or on terms more favorable to the buyers. The manufacturer, by reason of having taken care of the advertising, standardizing, and packing of the goods, and requiring of the retailer only the function of distributing and receiving payment, is in substance a partner with the retailer in selling, and has a legitimate interest in controlling the price to prevent the disorganization of his distributing system. This does not eliminate any competition between the manufacturer and other manufacturers who are doing the same sort of business. There is no exclusion of others from the manufacturing business, or from the business of retailing. It is the free competition among the manufacturers which determines the price to the public. The contract to keep up the price on resale is thus reduced to a device to preserve the most effective distributing organization for the manufacturer, who is also in part, at least, the actual seller as well.

§ 40. In Bobbs-Merrill Co. v. Straus, the supreme court held that the holder of a copyright on a book who had sold it with a restriction that it was not to be resold for less than $1.00 could not have an injunction against the violation of the restriction by a third party who had notice of it. This ruling seems to have proceeded solely upon a construction of the copyright act; for the jurisdiction of the court was founded, not on diverse citizenship and the specific performance of a restrictive agreement, but upon the protection afforded by the federal statutes against infringement of copyrights. The copyright act gave the holder of the copyright the "sole right of vending the same." This was construed to include no right whatever to fix the price at which the copyrighted article might subsequently be sold. In Bauer v. O'Donnell 10 the same ruling was made where a patented article was involved. This also proceeded upon the construction of the patent act, which gave the patentee the "exclusive right to make, use and vend the invention or discovery. In Straus v. Victor Talking Machine Co.11 an attempt to retain title to the patented article in the manufacturer who merely licensed the use subject to a condition and covenant that the article should not be resold for less than a certain price was equally ineffective and unenforcible. Again an injunction against 11—243 U. S. 490 (1917).

9-210 U. S. 339 (1908). 10-229 U. S. 1 (1913).

a third party who had no contract relations with the plaintiff, but who had notice of the restriction, was denied.

Suppose in these cases the complainant had abandoned all reliance upon the copyright or patent act; and had treated the articles sold as the "specialty" product of his manufacture, which he desired to market by securing a covenant requiring the price to be kept up on resale. Suppose the United States court secured jurisdiction on the basis of diverse citizenship; or suppose the suit were in a state court and the covenants were of the sort of which equity gave specific performance by injunction even against third parties with notice. Would the result have been the same? Clearly it would if the Dr. Miles Medical case were followed.12 But suppose the result in that case had been to enforce the restriction by injunction; would the same result have been reached in a case where a patented or copyrighted article was being marketed? Perhaps so and perhaps not. If the patent were a fundamental one which controlled an entire industry, like the original Bell Telephone patent, a court of equity might say: "You have a monopoly by the patent or copyright act, but we shall not aid that monopoly by giving you anything beyond what you are entitled to by the terms of the statute." On the other hand, if the patent or copyright gave no monopoly in the given business-if the patented or copyrighted article was in competition with other articles of the same sort-the patented or copyrighted article should not be any worse off for that reason. The same relief, therefore, might be given as in the case of "specialty" or "branded" goods which are in competition with others of the same sort.

SECTION 2

CONTRACTS TO BUY OR USE OTHER ARTICLES IN CONNECTION WITH THOSE SOLD

§ 41. The Supreme Court of the United States first held, in Henry v. A. B. Dick Co.,13 that where the holder of a patented

V.

13-224 U. S. 1 (1912).

12-Dr. Miles Medical Co. Park & Sons Co., 220 U. S. 373

(1911) [838].

Kales Sum. R. of T.-3

33

article licensed its use, the license may be made subject to the condition or stipulation that the licensee would use with the patented article only unpatented accessories, manufactured and sold by the licensor, and that upon the violation of this stipulation there would be an infringement by the user of the patented article. In the recent case of Motion Picture Patents Co. v. Universal Film Manufacturing Co.14 the decision in the Dick case was overruled; and it was held that the violation of the condition or stipulation does not make the use of the patented article an infringement. In both cases alike the court appears to have been obliged to deal with a controversy between the parties as if it involved the infringement of a patent; for only on that ground did the United States court obtain jurisdiction. The Dick case proceeded upon the theory that the act relating to patents permitted the holder of the patent to license the use of the patented article upon such terms as he saw fit; and if the conditions and stipulations which he imposed were not lived up to, then the license failed and there was a user without licensethat is to say, an infringement. This line of reasoning the Motion Picture Patents case denies. It declares that the holder of the patent may license the use of the article or not, as he pleases; but that the act gives him no authority to license subject to the condition or stipulations in question, which, if not adhered to, will cause the user to be an infringement.

