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INVESTIGATION OF CONCENTRATION
OF ECONOMIC POWER
HEARINGS
BEFORE THE
TEMPOEAEY NATIONAL ECONOMIC COMMITTEE
CONGEESS OF TSE UNITED STATES
SEVENTY-FIFTH CONGRESS
THIRD SESSION
PURSUANT TO
Public Resolution No. 113
(Seventy-fifth Congress)
AUTHORIZING AND DIRECTING A SELECT COMMITTEE TO
MAKE A FULL AND COMPLETE STUDY AND INVESTIGA-
TION WITH RESPECT TO THE CONCENTRATION OF
ECONOMIC POWER IN, AND FINANCIAL CONTROL
OVER, PRODUCTION AND DISTRIBUTION OF
GOODS AND SERVICES
PART 2
PATENTS
AUTOMOBILE INDUSTRY
GLASS CONTAINER INDUSTRY
December 5, 6, 12, 13, 14, 15, and 16, 1938
Printed for the use of the Temporary National Economic Committee
UNITED STATES
GOVERNMENT PRINTING OFFICE
WASHINGTON : 1939
TEMPORARY NATIONAL ECONOMIC COMMITTEE
(Created pursuant to Public Res. 113, 75th Cong.)
JOSEPH C. O'MAHONEY, Senator from Wyoming, Chairman
HATTON W. SUMNERS, Representative from Texas, Vice Chairman
THURMAN W. ARNOLD, Assistant Attorney General
• WENDELL BERGE, Special A.ssistant to the Attorney General
Representing the Department of Justice
WILLIAM E. BORAH, Senat9r from Idaho
WILLIAM O. DOUGLAS, Chairman
♦JEROME N. FRANK, Commissioner
Representing the Securities and Exchange Commission
GARLAND S. FERGUSON, Chairman
* EWIN L. DAVIS, Commissioner
Representing the Federal Trade Commission
WILLIAM H. KING, Senator from Utah
ISADOR LUBIN, Commissioner of Labor Statistics
•A. FORD HINRICHS, Chief Economist, Bureau of Labor Statistics
Representing the Department of Labor
HERMAN OLIPHANT, Genesal Counsel
♦CHRISTIAN JOY PEOPLES, Directot of Procurement
Representing the Department of the Treasury
RICHARD C. PATTERSON, Jr., Assistant Secretary
Representing the Department of Commerce
B. CARROLL REECE, Representative from Tennessee
CLYDE WILLIAMS, Representative from Missouri
LEON HENDERSON, Executive Secretary
•Alternates.
CONTENTS
Testimony of — Page
Arvedson, George C, chief of patent section, Automobile Manufac-
turers Association 301
Ball, Frank C, president. Ball Bros., Muncie, Ind 551,
556, 560, 561, 565, 567, 573, 576-582
Belknap, Charles B., executive vice president, Owens-Illinois Glass
Co., Toledo, Ohio. 656-666
Bracken, A. M., assistant treasurer and counsel, Ball Bros., Muncie,
Ind i 551, 554, 555, 573, 574, 577, 579-580
Coleman, S. A., Jr., former president of the Knape-Coleman Glass Co.,
Port Isabel, Tex 610-619
Collins, I. J., president, Anchor Hocking Glass Co., Lancaster, Ohio. 570-576
Curtiss, William H., vice president. Corning Glass Works, Corning,
N. Y 637-638
Day, George, attorney at law, Detroit, Mich . 619-624
Falck, Alexander D., chairman of the board. Corning Glass Works,
Corning, N. Y 637-644
Farley, I. Joseph, patent counsel, Ford Motor Co., Detroit, Mich._ 256-284
Ford, Edsel, president. Ford Motor Co., Dearborn, Mich 256-285
Geer, Paul L., treasurer, Amsler-Morton Co., Pittsburgh, Pa 596-602
Goodrich, Edgar J., counsel for Hartford-Empire Co., Washington,
D. C 395,601,602,606,667
Houghton, Amory, president. Corning Glass Works, Corning, N. Y__ 637—
639, 644-656
Jaspert, William B., patent attorney, Pittsburgh, Pa 596
Kettering, Charles F., vice president, General Motors Corporation,
Dayton, Ohio 340-361
Kingsland, Lawrence C, attorney, Obear-Nester Glass Co 624-636
Knudsen, William S., president. General Motors Corporation, Detroit,
Mich 328-340
Levis, William E., president, Owens-Illinois Glass Co., Toledo, Ohio. 474-491,
494-495, 497-522, 524, 528-535, 566-569
Macauley, Alvan, president, Packard Motor Car Co., Detroit, Mich. 304-315
Martin, E. F., assistant secretary aAd assistant treasurer, Owens-
Illinois Glass Co., Toledo, Ohio 518-51^
McCallister, E. W., patent attorney, Pittsburgh, Pa 464-473,
554, 556-560, 57&-580
McClure, Walter H., vice president and general sales manager, Hazel-
Atlas Glass Co., Wheeling, W. Va 536,547
McEvoy, James, director of patent section. General Motors Corpora-
tion, Detroit, Mich 328, 331, 332, 334-337, 361-371, 374-376
McNash, J. H., president, Hazel-Atlas Glass Co., Wheeling, W. Va. 536-548,
561-566
Parham, Sidney F., resident patent attorney, Hartford-Empire Co.,
Hartford, Conn 396,414,436-464
Pease, A. M., assistant treasurer, Hartford-Empire Co., Hartford,
Conn 603
Reeves, Alfred, vice president and general manager. Automobile Manu-
facturers Association, New York, N. Y 285-303
Saflford, Arthur T., Jr., secretary and counsel, Hartford-Empire Co.,
Hartford, Conn. ._ 379-380,
387, 395-399, 401, 405-411, 418-420, 433, 603-610
Smith, F.Goodwin, president, Hartford-Empire Co., Hartford, Conn. 379-433
Tibbets, Milton, vice president and patent counsel, Packard Motor Car
Co., Detroit, Mich .. 304,306,307,309-311,315-328
Underwood, R. R., president, Knox Glass Associates, Oil City, Pa. 582-596
Williams, Lloyd T., general counsel, Owens-Illinois Glass Co., Toledo,
Ohio.. 491-493, 495. 496. 521, 523, 526
ly CONTENTS
Statement of— Page
Arnold, Thurman, Assistant Attorney General, United States Depart-
ment of Justice, Washington, D. C 254—256
Coe, Conwav P., Commissioner of Patents, United States Patent
Office, Washington, D. C - . 372-374
Cox, H. B., chief counsel, Temporary National Economic Committee
study for Department of Justice 377-379
Automobile industry:
The policy of free licensing 257
The cross-licensing system 287
The license-royalty system 305
Glass Container industry:
Control of an industry through patents 381
Patents in the glass-container industry _ 437
The largest glass producer in the world 474
Litigation and licensing 536
The fruit-jar producers 552
The control of the lehr 596
The elimination of a Texas independent •_ 611
Refusal to license in Detroit 619
Record of an independent 625
The specialty glass field 640
Glass fiber and wool 657
Schedule and summary of exhibits. v-virr
Monday, December 5, 1938 253
Tuesday, December 6, 1938 --. 315
Monday, December 12, 1938 377
Tuesday, December 13, 1938 435
Wednesday, December 14, 1938. _. 489
Thursday, December 15, 1938 551
Friday, December 16, 1938 603
Appendix 669
Supplemental data 802
Index - 835
SCHEDULE OF EXHIBITS
Number and summary of exhibits
Intro-
duced
at page
100.
101.
102.
103.
104.
105.
106.
107.
List of patent threats received by the Ford Motor Co.,
1926 to date
Constitution and by-laws of the AutomCbile Manufac-
turers Association, luc
Members, officers, and directors of the Automobile Manu-
facturers Association, corrected to November 1938
National Automobile Chamber of Commerce cross licens-
ing agreement form -
Charter members of the National Automobile Chamber
of Commerce, Mar. 19, 1913
Substitute cross license agreement form of the National
Automobile Chamber of Commerce, Inc
First extension cross license agreement form of the Na-
tional Automobile Chamber of Commerce, Inc
Second extension cross license agreement form of the Na-
tional Automobile Chamber of Commerce, Inc
Third extension cross license agreement form of the Auto-
mobile Manufacturers Association
Automobile facts and figures of the Public Highway
Association '-.
Names of companies participating in the cross licensing
agreements, 1915-25, 1925-30, and 1935-40
Growth of membership of the Automobile Manufacturers'
Association for years 1913 to 1938, inclusive
Procedure covering patent section activities of General
Motors Corporation revised to June 1, 1938
Procedure covering foreign patent and engineering liaison
activities of General Motors Corporation revised to
Apr. 1, 1937
Memorandum, "Reason for Taking out Patents", Gen*-
eral Motors Corporation
List of patent-infringement suits litigated by General
Motors Corporation
Schedule of litigation costs of General Motors Corpora-
tion
Statement of royalties paid, patents purchased, and roy-
alties collected from Jan. 1, 1924 to Dec. 31, 1937, by
General Motors Corporation
107-A. Statement of royalties and other payments made in con-
nection with patents for the year 1937 by General
Motors Corporation and its subsidiaries
Four screws ._
"Too Many Patents", a booklet showing blueprints and
other patent data in connection with great number of
patents on a single screw
History of the growth of the long pending patent applica-
tion evil .
Proposed patent legislation by General Motors Corpora-
tion _
"Manufacture of Bottles," a pamphlet prepared by De-
partment of Justice _
108.
109.
110.
111.
112.
276
285
286
287
287
296
296
296
296
3(J2
303
303
362
362
364
364
366
367
367
369
369
374
375
379
on file with the committee.
VI
CONTENTS
SCHEDULE OF EXHIBITS— Continued
Number and summary of exhibits
Intro-
duced
at page
113. Major inter-company relations in glass container industry,
including supporting data
114. Schedule of royalty fees of the Hartford-Empire Co
115. Annual receipts from royalties and license fees, Hartford-
Empire Co
116. Revision of figure 17 of "Exhibit No. 112" by F. Goodwin
Smith of Hartford-Empire Co
117. Revision of figure 21 of "Exhibit No. 112" by F. Goodwin
Smith of Hartford-Empire Co
118. License agreement between Hartford-Empire Co. and
The Florida Glass Manufacturing Co. for the use of
Miller feeder No. 75, dated Aug. 2, 1935
119. General agreement between Hartford-Empire Co. and
Northwestern Glass Co., dated Aug. 1, 1933
120. Agreement, dated June 9, 1924, renewing license and lease
No. HSF-20 between Hartford-Empire Co. and Lau-
rens Glass Works ^..
121. General Lehr agreement of Sept. 19, 1933, between Hart-
ford Empire Co. and Whitall Tatum Co
122. Consolidated stacker and conveyor agreement between
Hartford-Empire Co. and Ownes-Illinois Glass Co
123.' Letter, dated Aug. 26, 1932, from A. T. Safford, Jr., sec-
retary of Hartford-Empire Co., to S. S. Searcy, an at-
torney in San Antonio, Tex., in contemplation of bring-
ing suit against Three Rivers Glass Co
124. Memorandum, dated Mar. 26, 1928, re Hartford-Fair-
mont and Hartford-Empire history and policy
125. Memorandum of Feb. 18, 1930, re policy of Hartford-
Empire Co
126. Copy of a letter from William E. Levis to R. H. Levis,
dated Apr. 1, 1935, taken from the files of the former
Illinois Glass Co. at Alton, 111
127. Schedule of Owens-Illinois payments to, and receipts from,
Hartford-Empire Co. for the years 1924 to 1937, in-
clusive
128. Copy of letter from W. E. Levis, president, Owens-Illinois
Glass Co., to F. Goodwin Smith, president, Hartford-
Empire Co
129. Copy of a letter, dated June 8, 1935, from A. L. Romine,
Washington, D. C, to Owens-Illinois Glass Co. re
contemplated erection of a glass factory
130. Copy of a letter, dated June 17, 1935, from legal and
patent department of Owens-Illinois Glass Co. to A. L.
Romine, Washington, D. C
131. Copy of a letter, dated June 25, 1934, from legal and
patent department of Owens-Illinois Glass Co. to Mrs.
Len Smith, Los Angeles, Calif
132. Copy of a letter, dated Dec. 10, 1934, to Sparks Construc-
tion Co., New York City, from legal and patent depart-
ment of Owens-Illinois Glass Co
133. Copy of a letter, dated Aug. 2, 1932, from W. E. Levis,
president of Owens-Illinois Glass Co., to R. H. Levis of
Illinois Glass Consolidated Corporation, Alton, 111
134. Memorandum, dated Apr. 12, 1930, from Henry W.
Carter of Hartford-Empire Co. to W. E. Levis, presi-
dent, Owens-Illinois Glass Co. re status of patent in-
fringement suits brought by Hartford-Empire Co . .
> On file with the committee.
385
399
399
403
403
405
406
408
410
411
420
420
433
482
494
517
518
518
518
519
520
522
CONTENTS
SCHEDULE OF EXHIBITS— Continued
VTI
Number and summary of exhibits
Intro-
duced
at page
Appears
inap-
136. Copy of general license agreement, in book form, dated
Apr. 9, 1924, between Ihe Owens Bottle Co., the
Graham Glass Co., the American Bottle Co., the
Charles Boldt Glass Co. and Hartford-Empire Co.,
Hartford- Fairmont Co
136. Amendment of Feb. 9, 1925, of sec. 21, Joint Acquisi-
tion of Outside Rights, an agreement between Owens-
rilinois and Haftford-Empire to share interests in in-
ventions, patents, and patent rights
137. Agreement, made Feb. 2, 1931, amending sec. 22 of
Owens-Hartford general hcense agreement
138. General license agreement, dated July 1, 1932, between
Hartford-Empire Co. and Owens-Illinois Glass Co
139. Suction inventions license agreement, dated July 1, 1932,
between Hartford-Empire Co. and Owens-Illinois Gla^s
Co
140. Supplemental agreement, dated July 1, 1932, between
Hartford-Empire Co. and Owens-Illinois Glass Co - _
141. Certified copy of original agreements in files of Owens-
lUinois Glass Co. between Hartford-Empire Co and
Owens-Illinois Glass Co. as follows:
1. General license, Hartford to Owens-Illinois, Oct. 1,
1935.
2. General license, Owens-Illinois to Hartford-Empire,
Sept. 30, 1935.
3. Suction inventions agreement, Oct. 1, 1935, be-
tween Hartford-Empire and Owens-IUinois.
4. Consolidated feeder and former license and lease from
Hartford-Empire to Owens-Illinois, Oct. 1, 1935.
5. Consolidated stacker and conveyor agreement,
Oct. 1, 1935, between Hartford-Empire and
Owens-Illinois.
,6. Consolidated Lehr agreement, Oct. 1, 1935, be-
tween Hartford-Empire and Owens-Illinois
142. Letter-dated Dec. 13, 1938, from G. S. Quay, vice presi-
dent and secretary, Hazel-Atlas Glass Co., to C. L.
Terril, Department of Justice, containing record of
royalty payments between Hazel-Atlas Glass Co. and
Hartford-Empire Co
143. General feeder Hcense agreement, dated Mar. 25, 1933,
between Hartford-Empire Co. and Ball Brothers Co
144. Copy of letter, dated Sept. 1. 1932, from J. H. McNash,
Hazel-Atlas Glass Co., to W. E. Levis, president of
Owens-Illinois Glass Co
145. Memorandum, dated Feb. 9, 1933, re Hartford-Empire
Co.'s license to Hazel-Atlas Glass Co. to make fruit jars.
146. Memorandum, dated Dec. 13, 1930, from Henry W.
Carter, vice president in charge of patent and license
department, Hartford-Empire Co., to W E. Levis,
president, Owens-Illinois Glass Co., re general license
agreement between Hartford-Empire and Owens-Illinois.
147. Letter, dated Aug. 17, 1933, from Roger M. Eldred of
Hartford-Empire Co. to I. J. Collins, president of the
Hocking Glass Co., Lancaster, Ohio, re sale of fruit jars
148. Letter, dated Aug. 15, 1933, from F. C. Ball, president,
Ball Bros. Co., Muncie, Ind., to R. M. Eldred of Hart-
ford-Empire Co. re sale of packers ware sold by General
Glass Co.; copy of an unsigned, undated letter re sale of
Mason jars; and a letter, dated 8-5-33, from the Copps
Co., M'holesale grocers at Stevens Point, Wis., to Ball
, - Bros Co at Muncie. Irid. re "packer" is situation.—
' On fiJe With the corannttee
534
534
534
534
534
534
534
543
554
562
563
568
572
5Ti 791
Yni
CONTENTS
SCHEDULE OF EXHIBITS— Continued
Number and summary of exhibits
Intro-
ducad
at page
Appears
in ap-
pendix,
page
149.
Copy of letter, dated May 3, 1933, from F. C. Ball, presi-
dent of Ball Bros. Co., to Goodwin Smith, president,
Hartford-Empire Co., re sale of "Crack Shot" fruit jars
made by the Three Rivers Glass Co
Copy of an agreement, dated Aug. 23, 1933, between Hart-
ford-Empire Co. and Lynch Corporation, a glass forming
machine manufacturer
Copy of a letter, dated Sept. 20, 1933, from Arthur T.
Saflford, Jr., secretary of Hartford-Empire Co., to T. G.
Werbe, president of the Lynch Corporation, Anderson,
Ind., re feeder licenses
Amended agreement, dated Nov. 12, 1938, between Hart-
ford-Empire Co. and the Lynch Corporation relating to
patent rights applicable to glass forming machines
Hartford-Empire analysis of financial statements
Letter, dated Feb. 1, 1936, from A. M. Pease of Hartford-
Empire Co., to George E. Day, Detroit, Mich., re prop-
osition for glass plant in Detroit
Copy of a letter, dated July 1, 1935, from W. A. Nester of
Obear-Nester Glass Co., to T. C. Werbe, president of
the Lynch Corporation, re furnishing of Lynch bottle
forming machines
Copy of a letter, dated July 1, 1935, from T. C. Werbe,
president of the Lynch Corporation, to W. A. Nester of
Obear-Nester Glass Co., re price and shipment of Lynch
machine Model 10
157. Copy of a letter, dated July 3, 1935, from W. A. Nester of
Obear-Nester Glass Co., to T. C. Werbe, president of the
Lynch Corporation, re taking out of license as pre-
requisite to shipping of Lynch machine
Copy of a letter, dated July 8, 1935, from T.' C. Werbe,
president of the Lynch Corporation, to W. A. Nester of
Obear-Nester Glass Co., re requirement of forming ma-
chine license to use Lynch machines
Copy 'of a letter, dated Nov. 20, 1937, from Goodwin
Smith of Hartford-Empire Co., to Amoxy Houghton,
president of Corning Glass Works, re line of glassware
caUed "Fryrock"
160. Contract between Owens-Illinois Glass Co. and Corning
Glass Works, dated Oct. 28, 1938, for the formation of
Owens-Corning Fiberglass Corporation
Copy of a contract, dated Nov. 1, 1937, between Owens-
Illinois Glass 1o. and Societa Anonima Vetreria Bal-
zaretti Modighani, of Leghorn, Italy
Letter, dated M.irch 31, 1936, from R. D. Browns of Hart-
ford-Empire Co., to T. C. Werbe of the Lyncli Corpora-
tion, re misinterpretation of license contract between
Hartford-Empire and the Lynch Corporation
Automobile Manufacturers Association, Inc., statement
of income and expense for vear ended June 30, 1938,
entered in record Feb. 28, 1939
Letter, dated Jan. 9, 1939, from E. G. Ackerman of the
Glass Container Association of America, submitting a
"Survey of the Glass Container Industry," entered in
record Feb. 28, 1939
Memorandum, dated Feb. 21, 1939, from Lawrence C.
Kingsland to T. N. E. C. regarding suggested changes
in the patent laws, entered in the record May 1, 1939—.
150.
151.
152.
153.
154
155.
156.
158.
159.
161.
162.
302
303
431
579
604
605
606
607
622
634
634
634
634
649
657
661
667
792
793
(0
794
798
798
799
799
800
800
(')
801
802
804
830
I On file with the committee.
INVESTIGATION OF CONCENTEATION OF ECONOMIC POWEE
MONDAY, DECEMBER 5, 1938
United States Senate,
Temporary National Economic Committee,
Washington, D. C.
The committee met, pursuant to adjournment, at 10 : 50 a. m. on
Saturday, December 3, 1938, in the caucus room, Senate Office Build-
ing, Senator Joseph C. O'Mahoney presiding.
Present: Senators O'Mahoney (chairman), Borah, and King^
Representatives Sumners and Reece; and Messrs. Arnold, Davis,
Henderson, Pattefson, Lubin, and Berge.
Present also : Department of Justice staff for Temporary National
Economic Committee study — counseL^ H. B. Cox (Special Assistant
to the Attorney General) ; Joseph Borkin, Ernest Meyers, Charles L.
Terrel, Benedict Cottone, Willis Rice, George Dession, Fowler Hamil-
ton, H. C. Engelbrecht, Victor H. Kramer," J. M. Henderson, Monroe
Karasik, Irving Glickfeld. Hyman Ritchin, David Clarke, Norman
Bursler, and Seymour Lewis; also chief counsel for Federal Trade
Commission Temporary National Economic Committee study, George
W. Williams.
The Chairman. The meeting will please come to order.
This morning we are beginning the formal proceedings under sec-
tion 3 (b) of the resolution by which this committee was created.
That section reads as follows :
The Department of Justice, Department of the Treasury, Department of
Labor, Department of Commerce, the Securities and Exchange Commission, and
the Federal Trade Commission are directed to appear before the committee or
its designee and present evidence by examination of witnesses or the intro-
duction of documents and reports. The evidence presented by each of these
agencies shall cover the subject matter of tliis inquiry which is witliin its
administrative jurisdiction under existing law, or which may be assigned to
such agencies by the committee. Each such agency is authorized to request the
committee to issue such subpenas as such agency may require for the attend-
ance of witnesses and the production of documents and reports.
It will be observed from the reading of this section that it is within
the jurisdiction of each of the departments to present its own case
to the committee. The committee sits in judgment upon the evidence
which is thus presented, and after the evidence has been presented
the full -committee will give consideration to the various facts Avhich
have been offered for study.
This morning the Department of Justice, which, with the Depart-
ment of Commerce, the Federal Trade Commission and other agencies
has been studying the effect of patent policies of the Government upoii
industry, and the effect of the use of patents upon industry, will
present the first of these formal hearings.
I now call upon Mr. Thurman Arnold, member of the committee,
who. is the representative of the Department of Justice upon this
committee, to explain what the purpose of 'he Department is this
morning.
253
254 CONCENTRATION OF ECONOMIC POWER
STATEMENT OF THURMAN ARNOLD, ASSISTANT ATTORNEY GEN-
ERAL, UNITED STATES DEPARTMENT OF JUSTICE, WASHINGTON,
D. C.
Mr. Arnoiz). Mr. Chairman, I would like to make a statement for
the record for the purpose of indicating the transition between the
more general type of hearing which has just preceded and the more
particular inquiries which the Department of Justice is about to
commence.
The hearing which follows will be presented by the Antitrust Divi-
sion of the Department of Justice. Mr. Hugh Cox, special assistant
to the Attorney General, will conduct the examination in chief. It
will deal with the use of patents.
In order to show the relationship) of this liearing to the general
introduction which has just been given by Mr. Lubin, Mr. Thorp,
and Mr. Henderson, it is necessary to outline the traditional point
of view of the Department of Justice, not as the point of view of
any individuals, but as the attitude deriving from the character
of the laws which it has administered for nearly 50 yeai*s.
I shall start my explanation by recalling two statements of Mr.
Lubin. He said that American industry could not rest its distribu-
tion system upon the 2.7 percent of American families whose income
is $5,000 a year or more. He went further and said that American
industry could not even rest its distribution system upon the 13
percent of families who get more than $2,500 a year, since they total
less than the population of the State of Xew York. We cannot
produce for a nation the size of America and limit our distribution
to the population of a State. There, in a nutshell, is our distribution
problem.
The antitrust laws represent an approach to that problem based
on the conviction that prices must be brought within the reach of
purchasing power for free and independent enterprise to do the
job. Mr. Lubin pointed out tlie tremendous revival of industry which
would occur if the five and one-half million families not on relief
whose incomes have been about $1,200 a year or le^s should receive
only $2.25 a day more.
Of course, there is more than one way of giving them that $2.25.
Incomes may be raised by direct Government subsidy. Another
method involves laws raising wages or, as in the case of farmers, the
prices of goods. they sell. A third is by lowering prices to bring
industrial goods and services within the reach of purchasin*; power.
There is no single method which should be rigidly perscribed; all
may be useful in their places. As a matter of fact, if industry can-
not bring its prices within the reach of purchasing power, it is diffi-
cult to see how industrial activity can be maintained without Govern-
ment spending.
The third method — that of increasing the distril)ution of goods
through competitive prices — is the one upon which the antitrust laws
lay emphasis. Therefore, it is that method which will be stressed
in that part of the hearings presented by the Department of Justice.
Before going further, I must emphasize tAvo points :
First. In this investigation the Department of Justice is working
for this committee, and, while we plan to bo complete and thorough,
CONCENTRATION OF ECONOMIC POWER 255
it must always be remembered that what we present always must
be subject to further study by the committee. We do not profess to
speak for the committee.
Second. Because of the title of "Monopoly" often given this com-
mittee, there has arisen some confusion which has tended to confuse
the work of the Department of Justice with that of the committee.
Of course, the committee is not engaging in enforcement activities
of any character. The Department is so engaged, but this work has
no relation to the committee's program, except, of course, as the com-
mittee may desire to avail itself of our experience.
The instruments by which the Antitrust Division seeks to accom-
plish its objectives are the antitrust laws. They emphasize decen-
tralization. They have been customarily referred to as an anti-
monopoly policy. A more accurate description would be to call it
a policy against such restraints of trade as unreasonably hamper the
free flow of goods in commerce at competitive prices. It is based
upon the assumption that free and independent enterprise is able
to distribute goods with efficiency, provided that small ^oups with-
out public responsibility are prevented from eliminatmg competi-
tion and exercising arbitrary power over prices and distribution.
In pursuing these objectives, antitrust enforcement oflPers an out-
standing advantage. That advantage is the fact that ttte traditional
case-by-case method permits us to take up problems, industry by
industry, and situation by situation. Mr. Thorp, in his testimony
last Friday, vividly demonstrated the tremendous variation between
industrial patterns. The problems of the building trades are not
the problems of the movies. The solution of milk tells us nothing
about problems of steel. Under the case-by-case procedure of the
Department of Justice, each business practice may be examined with
respect to the particular interest and individuals involved.
The presentation by the Department must necessarily cover two
fields: First, substantive antimonopoly laws; and, second, procedure
and administration. The inquiry into the latter should logically be
postponed until after the substantive problems have been explored,
and only a brief mention of the scope of the procedural inquiry can
be made at this time. It must include :
(1) An examination into the deficiencies of administration, involv-
ing determination of the size and type of organization required for
adequate enforcement;
(2) An examination of how the case-by-case method may be uti-
lized to clarify the antitrust laws with respect to individual busi-
nesses or geographic areas — to the end that each businessman may
have the guide he has so often requested as to what concerted action
is lawful in his own industry. Here we hope to find the answer to
the questions most frequently asked of the Department: (a) What is
a monopoly? (&) How may antimonopoly policy be so administered
as not to interfere with industrial efficiency? and (c) How may
scrambled eggs be unscrambled?
(3) An examination of how observance of the antitrust laws by
normally law-abiding businessmen may be obtained — those business-
men who now are so often compelled by the aggressive tactics of
others to violate the law in order to survive ; and
(4) An examination of how the antitrust laws may have a con-
structive application, through consent decrees and ^iv.-:;leil. rtic co-
256 CONCENTRATION OF ECONOMIC POWER
operation with legislative committees, in cases where certain combina-
tions may be found to be in the public interest.
In carrying out our first task, the task that relates to the sub-
stantive law of monopoly and the concentration of power it is neces-
sary to select a starting point. There is no inevitably logical starting
point. However, we are beginning with patents for the following
reasons :
A patent is a legal monopoly granted on the theory that it will
promote the progress of science and useful arts. The law at present
affords to the patent owner such a wide choice in exploiting a new
industrial art that it offers wide opportunities for the restraint of
trade. These opportunities are facilitated by the technical cdmplexity
of patent law, the costs of litigation, and the ever-present problem
of drawing a sound line between the legitimate use of patents and the
uneconomic extensions of that privilege.
In submitting evidence on patent practices we have selected auto-
mobiles and glass not Avith an intent to single out those industries,
but because they illustrate typical situations w^hich are common
throughout the industrial field. Moreover, they involve products
which are of interest to every consumer.
And with that statement, Mr. Chaiman, I will turn the presenta-
tion of testimony of witnesses over to Mr. Cox.
The Chairman. Mr. Cox, will you be good enough to call your first
witness ?
Mr. Cox, Mr. Ford and Mr. Farley, will you come forward?
Mr. Chairman, with your permission I should like to have two
witnesses sworn at the same time, Mr. Edsel Ford and I\Ir. I, J, Farley.
The Chairman, Do you and each of you solemnly swear that the
testimony you shall give in this proceeding shall be the truth, the
whole truth, and nothing but the truth, so help you God ?
Mr. Ford. I do.
Mr. Farley, I do.
The Chairman. Be seated.
TESTIMONY OF EDSEL FORD, PRESIDENT, THE FORD MOTOR CO.,
DEARBORN, MICH., AND TESTIMONY OF I. JOSEPH FARLEY,
PATENT COUNSEL, FORD MOTOR CO., DETROIT, MICH.
Mr. Cox. Mr. Ford, will you give your name and address to the
reporter ?
Mr. Ford. Edsel B. Ford, Ford Motor Co., Dearborn, Mich,
Mr. Cox. Mr. Farley, will you do the same?
Mr. Farley. I. Joseph Farley, Detroit, Mich.
Mr. Cox. Mr. Ford, you are the president of the Ford Motor Co.,
are you not ?
Mr, Ford, I am.
Mr. Cox. Also of the Lincohi Motor Car Co.?
Mr. Ford. I am.
Mr, Cox. As president you are familiar with the policy which
those two companies pursue in regard to the patents?
Mr. Ford. Yes, sir.
Mr. Cox. Mr. Ford, will you tell us whether those two companies
ever apply for and take out patents on inventions?
Mr. Ford. We do.
CONCENTRATION OF ECONOMIC POWER 257
Mr. Cox. What is the primary reason for your companies taking
out patents on inventions, Mr. Ford?
Mr. Ford. Our primary reason for taking out patents is to pro-
tect ourselves from possible infringements — our policy of taking out
patents is to protect ourselves from the possibility of being attacked
later when we have developed an art of some kind that we use in our
product and an individual who may claim that we have infringed
some device or idea of theirs may start an action against us, and we
found it to be a good policy to cover every new device that we felt
could be.
THE POLICY OF FREE LICENSING
Mr. Cox. Mr. Ford, after your company acquires a patent, is it
your practice to grant a license under that patent to others engaged
in the automobile industry?
Mr. Ford. We will grant a license to anyone who asks for it.
Mr. Cox. And do you ever charge royalty fees for that license ?
Mr. Ford. No, sir; we do not.
Mr. Cox. In ether word?, when you have acquired a patent on an
invention you, in effect, dedicate that invention to the public. Is that
a fact?
Mr. Ford. For those that want to use it as it applies to their
requirements.
Air. Cox. Has the Ford Motor Co. at any time in its history ever
collected royalties ?
Mr. Ford. In one instance.
Mr. Cox. How long ago was that, Mr. Ford ?
Mr. Ford. This license agreement was dated the 9th day of June,
1911. Do you want the name?
Mr. Cox.' No.
Mr. FpRD. That was the only instance where we granted a license and
collected the royalties.
Mr. Cox. Since 1911 there has been no other instance of that kind?
Mr. Ford. That is right.
Mr. Cox. Can you tell us, JNIr. Ford, in a general way, what form
your license agreements take, by that I mean, are they long documents?
Mr. Ford. Usually they are very brief letters, jnst giving authority
and outlining to the person taking out the license the authority to use
the license under a certain number and without restriction.
My. Cox. The license agreement contains no restrictions formally
of any kind?
Mr. Ford. That is quite right.
Mr. Cox. Mr. Ford, do persons ever use your patents or inventions,
1 should say, which are covered by your patents who have not obtained
a license from you ?
Mr. Ford. Yes.
Mr. Cox. Is it your policy to sue a person who does that?
Mr. Ford. It is not.
Mr. Cox. Has this always been the policy of the Ford Co. ?
Mr. Ford. With the exception of one instance, we started one suit,
I believe.
Mr. Cox. How long ago was that, Mr. Ford ?
Mr. Ford. 1909.
Mr. Cox. Since that time there have been no suits for patent in-
fringement in which the Ford Co. has been a plaintiff. Is that
correct?
258 CONCENTRATION OF ECONOMIC POWER
Mr. Ford. That is correct.
Mr. Cox. I take it, then, Mr. Ford, that your company is not inter-
ested in making money by pursuing a litigation policy on your patents.
You said a moment ago that the Ford Co. does apply for a patent
and has acquired patents. Have any of those patents covered devices
which have been used generally in the motor-car industry ?
Mr. Ford. In the early days they were.
Mr. Cox. Do you think of any in particular of that character ?
Mr. Ford. I can think of one in the patent which covered the
universal joint and torque tube drive. It has to do with the rear
axle construction.
Mr. Cox. That was used by the industry generally.
Mr. Ford. It was used. I don't know that I could say generally,
but to a great extent.
The Chairman. By that you mean it was used by some competitors.
Mr. Ford. Yes, sir.
Mr. Cox. And you collected no royalties on that patent ?
Mr. Ford. No royalties.
Mr. Cox. Mr. Ford, is the Ford Co. ever sued for patent infringe-
ments ? .
Mr. Ford. Are they sued?
Mr. Cox. Yes.
Mr. Ford. Yes, sir ; they are, quite frequently.
Mr. Cox. Can you give us any idea as to how many times the com-
pany has been sued ?
Mr. Ford. We have been sued 60 times; we have been threatened
346 times ; actual suits have been started against us 60 times.
Mr. Cox. How many such suits are pending now?
Mr. Ford. Thirteen.
Mr. Cox. And you say you have been threatened with siiits for
infringements some three-hundred-odd times ?
Mr. Ford. Yes ; 346 times, up to date.
Mr. Cox. That was throughout the history of the company?
Mr. Ford. Mr. Farley says it is from 1926 to the present time.
Mr. Cox. From 1926 to the present time. Can you give us any
idea, Mr. Ford, as to the range of devices which you have been
accused of using which infringe other persons' patents ?
Mr. Ford. I can, sir. Do you want me to read them over ?
Mr. Cox. Just indicate in a general way. Perhaps Mr. Farley can
do that.
Mr. Farley. I would say we are sued on everything from milk
wagons to cafeterias,. including many parts of the automobiles as
well as manufacturing processes used throughout the plants and all
departments of the plants.
Mr. Cox. Mr. Ford, when a new device is presented to you and
suggested that it be used by the company, what steps do you take to
discover whether the use of that device will infringe someone's
patent?
Mr. Ford. Did you mean a device that our own people develop ?
Mr. Cox. Well, yes.
Mr. Ford. We make a complete search through the Patent Office to
see whether there are any patents which come anywhere near the de-
vice that we have created.
COXCEXTKATION OF ECONOMIC POWER 259
Mr. Cox. What is your policy with respect to the suits which are
brought against you for patent infringement? Is it your practice to
litigate those?
Mr. Ford. We litigate every suit that we are threatened with or
that has been brought against us.
Mr. Cox. Is it your policy to settle those suits by compromise ?
Mr. Ford. Not generally.
Mr. Cox. How many of the suits, can you tell us, that you men-
tioned before, have been won by the Ford Company? If you can't
tell us, perhaps Mr. Farley can.
Mr. Ford. All but one.
Mr. Farley. Of the 60 suits actually brought against the Ford Co.,
there has been only one suit that was lost and finally decided against
the Ford Co. in the court of last resort.
Mr. Cox. Mr. Ford, did your company ever take a license under the
invention, under a patent held by someone else?
Mr. Ford. Yes, sir.
Mr. Cox. Is it the practice of the company to accept a license when
royalties are charged?
Mr. Ford. No, sir; we do not pay royalties.
Mr. Cox. You do not pay royalties. If the holder of a patent
does not wish to extend to you a license royalty free, what steps do
you take, if any, to obtain the use of the invention that is covered
by the patent?
Mr. Ford. If the device is one that we are very much interested in
and wish to use in construction, we, in several instances, encourage
the man that has developed this device to manufacture that article,
and then Ave purchase it from him, or we encourage him to license
some other manufacturer to make it, and we would purchase it from
them.
Mr. Cox. Did you ever give an inventor or patent holder who is
in that situation any assistance?
Mr. Ford. We have in several instances helped them get started,
helped finance them, loaned them machinery and so forth.
Mr. Cox. Will you explain, briefly, what the reason is for that
policy on your part, of not accepting a license which involves the
pavment of royalties?
Mr. Ford. We feel a patent should be worked, and we as a matter
of policy haven't encouraged inventors to bring in a patent to us
that we might be interested in and then just sit back and take the
royalty of this patent without putting the patent to some construc-
tive use. Therefore we felt that if the man having the patent could
get into the manufacturing business and use his patent for his benefit,
it would encourage him in using his ingenuity and it would also be a
constructive way of utilizing this device.
Mr. Arnold. You are also encouraging competition by that
method, aren't you, Mr. Ford ?
Mr. Ford. I feel so.
Senator KIng. In a number of those instances has your suggestion
been carried out?
Mr. Ford. That it has been accepted in that way ?
Senator King. Yes.
Mr. Ford. Oh, yes.
2gQ CONCENTRATION OF ECONOMIC POWER
Senator I^ng. So that a new industry would be developed?
Mr. Ford. A new manufacturer, a new parts maker, or a person
who was a very small source of supply might be developed into a
much larger.
Representative Sumners. May I ask this one question : Why don't
you pay the inventor some royalty, why are you not willing to pay
the inventor some royalty, and why as a different policy do you have
somebody else manufacture the article?
Mr. Ford. We feel that the inventor, from a constructive stand-
point, will benefit more from the patent if he sees that it is manu-
factured and lives with the patent and helps to develop it through
manufacturing processes. He may create the patent and then if he
licenses somebody he forgets it except for his ability to collect the
royalties; but if he starts to manufacture this patented article and
lives with it, we feel that he will be much more apt to develop that
and improve it for his benefit and for ours.
Mr. Arnold. And I take it that you do not desire the type of
exclusive control over the arts of the industry which the other
method would give you?
Mr. Ford. We don't desire it, Mr. Arnold.
Representative Reece. Your company maintains facilities for
making a study of and determining the usefulness of patents which
might be submitted to you by investors ?
Mr. Ford. We have no research department as such. We have our
engineers who check over and investigate things that are submitted,
and our patent attorneys here in Washington cooperate to that end.
Mr. Oliphakt. These suits for infringement brought against you.
Mr. Ford, are most of those suits brought by men wlio have not tried
to manufacture their invention ?
Mr. Ford. I should say in most instances.
Mr. Oliphant. Have you had any important suits brought by
people who are trjnng to manufacture their inventions, or are engaged
in manufacturing their inventions ?
Mr. Ford. I think Mr. Farley could answer that, if you will per-
mit it.
Mr. Oliphant. Are there any outstanding examples of that situa-
tion ?
Mr. Farley. I would say that 95 percent of the suits brought against
the Ford Co. are suits in which the holder of the patent is not engaged
in manufacturing, and in the very large majority of cases has never
been engaged in manufacture.
Mr. Oliphant. A little more information about the 5 percent, then.
What type are the outstanding examples of that ?
Mr. Farley. I don't think there are any outstanding examples.
There is only one case that I can recall offliand without consulting all
the records in which suit was brought by a concern which was activc'ly
engaged in business, but their business was that of licensing companies
to use a process on the basis that every pound of material used by
the licensee in carrying out the process carried with it a royalty of a
very substantial amount, of so much per pound.
Mr. Oliphant. Thank you.
Mr. Pattei;son. Mr. Farley, along this same line, what is the source
of those tlireats?
CONCENTRATION OP ECONOMIC TOWER 261
Mr. Farley. Well, I don't quite understand what you mean, "What
is the source of these threats?" Just exactly what do you mean, sir?
Mr. Patterson. Are they made chiefly by your competitors in the
auto industry, or by individuals ?
Mr. Farley. I would say substantially by individuals, none from
our competitors in the automobile business.
The Chairman. You may proceed , Mr. Cox.
Mr. Cox. Turning for a moment to the policy which you describe,
of asking the inventor either to manufacture his device or to license
someone else to manufacture it, would it be accurate to say that one
reason you do that is because you wish to make sure that the device
is, in fact, a device which is capable of practical application and not
merely a paper patent?
Mr. Ford., I should say that is quite true.
Mr. Cox. In other words, it is the attitude of your company that
the development of a device and its actual application to the art in
a practical way does promote the progress of science and useful arts,
but the issuance of a mere paper patent on which royalties are col-
lected does not?
Mr. Ford. I believe that very definitely. That is our policy.
Mr. Cox. In the licenses which you take under other persons' pat-
ents, is it your policy to accept a license if any restrictive provisions
are imposed ? And by "restrictive provisions" I mean restricting the
amount of your production in connection with which you may use
the patent, or restrictions as to resale price, or anything of that sort?
Mr. Ford. We would not take licenses under those circumstances.
We would want a free hand.
Mr. Cox. You neither take nor grant licenses of that kind ?
Mr. Ford. That's right.
Dr. LuBiN. Mr. Ford, is the Ford Motor Co. ever offered any pat-
ents on the basis as that described by Mr. Cox ?
Mr. Ford. With restrictions? I can't recall, offhand, but I have
that impression.
Senator King. I understood from your answer, as well as that of
Mr. Farley, that tenders had been made by the patentees or alleged
patentees, which were accompanied by restrictions, and you refused
to acquire them with those restrictions. You want a free hand.
Mr. Ford. That is our policy. We want a free hand, sir.
Mr. Cox. In a situation such as you have described, where the
owner of the patent has undertaken production of the patented article
or licensed someone else to produce the patented article, will you
indicate briefly the basis on which you purchase that patented article
for use in the manufacture of your cars?
Mr. Ford. The article is produced by some source. That source
goes to our purchasing department and a stipulated price is made for
the article which is to include any royalties that have to be paid, or
any additional remuneration that has to be collected because of the
benefit of the patent. It is all included in our purchasing price.
Mr. Cox. In agreeing on price with the manufacturer, then, it -is
not the policy of the company to refuse to make any allowance for
royalties to the inventor?
Mr. Ford. I would not say so.
124491— 39— pt. 2 2
262 GONCEXTRATION OF ECONOMIC POWER
Mr. Cox. I think you said a moment ago in response to a question
by a member of the committee that your company carried on research
for development work.
Mr. Ford. Yes, sir.
Mr. Cox. You don't have a separate department for that, however ?
Mr. Ford. Not as such.
Mr. Cox. In carrying on that work, is it the purpose or intent of
the company at all to develop inventions for the purpose of acquir-
ing patents on them ? Is that the purpose ?
Mr. Ford. No, sir; it is not. Our intention is to develop the art
of tlie manufacture of motorcars.
Mr. Cox. Do you have any opinion as to whether, if it were not
possible for a company to acquire a -patent on an invention, that same
work would nevertheless be carHed on ?
Mr. Ford. I feel quite definitely it would be carried on. It would
have to be, for progress.
Mr. Cox. What kind of arrangements do you have with respect to
employees who have inventions?
Mr. Ford. Employees that create inventions of their own origin
and are made on company's time are assigned to the Ford Motor Co.
We pay them no fee for that invention. We feel that they should
be well paid, and I think they are well paid, and anything they con-
tribute in the way of invention on Ford Motor Co.'s time should be
assigned to the Ford Motor Co. They have done that and that has
been the policy, and it seems to be satisfactory.
Mr. Cox. Mr. Farley, I think I should like to ask you one or two
questions now.
You do not devote all of your time to the Ford Motor Co., is that
correct ?
Mr. Farley. That is quite correct. I have represented, before
directly taking over the Ford litigation (the practice that I was en-
gaged in in New York), what may be termed the poor inventor and
the small manufacturing companies. I still number among my
clients a number of inventors and smaller companies.
Mr. Cox. You heard the answer Mr. Ford gave a moment ago,
when I asked him whether, if it were not possible for his company
to obtain a patent, his company would carry on its research and
continue Hs work. I now ask you whether you have any opinions as
to what effect the absence of a patent law would have on the work
which is carried on, not in a large corporate organization such as
Mr. Ford's but by individual inventors or small companies?
Mr. Farley. I would say, in my opinion, the absence of a patent
system for the small company and the small inventor would be quit©
a detriment. Unquestionably there are a large number of cases where
the small company has perfected a very good device that it in many
cases would be impossible for them to get capital interested in to
manufacture that device if capital were not assured there was some
sort of patent protection which could be relied upon during the
infancy of the company.
Mr. Cox. Is it also your opinion that the possibility of a patent
acts as a spur to the individual inventor ?
Mr. Farley, Well, I am afraid my opinion in that respect is
perhaps a little bit different from the average patent lawyer's.
CONCENTRATION OF ECONOMIC POWER 263
I personally feel that the majority of the worth-while, the important,
contributions are made by men — engineers — who are more concerned
with doing a good job than they are with their eye on the patent.
I feel we don't get most of our progress from what we call patent-
minded men as much as we do from men who are looking forward
to promoting progress.
Representative Sumners. At that point I would interrupt to make
an inquiry. These engineers are, however, usually, on'the pay roll
of somebody, and they don't have to live off public service entirely?
Mr. Farley. I would say that is true in the majority of instances.
It seems to me from what I have seen of the many patents I have had
to consider, particularly in connection with the automotive industry,
that the most important contributions have come from the men w^ho
have been devoting their lives to that work, and naturally, if they
are competent men, they are snapped up by the automotive com-
panies. A competent engineer has no difficulty getting a position in
which he is paid a very excellent salary, and when he gets that his
life work is the promoting of his job and bringing out the best
product he can.
Representative Sumners. Does he get his start, however, from
being patent-minded or from having a goob job as an engineer?
I won't go further with that.
Mr. Farley. That would be a matter of considering a number of
individual cases before you could really answer that.
Representative Sumners. I understood you were expressing opin-
ion on that particular point. That is the reason I asked the question.
Mr. Farley. I feel that because I know of the large numbers of
patents tliat have been granted to the various engineers. Most of
the contributions come from the engineering department of the cor-
porations who are engaged in the actual manufacture of automobiles.
Representative Sumners. One other"" question, to make it clear: Is
it a fact, however, that most concerns engaged in the manufacturing
business have engineers who are devoting a good deal of their time
to improving processes which are patentable?
Mr. Farley. I think it is unquestionably true. I don't think any
company today could exist if it didn't have that policy of improving
its product by any possible means of development work.
The Chairman. Is there any difference, Mr. Ford, in the manner
in which you compensate an employee of yours who is assigned to
research work and one who, not having been so assigned, happens to
conceive an idea which is capable of being written into a patent?
Mr. Ford. I don't know of any instance where that type of indi-
vidual has come to light. Usually the procedure in the various de-
partments where development is progressing from day to day is that
those are the men who usually create new ideas because of their
familiarity with the job and their work from day to day.
The Chairman. Do I correctly understand your testimony, that
your employees' salaries are fixed upon the basis of the work that
they are required to do, and any contribution that they make by way
of invention does not result in any special compensation for that
particular act?
Mr. Ford. It may not at that particular instant, but we naturally
would be anxious to reward a man through his salary.
264 CONCENTRATION OF ECONOMIC POWER
The Chairman. If an employee by his suggestion should indicate
competence to aid in the development of the automotive industry,
you would naturally, feel he was worthy of promotion, yes ; but I am
speating of the immediate suggestion.
Mr. Ford. I don't know of any instance of that kindj Senator.
The Chairman. May I ask you also whether this policy
Mr. Ford (interposing). There was one instance.
Th.e Chairman. Naturally, I was speaking only of the general rule.
I was about to ask you whether this policy of yours, of declining to
accept a license upon any invention, has caused the Ford Motor Co. to
lose the use of any material device on a motorcar.
Mr. Ford. I don't feel so. I don't feel we have lost anything by
that.
The Chairman, Do you feel that you have benefited by this policy ?
Mr. Ford. We think the policy is a good one.
The Chairman. As I understand your testimony it is to the effect
that if you were to accept licenses and manufacture the devices your-
self and handle them yourself, that would tend to deprive the inventor
of that constant contact with the patent which would enable him to
develop it, and might be productive of litigation and disturbance of
one kind or another.
Mr. Ford. That is correct.
The Chairman. Thank you verj^ much, Mr. Ford.
Senator King. Have you any instances of cases in mind where,
when you have refused to purchase a patent and have suggested that
the patentee develop it himself and secure capital, and you have aided
him in accomplishing that end, he has gone forward and developed the
art, or, rather, the particular mechanism or patent, to his own advan-
tage as well as to the advantage of the public ?
Mr. Ford. Yes, sir ; there are several instances of that kind.
Senator Kjng. Would you say, generally, that those inventions that
have been brought to your attention which have had merit, which you
have declined to purchase but on which the patentee has gone forward
and developed them, have resulted in greater benefit to him and to the
public than if you had acquired it?
Mr. Ford. I think so.
Mr. Cox. One question along the line Senator King was following
I should like to ask. In those cases where you have assisted an in-
ventor to put his patent into actual production, have you ever at-
tempted to prevent the inventor or his licensee from selling that
device to your competitors in the automobile industry ?
Mr. Ford. No, sir; we haven't.
Mr. Arnold. Your's has been a matter of public policy rather than
year to year figuring of income, hasn't it ?
Mr. Ford. Yes, sir; that is right.
Mr. Oliphant. Might I ask Mr. Farley this question : Your opin-
ion was that, speaking percentagewise, the mass of significant inven-
tions are the result of organized engineering effort. As I understand,
you were speaking percentagewise?
Mr. Farley. Yes.
Mr. Oliphant. There have been, in absolute numbers, a ^eat
many very significant inventions that have been the result of indi-
vidual effort.
CONCEMKATION OF ECONOMIC POWER 265
Mr. Farlet. I think that is unquestionably true. I would say
that, while I believe by far the most important contributions have
come from the men who were really more concerned in turning out
a good job than in getting a patent eventually, unquestionably there
have been many contributions of value which have come from men
M^o would not have done their work had they not had before them at
some time the hope of the reward of a patent.
Mr. Oliphant. Do there occur to you any examples of patents that
are the result of individual or organized effort?
Mr. Farley. I would prefer to check that by research into the
records, on that matter.
Senator Borah. Mr. Farley, you have evidently had a vast amount
of experience with the patent laws. Have you any suggestion you
could make to the committee with reference to change in the patent
laws for public good?
Mr. Farley. That matter, Senator, I feel, is one that requires a
great deal of careful thought and study. All of us men in the Patent
Bar have our own ideas as to our own pet schemes, and I would
prefer at this time to avoid making specific suggestions. Tt is a
Ilia tier I would prefer to discuss with perhaps the members of the
coniraittee here and others who may have different views, so that they
niiirht be harmonized.
Of course, we feel, gentlemen, tliat something certainly should be
dojie to avoid the long pending application, kept for many year'^ in
secrecy in the Patent Office. We feel that something should be done to
take care of the situations where a man files a patent application, in
rjiaiiy instances, on a device that has no commercial utility, and then
set's the product of practical manufacture and amends his claims in
the Patent Office to co^^er the practical device which has recently
come into being as the result of a development of a person who knew
n^ithing about the patent. We have had that in many of our own
cases where, after the Ford Co. produced a device on the market, the
inventor or pseudo-inventor, let's say, the patentee, had an applica-
ti 'n in the Patent Office, saw the Ford product and was able to
araend his application to draw claims which would cover, as we say
in the patent law, our construction.
Something should be done in that direction. A move toward cor-
recting it is the recent decision of the Supreme Court.
Something also should be done to correct the situation brought
about by the decision of the Supreme Court' in 1936 in tjie ease of
WJne V. Enterprise. Prior to that time it had always been the con-
struction of the law by most of the Courts of Appeal that, if a man
had secured a paper patent, he had to give actual notice to anyone
who he claimed was infringing that patent. The Supreme Court/
in construing the section of the revised statute having to do with the
matter of notice, said it is no longer necessary for anyone holding a
jpaper patent to give notice to the manufacturer if he is going to make
a charge of infringement. The result of that is that a man can hold
a paper jpatent today and sit by for 6 years without the manufac-
turer having the slightest knowledge that he has been infringing.
We have one case where we have made over 27,000,000 parts, with
no knowledge at all of a patent being in existence, but that man could
and did make a claim for infringement, on purely a paper patent.
266 CONCENTRATION OF ECONOMIC POWER
There are many things that should be considered, Mr. Chairman;
perhaps not revolutionary but merely procedural changes.
Senator Borah. Of course, I do not desire to urge you at this par-
ticular time, but sometime before we close these hearings I should
like to have your own individual judgment with reference to the
patent laws.
Mr. Farley. I would like very much, Senator, to make suggestions.
Senator Borah. You believe in the patent laws ?
Mr. Farley. Unquestionably, having been examiner with the
Patent Office, I still agree with the idea of the patent system.
The Chairman. In this testimony which you have just been giving,
Mr. Farley, do you speak as attorney for the Ford Motor Co., or in
your own individual capacity?
Mr. Farley. I would say that I speak in my individual capacity
as having had 15 years as a machinist, having represented the poor
inventor, having served for 4 years in the Patent Office, and having
had the extremely valuable experience of handling Ford litigation
matters and being connected with them for the last 10 or 12 years.
Senator King. Have you any objection to expressing an opinion as
to the practice, the wisdom, or the propriety of interference ?
Mr. Farley. The interference practice?
Senator King. Yes. Don't you think that ought to be abolished,
and if a person wants to interfere, let him go into court rather than
hold it up?
Mr. Farley. I think the interference practice as it has developed
through years of technicalities is a scar on the patent system. I
have in mind a fact of which you are probably aware, the fact that
when an interference proceeding starts and the matter of the ques-
tion of priority is determined, the Patent Office, the men who decide
that question, have never seen any one of the men who testified. I
had "a case a few years ago where we finally brought the case up to
the district court and the inventor on the other side, after I cross-
examined him for a week, admitted that the decisions which he had
gained in the Patent Office had been obtained by fake drawings and
untruthful testimony. That is something the examiner in the Patent
Office couldn't know.
Senator King. Would you suggest an opinion as to the propriety
of" amending the patent law so if a person wants to interfere, let
him go into the district court, and secondly, date the life of the
patent from the date the application was filed rather than from the
time the interference was disposed of in the Patent Office, which some-
times carries the patent for from 20 to 30 years ?
^ Mr. Farley. Certainly the suggestion which has been made many
times that the patent be dated from the date of application is worthy
of most serious consideration. As soon as they talk about dating
the patent from the date of application the question of interference
always corftes-up. At the end the patentee may inadvertently, through
no fault of his own, be delaj^ed many years in the Patent Office.
Senator King. That results, as I stated, in continuing the life of the
paent for many times as long as 30 years.
Mr. Farley. Unquestionably.
The Chairman. Mr. Cox, are you going to develop through the
testimony of Mr. Ford or Mr. Farley the contrast between the two
CONCENTRATION OF ECONOMIC POWER 267
policies which have been followed by the Ford Motor Co. as, for
example, one time they took out a license and when they changed to
the other policy, why that changed?
Mr. Cox. I am going into the historical reasons for the Ford policy
which I think will cover the matter that Your Honor brings up.
The Chairman. Perhaps you will make it a little more broad than
the historical reasons.
Mr. Cox. Yes, I hope to do that. I would like to ask you, Mr.
Farley, along the same line you have been speaking, whether you
would care to express an opinion as to whether the ease with which
patents on improvements are obtained is a blemish on the patent
law at the present time.
Mr. Farley. AVell, I don't think that any practicing lawyer who
has prosecuted cases before the Patent Office w^ould be c^uite w^illing
to agree that you obtain them with ease. You always have to battle
with the examiner, and it is a question of your ingenuity perhaps
as against his. It is, of course, quite true that too many patents
are issued on trivial bases, but I don't see how that can be corrected,
if you consider the fact that when a charge of infringement is made,
we make exhaustive validity searches that may take 2 months. I
know when I was in the Patent Office I was required or expected to
turn out 25 to 30 actions a week. That means that I was acting on
four or five cases a day, and making searches that probably were
anywhere from half an hour to 2 hours in duration, so that it was
impossible for the examiner and the efficient operation of the office
purely as an administrative office to make the type of search that
is necessary to really determine whether or not an idea is novel.
Mr. Cox. Mr. Ford, do either of your companies now belong to
the National Association of Automobile Manufacturers? Perhaps
the correct name is the Automobile Manufacturers Association.
Mr. Ford. No, sir; they do not.
Mr. Cox. Is it true that the Ford Co. has neA'er belonged to that
association ?
Mr. Ford. The Ford Co. has never belonged to the association.
Mr. Cox. There was an interval of time when the Lincoln Co. be-
longed ?
Mr. Ford. The Lincoln Co. was purchased by the Ford Motor Co.
as a going concern, and it had a membership in the association, and that
was maintained for a few ye^s.
The Chairman. Would you be good enough to bring out what that
association is?
Mr. Cox. Can you explain briefly what it is ? I have a witness who
is going into that, who is going to follow Mr. Ford.
The Chairman. For the benefit of the committee, you may state on
your own authority, if you will be good enough, what you intend to
show this association is.
Mr. Cox. I think perhaps it would be enough at this time, if I say
that the Association of Automobile Manufacturers is a trade associar
tion to which almost all of the manufacturing companies in the auto-
motive industry belong, with the exception of Mr. Ford's company,
and one or two smaller companies. It performs the usual functions
of a trade association, I understand, collects statistics, is responsible,
I believe, for the safety campaigns that are carried on from time to
268 CONCENTRATION OF ECONOMIC POWER
time with respect to traffio problems. Our chief interest in this asso-
ciation at this time is the fact that the association is the medimn by
which a cross-licensing agreement has been carried on in the motorcar
industries since 1914. I propose to go into that cross-licensing agree-
ment, its history, the reasons for its adoption and what its effect has
been in the industry, with another witness.
I am attempting now merely to develop the attitude of the Ford Co.
with respect to the association and the cross-licensing agreement.
The Chairman. Thank you, Mr. Cox. You may proceed.
Mr. Cox. Will you tell us, Mr. Ford, why your company has never
belonged to the Association of Automobile Manufacturers ?
Mr. Ford. Mr. Cox, the original association was formed around a
patent known as the Selden patent, and the association was known as
the Association of Licensed Automobile Manufacturers. We fought
that patent.
Mr. Cox. Will you tell us about what time this was ?
Mr. Ford. We were sued under the Selden patent in 1903.^ The
Ford Motor Co. was organized in June 1903, and the company was
sued in October 1903, and it carried through litigation mitil 1911.
Mr. Cox. That patent was a broad patent, was it not ?
Mr. Ford. It was a very broad combination patent, supposedly
covering the automobile as a unit.
Mr. Cox. Covered any and all kinds of gasoline automobiles?
Mr. Ford. That was the claim.
Mr. Arnold. It was in effect a patent on the idea of having an auto-
mobile, running it, wasn't it?
Mr. Ford. I think so.
Mr. Cox. Do you remember whether the Ford Co. ever applied for
a license under that patent ?
Mr. Ford. I understand that it did.
Mr. Cox. Your father?
Mr. Ford. My father; yes.
Mr. Cox. Can you tell us what happened in that connection, Mr.
Ford?
Mr. Ford. I can't recall exactly the date this took place, but it was
at one time during the course of the early days oi the Ford Motor Co.,
when we were a small manufacturer and getting started. The asso-
ciation had been started and had acquired numerous motor companies
as members. These members paid a license fee to the association
under the Selden patent. My father inquired of one of the officers of
the association if it were possible to join this association and become
a member as the other motor-car companies were. He was told, I
understand, he had best go out and manufacture some motor cars and
gain a reputation and prove that he wasn't a fly-by-night producer
before he should ask for a membership in this association.
Mr. Cox. They weren't sure your father was the proper kind of
person to make motor cars ?
Mr. Ford. So I understand. [Laughter.]
Mr. Cox. Of course it would be rather difficult, assuming that that
patent was valid, for your father to make a reputation manufactur-
ine: motor cars without a license.
See corrected statement of Mr. Ford, Infra, p. 271.
concp:ntration of economic power 269'
Mr. Ford. If the patent had been sustained, I think the Ford
Motor Co. would have been put out of business or would have be-
come a member of the association, one or the other.
Mr. Cox. The association sued your father's company immedi-
ately after this refusal of a license, is that a fact?
Mr. Ford. In 1903, in October, the company was sued by the
association.
Mr. Cox. Perhaps Mr. Farley can tell us the steps in that litiga-
tion.
The Chairman. May I interrupt before that question is answered ?
Mr. Ford, did this association of which you speak charge a royalty
for the use of this patent ?
Mr. Ford. Yes, sir,
Mr. Cox. What was that royalty, Mr. For^?
Mr. Farley. It was originally $15 a car and then later changed
to a percentage of H/4 percent of tne sale price of the car.
Mr. Cox. It might be interesting, Mr. Farley, if you could tell us
whether the association, that association, adopted a very aggressive
litigation policy.
Mr. Farley. I would say it had adopted a most aggressive not
only litigation policy but publicity campaign in connection with the
Selden patent. There are some very interesting phases of the matter.
The association apparently was organized or instigated by the then
Pope-Hartford Co. which had contemplated putting a machine on
the market, and they had a patent attorney in their employ who
had run across the Selden patent and advised his company that they
couldn't manufacture without infringing, and then steps were taken
to organize the Association of Licensed Manufacturers. The first
part of the litigation was conducted by suit against the Winton Co.
and against various dealers and users of automobiles. Consent de-
crees were obtained against some people and particularly the suit
against the Winton Co. was settled about a day or two before the
consent decree was issued and there were provisions to the extent
that the Winton Co. would have a rebate of $50,000 given to it on its
future license payments. They had worked up quite a defense, but
included in the settlement agreement was a payment to the attorneys
of the then Winton Co. and all of the defense material was turned
over to the- attorneys for the association, so that when the Ford
case came to trial a great deal of the defense material which had
been procured earlier was no longer to be found, and the Ford Co.
then was compelled to begin its actual trial work in which a great
many items of defense, so I understand, were no longer available
to it.
Mr. Cox. Is it true, Mr. Farley, that that association threatened
to sue not only the manufacturers who were asserted to be infringing
the patent, but also any ultimate consumer who bought a motor car
and operated it?
Mr. Farley. The record, of the Selden case shows and contains
many of the advertisements that were appearing in the papers at that
time in which users were notified that they would be equally liable
as infringers or as much liable as infringers as the manufacturer,
which, of course, is true under the provisions of the patent law.
"270 CONCENTRATION OF ECONOMIC POWER
Mr, Cox. That suit was first heard in the district court in the usual
manner, wasn't it, Mr. Farley? Just tell us what happened in the
steps of the suit.
Mr. Farley. In the trial in the district court, of course, a great
many witnesses were called, the plaintiffs had a mo^^ imposing array
of counsel and had imported for the purpose of the case one of the best
known and earliest writers on the internal combustion engine from
England, Sir Dugald Clerk. He was the principal expert for the
plaintiff, and I don't, ku' vv how long the trial lasted, but finally the
district court decided the case against the Ford Co. The hi.story of
the case and the facts involved seem to me are brought out better by
some of the excerpts from the decisions of the court, I have made
some extracts and I can either introduce those in the record and save
time, or whatever you prefer.
Mr. Cox. We might deal with tliem that way. I am primarily in-
terested in the steps in the litigation sense of the decisions which were
made. The case then was appealed to the circuit court of appeals?
Mr, Farley. Yes; the case was then" appealed to the circuit court
of appeals and the decision was rendered September 19, 1909, and
the decision in the upper court was in 1911, in January, in which the
upper court reversed the decision of Judge Hough and held that the
patent though valid should be restricted to the particular type of
engine shown in the Selden patent and that the Ford construction
did not infringe.
The Chairman. What is the citation of those cases?
Mr. Farley. The lower case i§ cited in 172 Federal Reporter, page
923, and the upper case is in Second Circuit Court of Appeals re-
ported at 184 Federal Reporter, page 895. They limited the Selden
patent and restricted it to certain phases bat not to combustion en-
gines with modifications which other corporations adopted.
Briefly, the situation there was that Sel len had a combination
claim in which he included in his claim vhe type of an engine
which he defined as "a liquid hydrocarbon gas engine of tlie compres-
sion type." He had selected a type of internal-combustion engine
knovni as the Brayton engine which was designed to simulate as
nearly as possible the pressure cycles of tlie s(eam engine, and it
was a two-cycle engine with a pump on the outside in which the
gas was compressed and the gas sent into the combustion chamber
and ignited by a flame. He had no carburetor, no electric ignition,
and Mr. Ford, of the Ford Co. — in fact, all of the developers of
practical automobiles of that day had all used what was known as
the Otto 4-cycle engine with electric ignition and carburetor and. all
that sort of thing.
The Chairman. Mr. Cox, if it is not inconvenient for you now,
and if no member of the committee desires to ask a question
Dr. LuBiN (interposing). Mr. Farley, do you know whether the
association under the Selden patents ever sued a consumer for vio-
lation of the patent?
Mr. Farley.- You mean a user? It is my understanding that is
true. A survey in the examination of the /Selden. case was made a
short time ago, in 1931, in fact, not at all having anything to dcJ
with this case, and there was one case that was brought against
a user.
CONCENTRATION OF ECONOMIC POWER 271
Mr. Cox. I think it is just a letter threatening suit. I think it
was a matter of threat.
Mr. Farley. There were threats, but we have in this notation a
case of a man by the name of Moore who bought a car known as the
Martini. It seems that he left New York ; he was quite a sportsman,
or something, a wealthy man and left New York and went to Texas
and never appeared, and as I understand it, a consent decree was
obtained against him and injunction issued. I take that, however,
from this article, something that I prefer to check with the records
in the New York office.
Mr. Arnold. In any event, no one there had the resources to fight
this hampering on the manufacturing of motor cars to a successful
conclusion. That is a fact, isn't it?
Mr. Farley. I think that is probably quite true.
The Chairman. At least nobody else did.
Mr. Patterson. I have a question I would like to have cleared
up in my mind, Mr. Ford. When the Ford Co. was begimiing in the
industry, did it then have a free licensing policy, at the beginning,
the start? 1
Mr. Ford. I would think so, but I am not positive. It was before
my time, and I don't remember positively.
Mr. Patterson. When the Ford Co. assists patentees to develop
and manufacture — we were on that topic a half hour ago — what does
the Ford Co. ask in return for that assistance in manufacturing and
developing patents?
Mr. Ford. Nothing, except the right to use the article which we
purchase.
Mr. Patterson. That is my understanding. I merely wanted to
clear it -up.
The Chairman. This policy of free licensing was not adopted at
the very beginning?
Mr. Ford. I don't recall.
The Chairman. Wasn't it your original testimony that you did
have a license at the beginning?
Mr. Ford. We sued once, and we granted one license; but I don't
think that would make a general policy.
Mr. Cox. To clear that one instance up, isn't it a fact that the one
instance where you sued another manufacturer, that was done at the
time that manufacturer was a member of the association, and you were
engaged in a controversy with the association over the Selden patent ?
Mr. Ford. That is right. They were an aggressive member of the
association and they were pursuing us and we felt that we had this
basic patent tliat they were using and we thought we might retaliate.
The Chairman. If there are no other questions at this time, the
committee will stand in recess.
Mr. Ford. May I make a correction ? I made the statement awhile
ago that the Association of Licensed Automobile Manufacturers sued
the Ford Motor Co. My information here is that it was brought in
the lower court by the Electric Vehicle Co. and George B. Selden.
(Whereupon at 12 noon a recess was taken until 2 p. m. of the same
day.)
* >• See, infra, p. 273, et seq., for additional testimony re early patent policy of Ford Co.
272 CONCENTRATION OF ECONOMIC POWER
AFTERNOON SESSION
The committee resumed at 2:04 p. m., on the expiration of the
recess.
The Chairman. The committee will please come to order. Mr. Cox,
are yon ready to proceed ?
Mr. Cox. Yes, sir.
TESTIMONY OF EDSEL FORD, PRESIDENT, AND I. JOSEPH FARLEY,
PATENT COUNSEL, FORD MOTOR CO., DETROIT, MICH.— Resumed
Mr. Cox. Before the committee arose, Mr. Ford, we were discussing
the Selden suit and the relations between your father and the Associa-
tion of Automobile Manufacturers at that time. I understood you to
testify, in effect, that from tlie day that your father was refused a
license by tliat association it has been the policy of the Ford Co. not
to belong to that association or any successors of it. and not to be a
party to any cross-licensing agreement. Is that correct ?
Mr. Ford. That is our general policy. We did belong as members
of a nonlicense association at one time, during the early days of the
industry, an association of members of motorcar manufacturers that
were not operating under the so-called Selden patents.
Mr. Cox. How long ago was that ?
INIr. Ford. That was in the same period, between 1903 and 1909, I
think.
Mr. Cox. Do you recall wlien you ceased to be a member of that?
Mr. Ford. No; I do not.
Mr. Cox. You are aware, of course, Mr. Ford, that the policy of
the Association of Automobile Manufacturers has changed since 1911,
so far as the granting of licenses is concerned, under the terms of their
cross-licensing agreement?
Mr. Ford. I don't quite understand what you mean, Mr. Cox.
The Chairman. May I ask the interrogators and the witness to talk
into the microphones? Tlie questions and answers are not being
heard.
Mr. Cox. I will put the question this way : Are you aware that it
is now and has been for some time the policy of the Association of
Automobile Manufacturers not to refuse membership in their cross-
licensing agreement to anyone who wishes to become a member?
Mr. Ford. I understand that is the policy at the present time.
Mr. Cox. Do you also understand that that policy has been the
policy for a number of years?
Mr. Ford. Yes, sir.
Mr. Cox. Despite that cTiange in their policy from the policy that
was pursued in 1911, your companies have nevertheless not seen fit
to join the association?
Mr. Ford. That is right.
Mr. Cox. Not becau.^^e tliere avhs any denial of your right to join
but because you preferred not to ?
Mr. Ford. As a matter of policy we preferred not to.
Mr. Cox. Do you have any opinion as to whether the cross-licensing
agreement, which is administered by that association, has been or is
a beneficial thing for the automotive industry?
CONCENTRATION OF ECONOMIC POWEll 273
Mr. Ford. I should think it had been a beneficial thing to the
industry.
Senator King. It prevents litigation.
Mr. Ford. That is right.
Senator King. And permits the members of the organization to
have the benefit of any patents which are brought within the terms
of the agreement.
Mr. Ford. That is right.
Mr. Cox. There are one or two additional matters that I passed
over this morning that I should like to ask you about, Mr. Ford, for
the record. Can you tell us how many patents your companies now
own ?
Mr. Ford. The record that I have shows that we own 409 patents.
Mr. Cox. Could you tell us how many licenses under those patents
your company has granted? For the record perhaps it should be
stated whether these are patents either of the Ford Co. or of both
the Ford and the Lincoln Co.
Mr. Ford. I don't think I can distinguish between that.
Mr. Cox. Do they include both parties ?
Mr.- Ford. Yes; they include both parties. I don't know the fig-
ures for each company. The total is 409.
Mr. Cox. The last total for the licenses given ?
Mr. Ford. For the patents only,
Mr. Cox. Now will you give us tlie total of the licenses granted by
the two companies.
Mr. Ford. There is a total of 92.
Mr. Cox. Can you tell us how many licenses under the patents of
others your company has taken ?
Mr. Ford. Five hundred fifteen.
Mr. Cox. Before the recess you were asked by a member of the
committee about the patent policy of the Ford Co. at its very in-
"Ception.
The Chairman. Mr. Cox, before the witness answers that question,
may I ask whether the 92 licenses granted by your company have
been granted solely to members of this association or to others out-
side of the association?
Mr. Ford. No, sir; that had nothing to do with the cross-licensing.
Those licenses are granted to outside manufacturers.
The Chairman. So your licenses are not confined to the manufac-
turers of automobiles or any particular set of manufacturers?
Mr. Ford. No; they may or may not be. They may be on other
processes besides the manufacture of automobiles.
The Chairman. And with respect to the licenses which you have
received from others, 515 in number, how many of those have been
received by the Ford Co. and how many by the Lincoln Co. ?
Mr. Ford. They are all granted to the Ford Motor Co.
The Chairm^nn. Thank you.
Mr. Cox. I just called your attention to the fact that before the
recess a member of the committee had asked you a question with re-
spect to the patent policy of the Ford Co. in its very early days, in
fact at its inception, and I think you answered you couldn't recollect
the details of that policy.^ If I suggest to you that it was the policy
^ See supra, p. 271.
274 CONCENTRATION OF ECONOMIC POWER
of the company in its very inception not to grant licenses under any
of the patents which it owned at that time, would that refresh your
recollection at all as to the situation?
Mr. Ford. I couldn't say whether that is true or not. I doubt
whether it is true.
Mr. Cox. I should like to ask this question with respect to your
policy of granting royalty free licenses under your own patents. It
makes no difference with respect to granting those licenses how much
money you may have expended in experimental and development
work in perfecting patents?
Mr. FoKD. It makes no difference.
Mr. Cox. The policy applies to all patents regardless of the ex-
pense incurred.
Mr. Ford. That is true.
Senator King, Do many of the companies avail themselves of the
patents which your company holds and which you give to them
freely ?
Mr. Ford. Yes; there have been 92 granted. That is not to other
motorcar companies ; those are to suppliers usually.
Senator King. TKen all of these patents do not relate to important
parts of your automobile ?
Mr. Ford. Not necessarily. They may have to do with procei^ses
involved in the manufacture of motor cars.
Mr. Oliphant, Do you grant licenses to other automobile manu-
facturers ?
Mr. Ford. We would.
Mr. Cox, Have you?
Mr. Ford. We have, Mr. Farley says; I don't recall the instance.
The Chairman, Of the 515 licenses which you have taken, you have
granted only 92, if I remember your testimony correctly.
Mr. Ford, We ha^^e leceived 515 and granted 92,
The Chairman, That was my understanding.
Mr. Ford. That is right,
Mr. Cox. Tlie sum of the 92 licenses which you have granted have
been to other manufacturers of motorcars, is that a fact ?
Mr, Ford, I wouldn't say so. There have been some.
Mr, Cox. Some have been but not all ?
Mr, Ford, Yes,
Mr, Arnold, A lot of your patents have to do with manufacturing
processes which could be used in any manufacturing industry and.
on which you could charge royalties far beyond the mere manufacture
of an automobile?
Mr, Ford. That is true.
Representative Sumners, Mr, Ford, do you grant licenses to those
Avho do not grant licenses to you ? Do you have any system of mutual
exchange ?
Mr. Ford. We have a system of mutual exchange and Ave also grant
licenses to those who do not grant to us..
Representative Sumnkrs, Would you grant a license to one who
would not grant a license to you ? *
]Mr, Ford, Where they had a process that we wanted, and we had
one that they wanted?
Representative Sumners, I think I would rather stand on the ques-
tion just as I asked it.
CONCENTRATION OF ECONOMIC POWER 27&
(The reporter reread the question : "Would you grant a license to
one who would not grant a license to you?")
Mr. Ford. Yes.
Representative Sumners. Why?
Mr. Ford. Because of our policy of granting licenses freely, and
giving shop rights.
Mr. Arnold. In other words, you do not wish that kind of con-
trol
Representative Sumners (interposing). Wait a minute, let me-
finish. I want to get that pretty clearly. If somebody came to you
and wanted you to grant the use of a patent that had been issued to
you either as the original- patentee or as assignee, and while in con-
versation you would say, "Well, you have got one I would like to-
have, too," and he would say, "You can't have mine," what would
you do about it ? I mean, do you have that ever occur as a practical
situation ?
. Mr. Ford. I don't think that has ever occurred that I know of, but
I would like to face that problem when it came up.
Representative Sumners. I tliink I would, too.
Senator Borah. Your system of granting licenses doesn't arise out
of a particular advantage wliicli you may derive from that grant,
does it, or as a general policy?
Mr. Ford. As a general policy.
Senator Borah. And, therefore, ^-ou certainly wouldn't change a
general policy because some particular individual isn't willing to live
up to your policy.
Mr.^FoRD. That is true.
The Chairman. I assume there are some patents in the automotive
industry which have been issued to others and under which you have
not been licensed, but which you perhaps would like to use if you
could be licensed under them.
!Mr. Ford. A reciprocal arrangement?
The Chairman. No; I am jvist wondering if it is not the fact that
there are some patents on devices in the automotive industry which
you are not permitted to use by the liolders of the patents.
Mr. Ford. And tli!\t we v.ouid like to?
The Chairman. And that you would like to.
Mr. Ford. Yes; I think so.
Senator King. Out of the 92 which yoii have granted to others, do
you recall whether any of the grantees have refused patents or the
right to a license to your organization?
Mr. Ford. I don't know that detail, but it could be very easily
ascertained.
Senator King. And when you have granted these licenses to others,
have you told them that 3^011 were doing it only upon the theory that
if they have patents which you would like to use that they will assign
to you?
Mr. Ford. I should think that in very *few instances they have
things that we want to use; there are those cases that arise, of course,,
and particularly in manufacturing processes there are many times
where we are developing an art and the outside party is developing
an art at the same time. We make a cross agreement so that anything
new that we are able to 'Sontribltte' they get' the benefit of, and any-
thing they are able to contribute we get the benefit of.
276 CONCENTRATION OF ECONOMIC POWER
Senator King. Those are special arrangements that may be en-
tered into?
Mr. Ford. Yes.
Mr. Cox. How many of those do you have, Mr. Ford?
Mr. Ford. Five hundred fifteen license agreements, and those cover
many more patents than that. One agreement might cover many
patents, you see. Mr. Farley says over 3,000 patents are involved in
those license agreements.
Mr. Cox. What I was really interested in was how many of those
involved this reciprocal arrangement.
Mr. Farley. I might answer that, if you don't mind, Mr. Cox. A
great many of them are involved, so it would be very difficult to get
exact information without reviewing all of the license contracts we
have in our files.
Senator King. I suppose most of those licenses to which you are
now referring are not primary, in the sense that they are not an im-
portant factor in the manufacture of wi automobile.
Mr. Ford. They may be important, byt they are not, possibly, major
items in the direct manufacture of a motor car. They may have
to do with processes — paint, for instance. I know we manufacture
paint, and we have' a cross-license arrangement with the duPont
people whereby we do just as I cited a few moments ago. We ex-
change our ideas.
Mr. Arnold. Types of conveyors, and things like that, would be
included.
Mr. Ford. I would think so. I don't recall whether that is an
actual fact.
Senator King. Loading and unloading devices from trains and
cars ?
Mr. Ford. It might cover most anything. I don't recall those
particular instances.
The Chairman. In other words, the patents to which you refer are
not exclusively those of devices which go into a car but include
devices which are used in the factory for the manufacture of the car
and which could be used for the manufacture of many other different
kinds of machines.
Mr. Ford. That is right. It covers a very wide range of devices.
I have a list, if you would be interested in some high spots of it.
The Chairman. It might be satisfacto-"y to put that into the record
without reading, Mr. Cox.
Mr. Cox. I will be glad to do that if you will take it out of the
book. It can be marked as an exhibit.
(The list referred to was marked "Exhibit No. 90" and is included
in the appendix on p. 669.)
Senator King. As illustrative of the importance of some of these
' patents and controversies, Mr. Farley mentioned cafeterias. Do you
have some controversy over patents for cafeterias, and get cross-
licenses there ?
Mr. Farley. That came under the question relating to the threats
received by the company. Somebody had a patent on these tubular
bars that you see running around the counters, and they were in-
stalled in the cafeteria of the employees of the Ford Co., and we
were threatened wiT.. ;uit under that patent. I don't think anything
was ever done abo <^^ )taining a licensej-so far as I know.
CONCENTRATION OF ECONOMIC POWER 277
Mr. Cox. If we can have that list we will include it in Mr. Ford's
testimony.
Would you say, Mr. Ford, that the patent litigation has been a
financial burden to your company?
Mr. Ford. It has been a very definite expense as we have gone on
from year to year.
Mr. Cox. Do you have any figures on that that you can give us ?
Mr. Ford. I can say that our general patent expense runs between
90 and 100 thousand dollars a year.
Senator Borah. How much of that goes for attorneys?
The Chairman. We will excuse the witness from answering.
Mr. Ford. I didn't hear the question.
The Chairman. That was not a question. It was merely
Senator King (interposing). Conversation.
Mr. Cox. Since we have been discussing this I have asked ques-
tions about the expense of litigation. Mr. Farley, as a result of
your years of experience as a patent attorney, do you have any
' opinion as to what, if any, steps might be taken or changes made to
reduce the expense of litigation so far as litigants are concerned?
Mr. Farley. I hardly see how it is possible to reduce the expense
of litigation to litigants, either plaintiff or defendant. We are con-
fronted in our cases in not knowing whether or not we are going to
be before a judge who may or may not be experienced in mechanical
matters. We proceed on the theory — and I am speaking now merely
as a patent lawyer — that whether for plaintiff or defendant, we must
make the case as simple as it can possibly be made. That involves
relatively high expenditures for ihe preparation of the descriptive
charts and models and all that sort of thing, and I don't see how that
sort of expense can be avoided so long as we operate under the pres-
ent system. I think it is a subject that is worthy of careful study
and consideration as to how those conditions might be improved.
Mr. Cox. Would you say that the holder of a patent who did not
have large resources was at a serious disadvantage in carrying on
patent litigation at the present time ?
Mr. Farley. If you speak of the holder of a patent, the job is very
much easier for the holder of a patent, that is, for the plaintiff. In
practically all of the cases in which I have been engaged with the
Ford Co. the expenditures by the plaintiff are relatively nil. A man
who has a patent and can convince counsel that he has even the
barest possibility of success can always get counsel to take cases on
a contingent basis. I venture to say that w^ell over 90 percent of the
cases brought against the Ford Co. are cases in which the suit for
the plaintiff has been taken on a contingent basis.
Representative Sumners. Mr. Cox, may I ask Mr. Farley a ques-
tion at this point ?
Mr. Cox. Yes, sir.
Representative Sumners. Mr. Farley, would it embarrass you in
the preparation of your reply to the suggestions of the committee to
express some opinion as to whether or not, as a condition attached to
the patent, there ought to be the obligation, under proper safeguards
and compensation, to grant permits to use, licenses, to any applicant ?
Mr. Farley. That is a subject that has come up quite frequently,
Mr. Congressman. The proposal has frequently been made. I as-
124491- 39 -pt 2 3
278 CONCENTRATION OF ECONOMIC POWER
sume you are referring to what is known as compulsory license pro-
visions.
Representative Sumners. Here is what I am referring to, and I
think it is one of the most important things, if not the most important
thing, with which this committee has to deal. That is, whether or
not, when the Federal Government grants a patent, which is an ex-
clusive right to use an idea, there ought to be some agreement under
which the patentee could not refuse the granting of the right to use
to anybody who paid a reasonable compensation for the right to
use.
Mr. Farley. Well, there are some adherents to that proposal, but
every time it is raised a storm of protest comes up from what is known
as the poor inventors. It is always thought that the large corporations
would gain most from that sort of provision of the law, and it may
have 3ome advantageous features. I know that that sort of provision
has been in effect in Canada and England, but it is very rarely used.
It is honored more in the breach than in the observance m those coun-
tries where that provision is in effect.
Representative Sumners. Is it honored more in the breach than in
the observance, or is it the effect of there being that power of compul-
sion that makes people get together and agree ? So far as I am con-
cerned as a member of this committee, that is one of the things that
I am mainly concerned about. There is no use in having you witnesses
come here just to give us all these details.
Mr. Farley. I think that is a subject worthy of careful consideration.
Representative Sumners. Will you consider it carefully ?
Mr. Oliphant. You say the objections come mostly from poor in-
ventors. Is there any association of these poor inventors from which
those objections come, or does the objection come from the patent bar ?
Mr. Farley. There is an association of inventors that gives an
annual show in New York, and I know that every time the proposal
has been made, objections have been registered by that committee or
that association. I think a great many, of course, are registered by
the patent bar.
The Chairman. May I say to the members of the committee that it
is my understanding that this particular subject matter on which these
questions are now being asked is being given special study under the
Commissioner of Patents and Dr. Thorp and Secretary Patterson, so
that it will come up at a later hearing. Perhaps we should not inter-
rupt Mr. Cox's examination with that matter at this time.
Senator King. Notwithstanding the statement made by the chair-
man, may I say for the enlightenment of my friend from Texas
that at the last session of Congress a bill known as the McFarlane
bill was introduced which had for its purpose compulsory licensing,
and my understanding is — and I examined hastily the testimony —
that only one person testified in favor of it, but a large number of
persons testified in opposition, and they came largely from the ranks
of the small inventor and the manufacturer who would be denomi-
nated in the low6r class so far as finances are concerned.
Mr. Farley. That is quite true. I am familiar with the legisla-
tion and the hearings.
Senator King. I offered a bill for compulsorv licensing, but T
didn't get any support, and I am not sure I am for it myself.
CONCENTRATION OF ECONOMIC POWER 279
Mr. Farley. I think one of the objections raised by the patent bar
is that practically every proposal that has been made along that line
attempts to throw the job on the Commissioner of Patents, and we
are- inclined to think that the Commissioner and his office are too
much overburdened to have that additional job thrown on them.
Mr. Cox. Mr. Ford, if it should be suggested to you that the rea-
son your company grants free licenses under your patents is because
the patents are of ho particular importance so far as the manufacture
of cars is concerned ; in other words, of little value in the art of man-
ufacturing cars, would you accept that as an accurate statement?
Mr. Ford. I wouldn't say so. I think some of them are of definite
importance.
Mr. Cox. You would say they are important and valuable; and
w^ould you say they are patents out of which you might, if you cared
to, make appreciable sums of money in the form of royalties under
license agreements?
Mr. Ford. I think we could, if we were so inclined.
llr. Cox. But you are not interested in making money in that way ?
Mr. Ford. That is right.
Mr. Cox. You will recall this morning, in response to questions by
members of the committee, Mr. Farley expressed the opinion that he
was in favor of the patent system — I think that is accurate — not of
all its details or the way it operates, but he thought basically it was
probably a wise, beneficial thmg.^ Do you have any opinion on that
question that you would case to express now ?
Mr. Ford. I have no opinibn other than Mr. Farley's. I think he
expressed exactly the way I feel about it.
Mr. Cox. I think that concludes my examination of Mr. Ford.
Senator KiNa That is, I understand, Mr. Farley, that you believe
it is a wise provision in the Constitution authorizing Congress to
grant patents for inventions and discoveries.
Mr. Farley. Unquestionably.
Senator King. And the patent law pursuant to that constitutional
warrant has served, by and large, a liseiul purpose?
Mr. Farley. Unquestionably ; and, of course, we feel at times
that, viewing the matter from the standpoint of being made the
defendant in all sorts of harassing litigations, our general feeling
is that the system has got to the point where the tail is wagging the
dog, and that it isn't acting 100 percent to promote progress, but in
many instances is used to impede progress.
Senator King. That could be avoided in part, could it not, if there
were more care in the issuing of patents, and not granting patents
without further examination than is now made? That could only
be done, perhaps, by augmenting the force in the Patent Office. Too
many patents are issued, too many without sufficient
Mr. Farley (interposing). Careful examination. I think that is
undoubtedly true.
The Chairman. Mr. Arnold, do you care to ask either of these
witnesses any additional questions?
Mr. Arnold. No.
The Chairman. Congressman Sumners?
1 See, supra, p. 262 et seq.
280 CONCENTRATION OF ECONOMIC POWER
Representative Sumners. I yield to Mr. Oliphant but I do want to
ask a question.
Mr. Oliphant. You said this morning the great mass of important
inventions were the result of organized engineering work, as opposed
to the individual genius working in the garret.^
Mr. Farley. No; I think you probably misundei-stood me some-
what. I don't mean to say necessarily "organized engineering work."
but work of the engineers who are in the various industries who are
thinking more of doing an effective job at the time. It doesn't neces-
sarily have to be organized; it may be the chief engineer and the
only engineer of a small company who is doing something to improve
the product of his company.
Mr. Oliphant. I accept your description of the situation, which is
quite accurate. Does that substantially describe the situation at the
time the constitutional provision was adopted, or the time our patent
laws took form?
Mr. Farley, I don't think it can, because obviously the condition
of industry and engineering development at the present day is quite
radically different from what it was at the time we were a rural
country.
Mr. Oliphant. Inventions can be nearly made to order, in terms of
our engineering ability.
Mr. Farley. We feel so.
Senator King. However, there were patents issued by the various
States before the Constitution was formed.
Mr. Farley. That is true as a historical fact.
Senator King. And the constitutional provision was bottomed in
part upon the form of the patents which were provided for in the
various Commonwealths of the confederation.
Mr. Farley. Yes ; and I think decidedly more important, however,
on the historical development of patents in the mother country,
England.
Mr. Oliphant. In the development of our technology do you think
the bottle neck is the inventive genius as opposed to necessary capi-
tal, or what have you ?
Mr. Farley. If I understand your question of the bottle neck, I
wouldn't say that inventive genius is a bottle neck, but there may be
a bottle neck on the part of men who are rather more patent minded
than they are seeking to make a real contribution which they can
develop and give to the general public. I have said that the patent
system seems to me to have sort of degenerated into the fact that a
great many people to whom patents are granted, and a great many
who seek to obtain patents, do it in possibly the same spirit of mind
that one purchases a ticket for the Irish sweepstakes, some sort of
gamble that they may or may not cash in on.
Mr. Oliphant. Is the situation today that there are numerous usable
patents looking for capital or much capital looking for usable patents?
Mr. Farley. I wouldn't attempt any answer in percentages. I think
you are going -to find that there are both classes. I know of many
instances of both.
Representatives Sumners. I would like to ask some questions, if you
please, sir, and if there are any of these questions that would be em-
' See, supra, p. 262 el seq-
CONCENTRATION OF ECONOMIC POWER 281
barrassing to you at all, you just indicate it and I will depend on some-
body else for the information. We are investigating here about
patents, and there are just two or three things that we can inquire
about. One is, ought there to be patents? Second, if there are to be
patents, should the patentee have the right of exclusive control of the
use of the thing patented until the expiration of the patent ? That is
the situation now, isn't it?
Mr. Farley. That is the present law.
Representative Sumners. The third proposition is, if a patent is
granted, ought there to be some arrangement, some condition attached
to that patent, under which that situation can be changed and other
people would be privileged to use that idea? That 'would carry with
it some notion of compulsory granting of license, because they have
got now the right, by mutual consent, to make any kind of contract or
agreement they want. What I am trying to find out is this: We have
got all this crowd of people here, and we are here, and what is it we
are trying to find out this afternoon? Just thre« things, isn't it? Is
there anything between those three points I have indicated that we
could be inquiring about as a practical proposition ?
Mr. Farley. Of course there are very many ramifications of the
system that I don't think you need to get into. Do you care to have
me answer those three questions ?
Representative Sumners. I do.
Mr. Farley. Will you repeat them?
Representative Sumners. What I am trying to find out is, ought
we to do anything about this business; second, if so, what?
Mr. Farley. My answer to that would be yes.
Representative Sumners. Can you tell us now, or do you want to
do it later?
Mr. Farley. What should be done?
Representative Sumners. Yes.
Mr. Farley. That is a matter, as 1 say, that I did not come here
prepared to make specific suggestions on. It is something that
sliould be done only after careful study. I would be glad to make
them.
Representative Sumners. I think those are all tlie questions there
are.
Mr. Arnold. Mr. Farley, would you agree to this analysis of your
present position? There are two questions in the patent field, in
getting a solution of the patent problem. First, a reward to en-
courage the inventor.
Mr. Farley. Correct.
Mr. Arnold. And, second, to avoid doing so in such a way that
you create a combination which restrains the industrial arts and
thereby restrains trade. There may be other questioils, but those
are at least two, and the policy of the Ford Co. represents a policy
which at least prevents this combination in restraint of the industrial
arts.
Mr. Farley. That is true.
Mr. Arnold. And the enormous growth of the automobiles from
1925 on is some evidence of the success of that policy in the industrial
arts.
Mr. FArLEv. I would think that is quite true too. I agree with that.
282 CONCENTRATION OF ECONOMIC POWER
Mr. Aknold. Now, the remedies fall into several classes: First,
the remedies which the Antitrust Division are most interested in,
that is the prevention of combinations, and second, the remedies
which more clearly fall within, we will say, the Department of Com-
merce, -the improvement of the patent laws, the stopping of this
litigation. Those merge together, but there are those two separate
aspects.
Mr. Farley. Correct.
Mr. Arnold. This hearing, as I see it — and I wonder if you will
agree with me — is one directed chiefly at the combination end of the
patent problem.
Mr. Farley. Well, I accept your statement as to what your com-
mittee is intending to investigate.
Mr. Arnold. Not the committee, but clarifying it for the purpose of
the Department of Justice and its function in this particular hearing.
The Chairman. Senator Borah, do you have some questions ?"
Senator Borah. Mr. Ford, you have been paying out something like
a hundred thousand dollars a year for patent laws in the past 2 years.
Havie you anything to suggest to this committee in the way of con-
structive legislationwith reference to patent laws?
Mr. Ford. Two points that Mr. Farley mentioned this morning, I
believe : One, I feel some restriction in the length of time that a patent
is allowed to remain in the Patent Office before it is issued. I think
that is a definite detriment. I also think that, as recited in this case
where no notice has to be given necessarily now of infringement — that
is one that may lead industry into very deep channels without their
knowledge of it when a patent is being violated without the knowl-
edge of the violator, and that policy of notice has been in effect up
until the Supreme Court decision which took place a few months ago,
in 1936. I think that is a very definite detriment. As far as the
length of life of a patent and other things, I don't think I am qualified
to express myself on that.
Senator King. In the light of the suggestions made by Judge Sum-
ners asking Mr. Farley to give his views, I would like to make a few
suggestions, if I may, and ask you in preparing to give your views
respecting procedure and what might be done to mitigate some' of
the evils now resulting, to consider these suggestions I propound to
you.
Mr. Farley. I will be very glad to.
Senator King. First, decrease in number of patents. Do you not
think that we should have fewer and better patents?
Mr. Farley. The answer to that is unquestionably yes.
Senator King. And should it not be made more difficult to secure a
patent, and should there not be assessed yearly fees on patents which
would lead to cancelation of wortliless and obstructive patents? I
don't ask for an answer now.
Mr. Farley. I am personally in favor of that. I am not express-
ing that as a policy of the company.
Senator King. A question as to validity of patents. Do you not
thiiik that patent applications should be examined more thoroughly
and to that extent there should be given to the Patent Office a larger
f.orce,of persons as examiners, paiticularly some who are familiar
with the question of patents and their intricacies and so on?
Mr. Farley. I would like to say hurrah to that.
CONCENTRATION OF ECONOMIC POW Eli 283
Senator King. Do you not tliink that effective publicity should be
given to every application before the issuance of a patent so as to'
encourage any possible objections or make it possible for any person
to submit objections to the granting of the patent?
Mr. Faeley. I could answer that now; if that means opposition
proceedings with the right of the manufacturer, to oppose a patent
either shortly before or shortly after the grant, it has some advan-
tages, some great advantages, if we are not going to have tacked to
it a provision such as exists in the German law that if opposition
is not made within the 5-year period the patent is unassailable. If
any provision of that type were attached to the law, I would be very
much opposed to it.
Senator King. Do you think it would be vise to annex as a provi-
sion to the granting of the patent a provision that if the validity
is to be tested it must be done within 5 years?
Mr. Farley. No; I think it would be most detrimental t3 have a
provision of that type.
Senator King. I wish you would examine the question as to the
assumption of validity of patents and preliminary injunction. As
.1 know, now that question is greatly befogged, and it is insisted
wy some that before a preliminary injunction even should be granted
the validity of the patent shall first be determined by the courts. T
wish you would give us your views w^itli respect to that. Do you
think there ought to be cumulative damages and costs in order to dis-
courage intentional infringement of patents and malicious infringe-
ment suits?. Do you thiiik we ought to recommend adoption of a
system of cumulative damages and cumulative costs in cases of the
character just indicated, where they are malicious suits for infringe-
ments or unjustifiable suits?
Mr. Farley. I am rather inclined to favor that.
Senator King. Have you any views to suggest — I won't ask you to
es:press them now — on the question of Court of Patent Appeals?
Mr. Farley. Yes ; I have some views on that subject.
Senator King. If you will elaborate those I will be glad. I wish
you would also consider the question of bringing suit for infringement
111 various jurisdictions. Ought there not to be a limitation so that if
A claims that B has infringed his patent he may not sue in one juris-
diction and get an adverse *lecision and go into another court in
another part of the United States and bring there a suit for infringe-
ment ?
Mr. Farley. That certainly should be an end to that practice.
Senator King. So there ought to be some amendment to the law in
respect to that matter.
I have a number of others, but I will be very happy to talk to you
before preparing your brief, and I would like to make some sugges-
tions so you can inform the committee — at least inform me — as to
Avhat clianges you think should be made in tlie procedure, because I
think procedural matters are very important.
Mr. Farley. May I have a written statement of those questions?
Senator King. Yes.
TheC-HAiRMAN. Mr. Patterson, do you care to ask any questions ?
Mr. Patterson. Not at this time.
284 CONCENTRATION OF ECONOMIC POWER
Eepresentative Reece. I should infer from your statements this
morning, Mr. Ford, that it is the attitude of the Ford Motor Co. that
there should be a wide and unrestricted competition among automo-
bile manufacturers.^ If your father had joined the Automobile Man-
ufacturers Association, and no other manufacturer had come along
sufficiently strong to have disregarded that association, would that not
have tended to restrict competition in the industry ?
Mr. Ford. I feel very definitely that would have.
Representative Reece. Now, I don't want any possible political
significance to be imputed to this phase of my question. If the Ford
Motor Co. had seen fit to have signed up mider the N. R. A. Code,
might not that possibly have had the same restrictive influence on
competition ?
Mr. Ford. I feel definitely so.
Representative Reece. It would be interesting to know if as a
result of the Ford Motor Co, not having agreed to the N. R. A.
Automobile Code, the opportunity to sell or to bid for the sale of
automobiles or motorcar vehicles by the Ford Motor Co. or any of its
agents was restricted either by large private prospective purchasers
or by governmental agencies.
Mr. Ford. I am sorry, but I have missed that last point.
The Chairman. I think, Mr. Ford, we will excuse you.
Mr. Cox. May I ask Mr. Farley one more question that I would
like to clean up? We were talking about the relative advantages
litigation has between litigants with resources, and large resources,
analitigants of small resources. You said it was usually cheaper for
the plaintiff to litigate than it was for the defendant.^
Mr. Farley. That is right.
Mr. Cox. Would you say that if the plaintiff were a litigant with
large resources and the defendant a litigant with small resources, the
"defendant was at a substantial disadvantage?
Mr. Farley. Yes ; that is true in certain litigation I have recently
been conducting where I have been defending a very small company
and where the very large company has started a train of suits, one
feiiit after the other, three suits, and they have declared on certain
of the claims of the patent before going in ; we have had to prepare
complete defenses on certain of these claims, and then at the open-
ing of the trial they have relinquished their claims of infringement
as to certain claims, and my client in this one particular case spent
over $5,000 in preparing only for that onei phase of the investigation
which was dropped at the trial and for which there can be no recov-
ery under the present law on the part of my client for any of those
expenses.
The Chairman. Mr. Ford, obviously from your testimony it is
your belief and the belief of the Ford Motor Co. that this system of
free and open patents has been beneficial to your company. Wliat is
your opinion as to its effect upon the motor industry as a whole?
Mr. Ford. I feel it has benefited the motor industry a great deal.
The Chairman. Would you care to tell the committee whether or
not on the basis of your experience in the motor industry you would
recommend a similar policy to other industries?
* See, supra, p. 2r>9.
■« See, supra, p. 277.
CONCENTRATION OF ECONOMIC POWER 285
Mr, Ford. Every other industry has its own problems. I know
notliing about those particularly, but as it has affected the motor
industry I think it has been a beneficial policy and might be well
worth looking over as far as other industries are concerned.
The Chairman. Thank you, Mr. Ford. The committee is very
much indebted to you, and to you also, Mr. Farley, for your testi-
mony today, and you now stand excused.
(The witness was excused.)
Mr. Cox. Will Mr. Alfred Reeves step forward, please?
The Chairman. Mr. Reeves, will you be sworn, please?
Do you solemnly swear that the testimony you are about to give in
this proceeding will be the truth, the whole truth, and nothing but
the truth so help you God ?
Mr. Ree\'es. I do.
TESTIMONY OF ALFRED REEVES, VICE PRESIDENT AND GENERAL
MANAGER, AUTOMOBILE MANUFACTURERS ASSOCIATION, NEW
YORK, N. Y.
Mr. Cox. Mr. Reeves, will you give the reporter yourliame and
address ?
Mr. Reeves. Alfred Reeves, vice president and general manager of
the Automobile Manufacturers Association, New York.
Mr. Cox. Will you tell us briefly just what the Automobile Manu-
facturers Association is, Mr. Reeves?
Mr. Reeves. It is a trade association of some 34 manufacturers,
the purpose of which is to do those things that can be done better by
single units probably than by a good many units working along the
same line. Would you like some of the departments?
Mr. Cox. You might indicate briefly the kind of work you do.
Mr. Reeves. Well, the work has to do with highways; it has to
do with safety, activities on traffic, sports, running the New York
automobile show, the patent division, and activities of that kind,
public relations, and all those things that a trade association naturally
does.
Senator King. Are all its members manufacturers of automobiles,
or some members merely distributors?
Mr. Reeves. Only manufacturers of automobiles, cars, and trucks.
Mr. Cox. I hand you this document, Mr. Reeves, and I ask you
wlietlier that is a correct copy of the constitution and bylaws of the
association of today.
Mr. Reeves. It is.
Mr. Cox. I should like to have this marked as an exhibit, with the
committee's permission.
The Chairman. It may be so marked and entered in the record.
(The constitution and bylaws referred to were marked "Exhibit
No. 91" and are included in the appendix on p. 672.)
Mr. Cox. How long has the association been in existence ?
Mr. Reev-es. Since 1913.
Mr. Cox. How long have you been connected with the association ?
Mr. Reeves. Since 1914.
Mr. Cox. There was a point in its existence where it changed its
name, was there not ?
Mr. Reeves. Yes, sir.
2§(5 CONCENTRATION OF ECONOMIC POWER
Mr. Cox. What was it known as before it acquired its present
name ?
Mr. Reeves. It was originally known as the Automobile Chamber
of Commerce. A short time f'fterwards they put the word "National"
to it, and during the N. R. A. code its name was changed to Auto-
mobile Manufacturers Association, so as not to confuse it with job-
bers and dealers and other types of allied trades that were having
codes under the N. R. A.
Mr. Cox. I hand you another document and I ask you whether this
is an accurate list of the present members of the association and of
the officers and directore at the present time.
Ml . Reeves. It is.
Mr. Cox. With the Chairman's permission, I should like to have
this marked as an exhibit.
The Chairman. It may be marked.
(The membership list referred to was marked "Exhibit No. 92"
and is included in the appendix on p. 682.)
Mr. Cox. What are the qualifications for membership Jn the asso-
ciation, Mr. Reeves?
Mr. Reeves. It is open to any manufacturer of cars or trucks, al-
though ii has been the custom to require that they be manufactur-
ing for a' least a year. It doesn't make any difference as to size,
because so.ae were admitted that only make 150 cars.
Mr. Cox. Since your connection with the association, has it ever
refused membership to anyone who applied?
Mr. Reeves. Nobody that applied, except on one occasion when we
had a presentation made by some people who wanted to make appli-
cation but were told that they probably had better not because they
only made two cars, and at that time.it was reported it was primarily
interested in selling stock.
Mr. Cox. How long ago was that?
Mr. Reeves. Probably 18 or 20 years ago.
Mr. Cox. That was after 1914, this instance you speak of, and the
person who was refused was not Mr. Ford.
Mr. Reeves. It was not Mr. Ford.
Mr. Cox. The instance we described this mopning took place be-
fore your connection with the Automobile Association. It is true,
isn't it, Mr. Reeves, that among the other duties of the association
is the duty of administering a cross-licensing agreement among its
members ?
Mr. Reeves. Right.
Mr. Cox. Is everyone wha is a member of the association a party
to that cross-licensing agreement?
Mr. Reeves. Right.
Mr. Cox. Is everyone who is a member of the aesociatioiy a party
to that cross-licensing agreement?
Mr. Ree\tes. No. There are a couple that are not.
Mr. Cox. That agreement takes the form, does it not, of an agree-
ment between the association as such and each of the individual
members that wishes to become a party to the cross-licensing arrange-
ment?
Mr. Reeves. Yes.
Senator Kino. Were those who were not a party to the cross-licenS-
ing excluded from the organization, or did they voluntarily withhold?
CONCENTPRATION OF ECONOMIC POWER 287
Mr. Reeves. They are still members of the association, and decided
that the cross-licensing patents agreement didn't furnish them suf-
ficient inducement to go mto it.
THE CROSS-LICENSING SYSTEM
Mr. Cox. When was the first cross-licensing agreement made, Mr.
Reeves ?
Mr. Reeves. January 1, 1915.
Mr. Cox. I hand you this document and I ask you if that is a true
and correct copy of the first cross-licensing agreement, the one that
was made January 1, 1915.
Mr. Reeves. Yes, sir.
Mr. Cox. I should like to have this marked in evidence.
The Chairman, It may be marked.
(The first cross-licensing agreement referred to was marked
"Exhibit No. 93," and is on file with the committee.)
Mr. Cox. Perhaps at this point it might be well if we introduced
in evidence a list of the charter members of the association, that is,
tliose manufacturers who were members as of March 1, 1913, and at
that time, of course, the association was known as the Automobile
Chamber of Commerce, and I ask you if that is a correct list?
Mr. Reeves. It is.
Mr. Cox. Very well. I should like to ask that this be marked.
(The list of charter members referred to was marked "Exhibit
No. 94," and is on file with the committee.)
The Chairman. Is it your desire to have these printed at length
in the record?
Mr. Cox. It is not my desire. I should be satisfied to have them
certified as original exhibits for the use of the committee.
The Chairman. I think that would be a very satisfactory method.
Mr. Cox. Mr. Reeves, can you tell us briefly what the circumstances
were which led to the makin<^ of the original cross-licensing agreement
for 1915?
Mr. Reeves. Well, I think it came partially from the situation in
the Selden case, the manufacturers were having great difficulty getting
out production; they didn't want to be bothered with patents; they
didn^t want to sue one another. They had had enough concern over
the Selden case itself, and there seemed to be a need for keeping pat-
ents out of the situation and trying to develop as good cars as they
could produce at prices at which the public could buy because at that
time most of the cars were very high priced cars.
Mr. Cox. You would say, then, that it was the desire to avoid litiga-
tion and the confusion and uncertainty which results from disputes
as to scope and validity of patents that led to the formulation of the
agreement in the first instance ?
Mr. Reeves. Yes.
Mr. Cox. NoAv, Mr. Reeves, can you tell us briefl}' what the effect
of that first cross-licensing agreement was, what rights did the mem-
bers acquire under it ?
Mr. Reeves. Well, the agreement was put through on the basis that
61 companies with at least 300 patents were obliged to sign before it
became operative, so if one manufacturer had 10 patents he received
licenses under 300 before he had to give licenses under his 10, and as
a result of that, it became operative, and 61 companies and 547 patents
283 rC'NCKNTRATlON OF KCOXOMIC POWER
Mr. Cox. Am I to understand, then, that tlie effect of the agree-
ment Avas to give each manufacturer, wlio was a party thereto a
license under patents of all of the other manufacturers who wei-e
parties to the agreement?
Mr. Reeves. That is right.
INIr. Cox. Did that apply only to the patents then held?
Mr. Reeves. No; in the first instance it applied to all patents that
they owned at that time and to all patents that they acquired during
the next 10 years.
Mr. Cox. The term of the agreement was to be for 10 years.
Mr. Rebates. A 10-year term.
Mr. Cox. Were any patents excluded from the operation of that
agreement?
Mr. Reeves. Yes; there was some fear tliat somebody might get an
extraordinary patent of a revolutionary character which he thought
he ought to have to himself and so tliere was a provision made for
what was known as a class B ])atent wliich was a patent of excep-
tional character, totally unknown at the time of the signing of the
agreement, but there were no class B patents developed during the
10-year ]ieriod.
Mr. Cox. Were tliose so-called class B i)atents not to be included
withhi the scope of the cross-licensing agreement?
Mr. Reeves. That is right.
The Chairjean. ]May I ask if any existing patents were excluded
from the agreement ?
Mr. Reeves. No. sir; all the patents owned by tlie members at the
time of signing came i^ito the pool and all that were taken out for 10
years following.
Mr. Cox. You say no class B patents ever came into existence in the
10 years?
Mr. Reeved. That is right.
]\Ir. Cox. Was an attempt ever made to have a patent classified as
class B?.
Mr. Reeves. Once.
Mr. Cox. Will you tell us about that?
Mr. Reeves. The Hudson Motor Car Co. made an application for a
<:lass B patent on their counterbalanced crankshaft. It was ruled as
I not being in class B and it went to arbitration. The arbitrators voted
unanimously that it was hot a class B patent.
Mr, Cox. That was the arbitration in which the arbitrators were two
professors from Columbia University and a judge from the circuit
court of appeals.
Mr, R^EVE^. Yes; Pi-ofessor Lucke. of, Columbia ; Professor, Pupin,
of Columbia ; and Judge NoyeS;
The CHAimfAx. Who lianded (lo«w-n the rule in the first insttuice that
it was not a cla.ss B patent ?
Mr. Reeves. A special patents committee of the association.
Mr. Cox. Did that agreement include patents held by subsidiaries of
;nt manufacturing companies that were parties to it?
"Mr. Reeves. If they were car manufacturers, yes; not if they were
parts manufacturers.
Mr. Cox. By j^arts manufacturers you mean someone who manu-
factures merely a particular part of a car, not the entire vehicle?
Mr. Reeves. Yes.
CONCENTRATION OF ECONOMIC POWER 289
Mr. Cox. Did it make any difference for the purpose of that provi-
sion if the parts manufacturer miglit be' owned by one of tlie manufac-
turers who was a party to cross-license agreements?
Mr. Reeves. No ; it was inchided.
Mr. Cox. Even thougli the parts manufacturing company might be
a wholly owned subsidiary ?
Mr. Reeves. During the first 10-year period subsidiaries were in-
cluded.
Mr. Cox. They were included?
Mr. REE^^ES. Yes. Mr. Arvedson suggests that I make known the
fact that the design patents, in the belief that they identified the prod-
uct, were excepted, and also the patents that were strictly applicable to
trucks or tractors or fire engines or apparatus of tliat kind where the
art was new.
Representative Sumners. May I have the Avitness answer about
trucks?
Mr. Reeves. The patents that Avere excepted from the agreement
were patents that were strictly applicable to trucks, fire engines,
tractors, or vehicles of that type that were very new in the art and
not very well known and where it involved hoisting devices, loading
devices, certain kinds of equipment of fire engines, that it was not
thought fair to bring into the agreement.
Representative Sumners. May I ask a clarifying (j.uestion? Were
patents that were used in the manufacture of trucks \\ Jnch had been
manufactured for a long time excluded also?
Mr. Ree\t;s. No, sir; unless it was something that could not be
used on passenger cars.
Representative Sumners. Why wouldn't the same rule apply to
the manufacturing of passenger cars that you made to be applicable
to the manufacture or manufacturing of trucks ?
Mr. Reeves. Well, the plan was to include all those patents that
could be used either on cars or trucks, but not devices that were exclu-
sively for the use of trucks.
