Automatic Radio Manufacturing Company v. Hazeltine Research/Dissent Douglas

by William O. Douglas

United States Supreme Court

339 U.S. 827

Automatic Radio Manufacturing Company  v.  Hazeltine Research

 Argued: April 5, 1950. --- Decided: June 5, 1950

Mr. Justice DOUGLAS, with whom Mr. Justice BLACK concurs, dissenting.

We are, I think, inclined to forget that the power of Congress to grant patents is circumscribed by the Constitution. The patent power, of all legislative powers, is indeed the only one whose purpose is defind. Article I, § 8 describes the power as one 'To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries.' This statement of policy limits the power itself.

The Court in its long history has at times been more alive to that policy than at other times. During the last three decades it has been as devoted to it (if not more so) than at any time in its history. I think that was due in large measure to the influence of Mr. Justice Brandeis and Chief Justice Stone. They were alert to the danger that business-growing bigger and bigger each decade would fasten its hold more tightly on the economy through the cheap spawning of patents and would use one monopoly to beget another through the leverage of key patents. They followed in the early tradition of those who read the Constitution to mean that the public interest in patents comes first, reward to the inventor second. ^[1]

First. Mr. Justice Brandeis and Chief Justice Stone did not fashion but they made more secure one important rule designed to curb the use of patents. It is as follows: One who holds a patent on article A may not license the use of the patent on condition that B, an unpatented article, be bought. ^[2] Such a contract or agreement would be an extension of the grant of the patent contrary to a long line of decisions. See Motion Picture Patents 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; Carbice Corp. of America v. American Patents Corp., 283 U.S. 27, 51 S.Ct. 334, 75 L.Ed. 819; Morton Salt v. G.S. Suppiger, 314 U.S. 488, 491-492, 778, 62 S.Ct. 402, 404, 405, 86 L.Ed. 363; United States v. Masonite Corp., 316 U.S. 265, 277, 278, 62 S.Ct. 1070, 1077, 86 L.Ed. 1461; Mercoid Corp. v. Mid-Continent Investment Co., 320 U.S. 661, 666, 64 S.Ct. 268, 271, 88 L.Ed. 376; United States v. United States Gypsum Co., 333 U.S. 364, 389, 68 S.Ct. 525, 539, 92 L.Ed. 746. For it would sweep under the patent an article that is unpatented or unpatentable. Each patent owner would become his own patent office and, by reason of the leverage of the patent, obtain a larger monopoly of the market than the Constitution or statutes permit. ^[3]

That is what is done here. Hazeltine licensed Automatic Radio to use 570 patents and 200 patent applications. Of these Automatic used at most 10. Automatic Radio was obligated, however, to pay as royalty a percentage of its total sales in certain lines without regard to whether or not the products sold were patented or unpatented. The inevitable result is that the patentee received royalties on unpatented products as part of the price for the use of the patents.

The patent owner has therefore used the patents to bludgeon his way into a partnership with this licensee, collecting royalties on unpatented as well as patented articles.

A plainer extension of a patent by unlawful means would be hard to imagine.

Second. Chief Justice Stone wrote for the Court in Sola Electric Co. v. Jefferson Electric Co., 317 U.S. 173, 63 S.Ct. 172, 87 L.Ed. 165, holding that a licensee is not estopped to challenge a price-fixing clause by showing the patent is invalid. And see Katzinger Co. v. Chicago Metallic Mfg Co., 329 U.S. 394, 67 S.Ct. 416, 91 L.Ed. 374; MacGregor v. Westinghouse Co., 329 U.S. 402, 67 S.Ct. 421, 91 L.Ed. 380. He also wrote for the Court in Scott Paper Co. v. Marcalus Mfg. Co., 326 U.S. 249, 66 S.Ct. 101, 90 L.Ed. 47, holding the estoppel did not bar the assignor of a patent from defending a suit for infringement of the assigned patent on the ground that the alleged infringing device was that of a prior-art expired patent. ^[4]

These decisions put the protection of the public interest in free enterprise above reward to the patentee. The limitations which they made on the estoppel doctrine represented an almost complete cycle back to the salutary teaching of Pope Mfg. Co. v. Gormully, 144 U.S. 224, 234, 12 S.Ct. 632, 636, 36 L.Ed. 414, that, 'It is as important to the public that competition should not be repressed by worthless patents, as that the patentee of a really valuable invention should be protected in his monopoly.' To estop the licensee from attacking the validity of patents is to forget that 'It is the public interest which is dominant in the patent system. Mercoid Corp. v. Mid-Continent Investment Co., supra, 320 U.S. at page 665, 64 S.Ct. at page 271.

It is said that if the purpose was to enlarge the monopoly of the patent-for example, through price fixing-then estoppel would not bar the licensee from challenging the validity of the patents. But what worse enlargement of monopoly is there than the attachment of a patent to an unpatentable article? When we consider the constitutional standard, what greater public harm than that is there in the patent system? It is only right and just that the licensee be allowed to challenge the validity of the patents. A great pooling of patents is made; and whole industries are knit together in the fashion of the unholy alliances revealed in United States v. Line Material Co., 333 U.S. 287, 68 S.Ct. 550, 92 L.Ed. 701, and United States v. Gypsum Co., 333 U.S. 364, 68 S.Ct. 525, 92 L.Ed. 746. One who wants the use of one patent may have to take hundreds. The whole package may contain many patents that have been foisted on the public. No other person than the licensee will be interested enough to challenge them. He alone will be apt to see and understand the basis of their illegality.

The licensee protects the public interest in exposing invalid or expired patents and freeing the public of their toll. He should be allowed that privilege. He would beallowed it were the public interest considered the dominant one. Ridding the public of stale or specious patents is one way of serving the end of the progress of science.

We depart from a great tradition in this field (and see Graver Tank & Mfg. Co. v. Linde Air Products, 339 U.S. 605, 70 S.Ct. 854), when we affirm this judgment.

Notes

1. See Mr. Justice Story in Pennock v. Dialogue, 2 Pet. 1, 7 L.Ed. 327; Mr. Justice Daniel in Kendall v. Winsor, 21 How. 322, 16 L.Ed. 165; Mr. Justice Campbell in Winans v. Denmead, 15 How. 330, 344, 14 L.Ed. 717 (dissenting opinion).
2. See Hamilton, Patents and Free Enterprice, T.N.E.C. Monograph No. 31, 76th Cong., 3d Sess., pp. 62-70.
3. Mr. Justice Brandeis speaking for the Court in Carbice Corp. of America v. American Patents Corp., supra, 283 U.S. at page 32, 51 S.Ct. at page 335, said, 'If a monopoly could be so expanded, the owner of a patent for a product might conceivably monopolize the commerce in a large part of unpatented materials used in its manufacture. The owner of a patent for a machine might thereby secure a partial monopoly on the unpatented supplies consumed in its operation. The owner of a patent for a process might secure a partial monopoly on the unpatented material employed in it. The owner of the patent in suit might conceivably secure a limited monopoly for the supplying not only of solid carbon diozide, but also of the ice cream and other foods, as well as the cartons in which they are shipped. The attempt to limit the licensee to the use of unpatented materials purchased from the licensor is comparable to the attempt of a patentee to fix the price at which the patented article may be resold.'
4. In this case Chief Justice Stone emphasized the public interest at stake in allowing the challenge to the patent, 326 U.S. at page 256, 66 S.Ct. at page 104: 'By the force of the patent laws not only is the invention of a patent dedicated to the public upon its expiration, but the public thereby becomes entitled to share in the good will which the patentee has built up in the patented article or product through the enjoyment of his patent monopoly.'