,”
Sonorable~.TcmSeay
countyAttorney
Potter couuty
AmUrillO,Texas
Dear Sir: OpinionNo. O-3322
&I: Whetherattachedcontract
for exclusiveright of sale
of csrtrlntrademarked
merohandieeby. Texas di8-
tributorin a Umltod territory
10 in vlolAtion~
of the Anti-
Tnlnt hle.
Pureuantto your requestof blamh 8, 1941,we M mhmitting
herbwithour opinionon the questionof Wether the rttrchedcontract
which providerfor the exoluaivedistributionby an Amarillohardware
dealer In a aert8inlimitedterritoryof tzmdeuurkedgood6 is in viola-
tion of the Autl-truetLam of Terra.
Sluoe the enaotmentof the firet Anti-truetLaw, the Appcl-
l&e Courts of Texrm have ooueistentlyconstruedit to forbid contra&e
providingfor au excluelvedealershipwithin a prescribedlimitedterri-
brY. This dootrlnewas firet auuoumsd by Chief JueticeGaines In
18g6’in the ca8e of Te$aa BrewingCo. v. Templonmu,90 Tu 77, 38 S-W.
27, wherein the SupremeCourt of Texas hold that a contra& between
a breweryand a dealer of beer whereby the dealerwas to handleno other
beer than that of the breweryand the dealerwae to be the exclunive
dealerfor irid brewerywae in violationof the Terse Anti-trustLaws. '~
Chief JusticeGains6 at page 28 stated:
'. "By the agreevnent
the brewingcompanybound itself
to give to lorwoodand Compmuy,the sole representation
aud sale of ite products in and near the town of Bavaeota,
and the latterplaaed tbemaclveaunder the reciprocal
obligationto sell no other beer than that of the oompany.
The effeotof the contract. is evidently to create and ‘carry
out reetrlotlonein trade' and 'to preventcompetition'in
the 'saleand pnrohaee.' of ' commodities', namely beer and
ice. Clear4, the act in questionforbidssuch agreements."
in state v. Willye~verland,IIE., 211 S.U. 609, (sm Antonio
L.. .*
Eon. Tan Sery, page 2 (Opinion4. O-3322)
Court of Civil Apperim 1919) the.Attomey CIenerrl
of Texam filed euit
psaiastthe WiUy~-Ovbrhnd Coqmay allegingtht Its oontmctwlth
its dealera in Texti ~18 in vidlrtionef the AWJ-trust Laws of Texas
by virtue of the faot that the purposeand effeotef said oontmot was
to lhit eaohderler to his particularterritoryin t&to darlsrwan
requiredto pay one-hlf of his profit to the dealer in am adjoining
territory,If he sold an mtomobile in ouch other dealer'sterritory,
even thoughsaid.contraotdid not In lta terns expresslypmhiblt such
dealer from sellingouteideof his own derrlgcmtsdterritory. The
court deolmed:
'Whateverthe motive my have been, in iaserting
such pmvisiom, it la evidentit WLB den-d to rid
in eaforcingthe territorirlrestrictian,and not for
the purposeof grantlmgby inpliortion,the right to
violðeplaillyempre6med intsltlontooonfinethe
distributorto the describedterMtory.'
The dootrirsforbiddingexclusivearle agenoiermnauxmed
byChiefJastloeGainee In the Templomaaouewrem@#tferoiblyre-
affltidbythe aoiminiou ofAppeals ia In HendernonTiraand
Ribber Co. 'v.Reberte, 12 S.W. (26) 19, wherein the oourt mperklng
throughJmlg$eCrite rt page 155, midr
,I** *E&I contraatgrmta te L.L.Roberta aad Co.
the exclwairdright to ssll, durlag the terPiof the
oontract, Lolipmecord rpd fabrlo tlrer in oertai8de-
flnedmdre~triated tarritoryin this ltrte, ud in
ooaeider&tlon of the grmtlng of the sxolu#ivet+rri-
tory bj the plilntiff,RobertaOompanyagreed ta eel1
esid Bllpse tire8 ex~lna1vel.y in raid definedub
restrioted~territory during the oontlnuanoeof ths
oontraot,and arid RobertsComgmy furtbr aSreed durina
ths~oontinurnoe'of said oontzaotnot to cell, carry ir
#took, or a&er$lse tlree of any other qmufaoturer.
As appliedto an outrightsale, rnoh an rgreamentis a
trumt,and a conaplrroyin rertraintof trade,under the
law0 of this state."
The foregolagrule eppllema8 well thoughthe artloke8for
whloh an exolualvedealershiplr #oughtto be glv6n ~a ooveredby pa-
tenta,oopyrightaor tradsmrrks. In 29 Texan Jurlrprudenoe768, we find
the follow* statomntr
"On the other hand the owner of an articlepro-
tectedby a patent,oopyrlghtor tradenmrk,when he hu
mrpufMtured and sold the 8NM, mry nQt lmpossireatria-
tlona upon the buyer an to future srlem. When owner-
ship is partedwith, the rrticleentersthe ohennelaof
tr@e and ie thereafterbeyond the ooatrolof the pro-
Hon. Tom Se.y, Page 3 (OpinionBo. O-3322)
prietorof the monopoly."
