United States v. United Shoe Machinery Co. of New Jersey

1917. Syllabus. 247 U. S. UNITED STATES v. UNITED SHOE MACHINER

YCOMPANY OF NEW JERSEY ET AL. APPEAL FROM THE DISTRICT COURT OF THE UNITED SPATES

FOR THE DISTRICT OF MASSACHUSETTS. ^ Argued 16, 19, No. 20, 21, 1917; restored March docket re- 207. argument May 21, 1917; reargued January 11, 14, 15, 1918. Decided May 20, 1918. strongly conflicting, especial Where evidence is weight attaches findings judges to the aof trial court whose saw and heard the wit- nesses.

Applying principle, holds, below, the court t'his the court that the n charges does hot sustain the of unlawful in- .evidence restraint of terstate machinery,, : commerce in monoply shoe thereof, in the

formation and ’. conduct of Machinery Company,. the United Shoe determining In whether a combination restrains interstate commerce

injuriously public, to the inquiry foremost is whether the inter- brought together-were ests competitive. Where, machines were .and,'though collectively used in the patented making single product, of a were so far distinct their functions. control, they, practically . noncompetitive, common over n (cid:127) use; their-manufacture and not obnoxious to held the Anti-Trust Act. Statements in notices to agency contract, and in an made.’ .shareholders by participants in combination, explaining object, held not to intent, establish unlawful in view done, of the of what was evidence publicity made, lapse'óf statements'when and inaction time ' , of the Government. Lapse time, changes progress condition due to it and to the art, development’ high efficiency,, .industrial difficulty or im- possibility restoring-antecedent injurious conditions and effects attempt' tb-grant-the that would follow the prayed, relief are matters determining in’ to be considered from' conflicting evidence whether should be

a combination dissolved. purchases-pf certain Unconnected patent businesses with rights, made by.the after its formation, held, on conflicting.evidence, intended, not to have been nor to' have had effect, of restrain- competition illegally ing brought or to have power. obnoxious Generally, right has -purchase patents one protection for the UNITED STATES UNITED SHOE MACH. CO. 33 . Statement Case. improvement of his own inventions and business, and for the prevention patent litigation, purchases and such should not be competition adjudged unduly upon to. have stifled speculative esti- potential competitive power mates of new and untried inven- tions. considerations,

Upon certain assignment similar contracts for of future (cid:127) legitimate. held inventions also Machinery charge Company’s the power The Shoe op- has been pressively is sustained.- used patentee patent gives right law the

The to exclude others from the absolutely invention, upon use of his terms. -The exertion of this right patent within the field of the law against is not an offense Anti-Trust Act. principle, cases, announced in recent patented that when a article passes beyond patent monopoly, sold has application no conveyance of title but a bona where there is no lease of the article. fide

In a patented upon suit to set aside ground machines leases rights patent exceed the' the lessor as owner operate and Act, seirible, produce to results to the Anti-Trust obnoxious that the- necessary parties. lessees supplied patented Defendant its sets 'of to machines shoe manufac-. royalty system turers on a leases, basis under a of a uniform term years, of 17 with conditions for use of each machine to capacity; full '(cid:127) leasing others lessor as more work available; became for use exclusion, of, forbidding coming and use on from, work ' leased; requiring not so lessee to supplies obtain certain from.lessor only; permitting lessor, for breach of condition in lease, to others, forfeit it and requiring thereupon all -and lessee to return Held: pay charge. (1) machines and Upon evidencé, that the leases were voluntarily entered into the lessees and without co ercion, legality and that apart gen their must be determined from a charge illegal dominaney by eral corporation evi- n (2) dence Upon evidence, failed sustain. purpose that the system' machinery was to make the sets of available to customers on promote terms and productive efficient operation, and eas3r accessory connection with an company, service furnished and (3) adequate royalty insure returns. That the conditions were-within patent rights, the lessor’s and not violative of the Anti-Trust Act. Rep. 349, 222 Fed. affirmed. an dissolve asserted combination Suit and

.. conspiracy companies, makers or bogt between dealers in certaip TERM, 247 U. S. for the United States.

Counsel also companies; the officers machinery, shoe agree- and canceled certain leases illegal declared have means of to be the the combination ments, charged control over the manufac- through conspiracy whereby, competition prevented, has been shoes, of boots and turers combiners, designs genius subjected inventive machines and accessories conspirators, auxiliary and. made subsidiary. controlled and

The, with denials, justification are met charges which is asserted to be illegal pro- that the conduct development motion of in natural of business and trade, compliance indeed, in strict with modern trade progress; simply independent that there was the fusion of and non- competing businesses, differing other, each from the the combination of various elements'of covered and patents relating all of it to the same States United art and school of And the samé manufactures. the agreements leases and were but the of exercise patent wholly and indeed rights, legal necessary. ' in a displayed These contentions bill which occupies 46 of and an pages the record answer of equal volume. ' The statute of is also pleaded defense, . limitations greater part of the acts charged being alleged to have place taken more than 6 before the years filing the peti- tion. judges case,

Three sat who heard the' testimony in open and Upon completion consideration court.. bill; entered dismissing decree was Each judge ren- opinion exhibiting dered an thé case from a different angle, opinions, taken together, and all display phases case and the issues involved. considerations Rep. 349. Fed. Brown,

Mr. H. La Rue Special Assistant the At- , General, torney with The Attorney whom The General, General, Solicitor Mr. Assistant to the Attorney General v. UNITED SHOE MACH. CO. STATES Opinion of the Court. Mr. Leo A. Assistant Todd, Rogers, Special briefs, were on for the Attorney General,.

States.1 y. . F. Jr., Mr. Frederick P. Choate, Fish,

Mr. Charles briefs, Mr. Malcolm was on the Donald whom appellees. Frank Y. Gladney, by

Mr. leave filed brief court, Machinery Co., on behalf General Shoe successor to . Manufacturing Co., amicus curia. Boylston McKenna, stating the case as above, Mr. after Justice of the court.. the opinion delivered being bill is that sat- charge defendants, The and determined monopoly patents isfied with the acquiring ownership the idea of it, extend conceived the manufacture engaged control of all concerns achieved, machinery. This purpose kinds shoe all commerce, monopoly acquired, it is and a charged, compet- union of restrained foreign, interstate And of others. and the ing acquisition companies the con- and assured completed leases were exacted acquired. thus monopoly trol and trade dominance was charge comprehensive But this dis- course of the Government trial. modified culpability of such extensive the assertion claimed adapted the its contention confined bot- uppers), machines (attaching soles of shoes toming and (cutting-out machines), eye- clicking called machines. name), indicated' and (sufficiently letting Smyth, Special J. Mr. As Constantine La Rue Brown Mr. H. for General, argued the case States Attorney United sistants to largely facts, deal of counsel with hearing. briefs The at the first ' representation here. proper extensive for too (cid:127) 247 U. S. Court. Opinion mo- limit the actual not so did if the bill that declared limit it. so to agree would counsel nopoly defend- the Government agree we course, Of because guilt merely all discharged from be ants cannot to the en- of the business some branches open leave “that a puts it, Government or, others, . terprise inBut view competition.” open yet field is as limited and the to the defendants design attributed large it they accomplished, it is contended of what illustration to be told when instructive interesting 'be would down, or broke even. was abandoned large scheme detail, unimportant to be an now said though may greater that neither the court has decided since the trial got by the evidence: lesser scheme was established in. contested, description is conclusion, however, that “the contended, says Government of what tiow . is organizers'of avowedly sought by end corporation, both ‘the control one Company was countries, of the foreign and in ef- United States And, further, machinery.’” after of shoe types ficient to be that “of supply-, defendants stating the business shoes,” in the manufacture machines used ing . in certain of' foreign restraint interstate commerce “ subject action, said: The matter machines, it is done the defendants things effect of the therefore, is the (cid:127) between, manufacturers of machines used the trade upon the manufacturers of shoes and in the manufacture of shoes;” of the interest which at- And in further display is are made every said: “Shoes issues, taches to the supplying and “it the Union” obvious section .of th^t an industry an must be ex- such important machines trade and com- important part ceedingly. interstate States.” of the United merce contentions as the dominance achieved. there are

And . fervidly somewhat Indeed,-it is asserted monarch, of the industry” “is absolute n , UNITED SHOE MACH. CO. 37 v.. STATES Opinion the Court. 32. pleasure unless its own

that “no can exist competitor destroying its hand.” or it withholds policy no fervidly urged. less are opposing There contentions to attributed the defend- There denial the purpose is or power, exercise baleful possession ants of non- is a union that the the insistence effect- patent, under letters competing businesses conducted economies greater the resources thus ing through acquired machinery and efficiency and greater manufacture art” —ad- the shoe-maker’s perfecting “in other ways to inuring not but vantages engrossed by company their prod- wearers of patrons through them the a uct, finished shoe. Government charge

In'final answer to the thé shoe comprehensive declaration is that terms. one on open equal not industry everybody if it have power, It is And patents. company’s one of power but the power, is not that of combination effect and superiority its inventions —the demonstrated of its instrumentalities. supremacy mechanical antagonistic^ be more The contentions could not well conflicting testimony, was upon each which there given be in mind that it was important fact is to borne pat certain contentions about open .(except court justifies defer The fact ents, scope validity).1 their 1 patents. pre up. During came about the trial discussion (fid up the siding court not desire to take judge intimated examiner. It but would send them an patents' themselves important. But the case that- matter was counsel stated question” “patent made a distinction between a court (cid:127)the being of the latter —and faith an “patent element controversy” good— hearing in the before would be included latter stated ordered open court. The court then examiner, but would heard - testimony as to that taking parties before-the examiner of both patents charged aft unlawful extension of of the bill which section man expense of boot and monopoly at the shoe perpetutate complete monopoly of all acquire a kinds them to to use ufacturers ltu,. Opinion of the Court. 247 U. S. ence findings tó the of the trial court. Gil Adamson v. , liland, U. S. 350

There two against accusations the defendants. One is that at the outset very they combined competing com- panies, and 1 subsequently acquired others, of Act § 1 being thereby offended. 1890 The other is a monop- olization of the trade in violation of 2 of that And act. § it- is charged, said, as we have that certáin li- leases and cense agreements-are the instruments which consummate both offenses.

