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ful he participates with the manufac turer in the success of it; but if it were going to be sold outright the manufac turer would discount all chances and require it to be sold atavery small price." Under this plan the customer obtains physical possession of the patented article, together with the right to use it under the conditions of the license, but is not obliged to pay the patent owner anything for this right of use un less he actually exercises it; and if he uses the patented article at all, he com pensates the patent owner strictly in exact proportion to the efficiency of the patented article and to the benefit that he derives from its use. VI Under such a plan, some means must be devised to measure the extent to which the customer uses the patented article. A frequent measure is the number of articles that the machine produces. When the amount of output can be accurately and inexpensively measured, either by a register or an accounting, this mode of determining the amount of royalty is generally adopted. In the case of innumerable articles, however, there is no accurate or convenient mode of registering or accounting for the amount of use or output, and the only convenient meas ure is that afforded by the material used with the patented article. By requiring the user of the patented article to obtain this material from a single source, the material — to use the phrase which Judge Lurton, now Associate Justice of the Supreme Court, and Judge Taft, now President of the United States, made famous in the so-called HeatonPeninsular Button Fastener case — be comes the "counters" of the profit and royalty earned by the patented article, and ensures the means for accurately
and inexpensively measuring the amount of the use and output. By charging for this material a sum sufficient to cover its cost, and also an additional amount in the nature of royalty for the use of the patented article, the patent owner collects, with perfect accuracy and with a minimum of expense, the royalty for the use of the patented art icle. The mimeograph, which was involved in the Dick patent case recently decided by the Supreme Court, is an illustra tion in point, as the counsel in that case explained to the Committee: The mimeograph is an office machine for turning out duplicate copies, and the effort is to get a machine which will produce a large number of copies in a very short time, those copies being not only legible and readable but of a high quality, to wit, in imitation of ribbon work on typewriting machines. Now, the inven tor with an invention of that sort, no matter whether the field has been previously exploited or not, has to create his own market; he has to establish a demand for that particular in vention. One of the best ways that he can de vise how not to do it, if the committee please, is to charge the public a prohibitive price. The effort must be and is and was to charge the pub lic such a price that all small tradesmen, public stenographers and people in other similar lines, who are of limited means, could acquire these machines readily and with ease. So this machine was exploited by first finding the cost of producing the goods; that is, taking what is commonly called the shop cost, adding the overhead, which includes advertising, etc., and giving the machine to the user at the exact cost, or less, to the manufacturer. I may say here that the cost of making and selling the rotary mimeograph, as proved in this DickHenry case, was at that time something like $34, and the price paid by the vendee was only $30. Under the scheme which the Dick Company employed — and this indicates to the committee one of the reasons why it is so attractive to the public that they have bought 50,000 of the machines — when they do not use the patented machine; when they do not utilize that pat ented monopoly given by the patent laws, they pay not one cent. Only when they are using the patented inventions and partaking, there-
