The Relation of Patents to Industrial Monopolies

• Author: Floyd L. Vaughan
• Published date: 01 January 1930
• Date: 01 January 1930
• DOI: http://doi.org/10.1177/000271623014700106
• Subject Matter: Articles

40

The

Relation

of

Patents

to

Industrial

Monopolies

By

FLOYD

L.

VAUGHAN

Professor

of

Economics,

University

of

Oklahoma,

Norman,

Oklahoma

P ATENTS

have

been

used

to

fur-

Jt.

ther

the

restraint

of

trade

and

the

creation

of

industrial

monopolies.

The

exploitation

of

patents

in

this

fashion

has

been

most

pronounced

since

the

passage

of

the

Sherman

Act

in

1890.

Many

corporations

have

sought

to

evade

this

Law,

together

with

the

Clayton

Act

of

1914,

both

of

which

denounce

restraint

of

trade

and

monop-

oly.

Some

of

them

haves

proceeded

on

the

assumption

that

patents

might

lend

legal

immunity

to

their

designs

because

patents

themselves

confer

legal

monopolies-the

exclusive

right

to

make,

use

and

sell.

Patents

have

been

used

to

defeat

the

purpose

of

the

anti-trust

laws

by

means

of

pools,

consolidations

and

unfair

competition,

all

three

of

which

will

be

described

and

discussed

in

this

article.l

THE

PATENT

POOL

A

patent

pool

is

an

arrangement

by

which

former

competitors

partake

of

the

privileges

conferred

by

one

or

more

patents

according

to

some

prearranged

basis

designed

to

restrain

trade.

The

pool,

the

typical

form

of

combination

during

the

early

nineties,

was

employed

by

the

owners

of

patents,

as

well

as

others,

in

trying

to

eliminate

com-

petition.

Those

in

control

of

the

patents

of

pools

may

be

grouped

according

to

whether

they

are

assignees

or

owners,

individuals

or

companies,

manufac-

turers

or

mere

possessors

of

patents.

In

some

instances

an

assignee

con-

trolled

the

patents;

in

others,

the

owners

of

them.

The

Consolidated

Seeded

Raisin

Company

and

the

Mo-

tion

Picture

Patents

Company

illus-

trate

the

former,

and

the

Rubber

Tire

Wheel

Company

and

Indiana

Manufac-

turing

Company,

the

latter.

In

one

instance-the

liquid

door

check

com-

bination-various

owners

of

patents

pooled

them

by

agreement

and

without

assignment.

In

the

bathtub

pool

an

individual

controlled

the

patents;

in

other

pools,

a

company.

Those

in

charge

of

the

patents

of

the

rubber

tire

and

coaster

brake

pools

were

also

engaged

in

manufacturing

the

products

covered

by

the

respective

groups

of

patents;

whereas

those

in

control

of

the

patents

of

the

harrow,

seeded

raisin,

wind-stacker,

bathtub

and

motion

picture

pools

confined

themselves

to

the

possession

of

patents

and

the

supervision

of

licensees.

TYPES

OF

POOLS

The

details

of

patent

pools

differed

as

to

the

number

of

business

units

that

contributed

patents

to

further

this

form

of

combination.

The

Rubber

Tire

Wheel

Company

and

the

Indiana

Manufacturing

Company

were

the

sole

owners

of

patents

in

the

rubber

tire

and

wind-stacker

pools;

the

former

used

one

patent

as

the

basis

of

license

agreements,

while

the

latter

employed

several

patents.

Two

or

more

con-

cerns,

but

not

all

the

members

of

the

pool,

furnished

patents

as

a

basis

for

the

arrangement

in

the

bathtub

and

motion

picture

pools.

Each

member

contributed

one

or

more

patents

in

the

harrow,

seeded

raisin,

liquid

door

1

Much

of

the

material

in

this

treatise

is

taken

from

Vaughan,

Economics

of

Our

Patent

System

(Macmillan).

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