827 Opinion of the Court. instant situation. This royalty provision does not create another monopoly; it creates no restraint of competition beyond the legitimate grant of the patent. The right to a patent includes the right to market the use of the patent at a reasonable return. See 46 Stat. 376, 35 U. S. C. § 40; Hartford-Empire Co. v. United States, 323 U. S. 386, 417, 324 U. S. 570, 574. The licensing agreement in issue was characterized by the District Court as essentially a grant by Hazeltine to petitioner of a privilege to use any patent or future development of Hazeltine in consideration of the payment of royalties. Payment for the privilege is required regardless of use of the patents. The royalty provision of the licensing agreement was sustained by the District Court and the Court of Appeals on the theory that it was a convenient mode of operation designed by the parties to avoid the necessity of determining whether each type of petitioner's product embodies any of the numerous Hazeltine patents. 77 F. Supp. at 496. The Court of Appeals reasoned that since it would not be unlawful to agree to pay a fixed sum for the privilege to use patents, it was not unlawful to provide a variable consideration measured by a percentage of the licensee's sales for the same privilege. 176 F. 2d at 804. Numerous District Courts which have had occasion to pass on the question have reached the same result on similar grounds, and we are of like opinion. 6 In this view of the contract we need not concern ourselves with the controversy between counsel as to whether the transcript shows a factual dispute over the use or non-use of Hazeltine patents by petitioner in its products. Hazeltine Research v. Admiral Corp., 87 F. Supp. 72, 79; H-P-M Development Corp. v. Watson-Stillman Co., 71 F. Supp. 906, 912; American Optical Co. v. New Jersey Optical Co., 58 F. Supp. 601, 606; Ohio Citizens Trust Co. v. Air-Way Electric Appliance Corp., 56 F. Supp. 1010, 1012; Cf. Pyrene Mfg. Co. v. Urquhart, 69 F. Supp. 555, 560; International Carbonic Engineering Co. v. Natural Car 874433 O-50-57 Opinion of the Court. 339 U.S. The mere accumulation of patents, no matter how many, is not in and of itself illegal. See Transparent-Wrap Machine Corp. v. Stokes & Smith Co., 329 U. S. 637. And this record simply does not support incendiary, yet vague, charges that respondent uses its accumulation of patents. "for the exaction of tribute" and collects royalties "by means of the overpowering threat of disastrous litigation." We cannot say that payment of royalties according to an agreed percentage of the licensee's sales is unreasonable. Sound business judgment could indicate that such payment represents the most convenient method of fixing the business value of the privileges granted by the licensing agreement. We are not unmindful that convenience cannot justify an extension of the monopoly of the patent. See, e. g., Mercoid Corp. v. Mid-Continent Investment Co., 320 U. S. 661, 666; B. B. Chemical Co. v. Ellis, 314 U. S. 495, 498. But as we have already indicated, there is in this royalty provision no inherent extension of the monopoly of the patent. Petitioner cannot complain. because it must pay royalties whether it uses Hazeltine patents or not. What it acquired by the agreement into which it entered was the privilege to use any or all of the patents and developments as it desired to use them. If it chooses to use none of them, it has nevertheless contracted to pay for the privilege of using existing patents plus any developments resulting from respondent's continuous research. We hold that in licensing the use of patents to one engaged in a related enterprise, it is not per se a misuse of patents to measure the consideration by a percentage of the licensee's sales. Second. It is next contended by petitioner that the license agreement is unenforceable because it contained a provision requiring the following restrictive notice to be bonic Products, 57 F. Supp. 248, 251-253, affirmed, 158 F. 2d 285. At least one state court has reached this result. Hazeltine Research v. De Wald Radio Corp., 84 N. Y. S. 2d 597, 603. 