Court Opinion

ID: 9418636
Source: CourtListenerOpinion
Date Created: 2023-08-02 22:34:24.820971+00
Date Added: 2024-06-11T17:22:07.234586
License: Public Domain

Me. Justice. Holmes.
These are. complaints brought by the respondent against the Commissioner of Corporations and Taxation of Massachusetts for the abatement of income taxes for the years 1921 and 1922. The question raised as stated by the Supreme Judicial Court of the State is whether the Commonwealth has the right to tax the income received from royalties. for the use of' patents issued by the United States. That Court held that the Commonwealth had no such right under the-Constitution of the United States *149and the Commissioner obtained a writ of certiorari from this Court.
The reasoning of the Court is simple. If the State ‘ cannot tax the patent, it cannot' tax the royalties received from its use’. The postulate is founded on the casual intimation of Chief Justice Marshall in McCulloch v. Maryland, 4 Wheat. 316, 432, and is said to have been conceded below by the Commissioner. It hardly is conceded here and, whether it is or is not, if this Court should be of opinion that the conclusion urged by the Commissioner can be supported upon broader grounds than he felt at liberty to take, the .Court is not estopped by his doubts. Why then cannot a State tax a patent by a tax that in no way discriminates against it? Obviously it is not true that patents are instrumentalities of the Government. They are used by the patentees for their private advantage alone. If the Government uses them it must pay like other people. Richmond Screw Anchor Co. v. United States, 275 U. S. 331. The use made by the patentee may be not to make and sell the patented article but simply to keep other people from doing so in aid of some collateral interest of his own. Continental Paper Bag Co. v. Eastern Paper Bag Co., 210 U. S. 405, 422, 424. .National banks really are instrumentalities of the.,Government and directly concern the national credit. Indians are wards of the nation. Interstate commerce is left expressly to regulation by Congress and the States can intermeddle only by its consent. In this case the advantages expectpd by the Government are mainly the benefits to, the public’when the patent has expired and secondarily the encouragement of invention, Pennock v. Dialogue, 2 Peters, 1, 19. The most that can be said is that a tax is a discouragement so far as it goes and to that extent in its immediate operation runs counter to the Government intent. But patents would be valueless to their owner , without the organized societies constituted by the *150States, and the question is why patents should riot contribute as other property does to maintaining that without which they would be of little use.
Most powers conceivably may be exercised beyond the limits allowed by the law. Rights that even seem absolute have these qualifications. American Bank & Trust Co. v. Federal Reserve Bank of Atlanta, 256 U. S. 350, 358.
But we do not on that accourit resort to the blunt expedient of taking away altogether the power or the right. Board of Trade v. Christie Grain & Stock Co., 198 U. S. 236, 247, 248. The power to tax is said to be the power to destroy. But, to repeat what I just.now have had occasion to say in another case, this Court, which so often has defeated the attempt to tax in certain ways, can defeat an attempt to discriminate or otherwise to go too far without wholly abolishing the power to tax. The power to fix rates is the power to destroy,' but this Court while it endeavors to prevent confiscation does not prevent the fixing of rates. Even with regard to patents some laws of a kind'that might destroy the use of them within the State have been upheld. Patterson v. Kentucky, 97 U. S. 501. Webber v. Virginia, 103. U. S. 344. Emert v. Missouri, 156 U. S. 296. They must be reasonable or they will be held void, but if this Court deems thena reasonáble they stand. Allen v. Riley, 203 U. S. 347, 355.
The fact that the franchise came from a grant by the United States is no more reason for exeinption, standing by itself, than is the derivation of the title to a lot of larid from the same source. Tucker v. Ferguson, 22 Wall. 527. In Baltimore Shipbuilding & Dry Dock Co. v. Baltimore, 195 U. S. 375, the land was conveyed subject 'to a condition that a dry-dock should be built upon if which the United States was) to have the right to use free from charge for docking arid which was to reyert to the'United States on a diversion of the land to any .other use or on *151the dry-dock being unfit for use for six months, tíertainly a case in which the United States was much more clearly interested than in an ordinary patent. Yet there it was held that neither the company nor the land was an instrumentality of the United States and that there was nothing to hinder the right of the State to tax. See further Forbes v. Gracey, 94 U. S. 762.
Mr. Justice Brandéis, Mr. Justice Sutherland and Mr. Justice Stone agree with this opinion.