The talking machine world (Jan-Dec 1916)

THE TALKING MACHINE WORLD. 41 GREAT VICTORY FOR VICTOR TALKING MACHINE CO. United States Circuit Court of Appeals Reverses Decision of Lower Court in Victor Co.-Macy Suit, and Recognizes Validity of Victor License Notice. The United States Circuit Court of Appeals handed down on Tuesday a most important opinion in the case of the Victor Talking Machine Co. vs. R. H. Macy & Co., reversing the decision of the lower court, which had dismissed the Victor Co.'s amended complaint. The decision in this case, which is of the utmost importance to the entire trade and constitutes a signal victory for price maintenance, is as follows : This cause comes here upon appeal from a decree of the District Court, Southern District of New York, dismissing the bill. Plaintiff is the manufacturer of certain talking machines and sound records, which are covered by patents which it owns. The suit is brought to restrain defendants, who conduct a department store, from selling or offering for sale, or attempting to part with the title and right of possession of any of plaintiff's patented talking machines and sound records. The theory of the bill is that defendant has some of these in its possession, having obtained such possession without the assent, direct or indirect, of complainant, and that defendant has no right to dispose of such machines and records without the consent of complainant and upon the terms which it prescribes. Upon the filing of the original bill motion was made to dismiss it under the new Equity Rule 29, which is the equivalent of a demurrer under the old practice. Judge Augustus N. Hand granted such motion and filed an opinion 222 F. R. 524. Appeal was taken to this court; we held that even on complainant's own theory his bill failed to make certain allegations which were essential. The dismissal was therefore affirmed, but with leave to amend (225 F. R. 535). The bill was then amended by inserting these allegations. Motion was made to dismiss the amended bill and was granted by Judge Hough, who filed no opinion, although he delivered one, orally. From the order of dismissal this appeal is taken. LACOMBE, C.J.: This case presents the familiar one of the manufacturer of a patented article undertaking to extend its use and at the same time regulate the terms and conditions under which it shall be used. It seeks to accomplish this in part by a written contract entered into between itself and every so-called licensed dealer to whom it delivers the possession of instruments or records. This need not be recited, as in substance it is the same as a so-called "License Notice" which is attached to a conspicuous part of every machine. This notice varies only in its statement of the amount of royalty, which, of course, is different for different types of machines. The notice affixed to every instrument of the type known as Victrola XVI reads as follows: This machine is manufactured by us under bur patents hereinafter noted, and is licensed for use only for the term of the patent having the longest term to run, and only with sound records, sound boxes and needles manufactured by us; and our records and sound boxes are licensed only for use with our machines. Only the right to use the said machine is granted to Victor distributers and dealers for demonstrating purposes, with the right to the distributer to assign a like right to regularly licensed Victor dealers at the dealers' regular discount royalty, with the right to the dealers to convey the license to the public to use the said machine only when a royalty of not less than $200 shall have been paid and upon consideration that all the conditions of license shall be strictly observed. A similar right is also granted to the distributer to convey to the public the right to use this machine under the same conditions. "No license to use this machine is granted to the public until the full royalty shall have been paid. This machine is not licensed for use for public entertainment for profit; for a license for such public use an extra license fee of ten per cent. (10%) of the full royalty shall be payable. Title shall remain in the Victor Talking Machine Co.; also the right to repossess the said patented goods upon the breach of any of the conditions upon the repayment by the Victor Co. to the user of the royalty paid by him, less 5 per cent, per annum of the full royalty for each year, or fraction of a year, that the user shall have had the use thereof. The Victor Co. also reserves the right for itself and its representatives to inspect, adjust and repair this machine at all reasonable times while in the possession of the user, and to instruct the user in its use, but assumes no obligation so to do. All patent rights are reserved by the licensor except those hereby granted to the licensees upon the performance of the conditions noted. Any excess use, or violation of the conditions, will be an infringement of the said patents. The patents under which this machine is manufactured and licensed for use are, among others, as follows: (here follows a long enumeration of the numbers and dates of issue of various patents) and