the presumption is, not that Congress intended that the construction of the Sherman Act should control, but on the contrary, that it should not control. Had Congress intended that the construction placed upon the Sherman Antitrust Act in those cases should apply to the Clayton Act, it would have used the same or like generic words, instead of defining what acts shall be unlawful, if the natural result of such acts tends to substantially lessen competition or create a monopoly in any line of commerce.

It will be noticed that in this act there is nothing said of combinations or conspiracies, nor that the parties complained of are monopolizing or attempting to monopolize any part of the commerce among the several States, as was required in the Sherman Act. This applies to the many cases cited by counsel for defendants on this point, all of which arose under the Sherman Act. Evidently Congress was not satisfied to only prohibit actual lessening of competition, or monopolizing, but to make it unlawful for any person to do those acts, which may put it in his power to do so.

For these reasons, in the opinion of the court, all that is necessary to state a cause of action under the Clayton Act is to charge that the defendants committed the acts prohibited by the statute and that they tend to substantially lessen competition or create a monopoly in inter

state commerce.

So far as the wisdom of the act is concerned the courts can not question it. Congress alone can determine that. (Veazie Bank v. Fenno, 75 U. S. (8 Wall.) 533, 19 L. Ed. 482; United States v. Union Pacific R. Co., 91 U. S. 72, 23 L. Ed. 224; Angle v. Chicago, etc., R. R. Co., 151 U. S. 1, 14 Sup. Ct. 240, 38 L. Ed. 55; Hunter v. Pittsburgh, 207 U. S. 161, 28 Sup. Ct. 40, 52 L. Ed. 151.) As stated in the Employers' Liability cases (207 Ú. S. 463, 492 [28 Sup. Ct. 141, 143, 52 L. Ed. 297]):

In testing constitutionality of an act of Congress this court confines itself to the power of Congress to pass the act, and may not consider any real or imaginary evils arising from its execution.

In Standard Sanitary Mfg. Co. v. United States (226 U. S. 20, 49, 33 Sup. Ct. 9, 15 [57 L. Ed. 107]), Mr. Justice McKenna, speaking for the court said:

[151] The law is its own measure of right and wrong, of what it permits, or forbids, and the judgment of the courts can not be set up against it in a supposed accommodation of its policy with the good intentions of parties, and it may be, of some good results.

Or as has been so tersely expressed by Judge Dyer, when this case was before him ([D. C.] 227 Fed. 507, 511):

If the course adopted by the defendants has the effect to stifle competition and create a monopoly within the law, then the law should be enforced, even if it resulted in going back to the awl and wooden peg.

Are the provisions in the leases requiring lessees to use lasting machinery to its full capacity, and in case the lessee shall have more machines adapted for doing the same work than is necessary, for a period of 12 consecutive months, the lessor can remove the machines not necessary, unreasonable?

These provisions are found in Exhibits 2 and 7. The court is unable to see anything unreasonable in these provisions. The only compensation for the use of the machines provided in the leases is

the royalty upon the shoes manufactured on them. To permit the lessees to retain more machines than are necessary for the manufacture of his product would result in the lessors receiving no compensation therefor, consequently no return on the investment. As these provisions are only to be enforced, if the machines are not used to their capacity for the period of 12 consecutive months, the court is unable to say that they are in violation of any provisions of the Clayton Act, or can in any way tend to substantially lessen competition or create a monopoly.

Is the act retroactive or retrospective, so as to apply as to leases entered into before the enactment of the act?

That question was fully discussed by counsel, but in the opinion of the court it is unnecessary to determine it on this motion, as on the final hearing there may be no such leases in force. If there should be, it will be time enough to determine that question then. Is the act unconstitutional in attempting to apply it to patents previously granted?

Neither in the oral argument, nor in the elaborate briefs filed by counsel, was this ground of the motion urged. It may therefore be assumed that it has been abandoned by the defendants. But in any event the court can conceive of no reason why Congress can not restrict the rights of patentees, if in its opinion they are used in a manner resulting in oppressing the public. A patent is merely a privilege granted to inventors by Congress, and whenever that privilege is abused or is found to be exercised in a manner contrary to the public policy of the government, Congress certainly has the power to enact laws which will prevent such an abuse. Whether it can deprive a patentee of all the privileges granted by the patent before its expiration is a question which can not arise under this act.

[14] Something was said in the oral argument about an impairment of contracts, but there is nothing in the Constitution of the United States which prohibits Congress from enacting legislation impairing the obligations of contracts. Article 1, section 10, applies to the States only, [152] and is not a limitation of the powers of Congress. (Legal Tender Cases, 79 U. S. (12 Wall.) 457, 547, 20 L. Ed. 287, et seq.; Mitchell v. Clark, 110 U. S. 633, 643, 4 Sup. Ct. 170, 312, 28 L. Ed. 279; Evans-Snider-Buel Co. v. McFadden, 105 Fed. 293, 44 C. C. A. 494, 58 L. R. A. 900, affirmed McFaddin v. Evans-Snider-Buel Co., 185 U. S. 505, 22 Sup. Ct. 758, 46 L. Ed.

1012.)

This disposes of all the issues raised by the motion to dismiss, which is overruled.

110600-30-50

MOTION PICTURE PATENTS CO. v. UNIVERSAL FILM MANUFACTURING CO. ET AL.21

(United States Circuit Court of Appeals, Second Circuit. June 15, 1916. On petition for rehearing, August 4, 1916.)

No. 248.

