Motion Picture Patents Co. v. Universal Film Manufacturing Co.

Motion Picture Patents Co. v. Universal Film Mfg. Co., 243 U.S. 502 (1917), is United States Supreme Court decision that is notable as an early example of the patent misuse doctrine. It held that, because a patent grant is limited to the invention described in the claims of the patent, the patent law does not empower the patent owner, by notices attached to the patented article, to extend the scope of the patent monopoly by restricting the use of the patented article to materials necessary for their operation but forming no part of the patented invention, or to place downstream restrictions on the articles making them subject to conditions as to use.. The decision overruled Henry v. A.B. Dick Co.,. which had held such restrictive notices effective and enforceable.

Background

The Motion Picture Patents Company (MPP) was the assignee of a number of patents covering motion picture projectors, including US Pat. No. 707,934, on a part of the mechanism used in motion picture Projectors to feed a film through the machine with a regular, uniform, and accurate movement. MPP granted to the Precision Machine Company (PMC) a license to manufacture and sell machines embodying the patented invention. The license provided that every machine PMC sold must be sold subject to a restriction and condition that the machine "shall be used solely for exhibiting or projecting motion pictures" embodying "the inventions of reissued letters patent No. 12,192"This patent was Thomas Edison's patent on motion picture film, which expired in 1914. and leased by a licensee of [MPP]." The license also provided that the machine must have a plate attached to it stating, "The sale and purchase of this machine gives only the right to use it solely with moving pictures" embodying "the inventions of reissued letters patent No. 12,192" and leased by a licensee of [MPP]."243 U.S. at 506.

PMC made and sold one of the patented machines to the owner of the Seventy-Second Street Playhouse (a movie house on 72nd Street in New York City), with a plate containing the required notice. Prague Amusement Company (Prague) then leased the Seventy-Second Street Playhouse, and acquired the machine in question as a part of the equipment of the leased playhouse. Also, at that time, the Universal Film Manufacturing Company (now known as Universal Pictures) made two films that were supplied to Prague for use on the machine. Prague used the machine to exhibit the films.243 U.S. at 507.

MPP sent letters protesting the alleged infringement of its patent, and then sued Universal, Prague, and the owner of the movie house. It was established at trial that 40,000 of the MPP machines are now in use in the US, and that the patented mechanism is the only one with which motion picture films can be used successfully. The district court held that the post-sale limitation on the use of the machine attempted to be made by the notice attached to it was invalid, and that the purchaser and its lessee had an implied license to use the machine as it had been used. The district court dismissed the case and the Second Circuit affirmed the district court.243 U.S. at 508.

Ruling of Supreme Court

The Supreme Court, in an opinion written by Justice Clarke affirmed the judgment. Justice Holmes, joined by Justices McKenna and Van Devanter, dissented.

Majority opinion

The patent statute

Justice Clarke began his analysis by observing that the patent statute does not provide for and thus authorize notices of the type involved here. Therefore, "whatever validity it [the notice] has must be derived from the general, and not from the patent, law."243 U.S. at 509. The statute gives the patentee the exclusive right to make, sell, and use the patented article. In interpreting the statute, three important rules have been declared by the Court: "The scope of every patent is limited to the invention described in the claims." The patentee "can claim nothing beyond them." The statute gives the patentee nothing but the power "to restrain others from manufacturing, using, or selling that which he has invented." "Since Pennock v. Dialogue, 2 Pet. 1, was decided in 1829, this Court has consistently held that the primary purpose of our patent laws is not the creation of private fortunes for the owners of patents, but is 'to promote the progress of science and the useful arts.' "243 U.S. at 510-11.

Accordingly: These rules of law make it very clear that the scope of the grant which may be made to an inventor in a patent, pursuant to the statute, must be limited to the invention described in the claims of his patent, and, to determine what grant may lawfully be so made, we must hold fast to the language of the act of Congress providing for it.

This patent is only on the film projector mechanism described and claimed in the patent, the Court said. By the same token:

It is not concerned with, and has nothing to do with, the materials with which or on which the machine operates. The grant is of the exclusive right to use the mechanism to produce the result with any appropriate material, and the materials with which the machine is operated are no part of the patented machine or of the combination which produces the patented result. The difference is clear and vital between the exclusive right to use the machine, which the law gives to the inventor, and the right to use it exclusively with prescribed materials to which such a license notice as we have here seeks to restrict it.243 U.S. at 511-12.

