Guest Post by Professor Tomás Gómez-Arostegui (Lewis & Clark Law School)
One of the questions in Impression Prods., Inc. v. Lexmark Int’l, Inc., on which the Supreme Court recently heard oral argument (March 21), is whether the authorized and foreign first sale of a patented item exhausts a U.S. patent holder’s use and distribution rights. The Patent Act of 1952 contains no pertinent provisions on the effect of the first sale of a patented article, and as a consequence many observers believe that the common law will be especially important in deciding the question. The Petitioner, Impression Products, has gone so far as to argue that the common-law backdrop is dispositive.[1] If the Court agrees and decides that the common law should control or influence the case, then assessing the content of that common law becomes paramount.
So what is the common-law rule? In Kirtsaeng v. John Wiley & Sons, Inc., a copyright case, the Court stated that the first-sale doctrine was a “common-law doctrine with an impeccable historic pedigree” that reached as far back as the 17th century and that made “no geographical distinctions.”[2] In reaching that conclusion, the Court relied in large part on English law, particularly Sir Edward Coke’s 1628 treatise in which he rejected post-sale restraints on the alienation of ordinary chattels. Although Coke was not speaking of chattels encumbered by copyrights or patents, let alone goods made and first sold in a different country, the Court nevertheless stated that this no-restraint principle applied to chattels embodying copyrighted works. Notably, the Court offered no other support for its historical account of the common law, apart from citing its 1908 decision in Bobbs-Merrill Co. v. Straus—which treated national (rather than international) copyright exhaustion.[3]
Not surprisingly, Impression Products refers to Coke repeatedly in its brief,[4] as do many amici who have submitted supporting briefs.[5] And at the oral argument last week, Impression Products began by stating that the “principle goes back, of course, to the 15th century.”[6] It also ended its argument by referring to Coke.[7] But more importantly, as Dennis notes in his recent post recapping the oral argument, Justice Breyer, who wrote the majority opinion in Kirtsaeng, seems very much inclined to continue relying on Coke’s account of English common law. Justice Breyer referred to Coke many times[8] and stated, for example, that a patent rule rejecting mandatory international exhaustion would be “very much contrary to what 300 years of restraints on alienation [doctrine] ha[d] in mind.”[9]
In an article posted on SSRN,[10] I examine and reject the Court’s historical account of English common law. Although Kirtsaeng gave the distinct impression that no early cases in England had ever ruled against gray-market importation in an intangible rights case, this is not so in fact. My article discusses two English cases and a few Scottish ones, decided in the long 18th century, and which have thus far escaped the attention of practitioners and scholars. Some of the cases are reported in print, but not all of them appear in traditional law reports, and some of the records only survive in manuscript. I have posted images of the most important manuscripts and less accessible print sources online. The cases demonstrate that the common law did not recognize international exhaustion. On the contrary, the common law observed foreign legal boundaries and permitted right owners and their licensees to stop gray-market goods that embodied intangible rights.
One of the English cases was decided in the Court of Chancery in 1716–1722, and the other in the Chancery and House of Lords in 1802–1804. Both involved patents for the exclusive right of printing, selling, and importing the Holy Bible, New Testament, and Book of Common Prayer. The King held prerogative copyrights in these works and had licensed them by letters patent separately in England and Scotland. At the request of the English licensees, the courts ruled against London booksellers who had imported books printed and sold by the Scottish licensees. Despite the union of the two countries in 1707, the Chancery and House of Lords viewed Scotland as a foreign country for the purpose of prerogative copyrights because the rights granted in the two countries were territorial, legally separate, and potentially distinct. Outside of English common law, a case decided in the Court of Session in Scotland and then in the House of Lords in 1828, extended the proposition to books traveling in the other direction—from England to Scotland.
Notably, these cases considered many of the same arguments that Lexmark and Kirtsaeng raise, such as the territoriality of patent rights; free trade among countries; the potential benefit to consumers of competition from imported gray-market goods; the potential harm to consumers who purchase goods in one country without any notice of their inability to bring those goods into another country; and the potential negative effect that gray-market imports could have on a domestic licensee.
