Bauer & Cie. v. O'Donnell

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Bauer & Cie. v. O'Donnell, 229 U.S. 1 (1913) was a United States Supreme Court decision involving licensing terms on patented works.

Argued April 10 1913. Decided May 26 1913.

Bauer & Cie sold Sanatogen, a patented water soluble albumenoid, with this notice on each bag;

"Notice to the Retailer. This size package of Sanatogen is licensed by us for sale and use at a price not less than one dollar ($1). Any sale in violation of this condition, or use when so sold, will constitute an infringement of our patent No. 601,995, under which Sanatogen is manufactured, and all persons so selling or using packages or contents will be liable to injunction and damages.
A purchase is an acceptance of this condition. All [229 U.S. 1, 9] rights revert to the undersigned in the event of violation.'"

O'Donnell purchased Santogen at wholesale and sold the Sanatogen for amounts less than one dollar. The court upheld that, "The right to make, use, and sell an invented article is not derived from the patent law. This right existed before and without the passage of the law, and was always the right of an inventor. The act secured to the inventor the exclusive right to make, use, and vend the thing patented, and consequently to prevent others from exercising like privileges without the consent of the patentee." As with copyright law the court acknowledges that restrictions in patent is a derived from statute. They also go on and differentate that copyright from patent by "the principal difference in the enactments lies in the presence of the word use in the patent statute and its absence in the copyright law. An inventor has not only the exclusive right to make and vend his invention or discovery, but he has the like right to use it; and when a case comes fairly within the grant of the right to use, that use should be protected by all means properly within the scope of the statute."

They however found that;

It is contended in argument that the notice in this case deals with the use of the invention, because the notice states that the package is licensed 'for sale and use at a price not less than $1,' that a purchase is an acceptance of the conditions, and that all rights revert to the patentee in event of violation of the restriction... it is a perversion of terms to call the transaction in any sense a license to use the invention. The jobber from whom the appellee purchased had previously bought, at a price which must be deemed to have been satisfactory, the packages of Sanatogen afterwards sold to the appellee. The patentee had no interest in the proceeds of the subsequent sales, no right to any royalty thereon, or to participation in the profits thereof. The packages were sold with as full and complete title as any article could have when sold in the open market, excepting only the attempt to limit the sale or use when sold for not less than $1. In other words, the title transferred was full and complete, with an attempt to reserve the right to fix the price at which subsequent sales could be made... to call the sale a license to use is a mere play upon words."

As in Bobbs-Merrill Co v. Straus, 210 U.S. 339 (1908) with copyright, the court found that restrictions could not be extended beyond the statute through the use of a license. They go further and by stating that calling the sale a license does not make it not a sale.

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