1. It is violative
per se of § 1 of the Sherman Act and
§ 3 of the Clayton Act for a corporation engaged in interstate
commerce in salt, of which it is the country's largest producer for
industrial uses, and which also owns patents on machines for
utilization of salt products, to require lessees of such machines
to use only the corporation's unpatented products in them. Pp.
332 U. S.
394-396.
2. The defendant in a civil action to enjoin violations of § 1
of the Sherman Act and § 3 of the Clayton Act having admitted
practices which were unlawful and unreasonable
per se, the
District Court was justified in granting summary judgment under
Rule 56 of the Rules of Civil Procedure. P.
332 U. S.
396.
3. Agreements which "tend to create a monopoly" being forbidden,
it is immaterial that the tendency is a creeping one, rather than
one that proceeds at full gallop; nor does the law await arrival at
the goal before condemning the direction of the movement. P.
332 U. S.
396.
4. A requirement in a lease of patented machines that the lessee
use only the lessor's unpatented products in them is not saved from
unreasonableness and from the tendency to monopoly by provisions
entitling the lessee to the benefit of any general price reduction
in the lessor's products and permitting the lessee to purchase the
products in the open market if the lessor fails to furnish them at
a price equal to the lowest price offered by any competitor. Pp.
332 U. S.
396-397.
5. Rules for use of leased machinery must not be disguised
restraints of free competition, though they may set reasonable
standards which all suppliers must meet. Pp.
332 U. S.
397-398.
6. The fact that they have not been included in all leases and
have not always been enforced when included does not justify the
general use of clauses requiring lessees of patented machines to
use the lessor's unpatented products therein. P.
332 U. S.
398.
7. In enjoining the practice of leasing patented machines on
condition that the lessees would use only the lessor's unpatented
products
Page 332 U. S. 393
in them, it was not improper for the District Court to include a
requirement that such machines be leased, sold, or licensed to all
applicants on nondiscriminatory terms and conditions -- especially
where the Court retained jurisdiction to consider applications for
the amendment, modification or termination of any provision of the
decree. Pp.
332 U. S.
398-402.
6 F.R.D. 302 affirmed.
MR. JUSTICE JACKSON delivered the opinion of the Court.
The Government brought this civil action to enjoin the
International Salt Company, appellant here, from carrying out
provisions of the leases of its patented machines to the effect
that lessees would use therein only International's salt products.
The restriction is alleged to violate § 1 of the Sherman Act
[
Footnote 1] and § 3 of the
Clayton Act. [
Footnote 2] Upon
appellant's answer and admissions of fact, the Government moved for
summary judgment under Rule 56 of the Rules of Civil Procedure upon
the ground that no issue as to a material fact was presented,
and
Page 332 U. S. 394
that, on the admissions, judgment followed as matter of law.
Neither party submitted affidavits. Judgment was granted, [
Footnote 3] and appeal was taken
directly to this Court. [
Footnote
4]
It was established by pleadings or admissions that the
International Salt Company is engaged in interstate commerce in
salt, of which it is the country's largest producer for industrial
uses. It also owns patents on two machines for utilization of salt
products. One, the "Lixator," dissolves rock salt into a brine used
in various industrial processes. The other, the "Saltomat," injects
salt, in tablet form, into canned products during the canning
process. The principal distribution of each of these machines is
under leases which, among other things, require the lessees to
purchase from appellant all unpatented salt and salt tablets
consumed in the leased machines.
Appellant had outstanding 790 leases of an equal number of
"Lixators," all of which leases were on appellant's standard form
containing the tying clause [
Footnote 5] and other
Page 332 U. S. 395
standard provisions; of 50 other leases which somewhat varied
the terms, all but 4 contained the tying clause. It also had in
effect 73 leases of 96 "Saltomats," all containing the restrictive
clause. [
Footnote 6] In 1944,
appellant sold approximately 119,000 tons of salt, for about
$500,000, for use in these machines.
The appellant's patents confer a limited monopoly of the
invention they reward. From them, appellant derives a right to
restrain others from making, vending, or using the patented
machines. But the patents confer no right
Page 332 U. S. 396
to restrain use of, or trade in, unpatented salt. By contracting
to close this market for salt against competition, International
has engaged in a restraint of trade for which its patents afford no
immunity from the antitrust laws.
