National Phonograph Co. v. Schlegel

• Decision Date: 10 March 1904
• Docket Number: 1,846.
• Citation: 128 F. 733
• Parties: NATIONAL PHONOGRAPH CO. v. SCHLEGEL et al.
• Court: U.S. Court of Appeals — Eighth Circuit

128 F. 733

NATIONAL PHONOGRAPH CO. v. SCHLEGEL et al.

No. 1,846.

United States Court of Appeals, Eighth Circuit.

March 10, 1904

The bill alleges that complainant is a New Jersey corporation and defendants are citizens of Iowa; that complainant is the exclusive licensee for the sale of Edison phonographs, record blanks, and records, covered by letters patent owned by the Edison Phonograph Company; that, in conformity with its established plan of selling the articles covered by its license and such letters patent, complainant, on April 27 1901, entered into a contract in writing, called 'Jobber's Agreement,' with defendants, whereby in consideration of sales of said articles to be made by complainant to defendants from time to time at a stated discount, defendants agreed to conform and strictly adhere to and be bound by certain terms and conditions in selling such articles, viz: (1) To sell only at certain named prices. (2) To sell to no retail dealer who does not sign a prescribed and similar agreement governing and controlling sales by retail dealers. (3) 'All Edison Phonographs, Records and Blanks are covered by United States patents and are sold under the condition that the license to use and vend them implied from such sale is dependent on the observance by the vendee of all the foregoing conditions; upon the breach of any said conditions the license to use or vend said phonographs, records and blanks, immediately ceases and any vendor or user thereafter becomes an infringer of said patents and may be proceeded against by suit for injunction or damages, or both. ' The bill also alleges that, under such agreement, complainant sold and delivered to defendants, from time to time, great numbers of Edison Phonographs, record blanks, and records, and defendants now have on hand many phonographs, record blanks, and records so purchased; that defendants recognized and conformed to the terms and conditions of said agreement until about March 1, 1902, since which time they have been selling and are continuing to sell large numbers of the phonographs, record blanks, and records so purchased from complainant at prices less than those agreed upon, and to retail dealers throughout the United States who have not signed and who refuse to sign the agreement prescribed for retail dealers. Other allegations relate to the effect of these sales in violation of the agreement, and tend to show pretty clearly that they seriously disturb the business of complainant, and do it irreparable injury. Among its prayers, the bill asks for preliminary and permanent injunctions restraining defendants from selling phonographs, record blanks, or records so purchased from complainant at prices less than those agreed upon, or to any retail dealer who does not sign the required retailer's agreement. After the filing of the bill and the service of process, defendants consented, in writing, to a permanent injunction as prayed, on condition that no damages or costs should be awarded against them, and complainant moved that such a decree be entered upon the bill and the written consent of defendants. The court, however, entered a decree dismissing the bill. The theory upon which this was done is shown by the following extracts from an opinion filed by the judge at the time: 'On the former hearing I reached the conclusion that this is a collusive suit. In this I was mistaken, and I now ground my decision upon the facts pleaded in the bill. * * * Is not the contract one that stifles trade? And if it is such a contract, should this court enforce it by the great writ of injunction? * * * And, aside from the phases of the patent law that have been argued, in my judgment the contract in suit cannot be the basis of an action at either law or in equity. And it likewise is my judgment that the contract cannot be upheld, even though the articles of merchandise are covered by patents.'

W. J. Roberts (Howard W. Hayes, on the brief), for appellant.

Before SANBORN, THAYER, and VAN DEVANTER, Circuit Judges.

VAN DEVANTER, Circuit Judge, after stating the case as above.

This is not a suit by the patentee or an assignee to enjoin the infringement of a patent, but is a suit by an exclusive licensee for the sale of articles embodying the patented invention or discovery to restrain the future violation of an underlicense or contract for the sale of such articles by a sublicensee. However, the validity of the underlicense or contract and the right...