Court Opinion

ID: 8800502
Source: CourtListenerOpinion
Date Created: 2022-11-26 14:29:43.788593+00
Date Added: 2024-06-11T17:03:52.728856
License: Public Domain

AUGUSTUS N. HAND, District Judge
(after stating the facts as above). [1] It was held by this court in tire case of Victor Talking Machine Company v. Strauss, 230 Fed. 449, — C. C. A. —, that a license to use a patented talking machine upon payment of an initial royalty to cover the life of the patent and upon condition that the licensee purchase all sound records to be used with the machine from the licensor was Valid, even though the license provided that title to the machine should pass to the licensor upon the expiration of the patent if the terms of the license had been observed. The present case differs from that case because here the title to tire machine at once passed by the sale of the projecting machine to the Seventy-Second Street Amusement Company. We think this case comes within the doctrine of 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, rather than that of Henry v. Dick, 224 U. S. 1, 32 Sup. Ct. 364, 56 L. Ed. 645, Ann. Cas. 1913D, 880. This is especially true since the enactment of the so-called Clayton Bill, which provides:
“That it shall be unlawful for- any person engaged in commerce, in the course of such commerce,-to lease or make a sale or contract for sale of goods, wares, merchandise, machinery, supplies, or other commodities, whether patented or unpatented, for use,' consumption or resale within the United States, or any territory thereof * * * on the condition, agreement or understanding that the lessee or purchaser thereof shall not use or deal in the goods, wares, merchandise, machinery, supplies or other commodities of a competitor or competitors of the lessor or seller, where the effect of such lease, sale, or contract for sale or such condition, agreement or understanding may be to substantially lessen competition or tend to Create a monopoly in any line of commerce.” Act Oct. 15, 1914, c. 323, § 3, 38 Stat. 731.
This act was not regarded as applicable either in the District Court, or in this court, in the case of Victor Talking Machine v. Strauss, supra, because that case was decided upon a demurrer to the bill upon the face of which no substantial restraint of competition or monopoly in any line of commerce appeared. Here, however, the testimony shows that the complainant has a monopoly under its patents of projecting machines so that, if no films not manufactured by complainant can be used upon these machines, the complainant will obtain an absolute monopoly of the film-business, in spite of the fact that its patent on films has expired. If the prohibitions of the Clayton Act mean anything at all, this case falls within them, and the restrictions as to use of films other than complainant’s with the projecting machines are therefore void. Indeed, the report of the judiciary committee of the House concerning the Clayton Act shows that its purpose is to reach *401the film monopoly. A portion of this report, quoted by Judge Dyer in his opinion in United States v. United Shoe Machinery Co. (D. C.) 227 Fed. 507, is as follows:
“Where the concern making these contracts is already great and powerful, such as the United Shoo Machinery Company, the American Tobacco Company, and the General Film Company, the exclusive or ‘tying’ contract made with local dealers becomes one of the greatest agencies and instrumentalities of monopoly ever devised by the brain of man. It completely shuts out competitors, not only from trade in which they are engaged already, but from the opportunities to build up trade in any community where these great and powerful conditions are appearing under this system and practice.”
[2] Judge Sessions has held in the case of Elliott Machine Co. v. Center (D. C.) 227 Fed. 126, that this act applies to contracts made before the passage of the act, and we think his opinion justified by decisions of the Supreme Court on which he relied. Louisville & Nashville Railroad Co. v. Mottley, 219 U. S. 467, 31 Sup. Ct. 265, 55 L. Ed. 297, 34 L. R. A. (N. S.) 671; Armour Packing Co. v. United States, 209 U. S. 56, 28 Sup. Ct. 428, 52 L. Ed. 681; Philadelphia, Baltimore & Washington R. R. v. Schubert, 224 U. S. 603, 32 Sup. Ct. 589, 56 L. Ed. 911. In the case of United States v. United Shoe Machinery Company (D. C.) 227 Fed. 507, Judge Dyer reached the same conclusion in regard to the Clayton Act.
[3] Inasmuch as the contract with the Precision Machine Company involved and restrained interstate commerce, it makes no difference that the particular act of infringement occurred within the state of New York, and the prohibitions of the Clayton Act apply. Marienelli v. United Booking Offices (D. C.) 227 Fed. 170; Nash v. United States, 229 U. S. 373, 33 Sup. Ct. 780, 57 L. Ed. 1232.
[4] It is urged that the defendant Prague Amusement Company cannot rely upon the license and repudiate its terms. It does not rely upon the license, but obtained a lease of the machine from the owner, the Seventy-Second Street Amusement Company, which acquired it after having paid the purchase price, and thus freed the machine from the unlawful restrictions. The remarks of this court upon the motion for a stay pending the decision of the appeal from Judge Dickinson’s decree in the criminal prosecution for violation of the Sherman Act (Act July 2, 1890, c. 647, 26 Stat. 209), in United States v. Motion Picture Patents Co. (D. C.) 225 Fed. 800, would be applicable to the case, if the restrictions we have held illegal had been held valid. Then it would have been true that the defendant, who was using the patented article under a license, could not question the validity of the patent, or claim it lacked invention. These remarks are not applicable when the restrictions are held invalid, and the article, having been thus freed from all restrictions, may be used at the will of the licensee.
In view of the foregoing considerations, it is unnecessary to discuss the other defenses raised by the defendants, and the decree dismissing the bill is affirmed.