The rise of the inherency doctrine

Until recently, the Court said, this plain meaning of the statute was generally understood as the law. But with the growth of corporations the idea had arisen "of gathering great profits in small payments, which are not realized or resented, from many, rather than smaller or even equal profits in larger payments" and so patentees have come to seek to assert "the right to restrict the use of [patented machinery] to materials or supplies not described in the patent, and not, by its terms, made a part of the thing patented." A majority of the Supreme Court had accepted that principle several years earlier in Henry v. A.B. Dick Co.

The Court traced the evolution of this idea and explained why a majority of the Court rejected it:

The construction of the patent law which justifies as valid the restriction of patented machines, by notice, to use with unpatented supplies necessary in the operation of them, but which are no part of them, is believed to have originated in Heaton-Peninsular Button-Fastener Co. v. Eureka Specialty Co. (which has come to be widely referred to as the Button-Fastener Case), decided by . . . the Sixth Circuit in 1896.

. . . This decision [Button-Fastener] proceeds upon the argument that, since the patentee may withhold his patent altogether from public use, he must logically and necessarily be permitted to impose any conditions which he chooses upon any use which he may allow of it. The defect in this thinking springs from the substituting of inference and argument for the language of the statute, and from failure to distinguish between the rights which are given to the inventor by the patent law and which he may assert against all the world through an infringement proceeding, and rights which he may create for himself by private contract which, however, are subject to the rules of general as distinguished from those of the patent, law. While it is true that, under the statutes as they were (and now are), a patentee might withhold his patented machine from public use, yet, if he consented to use it himself or through others, . . . he is thereby restricted to the use of the invention as it is described in the claims of his patent, and not as it may be expanded by limitations as to materials and supplies necessary to the operation of it, imposed by mere notice to the public.

The . . . obvious possibilities for gain in the method which it approved led to an immediate and widespread adoption of the system, in which these restrictions expanded into more and more comprehensive forms until at length the case at bar is reached, with a machine sold and paid for, yet claimed still to be subject not only to restriction as to supplies to be used, but also subject to any restrictions or conditions as to use . . . which the company which authorized its sale may see fit, after the sale, from time to time to impose. The perfect instrument of favoritism and oppression which such a system of doing business, if valid, would put into the control of the owner of such a patent should make courts astute, if need be, to defeat its operation. If these restrictions were sustained, plainly the plaintiff might, for its own profit or that of its favorites, . . . ruin anyone unfortunate enough to be dependent upon its confessedly important improvements for the doing of business.243 U.S. at 514-15.

Justice Clarke denied the legitimacy of this doctrine, because it extended the power of the patent monopoly from the claimed and patented invention—the mechanism described in the patent—to the unpatented supplies used with the mechanism, which were no part of the statutory monopoly:

[F]or the reasons stated in this opinion, we are convinced that the exclusive right granted in every patent must be limited to the invention described in the claims of the patent, and that it is not competent for the owner of a patent, by notice attached to its machine, to in effect extend the scope of its patent monopoly by restricting the use of it to materials necessary in its operation, but which are no part of the patented invention, or to send its machines forth into the channels of trade of the country subject to conditions as to use or royalty to be paid, to be imposed thereafter at the discretion of such patent owner. The patent law furnishes no warrant for such a practice, and the cost, inconvenience, and annoyance to the public which the opposite conclusion would occasion forbid it.243 U.S. at 515-16.

The Court therefore concluded, first, that Henry v. A.B. Dick must be overruled. Second, the notice on the plate affixed to the machine contains an invalid restriction that the machine must be used only with film embodying the invention of the Edison patent that expired in 1914. "[S]uch a film is obviously not any part of the invention of the patent in suit." Therefore, the notice "is an attempt, without statutory warrant, to continue the patent monopoly in this particular character of film after it has expired," and to enforce it "would be to create a monopoly in the manufacture and use of moving picture films wholly outside of the patent in suit and of the patent law as we have interpreted it." This notice restriction is contrary to public policy:

A restriction which would give to the plaintiff such a potential power for evil over an industry which must be recognized as an important element in the amusement life of the nation, under the conclusions we have stated in this opinion, is plainly void because wholly without the scope and purpose of our patent laws, and because, if sustained, it would be gravely injurious to that public interest, which we have seen is more a favorite of the law than is the promotion of private fortunes.243 U.S. at 518-19.

Holmes dissent