Fashion Originators Guild v. Federal Trade Com'n

• Decision Date: 25 November 1940
• Docket Number: No. 312.,312.
• Citation: 114 F.2d 80
• Parties: FASHION ORIGINATORS GUILD OF AMERICA, Inc., et al. v. FEDERAL TRADE COMMISSION.
• Court: U.S. Court of Appeals — Second Circuit

114 F.2d 80 (1940)

FASHION ORIGINATORS GUILD OF AMERICA, Inc., et al. v. FEDERAL TRADE COMMISSION.

No. 312.

Circuit Court of Appeals, Second Circuit.

July 22, 1940.

Writ of Certiorari Granted November 25, 1940.

Weisman, Quinn, Allan & Spett, of New York City (Milton C. Weisman and Melvin A. Albert, both of New York City, of counsel), for petitioners.

Everett F. Haycraft, of Washington, D. C., for respondent.

Before L. HAND, AUGUSTUS N. HAND, and CHASE, Circuit Judges.

Writ of Certiorari Granted November 25, 1940. See 61 S.Ct. 175, 85 L.Ed. ___.

L. HAND, Circuit Judge.

This case comes before us on petition to review an order of the Federal Trade Commission, directing the petitioners to "cease and desist" from certain "unfair trade practices" in interstate commerce. The principal respondent below, the Fashion Originators Guild, and its members sell medium and high priced women's dresses to retailers, who select from designs exhibited in show rooms in New York City. The members make their dresses from what they assert to be "original designs" of their own, to protect which the Guild was organized in 1932, though the designs are neither patented nor copyrighted. About a fourth of all women's dresses made in this country sell for more than $10.75, and the Guild (disregarding whether they were members for the whole year) in 1935 sold 42% of these; their sales of cheaper dresses were less, though in the next lowest grade, $6.75 to $10.75, they were 10% of the total sales in that class. (The Commission found much higher percentages than these; but for the purposes of the case it is not necessary to do more than to take the Guild's own figures.) In order to prevent what the Guild calls "style piracy," that is, the copying of their "original designs," the Guild and its members refuse in combination to sell any dresses to retailers who purchase, or order to be manufactured, dresses which the Guild finds embody copies of its designs. For that purpose it has set up a "Piracy Committee" which decides which of the designs "registered" by its members, are "originals"; it employs shoppers in various parts of the country who visit the shops of retailers and report delinquents; if a retailer is found to be selling "pirated designs," he must stop doing so, or he will get no more dresses of any sort from the Guild; nor will he be allowed to see the designs exhibited in its New York show rooms. Retailers who co-operate with the Guild must agree to accept the decision of the "Piracy Committee," and must return to sellers any dresses that have been "pirated"; they must also agree to abide by the Guild's regulations. Furthermore, in their sales they must warrant to the customer that the designs of the dresses they sell have not been "pirated." The Guild keeps a card index in which it enters upon red cards the names of those retailers who fail in any of these regards. It also maintains a group known as the "Textile Affiliates or Associates" whose members register textile designs with the "National Federation of Textiles, Inc.," and the dressmaker members of the Guild agree that they will not buy "unregistered" fabrics; conversely, textile members of the Guild agree to sell only to dressmakers who are parties to the combination. About twelve thousand retailers had signed the agreement by the end of the year 1935, and were coöperating with the Guild. Besides the Guild proper, several other subsidiary organizations were made parties to the proceeding, as well as their officers and members and those of the Guild: it is not necessary, however, to describe the relations of the subsidiaries to the parent. The Commission, having found the foregoing facts, made an order appropriate to break up the combination, which the respondents petitioned to review.

The findings are supported by an abundance of evidence and are indisputable; they do not go beyond the conceded purposes of the Guild, which does not indeed deny them, but on the contrary seeks to justify the combination. It says that the sanctions which it imposes were necessary to protect the industry as a whole from "demoralization" and the "property" of its members from appropriation. In great detail it offered to prove what were the results of allowing "style piracy" to continue; how disastrous it was to all those in the business — manufacturers, retailers and customers — how "style pirates" in some instances gained access to their designs by bribery, burglary and other crimes; how the Guild had benefited the whole industry by the elimination of such evil practices. The Commission refused to receive any evidence of the kind; it held that the combination was unlawful per se; thereby, by implication ruling that even though the combined interests of all those affected made "style piracy" an evil, the manufacturers could not lawfully unite to suppress it by the means employed.

