# United States v. United Shoe Machinery Company of New Jersey/Dissent R. Day

* Court Documents
* Case Syllabus
* Opinion of the Court
* Dissenting Opinion R. Day
United States Supreme Court
247 U.S. 32
United States v. United Shoe Machinery Company of New Jersey
Argued: March 16, 19, 20, and 21, 1917. ---
Mr. Justice DAY dissenting.
I concur with the opinion of Mr. Justice CLARKE as to the character of the combination here involved.
There are provisions in the so-called leases attacked in this case which in my view are so clearly within the condemnation of the Sherman Anti-Trust Act, that the further enforcement of them and the making of new leases of like character, should be enjoined. The far-reaching character of a decision sustaining a leasing system such as the defendant has developed and uses justifies a statement of the reasons which impel me to this conclusion.
As to the suggestion that the lessees are not parties to this proceeding, and, therefore, no decree can be had as to them, it seems to me this is not a case of want of indispensable or even necessary parties because of their absence such as should prevent the court from proceeding to a decree to enjoin the United Shoe Machinery Company from the further enforcement of these features of the leases and the making of similar contracts hereafter. If these leases are in violation of the Sherman Anti-Trust Act the makers of them may be proceeded against, and a decree rendered which shall effectually preclude them from further contracts of this sort, without the presence of the lessees if it could be assumed that any of them should desire to be heard in advocacy of the retention of these prohibitive and restrictive features.
The object of this proceeding is to enjoin in equity further violation of a criminal statute, not to determine title or property rights of the defendant. It is sufficient as to the doctrine of indispensable parties to refer to Shields et al. v. Barrow, 17 How. 130, 15 L. Ed. 158, and the cases collected in the discussion of the subject in Waterman v. Canal Bank, 215 U.S. 33, 48, 30 Sup. Ct. 10, 54 L. Ed. 80. There is no reason in this case why the court may not so shape its relief as to reserve the rights of persons not before it, if that should be necessary.
The questions involved in the aspect of the case now under consideration are two-fold. First: Are certain provisions of these lease agreements of themselves considered within the terms of the Sherman Anti-Trust Act? Second: Are such agreements to be held immune from the requirements of the act because of the fact that much, perhaps all the machinery of the United Shoe Machinery Company, is made and leased under letters patent issued by the United States? Of thes questions in their order.
It clearly appears from the record that the United Shoe Machinery Company dominates the trade in certain kinds of shoe machinery furnished to manufacturers all over the country; which machinery is essential to the successful prosecution of the business of manufacturing shoes. It has many customers to whom it supplies these machines under leases, and such customers are required to accept the terms of these instruments or go without the machines. The leases are made for a uniform term of seventeen years, and not now considering the conditions of payment for the use of the machines and other terms usual and legal in their nature, they contain certain other features which may be summarized in the requirements: (1) The lessee shall not use the machinery, or any part thereof, in the manufacture or preparation of welted boots, shoes or other footwear which has not had certain operations performed upon it by other machines leased from the lessor. This is called the prohibitive clause. (2) If at any time the lessee shall fail or cease to use exclusively lasting machinery held by him under lease from the lessor, or fail or cease to use exclusively tacking mechanisms and appliances held by him under lease from the lessor, etc., the lessor may at its option terminate any or all leases or licenses of lasting machines, etc., then existing between the lessor and the lessee, and the right of possession shall thereupon vest in the lessor. This is called the exclusive use clause. (3) In case the lessee has work of the kind which can be performed by the machines belonging to the metallic department of the lessor in excess of the capacity of the metallic machinery which he has under lease from the lessor, then the lessee shall either take from the lessor sufficient additional machinery to perform the work, or failing so to do the lessor may cancel the lease forthwith, or any other lease of metallic machinery then in force between the parties. This is called the additional machines clause. (4) The lessee shall obtain from the lessor exclusively, at such prices as it may establish, all the fastening material needed in operating the leased machines. (6) The lessee shall at the election of the lessor, suffer a termination of all leases which he may have, and the removal of all machines leased by him from the defendants, in the event of any violation of any term of any one of the leases.
From familiar decisions of this court it may be said to be now well settled that the Sherman Anti-Trust Act condemns all combinations and contracts the effect of which is to unduly restrain the free and natural flow of interstate commerce, or which monopolize or tend to monopolize such trade or commerce in whole or in part. While the act does not reach normal contracts sanctioned by law and sustained by usage, it does reach any and all means and devices by which the purposes of the act to protect the freedom of interstate commerce may be thwarted and monopolies promoted and created. United States v. American Tobacco Co., 221 U.S. 106, 179, 31 Sup. Ct. 632, 55 L. Ed. 663; United States v. St. Louis Terminal, 224 U.S. 383, 32 Sup. Ct. 507, 56 L. Ed. 810; United States v. Reading Company, 226 U.S. 324, 33 Sup. Ct. 90, 57 L. Ed. 243; United States v. Patten, 226 U.S. 525, 33 Sup. Ct. 141, 57 L. Ed. 333, 44 L. R. A. (N. S.) 325; Eastern States Lumber Ass'n v. United States, 234 U.S. 600, 34 Sup. Ct. 951, 58 L. Ed. 1490, L. R. A. 1915A, 788. That these lease restrictions tend to prevent the free flow of interstate commerce, and the natural course of its activities, and at least tend to monopolize an important trade in interstate commerce seems apparent from a mere statement of their terms, having in mind their natural and necessary effect.
