SUPREME COURT OF THE UNITED STATES
SYLLABUS UNITED STATES v. UNITED SHOE MACHINERY COMPANY OF NEW JERSEY ET AL.
247 U.S. 32
No. 207. Argued March 16, 19, 20, 21, 1917; restored to docket for reargument May 21, 1917; reargued January 11, 14, 15, 1918 -- Decided May 20, 1918
PRIOR HISTORY: APPEAL FROM THE DISTRICT COURT OF THE UNITED STATES FOR THE DISTRICT OF MASSACHUSETTS
Where the evidence is strongly conflicting, especial weight attaches to the findings of a trial court whose judges saw and heard the witnesses.
Applying this principle, the court holds, with the court below, that the evidence does not sustain the charges of unlawful restraint of interstate commerce in shoe machinery, and monoply thereof, in the formation and conduct of the United Shoe Machinery Company.
In determining whether a combination restrains interstate commerce injuriously to the public, the foremost inquiry is whether the interests brought together were competitive.
Where machines were patented and, though used collectively in the making of a single product, were so far distinct in their functions that they were practically noncompetitive, a common control over their manufacture and use, held not obnoxious to the Anti-Trust Act.
Statements in notices to shareholders and in an agency contract, made by participants in a combination, explaining its object, held not to establish unlawful intent, in view of the evidence of what was done, publicity of the statements when made, lapse of time and inaction of the Government.
Lapse of time, changes of condition due to it and to the progress of the art, the development of high industrial efficiency, difficulty or impossibility of restoring antecedent conditions and injurious effects that would follow the attempt to grant the relief prayed, are matters to be considered in determining from conflicting evidence whether a combination should be dissolved.
Unconnected purchases of certain businesses with patent rights, made by the Company after its formation, are held, on conflicting evidence, not to have been intended, nor to have had the effect, of restraining competition illegally or to have brought it obnoxious power. Generally, one has the right to purchase patents for the protection or improvement of his own inventions and business, and for the prevention of patent litigation, and such purchases should not be adjudged to have stifled competition unduly upon speculative estimates of the potential competitive power of new and untried inventions.
Upon similar considerations, certain contracts for assignment of future inventions are also held legitimate.
The charge that the Shoe Machinery Company's power has been oppressively used is not sustained.
The patent law gives the patentee the right to exclude others from the use of his invention, absolutely or upon terms. The exertion of this right within the field of the patent law is not an offense against the Anti-Trust Act.
The principle, announced in recent cases, that when a patented article is sold it passes beyond the patent monopoly, has no application where there is no conveyance of title but a bona fide lease of the article.
In a suit to set aside leases of patented machines upon the ground that they exceed the rights of the lessor as patent owner and operate to produce results obnoxious to the Anti-Trust Act, semble, that the lessees may be necessary parties.
Defendant supplied its sets of patented machines to shoe manufacturers on a royalty basis under a system of leases, of a uniform term of 17 years, with conditions for use of each machine to full capacity; for leasing others of lessor as more work became available; for use to exclusion of, and forbidding use on work coming from, machines not so leased; requiring lessee to obtain certain supplies from lessor only; permitting lessor, for breach of condition in any lease, to forfeit it and all others, and requiring lessee thereupon to return machines and pay a charge.
(1) Upon the evidence, that the leases were entered into by the lessees voluntarily and without coercion, and that their legality must be determined apart from a general charge of illegal dominancy by the corporation which the evidence failed to sustain.
(2) Upon the evidence, that the purpose of the system was to make the sets of machinery available to customers on easy terms and promote their efficient and productive operation, in connection with an accessory service furnished by the company, and insure adequate royalty returns.
(3) That the conditions were within the lessor's patent rights, and not violative of the Anti-Trust Act.
Mr. Justice Mckenna, after stating the case as above, delivered the opinion of the court.
Mr. Justice Day, dissenting. Mr. Justice Pitney and Mr. Justice Clarke concur in this dissent. Mr. Justice Clarke, dissenting.