The Supreme Court yesterday gave industry a substantially broadened license to use monopoly tactics as a way of protecting the profits flowing from scientific discoveries.
The court allowed a company that had developed a new use for an unpatented chemical to deny its sale to competitors. The company's patent on the use, the court ruled 5 to 4, gave it monopoly rights to the unpatented chemical as well.
Industry argued that without such monopolistic restrictions, discovery of useful applications for previously known substances is less profitable. Hypothetically, for example, a company discovers that insulin, injected with a needle, controls diabetes. It may patent that use. But if anyone can sell insulin and a needle, the patent is of little value. So the company attempts to monopolize the sales of insulin.
The decision was based on patent law. Competitors or the government can still try to sue under antitrust laws. But knowledgeable lawyers said the threat of antitrust suits was inconsequential compared to the loss of patent rights faced by corporations before yesterday's ruling.
The decision was sought by chemical and pharmaceutical companies, who are always looking for new uses for old and unpatentable chemicals and opposed by many chemical users and the Justice Department as a price-boosting monopoly practice.
The case, like the genetic engineering controversy resolved by the court two weeks ago, revived a long standing conflict between American traditions: strong economic incentives to promote technological growth versus the desire for free-wheeling competition.
In yesterday's case and in the genetics case, where man-made organisms were ruled patentable, the justices ruled that Congress meant to tilt toward the economic incentives, even at the expense of open markets.
Yesterday's decision concerned the chemical propanil, which sat around for 50 years after its discovery without a known use. In the 1950s, Rohm and Haas Co. scientist Harold Wilson discovered propanil's use as a weed killer suitable in the cultivation of rice.
It eliminated backbreaking handweeding and the need for the flooding of rice fields, allowing cultivation of new and different rice varieties.
The company was unable to obtain a patent to protect the chemical. After a lengthy court fight, the chemical was ruled "known" to science and therefore unpatentable as a private discovery.
But in 1974 the company was able to secure a patenet on the new use -- killing weeds in rice fields.
At the time, the Dawson Chemical Co. was selling propanil to farmers on its own, instructing them on how to use it on rice.
Whem Rohm and Haas sued Dawson for patent infringement, Dawson offered to buy licenses to sell propanil and to pay Rohm and Haas royalties on such sales. Rohm and Haas refused.
Rohm and Haas charged Dawson with contributing to patent infringement by farmers, then sought an injunction blocking Dawson's continued sales. Citing Supreme Court decisions of the 1940s in similar cases, Dawson countered that its competitor's monoploy practice in denying the licenses precluded the injunction.
Yesterday, the courrt overruled its earlier holdings, endorsing what lawyers call the doctrine of "contributory infringement. Citing congressional amendments to the patent laws in 1952, Justice Harry A. Blackmun, for the majority, said that the patent on the use of propanil extended to the chemical itself and that no law requires Rohm and Haas to let others use it.
Such a ruling would not apply to chemicals with other uses, Blackmun said. But propanil has only one known use -- a rice field weed killer -- and thus Rohm and Haas may control it.
"The policy of free competition runs deep in our law," he said, "but the policy of stimulating invention that underlies the entire patent system runs no less deep."