Woods & Sons v. Carl, 203 U.
S. 358, and
Allen v. Riley, 203 U.
S. 347, followed as to the power of a state, until
Congress legislates, to make such reasonable regulations in regard
to the transfer of patent rights as will protect its citizens from
fraud.
There cannot be an exact exclusion or inclusion of persons and
things in a classification for governmental purposes, and a general
classification, otherwise proper, will not be rendered invalid
because certain imaginary and unforeseen cases have been
overlooked. In such a case, there is no substantial denial of the
equal protection of the laws within the meaning of the Fourteenth
Amendment.
State legislation which regulates business may well make
distinctions depend upon the degrees of evil without being
arbitrary and unreasonable.
See Heath & Milligan Mfg. Co.
v. Worst, post.
The purpose of the statute of Arkansas providing that all notes
given for payment of patented articles must show that they were so
given, and permitting defenses to be made to such notes in the
hands of third parties, is to create and enforce a police
regulation, aimed principally at itinerant vendors of patented
articles, and the distinction in § 4 that it shall not apply
to merchants and dealers who sell patented articles in the usual
course of business is founded upon fair reasoning, and is not such
a discrimination as violates the equal protection provisions of the
Fourteenth Amendment.
Page 207 U. S. 252
Where the case was decided below solely upon constitutional
grounds upon which the decision cannot rest, it must be remanded
and if there are any other facts they can be presented upon another
trial.
145 F. 344 reversed.
This case comes here upon certiorari directed to the Circuit
Court of Appeals for the Eighth Circuit. The action was commenced
in the United States circuit court for the Western District of
Arkansas, upon certain promissory notes, which the defendant, the
Ozan Lumber Company, in its answer alleged had been given by it in
payment for a patented article, such notes not being executed upon
a printed form, showing they were given in consideration of a
patented machine, as required by the statute of Arkansas. Kirby's
Digest Laws of Arkansas, §§ 513 to 516, inclusive.
A demurrer to the defense was interposed on the ground that it
did not state facts constituting a defense. The circuit court
sustained the demurrer, because, as it held, the act was in
violation of the Fourteenth Amendment, as denying to the plaintiff
the equal protection of the laws. 127 F. 206. The case was taken by
writ of error to the circuit court of appeals, where the judgment
was affirmed for the reason that the act was an illegal
discrimination against patented articles. 145 F. 344. The
application by defendant for a certiorari to review that judgment
was granted.
Page 207 U. S. 254
MR. JUSTICE PECKHAM, after making the foregoing statement,
delivered the opinion of the Court.
The validity of this very statute of Arkansas (at least, until
Congress legislates upon the subject) has already been affirmed by
this Court (
Woods v. Carl, 203 U.
S. 358), and the validity of statutes of a somewhat
similar nature has also been affirmed in the case of
Allen v.
Riley, 203 U. S. 347,
immediately preceding the case above cited.
It is sought to avoid the authority of our decision upon this
Arkansas statute by asserting that nothing was therein decided
except the validity of the first section of the act, and that the
validity of the act when considered in connection with the fourth
section was not argued or decided. The fourth section reads as
follows: "This act shall not apply to merchants and dealers who
sell patented things in the usual course of business." Other
reasons for an affirmance are set up in the brief of
respondent.
The grounds given for the decision by the circuit court and the
circuit court of appeals differ somewhat. The circuit court says
that the effect of the fourth section of the statute is to violate
that portion of the Fourteenth Amendment to the federal
Constitution which provides that no state shall
Page 207 U. S. 255
deny to any person within its jurisdiction the equal protection
of the laws; while the circuit court of appeals bases its judgment
upon the unlawful discrimination evidenced by the act against those
who are protected by a patent granted by the United States.
