316 U.S. 241 (1942), 855, United States v. Univis Lens Co.

Docket Nº:No. 855
Citation:316 U.S. 241, 62 S.Ct. 1088, 86 L.Ed. 1408
Party Name:United States v. Univis Lens Co.
Case Date:May 11, 1942
Court:United States Supreme Court
 
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Page 241

316 U.S. 241 (1942)

62 S.Ct. 1088, 86 L.Ed. 1408

United States

v.

Univis Lens Co.

No. 855

United States Supreme Court

May 11, 1942

Argued April 9, 10, 1942

APPEAL FROM THE DISTRICT COURT OF THE UNITED STATES

FOR THE SOUTHERN DISTRICT OF NEW YORK

Syllabus

1. The facts establish venue for this suit in the District Court in which it was brought. P. 246.

2. Sale by a patent owner of an article which is capable of use only in practicing the patent is a relinquishment of the patent monopoly with respect to that article. P. 249.

3. A patent does not confer the right to control the resale prices of the patented articles after their sale by the patentee. P. 250.

4. The owner of a patent covering lens blanks (capable of use only in manufacturing eye glass lenses) and also (as was assumed in this case) covering the process of grinding and polishing them, by which the blanks are converted into finished lenses for use as eyeglasses, devised a licensing and price-fixing system pursuant to which, for a stipulated royalty, one licensee was authorized to make the blanks and sell them to other licensees, who in turn were authorized to buy them from the maker at prices fixed and to finish them as lenses according to the patent and to sell the lenses to other licensees, who were authorized to sell them to the public -- the prices in all cases being those fixed by the patent owner. The rewards of the patent owner and the manufacturer of the blanks for the exploitation of the patent and the patented lenses were derived wholly from the proceeds of sales of the blanks by the manufacturer, from which proceeds the royalty was paid.

Held:

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(1) That, with the sale of the lens blanks for use in manufacturing lenses, the patent owner conferred on the buyer the right to practice the patent with respect to the blanks, and parted with the right to assert its patent monopoly with respect to them, and could no longer control the price at which they might be sold in their unfinished, or their finished, forms. P. 250.

(2) The stipulations for maintenance of prices derived no support from the patent, and must stand on the same footing under the Sherman Act as like stipulations with respect to unpatented commodities. P. 251.

5. Agreements for maintaining prices of goods in interstate commerce, including restrictions imposed by the seller upon resale prices, held unreasonable restraints within the meaning of the Sherman Act. P. 252.

6. The Miller-Tydings Act cannot be so applied to products manufactured in successive stages by different processors that the first processor may control the prices of his successors. P. 253.

7. Features of a licensing system, which, by themselves, might be lawful, but which are closely identified and interwoven with a scheme of price restriction violative of the Sherman Act, will be suppressed with the scheme as a whole. P. 254.

No. 855 reversed.

No. 856 affirmed.

Appeal and cross-appeal from a decree of the District Court which granted in part, and in part refused, relief sought by the Government in a suit under the Sherman Act.

STONE, J., lead opinion

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

These cases come here on direct appeal and cross-appeal from a judgment of the district court granting in part and denying in part the Government's prayer for an injunction

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restraining violations of §§ 1 and 3 of the Sherman Act, 15 U.S.C. §§ 1, 3, which make unlawful and contract, combination or conspiracy in restraint of trade or commerce among the states. The principal questions for decision are:

First: Whether the system established and maintained by the Univis Corporation, appellee and cross-appellant, for licensing the manufacture and sale of patented multi-focal eyeglass lenses, is excluded by the patent monopoly from the operation of the Sherman Act.

Second: Whether, if not so excluded, the resale price provisions of the licensing system are within the prohibition of the Sherman Act, and not exempted from it by the provisions of the Miller-Tydings Act amendment of § 1 of the Sherman Act, 50 Stat. 693.

