An attempt has frequently been made by manufacturers to maintain the price of the manufactured article by making a series of contracts with jobbers/to whom the manufactured goods are sold, that they shall, not be resold at less than a stated price. Sometimes, an attempt is made to bind each purchaser of the goods by notice attached thereto. Sometimes, instead of exacting a contractual agreement, a condition qualifying the Tight of the purchaser is attached to the transfer of title. Though a series of contracts to this sort is lawful in England,47 and in some of the United States,48 the United States Supreme Court has in a series of decisions held such an attempt to maintain a resale price invalid at common law, and when affecting interstate commerce, in violation of the Sherman Act,
47 Am. St. Rep. 200; Harding v. American Glucose Co., 182 111. 551, 55 N. E. 577, 64 L. R. A. 738, 74 Am. St. Rep. 189.
46 In United States v. United Shoe Machinery Co., 247 U.S.. 32, 38 S. Ct. 473, 62 L. Ed. 968, Clarke, J. (diss.), briefly summarized the progress of the law: "This idea that the 'harmonious arrangement' [between competitors] was unlawful was doubtless inspired by the decision in the Trans-Missouri Freight Assoc. Case, 166 U. S. 290, 41 L. Ed. 1007, 17 S. Ct. Rep. 540, rendered in 1897, and he probably shared a then not uncommon notion that the holding company and the merger were devices lawfully available for evading the congressional purpose expressed in the Anti-trust Act. But in the Northern Securities Co. Case, 193 U. S. 197, 48 L. Ed. 679, 24 S. Ct. Rep. 436, this court decided in 1904, that the holding company was a futile device, and in the
American Tobacco Co. Case, 221 U. S, 106, 55 L. Ed. 663, 31 Sup. Ct. Rep. 632, it was decided in 1911, that the merger was also a mere 'subterfuge of form' which the courts would not permit to shield those who violated the act."
47 Elliman v. Carrington etc Son, Ltd.,  2 Ch. 275; National Phonograph Co. v. Edison-Bell Consol. Phonograph Co.,  1 Ch. 335; Dunlop Pneumatic Tyre Co. v. Selfridge, 29 T. L. R. 270.
48 Grogan v. Chaffee, 156 Cal. 611, 105 Pac. 745, 27 L. R. A. (N. S.) 295;
D. Ghirardelli Co. v. Hunsicker, 164 Cal. 355, 128 Pac. 1041; Garst v. Harris, 177 Mass. 72, 58 N. E. 174; Garst v, Charles, 187 Mass. 144, 72 N.
E. 839; Park & Sons Co. v. National Wholesale Druggist Assoc., 175 N. Y. 1, 67 N. E. 136, 62 L. R. A. 632, 96 Am. St. Rep. 578. Cf. Fisher Flouring Mills v. Swanson, 76 Wash. 649, 137 Pac. 144, 51 L. R. A. (N. S.) 522.
whatever form the attempt takes, even though the goods affected by the attempt are manufactured by a secret process,49 or are protected by the copyright,50 or patent laws51 of the United States.
The argument has been made that since the law protects patents, copyrights, and secret processes, contracts controlling the resale price of articles thus protected should not be obnoxious to the law. But it has been well said in answer to this argument, "It is the policy of the law to reward individual thought and research by protecting the enjoyment of their fruits; thus the author,52 the news gatherer,53 and the owner of an unpatented invention,54 are protected against the piratical use of their peculiar property. A similar protection is extended to the chemist who has discovered a secret formula.55 But it does not follow that because a secret process or formula will be protected against betrayal by those to whom it has been communicated in confidence under a contract for a restricted use,
49 Dr. Miles Medical Co. v. Park & Sons Co., 220 U. S. 373, 31 L. R. A. 376, 55 L. Ed. 502.
50 Bobbs-Merrill Co. v. Straus, 210 U. S. 339, 28 S. Ct. 722, 52 L. Ed. 1086.
5l Bauer v. O'Donnell, 229 U. S. 1, 33 S. Ct. 616, 57 L. Ed. 1041, 50 L. R. A. (N. S.) 1185, Ann. Cas. 1915 A. 150; Straus v. Victor Talking Machine Co., 243 U. S. 490, 37 S. Ct. 412, 61 L. Ed. 866, L. R. A.  E. 1196, Ann. Cas. 1918 A. 955; Motion Pictures Patents Co. v. Universal Film Mfg. Co., 243 U. S. 502, 37 S. Ct. 416, 61 L. Ed. 871, L. R. A. 1917 E. 1187, Ann. Cas. 1918 A. 959; Boston Store v. American Graphophone Co., 246 U. S. 8,38 S. Ct. Rep. 257, 62 L. Ed. 551, Ann. Cas. 1918 C. 447. The case last cited overruled the decision of Henry v. A. B. Dick Co., 224 U. S. 1, 32 S. Ct. 364, 56 L. Ed. 645, Ann. Cas. 1913 D. 880, which sustained the right of the manufacturer of the patented article to qualify the sales by a condition requiring material essential for working the machine to be bought from the seller.
52 Donaldson v. Beckett, 2 Brown P. C. 129; Palmer v. De Witt, 47 N. Y. 532, 7 Am. Rep. 480.
53 Exchange Tel. Co. v. Gregory,  1 Q. B. 147; Board of Trade v. Christie, 198 U. S. 236, 49 L. Ed. 1031, 25 S. Ct. 637; Dodge v. Construction Information Co., 183 Mass. 62, 66 N. E. 204, 60 L. R. A. 810, 97 Am. St. Rep. 412.
54 Peabody v. Norfolk, 98 Mass. 452, 96 Am. Dec. 664; Tabor p. Hoffman, 118 N. Y. 30, 23 N. E. 12, 16 Am. St. Rep. 740.
55 Harrison v. Glucose Sugar, etc., Co., 116 Fed. 304, 53 C. C. A. 484, 58 L. R. A. 915; Thum v. Tlocsynski, 114 Mich. 149, 72 N. W. 140, 38 L. R. A. 200, 68 Am. St. Rep. 469; Salomon v. Hertz, 40 N. J. Eq. 400, 2 Atl. 379; Tode v. Gross, 127 N. Y. 480, 28 N. E. 469, 13 L. R. A. 652, 24 Am. St. Rep. 475. See also Maxim Nordenfelt v. Nordenfelt,  1 Gh. Div. 630, for a review of the English cases.
that a system of contracts for the control of all sales and sub-sales of the article when produced will be outside of the rules in restraint of trade, simply because it is the product of such secret formula."
The attempt has also been made to control resale prices by agreeing to give rebates to such dealers as maintain the list prices of the manufacturer. This method gives an inducement to resell only at fixed price, but imposes no obligation to do so. There is, therefore, less reason for objection and contracts of this sort have been upheld.56 Another method, which involves no contract, is simply to name resale prices and refuse to supply more goods to any one who cut these prices,57 but in view of the latest decision of the United States Supreme Court,58 and of the facts that the method of rebates can be so used as to produce practically the same effect as a restrictive covenant, and that if the effect is opposed to public policy the means used whatever their nature are likely to be so also, it seems probable that any contract, at least if resulting in a general maintenance of prices, or made for that purpose will be held illegal by that court.