its own sales to jobbers and wholesale dealers, but also the retail prices, selling its products to those only who agreed to observe such price regulations. The company alleged that certain department stores had inaugurated a "cut rate" or "cut price" system which caused great damage to its business and affected the sale of the remedies, from the fact that the retail drug stores could not meet such cut rate prices, and therefore no longer kept the remedies in stock for sale. The defendant, Park, having procured supplies of the remedies from third parties, "advertised, marketed and sold" the same at cut rates. The company asked for an injunction against such practices and other necessary relief. The Supreme Court held that such contracts fixing the price restricted competition and were in restraint of trade. They resulted in a combination between the manufacturer, wholesalers and retailers to maintain prices and stifle competition. The Court said: "Agreements or combinations between dealers, having for their sole purpose the destruction of competition and the fixing of prices, are injurious to the public interest and void. * * * The complainant's plan falls within the principle which condemns contracts of this class. * * * And where commodities have passed into the channels of trade and are owned by dealers, the validity of agreements to prevent competition and to maintain prices is not to be determined by the circumstance whether they were produced by several manufacturers or by one, or whether they were previously owned by one or by many. The complainant having sold its products at prices satisfactory to itself, the public is entitled to whatever advantage may be derived from competition in the subsequent traffic." The injunction asked for was refused.

The following cases on "price fixing contracts or combinations" have been decided recently in the lower Federal Courts. In some cases appeals to the Supreme Court have been taken :

Note 2.-In the Ford Case (Ford Motor Company v. Union Motor Sales Company, U. S. Dist. Ct., Ohio), it was held that since the vendor (the Ford Company) had actually parted with the title to the cars sold to its licensed dealers it could not, by contract with its dealers, dictate the resale price. The court cites the case of Bauer v. O'Donnell, in which it was held that the vendor of a patented article could not by the notice on the package control the price at which the article should be resold after purchase by the vendee. It holds that what cannot be done by notice to the vendee cannot be done by contract with the vendee, as in both cases the sale to the vendee passes the article out of the patent monopoly and beyond the control of the patentee. This case involved an old form of contract which the Ford Company has discontinued. Its new form of contract was passed upon in a decision given in the District Court of the United States, in Illinois, by Judge Landis, December 3, 1914, by which the Barry Sales Company was enjoined from "inducing or attempting to induce any authorized agent of the Ford Company to arrange for the sale of Ford cars in violation of any of the terms of the contract of such agent with the company."

Note 3.-Keystone Watch Case: The growth of the Keystone Watch Company and the various consolidations by which it had been formed and enlarged were not criticized by the court, but the attempt of the company later on to coerce its jobbers to sell at a fixed price, by threatening refusal to deal with those who would not, was held to be a direct and unlawful restraint of trade. The plan of selling the Howard watch, material parts of

which were protected by patents, was held lawful so far as fixing by agreement with the jobbers a minimum fixed price at which the jobber should sell, but unlawful in the further attempt by notice on the box containing the watch to control the price at which the retailer should sell to the consumer. This case was decided by Buffington, Hunt and McPherson, Circuit Judges in the Circuit Court of Appeals in Pennsylvania.

Note 4.-In the Victor Talking Machine Case (Victor Talking Machine Co. v. Macy & Co., U. S. Dist. Ct., N. Y.), the Victor Company brought suit for the infringement of its patents. Various patents cover the Victor Talking Machine and sound records. Every machine and sound record has accompanying it a notice that the title remains in the manufacturer for the term of the patent having the longest term to run. The license to use the machine and records is granted on payment of a fixed sum as royalty at the time the license is granted. Upon the final expiration of the patents the goods become the property of the licensee if he shall have observed the conditions of the license. The contract also provides for retaking the patented goods upon violation of any of the terms of the license. One of those terms is that the goods shall be relicensed only upon payment of certain fixed prices. Alleged infringement lay in the act of the defendant selling the articles outright for less than the fixed price. The court held that the complainant by receiving the entire royalty had parted with its interest and could not object to a licensee disposing of the article at less than the fixed price. The court said in conclusion: "If this were a case of first impression I might feel that no sufficient reason exists for holding that a patentee could not attach such limitations to the future use of his patented goods as he might choose irrespective of whether he had received a full royalty or not. I think, however, the case of Bauer v. O'Donnell holds to the contrary."