Morton Salt Co. v. G.S.
Suppiger Co., 314 U. S. 488;
Mercoid Corporation v. Mid-Continent Investment Co.,
320 U. S. 661;
Mercoid Corporation v. Minneapolis-Honeywell Regulator
Co., 320 U. S. 680.
Appellant contends, however, that summary judgment was
unauthorized because it precluded trial of alleged issues of fact
as to whether the restraint was unreasonable within the Sherman Act
or substantially lessened competition or tended to create a
monopoly in salt within the Clayton Act. We think the admitted
facts left no genuine issue. Not only is price-fixing unreasonable,
per se, United States v. Socony-Vacuum Oil Co.,
310 U. S. 150;
United States v. Trenton Potteries Co., 273 U.
S. 392, but also it is unreasonable
per se to
foreclose competitors from any substantial market.
Fashion
Originators' Guild of America v. Federal Trade Commission, 114
F.2d 80,
aff'd, 312 U. S. 312 U.S.
457, 668. The volume of business affected by these contracts cannot
be said to be insignificant or insubstantial, and the tendency of
the arrangement to accomplishment of monopoly seems obvious. Under
the law, agreements are forbidden which "tend to create a
monopoly," and it is immaterial that the tendency is a creeping
one, rather than one that proceeds at full gallop; nor does the law
await arrival at the goal before condemning the direction of the
movement.
Appellant contends, however, that the "Lixator" contracts are
saved from unreasonableness and from the tendency to monopoly
because they provided that, if any competitor offered salt of equal
grade at a lower price, the lessee should be free to buy in the
open market, unless appellant would furnish the salt at an equal
price; and
Page 332 U. S. 397
the "Saltomat" agreements provided that the lessee was entitled
to the benefit of any general price reduction in lessor's salt
tablets. The "Lixator" provision does, of course, afford a measure
of protection to the lessee, but it does not avoid the stifling
effect of the agreement on competition. The appellant had at all
times priority on the business at equal prices. A competitor would
have to undercut appellant's price to have any hope of capturing
the market, while appellant could hold that market by merely
meeting competition. We do not think this concession relieves the
contract of being a restraint of trade, albeit a less harsh one
than would result in the absence of such a provision. The
"Saltomat" provision obviously has no effect of legal significance,
since it gives the lessee nothing more than a right to buy
appellant's salt tablets at appellant's going price. All purchases
must, in any event, be of appellant's product.
Appellant also urges that since, under the leases, it remained
under an obligation to repair and maintain the machines, it was
reasonable to confine their use to its own salt, because its high
quality assured satisfactory functioning and low maintenance cost.
The appellant's rock salt is alleged to have an average sodium
chloride content of 98.2%. Rock salt of other producers, it is
said, "does not run consistent in sodium chloride content, and in
many instances runs as low as 95% of sodium chloride." This greater
percentage of insoluble impurities allegedly disturbs the
functioning of the "Lixator" machine. A somewhat similar claim is
pleaded as to the "Saltomat."
Of course, a lessor may impose on a lessee reasonable
restrictions designed in good faith to minimize maintenance burdens
and to assure satisfactory operation. We may assume, as matter of
argument, that, if the "Lixator" functions best on rock salt of
average sodium chloride content of 98.2%, the lessee might be
required to use
Page 332 U. S. 398
only salt meeting such a specification of quality. But it is not
pleaded, nor is it argued, that the machine is allergic to salt of
equal quality produced by anyone except International. If others
cannot produce salt equal to reasonable specifications for machine
use, it is one thing; but it is admitted that, at times, at least,
competitors do offer such a product. They are, however, shut out of
the market by a provision that limits it not in terms of quality,
but in terms of a particular vendor. Rules for use of leased
machinery must not be disguised restraints of free competition,
though they may set reasonable standards which all suppliers must
meet.
Cf. International Business Machines Corporation v. United
States, 298 U. S. 131.
Appellant urges other objections to the summary judgment. The
tying clause has not been insisted upon in all leases, nor has it
always been enforced when it was included. But these facts do not
justify the general use of the restriction which has been admitted
here.
