1. In a suit to enjoin violations of §§ 1 and 2 of the Sherman
Antitrust Act, the District Court found that defendants had
participated in an "international cartel" constituting a
combination or conspiracy in restraint of trade and commerce in
titanium products among the several states of the United States and
with foreign nations through the pooling of patents and the
allocation of markets and that they had been and still were parties
to agreements in restraint of such trade and commerce in violation
of § 1 of the Sherman Act.
Held:
(a) Counsel for two of the defendants having accepted
cancellation of the agreements and an injunction against their
continuation or renewal, this Court accepts without discussion the
District Court's finding that these two defendants participated
since 1920 in the cartel in violation of § 1 of the Sherman Act.
Pp.
332 U. S.
325-326.
(b) This Court sustains the finding of the District Court that
the third defendant participated in such illegal combination after
1933. Pp.
332 U. S.
326-327.
(c) This Court sustains the finding of the District Court that
the contract between two of the defendants, under which they
utilized their patents to control and regulate the manufacture and
sale of titanium products in the United States, was offensive to
the antitrust laws apart from the relation of that contract, and of
the parties thereto, to foreign producers. Pp.
332 U. S.
327-328.
2. The District Court adjudged unlawful and canceled certain
agreements between defendants and between them and various
coconspirators; enjoined further performance, continuation, or
renewal of such agreements; enjoined defendants from entering into
similar agreements in the future; ordered defendants to grant to
any applicant therefor a nonexclusive license under certain patents
at a uniform reasonable royalty; authorized reciprocal licenses on
certain terms; ordered certain defendants to present to the court
for its
Page 332 U. S. 320
approval a plan for divesting themselves of their stockholdings
and other financial interests in certain other companies or for the
purchase of the entire stockholdings and other financial interests
in such companies; retained jurisdiction, and provided for
supervision.
Held: this decree did not exceed the District Court's
discretion. Pp.
332 U. S.
328-335.
(a) To a large extent, the provisions of this decree are matters
lying in the discretion of the District Court. P.
332 U. S.
334.
(b) The District Court was confronted with an obligation to give
effect, on the one hand, to the provisions of the patent laws
granting certain valuable rights in the nature of monopolies and,
on the other hand, to the provisions of the Sherman Act prohibiting
any combination or conspiracy in restraint of trade. Pp.
332 U. S.
334-335.
(c) The essential consideration is that the remedy shall be as
effective and fair as possible in preventing continued or future
violations of the Sherman Act in the light of the facts of the
particular case. P.
332 U. S.
335.
3. The decree should not be modified so as to provide for
compulsory royalty-free licenses or so as to enjoin the patentees
or licensees from enforcing the terms of the patents involved . Pp.
332 U. S.
335-351.
(a) Without reaching the question whether royalty-free licensing
or a perpetual injunction against the enforcement of a patent is
permissible as a matter of law in any case, the present decree
represents an exercise of sound judicial discretion. P.
332 U. S.
338.
(b) This being a civil, not a criminal, proceeding, the purpose
of the decree is not punishment, but effective and fair
enforcement. Pp.
332 U. S. 338,
332 U. S.
348.
(c) On the facts of this case, such a modification of the decree
has not been shown to be necessary in order to enforce effectively
the Antitrust Act. Pp. 338-349.
(d) To reduce all royalties automatically to zero, regardless of
their nature and regardless of their number, appears, on its face,
to be inequitable without special proof to support such a
conclusion. P.
332 U. S.
349.
(e) What will be "reasonable royalties" will depend upon the
facts of each case. P.
332 U. S.
349.
(f) Under its decree, the District Court retains sufficient
jurisdiction to enable it to vacate or modify its orders fixing
reasonable royalty rates if it finds such action to be necessary or
appropriate. P.
332 U. S.
351.
4. On the facts of this case, there was neither precedent nor
good reason for a requirement (requested by the Government and
denied by the District Court) that National Lead and du Pont each
submit
Page 332 U. S. 321
a plan for the divestiture of one of its two principal titanium
pigment plants, together with the related physical properties. Pp.
332 U. S.
351-353.
(a) The existing vigorous competition between these two
defendants suggested that the District Court would do well to
remove unlawful handicaps from it but demonstrates no sufficient
basis for weakening its force by divesting each of the two largest
competitors of one of its principal plants. Pp.
332 U. S.
352-353.
(b) It is not for the courts to realign and redirect effective
and lawful competition where it already exists and needs only to be
released from restraints that violate the antitrust laws. P.
332 U. S.
353.
(c) To separate the operating units of going concerns without
more supporting evidence than has been presented here to establish
either the need or the feasibility of it would amount to an abuse
of discretion. P.
332 U. S.
353.
5. The District Court did not exceed its discretion in requiring
that, during a period of three years, defendants make available to
licensees under their patents at a reasonable charge, certain
information in writing as to the methods and processes used by the
licensor at the date of licensing.
Hartford-Empire Co. v.
United States, 323 U. S. 386,
323 U. S. 413,
323 U. S. 418,
distinguished. Pp.
332 U. S.
353-358.
(a) The justification for the compulsory imparting of methods
and processes rests upon its appropriateness and upon the necessity
for it in providing an effective decree -- not upon a punitive
purpose. P.
332 U. S.
357.
(b) Since the public interest requires that the court be
permitted to produce the most effective and generally fair decree
that it can devise to give effect simultaneously to the antitrust
laws and the patent laws, the decree represents a permissible
exercise of judicial discretion -- even though it includes, within
narrow limits, disclosure of technical information by one defendant
to another defendant which is its leading competitor. Pp.
332 U. S.
358-359.
6. The District Court did not exceed its discretion in denying
the Government's request that there be substituted a requirement
that defendants furnish to any applicant at a reasonable charge,
during the period of three years, technical information desired by
the applicant relating to the methods and processes for
manufacturing titanium pigments. Pp.
332 U. S. 353,
332 U. S.
359.
(a) The decree is within the permissible breadth of the District
Court's discretion over the conditions under which technical
information shall be required to be shared with the world. P.
332 U. S.
359.
(b) The proposal to throw the field of technical knowledge in
this field wide open would discourage, rather than encourage,
Page 332 U. S. 322
competitive research, and thus would be contrary to, rather than
in conformity with, the present policy of the patent laws. P.
332 U. S.
359.
7. The District Court did not exceed its discretion in denying
the Government's request that there be omitted from the decree a
provision that defendants may make the grant of any license by
either of them to an applicant under the decree conditioned upon
the reciprocal grant of a license by the applicant at a reasonable
royalty, under certain described patents owned or controlled by
such applicant. Pp.
332 U. S.
359-360.
8. The Government's request to omit the six-months' time limit
imposed by the decree upon the options of certain corporations to
secure certain licenses under the decree need not be granted, since
the new effective date to be given the decree pursuant to the order
of this Court will allow ample time for the exercise of this option
under its terms. Pp.
332 U. S.
360-361.
9. The District Court did not exceed its discretion in denying
the request of a defendant to modify the decree so as to eliminate
language which, the defendant claimed, forbids normal and usual
business arrangements between the defendant and other producers of
titanium products. Pp.
332 U. S.
361-363.
(a) This provision deals solely with the future enforceability
of existing contracts which have been found to violate the Sherman
Act, and it imposes no unjustified restriction on defendant's power
to contract. P.
332 U. S.
362.
(b) If defendant later can demonstrate that its right of
contract has been unduly restricted, it may, under the terms of the
decree, apply to the District Court for a modification. P.
332 U. S.
363.
10. The acquisition by defendants of stock and other financial
interests in certain foreign companies having been part and parcel
of unlawful territorial allocation agreements, the future
performance of which has been enjoined, the District Court did not
exceed its discretion in decreeing that, within one year,
defendants shall present to the District Court for its approval a
plan for divesting themselves of their stockholdings and other
financial interests in such foreign companies or for the purchase
of the entire stockholdings and interests, direct or indirect,
therein. P.
332 U. S.
363.
11. In view of the stay granted by a Justice of this Court
suspending certain provisions of the decree pending determination
of these appeals, the decree shall be deemed, for the purposes of
those paragraphs and for the running of time thereon, to take
effect on the effective date of the mandate to be issued by this
Court. Pp.
332 U. S.
363-364.
63 F.
Supp. 513 affirmed.
Page 332 U. S. 323
In a proceeding in equity instituted under § 4 of the Sherman
Antitrust Act, the District Court found that defendants had
violated § 1 of the Act and issued a decree to prevent and restrain
further violations.
63 F.
Supp. 513. Both the Government and the defendants appealed.
Affirmed, p.
332 U. S.
364.
MR. JUSTICE BURTON delivered the opinion of the Court.
This action was brought by The United States of America, June
24, 1944, in the District Court of the United States for the
Southern District of New York, against National Lead Company (a New
Jersey corporation, here called National Lead or NL), its wholly
owned subsidiary, Titan Company, Inc. (a Delaware corporation, here
called Titan Inc. or Tinc) and E. I. du Pont de Nemours and Company
(a Delaware corporation, here called due Pont
Page 332 U. S. 324
or DP). It is a proceeding in equity instituted under § 4 of the
Sherman Anti-Trust Act, 26 Stat. 209, 36 Stat. 1167, 15 U.S.C. § 4,
to prevent and restrain alleged violations of §§ 1 and 2 of that
Act, 26 Stat. 209, 50 Stat. 693, 15 U.S.C. §§ 1 and 2. The trial
was conducted by Judge Simon H. Rifkind of that court. It began
December 4, 1944, and ended March 14, 1945. His opinion was filed
July 5, 1945. His 96 findings of fact and two conclusions of law
were entered October 2, 1945. After extended consideration of its
terms, by the court and by counsel for all parties, the decree was
entered October 11, 1945. The opinion and decree are reported in
63 F.
Supp. 513-535. The findings of fact, conclusions of law, and
much of the detailed discussion of the decree are in the record.
Separate appeals were filed in this Court, in case No. 89 by the
United States, in case No. 90 by National Lead and Titan Inc. and
in case No. 91 by du Pont. The three companies are sometimes
referred to as "the appellant companies." We noted probable
jurisdiction in each appeal, May 20, 1946, and the three appeals
were argued together February 3-5, 1947. A partial stay of the
decree had been granted by MR. JUSTICE REED, on January 2, 1946,
pending determination of the appeals. Reference is made to the
opinion of the District Court for a recital of the complex facts
which it had to consider in order to reach its conclusion that
National Lead, Titan Inc., and du Pont each violated § 1 of the
Sherman Act, [
Footnote 1]
although it found
Page 332 U. S. 325
a marked difference between the conduct of National Lead and of
its subsidiary, Titan Inc., on the one hand, and that of du Pont,
on the other. This Court affirms the judgment of the District
Court, except as to the original effective dates of certain of its
provisions, and our discussion will relate largely to the
assignments of error as to the terms of the decree.
