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DAWSON CHEMICAL CO. ET AL. v. ROHM & HAAS CO.

decided: June 27, 1980.

DAWSON CHEMICAL CO. ET AL
v.
ROHM & HAAS CO.



CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT.

Blackmun, J., delivered the opinion of the Court, in which Burger, C. J., and Stewart, Powell, and Rehnquist, JJ., joined. White, J., filed a dissenting opinion, in which Brennan, Marshall, and Stevens, JJ., joined, post, p. 223. Stevens, J., filed a dissenting opinion, post, p. 240.

Author: Blackmun

[ 448 U.S. Page 179]

 MR. JUSTICE BLACKMUN delivered the opinion of the Court.

This case presents an important question of statutory interpretation arising under the patent laws. The issue before us is whether the owner of a patent on a chemical process is guilty of patent misuse, and therefore is barred from seeking relief against contributory infringement of its patent rights, if it exploits the patent only in conjunction with the sale of an unpatented article that constitutes a material part of the invention and is not suited for commercial use outside the scope of the patent claims. The answer will determine whether respondent, the owner of a process patent on a chemical herbicide, may maintain an action for contributory infringement against other manufacturers of the chemical used in the process. To resolve this issue, we must construe the various provisions of 35 U. S. C. § 271, which Congress enacted in 1952 to codify certain aspects of the doctrines of contributory infringement and patent misuse that previously had been developed by the judiciary.

I

The doctrines of contributory infringement and patent misuse have long and interrelated histories. The idea that a patentee should be able to obtain relief against those whose

[ 448 U.S. Page 180]

     acts facilitate infringement by others has been part of our law since Wallace v. Holmes, 29 F. Cas. 74 (No. 17,100) (CC Conn. 1871). The idea that a patentee should be denied relief against infringers if he has attempted illegally to extend the scope of his patent monopoly is of somewhat more recent origin, but it goes back at least as far as Motion Picture Patents Co. v. Universal Film Mfg. Co., 243 U.S. 502 (1917). The two concepts, contributory infringement and patent misuse, often are juxtaposed, because both concern the relationship between a patented invention and unpatented articles or elements that are needed for the invention to be practiced.

Both doctrines originally were developed by the courts. But in its 1952 codification of the patent laws Congress endeavored, at least in part, to substitute statutory precepts for the general judicial rules that had governed prior to that time. Its efforts find expression in 35 U. S. C. § 271:

"(a) Except as otherwise provided in this title, whoever without authority makes, uses or sells any patented invention, within the United States during the term of the patent therefor, infringes the patent.

"(b) Whoever actively induces infringement of a patent shall be liable as an infringer.

"(c) Whoever sells a component of a patented machine, manufacture, combination or composition, or a material or apparatus for use in practicing a patented process, constituting a material part of the invention, knowing the same to be especially made or especially adapted for use in an infringement of such patent, and not a staple article or commodity of commerce suitable for substantial noninfringing use, shall be liable as a contributory infringer.

"(d) No patent owner otherwise entitled to relief for infringement or contributory infringement of a patent shall be denied relief or deemed guilty of misuse or illegal extension of the patent right by reason of his having

[ 448 U.S. Page 181]

     done one or more of the following: (1) derived revenue from acts which if performed by another without his consent would constitute contributory infringement of the patent; (2) licensed or authorized another to perform acts which if performed without his consent would constitute contributory infringement of the patent; (3) sought to enforce his patent rights against infringement or contributory infringement."

Of particular import to the present controversy are subsections (c) and (d). The former defines conduct that constitutes contributory infringement; the latter specifies conduct of the patentee that is not to be deemed misuse.

A

The catalyst for this litigation is a chemical compound known to scientists as "3, 4-dichloropropionanilide" and referred to in the chemical industry as "propanil." In the late 1950's, it was discovered that this compound had properties that made it useful as a selective, "post-emergence " herbicide particularly well suited for the cultivation of rice. If applied in the proper quantities, propanil kills weeds normally found in rice crops without adversely affecting the crops themselves. It thus permits spraying of general areas where the crops are already growing, and eliminates the necessity for hand weeding or flooding of the rice fields. Propanil is one of several herbicides that are commercially available for use in rice cultivation.