For the seventeen years term for which all the leases are drawn, the lessees upon failure to use exclusively the defendant's machines for lasting shoes, or upon failure to purchase needed additional machines from the lessor, or to buy certain supplies from t e lessor at prices to be fixed by it, are subject to the right of the lessor to terminate all the leases held by the offending lessee and to take possession of the machines to the utter destruction of the lessee's business. The necessary effect of these prohibitive provisions, in view of the dominating control of the business by the lessor, is to prevent the lessee from using other similar machines however advantageous to him it may be to do so, unless he is willing to incur the peril of losing machinery essential to his business. It likewise so curtails the field of free customers as to keep others from manufacturing such machinery. Whenever a newmachine is acquired by the lessee for the period of seventeen years (the full life of a patent under the statutes of the United States) the chain is forged anew which binds him to the use of the lessor's machines, to the practical exclusion of all others.
Nor is the situation changed by the fact that so-called independent leases are offered to manufacturers. These leases require the payment of considerable additional charges and embrace terms which lead the shoe manufacturers to choose the prohibitive and restrictive forms of leases rather than to accept others. Moreover, the questions in this case are to be tried upon the effect of the leases actually made, and for years to remain in force. When it is considered that these results may be obtained in the conduct of a great business industry by this system of 'tying' contracts, the necessary effect to restrain the freedom of commerce, and the attempt to effect monopolization, seems to me to be established.
2. The stress of the argument on behalf of the company is rested upon the fact that it is the owner of letters patent issued by the United States, and that within the monopoly created by such patents it has the right to make and enforce such contracts as are herein involved. At an early day this court, speaking by its Chief Justice, declared:
'The franchise which the patent grants, consists altogether in the right to exclude every one from making, using, or vending the thing patented, without the permission of the patentee. This is all that he obtains by the patent.' Bloomer v. McQuewan, 14 How. 539, 14 L. Ed. 532.
The extent and nature of rights secured by letters patent have been the subject of recent consideration in this court, and the definition, just quoted, has been appro ed and applied. Bauer v. O'Donnell, 229 U.S. 1, 33 Sup. Ct. 616, 57 L. Ed. 1041, 50 L. R. A. (N. S.) 1185, Ann. Cas. 1915A, 150; Straus v. Victor Talking Machine Co., 243 U.S. 490, 37 Sup. Ct. 412, 61 L. Ed. 866, L. R. A. 1917E, 1196, Ann. Cas. 1918A, 955; Motion Picture Co. v. Universal Film Co., 243 U.S. 502, 37 Sup. Ct. 416, 61 L. Ed. 871, L. R. A. 1917E, 1187, Ann. Cas. 1918A, 959; Boston Store of Chicago v. American Graphophone Co. (decided March 4, 1918), 246 U.S. 8, 38 Sup. Ct. 257, 62 L. Ed.--.
When this case was tried in the District Court Henry v. Dick, 224, U.S. 1, 32 Sup. Ct. 364, 56 L. Ed. 645, Ann. Cas. 1913D, 880, was the law of this court. In that case a mimeograph, made under letters patent, was sold for less than its full value, with a license agreement limiting its use to certain unpatented articles belonging to the patentee. Such use was held to be within the exclusive right secured by the lessor's patent. In Motion Picture Co. v. Universal Film Co., supra, it was sought to extend the doctrine of that case so as to protect a license agreement evidenced by notice attached to the machine so as to limit the purchaser to the use of certain films, and to restrict the purchaser to other terms to be fixed by the owner of the patent at his discretion. But such extended scope of patent rights was denied and it was again held that the patentee received from the law no more than the exclusive right to make, use, and sell his invention.
It is said, however, that the series of cases beginning with Bauer v. O'Donnell, supra, and ending with Boston Store of Chicago v. American Graphophone Co., supra, decided at this term, hold no more than that a patentee may not sell an article covered by his letters patent, receive his price therefor, and then undertake to impose a restriction upon the price at which resales of the patented article may by made. A reading of those cases shows that the nature and extent of the right to grant to others the use of an invention was fully discussed, and its limitations defined.