I. The first issue presented to the District Court was that of
the participation of National Lead and Titan Inc. in a so-called
"international cartel" dating back to 1920, and constituting a
combination or conspiracy in restraint of trade and commerce in
titanium pigments and compounds, among the several states of the
United States and with foreign nations, which combination, after
1933, was alleged to include de Pont. The District Court found such
participation. [
Footnote 2] In
their brief on appeal in No. 90, National Lead and Titan Inc.
said:
"The Government's case was based on a series of closely related
agreements made between 1920 and 1944. The agreements have been
cancelled, and continuation or renewal has been enjoined. The
appeals are greatly simplified by the fact that we accept the
cancellation and the injunction against continuation
Page 332 U. S. 326
or renewal. We submit, however, that the court went too far in
forbidding normal and usual contractual arrangements."
Accordingly, the finding of the District Court as to the
participation of National Lead and Titan Inc. in the violation of §
1 of the Sherman Act is accepted here without further
discussion.
II. The second issue was that of the participation of du Pont in
such combination after 1933. The District Court found that du
Pont
"joined the conspiracy found herein to exist between, NL and its
foreign associates. DP's status rights and obligations were
different from those of the other members of the combination. DP
did not thereafter withdraw."
Finding of Fact 73. The District Court, in its opinion, also
stated that --
"At least then as to territorial delimitations of the titanium
pigment business, DP joined the combination."
"
* * * *"
"My general summary of the evidence on this issue is that DP was
a member of the combination -- true, a special member, with a
status, rights, and obligations, different from that of the other
members, but a member nonetheless."
63 F. Supp. at 530, 531,
and see the preamble to the
decree at 532. [
Footnote 3]
This finding is contested vigorously by du Pont, and is the
principal subject matter of its appeal in No. 91. After careful
consideration, we agree with the following conclusion of the
District Court:
"In sharp contrast with NL, DP exhibited, from the very
beginning of its interest in titanium, an alert consciousness of
the antitrust laws, and moved cautiously and under the guidance of
trained antitrust
Page 332 U. S. 327
lawyers. The question is whether it succeeded in avoiding not
only the form, but also the substance, of transgression. I have
concluded that it has not. . . ."
Id. 63 F. Supp. at 527. It would serve no beneficial
purpose to review here the evidence upon which that court based its
conclusion. Its opinion analyzes the facts (
id. at
527-531) and, in the light of the record as a whole, we find in
those facts the support necessary for the conclusion reached.
III. Related to these issues was a third. This was whether the
contract between National Lead and du Pont was offensive to the
antitrust laws apart from the relation of that contract, and of the
parties thereto, to the foreign producers. The District Court found
that it was, and also related it to the international situation. It
found that --
"The defendants NL, DP, and Tinc have utilized their patents
which relate to the manufacture and use of titanium pigments to
control and regulate the manufacture and sale of titanium pigments
and compounds in the United States, and NL and Tinc, with the
cooperation of DP, have done so throughout the rest of the
world."
Finding of Fact 95, subparagraph 9. In its opinion, the District
Court emphasized also "the great power they acquired" (
id.
at 531), and indicated criticism of limitations originally inserted
in certain important licenses, although later removed from them.
Id. at 532. Added together, the control of the patents
covered by this agreement gave to National Lead and du Pont
"domination and control over the titanium pigment business in the
U.S." Finding of Fact 79. The District Court referred to the
"proliferation of patents" as another "inevitable consequence" of
the agreement.
Id. at 532. This was explained to mean the
great multiplication of
Page 332 U. S. 328
related patents, resulting in increasing the difficulty of an
attack upon them. The validity of none of the hundreds of patents
involved has been litigated.
"These patents, through the agreements in which they are
enmeshed and the manner in which they have been used, have in fact
been forged into instruments of domination of an entire industry.
The net effect is that a business, originally founded upon patents
which have long since expired, is today less accessible to free
enterprise than when it was first launched."
Id. at 532. Referring to the exchange of patents
between National Lead and du Pont, the District Court added:
". . . in the context of the present case, . . . this exchange
between two corporations, who between them controlled the entire
market, becomes an instrument of restraint, available for use and
used, to continue the mastery of the market which NL and DP
achieved by means of the illegal international agreement."
Id. at 532. These facts are important not only in
affirming, as we do, the finding that National Lead, Titan Inc.,
and du Pont each has violated § 1 of the Sherman Anti-Trust Act,
but also in passing upon the terms of the decree entered in order
to prevent future violations of that Act by them.
IV. The remaining issues relate to the terms of the decree. The
entire decree, exclusive of its Appendix, is reported at 63 F.
Supp. 532-535, and, for reference purposes, is here reprinted in
the margin, as there reported. [
Footnote 4]
Page 332 U. S. 329
This decree represents a careful attempt to fit the remedy to
the needs of this case. The record upon which
Page 332 U. S. 330
it is based consists of two large volumes of testimony and four
larger volumes of exhibits, representing a total of
Page 332 U. S. 331
over 5,500 pages, reflecting more than three months of trial. It
demonstrates a commendable procedure. Proposed
Page 332 U. S. 332
findings of fact and conclusions of law were submitted on behalf
of the respective parties and a form of
Page 332 U. S. 333
decree was submitted on behalf of the Government to the District
Court immediately following the trial. The
Page 332 U. S. 334
opinion of the District Court, when filed, formed the basis of
further consultation and argument. After the District Court's
findings of fact and conclusions of law were entered, further
conferences were held with counsel and full opportunity was given
to them to propose changes in the findings of fact and the decree.
Much of this discussion was reported in the record, and has been of
benefit to this Court in reviewing the decree.
In our opinion, the provisions of this decree, to a large
extent, are matters lying within the discretion of the District
Court as a court of equity whose duty it was to make the remedy as
effective as possible. The District Court
Page 332 U. S. 335
was confronted with an obligation to give effect to the
provisions, on the one hand, of the patent laws granting certain
valuable rights in the nature of monopolies to the patentees and
their licensees, and also to give effect, on the other hand, to the
provisions of the Sherman Anti-Trust Act prohibiting any
combination or conspiracy in restraint of trade among the several
states or with foreign nations. We believe that the District Court
has not exceeded its discretion in the provisions of this decree,
but has employed its discretion with commendable fairness, having
especial regard to the needs of this case. It has succeeded in
keeping within the lines of precedent thus far established,
although, in this field, such lines cannot be much more than
guides. The essential consideration is that the remedy shall be as
effective and fair as possible in preventing continued or future
violations of the Anti-Trust Act in the light of the facts of the
particular case.
The issues are presented by the assignments of error in the
three appeals. They will be considered separately in conjunction
with their supporting arguments. In each instance, we sustain the
present decree.
A Request to omit the requirement of the granting of compulsory
nonexclusive licenses at uniform, reasonable royalties and to
substitute for that requirement either a perpetual injunction
against the enforcement of the titanium patents presently owned or
controlled by the respective appellant companies or a provision for
compulsory licenses to be issued under those patents, free of
royalties.
This is the major legal issue in this case.
The material provisions in the present decree are as
follows:
"4. The term 'patents as herein defined' shall mean United
States letters patent and applications as follows: (a) the letters
patent and patent applications
Page 332 U. S. 336
listed in Appendix A hereof; (b) all divisions, continuations or
reissues of any of the foregoing patents and applications; (c) all
patents issued upon such applications; (d) all patents which cover
any titanium pigments or any process for the manufacture of
titanium pigments issued to any of the defendants within five years
from the date of this decree, and all such patents which any of the
defendants acquires within such five years, and all such patents of
which any of the defendants becomes the exclusive licensee within
such five years with power to sublicense."
"
* * * *"
"7. Each of the defendants is ordered to grant to any applicant
therefor, including any defendant or coconspirator, a nonexclusive
license under any or all of the patents as herein defined at a
uniform, reasonable royalty. Such grant may, at the option of the
licensor, be conditioned upon the reciprocal grant of a license by
the applicant at a reasonable royalty, under any and all patents
covering titanium pigments or their manufacture, now issued or
pending, or issued within five years from the date of this decree,
if any, owned or controlled by such applicant. Such license or
reciprocal license may, at the option of either party, contain a
provision for the inspection of the books and records of the
licensee by an independent auditor who shall report to the licensor
only the amount of royalty due and payable, and no other
information. During a period of three years from the date of this
decree, such license or reciprocal license may, at the option of
either party, contain a provision for the imparting in writing at a
reasonable charge, by the licensor to the licensee, of the methods
and processes used by the former at the date of the license in its
commercial practice under the licensed patents in connection with
the production of titanium
Page 332 U. S. 337
pigments. The Court reserves jurisdiction to pass upon the
reasonableness of any royalty or charge herein directed to be
reasonable. Defendants are restrained from attempting to enforce
any rights under any foreign patents owned by them or under which
they are the exclusive licensees to prevent the exportation of
titanium pigments from the United States to any foreign
country."
The assignment of error originally made by the Government in No.
89 as to this point was as follows:
"1. The court erred in failing to require each defendant to
license its existing titanium pigment patents free of royalty until
the court shall have determined, on application by any defendant,
that the effects of the defendants' illegal combination, as set
forth in the court's findings of fact and conclusions of law, have
been fully dissipated."
Later, the Government moved to amend this assignment of error so
that it would read as follows:
"The court erred in failing to enter an injunction perpetually
enjoining the defendants from enforcing the titanium patents
presently owned or controlled by them."
This Court postponed consideration of the above motion to the
hearing of the case on its merits. On oral argument, the Government
supported its second proposal but indicated that, if that proposal
were not satisfactory, it would prefer its original request to the
provision for uniform reasonable royalties now in the decree. The
Government's motion to amend its assignment of errors accordingly
is granted. National Lead, in its assignments of error in No. 90,
however, assigns the orders contained in paragraph 7 of the decree
on this subject as error and, in its briefs, argues that "[t]he
court erred in refusing to order royalty-free licensing of all
patents
Page 332 U. S. 338
as defined in the judgment." Accordingly, both proposals have
been considered.
While it has been contended that, because of the decision of
this Court in
Hartford-Empire Co. v. United States,
323 U. S. 386, the
District Court was not free in the present case to require the
issuance of royalty-free licenses, we feel that, without reaching
the question whether royalty-free licensing or a perpetual
injunction against the enforcement of a patent is permissible as a
matter of law in any case, the present decree represents an
exercise of sound judicial discretion.
