Straus v. American Publishers' Ass'n

Chief Justice Marshall said long ago, in Grant v. Raymond ( 6 Pet. 217 241): To promote the progress of useful arts is the interest and policy of every enlightened government. It entered into the views of the framers of our Constitution, and the 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,’ is among those expressly given to Congress. * * * It is the reward stipulated for the advantages derived by the public from the exertions of the individual, and is intended as a stimulus to those exertions. The laws which are passed to give effect to this purpose ought, we think, to be construed in the spirit in which they have been made, and to execute the contract fairly on the part of the United States, where the full benefit has been actually received; if this can be done, without transcending the intention of the statute, or countenancing acts which are fraudulent or may prove mischievous. The public yields nothing which it has not agreed to yield; it receives all which it has contracted to receive. The full benefit of the discovery after its enjoyment by the discoverer for fourteen years is preserved and for his exclusive enjoyment of it during that time, the public faith is pledged.”

That' case and many others were considered recently by the United States Supreme Court in Bement v. National Harrou Co. ( 186 U S. 70 ), Mr. Justice Peckham writing. After an examination of the cases which may be said to restrict the exceptions which grow out of a proper exercise of the police power of the state — of which Patterson v. Kentucky ( 97 U. S. 501 ) is an illustration ■—-he says ( 186 U. S. 91 ): “ Notwithstanding these exceptions, the general rule is absolute freedom in the use oí sale of rights under the patent laws of the United States The very object of these laws is monopoly, and the rule is, with few exceptions, that any conditions which are not in-theii very nature illegal with regard to this kind of property, imposed by the patentee and agreed to by the licensee fox the right to manufacture or use or sell the article,

That reasoning is employed as to patent rights. It is equally applicable to copyrights, the protection of which was perhaps the leading object of the association and agreement attacked in this action. And it points to the principle underlying the decision in the Park & Sons Co. Case ( 175 N. Y. 1 ), upon which defendants apparently rest their claim that the judgment of the Appellate Division should be reversed. But there is a feature in this case not to be found in that one, and which requires a different judgment than the one rendered therein — which will now be pointed out.

"While the leading object of this association and agreement purports to be to secure to the owner and publisher of copyrighted books that protection which the Federal government permits them to enjoy for the reasons stated by Chief Justice Marshall (supra), it does not stop there. It also affects the right of a dealer to sell books not copyrighted at the price he chooses, or to sell at all, if he fails to comply with the rules of the association. A combination creating a monopoly of the sale of books not protected by copyright offends against the law of this state as much as if it related to Milestone (164 FT. Y. 401) or to envelopes (166 Fí. Y. 292), and according to this complaint, which must be accepted as true on this review, such an outcome is not only possible but probable. But it is not of moment whether such a result is probable or not, for the test to be applied is, What may be done under the agreement ?

■ Reference to the complaint makes it clear that the association has undertaken to provide for the practical exclusion from the business of selling books not protected by copyright all who refuse to be bound by the rules of the association. And it appears from the complaint that the practical construction given to this agreement by those operating together under it is that if a dealer is suspected of selling copyrighted books at less than the arbitrary net price it is quite sufficient to exclude him from'selling books altogether. The agreement nowhere

The 15th paragraph of the complaint alleges “ That during the year 1900 a number of prominent publishers, including defendants, hereinbefore described as publishers (for the purpose of securing to themselves an unreasonable and extortionate profit and at the same time with intent to prevent competition in the sale of books and for the purpose of establishing and maintaining the prices of all boohs published by them, or any of them, and all boohs dealt in by them, or any of them, and preventing competition in the sale thereof, unlawfully, illegally and contrary to the public policy and the statutes of the state of Hew York * * * combined and associated themselves together,” etc. The 16tli paragraph refers to the method of organization, and the fact of the adoption of a resolution, and an agreement to carry out their object; while the 17tli states the nature of the agreement as follows: “ That as a part of said unlawful scheme and combination the members of said association agreed that such net copyrighted books, and all other booles, whether copyrighted or not, or whether published by them or not, should be sold by -1116111 to those booksellers only who would maintain the retail net price of such net copyrighted books for one year, and to those booksellers and jobbers only who would furthermore sell books [the word “ copyrighted ” is omitted at this point] at wholesale to no one hnovm to them to cut or sell at a lower figure than such net retail price, or whose name would be gi/uen to them by the association as one who cut such prices P

It will be seen that while the leading object of this portion of the agreement apparently is to maintain the retail net

And the agreement further provides that evidence shall not be required by the bookseller or jobber in order to restrain him from selling to one who has been blacklisted, but that all that shall be required to govern his action, and to prevent him from selling to such a person, shall be that the name has been given to him by the association as one who cuts such net prices. It has been admitted, and must be, that the agreement may be so worked out as to deprive a dealer from selling any books whatever, thus breaking up his business.

