247 U.S. 32 | SCOTUS | 1917
Lead Opinion
after stating the case as above, delivered the opinion of the court..
The charge of the bill is that defendants, not being satisfied with the monopoly of their patents and determined to extend it, conceived the idea of acquiring the ownership or control of all concerns engaged in the manufacture of all kinds of shoe machinery. This purpose was achieved, it is charged, and a monopoly acquired, and commerce, interstate and foreign, restrained by the union of competing companies and the acquisition of others. And that leases were exacted which completed and assured the control and monopoly thus acquired. .
But this charge of comprehensive trade dominance was modified in the course of the trial. The Government disclaimed the assertion of such extensive culpability and confined its contention to machinery adapted to the bottoming of shoes (attaching soles to uppers), machines called clicking machines. (cutting-out machines), and eye-letting machines (sufficiently indicated' by name), and
Of course, we agree with the Government that defendants cannot be discharged from all guilt merely because they leave open some branches of the business to the en- . terprise of others, or, as the Government puts it, “that a limited field is as yet open to competition.” But in view of the large design attributed to the defendants and the illustration of what it is contended they accomplished, it would 'be interesting if not instructive to be told when their large scheme was abandoned or broke down, even. though it may now be said to be an unimportant detail, since the trial court has decided that neither the greater got lesser scheme was established by the evidence:
The conclusion, however, is contested, and in. description . of what is tiow contended, the Government says that “the end which avowedly was sought by the organizers'of the United Company was ‘the control in one corporation, both in the United States and in foreign countries, of the efficient types of shoe machinery.’” And, further, after stating the business of defendants to be that “of supply-, ing machines used in the manufacture of shoes,” and the restraint of interstate and . foreign commerce in certain of' the machines, it is said: “ The subject matter of the action, therefore, is the effect of the things done by the defendants • upon the trade between, manufacturers of machines used in the manufacture of shoes and the manufacturers of shoes;” And in further display of the interest which attaches to the issues, it is said: “Shoes are made in every section .of the Union” and “it is obvious th^t supplying important machines for such an industry must be an exceedingly. important part of the interstate trade and commerce of the United States.”
And there are contentions as to the dominance achieved. Indeed,-it is asserted somewhat fervidly that the United . . Company “is absolute monarch, of the industry” and
There are opposing contentions no less fervidly urged. There is denial of the purpose attributed to the defendants or the possession or exercise of baleful power, and the insistence that the United Company is a union of noncompeting businesses conducted under letters patent, effecting through the resources thus acquired greater economies in manufacture and greater efficiency of machinery and “in other ways perfecting the shoe-maker’s art” — advantages not engrossed by the company but inuring to its patrons and through them to the wearers of their product, a finished shoe.
In'final answer to the charge of thé Government the comprehensive declaration is that the shoe machinery industry is not one open to everybody on equal terms. It is one of patents. And the company’s power, if it have power, is not that of combination but the power of the superiority of its inventions — the effect and demonstrated supremacy of its mechanical instrumentalities.
The contentions could not well be more antagonistic^ upon each of which there was conflicting testimony, and the important fact is to be borne in mind that it was given in open court .(except as to certain contentions about patents, their scope and validity).
There are two accusations against the defendants. One is that at the very outset they combined competing companies, and subsequently acquired others, § 1 of the Act of 1890
The offense of combination was committed, it is contended, February 7, 1899, at which time seven shoe machinery companies' were consolidated into the United Shoe Machinery Company of New Jersey, a corporation organized for that purpose. The companies were: Goodyear Shoe Machinery Company, International Goodyear •'Shoe Machinery Company, Consolidated & McKay Lasting Machine Company, McKay Shoe Machinery Company , Davey Pegging Machine Company, Epplér Welt Machine
The first question is, Were the companies in competition? It confronts us at the outset; all other considerations are dependent upon it. As an element in the answer to it we must revert to the admission that the charge of combination is only as to machinery for bottoming shoes— that is, the uniting of the sole to the upper — an operation which might be called “simple” if the complexity of this record did not contradict it and if we were not told that the letters patent covering the machinery for the operation are too great in number for explanation or enumeration. It is said that on certain classes of shoes over 100 different operations are performed by different machines. And the Government has taken pains to tell us how far “the mysteries of the shoemaker’s art and the variations between different methods of making shoes” are outside of the understanding of the purchaser of them. To him, it is said, “shoes are shoes, except as they differ in appearance, comfort, wearing qualities and price.” But to the manufacturer distinctions multiply and to the production of a shoe a complete line of machinery is necessary. Indeed, the Government makes the mystery of the art and the necessity of the instrumentalities, in part, the basis of its argument.
The Government, however, urges two circumstances which it contends corroborate its oral testimony and against which it asserts that “literal denials of specific intent to restrain trade are of no significance. ” But there was more than literal denials. There were detailed representation of the condition of the trade and explanation of the machines convincing, as we have seen, in its strength and the confirmation it received. Let us, however, consider the instances upon which the Government relies. The most important of them is a circular letter,
We cannot, therefore, accept the explanation of the Government. Its implications discredit it. It implies that there was governmental supineness for a long time or an extraordinary oversight of conspicuous, indeed vaunted, criminality. Neither can-be accepted. And we are persuaded that the circular and agreement were not. intended nor regarded to be the avowal, as contended by the Government, of monopoly, achieved or to be achieved, but simply the business expression and foresight of the advantages which would result from the concentration in one management of instrumentalities which, however different, supplemént one another in the creation of a shoe.
We have given the explanation of the Government im
■ The second circumstance cited by the Government is that before the union of the companies their machines had a flexibility in use that the testimony of defendants does not now ascribe to them, and that this was declared in advertisements.. We are not disposed to give much importance to the circumstance. It may be that there was á certain interchangeability in the described machines, but, in the opinion of the trial court, there was, notwithstanding, no practical competition .between them.. We can add nothing to what determined its judgment or to the detailed comparison and explanation of the machines made in its opinions. Indeed, we might rest this branch of the case on those opinions. They were considerate of all the elements of the Government’s contentions and the opposing contentions and tested the machines, their sameness and difference and respective efficienéy, by the purposes for which they were designed by the inventors and employed, in the trade and by the explanations made of them.v.
In considering the competition of the machines and in estimating the defendants’ acts-in uniting the companies,
And it was. held that competition was not destroyed to the designated extent. Indeed, the court was repelled, as it might well have been, by the consquences of so holding on account of the change of conditions, the union of the companies not having been, questioned by the Govem^ment for twelve years and. large investments having been made not only by the company but by the public.
The lapse of time, indeed, may not condone the offense
There are, however, certain instances of acquisition which may be said to give confirmation to the charges of the Government and justify the demand for redress, at whatever cost or disaster to the offenders; in other words, demonstrate the purpose of the original union of the companies, the persistence of that purpose and the extension; of its dominion having the evil consequences depictéd by the Government. Upon these instances it would seem unnecessary to dwell, the companies not being competitive at the time of their union in the United Company. However, they are made so much of by the Government and ' are so strongly urged that attention must be given to them. The most important of them and the one that was given most prominence in the testimony was that of the plant and machinery of the Thomas G. Plant Company, a New Jersey corporation, a manufacturer of shoes, not of machinery, and of the shoe machinery interest of Thomas G. Plant.