The offense combination was committed, it is con- tended, 7, February 1899, at which time seven shoe ma- chinery companies' were consolidated into the United Shoe Machinery Company New Jersey, a corporation organized for purpose. The companies were: Good- year Shoe Machinery Company, International Goodyear (cid:127)'Shoe Machinery Company, Consolidated & McKay Last- ing Machine Shoe Company, McKay Machinery , Company Davey Pegging Machine Company, Epplér Welt Machine machinery. of shoe The examination took place and it was the usual experts, battle of and the conflicts are recorded in a volume more eight pages. than hundred test, Their however, ultimate ef- and the fect patents testimony is the open delivered in court. 1 Every 1. contract, “Sec. combination in the form of trust or other wise, conspiracy, or in restraint of trade or among commerce the several States, foreign or nations, hereby with illegal. Every declared to be person any who shall e.ngage any make such contract or such com (cid:127) conspiracy, guilty bination or shall bé deemed of misdemeanor, and, thereof, punished by on exceeding conviction shall be fine five not thou sand-dollars, by imprisonment or exceeding year, not one or both punishments, said in the discretion of the court. Every person “Sec.- 2. monopolize, who shall attempt monop- or olize, conspire combine or person, persons, monop- or or any part among -or trade States, olizo the several commerce or foreign nations, guilty shall be deemed a misdemeanor, and, .with punished by on be fine exceeding conviction not thereof, .shall five dollars, by imprisonment exceeding thousand’ or year, one punishments, said in the both discretion court.” >(cid:127). CO. STATES UNITED MACH. SHOE Opinion of the Court. Machine Eppjer the International Welt Company and companies The last two were acquired . Company. re- but formation,

new after company garded companies. as constituent businesses conveyed company, to the new these companies arid manufacturing, selling those of the businesses being pat- machinery, including in shoe leasing dealing A more other countries.1 ents of the United States and pne'' In brief the.Government. confusion in the apparent There is of the' the consolidation that the United place it is stated companies over seven which were taken properties businesses Machinery Goodyear Company, Shoe Interna going concerns, to-wit: McKay .Machinery Goodyear & Company, Shoe Consolidated tional McKay Machinery Company,' Company, Shoe Lasting Machine Company, Davey Pegging Company, Eppler Machine Machine Welt (cid:127) Epplér Company. Welt Machine and International organization Company the of the stated place another is In Company, merger companies Goodyear of four Con- the — McKay McKay Company, Eppler Company & and the Shoe solidated Machinery suppression of Company resulted in the immediate —and dominating companies point “to between those and the competition important-field supplying principal the of the practical of exclusion necessary of machines in the manufacture shoes.” and essential (cid:127) However, conclusion of the Government’s brief it contends the vigorous competition “that there existed be- has established that it merged organization companies in the of three the tween of company, might fourth at and that the which moment Company, purpose competitor, was taken in for the and the have become a furthering unlawful of the the scheme combination thus of effect being.” company The fourth referred to "is no brought into doubt Machinery McKay Company. the Shoe were, is results it contended— (cid:127)The immediate “ of (1) suppression potential The the actual of the competition existing, theretofore lasting the & between Consolidated Goodyear Machinery McKay Company and the Shoe It Company. lasting a'monopoly in created machines! “ (2) suppression potential of the actual and of competition The the Machinery Goodyear Eppler Shoe .between monopoly It .Company. -welting created a Machine Welt machineiy. stitching outsole

Opinion S. of the U. Court. particular necessary distinction we do not deem it make. is, first question companies competition? Were the

It confronts us at the other considerations are outset; all upon it. As an dependent element in the answer revert to the we must admission that the charge com- is bination as only bottoming shoes— machinery is, the uniting upper operation sole —an might be called if the this “simple” complexity did record contradict not told that the we were letters patent covering machinery operation for the great are too in number for explanation or enumeration. It is said that on certain classes of 100 differ- shoes over ent operations And are different machines. performed taken pains Government has to tell us how far “the mysteries the shoemaker’s and the art variations be- tween different methods of making shoes” outside are To understanding purchaser him, them. said, it is “shoes shoes, differ in except appear- ance, comfort, wearing qualities But to price.” manufacturer distinctions and to the multiply production line of complete a shoe necessary. In- deed, the Government makes of the art mystery necessity instrumentalities, the basis part, its argument. “(3) prevention competition The absolute of future between the Machinery Goodyear McKay Company, Shoe Shoe Machinery' Company, Eppler Company, Welt Machine and the' Consolidated McKay Compel & “ complete creation ot an absolute (4) monopoly in lasting, welting, stitching, heeling pegging, outsole and metallic fastening machines. “ organization (5) The creation of an with vast whose resources con- many types necessary different of trol of to the shoe manu- industry gave power facturing it a to extend and monop- intrench its oly of companies, which none its constituent however successful, could approach.” UNITEÍ) r. STATES MACH. SHOE CO. Opinion

32. of the Court. We are therefore admonished at of the complexity once case of and the maze mechanical technicalities into which we should be plunged estimating evidence if we had not guidance opinions judges of the trial court. The court found, as we have said, that the companies were not in at the competition time union in the United Company, based the finding only upon testimony witnesses -but the uses machines of the respective companies and their methods of operation. The testimony was true, it is conflicting, and different judgments might be formed but upon it, from an examination of the record we^annoUpronounce that of the trial court to be wrong. Indeed, it seems to us to be supported by the better reason. We should risk misunderstanding error we should attempt pick out that which makes against disregard makes for it and judge witnesses from their reported words as against their living presence, advantage which the trial court had.

The Government, however, two urges circumstances which it contends corroborate its oral testimony against which it asserts that “literal denials specific ” intent to restrain trade are of no significance. But there was more than literal denials. There were detailed rep resentation of the condition of the trade and explanation of the machines convincing, as we have seen, strength and the confirmation it received. us, Let con however, sider upon which instances the Government relies. The most important of them is a circular letter,1 sent 1 “Plaintiff’s Exhibit 152. “ Goodyear To the Stockholders Shoe Machinery Company:' 8, Feb. “Boston, Mass., great advantages to be secured the control in one cor- “.The poration, both in foreign countries, States and in types efficient machinery, years of shoe have been for several rec- ognized by principal shoe-machinery- the officers companies. 1917. 247 U. S. Court.

Opinion of the stockholders, its Goodyear Company the directors secured advantages great forth that which set efficient' of the most corporation in one control by large the directors’and that machinery shoe types negotiation accomplish had been stockholdérs Company United would and further end; machinery properties shoe other acquire time .to time purchase of shares of ownership direct either by 1 in a contract Also like declaration a their stock. . Australia. agent'in large been year your shareholders have more a directors For than accomplish negotiation this end. thorough investigation of the and the “After financial-condition shoe-machinery organiza- companies below, of the named business under laws State of corporation of a been effected has tion Shoe-Machinery Company.' United Jersey, New to be known Machinery Company already has “The Shoe ’contracted United capital Goodyear majority stock of Shoe for more than Mar McKay Lasting Company, chineiy-Company, & Machine Consolidated Goodyear Machinery Machinery McKay Company, Shoe Com- Shoe Goodyear Machinery Company, Canada, International Shoe pany of Company, International Eppler Welt Machine Welt Machine Com- Davey Company, Pegging Machine besides stocks in other pany, companies, patent, property. letters and other shop-machinery Company acquire will also from time to time “The United other shoe-machinery properties, ownership either direct byor purchase of their stock.” shares Exhibit “Plaintiff’s 189. acquired has “Whereas control of boot working made following and leather shoe named ’ Boston, doing namely: corporations said business “Goodyear Machinery Company, Shoe McKay Consolidated & McKay Lasting Company, Machinery Machine Shoe Company, Company, Goddu Eppler Fastening Company, Welt Machine Metal Davey Tacking Staple Lasting Company, Pegging Gordon Machine Company, Company, Gem Flexible Insole Boot & Laying Shoe Sole acquiring contemplates Company, and control lines boot working machinery leather and boot findings, shoe and and shoe leather, except linings, lasts finished boots and shoes. . .” 4á r. SHOE MACH. CO. UNITED STATES Opinion of the-Court. themselves, not, could agreement circular and is evi- It companies. constituent to the character give give of need comment to them that therefore, both dent, innuendo of the Govern- significance, apd sinister them competing great that only meant'not they ment that united, companies— but that other been had companies It would be be—would acquired. competitors,- accept could this explanation that credulity a stout of put We out cannot against the counter considerations. in in- Government, repeated according mind that years in twelve be- sertions, 1899, into field jumped full-pano- suit was brought, fore the immediately and started on plied monopolistic power its of trade. But to dominance restraint .career pf that, denial it is now preclude the the assertions said in stock circulars and trade agreements, company ,might its con- trumpeted illegal enterprise two for it guilt, tinents. Deliberate deliberate guilt say—we -is usually not or question ignorance imbecility —is bold. It masks its it from purpose so hide preven- If that tion and asserted the trade penalty. may'be agreement was in letter to secret, certainly circular the stockholders committed the scheme to publicity. cannot, therefore, accept explanation

We Government. Its discredit it. It implications implies a long there for time governmental supineness that indeed extraordinary oversight conspicuous, an vaunted, can-be And we criminality. accepted. Neither in- agreement circular and were are persuaded not. nor avowal, tended to be the as contended regarded achieved, to be Government, achieved or monopoly, foresight but simply expression the business which from the concentration advantages would result which, dif- however management one instrumentalities supplemént in the of a shoe. ferent, one another creation im- have the Government given explanation We '44

' Opinion of the 247 U. >S. Court. portance because the has And we done so. Government have answered estimation what the circular only and agreement worth as avowals of intention. Of are course,, is right, unimportant Government circumstances; the demonstration of the United Com- pany’s purpose is without complete the Govern- them; ment contends that the constituent companies open competition their union resulted in the suppression “immediate of the actual and com- potential petition” in shoe machinery and the “creation an or- ganization vast which it a “gave power resources” to extend'and intrench its none of. monopoly successful, however could companies, ap- constituent ” proach. If this awere fact it would not need the confir- mation of words.' n The second circumstance cited is by Government the that before the union of the their had companies machines in flexibility use that the of defendants does testimony not ascribe to and that this in them, was declared now We not im disposed much give advertisements.. portance circumstance. It was be that there to the á machines, certain interchangeability in the described in but, the of opinion the trial there court, was, notwith no practical We competition .between them.. standing, can add nothing to what determined its judgment the detailed comparison and of explanation the machines in made opinions. Indeed, its we rest branch might this of the case on those opinions. were considerate of all They the elements the Government’s op contentions and the posing contentions and tested machines, the their same ness and respective difference efficienéy, by pur the poses for they designed which by the inventors and were in trade employed, explanations by made them.v.

In considering competition of the machines and in estimating the defendants’ acts-in uniting the companies, CO. SHOE 45 MACH.