In the Motion Picture Case the right of a patentee to place restrictions upon the use of a patented machine, and to limit its use by a purchaser, or purchaser's lessee, to terms stated in the license agreement, was considered. This court held that such limitations as were there involved upon the use of patented machines were not within the scope of the patent. It was upon the expanded right to use an invention that the Button Fastener Case, 77 Fed. 288, 25 C. C. A. 267, 35 L. R. A. 728, and Henry v. Dick, 224 U.S. 1, 32 Sup. Ct. 364, 56 L. Ed. 645, Ann. Cas. 1913D, 880, were rested; both cases were overruled in the Motion Picture Company Case. In the latter case it was specifically held that while the patentee might withhold his invention from public use, yet if he consented to its use by himself or others, he was limited to the use described in the claims of his patent, and that there was nothing in the statute which extended his right to control the patented invention by prescribing the use of machines, materials and supplies not covered by the patent. In view of the full discussion of the question in the series of cases already referred to, it is unnecessary to pursue it further.
Under the system of leasing, now before us, the patentee not only undertakes to grant the use of the machines covered by the letters patent, but to dictate the supplies with which they shall be used; to compel their surrender if the machine of another is used; to prevent their use except with other machinery furnished by the patentee; to extend the monopoly of the invention beyond the 17 years allowed by the statute; to lease the use of the invention only upon terms which permit the lessor to forfeit the patent license, and to terminate, if he chooses, all similar leases to use the machines of the lessor. And these extraordinary claims of right are made under the grant of the patent which gives to the inventor the exclusive right to make, use, and sell his invention, and nothing m re. In my opinion such extended power and authority are not consistent with the act as the same has been construed in every case dealing with the subject beginning with the decision in Bauer v. O'Donnell. To sustain such provisions it seems to me amounts to an authority to holders of patented inventions, under the guise of leasing the use of patented machinery, to exercise the right to make combinations necessarily and unduly restraining the freedom of trade, and by virtue of the patent grant to build up monopolies in direct violation of the Sherman Act.
True it is that there is embraced in the patent grant the right or privilege to make licenses and agreements covering the use of the machines patented so long as such agreements are not in themselves unlawful. But the right to make restrictions in controlled by the general principles of law, and because he is at liberty to make them, the patentee may not make contracts in themselves illegal and certainly is not authorized to make contracts in violation of other statutes of the United States. That rights granted under a patent do not authorize the making of contracts in restraint of trade, or monopolizing or tending to monopolize trade and commerce in violation of the Sherman Act, was held by this court in Standard Manufacturing Company v. United States, 226 U.S. 20, 33 Sup. Ct. 9, 57 L. Ed. 107.
In Straus v. American Publishing Company, 231 U.S. 222, 34 Sup. Ct. 84, 58 L. Ed. 192, L. R. A. 1915A, 1099, Ann. Cas. 1915A, 369, contracts, otherwise clearly within the terms of the Sherman Act, were claimed to be justified because of rights secured under the copyright laws of the United States. Quoting and following the decision in the Standard Manufacturing Company Case, this court said:
'So, in the present case, it cannot be successfully contended that the monopoly of a copyright is in this respect any more extensive than that secured under the patent law. No more than the patent statute was the copyright act intended to authorize agreements in unlawful restraint of trade and tending to monopoly, in violation of the specific terms of the Sherman law, which is broadly designed to reach all combinations in unlawful restraint of trade and tending because of the agreements or combinations entered into to build up and perpetuate monopolies. * * *'
The patent statute and the Sherman Act are each valid laws of the United States. While a patentee should be protected in the exercise of rights secured to the inventor under the patent system enacted into the laws of the United States, there is nothing in the Act which gives the patentee a license to violate other statutes of the United States, and certainly not the one now under consideration. In my opinion the restrictive and prohibitive clauses of these leases are within the Sherman Act, as they are clearly in restraint of interstate trade and tend to monopolize in the sense that those terms have been defined in the decisions of this court. That some of the leases were in existence when the United Shoe Machinery Company was formed affords no protection as against the exercise of the power of Congress in the passage of the Sherman Act. Louisville & Nashville R. R. Co. v. Mottley, 219 U.S. 467, 480, 31 Sup. Ct. 265, 55 L. Ed. 297, 34 L. R. A. (N. S.) 671. I think that a decree should be entered as prayed for, and I therefore dissent from the opinion and judgment of the court.
Mr. Justice PITNEY and Mr. Justice CLARKE concur in this dissent.
Mr. Justice CLARKE, dissenting.
A plain history of just what the parties did at and after the time the United Shoe Machinery Company was organized in February, 1899 compiled, almost exclusively, from the testimony of the two leaders in the organization and from documentary evidence, will be the best statement I can make of the reasons other than those stated in the dissenting opinion by Mr. Justice DAY, which render it impossible for me to concur in the opinion and judgment of the court in this case.
