General Talking Pictures Corp. v. Western Elec. Co., 304 U.S. 175 (1938)

MR. JUSTICE BLACK, dissenting.

The decisions in this case and Crown Cork & Seal Co. v. Gutmann Co., ante, p. 159, will inevitably result in a sweeping expansion of the statutory boundaries constitutionally fixed by Congress to limit the scope and duration of patent monopolies.

The area of the patent monopoly is expanded by the holding that the exclusive right granted an inventor to "make, use, and vend" his patented commercial device permits the inventor’s corporate assignee (and other "patent pool" participants) to control how and where the device can be used by a purchaser who bought it in the open market.{1}

Petitioner bought amplifying tubes from the American Transformer Company, a licensee authorized to "manufacture . . . and sell only for radio amateur reception, radio experimental reception and radio broadcast reception." The devices are of a standard and uniform type generally useful in many "fields."

We are not here concerned with the right of respondents under the contract with the licensee, American Transformer Company. Respondents do not -- in fact, could not -- rely on the contract made with the Transformer Company in this suit against petitioner which in no way was a party to that contract. If the Transformer Company violated its contract, respondents’ remedy was by suit against the Transformer Company for the breach. No question of malicious interference with contractual interests is presented. Respondents insist only that, under their patents, they have the right to control the use of these widely used tubes in the hands of purchasers from one authorized by respondents to manufacture and sell them.

The mere fact that the purchaser of a standard and uniform piece of electrical equipment has knowledge that his vendor has contracted with an owner of a patent on the equipment not to sell the equipment for certain agreed purposes does not enlarge the scope or effect of the patent monopoly. The patent statute only gives the patentee the exclusive right to make, use, and vend his patented article.

Where a licensee, authorized to manufacture and sell, contracts with the patentee to attach a notice to each patented article (a machine) of "the conditions of its use and the supplies which must be used in the operation of it, under pain of infringement of the patent," this Court has said:

The statutes relating to patents do not provide for any such notice, and [the patentee] can derive no aid from them [in a suit against a purchaser from the licensee]. . . .

The extent to which the use of the patented machine may validly be restricted to specific supplies or otherwise by special contract between the owner of a patent and the purchaser or licensee is a question outside the patent law, and with it we are not concerned.{2}

A patentee has no right under the patent laws to fix the resale price of his patented article{3} or to require that specified unpatented materials be used in conjunction with it.{4} The exclusive right to vend does not -- any more than the exclusive right to use -- empower a patentee to extend his monopoly into the country’s channels of trade after manufacture and sale which passes title. It is not contended that petitioner did not obtain title to the tubes.

The patent statute which permits a patentee to "make, use and vend" confers no power to fix and restrict the uses to which a merchantable commodity can be put after it has been bought in the open market from one who was granted authority to manufacture and sell it. Neither the right to make, nor the right to use, nor the right to sell a chattel includes the right-derived from patent monopoly apart from contract -- to control the use of the same chattel by another who has purchased it. A license to sell a widely used merchantable chattel must be as to prospective purchasers -- if anything -- a transfer of the patentee’s entire right to sell; it cannot, as to noncontracting parties, restrict the use of ordinary articles of purchase bought in the open market.

The words used in the statute are few, simple, and familiar, . . . and their meaning would seem not to be doubtful if we can avoid reading into them that which they really do not contain.{5}

Petitioner is held liable for using an ordinary vacuum amplifying tube bought from one who had title and the right to sell. Notice to petitioner that the vendor was violating its (the vendor’s) contract with respondents gave the latter no right under the patent and imposed no responsibility on the petitioner under the patent. Petitioner became the owner of the tubes.

At this time, a great portion of the common articles of commerce and trade is patented. A large part of the machinery and equipment used in producing goods throughout the country is patented. Many small parts essential to the operation of machinery are patented. Patented articles are everywhere. Those who acquire control of numerous patents covering wide fields of industry and business can, by virtue of their patents, wield tremendous influence on the commercial life of the nation. If the exclusive patent privilege to "make, use and vend" includes the further privilege after sale, to control, apart from contract, the use of all patented merchantable commodities, a still more sweeping power can be exercised by patent owners. This record indicates the possible extent of a power to direct and censor the ultimate use of the multitudinous patented articles with which the nation’s daily life is concerned.