In
203 U. S. 203 U.S.
358 (
supra) this Court held the statute valid as against
an objection of the same nature as that taken herein by the circuit
court of appeals. Our decision in that case had not been made at
the time of the decision of this case in the courts below. The
ground taken by the circuit court was not discussed in our opinion
in 203 U.S., and although it might be urged that all objections to
its validity arising upon the face of the statute, even if not
specially discussed, were overruled by the decision, yet, assuming
that the particular question now presented is still open in this
Court, we are of opinion that the exception contained in § 4
does not render the statute invalid. The plain purpose of the whole
statute is to create and enforce a proper police regulation. Its
passage showed that the legislature was of opinion that fraud and
imposition were frequent in the sale of property of this nature,
except in the cases mentioned in § 4, and that temptations to
false representations in regard to the virtues and value of the
article sold were also frequently yielded to. When the sale of the
article was effected by such representations, and a note given for
the amount of the sale, a transfer of the note to a
bona
fide purchaser for value before its maturity prevented the
vendee from showing the fraud by which the sale had been
accomplished. In order to reach such a transaction and to permit
the vendee to show the fraud, the statute was passed. It was
doubtless thought that merchants and dealers, as mentioned in the
statute, while dealing with the patented things in the manner
stated, would not be so likely to make representations or to engage
in a fraud to effect a sale, as those covered by the statute. The
various itinerant venders of patented articles, whose fluency of
speech and carelessness regarding the truth of their
representations might almost be said to have
Page 207 U. S. 256
become proverbial, were, of course, in the mind of the
legislature, and were included in this legislation. Indeed, they
are the principal people to be affected by it.
The manufacturer of a patented article, who also sells it in the
usual course of business in his store or factory, would probably
come within the exception of § 4. He may be nonetheless a
dealer, selling in the usual course of his business, because he is
also a manufacturer of the article dealt in. Exceptional and rare
cases, not arising out of the sale of patented things in the
ordinary way, may be imagined where this general classification
separating the merchants and dealers from the rest of the people
might be regarded as not sufficiently comprehensive, because in
such unforeseen, unusual, and exceptional cases the people affected
by the statute ought, in strictness, to have been included in the
exception.
See opinion of circuit court herein, 127 Fed.,
supra. But we do not think the statute should be condemned
on that account. It is because such imaginary and unforeseen cases
are so rare and exceptional as to have been overlooked that the
general classification ought not to be rendered invalid. In such
case, there is really no substantial denial of the equal protection
of the laws within the meaning of the Amendment.
It is almost impossible, in some matters, to foresee and provide
for every imaginable and exceptional case, and a legislature ought
not to be required to do so at the risk of having its legislation
declared void, although appropriate and proper upon the general
subject upon which such legislation is to act, so long as there is
no substantial and fair ground to say that the statute makes an
unreasonable and unfounded general classification, and thereby
denies to any person the equal protection of the laws. In a
classification for governmental purposes there cannot be an exact
exclusion or inclusion of persons and things.
See Gulf &c.
Co. v. Ellis, 165 U. S. 150, and
cases cited;
Missouri &c. Co. v. May, 194 U.
S. 267. We can see reasons for excepting merchants and
dealers who sell patented things, in the usual course of business,
from the provisions of the statute,
Page 207 U. S. 257
and we think the failure to exempt some few others, as above
suggested, ought not to render the whole statute void as resulting
in an unjust and unreasonable discrimination.
The case of
Connolly v. Union Sewer Pipe Co.,
184 U. S. 540, one
of the cases cited by the circuit court, is not, in our opinion,
applicable. The statute did not apply to agricultural products or
livestock while in the hands of the producer or raiser. It was held
that this exemption rendered the statute void, as denying to
persons within the jurisdiction of the state the equal protection
of the laws. The statute was held to create a classification of an
arbitrary nature, applicable to large numbers of people, and yet
not based upon any reasonable ground. Those who were exempted from
its provisions were numerous and stood practically in the same
relation to the subject matter of the statute as did the other
class upon whom the statute acted, and no valid reason could be
given why, if one were included, the other should be exempted. The
same reasons applied to all the classes, and should have led to the
same results with regard to all. There was no room for a proper or
fair discrimination.
We think there is a distinction, founded upon fair reasoning,
which upholds the principle of exemption as contained in the fourth
section, and that, consequently, the statute does not violate the
Fourteenth Amendment on the ground stated.
The case was decided by the courts below solely upon
constitutional grounds, and upon those grounds the decision cannot
rest. It must therefore be remanded, and if there be any other
facts to be urged they can be presented on another trial.
The judgments of the Circuit Court and the circuit court of
appeals must be reversed and the case remanded to the Circuit Court
for further proceedings not inconsistent with this opinion.
Reversed.
