Court Opinion

ID: 9455978
Source: CourtListenerOpinion
Date Created: 2023-08-04 19:39:04.835559+00
Date Added: 2024-06-11T17:34:48.723169
License: Public Domain

WATERMAN, Circuit Judge
(dissenting) :
I respectfully dissent from the action of my distinguished brethren in affirming the judgment entered below.
They agree with the respected judge below that, even if plaintiff-appellant’s factual allegations are testimonially supportable, these allegations are not sufficient to demonstrate that appellant had standing to complain against the defendants.
*190I believe the plaintiff-licensor has standing to sue. I find it rather strange these days to deny access to a court of law to a plaintiff who alleges facts that show it has suffered compensable damage by reason of the action of others. Thus I am constrained to believe that my brother judges have accepted an anachronistic judicial gloss upon the phrase “by reason of” as that phrase appears in 15 U.S.C. § 15 (1964 ed.), a Code section derived from prior antitrust statutes, the Sherman Anti-Trust Act of July 2, 1890, 80 years old, and Section 4 of the Clayton Act of October 15, 1914, 55 years old.
Initial, or priming, coats of gloss were put on even before 1914, as when the Third Circuit was adjudicating a case brought against a well-known corporation pursuant to Section 7 of the Sherman Anti-Trust Act of 1890. The plaintiff’s action there was demurred to and the lower court’s judgment sustaining the demurrer was affirmed by the Third Circuit. In holding that this plaintiff had no standing to sue, it was said:
There must exist some barrier which will effectually prevent such a multiplicity of suits as the plaintiff’s position suggests, and we believe not only that that barrier exists, but that it is found now just where it was prior to the passage of the act in question. Loeb v. Eastman Kodak Co., 183 F. 704, 709 (3 Cir. 1910).
Should we not have in mind that those were the days when “privity” was king and even MacPherson v. Buick Motors, 217 N.Y. 382, 111 N.E. 1050 (1916) had not been written ? Loeb was a stockholder and creditor of a corporation which had been ruined as a result of defendant’s antitrust violations. The court reasoned, as I have just set out, that the antitrust statute was not intended to grant causes of action to a multiplicity of plaintiffs who could not have maintained suits against the defendant for compen-sable damages prior to its passage. It held that as the corporation was the party primarily injured and a stockholder's interest in lost profits is derivative, the private antitrust cause of action, as with any other derivative cause of action, lay with the corporation. Accord, Ames v. American Telephone & Telegraph Co., 166 F. 820 (C.C.D.Mass.1909). Too, the court ruled that the same general principle applied to a creditor of an insolvent corporation which falls victim to antitrust violations, for creditors’ interests are protectable by the trustee in bankruptcy who may institute an antitrust action in the creditors’ behalf. The court, although appearing to recognize that Loeb had been damaged, wrote that any injury which he received was “indirect, remote, and consequential,” id. 183 F. at 709, and the underlying reasoning of the decision (which I hasten to point out I am not denigrating) contemplated the existence of another person, the corporation or the trustee, each of which had a fiduciary relationship to plaintiff as stockholder or to plaintiff as creditor and who, directly harmed by defendants’ conduct, was capable of bringing suit and in doing so would be protecting a stockholder’s or a creditor’s interest. The fiduciary, the proper party to institute the action, then, as envisaged by the court, would act as a conduit through which the stockholder’s and creditor’s damages would flow, for in the long run a successful suit by the corporation or its representative would presumably accrue to the benefit of its stockholders and its creditors. As to the standing of stockholders the court appeared to fear that if both those persons who possess truly derivative claims and the corporation, too, were allowed to bring suit, the defendant would be subject to damages in excess of treble the amount of the total actual damages inflicted upon the corporate entity and its stockholders by the antitrust conduct. Id. 183 F. at 823.
