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APRIL, 1927


The Relation of the Patent Law
to the Federal Anti-Trust Laws


The historical precedents for the modern patent statute and the existing federal anti-trust laws may be found in the English law during the reign of the Tudors, particularly Elizabeth and James I. During this period, as well as prior thereto, it was the practice of the crown to grant various types of monopolies in the exercise of the absolute prerogative to regulate all the affairs of the subjects, including the right to engage in trade and commerce. The monopolies thus granted covered a wide variety of activities, including importing and exporting of particular commodities, and the right to engage in trade and manufacture in specific articles. Many of the monopoly grants made by the crown, particularly those to "merchant guilds", had for their object the inducement of the subjects to engage in trade. Eventually, however, these grants became the subject of abuses and were made in consideration of money paid or services rendered to the crown. The monopolies thus granted were not for the purpose of inducing the recipient to engage in trade, but were obtained purely for resale to others for a price.2

The abuse of the monopoly grants from the crown reached its height during the reign of Queen Elizabeth, when it is said that most of the common articles of consumption were under the control of holders of monopolies. In the year 1601, a bill was proposed in Parliament to abolish monopolies. The Queen then issued a procla

*Of the New York Bar. Now special assistant to the Attorney General of the United States.

'HUME, HISTORY OF ENGLAND, ch. xliv, 174; 1. ROBINSON, PATENTS (1890) ch. I. In law the term "monopoly" originally meant a grant by the sovereign "of or for the sole buying, selling, making, working or using of anything, whereby any person or persons, bodies politic or corporate are sought to be restrained of any freedom or liberty that they had before or hindered in their lawful trade." COKF, 3RD INSTITUTE, c. 85, 181.

2WM. HYDE PRICE, THE ENGLISH PATENTS OF MONOPOLY (1906) chap. 1. Jones, Historical Development of the Law of Business Competition (1926) 35 YALE L. J. 905, 930.

ROBINSON, op. cit. supra, note 1, sec. 6.

mation which declared void some monopoly grants and decreed that any subjects, finding themselves "grieved, injured or wronged" by any of the grants remaining in force, might have their remedy in the Queen's Bench. In her "Golden Speech to Her Last Parliament," in explanation of her belief that the grants had been "for the good and avail of my subjects generally, though a private gain to some of my ancient servants, who have deserved weil," the good Queen is reported to have added:

"But that my grant shall be made grievances to my people, and oppressions to be privileged under color of our patents, our princely dignity shall not suffer it."

In the famous case of Darcy v. Allin, which was an action on the case for the infringement of a patent granted by Queen Elizabeth for the exclusive making, importing and selling of playing cards for twenty-one years throughout the realm, counsel for the infringer argued that the crown had no power to grant such a monopoly at common law. It was conceded, though, that monopoly grants for new inventions were an exception to the general rule. In the course of his argument counsel stated:

"Now, therefore, I will show you how the judges have heretofore allowed of monopoly patents, which is, that where any man by his own charge and industry or by his own wit or invention doth bring any new trade into the realm, or any engine tending to the furtherance of a trade that never was used before and that for the good of the realm-that in such cases the King may grant to him a monopoly patent for some reasonable time, until the subjects may learn the same, in consideration of the good that he doth bring by his invention to the Commonwealth; otherwise not."

The statement of this argument was probably among the earliest assertions of the right of every subject to freedom of trade, relieved of the restraint of a patent monopoly. At the same time it was also a recognition of the survival of the royal prerogative to grant monopolies for new inventions. The court adopted the argument of the defendant and held that the monopoly in playing cards was void under the common law, because their manufacture furnished employment to the subjects, and an exclusive grant to trade therein was against the liberty and benefit of the subjects. The court regarded

"The full text is printed as appendix K in Price, The English Patents of MONOPOLY, op. cit. supra note 2.

