[U.S. Circuit Court of Appeals-Third Circuit.]

NATIONAL HARROW COMPANY v. HENCH et al.

Decided October 29, 1897.

81 O. G., 1612.

1. CONTRACT-RESTRAINt of Trade.

While it is true that all contracts in restraint of trade are not prohibited, and it is sometimes difficult to determine whether a particular one is, there is no room for doubt that a contract between patentees and manufacturers of patented articles to prevent competition in business and enhance prices is unlawful. 2. SAME-PROPERTY COVERED BY LETTERS PATENT.

The fact that property involved is covered by Letters Patent cannot be urged as a justification of a contract which enhances prices and restrains trade. Patents confer a monopoly as respects property covered by them, but they confer no right upon the owners of several distinct patents to combine for the purpose of restraining competition and trade. Patent property does not differ in this respect from any other.

3. SAME-PATENT PRIVILEGES-COMBINATION BY DISTINCT OWNERS OF PATENTS— MONOPOLY-RESTRAINT OF TRADE.

The fact that one patentee may possess himself of several patents and thus increase his monopoly affords no support for an argument in favor of a combination by several distinct owners of such property to restrain manufacture, control sales, and enhance prices. Such combinations are conspiracies against the public interest and abuses of patent privileges. The object of these privileges is to promote the public benefit, as well as to reward inventors. 4. SAME-SAME-AVOIDING LITIGATION.

A contract based on patent rights which restrains trade is not justified by the situation of the parties. Their exposure to litigation is entitled to no greater weight. Patentees may compose their differences, as the owners of other property may, but they cannot make the occasion an excuse or cloak for the creation of monopolies to the public disadvantage.

APPEAL from the Circuit Court of the United States for the Eastern District of Pennsylvania.

Before DALLAS, BUTLER, and KIRKPATRICK, Judges.

Messrs. Risley & Love for the appellant.

Messrs. Strawbridge & Taylor and Mr. John G. Johnson for the appellees.

BUTLER, J.:

The essential facts are well stated by the Circuit Court as follows:

The National Harrow Company, a corporation of the State of New York-to whose contract rights and general purposes the plaintiff, a subsequently-created New Jersey corporation, has succeeded-originated in a written agreement between a number of leading and distinct manufacturers, under various United States Letters Patent of float spring-tooth harrows, whereby it was agreed that they should organize a corporation under the laws of New York and would assign to the corporation all United States Letters Patent which they respectively then owned or should thereafter acquire relating to float spring-tooth harrows and the good-will of their busi

ness in such harrows, and that they would not thereafter be interested in the manufacture or sale of such harrows except as agents or licensees of the corporation; that the corporation should issue to the persons, firms, and corporations respectively so assigning to it their said patents and the good-will of their business exclusive licenses to manufacture and sell upon their own account, subject to uniform terms and conditions, the same style of harrows which they were making and selling just prior to the agreement, and that the corporation itself would not manufacture and sell any style of harrows covered by its licenses; that each licensee should pay to the corporation one dollar on every float spring-tooth harrow manufactured and sold by such licensee, and that each person, firm, or corporation transferring to the corporation the good-will of their float-spring-tooth-harrow business and their patents relating thereto should receive in payment therefor the value thereof as agreed upon or as fixed by arbitration in paid-up stock of the corporation.

The agreement in the first instance was signed by six different manufacturers; but the contract contemplated and provided that others should come into the arrangement and become parties thereto. Accordingly, other manufacturers of float springtooth harrows soon joined the combination, which then embraced twenty-two different persons, firms, or corporations. Thus almost the entire output of float spring-tooth harrows made in the United States was brought under the regulation and control of this organization, its licensees manufacturing and selling at least 90 per cent. thereof.