Further development by judicial construction of § 4 of the Clayton Act has led to disqualification of employees of a corporation from suing for the consequences they suffered in the aftermath of antitrust violations committed in the competitive market of which their employer was a part. See, e. g., Conference of Studio Unions v. Loew’s Inc., 193 F.2d *19151 (9 Cir. 1951), cert. denied, 342 U.S. 919, 72 S.Ct. 367, 96 L.Ed. 687 (1952); Westmoreland Asbestos Co. v. JohnsManville Corp., 30 F.Supp. 389 (S.D.N.Y. 1939), aff’d, 113 F.2d 114 (2 Cir. 1940). But cf. Data Digests, Inc. v. Standard & Poor’s Corp., 43 F.R.D. 386 (S.D.N.Y. 1967). Similarly, a lessor or landlord has been denied standing to sue for decreased rental payments due to antitrust activity affecting the business engaged in by the lessee, regardless of “whether the tenant [lessee] be a party to the violation * * or not.” Lieberthal v. North Country Lanes, Inc., 221 F.Supp. 685, 690 (S.D.N.Y.1963), aff’d, 332 F.2d 269 (2 Cir. 1964); Melrose Realty Co. v. Loew’s, Inc., 234 F.2d 518 (3 Cir.), cert. denied, 352 U.S. 890, 77 S.Ct. 128, 1 L.Ed.2d 85 (1956). Contra, in circumstances where the lessee is a party to the antitrust violation, Congress Building Corp. v. Loew’s, Inc., 246 F.2d 587 (7 Cir. 1957). Patent licensors have likewise been held ineligible to sue for loss of royalty income because of antitrust violations directed at the licensee’s business, SCM Corp. v. Radio Corp. of Am., 407 F.2d 166 (2 Cir.), cert. denied, 395 U.S. 943, 89 S.Ct. 2014, 23 L.Ed.2d 461 (1969); Productive Inventions, Inc. v. Trico Products Corp., 224 F.2d 678 (2 Cir. 1955), cert. denied, 350 U.S. 936, 76 S.Ct. 301, 100 L.Ed. 818 (1956), the case relied upon by the court below, see 47 F.R.D. 345, 350 (S.D.N.Y. 1969) and by my brothers. In like fashion, suppliers of ingredients to customers who have fallen victim to antitrust violations have been denied the benefit of an antitrust suit. Volasco Prods. Co. v. Lloyd A. Fry Roofing Co., 308 F.2d 383 (6 Cir. 1962), cert. denied, 372 U.S. 907, 83 S.Ct. 721, 9 L.Ed.2d 717 (1963); Snow Crest Beverages, Inc. v. Recipe Foods, Inc., 147 F.Supp. 907 (D.Mass. 1956). It would seem now that even franchisors are placed in the same category. Nationwide Auto Appraiser Service, Inc. v. Association of Casualty & Surety Companies, 382 F.2d 925 (10 Cir. 1967).
There seems to have emerged from a major portion of the cases interpreting the antitrust statutes a talismanic rule of lack-of-standing, presumably based in some fashion upon those now famous words “by reason of.” If the plaintiff suffers injury from the defendant’s illegal antitrust conduct, but the plaintiff is somehow separated from the defendant by the presence of an intermediate person who has also fallen victim to that conduct, the plaintiff’s injury is given the label of an “indirect,” “remote,” or “consequential” injury. The label then dictates the outcome of the case and the plaintiff is denied a recovery regardless of the extent or the nature of plaintiff’s loss, or of any other facts and circumstances, and regardless of whether a fiduciary relationship existed between plaintiff and the intermediate person. Many courts, so accepting label disposition, have tended thereby to view the standing-to-sue requirement in general terms and thus have denied all plaintiffs who fall into certain classes of persons — lessors, landlords, stockholders, corporate officers, creditors, suppliers, franchisors, licensors — antitrust protection by holding that when the business and property interests of such plaintiffs are injured because of injuries to the competitive market of persons with whom they are related or connected the plaintiffs’ position vis-a-vis the offending defendants is “indirect.” This is not to say, of course, that denying a plaintiff access to court by “label disposition” will always lead to a deplorable deprivation. Nevertheless, in deciding whether a plaintiff has standing to pursue the federally created cause of action codified in 15 U.S.C. § 15 it seems to me that perhaps the use by courts in antitrust opinions of inherited decisional labels may have obfuscated the positions of some plaintiffs so as to have denied them the recoveries which fact-analysis might have indicated they should have obtained.
