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B. General Electric and the Ability of Patent Owners to Set Resale Prices

B. General Electric and the Ability of Patent Owners to Set Resale Prices

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Vertical Price Restraints and Intellectual Property 481



The dominant patent *** in the field of dropout fuse cutouts with double jointed

hinge construction was issued March 7, 1939, to the Southern States Equipment

Corporation, assignee, on an application of George N. Lemmon. This patent reads

upon a patent *** issued October 17, 1939 to Line Material Company, assignee, on

an application by Schultz and Steinmayer. The housing *** was issued November

18, 1930 to Line, assignee, on an application by W. D. Kyle. The Kyle patent covers

a wet-process porcelain box with great dielectric strength, which may be economically constructed and has been commercially successful. We give no weight to the

presence of the Kyle patent in the licenses.

The applications for the Lemmon and Schultz patents were pending simultaneously. They were declared in interference and a contest resulted. The decision of

the Patent Office, awarding dominant claims to Southern and subservient claims

to Line on the Lemmon and the Schultz applications made it impossible for any

manufacturer to use both patents when later issued without some cross-licensing

arrangement. [citation omitted] Only when both patents could be lawfully used

by a single maker could the public or the patentees obtain the full benefit of the

efficiency and economy of the inventions. Negotiations were started by Line which

eventuated in the challenged arrangements.

The first definitive document was a bilateral, royalty-free, cross-license agreement of May 23, 1938, between Southern and Line after the patent office award but

before the patents issued. *** Sublicense royalties and expenses were to be divided

between Line and Southern. Although a memorandum of agreement of January 12,

1938, between the parties had no such requirement, Line agreed to sell equipment

covered by the Southern patent at prices not less than those fixed by Southern.

Southern made the same agreement for equipment covered solely by the Line

patent. No requirement for price limitation upon sales by other manufacturers

under license was included.

Six of the other manufacturers here involved were advised by Line by letter,

dated June 13, 1938, that Southern had authority to grant licenses under the

Schultz prospective patent. On October 3, 1938, Kearney took from Southern a

license to practice the Lemmon and Schultz patents. The license had a price, term

and condition of sale clause, governed by Southern’s prices, which bound Kearney

to maintain the prices on its sales of devices covered by the patents. On October 7,

1938, the five other manufacturers *** were offered by Southern the same contract

as the standard licensor’s agreement. ***

The price maintenance feature was reflected in all the licenses to make and vend

granted by Line, under the Line-Southern contract, to the other appellees. There

were variations in the price provisions that are not significant for the issues of this

case. *** There can be no doubt, however, that each licensee knew of the proposed

price provisions in the licenses of other licensees from the circulation of proposed

from of license on October 6, 1939, subsequent consultations among the licensees

and an escrow agreement, fulfilled July 11, 1940. That agreement was entered into

after General Electric took its license and required for fulfillment the acceptance

of identical licenses by Matthews, Kearney and Railway. The licenses that were the



482 Antitrust Law and Intellectual Property Rights

subject of the escrow contained the price provisions of General Electric’s license.

This awareness by each signer of the price provisions in prior contracts is conceded

by appellees’ brief. A price schedule became effective January 18, 1941. Thereafter,

all the appellees tried to maintain prices. Where there was accidental variation,

Line wrote the licensee calling attention to the failure.

The licenses were the result of arm’s length bargaining in each instance. Price

limitation was actively opposed in toto or restriction of its scope sought by several

of the licensees, including General Electric, the largest producer of the patented

appliances. A number tried energetically to find substitutes for the devices. All the

licensees, however, were forced to accept the terms or cease manufacture. By accepting they secured release from claims for past infringement through a provision to

that effect in the license. The patentees through the licenses sought system in their

royalty collections and pecuniary reward for their patent monopoly. Undoubtedly

one purpose of the arrangements was to make possible the use by each manufacturer of the Lemmon and Schultz patents. These patents in separate hands produced a deadlock. Lemmon by his basic patent ‘blocked’ Schultz’ improvement.

