United States v. United Shoe Machinery Co. of New Jersey

247 U.S. 32, 38 S. Ct. 473, 62 L. Ed. 968, 1918 U.S. LEXIS 1956

• Court: Supreme Court of the United States
• Decided: March 21, 1917
• Docket: 207
• Status: Published

Opinions

Mr. Justice McKenna,

after stating the case as above, delivered the opinion of the court..

The charge of the bill is that defendants, not being satisfied with the monopoly of their patents and determined to extend it, conceived the idea of acquiring the ownership or control of all concerns engaged in the manufacture of all kinds of shoe machinery. This purpose was achieved, it is charged, and a monopoly acquired, and commerce, interstate and foreign, restrained by the union of competing companies and the acquisition of others. And that leases were exacted which completed and assured the control and monopoly thus acquired. .

But this charge of comprehensive trade dominance was modified in the course of the trial. The Government disclaimed the assertion of such extensive culpability and confined its contention to machinery adapted to the bottoming of shoes (attaching soles to uppers), machines called clicking machines. (cutting-out machines), and eye-letting machines (sufficiently indicated' by name), and declared that if the bill did not so limit the actual monopoly counsel would agree so to limit it.

Of course, we agree with the Government that defendants cannot be discharged from all guilt merely because they leave open some branches of the business to the en- . terprise of others, or, as the Government puts it, “that a limited field is as yet open to competition.” But in view of the large design attributed to the defendants and the illustration of what it is contended they accomplished, it would 'be interesting if not instructive to be told when their large scheme was abandoned or broke down, even. though it may now be said to be an unimportant detail, since the trial court has decided that neither the greater got lesser scheme was established by the evidence:

The conclusion, however, is contested, and in. description . of what is tiow contended, the Government says that “the end which avowedly was sought by the organizers'of the United Company was ‘the control in one corporation, both in the United States and in foreign countries, of the efficient types of shoe machinery.’” And, further, after stating the business of defendants to be that “of supply-, ing machines used in the manufacture of shoes,” and the restraint of interstate and . foreign commerce in certain of' the machines, it is said: “ The subject matter of the action, therefore, is the effect of the things done by the defendants • upon the trade between, manufacturers of machines used in the manufacture of shoes and the manufacturers of shoes;” And in further display of the interest which attaches to the issues, it is said: “Shoes are made in every section .of the Union” and “it is obvious th^t supplying important machines for such an industry must be an exceedingly. important part of the interstate trade and commerce of the United States.”

And there are contentions as to the dominance achieved. Indeed,-it is asserted somewhat fervidly that the United . . Company “is absolute monarch, of the industry” and that “no competitor can exist unless for its own pleasure or policy it withholds its destroying hand.”

There are opposing contentions no less fervidly urged. There is denial of the purpose attributed to the defendants or the possession or exercise of baleful power, and the insistence that the United Company is a union of noncompeting businesses conducted under letters patent, effecting through the resources thus acquired greater economies in manufacture and greater efficiency of machinery and “in other ways perfecting the shoe-maker’s art” — advantages not engrossed by the company but inuring to its patrons and through them to the wearers of their product, a finished shoe.

In'final answer to the charge of thé Government the comprehensive declaration is that the shoe machinery industry is not one open to everybody on equal terms. It is one of patents. And the company’s power, if it have power, is not that of combination but the power of the superiority of its inventions — the effect and demonstrated supremacy of its mechanical instrumentalities.

The contentions could not well be more antagonistic^ upon each of which there was conflicting testimony, and the important fact is to be borne in mind that it was given in open court .(except as to certain contentions about patents, their scope and validity).¹ The fact justifies deference tó the findings of the trial court. Adamson v. Gilliland, 242 U. S. 350, 353.

There are two accusations against the defendants. One is that at the very outset they combined competing companies, and subsequently acquired others, § 1 of the Act of 1890 ¹ being thereby offended. The other is a monopolization of the trade in violation of § 2 of that act. And it- is charged, as we have said, that certáin leases and license agreements-are the instruments which consummate both offenses.

The offense of combination was committed, it is contended, February 7, 1899, at which time seven shoe machinery companies' were consolidated into the United Shoe Machinery Company of New Jersey, a corporation organized for that purpose. The companies were: Goodyear Shoe Machinery Company, International Goodyear •'Shoe Machinery Company, Consolidated & McKay Lasting Machine Company, McKay Shoe Machinery Company , Davey Pegging Machine Company, Epplér Welt Machine Company and the International Eppjer Welt Machine . Company. The last two companies were acquired by the new company after its formation, but they may be regarded as constituent companies. The businesses of these companies were conveyed to the new company, the businesses being those of manufacturing, selling arid leasing and dealing in shoe machinery, including patents of the United States and other countries.¹ A more particular distinction we do not deem it necessary to make.

The first question is, Were the companies in competition? It confronts us at the outset; all other considerations are dependent upon it. As an element in the answer to it we must revert to the admission that the charge of combination is only as to machinery for bottoming shoes— that is, the uniting of the sole to the upper — an operation which might be called “simple” if the complexity of this record did not contradict it and if we were not told that the letters patent covering the machinery for the operation are too great in number for explanation or enumeration. It is said that on certain classes of shoes over 100 different operations are performed by different machines. And the Government has taken pains to tell us how far “the mysteries of the shoemaker’s art and the variations between different methods of making shoes” are outside of the understanding of the purchaser of them. To him, it is said, “shoes are shoes, except as they differ in appearance, comfort, wearing qualities and price.” But to the manufacturer distinctions multiply and to the production of a shoe a complete line of machinery is necessary. Indeed, the Government makes the mystery of the art and the necessity of the instrumentalities, in part, the basis of its argument.

