Standard Sanitary Manufacturing Company v. United States of America
| Decision Date | 18 November 1912 |
| Docket Number | No. 554,554 |
| Parties | STANDARD SANITARY MANUFACTURING COMPANY et al., Appts., v. UNITED STATES OF AMERICA |
| Court | U.S. Supreme Court |
Messrs. Herbert Noble, Henry D. Estabrook, Hartwell P. Heath, for appellants.
[Argument of Counsel from pages 21-28 intentionally omitted] Robert B. Honeyman, A. Parker Smith for appellants.
Attorney General Wickersham, and Mr. Edwin P. Grosvenor, Special Assistant to the Attorney General, for appellee.
[Argument of Counsel from pages 28-34 intentionally omitted]
Suit by the government against appellants for a violation by them of the act of July 2, 1890 [26 Stat. at L. 209, chap 647, U. S. Comp. Stat. 1901, p. 3200], commonly known as the Sherman anti-trust act.
A decree was entered in favor of the government, from which appellants (designated herein as defendants) have prosecuted this appeal. 191 Fed. 172.
There are sixteen corporate and thirty-four individual defendants, the latter, with the exception of Edwin L. Wayman, being the officers, presidents, or secretaries, of the companies.
The corporate defendants were alleged to be the manufacturers of enameled ironwar in various places in the United States, manufacturing 85 per cent of such ware, and engaged in interstate commerce in such ware throughout the United States and with foreign countries, in competition with one another and with certain other manufacturers of such ware, and that in 1909, or early in 1910, they entered into and engaged in a combination and conspiracy to restrain such trade and commerce.
The defendants denied the charges against them, Wayman doing so in a separate answer. The Colwell Lead Company denied that it was engaged in interstate commerce.
A great deal of testimony was taken and the case quite elaborately argued, but in the view we take of it it is in comparatively narrow compass, depending upon the application of well-settled principles.
The corporate defendants are manufacturers of sanitary enameled ironware, such as bath tubs, wash bowls, drinking fountains, sinks, closets, etc. The enameling consists in applying opaque white glass to iron utensils, first in the condition of a liquid, and, second, in the form of a powder. The process consists in heating the utensils to a red heat and then sifting upon it the enameling powder. The powder is fused by the high temperature, and forms on the utensil a hard, impenetrable, insoluble, smooth, and glossy surface.
Prior to the invention of James W. Arrott, Jr., covered by letters patent issued September 26, 1899, the enameling powder was applied by a sieve attached to a long bandle, which was held by the workman with one hand, and the sieve made to vibrate by the workman striking the handle with his other hand, thereby sifting the powder over the surface of the ironware. The implement was an imperfect one, not easily handled, and by its use the workmen were subjected to intense heat and physical strain. The
flow of the powder, beside, was not continuous; it was cast upon the metal in intermittent puffs, causing in many instances an unequal distribution of the powder and producing defective articles which either had to be thrown away or sold as 'seconds.' With Arrott's invention these evil results are lessened or disappear. The sieve is mechanically vibrated very rapidly, causing, instead of an intermittent flow of the powder as in the hand process, a practically continuous flow. Both hands of the workman may be used to guide and direct the sieve. The advantages of the instrument over the hand process are decided. It is more efficient and more economical. It makes a better article and in less time. There is no waste in defects or 'seconds.' The workman is relieved to some extent from 'fierce heat conditions,' to quote from the answers.
At the time of the contracts which are attacked by the government the Standard Sanitary Manufacturing Company was the owner of the patent and manufacturer of 50 per cent of the ware, and used in its production the patented device. Some of the other manufacturers were infringing and controversies existed. Some yielded to its validity, others contested it. It was sustained by the courts in several cases.