This record shows that the General Electric Company system, the Radio Corporation system, and the American Telephone & Telegraph Company system are participants in a "patent pool." This "patent pool" controls respondents’ patents. The record discloses that this "patent pool" operates under cross-licensing agreements in the United States and in foreign countries. It appears that the General Electric Company and the Radio Corporation have "agreed that the Radio Corporation shall not resell patented articles except as a part of the radio system," and that the Radio Corporation

agrees to use care not to enter with any patent device, process or system into the field of the General Electric Company or to encourage or aid others to do so.

Throughout the entire agreement appears the manifest purpose of the "patent pool" participants to protect for each other certain allocated "fields" in the production, sale, and distribution of modern electrical necessities used in everything involving modern communications. Although the patent laws contemplate and authorize but one patent monopoly for one invention, many separate patents authorizing single patent monopolies are merged in this "patent pool." Thus, all these separate patent monopolies are combined, and in many respects are made to function as one. The record shows that, from this larger combination, completely outside the conception in the patent statutes of single and separate monopolies, allotments of submonopolies are made in the respective "fields," from which emanate in turn other submonopolies. This Court has previously directed attention to the tendency of such combinations to stimulate patent law abuses, in the following language:

It was not until the time came in which the full possibilities seem first to have been appreciated of uniting, in one, many branches of business through corporate organization, and of gathering great profits in small payments, which are not realized or resented, from many, rather than smaller or even equal profits in larger payments, which are felt and may be refused, from a few, that it came to be thought that the "right to use . . . the invention" of a patent gave to the patentee or his assigns the right to restrict the use of it to materials or supplies not described in the patent, and not, by its terms, made a part of the thing patented.{6}

Articles manufactured under the patents thus controlled are widely used in the modern electrical field. The exclusive privilege to exercise the unrestrained power to determine the ultimate uses of all these important merchantable articles sold in the open market is a power I do not believe Congress has conferred. A power so far reaching -- apart from contract -- has not been expressly granted in any statute, and should not be read into the law by implication.

Second. The numerous patents acquired by respondents all relate to claimed inventions made between 1912 and 1916; yet, some of these patents do not expire until 1940. Patent No. 1,448,550 illustrates most of the patents involved. It is designated as the "continuation" of two earlier applications filed September 3, 1915, and November 2, 1915. February 3, 1919 -- more than four years after respondents’ commercial use -- the "continuation" application was filed, and March 13, 1923, the patent was granted. By this process of "divisionals" or "continuations" a seventeen-year patent monopoly is permitted to begin in 1923, theoretically based on original applications which were filed in 1915.

Congress has provided that two years’ public use of an invention prior to application bars the right to patent,{7} and no patent rights are awarded for disclosures in an application which are not claimed.{8} Here, however, approval is given patents for inventions -- as the District Court found and the record shows -- publicly used for more than two years before applications actually claiming the invention were filed. This approval is based on the fact that disclosures (unclaimed) were made in prior and separate applications which had not been preceded by two years’ public use. "Divisional" or "continuation" applications -- unauthorized by any statute -- are permitted to give priority from the date of original applications, in effect barring all other inventions from that date and nullifying the statute of two years’ public use. Thus, for years, respondents obtained no patent on their inventions for lack of claim. No one else could safely obtain a patent because of the certainty that respondents would later claim under a "divisional" or "continuation."

The statute provides no exception of public use by the inventor and, if he uses his completed invention in the ordinary conduct of his business -- for more than two years prior to his application -- the discovery is abandoned to the public and he cannot thereafter obtain a patent.{9} Such an exception, grafted onto the statute, would be directly contrary to its aim and purpose, and would enable inventors to obtain all the benefits of monopoly by simply making unclaimed disclosures, blanketing the field, and waiting until someone else attempted to claim a patent on the same invention. Then, by means of "divisional" or "continuation" applications, patent could be obtained. No such expansion of the patent statutes is justified.{10} I believe the judgment of the Circuit Court of Appeals should be reversed.