Mercoid Corp. v. Mid-Continent Investment Co.

1944-02-07

Headline: Court limits patent owners from using system patents to control sales of unpatented parts, blocks enforcement of licensing terms that force buyers to purchase only licensee parts, and narrows contributory-infringement remedies.

Holding: The Court held that a patent owner cannot use a combination patent to extend monopoly control over unpatented components, and misuse of the patent bars equitable relief against sellers of those parts.

Real World Impact:

Stops patentees from forcing buyers to buy unpatented parts from licensees.
Limits contributory-infringement suits when patents are used to monopolize parts.
Remands for the trial court to consider antitrust damages under the Clayton Act.

Topics: patent misuse, unpatented parts sales, patent licensing rules, antitrust and patents

Summary

Background

A company that owned a patent on a home heating system and its exclusive licensee tried to require that a key unpatented part — a combustion stoker switch — be bought only from the licensee. A maker of those switches (Mercoid) sold competing switches. Lower courts conflicted: the District Court found the patent owner had misused the patent and denied some relief, while the Court of Appeals treated Mercoid as a contributory infringer and allowed full relief.

Reasoning

The Court asked whether a patent on a combination system can be used to extend control over separate, unpatented parts that go into the system. Relying on prior decisions, the Court held that a patent owner may not use the patent to secure a monopoly in unpatented components. Even if a part is integral to the system, using the patent to prevent competition in that part is misuse and defeats the patentee’s right to get equitable relief. The Court therefore limited the ordinary contributory-infringement rule where the patent is being used to protect unpatented parts.

Real world impact

The decision protects independent makers and sellers of unpatented parts from being locked out of the market by patent licensing schemes. It narrows the situations in which patent owners can stop third-party suppliers through equity suits. The Court remanded the case to the trial court to sort out the antitrust counterclaim and whether damages under the Clayton Act can be awarded.

Dissents or concurrances

Some Justices dissented or cautioned that the ruling may confuse contributory-infringement law or improperly relieve parties from earlier judgments; others stressed preservation of free competition.