Mercoid Corporation v. Inv Co

• Decision Date: 03 January 1944
• Docket Number: Nos. 54,55,MID-CONTINENT,s. 54
• Citation: 320 U.S. 661,64 S.Ct. 268,88 L.Ed. 376
• Parties: MERCOID CORPORATION v. INV. CO. et al. (two cases)
• Court: U.S. Supreme Court

320 U.S. 661

64 S.Ct. 268

88 L.Ed. 376

MERCOID CORPORATION

v MID-CONTINENT INV. CO. et al.(two cases).

Nos. 54, 55.

Argued Dec. 9, 1943.

Decided Jan. 3, 1944.

Rehearing Denied Feb. 7, 1944.

See 321 U.S. 802, 64 S.Ct. 525.

Motion to Clarify Denied Oct. 16, 1944.

See 65 S.Ct. 77.

Mr. George L. Wilkinson, of Chicago, Ill., for petitioner.

Mr. Casper W. Ooms, of Chicago, Ill., for respondentMid-Continent Investment Co.

Mr. W. P. Bair, of Chicago, Ill., for respondentMinneapolis-Honeywell Regulator Co.

Mr. Justice DOUGLASdelivered the opinion of the Court.

This suit was brought by respondent, Mid-Continent Investment Co., against petitioner, Mercoid Corporation, for contributory infringement of the Cross combination patent No. 1,758,146, issued May 13, 1930, for a domestic heating system.Mercoid in its answer denied contributory infringement and alleged that Mid-Continent should be barred from relief because it was seeking to extend the grant of the patent to unpatented devices.The alleged improper use of the patent was also the basis of a counterclaim filed by Mercoid in which it was averred that Mid-Continent and its exclusive licensee under the patent, respondentMinneapolis-Honeywell Regulator Co., who was brought in as a partyplaintiff, had conspired to expand the monopoly of the patent in violation of the anti-trust laws.Mercoid asked not only for declaratory relief but for an accounting and treble damages as well.The District Court found that Mercoid did not contribute to the infringement of the Cross patent; that respondents had conspired to establish a monopoly in an unpatented appliance beyond the scope of the patent and in violation of the anti-trust laws; and that respondents were in no position to maintain the suit because of that conspiracy.Mercoid was granted an injunction but its prayer for damages was denied.The Circuit Court of Appeals affirmed the judgment of the District Court in disallowing dam- ages under the counterclaim.In all other respects it reversed that judgment, holding that Mercoid was guilty of contributory infringement under the rule of Leeds & Catlin Co. v. Victor Talking Machine Co., No. 2, 213 U.S. 325, 29 S.Ct. 503, 53 L.Ed. 816, and that Carbice Corp. v. American Patents Corp., 283 U.S. 27, 51 S.Ct. 334, 75 L.Ed. 819andLeitch Mfg. Co. v. Barber Co., 302 U.S. 458, 58 S.Ct. 288, 82 L.Ed. 371, did not bar recovery as the District Court had thought.133 F.2d 803.The case is here on a petition for a writ of certiorari which we granted because of the public importance of the questions presented.

The controversy centers around the license agreement between Mid-Continent and Minneapolis-Honeywell.By that agreement Minneapolis-Honeywell received an exclusive license to make, use, sell, and to sub-license others to make, use, and sell the Cross combination patent No. 1,758,146.The royalty payments under the license, however, were to be based only upon sales of the combustion stoker switch which was an element of the combination patent embodied in the patented article but which was itself unpatented.The license agreement was construed by the Circuit Court of Appeals to mean that the royalty payments were to be made only on switches used for fire maintenance purposes under the Cross patent.And Minneapolis-Honeywell in advertising its stoker switches stated that the 'right to use' the Cross system patent was 'only granted to the user' when the stoker switches of Minneapolis-Honeywell were purchased from it and used in the system.Neither Mid-Continent nor Minneapolis-Honeywell manufactures or installs heating systems under the Cross combination patent.There was ample evidence to sustain the findings of the District Court that respondents endeavored to use the license agreement so as to prevent the sale or use of combustion stoker switches in these heating systems unless they were the switches made by Minneapolis-Honeywell and purchased from it or its sub-licensees.

The patent is a combination or system patent, covering a domestic heating system which comprises three main elements—a motor driven stoker for feeding fuel to the combustion chamber of a furnace, a room thermostat for controlling the feeding of fuel, and a combustion stoker switch to prevent extinguishment of the fire.The room thermostat functions to supply, or discontinue the supply of, heat by closing or then opening the circuit to the stoker motor at the required temperatures.The combusion stoker switch, or holdfire control, is responsive to a low temperature in the furnace causing the stoker to feed fuel so as to prevent the furnace fire from going out.The control of the combustion stoker switch is said to be effective in mild weather when the room thermostat may not call for heat for a considerable period.