The appellant also strongly objects to the provisions of the
sixth paragraph of the decree. [
Footnote 7] Appellant denies
Page 332 U. S. 399
the necessity for such provision, and it is true that the record
discloses no threat to discriminate after the judgment of the Court
is pronounced. It also suggests that we modify the judgment to
accept a proposed alternative provision [
Footnote 8] similar to one it says it urged upon the
District Court, which rejected it. The record does not show what
proceedings were had between rendering of the court's opinion and
signing of the decree.
The specific ground of objection raised by appellant to
paragraph sixth is that International may find it necessary in some
sections of the country to reduce the rental rates of the machines
in order that its machines may compete with those of others. Of
course, the Clayton Act itself [
Footnote 9] permits one charged with price discrimination
to show that he lowered his price in good faith to meet
competition. Obviously, the District Court was not intending to
prevent competition, or to disable the appellant from meeting or
offering it. The Government, too, says it would not oppose
permitting a lower price to meet, in good faith, the equally low
price of a competitor if the need arose.
Page 332 U. S. 400
The short of the contention is that, since the company never has
threatened to violate any decree entered in this case to restrain
future use of the illegal leases, it feels that the provision
invalidating the objectionable leases should end the matter, and
that, as to any additional provisions, appellant is entitled to
stand before the court in the same position as one who has never
violated the law at all -- that the injunction should go no farther
than the violation or threat of violation. We cannot agree that the
consequences of proved violations are so limited. The fact is
established that the appellant already has wedged itself into this
salt market by methods forbidden by law. The District Court is not
obliged to assume, contrary to common experience, that a violator
of the antitrust laws will relinquish the fruits of his violation
more completely than the court requires him to do. And advantages
already in hand may be held by methods more subtle and informed,
and more difficult to prove, than those which, in the first place,
win a market. When the purpose to restrain trade appears from a
clear violation of law, it is not necessary that all of the
untraveled roads to that end be left open, and that only the worn
one be closed. The usual ways to the prohibited goal may be blocked
against the proven transgressor, and the burden put upon him to
bring any proper claims for relief to the court's attention. And it
is desirable, in the interests of the court and of both litigants,
that the decree be as specific as possible, not only in the core of
its relief, but in its outward limits, so that parties may known
their duties and unintended contempts may not occur.
The framing of decrees should take place in the District, rather
than in Appellate, Courts. [
Footnote 10] They are invested
Page 332 U. S. 401
with large discretion to model their judgments to fit the
exigencies of the particular case.
United States v. Crescent
Amusement Co., 323 U. S. 173,
323 U. S. 185;
United States v. National Lead Co., 332 U.
S. 319. In an equity suit, the end to be served is not
punishment of past transgression, nor is it merely to end specific
illegal practices. A public interest served by such civil suits is
that they effectively pry open to competition a market that has
been closed by defendants' illegal restraints. If this decree
accomplishes less than that, the Government has won a lawsuit, and
lost a cause.
The District Court has retained jurisdiction, by the terms of
its judgment, for the purpose of
"enabling any of the parties to apply to the court at any time
for such further orders and directions as may be necessary or
appropriate for the construction or carrying out of the
judgment,"
and "for the amendment, modification, or termination of any of
its provisions. . . ." We think it would not be good judicial
administration to strike paragraph VI from the judgment to meet a
hypothetical situation when the District Court has purposely left
the way open to remedy any such situations if and when the need
arises. The factual basis of the claim for modification should
appear in evidentiary form before the District Court, rather than
in the argumentative form in which it is before us. Nor are we
impressed that this will require a multitude of separate
applications. Once the concrete problem is before the District
Court, it will, no doubt, be able to fashion a provision that will
avoid repetitious applications which would be as vexatious to the
Court as to the litigants. We leave the appellant to proper
application
Page 332 U. S. 402
to the court below and deny the relief here, upon the present
state of the record, without prejudice.
Judgment affirmed.
[
Footnote 1]
26 Stat. 209, § 1, 15 U.S.C. § 1.
[
Footnote 2]
38 Stat. 730, § 3, 15 U.S.C. § 14.
[
Footnote 3]
6 F.R.D. 302.
[
Footnote 4]
Probable jurisdiction noted April 28, 1947.
