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A. The extent of patent and copyright monopolies should be judged solely with reference to the laws creating them and wholly independent of any operation of the “Anti-Trust Laws.”'
B. Out of the possible field of operation of the “Anti-Trust Laws” is definitely carved the complete field of patent and copyright monopolies.
C. If a patent is sufficiently broad to cover a whole industry, it is not a violation of the “Anti-Trust Laws” for its owner completely to monopolize that industry.
D. Licenses under a single patent, so long as they are of the character authorized by the patent laws, are valid, no matter how numerously multiplied.
Second: Beyond the inherent limitations of their monopolies, patents and copyrights have no protective force in determining whether the "Anti-Trust Laws" have been violated.
It is certain that there is no absolute guarantee of protection where:
(1) The combination or agreements in question relate to several different patents or copyrights originally acquired by more than one person.
(2) It is expressly provided that the combination or agreements shall extend beyond the life of the patents or copyrights.27
(3) Agreements seeking to control an entire industry are put in the form of “license agreements” under a patent which obviously does not naturally cover the whole industry.28
The Second Section of the Clayton Act is directed against unfair discriminations in prices between different purchasers of commodities. It provides:
26 National Harrow Co. o. Hench, 83 Fed. 36, 84 Fed. 226; Bobbs-Merrill Co. v. Straus, 139 Fed. 155; 1 Page on Contracts, p. 698; Vulcan Powder Co. v. Hercules Powder Co., 96 Cal. 510, 31 Pac. 581 (1892).
27 National Harrow Co. o. Bement, 47 N. Y. Supp. 462.
29 “An Act to Supplement Existing Laws against Unlawful Restraints and Monopolies and for other Purposes.” PUBLIC Acts No. 212, 63d Congress, H. R. 15657.
“Sec. 2: That it shall be unlawful for any person to discriminate in prices between different purchasers of commodities . . . where the effect of such discrimination may be to substantially lessen competition or tend to create a monopoly in any line of commerce. Provided, That nothing herein contained shall prevent discrimination in price between purchasers of commodities on account of differences in the grade, quality, or quantity of the commodity sold, or that makes only due allowance for difference in the cost of selling or transportation, or discrimination in price in the same or different communities, made in good faith to meet competition: And provided further, That nothing herein contained shall prevent persons engaged in selling goods, wares, or merchandise in commerce from selecting their own customers in bona fide transactions and not in restraint of trade."
The Third Section applies to what are known among merchants as “tying contracts” and provides:
“Sec. 3: That it shall be unlawful for any person ... to lease or make a sale or contract for sale of goods, wares, merchandise, machinery, supplies, or other commodities whether patented or unpatented ... or fix a price charged therefor, or discount from or rebate upon such price, 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 . .. may be to substantially lessen competition or tend to create à monopoly in any line of commerce.” (The italics are ours.)
These sections have probably not made any radical change in the law. By their terms they only operate where the effect of the transactions to which they apply “may be to substantially lessen competition or tend to create a monopoly.” But the Sherman Act already had the effect of prohibiting all contracts and attempts to monopolize commerce, which amounted to an "undue" or "unreasonable" restraint of trade, and the new test does not seem to differ greatly from the old one. Almost the exact words of the Clayton Act were used in Whitwell v. Continental Tobacco Co., where the Circuit Court of Appeals for the Eighth Circuit was considering squarely the propriety of a "tying contract” and
"(That the purpose of the Sherman Act) was to prevent the stifling or substantial restriction of competition, and the test of the legality of a combination under the Act which was inspired by this purpose is its direct and necessary effect upon competition in commerce among the states. If its necessary effect is to stifle or to directly and substantially restrict free competition, it is a contract, combination, or conspiracy in restraint of trade and it falls under the ban of the law.” (The italics are ours.)
The sections have, however, at least put the test into statutory form, and the very fact that there are now specific provisions against “tying contracts” and price discrimination will undoubtedly cause them to be scrutinized with greater care.
The insertion of the words "whether patented or unpatented” in Section 3 presents two interesting questions:
First: Has this specific reference to patents made the law larger than it would have been had the words been omitted?
Second: Is any significance to be attached to the omission of specific reference to copyrighted commodities in this section, and to either patented or copyrighted commodities in Section 2?
The first question is academic except for its bearing upon the second. There is no doubt that "tying contracts” relating to patented commodities are prohibited if their “effect may be to substantially lessen competition or tend to create a monopoly.” The Act says so. If, however, they would not have been but for the express mention of patented commodities, then immediately the maxim expressio unius est exclusio alterius is suggested to us, and the question arises whether copyrighted commodities are impliedly excluded from Section 3, and whether either patented or copyrighted commodities are covered by Section 2.
