|United States v. Univis Lens Co.|
|Argued April 9–10, 1942|
Decided May 11, 1942
|Full case name||United States v. Univis Lens Co., Inc., et al.|
|Citations||316 U.S. 241 ( more )|
|Majority||Stone, joined by Roberts, Black, Reed, Frankfurter, Douglas, Murphy, Byrnes|
|Jackson took no part in the consideration or decision of the case.|
United States v. Univis Lens Co., 316 U.S. 241 (1942), is a decision of the United States Supreme Court explaining the exhaustion doctrine and applying it to find an antitrust violation because Univis's ownership of patents did not exclude its restrictive practices from the antitrust laws.The Univis case stands for the proposition that when an article sold by a patent holder or one whom it has authorized to sell it embodies the essential features of a patented invention, the effect of the sale is to terminate any right of the patent holder under patent law to control the purchaser's further disposition or use of the article itself and of articles into which it is incorporated as a component or precursor.
The Supreme Court of the United States is the highest court in the federal judiciary of the United States. Established pursuant to Article III of the U.S. Constitution in 1789, it has original jurisdiction over a narrow range of cases, including suits between two or more states and those involving ambassadors. It also has ultimate appellate jurisdiction over all federal court and state court cases that involve a point of federal constitutional or statutory law. The Court has the power of judicial review, the ability to invalidate a statute for violating a provision of the Constitution or an executive act for being unlawful. However, it may act only within the context of a case in an area of law over which it has jurisdiction. The court may decide cases having political overtones, but it has ruled that it does not have power to decide nonjusticiable political questions. Each year it agrees to hear about one hundred to one hundred fifty of the more than seven thousand cases that it is asked to review.
The exhaustion doctrine, also referred to as the first sale doctrine, is a U.S. common law patent doctrine that limits the extent to which patent holders can control an individual article of a patented product after a so-called authorized sale. Under the doctrine, once an authorized sale of a patented article occurs, the patent holder's exclusive rights to control the use and sale of that article are said to be "exhausted," and the purchaser is free to use or resell that article without further restraint from patent law. However, under the repair and reconstruction doctrine, the patent owner retains the right to exclude purchasers of the articles from making the patented invention anew, unless it is specifically authorized by the patentee to do so.
United States Antitrust law is a collection of federal and state government laws that regulates the conduct and organization of business corporations, generally to promote fair competition for the benefit of consumers. The main statutes are the Sherman Act of 1890, the Clayton Act of 1914 and the Federal Trade Commission Act of 1914. These Acts, first, restrict the formation of cartels and prohibit other collusive practices regarded as being in restraint of trade. Second, they restrict the mergers and acquisitions of organizations that could substantially lessen competition. Third, they prohibit the creation of a monopoly and the abuse of monopoly power.
Univis, the owner of various method and product patents on optical lenses, manufactured lens blanks and sold them to licensees. When the unpatented blanks were ground and polished they became patented lenses. The licenses required the licensees to sell the lenses at prices that Univis fixed.
A lens is a transmissive optical device that focuses or disperses a light beam by means of refraction. A simple lens consists of a single piece of transparent material, while a compound lens consists of several simple lenses (elements), usually arranged along a common axis. Lenses are made from materials such as glass or plastic, and are ground and polished or molded to a desired shape. A lens can focus light to form an image, unlike a prism, which refracts light without focusing. Devices that similarly focus or disperse waves and radiation other than visible light are also called lenses, such as microwave lenses, electron lenses, acoustic lenses, or explosive lenses.
The lens blanks were specially adapted for making the patented lenses, and consequently the only use to which the blanks would be put and the only object of their sale was to enable the manufacture of the patented lenses. Thus, the Court was led to assume that sale of the blanks by an unlicensed manufacturer to an unlicensed finisher, who created the patented lenses by grounding and polishing the lenses, would be a contributory infringer.
Because the sale of the blanks would be contributory infringement, the Court ruled, the sale of the blanks exhausted the patent. Therefore, the case was governed by the exhaustion doctrine, which holds that—
An incident to the purchase of any article, whether patented or unpatented, is the right to use and sell it, and upon familiar principles the authorized sale of an article which is capable of use only in practicing the patent is a relinquishment of the patent monopoly with respect to the article sold.
The sale exhausts the patent monopoly "and the patentee may not thereafter, by virtue of his patent, control the use or disposition of the article," such as by fixing the resale price of the sold article. That the sold article was the unfinished lens blank, not the patented finished lens, did not alter the case:
[W]here one has sold an uncompleted article which, because it embodies essential features of his patented invention, is within the protection of his patent, and has destined the article to be finished by the purchaser in conformity to the patent, he has sold his invention so far as it is or may be embodied in that particular article. The reward he demanded and received is for the article and the invention which it embodies and which his vendee is to practice upon it. He has thus parted with his right to assert the patent monopoly with respect to it and is no longer free to control the price at which it may be sold either in its unfinished or finished form.
This principle applied equally '[w]hether the licensee sells the patented article in its completed form or sells it before completion for the purpose of enabling the buyer to finish and sell it." Since Univis's ownership of the patents did not shield its restrictions over post-sale conduct, the ordinary rules of law applied, under which price fixing is illegal.
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".
Price fixing is an agreement between participants on the same side in a market to buy or sell a product, service, or commodity only at a fixed price, or maintain the market conditions such that the price is maintained at a given level by controlling supply and demand.
Finally, the Court declined to try to separate (and preserve) the beneficial or pro-competitive features of the licensing system from the illegal ones. Any valid "features are so interwoven with and identified with the price restrictions which are the core of the licensing system that the case is an appropriate one for the suppression of the entire licensing scheme although some of its features, independently established, might have been used for lawful purposes."