Representative Sumners. I heard that statement but I was asking
the reason. Suppose they had been making trucks of a given sort for
10 years. Why should there be an exclusion of the right to cross-use
that sort of patent any more than you would have the right to use
such a patent that had been used in the manufacture of passenger
cars for 10 years?
Mr. Reeves. Judge, because the art in that field was neAv. there were
some of these manufacturers, for example, making flushers only as a
specialty; another Avas making sprinklers; and another Avas making
fire engines only. They all had a specialty of some kind, and the
theory Avas that in those specialties an exchange Avould put somebody
else, maybe, in their business.
Representative Sumners. I can understand the reason for that, but
I thought you included in your designation classification of trucks all.
these trucks that we see on the streets hauling heavy loads of stuff.
Mr. Reea'es. Oh, yes.
Represent atiA'e Sumners. They are not any neAver than automo-
biles, are they? They have been using them about as long as auto-
mobiles.
Mr: Ree\-es. That is right. They Avere included.
290 concp:ntration of economic power
Representative- SuMNERS. In these cross patents?
Mr, Ree\^s. All the patents on trucks.
Representative Sumners. Then I misunderstood you.
The Chairman. As I understand it, the only patents which were
excluded from the agreement were patents for such devices which
could be used only on trucks which were not interchangeable.
Mr. Reeves. Quite so.
Repfesentative Sumners. But every interchangeable^ device was
included within the agreement.
Mr. Reeves. That is right.
Representative Sumners. Let's see if that is the answer. It doesn't
apply to trucks that are well established in their manufacture, does it?
Mr. Reeves. Yes. Any trucks that were being manufactured at
that time, and they had patents on them, came into the arrangement.
Representative Sumners. Well, I don't understand it yet, but I will
read the record on it.
Mr. Reeves. I am sorry. I will be very glad to answer any more
questions. To put it simply, Judge, what they did was this: They
simply said all manufacturers will go into this agreement, but the
patents to be included in the agreement will not include patents that
are only for use on trucks.
Representative Sumners. That is the point I am trying to get at.
I have been seeing trucks almost as long as I have been seeing
automobiles. What I am trying to find out is why you are excluding
a patent that is used in the manufacture of some of these trucks
that has been worn out and its successor has been worn out.
Mr. Reeves. We excluded them because at that time trucks were
very new, companies were very small Bud most of the companies that
were making trucks-
Representative Sumners (interposing). They are not new and not
small now. Why don't you do it now ?
Mr. Reeves. They are in now. I apologize.
Representative Sumners. The acoustics are not good here and I
misunderstood the witness.
Mr. Cox. This agreement he is talking about now is the agree-
ment that was entered into in 1914 and it has been changed in a
number of respects.
Senator King. At the end of the 10 years was it extended?
Mr. Reeves. Yes, sir.
Senator King. And is still in existence?
Mr. Reeves. Yes, sir; under somewhat different terms.
Mr. Cox. Taking up that extension, the first extension that occurred
in 1925, what important modification was made in the contract at
that time, Mr. Reeves ?
Mr. Reeves. The agreement was extended for 5 years to in-
clude only the patents that were in the original agreement. That
is, the patents that were held or taken out by members during that
10-year period.
Mr. Cox. Isn't it a fact, Mr. Reeves, that the extension in 1925 ap-
plied only to patents held as of January 1, 1925?
Mr. Reeves. Yes, sir.
Mr. Cox. So that from that point on, no patents thereafter acquired
for that 5-year period were to be included ?
Mr. Reeves. That is right.
CONCENTRATION OF ECONOMIC POWER 291
Mr. Cox. Did you continue the use of that classification of A and
B patents in this extension ?
Mr. Reeves, There was no need for B patents then because it did not
include patents that were coming out.
Mr. Cox. I wish you would tell us as briefly as you can why that
chahge I mentioned a moment ago was made, why in other words did
the cross-licensing agreement at that point give up the inclusion of
patents theeraf ter to be acquired ?
Mr. Reeves. Well, it seemed to be pretty generally agreed that the
10-year period had worked very well, that it had been quite an ex-
traordinary thing, not only to put in the patents, but to put in any-
thing we were going to get during the next 10 years, and there was a
little doubt whether we wanted to do that for another 5 years in the
belief that somebody might get out some very good patents they
wanted to keep for themselves; however at the end of that 5 years
when the agreement was renewed again they did put in all the patents
that had been taken out during that 5 years.
Mr. Cox. Your last remark brings us to the extension that was
made in 1930, and would it be correct to say tl^at after that extension
it applied only to patents which were held by the members as of
January 1, 1930?
Mr. Reeves. Yes ; patents for the 15-year period,
Mr. Cox. And that extension was for a term of 5 years?
Mr. Reeves. Yes.
Mr. Cox. Another extension was made in 1935, is that a fact?
Mr. Reeves. Yes.
Mr. Cox. And that extension applied only to patents held by the
members on January 1, 1930, did it not?
Mr. Reeves, Yes, that is right ; yes ; in 1935 the agreement was ex-
tended to 1940, and included only the patents that were in up to 1930.
We didn't take in the new 5-year period patents.
Mr. Cox. Would it be correct to say beginning then in 1935 some
of the members of the association began to feel that they had some
patents that might be valuable and they might acquire some patents
which might be valuable and they didn't wish to put them into this
cross-licensing agreement ?
Mr. Ree.ves. I think that might be so.
Mr. Cox. Going back to the period between 1914 and 1925, when
all patents except the B patents and the class you mentioned with
respect to trucks were included in the agreement, can you tell us what
the effect of that agreement was in the industry so far as patent
litigation was concerned?
Mr. Reeves. There wasn't a patent suit among the members in 22
years.
Mr. Cox. Do you recollect whether any of the members ever sued
anyone who was not a member of the association for infringing a
patent held by a member ?
Mr. Reeves. I couldn't answer that, but I don't think there was.
Mr. Cox. Do you have any opinion, Mr. Reeves, as to the general
effect that that cross-licensing agreement had on the industry in
terms of productivity and price in the period between 1914 and 1925 ?
Mr. Reeves. I think it is generally agreed that it tended to throw
the automobile industry open to broad competition with rewards
going to the companies that made the best product, sold at the lowest
292 CONCENTRATION OF ECONOMIC POWER
price, but with an opportunity to every company to make a car based
on the best that the art knew about at the time.
Senator King. It gave every company, then, the same advantages
as every other company?
Mr, Eeeves. Quite right, Mr. King; any company that started in
business could take a membership in the association, which was open
to them, and receive all these Jicenses whether or not he had any pat-
ents to put in on his oAvn account.
Senator King. New companies, then, could avail themselves of that
generous provision.
Mr. Reeves. That is right. And in the original agreement I think
I ought to point out there were many companies that came in that
had no patents at all and the company that had the greatest number
of patents was the Maxwell Co., which put in 110; the Studebaker
Co. put in 55. The average was about 4 or 5 from the other com-
panies.
The Chairman. What would you say as to whether or not this
policy had the effect of standardizing the manufacture of automo-
biles?
Mr. Reeves. I don'jb think that is true, Senator. In every factory
there was a fight on constantly to make changes, to make their car
just a little bit better than somebody else's car and sell it at a low
price if they could.
Mr. Patterson. Mr. Reeves, very specifically Avhy did the two mem-
bers refuse to participate in the cross-licensing arrangement?
Mr. Reeves. Mr. Patterson, one of them felt, I believe, that they
had some patent that they thought shouldn't go into the agreement,
and I think you can get that from that manufacturer himself, and
another manufacturer had practically all the patents on what we call
air-cooled motors at that time and felt he wanted to keep it to himself.
Mr. Cox. One of those manufacturers was the Packard Motor Car
Co., wasn^ it?
Mr. Reeves. Yes, sir.
Mr. Cox. Will you tell us what the other one w^as?
Mr, Reeves. Franklin, which afterward, by the w^ay, came into the
agreement.
JNIr, Cox. Will you tell us now, Mr. Reeves, how many patents were
put into the cross-licensing agreement in 1915?
Mr. Reeves. Originally there were 547.
Mr. Cox. You might just trace the chain from there,
Mr. Reeves. There were 547 patents in the first agreement, 1,06G
in 1925, 1,687 in 1930, and 1,285 in 1935, and at the present time there
are 1,058 patents that are still alive in the agreement.
Senator King. Some of those expired?
Mr. Reeves. Yes, sir.
'Mr. Cox. Mr. Reeves, you said in your opinion in the period be-
tween 1914 and 1925 the cross-licensing agreement had the effect of
increasing productivity in 'the industry and probably of lowering-
price.
Mr. Reeves. That is right.
Mr. Cox. Do you have- any opinion as to what the effect was from
1925 on of excluding the patents that were thereafter to be^acquired
in terms of productivity and price?
Mr. Reeves. I don't think it made any difference.
CONCE^'TKATION OF ECONOMIC POWER 293
Mr. Cox. Why do you think it didn't make any difference ?
Mr. Reeves. Because I think they all kept on making the best cars
they could. The atmosphere created by this cross-licensing plan was
pretty well still in effect, and is today.
Dr. LuBiN. Mr. Reeves, I wonder if you could tell us whether you
have any idea as to number of patents now held and being used in the
manufacture of automobiles that are not subject to the cross-licensing
agreement ?
Mr. Reeves. You mean all outside patents?
Dr. LuBiN. That are being used today.
Mr. Reeves. If I may be permitted I will ask Mr. Arvedson, our
patent attorney, to answer.
Mr. Arvedson. We have no figures that would show that.
Mr. Cox., There was a point in the development of this cross-
licensing agreement, was there not, Mr. Reeves, where patents held
by subsidiaries were excluded from the operation of the cross-licens-
ing agreement.
Mr. Reeves. Yes.
Mr. Cox. Why was that done?
Mr. Reeves. Because it had largely to do with the parts and acces-
sory people and because a company happened to own an accessory
company it didn't seem fair to bring the patents of that company
into the agreement and permit all the members in the agreement to
have made by other companies, under the licenses, the same article.
Mr. Cox. Those patents, even though they were owned by a
wholly owned subsidiary', were excluded from the cross-licensing
agreements ?
Mr. Reeves. Yes, if they were parts; not if they were cars or
trucks.
Mr. Cox. Has it been your experience that any of the membei*s of
the parties to the cross-licensing agreement have assigned or trans-
ferred patents to their subsidiaries in order to avoid the inclusion of
those patents ?
Mr. Reeves. No; nothing like that.
Mr. Cox. No practice of that kind has ever deA^elopedl
Mr. Reeves. No.
The Chairman. Have you any idea how many such accessory
patents are owned by subsidiaries of companies which are in the
agreement ?
Mr. Reeves. I can't tell you that. We haven't that record, but some
of the companies that had subsidiaries might be able to tell you.
Mr. Cox. Do you think there is any substantial number?
Mr. Reeves. There might be.
Representative Sumners. Mr. Reeves, if this is a good thing, why
didn't they put into the agreement the patents tliat somebody wanted
to use? I mean these patents on parts controlled by subsidiaries
that somebody else might want to use. As I understand your expla-
nation, the reason they didn't put them in was because somebody
might want to use them.
Mr. Reeves. Somebody might want to make them, by an outside
concern, in opposition to the company that owned them.
The Chairman. You make a distinction between accessories and
parts, do you not?
Mr. Ri:e\t.s. Naturally.
12-1401— 30— pt. 2 4
294 CONCENTRATION OF ECONOMIC POWER
Representative Sumners. What is the difference? I didn't know
there was one.
Mr. Ree%^es. Accessories generally include lamps and things of that
kind that go on the car, and parts generally are things that go in the
car, such as crankshafts, sliding-gear transmissions, and things of that
kind.
Mr. Cox. Isn't it a fact, Mr. Reeves, that some of the parties to
these cross-licensing agreements refused to go along and put those
accessories patents in from time to time when request for renewals
came up ?
Mr. Reeves. Yes; there was a feeling it was unjust to ask them.
Mr. Cox. How many members of the association are there now, Mr.
Reeves ?
Mr. Reeves. Thirty-four.
Mr. Douglas. What does it cost per year to join ?
Mr. Reeves. The initiation fee is $500, but that applies on your dues,
and the dues are based on production at the rate of one-tenth of 1
percent for the first $20,000,000 worth of business, and then a sliding
scale up to $100,000,000 worth of business.
Mr. Douglas. Net or gross ?
Mr. Reeves. Net.
Mr. Cox. I think you should explain that those dues ai payable
by units within the companies.
Mr. Reeves. Yes ; they are payable by units in the company. That is
to say, Buick and Chevrolet, while they are General Motors institu-
tions, are both individual members in the association.
Mr. Douglas. Wliat other general membership requirements are
there?
Mr. Reeves. None, except as a matter of custom. They require that
the companies should be in production for at least a year. That hasn't
always been followed out ; in the case of Dodge Bros,, when they had
a great big factory under way, but hadn't made any cars, they were
admitted before they made cars because we knew they were in the
business substantially.
Mr. Patterson. What is your potential membership?
Mr. Reeves, The only concerns outside of the Automobile Manu-
facturers Association now are Ford, Bantam, which have been in-
vited, and a limited number of small truck companies who do mostly
a local business.
Mr. Patterson. What percent would you say of the potential mem-
bership do you have today?
Mr. REE^^:s. That is all, I should say ; outside of Ford, we have got
all the balance except these few companies.
Mr. Cox, A little while ago I asked you a question about the ef-
fects of the cross-licensing agreement. Has it been your experience
tliat that had any effect upon the industry since that eliminated in-
dustrial espionage? Do you understand what I mean by that term?
Mr, Reeves. Entirely so. There was never the slightest reason for
one company to have a spy in the plant of another company, because
they all walked through one another's plants whenever they wanted
to and could see all the machinery they had.
Mr. Cox, Has that always been true?
Mr, Reeves, Always been true.
CONCENTRATION OF ECONOMIC POWER 295
Mr. Cox. Was it true when you first began to work on this cross-
licensing agreement?
Mr. Reeves. Yes, sir; it was pretty true then. There have never
been many secrets about the automobile business.
Mr. Cox. Then the cross-licensing agreement didn't do much to
eliminate that fjractice if it didn't exist before the licensing agree-
ment was made.
Mr. Reeves. No ; but it improved the relationship.
The Chairman. Why did you refer, then, to that practice of spies
in factories?
Mr. Reeves. Well, because we know that in many industries we
hear about men being in there to report on activities of the plant, and
there is nothing like that in the automobile business because the
factories are wide open for you or anybody to walk through, as well
as competitors. They invite them over at frequent intervals when
they have meetings ; they invite men over to see some new process.
The Chairman. But you have heard of the other practice being
followed in other industries.
Mr. Reeves. I have ; yes, sir.
Mr. Cox. Mr. Reeves, do you think that this cross-licensing agree-
ment as it operates today is a matter of much importance in the
motor-car industry ?
Mr. Reeves. Well, I think so. Of course, as a manager I may
speak quite differently from what a patent attorney may speak, or
somebody else, but I might say as a matter of trade association it has
created a very fine spirit among the members and a very helpful
spirit which couldn't but be beneficial for any industry to have.
Mr. Cox. Do you think that the patents that are now included in
the cross-licensing agreement are of any particular value?
Mr. Ree\'ES. Some of our patent attorneys say they are not of great
value now.
Mr. Cox. The patents are now not of much consequence, so you
think the benefits of the cross-licensing agreement at the present
time so far as they exist are what might be described as psychical
or spiritual rather than benefits that can be described in terms of
patent law.
Mr. Ree\'es. I should say that.
Representative Sumners. We can't hear you.
Mr. Reeves. The gentleman asked whether or not the patents that
are now in the cross-licensing agreement could be considered of
great importance. The answer to that is, we can't tell unless they are
tested out, but there is a feeling that the patents that are in here
now are the latter-day patents and are not as important as the
patents that were in in the early part of the industry.
Representative Sumners. The ones that were in there in the early
part of the industry are not there now because of expiration of time.
Mr. Reeves. That is right.
Mr. Cox. The early patents in the early agreements have expired.
The only patents that are in the agreement now are patents which
the companies hold as of the 1st of January 1930.
Mr. Reeves. Yes.
Mr. Cox. At this point, I should like, for the sake of the record,
to put in some of these agreements. I will just hand these to you,
296 CONCENTRATION OF ECONOMIC POWER
to save time, and ask you to identify them as accurate copies of
agreements of extensions.
Mr. Reeves. They are.
The Chairman. They may be marked.
(The agreements referred to Avere marked "Exliibits Nos. 95 to 98,"
inchisive, and are on file with the Committee.)
Senator King. Would you say that tlie policy of exchange of these
licenses was advantageous particularly to the new companies which
came in and which had a limited number of patents ?
Mr. Reeves. I think that is certainly true. It is certainly true
because they came in immediately free from any possibility of patent
action, and the number of patents they had didn't enter into it. They
simply put in what they had as against what all others had in.
By the way, Senator, the patents are not given up by a manufac-
turer. He only grants licenses on them. He can license airplanes
on the outside, or Diesel engines, or a;ny kind of apparatus that he
wants to ; it has nothing to do with this.
The Chairman. Does your licensing agreement still contain that
clause, excluding class B patents?
Mr. Reeves. No; because it wasn't necessary. Senator, in view of
the fact that the present agreements don't call for putting in future
patents; they only call for patents that are already known.
The Chairman. If a revolutionary patent were issued now, one
that would make it possible, for example, to build a car which would
operate much more efficiently upon an altogether different principle,
then, in that event, in your opinion it would be beneficial to the
entire industry if that patent were made available to all manu-
facturers.
Mr. Reeves'. Of course, it might be, but as far as that patent was
concerned, the manufacturer who brought it out now would have it
for himself to do with as he pleases.
The Chairman. Yes; that is clear from what you said, but I am
trying to get an expression of your opinion, based upon your expe-
rience with this cross-licensing system as to whether or not it would
be of advantage to the entire industry to have such a patent avail-
able to all.
Mr. Reeves. I think I would be a little bold to answer that. I
think the answer ought to come from some manufacturer who might
get such a patent.
Senator King. It would depend entirely, would it not, upon its
utility, whether or not it Avould cheapen the manufacture of auto-
mobiles or introduce features Vv'hich were considered advantageous in
the automobile industry.
Mr. Patterson. I should like to ask for the record .this question :
No patents have been added to the pool since 1930 ?
Mr. Reeves. None have been added since 1930.
Mr. Patterson. Isn't it likely that today there are many, many
more patents outside of the pool than there are in and siibject to the
agreements?
Mr; Reeves. Owned entirely outside the pool ?
Mr. Patterson: Outside the pool.
Mr. Reeves. Oh, yes; thousands.
Mr. Patterson. What is your plan for taking care of those?
CONCENTRATION OF ECONOMIC POWER 297
Mr. Reeves. I don't think there is any plan that can be followed.
The Chairman. In other words, then, this cross-licensing agree-
ment refers only to the basic patents and as they run out, the agree-
ment is gradually disappearing.
Mr. Reeves. That is the way it is working now.
Mr. Patterson. Mr. Reeves, could not the cross licensing group
act in restraint of trade by mutually agreeing not to use a basic
patent ?
Mr. Reeves. To agree among themselves?
Mr. Patterson. Yes.
Mr. Reeves. I suppose they might, but if you get a good basic
patent, you will get a lot of manufacturers who will be very glad
to take a license from you, and very quickly.
Dr. LuBiN. Mr. Reeves, what in your opinion is the reason for
these manufacturers refusing to enter into a cross-licensing agree-
ment in 1930 and 1935, of the type that existed earlier, ^yhich would
provide for making new patents available to their competitors?
Mr. Reeves. Because I think that there was a good deal of re-
search work going on, proving grounds had been established by a
number of companies, large sums of money were being spent, and
it was recognized that it was hardly fair under those circumstances
to have the new patents included as they come out, providing new
ones were coming out, but there haven't been so very many.
Dr. LuBiN. Do you think that the fact that 1930 was a depression
year and the market v^as relatively limited might have had something
to do with this unwillingness, due to the fact that each company felt
that it would like to hold on to such patents as it had for itself so as
to get as big a share as it possibly could of the restricted market then
existing ?
Mr. Rebates. I don't think that; I don't think that they expected
that the patents were going to help them during those next couple
of years do much about the market. I think what they felt about the
market was that they had to get a car low down in price — of better
quality than before in order to participate in it.
Dr. LuBiN. Yes ; but the holding of your own patents and not shar-
ing with your competitors would make it possible for you to do that
and get a bigger share of the limited market than you would get if
you shared the patent.
Mr. Reeves. If the patents were really of great importance, but
there weren't any developing at that time.
Representative Sumners. This testimony that is being offered seems
to indicate that it is valuable to have this interchange of the right
to use a patent. You have been testifying with reference to this
group agreement under which there is an interchange of the right
to use a patent. That is supposed, I presume, to be valuable to the
industry and to the public. If that is so — and I am not asking this
in any argumentative sense — then why should there not be a general
and, if necessary, compulsory interchange where proper compensation
is made of the right to use a patent ?
Mr. Reeves. I couldn't answer that. Judge, because I am no judge
of what other industries require. It might be in other industries that
it is not necessary to interchange patents. It happened in the auto-
mobile industry, which was a very broad one, which involved many
298 CONCENTRATION OF ECONOMIC POWER
patents, many of them old, all put together to complete a motor
vehicle, that it worked very well.
Representative Sumners. Of course, if you just used second-hand
patents that were worn out, it didn't hurt anybody or do anybody
very much ^ood ; but to the degree that you did have some valuable
patents and it was a good thing — well, I think I won't press it. Well,
I don't know; I am not getting much information on the point that
I am particularly corteerned about. What T want to know is what
we are going to do about -it and what we ought to do about it.
Mr. Reeves. We have got to get a good deal more evidence in from
all the companies.
Representative Sumners. I don't believe we will get a smarter wit-
ness here before we get through.
Mr. Reeves. I hope I will bear that out.
Mr. Arnold. Could I direct your attention possibly to an industry
by an industrial approach to the facts, using this analogy. I pre-
sume under some circumstances a corporate merger would be a reason-
able restraint of trade. Under other circumstances, the use of that
same device would be an unreasonable restraint of trade. You would
agree there, would you not?
Mr. Reeves. Yes.
Mr. Arnold. Isn't it true that by the same token the use of an-
other legal privilege, the patents, might be in some circumstances a
completely unreasonable restraint in the development of an indus-
trial art and in other circumstances it might be mere compensation
for development work, and that that might be treated as a question
of fact which would differ in different industries? Would you think
that that would be a possibility?
Mr^ Reeves. I should think that would be more of a legal ques-
tion and I wouldn't have the ability to answer, Mr. Arnold.
Mr. Arnold. I wasn't intending to make it a legal question. I
was only intending to ask you whether as a businessman you con-
ceived of the use of the patent being not in a legal sense but in an
economic sense, an unreasonable restraint of trade if it were used in
such a way that it did create a monopoly privilege, and reasonable in
a business sense if it were used in such a way that it only compensated
for the development for the inventor, and so on, and that determina-
tion of whether it was economically reasonable or unreasonable might
be a question of fact which varied in different circumstances.
Mr. Reeves. I should think that would be true.
Senator King. The purpose of the constitutional provision and of
the law itself is to give a monopoly to the patentee. Now, he may
or may not use that patent. He may hide it under a bushel or he
may exploit it, as he sees fit, and in the utilization of the patent
per se he is not violating the Sherman antitrust law because he has
a monopoly on that patent.
Mr. Arnold. I would not wish to discuss the law on that. I would
only indicate that from an economic point of view, the use of any
legal privilege in such a way that it actually restrains the develop-
ment of industrial arts might be a question of fact and conceivable
machinery might be set up to treat the patent problem much as you
treat the merger problem. I don't wish to take any position; I am
only suggesting that in answer to Congressman Sumner's query as to
whera this particular hearing might be leading us.
CONCENTRATION OF ECONOMIC POWER 299
The Chairman. That is a question of policy, is it not, Mr. Arnold?
Mr. Arnold. Yes; and it is a hearing directed somewhat at ques-
tions of that kind.
Mr. Cox. Mr. Reeves, I would like to ask you some questions about
the state of aflfairs while the agreement was in the form which
existed between 1914 and 1925. Is it not a fact that if any of the
companies who were parties to the agreement at that time bought a pat-
ent from an inventor or some other person outside the cross-licensing
agreement, that patent had to be put in under the agreement?
Mr. REEvtis. Yes.
Mr. Cox. So that a company presented with an opportunity for
purchasing a patent from an inventor could get no competitive ad-
vantage by that purchase as against his competitors who were par-
ties t& thp cross-licensing agreement?
-ml: Reeves. Yes.
Mr. Cox. Do you think that situation was a healthy one from the
point of view of the inventor who was trying to sell a patent to
someone ?
Mr. Reeves. I think Mr. Arvedson can answer that.
Mr. Cox. I want you to answer it.
Mr. Reeves. He said "yes" and I rather agree with him.
Mr. Cox. Do you think an inventor in that situatiori was really
peddling his invention in a competitive market ?
Mr. Reeves. He didn't have to sell it, you know. He cou'd have
licensed them. He could have licensed them and he couldn't licei\se
them exclusively. He had to license everybody that wanted a license.
That was his protection.
Mr. Cox. Didn't it present an opportunity for all of t'lie members
of the cross-license agreement to agree even as to the license fee
which they paid to the inventor ?
Mr. Reeves. It might, but there were no such instances that came
up. The provision was that if a manufacturer took a license hfe
couldn't take an exclusive license, which would bar tha other mem-
bers in the agreement from having the same kind of agreement
with the inventor, so the inventor had the entire industry to deal
with, and under those circumstances he certainly wouldn't want
to sell patents to one company unless he got a very high price for it.
Mr. Cox. The inventor couldn't have given anyone an exclusive
license under that situation, because no one would have taken it from
hiru.
The Chairman. But it can be done now with respect to new pat-
ents, and the only distinction you make between the old policy and
the new policy is that modern patents are not particularly important.
Mr. Reeves. There haven't been so very many, but you never can
tell when something new and fine is going to come out.
The Chairman. You were unwilling to express ati opinion as to
what should be done if an important patent should develop.
Mr. Ree\'E9. I think that is for the man who has the patent to
decide.
The Chairman. What I had in mind was to get the benefit of
your judgment as a man who has been intimately associated with
♦^he use of this policy as to whether or not in your opinion it is n
I olicy that ought to be maintainprl
300 CONCENTRATION OF ECONOMIC POWER
Mr. Reeves. In view of the fact that the industry has always been
more of an industry of competition in manufacturing and selling,
with patents not considered so important, I think that members of
the industry might say that they think it was fine if they all had
an opportunity to make use of it.
The Chairman. You may recall when Mr. Ford was on the stand
I asked him whether he cared to make a statement to the committee
as to whether or not he would recommend this free licensing policy
to other industries.^ Would you care to answer that question?
Mr. Reeves. I think it would depend on the industry. I think it
is well worth their making a study of it, in view of the way it is
operating in our industry.
The Chairman. But your testimony to this committee is that so
far as it has gone it has been beneficial.
Mr. Ree\'es. That is right.
Mr. Patterson. One other point upon which I am not quite clear is
this: Are the companies in this cross-licensing arrangement under
agreement not to offer their patents to companies who are not
included in this group ?
Mr. Reeves. Oh, no. They can offer their patents to anybody
they want to. All they are doing is granting a license to those who
grant licenses to them.
Mr. Patterson. No verbal understanding?
Mr. Ree\te8. Not a thing; oh, no — nothing of that kind.
Mr. Cox. They cain grant a license to someone outside a cross-
licensing agreement?
The Chairman. It is an agreement for mutual exchange without
any restrictions upon the other users.
Mr, Reeves. And without any exchange of money. There is no
money royalty involved of any kind. It is a quid pro quo, A man
puts in all lie has and he gets all the others have, and the per-
centage is very much in his favor when it is done that way.
Representative Sumners. Mr. Reeves, I didn't exactly understand
your answer to one of Mr. Cox's questions. Here is an inventor.
He has devised something of value to the automobile industry.
There are 30 persons, each of whom might want that. This agree-
ment excludes from the possibility of making a deal with him
all except one, because if one makes it, he buys it for the benefit of
all. Is that right?
Mr. Reeves. If he buys it; but if he only takes a license under it,
then every other manufacturer, in order to compete, would have to
take a license from him. No manufacturer can take an exclusive
license for himself, barring the other manufacturers who are in the
agreement, and that is in the old agreement. In the new agreement
he can do anything he wants to.
^ Representative Sumners. But each manufacturer would have to go
io the same source for his right.
Mr. Reeves. The inventor has the right to grant licenses to 50 man-
ttfacturers if they all want it.
The Chairman. Was there any discussion in the organization at
.the time the policy was changed as to the merits of these two different
policies ?
Mr. Reeves. I don't think that anything came up except the fact that
■ » See supra, p. 284.
CONCENTRATION OF ECONOMIC POWER 3Q1
a great deal of development work was going on. Everybody hoped
that they would have something that would be a little better than
somebody else's, so they said : "We will renew the agreement with the
patents that are now in"; but at the end of 5 yeare, when they had
looked over all the patents that had come out during that period, they
said, "There is nothing here that is so important but what we all
ought to put them in" ; and they did ; so the agreement affected patents
over a 15-year period; and it was then, in the next agreement that
came along, where they said : "New developments are going on, and it
seems only fair that companies that are spending gieat sums of money
in development work and testing and things of that kind might be en-
titled to some special rights under it" ; so they agreed to go along with
the agreement as it was, with nothing new coming in.
The Chairman. Well, then, are we to understand that these auto-
mobile manufacturers are abandoning this policy?
Mr. Reeves. No, indeed. The present agreement does not expire
until 1940.
The Chairman. But I mean with respect to all patents which are
not included within that policy you are abandoning it.
Mr. Reeves. They may, in 1940, when that comes up, decide to
put them all in.
Mr. Douglas. They abandoned it in 1935, when you didn't iirelude
them in the new agreement.
Mr. Ree^^s. Yes ; for the future patents. All the old patents are in.
The Chairman. That is a very important factor of this original
agreement. Your original agreement extended to existing patents
and to all future patents. Now your agreement extends only to
existing patents.
Mr. Reeves. Right.
Senator King. Did it extend to all future patents for an indefinite
period, or was it not circumscribed or limited by a 5-year period?
Mr. Reeves. Ten-year.
Senator King. It was only for 10 years, not for all time?
Mr. Reeves. That's right.
Mr. Cox. It is a fact, isn't it, Mr. Reeves, that the patents that are
in the cross-licensing agreement today are not important patents?
Mr. Reeves. I think Mr, Arvedson ^ is a better judge of that.
Mr. Arvedson. I don't know.
Mr. Reeves. He says he doesn't know.
Senator King. They have been important, have they not, in the
development of the industry?
Mr. Reeves. There has been that feeling; yes.
Senator King. And they are being utilized now?
Mr. Reeves. I think so.
Senator King. Some of them are primary patents, in contradistinc-
tion to subsidiary patents, accessory to or appendages to the primary
patents ?
Mr. Reeves. I think some of the later witnesses can tell you how
many patents they are using under the cross-licensing agreement and
owned by other manufacturers, and how many are using their patents.
Mr. Cox. CouJd you tell us now, Mr. Reeves, from any Inaterial
you have there, how many of all the patents that are issued relate to
the automotive industry? Does your book have any figures on that?
> George C. Arvedson, chief of Patent Section, Automobile Manufacturers Association.
302 CONCENTRATION OF ECONOMIC POWER
Mr. Beeves. I think Mr. Arvedson. can give us those figures.
Mr. Cox. Look on page 43.
Mr. Reeves. Total automotive patents to date is 298,000. Nineteen
percent of all the patents issued are automotive patents. With
1,564,000 patents, 298,000 plus are automotive patents.
Senator King. You understand there are only about 700,000 patents
still alive. Do you know what proportion of that 700.000, assuming
I am correct in giving that figure, are still alive ?
Mr. Reeves. I couldn't tell that, sir.
Senator King. How many of the patents that are still alive are
owned or involved in your cross-licensing — 19 percent, did you say?
Mr. Reeves. One thousand fifty-eight live patents are in the cross-
licensing agreement at the present time.
Mr. Cox. I may say it is a little difficult to compare that figure, but
it appears from the figures which have been prepared by Mr. Reeves'
organization that there are probably roughly about 175,000 patents in
existence today which relate to the automotive industry.
The Chairman. It would be interesting to know how many of those
are merely accessory patents in which manufacturers were not inter-
ested wlien they were making this cross-licensing agreement and how
many of them are patents applying to parts used in the manufacture
of motor cars and trucks.
Mr. Reeves. I don't think there has ever been any check on that.
The Chairman. Obviously, the ten-hundred-odd patents which are
in the cross-licensing agreement are only a small proportion of the
number of patents which have been actually issued.
Mr. Reeves. Right. It had to do only with the members of the.
association.
The Chairman. Oh, I see. The total figure, in excess of 170,000,
applies to the patents of all kinds issued <to all sorts of persons, indi-
vidual inventors, and so on, not necessarily engaged in the manufac-
ture of automobiles.
Mr. Reeves. That is right.
Mr. Cox. They are all patents which relate to the automotive indus-
try in one way or the other.
I believe, since this question as to the number of patents has been
raised, that it might be well to offer for the record one page from a
publication of the Automobile Manufacturers Association entitled
"Automobile Facts and Figures, Edition for 1938." The page shows
the number of patents issued year by year since 1899 and percentage of
those patents each year as related to the automotive industry.
The Chairman. You want that inserted in the record at this point ?
Mr. Cox. Page 43 of the booklet I have just described.
The Chairman. Without objection, it is so ordered.
(The page of the booklet referred to was marked "Exhibit No. 99"
and is included in the appendix on p. 684.)
Mr. Reeves. It is a book distributed annually to anybody who is
interested in the industry.
Mr. Cox. In order to save time, I should also like to have you
identify this schedule and ask you whether it is an accurate statement
of the number of manufacturers who belong to the cross-licensing
agreement.
Mr. Reeves. Yes, sir.
CONCENTRATION OB^ ECONOMIC POWER 303
Mr. Cox. And is this an accurate statement of the names of the
companies ?
Mr. Reeves. Yes.
Mr. Cox. With the chairman's permission, I should like to have
those marked.
The Chairman. They may be marked as exhibits.
(The two schedules referred to were marked "Exhibits Nos. 100 and
101," respectively, and are included in the appendix on pp. 685, 691.)
Mr. Cox. I think I have probably concluded with the witness.
Mr. Pattekson. What advantage has the A. M. A. cross-licensing
arrangement over the free and unrestricted policy of the Ford Co.
as outlined by Mr. Ford this morning? In other words, your system
over the Ford system ?
Mr. Reeves. The difference between the Ford system of licensing
and the A. M. A. system of licensing?
Mr. Patterson. I want the advantages, Mr. Reeves, if that is a fair
question.
Mr. Reeves. The advantages of the A. M. A. system over the Ford
system ?
i\Ir. Patterson. The unrestricted licensing policy.
Senator King. That is the difference between a patent system and
having no patent system.
Mr. Reeves. Mr. Ford said they reciprocate with anybody on
patents, and that is what this is, a reciprocal arrangement. The only
thing is that Mr. Ford participates with one company. It is held to
that, whereas this provides that a member signing the agreement
enjoys the patents of all the other companies.
The Chairman. The Chair has been advised that the next witness
that Mr. Cox planned to call is very anxious to conclude this evening
and leave, so if it is agreeable to you, Mr. Cox
Mr. Cox (interposing). I have finished with Mr. Reeves.
The Chairman. If there are no other questions by members of the
committee
Mr. Douglas (interposing). Have you got for the record, Mr.
Reeves, an income statement of the association, showing how much
its annual income is and how much its annual expenditures are? ^
Mr. Reeves. Yes, sir. I will be glad to file it.
Mr. Cox. Do you have it here now ?
Mr. Reeves. No ; I will be very glad to get a copy and file it.
The Chairman. We are very much indebted to you, Mr. Reeves,
for your testimony.
Mr. Reeves. Thank you gentlemen very much for your courtesy.
Thank you, Mr. Cox.
(The witnesses were excused.)
The Chairman. Now, Mr. Cox, if you will call the next witness.
Mr. Cox. I think here again you might swear Mr. Macauley and
Mr. Tibbetts at the same time.
The Chairman. Do you and each of you solemnly swear the testi-
mony you are about to give in this proceeding will be the truth,
the whole truth, and nothing but the truth, so help you God ?
Mr. Macauley. Yes, sir.
Mr. Tibbetts. I do.
* Mr. Reeves subsequently submitted a statement of income and expense for the year
ended June 30, 1938, which was entered In the record at hearings on February 28, 1939,
aa Exhibit No. 302, and is included in the appendix, Infra, p. 802.
304 CONCENTRATION OF ECONOMIC POWER
TESTIMONY OF ALVAN MACAULEY, PRESIDENT, PACKARD MOTOR
CAR CO., DETROIT, MICH. ; AND MILTON TIBBETTS, VICE PRESI-
DENT AND PATENT COUNSEL, PACKARD MOTOR CAR CO., DE-
TROIT, MICH.
Mr. Cox. Mr. Macauley, will you give your name and address to
the reporter?
Mr. Macauley. Alvan Macauley, Detroit, Mich.
Mr. Cox. And Mr. Tibbetts?
Mr. Tibbetts. Milton Tibbetts, Detroit, Mich.
Mr. Cox. Mr. Macauley, you are president of the Packard Motor
Car Co.?
Mr. Macauley. Yes.
Mr. Cox. How long have you been connected Avith the Packard
Motor Car Co..?
Mr. Macauley. Twenty-eight j'ears; twenty-eight and a half, to
be exact.
Mr. Cox. Is your company a member of the Association of Auto-
mobile Manufacturers ?
Mr. Macauley. Yes, sir.
Mr. Cox. How long has it been a member of that association ? [No
response.]
Mr. Tibbetts, will you tell us what your present occupation is ?
Mr. TiBBETS. I am at present vice president and patent counsel of
ti. ^ Packard Motor Car Co. I have been with the company since 1907.
Mr. Cox. Have- you ever been a party to the cross-licensing agree-
ment administered by the association?
Mr. Macauley. >7o.
Mr. Cox. Will you tell us briefly now why you have never been a
party to that agreement ?
Mr. Macauley. Well, my best recollection is that at the time it was
proposed, for years back of that, we had been doing a great deal of
engineering and development work. We were one of the very early
companies in the business, our operations having begun in a formal
way about 1898, 40 years ago, or something like that, and we had
acquired and devised a number of patents of considerable value in
those early days, and measuring what we had against what the other
fellows had combined we felt it wasn't a good thing for us to go into.
Mr. Cox. And you have adhered to that opinion in the interval
of time since ?
Mr. Macauley. At any rate we haven't joined.
Mr. Cox. Can you tell us now how many pafents your company
owns at the present time ?
Mr. Macauley. About a thousand active live patents.
Mr." Tibbetts. Ten hundred thirty -eight.
Mr. Macauley. We own, however, 1,485, all but 1,038 of which
have expired.
Mr. Cox. Wliat is your primary purpose in taking out patents ?
Mr. Macauley. I say it is a defensive measure. If we conceive and
perfect a bit of mechanism or device useful in an automobile,- and we
don't take out a patent on it, it is very Ijkely to happen that somebody
later will devise that same thing or substantially the same thing.
The later deviser would take out patents on it and we would expect to
be notified of an infringement of a device which we had first devised.
CONCENTRATION OF ECONOMIC POWER 305
THE LICENSE-ROYALTY SYSTEM
Mr. Cox. Do you grant licenses to others under your patents?
Mr. Macauley. Yes.
Mr. Cox. Are those licenses granted royalty free, or do you charge
them royalty?
Mr. Macauley, Usually we charge royalty.
Mr. Cox. Is there any case where you have granted a license royalty
free that you recall ?
Mr. Macauley. Yes ; I do remember some.
Mr. Cox. It has always been a policy of your company to collect
royalties under your licensing agreements?
Mr. Macauley. Yes, sir.
Mr. Cox. When you grant those licensing agreements is it your
policy to include any provisions which restrict the licensee as to the
amount of his production or any restrictions as to price ?
Mr. Macauley. No ; there has never been any of that.
Mr. Cox. Are there any restrictive provisions of any kind that you
put in ?
Mr. Macauley, We have sometimes differentiated between the use
of a patent in automobiles on the one hand and perhaps an airplane
motor on the other hand.
Mr. Cox. That is a restriction as to the field of use?
Mr. Macauley. Yes.
The Chairman. By that do you mean you would permit it in one
field and not in another ?
Mr. Macauley. Yes; that might happen, too; but in any event it
Mould probably be that the royalty in the one hand would be larger
than in the other. We had a very recent negotiation in which the
royalty for the use of this device in an automobile engine was some-
thing like $2, but when applied to a modern high-powered aviation
engine it was $148,
The Chairman. I get the impression from what you say, or rather
the manner in which you say it, that the distinction in your mind is
merely one of royalty and not one of the manner in which the patent
is used.
Mr. Macauley. You are right about that.
Representative Reece, Mr. Chairman: On what theory, Mr. Ma-
cauley, do you grant some patents royalty free and others not?
Mr. Macauley. 'One that I have in mind was
Representative Reece (interposing). I am not interested in a par-
ticular patent, but in the theory upon which you grant some royalty
free and others not.
Mr. Macauley. We might have a patent on it, but if it were a
trivial sort of thing Mr. Tibbetts would recommend that no charge
be made.
Mr. Cox. It largely depends on the value of the patent, then ?
Mr. Macauley. Yes.
The Chairman. Would you grant a license to a competitor?
Mr. Macauley. Yes.
The Chairman. And you have done so?
Mr. Macauley. Many times.
The Chairman. So the question of competition with you doesn't
enter into the determination of the royalty?
306 CONCENTRATION OF ECONOMIC POWER
Mr. Macauley. Not at all.
The Chairman. Or the granting of the license.
Mr. Macauley. When we grant them at all we grant them on a
uniform basis to anyone that may apply, generally speaking.
Representative Reece. They are granted on a uniform basis, so
that you don't reserve to j-ourself the privilege of discriminating be-
tween various manufacturers as to Avhether you grant royalty free
or not ?
Mr ._ Macauley. There are xevy few cases of royalty free, so far as
that goes. I am not perfectly' sure that I have your question clearly
in mind.
Representative Reece. If you charge a royalty, do you charge the
same royalty to all manufacturers?
Mr. Macauley. That is generally true. Whether there are any
exceptions to it or not I don't know. I don't remember any at the
moment.
Representative Reece. I Avas just going to make one further ob-
servation. Do you think you should have the right to grant the
patent to one concern without royalty and to another concern with
royalty, and to a third concern at a different royalty?
Mr. Macauley. Yes; I think we shf»uld have the right, if we
want to do that.
Mr. Cox. In fact, in these cases you have spoken of, where the
license has been granted royalty free, that hasn't been a situation,
has it, where you licensed one person under the patent free, and
licensed another person under the same patent and charged him a
royalty ?
Mr. Macauley. No.
Mr. Cox. So far as the particular patent is concerned, you treat
all licenses alike.
Mr. Tibbetts, May I explain that a little? Some of the details
Mr. Macauley hasn't followed quite as carefully, if I may do this.
We sometimes grant a license at a given royalty, and later on we
find the patent is of more importance than Ave thought it was in the
first instance, and later applicants are then willing to pay a greater
royalty than the first one. We do grant, and have in a number of
instances granted, licenses then at higher royalties. Sometimes we
have granted licenses at lower royalties, in which case the first ones
get the benefit of the lower royalties, because in nearly every license
that we have granted, perhaps I could satisfy everyone, there is a
clause, and most licensees granted it, what Ave call a favored-nation
clause, Avhich is that if a license is granted at a loAver rate, a better
rate later on. the first licensee Avill have the benefit of the better rate.
Mr. Cox. The provision operates so, I take it, that the licensees
under a particular patent are all treated alike. There is no situation
Avhere one licensee is paying a larger royalty fee for the same patent
than another.
Mr. TiBBETTS. That depends someAA'hat upon the field also. This
aircraft-engine field we speak of will frequently pay a higher royalty
than the passenger car because of the difference in A^olume. One runs
in the hundreds of thousands, and the other into a few hundred.
Mr. Cox. I will amend the question to say if the patent is used in
the same field of use by two licensees, there is no situation in which
one licensee is being charged a lower royalty than another.
CONCENTRATION OF ECONOMIC POWER 307
Mr. TiBBEiTS. Generallv speaking, that is true.
Mr. Cox. Is it the policy of the Packard Co. to sue persons who
use your patents without obtaining a license?
Mr. Macauley. We never have sued.
Mr. Cox. Has there ever been an occasion when you sued anyone
for infringing your patents?
Mr. Macauley. We have never appeared except as a nominal
plaintiff or complainant in three cases. We have never been the
actual plaintiff or complainant.
Mr. Cox. Was that a situation where you had granted an exclu-
sive license to a third party but you retained legal title to the patent,
and the licensees were suing for infringement, and you were joined
as a nominal party to the plaintiff?
Mr. Macauley. That is right.
Mr. Cox. So, although you grant licenses and obtain royalties if
you can, if someone doesn't take a license and doesn't pay royalty
fees, you don't sue him ?
Mr. Macauley. No.
Mr. Cox. You are not saying you never would sue somebody?
Mr. Macauley. No.
Mr. Douglas. Why did you institute a policy different from the
rest of the industry? '
Mr. Macauley. I don't know. As a matter of fact, that is the
policy of a good deal of the industry. Very few of the other com-
panies have a patent we would like to use they don't charge us for.
We have taken, as I recall it, 176 licenses from other companies — a
very large number.
Mr. Tibbetts. We have 49 licenses outstanding now. That is where
we are receiving royalties.
Mr. Macauley. 176 on the one and 197 on the other, 176 licenses
have been granted to us and 197 licenses on our patents have been
granted to others.
Mr. Cox. Can you give us an idea of what your income from royalty
fees amounts to?
Mr. Macauley. That is about how much, Mr. Tibbetts? What is
that averaging?
Mr. Tibbetts. It has averaged over the past 30 years approxi-
mately $125,000 or $130,000 per year.
Mr. Cox. You will tell us what the licenses which yoii have taken
from others have cost you in license fees and royalty fees ?
Mr. Tibbetts. We have paid $553,000 in the past years. I haven't
divided it up.
Mr. Cox. How many years does that cover?
Mr. Tibbetts. The past 30 years, since I have been with the com-
pany. It is the entire life of the company, practically, because we
had not paid prior to. that time.
Mr. Cox. Are you often sued for infringing other persons' patents?
Mr. Macauley. Very seldom.
Mr. Cox. Can you give us anything to indicate how often that
happens?
Mr. Macauley. Four times. In one of those cases the suit was dis-
missed on our showing of the prior art to the complainant; in two
cases there was a settlement, so the suits were withdrawn ; and the
other case is still in court.
3Qg CONCENTKATION OF ECONOMIC POWER
Mr. Cox. Those four cases throughout the entire life of the com-
pany ; is that correct ?
Mr. Macauley. Yes.
Mr. Cox. Are you threatened with infringement suits from time to
time?
Mr. Macauley. Yes.
Senator Borah. Do you carry on research and development work in
your organization ?
Mr. Macauley. Yes; assiduously.
Mr. Cox. Do you have a special department that does that?
Mr. Macauley. Yes.
Mr. Cox. Do you spend substantial amounts of money in carrying
on that work ?
Mr. Macauley. Quite substantial.
Mr. Cox. If your company could not obtain a patent on the inven-
tion which it makes as a result of that development and experimental
work, is it your opinion that that work would still be carried on ?
Mr. Macauley. Yes.
^ Mr. Cox. You think it wouldn't make any difference?
"HMr. Macauley. I wouldn't say it wouldn't make any difference, but
we would still carry it on — most of it. Certainly some of it we
wouldn't. We very often start on a long blind trail. We don't kiiow
where it is going to come out, and we will pursue it if we think it is a
novel field of endeavor that might be valuable to the public and to
ourselves. We may follow that a long way at considerable expense,
with the hope and expectation that at the end of it we will get a
certain protection tliat will in a measure at least reward us for the
expense we have undergone in following this long trail.
I am quite sure we wouldn't do that sort of experimental work if
there were no patent at the end of it.
Mr. Cox. In a case of that kind, then, when you take out a patent,,
you don't take a patent purely for protective purposes.
Mr. Macauley. No ; not altogether. We feel that if we can, if we
have something to sell that somebody else wants, if they want to use
this new thing we have devised, we have a right to get back a part of
what it cost us to do the development work.
Senator King. As a result of your investigations and experiments
and expenditures, have you devised new practices ?
Mr. Macauley. Yes ; many.
Senator King. And are they being used by any other automobile
companies ?
Mr. Macauley. Evidently, because we have issued a total of 197
live licenses to others and have received from others, as I said, 176
licenses — pretty nearly a balance there.
Mr. Patter.son. Mr. Macauley, may I ask you this question: Has
your company ever availed itself of any royalty licenses off^ed by the
Ford Motor Co. ; and if not, why not ?
Mr. Macauley. We have contemplated it even recently. I don't
recall that we ever did ; no. To the best of my knowledge and belief,
we never have.
Mr. Cox. Mr. Macauley, you were active in the motor-car industry
in the early 1900's, were you not ? When did you first become active
in the industry?
Mr. Macauley. In 1899.
CONCENTRATION OF ECONOMIC POWER 309
Mr. Cox. I will ask Mr. Tibbetts the same question. When did you
first become active in the motor-car industry ?
Mr. Tibbetts. May, 1907.
Mr. Cox. Do either of you gentlemen have any recollection as to
the patent policy followed by the Ford Motor Car Co. at its inception ?
I speak of the period before the Selden suit.
Mr. Macauley. I haven't.
Mr. Tibbetts. I know nothing of it.
Mr. Cox. Are either of you gentlemen acquainted with the cir-
cumstances which led to the formulation of the first cross-licensing
agreement by the Automobile Manufacturers Chamber of Commerce,
in 1914?
Mr. Macauley. I haven't a very definite recollection of all the
circumstances. I have a recollection of the Kardo incident.
Mr. Cox. Will you tell us about the Kardo Co., Mr. Macauley?
Mr. Macauley. That was a long, long while ago ; in 1914, this was.
We had among our applications in the Patent Office one for rear-axle
structures, and the American Ball Bearing Co. had another applica-
tion in, and the Peerless Motor Car Co. had a third application, and
they got into interference. We fought up hill and down dale for
a while, and finally the interference was terminated. We, each of us,
got a patent at any rate, and then the American Ball Bearing said to
us that we were infringing their patent, and Peerless said we w^ere
infringing their patent, and we said, "Well, we have got one, too,
and we think you are probably infringing ours," and that is the way
it was for a little while. The two of them came to us and said they
had got together, and proposed that we join in order to clear up the
situation and to avoid their threat of infringement to us, their
respective threats, and we did. We joined up.
We said, "All right, that is a good way to clear it up as far as we
are concerned," and they organized what they called the Kardo
Co., with a certain group of patents, all relating, however, to rear
axles — front and rear; axles, anyhow — and that Kardo was organized
^"4 later granted a good many licenses to the industry.
'Mr. Cox. That was a case where, after you three companies had
been involved in long and, I presume, expensive interference proceed-
ings in the Patent Office, and the patents had issued, you still didn't
know what the respective scopes of the different patents were, and you
were faced by a Jong period of litigation ; is that right ?
Mr. Macauley. I don't say we didn't know. We had our opinion
about it, but it was somewhat easier to put in our patent with the
others than to undertake expensive and troublesome litigation.
Mr. Cox. You decided to put all of the patents in the one com-
pany, really a sort of holding company for the patents?
Mr. Macauley. That is right.
Mr. Cox. Do you think that circumstance contributed in any de-
gree to the execution of that first cross-licensing agreement?
Mr. Macauley. I don't definitely know that it did. I haven't any
clear recollection on that.
Mr. Tibbetts. I don't know% but I have always suspected that that
was the principal reason for it.
The Chair>lvn. It preceded the other agreement.
Senator King. It was a sort of precedent.
12442J— 39— pt. 2-= 5
310 CONCENTRATION OF ECONOMIC POWER
Mr. Cox. What do you think, Mr. Macauley, about the effect that
cross-licensing agreement of the association has had with regard to
the industry ? Do you think it has been a good thing ?
Mr. Macauley. I think it has been a good thing.
Mr. Cox. Do you think it is still a good thing, in the sense that it
now makes very much difference?
Mr. Macauley. I think it is a good thing right today.
Mr. Cox. You think the patents included in the cross-licensing
agreement are of any particular importance, or do you have an
opinion about that?
Mr. Macauley. I have just an impression. I don't know of any
outstanding ones, no, that are included. Of course, it is much more
difficult today to get an outstanding patent or important patent or
valuable patent than it was years ago when the industry was young.
It has been refined and developed today so that, to a considerable
extent, inventive talent is directed to the smaller features, not so
important.
Mr. Cox. I think that will be all.
The Chairman. Mr. Macauley, does the Packard Co. use any of the
1,000 patents which are in the cross-licensing agreement?
Mr. Macauley. We have the 1,000. We use our own patents, if
that is what you mean.
The Chairman. I am not asking about that. Of course, you iTse
your own. Mr. Reeves just testified that at the present time there
are some 1,000 patents in the cross-licensing agreement. Do you
know whether or not the Packard Co. uses any of those patents?
Mr. Macauley. Not to the best of my knowledge. Mr. Tibbetts
would be a better authority on that than I.
Mr. Tibbetts. I don't think we do, unless possibly it is some of
those under which we are licensed by the companies which hold them.
The Chairman, You do hold some special licenses? Wliat I am
trying to get at is some knowledge of to what extent the really basic
patents of the automobile industry were the foundation of this cross-
licensing agreement. It has been testified that, as the patents expire
and therefore lapse, they pass out of the agreement, and that the
association is not now making new patents the basis of the cross-
licensing system, or bringing them in the cross-licensing system.
What I am trying to find out is whether or not, at the time this cross-
licensing agreement was first effected, there were any basic patents
which were in the cross-licensing agreement which you didn't use.
Mr. Macauley. Well, I don't think there were an awful lot of im-
portant patents in it.
Mr. Cox. At any time?
Mr. Macauley. No.
Mr. Cox. Do you think that an agreement had any more beneficial
effect in tlie period between 1914 and 1925, when it included all patents,
including those thereafter to be acquired, than it has today? Do
you understand that?
Mr. Macauley. Will you ask that again ?
Mr. Cox. I will restate the question. What I wish to know is this :
I assume from your previous answer that you think that, for the
period between 1914 and 1925, the cross-licensing agreement had a
beneficial effect upon the motorcar industry? Would you say that
CONCENTRATION OF ECONOMIC POWER 311
that beneficial effect was of more importance tlian the effect of the
agreement is today?
Mr. Macauley. Yes, sir.
Mr. Cox. Is that because the patents which were under the cross-
licensing agreement at that time were more important than the patents
are today?
Mr, Macauley. I would say yes.
Mr. Cox. Would one. of the reasons for your answer also be that
that was a period during which the art in the industry was developing
in a more basic sense than it is today?
Mr. Macauley. Yes.
Mr. Cox. Has it been your experience in all the years you have
been in the motorcar industry, Mr. Macauley, that the manufacturers
in the industry paid a gi'eat deal of attention to patents in the sense
of attempting to enforce them against each other?
Mr. Macauley. No; they haven't.
Mr. Cox. Do you have any explanation for that?
Mr. Macauley. Wliy, no. I think they were an awful nice lot of
fellows.
Mr. TiBBETTS. That has more to do with it.
Mr. Macauley. Nobody was trying to pirate somebody else's pat-
ent. If we looked over the field and found we encountered some
General Motor's patent, we would go to them and say, "It looks like
we have been infringing this. Will you give us a license?" And if
the conditions were reversed, Ave gave them a license.
Mr. Arnold. No situation ever developed in the motorcar industry
where people who didn't manufacture had substantial control of pat-
ents, did there? That is, nonmanufacturing control of patents didn't
develop, did it?
Mr. Macauley. I don't remember many cases of that kind.
Mr. Arnold. And, therefore, the people dealing with the patents
were primarily interested in production and not in getting an income
from patents?
Mr. Macauley. That is true.
Mr. Arnold. And isn't it true that that probably is one of the
reasons why manufacturers did not emphasize patents as a source
of income ?
Mr. Macauley. Undoubtedly.
Senator King. In all the licenses you have issued, you have only
got in 30 years — —
Mr. TiBBETTS (interposing). $4,099,707 and have paid out $553,401.
Mr. Macauley. That, of course, didn't include the cost of getting
the patent.
Mr. Cox. Will you give us some rough idea of what percentage
that income from royalities bears to the rest of your income?
Mr. Macauley. I don't know. Our earnings have been as high as
$25,000,000 a year, so it is negligible.
The Chairman. Your chief concern in getting patents then is
rather to protect your company against exploitation by some other-
person who might patent the devices.
Mr. Macauley. That is quite right.
Mr. Douglas. On the basis of your experience, Mr. Macauley,
would you conclude that the protective period of the patent law
should ]»e shortened?
312 co^'CE^'TIiATION of economic power
Mr. Macauley. No; not the state of the patent, 17 years. I don't
think that should be. It often takes many years to perfect a device,
even after you have the general principles in mind. I know one cost
nearly $800,000, represented to me; it wasn't a serious thing either,
and it took quite a few years to get it so it was workable.
The Chairman. What would be your opinion with respect to the
practice which is sometimes followed of keeping a device in the
status of application rather than a patent ?
Mr. Macaulet. I am very much against it.
The Chairman. In other words, the period during which an appli-
cation may protect a device, in your opinion, ought to be shortened?
Mr. Macauley. No ; I think that there shouldn't be the opportunity
to keep a device in the Patent Office a long while. Some of them
have been there 10 or more years, and they are finally issued for 17
years. In a way, that makes 27 years. I think 17 years is all right.
I understand the Commissioner of Patents has a recommendation to
limit it so that no patent, including the time of application, shall
exceed 20 years.
The Chairman. You see no objection to that ?
Mr. Macauley. No,
Senator King. Hasn't the principal trouble in the Patent Office
been the unwarranted and oftentimes improper interference for the
purpose of protecting and prolonging the life of the patent ?
Mr. Macauley. I think there has been some of that. It is a very
bad practice, too.
Mr. Patterson. Disregarding the question of profits, which sys-
tem of patent licensing do you consider has been most beneficial to
the development of the industry? There are three systems — the
Ford system, your system, and the A. M. A. system.
Mr. Macauley. The patent system has been of very great value.
Mr. Patterson. I don't think you heard the question. Disregard-
ing the profit considerations, which system of patent licensing do you
consider has been most beneficial to the development of the auto-
mobile industry, of the three systems, which, in your judgment, do
you class as No. 1?
Mr. Macauley. I can think of two, cross-licensing, and the one we
use. What is the third?
Mr. Patterson. There are the Ford, the A. M. A., and the
Packard.
Mr. Macauley. I think the Packard system is the most generally
applicable, beyond any doubt. I don't think there are many indus-
tries to which the cross-licensing agreement of the A. M. A. would
be applicable.
Mr. Patterson. That is the answer I want.
, The Chairman. I don't think you understood his answer, or that
Mr. Macauley understood your question. He thought you were re-
ferring to the application of this system to other industries in gen-
eral. My understanding of your question was that you wanted to
know which was the most beneficial to the
Mr. Patterson (interposing). To the development of the motor
industry.
The Chairman. The Ford system, the association system, or the
Packard system.
Mr. Patterson. I think his reply will be the same.
CONCENTRATION OF ECONOMIC POWER 313
Mr. Macauley. I would Say the Ford system looks pretty good.
He says he gives them for nothing to anybody that asks.
Mr. Arnold. Couldn't you say that the Ford system would be the
best if you could afford it ?
Mr. Macauley. I think it would be iit Utopia ; yes.
Dr. LuBiN. Mr, Macauley, I wonder whether you would be willing
to venture an opinion as to why the manufacturers of motor vehicles
prior to 1930 were willing throughout the A. M. A. to share not only
existing patents but all new patents, excepting class B patents,
whereas after 1930 they were unwilling to take a chance on sharing
new patents that might be granted them with their competitors.
Mr. Macauley. Yes; I had the impression that they didn't have
very many valuable patents prior to some date in there ; I don't know
what it was, and
Senator Kikg (interposing). About 1925.
Mr. Macauley. After that, some of the companies began to expend
huge sums of money and to develop more or less valuable things, and
I think whenever the}' wanted to reserve the oi^portunit}', whenever
they were asked to go into an extension of their licensmg agreement
to look over what it was they were going to shovel into the general
agreement and the value of it before they committed themselves.
It is a very human sort of position to take, I would say.
Senator King. Do you think if that person in adopting a. policy
might take into account the fact that his company was exj^ending
perhaps several million dollars a year for new development, whereas
other companies were expending very little, and, therefore, he would
feel that he was entitled to some degree of discrimination or priority
in the allocation of the patent?
Mr. INIacauley. Very true.
The Chairman. Are there any other questions to be asked the wit-
ness ? Mr. Cox, you have completed ?
Mr. Cox. Yes • I have.
The Chairman. Gentlemen, you are excused with the thanks of the
committee.
(The witness was excused.)
We will recess until. tomorrow morning at 10 : 30.
(Whereupon at 4:30 p. m. a recess Avas taken until Tuesday, De-
cember 6, 1938, at 10 : 30 a. m,)
INVESTIGATION OF CONCENTKATION OF ECONOMIC POWEK
TUESDAY, DECEMBER 6, 1938
United States Senate,
Temporary National Economic Committee,
Was king ion, D. C.
The committee met at 10 : 40 a. m., pursuant to adjournment
on Monday, December 5, 1938, in the Old Caucus Room, Senate
Office Building, Senator Joseph C. O'Mahoney presiding.
Present: Senators O'^Iahoney (chairman), Borah, and King; Rep-
resentatives Sumners and Reece; Messrs. Arnold, Henderson, and
Patterson, Berge, and Peoples.
Present also : Department of Justice staff for Temporary National
Economic Committee study — counsel, H. B. Cox (Special Assistant
to the Attorney General), Joseph Borkin, Ernest Meyers, Charles L.
Terrel, Benedict Cottone, Willis Rice, George Dession, Fowler Hamil-
ton, H. C. Engelbrecht, Victor H. Kramer, J. M. Henderson, Monroe
Karasik, Irving Glickfeld, Hyman Ritchin, David Clarke, Norman
Bursler, and Seymour Lewis; also chief counsel for Federal Trade
Commission Temporarv National Economic Committee study, George
W.Williams.
The Chairman. The meeting will please come to order.
Mr. Cox, are you ready to proceed?
Mr. Cox. I am, sir.
The Chairman. You may do so.
Mr. Cox. I have recalled Mr. Tibbetts, who testified yesterday
afteroon with Mr. Macauley, because there is one matter I didn't
cover that I wish to cover with Mr. Tibbetts.
The Chairman. Very well.
TESTIMONY OF MILTON TIBBETTS, VICE PRESIDENT AND PATENT
COUNSEL, PACKARD MOTOR CAR CO., DETROIT, MICH.— Resumed
Mr. Cox. IVfr. Tibbetts, how long have you been practicing at the
patent bar?
Mr. Tibbetts. Thirty-five years.
Mr. Cox. Is all of your time now devoted to the Packard Motor
Car Co.?
Mr. Tibbetts. Yes.
Mr. Cox. That has not been true all the time ?
Mr. Tibbetts. It has been for 31 years.
Mr. Cox. As a result of your experience at the patent bar, Mr.
Tibbetts, are you prepared to venture an opinion as to any changes or
corrections that might be made in the patent law so that it would more
nearly fulfill the constitutional purposes?
Mr. Tibbetts. During most of that time I have been on various
committees of associations such as the National Association of Manu-
facturers and some committees in the Patent Office, and have conse-
quently followed the various suggestions that have been made from
time to time in connection with proposed legislation for changing
315
316 CONCENTRATION OF ECONOMIC POWER
the patent laws, and I have formed some conchisions as to changes
I think should be made, and amongst them, if you want me to state
them-
Mr. Cox (interposing). I should like to have you do so.
Mr. TiBBETTS. In particular is the so-called 20-year proviso, which
is a proviso fixing the term of the patent 20 years from the filing
date or 17 years from the issue date, whichever is shorter. And
with that, however — and I think this is probably one of the diffi-
culties that has been encountered before in getting that provision
through Congress — I think should go some other changes in connec-
tion with interferences. If you put that provision through only,
you then make it bad for the applicant who is in the Patent Office
and is tied up with interferences against his will, perhaps, and may
be in there for 10 or 15 years and thereby have the term of his
patent cut down considerably. If he had control of it that would be
something else, but if the practice in the Patent Office itself, inter-
ferences and prosecutions, can be at the same time cut so that 3 years
will be ample time for one to get his application out, then the 20-year
proviso becomes a practical thing, so that in shortening interferences
I might suggest that some of the appeals be cut out ; that is, that the
patent be issued, perhaps after a decision by the Examiner of Inter-
ferences, and that the Commissioner, for instance, be given authority
to shorten the 6 months' period within which an applicant may
comply with an official action. It is fixed at 6 months; it used to be
12 months some time ago. Let the Commissioner liave the option of
shortening that in cases where reply can be made very easily. That
is true in a great many of the Office actions.
And perhaps a change in the public-use statute from 2 years to 1
year would bring applications into (he office earlier, so that if a
program of that sort is outlined, I think it would probably have a
better chance at passage, and it certainly would be better than to
try to pass any one of them.
The Chairman. Mr. Tibbetts, all of tiiese suggestions which you
have just made seem to be based upon a belief in your mind that
the period of execlusive use to an inventor should be shortened.
Mr. Tibbetts. No, Mr. Chairman, I don't think so. I think you
should still have the 17 years, and that isn't any too long.
The Chairman. You misunderetand me. Of course, I realize that,
but under the present practice, by reason of the provision which
prevents the 17-year period from running until the patent is issued,
the period of exclusive use is greatly lengthened, is it not?
Mr. Tibbetts. Exclusive use starts only when the patent issues, sir.
The Chairman. When the patent is appHed for, there can't be
very much infringement without danger of litigation, can there, or
am I mistaken about that?
Mr. Tibbetts. If the infringement is continued after the patent
issues, there will be infringements, but there can be none before
that.
J. The Chairman. Perhaps I should state my understanding of your
testimony this way : All of these suggestions which you have made
impress me as implying the belief on your part that there sliould be a
definite limit to the period of protection.
Mr. Tibbetts. Yes, sir; and I don't think that the application
should be kept in the Office as long; that is^the main thing. Both of
CONCENTRATION OF ECONOMIC Pf)WER 317
these provisions will push them out earlier, the 20-year provision \yiU
throw them out earlier because one will not try to keep his application
in the office for 5 or 6 years, as some have done.
The Chairman. The reason for limiting the period of exclusive
use is, of course, the belief that any patent after a period should
becom.e public property. Is that right?
Mr. TiBBETTS. After the statutory period ; yes, sir.
The Chairman. And you believe that is a very important phase of
the method in which patents and inventions are handled, do you not?
Mr. TiBBETTS. I think it should have a definite period and it should
not be prolonged by the prolongation of the work in the Patent Office.
The Chairman. All right, now^ in view of the fact that the Auto-
mobile Manufacturers Association has, with respect to some patents,
followed the policy of free use, do you believe that the period of
exclusive use generally should be shortened below 17 years?
Mr. TiBBETTS. I do not.
The Chairman. Why?
Mr. TiBBETTS. Because in so many cases I have seen that isn't long
enough.
The Chairman. In other Avords, it is your belief that the inventor
should have at least 17 years of exclusive use.
Mr. TiBBETTS. I do.
Mr. Patterson. Mr. Chairman, let me ask Mr. Tibbetts this, so
that I can get it clear in my own mind. Do you mean that the period
of termination of a monopoly should be fixed for the fixed number
of years for the public benefit? Would you like to see it a fixed
number of years?
Mr. TiBBETTS. It is a fixed number of years now, Mr. Patterson.
Mr. Patterson. I mean if the whole thing were changed.
Mr. TiBBETTS. The change I suggest is merely for the purpose of
shortening the time in the Patent Office.
Mr. Patterson. Any other period of years than the 17 — you
wouldn't want to see a hundred years.
Mr. TiBBETTS. I certainly would not. I have forgotten just how
the 17 years was arrived at. but it seems to be a very good compromise
between the two cases, that is. one, the simple case where the monopoly
is ])robably too long at 17 years, and the other where inventions are
made and the art doesn't catch up with it until it is 10 or 12 years
old. and then the 17 years is not long enough.
Senator King. Your criticism of the patent system is the procedure
rather tlian the constitutional provision, supplemented by the statute
which gives to the patentee a monopoly for 17 years upon his patent.
Mr. TiBBETTS. The procedure as must be conducted by the Patent
Office now. The Patent Office is doing a good job in getting the
cases out.
Senator King. Do you think that the Patent Office will have the
right to shorten the period for interferences and limit the time
within which the interference must be heard and determined?
]Mr. TiBBETTS. Well, of course they have the limitations there now
in time of taking testimony, and so forth. My thought is if you cut
out several of the appeals, stop them at the examiner of interferences,
that will save considerable time in the Patent Office.
Senator King. Your idea would be to change the procedure in the
Patent Office and make it simpler and nebre expeditious.
318 CONCENTRATION OF ECONOMIC POAVER
Mr. TiRBETTS. Yes, sir.
Senator King. So that the time when the monopolistic provision
of the patent should begin to run would be as soon as possible after
the application for a patent has been filed.
Mr. TiBBETTS. Yes, sir.
Senator Borah. I wish you would state a little more fully why you
think it is proper just to have a 17-year period for some of these
patent monopolies. That is a long time.
Mr. TiBBETTS. Merely from my general experience, that is all. It
hasn't seemed long with a great many of the cases that we have had ;
others, it is too long, as I say, but you have to arrive at a compromise,
of course. It might be 16, it might be 14, it might be 20.
Senator Borah. I was rather anxious to get your views as a prac-
tical man as to why it seems just necessary to have it for so long a
period in order to compensate the man who made the patent.
Mr. TiBBETTS. I could only answer that. Senator, by saying that
with our cases we have never been overcompensated, I might put it
that way, and we have had 17-year terms. I have seen a great many
patents "rim out. I remember' in the early days I thought 17 years
was a long time, looking ahead ; looking back, it is short.
Senator Borah. Yes; I can imagine it would seem short in some
instances. Well, I 'was simply trying to satisfy myself because I
am in favor of a much shorter period, but I would like to have the
viewpoint of those who know more about it and have had experience
with it.
Mr. TiBBETiS. I think it w^ould be a mistake. Senator, unless you
go to the form of petty patents that they speak of, and that has been
suggested, of course, for small patents, of -a term of 3 or 5 years
for the little things. I don't like that because that would just add
to our numbers of patents; instead of two million we would have
three or four million in a very short time.
Senator Borah, You are speaking of the automobile industry en-
tirely.
Mr. TiBBETTS. That is all I can speak for, sir.
The Chairman. You see, Mr. Tibbetts. the point that has im-
pressed itself on, me during the testimony is that in the automobile
industry we had a system of handling patents, there is free ex-
change of certain patents which seems to be altogether at variance
with the principle of the patent law, which is one of exclusive use.
]^ow, the automobile manufacturers apparently felt that it was more
important for them to have a free use of all of these patents among
one another for the purpose of manufacturing than it was for each
patent only, except in the case of Packard, of course, to charge
royalties for the use of the patent. So you see there are two -different
policies witli respect to the handling of patents.
Now, which is the better from the point of view of the public.
That is the question which members of this committee are unques-
tionably asking themselves.
Is it better in the public interest that the monopoly upon the use
of a patent should be shortened; that it should be maintained as
it is or lengthened from the point of view of the inventor? Of
course, it is d<^sirable that he should have the exclusive use of that
device for as long a period as he can so that he may charge the
pubjic for the use of it, but obviously those who drafted the patent
CONCENTRATION OF ECONOMIC POWER 3^9
law now in existence believed that there should be a specific limit
to that period, and that the public at the expiration of that period
should have free use of the patent.
Now whether it be 17 years or 20 years or 6 years, that period is a
grant from the public, from the people of the United States through
their Government, to the inventor, and we are trying to find out
what in your opinion would be a reasonable limit to that grant.
Mr, TiBBETTS. And my opinion is that Ave are just about right
where we stand.
The Chairman. I see. Of course, you have been practicing under
the l7-years law and it may be that tradition has something to do
with that opinion.
Mr. TiBBETTS. It certainly has. We know nothing else in this
country.
Senator King. Isn't it possible if the procedure were modified so
that the patent might be issued promptly after the application has
been made, there would be no objection to a further limitation of
the period of monopoly ? If a person filed an application for patent
and all of the rubbish and delays in the Patent OflEice might be
cleared away and he would get his patent within 2 or 3 years
definitely, then it would be far better if that might be done, to limit
the time, say, to 10 years or 15 years.
Mr. TiBBETTS. I can't agree with you on that, because I fhink right
now a very large proportion of patients — I should say 90 or 95 per-
cent— come out within 3 years. The Commissioner could answer that
better than I.
Senator King. A great number of them are held by interference for
a long period of time.
Mr. TiBBETTS. I don't think the proportion is very great.
Senator King. I think so, if you apply the rule to primary patents,
patents of importance.
Mr. TiBBETTS. That may be. They are difficult to pick out.
Senator King. With these small ])atents, perhaps the interference
isiT^ very great, but I have made some investigation, and my investiga-
tion led me to believe that the evil was largely in the interference and
in (lie delays of the Patent Ofiice— not the fault of the employees, but
the procedure which has been established and which seems to have
been sanctioned by approval and by acts of Congress.
Mr. TiBBETTS. And those things could only be changed by statute.
The Patent Office itself is doing everything it can.
Representative Sumnei^s. I would like to ask Mr. Tibbetts a ques-
tion, if it won't interfere with your course of examination. Mr. Tib-
betts, of course, you were here yesterday and yott know the general
drift of the testimony that we have had thus far. It seems to me that
the outstanding feature of the testimony yesterday was the exhibition
of the automobile peo))]p as a gi'ou]5 which was exchanging patents
among themselves, exchanging the right to use their inventions among
themselves.
Now, the question suggests itself to me as a member of the com-
mittee that if that is a good thing in practice, why shouldn't it be
extended?
Mr, TiBBETTS. To other industries?
Representative Sumners. Yes; generally. And the queer thing
about the business to me is that thev have had this arraiitrement vnfh
--^
320 CONf'ENTKATIOX OF i:<"ON(jMI€ POWKW
reference to some patents and do not liave it with reference to others,
and the ones that ought to have it seem to be established business
people who don't want to have their business imperiled by somebody
discovering something and putting them out of business. Those are
the things that seem to be excluded. You can see how a bunch of
businessmen who want to operate their business and sell to their cus-
tomers and want to have some sort of business security, each one of
AA-hom was under the same peril of a revolutionary patent coming out
that would put him out of business, might agree each with the other
that they would avoid that by exchanging patents; but how it is when
they use these minor ]:)atents by exchange and still expose themselves
to that hazard, I don't understand; do you ?
Mr. TiBBETTS. I don't believe I can explain that, Congressman,. Of
course, I am not in that group, as you know, as you have accepted me
here. I am with the Packard Co. We believe they ought to ]iay for
the patents if they use them, and we do ourselves if we do use them.
Representative Sumneks. I thought this was an exhibition of how
beautiful it was for brethren to dwell together in unity yesterday. I
got it all mixed up.
Mr. TiBBETTS. Perhaps some of those witnesses follow^ing who are
in the cross-licensing agreement can explain that better than I Ci\n.
Representative Sumners. What bothered me about it was tha* if it
is a good thing, as seemed to be believed by some gentlemen yester-
day who testified — and I don't say that in criticism, they probablV
gave us very valuable information — why wouldn't it be a very good
policy generally when the Federal Government, as the cha rman has
indicated, as a matter of grace and not a matter of right, grants a
patent, shouldn't there be attached to the patent the privilege of the
general public, anybody, upon the payment of proper Qompensation,
having the right to use it ? But I am trying to find out, how it^ is
inconsistent with the disposition of the Government to stimulate in-
ventions and discoveries, to attach to that arrangement some provi-
sion which would prevent this grant on the part of the Federal Gov-
ernment from acting hurtfully to somebody engaged in a real produc-
tive business and serving the public interest ?
I don't like to talk so much but I want to get this aci'oss. Why
should the Government make an aiTangement under which it will
permit somebody to have the opportunity to destroy his competitors
in business by reason of a basic discovery ? I mean, as a matter of
public policy, and as a matter of justice, why should the Government
do it?
Mr. TiBBETTS. I don't know that it does do that, and I don't think
I can answ^er your question, either.
Representative Sumners. You mean you think the hypothesis is
not correct, that it isn't possible to develop a basic invention that
might put competitors out of business? I have heard of its being
done in some instances, but I don't know.
Mr. TiBBETTS. I may be Mrong in my view of that, but my thought
is that if this invention which you speak of is developed by one com-
pany, it isn't destroying anything when it keeps another company
"from using it. He has brought something else into existence.
Representative Sumners. Let's examine that a little bit. Suppose
there is an invention that would revolutionize, greatly cheapen, in-
ct-oskSQ the efficiency of, automobiles, for instance, and onh' ono auto-
CONCENTRATION OF ECONOMIC POWER 321
mobile company would use that invention, wouldn't its competitors
be put at tremendously great competitive difficulty in trying to main-
tain themselves?
Mr. TiBBETTS. I suppose they would, but the other answer to that
is that one of the other automobile companies would probably de-
velop something just as good or better in the next few weeks or
months, and as a result there would be competition.
Kepreseiitative Summers. I am not making these observations or
asking the questions in an argumentative sense, but I appreciate that
whether you all appreciate it or not, we are about to fundamentally
examine the whole question of patents under our system. I think
that is in the offing. I don't know whether it is in the offing or not;
it may be right here now. So it is" a proper time to make these basic
inquiries. X tliink.
Mr. TiBBETTS. I think the answer to your question is tliis: The
situation you refer to, I think, would in every instance take care of
itself, in ihat if this thing that is invented and is controlled by one
company is so ausolutely necessary, it will be manufactured either by
that compa'iiy or, if it can't do it there, it will be licensed by someone.
It has alw;i\- takeii care of itself, and I don't know why it won't in
the future.
RepresentatiAO Su:\iners. We heard yesterday that in regard to
the^e patents that they knew about, they had entered into some agree-
ment at least witJi reference to some of them. But with regard to
some invention that might in the future develop, which would be revo-
lutionary, they wouldn't grant their competitors a share in the pos-
sibility of use by any arrangement.
Mr. TiBBETTS. You are again in the cross-licensing agreement, of
which I know very little except as an outsider. We don't do that.
We weren't in the cross-licensing agreements, and I don't know how
to differentiate their patents, because I don't know enough about
them. I am sorry I can't answer your question, but I don't kno^^
liow to.
Representative Sumners., I want, to say to the gentlemen present,
and I say this pretty pei'sonally, we are ignorant. I mean, seriously,
we don't know these things that you gentlemen know, and we are
going to have to legislate, and if Ave legislate without informatiou
it won't be tlie fault of our not trying to find out.
Mr. TiBBETTS. You understand I am not trying to evade your ques-
tion. I just don't know and I am frank to state it.
Senator King. Isn't it a fact that the patent system was not borii
Avhen the republic came into existence, but that it existed in Great
Britain and it existed in all of the States, and that they found, by
experience, as was stated by George Washington in his first- message
to Congress, that it was wise to grant, for a limited period, the right
to in.ventions and to writings. He emphasized writings, as a result
of which our copyright time has been established and persons who
write a good book like, if I may advertise it (and some who do not),
"The Cnll of the Wild," would have a limited period within which
they could exercise control over a j^atented invention or over tlie
works of^tJieir brain, the writings which emanate from them.
Now, has not our development technologically and mechani(^ally
and in the arts as well as in what might be called the manufacttu-ing
business largely resulted from the patent system ?
322 cun<;i:ntratiox of economic power
Mr. TiBBETTS. I think it has.
Senator King. It has induced men to devote their lives to the dis-
covery of new things that would promote in the end the general
welfare.
Mr. TiBBETTS. That is why I think the substance of it should be
left where it is.
Senator King. In the early days before the patent system the people
who had something good kept it a secret, and Parliament said, "If
you give to the public the secret you have, we will give you a limited
period within which you may have the full benefit of your secret.
At the end of that time you must dedicate it to public use." So when
a patent law was formed they accepted that view and fixed 17 years
as the basis ; and your complaint largely, as I understand it, is with
regard to the procedural matters in the Patent Office under which
the life is prolonged for a period which is, perhaps, I say, too lon^.
I don't understand you to say that you object to A, B, C, and D, if
they have patents and there is some question as to whether one is a
slight infringement upon the other or whether it is a large infringe-
ment, giving a license, so to speak, to each otlier, mutual licenses, and
ihon taking advantage of all of the inventions.
Mr. TiBBETTS. We arc doin^ that right along.
Senator I^ng. You see no impropriety in that?
Mr. TiBBETTS. None whatever. It should be encouraged, to prevent
litigation.
Senator Borah. What they are doing is giving themselves the
benefit of the shorter period. They are ending the period of 17 years
between themselves the minute they interchange. I take it the Sen-
ator from Tiexas covered that question; but I want to repeat, these
people have an opportunity to shorten the period from 17 years to a
few months if they want to.
Mr. TiBBETTS. Between themselves.
Senator Borah. Why isn't it a good idea to pass that around to the
])nblic?
Mr. TiBBETTS. As between themselves, each has got something from
the other' They have exchanged. The public doesn't give anything
if you hand it out to the public.
Senator Borah. No; but tlie public is giving this man a special right
to benefit from his patent.
]SIr. TiBBEiTS. The right to exclude others.
Senator Borah. They are giving him a monopoly. Why should
that monopoly beany extended length of time? It is something the
l)iflilic is giving to an individual.
Mr. TiBBETTS. In return for the individual giving to the public his
invention.
Senator Borah. He gets for a certain length of time the benefit of it.
Why should it be 17 years? Seventeen years now would be a hun-
dred years back when Washington lived.
Mr. TiBBETTS. I can't answer that. Tjliat 17 years seems to have
worked out very well for a hundred years. Why change it ?
Senator Borah. It has worked out splendidly for some people.
Mr. Patterson. Yesterday there was some testimony tending to
condeiT.n the grant of patents on alleged trivial inventions.^ Fjom
Supra, pp. 280, 282.
CONCENTRATION OF ECONOMIC POWER 323
your experience as a manufacturer and a patent lawyer, do you care
to express any kind of opinion as to the dij05culties of attempting to
classify an invention as trivial on the one hand, and as important
on the other ?
Mr. TiBBETTS. That isn't easy to answer, Mr, Patterson. I think it
is very difficult to classify them that way. Some countries have
attempted to do it by issuing petty patents of 5 years, I think, and
another patent on real inventions for longer terms. I have alvays
been against it. I don't think you can do that, because you never
know what may be a petty patent today may be of a great deal of
importance tomorrow. I am thinking of one instance of our own,
where we developed a heater for the engine fuel. To shorten the
name of it I call it the "fuelizer," because that is what we called it,
and we used it on the car for several years.
Later carburetors developed and fuel developed so we didn't need
it and it was dropped. We had probably 50 or 75 patents on various
forms of that fuelizer, some of which we bought, some of which
we took out ourselves, but as soon as we dropped it those patents
were of no value at all so far as we could see.
But 2 years ago a manufactur • came out with an accessory for an
automobile, a heater for the body of the automobile, which involved
the same principles and the same construction, and came to us and
asked for a license.
Well, that series of patents is now netting us twenty or thirty
thousand dollars a year in royalties. Two years ago those were petty
patents, or useless, practically. Today they are of considerable value
to us.
That is about the best illustration I have of why you can^t tell.
The Chairman, That is an illustration of an instance in which your
inventor developed an idea for a particular purpose. He used the
patent for that purpose, abandoned the patent, and then another-
inventor conceived the idea of using a similar device for an altogether
different purpose and had to pay you a royalty.
Mr. TiBBETTS. Yes: so we may get some of our money back in
developing it in -the first instance.
The Chairman. It may be beneficial to you, but was it to him?
Mr. TiBBEiTS. Why not? He has an exclusive license and will be
able to control to some extent the competition there, which you should
have the right to do. He will have patents on his adaptation of it.
Representative Sum>;ers. I woidd like to ask one question which I
do not think has been made clear, and that is this: Is there a good
reason wh}', upon the payment of a proper compensation, anybody
ought not to be privileged to use in his business a novel invention ?
Mr. TiBBETTS. The best answer I would have to that is that with
small companies, particularly where they rely entirely upon their
patents and their exclusive use for the development of that compan}^
if they had to license someone else they just Avould be out of business;
that's all.
Mr. Olipiiant. Are you talking about existing or future patents?
I understood the Congressman m as referring to future patents.
Representative Sumners. I wanted to know generally, and I got
your answer, and I appreciate it.'
Mr. TiBBETTS. I don't know that it makes any difference. A small
company, probably organized because of the patented invention, if it
324 CONCENTRATION OF ECONOMIC POWER
had to immediately, before it got its money back at all (and maybe
it cost many hundreds of thousands or a million dollars to go into
the business) might give it to a competitor for nothing
Representative Sumners ((interposing). I got your answer. I
would like to pursue it further. Does this right to have a patent add
to the possibility of a new concern getting in the business as distin-
guished from the situation, if you can imagine it, where no patents
were granted? .
jNIr. TiBBETTS. I wonder if I understand your question?
Representative Sumners. I did it pretty well that time. Will the
reporter please read the question?
(The reporter read the previous question.)
Mr. TiBBETTS. That is a difficult question to answer. I can answer
it only in this way.
Representative Sumners. People don't have any patents on curing
sick folks, though some doctors do it better than others, you know,
and things of that sort.
JNIr. TiBBETTS. With no patents at all the company would have to
get in production in a secret way, keep his patent secret as long as he
could.
Representative Sumners. He wouldn't have any patents.
Mr. TiBBETTS. He would have to keep his inventions secret so long
as he could, and then, as soon as it came out, he would have the diffi-
culty of having competition immediately, I suppose, unless it was
one of those things that required a great deal of capital to get into
the business. Certainly the Incentive is there if he has a patent. If
he has no. patent, I should think the incentive would be gone, to a
certain extent.
Mr. Arnold. The difficulties he would get into vrould be difficulties
of competition.
Mr. TiBBETTS. Decidedly so.
The Chairman. Mr. Patterson, I am sorry for having interrupted
your question. You may have the floor now until you have finished
your questions.
Mr. Patterson. Mr. Tibbetts, will you kindly express your opinion
on this question: In connection with the demand for fewer and
better patents that came out in the testimony yesterday,^ do you
think this is possible by making the Patent Office a tribunal of last
resort; or, in other words, without abolishing appeals from the
Patent Office to the courts?
Mr. TiBBETTS. I don't see how you can do that unless you can
define patentable inventions and force the courts to follow sucli
definitions, and that seems to be an impossible thing to do, because
the Commissioner is guided entirely by the courts to which appeals
are taken from his decisions. At the present time, if he raises the
standard of invention in the Patent Office, the rejected applicant
immediately goes to the Court of Customs and Patent Appeals or
under 4915 to the district court and has him overruled.
Mr. Patterson. Let me ask this: Do you believe in fewer and
better patents I
Mr. TiBBETTS. I do, if we could get them, but I don't know how to get
them.
Mr. Patterson, Strike that out.
1 Siipr.-i, D. 2S2.
I
CONCENTRATION OF ECONOMIC POWER 325
Senator King. You wouldn't be in favor, would you, of making
administrative bodies the last resort, and deny to the inventors the
])rocesses of review in judicial court?
Mr. TiBBETTS. No, Senator; but I think we could make the Patent
Office give an administrative award and issue a patent and then still
have it so the other party to an interference can go out and obtain
his patent also, and in that way, if you can prove earlier production
than the other one you will have a patent that will take precedence
over the first issue.
Senator King. You would not be in favor of permitting some or-
ganization in the Patent Office, even the head of the Patent Office,
to determine that A or B is entitled to a patent and make his deter-
mination absolutely final, denying the right of appeal through the
court ; in other words, cutting off judicial review and making the ad-
ministrativ^e officer the court of last resort?
Mr. TiBBETTS. I am not in favor of that; but I think the patent
could be issued and the question be decided on appeal later.
Senator King. Oi* after the patent Avas issued, if an attempt was
made to sue for infringement, then the whole question - would be
brought to the court as to the validity of the patent ?
Mr. TiBBETTS. Yes, sir ; and it should.
Senator King. But at any rate, the court, if the matter was brought
to its attention, would have the final say in determining the validit.v
of the patent or whether there was an infringement.
'Mr. TiBBETTS. We must have that.
The Chairman. Mr. Cox, have you concluded ? Would it interrupt
you if Dr. Lubin were to ask a question ?
Mr. Cox. No, sir.
Dr. LuBiN. Mr. Tibbetts, to your knowledge has the Packard Motor
Co. ever refused to grant a ligt^^jse to one of its competitors on a
patent it was using in the production of its motorcars ?
Mr. TiBBETTS. Not to my knowledge. I think Mr. Macauley an-
swered that question yesterday in the same way. I have known of
every license we have granted in the last 30 years.
Mr. Cox. That raises a question in my mind which has puzzled me
a little, Mr. Tibbetts. Mr. Macauley and you both have testified that
the Packard Co. believes if someone wants to use one of your pat-
ents, he should pay a royalty ; nevertheless Mr. Macauley testified
yesterday that even though people used your patents without paying
a royalty, you never sued them.^ If you believe in collecting royalties
on your patents, why don't you pursue a more aggressive litigation
policy ?
Mr. TiBBETTS. I thought Mr. Macauley qualified that. I suggested
to him that he do so, and I thought it got into the record that we
hadn't found it necessary to bring suit, but we certaiply would not
say we would never bring suit under our patents, because we have
contemplated it a good many times, but it just simply became unnec-
essary, because we either issued a license or it was settled in some
way.
The Chairman. You succeeded in protecting yourself without
litigation?
Mr. TiBBETTS. Exactly.
See supr.i, p. 307.
124491— 39— pt. 2 6
326 CONCENTKATION OF ECONOMIC POWER
Mr. Cox. Would you say, Mr. Tibbetts, that the expense of patent
litigation is one of the blemishes of the present patent law?
Mr. Tibbetts. I can't answer that question, simply because the
Packard Co. has been able to keep out of litigation, both aggres-
sively and defensively. We have had but four suits filed against us,
and all have been settled or abandoned, so our litigation expense has
been nil.
Mr. Cox. Do you have any opinion at all as to whether any steps
might be taken which would reduce the expense of patent litigation?
Mr. Tibbetts. I don't say that I have. I am not qualified to speak
on that.
Mr. Cox. Eeverting for a moment to the term of the patent, it is
true, isn't it, that in the early days of the Republic the term was for
14 years ? Do you recall ?
Mr. Tibbetts. I think it was.
Mr. Cox. The only point I wish to make, and I wanted to see
whether you agree with me, is whether the 17-year period isn't
merely a historical accident. It is not a reasoned choice, is it?
Mr. Tibbetts. I don't know, but I thought it was a compromise
somewhere between the English law, 14 years, which they had then — ■
16 now — and a 20-year period somewhere else. I confess I am a little
lax in history there.
Mr. Patterson. I may be able to help there. My colleague the
Commissioner of Patents has just told me that when they had the
14-year period there was a provision to renew. With the 17-year
period there is not.
Mr. Tibbetts. I have forgotten.
Mr. Cox, Of course the 14-year period was carried over from the
English law.
Mr. Tibbetts. That is my understanding.
Mr. Cox. We understand that that period probably developed
out of the English practice of granting a patent on a particular occu-
pation which would last for two periods of apprenticeship, 7 years
each. Is that your understanding?
Mr. Tibbetts. That is my understanding, now that you recall it
to my mind.
Representative Reece. I shall first say that your response to Sen-
ator Borah's question that it had worked well for a hundred years,
therefore should not be altered may be all right, but it seems to me
that conditions have changed a great deal with reference to the
utilization of patents and the effect of the introduction of a new
patent might have upon more than one industry, or possibly industry
generally. A hundred years ago an important patent might have
been developed. It would have required at that time an organization
of a* new business, which would have been the beginning of a new
industry in order to utilize that patent.
Industry today is so widely developed in all of its phases so that
it is difficult to conceive how a new patent might now be developed
which could not be utilized by some business or industry that is now
in operation, and conversely, it is difficult to conceive how such an
important patent could be devised which would not have a more im-
portant effect upon industry if other concerns are not able also to
take advantage of that patent. Tliat is, as one of the members a
Avhile ago indicated in his question, it might destroy business wlik-h
CONCEXTItATIO?>: OF ECONOMIC POWER 327
is already developed in connection with which a great deal of cap-
ital has been invested. It would seem to me that those are questions
which rise for consideration which might not have obtained a hun-
dred years ago, or when our present patent laws were placed upon
the books.
What is your thought in that connection, if I may ask?
Mr. TiBBETTS. I would say that we are having that every day as a
matter of fact; a company comes out with something new and it
makes obsolete something that some other company is making or
something that that particular company was making itself, so far as
that is concerned, and I was going to say why shouldn't that company
have the advantage of a few years use of that particular improvement
over its competitors. The competitor will come out with something
just as good or better.
Representative Eeece. I agree with you this far, and I am not
saying that I disagree in any respect, but I readily recognize that he
might have certain advantages, but if granting those advantages
should destroy the investments of other people, he then is getting
more than an advantage, starting a destruction of investments which
would seem to me to give rise to a different question if such a condi-
tion should arise.
Mr. TiBBETTS. You have stated an answer as well as a question, you
might say. I don't know how I could improve upon it.
Representative Reece. It was an observation, I will say.
The Chairman. May I interrupt at this point? I think in the
interest of expediting the proceeding, it will be a better policy if we
permit Mr. Cox to complete his examination in chief before there
are any more interruptions.
Mr. Oliphant says he would like to ask a question in this con-
nection.
Mr. Oliphant. I should like to ask if he considers that the disrup-
tion of industry, of investments, dislocation of employment by sudden
emergence of new patent processes is in contemporary society a
trivial matter.
Mr. TiBBETTS. Taking the question as you put it, I would say, no;
it is a very important matter.
Mr. Oliphant. It is a serious matter.
Mr. TiBBETTS. I would think so.
Mr. Cox. Mr. Tibbetts, yesterday Mr, Macauley said that the Pack-
ard Co. was frequently threatened with infringement suits by persons
holding patents.^ Have you ever examined any of those instances to
determine how many of the threats were made with respect to a
paper patent; that is, a patent that had never in fact been put
into practical operation ?
Mr. TiBBETTS. I don't know the relative proportion, but most of
them are, you might say.
Mr. Cox. It is a fact, then, that in at least your experience paper
patents are used for purposes of threats and litigation?
Mr. TiBBETTS. Not entirely so. Paper patents have their use. As
a matter of fact, many inventions start from paper patents and are
followed by the practical application of the invention. It comes
oil later and other patents are granted on the improvements.
1 Supra, p. 308.
328 CONCENTRATlO-\ OF ECONOMIC POWER
Mr. Cox. In other words, then, you think it is difficult to draw a
distinction between a patent which is merely a claim on paper and
a patent which has actually been put into practical operation?
Mr. TiBBETTS. A pa})er patent may be a paper patent today and
may be a very practical and important one tomorrow when somebody
begins to manufacture on it.
Mr. Cox. The point that I am trying to inquire into is whether
any distinction should be made with respect to a man who holds a
patent which he has never attempted or tried to put into practical
operation, either by licensing someone to manufacture or by attempt-
ing to manufacture himself, and a patent which has actually been
used in one of those ways.
Mr. TiBBETTS. I think probably the courts make some distinction
in their determination of validit}^ of such patents, but I don't know
whether we could do it in a practical way or not.
Mr. Cox. You think the distinctions the courts make in that
respect are adequate to take care of it?
Mr. TiBBETTS. I M'ould think so.
Mr. Cox. I think I have finished.
The Chairman. You have finished with your examination of this
witness ?
Mr. Cox. Yes.
The Chairman. If so, Mr. Tibbetts stands excused, and we are
very much indebted to you, sir.
(The witness was excused.)
The Chairman. Will you call the next witness, Mr. Cox. please?
Mr. Cox. Mr. Knudsen.
The Chairman. Mr. Knudsen, do you solemnly swear that the
testimony you are about to give in this proceeding will be the truth,
the whole truth, and nothing but the truth, so help you God ?
Mr. Knudsen. I do.
Mr. Cox. Perhaps we might swear Mr. McEvoy at the same time.
The Chairman. Mr. McEvoy, do you solemnly swear that the
testimony you are about to give in this proceeding will be the truth,
the whole truth, and nothing but the truth, so help you God ?
Mr. McEvoT. I do.
TESTIMONY OF WILLIAM S. KNUDSEN, PRESIDENT, GENERAL
MOTORS CORPORATION, DETROIT, MICH., AND JAMES McEVOY,
DIRECTOR OF PATENT SECTION, GENERAL MOTORS CORPORA-
TION, DETROIT, MICH.
The Chairman. Mr. Cox, may I interrupt the examination long
enough now to reneAv the suggestion which I made at the conclusion
of the recent examination. If the members of the committee will
permit Mr. Cox to complete his examination before interrupting with
questions, I think that we will expedite the hearing very materially
and unless there is objection, that will be the rule.
Mr. Cox, you may proceed.
Mr. Cox. Mr. Knudsen, will you give the reporter your name and
address ?
CONCEXTKATIOX OF ECONOMIC POWER 329
Mr. Knudsen. William S. Kiuidsen, president of General Motore
Corporation, Detroit, Mich.
Mr. Cox. Mr. McEvoy, will you do the same thing ^
Mr. McEvoY. James McEvoy, 1771 Burns Avenue, Detroit, Mich.
I am director of the patent section. General Motors Corporation.
Mr. Cox. Will you tell us again what your present position with the
company is, Mr. Knudsen ?
Mr. Knudsen. I am the president.
Mr. Cox. How long have you been connected with (Jeneral Motors ?
Mr. Knudsen. Seventeen years.
Mr. Cox. What was your first work with the company that you
started out with ?
Mr. Knudsen. I was operating vice president of tlie Chevrolet
Motor Co.
Mr. Cox. How long have you been contiec^d with the motorcar in-
dustry,^
Mr. Knudsen. Referring to cars and parts, both?
Mr. Cox. Yes.
Mr, KnudSen. Thirty-one years.
Mr. Cox. In what capacity did you first work in the motorcar
industry ?
Mr. Knudsen. I worked as a foreman.
Mr. Cox. What position in the General Motors Co. did you hold
before you became president ?
Mr. Knudsen. I was operating vice president of Chevrolet, and then
from 1922 to 1924 I was made general manager and president of the
Chevrolet Motor Co., which position I held until 1933, October. I
was then made operating vice president of the corporation from Octo-
ber 1933 until May 1937, when I was made president.
Mr. Cox. As a result of your experience, Mr. Knudsen, are you
familiar with the policy which the General Motors Co. followed with
resi^ect to patents ?
Mr. Knudsen. Yes, sir.
Mr. Cox. Mr. Knudsen, would you say that the motorcar industry is
a highly competitive industry ?
Mr. Knudsen. I think we will admit that.
Senator Borah. How is that ?
Mr. Knudsen. I think we will all admit that.
Mr. Cox. Each .company, in your opinion, is trying to make the best
car it can and sell it to the public at the lowest price possible;
Mr. Knudsen. Yes, sir.
Mr. Cox. And that is true of General Motors, certainly, you would
sav?
jVIr. Knudsen. Yes, sir.
Mr. Cox. What competitive use does General Motors T>.ake of its
patents? I will withdraw that question.
Mr. Knudsen. I put something down here. Maybe I can answer it.
Mr. Cox. I will withdraw that questioii, and we will take it up a
step at a time. Does the General Motors Co. apply for and take out
patents on inventions?
Mr. Knudsen. Yes, sir.
Mr. Cox. For what purpose does it take out patents ?
Mr. Knudsen. To use in the manufacture of motorcars and parts.
330 CONCENTRATION OF ECONOMIC POWER
Mr, Cox. You use the device that the patent covers, isn't that
correct ?
Mr. Knudsen. I don't know that we have used all of them ; we
might have found a better one after we proceeded.
Mr. Cox. What I am trying to inquire into is why you take out
the patent itself, why don't you just use the invention that you make
without taking out the patent?
Mr. Knudsen. Sometimes we have to take out patents for protec-
tive purposes.
Mr. Cox; That is, you take it out so someone won't sue you for
infringing, who develops the same idea later on?
Mr. Knudsen. Yes, sir.
Mr. Cox. You use those patents to collect royalties from others?
Mr. Knudsen. To some extent, yes.
Mr. Cox. Does that represent any very considerable part of your
company's income?
Mr. Knudsen. We pay about four times more than we take in.
Mr. Cox. You take licenses from others as well as grant licenses to
others under your own invention?
Mr. Knudsen. Yes, sir.
Mr. Cox. Do you ever use those patents, your own patents, in an
attempt to get a competitive advantage in the industry?
Mr. Knudsen. I don't understand your question.
Mr. Cox. I will withdraw that question and ask another one. Did
you ever refuse to grant licenses under your patents to your com-
petitors in the industry?
Mr. Knudsen. Have we?
Mr. McEvoY. No; never.
Mr. Knudsen. Never have. I don't know of any.
Mr. Cox. Suppose the patent system should be abolished tomorrow,
Mr. Knudsen, do you have any opinion as to what difference that
would make to the competitive position of General Motors in the
automobile industry ?
Mr. Knudsen. No; but I think it would be bad for industry
generally.
Mr. Cox. You think it would be bad for industry generally?
Mr. Knudsen. Yes: I think so.
Mr. Cox. You think that it Avould be detrimental to the inA'eiitor.
Mr. Knudsen. Yes, sir.
Mr. Cox. By the Avay, are you an iuA'entor, Mr. Knudsen ? Have you
ever invented anything?
Mr. Knui>sen. I have two patents filed, assigned to the ]')eople I
was working for; that is all. T am no inventor.
Mr. Cox. In making those inventions, Avere you stimulated by the
thought that you or someone was going to get a patent on them ?
Mr. Knudsen. No; I wanted to ixet out more work.
Mr. Cox. You wanted to produce more cars.
Mr. Knudsen. Yes. sii-.
Mr. Cox. The patent didn't make much difference to vou. Is that
right?
Mr. Knudsen. No.
Mr. Cox. T want to make sure yr)u mean it did make a difference
or didn't.
I
CONCENTRATION OF ECONOMIC POWER 331
Mr, Knudsen. It did not make a difference. I might explain it
this way, that 1 thought the patent, so-called, was rather insignifir
cant. I turhed it over to the people I was working for. I had ,no
idea of getting anything in particular out of it.
Mr. Cox. Wliile you have been connected with General Motors
and being responsible in any way for its policy, has the company
ever considered adopting Mr. Ford's policy of granting licenses
royalty free?
Mr. Knudsejt. I don't know ; we talked about it.
Mr. Cox. What do j^ou think about that policy ?
Mr. Knudsen. Well, it is sort- of tied up with your first question
when you asked me whether we should abolish patents. It sort of ties
up with that, and you say as soon as you get a patent you should
grant a license. Does that mean you should only do tliat if j'oii were
big and not if you were small?
Mr. Cox. Well, I will ask the question generally as to both big and
small units.
Mr. Knudsen. Then you would be right back to your previous ques-
tion where you said abolish them altogether, because that would be
the same thing.
Mr. Cox. Do you think that would be bad for the individual
inventor?
Mr. Knudsen. Yes; I think it would be bad for progress.
Mr. Cox. It seems to you that what the Ford licensing policy does,
in effect, then, is just to abolish the patent system. Is that right ?
Mr. Knudsen. Well, it all depends on what Mr. Ford requires. If
he doesn't require any, then he doesn't have to bother about it. In
his particular job today, it might be 'that patents wouldn't interest
him; I don't know.
Mr. Cox. You think a system under which patents were u^ed in
the way in which Mr. Ford uses his patents, that is, in granting
licenses, royalty free to everyone, would be a system under which
the patent as such would not be of any particular importance, is that
right?
Mr. Knudsen. I don't know as I could answer that. He might
grant a license, a oood one ; I don't know.
Mr. Cox. You don't think that policy is a good thing for industry
generally ?
Mr. Knudsen. It all depends on what you manufacture. If Mr.
Ford today is willing to grant licenses on automobile patents, per-
haps that is fine from his standpoint, but to say that we as a corpora-
tion could do the sarpe thing without taking the interest of the stock-
holders into consideration, why, I think it would be wrong.
Mr. Cox. Mr. Knudsen, can j^ou tell us whether the General Motors
Co. follows the practice of suing persons who use patents without
obtaining a license ?
Mr. Knudsen. No ; we always try to avoid it. We don't want any
suits.
Mr. Cox. Can you tell us, or can Mr. McEvoy tell us, how many
patent suits the company has been plaintiff in ?
Mr. McEvoT. Yes, sir.
Mr. Knudsen. You are referring to automobiles only?
Mr. Cox. At the moment ; yes.
332 CONCENTRATION OF ECONOMIC POWER
Mr. McEvoT. You mean just the automobiles?
Mr. Cox. And parts.
Mr. MoRvoY. We have had 25 suits ailtogether since the beginning
of the corporation. That related to everything.
Senator Borah. How old is the corporation? When was it incor-
porated ?
Mr. MoEvoT. In 1912.
Mr. Cox. Perhaps we can get to these figures later on in the exami-
nation.
Mr. McEvoT. I have them picked "out here.
Mr. Knudsen. We have many articles other than automobiles.
Mr. Cox. Why is it, Mr. Knudsen, if you are interested in collecting
royalties under your patents, that you don't go after people who use
them without getting a license from you ?
Mr. Knudsen. The reason for it is this: They generally apply to
things we make and sell to the trade. Consequently, we would rather
sell people goods than collect royalties, so generally we are able to
make an honest arrangement whereby we sell at a fair price the ar-
ticle, which includes the patent. You see, we have a good many parts
companies that make all sorts of different things, and we sell to
the trade. We even sell to Mr. Ford.
Mr. Cox. Would it be right then to say that so far as your com-
petitive position is concerned, you rely more on your efficiency as a
manufacturing concern than you do on any monopoly position you
get by reason of a patent ?
Mr. Knudsen. I hope that will always be correct, sir.
Mr. Cox. That is correct, indeed.
General Motofs carries on a large amount of research work,
doesn't it?
Mr. Knudsen. Yes, sir.
Mr. Cox. And that is a separate department ?
Mr. Knudsen. Yes, sir. Well, we have a central research depart-
ment but the individual laboratories carry out their own.
Mr. Cox. Is that work expensive ?
Mr. Knudsen. Yes. Mr. Kettering is here and he could tell you,
but my recollection is that it costs about $1,200,000 a year.
Mr. Cox. The question I am coming to, Mr. Knudsen, is this:
Suppose that General Motors was unable to take out patents on any
inventions it made, would it still continue to spend that money for
development and research work ?
Mr. Knudsen, Yes; I am sure we would.
Mr. Cox. You think it would make no difference ?
Mr. Knudsen. I don't think it would make any difference.
Mr. Cox. Do you have any opinion whether in the case of re-
search and development work that is carried on by smaller organiza-
tions or by an individual, the absence of a patent would make any
difference ?
Mr. Knudsen. I think a small man or small fellow, a small me-
chanic, wouldn't be able to get as far as he can today, because with
a patent in his hand he can at least offer to industry and have them
judge as to its value.
Mr. Cox. Your company is now, and has been tor a number of
years, a member of the Automobile Manufacturers Association; is
that riffht
CONCENTRATION OF ECONOMIC POWER 333
Mr. Knudsen. Yes, sir.
Mr. Cox. Are you familiar generally with the nature of the cross-
licensing agreement that is administered by the association ? ^
Mr. Knudsen. I know it in a general way, but if you want any
details I -suggest you ask Mr. McEvoy, because I naturally didn't
study that part.
Mr. Cox. Do you have any opinions as to whether or not that
cross-licensing agreement has been a good thing?
Mr. Knudsen. I think in the early days of the industry when it
was being developed, it was. I might explain that perhaps best in
this way. There are three stages in the development of an article.
The first is the inventive stage, that is the idea ; the second is the de-
velopment stage, that is when the device is being perfected for pro-
duction; and the third is the mass production stage. Now anyone
who invents anything has got to pass those stages before it becomes
really profitable, and the first stage he can probably do himself, the
second he can partly do himself; with the third he might have to
engage capital to carry it through, and that is the way he makes the
real money.
Mr. Cox. Reverting again to the cross-licensing agreement, at what
stage in the development of the motorcar industry do you think that
agreement was most beneficial ?
Mr. Knudsen. Everybody was in the development stage at that
time.
Mr. Cox. And that was the time when you think it was most
useful ?
Mr. Knudsen. Yes, sir.
Mr. Cox. Do you have any opinion as to whether a similar arrange-
ment should be extended to other industries in the development
period ?
Mr. Knudsen. I don't know what the condition is.
Mr. Cox. You think that the answer to that question might vary
from industry to industry ; is that it ?
Mr. Knudsen. It depends first on the public demand for the article ;
and if you will tell me specifically what you refer to, I might give you
an opinion. Otherwise, I prefer not to.
Mr. Cox. Do you think after the development stage was passed in
the motorcar industry that the cross-licensing agreement was not of
such importance as it had been before?
Mr. Knudsen. Well, the progress from then on would have to be
in specific things. The car would run, the car was made, but from
then on the progress would have to be specific. For instance, some-
one would have to develop a new sort of motor, a new sort of axle, a
new sort of transmission, entirely different from what we were work-
ing on. I think it would be fair to hold that out so as to get it
through the development stage before it was given to the public.
Mr. Cox. But the cross-licensing agreement, in your opinion, was
chiefly useful in the period when the basic ideas in the art were being
developed.
Mr. Knudsen. Everybody was handling the thing
Mr. Cox. Do you recall that a change was made in that cross-
licensing agreement in 1925 so as to exclude from its operation the
» Snpra, p. 286 et seq.
334 CONCENTRATION OF ECONOMIC POWER
patents which were acquired thereafter by the members? ^ Do you
recollect that?
Mr. Knudsen. That is not coiTect, I think, is it? It was restricted
to patents p^ranted before January 1, 1930, I belieA'e.
Mr. McEvOY. He is talking about the first extension.
Mr. Cox. The first extension, that is right. It froze the patents in
the cross-licensing agreement as of January 1, 1925; is that correct?
Mr. McEvoY. No, it limited the patents to those which might have
emanated from or were produced by a plant making a complete auto-
mobile, a complete motorcar. It eliminated accessory patents and
things of that sort.
Mr. Cox. I am talking about the time limit. Wasli't it in 1925 —
patents thereafter acquired? I think Mr. Reeves touched on that
effect yesterday.^
Mr. McEvoY. I think I will read that to you. I see what you
mean, that the agreement was for 5 years and expired December 31,
I think, 1929, but all the patents that might belong to the members
falling within the class provided in the agreement down to December
1929 came within the terms of it.
Mr. Cox. Down to the 1st of January 1925
Mr. McEvoY (interposing). The first agreement expired then.
Mr. Cox. And the renewal made at that time applied to all pat-
ents except certain exceptions which were owned by the members as
of January 1, 1925, and ran until 1930?
Mr. McEvoY. That is right.
Mr. Cox. Could you understand that, Mr. Knudsen ?
Mr. Knudsen. Yes, sir.
Mr. Cox. Do you recall whether at the time that change was made,
General Motors was in favor of the change?
Mr. Knudsen. I don't recall. I wasn't in the directing chair at
that time.
Mr. Cox. Dp you recall anything about the change that was made,
1 renewal that was made in 1930 of the cross-licensing agreement?
Mr. Knudsen. No, sir.
Mr. Cox.. Or one in 1935 ?
Mr. Knudsen. No.
Mr. Cox. You have no recollection of those?
Mr. Knudsen. I wasn't president at the time.
Mr. Cox. Taking it on the basis of your experience in the motor-
car industry, Mr. Knudsen, do you think that the patent system as
it is worked in that industry has promoted science and the useful
arts?