Several courts, however, have resisted the adoption of labelous rules of standing-to-sue and have looked to some extent behind the “indirectness” label in an effort to preserve the basic policy considerations that give the standing-to-sue re*192quirement its viability. See, e. g., Sanitary Milk Producers v. Bergjans Farm Dairy, Inc., 368 F.2d 679, 688-689 (8 Cir. 1966); South Carolina Council of Milk Producers, Inc. v. Newton, 360 F.2d 414 (4 Cir.), cert. denied, 385 U.S. 934, 87 S.Ct. 295, 17 L.Ed.2d 215 (1966). One of these cases, decided some years ago, Karseal Corp. v. Richfield Oil Corp., 221 F.2d 358 (9 Cir. 1955), involved an antitrust action by a manufacturer of automobile polish which sold its product under the trade name of “Wax Seal” to enfranchised, but independently owned, distributors, which in turn resold the “Wax Seal” to independent service stations. The defendant, a sponsor of various automobile polishes and waxes other than “Wax Seal”, was alleged to have violated the antitrust laws by entering into “exclusive dealing” agreements with service station operators thereby causing an unreasonable restraint of trade in the car wax industry and, in particular causing restricted sales of “Wax Seal” by plaintiff’s enfranchised distributors, thereby diminishing the distributors’ demands for “Wax Seal” from plaintiff. The court was undaunted by the fact that plaintiff stood in the shoes of one “indirectly” injured and held that plaintiff was entitled to maintain the action. In reaching this conclusion the court characterized the issue this way:
“[W]as Karseal within the ‘target area’ of [defendant] Richfield’s illegal practices * * *? Assuming Kar-seal was ‘hit’ by the effect of the Rich-field antitrust violations, was Karseal ‘aimed at’ with enough precision to entitle it to maintain a treble damage suit under the Clayton Act?” Id. at 362.
The defendants in Karseal applied illegal restraints at the level of the retail outlets, as defendants allegedly did in this case. The independent distributors in Karseal stood between the plaintiff and the retailers, as the bottlers stand between Billy Baxter and the retailers in the instant case. The Karseal court found that:
Primarily the operation and effect of the illegal practices was on the products (including Karseal’s wax) which were competitive to the Richfield sponsored products. The impact was on the market. The gist of the violation was the prevention or impeding of the sale of these competitive products. Id. at 364.
Finally, the court observed:
To say to a manufacturer of wax that he may have the protection of the antitrust laws in private litigation if he hires salesmen for his product, and not have such protection if he decides to contract with a distributor, would appear to be an unequal application of the law and unjustified dictation as to how he operated his business. Id. at 364-365.
Appellees would distinguish Karseal because in that case the plaintiff supplied the finished product while in this case it is the plaintiff’s franchisees who make up the finished products and bottle the beverages. The majority at page 188 would distinguish Karseal by saying appellant “cannot claim to be a firm with comprehensive responsibilities for and identification with the beverages.” This analysis might have merit if plaintiff had not furnished the secret formulae extracts which served to make Billy Baxter’s beverages unique and which gave the Billy Baxter beverages their competitive edge in the soft-drink industry. I submit, however, that Billy Baxter does have “comprehensive responsibilities for and identification with the beverages” sold under its brand name trademark.