Certainly copyrighted productions are, at least in some instances, “commodities.” 31
31 See Barataria Canning Co. o. Joulian, 80 Miss. 555, 31 So. 961 (1902); Texas & Pacific Coal Co. v. Lawson, 89 Tex. 394, 32 S. W. 871 (1895); Beechley v. Mulville, 102 Ia. 602, 70 N. W. 107 (1897); S. S. White Dental Mfg. Co. v. Commonwealth, 212 Mass. 35, 98 N. E. 1056 (1912); Alpaca Co. v. Commonwealth, 212 Mass. 156, 98 N. E. 1078 (1912); Century Dictionary & Encyclopedia, vol. II, p. 1132; State v. Frank, 169 S. W. 333 (Ark., 1914); Amer. League Baseball Club of Chicago 0. Chase, 149 N. Y. Supp. 6 (1914); State v. Chicago, R. I. & P. Ry. Co., 95 Ark. 114, 128 S. W. 555 (1910); Rohlf v. Kasemeier, 140 Ia. 182, 118 N. W. 276 (1908); Queen Ins. Co. v. Texas, 86 Tex. 250, 24 S. W. 397 (1893).
It is not a sufficient answer to say that both Sections 2 and 3 prohibit “any person” from doing the acts to which they refer. The language of the Sherman Act applies to "every person who shall monopolize or attempt to monopolize . . . any part of trade or commerce. .” Literally construed, the Act would have abolished patent and copyright monopolies completely.
Section 3 applies to both patented and copyrighted commodities for at least two reasons. In the first place it would be quite arbitrary to apply it to one and not to the other. The maxim expressio unius est exclusio alterius does not create an inflexible rule. It is always subjected to the intent to be gathered from the statute as a whole.32 It does not operate where the specific mention is by way of illustration only. 33 Section 3 applies to a restricted and specific class of transactions. There is no evidence elsewhere in the statute of an intent to except from its operation any commodities. The reference to patented commodities indicates rather an intent not to overlook any.34 Although the Supreme Court has said that the rules applicable to patents under the “Anti-Trust Laws” do not necessarily govern copyrights,35 the distinction is not material in this connection.
In the second place there is no reason for reading copyrighted commodities out of Section 3, as there was for reading patented and copyrighted commodities to a certain extent out of the Sherman Act. Assuming that the section applies to all commodities, it takes away no rights created by the patent or copyright laws. Those laws do not confer the right to make "tying contracts.' Whatever rights the owners of patents and copyrights had to make such contracts before the Clayton Act, were rights existing by virtue of the common law. A "tying contract” relating to patented commodities was upheld in New York Bank Note Co. v. Hamilton Bank Note Co.,36 but for the reason that the contract was not "unreasonable in its restraint of trade," and not because the patents laws authorized such a contract.
32 Johnson 0. Southern Pac. Co., 196 U. S. 1 (1904); State 0. Standard Oil Co., 61 Ore. 438, 123 Pac. 40 (1912); Lewis' Sutherland Stat. Cons., 2 ed., vol. II, p. 925.
33 Scaggs v. Baltimore & Washington R. R. Co., 10 Md. 268 (1856); Brown 0. Buzan, 24 Ind. 194 (1865); Park v. Soldiers & Sailors Home, 22 Colo. 86, 43 Pac. 542 (1896); Lewis' Sutherland Stat. Cons., 2 ed., vol. II, p. 925.
34 The words were not in the draft of the Act originally reported to the House by Mr. Clayton from the Committee on the Judiciary. Report 627, 63d Congress, ad Sess. to accompany H. R. 15657.
35 Bobbs-Merrill Co. v. Straus, 139 Fed. 155.
Section 3, therefore, given its fullest possible force, operates only outside the “inherent limitations” of the patent and copyright monopolies. If it takes away any rights, they are commonlaw rights. If it produces any novel effects, it affects contracts relating to all commodities alike. The specific reference to patented commodities was not necessary to accomplish that result.
The situation regarding Section 2 is somewhat, but not entirely, the same. Would that section, if applied literally and fully to patented and copyrighted commodities, trespass upon rights created by the patent and copyright laws? Those laws do expressly confer the right “to vend” productions. The right "to vend” has been interpreted to include the right to fix prices. The Supreme Court in Bement v. National Harrow Co. said: 37
“The owner of a patented article can, of course, charge such price as he may choose.”
Both before and since the Clayton Act he undoubtedly has had the right to “choose,” within certain limits at least, to charge one purchaser one price and another a different price. Is not this right, however, merely a common-law right which he has enjoyed in common with all other traders except common carriers and other persons charged with a public service? Is it not the same right described by the Circuit Court of Appeals in Whitwell v. Continental Tobacco Co.,38 where it said, regarding a trader who was not dealing in patented or copyrighted commodities:
“The right of each competitor to fix the prices of the commodities which he offers for sale, and to dictate the terms upon which he will dispose of them, is indispensable to the very existence of competition.
They (the defendant and its employee) had the right to select their customers, to sell and to refuse to sell to whomsoever they choose, and to fix different prices for sales of the same commodities to different persons.”
Unless the right to discriminate in prices is necessary to protect the patent or copyright monopoly, the owner of copyrights or
36 180 N. Y. 280, 73 N. E. 48 (1905).