Virtue v. Creamery Package Mfg. Co.

• Decision Date: 23 March 1910
• Docket Number: 3,167.
• Citation: Virtue v. Creamery Package Mfg. Co., 179 F. 115 (8th Cir. 1910)
• Parties: VIRTUE et al. v. CREAMERY PACKAGE MFG. CO. et al.
• Court: U.S. Court of Appeals — Eighth Circuit

179 F. 115

VIRTUE et al. v. CREAMERY PACKAGE MFG. CO. et al.

No. 3,167.

United States Court of Appeals, Eighth Circuit.

March 23, 1910

Harlan E. Leach (Charles I. Reigard and James F. Williamson, on the brief), for plaintiffs in error.

Emanuel Cohen (John B. Atwater and Frank W. Shaw, on the brief), for defendant in error Creamery Package Mfg. Co.

A. C Paul (W. A. Sperry, on the brief), for defendants in error Owatonna Mfg. Co. and La Bare.

Before SANBORN and ADAMS, Circuit Judges, and RINER, District Judge.

RINER District Judge.

The plaintiffs in error were plaintiffs in the Circuit Court, the defendants in error were defendants in the Circuit Court, and will be hereafter referred to as plaintiffs and defendants respectively. This was an action at law to recover treble damages under the seventh section of Act Cong. July 2, 1890 c. 647, 26 Stat. 209 (U.S. Comp. St. 1901, p. 3202). The court below directed the jury to return a verdict in favor of the defendants, for the reason that the damages alleged in the complaint were not such damages as were contemplated by the act of Congress just mentioned.

The plaintiffs were engaged in the business of manufacturing combined churns and butter workers at Owatonna, Minn., and from there shipping and selling them in Minnesota and in other states. The defendant the Creamery Package Manufacturing Company, a corporation organized under the laws of Illinois, was also engaged in manufacturing and selling throughout the United States all kinds of dairy and creamery supplies and installing in creameries complete creamery outfits. The defendant the Owatonna Manufacturing Company, a corporation organized under the laws of Minnesota, was engaged in the manufacture of combined churns and butter workers. The defendant La Bare was president of the last-named corporation. The product of its plant was sold throughout the different states of the United States by the defendant the Creamery Package Manufacturing Company, pursuant to a contract hereafter referred to.

The record discloses that on the 2d of October, 1893, by an instrument in writing, Reuben B. Disbrow and Darius W. Payne, then owners of letters patent numbered 490,105, for a consideration, assigned said patent and the exclusive right to manufacture and sell throughout the United States and territories the Disbrow combined churn and butter worker covered by the patent, and also 'all subsequent patents for improvements that may be made to it to the Owatonna Manufacturing Company'; that thereafter the Disbrow Manufacturing Company, a corporation organized under the laws of Minnesota, Reuben B. Disbrow being its president and Darius W. Payne its secretary, began the manufacture of certain churns called the Winner or New Disbrow. The defendant the Owatonna Manufacturing Company claimed that this churn was being manufactured under improvements which were patented by Reuben B. Disbrow after the 1893 agreement, and therefore belonged to the Owatonna Company as subsequent patents for improvements. At this time the defendant the Creamery Company had a contract, made in October, 1896, with the Disbrow Company for the sale of the Winner churn. It had also advanced money to the Disbrow Company and held a mortgage upon its plant for $800.

Litigation arose with respect to the rights of the parties under the agreement of 1893, and several suits were pending in relation thereto, when, in April, 1897, a settlement was effected by the execution of four instruments. One was a contract between the Disbrow Manufacturing Company and the Owatonna Manufacturing Company, in and by which the rights of all parties under the October, 1893, agreement were mutually released, the suits were settled, and the Disbrows sold their patents, machines, tools, and patterns to the Owatonna Manufacturing Company, and retired from the churn business during the life of the patents. Another was an assignment of the of the Disbrow patents. A third was a contract between the Owatonna Manufacturing Company and the Creamery Package Manufacturing Company, by which the Creamery Package Manufacturing Company was made sales agent for all the churns manufactured by the Owatonna Manufacturing Company. The fourth was a contract between the Disbrow Manufacturing Company and the Creamery Package Manufacturing Company, whereby the agreement of October, 1896, between these parties was released and discharged and the mortgage on the plant of the Disbrow Manufacturing Company was satisfied, the Creamery Package Manufacturing Company agreeing to pay to the Disbrows royalties thereafter falling due from the Owatonna Manufacturing Company. These four contracts were executed at the same time, and, as shown by the recitals, were part of a single transaction. The purpose of these instruments, as disclosed by the instruments themselves, was to settle pending litigation and all matters concerning which the parties were at variance, and to cause the Disbrow Company to discontinue the manufacture of churns under the patents, which the Owatonna Manufacturing Company insisted belonged to it.

February 24, 1898, the defendant the Creamery Package Manufacturing Company and its stockholders entered into an agreement with a number of other concerns and persons engaged in the business of manufacturing and selling combined churns and butter workers and other creamery supplies. The purpose of this agreement, as stated by counsel for the defendant the Creamery Package Manufacturing Company in their brief, 'was to advance the business interests of the different parties by settling and avoiding litigation pending and apprehended and by terminating unreasonable and ruinous competition. ' The defendant the Owatonna Manufacturing Company was not a party to this agreement, and, so far as the record shows, was not responsible for any act of the Creamery Package Manufacturing Company in carrying out its provisions. The only connection it had with the Creamery Package Manufacturing Company was by virtue of the provisions of its contract of April 19, 1897, with that company. That contract was not a contract in restraint of trade, nor was it an attempt to create a monopoly. As suggested by the trial court:

'It was merely a contract making the Creamery Package Manufacturing Company the sales agent of the Owatonna Manufacturing Company.'

Even if it can be said that it incidentally or indirectly tended to restrain competition by giving the Creamery Package Manufacturing Company the exclusive right to sell its product, it would not violate the statute. As said by Judge Sanborn in Union Pacific Coal Company v. United States, 173 F. 737, 97 C.C.A. 581:

'If the necessary effect of a combination to engage in or conduct interstate or international commerce is but incidentally and indirectly to restrict competition therein, while its chief result is to foster the trade and to increase the business of those who make and operate it, it does not fall under the ban of this law. ' Hopkins v. United States, 171 U.S. 578, 19 Sup.Ct. 40, 43 L.Ed. 290; Anderson v. United States, 171 U.S. 604, 19 Sup.Ct. 50, 43 L.Ed. 300; United States v. Joint Traffic Association, 171 U.S. 505, 19 Sup.Ct. 25, 43 L.Ed. 259; Addyston Pipe & Steel Company v. United States, 175 U.S. 211, 20 Sup.Ct. 96, 44 L.Ed. 136;

Whitwell v. Continental Tobacco Company, 125 F. 454, 60 C.C.A. 290, 64 L.R.A. 689, and cases there cited.

The record shows that the Creamery Package Manufacturing Company was the assignee of three certain patents, numbered respectively 539,571, 565,720, and 600,168; that the Owatonna Manufacturing Company was the owner of another patent numbered 585,100, for new and useful improvements in combined churns and butter workers; that on the 16th of July, 1904, these two defendants brought independent suits against the plaintiffs for infringements of their patents. In the case of the Owatonna Manufacturing Company's patent, the patent was decreed to be void for lack of invention in view of the prior art. In the case of the Creamery Package Manufacturing Company's patents it was decreed that it was the owner of the patents sued on, and that the patents had been infringed by the plaintiffs, an injunction was issued, and the...