(1602) II Coke 84 B. The argument of counsel in this case appears in Noy, Reports and Cases Taken in the Time of Queen Elizabeth, King James and King Charles (1650), 173; reprinted in 74 English Reports, Full Reprint, Kings Bench, Book 3, p. 1131.

"Darcy v. Allin, supra note 5.

such monopolies as not only prejudicial to the traders who were excluded from dealing in that particular article, but also harmful to the public, because their inseparable incidents are (1) raising of prices, (2) a deterioration in quality, and (3) the impoverishment of the excluded traders.

In 1624, during the regin of James I, the famous Statute of Monopolies was passed. This Statute was declaratory of the common law that grants of letters patent

"For the sole buying, selling, making, working or using of anything within this realm or the Dominion or Wales, or of any other monopolies . . . are altogether contrary to the laws of this realm, and so are and shall be utterly void, and of noneffect, and in no wise to be put in use or execution." The statute then contained this notable exception:

"Provided, nevertheless, and be it declared and enacted: That any declaration before mentioned shall not extend to any letters patent and grants of privilege for the term of one and twenty years or under, heretofore made of the sole working or making or any manner of new manufacture, within this realm, to the first and true inventor or inventors .


There was also a similar exception covering letters patent for a term of fourteen years "hereafter to be made" and relating to new inventions.

A condition which was added to each of the exceptions must also be noted, because it indicates something of the original understanding of the relation of the law against monopolies to patents for new inventions. The condition accompanying the exceptions, reads as follows:

"So they be not contrary to the law nor mischievous to the state, by raising of the prices of commodities at home or hurt of trade, or generally inconvenient . . . .”

From this it will be seen that the provisions of the Statute of Monopolies related to two separate classes of monopolies: first, those which restricted the right to trade in some well known branch of industry or commerce to particular individuals or corporations, and,

721 James I, ch. 3; HUME op. cit. supra note 1, 335, commenting on the enactment of the Statute of Monopolies says: "Advantage was also taken of the present good agreement between the King and Parliament [the King needed money from Parliament to carry on a war with Spain] in order to pass the bill against monopolies, which had formerly been encouraged by the King, but which had failed by the rupture between him and the last House of Commons. This bill was conceived in such terms as to render it merely declaratory; and all monopolies were condemned as contrary to law and to the known liberties of the people. It was there supposed, that every subject of England had entire power to dispose of his own actions, provided he did no injury to any of his fellow-subjects; and that no prohibition of the King, no power of any magistrate, nothing but the authority alone of laws could restrain that unlimited freedom."

secondly, those which conferred exclusive rights on the inventors of a "new manufacture" or the introducers of a new trade into the realm. Monopolies of the first class developed into oppressive privileges and were held void by the courts, because in violation of the common law, and, in accordance with the principles of Magna Charta, they were nothing more than a royal usurpation of power. Monopolies of the second class, that is, patents for new inventions, were sustained by the courts even prior to the Statute of Monopolies, and were regarded as a legitimate exercise of the royal prerogative. Eventually, these monopolies acquired legal sanction by virtue of a fiction that the transaction was in the nature of a contract under which a grant was made in consideration of an immediate disclosure of something new and useful to the realm."

The early hostility to monopolies in England, evidenced by the Statute of Monopolies, was renewed in the American colonies as a result of the abuses of the patents of monopoly granted to English companies engaged in colonial trade. This hostility was one of the immediate causes of the Boston Tea Party, when a cargo of tea of an English company, to whom a monopoly in this commodity had been granted, was dumped in the Boston Harbor.10 This resentment against monopolies in the colonies increased during the Revolution, because of the monopolistic practices of local tradesmen." So strong was the belief in the prohibition of monopolies "as contrary to the spirit of a free government" that it was included in the declaration of rights in some of the first state constitutions.12

From time to time many of the states have enacted so-called antimonopoly statutes to curb abuses which menaced free trade in the states.13 Finally, in 1890, Congress passed the Sherman Anti-Trust

HYDE op. cit. supra note 2, ch. 1, points out that the patents of monopoly as a form of industrial encouragement, on the continent, at least, is believed to have preceded those based on the introduction of a new art. As early as 1467 a monopoly was granted for the manufacture and sale of paper in Berne and its jurisdictions. The industrial grants were developed in France before they were introduced in England. The practice of the early Tudor monarchs was to grant industrial patents to protect foreign workmen introducing new arts in England. The earliest exclusive patent of this character in England bears the date 1558. In the latter part of the sixteenth century patents were no longer wholly confined to new arts and the abuses crept in.

