Virtue v. Creamery Package Manufacturing Company

• Decision Date: 20 January 1913
• Docket Number: No. 80,80
• Parties: D. E. VIRTUE and the Owatonna Fanning Mill Company, Plffs. in Err., v. CREAMERY PACKAGE MANUFACTURING COMPANY, the Owatonna Manufacturing Company, and Frank LaBare
• Court: U.S. Supreme Court

227 U.S. 8

33 S.Ct. 202

57 L.Ed. 393

D. E. VIRTUE and the Owatonna Fanning Mill Company, Plffs. in Err.,

v CREAMERY PACKAGE MANUFACTURING COMPANY, the Owatonna Manufacturing Company, and Frank LaBare.

No. 80.

Argued December 9 and 10, 1912.

Decided January 20, 1913.

Messrs. Harlan E. Leach, James F. Williamson, and James A. Tawney for plaintiffs in error.

[Argument of Counsel from pages 9-17 intentionally omitted] Messrs. Emanuel Cohen, Amasa C. Paul, W. A. Sperry, John B. Atwater, Frank W. Shaw, and George C. Fry for defendants in error.

[Argument of Counsel from pages 17-24 intentionally omitted]

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Mr. Justice McKenna delivered the opinion of the court:

Action for the recovery of damages in the sum of $406,881.60, being the total of certain specific items mentioned in the complaint, and for all other damages sustained by plaintiffs (so designated throughout this opinion) by virtue of the facts stated, including all sums that they are entitled to under the provisions of the anti-trust act of 1890 [26 Stat. at L. 209, chap. 647, U. S. Comp. Stat. 1901, p. 3200], together with an attorneys' fee. The grounds of recovery are set forth in the complaint, which, inclusive of exhibits, occupies 150 pages of the record, and seems to make impossible any attempt at brevity or condensation. The case, however, is not in wide compass, and attention may be concentrated upon certain considerations. The contention of plaintiffs in its most general form is that the defendants entered into a conspiracy or combination in restraint of interstate trade, and in execution of it plaintiffs' interstate business was destroyed by defendants wrongfully prosecuting two suits against them for the infringement of patents under which the articles of their trade were manufactured, and by circulating slanders and libels to the effect that such articles were infringements of defendants' patents. A cause of action is hence asserted under § 7 of the anti-trust act. The section is as follows: 'Any person who shall be injured in his business or property by any other person or corporation by reason of anything forbidden or declared to be unlawful by this act may sue therefor in any circuit court of the United States in the district in which the defendant resides or is found, without respect to the amount in controversy, and shall recover threefold the damages by him sustained, and the costs of suit, including a reasonable attorneys' fee.'

To justify recovery, therefore, injury must result from something forbidden or made unlawful by the act, and

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what is forbidden or made unlawful is expressed in §§ 1 and 2. Section 1 is as follows: 'Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several states, or with foreign nations, is hereby declared to be illegal. . . .'

The acts forbidden are made a misdemeanor. And by § 2 it is also made a misdemeanor for any person to 'monopolize, or attempt to monopolize, or combine or conspire with any other person or persons to monopolize, any part of the trade or commerce among the several states, or with foreign nations.'

The question occurs, Do the facts of the case show a breach of the law by defendants and injury resulting from it to plaintiffs? The following facts are alleged: On the 24th of February, 1898, or just prior thereto, certain corporations and one partnership were engaged in making or selling creamery supplies, including combined churns and butter workers, and transporting them in state and interstate commerce. All of the corporations and the partnership were in direct competition in their lines of business, and as the result of it all of the articles manufactured and sold by them were sold at no more than a fair price and legitimate profit. The corporations controlled over 90 per cent of the business of manufacturing and selling creamery and dairy supplies in the states of Michigan and Indiana and in all the states west and in some of the states east thereof, manufacturing the articles in one or more of the states, and shipping by the same common carriers from the states where manufactured to other states, and distributing and selling such articles there.

On the 24th of February, 1898, the Creamery Package Manufacturing Company, one of the corporations, and its stockholders, then engaged in the manufacture and sale of dairy and creamery supplies, but not of

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combined churns and butter workers, it being as to the latter only the agent for their sale, entered into a contract with the other corporations and the partnership, by which it was agreed to increase the capital stock of the Creamery Package Manufacturing Company to enable it to purchase the property and business of the other corporations, parties to the contract, including in the property all patents and applications for patents.