The defendants were the owners of two United States Letters Patent relating to float spring-tooth harrows under which they had been manufacturing and selling harrows. They joined the combination, and, agreeably to the provisions of the above-recited agreement, they assigned to the New York corporation their patents, and that corporation then issued to the defendants a license to manufacture and sell their old style of harrows. The New Jersey corporation, which was formed in furtherance of the general scheme, issued to the defendants a second license in terms and conditions substantially like the former license. These are the two license contracts here sued on. The following-stated provisions are common to both licenses: The defendants agree not to sell float spring-tooth harrows, float-spring-tooth-harrow frames without teeth, or attachments applicable thereto, at less prices or on more favorable terms of payment and delivery to the purchasers than as is set forth in the schedule annexed to the license unless the licensor should reduce the selling-prices and make more favorable terms for purchasers, and that the defendants will not directly or indirectly manufacture or sell any other float spring-tooth harrows, etc., than those which they are thus licensed to sell and market, except for another licensee, and then only of such style as he is licensed to manufacture and sell. They agree to pay to the corporation one dollar upon each float spring-tooth harrow, etc., manufactured and sold by them agreeably to the terms of the license, and the sum of five dollars as liquidated damages for every harrow, etc., manufactured or sold by them contrary to the terms and provisions of the license, and the corporation agrees to defend all suits for alleged infringement brought against the licensees. All the licenses issued by the corporation are upon the like terms and conditions.

It is manifest as well from the contract as from the proofs outside of it that the purpose of the parties was to form a combination between the various manufacturers of these harrows to prevent competition in business and enhance prices, and such is the effect of their agreement. The corporation provided to hold the legal titles of the several patents is merely an instrument to effect this object. The prior owners are still beneficial owners, with right to continue their business, subject only to the restraint in its management imposed by the contract. The provision for licenses is made necessary by the transfers of title

and is simply another part of the scheme for combination and control of the business of the several patentees. The result would be the same in legal contemplation if the corporation and licensees had been dispensed with and the contract had provided simply, as it does, for combination and restraint of competition. That such a contract would be unlawful seems clear. While it is true that all contracts in restraint of trade are not prohibited, and it is sometimes difficult to determine whether a particular one is, there is no room for doubt that such a contract as this which provides for general and unlimited restraint is unlawful. To justify restraint, reason for it must be found in the nature of the property or the situation of the parties-as, for instance, in the sale of a business or professional good-will and other similar cases. Even then the restraint must be confined within such reasonable limits as the circumstances require. Here there is nothing to justify rest aint, and that imposed is without any limitation whatever. The fact that the property involved is covered by Letters Patent is urged as a justification; but we do not see how any importance can be attached to this fact. Patents confer a monopoly as respects the property covered by them, but they confer no right upon the owners of several distinct patents to combine for the purpose of restraining competition and trade. Patented property does not differ in this respect from any other. The fact that one patentee may possess himself of several patents and thus increase his monopoly affords no support for an argument in favor of a combination by several distinct owners of such property to restrain manufacture, control sales, and enhance prices. Such combinations are conspiracies against the public interest and abuses of patent privileges. The object of these privileges is to promote the public benefit, as well as to reward inventors.

The suggestion that the contract is justified by the situation of the parties-their exposure to litigation-is entitled to no greater weight. Patentees may compose their differences, as the owners of other property may, but they cannot make the occasion an excuse or cloak for the creation of monopolies to the public disadvantage.

We do not see anything to distinguish this case in principle from Nester v. The Continental Brewing Co., (161 Pa., 473;) Pittsburgh Canton Co. v. McMillan, (119 N. Y., 46;) Morris Run Coal Co. v. Barclay Coal Co., (68 Pa., 173;) The Distilling & Cattle Feeding Co. v. The People, (41 N. E. Rep., 188;) Straight v. The National Harrow Company, (18 N. Y. Sup. Ct., 233.) The last of these decisions was upon this contract, substantially, at least, as it appears before us. A similar conclusion was reached by the court in The National Harrow Company v. Quick, (C. D. 1895, 326; 71 O. G., 608; 67 Fed. Rep., 130,) where this contract was again involved. The doctrine of these cases is not new, and we feel no hesitation in applying it to the contract before us. The judg ment is therefore affirmed.

[U.S. Circuit Court-District of Connecticut.]

WILLCOX & GIBBS SEWING MACHINE COMPANY v. MERROW MACHINE COMPANY et al.

Decided October 30, 1897.

81 O. G., 1613.

1. WILLCOX-SEWING-MACHINE-INFRINGEMENT.

Claims 2 and 5 of Letters Patent No. 472,094, granted April 5, 1892, to Charles H. Willcox, for a sewing-machine, construed and Held that defendants' device is not found in the elements of these claims without unduly straining the doctrine of equivalents.