Efforts to obtain patent rights to propanil or its use as a herbicide have been continuous since the herbicidal qualities of the chemical first came to light. The initial contender for a patent monopoly for this chemical compound was the Monsanto Company. In 1957, Monsanto filed the first of three successive applications for a patent on propanil itself. After lengthy proceedings in the United States Patent Office, a patent, No. 3,382,280, finally was issued in 1968. It was declared

[ 448 U.S. Page 182]

     invalid, however, when Monsanto sought to enforce it by suing Rohm and Haas Company (Rohm & Haas), a competing manufacturer, for direct infringement. Monsanto Co. v. Rohm & Haas Co., 312 F.Supp. 778 (ED Pa. 1970), aff'd, 456 F.2d 592 (CA3), cert. denied, 407 U.S. 934 (1972). The District Court held that propanil had been implicitly revealed in prior art dating as far back as 1902, even though its use as a herbicide had been discovered only recently. 312 F.Supp., at 787-790. Monsanto subsequently dedicated the patent to the public, and it is not a party to the present suit.

Invalidation of the Monsanto patent cleared the way for Rohm & Haas, respondent here, to obtain a patent on the method or process for applying propanil. This is the patent on which the present lawsuit is founded. Rohm & Haas' efforts to obtain a propanil patent began in 1958. These efforts finally bore fruit when, on June 11, 1974, the United States Patent Office issued Patent No. 3,816,092 (the Wilson patent) to Harold F. Wilson and Dougal H. McRay.*fn1 The patent contains several claims covering a method for applying propanil to inhibit the growth of undesirable plants in areas containing established crops.*fn2 Rohm & Haas has been the sole owner of the patent since its issuance.

[ 448 U.S. Page 183]

     Petitioners, too, are chemical manufacturers. They have manufactured and sold propanil for application to rice crops since before Rohm & Haas received its patent. They market the chemical in containers on which are printed directions for application in accordance with the method claimed in the Wilson patent. Petitioners did not cease manufacture and sale of propanil after that patent issued, despite knowledge that farmers purchasing their products would infringe on the patented method by applying the propanil to their crops. Accordingly, Rohm & Haas filed this suit, in the United States District Court for the Southern District of Texas, seeking injunctive relief against petitioners on the ground that their manufacture and sale of propanil interfered with its patent rights.

The complaint alleged not only that petitioners contributed to infringement by farmers who purchased and used petitioners' propanil, but also that they actually induced such infringement by instructing farmers how to apply the herbicide. See 35 U. S. C. §§ 271 (b) and (c). Petitioners responded to the suit by requesting licenses to practice the patented method. When Rohm & Haas refused to grant such licenses, however, petitioners raised a defense of patent misuse and counterclaimed for alleged antitrust violations by respondent. The parties entered into a stipulation of facts, and petitioners moved for partial summary judgment. They argued that Rohm & Haas has misused its patent by conveying the right to practice the patented method only to purchasers of its own propanil.

The District Court granted summary judgment for petitioners. 191 USPQ 691 (1976). It agreed that Rohm & Haas was barred from obtaining relief against infringers of its patent because it had attempted illegally to extend its patent monopoly. The District Court recognized that 35 U. S. C.

[ 448 U.S. Page 184]

     § 271 (d) specifies certain conduct which is not to be deemed patent misuse. The court ruled, however, that "[the] language of § 271 (d) simply does not encompass the totality of [Rohm & Haas'] conduct in this case." 191 USPQ, at 704. It held that respondent's refusal to grant licenses, other than the "implied" licenses conferred by operation of law upon purchasers of its propanil, constituted an attempt by means of a "tying" arrangement to effect a monopoly over an unpatented component of the process. The District Court concluded that this conduct would be deemed patent misuse under the judicial decisions that preceded § 271 (d), and it held that "[neither] the legislative history nor the language of § 271 indicates that this rule has been modified." 191 USPQ, at 707.*fn3