The contract is very elaborate and verbose, but we need not give its particular covenants, as no point is made upon them; it being only alleged and contended that its purpose and effect were that the Creamery Package Manufacturing Company should acquire the property and business of the other corporations, and that while the latter should cease to exist, they should be represented as continuing as separate and independent concerns and competitors in the market with the Creamery Package Manufacturing Company, and with one another, while in truth and fact there would be no competition between them.

It is alleged that, in execution of the purpose of the contract, traveling men from the different houses, under instructions from the Creamery Package Manufacturing Company, met and secretly arranged the bid each should interpose, determining by by lot and other ways who should interpose the lowest bid and who the highest.

The Owatonna Company was not a party to that contract, but it is contended that it participated in or is brought into the scheme and purpose of the contract by certain agreements entered into by it with the Creamery Package Manufacturing Company. They are all attached to the complaint as exhibits, and may be described as transferring certain patents or the right to use certain patents to the Creamery Package Manufactur-

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ing Company. A brief summary of them is given in the margin.¹

¹ The first of the agreements between the companies was made April 19, 1897 (that was before the contract of February 24, 1898) and recited that the Owatonna Company was the owner of certain patents covering combined churns and butter workers, and was manufacturing the same, and that, as the Creamery Package Manufacturing Company was desirous of handing the same as sole agents, the agreement was made. It conveyed five patents issued between January, 1893, and August, 1896, and applications for another. There were provisions as to the size, material, and other details; also as to royalties to be paid to the Disbrow Manufacturing Company. And the Owatonna Company agreed to protect the Creamery Package Manufacturing Company from all suits for infringement of the patents, or claims for damages arising out of the sales of the churns, and promptly and vigorously to attack infringers, and to procure patents on all improvements made by it or by any person in its behalf.

There was an addition to the contract, made June 4, 1897, in regard to the repair parts of the 'Winner' churns and the repair and perfection of the same, and the rebate from the billing price.

On January 12, 1898, a supplemental contract was made by the same parties as to the disposition of the royalties received under a license contract made September 30, 1897, with the Cornish, Curtis, & Greene Manufacturing Company, of Fort Atkinson, Wisconsin.

On June 4, 1898, another agreement was made between the parties which referred to the agreement of April, 1897, and to the pendency of litigation based on the infringement or charges of infringement of the patents with which that contract was concerned. For the purpose of adjusting all claims growing out of such infringement, and settling the litigation between the Owatonna Company and F. B. Fargo & Company, whose rights the Creamery Package Manufacturing Company had acquired, it was agreed that one of the suits which was named, and in which proofs had been taken, should be brought to a speedy hearing and all other suits dismissed.

The Creamery Package Manufacturing Company agreed not to manufacture the machine known as the 'Winner' or the 'Disbrow,' both referred to in the contract of April, 1897, called the 'sales contract,' or any other of a described kind made by the Owatonna Company, but was at liberty to manufacture and sell churns and butter workers of any other construction. Satisfaction of all royalties, damages, and costs was agreed on.

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It is alleged that on July 8, 1904, the Creamery Package Manufacturing Company and the Owatonna Company brought suit separately in the circuit court of the United States for the first division of the state of Minnesota, at Winona, against the plaintiffs, charging infringement of patents for churns and butter workers. The bills in the suits are attached to the complaint in this action and are in the usual form. Process was issued and the plaintiffs here answered. Upon proofs taken a decree was entered in favor of plaintiffs and against the Owatonna Company in the suit brought by it. It is not alleged in the complaint, but it is in the answer of the Creamery

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Package Manufacturing Company and not denied, that it obtained a decree adjudging plaintiffs here infringers of the patents which were the subject of the suit.

It is alleged that the defendants here conspired with one another to commence and prosecute the suits, and that they were commenced and prosecuted maliciously and without probable cause, whereby plaintiffs were caused certain items of damages.

The other allegations of the complaint need not be repeated in detail. They are to the effect...