            ,”




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
      viol&etheplaillyempre6med 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