The United States Court of Appeals for the Fifth Circuit reversed. 599 F.2d 685 (1979). It emphasized the fact that propanil, in the terminology of the patent law, is a "nonstaple" article, that is, one that has no commercial use except in connection with respondent's patented invention. After a thorough review of the judicial developments preceding enactment of § 271, and a detailed examination of the legislative history of that provision, the court concluded that the legislation restored to the patentee protection against contributory infringement that decisions of this Court theretofore had undermined. To secure that result, Congress found it necessary to cut back on the doctrine of patent misuse. The Court of Appeals determined that, by specifying in § 271 (d) conduct that is not to be deemed misuse, "Congress

[ 448 U.S. Page 185]

     made or especially adapted for use in an infringement of [the] patent," and that it is "not a staple article or commodity of commerce suitable for substantial noninfringing use," all within the language of 35 U. S. C. § 271 (c).*fn6 They also concede that they have produced and sold propanil with knowledge that it would be used in a manner infringing on respondent's patent rights. To put the same matter in slightly different terms, as the litigation now stands, petitioners admit commission of a tort and raise as their only defense to liability the contention that respondent, by engaging in patent misuse, comes into court with unclean hands.*fn7

As a result of these concessions, our chief focus of inquiry must be the scope of the doctrine of patent misuse in light of the limitations placed upon that doctrine by § 271 (d). On this subject, as well, our task is guided by certain stipulations and concessions. The parties agree that Rohm & Haas makes and sells propanil; that it has refused to license petitioners or any others to do the same; that it has not granted express licenses either to retailers or to end users of the product; and that farmers who buy propanil from Rohm & Haas may use it, without fear of being sued for direct infringement, by virtue of an "implied license" they obtain when Rohm & Haas relinquishes its monopoly by selling the propanil. See App. 35-39. See also United States v. Univis Lens Co., 316 U.S. 241, 249 (1942); cf. Adams v. Burke, 17 Wall. 453 (1873). The parties further agree that §§ 271 (d)(1) and (3) permit respondent both to sell propanil itself and to sue

[ 448 U.S. Page 187]

     others who sell the same product without a license, and that under § 271 (d)(2) it would be free to demand royalties from others for the sale of propanil if it chose to do so.

The parties disagree over whether respondent has engaged in any additional conduct that amounts to patent misuse. Petitioners assert that there has been misuse because respondent has "tied" the sale of patent rights to the purchase of propanil, an unpatented and indeed unpatentable article, and because it has refused to grant licenses to other producers of the chemical compound. They argue that § 271 (d) does not permit any sort of tying arrangement, and that resort to such a practice excludes respondent from the category of patentees "otherwise entitled to relief" within the meaning of § 271 (d). Rohm & Haas, understandably, vigorously resists this characterization of its conduct. It argues that its acts have been only those that § 271 (d), by express mandate, excepts from characterization as patent misuse. It further asserts that if this conduct results in an extension of the patent right to a control over an unpatented commodity, in this instance the extension has been given express statutory sanction.

II

Our mode of analysis follows closely the trail blazed by the District Court and the Court of Appeals. It is axiomatic, of course, that statutory construction must begin with the language of the statute itself. But the language of § 271 is generic and freighted with a meaning derived from the decisional history that preceded it. The Court of Appeals appropriately observed that more than one interpretation of the statutory language has a surface plausibility. To place § 271 in proper perspective, therefore, we believe that it is helpful first to review in detail the doctrines of contributory infringement and patent misuse as they had developed prior to Congress' attempt to codify the governing principles.

As we have noted, the doctrine of contributory infringement

[ 448 U.S. Page 188]

     had its genesis in an era of simpler and less subtle technology. Its basic elements are perhaps best explained with a classic example drawn from that era. In Wallace v. Holmes, 29 F. Cas. 74 (No. 17,100) (CC Conn. 1871), the patentee had invented a new burner for an oil lamp. In compliance with the technical rules of patent claiming, this invention was patented in a combination that also included the standard fuel reservoir, wick tube, and chimney necessary for a properly functioning lamp. After the patent issued, a competitor began to market a rival product including the novel burner but not the chimney. Id., at 79. Under the sometimes scholastic law of patents, this conduct did not amount to direct infringement, because the competitor had not replicated every single element of the patentee's claimed combination. Cf., e. g., Prouty v. Ruggles, 16 Pet. 336, 341 (1842). Yet the court held that there had been "palpable interference" with the patentee's legal rights, because purchasers would be certain to complete the combination, and hence the infringement, by adding the glass chimney. 29 F. Cas., at 80. The court permitted the patentee to enforce his rights against the competitor who brought about the infringement, rather than requiring the patentee to undertake the almost insuperable task of finding and suing all the innocent purchasers who technically were responsible for completing the infringement. Ibid. See also Bowker v. Dows, 3 F. Cas. 1070 (No. 1,734) (CC Mass. 1878).

