Injunctive relief became a part of the patent statutes in the 1819 Patent Act.116 This act provided that in patent and copyright cases the court shall have authority to grant injunctions, according to the * The injunction provision of the 1952 Patent Code in similar language provides that: The several courts having jurisdiction of cases under this title may grant injunctions in accordance with the principles of equity to prevent the violation of any right secured by patent, on such terms as the court deems reasonable.116 The courts have never felt compelled to grant injunctive relief under any and all circumstances. Rather, considerations of public interest have dictated refusal of injunctive relief on numerous occasions. The most well-known of these cases are the patent misuse cases, where the courts have regarded the activity of the patentee as so contrary to the public interest as to require refusal of all patent relief. As Mr. Chief Justice Stone stated in Morton Salt v. Suppiger: 117 It is a principle of general application that courts, and especially courts of equity, may appropriately withhold their aid where the plaintiff is using the right asserted contrary to the public interest. It is the adverse effect upon the public interest of a successful infringement suit in conjunction with the patentee's course of conduct which disqualifies him to maintain the suit, regardless of whether the particular defendant has suffered from the misuse of the patent. Similarly equity will deny relief for infringement of a trademark where the plaintiff is misrepresenting to the public the nature of his product either by the trademark itself or by his label. *see also, for application of the like doctrine in the case of copyright, Edward Thompson Co. v. American Law Book Co. The patentee, like these other holders of an exclusive privilege granted in the furtherance of a public policy, may not claim protection of his grant by the courts where it is being used to subvert that policy. *** Reasoning along the lines of the Morton Salt and other misuse cases was applied in the dictum in the Vitamin Technologists case.118 Suit was there brought by Wisconsin Alumni Research Foundation under the Steenbock patents on the ultraviolet irradiation of foods to produce vitamin C. The court concluded that the patent owner was refusing to license irradiation of oleomargarine under the patents in 113 3 Stat. 481. 116 35 U.S. C. 283. By way of contrast, the copyright law is in terms unqualified with respect to injunc tive relief (17 U. S. C. 101 (a)). However, with respect to the statutory compulsory licensing applicable io musical recordings when the owner of a musical copyright permits recording, the statute provides that injunction may be granted "upon such terms as the court may impose" (17 U. S. C. 101 (e), cf. 17 U. S. C. 1 (e)). 117 314 U. S. 488, 492 (1942). 118 Vitamin Technologists v. Wisconsin Alumni Research Foundation, 146 F. 2d 941 (9th Cir. 1945), cert. den. 325 U. S. 867). order to promote the sale by Wisconsin farmers of natural butter. Even though the suit was brought against a defendant in no way related to irradiation of oleomargarine, the court nevertheless expressed the view that the activity of the patent owner was such as to preclude the grant of any relief for patent infringement.119 A second case of significance is based directly on considerations of public health and welfare. 120 Here action for patent infringement was brought against the city of Milwaukee on the ground that the sewage-disposal system used to treat sewage prior to discharge into Lake Michigan infringed the patent. The court found the patent valid and infringed. It nevertheless refused injunctive relief because the public health and safety would be prejudiced by an interruption in the operation of the system. The court decision in this instance accordingly amounted to a judicial grant of compulsory license in favor of the city of Milwaukee and against the plaintiff a compulsory license no less effective than if granted under some statute directed to that end.121 Additionally, since 1910 the Government has had the statutory right to use patented inventions free from injunctive relief,122 and since 1918 that right has also extended to manufacture and sale of patented products for use by the Government. 123 These statutes in effect subject the patents involved to compulsory licensing, as does a similar statute respecting the Tennessee Valley Authority.12 And the Atomic Energy Act likewise provides for compulsory licensing of patents 125 An additional and very important form of compulsory licensing has developed through the antitrust laws. Where practices relating to patents are a part of a proven violation of the Sherman Act, it is reasonable that a decree under section 4 of that Act-intended to dissipate the effects of the violation and restore competition-should include provisions directed to the use of the patents. In many cases these decree provisions have required the compulsory grant of patent licenses. While the power of a court to order such licenses on a royalty-free basis is unsettled, there is no present question with respect to the power to order such grant on a reasonable royalty basis.126 It is also well settled that where a patent is used as an integral part of activity in violation of the antitrust laws, such as an attempt to monopolize, relief for patent infringement will be denied.127 119 The court held the patent invalid and accordingly did not actually deny relief because of the refusal to license irradiation of oleomargarine. 