At the outset a preliminary question arises which we must dispose of before we proceed to the merits. The Commission asks us not to consider the proffered evidence on the ground that the Guild's only remedy was under § 5 of the Act, 15 U.S.C.A. § 45, that is, having failed to "apply to the court for leave to adduce additional evidence", it lost its only opportunity to question or correct any ruling made during the hearing. This argument rests upon an obvious misunderstanding of the section, and would incidentally result in a procedure that would greatly hamper, if it did not destroy, the effectiveness of the Commission itself. Section 5 is not directed to the correction of errors committed by the Commission during its proceedings or at any other time; it is analogous to a motion for a new trial upon newly discovered evidence. This appears from its very language, which makes it a condition upon the relief granted that "there were reasonable grounds for the failure to adduce such evidence in the proceeding before the Commission." It is absurd to speak of the exclusion of evidence as a "failure to adduce" it. Moreover, the notion that every time an examiner erroneously rules out evidence at a hearing, the respondent must apply first to the Commission, and then to the court, to correct his error at the risk of forfeiting all right to complain, scarcely needs to be stated to be answered. It contradicts the whole presupposition on which the statute was drawn; i. e., that the court shall have no jurisdiction over the proceedings until the Commission has concluded the case. Chamber of Commerce v. Federal Trade Commission, 8 Cir., 280 F. 45, 48. Cf. Federal Power Commission v. Edison Co., 304 U.S. 375, 384, 385, 58 S.Ct. 963, 82 L.Ed. 1408; Jones v. Securities and Exchange Commission, 2 Cir., 79 F.2d 617, 619. We must therefore decide the case as though the Guild had proved what it offered to prove; that is, we must decide whether its offer was relevant. If it was, the case must go back for further hearing, because the examiner made it plain that he would hear nothing of the kind suggested; and his refusal absolved the Guild from the idle ceremony of swearing witnesses and questioning them. We proceed therefore to the merits.

The author of a design for a dress should be deemed to be on the same footing as the author of a drawing or a picture; and the author of a drawing or a picture has a "common-law property" in its reproduction. Prince Albert v. Strange, 1 McN. & G. 25, 43; Turner v. Robinson, 10 Ir.Ch. 121; S.C. on appeal, 10 Ir.Ch. 510; Parton v. Prang, Fed.Cas.No.10,784; Oertel v. Wood, 40 How.Prac., N.Y., 10; Oertal v. Jacoby, 44 How.Prac., N.Y., 179. The controversy as to whether "intellectual property" is lost by "publication" goes back to the Eighteenth Century. The great case of Donaldson v. Beckitt, 4 Burr. 2408, decided, although by a narrow vote, that it is not so lost; but it also decided that the statute destroyed the "property" itself; and the result in most cases was therefore the same as though publication was an abandonment, since the act applied only to published works. It would follow, if Donaldson v. Beckitt, supra (4 Burr. 2408) remains law in all that it held, that so far as the statute does not cover such property, "publication" does not destroy it, and that it is therefore perpetual. Mr. Drone in his well-known work (A Treatise on the Law of Property in Intellectual Productions, 1879) insists that this is the only proper result (pp. 116-118); but his opinion was obviously much colored by his passionate disapproval of Donaldson v. Beckitt, supra (4 Burr. 2408) anyway; and we think that the logic, if inexorably applied, is overwhelmed by the practical absurdity of the result. It would certainly be a strangely perverse anomaly that turned the grant of statutory copyright into a detriment to the "author"; yet it would be hard to prove that the statutory remedies conferred made up for the limitation of the monopoly. Omission of property from the act would be a bonanza to those who possessed property of that kind. Although it is true that when Donaldson v. Beckitt, supra (4 Burr. 2408) was decided, there was considerable "intellectual property" which the statute did not cover, we do not believe that the judges would have countenanced such a result, and the implications of Turner v. Robinson, supra (10 Ir.Ch. 121, S.C. 10 Ir.Ch. 510) were very clearly to the contrary. When in this country the Constitution (§ 8, cl. 8, Art. 1) gave to Congress power to "secure" to authors the "exclusive Right to their * * * Writings," it was to be only "for limited Times," and did not allow a perpetual copyright. The purpose so disclosed is certainly inconsistent with the assumption that an author — notwithstanding publication and full enjoyment of his "common-law property" — might maintain his monopoly for "unlimited Times". While we have been unable to discover any case which squarely presented the situation — that is, in which "intellectual property", not covered by the copyright act then in existence, was...