[
Footnote 5]
"It is further mutually agreed that the said Lixate Process
Dissolver shall be installed by and at the expense of said Lessee
and shall be maintained and kept in repair during the term of this
lease by and at the expense of said Lessee; that the said Lixate
Process Dissolver shall be used for dissolving and converting into
brine only those grades of rock salt purchased by the Lessee from
the Lessor at prices and upon terms and conditions hereafter agreed
upon, PROVIDED:"
"If, at any time during the term of this lease, a general
reduction in price of grade of salt suitable for use in the said
Lixate Process Dissolver shall be made, said Lessee shall give said
Lessor an opportunity to provide a competitive grade of salt at any
such competitive price quoted, and, in case said Lessor shall fail
or be unable to do so, said Lessee, upon continued payments of the
rental herein agreed upon, shall have the privilege of continued
use of the said equipment with salt purchased in the open market
until such time as said Lessor shall furnish a suitable grade of
salt at the said competitive price."
It further provides as follows:
". . . should said Lessee fail to pay promptly the aforesaid
rental, or shall at any time discontinue purchasing its requirement
of salt from said Lessor, or otherwise breach any of the terms and
conditions of this lease, said Lessor shall have the right, upon 30
days' written notice of intention to do so, to remove the said
Lixate Process Dissolver from the possession of said Lessee."
[
Footnote 6]
"It is further mutually agreed that the said Salt Tablet
Depositor[s] shall be installed and maintained in good condition
during the term of this lease; that the said Salt Tablet
Depositor[s] shall be used only in conjunction with Salt Tablets
sold or manufactured by the Lessor, and that the Lessee shall
purchase from the Lessor or its agent, Salt Tablets for use in the
Salt Tablet Depositor[s] at prices and upon terms and conditions
hereinafter agreed upon, Provided: if, at any time during the term
of this lease, a general reduction in Lessor's price of Salt
Tablets suitable for use in the Depositor[s] shall be made, said
Lessor shall provide said Lessee with Salt Tablets at a like
price."
The lease further provides:
". . . should Lessee fail to pay promptly the aforesaid rental,
or at any time discontinue purchasing its requirements of Salt
Tablets for said Salt Tablet Depositor[s] from said Lessor, or its
agent, or otherwise breach any of the terms and conditions of this
lease, said Lessor shall have the right, upon 10 days' written
notice of intention to do so, to remove the said Salt Tablet
Depositor[s] from the premises and/or possession of said
Lessee."
[
Footnote 7]
"Defendant International Salt is directed to offer to lease or
sell or license the use of the Lixator or Saltomat machines, or any
other machine which is then being or about to be offered or shall
have been offered by such defendant in the United States embodying
inventions covered by any of the patents referred to in paragraph
II hereof, to any applicant on nondiscriminatory terms and
conditions;
provided that"
"(a) A machine or machines is or are available for such purposes
and"
"(b) Defendant shall not be required to make such offer unless
it is offering, about to offer, or has offered such machines for
lease or sale or license within the United States and at any time
the defendant may discontinue the business of renting or selling or
licensing the use of such machines; and"
"(c) Such sale or lease or license is not required to be made
without cash payment or security to any person not having proper
credit rating, and"
"(d) The rental or sale price or license royalty may differ as
to different types and sizes of machines and from time to time so
long as the rental or sale price or royalty at any one time is
uniform as to each size or type of machine. The terms of this
paragraph shall apply to all future contracts and modifications of
existing contracts. Any person with whom defendant International
Salt now has a lease agreement relating to the Lixator or Saltomat
machines may elect to retain his rights under the existing lease or
to enter into a lease or sale or license contract with defendant
International Salt in accordance with the provisions of this
paragraph."
[
Footnote 8]
Defendant would be enjoined
"from refusing to sell, lease or license the use of any such
machine to any person, firm or corporation, or from discriminating
in the terms of any contract of sale, lease or license of any such
machine with any person, firm or corporation, against the
prospective buyer, lessee or licensee on the ground that he has
used or dealt in, or intends or proposes to use or deal in, salt
not manufactured or sold by the defendant International Salt."