Plant was an inventor of machines of the shoe-bottoming variety and had taken out a number of letters patent in the United States and foreign countries covering the same. There was in: the testimony and is in the argument of counsel dispute as to the efficiency of the machines of themselves. We say “of themselves” to distinguish
It appeared that some of the machines infringed the United Company’s and in some details the latter infringed the Plant machines, and the complexity of rights hence resulting, to which we shall presently refer, had led to and threatened litigation; to compose which, it was
The. Govermnent resists the finding. Its conception is, and to this all of its contentions are addressed, that the Unitéd Company combined and wras intended to combine great competing companies and to acquire other competing companies. “The United Company acquired,” counsel say, “every company then [when the company was organized] actively putting' out or planning to put out” machinery adapted to bottoming shoes, and that “in the twelve years before the bringing of this action no substantial change took place, but rather the monopoly so acquired was in some respects extended and in many respects strengthened and intrenched.” In the light of this-conception and contention the Government sees and colors all that the United Company has done, all of the acquisitions it has made, and upon whatever motive made, including the prevention of patent troubles or the composition of litigation.. And it directly says of the purchase from Plant that it was made at an overvaluation and by it Plant was tempted to the bargain and the United Company satisfied by getting rid of a competitor.
We get no solution of the purpose of the parties by the price the United Company paid.
But there was qh interdependency of values. While the Plant device, had value over that of the United Company’s, it was controlled by the latter, or, as the witness expressed the situation, “in a broad way it was a perfect deadlock.” In other words,, the United. Company had the underlying invention and Plant a patent for a particular form of operation which was necessarily subordinate to the other — a situation familar in patent law and 'contests.
It will be seen, therefore, that there was no other Way out of the deadlock, if the inventions were to be used together — that is, embodied in one machine, without infringement — than by ownership in one hand of all the patents. That plan was adopted and was the inducement of the purchase of the Plant inventions by the United Company. But there was litigation to be composed as well, and it was composed.
Another witness testified as to the relation of the Plant patents and those of the United Company and stated that the result, if Plant had insisted upon his patent rights and the company had insisted upon its patent rights, would have been “a stop in the development of shoe machinery in these lines.” And continuing, he said: “We should hardly have dared to go ahead with the improvements in our machines for fear of not succeeding in our patent litigation, or of conflicting with such improvements as Plant had patented. On the other hand, Plant, or any company which he might form, would have hardly dared to go ahead with the possibility of these infringement suits. These infringement suits, or a good many of them, were then pending, and certainly he would have found very'few customers, I think, for his machines.”
This, in outline, was the situation that confronted the
There are other acquisitions, that are emphasized, among them, that of the stock of the Goddu Sons Metal Company. It was acquired March, 1899, a month after the United Company was formed and eleven years before this suit was brought; and the inducement to the acquisition, was to settle the patent troubles that came , to the United Company through one of its constituent companies. The valúe obtained was in patents. These were for the metallic variety of machines, and, according to a witness for defendants, “at that time the United Company was putting out commercial machines for doing the work for which the Goddu Company machines were intended.” And, according to another witness, though not then in a condition to be placed in the hands of manufacturers, “they were in a .state of development where some of them could have been, without extensive changes, made operative.”
By this testimony th defendants justify the purchase; the Government condemns it. The defendants say that it was in composition of an inheritéd litigation and that patents of value were obtained by it.. To this the Government replies m condemnation that the cost of the settlement of the disputes was excessive, being $150,000, and the purpose of getting the patents was to forestall the competition they threatened and could have accomplished by their development.
The value .of a settlement of a dispute about rights which has reached litigation or threatens it cannot be
We may say here of the contention of the Government as to the acquisitions — and the same comment may be made of most of its contentions — that they cast us into speculation for their estimate and urge us to decide between well-sustained conflicting opinions and adjudge the defendants guilty of a violation of law. And this, too, against the considered judgment of the trial court.
We. see no illegality in the contract with G.ofldu for assignment of other inventions he might make, or iri like agreement with others. We content ourselves with this general declaration. An analysis of the contracts is not feasible, nor are the covenants measurable. That they are attempts to subjects the inventive genius of the country to the designs of the defendants is too extreme. They can be seen to have more particular use and to be justified in the circumstances of the transaction with which they were connected. Those whom one employs one gives opportunity to (this was Goddu’s case) and may exact that it be used for the employer. Those who have conveyed to him special machines may be presumed to have • been compensated by their price, and that in either case
It is to be noted that the acquisitions in this case were not coincident in time nor parts of the same transaction. They were scattered through a period of years and varied each from the other, had no dependency, were different and unrelated steps in the development of the business of defendants. They must hence be judged separately, not in accumulation.
The above comment is applicable to other acquisitions, said to be fifty-six in number. It is impossible to review them. A description of them and wherein the machines acquired were competitive with the machines of the United Company ..the Government sets forth in many pages of its brief, and the defendants reply as circumstantially with opposing delineation and justification. Their effect is hard to estimate. The 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 of accessorial machines; some in composition of patent troubles; some not connected with the special charge of monopoly to 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 the defendants’ machines, tributary therefore to their efficiency. They give a false impression by their number. They added nothing of obnoxious power to the United Company nor in any practical or large sense removed competition. •
Defendants charge that the Government not only puts an exaggerated computation upon the acquisitions lay defendants but gives no credit for or account to their resistance of appfications to buy other and, it is asserted, more important concerns. Their number is given as 75, all of great use and importance. The trial court found that the
We pass by the charge of the Government that the United Company through its president threatened destruction to opponents and the use of his influence in the business world'to enforce transfers of competing concerns and the patents they controlled. The charge and its denial or explanation were estimated by the trial judges and the' charge was held not to be established, or of no serious importance. The court said that if the declarations could be called "threats” in view of all the surrounding circumstances shown, it was not established that any competitor lost a customer or that anybody was prevented from attempting competition. Besides, they were isolated instances, separated in time, without relation, not coordinated acts in a scheme of oppression.
We cannot go into further detail without unduly extending this opinion.' It would be repetition, besides, of what was done carefully and thoroughly in the opinions of the trial judges. We sum up with a generalization that the United Company took by its organization "established businesses already of great value, possessing great possibilities of development,” as said by the trial court. It was discerned that there was advantage in their concentration, and the expansion that has hence resulted has been as much in necessary evolution as by design. At its found’a- • tion there were certain basic patents and many auxiliary ones. Inventors — those connected with and those independent of it — were devising and experimenting, and of this the company had to keep informed. It had to keep up with the mechanical march; to fall back would have been its destruction. There was growth not only in its business proper but in the accessories to it. When it was formed in 1899 it had no facilities for furnishing findings
The company, indeed, has magnitude, but it is at once the result and cause of efficiency, and the charge that it has been oppressively used is. not sustained.. Patrons are given the benefits of the improvements made by the company and new machines are substituted for the old ones without disproportionate charge. There has been saving as well in the cost of manufacture of shoes. These are some of the results of the organization of the United Company. Others are testified to and the means of their accomplishment; but time will not permit their statement, and we pass to the leases.
