tions as to what the decree should contain. He objected also to the reaffirmance of the "rule of reason." 'Congress, with full

and exclusive power over the whole subject, has signified its purpose to forbid every restraint of interstate trade, in whatever form, or to whatever extent, but the court has assumed to insert in the act, by construction merely, words which make Congress say that it means only to prohibit the 'undue' restraint of trade. If I do not misapprehend the opinion just delivered, the court insists that what was said in the opinion in the Standard Oil Case, was in accordance with our previous decisions in the TransMissouri and Joint Traffic cases, . . . if we resort to reason. This statement surprises me quite as much as would a statement that black was white or white was black. . . . By every conceivable form of expression, the majority, in the Trans-Missouri and Joint Traffic cases, adjudged that the act of Congress did not allow restraint of interstate trade to any extent or in any form, and three times it expressly rejected the theory, which had been persistently advanced, that the act should be construed as if it had in it the word 'unreasonable' or 'undue.' But now the court, in accordance with what it denominates the 'rule of reason,' in effect inserts in the act the word 'undue,' which means the same as 'unreasonable,' and thereby makes Congress say what it did not say, what, as I think, it plainly did not intend to say and what, since the passage of the act, it has explicitly refused to say. It has steadily refused to amend the act so as to tolerate a restraint of interstate commerce even where such restraint could be said to be 'reasonable' or 'due.' In short, the court now, by judicial legislation, in effect amends an act of Congress relating to a subject over which that department of the Government has exclusive cognizance."

The facts in this case were briefly as follows: The A. B. Dick Company owned the patent on a stencil-duplicating machine

1224 U. S. 1-73 (March 11, 1912). This case was decided under the patent law rather than under the anti-trust law, but its bearing on the trust problem is sufficient to justify its inclusion.

known as the "Rotary Mimeograph." The company sold one of these machines to a Miss Skou under a license restriction attached to the machine, which stated that the machine was sold by the Dick Company with the license restriction that it might be used only with the stencil paper, ink, and other supplies made by the Dick Company. The defendant, Sidney Henry, a dealer in ink, sold to Miss Skou for use on the machine a can of ink not made by the Dick Company; and this with knowledge of the license restriction and with the expectation that it would be used in connection with the mimeograph. The Dick Company brought suit against Henry, alleging that the patent on the mimeograph had been infringed by the breach of the conditions upon which the patented machine was sold; and sought an injunction against indirect infringement by Henry.

The Court rendered a judgment in favor of the Dick Company. The patent laws, the Court pointed out, grant to the inventor the exclusive right to make, use, and sell the invention; and each of these is a separable right. Thus, one person may be permitted to make, but not to sell or use, the patented article. Another may be permitted to sell, but within a limited arca, or for a particular use. A third may be permitted only to use the patented article. While an absolute and unconditional sale of a patented article operates to place it beyond the boundaries of the patent, and thus places the purchaser in possession of the article to do with as he pleases, the owner of the patent, under his right to exclusive use of the patented article, may pass the property right to a purchaser under license restrictions which will give him the right to use the machine only for specified purposes or at specified places. This is because a patent monopoly gives the separate rights of manufacture, sale, and use. When, therefore, a patentee makes and sells a patented device, the extent of the license to use, which is carried by the sale, depends on whether any restriction was placed on its use, and brought home to the person acquiring the article. The Court held that it was clear from the license restriction adopted in this case that while the property in the machine passed to the purchaser, the sale carried with it only the right to use the invention according to the terms of the

license; and among these terms was the use of ink made by the Dick Company.