2. SAME-SAME-VALIDITY-INFRINGEMENT.

Claim 2 of Letters Patent No. 472,095, granted April 5, 1892, to Charles H. Willcox, for a sewing-machine, is of doubtful validity and it cannot be construed to cover defendants' device without unduly straining the doctrine of equivalents. Messrs. Howson & Howson for the complainant.

Messrs. Church & Church for the defendants.

TOWNSEND, J.:

At final hearing on this bill in equity charging infringement of the second and fifth claims of Patent No. 472,094 and the second claim of Patent No. 472,095 defendants deny the validity of both patents and deny infringement. The question of infringement only will be considered.

The claims alleged to be infringed are as follows:

No. 472,094.

2. The combination, with the needle and its operating mechanism, of a looper having an upper jaw provided with a hook and a lower jaw, said looper being arranged to oscillate in a path around the edge of the cloth-plate, and means for actuating said looper to carry a loop of the needle-thread around the cloth-plate, substantially as described.

5. The combination of the double-jawed looper moving in a single plane and a needle moving in a line oblique to the plane of the looper's movement and intersecting the same, whereby the looper is when beneath the cloth on one side of the needle and when above the cloth on the other side thereof, substantially as described.

No. 472,095.

2. The looper made with two jaws, one of which is furnished with a hook and the other with an eye, in combination with a reciprocating needle and operating mechanism for moving the looper in a plane oblique to the plane of movement of said needle, substantially as described.

No.

Both patents are for a sewing machine making an overseam. 472,094 is for a single-thread machine. No. 472,095 is for a doublethread machine.

The application for No. 472,094 was filed July 23, 1887. The application for No. 472,095 was filed May 24, 1890. Both patents were issued April 5, 1892. No. 472,095 is similar to No. 472,094, except for the changes necessary to adapt it to the use of two threads.

The stitch formed by complainant's machine is made under Patent No. 472,095, is the same as that formed by defendants' machine, and is old, and several different machines for forming it were well known in the prior art.

Defendants' machine is a double-thread machine. Generally speaking, the mode of forming said stitch is the same in all these machines, including those of the complainant and the defendants.

A sewing-machine needle having the eye near the point is first thrust through the fabric, carrying the needle thread with it. Then a hook of some kind takes hold of the needle-thread below the fabric and holds it so that the needle in being withdrawn from the fabric leaves a loop of needle-thread on the hook and below the fabric. This loop of needlethread is then drawn out to and lifted up around the edge of the fabric. Then a loop of another thread is thrust through the loop of needle-thread, and the needle in making its second stroke passes through this second loop.

In single-thread machines the loop of needle-thread after being lifted up around the edge of the fabric is carried over the fabric, and the needle in making its second stroke passes through the needle-thread loop.

The implement which seizes the loop of needle-thread and carries it around the edge of the fabric is called the "looper." When two threads and two implements are used, the implement which passes the second loop through the needle thread loop is called the "looper."

In Patent No. 472,094 the upper part of complainant's looper is shaped somewhat like the pointed end of a fish-hook. The point passes between the needle and the thread below the fabric, when the hook, which is shaped and attached very much like the barb of a fish hook, seizes the thread and draws out the loop. After the loop is carried around and over the edge of the fabric, the forward motion of the looper causes the hook or barb to drop the loop, and it then falls upon the lower jaw or member, which carries it forward over the fabric, so that the needle in its next descent may pass through it.

In Patent No. 472,095 this lower jaw member is longer and has an eye near the end carrying a second thread, and when the loop of needlethread falls upon this lower jaw it is not carried forward, but slips back along it, while the needle passes between the lower jaw and the thread carried by its eye.

Defendants' looper, which is that of Patent No. 541,722, is a bar having the forward end curved around to form a hook, which is pointed, and having an eye carrying a thread in the forward part near where the curve begins.

In operation this hook is inserted from the rear-that is, in the opposite direction from complainant's-between the needle and thread. The needle is then withdrawn, and this needle-thread loop is brought forward and around the edge of the fabric; but as the looper with its threaded eye moves along over the fabric the needle-thread loop slips