The exhaustion doctrine as restated in the Univis decision has remained a governing principle of United States patent and antitrust law. The Supreme Court relied on Univis in its 2008 decision in Quanta Computer, Inc. v. LG Electronics, Inc. to hold that the sale of patented microprocessors exhausted the patent monopoly including patents covering the combination of the patented microprocessors with other components, where (as in Univis) the essential features of the invention were all contained in the microprocessors, i.e., the sold article embodies the essential features of the patented invention. (Quanta's primary patents were on microprocessors, but it also had patents on products combining the patented microprocessors and other apparently conventional devices, such as PCs. See exhausted combination doctrine for an explanation of such patents.)
Quanta Computer, Inc. v. LG Electronics, Inc., 553 U.S. 617 (2008), is a decision of the United States Supreme Court in which the Court reaffirmed the validity of the patent exhaustion doctrine, and in doing so 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 the exhaustion doctrine is triggered by, among other things, an authorized sale of a component when the only reasonable and intended use of the component is to practice the patent and the component substantially embodies the patented invention by embodying its essential features. The Court also overturned, in passing, the part of decision below that held that the exhaustion doctrine was limited to product claims and did not apply to method claims.
The exhausted combination doctrine, also referred to as the doctrine of theLincoln Engineeringcase, is the doctrine of U.S. patent law that when an inventor invents a new, unobvious device and seeks to patent not merely the new device but also the combination of the new device with a known, conventional device with which the new device cooperates in the conventional and predictable way in which devices of those types have previously cooperated, the combination is unpatentable as an "exhausted combination" or "old combination". The doctrine is also termed the doctrine of the Lincoln Engineering case because the United States Supreme Court explained the doctrine in its decision in Lincoln Engineering Co. v. Stewart-Warner Corp.
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.
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.
A field-of-use limitation is a provision in a patent license that limits the scope of what the patent owner authorizes a manufacturing licensee to do in relation to the patent, by specifying a defined field of use—that is, a defined field of permissible operation by the licensee. In addition to affirmatively specifying the field of use, the license may negatively specify a field or fields, by specifying fields of use from which the licensee is excluded.
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.
Bowman v. Monsanto Co., 569 U.S. 278 (2013), was a United States Supreme Court patent decision in which the Court unanimously affirmed the decision of the Federal Circuit that the patent exhaustion doctrine does not permit a farmer to plant and grow saved, patented seeds without the patent owner's permission. The case arose after Vernon Hugh Bowman, an Indiana farmer, bought transgenic soybean crop seeds from a local grain elevator for his second crop of the season. Monsanto originally sold the seed from which these soybeans were grown to farmers under a limited use license that prohibited the farmer-buyer from using the seeds for more than a single season or from saving any seed produced from the crop for replanting. The farmers sold their soybean crops to the local grain elevator, from which Bowman then bought them. After Bowman replanted the crop seeds for his second harvest, Monsanto filed a lawsuit claiming that he infringed on their patents by replanting soybeans without a license. In response, Bowman argued that Monsanto's claims were barred under the doctrine of patent exhaustion, because all future generations of soybeans were embodied in the first generation that was originally sold.
Adams v. Burke, 84 U.S. 453 (1873), was a United States Supreme Court case in which the Court first elaborated on the exhaustion doctrine. According to that doctrine, a so-called authorized sale of a patented product liberates the product from the patent monopoly. The product becomes the complete property of the purchaser and "passes without the monopoly." The property owner is then free to use or dispose of it as it may choose, free of any control by the patentee. Adams is a widely cited, leading case. A substantially identical doctrine applies in copyright law and is known as the "first sale doctrine".
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.
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.
Leitch Manufacturing Co. v. Barber Co., 302 U.S. 458 (1938), is a 1938 decision of the United States Supreme Court extending the tie-in patent misuse doctrine to cases in which the patentee does not use an explicit tie-in license but instead relies on grants of implied licenses to only those who buy a necessary supply from it.
The Mercoid cases—Mercoid Corp. v. Mid-Continent Investment Co., 320 U.S. 661 (1944), and Mercoid Corp. v. Minneapolis-Honeywell Regulator Co., 320 U.S. 680 (1944)—are 1944 patent tie-in misuse and antitrust decisions of the United States Supreme Court. These companion cases are said to have reached the "high-water mark of the patent misuse doctrine." The Court substantially limited the contributory infringement doctrine by holding unlawful tie-ins of "non-staple" unpatented articles that were specially adapted only for use in practicing a patent, and the Court observed: "The result of this decision, together with those which have preceded it, is to limit substantially the doctrine of contributory infringement. What residuum may be left we need not stop to consider." The Court also suggested that an attempt to extend the reach of a patent beyond its claims could or would violate the antitrust laws: "The legality of any attempt to bring unpatented goods within the protection of the patent is measured by the antitrust laws, not by the patent law."
Dawson Chemical Co. v. Rohm & Haas Co., 448 U.S. 176 (1980), is a 1980 5-4 decision of the United States Supreme Court limiting the patent misuse doctrine and explaining the scope of the 1952 amendment of the patent laws that resurrected the contributory infringement doctrine in the wake of the Mercoid cases. The Mercoid cases and a few predecessor cases had denied relief against patent infringement to patentees who were deriving revenue from the sale of unpatented products used as supplies for patented combinations or as components of patented combinations, even when the unpatented products were specially adapted for use with the patented combinations and even when they lacked any utility other than that use. The patentees used contributory infringement suits or threats of such suits to enforce their business model, which the Mercoid cases outlawed.
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."
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.
United States v. Line Material Co., 333 U.S. 287 (1948), 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. 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.