The defendant manufactured and sold other staples to be used with the machine, and it was alleged that it was guilty of contributory infringement. An injunction was granted, the court holding that a purchaser of the plaintiff's machine was, in effect, a mere licensee, and the use of the machine contrary to the condition would not only be a breach of contract but an infringement of the patent monopoly, to restain which an injunction would lie. No appeal was taken in the above case, and the question appears not to have been decided by the Supreme Court of the United States until 1912, when Henry v. A. B. Dick Co.1 came before that court. The facts in this case are similar to those in the button-fastener case in that the articles to be used with the complainant's machine were not patented. The Dick company sold a patented device with the restriction that it should be used only with the stencil, ink, and other supplies made by the company. The defendant Henry sold ink to a purchaser of the machine with the knowledge that it would be used in violation of the condition, whereupon the Dick company brought an action for infringement. The question, "Did the action of the defendants constitute contributory infringement of the complainant's patent?" having been certified to the Supreme Court by the circuit court of appeals was decided in the affirmative by a divided bench (4 to 3). Justice Lurton, in delivering the opinion of the court, said in part:

The property right to a patented machine may pass to a purchaser with no right of use, or with only the right to use in a specified way, or at a specified place, or for a specified purpose. The unlimited right of exclusive use which is possessed by and guaranteed to the patentee will be granted if the sale be unconditional. But if the right of use be confined by specific restriction, the use not permitted is necessarily reserved to the patentee. If that reserved control of use of the machine be violated, the patent is thereby invaded. This right to sever ownership and use is deducible from the nature of a patent monopoly and is recognized in the cases.

**

* * * there is no difference, in principle, between a sale subject to specific restrictions as to the time, place or purpose of use and restrictions requiring a use only with other things necessary to the use of the patented article purchased from the patentee. If the violation of the one kind is an infringement, the other is also."

Section 9. Inducing breach of competitors' contracts.

The defendants in United States v. Patterson et al., which was a criminal prosecution for an alleged violation of the Sherman Law, requested an instruction to the effect that it was lawful for them in competition

to sell or offer and try to sell National cash registers to persons who had bought and owned competing cash registers in exchange at such price as was satisfactory to the parties.

1 224 U. S., 1, 24, 25, 35 (1912).

2 See also United Shoe Machinery Co. v. La Chapelle, 99 N. E., 289 (Mass., Sp. Ct.,

$222 Fed., 599, 650 (C. C. A., 1915).

The circuit court of appeals refused the request, being of the opinion that it was unlawful for the defendants to do as stated in the instruction

if the doing thereof involved the purchaser and owner of the competing cash register breaking his contract with the competitor in any particular, or was done for the purpose of driving the competitor out of the cash-register field. One competitor has the right to try to sell by fair means all of his goods that he can, and if the effect of his selling is to drive another competitor out of the field he is not to blame. But it is wrong for one competitor to want to drive another competitor from the field by unfair or illegal means, and to take steps to that end, so that he may have the field free from such competition and thereby be enabled to sell his goods.

Section 10. Enticement of employees.

The American Banana Co. brought an action under section 7 of the Sherman Act against the United Fruit Co.,' alleging, among other things, that the defendant enticed, or sought to entice away the plaintiff's employees, and oppressed, or sought to oppress, such of its own employees as presumed to buy stock in the plaintiff company. With respect to these charges Hough, J., observed:

* These proceedings, however unfair and immoral, are not in and of themselves forbidden or declared to be unlawful by the Sherman act, and I do not think that a cause of action can be built upon these acts alone. I can not regard it as more than a statement of evidence, which may well be used in explaining or proving the operation if not the formation of the alleged combination and monopoly."

Section 11. Bribery and espionage.

3

Before entering the final decree in United States v. American Tobacco Co. et al. the Circuit Court for the Southern District of New York considered a request to enjoin the defendants "from espionage on the business of any competitor, from bribery of employees of such competitor, and from obtaining information from any United States revenue official."4 Lacombe, J., denied the request, saying:

Why any one individual or corporation engaged in this business may not acquire such information as he or it can legitimately obtain from private or public sources as to the business of a competitor we fail to see. When illegitimate methods are proved, they may be dealt with.

Section 12. Boycotting and blacklisting by trade associations.

Boycotts of dealers who do not conduct their business in accordance with the wishes of trade associations have been specifically condemned by the courts.

1 160 Fed., 184, 189 (C. C., 1908).

