One who sets up a federal statute as giving immunity from a
judgment against him may bring the case here under § 709,
Rev.Stat., now § 237 of the Judicial Code, if his claim is denied
by the decision of the state court.
No more than the patent statute was the Copyright Act intended
to authorize agreements in unlawful restraint of trade and tending
to monopoly in violation of the Sherman Act.
The Sherman Act is broadly designed to reach all combinations in
unlawful restraint of trade and tending because of the agreements
or combinations entered into to build up and perpetuate monopolies.
The act is a limitation of rights which may be pushed to evil
consequences, and may therefore be restrained.
Standard
Sanitary Mfg. Co. v. United States, 226 U. S.
20.
As the agreement involved in this case went beyond any fair and
legal means to protect trade and prices, practically prohibited the
parties thereto from selling to those it condemned, affected
commerce between the states, it was manifestly illegal under the
Sherman Act, and was not justified as to copyrighted books under
any protection afforded by the Copyright Act.
Where the state court dismissed the bill solely on the ground
that defendant's acts were not within the denunciation of the
federal statute on which plaintiff relied, the judgment will be
reversed on
Page 231 U. S. 223
that ground, and it is unnecessary for this Court to decide
other federal questions involved.
Quaere, and not now discussed or decided, whether an
original action can be maintained in the state courts for
injunction and damages under the Sherman Act.
Judgment based on 199 N.Y. 548 reversed.
The facts, which involve the construction of the Sherman
Anti-Trust Act and its application to agreements regarding the sale
of copyrighted books, are stated in the opinion.
Page 231 U. S. 229
MR. JUSTICE DAY delivered the opinion of the Court.
This is a writ of error to review a judgment of the Supreme
Court of the State of New York, rendered on remittitur from the
Court of Appeals, refusing to grant to the plaintiffs in error an
injunction restraining any interference with their purchase and
sale of copyrighted books, and damages, the defendants acting under
an agreement alleged to be violative of the laws of New York and
the Sherman Anti-Trust Act (Act of July 2, 1890, 26 Stat. 209, c.
647).
The suit originated in a bill filed in the Supreme Court of the
State of New York for New York County, in which the plaintiffs in
error alleged that they conducted a department store in New York
city, a large department of which was devoted to books, magazines,
and pamphlets; that, because of their methods of business, they had
been able to undersell other retail book stores; that the
defendants in error, through the American Publishers' Association
and the American Booksellers' Association, and by means of
resolutions and agreements, with the cooperation of the
associations and their members, and by the use of various practices
and methods, to the end that books should be sold to the
booksellers only who would maintain the retail price upon net
copyrighted books for one year, and who would not sell books to
anyone who would cut such prices, had restrained and prevented
competition in the State of New York and throughout all of the
United States in the supply and price of books, and that the
business of the plaintiffs in error had been seriously affected,
and they prayed that the combination and agreements be declared
unlawful, and that defendants be enjoined from acting thereunder or
accomplishing the purposes thereof, and for damages. A demurrer
having been interposed to the complaint and sustained by the court
at special term, and the
Page 231 U. S. 230
interlocutory judgment there entered having been reversed upon
appeal to the Appellate Division of the First Department, the Court
of Appeals, permission having been granted to appeal and the
question certified, affirmed the decision, and held that, so far as
the bill related to copyrighted books, the demurrer was good, but
that as to uncopyrighted books, the complaint stated facts
sufficient to constitute a cause of action. 177 N.Y. 473.
Amended answers having been filed, upon trial to the court
without a jury, the court made findings of fact from which it
appears that the material allegations of the complaint are true, as
above set forth, and further, that about April 1, 1904, and after
the decision of the Court of Appeals reported in 177 N.Y., the
associations amended their resolutions and agreements so as to
restrict the application and operation thereof to copyrighted books
only; that, about January 19, 1907, the Publishers' Association
revoked all its former resolutions and adopted a new resolution,
but that the associations had continued the same course as to
copyrighted books as was followed before the passage of such
resolution. The court concluded that the resolutions and
agreements, so far as they related to uncopyrighted books, were
unlawful and contrary to the laws of New York, and to that extent
granted relief by way of injunction and damages, but held that, as
to copyrighted books, the agreements, resolutions, and acts of the
defendants were not unlawful, and entered an interlocutory judgment
accordingly, and in its opinion the court stated that the former
decision of the Court of Appeals in the case (177 N.Y. 473) was
controlling. Plaintiffs in error excepted to the conclusions of law
made by the court, restricting the illegality of the combinations
to uncopyrighted books, and requested that certain conclusions be
made, and excepted to the refusal to find the conclusions submitted
by them.