Mr. Knudsen. Yes; I think through the extended life of the motor-
car, patents have helped to develop the motorcar.
Mr. Cox. Do you think that the use of patents today is an im-
portant competitive practice in the motorcar industry ?
Mr. Knudsen. No, I don't ; but I think it is an "incentive, it is a
thought, and a driving force to work toward final betterment.
Mr. Cox. To whom, in your opinion, is that incentive directed; the
large companies or the people outside large companies?
ilr. Knudsen. I think anyone has a chance, if he has a real good
article.
* See supra, p. 290.
CONCENTRATION OF ECONOMIC POWER 335
Mr. Cox. To get a patent which will reward him financially ?
Mr. Knudsen. Yes, sir.
Mr. Cox. Of coiii-se, as far as your company is concerned, you
would continue to do research and development work whether you
could get patents or not ; is that right ?
Mr. Knudskn. Yes; we would have to do that to protect our in-
vestment and our employment.
Mr. Cox. Has your company been sued many times for patent
infringement?
Mr. KxuDsEX. Yes; quite often. We have at present a suit
pending.
Mr. McEvOT. We have had 99 suits all together brought against the
corporation since its inception.
Mr. Cox. Have you found that litigation which arises under pat-
ents h;is5 been a burdensome thing financially?
Mr. Knudsen. No, sir.
Mr. Cox. You haven't had to spend much money ?
Mr. Knudsen. We have paid out, that is in the cost of suits
Mr. McEvoT (interposing). What was the question?
Mr. Knudsen. Whether the patent suits have been burdensome to
us financially.
Mr. MoEvoT. Here is a tabulation of what it has cost us since 1924.
Mr. Knudsen. Our total expenditure along the lines you suggest
has been $2,526,010 since 1924.
Mr. Cox. Mr. Knudsen, we have had three general kinds of patent
practices described here : the practice which is followed by Mr. Ford
of granting licenses to everyone free ; ^ the practice which has been
followed by your own company and the other members of the Auto-
mobile Manufacturers Association of cross-licensing patents;^ and
the policy which has been followed by the Packard Motor Car Com-
pany of retaining its own patents, not entering into any cross-licens-
ing agreement but licensing others for a royalty.^ Do you have those
three in mind? Do you understand what I mean by the three
practices ?
Mr. Knudsen. Yes; I do.
Mr. Cox. Do you have any opinions as to which of the three prac-
tices is more beneficial to the industry and to the public generally?
Mr. Knudsen. No; I think it is a matter for the manufacturer
liimself to decide what he can do in justice to his stockholders, or
how patents may affect his particular job. As far as I am concerned,
I listened of course to what was said this morning, and the outstand-
ing thing was that some gentleman thought that a man making a
revolutionary invention in the automobile business could take all the
business. It can't be done.
Mr. Cox. Why can't that be done?
Mr. Knudsen. Because you can't make it.
Mr. Cox. You think the art has reached such a point that that
kind of invention isn't possible ?
Mr. Knudsen. It is quite possible; but if it was produced nobody
would take it in the automobile business. There is too much of it
1 See supra, pp. 256-285.
* See supra, pp. 285-303.
3 See supra, pp. 304^313.
336 CONCENTRATION OF ECONOMIC POWER
there and the public wouldn't stand for it. If it was controlled by
one man everybody would get sore.
In trying to quote what you say and put it in another sort of
words, I think we have folloAved the policy of either "filing the
patents to other manufacturers or licensing them at an extremely
low cost. That is the point, I guess, that you brought up.
Mr. Cox. Yes.
Representative 'Stjmners. Mr. Cox, there was no suggestion by any
question that I know of, of "at an extremely low price." I am not
interrupting the witness. The question was based upon the assump-
tion that there would be a reasonable remuneration for the right to
use.
Mr. Cox. That is right, as I understood. I am going to inquire
about that.
Representative Sumners. I thought I would save a little time by
making that statement
Mr. Cox. With respect to the licenses you grant under your patents,
on what basis are the royalty fees fixed in those licenses determined?
^»Ir. KisTDDSEN. They generally have relationship to the cost of the
article — a small percent. We could never make any money on it.
Mr. Cox. You don't make money on it ?
Mr. Knudsen. We couldn't.
Mr. Cox. Why do you bother to charge them, then'^
Mr. Knudsen. In order that we might induce thr^m, perha]>s. to
buy some of our stuff in which the device is used.
Mr. Cox. Is that because if you manufacture it yourself and pay,
naturally, no royalty to yourself, you are able to manufacture and sell
it more -<;heaply than one can who must pay a royalty under the
license ?
Mr. Knudsen. Yes; and I think the cost of the development, of
research, should be recovered in that way..
Mr. Cox. That is another thing I am interested in. To what
extent, in determining your fees under these license agreements, do
you take into account the amount of money which you have spent
in research and development in perfecting the patent?
Mr. Knudsen. I can't remember any case. Maybe Mr. McEvoy
can bring that out. Are you able to answer it ?
Mr. McEvoT. No. .
Mr. Cox. Is that a factor you consider at all ?
Mr. Knudsen. It is very seldom we hear of that.
Mr. Cox, In other words, you simply fix the royalty fee under
the license agreement on the basis of some percentage of the cost of
the patented article produced?
Mr. Knudsen. Yes; a very low percentage. We don't want to
affect the price to the public.
Mr. Cox. Even if it is to be manufactured by your licensee you
don't want to affect the price to the public?
Mr. Knudsen. No, sir.
Mr. Cox. Do you grant licenses to your licensees all on more or less
the same terms with respect to the same article? Do you under-
stand that? I mean, if you have one article and are granting licenses
to different persons
Mr. McEvoT (interposingV Always uniform.
CONCENTRATION OF ECONOMIC POWER 337
Mr. Knudsen, It would always be uniform.
Mr. Cox. Is it the practice of the company to grant many exclu-
sive licenses to other companies?
Mr. Kntjdhen. I don't think we have any.
Mr. McEvoT. That is right.
Mr. Cox. Is it the practice of the company to put any restrictive
conditions of any kind in the license agreements that you grant ?
Mr. Knudsen. No, sir.
Mr. Cox. Do you ever restrict the use of patented articles to the
automotive field as distinguished from the aircraft?
Mr. McEvoY. We have done that in xme or two cases.
Mr. Cox. There is no restriction on the quantity of the article to
be produced or the price at which it may be sold.
Later we hope to recall Mr. McEvoy for a little more detailed testi-
mony with respect to the experience of the company under the patent
system, and particukrly with respect to any suggestions Mr. McEvoy
may have as to changes in the patent law, but before we do that I
should like to examine another witness here from the same company,
and I have therefore finished with Mr. Knudsen.
The Chairman. Perhaps members of the committee would like to
ask Mr. Knudsen a few questions.
Senator King. I have none.
The Chairman. It is now noon, and if there are no questions I
Avanted to find out how many of the members of the committee desire
to ask questiojjs before I announce the recess, you see.
Mr. Cox. Mr. Knudsen would like to get away, if he could.
Mr. Knudsen. It is quite all right. I will stay.
The Chairman. We would like to suit your convenience if we can.
Mr. Arnold would like to ask a few questions. Are there any
other members of the committee who would like to ask questions?
Dr. Lubin will. Apparently there won't be many more questions,
so we will remain in session for a few moments longer.
Mr. Arnold. Mr. Knudsen, you stated that the problem of patents,
insofar as it affects invention, is entirely different with big units than
with small units — big industries rather than small industries.
Mr. Knudsen. Yes.
Mr. Arnold. That, as a matter of practical effect, the big industries
kvould liaA-e to carry on their research without the patent law.
Mr. Knudsen. Yes, sir.
Mr. Arnold. That tlie real problem is only with the small inventor.
Mr. Knudsen. Well, it depends on what kind of invention you are
talking about.
Mr. Arnold. In general. Doesn't that indicate possibly a different
policy in the patent law might be pursued as to those two separate
problems ?
Mr. Knudsen. I don't know.
Mr. Arnold. It might indicate that.
.\fr. Knudsen. I will have to refer that to Mr. McEvoy.
^ Mr. Arnold. And might it not indicate the possibility of con-
sidering a different policy as to patents which come from large
group research and patents which come from a single individual.
The question is somewhat argumentative. I simply wish to see if
you have any pronounced dissension from that idea.
338 CONCENTRATION OF ECONOMIC JPOWER
Mr. Knudson. I tried to hold back, I don't see how you can
possibly have that kind of clause in the law.
Mr, Arnold. If we could, from an economic standpoint it would
be beneficial.
Mr. Knudsen, I even couldn't answer it from an economic stand-
point. I don't see how you can restrict brains to an individual or a
«^roup, a small one or a large one.
]VIr. Arnold. You don't see how we can implement a patent policy
wliicli would have a different effect on large industry than it did
on small?
Viv. Knudsen. I don't see how.
Mr. Arnold. As a practical matter you don't see it, but as an
economic matter it would be a good thing if w^e could.
Mr. Knudsen. Even that I wouldn't be able to answer, sir.
Mr. Arnold. That is all I had to ask.
Dr. LuBiN. JMr. Knudsen, I was very much interested in your
statement relative to the great advantages of free exchange of
patents through the development stage of an industry, but after the
industry passed that stage the advantages disappeared, and that you
approved a policy of not sharing new patents after the industry had
got on its feet and became an established procedure. Does the Gen-
eral Motors Corporation manufacture electric refrigerators?
Mr. Knudsen. Yes, sir.
Dr. LursiN. Does it manufacture oil burners?
Mr. Knudsen. Yes, sir.
Dr. LuBiN. Does it manufacture air-cooling devices?
Mr. Knudsen. Yes. sir.
Dr. Lup.in. Would you say any of those are in the developmental
stage right now?
Mr. Knudsen. I think air cooling is.
Dr. Lup.in. Is there any exchange of patents in air cooling?
Mr. Knudsen. I don't think we have many patents in air cooling,
that I know of.
Dr. LuRiN. But such patents as are available
Mr. Knudsen (interposing). It is a combination of known devices
standard to air cooling; it is a combination of devices now in use in
other industries.
Dr. LuBiN. There are no patents of any particular merit that give
any particular type of burner any particular advantage?
Mr. Knudsen. I can't think of any of my own recollection.
Dr. LuBiN, I wanted to get your opinion as to whether you felt
ther.e might have been faster progress in the development of these
newer industries had they had the same system of patent exchange
that you had in automobiles.
Mr. Knudsen. I would have said yes, because it did work in the
automobile industry, sir.
The Chairman. Would you care to state your opinion, Mr. Knud-
sen, as to wiiy the cross-licensing policy was adopted in tlie first place,
and then abandoned?
Mr. Knudsen. Well, it would only be an opinion.
The Chairman. I realize that.
Mr. Knudsen. I was not in the councils of the industry when the
cross-licensing agreement was made. I was working doAvr^ in the
shop.
CONCENTRATION OF ECONOMIC POWER 339
The Chairman. Your experience is so great that your opinion will
have very much weight, of course.
Mr. Knudsen. I think it was in order to leave a little time to do
the work, because they were having trouble in the plant all the time
with the cars they were making, and I presume the patents, or so-
called suggestions for patents, were coming so fast and furiously that
they didn't have time to do any work for worrying about patents,
and I imagine that had something to do with it. It is only an opin-
ion, sir, I don't want you to think it is frivolous.
The Chairman. We understand it is not frivolous, Mr. Knudsen,
and I think it is a very valuable expression. Now, then, with respect
to the abandonment, what is your opinion?
Mr. Knudsen. Well, naturally when you have made an article for
a certain number of years, you always feel you are makmg it a little
better tha:n somebody else, especially if it is in a highly competitive
industry.
The Chairman. Would I be correct in inferring from what you
have said that in the opinion of most of the competition in the motor
industry, patents which are now possible of development would
merely have effect upon style and pattern, rather than upon the basic
develo})ment of a car ?
Mr. Knudsen. I don't know about that, because naturall}' we learn
as we go along, and some of us might get an idea that others hadn't
thought of before, but the majority of the developments are what I
call of the improvement nature.
The Chairman. They are incidental and not basic. You have tes-
tified that in your opinion it would not be impossible to develop a
revolutionary patent which would put any particular company out
of- business.
Mr. Knudsen. If I said that, I didn't mean it. Naturally every-
thing is possible. We might get a revolutionary invention in the
motor-car industry, I don't know.
The Chairman. That leads me to the question which I have iii
mind. Approximately what is the investment of General Motors?
What is your capital investment, approximately?
Mr. Knudsen. Twelve hundred million dollars.
The Chairman. How many employees do you have ?
Mr. Knudsen. 250,000.
The Chairman. How many stockholders do you have?
Mr. Knudsen. About 360,000.
The Chairman. Suppose some one of your competitors were to-
morrow to develop a revolutionary patent which would make it
impossible for General Motors, without the use of that patent, to
compete with the producer who had the revolutionary patent, what
would be the effect of that, in your opinion, upon your company,
your stockholders, your employees, and what should the Govermnent
do, if anything, about it?
Mr. Knudsen. If such a thing were possible, we certainly would
all either make a deal for license under this revolutionary patent
or you will see a lot of people working 7 nights a week until we have
found something.
The Chairman. If you couldn't get the deal for a license, if the
patentee, in other words, were to insist upon his exclusive ri^^rht for
340 CONCENTRATION OF ECONOMIC POWER
17 years, and you were unable, working nights for weeks, to develop
a comparable invention, then what would be the effect upon General
Motors, its stockholders, and its employees ?
Mr. Knudsen. Very bad.
The Chairman. Thank you very much.
(Mr. Knudsen was excused.)
(Whereupon, at 12 : 10, a recess was taken until 2 p. m. of the
same day.)
AFTERNOON SESSION
The committee resumed at 2 : 15 p. m. on the expiration of the
recess.
Present in addition to those previously listed : Mr. Ferguson.
The Chairman. Mr. Cox, are you ready to proceed ?
Mr. Cox. Yes.
The Chairman. The meeting will come to order. Will you be
good enough to call your first witness ?
Mr. Cox. Mr. Kettering.
The chairman will swear you.
The Chairman. Do you solemnly swear the testimony you are
about to give in this proceeding shall be the truth, the whole truth,
and nothing but the truth, so help you God ?
Mr. Kettering. I do. sir.
TESTIMONY OF CHARLES F. KETTERING, VICE PRESIDENT.
GENERAL MOTORS CORPORATION, DAYTON. OHIO
The Chairman. All right, Mr. Cox, you may proceed.
Mr. Cox. Mr. Kettering, will you give your name and address?
Mr. Kettering. Charles Kettering, Dayton, Ohio.
Mr. Cox. What is your present occupation?
Mr. Kettering. Head of the research division. General Motors
Corporation.
Mr. Cox. How long have you held that position ?
Mr. Kettering. I think the laboratories were organized in 1920.
Mr. Cox. How long have you been connected in one capacity or
another with the motorcar industry ?
Mr. Kettering. Since 1909.
Mr. Cox. What did you do before that ?
Mr. Kettering. I was with the National Cash Register Co.
Mr. Cox. Is that the first employment you undertook after you
finished your training?
Mr. Kettering. I was in the telephone business a little bit, and
then went into the National Cash Register Co.
Mr. Cox. You are an engineer by profession ?
Mr. Kettering. Supposed to be.
Mr. Cox. Will you tell us briefly what your duties are in the
research division of General Motors?
Mr. Kettering. Well, it is supposed to be running tlie laboratories,
but the main problem we have, of course, is the selection of the
proper research problems. That is really the most impoi-tant thing
we have to do.
CONCENTRATION OF ECONOMIC POWER 341
Mr. Cox. That department carries on all of the research and
development work for the General Motors ?
Mr. Kettering. Oh, no, no. May I explain how we are set up?
Mr. Cox. Certainly; I wish you would,
Mr. Kettering, Our research department is set up as an entirely
independent organization and it acts more as a general or central
consulting organization for the corporation. Each individual in-
dustry has its own engineering and development department for that
industry, and we try to work on the general problem. I think I
can best explain it by the way our budget is set up. Forty percent of
our budget is for consulting aervices with the divisions; 40 percent
is for more or less advanced engineering; and 20 percent is for the
so-called pure science or long-shot problems.
Mr. Cox, To illustrate that difference that you have just explained,
is there a separate research organization for that part of the General
Motors business which manufactures refrigerators ?
Mr. KJETTERiNG. Oh, yes ; they have a very fine research and engi-
neering department for that job alone, but we act as consultants
with them.
Mr. Cox. I see. How many employees do you have in this organ-
ization ?
Mr. Kettering. About 500.
Mr. Cox. Are they all engineers ?
Mr. Kettering. No; we have all types of men; we have physicists,
mathematicians, engineers, and fine mechanics, and all that sort of
thing.
Senator King. They are all skilled men?
Mr. Kettering. Yes.
Mr. Cox. As a result of the work which you carry on in your or-
ganization, Mr. Kettering, or in your department, to be more precise,
are inventions made on which patents are required ?
Mr. Kettering. Yes.
Mr. Cox. And does General Motors take out those patents ?
Mr. Kettering. Yes.
Mr. Cox. What arrangements does General Motors have with the
employees with respect thereto?
Mr. Kettering. We all sign the regular patent agreement that we
have with an institution of that kind ; we assign all the patents directly
to General Motors.
Mr. Cox. Is the employee who makes an invention of that kind
rewarded in any way beyond his usual compensation?
Mr. Kettering. We usually do ; yes. You see, when you are work-
ing on an invention — well, we don't work on inventions; we try to
solve some industrial problem; try to make a new piece of apparatus.
Now, you never know what inventions are going to be useful and what
are not, because as you come upon the problem, you can't tell what is
important and what is not important, so we have to kind of study the
whole thing on the whole front. It may go off at that angle or this
angle. What we would rather do is to try to reward the whole labora-
tory, to keep the individuals working together. If you gave the re-
ward to a particular individual for his particular invention, then he
would be secretive about the thing, so we try to reward the whole
laboratory, if they do good. In other words, if \w makes some things
124491— 39— pt. 2 7
342 CONCENTRATION OF ECONOMIC POWER
that are valuable, we reward the laboratory, because one department
may make an important contribution one year and another depart-
ment another year ; but then we always give a little particular bonus to
the fellow Avho did that job.
Mr. Cox, In other words, you have both a collective reward and an
individual reward.
Mr. Kettering. Yes. You have to keep the collective reward in
order to keep the thing from crystallizing and segregating. A one-
man invention isn't very possible these days, because there are so
many ramifications that we have to work together as a group. I
think that one of the hardest problems we have had is to get scien-
tific men to sit down and work on a common problem, because
their whole training has been individualistic, but if you get a good
problem and can divide it up into a number of sections and assign
the metallurgical department to the metallurgical part and assign
another problem to the physicist and another to the chemist, and so
forth, then our particular job is to correlate that so when their
work comes together, it is the thing we are trying to get made. It
works out pretty nice. You see our stuff fails so often; it is about
99 percent failure, and our biggest problem is to keep the men
enthusiastic, especially a young fellow will come in and set up some-
thing and develop it, and it doesn't work, then he is all down. We
say, "You are just an amateur failure; you have to learn how to
fail over and over and over again," but after they understand that,
there is no trouble about working together then.
Mr. Cox. That research is really carried on, then, as a collective
enterprise ?
Mr. Kettering. It depends entirely on the problem ; sometimes the
problem will be a particular problem. Suppose we were working on
the metallurgy of that particular thing, that would be assigned to an
individual in the metallurgical department. If that happened to be
a part of this, then it would have to be correlated to that, don't you
see ? But our job as managers is to develop the principles of corre-
lation.
Mr. Cox. Do you have any opinion, Mr. Kettering, as to whether
the possibility of the acquisition of a patent plays any part in stimu-
lating the'men who work under your direction ?
Mr. Kettering. Oh, yes.
Mr. Cox. You think it does?
Mr. Kettering. The younger fellows, you know, the United States
patent — it is just like a diploma to those boys. We like to see them
get them.
Mr. Cox. Well, patents in each case, however, are acquired by the
company.
Mr. Kettering. Sure. This fellow took it out, you see.
Mr. Cox. He applies for it.
Mr. Kettering. Yes.
Mr. Cox. You have made a number of inventions, haven't you, Mr.
Kettering?
Mr. Kettering. Yes ; quite a number.
Mr. Cox. Have you ever acquired any patents on those personally?
Mr. Kettering. I don't think I ever took out a personal patent. " I
may have one or two, but not that I could name offhand.
CONCENTRATION OF ECONOMIC POWER 343
Mr. Cox. But patents were taken out on those inventions by the
companies.
Mr. Kettering. Whatever company I was with ; yes. That is the
way I like to do.
Mr. Cox. When you were making those inventions did the possi-
bility of the acquisition of a patent serve to stimulate you in your
work?
Mr. EjrrTEsiNG. No^ I wouldn't say it did; I would say it came
more as a reward rather than as an incentive, because when you are
working on a problem, you see, I have had to give an order to get
people to understand. They say, ""What is research?" Well, a re-
search worker is a fellow who^ is working on something he doesn't
understand — he is trying to solve a problem.
The Chairman. That might be said of most of the members of this
committee, perhaps.
Mr. Kettering. I can't go outside of my own technic. [Laughter.]
So you never know when you get the problem solved whether there
is anything that is patentable in there or whether there isn't, so if you
start out to make an invention for the sake of making an invention it
will never be a very good one. An invention comes as really the
secondary thing of having accomplished a useful thing. You see, that
is what you start out with, by saying that a patent is a new and useful
improvement, but to start to make an invention for the sake of
making an invention, I don't think you would get a very good one. It
has to be worked out as part of the general problem.
Mr. Cox. But is it your opinion that the patent as such neverthe-
less does serve to stimulate the work by inventors?
Mr. Kettering. As I say, it conies to them, especially these
yoimger boys, as a reward of merit and it is very highly prized, and
of course patents are very valuable things in many diflFerent ways.
It has been mentioned here that there are many different ways by
which a patent can be valuable.
Mr. Cox. You spoke a moment ago of the fact that most of your
inventions you had assigned to the corporation which employed you
under the terms of some agreement you had with them. Did the
fact that you knew that any invention you might make would be
assigned to the corporation make any difference to you?
Mr. Jittering. Not a bit.
Mr. Cox. You work just as hard?
Mr. Kettering. Oh, absolutely, because if the invention is going
to be of any use, it has to be translated into a product and there is
sucli an enormous step between the patent and the product. Mr.
Knudsen mentioned this morning the three steps, the idea step, the
development step, and the production step. We call that second
step the "shirt-losing" zone, the development zone. It is a very diffi-
cult zone to work in because, first of all, you haven't any market yet,
and yet you have to put a product out that is good enough so that
somebody buys it and it will be all right and yet you have no com-
mercial experience on it at all, and that feeling of the road from the
patent out througli to get a successful product is a very, very diffi-
cult thing. It isn't understood at all, and that is where industry
has got to take their chances, and you have got to spend a lot of
344 CONCENTRATION OF ECONOMIC POWER
money in there sometimes before you get a really satisfactory
product.
Mr. G)x. Then you think tliat the protection the patent gives is
particularly important in what you call the "lose-your-shirt" period ?
Mr, Keitering. That is right, in that development period.
Mr. Cox. Will you develop a little more at length as to exactly
why you think it is important in that particular period?
Mr. Kettering. I can tell you two reasons. It doesn't seem to me
it makes any difference whether it is an individual or a corporation, or
what not, as I said a while a^o, when you start out to do a thing, you
are an amateur at it; the hrst time you do anything you are an
amateur at it, so you are always an amateur at doing these jobs.
That patent is a very important thing because you have to spend some
money to make tools and build a factory and to go into production.
After you go into production, you find out from the experience you
learned in the field, from the commercial operations, that if you had
it to do over you wouldn't do it that way. If you don't have some
protection for that thing, a competitor can start out with that fresh
information and he could bypass this thing, and so you have to have
some protection while you are getting the thing straightened out.
I think the patent protection is just as good for the big organiza-
tion in that development period as it is for the individual,
Mr. Cox, Would you say that so far as the stimulation that is of-
fered by a patent is concerned, that there is any difference between
the development and research work that is carried on by a large
corporation, such as General Motors, and the work which is carried
on by an individual inventor or small organization ?
Mr, Kettering, I don't think so. As I told you a while ago, we
don't take these problems with the idea that we will get patents on
them. We take these problems with the idea that we will get a new
product or new type of product. If we get it, and there are new and
useful developments in it, those are the things upon which we get
patents.
Mr. Cox. You would continue to do this work, as far as your own
organization is concerned, regardless of whether you could obtain
patents or not?
Mr, Kettering, I know we would do it so far as our own organiza-
tion is concerned, and I know I would do it as an individual. I
think perhaps the psychology of an inventor is not very well under-
stood here. An inventor is a fellow who wants to do something be-
cause he doesn't know why he wants to do it but he has an aptitude
for it, just like a fellow who wants to play a musical instrument or
paint a picture. He would invent whether he got a patent or not and
he doesn't know why he invents. He has an aptitude for doing that
thing and he wants to do it and enjoys doing it,
Mr, Cox. In other words, he invents with his eye on the device
and not with his eye on the patent,
Mr, Kettering. That is right. If you try to invent with your eye
on the patent, you never get very good patents, because they won't
be so useful ; but if you invent with the idea of protecting this new
thing — ^you haVe a problem and you say, "I would like to have a new
tool for that," and if I develop the new tool that does your work
CO^T'ENTRATION OF ECONOMIC POWER 345
all right and that happens to open up a new field, you say, "You
ouglit to get a patent on that." That is the only good patent there is.
Sometimes there are half a dozen ways of doing a thing after you
start to do it. When you put your money on that way, you take out
tliese auxiliary patents as sort of jDrotective things you didn't find
yourself, and I think that is all right, too.
Mr. Cox. Would you say then that the patent monopoly is prob-
ably more important to the man who is attempting to develop or put
an invention into large-scale production thaii Jt is to the inventor?
ISIr. Kettering. Oh, yes; because the amount of capital that you
have to put in some of these things sometimes is perfectly appalling,
because you have to make a set of tools. You make a few hundreds
and you find out you have to change the whole thing. Any develop-
ment of a new product is a very expensive thing because, you see,
your customers are the fellows who really tell you what your product
ought to be, and when you haven't got any customers on that product
you have to use your best judgment as to what you think they are
going to like. You have got to make the best thing you know how to
make, put. it on the market, get the customer reaction on it, and he
comes back and says, "Why didn't you make this this way instead of
that way?" You never thought about it, because he doesn't look at
it the way you do; he looks at it from his particular standpoint.
You find a good thing to modify and you have to throw your tools
away and start all over. We usually have to start about three times
with any new product before we really get something that has an
ability to broaden in the field.
Mr. Cox. Then you would say that so far as the present patent law
serves a useful purpose, it is probably more useful in protecting the
development and production of an article than it is in stimulating
the individual genius conceiving the article ?
Mr. Kettering. I should say so, yes ; but I can't weigh these things,
but I still think it has a good stimulating effect, too.
Mr. Cox. Now, Mr. Kettering, you have worked during your life in
a num.ber of industries, haven't you?
Mr. Kettering. Yes.
Mr. Cox. You started out in the telephone business and you had
something to do with the cash-r.egister business, and then in certain
branches of the electrical indusirv you worked on light and the self-
starter.
Mr. Kettering. I developed the self-starter.
Mr. Cox. And finally in the motorcar industry, aijd I assume that
in all your experience in thosfe different industries you have had an
opportunity to observe the practices which have been followed in those
industries with respect to patents.
Mr. Kettering. Well, I have never paid very much attention to the
patent policy, because I am one of those one-track individuals that
work on the apparatus rather than the other.
Mr. Cox. Throughout your experience in these different industries,
has it ever been your observation that the patent has been used as a
means of controlling or preventing competition in any one of the
industries ?
Mr. Kettering. Not that I know of: no.
346 CONCENTRATION OF ECONOMIC POWER
Mr. Cox. You have no experience of that kind ?
Mr. Kettering. No.
Mr. Cox. Has it ever been your experience that there has been any
abuse of the patent monopoly in the sense of using it to maintain
price?
Mr. Kettering. Not in any of the organizations I have been asso-
ciated with, I have never known of that. It is surely not true in the
motorcar industry at all.
Mr. Cox. Have you done anything about the cross-licensing agree-
ment existing in the motorcar industry ?
Mr. Kettering. Not a thing.
Mr. Cox. Do you have any opinions on that ?
Mr. Kettering. No ; I haven't. May I make this suggestion ? You
brought out the three ways it was used.
Mr. Cox. I am coming to that.
Mr. Kettering. All right; I won't jump to that.
Mr. Cox. I was going to take that up next and ask if you recol-
lected we have had three different ways of describing the use of
patents here.^ May I ask whether you would care to express an
opinion on the merits of those three systems ?
Mr. Kettering. I couldn't express any opinion on the merits of
them, but I think there is a logical reason for the three different
things. You see, depending on how you start and how you have
been organized, you look at these problems in different ways. We
have that same thing in connection with engines in General Motors.
"We have some divisions that think a valve-in-head engine is the only
thing that is any good. We have equally successful concerns that
think only an L-head engine is a good thing. If you try to take an
L-head engine and put it with a valve-in-head engine, or vice versa,
neither is any good.
I think that different way of looking at this thing is a perfectly
normal reaction in the method of having approached the problem.
The composite is very likely to be the best, a little bit of each one
of them.
Mr. Cox. That remark of yours is rather interesting, Mr. Ketter-
ing. I am rather puzzled as to how you could have a policy where
you have, for example, first a policy of licensing anyone under a
patent royalty free at one extreme, and at another extreme, if I may
use those words in no invidious sense, you have the policy of retain-
ing a patent and charging a royalty for a license.
Mr. Kettering. I think every individual case has to be treated on
its specific merits. If you treat them, you will find some fall into
one class, some into another, and some into tlie other class. I don't
believe you can give a general classification, because the method of
manufacturing, the marketing organizations, and all of those things
have a big influence on how much value you place on these things
for any individual invention.
Mr. Cox. You say "treat each case separately." You mean in-
vention.
Mr. Kettering. That's right.
Mr. Cox. You think, for example, a policy that might be possible
in a basic invention might not be the best thing in the case of an
invention on an improvement.
1 See supra, pp. 256-313.
CONCENTRATION OF ECONOMIC POWER 347
Mr. Kettering. That is true.
Mr. Cox. Would you say as a general proposition it would prob-
ably be more desirable in case, of a basic invention to use a policy
which Mr. Ford has tried, of licensing everyone royalty free?
Mr. Kettering. I say that would depend altogether on the state
of the art, the size of the company, and your financial condition, be-
cause if you were a small concern and you got that basic thing and
you had no sales organization and very little capital, you would
have to depend on that patent or you couldn't get into business.
Another concern that had a sales organization, that had good factory
technic — the latent value might be very much less for them..
Mr, Cox. You think, then, there might be situations in which it
would be proper to permit a person to have an absolute monopoly
on a device which was basic in an industry, in the sense that no one
could operate without it?
Mr. Kettering. Well, I think that is true, especially if it is a
young art, you see, just starting out.
Mr. Cox. You think at that point, the monopoly on the basis
Mr, Kettering (interposing). Yes, I think that is pretty impor-
tant,
Mr. Cox. You weren't here yesterday when Mr. Ford was testify-
ing, in the morning, but he described the situation which existed 111
the motor car industry in the early days when there was a patent
which purported to cover the entire idea of an automobile ; any com-
bination of a carriage with a internal combustion engine was claimed
for in the patent, Mr. Henry Ford, according to the testimony,
wanted to get a license under that patent to manufacture auto-
mobiles, and he was refused.^ If that patent had been held valid and
infringed, as it was not, don't you think that might have had an"
unhealthy effect on the motor-car industry?
Mr. Kettering, Of course that is one of the most controversial
kinds of patents; combination patents are very controversial always.
Mr, Gox. That was a basic patent.
Mr. Kettering. Oh, no. I wouldn't think tliat a basic patent. It
is a combination patent.
Mr. Cox, It covered at least the basic idea of an automobile,
Mr. Kettering I know, but I still wouldn't consider that a basic
patent.
Mr. Cox. Then you are not speaking, when jou speak of a basic
patent, necessarily of a patent which covers the whole idea of a
particular commodity or anything of that sort.
Mr. Keitering. Well, but you see, I think if you had gone back,
the idea of having an engine run a motor car or wheels or something
like that was much older. Here you had the railway locomotives
and all that sort of thing. I don't want to get into a discussion of
the details, but you had self-propelled vehicles long before the Selden
patents. I wouldn't consider that a basic patent. That was just
another kind of automatic transportation, you see.
Mr. Cox. Do you think that it might be proper for a holder of a
patent to have a monopoly, even though by the use of that monopoly
he might destroy a large investment in capital and increase unemploy-
ment? I have in mind the situation the chairman put to Mr, Knudsen
Soe supra, p. 268.
348 CONCENTRATION OF ECONOMIC POWER
at the conclusion of his testimony before the committee rose. Did
you hear that series of questions?
Mr. Kettering. Yes. I don't see how that thing could ever happen,
you see, because any very, very radical new departure doesn't come
suddenly. They come very slowly and you couldn't just reach in your
pocket and flash a new one out like that, especially in a highly devel-
oped art like the automotive business. You see, we have made about
40 or 45 million automobiles, and the engineers have scraped those spe-
cific bones pretty carefully to get them better and cheaper and easier
to make. For somebody to come and flash a brand-new principle is
almost inconceivable. It would take him a very long while to do that.
The next thing, he would have a terrible difficulty getting it manu-
factured, because it takes a long while to educate men how to manu-
facture a thing which is radically different.
Take a thing like this new injector we developed for the Diesel
engines. We had to start out with an absolutely new bunch of men,
rather young men, who didn't have any preconceived notions about that
thing, to get them to make that. When you come to a radically new
thing it takes 4 or 5 years to get men trained to think down that
alley. They always want to make the new thing like the old one and
it takes a lon^ while to overcome that. That is one of the most tedious
problems we have in getting a new thing out.
Mr. Cox. Reverting for the moment to the matter we were discuss-
ing a while ago, about the incentives which the patent offers to
the inventor, do you think there is any particular magic in the 17-
year monopoly? I am speaking from the point of time now. Would
8 or 9 or 10 years do just as well?
Mr. Kettering. Again I think you would have to take the individ-
ual case, because if an inventor is very smart and alert, right up to
the minute, 17 years isn't long enough, because he will be ahead of
the times. I just mentioned one the other day; this Funk developed
this nicotinic acid, which was a sort of correlation of vitamin B. He
did that in 1911 and the medical fraternity didn't start to fise that
very much until about 1933, because there were some corollary things
that hadn't been done. There was a man, if he had had a 17-year
patent on that, who wouldn't have got anything out of it at all. If
you are ahead of your times you have to have more than 17 years.
If you are behind the times, perhaps a shorter time would be suffi-
cient. That is a very difficult thing to tell, whether you are ahead
of or behind the times.
Mr. Cox. The more radical an invention is the more time the in-
ventor needs for people to accept it and put it into production.
Mr. Kettering. If the new idea happens to be negative to the pres-
ent trend, he would have a much more difficult time getting that into
production, because it would be opposite to what is in the textbooks
and what people think about it, and that makes it a pretty difficult
thing, and that fellow needs protection more than the fellow whose
problem is obvious. To do something opposite to the engineering
trend is a very, very difficult job, because everybody thinks you are
wrong and they say "If you would turn this over that way instead
of this way, it would be all right," yet it won't work that way.
Mr. Cox. I think that is all.
CONCENTRATION OP ECONOMIC POWER 349
Mr. Arnold. Mr. Kettering, in your testimony you have con-
stantly emphasized the importance of treating the differences in dif-
ferent industries in different cases different, and that leads me to
ask you a few questions frankly designed to show the relationship
of this hearing presented by the Antitrust Division with the possible
use of the antitrust law. I should like to start by asking you
whether there isn't a great economic difference between patents on
gadgets and patents which relate to some process to such an extent
that they might be restraints on industrial arts.
Mr. Kettering. I think there is a great deal of difference in the
social significance of the two kinds.
Mr. Arnoi>d. As an illustration of that, I hand you a little patent
that is pending which I cut out of the New Yorker, a rather at-
tractive coin knife. From an economic point of view, it doesn't make
so much difference how long that patent lasts, does it ?
Mr. Kettering. No.
Mr. Arnold. In other words, a problem like that is a problem of
equitable distribution of the profits between the inventor and the
person furnishing the capital, and so on, isn't it?
Mr. Kettering. Yes.
Mr. Arnold. And that is a problem of an equitable patent law.
I want to say that particular problem of an equitable patent law is
not the problem to which these particular hearings are directed, and
I wanted to make clear that difference.
Now, Mr. Kettering, you never know in advance whether a par-
ticular patent is going to be just a gadget or whether it is going to
have a tremendous influence on a process, do you ?
Mr. Kettering. Well, I say at least you could know from the type
of problem whether it was in the gadgetary class.
Mr. Arnold. Oh, in that extreme case; yes; but whether a patent
was unimportant
^Ir. Kettering (interposing). You can't tell until the thing goes
into production.
Mr. Arnold. You never find out until afterwards. I think you
would further agree with me when I state that any patent law drawn
from the point of view of an equitable distribution of the profits of
an idea, will tend to become distorted by patent-minded persons.
Mr. Kettering. Well, I don't know about that.
Mr. Arnold. That is the history of almost all general regulations.
Mr. Kettering. I suppose that is like salesmanship, they try to
thinlv their product is the best.
Mr. Arnold. In other words, there will always be people trying to
Ciake a profit out of a law as opposed to those people whom you are
talking about, the real inventors who are trying to improve the
process.
Mr. Kettering. Oh, I think you will always find that in any op-
eration.
Mr. Arnold. And it is very difficult, don't you think, to solve that
problem by any general formula?
Mr. Kettering. Yes; my experience with patents has been with
e:ich one of them and the circumstances around it are usually quite
different. Of course, we can't in engineering get very many good
3gQ CONCENTRATION OF ECONOMIC POWER
general laws, so we have to take a specific case, and I think maybe
you have to do that with human relatipnships, too. I am not a very
good psychologist, so I don't know that thing very well.
Mr. Arnold. Therefore, in administering even an equitable, even
the most equitable patent law that you can possibly devise, there
needs to be some instnmientality which will stop the use of that law
in such a way as actually to restrain trade or to restrain the indus-
trial arts.
Mr. Kettering. Well, of course, that seems to be clear out of my
field.
Mr. Arnold. Don't you think that that is necessary on those as-
sumptions?
Mr. Kettering. Well, jnst from a perfectly general thing it looks
like it is, although as I say I don't know enough about that legal
phase of the thing so that my opinion wouldn't be worth iriuch on that.
Mr. Arnold. I think the opinion of an inventor upon a legal ques-
tion is certainly worth something, probably more than the opinion of
a lawyer.
Mr. PIettering. You compliment us when you say that.
Mr. Arnold. I hope so.
Mr. Kettering. Our bosses don't think that well of us.
Mr. Arnold. Let me present an analogy. A corporate merger is
a legal thing which requires a certain amount of inventive and or-
ganization genius, doesn't it? The antitrust laws are supposed to
prevent unreasonable corporate mergers, that is. those which tend to
restrain competition and which can't be justified on the grounds
either of efficiency or orderly market. In other words, they stop the
use of an otherwise legal device in a particular case because the facts
of that case show it has an uneconomic effect. Would you conceive
that the same principle could apply to patents?
Mr. Kettering. Well, I could conceive it; I don't know whether
it exists or not.
Mr. Arnold. I am not referring to the present law; I am asking
you no opinion on the presentr law. but would you not consider that
that is a possible way of getting the case by case differentiation be-
tween these .situations which you have constantly emphasized in
your testimony?
Mr. Kettering. Well, I say that is taking me out of my field. I
don't think my judgment is worth very much.
Mr. Arnold. I think it is worth a great deal, Mr. Kettering.
Mr. Kettering. Well, T don't know how to answer that.
Mr. Arnold. Well, you would at least like to see some method
devised which would enable the treatment of this patent problem to
be applied differentlv in different industries and in different cases.
Mr. Kettering. Well, if the merits of the thing demanded such
thinirs, I certainlv would be in favor of it.
Mr. Arnold. And you have alreadv indicated that there was :5n
enormous difference between patents and between periods in the pat-
ents and between particular industries using the patents which would
require a case by case treatment, haven't you ?
Mr. Kettertno. Yes.
Mr, Arnold. These questions, frankly, Mr. Kettering, have been
somewhat argumentative on my part, but they are intended to show
CONCENTRATION OP ECONOMIC POWER 351
the relationship of this hearing with the Antitrust Division, and to
show that there are two problems here, one an equitable patent law
to which many of the questions have been directed, and one a pos-
sible treatment under the antitrust law which would apply some-
what the same standards to the use of the legal privilege of a patent
that they do to any other legal privilege which is used to restrain
trade.
The Chairman. Mr. Patterson, I invited you to speak because you
are representing the Department of Commerce, to which the Bureau
of Patents is assigned.
Mr. Patterson. Mr. Kettering, I have several questions here upon
which I should appreciate your opinion and advice. Did. I under-
stand you to say a few moments ago in substance to Mr. Arnold
that it"^is generally impossible for anyone to predict the importance
and tlie effective role a new invention will have in an industry when
the patent is granted ? I didn't quite get that.
Mr. Kettering. If it is granted early, before the product has had
ft chance to go to the customer, it is pretty hard to tell.
Mr. Patterson. Did I understand you to say that you are unaware
of any instance where a revolutionary invention has broken into an
industry with such suddenness as to cause a serious dislocation of
established industry?
Mr. Kettering. I don't know of any; there may have been such
things, but I am not familiar with them.
Mr. Patterson. Mr. Kettering, there was some testimony yesterday
to the effect that practically all of the valuable and worthwhile inven-
tions came from the industrial laboratory and very few from the
outside. Do you coincide with that?
Mr. Kettering. Oh, no, no, no, no ; there are a lot ot very brilliant
people outside of industry. We say we don't lock our laboratories up
for the reason that we lock so much more out than we can in. We
don't have any idea that that is so at all.
Mr, Patterson, Here is my next question, Mr, Kettering: Con-
ceding for the sake of argument that the liberal licensing of patents
between competitors in industry may under certain circumstances
be beneficial, just for the sake of argument for the record let us con-
cede that, as between voluntary agreements between members of the
industry on the one hand and agreements under compulsion of law on
the other, which procedure do you prefer, having in mind, of course,
the development of an industry as well as the consuming public,
Mr, Kettering, You are asking me a question that belongs to the
administrative and executive end of business, and I am not con-
sidered a very good administrator or executive officer, so I don't think
I could answei that, because I wouldn't know.
Mr. Patterson, If the protection now afforded under the patent
laws was withdrawn or substantially weakened, what would be the
general effect on industrial progress and advancement, and specifically
is it likely that your company, General Motors Co,, would invest as
much money or be as active in experimentation and research?
Mr. Kettering. I think we would be just as active, because you see
we are so far behind in this development work. You see we have
got this peculiar situation where we have got a lot of men out of
work and a lot of money out of work and a lot of material that is
352 CONCENTRATION OF ECONOMIC POWER
not nee(^ed, which means that we haven't got enough projects, so we
are very far behind on the development end of things and anything
(hat you can do to encourage development so that we can get these
men and material and money all back to Avork, that is the biggest
thing. We are away beliind technologically, we are not ahead at all,
and I am ashamed of our kind for being that way, too. We haven't
done a very good job.
Mr. Pattersox. Thank you. Dr. Kettering.
Senator King. Were you speaking of tlie automobile in that last
statement of yours?
Mr. Kr/rrERiNG. I am talking about the whole technological prob-
lem. Senator. We have done pretty well with our thing because we
have had the yearly automobile sliows and that has helped to accel-
erate that development, but to get new things started is a very diffi-
cult thing and that is the thing I am worried about, I am trying to
invent a way to get new industries started. There are so many new
things that can he, done; we know so little about almost anything;
that is the thing that I am trying to get going.
Senator King. Laboratories such as yours are conducive to new
investments and the develojnnent of new industries or the extension
of industries that are already in existence,
Mr. Kettering. AVell, the principal thing Senator, that we work
on is the development of new industries. There are two problems in
the industry; from the time of the idea through the development
standpoint, and then when it gets on what we call a profit-and-loss
basis that industry will then go on its economic motive.
That is wliere we work. We have taken it from ideas up to wiiere
they get to a profit-and-loss basis. That is the hard job to do, so we
only try to develop ncAv industries. The old industries will take care
of themselves just by the nature of the demand of the pnblic for the
product, throuo-h modifications and a normal activitv of the industry
itself.
Senator King. I suppose many inventions which have been pat-
ented have been brought to your attention. What would you say as to
the ]noportion that has been brought to your attention that are
feasible or useful?
Mr. Kettering. Not very many, and there is a verv definite reason
for that.
Senator King. State it, can you?
Mr. KETTERrNG, I clou't kiiow liow many, but we get thousands of
lliem every year. IMost inventions that come to you have to do with
locality — I am speaking about a motorcar invention. If a fellow
lives in a hilly section of the count '-y, he will invent things that he
thinks would make the motorcar better for tlie hilly country; if he
lives in a cold country he will have devices for that; if a warm coun-
try, for that. When our motorcars go out of I'le factory, Wo don't
know where they are going to go, and tliere are some very bright
young fellows doing that work, AYe don't say, "That is all right for
Pittsburgh or Seattle or something bke that." We take time to
explain to that fellow why it is a thing we can't adopt generally, a il
we try to get him to go back and get a broader survey of the
problem.
A lot of fellow^ dori't imderstand ihe industry situation, tlie f^ic;
tliat our cars niay be sent export or this, th:\:, or the . .. "'''
CONCENTRATION OF ECONOMIC POWER 353
try to take the opportunity of encouraging this fellow and showing
him w]iat the real problem of getting a n^ew thing is, because there
are a lot of intelligent people in the world.
Senator King. What proportion of the patents taken out by your
organization have ])roven of value ?
Air. Kettering. Not very many.
Senator King. I understood you to state in your opening remarl«
that it was 1 out of 100, was it not?
Mr. IvETTERiNG. I dou't think vre do that well. You see, the reason
for that is because when you are coming up on this problem, before
you break through and it takes definite shape, you don't know what
is important and what is not important.
I wish I could get this point over, that when you are doing an
invention, when you are working on a new product, you are a very
rank amateur at it. It is the first time anybody tried to do it. We
never do. a good job that way, and so you have notions ab^^-i vvliat
it was today, and whei> you get experience tomorrow that clu\]iges
your point of view on the thing, and finally when you get the thing
up so the public gets hold of it, they are the people who tell you
what they Avant to have.
Senator King. Isn't it true that most of the patents scarcely rise to
the dignity of accessories, but are some little improvement, a very
slight improvement upon a basic product ?
Mr. Kettering. There are manj- like that ; yes. I suppose that the
gamut of the patent values is just about the gamut of people; that is,
they will think in terms of about what their requirements are, and
that sort of thing.
Senator King. Are there not manv patents that are purely acci-
dental?
Mr. Kettering. Those I prefer to call discoveries rather than
inventions.
Senator King. Probably discovery is the proper term. I have in
mind, and doubtless you have in mind or are familiar with, the process
by which infinitesimally small particles of copper ore have been
recovered when the co})per mines have failed to be worked by any
other inethod — b}' the oil-flotation method. That is a pure accident.
Mv. Kettering. That was a discovery ; yet, if the fellow hadn't been
AYorking in that field, he Avouldn't have made the discovery. You get
these accidental things, but you only stumble when you are moving
around in tlie vicinity of the thing.
Senator King. As I understand your testimony, bringing it down
to summation, it is that the patent system, though it may have some
imperfections, perhaps many imperfections, it has been of importance
in developing the industries of our country.
Mr. Kettering. Marvelous.
Senator King. And no efforts ought to be made to destroy the
patent system.
Mr. Kettering. No. I should say let the patent technicians, the
Patent Office, the patent lawyers, and other people fix up their ma-
chine. It is like anything; as time goes on, improvements have to be
made. It is a. good machine basically, and I don't know what I would
suggest, because I have taken out many patents and worked with the
Patent Office for many years. I don't know what I would suggest.
but I vroald sooner leave it to the people whose bu-ine^s H is to ^york
354 CONCENTRATION OF ECONOMIC POWER
in that field to make the corrective things, whatever needs to be done.
Senator King. You stated to Mr. Arnold that it stimulates new
discoveries, new inventions — the fact that you may get a patent
and if it happens to be of use, obtain profit thereby.
Mr. Kettering. It lias a great value. I can't weigh the respec-
tive factors in percentages, but it is of value to the large corporation,
to the individual, and to any kind of group, because you people are
down here at Washington all the time, you live here, but remember
when we people out in the country get a document from Washington,
it is of very great importance to us.
Senator King. Especially if it is a tax notice.
Mr. Kettering. Oh, no; we don't object very much to those, either.
Mr. Arnold. Referring to the different importance of the patent
laws at different stages in the development of an article, I would
like to ask you a few specific questions that I don't know anything
about. Do you believe it would serve the public interest if patents
in Diesel engines, for example, were cross-licensed at this time?
Mr. Kettering. Of course, there aren't veiy many patents on
Diesel engines any more.
Mr. Arnold. No; but is that out of the development stage at this
time?
Mr. Kettering. It is out of one kind of a development stage. You
know, we just finished a Diesel development. I have been on that
job for about 8 or 10 years, and that has been largely a technique of
engineering rather than invention, to get the weight dovv'n from 120
pounds per horsepower to 10 or 12. That was engineering technique
rather than invention.
Mr. Arnold. Are there important ])atents alive in tlie Diesel
engines today which would be a substantial deterrent to a company
who wasn't licensed?
Mr. Kettering. I don't think so.
Mr. Arnold. So the Diesel engine is past that stage or else it never
got into it.
Mr. Kettering. Let me say this about th(5 method by which a thing
gets started. When Rudolph Diesel built the first Diesel engine, its
only market was to take the place of steam engines in ships, so it was
fashioned to take the place of the steam engine. It had to go in as a
substitute. Then later on the automobile business came along and
w<} tried to make Diesel engines to take the place of the gasoline
engine, so it had to go in as a substitute in another place. Suppose
we didn't have anything, we would say, let's design a Diesel engine
like a Diesel engine would like to be made instead of making it go
into a place where something else has been useful.
Naturally, there is very little patenting in that. It was coming
on to the problem in a different M-ay. Suppose we had no industrial
usage for this, suppose we are thinking of this in the cold abstract,
hoAA' would we make the engine?
Mr. Arnold, you asked the question that is one of the greatest
problems that the technical people have to deal with, and that is, we
start down certain alleys, one fellow says this is the way to go, an-
other that way, and another that way, and it is very difficult to get
them to accept another fellow's opinion about that because there
isn't anything in any of these engines, I think — the only patentable
CONCENTRATION OF ECONOMIC POWER 355
thing is the injector, and anybody could buy good injectors from
anybody.
Senator King. The rest is mechanical.
Mr. Kettering. The rest is engineering; yes. Of course, some of
these new materials that have come along have helped that. I give
the metallurgist quite a lot of credit for it.
Mr. Oliphant. I should like to ask this question in response to
Senator King. You spoke very highly of the patent law as a stim-
ulant to such development as we have had. Do you look upon the
development in contemporary medicine as advanced and commend-
able?
Mr. Kettering. Of course they have had a very difficult problem.
You see, the medical fraternity is just now beginning to use the
physicist and chemist, etc. It liasn't been the doctor's fault. That
has been because we haven't had our organic chemistry and that side
developed up to the point where they could really understand these
things, and I think you will see perfectly enormous progress made
in organic chemistry and biological chemistry in medicine in the next
20 years. You will see as great a development in chemistry in medi-
cine and agriculture in the next 50 years as you have seen in the last
50 years in the so-called mechanical and electrical arts. It is a per-
fectly unexplored field.
Mr. Oliphant. The turn which your response to my question took
suggests my altering my question somewhat and instead of asking
you about applied medicine, ask you about the sciences constituting
the immediate underpinning of modern scientific medicine. I refer
to chemistry, physiology, biology, and so forth. We have had a
large development in those fields, haven't we, since 1870 ?
Mr. Kettering. I know, it has been large, but it is only small com-
pared to the possibility, you see.
Mr. Oliphant. Would it have been larger if we had a system of
patents applicable to the whole field ?
Mr. Kettering. I don't know. I can't tell you about that. If
I may give one of my personal experiences, I have been running at
Antioch College for quite a number of years this research on, we
say, why the grass is green, how does the plant fix the sun's energy
into chemical compounds. That has been worked on for a hundred
years. I worked on it 25 years ago and couldn't get good people
and tried it over again, so for the last 8 or 10 years we have had an
organized staff working on it. We have made one new cliemical
compound there from which there can be at least half a million de-
rivatives made. It is just like getting into a new continent. The
interesting thing about those compounds is that every one of them
comes from^ a light-sensitive base, a base which is affected by light.
What the significance of that is going to be for medicine we haven't
the slightest idea, but we are just learning how to do this biological
chemistry now.
Mr. Oliphant. Did the patent incentive play an important part
in that research at Antioch College ?
Mr. Kettering. Not a thing, no, not a thing. We felt that was so
important to know. The only way we keep the sun's energy down
here is to evaporate water to run down the rivers, or plant growth^
and we don't' know anything about how that plant is able to hold
356 CONCENTRATION OF ECONOMIC POWER
getting a patent onTt That i one of fl.pT ^ '^""^ l^ '^"^k ^^
because we ought to knoAv it ""^' '''^ ^^^^^ t« know
aJ^petonfwTo S^tVoJS em f^^^^" ^^^^^ ^^ --^--^
tliose experiments ^^ employment m order to continue
Mr. Kettering. Yes, indeed.
of the^tate of the c'evelom^^^^^^ a«^'««^ed
inability to utilize allthis ScTmn.^^^^^^ ^f o»r
forth. Do you look upon natent^ow J ^"- '^^^^is labor, and so
more ideas, one of the bottle r,PPV: \^'^ "^centive for providing
order to utilize tlLe maSls and Tv. ™ ^f ^^ ^'' '^'^''^^' i^
Now
and business doesn't understand low to dnfl" *^'^ S^'^^P "^vention,
stand as inventors how to do if c'^ ^^"' T^^' ^^ ^^^^'^ ""der-
of going from one X to nnotl e'r^burr Z^V''''\!';^ ^'^^^
are learnin.n; as fast as we shonV W i ■ .^'' ^'^ether Ave
""'U^^^^'^^^y^^^^^t^l^^^ the best we can,
patent laws were framed rCrd\ea?sS''^'" "^"^^ ^^^'^^^^ -'■
vo^;il^IfS^,,U-l:;^^-:it is aVte;.t thing that is in-
business, all busine se s if they a'" -any Zo^^ 1 '^""\^' ^^S ^«" ^^^'
very detailed cost accounts That iffh ^ i ^'""''^ ^""^ ^" ^^^^'^ ^^ery
thing about it. When yoii come to \lf' ""''^^ ^''"'^ ^^^^>' ^'-^^ tell any-'
are doing, running a ^(Search hbora o?^'"^ T?'''''^ ''J^'^' ^^^'^ -^'
detailed cost accountincr 1 1 i s m o r e Jn n • / ^^^'>^ ^^^^^ t fit into this
'he insurance company'"nms. '^^^tuarial cost accounting like
^S'teS)r;Srm;?^tSlr'^us:;^ ai^ auditors to under-
detailed cost, and then yoVcWt fpl '' ^",^^^t^ ""'' ^^'^ ^^^^^ of
to cost when 'you get k done o, wl p T "'""'? ^^"^ ^^^"^^ ^^ ^oi"ff
thing M'hen >;,n ^Tet i h "t te„d to nv.l ' H ^"^"'^ *^^^ worth^any^
very specific small problems b7,t L n, • /^' '''?''''''^' ^^"^^^-'^ take
actuarial accounting into tWs t InT "o" I"'' ^'^"""^ "^^^' ^^"^^' ^^ P"t
^s not a scientific institution at a ' it I /n ^ """" "'''"^"^^'^ laboratory
whatever you pay for opeiatin^ U tho !." ^"-'"^'^"^^ company, and
Wan. ,„e aeeo,..,la„ts, b\^t ■v.^\'r,f,:'Vai^^"-S:il^f & pi™ ^o'^
CONCENTRATION OF ECONOMIC POWER 357
tlie work on detail he says, "Why can't this strange bunch of fellows
over here give you some detail about their work?"
We are just learning how to introduce this question of research and
development into industry and the accounting processes have been
one of the most difficult things to get ironed out. We are just get-
ting to understand that now. You see, we musn't forget that re-
gardless of patents and inventions, we are still all human beings, and
we still have those human problems to work with as a part of the
first thing.
The Chairman. Mr. Ferguson, do you care to ask any questions?
Mr. Ferguson. Nc
The Chairman. Dr. Lubin ?
Dr. Lubin. No.
The Chairman. Mr. Kettering, you describe an inventor as a per-
son with a special aptitude, interested not so much in the exploita-
tion of his ideas as in the development of the ideas and thereby mak-
ing a contribution to society.
Mr. Kettering. I don't know whether he goes that far or not,
whether he thinks about the contribution to society.
The Chairman. He makes a contribution to his own sense of self-
satisfaction.
Mr. Kettering. He is a sort of self-entertainer in a good many
cases.
The Chairman. Accepting that definition, based upon your ex-
perience as the head of a research laboratory, would you care to
say which factor derives the greatest amount of benefit from an in-
vention as now patented; number one, the inventor; number two,
the exploiter or the manufacturer; number three, the public?
Mr. Kettering. Well, of course, if the public doesn't profit by it
neither one of the other two will. It has to be something that,
when you get it, you don't care whether there is a patent on it or not,
if it serves your purpose and is at the right price, and it does you some
good.
The difference we meet in why inventors work on things is a thing
we meet in this transition thing. My main job in running the research
laboratory is to pick the problem. Going back to the insurance anal-
ogy agaiuj it is not a very good insurance company if it picks bum
risks, but if it picks good risks it is. We can do more with the scien-
tific man in our laboratory if we can take a problem and then subdi-
vide it and say this is a metallurgical problem or a mechanical problem,
or tliis, that, or the other thing. We can help those fellows to select
the kind of things upon Avhich they can work so there will be a high
utility value at the end of them.
The Chairman. Keturning to mj question, it must be assumed that
to be successfully used the patent must be beneficial to the public.
There must be a public demand. Assuming tliat, M'hich of tlie other
two factors under the present system derive, in your opinion, the
greater benefit — the inventor or tlie exploiter?
Mr. Keitering. Well, I don't know. I don't know much about that.
The Chairman. Is it or is it not true that particularly in the auto-
motive industry tliere have been several instances of the original in-
ventors who derived practically little benefit. I have in mind — I may
not be right about it — having read some years ago that a man who
gave lii? name to a widely used automobile died in comj^lete poverty.
124491—39 — pr.2— — 8
358 CONCENTRATION OF ECONOMIC POWER
Mr. Kettering. He wasn't an inventor ; he was a promoter.
The Chairman. You know the man I had in mind ?
Mr. Kettering. Dave Buick I think yon were talking about. He
was not an inventor in the sense I tliink of today. Of course — remem-
ber inventors have the same kind of peculiar personalities, sometimes,
and they don't get along very well with other people, too, so you have
that to take into consideration.
The Chairman. As you said a while ago, we are all human.
Mr. Kettering. That's right.
The Chairman. How long did you say you have be^n at the head
of the research bureau ?
Mr. Kettering. I think we organized the present consolidation in
about 1920.
The Chairman. Research bureaus in large industries are a charac-
teristic of modern corporate development, are they not?
Mr. Kettering. It is the only way to do it. I don't know how to
do it any other way. Take this Diesel engine problem we were telling
you about. If you hadn't
The Chairman (interposing). I didn't say it shouldn't be done.
Mr. Kettering. Certain types of problems you can only do in that
way because of the facilities. Take the metallurgical requirements
and things like that.
The Chairman. I was impressed by your statement that we are
passing into the era of group action.
Mr. Keitering. That is right. We have to, in a lot of these prob-
lems. We have to do it with a group.
The Chairman. So that these research bureaus, of which you are the
head of one, are characteristic of that era , are they not ?
Mr. Kettering. Of course, I still think every time they develop any-
thing new they reopen a lot of new problems for the individuals outside.
The Chairman. The individual inventor whom you described, and"
you yourself, as indicated by your testimony, seems to be a person who
is more interested in developing the idea than in almost anything else.
Mr. Kettering. Yes, sir; getting it to work.
The Chairman. Do you think that Congress should give any re-
search itself to the problem of making a better distribution of the ideas
which are developed by inventors than we have now?
Mr. ICettering. I wouldn't know how to answer that. I should
think it would be a fine thing, for instance, if any of you are out
around Detroit, to conie in and see how these laboratories have to be
nin. I think that would be very, very good for Congress and it would
be good for us, because, you see, we use the same language but we don't
speak the same, because we have to work with a technical problem,
and when Ave say the same words it doesn't mean the same to you unless
you have the same thing to do.
Senator Borah. Have you a bunch of cars here? We will drive ouo
and see you,
Mr. Kettering. We can get them, sir. I am really serious.
Senator Borah. I am, too.
Mr. Kettering. You fellows are trying to do the same thing we
arc trying to do, and if we could see each other's point of view
and how we have to work, there is a good common meeting ground
on all this stuff, and I think these hearings you have here, are wonder-
I
CONCENTRATION OF ECONOMIC POWER 359
ful, because a poor fellow like me wouldn't get to meet j'ou gentlemen
if it wasn't for sometliing like this.
The Chairman. We wouldn't get to meet you. I think we profit
more in the exchange.
With respect to your research bureau, Mr. Kettering, in searching
for the answer to a particular problem, doubtless your research attend-
ants frequently run across matters which are totally unrelated to the
objective of the research.
Mr. Ejittering. Yes, sir.
The Chairman. And sometimes develop patentable ideas with re-
spect to those independent things. What is the policy of your com-
pany with respect to such inventions?
Mr. Kettering. They come under the regular patent contract.
The Chairman. So that if one of your employees were to invent a
device which was altogether foreign to the automotive industry-^
Mr. Kettering (interposing). I don't know. What is our policy
on that, Mr. McEvoy? The Senator asks the question. Supposing
in developing a thing one of our men runs across something that has
no relationship to the automobile industry, its utility value is clear
outside of the field of the automobile? We let them have it.
Mr. McEvoT. Oh, yes.
The Chairman. You don't require that patent to be assigned to
your company?
Mr. McEvoY. It would have to be something in connection with
our work.
The Chairman. Your arrangement is that they must turn over to
you only those patents which are usable in the automotive field.
Mr. McEvoY. That is right. Of course, we have a good many
fields, sir.
The Chairman. In any field in which General Motors is inter-
ested.
Mr. McEvoY. That is the same tiling; yes.
The Chairman. In conclusion, Mr. Kettering, so far as I am con-
cerned, like Mr. Oliphant I was very much impressed by your very
succinct and lucid statement that we have men out of work and
money out of work and material out of work, and that the problem
before the country is to get all three of these factors working to-
gether again.
Mr. Keitering. That's right.
The Chairman. Have you any suggestions with respect to that,
outside of the particular field in which you are interested?
INIr. Kettering. I am doing the best I can in my field to get new
ideas and new things going. We have this new Diesel business which
is started. We are getting it on the railroads, and things like that.
The Chairman. And we are doing the best in our field, but your
answer suggests to my mind that I ask you, if you received a larger
allotment of funds from your accounting department, do you think
you could accomplish more?
Mr. Kettering. That isn't our trouble. The trouble is to get the
problem so it is understood between management and industry and
Government and everything else, what are the best problems to do?
If we could have an inventions congress or conference here in which
we had business men and economists and representatives of the Gov-
360 CONCENTRATION OF ECONOMIC POWER
ernment, and could sit down and say, "Now, what are the most prob-
able things that we can do?" Remember, some of the most important
things to do yon can't do in a hurry. It takes a long while. We-
have had men on work for 15 years, on some problems, and we
haven't the solution to the thing yet.
The Chairman. May I say to you, taking advantage of your state-
ment just now, that so far as I am concerned, the principal purpose
of these hearings is to provide a forum for just such a conference
with respect to our national economy. May 1 say to you, ISlr. Ket-
tering, that I feel very much stimulated by your testimony this
afternoon, and I very much appreciate it.
Representative Sumnfrs. Mr. Chairman, I am going to take ad-
vantage of this particular situation to make an observation that I
believe is important for the country. You gentlemen who are here,
engineers and inventors and so forth, in your work, undertake to
discover how you may improve the machinery that you have to deal
with. You discover natural law and how you can work in accord
with it. And you are all co-partners with this Government. You
own your business^ but you also are part of this Government.
Those of us who are Avorking at this job recognize that in the eco-
nomic and political government we have difficulties. Tlris govern-
ment has a nature just like the things you work with. It has the eco-
nomic government ; it has a nature. It has a respiratory system, and
I think a good many of us here at the Capital appreciate the fact that
the time has come, if Ave are to preserve free government in this
country, that we have got to discover the natural laAvs which govern
governments, and hoAv we can work in accord with tliem, and if we
cannot preserve this Government, all these big fortunes that are being
built up and all these mechanical deA'elopments will be a mockery to
these people.
I much appreciate the observation of the chairman, and I believe
I share with my colleagues on this committee the purpose to take
advantage of this opportunity to see if we can discover what is
fundamentally wrong, what may be done fundamentally to improve
the economic and political organizations of the country.
We have been, I am afraid, a little different in govermnent from
what you and the doctors have been. Doctors will try out a neAv
idea on a guinea pig first and they Avill be pretty cautious. Of course.
AA^e are not: but there have been people connected Avith goA-ernment
AA^ho Avant to try the Avhole idea on the GoA'cnuneut first and then,
if it won't Avork, they Avon't try it on the guinea pig, and they expect
to have a diploma because it didn't make the guinea ]')ig sick.
I am not attempting to make any general statement except that
observation, and I address it to the people of this country. I take
advantage, with the consent of my chairman, to make that brief
observation to these people and to the country.
Mr. Kettering. What you say is A-ery true. Hoav to do an experi-
ment Avitliout building the Avliole machine has been one of the biggest
problems we have had ; hoAv to discover how an engine AA'orked by
making only one cylinder of it. You must be patient, because we
must learn how to set up a one cylinder government and try that out.
I don't know anything about it.
CONCENTRATION OF ECONOMIC POWER 36X
Representative Sumners. This is a pretty good machine, a pretty
fair machine, and it isn't true that just because a thing has stood
the test for 25 years it should be destroyed.
Mr. Kettering. I don't think we technicians can help you on that,
more than to show you how we tackle our problems, and you fel-
lows, if you take that, maybe can get something out of it. I don't
know how it would apply to your problem. We will be very happy
to assist in any way we could. We will tell you how we go about
our problems and things like that, and if there is anything that is
usable, we will be very happy to have you use it.
Senator* King. If this is a testimony meeting, isn't it a fact that
democratic government, and in that phrase 1 mean a democratic
government in all of the proper connotations, is the most difficult to
maintain in the midst of communism, socialism, and dictatorship?
It is one of the most fragile of all governments and requires intelli-
gence and patriotism and a high degree of reverence for^ the spiritual
and moral values of life. If we have those things, this democracy
will* survive. If not, it won't.
Mr. Kettering. You are right.
The Chairman. Mr. Cox, do you have any^\ing to add at this
moment ?
Mr. Cox. No, sir.
The Chairman. Mr. Kettering, we are "very much indebted to you
and you are now excused.
(The witness was excused.)
Mr. Cox. We wish to recall Mr. McEvoy for a short time, and with
the chairman's permission I am going to ask Mr. Dession to examine
him.
The Chairman. Mr. Dession, you' may examine Mr. McEvoy.
TESTIMONY OF JAMES McEVOY, PATENT COUNSEL, GENERAL
MOTORS CORPORATION, DETROIT, MICH.— Resumed
Mr. Cession. I think you testified this morning, Mr. McEvoy,
that? you are director of the patent section of the General Motors
Corporation.
Mr. McEvoY. Yes, sir.
Mr. Dession. How long haVfe you occupied that position ?
Mr. McEvoY. Since July, 1922.
Mr. Dession. And were you before that time connected with the
corporation ?
Mr. McEvoy. Yes ; I had charge of the legal department in Detroit.
Mr. Dession. From about 1920?
Mr. McEvoy. It was from -1921. Before that I was general counsel
of the corporation in New York,
Mr. Dession. In your capacity as director of the patent section,
I assume that you formulate and administer the patent policies of
the corporation?
Mr. McEvoy. Yes, sir.
Mr. Dession. I show you a pamphlet which reads "General Motors
Corporation Procedure Covering Patent Section Activities." Does
this embody the general system adopted by the corporation?
362 CONCENTRATION OF ECONOMIC POWER
Mr. McEvoY. Yes; it does.
Mr. Dession. We offer that.
The Chairman, Do you desire to have it included in the record.
Mr. Dession. It need not be printed.
The Chaieman. It may be marked.
(The pamphlet referred to was marked "Exhibit No. 102" and is on
file with the committee.)
Mr. Dession. And is this the corresponding memorandum of pro-
cedure on foreign patents and engineering accomplishments?
Mr. McEvoT. It is.
Mr. Dession. We offer that as an accompanying exhibit.
(The pamphlet referred to was marked "Exhibit No. 103" and is on
file with the committee.)
Mr. Dession. That would place your entry into the corporation at
about the middle of the period covering the first cross-licensing
agreement, would it not?
Mr. McEvoY. Yes.
Mr. Dession. That is, the agreement was adopted in 1915 and
expired in 1925.
Mr. McEvoY. Yes.
Mr. Dession. At that time, Mr. McEvoy, and in your capacity as
director of the patent section, did you gather any impressions as to
why the General Motors Corporation, and perhaps others, were
induced to enter that cross-licensing agreement?
Mr. McEvoY. Well, I didn't Imow anything about the cross-
licensing a^eement until early in 1923, I guess. I began to attempt
to analyze it, to see what it might mean to the corporation if W6
entered into a renewal of it. I was told that in the early days of the
industry, in 1915, all of the automobile companies that became mem-
bers of the chamber thought that a cross-licensing agreement, under
which each of them could use the others' patents, would be an exceed-
ingly valuable thing, and perhaps it was at that time. I don't Imow.
Mr. Dession. Was that primarily because it would clear the decks —
facilitate design?
Mr. McEvoY. I don't really know what was in the mind — I think
most of them were sort of terrified by that old Selden case and just
thought it would be a good thing to do.
Mr. Dession. Do you think the Kardo Corporation, that is the
formation of that corporation around 1914, was another factor?
Mr. McEvoY. In the cross-licensing?
Mr. Dession. Yes.
Mr. McEvoY. I don't know.
Mr. Dession. When you re-examined the patent situation as of
1923, did you find there were important patents owned by other com-
panies which General Motors needed to use?
Mr. McEvoY. There were no important patents whatever.
Mr. Dession. Were there any patents which you were using?
Mr. McEvoY. Yes.
Mr. Dession. Would it have involved considerable trouble or
expense to redesign so that you might avoid them?
Mr. McEvoY. Not a great deal ; no. We were using at that time
22 patents going to .the other membeis of the cross-licensing agree-
ment, and they were using 42 of ours. None of them was controlling
CONCENTRATION OF ECONOMIC POWER 3^3
in any sense. There were two patents that we didn't want to continue
using. We could have gotten away from them by changing our
structure a little, that was all. ^
Mr. Dession. During that period, Mr. McEvoy, did General
Motors ever claim that it held any patent which was entirely apart
from the agreement, a class B patent?
Mr. McEvoY. No, sir.
Mr. Dession. I mean by class B a patent of exceptional originality.
Mr. McEvoY. We never had any such patent.
Mr. Dession. And General Motors joined in all the subsequent
extensions of the cross-license agreement, did it not?
Mr. McEvoY. Yes.
Mr. Dession. And was there any particular reason for that?
Mr. McEvoY. You mean for their doing it ?
Mr. Dession. Yes.
Mr. McEvoY. No. The only reason was tlmt I think all of the
autoniobile companies other than Ford Go. felt that this chamber, or
the present Manufacturers Association, was a very good thing,
mainly because the men got together and talked over problems, and
all that sort of thing. I think that was the main notion, not so far
as the patents were concerned, not after 1925.
Mr. Dession. Referring back to the period just before 1925, 1 show
you what purports to be a report on the cross-license prepared for
you by a member of your department, and if you will look at page
4, and also at page 6, it is stated there are certain Maxwell and other
patents not necessarily controlling but which it would be advisable
to own?
Mr. McEvoY. Yes ; there was one patent owned by the Maxwell
Co., known as the Law transmission patent. That covered a certain
feature of transmission that I think all the automobile companies
were using at that time. So when I had this report made, I was un-
certain whether we would join in the renewal of the cross-license
agreement or not. I saw the Maxwell Co. ^uid took a license under
that patent. Didn't pay them anything for it, they didn't ask for
anj^hing, and then there was another patent that covered a banjo
type of axle that was being used on one or two of our cars and we
did nothing about that because we intended to give that up in a
short time. Those are the only two patents tha;t were of the slightest
importance at that time.
Mr. Dession. Now, coming up to the present day, Mr. McEvoy,
would you say that General Motors had any general policy with re-
spect to taking out or acquiring patents ?
Mr. McEvoY. Well, I don't know that we. have any definite gen-
eral policy, in regard to taking out patents.
Mr. Dession. Let me put it another way. Is there any dominant
purpose which you have in mind whicli guides you as to whether
or not you will try to buy or take out an application on a given .
invention?
Mr. McEvoY. Probably the main reason why we filed so many ap-
plications was because if you didn't do that there might be some,
application in the Patent Office covering the same idea, and then the
patent would be issued and we would be charged with infringement.
364 CONCENTRATION OF ECONOMIC POWER
We have had in the Detroit office alone since 1922 about 750 inter-
ference proceedings.
Mr. Dession. And in these interferences have you found that pat-
ents taken out by the corporation have been of substantial value
purely as protection against those interferences?
Mr. McEvoY. Yes.
Mr. Dession. So that T assume that many of the patents taken out
on vt^ork or developed by the employees may have had considerable
utility in that connection.
Mr. McEvoY. A good many of them have.
Mr. Dession. Even though you might not desire to use them in any
other way?
Mr. McEvoY. Yes. Of course you can't tell about using an ap-
plication that is filed how it may appear at the time that we are going
to use it. Maybe we do use it, and perhaps by the time the patent
is granted we have given it up with a change in the structure.
Mr. Dession. I have here a memorandum which is entitled "Rea-
sons for taking out or acquiring patents" also. Is that by General
Motors ?
Mr. McEvoY. Yes; I prepared that. H
Mr. Dession. I offer that as an exhibit.
The Chairman. It may be marked.
(The memorandum referred to was marked "Exhibit No. 104" and
is included in the appendix on p. 691.)
Mr. Dession. You stated, Mr. McEvoy, that you have had some
446 interferences against General Motors since 1922; and I suppose
the total, if you lumped in the other divisions of General Motors,
would be larger.
Mr. McEvoY. Oh, yes. ■
Mr. Dession. Could you estimate the total at all?
Mr. McEvoY. I can give it to you in a minute.
Mr. Dession. I will withdraw that question. Never mind the
exact number.
Mr. McEvoT. I can dig it out for you.
Mr. Dession. I think we can dispense with the number.
Mr. McEvoT. I should say in the neighborhood of perhaps 800.
Mr. Dession. Is the corporation very frequently charged with in-
fringement of other patents?
Mr. McEvoy. Yes; quite often.
Mr. Dession. Could you give us any idea of the number of such
notices over any given year?
Mr. McEvoY. Yes. We have three main offices, the Detroit patent
office and one at the Frigidaire in Dayton and the Delco Products
division factory. At the Detroit office during the years 1927 to
1937, inclusive, we had 660 charges of infringement.
Mr. Dession. Wliat came of tllose?
Mr. McEvoY. We never heard any more from most of them.
Mr. Dession. Did some of those result in settlements or suits?
Mr. McEvoY. We had some suits; I couldn't tell you just how many
suits were brought.
Mr. Dession. Will you look at this memorandum?
(The memorandum referred to was marked "Exhibit No. 105" and
is included in the appendix on p. 697.)
CONCENTRATION OF ECONOMIC POWER 365
Mr. McEvoY. Very often suit is brought without infringement
notice. We have had akogether 99 suits brought against the corpo-
ration since its inception.
Mr. Dession. Most of tliose, I believe, are from charges of infringe-
ment.
Mr. McEvoY. Some "were not. Sometimes a suit was brought with-
out any charge of infringement.
Senator King. What were they brought for, if I may inquire.
Mr. McEvoY. For infringement, but you don't have to give a
notice. Sometimes they don't do that — just file the bill.
Mr. Dession. That is 99 suits since 1914?
Mr. McEvoY. Yes, sir.
Mr. Dession. And how many suits, if you know, did General
Motors bring against other persons?
:Mr. McEvoY. Twenty-five, I think.
Mr. Dession. And did all of these go to triaH
Mr. McEvoY. Oh, no.
Mr. Dession. Were most of them settled?
Mr. McEvoY. Of the suits brought against the corporation we lost
9; that is, 9 were decided against us. Twenty we won, and 20 were
settled before trial or shortly after, and 35 were discontinued with
the plaintiff before trial and were stricken from the calendar under
rule 57. In none of those cases did we pay anything, make any set-
tlement, and there are 15 cases now pending.
Senator King. You differentiated between your Delco and your
other activities outside of the automobile industry. Were any of
those suits or interferences based on the Delco?
Mr. ]\IoEvoY. Oh, yes; these are all of the suits. This statement
I have given is of all of the suits, including Frigidaire and every-
thing else.
Senator King. What I am trying to get at is how many of those
suits were based upon alleged infringement of patents dealing espe-
cially with automobiles or the automobile industry. I am not speak-
ing about Delco's, Frigidaire, or any of those other activities ♦in
which your company is engaged.
Mr. McEvoY. Sixty-two, sir. Sixty-two dealt with the antomobile
or things connected with it such as carburetor and so on.
Mr. Df^sion. That is out of a total of 99?
Mr. McEvoY. Yes, sir.
Mr, Dession. Now, I show you a schedule of costs of litigation by
years. Was that prepared in your office ?
Mr. McEvoY. Yes; I prepared that.
Mr. Dession. Will you tell us what it was for the last year in-
dicated ?
Mr. McEvoY. For 1937?
Mr. Dession. Yes.
Mr. McEvoY. It was $262,711.74.
Senator &ng. Did that include any judgments?
Mr. McEvoY. No ; just legal expense.
Mr. Dession. Lawyers' fees and tests and so on. And, as indicated
by the schedule, that was not an unusual figure as a yearly average?
Mr. McEvoY. No.
Mr. Dession. I offer that as an exhibit.
366 ^ CONCENTRATION OF ECONOMIC POWER
The Chairman. It may be accepted.
(The schedule referred to was marked "Exhibit No. 106" and is
inckided in the appendix on p. 700.)
The Chairman, In the interest of expediting the hearing, if you
have very many more exhibits I am sure that it might be possible
just to present them by reading without going to the bother of hav-
ing each one identified, unless there is some objection on the part
of the witness.
Mr. Dession. We have a few more and we will follow that pro-
cedure.
Now I should like to refer to the policy of General Motors insofar
i;s licensing competitors is concerned under its own patents. Do
you have any recollection of an instance where a license was refused
to any competitor?
Mr. McEvQY. No, sir. We have never refused to grant a license.
Mr. Dession. Do you cliiferentiate in licensing between inventions
-of what you would regard as exceptional value to the corporation
and the general run of patents?
Mr. McEvoY. No.
Mr. Dession. Let me take an example. Did General Motors a. few
3'ears ago acquire a patent >n the Tiiompson synchro-mesh trans-
mission?
Mr, McEyoY. Yes.
Mr. Dession. Would you regard that as one of the more valuable
patents now?
Mr. McEvoY. No.
Mr. Dession. Do you recall roughly what General Moto.rs paid for
that patent?
- Mr. McEvoY. I think we paid Thompson something over $500,000.
Then we had to buy three or four other patents. We found we were
in conflict with it knd I suppose that the actual patent cost was
nearly $600,000, and then the development cost was probably a
million.
Mr. Dession. Was a license under that patent or those patents
granted to Packard?
Mr. McEvoY. Yes.
Mr. Dession. Do you recall what sort of terms Packard paid under
that agreement?
Mr. McEvoY. Yes ; the original arrangement was $1.25 a car, with
a provision that when $200,000 was paid the license would be paid
up. For that we gave Packard a good deal more than just the license,
because we gave Packard all the production drawings of the Cadillac
<;ar, and then they continued to pay that royalty until they paid, I
think, $66,000, and then they put out a small car which hadn't been
contemplated at the time the license was taken. It didn't seem fair
to charge them as much as $1.25 on the small car, so we made an
arrangement with them whereby the license was canceled, and two or
three other controversies we had with them at that time were wiped
out, so we really got $66,000.
Mr. Dession. And with respect to those same patents, did any other
automobile manufacturers use that synchro-mesh?
Mr. McEvoY, Yes; all of them did, because the transmission is
made by the Borg- Warner Motor Co. and sold to almost every auto-
« iiobile company in the country.
CONCENTRATION OF ECONOMIC POWER 367
Mr. Dession. And did General Motors license Borg-Wamer?
Mr. McEvoT. Yes.
Mr. Dession. Was that before or after they started making and
selling these transmissions?
Mr. McEvoY. Several years after.
Mr. Dession. And was that suit settled or did it go to final de-
termination ?
Mr. McEvoY. No ; it was settled.
Mr. Dession. What sort of terms did General Motors accept in
that instance?
Mr, McEvoY. They paid $75,000 and gave us the license under a
number of patents they had on ready transmission.
Mr. Dession, Let me examine one other instance. Would the
Fisher ventilation system be regarded by you as another especially
valuable General Motors patent?
Mr. McEvoY. Yes ; we hold that very valuable.
Mr. Dession. Was that patent ever a matter of interest to the
Ford Motor Co.? .
Mr. McEvoY. Yes ; just a few months ago they talked about using
it and taking a license.
Mr. Dession. And was there any discussion of terms in connection
with that?
Mr. McEvoY. No ; we didn't get that far because they d&ided they
wouldn't change this year.
Mr, Dession. And you wouldn't venture to suggest the sort of
terms that might have been suggested by General Motors ?
Mr. McEvoY. No.
Mr. Dession. General Motors would have required some payment.
Mr. McEvoY. Oh, yes. Not very much, however.
Mr. Dession. I show you a schedule of royalties paid to General
Motors, and royalties collected by General Motors, which runs from
1924 through the end of 1937.
(The schedule referred to was marked "Exhibit No. 107" and is on
file with the committee, A similar schedule for 1937 was marked
"Exhibit No. 107- A" and is on file with the committee.)
Mr. Dession. That shows, does it not, the grand total for the
period of some three and a half million in royalties collected, and
some slightly under 14 million in royalties paid?
Mr, McEvoY. That is correct, except that ought to be "Royalties
and purchase of patents." That is an error because it says simply
"Royalties."
Mr. Dession. So the item of "Royalties paid" includes patents
purchased ?
Mr. McEvoY. That is right.
Senator King. That is to say, your company purchased a number
of patents,
Mr. McEvoY. Yes, sir.
Senator King. And paid a royalty upon others ?
Mr. McEvoY. Yes, sir.
Mr. Dession. Could you state offhand, Mr. McEvoy, about what
the net royalty cost to General Motors would represent per automo-
bile produced ?
Mr. McEvoY. Of course, that varies from year to year, but cer-
tainly never more than 60 cents.
3^g CONCENTRATION OF ECONOMIC POWER
Mr. Dession. And at the present time do you think it would be
less than that?
Mr. McEvoT. I think it would, probably not more than 35 or 40
cents.
Mr. Dession. And do you think that amount might be much larger
if the attitude which we have heard described here with respect to
patents in the auto industry had been different?
Mr. McEvoY. I don't think so.
Mr. Dession. I realize that the question is speculative, but you
aren't sure that it would make any material difference.
Mr. McEvoT. I don't think it would.
Mr. Arnold. You don't think you collect every cent you possibly
could ?
Mr. McEvoT. We never tried to do that. As Mr. Knudsen said,
we are making automobiles and not exploiting patents.
Mr. Arnold. I think that is what the question was directed at.
Kepresentative Sumners. When you t\u-ned in your patents to the
pool, there were two which you regarded as of some value. Did you
make some statement to that effect?
Mr. McEvoY. No, sir.
Representative Sumners. I misunderstood you.
Mr. McEvoY. I said when the first cross -licensing agreement came
to an -end, there were two patents, one belonging to the Maxwell
Co. and one belonging to another company, that we were using and
wanted to continue to use for a short time, but they weren't of any
special value We wanted them just because we were using a par-
ticular form of axle.
Representative Sumners. Those were two that you got out of the
pool?
Mr, McEvoY. Yes.
Re)<resentative Sumners. How many were you using still that you
contributed to the pool, of your own?
Mr. McEvoY. We were using 22 patents, I think it was, altogether.
Representative. Sumners. Thank you very much, and I hope you
will pardon that interruption.
Mr. Dession. Mr. McEvoy, when licenses have been issued by Gen-
eral Motors has there ever been a license with any provision in it
restricting the licensee either as to the movement of a given product
that he might produce, or as to the region wherein 4*e might mar-
ket it?
Mr. McEvoY. No, indeed.
Mr. Dession. Has there ever been any restriction as to resale
price ?
Mr. McEvoY. No, sir.
Mr. Dession. Have you ever granted any exclusive licenses?
Mr. McEvoY. No, sir.
Mr. Dession. That has not been thie practice?
Mr. McEv6y. No; and it is not our practice to use those exclusive
patents either.
Mr Dession. Would you refuse one if it were offered you?
Mr. McEvoy. I don't know. An exclusive license is a much more
expensive thing than a nonexclusive one. We have taken only a very
few exclusive licenses, and in most cases because we had a very great
CONCENTRATION OF ECONOMIC POWER 369
deal of development work to do. In one or two cases we wanted the
license rather badly and the licensor insisted on the exclusive license.
Mr. Dession. You may have heard this morning, and perhaps
yesterday, Mr. McEvoy, some discussion here as to whether there was
any tendency under the present patent laws and the patent system
for patents to issue on a great many trivial details, as well as on
inventions of genuine importance.
Mr. McEvoY. Oh, yes.
Mr. Dession. Do you concur in the impression that there are too
many detailed patents?
Mr. McEvoY. There is no question about that.
Mr. Dession. I have here four metal screws, Mr. McEvoy. I
wonder if you would look at these and tell us what essential difference,
if any, there is between them.
Mr. McEvoY. I can't see any.
Mr. Dession. If there are no essential differences, are there any
differences at all?
Mr. McEvoY. I can see nothing substantial. This is rather in-
teresting. I presented these, in talking over the thing and seeing
the troubles that you were up against in the Patent Office in issuing
a perfectly silly patent.
Mr. Dession. Now, two of those screws have a crossed slot, that is
to say, two slots like a cross in the head, and the others have one;
is that right ?
Mr. McEvoY. That is right.
Mr. Dession. That is about the only difference ?
Mr. McEvoY. That is all.
Senator King. This isn't supposed to represent a Swastika, is it,
with those indentations on top here ?
Mr. EcEvoY. Here is the collection of patents issued on that sort
of thing. I think there are about 25 of them.
Senator King. They get a patent, then, for the little indentation,
the form of the indentation on the head of the screw?
Mr. McEvoY. Yes, sir; and there are thousands and thousands of
patents just like that.
Senator King. Would there be any patent issued upon the number
of spiral descents?
Mr. McEvoY. Yes ; we might do that, too.
Mr. Db'SIon. Those are all right-handed screws?
Mr. McEvoY. I imagine so. But it might be of some interest to
the members of the committee to look at some of these patents.
Mr. Dession. That is a collection of patents on the cross-slotted
screw.
Mr. MoEvoY.' You will notice on the end of the screw that they are
a little different, but all substantially the same.
Mr. Dession. May we have those four metal screws marked as an
exhibit, and also the collection on patents on the double-slotted head?
(The four metal screws referred to were marked "Exhibit No. 108"
and are on file with the committee. The collection of patents referred
to was marked "Exhibit No. 109" and is on file with the committee.)
Mr. Dession. And you would say there are numerous other in-
stances of similar patents issued^
370 CONCENTRATION OF ECONOMIC POWER
Mr. McEvoY. Oh, yes.
The Chairman. Isn't the issuance of patents like this a result of
the difficulty of putting into language a definition of what is new
and useful?
Mr, McEvoT. I think one difficulty, sir, in the Patent Office is the
pressure that they are under to get out patents. They are supposed
to get out so many thousand patents every year, and in many cases
there is no proper investiga,tion, sometimes no investigation whatever.
Mr. Arnold. The pressure seems to operate to get out more patents
rather than to neglect them and get out fewer ones ?
Mr. McEvoY. That is right, and I understand in a great many
divisions the head of the division has given orders to the men that
they have to get out so many patents every week, and so there are
so many of them it is impossible for them even to read the claims.
Senator King. May I ask this question: Does the law require,
where there is such a similarity as this little indentation in the top
of the screw, that a person shall have a patent for each one of those?
Mr. McEvoY. There is nothing in the law whatever, sir. It is a
matter of opinion of the examiner whether you have an invention
or not.
Senator King. The law doesn't clearly define what an invention is,
then?
Mr. McEvoY. No, sir; and there are a good many decisions on that.
The Supreme Court has handed down various decisions defining in-
^^ention in very good shape, but this is another pressure the Patent
Office is up against, a very wide difference of opinion among the
various circuits. You find one circuit will hold one way on some-
thing and another circuit another way.
Senator King. The industry then might take out a patent on a
screw where it was desired to have a little different type of die at
the top than those in use, for fear that somebody else, if he adopted
that form of screw, might seek a patent for it.
Mr. McEvoY, That is right.
Senator King. So people might feel constrained to ask for a patent
upon a matter that was very simple and apparently not worth)^ of
patent.
Mr. McEvoY. Yes; and some of these men are very ingenious in
doing that very thing. Of course, I think that most patents like
that are utterly invalid. I don't think they would be upheld by any
court, but that is something nobody can tell.
Senator King. Somebody might sue the company and make some
trouble anyway.
Mr. McEvoY. Yes, sir ; very serious trouble.
Mr. Dession. Are those slotted screws used in making automobile
bodies ?
Mr. McEvoY. Yes.
Mr. Dession. Do you know whether they cost substantially more
than the one-slotted screw?
Mr. McEvoY. No ; I am quite sure they don't.
Mr. Dession. If I suggested to you that in Washington you could
buy the one-slotted screw in any 5-and-lO-cent store at about 12 for
a nickel, and the 2-slotted ones would cost about 3 cents, would you
be surprised at that?
Mr. McEvoY. No; I wouldn't be surprised.
CONCENTRATION OF ECONOMIC POWER 371
Mr. Dession. You don't know whether to attribute that difference
in cost to the 18 patents ?
Mr, McEvoY. They don't all belong to one man. I suppose they
charge it because they can get it.
Mr. Dession. There has been various testimony here today with
respect to other comments and suggestions on the working of the
patent laws and the patent system. Do you care to advance any
comments of your own, or comment on the comments made?
Mr. McEvoY. There are two special things that I think should be
corrected in our patent system. One is, you gentlemen probably
know an application is filed and it is secret. Nobody knows any-
thing about it until the j)atent is issued, unless you have in the file
an application that goes in interference with it, and then of course
vou would know. In many cases those applications stay in the
^Patent Office for many years until a big industry is built up. For
instance, take the Delco-Kemy Co. ; that is a very good illustration.
Mr. Kettering developed the self-starter in 1911, he started his
work then, and then the Eemy boys started their work on the two-
unit. There are two sets: Mr. Kettering's was a single unit and
the Remy Bros.' was a double unit, and both those large industries
were built up with millions and millions of dollars invested. In
1920 five patents were issued to a man named Heaney that covered
every phase of the starting and lighting system. Those patents had
been held in the Patent Office for 15 years, and every year they were
amended until they covered the entire situation. That has happened
in thousands and thousands of cases.
I think that applications should be thrown open to the public for
you to know what is in there.
The Chairman. What was the result of that condition ?
Mr. McEvoY. The result was that they brought suits, the concern
that owned those patents, and the General Motors Corporation, al-
though they felt pretty sure the patents were invalid, considered it
too big a' risk to run, so we made a settlement and paid $600,000 for
the license.
Everything that goes into production in General Motors comes to
my department and we make a patent search to see if we infringe on
somebody's patent. We make several thousand investigations a
year on every single item that goes into production.
Most of the licenses we take we find are as a result of researches,
and we run into somebody's patent and then we buy the patent, but
all_ we can do is to examine issued patents. We have no idea what
is in the Patent Office, don't you see, in the way of applications.
You spoke about this Thompson transmission. Mr. Thompson
brought his invention to us; he had one patent, and he had several
applications. We made a search as best we could and we didn't find
any issue of patents that conflicted with it, but we had to buy four
patents to clear his situation, all of which were in the Patent Office
in applications.
Senator King. But you had no knowledge of that.
Mr. McEvoY. No, sir. I see no reason why an application shouldn't
be thrown open — it is done in England, it is done in Germany, and
in France — to the public so you -can see what is in the Patent Office
and what you have got to meet.
372 CONCENTRATION OF KCOXOMIC POWER
The Chairman. Would it be agreeable to you if I should interrupt
the witness in order to ask a question of Commissioner Coe, who is
sitting at the table, for my own information? Commissioner Coe,
what is the practice within the Patent Office with respect to the
examination of pending applications before a given patent is issued,
that is to say, for the examination of pending ai)plications for the
purpose of developing possibilities of conflict ?
STATEMENT OF CONWAY P. COE, COMMISSIONER OF PATENTS,
UNITED STATES PATENT OFFICE, WASHINGTON, D. C.
Mr. Coe. Mr. Chairman, it gives me a great deal of pleasure to
answer that question. In spite of the criticism that has been leveled
at the Patent Office, I think I am safe in saying that we have the
finest examination system of any major country in the world, and
it is generally so regarded. It is the envy of every other couury
that I have talked to. Commissioners of Patents are stri'\ng to ap-
proach the efficiency of the United States Patent Office in its exam-
ination of cases. Our Patent Office is organized and is broken down
into a number of divisions, each according to its several arts known
to man. One section handles the art of typewriters, shoe machines,
chemicals-7-examiners in that art devote themselves to particular sub-
sections of the various general arts, and they are assigned cases to
handle in that art until they become extremely expert.
Now, it is true that a great many so-called trivial patents are is-
sued. Of course the gentlemen that refer to trivial patents that I
have spoken to always regard those patents as patents of tlieir com-
petitors; they never file trivial patents. The fact is that the Patent
Office receives more criticism because it is harsh and strict and re-
fuses patents far more than it is generous in its grant. As one evi-
dence of that fact, the Commissioner of Patents is the most sued of
all Government officials. The United States marshal is a daily vis-
itor to my office, bringing complaints against the illegality, the un-
fairness, the harshness of the Patent Office in refusing to grant pat-
ents. The further fact is that 40 percent of all cases filed are denied.
Another fact is that not one-tenth of 1 ])ercent of patents are
filed in the form sought by the inventor, and on these two patents,
for example, the inventors probably claimed a great deal when they
came into the Patent Office. This much is evident, that the protec-
tion afforded by those patents is extremely small.
I would be interested in knowing, for example, whetlier or not
any of the automobile companies filed applications on any of those
patents and whether they belonged to any of the companies, and
whether the people who complain about trivial patents would be
willing for the Patent Office to restrict their application to materially
raise the standard of invention. It is a ])roblem that we are faced
with every day. We realize that we would like to elevate the
standard of invention, but how can we do it unless the Patent Office
is made a tribunal of final resort, which I don't think it should be.
I think that Congress wisely provided that there should be some
review from the administrative agencies of the Patent Office. On
the other hand, as to the patents that we grant, only those patents
are granted by the Patent Office which in our judgment our appel-
late courts would require us to gi-ant, and we are reversed often
CONCENTRATION OF ECONOMIC POWER 373
enough by the appellate courts to set a standard for the Patent
Office. I don't know whether I have answered your question spe-
cifically or not.
The Chaieman. I was asking you what your practice is to set up
searches within the Patent Office so as to prevent such a situation
as the witness has described, wherein after a particular patent had
been issued, another patent which had been pending in application
form at that time was later issued with the result that his company
had to pay $600,000 to acquire licenses.
Mr. CoE. Mr. Chairman, I will answer that question in this way :
Seldom if ever is a patent held invalid on the art known and con-
sidered by the Patent Office. Of course this matter of getting, col-
lecting human knowledge is an extremely difficult thing to do. We
do the best we can, and there are many things unknown to the Patent
Office and generally when a patent is held invalid, it is in view of
something not known to the Patent Office.
Now, the proposal which I would favor, of publishing applications
for patents before the grant theoretically would improve that situa-
tion in that it would bring into the Patent Office art in which we
have a knowledge that we now have no means of collecting. On the
other hand, there are very serious objections to it. In its application
in foreign countries, for example, one of the most serious is that large
corporations invariably take advantage of the opposition proceedings
to oppose the grant of a patent which. in effect then becomes a small
litigation as to whether or not the patent should be granted and the
small inventor and small business cannot endure that expense.
The Chaieman. You say that the Patent Office is frequently re-
versed by the courts. In what proportion of these cases is the
reversal granted because of your issuing an invalid patent rather
than your failing to issue a patent ?
Mr. CoE. Well, there are two separate courts that handle those two
questions. One is the question of infringement and validity. It comes
up only in infringement suits. The second is on an appeal from
the Patent Office ih its denial of a patent. Therefore, the action of
the courts in those two respects cannot be very well prepared.
The Chairman. In actual number they could.
Mr. CoE. The courts of the District of Columbia reverse the Patent
Office in approximately 25 to 30 percent of the cases. Now, naturally
the Patent Office will not get in a position where it receives more
unfavorable opinions from above than favorable opinions. So it is
quite natural that we win a majority of our cases; otherwise, we
would naturally be sending up cases needlessly.
The Chairman. This 30 percent of the cases in the District of
Columbia courts — are they cases chiefly in which yOu are required
to issue patents which you are refused ?
Mr. CoE. Wliich" tlie examiner has refused and which the Board
of Appeals has failed to issue and which the applicants insist, in spite
of that, that they have a valuable invention.
The Chairman. So the facts are the courts compel you to issue
more patents than you would of your own volition.
Mr. CoE. That is absolutely correct, and I further repeat my prior
statement that the only way the Patent Office can elevate the stand-
ard of invention is to make the Patent Office a tribunal of final
124491— 39— pt. 2 9
374 CONCENTRATION OF ECONOMIC POWER
resort so that we can set the standard. There is no use of. our ele-
vating the standard and have the court tell us it is too high.
The Chairman. Thank you very much, Mr. Commissioner.
Mr. Arnold. You said you didn't want that done.
Mr. CoE. I think that Congress wisely provided a review of an
administrative agency; yes.
Mr. Arnold. And yet you say the only way to improve it is to have
that thing removed.
Mr. CoE. No, sir; Mr. Arnold, I didn't say it was the only way we
could improve it, because I am not sure that that is necessary.
Mr. Arnold. I misunderstood you. I thought you said the only
way you could elevate the standards was to make you, your commis-
sion, a court of final resort, and at the same time you said you
wouldn't want it done.
Mr. CoE. Yes ; but the question is whether or not it is desirable and
necessary to raise the standard of invention.
The Chairman, When you use the phrase "elevate the standard"
you are using that in a technical sense.
Mr. CoE. I mean in response to the demand for fewer and better
patents. Now, I have heard that phrase used, Mr. Chairman, and
the Patent Office has received that precept many, many times, but
we seem to be denied to give the prophecy required for its fulfillment.
We don't seem to know just how to tell how important an invention
may be at the time it is filed in the Patent Office.
Senator King. Do you think that it would be an improvement upon
the present patent system if as soon as an application for the patent
is filed, whether you call it lis pendens or the application as set out
in detail, it should be published or notice given on a board there, or
the public "advised as to the character and nature of the application
which has been made ? That was the point that the witness was
calling attention to.
Mr. CoE. As distinguished from the present practice, as far as
the present practice is concerned, I would regard that as a substantial
improvemejit, but I feel that if we would adopt a measure some-
thing like the 20-year bill and get cases out of the Patent Office, -
none of these things would be necessary.
The Chairman. Proceed, Mr. Dession,
Mr. Dession. I have here a study, entitled "History of the Growth
of the Long Pending Patent Application Evil." That was pre-
pared by the General Motors patent section.
Mr. McEvoT. Yes; by Mr. Miller.
Mr. Dession. We offer that for the record.
The Chairman. You want that in the record.
Mr. Dession. Yes.
The Chairman. It may be marked.
(The document referred to was marked "Exhibit No. 110" and is
included in the appendix on p. 701.)
Mr. Dession, That contains, amongst other things, a study of
the 143 particularly important patent applications?
Mr, McEvoT. Yes.
Mr. Dession. And can you tell us in a general way what this
study shows as to length of time ?
Mr. McEvoY. It shows that many of these patents, applications
rather, remained in the Patent Office sometimes as much as 5 years
and 10 months.
CONCENTRATION OF ECONOMIC POWER 375
Mr. Dession. And does it show that ever since, is it 1884 that
that study begins ?
Mr. McEvoY. Yes.
Mr. Dession. Ever since that year the average period of pendency
for all patents has been steadily lengthening?
Mr. McEvoY. It was up to 1930. I think since the last few years
it has gone down, since the office has been pushing these applications
out a little faster. I don't want you to think I am criticizing the
Patent Office, because I am not, for they have done an exceedingly
good job.
Mr. Dession. I should like the record to show that my question
contains no such suggestion. This is a study of actual intervals,
the causes, or something else, and those important patents picked
out for particular study there include such patents as the Morse
telegraph, the kinetoscope, the Edison motion-picture camera pend-
ing for 6 years, the Ricker auto ignition patent pending for 15
years and 9 months.
It was part of the Heaney group.
Mr. Dession. I show you another paper entitled "Proposed Patent
Legislation," and prepared by Mr. George H. Willitts and various
other members of the Michigan Bar. Does that also represent the
point of view of General Motors?
Mr. McEvoY. Yes.
(The paper referred to was marked "Exhibit No. Ill" and is
included in the appendix on p. 714.)
Mr. Dession. I will offer that for the record.
The Chairman. It may be accepted.
Mr. Dession. I have no further questions, Mr. Chairman.
The Chaibman. Do any members of the committee desire to ask
Mr. McEvoy any additional questions?
Representative Reece. As I understood, you advocated the open-
ing up of the application to the public, or some procedure by which
other parties would have a right to know about the application.
Then also did you advocate that other parties should have a right
to come in and protest the granting of a patent on an application?
Mr. McEvoY. Th^ do that abroad. I hadn't thought about that
very much. That isn't important to me.
Representative Reece. If that procedure should be adopted, then
the examiner's office would have a tendency to develop into a trial
board, would it not ?
Mr. McEvoY. Yes.
Representative Reece. And in that case, how would a smaller
man, an independent man, who had no means and lived a distance
from the capital, be able to properly protect his rights as against
the efforts of some large corporation which might be adversely
affected by his application if the patent should be granted?
Mr. McEvoY. I think we have the same situation now in regard
to interferences in the Patent Office. Of course there is a lot of talk
about the poor inventor and that sort of thing. I don't iust exactly
hold to it. 6 J J
Representative Reece. What is your attitude toward the interfer-
ence proceedings?
Mr. McEvoY. I think that that is one thing that certainly ought
to be corrected. The present interference proceeding is perfectly
376 CONCENTRATION OF E2C0N0MIC POWER
dreadful. The troubled lawyer cannot straighten the thing out in 5,
6, 7, or 8 years.
Representative Reece. But at the present time you suggest the
same thing be adopted with reference to applications ?
Mr. McEvoT. I am not suggesting that at all. I am not prepared
to say that it is a good idea to allow anyone who is affected by an
application to file a protest as you do abroad. The thing I am in-
terested in is throwing the application open after a reasonable time,
say the end of the second year or 3 years, or something of that kind
so that we know what is in the office.
Representative Reece. You think it would be advisable to have
one court vested with power to hear all patent cases ?
Mr. McEvOY. I think it would be a very good idea.
Representative Reece. Rather than the various circuit courts?
Mr.- McEvoY. A very good idea.
Mr. CoE. May I ask Mr. McEvoy one question? Would you be
in favor of making the Patent Office the tribunal of last resort so
far as the issuance of patents is concerned ?
Mr. McEvoY. Yes.
The Chairman. Are there any other questions to be asked of Mr.
McEvoy?
Mr. Dession. Before we adjourn, Mr. Chairman, I should like to
have certified as original exhibits, not to be printed, two statements,
one as a statement of royalties paid and collected by General Motors,
as has already been referred to. That is correct, is it not?
Mr. McEvoY. Yes.
Mr. Dession. And a statement of the same material for 1937.
The Chairman. The statements will be accepted.^
Mr. Cox. I should like to make a statement before we adjourn, if
I may. We had hoped to have Mr. Keller of the Chrysler Co.
here to testify as representative of another large motor car company
which has been a party to the cross-licensing agreement. Mr. Keller,
however, had some urgent engagements and in view of that we ex-
cused him, and that is the explanation for our failure to call any
one of the large manufacturers that was a party except General
Motors.
We had also hoped to have a representative of a smaller manu-
facturing company present, a company which has also part in the
cross-licensing agreement, and for the same reason we were unable
to obtain a representative there, and therefore had to abandon that.
The Chairman. You have no other witnesses?
Mr. Cox. Not so far as the alitomobile industry is concerned. This
concludes our presentation of that aspect of our hearings. The next
thing we plan to take up is the glass industry.
The Chairman, That will also be a patent inquiry?
Mr. Cox. That is also a patent inquiry.
The Chairman. Mr. McEvoy, we are very much indebted to you
for your presence here and for your testimony.
The committee will stand in recess until Monday morning at
10:30.
(Whereupon, at 4:30 p. m., an adjournment was taken until
Monday, December 12, 1938, at 10: 30 a. m.)
1 Previously received and marked as "Exhibits Nos. 107 and 107-A," supra, p. 367.
INVESTIGATION OF CONCENTEATION OF ECONOMIC POWEB
MONDAY, DECEMBER 12, 1938
United States Senate,
Temporary National Economic Committee,
Washington, D. C.
The committee met at 10:45 a. m., pursuant to adjournment on
Tuesday, December 6, 1938, in the caucus room, Senate Office Build-
ing, Senator Joseph C. O'Mahoney presiding.
Present: Senators O'Mahoney (chairman) and Borah; Represen-
tatives Reece and Sumners; Messrs. Arnold, Henderson, Patterson,
Lubin, Davis, Frank, and Berge.
Present also : Department of Justice staff for Temporary National
Economic Committee study — counsel, H. B. Cox (Special Assistant to
the Attorney General); Joseph Borkin, Ernest Meyers, Charles L.
Terrel, Benedict Cottone, David Clarke, George Dession, Fowler
Hamilton, H. C. Engelbrecht, Victor H. Kramer, J, M. Henderspn,
Monroe Karasik, Irving Glickfeld, Hyman Ritcliin, Norman Bursler,
and Seymour Lewis; also chief counsel for Federal Trade Commis-
sion Temporary National Economic Committee study, George W.
Williams.
The Chairman. The committee will please come to order.
Mr. Arnold, you have further proceedings to take place this
morning ?
Mr. Arnold. Yes, Mr. Chairman. I will introduce Mr. Cox to
make a statement.
Mr. Cox. Mr. Chairman and members of the committee, this morn-
ing the Department of Justice begins the presentation of material
relating to the use of patents in the gla^ container industry. The
patents involved cover machinery used to manufacture glass con-
tainers ; the material presented is intended to disclose the relationship
existing between those patents and competitive conditions in the
industry.
It is important at the outset to emphasize the purpose for which
this presentation is made. The Department has selected this ma-
terial for pT-Asp.ntation because it believes that the material throws
light on problems which arise in connection with the enforcement
of the anti-trust laws. The public policy embodied in those laws
rests on the assumption that the maintenance of a free and open
market in which neither production nor price is subject to artificial
limitations or control is socially and economically desirable. The
patent privilege is a limited exception to that policy. To the extent
that the Department of Justice is interested in the patent law, its
interest is confined to the question of the relationship between patent
practices and the free and open market which it is the purpose of
the anti-trust laws to maintain.
The Department is not concerned with the patent law as such or
with the details of its administration. What is a good patent. law,
whether the present patent law fulfills its constitutional purpose,
377
378 CONCENTRATION OF ECONOMIC POWER
and what changes with a view to improvement could be made in its
substantive or procedural provisions are questions with which this
Department has no direct concern. The Department asks that the
committee in hearing this testimony bear in mind that there are two
separate and distinct questions: (1) Is the present patent law equit-
able and effective merely as a patent law? and (2) What is the rela-
tion between the patent law and the enforcement of the antitrust
laws? It is the second question in which the Department is interested
and it is to the second question that this hearing is addressed. From
time to time during the course of the hearing certain evidence may
be adduced with respect to certain practices in connection with the
administration of the patent law. In each instance, however, the
Department presents this evidence because it believes that a direct
and substantial relationship exists between the practice described and
the enforcement of the anti-trust laws. It does not present this evi-
dence to criticize particular details of the patent law or its admin-
istration or with a view to suggesting at this time any changes in its
provisions.
At this point in its presentation of material the Department takes
no position with respect to the legality or the economic desirability
of the practices which will be revealed by the testimony. Its only
purpose now '4s to present the facts with respect to an industry in
which patents are of tlie utmost importance and in which the restric-
tive use of these patents has had a substantial effect upon competitive
conditions.
Two more matters, I think, should be briefly adverted to before the
presentation of testimony begins.
The Chaibman. May I interrupt you, Mr. Cox, to ask if I am
correct in understanding the statement which you have just made to
mean that the presentation of any evidence or testimony this niorn-
ing does not necessarily mean that the Department of Justice believes
that any of the practices which will be revealed involved a violation
of the antitrust laws?
Mr. Cox. I would not go that far. I would say that in presenting,
the testimony we are not taking any position in this hearing as to the
legality. What opinion the Department might have in the course
ot the administration of its regular duties is quite another matter
which I should prefer not to comment on now, with your permission.
The only point I make there is that we will not regard this hearing
as being held for the purpose of trying violations of the antitrust
law. If the Department believes those laws are being violated, it
will try that condition somewhere else, is the point I wish to make.
There are two other matters to which I wish to refer. From time
to time, with regularity throughout the testimony, it is going to be
necessary to refer to machines and certain technical processes used
in the manufacture of glass. In the hope that it might make it
Eossible for the committee and others to follow the testimony the
department has prepared this small pamphlet, entitled "The Manu-
facture of Bottles." It contains a brief description of the processes
used in manufacturing glass and certain figures and pictures which
illustrate those processes. As the testimony develops, I shall try at
appropriate times to refer to passages in the booklet which will make
clear the testimony which is being given.
CONCENTRATION OF ECONOMIC POWER 379
I also wish to make it clear that the testimony which we are going
to hear relates to the manufacture of glass containers. It has noth-
ing to do with plate glass or flat glass or window glass. It relates to
containers, such as milk bottles, to the jars the housewife preserves
fruit in, all the glass containers that food packers pack food in for
distribution to the ultimate consumer, and all kinds of bottles.
If the fact is borne in mind, I think it will assist the committee,
and others, to follow the testimony.
]\Ir. Arnold. That happens to be the major portion of the glass
industry ?
Mr. Cox. That is correct; yes.
The Chairman. It may be improper for me to remark at this
point that, if I undei-stand correctly the attitude of the members of
the committee their interest in the study of patents is primarily one
which involves the use of the resources of the country. We are con-
cerned to know whether or not the patent law^ as it now stands
upon the books and the practices which are followed under it by
any means restricts the maximum use of our resources.
Senator Borah. Or tends to establish monopoly.
The Chairman. Or tends to establish monopoly. Right you are
You may proceed.
Mr. Cox. The first witness will be Mr. F. GoodAvin Smith and
Mr. A. 1'. Safford. ...
