## Facts

- Dr. Miles Medical Company manufactured and sold proprietary medicines made by secret, unpatented processes and marketed under distinctive labels and trademarks.
- The company distributed its products through jobbers/wholesalers and retail druggists and sought to prevent “cut-rate” sales that it claimed harmed goodwill and reduced sales.
- Dr. Miles implemented a coordinated system of written contracts requiring:
  - jobbers to sell only to retailers who accepted Dr. Miles’s terms and at specified wholesale prices; and
  - retailers to adhere to specified minimum retail prices and to avoid sales to price-cutting outlets.
- John D. Park & Sons Company, a wholesale drug dealer that did not sign Dr. Miles’s contracts, allegedly obtained Dr. Miles products through intermediaries and resold them at discounted prices.
- Dr. Miles sued in equity seeking an injunction to stop Park & Sons from selling at cut prices and from inducing jobbers and retailers to breach Dr. Miles’s resale-price contracts.
- The trial court dismissed the bill for want of equity; the court of appeals affirmed.

## Issues

1. Whether Dr. Miles could obtain injunctive relief for alleged inducement of contract breaches when the underlying resale-price agreements were allegedly invalid.
2. Whether Dr. Miles’s resale price maintenance system constituted an unlawful restraint of trade at common law and, insofar as it affected interstate commerce, under the Sherman Act.
3. Whether the proprietary, secret (but unpatented) nature of Dr. Miles’s medicines gave it a special right to control downstream resale prices.

## Decision

- The Supreme Court (Hughes, J.) affirmed dismissal and denied equitable relief.
- The Court held Dr. Miles’s integrated resale price maintenance system was an unlawful restraint of trade at common law and, to the extent it affected interstate commerce, under the Sherman Act.
- Because the contracts were invalid, Dr. Miles could not obtain an injunction based on alleged interference with those contracts.
- The Court rejected any claimed special entitlement to fix resale prices based on the products being proprietary medicines made by secret, unpatented processes.
- Holmes, J., dissented.

## Legal Principles

- A coordinated scheme of manufacturer contracts designed to control resale prices at multiple distribution levels, eliminate dealer price competition, and fix consumer prices is an unlawful restraint of trade.
- Restraints ancillary to legitimate transactions may be enforceable only if reasonable and limited to what is necessary; broad price-fixing restraints are void as against public policy.
- A manufacturer of unpatented goods cannot, by notice or private ordering, impose binding resale prices for future sales absent lawful agreements; attempted downstream price control is not validated by mere knowledge of the restriction by purchasers.
- Secret, unpatented processes confer no patent-like privilege to restrain trade through resale price maintenance; manufacturers of such goods stand on the same footing as other sellers regarding downstream price control.
- Although malicious inducement to breach a valid contract may support equitable relief when legal remedies are inadequate, no such relief lies where the contract relied upon is itself invalid.

## Conclusion

The Court refused to enforce Dr. Miles’s resale price maintenance system because it unlawfully restrained trade by suppressing price competition and fixing resale prices, and it held that the secret, unpatented character of the medicines did not justify downstream price control.


Dr. Miles Med. Co. v. John D. Park & Sons Co., 220 U.S. 373 (1911)