1. MONOPOLIES, KEY No. 17(2)—PATENTS-RESTRICTIVE LICENSES.

Under the Clayton bill (act October 15, 1914, ch. 323, sec. 3, 38 Stat. 731), making it unlawful to lease, or sell goods, machinery, or supplies, on a condition that the lessee or purchaser shall not use or deal in the goods, machinery, or supplies of a competitor of the lessor or seller, where such condition may substantially lessen competition and create a monopoly, complainant, who by virtue of patents had a monopoly for the manufacture of motion-picture projecting machines, can not, in selling or leasing such machines, require the purchaser to use films manufactured by it, its letters patent for films having expired, and such a contract is invalid, as tending to create a monopoly. 2 MONOPOLIES, KEY No. 10-STATUTES-APPLICABILITY.

The Clayton bill, leveled at monopolies, applies to contracts entered into before its enactment.

3. MONOPOLIES KEY NO. 10-POWER OF STATE-MONOPOLIES-CLAYTON BILLAPPLICABILITY.

Where a contract involved and restrained interstate commerce, the Clayton bill is applicable, though the particular acts of restraint and infringement occurred in the State of New York, where the contract was made.

4. MONOPOLIES, KEY NO. 23-RIGHTS UNDER CONTRACTS-USE OF PATENTED ABTICLES-RESTRICTION.

Where the holder of a patent for motion-picture projecting machines re quired one licensed to manufacture to impose conditions as to the use of films in the machines, in violation of the Clayton bill, one who leased a machine sold by the manufacturer to a third person is not bound to observe such condltions on the theory that a patent license can not be relied on and its terms repudiated.

ON PETITION FOR REHEARING

5. PATENTS, KEY No. 210-SALE OF PATENTED ARTICLE-USE

The sale of a patented motion-picture projecting machine carries with it. in the absence of restriction, an implied license of use.

6. PATENTS, KEY No. 216-CONSTRUCTION-RESTRICTION.

The fact that there was attached to a patented motion-picture projecting machine a plate reciting that the sale and purchase of the machine gave only the right to use it upon other terms to be fixed does not, where it did not appear that the terms relating to royalty were ever fixed or brought to the notice of a purchaser from a licensee to manufacture, entitle the holder of the patent rights to royalties.

[399] 7. PATENTS, KEY NO. 216-CONSTRUCTION-RESTRICTION.

In such case, evidence that the purchaser had knowledge of the terms upon which the holder of the patent rights was accustomed to grant permisThis case is reported in 235 Fed. 398. Affirmed in 243 U. S. 502, see footnote p. 790.

sion to use a machine manufactured by its licensees will not establish the purchaser's liability for royalties; there being nothing in the notice to prevent the holder of the patent rights from varying the royalties.

Appeal from the District Court of the United States for the Southern District of New York.

Bill by the Motion Picture Patents Co. against the Universal Film Manufacturing Co., the Universal Film Exchange of New York, and the Prague Amusement Co. From a decree dismissing the bill, complainant appeals. Affirmed.

This cause comes here on an appeal from a decree dismissing the complainant's bill. The complainant is the owner of the patent in suit (No. 707934) for motion-picture projecting machines, and on June 12, 1912, granted to the Precision Machine Co. a license to manufacture and sell these machines for not less than $150 per machine, and at a royalty of $5 to the licensor each, with the further restriction that each machine put out by the licensee shall be used (1) solely for exhibiting or projecting motion pictures containing the invention of reissued Letters Patent No. 12192, leased by a licensee of the licensor while it owns said patent; and (2) upon other terms to be fixed by the licensor and complied with by the user while the said machine is in use and while the licensor owns said patents (which said other terms shall only be the payment of a royalty or rental to the licensor while in use). The license also provided that a plate should be attached to each machine and such plate was attached in the following form:

The sale and purchase of this machine gives only the right to use it solely with moving pictures containing the invention of Reissued Patent No. 12,192, leased by a licensee of the Motion Picture Patents Co., the owner of the above patents and reissued patent, while it owns said patents, and upon other terms to be fixed by the Motion Picture Patents Co. and complied with by the user while it is in use and while the Motion Picture Patents Co. owns said patents. The removal or defacement of this plate terminates the right to use this machine.

Motion Picture Patents Co.,
New York, N. Y., U. S. A.

Reissued Letters Patent No. 12192 expired subsequent to the execution of the license by the complainant to the Precision Machine Co. Thereupon the Universal Film Manufacturing Co. made a film embodying that invention, and sold it to the Universal Film Exchange, who furnished it for use to the Prague Amusement Co. The SeventySecond Street Amusement Co. became the lawful possessor of a moving-picture machine made by the Precision Machine Co. The defendant Prague Amusement Co. leased the machine from the Seventy-Second Street Amusement Co. and used the film furnished

to it by the Universal Film Exchange upon the machine in question. The use of the film upon the machine is the act of infringement alleged. The defendants set up three defenses: (1) That the restric tions in the contract of license to the Prague Amusement Co. are contrary to public policy, illegal and void, and the machine therefore is free from the bur[400]den of them. (2) That there is no proof of joint infringement as alleged. (3) That the patent is invalid.

Melville Church, of Washington, D. C., and George F. Scull, of New York City, for appellant.

Edmund Wetmore, John B. Stanchfield, and Oscar W. Jeffery, all of New York City, for appellees.

Before CoXE and ROGERS, Circuit Judges, and AUGUSTUS N. HAND, District Judge.

AUGUSTUS N. HAND, district judge, (after stating the facts as above):

[1] It was held by this court in the case of Victor Talking Machine Co. 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 the machine at once passed by the sale of the projecting machine to the SeventySecond Street Amusement Co. 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, ch. 823, sec. 8, 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 ma