While we are waiting, I should like to have this book entitled
"The Manufacture of Bottles" put into the record, if I may.
The Chairman. If you desire, without objection, it is so ordered.
(The book referred to was marked "Exhibit No. 112" and is in-
cluded in the appendix on p. 736.)^
The Chairman. Will the witnesses please be sworn? Do you
solemnl.y swear that the testimony that you are about to give in this
proceeding shall be the truth, the whole truth, and nothing but the
truth, so help you God ?
Mr. Smith. I do.
Mr. Safford. I do.
TESTIMONY OF F. GOODWIN SMITH, PRESIDENT, HARTFORD-
EMPIRE CO., HARTFORD, CONN. ; AND A. T. SAFFORD, SECRETARY
AND COUNSEL, HARTFORD-EMPIRE CO., HARTFORD, CONN.
Mr. Cox. Will you give the reporter your full name and address?
Mr. SiHTH. F. Goodwin Smith, president, Hartford-Empire Co.,
Hartford, Conn.
Mr. Safford. Arthur T. Safford, Jr., Hartford, Conn.
Mr. Cox. Mr. Smith, you are at present a director and member of
the executive committee of the Hartford-Empire Co. ?
Mr. Smith. That is correct.
Mr. Cox. Mr. Safford, you are the secretary of the company?
Mr. Safford. That is correct.
Mr. Cox. You are also a member of the bar of the State of Con-
necticut ?
1 See revisions of Hartford-Empire Co. subsequently entered as "Exhibits Nos. ]16 and
117," appendix, pp. 765 and 766.
380 CONCENTRATION OF ECONOMIC POWER
Mr Safford. That is correct.
Mr. Cox. The principal office of the Hartford-Empire Co. is in
Hartford, Conn.?
Mr. Smith. That is correct.
Mr. Cox. It is a Delaware corporation?
Mr. Satford. A statutory office.
Mr. Cox. Does your company own patents and patent rights on
automatic machinery used in the manufacture of glass, is that correct?
Mr. Smith. Correct.
Mr. Cox. Can you tell us now how many patents of that kind the
company owns today?
Mr. Smith. Not exactly. I think we own possibly a little over 700.
That can be checked.
Mr. Cox. You have that figure. It is about 720.
Mr. Smith. I am told it is 717.
Mr. Cox. Do you manufacture any glass making machinery your-
self?
Mr. Smith. "We have it built for us.
Mr. Cox. You have it manufactured by someone else?
Mr. Smith. Correct.
Mr. Cox. You don't manufacture any glass containers yourself.
Mr. Smith. We do not.
Mr. Cox. The machinery which you have manufactured for you by
someone else you license to others, is that correct ?
Mr. S:mith. Correct.
Mr. Cox. Eetaining in each case the title to the machinery?
Mr. Smitpi. Correct.
Mr. Cox. You never sell any machines at all ?
Mr. Smith. No.
Mr. Cox. In connection with those licenses you also perform cer-
tain services for your licensees.
Mr. Smith. Correct.
Mr. Cox. Would you say the largest part of the income of your
company is derived from license fees and royalties from your
patents ?
Mr. Smith. The largest part of our income is derived from
royalties.
Mr. Cox^ That in fact runs as high as upwards of 90 percent,
doesn't it?
Mr. Smith. I presume somewhere near there. I haven't figured it
out exactly.
Mr. Cox. How many people do you employ?
Mr. Smith. About 300 people.
Mr. Cox. And you have a plant at Hartford.
Mr. Smith. We have an office, a large engineering office, drawing
rooms, a little plant for spare parts, and in addition to that we have
a glass plant which is used for research and development and ex-
perimentation.
Mr. Cox. Just an experimental plant; it produces no glass?
Mr. Smith. That is all. We develop our ideas and inventions in
that plant. We do not sell any glassware.
Mr. Cox. Do you have in your papers a copy of your balance sheet
as of the end of December 1937, Mr. Smith ?
Mr. Smith. Yes.
CO:X"ENTRATION OF ECONOMIC POWER 38^
Mr. Cox. You had total assets as of that date of about $11,000,000,
is that correct ^
Mr. Smith. Correct.
Mr. Cox. You also had a cash reserve of about $229,000.
Mr. Smith, Yes; correct.
Mr. Cox. Another item just labeled "Cash," of seven-hundred-
eleven-some-odd thousand dollars, is that correct?
Mr. Smith. Correct.
The Chairman. May I interrupt, Mr. Cox. Mr. Smith, the
acoustics in this room are abominable. If you can find it convenient
to talk a little bit louder, 1 am sure the persons who are gathered here
will hear more readily.
Mr. Smith. I will be very glad to do so.
The Chairman. This is particularly asked on behalf of the news-
papermen.
control of an industry through patents
INIr. Cox. Taking the machines tb.at are involved in the automatic
manufacture of glass, Mr. Smith, it is true, isn't it, that those ma-
chines, speaking generally, are the furnace, the feeding machine, the
forming machine, and an annealing oven?
Mr. Smith. Correct.
Mr. Cox. Does your company hold patents on all of those
machines ?
Mr. Smith. Yes.
;Mr. Cox. Now the automatic feeder, Mr. vSmith, is a very important
machine so far as the commercial production of glass is concerned.
Mr. Smith. Correct.
Mr. Cox. It would be impossible for a man w^ho attempted to per-
form that process by hand in a plant to compete with one who used
an automatic feeder, wouldn't it?
Mr. Smith. In most lines of ware, the majority lines. There are
still hand plants in existence.
Mr. Cox. Those are for restricted items, such as expensive perfume
and cosmetic bottles.
Mr. Smith. Yes.
Mr. Cox. As far as the great mass of glass containers is concerned,
that kind of competition isn't possible.
Mr. Smith. As far as the great mass of containers is concerned,
they are made automatically by different processes.
Mr. Cox. And your company, as you said a moment ago, hoids
patents on machines for the automatic feeding of glass.
Mr. Smith. Correct.
Mr. Cox. And now, isn't it true, Mr. Smith, that so far as those
machines and those patents are concerned, your company has vir-
tually a monopoly on the patents which relate to that process?
Mr. Smith. As far as those particular types are concerned, w^hich
are owned an4 developed, we have a monopoly as regards that par-
ticular type of machine. That is the monopoly which is given to us
by the patent.
Mr. Cox. In the first place, I would like to know a little more de-
finitely what you mean by a particular type. Do you mean simply
the so-called plunger feeder, or do you mean the gob feeder generally
as distinguished from the suction feeder?
iVlr. Smith. There are two economical means of producing glass-
ware, which are the most economical. There are other means of pro-
382 CONCENTRATION OF ECONOMIC POWER
ducing glassware. There is the Owens suction machine which is an
entirely different method from what Hartford developed, and there
is the Hartford machine which is generally known or called a plunger
fe'^der, and represents a method of gob feeding.
Mr. Cox. So far as that plunger feeder is concerned, or in fact any
kind of a feeder whose principle consists of having glass flow through
an orifice and then being severed in suspension, your company has a
monopoly, has it not, Mr. Smith ?
Mr. Smith- Well, we think we have covered by patents the par-
ticular devices which we license and lease. There are other old
methods, stream feeding, and things of that sort, which we feel are
not as economical as our methods. They can be generally used as seen
fit by various people if they want to use them.
Mr. Cox. Some of your patents would even cover the old stream-
feed methods in some respects, wouldn't they ?
Mr. Smith. That I wouldn't know.
Mr. Cox. I will develop that point later. Taking for a moment
that stream-feed method of producing glass, there is only a limited
kind of ware that that could be used for, isn't that true, Mr. Smith?
' Mr. Smith. I wouldn't feel qualified to say.
Mr. Cox. You feel you can't express an opinion.
Mr. Smith. I would say it is not as good as our method.
Mr. Cox. Except for the stream-feed method of feeding glass and
the Owens suction method, can you think of any method on which
your company doesn't have a patent ?
Mr. Smith. No; no known method'that we are aware of.
Mr. Cox. Of course you ki^ow,. don't you, Mr. Smith, that the
Owens-Tllinois Co., which has the patents on the suction method of
feeding glass, has not granted any new licenses since 1914?
Mr. Smith. I wouldn't know it, no. It may be a faci .
Mr. Cox. If I suggest that to you, and then ask this question, isn't
it true that if a man wished to go into tl^ business of producing
glass and wished to get an automatic feeder, there is only one place
in the United States that he can go to get that feeder, and that is
your company, would you answer me in the affirmative?
Mr. Smith. If he wanted to go into business and use gob feeding
as a method for producing his ware; he would probably come to
Hartford.
Mr. Cox. He would have to come to you.
Mr. Smith. If he wanted to use gob feeding.
Mr. Cox. The only other thing he could use really would be the
suction method.
Mr.- Smith. He could go to the Owens Co. and ask for a license.
Mr. Cox. He would have to go to you or Owens.
Mr. Smith. Or he could use the old methods or buy his way into the
industry by picking up some plant tjiat had a license.
Mr. Cox. I am speaking about a man who doesn't want to buy his
way into the industry but wishes to start himself Avith new capital
and new plants.
Mr. Smith. If he wanted to use our equipment he would have to
come to us.
Mr. Cox. He would have to get yoUr equipment, wouldn't he, or
the equipment of the Ovrens Co.?
Mr. Smith. If he wanted to use our process.
CONCENTRATION OF ECONOMIC POWER 383
Mr. Cox. If he wanted to use any process. There are only two
that are available.
Mr. Smith. Only two that are the most economical.
Mr. Cox. And the reason you qualify that is because you have in
mind the old stream feed, is that right ?
Mr. Smith. Right.
Mr. Cox. So if I could demonstrate to you presently that certain
of your patents cover the stream feed, at least so far as it is now
commercially practical to operate, that demonstration would leave,
us in a position where a man would have to come either to you or to
Owens-Illinois, if he wished to go into the business of producing
glass.
Mr. Smith. If that was demonstrated, yes, unless he produced glass
by the hand method.
Mr. Cox. Of course, if he were going to produce glass by hand he
couldn't compete with anybody else producing it automatically.
Can you tell us how much of the percentage of the total production
of glass containers in this country your company licenses^
ISIr. Smith. About 66, 65, or 67 percent.
Mr. Cox. I show you a sheet, rather the photostatic copy of a
sheet, which was taken from your jfile headed "Memorandum to F. G.
Smith, from survey statistical department," and I point out to you
that on that sheet the figures indicate that in 1937, your company
licensed 67.4 percent of all the glass containers produced in the in-
dustry. Do you believe that is correct?
Mr. Smith. That is substantially correct.
Mr. Cox. I also point out to you the same sheet shows that Owens-
Illinois, licensed in 1937 suction feeders which produced 29.2 percent
of all glass containers produced in the country.
Mr. Smith. Owens suction here is 21
Mr. Cox (interposing). I think you have that wrong.
Mr. Smith. 29.2?
Mr. Cox. That is correct?
Mr. Smith. As far as I know.
Mr. Cox. You are satisfied with the substantial accuracy of tlie
figures ?
Mr. Smith. Yes; substantially correct.
INTr. Cox. So that less than 3 percent of the glass containers that
are produced, were produced in this country in 1937 by someone who
is not a licensee of yourself or not a part of the organization of
Owens-Illinois?
Mr. Smith. I think it is around 2 something. Generally speaking,
that is correct.
Mr. Cox. T will now hand you and Mr. SaflFord copies of the chart
which the Department has prepared, labeled "Major intercompany
relations in the glass container industry." * I call your attention first
to the three sTnall circles on the extreme rip'ht. the first one marked
"Alexander Kerr." the second "Obear-Nester Glass Co.," and the
third. "F. E. Reed Glass Co." Now I ask you if it isn't a fact that
not one of those three companies is a licensee of the Hartford-
Em ni re?
Mr. Smith. That is correct. We wish they were.
1 Later introduced as "Exhibit No. 113, •' see infra, p. 385. •
384 CONCENTRATION OF ECONOMIC POWER
Mr. Cox. But they are not ?
Mr. Smith. They are not.
Mr. Cox. -Can you tell us now whether there is any other company
aside from the subsidiaries — I will withdraw that for the present
I now call your attention to the companies whi<2h are shown at
the end of the lines radiating fron-. -the Hartford-Empire Co., and
I ask you to glance over those and tell me if it is true that those com-
panies are all licensees of your company. Perhaps Mr. Safford
might do that,
Mr. Smith. I assume you have the list.
Mr. Cox. I assure you that is correct, they are licensees of your
company. Now I ask you, Mr. Smith, whether there is any other
company, aside from the subsidiaries of Owens-Illinois, which stand
in a different category besides the three companies on the extreme
right, which is not a licensee of your company, that produces glass
containers ?
Mr. Smith. I can't think of any other companies right now.
Mr. Cox. You can't think of any others now, so that if we use the
word "independent" company as meaning a company which is not a
part of Owens-Illinois, or not licensed by Hartford-Empire, to your
knowledge there are only three such independent companies pro-
ducing glass containers in the United States today?
Mr. Smith. Correct.
Mr. Cox. I call your attention to the fact that this chart also shows
40 percent of the stock of the Hartford-Empire Co. is owned by the
Empire Machine Co. Is that correct?
Mr. Smith. Correct.
Mr. Cox. And that your company has a cross-license agreement
with the Lynch Corporation?
Mr. Smith. Correct.
Mr. Cox. And also the Owens-Illinois Corporation ?
Mr. Smith. Correct.
Mr. Cox. Mr. Chairman, I should like to have this chart showing
the major intercompany relations in the glass container industry in-
troduced in evidence now. 1 am aware that all of the relationships
shown on the chart have not yet been proved, but I ask you to take
it subject to proof, which I shall offer later on. 1 should like to have it
in. I think it would be convenient as a matter of record.
Representative Sumners. May I ask this question? Can't you
stipulate without going into detail ?
Mr. Cox. The point is that these gentlemen are not at the moment
probably able to testify or even to stipulate everything that is shown
on there.
The Chairman. This chart was prepared by the Department of
Justice from information secured from all of these companies, and
particularly from the company represented by the witness here today?
Mr. Cox. That is correct, and the other companies. Some of the
things sliown on the chart relatt- to the relationships between other
companies and the industry, but it is correct to the best of our
knowledge and belief, and t have no doubt we shall be able to es-
tablish it.
The Chairman. Unless there is some objection on the part of some
member of the committee, the chart mav be admitted.
CONCENTRATION OF ECONOMIC POWER 385
(The chart referred to was marked "Exhibit No. 113" and is in-
cluded in the appendix on p. 762, the legend for the chart is included
on p. 76'3.)
Mr. Cox. Of course, as far as particular lines of ware is concerned,
Mr. Smith, it is true, isn't it, that your company licenses far more
than merely 67 percent of all production m this country <
Mr. Smith. I don't know as I understand your question, Mr. Cox,
Mr. Cox. Take milk bottles, for example, what percentage of all
the milk bottles produced m this country m a given year would yovi
say are licensed by Hartf ord-Empire ?
Mr. Smith. I would say most all of them.
Mr. Cox. Practically all of the milk bottles are produced under
license of Hartford-Empire? What about fruit jars?
Mr. Smith. There would be three companies making fruit jars.
Mr. Cox. Would you say that an estimate of about 80 and 85 per-
cent of all the fruit jars in the country were produced under license
by Hartford-Empire?
Mr. Smith. Somewhere near there.
Mr. Cox. Somewhere in that neighborhood.
Now, packers ware. For the information of the committee, packers
ware includes all the kinds of jars that food products are packed m.
That is correct, isn't it ?
Mr. Smith. Yes.
Mr. Cox. Would you say that about 80 percent of the packers
ware
Mr. Smith (interposing). That I wouldn't know. I haven't looked
it up.
Mr. Cox. You testified a little while ago as to the number of your
patents, Mr, Smith. I should like to ask you some questions as to
the purpose of your company in taking out patents.
Representative Sumners. Mr. Cox, before you leave that do j-ou
propose to develop at any time during the examination from any
other witnesses as to how many of these different licensees are com-
peting amongst themselves in the production of various particular
sorts of glassware? You have, for instance. I notice, the Ball
Bros, fruit jars, and then a number of others. Are all these
licensees licensed to produce an^^ sort of glassware which they may
want to produce, or are they licensed to produce particular sorts
of glassware?
Mr. Cox. They are not licensed to produce any sort of glassware
they want tc.
Representative Stjmners. I don't want to interfere with youi
examination, but as one individual member of the committee I Avanted
to go into that.
Mr. Cox. I planned to go into it. I will do it now, if you prefer.
Representative Sumners. Not at all, sir.
Mr. Cox. What Avould you say was the primary purpose of your
company in taking out patents, Mr. Smith ?
Mr. Smith. To protect our inventions so that when our equipment
comes into public use and somebody tries to copy or pirate or in-
fringe it. we will have the right to go before the court to defend
our rights
Mr. Cox Now, to be sure that I understand that answer, you mean
by that, do you, that you take out patents so thai you car. license or
386 CONCENTRATION OF ECONOMIC POWER
use the machines which your own patents cover without fear of in-
fringement suits?
Mr. Smith. To protect our invention.
Mr. Cox. Is that the only purpose you have in taking out patents,
Mr. Smith?
Mr. Smith. I don't know of any other purpose, unless at times we
will feel that in the future the trend of the industry may go this way
or that way, and somebody comes along with an idea that may affect
our future, if we think it is worth patenting it, we patent it.
Mr. Cox. Tliose two statements are your considered answer to my
question, are they, Mr. Smith?
Mr. Smith. It is what I believe.
Mr. Cox. Now, Mr. Smith, I am going to hand you a photostatic
copy of a document dated February 18, 1930, which was removed
from your files, and I am going to ask you if you know who pre-
pared that document.^ It is not signed.
Mr. Smith. I think that memorandum was written by IVIr. Herbert
Knox Smith.
Mr. Cox. Will you tell us briefly who Mr. Herbert Knox Smith
was ?
Mr. Smith. Herbert Knox Smith for a number of years was here
in Washington,- *> Commissioner in the Department of Commerce, I
think — Comm| >ner of Corporations. He then returned to Hart-
ford and joinea our organization and handled or.r legal matters
outside of patent matters.
Mr. Cox. How long was he connected with the corporation?
Mr. Smith. At first, in the early days, I think it was probably
around '18 or '17, I have forgotten exactly, he jrave us part of his
time, and as the company commenced to grow he gave it practically
all of his time.
INIr. Cox. He was very active in the company's affairs, then?
Mr. Smith. As regards our legal matters, yes. very.
Mr. Cox. And had a voice in determining the company's policy
sometimes?
Mr. Si\nTH. Yes.
Mr. Cox. Mr. Smith, I am now going to call your attention to a
statement contained on page 17 of this memorandum, if you will find
page 17. The heading there is [reading from "Exhibit Xo. 125"] :
The Main Purpose In Securing-- Patents.
Do you see that, Mr. Smith?
Mr. Smith. Yes.
Mr. Cox. It then reads as follows [reading further] :
In taking out patents we have three main puipo.ses; (a), to cover the
actual machines which we are putting out, to prevent duplication of them.
Stopping there, that, as I understood it, was the answer you gave
a moment ago.
It then goes on to say :
The preat hulk of our income results from patents. Between a feeder protected
by patents * * *
And so forth. I am not going to read that at the moment.
Subsenuently entered "in record as "Exhibit No. 125"; see infra, p. 4-33.
CONCENTRATION OF ECONOMIC POWER 337
Now I call your attention to (&), which is the second main pur-
pose stated in securing patents [reading further from "Exhibit No.
125"] :
To block the development of machines which might be constructed by others
for the same purpose as our machines, using alternative means.
I would like to ask you exactly what you meant by that.
Mr. Saitord. That is not Mr. Goodwin Smith's testimony.
Mr. Cox. I am aware of that, but I assume the memorandum is
an accurate statement of the company's policy.
Mr. Smith. I don't happen to remember the memorandum. I
don't know what was considered, but I tliink I can answer your
question.
Mr. Cox. I would like to straighten up this one thing. This may
be Mr. Smith's out.
Mr. Goodrich (of counsel for witness). He doesn't need an out.
Mr. Cox. Is it your policy to take out patents to block the develop-
ment of machines which might be constructed for the same purpose
as your machine ?
Mr. Smith. Only in so far as to protect our own machines.
Mr. Cox. There is no qualification of that kind i]i that memo-
randum, is there?
Mr. Smith, Not as it reads.
Mr. Cox. You mean you only take out a patent to block the develop-
ment of some other patent when you are afraid somebody else is
going to sue you?
Mr. Smith. No; I am not cognizant of any such purposes or any
such means. If we think that a new idea might be developed over a
course of the year by someone else, and we think that idea may affect
cur machinery and our licenses, we may from time to time try to
protect that idea.
Mr. Cox,- Regardless of whether you intend to commercially apply
the idea yourself or not?
Mr, Smith. You can never tell when you are going to commercially
employ ideas. The scene shifts every year or two or three years.
Let me give you an example. Today we are spending quite a lot of
money on a research development which will be partially and quite
well covered by a patent which was taken out in '34, At that time
we thought it might have some possibilities; then all of a sudden,
in '37, something transpires that makes that patent a very valuable
patent, we hope, one that will be of great benefit to the trade at large
when it is put in a process form.
You I'ust can't tell when a thing is going to be sfood and when
it is going to be bad. An inventor never knows when or how. or
how long it is going to take his invention to be proved of value. ^ It
mav never be of any value; it may be of great value. You Just
can't tell.
Mr. Cox. When you take out a patent to an invention to block
the development of machines which misfht be constructed bv others
for the same purpose as yours, using alternative means, isn't it a
fact that you are more interested in preventing- the use of tha*- device
by someone else than you are in 'using it yourself?
38g CONCENTRATION OF ECONOMIC POWER
Ml. Smith. No; I don't think so. So long as I have been with
the company I am not conscious of any policy of definitely, delib-
eratly, going out and blocking people. We do take patents out
and iiave a number of additional patents, so that we are jirotectmg
and may protect our main development of machmery.
Mr. Cox. When you say "protect the main development of ma-
chinery" don't you mean to prevent someone else from developing a
machine which' will accomplish the same purpose, using alternative
means ?
Mr. Smith. I don't know if you would say that was wholly so.
If we felt that a machine might be improved, we will say, or some-
body else might make improvements on our machines, we try to stop
and figure out what those improvements might be, aild we cover
them as we can by patents.
Mr. Cox. Of course, about 90 percent of your company's income is
derived from royalties under your licenses.
Mr. Smith. Correct.
ISIr. Cox. So that anyone who perfects a machine which will ac-
complish the same purpose that your feeders or other glass machin-
ery accomplish, and obtains a patent on that, is in a position to strike
a blow at your income.
Mr. Smith. He is in a position to possibly affect our income or to
affect our licenses.
Mr. Cox. He would affect your income, would he not?
Mr. Smith. If he had a process that was efficient, one that we
didn't have, yes. He could naturally do business. There is no mo-
nopoly on ideas and inventions.
Mr. Cox. And, of course, you are interested in preventing that kind
of result, aren't you?
Mr. Smith. Yes; normally interested, naturally.
Mr, Cox. And that is one of the reasons why you take out patents
on devices you don't intend to put into commercial operation.
Mr. Smith. I wouldn't say that was so, !Mr.-Cox. You had better
ask our patent attorneys. It is a very difficult thing for me to an-
swer your question "yes" or "no." We naturally have a big invest-
ment in our equipment. We spent a lot of money in develoi>ing it.
We are looking for a return on that investment. As we put that out,
if one of our engineers should come to us and say, ''Well. now. liere
is something that might help," or if somebody else thoiight of this
idea first it might cost as some money, naturally we file an applica-
tion on that and hope to get a patent.
The Chairman. You maintain a research bureau?
Mr. Smith. We do.
The Chairman. For the purpose of keeping abreast or perhaps a
little ahead of the procession?
Mr. Smith. And at all times being in a position to give our
licensees the most efficient equipment, because otherwise they would
go out of business.
The Chairman. But so far as you are concerned yourself, your
desire is to get the new improvements first and get them patented
Mr. Smith. Then comes a long development process, costing a
great deal of money. Naturally we are out to get some return on our
money
CONCENTRATION OF ECONOMIC POWER 339
The Chairman. So in order to protect the inventions you now
have it is naturally in your interest to secure whatever hold you can
upon any competing idea or competing machinery.
Mr. Smith. Correct.
Mr. Cox. Not always with a view to using those ideas immediately,
Mr. Smith?
Mr. Smith. Yes and no. Sometimes yes, we do use them; some-
times we don't.
Mr. Cox. You would take out a patent if it would protect j^ou
against a competing machine even though you didn't intend to use it
right away, wouldn't you?
Mr. Smith. I just don't know.
Mr. Cox. Now, Mr. Smith, let's consider this for a moment. You
know, of course, what the difference is between an automatic feeder
which worlds with a vertical reciprocating plunger in the orifice, and
one that works by air pressure, don't you ?
Mr. Smith. I know there are those two different types.
Mr. Cox. And the Hartford feeder, which you produce, has been
a reciprocating plunger feeder ?
Mr. Smith. Primarily so.
Mr. Cox. Have you ever caused to be manufactured by you and
licensed to anyone any feeders which worked by the air-pressure
method ?
Mr. Smith. I think we have quite a few licensees who still use the
air pressure.
Mr. Cox. What I am interested in is whether they got them from
you or from someone else.
Mr. Smith. We didn't build and put out as a standard thing an
air feeder, if that answers it.
Mr. Cox. You don't do it at all, do you ? You don't build and put
out, and never have, and licensed it ?
Mr. Smith. Never have built, no.
Mr. Cox. All these air feeders your licensees are using now are
licensed and bought in the first instance from someone else ?
Mr. Smith. I think substantially that is correct.
Mr. Cox. Yet you have patents on air feeders?
Mr. Smith. That is true.
Mr. Cox, And you sue people who are using air feeders in their
business, even though you have no intention at the present time of
developing or commercially supplying an air feeder?
Mr. Smith. We did develop in the early days an air feeder. T
think Mr. Peiler could give you that history. I think it would be
(juite enlightening for the committee if they heard how we came
into being, and in those early days, as I remember it, Mr. Peiler did
develop an air feeder and then chose between the air feeder and the
plunger feeder.
Mr. Cox. Since that choice you have adhered to the plunger
feeder, so far as to your own commercial development ?
Mr. Smith. Quite correct.
Mr. Cox. Yet you have sued people for infringement on the air
feeder. Isn't that a case where you have been using a patent to block
the development of machines constructed by others for the same
purpose as your machines, which use an alternative method? You
124491— 39— pt. 2—^10
390 CONCENTRATION OF ECONOMIC POWER
have no interest in an air feeder so far as commercial development
is concerned.
Mr. Smith. Now, Mr. Cox, I am not a patent attorney. I can
give yon this picture. If we have patents covering two types of
feeders and we choose to say that this type is the better of the two,
that is what we license, and I see no reason why, if we have patents
covering the other type of feeder, namely the air feeder, we shouldn't
talfe advantage of those patents and protect our rights.
Mr. Cox. You mean your rights under the patents, even though
you are not using that patent for the purpose of producing feeders
find licensing them to others?
Mr. Smith. Yes.
Mr. Cox. You are protecting your rights there really for the pur-
pose of protecting your revenue from your other patents. Is that
correct ?
Mr. Smit^c. Not entirely.
Mr. Cox. You know, don't you, and I suppose you have seen it, of
the provision in the Constitution which makes it possible for the
Federal Government to enact patent laws ?
Mr. Smith. I know there is such a provision.
Mr. Cox. Do you know that the tenor of the provision is tltat
Congress shall have power to enact such laws for the purpose of
promoting the progress of science and useful arts. You have heard
that phrase, "science and useful arts" ?
Mr. Smith. I have.
Mr. Cox. Mr. Smith, do you think the use whicn you make of
those patents of yours on air feeders is a use which does promote
science and the usefiil arts ?
Mr. Smith. I would say yes, because they are our original inven-
tions, and I see no reason why, if we choose one type of machine,
Ave still shouldn't protect ourselves on the other.
Mr. Cox. Someone else using "those machines might develop the
machines to a place where they were greatly improved, might he not?
Mr. Smith. I suppose that might be so.
Mr. Cox. Yet you prevent anyone else from attempting or under-
taking that kind of enterprise?
Mr. Smith. No; not deliberately.
Mr. Cox. You do if you sue him for infringement and get an
injunction.
Mr. Smith. We sue for infringement because we think people
have either oopied or are using our rights without legal pemiission.
Mr. Cox. The upshot of that position is this, is it not, that there
is only one person, according to your view, who has a right to use or
develop an air feeder, and that is your company, and you are not in-
terested in doing it on a commercial scale ?
Mr. Smith. We would be if we thought the air feeder was more
efficient than the plunger feeder.
Mr. Cox. You decide that question for the people who want to use
the air feeder, don't you?
Mr. Smith. I do not think so. We have licensed air feeders. I
think there are quite a number of feeders operating today that are
air feeders..
Mr. Cox. I am sure of that, but again I suggest to you that each
of those air feeders which you have licensed is a feeder which was
CONCENTRATION OF ECONOMIC POWER 391
manufactured by someone else, licensed or sold outright to a glass
manufacturer, and then, by virtue of circumstances which I hope to
<ievelop in this hearing, that manufacturer found himself in a posi-
tion where he had to take a license from you to cover that feeder, even
though you never manufactured the feeder and he had never had
any relationship with you before the time he took the license. Those
are not feeders you built yourselves and licensed to the glass manu-
facturers. I am talking about the things you do yourself.
Mr. Smffh, Now, if that manufacturer infringed on our rights and
a court so held, we would give him his choice, and have so done,
either to use an air feeder or to use a plunger feeder, whichever he
thought was most efficient for his type of business.
Mr. Cox. But if he wanted to use the air feeder, he has to pay
royalty to you.
Mr. Smith. Quite right. If he wants to use the air feeder which
the courts have said is our property, why then he has to pay royalty
to us.
Mr. Cox. Now, Mr. Smith, I want to call your attention to the
second paragraph, under (6), in this memorandum on page 17, which
reads in part as follows [reading from "Exhibit No. 125"] :
We have in mind such machines as * * ♦.
I just want to ask you to look, Mr. Smith, at the feeders named in
the first paragraph under (h) on page 17.
Mr. Smith. Those are all suction machines.
Mr. Cox. I call your attention to that because a little while ago you
spoke about the stream feeder not being covered by your patents.
This suggests to my mind that perhaps you did take out some patents
which covered the improved stream feeder.
Mr. Smith. I couldn't answer. It might be so and might not.
Mr, Cox. I now want to call your attention to (c) on the next,
page of this memorandum, which is the third primary reason stated
liere. That reads [reading from "Exhibit No. 125"] :
To secure patents on possible improvements of competing machines so as to
"fence in" those and prevent their reaching an improv.ed stage.
As I understand that statement, Mr. Smith, and I assume that it
represents the policy of your company, it means, in some cases you
secure patents on devices which are merely improvements on devices
which are covered by patents held by someone else. Is that correct?
Mr. Smith. That is not a corporate policy.
Mr. Cox. Are you repudiating this memorandum, Mr. Smith?
Mr. Smith. As a corporate policy, or as ever having this memo-
randum come before the board of directors, or as having been ap-
proved as a statement of our entire policy, I am.
Mr. Cox. You told us a little while ago Mr. Smith was a man
who had been with the company for many years and was active in
its affairs. Would he seriously state in his memorandum, "in taking
out patents we have three, main purposes" when that was not the
case?
Mr. Smith. I don't know how that memorandum was written or
why. I do happen to remember that I have seen a copy of it and read
it, at the time it was written. When we come to the question of
deliberate policy or setting engineers to work to prevent others from
getting certain things, that isn't a corporate policy. There are a
great many times when an inventor will come in and say, "No-w, I
392 CONCENTRATION OF ECONOMIC POWER
have this idea or that idea," and it will encompass part of some other
machine and we do file application and get together a patent.
Mr. Cox. Then yon want us to understand now that when yon do
that you don't do it for, the purpose of fencing m tlie other man's
invention and preventing it from reaching an improved stage?
Mr. Smith. I don't like the words "foHcing in."
Mr. Cox. It is not my word, Mr. Smith.
Mr. Smith. We do that off and on as the occasion arises.
Mr. Frank. Would you consider it improper for you to adopt the
policy indicated in paragraph (c) ?
Mr. Smith. I don't think we would deliberately go out and spend
our time and money in a fencing-in policy.
Mr. Frank. My question is not whether you have done so, but
whether you would consider it improper to do so.
Mr. Smith. No; I think you have to protect your large invest-
ments; you have to protect your licensees. If you don't protect your
licensees, they can't stay in business.
Mr. Frank. Well, whether th^t has been- your policy or not, you
wouldn't consider it improper for your company to adopt such a
policy ?
Mr. Smith. No.
Mr. Cox. That M^ould be because you think it is necessary to pro-
tect your licensees ?
Mr. Smith. Insofar as that policy protects our investment, pro-
tects our licensee, we would say it is all right.
Mr. Cox. Just how does that policy protect the licensee ?
Mr, Smith. The licensee looks to us to continually improve the
equipment that he is using, to take certain machines and add things
to them, to increase his speed, to better his quality, to help him in the
glass furnace troubles, to enter in and show him how to make bottles
at the lowest possible cost, to give him the advantage of what we
find in other plants and how they are operating, to at all times keep
him in a competitive situation ; otherwise, he can't live. Now, if we
saw over in one corner something that we thought was desirable, even
though it was going to head off somebody else, and we should be
the first to invent that and get a patent on it that is going to assist
us by protecting us or help our licensee, we would so do it.
Mr. Cox. Isn't it possible, Mr. Smith, that if you didn't fence in
someone else's invention, he might invent a device which your
licensee could use?
Mr. Smith. I suppose that is possible, but I don't think the inven-
tion would be at all basic or original.
Mr. Cox. Well, it is really not necessary for the protection of your
licensees for you to stifle inventions on the part of everyone else.
Mr. Smith. I am not conscious of the fact that we have a policy
that wants to stifle. We have a policy that wants to protect what we
are doing and wants to insure our licensees of the best possible means
of producing glassware at the lowest cost.
Mr. Arnold. May I get that a little clearer in my own mind, Mr.
Smith? Your licenses — I don't know how long they run
Mr. Smith (interposing). They run, some of them, 8 years, with
a renewal, and some of them for the life of the patent.
Mr. Arnold. That is a contract which your licensee has and which
you have against the licensee?
CONCENTRATION OF ECONOMIC POWER 393
Mr. Smith. Eight.
Mr. Arnold. Now, if a new development should occur so that an-
other machine could compete with that machine which you have
licensed, then both you and the licensee would be in a disadvan-
tageous position because of that new competition ?
Mr. Smith. Right. We would probably go out of business because
the licensee could cancel his contract with us. He could use the new
development, the new process, and our income would cease.
Mr. Arnold. Therefore, to protect that 8-year license is not neces-
sarily because you are anxious to stifle inventions, but to protect
your own income it is necessary for you to fence in and stop this
new machine from developing. Have I put it too
Mr. Smith (interposing). I think you have put it a little too
strongly. I think I would say part of it is true, insofar as we pro-
tect ourselves, protect our future, and protect our licensee.
The Chairman. Let me put it this way : You do watch these com-
peting machines, do you not?
Mr. Smith. Yes ; we do.
The Chairman. And in your research laboratory you study them
for the purpose of developing improvements upon them?
Mr. Smith. Right.
The Chairman. And if you do develop an improvement upon a
competing machine, that thereby enables you to extend your in^
fluence, let me say, your contractual relationship ovei the competing
machine or those who use it. A competitor could not use any of
the improvement.
Mr. Smith. That depends upon what the improvement is, the effect
of it, whether it is incidental, or whether it is major.
The Chairman. Natui^lly it depends upon the importance or un-
importance of the improvement. Let us assume that a very valuable
improvement has been discovered simultaneously, or thereabouts, by
the competing company, which is operating a competing machine,
and you likewise developed one about the same time, then a conflict
arises immediately, does it not, whether or not that improvement
may be used without payment of royalty to you ?
Mr. Smith. Well, what would happen as a practical matter would
probably be the stoppage on the part of both of us. The competitor
might have 60 percent of the value of the invention and we might
have 40, or vice versa, or some^'other percentage. Neither of us could
go out because he would sue us, and if he went out, we would sue
him, so it would probably mean that we cross-license.
The Chairman. Well, you are engaged in the business of invent-
ing and patenting and you do this for the purpose of collecting
license fees and royalties primarily.
Mr. Smith. Correct.
The Chairman. So you watch the entire industry, and if you can
extend the influence by means of invention over competing industries,
you are going to do it because it means money to you.
Mr. Smith. Correct, and also it keeps our licensee in a competitive
situation.
The Chairman. So the incidental effect upon the development of
science and arts — it is only an incidental effect so far as you are
concerned.
394 CONCENTRATION OF ECONOMIC POWER
Mr. Smith. Perhaps I don't quite understand that question.
The Chairman. I mean your primary consideration is to make
license fees and royalties out of these inventions?
Mr. Smith. Right.
The Chairman. And you are willing to suppress the competition
for that purpose, to fence it in? Well, I don't want to ask
Mr. Arnold (interposing). Taking what your personal policy is
out of this, the total situation illustrated by this picture is one in
which whoever sits in your seat is under very strong pressure to
protect his licensees by preventing competition in machines from
arising, isn't it ? Regardless of who sits there that pressure exists.
Mr. Smith. I think that generally may be it.
Mr. Frank. I would like to make a differentiation
Senator Borah (interposing). Let me make a suggestion, I think
Mr. Cox ought to be permitted to develop his case.
The Chairman. The Senator is correct. That has been the policy
formerly announced, and we have all been violating it, and we will
refrain, Mr. Cox.
Mr. Cox. That is quite all right with me.
_ Two or three things have been developed in this which I should
like to go into, and particularly Mr. Arnold's last question.
Mr. Smith, T am interested in that, because I wonder to just what
extent your licensees are interested in preventing the development of
a new device even by someone else which would enable them to pro-
duce, which could be used to produce glass. Isn't it true that your
licensees are all engaged in producing and selling glass containers?
Mr. Smith. Correct.
Mr. Cox. And let's assume for the moment that their primary in-
terest is in producing and selling glass containers, and that as far as
the-^ are concerned, they will use any kind of machinery which will
enable them to produce and sell glass containers, good glass con-
tainers at a grood price, at which they can make a profit if they can
get that machinery. Why wouldn't they be as content to get the ma-
chine or device from someone else as from you ?
Mr. Smith. You see, Mr. Cox, people that pay us royalties look
upon us as the engineering and development and research concern
that is going to develop machinery for them, that is going to keep
them abreast of the times. They can't afford to spend large sums of
money each year in research work, or development work, but they
look to Hartford to take part of their royalties and spend money
in the development work, glass compositions, anything that affects
vitally the whole industry. " '■
Mr. Cox. Do you think that part of the royalty money, at least
that is paid to you, you take — I don't want to use too strong a word —
in sort of a trust to use for development and experimental purposes?
Mr. Smith. There is no question but that we have a deep sense of
obligation to protect our licensees, to keep them in business, to con-
tinually reduce their cost and give them the most efficient equipment.
Mr. Cox. You feel that is almost a fiduciary responsibility.
Mr. Smith. No ; T don't think it is that, but I think it is just de-
cent business ethics.
Mr. Cox. Do you think that they would feel that they hadn't had
their money's worth if somebody else would perfect an invention that
would enable them to produce glass more efficiently than yourself?
CONCENTRATION OF ECONOMIC POWER 395
Mr. Smith. I am quite sure if anybody else came along with an
invention or process that was more economical than our process, that
our licensees would cancel their contracts with us and install the most
efficient process.
Senator Borah. That would be competition.
Mr. Smith. You can't help that, Senator. We have no monopoly
on brains.
Mr. Cox. You "have a monopoly on some other things, though.
Well, isn't it a fact, really, Mr. Smith, that the important thing
in this picture, so far as this "fencing in" is concerned, is 90 percent
of your' income which comes from royalties and not the feelings
of your licensees?
Mr. Smith. I couldn'.t answer that question.
Mr. Cox. You feel you can't answer that question.
Mr. Smith. I don't know what each individual licensee feels. I
know that some of them feel that contact with us, the service we
give them, is worth more than the royalties they pay. Some others
might not.
Mr. Cox. I was rather more interested in what you felt than what
they felt. I was really inquiring whether in following this policy,
. your eye wasn't on the 90 percent of your royalties than on the feel-
ings of your licensees.
Mr. Smith. No ; I think the sound policy, looking ahead, of any
business is based primarily on the fact that you must serve your
customers, and if you don't serve them you don't, staj' in business.
Mr. Cox. Well, your customers would have a little difficulty going
anywhere else, wouldn't (hey, Mr. Smith ?
Mr. Smth. Until there is something new comes on the market that
is better than what we have.
Mr. Cox. There isn't any place for them to go now, that is what
I mean.
Mr, Smith. They can go to suction.
Mr. Cox. Well, if they went to suction, you would sue tliem.
Mr. Smith. I don't know why.
Mr. Cox. You are suing some people who are using suction.
Mr. Smith. Not to my knowledge
Mr. Safford. What you re^er to is not a suction machine.
Mr. Cox. I withdraw that*
The only place they could get a suction machine would be from
Owens.
Mr. Safford. Not necessarily.
Mr. Goodrich. I think Mr. Parham can give all the details of that.
Mr. Cox. Except for the suction machine there is no place for
them to go.
Mr. Smith. Not to get the most modern equipment, or the most
efficient.
Mr. Patterson. Let me ask, the patents in the suction machine
have not expired, have they?
Mr, Smith. The old original fimdamental, basic patents have
expired and if you and I wanted to go into- business tomorrow we
could build a suction machine under those original patents, or just
the same kind of machine that was originally covered by those
patents.
396 CONCENTRATION OF ECONOMIC POWER
Mr. Cox. It is true, isn't it, Mr. Smith— and perhaps we could
^t Mr. Parham to answer informally — that the machines now used
by Owens, the suction machines, the improved machines, are covered
l>y patents.
Mr. Parham. I understand you can build thoroughly good
machines, if you happen to know how, under the old patents. That
is my understanding.
Mr. Cox. Mr. Chairman, I am about to start on a new topic. Is
it your practice to adjourn at noon now or do you wish to go on ?
The Chairman. I think probably, unless there is objection, it
would be well, if you have finished this line of examination, to take
a recess until 2 o'clock.
(Whereupon, at 11 : 55 a. m., a recess was taken until 2 p. m.
-of the same day.)
AFTERNOON SESSION
The committee resumed at 2 : 08 p. m., on the expiration of the recess.
Present in addition to those previously listed : Senator King, Mr.
Oliphant.
The Chairman. The committee will please come to order. Are
you ready to proceed, Mr. Cox?
Mr. Cox. Yes, I am, sir.
The Chairman. You may, then.
TESTIMONY OF P. GOODWIN SMITH, PRESIDENT, HARTFORD-EM-
PIRE CO., HARTPORD, CONN.— Resumed ; TESTIMONY OP A. T.
SAPPORD, SECRETARY AND COUNSEL, HARTPORD-EMPIRE CO.,
HARTPORD, CONN.— Resumed
Mr. Cox. Mr. Smith, a few questions about the Hartford-Empire
Co. which I didn't ask this morning I would like to ask now. Will
you indicate briefly what the capital set-up of your company is? I
mean, what kinds of stock you have outstanding. If you prefer, I
will have Mr. SafTord do this.
Mr. Smith. It is common stock, no par value.
Mr. Cox. Any preferred stock?
Mr. Smith. None outstanding.
Mr, Cox. No bonds?
Mr. Smith. No.
Mr. Cox. Is vour stock listed on any of the exchanges?
Mr. Smith. It is not.
Mr. Cox. Is it a widely held stock?
Mr. Smith. No.
Mr. Cox. Do vou publish periodically your balance sheet?
Mr. Smith. We do not.
Mr. Cox. Do you file a financial report either in the State -of Con-
necticut with any State authority, or in the State of Delaware with
anv State authority?
Mr. Satford. Only for tax purposes.
Mr. Cox. Can you tell us in a very brief way what kind of state-
ment that is?
Mr. Safford. For Connecticut it is the tax reonirod under their
business tax law, and I think it cives the balance sheet and the
income statement as sent to the United States Tronsiirv.
CONCENTRATION OF ECONOMIC POWER . 397
Senator King. I suppose you file the Federal tax report in addi-
tion to the ones to the State.
Mr. Safford. Yes, sir.
Mr. Cox. Do you know whether you file a similar report in the
State of Delaware or not?
Mr. Satford. It is not required.
Mr. Cox. Aside from those, whatever may be contained in your
return to the State of Connecticut and the return which you file
Avith the Department of Internal Revenue of the Treasury Depart-
ment here, there is no disclosure of your balance sheet or your in-
come statement. Is that correct?
Mr. Safford. That should be qualified further; that is, in each
State where the corporation is qualified to do business there are cer-.
tain tax reports which you must file.
Mr. Cox. Will you tell us in how many States your corporation is
qualified to do business?
Mr. Smith. Seven or eight.
Mr. Cox. And in those States you file whatever reports are required
to be filed" by law ?
JVIr. Safford. Yes.
Dr. LuBiN. Do any of the States make those reports public?
Mr. Safford. I don't think so, Dr. Lubin.
Mr. Cox. No statement with repect to your_ company is contained in
Moody's or Poor's or any of the other financial reports ?
Mr. Safford. No, sir.
Senator King. Do the States treat your reports differently from re-
ports filed by corporations doing business within a State?
Mr. Safford. I think it puts us all in the same ca,tegory. I think
the figures are all confidential with the departments with which they
are filed.
Senator King. Who imposes confidentiality, if you permit that ex-
pression ?
Mr. Safford. It is under the statutes, sir, of the respective states.
Senator King. You conform with the State practice and the State
officials follow the State requirements?
Mr. Safford. Yes, sir.
Senator King. So if they are treated as confidential is it at your
request or in pursuance of the law which the State officials follow ?
Mr. Safford. It is in pursuance of the law which the State officials
follow.
Mr. Cox. Now, Mr. Smith, I would like to ask some questions about
the licenses under which your patents are used. You said this morn-
ing that you had patents on the feeding machines, the forming ma-
chines and the lehr or annealing machine, and I assume in the case
of each of those machines, when your company licenses under the
patent which applies to the machine, you retain title. Is that
correct ?
Mr. Smith. That is correct.
Mr. Cox. Do you have any patents on glass furnaces ?
Mr. SMriH. We have.
Mr. Cox. Did you ever license a glass furnace?
Mr. Smith. We have not as yet.
Senator King. Have you declined?
Mr. Smith. No ; we haven't the experiments completed.
398 CONCENTRATION OF ECONOMIC POWER
Mr. Cox. So that in the case of a man who licensed from you f eed-
iii*:; machines and his forming machines and the lehr or annealing
oven, the only part of the machinery, used in manufacturing glass
which he owns outright is the furnace. Is that right ?
Mr. Smith. In some cases, yes; in some cases, no. We have title
to the actual machines we ourselves built and licensed, but in a num-
ber of other cases we haven't actual title.
Mr. Cox. Even though you have licensed those ?
Mr. Smith. Yes.
Senator King. And accept royalties?
Mr, Cox. That is again a case where the machine is not built in the
first instance by your company and licensed?
Mr. Smith. Correct.
Mr. Cox. In some of those cases where the machine was not in the
first instance built by your company you have at a later date acquired
title and then licensed it?
Mr. Smith. Correct.
Senator King. You can't become a purchaser of the patent over a
licensee of the patent ?
Mr. Smith. I beg your pardon.
Senator King. Do you become a purchaser of the patent under
which the machine was constructed or a licensee of the patentee?
Perhaps I didn't make myself clear. I understood that there were
some machines which you didn't make.
Mr. Smith. Actually build. When the courts decide^ a suit in our
favor, if the manufacturer had infringed and wanted to license, he
could either take our own machinery or keep his machinery. In some
cases he took our machinery; in other cases he kept his machinery.
Mr. Cox. In some cases where he kept his machinery you paid him
a certain contribution for the title of the machinery?
Mr. Smith. Yes.
Mr. Cox. In some cases you didn't buy title, he just took license?
Mr. Smith. Yes.
Mr. Cox. There are two different kinds of charges you made in con-
nection with the license, are there not, a license fee and a royalty
charge ?
Mr. Smith. Correct.
Mr. Cox. The license fee is a lump-sum payment made either
at once or in installments which is a contribution to you for granting
the license?
Mr. Smith. Yes.
Mr. Cox. The royalty fee, on the other hand, is a fee which is paid
for the use of the licensed fnachinery ?
Mr. Smith. Correct.
Mr. Cox. And that royalty fee is on aiquantity basis, isn't it?
Mr. Smith. So much per gross, depending on the sliding scale,
depending- upon the weight of the article made.
Mr. Cox. Now taking up the license fees, in the first place can you,
or Mr. Safford, tell us what the license fefe is for the feeding machines?
Mr. SAFFom). $2,000.
Mr. Cox. And liow long has it been $2,000?
Mr. Saffokd. I would say within 2 or 3 years.
Mr. Cox. Isn't it about 1936 that it changed from $2,500 to $2,000?
CONCENTRATION OF ECONOMIC POWER 399
Mr. Safford. Yes.
Mr. Cox. Can you tell us what the license fee is for forming
machines ?
Mr. S^vFTORD. $8,000 for the four mold forming machines.
Mr. Cox. And what is the license fee for the lehr?
Mr. Safford. $2,500.
Mr. Cox. Do you have there a schedule of the royalty fees so we
could avoid this ? Just put it in.
(The schedule referred to was marked "Exhibit No. 114" and is in-
cluded in the appendix on p. 763.)
Mr. Cox. This is on the feeding machine, isn't it ?
Mr. Safford. Yes.
Senator King. What was the answer to the question ?
Mr. Safford. Yes.
Mr. Cox. If there is no objection, I should like to have this
The Chairman (interposing). It may be admitted.
Mr. Cox. Those agreements usually provide for the payment of a
minimum royalty fee, don't they ?
Mr. Smith. Yes.
The Chairman. This is a list of royalty rates and not of license
fees?
Mr. Cox, That is right. As a matter of fact, we have a statement
here which has been mimeographed, and which we might o'ffer at this
time, subject to check by the witnesses, showing the total gross amount
received by way of royalties and license fees by the company for each
year since 1923. This lis a gross figure and does not represent a
net income figure of the company. I would like to offer that subject
to correction.
Mr. Smith. That is all right.
The Chairman. It is not clear from the colloquy that has been
going on at that end of the table whether this has been identified
or not.
Mr. Cox. It has been identified as having been prepared from
statements which were furnished to us by the company, and I am now
about to offer it, subject to correction if any arithmetical errors are
found.
The Chairman. This purports to be a statement of receipts from
royalties and license fees by the Hartford-Empire Co., from and
including the year 1923 to 1937, both inclusive ?
Mr. Cox. That is correct.
The Chajrman. It may be received.
(The statement referred to was marked "Exhibit No. 115" and is
included in the appendix on p. 764.^
Senator Ejlng. I would like to ask one question. I note that in
1923 the total received from royalties and -license fees was $766,534;
in 1937, $6,065,262. I am interested to ascertain whether or not that
large increase in the licenses and in the royalties resulted from an
increase in license fees and royalties, or was it an increase in
production.
Mr. Smith. Increase in the number of licenses. In '23 we had not
established our patents; they had not been adjudicated. As our
patents were adjudicated and established we took on more licensees
each year, so that the royalty return came instead of from 15 or 20
400 CONCENTRATION OF ECONOMIC POWER
^oo^^"^*'''' ^Z-''''- ^ "^^derstopd from your testimony that the license
Mr%3i''1lTf^' ^^''^l^ P^"' I' ^'^'' "P«« production,
qlno? T' ^w^^^°y^^^'^! ^"^ ^^^^^ "Pon production.
non rpt u ^''''- •^''"^'^ ^''^ ""t ^^^^ increase from $766,000 to $6 065 -
000 result from increased production? , ^^^ tu ipD,uDo,-
Mr. Smith. Oh, yes.
fi,£^"5i'''' ^^''- ^^ "^^^ ^^ ^^«"^ increased number of licensees and
those from whom you were receiving royalties ^^^ensees and
alty rate?™- ^"'^' "^^^^ ^" '^"^' '^^^^ ^^ ^^^^ reduced the roy-
hJ}^Jl^''^^^''-J ""^""^^y ^^""^^^ *o call the attention of the mem-
bers of the committee to the fact that this morning we a °reed t^fd
low a rule of procedure which was originally suLIsted I think hv
fr/ ""vw?^' ^^'"?'^-^' *^"^ ^^ ^«"^^ Pe^^^it [he DfpartmLt to pro^
ceed with the original examination before asking our own questions
We are all violating this rule. Senator, but in the interest of orderlv
procedure.it was felt it would be the b^st way to go aW ^^
Senator King. The Senator's statement is in part accurate but T
will not challenge the inaccuracy. ^ accurate but I
Senator Borah. Wlio is going to enforce the rule?
miu': tV rXfn" ' '''" ^"^"^^ ^^ ^^^ ^^^ -^-^ers of the com-
tiesaTSosTlic^r?^ the percentage relatiLship betweerr^oyal
lom m^lfttTr^'!' ^"^ ^^.^'.^^^l F°«^ ^"c«^^ «f the company
SnshiD ?n iqq9 wl^oi o''"'^"^^^'^". '^^^' ^^''^^^ ^he percentage re-
962 percent }nf^^,%!\^ P''T*'. ^" F^' ^^'^ P^^^^^t; in 1934,
percent Inn^ni!?' ' ^^ P^^^^^t; in 1936, 93.Y percent; 1937, 94.5
Sf fW fi, T^ f''.'''^ ^^ ^^^^ *^^"s computation to the witnesses
so that they can check it, and we will make any corrections that mal
Mr. Smith I would be very glad to, if we could. I
that^rrn^ecelrry""'^ ""^ '^'*' ""^ ^^ ^^" ^^^^ ^"^ corrections I
aside from'cont^i^.'^n^ti?''^"'" agreements, those license agreements, "
.£;,t^^nr°JZ^rZ fras°?hfl^7/"y license which i,
manufactured is concerned' ™''' ''''"* "^y *«
Iic^'seeV''an'?'oilv'ft!!'"l'" *'£''''' <=''"'^'"" "'^l'' «><■" "« «wo
wr^TeV^I^rtehetL^d^TchteT"*''^'"- ""-^ «"^ <"
CONCENTRATION OF ECONOMIC POWER 401
Mr. Smith. That is correct.
Mr. Cox. Could you tell us who those licensees are?
Mr. Smith. The Owens-Illinois Glass Co. and Hazel-Atlas Glass
Co., both of which companies do a national business, have plants
located in various parts of the country, and also make, as they
advertise, everything in glassware and containers.
Mr, Cox. The Owens-Illinois Co. is the largest manufacturer of
glass containers?
Mr. Smith. Yes.
Mr. Cox. And the Hazel-Atlas Co. is another very large manu-
facturer of glass containers?
Mr. Smith. Correct.
Mr. Cox. But there is no license, even those licenses, which is
absolutely unrestricted as to kind of ware which can be produced by
the machines.
Mr. Smith. I don't get your question.
Mr. Cox. Neither the Owens-Illinois Co. nor Hazel-Atlas is free
under its license to manufacture heat-resisting ware, is that correct?
Mr. Smith. That is true.
Mr. Cox. Or electric bulbs.
Mr. Smith. That is true.
Mr. Cox. But those kinds of ware are, of course, not normally
regarded as being in the glass container class.
Mr, Smith. Correct.
Mr. Cox. And that kind of ware and several others are what is
known in the trade as specialty ware.
Mr. Smith. Specialty ware, and they are not allowed to make
specialty ware.
Mr. Cox. And you have only one licensee who is allowed to make
specialty ware, is that correct?
Mr. Smith. Practically. You are talking about bulbs or heat-
resisting ware. I am told by my partner that is not correct.
Mr. Safford. I think if you apply the term "specialty" to all non-
containei's, then there are a great many more licensees than one.
Mr. Cox. I wasn't applying the term in quite that wide way, al-
though my question perhaps was open to that kind of interpretation.
I have in mind the specific kinds of classifications that are named
in the contract between yourselves and the Corning Glass Works:
Signal and optical ware, electric bulbs, and certain kinds of heat-
resisting ware. As to those types of ware, you have only one licensee
and that is Corning.
Mr. Smith. Right.
Mr. Safford. Except as rights have been released by the Corning
Glass Works.
Mr. Cox. Except as they have granted sublicenses. That is a
contractual relationship between Corning and others?
Mr Safford. No ; they have permitted us to grant rights in those
fields.
Mr. Cox. And in some cases you grant those rights with the eon-
sent of Corning Glass Works?
Mr. Safford. That is right.
Mr. Cox. To return to the glass container field, you said a moment
ago you had only two licensees who are absolutelv unrestricted as to
402 CONCENTRATION OF ECONOMIC POWER
types of ware they can produce. Are those two licensees also un-
restricted as to the quantity of the different types of w^are that can
be produced on the licensed machine?
Mr. Smith. Correct.
Mr. Cox. But they are the only two who are so unlimited?
Mr. Smith. Correct.
Mr. Cox. All the other licensees are limited as to the amount or
the number of ^lass containers that they can produce.
Mr. Smith. Oh, no. They are limited to types of wares, but not to
amounts.
Mr. Cox. Some of them are limited as to amounts.
Mr. Smith. Some of them are, that is right.
Mr. Cox. Now taking for a moment milk bottles, you have before
you the chart which we marked this morning.^
Mr. Smith. Yes; and if you don't mind, Mr. Cox — excuse me, I
was talking about another chart. May I ask you a question about
another chart? In this pamphlet which you submitted to the com-
mittee this morning on page 27,^ graphically speaking it seems to me
that 1 little bottle which is supposed to represent 500,000 gross doesn't
tell what you really .intend to have it tell, namely, that there ought
to be 35 little bottles along the line as each concern produces 500,000^
gross.
And again when you have divided, on page 23,^ packers' ware, med-
icine and toilet, liquor ware, milk bottles and beer bottles, the statistics
which you used, I doubt whether they were quite complete and give
graphically the real picture. Am I permitted to submit for your ap-
proval revised charts, like on the packers' field, and the 35 bottles? I
think it would be rather interesting because on page 23 it is quite a
different story from what this particular chart tells. In other words,
you have packers' ware, and the records of the Container Association
and our own records show that 26 percent of the industry goes into
what you might call packers' ware ; 30 percent in medicine and toilet ;
16 percent in liquor M'are ; 5 percent in milk bottles ; 2 percent in fruit
jars; and 9 percent in beers.
Mr. Cox. We, I think, would be glad to have any other figures, so
far as page 23 is concerned.
Mr. Smith. It just shows a little different picture, that is all.
The Chairman. What does the chart on paae 23 purport to show,
Mr. Cox?
Mr. Cox. It purports to show the -importance of the different kinds
of ware, the numerical importance of the different kinds of ware in
the entire glass industry. That is, it shows, for example, what part
of glass containers are represented by the milk bottles produced,
what part are represented by the fruit jars. The figures from which
the chart was prepared were figures taken from the Census of Manu-
factures, they were the best figures we could get at the time we pre-
pared the chart., but we would be only too glad to have any other
figures that are more accurate.
Mr. Smith. Thank you very much, because I am sure those are
more accurate.
1 "Exhibit No. 113," appendix, p. 762.
=2 "Exhibit No. 112," appendix, p. 736 at p. 761.
» Ibid., at p. 757.
CONCENTRATION OF ECONOMIC POWER 403:
Mr. Cox. I would be glad to have this, which is Mr, Smith's revised
figures for the chart on page 23, put into the record.
(The amended chart referred to was marked "Exhibit No. 116" and
is included in the appendix on p. 765.)
The Chairman. It will be so inserted. This I take it is the same'
chart but the figures are changed.
Mr. Smith. The figures are quite different, and the same way
with this chart on page 27.^ Graphically there should be 35 little
bottles, 35 concerns, each making 500,000 gross. As a bottle repre-
sents 500,000 gross, there should be 35 bottles out in a line.
Mr. Cox. I think that Mr. Smith's objection to the second chart is
pictorial rather than statistical. Our chart was prepared to show
the average production of each one of these companies here so that
each one of the companies' position might be compared with each of
the companies listed above. What Mr. Smith wishes ta do it to put
out here at the side little milk bottles or bottles which Avill indicate
the lump production of all of the remaining 35 companies in its rela-
tion to the production of each of the other individual companies.
While I have no objection to this and will be glad to have it go in
the record, I want to make it clear that this chart of Mr, Smith's
shows quite a different thing. We were attempting to contrast the
position of the single small manufacturer in the field with the five
big companies, and Mr, Smith's figure here is a lump figure for all of
those 35, a pictorial representation of the 35,
(The chart referred to was marked "Exhibit No, 117" and is in-
cluded in the appendix on p. 766.)
The Chairman. With respect to this other chart, did you develop
the source of the percentages marked by Mr, Smith?
Mr. Cox. Where did you get your figures, Mr, Smith?
Mr. Smi'J-h. P'rom our own returns ai)d the returns of the Glass
Container Association,
Mr. Cox. Published from time to time by the Glass Container
Association ?
Mr. Smith. Yes.
Mr. Cox. That is the trade association for the glass container
industry.
Just so the record may be clear as to the relationship between your-
self and Corning Glass Works, I want to make sure that- 1 understand
it is correct that before you can grant a license in one of the fields
covered by the Corning contract it is necessary for you to get the
consent of the Corning Glass Works.
Mr. Smith. In the formation agreement of the Hartford-Empire
Co. and the agreement with the Corning Glass Works made at the
same time, we sold outright to the Corning Glass Works certain rights
and inventions, including the right to license in those particular fields
and wares, so it isn't in our hands. We sold the exclusive rights. If
the Corning Glass Works came to us and said, "Will you license
A, B, C, and D?" we would probably be glad to do so, but we have
no right to license. We sold them' that exclusive right. That is
theirs to do with as they see fit. We have divested ourselves of all.
further rights in those fields.
1 "Exhibit No. 112", appendix, p. 736 at p. 761.
404 CONCENTRATION OF ECONOMIC POWER
Mr. Cox. If I should wish to jjet the use of one of your machines
to manufacture Pyrex then, I would have to go to the Corning Glass
Works?
Mr. Smith, Correct.
Mr. Cox, If I came to you, you would send me to them.
Mr. Smith. I would send you to them.
Mr. Cox. Taking the chart ^ again, which is what I started on
a moment ago, you testified that your licensees are restricted els to
the kinds of ware that they can produce. Will you tell us how many
of the licensees shown on this chart are free today to produce milk
bottles?
Mr. Smith. I think there are 10, although this chart may not show
all of the various ramifications. Thatcher Manufacturing Co. have a
subsidiary, the Olean Glass Co., which is also producing milk bottles.
The Universal Glass Products Co. can produce milk bottles.
Mr. Oliphant. All kinds of milk bottles ?
Mr. Smith. Yes; all kinds; quarts and pints and creamers and
specialties.
Hamilton can produce milk bottles ; Liberty Glass ; Lamb Glass Co.
can produce milk bottles. Of course, the Owens-Illinois Co. can
produce milk bottles ; Hazel-Atlas Glass Co. can produce milk bottles.
Florida Glass Co- can produce milk bottles. Buck Glass Co. can
produce milk bottles.
Mr. Cox, Now, can you tell me this, Mr. Smith : Of those com-
panies you have named, how many can produce as many milk bottles
in a year as they want" to produce ?
Mr. Smith. The Owens can; Thatcher can; Olean could, and
Liberty Glass Co. could. I think that is all.
Mr. Cox. So that, counting Olean as a subsidiary of Thatcher, there
are only three companies in the United States today who have a
right, under their licenses from you, to produce as many as they likel
Mr. Smith. Correct.
Mr. Cox. The Thatcher Co. has a plant in Elmira, N. Y.?
Mr. Smith. Correct,
Mr. Cox. The Liberty Glass Co. has a plant in Oklahoma, doesn't
it? Do you know what plants of the Owens-Illinois Co. produce
milk bottles with your machinery?
Mr. Smith. They have a plant in Columbus and a plant on the
coast. I don't know whether they make any glass in the East here.
They probablj^ may at their Bridgeton plant. They have the right
to make them in any plant they see fit.
Mr. Cox. There is no territorial limitation on their right to make
milk bottles?
Mr. Smith. There are no territorial limitations on any of the
people who make milk bottles.
Mr. Cox. You spoke a moment ago of the Pacific coast. Is any-
one licensed to produce milk bottles on the Pacific coast besides
Owens ?
Mr. Smith. Owens and Hazel-Atlas.
Mr. Cox. But that is a limited license.
Mr. Smith. No.
1 See "Exhibit No. 113," appendix, p. 762.
CONCENTRATION OF ECONOMIC POWER 405
Mr. Cox. Limited as to quantity?
Mr. Smith. Mr. Safford says it might be called a limited license,
and I will accept his definition.
Mr. Cox. You said there were only three companies with the
absolutely unrestricted right.
Mr. Smith. Hazel-Atlas didn't originally have the right to make
milk bottles. They asked consent to make a few on the coast and
we gave it to them, but we didn't specify the number nor how the
license should run.
Mr. Cox, It is a license at will ?
Mr. Smith. It can be canceled tomorrow if we see fit.
Mr. Cox. And they do make a few milk bottles.
Mr. Smith. So I understand.
Mr. CoXr Now consider the fruit jars for a moment. Will you tell
us how many licensees shown on the chart have the right to produce
fruit jars?
Mr. Smith. Three; Hazel-Atlas Glass Co., Owens-Illinois Glass
Co., and Ball Bros.
Mr. Cox. Are any of those licensees restricted as to the number
of fruit jars they can produce?
Mr. Smith. No.
Mr. Cox. Those are all unrestricted licenses?
Mr. Smith. Yes.
Mr. Cox. Without naming them, can you indicate generally how
many of the licensees are licensed to produce packers' ware?
Mr. Smith. I would say a great many, something like 34.
Perhaps the committee will be interested in getting to the bottom
of this licensing policy.
Mr. Cox. I am going presently to ask some questions, Mr. Smith,
that may assist you in that regard; if you don't mind, you might
wait until then.
I think it might be helpful if at this point we put in the record
one or two of these license agreements. I have one here for the
Florida Glass Co., a certified copy which was taken from your files.
You are satisfied, I assume, that that is a copy.
(The license agreement referred to was marked "Exhibit No. 118"
and is on file with the committee.)
Mr. Cox. This license contract contains a provision which is, I
think, perhaps indicative of some of the provisions which limit
quantity. It contains a provision that the licensee may manufacture,
milk and cream bottles, "provided, however, that the licensee shall
not produce in any calendar year on any and all feeders licensed to
it by licensor more than 21,000 gross of such bottles."
Mr. Safford. That has been amended, Mr. Cox. The amendment
is in your license. That was raised at their request.
Mr. Cox. Can you tell me what the number is now?
Mr. Safford. It is 27,500.
Mr. Smith. That is due for some explanation, if I may make it.
Mr. Cox. I am perfectly willing to let you make any explanation
you want to make. Is what you wish to speak about the provision
contained in some of- those with respect to increase in total produc-
tion ? If so, you go ahead and tell about that.
124491— 39— pt. 2 11
400 CONCENTRATION OF ECONOMIC POWER
Mr. Smith. Well, let's take the whole thing, Mr. Cox, after you
finish. You go right ahead.
Mr. Cox. Your licenses do contain provisions restricting the terri-
tory within which the licensee may sell?
Mr. Smith. There is only one. |
Mr. Cox. Is that the Northwestern Glass Co. ?
Mr. Smith. Correct.
Mr. Cox. I hand this to you, which is a certified copy of that license
contract and ask you if you are satisfied as to. the accuracy of it.
Mr. Saftord. That is for a very small plant in a limited area.
Mr. Cox. I understand. Under this license he is permitted to man-
ufacture ware which can be sold only in Oregon, Idaho, Montana,
and Alaska. Is that right ?
Mr. Saffgrd. Yes; I think so. That is the only limited territory. ■
Mr. Cox. I should like to offer this.
Senator King. Is that to be inserted ?
Mr. Cox. I have no interest in having it printed. I'd like to have
it marked as an original exhibit and certified.
The Chairman. Is that true of "Exhibit No. 118"?
Mr. Cox. Yes.
The Chairman. Both of these exhibits may be filed with the com-
mittee and certified as exhibits offered by the Department of Justice
for the purpose of this hearing.
(The contract referred to was marked "Exhibit No. 119" and is on
file with the committee.)
Mr. Cox. Sometimes in your license agreements you specify the
customers to whom the manufactured ware may be sold?
Mr. Smith. No.
Mr. Cox. Are you quite sure about that, Mr. Smith ?
Mr. Smith. I don't remember any such situation. Yes; I think
there are only two such occasions.
Mr. Cox. Well, the one I have here is the license to the Laurens
Glass Works, Inc., Laurens, S. C, which reads as follows, or a letter
which was attached ^s a rider reads as follows [reading from "Ex-
hibit No. 120"] :
You are authorized to make under the said licenses a total of not over 4,000
gross per calendar year under both of said licenses, of panel bottles not exceed-
ing 14 ounces in weight.
By the way, what is a panel bottle?
Mr. Safford. It is a flat-sided bottle.
Mr. Cox. [reading further] :
The said bottles are to be sold chiefly to the Globe Medicine Co. or to the
Standard Drug Co., or both, both of Spartanburg, S. C. But you are also au-
thorized, until further notice, to sell a part of such total of 4,000 gross per year
to small usfers of such bottles in your vicinity.
That was one of the provisions I had in mind.
Mr. Smith. You may find one or two or possibly three, but
that
Mr. Safford (interposing). I don't want to interrupt the proceed-
ings, but are you sure that wasn't subsequently revoked and em-
bodied in a larger license?
Mr. Cox. Not so far as we could tell.
CONCENTRATION OF ECONOMIC POWER 407
Mr. Smith. That comes about due to this fact. A licensee may
be making packer's ware or some other field, and they occasionally
bob up and say, "I have a friend ,over here and I have known him
a long time. For heaven's sake, let me make 4,000 gross of pre-
scription bottles for him. We don't want to go into the prescrip-
tion business. We don't want to make that kind of ware, as a general
thing, but just as a courtesy from Hartford let us supply thpt
particular fellow.
Mr. Cox. You do it under those circumstances.
Mr. Smith. Not as a general proposition, but every once in a while.
We decide each case on its own merits. If it seems reasonable and a
decent thing to do, we will expand his license so that he can take
some particular advantage of some particular situation, but that isn't
an intrinsical part of our general licensing.
Mr. Cox. It would be accurate to say, then, that in the cases where
that kind of provision is in the agreement, what you have done is
to carve out a limited exception ta a prohibition against any manu-
facture of that kind of ware. Is that correct?
Mr. Smith. No ; not quite.
Mr. Cox. I thought that is what you said a moment ago, Mr. Sbaith.
Mr. Smith. One particular man under a license may not have the
right to make that particular line of ware because that wasn't his
business ; but if some particular situation arose where you might say,
almost as a matter of courtesy, if he wanted to make just a small
quantity of that particular line of ware for a particular concern, we
say, "All right, go ahead," and we added that right to his license.
Mr. Cox. What I wanted to be sure of is this : As you explain it,
it is a situation in which the man in the first instance under the
license had no right' to make that
Mr. Smith (interposing). He has no right because he has never
been in the habit of producing that ware and his business wasn't in
that particular line.
Mr. Cox. His license wouldn't let him make it?
Mr. Smith. But as a general licensing policy, when a manufac-
turer came to us for license, we said, "What have you been making?
Wliat would you like the license for?" And we would give him the
license to make the particular glassware that he was manufacturing,
selling, and marketing.
Mr. Cox. I would like to have this go into the record to be marked
as an exhibit. There has been a change in the quantity provision,
Mr. Safford, but we found no provision in that I read, but I will
correct it.
Mr, Safford. Let it go in subject to check.
The Chairman. Do I understand that it is your desire to have
this printed in the record or filed as the others were ?
Mr. Cox. Filed as the others were.
The Chairman. I want to be sure of your desire.
Mr. Cox. I want to make my own position clear about that. I
have no interest in burdening the record by having these things
printed. On the other hand, I wish to be sure they are certified as
exhibits so they can be used by the Department in connection with
any report to be prepared.
408 CONCENTRATION OF ECONOMIC POWER
The Chairman. Of course, it would be the desire of the com-
mittee to have a complete story told. Therefore, I am anxious that
whenever you present these that you are satisfied in your own mind
that you have sufficiently developed the character of the exhibit to
make the record clear.
Mr. Cox. I read or paraphrased the part of interest to the Depart-
ment, and we are not interested in having the rest of it printed.
The Chairman. Very well, it may be admitted with that under-
standing.
(The contract referred to was marked "Exhibit No. 120" and is
on file with the committee.)
Mr. Cox. Now sometimes your licenses contain restrictions which
may be made as to the use of the manufactured ware, do they not?
Mr. Smith. Can you give me an example?
Mr. Cox. Well, take the license which you have issued the Buck
Glass Co. Isn't there a provision in there which authorizes them
to manufacture wine bottles for sacramental wine ?
Mr. Smith. I think there is although I am not sure, but if there
is such a provision, it is right along the line with what we just have
been talking ^bout. The Buck Glass Co. is not a wine house, not a
liquor house, but they had a little extra business coming from some-
body that wanted some wine bottles for sacramental wine. That
may be in there. I assume it is if you say it is.
Mr. Cox. That is what I am informed. Another example I have in
mind would do with the Latchford Glass Co. I think they are
licensed to manufacture bottles to be filled with milk of magnesia. I
assume that under that license they can't manufacture bottles to be
filled with any other kind of medicine.
Mr. Safford. I think that is a descriptive term of the type of
bottle rather than the use.
Mr. Cox. I see. In other words, under that license they can manu-
facture a bottle of that type and it can be filled wit*h any kind of
medicine.
Mr. Safford. That is right.
Mr. Cox. Tell me this: Under your license agreements, some of
your licensees are entitled to manufacture packers' ware. There is a
kind of jar which fits into the packers' ware category which is com-
parable to a fruit jar in size and shape, is it not?
Mr. Smith. They are very much alike.
Mr. Cox. When you license a man to produce a bottle of that kind
for use for packing food products by processing food products, do
you regard it as a violation of the license agreement if he uses the
bottle to preserve fruit?
Mr. Smith. The license we extend to the manufacturer is to make
certain lines of bottles ; what those bottles are used for determines the
kind of the license. Now if a man were making ordinary packers'
jars and a jar goes to the producing manufacturer of food products
they use that jar and put their own products up in that jar. The
manufacture of fruit jars for the domestic household trade is an en-
tirely different kind of business, and the licensee who had the right to
make the packers' jars would not have the right to make fruit jars for
household domestic trade. Does that answer your question ?
CONCENTRATION OF ECONOMIC POWER 409
Mr. Cox. I think it does with one exception, I want to make sure
that I understand what you mean by that. If such a licensee should
manufacture a packers' ware jar and begin selling it for use as a fruit
jar, would that be a violation of his license ?
Mr. Smith. It would
Mr. Cox. Now the licenses which you have which you issue on
some of your machines, and I am speaking now particularly of the
lehr or annealing oven, contain a provision which restricts use of the
licensed machine, or in connection with other machinery which is
patented by you and licensed to the licensees, do they not?
Mr. Smith. That was true at first^ hut that is no longer in force.
Mr. Cox. Now, what I have specifically in mind is a provision
which I found, which I shall hand to you in a moment, in the agree-
ment, the license agreement, with Whitall Tatum Co. The agreement
was made in 1933, containing this provision [reading from "Exhibit
No. 121"] :
The said leased machines are designed, developed, and adapted especially for
use with other glass machines controlled by the licensor. The grant of rights
herein to use such leased machines and to use the said patent rights therein
embodied is therefore restricted and limited as follows : In case the said leased
machinery shall at any time be used by the licensee for the annealing or
treatment of glassware produced by the aid of any feeding machinery not then
controlled or under license from the licensor, and such use shall continue after
the licensee shall have received from the licensor written notice of objection
to such use, then in such case the licensor reserves the right, in its option, to
revoke and cancel this license and lease, upon paying to the licensee the amoiuit
of 1 year's minimum royalty hereunder.
Mr. Smith. That was in our early contracts and since has been
changed and was never enforced. I think we started out with the
idea that we wanted to have the use of our equipment tied to our own
forming machines and feeders. -
Mr. Cox. Has that particular provision in that particular license
agreement been changed? Can you answer that?
Mr. Safford. No.
Mr. Cox. So under that agreement as it statids today Whitall
Tatum Co. cannot use the lehr except in connection with your ma-
chinery, is that right?
Mr. Safford. That is not quite correct.
Mr. Cox. I realize that; I put it this way. If it does, it then brings
into operation the right to cancel which is provided by that contract.
Mr. Safford. That is not quite true. It is merely we reserve the
right.
Mr. Cox. You can cancel that contract.
Mr. Safford. But until we exercise it, they, have the right to use
the machinery with another.
Mr. Cox. But if they use the machinery with others, you have the
right to cancel that upon payment of 1 year's royalty.
Mr. Safford. That is correct.
Mr. Cox. Is this same provision in effect in many other existing
contracts today under lehrs?
Mr. Safford. It is not in the latest edition of the standard contract
and it is probably in all editions prior to that.
Mr. Cox. When was that change made ?
Mr. Safford. Well, this is the edition of May 1936, that I have
here that doesn't contain that provision.
410 CONCENTRATION OF ECONOMIC POWER
Mr. Cox. You think probably until that time the provision was
contained in these lehr contracts?
Mr. Safford. Yes.
Mr. Cox. Can you tell us, Mr. Smith, why the company decided
to abandon that provision ?
Mr. Smith. No, necessarily some legal reason. I will have to refer
to my legal staff. In fact, I didn't know it had been abandoned.
Mr. Cox. Do you have any opinion on that, Mr. Safford ?
Mr. Safford. I think it is a legal conclusion, namely, that the
combination of the lehr and the feeder had no reasonable relation
from the manufacturing point of view and, inasmuch as we had no
patents covering the combination of the two, it was thought advisable
to omit the provision.
Mr. Cox. Well, if I should suggest that you might and did abandon
it because you had reason to believe that it might present some ques-
tion as to whether or not such an agreement was prohibited by the
antitrust laws, would you deny that ?
Mr. Safford. I don't think we'd deny that.
Mr. Cox. That is one case where the the antitrust laws may have
had such an effect. I'd like to have the contract marked, if I may,
and treated the same way as the others.
The Chairman. It may be so marked.
(The contract referred to was marked "Exhibit No. 121" and is
on file with the committee.)
Mr. Cox. Under these license agreements, the agents or employees
of your company, of course, have a right to go on the premises of
the licensee at reasonable times to make reasonable repairs ?
Mr. Smith. Correct. In fact, they are quite welcome.
Mr. Cox. You attach a plate on each of your machines, do you
not, Mr. Smith, stating that the machine is licensed under certain
patents and giving the numbers ?
Mr. Smith. Correct.
Mr. Cox. And from time to time as new patents are issued, you
add numbers to the plates, is that correct ?
Mr. Smith. Correct.
Mr. Cox. Do you have the latest standard form of your stacker
and conveyor agreement there, Mr. Safford?
Mr. Safford. Yes; I have.
Mr. Cox. May I see it?
Mr. Safford. That is the stacker.
Mr. Cox. You don't have it consolidated? Has this form been
abandoned by your company?
Mr. Safford. Well, that agreement is just with the one company,
owing to the number of machines involved.
Mr. Cox. I see ; that is not in common use.
Mr. Safford. That is not in any use at all except with that one
company.
^ Mr. Cox. This contract ^ contains a provision similar to the provi-
sion which I read a moment ago in the Whitall Tatum contract. In
fact, it appears at first sight to read word for word with it and re-
stricts the use of this equipment to use in connection with other nia-
» Referring to "Exhibit No. 122."
CONCENTRATION OF ECONOMIC POWER 411
chinery which ,is covered by patents owned by your companj' and
licensed by your company. Has that praovision been modified or
changed in this contract ? That is, in section 5.
Mr. Safford. No; tliat has not been changed. It would fall in
the same category as the lehr situation. It is not used in the standard
contract.
Mr. Cox. But this particular provision in this. particular contract
is still in force?
Mr. Safford. Yes; I might add this one further thing, Mr. Cox,
that I believe that we base that upon the fact that certain of our
patents relate to the combination of- the stacker with the lehr.
Mr. Cox. If that is so, why did you take it out of your standard —
this is only the stacker and the lehr ?
Mr. Safford. That is right.
Mr. Cox. There is no such claim made with respect to the lehr
and the feeder?
Mr. Safford. That is what 1 explained before.
Mr. Cox. So the record may show what this document is, it is a
consolidated stacker and conveyor agreement between Hartford-
Empire Co. and Owens-Illinois Glass Co. The provision which I
referred to is found in section- 5, and appears to be in precisely the
same language as the restrictive provision as was found in the
Whitall-Tatum contract.
The Chairman. Do you care to read the provision ?
Mr. Cox (reading from "Exhibit No. 122") :
The said leased machinery is designed, developed, and adapted especially
for use with glass-annealing lehrs controlled by the licensoi*. The grant of
rights herein to use such leased machinery and to use the said patent rights
therein embodied, is therefore restricted and limited as follows: In case the
said leased machinery shall at any time be used by the lidensee for the handling
of glassware, into, upon, or in connection with any lehr or other glass anneal-
ing machinery not then controlled or under liceitse from the licensor, and such
use shall continue after the licensee shall have received from the licensor writ-
ten notice of objection to such use, then in such cage the licensor reserves the
right, in its option, to revoke and cancel this license and lease.
(The agreement referred to was marked "Exhibit No. 122" and is
on file with the committee.)
Mr. Cox. Now,' Mr. Smith, I should like to 'ask you some general
questions in respect to your ^icensing policy, and I hope you will
remember, as I am sure you will, as I ask these questions, that I have
no intention of criticizing you personally or injecting what I might
call the moral element into this investigation. I am merely interested
in finding out why j'ou follow certain policies. I take it, in the first
instance, that you do not treat all of your licensees alike. That is.
obvious. from the answers to the questions you have already given.
Mr. Smith. You mean that they all don't have the same kinds
and types of licenses ?
Mr. Cox. That is right.
Mr. Smith. Yes, that is right.
Mr. Cox. Now how do you decide exactly how you are going to
treat a licensee?
Mr. Smith. The manufacturer who hasn't been a licensee with
Hartford asks for a license. There is something he would like the
license for. We ask what use he desires to make of our machine.
412 CONCENTRATION OF ECONOMIC POWER
He says, "I am in this kind of a business. I am in the prescription
business, make some packers, make a few beers, and something of that
sort." "And that is what you want a license for?" "Yes." And
he gets it.
Mr. Cox. Now do you want us to understand, Mr. Smith, that you
always give the petitioning manufacturer a license to produce all the
kinds of ware he wants to produce?
Mr. Smith. Not all the kinds of ware he. wants to produce, but
all the kinds of ware, generally speaking, that he is then producing.
In other words, we have got to furnish him equipment which will
satisfy his business needs. Now there are very few of the com-
panies that make all kinds of ware. Many of the companies do a
national business from coast to coast. Many are quite satisfied if
they get a license from us to make three or four kinds of ware which
is in a business that they know, their sales organization know, their
producing organization know, their merchandizing organization
know, and that is the license we give them and that is generally true.
There may be one or two exceptions which I am not conscious of,
don't know about.
Mr. Cox. You wouldn't go so far as to say in every case you'd
^ant a license to permit the man to manufacture everything he
is manufacturing.
Mr. Smith. Pretty near.
Mr. Cox. Pretty nearl^^ that?
Mr. Smith. Yes; that is the general policy. You will find excep-
tions to every policy, of course.
Mr. Cox. Then if the man comes to you and says that he has been
producing packers' ware hitherto and he wants to keep on producing
packers' ware, but he thinks he might do pretty well in the milk
bottle business, although he has never made or sold any milk bottles,
will you give him a license in that ?
Mr. Smith, Probably not, due to the fact that the producing capac-
ity for manufacturing milks is way in excess of the consumption. In
other words, out of our licensees, those 9 or 10 that have the right to
produce milk bottles, they used our equipment something like 62.7
percent of the time. They didn't have the business to fill it up. Now
if the manufacturers couldn't supply milk bottles to the trade, that
would be an entirely different situation. We'd probably take on new
licensees.
Mr. Cox. Well, in taking the situation which you described a
moment ago where, in your opinion, the capacity of the industry to
produce milk bottles is in excess of the demand of milk bottle
supply
Mr. Smith (interposing). There is no question about that.
Mr. Cox. In a situation of that kind you would not grant a licensee
the right to produce milk bottles ?
Mr. Smith. No. If you had made a large investment in our equip-
ment and had been a good licensee and paid us quite a larije sum of
money each year and I came along to you and I said, "Mr. Cox, I
have got a half million or a million dollars to devote to the manu-
facture of milk bottles," and you wanted to build a plant right at
the back door of the licensee of the Hartford-Entpire Companv who
had served and served us for a number of years, we'd probably de-
CONCENTRATION OF ECONOMIC POWER 413
cline to give you such license ; but, on the other hand, if the capacity
couldn't look after the normal demand, so that people were suffering
and couldn't get milk bottles, then we'd probably welcome you as a
licensee.
Let me say, Mr. Cox, all those questions — we decided to take up one
thing at a time, when the problem arises, and you might have a situ-
ation 2 years from today that was entirely different than a year from
the present time. We reserve judgment, but, generally speaking,
when the producing capacity is way in excess of consumption, we
do not and would not grant licenses.
Mr. Cox. The effect of that kind of a policy is to protect the exist-
ing manufacturers of milk bottles from competition, from newcomers
in the field, is it not ?
Mr. Smith. No ; I don't like you to put it that way. It is to pro-
tect the present manufacturers, to make money, and to produce milk
bottles cheaper.
The Chairman. That is a sort of A. A. A. in milk bottles.
[Laughter.]
Mr. Smith. Not so far from it, but used intelligently. [Laughter.]
Mr. Arnold. You think that kind of power is better in private
than in public hands to decide capacity?
Mr. Smith. I don't think there is any question about it, Mr. Arnold.
Who is better able to say whether we shall have 1,000 licerisees or 500
or 200 or 50? We know the trade. It is our lifeblood to keep in
touch with the manufacturers a^id to find out what they need, to
develop machinery for them, to really keep competition going, if you
want to put it that v/ay.
Mr. Arnold. Whereas agriculture doesn't know agriculture so well ?
Mr. Smith. I am sorry. I don't want to get into that.
Mr. Cox. I 'd like to ask you a question about that. A man comes
to you and asks for the right to make milk bottles and you point out
to him that the capacity in the industry is already greater than the
demand for milk bottles.
Mr. Smith. Correct.
Mr. Cox. And he says, "Well, that may be but I can still make and
sell better milk bottles and I can sell them cheaper than anyone
else can, and I want to go into the industry." Then you say, "No;
you can't do that."
Mr. Smith. Of course, that is a hypothetical question, and I doubt
whether he could prove he could make milk bottles cheaper and serve
the public as well as the people who now make a specialty of produc-
ing milk bottles. It is not a cinch to produce milk bottles. The
requirements are severe and the manufacturers are all the time work-
ing to give the public a better, stronger milk bottle, and that means
cheapness, because a milk bottle today has 35 or 40 trips. If the
manufacturer can produce a milk bottle that has 60 or 70 trips, it
means less money. Of course, in Scotland, they use a milk bottle
100 trips, you know. [Laughter]
Mr. Cox. I expect that, Mr. Smith, but anyway you demand that
your company be the agency which makes the decision as to whether
a man
Mr. Smith (interposing). As to whether a man can use ou;*
machinery.
414 CONCENTRATION OF ECONOMIC POWER
Mr, Cox. If he doesn't use your machinery, he is going to have a
hard time.
Mr. Smith. No; he can go ask for a suction machine. He can
build a suction machine under the early patents. He can import
suction machines. We went over that this morning.
Mr. Cox. You are not seriously now suggesting to us, Mi ' Smith,
that a man could take Mr. Owens' early suction machine and com-
pete in the market today, the unimproved suction machine?
Mr. Smith. Well, I don't know. I would say it would be difficult
unless he had certain local conditions.
Mr. Cox. If that were true generally, I don't see what your li-
censees are paying royalties to you for. They might as well all begin
using suction machines.
Mr. Smith. They would prefer to use our machines.
Mr. Cox. I think they would undoubtedly and I doubt very much,
Mr. Smith, whether a suction machine would be a commercially
practical operation today.
Mr. Smith. I don't think it is the best, but he can do that. You
asked me whether he could do it. I don't want to do it. Does that
answer your question ?
Mr. Cox. Do you or Mr. Safford or any one in your organization
know of any place in the United States today where they are pro-
ducing glass containers on an unimproved Owens' suction machine
of the kind used between 1904 and 1920?
Mr. Smith. I don't know unless it may be the Ball Bros.
Mr. Parham.^ Ball Bros, is doing it today.
Senator King. Mr. Cox, you are not trying to suppart the thesis
that there is to be no further improvement in the matter of glass-
ware or anything else ?
Mr. Cox. No; I am not. I was simply trying to develop a point
which I believe to be true. If you or I or anyone else wants to go
into the business of manufacturing glass today in this country there
is only one place we can go to get machinery, and when we go there,
they are the ones to decide what we can make and how much. I am
not suggesting, sir, that it is improper or illegal, but I am trying to
bring that fact out.
Senator King. You are not suggesting that somebody else might
provide better machinery.
Mr. Cox. I don't know. I have no power to look into- the future;
I only know what the situation is today. I think it is quite possible
somebody in the future might develojf it.
Mr. Parham. I think someone has already.
Mr. Cox. Whatever the foundation is for your decision which you
make in respect to whether or not a person shall have a license to
produce milk bottles, or fruit jars, either, as far as that person is
concerned and your machinery is concerned, it is a final decision.
Mr. Smith. Connect, as far as our machinery is concerned, it is a
final decision — we either say yes or no.
Mr. Cox. Unless he can find some other machinery somewhere, he
can't manufacture milk bottles.
Mr. Smith. Not at present. Things change from time to time. We
originally had, I think, 14 milk bottlei'iS all told we have given out
» Siflney F. Pnrliain. See testimony beginning Infra., p. 436 et sm-
CONCENTRATION OF ECONOMIC POWER 415
and we try to look after these manufacturers. For instance, we gave
m the Florida Glass license, a little fellow, the right to make 21,500
gross. As time comes along, he comes up and says, "Well, I think I
can do a little more business in the territory. Will you extend the
license rights?"
Yes, we have done it. He now has the right to make 27,500.
Mr. Cox. What consideration do you take into account when there
is a request of that kind made to you ? Do you always grant it ?
Mr. Smith. Not always, no ; it all depends upon conditions existing
at that time.
Mr. Cox. What conditions?
Mr. Smith. We rather like to grant those extensions when the
conditions or the situations warrant.
Mr. Cox. "WKat conditions particularly do you have in mind?
Mr. Smith. Well, I can't tell you, Mr. Cox. There may be 10 or
15 different reasons that affect it.
Mr. Cox. In determining what the character of these provisions
of your license agreements is, Mr. Smith, do you make any attempt
to delete or control competition among your various licensees?
Mr. Smith. Well, I would say yes and no. What is the question,
I mean?
(The question was reread by the reporter.)
Mr. Smith. Imagine a situation of this sort where two licensees
serve a certain radius and one licensee comes and wants an extension
of rights or wants to produce a larger quantity of bottles, and if we
thought that it was inadvisable to give him that extension, we
wouldn't. Again we take those things up as they come alon^ and
try to decide each case on its merits. We are not always right. ^ I
don't knoAV anybody who is always right. We have made some mis-
takes.
Mr. Cox. One of the circumstances which you would take into
account in considering that question is as to whether there was some
other manufacturer serving that particular territory with the sama
kind of ware.
Mr. Smith. I think so. It would be a natural thing. It is a ques-
tion of their both living or both being prosperous, not getting at each
other's throats. We want to have them have steady business, steady
employment, and we have found a lot 'of memorandums where I
talked about stabilization, that is what I mean, not great fluctuations
in industry, where our licensees can manufacture steadily, day by day
and week by week and month by month and give employment to
labor on a steady basis.
Mr. Cox. To the extent
Mr. Smith (interposing). In other words, to try to promote a
healthy situation.
Mr. Cox. To the extent that competition among various manufac-
turers did not produce stabilized conditions of that kind, but re-
sulted in price wars and wild fluctuations in price, you would think
it wasn't a healthy thing?
Mr. Smith. I don't think we have ever gone into price wars. We
have nothing to do with what a manufacturer gets for his goods, to
whom he sells, at what price he should sell. As a matter of fact,
we don't know how he does merchandise his goods. I couldn't tell
you the names of the customers of our licensees, or the prices they
416 CONCENTRATION OF ECONOMIC POWER
get, or under what conditions they sell, or what territory they serve.
But when they come to output, and ask for a certain right and a cer-
tain extension, that whole question as to whether they can produce
that and add to their use of the machines, or machinery, so that it
migl)t be to the disadvantage of somebodj'^ else, I think probably we
make up our minds then and there either yes or no. I can't give
you any general rule, Mr. Cox, because we haven't any.
Mr. Cox. When you spoke a moment ago about stabilization, did
you have in mind any such thing as stabilization of price?
Mr. SMrrii. No; we haven't anything to do with price?.
Mr. Cox. Did you have in mind any such thing as stabilization of
the part of the total quantity of glass containers produced in terms
of any particular individuals?
Mr. Smith. No.
Mr. Cox. "iou have no interest in seeing that a particular manu-
facturer preserves his present position?
Mr. Smith. Not as regards his particular position in the industry,
but preserves his financial condition so that he can continue to pay us
royalties.
Mr. Cox. To the extent that competition might weaken his financial
condition so that he couldn't pay you royalties, you are not interested
in competition?
Mr. Smith. No ; not a bit. We don't care where he sells his goods,
what prices h?. gets for them, the terms he gets. We can't tell you.
Mr. Cox. You wouldn't say that you were absolutely indifferent
to competitive conditions in the industry, would you, Mr. Smith?
Mr. Smith. Oh, in general, insofar as it might affect the sound-
ness or might help the licensee; our income comes from the manu-
facturer, if a manufacturer can't make money he isn't going to be
able to use our equipment, therefore he isn't going to pay us roy-
alties. But what he does with the ware he makes on our machine id
none of our business. We have never followed that up.
Mr. Cox. But you think that it is quite proper, do you, Mr. Smith,
for you to use your patents and the rights thereunder to stabilize the
glass container industry in the way you have described to us?
Mr. Smith. Stabilized so far as the use of our machinery goes, not
so far as their business goes, because we have nothing to do with their
business.
Mr. Cox. Well, so far as your machinery relates to the manufacture
of glass containers — —
Mr. Smith (interposing). Anything that will keep the manufac-
turer producing at a low cost, and at the same time bring us the
return in royalties, we are interested in.
Mr. Cox. Those things are sometimes a little inconsistent.
Mr. Smith. I know.
Mr. Cox. Of course, the cost might be lower if they didn't pay you
any royalties at all.
Mr. Smith. If they didn't pay royalties they wouldn't have our
equipment and they would be out of business.
Mr. Cox. ^Well, that is the first time today I have been able to get
you to adinit that if they didn't have your equipment they would be
out of business.
Mr. Smith. If we withdraw our equipment they have to go some-
where else.
CONCENTRATION OF ECONOMIC POWER 417
Mr. Cox. They have to go out of business, is what you said a
moment ago.
Mr. Smith. Well, this is a very intricate business and when we say
we are working for our licensees it is literally true. We are working
for them and we are working for ourselves, and we try to keep them
at a competitive cost. We are continually supplying means and
methods so that they can increase their production with the equip-
ment which we have.
Mr. Cox. Mr. Smith, I am going to show you a memorandum which
we took from your files dated March 26, 1928, entitled, "Memorandum
as to Hartford-Fairmont and Hartford-Empire History and Pol-
icy," ^ and ask you if you will identify that as a document which was
in fact taken from your files.
Mr. Smith. This is a memorandum which I assume was written by
Mr. Herbert Knox Smith. His initials are on it, on the typewriter.
Wliat date was that?
Mr. Cox. This is March 26, 1928.
I want to call your attention to the following statement which is
found in this memorandum [reading from "Exliibit No. 124"] : "
Consequently we adopted the policy which we have followed ever since, of
restricted licenses; that is to say, (c) We licensed the machines only to selected
manufacturers of the better type, refusing many licensees who we thought
would be price cutters ; and ( & ) we restricted their field of manufacture in each
case to certain specific articles with the idea of preventing too much competi-
tion; (c) in order to retain more complete control of the situation, we retained
title to the machines and simply leased them for a definite period of years,
usually 8 or 10 years, with the privilege of renewal for a smaller additional
term.
The Chairman. Mr. Cox, before you propound the question, may
I ask, for the benefit of the record, to whom the word "we" applies
or refers ?
Mr. Cox. I take it the word "we" applies to the Hartford-Empire
Co. The memorandum is entitled "Memorandum as to the Hartford-
Fairmont and Hartford-Empire History and Policy. I understand
it vv-as written by Mr. Herbert Knox Smith, to whom he referred
this morning.
The Chairman. And it has been so identified by the witness?
Mr. Smith. I think there is no question about that, Mr. Chairman.
His initials are on it. He had a habit of writing, every i^nce in
avvhile [laughter] dissertations which always more or less clarified
certain things in policy, looking 'way ahead of here. Every once in
awhile he would sit down and review things and see how far off
the track you may be, and how well on the track.
Tlie Chairman. If I may be permitted to make an observation, I
should say he had a very lucid style.
Mr. Cox. I had no difficulty in understanding the passage I read.
Mr. Smith. A very remarkable man ; very remarkable.
Mr. Cox. That, in fact, was the policy of the company.
Mr. Smith. Not necessarily.
Mr. Cox. Do you suggest that Mr. Smith was wrong?
Mr. Smith. Let me read it again.
This isn't so bad as you are making out, Mr. Cox.
Mr. Cox. I am not making anything out.
1 Subsequently entered as "Exhibit No. 124," see appendix, p. 768.
•Ibid., at p. 769.
418 CONCENTRATION OF ECONOMIC POWER
IMr. Smith. We had a restricted policy for fields of ware. It is
true in those earlier days that we were more anxious to obtain as
licensees the most financially strong concei-ns, and it is true that we
restricted, in those early days, when we felt that the industry was
overproduced, in various lines of ware. All of that is true, as I have
previously told you.
Mr. Cox. You think that is all right; it is just the way I read it,
perhaps.
Mr. Smith. I don't think it tells the whole picture or gives the
whole reasons for certain policies. I think I could do as well, almost,
if I had time.
Mr. Cox. I am sure you could.
I want to ask both you alid Mr. Safford another question. I want
you to consider it very carefully and give me your answer, and then
I think I shall leave this topic.
Is it your considered position now that you have no interest in
price cutting in the industry, and that you never take any action to
discourage that sort of activity? '
Mr. Smith. I would say "yes," Mr. Cox.
Mr. Cox. With no qualification?
Mr. Smith. Yes ; ' I Avill make a qualification. A licensee may
come to me, after a year and a half or 2 years, and say : "My heavens,
licensee No. 87 is pretty bad. He is selling below cost. Can't you do
something about it?"
I will say: "Why, no; of course we can't do anytliing about it;
we have no control over that licensee." But the next time I happen
to meet the president I may say to him, 'Why, Bill" — Dick, Tom, or
Harry — "you know So-and-so is kind of disturbed. He thinks your
prices are kind of bad." And that is all. We have no power over
prices, we don't follow them, we don't know what people are charg-
ing. I couldn't tell you what a gross of bottles sells for today.
Mr. Cox. Mr. Safford, do you recall a man named Searcy who
apparently lives in San Antonio, Texas?
Mr. Safford. That is right.
Mr. Cox. Who is Mr. Searcy?
Mr. Safford. He is an attorney who has represented us on various
occasions.
Mr. Cox. Before I started this I should have asked : Did you con-
cur in the answer I liave just had from Mr. Smith?
Mr. Safford. I do.
Mr. Cox. I am going to hand you what purports to be a copy of a
letter which you wrote to Mr. Searcy on August 26, 1932, and ask
if, in fact, you wrote such a letter to Mr. Searcy.
Mr. Safford. Mr. Cox, the company referred to in this letter is
the Three Rivers Glass Co.
Mr. Cox. Perhaps, before we go into that, I should have the letter
back, because it is a little hard to tell what we are talking about.
This letter is dated August 26, 1932, addressed to S. S. Searcy, at-
torney at law, San Antonio, Tex., and I understand it was a letter
■which you wrote.
Mr. Safford. That is correct.
CONCENTRATION OF ECONOMIC POWER 419
Mr, Cox. The passage to which I particularly call Mr. Safford's
attention, and which he is about to explain, I hope, is a passage which
reads as follows [reading from "Exhibit No. 123"] :
Three Rivers Glass Co. has been a perpetual thorn in the side of all the manu-
facturing companies. It won't assist the other manufacturers in any manner in
maintaining general price levels. It isn't because they are more efficient than
anyone else (which is a justifiable reason, of course, for lowering the price), but
because they are just simply selling at an actual loss in order to stay in business.
We should like, for reasons of the general commercial situation and also be-
cause we feel there is no hope of Three Rivers ever paying us as they should,
to take the machinery out of their factory.
Mr. Safford. Well, that statement, that letter, was written to Mr.
Searcy as our attorney. If I recollect, the Three Rivers Glass Co. was
well behind in its royalties. It had started as a real-estate proposition
and had pretty iiearly lost money from the start. I don't know how
much in royalties the Hartford-Empire Co. lost as a result of that,
and several times when we examined statements supplied by that com-
I^any, it was apparent from th.e face of tlie statements that they were
selling ■ . , \}iow t.
Mr. Cox. You did take the macliiner}' out of their factory?
Mr. Safford. We took the nnehinery out of their factory, but l)e-
fore that tlu-^- we.'x: in bankruptcy.
Mr. Cox. Bi.t they were still manufacturing ^lass?
Mr. Saffoed. That is a funny thing, M^ Cox. We got the court
order for the vritlidrawul of our machine^ , . I think that was in the
winter of 1933, und they asked us if the\ could continue and use that
machinery during the winter. Even at that time we saw no possi-
bility of collectiuL^: royalties, but we allowed the machinery, as I
recollect, to operate for 2 years more in order to keep up the employ-
ment, and I have foigotten in the end how much we failed to collect
in royalties.
Mr. Cox. Now, what I would like to ask you is this, Mr. Safford —
you say "for reasons of the general commercial situation" you should
like to take the machinerv out of the factory : What did you mean
by that?
Mr. Safford.. I have no recollection.
Mr. Cox. If I suggest to you what you meant by that, they were
selling glass, as you state in the letter, at cut prices, would that refresh
your recollection?
Mr. Safford. They probably were selling below cost.
Mr. Cox. And you wanted to put a stop to that situation.
Mr. Safford. Not necessarily, but they always were a low-price
house — probably selling below cost. Their freight differentials were
over 16 percent at all times, the average for the industry being 8 or 9,
so some place they were taking up those freight allowances, and we
always felt they were selling far below cost.
Mr. Cox. You had been suspicious of them on that ground for some
time.
Mr. Safford. Our royalties were behind. We naturally went into
their financial situation rather carefully.
Mr. Cox. Was it your royalties you were thinking of?
Mr. Safford. I think that was part of the picture ;.yes.
420 CONCENTRATION OF ECONOMIC POWER
Mr. Cox. And price levels at which other manufacturers had to
compete had nothing to do with it?
Mr. Safford. It probably had something to do with it; yes.
Mr. Cox. I should like to offer this letter in its entirety and have it
printed.
The Chairman. It may be received and printed.
(The letter referred to was marked "Exhibit No. 123" and is
included in the appendix on p. 767.)
The Chairman. Mr. Cox, did you offer for the record this document
entitled "Memorandum as to Hartford-Fairmont and Hartford-
Empire History and Policy"? ^
Mr. Cox. Yes; I would like to offer that, and I would like to have
that printed.
The Chairman. Without objection, it is so ordered.
(The memorandum referred to was marked "Exhibit No. 124" and
is included in the appendix on p. 768.)
Mr. Cox. May I inquire how long we are going to sit this afternoon?
The Chairman. The practice will be to sit until 4 o'clock every
afternoon.
Mr. Cox. Mr. Smith, you testified that certain of these licenses
fcontam restrictions as to the amount of ware that might be produced
with this machinery. What considerations have you taken into ac-
count in determining the amount of a particular line of ware which
a licensee may produce ?
Mr. Smith. Those licenses that you call attention to, Mr. Cox, are
very few and far between. It is not a real picture of a general licens-
ing policy. Very few licenses have those restrictions as to the
amounts of ware. A great many have restrictions as to kinds of ware,
but not so many of that. For instance, we have 34 licensees in food,
31 in prescription and proprietary, 31 in liquors, 26 concerns making
perfumery and toiletry, 27 pressure beverages, 32 beers, and so on
down the line, so the restrictions that you have specifically called
attention to really are not the general policy.
Mr. Cox. Those numbers you read to us are unrestricted as to
quantities ?
Mr. Smith. Unrestricted as to quantity. I take that back. Most
01 them are ; not every one.
_ Mr. Cox. They have an unrestricted right so far as the field of ware
is concerned with respect to the field of ware which you read, but they
^^"L^^^c.""''^^^^^^^^^ ^^ "^^"y instances as to quantity; is that right'«
Mr. Saftord. In some instances.
Mr. Cox. Now, you have told us when a man wishes a license as
I understand it, the test in determining what field of ware a manu-
facturer may enter is what his business is when he applies to vou for
license. Do you have any same general test which you applv so far as
quantity is concerned ? ^ rx j
Mr. Smith. No; I don't think so. I am not conscious of any If
they come along and want the license, the question is. What have you
been making? Wliat is the title of your business? What part of the
industry do vou serve? What customers must you produce for« Do
you sell food containers, or do you sell perfumery containers, or do
you sell the liquor trade, or do you sell beers and so forth; and gen-
1 See supra, p. 417.
CONCENTRATION OF ECONOMIC POWER 421
erally speaking, they got what they wanted; not in every case, of
course, but generally speaking.
Mr. Cox. Do you inquire at the same time as to the quantity of the
particular line or ware which they have been producing ?
Mr. Smith. Not as a general rule. Sometimes, yes.
Mr. Cox. Why do you put those quantity restrictions in at all ?
Mr. Smith. Well, if you could give me a case, I think I could
explain it.
Mr. Cox. Take the Florida Glass Co.
Mr. Smith. The Florida Glass Co. infringed our rights, they lost
their suit, and they came to Hartford; and their president said he
wanted certain rights, and we had a discussion in regard to those
rights — what he should have — and finally we thought that plus other
rights we^had given him, 21,000 gross of milk bottles would satisfy
him. He' went along and came back and said, "I would like a little
more."
"What is it that you really think you need down there?"
"I would like 27,500."
And he got it, and if he came along tomorrow or the next day
and said he needed a little larger quantity, we would probably give
it to him.
Mr. Cox. What I am interested in is why you put any quantity
restriction in in thfe first place.
Mr. Smith. Because if you didn't, you would at once be giving
that man an asset which he might or might not use, and if you give
him an unlimited right in that particular case it might prove very
valuable to a lot of other people, stronger concerns that might go and
buy him up. The Florida Glass Co. didn't guarantee to use extra
machines to make the given number of bottles. Our license was to
give him sufficient rights in order that he could live and make a
profit.
Mr. Cox. Why are you interested in preventing a situation where
someone else might buy him up ?
Mr. Smith. I think when you just give everybody everything they
want, whether they are going to use it or not, you might not have
such a sound industry.
Mr. Cox. You think it would be an unhealthy industry if every
manufacturer could use everything he wanted to ?
Mr. Smith. To use everything he wanted, at every time, I think
would be quite undesirable and unhealthy for the industry.
Mr. Cox. Why do you think that?
Mr. Smith. Because I think you would have retaliation to a very
great degree.
Mr. Cox. What do you mean by that ?
Mr. Smith. A man would attempt to make things he wasn't really
fitted to make, he wouldn't produce as good ware, he wouldn't pro-
duce ware as economically. The extra costs and the extra expense
of producing ware at the lowest possible price would be seriously
affected. And then again, as I understand it, the different fields
of ware require different kinds of sales organizations, different kinds
of merchandising, but you can get from the manufacturers them-
selves a much clearer picture of that, Mr. Cox. than you can get
from me, and you are going to have them on,
124491— 39— pt. 2 12
422 CONCENTRATION OF ECONOMIC POWER
Mr. Cox. You think it is proper for you to use your patent rights
to prevent that sort of situation ?
Mr. Smith. I do, yes ; I think it is sound. I think we maintain and
create competition rather than destroy it.
Mr. Cox. You think that is better than letting the manufacturers
find out for themselves w]iat kind of situation they may be in?
Mr. SftiiTH. I do. If we didn't think it was better, we wouldn't
follow that policy.
Mr. Cox. And that, of course, is a decision which is made by your
company ?
Mr. Smith. Correct.
Mr. Cox. I think I have finished with Mr. Smith. If there is any-
thing I haven't touched upon that you would like to say about any of
the answers you have given to me, that is quite all right.
Mr. Smith. I was in hopes, Mr. Cox, you might say something
about compulsory license. Of course, I think if a law is passed, new
laws so that you have to give a compulsory license, that it will ruin
a great many industries, in that those strongest in the industry, the
largest people in the industry, would end up with most of the business
and certainly it would ruin the glass business.
Have you thought of this phase of the compulsoi^y license? Sup-
posing you and I, Mr. Cox, are in the button business, producing
buttons and we have a patented process for the finish, and we have a
mill in a little town in Texas or up in New England or out on the
coast, and the only reason we can compete with the larger button con-
cerns who turn out mass production is because we can make a quality
button, a much better button than they can, and we have a selected
trade, and we made that because we have a patented process. If
Congress should see fit to change the laws, why, of course, you and I
would have to give the big competitor the right to use that patented
process. All his buttons would be quality buttons and you and I
would be out of business.
Offhand, it sounds rather nice, compulsory licensing, but just prac-
tically it wouldn't work out that way. It would do great injury
to so many concerns, and particularly so to the little concern because
eventually you have every type of patented process in the hands of
the larger concerns. I just submit that idea because it seemed rather
far-reaching.
Mr. Cox. Mr. Smith, I find your remarks very interesting, as I
am sure the committee does. I want to make clear to you that you
may be under a little misunderstandino; as to the position of the I)e-
partment of Justice in that respect. We are not now advocating any
such thing as compulsory licensing.
The Chairman. Some other members of the committee may ask
questions of that kind.
Mr. Cox. His remarks brought up one matter that I should like
to ask obout. Mr. Smith, in granting these licenses, you are faced
with a certain amount of bargaining with the licensees, you bargain
to and fro as to terms of the license.
Mr. Smith. Not as to terms. We may disagree with them to some
extent about particular details of the license and lease agreement, but
the royalty rates are the same to everybody.
CONCENTRATION OF ECONOMIC POWER 423
Mr. Cox. I iinderstcand that, but I am thinking particularly as to
these provisions as to types of ware and quantity. You do have a
certain play, there is a certain play of bargaining; there, isn't there?
Mr. Smith. I haven't done much of that in the last 5, 6, or 7 years,
and I just couldn't answer you; I don't believe there is such an awful
amount of it. There may be some. If I were to come to you and
you weren't going to give me just everything I wanted, I would
probably plead with you a little bit to loosen up, to be a little more
generous. I don't know, but people of our organization can tell you
more about that.
Mr. Cox. Do you disclose to all of the licensees the terms which
are granted to each one. or is that a matter of private arrangement?
Mr. Smith. Private arrangement.
Mr. Cqx. So that if I were a licensee and Mr. Safford were a
licensee, unless we told each other, we wouldn't know what terms
were in effect, each with the other.
Mr. Smith. If you came to Hartford we would probably tell you,
but we don't say to you, "Here is a complete list of every contract we
have drawn."