other United States patents under which this machine or parts thereof are manufactured. No license is granted to use this machine in any altered or changed condition, or with any parts not manufactured by this company. This machine is licensed for use only in the condition, construction and arrangement in which it is put out by us, and any use of this machine, or parts thereof, in any other or altered construction or arrangement will be construed as a violation of this license. This machine is licensed for use only with needles supplied by the Victor Co.; needles will be supplied by the Victor Co., direct to any licensee of any of its patented machines ot wholesale price, upon written request. This license is good only so long as this label remains on this machine; any erasure, alteration or removal of this laoel, or of any of the company's labels, or marks attached to this machine, will be construed as a violation of this license. This machine, at the expiration of the patent having the longest term to run, under which it is licensed, shall become the property of the licensee (the machine being then free of the patents, the subject-matter of the license), provided that the licensee shall have faithfully observed the conditions of license, and the Victor Co. shall not have previously taken possession of the machine as herein provided. An acceptance of this machine is an acceptance of these conditions. All rights revert to the undersigned in the event of violation. Victor Talking Machine Co., Camden, N J. August 1, 1913. A somewhat similar License Notice is affixed to every sound record cr its envelope. A study of these various documents leads to the conclusion that complainant has undertaken to avoid making such a sale of its machine as would permanently pass it beyond any further control by itself. We think it has succeeded in so doing; this is not a sale outright, or a conditional or restricted sale or any sale at all. Under the authorities the owner of a patent who manufactures machines under such patent can give the right to use to whom he pleases upon what conditions he may choose to impose. Some of those conditions may involve pecuniary return, such as royalties, rentals for fixed periods, specified lump sum compensation for the whole period. We do not see why he may not give to one person a more re stricted right to use than he does to another. The Dick case 224, U. S. 1, establishes the proposition that a restriction to use only with other products of the patentee is legitimate. Of course, the giving to any person of a "right to use" things of this sort is an idle thing, unless the person is also supplied with the physical thing to be used, to hold the same while he is enjoying the use and complying with its terms. Turning now to the License Notice.. What is granted by the patentee is "only the right to use" the particular machine, unaltered, without parts not manufactured by the Victor Co., maker and owner of the patents and only with records and needles made by the Victor Co., and to Use it only so long as the notice unerased and unaltered remains on the machine. The term for which this right to use is granted is a fixed period "for the term of the patent having the longest term to run" — this term is ascertainable with precision by reference to the notice affixed to the machine which enumerates all the patents. The character of the use is not the same in all cases. 1. To "Victor distributers" there is given a right to use only for "demonstrating." As. the sole result of demonstration is to induce the public to get the machines it may be assumed that these distributers are paid by the Victor Co. 2. To regularly licensed "Victor dealers" there is also given a right to use for "demonstrating" purposes. Sometimes conveyance of such right to use is made directly by the Victor Co. to the licensed Victor dealer. Sometimes the conveyance is made to the "dealer" by the "demonstrator," who by the terms of the notice is expressly authorized to convey such right to the dealer. These dealers, of course, do not use these machines for their personal enjoyment; their demonstrations are given to induce the public to apply for machines and they are paid by a commission cn the amount paid by every person who may be induced by them to take one. 3. To the public, i.e., to individuals who wish to use the machines generally. Apparently such conveyances are not made directly by the manufacturer; they are made by "Victor distributers" or by "licensed Victor dealers," who are expressly empowered to make such conveyances. For each one of such machines the person to whom a right to use the same is granted and a machine delivered, to be by him used, shall pay a lump sum, which varies with the type of machine. This is called a royalty; in effect, it is a payment in advance covering use for the entire term— down to the expiration of the last patent. During such term the restrictions as to parts, integrity of notice, needles, record, etc., are in force and the manufacturer reserves title in itself. Of course, when the patents expire no such restrictions could be maintained and, therefore, when that time comes any