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

Docket NºNo. 113
Citation272 U.S. 476, 47 S.Ct. 192, 71 L.Ed. 362
Party NameUnited States v. General Electric Company
Case DateNovember 23, 1926
CourtUnited States Supreme Court

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.

Page 477

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.

Page 478

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

Page 479

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,

Page 480

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 patent of 1916, which is for the use of gas in the bulb by which the intensity of the

Page 481

light is substantially heightened. These three patents cover completely the making of the modern electric lights with the tungsten filaments, and secure to the General Electric Company the monopoly of their making, using, and vending.

The total business in electric lights for the year 1921 was $68,300,000, and the relative percentages of business done by the companies were: General Electric, 69 percent; Westinghouse, 16 percent; other licensees, 8 percent, and manufacturers not licensed, 7 percent. The plan of distribution by the Electric Company divides the trade into three classes. The first class is that of sales to large consumers readily reached by the General Electric Company, negotiated by its own salaried employees, and the deliveries made from its own factories and warehouses. The second class is of sales to large consumers under contracts with the General Electric Company, negotiated by agents, the deliveries being made from stock in the custody of the agents, and [47 S.Ct. 194] the third is of the sales to general consumers by agents under similar contracts. The agents under the second class are called B agents, and the agents under the third class are called A agents. Each B agent is appointed by the General Electric Company by the execution and delivery of a contract for the appointment, which lasts a year from a stated date, unless sooner terminated. It provides that the company is to maintain on consignment in the custody of the agent a stock of lamps, the sizes, types, classes, and quantity of which and the length of time which they are to remain in stock to be determined by the company. The lamps consigned to the agents are to be kept in their respective places of business, where they may be readily inspected and identified by the company. The consigned stock, or any part of it, is to be...