We are therefore admonished at once of the complexity of the case and the maze of mechanical technicalities into which we should be plunged in estimating the evidence if we had not the guidance of the opinions of the judges of the trial court. The court found, as we have said, that the companies were not in competition at the time of their union in the United Company, and based the finding not only upon the testimony of witnesses -but the uses of the machines of the respective companies and their methods of operation. The testimony was conflicting, it is true, and different judgments might be formed upon it, but from an examination of the record we^annoUpronounce that of the trial court to be wrong. Indeed, it seems to us to be supported by the better reason. We should risk misunderstanding and error if we should attempt to pick out that which makes against it and disregard that which makes for it and judge of witnesses from their reported words as against their living presence, the advantage which the trial court had.

The Government, however, urges two circumstances which it contends corroborate its oral testimony and against which it asserts that “literal denials of specific intent to restrain trade are of no significance. ” But there was more than literal denials. There were detailed representation of the condition of the trade and explanation of the machines convincing, as we have seen, in its strength and the confirmation it received. Let us, however, consider the instances upon which the Government relies. The most important of them is a circular letter,¹ sent by the directors of the Goodyear Company to its stockholders, which set forth that great advantages were to be secured by the control in one corporation of the most efficient' types of shoe machinery and that the directors’and large stockholdérs had been in negotiation to accomplish that end; and further that the United Company would from time .to time acquire other shoe machinery properties either by direct ownership or by purchase of shares of their stock. . Also a like declaration¹ in a contract with its agent'in Australia.

The circular and agreement could not, of themselves, give character to the constituent companies. It is evident, therefore, that both of them need comment to give them sinister significance, apd the innuendo of the Government is that they meant'not only that great competing companies had been united, but that other companies— competitors,- it may be — would be acquired. It would be a stout credulity that could accept this explanation against the counter considerations. We cannot put out of mind that according to the Government, in repeated insertions, the United Company in 1899, twelve years before the suit was brought, jumped into the field full-panoplied in monopolistic power and started immediately on its .career of dominance and restraint of trade. But to preclude the denial pf the assertions it is now said that, in stock circulars and trade agreements, the company trumpeted its might , and illegal enterprise to two continents. Deliberate guilt — we say deliberate guilt, for it -is not a question of ignorance or imbecility — is usually not so bold. It masks its purpose to hide it from prevention and penalty. If it may'be asserted that the trade agreement was in secret, certainly the circular letter to the stockholders committed the scheme to publicity.

We cannot, therefore, accept the explanation of the Government. Its implications discredit it. It implies that there was governmental supineness for a long time or an extraordinary oversight of conspicuous, indeed vaunted, criminality. Neither can-be accepted. And we are persuaded that the circular and agreement were not. intended nor regarded to be the avowal, as contended by the Government, of monopoly, achieved or to be achieved, but simply the business expression and foresight of the advantages which would result from the concentration in one management of instrumentalities which, however different, supplemént one another in the creation of a shoe.

We have given the explanation of the Government importance because the Government has done so. And we have only answered in estimation of what the circular and agreement are worth as avowals of intention. Of course,, if the Government is right, they are unimportant circumstances; the demonstration of the United Company’s purpose is complete without them; for the Government contends that the constituent companies were in open competition and that their union resulted in the “immediate suppression of the actual and potential competition” in shoe machinery and the “creation of an organization with vast resources” which “gave it a power to extend'and intrench its monopoly which none of. its constituent companies, however successful, could approach. ” If this were a fact it would not need the confirmation of words.'

■ The second circumstance cited by the Government is that before the union of the companies their machines had a flexibility in use that the testimony of defendants does not now ascribe to them, and that this was declared in advertisements.. We are not disposed to give much importance to the circumstance. It may be that there was á certain interchangeability in the described machines, but, in the opinion of the trial court, there was, notwithstanding, no practical competition .between them.. We can add nothing to what determined its judgment or to the detailed comparison and explanation of the machines made in its opinions. Indeed, we might rest this branch of the case on those opinions. They were considerate of all the elements of the Government’s contentions and the opposing contentions and tested the machines, their sameness and difference and respective efficienéy, by the purposes for which they were designed by the inventors and employed, in the trade and by the explanations made of them.v.

In considering the competition of the machines and in estimating the defendants’ acts-in uniting the companies, it is to be observed that the machines were all made “under letters patent of the United States and other countries,” were, owned by the companies, and covered improver ments made by the companies from time to time and embodied in the machines, which were so far developed that they were in. 1899 principally in use by shoe manufacturers in the kinds of work to which they were respectively adapted. The patents and the businesses passed to the new company, but necessarily were the same in its hand as before. In other words, the patents did not lose their distinction, nor the machines their difference; and to dwell upon the percentages of manufacture is misleading. Of a like situation we said in United States v. Winslow, 227 U. S. 202, 217, and said of it in answer to the charge against the combination here involved, that we could “see no greater objection to one corporation manufacturing seventy per cent, of three non'competing groups of patented machines collectively used for making a single product than to three corporations making the same proportion of one group each. Ine disintegration aimed at by the statute [Act of 1890] does not extend to reducing all manufacturé to isolated units of the lowest degree.” Or, as expressed by one of the judges in the court below, “The combination was not unlawful so far as it did no more than put the different groups of noncompeting patented machines into one control. ... It was not unlawful unless, to an extent injurious to the public, interest, it destroyed competition.”

And it was. held that competition was not destroyed to the designated extent. Indeed, the court was repelled, as it might well have been, by the consquences of so holding on account of the change of conditions, the union of the companies not having been, questioned by the Govem^ment for twelve years and. large investments having been made not only by the company but by the public.