Cross-licenses furnished appellees a solution.

On consideration of the agreements and the circumstances surrounding their

negotiation and execution, the District Court found that the arrangements, as a

whole, were made in good faith, to make possible the manufacture by all appellees

of the patented devices, to gain a legitimate return to the patentees on the inventions and apart from the written agreements there was no undertaking between

the appellees or any of them to fix prices. Being convinced *** that the General

Electric case controlled and permitted such price arrangements as are disclosed in

the contracts the District Court dismissed the complaint. The Government attacks

the rationale of the General Electric case and urges that it be overruled, limited and

explained or differentiated.

II. The General Electric Case

That case was decided in 1926 by a unanimous court, Chief Justice Taft writing.

It involved a bill in equity to enjoin further violations of the Sherman Act. While

violations of the Act by agreements fixing the resale price of patented articles

(incandescent light bulbs) sold to dealers also were alleged in the bill, so far as here

material the pertinent alleged violation was an agreement between General Electric

and Westinghouse Company through which Westinghouse was licensed to manufacture lamps under a number of General Electric’s patents, including a patent on

the use of tungsten filament in the bulb, on condition that it should sell them at

prices fixed by the licensor. On considering an objection to the fixing of prices on

bulbs with a tungsten filament, the price agreement was upheld as a valid exercise

of patent rights by the licensor.

Speaking of the arrangement, this Court said: ‘If the patentee * * * licenses

the selling of the articles (by a licensee to make), may he limit the selling by limiting

the method of sale and the price? We think he may do so provided the conditions



Vertical Price Restraints and Intellectual Property 483



of sale are normally and reasonably adapted to secure pecuniary reward for the

patentee’s monopoly.’ [citation omitted] This proviso must be read as directed

at agreements between a patentee and a licensee to make and vend. The original

context of the words just quoted makes clear that they carry no implication of

approval of all a patentee’s contracts which tend to increase earnings on patents.

The opinion recognizes the fixed rule that a sale of the patented article puts control

of the purchaser’s resale price beyond the power of the patentee. [citation omitted]

Nor can anything be found in the General Electric case which will serve as a basis

to argue otherwise than that the precise terms of the grant define the limits of a

patentee’s monopoly and the area in which the patentee is freed from competition

of price, service, quality or otherwise. [citation omitted]

General Electric is a case that has provoked criticism and approval. It had only

bare recognition in Ethyl Gasoline Corporation v. United States, 309 U.S. 436,

456. That case emphasized the rule against the extension of the patent monopoly

[citation omitted] to resale prices or to avoid competition among buyers. [citation omitted] We found it unnecessary to reconsider the rule in United States v.

Masonite Corporation, 316 U.S. 265, 277, although the arrangement there was

for sale of patented articles at fixed prices by dealers whom the patentee claimed

were del credere agents. As we concluded the patent privilege was exhausted by a

transfer of the articles to certain agents who were part of the sales organization of

competitors, discussion of the price fixing limitation was not required. *** Other

courts have explained or distinguished the General Electric rule. *** Furthermore,

the point is made that there is such a ‘host of difficult and unsettled questions’ arising from the General Electric holding that the simplest solution is to overrule the

precedent on the power of a patentee to establish sale prices of a licensee to make

and vend a patented article.

Such a liquidation of the doctrine of a patentee’s power to determine a licensee’s

sale price of a patented article would solve problems arising from its adoption.