UNITED STATES UNITED o. Opinion of the Court. all made machines were it is to be observed “under countries,” States and other patent letters were, companies, improver and covered owned time and em time to made by companies ments developed in the were so far bodied machines, which in use shoe manufac principally were they in. respec were in the kinds work to turers patents and the businesses passed adapted. tively but the same necessarily new company, did patents not lose words, hand as before. In difference; their distinction, nor the machines mislead dwell manufacture upon percentages d Win States v. Of we Unite a like situation said ing. answer to the and said of slow, 202, 217, U. S. that we involved, here the combination charge against to one manu corporation “see no greater objection could cent, non'competing seventy per groups of three facturing making single used for collectively patented corporations the same making than to three product disintegration aimed group one each. Ine proportion not extend reduc at the statute does [Act 1890] to isolated units of lowest de all manufacturé ing court expressed by judges one gree.” Or, as far as it “The combination not unlawful so below, of noncompet put groups did no more than the different It was machines into one control. ... patented ing public, to the unless, injurious unlawful to an extent interest, destroyed competition.” destroyed held that not And was. was competition Indeed, the designated repelled, to the extent. court of so hold- been, consquences well have might as union of conditions, the change on ing account been, the Govem- having not companies questioned been having investments years large for twelve and. ^ment public. only by not but company made the offense indeed, not condone lapse time, may Opinion S. of the Court. U. It, however, if offense there was. call offense and an element the refutation accusa- question reme-, long deferred, tions determine against piarticular dies. It is be remembered that a dissolution the of- is fending companies prayed that each of them be parts into "separated such that no one them will con- stitute ... monopoly the shoe machinery busi- ness,” or that appointed receivers be take possession of them assets, and their business and affairs wind about up "bring them conditions trade and com- among the foreign merce States and with nations in har- If mony law.” this there be need for .with difficulties - of deter; achievement not but the difficulties may should admonish''against, the need and demonstrate . maybe

situation or to be redressed at remediless a cost great. Therefore, too’ remedy considering prayed, extreme, even in its demands;, mildest we may ask, what of investments that have been made during years these of extension development of the new business? company’s What thé machines that have ones, become obsolete and the new that have been de- veloped? What of the patents expired that have new out, ones that run yet have and how distrib- ute them? And what of their effect when distributed? cease, regarded Will or be an monopoly instru- ment illegal purpose as a deodand? forfeited How put from pick the new conditions the conditions of 1899 and restore them and the art time and rehabilitate the businesses that alleged to have ceased to exist toor merged have become in tie United How Company? thus complexity only suggested, not "bring displayed, about conditions in trade and commerce” in shoe ma- chinery "among the States and with foreign nations harmony law,” which is resource of the the..ultimate Government for'this part of the case? How radical should the disintegration be?' Or should there be a sale in en- 47 v. SHOE MACH. CO. STATES UNITED

'¿2. Opinion of the Court. And, if will entirety, in the pur- not in

tirety parts? and did not that the have? immunity companies an get chaser absolutely necessary seem to be A in would entirety sale Beverly, And how that yét the works at can to preserve a company dissolution of the and a be there be doné hand, On the other the of machines? idea distribution instrumentality so an should complete that be is repellent efficiency its concentration and lost. It dismantled and organization purpose has testified was been of all modern consolidating factory one This has been standardizing purpose and the of them. 4,000 there men. The company employs attained. however, acquisition certain instances are, There charges to the to give be said confirmation redress, the demand for at and justify Government in other offenders; words, to the cost or disaster whatever union the com- original purpose demonstrate the of that purpose panies, persistence extension; depictéd by the evil having consequences of its dominion un- these instances would seem Upon the Government. being dwell, competitive necessary companies How- Company. their union at the time of ' much of the Government ever, made so to them. given that attention urged must strongly are so given and the one that was of them important The most testimony plant in the most prominence G. Plant New Company, of the Thomas shoes, not of ma- a manufacturer corporation, Jersey chinery, machinery interest of Thomas of the shoe G. Plant. machines of the shoe-bottom-

Plant was an inventor letters patent out a number of had taken ing variety covering foreign countries in the United States argu- testimony in: and is same. There was as to the machines efficiency dispute ment of counsel distinguish “of say themselves” We of themselves. 1917, . TERM, Opinion of the Court. S.U. them the inventions embodied them; necessarj^ phases to meet some of.the A set distinction case. Plant factory, was installed in the of which Company’s majority Plant owned a the stock: other concerns Two which they to were offered under to inducements refused ' It accept admitted, found, them. court as the trial n that they had experimental promise, and was testified , that a number shoe had concerted to manufacturers them. buy There charges infringements were United Company’s machines and Plant was loath to per- an inspection; indeed for a time And, refused it. be- mit for sides, their completion into a set for opera- combined tion important necessary were were machines yet they As developed. stood were they undoubtedly inferior to the Company, and state, therefore, in which the United took Company them were not they found óf capable use. Nothing was in them which affords reasonable support the Govern- ment’s contention that they “right at the thresh- ” old of extensive competition with the United Company. But, It they were. suppose only would be conjecture to that would say they cross it or that their strength would be formidable did. It is in they the testimony that they broke trial and were upon down supplanted the Plant factory where Plant had installed them by the United Company’s machines. And the substitution was not at the dictation of the latter company. The vice president of the Plant general Company of its manager factory that satisfactory work could not testified. bé done with them on men’s broke shoes; down even in the manu- facture of women’s shoes which they were adapted.

It appeared that some of the machines infringed United and in Company’s details some the latter in- machines, Plant and the fringed complexity of rights resulting, hence to which we shall presently refer, had led litigation; and threatened to compose which, was CO. SHOE MACH. u: UNITED STATES of the Court. Opinion found, contributory was a trial court testified, and Company’s purchase inducement Plant. Its finding. conception resists

The. Govermnent addressed, this of its contentions are all is, and to com- intended combined Company Unitéd wras com- and to acquire competing companies bine great acquired,” “The United peting companies. “every company then say, counsel company [when put out organized] planning actively putting' shoes, and bottoming out” adapted this action years bringing “in twelve before monop- but change substantial rather the place, no took was in extended acquired respects so some oly the In and intrenched.” many respects strengthened this-conception of contention the Government light done, has all Company sees and colors that the United mo- whatever made, all the it acquisitions upon of has of troubles made, including patent the prevention tive the it of says of And litigation.. directly the composition at from Plant it made an overvaluation that was purchase United Plant bargain was to the the by tempted satisfied rid of a getting competitor. Company the parties no of the getWe solution purpose consider We must paid.1 the United price Company we are that what it was for. It is to be remembered paid place years a took eleven dealing with transaction which and is to company judged after the formation of that time. incentives of that circumstances, own him— came from to sell the overtures eager Plant was intermediaries, whom to one indeed, engaged he two <?f ne- necessarily There was large commission. paid he of minds. To estimate gotiation meeting before the .final t'o it United insisted an bargain upon $1,500,000 price $3,000,000 in cash and 1 The common stock of par, Company at the market value which was $3,000,000. TERM, 1917. 50 the Court. U. £>. Opinion of their is, value, estimate machines, inspection advancing the art shoe- testified., “to. as was ” 1 said, first, have but making. Plant as we later refused at yielded, purchase was consum- inspection after Indeed, inspections. report Thé mated. there were two Winslow, first Mr. on the was adverse to the purchase. of the United took in the second president Company, part his for it is and we quote testimony, standpoint company of that we are now His considering. testimony, besides, had confirmation. he believed, testified, He had a broader knowledge he shoe than else and he therefore studied the one Plant machines “per- expert.” an He sonally them, said, as considered he standpoint capacity, value of the inven- tions improvements them, and the embodied in the com- of their with the work of parison work the United Com- machines and the pany’s mechanical construction of the further latter. He testified that “Plant had used Goodyear as Company’s [the machines] his had basis for machines and made.important improve^- developments.” ments and He indicated one im- provements particular, regarded he very greatest practical importance, especially when combined gave following Mr. explanation Winslow purpose his in the Plant as stated in purchase conversations with Mr. Plant: always “I anything declined have do only buying but considering propositions his without a complete full and right ex- to 'machinery, amine his determine the value of the inventions —the patents that he had —and Mr. Plant knew my position that all the every time, interview I at was that was not interested in what it cost-' up, get him to them whether much My or little. only entire and patents was whether those- interest could be made of benefit to our they If and the trade. customers could be of benefit, they if were of . large ought benefit, to and the trade have them, I very glad should be buy embody them them and in our machines for 'thought what I they irrespective worth, were of what had cost him —but I would pay cent for not a more them.” SHOE MACH. CO. UNITED v. STATES Opinion the Court. Company just had devel-

with a device United. In in its way,” factories. “broad he and placed oped almost incalculable. was said, the value interdependency of was values. While qh But there device, over that of the United Com- had value Plant latter, or, as the witness pany’s, controlled was situation, way “in a broad it was a perfect expressed words,, In other Company deadlock.” had United. invention Plant for a underlying patent par- necessarily which was operation subor- ticular form situation in law patent dinate the other —a familar 'contests. no other seen, therefore, Way will there was

It be if to be to- deadlock, the inventions were used out machine, in one without in- is, embodied gether —that in hand all the ownership one fringement —than and was the inducement adopted That was patents. plan Plant inventions the United purchase litigation composed But there was as Company. composed. well, and it to the

Another witness testified as relation Plant stated that those patents rights had his result, upon patent Plant insisted rights, its patent had insisted would upon the company of shoe machin- development have been “a stop continuing, he said: “We should these lines.” And ery with the improvements dared ahead hardly go have in our succeeding patent our fear with such litigation, conflicting improvements or of Plant, or hand, On the other Plant had patented. form, hardly would have dared might which he company infringement of these the possibility ahead go them, suits, many or a infringement good These suits. he have certainly would found pending, then I for his customers, think, machines.” very'few This, outline, situation was the that confronted the 1917.

Opinion 247 U. R of Court. of transaction, the incentives and induced their parties each, in- justifiable they as And were being indicated. centives, may accept and we them ah alternative contention that violation made the Government of And we law was motive of the impelling parties. say that the United had made Plant Company after to make acquisition proceeded improvements on Plant patents many them, them developed giving they an did not have efficiency before.

There are other acquisitions, that emphasized, among them, the stock of the Goddu Sons Com- Metal It was pany. March, 1899, a month acquired after the was Company years and eleven before this formed suit was brought; and the inducement to the acquisition, , was to settle the patent troubles that came through one of companies. constituent valúe was in obtained patents. These were metal- lic and, variety machines, according to a witness for defendants, “at time the United Company put- out commercial ting doing machines for work for the Goddu Company machines were intended.” And, according witness, to another though then in a condi- tion to be in the placed hands manufacturers, “they of development where some them could .state been, have without extensive changes, made operative.” this th By testimony defendants justify purchase; the Government it. condemns The defendants say that it was in composition an inheritéd litigation and that patents value were obtained it.. To this the Govern- replies ment m condemnation that the cost of the settle- ment disputes was excessive, being $150,000, and the purpose getting the patents was to forestall the com- petition threatened and could accomplished have their development.

The value a settlement of a dispute .of about rights which has litigation reached or threatens it cannot be v. MACH. CO. SHOE

UNITED STATES Court, Opinion of the many too It depends upon accurately estimated. easily in paid. the price not reflected which are considerations As the has strength. of condemnation ground The other Putnam Judge Circuit says, in quoting Government its purpose of the law nor letter case, neither another which has of commerce strangling between “distinguishes a commerce birth.of been bom preventing No one can view. But there is another exist.’’ does not in a may be pat- competition tell of the strength than be de- competition; may It be more may ent. Act does not require surely and the Anti-Trust struction, it. forbid effort to But of that or prevent the acceptance certainly impend, improve- such does not extreme even can be for with- efficiency and its striven of business ment Winslow, supra. United States v. law. offense to the out the Government here of say mayWe contention may be comment same acquisitions as to the —and cast us into they of its contentions —that made most us to decide be urge their estimate and for speculation conflicting adjudge opinions well-sustained tween this, too, of a violation And of law. guilty defendants trial court. judgment the considered against no the contract with for as- illegality We. see G.ofldu like make, he or iri might other inventions signment ourselves with this with others. We content agreement is not analysis An of the contracts declaration. general they measurable. That nor are the covenants feasible, coun- subjects genius the inventive attempts They defendants too extreme. designs to the try justified particular more use and to be to have be seen can with which of the transaction circumstances gives Those whom one one employs connected. case) may exact was Goddu’s (this opportunity con- who have Those employer. it be used to have presumed be special to him veyed case (cid:127) that in either price, compensated been Opinion-of the Court. S.U. wiE such there and use development as to make them is too speculative justify judgment. competitive acquisitions It is to be noted that the this case were in time nor parts not coincident the same transaction. through period years were scattered They and varied other, no from the had dependency, each were different steps and unrelated development business defendants. They must be judged hence separately, in accumulation.

