United States v. General Electric Co.

United States v. General Electric Co., 272 U.S. 476 (1926), is a decision of the United States Supreme Court holding (per Chief Justice Taft) that a patentee who has granted a single license to a competitor to manufacture the patented product may lawfully fix the price at which the licensee may sell the product.[1]

Background

GE owned three patents that “cover[ed] completely the making of the modern electric lights with the tungsten filaments.”[2] GE accounted for 69% of total manufacture and sale of incandescent light bulbs, and Westinghouse, 16%.[2] GE licensed Westinghouse to manufacture and sell light bulbs on the condition that Westinghouse should sell at prices that GE fixed and changed at its discretion.[3]

Supreme Court opinion

Subsequent developments

The U.S. Department of Justice has been trying to overturn the 1926 GE decision almost since it was first handed down, and has twice seen it upheld by an equally divided 4–4 Supreme Court.[9]

Subsequent decisions of the Court, however, have repeatedly circumscribed the scope of the dispensation that the 1926 GE case offers.[10] It does not apply when several patentees pool their patents[11] or when the patentee has multiple licensees.[12] It does not apply when the patentee-licensor is not itself a manufacturer licensing competitive manufacturers.[13] It does not apply to a price-fix on an unpatented product made by a patented machine or patented method.[14]

The United States Court of Appeals for the Federal Circuit has continued to rely on what is termed, above, the core of the opinion. In Mallinckrodt, Inc. v. Medipart, Inc., the Federal Circuit relied on GE as the basis for its ruling that the patentee’s post-sale restrictions were not prohibited under the exhaustion doctrine. The Federal Circuit’s Quanta decision relied for its rationale on Mallinckrodt, and thus on GE. But the Supreme Court’s reversal of that decision in Quanta Computer, Inc. v. LG Electronics, Inc. has created uncertainty about the continuing authority of this line of precedent and has left this area of law unsettled.

In its initial brief in the Quanta case, as amicus curiae, the United States had pointed to the "seeming anomaly" between the two lines of authority that the GE case addresses.[15] One line is represented by the Supreme Court's "exhaustion" cases such as United States v. Univis Lens Co.[16] and Quanta. Another line is reflected by such decisions and GE and General Talking Pictures Corp. v. Western Electric Co. The Mallinckrodt case seemed to expand the scope of the second line of authority at the expense of the first, but now Quanta may be reversing the direction of expansion. This area of law may thus remain unsettled for several years.

Early in 2015, the Federal Circuit called for en banc briefing and argument of whether the Mallinckrodt case should be overruled, in light of Quanta.[17] In February 2016, the Federal Circuit, in a 10–2 decision, reaffirmed Mallinckrodt.

References

GE, 271 U.S. at 481.^

271 U.S. at 488.^

271 U.S. at 489.^

271 U.S. at 489–90.^

271 U.S. at 490 (emphasis supplied). However, in, the patentee Adams assigned the right to make, use, and sell the patented product (a coffin lid) within a ten-mile radius of Boston to another, who manufactured the patented product and sold it to Burke. Burke then took the product more than ten miles from Boston and used it in his undertaking business to bury a customer. Adams sued Burke for patent infringement, but the Supreme Court held that the exhaustion doctrine freed Burke from infringement liability.^

See, e.g., (“As was said in United States v. General Electric Co., 272 U.S. 476, 489 (1926), 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.’”), quoted in https://law.justia.com/cases/federal/appellate-courts/F2/976/700/47378/ 1992, retrieved 2018-07-05^

GE. 271 U.S. at 488 (emphasis supplied).^

{{ussc|name=United States v. Huck Mfg. Co.|link=|volume=382|page=197|pin=|year=1965}}; {{ussc|name=United States v. Line Material Co.|link=|volume=333|page=287|pin=|year=1948}}.^

Robert A. Lipstein & Ryan C. Tisch, RPM in IP: RIP to Per Se?, Competition Law 360, The Newswire for Business Lawyer (April 9, 2007), at 2 (“courts have nibbled away at [General Electric], leaving it a narrow rule surrounded entirely by wide exceptions”).^

See Line Material, supra.^

See https://law.justia.com/cases/federal/appellate-courts/F2/237/283/120310/ 1956, retrieved 2018-07-05^

(licensor is patent holding company and licensees are manufacturers). See also https://law.justia.com/cases/federal/appellate-courts/F2/420/449/307534/ 1969, retrieved 2018-07-05^

See Cummer-Graham Co. v. Straight Side Basket Corp., 142 F.2d 646 (5th Cir. 1944); https://law.justia.com/cases/federal/appellate-courts/F2/69/406/1561947/ 1934, retrieved 2018-07-05^

For a more detailed discussion of this issue, see the article on Quanta v. LGE.^

See Mallinckrodt—Continued viability questioned.^

litigants	United States v. General Electric Co.
arguedate	October 13
argueyear	1926
decidedate	November 23
decideyear	1926
fullname	United States v. General Electric Co.
usvol	272
uspage	476
parallelcitations	47 S. Ct. 192; 71 L. Ed. 362; 1926 U.S. LEXIS 974
prior	15 F.2d 715 (N.D. Ohio 1925) (affirmed)
holding	A patentee who has granted a single license to a competitor to manufacture the patented product may lawfully fix the price at which the licensee may sell the product.
majority	Taft
joinmajority	unanimous

Background

Supreme Court opinion

Subsequent developments

External links

References