Mr. Cox. Would you say it is merely a coincidence that your only
two unrestricted licenses have been granted to two of the largest
companies in the field?
Mr. Smith. No; I thought I explained that by saying they were
doing a national business, they were making broad lines, fields of
ware, and they just felt they had to have a broad license, and
demanded it.
Mr. Cox. I want to ask you one more question, and then I will
really terminate. Wouldn't you say that the effect of your licensing
policy as you have described it is to freeze the economic structure
of the glass container industry into its present fotm?
Mr. Smith. I would say to ease the economic structure, because
if we hadn't done certain things, the little independent licensees
wouldn't be in business today.
Mr. Cox. That may be true. What I am inquiring into is this : Isn't
the effect of your licensing policy to prevent a manufacturer from
going into a field of ware which he has not previously been in ?
Mr. Smith. That partially might be true. I don't think it is wholly
true. We do occasionally let people in, but I think as a general propo-
sition if a manufacturer is prospering, if he is making a particular
line of ware, that unless he had some very good reason, sound reason,
we would question somewhat as to how far we should extend that
license.
Mr. Cox. Your tendency is to give him a license for the field in
which he has been ?
Mr. Smith. Yes ; or even if it is going to keep him alive and make
him money, we may extend that.
Mr. Arnoij). You very frankly stated, Mr. Smith, you thought it
was undesirable to have everyone able to make all the glass he wanted
to because of the various unstabilizing elements which you thought
that would introduce into the picture.
IVfr. Smith. That was the general thought.
Mr. Arnold. In other words, you think competition in the glass
industry is a bad thing?
424 CONCENTRATION OF ECONOMIC POWER
Mr. Smith. No ; I think it is a very good thing.
Mr. Arnold. But free and unrestricted competition ?
Mr. Smith. Do you mean by that that we should give the use of
our machines to everybody ?
Mr. Arnold. No; we are talking about a. socially desirable policy
for the glass industry.
Mr. Smith. I would say that any policy that puts into the hands
of the consumers glassware at the lowest possible price, if that is true,
and I think that is what the industry is doing, was socially desirable.
Mr. Arnold. And competition in the glass industry, free and un-
restricted competition, is socially undesirable today, you think, or at
least you think — and I am not criticizing you in the least — it is
desirable to give the Hartford-Empire Co. the right to look over the
field and determine the capacity and the quantity and the demand
and all of that sort of stuff ?
Mr. Smith. I do, Mr. Arnold, because I don't know who is better
able to decide, as I said before, whether there should be 1,000 licenses
or 500, or 300, or 50. Now, that has only to do with our own inven-
tions and our own machines. li somebody else comes along with a
new idea, something that is revolutionary
Mr. Arnold (interposing). You would buy it up.
Mr. Smith. We would have to take a back seat or get some new
arrangement.
Mr. Arnold. But you would like to get control of the new idea and
to maintain this humanitarian, paternalistic policy toward the
industry ?
Mr. Smith. No.
Mr. Arnold. I am not using those words critically, but I thought
you do have a humanitarian idea here.
Mr. Smith. I think we try to encourage the manufacturer to pro-
duce better goods all the time, to sell them at a lower price. I think
we feel a distinct moral obligation of good business ethics to continue
to help him keep in business, but, of course, we get paid for it; we
are not a charitable institution.
Mr. Arnold. I wasn't criticizing the profits at all. I was simply
bringing out what I thought to be your policy; that you thought it
was socially desirable to have someone with pretty complete power to
determine who would go in and who would stay out of the industry
in the interests of stabilization, and that you thought the Hartford-
Empire Co. was a pretty good repository of that power.
Mr. Smith. I think that, so far as we are concerned — and I haven't
given enough thought to the various other kinds of industries
Mr. Arnold (interposing). I was talking about glass.
Mr. Smith. I think, as far as glass is concerned, the industry has
been very much benefited by our policy.
Mr. Ajinold. And insofar as in other industries we could find wise
people to keep out this ruinous competition, and to exercise the pater-
nalistic and humanitarian policy, that also would be a good thing?
Mr. Smith. Yes ; if you can find people who live with the industry
day by day and have something to offer that industry, and they are
part of that industry, but I wouldn't want a board who wasn't in the
business, or creating anything, to sit down and have a power like that.
Mr. Arnold. And you would rather have that power in private
hands than you would in governmental hands ?
CONCENTRATION OF ECONOMIC POWER 425
Mjc. Smith. I certainl}' would, Mr. Arnold, I am sorr}^
Mr. Arnold. That is substantially the argument made in favor of
the European cartel system, isn't it ?
Mr. Smith. I don't know as I know much about that.
Mr. Arnold. Do you know the European cartel system?
Mr. Smith. No, I am not familiar with it.
The Chairman. It would appear from the testimony that was sub-
mitted this afternoon, Mr. Smith, that your company, by virtue of
certain patents granted by the Government of the United States, is
in position practically to dominate the manufacture or the production
of glass containers.
Mr. Smith. No. For instance, there is the great suction machine
that produces such an enormous quantity of bottfes.
The Chairman. What percentage was that? You said something
less than 40 percent.
Mr. Smith. Twenty-nine point something, I think.
The Chairman. So you are producing well in excess of 60 percent.
Mr. Smith. But that is a nornial thing to have happen, isn't it,
Senator? If we have invented and created the most efficient
The Chairman (interposing). Don't misunderstand me, I am not
criticizing ; I am trying to develop the conclusions which we must all
reach after having listened to your testimony. Your company has
received from the Government of the United States certain patents
which may or may not be granted, according to the position that
Congress may take with r'^ipect to matters of public policy, so. that
you are the beneficiary of a grant of power from the Government of
the United States, that is from all the people.
Mr. Smith. Quite true.
The Chairman. And as the result of that grant, j^our company
now, through its control of patents, dominates this particular
industry.
Mr. Smith. That is right, if you leave out the suction.
The Chairman. And you do not sell your patents, you do not sell
the machines that are made i:mder them, you follow a policy of leasing
only. No person may buy a machine outright, and no person or com-
pany may use a machine except under the condition that you lay
down.
Mr. S^^TH. Correct.
The Chairman. So you follow as a policy the program of strictly
examining the power of every licensee to produce.
Mr. Smith. Correct.
The Chairman. And you define that power.
Mr. Smith. Correct.
The Chairman. You say to licensee A, "You may produce so many
bottles of such a kind and character."
Mr. Smith. Not so many, only in a very few instances. "You may
produce bottles of such-and-such character."
The Chairman. But you never impose
Mr. Smith (interposing). Only in a very few instances.
The Chairman. You do, then, reserve the right to limit the pro-
duction ?
Mr. Smith. Correct.
The Chairman. And you exercise that right in some cases ?
Mr. Smith. Correct.
426 CONCENTRATION OF ECONOMIC POWER
The Chairman. So that your licensees are under obligation to come
to you to find out how many bottles they may produce and what kind
of bottles they may produce ?
Mr. Smith. Primarily what kind. Very seldom how many. There
are some, but there are many more licenses as to kind rather than the
restrictive number.
The Chairman. In most cases, you want the committee to under-
stand, your desire is to control only the kind of bottle that may be
produced by a particular individual, and not the quantity?
Mr. Smith. Both are true. We have restricted in certain cases the
quantity. In most cases we merely restrict the kind.
The Chairman. And why did you restrict the quantity in those
cases?
Mr. Smi^i. Because we felt that if that satisfied the licensee's needs
and his desires, and if by doing otherwise he was going to overproduce
to the disadvantage of somebody else, we would do that.
The Chairman. And who determines the needs of the licensee and
■whether or not what he desires to do will be overproduction ?
Mr. Smith. The licensee comes to Hartford and he tells us about
his business; what his requirements are.
_ The Chairman. And so by virtue of this grant which Congress has
given you, through, a patent, you undertake to exercise your judgment
as to whether he has correctly stated his need or the desire to operate?
Mr. Smith. That is quite true.
The Chairman. Now, that boils down, does it not, Mr. Smith, to the
exercise by your company of the right to control both the production
and the price at which
Mr. Smith (interposing). Not the price ; we have nothing to do with
the price.
The Chairman. I understand you testified that in none of these
contracts do you impose a resale price, but if you can control the
production you can thereby control the price, can you not?
Mr. Smith. No. There has always been, since we have been a
corporation, an overcapacity. There is today a large overcapacity
in the industry. It is running at 60 percent of full capacity.
The Chairman. But under this policy which is now permitted
apparently by the patent laws, at least, you could, if you desired, or
some other corporation if it were in your place and none of your
officers had anything to do with it, would be empowered to say to
the licensee, "You may not sell these containers which you manufac-
ture for less than such and such a price."
Mr. Smith. That may be true, but I don't know that it is true.
It is a question that we haven't gone into because we don't want to
have anything to do with the price or the sale of the article made on
our machines. It might be true that we could get five lawyers that
would say, "You can do it if you want to," or other lawyers that
would say, "You mustn't do it, you are on the border edge," but we
do not attempt to do it and we have no interest in doing it.
The Chairman. But you can control the production.
Mr. Smith. The production, as to what they make we can control.
The Chairman Why is it that you have as a policy refused to
follow a policy of unlimited licenses, by which the licensee would
be at liberty to produce as many and as many different kinds of
Gontainers as he desired?
CONCENTRATION OF ECONOMIC POWER 427
Mr. Smith. I tried to explain to you that fk-st of all, in different
types of ware, liquor ware, packers' ware, toilet-prescription ware,
the various types of ware had to be marketed in a different way, one
from another, and I think the manufacturers Could explain it to you
much more clearly than I could.
The Chairman. I think you explained it very clearly.
Mr. Smith. It takes a different kind of organization. If a licensee
is making his business and making, say, prescription ware, that is
his advertising program, that is his sales force, are tuned up to that
particular kind of a business. Supposing he came to us and said,
"Well, after all, I would like to make packers' goods,'" and we had
a licensee fifty or a hundred mile^ away who was in the business of
making packers' ware, but which he again sold. in a different way, I
doubt whether we would give the prescription fellow the right to
make the packers' goods.
The Chairman. And what is the reason that you doubt that yoti
would grant it to him ?
Mr. Smith. I doubt if it would be good business. It might be
demoralizing.
The Chairman. In other words, it might affect the resale price,
so that tliis policy is, after all, a policy designed to maintain the
price.
Mr. Smith. Well, I wish I could answer you "yes" or "no." It
has never occurred to me that our policy maintains a price. I would
say our policy has prevente 1 ruinous competition.
The Chairman. That's right.
Mr. Smith. But as to the price level, or anything of that sort, it
maintained a stability in the industry. Labor has been employed
continuously, I think, probably better in the glass industry than in
any other industry during the depression years.
The Chairman. And that is because you have, the power granted
to you by Congress
Mr. Smith (interposing). I think we have helped, with no great
fluctuation.
The Chairman. But it is because you have had the power, through
a grant from Congress, to control the production in this particular
field, and by controlling production, also to control the price.
Mr. Smith. Also to help stabilize.
The Chairman. All rignt, we will put it in that euphonious way,
to stabilize the industry. As Mr. Arnold indicated, that is the argu-
ment always advanced for the control of industry by private persons,
is it not ?
Mr. Smith. I don't know as I quite understand that question, sir.
The Chairman. That, of course, is perhaps going a little bit afield.
Let me ask you now. How do you fix the royalty which you charge,
and the license fee ?
Mr. Smith. 'The royalties were fixed when we first started business,
and the only change in those royalties has been reductions, and they
are based on a sliding scale. If ^ou make a 10-ounce bottle, it is one
royalty; if it weighs 7 ounces, it is another royalty; if it weighs
15 ounces, it is anotlier royalty. We determined that by figuring
out what the saving would be, either thti saving in labor or the total
saving, and we struck some very interesting figures, and finally estab-
428 CONCENTRATION OF ECONOMIC POWER
lished on what we call about one-third of the price of the saving
in labor or the total saving, and we have never changed those figures.
I think somewhere here we have the exact situation, but roughly
speaking, two-thirds of the saving went to the manufacturer and we
collected one-third.
Now, that was a very tangible third, but the manufacturer made
a great deal more money than that, because if he had a large tank
filled with molten glass, a hundred tons of this molten glass in a
tank, he had to make money. The only way he could make money
was to put into salable ware so many tons of glass a day, and the
fact that our machinery let him put so many more tons per day
than he had ever been able to put before, he had a great saving in
overhead.
It is a rather romantic situation. I don't want to keep you, but
our company came into being through an idea. Here was a glass
manufacturer who was making jars for the Beech-Nut Packing Co.
You remember in the old days you bought your bacon and mustard
and peanut butter (and still do, to some extent) in glass jars, and
the Beech-Nut Packing Co. developed a sealing which automatically
made a vacuum seal on the jars. They found they couldn't get
accurate enough jars to do that without great losses. They were
using millions and millions of jars each year and they went and com-
plained to the manufacturer producing these by hand, and said,
"Your jars are costing us too much money. Breakage is too great;
we are losing a lot of them in this sealing process. For heaven's sake,
let's get together and hire some engineers in Hartford to see if we
•can't make glass automatically."
That is the start. Mr. Peiler, in 1911, started to investigate the
glass industry and he found there was only one automatic means of
producing glassware, and that belonged to the great Owens Co., a
suction machine. We made a complete study of the patent situation
and finally Mr. Peiler, the inventor, evolved this method of feeding
glass.
At that time all the hand people were having pretty tough sledding.
The Chairman. I think, Mr. Smith, it is the intention of the
Department of Justice to go into the history.
Mr. Cox. We are going to put that in.
The Chairman. If you want to make a suggestion, Mr. Good-
rich
Mr. Goodrich. Yes, please.
The Chairman. Mr. Smith, two contracts were put into the record
this afternoon, one of them the Whitall-Tatum contract^
Mr. Smith (interposing). As regards a lehr.
The Chairman. Each of which contains a provision reserving to
your company the right to withdraw the license from any licensee who
uses the particular machine thereby licensed in connection with !any
other machine which is not licensed by you.^
. Mr. Smith. That was our policy. Now, let me explain, if I may.
That still is our policy as regards our forming machine, because we
have a hook-up between the feeder and former which is under patent,
1 Referring to "Exhibits Nos. 121 and 122."
» Ibid.
CONCENTRATION OF ECONOMIC POWER . 429
SO we are considering that one unit, and it is a little different situation
from the lehr situation.
The Chairman. But you have abandoned that policy with respect
to lehrs?
Mr. Smith. The stacker and the lehr.
The Chairman. Do you wish the committee to understand that,
except for these two cases you have come to the conclusion that that
policy of restricting the use to machines which you yourself control is
not followed any longer except in these two instances?
Mr. Smith. Y u are referring to lehrs ?
The Chairman. Yes.
I understood the testimony of Mr. Safford to be that that had been
eliminated from the general contract.
Mr. Smith. Yes; not as far as a feeder hooked up to our forming
machine is concerned.
The Chairman. But you still feel that you have the right to reserve
that right if you care to do so ?
Mr. Smith. Yes; because that is a different situation and under a
different set of patents, and we have patents on the combination.^ I
mustn't get into the technical end of this thing. I really Imow nothing
about it.
The Chairman. Of course, that suggests to my mind, as a Member
of Congress, whether or not it is a wise thing for Congress to allow
any law to stand which enables the holder of any patent to say to
the user of that patent that he may not use it in connection with any
other patent unless the licensor permits him to do so.
You see the question that it raises.
Mr. Smith. I think that would wholly depend upon so many vary-
ing situations. What is the patent situation at that time? What
does the patent cover? It may cover two machines. As a matter of
fact Ave have let people use our lehrs with other machines, and the
situation varies to such a degree and has so many legal angles that
if you would like to go into that I wish you would ask our attorneys
tomorrow.
The Chairman. Secretary Patterson, I am rather apologetic. I
think I have taken up a good deal more time than I wanted to. Do
you have some questions to ask the witness?
Mr. Patterson. Most of my questions of Mr. Smith have been
answered, but there are one or two with reference to the international
aspect.
The Chairman. Mr. Patterson, would you care to come over here?
Mr. Patterson. Mr. Smith, I am going to cut these questions rather
short, because you have been on the stand 2 hours and it is rather
burdensome.
Is any part of the process you use subject to license from foreign
patent holders?
Mf. Smith. No.
INIr. Patterson. None whatsoever?
Mr. Smith. Not if I understand you correctly.
Mr. Parham (of counsel -for the witness). That is substantially
correct. One particular patent I have might possibly bear.
Mr. Patterson. Is any of your machinery leased to foreign glass
manufacturers, Mr. Smith?
430 CONCENTRATION OF ECONOMIC POWER
Mr. Smith. None leased. We have sold our patent rights in 17
different countries, but we have sold those rights outright. We have
no ownership, nor do we collect royalties or anything of that sort
from across the water.
Mr. Patterson. In 17 foreign countries, and you have no further
connection with them — sold outright; you have your money, are
not represented on the boards, and it is a clean slate?
Mr. Smith. That's right.
Mr. Patterson, Go right along and develop that, Mr. Smith, if
you have any thoughts on it.
Mr. Smith. They thought there might have been one point where
I was 9914 percent right and one-half percent wrong, and they were
trying to clear it.
Mr. Patterson. You are ahead of most of us if you are 99 percent
right. I might tell you, Mr. Smith, I am personally getting this
more or less for the Patent Office. My colleague, the Commissioner
of Patents, is here with me and we are after developing certain infor-
mation which will help us, not only in the committee work but with
the Patent Office end of it, when it comes to legislation.
Have you any idea as to what percentage of the total glass-con-
tainer production of these 60 foreign countries is made on your
machines ?
Mr. Smith. No; I really haven't. I think in England, well, I
naven't the statistics. Our equipment is used there quite exten-
sively; it is used quite extensively in France. I haven't heard much
about Germany lately, Czechoslovakia, Argentine, Brazil, even in
China, and is used extensively in Japan. There may be others. I am
not ticking very. well just n^w.
Mr. Patterson. That is a s^tisfactoi^ answer, Mr. Smith. Thank
von.
Now, is there any clause in your leasing contracts restricting their
use? You sold these outright. In your bill of sale or in your con-
tract to these foreign manufacturers, are they restricted from selling
in the United States or in any other market ?
Mr. Smith. No. You see what we did, we took out patents in all
these foreign countries, and when the patents issued, like the British
patents, French patents and so on, the manufacturers over there
came over here and said, "Here, we would like to buy your patents,"
and we sold them, -and in some cases where we hadn't patents 'issued
up to that time they agreed not to ship the machines into that country
which had no patents, to protect our particular type of machine.
Mr. Patterson. Thank you. Have you any idea, Mr. Smith, as to
the percentage of world production produced in this country, in the
United States?
Mr. Smith. No; I haven't the least idea.
Mr, Patterson. You do have some idea, though, I imagine, as to
how the costs of production compare here versus the leading countries
abroad.
Mr. Smith. No; I'm sorry. I think you can get that information
from a manufacturer of glass. Personally, I have none,
Mr. Patterson. We can get that a little later on.
Now, this is my last question. I am advised that the exports of
glass containers during 1937 were valued at $3,320,000 and that im-
CONCENTRATION OF ECONOMIC POWER 431
ports during the same year were valued at $719,000, which is a com-
paratively small quantity in relation to domestic production of $161,-
000,000. This indicates that the United States container manufac-
turers must be among the world's lowest cost producers. Now, Mr.
Smith, would you say that this is principally due to the development
of automatic machines in this country?
Mr. Smith. I think so ; yes.
Mr. Patterson. Anything else?
Mr. Smith. Well, further than that, of course, you have great
research and development undertakings here. "VVe spend a great deal
of money, several hundred thousand dollars, five or six hundred
thousand dollars, perhaps, on research and development. Other
big research concerns are doing the same. I suppose Corning Glass
Works has the finest research laboratory in the world, and when you
tie up all those things, and the aggressiveness and inventive ability
of the United States, it is a leader in glassware-. It is just bound and
got to be satisfactory.
Senator King. You have more efficient labor, too, do you not, and
greater use of electrical appliances to be used in connection with the
machinery.
Mr. Smith. That I wouldn't know, Senator. Of course in some
of the countries where j[ou have such free water power across the
way, that may have a similar effect. I am not prepared; I don't
know enough about the subject.
The Chairman. Do any other members of the committee have any
questions to ask before we recess ?
Mr. Davis. Mr. Smith, can you tell us whether any machine manu-
factured in these foreign countries under your patents is shipped
into the United States?
Mr. Smith. No; none. None are shipped in at all under our pat-
ents. It isn't permissible. We wouldn't allow it.
Mr, Davis. You mean you have a clause against that in the sale
of the patent? Did you liave a contractual provision against ship-
ment of machines into this country?
Mr. Smith. In some cases in the early days we did.
Dr. LuBiN. Mr. Smith, may I ask whether your corporation owns
any patents which are not now being used in connection with either
the manufacture or development of your own product?
Mr. Smith. I wouldn't know. I suppose there are some.
Mr. Parham. i have got some, but I don't think the principal ones
are included.
Dr. LuBiN. Do you own any patents applicable not to your own
machinery, but to machinery manufactured by other people?
Mr. Parham. Yes; I have some.
Dr. LuBiN. In other words, those patents are being held by you so
that in the event anybody else should use that procedure or method
on machines other than yours, and they are not applicable to yours
so that they can't be used on yours, you are in position to bring
infringement suits against them ?
Mr. Parham. I happened to think of one case in which we have
licensed the other machine.
Dr. LuBiN. Can you tell me how many cases of infringement you
have brought in the last 5 years?
432 CONCENTRATION OF ECONOMIC POWER
Mr. Parham. I haven't been sworn as yet. That is in a book which
Mr. Cox is going to introduce.
Dr. LuBiN. May I ask a question of Mr. Smith ? You may not be
in a position to answer it. but I would be interested if you could. If
I were a person with the necessary capital and rej)utation and I
wanted to go into the production of milk bottles, and assuming for
the sake of argument that at the time I came to you and asked for. a
license the milk-bottle production was more or less on a par with the
market situation — in other words., you didn't have that large over-
capacity that you now have, would yqu give me a license in preference
to somebody who already owned a license who wanted to expand his
production ?
Mr. SivriTH. That is a pretty tough question. We certainly would
receive with great seriousness your application. Wliether we would
give it to you or not Would depend on probably 10 or 15 other different
reasons. I just can't tell you. I can get up a set of reasons some
time. I can't tell you now,
I don't think you meant to imply it, out certainly we would see that
the production capacity was maintained so that, so far as our machin-
ery was concerned, milk bottles were being produced at the lowest
possible cost.
Dr. LuBiN. But you couldn't say at this time that in the event
production was being increased
Mr. Smith (interposing). I said your application would receive
serioTis consideration.
Dr. LuBiN. Let me ask one final question, i note in your testi-
mony you mentioned the fact that one of the companies that has
freedom to produce in unlimited quantities and with few exceptions
■freedom to produce unlimited types of glass is the Owens-Illinois
Glass Co. Is there a financial relationship between the Hartford
Empire and the Owens-Illinois through the Owens-Corning and the
Empire Machine?
Mr. Cox. We are going into all of that question.
Mr. Smith. There is that chart.^
Senator King. I would like to ask one question : By your policies
which you have pursued, have the prices of your products 'been de-
creased, cheapened?
Mr. Smith. The prices of glassware to the consumer have been
continuously decreased.
Senator King. Is that a result of your policies or the result of
your licensees', or both?
Mr. Smith. I should say when you manufacture by the use of
our machines you manufacture at the lowest possible cost, and that
has been continually happening, according to our figures. Glass-
ware today, certainly in a number of fields, is being oflere.d to the
consumer at a far less price than it was a few years ago, but there
again the manufacturers themselves can speak for that. I am in no
position to speak for them.
Senator King. Do you think the policies which you have pursued,
yon ahdrthe manufacturers, either individually or jointly, have re-
sulted in the cheapening of the prices!
I "Exhibit No. 113," app.endix, p. 762.
CONCENTRATION OF ECONOMIC POWER 433
Mr. Smith. I don't think there is any question about it.
Senator King. Do you think your policy has in any way — and if so,
to what extent — made for monopolistic control of prices, either of
production or of distribution ?
Mr. Smith. No; I don't think there is any monopolistic control.
I tliink we have so many licensees that are competing, one against the
other, in various tields of ware that there is no control.
Mr. Arnoij). Well, you said awhile ago that there was a monopo-
listic control but it vras in wise hands.
Mr. Smith. So far as the use of our own inventions is concerned,
yes; but that use has been spread to such a degree, there are so many
manufacturers using our equipment, that there is a free competition
between those manufacturers.
Mr. Cox. I would like to put in the record this memorandum on
"Policy of the Hartford Empire Co." that was discussed and that I
read from this morning. It has been identified.
Mr. Saftord. Mr. Cox, could it be put in as a personal memorandum
of Mr. Herbert Ivnox Smith?
Mr. Cox. I will offer it on these terms, that it is a memorandum
entitled "Memorandum on policy of Hartford Empire Co., February
18, 1930," which we took from your files and which we understand
was written by Mr. Herbert Knox Smith. That is as far as I can go.
The Chairman. Which the witnesses have said was apparently
written by Mr. Herbert Knox Smith.
(The memorandum referred to was marked "Exhibit No. 125" and
is included in the appendix on p. 771.)
Representative Sumners. Mr. Smith, are you going to be avail-
able tomorrow ? . Do you want to leave this evening ?
Mr. Smith- I had "hoped to be excused, but Mr. Cox tells me that
he may want me back again, and I don't think I have much else to
offer.
Mr. Cox. Much as I regret it, I am going to have to keep Mr.
Smith here for part of this week, at least, I think.
Representative Suiviners. Mr. Smith, these other people have just
been skimming around what you know, and tomorrow I want to ask
you two or three questions that will really explore your wisdom.
The Chairman. Thank you, very much, Mr. Smith.
The committee stands in recess until tomorrow morning at 10 : 30.
(Wliereupon, at 4:30 p. m., a recess was taken until Tuesday,
December 13, 1938, at 10:30 a. m.)
INVESTIGATION OF CONCENTEATION OF ECONOMIC POWER
TUESDAY, DECEMBER 13, 1938
United States Senate,
Temporary National Economic Committee,
Washington, D. G.
The committee met at 10:45 a. m., pursuant to adjournment on
Monday, December 12, 1938, in the old caucus room, Senate Office
Building, Senator Joseph C. O'Mahoney presiding.
Present: Senators O'Mahoney (chairman). King, and Borah; Rep-
resentative Sumners ; Messrs. Arnold, Patterson, Lubin, Henderson,
Davis, and Peoples.
Present also : Department of Justice staff for Temporary National
Economic Committee study — counsel, H. B. Cox (Special Assistant
to the Attorney General) ; Joseph Borkin, Ernest Meyers, Charles L.
Terrel, Benedict Cottone, David Clarke, George -Dession, Fowler
Hamilton, H. C. Engelbrecht, Victor H. Kramer, J. M. Henderson,
Monroe Karasik, Irving Glickfeld, Hyman Ritchin, Norman Bursler,
and Seymour Lewis; also chief counsel for Federal Trade Commis-
sion Temporary National Economic Committee study, George W.
Williams.
The Chajrman. The committee will please come to order.
Mr. Cox, are you ready to proceed ?
Mr. Cox. Yes. Our first witness this morning is Mr. Parham.
The Chair^ian. Before you begin, however, I should like to take
this opportunity of making an announcement to the members of the
committee. Secretary Patterson, member of the committee, repre-
senting the Department of Commerce, today suggested to me that
the Department of Commerce would like to have the committee
assign later 2 or 3 days for the presentation by the Department of
Commerce of testimony with respect to the general features of the
patent law. That would be a presentation altogether independent
from that which is now being made by the Department of Justice
and would be intended primarily for the purpose of showing the sort
of change in the patent law which tlie Bureau of Patents miglit be
willing to reconmiend to Congress, and if there is no objection upon
the part of the committee the request of the Department of Commerce
will be granted, and a date for those hearings will be fixed later.
Representative Sumners. Mr. Chairman, will that come after we
shall have concluded taking testimony with reference to patents?
The Chairman. That will come after we have concluded the presen-
tation of the case by the Department of Justice.
Mr. Arnold. May I make this explanation, Mr. Congressman : We
have been in close cooperation and consultation with the Department
of Commerce, and for the purpose of orderly presentation there are
two things which we have separated ; one, the questions of the proper
435
436 CONCENTRATION OF ECONOMIC POWER
technical and procedural operation of the patent law, with which the
Department of Justice is not charged, with which they are not particu-
larly skilled; and our own hearing is with the restraints-of-trade
aspect, and we are cooperating with the Department of Commerce in
the other; but we thought, in tlie interest of orderly presentation, it
would be better to separate those two things.
Representative Sumners. The only point I had in mind is whether
it is a matter of bringing the existing law toihe attention of the com-
mittee or whether it' was a suggestion of remedial law. It seems to me
that if it is going to make a suggestion toward remedial legislation,
that ought to be toward the conclusion of the presentation with refer-
ence to patents.
Mr. Arnold. The date will have to be fixed.
Tlie Chairman. That is what we had in mind.
Senator King. I assume, in the announcement made, it is not in-
tended to preclude persons who desire to present their views for or
against the present patent situation.
The Chairman. Not at all.
Mr. Cox. I think Mr, Parham has not yet been sworn.
The Chairman. Do you solemnly swear the testimony you are about
to give in this proceeding shall be the truth, the whole truth, and
nothing but the truth, so help you God ?
Mr. Parham. I do.
Representative Sumnees. Before you do that, at the conclusion of
the session last evening I understood Mr. Smith was to be here.
Mr. Cox. Well, I am sorry if I gave the impression that he wa^
going to be here today. I did plan to have him back tomorrow
possibly or the next day.
TESTIMONY OP SIDNEY F. PARHAM, PATENT ATTORNEY,
HARTFORD-EMPIRE CO., HARTFORD, CONN.
Mr. Cox. Will you give the reporter your name and address?
Mr. Parham. My name is Sidney F. Parham. I am a resident pat-
ent attorney of the Hartford-Empire Co., being chief assistant to Mr.
R. D. Brown, the vice president of that company in charge of patents.
Mr. Cox. How long have you lield that position?
Mr. Parham. I have been resident patent atttorney since 1926.
Mr. Cox. Did you do any Avork for the company before that?
Mr. Parham. Yes, sir. JPrior to that time I was engaged in patent
law practice in Washington with Dorsey S: Cole and spent a consider-
able portion of my time on work for the Hartford-Empire Co.
Mr. Cox. Mr. Parham, yesterday Mr. Smith testified that the Hart-
ford-Empire Co. held certain patents relating to methods or machines
used in automatic feeding of glass by the gob method. Do you recall
that?
INIr. Parham. Yes, sir.
Mr. Cox. I ask you whether it would be possible to classify the
patents in the sense that some of them are basic in character and
others are on improvements or details.
Mr. Parham. It might be possible to classify them, but I am not
prepared to give you an accurate classification at ^liis time.
Mr. Cox. Well, I will ask you about two specific patents. I refer
to Tlie one which is numbered "1,573,742." I thjnl-: that is the so-
called phase change patent.
CONCENTRATION OF ECONOMIC POWER 437
Senator Kjng. What is that name ?
Mr. Cox. Phase change; p-h-a-s-e. I ask you about that patent.
Will you describe that as a basic patent?
PATENTS IN THE GLASS CONTAINER INDUSTRY
Mr. Pabham. I would describe that patent as an exceedingly im-
portant patent but possibly not the basic patent in the gob-feeding
art.
Mr. Cox. Would you say the basic one was 1,655,391?
Mr. Parham. No, sir; I would not. I would say that is also an
exceedingly important patent with broad control ; yes.
Mr. Cox. Of course, those have figured very largely in the litiga-
tion whieh your company has had.
Mr. Parham. That is true.
Mr. Cox. On the so-called phase change, you sued the Nivison-
Weiskopf Co. at one time?
Mr. Parham. Yes, sir.
Mr. Cox. And the Kearns-Gorsuch ?
Mr. Parham. Yes, sir.
Mr. Cox. The Lamb Co.?
Mr. Parham. Yes, sir.
Mr. Cox. And the Obear-Nester Co. ?
Mr. Parham. Yes, sir.
Mr. Cox. And on the second patent, the 1,655,391, which I shall
hereafter refer to as the Peiler patent merely for convenience
Mr. Parham (interposing). They are all Peiler patents, Mr. Cox.
Mr. Cox. Well, there is some dispute about that, although I under-
stand it is their name.
Mr. Parham. Not in my mind, shv
Mr. Cox. Well, I am not going to discuss that with you now. I
am just going to refer to it by that term so we won't confuse the
numbers. That patent has also been important in your litigation.
Mr. Parham. You are also referring to 1,655.391 ?
Mr. Cox. That is the patent you sued Hazel-Atlas Co. ?
Mr. Parham. Correct.
Mr. Cox. Knape-Coleman ?
Mr. Parham. Yes, sir. I beg your pardon. We did not sue Knape-
Coleman on that.
Mr. Cox. Was it on the other patent?
Mr. Parham. On the other one ; the phase change.
Mr. Cox. And you sued the Keed Glass Co. on this?
Mr. Parham. That is correct.
Mr. Cox. And you sued the Florida Glass Co. ?
Mr. Parham. That is correct.
Mr. Cox. And the Jeanette Glass Co.?
Mr. Parham. I believe so.
Mr. Cox. When was the 1,655,391 patent issued?
Mr. Parham. January 1928.
Senator Borah. Have you another name by which you can call
that? ^ ^ ^
Mr. Cox. I am going to try to refer to the 1,655,391 as the Peiler.
Mr. Parham. I'd call it the shaping patent.
124491— 39— pt. 2 13
438 CONCENTRATION OF ECONOMIC POWER
Mr. Cox. You might use the term which Mr. Parham did, calling
it the shaping patent for 391 and the phase change for the other.
Mr. Parham. We ourselves call it the stuffing patent.
Mr. Cox. Which one is this ?
Mr. Parham. The same patent, 1,655,391.
Mr. Cox. Have you any choice between "shaping" and "stuffing"?
Mr. Parham. I prefer "stuffing," because the feature of the patent
is the stuffing of the upper end of the charge to give it an" artificial
shape which is different from the natural shape it would have.
Mr. Cox. That patent expires 17 years after the date of issue, or
about the 2d of January 1945.
Mr. Parham. That is the law ; yes, sir.
Mr. Cox. And when was the phase-change patent issued?
Mr. Parham. I will have to check. I think it was 1926.
M;'. Cox. My recollection is that it was about that time and it
expires some time in February 1943.
Mr. Parham. That would be correct.
Mr. Cox. Now I want to call your attention to three other pat-
ents, Mr. Parham. They all start out with 2,073 and run from
2,073,571 to 2,073.573. Do you recall those patents? Do you have a
copy of those?
Mr. Parham. I think I have copies of some of our patents with
numbers in those series; yes, sir. There is a Peiler patent, 2,073,572,
I recognize as one of our patents; Steimer patent, 2,073,571, I recog-
nize as one of our patents; and patent to Steimer, 2,073,573, is also
one of our patents,
Mr. Cox. What do you call these patents? I just want the term
now.
Mr. Parham. We call the Peiler patent the heated-hood case, simply
a nickname in the office. The patent, as a matter of fact, is directed
very broadly to the idea of feeding suspended charges by the use of
viscous glass, the charges being hung up at the orifice of the feeder
until a full charge is accumulated, at which time a pair of mechanical
shears enter and sever the charge to permit a unit of glass to drop
as a unit into the mold of the molding machine.
Mr. Cox. What do you call the Steimer patents ? Do you have one
name for them or two names?
Mr. Parham. I call them the Steimer patents. The one with the
higher number is a very minor patent.
Mr. Cox. If I hereafter refer to the heated-hood patent and the
Steimer patents, you will understand what I am referring to?
Mr. Parham. Yes. The reason it is called the heated-hood patent
is it happens the particular embodiment of that broad invention which
is shoAvn in the patent drawing shows a hood which comes down
below the orifice or the opening in the. feeder, and there is heat applied
in that hood for the purpose of curing any scar which the severing
operation might have left on the stream of glass.
Mr. Cox. When were the Steimer patents applied for?
Mr. Parham. The Steimer patents were applied for in February
1910.
Mr. Cox. They were applied for by Mr. Steimer?
Mr. Parham. Yes, sir,
Mr. Cox. Can you tell us when they were acquired by Hartford-
Empire ?
CONCENTRATION OF ECONOMIC POWER 439
Mr. Paeham. They were acquired by Hartford-Empire — they were
not acquired directly by Hartford-Empire.
Mr. Cox. They were acquired in the first instance by the Empire
Machine Co.
Mr. Parham. They were acquired by Empire Machine Co. and
Hartford-Empire in 1917.
Mr. Cox. The consideration for that acquisition was $2,300, is that
riffht?
Mr. Parham. That sounds right.
Mr. Cox. It is right, isn't it?
Mr. Parham, I believe so, as nearly as I can remember. I can
check back and be sure.
Mr. Cox. I want to review briefly with you the history of those two
Steimer patents. They were in the Patent Office under consideration
by an examiner from 1910 to 1916, is that correct ?
Mr. Parham. Yes, sir; there was ex parte prosecution, as we call it,
from 1910 to 1916, during which time Mr. Steimer's own attorney
prosecuted the case.
Mr. Cox. By the way, is Mr. Steimer still alive ?
Mr. Parham. No, sir.
Mr. Cox. When did he die?
Mr. Parham. I think it was along around 1919, or something of
that sort, but I am not certain.
Mr. Cox. Then from 1916 to 1925 these patents were involved in
interference in the Patent Office, is that correct?
Mr. Parham. That is correct, sir. I think there were interferences
that continued after 1925.
Mr. Cox. I think there were, as a matter of fact, but there was a
development at that point where at least under one of the patents
there was a division and a patent issued under that division, is that
correct ?
Mr. Parham- Yes, sir; there was a division, and the division was
then put into interference and after that interference was over, the
patent issued on the division ; I take it you are referring to the divi-
sion of patent which we put in suit.
Mr. Cox. That is ri^t. That is one of the patents that was
involved in the Nivison-Weiskopf suits.
Mr. Parham. And in the Obear-Nester and Kearijs-Gosuch suits
also.
Mr. Cox. Going back to the part of the application still left in the
Patent Office, that other part of the patent was prosecuted before the
examiner and the Board of Appeals in the Patent Office from 1925
to 1929, is that correct ?
Mr. Parham. I made a memorandum of those dates. After they
came out of the interference in 1925 they were prosecuted before the
primary examiner until April 14, 1927. Thereupon an appeal was
taken.
Mr. Cox. That was to the Board of Appeals.
Mr. Parham. That appeal was taken to the Board. Because of the
general crowded condition of dockets, the Board did not render its
opinion until August 17, 1929. After an opinion adverse to the ap-
plication had been rendered we immediately filed a bill of complaint
under 4515 Revised Statutes.
Mr. Cox. Perliaps the committee might like to know that is a pro-
vision— but you go ahead and lescribe it.
^Q CONCENTRATION OF ECONOMIC POWER
Mr. Parham. It is a procedure in the nature of a_snit in equity
which you bring to enforce the issuance of a patent which you believe
is wrongfully refused by the Patent Office.
It is used frequently in important cases where it is necessary to
get the testimony of witnesses, it being impossible to make a record
by testimony in the regular course of appeals in the Patent Office,
and we wished the testimony in this case so we proceeded in that way.
Mr. Cox. In other words, this was a situation where the Patent
Office declined to give you a patent on your application and you took
advantage of the procedure provided in this section to seek relief, in
the courts.
Mr, Parham, That is true to the extent that they had refused to
give us certain claims which we thought we were entitled to. Thej
had allowed other claims which we did not think adequately covered
the invention.
Mr. Cox. Do you recall why they refused to give you the claims ?
Mr. Parham. It was a question of the prior art. It was a Hitch-
cock patent, I believe.
Mr. Cox. Then you went to the Supreme Court of the District of
Columbia, is that correct?
Mr. Parham. Yes, sir ; we went there. We found that court docket
quite crowded. We finally got to trial in November 1932.
Mr. Cox. Wlien was the suit filed?
Mr. Parham. The suit was filed on September 3, 1929. As I said,
the trial took place in November 1932. After the trial the court held
the case under advisement for over 2i/^ years and rendered a mem-
orandum opinion on May 3, 1935, in general terms sustaining the
position of the Patent Office. Appeal was taken to the Court of
Appeals, District of Columbia, May 28, 1935. The case was argued
April 9, 1936, and a decision favorable to Steimer was rendered De-
cember 7, 1936, and the patent was issued as promptly thereafter as
possible.
Mr. Cox. The court in effect directed the Patent Office to issue the
patent?
Mr. Parham. Yes, sir.
Mr. Cox. That history you have given covers the Steimer patents;
except for the date of application, are the facts of that history sub-
stantially coTrect as applied to the Peiler patent?
Mr. Parham. No.
Mr. Cox. Will you tell us briefly what the difference was there ?
Mr. Parham. It was in the latter course of the history, but the
Peiler patent, known as the heated-hood patent, the one I believe to
be the basic patent in the gob-feeding art, was filed in March 1914.
In 1915 the Patent Office suggested claims for interference. We were
placed in interference with several applications and we -were placed
in several interferences. I believe the total number of those inter-
ferences was something like
Mr. Cox (interposing). Mr. Parham, you can go into as much de-
tail as you would like, but what I am interested in is the chronology.
Mr. Parham. I would like to go into detail, because I want to
paint the proper picture.
Anyway, it was in a large number of interferences which together
extended for a period of 12 years. Thereafter we proceeded as in
the Steimer case. That case was consolidated for trial with the
CONCENTRATION OF ECONOMIC POWER 441
Steinver case, thus getting an earlier date than it would otherwise
have gotten. We took an appeal at the same time and got a favorable
decision from the court of appeals and were issued a patent as
promptly as possible.
Mr. Cox. Can you tell us exactly the date when that heated-nood
patent issued? You haven't told us that yet, have you?
Mr. Parham. No ; I didn't.
Mr. Cox. I think it was issued March 9, 1937.
Mr. Parham. March 9, 1937, is correct. That's right.
Mr. Cox. Of course that patent will exist for 17 years. Is that
correct ?
Mr. Parham. From that date.
Mr. Cox. And expire in 1954?
Mr. Parham. Yes, sir; that is correct.
Mr. Cox. A moment ago you described that heated-hood patent as
a basic patent in the gob-feeding art.
Mr. Parham. I believe it to be so.
Mr. Cox. Do you mean by that that the patent covers all of the
known forms of feeding, automatically feeding, glass in gobs to
forming machines?
Mr. Parham. I should say it covers all suspended-charge feeders;
if that is what you understand by "gob," it covers all gob feeders.
Mr. Cox. When you say it covers all suspended charge feeders, you
mean every kind of feeder in which the gob, after it comes through
the orifice, hangs without *>ny support?
Mr. Parham. Let me correct myself a moment. The broad claim,
which I believe practically covers all suspended-charge feeding
or gob feeding, if you wish to use "gob" to mean suspended charge,
covers all of those types of feeders which I know of in which viscous
glass is employed and in which the charges are cut off by mechanical
shears. I do not happen to know of any commercial feeders which
do not use viscous glass and the severance by mechanical shears.
Mr. Cox. Would it be accurate to say, then, that that patent covers
all automatic glass feeders excluding the Owens suction machine?
Mr. Parham. No, sir.
Mr. Cox. What doesn't it cover?
Mr. Parham. The feeders known as stream feeders, of which there
have been quite a variety in the past, are not covered by that patent.
There are some of those being used commercially now at the Kerr
Glass Co., particularly. They use a stream feeder to make pressed
and blown ware. I happen to know of another company, which is
not in the container art, which also uses a stream feeder. I think the
Hazel-Atlas Co. and Ball Bros, use stream feeders for certain articles.
Mr. Cox. Perhaps I might interpose this question: Is there any
other feeder besides the Owens suction and the stream feeder that
you think is not covered by this patent ?
Mr. Parham. Yes, sir. There is what is known as a ribbon feeder.
Mr. Cox. That is not used for com - iners to any great extent, is it ?
Mr. Parham. To make tumblers.
Mr. Cox. That is pressed and blown ware, usually, isn't it?
Mr. Parham. No, sir ; tumblers are paste mold ware.
Mr. Cox. I am speaking of the commercial classification in the
industry.
Mr. Parham. I think still they are paste mold.
442 CONCENTRATION OF ECONOMIC POWER
Mr. Cox. Is it ever used to make milk bottles ?
Mr, Parham. No.
Mr. Cox. Fruit jars?
Mr. Parham. No.
Mr. Cox. Used to make packers' ware ? I am asking about packers'
ware, which is used to pack food, and I ask you now whether you
can tell me any place in this country where that feeder you have
named is being used for that purpose.
Mr. Parham. The feeder which I named is being used by the Corn-
ing Glass Works at its Providence plant to make articles which you
may call either a tumbler or a container, a packers' container, ac-
cording to the way it is used. The ones that are being made there to
my knowledge are sold as tumblers. They are used as tumblers,
but identically -formed and shaped articles, made by the Westlake
process, are used as packers' ware.
Mr. Cox. Are those made and sold as packers' ware ?
Mr. Parham. I understand they are.
Mr. Cox. What company does that?
Mr. Parham. Libbey Glass Co.
Mr. Cox. They make them and use them themselves?
Mr. Parham. They make them and sell them; they do not fill
them themselves.
Mr. Cox. Is there any place else you can think of where that
machine is used for making containers of any kind ?
Mr. Parham. I can think of no other place.
Mr. Cox. Is it ever used to make narrow-neck ware of any kind?
Mr. Parham. Not that I know of.
Mr. Cox. Opal ware?
Mr. Parham. Not that I know of.
Mr. Cox. You are quite sure about the ribbon machine being used
by Libbey?
Mr. Parham. I didn't say the ribbon machine is being used by
Libbey. The Westlake machine is being used by Libbey to make an
article which is in the shape of a tumbler and which may be used by
packers. The Corning Glass Works uses the ribbon machine.
Mr, Cox. Is the Westlake piachine not covered by this patent we
are talking about?
Mr. Parham. No; it is not.
Mr. Cox. You have named four feeders, the Owens suction
feeder
Mr. Parham (interposing). I don't call that a feeder.
Mr. Cox. That's all right. Mr. Smith and I were talking that way
yesterday. And the Westlake feeder, the ribbon machine, and the
stream-flow feeder you say are not covered by this patent. Is that
correct? Can you think of any others?
Mr. Parham. I can't think of any others at the moment.
Mr. Cox. So, except for those four, this patent covers all known
forms of gob feeders; is that right?
Mr, Parham, I think that is true, and none of the four that I
mentioned are gob feeders,
Mr. Cox, And none of them are used extensively except possibly
the stream feeder for production of glass containers ; is that correct ?
Mr. Parham. Well
CONCENTRATION OF ECONOMIC POWER 443
Mr. Cox (interposing). I am not asking what can be done; I am
asking what is done today.
Mr. Parham. I realize that, but the question is, Do you mean ex-
tensively by a large number of concerns, or by that do you mean to
make a lot of ware, because the ribbon machine makes lots of ware?
Mr. Cox. I mean, what part of the glass containers now manu-
factured in this country, and by containers I am not speaking of
tumblers or tableware or anything of that sort, is made by that sort
of machine?
Mr. Parham. I am not a statistician and I don't know the exact
figures. I think Mr. Smith told you yesterday that something in
the neighborhood of 30 percent or more were made by means other
than the gob feeders.
Mr. Cox. You know, don't you, that most of that 30 percent is
made by the Owens suction machine?
Mr. Parham. I know a good portion of it is.
Mr. Cox. Most of it is — 29 percent.
Mr. Parham. I don't know the figures ; I am not a statistician.
Mr. Cox. You heard Mr. Smith testify yesterday that it was 29
percent? ^
Mr. Parham. I will accept his word for it.
Mr. Cox. You don't have to be a statistician for that, do you?
Mr. Parham. No.
Mr. Cox. You are quite clear, are you, that this new patent, the
Peiler patent, doesn't cove' the stream feeder?
Mr. Parham. You mean by Peiler patent the heated hood ; it does
not cover the stream feeder. Now, which stream feeder are you
speaking of?
Mr. Cox. I am speaking about the same stream feeder you were
talking about.
Mr. Parham. When you speak about the old Brooke feeder it
does not. There may be modifications that come under some claim,
but I don't believe there are. I don't think the other feeders are
covered.
Mr. Cox. Is that what you are going to say when you sue those
people some time, Mr. Parham?
Mr. Parham. Why do you assume that I am going to sue those
people?
Mr. Cox. You sue everyone sooner or later, don't you ?
Mr. Parham. I don't think so. We sue only where there is in-
fringement.
Mr. Cox. I assume that that is so.
Representative Sumners. Mr. Chairman, I hardly believe that is
very illuminating.
Senator King. I share your views.
Mr. Cox. I think the -vtitness is being reluctant. I think, as a
matter of fact, if we are called upon to demonstrate the litigation
policy of this company, we can show that they have sued or threat-
ened to sue almost everybody.
Representative Sumners. How is that to guide us in our deter-
mination of policy on this thing?
iSee supra, p. 383.
444 CONCENTRATION OF ECONOMIC POWER
Senator Borah. I think it has a great deal to do with it.
Mr. Cox. I am not going to pursue it any further, but I would
like to point out this to you, sir, that one of the most effective ways
of using a patent to achieve a position of dominance in an industry,
quite apart from the rights which the patent gives you as a patent,
is by litigation, because if you have the resources to engage m liti-
gation you can eventually wear out your competitors or so weaken
them that their competitive position in the industry is one where
they are of little or no account. We expect to produce some testi-
mony of that kind.
The Chairman. May I suggest, Mr. Cox, that you ask the witness
to state in his own language why he termed this particular patent
of which you are speaking a basic patent ?
Mr. Goodrich (of counsel for the witness). May I request that
in view of Mr. Cox's statement this witness be permitted to go into
the various suits this company has brought, to show why those
suits were brought, because it is our position that we sued where our
patents were being infringed, and no place else?
Mr. Arnold. Mr. Chairman, it seems to me that to get an orderly
presentation of this matter we must present our case. It seems to
me that Mr. Cox is quite right; the witness has seemed somewhat
reluctant. We are sorry if we seem to delay matters, but such
presentations as Mr. Goodrich is talking about I think should come
at a later time, because if both the point of view of the Department
and the point of view of the company are presented at the same time
we will get nothing but confusion, and I will ask the committee to
bear with us a little bit on some of this cross-examination.
The Chairman. There will be that opportunity.
Mr. Parham. I have no intention of being reluctant. I simply try
to be as exact as I can be, because I think the picture needs to be exactly
defined and not to be painted in broad terms.
The CHArRMAN. I think the committee understands that. May the
Chair suggest, both to the witness and Mr. Cox, that if we proceed
with less fencing between the two verj^ able gentlemen and get down
to brass tacks we will proceed more rapidly ?
Mr. Cox. Perhaps we can move on to something that is a little less
controversial.
Senator King. I would like that question answered, because I think
that might save some cross-examination — as to whether this was a basic
patent.
The Chairman. Why do you think it is a basic patent ?
Mr. Parham. I consider it is a basic patent for the reason that the
patent contains claims which, in my opinion, express the fundamen-
tally important thought which Mr. Peiler had when he originated this
new art of gob feeding. That thought, as I understand it, is the use
of much more viscous glass than was ever used before in mechanical
feeding, and the control of that glass so that it would hang up until
the entire charge was in suspension below the orifice, whereupon the
exact quantity would be cut off quickly by mechanical shears.
The Chairman. Am I correct in understanding that in the trade,
so to speak, a basic patent is such a patent that, in the then current
state of the art, it is necessary for the construction of any efficient
machine to do the particular work that is required to be done?
CONCENTRATION OF ECONOMIC POWER 445
Mr. Parham. I don't know as I follow you, quite, Mr. Chairman.
My thought is this, that a basic patent, in my opinion, is the patent
which lies at the base of a new advance of some considerable magni-
tude.
The Chairman. In the present state of the ei't and without which
the art cannot be carried on in the most efficient manner ?
Mr. Parham. In that particular branch of the art ; yes, sir.
The Chairman. So that when you speak of this as a basic patent
you mean by that that it is such a patent that any company which
undertakes to engage in the manufacture of that type of glass for
which this machine is used would not be pursuing a most efficient
method of manufacturing it without the use of this patent in some
form ?
Mr. Parham. Well, I think that happens to be true in this par-
ticular ^ase, but you may have several different lines of developing
it from a base.
The Chairman. Certainly.
Mr. Parham. You may have several different bases, and they all
may end up with the same ultimate article, but the company that has
the basic patent on the most efficient way is the fellow who is on top.
The Chairman. He controls the industry. That is the point.
Mr. Cox. I woiuld like to revert for a moment to a patent we were
talking about a little earlier, 1,655,391, the stuffing patent; and I
would like to have you tell the committee how wide you think the
scope of that patent is so far as it relates to gob feeding.
Mr. Parham. I think I can best tell the committee that in terms
of the opinion in our case against the Shawkee Co. In the opinion
of Judge Buffington, the formal title is Shawkee Manufacturing Com-
pany et al. v. Hartford-Empire Company (68 Fed. 2d 726). Judge
Buffington, speaking of the; invention of that patent, stated: "The
functional invention of that patent was the swelling of a gob in sus-
pension to desired shape and shearing such shaped gob in suspension."
That patent, as you see, adds to the earlier patent the thought that
the charge is to be artificially shaped in a certain way; that is, by
stuffing it, and that is the reason we call it the stuffing patent. The
suit to which I have referred. Your Honors, was brought by us to
stop the inf rifigement of this patent by one of these air feeders, which
was spoken of yesterday. The description of the court here shows
that the invention applied to an air feeder even though the patent
drawings showed a plunger feeder. I thought that might clear up
some difficulty, that there seemed to be question as to a plunger
feeder being one thing and an air feeder another. They are different
species of the same invention which are covered by these Peiler
patents. There are also some specific inventions'^ under those broad
inventions on each, but they are really not two absolutely different
things.
Mr. Cox. Have you finished, Mr. Parham?
Mr. Parham. Yes.
Mr. Cox. Would you say this patent whose scope you have just
described is a narrower or wider patent than the heated-hood patent?
Mr. Parham. It is a narrower patent.
Mr. Cox. Now, thinking in terms of machines, Mr. Parham, what
kind of automatic feeders in use today are not covered by this stufl^g
patent just described?
446 CONCENTRATION OF ECONOMIC POWER
Mr. Parham. You mean in use today — are you limiting: that ques-
tion, or are you referring to feeders which have been in use and which
have been supplanted by this preferred form, because there are some
of those?
]VIr. Cox. I am speaking, first, of the feeders which are in use today.
]Vfr. Parham. The feeders which I referred to previously — the
stream feeders, and, if j^ou want to call it such, the Owens device and
the ribbon device and the Westlake device. In the other field this
superseded our own commercial paddle feeder, which was our first
commercial gob feeder.
Mr. Cox. So that in terms of machines now in use the two patents
cover relatively the same ground. I don't mean that the patents are
the same, but the machines that fall under one also fall under the
other; is that right?
Mr. Partiam. Anything that falls under the narrower automatically
falls under the broader patent, obviously.
Mr, Cox, Now, when the narrower patent expires in 1945 — doesn't
it
Mr. Parham (interposing). I believe that is correct.
Mr. Cox. Anyone who is using one of your feeders on January 4,
1945, or anyone who is using one of the feeders, some other kind of
feeder, which is covered by, which falls within, the claims of the
patent which expires, say, on January 2, 1945, will not be free, on
January 4, 1945, to continue to use that feeder without paying
royalties to you, will he ?
Mr. Parham. He will not be free of the monopoly granted by the
Patent Office on the broader patent which came out later, and
therefore we would probably claim royalties.
Mr. Cox. You won't probably; you will, won't you, Mr. Parham?
Mr. Parham. I don't dictate the policy. I would suspect we would,
though. I wouH advise it.
Mr. Cox. I wanted to find out how strong your qualification was.
Mr. Parham. I would advise it.
Mr. Cox, So that that monopoly would extend, then, for another
10 years, is that correct?
Mr. Parham. The monopoly on the later patent will extend for
another 10 years, but the monopoly, which is a different monopoly,
on the narrower patent, will have expired.
Mr. Cox. But the broader monopoly will continue under the patent
which went into the Patent Office in 1910 and came out in 1937,
Mr. Parham. Yes, sir; having started later, it will end later.
Representative Sumnf.rs. Will you develop that pretty well? That
is a very im]:)ortant point, it strikes me, right on that point.
Mr, Cox, You mean the length of time it was in the Patent Office?
Representative Sumxkrs. You have an idea that is patented and
the right to use that particular article, we say, will expire in 5 years.
Then, from this answer, it seems to me that it is possible to go in and
get a broader patent in which you can bracket in, maybe not only this
one, but innumerable others, that people can't use. On what theory
is that? I mean, it is rather important for us to know about it, I
think.
Mr, Cox. I would like to have Mr. Parham tell you about that.
Mr. Parham. Well, as I understand it, the theory of the patent law
provides for the grant of a patent on each invention. If you have
CONCENTRATION OF ECONOMIC POWER 447
two inventions you may have two patents, assuming they are both
inventions and the Patent Office finds them so.
Now, an inventor may make his broad invention first — he always
makes it first, as a rule. I shouldn't say "always." As a rule he
makes it first. He applies for his patent application asking for a
broad patent on that thing that he has invented. He goes on and
works further to improve what he has made in the first place, and in
tlie course of making that improvement he invents something further.
He makes a second invention. He applies for his application on his
improved invention.
Representative Sumners. Let me ask you a question, to get right
down where we can understand it. Suppose there are four patents,
a, b, c, and d, and they are approaching expiration, and there may be
a number of things that can be made by people by using the patents
a, b, c, and d, each. Now then, is it possible under our patent law
for somebody to come along and take out another patent which would
preclude these individuals who could use one of those pieces of
machinery, with which you did a, b, c, and d? I don't understand
your language but maybe you can get mine.
Mr. Parham. It is not possible for a later inventor to cover any of
those four things, but if an earlier inventor had applied earlier than
those four patents for his application, and his application had been,
delayed so that his patent came out after the patents on the four
things you are speaking of, then it is possible that for a period
there is a control of those four things. That is possible under the
law.
Representative Sumners. Is that on the theory that he earlier ap-
plied for the patent and that you are now gi-anting him the patent
on an idea that probably antedated these four?
Mr. Parham. That is the idea, sir. The idea is based on the later
patent.
Representative Sumners. I have got it.
Senator Borah. Assume that Mr. A had made application for a
patent. He is delayed for 10 or 15 years. Somebody else comes in
and makes application and covers part of this territory that has been
covered by the previous application. Does the Patent Office go for-
ward and issue a patent while there is another application pending?
Mr. Parham. If the second man has an improvement and the first
man is not claiming that same improvement; yes, sir.
Mr. Arnold. That would be part of the fencing process, wouldn't
it?
Mv. Parham. No, sir; I don't understand that as a fencing process.
Mr. Arnold. A blocking process ?
Mr. Parham. No; neither one in my mind." It is a simple opera-
tion of the patent laws, when you consider the possibility of the
patent on the broad invention being delayed in. the Patent Offic©
longer than the one on the narrower invention.
Tlie Chairman. And it makes no difference whether the two ap-
plications are associated ?
Mr. Parham. It makes no difference.
The Chahiman. But it is m^ understanding from your testimony
that no application for a basic patent m:.f be filed after the nar-
rower patents have been issued and then be granted.
^g CONCENTRATION OF ECONOMIC POWER
Mr. Parham. Well, the narrower patent would probably be a bar
under the law.
The Chairman Yes; but if the application of the basic patent
has been filed and subordinate patents were afterwards asked for
and issued, their issuance would not be a bar to the issuance of the
other patent.
Mr. Parham. You have correctly stated the matter.
Mr. Arnold. It might enlighten the committee, Mr. Cox, if we
introduce the statement of stipulated facts in the Ethyl patent case.
Isn't that a somewhat similar situation?
Mr. Cox. Somewhat similiar; yes.
Mt . Arnold. You might for the benefit of Kepresentative Sum-
ners
Representative StJMNER8^ (interposing). I understand it now. I
don't need it.
Senator King. I'd like to ask one question, if I may be permitted.
Suppose that A, B, and C do file application for patents which are
covered by the broader patents which antedate that, and the Patent
Office grants to A, B, C, and D patents somewhat narrower yet
carrying out the same policy and the same thought that is in the
broader patent. Then the broader patent is issued. Does not that,
if it is issued to different and conflicting interests, destroy the A, B,
and C patents? What is the effect? Does the broader one nullify
the subordinate one or do they all exist?
Mr. Parham. If they are owned, by different parties
Senator King (interposing). I am assuming they are.
Mr. Parham. The owner of the broad patent may use his own
embodiment of the patent and any other embodiment he can think
of except those patented to A, B, and C, who have the narrower
patents. He cannot use those narrower embodiments because they
are covered by the patents to A, B, and C. There can be a stalemate,
then.
Senator King. It seems to me, if you give a blanket patent, a broad
patent, and then you attempt to give little, narrower patents that
when the broad patent is granted it would supersede the narrower
one, and the holders of those narrower ones could be debarred from
exercising them.
Mr. Parham. As a matter of practice, I don't think they supersede
really because if I have the broad patent and you have the narrower
and improved patent, the chances are, the presumption is that your
machine is going to be better than mine because it is an improvement
On mine and there is a great incentive immediately for me to use your
machine and as a practical matter I think the patent usually finds its
own level and business will go on by some accommodation between
ns. I think we'd both be foolish if we didn't. I am not so certain
of that as a general policy, but it is so in my own mind, sir.
Senator Borah. Did you ever hear of a better scheme for manu-
facturing litigation?
Mr. Parham. Well, I would hardly say that the Patent Office
manufactures litigation for the person who takes out patents. It
is the fellow who comes out, who tries to take without payment the
invention of the other fellow that stirs up the litigation.
CONCENTRATION OF ECONOMIC POWER 449
Senator Borah. That is always true.
Mr. Arnold. May I ask a question ?
The Chairman. Pardon me just a minute, Mr. Arnold. Vice
Chairman Sumners wanted to ask a question.
Representative Sumners. I see once in a while articles that have
stamped on them "patent applied for." Does that afford any pro-
tection ?
Mr. Parham. I don't think so ; no, sir ; it is not provided for.
Representative Sumners. Now, if a person manufactured an article
where just a patent was applied for and afterwards, if it was hung
up 5 or 6 or 8 or 9 years, and if he does get a patent and this other
person has been making that thing, could anything happen in a law
suit about it?
Mr. Parham. I don't think that notice is worth anything.
Representative Sumners. Well, apart from the notice, if a person
applies for a patent and during the process of determination as to
whether he is to have it, somebody manufactures an article that is
covered by that patent, is there any possibility of any of these law
suits?
Mr. Parham. No, sir; during the period that the application is in
the Patent Office, any one who knows about the invention may apply
it and be subject to no suit until the patent issues, and he is only
liable for his acts after the patent issues.
Mr. Arnold. I'd like to ask a question simply to relate your previous
testimony to testimony given yesterday, in an exhibit which is headed,
"Memorandum on Policy of the Hartford-Empire Co."^ I do not
wish to raise now the testimony which lias already been given as to
whether that Avas or was not the policy. There is a statement of
policy under "c" on page 2 of that memorandum which reads as
follows :^
To secure patents on possible improvements of competing machines so as to
fence in those and prevent their reaching an improved stage.
Now, that particular process referred to would be effectuated by
just tlie thing which we are discussing, wouldn't it?
Mr. Parham. I don't think the two things are tied together very
much, Mr. Arnold. My idea there
Mr. Arnold (interposing). Wouldn't this fence in the basic patent
by creating a stalemate?
Mr. Parham. It would prevent — the narrower patent would pre-
vent the owner of the broader patent from using the improvement,
that is correct.
Mr. Arnold. And don't you think that is what that sentence in
that memorandum refers to?
Mr. Parham. Of course, it is not my memorandum. My idea is on
that particular matter that we have always filed our applications with
the idea of l^eeping our inventions ahead of the other fellow.
Mr. Arnold. I wasn't referring to whether this Avas your policy or
not, because that was gone into yesterday, but don't you think that
that particular sentence, whether it is or isn't your policy, refers to
this process we have just been discussing?
1 See "Exhibit No. 125," appendix, p, 771.
» Ibid., at p. 776.
450 CONCENTRATION OF ECONOMIC POWER
Mr. Parham. Well, to my mind, it would refer to any taking of
patents on your own inventions, for the purpose of developing the
otlier man's machine, perhaps, for keeping up with the art in your
own machines and in connection with your competitor's machine.
Mr. Arnold. This says "to secure patents on possible improvements
of competing machines."
Mr. Parham. Yes, sir.
Mr. Arnold. So the discussion we have been having on this process
probably related to that fencing in method, doesn't it?
Mr. Parham. I don't think the immediate discussion we have had
really particularly applies to that one thing, Mr. Arnold. Maybe I
don't understand you well. I am trying to be helpful in connection
with it, but my thought there is that what was intended to be ex-
pressed in, maybe, office shorthand, ^yas the idea that we were going
to search constantly for the improvements that could be made in our
own and competing devices so that we would always have the best
situation and could furnish the best device .
Mr. Arnold. But this statement says, "to prevent their" — and that
refers to competing machines — "reaching an improved stage."
Mr. Parham. That wouldn't be my idea.
Mr. Arnold. But it could be accomplished by this process.
Mr. Parham. Yes; it could be accomplished by that process, but,
as a matter of fact, when you did accom])lish that you Avould actually
yourself have brought that machine to the improved stage.
The CHAHiMAN. Mr. Parham, isn't this all a very simple, practical
matter ?
Mr. Pa!rham. I think so.
The Chairman. A patent is a very profitable right which is
granted by the Government. The holder of the i)atent is naturally
desirous of maintaining the monopoly which it grants as long as he
can. Therefore, he would like to prolong it, if that were possible.
Mr. Parham. Yes, sir.
The Chairman. Therefore, when a patent is acquired by a large
concern with large resources capable of establishing research bureaus
and employing competent legal staff, isn't it a perfectly natural thing
for such an organization to do what you have just described ; namely,
study intensively all possibilities of improving not only the patent
which that concern itself owns, but every competing patent ?
Is not the natural and inevitable result of that — and from the
point of view of the patentee, the desirable result, whether or not
it be desirable from the point of view of the public or from the
Congress — that it affords the opportunity of the adroit, of the able,
of the studious holder of a patent to do just exactly what Mr. Smith's
memorandum said, fence-in competing patents so that the person
who develops these improvement patents finds himself in a position
to control the competing patent?
Mr. Parham. It doesn't, of course, control the competing patent.
but he controls the next step in the art.
The Chairman. That is right.
Mr. Parham. And I say it is my belief that it is a very fine way
in which to develop the art, because you have got to do something
positive before you can do the negative thing of fencing.
CONCENTRATION OF ECONOMIC POWER 45^
The Chairman. But it is also a very fine and a very efficient way
to concentrate control of the particular industry that may be in-
volved.
Mr. Parham. It may be ; if you have the brainier men that get the
most inventions, you might possibly get the control.
The Chairman. You imderstand what we are after. We are
merely interested in seeking the effect of these policies.
Mr. Parham. I realize that. I am trying to give you all I can on it.
Senator King. I assume that the competing companies would also
be utilizing their brains.
Mr. Parham. Absolutely.
Senator King. And engaging in research in order to fence in their
patents.
Mr. Parham. That is exactly what happens.
Senator King. So that each company, each inventor, is trying to
improve and to cover the field that some other inventor is trying to
cover, so there is rivalry between companies in order to secure the
very best improvements upon basic patents.
Mr. Parham. Well, I personally boiieve you are absolutely right
about that.
Senator King. I am not defending it, I am simply stating what is
the view,
Mr. Parham. I also say if we didn't follow our policy of continu-
ing improving, we wouldn't last very long; somebody would get
ahead of us.
The Chairman. May I interrupt your examination, Mr. Cox, long
enough to say that what impresses me is that we are now developing
facts which show the operation of groups rather than persons. Mr.
Kettering testified here the otlier day to the effect that we have
entered the group era in the development of patents, and he pointed
out the various research bureaus which are operated to illustrate
that point of view. So here in the patent situation, therefore, we
have this condition : The patent is a grant from the Government ;
it can't exist except by the act of Government. The corporation
which holds the patent also arises by reason of a grant from Govern-
ment, so here we have two artificial creations of Government w^hich
lay the basis and create the opportunity for the condition which has
been developed by the Hartford-Empire Co. in the manufacture of
glass containers.
Mr. Parham. I don't know as the corporate end of it has verj'^ much
to do with it. One rich man w^ould have hired all the rest of us to go
to work, as Avell as the corporation.
The Chairman. But, as a practical matter, one rich man would not
do that.
Mr. Parham. Itjs probably necessary to have the corporation ; yes.
Mr. Arnold. You made one statement that interested me in answer
to Senator K4ng's question. You spoke of the opportunities that might
develop to prevent these blocking situations if, because of competing
companies, each invention and improvement of theirs is changed.
That would indicate you believe as a matter of social policy the situa-
tion would be happier if there were more competing^ companies in
glass.
Mr. Parham. I am trying to think it through, Mr. Arnold, with all
its implications. Of course, the fact is that if this company of ours
452 CONCENTRATION OF ECONOMIC POWER
hadn't come along there might not have been as many competing com-
panies as there are now. I don't know of any reason why another
company might not start and do what we did and make still further
competition, and that might not be desirable. We think we have used
our patents properly. We might have done a very selfish thing in a
way, or it might not have been so selfish. Instead of licensing any-
body on our basic inventions, we might have built a glass plant and
made all the glass that would have been made by the gob-feeding
method, and that we would have been entitled to do under our basic
patent. I think we have created more competition than had we done
that; a great deal more competition. Whether that would have been
smarter or not I don't know ; I don't pass on it, but it could have
happened.
Mr. Arnold. Of course, I wasn't criticizing the policy, because if
the Government gives you a monopoly I suppose we have no right to
criticize you for using it.
Senator King. Would it interrupt your procedure if I ask one
question ?
Mr. Cox. No; certainly not.
Senator King. Reference was made to the long period that some
of tliese patents were held in the Patent Office, to that application
made way back in 191G and the final patent wasn't obtamed until
along in the thirties. It seems to me that if your organization or
any company contributes to those delays, there ought to be some
penalty, and I was wondering if those delays there were in any way
contributed to by your organization or its subsidiary.
Mr. Pariiam. I don't know. I would say they were- not, sir. That
is just the course of events. I personally have some ideas about
changes that should be made.
Senator King. Who filed those interferences which delayed the
granting of the patents?
Mr. Parham. An interference is always declared by the Com-
missioner of Patents when two applications exist which have the
same, or substantially the same, claim to invention. Neither appli-
cant starts that interference, otherwise than by making his own claun
to his own invention.
Senator King. "When this application was made adverse to the
application of your corporation or your predecessor, or when the
predecessor assigned his patent to you, did he use due diligence in
trying to eliminate that interference and adopt all the process which
would culminate in a patent?
Mr. Parham. It is my belief, sir, that he did.
Senator King. I would be in favor, if I may be permitted to
express an opinion now, of some policy under the terms of which
those interferences may not be continued indefinitely, so that when a
patent is applied for it may be issued at the earliest possible date.
Mr. Parham, I concur with your opinion heartily, sir, and I think
that is one place where we really need a change in the patent law.
I think the substance of the patent law is all right, but the procedure
is bad in that respect.
The Chairman. Mr. Cox, you may now have the floor.
Mr. Cox. Mr. Parham, the mere fact, of course, that the Patent
Office issues a patent doesn't mean it is valid, does it ?
CONCENTRATION OF ECONOMIC POWER 453
Mr. Parham. It is presumably valid until the courts find otherwise.
Mr. Cox. That is the point I wish to make, that it still must run
the gauntlet of the courts ; is that correct ?
Mr. Parham. Very often it does, but frequently its validity is
recognized by those who wish to deal in it.
Mr. Cox. But the law provides for judicial test.
Mr. Parham. Yes, sir.
Mr. Cox. Now take the patent you were talking about a moment
ago, this heated hood patent. That was in the Patent Office for a
long time, wasn't it?
Mr. Parham. Yes, sir.
Mr. Cox. Involved in a lot of interferences; and the Commissioner
of Patents in the Patent Office finally refused to issue a patent on
the application, and they were afterward directed to do so by the
courts. Are those all circumstances which someone who wanted to
contest the validity of the patent might raise?
Mr. Parham. Absolutely, sir.
Mr. Cox. You think they could, and, of course, it is right they
should, raise them.
Mr. Parham. Even the decision of the circuit court of appeals
is not necessarily binding in an opinion. It is persuasive, of course.
Mr. Cox. Now, Mr. Parham, will you just tell us who there is
manufacturing glass containers in the United States today who could
contest the validity of this heated hood patent in court?
Mr. Parham. They can contest the heated hood patent in court
when, as, and if they are sued on the basis of that patent, or if they
are threatened with suit on that patent I believe they can proceed
under the Declaratory Judgment Act, and that applies to anybody
who is threatened with suit.
Mr. Cox. Could any of your licensees raise the question of validity
of that patent?
Mr. Parham. Our licensees probably would raise the question, yes,
if they were sued for an infringement.
Mr. Cox. Could they legally?
Mr. Parham. They have no occasion to raise it while they are
licensees.
Mr. Cox. Suppose they cease to be licensees, could they raise it?
Mr, Parham. If they cease to be licensees, they could raise the
point; yes, sir.
Mr. Cox. Mr. Parham, I would call your attention to a provision
in the license granted the Florida Glass Co., put in evidence yes-
terday.^ I will read from it as follows:
So long as this license remains in force, the licensee agrees not to dispute
the validity of the Letters Patent under which this license is granted, some of
which are set forth in schedule E annexed hereto, so far as these patents apply
to the methods and machines which are hereby licensed to the licensee.
I take it that means as to all of your licensees, they could only
contest the validity of that patent if they or you should terminate
their license; is that correct?
Mr. Parham. I think so. It says so long as the license is in force
they shall not contest the validity of the patents under which they,
are licensed, insofar as they are in the licensed machinery.
1 Entered as "Exhibit 118," supra, p. 405.
124491— 39— pt. 2 14
454 CONCENTRATION OF ECONOMIC POWER
Mr. Cox. So if they "^ant to contest the validity of that license
or that patent, they have to run the risk of terminating your license
and findino- glass-making machinery elsewhere; is that right?
Mr. Parham. Surely. It is very much like certain other doc-
trines of law ; you can't hold a right and dispute it at the same time.
In fact, the law implies that same thing.
Mr. Cox. Of course, this patent right is a right which you acquire
after the license is made in the case I am speaking of, isn't it? This
patent was issued in 1937, and that license agreement was issued
before then.
Mr. Parham. Oh, yes ; I believe that is true, but they were licensed
under the applications.
Mr. Cox. As soon as the patent comes out, you put the number of
the patent on a plate on the machine, do you not?
Mr. Parham. We usually do ; yes, sir.
Mr. Cox. And that binds the licensee by the estoppel set up by
this provision in the license?
Mr. Parham. I believe so. There may be some cases that would
take issue with that.
Mr. Cox. So the only people on that chart who could contest the
\'alidity of the patent today without making a change in their method
of manufacture would be the three companies over there on the right,
the three independent companies?
The Chahiman. Will you identify the chart?
Mr. Cox. This is the chart that was introduced in evidence 3'ester-
day as "Exhibit No. 113." \
Mr. Parham. Of course, it is true that any one of the three so-called
independent plants which you show on this chart can contest the
validity of any patent. It is true that any one of the licensees may
contest that validity when they cancel or abrogate or breach their
contract or are sued in infringement.
Mr. Arnold. That means they practically have to go out of busi-
ness first, in respect to the methods they were using in conducting the
business.
Mr. Parham. I don't know as they would go out of business. If
they became infringers, they would still be in business or they wouldn't
be infringers.
Mr. Arnold. You have title to the machinery in their plants in
most cases and could take it out.
Mr. Parham. Yes, sir ; but we have to proceed to the coi?rt to prove
we are entitled to it.
The Chairman. It all amounts to this: That you have entered into
contractual agreements with a number of individuals by which you
have licensed them to use the patents which you hold, and, in turn, in
these license agreements, you have bound each of them contractually
not to bring litigation against them.
Mr. Parham. Yes, sir. It is not to bring litigation against us; it
is not to dispute the title of the thing under which they are licensed.
That is what it amounts to, and it is exactly what the law provides
without this provision.
Mr. Cox. Of course, that is a kind of automatic estoppel, isn't it?
It operates as soon as you put the patent number on the machine.
* See appendix, p. 7(>2.
CONCENTRATION OF ECONOMIC POWER 455
Mr. Parham. I would assert it would.
Dr. LuBiN. May I clarify in my own mind the statement you have
just made? As I understood it, this licensee agreed to these things
before the patent had ever been granted by the Patent Office : is that
true?
The Chairman. I didn't understand that.
Mr. Parham. It appears to be the fact that as to the particular
instance Mr. Cox was referring to the license was granted ahead of the
issue date of that patent; yes, sir.
Mr. Cox. I think one more question and we will finish, if you don't
mind bearing with me for a moment. Mr. Parham, I thought T
understood j'ou to say in response to some questions of the committee
that it was your belief that Hartford-Empire Co. does not file appli-
cations in the Patent Office except with the vieAv of obtaining patents?
Mr. Parham. I will say with very, very few exceptions I person-
ally recommend that. I think we have filed a feAv applications upon
details of machines which we were to put out where I had very, very
grave doubt of patentability and I filed the application for the very
purpose of making a record in the Patent Office that we had such a
device at that time. The Patent Office has refused to grant patents,
and I have concurred in that refusal ; but the record is there in the
Patent Office should I need it, if someone else tries again to get a
patent on that improvement and stop our use of the invention.
Mr. Cox. Do you recall au}^ specific cases where you filed applica-;
tions for that purpose and not with the view to getting a patent?
Mr. Parham. I am sorry to say I can't tell you. I just recall there
have been several instances when my doubt of the patentability was
so great that I expected to do that when I filed the application.
Mr. Cox. You don't recall any instances where an application has
been filed primarily for the purpose of throwing some other applica-
tion into a series of interferences ?
Mr. Parham. Have you something particular in mind? I will be
glad to help.
Mr. Cox. Will the reporter read the question? I want an answer.
(The last question was read.)
Mr. Parham. I can think of one occasion when we had purchased
an application and we tried to get it in condition to get it into inter-
ference with another application of another party. Yes; I remember
that. There may be other instances ; I don't recall any right now.
Mr. Cox. Is tiiis one you are speaking of now in 1924?
Mr. Parham. What I have in mind is the Headley-Thompson case,
if that is what you have on your mind. It is the same thing.
Mr. Cox. I have a copy of a letter which purports to have been
written by Mr. Brown in 1924. Mr, Brown was the chief patent
counsel for Hartford?
Mr. Parham. Yes, sir ; and vice president.
Mr. Cox. Written to Mr. Henry W. Carter, of Owens Bottle Co.,
of Toledo, Ohio. There is a paragraph which I shall read to you
and I ask you if this is the same incident to which you refer. Per-
haps I had better start at the beginning. [Reading:]
It Keoms rather likely that the negotiations with Whitall-Tatum will fall
through.
456 CONCENTRATION OF ECONOMIC POWER
Can you tell us what those were?
Mr. Parham. The negotiations with Whitall-Tatum were to obtain
the right to a license ; the negotiations for a license, to obtain a license
under the Headley-Thompson applications which we had learned of
in about 1920, and which we feared would cover and control the types
of narrow neck forming machines which were being used by our
licensees with our licensed feeders.
Mr. Cox. I will resume reading.
* * * the negotiations with Whitall-Tatum will fall through or be deferred
in such a way that we shall have to stage a delaying flght. Mr. Byrnes says —
Is that one of the patent lawyers for Hartford-Empire ?
Mr. Parham. Mr. Byrnes in this connection was not our patent
lawyer. He has been emploj^ed in other connections.
Mr. Cox. What was he doing in this connection?
Mr. Parham. He was representing Whitall-Tatum Co.
Mr. Cox (reading) :
Mr. Byrnes says that we cannot succeed in holding the Headley and Thomp-
son cases in the Patent Office through interference proceedings, but that if we
do not deal, he proposes to file divisional applications on matters covering com-
mercial machines, and that he is sure of being able to issue dominating patents
on the divisionals in spite of anything that we can do.
The next paragraph is the one I wish to call your attention to par-
ticularly. [Reading :]
For the purpose of forestalling any such program, we think it would he
desirable, if possible, to plant a series of traps for such possible Headley and
Thompson divisionals, the traps consisting of new applications to be filed to
cover the several subject matters which Headley and Thompson seem likely
to dominate.
Do you recall that? Is that the incident?
Mr. Parham. This particular letter was not written while I waa
associated with Mr. Brown, but I have seen the letter before in the
file. I don't doubt Mr. Brown wrote it. So far as I can now recall^
what he suggested was not done. It was just a skirmishing in the
case of a fight and a deal.
The Chairman. Mr. Parham, in this connection perhaps it might
be well to point out that the applications to which you refer as having
been filed by your company are actually not filed by the company,
are they? They are filed by individuals?
Mr. Parham. They are filed in the name of the individual in all
cases. That is the law. They must be filed in the name of the first
inventor.
The Chairman. I just wanted the record to show at this point
that a corporation, as a corporation, may not be an applicant tor a.
patent.
Mr. Parham. That is correct, sir.
The Chairman. Now, how do you choose your applicants, your
personal applicants?
Mr. Parham. We don't choose our applicants. The applicants
choose themselves by being the inventors. If we have doubts as
between two of our employees as to which is actually the inventor, we
usually call them on the carpet and find out their dates of conception
and their various reasons for each asserting that he is the first in-
CONCENTRATION OF ECONOMIC POWER 45/
ventor, and we try to make the correct decision between tke two in
our Patent Department, and then file an application.
The Chairman. Do these emploj'ees receive any reward in addi-
tion to their salaries as employees?
Mr. Parham. I believe that there is a reward for men in certain
salaried classes, a very small reward, but they are really not the
source of our patents as a rule. Our inventions us\ially come out
of our engineers; of course, their salary is based on their probable
inventive ability, and they are frequently, or when it is available,
offered stock at a low price, employee stock. I myself have been the
beneficiary of that to a slight extent.
The Chairman. If it were your desire to file an application for a
patent which would constitute an irite^rference with some other appli-
cation, how would you go about doing it? How would you choose
the_ applicant in such a case?
Mr. Parham, I am not sure I have the question. Will you read it ?
(The preceding question was read by the reporter.)
Mr. Parham. Well, first of all, you would have to assume that I
knew about the other man's application, which I probably wouldn't.
I might under certain circumstances. If I thought that one of my
inventors, or one of the inventors in our own employ, had made the
invention earlier than the opposing applicant, I would file an appli-
cation in his name, seeking interference so that he should have his
invention rather than to have the invention belong to the opposite
party. I would not make ' ny different choice as between inventors in
our own employ for that purpose. The only controlling issue is to
find out who really made the invention in our own organization.
The Chairman. Do you maintain a staff to watch applications that
may be filed in the Patent OflBce, so that you will keep abreast of the
developments ?
Mr. Parham. No, sir; we cannot follow the applications because
they are not public, but we do receive in our office copies of the
patents as they come out,, and it is the duty of the several assistants
in the Patent Department to go through their particular classifica-
tions and see if there is anythnig we should do anything about.
The Chairman. So one of the functions of your company is to
keep in as close as possible touch with every patent that may be
issued on any device that couJd be of possible use in your business?
Mr. Parham. I think it is fair to say we do keep up with the
patent art as best we can. We think our business depends on it. We
have to be up with the procession and a little ahead.
The Chairman. I understood you were going to offer some docu-
ments.
Mr. Cox. That is a stipulation of Mr. Arnold's. I will bring that
after lunch.
The Chairman. Judge Davis, do you. wish to ask a question?
Mr. Davis. Mr. Parham, you described a procedure with respect
to an application of a certain patent for which application was filed
by the inventor in 1910, and which was in process over a long period
of time, and I" believe you said that your company purchased that
patent claim for , $2,300.
Mr. Parham. Yes, sir.
458 CONCENTRATION OF ECONOMIC POWER
Mr. Davis. When did they make that purchase?
Mr. Parham. That purchase was made in 1917. The circumstances
were these. May I tell you a little more completely. We learned of
this application by reason of being in interference with our own ap-
plication, and we found that it had certain features that we thought
we needed.
Mr. Davis. When you learned of this application for a patent,
someone representing your company filed an interference?
Mr. Parham. No, sir; we did not file an interference." Only the
Patent Office can declare the interference.
Mr. Davis. I understand that.
Mr. Parham. We made no effort to get the interference. It was
declared and there we were. That was the first we knew of the
Steimer application.
Mr. Davis. And no effort was made on the parjL of any one repre-
senting your company to get it placed in interference?
Mr, Parham. No, sir ; no effort was made to interfere.
Mr. Davis. Was this, inventor identified with some other glass
company, or was he a wholly independent inventor?
Mr. Parham. He was a worker in glass, but not identified with any
particular glass company; that is, he was not under any contract
or agreement with any other company to transfer his inventions.
He was an independent who had thought up this scheme and filed
his own application.
Mr. Davis. And was not in the employ at the time of some other
glass company ?
Mr. Parham. He may have been actually working for some other
glass company, but he was not inventing on the time of that company.
It was an independent invention of his own, as I have understood it,
sir. That was back a little before my time and I was speaking of
there early proceedings from the record.
Mr. Davis. I believe you have agreements with all of your em-
ployees under which any inventions developed by them belong to,
the company.
Mr. Parham. Any invention in our particular field of glass.
The Chairman. If there are no other questions, the committee will
stand adjourned,
(Whereupon, at 12 : 15 noon, a recess was taken until 2 p. m. of
the same day.)
afternoon session
The committee resumed at 2 : 10 p. m. on the expiration of the
recess,
The Chairman. The meeting will please come to order.
Are you ready to proceed, Mr. Cox?
Mr. Cox. I am, Mr. Chairman. I have finished with Mr. Parhant
for the time being, at least, if the committee has no questions.
The Chairman. Do any of tlie members of tlie committee desire-
to ask Mr. Parham any questions?
Senator Borah. I wish you would explain so a layman can under-
stand it what is meant by "fencing in." ^
I See "Exhibit No. 125," appendix, p. 771, at p. 780.
CONCENTRATION OF ECONOMIC POWER 459
TESTIMONY OF SIDNEY F. PARHAM, PATENT ATTORNEY,
HARTFORD-EMPIRE CO., HARTFORD, CONN.— Resumed
Mr. Parham. Well, fencing in, as I think that term has been used
and in a way I think a layman would understand it, means that
from a patent sense you try to get not just the particular piece of
machinery covered with a patent claim but a certain zone around
that particular machine which you speak of as being fenced in as
your property, and the other fellow fenced out. At least that is the
way I would understand it. That means that if you have a broad
claim by itself it may fence in, or you may fence in by half a dozen
narrower claims of different types.
Senator Borah. So that the enemy can't spread out too much?
.Mr. Parham. So that the enemy can't break into your own little
patented preserves— is the way I would understand the term.
Senator Borah. That is all I desire to ask at present. He will,
be back, I suppose.
Senator King. In any of those proceedings in the Patent Office
in which your organization was interested did it pursue any course
that might be denominated one of delay for the purpose of prevent-
ing a speedy consideration and determination of applications that
were filed?
Mr. Parham. Speaking of the interference proceedings with rela-
tion to feeders that we were speaking of today, I thinlc I can only
generally answer that we did not delay. We had every urge on the
contrary to hasten things, because we were trying to do business with-
out our patents. On the other hand, to be perfectly candid I do know
of one instance in which we were being more or less threatened with
a very serious patent coming out on forming machines, in which we
slightly delayed the issuance until we could make a trade with the
man that owned the other patent. That is the only one I recall at the
moment.
Senator King. Coming to that instance where so niany years elapsed
from the filing of the application until the matter was finally de-
termined in the circuit court of appeals, did your organization tlake
any steps to delay proceedings either in the Patent Office or in any
of the courts?
Mr. Parham. None that I recall, sir, unless you call the compliance
with the almost mandatory rule of the Patent Office to make motions
adding such other issues to the interference as you may need to avoid
estoppels. That is mandatory, or you lose your rights. We made
such motions in some of those cases, as I recall them now.
Senator King. Were you interested in securing patents at the
earliest date possible ?
Mr. Parham. We were, sir, because we had our commercial ma-
chines out in large number; we had licensees who had taken our
word that we were going to have patents and they had gone into
business on that faith, and we had to make good, so to speak. We
were being held up in these interferences and we desired more than
anything else to get at least some of our basic patents out so we
could protect that situation.
Senator King. While this may not be germane to the testimony
which has been given, interference matters have been referred to,^ and
460 CONCENTKATION OF ECONOMIC POWER
this long case has been alluded to, \vhat suggestion would you care
to make as a patent lawyer to expedite matters and to prevent such
long delays so that the patent, the application for which was made
10 or 15 or 20 or 25 years ago, will not expire until 1940?
Mr. Parham. I have some very decided opinions on those, entirely
personal opinions as a patent lawyer rather than as a representative
of the company. I think the interference practice can be greatly
shortened by doing away with certain of the interlocutory appeals.
At the present time there is a series of appeals allowed on motions
within the Department. I think you can neatly shorten the time
by having in the Patent Office, or connected with the Patent Office,
say regional judges or examiners of interference, before whom you
take your testimony and argue your cases as in open court.
We now have a deposition practice which is very long drawn out.
After the decision of one of those judges, I would like to see a single
appeal to a single patent appellate court. I believe in a single court
for patents to have that jurisdiction as well as the jurisdiction in
infringement cases. These are my personal ideas.
Senator King. Speaking only for myself, it seems to me that those
who are interested in obtaining patents and believe in the limited
monopoly which the patent gives ought to be willing to and should
contribute to some plan under the terms of which the applications
for patents may be speedily determined because, if we are to delay
those matters for 10 or 15 or 20 or 25 years, there will be a demand,-
in my opinion, for very radical modification of the patent laws.
Mr. Parham. I am entirely in accordance with that opinion, Sen-
ator, and I am very glad to do what little I can to help that.
Mr. Arnold. Your own definition of fencing in is not, then, that
given in the memorandum entitled "Memorandum on Policy of Hart-
ford-Empire Company," which reads as follows : ^
To secure patents on possible improvements of coDppeting machines so as to
"fence in" those and prevent their reaching an improved stage.
You wouldn't agree with that?
Mr. Parham. That is not exactl}^ my idea of fencing in. I already
have explained tliis morning, or tried to explain, that in the position
in which we have found ourselves we have considered it good policy —
I personally think it is sound policy — to try to develop along every
possible avenue to get the best result we can for our licensees. Now,
if we do that it means that we take a view of the competitor's machine ;
we see if it can be improved up to a point where it will be worth-while
competition for our machine. If we can make that improvement and
get the {latent on it, we block off the other fellow or fence him out.
We don't necessarily fence him in ; we fence him out really of that par-
ticular iniprovement ; but while we are doing it we ourselves are im-
proving the art, and if we succeed in making that machine better than
our own machine we have got that available to put out.
Mr. Arnold. Then, I take it there is a conflict between the written
contemporaneous memorandum which we have introduced and your
present definition of the policy.
Mr. Parham. Well, of course, sir, this is not my definition in the
memorandum. It was written by Mr. Knox Smith.
1 See "Exhibit No. 125," appendix, p. 771, at p. 780.
CONCENTRATION OF ECONOMIC POWER 4g^
The Chairman. That is a good definition of fencing in, is it not?
Mr. Parham. I personally like my definition much better. Mr.
Knox Smith liked the other point of view. I have a gi-eat respect for
his opinion.
The Chairman. You are like the man with the basic patent — ^you
cover a good deal more of the field than he.
Mr. Parham. I really don't think I do. I place a different 'em-
phasis on the words than the committeemen place on them. To me
the idea is one of doing something positive in the way of develop-
ment, rather than the negative thing of cutting the other fellow out.
Now, you may incidentally cut the other fellow out.
The Chairman. The two things are identical. It is the reverse
and the obverse of the same method, isn't it?
Mr, Parham. Yes; you can put it that way; but I prefer the
positive side.
The Chairman. It is a nicer way of stating the same thing.
Mr. Parham. And I think it is a more exact way when you apply
it to us.
Senator Borah. Both propositions accomplish the same end.
Mr. Parham. Yes; they ma}^ accomplish the same end except I
don't know how to block out anybody by doing nothing.
Senator King. Each competitor is trying to improve, if he is in
the business to succeed, trying to improve his mechanism and his art
and to that extent he is trying to block out his competitor, and each
competitor is working against the other fellow for the purpose of
blocking out or getting the best in the art, so that he may get the
trade. If he doesn't improve, some other organization may get the
trade away from him, so there is constant rivalry between the com-
petitors.
Mr. Parham. Yes, sir.
Senator Borah. It is not always for. the purpose of improving^
It is sometimes for the jDurpose of preventing somebody else from
doing something, isn't it?
Mr. Parham. t have never been conscious we have been proceeding
along that line, if you are applying it to us.
Senator Borah. I am not speaking of your particular company.
W,\\Sit I want to know is about fencing in, in general, how it is used
by other companies. It is often used for the purpose of preventing
somebody from developing their fidd, isn't it?
IMr. Parham. I would say if someone starts out to block someone
else, he must make an invention. All he is trying to do is to make
some money on that invention, and he may sell it to the other fellow,
and he can use it if the improvement is worth anything. If it is not
worth anything, you don't have to use it, so the thing finds its own
place in the economic structure, as I see it.
Senator Borah. I judge from the letter of Mr. Brown today that
there are times when it is looking to individual iiiterests.^
Mr. Parham. As I explained this morning, that was one of the
suggestions, as I understood it, in the course of a rough-and-tumble in
which we were trying to get to a point where we could make a contract
to obtain these rights we were afraid we would need in order to carry
on our purpose. That is a little unfortunately expressed.
^-Supra, p. 455 et 3eq.
452 CONCENTRATION OF ECONOMIC POWER
Mr. Abnold. Would it be correct to say, to summarize your state-
ment, that they were, of course, in your organization primarily inter-
ested solely in making; money, but they always lost out in favor of
the more humanitarian policy?
Mr. Parham. Oh, I wouldn't say that.
Mr. Arnold. Generally, I will say.
Mr. Parham. No; I wouldn't say that. Mr. Smith testified yester-
day, and I agree with him, we are not a charitable organization.
Mr. Arnold. The question was argumentative, so I won't ask you
to answer it.
Mr. Cox. Two cfuestions have been raised by the committee which I
s'hould like to ask a question about, if I may. In response to Senator
King's and Senator Borah's questions I got the impression that you
^ere suggesting that insofar as this fencing-in process is carried on. it
is carried on as a part of a competitive contest between people in the
same line of business.
Mr. Parham. I think that is what it usually is, if you ai^ speaking
of it generally; yes. Each fellow is trying to get the biggest place
In the sun.
Mr. Cox. Is that the situation today with respect to your company
so far as it carries on the fencing-in process ?
Mr. Parham. Insofar as you say we are carrying it on. I don't like
the word the way you use it, but nevertheless what we are doing is
trying to maintain our position at the top of the pile so that we can
pass on to our liceijsees better machinery, keep them right up to snuff,
and incidentally make money for ourselves.
Mr. Cox. You are in the business of developing and perfecting
glass-making machinery, obtaining patents on that, and licensing
peonle under the patents; is that correct?
Mr. Parham. We are in that business and in the business of servic-
mf! and repairing. We give advice about other machinery.
Mr. Cox. Take the business of develdfung experimental work for
obtaining patents on class-making machinery and licensing under
those patents, what other companies are in that who are your com-
petitors ?
Mr. Parham. My competitors may be. first of all. the builders of
the Owens suction machine, I mean the more improved machine. As
I told vou before, the old patents are out.
Mr. Cox. That is the Owens Co.
Mr. Parham. If vou are speaking of the feeding and forming end.
I think Mr. Peiler has prepared a list for you of certain people that
make forminjr machines and supply them to the trade. There is
quite a list of them, some seven or eight people;
Mr. Cox. What about feeding machines? "\Ylio makes those nnd
supplies them to the trade?
Mr. Parham. T think most of the poo]->le that make the stream
fepd now make them for themselves^ — -the people thnt use them. I
am not certain of that. T think all of those matters arc on those lists
that you asked Mr. Peiler to prepare.
Mr. Cox. I wasn't aware we had asked for that.
Mr. Parham. You asked for a list of those competing machines
and competing processes.
CONCENTRATION OF ECONOMIC POWER 463
Mr. Cox. Is there anyone else who is in the business in this country
today, that you are in? '
Mr. Parham. Do you mean in the whole business or in the busi-
ness as to tanks, in the business as to things separate ? There are a
number of people in tanks.
Mr. Cox. Take first the whole business.
Mr. Parham. I think that several of the larger glass companies
•carry on the complete line of development. The Hazel-Atlas Glass
Co. and the Owens Co., I understand, have very extensive experi-
ments and development work done in connection with their own
business and their own machines and their own processes. Now, in-
dividually, if you get down to the question of tanks, I would say we
are not a competitor yet. We have had a lot of ideas. We haven't
licensed anj' tanks of our own yet. We hope we are going to have a
better one in the near future, and there are a number of people that
make those. It is quite a competitive field.
Mr. Cox. You haven't done much in the tank field ?
Mr. Parham. We have done a lot of cutting and trying over the
last 7 years ; it has cost a lot of money, but we haven't got any money
back.
Mr. Cox. You haven't started the commercial exploitation?
Mr. Parham. No ; that isn't out commercially yet.
On the question of lehrs, there are, I think, some 8 or 10''companies
that are making lehrs of one kind or another.
Mr. Cox. They are making them under your patents?
Mr. Parham. There are two companies that have made them under
our patents. One of them is not making them under our patents now.
There are a number that are making lehrs outside of our patents.
There is a company we have alleged infringed our patents, and
we have a recent holding of the court of appeals that they did in-
fringe our patents. There are other companies that are making kinds
of lehrs that differ from ours and are not covered by our patents and
which are still used.
Mr. Cox. I want to come back, INIr. Parham, to a question I asked
in the first place, which is whether there is any other company in the
country today which is engaged in the business of licensing feeding
and forming machines?
Mr. Parham. I don't know whether I can fully answer that ques-
tion. There may be a licensing of the suction machinery, which I
understand you are classifying as a feeder and which I do not classify
as a feeder.
Mr. Cox. But you feel you can't answer that question?
Mr. Parham. No ; I think Mr. Peiler can answer all those questions
for you just like that, and I can't.
Mr. Cox. I will leave that matter^ because we are going to develop
some testim.ony about these people by other witnesses.
I have one other matter, and tlien t will be through.
You spoke in reply to a question by Senator King about the inter-
est which the owner of the application in the Patent Office feels in
getting the patent out as rapidly as he can, so that he will have
patent protection. Take the situation such as the one you described
this morning, where the same man has two patent applications in
454 CONCENTRATION OP ECONOMIC POWER
the Patent Office, one covering substantially the same machines but
one narrower in scope than the other.. That incentive doesn't exist
to the same extent there, does it?
Mr. Paeham. I can conceive of the case, certainly, where a man
might wish to delay a broad application if he has two going on, but
it is not always to an applicant's advantage to delay. Frequently
it is more to his disadvantage. I am speaking generally. There are
times when the art takes a new turn and goes off and leaves him
before his patent ever gets out. He is foolish to delay in a case
like that. There are other cases in which the cream is taken off
his invention by somebody else during the period he is in the Patent
Office. Now, there is the other side of the picture. If His monopoly
starts later, he may pick up the most profitable period of use of that
invention. You can't tell which it is going to be, because you can't
tell when the next invention, is corning out.
Mr. Cox. If he gets his narrow patent first and his broad patent
later, that may be an economic advantage to him.
Mr. Paeham. It may be ; yes, sir.
Mr. Cox. I think I have finished with Mr. Parham.
The Chairman. Mr. Parham, you, may be excused. We thank you
very nmch.
(The witness was excused.)
The Chairman. Call the next witness please.
]Mr. Cox. .In view of the nature of some tA Mr. Parham's testimony,
I should like to call a witness whose testimony will not take more
than 5 minutes- — Mr. McAllister.
The Chairman. Mr. McAllister, do you solemnly swear the testi-
mony you are about to give in this proceeding will be the truth, the
whole truth, and nothing but flie trutji, so help you God?
Mr. McAllister. I do.
TESTIMONY OF E. W. McCAILISTER, PITTSBUEGH, PA.
Mr. Cox. Give the reporter your name and address.
Mr. McCallister. E. W. McCallister, Pittsburgh, Pa., and I am a
lawyer.
Mr. Cox. Will you tell us now what your qualifications are, par-
ticularly with respeot to patent law?
Mr. McCallister. I am a graduate engineer ; I am also a graduate
of Cincinnati Law School. I practiced law in Cincinnati, and spe-
cialized ill patents. In all my law practice I have always specialized
in patent, trade-mark, and allied lines. I spent a number of years
with the Westinghouse Co. at East Pittsburgh, and for tlie last 20
years I have been practicing general patent law in the city of
Pittsburgh.
Mr. Cox. Have you had any experience with patents relating to
glass machinery, Mr. McCallister, and if so, will you tell us briefly
what it is?
Mr. McCallister. Yes ; I have represented a number of defendants
in the litigations that you have heard of this morning. ' I was in one
of the earliest glass cases brought by the Hartford-Fairmont Co. at
that time against the United States Glass Co., and I have also been
counsel and of counsel in other cases.
CONCENTRATION OF ECONOMIC POWER 465
Mr. Cox. Now I am going to show you two of the patents which
we discussed this morning ; the one, patent 572, which we referred to
as the heated hood patent; and the other, 571, which I think we
i-ef erred to as the Steimer patent; and I ask you whether you have
any familiarity with those patents, whether you have had any experi-
ence in connection with them, and if so. if. you will tell us what it is,
very briefly.
Mr. McCallister. Yes; some jears ago and before these applica-
tions matured into patents, I assisted the then solicitor in the Patent
Office in the attempt to avoid having the Commissioner issue these
patents. You have heard of the suit this morning under 4,915^ I
helped the Commissioner, or, rather, the Solicitor of the Patent Office,
in that case, in an effort to resist the outcome of the case.
The Chairman. By that, you mean the issuance of the patent ?
Mr. McCallister. The issuance of the patent ; yes, sir.
Mr. Cox. Now, Mr. McCallister, will you look at claim 5 of the
claim of the Steimer patent, read it into the record, and tell us
briefly as you can what, in your opinion, is the scope of that claim
of the patent so far as it applies to the glass-making machines ?
Mr. McCallister. I am reading from Steimer patent 2,073,571,
which issued March 9, 1937. Claim 5 reads as follows :
The method of forming masses of molten glass that comprises causing glass
to flow from a parent body through an opening, causing successiAe portions of
the glass, as they emerge from said opening, to hang freely below the opening,
and then detaching the said successive portions of glass before they are received
in any receptacle.
This is a broader claim than any that had theretofore issued to
the Hartford-Empire Co. or their predecessor, the Hartford-Fair-
mont Co. In my opinion, it broadly defines the procedure of sus-
pended gob feeding, or, as it is sometimes called, suspended charge
feeding; that is, the procedure of making mold charges which is
carried forward by the Hartford-Empire feeders here under consider-
ation. It is of such scope that it involves also producing mold charges
where the molten glass flows through an opening and is cut into
mold charges while still in suspension.
Mr. Cox. Well now, will you look at claim 30 of the so-called
heated hood patent and- do the same for that, Mr. McCallister?
Mr. McCallister. By heated hood patent I assume you mean Peiler
patent 2,073,572, which issued March 9, 1937. Claim 30 of that patent
reads as follows:
The method of delivering gathers of fused glass from a melting furnace,
melting container, or the like through a subpaerged outlet thereof, said method
comprising the steps of maintaining the temperature of glass to be fed through
the outlet adequately low to preclude the direct formation of a freely flowing
glass current and to maintain such a state of viscosity in the glass that a
volume of glass roughly corresponding to the gather to be delivered, collected
by the outlet' of the melting furnace, container or the like, is allowed to hang
down aiid adapted to be cut off before such gather breaks off or continues flow-
ing, and severing of such gather by mechanical shears closed to cut through the
glass below and out of smearing relation with the outlet while said gather hangs
down and before it continues flowing.
Claim 30 that I have just read is also a very broad claim. It is
addressed to a procedure involved by the Hartford-Empire feeders
here under consideration, and in my opinion is fundamental insofar as
455 CONCENTRATION OF ECONOMIC POWER
that procedure is concerned. It is addressed to a little different angle
of the procedure than is defined by claim 5, of Steimer, in that it
involves temperature maintenance of the molten glass during the feed-
ing operation, and it also specifically involves the use of mechanical
shears for accomplishing the severance of the molten stream of glass in
the mold charges while such glass is suspended from a glass-sub-
merged orifice.
Senator King. I understand what you have just read is your own;
language.
Mj\ McCallister. Yes. I should have said "end of quotation."
Mr. Cox. Mr. McCallister, taking those two claims together, I
wonder if you would state shortly for us what is your opinion as to
the scope of those patents, so far as they apply to the machines in use
today.
Mr. McCallister. Well, these two claims, whether they are con-
trasted or whether they are taken together, are very broad claims.
You noticed the claim 30, that I read, involves no implement ex-
tending into or above the glass. This claim is, therefore, broad
enough to co\'er, I believe, a form of feeding which has been re-
ferred to as the old "flow" feed, provided the cutting into mold
charges is accomplfshed by shears located, of course, below the
orifice.
Mr. Cox. Mr, McCallister, it was testified to this morning that that
flow-feed method of feMing glass was in use in some places com-
mercially. Do you know whether in any of the places where it is
in use shears are close enough to the orifice so that that method falls
within tlie claims that you naA'e mentioned?
Mr. McCallister, Yes; I have seen it operating at Ball Bros.,
and I am quite sure the claim would cover that procedure.
Mr. Cox. I have finished with Mr. McCallister.
Kepresentative Sumners. Mr. McCallister, what are you reading
from ?
]Mr. McCallister. I read from the patents first, and then I read
from my own notes, because I knew what I was going to be asked.
The Chairman. You dfiscribod the Steimer patent first, did you
not? That was the patent tlrat was issued in 1927 or '28?
Mr. McCallister. In 1937, on an.ap})lication which was filed in
1910.
The Chairman. It was issued in 1937; the application was filed
in 1910. It appears to be a very basic patent.
Mr. McCallister. In my opinion it is, sir ; yes.
The Chairman. Well, was the method there described in this pat-
ent of 1937 used in the industry prior to the issuance of the patent?
Mr. McCallister. Oh, yes;
The Chairman. For how long a period?
Mr. McCALLisraR. To my own knowledge, 17 years.
The Chairman. By whom was it used ?
Mr. McCallister. " This United States Glass ease that I spoke of
was predicated on juct such a use by the United States Glass Co.
The Chairman. By Av'hom else was it used?
Mr. McCallister. Well, the Berno^'-Bond Co., which was sued at
that time. They were using a feeder which oi)erated within the broad
terms defined by the claim which I read from the Steimer patent.
The Cii.viR^rAN. Bv whom is it used now?
CONCENTRATION OF ECONOMIC POWER 467
Mr. McCaixister. I believe all glass manufacturers, aiid particu-
larly those making the so-called containers that have been discussed
here.
The Chairman. But under license now from Hartford-Empire?
Mr. McCallister. So I understand, sir ; yes.
Representative Sumners. May I ask a question? You say this,
process was used 17 years before the patent was issued to which you
refer. The people who were using the process', were the;y^using that
under a prior patent ?
Mr. McCallister. No, Your Honor; I don't like to be pedagogical,,
but I think from what I have heard there has been a little misunder-
standing here
Representative Sumxers (interposing). That is what I am trying
to get straightened out. Somebody was using this patent 17 years —
I mean, using the process 17 years before the patent was issued, if I
understood your statement.
Mr. McCallister. Yes; that is right.
Representative Sumners. Now, tlie people who were using the
process 17 yeai-s before the patent was issued, wei-e they operating
under a patent ?
Mr. McCallister. They may have been. The United States Glass,
which was my client
Representative Sumners (interposing). Now, you don't know
whether they were or not.
Mr. McCallister. If you will just give me a chance, I will answer
you. The United States Glass, who was my client, were operating
under a patent. They were operating under a so-called Miller patent.
It involved these same operations accomplished by a plunger, and
it also employed what was called a blow back.
Representative Sumners. I know, but you are a patent man, and
I am not. What I want to know is, AVere the people operating under
a patent wlio were iising the process? Can't you answer?
Mr. McCallister. I have answered; yes.
Representative Sumners. Now, then, were they precluded by the
later patent to continue to use the process that they had been using
17 years before?
Mr. McCallister. They would be subject to suit if that is what
you mean by precluding.
Representative Sumners. I mean a successful suit. I know any-
body can sue. you, but I mean a successful suit.
Mr. McCallister. You are asking me to pass upon the validity of
the claim I have just read to you?
Representative Suininers. I am just hoping you can help us; I am
not asking you to do anything.
]\Ir. McCallister. The only answer I can give you, sir, is this : That
these claims give an apparently broad protection to the Hartford-
Empire Co.
Representative Sumners. I understood that.
Mr. McCallister. The courts will determine as to whether or not
that protection is proper protection by determining whether or not
the claims that I have read to you are valid claims.
Representative Sumners. May I ask you another question, if you
don't mind. Were the people who were operating under this process
468 CONCENTRATION OF ECONOMIC POWER
17 years before the issuance of the patent sued for any reason ? Were
suits brought against them or did they quit using the old process?
What happened, when the new patent was issued ?
Mr. McCallister. When it was issued in 1937 all the people that
were then operating, except the three noted on that chart and one
other — the United States Glass should also be included with the three
on the right hand of that chart [indicating] ^ — were all licensees
under the Hartford-Empire Co. The United States Glass Co. is inci-
dentally still operating even in the face of these two patents from
which I have read.
Kepresentative Sumners. Thank you, sir.
Senator King. I understand there is a controversy between the
company which you represent as a lawyer and the Hartford-Empire
Co., and your company was defeated.
Mr. McCallister. No, sir ; that is one of the cases that was won by
the defendant.
- Senator King. Well, Mere you operating under this patent — was
your client operating under the patent or under any patent? If so,
to Avhom was it issued?
Mr. IMcCallistee. May I make a suggestion ?
Senator King. No; answer that question. Was your client oper-
ating under a patent?
Mr. McCallister. The United States Glass Co., as I answered just
a minute ago, was operating under a so-called jNliller patent which
covered a niacliine, and I think also a procedure, for forming sus-
pended mold gobs under the action of a reciprocating plunger and
what I ha\'e termed a blow back.
Senator King. Tb.en tliere was a conlroversy between your com-
pany and the Hartford Co., you contending th&t they vv-ere infring-
ing the Miller patent, or they contending that you were infringing
their patent?
Mr. ^IcCallister. Yes; the IMUler patent never came into the con-
troversy.
Senator King. I am not interested in that controversy ; I am only
trying to find out whether there was a controversy between your
company and the Hartford-Empire Co.
Mr. McCallister. Well, there was this
Senator King (interposing). Was there that controversy?
Mr. McCallister. Certainly there was the suit.
Senator King. Now, why were you interested in going to the
Solicitor? Why were you interested, and did you think that it was
ethical— I am not making any comment one way or the other — in
going to the Solicitor of the Patent Office and trying to prevail upon
him not to issue a patent or to approve of an application?
Mr. McCallister. Well, you misunderstood me absolutely and en-
tirely, sir. Let me explain that again — —
Senator King (interposing). Did you go to him?
Mr. McCallister. Yes, yes; but that was long after the United
States Gla><s Co. case. The United States Glass Suit was filed and
tried in 1920 and 1921.
Senator Kjng. Well, what was it that you were trying to prevent
the Solicitor from approving?
Mr; McCallister. If you will just wait a minute
1 See "Exhibit No. 113," appendix, p. 762.
CONCENTRATION OF ECONOMIC POWER 469
Senator King (interposing). What was it? Yon can answer that.