But, it is said, that is only intended as a punishment for one who refuses to be bound by the wishes of the owner of the copyrighted book as to its selling price; in other words, that the association inflicts upon him the penalty of a destruction of his business, because of his refusal to abide by the the rules of the association. It is of course of no consequence how this course of action may be described by those who invented it, for if it be the fact that the combination which agrees to exclude others from an unprotected business violates the statute, then it matters not what excuse may be offered for it. It is the excuse, not the statute, which must give way.

The 18th paragraph of the complaint contains what purports to be a practical construction given to this agreement by the members of the association. It states “ That, in pursuance of said unlawful combination and agreement, said American Booksellers' Association and its members have continuously co-operated with and assisted the American Publishers’ "Association and the members thereof in establishing and maintaining prices of such books, and preventing competition in the supply and sale of the same, and still continues so to do; and plaintiffs say that in compliance with said agreement neithei said associations nor any of the members thereof will . sell or supply books at any price to any dealer, whether a

Here then we have a practical construction of the agreement— one put upon it by the parties to it — and it is such a construction as the language employed calls for. And it discloses that the parties who are acting under the agreement assume it to be their right and their duty by virtue of it not to sell or permit to be sold books of any kind or at any price to any dealer “ who resells or is suspected of reselling copyrighted books at less than the arbitrary net price,” whether such dealer be a member of the association or not.

The intended effect of this is to prevent any dealer who is even suspected of reselling copyrighted books at less than the net price from obtaining books at any price or on any terms, whether copyrighted or not. And it does not stop there, for the members of the association agree not to supply him any books at any price, whether he resells copyrighted books or not at less than the arbitrary-net price, provided he is suspected of selling to any dealer who thereafter sells the same at less than such arbitrary net price. And this means — inasmuch as the members represent 95% of the publishers and 90% of the business done in the book trade■—-that he may be practically driven out of the business it any one chooses to suspect that a dealer to whom he has sold books has resold them at less than the price fixed.

The members of the association, therefore, have entered into an agreement which by its terms — as we read it, and as they have construed it in their every-day working under it —■ undertakes to interfere with the free jiursuit in this state of a lawful

The order should be affirmed, with costs.

(dissenting). This case, as it comes before us, presents a complaint, alleging that the plaintiffs have suffered injury and damage as the result of unlawful combinations and associations entered into by the defendants, either in the form of the American Publishers’ Association, or m the form of the American Booksellers’ Association ; which were intended to establish and to maintain the retail net prices fixed on copyrighted books by their publishers. A demurrer interposed by the defendants to the complaint was sustained by the court, at Special Term; but it has been overruled by the Appellate Division and that court has certified to us this question : ,£ Are the facts stated m the complaint m this action sufficient to constitute a cause of action ? ” In determining this question, we must regard as admitted all the material facts alleged by the plaintiffs. Though their complaint is stated at considerable length, much of it is matter of' description or the statement of legal conclusions. The plaintiffs conduct a department store, in the city of New Y ork, under the name of It. H.

In these statements, taken from the complaint, may he .found the gist of this suit and all that is necessary to be considered, in my opinion, in the determination of the question . whether, by such combinations and agreements, the defendants have violated the law. Other allegations relate to the refusal of the plaintiffs to join in such combinations; to the methods adopted by the defendants to prevent others from selling books to the plaintiffs, by “ blacklisting ” them in the book business, and by the use of coercive and intimidating measures; to the establishment by the defendants of a system of espionage, in order to secure information as to the sources of plaintiffs’ supplies of books, and that, as the result of these agreements and of the methods adopted to make them effectual, publishers of books and book dealers hav.e refused to sell books at any price to the plaintiffs, to their damage. The relief asked is, in substance, the adjudication of the unlawfulness of the combination and of the nullity of the agreement alleged and that an injunction issue restraining action by the defendants under their agreement, of any nature which may make it effectual against the plaintiffs, and, as

Whatever else is in this complaint is but subsidiary to, and in demonstration of, the real cause of grievance; which is that, in order to maintain the retail net price of a copyrighted book, as fixed by its publisher, the defendants had entered into a combination and had agreed with each other that they would only sell to those in the trade, who would agree to maintain, and to assist in maintaining, the net retail price, and that they would not deal at all with those, who refused strict co-operation, in such respect; whether that was shown in the conduct of their own sales, or in the selling to others known by them to be “ cutting ” the net price. That I regard as the gravamen of this suit.

