the goods of a competitor of the seller

sale, or contract, or such condition, agreement, or understanding, may be substantially to lessen competition or tend to create a monopoly.

[For other cases, see Patents, III. a; Constitutional Law, IV. b, 7, b, in Digest Sup. Ct. 1908.]

the United States for the Eastern District of Missouri to review a decree enjoining the use of certain clauses in leases of patented shoe machinery, as contravening the Clayton Act of October 15, 1914. Affirmed.

See same case below, 264 Fed. 138.
The facts are stated in the opinion.

Messrs. Charles F. Choate, Jr., Cordenio A. Severance, and Frederick P. Fish argued the cause, and, with Messrs. Malcom Donald, Frank W. Knowlton, Henry W. Dunn, and James Garfield, filed a brief for appellants on original

Injunction

against monopoly

"tying" leases -new form of lease. 13. Injunctive relief against the making of leases of patented shoe machinery, which contain restrictive "tying" clauses forbidden by the Clayton Act of October 15, 1914, § 3, should not be denied merely because the form of lease that the lessor has adopted since that act became effective is free from the objectionable clauses, where these leases are terminable upon thirty days' notice, and are denominated temporary loan agreements, and are evidently framed in view of the Clayton Act and the litigation likely to arise over the former leases, in view of that enactment, and their fate evidently depends upon the outcome of the present suit. [For other cases, see Injunction, I. d, in Digest Sup. Ct. 1908.]

Commerce

leases.

14. While the mere making of leases of patented shoe machinery is not interstate commerce, yet, when, connected with the making of such a lease, a movement of goods in interstate commerce is required, there can be no doubt of the authority and intent of Congress, expressed in the Clay;

ton Act of October 15, 1914, § 3, to control

the making of such leases by the provision of that section making it unlawful for persons engaged in interstate commerce, in the course of such commerce, to lease machinery, supplies, or other commodities, whether patented or unpatented, upon the condition, agreement, or understanding that the lessee shall not deal in or use the goods of a competitor of the lessor, where the effect of such lease or such condition, agreement, or understanding may be substantially to lessen competition, or tend to create a monopoly.

[For other cases, see Commerce, I. b; Monopoly, II. b, in Digest Sup. Ct. 1908.]

[No. 119.]

Argued March 7, 8, and 9, 1921. Restored to docket for reargument June 6, 1921. Reargued January 17 and 18, 1922. Decided April 17, 1922.

Size alone, or extensive combination, or the enjoyment of a large percentage of the total business, may not result in monopoly in the legal sense, in control of prices or production, in the creation of noncompetitive conditions.

United States v. United States Steel Corp. 251 U. S. 417, 64 L. ed. 343, 10 A.L.R. 1121, 40 Sup. Ct. Rep. 293.

The obvious purpose of the final clause of the Clayton Act is to distinguish between conduct which is merely a legitimate exercise of the right to compete, and conduct which goes beyond those limits in order to exclude others from the enjoyment of the same right.

United States v. Union P. R. Co. 226 U. S. 61, 87, 57 L. ed. 124, 133, 33 Sup. Ct. Rep. 53; United States v. Reading Co. 226 U. S. 324, 369, 57 L. ed. 243, 258, 33 Sup. Ct. Rep. 90.

The words "lessen competition" and "create a monopoly" have the same meaning as the words "restraint of trade" and "monopoly" in the Sherman Act; and the substantial lessening of competition, referred to in the Clayton Act, must be undue or unreasonable, and not the effect of legitimate business contracts and methods.

Great Atlantic & Pacific Tea Co. v. Cream of Wheat Co. 224 Fed. 573; Standard Fashion Co. v. Magrane Houston Co. 170 C. C. A. 593, 259 Fed. 793; Board of Trade v. United States, 246 U. S. 231, 238, 62 L. ed. 683, 687, 38 Sup. Ct. Rep. 242, Ann. Cas. 1918D, 1207.

The application of § 3 is intended to be limited to classes of transactions falling exactly within its description.

Federal Trade Commission v. Gratz, 253 U. S. 421, 427, 64 L. ed. 993, 995, 40 Sup. Ct. Rep. 572.

In order to be within § 3, the transaction must involve a condition, agreement, or understanding that the vendee or lessee shall not use or deal in the goods of a

competitor of the vendor or lessor. This imports an enforceable obligation.