licensee (or user) in whose hands a machine may be, and who has faithfully observed the conditions, shall receive full title to the same. The documents are long and complicated, but it seems to us that this is what they provide for. We do not know why, under the law and the authorities, a patentee may not thus dispose temporarily of the use and ultimately of the title of a machine made by him and protected bv his patent. The order is reversed. Fenton & Blount, Philadelphia, Pa., were the attorneys for the Victor Co., and Wise & Seeligs.. berg appeared for R. H. Macy & Co. AIDING MUSICAL APPRECIATION. How the Victrola Is Utilized in Normal Training School in Kansas City — Good Work Done by J. F. Ditzell, Manager of the George B. Peck Co. Victrola Department, Brings Results. (Special to The Talking Machine World.) Kansas City, Mo., January 10. — Kansas City is developing a most emphatic inclination towards musical appreciation and culture, which is nowhere more clearly shown than in the public schools. In the past few years there has been an increasing attention to musical instruction particularly observable in the introduction of pianos in practically every school, and more lately with the desire of every school to have a talking machine. These machines are usually purchased by subscription of parents of the pupils, the school board not having yet reached the point where it will supply them. But it seems likely that before long the talking machine will be recognized as quite as indispensable as the piano. The reason for this is the increased attention to the subject of musical appreciation, which can only be inculcated with such various examples of performance and subject as the talking machine provides. The problem of the dealers, however, has been the expense of soliciting the business. Most of them have been waiting for the psychological moment to arrive, when the subject could be presented without uneconomical loss of salesmen's time. The psychological moment seems to have arrived. Shortly after school was resumed following the holidays, J. F. Ditzell, manager of the Victrola department of the Geo. B. Peck Dry Goods Co., received a visit from Miss Emma Serl, instructor in music at the normal training school in Kansas City. Miss Serl inquired as to the most convenient method of giving her pupils a "view" of some of the operas they had been studying. She had been using the Victor Book of the Opera, and naturally turned to a Victrola dealer for advice. Mr. Ditzell invited her to bring her class to the concert room in the store for a special session. Some thirty students, all young ladies preparing for the teaching of music in the public schools, came with Miss Serl. A program had been prepared of selections from the three operas, "Bohemian Girl," "Martha" and "II Trovatore," that were being studied. Miss Serl lectured on each selection as it was given on the Victrola. This is the first year that the normal school has been taking up such work; and the importance of the demonstration and service can hardly be overestimated. Not only is the training school itself thus finding the necessity as well as the advantage of the Victrola in class work, but the students are learning their duties in the light of the assistance of the machine and the records. It seems inevitable that in a very short time every school in the city must have a talking machine as a part of the regular equipment. NEW INCORPORATION. A. M. Warenberg, M'. Freedman and A. S. Levy, of 233 Broadway, this city, have incorporated the Perma Recording Laboratories Corporation, with a capitalization of $300,000. The new concern will deal in talking machine records, pianos, players, novelties, and make master records as well. KOERBER=BRENNER CO. PROGRESS. Closed Great Year in 1915 — Was One of Expansion for the House and Its Dealers — Big Plans for Year Just Opened Have Been Made. (Special to The Talking Machine World.) St. Louis, Mo., January 11.— Few firms have made a better record of advancement in the year just closed than the Koerber-Brenner Music Co., of this city. As Victor distributer it has been most solicitous of the needs of its dealers and has at all times aimed to keep them supplied not only with stock, hut with such "service" pointers as would be helpful in developing their business. This co-operation has been much appreciated, and has resulted in the general expansion not only of the house of Koerber-Brenner itself, but of its dealers in the important territory which it controls. The plans for 1916 are bigger and better than for 1915, and this means much, for the Koerher-Brenner Co. is ever on the alert for every means of advancing the interests of its growing constituency. This is unquestionably the secret of its great success. An interesting announcement from the Koerber-Brenner Co. appears elsewhere in this issue of The Talking Machine World. Arthur Figner, a nephew of Gustavo Figner, of Sao Paulo, Brazil, has connected himself with a talking machine concern in New York City. DO IT NOW! DON'T DELAY PUTTING OFF SEEING YOUR CONGRESSMAN SO THAT HE MAY KNOW THAT HE WILL HAVE YOUR SUPPORT IN THE ADVOCACY OF THE STEVENS BILL.