UNITED STATES SUPREME COURT DECISIONS ON-LINE

1. Agreements for interchange of licenses under patents covering processes for the manufacture of an article sold in interstate commerce may be illegal under the Sherman Act if part of a larger plan to control interstate markets or if their necessary effect is to suppress or unduly to restrict competition. They should therefore be closely scrutinized. P. 283 U. S. 168.

2. An interchange of patent rights and a division of royalties according to the value attributed by the parties to their respective patent claims is frequently necessary if technical advancement is not to be blocked by threatened litigation, and if the available advantages are open on reasonable terms to all manufacturers desiring to participate, clubjuris

Page 283 U. S. 164

such interchange may promote, rather than restrain, competition. P. 283 U. S. 170.

3. Unless the industry is dominated, or interstate commerce directly restrained, the Sherman Act does not require cross-licensing patentees to license at reasonable rates others engaged in interstate commerce. P. 283 U. S. 172.

4. Three corporations, in the business of producing gasoline and owning patents for "cracking" processes by which the yield of gasoline from crude petroleum is greatly increased, joined with another corporation owning a similar patent in agreements for exchanges of patent rights and division of royalties which were challenged by the government as obnoxious to the Sherman Act, chiefly upon the ground that they enabled the corporations to maintain existing royalties and thereby to restrain interstate commerce.

Held:

(1) That the evidence must be examined to ascertain the operation and effect of the agreements. P. 283 U. S. 173.

(2) Since no monopoly or restriction of competition either (a) in the business of licensing patented cracking processes or (b) in the production of either ordinary or cracked gasoline or (c) in the sale of gasoline has been effected either by means of the agreements or otherwise, it is not shown that, by agreeing upon royalty rates, the patentees could control either the price or the supply. Therefore, agreement upon such rates is not a ground for injunction. P. 283 U. S. 175.

(3) To warrant an injunction which would invalidate the contracts here in question, and require either new arrangements by the patent owners or settlement of their conflicting claims by litigation, there must be a definite factual showing of illegality. P. 283 U. S. 179.

5. Failure of the government to take a cross-appeal from the decree of the district court granting part of the relief sought in this case makes unnecessary a review of findings adverse to the government's contention that the patents were invalid and the cross-licensing agreements made in bad faith. P. 283 U. S. 180.

6. In a suit for an injunction under the Sherman Act, questions raised by the government as to validity of agreements between defendants become moot when the agreements are cancelled by the defendants at the request of the district court before entry of the decree. P. 283 U. S. 181.

33 F.2d 617 reversed.

Appeal from a decree granting part of the relief sought by the government in a bill charging an illegal combination clubjuris

Page 283 U. S. 165

to monopolize and restrain interstate commerce by controlling that part of the supply of gasoline which is produced by the process of " cracking."