United States Law and the Proposed Code of Conduct on the Transfer of Technology

Published date01 December 1978
DOI10.1177/0003603X7802300406
Date01 December 1978
Subject MatterArticle
UNITED
STATES
LAW
AND
THE
PROPOSED CODE OF CONDUCT
ON
THE
TRANSFER
OF TECHNOLOGY
by
MARK
R. JOELSON*
For some time, the nations of the world have been making
an effort, under the auspices of the United Nations Confer-
ence on Trade and Development
(UNCTAD),
to negotiate an
international code of conduct on the transfer of technology.
The impetus for this work has come from the developing
nations, who have asserted
that
technology is the universal
heritage of mankind and
that
legally binding rules must be
adopted to shield their economies and nationals from undesir-
able licensing practices by the transnational enterprises who
control the bulk of the technology. The developed nations, for
their part, have taken the position
that
any guidelines should
be voluntary in nature and
that
freedom of contract should
continue to have broad leeway in this area. As of this writing,
despite years of preparatory work by experts and the conclu-
sion of a four-week plenary negotiating conference in Geneva,
the gap between the Group of 77 (the developing nations) and
the Group B nations (the non-communist developed nations)
remains wide.
One important battleground has been the question of what
types of provisions in patent, know-how, and associated trade-
mark licensing agreements should be deemed restrictive busi-
ness practices and hence improper. The developed nations,
finding applicable reference points in the antitrust and
com-
petition laws of the United States, the European Economic
Community, and the like, proposed a relatively short list of
abusive licensing practices. The developing countries, with lit-
tle interest in competition law as such and primarily con-
~erned
with their national development, presented a lengthy
*Arent, Fox, Kintner, Plotkin &Kahn, Washington, D.C.
835
836 THE ANTITRUST BULLETIN
list of provisions to be proscribed. These ranged in subject
matter across the broad spectrum of licensing practices, many
outside the scope of Western antitrust doctrine.
The following discussion summarizes the applicable United
States law with respect to the types of licensing provisions
that
the developing nations maintained should be deemed
restrictive business practices. It is a slightly revised version of
the report
that
was prepared by the author in 1977 at the
request of, and for the use of, the
UNCTAD
Secretariat.1
RESTRICTIONS OR OBLIGATIONS
AFTER
EXPIRATION OF INDUSTRIAL PROPERTY
(a) In Scott Paper
Co.
v. Marcalus Mfg.
Co.,
(1945)
the U.S. Supreme Court observed
that
[i]f a manufacturer or user could restrict himself, by
express contract
...
from using the invention of an
expired patent, he would deprive himself and the consum-
ing public of the advantage to be derived from his free
use of the [patent] disclosures
....
Hence any attempted
reservation or continuation in the patentee or those
claiming under him
of
the patent monopoly, after the
patent expires, whatever the legal device employed, runs
counter to the policy and purpose
of
the patent laws.
[Id.
at 255-56 (emphasis added)]
This quotation states the general United States policy toward
restraints purporting to apply after expiration of industrial
property rights. The major problems
that
have developed in
the area of such post-expiration restraints have involved
efforts by licensors to require payments of royalties on the use
of a patented invention after the patent has expired. In
1Acompilation by the Secretariat of the various relevant
national laws and policies, drawing from the contributions of the
author and other consultants, is available in
UNCTAD
Secretariat,
Control of Restrictive Practices in 'Iransfer of
Thchnology
'Iransac-
tions, U.N.
Doc.
TD/AC.
1/17
(1978).
CODE OF CONDUCT ON TECHNOLOGY TRANSFER 837
Brulotte v. Thys
Co.,
379 U.S. 29 (1964), the Supreme Court
held
that
such a practice was unlawful per se. The post-
expiration payments in Brulotte were deemed intended as
royalties for post-expiration use, and not as deferred payments
of royalties for pre-expiration use.
It
appears from the Court's
opinion
that
such deferred payments would have been
permissible. See also Huyck
Corp.
v. Albany International
Corp., 193 U.S.P.Q. 200
(M.D.
Ala. 1977), upholding the
lawfulness of a lump sum payment spread over a period longer
than the life of the patent.
(b) Many of the progeny of Brulotte have involved more
complicated factual situations concerning multiple-patent
licenses.
In
McCullough
Tool
Co.
v. Well Surveys, Inc., 343 F.
2d 381 (10th Cir. 1965), cert. denied, 383 U.S. 933 (1966), the
court upheld the propriety of a license agreement, entered into
voluntarily, providing for level royalties to be payable on a
package of patents, some of which had expired or would
expire during the effective period of the agreement. The
deci-
sive considerations for the court were
that
the term of the
license did not extend beyond
that
of the last-to-expire patent
(as had been the case in Brulotte) and
that
there had been no
refusal to license other than on a package basis.
See
also Well
Surveys, Inc. v. Perfo-Log, Inc., 396F.2d 15 (10th Cir.), cert.
denied, 393 U.S. 951 (1968).
On the other hand, in American Securit
Co.
v. Shatter-
proof Glass
Corp.,
268F.2d 769 (3d Cir.), cert. denied, 361
U.S. 902 (1959), the court suggested
that
a package license
that
required level royalties until expiration of the last-to-
expire patent constituted patent misuse. In this case there
apparently was no option but to take a license on the entire
package of patents. In Beckman Instruments, Inc. v. Technical
Development
Corp.,
433F.2d 55 (7th Cir. 1970), cert. denied,
401 U.S. 976 (1971), the court followed the Tenth Circuit's
Well Surveys decisions upholding voluntary agreements to pay
level royalties upon a package of patents expiring during the
term of the license. If, however, such agreement was not