There was complaint of them ana the Go vermuth., attacks them. Complaints, however, may be interested lament; but, on the other hand, they may be the expression of real grievance and demand redress. And which they are should be considered. To the attacks of the Government the defendants reply that the leases are the exercise of their right as patentees and if there is monopoly in them it is the monopoly of the right. It
Of course, there is restraint in a patent. Its strength is in the restraint, the right to exclude others from the use of .the invention, absolutely or on the terms the patentee chooses to impose. This strength is the compensation which the law' grants for the exercise of invention. Its exertion within the field covered by the patent law is not an offense against the Anti-Trust Act. In other circumstances it may be, as in Standard Sanitary Mfg. Co. v. United States, 226 U. S. 20, to which case that at bar has no resemblance.
. The question, then, is, Was the .patent right lawfully exerted in' the leases? Were they anything more than the exercise of the patent monopoly? The word is descriptive and must be used, but it does not imply oppression. The old instrumentalities exist for all who are content with them and who care not for the better ones which inventive genius creates.
The charge of oppression puts out of .view many essential things. We must keep in mind the quality of the right we are considering and that the inventor gets nothing from the law that he did not have before and that, the only effect pf his patent is to restrain others from dealing with or using its device. United States v. Bell Telephone Co., 167 U. S. 224, 239; Paper Bag Patent Case,
Indeed, we said in the Paper Bag Patent Case that he may keep his invention out of use. Therefore, he necessarily has the power of granting it to some and withholding it from others, a right of selection of persons and terms. There is, however, a limitation upon him; he cannot grant the title and retain the incidents of it. Straus v. Victor Talking Machine Co., 243 U. S. 490; Bauer v. O’Donnell, 229 U. S. 1; Motion Picture Co. v. Universal Film Co., supra.
These cases have received review and application in Boston Store of Chicago v. American Graphophone Co., 246 U. S. 8. The principle, of them was expressed to be that where an article has been sold it passes beyond the monopoly given by the patent and conditions cannot-be imposed upon it. Leases are not of this character; they do not convey the title. It is not contended, nor could it be, that in this'case they are a disguise for something else, artifices to convey the machinery and yet keep it subject to the patent right and its exercise. It therefore follows that conditions may .be imposed by them.
It is not certain that the Government denies, this or means to assert anything more than that the patent right is exercised in oppression, assisting,' indeed consummating,' á scheme of monopoly, begun by the formation of the United Company, prosecuted in the various ways to which we have referred, and completed by the leases and their clauses.
It is difficult to. represent the contentions of the Gov-
The first objection made to the leases is that they are unchangeable by the lessee — he “has no right,” it is urged, to demand either the cancellation or modification of an existing one. The objection is not definite or measurable. It is probably but a representation of what is deemed the severity of the leases, for, of course, a contract is a restraint upon option and can be enforced.. This power is its efficacy and indicates its obligation. And further it is of no consequence that the leases cover all of the machines of the United Company if they are an exercise of the patent rights. Whether they are is the broad question in the case and its disposition will dispose of all minor and dependent ones.
What, then, do the "leases accomplish? They have clauses called “tying” clauses, so called because, it is said, they tie the use of the machine leased to the use of machines not covered by the particular lease. Their result is, the Government asserts, “to make it in effect- a
And it isurged: “In addition to those clauses there are certain other clauses which have a similar effect upon the freedom of the lessee’s choice of machines. They give to the tying clauses their maximum effect as destroyers of the possibility of competition with the defendants.” It is charged that “the objectionable clauses are inter-related and operate together with cumulative effect”; that “they are unlawful both' as integral and effective parts of an unlawful whole, and, for the most part, in and of themselves.” ' And' it is further charged that “it is, however, -in their combined effect as a system of leasing, used and' insisted upon by a corporation dominant in its . field that, the full extent of their illegality is to be per--' ceived.” This, however, is assertion and relies for- its foundation upon the-assumption of an illegal dominance by the United Company that has been found not to exist. This element, therefore, must be put to one side and the leases regarded in and of themselves and by the incentives that induced their execution; and to a suit seeking their dissolution it may well be contended that the lessees are necessary parties, certainly so far as existing leases are concerned. But the contention of the Government goes farther and asserts that its purpose and object justify the absence of the lessees from the case. Indeed the Government takes merit to itself in reheving them of a thraldom. “The rights of the lessees,” it' is said, “are not touched except to preserve them.” - But a lessee may like his situation, may have .deliberately, chosen it and may' ¡ót care for any interposition, benevolent or otherwise.
Finally the Government, in possible opposition to both . .essor and lessee; asserts that “no one has the right to
However, let us consider the clauses from the standpoint of the Government’s contentions and determine if they transcend the rights given to patentees. The clauses are: (1) One that prescribes a uniform term of 17 years.. The result of this is, the Government says, “that during that long period no replacement of a machine so leased by a better machine of defendants or others and no change in the form of the lease,or avoidance of any of its requirements is open to the lessee except with the defendants’ consent and upon their terms.” To.this it is replied that the leases of the constituent companies ran for indefinite periods and, besides, new patents were constantly taken out, and to these the criticism of the Government does not apply. And again, the term was assurance to the lessee as well as lessor, and, as defendants’ counsel'Suggest, there is analogy in the term to that of a ■ building lease which may under the hazard of circumstances turn out tó be or not to be advantageous Gf this there are two recent examples in this court. Filene’s Sons Co. v. Weed, 245 U. S. 597, and Gardiner v. Butler & Co., 245 U. S. 603. Indeed, we may. say. of all the clauses,, without a minute analysis and discussion of them, that they were simply bargains, based on patent rights and the conditions upon which those rights were granted.
(2)' The “additional-machines” clause, which provides that in case the lessee has moré work than can be performed by the, machine leased, he will lease additional machinery to perform the work, and that if the lessee does not do so the lessor may cancel the lease if he so elect, and any other lease of machinery of the same kind then in
The evil potency ascribed to the leases (we use the word as inclusive of the clauses and we do not think .it necessary to distinguish them according to their application to particular machines) by the Government is their asserted coercion of shoe makers and machinery makers. They limit the freedom of the first, it is contended, and by that limitation preclude the competition of the second with thN defendants. In other words, 'the use of the machines of the United Company is compelled as against the use of machines of other manufacturers, resulting in the restraint of the trade of the latter. To this charge all other charges are subsidiary, and the restraint is said to have been the initial conception of the company and the purpose of its organization. The evidence disproves this. As we have seen, the' leasing of their respective machines was the. practice of the constituent companies before their union and they were substantially the same after union as before — in instances better. There was a difference as to the prohibitive clause. After the union it related to machines of all of the companies. And the testimony also shows that the advantage of the leases was and is that manufacturers of' not large, means were able to obtain machinery which they were without capital to buy. They helped, indeed, the big and the little. One manufacturer, whose output was 5,000 pairs of shoes a day, testified that if his company had béen compelled to buy outright the machinery necessary, to equip its factory, it could not have developed as it had.
r Let us guard against confusion and not confound things which must be kept in distinction. A patentee is given ■rights to his device, but he is given no power to force it on the world. If the world buy it or use it the world will do so upon a-voluntary judgment of its utility, demonstrated, it may be, at great cost to the patentee. If its price be too high, whether in dollars or conditions, the world will refuse it; if it be worth the price, whether of dollars or conditions, the world will seek it. To say that the world is not recompensed for the price it pays is to attack the policy of the law, is to defy experience and to declare that the objects of inventive genius all around us have contributed nothing to the advancement of mankind. This comment is applicable here. We cannot accept, therefore, the contention of the Government. We sée nothing else in the circumstances of the parties than that which moves and may move the transactions of men.
