United Shoe MaChinery Co. v. La Chapelle
| Decision Date | 03 July 1912 |
| Parties | UNITED SHOE MACHINERY CO. v. LACHAPELLE. |
| Court | United States State Supreme Judicial Court of Massachusetts Supreme Court |
Walter B. Farr and Nelson B. Todd, both of Boston, for complainant.
G. K Bartlett, Jas. M. Perkins, Saml. W. Emery, and Geo. W Anderson, all of Boston, for respondent.
This is a suit in equity by which specific performance of a contract between the plaintiff and defendant is sought. The plaintiff is a manufacturer, and the defendant an inventor, of shoe machinery. The contract provided, among other matters, for an employment by the plaintiff of the defendant in designing and improving shoe machinery, terminable at the will of either party, with wages at the rate of $20 a week. One paragraph of the contract bound the defendant to assign to the plaintiff any and all inventions, improvements and patents which he should make during the continuance of the contract and for 10 years thereafter, and for a like period not to engage in any similar business. The employment under the contract continued from 1906, with a brief interruption, until 1909, when it ceased. Since then the defendant has taken out a patent for some improvement in shoe machinery which he refuses to assign to the plaintiff; and this suit is to compel such assignment.
The cause comes up on exceptions, and hence only limited and narrow questions are presented. The broader issues which would be open on an appeal are not raised. Whether the contract is unconscionable and hence unenforceable, although somewhat argued, falls in this class and is left undecided by this judgment. The point is not made that the plaintiff or its conduct constitutes a monopoly or an engrossing at common law, in furtherance of which the contract in suit was made, and hence that question is left on one side.
1. The defendant offered to show that before the contract was made he had assigned to the plaintiff an invention, and that although he said nothing about it he was by reason of this fact 'intimidated in an equitable sense' when the general manager of the plaintiff, presenting the contract, told him to 'sign it.' There is nothing to indicate duress, or that the defendant was not a free agent when he made the contract and during the three years of work under it. Whatever may be said as to the illusory character of freedom of contract growing out of economic conditions (Continental Wall Paper Co. v. Voight & Sons Co., 212 U.S. 227, 271, 29 S.Ct. 280, 53 L.Ed. 486), the defendant utterly fails to show that he acted under any element of duress, in its legal sense, or that he suffered any injury by the exclusion of this proffered evidence ( Connolly v. Bouck, 98 C. C. A. 184, 174 F. 312; Silliman v. United States, 101 U.S. 465, 25 L.Ed. 987).
2. It was of no consequence whether the inventions assigned by the defendant to the plaintiff during the term of his employment were equivalent in value to his wages. It was an implied condition of his contract that he should do his best. The value of his work to the plaintiff had no bearing upon any issue raised.
3. There are averments that the plaintiff is a monopoly perpetuated by means of conditions in leases of certain patented machines to the effect that the lessees shall use no other machines not manufactured by the plaintiff, and that the plaintiff thus secures to itself a monopoly of all machinery used in the manufacture of footwear which is alleged to be an infraction of the federal anti-trust act of July 2, 1890. 26 Stat. 209, c. 647 (U. S. Comp. St. 1901, p. 3200). The power to make such leases appears to be within the protection granted by the patents. This is settled by Henry v. A. B. Dick Co., 224 U.S. 1, 32 S.Ct. 364, 56 L.Ed. 645, decided since the argument of this case. See, also, National Phonograph Co. of Australia v. Menck, [1911] A. C. 336; United Shoe Machry. Co. of Canada v. Brunet, [1909] A. C. 330, 344. Hence these allegations and the evidence offered in support of them drop out of the case.
4. The remaining material matters averred in the answer of defendant as to alleged violation of the federal anti-trust act are in substance that in 1899 the plaintiff was constituted by the combination of seven or more pre-existing corporations competing with each other in two-thirds of the states of the Union, being all the principal shoe machinery manufacturers in the United States, and that by their merger into the single organization of the plaintiff, it acquired monopolistic control of the business of manufacturing, leasing and selling throughout the United States shoe machinery for the manufacture of footwear, and that it obtained the greater part of the valuable inventions of such machinery made prior to 1899, and that since 1899 it has bought competing corporations to the number of at least 30 for the purpose of diminishing competition, and thus has gained control of 90 per cent. of the shoe mashinery business; that it has achieved and maintained its monopoly of manufacture and trade and commerce in this class of manufactures between the several states of the Union by contracting with 95 per cent. of the inventors of shoe machinery for the entire product of their inventive skill, through contracts similar in form to that with the defendant; and that by these means it has stified competition, so that it now controls from 90 to 95 per cent. of all the shoe machinery in the United States, and has acquired also a monopoly of inventions relating to shoe machinery, and that the contract in suit was made in furtherance of that monopoly, all in violation of Act July 2, 1890, c. 647, 26 Stat. 209 (U. S. Comp. St. 1901, p. 3200). The court below ruled that no evidence was admissible under this averment of the answer, and excluded all evidence offered. The defendant's exceptions to this ruling present the principal question in the case.