So what do these cases mean for international patent and copyright exhaustion in the United States?
Two consequences follow. First, they call into question the Supreme Court’s decision in Kirtsaeng. Neither the parties nor the Court were aware of these cases and thus the decision issued on an incomplete record of the common law. Second, and most obviously, these newly revealed cases could have an even greater impact in Lexmark. If the Court or any of its members choose to rely on English common law once more—whether presented as controlling, persuasive, or simply historical narrative—that consultation must now occur with a different view of the common law in mind.
= = = = =
[1] Brief for Petitioner at 10–11, 44–47 (Jan. 17, 2017); Reply Brief for Petitioner at 2–3, 16–17 (Mar. 14, 2017).
[2] 133 S. Ct. 1351, 1363 (2013).
[3] Id. at 1363 (citing Bobbs-Merrill Co. v. Straus, 210 U.S. 339 (1908)).
[4] Brief for Petitioner at 10, 13, 42, 45–46 (Jan. 17, 2017).
[5] E.g., Brief of Public Knowledge et al. at 5, 9, 13–14 (Jan. 23, 2017); Brief of Costco Wholesale Corp. et al. at 20–21, 33–34 (Jan. 24, 2017); Brief for HTC Corp. et al. at 12, 17 (Jan. 24, 2017); Brief of the Association of Medical Device Reprocessors at 36 (Jan. 24, 2017); Brief of Auto Car Association et al. at 21 (Jan. 24, 2017); Brief of Intellectual Property Professors et al. at 6, 26–27 (Jan. 24, 2017).
[6] Oral Argument Transcript at 3 (Mar. 21, 2017).
[7] Id. at 53.
[8] Id. at 14, 26, 28, 33–34, 36.
[9] Id. at 28; see also id. at 26.
[10] H. Tomás Gómez-Arostegui, Patent and Copyright Exhaustion in England circa 1800, available at http://ssrn.com/abstract=2905847.
Referencing here a Law Review article on antitrust law, with the standard quote (“If a man sell a horse…”) concerning “restraints on alienation” found in Sir Edward Coke’s Institutes of the Laws of England 360.
C. Paul Rogers III, Restraints on Alienation in Antitrust Law: A Past with No Future, 49 SMU L. Rev. 497 (1996)
Available at the URL here:
link to scholar.smu.edu
I have come across the same quotation in other discussions of SCOTUS cases in the area where intellectual property law and antitrust law interacted, particularly in the earlier decades of the twentieth century.
Not related to the Coke quote directly, but, in web search results, I have just come across an article relevant to exhaustion in the Virginia Law Review.
Ariel Katz, Aaron Perzanowski and Guy A. Rub, The interaction of exhaustion and the general law: A reply to Duffy and Hynes, 102 Va. Law Rev. Online 8 (2016).
Available at the following URL:
link to virginialawreview.org
Summary, patent law incorporates common law doctrines and the Supreme Court has consistently interpreted patent and copyright law doctrine to be consistent with the common law.
Actually, Distant, the see Pennock v. Diologue that adds that the meaning of our patent law is guided, if not controlled by, the common law interpretations from England, whence our laws came. Coke is cited, and the Supreme Court followed Coke.
link to scholar.google.com
Please be aware DP that Ned will at times blindly – and purposefully so – OVER rely on the sense that US patent law borrows some (but critically, not all) patent jurisprudence from the existing English law.
As long as you are aware of Ned’s Windmill Chases and discount his over reach, you can properly glean some insights from Ned’s historical references.
Another law review article in my web search results. No Coke quote though.
Molly Shaffer Van Houweling, Exhaustion and the limits of remote-control property, Denver Law Review 93.4 pp. 951-974 (2016)
link to static1.1.sqspcdn.com
The article begins with extensive discussion of servitudes on real property, then moves on the servitudes on personal property, and why they are disfavoured, and concludes with a discussion of exhaustion in IP Law, including mention of Impression Products v. Lexmark.