We may say further, in answer to the criticism of the leases, that relaxations of them' were granted by “riders” and that forms other than the restrictive were open to the shoe manufacturers, distinguished in the testimony by the term “independent.” They do not contain the prohibitive clause but do contain the other clauses and require an initial payment. Comparison is made of the independent form and the other forms by witnesses and various judgments are expressed. The Government sees nothing in any of them but the restraints upon the freedom
However, we need not dwell further upon the leases. It approaches declamation to say that the lessees were coerced to their making. And, as we have said, there was benefit to the lessee. It is easy to say that the leases are against the policy of the law. But when one tries to be definite one comes back to the rights and obligations of the parties. There is no question in the case of the use of circumstances to compel or restrain; the leases are simply bargains, not different from others, moved upon calculated considerations, and, whether provident or improvident, are entitled nevertheless to the sanctions of the law. We have said this, indeed, with iteration, but sometimes propositions which have become postulates have to be justified to meet objections, which, if they do not deny their existence, tend to bring them into question.
Besides, it is impossible to believe, and the court below refused to find, that the great business of the United Shoe Machinery .Company has been built up by the coercion of its customers and that its machinery has been installed in most of the large factories of the country by the exercise of power, even that of patents. "The installations could, have had no other incentive than the excellence of the machines and the advantage of then use, the con-.
Decree affirmed.
During the trial a discussion came up. about patents. The presiding judge intimated that the court (fid not desire to take up the patents' themselves but would send them to an examiner. It was stated by counsel in the case that- the matter was important. But •the court made a distinction between a “patent question” and a “patent controversy” — good faith being an element of the latter — and stated that the latter would not be included in the hearing before the examiner, but would be heard in open court. The court then ordered the taking of testimony of both parties before-the examiner as to that - section of the bill which charged aft unlawful extension of the patents to perpetutate their monopoly at the expense of boot and shoe manufacturers and to use them to acquire a complete monopoly of all kinds
“Sec. 1. Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is hereby declared to be illegal. Every person who shall make any such contract or e.ngage in any such combination or conspiracy, shall bé deemed guilty of a misdemeanor, and, • on conviction thereof, shall be punished by fine not exceeding five thousand-dollars, or by imprisonment not exceeding one year, or by both said punishments, in the discretion of the court.
“Sec.- 2. Every person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person, or persons, to monopolizo any part of the trade -or commerce among the several States, or .with foreign nations, shall be deemed guilty of a misdemeanor, and, on conviction thereof, .shall be punished by fine not exceeding five thousand’ dollars, or by imprisonment not exceeding one year, or by both said punishments, in the discretion of the court.”
There is apparent confusion in the brief of the.Government. In pne'' place it is stated that the United Company was the consolidation of the' businesses and properties of seven companies which were taken over as going concerns, to-wit: Goodyear Shoe Machinery Company, International Goodyear Shoe .Machinery Company, Consolidated & McKay Lasting Machine Company, McKay Shoe Machinery Company,' Davey Pegging Machine Company, Eppler Welt Machine Company, and International Epplér Welt Machine Company. •
In another place the organization of the United Company is stated to be the merger of four companies — Goodyear Company, Consolidated & McKay Company, Eppler Company and the McKay Shoe Machinery Company — and resulted in the immediate suppression of competition between those companies and dominating “to the point of practical exclusion the important-field of supplying the principal and essential machines necessary in the manufacture of shoes.”
• However, in the conclusion of the Government’s brief it contends that it has established “that there existed vigorous competition between three of the companies merged in the organization of the United Company, and that the fourth company, which at any moment might have become a competitor, was taken in for the purpose and with the effect of furthering the unlawful scheme of the combination thus brought into being.” The fourth company referred to "is no doubt the McKay Shoe Machinery Company.
•The immediate results were, it is contended—
“ (1) The suppression of the actual and of the potential competition in lasting machines theretofore existing, between the Consolidated & McKay Company and the Goodyear Shoe Machinery Company. It created a'monopoly in lasting machines!
“ (2) The suppression of the actual and of the potential competition .between the Goodyear Shoe Machinery Company and the Eppler Welt Machine .Company. It created a monopoly of -welting and outsole stitching machineiy.
*40 “(3) The absolute prevention of future competition between the McKay Shoe Machinery Company, the Goodyear Shoe Machinery' Company, the Eppler Welt Machine Company, and the' Consolidated & McKay Compel
“ (4) The creation ot an absolute and complete monopoly in lasting, pegging, welting, outsole stitching, heeling and metallic fastening machines.
“ (5) The creation of an organization with vast resources whose control of many different types of machines necessary to the shoe manufacturing industry gave it a power to extend and intrench its monopoly which none of its constituent companies, however successful, could approach.”
“Plaintiff’s Exhibit 152.
“ To the Stockholders of Goodyear Shoe Machinery Company:'
“Boston, Mass., Feb. 8, 1899.
“.The great advantages to be secured by the control in one corporation, both in the United States and in foreign countries, of the efficient types of shoe machinery, have been for several years recognized by the officers of the principal shoe-machinery- companies.*42 For more than a year your directors and large shareholders have been in negotiation to accomplish this end.
“After a thorough investigation of the financial-condition and the business of the shoe-machinery companies named below, the organization of a corporation has been effected under the laws of the State of New Jersey, to be known as United Shoe-Machinery Company.'
“The United Shoe Machinery Company has already ’contracted for more than a majority of the capital stock of Goodyear Shoe Mar chineiy-Company, Consolidated & McKay Lasting Machine Company, McKay Shoe Machinery Company, Goodyear Shoe Machinery Company of Canada, International Goodyear Shoe Machinery Company, Eppler Welt Machine Company, International Welt Machine Company, Davey Pegging Machine Company, besides stocks in other shop-machinery companies, letters patent, and other property.
“The United Company will also from time to time acquire other shoe-machinery properties, either by direct ownership or by purchase of shares of their stock.”
“Plaintiff’s Exhibit 189.
“Whereas the United Company has acquired control of the boot and shoe and leather working machinery made by the following named ’ corporations doing business in said Boston, namely:
“Goodyear Shoe Machinery Company, Consolidated & McKay Lasting Machine Company, McKay Shoe Machinery Company, Eppler Welt Machine Company, Goddu Metal Fastening Company, Gordon Staple Lasting and Tacking Company, Davey Pegging Machine Company, Gem Flexible Insole Company, Boot & Shoe Sole Laying Company, and contemplates acquiring the control of other lines of boot and shoe and leather working machinery and boot and shoe findings, except leather, linings, lasts and finished boots and shoes. . . .”
The price was $3,000,000 in cash and $1,500,000 in common stock of the United Company at par, the market value of which was $3,000,000.
Mr. Winslow gave the following explanation of his purpose in the Plant purchase as stated in conversations with Mr. Plant:
“I always declined to have anything to do not only with buying but considering his propositions without a full and complete right to examine his 'machinery, determine the value of the inventions — the patents that he had — and Mr. Plant knew that my position all the time, at every interview was that I was not interested in what it cost-' him to get them up, whether much or little. My entire and only interest was whether those- patents could be made of benefit to our customers and the trade. If they could be of benefit, if they were of . large benefit, and the trade ought to have them, I should be very glad to buy them and embody them in our machines for what I 'thought they were worth, irrespective of what they had cost him — but I would not pay a cent more for them.”
