The Edison phonograph monthly (Dec 1914-Dec 1915)

10 EDISON PHONOGRAPH MONTHLY, SEPTEMBER, 1915 THE RIGHT OF A MANUFACTURER TO CONTROL THE RETAIL PRICE AT WHICH HIS PRODUCT SHALL BE SOLD Synopsis of Mr. H olden' s Paper Read at the Dealers' Convention. THE primary fact upon which the carrying on of all lines of business depends is that business men do what they agree to do. Unless this were true, business could not be carried on for a day. This being so, it should be a simple matter for any manufacturer to control the price at which his goods should be sold at retail by making suitably worded contracts with his jobbers and dealers. Such contracts are valid in England and -Canada as regards all lines of merchandise, but the law is different in the United States on account of the statute commonly known as the "Sherman Anti-Trust Act," passed in 1890, which prohibits certain contracts in restraint of trade. The U. S. Supreme Court has had occasion only once to pass upon the question of whether or not the owner of a patent can by license, agreement or contract specify or fix the price at which a patented article shall be sold by his licensee, this case being entitled Bement vs. National Harrow Co., 186 U. S. 70 (May 19, 1902). In that case it was held that "the owner of a patent may assign it or sell the right to manufacture and sell the article patented upon the condition that the assignee shall charge a certain amount for such article ;" and as the contract which was passed upon was a license contract, we may substitute the word "licensee" for "assignee." Upon the strength of this decision, the various U. S. Circuit Courts (now District Courts), and Circuit Courts of Appeals rendered a vast number of decisions in which the license contracts of Thomas A. Edison, Inc., with its various jobbers and dealers were upheld, approved and enforced. About five years ago, however, a case came before the Supreme Court in which the legality of jobbing and retail agreements for the marketing of the preparation known as Peruna was questioned. This article being unpatented, the Court held that the agreements in question were illegal since they were in restraint of trade within the meaning of the Sherman Act, or in other words, that the Sherman Act prohibited the manufacturer of an unpatented article from fixing the price at which his product shall be sold by the jobber to whom he sells or the dealer to whom the jobber supplies the same. This case is entitled "Dr. Miles Medical Co. vs. Park & Sons Co.," 220 U. S. 373. The next important case decided by the Supreme Court and known as the Sanatogen case, Bauer vs. O'Donnell, 229 U. S. 1, has been so much misrepresented by newspaper statements that it has by many persons been understood as deciding that a patent owner cannot fix the price at which the patented article shall be sold, but this is a mistake, as a careful reading of the opinion shows that no such finding was made. The preparation known as Sanatogen was a patented article, to be sure, but the manufacturer had no license agreement with the defendant in that case. The manufacturer endeavored to maintain the retail price by placing a label upon each bottle of Sanatogen which stated that the same should not be sold for less than one dollar. The defendant, O'Donnell, who conducts a drug-store in a prominent location in Washington, D. C, purchased bottles of Sanatogen from a jobber but did not agree to resell them only at a given price, he making no agreement whatever either with the owner of the patent or the jobber from whom he purchased the goods. Under these circumstances, the Supreme Court found that the defendant was not bound in any way as to the price at which he should dispose of the goods. A more recent case which has attracted considerable attention in this part of the country is known as Victor Talking Machine Co. vs. Straus (R. H. Macy & Co.), the well-known New York department store; this suit being brought for an injunction to restrain the defendant from the sale of Victor talking machines and records. The goods of the Victor Co. are patented and are put out under a license agreement system which differs from that under which the goods of Thomas A. Edison, Inc., are marketed in that while our goods are sold outright by us to the jobber and by the jobber to the retail dealer, the Victor Co. maintains that the title to the goods remains in them and they dispose of only the right to use the goods with a provision that if their license requirements are observed the title will vest in the ultimate purchaser after the latest patent under which the goods are put out has expired. The defendant in this suit had acquired a large quantity of the Victor goods and was offering the same at lower prices than the Victor Co.'s licensed dealers. The injunction prayed for, however, was not for restraining the defendant from selling at cut prices, but from selling the goods at any price, on the ground that any sale whatever by the defendant would be a violation of the Victor patents since the Victor Co. had not granted to any one the right to sell the goods. In this case there was no license agreement existing between the Victor Co. and the defendant, or in other words, the Macy Co. had not agreed with