Just noticed this.
Clarifying the meaning of “unconditional sale” in statements of the doctrine of patent exhaustion.
I refer to Motion Picture Patents v. Universal Film at the following URL:
link to supreme.justia.com
Justice Clarke delivering the opinion of the Court:
“But this Court, when the question came before it in Bauer v. O’Donnell, supra, rejecting plausible argument and, adhering to the language of the statute from which all patent right is derived, refused to give such a construction to the act of Congress, and decided that the owner of a patent is not authorized by either the letter or the purpose of the law to fix, by notice, the price at which a patented article must be sold after the first sale of it, declaring that the right to vend is exhausted by a single, unconditional sale, the article sold being thereby carried outside the monopoly of the patent law and rendered free of every restriction which the vendor may attempt to put upon it.”
In the same case, Justice Holmes, dissenting, joined by Justices McKenna and Van Deventer, included the following which seems to clarify what is meant by a conditional sale in the context of the cases relevant to patent exhaustion:
“I will add, for its bearing upon Straus v. Victor Talking Machine Co., ante, 243 U. S. 490, that a conditional sale retaining the title until a future event after delivery has been decided to be lawful again and again by this Court.”
This does seem to confirm that the Court, when distinguishing between conditional and unconditional sales, did indeed understand a conditional sale to be one where title does not pass on delivery but on the fulfillment of some future conditions, not merely a sale where the patentee imposes “conditions” on the use of the article by the vendee.
For good measure, I would add that Sir Edward Coke finds mention in Straus v. Victor Talking Machine:
“Courts would be perversely blind if they failed to look through such an attempt as this “License Notice” thus plainly is to sell property for a full price, and yet to place restraints upon its further alienation, such as have been hateful to the law from Lord Coke’s day to ours, because obnoxious to the public interest. The scheme of distribution is not a system designed to secure to the plaintiff and to the public a reasonable use of its machines, within the grant of the patent laws,…”
URL for Victor Talking Machines is here:
link to supreme.justia.com
Distant, good research there, and consistent with my understanding of “conditional sale.” Retention of title is essential.
I can also tell why the Federal Circuit gets it so wrong so, so often. They absolutely do not like the Supreme Court, nor do they willingly follow its rulings.
Ned,
It is not only the CAFC that gets it wrong.
You really need to stop worshiping at he alter of the Supremes….
Continuing to worry away at Impression Products v. Lexmark, like a dog gnawing away on an old bone. Admittedly this forthcoming comment is on domestic exhaustion, not international exhaustion, which is the main subject of the guest post by Professor Gómez-Arostegui.
My intention here is to play the obiter dicta game. Those arguing for Lexmark make great play with Mitchell v. Hawley. But surely, whatever Justice Clifford meant in writing “authorized another to construct, sell and deliver it, or to construct, use and operate it, without any conditions” etc. is obiter dicta, if regarded as distinguishing between “unconditional” sales and “conditional sales”. And the reason for this is that the licensee, Bailey, was not licensed to sell any machines whatsoever, so what the precise exhaustion rule would have been, had he been authorized to sell, is surely irrelevant to the holding of the case.
The most concise statement of the license seems to be in the Syllabus of Mitchell v. Hawley:
BEGIN QUOTE FROM SYLLABUS
A patentee of certain machines, whose original patent had still between six and seven years to run, conveyed to another person the “right to make and use and to license to others the right to make and use four of the machines” in two states “during the remainder of the original term of the letters patent, provided that the said grantee shall not in any way or form dispose of, sell, or grant any license to use the said machines beyond the said term.”