The Wallace case demonstrates, in a readily comprehensible setting, the reason for the contributory infringement doctrine. It exists to protect patent rights from subversion by those who, without directly infringing the patent themselves, engage in acts designed to facilitate infringement by others. This protection is of particular importance in situations, like the oil lamp case itself, where enforcement against direct infringers would be difficult, and where the technicalities of patent law make it relatively easy to profit from another's invention without risking a charge of direct infringement.

[ 448 U.S. Page 189]

     See Thomson-Houston Electric Co. v. Ohio Brass Co., 80 F. 712, 721 (CA6 1897) (Taft, Circuit Judge); Miller, Some Views on the Law of Patent Infringement by Inducement, 53 J. Pat. Off. Soc. 86, 87-94 (1971).

Although the propriety of the decision in Wallace v. Holmes seldom has been challenged, the contributory infringement doctrine it spawned has not always enjoyed full adherence in other contexts. The difficulty that the doctrine has encountered stems not so much from rejection of its core concept as from a desire to delimit its outer contours. In time, concern for potential anticompetitive tendencies inherent in actions for contributory infringement led to retrenchment on the doctrine. The judicial history of contributory infringement thus may be said to be marked by a period of ascendancy, in which the doctrine was expanded to the point where it became subject to abuse, followed by a somewhat longer period of decline, in which the concept of patent misuse was developed as an increasingly stringent antidote to the perceived excesses of the earlier period.

The doctrine of contributory infringement was first addressed by this Court in Morgan Envelope Co. v. Albany Paper Co., 152 U.S. 425 (1894). That case was a suit by a manufacturer of a patented device for dispensing toilet paper against a supplier of paper rolls that fit the patented invention. The Court accepted the contributory infringement doctrine in theory but held that it could not be invoked against a supplier of perishable commodities used in a patented invention. The Court observed that a contrary outcome would give the patentee "the benefit of a patent" on ordinary articles of commerce, a result that it determined to be unjustified on the facts of that case. Id., at 433.

Despite this wary reception, contributory infringement actions continued to flourish in the lower courts.*fn8 Eventually

[ 448 U.S. Page 190]

     the doctrine gained more wholehearted acceptance here. In Leeds & Catlin Co. v. Victor Talking Machine Co., 213 U.S. 325 (1909), the Court upheld an injunction against contributory infringement by a manufacturer of phonograph discs specially designed for use in a patented disc-and-stylus combination. Although the disc itself was not patented, the Court noted that it was essential to the functioning of the patented combination, and that its method of interaction with the stylus was what "[marked] the advance upon the prior art." Id., at 330. It also stressed that the disc was capable of use only in the patented combination, there being no other commercially available stylus with which it would operate. The Court distinguished the result in Morgan Envelope on the broad grounds that "[not] one of the determining factors there stated exists in the case at bar," and it held that the attempt to link the two cases "is not only to confound essential distinctions made by the patent laws, but essential distinctions between entirely different things." 213 U.S., at 335.

The contributory infringement doctrine achieved its high-water mark with the decision in Henry v. A. B. Dick Co., 224 U.S. 1 (1912). In that case a divided Court extended contributory infringement principles to permit a conditional licensing arrangement whereby a manufacturer of a patented printing machine could require purchasers to obtain all supplies used in connection with the invention, including such staple items as paper and ink, exclusively from the patentee. The Court reasoned that the market for these supplies was created by the invention, and that sale of a license to use the

[ 448 U.S. Page 191]

     patented product, like sale of other species of property, could be limited by whatever conditions the property owner wished to impose. Id., at 31-32. The A. B. Dick decision and its progeny in the lower courts led to a vast expansion in conditional licensing of patented goods and processes used to control markets for staple and nonstaple goods alike.*fn9

