The Legacy of A.B. Dick and Motion Picture Patents: How these 100+ Year Old Ruling Reshaped Patent Law

by Dennis Crouch

I see the US Supreme Court’s 1912 decision in Henry v. A.B. Dick Co. as a major turning point in American patent and antitrust law. 224 U.S. 1 (1912).  The Court’s 4-3 decision favored the patentee and allowed the patent owner to place restrictions on the use of its patented product even after sale. But, that decision sparked a major reform effort.  Just a few years later, the Supreme Court reversed course in Motion Picture Patents Co. v. Universal Film Mfg. Co., 243 U.S. 502 (1917), effectively overruling A.B. Dick and signaling a new largely anti-patent-monopoly era.

In A.B. Dick, the Court considered “whether a patentee or his assignee can, by a mere notice attached to a patented machine, limit the buyer to the use of unpatented supplies necessary for operating the machine, and which the buyer can procure from other sources.”  The product at issue was a patented rotary mimeograph machine.  Thomas Edison had patented what he termed an “Autographic Printing” process that used an electric pen and flatbed press.  Albert Blake Dick later built upon these ideas with the mimeograph.  He obtained his own patents and also partnered with Edison.

Although Dick/Edison had patented the machine, they were an early adopter of the subscription model and wanted to also be the exclusive seller of copying supplies.  The proposed solution then was to include a license restriction, printed each machine sold, stating that the patented machine could only be used with stencil paper, ink, and other supplies made by A.B. Dick Co.  At least according to the briefing in the case, Dick was selling the Rotary Mimeograph machines at a loss, relying on profits from the sale of supplies like ink to recoup their investment.

Third party ink seller Sidney Henry sold ink to a buyer of the machine, despite knowing of the restriction, and was sued for contributory patent infringement. Henry’s ink had been specially designed for use with the machine — undermining any arguments that the license restricted use of commodity goods.  Interestingly, although clearly specially designed for use on Dick’s rotary mimeograph, Henry’s ink can itself bore a notice stating it was not to be used on A.B. Dick’s machines — done on advice of counsel in an attempt to avoid liability.  And, when selling the ink to customers Henry advised them to pour the ink into an A.B. Dick can to conceal any violation.

Before reaching the Supreme Court, the license restriction had been upheld in multiple prior cases involving the same parties, establishing a line of precedent in A.B. Dick’s favor.  In a decision written by Justice Horace Harmon Lurton, the Court ruled in favor of the patent owner. Lurton reasoned that “the property right to a patented machine may pass to a purchaser with no right of use, or with only the right to use in a specified way, or at a specified place, or for a specified purpose.”  The three dissenting justices disagreed.  The opinion by Chief Justice Edward Douglass White argued that the majority’s ruling improperly extended the patent monopoly to unpatented supplies and impaired the public’s rights.  White explained that:

The result of the ruling just made is to extend the patent monopoly beyond its legitimate scope, to authorize restrictions which the law does not sanction, and to endanger the public interest by placing it at the mercy of patentees who may impose upon their machines conditions which will not only burden the user but which may also operate to defeat competition and to give to patentees powers which the patent law has not conferred.”

The dissenters saw a fundamental distinction between a patentee’s exclusive rights in the patented invention itself versus contractual rights in unpatented articles used with the invention.  A.B. Dick was met quick criticism, as many feared it would empower patentees to engage in abusive practices and restrain trade. Soon thereafter, the “Oldfield Bill” proposed a number of limitations on patent rights. Section 17 of the bill proposed a use requirement – if a patented invention was not being manufactured or supplied to the public after four years, the patentee would have to grant licenses to others upon demand or else the patent would be forfeited. Section 32 would have overruled A.B. Dick by prohibited placing conditions on the purchase of patented articles that would prevent the buyer from using the article freely.

The Oldfield Bill reflected the growing progressive sentiment at the time that patents were being misused by large corporations to create monopolies and harm consumers. Supporters argued the bill was necessary to prevent patent suppression and ensure access to inventions. But the bill also had many critics who saw it as a radical upending of long-settled property rights, based on an incomplete understanding of the patent system. Although the bill was seriously considered with a large number of hearings, it ultimately was not passed.

