Horace Pettit, for Victor Talking Machine Co.

Waldo G. Morse, for defendant.

CHATFIELD, District Judge. The present cases have been heard upon a record consisting of pleadings and affidavits presented originally upon a motion for preliminary injunctions and by stipulation made the record and testimony on final hearing. The two actions involve substantially the same principles and can be disposed of together, the slight differences between the positions of the parties, and certain questions peculiar to the allegations of each complainant, being capable of statement and determination in connection with the main issues, which are alike in the two suits.

The complainants at the present time are producing and putting upon the market records of vocal and instrumental music, for use upon machines for the reproduction of sound, and constructed in a form suitable. for operation with these records in the flat and circular or disc form described in the patent to Berliner, No. 534, 543, February 19, 1895 (Victor v. Amer. Grapho. Co., 145 Fed. 350, 76 C. C. A. 180), and Jones, No. 688, 739, December 10, 1901 (Amer. Grapho. Co. v. Universal Co., 151 Fed. 595, 81 C. C. A. 139). It is unnecessary to consider in detail the machines made by either company, further than to say that those manufactured by the complainant the Victor Talking Machine Company are known generally as the "Victor talking machines," and those put upon the market by the Columbia Company are called "graphophones," and the discs described can be interchangeably used upon either type of instrument.

The discs themselves, as at present made, are of some such substance as hard rubber, and are said to be made by causing the music to be sung or played into a receiving instrument, which records the waves of sound upon a disc properly prepared, which, in turn, by an electroplating process, is used to yield a matrix of metal. From this matrix numberless reproductions, substantially duplicates even in minute details of the original record, are produced by processes perfected by each company, and these reproduced discs, when used upon the talking machine or graphophone, turn back, by means of the diaphragm of the instrument, the lines of the record into sound waves, which are the equivalent of those originally sung or played.

In the case of the Victor Company, the discs sold by it within the United States are plainly marked with notice of the patent, and also with notice that the disc is sold for use only upon a talking machine, for the reproduction of sound. The price at which the discs are to be sold is also printed upon each disc, and the maintenance of this price is made a condition of the sale under license. Thus actual notice is given to each purchaser or user of the Victor Company's discs, of the conditions under which they have been sold, and that the article has to do with a patented product. It also appears that a company was organized in Canada by Berliner, who had previously assigned his patent

to the Victor Company, and the Berliner Company, Limited, of Canada, has for a number of years been furnished with matrices of the Victor records, and has put upon the market and sold discs reproduced from these matrices, bearing similar license notices to those used by the Victor Company of this country.

The Fonotipia Limited is a British corporation, and the Columbia Phonograph Company is a corporation organized under the laws of West Virginia; the Fonotipia Limited conducting business in England, and in Italy, Germany, and other places on the Continent of Europe, while the Columbia Phonograph Company carries on its business within the United States. . .

Particular attention has been called to the trademark of the Victor Company, which, both as a trademark and as an advertisement, in the shape of a dog listening to the sounds from a talking machine horn, and labeled "His master's voice," has become familiar to the public. The methods employed by all of the complainant companies, the uniform care and excellent reproducing qualities of their products (both machines and records), has educated the public to expect the successful reproduction of music of a high standard of quality in the reproduction, and, as shown by the record, the grade of goods produced by the complainant companies upholds the standards which they have established. The public is protected in its purchases by the evenness and excellence of the output.

In addition to the expense and the rights represented by the business indicated, all three of the complainant companies have entered into separate contracts with individual singers and musicians, and particularly in the case of singers under contracts with the so-called "Grand Opera Companies" of New York, Paris, London, Berlin, Milan, etc. Under these contracts with artists able to command large prices, the initial cost of producing the record is great, and the companies are under an agreement to pay a royalty for each record produced from the original matrix, thus furnishing a continuing contract and expense, of which the benefit is going to the singer. . . .

