Vulcan Mfg. Co. v. Maytag Co., 9947.
| Citation | 73 F.2d 136 |
| Decision Date | 02 November 1934 |
| Docket Number | No. 9947.,9947. |
| Parties | VULCAN MFG. CO. v. MAYTAG CO. |
| Court | United States Courts of Appeals. United States Court of Appeals (8th Circuit) |
William G. Boatright and Armwell L. Cooper, of Kansas City, Mo. (Daniel S. Millman, Cooper, Neel, Kemp & Sutherland, and Ringolsky, Boatright & Jacobs, all of Kansas City, Mo., on the brief), for appellant.
George Mankle, of Chicago, Ill., and Nelson E. Johnson, of Kansas City, Mo. (Wallace R. Lane and Parkinson & Lane, all of Chicago, Ill., on the brief), for appellee.
Before STONE, Circuit Judge, and JOYCE and BELL, District Judges.
Appellee, as licensor under various patents, brought this action to enjoin appellant, its licensee, from violation of the license and for an accounting of damages on account of violations. Upon final hearing the court decreed a permanent injunction, an allowance of damages, and appointed a master to take the accounting in damages. From that decree this appeal is brought.
The patents covered by the license had to do with a swinging wringer and its gear mechanism for use on power-operated washing machines. Appellee granted a license to endure until expiration of the longest patent covered thereby, under certain conditions set forth in the license, in return for payment of a fixed royalty for each swinging wringer and gear mechanism made and sold by the licensee. One of the conditions of the license was to manufacture and sell "swinging wringers and gear mechanisms shown in the attached circular, for use only in connection with and as a part of power-operated washing machines of the general type and design shown in the circular attached hereto and made a part hereof under said patents and patent application, and to sell the same in accordance with the provisions hereinafter contained." (Italics added.)
A related provision of the license is as follows: "Second party further agrees not to sell any of said patented devices separately or as a part of any other mechanism than on the washing machines made by it of the general type shown in the attached circular to any person, firm or corporation, except for repairs to machines previously sold by second party." (Italics added.)
Attached to and made part of the license were illustrations and descriptions of the washing machine manufactured by the licensee and referred to in the license in the two above quotations.
After proceeding under this license for several years, the licensee abandoned the type of washing machine formerly made by it and covered by the license. Refusing to cease attaching the wringers and gearing covered by the license to this new type of machine this action resulted. In the court below there were issues as to the construction of the license and as to whether this new machine was a departure therefrom, but those issues are not in the appeal, so we may enter our consideration with the established situation that attachment of the licensed apparatus to the machines made and being made by appellant is a violation of the terms of the license. The issues on this appeal concern the binding effect of the license under the situation here presented.
One important issue urged here is that this license is invalid as a violation of the Clayton Anti-Trust Act § 3 (15 USCA § 14). The basis of this contention is that the wringer and gear mechanism covered by the patents and the license are for attachments to power-operated washing machines, which are not covered by patents; that such attachments are necessary to salability of such washing machines; that to limit, through license, the use of the patented device to a particular kind of washing machine, thus preventing its use upon other and more desirable types of washing machines which are manufactured by appellant, has the effect of giving appellee a monopoly over unpatented articles through the device of such character of license.
It may be conceded that the evidence establishes that it is difficult, if not impractical, to dispose of power-operated washing machines without the wringer and gearing attachments covered by these patents. Also, that there are various types of washing machines, and that a limitation of license to a less desirable and salable washing machine would seriously hamper, if it did not practically prevent, competition with a more desirable and a more salable machine, and that this lessening of competition would have a tendency to create a monopoly. Also, that these patents cover only the wringer and gearing mechanism, and have no reference to the washing machines themselves.
These concessions, however, fall short of establishing a situation which invalidates this license. It is well established that the essence of a patent is monopoly in the subject-matter of the patent. E. Bement & Sons v. National Harrow Co., 186 U. S. 70, 91, 22 S. Ct. 747, 46 L. Ed. 1058. The sole incentive offered by the patent laws to encourage development in the arts and sciences is the right to this monopoly for a given term of years. It is not against such kind of monopoly that the anti-trust laws are aimed or to which they have any application. It is true, however, that it is possible for a patentee to so employ the force of this legitimate monopoly, through a license, through sales of the patented article, or otherwise, as to effect another and additional monopoly unrelated to that accorded by the patent. When this is done, such license, sales, or other device is unlawful. In declaring the rule of law applicable to this latter situation the Supreme Court has said that the patentee may grant a license "upon any condition the performance of which is reasonably within the reward which the patentee by the grant of the patent is entitled to secure." United States v. General Elec. Co., 272 U. S. 476, 489, 47 S. Ct. 192, 196, 71 L. Ed. 362. Therefore, the question here is whether the condition of this license (that the patented matters should be used only in connection with a particular type of washing machine) is reasonably within the reward of monopoly granted by the patent.
Obviously, there was no obligation on the patentees to grant any license whatsoever. If the situation in the washing machine business was such that there would be no commercial demand for washing machines without these patented attachments, the natural and legitimate result flowing from the monopoly of these attachments would be a monopoly of the washing machine business, although the machines themselves were entirely unpatented. This is a situation brought about by the excellence of the patent in a commercial sense, and not by any arrangement, contract, or other act of the patentee than the bare ownership of the patent and the monopoly of use of the subject-matter covered thereby. If this be the situation of the evidence, the only effect of granting a license to use the patented attachments would be one beneficial to the licensee, since it would enable him to continue in a business where he could not commercially remain without the license. Obviously, the patentee is not compelled to choose between granting full and complete use under the patent or granting no use. He may attach such limitations upon the use as do not go beyond the influence of his complete monopoly without granting licenses. Under the situation here, it is clear that this limitation in the license to use of the patented attachments to certain types of washing machines is well within the monopoly of the patent. The very fact that appellant insists on going outside of the license, and testifies (through its president) that it would have to go out of business unless it did, is convincing that the commercial situation is such that the monopoly of these patented attachments has the practical effect of a monopoly of the power driven washing machine business. None of appellant's rights are invaded by this limitation, since it may cease using the patented device and manufacture any character of washing machines it desires with any other wringer and gearing attachments or with no such attachments. As to it, the difficult situation is one naturally resulting. It has no standing of itself to claim a right to use the patented device. Nor is the public harmed by this limitation, because the patentee is entitled to all the benefits naturally flowing from the monopoly of his patent and, under the commercial situation here shown, a natural benefit of this monopoly is its extension to the entire machine. This limitation in the license is well within the language and the intent of the rule as quoted above from the Supreme Court.
It is quite evident that the main reliance of appellant in the court below and here is upon its contention that the conduct of appellee in connection with the violation of the license by appellant is such as to defeat this action. In presenting this matter, the ingenuity of able counsel has left no legal ground untouched. They claim estoppel, ratification, acquiescence, approval, implied license, waiver, election, and kindred doctrines. While there are differences in the rules of law governing these various grounds, it seems unnecessary to burden this opinion with such legal definitions, as we are convinced there is no ground in the evidence for sustaining any of them. This involves a discussion of the purport of so much of the evidence as relates to these matters.
Prior to 1927, appellant discovered that the type of washing machine (as distinguished from the patented attachments) which it was making was being replaced in the purchasing public esteem by machines differently constructed and differently performing the washing operation. Thereupon, it set to meet this change in public demand. The result was that it devised the machine objected to by the licensor. By September or October, 1927, it had constructed, by hand, a working model. Convinced of the practicability and sales attraction of this...
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