: General Electric, 29.2%; Line, 25.4%; Kearney, 18.9%; Southern, 7.9%; Westinghouse, 5.3%; Schweitzer and Conrad, 5.1%; Railway, 3.8%; Matthews, 2%; Porcelain, 1.5%; Royal, 0.5%; Pacific, 0.2%; and Johnson, 0.2%.
  4. ↑ United States v. Line Material Co., 64F. Supp.970 , 972–73( E.D. Wis. 1946).
  5. 1 2 64 F. Supp. at 974.
  6. ↑ 333 U.S. at 297.
  7. ↑ 333 U. S. 300–01.
  8. ↑ 333 U. S. 303.
  9. ↑ See last several paragraphs of this section.
  10. ↑ 333 U.S. at 304.
  11. 1 2 333 U.S. at 305.
  12. 1 2 333 U.S. at 307.
  13. ↑ 333 U.S. at 310.
  14. ↑ 333 U.S. at 311.
  15. ↑ 333 U.S. at 312.
  16. ↑ 333 U.S. at 315.
  17. ↑ 333 U.S. at 316.
  18. ↑ Bement v. National Harrow Co., 186 U.S. 70 (1902).
  19. ↑ 333 U.S. at 318.
  20. ↑ 333 U.S. at 319.
  21. ↑ 333 U.S. at 321.
  22. ↑ 333 U.S. at 321 (Burton, J., dissenting).
  23. ↑ 333 U.S. at 358-59.
  24. ↑ 333 U.S. at 383.
  25. ↑ In particular, United States v. United States Gypsum Co. , 333 U.S. 364 (1948), decided the same day as Line Material.
  26. ↑ Rep. Atty. Gen. Nat'l Comm. to Study Antitrust Laws 233.
  27. ↑ Report at 235.
  28. ↑ United States v. Huck Mfg. Co. , 382 U.S. 197 (1965), affirming per curiam 227 F. Supp. 791 (E.D. Mich. 1964).
  29. ↑ James M. Wetzel, Did Line Material Really Rule Out Patent Price Fixing?, 26 Mercer L. Rev. 471, 476-77 (1975).
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