Since 1902, however, when E. Bement & Sons v. National Harrow Co., 186 U.S. 70,

was decided, a patentee has been able to control his licensee’s sale price within the

limits of the patent monopoly. Litigation that the rule has engendered proves that

business arrangements have been repeatedly, even though hesitatingly, made in

reliance upon the contractors’ interpretation of its meaning. Appellees urge that

Congress has taken no steps to modify the rule. Such legislative attitude is to be

weighed with the counter balancing fact that the rule of the General Electric case

grew out of a judicial determination. The writer accepts the rule of the General

Electric case as interpreted by the third subdivision of this opinion. As a majority

of the Court does not agree with that position, the case cannot be reaffirmed on

that basis. Neither is there a majority to overrule General Electric. In these circumstances, we must proceed to determine the issues on the assumption that General

Electric continues as a precedent. *** On that assumption where a conspiracy to

restrain trade or an effort to monopolize is not involved, a patentee may license

another to make and vend the patented device with a provision that the licensee’s

sale price shall be fixed by the patentee. The assumption is stated in this was so as to



484 Antitrust Law and Intellectual Property Rights

leave aside the many variables of the General Electric rule that may arise. For example,

there may be an aggregation of patents to obtain dominance in a patent field, broad

or narrow, or a patent may be used as a peg upon which to attach contracts with former or prospective competitors, touching business relations other than the making

and vending of patented devices. Compare United States v. United States Gypsum

Co., decided today; United States v. Masonite Corporation, 316 U.S. 265. ***

III. The Determination of the Issue

Under the above-mentioned assumption as to General Electric, the ultimate question for our decision on this appeal may be stated, succinctly and abstractly, to be

as to whether in the light of the prohibition of § 1 of the Sherman Act, [citation

omitted] two or more patentees in the same patent field may legally combine their

valid patent monopolies to secure mutual benefits for themselves through contractual agreements between themselves and other licensees, for control of the sale

price of the patented devices. ***

If the patent rights do not empower the patentees to fix sale prices for others,

the agreements do violate the Act. *** As the Schultz patent could not be practiced without the Lemmon, the result of the agreement between Southern and Line

for Line’s sublicensing of the Lemmon patent was to combine in Line’s hands the

authority to fix the prices of the commercially successful devices embodying both

the Schultz and Lemmon patents. Thus though the sublicenses in terms followed

the pattern of General Electric in fixing prices only on Line’s own patents, the additional right given to Line by the license agreement of January 12, 1940, between

Southern and Line, to be the exclusive licensor of the dominant Lemmon patent,

made its price fixing of its own Schultz devices effective over devices embodying

also the necessary Lemmon patent. By the patentees’ agreement the dominant

Lemmon and the subservient Schultz patents were combined to fix prices. In the

absence of patent or other statutory authorization, a contract to fix or maintain

prices in interstate commerce has long been recognized as illegal per se under the

Sherman Act. This is true whether the fixed price is reasonable or unreasonable. It

is also true whether it is a price agreement between producers for sale or between

producer and distributor for resale.

It is equally well settled that the possession of a valid patent or patents does

not give the patentee any exemption from the provisions of the Sherman Act

beyond the limits of the patent monopoly. By aggregating patents in one control, the holder of the patents cannot escape the prohibitions of the Sherman Act.

[citation omitted] ***

We are thus called to make an adjustment between the lawful restraint on trade

of the patent monopoly and the illegal restraint prohibited broadly by the Sherman

Act. That adjustment has already reached the point, as the precedents now stand,

that a patentee may validly license a competitor to make and vend with a price

limitation under the General Electric case and that the grant of patent rights is the

limit of freedom from competition ***.



Vertical Price Restraints and Intellectual Property 485



With the postulates in mind that price limitations on patented devices beyond

the limits of patent monopoly violate the Sherman Act and that patent grants are

to be construed strictly, the question of the legal effect of the price limitations in

these agreements may be readily answered. Nothing in the patent statute specifically gives a right to fix the price at which a licensee may vend the patented article.

[citation omitted] While the General Electric case holds that a patentee may, under

certain conditions, lawfully control the price the licensee of his several patents may

charge for the patented device, no case of this Court has construed the patent and

anti-monopoly statutes to permit separate owners of separate patents by crosslicenses or other arrangements to fix the prices to be charged by them and their

licensees for their respective products. Where two or more patentees with competitive, non-infringing patents combine them and fix prices on all devices produced

under any of the patents, competition is impeded to a greater degree than where

a single patentee fixes prices for his licensees. The struggle for profit is less acute.