Phoenix Iron & Steel Co. v. Wilkoff Co. 253 Fed. 165; Franklin v. Browning, 54 C. C. A. 258, 117 Fed. 226; Garrett v. Western U. Teleg. Co. 92 Iowa, 449, 58 N. W. 1064, 60 N. W. 644; House v. Howell, 3 Silv. Sup. Ct. 455, 6 N. Y. Supp. 799; Mitchell v. National R. Bldg. & L. Asso. Tex. Civ. App. -, 49 S. W. 624; Barkow v. Sanger, 47 Wis. 500, 3 N. W. 16; Barkhausen v. Chicago, M. & St. P. R. Co. 142 Wis. 292, 124 N. W. 649, 125 N. W. 680; Saltmarsh v. Bower, 34 Ala. 613; Higginson v. Weld, 14 Gray, 165; Holman v. Clark, 148 Ala. 286, 41 So. 765; Mount v. Montgomery County, 168 Ind. 661, 14 L.R.A. (N.S.) 483, 80 N. E. 629; Griffin v. Isbell, 17 Ala. 184; Winslow v. Dakota Lumber Co. 32 Minn. 237, 20 N. W. 145; 30 Cyc. 672, notes 89, 90; Primrose v. Western U. Teleg. Co. 154 U. S. 1, 38 L. ed. 883, 14 Sup. Ct. Rep. 1098; Tichenor v. Bruckheimer, 40 Misc. 194, 81 N. Y. Supp. 653; Detroit v. Detroit United R. Co. 173 Mich. 314, 139 N. W. 56; Acme Lumber Co. v. Wessling, 19 Cal. App. 406, 126 Pac. 167; Milwaukee Land Co. v. Ruesink, 50 Mont. 489, 148 Pac. 397; Victoria Hospital Asso. v. All Persons, 169 Cal. 455, 147 Pac. 124; Nowak v. Dombrowski, 267 Ill. 103, 107 N. E. 807; Koch v. Streuter, 232 Ill. 599, 83 N. E. 1072; Self v. Billings, 139 Ga. 400, 77 S. E. 562; Voinche v. Marksville, 124 La. 712, 50 So. 662; Banks v. Eastern R. & Lumber Co. 46 Wash. 610, 11 L.R.A.(N.S.) 485, 90 Pac. 1048; Perkins v. Kirby, 35 R. I. 84, 85 Atl. 648; Barr v. Weld, 24 Pa. 84; Gegiow v. Uhl, 239 U. S. 3, 60 L. ed. 114, 36 Sup. Ct. Rep. 2; United States v. Louisville & N. R. Co. 236 U. S. 318, 59 L. ed. 598, P.U.R.1915B, 247, 35 Sup. Ct. Rep. 363; First Nat. Bank v. United States, 46 L.R.A. (N.S.) 1139, 124 C. C. A. 256, 206 Fed. 374; Newport News & M. Valley Co. v. United States, 9 C. C. A. 579, 22 U. S. App. 145, 61 Fed. 488; United States v. 1,150 Pounds of Celluloid, 27 C. C. A. 231, 54 U. S. App. 273, 82 Fed. 627; Carson & Co. v. Shelton, 128 Ky. 248, 15 L.R.A. (N.S.) 509, 107 S. W. 793; Israel v. New Orleans, 130 La. 980, 58 So. 850; German Corp. v. Negaunee German Aid Soc. 172 Mich. 650, 138 N. W. 343; Pardy v. Boomhower Grocery Co. 178 App. Div. 347, 164 N. Y. Supp. 775; State v. Liffring, 61 Ohio St. 39, 46 L.R.A. 334, 76 Am. St. Rep. 358, 55 N. E. 168, 15 Am. Crim. Rep. 516; Gates & Son Co. v. Richmond, 103 Va. 702, 49 S. E. 965; Morse v. Buffalo F. & M. Ins. Co. 30 Wis. 534, 11 Am. Rep. 587; Biggs

v. Mitchell, 2 Best & S. 523, 121 Eng. Reprint, 1167, 31 L. J. Mag. Cas. N. S. 163, 8 Jur. N. S. 817, 6 L. T. N. S. 242, 10 Week. Rep. 559; Bridger v. Richarson, 2 Maule & S. 568, 105 Eng. Reprint, 493.

Section 3 is not violated by a business policy of furnishing only a full equipment, and refusing contracts for separate items.

Federal Trade Commission v. Gratz, 253 U. S. 428, 438, 64 L. ed. 996, 1000, 40 Sup. Ct. Rep. 572; Great Atlantic & Pacific Tea Co. v. Cream of Wheat Co. 141 C. C. A. 594, 227 Fed. 47.