The above comment is applicable to other acquisitions, said to be fifty-six in It number. is impossible to review them. A description them and wherein the machines acquired were competitive with the machines of the United Company Government sets forth in many pages ..the its brief, and the defendants reply as circumstantially opposing delineation justification. Their effect hard The estimate. removal in some degree of competition may be charged against some of them and yet, on'the other hand, the acquisitions may be said to be justified by the exigencies or conveniences of the situation. Some of them were merely machines; accessorial some in composition of patent troubles; some not connected with the special charge monopoly which the Government has limited itself; some the transfer to defendants of kinds of machines not possessed by them; some of patented improvements and inventions, aiding or completing defendants’ ma- chines, tributary therefore to their efficiency. They give a false impression by their number. They added nothing power obnoxious to the United Company nor any (cid:127) practical or large sense removed competition. charge

Defendants that the Government not only puts an exaggerated computation upon de- acquisitions lay fendants but gives no credit or account to their resist- ance and, appfications buy other is asserted, more important concerns. Their given 75, number is all of great use and The court importance. trial found that the r: SHOE

UNITED STATES MACH. CO. 55 Opinion of the Court. ,and numerous several them were more offers refused to the scheme important monop- more concerns were of specified against defendants than charged oly justified by comment is the evidence. The acquisitions.,- charge that of the Government pass by We through its threatened destruc- Company president and the his influence busi- tion use of opponents competing enforce transfers ness world'to concerns its denial charge controlled. The or the patents they and the' judges were estimated the trial explanation established, or of no serious was held not be charge could court said the declarations that importance. circum- surrounding be in view of all the called "threats” shown, any competitor not stances was established at- lost a that anybody prevented customer in- isolated Besides, competition. tempting relation, stances, time, without coordi- separated nated acts in a scheme of oppression. ex- unduly without into further detail go cannot

We besides, of this It tending opinion.' repetition, would in the opinions done thoroughly what was carefully generalization the trial judges. We sum with a up "established organization took value, possi- of great great businesses already possessing It was as said the trial court. development,” bilities of concentration, in their that there was advantage discerned as hence resulted has been that has expansion At its found’a- design. as by in evolution necessary much (cid:127) auxiliary many patents there were certain basic tion inde- with and those Inventors —those connected ones. and of devising experimenting, of it—were pendent to keep informed. It had keep had to this the company have would march; fall back mechanical with the up in only not growth There was its destruction. been it was it. When but accessories proper business in findings furnishing no it had facilities in 1899 formed Opinion of the Court. S.U. It supplies. enterprise or, may be, was business necessity, them, to acquire and their acquisition became what is called the case the United Company’s “general department,” handles, which it is said, between 150 and 200 different kinds of machines. The expansion to this and in this expansion was like the department store —an accumulation not only things, necessary but of incidental, supplemental auxiliary to things, the com- pletion and finish of a boot or is a shoe. There service force well, 6,000 as estimated at men, to repair imme- diately breaks deterioration charge. without extra And kept these men are at places convenient repair ma- chines and worn-out replace parts, depots of supplies are maintained. There also are of operators instructors as furnishing well men in emergency. It is in the testimony'that 8,889 a total of operatives taught year 1911 alone.

The company, indeed, has magnitude, but is at once the result cause of efficiency, and the that it charge oppressively has been used not sustained.. Patrons is. given the benefits improvements made by the and new machines company are substituted for the old ones disproportionate without charge. There has been as well saving cost manufacture of shoes. These are some of the results the organization of the United Company. Others are testified to and the means but will accomplishment; permit time their statement, and we pass the leases. vermuth.,

There was complaint of them ana the Go attacks Complaints, them. be however, may interested lament; on the but, other hand, they may be the ex- pression of grievance real and demand redress. And should they are To considered. the attacks of the defendants reply that the leases Government are the of their right exercise as patentees and if there is monopoly monopoly them it of the right. It v. SHOE CO. 57 UNITED STATES MACH. Opinion the 32. % Court. experience of the world indeed, be said that it is the

must, infringement,- entices utility that the an invention facilitate things to the perversion but would be a pf from the re- right the revulsion a sacrifice wrong by on right But, the other which the authorizes. straint or it a the right give must not over-estimate hand, we means, to use the words permit it sinister effect — building and intrench- Government, up “to the We cannot consider “illegal monopoly.” ment” an detail that counsel We with the have. the contentions think is in of certain the statement their answer general propositions. strength is Its course, patent.

Of there restraint the use others from restraint, right is exclude invention, patentee or on terms the absolutely .the strength compensation This is the impose. chooses of invention. Its for exercise grants which the law' is law not patent within field covered exertion circumstances Act In other offense against an Anti-Trust Co. v. Sanitary Mfg. as in Standard be, to which case that bar has 20, U. S. at States, no resemblance. ex- lawfully then, is, .patent right question,

. The Was than the in' more they anything the leases? erted Were descriptive is The patent monopoly? word exercise The imply but it used, oppression. must be does exist all who old instrumentalities content ones inventive who care not for the better them creates. genius essen puts many out of charge oppression .view must in mind things. keep quality We

tial gets and that the inventor considering we are right that, that he did not before and from the law have nothing pf deal patent his restrain effect others only Tel its device. United States Bell using v. ing with Case, 224, 239; S. Patent Paper Bag 167 U. Co., ephone S. 247 Opinion of the ü. Court. Motion Picture v. Film 424; 210 U. Co. Universal 405; S. Co., 502, put 243 U. S. 510. Or to another way, get right, inventor does from the law a a use that not right he did but to an ex gets not have.before he clusive Take from him and take all that the you use. this law. to. gives public him and sécure which faith is pledged. in Grant Raymond, Chief Justice Marshall v. 6 218, Pet. 242. in

Indeed, we said Patent Paper Bag Case that he may keep his invention out use. nec Therefore, he essarily has the it to and with power granting some holding others, it from a right persons of selection of terms. There is, however, upon limitation he can him; not grant the and retain title the incidents it. Straus Victor v. Talking Co., Machine S. Bauer 490; U. v. O’Donnell, 229 U. S. Motion 1; Picture Co. v. Universal Film Co., supra.

These cases have received review and in application Boston Store Chicago v. American Graphophone Co., 246 U. S. principle, 8. The them was expressed to be has passes where an article been sold it beyond the monopoly given patent and conditions cannot-be imposed it. Leases are not of this upon character; they do not convey contended, the title. It is not nor could it be, that in this'case are a they disguise something else, convey artifices to yet keep it subject to the patent right and its exercise. It therefore follows that conditions may imposed by them. .be denies,

It is not certain that the Government this or means to anything more than that the patent assert in is right oppression, assisting,' indeed con- exercised begun á summating,' monopoly, scheme the forma- tion Company, prosecuted of the United the various referred, have ways completed to which we leases and their clauses. represent

It is difficult to. the contentions of the Gov- STATES r. UNITED SHOE MACH. CO. . Opinion of the Court. or over-coloring them under-coloring without eminent in' one that the leases invalid There is them. another that “ultimately, course,

themselves; there apparent forms themselves and their upon it is the lease competition necessary upon effect The first contention Government States relies.” defendants, charge assertion, leaves very much the second con- court; made the trial that was not an obnoxious leases assign tention is necessary United-Company the hands quality companies. did not of the constituent have the hands itself, would distinction seem material to..be is not what leases important consideration hi their they were in some other relation but what are being right- and to what are present purpose they relation or wrong- or or can wrongfully, they rightfully fully now or shall used enforced? To this we fully, inquiry address ourselves. is are they

The first that objection made to the leases is no it right,” “has unchangeable by lessee—he or modification urged, demand either the cancellation or definite of an one. is existing objection not of what measurable. is but a probably representation It course, of a leases, is of the severity for, deemed con- This can be upon option a restraint enforced.. tract And obligation. its efficacy is its indicates power cover all it is of no that the leases consequence further an ex- are they the United Company the machines of is the broad are they Whether patent rights. ercise of all dispose will disposition in the case its question dependent minor and ones. have They then, accomplish? do "leases

What, it is because, called clauses, so “tying” clauses called leased to use use the machine said, tie the re- lease. Their particular not covered machines “to make it effect- a asserts, Government is, the sult S. Opinion 247 U. Court. ma- condition of the that lessee shall use the iease for competitors supply chines either to need additional im- of the kind leased for machines wholly portant though types;” different “In isurged: And addition to those are clauses there other clauses which have a similar upon certain effect They give freedom the lessee’s choice machines. tying destroyers clauses their maximum effect as possibility competition the defendants.” It is charged that are objectionable “the clauses inter-re operate together lated effect”; with cumulative that unlawful both' “they integral as and effective parts whole, of an and, unlawful the most part, in and of ' charged themselves.” And' is further is, that “it however, -in their combined effect a system of leasing, used and' insisted by a dominant its upon corporation that, field the full their extent of is to illegality be per--' ceived.” This, however, is assertion and relies for- upon foundation of an the-assumption illegal dominance by the United has been found not element, therefore, exist. must be put This to one side regarded in and the leases and of themselves and their execution; incentives induced and to suit seeking dissolution it well be contended that the necessary parties, certainly lessees are so as existing far But the concerned. contention of the Govern leases goes farther ment and asserts that its purpose object absence the lessees from the case. Indeed justify takes to Government merit in reheving itself them of a rights lessees,” thraldom. “The it' is said, “are - not touched to except preserve them.” But a lessee may situation, may like his have .deliberately, chosen it ¡ót may' for any care benevolent or other interposition, wise.