We have gone through this detail to exhibit the conditions, as asserted by defendants, which confronted them and induced their contracts. In further display of it we quote Wayman's answer, as follows:
'For the reasons stated, the art was in a very unsatisfactory condition. No means had been discovered of accomplishing the result produced by the use of the Arrott invention without laying the user of such means open to a suit for infringement, by the owner of the Arrott patent. The manufacturers using the process in use prior to Arrott's invention were unable to successfully compete with those using the Arrott invention, and, moreover, produced a
disproportionate number of defective, unsightly and substantially unsalable articles. The consumer was deceived and defrauded and the use of sanitary enameled ironware lessened and its reputation depreciated by defective articles being palmed off on the consumer as not defective.'
On the situation thus asserted to exist, the defendants build their defense, contending that Wayman saw its evils and conceived the way to correct them; and insist that the following facts are established by the evidence: Wayman was familiar, company, called the Seamless Steel company, called the Seamess Steel Bath Tub Company, with the enamel ware trade, and had become convinced of the advantages, indeed, necessity, of the use of the Arrott invention. He tried to secure it, but the Standard Company seemed unwilling at that time to confer its utility upon other companies, and pending the negotiations the Seamless Company failed and Wayman turned to other plans, one of which resulted in the contracts under review.
As early as 1908, impressed with the importance of the Arrott patent, he endeavored ored to have the Standard Company grant licenses to other companies in order to improve trade conditions, and to this end he tried to interest other gentlemen in the project. The Standard Company was unwilling to grant, and other manufacturers were equally disinclined to accept, them He then conceived the idea of a holding company, but this failed also, the Standard still being unyielding, stating by one of its officers that 'his company was unwilling either to sell the Arrott patent or to enter into any arrangement which would lessen the advantage which it had by reason of the ownership of the Arrott patent.' The plan was therefore abandoned.
In August, 1909 (we are still following the version of the testimony given by counsel for defendants), it was suggested to Wayman by a person connected with one
of the manufacturing companies that he (Wayman) apply for the position of secretary of the Association of Sanitary Enameled Ware Manufacturers which was about to be reorganized. The position, it was said, would give Wayman an excellent opportunity to continue his efforts to buy the Arrott patent, and establish such relation with the manufacturers of enameled ware as would enable him to present in the most favorable manner his ideas in regard to the advantages of patent licenses under the Arrott patent. This association was a pure trade organization, and not formed to control or regulate prices. Wayman applied for and obtained the position, and commenced again negotiations for the Arrott patent, and persisted, against the apparent reluctance of the Standard Company to give up the advantages of the patent. Finally he impressed the manager of the Standard factories with the greater advantages which would come to his company by the elimination of 'seconds,' and removing them as competitors of the better articles of the Standard, confining the competition to such articles, of which the Standard produced 50 per cent. The manager of the Standard and that company yielded to the representation of these advantages.
These advantages are dwelt on and made much of by counsel and they quote testimony to display their extent. 'Seconds,' as we have said, were articles of inferior or defective manufacture, and as their inferiority was not apparent, they could be represented and sold as of standard quality. Such deception, it is asserted, was frequently practised, and the articles turning out defective discredited enamel ware, gave it a bad reputation, and there was a growing difficulty to maintain or extend its sale. With 'seconds' out of the way, it may be conceded, as it is contended, that only honest articles were available to plumbers, jobbers, and builders.
The Standard Company fixed a price upon the Arrott patent and gave Wayman an option upon it. He, in the
following December, secured also an option from the J. L. Mott Iron Works upon a patent called the Dithridge, and from the L. Wolff Manufacturing Company an option upon the Lindsay patent. These patents were infringements of the Arrott device. Thus equipped, Wayman proceeded to engage the manufacturers in his proposition.
This summary of the situation counsel have supplemented by a declaration of motives. Counsel say that Wayman and the manufacturers were advised by able and competent lawyers of the legality of their plan. 'Wayman's motive,' it is asserted. 'was to make money for himself, not as a manufacturer, but as the owner of a patent, receiving royalties from those whom he licensed to use his patented invention.' The form of his license, it is further asserted, followed the precedents, and was based on that principle of the patent law which gives to the owner of an invention the power to grant to others its use or to withhold it, or to grant it upon such terms as he may choose to impose. Such being his motive and such being his right, he, it is contended, negotiated with and...
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