This was followed by what may be characterized through the lens of hindsight as an inevitable judicial reaction. In Motion Picture Patents Co. v. Universal Film Mfg. Co., 243 U.S. 502 (1917), the Court signaled a new trend that was to continue for years thereafter.*fn10 The owner of a patent on projection equipment attempted to prevent competitors from selling film for use in the patented equipment by attaching to the projectors it sold a notice purporting to condition use of the machine on exclusive use of its film. The film previously had been patented but that patent had expired. The Court addressed the broad issue whether a patentee possessed the right to condition sale of a patented machine on the purchase of articles "which are no part of the patented machine, and which are not patented." Id., at 508. Relying upon the rule that the scope of a patent "must be limited to the invention described in the claims," id., at 511, the Court held that the attempted restriction on use of unpatented supplies was improper:

"Such a restriction is invalid because such a film is obviously not any part of the invention of the patent in suit; because it is an attempt, without statutory warrant, to continue the patent monopoly in this particular character

[ 448 U.S. Page 192]

     of film after it has expired, and because to enforce it would be 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 as we have interpreted it." Id., at 518.

By this reasoning, the Court focused on the conduct of the patentee, not that of the alleged infringer. It noted that as a result of lower court decisions, conditional licensing arrangements had greatly increased, indeed, to the point where they threatened to become "perfect [instruments] of favoritism and oppression." Id., at 515. The Court warned that approval of the licensing scheme under consideration would enable the patentee to "ruin anyone unfortunate enough to be dependent upon its confessedly important improvements for the doing of business." Ibid. This ruling was directly in conflict with Henry v. A. B. Dick Co., supra, and the Court expressly observed that that decision "must be regarded as overruled." 243 U.S., at 518.

The broad ramifications of the Motion Picture case apparently were not immediately comprehended, and in a series of decisions over the next three decades litigants tested its limits. In Carbice Corp. v. American Patents Corp., 283 U.S. 27 (1931), the Court denied relief to a patentee who, through its sole licensee, authorized use of a patented design for a refrigeration package only to purchasers from the licensee of solid carbon dioxide ("dry ice"), a refrigerant that the licensee manufactured.*fn11 The refrigerant was a well-known and widely used staple article of commerce, and the patent in question claimed neither a machine for making it nor a process for using it. Id., at 29. The Court held that the patent holder and its licensee were attempting to exclude

[ 448 U.S. Page 193]

     competitors in the refrigerant business from a portion of the market, and that this conduct constituted patent misuse. It reasoned:

"Control over the supply of such unpatented material is beyond the scope of the patentee's monopoly; and this limitation, inherent in the patent grant, is not dependent upon the peculiar function or character of the unpatented material or on the way in which it is used. Relief is denied because the [licensee] is attempting, without sanction of law, to employ the patent to secure a limited monopoly of unpatented material used in applying the invention." Id., at 33-34.

The Court also rejected the patentee's reliance on the Leeds & Catlin decision. It found "no suggestion" in that case that the owner of the disc-stylus combination patent had attempted to derive profits from the sale of unpatented supplies as opposed to a patented invention. 283 U.S., at 34.

Other decisions of a similar import followed. Leitch Mfg. Co. v. Barber Co., 302 U.S. 458 (1938), found patent misuse in an attempt to exploit a process patent for the curing of cement through the sale of bituminous emulsion, an unpatented staple article of commerce used in the process. The Court eschewed an attempt to limit the rule of Carbice and Motion Picture to cases involving explicit agreements extending the patent monopoly, and it stated the broad proposition that "every use of a patent as a means of obtaining a limited monopoly of unpatented material is prohibited." 302 U.S., at 463. Morton Salt Co. v. G. S. Suppiger Co., 314 U.S. 488, 492-494 (1942), which involved an attempt to control the market for salt tablets used in a patented dispenser, explicitly linked the doctrine of patent misuse to the "unclean hands" doctrine traditionally applied by courts of equity. Its companion case, B. B. Chemical Co. v. Ellis, 314 U.S. 495, 495-498 (1942), held that patent misuse barred relief even where infringement had been actively induced, and that practical

[ 448 U.S. Page 194]

     difficulties in marketing a patented invention could not justify patent misuse.*fn12

Although none of these decisions purported to cut back on the doctrine of contributory infringement itself, they were generally perceived as having that effect, and how far the developing doctrine of patent misuse might extend was a topic of some speculation among members of the patent bar.

