Document: 329 U.S. 637 67 S.Ct. 610 91 L.Ed. 563 TRANSPARENT-WRAP MACH. CORPORATIONv.STOKES & SMITH CO. No. 208. Argued Jan. 7, 8, 1947. Decided Feb. 3, Rehearing Denied March See 330 854, 859. Mr. R. Morton Adams, of New York City, for petitioner. Samuel E. Darby, Jr., respondent. Justice DOUGLAS delivered the opinion Court. 1 This is a suit declaratory judgment (Judicial Code § 274d, 28 U.S.C. 400, U.S.C.A. 400) and an injunction, instituted by respondent determination legality enforceability provision patent license agreement. The District Court, whose jurisdiction was based on diversity citizenship 24(1), 41(1), 41(1) entered petitioner, holding valid. Circuit Court Appeals reversed divided vote, 2 Cir., 156 F.2d 198, being that in question illegal under line decisions represented Mercoid Corporation v. Mid-Continent Co., 320 661, 64 268, 88 376. case here petition writ certiorari which we granted because public importance presented apparent conflict between decision below Allbright-Nell Co. Stanley Hiller 72 392, decided Seventh Appeals. Petitioner, organized 1934, has patents machine bears trade-mark 'Transwrap'. makes transparent packages, simultaneously fills them with such articles as candy, seals them. In 1937 petitioner sold acquired Transwrap business United States, Canada, Mexico, right to use 'Transwrap', exclusive manufacture sell then owned or might acqui e. agreement contained formula royalties were be computed paid. term ten years option renew it thereafter five year periods during life covered could terminated notice specified defaults respondent's part. around present controversy turns covenant assign improvement applicable suitable connection it.1 3 parties had operated several when ascertained taken out certain improvements machine. Petitioner notified its failure disclose these constituted breach called remedy default. When did not occur would day certain. Thereupon this action asking provisions respecting declared unenforceable enjoined from terminating agreement.2 4 long consistent cases held owner may condition so tie other materials, processes devices lie outside monopoly patent. Motion Picture Patents Universal Film Mfg. 243 502, 37 416, 61 871, L.R.A.1917E, 1187, Ann.Cas.1918A, 959; Carbice American Dev. Corporation, 283 27, 51 334, 75 819; Leitch Barber 302 458, 58 288, 82 371; Salt S. Suppiger 314 488, 788, 62 402, 86 363; B. Chemical Ellis, 495, 406, 367; supra; Minneapolis Honeywell 680, 278, 396. As stated supra, at page 492, 405, 363, '* * policy includes inventions within excludes all embraced invention. It equally forbids secure limited Patent Office contrary grant.' If practices tolerated, ownership give patentee control over unpatented but he possess. 'If restraint lawful patent, will have been expanded contract. That no obtained effectively protected if issued. Private function own office impose law upon licensees.' 667, 272, requirement licensee material device violate antitrust laws attempted protection Id. condemnation practice, however, does depend showing. Though article falls short prohibited trade monopoly, sanctioned. supra. For tendency direction condemns practice which, approved court either through enjoining infringement enforcing covenant, receive powerful impetus. 5 view principle those rendered stated, 202, 'The property, withholding any terms, may, can, force others buy him; land best example every parcel monopoly. But precisely like property; him things four corners. defendant gets plaintiff's patents, put itself position, part rate, virtue compulsion patents.' 6 went note since expire until after expiration petitioner's machine, arrangement competitive disadvantage. lose negative command art given it. Moreover, respondent, though able conditions agreement, irretrievably tied 'Forced, cease efforts improvements, keep renewing contract order escape consequences ingenuity.' Id., 203. 7 First. first difficulty position Congress made assignable assignee same rights patentee. 'Every application interest therein shall instrument writing, applicant his assigns legal representatives manner grant convey whole States.' R.S. 4898, 35 U.S.C.Supp. V, 47, 47. statute limit consideration paid assignment species kind property. At least far terms are concerned, see difference whether services (cf. Standard Parts Peck, 264 52, 44 239, 68 560, 32 A.L.R. 1033) cash, another 8 An step process, great strategic value. basic key technology. One who holds therefore considerable advantage. And one thereby loses reason suffered real handicap. pay toll assignee, handicap disadvantage suffers greater less something else say, freedom restricted degree pursuant otherwise. 