Dissenting Opinion
dissenting.
I concur with the opinion of Mr. Justice Clarke [post, 75] as to the character of the combination here involved.
There are provisions in the ■ so-called leases attacked in this case which in my view are so clearly .within the condemnation of the Sherman Anti-Trust Act, that the further enforcement of them and the making of new leases of like charactér, should he enjoined: The far-reaching character of a decision sustaining a leasing system such as thé defendant has developed and uses justifies a statement of the reasons which impel me to this conclusion.
As to the suggestion that the lessees are not parties to this proceeding, and, therefore, no decree can be had as to them, it seems to me this is not a case of want of indispensable or even necessary parties because of their interest such as should prevent the court from proceeding to a decree to enjoin the United Shoe Machinery Company from the further enforcement of these features -of the leases and the making of similar contracts hereafter. If these leases are in violation of the Sherman Anti-Trust Act the makers of them may be proceeded against, and a decree rendered which shall effectually preclude them from further contracts of this sort, without the presence of the lessees, if it could be assumed that any of them should desire to be heard in advocacy of the retention of these ^prohibitive and restrictive features.
The object of this proceeding is to enjoin in equity fur
The questions involved in the aspect of the case now under consideration are two-fold. First: Are certain provisions erf these lease agreements of themselves considered within the. terms of the Sherman Anti-Trust Act? Second: Are such agreements to be held immune from the requirements of the act because of the fact that much, perhaps all, of the machinery of the United Shoe Machinery Company is made and leased under letters patent issued by the United States? Of these questions in their order.
1. It clearly appears from the record that the United Shoe Machinery Company dominates the trade in certain kinds of shoe machinery furnished to manufacturers all over the country; which machinery is essential to the successful prosecution of the business of manufacturing shoes. It has many customers to whom it supplies these machines under leases, and such customers are required to accept the terms of these instruments or go without the machines. The leases are made for a uniform term of seventeen years, and not now considering the conditions of payment for the use of the machines and other terms usual and legal in their nature, they contain certain other features which may be summarized in the requirements: (1) The lessee shall not use the machinery, or any part thereof, in the manufacture or preparation of welted boots, shoes or other footwear which has not had certain operations performed upon it by other machines leased from, the lessor. This is called the prohibitive clause. (2)
From familiar decisions of this court it may be said to be now well settled that the Sherman Anti-Trust Act condemns all combinations and contracts the effect of which is to unduly restrain the free and natural flow of interstate commerce, or which monopolize or tend to monopolize such trade or commerce in whole or in part. While the act does not reach normal contracts sanctioned by law and sustained by usage, it does reach any and all means and devices by which the purposes of the act to protect the freedom of interstate commerce may be thwarted and monopolies promoted and created. United States v. Ameri
For the seventeen years term for which all the leases are drawn, the lessees upon failure to use exclusively the defendant’s machines for lasting shoes, or upon failure to purchase needed additional machines from the lessor, or to buy certain supplies from the lessor at prices to be fixed by it, are subject to the right of the lessor to terminate all the leases held by the offending lessee and to take possession of the. machines to the utter destruction of the lessee’s business. The necessary effect of these prohibitive provisions, in view of the dominating control of-the business by the lessor, is to prevent the lessee from using other similar machines, however advantageous to him it may be to do so, unless he is willing to incur the peril of losing machinery essential to his business. It likewise so curtails the field of free customers as to keep others from manufacturing such machinery.
Nor is the situation changed by the fact that so-called independent leases are offered to manufacturers. These leases require the payment of considerable additional charges and embrace terms which lead the shoe manufacturers to choose the prohibitive and restrictive forms of leases rather than to accept others. Moreover, the questions in this case are to be tried upon the effect of the leases actually made, and for years to remain in force. When it is considered that these results may be obtained in the conduct of a great business industry by this system of “tying” contracts, the necessary effect to restrain the freedom of commerce, and the attempt to effect monopolization, seem to me to be established.
2. The stress of the argument on behalf of the company is rested upon the fact that it is the owner of letters patent issued by the United States, and that within the monopoly created by such patents it has the right to make . and enforce such contracts as are herein involved. At an
When this case was tried in the District Court Henry v. Dick, 224 U. S. 1, was the law of this court. In that • case a mimeograph, made under letters patent, was sold for less than its full value, with a license agreement limiting its use to certain unpatented articles belonging to the patentee. Such use was held to be within the exclusive right' secured by the lessor’s patent. In Motion Picture Co. v. Universal Film Co., supra, it was sought to extend the doctrine of that case so as to protect'a license agreement evidenced by notice attached to the machine só as to limit the purchaser to the use of certain films, and to restrict the purchaser to other terms to be fixed by the owner of the patent at his discretion. But such extended scope of patent rights was denied and it was again held that the patentee received from the law no more than the exclusive right to make, use, and sell his inyention.
It is said, however, that the series of cases begining with Bauer v. O’Donnell, supra, and ending with Boston Store of Chicago v. American Graphophone Co., supra, decided at this temí, hold no more than that a patentee may not sell an article covered by his letters patent, receive his price therefor, and then undertake to impose a restriction upon the price’at whieferesales of the patented article may
In the Motion Picture Case the right of a patentee to place restrictions upon the use of a patented machine, and to limit its use by a purchasér, or purchaser’s lessee, to terms stated in the license agreement, was considered. This court held that such limitations as were there involved upon the use of patented machines were not within the scope of the patent. It was upon the expanded right to use an invention that the Button Fastener Case, 77 Fed. Rep. 288, and Henry v. Dick, were rested; both cases were overruled in the Motion Picture Case. In the latter case it was specifically held that while the patentee might withhold his invention from public use, yet if he consented to its use by himself or others, he was limited to the use described in the claims of his patent, and that there was nothing in the statute which extended his right to control the patented invention by prescribing the use of machines, materials and supplies not covered by the patent. In view of the full discussion of the question in the series of cases already referred to, it is unnecessary to pursue it further.
Under the system of leasing, now before us, the patentee not only undertakes to grant the use of the machines covered by the letters patent, but to dictate the supplies with which they shall be used; to compel their surrender if the machine of another is used; to. prevent their use except with other machinery furnished by the patentee; to extend the monopoly of the invention beyond the 17 years allowed by the statute; to lease the use of the invention only upon terms which permit the lessor to forfeit the patent license, and to terminate, if he chooses, all similar leases to use the machines of the lessor. And these extraordinary claims of right are made under the grant of the patent which gives to the inventor the exclusive
True it is that there is embraced in the patent grant the right or privilege to make licenses and agreements covering the use of the machines patented so long as such' agreements are not in themselves unlawful. But the right to make restrictions is controlled by the general principles of law,, and because he is at liberty to make them, the patentee may not make contracts in themselves illegal and certainly is not authorized to make contracts in violation of other statutes of the United States. That rights granted under a patent do not authorize the making of contracts in restraint of trade, or monopolizing or tending to monopolize trade and commerce in violation of the Sherman Act, was held by this court in Standard Sanitary Mfg. Co. v. United States, 226 U. S. 20.
