chines are therefore void. Indeed, the report of the Judiciary Committee of the House concerning the Clayton Act shows that its purpose is to reach [401] the 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 Shoe Machinery Co., the American Tobacco Co., and the General Film Co., the exclusive or “tying" contract made with local dealers becomes one of the greatest agences 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 ([Ď. 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. Ś. 603, 32 Sup. Ct. 589, 56 L. Ed. 911.) In the case of United States v. United Sho6 Machinery Co. ([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 Co. 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 Co. can not 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 Co., 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, ch. 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.*


The appellant seeks a reargument upon the question whether the Prague Amusement Co. did not infringe by not [402] complying

Affirmed by Supreme Court, see footnote next page.

with the condition as to royalty or rental imposed by the appellant on users of machines manufactured under its licenses.

[5, 6] The sale of the projecting machine carried with it, in the absence of any restriction, an implied license of use. (Mitchell v. Hawley, 16 Wall. 547, 21'L. Ed. 322.) The notice which was attached attempted to impose the condition that it should only be used with films containing the invention of a patent which had expired and upon other terms to be fixed by the Motion Picture Patents Co.” The condition as to use only with the specified films we have held illegal for the reasons given in our opinion heretofore rendered. The condition as to which a reargument is desired relating to a continuing royalty was not brought to the notice of the defendants and can not, therefore, be regarded as limiting the implied license which accompanied the sale of the machine. (Cortelyou v. Johnson, 207 U. S. 196, 28 Sup. Ct. 105, 52 L. Ed. 167; LovellMcConnell Manufacturing Co. v. Waite Auto Supply Co. (D. C.), 198 Fed. 133.) The clause" upon other terms to be fixed” in no way specified the nature of these terms and in particular in no way men. tioned a continuing royalty, or the amount thereof. There is no evidence, moreover, that any “ other terms ” were ever fixed or de. manded. We think such a vague condition insufficient to limit the implied right of user passing to the vendee of the machine, and consequently unenforceable.

[7] The appellant offered evidence at the trial, which was escluded, that the Prague Amusement Co. had knowledge of the terms upon which the Motion Picture Patents Co. was accustomed to grant permission to use a machine put out by its licensed manufacturers; but this evidence, had it been allowed, would not have obviated the difficulty with the form of the notice. If the terms that were cus tomary had been known, there was nothing in the notice or elsewhere to prevent the appellant from varying the royalty as to nature or amount. Such a condition is too indefinite for enforcement, though a notice of a precise amount to be paid might be perfectly good. The notice affixed to the machine was so broad as to allow the patentee to fix any terms he might choose and to be repugnant to all rights which the owner of the machine might have obtained by his purchase and implied license.

The motion for a reargument is denied.22

22 COMPILER'S NOTE. The decision was affirmed by the United States Supreme Court in Motion Plature Patents Co. v. Universal Film Mfg.

Co. et al (decided April 9, 1917, 243 U. S. 502), where that court's only reference to the Clayton Act was in the following language :

“We are confirmed in the conclusion which we are announcing by the fact that since the decision of Henry v. Dick Co. (224 U. S. 1), the Congress of the United States, the source of all rights under patents, as if in response to that decision, has enacted a lap making it unlawful for any person engaged in interstate commerce 'to lease or make a sale or contract for sale of goods,

machinery, supplies, or other commodities. whether patented or unpatented, for use, consumption, or resale

or fix a price charged therefor on the condition, agreement,

or understanding that the lessee or purchaser thereof shall not use

the goods,

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 for such condition, agreement er understanding may be to substantially lessen competition or tend to create a monopoly to any line of commerce.' (38 Stat. 730.)

* Our conclusion renders it unnecessary to make the application of this statute to the case at bar which the Circuit Court of Appeals made of it but it must be accepted by us as a most persuasive expression of the public [518] policy of our country with respect to the question before us.

" It is obvious that the conclusions arrived at in this opinion are such that the decision in Henry v. Dick Co. (224 U. S. 1), must be regarded as overruled."




(United States District Court, Southern District of New York.

June 24, 1916–234 Fed. 964.)


COMPILER'S NOTE.—This case arose on petition under the Sherman Antitrust Act by the United States for an injunction and dissolution of the Corn Products Refining Co. because of monopolization and restraint of interstate and foreign commerce, and because of a conspiracy to monopolize and restrain such commerce in the manufacture and sale of starch, glucose, grape sugar, and in the mixing of glucose with the refiners' sirup, molasses, or other sirups.

The court in a 53-page opinion (Judge Learned Hand) directed the dissolution of the defendant and referred to the Federal Trade Commission therein as follows:

The form of the decree as concerns dissolution will in general follow that in the case of United States v. International Harvester Co. except that the time within which to file a plan will be 120 days, instead of 90, and that the plan will be filed with the Federal Trade Commission as master in chancery, under section 7 of the Federal Trade Commission Act. That commission will in due course present a plan for dissolution, which will come on for confirmation to the District Court as the report of any master in chancery. (234 Fed. 964, 1018.)

On November 13, 1916, the District Court entered a decree against the defendants, section 6 of which reads as follows:

SIXTH. Within 120 days from the entry of this decree, or in case an appeal be taken therefrom to the Supreme Court of the United States and duly prosecuted, then within 120 days after the filing in this court of the mandate of the Supreme Court affirming the decree, a plan for carrying out such dissolution shall be filed by the defendants with the Federal Trade Commission as master in chancery under section 7 of the Federal Trade Commission Act, and the said commission shall thereupon hear all the parties and report to the court a plan which will effectually dissolve the combination and restore a condition in harmony with law. If the defendants shall fail to present such a plan within the time stated, this court will take such further steps by receivership or otherwise as may then seem necessary to dissolve the unlawful combination and create a new situation in harmony with law.

