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Keywords

contractplaintiffjurisdictioninjunctionpatent
contractjurisdictionwillcopyrightpatent

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Boston Store of Chicago v. American Graphophone Co., 246 U.S. 8, 38 S.Ct. 257, 62 L.Ed. 551, 16 Ohio Law Rep. 5, Am.Ann.Cas. 1918C,447

Facts

The American Graphophone Company and the Columbia Graphophone Company filed a bill against the Boston Store of Chicago for violating a price maintenance contract. The contract required the Boston Store to sell phonographic products at prices set by the American Company. The Boston Store disregarded this stipulation, leading to the injunction sought by the plaintiffs. The case raised questions about the validity of the price maintenance contract under patent law and general law.

The American Company, acting through its agent, the Columbia Company, employs in the marketing of its phonographic records and its other products a system of price maintenance, by which system it has been its uniform practice to cause its agent, the Columbia Company, to enter into contracts with dealers in phonographic records.

Issue

Whether the price maintenance contract was valid under patent law and whether the federal court had jurisdiction to enforce it.

Does jurisdiction attach under the patent laws of the United States?

Rule

The court held that a contract requiring a retailer to maintain minimum selling prices is void under general law and not sustainable under the monopoly granted by patent law. The right to enforce such a contract does not arise from patent law, and the jurisdiction of the federal court is limited to cases that clearly arise under federal law.

The exclusive right to vend given by the patent law had the same significance which had been affixed to that word in the copyright law in the Bobbs-Merrill Case, supra.

Analysis

The court analyzed previous cases that established that a patentee cannot impose restrictions on the resale price of a product after it has been sold. The court concluded that the price-fixing contract was contrary to general law and void, as it attempted to extend the patent monopoly beyond its legal limits. The court also determined that the federal court had jurisdiction to consider the case only because the assertion of rights under patent law had not been conclusively settled at the time the bill was filed.

The alleged price-fixing contract disclosed in the certificate was contrary to the general law and void. There can be equally no doubt that the power to make it in derogation of the general law was not within the monopoly conferred by the patent law and that the attempt to enforce its apparent obligations under the guise of a patent infringement was not embraced within the remedies given for the protection of the rights which the patent law conferred.

Conclusion

The court concluded that the price maintenance contract was void and that the federal court did not have jurisdiction to enforce it under patent law.

The first question will be certified as answered, Yes; and the second, third and fourth as answered, No.

Who won?

The American Graphophone Company and the Columbia Graphophone Company prevailed in this case. The court ruled that the price maintenance contract was void under general law and could not be enforced under patent law. This decision reinforced the principle that once a patented product is sold, the seller cannot impose future price restrictions on the buyer, thus protecting the rights of retailers and consumers against anti-competitive practices.

The American Graphophone Company and the Columbia Graphophone Company prevailed in this case, as the court ruled that the price maintenance contract was void under general law and could not be enforced under patent law.

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