END QUOTE FROM SYLLABUS
Was the licensee, Bayley, entitled to sell any machines, either “unconditionally” or with “conditions”? He was only granted to “make” and “use”. He was not explicitly granted the right to “sell”. And moreover, parsing the logic, the grantee could not, in any way or form
(dispose of) OR (sell) OR (grant any license to use the said machines beyond the said term)
I argue that there is no alternative construction that associates “beyond the said term” with the act of “selling”. One cannot surely “dispose of” a machine “beyond the said term”, or “sell” a machine “beyond the said term”. To support Lexmark, one would surely need a wording such as
sell one or more of said machines and grant a license to use that machine beyond the said term.
Thus it is difficult to see how the license could be construed to give the licensee, Bayley, authorization to sell any of the machines he had constructed, irrespective of the conditions of such sale.
By coincidence, a brief for the patentee-respondent in Quanta v. LG Electronics has just brought me to Waterman v. Mackenzie 138 U.S. 252 (1891), which cites Mitchell v. Hawley as an example of a case where the licensee had rights to make and use, but not to sell patented machines. In another case, Gayler v. Wilder the licensee had exclusive rights to make and vend, but not to sell, within a given district. (According to Waterman (assuming I paraphrase part of its argument correctly) a patent is assigned if and only if the exclusive rights to make, use and vend all pass from the assignor to the assignee, hence the reference to and citation of Mitchell v. Hawley.)
Clarification re Waterman: this was cited in a “brief of various law professors as amici curae in support of the respondent”.
Nevertheless the quote from the Syllabus of the terms of the license is incorrect, if the quotation in Justice Clifford’s delivery of the opinion of the Court in Michell v. Hawley is correct. The licensee could not himelf license others to “make”. Here is the relevant text, as quoted in the Opinion itself:
“The exclusive right to make and use, and to license to others the right to use the said machines in the said states of Massachusetts and New Hampshire, and in no other place or places, during the remainder of the original term of said letters patent. Provided, that the said Bayley shall not in any way or form dispose of, sell, or grant any license to use the said machines beyond the 3d day of May, A.D. 1867.”
“First, they call into question the Supreme Court’s decision in Kirtsaeng.” True, but I don’t think Steve “I never met an IP right I liked” Breyer gives a $%^&. Nor do I think he would allow the fact that common law isn’t what he says it is to affect his view in Lexmark.
Atari Man, they do not call into question the common law. The cases cited are very much like General Talking Pictures where a make and sell licensee exceeded the scope of his license by selling beyond the scope of his license. The buyer, in such circumstances, never got good title from the right holder.
I think you have tried to say something beyond the scope of what you are saying… I’m not so sure you succeeded in exceeding your own success.
Sorry Ned, I reread your post. Please ignore comment 6.1.1
Note: This is not particularly about the current Guest Post, but something a bit more meta, I’d like to engage others in.
The differences between social activism (SA) and academic scholarship (AS) are legion.
I find it particularly interesting that:
whereas one of these anticipates and is often coincidental with pending or on-going actions before the court or government institutions;
the other will often post-date a noteworthy or important development, putting it in perspective after the fact as thoroughly as academic scholarship enables,
and regardless of how successful they are at their respective endeavors,
one (SA) aims to present a particular persuasive position in the hopes of swaying that court or institution, whereas
the other (AS) aims to provide objective and accurate scholarship analyzing from a dispassionate distance, the result or action of the court or institution,
whereas one (SA) IS for affecting or effecting a result,
the other (AS) IS for scholarly understanding of a result.
This is not news (fake or real) to anyone. I still find this interesting to think about and keep in mind from time to time. Various blogs and sites have papers/posts/articles which vary from AS to SA. Given the ongoing political war between collectivism and individualism, SA is unavoidable in an area touching on property rights (IP and patent law), so every site and blog will have some of that if not explicitly, implicitly.
I’m wondering if anyone would care to rank sites or blogs regarding the level of AS or ratio of Academic Scholarship (AS) to Social Activism (SA)?
In particular blogs or sites dealing with IP and patent law.
This is just a subset of the ancient gray area separating the “hard” sciences from the “soft”.
