General Talking Pictures Corp. v. Western Electric Co. , 59 S. Ct. 116 ( 1939 )

Mr. Justice Brandéis

delivered the opinion of the Court.

In this case, we affirmed on May 2, 1938, 304 U. S. 175, the judgment of the Circuit Court of Appeals, 91 F. 2d 922, which held that petitioner had infringed certain patents relating to vacuum tube amplifiers. On May 31st, we granted a rehearing, 304 U. S. 587, upon the following questions which had been presented by the petition for certiorari.

1. Can the owner of a patent, by means thereof, restrict the use made of a device manufactured under the patent, after the device has passed into the hands of a purchaser in the ordinary channels of trade, and full consideration paid therefor?

2. Can a patent owner, merely by a “license notice” attached to a device made under the patent, and sold in the ordinary channels of trade, place an enforceable restriction on the purchaser thereof as to the use to which the purchaser may put the device?

Upon further hearing we are of opinion that neither question should be answered. For we find that, while the devices embody the inventions of the patents in suit, they were not manufactured or sold “under the patent [s]” and did not “pass into the hands of a purchaser in the ordinary channels of trade.”

These are the relevant facts. Amplifiers embodying the invention here involved are useful in several distinct fields. Among these is (a) the commercial field of sound recording and reproducing, which embraces talking picture equipment for theatres, and (b) the private or home field, which embraces radio broadcast reception, radio amateur reception and radio experimental reception. For the commercial field exclusive licenses had been granted by the patent pool to Western Electric Company and Electrical Research Products, Inc. For the private or home field the patent pool granted nonexclusive licenses to about fifty manufacturers. Among these was American Transformer Company. It was licensed

“solely and only to the extent and for the uses hereinafter specified and defined ... to manufacture . . ., and to sell only for radio amateur reception, radio experimental reception and radio broadcast reception . . . licensed apparatus so manufactured by the Licensee. . . .”

The license provided further:

“Nothing herein contained shall be regarded as conferring upon the Licensee either expressly or by estoppel, implication, or otherwise; a .license to manufacture or sell any apparatus except such as may be manufactured by the Licensee in accordance with the express provisions of this Agreement.”

Transformer Company, knowing that it had not been licensed to manufacture or to sell amplifiers for use in theatres as part of talking picture equipment, made for that commercial use the amplifiers in controversy and sold them to Pictures Corporation for that commercial use. Pictures Corporation ordered the amplifiers and purchased them knowing that Transformer Company had not been licensed to make or sell them for such use in theatres. Any use beyond the valid terms of a license is, of course, an infringement of a patent. Robinson on Patents, § 916. If where a patented invention is applicable to different uses, the owner of the patent may legally restrict a licensee to a particular field and exclude him from others, Transformer Company was guilty of an infringement when it made the amplifiers for, and sold them to, Pictures Corporation. And as Pictures Corporation ordered, purchased and leased them knowing the facts, it also was an infringer.

The question of law requiring decision is whether the restriction in the license is to be given effect. That a restrictive license is legal seems clear. Mitchell v. Hawley, 16 Wall. 644. As was said in United States v. General Electric Co., 272 U. S. 476, 489, 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.” The restriction here imposed is of that character. The practice of granting licenses for a restricted use is an old one, see Rubber Company v. Goodyear, 9 Wall. 788, 799, 800; Gamewell Fire-Alarm Telegraph Co. v. Brooklyn, 14 F. 255. So far as appears, its legality has never been questioned. The parties stipulated that

“it is common practice where a patented invention is applicable to different uses, to grant written licenses to manufacture under United States Letters Patents restricted to one or more of the several fields of use permitting the exclusive or non-exclusive use of the invention by the licensee in one field and excluding it in another field.”

As the restriction was legal and the amplifiers were made and sold outside the scope of the license the effect is precisely the same as if no license whatsoever had been granted to Transformer Company. And as Pictures Corporation knew the facts, it is in no better position than if it had manufactured the amplifiers itself without a license. It is liable because it has used the invention without license to do so.

We have consequently no occasion to consider what the rights of the parties would have been if the amplifier had been manufactured “under the patent” and “had passed into the hands of a purchaser in the ordinary channels of trade.” Nor have we occasion to consider the effect of a “licensee’s notice” which purports to restrict the use of articles lawfully sold.

Affirmed.

[Over.]

Me. Justice Roberts took no part in the consideration or decision of the case.