clusive right to make, use and vend. * A patentee who agrees to suppress his [invention] is not promoting it. He is not deriving his profit from its promotion, but from the manipulation of the market. It is no part of the constitutional scheme, or of the scheme of the patent laws, to secure to inventors a profit from the suppression of their creations. * * The reasons for enacting the Sherman Law seem quite as applicable to articles of this character as to articles having no connection with patents."

Requiring Vendee to Maintain Retail Price of Patented Article.-After some variation in judicial holdings as to the right of the patentee to fix the continuing re-sale price of patented goods, such practices were declared illegal in Bauer & Cie v. O'Donnell. This case holds to the effect that where the owner of the patent has sold the product, he cannot control the re-sale price further than as to his immediate vendee, i. e., the price more than once removed or after the goods pass into the channels of trade.

"The right to vend conferred by the patent law has been exercised, and the added restriction is beyond the protection and purpose of the act."

Accordingly, a notice that a sale of the patented thing by a party not under contract with the patent owner at less than the fixed price shall constitute an infringement of the patent is brutum fulmen, and need excite no apprehension. The question seems settled in accordance with the dictates of reason and sound principles of law.

Prohibition Extends to Copyrighted and Unpatented Wares. -In another recent case the same rule as to re-sales has been applied to unpatented articles, and the cases have been construed together in an official publication:

"These last three cases (Bobbs-Merrill Co. v. Strauss, 210 U. S. 339; Dr. Miles Medical Co. v. Park & Sons Co., 220 U. S. 373, and Bauer v. O'Donnell, 229 U. S. 1) form a distinct trinity and express the views of the Supreme Court of the United States under existing law on the subject or re-sale and price-fixing and price-maintenance con

7 Blount Mfg. Co. v. Yale & Towne, 166 Fed. 555. 8 229 U. S. 1, 33 Sup. Ct. 616, 57 Law Ed. 1041.

tracts. The Bobbs-Merrill case relates to copyrighted articles, while the Dr. Miles case relates to unpatented articles entering into interstate commerce, and the O'Donnell case applies to patented articles. These cases cover the whole subject of price-fixing contracts."

Clayton Act Applied.-In a recent decision by a federal court,10 a restraining order was refused where the defendant declined to sell its product direct to a customer, who, because of the magnitude of its business, through the medium of an extensive chain of stores, had been accustomed to purchase in car-lots and take advantage of special car-lot prices and, in retailing, had cut prices below the price at which small retailers were accustomed to sell and were obliged to sell in order to make a profit on the product. The decision is based upon the rights of defendant to control its trade name "Cream of Wheat" as well as upon the inherent right to select customers or refuse to deal. The decision is justified in recognizing the right to refuse to deal by reference to various court decisions," and by the court's interpretation of the language of Section 2 of the Clayton Act, providing that "nothing herein contained shall prevent persons engaged in selling goods, wares, or merchandise in commerce from selecting their own customers in bona fide transactions and not in restrain of trade."

Decision Recognizes Right of Dealer to Protect Trade.This decision recognizes the right of a manufacturer to refuse to place in the hands of one large customer the means of destroying the business and trade of a multitude of other customers, thus recognizing the right of every man to carry on his own business

9 "Laws on Trusts and Monopolies with Authorities," compiled by Nathan B. Williams in connection with the enquiry conducted by the House Committee on Judiciary,—at page 36. This work contains in compact and convenient form a valuable collection of Anti-trust laws, domestic and foreign.

10 Great Atlantic & Pacific Tea Co. v. Cream of Wheat Co., 224 Fed. 566. See note containing matter pertaining to this decision, page 28, supra. II This right is referred to in connection with labor disputes,-Chapter XIV, pages 164-184, supra.

The following decisions recognize the inherent right of refusing business, but bear no relation to the facts herein: In re Grice, 79 Fed. Rep. 627; Greater New York, Etc., Co. v. Biograph Co., 203 Fed. Rep. 39; Adair v. United States, 208 U. S. 161; Standard Oil Co. v. U. S., 221 U. S. at p. 56.

by such methods as, in his own judgment, will be to the best advantage of the business, so long as he does not adopt methods prohibited by law or contrary to public policy. The court adopts the reasoning advanced by the Supreme Court of the State of Washington in a recent decision.12

"Price-Discrimination" Section Construed.-Section 2 of the Clayton Law forbids price discrimination, with the exception among others that persons are not prevented thereby "from selecting their own customers in bona fide transactions, and not in restraint of trade." It was this provision of the Clayton Law which came up for construction."

12a

Combinations by Patentees Subject to Anti-trust Laws.Authorities cited and before quoted show clearly that while a patentee may receive a grant of a limited exclusive enjoyment in return for the disclosure of his invention, he must conduct his business thereunder in conformity to law. Combinations of independent patents by their owners,—

"whereby as part of a plan to monopolize the commercial field, competition is eliminated, are within the Sherman Law, for the reason that the restraint of trade or monopoly arises from combination, and not from the exercise of rights granted by letters patent.”13

In consequence of this ruling, agreements between owners of distinct patents limiting and restraining the interstate trade of each, were declared void under the Sherman Anti-trust Act.