120 City of Milwaukee v. Activated Sludge, 69 F. 2d 577 (7th Cir. 1934), cert. den. 293 U. S. 576, and see Bliss v. City of Brooklyn, 3 Fed. Cas. 706 No. 1 (E. D. N. Y. 1871), and Nerney v. New York, N. H. & H. Ry. Co., 83 F. 2d 409 (2d Cir. 1936). in Cf. Report of the National Patent Planning Commission of June 18, 1943, recommending a statutory provision precluding injunctive relief "whenever the court finds that the particular use of the invention in controversy is necessary to the national defense or required by the public health or public safety." The Commission tendered this recommendation with the suggestion that it was intended to "remove any possible doubt on the subject." 25 J. P. O. S. 455, 459. 122 36 Stat. 851, now incorporated in 28 U. S. C. 1498. 123 40 Stat. 705, now incorporated in 28 U. S. C. 1498. 124 48 Stat. 68. See note 54 Harv. L. Rev. 1051, 1054-1057 (1941). 125 68 Stat. 919, 945. The history of the compulsory licensing provisions of the Atomic Energy Act of 1946 (60 Stat. 768) and those of the present statute is steeped in controversy that illustrates the intense feelings that the subject of compulsory licensing evokes. As one commentator-analyzing the subject along the lines of the analysis herein-states: "In view of (the limitations in the 1946 Atomic Energy Act) *** it is somewhat surprising that this proposal for compulsory licensing, restricted as it is, evoked the controversy which it did during the debates on the act. Compulsory licensing in various restricted forms is not new to the American patent system... (Ooms, Patent Provisions of the Atomic Energy Act, 15 Univ. of Chicago L. Rev. 822, 832 (1948)). And see Ooms, Problems of Patent Policy, 1952 University of Michigan Summer Institute 155, 173-174; The Constitutionality of the Patent Provisions of the 1954 Atomic Energy Act, 22 Univ. of Chic. L. Rev. 920 (1955). 126 Report of the Attorney General's National Committee To Study the Antitrust Laws, pp. 255-259 (1955). 127 E. g., Kobe, Inc. v. Dempsey Pump Co., 198 F. 2d 416 (10th Cir. 1952), cert. den. 334 U. S. 837. In the light of these existing statutes and judicial doctrines the subject of compulsory licensing becomes more academic than real. 128 The courts need no new power to handle abuses of patent rights that might otherwise justify a statute. It would be incredible, for example, to find an injunction issued where the public safety or health required otherwise. In like measure there are clear indications that in a proven case, of unreasonable "suppression"--such as a patent used to "block" or "fence in" a competitor exploiting a competing technology-would be similarly treated 129 And any compulsory licensing statute reaching beyond cases of this general kind would in like measure reach situations where the patent system would otherwise induce competition in research and development. 130 To be sure, it can be argued that there is a need for a compulsory licensing statute until some court specifically and in so many words denies injunctive relief in a patent case involving anticompetitive "suppression." But this argument proves too much, for the failure of litigants to raise the issue is itself a persuasive indication that practical considerations prevent the matter from arising. Whatever the reason for this history-whether economic, patent law, antitrust law, public relations or otherwise the important point is that if a case arises that really involves "suppression" justifying compulsory licensing, the defendant in the infringement suit involved would surely raise the point. The Paper Bag case-now half a century old—is an open invitation to prove the unreasonableness of a nonuse, and more recent decisions such as the Vitamin Technologists case drive home. the point. Even if we assume-contrary to the trend and reasoning of the decisions--that the courts would somehow countenance what is plainly contrary to the objectives of the patent system there can be no doubt that the point would be raised in any case where arguably warranted by the facts. The most meaningful argument in favor of compulsory licensing is that it might silence the contentions about what would happen if the theoretical case that has not come up did in fact arise. If the Congress had an excess of time and an inclination to pursue this essentially theoretical and highly controversial matter, there might be some point in doing so. However, so many pressing tasks of unquestionable public importance demand the attention of Congress that it seems clearly unsound to pursue the matter of a statute for which the need is at best debatable. 