This is a civil, not a criminal, proceeding. The purpose of the
decree therefore is effective and fair enforcement, not punishment.
An understanding of the findings of fact is essential to an
appreciation of the reasons for the decree.
Pure titanium pigment and its compounds represent a product of
comparatively recent development, but of major commercial value.
The District Court found that --
"Titanium pigments are possessed of great opacity, hiding power,
and chemical inertness, and are largely displacing other pigments
such as lithopone and white lead. Titanium pigments are used in the
manufacture of paints, and are also used in the manufacture of
rubber, glass, paper, vitreous enamels, and many other products. .
. ."
"In and before 1920, there was no substantial trade or commerce
in, and no commercial manufacture of, titanium pigments for use in
paint, paper, rubber, or other products. . . ."
Finding of Fact 33.
"The production of titanium pigments in the United States has
risen from 100 tons (on the basis of pure TiO2 content) in 1920 to
approximately 110,000 tons in 1943, with a peak production of
approximately 128,000 tons in the United States in
Page 332 U. S. 339
1941. The total production of titanium pigments and compounds
outside of the United States has shown less growth, the estimated
foreign production of titanium pigments and compounds being
approximately 1,000 tons in 1920 and approximately 23,000 tons in
1938."
Finding of Fact 35.
There are four producers of titanium products in the United
States -- National Lead, du Pont, American Zirconium (here called
Zirconium), which is a subsidiary of Glidden Company, and Virginia
Chemical Company (here called Virginia Chemical), which is a
subsidiary of American Cyanamid Company. National Lead and du Pont
have cross-licensed each other under their respective patents.
Zirconium entered the field in 1935 with licenses from National
Lead and du Pont, but the National Lead license has been canceled.
Virginia Chemical entered the field in 1937 with a license from du
Pont. Finding of Fact 42.
National Lead has assets of over $100,000,000, and is the
largest manufacturer of titanium pigments and compounds not only in
the United States, but in the world. In 1943 it manufactured and
sold 76.5% of composite pigments and 46.4% of pure TiO2 made in the
United States. Finding of Fact 3. Du Pont is one of the largest
chemical companies in the United States, with assets of over
$1,000,000,000. It is one of the largest manufacturers of titanium
pigments in the United States. In 1943, it manufactured and sold
approximately 23.5% of the composite pigments and 45.1% of pure
TiO2 made in the United States. Finding of Fact 9.
National Lead took an early lead in promoting the commercial
manufacture and use of titanium pigments. In 1920, it acquired an
interest in The Titanium Pigment Company, Inc., which had been
organized by the Titanium Alloy Manufacturing Company at Niagara
Falls, New York. It made use of a patented process developed
Page 332 U. S. 340
by Barton and Rossi. At about that time, a Norwegian chemist,
Gustav Jebsen, made similar investigations, but along different
lines, in Norway. He and his associates perfected a patented means
for producing relatively pure titanium dioxide by a process much
less costly than that in use at Niagara Falls. These associates had
not, however, perfected processes for the manufacture of composite
pigments. Finding of Fact 33. In about 1922, Joseph Blumenfeld, a
chemist and managing director of a French company, obtained patents
relating to the manufacture of titanium compounds. Finding of Fact
34.
On July 30, 1920, The Titanium Pigment Company, Inc.,
(affiliated with National Lead) and Titan Co. A/S (representing the
Jebsen interests) entered into an agreement which is still
uncanceled. Its principles became the basis for more than 60
subsequent agreements and for an international cartel [
Footnote 5] in titanium pigments. The
essential
Page 332 U. S. 341
features of this agreement are stated in Finding of Fact 44 and
in the opinion of the District Court, 63 F. Supp. at 517, 518.
Briefly stated, it applied to a licensed field, defined as
including all substances containing above 2% of titanium unless
containing by weight more than 5% of a metal other than titanium in
its purely metallic form. It applied to all apparatus, methods and
processes useful in obtaining or manufacturing such substances both
in the titanium and in the titanium compound field.
Both parties agreed to grant and accept a license, exclusive of
all others including the licensor, under all "existing or future"
patents of the licensing party. They divided the globe
territorially. The American company was to have the North American
continent. The Norwegian company was to have the rest of the world,
except that reciprocal, nonexclusive rights of sale were reserved
for both companies in South America.
Detailed provision was made for exchange of copies of
applications for patents filed by the parties or their other
licensees. Neither party was ever to question or contest the
validity of any patent of the other under which it was licensed
within the field described.
The American company became the exclusive agent for the
Norwegian company in North America and vice versa outside of North
and South America. Sales were to be at prices and on terms
determined by the agent. Notwithstanding these agencies, however,
importations of "finished articles" -- that is, paint, paper,
rubber, glass, etc. -- containing titanium products of the
principal, its licensees or sublicensees, would be permitted
provided such products did not constitute such an important part of
such finished articles that sales within the agent's territory
would interfere substantially with the agent's sales of its own
titanium products.
Each party would impart semiannually to the other information in
detail as to knowledge obtained in and applicable
Page 332 U. S. 342
to the "licensed field," and would permit the other to inspect
and study operations in its plants (exclusive of research
laboratories). The reciprocal grants of exclusive licenses would
extend to December 31, 1936, and thereafter for periods of ten
years each, with provision for termination by notice to be given at
least five years before the end of any such period. In particular,
so long as each company held an exclusive license from the other
under this agreement, it would have the right to grant licenses
under its own patents, and sublicenses under the other's patents,
on the condition, nevertheless, that every such licensee or
sublicensee would grant to the party to the 1920 agreement (other
than its licensor), its patent rights in the "licensed field"
identical in character, territorial scope, and duration to those
given by its licensor to such other party under the 1920 agreement,
and would impart technical information to such other party in the
same manner and to the same extent as its licensor.
In 1929, the obligations of Titan Co. A/S under this agreement
were assumed by Titan Inc. and, in 1936, the obligations, of The
Titanium Pigment Company, Inc., were assumed by National Lead.
Other companies throughout the world joined in carrying out this
program to restrain international commerce and to establish an
international combination or conspiracy in restraint of trade. The
complaint in the present case lists many of these foreign companies
as coconspirators with National Lead, Titan Inc. and du Pont, but
it does not attempt to make such coconspirators parties defendant.
The District Court recognized that it did not have jurisdiction
over such coconspirators and found in that circumstance one of its
difficulties in effectively restraining National Lead, Titan Inc.
and du Pont from further violations of the Sherman Anti-Trust
Act,
Page 332 U. S. 343
pursuant to this international, as well as domestic, program. To
accomplish this purpose, the District Court has adjudged these
agreements to be unlawful and it has canceled them. In addition, it
has enjoined all three defendants, National Lead, Titan Inc. and du
Pont, from further performance of any of the provisions of such
agreements and of any agreements amendatory thereof or supplemental
thereto. Pars. 5 and 6 of the decree, 63 F. Supp. at 533, 534.
National Lead acquired an 87% interest in Titan Co. A/S, Jebsen
retaining 13%. The District Court found that
"The intended purpose of the acquisition of control of TAS by NL
was to utilize TAS and the contract of 1920 to further control
competition in the manufacture of titanium pigments and compounds
in all markets of the world including the United States."
Finding of Fact 47. [
Footnote
6]
Page 332 U. S. 344
While this combination and conspiracy in restraint of interstate
and foreign commerce thus was developing from 1920 to 1931, with
National Lead and Titan Inc. at its center, du Pont was unconnected
with it. Du Pont had initiated independent, but unsuccessful,
efforts to develop, through research, a new and patentable
commercially feasible process in this field. It became convinced
that, if it were to undertake the manufacture and sale of titanium
pigments as a development of its white pigment business, it would
be necessary to enter the field as promptly as possible through the
acquisition of the patents and of the going business of Commercial
Pigments Company. That company had been formed by Commercial
Solvents Corporation in 1928 and had acquired the Blumenfeld and
other patents in the United States relating to the manufacture and
sale of titanium pigments and compounds. It was operating a plant
in Baltimore, Maryland, where it manufactured pure TiO2 pigment
only and sold it in competition with the The Titanium Pigment
Company, Inc. (the affiliate of National Lead). In July, 1931, du
Pont, through its subsidiary, Krebs Pigment & Color
Corporation, acquired all of the assets and assumed some of the
obligations of Commercial Pigments Company. It thus continued and
in fact increased its competition in the titanium pigment field
against National Lead. Findings of Fact 70, 12, 10, and 71.
"Both NL and DP in good faith claimed that each infringed
certain of the other's titanium pigment patents, and both in good
faith denied such infringement, claiming, among other things, that
the patents alleged to be infringed were of doubtful validity. NL
and DP agreed in October, 1932, that the validity
Page 332 U. S. 345
of the patents claimed to be infringed should not be questioned
except as a last resort, and that they should try to arrive at a
general understanding."
Finding of Fact 72.
Finally, in 1933, the Titanium Pigment Company, Inc. (by that
time, a 100% subsidiary of National Lead), and Krebs Pigment &
Color Corporation (subsidiary of du Pont) were the only producers
of titanium pigments in the United States. The 1920 agreement,
however, prevented The Titanium Pigment Company, Inc. (National
Lead), from entering into a contract with Krebs Pigment & Color
Corporation (du Pont) unless the latter subscribed to the
provisions of the 1920 agreement. Such a subscription would have
required an agreement by Krebs (du Pont) not to export into the
territories of National Lead's foreign associates, and an agreement
to grant to National Lead's foreign associates exclusive licenses
under all of Krebs' (du Pont's) present and future patents for
titanium pigments and compounds in the territories of the foreign
associates. Finding of Fact 73. After extensive negotiations,
National Lead and du Pont formulated an agreement in writing, dated
as of January 1, 1933, which was executed August 28, 1933. It is
summarized in Finding of Fact 73 and in the opinion of the lower
court, 63 F. Supp. at 520, 521. By its terms, it provided for
cross-licensing, but did not provide for the exclusive licensing
and restrictive territorial and agency agreements specified in the
1920 program. Certain foreign associates of National Lead,
particularly Interessengemeinschaft Farbenindustrie
Aktiengesellschaft (usually referred to as I.G. Farbenindustrie),
insisted upon some such commitment from du Pont or its subsidiary.
This insistence never was abandoned. After further negotiations and
an exchange of letters, all as set forth in full in Finding of Fact
73 and in the opinion of the District Court, 63 F. Supp. at 528,
529, some understanding was reached as to the future conduct
Page 332 U. S. 346
of du Pont, or of its subsidiary. On the strength of this, I.G.