Over the five years following A.B. Dick, the make-up of the Supreme Court changed substantially — leading the Court to re-address the controversy it had created. In 1917, in the Motion Picture Patents case, the Court considered a similar license restriction – this time imposed on patented film projectors requiring that only films made by the patentee be used with the machines. Motion Picture Patents Co. v. Universal Film Mfg. Co., 243 U.S. 502 (1917).  The 1917 Court now ruled that such restrictions were unlawful, as they sought to impermissibly “continue the patent monopoly in this particular character of film after it has expired” and “to create a monopoly in the manufacture and use of moving picture films, wholly outside of the patent in suit and of the patent law.”  The new majority opinion authored by Justice John Hessin Clarke emphasized that “the primary purpose of our patent laws is not the creation of private fortunes for the owners of patents, but is ‘to promote the progress of science and useful arts.'” The Court rejected the rationale of A.B. Dick, holding that the scope of the patent grant “must be limited to the invention described in the claims of its patent.”  The court here embraced a much more restrictive view of a patentee’s rights – especially limiting its ability to impose post-sale restrictions through license agreements.  Writing in dissent, Justice Oliver Wendell Holmes argued that the patentee should have the right to impose conditions on the use of their patented machines, even if those conditions extended to unpatented supplies. He asserted that such restrictions were a legitimate exercise of property rights, an “an ordinary incident of ownership.” Holmes contended that allowing patentees to enforce these conditions was consistent with the principle that the patentee has the right to exclude others from using the invention entirely.

These pair of cases played an important role a century later in the Supreme Court’s Impression Products decision. Impression Products, Inc. v. Lexmark International, Inc., 137 S. Ct. 1523 (2017).  Lexmark sold printer toner cartridges under a “Return Program” that restricted reuse and resale. Lexmark argued that these restrictions should be enforceable through patent law, similar to the reasoning in A.B. Dick. However, the Supreme Court, echoing the sentiment from Motion Picture Patents, ruled that “a patentee’s decision to sell a product exhausts all of its patent rights in that item, regardless of any restrictions the patentee purports to impose or the location of the sale.” The Court emphasized that once a patentee sells an item, it relinquishes the patent rights to that item, rendering any post-sale restrictions unenforceable under patent law.

Chief Justice John Roberts, writing for the Lexmark majority, cited Motion Picture Patents to reinforce the principle that post-sale restrictions are not permissible under patent law. He reiterated, “[t]he primary purpose of our patent laws is not the creation of private fortunes for the owners of patents but is ‘to promote the progress of science and useful arts.'” quoting Motion Picture Patents.

The Impression Products case also addressed the international exhaustion of patent rights. Lexmark contended that foreign sales should not exhaust U.S. patent rights unless expressly stated. The Court disagreed, ruling that “an authorized sale outside the United States, just as one within the United States, exhausts all rights under the Patent Act.” Justice Ruth Bader Ginsburg dissented in part, specifically regarding the issue of international exhaustion. She argued that a foreign sale should not exhaust U.S. patent rights because U.S. patent law is inherently territorial, granting no protections outside the United States. Justice Ginsburg emphasized that U.S. patents provide no authority abroad, and therefore, a sale in a foreign market should not affect the patentee’s rights within the United States.

Claim Drafting: The Supreme Court’s ruling in Motion Picture Patents highlighted the critical importance of careful and precise claim drafting in patent applications. By holding that the scope of the patent grant “must be limited to the invention described in the claims of its patent,” the Court made clear that the metes and bounds of the patentee’s rightful monopoly rights would be defined by the language of the claims. This placed a new onus on patent drafters to craft claims that accurately captured the full scope of the invention. In the wake of Motion Picture Patents, it became even more crucial for inventors and their patent attorneys to invest time and effort into the claim drafting process. Claim drafting strategy had to take into account not only the technical details of the invention, but also the legal landscape and the potential for antitrust challenges.

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I should note here that Henry v. Dick had already been somewhat undermined by the 1917 Motion Picture Patent decision.  In Bauer & Cie v. O’Donnell, 229 U.S. 1 (1914), for instance, the court held that a patentee may not set price limits on future retail sales of a patented article simply by placing a notice on the item (assuming that the original buyer had not negotiated a lower price in consideration for the price limit).