Note 5.-Kellogg Case (U. S. v. Kellogg Toasted Corn Flake Co., U. S. Dist. Ct. in Michigan) No illegality was alleged in the formation or growth of the company, but the Government centered its attack on the present selling plan of the defendant, which it claimed was a combination between the company and its jobbers and retailers. The selling plan is briefly described as follows: The company owns a patent on the cartons or packages in which its "Corn Flakes" are sold. Sales are made directly to jobbers, the company refusing to deal with consumers or retailers. Agreements are exacted from the jobbers to charge the retailers a specified price, and this condition is strictly enforced by the company refusing to continue dealings with any jobber who fails to maintain the fixed prices. An attempt is made to form agreements between the company and the retailer by printing on the carton that the package and its contents are sold on condition that the package and contents shall not be retailed for less than ten cents, and that a violation would be considered as an infringement on the company's patent rights. The Court held that although the notice on the carton may not constitute a valid contract it may still have the effect of unduly restraining trade, and the fact that the carton is patented is immaterial in determining whether the company's plan of maintaining prices was a violation of the Sherman Law.

Also in Kellogg Co. v. Buck, 208 Federal Reports 383, in refusing to enforce the restrictions above mentioned the court held that where a patented article has passed into the channels of trade and reached a retail dealer, the manufacturing patentee is not entitled to enforce a price restriction agreement.

Sub-Section B.

EXTENT OF THE POWER OF THE STATES OVER COMMERCE.

1. The State Taxing Power as Affecting Commerce.

BROWN v. MARYLAND.

12 WHEATON, 419. 1827.

A statute of Maryland, passed in 1821, provided that all importers of foreign commodities or articles and persons selling the same by wholesale, bale or package, hogshead, barrel, or tierce should, before being authorized to sell the same take out a license, for which they should pay fifty dollars. In case of neglect or refusal to pay the license, a heavy penalty was imposed by the statute. Brown was charged with having imported and sold one package of foreign dry goods without having a license to do so. He was fined by the State Court and the Court of Appeals upheld the lower court. An appeal was taken to the Supreme Court of the United States on the ground that the Legislature of a State could not constitutionally require the importer of foreign articles to take out a license from the State before being permitted to sell a bale or package so imported.

MR. CHIEF JUSTICE MARSHALL delivered the opinion of the court:

The plaintiffs in error take the burden upon themselves, and insist that the act under consideration is repugnant to two provisions in the Constitution of the United States.

1. To that which declares that "no State shall, without the consent of Congress, lay any imposts or duties on imports or exports, except what may be absolutely necessary for executing its inspection laws."

2. To that which declares that Congress shall have power "to regulate commerce with foreign nations, and among the several States, and with the Indian tribes."

1. The first inquiry is into the extent of the prohibition upon States "to lay any imposts or duties on imports or exports." The counsel for the State of Maryland would confine this prohibition to laws imposing duties on the act of importation or exportation. The counsel for the plaintiffs in error give them a much wider scope.

What, then, is the meaning of the words, "imposts or duties on imports or exports?"