Farbenindustrie agreed to the situation. On the basis of all the
evidence, the District Court found that --
"DP, through Rupprecht [President of Krebs Pigment & Color
Corporation] and Krebs [the corporation], by these assurances and
Exhibit E [the agreement dated as of January 1, 1933], joined the
conspiracy found herein to exist between NL and its foreign
associates. DP's status, rights, and obligations were different
from those of the other members of the combination. DP did not
thereafter withdraw."
Finding of Fact 73.
That finding, which we accept, throws important light upon the
conditions to which the decree is to be applied. Furthermore,
although National Lead and du Pont exchanged technical information
relating to the manufacturing or use of titanium pigments or
compounds from about April, 1932, until April, 1940, this exchange
was discontinued May 1, 1940. The agreement of 1933 between The
Titanium Pigment Company, Inc., and Krebs Pigment & Color
Corporation which then had been assumed by National Lead and du
Pont, respectively, was amended on January 1, 1941, to eliminate
provisions for the exchange of technical information. Finding of
Fact 75. It was further amended to include extender pigments, which
theretofore had been included by implication and practice. Finding
of Fact 76. After January 1, 1941, patent applications were to be
available between National Lead and du Pont only after six months
from the date of their filing, instead of immediately. Finding of
Fact 77.
"From 1933 on, there was active competition between NL and DP
for customers. There has been a vast increase in sales, and
repeated reductions in
Page 332 U. S. 347
the price of titanium pigments have taken place, and a very few
increases. DP entered the titanium pigment business in 1931, and,
since that date, it has made frequent plant expansions for the
manufacture of pure and composite TiO2, and its production
increased from 20,027 tons in 1935 to 50,674 tons in 1941 and then
decreased to 42,843 tons in 1943."
"NL and DP have endeavored to match each other's titanium
products, but each also manufactures certain titanium pigments
having special applications not manufactured by the other."
"There is no allocation of territory or customers between NL and
DP, and each maintains a large, highly trained technical sales
force engaged in endeavoring to sell titanium pigments. To a very
large extent, the salesmen of the two companies are chemists whose
contact with consumers (that is, manufacturers of paint, rubber,
glass, etc.) consists in endeavoring to demonstrate that their
products merit acceptance on the basis of technical superiority.
The buyers of titanium pigments are mainly well informed,
experienced purchasing agents. NL and DP sell for identical prices;
there is no evidence that such price identity is the product of
agreement or collusion."
Finding of Fact 78.
These findings disclose the special conditions which confronted
the District Court in framing its decree. They disclose a vigorous,
comparatively young, but comparatively large worldwide industry in
which two great companies, National Lead and du Pont, now control
approximately 90% of the domestic production in substantially equal
shares. The balance of that production is in the hands of two
smaller companies. Each of these is affiliated with larger
organizations not parties to this case. The findings show vigorous
and apparently profitable competition on the part of each of the
four producers,
Page 332 U. S. 348
including an intimation that the smaller companies are gaining
ground, rather than losing it. Keen competition has existed both
before and after the elimination, by the 1933 agreement and
understanding, of certain patent advantages from among the weapons
of competition. The competition between National Lead and du Pont
has been carried into this Court, where today National Lead
supports the Government's proposal for royalty-free licenses, while
du Pont argues strongly for a complete dismissal of the proceedings
and contends that, in any event, if there are to be compulsory
licenses they at least should require payment of uniform,
reasonable royalties as provided in the present decree.
Assuming, as is justified, that violation of the Sherman Act in
this case has consisted primarily of the misuse of patent rights
placing restraint upon interstate and foreign commerce, that
conduct is not before this Court for punishment. It is brought
before this Court in order to secure an order for its immediate
discontinuance and for its future prevention. That will be
accomplished largely through the strict prohibition of further
performance of the provisions of the unlawful agreements. Further
assurance against continued illegal restraints upon interstate and
foreign commerce through misuse of these patent rights is provided
through the compulsory granting to any applicant therefor of
licenses at uniform, reasonable royalties under any or all patents
defined in the decree. Such patents include not only the patents
and patent applications listed in the appendix to the decree, but
also, among others, all patents which cover any titanium pigments
or any process for the manufacture of such pigments issued to, or
acquired by, any of the appellant companies within five years from
the date of the decree. It applies also to all such patents of
which any of the appellant companies shall become the exclusive
licensee within such five years with power to sublicense.
Page 332 U. S. 349
On the facts before us, neither the issuance of such licenses on
a royalty-free basis nor the issuance of a permanent injunction
prohibiting the patentees and licensees from enforcing those
patents has been shown to be necessary in order to enforce
effectively the Anti-Trust Act. We do not, in this case, face the
issue of the constitutionality of such an order. That issue would
arise only in a case where the order would be more necessary an
appropriate to the enforcement of the Anti-Trust Act than here. In
the absence of a showing to the contrary, it is obvious that some
patents should entitle their owners to receive higher royalties
than others. Also, it is clear that several patents, each of equal
value, ordinarily should entitle their owners to a larger total
return in royalties than would one of them alone. It follows that
to reduce all royalties automatically to a total of zero,
regardless of their nature and regardless of their number, appears,
on its face, to be inequitable without special proof to support
such a conclusion. On the other hand, it may well be that uniform
reasonable royalties computed on some patents will be found to be
but nominal in value. Such royalties might be set at zero or at a
nominal rate. The conclusion, however, would depend on the facts of
each case.
Recognizing the difficulty of computing a reasonable royalty,
[
Footnote 7] nevertheless, that
conception is one that already has been recognized both by Congress
and by this Court. [
Footnote
8]
Page 332 U. S. 350
The term frequently has been employed in Sherman Anti-Trust case
consent decrees. [
Footnote 9]
In the present case, the royalties charged to and paid by Zirconium
and Virginia Chemical provide enough guidance to indicate that the
reasonableness of future royalties may be determined in this case
with less difficulty than often might confront a court faced with
such a task.
Cf. Sinclair Refining Co. v. Jenkins Petroleum
Process Co., 289 U. S. 689,
Page 332 U. S. 351
289 U. S.
697-698. The growing strength of those two
royalty-paying licensees has demonstrated that royalty-free
licenses have not been essential to such progress even under past
conditions. Finally, the District Court, under paragraphs 7 and 13
of the decree, will retain sufficient jurisdiction to enable it to
vacate or modify its orders fixing reasonable royalty rates if it
finds such action to be necessary or appropriate. We hold therefore
that paragraphs 4 and 7 of the decree should not be modified either
so as to provide for compulsory royalty-free licenses or so as to
enjoin the patentees or licensees from enforcing the terms of the
patents involved.
B. Request to add a provision requiring National Lead and du
Pont each to submit, within a year, a plan for the divestiture by
it of one of its two principal titanium pigment plants, together
with the related physical property. This request is urged by the
Government in No. 89. It is strongly opposed both by National Lead
and du Pont. The issue was discussed at length by the parties and
the District Court in the reported conferences as to the form of
the decree.
We believe there is neither precedent nor good reason for such a
requirement. The violation of the Sherman Act is found in these
cases in the patent pooling and in the related agreements
restraining interstate and foreign commerce. There is neither
allegation in the complaint nor finding of fact by the District
Court that the physical properties of either National Lead or du
Pont have been acquired or used in a manner violative of the
Sherman Act, except as such acquisition or use may have been
incidental or related to the agreements above mentioned. The
cancellation of such agreements and the injunction against the
performance of them by the appellant companies eliminate them.
Paragraph 8 of the decree goes further. It requires National Lead
and it subsidiary, Titan Inc., to present, within one year, a plan
for
Page 332 U. S. 352
divesting themselves of their stockholdings and other financial
interests in certain foreign corporations, or for the purchase of
the entire stockholdings and other financial interests, direct or
indirect, in such corporations or any of them. Such a plan, which
was required also to provide for its completion within two years
from the date of the decree, will go as far toward divestiture as
the findings of fact indicate should be necessary to make the
decree effective.
There is no finding of fact, and apparently no evidence, showing
that the respective principal titanium plants of National Lead or
du Pont were acquired in violation of law, that they ever were
separately owned or operated, or that they are adapted to such
operation. Presumably, the requested divestiture would be for the
purpose of providing four, instead of two, independent major
competing plants in the titanium pigment industry. However, there
is no showing whether or not the two licensees, Zirconium
(subsidiary of Glidden Company) and Virginia Chemical (subsidiary
of American Cyanamid Company), may not be able to develop, under
the decree, even more substantial competition against National Lead
and du Pont than would new concerns operating the divested plants.
No comparable precedents have been presented.
There is no showing that four major competing units would be
preferable to two, or, including Zirconium and Virginia Chemical,
that six would be better than four. Likewise, there is no showing
of the necessity for this divestiture of plants or of its
practicality and fairness. The findings of fact have shown vigorous
and effective competition between National Lead and du Pont in this
field. The general manager of the pigments of department of du Pont
characterized the competition with Zirconium and Virginia Chemical
as "tough," and that with National Lead as "plenty tough." Such
competition suggests that the District Court would do well to
remove
Page 332 U. S. 353
unlawful handicaps from it, but demonstrates no sufficient basis
for weakening its force by divesting each of the two largest
competitors of one of its principal plants. It is not for the
courts to realign and redirect effective and lawful competition
where it already exists and needs only to be released from
restraints that violate the antitrust laws. To separate the
operating units of going concerns without more supporting evidence
than has been presented here to establish either the need for, or
the feasibility of, such separation would amount to an abuse of
discretion.
C. Request to add a provision requiring National Lead and du
Pont to furnish to any applicant at a reasonable charge, during a
period of three years, technical information desired by the
applicant relating to the methods and processes for manufacturing
titanium pigments. This would supersede the provision now in the
decree which, during a period of three years, makes available to a
licensee certain information in writing at a reasonable charge, as
to the methods and processes used by his licensor at the date of
the license. This is urged by the Government in No. 89 and opposed
by National Lead and du Pont. Du Pont, in No. 91, goes further, and
urges the omission of all requirements compelling it to furnish
technical information.
The request by du Pont to eliminate this requirement altogether
is based, in part, upon the experience of the appellant companies.
Du Pont emphasizes the fact that the titanium pigment industry has
matured, and that, since about May 1, 1940, the exchange of
technical information between National Lead and du Pont has ceased.
Also, the agreement between them which called for the exchange of
technical information was amended January 1, 1941, to eliminate the
provisions requiring such exchange. Finding of Fact 75. Du Pont
argues that neither Zirconium, which entered the industry
Page 332 U. S. 354
in 1934, nor Virginia Chemical, which entered the industry in
1935, ever exchanged technical information with du Pont or received
any from du Pont. However, finding of fact 84 shows that, as to
National Lead in 1935 --
". . . NL and Zirconium cross-licensed each other under all
patents in the titanium pigment field then owned or thereafter
acquired, and both parties agreed to exchange technical information
and experience. . . ."