The lapse of time, indeed, may not condone the offense if offense there was. It, however, may call offense in question and be an element in the refutation of accusations long deferred, or determine against piarticular reme-, dies. It is to be remembered that a dissolution of the offending companies is prayed and that each of them be "separated into such parts that no one of them will constitute a monopoly ... of the shoe machinery business,” or that receivers be appointed to take possession of them and their assets, business and affairs and wind them up and "bring about conditions in trade and commerce among the States and with foreign nations in harmony .with law.” If there be need for this the difficulties - of achievement should not deter; but the difficulties may admonish''against, the need and . demonstrate that the situation maybe remediless or to be redressed at a cost too’ great. Therefore, considering the remedy prayed, which is extreme, even in its mildest demands;, we may ask, what of the investments that have been made during these years of extension and development of the new company’s business? What of thé machines that have become obsolete and the new ones, that have been developed? What of the patents that have expired and the new ones that have not yet run out, and how distribute them? And what of their effect when distributed? Will their monopoly cease, or be regarded as an instrument of illegal purpose and forfeited as a deodand? How pick put from the new conditions the conditions of 1899 and restore them and the art of that time and rehabilitate the businesses that are alleged to have ceased to exist or to have become merged in tie United Company? How from the complexity only thus suggested, not displayed, "bring about conditions in trade and commerce” in shoe machinery "among the States and with foreign nations in harmony with law,” which is the..ultimate resource of the Government for'this part of the case? How radical should . the disintegration be?' Or should there be a sale in entirety and not in parts? And, if in entirety, will the purchaser get an immunity that the companies did not have? A sale in entirety would seem to be absolutely necessary to preserve the works at Beverly, And yét how can that be doné if there be a dissolution of the company and a distribution of machines? On the other hand, the idea is repellent that so complete an instrumentality should be dismantled and its concentration and efficiency lost. It has been testified that the purpose of the organization was the consolidating of all the machines in one modern factory and the standardizing of them. This purpose has been attained. The company employs there 4,000 men.

There are, however, certain instances of acquisition which may be said to give confirmation to the charges of the Government and justify the demand for redress, at whatever cost or disaster to the offenders; in other words, demonstrate the purpose of the original union of the companies, the persistence of that purpose and the extension; of its dominion having the evil consequences depictéd by the Government. Upon these instances it would seem unnecessary to dwell, the companies not being competitive at the time of their union in the United Company. However, they are made so much of by the Government and ' are so strongly urged that attention must be given to them. The most important of them and the one that was given most prominence in the testimony was that of the plant and machinery of the Thomas G. Plant Company, a New Jersey corporation, a manufacturer of shoes, not of machinery, and of the shoe machinery interest of Thomas G. Plant.

Plant was an inventor of machines of the shoe-bottoming variety and had taken out a number of letters patent in the United States and foreign countries covering the same. There was in: the testimony and is in the argument of counsel dispute as to the efficiency of the machines of themselves. We say “of themselves” to distinguish them from the inventions embodied in them; a necessarj^ distinction to meet some of the phases of. the case. A set was installed in the Plant Company’s factory, of which Plant owned a majority of the stock: Two other concerns to which they were offered under inducements refused to ' accept them. It may be admitted, as the trial court found, ■ that they had experimental promise, and it was testified that a number of shoe manufacturers had concerted , to buy them. There were charges of infringements of the United Company’s machines and Plant was loath to permit an inspection; indeed for a time refused it. And, be- . sides, for their completion into a set for combined operation important machines were necessary which were not yet developed. As they stood they were undoubtedly inferior to the machines of the United Company, and in the state, therefore, in which the United Company took them they were not found capable óf use. Nothing was in them which affords reasonable support for the Government’s contention that they were “right at the threshold of extensive competition with the United Company. ” But, suppose they were. It would only be conjecture to say that they would cross it or that their strength would be formidable if they did. It is in the testimony that they broke down upon trial and were supplanted in the Plant factory where Plant had installed them by the United Company’s machines. And the substitution was not at the dictation of the latter company. The vice president of the Plant Company and the general manager of its factory testified. that satisfactory work could not bé done with them on men’s shoes; they broke down even in the manufacture of women’s shoes to which they were adapted.

It appeared that some of the machines infringed the United Company’s and in some details the latter infringed the Plant machines, and the complexity of rights hence resulting, to which we shall presently refer, had led to and threatened litigation; to compose which, it was testified, and the trial court found, was a contributory inducement of the United Company’s purchase from Plant.

The. Govermnent resists the finding. Its conception is, and to this all of its contentions are addressed, that the Unitéd Company combined and wras intended to combine great competing companies and to acquire other competing companies. “The United Company acquired,” counsel say, “every company then [when the company was organized] actively putting' out or planning to put out” machinery adapted to bottoming shoes, and that “in the twelve years before the bringing of this action no substantial change took place, but rather the monopoly so acquired was in some respects extended and in many respects strengthened and intrenched.” In the light of this-conception and contention the Government sees and colors all that the United Company has done, all of the acquisitions it has made, and upon whatever motive made, including the prevention of patent troubles or the composition of litigation.. And it directly says of the purchase from Plant that it was made at an overvaluation and by it Plant was tempted to the bargain and the United Company satisfied by getting rid of a competitor.

We get no solution of the purpose of the parties by the price the United Company paid.¹ We must consider what it was paid for. It is to be remembered that we are dealing with a transaction which took place eleven years after the formation of that company and is to be judged of by its own circumstances, the incentives of that time. Plant was eager to sell and the overtures came from him— indeed, he engaged two intermediaries, to one <?f whom he paid a large commission. There was necessarily negotiation before the .final meeting of minds. To estimate the bargain t'o it the United Company insisted upon an inspection of the machines, that is, to estimate their value, as it was testified., “to. the advancing of the art of shoe-making. ” ¹ Plant refused at first, as we have said, but later yielded, and after inspection the purchase was consummated. Indeed, there were two inspections. Thé report on the first was adverse to the purchase. Mr. Winslow, president of the United Company, took part in the second and we may quote his testimony, for it is the standpoint of that company we are now considering. His testimony, besides, had confirmation. He believed, he testified, that he had a broader knowledge of shoe machinery than any one else and he therefore studied the Plant machines “personally as an expert.” He considered them, he said, from the standpoint of their capacity, the value of the inventions and the improvements embodied in them, the comparison of their work with the work of the United Company’s machines and the mechanical construction of the latter. He further testified that “Plant had used the Goodyear machines [the United Company’s machines] as a basis for his machines and had made.important improve^ments and developments.” He indicated one of the improvements in particular, which he regarded as of the very greatest practical importance, especially when combined with a device that the United. Company had just developed and placed in its factories. In a “broad way,” he said, the value was almost incalculable.