This main inquiry divides itself into two parts: First, whether the plaintiff is itself an illegal combination in restraint of trade and has monopolized trade and commerce between the several states; and second, whether the contract sought to be enforced is a contract in direct aid of such monopoly. Both these subsidiary questions ultimately must be governed by decisions of the Supreme Court of the United States, for they relate to interstate commerce and the meaning of a federal statute touching that subject. No such decision has been made exactly covering the points here presented, but as they are raised here it becomes necessary to decide them.
It is to be observed that the averment of the answer is positive and direct that the plaintiff has acquired and maintained a monopoly of interstate trade in shoe machinery, and the offer of proof in this regard was coextensive with the averment. This brings the case within the words of section 2 of the anti-trust act, which subjects to a penalty 'every person who shall monopolize * * * any part of the trade or commerce among the several states.' This section is complimentary of section 1 of the same act, which prohibits all contracts and combinations to the end of monopolizing trade and commerce. Standard Oil Co. v. U. S., 221 U.S. 1, 59 to 62, 31 S.Ct. 502, 55 L.Ed. 619, 34 L. R. A. (N. S.) 834. That decision, as we understand it, holds that the test to determine whether or not a given contract or combination is in restraint of interstate trade and commerce is the standard of reason as applied to like contracts or combinations at common law. We are not called upon to apply that rule because this record presents as its hypothesis an existing and absolute monopoly of a branch of interstate commerce founded upon a combination. When an actual monopoly is established in the sense in which that term was used in the law when the statute was enacted, then a contract must be closely scrutinized to determine whether it is in furtherance thereof or unreasonable and a violation of the statute. The earlier conception of a monopoly was a grant of an exclusive right from the sovereign power. This still defines with accuracy that which an inventor receives under the patent laws. But in a wider sense monopoly denotes a combination, organization or entity so extensive, exclusive and unified, that its tendency is to prevent competition in its comprehensive sense with the consequent power to control prices to the public harm. National Cotton Oil Co. v. Texas, 197 U.S. 115, 129, 25 S.Ct. 379, 49 L.Ed. 689; U.S. v. American Tobacco Co., 221 U.S. 106, 31 S.Ct. 632, 55 L.Ed. 663; U.S. v. St. Louis Terminal, 224 U.S. 383, 32 S.Ct. 507, 56 L.Ed. 810; United Shoe Machinery Co. of Canada v. Brunet, [1909] A. C. 330. See cases collected in Cooke on Combinations, § 116. But whatever may be the precise definition of the word 'monopoly' as used in this statute, a business device by which a considerable number of competing corporations are welded into a single corporate entity, which controls from 90 to 95 per cent. of the commerce of the country in a particular branch required for the economical production of a necessity of mankind, is a monopoly. See Dr. Miles Medical Co. v. Park & Sons Co., 220 U.S. 373, 408, 31 S.Ct. 376, 55 L.Ed. 502; U.S. v. Standard Sanitary Mfg. Co. (C. C.) 191 F. 172. The modern machinery for the manufacture of footwear would seem to be a close approach to a prime necessity. See Central Shade Roller Co. v. Cushman, 143 Mass. 353, 364, 9 N.E. 629; Gloucester Isinglass & Glue Co. v. Russia Cement Co., 154 Mass. 92, 94, 27 N.E. 1005, 12 L. R. A. 563, 26 Am. St. Rep. 214; Gamewell Fire Alarm Telegraph Co. v. Crane, 160 Mass. 50, 35 N.E. 98, 22 L. R. A. 673, 39 Am. St. Rep. 458; Taft, J., in U.S. v. Addystone Pipe & Steel Co., 85 F. 271, 286, 29 C. C. A. 141, 46 L. R. A. 122.
It is fairly inferable from the...
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