United States v. Univis Lens Co.
Headline: Patent-based licensing system struck down as anticompetitive; Court blocks manufacturer from fixing resale prices on finished eyeglass lenses, curbing license rules that forced set retail prices across many sellers.
Holding:
- Stops patent owners from fixing resale prices after selling an unfinished product.
- Forces eyeglass manufacturers to let retailers set final prices.
- Allows courts to block licensing systems centered on price maintenance.
Summary
Background
A maker of patented multifocal eyeglass lenses organized a corporation that sold rough lens blanks and licensed wholesalers and retailers to finish and sell the completed lenses. The corporation set fixed prices for blanks and finished lenses, required licensees to follow price rules, and could cancel licenses for price cutting. The Government sued under the Sherman Act to stop the licensing system and certain “fair trade” resale-price agreements. The district court blocked some restrictions on prescription retailers but left other parts of the system intact.
Reasoning
The Court addressed whether the patent allowed the owner to control the resale price of finished lenses after selling the patented blanks. The majority assumed the blanks embodied essential patent features and that finishing could practice the patent, but concluded that selling the blanks exhausted the patent monopoly with respect to those articles. Once sold, the patentee could not lawfully use the patent to fix resale prices. The Court also held the Miller-Tydings Act did not protect the price rules because the company sold blanks while the price controls covered a different finished product, so the statutory exception did not apply.
Real world impact
The ruling bars a patentee from enforcing broad resale-price maintenance through multi-level licensing when the patentee sells an article destined to be finished and resold. The Court extended the district court’s injunction to suppress the entire licensing scheme (except the corporation’s license to the Lens Company), reversed and affirmed parts of the lower judgments, and sent the cases back for a decree consistent with this opinion.
Dissents or concurrances
Justice Jackson did not take part in the consideration or decision of these cases.
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