From that part of the interlocutory judgment denying
Page 231 U. S. 231
relief as to copyrighted books, the plaintiffs in error appealed
to the appellate division, which, also upon the authority of 177
N.Y. 473, affirmed the interlocutory judgment, and judgment of
affirmance was entered in the supreme court; and, with permission,
an appeal was taken to the Court of Appeals, which answered in the
negative the question certified by the appellate division as to
whether plaintiffs in error, insofar as copyrighted books were
concerned, were entitled to relief, adhering to its previous
decision (177 N.Y. 473). 193 N.Y. 496, 86 N.E. 525. Judgment was so
entered on remittitur to the supreme court. The report of the
referee appointed to ascertain the amount of the damages sustained
by the plaintiffs in error in the sale of uncopyrighted books
having been filed and approved, final judgment was entered in the
supreme court, granting an injunction and damages as to
uncopyrighted books only, and, upon appeal to the Court of Appeals,
that court affirmed the final judgment (199 N.Y. 548) and remitted
the case to the supreme court. Judgment on remittitur was
accordingly entered, and this writ of error sued out to review that
judgment.
In this Court, a motion, was made to dismiss the writ of error
upon the ground that it presents no federal question so saved and
brought here as to permit a review of such question. When the case
was before the Court of Appeals, upon demurrer to the complaint
(177 N.Y. 473), that court held that the agreement, as to
copyrighted books, was not illegal, because of the monopoly granted
to the holder of a copyright under the statutes of the United
States. The court held that the agreement, as to uncopyrighted
books, however, was in violation of the so-called Anti-Trust Law of
New York, chapter 690, Laws of 1899, making contracts, agreements,
etc., creating monopoly, or restraining or preventing competition
in the supply or price of articles or commodities void as against
public policy. Subsequently the agreement was modified so as
Page 231 U. S. 232
to apply to copyrighted books only, and findings of fact were
specifically made upon which the case again went to the Court of
Appeals of New York upon the certified question:
"Are the plaintiffs, under the findings of fact contained in the
decision in this case, entitled, insofar as copyrighted books are
concerned, to the relief demanded in the complaint, or to any
relief as against the defendants in this case?"
Upon the record, the Court of Appeals, by a majority, adhered to
its former decision notwithstanding the decision of
Bobbs-Merrill Co. v. Straus, 210 U.
S. 339, which had in the meantime been decided by this
Court, and held that, as the object of the copyright and patent
statutes was to give monopolies, contracts made by the owners of
copyrights to secure the fullest protection in the enjoyment of
their monopolies would not be condemned by the courts as being in
unlawful restraint of trade, at least not until the Supreme Court
of the United States had pronounced differently (193 N.Y. 496).
Three of the justices dissented upon the ground that the agreement
was clearly one in restraint of trade, as they had theretofore
held, and that the decision of this Court in
Bobbs-Merrill Co.
v. Straus, supra, had so construed the Copyright Act as to
limit the right of a copyright holder to the sale of copyrighted
works, and did not have the effect to protect such monopolistic
agreements as were shown in the present case. As to uncopyrighted
books, the views theretofore expressed were maintained by the
court, and, upon remittitur, judgment was entered granting
injunction and damages as to such books.
An inspection of the record shows that, before the case went to
the Court of Appeals for decision the second time upon the facts
found in the lower court, the following conclusions of law were
specifically requested, covering the effect of the Sherman
Anti-Trust Act as to copyrighted books dealt with in interstate
commerce, as was found to be established by the facts in the
present case:
Page 231 U. S. 233
"VII. That such resolutions and agreements purporting to
restrict the effect of the combination, arrangement, or contracts
to copyrighted books likewise affect an article of interstate
commerce, and was unlawful and contrary to the aforementioned
statute [the Sherman Anti-Trust Act] of the United States as being
in restraint to interstate commerce and tending to create a
monopoly."
"IX. That the owners of several separate copyrights are not
empowered to enter into any contract or agreement or combination
between themselves concerning the supply and price of books
published under their separate copyrights which would be unlawful
and contrary to the statutes of the United States against
combinations in restraint of trade or for the purpose of creating a
monopoly if entered into with reference to the supply or price of
uncopyrighted books."
It is thus apparent that, when the defendants below set up the
copyright statute of the United States as an authority for the
agreement of the character here in question, the plaintiffs
contended that such agreement was not only beyond the authority
conferred in the Copyright Act, but was in violation of the terms
of the Sherman antitrust law, making illegal combinations in
restraint of trade and tending to monopoly. This contention was in
terms denied by the lower court, and the decision upon the facts
found went to the Court of Appeals, with the result which we have
stated. The contention thus made as to the effect of the Sherman
Anti-Trust Act when read in connection with the Copyright Act of
the United States presented a question of a federal character to
the state courts, which claim of federal right was necessarily
denied in the decision of the Court of Appeals, affirming the
judgment of the court below. One who sets up a federal statute as
giving immunity from a judgment against him, which claim is denied
by the decision of a state court, may bring the case here for
review under § 709 of the Revised Statutes,
Page 231 U. S. 234
now § 237 of the Judicial Code.
Nutt v. Knut,
200 U. S. 12;
St. Louis & Iron Mountain Ry. v. Taylor, 210 U.
S. 281;
St. Louis & Iron Mountain Ry. v.