I fully agree with the customary practice of giving great we ght to the conclusions of trial judges as to questions of fact involved when the value of the testimony depends upon the appearance and manner of the witnesses when testifying, but the reason for this rule ceases when the evidence is in writing, or consists, chiefly, as it does in this case, of purchases of property, the significance of which lies in the fact of the purchase rather than in the manner of making it.
Obviously, the attaching of the sole of a shoe to the upper is the difficult and dominating operation in the manufacture of shoes by machinery, and early in the trial the charge of the government in the case, by stipulation in open court, became, that the consolidation was formed for the purpose of monopolizing interstate trade or commerce in machinery adapted to that purpose, the 'bottoming of shoes,' in violation of both the first and second sections of the Anti-Trust Act of 1890.
Before the merger the Goodyear Shoe Machinery Company (hereinafter designated the Goodyear Company) was engaged in manufacturing and leasing to shoe manufacturers two principal and sixteen auxiliary machines, the latter being used in preparing the materials of the operation of the former. The two principal machines were used for sewing the sole to the upper and were known as the Goodyear welt and turn shoe machine and the Goodyear outsole rapid lock stitch machine. With these machines, the Goodyear welt, a popular and largely used shoe, was manufactured. This company also manufactured a specially designed lasting machine used in making Goodyear welt shoes.
The Consolidated and McKay Lasting Machine Company(hereinafter designated as the Consolidated Company) was engaged in manufacturing and leasing lasting machines of three types.
As the name of the one implies, and as otherwise appears in the record, each of these two companies had resulted from prior consolidations of shoe machine manufacturing companies and they were the largest organizations of their kind in the country.
The controlling spirit of the Consolidated Company was S. W. Winslow, and of the Goodyear Company E. P. Howe, who, the record shows, were keen and masterful men, and they both testify that in July, 1898, they began the negotiations looking to a uniting of the interests of the two companies, which culminated in the organization of the United Shoe Machinery Company in February, 1899. A 'harmonious arrangement' or 'working agreement' was at first proposed, but Howe, being a lawyer, would not agree to this, 'because,' he says, 'I had a sort of indefinite idea that it might be deemed to be a combination in restraint of trade. * * * I had an indefinite fear that if the two companies remained separate but, for instance, had a joint factory and joint branch offices, there might be something in the way of restraint of trade. I insisted, for that reason, that there should be a complete merger and consolidation.'
This idea that the 'harmonious arrangement' was unlawful was doubtless inspired in the mind of Howe by the decision in the Trans-Missouri Freight Association Case, 166 U.S. 290, 17 Sup. Ct. 540, 41 L. Ed. 1007, rendered in 1897, and he probably shared a then not uncommon notion that the holding company and the merger were devices lawfully available for evading the congressional purpose expressed in the Anti-Trust Act. But in the Northern Securities Case, 193 U.S. 197, 24 Sup. Ct. 436, 48 L. Ed. 679, this court decided in 1904, that the holding company was a futile device and in the American Tobacco Company Case, 221 U.S. 106, 31 Sup. Ct. 632, 55 L. Ed. 663, it was decided in 1911, that the merger was also a mere 'subterfuge of form' which the courts would not permit to shield those who violated the act.
Thus rejecting the 'harmonious agreement' or 'understanding' as unlawful, for the purpose of accomplishing the same end, in what they thought a not illegal way, the defendants resorted to the merger (later on, as we shall see, using also the holding company) and organized the United Shoe Machinery Company, under the laws of New Jersey, with a capital stock of $25,000,000.
The scope of the declaration of the purposes for which this corporation was formed, as stated in its articles of incorporation, is of much significance in determining what the real objective was at which the persons interested were aiming. It is therein declared that the company is formed not only 'to manufacture, lease and sell shoe machinery,' but also 'to manufacture boots, shoes and footwear and all articles of every description that may be produced or manufactured, in whole or in part, from leather, rubber, or any other materials or fabrics, * * * to purchase, lease or otherwise acquire trade-marks, trade-names, copyrights and patent rights * * * and with a view to working and developing the same, to carry on any legal business whatsoever * * * whether manufacturing or otherwise, which the corporation may deem calculated, directly or indirectly, to accomplish these objects or any of them. * * * To hold, purchase or otherwise acquire * * * shares of capital stock * * * of any other corporation or corporations * * * to do any or all of the above things * * * in any part of the world.'
As impressive proof of the objects of the incorporators, we print in the margin some extracts from the certificate of incorporation of the holding company, the 'United Shoe Machinery Corporation,' organized in 1905, by the men controlling the United Shoe Machinery Company, of 1899.
And now thus equipped with apparent legal authority, amply sufficient if successfully used, to restrain and monopolize among the several states the branch of trade and commerce involved, let us see what the defendants did.