129 Compulsory licensing by statute is considered in some quarters to be equivalent to destruction of the patent system. Small manufacturers, particularly, generally feel that a statute-regardless of built-in safeguards would enable their larger competitors to take advantage of them. See, e. g., hearings before the Committee on Patents, House of Representatives, on H. R. 9259, H. R. 9815, and H. R. 1666, 75th Cong., 3d sess., March 21-25 and 28-31, 1938. It is of interest that the compulsory licensing statutes of foreign countries have rarely been invoked. See, e. g., Wyss and Brainard, Compulsory Licensing of Patents, 6 Geo. Wash. L. Rev. 499 (1938); Vojacek, A Survey of the Principal National Patent Systems (1936); Frost, Legal Incidents of Nonuse of Patented Inventions Reconsidered, 14 Geo. Wash. L. Rev. 273, 435, 449-459 (1946); Penrose, The Economics of the International Patent System (1951), pp. 162-204; Federico, Compulsory Licensing in Other Countries 13 Law and Contemp. Prob. 295 (1948). "These provisions (for compulsory licensing) have been steadily widened over many years, so as to abolish one by one limitations put upon them by judicial interpretation, but the legislature has never yet succeeded in making compulsory licensing of real importance." White, Patents for Inventions, London, (1955), p. 271. 129 See, e. g., Report of the Attorney General's National Committee To Study the Antitrust Laws 230, note 34. 130 An example of such statute is found in H. R. 9259, 75th Cong., 3d sess., which contains no significant limitations on the grant of compulsory license other than an amorphous statement that there be a finding that the public interest be served. See also the recommendation of the TNEC that all patents be subjected to unlimited compulsory licensing. Final Report, p. 36 (S. Doc. No. 35, 77th Cong., 1st sess.). C. PATENTS AND THE ANTITRUST LAWS-TOOLS TO A COMMON END A major value of the patent system in today's economy is that it injects competition of a kind that otherwise would not exist. Competition of new products manufactured by new entrants into existing industries, competition in product and process improvement and cost reduction between existing firms, research competition by royaltysupported organizations-all these are stimulated by the patent system. And all of these are forms of competition precluding the quiet repose that the antitrust laws seek to prevent. Of course the patent system operates in one sphere by the grant of exclusive rights and the antitrust laws operate in another sphere by keeping the channels of trade open. But in ultimate objective-a competitive atmosphere-there is identity.131 This fundamental fact is too often overlooked. Instead of emphasizing the similarity of object and seeking to make the patent laws and the antitrust laws both more effective, there has been much discussion based on the assumption that they represent rival philosophies and conflicting policies. And too often the assumption has been that strengthening the patent laws weakens the antitrust laws, and vice versa. While the patent laws operate in a different manner and in a different environment than the antitrust laws, practical business practices are not so easily classified. Accommodation must accordingly be made. It is this accommodation-and not any conflict in over-all objective-that forms the subject matter of the patent-antitrust problems. There is no need here to discuss in comprehensive fashion the various patent-antitrust problems, or to dwell on the many ramifications of antitrust enforcement that raise questions with respect to the patent system.132 A few general observations, however, will be helpful in bringing out the broad considerations that should bear on the subject. The first determination in relation to any patent-antitrust question must be directed to the nature and character of the patent rights involved. For example, the patent to a sieve used in making vitreous enamelware cannot justify agreements excluding second grade ware from the market, or fixing the price at which the first grade ware is sold.133 Plainly the patent right to exclude as to the sieve cannot warrant agreements of this kind as to the unpatented ware produced through its use. Similarly patents to parking meters form no basis upon which the price of unpatented accessories can be fixed.134 However, the fact that an agreement or practice reaches outside the area of the patent should not render it automatically illegal. Rather, the inquiry should then go to the legality of the agreement or practice as 131 See, e. g., Oppenheim, Patents and Antitrust: Peaceful Coexistence?, 54 Mich. L. Rev. 199 (1955), Wood, Premises and Scope of the Patent Chapter (Report of the Attorney General's National Committee To Study the Antitrust Laws), 104 U. of Pa, L. Rev. 243, 244 (1955). (“*** The two sets of statutes take obviously different routes, but their goals-of stimulating progress and achievement on the one hand, and stimulating and protecting competition on the other-are much the same.") 132 See, c. g., Report of the Attorney General's National Committee To Study the Antitrust Laws, March 31, 1955, ch. V: Wood, Patents and Antitrust Law (1942); and Oppenheim, Cases on Federal Antitrust Laws (1948), pp. 464-597 and 637-710. 