page_title: United States v. Masonite Corp.
section_title: Background
hierarchical_section_title: United States v. Masonite Corp. / Background
caption_attribution_description: English: Masonite CORPORATION, Quartrboard, c.1930
context_page_description: United States v. Masonite Corp., 316 U.S. 265, 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.
context_section_description: Masonite Corporation, the principal defendant in this case, and defendants Celotex Corporation, Certain-Teed Products Corporation, Johns-Manville Sales Corporation, Insulite Company, Flintkote Company, National Gypsum Company, Wood Conversion Company, Armstrong Cork Company, and Dant & Russell, Inc. were all competitors engaged in manufacturing and selling building materials, including hardboard. Hardboard is a strong, hard, dense, grainless, synthetic board made from heat and pressure treated wood chips, and is claimed in a Masonite patent. Masonite sued Celotex for patent infringement and prevailed. The parties settled the dispute with a 1933 "agency" agreement. Then Masonite sent and proposed the same agreement to others of the defendants, and each executed the agreement between 1933 and 1934. As each agreement was made, Masonite informed the signatory of the existence and terms of each of the agreements that Masonite had previously made with the other companies, and sent copies of the new agreement to those companies that had previously executed similar contracts.
  Masonite sent the agency agreement to Insulite, but that company refused to sign; Masonite then sued a dealer who handled Insulite's hardboard, charging infringement of one of Masonite's patents, and Insulite undertook the defense. But Insulite then signed the same agency agreement in 1935. The agency agreements were modified in 1936 and an agreement relating to them was signed by each defendant, so that each party knew at that time that Masonite proposed to make substantially identical agreements with the others. The agreement provided that it should become effective only when all the parties had agreed to it.
  The contracts between Masonite and the other defendants each designated the other defendant as an "agent" and appointed it as a "del credere factor" to sell Masonite's hardboard products. The contracts also provided that Masonite would fix uniform prices for itself and the others on hardboard they manufactured and sold:
  Masonite agreed to designate from time to time the minimum selling price and the maximum terms and conditions of sale at which the "agent" might sell Masonite's products. The list prices and terms of sale were to be the minimum prices and maximum terms of sale at which Masonite was either offering or making sales to its customers. The right to change the list prices and terms of sale was vested solely in Masonite. . . . It was agreed that Masonite was bound to adhere to the prices, and terms and conditions of sale which it fixed for its "agents." In case the "agent" sold for less than the minimum price, it was obligated to pay liquidated damages at a specified rate.
  For hardboard that Masonite manufactured and shipped to the "agents" for disposition to their customers, Masonite "consigned" the product for sale at the price Masonite prescribed, but the "agent" bore the costs once the product left Masonite's plant:
  On direct shipments to the "agent," the hardboards "shall be received and held on consignment," and "title thereto shall remain" in Masonite until sold by the "agent." The minimum prices were f.o.b. Masonite's factory, the "agent" paying freight and transportation costs and sales and other taxes. The "agent" also agreed at its expense to carry insurance on all products consigned to it. The "agent's" compensation was fixed by way of specified commissions on each sale.
  The Government sued the defendants for price fixing and other restraints of trade such as tie ins, division of markets, and agreements to suppress the use of other patents. The district court ruled that the defendants' conduct was permissible under United States v. General Electric Co. and dismissed the complaint.
caption: Masonite Corp. hardboard
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