The law is a creature of politics, so testable predictions; controlled experiments, exacting data, accurate models, strong consensus, predictive success, and rigidity of the scientific method are all problematic, as they are with many of the social sciences.
Skill in both creating and consuming legal scholarship comes from an innate, trained, and experienced ability to apportion (AS) and (SA) in any given writing.
The growth in quantitative methods and measured variables throughout human activity has created more opportunity for authors to design models and forecast results that match up to objective reality, yet nonetheless, human affairs are emergent phenomena and will always defy exact prediction. Human meanings are complex, ambiguous, and fluid, and will ever be so.
One of the most beautiful aspects of the law is the endless drive to synthesize both human truth and scientific truth toward conceptions of moral justice. Any attempt to deny or diminish either the human or the scientific aspects of their essential validity can only lead to less justice.
(SA) or (AS) is in the eye of the beholder, and must be.
Your last statement is an obvious error.
It is tantamount to saying “why bother trying to draw a distinction between the two?”
“(SA) or (AS) is in the eye of the beholder, and must be.”
There are actual differences which have been outlined. Certainly whether one *chooses* to engage in SA or AS is up to the *will* of the acting party since individuals do have volition, but its identification is not limited to those who act. Everyone else, to extent they are willing to see, need not be blind to the choices and actions which have been made by the acting party.
Differences:
1. Intent: as exhibited by the actions, a pattern of conduct, or explicitly stated as the aim of the acting party – is the aim one of prescription or one of purely description
2. Timing: prior to or concurrent with court decisions/institutional actions; versus ex post facto analysis of that which has already occurred.
3. Substance: use of persuasion and appeals to action… i.e. clearly directed to causally affect outcomes which have not yet occurred i.e. advocacy; versus dispassionate objective analysis which although may contain normative positions does not appeal to action or attempt to persuade any action but simply to analyze and identify.
Contrast:
I) The facts are A, the law is B, therefore the appropriate outcome is C, and the court/institution SHOULD take actions D to ensure the outcome C.
with
II) The facts were A, the law was B, the outcome was C. The actions D of the court/institutions were consistent with/appropriate (or the converse) in reaching C because of particular aspects of A, B, and D.
Conversation on these new threads has been artificially constrained.
Ecosystem experimentation underway.
Perhaps poetic.
Perhaps not.
anon
How so? Please explain I am at a total loss…
It has been hot or miss with comments either held up for moderation (not a b @ d word in sight), comments disappearing or comments getting through.
Eve since the system was up gra ded with the additional function.
Excellent point – and one which tends to draw a difference (or at least should) as to the recognition of a level of bias driving any desired result.
Justice Breyer of course did not pluck Sir Edward Coke and his horse out of thin air. Indeed the following is excerpted from the Lexmark oral argument, when Breyer was addressing the lawyer for Lexmark:
“All this precedent is very hard for you to get around. And I’m not talking about just Lord Coke; I’m talking about
the Supreme Court precedent.”
The quote bolow is excerpted from Dr. Miles Medical Co. v. John D. Park and Sons Co. 220 U.S. 373 (1911).
The URL from which the quotation is taken is here:
link to supreme.justia.com
This is not strictly a patent case as there was not patent. But the product was protected by a reasoning. And this case was cited by other later SCOTUS cases that were directly concerned with exhaustion where patents are concerned. Maybe even quoting at length from one SCOTUS case per comment is pushing it.
Also it is worth noting that the doctrine of patent exhaustion was developed in a series of SCOTUS cases where there were vigorous dissents. The doctrine, and the underlying theory was not inescapable. Judges like Oliver Wendell Holmes Jr. argued against it. But even a casual reading of those old SCOTUS cases showed how it developed from the 1870s to the early decades of the 20th century. Thus Breyer is appealing to stare decisis determined by the holdings of these cases.
So, on to Justice Hughes, delivering the Opinion of the Court in Dr. Miles.