Billy Baxter, as was Karseal, is the nerve center or the center of operations for the production and marketing of a “brand name” product. Billy Baxter’s franchisees, as did Karseal’s franchisees, perform functions ancillary to and in furtherance of, their franchisor’s primary function and purpose, that of providing the consumer public a different and distinct product line and of promoting its products’ good will and acceptability in a competitive market.
*193Several considerations lead me to believe that the majority is wrong in its assessment that appellant’s relationship with its bottlers is not sufficiently close to bring it within the protection of the antitrust laws.
The majority points out that apart from the terms of Billy Baxter’s written agreement with its bottlers, “the record contains no mention of the nature of the relations of Billy Baxter, Inc. with the bottlers.” (Majority opinion, footnote 11). Unlike the majority, however, I find that the agreement referred to is of special significance. In relevant part the licensing agreement provides:
4. Licensee [bottler] shall strictly comply with the instructions, formulas and directions of Billy Baxter, which Billy Baxter may give from time to time in relation to the preparation, handling, bottling and distribution of Billy Baxter beverages * * *. Licensee shall furnish Billy Baxter with as many samples of Billy Baxter beverages as may be requested to enable Billy Baxter to test Licensee’s compliance with the instructions herein-before described, and Licensee shall permit representatives of Billy Baxter, at all reasonable times, to inspect and investigate the processes, methods and conditions of Licensee’s operation of its plant, and operation of the financial aspects of Licensee’s business * * *. The majority concludes that plaintiff’s reserved right to inspect is primarily designed to guarantee “volume control” whereby performance could be ascertained and royalties determined. (Majority opinion, footnote 11). I think it is a fuller statement to add that the language of the agreement allows plaintiff to direct unqualifiedly the bottlers in their “preparation, handling, bottling and distribution of Billy Baxter beverages,” and that inspections are not only designed to measure “volume” but in addition to insure “quality control.” Plaintiff has an important stake in achieving and in insisting upon uniform standards of quality among the products its bottlers produce and distribute. This is not only very good business but is required legally. The majority fails to recognize that inasmuch as plaintiff owns the federally registered trademark that identifies the Billy Baxter beverages in the market, plaintiff is required to exercise reasonable supervision and control over licensees it allows to use the trademark so as to insure uniform standards of quality in all the Billy Baxter beverages produced by various bottlers, for lack of reasonable “quality control” works an abandonment of the licensor’s registration of its trademark. Lanham Act, 15 U.S.C. § 1051 et seq., Dawn Donut Co. v. Hart’s Food Stores, Inc., 267 F.2d 358, 367 (2 Cir. 1959).1
*194Therefore, instead of merely licensing “information” to its licensees and then quietly sitting back to collect royalties, plaintiff was obligated to play a continuing role in overseeing its licensees’ performance for plaintiff, as the trademark owner, was responsible, according to federal law, to the ultimate consumer lest the “public * * * be unwittingly deceived,” id. at 367, and the penalty for failure to take active steps to supervise and control its licensees would be the loss of its registered trademark. Moreover, this affirmative duty that a licensor owes to the public to prevent diverse standards of product quality may well lead to a reciprocal liability for any injuries suffered by a consumer because of a lack of effective “quality control,” and indeed may thereby constitute the relationship of the licensor to its licensee, depending upon the extent of the control reserved by the licensor, to be that of a principal liable for the acts of its agent. E. g., Nichols v. Arthur Murray, Inc., 248 Cal. App.2d 610, 56 Cal.Rptr. 728 (1967). See Note, The Franchisor as Plaintiff in Treble Damage Actions: An Antitrust Anomaly, 49 B.U.L.Rev. 322, 335-337 (1969); Note, Liability of a Franchisor For Acts of the Franchisee, 41 So.Cal.L. Rev. 143 (1967).
