United States V. General Electric Co. - Subsequent Developments

Subsequent Developments

The U.S. Department of Justice has been trying to overturn the 1926 GE decision almost since it was first handed down, and has twice seen it upheld by an equally divided 4-4 Supreme Court.

Subsequent decisions of the Court, however, have repeatedly circumscribed the scope of the dispensation that the 1926 GE case offers. It does not apply when several patentees pool their patents or when the patentee has multiple licensees. It does not apply when the patentee-licensor is not itself a manufacturer licensing competitive manufacturers. It does not apply to a price-fix on an unpatented product made by a patented machine or patented method.

The United States Court of Appeals for the Federal Circuit has continued to rely on what is termed, above, the core of the opinion. In Mallinckrodt, Inc. v. Medipart, Inc., the Federal Circuit relied on GE as the basis for its ruling that the patentee’s post-sale restrictions were not prohibited under the exhaustion doctrine. The Federal Circuit’s Quanta decision relied for its rationale on Mallinckrodt, and thus on GE. But the Supreme Court’s reversal of that decision in Quanta Computer, Inc. v. LG Electronics, Inc. has created uncertainty about the continuing authority of this line of precedent and has left this area of law unsettled.

In its initial brief in the Quanta case, as amicus curiae, the United States had pointed to the "seeming anomaly" between the two lines of authority that the GE case addresses. One line is represented by the Supreme Court's "exhaustion" cases such as United States v. Univis Lens Co. and Quanta. Another line is reflected by such decisions and GE and General Talking Pictures Corp. v. Western Elec. Co.. Mallinckrodt seemed to expand the scope of the second line of authority at the expense of the first, but now Quanta may be reversing the direction of expansion. This area of law may thus remain unsettled for several years.