statutes as to patents and copyrights in conferring upon an inventor or author the exclusive right to make, use, and sell articles embodying his invention or authorship create in him a new right, and do not extend, protract, continue, or prolong a previously existing right. An inventor or author who has not obtained a patent or copyright, has, before publication, a valuable right of another kind. He has the right to keep the knowledge of what he has invented or composed to himself. No one can lawfully obtain it from him without his consent. So, likewise, the owner of a secret process has the right to maintain the secrecy of his process. Both such an inventor or author and such owner have a right to sell their knowledge and their right to keep it a secret to another and vest him with the same rights in regard thereto as he has. They have the right to impart the knowledge to others with restrictions as to the use they shall make of it, and to have them make no greater use of it. Such knowledge as well as the articles embodying it is property, and entitled to the protection of the courts. From a commercial standpoint, the owner of a secret process may be in as good a position, if not better, than an inventor or author who has obtained a patent or copyright. But the exclusive right to make, use, and sell articles embodying his invention or authorship which such an inventor or author has is not the same as the right to secrecy which the owner of a secret process or an inventor or author who has not obtained a patent or copyright has before publication. The two rights are entirely distinct..

In the case of Tabor v. Hoffman, 118 N. Y. 31, 23 N. E. 12, 16 Am. St. Rep. 740, Judge Vann said:

"If a valuable medicine not protected by patent is put upon the market any one may, if he can by chemical analysis and a series of experiments or by any other use of the medicine itself aided by his own resources, discover the ingredients and their proportions. If he thus finds out the secret of the proprietor he may use it to any extent that he desires without any danger of interference by the courts. But because this discovery may be possible by fair means, it would not justify a discovery by unfair means, such as the bribery of a clerk who in the course of his employment has aided in compounding the medicine and had thus become familiar with the formula. The courts have frequently restrained persons who have learned a secret formula for compounding medicines, beverages and the like, while in the employment of the proprietor, from using it themselves or imparting it to others, to his injury."

And in the case of Vulcan Detinning Co. v. American Can Co. (N. J. Ch.), 58 Atl. 290, Vice-Chancellor Reed said:

"A patent protect its owner and his assignees and licensees against every one infringing it, while a trade secret protects its owner only against those who have learned the secret under a contractual or confidential obligation.”

It must be accepted, therefore, as true that as to the exclusive right which the statutes as to patents or copyrights confer the owner of a patent or copyright has it by virtue alone of said statutes. It arises

solely therefrom. If it were not for them he would not have it. And no other person has any such right in relation to any other articles. This right, however, is not the same as the right in question; that is, the right on the part of the owner of a patent or copyright to sell the things patented or copyrighted outright, and at the same time by a system of contracts similar to that involved herein retain control over the subsequent trade therein. As counsel for defendant say the two are essentially different. And this exclusive right is the only right which those statutes in express terms confer. It follows, therefore, that, if the owner of a patent or copyright has the right to sell the things patented or copyrighted and at the same time by such a system of contracts retain control over the subsequent trade therein by virtue alone of said statutes, he does not have it directly therefrom. Said statutes do not in express terms confer it upon him. If he has it at all, he must come by it indirectly; that is, through said exclusive right. It must grow out of that right. And it must be conceded that if it does grow out thereof that he has it by virtue alone of said statutes, just as much so as he has the exclusive right by virtue alone thereof, which we have heretofore demonstrated. The question I have been considering, then, simmers down to this: Does the right which it is presupposed the owner of a patent or copyright has — that is, the right to sell the things patented or copyrighted outright, and at the same time by a system of contracts similar to that involved herein retain the control over the subsequent trade therein as to retailers to whom and prices at which the wholesalers may resell, and as to the prices at which the retailers may resell to the consumers grow out of the exclusive right which those statutes confer, and which the owner of a patent or copyright has by virtue alone thereof?