Appellee, Univis Lens Company, was the owner of a number of patents and two trademarks relating to multi-focal lenses. In 1931, it organized appellee, Univis Corporation. The Lens Company then acquired and now holds a majority of the stock of the corporation. The individual appellees are the principal stockholders of the Lens Company. They are stockholders in the Corporation, and are the principal officers of both corporations, which may, for the purposes of this suit, be treated as though they were a single corporation. Upon the organization of the Corporation, the Lens Company transferred to it all its interest in the patents and trademarks presently involved, and the Corporation then proceeded to set up, and has since maintained, the licensing system which the Government now assails.

The relevant features of the system are as follows: the Corporation licenses the Lens Company to manufacture lens blanks and to sell them to designated licensees of the Corporation, upon the Lens Company's payment to the Corporation of an agreed royalty of 50 cents a pair.

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The lens blanks are rough opaque pieces of glass of suitable size, design, and composition for use, when ground and polished, as multi-focal lenses in eyeglasses. Each blank is composed of two or more pieces of glass of different refractive power of such size, shape, and composition, and so disposed that, when fused together in the blank, it is said to conform to the specifications and claims of some one of the Corporation's patents.

The Corporation also issues three classes of licenses -- licenses to wholesalers, to finishing retailers, and to prescription retailers. The licenses to wholesalers authorize the licensees to purchase the blanks from the Lens Company, to finish them by grinding and polishing, and to sell them to prescription licensees only at prices fixed by the Corporation licensor. In finishing the lenses so as to make them an effective aid to vision of the prospective wearer, to whom the prescription retailer sells, it is necessary for the wholesaler, by grinding the blanks, to conform their curvatures to the prescription supplied by the retailer with his order. By the terms of the license, the wholesalers are required to keep full accounts of all sales, showing the sales prices of lenses and the names of the purchasers, and to make them available to representatives of the Corporation.

The licenses to finishing retailers -- who purchase the blanks from the Lens Company, grind and polish them, and adjust the lenses, in frames or supports, to the eyes of the consumers -- contain similar provisions. The retailers are licensed to purchase the blanks of the Lens Company and to sell them to their customers at prices prescribed by the Corporation licensor.

Both the licenses to wholesalers and to finishing retailers require the licensee to notify the Corporation

of any violation on the part of any jobbers or other [62 S.Ct. 1091] licensees of the agreements respectively made by them with the Corporation, and to assist the Corporation in all possible ways

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in securing evidence against, and enforcing its agreements with, such jobbers and licensees.

The licenses to prescription retailers, who are without facilities for grinding and finishing the lenses, but who prescribe and adjust glasses for their customers, are signed both by the Corporation and a licensor wholesaler, and grant to the retailer a "franchise to prescribe and fit Univis lenses," in return for which the prescription retailer agrees to sell finished lenses only to consumers and only at prices prescribed by the Corporation.

All the licenses to wholesalers and retailers recite the Corporation's ownership of the lens patents, and purport to confer on the licensee the privilege of selling the patented invention in the manner and to the extent stated. No royalties are exacted of any of the licensees other than the 50 cents collected by the Corporation for each pair of blanks sold by the Lens Company. The rewards of the corporate appellees for the exploitation of the patents and the patented lenses are derived wholly from the sales by the Lens Company of the blanks, from the proceeds of which the 50 cent royalty is paid.

The prices prescribed and maintained under the licensing system are: $3.25 a pair for the blanks sold by the Lens Company to wholesalers, and $4 a pair for those sold to finishing retailers; $7 a pair for finished lenses sold by wholesalers; $16 a pair for white, and $20 for tinted, lenses sold to consumers by prescription and finishing retailers.

The Corporation pursues the policy of issuing licenses to "qualified licensees" who, it is said, are required to maintain "high standards of practice," and to be skilled in the performance of the services which they undertake to render. According to the Corporation's instructions to its field representatives, "price-cutters" are not eligible as prescription retailer licensees. Inquiry is made to ascertain whether prospective licensees advertise prices, and whether they are considered in their communities to

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be price-cutters. The Corporation cancels licenses principally because of the failure of...

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