Even when, as here, the devices are not commercially competitive because the

subservient patent cannot be practiced without consent of the dominant, the statement holds good. The stimulus to seek competitive inventions is reduced by the

mutually advantageous price fixing arrangement. Compare, as to acts by a single

entity and those done in combination with others. [citation omitted] The merging

of the benefits of price fixing under the patents restrains trade in violation of the

Sherman Act in the same way as would the fixing of prices between producers of

nonpatentable goods.

If the objection is made that a price agreement between a patentee and a

licensee equally restrains trade, the answer is not that there is no restraint in such

an arrangement but, when the validity of the General Electric case is assumed, that

reasonable restraint accords with the patent monopoly granted by the patent law.

Where a patentee undertakes to exploit his patent by price fixing through agreements with anyone, he must give consideration to the limitations of the Sherman

Act on such action. The patent statutes give an exclusive right to the patentee to

make, use, and vend and to assign any interest in this monopoly to others. The

General Electric case construes that as giving a right to a patentee to license another

to make and vend at a fixed price. There is no suggestion in the patent statutes of

authority to combine with other patent owners to fix prices on articles covered by

the respective patents. As the Sherman Act prohibits agreements to fix prices, any

arrangement between patentees runs afoul of that prohibition and is outside the

patent monopoly.

We turn now to the situation here presented of an agreement where one of the

patentees is authorized to fix prices under the patents. The argument of respondents is that if a patentee may contract with his licensee to fix prices, it is logical to

permit any number of patentees to combine their patents and authorize one patentee to fix prices for any number of licensees. In this present agreement Southern

and Line have entered into an arrangement by which Line is authorized to and has

fixed prices for devices produced under the Lemmon and Schultz patents. It seems

to us, however, that such argument fails to take into account the cumulative effect



486 Antitrust Law and Intellectual Property Rights

of such multiple agreements in establishing an intention to restrain. The obvious

purpose and effect of the agreement was to enable Line to fix prices for the patented

devices. Even where the agreements to fix prices are limited to a small number

of patentees, we are of the opinion that it crosses the barrier erected by the

Sherman Act against restraint of trade though the restraint is by patentees and their

licensees. ***

Even if a patentee has a right in the absence of a purpose to restrain or monopolize trade, to fix prices on a licensee’s sale of the patented product in order to

exploit properly his invention or inventions, when patentees join in an agreement

as here to maintain prices on their several products, that agreement, however

advantageous it may be to stimulate the broader use of patents, is unlawful per

se under the Sherman Act. It is more than an exploitation of patents. There is the

vice that patentees have combined to fix prices on patented products. It is not the

cross-licensing to promote efficient production which is unlawful. There is nothing unlawful in the requirement that a licensee should pay a royalty to compensate

the patentee for the invention and the use of the patent. The unlawful element is

the use of the control that such cross-licensing gives to fix prices. The mere fact that

a patentee uses his patent as whole or part consideration in a contract by which he

and another or other patentees in the same patent field arrange for the practice of

any patent involved in such a way that royalties or other earnings or benefits from

the patent or patents are shared among the patentees, parties to the agreement,

subjects that contract to the prohibitions of the Sherman Act whenever the selling

price, for things produced under a patent involved, is fixed by the contract or a

license, authorized by the contract. Licensees under the contract who as here enter

into license arrangements, with price fixing provisions, with knowledge of the

contract, are equally subject to the prohibitions. ***

Comments and Questions

1. Although the 1926 General Electric case concerns a vertical agreement in

that General Electric and Westinghouse had a licensor-licensee relationship, the

arrangement also had horizontal elements because GE and Westinghouse were

competitors in the market for light bulbs. Because the case was interpreted as

allowing a patentee to set the resale price charged by licensees, this vertical aspect is

what this chapter—and the excerpted cases—focuses on.