[ 448 U.S. Page 195]

     The Court's decisions had not yet addressed the status of contributory infringement or patent misuse with respect to nonstaple goods, and some courts and commentators apparently took the view that control of nonstaple items capable only of infringing use might not bar patent protection against contributory infringement.*fn13 This view soon received a serious, if not fatal, blow from the Court's controversial decisions in Mercoid Corp. v. Mid-Continent Investment Co., 320 U.S. 661 (1944) (Mercoid I), and Mercoid Corp. v. Minneapolis-Honeywell Regulator Co., 320 U.S. 680 (1944) (Mercoid II). In these cases, the Court definitely held that any attempt to control the market for unpatented goods would constitute patent misuse, even if those goods had no use outside a patented invention. Because these cases served as the point of departure for congressional legislation, they merit more than passing citation.

Both cases involved a single patent that claimed a combination of elements for a furnace heating system. Mid-Continent was the owner of the patent, and Honeywell was its licensee. Although neither company made or installed the furnace system, Honeywell manufactured and sold stoker switches especially made for and essential to the system's operation. The right to build and use the system was granted to purchasers of the stoker switches, and royalties owed the patentee were calculated on the number of stoker switches sold. Mercoid manufactured and marketed a competing stoker switch that was designed to be used only in the patented combination. Mercoid had been offered a sublicense

[ 448 U.S. Page 196]

     by the licensee but had refused to take one. It was sued for contributory infringement by both the patentee and the licensee, and it raised patent misuse as a defense.

In Mercoid I the Court barred the patentee from obtaining relief because it deemed the licensing arrangement with Honeywell to be an unlawful attempt to extend the patent monopoly. The opinion for the Court painted with a very broad brush. Prior patent misuse decisions had involved attempts "to secure a partial monopoly in supplies consumed . . . or unpatented materials employed" in connection with the practice of the invention. None, however, had involved an integral component necessary to the functioning of the patented system. 320 U.S., at 665. The Court refused, however, to infer any "difference in principle" from this distinction in fact. Ibid. Instead, it stated an expansive rule that apparently admitted no exception:

"The necessities or convenience of the patentee do not justify any use of the monopoly of the patent to create another monopoly. The fact that the patentee has the power to refuse a license does not enable him to enlarge the monopoly of the patent by the expedient of attaching conditions to its use. . . . The method by which the monopoly is sought to be extended is immaterial. . . . When the patentee ties something else to his invention, he acts only by virtue of his right as the owner of property to make contracts concerning it and not otherwise. He then is subject to all the limitations upon that right which the general law imposes upon such contracts. The contract is not saved by anything in the patent laws because it relates to the invention. If it were, the mere act of the patentee could make the distinctive claim of the patent attach to something which does not possess the quality of invention. Then the patent would be diverted from its statutory purpose and become a ready instrument for economic control in domains where the

[ 448 U.S. Page 197]

     anti-trust acts or other laws not the patent statutes define the public policy." Id., at 666.

The Court recognized that its reasoning directly conflicted with Leeds & Catlin Co. v. Victor Talking Machine Co., supra, and it registered disapproval, if not outright rejection, of that case. 320 U.S., at 668. It also recognized that "[the] result of this decision, together with those which have preceded it, is to limit substantially the doctrine of contributory infringement." Id., at 669. The Court commented, rather cryptically, that it would not "stop to consider" what "residuum" of the contributory infringement doctrine "may be left." Ibid.

Mercoid II did not add much to the breathtaking sweep of its companion decision. The Court did reinforce, however, the conclusion that its ruling made no exception for elements essential to the inventive character of a patented combination. "However worthy it may be, however essential to the patent, an unpatented part of a combination patent is no more entitled to monopolistic protection than any other unpatented device." 320 U.S., at 684.

What emerges from this review of judicial development is a fairly complicated picture, in which the rights and obligations of patentees as against contributory infringers have varied over time. We need not decide how respondent would have fared against a charge of patent misuse at any particular point prior to the enactment of 35 U. S. C. § 271. Nevertheless, certain ...


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