A judgment dismissing the complaint was affirmed by the circuit court of appeals (166 Fed., 261) and the Supreme Court (213 U. S., 347). This feature of the case, however, was not discussed.

191 Fed., 371, 381 (C. C., 1911).

4 See Record (C. C. So. Dist. N. Y.), Vol. II, pp. 326-327, and brief for the United States in the Supreme Court, p. 195; also United States v. Standard Oil Co. (C. C. E. D. Mo.); Brief of facts and argument for petitioner, Vol. II, pp. 422–428.

In Mines v. Scribner et al.,' which was an action brought under section 7 of the Sherman Act, the facts, as stated by the court, were as follows:

Defendants, with others, became members of the American Publishers' Association, whereby 90 per cent of the book business of the country was controlled. A rule was adopted and agreed to all around that they would not sell to anyone who cut prices on copyrighted books, nor to anyone who should be known to have sold to others who cut prices. A blacklist was to be kept, containing the names of such persons, and no one on that blacklist could buy any books of anybody in the scheme. Plaintiff got on the blacklist, could not buy, and was thereby injured, and claims his treble damages.

Platt, J., overruled a demurrer to the declaration, saying:

It is true that this scheme does not prevent each publisher from putting such price as he sees fit upon his copyrighted book; but it compels jobber and retailer to stand by that price, whatever it may be, and if it is broken in any instance it puts such person out of business. It is not content with refusing to deliver any more copies of the particular book upon which he cuts the price, but it closes him out of all dealings on any and every book, copyrighted or not.

The copyright law can not help the defendants, because, in the first place, the restraint is not confined to copyrighted books, and, if it were, it can not be so that the right given a single publisher to do as he pleases with his copyrighted book can be extended, so that he can combine with other owners of copyrights and permit his book to be subject to the rules laid down by the united owners."

3

A similar principle was involved in Straus v. American Publishers' Association. That was an action originally instituted in the Supreme Court of New York praying an injunction to restrain the defendants from interfering with the purchase and sale by the plaintiffs of copyrighted books on the ground that the defendants were acting under an agreement in violation of the laws of New York and the Sherman law. It was established by evidence that the defendant association was composed of about 75 per cent of the pub

1 147 Fed.. 927 (C. C., 1906).

2 But see Dueber Watch Case Manufacturing Co. v. Howard Watch Co., 66 Fed., 637, decided by the circuit court of appeals for the second circuit in 1895. In that case the plaintiff sued a number of competitors for treble damages under sec. 7 of the Sherman law. The complaint alleged in substance that the defendants had agreed to maintain arbitrary and fixed prices for their watchcases, and that for the purpose of compelling the plaintiff to join with them therein had further agreed not to sell any goods to any dealer who dealt with the plaintiff. A majority of the court held that a demurrer to the complaint had been rightly sustained below, but even the majority could not agree as to the ground on which the decision should be based. Lacombe, J., held that the agreement was not in violation of the Sherman law. Shipman, J., although agreeing with the action of the lower court, refused to adopt the reasoning of Lacombe, J., and expressly stated that he decided the case on the more technical ground that the complaint failed to show that interstate commerce was involved. Wallace, J., on the other hand, dissented, holding that the agreement complained of was an illegal restraint of interstate commerce within the meaning of the Sherman law. In commenting on this decision in United States v. Addyston Pipe & Steel Co., 85 Fed., 271 (C. C. A., sixth circuit, 1898), Taft, J., said with reference to the three opinions expressed therein (p. 300): "These varying views decided the case, but they certainly furnish no precedent or authority." See also Dueber Watch Case Manufacturing Co. v. E. Howard Watch & Clock Co. et al., 24 N. Y. S., 647 (Sup. Ct., 1893),

a 231 U. S., 222 (1913).

lishers of copyrighted books in the United States, and that its members had agreed to sell such books only to those who maintained certain retail prices fixed thereon by the association; that whenever these prices were cut by retailers the association would issue cut-off lists, so called, directing the discontinuance of the sale of books to offenders, and that the plaintiffs who had failed to maintain the fixed prices had been put upon the cut-off lists and were unable to secure a supply of copyrighted books in the ordinary course of business. On these facts the Court of Appeals of New York held,1 following its previous decision in Straus v. American Publishers' Association,2 that the plaintiffs had no cause of action because the books involved were copyrighted. This decision was reversed by the Supreme Court of the United States on the ground that the agreement of the defendants transcended what was necessary for the proper protection of the copyright monopoly, applying the doctrine announced in Standard Sanitary Manufacturing Co. v. United States with reference to patented articles.