To answer this question correctly it is essential that we look more deeply into this exclusive right so conferred, and ascertain its exact nature. No better definition of the nature of this exclusive right which the owner of a patent has by virtue alone of the statutes as to patents can be found than in these words of Mr. Chief Justice Taney, in Bloomer v. McQuewan, 14 How. (U. S.) 539, 14 L. Ed. 532, to wit:

"The franchise which the patent grants consists altogether in the right to exclude every one from making or using or vending the thing patented, without the permission of the patentee. This is all he obtains by the patent."

In other words, the right is the right to prevent every one from making, or using, or selling the thing patented without his consent. Or, to put it differently, it is the right to sue any one who so makes, uses, or sells the thing patented. It is not the right to make, or to use, or to sell the thing patented. That he has the right to do irrespective of the statute by virtue of the common law. That it is the former right, and not the latter which the statute grants, and the patentee has by virtue thereof, is pointed out in these words of Mr. Justice Harlan in Patterson v. Kentucky, 97 U. S. 506, 24 L. Ed. 1115, to wit:

"The right to sell the Au.ora oil was not derived from the patent; that right existed before the patent, and unless prohibited by valid local laws could have been exercised without the grant of the latter's patent. The right which the patent primarily secures is the exclusive right in the discovery, which is an incorporeal right, or in the language of Lord Mansfield, in Millar v. Taylor, 4 Burr. 2303, 'a property in notion' which has no corporeal tangible substance."

Having the right to prevent every one else from making, using, or selling the thing patented, he has the right to permit any one else to make, use, or sell it. This right to license does not exist by virtue of the statute. It is a common-law right. In the case of United States v. American Bell Telephone Co. (C. C.) 29 Fed. 17-43, Judge Jackson said:

"The right of the patent owner to permit or license the use of the invention is not the creature of the federal franchise or statute, but of the common law." Just as the exclusive right of the owner of the patent has been defined as the right to sue any one who makes, uses, or sells the thing patented, so the grant of a license to another by the owner of the patent may be said to be a grant of the right not to be sued for making, using, or selling the things patented.

Judge Lurton in Heaton Peninsular Button Fastener Co. v. Eureka Specialty Co. (77 Fed. 288, 25 C. C. A. 267, 35 L. R. A. 728), said:

"It has been said that the sole matter conveyed in a license is the right not to be sued."

Still further, it is to be noted that what the owner of a patent has a right to prevent every one else from doing, and to sue him if he does it, is either one of three separate and distinct things, to wit, making the thing patented, using the thing patented, or selling the thing patented. Likewise, the common-law right of doing which the owner of the patent has is of doing either one of these three things. And the like right of licensing others to do, which the owner of the patent has, is to make the thing patented, to use the thing patented, or to sell the thing patented. The statutory exclusive right of prevention and suing consists of these three separate and distinct things, and the commonlaw rights of doing and licensing to do consists also of these three separate and distinct things. . .

Hence, the patentee may license another simply to make the thing patented. If he licenses him to do no more he has no right to use or to sell the thing patented. He simply acquires title to the thing patented if he makes it under the license. He can neither use nor sell it. . . .

But it is possible that the license may go no further and it is conceivable that a patentee might grant no greater license. So, in addition to licensing such other person to make the thing patented, he may license him to use it, or to sell it, or to both use and sell it. If

he licenses him to use it only, he has no right to sell it, and if he licenses him to sell it, he has no right to use it. . .

We come, then, to this. The owner of a patent may make the things patented himself, and sell them to others and license such others to resell them, but may limit the license to resell to such persons as he may designate and at certain prices and the license of such persons to resell to others at certain prices. If he does so, and the first purchasers exceed the license either by selling the things licensed to persons other than those they were licensed to sell to or by selling at different prices from those at which they were licensed to sell, or the second purchasers exceed the license by selling the things licensed at different prices from those at which they were licensed to sell at, then, in either case, the purchasers so exceeding the license invade the patent owner's exclusive right, and infringe the patent. That this is so is established by several recent decisions. They are: Edison Phonograph Co. v. Kaufmann (C. C.), 105 Fed. 960; Same v. Pike (C. C.), 116 Fed. 863; Victor Talking Machine Co. v. The Fair, 123 Fed. 424, 61 C. C. A. 58; National Phonograph Co. v. Schlegel, 128 Fed. 733, 64 C. C. A. 594. . . .