Ewing, Bearing of the Contract Theory of Patents on Certain Defenses (1914), an address delivered by the Commissioner of Patents at the 37th Annual Meeting of the American Bar Association, held at Washington, D. C., October, 1914. 10Jones, op. cit. supra note 2; (1926) 36 YALE, L. J. 42, 52, 55. "Jones, op. cit. supra note 10.

12 Jones, op. cit. supra note 10.

13In 1889 and 1890 the states of Iowa, Kentucky, Maine, Michigan and Texas enacted statutes prohibiting combinations of corporations in restraint of trade. Almost all states now have laws against monopolies or combinations in restraint of trade. DAVIES, TRUST LAWS AND UNFAIR COMPETITION (1915) Ch. IV.

Act, pursuant to the constitutional power to regulate interstate commerce. This Act and the Clayton Act15 constitute the principal federal anti-trust statutes.

The exceptions, contained in the Statute of Monopolies, relating to letters patent for new inventions, to which reference has previously been made, are represented in our modern federal law by the provisions of Article 1, Sec. 8 of the Constitution, which gives Congress power to promote "the Progress of Science and useful Arts by securing for Limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries;" and in the patent statute, 16 which provides that "every patent shall contain a. . . grant to the patentee, his heirs or assigns, for the term of seventeen years of the exclusive right to make, use and vend the invention or discovery throughout the United States, and the territories thereof, referring to the specifications for the particulars thereof."


The purpose of the Sherman Act was to preserve competition.17 At the time of the adoption of this Act, it was believed that interstate commerce was being interfered with by powerful trusts and corporate combinations, with which the anti-monopoly statutes of the several states were unable to deal, because the operations of the great trusts and combinations extended beyond state lines.18 An additional necessity for the adoption of the Sherman Act was the absence of any common law of crimes in the federal courts.1 19 The Sherman Act

1426 Stat. 209 (1890) U. S. Comp. Stat. (1918) § 8820, 8821. The first and second sections of the Sherman Act, which are the sections bearing on this discussion, are as follows: "Section 1. Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is hereby declared to be illegal. Every person who shall make any such contract or engage in any such combination or conspiracy shall be deemed guilty of a misdemeanor, and, on conviction thereof, shall be punished by fine not exceeding five thousand dollars, or by imprisonment not exceeding one year, or by both said punishments, in the discretion of the court. "Section 2. Every person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several States, or with foreign nations, shall be deemed guilty of a misdemeanor, and, on conviction thereof, shall be punished by fine not exceeding five thousand dollars, or by imprisonment not exceeding one year, or by both said punishments, in the discretion of the court." 538 Stat. 730, (1914), as amended May 15, 1916 and May 26, 1920; U. S. Comp. Stat. (1918) § 8835.

16U. S. Rev. Stat. (1874) sec. 4884; U. S. Comp. Stat. (1918) § 9428. 17U. S. v. Standard Oil Co., 221 U. S. 1 (1910).

1821 Cong. Rec. Part 3, 51st Cong. Ist Session (1890) 2455, 2460, 2462. 19Senator Vest and Senator Hoar stated in the course of the debates in the Senate that there was no common law of the United States as there was in all of the states of the Union. 21 Cong. Rec. Part 3, supra note 16, 2603, and part 4, 3152. See also Walker, HistORY OF THE SHERMAN LAW (1910). For a general discussion see BURDICK, THE LAW OF THE AMERICAN CONSTITUTION (1922), sec. 133.

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