The defendant has been connected with the business of selling phonographs and sound producing machines for a number of years. He is shown by the record to be more or less familiar with the business and to be at present acting as sales agent for a corporation called the Continental Record Company, which is stated in the papers of incorporation to have its home office at New Baltimore, N. Y. The records show that at New Baltimore no plant or office is maintained, but that the company has a local attorney or representative to comply with the requirements of the law. In New York City the only address shown by the testimony as that of the Continental Record Company is the address contained in a bill for certain discs purchased by a representative of one of the complainants. . . . We have therefore no more information about the Continental Record Company and its business than

that which its selling agent has furnished, and what has been discovered by those investigating on behalf of the complainants as above set forth. The defendant has been for some months advertising by circular letter and in other ways his ability to sell records of the Continental Record Company, stating in these advertisements that the records are sold at prices not more than half those now charged for the original records. The advertisements claim that the records themselves are pressed upon the very highest class of material finished equal to the original, that the character of the record itself is identical with the original record, and that experts who have listened to samples are unable to determine between the original and the copy. The catalogue contains a statement that the records offered by Bradley are "all duplicates from the original records made by the artists whose names are used herein."

The Victor Company has, in addition to its patents and license system, and to its trademark, adopted a design for the center or identifying part of the commercial records, and has made use of a so-called "red seal" to cover the center of its higher grade of records. These centers or seals are made of some foreign substance, applied to the record, containing the labels and notices together with the trademark, and are printed in type. . . . It need only be said that the use of a red band cannot of itself be deemed an imitation of a red label, where the general style of the design is entirely different. The Victor Company does not seem to have the right to prevent, solely from the standpoint of its trademark, the use of a label of any sort affixed to the center of a disc, nor even of a circular label; and the fact that all of the labels are appropriate for use upon sound discs does not give either of the complainant companies right to relief solely from registration of trademark.

It would seem to be true, in a sense (and the evidence tending to show likeness between the original records of the complainant companies and the particular records sold by the defendant only accentuates this testimony), that the records put upon the market by the defendant have been made, through some transmutation, from original songs sung under contract by the artist to whom the disc is accredited, and to whom a royalty is being paid by one of the complainants, and with whom the defendant has no contractual or business relations whatever. In such case it is impossible to hold that the public is being deceived in the representation that the original song, from which the matrices and reproductions were derived, was sung by the artist to whom it is accredited. Certain mistakes in labelling are shown; but these are merely evidence of the way in which the work was done, rather than sufficient grounds for decree by themselves. Nor is there sufficient similarity to hold, as has been said, that the discs sold by the defendant are in appearance sufficiently like any other discs of the complainants as to bring them within the case of Victor Talking Mach. Co. v. Armstrong et al., C. C., 132 Fed. 711. . . .

But before determining whether the complainants can have any remedy under the doctrine of unfair competition, certain questions must be disposed of, which cannot control, and which will complicate the issue if not separately taken up at the outset. First, the defendant contends that the complainants should be compelled to rely upon their patent rights; and inasmuch as their rights under their patents would prevent infringing, making, and sale of discs of the form in question, if their patents be valid, the defendant attempts to urge the converse of the proposition, and asks the court to dismiss this action on the ground that the complainants have an adequate remedy, not at law, but in equity, for infringement of patent. This would necessitate the finding of an additional proposition, namely, that the complainants are not entitled to a decree based upon the doctrine of unfair competition, if they could accomplish the same results by means of an injunction suit upon their patents. But if they should fail in upholding the validity of their patents or proving infringement, or when their patents expire, we should again be facing the same situation now presented, namely, that the doctrine of unfair competition is claimed by the defendant to be limited to cases in which an intent to deceive can be found, either because of misrepresentations or imitation of the trade name or outward appearance of the article over which the competition exists, or that some special quality in the nature of the product renders the sale of the competing article unfair competition, such as was shown in the stock-ticker, trading-stamp, or railroad-ticket cases, referred to below. . . .

