United States v. Huck Manufacturing Co.

PETITIONER: United States
RESPONDENT: Huck Manufacturing Co. and Townsend Co.
LOCATION: Huck Manufacturing

DOCKET NO.: 8
DECIDED BY: Warren Court (1965-1967)
LOWER COURT:

CITATION: 382 US 197 (1965)
ARGUED: Nov 15, 1965
DECIDED: Dec 06, 1965

ADVOCATES:
Dennis G. Lyons - for the appellees
Donald F. Turner - for the appellant
Thomas W. Pomeroy, Jr. - for the appellees

Facts of the case

Huck Manufacturing Company owned the patent for a certain type of lock bolt. Huck granted a license to Townsend Company to manufacture the lock bolt on the condition that Townsend sell those bolts at a price set by Huck. Huck granted no other licenses to manufacture its lock bolt patents. The United States filed a complaint against Huck and Townsend, alleging Sherman Act violations of conspiracy to unreasonably restrain trade and monopolize interstate commerce in lock bolts. The district court ruled in favor of Huck and dismissed the complaint. The Supreme Court heard this case on direct appeal.

Question

(1) Should the Court overrule United States v. General Electric Co. which held that a license to make a patented article on the condition that the licensee sell the articles at a price set by the patent holder was illegal?

(2) If not, does a patent holder's decision not to grant additional licenses, as long as the first licensee sells the product at a price set by the patent holder, violate the Sherman Act?

Media for United States v. Huck Manufacturing Co.

Audio Transcription for Oral Argument - November 15, 1965 in United States v. Huck Manufacturing Co.

Earl Warren:

Number 8, United States, appellant, versus Huck Manufacturing Company et al.

Mr. Turner.

Turner:

Mr. Chief Justice, May it please the Court.

This is a direct appeal under the Expediting Act from a final judgment of the District Court dismissing the Government’s Civil Antitrust suit against Huck Manufacturing Company and Townsend Company the appellee is here.

I shall recount the facts substantially stated in the Government's brief.

The complaint alleged that two companies had violated Sections 1 and 2 of the Sherman Act by restraining trade and conspiring to monopolize the manufacture and sale of patented lock vaults which were metal fastening devices used principally in the construction of aircraft.

More precisely, the charge was the clock, the patentee in Townsend, its licensee, had agreed that Townsend would sell patent products at the prices and on the terms and conditions fixed by Huck.

And that Huck would issue no additional licenses under its patent.

In earlier criminal proceeding, involving the same charge have been dismissed by another district judge in the conclusion of the Government's case on the ground that the facts established did not constitute violations of Section 1 of the Sherman Act without evidence that what was obtained by defendants by their alleged agreements was more than a normal and reasonable reward to a patentee.

By stipulation of the parties, the record in the criminal case was introduced into evidence as a Government's case in cheat in this civil action.

And on that record, the District Court granted defendant's motions to be dismissed, although, the defense has not yet put in its case, Huck and Townsend have vigorously denied and do vigorously denied the existence of the oral agreement to fix prices which the Government's proof purported to show and maintain the exclusivity of Townsend's license in which the Government's proof also purported to show.

The District Court made no finding on the existing --

William J. Brennan, Jr.:

I didn't quite hear Mr. Turner what you said about the -- what disagreement was about the exclusivity of Townsend's license?

Turner:

Well, the Government put an evidence Mr. Justice attending to show that there was a mutual agreement between the patentee on the one hand and the licensee on the other.

Potter Stewart:

That there should be license with nobody else.

Turner:

Whereby that patentee would license no one else, so long as the licensee abided by the patentee's prices.

Now, the District Court made no finding on the existence of this agreement.

But on the assumption and if we read the opinion that an agreement did exist, the Court concluded and I quote here, “That upon the evidence submitted, the case at bar is in all material respects, the same and ruled by the decision in US v. General Electric.”

And a court further ruled and I again quote, “There is no violation of the Sherman Act by Huck's establishment of the prices, terms, and conditions of sale for the patent lock vaults and the following thereof by the licensee Townsend or it is established law under the General Electric case that it is not a violation of the Sherman Act for licensee to follow the terms, prices, and conditions of sale or patent owner by agreement to do so.”

Now, the Government in its appeal has contended that decision of the court below should be reversed for either of two reasons.

First, and our main reason that the decision of this Court in US v. General Electric that a license to make a patented article on conditions of the licensee maintains its prices at a level set by the patentee does not in and out of itself violate the Sherman Act, that's the Rule in General Electric was erroneous and should be overruled.

Or secondly, that in any event, the General Electric decision should not be interpreted to protect an agreement by a patentee, not to grant additional licenses as long as its licensee follows the prices which he sets.

Potter Stewart:

Oh, yes.

Turner:

Now, before turning to a consideration of the issues -- these issues on the merits, I should like to discuss briefly and all the way, we'll have to come back to it again, a question raised by defendant and fairly read, namely whether in the circumstances of this case it is appropriate for the Court to consider the issue whether the General Electric decision should be overruled.

That issue was raised by the following facts.

Subsequent to the entry of the judgment below and the filing of the notice of the Notice of Appeal, the District Court granted defendant's motion to supplement the record by adding two pretrial orders.

These orders had been drafted by the Court in 1962 submitted to counsel, the suggestions and signed by the judge, but contrary to belief of all counsel had not been entered on the record.

The Government did not object to this much of the motion by defendant.

In addition, however, at the request of the defendants and although the Government's vigorous objection, the District Court added the following statement to one of the pretrial orders and I again I quote, “On October 15, which is the date of the pretrial hearing, reporting on the applicability of the General Electric case.

The Government stated that it is not attempting to have a doctrine set in the General Electric case overruled and stated only that facts in this case do not follow in that doctrine.