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The Victor Talking Machine Company

Appendix X
License Royalty


Victor started to license its products for SALE as early as March I, 1902, barely five months after the company was incorporated. The notice read as follows:


This machine, which is registered on our books No._______ is licensed by us for sale and use only when sold to the public at a price not less than $ _______. No license is granted to use this machine when sold at a less price. Any sale or use of this ma­chine when sold in violation of this condition will he considered as an infringe­ment of our United States patents under which this machine, and records used in connection therewith are constructed, and all parties so selling or using this ma­chine contrary to the terms of this license will be treated as infringers of said patents, and will render themselves liable to suit and damages.

The license is good only so long as this label and the above noted registered num­ber remains upon the machine: any erasures, or removal, of this label will be con­strued as a violation of the license. A purchase is an acceptance of these conditions. All rights revert to the undersigned in the event of any violation.


2. The plan was broadened and made the basis of dealer and distributor franchising on June 1, 1906.
3. The basic plan of 1906 was revised on May 1, 1910. The most important change called for exclusive representation by the Distributors.
4. On August 1, 1913 the plan was changed from a "License to Sell" basis to a "License to Use." The exclusive representation provision was dropped.
5. This plan of sale, developed by some of the best legal minds of the time, was based on the theory that an inventor, having been given a patent monopoly by the government, was entitled to control of its application during the 17-year life of the patent.
6. Victor’s objective was to set up a fair schedule of prices for the public, for dealers, and for distributors, and to keep price-cut scalping from making the line unattractive and unprofitable to dealers who could and were ready to do constructive jobs of merchandising.
7. In 1915, the United States Circuit Court of Appeals for the second Circuit handed down a decision favorable to the company.

However, on April 9th, 1917, the United States Supreme Court rendered a decision to the effect that the notices applied to the company product were “in part unenforceable.” Whereupon, the company announced to the Trade that the plan had been discontinued and that sales in the future would be without control. Suggested prices were clearly marked “not binding on the Trade.”

(p. 113)

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