At the time of the doing of the things alleged in the complaint to have been unlawful, there was upon the statute books of this state an act, which had for its object the prevention of monopolies and the prohibition of restraints upon trade and commerce. (Chap. 690, Laws of 1899.) This statute, commonly called the Anti-Trust Law, contains three sections. The first section has a threefold purpose; in declaring to be against public policy, illegal and void, every contract, or combination, whereby a monopoly in the manufacture, production, or sale, in this state of “ any article, or commodity, of common use ” may be created; or “ whereby competition in this state in the supply or price of any such article or commodity is or may be restrained or prevented ; ” or whereby the free pursuit of any lawful business may be restricted or prevented. I am unable to see how that any but the second provision of this section can bear upon the present controversy; because the owner of the copyright has a monoply under Federal laws and because the agreement complained of does not restrict the pursuit of the book business, to localities, or to persons; or otherwise than for the purpose. of preventing the cutting by any one of the infice of a copyrighted book, through the threatened withdrawal of all business relations with such person. Section two of the act makes it a misdemeanor, punish

The argument in behalf of the plaintiffs is largely, if not wholly, based upon this statute. I regard its prohibitory provisions, however, as but the declaration of a state policy; which is, to use the language of the opinion in the Matter of Davies ( 168 N. Y. 89 , 101), “ little more than a codification of the common law upon the subject.” The contracts, agreements, arrangements and combinations prohibited by this statute were condemned at common law; but they.did not, as this statute does, subject those who entered into them to criminal punishment, or make them amenable to restraint at the suit of the People. It might, possibly, be well said of this statute that, introducing no new rule of law, it now makes the contracts or combinations mentioned, which, before, were unenforceable, unlawful and criminal offenses and the subject of preventive judgments, at the instance of the law officer of the state.

If, then, the statute makes the position of the complainant no stronger at law. than it was before its passage, it seems to me that the decision of this case should be controlled by our decision in Park & Sons Co. v. National Druggists’ Association ( 175 N. Y. 1 ). Indeed, the decision of that case was made after the passage of chapter 383 of the Laws of 1897, of which the act in question is but the continuation and re-enactment, and the existence of the law upon the statute books was not ignored; for it was expressly referred to by Judge Martin, in his dissenting opinion, as a declaration .of the policy of the state with reference to combinations of the nature of those described. It was, in my opinion, quite as authoritative upon the question of the lawfulness of the existing combination aimed at in the Park case; for, being a continuing arrangement, it could not be exempt from the operation of the act. The

This plan was not against public policy, it was held, because public policy “ commends the conduct of business in such a way as to serve all consumers alike ” and “ one of the cardinal and chief principles of the plan adopted is the establishing of an uniform price by proprietors, which necessitates the service of all persons alike throughout the United States.” Chief Judge Parker also speaking for the majority of the court in the Park case, was of the opinion, with reference to the charge in the complaint that the wholesale dealers could be proceeded against, because they compelled some, or all, of the manufacturers, against their will and inclination, to refuse to sell their goods to plaintiff, by threats, intimidation and black

It is difficult for me to see wherein the decision in the Pa/rh case is not controlling. The logical and consistent application of its doctrine must result in sustaining the demurrer here.

I can discover nothing in the purpose of these defendants, which is morally wrong, or which would. deserve condemnation at common law. There is no combination to restrain competition among themselves; but, simply, an agreement among themselves to bring about more healthful conditions in a certain branch of the general bookselling trade by the maintenance of an uniform fixed retail price on a copyrighted book. That is to say; they agree that publishers of copyrighted books shall fix the net price at which such books shall be sold at retail and that those prices must be observed by all dealers; at the peril to them, if they undersell, of having business relations wholly severed. That the publisher of a copyrighted book may fix its price cannot, very well, be denied and if, by reason of a large number of publishers combining in a plan to compel the net retail price to be universally adhered to in sales, competition may be restrained, that is but an incident of the execution of a lawful plan. How can it be said that the statute in question is operative in such a case; where the copyright constitutes a monopoly, which the Federal government has granted to the publisher ? The subject of these protective agreements —■ the very kernel, as we may say, of the combination — was the resolve of publishers to maintain throughout the trade, and everywhere, a net retail price for copyrighted books and that was to be enforced, to the extent of refusing to have any business dealings with those sellers of books — whether in treaty with the defendants or not—who refused, or connived at the refusal of