In short, the majority’s classification of Billy Baxter, Inc. as an entity which “consciously structured the production-distribution process in a way which limited its own activities in order to gain the benefits of certain specific rights and liabilities” (majority opinion page 188) ignores the Lanham Act’s imposition of affirmative duties that Act requires of licensors and which may substantially break down whatever insulation from liability a trademark licensor might have otherwise previously enjoyed. I, therefore, find it rather anomalous to conclude that an enterprise owning a brand-name is not sufficiently identified with and not sufficiently responsible for the consistent quality of its brand-name products to have standing to prosecute an antitrust cause of action and yet, on the other side of the coin, is so sufficiently identified with these same brand-name products that the Congress, so as not to have the public deceived, has imposed affirmative responsibilities upon it to police its licensees in order to protect the integrity of the product in the consumer market.
Assuming the facts plaintiff alleges in its complaint are provable I cannot think of a more strained use of reason and of logic than to say that Billy Baxter was not “aimed at” by the defendants and was inadvertently hit as an “innocent bystander.” See Perkins v. Standard Oil Co., 395 U.S. 642, 649, 89 S.Ct. 1871, 23 L.Ed.2d 599 (1969); Karseal Corp. v. Richfield Oil Corp., supra at 363. Can there be any doubt, again assuming the alleged facts to be provable, that the defendants’ ultimate objective was to undermine the competitive position enjoyed by Billy Baxter trade name products in the beverage market? These allegations do not claim that defendants’ aim was to eliminate competition in the beverage bottling industry but to eliminate the Billy Baxter brand-name beverage products from competition with defendants’ brand-name beverage products. Here, in fact, under the allegations of this case, the bottlers are the businessmen who are secondarily or incidentally “hit.” This proposition may be demonstrated by assuming that, because of defendants’ conduct, the market for Billy Baxter beverages has been eliminated. Of course the bottlers who have been bottling those beverages are unable to continue doing so. However, it does not necessarily follow from the demise of *195the Billy Baxter beverage market that the bottlers are eliminated from the pursuit of their business of bottling beverages. There still may exist a market for bottling, although that market may be that of bottling some other company’s beverages — even perhaps the beverages of these defendants. There are, however, no alternatives open to Billy Baxter; its business is destroyed because its ability to compete has been destroyed.
Billy Baxter, therefore, is the principal, and the intended, victim of the defendants’ illegal conduct, for the purpose for which defendants conspired was to keep Billy Baxter’s trade name beverages off retail shelves; the defendants did not say to retailers, “don’t stock beverages bottled by companies A, B, or C.” The object of the defendants’ conspiracy was not to put certain bottlers out of business ; it was to scuttle Billy Baxter and the Billy Baxter trademarked brand-name in the relevant competitive market. Of course when the Billy Baxter business was scuttled Billy Baxter’s franchisees would be damaged, but this would be so only because they happened to be bottling Billy Baxter products, not because they were the ultimate and principal targets aimed at. It was the plaintiff franchisor, not the plaintiff’s franchisees, who was aimed at with such deadly accuracy and precision.
The fact that Billy Baxter provided for a financial structure between itself and its franchisees that contemplated the outright sale of the flavor extracts and a royalty for every ease of beverages sold rather than providing for payment to its bottlers of a fee for bottling and distributing the beverages has no more significance than the outright sale of automobile polish to distributors had in Kar-seal v. Richfield Oil Corp., supra. To hold otherwise would be an unwarranted exaltation of form over substance. Billy Baxter’s way of doing business did not insulate it from loss so that its elimination from the relevant market injured only its franchisees, for its way of doing business did not cause any unusual allocation of risks of financial loss between it and its franchisees if the market for Billy Baxter products should decline. The franchisees were not contractually obligated to purchase extracts from Billy Baxter except on a need-as-you-go basis. If the demand for Billy Baxter beverages slackened a Billy Baxter bottler’s demand for extracts would diminish in like proportion. The ratio of commercial risk between them would be essentially the same whether Billy Baxter acted as its own distributor and paid the bottlers for bottling or whether it was agreed that title to the finished beverages would vest in Billy Baxter prior to distribution to the consuming public. The only risk of loss not assumed by Billy Baxter that the franchisees faced with respect to the finished products was the risk of loss of inventory if the market for Billy Baxter should collapse overnight, not a very significant factor over the long run.