But, as has been already said, the question of imitation of trademark cannot control the present case. And we must therefore consider the broad question presented by the issue, namely, whether the taking of property in the shape of valuable ideas and products, by mechanical imitation or reproduction, is susceptible of notice by a court of equity and whether any remedy therefor can exist apart from the questions of patent, trademark, and intentional deception, or imitation and deceitful substitution of the product.

No case cited and decided strictly upon the question of unfair competition, so far as called to the attention of the court, has ever granted relief in instances outside of imitation or deception, and where the public would be likely to be misled by the points of similarity involved; but equity has granted relief in certain typical lines of cases where the doctrine of unfair competition seems to have been the guide to the decision, but where the basis upon which the relief was granted was the unfair taking of the complainant's property, rather than the deception. of the purchaser, or the imitation of a patented or copyrighted article, or a registered trademark or trade name.

In the cases of National Tel. News Co. et al. v. Western Union Tel. Co., 119 Fed. 294, 56 C. C. A. 198, 60 L. R. A. 805, and Illinois Commission Co. et al. v. Cleveland Tel. Co. et al., 119 Fed. 301, 56 C. C. A. 205, the dissemination of market news by a tape ticker was held not to

be copyrightable; but the Court determined that the business was lawful and involved the use of property which included intangible rights which were capable of illegal or inequitable appropriation and use by another party. The service of news by means of such a tape ticker was protected, and the further sale of the items of news given to the public by the ticker service was enjoined, apparently upon the theory that the appropriation of such property was the taking of that property from the person entitled to the enjoyment thereof. These cases were substantially approved by the Supreme Court of the United States in Board of Trade v. Christie Grain & Stock Co., supra, and the Court says:

"The plaintiff has the right to keep the work which it has done, or paid for doing, to itself. The fact that others might do similar work, if they might, does not authorize them to steal the plaintiff's" - comparing Bleistein v. Donaldson Lithographing Co., 188 U. S. 239, 23 Sup. Ct. 298, 47 L. Ed. 460.

And while the approval by the Supreme Court of the United States in this particular case seems to have been specially given because the acts complained of therein induced a breach of trust, it is difficult to see any distinction between the questions involved in the present litigation and that in the stock-ticker cases.

Another line of cases involving somewhat similar determinations are known as the "ticket-scalper cases," such as: Bitterman v. Louisville & N. R. R. Co., 207 U. S. 205, 28 Sup. Ct. 91, 52 L. Ed. 171, affirming Louisville & N. R. Co. v. Bitterman, 144 Fed. 34, 75 C. C. A. 192; Penna. Co. v. Bay et al. (C. C.) 150 Fed. 770; Illinois Central R. R. Co. v. Caffrey et al. (C. C.) 128 Fed. 770; Nashville, C. & St. L. Ry. Co. v. McConnell et al. (C. C.) 82 Fed. 65. And also the trading-stamp cases. Sperry & Hutchinson Co. v. Mechanics' Clothing Co. (C. C.) 128 Fed. 800; Same v. Louis Weber & Co. (C. C.) 161 Fed. 219, and cases therein cited.

In the ticket-scalper cases injunctions were granted, not because the purchasers of tickets were deceived by imitation or fraudulent tickets, but because the railroads issuing the tickets were injured by the trade in tickets obtained from them under special contracts, and then sold to other individuals who were not entitled to enjoy those contracts. In the trading-stamp cases, relief was granted, not to the extent of holding that trading stamps could not be transferred, nor upon the ground that persons obtaining trading stamps were being defrauded by a transfer of the right to redeem, but on the theory that the use of trading stamps as premiums, for the sake of soliciting trade by persons not parties to the original contracts under which the Sperry & Hutchinson Company agreed to issue the tickets, was a wrongful appropriation of property rights belonging to the Sperry & Hutchinson Company.

The present case is extremely like these just considered in principle. It is almost as if the Court should be asked to enjoin individuals from theft, upon the ground that the criminal statutes did not make the