"
* * * *"
"NL did render some engineering assistance to Zirconium in
connection with the installation and use of its processes and
imparted some technical information, but frequently it refused to
convey such technology to Zirconium on the ground that it was
prevented by other agreements from so doing."
"
* * * *"
"On occasions before 1940, there was exchange of information
between DP and NL relative to Zirconium's production."
Virginia Chemical was not licensed under National Lead's
patents, and apparently did not receive technical information from
National Lead.
Finding of Fact 95, subparagraph 8, contains a further material
finding, although this is disputed by du Pont:
"The defendants NL and DP secured a monopoly on technical
information relating to the manufacture and use of titanium
pigments and certain apparatus and equipment necessary to the
manufacture of certain titanium pigments to the exclusion and
detriment of other producers now engaged in the titanium pigment
business in the United States; when NL and DP ceased exchanging
technical information, the titanium pigment business was a mature
industry. "
Page 332 U. S. 355
The requirement for the exchange of technical knowledge under
the present decree is merely that included in paragraph 7, which is
as follows:
"During a period of three years from the date of this decree,
such license or reciprocal license may, at the option of either
party, contain a provision for the imparting in writing at a
reasonable charge, by the licensor to the licensee, of the methods
and processes used by the former at the date of the license in its
commercial practice under the licensed patents in connection with
the production of titanium pigments."
The limited scope of this access to technical information is
apparent. On the other hand, there is reason to believe that the
knowledge which thus can be secured may be vital in giving value to
the compulsory licenses which are a central feature of the decree.
The information is put upon a basis comparable to that of a
license. Just as a licensee is required to pay a uniform reasonable
royalty for the privilege of operating under the patent, so also he
is required to pay a reasonable charge for the information as to
methods and processes which may be important to him in his
commercial practice under the licensed patents.
The need for technical information to accompany patent licenses
in this field, at least where desired by a newcomer, is testified
to repeatedly. If there be such a need, the reasonableness of this
limited availability of it as stated in the decree is hard to deny.
Findings of fact evidencing the importance of such information
include the following:
"NL wished to pool with DP all their patents and technical
information relating to the manufacture or use of titanium pigments
in the United States in
Page 332 U. S. 356
order to settle its patent controversies with DP and to obtain
access to DP's patents and technical facilities and jointly to
control and dominate the manufacture and sale of titanium pigments
and compounds. . . . Both TP and Krebs began to exchange
extensively technical information relating to the manufacture and
use of titanium pigments in 1932, and the information so exchanged
related to much more than any alleged claims of patent infringement
by either company. Blemenfeld and his foreign associates furnished
technical aid and assistance to Krebs at its instance from August,
1931, until the approximate date at which TP and Krebs commenced
the exchange of technical information in 1932."
Finding of Fact 72.
"DP and NL exchanged technical information relating in any
manner to the manufacturing or use of titanium pigments or
compounds from about April, 1932, until April, 1940."
Finding of Fact 75.
"In entering into the agreement, Ex. E [the agreement of July 1,
1933], NL had several purposes: "
"1) For about a year prior to the making of Ex. E, officials of
NL had been concerned by the early expiration dates of many of the
patents upon which NL relied. By exchanging patents and technology
with DP, a large and powerful corporation, possessed of great
research facilities, NL expected to strengthen the patent monopoly
of NL and DP jointly, as against newcomers in the titanium pigment
business."
"
* * * *"
"DP's purpose in entering into the agreement Ex. E were:"
"
* * * *"
"3) To obtain access to NL's technical experience and patents in
the titanium pigment field, as well
Page 332 U. S. 357
as the patents and the experience of NL's foreign
associates."
"
* * * *"
"The necessary effects of the agreement Ex. E and of DP
assurances have been"
"1) The achievement of NL purposes."
"2) The achievement of DP's purposes."
"3) To give NL and DP together domination and control over the
titanium pigment business in the U.S."
Finding of Fact 79.
National Lead, on this point, now takes a middle ground.
Apparently it supports the present provision in the decree and
opposes its expansion as proposed by the Government. It expressly
endorses the present provisions if the decree is amended so as to
put the compulsory licenses on a royalty-free basis. If it approves
this grant of access to technical information on that basis, it
hardly can object to it in connection with licenses on a uniform,
reasonable royalty basis.
The fact that this Court eliminated without discussion,
paragraph 24(c) from the
Hartford-Empire decree is not
controlling here.
Hartford-Empire Co. v. United States,
supra, at
323 U. S. 413,
323 U. S. 418.
The fact that the violations of the Anti-Trust Act may have been
more reprehensible in that case than here is not persuasive,
because this provision is not and should not be punitive. The
justification for the compulsory imparting of methods and processes
rests upon its appropriateness and upon the necessity for it in
providing an effective decree. In the
Hartford-Empire
decree, paragraph 24(c) proposed to make available, to any licensee
under paragraph 24(a) (without royalties), or under paragraph 24(b)
(with reasonable royalties) at cost, plus a reasonable profit, "all
drawings and patterns "relating to the machinery or methods used in
the manufacture of glassware" embodied in the licensed inventions.
. . ."
Page 332 U. S. 358
Id. at
323 U. S.
413-414. This Court, in that case, modified paragraphs
24(a) and 24(b) and deleted paragraph 24(c). In the absence of a
statement of this Court's reasons for the deletion of paragraph
24(c), it cannot be assumed that, by such deletion, it announced
its disapproval, in all future decrees, of provisions requiring the
supplying of technical information to licensees at a reasonable
charge.
It may well be that the District Court, in the present case,
took into consideration the argument made by National Lead that, in
this field,
"The product claims cover practically all such improved titanium
pigments; thus, of 23 different grades of titanium pigments
(
i.e., different products) sold by NL, 21 are covered by
unexpired patents."
Finding of Fact 37. Therefore, the imparting to the newcomer of
methods and processes covered by the decree might be particularly
important to him in entering this industry, where substantially all
the commercial products are covered either by process or product
patents.
Du Pont has presented a strong case against compelling it to
make further disclosure of its technical information to its leading
competitor, National Lead, in this comparatively mature technical
industry, especially since the agreement of 1941 between these
companies expressly terminated their preexisting agreement to
supply such information. This argument does not apply, however,
with comparable force to the many other situations toward which
this provision is directed. Under all the circumstances and in view
of the narrow limits written into the provision by the District
Court, we believe that it represents a permissible exercise of
judicial discretion. It is to be judged from the point of view of
the public interest, as well as that of the private interests
concerned. That public interest requires that the court be
permitted to produce the most effective and generally fair
decree
Page 332 U. S. 359
that it can devise to give effect simultaneously to the
antitrust laws and the patent laws.
This decision relies also on the permissible breadth of the
District Court's discretion over the conditions under which
technical information shall be required to be shared with the
world. The attempt of the Government to throw the field of
technical knowledge in the titanium pigment industry wide open
would reduce the competitive value of the independent research of
the parties. It would discourage, rather than encourage,
competitive research. It would be contrary to, rather than in
conformity with, the policy of the patent laws now in force.
Changes in the underlying policies of the patent laws frequently
have been presented to Congress, [
Footnote 10] but Congress, by its failure to accept those
changes, has added to, rather than detracted from, the strength of
the present and traditional patent policies.
D. Request to omit the provision that National Lead and du Pont,
respectively, may make the grant of any license by either of them
to an applicant under the decree conditioned upon the reciprocal
grant of a license by the applicant at a reasonable royalty under
certain described patents owned or controlled by such applicant.
This is urged by the Government in No. 89, and opposed by the
appellant companies.
The District Court, during the conferences on the terms of the
decree, summarized the need for this provision by a concrete
illustration of what it suggested might happen without it. It
said:
Page 332 U. S. 360
"Otherwise you will arrive at a situation conceivably where
Virginia Chemical would simply change places with du Pont in
becoming the dominating factor in the industry under this
extraordinary advantage of being able to take everything for itself
and keeping everything that it has."
The District Court distinguished the present case from the
Hartford-Empire case by showing that, in the latter, there
had not been a similar reason for inserting the reciprocal
requirement. In that case, the court was dealing with a licensor
organization which had no use for patents except for the resulting
control over licensing, and, consequently, it would have derived no
benefit from cross-licenses. The reciprocal clause includes an
appropriate reference to future patents. As a five-year limit is
put on the patents which will be subject to the compulsory license
clause, under paragraphs 4 and 7 of the decree, so also the
reciprocal licenses are limited by paragraph 7 to "patents covering
titanium pigments or their manufacture, now issued or pending, or
issued within five years from the date of this decree. . . ."
Here again, the provision is well within the discretion of the
District Court in seeking means to fit the relief it grants to the
needs of the particular case, always with due regard to the
underlying public interest that is inherent in the antitrust and
patent laws. [
Footnote
11]
E. Request to omit the six-months' time limit imposed by the
decree upon the options of American Zirconium Corporation and
Virginia Chemical Corporation, respectively, to secure certain
licenses under the decree. This is urged by the Government in No.
89. It is not discussed
Page 332 U. S. 361
here in the briefs of the other parties. The effective date of
the decree of October 11, 1945, was stayed an suspended, by the
order of MR. JUSTICE Reed entered January 2, 1946, pending
determination of the present appeals to this Court, so that more
than six months already have passed since the original date of the
decree without prejudicing the rights of the parties affected. In
view of such suspension and of the new effective date to be given
to the decree, pursuant to the order of this Court, there will be
ample time for the exercise of this option under its terms.
F. Request to modify the language of the decree so as to
eliminate language which, it is claimed, enjoins normal and usual
business arrangements between the appellant companies and other
producers of titanium products. This is urged by National Lead in
No. 90, and is opposed by the Government. The precise request is to
strike from paragraphs 5 and 6 of the decree certain language shown
in the margin of this text in italics and to insert in paragraph 6
the word "producer" at the point there shown in capital letters.
[
Footnote 12] National Lead
contends that the cancellation
Page 332 U. S. 362
of the agreements, as ordered in paragraph 5, and the
injunction, as ordered in paragraphs 5 and 6, against the further
performance or the continuation or renewal of the unlawful
provisions thereof (namely, division of sales or manufacturing
territory, allocation of markets, limitation of imports or exports,
restrictions on use, etc.) will insure complete and effective
relief without subjecting National Lead or du Pont to undue
hardship and losses. Accordingly, National Lead states that it asks
for the changes here indicated in the interest of promoting trade
and competition in titanium pigments.