McWhirter, 229 U. S. 265. The
motion to dismiss for want of jurisdiction must therefore be
overruled.
This Court, in the case of
Bobbs-Merrill Co. v. Straus,
supra, held that the Copyright Act did not grant the right to
fix a limitation upon prices of books at subsequent sales to
purchasers from retailers by notice of price limitation inscribed
upon the book, and, construing the Copyright Act, held that, in
conferring the right to vend a book, it did not intend to confer
upon the holder of the copyright any further right after he had
exercised the right to vend secured to him by the act.
In the case of
Standard Sanitary Mfg. Co. v. United
States, 226 U. S. 20, this
Court had under consideration the effect of the patent statute upon
agreements found to be unlawful under the Sherman law, and the
agreements condemned were held not to be protected as within the
patent monopoly conferred by the statute. Replying to the
contention as to the protection which the patent law gave to enter
into such agreements, this Court said (p.
226 U. S.
49):
"Rights conferred by patents are indeed very definite and
extensive, but they do not give any more than other rights an
universal license against positive prohibitions. The Sherman law is
a limitation of rights -- rights which may be pushed to evil
consequences, and therefore restrained."
So, in the present case, it cannot be successfully contended
that the monopoly of a copyright is in this respect any more
extensive than that secured under the patent law. No more than the
patent statute was the Copyright Act intended to authorize
agreements in unlawful restraint of trade and tending to monopoly,
in violation of the specific terms of the Sherman law, which is
broadly designed
Page 231 U. S. 235
to reach all combinations in unlawful restraint of trade, and
tending, because of the agreements or combinations entered into, to
build up and perpetuate monopolies.
From the finding of facts upon which the court certified the
question decided to the Court of Appeals, after the attempted
reformation in view of the first decision of that court, it appears
that the Publishers' Association was composed of probably 75
percent of the publishers of copyrighted and uncopyrighted books in
the United States, and that the Booksellers' Association included a
majority of the booksellers throughout the United States; that the
associations adopted resolutions and made agreements obligating
their members to sell copyrighted books only to those who would
maintain the retail price of such net copyrighted books, and, to
that end, that the associations combined and cooperated with the
effect that competition in such books at retail was almost
completely destroyed. The findings further show that the
associations employed various methods of ascertaining whether
prices of net copyrighted books were cut and whether there was
competition in the sale thereof at retail, and issued cut-off
lists, so-called, directing the discontinuance of the sale of such
books to offenders, and that the plaintiffs in error, who had
failed to maintain net prices upon copyrighted books, had been put
upon the cut-off lists, and were unable to secure a supply of such
books in the ordinary course of business. It further appears that
in some instances dealers who had supplied the plaintiffs in error
were wholly ruined and driven out of business; that the
Booksellers' Association widely circulated the names of such
dealers, and warned others to avoid their fate, and that various
circulars were issued to the trade at large by both associations,
warning all persons against dealing with the plaintiffs in error or
other so-called price-cutters; that, after the reformation of the
resolutions and agreements in 1904, the associations and
Page 231 U. S. 236
their members continued the same methods as to ascertaining the
supply of copyrighted books of the plaintiffs in error, as to
cut-off lists and circulars to the trade, and that, although in
1907 the resolution of the Publishers' Association was modified so
that the "agreement" became a "recommendation," the cut-off lists
were still issued, with plaintiff's name thereon, and that the
dealers still refused to supply plaintiffs in error with books of
any kind. And it also appears from the finding of facts that the
members of the associations resided in and carried on the business
of selling books in many different states, and purchased books from
persons in many states other than the one in which they resided and
did business, and that the rules, regulations, and agreements of
the associations were enforced against all publishers and dealers
in books throughout the United States, whether they were members of
either Association or not, and whether they purchased books in one
state for transportation and delivery in another, or for delivery
in the state where purchased.
We agree with the Court of Appeals in its characterization of
the agreement involved in this case, about which there seems to
have been no difference of opinion except as to the supposed
protection of the Copyright Act. It manifestly went beyond any fair
and legal agreement to protect prices and trade as among the
parties thereto, and prevented, as the Court of Appeals said, when
dealing with uncopyrighted books, the sale of books of any kind at
any price to those who were condemned by the terms of the
agreement, and with whom dealings were practically prohibited. We
conclude, therefore, that the Court of Appeals erred in holding
that the agreement was justified by the Copyright Act, and was not
within the denunciation of the Sherman act, and in denying, for
that reason alone, the right of the plaintiffs in error to recover
under the state act as to copyrighted books.
Page 231 U. S. 237
This view of the case renders it unnecessary to decide whether
an original action can be maintained in the state courts seeking an
injunction, and to recover damages under the Sherman law.
As the federal question, made in the manner which we have
stated, was, in our view, wrongly decided, and such decision was
the basis of the judgment in the state court, the judgment of that
court must be reversed.
Murdock v.
Memphis, 20 Wall. 590,
87 U. S.
634.
Judgment reversed and case remanded to the state court
whence it came for further proceedings not inconsistent with this
opinion.