[
Footnote 9]
38 Stat. 730, 49 Stat. 1526, 15 U.S.C. § 13(b).
[
Footnote 10]
That court is authorized, but not required, to call upon the
Federal Trade Commission to assist in framing decrees in antitrust
cases. § 7, Federal Trade Commission Act, 38 Stat. 722. This would
seem unnecessary if Congress intended a simple prohibition of the
particular practice proved before the court. It indicates the
Congress has intended decrees to deal with the future economic
condition of the enterprise, as well as past violations.
MR. JUSTICE FRANKFURTER, whom MR. JUSTICE REED and MR. JUSTICE
BURTON, join, dissenting in part.
Agreeing wholeheartedly with the Court's opinion on the main
issue, I am left unpersuaded by its justification for retaining
Paragraph VI [
Footnote 2/1] in the
judgment.
Page 332 U. S. 403
Inasmuch as the holder of patents on machines is not obliged to
dispose of them to all comers or to do so at a uniform price,
Paragraph VI, in and of itself, undoubtedly deprives appellant of a
legal right. It is not merely a theoretical right. Practical
considerations may make it important for appellant to act upon its
legal right not to have a uniform price for all its customers. It
was conceded at the bar that competition may require this. No
doubt, when a court condemns practices as violative of the Sherman
Law and the Clayton Act, it has the duty so to fashion its decree
as to put an effective stop to that which is condemned. But the law
also respects the wisdom of not burning even part of a house in
order to roast a pig. Ordinarily, therefore, when acts are found to
have been done in violation of antitrust legislation, restraint of
such acts in the future is the adequate relief.
See New York,
New Haven & Hartford R. Co. v. Interstate Commerce
Commission, 200 U. S. 361,
200 U. S. 404;
Standard Oil Co. v. United States, 221 U. S.
1,
221 U. S. 77;
Labor Board v. Express Publishing Company, 312 U.
S. 426,
312 U. S.
435-437. Reflecting the dictates of fairness, equity
does not put under ban that which is intrinsically legitimate
unless, for all practical purposes, it is tied with the
illegitimate, or the circumstances of the case makes it reasonable
to assume that pursuit of what is legitimate would be a cover for
doing what is forbidden.
The Government argues, in effect, that to compel appellant to
observe uniformity of price for its machines removes any temptation
for more favorable treatment of a customer who buys its salt. But
that is precisely the aim of the main decree -- it prohibits
extension of the patent for the machines by requiring as a
condition of its acquisition the purchase of nonpatented salt. The
presupposition of Paragraph VI is that the appellant will disobey
that which the court explicitly forbids, so that the withdrawal
Page 332 U. S. 404
of an otherwise legal right to fix the purchase price of
patented machines is employed as a precautionary screw to hold the
appellant down from disobeying the court's decree. Surely a court
of equity ought not to add to its prohibition of the illicit a
prohibition of the licit unless the two are practically
intertwined, or there is some ground for believing that the licit
will surreptitiously be misused in order to accomplish the illicit.
There should be no such prohibition merely as a reenforcement of
the appropriate presupposition that a litigant, not shown to have
ben recalcitrant or underhanded, will obey the court's decree. If
he does, the power of contempt is there to enforce obedience. It is
suggested that, if the presupposition of obedience is to be
entertained, it is unnecessary to enjoin even illegal conduct. But
surely it is one thing to decree prohibition of conduct found to be
illegal, and a wholly different thing to add thereto the
prohibition of that which is otherwise legal on the theory that
thereby any temptation to persist in the forbidden illegality is
removed.
Upon the record before us, there is nothing to suggest that the
appellant is likely to disobey the decree not only of the District
Court against a continuance of illegal leases, but what, in effect,
upon affirmance, becomes a decree of this Court. It must be
remembered that the Government saw fit to move for judgment on the
pleadings. It thereby raised a pure legal question as to the
validity of the leases on their face. The Government chose not to
try to lay bare, as is often done in Sherman Law cases, fair and
unfair practices inextricably blended. In such a situation, the
lawful has to fall with the unlawful. Having invited judgment on
the bare bones of the pleadings which merely raise the validity of
the tying clauses, the Government is not entitled to remedies which
go beyond the justification of the pleadings. The Government
Page 332 U. S. 405
ought not to have it both ways. The Government is not entitled
to a provision in the decree which can be justified only on some
indication in the record, of which here there is none, that
appellant's past shows a devious temper which needs to be hobbled
by withdrawing a conceded legal right.