But there was qh interdependency of values. While the Plant device, had value over that of the United Company’s, it was controlled by the latter, or, as the witness expressed the situation, “in a broad way it was a perfect deadlock.” In other words,, the United. Company had the underlying invention and Plant a patent for a particular form of operation which was necessarily subordinate to the other — a situation familar in patent law and 'contests.

It will be seen, therefore, that there was no other Way out of the deadlock, if the inventions were to be used together — that is, embodied in one machine, without infringement — than by ownership in one hand of all the patents. That plan was adopted and was the inducement of the purchase of the Plant inventions by the United Company. But there was litigation to be composed as well, and it was composed.

Another witness testified as to the relation of the Plant patents and those of the United Company and stated that the result, if Plant had insisted upon his patent rights and the company had insisted upon its patent rights, would have been “a stop in the development of shoe machinery in these lines.” And continuing, he said: “We should hardly have dared to go ahead with the improvements in our machines for fear of not succeeding in our patent litigation, or of conflicting with such improvements as Plant had patented. On the other hand, Plant, or any company which he might form, would have hardly dared to go ahead with the possibility of these infringement suits. These infringement suits, or a good many of them, were then pending, and certainly he would have found very'few customers, I think, for his machines.”

This, in outline, was the situation that confronted the parties and induced their transaction, the incentives of each, being as indicated. And they were justifiable incentives, and we may accept them as ah alternative to the contention made by the Government that a violation of law was the impelling motive of the parties. And we may say that after the United Company had made the Plant acquisition it proceeded to make improvements on the Plant patents and developed many of them, giving them an efficiency they did not have before.

There are other acquisitions, that are emphasized, among them, that of the stock of the Goddu Sons Metal Company. It was acquired March, 1899, a month after the United Company was formed and eleven years before this suit was brought; and the inducement to the acquisition, was to settle the patent troubles that came , to the United Company through one of its constituent companies. The valúe obtained was in patents. These were for the metallic variety of machines, and, according to a witness for defendants, “at that time the United Company was putting out commercial machines for doing the work for which the Goddu Company machines were intended.” And, according to another witness, though not then in a condition to be placed in the hands of manufacturers, “they were in a .state of development where some of them could have been, without extensive changes, made operative.”

By this testimony th defendants justify the purchase; the Government condemns it. The defendants say that it was in composition of an inheritéd litigation and that patents of value were obtained by it.. To this the Government replies m condemnation that the cost of the settlement of the disputes was excessive, being $150,000, and the purpose of getting the patents was to forestall the competition they threatened and could have accomplished by their development.

The value .of a settlement of a dispute about rights which has reached litigation or threatens it cannot be easily or accurately estimated. It depends upon too many considerations which are not reflected in the price paid. The other ground of condemnation has strength. As the Government says, quoting Circuit Judge Putnam in another case, neither the letter of the law nor its purpose “distinguishes between strangling of commerce which has been bom and preventing the birth.of a commerce which does not exist.’’ But there is another view. No one can tell the strength of the competition that may be in a patent. It may be more than competition; it may be destruction, and the Anti-Trust Act surely does not require the acceptance of that or forbid effort to prevent it. But even if such extreme does not impend, certainly improvement of business and its efficiency can be striven for without offense to the law. United States v. Winslow, supra.

We may say here of the contention of the Government as to the acquisitions — and the same comment may be made of most of its contentions — that they cast us into speculation for their estimate and urge us to decide between well-sustained conflicting opinions and adjudge the defendants guilty of a violation of law. And this, too, against the considered judgment of the trial court.

We. see no illegality in the contract with G.ofldu for assignment of other inventions he might make, or iri like agreement with others. We content ourselves with this general declaration. An analysis of the contracts is not feasible, nor are the covenants measurable. That they are attempts to subjects the inventive genius of the country to the designs of the defendants is too extreme. They can be seen to have more particular use and to be justified in the circumstances of the transaction with which they were connected. Those whom one employs one gives opportunity to (this was Goddu’s case) and may exact that it be used for the employer. Those who have conveyed to him special machines may be presumed to have • been compensated by their price, and that in either case there wiE be such development and use as to make them competitive is too speculative to justify a judgment.

It is to be noted that the acquisitions in this case were not coincident in time nor parts of the same transaction. They were scattered through a period of years and varied each from the other, had no dependency, were different and unrelated steps in the development of the business of defendants. They must hence be judged separately, not in accumulation.

The above comment is applicable to other acquisitions, said to be fifty-six in number. It is impossible to review them. A description of them and wherein the machines acquired were competitive with the machines of the United Company ..the Government sets forth in many pages of its brief, and the defendants reply as circumstantially with opposing delineation and justification. Their effect is hard to estimate. The removal in some degree of competition may be charged against some of them and yet, on'the other hand, the acquisitions may be said to be justified by the exigencies or conveniences of the situation. Some of them were merely of accessorial machines; some in composition of patent troubles; some not connected with the special charge of monopoly to which the Government has limited itself; some the transfer to defendants of kinds of machines not possessed by them; some of patented improvements and inventions, aiding or completing the defendants’ machines, tributary therefore to their efficiency. They give a false impression by their number. They added nothing of obnoxious power to the United Company nor in any practical or large sense removed competition. •

Defendants charge that the Government not only puts an exaggerated computation upon the acquisitions lay defendants but gives no credit for or account to their resistance of appfications to buy other and, it is asserted, more important concerns. Their number is given as 75, all of great use and importance. The trial court found that the offers refused were more numerous ,and several of them were of concerns more important to the scheme of monopoly charged against defendants than any of the specified acquisitions.,- The comment is justified by the evidence.