We agree, however, with the Government's interpretation that
paragraph 5 deals solely with the future enforceability of existing
contracts, and that the deletion of the words requested by National
Lead is not necessary in order to remove barriers to future
contracts. Paragraph 6 deals with future contracts. Clause (a)
enjoins the parties from entering into or adhering to any
agreement, plan or program "which has as its purpose or effect the
continuing or renewing of any of the agreements listed in paragraph
5. . . ." Since such agreements have been found to violate the
Sherman Act, this provision imposes no unjustified restriction on
National Lead's power to
Page 332 U. S. 363
contract. We find also no sufficient basis for inserting the
word "producer" as requested in paragraph 6. If National Lead later
can demonstrate that its right of contract has been unduly
restricted, it may, under the terms of the decree, apply to the
District Court for a modification of the judgment.
G. Request to omit the requirement that National Lead and Titan
Inc. within one year, shall present to the District Court, for its
approval, a plan for divesting themselves of their stockholdings
and other financial interests in certain foreign companies or for
the purchase of the entire stockholdings and interests, direct or
indirect, in such companies or any of them. To accomplish this,
National Lead and Titan Inc., in No. 90, urge the deletion of
paragraph 8 from the decree. [
Footnote 13] The Government opposes such deletion. The
requirement imposed by paragraph 8 is merely that certain parties
shall present to the District Court, within one year, a plan
subject to its approval. That court, during the conferences on the
terms of the decree, said:
"In other words, the stock acquisitions were part and parcel of
the territorial allocation agreements, and probably were a
necessary element in the establishment of the territorial
arrangement."
We find ample reasons in the record for the action of the
District Court in inserting paragraph 8 in the decree. It is
related directly to the injunction against further performance of
any of the provisions of the agreements listed in the decree as
being in violation of the Sherman Act.
In thus disposing of the points relied upon in the respective
appeals, the decree will remain as originally entered by the
District Court, excepting only that, as a result of the dissolution
of the stay and suspension of certain provisions of the decree
contained in paragraphs
Page 332 U. S. 364
5, 8, 9, 10, and 11 thereof, which were granted pending
determination of these appeals to this Court, the decree shall be
deemed, for the purposes of those paragraphs and for the running of
time thereunder, to take effect on the effective date of the
mandate to be issued by this Court.
For the reasons set forth, the motion of the United States to
amend its assignments of error is granted, and the judgment of the
District Court is
Affirmed.
MR. JUSTICE BLACK and MR. JUSTICE JACKSON took no part in the
consideration or decision of these cases.
* Together with No. 90,
National Lead Co. et al. v. United
States, and No. 91,
E. I. du Pont de Nemours Co. v. United
States, also on appeal from the same Court.
[
Footnote 1]
"SECTION 1. Every contract, combination in the form of trust or
otherwise, or conspiracy, in restraint of trade or commerce among
the several States, or with foreign nations, is hereby declared to
be illegal. . . . Every person who shall make any contract or
engage in any combination or conspiracy hereby declared to be
illegal shall be deemed guilty of a misdemeanor, and, on conviction
thereof, shall be punished by fine not exceeding $5,000, or by
imprisonment not exceeding one year, or by both said punishments,
in the discretion of the court."
50 Stat. 693, 694, 15 U.S.C. § 1.
[
Footnote 2]
The conclusions of law of the District Court were as
follows:
"1. Beginning on or about July 30, 1920, NL and coconspirator
TAS [Titan Co. A/S, to which Titan Inc. became a successor in
interest] and on various dates thereafter Tinc, DP, and the others
found herein to be coconspirators continuing at all times
thereafter to the date of these findings have been continuously
engaged in a combination and conspiracy in restraint of trade and
commerce in titanium pigments and compounds among the several
states of the United States and with foreign nations, and have been
and are now parties to contracts, agreements and understandings in
restraint of such trade and commerce."
"2. Plaintiff is entitled to a decree."
See also United States v. National Lead
Co., 63 F.
Supp. 513, 527, 531, 532.
[
Footnote 3]
See note 4
infra.
[
Footnote 4]
"This cause came on to be heard upon the complaint and the
answers thereto upon the evidence and upon argument of counsel. The
Court having thereafter rendered and filed its opinion and having
made and entered findings of fact and conclusions of law wherein
the defendants have been found to have been engaged in a
combination in restraint of trade and commerce in titanium pigments
among the several states of the United States and of foreign
nations, and that the defendants have been and now are parties to
contracts, agreements, and understandings in restraint of such
trade and commerce in violation of Section 1 of the Sherman Act, 26
Stat. 209;"
"Now therefore upon motion of plaintiff by Wendell Berge,
Assistant Attorney General, Herbert Berman and William C. Dixon,
Special Assistants to the Attorney General, Julian Caplan and
Ephraim Jacobs, Special Attorneys, and John F. X. McGohey, United
States Attorney, for relief in accordance with the prayer of the
complaint, and the defendants having severally appeared by counsel,
it is ordered, adjudged and decree as follows:"
"1. The term 'titanium pigments' as used herein shall mean any
product containing two percent (2%) or more of the element titanium
in a chemically, mechanically or physically combined state and
mixtures thereof which can be used as pigments, whether or not
adapted for other uses, and also extenders to be used in
conjunction with any such product."
"2. The term 'defendants' shall mean the corporations
hereinafter listed who may be identified by the designated
abbreviations:"
NL National Lead Company
Tinc Titan Company, Inc.
DP E.I. du Pont de Nemours and Company
"3. The term 'coconspirators' shall mean the corporations
hereinafter listed, who may be identified by the designated
abbreviations:"
TP The Titanium Pigment Company, Inc.
Krebs Krebs Pigment & Color Corporation
TAS Titan Co. A/S
IG Interessengemeinschaft Farbenindustrie Aktiengesellschaft
TG Titangesellschaft m.b.H.
SIT Societe Industrielle du Titane
ICI Imperial Chemical Industries, Ltd.
GW Goodlass Wall and Lead Industries, Ltd.
ISC Imperial Smelting Corporation, Ltd.
BTP British Titan Products Company, Ltd.
NTP or National Titanium Pigments, Ltd.
Laporte
CIL Canadian Industries, Ltd.
CTP Canadian Titanium Pigments, Ltd.
Kokusan Kokusan Kogyo Kabushiki Kaisha
or KK
TK Titan Kogyo Kabushiki Kaisha
Terres Rares Societe des Produits Chimiques des Terres Rares
Thann Fabriques des Produits Chimiques de Thann et de
Mulhouse
Montecatini Societa Anonima Titanium
Aussig Verein fur Chemische und Metallurgische Produktion
"4. The term 'patents as herein defined' shall mean United
States letters patent and applications as follows: (a) the letters
patent and patent applications listed in Appendix A hereof; (b) all
divisions, continuations or reissues of any of the foregoing
patents and applications; (c) all patents issued upon such
applications; (d) all patents which cover any titanium pigments or
any process for the manufacture of titanium pigments issued to any
of the defendants within five years from the date of this decree,
and all such patents which any of the defendants acquires within
such five years, and all such patents of which any of the
defendants becomes the exclusive licensee within such five years
with power to sublicense."
"5. The following agreements are hereby adjudged to be unlawful
under Section 1 of the Sherman Act, and each of them is hereby
cancelled, and the defendants and each of them and all persons
acting or claiming to act through, for or under them and all
successors and subsidiaries of any of the defendants are hereby
enjoined and restrained from the further performance of any of the
provisions of said agreements and of any agreements amendatory
thereof or supplemental thereto: "
"Agreement dated July 30, 1920, between TP and TAS (Exhibit
A);"
"Agreement between TP and Krebs dated January 1, 1933, as
amended January 1, 1941 (Exhibits E and E-3);"
"Agreements dated July 30, 1920, between NL, TP, The Titanium
Alloy Manufacturing Company and TAS (Exhibits A-1 and A-2);"
"Agreement between TAS and SIT dated March 3, 1927 (Exhibit
B);"
"Agreement between TAS and IG dated October 3 and 20, 1927
(Exhibit C);"
"Agreement between TAS and IG signed June 24 and October 20,
1927 (Exhibit C-1);"
"Agreement between TAS and TG signed October 3 and 20, 1927
(Exhibit C-3);"
"Agreement between TG and TAS dated October 3 and 20, 1927
(Exhibit C-7);"
"Agreement between TG and TAS dated October 3 and 20, 1927
(Exhibit C-8);"
"Agreement dated February 16, 1933 between ICI, ISC, GW, and
TINC (Exhibit F);"
"Agreements between TINC, SIT, TERRES RARES, and Thann dated
June 5 and 17, 1935 (Exhibits G-1 and G-2);"
"Agreements between TINC, TERRES RARES, and IG, and between
TINC, Terres Rares, IG, TG, Thann, and Doitsu (Doitsu Senryo Gomei
Kaisha, Kobe/Japan) both dated January 18, 1936 (Exhibits J and
J-2);"
"Agreement between NL an CIL dated January 1, 1937 (Exhibit
K);"
"Agreement between NL and CTP dated January 1, 1937, as amended
February 27, 1939 (Exhibits K-1 and K-5);"
"Agreements between DP and TINC dated July 27, 1937, June 20,
1938, April 21, 1939, May 10, 1940, and June 23, 1941 (Exhibits M,
N, Q, R and S), and the 'License Field Extender' agreements to
which NL or TINC were parties, including the agreement between NL
and TINC dated March 28, 1939 (Exhibit O); provided, however, that
the provisions of this paragraph with respect to the agreements
between TP and Krebs dated January 1, 1933, as amended January 1,
1941 (Exhibits E and E-3) shall not go into effect until the
expiration of nine months from the date of this decree."
"6. Each of the defendants and each of their directors,
officers, agents, employees, successors and subsidiaries and all
persons acting, or claiming to act under, through or for them or
any of them are hereby enjoined and restrained (a) from entering
into, adhering to, maintaining or furthering, directly or
indirectly, or claiming any rights under any contract, agreement,
understanding, plan or program among themselves, the
coconspirators, or with any other person, partnership or
corporation which has as its purpose or effect the continuing or
renewing of any of the agreements listed in paragraph 5 hereof; (b)
from entering into, adhering to, maintaining or furthering,
directly or indirectly, any contract, agreement, undertaking, plan
or program with any other producer or dealer relating to titanium
pigments which has as its purpose or effect (1) to divide sales or
manufacturing territories, (2) to allocate markets, (3) to limit or
prevent United States imports or exports, (4) to grant to any third
party any market as its exclusive territory, (5) to keep any third
party out of any market; provided, however, that nothing contained
in this subdivision (b) of this paragraph 6 shall prohibit any
normal and usual arrangements between any defendant and its
directors, officers, employees, agents, subsidiaries, or any dealer
or distributor, whether or not a coconspirator; (c) from
restricting any purchaser of titanium pigments in the use
thereof."