First of all, $4,918,000 of the stock of the new company was exchanged for all of the capital stock of the Goodyear and International Goodyear Companies, and $4,432,000 of stock plus $432,000 in cash was exchanged for all of the capital stock of the Consolidated Company. By this merger, with fifteen millions of the capital stock of the new company still available for other uses, the two largest manufacturers of lasting machines in the country were combined and Winslow testifies that:
'After the formation of the United Company it was manufacturing every single lasting machine that was being put out in the United States except the Seaver machine; and in 1900 we acquired the Seaver Company.'
Next, and immediately, although Winslow testifies that 'no word had been spoken to either the McKay people or the Eppler people when the charter for the United Company was obtained,' the company purchased the entire capital stock of the McKay Shoe Machinery Company for five and one-half million dollars of stock of the United Company. This company, Winslow testifies, was engaged in manufacturing metallic fastening machines and heeling machines, 'was doing a very large business,' and through controlled subsidiaries was 'putting out nearly all the metallic fastening machines and nearly all the heeling machines that were being made in the United States.'
Thus, confessedly, by this union of these three companies there were consolidated substantially all of the manufacturers of lasting machines and of machines for attaching the soles of boots and shoes to uppers with metallic fastenings and with thread, and in addition to this the Davey Pegging Machine Company was owned by the Consolidated Company.
There yet remained only one strong competitor doing business in this country, the Eppler Welt Machine Company, with an international subsidiary. Besides the Eppler there was only one other welt machine company en aged in business, the Globe, an unimportant concern which, however, was acquired by the United Company a little later, in 1901.
Although Winslow and Howe could remember within a small fraction of a cent just what royalties were paid at any time for the use of their machines, neither of them could remember what was paid for the Eppler stock, and both testified that the records of the company did not show the amount. But other testimony shows that payment for it, of between $350,000 and $400,000 in cash, was made within a few weeks after the organization of the United Company, and it was admitted, significantly, that no inventory was taken at the time of the purchase of either the McKay or Eppler stock.
That the Goodyear and Eppler machines were sharply competitive is shown by the testimony of both Winslow and Howe. Winslow testifies that just before the consolidation the Eppler Company was 'manufacturing a welting machine, an outsole stitching machine and auxiliary machines' and that the Goodyear Company was making a 'welting machine, an outsole stitching machine and auxiliary machines that performed the same function as the auxiliary machines of the Eppler Company, and a number in addition.' 'Both machines,' continues Winslow, 'were being used in the manufacture of men's welt shoes,' and 'the two welting machines that were being specially pressed on the market at that time were the Goodyear machine and the Eppler machine.' And Howe testifies:
'Those two types of shoes were well known in the trade. There was the Goodyear welt, which was a recognized class shoe. We didn't know whether the manufacturers would prefer Eppler welts or whether they would prefer Goodyear welts.'
What these two dominating spirits of the enterprise thought of their work at the stage of its development which we have thus far described, is interesting and illuminating as to their purpose. Thus, Winslow:
'Immediately after the organization of the company our welting, outsole stitching and lasting machines were doing about all the welting, outsole stitching and lasting that was being done in the United States.
'Q. And so with your heeling and metallic fastening machines?
'A. Not so much the heeling.'
'When the United was formed I don't remember that any outside concerns were putting out lasting machines.'
And he elsewhere says, on cross-examination, that lasting machines of the Goodyear and Consolidated Companies overlapped in the work which was done with them and, if this was true, obviously they must have been competitors in the market.
To this must be added the statements made in circulars sent at this time to the smaller stockholders of the companies to induce them to join in the combination. Thus, to stockholders of the Goodyear Company:
'The great advantages to be secured by the control in one corporation, both in the United States and in foreign countries, of the most efficient types of shoe machinery, have been for several years recognized by the officers of the principal large machinery companies. For more than a year your directors and large shareholders have been in negotiation to accomplish this end. After a thorough investigation of the financial condition of the business of the shoe machinery companies named below the organization of a corporation has been effected under the laws of the state of New Jersey, to be known as the United Shoe Machinery Company. * * * The United Shoe Machinery Company has already contracted for more than a majority of the capital stock of [the companies named other than the Eppler Company and the Davey Pegging Machine Company] besides stocks in other machine companies and letters patent.
'The United Company will from time to time acquire other machinery and property, either by direct ownership or purchase of shares of their stock.'
I cannot share in estimating this circular as simply a naive expression of unusual business foresight. It was a confidential circular, boldly phrased, perhaps because its au hors thought that their combination had been given a character of merger which could withstand government attack, but which this court has since repeatedly held is a mere subterfuge of form. The circular is an accurate description of what had been accomplished and of what, as we shall see, the evidence in the record shows, was intended to be done in the future.