Finally Government, possible opposition to both . lessee; .essor and asserts “no that one has the right . MACH. CO. 61 UNITED STATES v. UNITED SHOE , Opinion of the Court. conduct another shall be per- the unlawful say that in it.” he has an interest mitted to continue because may dispute be as the chan- But there not. Perhaps illegality cannot conceded conduct, and acter be a assumption consequent assertion.and -to mere destroying power.. from the stand let consider the clauses us

However, if determine of the Government’s contentions and point The rights given patentees. transcend they (1) prescribes One that a uniform term clauses are: “that is, says, of this the Government The result years.. so of machine long period replacement no during that or others better machine defendants leased lease,or of any avoidance change in the form the no with the except open of its is lessee requirements is re To.this consent and terms.” upon defendants’ ran for constituent companies that the leases of the plied con were besides, new and, patents indefinite periods criticism of the Gov out, these the stantly taken and to was as the term again, ernment does not And apply. lessor, and, defendants’ as surance the lessee as well of a to that counsel'Suggest, analogy there term n circum the hazard building lease which under Gf this advantageous be turn out tó be or not to stances Filene’s court. examples two in this there are recent & v. 597, U. and Gardiner Butler Weed, Sons Co. v. S. clauses,, say. all Co., Indeed, may. 245 U. S. 603. we them, analysis and discussion of without a minute rights on bargains, patent based simply were rights granted. those conditions which upon clause, provides (2)' “additional-machines” than can per- has moré work case the lessee the, will lease additional leased, machine he formed work, if the lessee does and that machinery to perform elect, so the lease he may cancel not do so the lessor kind then machinery of the same lease 62 S

Opinion of the Court. U. clause, see, This we presently force between them. shall was discontinued in 1907 and was not in when this use '(3) An brought. suit was “exclusive clause re- Use” particular of machinery the lessee to use quiring ex- auxiliary machines clusively and which aid or supple- it, so, for to do lessor may failure at option ment his writing terminate any forthwith or all or li- leases in particular of censes and accessorial machines shall become in the lessor. This revested clause of requires an election use only Com- between pany’s machines and those If other makers. the elec- latter, tion be of the the lessor terminate the lease '(4) his resume machines. A This prohibitive clause. clause provides that the particular machine leased shall not be used the preparation shoes, or manufacture of etc., upon which work is done by any machine held not by the under (5) lessee lease the lessor. right terminate all leases This clause. clause does not need much Its explanation. name expresses It purpose. gives the lessor the right, default the performance lease, the conditions of the particular only .cancel lease but requires all leases and delivery the leased to the lessor at Beverly, Mass., com- good order, plete reasonable wear and tear alone clause; excepted. ’(6) The full-capacity Its name ex- presses its It purpose. requires leased machinery to be used to its full capacity the work upon to which it is ap- plicable. This clause was lease- the Consolidated to the formation of the United prior Company. Its tois secure the purpose which is royalty based on the amount use the machine. It does not require the. use particular dr machine the use of other machines-. requires It merely particular machine that installed shall be used have work for it. With- lessee say that, lessors, out it defendants they would have (7) compensation no assurance their machine. A v. UNITED SHOE MACH. CO. STATES of the Opinion Court. 32. re- machinery of the leased the return

charge upon is (8) comment further no notice.. This needs or. quired. machinery for the purchase provide metallic leases The. lessor, This clause fastening material. certain the which, the provides payment royal- next, and the. ma- make-weights special and not are mere ties, teriality. (we the use the to leases ascribed

The evil potency think and we do not inclusive of the clauses .it as word according applica- to their distinguish to them necessary is machines) by Government particular tion makers. machinery of shoe makers and coercion asserted contended, first, it is limit the freedom They of the second competition limitation preclude words, In 'the use of the other with thN defendants. compelled against is as of the United Company machines manufacturers, resulting use of machines other charge latter. To this of the restraint of trade is said charges subsidiary, and restraint all conception company the initial have been organization. disproves evidence of its the purpose leasing respective of their seen, As we have the' this. companies constituent practice was the. substantially the same they union and were before their a instances better. There was before —in after union as clause. After the union prohibitive to the as difference And the companies. of all of the to machines it related advantage of the leases shows that also testimony large, means of' is that manufacturers was cap- were without machinery which to obtain able lit- and the indeed, big They helped, to buy. ital 5,000 output pairs was whose manufacturer, One tle. béen if his had company testified day, shoes necessary, outright buy compelled developed it could not have as factory, equip it had.

6-1 . Opinion of the 247- U. S. Court. And sets of machines are necessary equipment thé factory, and their best results are obtained when relation. proper indeed,'the used This nec relation^ coordination essary machines, picto was shown rially by a number of views in eourt below, well as testified to witnesses. And there is great economic advantage, testified, in the service accessory - furnished for the reason that "the regularity and continuous operation of the machines upon what dependent be termed instantaneous service. This ... factor of service is the very at operation base of successful factory. shoe The is to travel planned work one room to another in n many fixed So in in quantities. pair go morning —so at many pair night. come out The operatives are de pendent upon that traveling along regularly them. work breaking down of some 6f these will in machines of the many factories the entire work.” block flow of the testimony, This was the of the of the United president and it Company, received corroboration witness fronma States, United for the who said: "The margin of profit making shoes'is such that it- very is essential that our with, machinery should work smoothly regularly continuity, economies the manufacture shoes á make the difference often 'between successful manu who is not facturer one successful. One of the most is to economies have our important' machinery work with continuity highest, and with the efficiency and out turn (cid:127)with the utmost regularity day day, our- after product it so get we want to that there won’t just be hitch flow of our product through anywhere factory.” our gave The witness the excellence of the praise This the de Company. -the excellence and service the leases secured to the scribed lessees and secured timé.rights And same lessors.' at the leases to-the machines, of the use of the a right a reservation strictly », SHOE MACH. UNITED CO. STATES Opinion Court. O’Donnell; Talking Bauer Straus v. Victor v. recognized Motion Picture Co. v. Film Co., Machine Universal were entered into We must assume Co., supra. of their efficiency calculation value —the upon the lessees against'the upon balanced restrictions of the machines the alternative of their use. The lessees had conditions machines for other machines were the choice This, we those covered. sold side side with the leases is of view. think, out put things Let us confound guard against confusion and not

r given must in distinction. A kept patentee be n rights to force it on device, given to his but he is power no it will do buy If or use it the world the world. the world demonstrated, so a-voluntary utility, upon judgment If its price to the be, great at cost patentee. conditions, the world will high, too in dollars or whether dollars or whether of it; price, refuse it be worth the world say will it. To the world seek conditions, is to attack is not for the recompensed price pays and to declare law, defy is to policy experience us con- around have genius of inventive all objects This nothing of mankind. to the advancement tributed therefore, accept, cannot applicable comment is here. We nothing else of the Government. We sée the contention than that which moves circumstances of the parties in the of men. move the transactions criticism of the say further, in answer to the mayWe by “riders” granted of them' were leases, that relaxations to were open forms than the restrictive and that testimony in the distinguished manufacturers, the shoe contain “independent.” They do not the term but do contain the other clauses clause prohibitive is made payment. Comparison initial require an forms witnesses and the other independent form sees judgments expressed. The are Government various upon the freedom nothing of them but the restraints üü 247 U. S.

Opinion of the Court. form only as regards independent business, is slavery counsel relaxing implies what slightly are the they contend that others. The defendants mutuality of right, property exercise of a simple based on definite and valuable considerations. agreement that the machines the United Com- And it was testified always have been sale pany’s general department open further said that the additional-machine or lease. It is removed from all leases of the as company clauses were did they 1907 and were not in use and not rep- as early bringing its at the time of this suit. But policy resent outstanding, with that clause are the Government leases replies. we need not dwell further

However, upon the leases. It declamation to that approaches say lessees were And, making. said, coerced to their we have there was It is to the lessee. easy say benefit leases against the the law. But when one tries policy to be definite one comes back the rights obligations is no question There in the parties. case the use of to compel restrain; circumstances the leases are simply different from bargains, others, not moved upon calculated considerations, and, whether provident or improvident, are entitled nevertheless the sanctions of the law. We this, indeed, have said but iteration, sometimes which have become have to be propositions postulates justified objections, which, to meet do deny existence, bring tend to them into question.

Besides, impossible believe, the court below find, the great refused to business the United Shoe has been built the coercion Machinery .Company up of its and that customers has been installed ex- large country by factories most ercise of even that "The power, installations patents. could, had no other than the excellence of have incentive advantage use, machines and then the con-. v. UNITED SHOE MACH. CO. 67 STATES Day, J., dissenting. and not compensation having adequate imposed ditions of the law. or the policy the letter offensive being

Decree affirmed. McReynolds Mr. Justice Brandéis Justice Mr. of the case. decision in the consideration part no took dissenting. Day, Mr. Justice Justice Clarke Mr. opinion

I concur here to the character the combination [post, 75] involved. n in the so-called leases attacked provisions There are so view are my clearly in this case .within Act, Sherman Anti-Trust condemnation of them and of new making enforcement further The far- charactér, enjoined: should he like leases of leasing sustaining of a character decision reaching uses developed defendant such as thé has system this impel reasons which me justifies a statement of the conclusion. parties are not lessees suggestion

As to the had as and, therefore, no decree can be this proceeding, of in- this is not of want to me a case them, seems of their because parties or even necessary dispensable from proceeding the court prevent such as should interest Com- Machinery United Shoe enjoin to a decree features -ofthe enforcement these from the further pany If contracts hereafter. making of similar leases and the Sherman Anti-Trust are in violation these leases against, and of them be proceeded Act the makers them effectually which shall rendered preclude decree sort, presence of this without further contracts of them should lessees, it could be assumed that these retention of advocacy heard to be desire restrictive features. ^prohibitive fur- in equity is to enjoin of this object proceeding TERM, 1917. 247 U. 8. J.,

Day, dissenting. title statute, criminal not to determine of a ther violation to It as is sufficient of the defendant. rights or property Shields v. to refer parties of indispensable the doctrine in the cases collected 130, the 17 How. Barrow, v. in Waterman Canal-Louisiana subject discussion the in this case is no reason 33, S. 48. There Co., Bank 215 U. its shape not so reserve may the court relief why be neces- it, should not before rights persons sary. case now involved the aspect questions

The Are certain two-fold. First: under consideration are con- of themselves agreements erf these lease provisions Anti-Trust Act? within terms Sherman sidered the. to be held immune agreements Are such Second: much, of the fact that act because requirements machinery all, of the of the United Shoe Machinery perhaps and leased is made under letters patent issued Of these their order. questions the United States? 1. It from the record that clearly appears dominates the trade in certain Machinery Company Shoe furnished to manufacturers machinery kinds of shoe all machinery essential country; over of the business of prosecution manufacturing successful whom it customers to many supplies It has these shoes. leases, and such customers are required machines under instruments go terms of these or without accept for uniform The leases are made term of the machines. considering not now the conditions seventeen years, use the machines and other terms for the payment nature, contain certain in their legal usual and summarized in the be may requirements: features which (1) lessee shall use the or machinery, any part or thereof, the manufacture welted preparation of which has boots, or other footwear not had certain shoes it by other leased performed upon machines operations from, (2) This is called the the lessor. clause. prohibitive SHOE MACH. CO. 69 STATES ». UNITED Day, dissenting. J., or lessee shall fail cease use ex- If at time the any him held under lease from lasting clhsively tacking fail or cease to mech- exclusively or use lessor, him under lease from the held appliances anisms and at option terminate lessor, etc., lessor etc., lasting machines, then ex- all or licenses leases lessee, right and the isting lessor and the between in the This is shall vest lessor. possession thereupon (3) called use clause. In case lessee the exclusive the kind which performed by has work of can to the belonging department metallic machineiy of of the capacity lessor in excéss the metallic the from the then lessee lessor, which has under lease he the sufficient additional shall take from lessor either the or so to do the work, failing to machinery perform forthwith, or other lease lessor cancel the lease may any the parties. then in force between of metallic (4) This the machines clause. The is called additional exclusively, from the at such lessee obtain lessor shall establish, it all the material needed may fastening prices shall, lessee (6) machines. The in leased operating all lessor, suffer a at the termination election have, of all machines which he and the removal may leases in defendant, any him from the the event leased by of the any any violation of term one leases. it may

From familiar decisions this court be said to Act now settled that Sherman Anti-Trust be well con and contracts the effect of demns all combinations free natural is to restrain the flow interstate unduly or which or tend to commerce, monopolize monopolize or or such trade commerce whole While part. act contracts sanctioned lawby does not reach normal all by and sustained does reach and means usage, and devices which to by protect act purposes may freedom of thwarted and interstate commerce be monopolies promoted and United v. Ameri created. States