Mercoid, like Mid-Continent and Minneapolis-Honeywell, does not sell or install the Cross heating system.But the Circuit Court of Appeals found that Mercoid manufactured and sold combustion stoker switches for use in the Cross combination patent.And we may assume that Mercoid did not act innocently.Indeed the Circuit Court of Appeals said that it could find no use for the accused devices other than in the Cross combination patent.And it assumed, as was held in Smith v. Mid-Continent Inv. Co., 8 Cir., 106 F.2d 622, that the Cross patent was valid.But though we assume the validity of the patent and accept fully the findings of the Circuit Court of Appeals, we think the judgment below should be reversed.

Ever since Henry v. A. B. Dick Co., 224 U.S. 1, 32 S.Ct. 364, 56 L.Ed. 645, Ann.Cas.1913D, 880, was overruled by Motion Picture Co. v. Universal Film Co., 243 U.S. 502, 37 S.Ct. 416, 61 L.Ed. 871, L.R.A. 1917E, 1187, Ann.Cas.1918A, 959, this Court has consistently held that the owner of a patent may not employ it to secure a limited monopoly of an unpatented material used in applying the invention.Carbice Corp. v. American Patents Corp., supra;Leitch Mfg. Co. v. Barber Co., supra;Morton Salt Co. v. G. S. Suppiger Co., 314 U.S. 488, 62 S.Ct. 402, 404, 86 L.Ed. 363;B. B. Chemical Co. v. Ellis, 314 U.S. 495, 62 S.Ct. 406, 86 L.Ed. 367.In those cases both direct and contributory infringement suits were disallowed on a showing that the owner of the patent was using it 'as the effective means of restraining competition with its sale of an unpatented article.'Morton Salt Co. v. G. S. Suppiger Co., supra, 314 U.S. page 490, 62 S.Ct. page 404, 86 L.Ed. 363.The Court has repeatedly held that to allow such suits would be to extend the aid of a court of equity in expanding the patent beyond the legitimate scope of its monopoly.It is true that those cases involved the use of the patent for a machine or process to secure a partial monopoly in supplies consumed in its operation or unpatented materials employed in it.But we can see no difference in principle where the unpatented material or device is itself an integral part of the structure embodying the patent.

The grant of a patent is the grant of a special privilege 'to promote the Progress of Science and useful Arts.' Const., Art. I, § 8.It carries, of course, a right to be free from competition in the practice of the invention.But the limits of the patent are narrowly and strictly confined to the precise terms of the grant.Ethyl Gasoline Corp. v. United States, 309 U.S. 436, 456, 60 S.Ct. 618, 625, 84 L.Ed. 852;United States v. Univis Lens Co., 316 U.S. 241, 251, 62 S.Ct. 1088, 1093, 86 L.Ed. 1408.It is the public interest which is dominant in the patent system.Pennock v. Dialogue, 2 Pet. 1, 7 L.Ed. 327;Kendall v. Winsor, 21 How. 322, 329, 16 L.Ed. 165;Adams v. Burke, 17 Wall. 453, 21 L.Ed. 700;Motion Picture Co. v. Universal Film Co., supra, 243 U.S. pages 510, 511, 37 S.Ct. page 418, 61 L.Ed. 871, L.R.A.1917E, 1187, Ann.Cas.1918A, 959;Morton Salt Co. v. G. S. Suppiger Co., supra;United States v. Masonite Corp., 316 U.S. 265, 278, 62 S.Ct. 1070, 1077, 86 L.Ed. 1461.It is the protection of the public in a system of free enterprise which alike nullifies a patent where any part of it is invalid (Marconi Wireless Co. v. United States, 320 U.S. 1, 58, 63 S.Ct. 1393, 1419, 87 L.Ed. 1731;and seeGeneral Electric Co. v. Wabash Corp., 304 U.S. 364, 372, 58 S.Ct. 899, 903, 82 L.Ed. 1402) and denies to the patentee after issuance the power to use it in such a way as to acquire a monopoly which is not plainly within the terms of the grant.The necessities or convenience of the patentee do not justify any use of the monopoly of the patent to create another monopoly.The fact that the patentee has the power to refuse a license does not enable him to enlarge the monopoly of the patent by the expedient of attaching conditions to its use.United States v. Masonite Corp., supra, 316 U.S. page 277, 62 S.Ct. page 1077, 86 L.Ed. 1461.The method by which the monopoly is sought to be extended is immaterial.United States v. Univis Lens Co., supra, 316 U.S. pages 251, 252, 62 S.Ct. pages 1093, 1094, 86 L.Ed. 1408.The patent is a privilege.But it is a privilege which is conditioned by a public purpose.It results from invention and is limited to the invention which it defines.When the patentee ties something else to his invention, he acts only by virtue of his right as the owner of property to make contracts concerning it and not otherwise.He then is subject to all the limitations upon that right which the general law imposes upon such contracts.The contract is not saved by anything in the patent laws because it relates to the invention.If it were, the mere act of the patentee could make the distinctive claim of the patent attach to something which does not possess the quality of invention.Then the patent would be diverted from its statutory purpose and become a ready instrument for economic control in domains where the anti-trust acts or other laws not the patent statutes define the public policy.

The instant case is a graphic...