Untitled Texas Attorney General Opinion

,” 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