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UNITED STATES v. GE

August 18, 1969

United States, Plaintiff
v.
General Electric Co., Defendant.


Tyler, D.J.


The opinion of the court was delivered by: TYLER

TYLER, D.J.:

Ever since Simpson v. Union Oil Co., 377 U.S. 13, 12 L. Ed. 2d 98, 84 S. Ct. 1051 (1964), was decided by the Supreme Court, legal scholars have mooted the interesting antitrust question of whether the celebrated case of United States v. General Electric Co., 272 U.S. 476, 71 L. Ed. 362, 47 S. Ct. 192 (1926), would be decided in the same way under the current state of the law. On these cross motions for summary judgment, counsel for both parties have made a commendable effort to bring that precise issue before the court. I conclude, however, that despite extensive stipulations by counsel which have saved the court much time and effort, the inevitable passage of time has or may have affected the factual situation which existed in 1926, and that at least one critical fact is in substantial controversy, precluding the grant of summary judgment at this juncture.

 General Electric Company's ("GE") system of distributing the large lamps it manufactures to the public is well known and has been discussed at length in two prior decisions terminating litigations brought by the government. United States v. General Electric Co., supra; United States v. General Electric Co., 82 F. Supp. 753 (D.N.J. 1949). The government concedes that the present distribution system "is not significantly different" from the system as it existed at the time of the two earlier litigations, and the parties have stipulated to a description of the particulars of the system. (See Stip. of Facts No. 1.) The central feature of the system, and the one under attack here, is that GE sets the price at which a large volume of its lamps is sold to the consuming public by its consignees. These lamps are distributed to the public through consignment agreements between GE and otherwise independent businesses - electric power companies, electrical equipment distributors, retail grocery, drug and hardware stores, and others. (See Stip. of Facts No. 1.)

 Of crucial significance on these motions is the state of GE's patents on large lamps. In 1926 it was apparently undisputed that GE's patents in this area were controlling on the industry. Obviously, the patents then in existence have now expired. It has been stipulated in this case that since 1955 GE has applied for and received 250 patents in the large lamp field. The record, however, is barren of information as to the effect these or other current GE patents have on the production and sale of various types of large lamps by other electrical manufacturers. Significantly, the government has conceded, for purposes of its own motion for summary judgment only, that GE's patents are controlling in the large lamp area.

 I.

 The Simpson Case

 Since my conclusion that summary judgment can be granted to neither party is grounded in large part on my reading of the Simpson case, it will be helpful to examine that decision in relevant part. Simpson, a gas station operator selling for Union Oil, claimed that Union Oil had violated the Sherman Act by enforcing a resale price maintenance system of distributing unpatented gasoline. He claimed to have been injured by the cancellation of his one year lease and consignment agreement which had come about because of his pricing at rates different from those set by Union Oil.

 The gasoline was distributed through consignment agreements with individual station operators. The Court assumed that the consignment arrangements were valid between the parties as a matter of state law, but stated that "a consignment, no matter how lawful it might be as a matter of private contract law, must give way before the federal antitrust policy." 377 U.S. at 18. The Court's legal conclusion is instructive here:

 
" . . . When, however, a 'consignment' device is used to cover a vast gasoline distribution system, fixing prices through many retail outlets, the antitrust laws prevent calling the 'consignment' an agency, for then the end result of United States v. Socony-Vacuum Oil Co., supra, would be avoided merely by clever manipulation of words, not by differences in substance. The present, coercive 'consignment' device, if successful against challenge under the antitrust laws, furnishes a wooden formula for administering prices on a vast scale." 377 U.S. at 21-22.

 The important feature of the case for our purposes is the manner in which the Court differentiated Union Oil's system from the GE system before the Court in 1926: *fn1"

 
" . . . Union Oil correctly argues that the consignment in General Electric somewhat parallels the one in the instant case. The Court in the General Electric case did not restrict its ruling to patented articles; it, indeed, said that the use of the consignment device was available to the owners of articles 'patented or otherwise.' Id., at 488. But whatever may be said of the General Electric case on its special facts, involving patents, it is not apposite to the special facts here.
 
The Court in that case particularly relied on the fact that patent rights have long included licenses 'to make, use and vend' the patented article 'for any royalty or upon any condition the performance of which is reasonably within the reward which the patentee by the grant of the patent is entitled to secure.' Id., at 489. . . .
 
* * *
 
The patent laws which gave a 17-year monopoly on 'making, using, or selling the invention' are in pari materia with the antitrust laws and modify them pro tanto. That was the ratio decidendi of the General Electric case. See 272 U.S., at ...

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