70 S. J., dissenting. Day, U. v. St. 179; U. States 106, can Tobacco S. Co., Reading United States v. 383; 224 U. S. Terminal, Louis 525; 324; United States v. 226 U. S. Patten, U. S. Co., 226 Lumber Dealers’ Assn. v. Eastern Retail Unite States That States, 234 U. S. 600. these lease restrictions tend d to flow of prevent commerce, the free interstate its activities, least natural course of and at tend to mo nopolize an trade interstate commerce seems important mere terms, from a statement of apparent having mind their natural effect. necessary

For the for which years seventeen term all the leases drawn, are the lessees upon failure to use exclusively shoes, defendant’s for lasting machines upon failure additional lessor, needed machines from the purchase or to buy supplies certain from the lessor prices at it, subject right fixed the lessor to terminate all leases held lessee and offending to take possession to the utter destruction of the the. lessee’s business. effect of these necessary prohibitive in view control provisions, dominating of-the busi- ness lessor, the lessee prevent using machines, advantageous similar however to him so, be to do unless he is incur willing the peril losing machinery essential to his business. It likewise so field of free curtails the customers as to keep others from manufacturing machinery.1 such Whenever a new ma- Judiciary of Representatives, Committee the House of when Clayton (38 considering 730), provisions: of the Bill Stat. said such making already great “Where the concern these contracts is and Company, such the Shoe . powerful, United . . the Machinery ‘tying’ contract made with local dealers of exclusive becomes one the'greatest monopoly agencies and instrumentalities of ever devised by completely competitors only It the brain man. shuts out of. already engaged in are opportu- from trade but from the any community up great to nities build trade where these system appearing By powerful practice. conditions are under this . practice Machinery Company method and the Shoe up this has built SHOE MACH. CO. r. UNITED STATES dissenting. Day, J., 32. for of seventeen by period the lessee the acquired

chine is the statutes of of a under patent full life (the years him binds forged anew which States) the chain exclu- machines, to the practical lessor’s to the of the use of sion all others. so-called the fact that changed by situation

Nor is the These to offered manufacturers. leases are independent additional of considerable require payment leases man- shoe which lead the terms charges and embrace forms to and restrictive prohibitive choose the ufacturers Moreover, others. accept of than to leases rather tried the effect in this case be questions upon in force. made, years remain actually leases obtained it these results When is considered that this system great industry business by conduct of restrain contracts, effect to necessary “tying” mo- effect commerce, attempt freedom seem me to be established. nopolization, company 2. on behalf argument The stress patent of letters is the owner upon is rested the fact that within the mo States, issued and that by make right such has nopoly by patents created involved. At an such as are herein enforce contracts machinery being monopoly that owns and controls entire now a. great manufacturing all houses the United States. No in- used slightest opportunity machines dependent manufacturer shoe has the country up trade in this while this to build condition considerable using If the who is obtains. manufacturer the Shoe Machinery purchase place were to man- a machine independent company establishment, an Shoe ufactured his Machinery Company could, contracts, under its withdraw all thereby from the establishment and wreck the business (Report 13.) Committee, p. the manufacturer.” forbidding patentees making A statute of Massachusetts leases effect like those here involved was sustained as constitutional Supreme Massachusetts, Judicial Court Massachusetts in 193 1917. 72 Day, J., dissenting. 247 S.U. Justice, de by Chief court, speaking this early day consists patent grants, the “The franchise which clared: every making, to exclude one from right in the altogether without thing patented, per vending using, This is all that he obtains by mission patentee. 14 McQuewan, Bloomer v. How. 539. The ex patent.” by rights patent secured letters have tent and nature subject recent in this court, been the consideration definition, has been just quoted, approved ap O’Donnell, 1; v. 229 U. S. Straus v. Victor Bauer plied. 490; Picture v. Co., Machine U. S. Motion Co. Talking Film Co., 502; 243 U. S. Boston Store Chicago Universal U. S. Co., 246 Grapnophone v. American tried the District Court Henry this When case was 224 U. was Dick, 1, v. S. the law this court. In that (cid:127) made letters under was sold mimeograph, patent, case a full value, agreement than its with license less its use to certain articles limiting unpatented belonging to use held to Such was be within ex patentee. right' by secured the lessor’s In Motion patent. clusive Film Co., Picture v. Universal supra, sought Co. was so as to doctrine of case protect'a extend the license notice attached to the agreement evidenced machine use of films, só limit to the certain purchaser terms fixed to be restrict purchaser his patent at discretion. But such extended owner of and it was rights again held patent scope denied received the law that the no more than the patentee inyention. his right make, sell use, exclusive said, however, begining It the series cases O’Donnell, supra, ending Bauer v. with Boston Store v. American Co., Chicago Graphophone supra, decided hold temí, at this no more that a than patentee may sell article covered his letters an his patent, receive therefor, and then undertake to price impose restriction whieferesales of the upon price’at patented article v. SHOE STATES UNITED MACH. CO. J., dissenting. Day, shows that the nature of those cases reading A be made. use of an to others the right grant to of the and extent limitations defined. discussed, its fully and invention was to right the of a patentee Picture Case In the Motion machine, of a patented use the place upon restrictions lessee, purchaser’s or by to limit its a purchasér, and use in was considered. agreement, to the license terms stated there involved limitations as were This court held that such not within the were use of upon patented the right to It the expanded of the was patent. upon scope 77 Case, Fed. Button Fastener an invention that the use rested; both cases v. Dick, Rep. 288, Henry In the latter Motion Picture Case. were overruled the might while the specifically patentee case held that was if he con- use, yet withhold his invention public others, was limited to he by sented to use himself of his and that use claims patent, the described the his right which extended nothing the statute there use by to the invention the patented prescribing control not covered machines, by materials and the supplies full In view of the discussion question patent. is to, already unnecessary referred the series of cases to it further. pursue leasing, us, the now before the system

Under pat- grant the use of the ma- entee not undertakes to only to but dictate the patent, covered letters chines used; compel which shall to their with supplies used; prevent of another surrender the machine to. with furnished except use monopoly beyond the invention to patentee; extend statute; to the use by the lease years allowed for- to permit terms which only upon invention lessor terminate, if he to all license, chooses, feit patent And similar these the machines lessor. leases to use right grant made under extraordinary claims gives the inventor the exclusive patent TERM, 1917. OCTOBER. S. 247 U. dissenting. Day, J., nothing invention, sell his use, and make, right authority extended power In such my opinion more. con- has been the same with the act as consistent are not subject beginning dealing with the in every strued case such To sustain in Bauer v. O’Donnell. decision authority to an it seems me amounts provisions leasing inventions, guise of under the of patented holders right machinery, to exercise the use of patented restraining necessarily unduly combinations make grant trade, virtue of patent the freedom in the Sher- direct violation of monopolies up to build man Act. grant in the patent it is that there is embraced

True agreements the or to make licenses and privilege right long so as covering patented use of the machines the But not in unlawful. are themselves agreements such' gen- is controlled the the to make restrictions right law,, of is at liberty eral and because he principles them, make in them- make the contracts patentee is not authorized to make con- illegal certainly selves in violation of other statutes the United States. tracts That not authorize granted patent under a do rights trade, monopolizing contracts in or making of restraint or in viola- tending monopolize trade commerce in Act, this court Standard tion of the Sherman was held States, Co. v. United 226 U. S. 20. Sanitary Mfg. Publishers’ Assn., In v. American 231 U. 222, Straus S. contracts, clearly otherwise within terms the Sher- be Act, justified rights man were claimed to because of the United laws States. copyright secured under following decision in the Standard Sani- Quoting Case, “So, this in tary court said: Mfg. Co. the present that, case, successfully contended it cannot be the mo- inis this copyright respect any of a more ex- nopoly patent that secured under the tensive than law. No more statute was than the act patent copyright intended SHOE r. UNITED MACH. CO. 75 STATES J-, dissenting. Clarke, 32. of trade and in unlawful restraint agreements authorize terms of in monopoly, specific violation

tending all to reach designed is broadly Law, the Sherman tending in restraint of trade unlawful combinations into entered combinations agreements because of the . .” monopolies. to build and perpetuate up Act are valid Sherman each statute and patent While a should patentee laws States. United .the secured to the inventor rights protected in exercise into the laws enacted system under the patent gives in act which nothing States, United there of the United to violate license patentee statutes one now under considera not the States, certainly the restrictive and prohibitive In tion. my opinion Act, within the as are Sherman clauses of these leases tend to of interstate trade and clearly restraint the sense those terms been defined have monopolize of this court. That some of the leases were the decisions Machinery Company when the Shoe existence exercise against no formed affords protection Congress in the of the Sherman passage of the power 219 U. Mottley, Act. Louisville & R. Co. v. S. Nashville R. 467, I think should be entered as that a decree for, and I opinion therefore dissent from the and prayed of the court. judgment Pitney con-

Mr. Mr. Justice Clarke and Justice in this cur dissent.

(cid:127) Mr. Justice Clarke, dissenting.

A after did at plain mstory just parties what the and of the was or- time the United Machinery Shoe in ganized 1899, exclusively, almost February, compiled, in organization from the of the two leaders testimony tl^.e state- be the best documentary evidence, and from will dissenting. U. S. Clarke, J., in than stated those I of the reasons can make ment which render Day, by' Mr. Justice dissenting opinion the the opinion judg- to concur for me in impossible in this of the court case. ment customary giving great of fully agree practice

I with the judges questions trial weight the conclusions of of the testimony depends fact when the value of involved the when of witnesses the manner upon appearance this rule ceases when the testifying, but the reason for chiefly, as it in this writing consists, in does evidence is significance which case, of the purchases property,' in the than in manner purchase lies fact rather the making.it. Obviously, attaching of the sole of to the a shoe in dominating operation the difficult and the man- upper in by machinery, early ufacture shoes the trial the case, in by stipulation Government in the charge court, consolidation was open became, formed for interstate trade or monopolizing com- purpose machinery adapted purpose, merce “bot- ” both the shoes, violation of first and toming second Anti-Trust Act of 1890. sections Shoe Before the merger Goodyear Machinery Com designated Goodyear (hereinafter pany Company) leasing engaged manufacturing was to shoe man auxiliary and sixteen machines, ufacturers two principal used in materials the latter for the being preparing two principal the former. The machines were operation the sole to upper used known as sewing (cid:127) and turn shoe machine and Goodye the Good welt n outsole lock stitch machine. With ma- year rapid these chines, Goodyear Welt, popular used largely This shoe, manufactured. also man company designed lasting ufactured machine used specially making Goodyear Welt Shoes. McKay Lasting

The Consolidated and Com- Machine MACH. CO. 77 r. UNITED SHOE STATES J., dissenting. Clarke, 32. designated as the Consolidated Com- (hereinafter

pany lasting manufacturing leasing in engaged was pany) of three types. ap- and as otherwise implies, of the one As the name had re- companies of these two pears record, in the each machine of shoe man- consolidations prior sulted organiza- the largest were they ufacturing companies country. tions their kind in the the Consolidated controlling spirit E. P. Goodyear Company was W. Winslow, S. and masterful who, shows, were keen Howe, the record 1898, they in July, began that men, testifiy both the interests looking uniting negotiations organization in the which culminated companies, two in February, Machinery Company the United Shoe arrangement” “working agreement” A “harmonious being would not Howe, but a lawyer, was at first proposed, of in- “I a sort says, he had this, “because,” agree to be a combination be deemed definite idea that might I an that had indefinite fear of trade. ... restraint instance, for separate but, remained companies the two offices, might branch there joint factory joint had a I of trade. insisted something in the way restraint merger be a reason that there should complete that ” consolidation. arrangement” was This that the “harmonious idea in the mind of Howe inspired was doubtless unlawful Case, Assn. Freight the Trans-Missouri the decision probably shared 1897, and he 290, rendered U. S. holding notion that the company and; uncommon then not evading available for lawfully devices merger in the Act. Anti-Trust expressed congressional purpose Case, 197, 193 U. S. this Northern in the Securities But holding in 1904 was a company decided court Case, Tobacco Co. American device, and futile merger in 1911 also 106, was decided S.U. 78 1917.