This brings us to the point of inquiring whether this Billy Baxter case can be meaningfully distinguished from the apparent holding in the case of Productive Inventions, Inc. v. Trico Prods. Corp., supra, upon which my colleagues rely. Although the court in that case recognized that:
[N]o hard and fast rule can be laid down in these situations as the line between direct and incidental damage is not always definable with clarity. * * * Id. at 68.
and characterized the issue presented by the pleadings as a “limited” one, the court held that a patentee who has granted an exclusive license to a manufacturer, upon a royalty basis, could not maintain a treble damage action for recovery of damages for loss of royalties on sales that might have been made by the licensee save for defendants’ antitrust violations. Id. at 679, 680. Relying on decisions denying relief to stockholders, employees, creditors and landlords, the court, in sweeping language, adopted the classical “indirect,” “incidental,” damage formula and denied the licensor-plaintiff standing to sue.
Our court held this even though the court appeared to recognize, id. at 680, n. *1961, that “direct” damages suffered by the licensee for loss of sales and “indirect” damages suffered by the licensor for loss of royalties on the lost sales were different kinds of damages and appeared to recognize that under its holding neither the licensor nor the licensee could recover for the loss of the licensor’s royalties, id. at 680.2
The Trico Products result is, I suggest, motivated by a judicial adherence to a notion that inasmuch as Congress has provided that affected plaintiffs may recover three-fold damages, i. e., may benefit by a “windfall,” the courts should frustrate the legislation by preventing some persons damaged by proscribed unfair competition from sharing in the “windfall.” The argument makes sense, of course, as long as one person is available to bring the antitrust suit, and the extent of the damages that he may recover is allocable between him and others similarly damaged because of the manner in which he and they are doing business. In such a situation the policy of Congress to encourage private antitrust actions by permitting the recovery of treble damages is not thwarted even if only the most directly affected person is allowed to bring the suit.
But if the person “most directly affected” does not have a relationship with another affected person of the sort that will permit him to recover the other’s damages it is the defendant who reaps a “windfall.” This “windfall” would seem to occur when conspiratorial defendants happen to direct antitrust activity at a vertically non-integrated enterprise rather than at a completely integrated one. In the latter case, a defendant guilty of antitrust conduct must pay three-fold the actual damages it inflicts. In the former, such a defendant need only pay three-fold the damages it inflicts on the first independently organized tier of the affected industry, thereby avoiding the full measure of its illegal undertakings. Whether particular guilty defendants will pay the full measure of what Congress prescribed, then, turns on how the innocent parties in the affected target enterprise chose to do business. Nothing in the congressional history of the antitrust legislation even remotely suggests that such an anomalous standard should be applicable in this field.
Of course it is apparent that a line must be drawn somewhere, as in all damage actions, for there is always a point where proof of damages becomes too difficult or too speculative. In the antitrust area that point is surely reached when the one claiming to be damaged by another’s antitrust activity has too tenuous a relationship to the competitive market affected. Perhaps this consideration justifies the line drawn in Productive Inventions v. Trico Products — at least our court as of now has so drawn the line — • but for the reasons I have stated I believe the line there drawn was drawn without examining the rationale behind the labels there relied upon, and, in any event, that case ought not support a decision moving the line over to bar out Billy Baxter. Billy Baxter’s relationship to the relevant market is far from tenuous. Billy Baxter is directly in the retail market where it alleges defendants’ violations occurred because it pre-sells it brand named products in the consumer’s mind and, presumably in order to protect its own interest, *197makes available business advice and promotes product quality control through inspections of its franchisees; the franchisee-bottlers, therefore, do not have the “inalienable right to mismanage” their own businesses. See Slater, Some SocioEconomic Footnotes on Franchising, 11 B.U.Bus.Rev. 19, 21 (1964). In contrast, the licensor in Trico Products was passive in the relevant market and left every aspect of the business to the manufacturer licensee.