Second. We come, then, to the second question — whether the complainant, irrespective of the secrecy of its process, is entitled to maintain the restrictions by virtue of the fact that they relate to products of its own manufacture.
The basis of the argument appears to be that, as the manufacturer may make and sell, or not, as he chooses, he may affix conditions as to the use of the article or as to the prices at which purchasers may dispose of it. The propriety of the restraint is sought to be derived from the liberty of the producer.
But because a manufacturer is not bound to make or sell, it does not follow in case of sales actually made he may impose upon purchasers every sort of restriction. Thus, a general restraint upon alienation is ordinarily invalid.
“The right of alienation is one of the essential incidents of a right of general property in movables, and restraints upon alienation have been generally regarded as obnoxious to public policy, which is best subserved by great freedom of traffic in such things as pass from hand to hand. General restraint in the alienation of articles, things, chattels, except when a very special kind of property is involved, such as a slave or an heirloom, have been generally held void. ‘If a man,’ says Lord Coke, in Coke on Littleton, section 360,”
“be possessed . . . of a horse or of any other chattel, real or personal, and give or sell his whole interest or property therein, upon condition that the donee or vendee shall not alien the same, the same is void, because the whole interest and property is out of him, so as he hath no possibility of a reverter, and it is against trade and traffic and bargaining and contracting between man and man.”
John D. Park & Sons Co. v. Hartman, 153 F. 24. See also Gray on Restraints on Alienation of Property, §§ 27, 28.
Nor can the manufacturer by rule and notice, in the absence of contract or statutory right, even though the restriction be known to purchasers, fix prices for future sales. It has been held by this Court that no such privilege exists under the copyright statutes, although the owner of the copyright has the sole right to vend copies of the copyrighted production. Bobbs-Merrill Co. v. Straus, 210 U. S. 339. There, the Court said (p. 210 U. S. 351):
“The owner of the copyright in this case did sell copies of the book in quantities and at a price satisfactory to it. It has exercised the right to vend. What the complainant contends for embraces not only the right to sell the copies, but to qualify the title of a future purchaser by the reservation of the right to have the remedies of the statute against an infringer because of the printed notice of its purpose so to do unless the purchaser sells at a price fixed in the notice. To add to the right of exclusive sale the authority to control all future retail sales, by a notice that such sales must be made at a fixed sum, would give a right not included in the terms of the statute, and, in our view, extend its operation, by construction, beyond its meaning, when interpreted with a view to ascertaining the legislative intent in its enactment.”
It will hardly be contended with respect to such a matter that the manufacturer of an article of commerce not protected by any statutory grant is in any better case. See Taddy & Co. v. Sterious & Co. (1904), 1 Ch. 354; McGruther v. Pitcher (1904), 2 Ch. 306; Garst v. Hall & L. Co., 179 Mass. 588. Whatever right the manufacturer may have to project his control beyond his own sales must depend not upon an inherent power incident to production and original ownership, but upon agreement.
“product was protected by a reasoning”. Originally “product was protected by a secret recipe…”, but text got accidentally snipped.
I draw attention here to what SCOTUS evidently thought it had decided in Motion Picture Patents Co. v. Universal Film Co., 243 U.S. 502. The URL is here:
link to supreme.justia.com
First, this his how Judge Newman characterized Motion Picture Patents in Mallinckrodt:
“In Motion Picture Patents a license notice was attached to patented movie projectors, stating that the purchaser had the right to use the machine only with motion picture films that were leased from the patentee. The defendant used a patented projector with films leased from other sources. The Court condemned the patentee’s tie-in as illegal, since it extended the “scope of its monopoly” to materials which were not part of the patented invention. 243 U.S. at 516, 37 S. Ct. at 420.”