Clarke, J., dissenting. "247 U. S. “subterfuge" of form” which a mere the courts would not those who violated to shield the act. permit the “harmonious agreement” rejecting Thus or “un- . unlawful, for the derstanding” purpose of accom- end, what the same plishing they thought a not way, the defendants resorted to illegal the merger (later see, using on, as we shall also the holding company) the United Shoe and organized Machinery Company, of under the New Jersey, laws stock a capital of $25,000,000.

The of declaration scope of the for which purposes this was formed, corporation as stated its articles of of significance is much incorporation, in determining what the real was at which objective persons interested It is therein aiming.- declared that the company is manufacture, formed not “to only lease and sell shoe ma- also, “to chinery,” but manufacture . . boots, . shoes, ' all articles .. footwear and . . of every descrip- tion may produced manufactured, or in whole or leather, or part, rubber any other materials or fabrics; ... or purchase, lease otherwise ac- quire trade-marks, . . . trade-names, . . . copy- rights . . . rights, and patent and, with a view to the working and development same, of the to carry on any legal whatsoever, business whether manufacturing or otherwise, which the corporation deem calculated, or directly to. indirectly, accomplish these objects, or any of them. ... To hold';'purchase) or' otherwise . . acquire shares the capital stock ....

any other corporation corporations; ... to do all or things the above ... in any part of the'world.”

As impressiye proof objects incorporators, we print the margin some extracts from the certificate incorporation 'the holding company, the “United ” Shoe Machinery Corporation, organized in 1905, STATES /(cid:127). UNITED SHOE MACH. CO. J., dissenting. Clarke, controlling the United Shoe Company, Machinery men of 1899.1 excerpts incorporation from the articles of following are The Machinery Corporation,” capital with a stock

“United Shoe May 2nd, 1905: filed $50,000,000.00, objects corporation which the is formed are: “Third. sell, lease, operate manufacture, buy, and deal in and “To with all tools, implements, and machinery, mechanical devices kinds every especially whatsoever, name and. nature and contrivances lease, operate in and manufacture, buy, sell, and deal with all sorts every machinery, lasts, trees, forms, and kind of boot and shoe any implement, tool, material, or in mechanism, contrivance, thing with, or in connection with the man- way connected useful whatsoever boots, footwear, and the manufacture of leather shoes or ufacture of any goods made from materials and fabrics of goods, or and rubber or connection with the whatsoever, useful in manufacture description any machinery, devices or con- mechanical operation or mentioned; produce, prepare and man- trivances hereinbefore rubber, and and mate- ufacture, sell and in and with leather Miy, deal sorts, materials from which said of all and the raw fabrics rials and buyj produced; manufacture, or fabrics are leather, materials rubber and boots, and footwear and all articles with shoes sell and deal in and manufactured, may produced every description that be or things of any or other or leather, from rubber materials part, or in whole , prepar and deal general produce, manufacture fabrics; and in things wares, merchandise, property, materials and goods, and with description. every and class in all kinds carry of manufacturers of and dealers on business “To buttons, and studs, nails, wires, rivets, tacks, metallic hooks, of eyelets, linen, laces, cloth, fastenings, other plates, metallic, wood and other cements, dressings, fabrics, brushes, materials, abrasive tape other and requisites improvement and treat- blackings for the and other stains, material, buttons and inner shoes, threads, elastic ment of boots damp protecting or feet soles, articles substances and other or used in connection with articles substances heat, or tents, shoes, sails, cloth- corsets, stationery, of boots and manufacture carry of man- analogous the business and to on ing purposes, and for findings, appliances, devices, all kinds of of and dealers in ufacturers may things mechanisms, accessories, processes and tools, any manufacture or treatment with the in connection used or useful articles or . . . above substances. of the named , (cid:127) J:, dissenting. Clarke, 247 U. S. now thus equipped apparent legal And authority, if successfully used, sufficient restrain and amply mo- the several among States branch of trade nopolize involved, let us and commerce see what the defendants did. all, $4,918,000

First of of the stock of the new com- exchanged for all of the pany capital stock of the Goodyear and International Goodyear Companies, and stock $4,432,000 $432,000 jblus cash was exchanged for all of the capital stock of the Consolidated Company. By merger, this with fifteen millions capital stock apply for, obtain, register, “To purchase, lease or acquire, otherwise own, use, operate, to hokL introduce, sell, assign or otherwise dis- pose any trade-marks, and all tráde-names and marks, distinctive copyrights, patents and pateqt rights, and all inventions, improvements processes used in connection with or secured under'Letters Patent of the United States or elsewhere, otherwise, or use, and to exercise, develop, grant .licenses, respect of, or otherwise turn any to account quch trade-marks, patents, licenses, concessions,processes and like, any rights property, or' such so acquired, and, with a information working development view to the same,' .carry any on legal whatsoever, manufacturing business whether or otherwise, which corporation directly calculated, or indirectly, deem to ac- n objects cemplish these of them. . . . purchase,^acqujre subscription “To or otherwise, and to hold for .therwise, use, investment or sell assign, transfer, mortagage, pledge,, dispose guarantee any or of and to otherwise shares of stock, bonds, obligations any tecurities, corporation or other other or association ..of carrying any on corporation business which this carry authorized to on. . . . partnership any enter into or arrangement into for sharing “T^

profits* interest, jpint union of co-operation adventure or any .with person, partnership, corporation association or carrying engaged on or in business which this .corporation-is carry authorized to on or ., engage t . in. everything necessary “To and do all or convenient for the accom- objects plishment purposes, powers above-mentioned, or the< thereto, incidental and to business, conduct its or anything do do, every it is authorized to in State and in the Territories and Colonies of the foreign States America and in United countries . .” SHOE'

UNITED STATES UNITED MACH. CO. 81 e. J., dissenting. Clarke, 32. uses, for other new still available two company;

of the lasting in machines largest country manufacturers that, and Winslow testifies “After combined were it was Company manufacturing the United formation was being put machine that out single lasting every machine; and in 1900 except the Seaver we United States Seaver Company.” acquired .the although Winslow Néxt, immediately, testifies that McKay been to either the spoken word had people “no Com- when the charter for the United Eppler people ” obtained, purchased was the entire Company pany McKay Machinery Company stock Shoe capital million of stock five one-half dollars testifies, en- This Winslow was company, Company. fastening machines and manufacturing metallic gaged business,” very large machines, doing “was heeling nearly was out “putting subsidiaries controlled through all fastening nearly machines the-heel- all the metallic in the United being that were made States.” ing machines union of these com- this three Thus, confessedly, by all of the substantially consolidated there were panies and of machines for lasting manufacturers with me- attaching the of boots and shoes uppers soles in addition to this thread, and fastenings tallic was owned Machine Davey Pegging Company Company. Consolidated doing yet strong competitor

There remained one only Com- Welt Machine country, this Eppler business Besides the subsidiary. with an international pany, company welt machine there was only one Eppler Globe, concern business, unimportant an engaged however, acquired by which, later, in a little within Howe could remember Winslow and

Although a cent what at just, royalties paid fraction small machines, neither of them use of for the time J., dissenting. 247 U. S. Clarke, stock, and paid Eppler was for the could remember what of the did not company the records both testified testimony But other shows that show the amount. it, $350,000 $400,000 cash, between payment organization' within a few weeks after was made admitted, significantly, it was Company, was taken at the time of the inventory purchase no stock. McKay Eppler either the Goodyear and That the machines were Eppler sharply is shown by testimony of both competitive Winslow Winslow testifies that just and Howe. before the con- Eppler solidation the was “manufacturing machine, an welting stitching outsole machine and two machines” and that auxiliary Goodyear Company welting machine, “a an making outsole ma- stitching chine machines that auxiliary performed the same functions that the auxiliary machines Com- Eppler pany did, a number in addition.” “Both machines,” “were Winslow, being continues used the manufacture of men’s welt shoes,” and “the two welting machines that were being specially on the pressed market at that time Goodyear were the machine and the Eppler machine.” testifies, And Howe “Those two types of shoes were well known in the trade. There was the Goodyear welt, made by the welt Goodyear machines; welt, which Eppler was a recognized class of shoe. We didn’t know whether the manufacturers would prefer welts Eppler ... or whether would prefer Goodyear welts.”

What these two dominating, spirits enterprise thought of their work at of its stage development thus described, we have far illu- interesting minating Thus, as to their purpose. Winslow:

“Immediately after the organization of the company our welting, stitching outsole and lasting machines were doing welting, about all the outsole lasting stitching being that was done the United States. e. UNITED SHOE CO. STATES MACH. J., dissenting. Clarke, fastening your heeling and metallic

“Q. And so machines? heeling.”

"A. Not much the so I was formed Howe,- And this “When putting outside concerns were don’t remember that says, on cross- machines,” out he elsewhere lasting examination, Goodyear lasting that in work Companies overlapped Consolidated obviously they them and, true, was done with this- was in the market. competitors must have been made in circulars be the statements To this must added . of the com- time to the smaller stockholders sent at this Thus, induce combination. panies to them join “The Goodyear great Company: to stockholders corpora- control one advantages secured countries, foreign both in tion, the United States and for sev- have been efficient machinery, shoe types shoe- principal the officers of the years recognized eral di- your year Tor than a companies. more negotiation been large rectors and shareholders have investigation of the thorough this a accomplish end. After shoe-machineiy business of condition'and the financial below, corporation of a organization named companies the State of New been effected under laws of. has Machinery Com- be known as the United Shoe Jersey, to Machinery Company United Shoe . . The pany. majority a contracted more than has already than the other named companies stock capital [the Com- Machine Pegging Davey and the Eppler Company shoe-machinery companies, in other besides stocks pany] and other patent property. letters ac- time also from will time United Company “The either direct and properties, quire shoe-machinery of their stock.” of shares ownership purchase a as simply this circular estimating I cannot share in It was foresight. business of unusual naive expression TERM, 1917. J., dissenting. 247 U. S. Clarke, circular, boldly confidential because its phrased, perhaps combination had thought authors been given of merger character which could withstand Govern- ment but which this court attack, has since repeatedly subterfuge held is a of form. The circular is an mere accu- of what had been rate and of descripton accomplished as we shall the evidence in the what, see, record shows, to be done in intended the future. It would who seem men were not bent upon com- control would plete and have been monopoly satisfied with have advantages we thus those in which, seen, this any held over who enterprise competitors might clearly remain or who in the might future. But that the appear the United men connected with were not satis- Company to their fied, and were determined make control as perfect and is shown permanent possible, by further con- duct first of year during existence of that com- as follows: pany,

Within of organization a month of the United Com- on March for 1, pany, 1899, $74,800 sum worth of stock the control of capital purchased the Goddu which was manufacturing metallic Company, fastening which machines, with those of the competed absorbed the six McKay and inventors who Company, owned the stock were bound the contract of to purchase transfer to the United all Company inventions to shoe relating jointly or they machinery, severally make or might have interest in any period years; ten and they for also bound not to become interested or indi- “directly, for like “in rectly” term the business and sell- making ing inventions or any improvements relating any way shoe or relating machinery,” any to the way manufac- ture of boots and shoes or useful in connection therewith “without the consent in writing the United Company.”