"7. Each of the defendants is ordered to grant to any applicant
therefor, including any defendant or coconspirator, a nonexclusive
license under any or all of the patents as herein defined at a
uniform, reasonable royalty. Such grant may, at the option of the
licensor, be conditioned upon the reciprocal grant of a license by
the applicant at a reasonable royalty, under any and all patents
covering titanium pigments or their manufacture, now issued or
pending, or issued within five years from the date of this decree,
if any, owned or controlled by such applicant. Such license or
reciprocal license may at the option of either party, contain a
provision for the inspection of the books and records of the
licensee by an independent auditor who shall report to the licensor
only the amount of royalty due and payable, and no other
information. During a period of three years from the date of this
decree, such license or reciprocal license may, at the option of
either party, contain a provision for the imparting in writing at a
reasonable charge, by the licensor to the licensee, of the methods
and processes used by the former at the date of the license in its
commercial practice under the licensed patents in connection with
the production of titanium pigments. The Court reserves
jurisdiction to pass upon the reasonableness of any royalty or
charge herein directed to be reasonable. Defendants are restrained
from attempting to enforce any rights under any foreign patents
owned by them or under which they are the exclusive licensees to
prevent the exportation of titanium pigments from the United States
to any foreign country."
"8. Within one year from the date of this decree, defendants NL
and Tinc shall present to the Court for its approval a plan for
divesting themselves of their stock holdings and other financial
interest, direct and indirect, in BTP, CTP, TG, and TK, or for the
purchase of the entire stock holdings and other financial
interests, direct and indirect, in said companies or any of them.
Such plan of sale shall not provide for the transfer of such stock
or interest to any other defendant or to any corporation in which
any defendant will, upon consummation of the plan, have any
interest, provided that this provision shall not preclude transfer
of said defendants' stock holdings in BTP to ISC, GW, and ICI, or
any of them, or preclude transfer of said defendants' stock
holdings in CTP to CIL. The plan shall provide for its completion
within two years from the date of this decree."
"9. Either American Zirconium Corporation or Virginia Chemical
Corporation, their successors or assigns, may at their option, if
exercised within six months from the date of this decree, apply for
licenses from DP under the provisions of paragraph 7. In the event
American Zirconium Corporation, Virginia Chemical Corporation, or
their respective successors or assigns exercise the foregoing
option, DP is enjoined from collecting royalties under any existing
license agreement relating to titanium pigments between it and the
person exercising the option in respect of any period subsequent to
such exercise. Defendants NL, Tinc, and DP are hereby enjoined from
bringing, or threatening to bring, any action against any person or
corporation for the alleged infringement prior to the date of this
decree of any patent as herein defined."
"10. The Attorney General of the United States or his proper
representative shall, for the purpose of securing compliance with
this decree, be permitted (1) access, during the office hours of
the defendants, to all books, ledgers, accounts, correspondence,
memoranda, and other records and documents in the possession or
under the control of the defendants, relating to any matters
contained in this decree, (2) subject to any legally recognized
privilege, without restraint or interference from the defendants,
to interview officers or employees of the defendants, who may have
counsel present, regarding any such matters; provided, however,
that information obtained by the means permitted in this paragraph
shall not be divulged by any representative of the Department of
Justice to any person other than a duly authorized representative
of the Department of Justice except in the course of legal
proceedings for the purpose of securing compliance with this decree
in which the United States is a party or as otherwise required by
law."
"11. Judgment is entered against the defendants for all costs to
be taxed in this proceeding."
"12. The cancellation, injunctions and all executory action
provided for under this decree shall not become effective or
operative until ninety days from the date of this decree."
"13. Jurisdiction of this cause, and of the parties hereto, is
retained by the Court for the purpose of enabling any of the
parties to this decree, or any other person or corporation that may
hereafter become bound, in whole or in part, thereby to apply to
the Court at any time for such further orders, modifications,
vacations or directions as may be necessary or appropriate."
"(1) for the construction or carrying out of this decree,
and"
"(2) for the enforcement of compliance therewith and the
punishment of violations thereof."
"Appendix A" consists only of the identification of National
Lead's 82 patents and 20 applications for patents; Titan Inc.'s 19
patents and 1 application; Titan Co. A/S's 2 patents; I.G.
Farbenindustrie's 22 patents; Titangesellschaft's 2 patents, and du
Pont's 175 patents and 30 applications. The references in the
decree to Exhibits refer to such exhibits as they are identified in
the record of this case in the District Court.
[
Footnote 5]
"Cartels have been defined by two of the foremost members and
advocates of such bodies. In the words of Sir Alfred Mond,
organizer of Imperial Chemical Industries:"
" I use the word 'cartel' to include fusion, pooling
arrangement, quota arrangement, and price convention, because a
cartel is protean in its form. . . . In an ultratechnical way, a
cartel might be defined as a combination of producers for the
purpose of regulating, as a rule, production, and, frequently,
prices. . . ."
"In the words of Sir Felix J. C. Pole, chairman of Associated
Electrical Industries, Ltd.:"
" A 'cartel' or 'association' usually means as association by
agreement of companies or sections of companies having common
interests. It is designed to prevent extreme or unfair competition
and allocate markets, and it may also extend to interchange of
knowledge resulting from scientific and technical research,
exchange of patent rights, standardization of products, etc.
Competition is not eliminated, but it is regulated. Competition in
quality, efficiency, and service takes the place of the crude
method of price-cutting."
Monograph No. 1, Subcommittee on War Mobilization of the
Committee on Military Affairs, U.S. Senate, 78th Cong., 2d Sess.,
Part I, p. 1. Quoted also in
United States v. National Lead
Co., 63 F.
Supp. 513, 523, note 5.
[
Footnote 6]
"This purpose was accomplished. The defendant NL and TAS agreed
to have TAS and subsequently defendant Tinc form in each of the
important industrial countries of the world, in association with a
local corporation or firm which contemplated the manufacture and
sale of titanium pigments and compounds or which could contribute
to the technical or commercial development or which threatened to
be a serious competitor of NL and TAS, a new company in which NL or
TAS were to have a part interest. Any new company so formed was to
be given certain territory in which it would have the exclusive
right to manufacture and sell titanium pigments and compounds free
from any exports into said territory by NL. The new company so
organized was to refrain from competing with NL in its territory
(the United States and other countries of North America) or in the
territory of any other company associated with NL. TAS and
subsequently defendant Tinc were to make said contracts providing
for the formation of the new companies, and NL was to be bound to
adhere to all of the territorial restrictions placed on TAS and
subsequently defendant Tinc in such contracts by virtue of contract
Exhibit A. [The agreement of July 30, 1920.] All the present and
future patents belonging to NL or TAS or any of the companies
associated with either in the formation of such new companies, as
well as those of the new companies to be organized, were to be
licensed exclusively to NL for North America and to the new
companies to be organized for their respective exclusive
territories and to TAS and subsequently defendant Tinc for the rest
of the world."
Finding of Fact 48.
[
Footnote 7]
Hearings before Committee on Patents on H.R. 23,417, 62d Cong.,
2d Sess. (1912), Part XII, pp. 10-11; H.R.Rep. 1161, 62d Cong., 2d
Sess. (1912), Part 2, p. 8; Report of Subcommittee of the American
Bar Association appointed to consider the King Bill, S. 383, 74th
Cong. (1935), p. 38.
[
Footnote 8]
A recent recognition of a reasonable royalty test is contained
in Chapter 726 of the 79th Congress, 2d Session:
". . . upon a judgment being rendered in any case for an
infringement the complainant shall be entitled to recover general
damages which shall be due compensation for making, using, or
selling the invention,
not less than a reasonable royalty
therefor, together with such costs, and interest, as may be
fixed by the court. . . ."
(Italics supplied.) R.S. § 4921, as amended August 1, 1946, 60
Stat. 778, relating to the power of courts to grant injunctions and
estimate damages.
The most recent and outstanding example of its recognition is in
Hartford-Empire Co. v. United States, 323 U.
S. 386,
323 U. S.
413-417.
In patent accounting suits, where the profits or damages cannot
be ascertained and no standard of comparison is available, the
court may allow a reasonable royalty.
"But, as the patent had been kept a close monopoly, there was no
established royalty. In that situation, it was permissible to show
the value by proving what would have been a reasonable royalty,
considering the nature of the invention, its utility and
advantages, and the extent of the use involved. Not improbably such
proof was more difficult to produce, but it was quite as admissible
as that of an established royalty."
Dowagiac Mfg. Co. v. Minnesota Moline Plow Co.,
235 U. S. 641,
235 U. S. 648.
See also Sheldon v. Metro-Goldwyn Pictures Corp.,
309 U. S. 390,
309 U. S. 404;
Suffolk Co. v.
Hayden, 3 Wall. 315,
70 U. S. 320; 3
Walker on Patents § 833 (Deller's ed.1937) (
Id.,1945
pocket supp.); 56 Yale L.J. 77.
[
Footnote 9]
United States v. Owens-Ill. Glass Co., CCH Trade
Reg.Serv. � 57,498 (D.C.N.D.Calif.1946);
United States v.
American Air Filter Co., CCH Trade Reg.Serv. � 57,492
(D.C.W.D.Ky.1946);
United States v. Libbey-Owens-Ford Glass
Co., CCH Trade Reg.Serv. � 57,489 (D.C.N.D.Ohio 1946);
United States v. Diamond Match Co., CCH Trade Reg.Serv. �
57,456 (D.C.S.D.N.Y.1946);
United States v. General Elec.
Co., CCH Trade Reg.Serv. � 57,448 (D.C.N.J.1946);
United
States v. Bendix Aviation Corp., CCH Trade Reg.Serv. � 57,444
(D.C.N.J.1946);
Crosby Steam Gage & Valve Co. v. Manning,
Maxwell & Moore, CCH Trade Reg.Serv. � 57,336
(D.C.Mass.1945).
[
Footnote 10]
H.R. 20,388, 60th Cong., 1st Sess. (1908); H.R. 11,796, 61st
Cong., 1st Sess. (1909); H.R. 2930, 62d Cong., 1st Sess. (1911);
H.R. 16,828, 62d Cong., 2d Sess. (1912); H.R. 23,417, as amended,
62d Cong., 2d Sess. (1912); H.R. 1700, 63d Cong., 1st Sess. (1913);
H.R. 14,865, 63d Cong., 2d Sess. (1914); S. 2783, 70th Cong., 1st
Sess. (1928): S. 2491, 77th Cong., 2d Sess. (1942).