In comparable situations, where orders of the Federal Trade
Commission come here for review, this Court has sought to protect
otherwise legitimate rights even where a business has indulged in
unfair methods of competition. The Commission is not authorized to
make its order needlessly destructive. The baby is not to be thrown
out with the bath.
See Federal Trade Commission v. Royal
Milling Co., 288 U. S. 212, and
Jacob Siegel Co. v. Federal Trade Commission, 327 U.
S. 608. Accordingly, if this were a review of an order
of the Federal Trade Commission, I should remit the order for
appropriate reconsideration by the Commission. Since this is a
review of a lower federal court, and the record presumably presents
to us all that was before the District Court in support of
Paragraph VI, we could dispose of the matter here.
But the molding of decrees in Sherman Law cases is normally the
business of district courts. They have a scope of discretion which
should not unduly be cut off by a recasting of the decree on appeal
here. (It is worth nothing that the availability of the Federal
Trade Commission in the role of a master in chancery to help mold
decrees in suits under the antitrust statutes apparently does not
apply to a suit like the present, where judgment was asked on the
pleadings, and no testimony was taken.
See § 7 of the
Federal Trade Commission Act, 38 Stat. 717, 722, 15 U.S.C. § 47.)
And so, I would remand the case to the District Court. It has been
suggested that Paragraph VI is merely a roundabout way of saying
that the appellant should not discriminate in the price of its
Page 332 U. S. 406
patented machines in favor of a purchaser of its salt. If such
was the intention of Paragraph VI, the District Court will want to
convey such meaning less ambiguously. [
Footnote 2/2]
As the paragraph stands, I do not see how any lawyer would
advise that the appellant could vary its prices among customers in
different localities for a legitimate reason without, each time,
going to the District Court for a modification of the decree. That
is not a burden which, on this record, ought to be placed on the
appellant. The undue sting of Paragraph VI is not saved by the fact
that it is "specific." Of course, it is in the interest of courts
and of litigants that the terms of a decree be as specific as
possible. But the
desideratum of explicitness does not
dispense with the requirement that remedies be appropriate to the
condemned illegality. It does not draw the sting of undue
prohibition of lawful conduct to make the prohibition specific.
[
Footnote 2/1]
"
VI
"
"Defendant International Salt is directed to offer to lease or
sell or license the use of the Lixator or Saltomat Machines, or any
other machine which is then being or about to be offered or shall
have been offered by such defendant in the United States embodying
inventions covered by any of the patents referred to in paragraph
II hereof, to any applicant on nondiscriminatory terms and
conditions;
provided that"
"(a) A machine or machines is or are available for such
purposes, and"
"(b) Defendant shall not be required to make such offer unless
it is offering, about to offer, or has offered such machines for
lease or sale or license within the United States and at any time
the defendant may discontinue the business of renting or selling or
licensing the use of such machines; and"
"(c) Such sale or lease or license is not required to be made
without cash payment or security to any person not having proper
credit rating, and"
"(d) The rental or sale price or license royalty may differ as
to different types and sizes of machines and from time to time so
long as the rental or sale price or royalty at any one time is
uniform as to each size or type of machine. The terms of this
paragraph shall apply to all future contracts and modifications of
existing contracts. Any person with whom defendant International
Salt now has a lease agreement relating to the Lixator or Saltomat
machines may elect to retain his rights under the existing lease or
to enter into a lease or sale or license contract with defendant
International Salt in accordance with the provisions of this
paragraph."
[
Footnote 2/2]
See the clause which the appellant proposed to the
District Court, enjoining it
"from refusing to sell, lease or license the use of any such
machine to any person, firm or corporation, or from discriminating
in the terms of any contract of sale, lease or license of any such
machine with any person, firm or corporation, against the
prospective buyer, lessee or licensee on the ground that he has
used or dealt in, or intends or proposes to use or deal in, salt
not manufactured or sold by the defendant International Salt."