On March, the 16th day 1900, the Company pur- chased from Winkley Phillips exclusive license /(cid:127). SHOE MACH. STATES UNITED CO. J., dissenting. Clarke, leveling in sole improvements the inventions use of the United in ten letters patent described machines, Britain, Fiance Ger- Great patents States the inventors and bound communicate many, or all “which either of inventions Company leveling machines or make” sole shall them hereafter at machines. Howe testifies that time sole pressing ma- Company making of this purchase but a different kind, type'. chines 1899, $72,000 for the sum the Com- 26, On August Bresnahan, the business of to- Timothy pany purchased stock of the Boston Shoe entire gether capital It manager Bresnahan as employed Tool Company. bound him contract not two years thereafter edge in “the. manufacture of heel trimming, engage . and tools . . trimming edge setting or now or of . . tools machines, products Tool Com- or Boston Shoe him said made by [then] aid, indirectly he “directly and that would pany,” Boston Shoe with said any competition assist or encourage “everything do but would business,” Tool or its United Shoe of the in to the interests promote his power Machinery Company.” pur- 11th of the Company October the same year,

On on each $250 $5 Brewer, one for and royalty chased from his appli- manufactured, which machine should breast- in heel patent cation letters for an improvement for and one machine he had machines, manufactured ing as- took an it, he had made the tools it. he may inventions “of all from Brewer signment any.and heels ‘on breasting for relating to machines make hereafter ” the last.’ as familiar argument to justify made attempt in binding as these, such contracts business practice pur property whom patents ventors from all to the United to surrender Company chased 86 1917.

Clarke, J., dissenting. 247 S.U. fruits of their inventive after the genius many years purchase many and often for years after their employment had ceased, disingenuous the' In a single, extreme. terse sentence this court has made conclusive answer to such contention, “Even if saying, separate elements (cid:127)of such a scheme are when to lawful, they are bound gether intent as by common of an unlawful parts scheme to monopolize interstate make commerce plan the parts unlawful.” & Co. v. States, United Swift U. S. United States 375; v. U. S. Reading Co., 226

On 1900, the January 13, purchased, for the of sum $38,000, business and assets, including twenty foreign States and patents ma- lasting chines, of the Seaver Process Lasting This Company. was the only independent company putting ma- lasting chines on market after formed, combination was and it the last vestige removed in the competition machine lasting business. will

These suffice. They typical fifty-seven pur- Com-, chases to have been proved made pany prior to commencement this suit; shoe manufacturing boot companies; and shoe manufacturing companies; or patent rights Applications for such and of rights; property businesses partnerships corporations engaged manufacturing appliances “calculated,” in the language of the charter or company, “directly indirectly, accomplish objects, them, corporation,” and sewing machine varying needles and awls, tack- ing machines, buttons, brushes and Brew- sandpaper. $250 er’s for a was not patent too application small to be overlooked, and we shall see a six million dollar pur- chase great was not too to be made order to continue, extend, make secure, complete control over the business which was first involved, attained by the of the consolidation Goodyear and Consolidated Com- r. UNITED SHOE MACH. CO. STATES J., dissenting. Clarke, McKay of the Com- purchase Eppler and the panies in 1899. panies would not first of this company history year to the fact that com- reference without

be complete that during year resulted made binations purchases hundreds many patents one in under control collecting of a shade” variation “shadow every covering used the manufacture many parts month of that noticed, shoes, and, must of leases were the first the forms 1900, December, into to be known brought use, came developed dis- and which have been clad,” “iron in the trade as in which in dissenting cussed Mr. Justice Day opinion concur.. I cordially so trade of the was restless country

The boot and shoe denounced regarded unhesitatingly was under what although the that entrenched, strongly as a monopoly, were now utterly dependent trade engaged men on which for the terms the United Company upon of im- groups to do at least two continue business, might the com- were formed before manufacturers portant devising, this suit for purpose mencement from con- freeing themselves some means possible, the record 'abundantly they regarded, ditions which intolerable. shows, as oppressive that a it came to pass this incentive spur Under of, de- Boston, one Plant, manufacturer shoes, large so com- of shoe manufacturing machinery a line veloped he canceled the 1, 1910, in character on May plete the United held on machines owned leases which he many adver- factory, his and removed them Company with adequate, his manufacturers tised readiness supply working shoe termed, machinery.” and what “wonder for the story, pur- own Winslow’s By negotiations manufacturing business chase of Plant’s shoe 16th, on June upon were entered 1917. J., dissenting. S. 2-17U. Clarke, within two of the that he months time removed their ma- his These factory. negotiations chines from inter- were on and on the 5th, 28th of rupted July the same four month suits were commenced United against Company two Plant, were on August more commenced two 11th, more on two August 13th, and more on 3rd. September These suits were in royalties recover for part claiméd use machines before were taken they United out Plant’s and the rest were to enjoin him factory using his machines, own on the in- ground fringed of the patents United Company.

Whether as a result of this familiar resort to coercive measures need not be determined, but on September 22nd, at four o’clock in the morning, ne- possibly anticipate gotiations which were for the progress purchase Plant’s property by group wealthy shoe manufacturers, purchased Plant’s shoe Company machinery business and manufacturing patents, and also the con- trol which he owned stock capital of a shoe man- ufacturing United company. for Company paid these two six millions properties dollars, plus $122,000 for the which Stambon insisted Plant must be property, purchased as a of the transaction. This part large sum of money, for larger than was either of the paid original constituent of the companies consolidation, was not divided of sale, contract but Winslow allots three and one-hálf millions purchase shoe manufacturing com- stock two and one-half pany millions to the pur- chase shoe machinery manufacturing company Even this it will division, patents. observed, al- lows two and one-half millions of dollars to be for the paid company Plant property patents, of little it is now argued value at best were in- owned patents fringements Company. however, thought Mr. Winslow, better of them, he says they were “almost invaluable” to his company. STATES /.. SHOE MACH. CO. UNITED J., Clabke, dissenting. how the for me to understand transac

It is impossible own fail in Winslow’s can words, thus described tion, reads hears description, who convince one was a actual competitor, the Plant formidable great that the of the United Company, and potential, stifle and re to control was paid sum of paid money Standing the defendant strict alone shows competition. the Anti-Trust against offender to be unmistakable an com-, with the of the Law, together origin but when taken small it, of the conduct history and with pany described, seems but we typical part which have against offender but confessed flagrant me a an all this law, repeatedly interpreted by as has been 221 U. S. Co., Tobacco court, United States v. American 324; U. Co., v. 226 S. 106, 179; States Reading United Re 525; Eastern States Patten, United States v. 226 U. S. tail Lumber Dealers’ Assn. v. 600, States, 234 U. S. in the act law as against expressed of the policy of Congress.

I statement to the convincing as shall add only has attained which the combination ascendancy complete country of the of the industry branch over the important the following control, shown selected for from the in the brief of the results tabulated Government seriously disputed all from which elements testimony, have been excluded: defendants counsel for by Manf'd Manf’d country. use this Machines in in. all others. defendants. 7 7,496 machines............. Lasting None. 409 Standard screw machines...... None. 146 machines.............. Pegging 6 3,488 Tacking machines........ 142 2,527 machines......... sewing Welt 2,676 .... machines. stitching Outsole 1,835 Loose-nailing machines. 2,019

Heeling machines............. Clabke, J., dissenting. 247 U. S. Further details eould not add to the effect of the large we have thus presented. outline This is not case to be the detailed statements of individuals upon decided refined distinctions as to the upon their intentions ap- law. The plication design one, was a patent large comprehensively boldly conceived and executed. The dominating spirits enterprise, the advantage of knowing precisely what they accomplish, wished re- jected a “harmonious arrangement” of their interests as unlawful, but to accomplish the same end adopted the scheme of merger, since condemned this court as a mere “subterfuge form.” recognized

The trade the combination monopoly as a from the beginning, and years struggled in vain to free itself by organizing competing interests; Judiciary Com- mittee of the House of Representatives, when the Clayton Bill was under consideration, reported as result of its investigations that the company appeared to be “a mo- that owns nopoly and controls the entire now being by used all manufacturing houses of great the United States” and with a record before me such in as I outline have it is detailed, impossible for me to agree that this now entrenched securely is in- monopoly an nocent result of normal business development.

The difficulties of bringing the defendants within the restraints law, regarded the court as all but insurmountable, seem unimpressive the pres- ence of the resoluté manner which this court dealt with with difficulties quite as and complex vastly interests greater in the Northern Securities, Standard Oil U. S. [221 1] and American TobaccoCo. Cases, In supra. the last named of it these cases was found “in unnecessary give order to effect to the requirements of the statute” the apply to of remedy restraining the movement of the products the combination in commerce, interstate that of ap- or pointing á receiver for the property offender, for

McGINIR v. CALIFORNIA. 91 Syllabus. simple the the declaration court of its readiness to resort or remedies, to either both of these effective exigencies parties conduct of the situation it, this, it case, should served that would require to in- way bringing interests open the powerful volved into obedience the law. I am, study

Convinced as a most of this careful rec- ord, that the United a com- Shoe Machinery Company commerce; bination in restraint interstate trade and a designed actually monopolize that to and does was commerce, of that trade that there- part large continuing of both fore is violation §§ I July 2, Act of to dissent 1890, obliged Anti-Trust am judgment the court. opinion Day Mr. say authorized to that Mr. Justice I am Pitney in this dissent. concur Justice THE STATE v. PEOPLE OF OF McGINIS ET AL. CALIFORNIA. imperial superior county, court

ERROR CALIFORNIA. STATE OF 26, April May 20, 1918. Argued 1918. Decided No. 133. through California in transit question opium was Upon whether violation defendants Mexico, possession or was in weighing officer in custom^ purpose law, state evidence of the defendants boundary of one assistance it at de- exportation, necessary for the papers make out export, Treasury Department authority from the had fendants possession, and unlawful prosecution for competent right the defendants federal court the state denied exclusion clause. arising commerce under the

Reversed.

Case Details

Case Name: United States v. United Shoe Machinery Co. of New Jersey

Court Name: Supreme Court of the United States

Date Published: Mar 21, 1917

Citation: 247 U.S. 32

Docket Number: 207

Court Abbreviation: SCOTUS