Bauer & Cie v. O'Donnell

Background

The case involves Bauer & Cie, German partners who owned a U.S. patent for a water-soluble product called “Sanatogen.” They licensed an American agent, who sold sealed packages labeled with a printed notice fixing a minimum retail price of one dollar. A Washington, D. C., drugstore owner bought original packages from jobbers and sold them for less than one dollar. After the manufacturer severed relations, the retailer continued such sales and was sued; the legal question was whether those retail discounts infringed the patent.

Reasoning

The Court examined the patent law’s grant of the exclusive right to “make, use, and vend” an invention and compared prior cases about whether a seller can restrict later sales. It distinguished an earlier decision that allowed a use restriction because the patentee had sold a machine with a limited license to use it with specific supplies. Here, the packages were sold with full title, no royalties, and no conditioned license. The Court concluded that once the patentee had sold the product and transferred full title, the patent monopoly was exhausted and a notice trying to fix future retail prices was beyond the patent law’s protection. The Court answered the certified question in the negative.

Real world impact

Retailers who lawfully buy genuine patented packages from wholesalers may sell them at lower prices without committing patent infringement. Patent owners cannot reserve control over later retail prices by printing price conditions on sold packages. The ruling leaves other tools, like licensing agreements, distinct from ordinary full sales.

Dissents or concurrances

Four Justices—McKenna, Holmes, Lurton, and Van Devanter—dissented, indicating disagreement but not changing the practical result here.