An impost, or duty on imports, is a custom or a tax levied on articles brought into a country, and is most usually secured before the importer is allowed to exercise his rights of ownership over

them, because evasions of the law can be prevented more certainly by executing it while the articles are in its custody. It would not, however, be less an impost or duty on the articles, if it were to be levied on them after they were landed. The policy and consequent practice of levying or securing the duty before or on entering the port, does not limit the power to that state of things, nor, consequently, the prohibition, unless the true meaning of the clause so confines it. What, then, are "imports?" The lexicons inform us they are "things imported." If we appeal to usage for the meaning of the word, we shall receive the same answer. They are the articles themselves which are brought into the country. "A duty on imports," then, is not merely a duty on the act of importation, but is a duty on the thing imported. It is not, taken in its literal sense, confined to a duty levied while the article is entering the country, but extends to a duty levied after it has entered the country. The succeeding words of the sentence which limit the prohibition, show the extent in which it was understood. The limitation is "except what may be absolutely necessary for executing its inspection laws." Now, the inspection laws, so far as they act upon articles for exportation, are generally executed on land, before the article is put on board the vessel; so far as they act upon importations, they are generally executed upon articles which are landed. The tax or duty of inspection, then, is a tax which is frequently, if not always paid for service performed on land, while the article is in the bosom of the country. Yet this tax is an exception to the prohibition on the States to lay duties on imports or exports. The exception was made because the tax would otherwise have been within the prohibition.

*

From the vast inequality between the different States of the confederacy, as to commercial advantages, few subjects were viewed with deeper interest, or excited more irritation, than the manner in which the several States exercised, or seemed disposed to exercise, the power of laying duties on imports. From motives which were deemed sufficient by the statesmen of that day, the general power of taxation, indispensably necessary as it was, and jealous as the States were of an encroachment on it, was so far abridged as to forbid them to touch imports or exports, with the single exception which has been noticed. Why are they restrained from imposing these duties? Plainly, because, in the general opinion, the interest of all would be best promoted by placing that whole subject under the control of Congress. Whether the prohibition to "lay imposts, or duties on imports or exports," proceeded from an apprehension that the power might be so exercised as to disturb that equality among the States which was generally advantageous, or that harmony between them which it was desirable to preserve, or to maintain unimpaired our commercial connections with foreign nations, or to confer this source of revenue on the government of the Union, or whatever other motive might have induced the prohibition, it is plain that the object would be as completely defeated by a power

to tax the article in the hands of the importer the instant it was landed, as by a power to tax it while entering the port. There is no difference, in effect, between a power to prohibit the sale of an article, and a power to prohibit its introduction into the country. The one would be a necessary consequence of the other. No goods would be imported if none could be sold. No objection of any description can be accomplished by laying a duty on importation, which may not be accomplished with equal certainty by laying a duty on the thing imported in the hands of the importer. It is obvious that the same power which imposes a light duty, can impose a very heavy one, one which amounts to a prohibition. Questions of power do not depend on the degree to which it may be exercised. If it may be exercised at all, it must be exercised at the will of those in whose hands it is placed. If the tax may be levied in this form by a State, it may be levied to an extent which will defeat the revenue by imposts, so far as it is drawn from importations into the particular State.

The counsel for the plaintiffs in error contend that the importer purchases, by payment of the duty to the United States, a right to dispose of his merchandise, as well as to bring it into the country; and certainly the argument is supported by strong reason, as well as by the practice of nations, including our own.' The object of importation is sale; it constitutes the motive for paying the duties; and if the United States possess the power of conferring the right to sell, as the consideration for which the duty is paid, every principle of fair dealing requires that they should be understood to confer it. The practice of most commercial nations conforms to this idea. Duties, according to that practice, are charged on those articles only which are intended for sale or consumption in the country.

This indictment is against the importer, for selling a package of dry goods in the form in which it was imported, without a license. This state of things is changed if he sells them or otherwise mixes them with the general property of the State, by breaking up his packages and traveling with them as an itinerant peddler. In the first case, the tax intercepts the import, as an import in its way to become incorporated with the general mass of property, and denies it the privilege of becoming so incorporated until it shall have contributed to the revenue of the State. It denies to the importer the right of using the privilege which he has purchased from the United States until he shall have also purchased it from the State. In the last cases, the tax finds the article already incorporated with the mass of property by the act of the importer. He has used the privilege he had purchased, and has himself mixed them up with the common mass, and the law may treat them as it finds them. The same observations apply to plate, or other furniture used by the importer.