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294 practice notes
  • 105 F.2d 981 (2nd Cir. 1939), 326, Nachod & United States Signal Co., Inc. v. Automatic Signal Corp.
    • United States
    • Federal Cases United States Courts of Appeals United States Court of Appeals (2nd Circuit)
    • 31 Julio 1939
    ...an immunity against claim of infringement by the owner. He has no title of any sort in the patent. United States v. General Electric Co., 272 U.S. 476, 489, 47 S.Ct. 192, 71 L.Ed. 362; General Talking Pictures Corp. v. Western Electric Co., 304 U.S. 175, 181, 58 S.Ct. 849, 82 L.Ed. 1273. An......
  • 2 F.R.D. 261 (D.Del. 1942), 1268, Innis, Speiden & Co. v. Food Machinery Corporation
    • United States
    • Federal Cases United States District Courts 3th Circuit United States District Court (Delaware)
    • 11 Marzo 1942
    ...common-law license. Waterman v. Mackenzie, 138 U.S. 252, 255, 11 S.Ct. 334, 34 L.Ed. 923; Page 263 United States v. General Electric Co., 272 U.S. 476, 489, 490, 47 S.Ct. 192, 71 L.Ed. As to licenses, a bare license may be defined as nothing more than a grant of authority to make, use or ve......
  • 229 F.Supp. 347 (D.Kan. 1964), Civ. A. W-2600, Monroe Auto. Equipment Co. v. Precision Rebuilders, Inc.
    • United States
    • Federal Cases United States District Courts 10th Circuit United States District Courts. 10th Circuit. District of Kansas
    • 27 Marzo 1964
    ...(1859), 22 How. 217, 16 L.Ed. 240; Mitchell v. Hawley (1872), 16 Wall. 544, 21 L.Ed. 322; United States v. General Electric Co. (1926), 272 U.S. 476, 47 S.Ct. 192, 71 L.Ed. 362. Thereafter, the buyer of the patented article may continue to use it so long as it is capable of use, and he may ......
  • 770 F.2d 367 (3rd Cir. 1985), 84-5630, Seaboard Supply Co. v. Congoleum Corp.
    • United States
    • Federal Cases United States Courts of Appeals United States Court of Appeals (3rd Circuit)
    • 16 Agosto 1985
    ...Preferences granted to a legitimate sales agent are not actionable because there is no sale to the agent. See United States v. GTE, 272 U.S. 476, 47 S.Ct. 192, 71 L.Ed. 362 (1926) (distinction between agency relationship and sales contract); Edward J. Sweeney & Sons, Inc. v. Texaco, Inc......
  • Request a trial to view additional results
260 cases
  • 105 F.2d 981 (2nd Cir. 1939), 326, Nachod & United States Signal Co., Inc. v. Automatic Signal Corp.
    • United States
    • Federal Cases United States Courts of Appeals United States Court of Appeals (2nd Circuit)
    • 31 Julio 1939
    ...an immunity against claim of infringement by the owner. He has no title of any sort in the patent. United States v. General Electric Co., 272 U.S. 476, 489, 47 S.Ct. 192, 71 L.Ed. 362; General Talking Pictures Corp. v. Western Electric Co., 304 U.S. 175, 181, 58 S.Ct. 849, 82 L.Ed. 1273. An......
  • 2 F.R.D. 261 (D.Del. 1942), 1268, Innis, Speiden & Co. v. Food Machinery Corporation
    • United States
    • Federal Cases United States District Courts 3th Circuit United States District Court (Delaware)
    • 11 Marzo 1942
    ...common-law license. Waterman v. Mackenzie, 138 U.S. 252, 255, 11 S.Ct. 334, 34 L.Ed. 923; Page 263 United States v. General Electric Co., 272 U.S. 476, 489, 490, 47 S.Ct. 192, 71 L.Ed. As to licenses, a bare license may be defined as nothing more than a grant of authority to make, use or ve......
  • 229 F.Supp. 347 (D.Kan. 1964), Civ. A. W-2600, Monroe Auto. Equipment Co. v. Precision Rebuilders, Inc.
    • United States
    • Federal Cases United States District Courts 10th Circuit United States District Courts. 10th Circuit. District of Kansas
    • 27 Marzo 1964
    ...(1859), 22 How. 217, 16 L.Ed. 240; Mitchell v. Hawley (1872), 16 Wall. 544, 21 L.Ed. 322; United States v. General Electric Co. (1926), 272 U.S. 476, 47 S.Ct. 192, 71 L.Ed. 362. Thereafter, the buyer of the patented article may continue to use it so long as it is capable of use, and he may ......
  • 770 F.2d 367 (3rd Cir. 1985), 84-5630, Seaboard Supply Co. v. Congoleum Corp.
    • United States
    • Federal Cases United States Courts of Appeals United States Court of Appeals (3rd Circuit)
    • 16 Agosto 1985
    ...Preferences granted to a legitimate sales agent are not actionable because there is no sale to the agent. See United States v. GTE, 272 U.S. 476, 47 S.Ct. 192, 71 L.Ed. 362 (1926) (distinction between agency relationship and sales contract); Edward J. Sweeney & Sons, Inc. v. Texaco, Inc......
  • Request a trial to view additional results
16 firm's commentaries
  • California Courts reexamine Vertical Price and Distribution Restraints under the Cartwright Act
    • United States
    • JD Supra United States
    • 11 Octubre 2013
    ...goods). This would have obviated any potential vertical price fixing claim in the first instance. See United States v. General Electric, 272 U.S. 476 (1926) (holding that the per se rule against resale price maintenance does not apply to agency relationships or where a good is sold on consi......
  • The U.S. Supreme Court Clarifies Patent Exhaustion
    • United States
    • Mondaq United States
    • 12 Febrero 2009
    ...retain his ownership in it can not control the price at which it is sold by his distributors.") (citing U.S. v. General Electric Co., 272 U.S. 476 (1926)). 30 See id. at 249. 31 Id. at 250-51. 32 Id. at 249. 33 See id. at 251. 34 Id. 35 See id. at 252. 36 See 976 F.2d 700, 702 (Fed. Ci......
  • Bayer Files Amicus Brief in K-Dur Case
    • United States
    • JD Supra United States
    • 28 Septiembre 2012
    ...are "a legitimate and desirable result in itself." In this regard the brief cites United States v. General Elec. Co., 272 U.S. 476, 493 (1926), which found price setting under a patent license to be The brief then makes the case that antitrust laws are directed to lawful competiti......
  • Impression Products, Inc. v. Lexmark International, Inc. (2017)
    • United States
    • JD Supra United States
    • 31 Mayo 2017
    ...-- it is an affirmative limit on the scope of a patentee's right to exclude, the Court citing United States v. General Elec. Co., 272 U.S. 476, 489 (1926) to this effect. The opinion sets out the principle: the right to own (and use, and sell) property exists outside the patent right, and t......
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18 books & journal articles
  • Dworkinian Antitrust
    • United States
    • Iowa Law Review Nbr. 102-1, November 2016
    • 1 Noviembre 2016
    ...287, 300 (1948) (noting that the terms of a patent demarcate the limits of the patent holder’s monopoly); United States v. Gen. Elec. Co., 272 U.S. 476, 485 (1926) (finding the Sherman Act applicable to the actions of a patent holder only where the patent’s scope is exceeded). 272. Actavis,......
  • The Supreme assimilation of patent law.
    • United States
    • Michigan Law Review Vol. 114 Nbr. 8, June 2016
    • 1 Junio 2016
    ...the invention' are in pari materia with the antitrust laws and modify them pro tanto." (citing United States v. Gen. Elec. Co., 272 U.S. 476, 485 (1926))); United States v. Gen. Elec. Co., 272 U.S. 476, 488, 494 (1926) (holding that a patentee may agree to restrict prices in a license ......
  • RETHINKING THE EFFICIENCY OF THE COMMON LAW.
    • United States
    • Notre Dame Law Review Vol. 95 Nbr. 2, December 2019
    • 1 Diciembre 2019
    ...Corp., 485 U.S. 717, 733 (1988); Monsanto Co. v. Spray-Rite Serv. Corp., 465 U.S. 752, 761, 769 (1984); United States v. Gen. Elec. Co., 272 U.S. 476, 487-88 (1926); United States v. Colgate & Co., 250 U.S. 300, 306-08 (1919). (245) See, e.g., Robert H. Bork, Legislative Intent and the ......
  • The Law of Vertical Integration and the Business Firm: 1880-1960
    • United States
    • Iowa Law Review Nbr. 95-3, March 2010
    • 1 Marzo 2010
    ...and accompanying text (discussing how the first-sale doctrine performs an antitrust function). [150] United States v. Gen. Elec. Co., 272 U.S. 476, 481-83 (1926). [151] Dr. Miles Med. Co. v. John D. Park & Sons Co., 220 U.S. 373, 394-98 (1911). The Court reached the same conclusion in S......
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