Below, I quote the Syllabus for Motion Picture Patents, just editing out the name of a company mentioned in order to avoid the need for moderation of the comment. Of course this is just the Syllabus, and one needs to go to to Justice Clarke’s opinion, in order to analyse the disposition of the case, what is holding, what is dicta etc. The link to the case on justia.com is above to follow, for anyone interested But, if I am criticised for not doing so, I would answer that the quote from Judge Newman’s opinion in Mallinckrodt seems to offer little beyond cursory conclusory assertion to substantiate her reading of the text of the opinion, or which she feels justified in departing so remarkably from what would seem to be the plain import of the opinion. Also this SCOTUS case is but one amongst many regarding patent exhaustion.
Now to the syllabus of Motion Pictures (with the small edit):
Under the patent law, the grant by patent of the exclusive right to use, like the grant of the exclusive right to vend, is limited to the invention described in the claims of the patent, and that law does not empower the patent owner, by notices attached to the things patented, to extend the scope of the patent monopoly by restricting their use to materials necessary for their operation but forming no part of the patented invention, or to send such articles forth into the channels of trade subject to conditions as to use or royalty, to be imposed thereafter, in the vendor’s discretion. The Button-Fastener Case, 77 F. 288, and Henry v. [____] Company, 224 U. S. 1, overruled.
In determining how far the owner of a patent may restrict the use after sale of machines embodying the invention, weight must be given to the rules long established that the scope of every patent is limited to the invention as described in the claims, read in the light of the specification, that the patentee receives nothing from the patent law beyond the right to restrain others from manufacturing, using, or selling his invention, and that the primary purpose of that law is not to create private fortunes, but is to promote the progress of science and the useful arts.
The extent to which the use of a patented machine may validly be restricted to specific supplies or otherwise by special contract between the owner of the patent and a purchaser or licensee is a question outside of the patent law, and not involved in this case.
Link here to justia.com to SCOTUS case Bauer & Cie. v. O’Donnell 229 U.S. 1 (1913). Here is the URL:
link to supreme.justia.com
Fancy footwork here from Justice Day, undertaking the task of formally respecting then valid precedent from The Case That Must Here Remain Nameless, whilst subverting its logic. It seems to set things up nicely for the subsequent Motion Pictures Patents case to formally overrule the Nameless Case (and the related Button-Fastener case), and in the meantime labels as the infringer in the Nameless Case the vendor of the bottle of ink not authorized by the patentee for use with the patented machine.
Link to justia.com for
United States v. General Electric Co., 272 U.S. 476 (1926).
link to supreme.justia.com
Opinion for the Court delivered by Chief Justice Taft.
My reading below of this case and its relationship to other cases.
Extensive network of licensees and agents for selling patented electrical goods such as lightbulbs. No evidence of internal sales between licensees and agents. Therefore all patented goods remain within the “patent monopoly” until authorized first sale. The first sale is the sale to the end user. But the patent monopoly protects the network from violating antitrust laws that might in other circumstances might have read on them.
This contrasts with Dr Miles, where there was no patent protection, and where also internal sales between “agents” were at least permissible under the contracts. And also contrasts with Univis, where the sale of the lens blanks takes them outside the “patent monopoly”.
What I, as a non-lawyer, am picking up from these cases is that those SCOTUS Justices that developed the doctrine of exhaustion (as opposed to those who dissented in the cases developing the doctrine) regarded the exclusive rights conferred by a patent as encumbrances on and/or interests in the title of items (machines, manufactures etc.) falling within the relevant “patent monopoly”. In order for a valid sale to take place, the vendor must have clear title to grant and convey to the vendee. In the period when the Nameless Case was governing precedent and had not been explicitly overruled, the Justices opposed to the Nameless Case majority regarded the Nameless Case as establishing that the vendor (e.g., licensee) could validly grant and convey a title encumbered with restrictions on use. The First Sale Doctrine was then cemented in place in Motion Picture Patents by explicitly overruling the Nameless Case, appealing to prior precedent, and indirectly to the teachings of Sir Edward Coke et al, to the effect that the law did not generally recognize servitudes in chattels, unless these had a statutory basis, the patent law itself did not provide such a statutory basis. At least this is my reading, as a non-lawyer.