We pass by the charge of the Government that the United Company through its president threatened destruction to opponents and the use of his influence in the business world'to enforce transfers of competing concerns and the patents they controlled. The charge and its denial or explanation were estimated by the trial judges and the' charge was held not to be established, or of no serious importance. The court said that if the declarations could be called "threats” in view of all the surrounding circumstances shown, it was not established that any competitor lost a customer or that anybody was prevented from attempting competition. Besides, they were isolated instances, separated in time, without relation, not coordinated acts in a scheme of oppression.

We cannot go into further detail without unduly extending this opinion.' It would be repetition, besides, of what was done carefully and thoroughly in the opinions of the trial judges. We sum up with a generalization that the United Company took by its organization "established businesses already of great value, possessing great possibilities of development,” as said by the trial court. It was discerned that there was advantage in their concentration, and the expansion that has hence resulted has been as much in necessary evolution as by design. At its found’a- • tion there were certain basic patents and many auxiliary ones. Inventors — those connected with and those independent of it — were devising and experimenting, and of this the company had to keep informed. It had to keep up with the mechanical march; to fall back would have been its destruction. There was growth not only in its business proper but in the accessories to it. When it was formed in 1899 it had no facilities for furnishing findings and supplies. It was business enterprise or, it may be, necessity, to acquire them, and their acquisition became what is called in the case the United Company’s “general department,” which handles, it is said, between 150 and 200 different kinds of machines. The expansion to this and in this was like the expansion of the department store — an accumulation not only of necessary things, but of incidental, supplemental things, auxiliary to the completion and finish of a boot or shoe. There is a service force as well, estimated at 6,000 men, to repair immediately breaks or deterioration without extra charge. And these men are kept at convenient places to repair machines and replace worn-out parts, and depots of supplies are maintained. There are also instructors of operators as well as furnishing of men in emergency. It is in the testimony'that a total of 8,889 operatives were taught in the year 1911 alone.

The company, indeed, has magnitude, but it is at once the result and cause of efficiency, and the charge that it has been oppressively used is. not sustained.. Patrons are given the benefits of the improvements made by the company and new machines are substituted for the old ones without disproportionate charge. There has been saving as well in the cost of manufacture of shoes. These are some of the results of the organization of the United Company. Others are testified to and the means of their accomplishment; but time will not permit their statement, and we pass to the leases.

There was complaint of them ana the Go vermuth., attacks them. Complaints, however, may be interested lament; but, on the other hand, they may be the expression of real grievance and demand redress. And which they are should be considered. To the attacks of the Government the defendants reply that the leases are the exercise of their right as patentees and if there is monopoly in them it is the monopoly of the right. It must, indeed, be said that it is the experience of the world that the utility of an invention entices to its infringement,but it would be a perversion of things to facilitate the wrong by a sacrifice pf the right in revulsion from the restraint which the right authorizes. But, on the other hand, we must not over-estimate the right or give it a sinister effect — permit it to be a means, to use the words of the Government, “to the building up and intrenchment” of an “illegal monopoly.” We cannot consider the contentions with the detail that counsel have. We think that their answer is in the statement of certain general propositions.

Of course, there is restraint in a patent. Its strength is in the restraint, the right to exclude others from the use of .the invention, absolutely or on the terms the patentee chooses to impose. This strength is the compensation which the law' grants for the exercise of invention. Its exertion within the field covered by the patent law is not an offense against the Anti-Trust Act. In other circumstances it may be, as in Standard Sanitary Mfg. Co. v. United States, 226 U. S. 20, to which case that at bar has no resemblance.

. The question, then, is, Was the .patent right lawfully exerted in' the leases? Were they anything more than the exercise of the patent monopoly? The word is descriptive and must be used, but it does not imply oppression. The old instrumentalities exist for all who are content with them and who care not for the better ones which inventive genius creates.

The charge of oppression puts out of .view many essential things. We must keep in mind the quality of the right we are considering and that the inventor gets nothing from the law that he did not have before and that, the only effect pf his patent is to restrain others from dealing with or using its device. United States v. Bell Telephone Co., 167 U. S. 224, 239; Paper Bag Patent Case, 210 U. S. 405; 424; Motion Picture Co. v. Universal Film Co., 243 U. S. 502, 510. Or to put it another way, the inventor does not get from the law a right, to a use that he did not have.before but he gets the right to an exclusive use. Take this from him and you take all that the law. gives him and to. sécure which the public faith is pledged. Chief Justice Marshall in Grant v. Raymond, 6 Pet. 218, 242.

Indeed, we said in the Paper Bag Patent Case that he may keep his invention out of use. Therefore, he necessarily has the power of granting it to some and withholding it from others, a right of selection of persons and terms. There is, however, a limitation upon him; he cannot grant the title and retain the incidents of it. Straus v. Victor Talking Machine Co., 243 U. S. 490; Bauer v. O’Donnell, 229 U. S. 1; Motion Picture Co. v. Universal Film Co., supra.

These cases have received review and application in Boston Store of Chicago v. American Graphophone Co., 246 U. S. 8. The principle, of them was expressed to be that where an article has been sold it passes beyond the monopoly given by the patent and conditions cannot-be imposed upon it. Leases are not of this character; they do not convey the title. It is not contended, nor could it be, that in this'case they are a disguise for something else, artifices to convey the machinery and yet keep it subject to the patent right and its exercise. It therefore follows that conditions may .be imposed by them.

It is not certain that the Government denies, this or means to assert anything more than that the patent right is exercised in oppression, assisting,' indeed consummating,' á scheme of monopoly, begun by the formation of the United Company, prosecuted in the various ways to which we have referred, and completed by the leases and their clauses.

