Know-How Licensing and the Antitrust Laws

DR Macdonald - J. Pat. Off. Soc'y, 1964 - HeinOnline
DR Macdonald
J. Pat. Off. Soc'y, 1964HeinOnline
By David R. Magdonald f Sixty-nine years ago, a German inventor named Christensen
walked into the offices of the American Aristotype Company and successfully demonstrated
a secret process for manufacturing photographic printing-out paper. Thereupon, American
Aristotype purchased exclusive rights to use the process and sell products made therefrom
throughout the world, except in Europe and England. Christensen, in turn, agreed to limit his
utilization of the process and sales to Europe and England. In commenting upon the validity …
By David R. Magdonald f Sixty-nine years ago, a German inventor named Christensen walked into the offices of the American Aristotype Company and successfully demonstrated a secret process for manufacturing photographic printing-out paper. Thereupon, American Aristotype purchased exclusive rights to use the process and sell products made therefrom throughout the world, except in Europe and England. Christensen, in turn, agreed to limit his utilization of the process and sales to Europe and England. In commenting upon the validity of this agreement under the antitrust laws, 1 a court of appeals in 1931 noted that it constituted" a typical sale of property with a restrictive covenant against competition by the vendor, valid in law. The validity of the contract was heightened, if possible, by the character of the property—a grant of rights in a secret process." 2 Eighteen years after this decision, another federal court invalidated a territorial division contained in licenses of know-how pertaining to the manufacture of tapered roller bearings, stating:
One who possesses greater knowledge or superior skill in the manufacture of a product is entitled to be fairly and adequately compensated if he furnishes his knowledge or skill to others. He is not entitled, however, to exact as a price for such contribution, complete freedom from competition. The quid pro quo for furnishing of know-how cannot be an absolute license to avoid the provisions of the Sherman Act, The harm caused thereby would be too great a tribute to knowledge and skill when viewed in the light of public policy. 3
HeinOnline