The United States Supreme Court, in its consideration of the act of Congress, known, commonly, as the Sherman AntiTrust Act, (passed July 2d, 1890), which declared that “ every contract, combination in the form of a trust or otherwise, or conspiracy in restraint of trade, or commerce, among the States ” etc., was illegal, has interpreted it as aiming only at a contract, or combination, which has for its direct purpose the restraint of interstate trade, or commerce, and as not comprehending a case, where the restraint was an incidental result. (Anderson v. U. S., 171 U. S. 604 .) In that case, by the by-laws of an association, its members were forbidden to buy, or sell, cattle from, or to, traders, not members of the exchange, or to buy from commission men, who bought from, or sold to, non-members. The United States sought to dissolve the association and to enjoin the members from carrying out their exclusive rules, upon the theory that they were engaged in interstate commerce. But the Federal Supreme Court held, if that were so, that, nevertheless, the combination was not within the purview of the statute, and that the agreement did “ not restrict competition among the defendants for the class of cattle dealt in by them.”

But this contract of the combination, analyze it how you may, had no other reason, nor purpose, than to protect, in as drastic ways as the parties could devise, the trading business of publishers of copyrighted books. There was no pooling” in the arrangement; nor was there any restraint imposed upon the parties to it as to competition in the production and the sale of some article, which all were engaged in producing and which all were free to supply. The contract did not extend to uncopyrighted books; other than by way of penalty, as the refusal to deal in them might be incidental to the refusal to deal with booksellers, who would not live up to, or who would not co-operate .in, an agreement to maintain the net retail price of a copyrighted book. It is not unlawful for a person to refuse to deal with others, as his judgment, or fancy, may impel him. His business is his own and the only limita

To summarize, as it has been well done in the argument of the appellants’ counsel; the purpose of the parties to this contract, to maintain one price for the same book to all retail buyers, was limited to copyrighted books, published by members of the American Publishers’ Association, and did not extend to uncopyriglited books, whether published by such members, or by others. Nor was any party restrained from selling uncopyrighted books and uncopyrighted books only to any person, provided such person does not buy, or sell, copyrighted books published by the members of that association. R is only to dealers, who, themselves, insist upon selling at retail the copyrighted books of the members of the associa

I am led to the conclusion, after a careful consideration of the question presented, upon principle as upon the authority of the Park case, that the question certified should be answered in the negative and, therefore, I think that the order of the Appellate Division should be reversed and that the order of the Special Term should be affirmed.

(dissenting). I agree with the opinion of Judge Gray.

The agreement attacked has for its sole object the protection of copyrighted books. I consider the construction given to it by Judge Gray is logical, conducive to the best interests of trade and consistent with the latest utterance of this court on the subject. (Park & Sons Co. v. National Druggists' Association, 175 N. Y. 1 .)

It cannot be reasonably said that a publisher of books protected by copyright, and a dealer in books generally, may not say to his customers in the trade, that if they cut the prices of his copyrighted books he will sever business relations absolutely.

If this be so, and I do not understand it can be successfully questioned, why may not any number of men similarly situated agree to adopt that policy ?

There is a phase of this case that has not been specially discussed, but which may be considered by way of argument. The refusal to maintain trade relations with a given individual is an inherent right which every person in business may exercise, for reasons he deems sufficient or for no reason whatever. It is a part of that liberty of action which the Constitutions, State and Federal, guarantee to the citizen.

This case discloses one of the saddest phases of our modern business life.

It is a well-known fact that the great department stores of

It may be fairly assumed that the general business is conducted at a profit.

The result is a large number of the retail dealers in the various kinds of articles thus undersold are driven out of business, many of them at a time of life when they are unable to reinstate themselves in some other calling.

It also results in great damage to manufacturers, producers and wholesale dealers in loss of customers who have been driven into insolvency".

It is, of course, true that the proprietors of department stores have the legal right to offer to the public goods of any kind at prices below production, or, indeed, may donate them to their customers. It is, however, equally true that the manufacturers, producers and wholesale dealers may say to the men whose policy is thus carrying ruin and destruction to their business and that of their customers, that if you persist in this disastrous cutting of rates we will sever all business relations absolutely. These are mutual and inherent rights, in the nature of things, so long as self-defense and the privilege to exist survive among men.

Haight, Martin, Yann and Werner, JJ., concur with Parker, Ch. J.; Gray and- Bartlett, JJ., read dissenting opinions..

Order affirmed.