In Straus v. American Publishers’ Assn., 231 U. S. 222, contracts, otherwise clearly within the terms of the Sherman Act, were claimed to be justified because of rights secured under the copyright laws of the United States. Quoting and following the decision in the Standard Sanitary Mfg. Co. Case, this court said: “So, in the present case, it cannot be successfully contended that, the monopoly of a copyright is in this respect any more extensive than that secured under the patent law. No more than the patent statute was the copyright act intended
The patent statute and the Sherman Act are each valid laws of .the United States. While a patentee should be protected in the exercise of rights secured to the inventor under the patent system enacted into the laws of the United States, there is nothing in the act which gives the patentee a license to violate other statutes of the United States, and certainly not the one now under consideration. In my opinion the restrictive and prohibitive clauses of these leases are within the Sherman Act, as they are clearly in restraint of interstate trade and tend to monopolize in the sense that those terms have been defined in the decisions of this court. That some of the leases were in existence when the United Shoe Machinery Company was formed affords no protection as against the exercise of the power of Congress in the passage of the Sherman Act. Louisville & Nashville R. R. Co. v. Mottley, 219 U. S. 467, 480. I think that a decree should be entered as prayed for, and I therefore dissent from the opinion and judgment of the court.
A plain mstory of just what the parties did at and after the time the United Shoe Machinery Company was organized in February, 1899, compiled, almost exclusively, from the testimony of the two leaders in tl^.e organization and from documentary evidence, will be the best state
I fully agree with the customary practice of giving great weight to the conclusions of trial judges as to questions of fact involved when the value of the testimony depends upon the appearance and manner of the witnesses when testifying, but the reason for this rule ceases when the evidence is in writing or consists, chiefly, as it does in this case, of purchases of property,' the significance of which lies in the fact of the purchase rather than in the manner of making.it.
Obviously, the attaching of the sole of a shoe to the upper is the difficult and dominating operation in the manufacture of shoes by machinery, and early in the trial the charge of the Government in the case, by stipulation in open court, became, that the consolidation was formed for the purpose of monopolizing interstate trade or commerce in machinery adapted to that purpose, the “bottoming of shoes, ” in violation of both the first and second sections of the Anti-Trust Act of 1890.
. Before the merger the Goodyear Shoe Machinery Company (hereinafter designated the Goodyear Company) was engaged in manufacturing and leasing to shoe manufacturers two principal and sixteen auxiliary machines, the latter being used in preparing the materials for the operation of the former. The two principal machines were used for sewing the sole to the upper and were known as the Goodye • welt and turn shoe machine and the Goodyear outsole rapid lock stitch machine. With these ma- ■ chines, the Goodyear Welt, a popular and largely used shoe, was manufactured. This company also manufactured a specially designed lasting machine used in making Goodyear Welt Shoes.
The Consolidated and McKay Lasting Machine Com
As the name of the one implies, and as otherwise appears in the record, each of these two companies had resulted from prior consolidations of shoe machine manufacturing companies and they were the largest organizations of their kind in the country.
The controlling spirit of the Consolidated Company was S. W. Winslow, and of the Goodyear Company E. P. Howe, who, the record shows, were keen and masterful men, and they both testifiy that in July, 1898, they began the negotiations looking to a uniting of the interests of the two companies, which culminated in the organization of the United Shoe Machinery Company in February, 1899. A “harmonious arrangement” or “working agreement” was at first proposed, but Howe, being a lawyer, would not agree to this, “because,” he says, “I had a sort of indefinite idea that it might be deemed to be a combination in restraint of trade. ... I had an indefinite fear that if the two companies remained separate but, for instance, had a joint factory and joint branch offices, there might be something in the way of restraint of trade. I insisted for that reason that there should be a complete merger and consolidation. ”
This idea that the “harmonious arrangement” was unlawful was doubtless inspired in the mind of Howe by the decision in the Trans-Missouri Freight Assn. Case, 166 U. S. 290, rendered in 1897, and he probably shared a then not uncommon notion that the holding company and; the merger were devices lawfully available for evading the congressional purpose expressed in the Anti-Trust Act. But in the Northern Securities Case, 193 U. S. 197, this court decided in 1904 that the holding company was a futile device, and in the American Tobacco Co. Case, 221 U. S. 106, it was decided in 1911 that the merger was also
Thus rejecting the “harmonious agreement” or “understanding” . as unlawful, for the purpose of accomplishing the same end, in what they thought a not illegal way, the defendants resorted to the merger (later on, as we shall see, using also the holding company) and organized the United Shoe Machinery Company, under the laws of New Jersey, with a capital stock of $25,000,000.
The scope of the declaration of the purposes for which this corporation was formed, as stated in its articles of incorporation, is of much significance in determining what the real objective was at which the persons interested were aiming.- It is therein declared that the company is formed not only “to manufacture, lease and sell shoe machinery,” but also, “to manufacture . . . boots, shoes, and footwear and all articles .. ' . . of every description that may be produced or manufactured, in whole or in part, from leather, rubber or any other materials or fabrics; ... to purchase, lease or otherwise acquire . . . trade-marks, trade-names, . . . copyrights and patent rights, . . . and, with a view to the working and development of the same, to carry on any legal business whatsoever, whether manufacturing or otherwise, which the corporation may deem calculated, directly or indirectly, to. accomplish these objects, or any of them. ... To hold';'purchase) or' otherwise acquire . . . shares of the capital stock .... of any other corporation or corporations; ... to do all or any of the above things ... in any part of the'world.”
As impressiye proof of the objects of the incorporators, we print in the margin some extracts from the certificate of incorporation of 'the holding company, the “United Shoe Machinery Corporation, ” organized in 1905, by the
First of all, $4,918,000 of the stock of the new company was exchanged for all of the capital stock of the Goodyear and International Goodyear Companies, and $4,432,000 of stock jblus $432,000 in cash was exchanged for all of the capital stock of the Consolidated Company. By this merger, with fifteen millions of the capital stock
Néxt, and immediately, although Winslow testifies that “no word had been spoken to either the McKay people or the Eppler people when the charter for the United Company was obtained, ” the Company purchased the entire capital stock of the McKay Shoe Machinery Company for five and one-half million dollars of stock of the United Company. This company, Winslow testifies, was engaged in manufacturing metallic fastening machines and heeling machines, “was doing a very large business,” and through controlled subsidiaries was “putting out nearly all the metallic fastening machines and nearly all the-heeling machines that were being made in the United States.”
Thus, confessedly, by this union of these three companies there were consolidated substantially all of the manufacturers of lasting machines and of machines for attaching the soles of boots and shoes to uppers with metallic fastenings and with thread, and in addition to this the Davey Pegging Machine Company was owned by the Consolidated Company.
There yet remained only one strong competitor doing business in this country, the Eppler Welt Machine Company, with an international subsidiary. Besides the Eppler there was only one other welt machine company engaged in business, the Globe, an unimportant concern which, however, was acquired by the United Company a little later, in 1901.