Thereupon the defendants took an appeal to the Supreme Court, during the pendency of which the above-mentioned decree was suspended. However, on March 31, 1919, the appeal was dismissed by the Supreme Court "on motion for appellants” (249 U. S. 621), and the same day the District Court entered a decree (a) reinstating its decree of November 13, 1916, excepting, among other parts, the above-quoted section Sixth referring to the Federal Trade Commission; and (b) accepting a plan of dissolution agreed upon by the parties, and in accordance therewith directing the dissolution of the unlawful combination. Under the circumstances the Federal Trade Commission was not required to act as master in chancery.

FREY & SON, INC., v. WELCH GRAPE JUICE CO." (United States Circuit Court of Appeals, Fourth Circuit. February

26, 1917.)

No. 1483.


In an action by a wholesaler against a manufacturer, who had refused to sell his product to plaintiff at less than the price charged retailers, because plaintiff had been selling the product at less than the price fixed by the manufacturer, where the declaration contained two counts, one for unlawful combination to control the price of the product, and the (115) other for unlawful discrimination against plaintiff, it was error to admit evidence offered by defendant that the profit to dealers on the product at the list price was the average profit on other groceries, that defendant was not in any combination with manufacturers of other brands of the product to control the price, and that by the custom of the trade the price at which the jobber was expected to sell was fixed by the manufacturer, all of which was irrelevant and incompetent



In view of the novelty and difficulty of questions presented in an action for unlawful combination and discrimination, the admission of such evidence, in connection with remarks by the trial judge as to the importance of the issues involved, was prejudicial to plaintiff, as obscuring the real issues in the case, though the court correctly charged the jury as to the issues, and told them to disregard the economic questions made by the on jectionable testimony; the rule that such a charge will make the error harmless being subject to exception, where the testimony has made such a strong impression on the jury that its withdrawal will not remove the

effect caused by its admission. 3. MONOPOLIES, KEY No. 28—DAMAGES-MEASURE-LOSS OF PROFITS.

The measure of a jobber's damages for unlawful discrimination against him by a manufacturer whose product the jobber had been selling for several years, the sales increasing each year, is not limited to profits lost on sales which he proved he could have made; but the jury could bare inferred, from the average increase of sales, the probable increase during the time of the discrimination, and could allow for the loss of profits on

such sales. 4. MONOPOLIES, KEY No. 28-DAMAGES—Loss or OTHER SALES.

A jobber to whom a manufacturer of a well-known product refused to sell his product at less than the regular price charged to retailers can not recover as damages the loss of profits on sales of other articles to customers desiring that product, who dealt with competing jobbers in order to get all their goods at the same place, since such damages are too re mote and uncertain, and could have been prevented by the jobber buying the product at the retailers' price and reselling it without profit

* This case is reported in 240 Fed. 114. For another decision in the same case see

p. 875.

In error to the District Court of the United States for the District of Maryland, at Baltimore; John C. Rose, judge.

Action by Frey & Son (Inc.), against the Welch Grape Juice Co. Judgment for defendant, and plaintiff brings error. Reversed.

Horace T. Smith, of Baltimore, Md., and Daniel W. Baker, of Washington, D. C., for plaintiff in error.

Charles P. Spooner, of New York City (John Hinkley and Thomas Foley Hisky, both of Baltimore, Md., on the brief), for defendant in


Before PRTICHARD, KNAPP, and Woods, Circuit Judges.

Woods, Circuit Judge:

This action is for damages under the Federal statutes forbidding combinations and discriminations in restraint [116] of trade. The verdict was for the defendant, and the plaintiff asks a new trial for errors assigned in the admission of testimony and in the charge on the subject of damages.

There was evidence tending to support these allegations of the declaration: The defendant, a manufacturer and seller in Baltimore of an established article of commerce known as “ Welch's Grape Juice,” had an understanding or agreement with the jobbers to whom it sold that they should sell at not less than a fixed price to retailers. The plaintiff

, a wholesale grocer in Baltimore, with a considerable trade in defendant's goods, being contented to take a smaller profit than others, began to sell at a lower price than that the defendant required its customers to charge. For this violation of its requirements the defendant refused to sell to the plaintiff, except at the list price which it required jobbers to charge retailers. This discrimination resulted in the entire loss of the profits which the plaintiff would have made in the regular course of its sales of Welch's grape juice and loss of trade in other commodities, since customers who desired Welch's grape juice and could not purchase it from the plaintiff transferred their general accounts to other jobbers, who could supply the grape juice.

The declaration was divided into two counts--the damages declared in the first count being for the alleged unlawful combination to control the price; and in the other for the alleged unlawful discrimination in price against the plaintiff. The defendant denied both the unlawful combination and the unlawful discrimination.

In the effort to avoid any appearance of an expression of an opinion on the merits, we have made only such statement of the case as seems necessary to an understanding of the point here involved. The law applicable to the issues of violation of the Federal statutes was not in serious dispute.

Evidence was admitted over the objection of the plaintiff: (1) That the profit to dealers on Welch's grape Juice at the listed price prescribed by the defendant was the average profit on other groceries; (2) that the defendant was not in any combination with manufacturers of other kinds of grape juice to control the price; (3) that by the custom of trade the price at which the jobber is expected to sell is fixed by the manufacturer.

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