The fundamental right of any trader or manufacturer engaged in private business, where no question of monopoly in the Sherman Act sense is involved, to deal as he will with his own property, conduct his business in his own way, select his own customers, and decide for himself how long he will continue to deal with them, has been repeatedly asserted and recognized by this court.

United States v. Trans-Missouri Freight Asso. 166 U. S. 290, 320, 321, 41 L. ed. 1007, 1020, 1021, 17 Sup. Ct. Rep. 540; Grenada Lumber Co. v. Mississippi, 217 U. S. 433, 440, 54 L. ed. 826, 830, 30 Sup. Ct. Rep. 535; United States v. United Shoe Machinery Co. 247 U. S. 32, 66, 62 L. ed. 968, 989, 38 Sup. Ct. Rep. 473; Eastern States Retail Lumber Dealers' Asso. v. United States, 234 U. S. 600, 614, 58 L. ed. 1490, 1500, L.R.A.1915A, 788, 34 Sup. Ct. Rep. 951; United States v. Colgate & Co. 250 U. S. 300, 307, 63 L. ed. 992, 996, 7 A.L.R. 443, 39 Sup. Ct. Rep. 465; Federal Trade Commission v. Gratz, 253 U. S. 421, 428, 64 L. ed. 993, 996, 40 Sup. Ct. Rep. 572; Great Atlantic & Pacific Tea Co. v. Cream of Wheat Co. 141 C. C. A. 594, 227 Fed. 46; Adair v. United States, 208 U. S. 161, 52 L. ed. 436, 28 Sup. Ct. Rep. 277, 13 Ann. Cas. 764.

The restricted-use clause is a mere exercise of a patent right, and, as such, is not forbidden by the Clayton Act.

Bloomer v. McQuewan, 14 How. 539, 549, 14 L. ed. 532, 537; Virtue v. Creamery Package Mfg. Co. 227 U. S. 8, 32, 57 L. ed. 393, 404, 33 Sup. Ct. Rep. 202; Henry v. A. B. Dick Co. 224 U. S. 1, 49, 56 L. ed. 645, 663, 32 Sup. Ct. Rep. 364, Ann. Cas. 1913D, 880; Bauer v. O'Donnell, 229 U. S. 1, 57 L. ed. 1041, 50 L.R.A. (N.S.) 1185, 33 Sup. Ct. Rep. 616, Ann. Cas. 1915A, 150; Motion Picture Patents Co. v. Universal Film Mfg. Co. 243 U. S. 502, 61 L. ed. 871, L.R.A.1917E, 1187, 37 Sup. Ct. Rep. 416, Ann. Cas. 1918A, 959; Boston Store v. American Graphophone

1

Defendants' leases are not made in the course of interstate commerce.

commerce

If the subject-matter has come to rest within a state, then transportation has ceased, and interstate has ceased. Bacon v. Illinois, 227 U. S. 504, 57 L. ed. 615, 33 Sup. Ct. Rep. 299; Susquehanna Coal Co. v. South Amboy, 228 U. S. 665, 57 L. ed. 1015, 33 Sup. Ct. Rep. 712; General Oil Co. v. Crain, 209 U. S. 211, 52 L. ed. 754, 28 Sup. Ct. Rep. 475; Gulf, C. & S. F. R. Co. v. Texas, 204 U. S. 403, 51 L. ed. 540, 27 Sup. Ct. Rep. 360; Settle v. Baltimore & O. S. W. R. Co. A.L.R., 162 C. C. A. 111, 249 Fed. 913.

The fact that goods are intended for interstate shipment does not subject them to the control of Congress until interstate transportation has begun, or the goods have been turned over to a carrier for shipment to another state.

Coe v. Errol, 116 U. S. 517, 29 L. ed. 715, 6 Sup. Ct. Rep. 475; Arkadelphia Mill Co. v. St. Louis S. W. R. Co. 249 U. S. 134, 63 L. ed. 517, P.U.R.1919C, 710, 39 Sup. Ct. Rep. 237; McCluskey v. Marysville & N. R. Co. 243 U. S. 36, 61 L. ed. 578, 37 Sup. Ct. Rep. 374; Bay v. Merrill & R. Lumber Co. 211 Fed. 717; Re Conecuh Pine Lumber & Mfg. Co. 180 Fed. 249.