4

3

In United States v. The Eastern States Retail Lumber Dealers' Association and others it appeared that the defendants distributed information in a certain document known as the "Official Report," the form of which was as follows:

OFFICIAL REPORT.

[Name of the particular association circulating it.]

STATEMENT TO MEMBERS (WITH THE DATE).

You are reminded that it is because you are members of our Association and have an interest in common with your fellow members in the information contained in this statement, that they communicate it to you; and that they communicate it to you in strictest confidence and with the understanding that you are to receive it and treat it in the same way.

The following are reported as having solicited, quoted or as having sold direct to the consumers:

(Here follows a list of the names and addresses of various wholesale dealers.) Members upon learning of any instance of persons soliciting, quoting, or selling direct to consumers, should at once report same, and in so doing should, if Fossible, supply the following information:

The number and initials of car.

The name of consumer to whom the car is consigned.

The initials or name of shipper.

The date of arrival of car.

The place of delivery.

The point of origin.

The defendants were enjoined from

*

combining, conspiring, confederating, or agreeing together or with others jointly to distribute, and from jointly distributing, to any of the members of the

1 193 N. Y., 496 (1908).
2177 N. Y., 473 (1904).

3 226 U. S., 20 (1912).

4234 U. S., 600, 605, 608, 609, 614 (1914).

aforesaid associations or any other person or persons any information showing soliciting, quotations, or sales and shipments of lumber and lumber products from manufacturers and wholesale dealers to consumers of or dealers in lumber, and from the preparing and distributing the said list known as the " Official Report," heretofore described, or by the use of any similar device.

In considering this case on appeal, the Supreme Court, by Mr. Justice Day, said in part:

These lists were quite commonly spoken of as blacklists, and when the attention of a retailer was brought to the name of a wholesaler who had acted in this wise it was with the evident purpose that he should know of such conduct and act accordingly. True it is that there is no agreement among the retailers to refrain from dealing with listed wholesalers, nor is there any penalty annexed for the failure so to do, but he is blind indeed who does not see the purpose in the predetermined and periodical circulation of this report to put the ban upon wholesale dealers whose names appear in the list of unfair dealers trying by methods obnoxious to the retail dealers to supply the trade which they regard as their own.

*

A retail dealer has the unquestioned right to stop dealing with a wholesaler for reasons sufficient to himself, and may do so because he thinks such dealer is acting unfairly in trying to undermine his trade. "But," as was said by Mr. Justice Lurton, speaking for the court in Grenada Lumber Co. v. Mississippi, "when the plaintiffs in error combine and agree that no one of them will trade with any producer or wholesaler who shall sell to a consumer within the trade range of any of them, quite another case is presented. An act harmless when done by one may become a public wrong when done by many acting in concert, for it then takes on the form of a conspiracy, and may be prohibited or punished, if the result be hurtful to the public or to the individual against whom the concerted action is directed."

When the retailer goes beyond his personal right, and, conspiring and combining with others of like purpose, seeks to obstruct the free course of interstate trade and commerce and to unduly suppress competition by placing obnoxious wholesale dealers under the coercive influence of a condemnatory report circulated among others, actual or possible customers of the offenders, he exceeds his lawful rights, and such action brings him and those acting with him within the condemnation of the act of Congress, and the District Court was right in so holding. It follows that its decree must be affirmed.

1 In like manner it has been held that the Sherman law does not prevent a single wholesaler from refusing to deal with another wholesaler. Locker v. American Tobacco Co., 218 Fed., 447 (C. C. A., Second Circuit, 1914). The court there said: We can think of no reason based on the common law or the Sherman law which required the introduction of a second jobber or wholesaler between the producer and the consumer. In short, we are convinced that what was done by these defendants was not prohibited by law, but was a reasonable common sense trade arrangement adopted by the exigencies of the situation. See also Locker v. American Tobacco Co., 195 N. Y., 565 (1908).

2217 U. S., 433, 440.

3 In Lawlor v. Loewe, 235 U. S., 522, 534 (1915), Mr. Justice Holmes, referring to Eastern States Retail Lumber Dealers' Association v. U. S., said: "Whatever may be the law otherwise, that case establishes that, irrespective of compulsion or even agreement to observe its intimation, the circulation of a list of unfair dealers,' manifestly intended to put the ban upon those whose names appear therein, among an important body of possible customers combined with a view to joint action and in anticipation of such reports, is within the prohibitions of the Sherman Act if it is intended to restrain and restrains commerce among the States."