Keep in mind that Prof. Tomás Gómez-Arostegui’s post addresses the “international exhaustion” aspect of Lexmark, not the “domestic exhaustion” issue, which is what Dr. Miles, Motion Picture Patents, Bauer et cie., and General Electric are all directed to.
One interesting point (at least to me) is that the Statute of Monopolies in England (1623) did not create new rights, but simply declared what the common law was and enacted the common law into statute law. (See Walker on Patents, Deller Ed. v.1 at 22 (1937)).
The Statute of Monopolies permitted letters patent for “new manufactures, within this realm.” English decisions interpreted that to mean that “a patent may be granted though the thing was practised beyond the sea before; for the statute speaks of new manufactures within this realm; so that, if they be new here, it is within the statute.” Edgeberry v. Stephens (K.B. 1691) (quoted in Walker, supra. at 23).
Permitting grey market imports would seem directly contrary to the Statute of Monopolies’ authorization of a letters patent for a new manufacture in England, even if the manufacture was already known overseas.
And since the Statute of Monopolies was a restatement of the common law, whatever Lord Coke’s views on chattels under the common law, those views should not be extended to cover exhaustion via an overseas sale.
Unless, of course, U.S. law differed from the English “Letters Patent” in the respect of which you seem to want to discuss (which it does); thereby drawing the opposite conclusion of what you proffer.
There be too much attempt to reach a desired end state and not enough critical thinking on the Means in the analysis going on…
I agree that what qualifies for a patent under current US law is different from what qualified under the Statute of Monopolies.
I was not trying to argue for any specific outcome here. I was just adding a comment to the professor’s discussion of Lord Coke’s statements.
My attempted contribution to critical thinking was to suggest that if one wants to rely on Lord Coke’s statements regarding common law as applying to grey market imports, one should also consider that the Statute of Monopolies (which also was declaratory of the common law) permitted patents for inventions if they were new in England, even if known overseas – inherently suggesting that someone importing the product from overseas would infringe the English patent under the common law.
Returning to the fray, after giving people a rest from this series of comments.
I looked at Kirtsaeng again. The opinion authored by Breyer doesn’t seem to have been quoting Sir Edward Coke in relation to sales of intellectual property, merely for what he had to say about “alienation of chattels” generally.
Breyer’s Opinion in Kirtsaeng has the following passage:
BEGIN QUOTE
A law that permits a copyright holder to control the resale or other disposition of a chattel once sold is simi- larly “against Trade and Traffi[c], and bargaining and con- tracting.” Ibid.
With these last few words, Coke emphasizes the importance of leaving buyers of goods free to compete with each other when reselling or otherwise disposing of those goods. American law too has generally thought that competition, including freedom to resell, can work to the advantage of the consumer…
END QUOTE
This does not seem to me to be well-worded. It seems to suggest that Coke was arguing directly that a law that permits a copyright holder to control resale etc. is against trade etc. But there are only eight words of Coke quoted in the above quote, and they relate only to the aversion in the general common law to “restraints on alienation of chattels”.
I plan to follow up this comment with another relating to an article in the Yale Law Journal of 1916 by M.H.L.
There could be a distinction here because it appears a licensee to make and sell in Scotland was instead making and selling in England.
I also thought that “license” was more at point in the academics writings…
Life must have been interesting for the inhabitants of his Majesty’s town of Berwick upon Tweed.
Yeah, anon, looks like Dragon got me and said “licensee” instead of “license.”
But the principle involved here is the same as in General Talking Pictures – where the licensee exceeds the scope of his license the buyer takes an unauthorized sale.
It all comes down to whether or not patent rights are property rights (or perhaps more exact, whether patent rights belong in the bundle of rights that property rights reflect, from a legal point of view).
One unraveling that must happen if patent rights are deemed to NOT be property rights…
And, I suppose that the English penalty for possessing banned religious text remained the same as at the time of Henry VI in the case of one Joan de Arc?
Comments are closed.