The fact that the parties use the mails in connection with the execution and performance of the leases does not make their relation one of interstate commerce any more than would a lease of land by a nonresident.

New York L. Ins. Co. v. Deer Lodge County, 231 U. S. 495, 509, 511, 58 L. ed. 332, 337, 338, 34 Sup. Ct. Rep. 167.

Where the interstate transportation is merely incidental, and is not so closely related to the transaction in question as to be one of its determining characteristics, this court has repeatedly held that the business is local rather than interstate.

Hooper v. California, 155 U. S. 648, 655, 39 L. ed. 297, 300, 5 Inters. Com. Rep. 610, 15 Sup. Ct. Rep. 207; Hopkins v. United States, 171 U. S. 578, 592, 43 L. ed. 290, 296, 19 Sup. Ct. Rep. 40; Banker Bros. Co. v. Pennsylvania, 222 U. S. 210, 56 L. ed. 168, 32 Sup. Ct. Rep. 38; Loomis v. People's Constr. Co. 128 C. C. A. 125, 211 Fed. 453; Diamond Glue Co. v. United States Glue Co. 187 U. S. 611, 47 L. ed. 328, 23 Sup. Ct. Rep. 206; Ware & Leland v. Mobile County, 209 U.

Both leases and patents were property, and entitled to the protection of the guaranties of the Constitution.

Wilson v. Rousseau, 4 How. 646, 11 L. ed. 1141; Brown v. Duchesne, 19 How. 183, 15 L. ed. 595; Seymour v. Osborne, 11 Wall. 516, 20 L. ed. 33; James v. Campbell, 104 U. S. 356, 26 L. ed. 786; Continental Paper Bag Co. v. Eastern Paper Bag Co. 210 U. S. 405, 52 L. ed. 1122, 28 Sup. Ct. Rep. 748; William Cramp & Sons Ship & Engine Bldg. Co. v. International Curtis Marine Turbine Co. 246 U. S. 28, 62 L. ed. 560, 38 Sup. Ct. Rep. 271; United States v. Winslow, 227 U. S. 202, 57 L. ed. 481, 33 Sup. Ct. Rep. 253; Paper Bag Patent Case (Continental Paper Bag Co. v. Eastern Paper Bag Co.) 210 U. S. 405, 424, 52 L. ed. 1122, 1131, 28 Sup. Ct. Rep. 748; Grant v. Raymond, 6 Pet. 218, 8 L. ed. 376.

The United States cannot take them under its power to regulate commerce.

James v. Campbell, 104 U. S. 356, 358, 26 L. ed. 786, 787; United States v. Palmer, 128 U. S. 262, 32 L. ed. 442, 9 Sup. Ct. Rep. 104; Belknap v. Schild, 161 U. S. 10, 40 L. ed. 599, 16 Sup. Ct. Rep. 443; International Postal Supply Co. v. Bruce, 194 U. S. 601, 48 L. ed. 1134, 24 Sup. Ct. Rep. 820; McClurg v. Kingsland, 1 How. 202, 11 L. ed. 102.

The vested rights of a patentee of an invention under grant from the United States are analogous to rights in land granted by the United States, and carrying certain vested rights secured by direct contract with the United States.

Choate v. Trapp, 224 U. S. 665, 56 L. ed. 941, 32 Sup. Ct. Rep. 565; Marchie Tiger v. Western Invest. Co. 221 U. S. 286, 55 L. ed. 738, 31 Sup. Ct. Rep. 578; Gleason v. Wood, 224 U. S. 679, 56 L. ed. 947, 32 Sup. Ct. Rep. 571; English v. Richardson, 224 U. S. 680, 56 L. ed. 949, 32 Sup. Ct. Rep. 571; Sizemore v. Brady, 235 U. S. 441, 59 L. ed. 308, 35 Sup. Ct. Rep. 135; Williams v. Johnson, 239 U. S. 414, 420, 60 L. ed. 358, 360, 36 Sup. Ct. Rep. 150; United States v. Rowell, 243 U. S. 464, 61 L. ed. 848, 37 Sup. Ct. Rep. 425; McKee v. Henry, 119 C. C. A. 412, 201 Fed. 74; Chase v. United States, 138 C. C. A. 117, 222 Fed. 593; Morrow v. United States, 156 C. C. A. 366, 243 Fed. 854.

The Clayton Act is unconstitutional if and so far as it makes unlawful patent licenses granted by leases executed after the enactment of the act, under patents issued prior to such enactment.