9 Congress, authority created, allowed assigned only consideration, our duty permit exceptions. limitation. A gives 'exclusive make, use, vend invention discovery' period. 4884, 40, 40. carries statutory period 'a free competition invention.' 665, 271, right, essence privilege, is, purposes statute, dignity property used purchase patents. 10 Second. What said not, course, complete answer remains here, predecessors, violates some policy. fact power refuse mean choose. States Masonite 316 265, 277, 1070, 1077, 1461. 11 noted, power, conceded, enable exploit acquire Thus, require licensees materials have, stand acquire, themselves. Beyond 'limited monopoly' methods exploited 'subject general law'. Protection sale law. He uses obtain extends respects sanctions neither monopolies nor restraints trade. 12 point second found. elates, legalized permits both bought sold. extending governed indeed using 13 limiting found corners grant, outlawed unaided restrictive agreements protect. Take leases otherwise licenses lessee should assigned. one. more make acquisition unlawful than cash. Yet property;3 exact condition, why patented machine? 14 true disabilities owners burdened. Thus where lend aid enforce prohibitied There suggestion course followed concentration economic run counter anti-trust laws. said, there whatever apart violations shortly advert, end result wealth accumulates exploiting purpose. sum, coercively what plainly per se against interest. 15 licensor obtains acquires beyond creating sanction. creates On facts effect seem 16 enforcement incentive bound turn products inventive genius. Since primary aim promote progress science useful arts (United pages 1078, 1461 cited), arran ement diminishes Whatever argument situations, persuasive here. Respondent pays additional royalty used. By can immediate account licensee. benefit continues renewed. thus serves supplying market Whether opportunity increased depends vicissitudes too conjectural record appraise. 17 Third. We quite aware possibilities abuse licensing licensor. Conceivably employed purpose violating two double added industry regimented. perpetuate expired. Competitors eliminated industrial perfected maintained.4 Through pools multiple fruits entire systematically funneled into hands original Shoe Machinery La Chapelle, 212 Mass. 467, 99 N.E. 289, Ann.Cas.1913D, 715. 18 Sanitary 226 20, 33 9, 57 107; 258 451, 42 66 708; Ethyl Gasoline 309 436, 60 618, 84 852; Such arise whereby seeks conduct fixing prices (Ethyl supra) practices. Clayton Act, 38 Stat. 730, 731, 14, lease competitor's (whether patented), 'to substantially lessen tend create monopoly'. International Business Machines 298 131, 56 701, 80 1085. specific prohibition conditioning immunity Indeed, recent Hartford-Empire 323 386, 65 373, 89 322; 324 570, 815, 1198, dramatically illustrates how rise laws.5 19 violation case. reach question. Hence it, well questions preserved, open remand cause 20 hold inclusion requiring unenforceable. 21 Reversed. 22 BLACK, RUTLEDGE BURTON affirm reasons set forth 23 MURPHY affirmed. believes Court's unduly enlarges scope inconsistent philosophy enunciated Inv. 376, similar cases. relevant portions read follows: Licensee discover invent Packaging Machine therewith making closing package, filling contents submit Licensor, option, apply Letters covering same. event patentable ideas, applied they deemed License Agreement hereunder without further fee above provided. Machines, (after refusal Licensor thereon), nevertheless, territories Agreement. expenses obtaining party applying therefor.' likewise challenged, provided secured included payment royalty. joined issue filed counterclaim assigned, dismissed complaint, ordered Appeals, reversing, also excused performance repudiated remanded determine entitled restitution. James Campbell, 104 356, 358, 26 786; Hollister Benedict Burnham Marine Turbine 113 59, 67, 717, 721, 79 699; Cramp Sons Ship Engine Bldg. Curtis 246 28, 39, 273, 274, 560; Dubilier Condenser 289 178, 187, 53 554, 557, 77 1114, 85 1488. Free Enterprise, Monograph 31, Investigation Concentration Economic Power, Temporary National Committee, 76th Cong., 3d Sess., chs. V VII; Wood, Antitrust Law (1941), 4; Marcus, Patents, Judgments Hartford-Empire. (1946) 34 Georgetown L.J. 1. 45 Col.L.Rev. 601.

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