It would seem that men who were not bent upon complete monopoly and control would have been satisfied with the advantages which, we have thus seen, those in this enterprise clearly held over any competitors who might remain or who might appear in the future. But that the man connected with the United Company were not satisfied, and were determined to make their control as perfect and permanent as possible, is shown by their further conduct during the first year of the existence of that company, as follows:
Within a month of the organization of the United Company, on March 1, 1899, for the sum of $74,800 worth of its capital stock it purchased the control of the Goddu Company, which was manufacturing metallic fastening machines, which competed with those of the absorbed McKay Company, and the six inventors who owned the stock were bound by the contract of purchase to transfer to the United Company all inventions relating to shoe machinery, which they jointly or severally might make or have any interest in for a period of ten years; and they were also bound not to become interested 'directly or indirectly' for a like term 'in the business of making or selling any inventions or improvements relating in any way to shoe machinery,' or relating in any way to the manufacture of boots and shoes or useful in connection therewith 'without the consent in writing of the United Company.'
On the 16th day of the same month the company purchased from Winkle and Phillips the exclusive license to use the inventions and improvements in sole leveling machines, described in ten letters patent of the United States and in patents of Great Britain, France and Germany, and bound the inventors to communicate to the United Company all inventions 'which they, or either of them, shall hereafter make' in sole leveling machines or sole pressing machines. Howe testifies that at the time of this purchase the United Company was making machines of the kind, but of a different type.
On August 26, 1899, for the sum of $72,000 the company purchased the business of Timothy Bresnahan, together with the entire capital stock of the Boston Shoe Tool Company. It employed Bresnahan as manager for two years and bound him by contract not to thereafter 'engage in * * * the manufacture of heel trimmings, edge trimmings or edge setting machines and tools * * * or of any machines, tools or product now [then] made' by him or by the Boston Shoe Tool Company, and that he would not 'directly or indirectly aid, assist or encourage any competition with the Boston Shoe Tool Company or its business, but would do everything in his power to promote the interests of the United Company.'
On October 11th of the same year, the company purchased from one Brewer, for $250 and $5 royalty on each machine which should be manufactured, his application for letters patent for an improvement in heel breasting machines, the one machine he had manufactured and the tools with which he had made it, and it took an assignment from Brewer 'of any and all inventions he may hereafter make, relative to breasting heels on the last.'
The attempt made in argument to justify as familiar business practice such contracts as these, binding inventors from whom patents and other property were purchased to surrender to the United Company all of the fruits of their inventive genius for many years after the purchase and often for many years after their employment had ceased, is disingenuous in the extreme. In a single, terse sentence this court has made conclusive answer to such contention, saying:
'Even if separate elements of such a scheme are lawful, when they are bound together by a common interes as parts of an unlawful scheme to monopolize interstate commerce the plan may make the parts unlawful.' Swift & Company v. United States, 196 U.S. 375, 25 Sup. Ct. 276, 49 L. Ed. 518; United States v. Reading Co., 226 U.S. 324, 33 Sup. Ct. 90, 57 L. Ed. 243.
On January 30, 1900, the company purchased, for the sum of $38,000, the business and assets, including twenty United States and foreign patents and 138 lasting machines, of the Seaver Process Lasting Company. This was the only independent company putting lasting machines on the market after the combination was formed, and it removed the last vestige of competition in the lasting machine business.
This will suffice. They are typical of fifty-seven purchases proved to have been made by the United Company prior to the commencement of this suit; of shoe machinery manufacturing companies; of boot and shoe manufacturing companies; of patent rights or applications for such rights; and of the property and businesses of partnerships and corporations engaged in manufacturing appliances 'calculated,' in the language of the charter of the company, 'directly or indirectly, to accomplish the objects, or any of them, of the corporation,' and varying from sewing machine needles and awls, to tacking machines, to buttons, brushes and sandpaper. Brewer's $250 application for a patent was not too small to be overlooked, and we shall see a $6,000,000 purchase was not too great to be made in order to continue, to extend, and to make secure, the complete control over the business involved, which was first attained by the consolidation of the Good-year and Consolidated Companies and the purchase of the McKay and Eppler Companies in 1899.
The history of the first year of this company would not be complete without reference to the fact that the combinations and purchases made during that year resulted in collecting under one control many hundreds of patents covering every 'shadow of a shade' of variation in the parts of the many machines used in the manufacture of shoes, and, it must be noticed, that in the month of December, 1900, the first of the forms of leases were developed and brought into use, which came to be known in the trade as 'iron clad,' and which have been discussed by Mr. Justice DAY in a dissenting opinion in which I cordially concur.
The boot and shoe trade of the country was so restless under what was regarded and unhesitatingly denounced as a monopoly, strongly entrenched, that although the men engaged in that trade were now utterly dependent upon the United Company for the terms on which they might continue to do business, at least two groups of important manufacturers were formed before the commencement of this suit for the purpose of devising, if possible, some means of freeing themselves from conditions which they regarded, as the record abundantly shows, as oppressive and intolerable.