2. Judge Posner summarized the facts of General Electric as follows:

General Electric licensed its principal competitor, Westinghouse, to manufacture

light bulbs using the GE patents. GE had 69 percent of the market, Westinghouse

16 percent, and other licensees of GE 8 percent, for a total of 93 percent. The

effect of the licensing agreement was to solidify the monopoly conferred by the

GE patents. The license fixed a minimum price at which Westinghouse could sell

the light bulbs. The royalty rate was only 2 percent but was to rise to 10 percent

if Westinghouse’s share of the light-bulb market exceeded 15 percent, which,

as the figures above reveal, it did by the time the case was tried. The very low



Vertical Price Restraints and Intellectual Property 487

starting royalty rate suggests that the right to use the GE patents was not worth a

lot to Westinghouse, and the rate escalation keyed to Westinghouse’s market share

suggests that the parties were trying to minimize competition, which was anyway

the effect of the minimum-price term in the licensing agreement. The Court

upheld the arrangement but I doubt that it would do so today, at least without a

further inquiry into the strength of the patents and the rationale for the licensing

arrangement.



Asahi Glass Co. v. Pentech Pharm., Inc., 289 F.Supp.2d 986, 992 (N.D. Ill. 2003)

(Posner., J.). Judge Posner described the Supreme Court’s opinion as “an elderly

and much-criticized decision.” Id.

3. How does the Court in Line Materials distinguish the facts of General

Electric?

4. In Newburgh Moire Co. v. Superior Moire Co., 237 F.2d 283, (3rd Cir. 1956),

the Third Circuit explained how the Supreme Court dealt with the issue of cabining General Electric opinion, without reversing it:

BIGGS, Chief Judge.

The principle enunciated in Bement & Sons v. National Harrow Co., 1902, 186

U.S. 70, and followed in United States v. General Electric Co., 1926, 272 U.S. 476,

permitted a patentee to fix the price the licensee of the patent may charge for the

device. It is difficult to say how much of this principle remains in the law. This

question came to a head but was not resolved in United States v. Line Material

Co., 1948, 333 U.S. 287, 312. The Line decision dealt with arrangements made

between two patentees for the cross-licensing of their interdependent product

patents and for the licensing by one of them of other manufacturers under both

patents. The Court held that price maintenance by the various types of agreements

constituted a violation of Section 1 of the Sherman Act. Four Justices thought that

the General Electric decision should be overruled. Three thought otherwise and

dissented. One Justice did not participate. Mr. Justice Reed, voicing an opinion

for a divided Court, distinguished the General Electric decision and construed the

patent statutes as giving a patentee a right to license ‘another to make and vend at

a fixed price.’ [citation omitted] ***

On the same day as the Line decision a unanimous Supreme Court, albeit with

two Justices not participating, decided United States v. United States Gypsum Co.,

1948, 333 U.S. 364. In Gypsum there was no cross-licensing, but rather industrywide licensing under several patents held by Gypsum Company. Mr. Justice Reed

stated for the Court: ‘We think that the industry-wide license agreements, entered

into with knowledge on the part of licensor and licensees of the adherence of others,

with the control over prices and methods of distribution through the agreements

and the bulletins, were sufficient to establish a prima facie case of conspiracy.’

[citation omitted] The licensing agreements extended to unpatented as well as to

Patented Gypsum products but the Supreme Court did not seem to rely on this

fact. Mr. Justice Reed went on to say: ‘Even in the absence of the specific abuses in



488 Antitrust Law and Intellectual Property Rights

this case, which fall within the traditional prohibitions of the Sherman Act, it would

be sufficient to show that the defendants, constituting all former competitors in an

entire industry, had acted in concern to restrain commerce in an entire industry

under patent licenses in order to organize the industry and stabilize prices. That

conclusion follows despite the assumed legality of each separate patent license, for

it is familiar doctrine that lawful acts may become unlawful when taken in concert.