The Court then turned to an examination of the nature of the restrictions that might be lawfully imposed on a purchaser of a patented article. It declared that it would construe the patent law as granting a monopoly in order to subserve a broad public policy, the encouragement of invention. It referred with approval to the Bement case. In that case it was held that a contract in regard to the use of a patent, even though it restrained interstate trade, did not fall within the prohibitions of the Sherman Act, if it involved only the reasonable and legal conditions imposed under the patent law. But, it was argued, to permit the seller to restrict the buyer to a use of the mimeographing machine in connection with ink made by the patentee would give the latter the power to extend his monopoly so as to embrace articles not within the patent. To cite one of the suggestions pressed upon the Court, it was said that a patentee of a coffee pot might sell on the condition that the pot be used only with coffee bought from him. While granting that competition in the sale of ink, coffee, etc., might be slightly affected by such restrictions, the Court held that these illustrations failed to show marked inconvenience to the public, since the public was always free to take or refuse the patented article on the terms imposed. If the terms were too onerous, the patented article would not find a market; and the public, by permitting the invention to go unused, lost nothing which it had before. When the patent expired the public would be permitted to use the invention without compensation or restriction. "It must not be forgotten," said the Court, "that we are dealing with a constitutional and statutory monopoly. . . . We are not at liberty to say that the Constitution has unwisely provided for granting a monopolistic right to inventors, or that Congress has unwisely failed to impose limitations upon the inventor's exclusive right of use. And if it be that the ingenuity of patentees in devising ways in which to reap the benefit of their discoveries requires to be restrained, Congress alone has the power to determine what restraints shall

1 See p. 398.

/

be imposed." (In 1914, as a part of the anti-trust legislation of that year, Congress acted upon this suggestion; and in section three of the Clayton Act specifically forbade such restrictive sales as the Supreme Court had upheld in the Dick case). 1

From the opinion in the Dick case Chief Justice White and Justices Hughes and Lamar dissented. Inasmuch as the case was argued after the death of Justice Harlan and during the absence of Justice Day, the decision was 4 to 3.

Subsequently-after the passage of the Clayton Act-the Supreme Court in the Motion Picture Patents Company case said: "Under the patent law the grant by patent of the exclusive right to use, like the grant of the exclusive right to vend, is limited to the invention described in the claims of the patent, and that law does not empower the patent owner by notices attached to the things patented to extend the scope of the patent monopoly by restricting their use to materials necessary for their operation but forming no part of the patented invention, or to send such articles forth into the channels of trade subject to conditions as to use or royalty, to be imposed thereafter, in the vendor's discretion."2 By this decision Henry v. Dick was definitely overruled.

UNITED STATES v. ST. LOUIS TERMINAL ASSOCIATION 3

This case is significant since it illustrates the "advantages that may result from the adoption of the Court's "rule of reason." It was the first case in which the Court held that a combination which was illegal because in unreasonable restraint of trade might, by a modification, of its provisions, become a lawful combination. The decision was unanimous, although Justice Holmes did not participate in the hearing of the case.

The geographical and topographical conditions at St. Louis are unusual. On the east lies the Mississippi river, which constitutes quite an obstacle to railroad communications. The cost of constructing a bridge over the river is so great that the railroads have not endeavored to build their own bridges, but 1 Cf. p. 361. 2 243 U. S. 502 (April 9, 1917). 3224 U. S. 383-413 (April 22, 1912).

each has made use of a toll bridge, open to all railroads. From the west access to the city is almost as difficult. The city is located on hills which approach close to the river bank, and it was found necessary to tunnel these hills in order to connect the city with the valley of Mill creek, where the roads from the west had their termini. Gradually the Terminal Railroad Association of St. Louis acquired the several independent terminal companies which ministered to the needs of different groups of railroads, until finally it was practically impossible for any railroad to pass through, or even enter, St. Louis without using the facilities controlled by this company.

The question before the Court was whether this unification of the terminal facilities was a combination in restraint of trade within the meaning of the Sherman Act. The Court held that the mere combining of several independent terminal systems into one was not necessarily a restraint upon interstate commerce; a unified terminal system open to all on equal terms might✔ be of the greatest public utility, particularly in a city like St. Louis. The question was whether this particular terminal association was unreasonable. The Court held that it was. In the first place, the association was controlled by fourteen of the twenty-four railroads which converged at St. Louis, while the other ten had no stock interest in it. And no railroad might become a member of the terminal association without the unanimous consent of the fourteen proprietary companies, as they were called. While counsel for the terminal company claimed that no company which applied would be refused joint use or ownership of the terminal company, the fact was that the requirement of unanimous consent still remained. It was also true that the terminal company paid no dividends, and disclaimed any intention of ever paying any; and that the non-proprietary railroads were permitted to use the facilities of the terminal company upon paying the same charges as were paid by the proprietary companies. But, said the Court, there is no provision guaranteeing them this privilege. It may also be true, said the Court, that the proprietary companies have not availed themselves of the full measure of their power to impede the free competition.