§ 42. The Dick case and the Motion Picture case have to do only with a construction of the patent act; but behind the decision in the Motion Picture case is the intimation that the arrangement there attempted is so far contrary to the public interest that the patent act should not be construed to permit it. Suppose, then, that instead of seeking relief for an infringement, the complainants in the Dick case and the Motion Picture case sought damages for the breach of a contract on the part of the licensee to use only such accessories with the patented article as were furnished by the licensors. Is it a defense to such suit that the contract is illegal?

§ 43. The reasoning of the court in the Dr. Miles case has nothing to do with this problem. The result of the Dr. Miles

14-243 U. 8. 502 (1917).

case went upon the illegality of a restraint or forfeiture on alienation which was attempted to be imposed, and the fact that there was in effect a combination of retailers under contract with each other to fix the price of a commodity. Neither line of reasoning touches the contract by a purchaser to use only certain accessories with the article purchased. If such contracts are illegal between the parties, it must be on some ground not articulated or applied in the Dr. Miles case. What can it be?

§ 44. Suppose A has a mule; can he sell him to B subject to the covenant by B to curry him only with such combs as are furnished by A? Why not? A does not have to sell. Can he not, as one of the terms of the selling, require the purchaser to buy something else? What is the objection to limiting what B must also buy to an article used in connection with the chattel sold? The courts have not been troubled with such a case because trading in mules is carried on in such a way as to make stipulations of the sort suggested impracticable. Such conditions and stipulations can only be exacted where the article sold is of special and peculiar value-as is more frequently the case with patented articles. Suppose, then, that A had a valuable collection of paintings: could he sell each article with the stipulation that the purchaser should use only such cleaning and preserving preparations for the picture as were sold by A? Why not? The only difference in the cases is that now A is in a strong enough position in the market to exact the stipulation.

§ 45. Where A has a patented article the situation is precisely the same. The patent laws, by giving him the right to prevent anyone else from making the patented article, place A in the unique position of being able to control absolutely the sale of an article of special and peculiar value. He can sell it or not as he pleases. He can prevent anyone else from selling it. Having such an article, A bargains for the sale or license of it as he would any other piece of personal property. Is he, then, debarred from selling it on the best terms possible? Is he barred from saying, "I will not sell unless the purchaser buys something else with it which is not patented"? Is he forbidden to make a bargain that unpatented accessories which are used in connection with the patented article shall be only those made and sold by the licensor or holder of the patent? How can there

be any other answers to these questions than an emphatic negative? When A has goods to sell, is it not in the public interest that he should get as much for them as possible? Is he not free to make the best terms possible? If he can require the purchaser to buy other goods, and thus secure a market for the sale of such other goods, in competition with other parties, is not that his privilege? Since when has it been true that this timehonored method of trading has become illegal? If such terms are legal, is it not equally legal for the purchaser to require that unpatented accessories used with a patented article sold shall be purchased from the seller? Are the rights of a patentee in this respect less than the rights of the owner of a mule or a picture?

§ 46. If the stipulation in question makes a legal and enforceable contract at law, then the question arises whether equity will give specific performance of it as between the original parties and as against third parties who take the patented article with notice. This depends upon whether the remedy at law is inadequate. Suppose it is. Suppose, also, the fact that the restrictive covenant is connected with the sale or license of a chattel is no objection to the specific enforcement of the covenant against third parties taking the chattel with notice.15 Is there any defense to an action of specific performance that the contract, while not illegal in law, is so far unfair, unconscionable, or contrary to the interests of the public that equity should not give specific performance? Such a defense might exist, especially where the contract was supplementary to a combination occupying a preponderant position in the business and part of a system of contracts used for the purpose of compelling others to come into the combination or be excluded entirely from the business. It is submitted, however, that no such defense to specific performance existed in the Dick case or the Motion Picture case.

15-John Brothers Abergarw Brewing Co. v. Holmes, L. R. [1900] 1 Ch. 188; Francisco v. Smith, 143 N. Y. 488 (1894); Standard Co. v. Methodist Co., 33 N. Y. App. Div. 409 (1898); Mur

phy v. Christian Press Assn., 38 N. Y. App. Div. 426 (1899); New York Co. v. Hamilton Co. 83 Hun 593 (1895), 28 N. Y. App. Div. 411 (1898).