Such concerted action is an effective deterrent to competition; * * *.’ [citation

omitted]

In the second Gypsum case, 1950, 340 U.S. 76, the Supreme Court explained

that conspiracy to restrain commerce was the basis of the first Gypsum decision.

Mr. Justice Reed stated: ‘There was no holding in our first opinion in Gypsum that

mere multiple licensing violated the Sherman Act.’ [citation omitted] Footnote 4

cited to the text, to the sentence just quoted, seems to indicate that the dissenters

in Line Material would not have concurred in the first Gypsum opinion were it

not for the conspiracy element in that case. The footnote should be repeated here.

‘The dissenters in Line * * * joined in the United States Gypsum opinion, since

the concerted action in the United States Gypsum case was thought to violate the

Sherman Act, despite their view that the mere multiplication of licenses, as in

Line, ‘produces a repetition of the same issue (as in General Electric) rather than a

different issue.’ [citation omitted]



Other/subsequent opinions narrowed the holding of General Electric further,

suggesting that if the patentee’s patent covered a small part of a larger good, then

the patentee could not set the resale price of the larger good even though it incorporated the patentee’s intellectual property. See U.S. v. General Elec. Co., 82 F.

Supp. 753 (D.N.J. 1949).

Explaining this limitation on the General Electric rule, Roscoe Steffen explained:

“if the Chief Justice meant precisely what he said, price fixing, where permissible at

all, must be tailored carefully to fit the particular patent. In a crowded field, where

many prior patents have contributed to the development of the article sought to

be controlled, it is difficult, as a practical matter, to see how any price fixing whatever could be sanctioned. It would scarcely be possible to permit price control of

the whole article, as that would be giving the latest inventor not only a ‘pecuniary

reward for the patentee’s monopoly,’ but would be permitting him and his licensees to collect a tribute from the public on the work of many other inventors as

well.” Roscoe Steffen, Invalid Patents and Price Control, 56 Yale L.J. 1, 4 (1946).

5. Aside from the specific restrictions at issue, is there any inherent problem

with the parties in Line Materials engaging in cross-licensing?

6. One reason that antitrust law condemned vertical price fixing is because it

could be used to maintain a buyers’ cartel. What evidence suggests that the vertical

price fixing is not serving that function in this case?

7. While the General Electric holding is arguably inconsistent with Dr. Miles, the

holding in General Electric can be seen as upholding the Court’s 1902 decision in

Bement, discussed above. If the medicines in Dr. Miles had been patented, should

the result have been different?



Vertical Price Restraints and Intellectual Property 489



The medicines had been protected by trade secret and their packaging— with

which Park & Sons had allegedly tampered— had been protected by trademark.

Should these forms of intellectual property protection have been sufficient to apply

the reasoning of General Electric to the facts of Dr. Miles?

8. Even if the General Electric rule is sound on its terms, should the rule protect

patentees whose patents are invalid?

If not, how should courts deal with issues of patent validity in antitrust litigation?

9. Some courts have held that a vertical price-fixing provision in a patent license

may make the patent unenforceable, but the patentee can purge the misuse by

waiving the vertical price-fixing provision, which makes the patent enforcement.

See Westinghouse Electric Corp. v. Bulldog, 179 F.2d 139, 145 (4th Cir. 1950).



C. Vertical Price Fixing and Copyrighted Works

United States v. Paramount Pictures, Inc.

334 U.S. 131 (1948)



Mr. Justice DOUGLAS delivered the opinion of the Court.