It is difficult to. represent the contentions of the Gov-eminent without under-coloring them or over-coloring them. There is one that the leases are invalid in' and of themselves; there is another that “ultimately, of course, it is upon the lease forms themselves and their apparent and necessary effect upon competition that the United States relies.” The first contention the Government leaves very much to assertion, and defendants, charge that it was not made in the trial court; the second contention is necessary to assign to the leases an obnoxious quality in the hands of the United-Company which they did not have in the hands of the constituent companies. The distinction would seem to..be not material of itself, and the important consideration is not what the leases were in some other relation but what they are hi their present relation and to what purpose are they being rightfully or wrongfully, or can they be rightfully or wrongfully, used or enforced? To this inquiry we shall now address ourselves.

The first objection made to the leases is that they are unchangeable by the lessee — he “has no right,” it is urged, to demand either the cancellation or modification of an existing one. The objection is not definite or measurable. It is probably but a representation of what is deemed the severity of the leases, for, of course, a contract is a restraint upon option and can be enforced.. This power is its efficacy and indicates its obligation. And further it is of no consequence that the leases cover all of the machines of the United Company if they are an exercise of the patent rights. Whether they are is the broad question in the case and its disposition will dispose of all minor and dependent ones.

What, then, do the "leases accomplish? They have clauses called “tying” clauses, so called because, it is said, they tie the use of the machine leased to the use of machines not covered by the particular lease. Their result is, the Government asserts, “to make it in effect- a condition of the iease that the lessee shall not use the machines of competitors either to supply a need for additional machines of the kind leased or for machines of other important though wholly different types;”

And it isurged: “In addition to those clauses there are certain other clauses which have a similar effect upon the freedom of the lessee’s choice of machines. They give to the tying clauses their maximum effect as destroyers of the possibility of competition with the defendants.” It is charged that “the objectionable clauses are inter-related and operate together with cumulative effect”; that “they are unlawful both' as integral and effective parts of an unlawful whole, and, for the most part, in and of themselves.” ' And' it is further charged that “it is, however, -in their combined effect as a system of leasing, used and' insisted upon by a corporation dominant in its . field that, the full extent of their illegality is to be per--' ceived.” This, however, is assertion and relies for- its foundation upon the-assumption of an illegal dominance by the United Company that has been found not to exist. This element, therefore, must be put to one side and the leases regarded in and of themselves and by the incentives that induced their execution; and to a suit seeking their dissolution it may well be contended that the lessees are necessary parties, certainly so far as existing leases are concerned. But the contention of the Government goes farther and asserts that its purpose and object justify the absence of the lessees from the case. Indeed the Government takes merit to itself in reheving them of a thraldom. “The rights of the lessees,” it' is said, “are not touched except to preserve them.” - But a lessee may like his situation, may have .deliberately, chosen it and may' ¡ót care for any interposition, benevolent or otherwise.

Finally the Government, in possible opposition to both . .essor and lessee; asserts that “no one has the right to say that the unlawful conduct of another shall be permitted to continue because he has an interest in it.” Perhaps not. But there may be dispute as to the chan- . acter of the conduct, and its illegality cannot be conceded -to mere assertion.and the consequent assumption of a destroying power..

However, let us consider the clauses from the standpoint of the Government’s contentions and determine if they transcend the rights given to patentees. The clauses are: (1) One that prescribes a uniform term of 17 years.. The result of this is, the Government says, “that during that long period no replacement of a machine so leased by a better machine of defendants or others and no change in the form of the lease,or avoidance of any of its requirements is open to the lessee except with the defendants’ consent and upon their terms.” To.this it is replied that the leases of the constituent companies ran for indefinite periods and, besides, new patents were constantly taken out, and to these the criticism of the Government does not apply. And again, the term was assurance to the lessee as well as lessor, and, as defendants’ counsel'Suggest, there is analogy in the term to that of a ■ building lease which may under the hazard of circumstances turn out tó be or not to be advantageous Gf this there are two recent examples in this court. Filene’s Sons Co. v. Weed, 245 U. S. 597, and Gardiner v. Butler & Co., 245 U. S. 603. Indeed, we may. say. of all the clauses,, without a minute analysis and discussion of them, that they were simply bargains, based on patent rights and the conditions upon which those rights were granted.

(2)' The “additional-machines” clause, which provides that in case the lessee has moré work than can be performed by the, machine leased, he will lease additional machinery to perform the work, and that if the lessee does not do so the lessor may cancel the lease if he so elect, and any other lease of machinery of the same kind then in force between them. This clause, we shall presently see, was discontinued in 1907 and was not in use when this suit was brought. '(3) An “exclusive Use” clause requiring the lessee of particular machinery to use it exclusively and the auxiliary machines which aid or supplement it, and for failure to do so, lessor may at his option terminate forthwith in writing any or all leases or licenses of the particular machines and accessorial machines and they shall become revested in the lessor. This clause only requires an election of use between the United Company’s machines and those of other makers. If the election be of the latter, the lessor may terminate the lease and resume his machines. '(4) A prohibitive clause. This clause provides that the particular machine leased shall not be used in the preparation or manufacture of shoes, etc., upon which work is done by any machine not held by the lessee under lease from the lessor. (5) The right to terminate all leases clause. This clause does not need much explanation. Its name expresses its purpose. It gives the lessor the right, in default of the performance of the conditions of the particular lease, not only to .cancel that lease but all other leases and requires a delivery of the leased machinery to the lessor at Beverly, Mass., complete and in good order, reasonable wear and tear alone excepted. ’(6) The full-capacity clause; Its name expresses its purpose. It requires the leased machinery to be used to its full capacity upon the work to which it is applicable. This clause was in the lease- of the Consolidated Company prior to the formation of the United Company. Its purpose is to secure the royalty which is based on the amount of use of the machine. It does not require the. use of any particular machine dr the use of other machines-. It merely requires that the particular machine that is installed shall be used if the lessee have work for it. Without it defendants say that, as lessors, they would have no assurance of compensation for their machine. (7) A charge upon the return of the machinery leased is required. This needs no comment or. further notice.. (8) The. leases of metallic machinery provide for the purchase from the lessor, of certain fastening material. This clause and . the next, which, provides for the payment of royalties, are mere make-weights and not of special materiality.

