272 U.S. 476 (1926), 113, United States v. General Electric Company

Docket Nº:No. 113
Citation:272 U.S. 476, 47 S.Ct. 192, 71 L.Ed. 362
Party Name:United States v. General Electric Company
Case Date:November 23, 1926
Court:United States Supreme Court
 
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Page 476

272 U.S. 476 (1926)

47 S.Ct. 192, 71 L.Ed. 362

United States

v.

General Electric Company

No. 113

United States Supreme Court

Nov. 23, 1926

Argued October 13, 1926

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF OHIO

Syllabus

1. Through a system of contracts between a company which owned the patents for electric lamps with tungsten filaments and manufactured most of those sold and a large number of wholesale and retail dealers in electrical supplies, the dealers were appointed agents of the company to sell, on commission, the lamps, which were to be consigned to them by the company, transportation prepaid; the sales were to be at prices fixed by the company, the dealers to pay all expenses except the original transportation and to account to the company periodically for the amount, less commission, of all sales, cash or credit, and all the stock entrusted to the dealers was to remain the property of the company until sold, and to be accounted for by the dealers.

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Held, that the dealers were genuine agents, not purchasers in disguise, and that the plan was not a device to fix prices after sale and to restrain trade and exercise monopoly in the lamps in violation of the Anti-Trust Act. P. 484.

2. The circumstance that the agents were in their regular business merchants, and, under a prior arrangement, had bought the lamps and sold them as their own did not prevent this change in their relation to the company. P. 484.

3. Nor did the size and comprehensiveness of the scheme bring it within the Anti-Trust Law. P. 485.

4. As a patentee has a statutory monopoly of the right to make, use, and sell the patented article, the comprehensiveness of his control of the business of selling is not necessarily an evidence of illegality in method. P. 485.

5. As long as a patentee makes no effort to fasten upon ownership of the articles he sells control of the prices at which his purchaser shall sell, it makes no difference how widespread his monopoly. P. 485.

6. The owner of articles, patented or otherwise, is not violating the common law or the Anti-Trust law by seeking to dispose of his articles directly to the consumer and fixing the price by which his agents transfer the title from him directly to such consumer. P. 488.

7. A patentee, in licensing another person to make, use, and vend, may lawfully impose the condition that sales by the licensee shall be at prices fixed by the licensor and subject to change at his discretion. P. 488.

15 F.2d 715 affirmed.

Appeal from a decree of the district court dismissing, for want of equity, a bill brought by the United States to enjoin the General Electric Company, Westinghouse Electric and Manufacturing Company, and Westinghouse Lamp Company, appellees herein, from prosecuting a plan for the distribution and sale of patented electric lamps, which was alleged to be a restraint and monopoly of interstate commerce.

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TAFT, J., lead opinion

MR. CHIEF JUSTICE TAFT delivered the opinion of the Court.

This is a bill in equity, brought by the United States in the District Court for the Northern District of Ohio to enjoin the General Electric Company, the Westinghouse Electric & Manufacturing Company, and the Westinghouse Lamp Company from further violation of the Anti-Trust Act of July 2, 1890. 26 Stat. 209, c. 647. The bill made two charges, one that the General Electric Company, in its business of making and selling incandescent electric lights, had devised and was carrying out a plan for their distribution throughout [47 S.Ct. 193] out the United States by a number of so-called agents, exceeding 21,000, to restrain interstate trade in such lamps and to exercise a monopoly of the sale thereof, and, second, that it was achieving the same illegal purpose through a contract of license with the defendants, the Westinghouse Electric & Manufacturing Company and the Westinghouse house Lamp Company. As the Westinghouse Lamp Company is a corporation all of whose stock is owned by the Westinghouse Electric & Manufacturing Company, and is but its selling agent, we may treat the two as one, and reference hereafter will be only to the defendants the General Electric

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Company, which we shall call the Electric Company, and the Westinghouse Company.

The government alleged that the system of distribution adopted was merely a device to enable the Electric Company to fix the resale prices of lamps in the hands of purchasers, that the so-called agents were in fact wholesale and retail merchants, and the lamps passed through the ordinary channels of commerce in the ordinary way, and that the restraint was the same and just as unlawful as if the so-called agents were avowed purchasers handling the lamps under resale price agreements. The Electric Company answered that its distributors were bona fide agents, that it had the legal right to market its lamps and pass them directly to the consumer by such agents, and at prices and by a system prescribed by it and agreed upon between it and its agents, there being no limitation sought as to resale prices upon those who purchased from such agents.

The second question in the case involves the validity of a license granted March 1, 1912, by the Electric Company to the Westinghouse Company to make, use, and sell lamps under the patents owned by the former. It was charged that the license in effect provided that the Westinghouse Company would follow prices and terms of sale from time to time fixed by the Electric Company and observed by it, and that the Westinghouse Company would, with regard to lamps manufactured by it under the license, adopt and maintain the same conditions of sale as observed by the Electric Company in the distribution of lamps manufactured by it.

The district court, upon a full hearing, dismissed the bill for want of equity, and this is an appeal under § 2 of the Act of February 11, 1903, known as the Expediting Act. 32 Stat. 823, c. 544, § 2.

There had been a prior litigation between the United States and the three defendants and 32 other corporations,

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in which the government sued to dissolve an illegal combination in restraint of interstate commerce in electric lamps, in violation of the Anti-Trust Act, and to enjoin its further violation. A consent decree was entered in that cause by which the combination was dissolved, the subsidiary corporations surrendered their charters, and their properties were taken over by the General Electric Company. The defendants were all enjoined from fixing resale prices for purchasers, except that the owner of the patents were permitted to fix the prices at which a licensee should sell lamps manufactured by it under the patent. After the decree was entered, a new sales plan, which was the one here complained of, was submitted to the Attorney General. The Attorney General declined to express an opinion as to its legality. The plan was adopted, and has been in operation since 1912.

The government insists that these circumstances tend to support the government's view that the new plan was a mere evasion of the restrictions of the decree, and was intended to carry out the same evil result that had been condemned in the prior litigation. There is really no conflict of testimony in the sense of a variation as to the facts, but only a difference as to the inference to be drawn therefrom. The evidence is all included in a stipulation as to certain facts as to what certain witnesses for the defendants would testify and as to the written contracts of license and agency made by the General Electric Company and the Westinghouse Company.

The General Electric Company is the owner of three patents -- one of 1912 to Just & Hanaman, the basic patent for the use of tungsten filaments in the manufacture of electric lamps; the Coolidge patent of 1913, covering a process of manufacturing tungsten filaments by which their tensile strength and endurance is greatly increased; and, third, the Langmuir...

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