These cases are here on appeal from a judgment of a three-judge District Court

holding that the defendants had violated § 1 and § 2 of the Sherman Act, [citation

omitted] and granting an injunction and other relief. [citation omitted]

The suit was instituted by the United States under § 4 of the Sherman Act,

15 U.S.C.A. § 4, to prevent and restrain violations of it. The defendants fall into

three groups: (1) Paramount Pictures, Inc., Loew’s, Incorporated, Radio-KeithOrpheum Corporation, Warner Bros. Pictures, Inc., Twentieth Century-Fox Film

Corporation, which produce motion pictures, and their respective subsidiaries or

affiliates which distribute and exhibit films. These are known as the five major

defendants or exhibitor-defendants. (2) Columbia Pictures Corporation and

Universal Corporation, which produce motion pictures, and their subsidiaries

which distribute films. (3) United Artists Corporation, which is engaged only in

the distribution of motion pictures. The five majors, through their subsidiaries or

affiliates, own or control theatres; the other defendants do not.

*** The complaint charged that all the defendants, as distributors, had conspired to restrain and monopolize and had restrained and monopolized interstate

trade in the distribution and exhibition of films by specific practices which we will

shortly relate. It also charged that the five major defendants had engaged in a conspiracy to restrain and monopolize, and had restrained and monopolized, interstate trade in the exhibition of motion pictures in most of the larger cities of the

country. It charged that the vertical combination of producing, distributing, and

exhibiting motion pictures by each of the five major defendants violated § 1 and §

2 of the Act. It charged that each distributor-defendant had entered into various

contracts with exhibitors which unreasonably restrained trade. ***

No film is sold to an exhibitor in the distribution of motion pictures. The right

to exhibit under copyright is licensed. The District Court found that the defendants



490 Antitrust Law and Intellectual Property Rights

in the licenses they issued fixed minimum admission prices which the exhibitors

agreed to charge, whether the rental of the film was a flat amount or a percentage of

the receipts. It found that substantially uniform minimum prices had been established in the licenses of all defendants. Minimum prices were established in master

agreements or franchises which were made between various defendants as distributors and various defendants as exhibitors and in joint operating agreements made

by the five majors with each other and with independent theatre owners covering the operation of certain theatres. By these later contracts minimum admission

prices were often fixed for dozens of theatres owned by a particular defendant in a

given area of the United States. Minimum prices were fixed in licenses of each of

the five major defendants. The other three defendants made the same requirement

in licenses granted to the exhibitor-defendants. ***

The District Court found that two price-fixing conspiracies existed-a horizontal

one between all the defendants, a vertical one between each distributor-defendant

and its licensees. The latter was based on express agreements and was plainly established. The former was inferred from the pattern of price-fixing disclosed in the

record. We think there was adequate foundation for it too. It is not necessary to

find an express agreement in order to find a conspiracy. It is enough that a concert

of action is contemplated and that the defendants conformed to the arrangement.

[citation omitted] That was shown here.

On this phase of the case the main attack is on the decree which enjoins the

defendants and their affiliates from granting any license, except to their own theatres, in which minimum prices for admission to a theatre are fixed in any manner or by any means. The argument runs as follows: United States v. General Electric Co., 272 U.S. 476, held that an owner of a patent could, without violating the

Sherman Act, grant a license to manufacture and vend and could fix the price at

which the licensee could sell the patented article. It is pointed out that defendants

do not sell the films to exhibitors, but only license them and that the Copyright Act,

[citation omitted] like the patent statutes, grants the owner exclusive rights. And

it is argued that if the patentee can fix the price at which his licensee may sell the

patented article, the owner of the copyright should be allowed the same privilege.

It is maintained that such a privilege is essential to protect the value of the copyrighted films.

We start, of course, from the premise that so far as the Sherman Act is concerned, a price-fixing combination is illegal per se. [citation omitted] We recently

held in United States v. United States Gypsum Co., 333 U.S. 364, that even patentees could not regiment an entire industry by licenses containing price-fixing

agreements. What was said there is adequate to bar defendants, through their

horizontal conspiracy, from fixing prices for the exhibition of films in the movie

industry. Certainly the rights of the copyright owner are no greater than those of

the patentee.

Nor can the result be different when we come to the vertical conspiracy between

each distributor-defendant and his licensees. The District Court stated in its findings [citation omitted]: ‘In agreeing to maintain a stipulated minimum admission



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