[
Footnote 11]
Provisions for reciprocal licensing have been incorporated in
consent decrees.
See United States v. General Elec. Co.,
CCH Trade Reg.Serv. �52,777 (D.C.N.J.1942);
United States v.
American Bosch Corp., CCH Trade Reg.Serv. � 52,888
(D.C.S.D.N.Y.1942).
[
Footnote 12]
"'5. The following agreements are hereby adjudged to be unlawful
under Section 1 of the Sherman Act and each of them is hereby
cancelled,
and the defendants and each of them and all persons
acting or claiming to act through, for or under them and all
successors and subsidiaries of any of the defendants are hereby
enjoined and restrained from the further performance of any of the
provisions of said agreements and of any agreements amendatory
thereof or supplemental thereto: [followed by a list of the
canceled agreements].'"
"'6. Each of the defendants and each of their directors,
officers, agents, employees, successors and subsidiaries and all
persons acting, or claiming to act under, through or for them or
any of them are hereby enjoined and restrained
(a) from
entering into, adhering to, maintaining or furthering, directly or
indirectly, or claiming any rights under any contract, agreement,
understanding, plan or program among themselves, the
coconspirators, or with any other person, partnership or
corporation, which has as its purpose or effect the continuing or
renewing of any of the agreements listed in paragraph 5
hereof; (b) from entering into, adhering to, maintaining or
furthering, directly or indirectly, any contract, agreement,
undertaking, plan or program with any other producer or dealer
relating to titanium pigments which has as its purpose or effect
(1) to divide sales or manufacturing territories, (2) to allocate
markets, (3) to limit or prevent United States imports or exports,
(4) to grant to any third party any market as its exclusive
territory, (5) to keep any third party out of any market; provided,
however, that nothing contained in this subdivision (b) of this
paragraph 6 shall prohibit any normal and usual arrangements
between any defendant and its directors, officers, employees,
agents, subsidiaries, or any PRODUCER, dealer or distributor,
whether or not a coconspirator; (c) from restricting any purchaser
of titanium pigments in the use thereof.'"
[
Footnote 13]
For paragraph 8,
see note 4 supra.
MR. JUSTICE DOUGLAS, with whom MR. JUSTICE MURPHY and MR.
JUSTICE RUTLEDGE concur, dissenting in part.
I cannot agree that royalties should be charged on patents whose
misuse has been so flagrant as to persuade us to approve compulsory
licensing of all who desire to use the inventions. Nor do I think
that the failure to provide for royalty-free licensing may be
sustained as an exercise of the judicial discretion of the District
Court. That would be the case if the District Court had been free
to frame its decree unembarrassed by the ruling in
Hartford-Empire Co. v. United States, 323 U.
S. 386;
324 U. S. 324 U.S.
570. In that case, this Court modified an antitrust decree so as to
permit "reasonable" royalties on patents which had been ordered
licensed without charge to all applicants. The language there used
well might lead a court to the conclusion that royalty-free
licensing is a remedy unacceptable as a matter of law. [
Footnote 2/1] In these
Page 332 U. S. 365
circumstances, it is fair to assume that the action of the
district judge in the present case was in deference to the
Hartford-Empire rule, rather than a reflection of his own
judgment. [
Footnote 2/2]
The
Hartford-Empire case presented the first instance,
so far as I am aware, of the incorporation of a royalty free
licensing provision in an antitrust decree. Since the question is
one of the greatest importance in the administration of the
antitrust laws, and was not considered by the full Court, [
Footnote 2/3] I think it remains an open
one, except as applied to the
Hartford-Empire case, and we
are free to consider whether that case should be followed under the
facts and circumstances here presented.
In the
Hartford-Empire case, the Court stressed the
fact that Congress had not specifically authorized forfeiture of
patents in antitrust actions. It thought that
"if, as we must assume on this record, a defendant owns valid
patents, it is difficult to say that, however much in the past such
defendant has abused the rights thereby conferred, it must now
dedicate them to the public. "
Page 332 U. S. 366
323 U.S. at
323 U. S. 415.
The difficulty with that argument is that it proves too much. For
the Court was at the same time sanctioning compulsory licensing, a
most serious inroad on patent rights. The patent law gives to the
patentee or his assignee the "exclusive right to make, use, and
vend the invention or discovery. . . ." R.S. § 4884, 35 U.S.C. §
40. If the antitrust court could not interfere with patent rights,
then it could not order licensing on any terms, for mandatory
licensing is hardly consistent with exclusive rights. Again, if the
failure of Congress specifically so to provide prevents a court
from directing royalty free licensing, then, by the same token, the
failure to provide for compulsory licensing is a bar to that relief
also.
It is thus clear that the criterion for choosing the appropriate
antitrust remedies cannot be found in Congressional silence. The
task of putting an end to monopolistic practices and restoring
competition is one of magnitude and complexity; Congress has
authorized use of the broadest powers of equity to cope with it.
Under a statute providing more detailed remedies than do the
antitrust laws, we have held that an equity court may mould
additional ones.
See Porter v. Warner Holding Co.,
328 U. S. 395. And
its powers under the antitrust laws, though not specifically
enumerated, are ample to thwart the plans of those who would build
illegal empires, no matter how imaginative their undertakings or
subtle their techniques. The power of the court is not limited to
the restraint of future transgressions. The impairment of property
rights is no barrier to the fashioning of a decree which will grant
effective relief.
United States v. Union Pacific R. Co.,
226 U. S. 470,
226 U. S.
476-477. Divestiture or dissolution may be ordered in
spite of hardship, inconvenience, or loss.
United States v.
Crescent Amusement Co., 323 U. S. 173,
323 U. S. 189.
Devices or instrumentalities which may be used for legitimate ends
may
Page 332 U. S. 367
nevertheless be outlawed entirely where they have been employed
to build the monopoly or to create the restraint of trade.
United States v. Crescent Amusement Co., supra, at
323 U. S.
187-188. For the aim of the decree is not only to
prevent a repetition of the unlawful practice, but to undo what was
done, to neutralize power unlawfully acquired, to prevent the
defendants from acquiring any of the fruits of the condemned
project.
Standard Oil Co. of New Jersey v. United States,
221 U. S. 1,
221 U. S. 78.
If that is to be done here, I think we must do more than forbid
further expansion of the existing monopolistic situation. The
defendants have unlawfully acquired control and domination over
this industry to the exclusion of competitors. This control was
obtained in part through the unlawful acquisition and use of
patents. As stated by the District Court,
"These patents, through the agreements in which they are
enmeshed and the manner in which they have been used, have, in fact
been forged into instruments of domination of an entire industry.
The net effect is that a business, originally founded upon patents
which have long since expired, is today less accessible to free
enterprise than when it was first launched."
63 F.
Supp. 513, 532. If defendants are allowed royalties on those
patents, they do, indeed, reap dividends from their unlawful
activities. As stated in a dissent in the
Hartford-Empire
case,
"Every dollar hereafter, as well as heretofore, secured from
licenses on the patents illegally aggregated in the combination's
hands is money to which the participants are not entitled by virtue
of the patent laws or others. It is the immediate product of the
conspiracy."
323 U.S. at
323 U. S.
443.
But beyond that is the effect on the industry. Here, defendants
have been in a commanding and impregnable position. They have
dominated the field, and suppressed competition. If competition is
to be restored, strong measures must be adopted to provide the
maximum opportunity
Page 332 U. S. 368
for new ventures to compete with the established giants of the
industry. It is here that the major vice of permitting royalties on
the licensed patents becomes apparent. Each dollar of royalty adds
a dollar to the costs of the new competitor and gives the
established licensor another dollar with which to fight that
competition. As stated by National Lead in its brief before this
Court:
"National and du Pont not only compete with their licensees, but
dominate the titanium industry. A requirement of uniform reasonable
royalties in no way frees competition, because, no matter what the
royalty may be in this industry, a licensee required to pay more
than its licensor will be at a competitive disadvantage."
"
* * * *"
"Compulsory licensing alone would not be enough to restore the
industry to a healthy competitive condition. If National and du
Pont are permitted to receive royalties on their existing patents,
they will still be in position to dominate the industry."
If National Lead, the world's largest producer of titanium
pigments, expects to find itself at a competitive disadvantage as a
result of reasonable royalty licenses, what can be the probable
fate of newcomers or existing independents of small statute?
[
Footnote 2/4]
The decree approved by the Court stops short of granting
effective relief. Divestiture is refused. Compulsory licensing is
ordered, but only to those who are willing reciprocally to license
use by the defendants of their patents.
Page 332 U. S. 369
In this additional respect, the decree will enable the large
established companies to strengthen their dominant position. To get
the benefits of the decree, an independent must give up one of his
few competitive advantages -- the exclusive right to use such
patents as he may possess. These provisions, plus the additional
requirement of royalties on the misused patents, even though those
royalties be "reasonable," greatly increase the odds against
restoration of competition in this industry.
Except as to the matters mentioned, I join in the opinion of the
Court.
[
Footnote 2/1]
"That a patent is property, protected against appropriation both
by individuals and by government, has long been settled. In
recognition of this quality of a patent, the courts, in enjoining
violations of the Sherman Act arising from the use of patent
licenses, agreements, and leases, have abstained from action which
amounted to a forfeiture of the patents."
"The Government urges that such forfeiture is justified by our
recent decisions. . . . But those cases merely apply the doctrine
that, so long as the patent owner is using his patent in violation
of the antitrust laws, he cannot restrain infringement of it by
others. We were not there concerned with the problem whether, when
a violation of the antitrust laws was to be restrained and
discontinued, the court could, as part of the relief, forfeit the
patents of those who had been guilty of the violation. Lower
federal courts have rightly refused to extend the doctrine of those
cases to antitrust decrees by inserting forfeiture provisions."
323 U.S. at
323 U. S.
415-416.
[
Footnote 2/2]
He, indeed, stated on argument of a motion to determine
reasonable royalties: "I would have liked to go along on the
question of royalty-free patents, but I felt that I hadn't been
given the green light on that."
[
Footnote 2/3]
The
Hartford-Empire decision was four to two on this
point.
[
Footnote 2/4]
It must be remembered that one of the consequences of the
unhealthy monopolistic condition in the industry has been a dearth
of the ordinary patent litigation. The burden of testing
potentially invalid patents will thus be placed on the first
enterprise unwilling to pay the royalties.