I believe that this circuit has already reached or may have surpassed the permissible high watermark in this area in Productive Inventions v. Trico Products. The Supreme Court from time to time has instructed that the protection afforded by antitrust legislation is not to be restricted by niggling precepts or by artificial limitations. As far back as 1948 the Supreme Court in Mandeville Island Farms, Inc. v. American Crystal Sugar Co., 334 U.S. 219, 236, 68 S.Ct. 996, 1006, 92 L.Ed. 1328 (1948) stated:
The statute [Sherman Act] does not confine its protection to consumers, or to purchasers, or to competitors, or to sellers. Nor does it immunize the outlawed acts because they are done by any of these. * * * The Act is comprehensive in its terms and coverage, protecting all who are made victims of the forbidden practices by whomever they may be perpetrated. * * * (Emphasis added.)
See statements of similar effect in Radiant Burners, Inc. v. Peoples Gas, Light & Coke Co., 364 U.S. 656, 660, 81 S.Ct. 365, 5 L.Ed.2d 358 (1961); Radovich v. National Football League, 352 U.S. 445, 453-454, 77 S.Ct. 390, 1 L.Ed.2d 456 (1957). See also Perkins v. Standard Oil Company of California, 395 U.S. 642, 89 S.Ct. 1871, 23 L.Ed.2d 599 (1969).
I would, therefore, reverse the judgment below entered after the grant of the summary judgment motion and would remand for further pleadings and proceedings.

. The legislative scheme may be briefly described. Section 5 of the Lanham Act, 15 U.S.C. § 1055 provides:
Where a registered mark or a mark sought to be registered is or may be used legitimately by related companies, such use shall inure to the benefit of the registrant or applicant for registration, and such use shall not affect the validity of such mark or of its registration, provided such mark is not used in such manner as to deceive the public.
The concept of control is introduced by the Act’s definition of “related company.” 15 U.S.C. § 1127:
The term “related company” means any person who legitimately controls or is controlled by the registrant or applicant for registration in respect to the nature and quality of the goods or services in connection with which the mark is used.
This court in Dawn Donut set forth the necessity for this policy of the Lanham Act:
Without the requirement of control, the right of a trademark owner to license his mark separately from the business in connection with which it has been used would create the danger that products bearing the same trademark might be of diverse qualities (citing cases). If the licensor is not compelled to take some reasonable steps to prevent misuses of his trademark in the hands of others the public will be deprived of its most effective protection against misleading uses of a trademark. The public is hardly in a position to uncover deceptive uses of a trademark before they *194occur and will be at best slow to detect them after they happen. Thus, unless the licensor exercises supervision and control over the operations of its licensees the risk that the public will be unwittingly deceived will be increased and this is precisely what the Act is in part designed to prevent. See Sen. Report No. 1333, 79th Cong., 2d Sess. (1946). Clearly, the only effective way to protect the public where a trademark is used by licensees is to place on the li-censor the affirmative duty of policing in a reasonable manner the activities of his licensees. 267 F.2d at 367.

. This result appears to have been reached without having considered the reasons the early courts found dispositive based upon a justified fear that persons in privity with each other would recover for the same damages. As is said in 69 Harv.L. Rev. 575, 576 (1956) the result in Productive Inventions v. Trico Products permitted a defendant to escape a liability it should have been accountable for:
Since the licensee was not obligated to pay the royalties to the plaintiff unless the patented articles were sold, the royalties could not be recovered by the licensee in a suit for damages based on the lost sales; they were a cost which the licensee had not incurred and which would have reduced its profit margin had the sales been made. The plaintiff has no remedy other than a suit under the antitrust laws. Thus, the defendant is permitted to escape liability for much of the harm caused by its unlawful conduct.