Was it an application for a patent and, if so, by whom ?
Mr. McCallister. The Hartford-Empire Co. had sued the Com-
missioner under 4915 to compel him to issue the two patents to which
I have referred. Now, of course, the records of all suits in the Fed-
eral courts become public property.
Senator King (interposing). Oh, we are all familiar with that.
Mr. McCallister. And that is how I knew about it, and in an
attempt to protect a client at that time against the issuance of what
I believed to be improper patents, I asked — I think his name was —
Hostetter if I could give him any help in connection with briefing
his case before the Supreme Court of the District. He gladly ac-
cepted my help and I briefed the case for him.
Senator King (interposing). I am not interested in that. I am
just trying to find out what the controversy was and did the courts
finally determine the validity of a patent. Eeference was made by
one of the witnesses today or yesterday that the case went to the
circuit court of appeals here and that overruled the district court
and affirmed the validity of the patent. Is that the patent to whicli
you are referring ?
Mr. McCallister. Yes, your Honor; but the court did not confirm
the validity of the patent. That was a case of 4915 against the
Commissioner and— —
Senator King (interposing). Requiring the Commissioner to issue
the patent ?
Mr. McCallister. Yes, sir; that is it, and these two patents re-
sulted.
Senator King. So there is a controversy between you as a lawyer
and the lawyer of the other company as to who had priority under
these patents ?
Mr. McCallister. No ; I have no controversy with anybody as to
who has priority.
Senator King. Well, you claim the priority, do you, for your com-
pany?
Mr. McCallister. No; I do not. We were contending that the
Peiler — in the briefs that I wrote and in the controversy that you
refer to between this Commissioner of Patents and the Hartford-
Empire Co., the Patent Office had already held that the basic claims,
those that I have read to you, were not patentable claims. This suit
was to compel the commissioner to issue the patent with those claims
in it. Now I was taking the side of the Commissioner and the Patent
Office and I were agreeing that they were not patentable claims, but
I had no controversy as between a client of mine and the Hartford-
Empire Co.
Senator King. As I understand it, there is no controversy between
you and your client and the Hartford Co.
Mr. McCallister. No.
Senator King. You are all harmonious ?
Mr. McCallister. Well, I suppose I can't answer that "yes." That
is a pretty big word because there very few of us that are harmonious
with anybody else.
Senator King. Are you here for the purpose of indicating that the
Hartford Co. has not infringed upon your client and here in its
defense or in its favor or what?
124491— 39— pt. 2 15
470 CONCENTRATION OF ECONOMIC POWER
Mr. Cox. I feel in favor to the witness I should make a preliminary
answer to that question. The primary reason he is here is we sub-
penaed him and he came under legal pressure.
Mr. McCaluster. I might also add that they had a lot of my let-
ters, and if I hadn't testified this way they would have read to me out
of my letters. [Laughter.]
Senator King. That is all.
The Chairman. Have you finished with the witness?
Mr. Cox. Yes. I think I should say in relation to the statement
that the witness made in respect to the chart,^ it is our understanding
that the United States Glass Co., which he said should be up there,
does not now produce glass containers.
Mr. McCallister. Maybe not; just tumblers and pressed ware,
Mr. Cox. And that is the reason why that company is not on that
chart.
Senator Borah. I want to ask the witness a question. I think you
need not return. You have been in the patent practice a long time.
Wliat do you understand by the term "fencing in" ? Have you ever
indulged in it?
Mr. McCallister. I think patent lawyers have used that term for
a number of years. I don't mean to say there is any definite signifi-
cance to the term. I myself have always thought of it as building
a paling fence around an invention. Now, I think of an invention as
an entity, and an improvement is also an invention — it is an entity.
If I have an invention of any sort, to fence in that invention I or my
colleagues try to figure out as many ways of accomplishing the same
or substantially the same result, and then we patent those ways, and as
a result we have, instead of one patent, a number all bearing on the
same subject matter, and we call that building a paling fence around
it or, as you have termed it, fencing in.
Senator Borah. In other words, if you have a patent, you under-
take to surround that by other inventions, as nearly as practical, so
as to confine it within a certain limited area.
Mr. McCallister. Well, I wouldn't say confine it, but so as to make
your protection of the general idea as broad as possible. You see, when
you are talking or thinking of building a paling fence around some-
thing or fencing it in, you are thinking of confining, yes; but the
patent attorney's idea is to get as many patents on the general idea
as he can for the purpose of widening out the scope of his patent
protection. Is that clear?
Senator Borah. I understood what it meant to fence m cattle and
horses, and so on, and I assumed that you were trying to limit the
operation of a particular patent by patenting other ideas as near to
it as you could get them without infringing.
Mr. McCallister. That would not be my idea, sir, and very often,
and I think most often, the patent attorney who is working for a client
that can afford to take out a number of patents is merely thinking of
the scope of the protection that he can get. Now, he may have nobody
else's invention in mind ; he may know of no one else's invention, and
in 99 cases out of 100 that would be the case.
Senator Borah. But I am speaking now of a person who wants to
deal with another person who has a patent. They have spoken here
1 See "Exhibit No. 113," appendix, p. 762.
CONCENTRATION OF ECONOMIC POWER 471
about fencing in this or that patent belonging to someone else than
those who are doing the fencing.
Mr. McCallistek. The term could be used in that way. I never so
used it. But under those circumstances you would undoubtedly have
to know the subject matter of the adversely owned patent, and then
you, yourself, and those colleagues who have inventive turns of mind,
would direct their energies, their inventive energies, if you can con-
sider invention as an energy — they would direct their inventive ener-
gies toward that particular thing covered by the adversely owned
patent, with the hope of building patents around it, and therefore
overlaying or at least overlapping such field of invention as the
adverse owner of the patent might also think of.
Representative Sumners. He couldn't expand?
Mr. McCalljster. No; you are trying to prevent his expansion by
really foreseeing the field that he would expand into, and covering that
field. It is just exactly. Senator, as if we were staking out claims
around a gold mine. Now you hurry out to the productive claim and
you stake out claims around that gold mine, and in that way prevent
the owner of the productive claim from expanding to the adjacent
claims.
Senator Borah. I understand that now, but I want to read the
statement here to which I was referring when I asked the question in
the first instance. It says that the main purpose of securing patents
is this : ^
In taking out patents we have three main purposes : ( a ) To cover the actual
machines vrhich we are putting out and prevent duplication of them. The great
bulk of our income results from patents. Between a feeder protected by patents
and one not so protected there is the cash difference between one ordinary
manufacturing profit of say $1,500, and a royalty return of at least $30,000
over 8 years; (b) to block the development of machines which migtit be con-
structed by others for the same purpose as our machines, using alterative means.
Now the fencing-in process comes in there, doesn't it?
Mr. McCallister. That would be what I just referred to, staking
out your claims around the productive mine with the idea of blocking
expansion of the mine owner or, from the standpoint of a patent, it
seems to me that you would be trying to foresee the possible expan-
sion or the possible improvements that might be made on the invention
covered by the adversely owned patent, and in that way block the
adverse owner of the patent from taking out improvement patents.
Senator Borah (reading) : ^
(c) To secure patents on possible improvements of competing machines so as
to fence in those and prevent their reaching an improved stage.
Mr. McCallister. Of course, I think that would be an impossible
thing for anybody to do. I have heard that letter read several times
this morning, and I think the man who wrote it must have been an
optimist, because we can't — nobody can foresee what somebody else is
going to invent. Now, he can only try to out-invent the other man,
but that is all he can do.
Senator Borah. It says "to secure patents on possible improve-
ments of competing machines." Now, if you have in mind a com-
peting machine, you undertake to determine what are the possible
improvements which may be made to limit the operation of that
machine.
1 See "Exhibit No. 125," appendix, p. 771, at p. 780.
Ibid
472 CONCENTRATION OF ECONOMIC POWER
Mr. McCallister. Not to limit ; no ; but you try to foresee what the
possible improvements on that machine would be to make it a better
commercial machine, and then you try to patent those imnrovements
in order to prevent the owner of the patent from getting atents on
those improvements.
Senator Borah. From developing his patent?
Mr. McCallister. Yes; from developing his patent. Now, as I
say, the man who wrote that letter must have- been an optimist, be-
cause it would be just hit or miss. No two men invent the same way.
just as no two men think the same way.
Mr. Arnold. Could you put it this way : This fencing in process
can be used as a defense against others, as was testified in the Gen-
eral Motors hearing, or as an oifense by which you attack others, as
there has at least been some testimony here, and that the defensive
method is a whole lot easier to defend as a matter of public policy
than the offensive method.
Mr. McCaluster. Well, I don't know that public policy enters into
it. I think that every patent lawyer in this country has been guilty
at one time or another of trying to do both.
Mr. Arnold. I w^asn't speaking of patent lawyers, because I con-
ceive they must represent their cKents and give the best benefit of the
law as is. I was only speaking of the public policy of the law itself.
Mr. McCallister. Well, you know we live in a world of live and
let live, and I think that each one of us is trying to build up the best
that w^e can get for ourselves and for our clients. Therefore, I don't
see public policy in it at all.
Mr. Arnold. You don't see a difference in policy between the auto-
mobile situation in patents and the Hartford-Empire situation?
Mr. McCaixister. Both are operating under the law.
Mr. Arnold. But isn't there a difference in policy ?
Mr. McCallister. There is a difference in policy, that is very clear,
but they are both operating under the law and I don't see why I
should be called upon to make a distinction of the morals in the
situation.
Mr. Arnold. I wasn't calling on you for morals; it was simply a
question of economic policy. However, I withdraw the question.
The Chairman. As I understand the description which you have
given us, Mr. McCallister, it may be stated briefly this w\ay : Just as a
typical case, let us assume there are two machines, A and B, which
perform generally the same function and serve generally the same
purpose but are covered by different patents.
The owner of A, under the system which has been described here
from the beginning of these hearings, and the owner of B, each
undertakes to study the effect not only of his ow^n patent but of tlie
competing patent, and if his research laboratory is sufficiently able
and his lawyers are sufficiently able he will endeavor to study the im-
provements which the other competing .patents are susceptible of,
and secure the patents upon them in order to prevent the holder of
the other patent from expanding his business without first dealing
or obtaining a license from the other man.
Mr. McCallister. That is exactly rig;ht. I tried to state tlie same
thing.
The Chairman. And that is the process of fencing in.
CONCENTRATION OF ECONOMIC POWER 473
Mr, McCali<istee. That is one process of fencing in. The other
is to fence in your ovrn invention.
The Chairman. And that was the process of fencing in Avhich was
described in this very clear memorandum from which Senator Borah
was reading, and it has been practiced in industry generally.
Mr. McCallister. Oh, I think so.
Representative Sumnebs. One reason you fence your own in is to
keep the other fellow from running a fence first.
Mr. McCallister. It is just exactly like staking out a lot of claims
in a gold field.
The Ch^urman. Or fencing in a water hole on a ranch.
Mr. McCallister. That's right.
Senator King. Senator O'Mahoney referred to A and B, each of
whom had a patent, and each of ^hom tried to fence in by adopting
eiich protective measures as he deemed proper, by finding what im-
provements, through his research laboratory, he might feel neces-.
sary. Suppose there is not a B, but there is just an A. Would not
the A try to fence in by watching the development of the art and
the development of the industry, and if he thought that his machine,
though perhaps it was the best aiid most effective of any in opera-
tion, might some day be Superseded by some other company not
then in existence, would he not try to make improvements upon the
machine which he had ?
Mr. McCallister. Oh, yes; and that is done every day.
Senator King. Are any of the great inventions and those who have
them satisfied with them and regard the inventions as perfect even
though they have no comj^etition, or are they trying to improve
them, anticipating that through technological development, the arts
and sciences, some day somebody will beat them to the market and
get the mai < t -Away from them unless they make irnproved equip-
ment^
Mr. McCallister. I spoke of being with the Westinghouse Co. At
the time I was there the steam turbme was being developed. There
were two lines of development, one by the Westinghouse and one by
the General Electric Co., and each of those companies was doing just
exactly this fencing in from both standpoints. We were trying to
broaden out our own protection and we were trying to prevent de-
velopments along the line of Oie other turbine by patenting what we
thought would be the probable commercial developments of the other
turbine.
Senator Borah. Did you ever represent a client who had been
fenced in?
Mr. McCallister. I shouldn't wonder.
The Chairman. Are there any other questions ?
Thank you, Mr. McCallister.
(The witness was excused.)
Will you call your next witness, Mr. Cox ?
Mr. Cox. Mr. Levis.
Tlie Chairman. Do you solemnly swear t:hat tlie testimony you are
about to give in this proceeding shall be the truth, the whole truth
and nothing but the truth, so help you God ?
Mr. Levis. Yes, sir.
474 CONCENTRATION OF ECONOMIC POWER
TESTIMONY OF WILLIAM E. LEVIS, PRESIDENT, OWENS-ILLINOIS
GLASS CO., TOLEDO, OHIO
Mr. Cox. Mr, Levis, will you give the reporter your name, address,
and occupation ?
Mr. Levis. William E. Levis. I am president of the Owens-Illinois
Glass Co. My address is 2104 Parkwood, Toledo, Ohio.
Mr. Cox. Will you tell us now briefly, Mr. Levis, what the nature
of the business of the Owens-Illinois Glass Co. is ?
THE LARGEST GLASS PRODUCER IN THE WORLD
Mr. Lem:s. The Owens-Illinois Glass Co. manufactures glass con-
tainers, tumblers, tableware through a subsidiary, the Libbey Glass
Co:; it manufactures tin containers througli the Owens-Illinois Can
Co.; it manufactures glass brick and insulators through a division
called the Insulux Products Division. It also has a subsidiary on the
Pacific Coast called the Owens-Illinois Pacific Coast Co., which manu-
factures glass containers west of the Rocky Mountains.
Mr. Cox. Considering glass containers for the moment, Mr. Levis,
does it manufacture a full line of glass containers? By that I mean
JEill different types.
Mr. Levis. It manufactures all known types.
Mr. Cox, Just give us some idea of the size of your company, Mr.
Levis. Can you tell us what the balance-sheet assets were as of the
close of business in the end of 1937?
Mr. Levis. I have it for October 31 of this year. I jotted it down.
The Chairman. How long have you been president of the
company ?
Mr. Levis. Since January 1930, sir.
Mr. Cox. I am going into some of that history.
Mr. Levis, The capital and surplus, net worth, of the companv on
October 31 of this year was $63,866,000.
Mr. Cox, Your company, as compared with other companies, is
rathet a large producer of glass containers, isn't it, Mr, Levis?
Mr. Levis. Yes, sir,
Mr, Cox, In fact it is the largest, and produces about 38 or 39
percent of the total ?
Mr. Levis, That is about 35 percent for the company east of the
mountains,
Mr. Cox, What figure would we get if we put in the company
west of the mountains?
Mr, Levis. About 38,
Mr,, Cox. If you take the two of them together?
Mr. Levis. If you don't mind, I will treat them as one.
Mr. Cox. I would prefer to have .^tou do that, Mr. Levis, if you will.
It distributes the glass containers nationally, of course, and sells
them everywhere?
Mr. Levis. Yes,
Mr. Cox. Mr, Levis, I don't know whether you have seen the chart
that we had marked yesterday.^
Mr. Levis. I have a copy of that.
Senator King. Might I ask a question? I would like to know
something about your assets. You have given the sum of $63,000,000.
What part of that consists of patents, and what value do you at-
1 "Exhibit No. 113," appendix, p. 762.
CONCENTRATION OF ECONOMIC POWER 475
tribute to them? What part to bricks and mortar, to machinery and
plant, and what part to cash or liquid assets?
Mr. Levis. Our current assets, sir, are about $30,000,000 net; that
is, assets after current liabilities, and we have about $79,000,000 in
plants with a reserve for depreciation to bring that down to about
$48,000,000 net. Our patents are on at their actual cost, I think
three or four hundred thousand dollars, which was the cost of se-
curing the patents.
Senator King. Your liabilities are $30,000,000, did you say?
Mr. Levis. No; our net assets.
Mr. Cox. Referring again to the chart introduced yesterday in
evidence as "Exhibit No. 113," ^ I call your attention to those plants
which are shown at the end of the lines radiating from the Owens-
Illinois Glass Co. and I ask you if those are plants which your
company operates. Is that correct?
Mr. Levis. They are plants which we own, but not plants which
we operate.
Mr. Cox. There are some there you aren't operating, but you own
them all?
Mr. Levis. Yes, sir.
Mr. Cox. Which ones aren't operating?
Mr. Levis. Going across the top backwards, that is, that is down the
curve counterclockwise, we operate the plant at Los Angeles, at
Oakland; the Evansville plant hasn't operated in 10 years.
Senator King. Is it obsolete ?
Mr. Levis. Yes, sir. The Terre Haute plant hasn't operated in the
last 2 or 3 years.
Senator King. Obsolete ?
Mr. Levis. No, sir; it is equipped and could be operated if there
were sufficient business. The Chicago Heights plant is a very small
operation, a hand-blown plant.
Mr. Cox, Per fume, bottles?
Mr. Levis. Gadgets for bending machines and items "of that type.
The Glassboro plant was abandoned in '29 and is now a cap factory,
and operating as such. The plant makes plastic and metal closures.
The San Francisco plant was abandoned when the Oakland plant was
put into operation.
Senator Kjng. Is that obsolete?
Mr. Levis. It has been torn down, sir, and the equipment has been
moved to a new factory in Oakland.
The Clarksburg plant hasn't operated for 15 years.
Mr. Cox. Is that obsolete?
Mr. Levis. Yes, sir ; it is dismantled.
This is accurate insofar as our published data are concerned. I
don't consider the chart in error.
~ Mr. Cox. I am glad to get that statement so we can see what the
situation is in each one of those.
Mr. Levis. I might volunteer in connection with your discussion
today — it means nothing to me— that in a number of these plants
we have no Hartford equipment. In other words, if you use. those
.as contrasted to the other side of the page, we have no Hartford
equipment in several of these plants. I made these data : of the 17
1 Appendix, p. 762.
476 CONCENTRATION OF ECONOMIC POWER
plants, 11 are operative and 6 of them have Hartford equipment.
The others are suction plants, solely.
Representative Sumners. Who controls those suction patents?
Mr. Levis. Our company did, sir, but I don't think there is much
left to them.
Mr. Cox. Since that question has been raised, I might ask you
when the basic patent, if you recall, on suction machines ran out.
Ml'. Levis. I would say we had no very important patents after
1929.
Mr. Cox. There are some patents existing today which cover im-
provements on machines ; is that right ?
Mr. Levis. Yes, sir; and one rather basic patent on the stationary
pot.
Mr. Cox. The pot revolves now ?
Mr. Levis. The pot has always revolved, and we hoped that it
would stop, but we haven't yet made jjb stop.
Mr. Cox. You can't work that patent?
Mr. Levis. We are working it on small machines, but not on large
ones.
Senator King. Did you say 11 of those plants you operated, and 6
used the Hartford equipment?
Mr. Levis. And then only partially, sir. At our Alton plant, the
largest in the world, we have 10 furnaces and only 2 of them have
Hartford equipment, and at our Huntington plant there are only
2 out of 5, and at Streator there is only 1 out of 11, so that in 6 plants
a very small proportion of our equipment is Hartford equipment.
Representative Reece. Mr. Chairman, may I ask if the require-
ments with reference to licensing and royalties have restrained you
from using the Hartford equipment in your plants?
Mr. Levis. No, sir ; we believe our own development is superior to
the Hartford's.
Mr. Cox. Of course, you do have a license under the Hartford ?
Mr. Levis. We can make anything, but we only use it for a few
things.
Mr. Cox. It is an unrestricted license, but you use it only for a few
things. That has always been true?
Mr. Levis. It has always been true.
Mr. Cox. Does your company own any stock, Mr. Levis, in any
other glass-producing company?
Mr. Levis. No, sir.
Mr. Cox. Does it own any stock in companies which use glass
containers ?
Mr. Levis. No, sir. Its only stock investment is the stock invest-
ment made about 1932 in the Container Corporation, and some stock
in the Pennsylvania Sand Co. which was taken in the sale of some
sand properties.
" Mr. Cox. That brings me, really, Mr. Levis, to my next question,
which is this: Would you describe your company as an integrated
company? Do you own your raw materials, and do you manufac-
ture a great many other things besides containers which you use in
connection with the sale of your materials?
Mr. Levis. We tried to do that, but now we manufacture very
little of our raw materials. We sold our paper plant and sold our
sand operation and received shares. We have jointly with the Libby-
CONCENTRATION OF ECONOMIC POWER 477
Owens-Ford Glass Co. a half interest in about 150,000 acres of ^as
property, leases, and in fee, in and around Charleston, W. Va., which
supplies the gas for their plate-glass factory at Charleston and our
bottle factory at Charleston, and we likewise have gas properties at
Clarion, Pa., which we acquired from the former owners of that
company.
Mr. Cox. You said a moment ago you made caps now for bottles,
and you still make boxes to pack them in ?
]\Ir. Levis. Yes ; we are probably the largest manufacturer of boxes.
Mr. Cox. You not only make those for your own use but sell them
to others?
Mr. Levis. Yes.
Mr. Cox. But you regard your business as primarily that of manu-
facturing and selling glass, is that correct ?
Mr. Levis. Yes^-a very small proportion of our corrugated manu-
facture for outside sales.
Senator King. What do you mean "corrugated?"
Mr. Levis. Corrugated packages for the packaging of our glass
containers.
Mr. Cox. Mr. Levis, I would like to have you tell us a little bit
about your personal history in the glass business. You began with
the Illinois Glass Co., didn't you? Is that your first connection?
Mr. Levis. Yes.
Mr. Cox. How long were you with the Illinois Glass Co. when it
existed as a glass-producing company ?
Mr. Levis. Well, I guess I was always with them. My grandfather
started it 70 years ago. My family were always in it, and I started
to work when I finished school in '13, and I was president of the
company a sl*ort time after I came out of the Army.
Mr. Cox. 'About 1920?
Mr. Levis. I i^uess '22.
Mr. Cox. From that point on you were president of the company,
and that was a manufacturing company?
Mr. Levis. Solely manufacturing and selling.
Mr. Cox. And solely glass containers ?
Mr. Levis. No; it sold everything, but w^e used to say from the
formula to the sales ; we sold labels and cartons and everything except
what the user of the bottle put in it.
Mr. Cox. You didn't make or sell any glass-making machinery?
Mr. Levis. No, sir.. We licensed machines from others.
Mr. Cox. You were a licensee at one time both of the old Owens
Bottle Co. and of Hartford-Empire?
Mr. Levis. We were one of the original licensees of Owens, and in
1919 we took a Hartford, license..
Mr. Cox. That company was merged in 1929 wath the Owens Bottle
Co.; is that correct?
Mr. Levis. Well, its assets were acquired by the Owens Co.
Mr. Cox. It continued to exist after that for some time?
Mr. Levis. Yes.
Mr. Cox. Wliat function would you say it served after that?
Mr. Levis. It was more or less an investment trust or a holding
company who had investments in the glass industry, in the busmesses
of customers.
^•jrg CONCENTRATION OF ECONOMIC POWER
Mr. Cox. Was the stock of the Illinois Glass Co. widely or closely
held?
Mr, Levis. There were 135 stockholders. They were practically all
members of my family or employees of the company.
Mr. Cox. I see. Would you object if from time to time in the
course of my examination I should refer to that group as the Levia
group ?^
Mr. Levis. No, sir.
Mr. Cox. It may make it easier for both of us if we treat it that
way.
That company, as you said, continued as a sort of investment trust
until a rather recent period, 2 or 3 years ago.
Mr. Levis. No; in August of this year the directors submitted to
the shareholders a plan of liquidation. The liquidation took place in
September.
Mr. Cox. And the company has been dissolved?
Mr. Levis. Liquidated in kind. All of the stock distributed to the
stockholders in kind. That is the Illinois Glass Co., which sold its
assets to Owens and became Owens-Illinois.
Mr. Cox. So that the business which was formerly carried on in
the manufacture of glass, the business of the Illinois Glass Co., from
1929 on, has been carried on by Owens-Illinois, is that it?
Mr. Levis. Yes. As I always thought of it, we sold our brick and
mortar and inventory and accounts receivable for securities in an-
other company. Instead of having those, we owned securities in the
company that had them.
Mr. Cox. What position did you first occupy in Owens-Illinois ?
Mr. Levis. I was vice president and general manager from April.
Their shareholders' meetmg, I think, was about the 21st of April
1929, in which their shareholders ratified the purchase; and then in
January, between the 10th and 15th, I was elected president.
Mr. Cox. You said a moment ago that the stockholdings which
were held by the Illinois Glass Co. included stocks in other glass-
producing companies. Did I understand you correctly?
Mr. LE\^s. And in various businesses that we were familiar with
and thought would be*good investments.
Mr. Cox. And those securities have now, you said, been distributed
in kind to the stockholders, and are largely held by what we called
a moment ago the Levis group ?
Mr. Levis. Yes.
Mr, Cox. Would you tell us one or two of the glass-producing
companies in which the Levis group now has stockholders?
Mr. Levis. They owned shares in the Owens-Illinois Glass Co., the
Hazel-Atlas Glass Co., the Anchor Hocking Glass Corporation, the
Thatcher Manufacturing Co., and the Kimble Glass Co.
Mr. Cox. What is the Kimble Glass Co., Mr. Levis?
Mr. Levis. The Kimble Glass Co. is a small company in New Jer-
sey who manufactures lime glass tubing and cane and rod for Bureau
of Standards specification apparatus, for homeopathic vials, towel
bars, and various items of that kind.
Mr. Cox. There was no stock in Hartford-Empire Co, OMned by th<
Illinois Glass Co.?"
CONCENTRATION OF ECONOMIC POWER 479
Mr. Levis. At no time, so far as I can recall, was anyone associated
with the Owens-Illinois Co. in any principal capacity, nor were the
Illinois Co. ever shareholders in Hartford.
Mr. Cox. You would make the same statement with respect to each
member of the group you talked about as the Levis group?
Mr. Levis. I wouldn't know the minor people, but I know my
uncles and father had no stock.
Mr. Cox. The immediate family had no stock?
Mr. Levis. That is right.
Mr. Cox. Would both of those answers apply so far as any stock-
holdings in the Corning Glass Works is concerned?
Mr. Levis. Yes, sir.
Mr. Cox. Can you tell us how much of the outstanding stock of the
Kimble Glass Co. the Levis group holds?
Mr. Levis. About 62 percent.
Mr. Cox. Do you know whether the Kimbte Glass Co. owns any
stock in the Corning Glass Works ?
Mr. Levis. I know they don't own any stock in any company other
than one small subsidiary. I think they did have at one time some
other stocks, but they have none now.
Mr. Cox. You don't think at that time they had any stock in
Corning Glass Works?
Mr. Levis. I know they never owned any in Corning.
, Mr. Cox. Or Hartford?
Mr. Levis. That is right.
Mr. Cox. Now take the Thatcher Manufacturing Corporation ; that
is a company engaged in manufacturing glass containers, largely
milk bottles, isn't it ?
Mr. Levis. Yes; and they have a subsidiary, the Olean Glass Co.,
which manufactures a general line.
Mr. Cox. Could you tell us what percentage of the outstanding
stock of that company the Levis group owned ?
Mr. Levis. They owned less than 10 percent
Mr. Cox. Can you give us a limit in the other direction, too ?
Mr. Levis. They owned 10,000 shares of the stock at the maximum,
and certain individuals owned shares personally. I explained to
the S. E. C. in detail, gave them a lengthy report on the whole trans-
action, and they ruled it was less than 10 percent, even though they
knew of the Kimble interests.
Mr. Cox. When you add the Kimble interests, is it more than
10 percent ?
Mr. Levis. There was no title to it so far as the same people were
concerned. Remotely, we might have gathered everybody together.
Mr. Cox. You mean the only chain there was the fact that one
and the same group owned 60 percent of the Kimble, and Kimble
owned a small percent ?
Mr. Levis. No; a corporation in which certain individuals are
interested own 60 percent of Kimble.
Mr. Cox. And Kimble owned a certain percentage of Thatcher?
Mr. Levis. Yes.
Mr. Cox. Does the Levis group now have a representative on the
boaid of directors of the Thatcher Co. ?
480 CONCENTRATION OF ECONOMIC POWER
f idered our representative ' ""S*** '>''™ ^^"^ ™"-
^J|rpe|enilitfL:e1Llt " f!^i
JMr. JLevis. Yes, sir.
had a large block of^hlres .nd tl ev IT^^' ""''^ •'''?' ^°^^"^ "^'
thought he M'oiild be fine ' ^ '"'^ "'^' ^P^"^«^^' ^"^ ^e
terest in anything sh ^g^^ded, anyone as representing our in-
lettJ^iin wni'chT^/st" '""''' '" ^'" ^^^""^^^^ ^'-^ "-^ - ^^e
with „s regarding the sitnatlon which he has fn mind ^""^ ^^^^ ^" ^^"^^^^
.^.^/ex^^^ecfctrtS^^^^^^
representative. ' '^"" -^ <=fO^ t think I am their
f>"onsCo.ontheThaSerboard" ^''P-'esentative of the
. ho has teen a great p^l'Sl'™ Srg..eltta^; e^T '^ ""^ ""^«'
.>|;n|?;JtCur;a'«t sSt*^/''-- '^ ^'^ ^« ^-eeP
J.^:fcs%rai%is^s--i.r.^^^^^^^
that relationship id airefflct^u™ tl^ ''"^^ ^^^ ^^ink
the two companies? ^ ^"^^^"Po» the competitive practices between
Mr. Levis. I know it didn't.
Mr." Levis.^No '^""^ '' "'"^^ ^" difference?
ha^t^^n o^XlLrdT^^^' ^'"^^ ^^ ^^^^^ - >-- -"^^^ ^^-e if he
CONCENTRATION OF ECONOMIC POWER 481
Mr. Levis. Yes.
Mr. Cox. When he kept in contact with you regarding a situation,
did that contact ever involve reporting as to practices and policies
with respect to sale of containers ?
Mr. Levis. It didn't influence it, sir. I mean my relationship with
Mr. Mandeville would have been just as pleasant had I not been
a shareholder, as being one.
Mr. Cox. You and everyone in the glass business, manufacturing
glass containers, are rather friendly, is that it?
Mr. Levis. They have alwaj^s been nice to me.
Mr. .Cox. You have all grown up together, haven't you ?
Mr. Levis. I don't know hardly anyone in the industry whom I
haven't known of for at least three generations.
Mr. Cox. Could you tell us now what directorships you hold in
other companies besides Owens-Illinois ?
Mr. Levis. I am a director of National Distillers and of the W. & A.
Gilbey & Co., Ltd., which is the Gilbey American company; of the
Weco Products Co. which manufacturers and sells Dr. West tooth
bruslies, powder puffs, handkerchiefs and items of that kind; the
Kimble Glass Company; the Owens-Illinois Co.; the Owens Staple-
Tied Brush Co.
Mr. Cox. Were you ever a director of Hazel-Atlas?
Mr. Levis. Yes.
Mr. Cox. When did you resign?
Mr. Levis. It must have been in the spring of 1934. When I filled
out this paper, sir, it shows that I was a director in '33 and was not
a director in '36.' As near as I can determine from asking the Hazel
people, I must have been on about a year, from the fall of 1933
until the fall of 1934.
Mr. Cox. If I should suggest to you it was about sometime in the
spring of 1935 that you resigned, would that refresh your recollec-
tion?
Mr. Levis. I wasn't on in '36 and I was on in '33 when I prepared
this schedule.
Mr. Cox. Of course, Hazel-Atlas is a competitor of yours, isn't it ?
Mr. Levis. Oh, Owens, not mine.
Mr. Cox. Can you tell us why you resigned from the board of Hazel-
Atlas? Was there any particular set of circumstances?
' Mr. Levis. I don't know. I went on the board, because the Illinois
"Glass Co.- made a large investment in the company and I thought I
could contribute something in help and I figured that I had con-
tributed that and I resigned.
Mr. Cox. Does the Owens-Illinois Co. or the Levis group, either
one, now have a representative on the board of Hazel-Atlas?
Mr. Levis. No; only about insofar as William IVlandeville might
figure that he represents our interests. I have always voted the Illi-
nois interest for Mr. Quay.
Mr. Cox. I am going to hand you a letter ^ now, dated April 1,
1935, another letter which you wrote to your uncle, and I call your
attention to the last paragraph in that letter and ask you if it refreshes
your recollection.
Mr. Levis. It does. I didn't recall it until I saw this.
Subsequently introduced as "Exhibit No. 126," infra, p. 482.
482 CONCENTRATION OF ECONOMIC POWER
St^ofrM""^ •''^ "T^"^ publicity given Owens-Illinois and our investment in
have a cliance to discuss just what should be done in this connection
Would it be correct for me to suggest, Mr. Levis, that Mr. Quay
^^a^e^^tSe^^^^ i
}Zr y.^Lr'"''^!''' *^' ^!^^^"^ ^^'^ ^^^d ^'^re sent to Mr. Quay He
either had the right to use it or not. That was optional wi?h hL.
thfboard?* d«"t regard him as representing your interests on
Mr. Levis. No more than I think I represent the Libbev estate in-
terests, and you think I am all right. ^
Mr. Co^- You suggest that this choice of language in the letter is _J
perhaps a little unfortunate, Mr. Levis. You didn't really mean that fl
^l\r'' ^ ^/1" ' T^'^' '^^'" '^^' "^y l^tt^rs I ^^rote^to my uncle I
were not my uncle's and my private property. ^ U
Mr. Cox. Well now, I will ask you this question, which is a simi- H
kr ques ion to he one I asked you about Thatche'r a moment ago 1
yo" thmk whatever the relationship is between you or your com
E'ed'in i^v "' ^7."^' ^"^ ''''■■ Q^^^' *h«^ that^elatioSp 1 as '
Mr. Levis. No, sir.
tio^ship did J"e"xisa" "''"'"'^ '"™ ^'•■"'""^'^ i"^' ''^ '* *'-^ -'-
ba^s^' ■^"'' **""■ ^"^"^ wouldn't give me credit on that kind of a
t^'i,.^ w/ ""'i''' "*?'> ''*'"= ""^l"""- marked and admitted.
incSd'^'the^p'PL'^onTTs'Sr'' "^^"'"■^ '^"- '''" ^^^ '^
twSrth:two''"com^a^:sV''° *"''" *""> '^"^ I^- """P^""™ "-
Mr. Levis. Always.
adStedTaT:.hMl'"" '"'^■""™' "''^ '''"^•- "''^ "^ '""'^^'^ -<»
to Us-teinTad'^itn?""''" ""'"'""' "•^i"''"""" "^'" I "-'' object
The Chairman I mean on the part of the members of the com
mittee; do you wish to offer an objection? "'^^^^^^ ot the com-
Mr. Levis. I do object to its being admitted. It is a personal
letter to my uncle ^d isn't a business document of any kind^
The Chairman You just testified with respect to it.^
Mr. Levis. That I wrote it; yes.
Tlie (^iiAiijMAN. You acknowledged it.
CONCENTRATION OF ECONOMIC POWER 483
Mr. Levis. Yes.
The Chairman. And it was read into the record at that time.
Mr. Levis. You can treat it as you want to, sir; but I don't like
to see it admitted. I don't think it has anything to do with the
Temporary National Economic Committee.
Mr. Cox. Perhaps, Mr. Levis — I want you to understand what we
are trying to do here, at least what the Department is trying to do,
so you won't think we are taking unfair advantage of you. We
went into this and your stockholdings in other glass companies and
your directorships in other glass companies in relation to this patent
problem merely because it has been our experience in enforcing the
antitrust laws that one of the most difficult and at the same time
nebulous problems we have is the effect on competitive conditions of
that kind of interlocking relationship. Now, I have no desire, I
am sure you don't, to argue out this afternoon the implications of
those interlocking relationships, but we want to put this letter in the
record, and the other material in the record, with respect to that kind
of a situation so that the committee and the Department, for the pur-
pose of whatever conclusions either the Department or the committee
wishes to draw, will be in a position to see what the situation is in
the industry with respect to those relationships. I want to make
that perfectly clear to the witness.
The Chairman. I think that is clear to the witness. It certainly
is to the committee.
Mr. Levis. Yes. My only theory is that he has something over
8,000 of my letters, and this one is quite remote and not to the point,
and many of the' other ones which are to the point that would be
helpful would never occur.
Mr. Cox, I will make an offer to you. If you will select some of
those you would like to have me put in, I will, without giving you
a blanket guarantee, seriously consider putting them in tor you.
I would like to ask you one or two more questions about this, Mr.
Levis, because I think it has some importance. Why did you feel
that that criticism was of sufficient force that you should withdraw
ftom the board of Hazel- Atlas? Let me start with this question.
You, I assume, were perfectly assured in your own. mind when you
were on the board that that relationship didn't violate the anti-
trust laws and had no effect on competitive practices. Wouldn't
that be an accurate statement?
Mr. Levis. I felt that way or I wouldn't have gone on.
Mr. Cox, Then why did you feel in view of the criticism that you
should withdraw?
Mr, Levis. Because I couldn't find out who wrote the Senator. I
had every member of the glass-container industry sign a petition
voluntarily at a meeting, saying that they didn't ,write it and they
weren't in sympathy with what was said, and at the same time we
were members of the Code Authority under the N. R. A. Code. We
resigned from that and from officership of the association because we
thought that if anonymous letters were read into the record and no
one could find out who' wrote them, that we had better pull into our
shell.
Mr. Cox. You felt perhaps that your company was frequently
subject to that kind of criticism?
434 CONCENTRATION OP ECONOMIC POWER
Mr. Levis. Yes, we were a publicly owned company, and I had
committed some act which met with some disrepute which I didn't
presume was entitled to that "criticism.
Mr. Cox. I think that clears up what I wanted to ask you about.
I want to ask you some questions now about the contract between
your company and the Hartford-Empire Co. — I say your company;
I mean the Owens-Illinois Co. — that was made in 1924. You know
the contract I am speaking of, I assume.
Mr. Levis. No; I know of it but I wasn't in the company when
the contract was made.
Mr. Cox. Were you, as an official of the Illinois Glass Co., at all
familiar with the negotiations which preceded that contract?
Mr. Levis. Yes ; wo had presumed that we had rights under Hart-
ford's patents, if acquired by Owens, and we were also a licensee of
Hartford and in exchange for revision of our Hartford license we
waived any rights that AVe had and became licensees of both com-
panies.
Mr. Cox. Can you recollect now, Mr. Levis, what the attitude of
your company was at that time — the Illinois Glass Co. I am speaking
of now — with respect to this proposed contract between Hartford
and the Owens Bottle Co. ?
Mr. Levis. I don't know that I could. If you have anything that
would refresh my recollection, I might.
Mr. Cox. I will read something to you which was not a statement
which you made but a statement which was made by Mr. Ashcraft
who, I understand, was at that time representing the Illinois Glass
Co., is that right ?
Mr. Levis. He was the counsel and a 'director.
Mr. Cox. I will now read to you a statement contained in a letter
written by Mr. V. M. Dorsey to Mr-. Alexander D. Falck, at Corning
Glass Works, dated November 5, 1921, which purports to report some-
thing that Mr. Ashcraft said, and I just ask you whether it refreshes
your recollection. This statement is:
At a recent conference witli Owens, Mr. Ashcraft of the Illinois Co., who is a
licensee under the Owens Co. for certain rights, and under the Hartford Co.
"for other rights, vigorously put up to Owens the necessity of closing out these
pirates, ancj that this could probably only and certainly be best done by a coop-
eration with the Hartford-Fairmont Co., the appeal being made to the Owens
Co. in the capacity of manufacturers of glassware and as manufacturers of
machines.
I think I started to read the quotation. a little too early in the para-
graph. I am going to read the first sentence in the paragraph to you
now, and then I will give it to you to look at. The first sentence
reads :
The Illinois Co., as manufacturers of glassware, are disturbed at the market
conditions created by the fact that a number of irresponsible manufacturers
have installed the pirate machine, namely, Howard, Miller, etc.
Then the paragraph proceeds as I previously read it. Will you
look at that ?
Mr. Levis. I was operating the factory in Alton in 1921.
Mr. Cox. It doesn't refresh your recollection ?
Mr. Levis. It wasn't until 1924 that I had anything to do with
the patent situation. Mr. Ashcraft handled it prior to that time, with
one of my uncles who since died.
CONCENTRATION OF ECONOMIC POWER 485
Mr. Cox. Did you prior to that time have anything to do with
competitve conditions in the industry ?
Mr. Levis. Only to make better bottles and more of theni.
Mr. Cox. You didn't have anything to do with the marketing end
of it?
Mr. Levis. No, sir ; I was an operating man.
Mr. Cox. You were engaged just in manufacturing containers?
Mr. Levis. That's right.
Mr. Cox. And this doesn't refresh your recollection at all as to the-
circumstances?
Mr. Levis. I might say by way of passing that the Illinois Co.'s
policy always was to take a license under any patent that anybody
thought they had, on the theory that it was cheaper to do that than
it was to spend the time necessary to fool with the patent situation.
We always pride ourselves that we had never paid a patent lawyer
a dollar in the 70 years of existence. We paid the fee as our con-
tribution to tlie fellow who worked on that end of it. We made prod-
ucts and sold them. We weren't interested in patents. That was my
bringing up.
Mr. Cox. So you were engaged in manufacturing at that time under
licenses which you took from other people ?
Mr. Levis. It didn't make any difference who it was, if he said he
had one we didn't even read it. We just signed it and paid it.
Mr. Cox. Do you recall wliether in the light of what I read to you
your company was ever disturbed by the fact that while it was paying^
under these licenses which they sometimes didn't even read, there
were other manufacturers in the field who were using other machinery
and not paying any other royalties ?
Mr. Levis. We always complained about that, like we did about
local taxes and anything else we didn't like.
Mr. Cox. You didn't like that kind of competition ?
Mr. Levis. No.
Mr. Cox. In other words, if you were going to pay royalties, you_
wanted everybody else to pay royalties ?
Mr, Levis. Or else tell us the patents weren't any good and quit
talking about it.
Mr. Cox. But you wanted to be able to compete with those people
on an even basis ?
Mr. Levis. Yes, sir; except those who licensed like Owens, who-
spent money to develop.
Mr. Cox. But so far as other manufacturers were .concerned, who-
weren't development concerns, you didn't want them manufacturing-
and selling bottles and not paying a royalty fee for the machinery
while you were doing that?
Mr, Levis. More or less the other way around. We didn't want
Hartford to collect a fee from us and not collect it from someone else
if their patent was any good.
Mr. Cox, And of course to these pirate feeders, the pirate machines
referred to in the letter, they were machines which people were using-
without the permission of Hartford Empire or of Owens.
Mr. Levis. I think Hartford had a patent structure they were tid-
ing to develop there. There was a lot of development in the art and
it took a lot of litigation in the Patent Office to perfect it. We wanted.
124491 — 33 — pt. 2 16
486 CONCENTRATION OF ECONOMIC POWER
that hurried. We either stopped paying and everybody did or we
paid and everybody else did.
Mr, Cox. You wanted it hurried so you wouldn't have to continue
to compete with people manufacturing on what those people called
the pirate machine?
Mr. Levis. I don't think that was the point. Tlie point was, we
didn't want to pay because the patent was good, and have another
man not pay if it was good. We didn't care what the other fellow
did, because when we took the license under Owens and Hartford we
knew that they were more economical devices than the pirate devices,
or else we would have taken a pirate device. We had the option of
■doing either, and we sought to take what we thought was best, and
theirs was in our opinion better.
Mr. Cox. I want to be sure I understand you about that. Your
feelijig was rather a feeling that in fair plav and equity you should
be treated the same as anybody else by Hartford-Empire, rather than
a feeling that the payment of royalties by you, when you were com-
peting with someone who didn't pay royalties, subjected you to a
^competitive disadvantage?
Mr. Levis. I don't think the competitive disadvantage was there.
Mr. Cox. You don't think that had any part in the picture at all ?
Mr. Levis. The other device was sufficiently inefficient that we
always believed you could pay the royalty and have the efficient
device and still have lower costs than if you used the pirate device.-
Mr. Cox. So you weren't objecting to the pirate device?
Mr. Levis. We were interested in manufacturing under the patent.
Mr. Cox. That has been the attitude not only of the Illinois Glass
Co. but also of Owens-Illinois ?
Mr. Levis. I inherited a situation when I went into Owens-Illinois,,
but my general thinking on it hasn't been very different.
Mr. Cox. Do you feel that you are sufficiently familiar with the
general provisions of that '24 contract so that you can discuss them
in a general way? It was in existence when you came in Owens-
Illinois in '29, was it not?
Mr. Levis. I am not familiar with it. I would much prefer that
Mr. Williams or Mr. Belknap talk on it, because-they had all tcdo
with it.
Mr. Cox. There are two or three questions about the policy that
I want to ask you in the light of the provisions of that agreement,
and I wonder if you know enough about the provisions of the agree-
ment so that I can ask the questions. I vnll try with some questions
and if you don't know you must tell me, and I will try with someone
else.
Under that agreement, Owens and certain subsidiaries gave to
Hartford-Empire an exclusive, divisible, assignable license under
patent rights for feeding glass which didn't relate to the suction
method. Would you agree with that?
Mr. Levis. I couldn't ^ve you the theory of that accurately, Mr.
Cox. There were some situations in there. All I know is that when
I came into the picture in '29 there was so much time consumed in
conferring on these kinds of things and so little time consumed in
really running the business that I did, over a period of 4 or 5 years,
the best I could to get shed of all this patent stuff, to get down to
making bottles and selling them.
CONCENTRATION OF ECONOMIC POWER 487
Mr. Cox. You found if you would, you could spend all your time
on it.
Mr. Le^^s. And that, after having Owens lose money.
We took in a lot of royalty; a lot of it came from themselves, a
lot of it they paid out, and when they got all through our schedule
showed we took in $12,000,000 from outsiders in 18 years and paid
out $5,000,000 in 17 years, and we had about $7,000,000 left, and our
development expense in that same period was $7,400,000, so we were
out $400,000 for fooling with it. I couldn't see that there was any-
thing in that and when we stopped it in '35 and sold out our whole
interest — true, the prohibition amendment had something to do with
our success — we did better than we ever did.
Mr. Cox. You made more money after that contract was termi-
nated?
Mr. Levis. Yes; we knew how to do that. We didn't know how
to do patent things.
Mr. Cox. You wouldn't suggest that thei net result of that contract
which Hartford-Empire made in 1924 was that your company lost
money, would you
Mrl Le^^s. Well
Mr. Cox (interposing), I think we are talking about different
things. You are talking about the whole of your patent activities.
I am talking about the contract, considered apart from the rest of
your patent activities.
Mr. Levis. I don't believe I have compiled that figure, but in 1931'
I recall the first interest I had in the matter was to address a letter
to Hartford waiving any right that Owens might have had to have
restricted their licensees, which I had been informed had never
been exercised: and in 1932 in a desire to get out of this situation
and to clean up all that was behind it, we entered into an amend-
ment agreement in which we gave up a sixth of the income from any
patents that might have related to the '24 agreement, and as quickly
after that as it could be an-anged, which was in 1935, we sold all
of our interest in the situation and we tried to carry our policy which,
despite what the memorandas we might have written ourselves and
the discussions we might have had, we felt that a patent is not a
grant of right to use the thing; it is only a grant to exclude other
people from using the same thing. And we have today 536 patents
just so that we won't be excluded from doing something that some-
b)ody else has a patent on.
Mr. Cox. That is very interesting, Mr. Levis. In other words, as
far as you are concerned, the only significance of the patent is it is
s. thing someone" else may get and prevent you from doing something
you may wish to do in connection with your manufacture.
Mr. Levis. If we want to go in and build suction machines and put
any kind of gadget on them, we want to do it without reading a pile
of patent papers to find out whether or not we can do it.
Mr. Cox. Would it be accurate to say you are not interested in
keeping others from using them; you are just interested in using
them in your own manufacture of glass ?
Mr. Levis. That is an accurate statement of how I feel. I don't
know what I might have said as trading talk on it.
Mr. Cox. I was just trying to develop the attitude you expressed a
moment ago.
488 CONCENTRATION OF ECONOMIC POWER
Mr. Chairman, I am about to go into this '24 contract. It is a
matter which will probably take a half an hour or so. I am pre-
pared to go along as long as the committee wishes, but if you wish
to arise at the usual time this would be a convenient break.
The Chairman. The members of the committee have a few other
duties to perform; and if there is no objection on the part of any
member of the committee, if no other questions are to be asked at the
moment, we will recess until tomorrow morning at 10 : 30.
(Whereupon, at 4 p. m,, a recess was taken until Wednesday, De-
cember 14, 1938, at 10:30 a. m.)
INVESTIGATION OF CONCENTRATION OF ECONOMIC POWER
WEDNESDAY, DECEMBER 14, 1938
United States Senate,
Temporary Natiotsjal Economic Committee,
Washington^ D. G.
The committee met at 10:45 a. m., pursuant to adjournment on
Tuesday, December 13, 1938, in the Caucus Room, Senate Office
Building, Senator Joseph C. O'Mahoney, presiding.
Present : Senators O'Mahone}'^ (chairman), Borah, and King;
Messrs. Henderson, Arnold, Patterson, Oliphant, Berge, and Thorp.
Present also : Department of Justice staff for Temporary National
Economic Committee study — counsel, H. B. Cox (Special Assistant to
the Attorney General) ; Joseph Borkin, Ernest Meyers, Charles L.
Terrel, Benedict Cottone, David Clarke, George Dession, Fowler Ham-
ilton, H. C. Engelbrecht, Victor H. Kramer, J. M. Henderson, Monroe
Karasik, Irving Glickfeld, Hyman Ritchin, Norman Bursler, and
Seymour Lewis; also chief counsel for Federal Trade Commission
Temporary National Economic Committee study, George W. Ayilliams.
The Chairman. The committee will please come to order.
Mr. Cox, are you ready to proceed? Is Mr. Levis to be on the
stand again this morning ?
Mr. Cox. Yes; Mr. Levis will be on the stand.
The Chairman. Have you brought an additional wdtness?
Mr. Cox. This is Mr. Williams, counsel for the company. I think
we might have him sworn ; he may not testify.
The Chairman. Mr. Williams, do you solemnly swear that the evi-
dence you are about .to give in this proceeding will be the truth, the
whole truth, and nothing but the truth, so help you God ?
Mr. Williams. I do.
Mr. Cox. Just give the reporter your name and address.
Mr. Williams. Lloyd T. Williams, 2025 ParkAvood Avenue, Toledo,
Ohio.
Mr. Cox. You are counsel for the Owens-Illinois?
Mr. Williams. Counsel for Owens-Illinois Glass Co.
TESTIMONY OF WILLIAM E. LEVIS, PRESIDENT, OWENS-ILLINOIS
GLASS CO., TOLEDO, OHIO— Kesumed
Mr. Cox. Mr. Levis, there are one or two loose ends in yesterday's
examination that I would like to go over before we go ahead. Yes-
terday when I was asking you about your directorships held in other
companies, I neglected to ask you whethei- you were ever a director
of the Lynch Co.
Mr. Le\^s. No^ sir.
Mr. Cox. You never were a director ?
Mr. Levis. No, sir.
4S9
490 CONCENTRATION OF ECONOMIC POWER
Mr, Cox. I also think it might be useful if you would tell me
whether, in speaking of the group of persons we described yesterday
as the Levis group, you included Mr. Boeschenstein.
Mr. Levis. I would have included him.
Mr. Cox. Yesterday you told us you were a director of the National
Distillers and of the Gilbey Co. Do you recall that ?
Mr. Levis. Yes, sir.
Mr. Cox. Both of those companies use bottles in their business?
Mr. Levis. Yes, sir.
Mr. Cox. Do they buy bottles from Owens-Illinois ?
Mr. Levis. Yes, sir.
Mr. Cox. I think I also neglected to ask you what percentage of
the total outstanding stock of Hazel-Atlas is owned by what we
describe as the Levis gi'oup. Can you give me a figure on that?
Mr. Levis. The Illinois Glass Co. owned, I think, a maximum of
22,000 shares. I may be wrong in that. It may have gone as high
as 25,000 but for the longest period of time the holding was 20,000
shares, and that was the amount we distributed in liquidation.
Mr. Cox. In the case of the Lynch Corporation, will you tell us how
many shares in that the Levis group held?
Mr. Levis. There was distributed in kind at the time of liquidation
4,500 shares.
Mr. Cox. I have a figure here which we obtained fi-om your com-
pany of about 6,000. I wonder if we could some time work out that
discrepancy. That is a figure as of today, based on the holdings of
members of the Levis group.
Mr. Levis. That probably is so. The Illinois Glass Co. was a stock-
holder of record of 4,500 shares, and I own some shares personally,
which, together, maybe, with the holding, might be 6,000 shares.
Mr. Cox. I am willing to check that.
Mr. Levis. I am willing that it stand as 6,000.
Mr. Cox. The exact figure I have is 6,644 shares.
Mr. Levis. That is probably correct.
Mr. Cox. Mr. Levis, I'd like to ask you some questions about the
testimony which you gave me in respect to the company's attitude
toward taking licenses on patents. As I understood, your testimony
yesterday was that the attitude, or your own attitude and that of the
Illinois Glass Co., was that all licensees of Hartford-Empire should
be treated in the same way. Is that correct ?
Mr. Levis. Would you make that a little clearer, Mr. Cox?
Mr. Cox. Well, I will put the question this way : It was your atti-
tude and the attitude of the Illinois Glass Co. that no licensee of
Hartford-Empire should receive preferential treatment over another
licensee.
Mr. Levis. We weren't concerned with anybody else's business, Mr.
Cox. As far as we were concerned, we had alwa^^s made bottles of
every description and we weren't gom^ to sit back and be throttled
by any licensing policy on the part of either Owens or Hartford. We
went out until we got enough devices licensed to make everything
that we had always made. What the other fellow did, that was his
business.
Mr. Cox. You then were not interested in whether you got the
same treatment from Hartford-Empire as a licensee that the other
licensees got?
CONCENTRATION OF ECONOMIC POWER 49 J
Mr. Levis. No ; we had a favored nation cla-use, tliat is, no one
could have anything more favorable than we could have.
Mr. Cox. And that was your attitude on that question?
Mr. Levis. It was the attitude on that or even the purchase of
supplies.
Mr. Cox. Was that the attitude of the Owens-Illinois Co. after you
became connected with that and acquired the assets of the Illinois
Glass Co.?
Mr. Levis. Well, as I said yesterday, to restate, I inherited a sit-
uation in Owens-Illinois which I didn't know very much about.
Mr. Cox. The thing you speak of inheriting, I presume, is the 1924
contract.^
Mr. Levis. Well, no ; a patent-licensing policy, the development or-
ganization and legal powers and applications, and things of that kind
which we didn't know anything about.
Mr. Cox. You didn't mean the 1924 contract ?
Mr. Levis. The 1924 contract I didn't know of, other than it was
in existence. I had never read it. That is when I went into Owens-
Illinois.
Mr. Cux. You feel today, I suppose, that your company should
get the same treatment from Hartford-Empire that any other licensee
gets; is that correct?
Mr. Levis. Yes.
Mr. Cox. You have been successful, you think, in getting that kind
of equitable treatment, Mr. Levis?
Mr. Levis. Yes, sir.
Mr. Cox. Now I want to develop very briefly some of the provi-
sions of that 1924 agreement ; in case you feel you can't answer the
question, perhaps Mr. Williams can. I am going to put the agree-
ment in the record ultimately ,2 but I would like to develop briefly
the character of -some of the provisions. Do you wish to have a
copy of the contract before you?
Mr. Williams.^ I have a copy here, Mr. Cox.
Senator King. Which contract is this?
Mr. Cox. This is a cross-licensing contract made in 1924 between
Owens-Illinois and Hartford -Empire. Under that contract it would
be accurate to say that the two companies exchanged licenses, Mr.
Williams?
Mr. Williams. Yes; each granted to the other a license under the
patents that they then had, or would acquire within the time stated,
limited, however, to feeders and feeder-fed forming machines.
Mr. Cox. The suction machine was excluded?
Mr. Williams. That is right.
Mr. Cox. Under that contract the Owens Co. was to pay certain
royalties to the Hartford Co.; is that correct?
Mi". Williams. They had a most-favored-nation clause that they
got as low royalties or as good royalties as anybody got, with one or
two exceptions.
Mr. Cox. One of those exceptions was the fact that they had the
use of 40 free units of machinery, did they not, or not to exceed 40
free units of machinery?
1 Entered later as "Exhibit No. 135," see infra, p. 534.
»Ibid.
» Lloyd T. Williams, ger^ral counsel, Owens-Illinois Glass Co.
492 CONCENTRATION OF ECONOMIC POWER
Mr. "WiLLiAiNis. Yes; although by the answer I meant with respect
to certain other concerns that might have lower rates.
Mr. Cox. I see, I beg your pardon, but that was an exception, at
least it was a limit, a qualification of the royalties I speak of, the 40
free units.
Mr, Williams. Yes.
Mr. Cox. That was in section 5 of the contract. Is that correct?
Mr. Williams. Yes.
Mr. Cox. And under the contract Hartford-Empire was to make
certain payments to Owens. Is that correct ?
Mr. WiLLiAiMS. Yes.
Mr. Cox. And would it be a correct summary of one of the provi-
sions as to those payments to say that Owens was to receive one-half
of Hartford's divisible income from ""
income was defined in the agreement^
Mr. Williams. Yes.
Mr. Cox. And divisible income was defined in the agreement as
including gross royalties, licensing fees in excess of cost, profits on
parts, damages collected in infringement suits, less the $000,000?
That is in section 1 if you would like to look at it, I think page 7 of
that contract. I hope you have followed this, Mr. Levis, because ]
want to ask you some questions about it.
Mr. Williams. Yes; there were five items. I think you mentioned
the five, that is, the income from licensed inventions.
There was the income derived from royalties ; license fees in excess
of cost of the manufacturing of licensed machines; profits on manu-
facturing, lease, or sale of machines or parts ; settlement for damages
and profits arising cut of infringements' of licensed inventions, and
other gross revemi'es with exceptions as provided.
Mr. Cox. That same contract provided in section 1 in certain cir-
cumstances for the joint purchase of patent rights owned by others;
is that correct?
Mr. Williams. No; not in section 1, 1 think.
Mr. Cox. Can you find that, Mr. Williams ?
Mr. Williams. It is not in section 1.
Mr, Cox. I think section 21, 1 beg your pardon.
Mr. Williams, I think that is coiTect; yes.
Mr. Cox, And in section 8 of the contract there was a provision
that each party should vigorously prosecute infringements of patents
owned or controlled by it, at its own expense.
Mr. Williams. Yes.
Mr. Cox, And in section 8 of the contract there was a provision
that if the parties couldn't agree as to the suits which were to be
brought, that disagreement was to be arbitrated. Is that correct?
Mr. Williams. Yes,
Mr, Cox. I wish 3'ou would look at section 22 of the contract, now,
Mr. Williams, and tell me if that section provided that Hartford could
not license anyone under the inventions which were covered in the
cross-licensing agreement by Ovrens, without Owens' consent, except
to existing licensees of Hartford for machines already installed or for
additional macliines, and to be used in the same fields covered by
Hartford's existing licenses, or to any legitimate manufacturer who
was defined as a glass manufacturer of good commercial and financial
".tJinding, who was not a commercial user of his own product, and the
CONCENTRATION OF ECONOMIC POWER 493
license was to be in his case for the same kind of ware which he made
1 year previous to the date of the contract. Is that an accurate para-
phrase of those provisions ?
Mr. Williams. Yes; except that in the first class which you men-
tioned, not only the lines of ware or fields of ware covered by existing
licenses but also that might be covered by outstanding contracts. That
limitation was taken out of the contract on February 2, 1931.^
Mr. Cox. I was going to ask you about that. Maybe we might run
through very briefly some of the subsequent changes in that contract.
I will suggest them to you and you tell me whether they are correct
in a general way.
In 1932 the Hartford-Owens license was changed from an exclusive
to a nonexclusive license. Is that correct ?
Mr. Williams. Yes ; among other changes.
Mr. Cox. Also certain other provisions were eliminated from the
contract, such as the provision as to suits and the joint acquisition
of rights.
iSIr. Williams. An entirely new contract was dravrn, and this 1924
contract was canceled.
Mr. Cox. And the new contract eliminated the provisions as to joint
acquisition of outside rights and the provision as to litigation.
Mr. Williams. I think that is correct.
Mr. Cox. And, of course, in a separate contract in 1932 Owens got
a license under certain suction patents of Hartford-Empire.^ Is that
correct ?
Mr. Williams. That is right.
Mr. Cox. Is that an exclusive or nonexclusive license?
Mr. Williams. I think it was nonexclusive, but I can look at it
and see.
Mr. Cox. That is my understanding. At the same time, the
right to use 40 free units was surrendered ?
' Mr. Williams. Yes.
Mr. Cox. By tlie way, when you speak of a unit in that connec-
tion, it means one feeding and one forming machine?
Mr. Williams. It was so defined.
]Mr. Cox. At the same time a change Avas made with respect to the
divisible income so that Hartford-Empire was entitled to deduct
$850,000 from its gross figure before dividing with Owens-Illinois.
Is that correct ?
INIr. Williams. Correct.
Mr. Cox. And was any otlier change made at tliat time with re-
spect— wasn't it at that time that the amount which Owens was to
receive was cut from one-half to one-third?
]\Ir. Williams. Correct.
Mr. Cox. So that between 1924 and 1932 Owens got one-half of
Hartford-Empire's divisible income, as to the agreement from 1932,
and until 1935 it received one-third.
Mr. Williams. That is correct.
Mr. Cox. In 1935 another series of contracts was instituted as a
result of which the right of Owens to receive any part of Hartford's
divisible income was surrendered?
Mr, Williams. That is right.
1 Entered later as "Exhibit No. 137." infra, p. 534.
a Entered later da "Exliiblt No. 139,".infra, p. 534.
"494 CONCENTRATION OF ECONOMIC POWER
Mr. Cox. And in coLsideration of the execution of those contracts
and in consideration of that surrender of that right, and perhaps
some other matters, Hartford paid Owens $2,500,000, approximately ?
Mr. Williams. Yes; payable in installments.
Mr. Cox. Payable in installments. Well, now, Mr. Levis, I'd like
to ask you some questions about that contract. In the first place, I
am going to show you a schedule of the payments made by Hart-
iord to you under that contract between 1924 and 1937, and the pay-
ments made by you to Hartford. This was given to us by Mr.
Martin. I ask ;you to identify those figures as being from your
record and as being substantially correct.
Mr. Levis. Yes, sir.
Mr. Cox. This schedule which I am shortly going to offer for the
record shows that between 1924 and 1937 you paid in royalties to
Hartford-Empire $3,962,921 ; you received "in return under the '24
contract from Hartford $4,815,093, so that there was a net return to
you under that contract of about $800,000. Is that correct ?
Mr. Levis. Yes, sir.
Mr. Cox. May I have this marked in evidence?
The Chairman. It may be marked and entered in the record.
(The schedule referred to was marked "Exhibit No. 127" and i3
included in the appendix^on p. 781.';
Mr. Cox. So at least on that contract, on that part of your patent
licensing business, you did make some money, didn't you?
Mr. Levis. Not after the developments nor the legal expense that
was involved. In fact, we never made any money, Mr. Cox. in our
business, in the whole of the patent situation or in a division of it.
Mr. Cox. I will put it this way: The net result of the payments
to and fro under that contract was that you ended the transaction
on the credit side of the ledger so far as those payments are con-
cerned.
Mr. Levis. Oh, yes; but I mean, we can't segregate each carload of
bottles and determine whether that is profitable or not. It is our
bottle business as a whole. Our patent business as a whole was tm-
profitable.
Mr. Cox. That is, taking the patent business in its entirety ?
Mr. Levis. This is unprofitable if, accountingwise, you would
charge against the income our <levelopment and legal expense.
Mr. Cox. Of course, this figure which I have read to you here
doesn't include the 2i/^ million dollars you received in 1935.
Mr. Levis. That was for the sale of patents, sir. •
Mr. Cox. Well, that wasn't a part of the consideration for that
payment
Mr. Levis (interposing). Wasn't royalty.
Mr. Cox. Wasn't that cancelation of your right to receive one-third
of the divisible income of Hartford-Empire ?
Mr. Levis. Well, it was for a settlement of everything from the
selling of our patents and the cleaning up of a lot
Mr. Cox (interposing). .Including the surrender of your right to
give up and receive.
Mr. Levis. But the 2i/o million dollars — —
Mr. Cox (interposing). You included that in determining whether
QT not you made a profit on your whole?
CONCENTRATION OF ECONOMIC POWER 495
Mr. Levis. The whole patent business ; yes.
Mr. Cox. Of course, between 1924 and 1932 you also had the free
use of up to 40 units of the Hartford-Empire machines?
Mr. Levis. So far as I know, it was never exercised.
Mr. Cox. Will you refresh your recollection on that, Mr. Levis,
because we have some documents from your file which would indicate
that it was used.
Mr. Levis. Mr. Williams said that the Owens Co., before I came in,
did have some free units.
Mr. Cox. We have a document which would indicate that in 1929,
just before you came in, they were using at least 15 of those units.
Would you think that was substantially correct ?
Mr. Williams. I couldn't tell you the number of them, Mr. Cox, but
I simply know there were free units.
Mr. Levis. I might point out just this, which I think explains it:
Under the provisions of the contracts, when Owens acquired the assets
of Illinois, Illinois feeder licenses could have been surrendered and
free licenses substituted for them up to 40, and we never felt that was
the proper thing to do.
Mr. Cox. Do you know if any of the free feeder units, to which you
were entitled under the contract, were used by Owens-Illinois between
1929 1
Mr. Levis (interposing). It was always my recollectiorf that none
were used ; that we always paid our part of the rate.
Mr. Cox. You think not one of those units
Mr. Le"\^s (interposing). I may be mistaken.
Mr. Cox. Will you check on that, Mr. Levis?
Mr. LE^^8. .1 will check on that.
Mr. Cox. You, on the other hand, Mr. Williams, are inclined to be-
lieve that at least up until 1929, with the 5-year interval there, some
of those free units were used by the Owens Bottle Co. ?
Mr. Williams. The Owens Bottle Co. did have free units. I can't
tell you just the period or just the number, but they did have some
free units.-
Mr. Cox. They did use them to manufacture bottles?
Mr. Williams. Yes.
Mr. Cox. Now, Mr. Levis, taking this contract in its entirety, let's
consider it for a minute. Under that contract ^
Senator King (interposing). Are you speaking of the 1924 or the
later one ?
Mr. Cox. I am speaking of the contract from 1924, first, to 1932.
Under that contract your company received one-half of the divisible
income of Hartford-Empire and also the use, if it cared to take
advantage of the opportunity, of these free units ?
Mr. Levis. Yes, sir.
Mr. Cox. DoVi't you think that provision in the contract gave the
Owens Co. a certain competitive advantage in the manufacture and
the sale of bottles ?
Mr. Levis. It would only be an opinion, sir, because I had noth-
ing to do with the negotiation, but my opinion always was that the
1 Mr. Levis later stated that 15 feeders were used under the free provision of the 1924
contract. See, infra, p. 517.
2 Ibid.
» Entered later as "Exhibit No. 135," infra, p. 534.
496 CONCENTRATION OF ECONOMIC POWER
Owens Co. had as valuable a feeder patent structure that was con-
tributed to the Hartford Co.'s patent picture as Hartford then had,
and that they were entitled to compensation . for their contribution,
and Mr. Williams might verify that.
Mr. WiLUAMS. That is right. When the contract was made in '24
Owens contributed patent rights by license that it had and which it
claimed dominated the .Hartford machine. Litigation had been
started and they were in for a free-for-all fight when this settlement
was made.
Mr. Cox. Will you give us the names of those patents, if you can?
Mr. Williams. The Bock patent, the Lott patent, and the Brook-
field patent are the ones I recall, and there were many others listed
in the schedules attached to the contract.
Mr. Cox. And it is true, is it not, when you spoke of litigation
you referred to the suit the Owens Co. had started against certain
users of the Hartford-Empire feeders?
Mr. Williams. Yes ; against one, I think.
Mr. Cox. So one of the circumstances which led to the making
of the 1924 contract, in your opinion, was the fact that the parties
had patents which appeared to cover, at least each asserted that the
patents covered machinery which accomplished the same result, and
they were both threatened with litigation as a result of that situa-
tion.
Mr. Williams. Yes; and if the claims of each were sustained in any
major part, the result would be that neither could make a substantial
or efficient feeder and each would be blocked by the other.
Mr. Cox. Each would be blocked by the other ?
Mr. Willi'ams. That is correct.
Mr. Cox. And as far as those companies were concerned, there
wouldn't be any patents on automatic feeders effective ?
Mr. Wn>LiAMS. Well, there would still be patents that each would
have,. but the difficulty came with the infringement that arose out
of the use of any specific mechanism that either would make.
Mr. Cox. The patent would be there, but it wouldn't be much good
as a patent because there would be an effective right to sue for
infringement ?
Mr. Williams. Well, either party could have sued anyone who
made a feeder that infringed his patent, so that the patents still had
their value. The difficulty arose in the use of any mechanism that
was covered in part or in whole by the patents of either
Mr, Cox. They might have been each suing each other ?
Mr. Williams. Yes.
Mr. Cox. Rather than face that situation, they made thf contract
and provided for the cross licensing?
Mr. Williams. That's right.
Mr. Cox. Well now, Mr. Levis, taking this provision providing for
the division of the income of the Hartford-Empire, wasn't, the effect
of that that the Owens Co. was getting a kind of rebate on all the
royalties paid by other licensees of Hartford-Empire?
.Mr. Levis. No; I don't think so, Mr. Cox. The Owens Co., back
in 1904, developed a patent structure and they received royalties
from many companies. They were in the royalty collecting and
piatent development game, just about like the Hartford people subse-
quently became. - "
CONCENTRATION OF ECONOMIC POWER 497
Mr. Cox. You mean they gave up that part of the business?
Mr. Levis. So far as they could have owned it in the licensing of
feeders to their existing licensees and others. In fact, I don't know
accurately, but it is my recollection that the Graham A. W. machine
was licensed to Coshocton in 1917, to Glenshaw in 1918, to Turner
in 1918, by the Owens Co., and that they were a feeder fed machine,
and they went on in the development of their art and •
Mr. Cox (interposing). Are t^rose the last licenses in point of time?
Mr. Levis. No. The 1932 liceiise to Hazel-Atlas in July, and the
October 31, 1935, to Hazel- At] as, of which you have copies
Mr. Cox (interposing). But aside from Hazel-Atlas, the three you
have named are the last licenses that have been issued.
Mr. Levis. Yes; that is our record.
Mr. Cox. Prior to that time most of your licenses had been issued
before 1914 and 1915?
Mr. Levis. Yes.
Mr. Cox. Now, if I understood your answer a moment ago, it was
in effect that the result of the 1924 contract really was that the Owens
Co. gave up the business of licensing under its patents which might
have provided some revenue for it, and turned that over to Hartford-
Empire to manage for them, and they went on conducting their
licensing in the suction field, extracting royalties from the Illinois
Co., of which you were then president.
Mr. Levis. They carried on tlie business in the suction field, and
the Hartford group carried it on in the feeder field and tliey got
part of the income from that that thej contributed to, and Hartford
had contributed nothing to the suctfon field, therefore didn't par-
ticipate.
Mr. Cox. As far as other business in patents is concerned, Owens'
last business in the suction-licensing field was in 1915.
INIr. Levis. The last license was 1918.
Mr. Cox. Most of them had been gi-anted before that, up to 1915,
Now,_ isn't it a fact, Mr. Levis, that under the provisions of the
division of income, every^ licensee who was paying royalty to Hart-
ford-Empire Avas in effect paying part of that royalty to you, to
your company?" I am speaking of the Owens Bottle Co. and not
the Owens-Illinois Co.
Mr. Levis. That is w^hat actually happened, Mr. Cox, but as a
matter of fact, as a bottle manufacturer I think but very few of
them ever thought of it as royalty. It was their contribution to
the development of the art, the furnishing of a service on the part of
Hartford which kept patent things straight and development things
straight, and they didn't have departments like Owens have, big
machine shops and patent linguists and patent draftsmen and solic-
itors, and all those things. They bought that for a fee to Hartford,
who gave them splendid service and put them in a position to become
better competitors in the industry- because they acquired that service
which made them better manufacturers.
Mr. Cox. Part of the fee they paid for th^,*. went to you, to your
company?
Mr. Levis. No, sir ; we contributed certain patents and development
and legal expense to them and they collected in the form of royalties
for us. We never thought of it as our putting up nothing and taking
in something. '■ ^ ^
498 CONCENTRATION OF ECONOMIC POWER
rr.S; £nHiS«;Sr i "-".;'=
Mr. Levis. Yes, sir
.o;^o^\^ To.&p:Src^J-^^^^^^^^^ i- to -
JNIr. Levis. I stated so yesterday. We bel ievprl fl.oj- „•
Mr' J^f ^^V^""" ^'""^'^ ^^^ t« c^ear "P who "you" is in this
maiiv years Yoii tliink „„,;„ f^^- ■ ^'''^s business for a good
the slai biisiness" «<'"'P''t«>on .s a good thing, don't yol?, in
Mr. Levis. Yes, sir.
sorTof?ondUiin thTiU:nduciy1'to%f ft','^^'- ">'' *>!'"" "-' ^ *«
company, and a large Srp^^n^JIr'lltl^ -,^^^^^^^^^^^^^
Mr clT'/i!^ improper to term it a rebate.
aIfeo?",J>a?kind.""''™" """ '^™- ^ ""' ^^^ -^ division of roy-
whfha^'bSn'i'nre Zs Kin^eTrb °P'"'™' ^l^' C™' =>= » "-'
"royalty" was a proSr word I '„L ^r^'l*''"."''" t"^" ^™'-d
as a contribution fo the dCTeWnfrfTv, """"K^t of our payment
who collected that neifnv^ i '^ ^ ■ ^ "'? *■■'• ""^ 'hat tlie people
which he'Sn-f hav^ oTrftm WmseT/"n/"^ "\'', """l"*"'*"-'
I..tis'^p?;fotm^g'tr1h*fH'c:S:i^of Cf^^^r ^^ "--
your opinion justified the naympST^n, Haj-tford-Empire that in,
Oft Xts?hStre-prSrtegt';"-"'-'- P-^''- PHce
CONCENTRATION OF ECONOMIC POWER 499^
Mr. Cox. Those are the gob-feed patents that Mr. Williams
spoke of?
Mr. Le\^s. Yes. And, second, they were perfecting those, and any
right that they developed in that connection flowed to Hartford as
a part of the consideration for the payment.
Mr. Cox. Throughout this period — if you don't know, perhaps
Mr. Williams can tell us whether the Owens Co. was doing develop-
ment work on the gob-feed patent as distinguished from the suction^
Mr. Levis. Oh, yes; anything we do goes to Hartford, and he
takes it and gives it to our competitor to use against us.
Mr. Cox. But, of course, so far as that situation existed between
1924 and 1935, when your competitor used the device, you in effect
collected a royalty on it through this division of income.
Mr. Levis. We received a part of the divisible income. _
jNIr. Cox. Then would 5'ou say, Mr. Levis — and I want you to think
very carefully about this — that it was never your policy or the policy
of the Owens-Illinois Co., as long as you were connected with it, to-
receive better treatment from Hartford-Empire than other licensees
in the field received?
Mr. Levis. Mr. Cox, that is a very broad question. If you limit
it, I will try to answer it.
Mr. Cox. Well, I will put it this way: Was it your policy to turn
the whole patent and licensing business over to Hartford-Empire for-
development and exploitation and to receive in return a preferen-
tial treatment so far as the payment of royalties was concerned?
Mr. Levis. Mr. Cox, as I explained yesterday, my bringiug up in
this thing was different from that. When I came into the Owens-
Illinois Co. I knew very little about patent matters. They had a
large investment in a licensing business. I was the president of the
company and wanted to liquidate. I even sought to inaugurate a
policy so far as their licensing business was concerned that we would
pay no royalty to anyone, that everybody else would pay a royalty
to someone, and we would get just as much of that as we could.
Now I found out, at least along in '33 and '34, that I was just
swapping dollars and I was riding railroad trains and I wasn't mak-
ing a dime, and as soon as I could convince the people who had grown
up in the other field that my doctrine of this thing was right, we
finally sold out and started on in our business; and as I said to you
yesterday, we were more successful after we did it.
Mr. Cox. You found it didn't pay to try to make money out of the
patent situation.
Mr. Levis. Even with the policy as I stated it, it didn't pay, be-
cause the time of our principals who had to devote their thinking to
these interferences and litigation and how to keep from being excluded
in fields was consumed away from the business features of our
company.
Mr. Cox. Then if I understand you correctly, your purpose at one
time was to create a situation where everyone else in the field would
pay a royalty for the inventions which they were using, and that your
company would not pay a royalty to avoid doing so-?
Mr. Levis. No; I don't think that was ever my purpose, Mr. "Cox.
Just like I would like to sell certain items cheaper, but there are cer-
tain factors in connection with an investment that we owned that I
felt we must liquidate profitably, that I tried even to create a policy..
500 CONCENTRATION OF ECONOMIC POWER
and even if that policy had been 100 percent successful, then that
division of our business would not have been profitable, and conse-
quently, having tried it for 5 years without success, I sought the policy
of abandonment.
Mr. Cox. You did make a change in policy ?
Mr. Levis. Yes, sir; changed my mind, and it wasn't much dif-
ferent after I changed it than when I started, because the Illinois Co.
had been successful under the other policy.
Mr. Cox. To the extent there was a change, it was a change from
the policy which you say you inherited when you came into the
Owens Co.
Mr. Levis. That is the way I think of it.
Mr. Cox. I just want to get a precise definition of what that policy
was that ;v'ou inherited.
I am going to show you a document which purports to be a copy of
a pencil memorandum, and I call your attention to the paragraph I
have marked.
Mr. Levis. Before I look at it, I want to correct you to this extent :
This isn't the policy ; this is my idea of to what extent we might go to
try to make this division of our business possible.
Mr. Cox. Wliat are you describing now?
Mr. Levis. A restatement of your question that you were handing
me something.
Mr. Cox. Are you describing what this is that I have given you
now?
Mr. Levis. No; I was answering your question in giving it to me.
Mr. Cox. You look at that, Mr. Levis, and see that paragraph that
I have marked. It is the paragraph which begins, "Our negotia-
tions witli Hartford-Empire Co. and others," etc.
Senator King. Are you referring to the policy after 1934 or under
the 1924 contract?
Mr. Cox. I have to find out from the witness first when this memo-
randum was prepared. That is the next question I am going to "ask
him. It is undated.
When was it prepared?
Mr. Levis. I don't know. I have no recollection of the memo-
randum. Some of your men went to Alton and took from my office
personal files a lot of papers that my uncle had accumulated, evi-
dently for sentimental reasons. I had no copy, and this was one of
them, and when I saw your typed copy of what one of my men who
has been with me for many years skid is not in my writing, it doesn't
differ, though, sir, from what my thinking was as a kid in 1929,
starting out to liquidate this undesirable part of this business.
Mr. Cox. You think this substantially describes your attitude?
Mr." Levis. It describes what I might have been thinking, but it
doesn't describe what I think now;
Mr. Cox. I understand that. What I am trying to find out now
is wliat the precise policy was that you did change in '35, and this is
the policy that you did change.
Mr, Levis. We never were able to carry that out,
Mr. Cox. That is what you were trying to do?
Mr. Levis. No: that is what I believed it would be necessary to
do to make that division of our business profitable.
CONCENTRATION OF ECONOMIC POWER 501
Mr. Cox. I think perhaps we might read this so it will be clear
what we are talking about. The paragraph reads:
Our negotiations with Hartford-Empire Co. and others, so far as our patent
situation and royalty income is concerned, should be to attempt to secure a
position whereby we pay no royalty on any item we produce and we attempt
to force all others to pay royalty on every item they produce, we participating
with anyone else in the royalties they receive.
I suppose "they" means Hartford-Empire.
That is the policy you thought you would have to adopt if you were
going to make any money out of patents ?
Mr. Levis. Yes. The early part of the memorandum tells of the
policies I thought we would have to adopt if we were going to make
money selling bottles.
Mr. Cox. That is the policy you gave up in 1935 ?
Mr. 'Levis. No; I gave it up right along. I can't state what date
I started to think differently. I had a right to change my mind.
This was a memorandum evidently prepared for me to talk over
with my uncle, who was an old head in the business, and when I got
through spending the evening with him I probably left it with him.
I don't see any economic significance to it.
Mr. Cox. You have told us you changed the policy. I think I
understand what the policy is today, so I am going to ask you
about that in a moment ; but I want to get a precise definition of some
kind as to what the policy was you changed, and if this represents, at
least in one form, the acme of that policy, or what you thought j^ou
might have to do to accomplish the result to which your prior policy
was directed, I am content.
Mr. Levis. That is right.
Mr. Cox. How would you describe your policy on patents today,
Mr. Levis, or since 1935 ? I am going to ask you some questions later
on about licensing. Let's confine it now to the collection of royalties
paid by others manufacturing bottles. Are you interested in collect-
ing royalties from other persons who are engaged in manufacturing
bottles and who are competing with you?
Mr. Levis. No, sir.
Mr. Cox. That has been your policy since 1935 ?
Mr. Levis. Yes, sir.
Mr. Cox. Do you collect any royalties today from anyone engaged
in manufacturing bottles in competition with you?
Mr. Levis. We have a few small contracts, like the Dominion Glass
Co., who really aren't in competition with us, and we have some small
income from gadgets like decorating and items of that kind, but cer-
tainly we have no competitive advantages as a result of royalty
income.
Mr. Cox. You don't get any royalties from any of the large com-
panies manufacturing glass containers, sunh as Hazel-Atlas and Ball
Bros. ? I am speaking of the period of time since 1935.
Mr. Levis. Our royalties received in the years 1936 and 1937
amounted to $2,690,000 in the year 1936, of which $2,624,000 was paid
by ourselves; $12,752 by the Dominion Glass Co.; $1,179 by the
Thatcher Co.; $614 from foreign sources. There are a number of
other small items that don't relate to glass. Does that answer your
question ?
Mr. Cox. That answers the question.
124491— 39— pt. 2 17
502 CONCENTRATION OF ECONOMIC POWER
When you say you paid them yourselves
Mr. Levis (interpolating). It is simply bookkeeping. In other
words, in determining our cost we like to have in, as an element of
cost, royalties, even though we charge them to ourselves.
Mr. Cox. All right ; I think that answers my question.
Now, Mr. Levis, I want to ask you some questions about section 22
under the 1921 contract/ which I think you said a moment ago was
withdrawn in 1931 ; or Mr Williams said that. Do you recall that was
a provision which prevented Hartford from licensing people under
your patents M'ithout your consent, except in the specific cases men-
tioned there, which in effect might be summarized by saying they
could be given only to people who were in business or under license
to Hartford at the time the contract was made? That section was
taken out of the contract in '30 or '31, I think, after you came into
the Owens-Illinois Co.
Mi". Levis. January 3, '31.
Mr. Cox. Tell us why that was taken out.
Mr. Levis. All I know is that when I came there I was advised
that it never had been exercised and Mr. Williams asked to have it
removed from the contract, and I thought if it wasn't an essential
feature I was willing that that be done.
Mr. Cox. Was one of the reasons, Mr. Williams, why you thouglit
it better be taken out because it raised some question under the anti-
trust laws?
Mr. Williams. It was the one vulnerable spot, I thought, in the
contract: or rather, the provision that would raise objections. I ob-
jected to putting it in. in the first place and was overruled.
Mr. Cox. When you took that provision out, did it make any dif-
ference in the nature of your relationships with Hartford-Empire
at all?
Mr. Levis. No. So far as I was concerned, I was advised that it
had never been used, and Mr. Williams, for some reason, didn't want
it in, and I didn't see any reason why it should have been in anyway.
Mr. Cox. Isn't one reason why you took it out because you felt
sure Hartford-Empire wasn't going to grant licenses recklessly or
in disregard of your interests?
Mr. Levis. Oh, no.
Mr. Cox. I am going to read to you a paragraph of a memorandum
which was sent to you by Mr. Carter, who, I understand, is your vice
president in charge of your patent section in your legal department.
Is that correct?
Mr. Levis. He was.
Mr. Cox. This memorandum" is dated December 13, 1930.- It reads
as follows [reading from ^'Exhibit No. 14<)"] :
The objection on our part to eliminating section 22 is the fear that Hartford,
once freed of onr veto, might be inclined to grant licenses recklessly and with-
out regard to the state of the market or good of the industry. Believe that this
fear is much exaggerated. We have been dealing with Hartford under our 1924
agreement for more than 6 years now and have never found any tendency on
their part to act recklessly or in disregard of basic conditions. Believe we may
safely conclude that their attitude in the future will not be different.
lEntorpd Intor as "Exhibit No. ]:^5." p. 5;U.
» Siibsf(iuently entered as "Exiiibit No. 146." See appendix, p. 780, at p. 701.
CONCENTRATION OF ECONOMIC POWER 503
I ask you if that is not a statement of a reason for agreeing to the
abolition of the section which is in substantial agreement with my
question to you a moment ago.
Mr. Levis. Mr. Cox, when I got to Toledo in April about every
20 minutes I got six mem.oranda like that. I just couldn't read them.
They didn't have anything to do with the business. You take my
early '29 memoranda, all of which you have, and they don't differ at
all in the theories I explained. Maybe there is some trade talk in
some memorandum Mr. Carter did, but my way of handling this busi-
ness hasn't been a darned bit different, and the way my early memo-
randa indicated I was raised. That memorandum had no effect on
me. I was simply a young fellow in there, and they said, "Mr. Wil-
liams would like this paragraph out of the contract," and I said,
"Well, have you ever used it^" They said, "No." I said, "It doesn't
amount to anything, anyway, so take it out,"
As to what Hartford would do, as to whether they would do scme-
thirig we asked them to or not, I don't think that ever worried us.
Mr. Cox. Weren't you interested in the persons to whom they
granted licenses ?
Mr. Levis. Yes. I think other bottle manufacturers were more
interested in it than we were.
]\Ir. Cox. But you were interested in it to some extent?
Mr. Levis, Oh, yes; but we had the largest percentage of our pro-
duction on our own royalty-free machines. At that time we had a
participation for the patents we contributed to in the 1924 Hartford
contract.
Mr. Cox. Isn't it a fact that even since the abolition of this provi-
sion in the contract you have talked to Hartford-Empire and con-
sulted with them about the wisdom and propriety- of granting licenses
under their patents ?
Mr, Levis, I may have, Mr. Cox. I complain and talk about things
of that kind just like I would about some enactment of legislation
I might not like, but as for ever believing that I could, other than
through my own personal persuasion, get some fellow to do some-
thing because I had a contract with him to force him to do it, I didn't.
Mr, Cox, You did at least offer your advice or suggestions on
that?
Mr, Levis. Oh, I offer that freely, sir, to everybody in the glass
industry, and lots of them take it,
Mr,^Cox, Have you ever suggested or advised Hartford that in
your opinion they should be careful about granting licenses to people
who want to go into the business of manufacturing bottles and con-
tainers?
Mr, Levis. I may have, sir, but I don't recall the incident,
Mr. Cox. I am thinking generally now. I have one instance that
occurred in 1933 that I am going to ask you about in a moment, but
I just want to ask you now if you had any general statement on
that that you wanted to make,
Mr, Levis, I don't believe, Mr, Cox, that I feel at all that I have
anything to do with that,
Mr, Cox. Now, Mr, Levis, I am going to read to you a letter '■
^ Subsequently introduced as "Exhibit No. 128." See appendix, p. 781.
504 CONCENTRATION OF ECONOMIC POWER
which you wrote January 13, 1933, to Mr. F. Goodwin Smith. It
reads as follows [reading from "Exhibit No. 128"] :
Referring to Mr. Northenrt's letter of January 10 regarding the persistent
letters he has received from Mr. E. C Devlin, I am replying to you rather than
to him because I feel that you should knovp that the old Northern Glass Co.
plant never was operated successfully and that I do not think we should be at
all concerned regarding their thoughts of resuming operation.
We are in splendid shape to take care of Milwaukee trade from our Streator,
111., plant, and while I want to keep posted from time to time about people
who inquire for licenses for the manufacture of beverage bottles, I think the
position that you are taking — that there is at present considerable overproduction
in the industry — should be maintained in replies to similar requests.
I ask you if you in fact wrote that letter to Mr. Smith.
Mr. Levis. Yes, sir.
Mr. Cox. That was a situation, was it not, where Mr. Devlin had
been writing to Mr. Smith about getting a license and Mr. Northend
had written to you about it ?
Mr. Levis. He probably had, Mr. Cox. I can't remember that.
Mr. Cox. You don't remember anything about it?
Mr. Levis. It is just one of many things in 10 years' work.
Mr. Cox. The correspondence you had with Hartford involved a
request that had been made to them for license for use in a glass-
factory plant somewhere in the neighborhood of Milwaukee. Does
that refresh your recollection at all?
Mr. Levis. No, sir. There may have been many such letters, and
I may have answered them in that same way.
Mr. Cox. Was it your position at that time that you wanted to
keep posted from time to time about people who inquired for licenses
for the manufacture of beverage bottles?
Mr. Levis. Yes, sir.
Mr. Cox. Why did you want to be posted ?
Mr. Le\t:s. I wanted to be posted on everything.
Mr. Cox. Was that just curiosity, or did you have some specific
purpose in mind that you wanted the information for?
Mr. Levis. I don't think I had any specific purpose, Mr. Cox.
Mr. Cox. If I should suggest to you that what you really wanted
to know was who was asking Hartford for a license for that purpose,
so you could discuss with Hartford whether the license should or
should not be granted, would j'ou repudiate that suggestion ?
Mr. Levis. I wouldn't repudiate any suggestion, Mr. Cox. You
have 8,000 pieces of my papers. I will try to help you in working
any of those out, but I just can't remember each isolated letter that
I wrote to Goodwin Smith. Show me the incident, and if I can
refresh my memory I will tell you the truth.
Mr. Cox. I am sure you will, Mr. Levis. I am not asking you now
about a particular incident. I am asking you about the general state-
ment you make that you want to keep posted from time to time about
people who inquire for licenses for the manufacture of beverage
bottles. YoU said you wanted to keep posted about everything, and
I still want to know whether you wanted to know about people who
inquired as to beverage bottles merely out of curiosity or because you
were interested in seeing that too' many of them' didn't go into
business.
Mr. Levis. I had no way of controlling whether they went into
business. I was interested in protecting my own business.
CONCENTRATION OF ECONOMIC POWER 505
Mr. Cox. Of course you could talk to Mr. Goodwin Smith about it?
Mr. Levis. I could talk to anyone in the industry about it.
Mr. Cox. In your very persuasive manner, Mr. Levis ?
Mr. Levis, Well
Mr. Cox ^interposing) . Now I call your attention to this last sen-
tence in the letter :
I think 'the position that you are taking — that there is at present considerable
overproduction in the industry — should be maintained in replies to similar
requests.
Was that your positioil at that time ?
Mr. Levis. Yes; I think that was the position of all glass manu-
facturers at that time. I think that any licensee of the Hartford
Co. would have told Mr. Smith that same thing.
Mr. Cox. It was a situation w^here it wasn't desirable to grant any
more licenses?
Mr. Levis. The banks had just all been closed, and we were in the
peak of the depression with a tremendous overproduction.
Mr. Cox. Is that your attitude today? Do you think there is
overproduction today?
Mr. Levis. In the glass industry ? Yes, sir.
Mr. Cox. And would you say that you think because of that over-
production licenses should not be granted by Hartford-Empire to
people who apply for the right to go into business ?
Mr. Levis. I have nothing to do with Hartford-Empire, sir, and
I don't know what they would do. So far as I am concerned, I think
that there are plenty of people in the business and there is an
overproduction.
Mr. Cox. Would it be correct for me to say that if you had occa-
sion to write a letter today to Mr. Smith like ^he letter you wrote
in 1933, your advice to him would be the same ?
Mr. Levis. My advice to him would be that I think there is an
overproduction.
Mr. Cox. And that no more licenses should be granted ?
Mr. Lews. I don't think I would add that now.
Mr. Cox. As a matter of fact, you have from time to time been
interested in the use of patents as a device for stabilizing conditions
in the industry, haven't you, Mr. Levis?
Mr. Levis. Yes, sir.
Mr. Cox. And, of course, the best way that can be done is through
Hartford-Empire, since they are the license-granting organization
in the real sense, aren't they ?
Mr. Levis. We are, too, Mr. Cox.
Mr. Cox. You haven't granted any, though, since 1918.
Mr. Levis. Nobody has either the capital with which to buy one
of our complicated machines or the organization capable of making
it work.
Mr. Cox. That is very interesting. Are your machines very ex-
pensive to buy?
Mr. Levis. Expensive to build.
Mr. Cox. To build, I mean.
Mr. Lems. Yes.
Mr. Cox. Can you tell us about that? Why is that?
Mr. Levis. Because tliey are precision machines.
gQg CONCENTRATION OB^ ECONOMIC POWER
Mr. Cox. Have to have special dies?
Mr. Levis. Yes. I think we paid $65,000 for the last lO-arm ma- ,
chine.
Mr. Cox. If a man wanted to go into business, to get a license ^rom
you and build a suction machine it- would cost him about $65,000 to
build one machine?
Mr. Levis. It mi^ht cost him more than that to build the first one.
Mr. Cox. Returning for a moment to the use of patents to stabilize
the industry, you said you were interested in that from time to time.
In that kind of stabilization do you include elimination of price cut-
ting, stabilization of prices on any line of ware ?
Representative Sumnebs. Mr. Cox, at some time \^ould you de-
velop the cost of installing an efficient unit to produce these glass
bottles? I mean to establish a business, a small business, but a
business sufficiently complete to produce the finished article that
would require spme place to melt the sand and whatever goes with it.
Mr. Cox. I will do that through these witnesses if I can, so far aa
their particular kinds of machinery are concerned, and through other
witnesses as to other kinds of machines.
Representative Sumners. I wouldn't want to take too much time,
°J)ut it would be interesting.
Mr. Cox. Perhaps Mr. Levis can tell us about that.
Mr. Levis. Very briofly, sir — we have always analyzed it — it costs
about $500,000 per furnace to go into the glass-container business;
that is, the furnace that melts the glass, the forming devices for mak-
ing the ware, and the annealing ovens, with their buildings and
packing-house facilities. Another»$100,000 should be added to cover
compressors and office facilities and machine shop, and about half a
million dollars working capital, or $400,000 to make a round num-
ber, requiring about a million dollars invested capital, which you
would turn once in the productioji from that furnace, about a million
dollars in sales. That "TOuldn't make any difference, sir^ whether
thfit had our suction machine on it, or, say, we put two suction ma-
chines to draw 100 tons, or whether we put six or seven Hartford
machines on to draw that same tonnage.
Tlie Chairman. It would make a big difference, however, Mr. Levis,
whether or not you had to pay any ectual royalty.
Mr. Levis. Yes, sir ; except that you would be paying the royalty —
well, it is like a suit of clothes in the expense account; if you have
to go through the development and work out the applications and
work out the interferences in the patents, you spend it that way,
or you pay Hartford a fee for their service.
The Chairman. I was comparing this typical j)lant which you
have just described with your plant, and considering the position
that it would occupy as a competitor of your company. When you
were giving your figures on royalty a few moments ago, I was
struck by the fact that as a rule you recited that about 2l^ million
dollars will be charged against yourself as royalties, as an item of
cost; in other words, you didn't actually pay that royalty.
Mr. Leais. We p'aid more than $600,000 of it to Hartford.
The Chairman. Yes; but 2i/^ million, as I recall
Mr. Levis (interposing). It is 5 percent of selling cost, roughly.
The Chairman. This is the point I am getting at. Whatever it
"Wa5, 2 million or 2^^ million, there was a substantial portion of
CONCENTRATION OF ECONOMIC POWER 507
that royalty which actually never was paid to anybody. You
charged it against yourself as an item of cost. Now I gather from
an accounting procedure your purpose in doing that was to make
certain that into the price of the article which j^ou sold would go
this element of royalties which your competitors were actually pay-
ing upon all their machines. Is that right?
Mr. Levis. Yes, sir; but if I might carry on briefly, we then credit
that to a so-called holding division as income to that division, and
then we charge that division for our experimental and development
expense, and our patent and license expense, and our legal expense,
and the holding division consumes that. In other words, we spent
$1,811,000 of that $2,000,000 last year that we charged ourselves
two million six for use in research and development alone.
The Chairman. I thought that you had practically shed yourself
of that element.
Mr. Levis. Oh, not on the suction, sir. I tried to make it clear
yesterday that we are always taking out patents on that.
The Chairman. So that of this two and a half million charged
to yourself as royalties, but not actually paid as royalties, there
were actually $1,800,000 expended in research or similar activities.
Is that correct?
Mr. Levis. Yes, sir. We then paid, of that that we received
The Chairman (interposing). I am not interested in the exact
figure, Mr. Levis. I was merely trying to determine whether or not
that was an actual item of overhead, actually laid out or not.
Mr. Levis. No; we actually charged the bottle division of our
parent company with royalty at 5 percent of their selling price, and
if they owe Hartford something, the holding division, which we call
it, pays Hartford the royalties, and it spends the rest of that money
in research and development, patent and legal and general overhead.
The Chairman. If the actual amount were computed only, in-
stead of just this arbitrary amount of 5 percent, would that be
smaller ?
Mr. Levis. No ; it vv^ould be about the same. It figures 5 percent.
The Chairman. So that I would not be justified in drawing an
inference that if you didn't make this charge for royalty on an ar-
bitrary basis but charged only the actual expenditures for these
various items, you would be in a position to sell your bottles cheaper.
Mr. Levis. No ; they are about the same, sir. In this million dollar
mythical factory which I described, the royalty would be, roughly,
$50,000. I don't believe that a small manufacturer today for $50,000
could have adequate engineering and patent counsel and other talent,
such as they buy from Hartford for that fifty.
The Chairman. Are you in such a position with respect to royal-
ties and your relations with the Hartford-Empire that you actually
have an advantage over other licensees of Hartford in the production
of glass containers?
Mr, Levis. That is a very difficult question to answer.
The Chairman. Of course, I would say it would be a perfectly
natural thing for you to try to get into that position because you
are in the business of producing bottles and making money, and if
you can make money out of royalties that are paid by your com-
5Q§ CONCENTRATION OF ECONOMIC POWER
petitors, that is a perfectly normal and natural thing for you to do.
We are just anxious to find out whether that is actually the fact.
Mr. Levis. I might answer that by saying this, sir — that the
mythical factory I said would put up $500,000 for a furnace. ^I be-
lieve that the smaller manufacturers in the industry investment in
their furnace is probably $300,000, while ours, sir, is about a million.
We have elaborate machine shops and machine tools for doing pre-
cision work, and a trained personnel that- can operate necessarily
complicated machines. In fact, on the Pacific coast, where we have
built a new plant, it cost us about $10,000,000. We have put in Hart-
ford equipment, not because we don't believe our equipment would
not be superior, but because we don't want to make the further in-
vestment for precision tools to make*parts on the coast, and molds,
and we aren't capable of training on the coast yet labor that can
operate these complicated machines. Therefore, if we have an ad-
vantage, sir, it is oecause we have a different article for producing
containers than Hartford licensees.
The Chairman. The whole glass industry is now in such a posi-
tion with respect to demand and production and the number of
plants that are going, and the method by which patents are operat-
ing, that it would be an extremely difficult thing for any new inde-
pendent concern to break into the field'. Is that a correct assumption ?
Mr. Levis. No, sir.
The Chairman. You think it would be possible?
Mr. Levis. I think they could get in ; yes, sir.
The Chairman. Where would they get the license ?
Mr. Levis. I don't think Hartford would object to granting them
a license.
The Chairman. You think that Hartford, in the light of the tes-
timony that was given here by„Mr. Smith on the opening day,^ would
be willing to grant licenses to new concerns for the production of con-
tainers, of which you say there is now an overproduction ?
Mr. Levis. I don't see that it would be anything to Mr. Smith's ad-
vantage. In other words, he can't get any more royalty and he might
as well deal with others.
The Chairman. He testified very candidly that his purpose in man-
aging the patents and the licenses was to prevent the ups and downs
in the industry, to prevent depressions, to do for the glass industry
what this committee is trying to find a way of doing for all indus-
try, if it can be done, with the preservation of the anti-trust laws.
So, in those circumstances, with that purpose in mind — to protect
overproduction and thereby to prevent a dropping of price — would it
in all these circumstances permit a new competitor to enter the field ?
Mr. Levis. I don't know that he would, but I believe that the Hart-
ford Co. have always been liberal in granting licenses to anybody who
should be of a business type.
The Chairman. But liberal within these broad boundaries of main-
taining the stability of the industry^ which is a polite way of saying
of mamtaining the price and of maintaining the market and of pre-
venting competition from coming in.
1 Testimony of Mr. F. Goodwin Smith, of Harl ford-Empire Co., supra, p. 379 et seq.
CONCENTRATION OF ECONOMIC POWER 5QQ
Mr. Levis. No, sir ; I don't think that is the fact, because the Glass
Container Association have prepared a very interesting report on the
industry, and they show that since 1920 — that in 1920 there were 80
companies, and during the 18-year period 20 new companies came
into the industry, 29 companies have failed or gone out of the in-
dustry, and 26 companies have been consolidated in other companies
of the industry. So in 1938 we have 45 companies in the industry.
All of these data that these gentlemen have prepared show schedules
of this mortality,, that these men who enter
Mr. Oliphant. How many went out of business ?
Mr. Levis. Twenty -nine, sir.
Eepresentative Sumneks. Did any of the concerns use the old
method ?
Mr. Levis. I couldn't answer that, but the report which I have a
copy of here shows the mortality and the names, and from those
names I could answer.
Mr. Arnold. Putting the same question a little differently, not in
terms of guessing what Mr. Smith's policy might be or in terms of
what 3'our policy might be in case you changed it again, or some one
else took your place, it is certainly true that these private companies
have the power to do exactly what Senator O'Mahoney was speaking
of; haven't they?
Mr. Levis. I don't know, sir.
Mr. Abnold. They have the power now to grant the licenses along
the suggestions made in your letter of January 13, 1933. Now
whether they do that or not is, of course, a guess, but they have
the power.
Mr. Levis. They have the legal right not to license someone, I
presume.
Mr. Arnold. And so this power does exist in private hands to
stabilize an industry with respect to price and with respect to produc-
tion. Now, I understand that you believe in using that power liber-
ally, but the power does exist there, doesn't it ?
Mr. Levis. I don't believe that I can answer that, sir.
Mr. Arnold. Never mind, let me ask you another question vsdth
respect to the charge of $2,000,0(X) for royalties to yourself. It
seems to almost equal the amount tKat you spent on research, doesn't
it?
Mr. Levis. It is a little bit less than what we spent on research and
pay to Hartford.
Mr. Arnold. Approximately they are equal then. Does that indi-
cate that it would be a good patent policy as a matter of law to make
the amount which could be collected on research about equivalent to
the amount you collected in royalties where the invention was held by
a group and where the question of equitably rewarding some particular
inventor was not an issue ?
Mr. Levis. I think, sir, you only have one qualification to that, a
new business that is starting up couldn't survive with just that pro-
tection. An industry that has "Sirrived in the stage of development
that our industry has could probably consider adopting that policy.
Mr. Arnold. Then, with that, qualification, if it is a good policy
for your industry — with the qualification that you mentioned — might
it not be a good legislative policy ?
5JQ CONCENTRATION OF ECONOMIC POWER
Mr. Levis. I don't bfelieve I can answer that, sir, unless you insist.
Mr. Arnold. No, I wouldn't; it is an opinion. If you haven't any
opinion, I wouldn't press you.
Senator King. May I ask a question? Has your organization
licensed any of its patent devices?
Mr. Levis. Not since 1935; I mean, their only licenses were, as
Mr. Cox explained, up to about 1914, and three small licenses were
granted : One in 1917 and another in 1918, and another in 1918. and
in 1932 the Hazel revision.
Mr. Cox. Of course, that was a revision of the existing license.
That first license to Hazel was made before 1914. It was made about
1909.
Senator King. Do you utilize your own devices in the manufacture
of glass?
Mr. Levis. Exclusively, sir.
Senator King. Do you regard them as comparable to the patents
of the Hartford Co.?
Mr. Levis. We regard them as superior, sir.
Senator King. Why did you not use your own devices — I think
you explained it; pardon me for asking if it is a repetition — in the
new plant which cost 5^ou $10,000,000 in California?
Mr. Levis. Because we didn't want to add further invested capital
for the machine tools to take care of the necessary equipment, and
we didn't have trained personnel for the operating of precision
equipment.
Senator King. What would it cost for the purpose of manufactur-
ing necessary dies and constructing the plant?
Mr. Levis. Our investment has always been an investment of about
a million. I believe the smaller manufacturer has an investment of
$300,000. Our investment is approximately a million, and that dif-
ference between his $300,000 and our million is in this precision
equipment, better working facilities in shops, which they engage on
the outside. In other words, we manufacture corrugated boxes, they
buy them ; we make molds, they buy them ; we make machine parts,
they buy them.
Senator King. Is it essential in the establishment of an industry to
have a selling agency or to have an organization for the purpose of
finding markets for the production ; and, if so, state whether there
is a considerable item of cost which must be taken into account in
the launching of the firm?
Mr. Levis. Yes ; we have always figured selling, administrative and
general expense at about 10 percent, and we have always believed we
should have our own branches which are manned by salaried people
rather than commissioned employees.
Senator King. But it would require a larger sum m the initial
stages of the development of an organization than would be required
later on after it had been running full blast.
Mr. Levis. I think it gets a little cheaper as you go along, sir.
Representative Sumners. I meant to ask you a question or two a
moment ago, but my line of interrogation was interrupted. May I
ask you this question? You speak of the installation of your factory.
Do you have to make your own equipment, mechanical equipment, or
is tlicre some plant that manufactures it for the market?
CONCENTRATION OF ECONOMIC POWER 511
Mr, Levis. We manufacture all of ours, sir, except certain machines
that Hartford manufactures.
Representative Sumners. Do they have a plant where they manu-
facture these machines?
Mr. Levis. Yes; you can buy bottle- forming machines or you can
make them. We make our own.
Representative Sumners. You spoke of the requirement with ref-
erence to exactness of the machine. Is there any market where you
can buy such machines as you would like to install on the Pacific
coast ?
Mr. Levis. No, sir; not our suction Machine. We are the only one
who makes it.
Representative Sumners. Do you make that for the trade or only
for yourselves?
Mr. Levis. For ourselves. If someone "<\'anted a license I presume
we would grant it.
Representative Sumners. I am trying to get the picture. Do you
keep a plant that is constantly operating where somebody goes in
there and says, that is the plant that manufactures machinery that
makes glass?
Mr. LE^^s. We do, yes, sir ; ,at Alton, 111.
Representative Sumners. Now, if a person wanted to go into the
manufacture of ^lass and Wanted the machinery which would enable
him to compete m that production, that field of activity, how many
concerns could keep him from doing that if they wanted to? There
is your plant, you are one sort, then there is the Hartford plant
which has another sort. If those two would not be willing for him
to engage in the production of glassware containers, could he do it ?
Mr. Levis. He can buy certain other machines. The Roirant
machine has been advertised in this country for years, and some of
them are installed. I am informed that over 500 of them are operat-
ing in Europe.
Representative Sumners. Is that comparable in efficiency and econ-
omy to the machines that operate in your plant and that Hartford-
Empire Co. control?
Mr. Levis. It is different in type from Hartford. It is about the
same as our 6'arm machines, a number of which we have in operation.
Representative Sumners. I don't know about the six-arm machine.
Wliat I am trying to find is the one thing. A person with a factory
equipped with machinery that can be bought in the open market,
would he have, as a matter of competitive conditions, an opportunity
to stay in the market?
Mr. Levis. We are operating six-arm suction machines that are
about the same as the Roirant machine, at certain of our plants to-
day. We believe that we can do that because over a period of 40
or 50 yeai"S we have trained personnel capable of doing it. I don't
believe that a newcomer can just walk out and hire a glass- factory
machinist and hire a glass-factory engineer and enter into this busi-
ness, regardless of license restrictions.
Representative Sumners. What we are trying to get here on th^a
committee is as nearly a correct picture as we can of the situa-
tion. Now, taking this machine that you have just mijitioned, if
three persons of equal ability were undertaking to prodii> glassware
gJ2 CONCENTRATION OF ECONOMIC POWER
containers, one who had your machine, one who had the Hartford,
machine, and one who had this machine that you mentioned that may
be bought in the market, as a matter of practical business competition
would the third man with the machine that you have just mentioneci
have a chance to stay in the market?
Mr. Levis. If he was of equal ability, he would have a chance.
Representative Sumners. IVIake everything equal ; just the question
of difference in machine.
Mr. Lewis. You can't make it equal unless he can buy the engi-
neering service from Hartford or from us.
Representative Sumners. Well, assuming that he can buy every-
thing.
Mr. OuPHANT. Assuming he can't buy from Hartford or you.
Mr. Levis. If he could buy that service from someone who was
trained in the business
Mr. Oliphant (interposing). Can't he? Isn't there such a thing?
Mr. Levis. I would sell it to him.
Representative Sumners. But I am trying to draw a distinction
between human ability and machine efficiency,
Mr. Levis. But you lost track, sir, that the "know how" is the
essential thing.
Representative Sumners, That is human ability. You can't manu-
facture it. You can train it, but you can't run it through a machine
shop.
Mr. Levis. And very few people can acquire it.
Representative Sumners. But you don't get any patent right on
human ability.
Mr. Levis. That is why you don't need a patent right if you have
the "know how."
Representative Sumners. Let's get that pretty straight. When
you, then, train a personnel, you no longer need a patent; is that
right?
Mr. Levis, I have explained technically to Mr, Borkin
Representative Sumners (interposing). Explain it untechnically,
so I can understand it.
Mr. Levis. If I may refei: to this, sir, I say. Tlie management of
the large company in an established business is not concerned re-
garding the license or patent or comjDulsory licensing laws. If a
company engaged in an established business on a large scale has the
right to use all inventions at a fair royalty, it would save large sums
of money.
Representative Sumners. I quite remember that testimony. In
other words, you are already established and you huve your market
and you have your trained personnel; if nobody else can have a
patent, then you are willing not to have any patents for anybody,
is thajt right?
Mr. Levis. No, sir; I don't want to make it appear technical, sir,
but I can't answer it otherwise,
Mr. Arnold, Mr, Levis, you put in a condition that I am
interested in.
Representative Sumners, But he hasn't answered my question, if
my colleague will pardon me. I want to get this answered. You
see, I am not smart like you boys. It seems to me from our stand-
CONCENTRATION OF ECONOMIC POWER 513
point, what we are trying to find out are just a few things, and we
nave received a good deal of evidence on some things. First, we dis-
cover from the testimony here that there are a few big concerns that
largely control the patents, that govern the manufacture of glass con-
tainers. Then, of course, there has been testimony about suits and
about the notions of persons who have this control. What I want to
know — and I believe my colleagues on the committee would like to
know — is whether or not there is a possibility of an individual person
who wants to establish a plant or factory, being able to procure the
machinery tliat would enable him in turn to be a competitor of you
people insofar as machinery is concerned.' Of course, if you hire
the brains, that is different. You can't patent that, I guess.
Mr. Levis. Or if he wants to pay us what is a fair compensation
for the "know how," for the training, the engineering drawings that
we have worked up in our business, we will gladly let him have on6
of our machines.
Representative Sumners. To establish a serious competition, a new
serious competition for your plant?
Mr. Oliphant. To get that Milwaukee bottle business?
Mr. Levis. Oh, yes, sir.
Mr. Cox. Of course, you haven't granted any license to new people
in the industry ?
Mr. Levis. There hasn't been anybodj^ that I kfiow of who has
developed the technique capable of operating one of our machines.