We must conclude, therefore, that the owner of a patent or copyright has the right to sell the thing patented or copyrighted outright, and, at the same time, retain the control over the subsequent trade therein as to the retailers to whom, and prices at which, the wholesalers may resell, and as to the prices at which the retailers may resell to consumers; that this right on his part so to do grows out of the exclusive right which the statutes as to patents and copyrights confer and which such owner has by virtue alone thereof; and that this right of outright sale and retention of control which he has, he has by virtue alone of said statutes. . . . It follows from this that no other person has the right to sell any other personal property outright, and at the same time in this way retain the control over the subsequent trade in such personal property by the vendees and subvendees thereof. The owner of a secret process does not have the right to sell articles embodying said process outright, and at the same time in this way retain the control over the subsequent trade in such article by his vendees and subvendees. He can communicate the knowledge of his secret to others and limit the use that they are to make of it, and compel them to make no greater use thereof. If they make a greater use thereof, such conduct on their part is no invasion of an exclusive right on his part, but a breach of his confidence. If he sells the articles embodying the secret to others outright, he can, at the same time, retain no greater control over the subsequent trade therein by his vendees and subvendees than can the vendor of any other personal property, not a thing patented or copyrighted, who sells it outright can at the same time retain; and he cannot retain it in any other way than the owner of such other personal property can. Neither he nor the owner of such other property

can sell outright, and, by a mere limiting license to resell, retain control, so that a reselling in excess of the license will be an invasion of any exclusive right on his part and liable to be proceeded against as such.

But the question I have been considering has not been so far answered. As heretofore stated, it is this: Does the right to sell the things patented or copyrighted outright, and, at the same time by a system of contracts similar to that involved herein retain control over the subsequent trade therein by his vendees and subvendees, in the particulars stated, which it is presupposed the owner of a patent or copyright has, grow out of the exclusive right which the statutes as to patents and copyrights confer; and hence, does such owner have such right by virtue alone of said statutes? It will be noticed that the question is not whether the right to retain such control in the way I have indicated that is, by limiting the license to resell-grows out of such exclusive right, or whether the patent or copyright owner has the right to retain such control in that way, by virtue alone of said statutes; but it is whether the right to retain such control by a system of contracts similar to that involved herein grows out of such exclusive right, and whether the patent or copyright owner has the right to retain such control by such a system of contracts by virtue alone of said statutes. The question thus put must be answered in the negative. No right on the part of the patent or copyright owner to sell the thing patented or copyrighted outright, and at the same time retain control over the subsequent trade therein by his vendees and subvendees by such a system of contracts, grows out of said exclusive right and the patent or copyright owner has no such right by virtue alone of said statutes. [No] such a system of contracts, nor any contract on the part of the licensee that he will not exceed his license, is necessary to enable the patent or copyright owner so to do. He is enabled so to do by limiting the licenses as heretofore indicated. The licensees are bound not to exceed the license, even though they may not have agreed so to do. They are bound so to do in such a case, because an excess of the license is an invasion of the exclusive right. . . .

The sole effect, then, of the application of a system of contracts to things patented or copyrighted is, as stated, to afford another remedy for an excess of the license, which may be enforced in another forum. . .

Inasmuch, then, as the right to apply such a system of contracts to things patented or copyrighted arises solely from the common law, and not to any extent from the statutes as to patents and copyrights, no inference whatever can be drawn. . . . that the owner of a secret process, who cannot appeal to any statute for any right, has no right to apply it to articles made thereunder, or that it would be unlawful for him to apply it thereto.

I am therefore driven to the conclusion that the argument of defendant's counsel is not sound. It breaks down at two points. The presupposition that control over the subsequent trade in things pat