827 Opinion of the Court. attached to apparatus manufactured by petitioner under the agreement: ''Licensed by Hazeltine Corporation only for use in homes, for educational purposes, and for private, non-commercial use, under one or more of the following patents and under pending applications:' followed by the word 'Patent' and the numbers of the patents which are, in the opinion of Licensor, involved in apparatus of the types licensed hereunder manufactured by one or more licensees of Licensor." Respondent did not seek to have this provision of the agreement enforced, and the decree of the District Court does not enforce it. It may well have been a dead letter from the beginning, as indicated by the fact that, as petitioner averred in its answer, it has never observed this provision of the agreement. Thus it is doubtful that the legality of this provision could be contested, even assuming that the issue was properly raised, which respondent disputes. In any event, it is clear that any issue with respect to this provision of the agreement is moot. An affidavit of the president of respondent corporation advises us of certain letters which were sent by respondent in September 1945, to each of its licensees, including petitioner. These letters authorized the discontinuance of the restrictive notice provision and the substitution of the marking "This apparatus is licensed under the United States patent rights of HAZELTINE CORPORATION." It is further averred that this form of notice is all that respondent has required of its licensees since September 1945. Since this provision of the agreement was made for the benefit of respondent, it could voluntarily waive the provision. Westinghouse Electric Corp. v. Bulldog Electric Products Co., 179 F. 2d 139, 145, 146. Thus the question of the legality of the original restrictive notice DOUGLAS, J., dissenting. 339 U. S. provision is not before us. Cf. Standard Oil Co. v. United States, 283 U. S. 163, 181–182. Third. Finally, it is contended that notwithstanding the licensing agreement, petitioner-licensee may contest the validity of the patents it is charged with using. The general rule is that the licensee under a patent license agreement may not challenge the validity of the licensed patent in a suit for royalties due under the contract. United States v. Harvey Steel Co., 196 U. S. 310. The general principle of the invalidity of price-fixing agreements may be invoked by the licensee of what purport to be valid patents to show in a suit for royalties that the patents are invalid. Katzinger Co. v. Chicago Metallic Mfg. Co., 329 U. S. 394; MacGregor v. Westinghouse Elec. & Mfg. Co., 329 U. S. 402. There is no showing that the licensing agreement here or the practices under it were a misuse of patents or contrary to public policy. This limited license for "home" use production contains neither an express nor implied agreement to refrain from production for "commercial" or any other use as part consideration for the license grant. The Katzinger and MacGregor cases are inapplicable. The general rule applies, and petitioner may not, in this suit, challenge the validity of the licensed patents. The judgment of the Court of Appeals is Affirmed. MR. JUSTICE JACKSON took no part in the consideration or decision of this case. MR. JUSTICE DOUGLAS, with whom MR. JUSTICE BLACK concurs, dissenting. We are, I think, inclined to forget that the power of Congress to grant patents is circumscribed by the Constitution. The patent power, of all legislative powers, is indeed the only one whose purpose is defined. Article 827 DOUGLAS, J., dissenting. I, § 8 describes the power as one "To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries." This statement of policy limits the power itself. The Court in its long history has at times been more alive to that policy than at other times. During the last three decades it has been as devoted to it (if not more so) than at any time in its history. I think that was due in large measure to the influence of Mr. Justice Brandeis and Chief Justice Stone. They were alert to the danger that business-growing bigger and bigger each decadewould fasten its hold more tightly on the economy through the cheap spawning of patents and would use one monopoly to beget another through the leverage of key patents. They followed in the early tradition of those who read the Constitution to mean that the public interest in patents comes first, reward to the inventor second.1 First. Mr. Justice Brandeis and Chief Justice Stone did not fashion but they made more secure one important rule designed to curb the use of patents. It is as follows: One who holds a patent on article A may not license the use of the patent on condition that B, an unpatented article, be bought. Such a contract or agreement would be an extension of the grant of the patent contrary to a long line of decisions. See Motion Picture Patents Co. v. Universal Film Co., 243 U. S. 502; Carbice Corp. v. American Patents Corp., 283 U. S. 27; Morton Salt Co. v. Suppiger Co., 314 U. S. 488, 491-92; United States v. Masonite Corp., 316 U. S. 265, 277, 278; Mercoid Corp. v. Mid-Continent Investment Co., 320 U. S. 661, 666; 1 See Mr. Justice Story in Pennock v. Dialogue, 2 Pet. 1; Mr. Justice Daniel in Kendall v. Winsor, 21 How. 322; Mr. Justice Campbell in Winans v. Denmead, 15 How. 330, 344 (dissenting opinion). 2 See Hamilton, Patents and Free Enterprise, T. N. E. C. Monograph No. 31, 76th Cong., 3d Sess., pp. 62-70. |