183 Standard Sanitary Mfg. Co. v. United States, 226 U. S. 20 (1912) ("The agreements clearly, therefore, transcended what was necessary to protect the use of the patent or the monopoly which the law conferred upon it. They passed to the purpose and accomplished a restraint of trade condemned by the Sherman law.") 134 United States v. Vehicular Parking, 54 F. Supp. 828 (D. Del. 1944). a matter of general law. The patent is one factor to consider in such inquiry. But to condemn conduct otherwise legal merely because it is associated with-but outside the scope of-some patent or patents is to penalize the fact of the patent and discourage rather than encourage the research that brought forth the patent in the beginning.135 Secondly, in dealing with practices and agreements relating to patents few absolute rules should be applied. A major value of the antitrust laws as a control over anticompetitive practices lies in their flexibility. Conduct licit in one setting may be illicit in another. The decisions on grant-back clauses in patent licenses bring out the point. Such clauses, by giving to the patent licensor some advance rights to the inventions of the licensee, necessarily exert at least some depressing effect upon the incentive of the licensee to engage in research and development. Yet even a patent assignment grant-back provision has a proper area of use-as, for example, to provide adequate security in connection with the sale of a business. 136 And in most instances a simple nonexclusive license grant-back represents no more than part of the agreed exchange for the main license." On the other hand, in a decree to dissipate the effects of a proven violation of the Sherman Act it may be necessary to prohibit even nonexclusive license grant-backs.138 To take another and especially significant-illustration, the newcomer or small manufacturer in a field may well insist upon license clauses designed to protect the return of his own manufacturing activity that would almost certainly transgress the antitrust laws if incorporated in patent license agreements between established oligopolistic concerns.139 137 Third, the practical problems arising under the patent system should not be disregarded in enforcing the antitrust laws. In the nature of things, the patent system leads to some conflicts-situations wherein an interchange agreement between the owners of the two or more patents is essential to permit the practical manufacture of the most desirable product. In such situations the antitrust laws should not preclude agreement, provided the over-all effect does not reduce the access of outsiders to the respective patents or competition between the parties to the agreement.140 135 The cases display some tendency to find a per se antitrust violation in any patent misuse situation. Such result can be superficially justified by applying a formula that a patent by definition is a "monopoly" and misuse is an "at use of monopoly power." This syllogistic reasoning is fallacious for it overlooks the fact that the term "monopoly" is used in one sense in the major premise and in another sense in the minor premise. The existence of a patent ought not to foreclose inquiry-if otherwise appropriate-as to actual market power and effect, for this is necessary to establish whether there is indeed "monopoly power" in the antitrust sense and to support any conclusion that there is in fact an abuse of "monopoly power." See Report of the Attorney General's National Committee To Study the Antitrust Laws, p. 254, and Frost, Misuse as a Per Se Violation, Conference on the Antitrust Laws and the Attorney General's Committee Report, Northwestern University, p. 113. 1955. 136 Transparent-Wrap Machine Corp. v. Stokes & Smith Co., 329 U. S. 637 (1947) (grant-back not a patent misuse), and Stokes and Smith Co. v. Transparent-Wrap Corp., 161 F. 2d 565 (2d Cir. 1947) (holding on remand that the same grant-back was not shown to be a violation of the antitrust laws). 137 See, e. g., United States v. National Lead Co. 332 U. S. 319, 359 (1947). 138 See, e. g., United States v. Aluminum Co. of America, 91 F. Supp. 333, 409-410 (S. D. N. Y. 1950). 13 The case of the newcomer or small manufacturer is the classic example of competition made possible by the patent system. The encouragement in this instance necessarily depends on a broad-range freedom from compulsion to license. Accordingly, in this special case the patentee ought to have a very broad right to license on nearly any terms it deems necessary to avoid prejudice to its manufacturing business. In such instances the principal inquiry should be directed to the presence of a bona fide effort on the part of the licensor to preserve its own manufacturing opportunities. 140 There has been some tendency to insist that considerations of antitrust enforcement should preclude settlement of patent controversy by agreement. See dissent of Louis B. Schwartz, Report of Attorney General's National Committee To Study the Antitrust Laws, p. 247. But see United States v. Imperial Chemical Industries, et al., Civil 24-13, unreported decision at hearing of June 4, 1954, United States District Court, Southern District, New York, where a patent interference settlement agreement was approved over the protests of the Department of Justice that the parties should have been forced to litigate the matter. It is difficult to perceive the basis for this contention-for the fundamental need is for competitive effort and not needless controversy. Where agreement does not foreclose competitors or eliminate competition between the parties, long-run competition is best served by such agreement rather than controversy. The courts have in effect o held. See Report of the Attorney General's National Committee To Study the Antitrust Laws, pp. 242-247. 83984-57-6 |