§ 47. If, then, the condition or stipulation entered into by the licensee or purchaser of a patented article, that he will not use the same except with unpatented accessories furnished by the licensor or seller is not illegal-and if it is specifically enforceable in equity as between the parties and as against third parties taking with notice-what possible objection is there to permitting a construction of the patent act which would permit the holder of a patent to make a license or sale of a patented article subject to the condition or stipulation that it be used only in connection with certain unpatented accessories sold by the licensor, with the result that upon a breach of the stipulation or condition the continued user of the patented article would become an infringement? Perhaps this: that so long as the stipulation is justified under the patent act it confers an absolute statutory right in equity to obtain specific performance in the guise of enjoining an infringement. On the other hand, so long as it is merely a contract of which equity gives specific performance under certain terms and conditions, its enforcement by injunction may be so far limited and controlled that the results will not be unconscionable as between the parties or contrary to the interests of the public. In short, a stipulation which requires specific performance as a matter of right might be regarded as contrary to public policy when a stipulation which was valid at law between the parties, and the specific performance of which was in the control and discretion of a court of equity, might be regarded as valid.

SECTION 3

CONCLUSION

847a. What has been said by way of objection to the Dr. Miles case and the Motion Picture Patents case has been based upon the assumption that there was no objection to a court of equity giving specific performance of restrictions as to the use of chattels even against third parties taking the chattels with notice of the restrictions. This proposition, however, may be open to question. It is only recently that courts have been called upon to give specific performance in such cases. While

the justice of so doing in particular instances may be apparent, the courts must face the fact that they are opening up a wide field for the creation of what are, in effect, property interest servitudes in chattels. When the covenantee or promisee can say to the buyer of a chattel, "You cannot use what you have bought unless you do so in the following manner," or, "You cannot sell it unless at a certain price," and if this position on the part of the seller can be enforced specifically against any holder of the chattel taking with notice, a servitude has been created in the chattel in favor of the promisee and perhaps in favor of whomever is running the business of the promisee. It may be that the Dr. Miles case and the Motion Picture Patents case both indicate a reaction against permitting the specific performance of restrictions as to chattels against third parties with notice. Perhaps the undesirable features of having vast numbers of chattels in commerce subject to all manner of property servitudes has been borne in upon the Supreme Court of the United States. Perhaps a general dislike for such servitudes may have been translated by the court into what appears to the casual reader of the opinions to be a condemnation of the particular restrictions involved.

§ 47b. The following discriminations are suggested:

1. Stipulations and conditions requiring the buyer of a chattel to keep up the price on resale, or to buy or use other articles in connection with those sold, are valid between the parties and may be enforced in suits at law for damages.

2. When the articles sold are patented or copyrighted, the license to use them cannot be made subject to such conditions and stipulations so that the failure to observe them will give rise to the statutory action in equity for an infringement.

3. Such restrictive contracts may be specifically enforceable in equity as between the parties.

4. Whether specific performance will be given to the promisee against third parties taking the chattel with notice of the restrictions may be open to debate. Specific performance should not, however, be refused because the contract is illegal as between the parties. It should not be refused because there is anything inimical to the interests of the public in such restrictions as were involved in the Dr. Miles and Motion Picture Patents cases.

It is entirely conceivable, however, that some restrictions might be of such character that while they were valid at law or even in equity, as between the parties, it would be proper, in the interests of the public, to refuse enforcement of them against third parties, even with notice. If specific performance against third parties is refused in the case of restrictions such as were involved in the Dr. Miles and Motion Picture Patents cases, it should be on the ground that it is against public policy that any servitudes be created in chattels by the specific performance in equity of restrictions against third parties with notice.

CHAPTER V

COMBINATIONS

[GOOD AND BAD TRUSTS] 1

§ 48. The term "trusts" has now come to refer to extensive combinations of capital in the commercial and industrial world, regardless of what the form of the organization may be. The combination may be by agreement of the units combining that they will sell through a common board or committee,2 or by the device of trustees holding under a trust agreement stock controls in subsidiary corporations, or the controlling interests in partnerships and other forms of industrial and commercial units,3 or by a parent corporation holding stock controls in subsidiary corporations, or by the actual purchase of plants and their operation as a single industrial unit by a single corporation.5 In describing the size of the combination which is sufficient to warrant its being called a "trust," we may adopt the phraseology of the government in its brief in the International Harvester and Steel cases. The combination to be a trust must embrace "units which together occupy a preponderant position in a given industry." To ask whether a trust is good or bad is only to ask where the line shall be drawn between combinations which

4

1-Reprinted from 30 Harv. L. Rev. 830.

2-This was the form of the combination attacked by the government in United States v. Addyston Pipe & Steel Co., 85 Fed. 271 (1898) [625]; Addyston Pipe & Steel Co. v. United States, 175 U. S. 211 (1899) [772, 1047].

3-This was the form of the combination known as the Standard Oil Trust under the Standard Oil Trust Agreement in 1882. State v. Standard Oil Co., 49 Oh. St. 137,

30 N. E. 279 (1892) [649]; Standard Oil Co. v. United States, 221 U. S. 1 (1910) [780, 1072].

4-This was the form of organization of the Standard Oil Company of New Jersey as it was reorganized in 1899. Standard Oil Co. v. United States, 221 U. S. 1 (1910) [780, 1072].

5-This was the form of the combination of the International Harvester Company. United States v. International Harvester Co., 214 Fed. 987 (1914).

are legal and those which are illegal. It will be convenient in the beginning to indicate, first those that are clearly illegal, and then those that are clearly legal. By this process we shall arrive at the debatable ground.

SECTION 1

COMBINATIONS CLEARLY ILLEGAL

§ 49. Since the Standard Oil and Tobacco Cases, it has become articulate that a combination of properties (in whatever form) which, by reason of its size and preponderant position in the business, has the power and the purpose, or uses its power to exclude others from the business by illegal acts and unlawful and unfair methods of competition, is an attempt at monopoly, and a restraint of trade and illegal at common law, and, if interstate commerce is involved, under the Sherman Act. It is what may be called a bad trust.7