Source: http://www.law.cornell.edu/supremecourt/text/342/371
Timestamp: 2014-10-23 20:16:28
Document Index: 693417369

Matched Legal Cases: ['§ 4', '§ 1', '§ 2', '§ 29', '§ 1', '§ 4']

UNITED STATES v. NEW WRINKLE, Inc., et al. | LII / Legal Information Institute
Supreme Court aboutsearch liibulletin subscribe previews UNITED STATES v. NEW WRINKLE, Inc., et al.
342 U.S. 371 (72 S.Ct. 350, 96 L.Ed. 417)
Argued: Jan. 10, 11, 1952.
Decided: Feb. 4, 1952.
[HTML] Mr. Charles H. Weston, Washington, D.C., for appellant.
This suit against New Wrinkle, Inc., and The Kay & Ess Co. was instituted in the United States District Court for the Southern District of Ohio by the United States as a civil proceeding under § 4 of the Sherman Act.
Defendants are charged with having violated § 1 of that law
of the United States by means of patent license agreements. Motions to dismiss the suit were filed by defendants. The defendant Kay & Ess urged that the complaint failed to state a cause of action. Defendant New Wrinkle pressed a sole contention: that it was not then and never had been engaged in interstate commerce and could, therefore, not be guilty of violating the Sherman Act.
The District Court, without opinion, thereafter entered separate judgments as to each defendant dismissing the complaint and reciting in each judgment that the motion to dismiss was 'well taken.' A petition for appeal was filed and allowed, and on October 8, 1951, probable jurisdiction was noted on direct appeal pursuant to a jurisdiction conferred on this Court by § 2 of the Expediting Act of February 11, 1903. 15 U.S.C. 29, 15 U.S.C.A. § 29.
Pursuant to this arrangement, the complaint charges New Wrinkle was incorporated, and the patent rights of Kay & Ess and Chadeloid were transferred to it. In conjunction with other named companies and persons, the defendants and Chadeloid thereafter worked together to induce makers of wrinkle finishes to accept the price-fixing patent licenses which New Wrinkle had to offer. These prospective licensees were advised of the agreed-upon prices, terms and conditions of sale in the New Wrinkle licenses, and they were assured that like advice was being given to other manufacturers 'in order to establish minimum prices throughout the industry.' After May 7, 1938, when the requisite twelve leading manufacturing companies had accepted New Wrinkle licenses, the price schedules became operative. By September 1948, when the complaint was filed in this action, more than two hundred, or substantially all, manufacturers of wrinkle finishes in the United States held nearly identical ten-year extendable license agreements from New Wrinkle. These agreements required, among other things, that a licensee observe in all sales of products covered by the licensed patents a schedule of minimum prices, discounts and selling terms established by the licensor New Wrinkle. Upon thirty days' notice in writing, New Wrinkle might alter any or all of the terms of the price schedule, but such prices, terms and discounts as New Wrinkle might establish were to bind the licensee only if imposed at the same time and in the same terms upon the licensor and all other licensees.
Appellee, New Wrinkle, differs from Kay & Ess. New Wrinkle is not a manufacturer of the commodities covered by its patents. It is solely a holder or owner of the patents, granting the right of making and vending to others. Kay & Ess does manufacture under the New Wrinkle license. New Wrinkle urges that its abstention from manufacturing activities and concentration on patent licensing insulates its activity from the prohibitions of § 1 of the Sherman Act. Persons engaged exclusively in licensing patents are said by appellee to be exempt from the Sherman Act because such contracts are not commerce and are functions solely controlled by the patent laws. For the contention that its licensing is not commerce, reliance is placed on New York Life Ins. Co. v. Deer Lodge County, 231 U.S. 495, 34 S.Ct. 167, 58 L.Ed. 332, and cases involving such local incidents of interstate commerce as were treated in United Shoe Machinery Corp. v. United States.
For the latter contention, if we understand the argument correctly, New Wrinkle asserts that since patents give their owners a right to sell, they may do so on such terms as they please because they are merely selling personal services, and such services are not commerce, citing Apex Hosiery Co. v. Leader, 310 U.S. 469, 502, 60 S.Ct. 982, 997, 84 L.Ed. 1311, a case holding that a strike to unionize a factory did not violate the Sherman Act.