Representative Sumners. Now wait a minute, Mr. Cox, you have
just been asking more questions. You know, we are just trying to
get that. I would like to have it myself. If you can't answer it
Mr. Levis (interposing). I can ansAver it, sir, if you will be patient
with me and tell me what you want answered.
Senator Borah. Let's take lunch first.
The Chairman. Before we take lunch, may I just ask one ques-
tion, Mr. Levis? As I understood your first answer to Congressman
Sumners, you said that there was one foreign machine which this
mythical competitor could obtain, that it was possible, and then you
compared that machine, that foreign machine, with some six-arm
suction machine of yourS, did you not ?
Mr. Levis. Yes, sir.
The Chairman. That was the fii-st time that I remember having
h-eard anybody mention the six-arm machine. Now my own question
to you is this: Is that six-arm machine your most efficient machine?
Mr. Levis. Yes and no. It is the most efficient for making a variety
of various sizes for scheduling, and less efficient for making long
straight runs. In other words, we couldn't operate our factory with-
out it, and we couldn't operate and be competitive exclusively with
it.
The Chairman. And how many other machines do you use in
comparison with this, proportionately?
Mr. Le\is. It is all to the capacity, sir. We have 15-head machines
that make two bottles at a time and 10-head machines that make two
aj\d a half, and six-head machines.
The Chairman. But the answer to the original question of Judge
Suniners is this : That a competitor who was using only that single
foreign machine (since it is comparable to your six-arm machine
5]^4 CONCENTRATION OF ECONOMIC POWER
which is a machine which, while necessary for your business, is not
st^cient to enable; you to maintain it as a whole) would not be able
to enter the field in which you are operating.
Mr. Levis. No one else has ever sought to enter the field we are
operating.
Representative Sumners. Could you make milk bottles? Could
you stay in business using that sort of machine making milk bottles
in competition with an organization like Owens?
Mr. Levis. Yes, sir.
Representative Sumners. Have you really got my question? By
using this machine that you have just been discussing, a competitor
could successfully compete with you, using your other machinery and
making milk bottles ?
Mr. Levis. Mr. Representative, I don't believe anybody could suc-
cessfully compete with me in this thing. It isn't j ast a machine.
Representative Sumners. I know. They couldn't get your ability,
possibly, and I am not speaking facetiously at all; we appreciate
that, but we are talking about machinery now. That is what the
patent is on, you know. We are not talking about nice personnel and
good lawyers and efficient pc?ple; we are talking about machinery.
If that is so, why don't you use that machinery instead of the other
kind you use?
Mr. Levis. We do.
Representative Sumners. I mean to make milk bottles.
Mr. Levis. Because we happen to make milk bottles at Columbus
and Clarion and probabl}^ it would cost us $1,000,000 to take the
machine out and put this in.
Representative Sumners. Is that a new machine?
Mr. Levis. Newer than the ones we are operating. But, sir, it isn't
the machine. I can take good personnel and a 20-year-old machine
and make bottles more efficiently than an average personnel and a
modern machine.
Representative Sumners. Why have patents around here been
bothering people anyhow?
Mr. Levis. I am not bothering th^^m. I stated my patent policy
yesterday.
Representative Sumners. Some people are conccrr>ed about keep-
ing patents and we had a notion that maybe patents had something to
do with efficient manufacturing, but I guess I am wrong.
Mr. Levis. I don't think that; others may.
The Chairman. Judge Sumners has assumed the equality of per-
sonnel. Now, with that assumption, taking out of consideration,
therefore, all this "know how" business, assuming that the personnel
is absolutely equal in competency and efficiency, then the question
comes down to this. Could a competitor who is compelled to use
exclusively the foreign machine and cannot use this other machine
which you have, successfully compete with you ?
Mr. Levis. If the question is, "Could he successfully stav in busi-
"ness?" then I can say he can. If you ask, "Can he successfully com-
pete with me?"
The Chairman (interposing). Why do you change the question?
Mr. Levis. If the question is, "Can he successfully compete with
me?" I don't know.
CONCENTRATION OF ECONOMIC POWER 515
Senator Borah. You are not afraid ?
Mr. Levis. Not a bit, sir.
Senator Borah. That would be true if there were no patents what-
ever?
Mr. Levis. That is right, sir.
Senator Borah. If there were no patents whatever, then the manu-
facture of milk bottles would go on just the same?
Mr. Levis. That is right, sir.
Senator King. Would a person with limited capital, even if he had
all of the engineering ability and the "know how" > to which you
have referred, be inclined to go into business and establish a plant if
the existing facilities created an over-production?
Mr. Levis. I don't think that he would.
Senator King. Wouldn't that influence a person in going into busi-
ness, whether there was any available market for his commodity?
Mr. Levis. It is more influencing to him, though, sir, than the
patent situation.
Senator King. A man, if he is going into any business, whether it
is building a smelter or opening a mine or building a shoe factory,
wants to know whether he has a market, and if the market is sur-
charged with commodities which cannot be sold' except at a loss, he
isn't disposed to invfest his capital. Is that right?
Mr. Levis. It is, sir.
Senator King. It is a business proposition, business common sense,
whether you go into business when you find that the market is over-
supplied.
Mr. Levis. That same man might be a greater success in some
other field.
Mr. Arnold. Then, as I get the substance of your testimony, it is
this: Since both you and the Hartford-Empire are really selling
research and brains, since you have this established organization
which has concentrated them to a high degree, then neither you nor
the Hartford-Empire need any patent to presence your present
position.
Mr. Leasts. I can't answer for Hartford, sir.
Mr. Arnold. That would follow from your testimony that you
have just given.
Mr. Levis. I don't think I have ever attempted to answer for
Hartford.
Mr. Arnold. Would that not follow from your present testimony?
Mr. Levis. I can't answer that, sir.
Mr. Oliphant. But, answering for yourself?
Mr. Levis. I don't believe, being an established business, sir ; if it
were a new development, a new industry, it must have that protection
in order to create an incentive for genius, an incentive for capital to
develop. It is a good deal like the excess-profits tax or the un-
distributed-earnings tax. If you have got plenty of money you
don't worry. If you have to go bornow the money to pay it, it does
worry you.
Mr. Oliphant. Why were- you worried about the piece of Mil-
waukee business? Did you get that business?
Mr. Levis. I wasn't worried about it. I inquired as I would about
a lot of things.
515 CONCENTRATION OF ECONOMIC POWER
Mr. Cox. You have that business now, don't you?
Mr. Oliphant. Did you get the Milwaukee business?
Mr. Levis. I couldn't tell you. We have some beer bottle business
in Milwaukee, but not all of it.
Mr, Oliphant. Let me ask a little along the lines suggested by the
Congressman. Suppose Henry Ford decided he want^ to go into
the business of making nursing bottles for babies so the poorest could
have the best. Would Hartford- Empire and you have the power to
refuse to give him licenses?
Mr. Levis. No, sir.
Mr. Oliphant. You wouldn't have that legal right ?
Mr. Levis. Yes, sir.
Mr. Oliphant. You would have to give him the license?
Mr. Levis. We are not the only grantors of licenses, sir.
Mr. Oliphant. But of the machines controlled by those two or-
ganizations.
Mr. Levis. If he wanted our machine, I presume we would have
the option of telling him whether or not he could have it-
Mr. Oliphant. Suppose he thought your action was arbitrary,
could he appeal to anyoody from your decision?
Mr. Levis. Not much difference, sir, than if he liked my house on
Parkwood better than his own and wanted it.
Mr. Oliphant. But your house on Parkwood is not 97 percent of
the houses of the United States.
Mr. Cox. It wasn't given you by the Government.
Mr. Levis. My business wasn't.
Mr. Cox. Your patents are.
Mr. Oliphant. Could he appeal to the Supreme Court if he
thought your action was arbitrary and unreasonable?
Mr. Levis. Sir, I stated yesterday, he can build an Owens ma-
chine. We have no patents covering the Owens machine, sir. They
are about all gone. I said we had only one that amounted to any-
thing, and that was the stationary pot, and that we were still oper-
ating revolving pots, trying to find a way to make them stop revolv-
ing. We have done it in a small way. There isn't any way a man
with brains who wants to build an Owens machine can't go build one,
and enter into competition with us, and I am not afraid if he does.
Senator King. Mr. Ford could build an Owens machine if he
wanted to?
Mr. Levis. Yes, sir.
Senator King. Or anybody else?
Mr. Levis. Yes, sure; Mr. Ball operates a number of them which
he has had and the patents have expired. We don't need a court or
anything.
The Chairman. The Senator from Utah suggests that the time has
come to take a recess.
Mr. Patterson. Will Mr. Levis be on this afternoon ?
The Chairman. Do I understand that Mr. Levis will be back this
afternoon ?
Mr. Cox. Yes.
The Chairman. We recess until 2 o'clock.
(Whereupon, at 12:25 p. m. a recess was taken until 2 p. m. of
the same day.)
CONCENTRATION OF ECONOMIC POWER 517
AFTERNOON SESSION
The committee resumed at 2 : 15 p. m. on the expiration of the
recess, Senator O'Mahoney (chairman) presiding.
The Chaibman. The committee will please come to order.
Mr. Cox, will you resume your examination?
TESTIMONY OF WILLIAM E. LEVIS, PRESIDENT, OWENS-ILLINOIS
GLASS CO., TOLEDO, OHIO— Resumed ; AND LLOYD T. WILLIAMS,
COUNSEL, OWENS-ILLINOIS GLASS CO., TOLEDO, OHIO— Resumed
Mr. Cox. Mr. Chairman, I should like to offer now a letter which
I read into the record this morning, dated January 13, 1933, written
by Mr. Levis to Mr. F. Goodwin Smith.
(The letter referred to was marked "Exhibit No. 128" and is in-
cluded in the appendix on p. 781.)
Mr. Cox. Mr. Levis, I asked you to check some facts with respect
to the free feeders you had under the 1924 agreement. Will you tell
us what you found out?
Mr. Levis. Yes, sir ; during the recess, Mr. Phillips, our vice presi-
dent and treasurer, advised me that there were 16 feeders that we-
used under the free provision of the 1924 contract.^ Ten of them,
were at the Evansville plant working in connection with Owens A. W..
machines, which plant was closed prior to 1932. Five of them at
Huntington. Therefore, there were approximately 15 feeders in
which that right was exercised.
Mr. Cox. I; also understood you to testify before the committee
rose that it was the policy of your company now to grant licenses,
to persons who applied for licenses under your patents.
Mr. Levis. I don't think we have any policy, Mr. Cox, but we
would not refrain from granting a license to someone who aj)plied.
Mr. Cox. Was that like the other policy that I described this morn-
ing?
Mr. Levis. No, sir; I don't think we would change our minds oni
that.
Mr. Cox. That is not a recent development?
Mr. Levis. No, sir.
Mr. Cox. Well now, Mr. Levis, I want to read to you some cor-
respondence which was given to us by your company. The first is a
letter dated June 8, 1935, addressed to the Owens-Illinois Glass Co.,
Toledo, Ohio, and reads as follows [reading from "Exhibit No. 129"] :
-) I have under contemplation the erection of a glass factpry with a view to.
manufacturing a line of goods in keeping with the requirement of such retail
entities as Woolworth, et al. I understand that you and Hartford-Bmpife-
control the fabricating machinery incidental to the equipping of a plant for
the output of such products, and that it is necessary 'to arrive at terms with
you before such machinery is obtainable. I would therefore appreciate hearing
from you and being advised as to the course I should pursue initially.
I am also going to call your attention to the following letter, dated
Tune 17, 1935, which was apparently signed by Mr. Martin, assistant
^ See supra, p. 495.
124491—39 — pt. 2 18
518 CONCENTRATION OF ECONOMIC POWER
secretary of your company, and reads as follows [reading from
"Exhibit No. 130."] :
Referring to your communication of June 8, tliis company is engaged in the
manufacture and sale of glass containers, but we are not licensors of glass-
making machinery. We do construct certain glass-forming mechanisms, but
such equipment is for use in our own factories exclusively. We are unable,
therefore, to render the service which you require.
It is signed by Mr. Martin, assistant secretary, and I ask you
whether you will identify those documents as having been taken from
your files. I call attention to the certification.
Mr. Levis. Mr. Martin can; I can't.
Mr. Cox. Could we have Mr. Martin come forward and identify
these? May I have Mr. Martin sworn, please?
The Chairman. Mr. Martin, do you solemnly swear that the testi-
mony you are about to give in these proceedings shall be the truth,
the whole truth, and nothing but the truth.
Mr. Martin. I do.
TESTIMONY OP E. F. MARTIN, ASSISTANT SECKETARY AND
ASSISTANT TREASTJREIl, OWENS-ILLINOIS GLASS CO., TOLEDO,
OHIO
Mr. Cox. Will you examine those documents and see if you can
identify them as having been taken from your files ?
Mr. Martin, fes; they are copies of letters taken from our files.
Mr. Cox. Very well, I should like to oifer these letters in evidence.
(The letters referred to were marked "Exhibits Nos. 129 and 130"
and are included in the appendix on pp. 781 and 782.)
The Chairman. The letters niay be admitted as requested.
Mr. Cox. Mr. Martin, I now call your attention to a letter which
I shall show you in a mx)ment, dated June 25, 1934, addressed to Mrs.
Len Smith, 960 South Oxford Avenue, apartment 325, Los Angeles,
Calif, [reading from "Exhibit No. 131"] :
Tour letter of June 14 addressed to our Chicago sales office has been referred
to this department.
For the past several years we have not built the Owens Machine^ for use
outside of our own company, and we regret, therefore, that we are unable to
furnish you with particulars concerning this type of bottle-building mechanism.
Mr. Cox. I ask you whether you can identify that as a copy of a
document which was taken from your files?
Mr. Martin. Yes ; that was taken from our file.
Mr. Cox. I now call your attention — first, I should like to offer
that letter, if I may.
(The letter referred to was marked "Exhibit No. 131" and is in-
cluded in the appendix on p. 782.)
The Chairman. It may be admitted.
Mr. Cox. I should now like to call your attention to a letter dated
December 10, 1934, which reads as follows [reading from "Exhibit
No. 132"]:
Referring to your communication of November 30, this company does not
manufacture glass-making machinery for use outside its own planta
CONCENTRATION OF ECONOMIC POWER 519
Mr. Cox. I ask you if you can identify that.
Mr. Maktin. Yes, sir.
Mr. Cox. I should like to oflfer this letter, too.
The Chairman. The letter may be admitted.
(The letter referred to was marked "Exhibit No. 132" anu u>
included in the appendix on p. 782.)
Mr. Cox. I should like to state for the record that the letters which
elicited the replies which are contained in the last two exhibits^
which would be letters addressed to the Owens-Illinois Co., our in-
vestigators for some reason were not abh to find. However, if Mr.
Martin can find them, I should be glad to add them to the exhibits.
Mr. Martin. Letters we received from these people?
Mr. Cox. Yes; to which these letters apply.
Senator King. Is it your intention to show it was the duty of this
company or any company that had a patent to manufacture a ma-
chine at small cost; that they must continue to manufacture them
for other persons?
Mr. Cox. Certainly not.
Mr. Arnold. The Department of Justice isn't at all interested in
the present duties at all.
Senator King. Then there is no legal obligation to manufacture
these costly plants for other person??
Mr. Arnold. May I answer that. Senator?
Senator King. I wanted to ask if that was the purpose of his
question.
Mr. Cox. That is my understanding of the law, that there is no
legal duty to manufacture anything.
Senator King. You have answered my question. I think you
are right.
Mr. Cox. Mr. Levis, at one point this morning you and I were
talking about your interest in stabilizing the industry, and I was
about to inquire whether in that connection you regarded the elimi-
nation of price cutting as something which led to stabilization.
Mr. Levis. If I ever did, Mr. Cox, it hasn't in my opinion
amounted to much, because there is and always has been price
cutting.
Mr. Cox. Has it ever been your policy to encouragfe the use of
patents or patent rights to prevent pri(» cutting?
Mr. Levis. I know of no case where we have coupled with a pat-
ent oi- license any control of price.
Mr. Cox. I am thinking now particularly perhaps of the use of
patent or patent rights by others.
Mr. Levis. Would you give me an example?
Mr. Cox. I have another letter here, Mr. Levis, which you wrote
to your Uncle Harry, K. H. Levis, is that right?
Mr. Levis. Yes, he is my uncle; he still is.
Mr. Cox. This letter is dated August 2, 1932, addressed to Mr.
R. H. Levis, Illinois Glass Consolidated Corporation, Alton, 111. I am
going to read two paragraphs and then I will give you the letter to
examine. [Reading from "Exhibit No. 133"] :
As I see the situation now, it appears that we ate on the eve of straightening
out the Hartford patent situation. Hazel-Atlas has come in and taken a
license, and yesterday the Knox Glass Co. agreed to come in, pay back damages.
520 CONCENTRATION OF ECONOMIC POWER
and ta^e a license. In so doing they have withdrawn from the Miller Feeder
Users pefense Association, and other Miller feeder users have expressed their
willingness to come in and take a Hartford license if Knox and Hazel-Atlas
took a license from Hartford. The only important manufacturers who remain
out of Hartford's licensing plan are Ball Bros, and the Root Glass Co. We are
negotiating with both of these companies and I am quite confident that they will
come "in if all of the other feeder operators come in, If for no other reason
than to protect fruit jar licensing, as well as to curtail the licensing of beverage
bottle manufacturers.
With the plans we now have, there is certain to be a curtailment of the
promiscuous manufacture of milk bottles on nonlicensed feeders, which will
result in our company's and the Thatcher Co.'s securing a greater proportion
of the available milk bottle business. This should stabilize the price and in-
crease the earnings of the Thatcher Co.
I ask you if that is a letter which in fact you wrote to Mr. R. H.
Levis.
Mr. Levis. Yes, sir.
Mr. Cox. Now Hazel-Atlas did thereafter, to use your word, come
in and take a license, didn't they?
Mr. Levis. Yes, sir.
Mr. Cox. And Knox took a license, did it not, from Hartford-
Empire ?
Mr. Levis. Yes, sir.
Mr. Cox. And Ball Bros, took a license afterward from Hartford-
Empire, did they not?
Mr. Levis. Yes, sir.
Mr. Cox. I should like to have this letter marked.
The Chairman. The letter may be admitted.
(The letter referred to was marked "Exhibit No. 133" and is in-
cluded in the appendix on p. 782.)
Mr. Cox. Mr. Levis, this morning we were talking about the
Roirant machine, the French machine. Do you know anything now
about the patent situation with respect to that machine? Is it
covered by any patents which are owned by any manufacturer who
is now manufacturing glass?
Mr. Levis. No, As near as I know they are a company who have
ofBces in Paris, who have offered the machine for sale in this country
through advertisements in trade magazines for the last several years.
We have one of the machines.
.Mr. Cox. Do you recall having conversation with Mr. Bracken,
of Ball Bros. Co., in September or August of 1935, about the patent
rights on that French machine?
Mr. Levis. I don't recall the conversation with Mr. Bracken, but
I recall the circumstances. I couldn't identify it as to him.
Mr. Cox. You don't ever recall having stated to Mr. Bracken that
that machine was covered by some patents which the Owens-Illinois
Co. owned, so that the use of the machine would infringe those
patents ?
Mr. Levis. Not the Roirant machine — I don't recall. I recall the
Moorshead machine was involved.
Mr. Cox. Mr. Levis, I have a letter here, a certified copy of a
letter which was taken from the files of Ball Bros. Co., written by
Mr. F. C. Ball to Mr. McCallister, who testified yesterday, in which
Mr. Ball makes this statement. I am going to read it to you and
ask you if it refreshes your recollection as to that conversation. This
CONCENTRATION OF ECONOMIC POWER 521
letter is dated . September 14, 1935, and is addressed to Mr. E. W.
McCallister, Grant Building, Pittsburgh, Pa.
Mr. Levis, president of the Owens-Illinois Co., stated to me over the tele-
phone that the Roirant machine which dips from at hearth extending from
the furnace could not be used in America owing to the fact that his company
secured in their purchase from the O'Neill Machine Co. patents covering this
extension hearth for feeding glass.
Do you have any recollection of that ?
Mr. Le\t:s. I haven^t any recollection of it, but I do know that that
is the O'Neill stationary pot machine, but the Roirant machine doesn't
use that. It is a revolving machine of the same type as our Owens
six-arm machine, and it runs from a revolving pot. The single-head
Roirant machine, which would probably be impractical except for
small orders, dips into a stationary pot. If Mr. Ball is referring to
the single-head machine, his statement is correct; if he is referring
to the machine I have been talking about, it is incorrect. The six-
arm Roirant machine, which runs from a revolving pot and which
anybody can have for the asking, is the one I am talking about. If
this statement is made with respect to the single head,' it would be
accurate. I have no independent recollection. If Mr. Ball would
ask me that question today I would tell him that if he dipped from
a stationary pot of a construction as covered by the O'Neill patent,
I wouL^ believe it were an infringement.
Mr. Cox. And to the extent that anyone wanted to use that process
they would have to get a license ?
Mr. Levis. Yes, sir; but in that same connection Mr. Ball wanted
to bring in the Moorshead machine, which interfered with a patent
which we own, a bock patent, and we gave Mr. Ball the release in
order that he could bring in the Moorshead machine into this country.
Mr. Cox. When was it that you did that?
Mr. Levis. Three or four years ago. We even sent in the engineers'
reports that our engineers made on the Moorshead machine, so he
could see them before he took it.
Mr. Cox. Ball Bros, got exclusive rights for that machine, didn't
they?
Mr. Levis. I had nothing to do with it other than to give them
our report.
Mr. Cox. You don't know whether they had exclusive rights?
Mr. Levis. I don't know.
Mr. Cox. I think they did. Now, I want to ask you a few more
questions, and then I think I will have about finished, about certain
cooperative activities between the Owens Co. and the Hartford-Em-
pire Co. under the 1924 agreement as made. If you don't know the
answers, perhaps Mr. Martin will be able to answer the questions.
It is true, is it not, that after that contract was made, the two com-
panies cooperated to the extent of sharing the expense of suing
infringers ?
Mr. Levis. I would prefer Mr. Williams answering up until '29. I
will go from '29 on.
Mr. Cox. Very well ; can you answer that question ?
Mr. Williams. I am sorry; my mind was diverted for a moment.
I heard only half the question.
522 CONCENTRATION OF ECONOMIC POWER
Mr. Cox. Perhaps, Mr. Levis, I miffht grive to you and to Mr.
Williams this memorandum which I think, if you have it before you,
will assist you in answering these questions. This memorandum was
written by" Mr. Carter to you, dated April 12, 1930, and is entitled
"Status of patent infringement suits now pending."
Will the reporter read for Mr. Williams the question which I asked
a moment ago ?
(The reporter reread Mr. Cox's last question.)
Mr. Williams. That is true; yes.
Mr. Cox. For example, Mr. Williams, there was a siiit brought
by Hartford -Empire in the Federal court in St. Louis in 1926 against
dbear-Nester, and the two companies shared the expense of that
suit.
Mr. Williams. I can't answer in detail, Mr. Cox, as to whether
participation was had in any particular suit, or the extent of it. I
simply know there was participation.
Mr. Cox. I think if you look at that memorandum, which I assume
is correct, you will see that these suits are listed there.
I ask you again if that doesn't refresh your recollection as to' the
Obear-Nester suit.
Mr. Williams. I won't say it refreshes iny recollection. I don't
know that I ever knew what particular cases or what particular suits
they participated in. I know Owens did participate in the expense.
Mr. Cox. Perhaps we can solve this this way : Mr. Martin, are you
prepared to identify that as a photostatic copy?
Mr. Williams. The statement is made in the letter that we did par-
ticipate in the St. Louis suit, and I assume it means the Ohear-Nester
case.
Mr. Cox. This is dated April 12, 1930, and states that Hartford-
Empire and Owens-Illinois shared the expenses of suits brought by
Hartford-Empire against Obear-Nester Co., not one suit there but
two, one broueht in 1928 and one in 1929; the expenses of the suit
brought by HaHford-Empire against Nivison-Weiskopf . 1926 ; , a
similar suit against Kearns-Gorsuch Co., 1926; the expenses of a
similar suit brought by Hartford-Empire against the Lamb Glass
Co.; the expenses of a similar suit brought by Hartford-Empire
against the Hazel- Atlas Co.; and the expenses of a similar suit
brought by the Hartford-Empire Co. against the Reed Glass Co. I
should like to have this memorandum admitted in evidence.
The Chaibman. The memorandum may be admitted.
CThe memorandum referred to was marked "Exhibit No. 134" and
is included in the appendix on p. 784.)
Mr. Cox. Now, do you know, Mr. Levis, the circumstances under
which Hartford-Empire and Owens-Illinois, after 1924, shared the
expense of acquiring certain patent rights and the assets of certain
other companies engaged in manufacturing glass-making machinery?
Mr. Levis. No. Mr. Williams does.
Mr. Cox. I shall address these questions, then, to Mr. Williams.
Can you tell us, Mr. Williams, if it is not a fact that the two com-
panies contributed equally to the cost of acquiring the William J.
Miller Engineering Co. and the patent rights of William J. Miller?
Mr. Williams. No, not the company, but the patent rights. What
we acquired there, principally if not entirely, was relinquishment of
COT^CENTKATION OF ECONOMIC POWER 523
Miller's rights in the Patent Office interferences. We had been in
intereference there, both Hartford and Owens, on patents for quite
a long time — extensive hearings, and quite expensive, and I may say
that in the negotiations in which I participated in part the statement
was made by Miller's attorney that he hadn't any great expectations
of getting a patent out for Miller, but it would keep us in the Patent
Office for 5 years, and it was quite important to us to get our patents
out, and we bought Mr. Miller's position in the Patent Office.
Mr. Cox. And shared the expense equally.
Mr. Williams. That is right.
Mr. Cox. Then you bought patents to a feeder known as the Tucker,
Reeves & Beatty feeder, and the expense of that acquisition was
shared by the two companies.
Mr, WHiLiAMS. That is correct. We were in much the same situa-
tion there, in long-winded interferences and particularly with refer-
ence to Hartford's patent and our own. We couldn't get the patents
out, and licensees were becoming very much dissatisfied.
Mr; Cox. Now I come to the O'Neill Machine Co., Mr. Williams.
That was a case where Hartford purchased all the patent rights
covering gob feeding and forming machines, and the Owens Co. pur-
chased the remainder of that business, including the patent rights re-
lating to suction machines. Is that right?
Mr. Williams. I think that is right.
Mr. Cox. So that when the transaction was o^^er the two companies
betweeii them owned everything that the O'Neill Machine Co. had
previously owned — patent rights and physical assets.
Mr. Williams. That was true only as to the United States patents.
We didn't j)nrchase O'Neill's foreign patents.
Mr. Cox. Now I come to the Whitall Tatum patent rights on form-
ing machines. That acquisition was one that was financed by the"
two companies in equal shares, was it not?
]\Ir. Williams. Yes; that is frequently referred to as the Headley
and Thompson application. I hate to refer to interferences so much,
but there agaiji was a situation in which Headley and Thompson
had some very broad claims on forming machines, and I think on
the feeders, at least upon the joint use of the two as a unit. Owens
was in interference, Hartford, I think, two or three others. The
claims were such that if allowed they would have absolutely overlain
not only the use of the Hartford feeder, but also the use of the
Graham machine which we were trying to develop, and which we did
develop through three successive stages that we called, as they got
larger, the A. W.. A. Y., and A. Z. machines. I think I told you
something about their exploitation, especially abroad. The transac-
tion was that Hartford took an option from Headley and Thomp-
son— no, from Whitall Tatum Co., which owned the Headley and
Thompson application and was pursuing its allowance in the
Patent Office to hav^ either an exclusive or nonexclusive license, as
Hartford might elect when the patents came out and the Hartford
people could make up their minds how valuable the patents would
be, and we paid a certain sum — I have forgotten for the moment —
each year to maintain that option, and Owens participated half
and half.
524 CONCENTRATION OF ECONOMIC POWER
Mr. Cox. I want to ask you, I think for the sake of the record, to
give us the year, if you can, when the William J. Miller patent rights
were acquired,
Mr. Williams. That was in July 1925.
Mr. Cox. And that was a going concern, manufacturing machinery,
at the date of that acquisition ?
Mr. Williams. Yes. We didn't acquire Miller's business, how-
ever, just his patent rights, his applications in the Patent Office. That
is what we acquired.
Mr. Cox. When was Tucker, Keeves & Beatty acquired ?
Mr. Williams. That was in August of the same year, 1925.
Mr. Cox. When was the O'Neill Machine Co. acquired? That was
in 1933, wasn't it?
Mr. Williams. 1933, 1 think ; yes.
Mr. Cox. When were the Whitall Tatum rights acquired?
Mr. Williams. The option of which I spoke was abandoned, and
the Headley and Thompson patents in the hands of Whitall Tatum
were purchased — I have a very bad memory for years.
Mr. Cox. I think that was 1933 too.
Mr. Williams. I thought it was '34 ; 1933 then.
Mr. Cox. Very well. Now, I wish to touch briefly on one more of
these transactions, and that is the one relating to the Ed Miller Ma-
chine & Mold Co. Do you know whether that company manufactured
glass machinery ?
Mr. Williams. It manufactured glass working machinery; yes. I
think they were principally in the press, and press and blow machines.
Mr. Cox. And that company was bought by the Ljmch Corpora-
tion, is that correct ?
Mr. Williams. Yes.
Mr. Cox. In order to eliminate details, some of the details of that
transaction, would it be accurate to say that Hartford-Empire Co.
and Owens-Illinois between them furnished the money which the
Lynch Corporation used for that acquisition ?
Mr. Williams. I do know about it ; I think Mr. Levis can tell that
better than I can. I drew some of the papers, but I have forgotten
some of the details.
Mr. Levis. Hartford bought the feeder rights involved and Owens
bought the suction rights involved, and there was a sale of shares of
about $200,000 in cash in which I was one of the underwriters.
Mr. Cox. And with that money the Lynch Corporation obtained, it
bought the Ed Miller Machine & Mold Co. ?
Mr. Levis. Yes, sir.
Mr. Cox. I want to ask a few brief questions about the acquisition
by Owens-Illinois of two other companies : One is the Atlantic Bottle
Co. Do you remember the circumstances of that acquisition?- I am
asking you if you do remember it, that is all.
Mr. Levis. Yes ; I do remember it.
Mr. Cox. That was a company which had been notified that it was
infringing the patents of Hartford-Empire?
Mr. Levis. Yes, sir; it was a member of the IVEiller defense group.
Mr. Cox. A member of the Miller defense group. And after that
notification, you purchased the assets of the company and made set-
tlement with Hartford-Empire as to the infringement claims?
CONCENTRATION OF ECONOMIC POWER 525
Mr. Levis. We purchased the assets subject to a settlement being
made, and that settlement was subsequently made.
Mr. Cox. And I now want to call your attention to the Rawleigh
Glass Co. They used a Nivison-Weiskopf feeder, was it not ?
Mr. Levis. I don't know what feeder the name was, but they used
a feeder.
Mr. Cox. And that company was notified that they had infringed
the Hartford-Empire Co.?
Mr. Levis. Dr. Kawleigh told me that.
Mr. Cox. And you then bought the assets of the company and made
an adjustment witli the Hartford-Empire?
Mr. Levis. No, sir; we got — it wasn't the company, sir. They are
worth as much as we are. We couldn't have bought it. It was a
bottle factory that they had to make their own bottles, and it hadn't
been operated for 2 or 3 years.
Mr. Cox. Just what did you buy?
Mr. Levis. We bought some old batch handling devices and some
machines and trucks and mold shop equipment, a couple of Keller
cutting machines, a lot of assets.
Mr. Cox. And did you settle an infringement claim that the Hart-
ford-Empire Co. had against that company?
Mr. Levis. No; I think he settled the claim. We might have as-
sisted him in doing it.
Mr. Cox. Did you write him' ? .
Mr. Levis. I don't know ; there are some letters that I saw at that
time that I think he wrote. I don't think I wrote any.
Mr. Cox. I will show you a letter and ask you if this doesn't re-
fresh your recollection that you talked to Mr. Goodwin Smith about
settlement of that infringement claim before the acquisition.
(Mr. Cox submitted a letter to Mr. Levis.)
Mr. Levis. Yes, sir; that is my letter.
Mr. Cox. That refreshes your recollection that you did discuss the'
claim with Mr. Goodwin Smith prior to the 'acquisition, and then you
did settle it afterwards.
Mr. Levis. Yes, sir. I don't think there were any settlement
papers drawn, sir. There may have been.
Mr. Cox. One more thing that I want to ask you. Yesterday we
heard some testimony about the Westlake machine. That machine i&
covered by some patents which your company owns, is it not?
Mr, LE^^s. They are owned in the name of the Libbe'y Glass Co.
Mr. Cox. And the last one of those patents expires in 1942, is that
correct ?
Mr. Levis. I presume so, but there shouldn't be any very important
patents on it.
Mr. Cox. There isn't, but there are some patents that expire in
1942?
Mr. Levis. Not to go into detail, but there are two different groups
of patents. There are the machine patents and there is the so-called
burn-off patent. That is the patent that severs the top of the tumbler
and forms the edge. The burn-off patent has some value.
Mr. Cox. They are still in existence?
Mr. Levis. Yes.
526 CONCENTRATION OF ECONOMIC POWER
Mr. Cox. I think that is all as far as I am concerned.
The Chairman. Do any members of the committee desire to ask
Mr. Levis any additional questions?
Mr. Patterson. Mr. Levis, you touched on the French machine a
little while ago and that reminded me to ask you one or two questions
on the foreign market situation with reference to your business. I
should like to ask if any of your glass-making equipment or processes
which you use are subject in any way to control b}^ foreign individ-
uals or by foreign firms ?
Mr. Levis. Well, a number of years before I came to the Owens Co.
they sold their European rights to their developments and machines
to the so-called European Verband Co. That resulted in some litiga-
tion which was settled along about 1930 which resulted in a 10-year
period to run from then in which they had the right to the then exist-
ing patents with nonexporting arrangements; that is, they could not
export the products of that machine into our territory and we could
not into their territory, but I might add tha H never has been a very
practical thing because of the service featuies in containers. There
is very little import of the type of containers that we manufacture,
nor could we export to advantage in their territory.
Mr. Patterson. Now, also for the record, have any of the glass-
making processes or equipment which you control been leased, sold,
licensed, or in any other manner made available to foreign manu-
facturers?
Mr. Levis. Yes; we have sold our equipment and have licensed
manufacturers under our suction equipment.
Mr. Cox. In what countries, Mr. Levis ?
Mr. Levis. Well, you can explain that, Lloyd, better than I can.
Mr. Williams. I will have to go back a little so you will under-
stand names. The basis of the Owens suction machine was the in-
vention by M. J. Owens of what we call the suction feed. Up to
his time, while there were semiautomatic machines that they had
that helped somewhat in the blowing of a bottle, no one had ever
mechanically gotten the molten glass out of the tank into the mold
even where they had a semiautomatic machine. It took an expert
gatherer with a punty rod to reach into the furnace and get a gob
of glass and pull it out and drop it into the mold, and he had the
problem of getting the right quant' ty^ whether he wanted 2 ounces
or 214 or 5 or 10. Owens was the first one to get the glass mechani-
cally from the tank to the mold.
Mr. E. D. Libbey backed him with the finances and in 1895 they
organized the Toledo Glass Co. to carry on Owens' experiment.
They finally got a bottle machine that would work about 1903, and
then the Owens Bottle Co., or rather the Owens Bottle Machine Co.,
was organized at their instance to take the exclusive United States
license for the use of those patents. Then the foreign rights still
belonged to the Toledo Glass Co. Some of them were directly sold as
in (^anada, Dominion Glass Co. ; sold to Mexican firms, and later, I be-
lieve, the ri2:hts were sold in Japan. Then they organized the Owens
European Bottle Co. to which they transferred all the rest of the
foreign rights, and that concern then sold those rights to the Eh-
ropaeischer Verband Der Flaschen Fabriken, Ltd., or G. M. B. H.
As Mr. Levis said, there was some litigation that arose later be-
tween the Verband and the Owens Bottle Co. ; the Verband claiming
CONCENTRATION OF ECONOMIC POWER 527
the improvements of the Owens Bottle Co. That waa denied. It was
not a party to the European agreement^ but it was settled and did give
them — settled about 1930 after litigation in the Federal courts — the
inventions which we then had and were expressed either in patent
form or in application form. We had quarreled over words and inde-
terminate phrases, so we limited it to those things in writing or in
patents or in application form in this country. They could have
Europe as their territory.
Then there is one more thing about it, if you care to know.
Mr. Patterson. Yes, surely.
Mr. Williams. When the Owens Co., in 1916, acquired the rather
inchoate invention and ideas of Joseph Graham, he was using a rather
crudely developed automatic machine and feeder. Owens Co. took
those and developed them and their first development they called the
A. W. Graham type machine. Rights and machines were sold for use
in Sweden, iii Brazil, rights were sold in Canada. I have forgotten
whether machines went there, and then on the second or larger de-
velopment, something like a 10-arm machine, rights were sold to tJie
Soviet Glass Trust. I have forgotten the name for the moment.
It was in Russia. Rights were sold and a machine or two or three
deliveied in Cuba. That, I think, about completes our foreign
developments.
Mr. Patterson. Thank you, Mr. Williams.
There is ju:;t one other question, possibly two, which I have. Has
your company entered into any agreements which in effect restrict ex-
ports and imports of glass products from or to the United States?
Mr. Williams. The only one I recall is the settlement made with
the Verband, settling the pending case in the United States Circuit
Court of Appeals for the Sixth Circuit, and there was the agreement
that neither would export ware into the territory of the other. As
Mr, Levis says, there has been practically no exportation of empty
Ijottles back and forth because they aren't a commodity that lends
itself well to export. That, I think, is the only agreement we have
ever had and, as far as I know, no bottles have ever been exported to
Europe. In any event they can make them as cheap over there as
we can and vice versa.
Mr. Patterson. That leads me to this question. What is the basic
policy of your firm, if you have any, in allocating foreign markets
to foreign licensees? Is there such a policy?
Mr. Williams. No; these machines that I tell you about that were
sold — these A. W. machines in Sweden about 1917 ; the last, I think,
Avas the Russian, something like 1924 or 1925 — I don't recall if in
any of those agreements we had nonexport provisions. The only
one I noAv recall, I may be in error, was in the Verband settlement,
and it was of practically no. moment because empty bottles can't be
carried across tlie ocean profitably.
Mr. Patterson. That is all. Thank you, Mr. Williams.
The Chairman. Mr. Sumners, do you want to ask the witness
anything ?
Representative Sumners. No, sir.
Senator Borah. How many firms are there in the United States
manufacturing milk bottles?
Mr. Levis. I think Mr. Smith stated in his testimony day before
yesterday, 10.
528 CONCENTRATION OF ECONOMIC POWER
Senator Borah. What proportion of those milk bottles are pro-
duced by yourself and by the Empire patents, those under the
Empire patents?
Mr. Levis. So far as I know, they are all produced under machines
that are under the Hartford-Empire patents. We can produce them
on our suction machines, sir, but there is color and service and style
and items of that kind, and the Hartford-Empire machines seem to be
better equipped to produce them than our larger suction machines.
Senator Borah. How is the price of milk bottles fixed in the United
States?
Mr. Levis. I guess by competition, sir.
Senator Borah, Are yoa sure about that?
Mr. Levis. I hope so.
Senator Borah. Well, I hope so, too. Do you think milk bottle
prices are fixed in the competitive world?
Mr. Levis. Well, I can answer it this way, sir. Milk bottles, beer
bottles, and soda bottles are a type of glass container tk^i- is what we
call a reuse item. It doesn't make much difference to tne purchaser
of that whether he pays $10 a gross or $2 a gross. Its only question
of price is as to the cost per trip. If my milk bottle will give 100
trips,' it is worth 50 times more than one that gives 2 trips. It is a
question of style and color and quality. All we have are the Depart-
ment of Agriculture's figures which show that the average last year
was 34 trips. Our selling price on a quart bottle is $5.33 a gross which
would be $0.00109 each, one-tenth of a cent, on the Department of Ag-
riculture trips.
The Chairman. What is that'^gure again ?
Mr. Levis. $0.00109, roughly a tenth of a cent, roughly a in '1.
The Chairman. Per trip?
Mr. Levis. Per trip ; yes. On 34 trips at $5.33 per gross.
The Chairman. That is what the statistician would call the trip
bottle.
Mr. Levis. Well, sir, they are all that. Coca-Cola's average of their
parent company-owned plants was 110 trips per bottle last year.
I have seen dairies in thrifty places like St. Louis and Milwaukee
run over 100 trips. It isn't much a question of price ; it is the question
of price per trip.
The Chairman. What variation is there in the price charged by
these 10 firms which you say are engaged in the manufacturing of
milk bottles?
Mr. Levis, Where we have tested, sir, we run about 58 trips per
bottle and the Department of Agriculture's record is 34.
The Chairman, You didn't understand my question. I say, what
difference, if any, is there in the price charged by these 10 manu-
facturing companies for the bottles which they sell ?
Mr. Le\is. It will range 25 and 30 cents a gross difference.
The Chairman. I don't understand your answer.
Mr. Levis. I am sorry, sir.
The Chairman. I have evidently not made my question plain to
you. Is there any variation in the price charged by these 10 com-
panies for the milk bottles which ^re produced by them ?
Mr. Levis. Yes, sir.; the variation in price is as much as from 25
or 35 cents per gross.
CONCENTRATION OF ECONOMIC POWER 529
The Chairman. I see. How many companies charge the low price
and how many companies charge the high price?
Mr. Levis. It depends, sir, upon how bad they need the business
and where it is.
The Chairman. So your answer is that there is competition among
these firms as to price.
Mr. Levis. I believe so and hope so.
Mr. Cox. I'd like to ask one or two questions along that line, if I
may, of Mr. Levis before any one else resumes a different subject.
Senator Borah. I'd like to know just how definite your knowledge
is as to there being competition in the sale of these milk bottles among
these 10 men, or let me ask first — is it within the power of the
Empire Co. to enforce one price among them all?
Mr. Levis. No, sir.
Senator Borah. Why not, if it wouldn't issue a license except upon
such terms as it sees fit?
Mr. Levis. It never has done it, sir. They may have the legal right,
but as I testified, and I think they do, at no time has there ever
been coupled with what right there may have been any price-control
factors.
Senator Borah. That may be true, but what I am asking is, is it
not within the power of the Empire Co. owning all these patents,
and all others dealing with the subject, to enforce a price if they see
fit to do it, among all? Mr. Smith testified that they would pass
upon the question of whether a man's field of business was sufficient
to justify the issuing of a license. Wouldn't the question of price, and
so forth, enter into that?
Mr. LE^^s. Not to licenses granted without that restriction, sir. I
imagine that license may remain in existence and not be subject to
change.
Senator Borah. I understand that, but suppose a man comes and
asks for a license from the Empire Co. ajid says he wants to go into
business, and the Empire Co. passes upon the question of whether
he should have the license. It may say yes or no, and for any rea-
son in the world that suits it. It may say, "We are not granting
license except upon tlie understanding or the agreement that such
and such a price be charged."
Mir. Levis. It may, sir, but it never has.
Senator Borah. Yes; I know.
Mr, Levis. The other situation, sir, that comes into the equation is
one of the competitive container. If we were to have a high price, a
paper bottle might take all of the business and then we would de-
prive ourselves of our market through our error.
Senator Borah. I understand that, and, of course, that would
interest you, but I am saying now, have they not the power, if they
see fit, having only 10 customei-s in the United States, or 10 firms in
the United States carrying on the business, to say to all these people
who get a license from them, "We are granting licenses only on the
undei-standirig that you charge a certain price."
"We must do that," as Mr. Smith says, "in order to look properly
after our licensees."
Mr. Levis. It is not my opinion that there is any legal right they
have, and even if there were, they have never exercised it.
530 CONCENTRATION OF ECONOMIC POWER
Mr Cox May I ask a couple of questions alon^ the line that Sen-
ator Borah has been pursuing as to milk-bottle prices, Mr. Levis
Let s see you and Thatcher together manufacture about 70 percent
of the milk bottles in the United States, don't you? I am including
your l^acihc coast company. " ^
Mr. Levis. Yes, sir.
Mr.Xox. Now, Mr. Levis, you wouldn't seriously dispute it, would
you, if I suggested to you, if we charted the prices charged by your
company and Thatchel^ it would show that all the chaVs m the
price lists over a period of time occurred for both companies in the
same month and the same year? pinieb in uie
Mr. Levis No. If you warit to embark into the theory of price
policy, which is-quite a large subject, I will be just tickled to death
Mr. Cox. I wouldn't want to go too deep
Mr. Levis. But Thatcher sets a price on milk bottles and Ball
rert^irifl'^ w """' ^^^ T ^^ ^^ ^^^^^^^ 1"^^^ ^''^ Hazel do on
Z 1 1 ?.^* ^' '^''} ^'^ ^^y T'^ th^^ they ask as leaders in
the line, and we are not going to take any less because we think our
goods are as good as theirs.
Senator Borah. That is just the way they fix the price
Mr. Arnold. But you are interested, or have been, or at least there
has been a good correspondence to the effect that y^u are interes ed
m what you might call- stabilization of the industry "'^^^^^f^^'
Mr. Levis. Mr. Arnold, the correspondence is workino- papers with
me I am not interested in anything that has happened" ^ ^
thrnLtr'"'^''- ^!,"^^«i? y«u^^ uncle-those ideas have at least passed
thiough your mmd, and letters to your uncle and your father
corrJspiTnc^e t^olaTeffSr "'"^^' '^^"^^^"^ "^^'^^^ ^^^^ ^^^ --
', c^^i*- ■'"^^f- ^i^"^, ^""^^^^ crackpot that writes us and wants to let
wru!Tl'^''V''J''' ^ "^^"^"^ ^^"^^^ t« P"t in a glass factorv and
writes in longhand, we are not. going to send a m"n to sec him I
mean you have got to terminate. the thing. If I ra„ a hw office I
^"j:;^^Vf^%^7,f^^t every guy that came m '^'' ^
Mr. Arnold But the correspondence doesn't indicate that thev were
fnTi ^°,r.^''^"'" ^^ 1^^^ «f fi^^^^i'^1 ability. As I heai^rju
indicated that you just weren't granting licenses at all '
,Mr. Levis. We gave that as words to express the desire to no longer
'XXir T^'^^J^S ''' f^^^"S-^^t ^^'«"^^^"'t materialize ^''
Mr. Arnold. I see, but at least there is this in the picture Th^
correspondence which we have introduced is very muc at variance
ttVct-^Tn't tKrJet^^' ^^^'^ ^^^ '' ^^^ be^vrong, 1 1 ThaT i^
Mr Levis I could only say tjiat, sir, and perjure myself Mv
that n,»r '■''Y^yhen I came here' this morn'inj that I qualiS
CONCENTRATION OF ECONOMIC POWER 531
joining up with other companies in bringing patent infringement
suits — that all appears at different times as part of what the com-
pany has done, and that your present policy is a matter which can bfr
very easily changed. It is entirely within your power either to follow
your present statement or the line taken by that correspondence.
Isn't that true?
Mr. Levis. Oh, sir^ no more than anyone^ else enjoys that right,,
politically or otherwise. If I have done something wrong
Mr. Arnold (interposing). I wasn't suggesting you had done any-
thing wrong. The purpose of my question was directed to only one
thing, and that is this: The anti-trust division is interested in the
power to limit competition. This is not an investigation of any un-
ethical or immoral conduct on your part. It is an investigation of the
extent of your power, and it had occurred to me that there was a goo<L-
deal of evidence in here that from time to time you had exercised V
that power.
Now specifically, why were you interested in joining u-p with the-
Hartford-Empire and taking half of the burden on infringement
suits, designed, frankly, to stop other people from manufacturing-
glass ?
Mr. Levis. Mr. Williams explained this moaning why we were
interested, and I explained yesterday and this morning that I had no
interest, and if they would cut off the connecting link between the
two at the date October 1, 1935, the chart would be right, because
since then we sold out. We have no interest in it.
Mr. Cox. You still have a cross-licensing agreement there, though.
Mr. Levis. No more than would put us out on those other lines.
They have one' too, haven't they?
Mr. Cox. I am just sensitive about my chart.
Mr. Levis. I am not critical of your chart, but in 1935, that is 3
years ago, Mr. Arnold, we discontinued contributing to those things,
we discontinued taking it, we sold our patents for two and a half
million dollars worth of money to be paid over a° period of two and
a half years. That is what I had always desired to do. I explained it
at length. The only point I want to make, you people have been
awfully nice to us and awfully fair, and your boys have been in our
office for 12 or 13 weeks, and we have turned over, to them and we
have cooperated in every way we could and they have been nice and
fair with us. If out of that 12 weeks' investigation there is nothing-
more serious than I have been confronted with today, I go away
happy.
Mr. Arnold. I think you are taking a very erroneous assumption
on the basis of which this question was asked. There is certainly
nothing serious developed involving you personally in any violation
of the law. That is perfectly true. That wasn't the purpose that .
we sent the people around there. But it does seem to me — and I
wonder if it doesn't seem to you — that there is a power over the glass
business developed through this holding of patents, through the
power to refuse licenses, through the desire to stabilize the industry
and through (I don't use the word in an offensive sense) the ganging
up of these companies on infringement suits, which does not create-
what a person would call a Gomr^etitive situation. Would vou agree-
with that? . ^
532 CONCENTRATION OF ECONOMIC POWER
Mr. Levis. Yes. If these fellows would tell you the facts, Mr.
Arnold, they think I am the greatest opponent to that power that has
come into the industry.
Mr. Arnold. You may be an opponent of the power; your testi-
mony seems to indicate it, but the power is there.
Mr. Levis. You traced it for 25 years and I thought you disposed
of that thing. You finally did it. I am not here to pass
Mr. Arnold (interposing). We might be on the same side, Mr.
Levis.
Mr, Levis. I think we are, sir.
Mr. Arnold. And you would like to give up that power.
Mr. Levis. I have given it up — in 1935, sir.
Mr. Arnold. And as a matter of social policy do you think it
would be a good thing if the Hartford-Empire would do so?
Mr. Levis. I can't answer that,
Mr. Arnold. You can answer as a matter of social policy for the
industry.
Mr. Levis. Is that fair, sir?
The Chairman. I think you have answered; and supplementing
what Mr. Arnold hag said, I think it ought to be made clear to you
and to all other persons who have been summoned here as witnesses
that the purpose of the committee was to be just what these repre-
sentatives of the Department of Justice have been to your company,
according to your statement — fair, seeking to understand a condition.
There is no question of moral turpitude involved here, and I hope, I
really hope, that you never entertained the belief that there was,
because this committee is merely trying to discover, as Mr. Arnold
said and as Senator Borah said, whether or not there exists, as a
result of the patent law, the power to control prices of glassware in
this country. Now that is all we are interested in, and we have not
sought at any time, and I am sure Mr. Cox will agree, to fasten upon
you any sense of guilt,
Mr, Levis, No, sir; you have been very fair, and I only hope that
giving you the benefit of my experience has been what you want.
The Chairman. I think it has been very helpful, speaking for
myself, and I am sure the other members of the committee feel
likewise,
Mr. Arnold. With respect to my question, I was in the hope that
I could get your opinion on the glass industry, even the Hartford-
Empire situation. If you have no opinion, that is sufficient. You .
have met pay rolls and I haven't.
Senator King. I would IDce to ask whether or not the output of
glass containers has increased from year to year during the past 15
years or 20 years.
Mr, Levis, Very much, sir.
Senator King. What is the output now, contrasted with the out-
put 10 years ago or 5 years ago or 2 years ago ?
Mr. Levis. I don't know if I could quote that. I think I h^ve a
schedule here that would show that. I don't find it right now, but
production, as I recall it, has almost doubled in the last 10 years,
somewhat due to the return of beer and whisky.
Senator King. It has considerably more than doubled, has it not,
in the past 10 years — the output ?
CONCENTRATION OF ECONOMIC POWER 533
Mr. Levis. Yes, sir.
This curve shows it, sir. I think I can read from it.
Senator King. I thought I had the figures in my file.
Mr. Levis. In 1928 it was roughly 30,000,000 gross. It went up to
about 32,000,000 gross m '35 ; it went down as low as 25,000,000 gross
in 1933, and last year it was up to about 47,000,000.
Senator King. Is that the highest output?
Mr. Levis. Yes, sir; ever in its history.
Senator King. Forty-seven million gross. Would that embrace
all
Mr. Levis (interposing). That is all of the capacity east of the
Rocky Mountains. The west coast follows almost parallel to it, sir.
Senator King. Then that does not comprise all of the output in the
United States, if I understand you.
Mr. Levis. We can add them together. I have a west coast figure
here also, the peak of which was roughly 3,500,000 gross.
Senator King. Then that would be over 51,000,000 gross With the
increase in the output, what do you say as to the price, whether it
has increased or been reduced?
Mr. Levis. It has decreased, sir.
Senator King. What percent of decrease in the price of the com-
modity, from year to year?
Mr. Levis. The price has gone down from 1925 from around about
$3.75 a gross to a low of about $2.80 a gross in 1933. In 1935 it
returned roughly to $3 a gross, and is now around about $2.90. I
am reading this chart roughly, sir. There are things that influence
price, such as the packages and closures, caps, and types of packing.
In other words, a beer bottle used to be sold in bulk, piled loose in a
car. Today it is sold in a corrugated box. A whisky bottle takes
a more expensive package than a ketchup bottle. This is the price
of the glass in its package, ready to be delivered, so if you were to
take out even that trend of the increased quantity or quality of
merchandise that you give for the dollar, I think the price will
even continue on that decline.
Senator Ki^g. What proportion of the cost would you say should
be attributed to those accessories?
Mr. Levis. About 121/^ percent in packages — about the same as the
freight.
Senator King. So you would deduct 12i/^ percent from the gross
price now in order to reach the level of the price of the glassware?
Mr. Levis. Talking about naked bottles packed.
Senator King. You stated there was competition between the 10
producers. Was that constant, that competition? Was there weekly
or yearly competition?
Mr. Levis. Yes, sir; I think, sir, that we are in competition with
each other and in competition with other containers.
Senator Kjng. What other containers are in competition with
yours ?
Mr. Levis. The tin can, paper milk bottle, and plastic jars.
Senator King. Have they entered the field to any great extent!
Mr. Levis. The beer can did, sir. The paper milk bottle seems
to have made great strides. I know I used to buy tomato juice in
glass, and now it comes in a can. That is why we went into the can
124491— 39— pt. 2 19
534 CONCENTRATION OF ECONOMIC POWER
business. We thought maybe some fellow might change and we could
get him anyway.
Mr. Cox. Since Senator King has asked about price trends, I would
like to ask you if it isn't a fact that the list price of milk bottles in the
industry, at least as between you and the Thatcher Co., remained con-
stant from November 1924, to January 1931, and again from Novem-
ber 1933, to April 1938?
Mr. Levis. I couldn't answer that specifically, but I think maybe
Mr. Martin could. I didn't come prepared for that.
Mr. Cox. I realize you didn't.
Representative Reece. May I ask Mr. Cox if you expect to develop
the question with reference to the right of a concern to license a
patent; that is, the intangible patent, as compared to his right to
license a tangible article which may have embodied in it a patent?
Do you plan to develop those two questions? It seems to me, as I
indicated in one of my questions the other day, that there are two
questions involved; that is, even under our present laws, or maybe
under any policy that Congress might consider adopting, there is one
dealing with the right of a concern to license the patent itself, and
another dealing with a concern's right to lease an article, a machine,
a tangible article, as distinguished from the intangible right,- the
patent itself.
Mr. Cox. I think the best answer I can make to your question, sir,
would be that we plan to show, and I think have shown, if I under-
stand your distinct question, that both practices have been followed
in this industry. That is, they have a leasing of machines and a
granting of a license to use a machine, and you also have the exchange
of patent rights as such, quite apart from any object. I don't know
that we are going to develop it any more than to show that those two
practices exist so far as the presentation of evidence is concerned. I
think it may be a matter of comment in our report. I wouldn't want
you to believe that we were going to have any witnesses to testify
particularly as to that distinction.
The Chairman. Are there any other questions ? If not, the wit-
nesses are excused. We thank you very much.
Mr. Cox. I think, perhaps, since there was so much talk about
these contracts, that, without having them printed, they should be
inserted as original exhibits and identified.
The Chairman. To which contracts do you refer?
Mr. Cox. All contracts between 1924 up to 1935 between Owens-
Illinois and Hartford-Empire,
The Chairman. They may be admitted.
(The contracts referred to were marked "Exhibits Nos. 135 to 141,"
inclusive, and are on file with the committee.)
Senator King. Would you care to express any opinion as to
whether or not it would be advantageous to the glass industry, partic-
ularly to the milk bottle part of the glass industry, if there were no
patent system at all ? That is to say, any person could manufacture
glassware without licenses and without patents.
Mr. Levis. I have a lot of theories on that. It doesn't only involve
(hat, but it involves our opinions on many phases of the patent situa-
tion which Mr. Borkin and his associates asked me to talk to them
about later. I will be willing to do it now if they want it done now.
COXCENTRATION OF ECONOMIC POWER 535
Senator King. If you have talked to them at their solicitation I
have no doubt, that later the matter will be developed. I shall not
press the question now.
Mr. Cox. We have no objection; we would be glad to have Mr.
Levis tell us now what he feels about it.
Mr. Levis. I more or less prepared for the situation in connection
with my discussions on the theories of cross-licensing. I feel that
when a concerji has become large and it has its business established,
and it has an organization that is capable of carrying on its develop-
ments, that that concern then naturally prefers to have compulsory
licensing. It is a means that without an expense to them they can
acquire a right to do certain things without being excluded by these
small interferences; or, in other words, if we can go ahead and
develop the theory of the building of our machines, we having arrived
and been established and having been capable of affording to have
a development in engineering and design organization, we would
much prefer that we could ask for a compulsory license on anything
that interferes with the progress of our development.
On the other hand, we believe that is — what shall we call it — an
incentive for genius, an incentive for capital to invest in the ideas of
genius, that any infant industry or any new idea should be given the
benefits of a patent protection, and we believe that those items are not
inconsistent if the legislation is such that it requires a shorter space of
time in which a patent of one type can be subject to compulsory
licensing or subject to the protection of genius than one that is pur-
chased, say, in order to build up a field.
I think that states it fairly accurately, Mr. Borkin, as I have stated
to you.
Mr. Borkin. That is right.
Senator King. Are you acquainted with the report of the Science
Advisory Board of the patent system, appointed by the Secretary of
Comm'erce a number of years ago ? ^
Mr. Levis. No, sir ; I am not.
Senator King. In which they discussed some of these questions
about compulsory licensing?
Mr. Levis. No, sir; I am not, but I wish I were; I would like to
know more about it.
Senator King. I shall later draw the attention of the committee to
it and perhaps put some extracts of it in the record. I will not burden
the record today.
Tlie Chmrman. Thank you very much, Mr. Levis. We have
profited very much from your testimony.
(The witness was excused.)
Mr. Cox. If I could have 5 minutes adjournment I can bring
another witness.
The Chairman. The committee will stand in recess for 5 minutes.
(Fifteen-minute recess.)
The Chairman. The committee will come to order, please. Mr.
Cox. are jou now ready to proceed?
Mr. Cox. I amT
The Chairman. Will you call your next witness.
Mr. Cox. The next witness is Mr. McNash. Mr. McClure, will you
come up also.
1 SubspqiieDTly entered in rpcord as "Exhibit No. 206," see Hearings, Pait III. appendix.
536 CONCENTRATION OF ECONOMIC POWER
The Chairman. Do you and each of you solemnly swear that the
testimony you are about to give in this proceeding will be the truth,
the whole truth, and nothing but the truth, so help you God?
Mr. MoNash. I do.
Mr. McClure. I do.
TESTIMONY OF J. H. McNASH, PRESIDENT, HAZEL-ATLAS GLASS
CO., WHEELING, W. VA.; AND TESTIMONY OF WALTER H. Mc-
CLURE, VICE PRESIDENT AND GENERAL SALES MANAGER,
HAZEL-ATLAS GLASS CO., WHEELING, W. VA.
Mr. Cox. Will each of you in turn give the reporter your name
and address, and your occupation?
Mr. McNash. J. H. McNash, Wheeling, W. Va., president, Hazel-
Atlas Glass Co.
Mr. MoClure. Walter H. McClure, vice president and general sales
manager, Hazel- Atlas Glass Co., Wheeling.
Mr. Cox. Mr. McNash, the Hazel-Atlas Co. is a company engaged
in manufacturing glass containers, is that right ?
Mr. McNash. Yes,
Mr. Cox. And it is a large manufacturer, in fact it is about the
second largest.
Mr. McNash. The second in size, that is right.
Mr. Cox. Can you give us an approximate percentage of all glass
containers produced by your company?
Mr. McNash. Around 18 percent.
LITIGATION AND LICENSING
Mr. Cox. How long has the Hazel- At],as Co. been in the business?
Mr. McNash. Probably 50 years— predecessor and the present cor-
poration.
Mr. Cox. And you at the present time are licensees of the Hartford-
Empire Co., is that right?
Mr. McNash. That is right.
Mr. Cox. You were at one time, and still are, I understand, a li-
censee of the Owens-Illinois Co., is that right?
Mr. McNash. That is right.
Mr. Cox. Your first license was from the old Owens Bottle Co.
in 1909.
Mr. McNash. That is right.
Mr. Cox. And that license was received in consideration for the
exchange of one-third of your capital stock, is that correct?
Mr. McNash. Correct, $500,000 in our stock, to be exact. "
Mr. Cox. Thereafter that stock was repurchased, was it not?
Mr. McNash. It was.
Mr. Cox. When was that?
Mr. McNash. In 1926, I believe. We paid approximately $3,600,-
000 for that stock.
Mr. Cox. Now, when did you first become a licensee of Hartford-
Empire ?
Mr. McNash. 1932.
Mr. Cox. Prior to that time, had you been engaged in litigation
with Hartford-Empire with respect to patents?
CONCENTRATION OF ECONOMIC POWER 537
Mr. McNash. On a wholesale basis ; yes.
Mr. Cox. How many of those suits were there, can you tell us?
Mr. McNash. There was a suit against the Kearns-Gorsuch Bottle
Co., located at Zanesville, Ohio, a subsidiary of our company. AVe
owned all the shares. I think there were four or five patents in-
volved in that suit. Then the Hazel-Atlas Glass Co. was sued under
: Peiler patent.
Mr. Cox. That is the one we were speaking of as the heated hood
patent ?
Mr. McNash. No; it was the famous stuffing patent. And I think
at a later time than that a suit was entered against the Hazel- Atlas
Glass Co. in Wheeling, W. Va. That suit was never tried.
Mr. Cox. Can you tell us approximately how much money this
litigation cost your company?
Mr. McNash. We have a very good record, I believe, of the legal
expenses involved, but we do not have the record of the expense
involved in the time of people on our staff taken from their jobs,
their various positions in the organization. It would be almost im-
possible to calculate that part of the expense. We have no record
of that.
Mr. Cox. Can you tell us what the legal expense was ?
Mr. McNash. I believe it ran somewhere from 50 to 150 thousand
dollars a year.
Mr. Cox. For as long as this litigation lasted ?
Mr. McNash. Yes.
Mr. Cox. And that again was a suit against the Kearns-Gorsuch
Bottle Co.?
Mr. McNash. Yes.
Mr. Cox. That was about 1925 or '6?
Mr. McNash. I think about '26 or '27.
Mr. Cox. And continued until you accepted the license in '32 ?
Mr. McNash. In 1932.
Mr. Cox. And that figure you gave us a little while ago doesnt
include the expense which you referred to a moment ago as having
been incurred by reason of the time and effort of your regularly em-
ployed officers?
Mr. McNash. And the distraction from the manutacturmg plant;
that is correct.
Mr. Cox. Will yx)u tell ^ig, Mr. McNash, just briefly if you can why
it was that you didn't take a license from Hartford-Empire before
1932?
Mr. McNash. We were fairly well satisfied that the feeding device
used by the Hazel-Atlas Glass Co. was a mechanism entirely of our
own development. We saw no reason why someone should come in
and attempt to control our use of that device.
Mr. Cox. But in 1932 you changed your mind; is that correct?
Mr. McNash. The circuit court of appeals for Philadelphia district .
changed our mind.
Mr. Cox. After that aecision you decided there wasn't any point
in going on with this?
Mr. McNash. No ; we were going on.
Mr. Cox. You were going to petition for certiorari through the
court.
538 CONCENTRATION OF ECONOMIC POWER
Mr. MoNash. Correct.
Mr. Cox. Tell us why, then, you did take a license in 1932 from
Hartford-Empire.
Mr. McNash. The . Hartford-Empire Co. approached us in con-
nection with taking a license and eventually under such conditions
that I think we would have been foolish to refuse.
Mr. Cox. What were those conditions that you think it would have
been foolish to refuse?
Mr. McNash. Whien these negotiations began, our view was a will-
ingness to settle, paying Hartford annually about the amount of our
legal expenses. Those negotiations were handled by me and that was
quite clear in my mind that was all we could do.
Mr. Cox. You thought you might as well pay it to them as to the
lawyers.
Mr. MoNash. That is correct, to be free from the troubles incident
to lawsuits.
Senator King. I suppose the fact that the court of appeals decided
against 5^ou was one of the factors that influenced you to seek a
compromise.
Mr. Cox. I was asking what conditions you thought it would be
foolish for you to refuse a license from Hartford.
Mr. McNash. We were willing to pay the Hartford-Empire Co.
this amount that we were spending for legal services, to free our-
selves from the troubles incident to these various suits.
Senator King. May I ask, do you have any suits against persons
for alleged infringement of your patents?
Mr. McNash. Not to my Imowledge. I am sure we did not have.
Senator King. The company, then, never brought suits for alleged
infringements of your patents?
Mr. Cox. You brought suit back in 1923 with Owens against the
J. T. and A. Hamilton Co.
Mr. McNash. Did it ever amount to very much?
Senator King. I didn't ask the amount. I asked if you brought
any suits.
Mr. McNash. Evidently the Hazel-Atlas did in 1923. I don't
think of any important one.
Mr. Cox. They were joint plaintiffs in suit with Owens-Illinois Co.
Mr. McNash. But I am on the subject now of why I took the
license.
Mr. Cox. That is right ; you were still there.
Mr. McNash. We were willing to pay Hartford that amount. In
addition to that, relieving us of this embarrassing suit situation, the
idea was that we would have call on Hartford development if we
wanted it. As a matter of fact, these negotiations kept changing
from time to time and day to day, and it was apparent that Hart-
ford-Empire could not make such an arrangement with us. Before
we got very far it was necessary for the Hazel- Atlas Glass Co. to
agree to pay damages, because according to their judgment we were
in the position all these years of having used their device and paid
nothing for the use.
Mr. Cox. How many years did the claim that the Hartford people
make cover?
Mr. McNash. Of course, these suits were brought at different times
and the suit against Kearns-Gorsuch didn't necessarily pile up the
damage against Hazel-Atlas. The Hazel damages piled up after the
CONCENTRATION OF ECONOMIC POWER 539
suit was filed in Pittsburgh, or the notice of that infringement. I
don't know what the total amounted to : T would say, in a general way,
$2,000,000 or $2,600,000, or thereabouts.
Mr. Cox. That was the contingent Tiability which you faced if
you lost the contest.
Mr. MoNash. That is right.
Mr. Cox. Go on now.
Mr. McNash, So we said that if other things were reasonable
we would agree to pay damages, to cut that out. In addition to that,
we insisted that our position in this industry be no different than
the position of the then Owens-Hlinois Glass Co.
Mr. Cox. Why did you insist on that ?
Mr. McNash. We were a licensee of the Owens-Illinois Glass Co.,
for all their development.
Mr. Cox. That was under the 1904 agreement ?
Mr. McNash. 1908 or 1909; for all their development. Of course,
the Owens contention was that development applied to suction only.
Our view was broader than that. However, that point never has
been litigated. Maybe it is just as well it hasn't, but it hasn't been
litigated.
Mr. Cox. You haven't had to pay lawyers for that?
Mr. McNash. Not on that point. At one time in the relation be-
tween Owens and Hazel as the result of that 1909 license, Mr. M. J.
Owens arranged with our Mr. J. C. Brady for us to turn over to
Owens the title to our Brookfield patent. The understanding was
that the Owens Bottle Co. — then the Owens Bottle Co. — would sue
the Hartford-Empire Co. They did sue, but under the Lott patent,
not Brookfield. Before that suit had gotten very far, it was apparent
that negotiations were on between the Owens Bottle Co. and the Hart-
ford-Empire Co., and you heard Mr. Williams say that among the
patents in the cross-licensing of Owens Bottle and Hartford-Empire
was this Brookfield patent they had gotten from us. As I said a while
ago, we also contended we were entitled to all of the development. Our
working arrangement with the Owens Bottle Co. as a result of the
1909 agreement and the fact that they had 500,000 shares of our stock,
was necessarily a very close working arrangement, so we felt fully
justified in insisting that if this suit in question was to be comproniised,
it had to be compromised on the basis that at least we were in as
good a competitive position as the Owens-Illinois Glass Co., and that
eventually was worked out.
Mr. Cox. Now tell us, briefly, if you can, what the provisions of
that settlement agreement were. Perhaps it would be quicker if we
did it this way. Would it be accurate to say under that agreement,
you agreed to pay the regular royalty rate to Hartford for the
machines which you were using then ?
Mr. McNash. That is right.
Mr. Cox. Although those were not machines which you got from
Hartford-Empire in the first instance?
Mr. McNash. That is correct.
Mr. Cox. Not machines that they had had built?
Mr. McNash. That is correct. We are using today, I think, one
Hartford-Empire feeder.
Mr. Cox. And yet you are paying royalty to Hartford on all your
machines.
540 CONCENTRATION OF ECONOMIC POWER
Mr. McNash. That is right.
Mr. Cox. And in return for that agreement on your part to pay-
royalty at regular rate, Hartford-Empire was to pay you one-third
of its divisible income. Is that correct ?
Mr. McNash. That is correct.
Mr. Cox. And that divisible income was the same kind of income
that was defined this morning ; that is, it was income from royalties,
profit on manufacturing, license fees over the cost.
Mr. MoNash. You have it better than I have.
Mr. Cox. Those were the items. In other words, roughly speak-
ing, it was Hartford's income from patents and patent rights, includ-
ing infringement suits, and deduction was to be made from that, and
you were to get one-third of that.
Mr. McNash. That is right.
Mr. Cox. Is that contract still in effect ?
Mr. McNash. Yes, sir.
Mr. Cox. How long does it run?
Mr. McNash. About 1945.
Mr. Cox. You have prepared and sent to us some figures.
Mr. McNash. Before we get onto that, I think this contract thing
probably should be talked about a little more. I don't know that our
relation with Owens had any particular effect on Hartford-Empire.
I think the thing that disturbed Hartford-Empire was we were going
to make every effort to get to the Supreme Court of the United States.
I think in addition to that, they fully realized the resourcefulness of
our organization and experience in the practical application of feed-
ing devices of all kinds.
Mr. Cox. You were a large company ?
Mr. McNash. A lar^e company.
Mr. Cox. You were m a position, if you cared to, to fight on?
Mr. McNash. That is right. And we had that experience. That
experience might have been very attractive to Hartford-Empire Co.
In addition to that, we had a fairly large array of patents. Just
■what they were worth, I don't know. We never utilized them to any
extent in establishing them generally.
Mr. Cox. If you had been a smaller company with less resources,
the story would have been quite different, wouldn't it?
Mr. McNash, I don't know as to that. But I do believe, though,
that the Hartford-Empire Co. had a very large and great respect
for our ability to apply these things. I might add, too, that we had,
after this Philadelphia decision was against us, made quite a few
changes in our feeding device. We made quite a lot of progress
along that line, I think, in the direction of probably having those
patents — rather, those feeders — come outside the patent involved in
the Pittsburgh case. That is only our view. I have never wished
to test it. It might have meant other lawsuits had that continued;
it probably would have. But we did surprise ourselves in what we
were able to accomplish in the way of changing our feeders to come
outside the scope of that Pittsburgh • patent. I have every reason
to believe that Hartford was aware of just what we were doing in
that respect.
Mr. Cox. Of course, if you had done that you would have faced
some more litigation.
CONCENTRATION OF ECONOMIC POWER 541
Mr. McNash. Lawsuits; that is right.
The Chairman. Mr. McNash, I understood you to testify that in
conducting your negotiations with the Hartford-Empire for the
settlement of this litigation, you intended that your company should
be put in at least as good a position as that occupied by the Owens-
Illinois Co,
Mr. McNash. That is right.
The Chakman. Now what was that position as you saw it?
Mr. McNash. The position that they secured in their arrangement
with the Hartford-Empire as of 1924.
The Chairman. And just what was that?
Mr. McNash. They were contributing to the patent experience of
Hartford-Empire and also the engineering experience of Hartford-
Empire, in exchange for half the so-called divisible income of
Hartford.
The Chairman. And what position were you fearful of being put
into if you had not insisted upon this equal treatment?
Mr. McNash. We either had to beat Hartford-Empire's conten-
tion in the courts or pay royalty to the extent of approximately eight
or nine hundred thousand dollars a year, maybe a million dollars a
year that the Owens would not be paying.
Mr. Cox. It placed you at a competitive disadvantage against
Owens.
The Chairman. And the final result was that although you use
only one of the Hartford-Empire machines, and all of the other ma-
chines which you use are those which you developed yourself but the
patent on which was in litigation, you now pay to the Harford-
Empire royalties upon all of these machines and receive in return
one-third of the divisible income of the Hartford Co.
Mr. McNash. That is correct.
Representative Sumners, Mr. McNash, you said awhile ago that
during this period of uncertainty and of negotiation you had made
some improvements in order to bring, as you hoped, your processes
outside of the patents of the other concern. Were they patented or
were patents applied for on these improvements?
j\Ir. McNash. No ; we have never been very patent-conscious.
Senator King. Your company did have pc<?tents, did it not?
Mr. McNash. Oh, yes.
Senator King. Were they patents which were the invention of
representatives of your company as predecessors or members of the
corporation ?
Mr. McNash. That is right; employees of the corporation.
Senator King. And how long had your company been in existence
when this litigation commenced, based upon patents which you had
taken out?
Mr. McNash. You mean the company in existence or the patents ?
Senator ICing. The patents.
Mr. McNash. They had been in existence quite some time.
Senator King. And was it the contention of the Hartford-Empire
that your patents infringed patents which they owned?
Mr. McNash. Patents and the devices we were using" infringed
theirs.
Senator King. You contended there was no infringement.
Mr. McNash. That is risrht.
542 CONCENTRATION OF ECONOMIC POWER
Senator Kino. And litigation then followed for several years.
Mr. McNash. Quite some years.
Senator King. At considerable cost to your company, and finally
the circuit court of appeals decided you had infringed their patents.
Mr. MoNash. That is right.
Senator King. And then this compromise was effected to which you
have referred.
Mr. McNash. That is right.
Senator King. Did the action of the Owens Co. which had a $500,-
000 interest or stock in your corporation have any influence in effect-
ing the compromise?
Mr. McNash. None, because they owned no stock in our company
at that time. The Owens Bottle Co. holdings in our company were
repurchased by us, I think, in 1926.
Senator King. So at the time the compromise settlement was made,
the Owens Co. did have no interest whatever in your company.
Mr. McNash. That is right, and have not had since, neither the
Owens-Illinois or Owens Bottle.
Senator King. What circuit court of appeals decided adversely
to you ?
Mr. MoNash. The one in Philadelphia.
Mr. Cox. The third circuit opinion, written by Judge Buffington.
Senator King. Have you the date?
Mr. Cox. Just a moment and I will give you the citation. It is in
Fifty-ninth Federal Reports (2d), page 399.
Mr. McNash, would it be accurate to say after this- contract was
made, the result was that the divisible income of Hartford was split
in three ways, one-third to Hartford, one-third to Owens, and one-
third to you, instead of having been split two ways as before?
Mr. McNash. That is right.
Senator King. Were you to be the beneficiary of any patents which
the Hartford Co. might acquire after that settlement? If they ac-
quired new patents which contributed to the development of the
industry, were you to have any benefits?
Mr. McNash. Yes; that is right.
Senator King. So any patents that they have acquired or may
acquire, your corporation becomes a beneficiary?
Mr. MoNash. That is right, during the life of the contract.
The Chairman. What is the life of the contract ?
Mr. McNash. Until 1945.
Representative Sumners. What is the divisible income?
Mr. Cox. The divisible income, Congressman, in a sentence, is all
of the income of Hartford-Empire from patents and patent rights,
less a deduction which in the beginning was $600,000, and from 1932
to 1935, I think, was $850,000. Is that right?
Mr. McNash. I think so.
Tho Chairman. Was that the overhead?
Mr. Cox. I don't know. We have tried to develop that. I don't
know what the $600,000 was, or the $850,000. That is just a thing
that was deducted.
Now, while this contest was going on between you. and Hartford-
Empire, Mr. McNasli, it was true, wasn't it, that there were a number
of smaller glass companies who were also charged with infringement
CONCENTRATION OF ECONOMIC POWER 543
of the Hartford patents, who were rather waiting to see what the
outcome of the battle was going to be ?
Mr. McNash. That is right.
Mr. Cox. So that if before the decision of the court of the third
circuit we have just referred to, a chart like that had been drawn,
there would have been a far larger number of companies on the ex-
treme right which would not have been licensees.
The Chairman. You are now referring to "Exhibit No. 113." ^
Mr. Cox. That is right, "Exhibit No. 113." Have you seen the
chart ?
Mr. McNash. I see it in front of me.
Mr. Cox. And after you took a license from Hartford-Empire, it is
true, isn't it, that a substantial number of those smaller companies
also took licenses?
Mr. McNash. That is true.
Mr. Cox. Did you at any time take any part in attempting to
persuade any of those companies to take a license in the Hartiord-
Empire, Mr. McNash?
Mr. McNash. I did not.
Mr. Cox. You didn't talk to them about it or advise them?
Mr. McNash. I did not.
Mr. Cox. You felt that was none of your affair ?
Mr. McNash. None of my affair.
Mr. Cox. You didn't ever, in the case of the Brockway Glass Co.,
attempt to persuade them ?
Mr. McNash. I don't think the Brockway people ever talked to me.
Mr. Cox. Would you make the same answer with respect to the
Tygart Valley Glass Co.?
Mr. McNash. The Tygart Valley Glass Co, never did discuss this
question with me. Of course, their plant being in the same town in
which we have three plants, their manager, I think, occasionally did
talk to our general factories manager located there, but I am satis-
fied that our general factories manager did not advise the Tygart.
Valley Glass Co. what they should or should not do.
Mr. Cox. I think I Avill ask you again about these figures which you
gave us which show the royalties which you paid to Hartford between
1932 and date, payments received by you from Hartford. Will you
look at those?
Mr. Cox. We will just use the letter, then, if that is satisfactory.
Mr. McNash. Right.
Mr. Cox. This letter shows that vou have paid to Hartford-Em-
pire, from 1932 to the end of the first 9 months of 1938, $5,770,140.97 ;
that Hartford-Empire has paid you $6,528,660.94.
Mr. McNash. That is correct.
Mr, Cox. So that you have a net gain on that transaction of about
a million dollars,
Mr. McNash. Well, to be exact, it is $750,000.
Mr. Cox. $750,000. May I have this letter marked in evidence ?
The Chairman. It may be so marked.
(Letter referred to was marked "Exhibit No. 142" and is included in
the appendix on p, 787.)
' See appendix, p. 762.
544 CONCENTRATION OF ECONOMIC POWER
Senator King. You received more than you paid? Was that one-
third of the divisible income?
Mr. McNash. That is right.
Senator King. I didn't quite understand, if you explained, why you
got more,
Mr. McNash. i think I should say that the contribution we received
was greater than anyone had in mind that it might be at the time the
1932 license was negotiated with the Hartford-Empire Co. My own
view of it was that it would cost us between $100,000 and $200,000 a
year. The transaction turned out better than I thought it might.
Senator King. You paid in royalties, if that is the proper term, to
the Hartford Co., at $5,000,000 plus, and received in return dividends
of that divisible income, $6,000,000 plus.
Mr. McNash. Well, you can call it whatever you will. The fact is
that we participated in the divisible income of the Hartford-Empire
Co.. in consideration for what they got from us.
Senator King. I understand.
Mr. McNash. It happened that that was greater than the amount
of money we paid in.
Mr. Cox. Now, the effect of that agreement and of those payments
has been, has it not, Mr. McNash, that you have been receiving a
share of the royalty payments made by other licensees to Hartford-
Empire?
Mr. McNash. That being in the divisible income, we have.
Mr. Cox. And of course, since 1935 you are the only company which
does share that income.
Mr. McNash. The Owens having sold theirs for $2,500,000.
Senator King. Did you surrender to the Empire Co. in this
transaction .settlement j^our right, title, and interest to the patents
which you claimed?
Mr. McNash. That's right.
Senator King. So you claim to have sold patents which had value
in this transaction ?
Mr. McNash. And then this accumulation of years of experience in
the application of these devices.
Mr. Cox. Was it your opinion, Mr. McNash, that the result of that
situation has been to give you any competitive advantage as against
licensees who do not share ?
Mr. McNash. Probably it has. I think that I should say this:
I think I should say further in that connection, as was brought out
today, the larger companies in the glass industry are able to take
care of their own research and engineering problems, and do. The
smaller concerns are not in that position. The Hartford-Empire Co.
is rendering us no service. The Hartford-Empire Co. is rendering
its smaller companies or licensees a real service.
If a licensee of the Hartford-Empire Co., as I understand it; using
their devices, has meclianical difficulties or glass difficulties, the Hart-
ford-Empire Co. have a well qualified staff to assist in the solution
of those difficulties. They are available at all times to the licensees.
We don't call on that service. As a matter of fact, speaking for the
Hazel-Atlas Glass Co. alone, w« are constantly building up an ex-
{)erience that is available to the Hartford-Empire Co. to give to the
licensees. Anything we do is at their service.
CONCENTHATION OF ECONOMIC POWER 545
Mt. Cox. Are you speaking of the patents now?
]\Ir. McNash. I am speaking of practical application of devices in
operation.
Mr. Cox. That is more a matter of experience than patents or
patent rights?
Mr. McNash. That is right.
Mr. Cox. You don't get any of this service from Hartford-Empire,
and you don't give it to anyone except Hartford-Empire?
Mr. McNash. That's right.
Representative Sumners. On what basis is this service rendered?
What compensation is given to the Hartford for this service?
Mr. McNash. By its licenses. It is in the royalty the licensees
pay.
Representative Sumners. Suppose a small concern Avants the assist-
ance of an engineer of the Hartford-Empire Co. to help them with
some difficulties they have.
Mr. ?v^cNash. I don't believe there is any charge made for it. It
is in the royalty they pay.
Representative Sumners. You mean, they have paid for that?
Mr. McNash. That is what they are really paying for. It is royalty,
but they really are paying —
Representative Sumners (interposing). I've got it.
Now, another question, if you please. What did the patents and
other things that you transferred to the Hartford-Emjjire Co. cost
you? Have you any estimate of that?
Mr. McNash. I don't think very much, because m m<jst of the in-
stances it was a matter of our own development.
Representative Sumnkrs. Of course, you did nave to make some
compensation to the person who made them, but you . never have
estimated that?
Mr. McNash. No.
Mr. Cox. Yoii never made any income to speak of from those
patents, from licensing them to others?
Mr. McNash. We never have been in the licensing business. We
are glass manufacturers.
Senator King. You utilized those patents before the alleged in-
fringement and before the settlement and you got the benefit of your
own patents in the production of your machines in your factory,
which production was sold to the general public.
Mr. McNash. That is right.
Mr. Cox. Those patents, then, except for the use you made of the
inventions which they covered for your own business, ultimately
proved to be of value to you largely because of the bargaining posi-
tion they gave you with the Hartford-Empire?
Mr. McNash. That, plus our experience in the application of glass
manufacturing devices.
.Mr. Cox. And those two things, plus the fact that you had re-
sources enough to continue the battle, are the things you testified a
moment ago you thought led finally to the ultimate settlement with
the Hartford -Empire Co.
Mr. McNash. I think so.
Senator King. I would like to ask one question, if I may. As a
result of this agreement, did your corporation assume a larger field
546 CONCENTRATION OF ECONOxMIC POWER
in the production, a larger part of the field of production, and obtain
any monopolistic advantages?
Mr. MoNash. I would say no. Understand, now, our manufacture
of glass has increased, because the volume has increased in the
industry.
Senator King. Did you attempt, in view of that settlement, to re-
strict competition or join any other persons?
Mr. McNash. Positively not.
Senator King. And have you, during the life of your organization
and particularly since the agreement to which you have referred, at-
tempted unfair practices or engaged in the destruction of competition
in the product of your factory or the product of others ?
Mr. McNash. We do not think we have.
Senator King. Has there been reasonable competition, fierce or
otherwise, between you and other manufacturers?
Mr. McNash. There is reasonable competition in the industry.
Senator King. Have the prices of your commodities been reduced
during the past 15 or 20 years ?
Mr. McNash. They have. I have in mind especially in the wide
mouth line, in which we are a large factor, used for the containing
of food products. Our price level today is below the level in effect in
1913. In 1913 we were paying 12 to 14 cents an hour for common
labor. Today we are paying 571/^ cents for common labor. In spite
of that, our price level today is below what it was in 1913.
Senator King. Is it below what it was 10 years ago ?
Mr. McNash. Ten years ago would make it 1928. It is verv much
below 1928.
Senator King. You are cheapening, then, your product, as the
years go by.
Mr. McNash. That is our constant aim in order to increase the u.-e
of glass.
Representative Sumners. How much, and to what percentage, has
your labor volume, in proportion to productivity, decreased during
those years?
Mr. McNash. I cannot give you an exact figure in that respect. Of
course, there has been a tremendous increase in the productivity per
man.
Representative Sumnebs. By reason of improvement in machinery?
Mr. McNash. That's right, but actually as a result of, especially
for our company, the use of glass having increased so rapidly that
today we are employing more people than we ever have in our history.
Representative Sumners. Can you give us an opinion as to tlie i>er-
centage of increase of productivity of the individual in that period
from 1913 to now?
Mr. McNash. No; I cannot. I can give you, I think, a very inter-
esting instance.
Representative Sumners. If it won't take too much time.
Mr. McNash. Mr. Levis testified today in connection with ti\e
Owens machine. I can subscribe to what he said in that connection
with respect to the operation of an Owens machine. The Hazel-
Atlas Co., a<? the record shows, had a license from 1909 to. use Owens
machines. We had seven furnaces equipped with Owens machines.
Senator King. That is a suction machine?
CONCENTRATION OF ECONOMIC POWER 547
Mr, McNash. That is a suction machine. Even during that time,
however, the preponderance of our operation was feeder. We never
were very successful in the operation of an Owens machine in our
wide-mouth field, and as a consequence of that, we eliminated its use.
We began a the Hazel No. 2 plant in Washington taking one furnace
at a time and converting it from Owens operation to feeder operation.
When that whole plant was changed the production had increased
to the point that we had to shut down two other plants to keep a
semblance of activity in this Hazel No. 2 plant. The fact of the
matter is that we made on one furnace under extreme conditions
almost as much glass as we made on four Owens furnaces in that
plant.
Representative Sumners. Did you increase the number of persons
operating that furnace ?
Mr. McNash. It takes more people to operate feeders than it does
an Owens machine, but in our judgment there are other compensa-
tional advantages.
Representative Sumners. May I ask you one question? Did you
build that Owens machine yourself or did somebody else build it and
install it?
Mr. McNash. We purchased those machines, I think, from the
Kent Machine Co.
Representative Sumners. Is that machine company engaged in the
business of making
Mr. McNash (interposing). I don't know where they are now.
Senator King. In the aggregate, is your pay roll now larger than
it was in 1913, 1914, or 1915, or any intervenmg period?
Mr. McNash. Oh, decidedly.
Senator King. Wages are higher and pay roll is larger, and the
same or more employees than you had a few years ago ?
Mr. McNash. I said now. I should have said in 1937, when we
were employing more people than ever in our history, because 1938
is not as good a year as 1937, and our operations are not as large.
Mr. Cox. I have about three questions I could ask Mr. McClure. I
can dispense with him hereafter.
The Chairman. Proceed.
Mr. Cox. Mr. McClure, you are the vice president and sales man-
ager of Hazel-Atlas?
Mr. McClure. Yes.
Mr. Cox. Do you have with you a copy of the reply you gave to us
to a questionnaire we sent you with respect to this ?
Mr. McClure. I have, but I left it at the hotel.
Mr. Cox. I will read to you some excerpts from your replies which
you may recognize, because I want to ask you some questions about
them. In answer to question No. 3 in that questionnaire you said,
"Hazel-Atlas Glas^ Co. initiates the prices covering wide-mouthed
container ware, and the Hazel-Atlas price list for ware of this class
constitutes the recognized market price of the industry."
Is that to be understood as meaning that the tendency in the in-
dustry is, when you change your price for that class of ware, the other
companies manufacturing that class f>4 ware also change their prices,
so that if your price goes up, their price goes up; if your price goes
down, their price goes down? '
548 CONCENTRATION OF ECONOMIC POWER
Mr. McClure. Yes, sir,
Mr. McNash. It doesn't vary that rapidljj though.
Mr. Cox. That is generally true, is that right?
Mr. MoCluee. Generally speaking.
Mr. Cox. You also say, "As to prices on proprietary and prescrip-
tion ware we adopt the schedules of the Owens-Illinois Glass Co. and
make their prices ours."
Mr. McClure. That is correct ; yes, sir.
Mr. Cox. I will quote again :
The same conditions as regards proprietary and prescription ware apply in
connection with our liquor ware lists and our heer bottle lists. We are rela-
tively small operators in these lines, and follow the market as established
by the leaders in these branches of the industry.
Does that mean, as you state above, that you adopt the schedules
of the Owens-Illinois Glass Co. for those lines of ware?
Mr. McClure. Yes; I might say we have only about three liquor
accounts, and not many more than that in the beer business.
Mr. Cox. I am quoting again from your reply. "As to fruit jars,
for similar reasons we adopt the prices as published by the Ball
Bros. Co, as our prices for fruit jars, jelly glasses, and fruit jar
tops."
Mr. McClure. That is correct.
Mr. Cox. "We initiate our own prices for automatically made
pressed tumblers and tableware." That is not commonly regarded in
the industry as a branch of the container manufactory.
Mr. MoCluke. No; but they are parallel lines, and you wanted
information on all of them, containers ' and otherwise.
Mr. Cox. "We initiate our own ])rices on opal ware for the cosmetic
and drug trade." That is correct?
Mr. McClure. That is correct.
Mr, Cox. You meant by that the tendency was for the other per-
sons in the industry to follow your prices?
Mr. McClure. No, sir; we have only one competitor in that line,
the Carr-Lowrey Co., in Baltimore.
Representative Sumners. To what degree, if any, is there compe-
tition in quality and style in this glassware? Has that gone into the
record ?
Mr. Cox. I don't think tliere is much about that. I will ask some
questions now about that. I will start first with the proprietary and
prescription ware. You sa}^ you adopt the schedules of the OVons-
Illinois Glass Co. as far as prices are concerned. Is there competition
between the two companies as to the quality of that ware?
Mr. McClure. I don't know that there is ; no.
Mr. Cox. You think one piece of prescription ware is probably
Mr. McClure (interposing). We make no prescription ware at all.
Mr. Cox. What about the proprietary ware?
Mr. McClure. We haven't had a great line of business in that.
We have molds and publish a price list and solicit the trade and
have some few accounts of a rather small natuffi in that line. I am
speaking now of narrow-neck ware. Of course, there are some drug
store items that we make in rather large quantities, but they come
under broad, wide-moutli schedules.
CONCENTRATION OF ECONOMIC POWER 549
Mr. Cox. Would you say there was competition as to quality
there ?
Mr. McClure. There is some competition.
Mr. Cox. Each one trying to make a better jar, or whatever it
may be, than the other manufacturer ?
Mr. McClure. I assume so. We try to make the best we can.
Mr. Cox. Does the physical quality differ very much from manu-
facturer to m.anuf acturer in your opinion ?
Mr. McClure. The quality between manufacturers? Oh, there
is some difference.
Mr. Cox. A great deal of difference, do you mean ?
Mr. McClure. I wouldn't say a great deal ; no.
Mr. Cox. What about your beer bottle and liquor ware bottles?
Is th^re a great difference in quality there between the bottles you
make?
Mr. McClure. We think ours are about as good as are made. I
wouldn't admit otherwise.
Representative Sumners. That is enough, Mr. Cox. Thank you.
Senator King. Might I ask one question. It isn't quite germane.
Has there been any increase in the price of the bottles which you have
turned out from the factory for the drug trade since the passage of
the Miller-Tydings bill and the Patman bill ?
Mr. McClure. I would say no. I know nothing about the Miller-
Tydings bill except that there is such a thing. I think not. When
was the Robinson-Patman Act — it was passed in '36. There was
some upAvard revision then. In '37 they advanced — they had been
declining from '34 — owing to the pressure of rising cost.
Mr. Cox. I want to read you one more paragraph from the ques-
tionnaire, and I shall be through. You say, "We cannot, of course,
get more for our goods in this category than can the Owens-Illinois
or any other recognized competitor, and to greatly deviate below
these levels would result only in our figures being met by competition.
The reason for all this is because the Owens-Illinois and, to the same
extent, as a matter of ratio of proprietary and prescription business
to the total, some of our other competitors, are stronger in those lines
than we are, and being more or less a secondary factor in the manu-
facture of these lines, we follow the lead of the larger interests."
Do you remember that?
Mr. McClure. I do.
Mr. Cox. And that, you think, is a substantially accurate state-
ment?
Mr. McClure. I think so, according to my knowledge of the situa-
tion.
Mr. Cox. I think that is all I have of this witness.
The Chairman. Are there any other questions to be asked of either
of these witnesses?
Mr. Cox. I want Mr. McNash tomorrow morning. I think I have
finished with Mr. McClure.
The Chairman. The committee stands in recess until 10:30 to-
morrow morning.
(Whereupon, at 4: 35 p. m., an adjournment was taken until Thurs-
day, December 15, 1938, at 10 : 30 a. m.)
124491— 39— pt. 2 20
INVESTIGATION OF CONCENTRATION OF ECONOMIC POWER
THURSDAY, DECEMBER 15, 1938
United States Senate,
Temporary National Economic Committee,
Washington^ D. C.
The committee met at 10:50 a. m., pursuant to adjournment on
Wednesday, December 14, 1938, in the old caucus room, Senate Office
Building, Senator Joseph C. O'Mahoney presiding.
Present: Senators O'Mahoney (chairman) and King; Eepresenta-
tive Reece; Messrs. Henderson, Arnold, Patterson, Berge, and
Peoples.
Present also : Department of Justice Staff for Temporary National
Economic Committee study — counsel, H. B. Cox (Special Assistant
to the Attorney General) ; Joseph Borkin, Ernest Meyers, Charles
L. Terrel, Benedict Cottone, David Clarke, George Dession, Fowler
Hamilton, H. C. Engelbrecht, Victor H. Kramer, J. M. Henderson,
Monroe Karasik, Irving Glickfeld, Hyman Ritchin, Norman Bursler,
and Seymour Lewis; also chief counsel for Federal Trade Commis-
sion Temporary National Economic Committee study, George W.
Williams.
The Chairman. The committee will please come to order. Mr.
Cox. are you ready to proceed.
Mr. Cox. I am, sir. The first witness this morning will be Mr.
F. C. Ball. Mr. Bracken, will you be sworn, too? Mr. Bracken will
be sworn.
The Chairman. Do you and each of you solemnly swear that the
testimony you are about to give in this proceeding shall be the truth
the whole truth, and nothing but the truth, so help you God ?
Mr. Ball. I do.
Mr. Bracken. I do.
The Chairman, Proceed.
TESTIMONY OF FRANK C. BALL, PRESIDENT, BALL BROS., MUNCIE,
IND.; A. M. BRACKEN, ASSISTANT TREASURER AND COUNSEL,
BALL BROS., MUNCIE, IND.; and E. W. McCALLISTER, PATENT
ATTORNEY, PITTSBURGH, PA.— Resumed
Mr. Cox. Mr. Ball, will you give the reporter your name and
address ?
Mr. Ball. Frank C. Ball, Muncie, Ind.
Mr. Cox. Mr. Bracken, will you do the same?
Mr. Bracken. A. M. Bracken, Muncie, Ind.
Mr. Cox. Mr. Ball, you are president of the Ball Bros. Co. ?
Mr. Ball. I am.
Mr. Cox. That company majiufactures glass containers?
Mr. Ball. Yes, sir.
Mr. Cox. Principally fruit jai-s?
551
552 CONCENTRATION OF ECONOMIC I'OAVEK
ISIr. Ball. Yes, sir.
THE FRUIT JAR PRODUCERS
Mr. Cox. Could either you or Mr. Bracken gi^-e us an approximate
figures as to the percentage of fruit jars which in any given year are
manufactured by your company? If I should suggest around 60
percent, would that be substantially accurate?
Mr. Ball. That is about right.
Representative Reece. That is, Mr. Cox, of all the fruit jars in the
country ?
Mr. Cox. Of all the fruit jars in the country.
Mr. Ball. That refers to fruit jars only.
Mr. Cox. How long have you been manufacturing fruit jars, Mr.
Ball?
Mr. Ball. Since 1882.
Mr. Cox. You were one of the licensees under the original Owens
suction machine, were you not?
Mr. Ball. Yes, sir.
Mr. Cox. Do you remember M^hen you obtained that license?
Mr. Ball. In 1909.
Mr. Cox. And you are now a licensee of the Hartford-Empire Co.?
Mr. Ball. Yes, sir.
Mr. Cox. How long have vou been a licensee of the Hartford-
Empire Co., Mr. Bali ?
Mr. Ball. Since 1933.
Mr. Cox. Had you at any time before entering into the negotiations
which led to that license agreement negotiated with Hartford-Empire
with respect to obtaining a license under their patents ?
Mr. Ball. Before that time we had some little discussion, but not
to any extent.
Mr. Cox. Nothing ever came of it ?
Mr. Ball. No.
Mr. Cox. That was about in 1926?
Mr. Ball. In that neighborhood.
Mr. Cox. Were you interested at that time in obtaining a license
from Hartf ord-Enipire ?
Mr. Ball. No, sir; not particularly.
Mr. Cox. It was a matter, rather, of that company approaching you
than of you approaching that company ?
Mr. Ball. Yes, sir.
Mr. Cox. Now, were you at some time in 1931 notified by Hartford-
Empire that the equipment Avhich you were using to manufacture
glass containers infringed their patents?
Mr. Ball. I think they notified us several times that, in their
opinion, we were infringing some of their patents.
Mr. Cox. And was that one of the circumstances which led to the
making of the license agreement in 1932?
Mr. Ball. No, sir; not directly.
Mr. Cox. Well, did that circumstance have anything to do with
the negotiations which led to that contract ?
Mr. Ball. The only thing that had anything to do with it was the
decision in the Hazel- Atlas case that indicated that perhaps gob
feeds might infringe.
Mr. Cox. Was the decision in that case as far as your company was
concerned the decisive factor which led'f<5» lie making of the license
agreement ?
CONCENTRATION OF ECONOMIC POWER 553
Mr. Ball. Yes, sir.
Mr. Cox. Now, in connection with your negotiations with the Hart-
ford-Empire Co., did you make any request to them in connection
with the granting of the license? I will strike out that question, if
I may, and start again. Whom did you negotiate with in connection
with the license of the Hartford-Empire, Mr. Goodwin Smith ?
Mr. Ball. When we commenced negotiations; yes, sir.
Mr. Cox. With Mr. Goodwin Smith, and in connection with those
negotiations, did you suggest to Mr. Goodwin Smith that if you were
going to take a license, you wanted a license that was exclusive for
fruit jars?
Mr. Ball. Yes, sir; as far as they were in a position to grant it.
Mr. Cox. In other words, you wanted a license which would permit
you to make fruit jars on their machinery and no one else, so far
as they could give it to you ?
Mr. Ball. Yes, sir.
Mr. Cox. Did Mr. Goodwin Smith ever suggest to you that he
was denying other people the right to make fruit jars on Hartford
equipment as an inducement to you to enter into this license agree-
ment with him?
Mr. Ball. Yes, sir; he made that suggestion.
Mr. Cox. I am going to show you a letter now, Mr. Ball, and ask
if you or Mr. Bracken can identify this letter as a letter which
ypu received from Mr. F. Goodwin Smith.
/Mr. Bracken. Mr. Cox, this is not a letter which you got from
our files, is it?
Mr. Cox. I think not.
Mr. McCallister. It is dated April 22, 1932, and it is. addressed to
you, Mr. Ball.
Mr. Cox. Do vou recall whether you in fact received a copy of
that letter?
Mr. Ball. I don't recall it ; no. Probably it was received, if it was
addressed to our c.ompany.
Mr. 'Cox. Neither you nor Mr. Bracken recollect ever having seen
this letter before?
Mr. Bracken. I don't.
Mr. Ball. I don't recall having seen it.
Mr. Cox. But you are qui-te clear in your own mind that Mr.
Goodwin Smith spoke to you dbout denying others the right to make
fruit jars in consideration of your accepting a license from his
company ?
Mr. Ball. Yes, sir ; as far as he could, beyond the licenses that ha
had already granted.
Mr. Cox. Then on March 25, 1933, your company took a license
from Hartford-Empire Co., you testified a moment ago, and would
it be correct to say that that license agreement provided that as long
as you made royalty payments, Hartford would not thereafter during
the continuance of the license grant to any^ other person any further
license or right to use in the continental United States their ma-
chinery for the making of fruit jars for the dom^tic household use?
Mr. Ball. Yes, sir; in substance that is as we understand it.
Senator King. Could I interrupt right there ? You stated that he
said he would give an exclusive right so far as he could, and inti-
mated that he had granted licenses to others. Did he so state that a
554 CONCENTRATION UF ECONOMIC POWER
license had been granted to other corporations for the manufacture
of fruit jars?
Mr. Ball. Limited licenses we understood; yes, sir.
Senator King. Similar to the one you were seeking ?
Mr. B^LL. I don't know the shape of their license.
Senator Kjnq. All I want to know is whether he said to you
whether qr not you had an exclusive license or whether other people
had received a license at that time.
Mr. Ball. Exclusive as far as they were in position to grant,
which would refer, as we understood it, to companies who had not
so far taken licenses. We understood that they had granted limited
licenses to one or two companies, but that they had not so far granted
licenses to other companies, and, if they entered into this license
agreement with us, they would not grant to others.
Mr. Cox. I hand you this document and ask you if you or Mr.
Bracken can identify it as a correct copy of the license agi'eement
which was entered into between your company and Hartford-Empire.
Mr. Bracken. Without reading it all through, I assume that it is.
Mr. Cox. Would you have any objection if we offer it subje<;t to
correction ?
Mr. Bracken. No.
Mr. Cox. This document which X ani about to offer as an exhibit
contains in schedule C
The Chairman (interposing). What is the document?
Mr. Cox. The general feeder license agreement between Hartford-
Empire Co. and Ball Brothers Co., dated March 25, 1933. Schedule
C thereof shows that as of ,the date of this contract Hartford had
granted certain licenses to other persons; prior to the date of this
contract Hartford had granted licenses to certain persons to make
fruit jars on the Hartford machines. The companies which have been
so licensed included the Salem Glass Works, Gayner Glass Works.
Salem is owned by the Anchor Hocking Glass Co. The other two
licenses that I wish to mention as having licenses at this time to man-
ufacture fruit jars were Owens-Illinois and Hazel-Atlas.
I should like to offer this document now. It is not necessary to
have it printed in the record. I should like to have it certified as an
exhibit. .
The Chairman. The document may be admitted for the files and
certified without printing in the record.
(The contract referred to was marked "Exhibit No. 143" and is on
file with the committee.)
The Chairman. You were referring to schedule C.
Mr. Cox. Schedule C; yes.
There are some other companies listed in that schedule, but they
are not licensed for fruit jars.
Mr. Bracken. It is only 1, 2, 5, and 6.
Mr. Cox. Salem and Gayner, Hazel and Owens. And I think
the same document shows the Hazel and Owens licenses were unre-
stricted as to number.
Mr. McCallister. At least it doesn't say they were restricted.
Mr. Cox. The other two were restricted as to number.
Mr. Ball, can you tell us what consideration yon paid for this
license agreement?
Mr. Ball. I tliink it was $400,000.
CONCENTRATION OF ECONOMIC POWER 555
Mr. Cox. Did that $400,000 include any damages for past infringe-
ment?
Mr. Ball. That was to settle any past damage claims that they
might make.
Mr. Cox. I want to ask you one more question about your reasons
for entering into this contract. Would it be accurate to say that
after the Hazel-Atlas decision you felt that if you did not come to
some agreement with Hartford you would be faced with involved
and expensive and perhaps lengthy litigation which you didn't wish
to endure?
Mr. Ball. Yes, sir. We wanted to escape any such unpleasant
litigation, and any claims that they might make for past damages.
Senator King. Had any suits been instituted by the Hartford or
by the Owens against your company for alleged infringement of
their patents? Prior to the time you made this settlement with
them, had either of those corporations, the Owens or the Hartford,
instituted any suits against your company for alleged infringement
of their patents?
Mr. Ball. No, sir.
Mr. Cox. At this point, Mr. Chairman, I shotdd like to recall Mr.
McNash and Mr. Levis for some brief testimony.
The Chairman. Before these gentlemen are recalled, let me ask. Is
it your intention to develop at this point in the record the provisions
of section 2 of this document, which you have just had certified?
Mr. Cox. I had paraphrased the provisions of that section in my
question.
The Chairman. Let me suggest that you read it into the record and
ask the witness what his understanding of that section is. It strikes
me as being very important.
Mr. Cox. I shall now read into the record the provisions of section
2, the section I paraphrased to you a moment ago, Mr. Ball. That is
on page 5.
Mr. Bracken. Section 2 of article II?
Mr. Cox. Article II; yes. [Heading from "Exhibit No. 143":]
Hartford agrees, if Ball shall make the minimum payments provided in
Section 3 below, that it will not hereafter during the continuance of this
General Feeder License Agreement grant to any person, firm or corporation,
other than Ball, any further lioense or right to use in continental United
States for the making of fruit jary for domestic (household) use any apparatus
and/or method for dropping mold charges of molten glass into molds ; Provided,
however, that said agreement of Hartford not to grant such license or rights
to others shall not be held to conflict with or in any way prejudice the rights
now outstanding of certain concerns to use, under license from Hartford, ap-
paratus and/or methods for dropping mold charges of molten glass into molds
for the manufacture of fruit jars for domestic (household) use, as set forth
in Schedule C annexed hereto. Hartford represents that there are no such
rights outstanding, other than those listed in said schedule C.
I ask you, Mr. Ball, if it was your understanding that, after the
execution of this contract, and during the life of the contract, Hart-
ford-Empire, would not be free to grant any new license to any one
to use its machinery for the manufacture of domestic fruit jars in
the continental United States?
Mr. Ball. Yes, sir; that was our understanding.
556 CONCENTRATION OF ECONOMIC POWER
Mr. Cox. And was the inclusion of this provision in the contract
required by you as a condition precedent to your entering into this
arrangement ?
Mr. Ball. Yes, sir.
The Chairman. Was that provision of the contract carried out, Mr.
Ball, by Hartford?
Mr. Ball. As far as we know ; yes.
The Chairman. You have known of no violation?
Mr. Ball. We have known of no granting of licenses.
The Chairman. So, to the best of your knowledge, since you entered
into this contract with the Hartford-Empire, it has not issued any li-
censes to any other person or company to use this particular device
for the manufacture of fruit jars?
Mr. McCallister. Domestic fruit jars.
Mr. Ball. Yes, sir ; that is our understanding.
Representative Reece. Mr. Chairman, I am interested to know if
your attorneys studied the question as to whether the Hartford or any
other concern had a right to grant a lease on this or other machines
which embodied the patented idea with restrictions of any kind.
Mr. McCallister. May I answer that? I was representing Ball
Bros, at the time. We had looked not only into the Hartford-
Eftipire patent situation, but also into the law, and we were con-
vinced that Hartford had the right to grant just such a license as
you have had outlined to you by Mr. Cox in his reading from the
license agreement.
Representative Reece. It is your opinion, then, that under the law
a concern who manufactures a patented article has a right to grant
a license for the use of that article with restrictions; that is, any
restriction which he sees fit to place upon the licensee with reference
to the manner in which he might use it, the price he might charge
for the product resulting from the use of it, the quantity of
Mr. McCallister (interposing). You are going too far. I can't
say either "yes" or "no" to your question.
Representative Reece. It would seem to me that when a case of
restriction was involved that those questions become very material
Mr. McCallister (interposing). They are material, but your ques-
tion is far too broad. For example, there was no consideration on
our j)art nor did we have the thought that Hartford-Empire had
the right or the opportunity to establish or fix prices on that ware
manufactured by or with the aid of these Hartford-Empire feeders.
The ware, you must understand, is unpatented ware and we were
very, very much of the opinion that no license situation or no patent
situation would enable any patentee to fix prices on unpatented
articles of commerce.
Representative Reece. But would he, do you think, be able to fix
the amount of product produced on the licensed machine?
Mr. McCallister. Yes; we thought that was a proper limitation
at the time.
Representative Reece. What is the difference between that and fix-
inff price
Mr. Arnold (interposing). May I say for your inform^ition, Con-
gressman, that the Department of Justice has filed a brief in the
Supreme Court which deals explicitly with the amount of restric-
CONCENTRATION OF ECONOMIC POWER 557
tions which are proper under the antitrust laws, and that the law, I
think you will agree with me, at present is far from clear.
Mr. McCallister. Yes ; I agree with that statement.
The Chairman. This is a question as to whether or not this was
a reasonable restraint of trade.
Mr. McCallister. I understand what he was leading at, and that
is why I wanted him to limit it one step at a time.
Representative Eeece. May I ask one more question, if you will
bear with me. I, of course, realize that this question doesn't deal
with the issue involved in your contract there. Is it the opinion of
your able patent attorneys
The Chairman (interposing). You are addressing a patent at-
torney. We will all agree he is able.
Representative Reece. I admit it, but he has some assistants, as able
as he is. Is there any difference in the right to lease a patented idea,
that is, the patent itself, with restrictions, and a right to lease a
machine which embodies a patented idea with restrictions?
Mr. McCallister. Well, again I think Mr. Arnold will agree with
me when I say that it isn't clear cut. There are some decisions on that
point, but you will notice every time a license is granted where
restrictions follow the use of the license, if the machine involved is a
patented machine, it is not sold; it is merely leased because the law
is clearly this: That where a patented machine is sold outright, the
purchaser has the right to use that patented machine in every way
he cares to use it and without restrictions. Now, in this case, it
probably has been, or will be, brought out that the machines here
involved are all leased machines.
Mr. Cox. It has been brought out.
Representative Reece. If I may say so, it seems rather strange
to me that, as large a question as is involved and as much cost as it
has been to certain concerns, that the law in the case might not have
been cleared up before now.
Mr. McCallister, Well, our patent law has been developing for
the last 100 years, and it develops with litigation. Now, this particu-
lar point has not yet been decided by the Supreme Court, so far as
I know. I have to put that reservation in.
The Chairman. Would you care to express an opinion as to
whether or not Congress should decide that point by providing by
statute that a patentee who leased his patent should not be permitted
to require as a consideration for the lease a restriction of produc-
tion?
Mr. McCallister. I haven't thought about that enough to want
to answer it, but I would say this: That we must remember that
all restrictions that we are putting on our patent law as we now
know it are restrictions to the individual inventor. Of course, it has
been brought out here about group inventions, but there are still
individual inventors and every restriction that you place on a patent
right means value to the individual inventor.
Jumping at a conclusion, from the standpoint of group invention,
I should undoubtedly agree with the thought that you implied or
expressed.