The evil potency ascribed to the leases (we use the word as inclusive of the clauses and we do not think .it necessary to distinguish them according to their application to particular machines) by the Government is their asserted coercion of shoe makers and machinery makers. They limit the freedom of the first, it is contended, and by that limitation preclude the competition of the second with thN defendants. In other words, 'the use of the machines of the United Company is compelled as against the use of machines of other manufacturers, resulting in the restraint of the trade of the latter. To this charge all other charges are subsidiary, and the restraint is said to have been the initial conception of the company and the purpose of its organization. The evidence disproves this. As we have seen, the' leasing of their respective machines was the. practice of the constituent companies before their union and they were substantially the same after union as before — in instances better. There was a difference as to the prohibitive clause. After the union it related to machines of all of the companies. And the testimony also shows that the advantage of the leases was and is that manufacturers of' not large, means were able to obtain machinery which they were without capital to buy. They helped, indeed, the big and the little. One manufacturer, whose output was 5,000 pairs of shoes a day, testified that if his company had béen compelled to buy outright the machinery necessary, to equip its factory, it could not have developed as it had.

And sets of machines are necessary to thé equipment of a factory, and their best results are obtained when used in proper relation. This relation^ indeed,'the necessary coordination of the machines, was shown pictorially by a number of views in the eourt below, as well as testified to by witnesses. And there is great economic advantage, it was testified, in the accessory service furnished by the United - Company for the reason that "the regularity and continuous operation of the machines is dependent upon what may be termed instantaneous service. ... . This factor of service is at the very base of the successful operation of a shoe factory. The work is planned to travel from one room to another in fixed quantities. ■ So many pair go in in the morning — so many pair come out at night. The operatives are dependent upon that work traveling along regularly to them. The breaking down of some 6f these machines will in many of the factories block the entire flow of the work.” This was the testimony, of the president of the United Company, and it received corroboration fronma witness for the United States, who said: "The margin of profit in making shoes'is such that it- is very essential that our machinery should work smoothly and regularly and with, continuity, and economies in the manufacture of shoes often make the difference 'between á successful manufacturer and one who is not successful. One of the most important' economies is to have our machinery work with continuity and with the highest, efficiency and turn out our- product with • the utmost regularity day after day, just as we want to get it so that there won’t be any hitch anywhere in the flow of our product through our factory.” The witness gave praise to the excellence of the machines of -the United Company. This excellence and the described service the leases secured to the lessees and secured at the same timé.rights to-the lessors.' And the leases are strictly a reservation of the use of the machines, a right recognized in Bauer v. O’Donnell; Straus v. Victor Talking Machine Co., and Motion Picture Co. v. Universal Film Co., supra. We must assume they were entered into by the lessees upon a calculation of their value — the efficiency of the machines balanced against'the restrictions upon and conditions of their use. The lessees had the alternative of the choice of other machines for other machines were sold side by side with those the leases covered. This, we think, is put out of view.

r Let us guard against confusion and not confound things which must be kept in distinction. A patentee is given ■rights to his device, but he is given no power to force it on the world. If the world buy it or use it the world will do so upon a-voluntary judgment of its utility, demonstrated, it may be, at great cost to the patentee. If its price be too high, whether in dollars or conditions, the world will refuse it; if it be worth the price, whether of dollars or conditions, the world will seek it. To say that the world is not recompensed for the price it pays is to attack the policy of the law, is to defy experience and to declare that the objects of inventive genius all around us have contributed nothing to the advancement of mankind. This comment is applicable here. We cannot accept, therefore, the contention of the Government. We sée nothing else in the circumstances of the parties than that which moves and may move the transactions of men.

We may say further, in answer to the criticism of the leases, that relaxations of them' were granted by “riders” and that forms other than the restrictive were open to the shoe manufacturers, distinguished in the testimony by the term “independent.” They do not contain the prohibitive clause but do contain the other clauses and require an initial payment. Comparison is made of the independent form and the other forms by witnesses and various judgments are expressed. The Government sees nothing in any of them but the restraints upon the freedom of business, and regards the independent form as only slightly relaxing what counsel implies is the slavery of the others. The defendants contend that they are the simple exercise of a property right, the mutuality of agreement based on definite and valuable considerations. And it was testified that the machines in the United Company’s general department have always been open to sale or lease. It is further said that the additional-machine clauses were removed from all leases of the company as early as 1907 and they were not in use and did not represent its policy at the time of bringing this suit. But leases with that clause are outstanding, the Government replies.

However, we need not dwell further upon the leases. It approaches declamation to say that the lessees were coerced to their making. And, as we have said, there was benefit to the lessee. It is easy to say that the leases are against the policy of the law. But when one tries to be definite one comes back to the rights and obligations of the parties. There is no question in the case of the use of circumstances to compel or restrain; the leases are simply bargains, not different from others, moved upon calculated considerations, and, whether provident or improvident, are entitled nevertheless to the sanctions of the law. We have said this, indeed, with iteration, but sometimes propositions which have become postulates have to be justified to meet objections, which, if they do not deny their existence, tend to bring them into question.

Besides, it is impossible to believe, and the court below refused to find, that the great business of the United Shoe Machinery .Company has been built up by the coercion of its customers and that its machinery has been installed in most of the large factories of the country by the exercise of power, even that of patents. "The installations could, have had no other incentive than the excellence of the machines and the advantage of then use, the con-. ditions imposed having adequate compensation and not being offensive to the letter or the policy of the law.

Decree affirmed.

Mr. Justice McReynolds and Mr. Justice Brandéis took no part in the consideration and decision of the case.