We think it beyond question that this making of 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 is wholly within a single state. Certainly since United States v. Treton Potteries Co., 1927, 273 U.S. 392, 397, 47 S.Ct. 377, 379, 71 L.Ed. 700, price fixing in commerce, reasonable or unreasonable, has been considered a per se violation of the Sherman Act.
'If contracts of insurance are in fact made the instruments of restraint in the marketing of goods and services in or affecting interstate commerce, they are not beyond the reach of the Sherman Act more than contracts for the sale of commodities,contracts which, not in themselves interstate commerce, may nevertheless by used as the means of its restraint.'
Appellees argue further, however, that the principles of United States v. General Electric Co., 272 U.S. 476, 47 S.Ct. 192, 71 L.Ed. 362, and E. Bement & Sons v. National Harrow Co., 186 U.S. 70, 22 S.Ct. 747, 46 L.Ed. 1058, control here. Since we examined these principles in detail as recently as 1948, we draw upon that discussion for our conclusions here.
The Bement and General Electric cases allowed a patentee to license a competitor in commerce to make and vend with a price limitation controlled by the patentee. When we examined the rule in 1948, the holding of the General Electric case was left as stated above. 333 U.S. at page 310, 68 S.Ct. at page 562, 92 L.Ed. 701. But it was pointed out that 'the possession of a valid patent or patents does not give the patentee any exemption from the provisions of the Sherman Act beyond the limits of the patent monopoly.' 333 U.S. at page 308, 68 S.Ct. at page 561. We said that 'two or more patentees in the same patent field may (not) 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.' 333 U.S. at page 305, 68 S.Ct. at page 559. Price control through cross-licensing was barred as beyond the patent monopoly.
On the day of the Line Material decision, this Court handed down United States v. United States Gypsum Co., 333 U.S. 364, 68 S.Ct. 525, 92 L.Ed. 746. The Gypsum case was based on facts similar to those here alleged except that the patent owner was also a manufacturer. We have pointed out above in section II of this opinion that we consider the fact that New Wrinkle is exclusively a patent-holding company of no significance as a defense to the alleged violation of the Sherman Act. We said in Gypsum that 'industry-wide license agreements, entered into with knowledge on the part of licensor and licensees of the adherence of others, with the control over prices and methods of distribution through the agreements and the bulletins, were sufficient to establish a prima facie case of conspiracy.' 333 U.S. at page 389, 68 S.Ct. at page 539. On remand, the prima facie case resulted in a final judgment, affirmed by this Court.
In discussing the General Electric case, the Court was unanimous in saying that it 'gives no support for a patentee, acting in concert with all members of an industry, to issue substantially identical licenses to all members of the industry under the terms of which the industry is completely regimented, the production of competitive unpatented products suppressed, a class of distributors squeezed out, and prices on unpatented products stabilized. * * * it would be sufficient to show that the defendants, constituting all former competitors in an entire industry, had acted in concert to restrain commerce in an entire industry under patent licenses in order to organize the industry and stabilize prices.' 33 U.S. at pages 400401, 68 S.Ct. at page 544, 92 L.Ed. 746.
100 2.70 2.55 2.50 2.45
100 3.25 3.10 3.05 2.95
100 3.50 3.35 3.25 3.20
100 3.85 3.70 3.60 3.55
100 3.35 3.20 3.10 3.05
15 U.S.C. 4, 15 U.S.C.A. § 4: 'The several district courts of the United States are invested with jurisdiction to prevent and restrain violations of sections 17 of this title; and it shall be the duty of the several district attorneys of the United States, in their respective districts, under the direction of the Attorney General, to institute proceedings in equity to prevent and restrain such violations. Such proceedings may be by way of petition setting forth the case and praying that such violation shall be enjoined or otherwise prohibited. When the parties complained of shall have been duly notified of such petition the court shall proceed, as soon as may be, to the hearing and determination of the case; and pending such petition and before final decree, the court may at any time make such temporary restraining order or prohibition as shall be deemed just in the premises.'