Although Winslow and Howe could remember within a small fraction of a cent just, what royalties were paid at any time for the use of their machines, neither of them
That the Goodyear and Eppler machines were sharply competitive is shown by the testimony of both Winslow and Howe. Winslow testifies that just before the consolidation the Eppler Company was “manufacturing a welting machine, an outsole stitching machine and two auxiliary machines” and that the Goodyear Company was making “a welting machine, an outsole stitching machine and auxiliary machines that performed the same functions that the auxiliary machines of the Eppler Company did, and a number in addition.” “Both machines,” continues Winslow, “were being used in the manufacture of men’s welt shoes,” and “the two welting machines that were being specially pressed on the market at that time were the Goodyear machine and the Eppler machine.” And Howe testifies, “Those two types of shoes were well known in the trade. There was the Goodyear welt, made by the Goodyear welt machines; the Eppler welt, which was a recognized class of shoe. We didn’t know whether the manufacturers would prefer ... . Eppler welts or whether they would prefer Goodyear welts.”
What these two dominating, spirits of the enterprise thought of their work at the stage of its development which we have thus far described, is interesting and illuminating as to their purpose. Thus, Winslow:
“Immediately after the organization of the company our welting, outsole stitching and lasting machines were doing about all the welting, outsole stitching and lasting that was being done in the United States.
*83 “Q. And so with your heeling and metallic fastening machines?
"A. Not so much the heeling.”
And this from Howe,- “When the United was formed I don’t remember that any outside concerns were putting out lasting machines,” and he elsewhere says, on cross-examination, that lasting machines of the Goodyear and Consolidated Companies overlapped in the work which was done with them and, if this- was true, obviously they must have been competitors in the market.
. To this must be added the statements made in circulars sent at this time to the smaller stockholders of the companies to induce them to join in the combination. Thus, to stockholders of the Goodyear Company: “The great advantages to be secured by the control in one corporation, both in the United States and in foreign countries, of the efficient types of shoe machinery, have been for several years recognized by the officers of the principal shoe-machinery companies. Tor more than a year your directors and large shareholders have been in negotiation to accomplish this end. After a thorough investigation of the financial condition'and the business of the shoe-machineiy companies named below, the organization of a corporation has been effected under the laws of. the State of New Jersey, to be known as the United Shoe Machinery Company. . . . The United Shoe Machinery Company has already contracted for more than a majority of the capital stock of [the companies named other than the Eppler Company and the Davey Pegging Machine Company] besides stocks in other shoe-machinery companies, letters patent and other property.
“The United Company will also from time to time acquire other shoe-machinery and properties, either by direct ownership or purchase of shares of their stock.”
I cannot share in estimating this circular as simply a naive expression of unusual business foresight. It was a
It would seem that men who were not bent upon complete monopoly and control would have been satisfied with the advantages which, we have thus seen, those in this enterprise clearly held over any competitors who might remain or who might appear in the future. But that the men connected with the United Company were not satisfied, and were determined to make their control as perfect and permanent as possible, is shown by their further conduct during the first year of the existence of that company, as follows:
Within a month of the organization of the United Company, on March 1, 1899, for the sum of $74,800 worth of its capital stock it purchased the control of the Goddu Company, which was manufacturing metallic fastening machines, which competed with those of the absorbed McKay Company, and the six inventors who owned the stock were bound by the contract of purchase to transfer to the United Company all inventions relating to shoe machinery, which they jointly or severally might make or have any interest in for a period of ten years; and they were also bound not to become interested “directly, or indirectly” for a like term “in the business of making and selling any inventions or improvements relating in any way to shoe machinery,” or relating in any way to the manufacture of boots and shoes or useful in connection therewith “without the consent in writing of the United Company.”
On the 16th day of March, 1900, the Company purchased from Winkley and Phillips the exclusive license
On August 26, 1899, for the sum of $72,000 the Company purchased the business of Timothy Bresnahan, together with the entire capital stock of the Boston Shoe Tool Company. It employed Bresnahan as manager for two years and bound him by contract not to thereafter engage in “the. manufacture of heel trimming, edge trimming or edge setting machines and tools . . . or of any . . . machines, tools and products now [then] made by him or by said Boston Shoe Tool Company,” and that he would not “directly or indirectly aid, assist or encourage any competition with said Boston Shoe Tool Company or its business,” but would do “everything in his power to promote the interests of the United Shoe Machinery Company.”
On October 11th of the same year, the Company purchased from one Brewer, for $250 and $5 royalty on each machine which should be manufactured, his application for letters patent for an improvement in heel breasting machines, the one machine he had manufactured and the tools with which he had made it, and it. took an assignment from Brewer “of any.and all inventions he may hereafter make relating to machines for breasting heels ‘on the last.’ ”
The attempt made in argument to justify as familiar business practice such contracts as these, binding inventors from whom patents and other property were purchased to surrender to the United Company all of the
On January 13, 1900, the Company purchased, for the sum of $38,000, the business and assets, including twenty United States and foreign patents and 138 lasting machines, of the Seaver Process Lasting Company. This was the only independent company putting lasting machines on the market after the combination was formed, and it removed the last vestige of competition in the lasting machine business.
These will suffice. They are typical of fifty-seven purchases proved to have been made by the United Com-, pany prior to the commencement of this suit; of shoe machinery manufacturing companies; of boot and shoe manufacturing companies; of patent rights or Applications for such rights; and of the property and businesses of partnerships and corporations engaged in manufacturing appliances “calculated,” in the language of the charter of the company, “directly or indirectly, to accomplish the objects, or any of them, of the corporation,” and varying from sewing machine needles and awls, to tacking machines, to buttons, brushes and sandpaper. Brewer’s $250 application for a patent was not too small to be overlooked, and we shall see a six million dollar purchase was not too great to be made in order to continue, to extend, and to make secure, the complete control over the . business involved, which was first attained by the consolidation of the Goodyear and Consolidated Com
The history of the first year of this company would not be complete without reference to the fact that the combinations and purchases made during that year resulted in collecting under one control many hundreds of patents covering every “shadow of a shade” of variation in the parts of the many machines used in the manufacture of shoes, and, it must be noticed, that in the month of December, 1900, the first of the forms of leases were developed and brought into use, which came to be known in the trade as “iron clad,” and which have been discussed by Mr. Justice Day in a dissenting opinion in which I cordially concur..
The boot and shoe trade of the country was so restless under what was regarded and unhesitatingly denounced as a monopoly, strongly entrenched, that although the men engaged in that trade were now utterly dependent upon the United Company for the terms on which they might continue to do business, at least two groups of important manufacturers were formed before the commencement of this suit for the purpose of devising, if possible, some means of freeing themselves from conditions which they regarded, as the record 'abundantly shows, as oppressive and intolerable.
Under the spur of this incentive it came to pass that a large manufacturer of shoes, one Plant, of, Boston, developed a line of shoe manufacturing machinery so complete in character that on May 1, 1910, he canceled the leases which he held on many machines owned by the United Company and removed them from his factory, and advertised his readiness to supply manufacturers with adequate, and what was termed, “wonder working shoe machinery.”
By Winslow’s own story, negotiations for the purchase of Plant’s shoe machinery manufacturing business by the United Company were entered upon on June 16th,
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, possibly to anticipate negotiations which were in progress for the purchase of Plant’s property by a group of wealthy shoe manufacturers, the United Company purchased Plant’s shoe machinery manufacturing business and patents, and also the control which he owned of the capital stock of a shoe manufacturing company. The United Company paid for these two properties six millions of dollars, plus $122,000 for the Stambon property, which Plant insisted must be purchased as a part of the transaction. This large sum of money, larger than was paid for either of the original constituent companies of the consolidation, was not divided in the contract of sale, but Winslow allots three and one-hálf millions to the purchase of the shoe manufacturing company stock and two and one-half millions to the purchase of the shoe machinery manufacturing company and patents. Even this division, it will be observed, allows two and one-half millions of dollars to be paid for the Plant machinery company property and patents, which it is now argued were of little value and at best were infringements of patents owned by the United Company. Mr. Winslow, however, thought better of them, for he says they were “almost invaluable” to his company.