1 During the trial a discussion came up. about patents. The presiding judge intimated that the court (fid not desire to take up the patents' themselves but would send them to an examiner. It was stated by counsel in the case that- the matter was important. But •the court made a distinction between a “patent question” and a “patent controversy” — good faith being an element of the latter — and stated that the latter would not be included in the hearing before the examiner, but would be heard in open court. The court then ordered the taking of testimony of both parties before-the examiner as to that - section of the bill which charged aft unlawful extension of the patents to perpetutate their monopoly at the expense of boot and shoe manufacturers and to use them to acquire a complete monopoly of all kinds of shoe machinery. The examination took place and it was the usual battle of experts, and the conflicts are recorded in a volume of more than eight hundred pages. Their ultimate test, however, and the effect of the patents is the testimony delivered in open court.

1 “Sec. 1. Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is hereby declared to be illegal. Every person who shall make any such contract or e.ngage in any such combination or conspiracy, shall bé deemed guilty of a misdemeanor, and, • on conviction thereof, shall be punished by fine not exceeding five thousand-dollars, or by imprisonment not exceeding one year, or by both said punishments, in the discretion of the court.

“Sec.- 2. Every person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person, or persons, to monopolizo any part of the trade -or commerce among the several States, or .with foreign nations, shall be deemed guilty of a misdemeanor, and, on conviction thereof, .shall be punished by fine not exceeding five thousand’ dollars, or by imprisonment not exceeding one year, or by both said punishments, in the discretion of the court.”

1 There is apparent confusion in the brief of the.Government. In pne'' place it is stated that the United Company was the consolidation of the' businesses and properties of seven companies which were taken over as going concerns, to-wit: Goodyear Shoe Machinery Company, International Goodyear Shoe .Machinery Company, Consolidated & McKay Lasting Machine Company, McKay Shoe Machinery Company,' Davey Pegging Machine Company, Eppler Welt Machine Company, and International Epplér Welt Machine Company. •

In another place the organization of the United Company is stated to be the merger of four companies — Goodyear Company, Consolidated & McKay Company, Eppler Company and the McKay Shoe Machinery Company — and resulted in the immediate suppression of competition between those companies and dominating “to the point of practical exclusion the important-field of supplying the principal and essential machines necessary in the manufacture of shoes.”

• However, in the conclusion of the Government’s brief it contends that it has established “that there existed vigorous competition between three of the companies merged in the organization of the United Company, and that the fourth company, which at any moment might have become a competitor, was taken in for the purpose and with the effect of furthering the unlawful scheme of the combination thus brought into being.” The fourth company referred to "is no doubt the McKay Shoe Machinery Company.

•The immediate results were, it is contended—

“ (1) The suppression of the actual and of the potential competition in lasting machines theretofore existing, between the Consolidated & McKay Company and the Goodyear Shoe Machinery Company. It created a'monopoly in lasting machines!

“ (2) The suppression of the actual and of the potential competition .between the Goodyear Shoe Machinery Company and the Eppler Welt Machine .Company. It created a monopoly of -welting and outsole stitching machineiy.

“(3) The absolute prevention of future competition between the McKay Shoe Machinery Company, the Goodyear Shoe Machinery' Company, the Eppler Welt Machine Company, and the' Consolidated & McKay Compel

“ (4) The creation ot an absolute and complete monopoly in lasting, pegging, welting, outsole stitching, heeling and metallic fastening machines.

“ (5) The creation of an organization with vast resources whose control of many different types of machines necessary to the shoe manufacturing industry gave it a power to extend and intrench its monopoly which none of its constituent companies, however successful, could approach.”

1 “Plaintiff’s Exhibit 152.

“ To the Stockholders of Goodyear Shoe Machinery Company:'

“Boston, Mass., Feb. 8, 1899.

“.The great advantages to be secured by the control in one corporation, both in the United States and in foreign countries, of the efficient types of shoe machinery, have been for several years recognized by the officers of the principal shoe-machinery- companies. For more than a year your directors and large shareholders have been in negotiation to accomplish this end.

“After a thorough investigation of the financial-condition and the business of the shoe-machinery companies named below, the organization of a corporation has been effected under the laws of the State of New Jersey, to be known as United Shoe-Machinery Company.'

“The United Shoe Machinery Company has already ’contracted for more than a majority of the capital stock of Goodyear Shoe Mar chineiy-Company, Consolidated & McKay Lasting Machine Company, McKay Shoe Machinery Company, Goodyear Shoe Machinery Company of Canada, International Goodyear Shoe Machinery Company, Eppler Welt Machine Company, International Welt Machine Company, Davey Pegging Machine Company, besides stocks in other shop-machinery companies, letters patent, and other property.

“The United Company will also from time to time acquire other shoe-machinery properties, either by direct ownership or by purchase of shares of their stock.”

1 “Plaintiff’s Exhibit 189.

“Whereas the United Company has acquired control of the boot and shoe and leather working machinery made by the following named ’ corporations doing business in said Boston, namely:

“Goodyear Shoe Machinery Company, Consolidated & McKay Lasting Machine Company, McKay Shoe Machinery Company, Eppler Welt Machine Company, Goddu Metal Fastening Company, Gordon Staple Lasting and Tacking Company, Davey Pegging Machine Company, Gem Flexible Insole Company, Boot & Shoe Sole Laying Company, and contemplates acquiring the control of other lines of boot and shoe and leather working machinery and boot and shoe findings, except leather, linings, lasts and finished boots and shoes. . . .”

1 The price was $3,000,000 in cash and $1,500,000 in common stock of the United Company at par, the market value of which was $3,000,000.

1 Mr. Winslow gave the following explanation of his purpose in the Plant purchase as stated in conversations with Mr. Plant:

“I always declined to have anything to do not only with buying but considering his propositions without a full and complete right to examine his 'machinery, determine the value of the inventions — the patents that he had — and Mr. Plant knew that my position all the time, at every interview was that I was not interested in what it cost-' him to get them up, whether much or little. My entire and only interest was whether those- patents could be made of benefit to our customers and the trade. If they could be of benefit, if they were of . large benefit, and the trade ought to have them, I should be very glad to buy them and embody them in our machines for what I 'thought they were worth, irrespective of what they had cost him — but I would not pay a cent more for them.”