In Xrtiaal Automatic MaohinoCconpany v. Smith, 32 8.U.
(26) 678, Th&Auetin Court of Civil Appeale kad before it a contract
peoulirrlysimilarto the one umder oonsideration here. In that
caeo the I?ationalAutomaticMachineCompanyhad entered into a con-
tra& with Smith whereby it grantedto him the exolualvsderlorehip
for sixty-twoaountiesof certaincoil operatedboxing amusementdevises
kaown w 'K.O.Pightere". The contractwae for a period of five years,
and the HationalAutoMtic MachineCompanyhad epplledfor l&tore pa-
tentomthemachines. The oourt declaredeold contractto be in viola-
tion of the Texas Anti-trustInwe. We quote at 8ome langthfrom the
opinion:
"But appellantcontendsthat since the ctintraot show61
ltwos amignee of patent rightia to the merchPndieesold to
appellee,it had the right to make such restriotions,or to
grant such excluslve.righteto its vendee ae it might
coo fit and proper,vendee PgreSlngthereto; and that such
reotxictitmeamd rights grantedwere not in violationof
the anti-trustlawe of thle state. In this oonteationap-
pellantrelies upon the rule announcedby thle court in
the case of Coos-Cola00. v. State (Tex.Civ. App) 225
S.W. 791, 793, tbatr 'Theowner of I patent right,copy-
right, or trade&k, having excluraive right to manufacture
and salZVtihearticleprotectedthereby,and being under no
legal obligationto grant such right to another,may impose
upon hi& assigneesuoh restriotionePO he may eee proper,
and t&which his aesigneewill agree, lmoludingthe price
.t which the articlemay be cold, the territoryin which
It may be laraufaotured
tid mold, the m&aria1 that may be
used in It& manufacture,or in oonuectlontherewith.'
"But that rnle ha8 no appliootionto the contract
here Involved,because it does not relate to the petent
right or to e merohmdiae sold in connectionwith the
patent right,but relates to merchandieemanufactured
and actuallysoldunde~rpend~ patentwhiohappcllant
assertedin the contractit is owner. The cam is there-
fore oontmlled by the furtherrule announcedin the OOOP-
Cola Case that: 'The owner of M articleprotectedby
a patent,copyright,or trade--k, when he hae manufactured
and sold the~sune,cannot imposerostri&ione upon his ven-
dee .a to the future sole of the BUILC.Having partedwith
his ownerehlptherein,it enters the chennelsof trade a8
an articleof ccmmeroe,end ie theretiterbeyond b.iacontrol.'
"The dlatlnctionbetweenthese ruloa iB clearlypointed
out in the Coca-Colacaeo and the authoritiesthere cited,
and meads no discussionhere.
Hon. Tom Seay, Page 4 (OpinionNo. O-3322)
"Nor can appellant'8contentionbe sustainedthat
It appearedfrom the pleadingsthat the contractsued
upon wee one involvinginterstateoanrmerce.The con-
trary clear4 appears,becausethe restrictionsImposed
apply to acts of the vendee in the aale of the merohan-
disc after the interetateconuneroe transactionsinvolved
had been completed. As above pointedout, the contract
of purchasewas completedwhen the merohandisewee de-
liveredto lppellee,and no other interstatecommerce
transactioncould have been Involvedunder the terms
of the contract. Thereforethe restrictions which
appliedto acts of appelleeto be performedafter all
interstateoommercetransactionsceased renderedthe
contractvoid aa violativeof the anti-trustlaws of
Tex.8. * * *."
&ee Also Rogers v. WestinghouseElectricSupp4 Co., (Dallas
Court of CivilApperki 1938) 116 S.W. (2d) 886, wherein the court
declared,at page 80th
"AEJEUIU~IIS
that the icing unit, part of the equip-
ment of the refrigerator, wee P patentedarticleand
owned eitherby the WestinghouseElectricand Nl'g.Co.,
or the WestinghouseXleotrioSupply Co., defendant
herein,the dealer'scontractin questioncontemplated
en absolutesale of the articleby the Manufacturing
Companyto the supply Company,and by the Supp4 Company
(deftident.)to plaintiff,showingoonclusive4 that, PB
the owner of the patentedarticlepartddwith title, the
doctrineinvoked161not rppliorble,hence the attempt
to prescriberestriction8e&ito territory,etc., is
clear4 withiI.thecond3mn.tionof the .nti-trustlaws
of the state. This doctrinewoe announcedin Coca Cola
v. State, Tex. Civ. App., 225 S.W. 791; NationalAuto-
matic Mach. Co. v. Smith, 32 S.W. 678."
Under the foregoingauthorities,we believethe conclusion
is inescapablethat the attachedcontractis in violationof the Texas
Anti-trustLaws.
very truly your3,
AlTOBNEYGENERALOFTFXAS
Byr Walter R. goch /e
Welter R. Koch
Aasietuit
hwtssm
EIOCIOSURR APPROVED MAR 28, 1941 APPROVED
Gerald C. Mann /a Opinion
A'TTOBNEYGENEFIALOF
TEXAS Committee
By: BWB
Ch.bIJl.l2