United States v. United Shoe Machinery Co of New Jersey 16, 19 20 21, 1917

• Decision Date: 21 May 1917
• Docket Number: No. 207,207
• Parties: UNITED STATES v. UNITED SHOE MACHINERY CO. OF NEW JERSEY et al. Argued March 16, 19, 20, and 21, 1917. Restored to Docket for Reargument
• Court: U.S. Supreme Court

247 U.S. 32

38 S.Ct. 473

62 L.Ed. 968

UNITED STATES

v UNITED SHOE MACHINERY CO. OF NEW JERSEY et al.

No. 207.

Argued March 16, 19, 20, and 21, 1917.

Restored to Docket for Reargument May 21, 1917.

Reargued Jan. 11, 14, and 15, 1918.

Decided May 20, 1918.

- Suit to dissolve an asserted combination and conspiracy between certain companies, makers or dealers in boot and 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 six 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, (D. C.) 222 Fed. 349.

Mr. H. La Rue Brown, of Boston, Mass., for the United States.

Messrs. Charles F. Choate, Jr., and Frederick P. Fish, both of Boston, Mass., for appellees.

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 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 prise 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 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 l rge 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 condlusion, 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 that 'no competitor can exist unless for its own pleasure or policy it withholds its destroying hand.'

There are opposing contentions no less fervidly urged. There is denial of the purpose attributed to the defendants or the possession or exercise of baleful power, and the insistence that the United Company is a union of noncompeting businesses conducted under letters patent, effecting through the resources thus acquired greater economies in manufacture and greater efficiency of machinery and 'in other ways perfecting the shoemaker's art' advantages not engrossed by the company but inuring to its patrons and through them to the wearers of their product, a finished shoe.

In final answer to the charge of the government the comprehensive declaration is that the shoe machinery industry is not one open to everybody on equal terms. It is one of patents. And the company's power, if it have power, is not that of combination but the power of the superiority of its inventions—the effect and demonstrated supremacy of its mechanical instrumentalities.

The contentions could not well be more antagonistic, upon each of which there was conflicting testimony, and the important fact is to be borne in mind that it was given in open court(except as to certain contentions about patents, their scope and validity).¹ The fact justifies deference to the findings of the trial court. Adamson v. Gilliland, 242 U. S. 350, 353, 37 Sup. Ct. 169, 61 L. Ed. 356.

There are two accusations against the defendants. One is that at the very outset they com ined competing companies and subsequently acquired others, section 1 of the act of 1890 (Act July 2, 1890, c. 647, 26 Stat. 209 [Comp. St. 1916, § 8820])² being thereby offended. The other is a monopolization of the trade in violation of section 2 of that act (Comp. St. 1916, § 8821). And it is charged, as we have said, that certain leases and license agreements are the instruments which consummate both offenses.

The offense of combination was committed, it is contended, February 7, 1899, at which time seven shoe machinery companies were consolidated into the United Shoe Machinery Company of New Jersey, a corporation organized for that purpose. The companies were: The Goodyear Shoe Machinery Company, the International Goodyear Shoe Machinery Company, Consolidated & McKay Lasting Machine Company, McKay Shoe Machinery Company, Davey Pegging Machine Company, Eppler Welt Machine Company and the International Eppler Welt Machine Company. The last two companies were acquired by the new company after its formation, but they may be regarded as constituent companies. The businesses of these companies were conveyed to the new company, the businesses being those of manufacturing, selling and leasing and dealing in shoe machinery, including patents of the United States and other countries.³ A more particular distinction we do not deem it necessary to make.

The first question is, Were the companies in competition? It confronts us at the outset; all other considerations are dependent upon it. As an element in the answer to it we must revert to the admission that the charge of combination is only as to machinery for bottoming shoes—that is, the uniting of the sole to the upper an operation which might be called 'simple' if the complexity of this record did not contradict it and if we were not told that the letters patent covering the machinery for the operation are too great in number for explanation or enumeration. It is said that on certain classes of shoes over 100 different operations are performed by different machines. And the government has taken pains to tell us how far 'the mysteries of the shoemaker's art and the variations between different methods of making shoes' are outside of the understanding of the purchaser of them. To him, it is said, 'shoes are shoes, except as they differ in appearance, comfort, wearing qualities, and price.' But to the manufacturer distinctions multiply and to the production of a shoe a complete line of machinery is necessary. Indeed, the government makes the mystery of the art and the necessity of the instrumentalities, in part, the basis of its argument.

We are therefore admonished at once of the complexity of the case and the maze of mechanical technicalities into which we should be plunged in estimating the evidence if we had not the guidance of the opinions of the judges of the trial court. The court found, as we have said, that the companies were not in competition at the time of their union in the United Company, and based the finding not only upon the testimony of witnesses but the uses of the machines of the respective companies and their methods of operation. The testimony was conflicting, it is true, and different judgments...