Resale Price Maintenance: Consignment Agreements, Copyrighted or Patented Products and the First Sale Doctrine

Posted by D. Daniel Sokol

Herbert J. Hovenkamp, University of Iowa - College of Law analyzes Resale Price Maintenance: Consignment Agreements, Copyrighted or Patented Products and the First Sale Doctrine.

ABSTRACT: The rule of reason adopted for resale price maintenance in the Supreme Court’s Leegin decision, which upset the century old Dr. Miles rule of per se illegality, requires some reconsideration of a number of issues about antitrust treatment of RPM. Under the old per se rule, bona fide “consignment” agreements were not covered by Section 1 of the Sherman Act at all because there was said to be no qualifying “agreement” between the supplier and the dealer. Rather the dealer was simply said to be acting as an agent of the seller. However, insofar as RPM produces competitive dangers, such as those occasioned by powerful dealers, these harms do not seem to depend on whether the transfer from the supplier to the dealer was a sale or a consignment.

Secondly, while Leegin took RPM in one direction, applying a rule of reason to conduct that had previously been unlawful per se, the Supreme Court’s Quanta Computer decision went in the other direction, restoring an invariant rule prohibiting resale price maintenance requirements from being enforced by means of patent infringement suits.