CONTENTS Page 1 12466799G 12 I. Introduction__. III. Relationship of the patent system to the antitrust laws.. IV. Patent transactions of a sole patentee__--- Acquisition, nonuse, and enforcement____ Restrictions on fields of use... Restrictions as to quantity or time... ANTITRUST PROBLEMS IN THE EXPLOITATION OF PATENTS I. INTRODUCTION The Antitrust Subcommittee of the House Committee on the Judiciary has been engaged in extensive hearings and investigation of the manner in which regulatory agencies of the Federal Government are accommodating the protective policies of their respective statutes to the broad competitive dictates of the antitrust laws. Time and the resources of the subcommittee did not permit a comparable full-scale investigation of the patent-antitrust field, but the subcommittee believes that its current study of the interplay of the legislative policies of protection and of competition should provide a summary survey of the manner in which the antitrust laws are being applied in situations involving the commercial exploitation of patents. First, there is a clear and close analogy between the two areas of inquiry. Industry regulation seems superficially to authorize monopoly and negate competition; the monopolistic patent grant seems at first blush to exempt the exploitation of inventions from antitrust enforcement. On closer scrutiny, however, industry regulation is shown to require a delicate adjustment of coexistent public policies, and the exclusive patent grant is seen to have its sole justification in the public interest in stimulating inventive initiative, and thereby extending rather than curtailing competition, so that its commercial exploitation must conform to the policies of the antitrust laws. Second, the subject is highly controversial and the manner in which the courts have marked off the respective areas of patent protection and antitrust prohibition has not been free from criticism. The subcommittee notes the alarm which has found recent expression in some quarters concerning the alleged destructive effect upon the patent system of the judicial trend in so-called patent-antitrust cases. For example, a distinguished attorney has publicly stated that: *** The judicial assaults on the patent system in the late thirties and forties are reminiscent of the hurricanes that pounded the eastern seaboard early last fall *** by injecting into the general patent law antitrust principles in the guise of unclean hands, by expanding the concept of patent misuse, by eliminating the estoppel between patentee and licensee where the licensing agreement contains a price-fixing stipulation, by invalidating customary license restrictions, and by obliterating the remedy of contributory infringement, the courts effected radical changes in doctrine, leaving this branch of the law in a state of turmoil.1 Another distinguished patent practitioner purports to discern an antipatent movement, declaring that: During the last 30 years an antipatent movement has developed in the United States. It is clearly depicted in events that have occurred in all three branches of the Government, and never more noticeably than in several legal decisions and legislative proposals that have been made in recent months. Principally by 1 Antitrust Bulletin, vol. 1, No. 3, June 1955, p. 157. 83914-57-2 1 means of the antitrust laws, which were not originally intended for this purpose, our patent system is being deliberately emasculated. Large corporations have, in effect, been put on notice that their research laboratories can be raided.2 This commentator would make "patents wholly exempt from the antitrust laws," and would restrict defenses in patent infringement suits solely to "traditional questions of validity and infringement. These grave assertions bear directly upon an important area of the subcommittee's interest. The subcommittee has accordingly directed the preparation of the present report on the nature of the antitrust problems that arise in the exploitation of patents and on the trend of the judicial solutions of those problems. The report briefly describes the patent system, its relation to the antitrust laws, the kinds of transactions involving patents which have given rise to antitrust questions, and the criteria, principles and remedies which the courts have brought to bear on the solution of those questions. II. THE PATENT SYSTEM The common law recognized no property right in an invention. Anyone had the right to make anything he had the strength or ingenuity to contrive, and to use or sell anything he owned. Short of outright theft or palming off, nothing in the common law prevented the copying of another's design or invention. Thus, the maker of a better mousetrap might see his competitor copy it detail for detail; there was no remedy at law. The sole recourse of the inventor who wished to protect his invention was to attempt to practice it in secret. The practice of the British Crown, of seeking to promote the useful arts by giving inventors for a limited time the exclusive right to use their own inventions, found root in England in time to be engrafted in the American Constitution which empowers Congress to grant patents. As a consequence, Federal patent statutes have been in effect in this country continuously since 1790.5 (Significantly, the primary purpose of the patent system is not to enrich the inventor, but to promote technology by the disclosure of the invention and by affording some protection to risk capital to be used in its exploitation. To these ends, the grant of a patent gives the patentee, for a 17-year term, the "right to exclude others from making, using or selling the invention throughout the United States." It gives no more than this right to exclude others; such rights as the right to practice his invention are derived by the patentee from the common law. 9 To be patentable, the invention must be "a new and useful process, machine, manufacture, or composition of matter or any new and useful improvement thereof." In a sense, the patent is the explicit embodiment of the invention in a legal document containing a "specification" or description of the invention in "full, clear, concise and exact terms," and claiming the novel or invented feature "particularly” 2 Harvard Business Review, vol. 34, No. 3, May-June 1956, p. 21. 3 Id., at p. 32. 4 Art. I, sec. 8: "The Congress shall have Power *** To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries." As codified in 1952, the patent laws appear in 35 U. S. C., secs. 1–293. • See Kendall v. Winsor, 21 How. 322, 327-329 (U. S. 1858).' 7 35 U. S. C., sec. 154 (1952). Patterson v. Kentucky, 97 U. S. 601 (1878). 35 U. S. C., sec. 101 (1952). |