272 U.S. 476, 489 (1926)
The United States filed a bill in equity in the District Court for the Northern District of Ohio against the General Electric Company, the Westinghouse Electric and Manufacturing Company, and the Westinghouse Lamp Company seeking to enjoin further violations of the Anti-Trust Act of July 2, 1890.1
The bill charged that the General Electric Company had devised and was carrying out a plan using more than 21,000 so-called agents to distribute incandescent electric lights throughout the United States in restraint of interstate trade and to exercise a monopoly of their sale.2 It further charged that the same illegal purpose was being achieved through a license contract with the Westinghouse companies.3
There had been prior litigation between the United States and the three defendants plus thirty-two other corporations in which a consent decree dissolved an illegal combination in restraint of interstate commerce in electric lamps.4 Under that decree the defendants were enjoined from fixing resale prices for purchasers except that the owner of the patents was permitted to fix the prices at which a licensee should sell lamps manufactured under the patent.5 After the decree a new sales plan was submitted to the Attorney General in 1912. He declined to express an opinion on its legality. The plan has been in operation since that year.6
The Electric Company owns three patents covering the making of modern tungsten-filament electric lights. These are the 1912 Just and Hanaman basic patent, the 1913 Coolidge patent for manufacturing tungsten filaments of increased tensile strength, and the 1916 Langmuir patent for the use of gas in the bulb.7 In 1921 the total business in electric lights was $68,300,000. Of this the Electric Company accounted for 69 percent, the Westinghouse Company for 16 percent, other licensees for 8 percent, and unlicensed manufacturers for 7 percent.8
The distribution plan divides trade into three classes.9 There are approximately 400 B agents serving as large distributors.10 There are more than 21,000 A agents serving as retail dealers.11 Under written contracts the company maintains on consignment in the custody of each agent a stock of lamps.12 The sizes, types, classes, and quantity of the lamps are determined by the company.13 The lamps remain the property of the company until sold.14 The proceeds of all lamps are to be held in trust for the benefit and for the account of the company until fully accounted for.15 The agent is to pay over to the company not later than the 15th of each month an amount equal to the total sales value less the agent's compensation.16 This covers all of the company's lamps sold by him.17 Since 1915 the company has assumed all risk of fire, flood, obsolescence, and price decline and carries whatever insurance is carried on the stocks of lamps in the hands of its agents.18
On March 1, 1912 the Electric Company granted the Westinghouse Company a license to make, use, and sell lamps under the three patents.19 The license required the Westinghouse Company to follow prices and terms of sales from time to time fixed by the Electric Company and observed by it. The Westinghouse Company would with regard to lamps manufactured by it under the license adopt and maintain the same conditions of sale as observed by the Electric Company in the distribution of lamps manufactured by it.20
The District Court upon a full hearing dismissed the bill for want of equity. This is an appeal under section 2 of the Act of February 11, 1903 known as the Expediting Act.21
Whether the General Electric Company's distribution of incandescent lamps through more than 21,000 consignment agents violated the Anti-Trust Act of 1890?22
The owner of an article, patented or otherwise, is not violating the common law, or the Anti-Trust law, by seeking to dispose of his article directly to the consumer and fixing the price by which his agents transfer the title from him directly to such consumer. Genuine contracts of agency like those before us, however comprehensive as a mass or whole in their effect, are not violations of the Anti-Trust Act.23
No. The contracts provided that the lamps remain the property of the company until sold, the proceeds are held in trust for the company, and the agent must pay over monthly the sales value less commission while guaranteeing payment and bearing storage, cartage, and handling expenses. Since 1915 the company has assumed all risk of fire, flood, obsolescence, and price decline and carries the insurance on the consigned stocks. The District Court found upon the stipulation that the agents were genuine agents, and the Supreme Court agreed that the change in relation was in good faith and actually maintained, distinguishing from Dr. Miles Medical Company v. John D. Park & Sons Company where the contracts were found to be sales.24
The distribution plan did not violate the Anti-Trust Act of 1890.25
Whether the March 1, 1912 license granted by the General Electric Company to the Westinghouse Company, requiring the licensee to sell at prices fixed by the licensor, was valid?26
The patentee may grant a license to make, use and vend articles under the specifications of his patent for any royalty or upon any condition. The performance of the condition must be reasonably within the reward which the patentee by the grant of the patent is entitled to secure.27 The patentee who grants a license to one to make and vend the patented article may limit the licensee in the exercise of the right to sell.28 He may do so by limiting the method of sale and the price, provided the conditions of sale are normally and reasonably adapted to secure pecuniary reward for the patentee's monopoly.29
Yes. The Electric Company owns the three patents covering completely the making of the modern electric lights with the tungsten filaments. The license required the Westinghouse Company to follow prices and terms of sale from time to time fixed by the Electric Company and to adopt and maintain the same conditions of sale observed by the Electric Company. This condition is reasonably adapted to secure the pecuniary reward, as the price at which the licensee will sell will necessarily affect the price at which the licensor can sell its own patented goods, and is supported by the precedent in Bement v. National Harrow Company.30
The license granted by the Electric Company to the Westinghouse Company was valid.31