I shall add only the convincing statement as to the complete ascendancy which the combination has attained over the important branch of the industry of the country selected for its control, which is shown in the following results tabulated in the brief of the Government from the testimony, and from which all elements seriously disputed by counsel for defendants have been excluded:
Machines in use in. this country. Manf’d by defendants. Manf'd by all others.
Lasting machines............. 7,496 7
Standard screw machines...... 409 None.
Pegging machines.............. 146 None.
Tacking machines........ 3,488 6
Welt sewing machines......... 2,527 142
Outsole stitching machines. .... 2,676
Loose-nailing machines. 1,835
Heeling machines............. 2,019 17
The trade recognized the combination as a monopoly from the beginning, and for years struggled in vain to free itself by organizing competing interests; the Judiciary Committee of the House of Representatives, when the Clayton Bill was under consideration, reported as the result of its investigations that the company appeared to be “a monopoly that owns and controls the entire machinery now being used by all great manufacturing houses of the United States” and with a record before me such as in outline I have detailed, it is impossible for me to agree that this now securely entrenched monopoly is an innocent result of normal business development.
The difficulties of bringing the defendants within the restraints of the law, which are regarded by the court as all but insurmountable, seem unimpressive in the presence of the resoluté manner with which this court dealt with difficulties quite as complex and interests vastly greater in the Northern Securities, Standard Oil [221 U. S. 1] and American Tobacco Co. Cases, supra. In the last named of these cases it was found unnecessary “in order to give effect to the requirements of the statute” to apply the remedy of restraining the movement of the products of the combination in interstate commerce, or that of appointing á receiver for the property of the offender, for
Convinced as I am, by a most careful study of this record, that the United Shoe Machinery Company is a combination in restraint of interstate trade and commerce; that it was designed to and actually does monopolize a large part of that trade and commerce, and that it therefore is a continuing violation of both §§ 1 and 2 of the Anti-Trust Act of July 2, 1890, I am obliged to dissent from the opinion and judgment of the court.
The Judiciary Committee of the House of Representatives, when considering the Clayton Bill (38 Stat. 730), said of such provisions:
“Where the concern making these contracts is already great and powerful, such as the United Shoe Machinery Company, . . . the exclusive or ‘tying’ contract made with local dealers becomes one of the'greatest agencies and instrumentalities of monopoly ever devised by the brain of. man. It completely shuts out competitors not only from trade in which they are already engaged but from the opportunities to build up trade in any community where these great and powerful conditions are appearing under this system and practice. By this method and practice the Shoe Machinery . Company has built up*71 a. monopoly that owns and controls the entire machinery now being used by all great manufacturing houses of the United States. No independent manufacturer of shoe machines has the slightest opportunity to build up any considerable trade in this country while this condition obtains. If the manufacturer who is using machines of the Shoe Machinery Company were to purchase and place a machine manufactured by an independent company in his establishment, the Shoe Machinery Company could, under its contracts, withdraw all their machinery from the establishment and thereby wreck the business of the manufacturer.” (Report of Committee, p. 13.)
A statute of Massachusetts forbidding patentees from making leases in effect like those here involved was sustained as constitutional by the Supreme Judicial Court of Massachusetts in 193 Massachusetts, 605.
The following are excerpts from the articles of incorporation of the “United Shoe Machinery Corporation,” with a capital stock of $50,000,000.00, filed May 2nd, 1905:
“Third. The objects for which the corporation is formed are:
“To manufacture, buy, sell, lease, operate and deal in and with all kinds of machinery, tools, and implements, and mechanical devices and contrivances of every name and. nature whatsoever, and especially to manufacture, buy, sell, lease, operate and deal in and with all sorts of boot and shoe machinery, lasts, trees, forms, and every kind of mechanism, contrivance, implement, tool, material, or thing in any way whatsoever connected with, or useful in connection with the manufacture of boots, shoes and footwear, or the manufacture of leather and rubber goods, or goods made from materials and fabrics of any description whatsoever, or useful in connection with the manufacture or operation of any of the machinery, mechanical devices or contrivances hereinbefore mentioned; to produce, prepare and manufacture, Miy, sell and deal in and with leather and rubber, and materials and fabrics of all sorts, and the raw materials from which said leather, rubber materials or fabrics are produced; to manufacture, buyj sell and deal in and with boots, shoes and footwear and all articles and things of every description that may be produced or manufactured, in whole or in part, from leather, rubber or any other materials or fabrics; and in general to produce, prepar , manufacture and deal in and with goods, wares, merchandise, property, materials and things of every class and description.
“To carry on the business of manufacturers of and dealers in all kinds of eyelets, hooks, buttons, studs, nails, wires, rivets, tacks, metallic and other plates, metallic, wood and other fastenings, laces, cloth, linen, tape and other fabrics, brushes, abrasive materials, cements, dressings, stains, blackings and other requisites for the improvement and treatment of boots and shoes, threads, elastic material, buttons and inner soles, and other articles or substances for protecting feet from damp or heat, and other articles or substances used in connection with the manufacture of boots and shoes, corsets, stationery, sails, tents, clothing and for analogous purposes, and to carry on the business of manufacturers of and dealers in all kinds of appliances, devices, findings, tools, mechanisms, accessories, processes and things which may be used or useful in connection with the manufacture or treatment of any of the above named articles or substances. . . .
*80 “To apply for, obtain, register, purchase, lease or otherwise acquire, and to hokL own, use, operate, introduce, sell, assign or otherwise dispose of any and all trade-marks, tráde-names and distinctive marks, copyrights, patents and pateqt rights, and all inventions, improvements and processes used in connection with or secured under'Letters Patent of the United States or elsewhere, or otherwise, and to use, exercise, develop, grant .licenses, in respect of, or otherwise turn to account any quch trade-marks, patents, licenses, concessions, processes and the like, or' any such property, rights and information so acquired, and, with a view to the working and development of the same,' to .carry on any legal business whatsoever, whether manufacturing or otherwise, which the corporation may deem calculated, directly or indirectly, to ac- ■ cemplish these objects or any of them. . . .
“To purchase,^acqujre by subscription or otherwise, and to hold for investment or .therwise, use, sell assign, transfer, mortagage, pledge,, or otherwise dispose of and to guarantee any shares of stock, bonds, tecurities, or other obligations ..of any other corporation or association carrying on any business which this corporation is authorized to carry on. . . .
“T^ enter into partnership or into any arrangement for sharing profits* union of interest, jpint adventure or co-operation .with any person, partnership, association or corporation carrying on or engaged in any business which this .corporation- is authorized to carry on or engage in. ., t .
“To do all and everything necessary or convenient for the accomplishment of the< purposes, objects and powers above-mentioned, or incidental thereto, and to conduct its business, or do anything which it is authorized to do, in every State and in the Territories and Colonies of the United States of America and in foreign countries . . .”
