247 U.S. 32 (1918), 207, United States v. United Shoe Machinery Company

Docket Nº:No. 207
Citation:247 U.S. 32, 38 S.Ct. 473, 62 L.Ed. 968
Party Name:United States v. United Shoe Machinery Company
Case Date:May 20, 1918
Court:United States Supreme Court
 
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247 U.S. 32 (1918)

38 S.Ct. 473, 62 L.Ed. 968

United States

v.

United Shoe Machinery Company

No. 207

United States Supreme Court

May 20, 1918

Argued March 16, 19, 20, 21, 1917

Restored to docket for reargument May 21, 1917

Reargued January 11, 14, 15, 1918

APPEAL FROM THE DISTRICT COURT OF THE UNITED STATES

FOR THE DISTRICT OF MASSACHUSETTS

Syllabus

Where the evidence is strongly conflicting, especial weight attaches to the findings of a trial court whose judges saw and heard the witnesses.

Applying this principle, the Court holds, with the court below, that the evidence does not sustain the charges of unlawful restraint of interstate commerce in shoe machinery, and monopoly thereof, in the formation and conduct of the United Shoe Machinery Company.

In determining whether a combination restrains interstate commerce injuriously to the public, the foremost inquiry is whether the interests brought together were competitive.

Where machines were patented and, though used collectively in the making of a single product, were so far distinct in their functions that they were practically noncompetitive, a common control over their manufacture and use held not obnoxious to the Anti-Trust Act.

Statements in notices to shareholders and in an agency contract, made by participants in a combination, explaining its object, held not to establish unlawful intent in view of the evidence of what was done, publicity of the statements when made, lapse of time, and inaction of the government.

Lapse of time, changes of condition due to it and to the progress of the art, the development of high industrial efficiency, difficulty or impossibility of restoring antecedent conditions, and injurious effects that would follow the attempt to grant the relief prayed are matters to be considered in determining from conflicting evidence whether a combination should be dissolved.

Unconnected purchases of certain businesses with patent rights, made by the Company after its formation, are held, on conflicting evidence, not to have been intended, nor to have had the effect, of restraining competition illegally, or to have brought it obnoxious power. Generally, one has the right to purchase patents for the protection

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or improvement of his own inventions and business and for the prevention of patent litigation, and such purchases should not be adjudged to have stifled competition unduly upon speculative estimates of the potential competitive power of new and untried inventions.

Upon similar considerations, certain contracts for assignment of future inventions are also held legitimate.

The charge that the Shoe Machinery Company's power has been oppressively used is not sustained.

The patent Law gives the patentee the right to exclude others from the use of his invention, absolutely or upon terms. The exertion of this right within the field of the patent law is not an offense against the Anti-Trust Act.

The principle, announced in recent cases, that, when a patented article is sold, it passes beyond the patent monopoly has no application where there is no conveyance of title, but a bona fide lease of the article.

In a suit to set aside leases of patented machines upon the ground that they exceed the rights of the lessor as patent owner and operate to produce results obnoxious to the Anti-Trust Act, semble that the lessees may be necessary parties.

Defendant supplied its sets of patented machines to shoe manufacturers on a royalty basis under a system of leases of a uniform term of 17 years, with conditions for use of each machine to full capacity; for leasing others of lessor as more work became available; for use to exclusion of, and forbidding use on work coming from, machines not so leased; requiring lessee to obtain certain supplies from lessor only; permitting lessor, for breach of condition in any lease, to forfeit it and all others, and requiring lessee thereupon to return machines and pay a charge. Held:

(1) Upon the evidence, that the leases were entered into by the lessees voluntarily and without coercion, and that their legality must be determined apart from a general charge of illegal dominancy by the corporation which the evidence failed to sustain.

(2) Upon the evidence, that the purpose of the system was to make the sets of machinery available to customers on easy terms and promote their efficient and productive operation in connection with an accessory service furnished by the company, and insure adequate royalty returns.

(3) That the conditions were within the lessor's patent rights, and not violative of the Anti-Trust Act.

222 F. 349 affirmed.

[38 S.Ct. 474] Suit to dissolve an asserted combination and conspiracy between certain companies, makers or dealers in boot and

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shoe machinery and the officers of the companies; also to have declared illegal and canceled certain leases and agreements charged to be the means of the combination and conspiracy whereby, through control over the manufacturers of boots and shoes, competition has been prevented, inventive genius subjected to the designs of the combiners and conspirators, and auxiliary machines and accessories controlled and made subsidiary.

The charges are met with denials, with justification that the conduct which is asserted to be illegal was in promotion of trade, in natural development of business and in strict compliance with modern trade progress -- indeed, that there was simply the fusion of independent and noncompeting businesses, each differing from the other, and the combination of various elements of machinery covered by United States patents, and all of it relating to the same art and the same school of manufactures. And that the leases and agreements were but the exercise of patent rights, wholly legal and indeed necessary.

These contentions are displayed in a bill which occupies 46 pages of the record and an answer of equal volume.

The statute of limitations is also pleaded in defense, the greater part of the acts charged being alleged to have taken place more than 6 years before the filing of the petition.

Three judges sat in the case, who heard the testimony in open court. Upon its completion and consideration, a decree was entered dismissing the bill. Each judge rendered an opinion exhibiting the case from a different angle, and the opinions, taken together, display all the phases of the case and the considerations and issues involved. 222 F. 349.

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MCKENNA, J., lead opinion

MR. JUSTICE McKENNA, 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 eyeletting machines (sufficiently indicated by name), and

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declared that, if the bill did not so limit the actual monopoly, counsel would agree so to limit it.

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 enterprise 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 [38 S.Ct. 475] 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 nor lesser scheme was established by the evidence.

The conclusion, however, is contested, and in description of what is now 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 supplying 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 part of the Union" and

it is obvious that 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

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that "no competitor can exist unless, for its own pleasure or policy, it withholds its destroying hand."

There are opposing contentions no less...

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