Under the spur of this incentive it came to pass that a large manufacturer of shoes, one Plant, of Boston, developed a line of shoe manufacturing machinery so complete in character that on May 1, 1910, he canceled the leases which he held on many machines owned by the United Company and removed them from his factory, and advertised his readiness to supply manufacturers with adequate, and what was termed, 'wonder working shoe machinery.'
By Winslow's own story, negotiations for the purchase of Plant's shoe machinery manufacturing business by the United Company were entered upon on June 16th, within two months of the time that he removed their machines from his factory. These negotiations were interrupted on July 5th, and on the 28th of the same month four suits were commenced by the United Company against Plant, two more were commenced on August 11th, two more on August 13th, and two more on September 3d. These suits were in part to recover royalties claimed for the use of the United machines before they were taken out of Plant's factory and the rest were to enjoin him from using his own machines, on the ground that they infringed pa ents of the United Company.
Whether as a result of this familiar resort to coercive measures need not be determined, but on September 22d, at 4 o'clock in the morning, possibly to anticipate negotiations which were in progress for the purchase of Plant's property by a group of wealthy shoe manufacturers, the United Company purchased Plant's shoe machinery manufacturing business and patents, and also the control which he owned of the capital stock of a shoe manufacturing company. The United Company paid for these two properties six millions of dollars, plus $122,000 for the Stambon property, which Plant insisted must be purchased as a part of the transaction. This large sum of money, larger than was paid for either of the original constituent companies of the consolidation, was not divided in the contract of sale, but Winslow allots three and one-half millions to the purchase of the shoe manufacturing company stock and two and one-half millions to the purchase of the shoe machinery manufacturing company and patents. Even this division, it will be observed, allows two and one-half millions of dollars to be paid for the Plant machinery company property and patents, which it is now argued were of little value and at best were infringements of patents owned by the United Company. Mr. Winslow, however, thought better of them, for he says they were 'almost invaluable' to his company.
It is impossible for me to understand how the transaction, thus described in Winslow's own words, can fail to convince any one who reads or hears the description, that the Plant Company was a formidable competitor, actual and potential, of the United Company, and that the great sum of money paid to control it was paid to stifle and restrict competition. Standing alone it shows the defendant to be an unmistakable offender against the Anti-Trust law, but when taken together with the origin of the company and with the history of the conduct of it, a small but typical part of which we have described, it seems to me a flagrant and an all but confessed offender against that law, as it has been repeatedly interpreted by this court, United States v. American Tobacco Co., 221 U.S. 106, 179, 31 Sup. Ct. 632, 55 L. Ed. 663; United States v. Reading Co., 226 U.S. 324, 33 Sup. Ct. 90, 57 L. Ed. 243; United States v. Patten, 226 U.S. 525, 33 Sup. Ct. 141, 57 L. Ed. 333, 44 L. R. A. (N. S.) 325; Eastern States Retail Lumber Dealers' Ass'n v. United States, 234 U.S. 600, 34 Sup. Ct. 951, 58 L. Ed. 1490, L. R. A. 1915A, 788, and against the policy of the law as expressed in the act of Congress.
I shall add only the convincing statement as to the complete ascendancy which the combination has attained over the important branch of the industry of the country selected for its control, which is shown in the following results tabulated in the brief of the government from the testimony, and from which all elements seriously disputed by counsel for defendants have been excluded:
Man'f'd Man'f'd Machines in Use in this Country.by by All DefendantsOthers
Lasting machines...................... 7,496 Standard screw machines................ 409 None Pegging machines....................... 146 None Tacking machines...................... 3,488 Welt-sewing machines.................. 2,527 Outsole stitching machines............ 2,676 Loose-nailing machines................ 1,835 Heeling machines...................... 2,019
Further details could not add to the effect of the large outline we have thus presented. This is not a case to be decided upon the detailed statements of individuals as to their intentions or upon refined distinctions as to the application of the patent law. The design was a large one, comprehensively conceived and boldly executed. The dominating spirits of the enterprise, with the advantage of knowing precisely what they wished to accomplish, rejected a 'harmonious arrangement' of their interests as unlawful, but to accomplish the same end they adopted the scheme of merger, since condemned by this court a a mere 'subterfuge of form.'
The trade recognized the combination as a monopoly from the beginning, and for years struggled in vain to free itself by organizing competing interests; the Judiciary Committee of the House of Representatives, when the Clayton bill was under consideration, reported as the result of its investigations that the company appeared to be 'a monopoly that owns and controls the entire machinery now being used by all the great shoe manufacturing houses of the United States' and with a record before me such as in outline I have detailed, it is impossible for me to agree that this now securely entrenched monopoly is an innocent result of normal business development.