As has been mentioned already (page 191, supra), combinations by owners of patents may in effect result in an enlargement of patent-rights beyond anything contemplated by law, and thereby accomplish ends that would fail if attempted through the ordinary channel of a petition for original patent-rights. In brief, it may

12 Fisher Flour Mills Co. v. Swanson, 76 Wash. 649.

122 It may be contended, however, in opposition to this judicial construction and application of Section 2, that the Clayton Law, like the Sherman Law, is a criminal statute creating new conditions (page 149, supra) and that intent and motive are controlling factors in proceedings thereunder; also, that whereas common law rights of property may not be taken away, due process, i. e., the "rules of the road," may be changed, if public exigencies so require. (See pages 77-81, supra; also, generally, Addystone Case, 175 U. S. 211, affirming 85 Fed. 171, and Straus Case, 231 U. S. 222.)

13 Blount Mfg. Co. v. Yale & Towne, 166 Fed. 555, 562; Standard Sanitary Mfg. Co. v. U. S., 226 U. S. 20, 33 Sup. Ct. 9, 57 L. Ed. 107; affirming 191 Fed. 172.

be said that if the combining or restraining contract operates in direct restraint of interstate commerce the statutes are violated.

Right to Exclude is Distinct from Right to Sell.-There is a basic difference between these several rights. The "exclusive right to their respective writings and discoveries" which Congress, under Article 1, Section 8, of the Constitution, is empowered to secure to inventors "to promote the progress of science and the useful arts," if taken literally, means the power to exclude others from interfering with profitable exploitation thereof. Congress translated this power into a statutory grant of "the sole and exclusive right and liberty of making, using and vending to others." (See page 185, supra.)

Thoughtful consideration of the subject must make it apparent that the word "exclusive" contains the only right which the Constitution and the resultant statutes confer upon authors and inventors. The power to make, use and vend was theirs already, under the common law, and could not be taken away by any government authority, State or national, even under that most elastic function-the exercise of police powers.11

The ability to exclude others is the measure of the new power given them by the patent law, and is confined to and regulated by the provisions thereof, and as a portion of the grant thus circumstanced and limited the right to sell is subject to such requirements and terms as the legislating body has seen fit to provide. Hence it will be seen that the Anti-trust laws are applicable in the case of patented as of unpatented articles, and that the provisions intended to prevent or overcome restraints of interstate trade and monopolies are of universal application.

It follows that within the monopoly conferred by the patent law, the patentee is absolute dictator. He may refuse to utilize it at all, or he may reserve its use absolutely to himself, at his sole election. Even where he suppresses the device by refusing to employ it himself or to permit others to use it, he is but suppressing his own. "A suppression can endure but for the life of the patent, and the disclosure he has made will enable all to enjoy the fruit of his genius."15 But he cannot lawfully enter into a contract to suppress his discovery (p. 191, supra).

The inventor may make or use his discovery under his grant of monopoly; but if he sells his product, it passes into the general 14 Allen v. Riley, 203 U. S. 347.

15 Heaton-Peninsular, Etc., Co. v. Eureka Specialty Co., 77 Fed. 288, 25 C. C. A. 267, 35 L. R. A. 728; 47 U. S. App. 146, 160.

channels of trade and the ordinary rules and regulations common to commercial affairs apply.

Medical Compounds.-The rules generally applicable to articles protected by letters patent are in like force and effect as to proprietary medicines. The discussions of that subject are for the most part contained in cases which turned upon the right of the manufacturer to prevent cut-rate prices by fixing the charge which the retailer shall make to the consumer. It has uniformly been held in the leading decisions that such regulation of re-sales was in restraint of trade and therefore void.16

Secret Concoctions Not Favored.-In some instances the medical preparations are made by secret formulas and are outside of the protection of the patent laws. In these cases there is discernible a distinct tendency to restrict the proprietor to his common law rights.

"The owner of the trade secret gives nothing to the public, the value of his property being dependent upon its secrecy. Hence public policy, as expressed in statutes or decisions, favors the statutory and opposes the natural monopoly."

See also the "trinity of decisions" covering the subject of pricefixing contracts, mentioned at pages 192-3, supra.

Extent of Exclusive Rights Fixed.-It is fortunate that the nature and extent of the patentee's exclusive right to "make, use and vend," have been considered and fixed by the courts. The task of the Federal Trade Commission will be much lessened by rulings which mark out the extent to which that board can properly exercise its powers when seeking to prevent or restrain abuses which relate to patented articles in commerce.

3. COPYRIGHT LAWS AS CONSTRUED UNDER ANTITRUST STATUTES.

Source of Power.-As has been shown at a former place in this chapter (page 185, supra), the laws conferring exclusive rights upon authors and upon inventors result from the same constitutional grant of power.

Great Benefits Derived.-No other feature of our national life outside of agriculture and mining has proved so productive as the

16 Dr. Miles Medical Co. v. John D. Park & Sons Co., 220 U. S. 373, 31 Sup. Ct. 376, 55 L. Ed. 902; affirming 164 Fed. 803.

17 William J. Shroder, in 25 Harvard Law Review, p. 59, etc. (Nov.,