The difficulties of bringing the defendants within the restraints of the law, which are regarded by the court as all but insurmountable, seem unimpressive in the presence of the resolute manner with which this court dealt with difficulties quite as complex and interests vastly greater, in the Northern Securities, Standard Oil, and Tobacco Company Cases, supra. In the last named of these cases it was found unnecessary 'in order to give effect to the requirements of the statute' to apply the remedy of restraining the movement of the products of the combination in interstate commerce, or that of appointing a receiver for the property of the offender, for* the simple declaration by the court of its readiness to resort to either or both of these effective remedies, if the conduct of the parties or the exigencies of the situation should require it, served in that case, as it would in this, to open the way for bringing the powerful interests involved into obedience to the law.
Convinced as I am, by a most careful study of this record, that the United Shoe Machinery Company is a combination in restraint of interstate trade and commerce; that it was designed to and actually does monopolize a large part of that trade and commerce, and that it therefore is a continuing violation of both sections 1 and 2 of the Anti-Trust Act of July 2, 1890, I am obliged to dissent from the opinion and judgment of the court.
I am authorized to say that Mr. Justice DAY and Mr. Justice PITNEY concur in this dissent.

## Notes

* ↑ The Judiciary Committee of the House of Representatives, when considering the Clayton Bill (Act Oct. 15, 1914, c. 323, 38 Stat. 730), said of such provisions:
* ↑ The following are excerpts from the articles of incorporation of the 'United Shoe Machinery Corporation,' with a capital stock of $50,000,000, filed May 2, 1905:
'Third. The objects for which the corporation is formed are:
'To manufacture, buy, sell, lease, operate and deal in and with all kinds of machinery, tools, and implements, and mechanical devices and contrivances of every name and nature whatsoever, and especially to manufacture, buy, sell, lease, operate and deal in and with all sorts of boot and shoe machinery, lasts, trees, forms, and every kind of mechanism, contrivance, implement, tool, material, or thing in any way whatsoever connected with, or useful in connection with the manufacture of boots, shoes and footwear, or the manufacture of leather and rubber goods, or goods made from materials and fabrics of any description whatsoever, or useful in connection with the manufacture or operation of any of the machinery, mechanical devices or contrivances hereinbefore mentioned; to produce, prepare and manufacture, buy, sell and deal in and with leather and rubber, and materials and fabrics of all sorts, and the raw materials from which said leather, rubber materials or fabrics are produced; to manufacture, buy, sell, and deal in and with boots, shoes and footwear and all articles and things of every description that may be produced or manufactured, in whole or in part, from leather, rubber or any other materials or fabrics; and in general to produce, prepare, manufacture and deal in and with goods, wares, merchandise, property, materials and things of every class and description.
'To carry on the business of manufacturers of and dealers in all kinds of eyelets, hooks, buttons, studs, nails, wires, rivets, tacks, metallic and other plates, metallic, wood and other fastenings, laces, cloth, linen, tape and other fabrics, brushes, abrasive materials, cements, dressings, stains, blackings and other requisites for the improvement and treatment of boots and shoes, threads, elastic material, buttons and inner soles, and other articles or substances for protecting feet from damp or heat, and other articles or substances used in connection with the manufacture of boots and shoes, corsets, stationery, sails, tents, clothing and for analogous purposes, and to carry on the business of manufacturers of and dealers in all kinds of appliances, devices, findings, tools, mechanisms, accessories, processes and things which may be used or useful in connection with the manufacture or treatment of any of the above-named articles or substances. * * *
'To a ply for, obtain, register, purchase, lease or etherwise acquire, and to hold, own, use, operate, introduce, sell, assign, or otherwise dispose of any and all trade-marks, trade-names and distinctive marks, copyrights, patents and patent rights, and all inventions, improvements and processes used in connection with or secured under letters patent of the United States or elsewhere, or otherwise, and to use, exercise, develop, grant licenses, in respect of, or otherwise turn to account any such trademarks, patents, licenses, concessions, processes and the like, or any such property, rights and information so acquired, and, with a view to the working and development of the same, to carry on any legal business whatsoever, whether manufacturing or otherwise, which the corporation may deem calculated, directly or indirectly, to accomplish these objects or any of them. * * *
'To purchase, acquire by subscription or otherwise, and to hold for investment or otherwise, use, sell, assign, transfer, mortgage, pledge, or otherwise dispose of and to guarantee any shares of stock, bonds, securities, or other obligations of any other corporation or association carrying on any business which this corporation is authorized to carry on. * * *
'To enter into partnership or into any arrangement for sharing profits, union of interest, joint adventure or co-operation with any person, partnership, association or corporation carrying on or engaged in any business which this corporation is authorized to carry on or engage in. * * *
'To do all and everything necessary or convenient for the accomplishment of the purposes, objects and powers above-mentioned, or incidental thereto, and to conduct its business, or do anything which it is authorized to do, in every state and in the territories and colonies of the United States of America and in foreign countries. * * *'
This work is in the public domain in the United States because it is a work of the United States federal government (see 17 U.S.C. 105).
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