The Chairman. Since you have suggested that thought, may I
suggest this one to you. Under the law, as it now stands, a corpora-
558 CONCENTRATION OF ECONOMIC POWER
tion may not file an application for a patent and may not receive a
patent. In other M'ords, in the contemplation of the law as drafted
by Congress, patents were to be issued to the individual inventors;
because Congress had placed no restriction about the assignment of
patents there has developed this system under which a corporation
may become the repository of an unlimited number of patents, al-
though the law does not contemplate the issuance of patents to a
corporation. Now, then, the question : Would you care to express an
opinion as to whether or not it would be in the public interest for
Congress to provide by statute that there should be a limit to the
numbei' of patents which a corporation might obtain by assignment?
Mr. McCallister. Oh, I am sure that wouldn't be good because a
patent is like a will; it stands on its own base; it may be of large
scope or it may be of very limited scope. Consequently, from the
standpoint of numbers we don't imply anything as to quality. Quan-
tity and quality, they are just as important as when we are buying
potatoes, so if we just arbitrarily say that a patent holding company
shall only hold a hundred patents, that might mean no value for
some company and it might mean a tremendous value for another
company.
The Chairman. But you testified here the other day as to the prac-
tice which has been termed "fencing in." ^
Mr. McCallister. Yes.
The Chairman. Whereby one corporation may and in some in-
stances does undertake to study the machines of a competitor, with
the view of developing improvements upon that machine so as to
compel the competitor to take licenses for the improvements from the
corporation undertaking the study, that situation obviously develop-
ing a certain restriction of improvement in the art, unless tribute is
paid to the corporation which does it.
Mi*. Mc?Calli8ter. I think there is a shade of difference in what I
testified to and the way you have expressed it.
The Chairman. Yes ; you covered it on both sides.
Mr. McCallister. I was trying to say that in connection with this
fencing in when we are considering the competitor's machine, it has
been the practice to try to foresee the line of commercial develop-
ment which the public would demand.
The Chairman. Perfectly natural for you to do.
Mr. McCallister. And then try to fence in by making those im-
provements and patenting them, but you see I also said that the man
would be optimistic who thought that he could fence in because he
would have to foresee the trend of the commercial development and
he might and he might n6t be lucky in his forethought.
The Chairman. Oh, well, of course, he couldn't be at all certain
that his invention would be the invention, but it is a practice which is
followed, is it not?
Mr. McCallister. As I understand it, yes; and I admit that I
have been guilty of suggesting just such a practice.
The Chairman. Let's not use the word "guilty" in that connection.
It was a matter of your study and attempts to secure those patents.
Mr. McCallister. But when I say I suggested such practice, don't
misunderstand that I have suggested it to the present witness.
Supra, p. 470.
CONCENTRATION OF ECONOMIC POWER 559
Mr. AuNOLD. May I ask just two or three questions to tie your testi-
mony up with the main purpose of this hearing, which is the possible
effect of the antitrust laws. The situations with respect to different
patents and different industries are very dissimilar, are they not?
Mr. McCallister. Yes.
Mr. Arnold. And one way — and I am not asking you at this point
t9 give an opinion on the advisability of that way — of treating differ-
eiit situations according to their facts, and not having a rule which
spreads a regulation over all situations, would be through the applica-
tion of the antitrust laws, wouldn't it ?
Mr. McCallister. Undoubtedly.
Senator King. Under the fourteenth amendment a corporation is
regarded as a person. Is there any inhibition in the law, or any
moral turpitude involved, in corporations acquiring patents?
Mr. McCallister. No. I was going to correct the chairman
The Chairman (interposing). Wait a minute. The chairman
didn't even suggest that, so that there couldn't possibly be any cor-
rections on that basis.
Mr. McCallister. Correct the idea that the chairman gave me in
one of his questions. The law does provide for assignments of ap-
plications, therefore we do talk of patents being issued to corpora-
tions, but the application for the patent must be filed by the first,
must be granted to the first, inventor. He can assign it either be-
fore or after. If he assigns it before, then it goes direct to the cor-
poration.
Senator King. I am not speaking as to the wisdom of permitting
corporations to become assignees of patentees, but the point I am try-
ing to elicit is that so far as I understand the law, there is no inhibi-
tion or prohibition against you, if you have a patent, assigning it to
Senator O'Mahoney and myself, if we have a corporation.
Mr. McCallister. Absolutely not.
Senator King. And the Supreme Court has frequently said the
holder of a patent may use it or not use it, as he pleases.
Mr. McCallister. That is right.
Senator King. And he may assign it to whom he pleases ?
Mr. McCaluster. That is right.
Senator King. And with such restrictions as he sees fit ?
Mr. McCallister. There are limitations to the restrictions.
Senator King. Without violation of the antitrust laws ?
Mr. McCallister. Perhaps, that is one thing that is involved,
and I have tried to point to another one. You cannot assign a
patent on a machine or process and hope to fix prices on the producJt
of that machine, or the process, if the product is an unpatented
product.
The Chairman. In other words, you will express as your opinion
the thought that it would be possible for a licensee to attach to his
license restrictions which in your judgment would be in violation of
the antitrust laws?
Mr. McCallister. Oh, yes; and such restrictions have been at-
tached.
The Chairman. And the whole question with respect to these
restrictions is whether or not they are such as would come within
the rule of reason.
Mr. McCallister. I think you are right in that.
560 CONCENTRATION OF ECONOMIC POWER
Senator King, The patentee may transfer or assign liis patent to
whom he pleases with such restrictions as would be regarded as
reasonable in the light of the common law and our economic and
social situation. ^
Mr. McCallister. Yes. Such a transfer would probably not be
termed an assignment by the technical patent man. It would be
termed a license carrying restrictions.
Senator Kjng. You spoke about the fencing in. Do not corpora-
tions; or individuals who have patents, who have for instance a
prim ry patent, frequently try to obtain patents upon what some
woula ^all immaterial, I would say anbillary matters, so that they
would i rengthen the basic patents which they have?
Mr. !! ^oCallister. A very good example of that is the fountain
pen. A sume we are 100 years back, the man who has the funda-
mental ) itent on the fountain pen would undoubtedly try to get the
patent a the self-filling device, because he would assume that the
commercial trend would be in simplification. And there we have the
situation, if the man owning the fundamental patent on the foun-
tain pen is not fortunate enough to acquire the patent on the self-
fiUing device, we have a checkmate. The man owning the self-filling
device must build a fountain pen to get it to the customer. Conse-
quently, he is stopped by the man who has a fundamental patent
on the fountain pen. On the other hand, the fact that a self-filling
device is in existence makes the public want that self -filling device,
but the owner of the patent on the pen per se can't furnish it be-
cause of the adverse ownership of the filling device patent.
You see, each patent is an entity in itself. It must be based on
invention, and even though we call that invention an improvement.
Senator King. Are not many of the patents held by individuals
as well as by corporations ancillary — usmg your expression— to the
basic patent, so that the person who has a basic patent may have a
dozen or 20 or 30 minor patents for the purpose of protecting the
basic patent?
Mr. McCallister. Necessarily so. You take the radio situation.
Now I am not up on radio patents and I am not trying to intimate
that I am, but I can assume that possibly the broad patent on the
radio has expired within the last several years, but still we know
that there are a great many patents still outstanding on radios, and
that they ^ve each manuiacturer at least a talking^- point because
he knows his competitor cannot encroach upon his own patented field.
Mr. Cox. Before I recall the witnesses I mentioned a moment ago,
I would like to ask Mr. Ball two or three more questions. Mr. Ball,
under this contract which was made in 1933,^ you pay royalties to
the Hartford-Empire Co., that is right, isn't it?
Mr. Ball. It is.
Mr. Cost, Mr. Ball, were you ever told before you signed this con-
tract that those royalties were going to be divided with Owens-Illinois
and Hazel-Atlas?
Mr. Ball. No, sir ; we had no idea of it.
Mr. Cox. When did you find out about that, Mr. Ball ?
Mr. Ball. Read it in the newspaper a couple of days ago.
1 Entered as "Exhibit No. J.43," supra, p. 5£4.
CONCENTRATION OF ECONOMIC POWER 551
Mr. Cox. I think now I will call Mr. McNash. I would like to
have Mr. Ball stay. I might call Mr. Levis at the same time.
I would like to say, as far as Mr. Levis is concerned, that yester-
day afternoon I did excuse him, and he is here again this morning
because we asked him last night to come back and he very kindly
agreed to do so.
TESTIMONY OF J. H. McNASH, PRESIDENT, HAZEL-ATLAS GLASS
CO., WHEELING, W. VA., AND WILLIAM E. LEVIS, PRESIDENT,
OWENS-ILLINOIS GLASS CO., TOLEDO, OHIO— Resumed
Mr. Cox. Mr. McNash, you were aware, of course, of the negotia-
tions between Hartford-Empire and Ball Brothers looking toward the
issuance of a license to Ball Brothers.
Mr. McNash. That is correct.
Mr. Cox. And would it be an accurate statement to say that you
were interested in seeing that Ball Brothers did take a license from
Hartford-Empire?
Mr. McNash. We might have had a selfish interest in that.
Mr. Cox. I wasn't describing it in such an invidious term, Mr.
McNash. What I really was trying to develop was that you partic-
ipated in some discussion with respect to that license, did you not?
Mr. McNash. Correct.
Mr. Cox. Mr. McNash, I am going to hand you a letter which is a
certified copy taken from your files and ask you if you can identify
that as a letter which you wrote, or a copy of a letter which you wrote.
Mr. McNash. That is correct.
Mr. Cox. This is a copy of a letter written by Mr. McNash to Mr.
Levis dated September 1, 1932. Mr. McNash, I wish to read a para-
graph of that letter to you and then I want to ask you some ques-
tions about it. The paragraph reads as follows [reading from
"Exhibit No. 144"] :
About Ball — I really don't have any additional views. This Company, how-
ever, is willing to go pretty far, as I indicated in New York, to give Ball what
he wants as long as that want does not actually cramp our style. I don't
mean by this that your Company or this Company should actually pay Ball to
come in, but I believe the Hazel-Atlas Glass Company could restrict itself in
such a way that there actually would not be a penalty. For instance, have the
quantity of jars that we are allowed to make under the license from Hartford-
Empire for fruit jars, be sufficiently large to have an excess each year to
accumulate to the benefit of some year when we have a repetition of the condi-
tions that existed in 1931.
, I want to ask you, Mr. McNash, whether it was your understand-
ing at that time that Mr. Ball wished to have your company make
sDme agreement to restrict its production oi fruit jars?
Mr. MgNask. That is true.
Mr. Cox. Is that correct, Mr. Ball, did you wish to have the Hazel-
Atlas Co. restrict its production of fruit jars?
Mr. Ball. Yes ; we did.
Mr. Cox, And you had made that request to Mr. Goodwin Smith?
Mr. Ball. Yes, sir.
Mr. McNash. It is true, is it not, that that paragraph refers only
to restriction as to the quantity of jars we might make?
gg2 CONCENTRATION OF ECONOMIC POWER
Mr. Cox. As to fruit jars you might make. It has nothino; to do
with any other line of work.
Mr. McNash. And it has no other signijBcance.
Mr. Cox. I would like to have it marked as an exhibit and admitted,
if I may.
The Chairman. It may be admitted to the record.
(The letter referred to was marked "Exhibit No. 144" and is
included in the appendix on p. 788.)
Mr. Cox. Now, Mr. McNash, will you tell us whether any .such
agreement and understanding was finally made on the part of your
company?
Mr. McNash. We were perfectly willing to make such an agree-
ment. I think the restriction discussed for our company was 300,000
gross per year. That was of no particular moment, for the reason
that our business did not amovmt to that much, actually, per year,
following 1931.
Mr. MoCallister. Did you hear his answer, Mr. Ball?
Mr. Ball. I didn't get all of it.
Mr. McNash. I said, Mr. Ball, that the restriction discussed was
one of 300.000 gross per year. We were willing to assume that re-
striction, because actlially we had not sold since. 1931 that amoiuit of
jars.
Mr. Cox. In 1931 you. sold about 500,000.
Mr. McNash. And I might add we have not sold near that amount
since.
Mr. Cox. In fact, since 1931 your sales of fruit jars have always
been below 300,000 gross.
Mr. McNash. That is right, and not in any attempt to stay below
the 300,000 gross.
Mr. Cox. Is it your present understanding, Mr. McNash. that
there is no agreement on the part of your company to limit your
production to 300,000 ?
Mr. McNash. I am not sure whether there is or is not. We were
perfectly willing to sign such an agreement. Whether that willing-
ness evolvei itself into a contract, I am unable to say.
The Chairman. Did you sign the agreement?
Mr. McNash. I am unable to say, because I have forgotten whether
I have or have not signed such a contract. I will admit, as I said
a while ago, a perfect willingness to sign such an agreement.
Mr. Cox. I am going to read to you from this memorandum, a cer-
tified copy of a memorandum taken from your files, which I am
going to ask you in a moment if you can identify. This document is
entitled, "Hartford-Empire Co. — Memorandum," dated February 9,
1933, and begins [reading from "Exhibit No. 145"] :
The Hazel-Atlas Glass Company have a nonrestricted, nonexclusive license
from Hartford-Empire to make fruit jars.
Nosrotiations are under way looking forward to Ball Brothers taking a
license.
Hartford really offered Ball the residual rights excepting as to Hazel and
Owens-Illinois. Ball really wants more than that; he wants some restriction
placed upon Owens-Illinois and Hazel —
I expect I had better read it all —
Various conversations have been had on this subject between the interested
parties.
CONCENTRATION OF ECONOMIC POWER 5g3
During some of these conversations the atmosphere became very tense. Even
questions of good faith were involved.
All these things finally came to the top Friday, February 3, in New York.
Messrs. F. C. and G. A. Ball questioned me up to about a quarter to six on that
day, in connection with the attitude of Owens-Illinois in case an agreement could
be reached.
I want to ask you there, Mr. McNash, if you can tell us who else
was at that meeting in New York besides Mr. F. C. Ball and Mr.
G. A. Ball.
Mr. McNash. At this particular discussion I don't believe anybody,
with the exception of the Ball brothers and myself.
Mr. Cox. I see. That was the meeting on February 3.
Mr. McNash. At that particular time.
Mr. Cox. At that particular time.
Mr. McNash. Yes.
Mr. Cox. Did you have any other meeting on that same day?
Mr. McNash. I think the meeting that day lasted the better part
of the day on this subject.
Mr. Cox. On this subject.
Mr. McNash. Tiiat is right.
Mr. Cox. Very well ; I will begin reading from the memorandum
again. [Reading from "Exhibit No. 145:"]
I explained my view of the thin^with respect to Owens-Illinois, and why.
Apparently, there was a desire on the part of Messrs. F. C. and G. A. Ball to
arrive at a satisfactory situation.
As a consequence of this, I was willing to change my view to some extent
with respect to Hazel's position in this matter, and restrict our license to
300,000 gross per year, without any mention in the contract of any conditions
modifying this amount.
Previous to this I had been insisting upon some understanding in eveiit of
an increase in the use of fruit jars for the domestic trade ; or some repetition of
what took place in September of 1930 in our New England territory, whicli
might put us over our restricted license ; or, a repetition of what transpired
in 1931, when, by a combination of many circumstances, an unusual demand was
had for domestic fruit jars.
I told Mr. F. C. and G. A. Ball it was not necessary to have these modifica-
tions in the contract as far as I was concerned, if they (Messrs. F. C. and
G. A.) would permit me to tell my story to Mr. F. Goodwin Smith in their
presence, inat^much as he would have to be the umpire under the licensing
arrangement, and for them to see whether my statement was correct or not.
Mr. F. Goodwin Smith came into the room. I presented my story as out-
lined, particularly with respect to an increase in the use of jars generally, or
some recurrence in some particular territory of what happened in New England
in 1930, or a repetition of 1931 generally, and the fact that the Ball Brothers
had said that in these respects a very liberal interpretation should be given
to our restriction.
Messrs. F. C. and G. A. Ball confirmed my understanding in Mr. F. Goodwin
Smith's presence, and I am asking Mr. F. Goodwin Smith to make a record of
this, certify to it, to be in his files as a part of the atmosphere, at least of
this Ball situation, so that anyone following Mr. F. Goodwin Smith will know
just how the situation is to be handled.
I am certifying to this record here for the same purpose.
Mr. McNash. So what have you?
Mr. Cox. Will you identify that as your memorandum?
Mr. McNash. That is correct.
The Chairman. It may be received.
(The memorandum referred to was marked "Exhibit No. 145" and
is included in the appendix on p. 789.)
Mr. Cox. Mr. McNash, does that refresh your recollection nt^all
as to whether any agreement was actually mffde ?
564 CONCENTRATION OP ECONOMIC POWER
Mr. McNash. It does not. I said I was perfectly willing to sign
one, but whether I did or not I do not remember. I might ask if
you found any.
Mr. Cox. We found no such written agreement.
Mr. McNash, what I suggest to you now is that the last para-
graph of this memorandum would appear to indicate that the parties
decided to handle the matter by an agreement which was not in
writing. Would you accept that suggeition?
Mr. McNash. No, sir.
Mr. Cox. You would agree that there is language in here which
indicates that nothing was to be put into the contract as to the re-
strictions on production, would you not?
Mr. McNash. There was nothing in this memo to prevent a con-
tract being drawn restricting us to 300,000 gross per year.
Mr. Cox. I am goin^ to ask you one more question, Mr. McNash,
and I think I shall have finished with you on this subject, so far
as you are concerned.
Mr. McNash. Where do you find that suggestion?
Mr. Cox. I call your attention to this language particularly [read-
ing from "Exhibit No. 145"] :
As a consequence of this I was willing to change my view to some extent
with respect to Hazel's position in this matter, and restrict uur license to 300,000
gross per year, without any mention in the contract of any conditions modify-
ing this amount.
Mr. McNash. That refers to the modifications of the 300,000 gross
per year as a result of some unusual demand for fruit jars. It does
not refer to the 300,000 gross.
Mr. Cox. You are quite sure about that ?
Mr. McNash. I am positive.
Mr, Cox. What would be the point of having any provision as to
the unusual circumstances if you weren't going to have an under-
standing as to the 300,000?
Mr. McNash. I don't say there is not an understanding as to the
300,000 gross, but I cannot tell you as to whether it was put in writ-
ing and a contract signed.
The Chairman. What is the purpose of the second paragraph from
the end, beginning, "Messrs. F. C. and G. A. Ball"?
Mr. McNash. That relates to this: We were willing to assume a
restriction of 300,000 gross per year, but we wished it fully under-
stood that in case there was a favorable circumstance in connection
with the use of fruit jars, as resulted in 1931, from a large fruit crop,
cheap sugar, the disposition on the part of the housewife to con-
serve, if there was a repetition of that, we were not bound by any
300,000 gross per year.
The Chairman. I have in mind whether or not it was your under-
standing at the time of this conference that no written contract
should be made but that in lieu of" a written contract there should
be a memorandum of exactly what transpired to be placed in the
files of Mr. Smith so that he or anybody who succeeded him would
know exactly what the oral understanding was. In other words,
when I read this paragraph, which apparently was your language
Mr. MoNash (interpolating). Correct.
CONCENTRATION OF ECONOMIC POWER 565
The Chairman (reading from "Exhibit No. 145") :
Messrs. F. C. and G. A. Ball confirmed my iiuderstanding in Mr. F. Goodwin
Smith's presence, and I am asking Mr. F. Goodwin Smith to make a record of
this, certify to it, to be in his files as a pa,rt of the atmosphere, at least of
this Ball situation, so that anyone following Mr. F. Goodwin Smith will know
just how the situation is to be handled —
Would I be justified, after reading that language, in inferring
that it was the specific intention of all the parties to this conference
that there should not be a written contract, but that in lieu of such
a written contract there would be a memorandum of the understand-
ing?
Mr. McNash, I don't think your view is correct.
The Chairman. Thank you.
Mr. Cox. I have one more question that I would like to ask about
that which I was going to ask a moment ago and didn't get to, Mr.
McNash, and after I have asked that I think we will be through so
far as you are concerned.
Do you have any opinion as to why it was considered desirable or
necessary for Mr. F. Goodwin Smith to make a memorandum to put
it in his, files in these circumstances?
Mr. McNash. The question is on the 300,000 gross per year restric-
tion. If we exceeded that, I didn't want anybody coming to me
telling me that we were not actually following a written contract,
if I could justify it by conditions, repeating what happened in 1931
or what happened in 1930. In the fall of 1930 there was an unusual
demand for fruit' jars in the New England States. That happens to
be the territory where our location of plants gives us an advantage.
Wo can serve it nuich more rapidly. That demand didn't exist in any
other part of the United States. We took advantage of it by making
the jars that the trade required.
Now, a situation of that kind might put us over 300,000, but I
wanted the modification of this 300,000 gross to be allowed if those
conditions repeated themselves.
Mr. Cox. Why was a modification necessary, if there was no restric-
tion to 300,000 gross in the first place?
Mr. McNash. I think as a result of this there actually is no restric-
tion, but we were perfectly willing to sign a contract restricting our-
selves to 300,000 gross per year.
Mr. Cox. Mv. Ball, did you have any information or knowledge as
to any agreement on the part of anyone else, of either Hazel-Atlas
or Owens-Illinois, to restrict their production in connection with the
granting of a license to you?
Mr. Ball. It was our understanding that they would not exceed
the 300,000 gross which was recognized as being as much as they had
produced before unless it was in some unusual year, when the demand
was unusually large. That was talked about, and that was Mr. Mc-
Nash's desire at that time, and we felt that if there was an unusual
demand it would fall to all of the manufacturers and would not
harm us particularly if the demand set in and they could supply
more than that.
Mr. Cox. In the absence of such unusual circumstances it was your
understanding that their production of fruit jars would not exceed
300,000 gross? •
124491— 39— pt. 2 21
ggg CONCENTRATION OF ECONOMIC POWER
Mr. Ball. It was our understandings that it would not, because it
had not before that time even come up to that amount.
Mr. Cox. Except in the one year Mr. McNash has mentioned. I
think, Mr. McNash, that I have finished with you.
The Chairman. Did you certify to this memorandum ?
Mr. McNash. No, sir.
The Chairman. The concluding sentence is [reading from "Ex-
hibit No. 145"] :
I am certifying to this record. ♦ * ♦
Mr. McNash. You asked me about your memorandum.
The Chairman. I am asking about the memorandum that is in the
record.
Mr. McNash. I am pretty sure I did.
The Chairman. Did you ever ask your attorney whether or not
that signature made it a written contract?
Mr. McNash. I did not. Does it?
The Chairman. I think so.
Mr. Cox. I think, Mr. McNash, if you will move now, and let Mr.
Levis take your place, we will proceed.
Mr. Levis, I wanted to ask you about the attitude of your company
with respect to the transactions between Hartford-Empire and Ball
Bros. Did you participate to any extent in the discussions which
preceded the agreement between Hartford and Ball Bros.?
Mr. Levis. Yes; from time to time.
Mr. Cox. And would it be an accurate statement to say that you,
your company, too, was interested in seeing that Ball Bros, took a
license from Hartford-Empire?
Mr. Levis Yes, sir. We got half of the back damages and we
got half of the royalty they paid, if any. We were trying to liquidate
this unsatisfactory license business I explained yesterday, and. I got
everything I could.
, Mr. Cox. Was it your understanding that as a part of that trans-
action. Ball Bros, wanted your company to agree to limit its produc-
tion of fruit jars to 100,000 gross per year?
Mr. Levis. That was discussed, and a form of agreement was sub-
mitted to us and we refused to enter into it.
Mr. Cox. Is it your understanding now that there is no agreement
on the part of your company, either oral or written, that your com-
pany, so lon^ as that license between Hartford-Empire and Ball
Bros, is in effect, will not produce in excess of 100,000 gross of fruit
jars in any year?
Mr. Levis. I have testified under oath, Mr. Cox, in this proceeding
that we had no restrictions under our Hartford licenses,
Mr. Cox. Of course you can make fruit jars on your own machines,
too, can't you, so this is a slightly different question than the one
involved as to the restrictions under the Hartford license.
Mr. Levis. There is no restriction so far as our ability to make
fruit jars is concerned.
Mr. Cox. You feel your company is absolutely free to make as many
fruit jars as you want to to sell in any given year?
Mr. Levis. Yes, sir.
Mr. Cox. Of-course, since 1932 it is true, isn't it, Mr. Levis, that
your company has never made or sold more than 100,000 gross of
fruit jars?
CONCENTRATION OF ECONOMIC POWER 5Q7
Mr. Levis. They have tried to sell more, sir.
Mr. Cox. But you haven't made any more thafi that?
Mr. Levis. It is pretty hard to sell more than that against Mr.
Ball.
Mr. Cox. Well, there were two years when you did it, Mr. Levis.
Mr. Levis. What years were they, sir ?
Mr. Cox. 1931 and '32.
Mr. Levis. We had thrift then, and cheap sugar and cheap fruit.
We will never have that for some time, and that is the only time
fruit jars are used. We didn't have the reuse of packers' ware for
jars, and all sorts of items of that kind.
Mr. Cox. So, as far as your company is concerned, you are' quite
satisfied that, irrespective of exceptional conditions such as Mr.
McN^sh was talking about, you are free to produce as many fruit
jars as you like in any year.
Mr. Levis. As far as our company is concerned I have never
signed an agreement to restrict, and I am informed by our counsel
that there are no agreements in existence.
Mr. Cox. Quite apart from signing such agreements, you have
reached no oral understandings with anyone with respect to the same
thing?
Mr. Levis. I can't answer that, Mr. Cox.
Mr. Cox. Wliy can't you answer that?
Mr. Levis, I don't consider that would be an agreement. I may
have talked about it, but I have no agreement of any kind.
Mr. Cox. What I am really trying to find out is whether you gave
anyone an oral promise or assurance that you would not produce
more than 100,000 gross in any given year.
Mr. Levis. I don't recall it.
Mr. Cox. Would you say definitely that you never had done so ?
Mr. Levis. No; I probably may have. I have given=a lot of people
assurances on matters of that kind in a 25 years' business career.
Mr. Cox. That is the kind of assurance you might be likely to
remember, isn't it, Mr. Levis?
Mr. Levis. No, sir ; I have forgotten a lot of them.
Mr. Cox. Mr. Ball, at the time you signed this agreement, what
was your understanding as to the position which Mr. Levis' com-
pany was to have as far as his production of fruit jars is concerned?
Was it your understanding that they were not to produce more than
100,000 gross in any year?
Mr. Ball. You are referring to the agreement with the Hartford -
Empire Co.?
Mr. Cox. That is right.
Mr. Ball. No; there was no understanding in that agreement as
far as I know that they would not, but there was a general under-
standing that they would not. There is nothing in the contract to
the effect that they were restricted from any quantity.
Mr. Cox. I think that I have finished with both Mr. McNash and
Mr. Levis on this particular subject matter, so perhaps it would be
a good place for the committee to ask any questions it may have.
The Chairman. Do any members of the committee desire to pro-
pound questions to any of these witnesses?
Senator Kino. Mr. Levis.
■ Mr. Levis. Yes, sir.
^g§ CONCENTRATION OF ECONOMIC POWER
Senator I^ng. You would respect an oral agreement, would you
not, where it was quid pro quo as quickly as you would a written
one ?
Mr. Levis. Yes, sir.
Senator King. I would assume that. If you didn't do it, I wouldn't
think it very ethical. Now, coming to that question which was pro-
pounded to you, did you make an oral agreement, bottomed upon
matters of consideration or out of your own generosity, under the
terms of which you limited the amount of production of glass fruit
jars by your company?
Mr. Levis. Senator, I don't believe that I ever obligated the Owens-
Illinois Co. to restrict their business in any respect. I may have
discussed these situations. I have known Mr. Ball for a great many
years and I have been in a great many negotiations with him, and I
think he would understand anything J would say without an agree-
ment.
Senator King. Has there been any controversy between you and
Mr. Ball, or between the Hartford Co. and Mr. Ball and yourself,
in a triangular way, which would call into question any alleged
agreement which you had entered into restricting production ?
Mr. Levis. Not "that I know of, sir.
Senator King. That is all.
Mr. Cox. Mr. Levis, before you go, do you recall this memoran-
dum which we discussed yesterday which Mr. Martin identified ? ^
I want to get you to identify this for the record. It is the one I read
the paragraph from.
^Ir. Levis. My comment in the record was that it was one of many
memoranda from Mr. Carter. I didn't recall it specifically. I know
if Mr. Martin turned it in, it was from our files.
Mr. Cox. Are you prepared to accept it as coming from your
files ? I'd like to offer it now as a memorandum which was discussed
yesterday. I neglected to offer it at that time.
The Chairman. It may be received.
(The memorandum referred to was marked "Exhibit No. 146" and
is included in the appendix on p. 789.)
Mr. Cox. I think I am finished with Mr. Levis.
The Chairman. May I ask you whether you had in your own mind
any understanding of a limitation to which you have expressed will-
ingness to adhere, a limitation on production, to these other gentle-
men ?
Mr. Levis. Sir, I tried yesterday and the day before to point out to
the committee that from 1929 to 1935 we had 'many, many agree-
ments, many participations, many memoranda; that from 1929 to 1935
I used my best efforts to saw it all off. In 1935 I sawed it all off, and
I then went on carrying on a business of manufacturing and selling
containers of various types, and found in the clear vision of hindsight
that that decision proved a more profitable transaction for the share-
holders of our company. I had lots of trading talk from along
about 1913.
The Chairman. That is not the subject to which I am directing
your attention.
1 See supra, p. 502 et seq.
CONCENTRATION OF ECONOMIC POWER 5g9
Mr. Levis, If I had any such understanding in 1935, 1 sawed it off.
The Chairman. You are speaking now, are you not, of having
sawed off the patent business?
Mr. Levis. I canceled all contracts.
The Chairman. Respecting patents?
Mr. Levis. Respecting licenses. I canceled all of the contracts.
The Chairman. Very good. Now, that, of course, is not my ques
tion. I understand that to be quite clearly your testimony, but this
morning it has been developed here by the testimony of Mr. Bali
and the testimony of Mr. McNash that the Hartford-Empire Co.
was seeking to induce Mr. Ball and his company to become licensees
of the Hartford machines. The Hartford Co. was very anxious to
have that circumstance brought about. Li order to bring it about,
Mr. Ball expressed the opinion that there should be a limitation on
the amount of production by the Hazel-Atlas Co., and there was
some discussion at this time with respect to the production by
Owens-Illinois as well as by Hazel, and according to the memo-
randum of Mr, McNash,^ at this conference held in New York on
February 3, Mr. Ball really wanted some restriction placed upon
Owens-Dlinois as well as Hazel.
Now, we have before us a memorandum, acknowledged by Mr.
McNash, in which he stated that there was a general understand-
ing that there would be a limitation by Hazel to 300,000 gross in a
year. Mr. McNash testifies that that was in excess of his produc-
tion and it really didn't amount to anything. Now what I am trying
to develop is not whether you had any contract, not whether you
made any promise, but whether you had any gentlemen's under-
standing similar to that which Mr. McNash has testified to upon
which Mr. Ball can rely, that there is a figure above which you
won't go in the production of these jars.
Mr. Levis. My answer to that is there is no contract and so far as
I am concerned I have no such understanding.
The Chairman; Very good.
Senator King. I think we might supplement the Senator's state-
ment. I understood Mr. McNash's statement and klso Mr. Ball
assenting that notwithstanding the limitation of 300,000, in the event
of some extroordinary situation, a large increase in the fruit crop and
cheap sugar, then the 300,000 jars might be exceeded.
The Chairman. Yes.
Mr. McNash. It is a restriction that isn't a restriction.
Senator King. That is, the limitation to 300,000 did not extend to
extraordinary circumstances such as I have just indicated.
That is all.
The Chairman. That is all.
Mr. Cox. Are we going on now?
The Chairman. We will stand in recess until 2 o'clock.
(Mr, Levis was excused.)
( Wliereupon, at 12 : 05 p. m., a recess was taken until 2 p. m. of the
same day.)
1 See "Exhibit No. 145" appendix, p. 789.
570 CONCENTRATION OF ECONOMIC POWER
AFTERNOON SESSION
(The committee resumed at 2:15 p. m. on the expiration of the
i-ecess.)
The Chaikman. The committee will please come to order.
Mr. Cox, are you ready to proceed?
Mr. Cox. I am. I should like to have another witness sworn at
this time. I think it would save time to have him take the stand
now and answer questions.
The Chairman. Will you call the witness?
Mr. Cox. Mr. Collins.
The Chairman. Mr. Collins, do you solemnly swear that the testi-
mony you are about to give in this proceeding shall be the truth,
the whole truth, and nothing but the truth, so help you God ?
Mr. Collins. Yes, sir.
TESTIMONY OF I. J. COLLINS, PRESIDENT, ANCHOR HOCKING GLASS
CO., LANCASTER, OHIO; FRANK C. BALL, PRESIDENT, BALL BROS.,
MUNCIE, IND.; A. M. BRACKEN, ASSISTANT TREASURER AND
COUNSEL, BALL BROS., MUNCIE, IND. ; AND E. W. McCALLISTER,
PATENT ATTORNEY, PITTSBURGH, PA.— Resumed
Mr. Cox. Mr. Collins, will you give the reporter your name and
address and tell what your occupation is ?
Mr. Collins. I. J. Collins, Lancaster, Ohio, president of the An-
chor Hocking Glass Co.
Mr. Cox. You are president of the Anchor Hocking Glass Co.?
Mr. Collins. Yes.
Mr. Cox. That is a company which is engaged in the manufactur-
ing of a general lUne of glass containers. Is that right?
Mr. Collins. That is right.
Mr. Cox. How long has that company been in existence, Mr.
Collins?
Mr. Collins. January 1, 1938.
Mr. Cox. It came into existence as the result of a merger of some
other companies, including glass companies and companies engaged
in the manufacturing of products used in connection with glass
containers. Is that correct?
Mr. Collins. That is correct.
Mr. Cox. What did you do before the organization of the Anchor
Hocking Co.?
Mr. Collins. I was president of the Hocking Glass Co. and Gen-
eral Glass Co.
Mr. Cox. General Glass Co.? Will you tell us who owned the
stock of the General Glass Co. ?
Mr. Collins. Hocking Glass Co.
Mr. Cox. A wholly owned subsidiary?
Mr. Collins. Right.
Mr. Cox. At the end of 1932, it is true, isn't it, Mr. Collins, that
the General Glass Co. was a licensee of Hartford -Empire ?
Mr. Collins. Right.
Mr. Cox. And under its license it was per^nitted to manufacture
fruit jars; is that correct?
CONCENTRATION OF ECONOMIC POWER 571
Mr. Collins. That is correct.
Mr. Cox. Before I go into that, I want to ask you one more question
about the Anchor Hocking Corporation. That, in point of size, is
about the third largest in the industry; is it not?
Mr. Collins. I think that is correct.
Mr. Cox. To return to the General Glass Co. and the license it had
from Hartford-Empire to manufacture fruit jars, at a date in the
spring of 1933 that license, so far as it permitted the manufacture
of fruit jars, was canceled. Is that correct ?
Mr. Collins. Tliat's right.
Mr. Cox. Can you tell us what the consideration for that cancela-
tion was?
Mr. Collins. $100,000.
Senator King. Was it canceled while it was a subsidiary or after
it had been absorbed, or did the absorption, if it was absorbed, have
anything to do with the cancelation ?
Mr. Collins. It had nothing to do with the cancelation. It was
while it was a subsidiary of the Hocking Glass Co.
Mr. Cox. Now, Mr. Ball, I would like to ask you a question. Do
you recollect whether your discussions with Mr. Smith prior to the
makin^ of your license agreement with the Hartford-Empire touched
upon the matter of the license which the General Glass Co. had to
make fruit jars? Was that matter discussed?
JNIr. Ball. Yes, sir.
Mr. Cox. Do you recall whether you. requested Mr. Smith to ar-
range to have that license canceled as a condition precedent to your
taking a license from Hartford-Empire?
Mr. Ball. Yes, sir. That was one of the understandings, that some
of those who had partial licenses and whole licenses would be canceled,
so that they could deliver to us as near as possible the exclusive use
of the patents.
Mr. Cox. Mr. Collins, was that license to the General Glass Co., so
far as it related to fruit jars, a license which restricted the quantity
that could be produced on the machines?
]\fr. Collins. There were no restrictions, as I remember. I think
that is true.
Mr. Cox. Do you recall whether it was ever suggested to you, Mr.
Collins, that that license should be canceled without your receiving
any consideration for it ? •
Mr. Collins. I don't think so. It might have been. We felt there
was some value; naturally we wanted to get something for it if we
were going to cancel it.
Mr. Cox. That was a matter which you and Mr. Levis and Mr.
McNash discussed ; was it not ?
Mr. Collins. No ; I never discussed it with Mr. McNasli.
Mr. Cox. You don't remember discussing it with Mr. McNash
and Mr. Levis while at Wliite Sulphur Springs in the year of 1933?
Mr. Collins. I don't think so.
Mr. Cox. But at any event you did receive $100,000 in cancelation
of that license?
, Mr. Collins. Yes.
Senator King. From whom ?
Mr. Collins. From the Hartford-Empire Co.
572 CONCENTRATION OF ECONOMIC POWER
Mr. Cox. Mr, Collins, there is one more matter that I wish to ask
you about. Thereafter, in 1933, do you recall some correspondence
with the Hartford-Empire Co. with respect to sales of packers' ware
by the General Glass Co. in competition with fruit jars?
Mr. Collins. In what year?
Mr. Cox. This would be in 1933, in August.
Mr. Collins. I don't recall it.
Mr. Cox. I am going to show you a letter now. First, you might
tell me this, Mr. Collins. As an experienced glass manufacturer, is it
your opinion that a packers' ware jar might be sold and used for
the same purposes as a fruit jar in certain situations ?
Mr. CoLMNs. I thinli so.
Mr. Cox. They are enough alike in size and shape so that, as to
use, they might be interchangeable ?
Mr. Collins. That is right.
Mr. Cox. Now, I am about to hand you a letter dated August 17,
1933, addressed to you, which reads as follows [reading from "Ex-
hibit 147"] :
I am enclosing copy of a letter just received from Mr. F. C. Ball, relative
to packers' jars sold into the domestic fruit jar field.
We discussed this in Nevp York and you assured me that you were using
every effort to keep jars out of this Iield.
I feel, therefore, that in fairness to you, you should be advised about this
complaint from Ball, as I knovv^ you won't misunderstand my sending it to you.
Mr. Cox. The rest of the letter is not germane. It is signed "Sin-
cerely yours, Roger Eldred."
Will you look at that and see if you can identify it as a letter
which you in effect received?
Mr. Collins. Evidently I received it. It is addressed to me.
Mr. Cox. You are prepared to identify it as a letter you received?
Mr. Collins. Yes.
Senator King. Wlio is the sender?
Mr. Cox. The sender is Mr. Eldred. Can you tell us who Mr.
Eldred is?
Mr. Collins. Mr. Eldred is, I think, the genej-al manager of the
Hartford-Empire Co.
Mr. Cox. Vice president, I believe.
I should like to have that letter marked and admitted in evidence.
The Chairman. It may be so admitted.
(The letter referred to was marked "Exhibit No. 147" and is in-
cluded in the appendix on p. 791.)
Mr. Cox. Now Mr. Ball, do you recall about in August 1933,
complaining to Mr. Eldred, of the Hartford-Empire Co., about sales
of packers' ware in competition with fruit jars which your company
was producing?
Mr. Ball. We did complain several times of their being sold in
place of domestic jars. It was our understanding that we were
^to have the exclusive rights for domestic jars, and these so-called
packers' jars were sold in place of domestic jars and we thought that
it was an unfair prar-tice.
Mr. Cox. I am.goif.g to show you a photostatic copy of a letter
that purports to be a letter addressed by you to Mr. Eldred, to-
gether with certain attachments, and ask whether you or Mr.
Bracken can identify' the letter as one which you in fact wrote.
CO-NX'ENTRATION OF ECONOMIC POWER 573
Mr. Ball. Yes, sir; I think that is authentic.
Mr. Cox. In order that the committee may understand what kinds
of ware are involved, we have some samples here. This, I believe, is
a fruit jar produced by your company, is that correct?
Mr. Ball. That is correct.
Senator King, Mark it "A" on the side.
Mr. Cox. It is marked "A" on the side. Senator.
xlnd this is a packers' ware jar produced by your company, is it
not?
Mr. Ball. I rlon't know that it was produced by our company, but
it is a packers' jar; yes sir [examining jar]. Yes, sir; that was pro-
duced by our company. It has our company mark.
Mr. Cox. The committee will note the two jars are the same size
and shajje. In fact, the cap that normally goes on the fruit jar can
be put on the packers' ware jar like that [demonstrating]..
Then it was your understanding that as a result of your license
agreement with Hartford-Empire, Mr. Ball, you were to have ex-
clusive rights for the manufacture of fruit jars and that right car-
ried; with it the prevention of the kind of competition that you met
from packers' ware jars when thej' were used for fruit- jar purposes;
is that right?
Mr. Ball. Yes, sir.
Senator King. I understood the witness to testify this morning
that two other companies had the right to manufacture the same
cotnmoditj^ which Mr. Ball's company has a right to manufacture,
so that his license, or the license of his company, was taken subject
to the licenses which had been granted to two othef companies.
Mr. Bracken. If I may answer, schedule C of the contract shows
that there were four other companies which had the right to make
jars.
Mr. Cox. Can you tell us wliile we are oh that subject, how maiw
companies there are today who are manufacturing fruit jars? It
is true that Hazel-Atlas manufactures them.
Mr. Bracken. That is correct.
Mr. Cox. And Owens-Illinois.
Mr. Bracken. That is correct.
Mr. Cox. And the Kerr Glass Co.
Mr. Bracken. That is correct.
Mr. Cox. And the Reed Glass Co., do you know whether they manu-
facture fruit jars?
Mr. BiLL. If I may answer, they manufacture jars and have sold
them to go into the domestic trade but, as we undei^tand it, they
have no license for manufacturing those jars from the Hartford-
Empire Co.
Mr. Cox. Do you know of any other companies that are today
manufacturing fruit jars?
Mr. Ball. There are several companies that have manufactured
so-called packers' jars, but they are making them so that they wiU
seal with the regular domestic fruit jar cap, and in that way they
get them into the market and displace the regular domestic jars, and
that we consider unfair practice. It was supposed that we would
have exclusive right to make the jars used for domestic canning
without being encroached upon by jars like these packers' jars.
Mr. Cox. I would like to offer these letters.
574 CONCENTRATION OF ECONOMIC POWER
(The letters referred to were marked collectively "Exhibit No. 148"
and are included in the appendix on p.-791.)
Senator King. The gentleman on your left, Mr. Ball, has just
stated, if I understood him correctly, that your license was sub-
ject to prior licenses to four companies, is that correct ?
Mr. Ball. Yes, sir.
Senator King. Then your statement now that you had the exclusive
riffht is not quite accurate, is it, if there were four other companies?
Mr. Ball. The exclusive right beyond the licenses that had been
granted prior.
Mr. Bracken. That was called, as I remember, the residual rights.
Mr. Cox. That is correct, and the reason there is now a discrep-
ancy between the four companies that Mr. Brackeii spoke of as hav-
ing been in contract and the ones I named a moment ago as having
a license today, is because one of the licenses which existed as or
the date of the contract I understand has since expired.
Mr, Collins, one more question : Did you as a result of receiving a
letter from Mr. Eldred take any steps to see that the General Glass
Co. ceased to sell and distribute packers' ware for use as domestic
fruit jars?
Mr. Collins. The fact of the matter is that I don't think we ever
made any effort to sell packers' jars as domestic fruit jars.
Senator King. And you got the $100,000 without consideration?
Mr. Collins. Oh, no.
Senator King. You surrendered the license to make those jars and
I understood you just now that you didn't make any.
Mr. Collins. That's right; as domestic fruit jars. We made
packers' jars, which is the thing Mr. Ball was complaining about in
that letter.
Mr. Cox. You were making fruit jars before you gave up the
right to make them?
Mr. Collins. No; we never made them.
Mr. Cox. So you got the $100,000 for giving up the right to make a
thing which you had never exercised.
Mr. CoUiiNS. Right,
Senator King. It was a good trade, wasn't it? There are lots of
potentialities, aren't there?
Mr. Collins. Right.
Mr. Cox, Mr. Collins, I think for the time being that is all I shall
want from you, but I shall want some testimony on another subject
later on.
Senator Kin"g. Did you regard the license which your company held
as of any value?
Mr. Collins. Yes; I certainly did, otherwise I wouldn't probably
have asked $100,000 for it.
Senator King. Although you never exercised the right the license
Mr. Collins. Yes.
Senator King. What part of the licenses, if there were more than
one, or only one, that you held from the Hartford Co., did you
reserve ?
Mr. Collins. I reserved everything that we had in our license
excepting the fruit jars, which I sold for $100,000. It didn't affect
any other part of my license.
CONCENTRATION OF ECONOMIC POWER 575
Senator King. By your disposing of that right did you diminish
competition?
Mr. Collins. So far as I was concerned, there was no competition,
because we had never made them.
Senator King. Did you intend to?
Mr. Collins. Not at that time ; no. _
Senator King. Were you in competition with any other licensees
of the Hartford Co. at the time that you parted with this right ?
Mr. Collins. Do you mean on fru^t jars?
Senator King. On anything.
Mr. Collins. Oh, yes.
Senator King. What were you making, aside from fruit jars?
Mr. Collins. We made a general line of packers' ware of all types,
narr£)w neck and wide mouth.
Senator King. Does your company still continue in operation ?
Mr. Collins. Eight.
Senator King. Making the same commodities?
Mr. Collins. Eight.
Senator King. Are you in competition with other companies ?
Mr. Collins. Yes; with Owens-Illinois, Hazel-Atlas, and every
company that is named on that board.
Senator King. Is there competition among you?
Mr. Collins. Plenty.
Senator King. No combination in restraint of trade; no agree-
ment to fix prices ?
Mr. Collins. No, sir.
Senator King. Has there ever been ?
Mr. Collins. No, sir.
Senator King. Do you believe in a competitive system?
Mr. Collins. That is what we have lived under all our lifetime.
Senator King. Have you had "fierce competition or any compefition
in the market?
Mr. Collins. Yes; plenty of competition.
Mr. Patterson. Mr. Collins, with regard to that $100,000, was
there any other consideration besides that?
Mr. Collins. No.
Mr. Patterson. It wasn't $100,000 plus?
Mr. Collins. It was $100,000 for our fruit jars.
Mr. Patterson. And a clean bill of sale.
Mr. Cox. Mr. Ball, I might ask you this. Was it your under-
standing when you paid the money which you paid to Hartford as
consideration for the license agreement that part of that money was
to be used to buy back the fruit jar rights of the General Glass Co. ?
Mr. Ball. We didn't know at that time what the Hartford-Empire
would do with the amount that we paid. They exacted $100,000 for
the rights that they proposed to grant to us and they were to elimi-
nate the competition that might come from these factories that had
licenses, and by that we supposed that they would in some way make
settlement with those companies. We did not knoAV at that time how
they would make those settlements.
Mr. Cox. You simply knew that with respect to the General Glass
Co. they were going to get that right back — Hartford-Empire was
going to get it back. You didn't know how or how much they were
going to pay to get it back.
576 CONCENTRATION OF ECONOMIC POWER
Mr, Ball. Yes, sir ; that was our expectation, that they would have
that license canceled in some way.
Senator Kino, Did you know that Mr. Collins' company had a
license?
Mr. Ball. Well, the General Glass Co. had a license at that .time;
Senator King. Did you know it had not been producing under
that license?
Mr. Ball. We knew they had not produced the domestic jars under
that license, but we knew that they had the privilege of producing
the jars, the domestic jars, under their license and we thought that
we should have that canceled if we were to take out the license that
we were proposing to take out and pay the amouht of money that
the^'^ wanted us to pay.
Senator King. You were not extinguishing, then, an active com-
petitor in the product to which you referred but a possible potential
competitor ?
Mr. Ball. Yes, sir.
The Chairman. Who paid you the $100,000, Mr. Collins?
Mr. Collins. Hartford-Empire.
The Chairman. This was for the right which you have ju&t testi-
fied j^ou had never exercised and never intended to exercise?
Mr. Collins. We at least never had.
The Chairman. But you might have exercised it?
Mr, Collins, That is right,
The Chair:man. What did Hartford think it was getting for the
$100,000?
Mr. CoIlins. Rights to make our fruit jars.
The Chairman, Sort of eliminating you for the period of the
contract or for all tinie from this field. Is that right?
Mr. Collins. That is right.
Senator King. How many years did the contract run from the
date of your disposition of it, accepting the $100,000?
Mr. Collins. Well, I think the contract or license would run the
term of the patent of the Hartford-Empire.
Senator King. You had obtained the license from the Hartford-
Empire for the life of their patent in this particular commodity?
Mr, Collins. Yes.
Senator King. And though you hadn't exercised the right granted
under the license, you parted with that right, you surrendered the
license which you had received for $100,000.
Mr. Collins. That is right,
Mr. Cox. I have finished with Mr.. Collins if all the other members
of the committee have.
The Chairman. If there are no questions, Mr. Collins, you may be
excused.
(Witness Collins was excused.)
Mr. Cox. I should like to ask either Mr. Ball or Mr. Bracken some
questions about the price ranges for domestic fruit jars shown by
your price list. Do you have a price list?
Mr. Bracken. Yes, sir.
Mr. Cox. I wonder now if you will follow me while I ask you some
questions about those price ranges, I am going to speak each time
CONCENTRATION OF ECONOMIC POWER 577
in terms of price per gross. You have a list there tliat shows the
prices, beginning in 1922?
Mr. Bracken. Yes.
Mr. Ball, On fruit jars?
Mr. Cox. On fruit jars.
Mr. Ball. "We quoted prices from year to year, making up our
prices, based on cost and conditions and investments that we were
making in the fruit jars, but we had no regular fruit jar price list to
cover a ^rm of years such as they have on some other bottles.
Mr. Cox. Now, is it true, Mr. Ball, can you tell whether it is true
from your material there that the price in 1922 for domestic fruit
jars per gross was $7.50, the quart size jar?
Mr. Ball. Yes. sir.
Mr. Cox. And it remains $7.50 in 1923 and in 1924?
Mr. Ball. We quoted what was called our base price, and at times
when we wanted to urge shipments early in order to relieve our
.'borage capacity, we made a reduction for earlier shipments, and
.some of these prices are quoted as a base price, f . o. b. factory, with
the understanding that if they would take the jars out early, there
would be a reduction from that price.
Mr. Cox. I see. Well, now can we from this point on take the base
price with the understanding that there were certain deviations from
that price in the case of shipments made before the seasonal ship-
ment period?
INIr. Ball. Yes.
Mr. Cox. So that fi'om 1922 to 1924 the price per gross for the
perfect mason quart jars was $7.50. Is that right?
Ml-. Ball. Wliat is the question?
Mr. Cox. I asked you if the base price didn't remain the same
from 1922 to 1924, the price being $7.50 per gross.
Mr. Ball. Tlie net price for 1922, after the deductions were fig-
ured off, was $7 a gross ; in 1923 it was $7 per gross ; in 1924 it was
$7 per gross; in 1925 it was $5.85 per gross; in 1926 it was $7.25 per
gross ; in 1927, $7.50 per gross.
Mr. Cox. Perhaps just at that point, to speed this up, if you will
stop there and examine those prices between 1927 and 1933 and tell
me whether there was any change in that period, and, if so, what
the change was an^d when it occurred.
Mr. Ball. In 1932 it was $7.27 per gross ; in 1933, $6.70 per gross.
Then in 1930 it was $7.27 per gross; in 1933, $6.70 per gross.
Mr. Cox. Now, for the sake of the record, you had better tell us
what the price was from 1927 to 1930. Did it remain constant for
that time?
Mr. Ball. In 1927, '28, and '29 it was $7.50 per gi-oss. In 1931 it
was— no, 1930 it was $7.27 per gross; 1932, $6.70 p^r gross; 1934,
$7.29 per gross.
Mr, Cox. Do you want to take those prices down to the present
time that you have them ? Just have Mr. Bracken read them, if you
will.
Mr. Bracken. In 1933, $6.70; 1934, $7.29; 1935, $7.05; 1936, $5.56;
1937, $6.79; and in 1938, $6.79.
Mr. Cox. That is right.
Mr. Bracken. Those, you understand, are on the quart mason.
g'jTg CONCENTRATION OF ECONOMIC POWER
Mr. Cox. That is the quart mason. Is that the base price you
Avere speaking about before?
Mr. Ball. That is the net price after deducting the allowances for
the earlier shipments.
Mr. Cox. Now, can you tell us what the base price was for people
who didn't get those deductions ?
Mr. Bracken. That is the base price, after taking the 2 percent cash
discount.
Mr. Cox. All right, that is as much as I want. Now, Mr. Ball, I
want to ask you some more questions about licensing arrangements
with the Hartford-Empire. Was it your belief that, when that
contract was made, afterward Hartford-Empire was to give you
any protection against persons who were manufacturing fruit jars
and selling them at cut prices? Do you understand my question?
Mr. Ball. No, sir; not those who had the right to manufacture
fruit jars at all. There was no arrangement as to the price that the
licensee should charge, but they did agree to restrict those who had
no license from manufacturing jars and selling them at any price.
Mr. Cox. And you, from time to time, did you not, complained to
Hartford-Empire about the manufacture of fruit jars by persons who
had no license to do so, and the sale of those fruit jai-s at cut prices in
competition with your own ?
Mr. Ball. Yes, sir; we did.
Mr. Brackjin. I think we should say not the making of fruit jars
but the making of these plain jars which went into the domestic
trade.
Mr. Ball. Well, making jars that would sell with the- regular domes-
tic cap, but calling them packers' jars when in reality they were
sold in the fruit- jar trade as domestic jars.
Mr. Cox. Do you remember complaining to Mr. Goodwin Smith in
1935 that the Glenshaw Co. was indulging in that practice ?
Mr. Ball. I think we did.
Mr. Cox. And do you remember complaining in 1935 to Mr. Smith
that the Reed Co. was also indulging in that practice ?
Mr. Ball. I think we did.
Senator King. Were they licensees?
Mr. Ball. No, sir.
Senator King. You said they were operating in violation of the
patent rights of the company and in violation of your contract with
the company as a licensee.
Mr. Ball. Yes; in violation of our contract with the Hartford-
Empire Co.
Mr. Cox. Mr. Ball, I think perhaps your recollection may be at
fault about the Glenshaw Co. It was a licensee.
Mr. McCallister. Glenshaw w^s a licensee.
Mr. Ball. Not to make-iruit jars.
Mr. Cox. The Reed Co. was not a licensee at all.
Mr. McCallister. And isn't now.
Mr. Cox. In the case of the Reed Co. you offered to assist in suing
them for infringement of the Hartford patents, did you not?
Mr. Ball. I am not sure about that, whether we offered to assist
them or not.
Senator King. Do you mean by a financial contribution or by fur-
nishing evidence, or both?
CONCENTRATION OF ECONOMIC POWER 579
Mr, Cox. I will find that out, Senator. I will ask Mr. Ball to
examine this copy of a letter which was written to him by Mr. R. D.
Brown, of the Hartforcl-Empii*e, dated May 13, 1935, and then I shall
ask him if that refreshes his recollection.
Mr. Ball. Yes, sir ; that is a letter addressed to me bj' Mr. Brown,
and the Reed Glass Co. was making jars that were going into the
domestic trade and, as we understood it, in violation of the Hartford-
Empire patent and, in view of the contract that we had with the
Hartford-Empire Co., we considered that it was their duty to see
that that violation of our contract with the Hartford-Empire was
discontinued.
Mr. Cox. Mr. Ball, what I want to ask you particularly about this
matter is this : The letter begins [reading] :
Deab Mr. Baix : On my return to Hartford, Mr. Smith has handed me your
letter of May 6 with regard to the Reed suit, in which you suggest that we
discuss the situation with Mr. McCallister. We shall be very glad, indeed, to
do this, and I appreciate very much your suggestion and your offer of coopera-
tion in this matter.
In the hope that I can elicit the information which Senator King
was asking for, I ask you whether that refreshes your recollection as
to the general character of the assistance and cooperation which you
offered to give Hartford-Empire in this connection.
Mr. Ball. We were willing to give them any assistance we could
properly and within the law and reason.
Senator Kjng. Did you give them any assistance, and if so, what
was the character of it ?
Mr, Ball. If they wanted any information that we could give them
we were glad to give it.
Mr. McCallister. He asked you if you did give the assistance.
Mr. Ball. I doubt if we ever did.
Mr. Bracken. We did not.
Mr. Ball. I don't recall that w^e were called upon to give any
assistance.
Mr. Cox. Mr. Ball, I am going to read to you the first paragraph
of a copy of a letter which purports to have been sent by you to Mr.
Goodwin Smith, of the Hartford-Empire Co., dated May 3, 1933
[reading from "Exhibit No. 149"] :
Since writing to you yesterday regarding Three Rivers Glass Company I have
been reliably informed that a Sherman, Texas, jobber is now offering to sell
to the retail trade fruit jars for domestic use to be manufactured by the Three
Rivers Glass Company under the brand name "Crack Shot." The price at which
they are offering these jars is 65 cents per gross less than the same jobber is
offering "Ball Jars." This is disturbing the other jobbing customers and they
want to know what we are going to do about it.
I ask you if that is a letter which, in fact, you wrote to Mr.
Goodwin Smith.
Mr. Ball. I believe it is.
Mr. Cox. I should like to offer this letter.
The Chairman. The letter may be admitted.
(The letter referred to was marked "Exhibit No. 149" and is in-
cluded in the appendix on p. 792.) •
Mr. Cox. Mr. Ball, are you using any Hartford equipment in your
plants today?
Mr. Ball. We are using the gob-feed feeders that we invented and
built and installed, and under the Hartford-Empire license we have
580 CONCENTRATION OF ECONOMIC POWER
the right to either continue to use the feeders that we had in use
at that time and installed, or the Hartford-Empire feeder, and so
far we have not installed any of the Hartford-Empire feeders.
Mr. Cox. You are using the feeder you always used, but you are
paying royalties to Hartford-Empire on your production on those
feeders?
Mr. Ball. On those feeders.
Mr. Cox. One more question, Mr, Ball. This mornkig I asked you
whether you knew, when you made your agreement with Hartford-
Empire, that the royalties which you were paying were being divided
with Owens-Illinois and Hazel-Atlas, and you answered that you did
not.^ You know, of course, now, that royalties which you are paying
now are still being divided with Hazel- Atlas, do you not?
Mr. Ball. So I understand, from the evidence that has been
given.
Mr. Cox. Now, I want to ask you, Mr. Ball, whether in your opinion
that situation is a healthy situation from the competitive point of
view, so far as you are concerned ? Do you like it ?
Mr. Ball. We don't like it very well.
Mr. Cox. I think I have finished with Mr. Ball.
Senator Kjng. You mentioned that you were operating the gob
machine. Is that the machine which tlie Hartford Co. contended
was an infringement upon their patent?
Mr. Ball. They contended that it was an infringement on their
patent, but up to the time of the decision in the Hazel-Atlas suit,
decided by Judge Buffington, we were advised by our patent at-
torneys and other attorneys that it was not an infringement in their
opinion, but when that deci'^ion was made it seemed to cover the
gob feed that we were using,' and rather than face a law suit and the
annoyance and trouble and expense connected with it, we decided to
take out a license, provided we could get one on satisfactory terms,
and in that way we jiegotiated with the Hartford-Empire Co.
Senator King. At any rate the Hartford-Empire Co. contended
that you had infi-inged their patent and the litigation to which you
refer culminated in the support of the contention of the Hartford-
Empire Co., and you accepted the decision of the court and took a
license from the Empire Co.?
Mr. McCallister. They themselves were ^ot sued.
Senator King. I understand that. They were not i)arty to that
suit, but there was an adjudication sustaining the validity of the
Empire patent.
Mr. Bracken. There were four suits in all.
Mr. Ball. There were a number of suits that were pending at the
same time. Some I guess had been decided, and this was one of
them. It looked to us that it would be better and cheaper, perhaps,
for us to take out a license than to fight a patent lawsuit and so we
took it out.
Mr. McCallister. You understand I was in favor of fighting.
The Chairman. The attorney wants it understood that he stood
by his original opinion.
Mr. McCallister. Absolutely.
1 Supra, p. 560.
CONCENTRATION OF ECONOMIC POWER 5gl
Mr. Ball. I might say that Mr. McCallister was not in on the
negotiations that we had with the Hartford-Empire Co. We had two
of our regular attorneys, Mr. Hornbrook, of Indianapolis, who has
since died, and Mr. Brady, our regular attorney, who has since died.
They two joined with me in going to New York to draw up the agree-
ment with the Hartford-Empire Co.
Senator King. I have notliing further.
The Chairman. This machine that you were using was of your
own development?
Mr. Ball. Yes, sir.
Tlie Chairman. What was the name of that machine?
Mr. Ball. The difference between that machine and the Hartford-
Empire machine is the fact that they use what is known as a solid
plunger that goes into the glass and pushes the glass through the
aperture and then withdraws and draws the glass up. We had one
that embodied a tube in which we inserted air pressure to force the
glass down and then vacuum to draw the glass back, and in that way
we got the same result that they are gettmg with the solid plunger,
but using air pressure in place of a solid plunger.
The Chairman. You had been using this device of yours
Mr. Ball. What is that?
The Chairman. You had been using this device of yours for how
long a period?
Mr. Ball. Oh
Mr. McCallister (interposing). I would say from 1920 on.
Mr. Ball. I think it was 1929, about there, we began using it.
Before using the gob feed we had used a flowing stream. In fact, if
you wish, I will go back to the point that we started in the glass
business, using the tools that were used by the Egyptians, 2,000
years ago.
The Chairman. I don't think that will be necessary.
Mr. Ball. The hand blowpipe and the hand molds, and we used
those up to 1886 when we invented the first practical press and blow
machine for making glass jars.
The Chairman. I wanted to make clear in my own mind that I
understood you correctly in that you paid this $400,000 not because
you had any conviction that the process which you were using was
an infringement upon the Hartford patent, but that you wanted to
get rid of the nuisance of lawsuits and go on with the manufacturing
of your glass product. Is that correct?
Mr. Ball. Well, taking into consideration the decision of the court,
Judge Buffington, it would seem as though we did infringe, but that
was something that we were not, of course, sure of.
The Chairman. And as a consideration for taking out the license,,
you wanted to be assured that no new licensees would be permitted
to enter the field under the Hartford patent to compete with you.
Mr. Ball. Yes, sir.
Senator King. I want to ask one question if I may. You gave
in answer to questions by Mr. Cox the base prices for a number of
years from '22 on. How did those base prices, or the prices which
ultimately were paid by the consumer, compare witli the prices paid
by consumers for other fruit jars manufactured under similar pat-
ents. Did you charge more or did you charge less? Was there any
124401— rJO—pt. 2 22
582 CONCENTRATION OF ECONOMIC POWER
competition between you and other manufacturers of the same kind
of jars?
Mr. Ball. Really, I don't know what jars made by other manu-
facturers were sold at.
Senator King. Didn't you try to find out when you were fixing
your prices for the vending of your commodity what the market
price was for a similar one?
Mr. Ball. We made our price on the Ball perfect mason jar. We
began in 1880.
Senator King. If you will pardon me, all I am interested in
knowing is whether or not there was any effort by you and others
making prices to combine for the fixing of prices, or was there com-
petition between you and them?
Mr. Ball. Not so very much. Our prices were made on the Ball
perfect mason jar. We started nearly 50 years ago to build up a de-
mand for that particular brand, and by making jars and inspecting
them as perfectly as possible, we had created a demand so that they
were called for in practically all States of the Union.
Senator King. So you had a clientele of your own and you fixed
your own price without reference to anybody else.
Mr. Ball. Yes, sir. When it came time for us to quote prices
we took the cost and the investment and the risk and the conditions
into consideration and made our price, and quoted it broadcast to
all the jobbing customers of the United States.
Senator King. Did the production of fruit in a given year, and
the price of sugar, and the economic conditions have anything ,to
do with the fixing of prices, or did you fix your base without ref-
erence to those considerations or factors?
Mr. Ball. We took into consideration more than anything else
the cost and carrying charge and the investment.
Senator King. Plus a reasonable profit.
Mr. Ball. With a reasonable profit.
The Chairman. If there are no other questions, the witnesses may
be excused. We thank you, Mr. Ball and Mr. Bracken and Mr.
McCallister.
(Mr. Ball, Mr. Bracken, and Mr. McCallister were excused.)
Mr. Cox. Mr. Underwood is going to be the next witness.
The Chairman. Mr. Underwood, do you solemnly swear that the
testimony you are about to give in this proceeding shall be the truth,
the whole truth, and nothing but the truth, so help you, God ?
Mr.. Underwood. I do.
TESTIMONY OF R. K UNDERWOOD, PRESIDENT, KNOX GLASS
ASSOCIATES, OIL CITY, PA.
Mr. Cox. Mr. Underwood, will you give the reporter your name
and address and your present occupation.
Mr. Underwood. R. R. Underwood, president, Knox Glass Asso-
ciates, Oil City, Pa.; residence, Knox, Pa.
Mr. Cox. Just briefly tell us what Knox Glass Associates is.
Mr. Underwood. Knox Glass Associates is a corporation held
equally by five of our associated companies, located in Pennsylvania.
Mr. Cox. The five associated companies are companies which pro-
duce glass containers; is that right?
CONCENTRATION OF ECONOMIC POWER 5g3
Mr. Underwood. Yes, sir.
Mr. Cox. Can you tell what they are ?
Mr. Underwood. Knox Glass Bottle Co.. Wightman Bottle & Glass
Manufacturing Co., Pennsylvania Bottle Co., Marienville Glass Co.,
and Oil City Glass Bottle Co.
Senator King. All subsidiaries ?
Mr. Underwood. No; they are rather associated companies.
Senator Ejng. How many in all?
Mr. Underwood. Five in Pennsylvania, and we have two associ-
ated with us, one in Jersey City, N. J., known as the Metro Glass
Bottle Co., and one in Jackson, Miss., known as the Knox Glass
Bottle Co. of Mississippi.
Mr. Cox. Is Knox Glass Associates a licensee of Hartford-Empire ?
Mr. Underwood. No ; Knox Glass Associates is not a licensee of
Harlford, but the other companies are.
Mr. Cox. Each of what you call the associated companies is a
licensee of Hartford-Empire.
Mr. Underwood. Yes, sir.
Mr. Cox. Just tell us briefly wliat functions Knox Glass Associates
perform for the associated companies, so the committee will under-
stand the nature of your business organization.
Mr. Underwood. I formed the Knox Glass Associates, Inc., Janu-
ary 1, 1935. for the purpose of administering the sale as well as
engineering, and so forth, and management for the five companies
located in Pennsylvania, as well as the companies located in Jersey
City and Jackson, Miss.
Senator King. Is that a holding company, then ?
Mr. Underwood. No; it is not a holding company; rather it is
held by the five companies.
Mr. Cox. Stock of Knox Glass Associates is held by these com-
panies which are engaged in producing glass containers.
Mr. Underwood. That is right.
Mr. Cox. And it performs certain sales services and certain en-
gineering services for the companies?
Mr. Underwood. And business administration.
Senator King. Did it have any capital ?
Mr. Underwood. None other than is held in equal amounts by the
five companies located in Pennsylvania, and a nominal capital.
Mr. Cox. How long have you been in the glass business ?
Mr. Underwood. Since 1914.
The Chairman. May I interrupt to inquire what common owner-
ship there is among the five associated companies?
Mr. Underwood. The I*Inox Glass Bottle Co. of Knox, formed
some time in 1917, has a stock interest in each one of these companies
that I have named, ranging from possibly 35 percent ownership to
wholly owned subsidiary in the case of Knox Glass of Mississippi.
The Chairman. And how about the ownership in the Jersey
company ?
Mr. Underwood. It has a stock ownership in the Metro Glass of
Jersey in the amount of 331^ percent.
The Chairman. So that the Knox Co. of Knox is really the parent
company of the various associated companies.
Mr. Underwood. That is right.
534 COXCENTRATION OF ECONOMIC POWER
The Chairman. And the Knox Glass Associates is tne agency of
all of the companies to perform these services which you have
described.
Mr. Underwood. That is right, with the exception of the company
in Jei-sey City which administers its own sale; likewise in the case
of the Mississippi corporation.
The Chairman. With the exception of those tAvo companies, all
of the others are chiefly confined to the manufacturing of glass.
Mr. Underwood. That is right.
The Chairman. And they turn their product over to this otner
company for sale.
Mr. Underwood. That is right, sir.
Mr. Cox. Mr. Underwood, is the Knox Glass Co. the company
that you first became connected with?
Mr. Underwood. Knox Glass Bottle Co.
Mr. Cox. How long have these companies been licensees of Hart-
ford-Empire ?
Mr. Underwood. I should think since August 1932.
]\Ir. Cox. Before that time, what kind of glassmaking machinery
were the companies using?
Mr. Underwood. We employed both what is known as the Miller
feeder and the O'Neill feeder.
Mr. Cox. Were those both gob feeders?
Mr. Underwood. Yes, sir.
Senator King. Was not the Miller patent held to be invalid, or
was not its validity challenged by some competing companies?
Mr. Underwood. That is right, sir. It was held to be invalid by
Judge Buffington of the third circuit, Philadelpliia.
Air. Cox. I believe that was not the Miller patent that was held
to be invalid in the third circuit ; it was the Hazel patent. I believe
the Miller patent was adjudicated in the Cincinnati circuit.
The Chairman. Wasn't it negotiated out?
Mr. Cox. It never was declared invalid.
The Chairman. It was purchased out by the Hartford-Empire
Co., because the testimony was given here that the attorney for
Miller threatened the Hartford-Empire, and the Ball Co., as I recall,
that the patent would be kept in the Patent Office by interference
for 5 years, and it was to settle that litigation that an agreement was
reached. Is that your recollection?
Mr. Underwood. I believe, Senator, that the Lamb Glass Co. of
Mount Vernon, Ohio, who operated what was known as the Miller
feeder, was sued by the Hartford Co. in the District Court of Co-
lumbus, and I believe that that patent was adjudicated in the circuit
court in Cincinnati, that particular Miller patent.
Senator King. To be valid or invalid, which?
Mr. Underwood. I believe that was held, if I recall correctly, to
he invalid as to what was known as phase changing in the patent.
Mr. Cox. Do you recall the purchase of the business of the William
J. Miller Engineering Co. or the patent rights of that company, I
should say, by Hartford-Empire?
Mr. Underwood. Yes ; by Hartford-Empire ; I recall distinctly the
taking of the patents of William J. Miller, who was the proprietor
of the Miller Engineering Co., by the Hartford Co.
I
CONCENTRATION OF ECONOMIC POWER 585
Mr. Cox. At that time you were connected with the Knox Glass
Bottle Co.?
Mr. Underwood. Yes, sir.
Mr. Cox. Was it using a William Miller feeder ?
Mr. Underwood. Yes, sir.
Mr. Cox. We from time to time in this hearing have had refer-
ences to what has been called the Miller Users' Defense Association.
Will you tell us briefly what that was and how it came into existence
and what it did?
Mr. Underwood. At the time that the Hartford-Empire Co. pur-
chased the patents of William J. Miller, a number of us smaller
manufacturers were employing the Miller feeding device.
Mr. Cox. I beg your pardon, but you had both those feeders out-
right ?
Mr. Underwood. That is right.
Mr. Cox, Not under license; they were your property?
Mr. Underwood. Purchased them from the Miller Engineering Co.
specifically. After the purchase of the patents by the Hartford Co.,
we decided that possibly William J. Miller would not give a sufficient
support to their defense and, not being able individually or at least
a number of us individually able financially to prosecute the defense,
we formed what was known as tlie Miller Users' organization and
employed counsel and defended the patents to as great an extent as
we thought it was practical to do, giving consideration to the finan-
cial obligations incurred thereby.
Mr. Cox. I understand by that, then, that you did contribute finan-
cially to the defense of certain litigation.
Mr. Underwood. That is right.
Mr. Cox. Which involved the question as to whether or not the use
of those patents infringed the Hartford patents.
Mr. Underwood. That is right.
Senator King. Hartford was the other side of the litigation.
Mr. Underwood. That is right.
Mr. Cox. Could you tell us how long that litigation lasted?
Mr. Underwood. I believe that we conducted that litigation from
somewhere around 1927 or 1928 until the time that the Hazel settled
their suit with the Hartford Co.
Mr. Cox. And after the settlement of tite Hazel-Atlas suit did the
association continue to be active?
Mr. Underwood. Subsequent to the settlement of the Hazel-Atlas
suit the association substantially disintegrated, I believe.
Mr. Cox. Some of the members took licenses of Hartford?
Mr. Underwood. That is right, and we were those who took the
license.
Mr. Cox. There is one more question I want to ask. Can you tell
us approximately how expensive this litigation was, conducted with
the Hartford-Empire? I am speaking now of the whole group
which belonged to the Miller Users' Defense Association.
Mr. Underwood. Our records indicate that a total expenditure
of some approximately $130,000 to $140,000 was expended in the
defense or the prosecution of that defense.
Mr. Cox. That was for the whole period of time?
Mr. Underwood. That was for the group.
586 CONCENTRATION OF ECONOMIC POWER
Mr. Cox. Most of those companies you said a moment ago were
small companies; is that correct?
Mr. Underwood. Yes ; I believe that most of them would be con-
sidered the minor companies of the industry.
Mr. Cox. Now, I want you to tell us briefly
Senator King (interposing). Could I ask one question? Were they
manufacturing anything other than the kind of glass that has been
referred to in these hearings?
Mr. Underwood. Most of them, Senator, were manufacturing a
general line.
Senator King. Not plate glass?
Mr. Underwood. No.
Senator King. Window glass?
Mr. Underwood. All glass containers.
Senator King. I see.
Mr Cox. Will you tell us, Mr. Underwood, the circumstances unaer
which you- took a license from Hartford -Empire? I am speaking
now of you in your connection with the Knox Glass Bottle Co.
Mr. Undfrwood. Of course. We were notified by the Hartford Co.
that we were infringing their patents, and we were in hopes that we
could continue defending until the patents would be adjudicated.
We found, sometime late in 1929 or 1930, that it was impractical for
our company on account of financial reasons to prosecute the defense
further, and we were invited to discuss the matter with the Hartford
Co. early in 1932, I believe, and as a result of that discussion
Mr. Cox (interposing). Tell us about that invitation, Mr. Under-
wood. You say you were invited. Tell us what happened.
Mr. Underwood. Mr. Goodwin Smith, president of the Hartford-
Empire Co., invited me to Hartford early in August 1932 to confer
with him in connection with the patent situation. I met Mr. Smith
in his office at Hartford in conjunction with some of his staff from
his legal department.
Mr. Cox. Did you have a lawyer?
Mr. Underwood. Yes. I beg your pardon?
Mr. Cox. I said, "Did you have a lawyer?"
Mr. Underwood. No; I didn't have a lawyer with me. I don't
know whether that may be fortunate or unfortunate. Nevertheless,
I met Mr. Smith and his staff and, of course, he placed before me a
proposition which it was impossible for us to accept at that time,
and he was so advised that on account of the financial obligation our
companies would be obliged to accept in the event we met his first
thought on the subject
Mr. Cox (interposing). What was that proposition?
Mr. Underwood. I believe that the Hartford Co. requested us to
compile a memorandum of royalties due them from the date of issue
of the Peiler patent sometime in 1925 to date. We did ; and the result
of that was simply that we were indebted to them on account of that
record so compiled, a sum equal to about $630,000.
Mr. Cox. What was the capitalization of your company at that
time?
Mr. Underwood. Somewhere, possibly, at that time — I believe at
that particular time our company was probably capitalized at a mil-
lion dollars, with probably half of that amount outstanding, or less.
CONCENTRATION OF ECONOMIC POWER 587
Of course, I advised Mr. Smith that we couldn't meet that situation,
and then we reconvened at a subsequent conference, and as a result of
that we did effect a settlement with the Hartford Co. by paying them
a certain amount and accepting licenses for 25 of their umts.
Mr. Cox. How much did you have to pay, Mr. Underwood?
Mr. Underwood. We paid Hartford $100,000.
Mr. Cox. Now, was that license you were given an unrestricted
license ?
Mr. Underwood. No ; we were restricted with respect to a limited
number of milk bottles, I believe 75,000 gross.
Mr, Cox, How many milk bottles had you been making before
that?
Mr. Underwood. Approximately 100,000 to 150,000 per annum.
Mr. Cox. You asked for more milk bottles ?
Mr. Underwood. That's right.
Mr. Cox. But you didn't get them?
Mr. Underwood. We didn't get them, and 1 believe the fruit jar
was excluded from that particular license, and all carbonated-bever-
age bottles.
Mr. Cox. Were any other restrictions contained in the license so
far as number and quantities were concerned ?
Mr. Underwood. We were restricted to the use of 25 feeding
devices.
Mr. Cox. And that, of course, restricted the amount of ware you
could produce?
Mr. Underwood. That's right.
Mr. Cox. Could you, Mr. Underwood, tell me whether at any time
after that you attempted to develop any other kind of glassmaking
machinery that you could use free from license of the Hartford-
Empire ?
Mr. Underwood. Yes. Sometime in 1927 I joined hands with
Frank O'Neill, of Toledo, Ohio, operating the O'Neill Machine' Co.,
and as a result of that we developed in our plant what was known as
the Knox-0'Neill suction machine.
Mr. Cox. What did you use that machine for?
^ Mr. Underwood. The manufacturing of a miscellaneous or general
line of glass.
Mr. Cox. I meant to ask you a moillent ago, Mr. Underwood,
whether, before you took a license from Hartford- Empire, you manu-
factured any milk bottles and sold them.
Mr. Underwood. Yes; ranging from 100,000 to about 150,000 gross
per annum.
Mr. Cox. Was that a considerable part of your business?
Mr. Underwood. That was a very substantial part of our business,
profit-wise.
Senator King. You are speaking of the four or five companies,
now?
Mr. Underwood. Yes.
Mr. Cox. Did you, before you took the license, manufacture any
fruit jars?
Mr. Underwood. Yes; we manufactured what was known as the
Knox fruit jar.
588 CONCENTRATION OF ECONOMIC POWER
Mr. Cox. And did you manufacture, before you took a license, any
carbonated-beverage bottles ?
Mr. Underwood. Not to any great extent. Our manufacture of
carbonated-beverage bottles was very limited.
Mr. Cox. You manufactured some, but not many ?
Mr. Underwood. That's right.
Mr. Cox. And after you took the license you ceased to manufacture
carbonated-beverage bottles and fruit jars altogether?
Mr. Underwood. We ceased manufacturing carbonated-beverage
bottles except that Hartford granted to us the right to manufacture
a small quantity of carbonated-beverage bottles for an account in
Cleveland. We did not manufacture subsequent to our license with
Hartford any more fruit jars on their equipment. We did, however,
manufacture on the Knox suction machine.
Mr. Cox. That was the machine you were speaking of a moment
ago which you developed with Mr. O'Neill ? Is that correct ?
Mr. Underwood. That's right.
Mr. Cox. You manufactured fruit jars on that machine, you say.
How long did you continue to manufacture those fruit jars?
Mr. Underwood. I believe we continued manufacturing fruit jars
on our Knox-O'Neill suction machine until sometime early in 1933.
Mr. Cox. What happened then?
Mr. Underwood. We sold our fruit-jar business to Ball Bros.
Mr. Cox. Why did you do that, Mr. Underwood? Hadn't it been
profitable ?
Mr. Underwood. Yes; fruit jars were a very profitable line to us.
However, we were approached by Hartford with respect to our Knox-
O'Neill machine being a possible infringement on certain patents
that had issued to them or for which they had applications filed, and
in addition to that they questioned our position with leference to
manufacturing fruit jars on any device that we had operating at that
time. Rather than to develop a situation which we were not in posi-
tion to defend, and didn't feel that we should at that time, we sold
the business to the Ball Bros, for what we thought was a fair con-
sideration.
Mr. Cox. What was that?
Mr. Underwood. I think Ball Bros, paid us $100,000, if I remember
rightly— $85,000 to $100,000.
Mr. Cox. Was this early in 1933?
Mr. Underwood. I believe it was. I believe it was some time dur-
ing February or March 1933.
The Chairman. How did you happen to sell to Ball Bros.?
Mr. Underwood. We were contacted by Mr. George Ball, I be-
lieve, in connection with the matter, or it was discussed in some
manner or other that we came to know that they were interested in
purchasing our fruit- jar business.
The Chairman. Through whom did you coma to know it?
Mr. Underwood. I don't recall distinctly whether it was a contact
made by Mr. George Ball or the Hartford Co. I don't recall just
how that contact was made.
The Chairman. When the Hartford Co. approached you with re-
spect to the manufacture of fruit jars, did it through its representa-
tive make any representation that you were competing with Ball
Bros.?
conce>:tration of economic power 539
Mr. Underwood. Yes; the Hartford Co., in their contact with me,
advised that in their opinion the machine on which we were making
these fruit jars infringed some of their patents.
The Chairman. Some of whose patents?
Mr. Underwood. Some of Hartford's patents, and they were par-
ticularly interested in the fact that we were manufacturing fruit jars
on that machine and, of course, sooner or later that matter would
necessarily be adjudicated, I knew.
The Chairman. Then was it suggested by the emissary of Hartford
that you should sell to Ball ?
Mr. Underwood, No ; I don't know that it was. I think Hartford
simply notified me that in their opinion we were restricted with re-
spect to our feeder rights that we had under them, that we shouldn't
manufacture under our feeder rights, and in addition to that, that no
doubt their patents read on our vacuum machine.
Mr. Cox. Did you ask them for a license under their suction patents
to manufacture fruit jars?
Mr, Underwood. No ; I don't believe I did.
The Chairman. Did you seek out Ball yourself?
Mr. Underwood, I don't recall, Senator, how that contact was
made, whether Hartford contacted me, whether it was by George
Ball, or how the contact was made. I don't recall the incident as to
how the situation was handled, but I know we were manufacturing
a substantial quantity of fruit jars and we were very happy with
the business.
Mr. Cox. Wliat happened to the suction machines? Did you con-
tinue to manufacture anything else on them after you stopped man-
ufacturing fruit jars?
Mr. Underwood. We continued the Knox-0'Neill vacuum machine,
I believe, about eight units in production, until some time during
1933, without license from the Hartford-Empire.
Mr. Cox. What happened then?
Mr. Underwood. Mr. Smith advised me, some time I believe during
1933, that the Knox-0'Neill machine had infringed certain of their
patents, and it was noAv time that we should get together and discuss
the situation. As a result of that I met Mr. Smith, I believe in June
or possibly in July of 1933, if my memory serves me correctly, to
discuss that situation. And, of course, as a result of that discus-
sion, we arranged to have our respective patent counsel get together,
.which they did, and our counsel advised us that it was possibly a
50-50 break as to whether we infringed the patents they alleged we
were infringing, and then again as a result of that, of course, I
thought it best not to involve our company further in defense, and
we took a license for the suction machine from Hartford, and they
purchased the equipment from us at some price satisfactory to both
organizations.
Mr. Arnold. Did the greater resources of Hartford have anything
to do with your making that decision not to take up the 50-50 fight?
Mr. Underwood. I would say that that has always been an influence
in the life of our company, patentwise.
Mr. Arnold. You felt that they could continue the fight longer
than you could?
Mr. Underwood. That's right.
590 CONCENTRATION OF ECONOMIC POWER
Mr. Arnold. And that resources and persistence and an army of
experts and counsel are as important in a patent fight as they are in
any other kind of war?
Mr. Underwood. That's right. My file indicates that.
Mr. Cox. Mr. Underwood, did you continue to manufacture milk
bottles after you took the Hartford license?
Mr. Underwood. Yes. I apprised Hartford of the fact that it
would be impossible for us to discontinue forthwith the manufacture
of milk bottles and they kindly consented to permit us to continue
manufacturing our previous quantity for a period, I believe, of 4 or 5
months. Then they requested us, at .the close of that period, to re-
duce our production to 75,000 gross per year, which was the amount
they finally allotted to us under our license.
Mr. Cox. Did you continue to produce thereafter 75,000 gross?
Mr. -Underwood. For possibly a few months only. We found that
that quantity, for our organization and our equipment, was imprac-
tical.
Mr. Cox. In other words, you could, from the point of view of profit,
manufacture and sell successfully 100,000 or 150,000 gross, but if you
were limited to 75,000 gross you couldn't do it ?
Mr. Underwood. That is right.
Mr. Cox. Wliat did you do, then, with the milk-bottle part of vour
business ?
Mr. Underwood. Sometime in December 1932, when I realized that
it was impractical for our company to continue manufacturing a
limited quantity in the amount of 75,000 gross of milk bottles per
annum, I contacted Mr. Mandeville, of the Thatcher Manufacturing
Co., and asked him if he would be interested in purchasing our milk-
bottle business, that is, the machinery, good will, and so on, and so
forth, and in the event that he would make the purchase, that we
wonld go out of the business. He told me promptly that they might
be interested in that, and as a result of our conference we sold our
milk-bottle rights, that is, the right to make 75,000 gross of milk
bottles, together with all machinery, molds, and equipment incident
to the manufacturing of milk bottles, to the Thatcher Manufacturing
Co., and I believe that sale was made in late 1932, in December.
Mr. Cox. How did you happen to go to Mr. Mandeville, of the
Thatcher Co.?
Mr. Underwood. Well, the reason I contacted Mr. Mandeville is be-
cause the Thatcher Manufacturing Co. were the leaders in this par-
ticular field, and I thought that if anyone would be interested in
handling our milk-bottle — the residue of our milk-bottle — rights, Mr.
Mandeville would be interested, the Thatcher Co. would be inter-
ested. It was a natural consequence of the situation.
Mr. Cox. Because you knew it was probably the largest manufac-
turer of milk bottles in the country ?
Mr. Underwood. That's right.
Senator King. May I ask, did your company manufacture up to
that time anything besides milk bottles? You have mentioned one
product.
Mr. Underwood. We manufactured at that time a general line of
all glass containers exo^t the items that I referred to, such as car-
bojiated-beverage bottles, and so on.
CONCENTRATION OF ECONOMIC POWER 591
Mr. Cox. Now, Mr. Underwood, in your opinion if today you had
a right under your license to manufacture fruit jars, could you man-
ufacture and sell those frui^ jars in the market at a profit ?
Mr. Underwood. I would say, at the present market levels, volume-
wise, insofar as fruit jars is concerned, no doubt a profit could be
made on a limited quantity only.
Mr. Cox. But you could sell a limited quantity of fruit jars, you
think, at a profit?
Mr. Undeewood. That's right.
The Chairman. Wliy do you say a "limited quantity" ?
Mr. Underwood. Because the domestic fruit jar, the volume on the
domestic fruit jar, in our industry is very small compared with some
of our other wide-mouth lines, such as Mr. Ball referred to some few
moments ago.
The Chairman. What I had in mind was whether or not, in your
judgment, you thought it would be a limited quantity because it
would be limited to an area around your plants, or something of
that kind.
Mr. Underwood. No, no. I am speaking Nation-wide.
Senator King. Has that industry increased in these last Tew years?
Mr. Underwood, No; rather it has decreased on account of the
packer jar making inroads into that particular division, such as the
peanut butter jar that is reused, and so on, and so forth.
Senator King. There has been a diminishing market, then?
Mr. Underwood. Yes.
Senator King. Has there been overproduction?
Mr. Underwood. Well, I can't say that there has been overproduc-
tion, because those who manufacture fruit jars are very well versed
in the consumption, and I believe that they just simply wouldn't
over-produce.
Senator King. Has there been any decrease in price?
Mr. Underwood. I am not familiar with that. Senator, because I
haven't followed that particular phase of the situation since we passed
out of the picture.
Mr. Cox. You spoke a moment ago of the inroads the packers' ware
was making in the fruit-jar field. Do you have any opinion as to
whether those inroads are caused at least in part by the fact that
packers' M'are sells at a lower price?
Mr. Underwood. Well, I can't say that that is the sole reason.
Glass is being used by the consuming public in products not to
such an extent as we have had heretofore. For instance, the house-
wife today will take a peanut-butter jar with a finish, that G finish,
and they will use the peanut butter from the jar and save the jar by
going to the store and purchasing a cap that will accommodate it.
It seems that during the past few years that practice has become
more popular.
Senator King. That reduces consumption.
Mr. Underwood. Yes; insofar as the domestic jar.
The Chairman. Do all of the companies manufacture jars in such
fashion as to accommodate a standard cap ?
Mr. Underwood. Yes; the quart jar, the quart packers' jar is
pretty com.monly manufactured with what we know as a G finish
which will accommodate the zinc cap that Mr. Ball referred to this
592 CONCENTRATION OF ECONOMIC POWER
Mr. Cox. Could you manufacture, and sell carbonated-beverage
bottles?
Mr. Underwood. Yes, sir'; we could do that very nicely.
Mr. Cox. Could you do the same with milk bottles?
Mr. Underwood. Yes. The field is greater for profit I think
volume-wise in the carbonated beverage bottle than it would be in
the milk bottle.
Mr. Cox. Did you ever apply to Hartford-Empire for permission
to make carbonated beverage bottles?
Mr. Underwood. Yes, sir.
Mr. Cox. Were you granted that privilege?
Mr. Underwood. No, sir.
Mr. Cox.. Did they tell you why you couldn't do it?
Mr. Underwood. I can't say that they ever gave us any detailed
reply on that. They simply refused it.
Mr. Arnold. Did they say anything about stabilizing production
of the industry or anything of that sort ?
Mr. Underwood. In their reply to me on the subject I don't recall
that they put it that way.
Senator King. Are there licensees for the manufacture of those
bottles?
Mr. Underwood. Yes.
Senator King. How many licensees?
Mr, Underwood. I imagine that there are possibly 10 or 12 manu-
facturers who are licensed to make carbonated-beverage bottles.
Senator King. Are there any other companies that hold patents
under which carbonated-beverage bottles might be made other than
the patentee?
Mr. Underwood. No; not in our country. I believe that if you
were to
Senator King (interposing). I am speaking of the United States.
Mr. Underwood. That is right.
■Mr. Cox. Mr. Underwood, are you reasonably familiar with the
provisions of your license agreements with the Hartford-Empire?
Mr. Underwood. Fairly well.
Mr. Cox. We have introduced here in evidence marked "Exhibit
No. 118" ^ a license agreement between Hartford-Empire and four
other glass companies. Section 8 of that agreement reads as follows
[reading from "Exhibit No. 118"] :
No changes and no additions other than reasonahle and necessary repairs and
other than necessary or proper safety appliances shall be made in or to said
leases machinery except by consent of both parties to this license and lease, or
except as provided in section hereof for the event of injunction, and except as
provided in this section for improvements, and all changes and additions when
made shall become the property of the licensor.
I want to call your attention particularly to this sentence :
Complete title to all patent rights at any time possessed during the term of
this license and len«:o by the licensee, covering such changes and additions, shall
be transferred to the licensor.
As I understand that provision, Mr. Underwood, it means that if
you make any improvement on the machines you have in your estab-
lishment during the term of this license and ob'^ain a patent on that
improvement, that patent must be transferred to Hartford-Empire.
* Entered supra, p. 405.
CO^X'E^TRATION OF ECONOMIC POWER 593
Mr. Underwood. That is right, as I understand it.
Mr. Cox. Does that agreement serve as an incentive to you to do
experimental and development work in an attempt to improve your
machines ?
Mr. Underwood. Well, to be frank about the matter, I would say
no, not to an independent organization that is desirous of developing
their own technique. They are loath to do so in view of the fact that
it will extend to Hartford and as a result of that reach all of their
other licensees who are your competitors.
Senator King. Do you have a research organization ?
Mr. Underwood. Small.
Mr. Cox. Is that provision in 3'our contract?
Mr. Underwood. I believe that it is.
Mr. Cox. We have heard some testimony here about services, engi-
neering and otherwise, which Hartford-Empire performs for its
licensees. Do they perform those services for you and your company?
Mr. Underwood. I believe that under their contract th^y agree to
furnish that service, and I believe they do to a greater or lesser extent
to all their licensees. In our particular situation it is lesser.
Mr. Cox. You don't find that you need that service.
Mr. Underwood. Not in all cases. We don't require their services
or, in other words, we don't depend upon the Hartford-Empire people
to operate our plants.
Senator King. Have they refused when you have asked?
Mr. Underwood. Not at all. They are always willing, on the other
hand, to assist us.
Mr. Cox. You don't find it necessary to ask them very often.
Mr. Underwood. That is right.
Mr. Cox. Mr. Underwood, do you recall what you had to pay for
the Hartford machinery which you now have? I am not speaking
about royalties you paid for producing ware, I am speaking about
the 'license fees. Take the feeder, for example, and tell me what you
paid for the Hartford feeder in the way of a license fee.
Mr. Underwood. If my memory serves me correctly in that con-
nection I believe that we paid for a license fee approximately $2,000
and for the physical parts about $2,300 to $2,.50O, after which we pay
the regular rate of royalty.
Mr. Cox. To get that license you pay $4,500.
■ Mr. Underwood. That is right.
Mr. Cox. Then you don't own it.
Mr. Underwood. The title vests in the Hartford Co.
The Chairman. What do these parts consist of?
Mr. Underwood. Cams to operate the plunger, and different mech-
anisms that are on the feeder, such as mators and shears.
The Chairman. That is ordinary repair parts.
Mr. Underwood. Yes; that will be necessary in the construction.
The Chairman. How about improvements ?
Mr. Underwood. Any improvements that Hartford would bring
out they pass along to us with their usual charge.
The Chairman. So that if Hartford research or engineering bureau
should develop improvements upon the machines which you have, you
would be entitled to those.
Mr. Underwood. They extend to us under our license.
594 CONCENTRATION OP ECONOMIC POWER
The Chairman. Have yoit received those in the past?
Mr. Underwood. I believe that any that they have developed they
have passed along to us.
The Chairman. I noticed that in the earlier part of your testi-
mony you referred to having taken a license on 25 units.
Mr. Underwood. Yes, sir.
The Chairman. Is that a limitation?
Mr. Underwood. Yes.
The Chairman. Could you use 30 units if you wanted them?
Mr. Underwood. Well, sometime, we thought we could use 60.
Tlie Chairman. I don't mean that. I mean are you under your
agreement permitted to use 30 or 60 units if you can ?
Mr. Underwood. No.
The Chairman. Then you are limited to 25 units.
Mr. Underwood. We were at that time. That has since been
increased.
The Chairman. What is it now?
Mr. Underwood. To a total of all our associated companies of 3^
units.
The Chairman. So that no matter what business you and your
associated" companies may develop, vou may under this agreement
use only this specific number of machines ?
Mr. Underwood, That is right, sir.
The Chairman. And under this agieemeut you are also limited
with respect to the output?
Mr. Underwood. That is right, sir.
Mr. Cox. Mr. Underwood, did you know, prior to these hearings,
that the royalty you were paying Hartford-Empire was being di-
vided between "^them for a period with Hazel-Atlas and Owens-
Illinois?
Mr. Underwood. I certainly did not.
Mr. Cox. Do you think tliat situation places your company at a
competitive disadvantage against a company like Hazel-Atlas which
is receiving hi turn a part of the royalty ?
Mr. Underwood. In my opinion, at a great disadvantage.
Senator King. May I ask about these machines? I saw a picture
of these macliines. They are rather complicated, are they not, with a
great many parts?
Mr. Underwood. Yes, sir; undoubtedly.
Senator Kino. What would be the cost to build a machine with
dies and so on, if you didn't have the dies and forms?
Mr. Underwood. That is for a Hartford feeder?
Senator King. Yes; for the machine which you use in making
these milk bottles and these containers?
Mr. Underwood. Well, in the manufacturing of the container we
have two units, one known as the feeder device, and under that the
forming machine. Which one do you refer to, the feeding- device or
the forming machine? Or the complete unit?
Senator King. The complete unit.
Mr. Underwood. Oh, I would say that for us to jig our machine
shop up, drawings, patterns, and all the necessary work to make the
first machine would be considerable, possibly three times the cost of
the finished product as we can purchase it now.
CONCENTRATION OF ECONOMIC POWER 595
Senator I^ng. Could you build one for $500,000, making your dies
and jigs — supposing you started from scratch, to use an expression,
buy the material and steel and whatever products are necessary?
Mr. Underwood. On the equipment we use today, we feel that we
could take a bottle- forming machine, together with a feeder, and build
the unit ourselves, if we were permitted to use — if we didn't meet
patent interference — for possibly $40,000 to $50,000. That is our firet
unit. We have calculated that. However, we can purchase that same
anit today from the Lynch Corporation and the Hartford-Empire
Co. for half that amount.
Senator King. That is all.
Mr. Cox. Have you ever made any computation as to what it would
cost you thereafter to produce additional
Mr. Underwood (interposing). Well, I believe we could do just as
good a job as they do after we are equipped and with the personnel
and jigs to do it.
Mr. Arnold. Do you think there is any great superiority in brains
in the organization in any one section of the glass industry which
requires them to have any peculiar advantages in order for them to
use those brains ?
Mr. Underwood. Will you repeat that question?
Mr. Arnold. I will preface the question with an explanation. It
has been suggested at various times in the hearing that in certain
parts of the glass industry, organization and skills and techniques
have been affected to such an extent that it might be a pretty good
thing for the industry, since those people know the industry so well,
to centralize power in their hands. That inference might be drawn.
Do you feel that to be an effect ?
Mr. Underavood. Not to such an extent as was brought out here
yesterday.
Senator King. That is all.
The Chairman. If there are no other questions, Mr. Underwood
may be excused.
Mr. Cox. I'd like to put on one more witness, if I may, after Mr.
Underwood.
Senator King. Will that be long?
Mr. Cox. I think we can be through in 15 minutes.
The Chairman. Suppose we put him on.
(Mr. Underwood was excused from the stand.)
Mr. Cox. With the chairman's permission, I am going to ask Mr.
Hamilton to examine the next witness.
The Chairman. That is agreeable. Will you please call the next
witness ?
Mr. Hamilton. Mr. Geer and Mr. Jaspert.
The Chairman. Do you and each of you solemnly swear that the
testimony you are about to give in those proceedings shall be the
truth, the whole truth, and nothing but the truth ?
Mr. Geer. I do.
Mr. Jaspert. I do.
596 CON-CK.VTUATinX ( )I' EtOSOMlO POWER
TESTIMONY OF PAUL L. GEEE, TREASURER, AMSLER-MORTON CO.,
PITTSBURGH, PA.; AND TESTIMONY OF WILLIAM B. JASPERT,
PATENT ATTORNEY, PITTSBURGH, PA.
Mr. Hamilton. Now, Mr. Gcer, will you please state your name
and occupation to the reporter ?
Mr. Geer. My name is Paul L. Geer. I am treasurer of the Amsler-
Morton Co., located in Pittsburgh, Pa.
Senator King. Which company is that?
:Mr. Hamilton. Amsler-Morton Co. Mr. Jaspert, will you please
give the repoi-ter your name and occupation?
"^ Mr. Jaspert. I am patent attorney in the city of Pittsburgh, and
I am representing, or have represented, the Amsler-Morton Co. in
litigation and advice on glass machine making equipment.
Mr. Hamilton. Now, Mr. Geer, will you plense describe briefly the
business in which the Amsler-Morton Co. is engaged?
Mr. Geer. We are in the en<^ineering and contracting business for
the purpose of supplying melting and annealing equipment for the
glass industry.
Mr. Hamilton. Is it true to say that the Hartford-Empire Co. is
also engaged in that business?
Mr. Geer. Yes; they are engaged in the same business, but, of
course, we arc one of the small businessmen compared to that concern.
Mr. Hamilton. You say that you are engaged in the manufacture
of glass machinery. Do you specialize in any particular type of
glass machinery manufacturing?
THE CONTROL OF THE LEHR
Mr. Geer. We specialize in the glass-annealing equipment.
Mr. Hamilton. Will you please describe briefly wjiat glass-anneal-
ii^g is ?
Mr. Geer. Well, the complete operation is comprised of a glass-
melting furnace, a feeder, a forming machine, and a lehr.
Senator King. What is a lehr?
Mr. Geer. It is a device for annealing the glassware after it is
formed.
Mr. Hamilton. Would you say that it is correct to describe a lehr
as being a kind of oven into which the hot glass is put as it comes
off the forming machine and in which the temperature of the glass is
lowered until it finally comes out of the end definitely set and
formed ?
Mr. Geer. That is correct.
Mr. Hamilton. Do you have any patents on lehrs?
Mr. Geer. We have a number of patents on lehrs, applying to our
particular method of producing the result.
Mr. Hamilton. Mr^ Geer, I should like to ask you when you first
began, that is when your company first began the manufacture of
lehrs.
Mr. Geer. We first began the manufacture of lehrs in 1915.
Mr. Hamilton. Have you been engaged in that business continu-
ously since?
Mr. Geer, We have been engaged in that business continuously
and up to about 1934 we built approximately 400 lehrs for the in-
dustry. Since that time, of course
CONCENTKATION OF ECONOMIC POWER 597
Mr. Hamilton (interposing). I will get to that.
Senator King. Could those lehrs be used independently of tha
mechanism necessary to reduce the sand and other ingredients to
!?
Mr. Geer. It is a composite part of the whole operation.
Mr, Hamilton. But it could be used with any kind of feeder or
any kind of tank or any kind of former.
Mr. Geer. Or even for annealing hand ware.
Mr. Hamilton. Now you say you have patents upon lehrs. Have
you ever inaugurated an infringement suit upon your patents?
Mr. Geer. Never.
Mr. Hamilton. Has anyone ever charged j^ou with infringing
their patents by your making your lehr?
Mr. Geer. We have been charged with infringing a number of
times by the Hartford-Empire Co.
Mr. Hamilton. When were you first charged?
Mr. Geer. As soon as we developed the unit lehr between '26
and '27, and especially when we placed them on the market in quan-
tities in the early part of '28. They charged us with infringement
and finally invited us to go to Hartford.
Mr. Hamilton. Did you accept that invitation to go to Hartford?
Mr. Geer. Yes; we accepted it because there seemed to be some
question in their minds as to the matter of infringement and they
wanted to discuss the lehr in general, and some possible plan for
getting together.
Mr. Hamilton. With whom did you discuss the situation when you
went to Hartford, at their invitation?
Mr. Geer. We discussed the matter with Mr. Smith and possibly
8 or 10 other engineers.
Mr. Hamilton. What proposals were put forward either by you
or Mr. Smith at that time ?
Mr. Geer. The first thing they asked was whether we had brought
the drawings along of our equipment, and when we told them we
didn't bring them, they offered different suggestions for getting to-
gether. At that time the price of our lehr was $9,500 for the 4 by 75
foot lehr, which is the lehr used mostly in the hollow-ware industry,
and they suggested that we raise that price to $13,500, for which they
would grant us a cross-license and we were to pay them the difference,
or $4,000.
Mr. Hamilton. Can you tell us what the comparable Hartford-
Empire lehr was selling for at the time Mr. Smith made this proposal
to you?
Mr. Geer. From the information we have been able to collect, they
charged a price of $6,500 for the license. The purchaser was required
to pay the cost of the erection and in addition they were obliged to
pay a license fee of $100 a month at that time.
Mr. Hamilton. If you had accepted Mr. Smith's proposal, would
that have placed you at a definite competitive disadvantage?
Mr. Geer. Definitely.
Mr. Arnold. In other words, you were competing with them and
also paying part of your profits back to them.
Mr. Geer. Exactly.
Mr. Hamilton. Well, now, you rejected the proposal, I take it.
Mr. Geer. Yes, sir.
124491— 39— pt. 2 -23
59§ CONCENTRATION OF ECONOMIC POWER
Mr. Hamilton. Tlien did Hartford-Empire take any further steps-
in regard to their claims that your lehr was infringing their patent?
]\Ir. Geer. Well, after we rejected the proposal, we returned ta
Pittsburgh, attempting to go on as we had in the past, charging a
fixed price for the lehr and selling it outright, with no royalties,
and they, of course, got busy immediately to make the sale ditficult
by threatening suit to the custom.ers and other means of coercion
which I could explain.
Mr. Hamilton. What I am interested in more particularly, Mr.
Geer, is any particular negotiations j'ou had with Hartford-Empire
or anyone else regarding your lehr and Hartford-Empire's claim that
it infringed their patents.
Mr. Geer. After we refused the agreement, they sent two mem-
bers of the British Hartford-Fairmont Co. to see us, at which time
they offered us $10,000 for the British rights, agreeing to give us $2,000
cash for the drawings, which we rejected, and Mr. Amsler, a former
member of our company who was then connected with the Hartford
Co., made numerous visits to our office for the purpose of obtaining
information as to the construction and
Mr. Hamilton (interposing). I take it you didn't give him any
information.
Mr. Geer. They finally submitted us a questionnaire and on advice
of counsel we signed
Mr. Hamilton (interposing). That was relating to your lehr?
Mr. Geer. Yes. We answered about 30 or 40 questions.
Mr. Hamilton. Did anyone offer to purchase your lehr business
about this time or later?
Mr. Geer. Well, that wasn't until later.
Mr. Hamilton. When was that?
Mr. Geer. We were approached by one Mr. Collin, of the Collin-
Norton Co., in Toledo, early in 1934. Mr. Collin made an appoint-
ment and came to see us the next day, making an offer of $200,000
for our glass business.
Mr. Hamilton. That was just for your glass machinery manu-
facturing business?
Mr, Geer. That is right, and the patents.
Mr. Hamilton. Did you accept that offer ?
Mr. Geer. No; we didn't. We thought it was too low, and he
raised the price to $260,000, and, in fact, he approached me pri-
vately because of my having a controlling interest in the company*
he approached me on the basis of selling out for $200,000.
Mr. Hamilton. That is your controlling stock interest.
Mr. Geer. Yes.
Mr. Hamilton. Did you accept either his proposal to pay $260,000-
altogether, or $200,000 for your controlling interest in the stock?
Mr. Geer, No; we didn't.
Mr. Hamilton. Did he approach you again with any other
proposition,
Mr. Geer. Yes ;^ the first visit was in January 1934, and
Mr. Hamilton (interposing). Now you are referring to the origi-
nal visit when he offered you $200,000?
Mr. Geer. Yes.
Mr. Hamilton. That was January 1934?
CONCENTRATION OF ECONOMIC POWER 599
Mr. Geer. Yes; and in February lie called up and made another
appointment, and this time he brought with him Mr. Hazelton, vice
president of the Owens-Illinois Glass Co., and Mr, Frazier, president
of the Simplex Engineering Co., a competitor and a licensee of the
Hartford Co.
Mr. Hamilton. That is a licensee of the Hartford Co. to make
lehrs.
Mr. Geeh. That is right. This time he told us that his company, the
Collin-Norton Co., of Toledo, were the people that combined the
Owens Bottle Co. and the Illinois Glass Co. together, and that he
was then a director in that company, and he also combined the Ed.
Miller Machine Co. in Columbus, the O'Neill Machine Co. in Toledo,
and the Lynch Machinery Corporation of Anderson, Ind., to operate
and sell equipment under the Hartford license.
Mr. Hamilton. What was his proposal to you at that time?
Mr. Geer. He proposed to combine the Simplex Engineering Co.
and the Amsler-Morton Co. He suggested that each of us be per-
mitted to remove the cash from the corporation, that we would each
receive one-third interest in the new corporation.
Mr. Hamilton. By each ? Whom do you mean ?
Mr. Geer. Mr. Frazier and ourselves would each receive a third
interest in the new corporation, and another party, whom he did not
mention, would receive the other third.
Mr. Hamilton. Did he make any reference to Hartford-Empire's
claim that your lehr infringed its lehr patents ?
Mr. Geer. Oh, that came up in the course of the conversation, but
he went on to say that the person or interest obtaining the third
interest in the combined corporations would put up half a million
dollars to finance the combination; that he would guarantee us all
of the construction work for the Owens-Illinois Glass Co. and others
that he did not mention ; and he would also obtain a cross-license from
the Hartford Co. to build lehrs ; and, in fact, we would be permitted
to build all of their lehrs.
Mr. Hamilton. Did you accept that proposal?
Mr. Geer. No ; we told him if he would give us 51 percent of the
proposition, we would consider it, but not otherwise. We, of course,
discussed the thing for probably 2 hours after that. We didn't change
our opinion, and as Mr. Hazelton got up to leave, he said, "Boys, we
have made a good offer to you now. You can make a lot of money
out of this. I will give you 1 month to consider it. If you don't go in
with us on this thing," he said, "we will enter suit against you and
we will continue to sue you until you are out of business." And he
made this statement, that "It is our plan that nobody in the glass
industry should own one piece of glass-making equipment."
Mr. Hamilton. At the end of 1 month after you had considered
this proposition, did you accept Mr. Hazelton 's proposal?
Mr. Geer. No; we didn't do anything about it, but the Hartford-
Empire Co. entered suit against the Swindell Co. in Baltimore, one
of our customers.
Mr. Hamilton. Did you defend that suit?
Mr. Geer. We were obligated to defend it because we had written
into the contract that we would defend and hold them harmless
against any litigation.
QQQ CONCENTRATION OF ECONOMIC POWER
Mr. Arnold. Why do you think they sued your customer rather
than yourselves?
Mr. Geer. That is very simple. If they had sued us, we would have
entered a counter-suit against them because we owned the prior
patent that we still believe would have them tied up, and, suing
Swindell as they did, we were obliged to enter the suit with the situa-
tion as we found it in that Swindell had previously brought three
lehrs from the Hartford Co. in which they agreed, unknown to us,
to not contest the validity of the Hartford patents. Entering that
suit as we did, we had to defend it on the basis of noninfringement
and were unable to have a fair fight.
Mr. Arnold. In other words, because of that license to Swindell,
you were unable in that suit by any means whatever to bring your
counter-claims for infringement.
Mr. Geer. That is correct.
Mr. Arnold. If it hadn't been for that license, you might have
done it.
Mr. Geer. We would have. We may yet.
Mr. Hamilton. What was the result of that suit in the district
court? Who won it? That is what I want to know.
Mr. Geer. We won the suit in the lower court, principally because
we proved that the Hartford patent was a reissue taken out 2^^ years
after the original patent.
Mr. Hamilton. Mr. Geer, then what happened when the case went
up on appeal?
Mr. Geer. We received the favorable decision in the lower court,
and when it went up on appeal the decision was reversed, and that is
the way the decision stands today.
Mr. Hamilton. You told us awhile ago, I believe, that your com-
pany had made in all 400 lehrs.
Mr. Geer. That is correct.
Mr. Hamilton. And that was over a period of approximately 20
years?
Mr. Geer, A little over 20 years.
Mr. Hamilton. Do you recall how many lehrs you made and sold
in 1934?
Mr. Geer. It dropped precipitously at that time.
Mr. Hamilton. The Swindell suit was filed in 1934?
Mr. Geer. In 1934. Now I am referring to the bottle industry.
We had been selling approximately 20 lehrs per year up to that time,
and in 1934 we sold 5, and in 1935 I think 4, and it has gradually
gotten down to 1 at the present time.
Mr. Hamilton. What do you mean by the present time — 1938 ?
Mr. Geer. 1938.
Mr. Hamilton. You have only sold one this year?
Mr. Geer. Only one this year.
Mr. Hamilton. How many did you sell in 1937?
Mr. Geer. I don't believe we sold any in 1937.
Mr. Hamilton. Can you tell me how much the Swindell litigation
cost your company ?
Mr. Geer. Well, it was tremendous for a small concern.
Mr. Hamilton. How much was it?
Mr. Geer. It amounted to close to $50,000. and that doesn't take into
consideration the exnense of. our organization.
CONCENTRATION OP ECONOMIC POWER gQl
Mr. Hamilton, Is that litigation terminated, or is the case still
pending ?
Mr. Geer. No ; the case is still pending.
Mr. Hamilton. Is the reason that your sales dropped the fact that
your customers are apt to be sued if they l..y?
Mr. Geer. That is true.
Mr. Hamilton. Mr. Geer, can you tell me who Mr. Hazelton was,
ana Mr. Collin? What did you say their full names were?
Mr. Geer. Everybody knows him as Ben Hazelton, but I think
his full name is Benjamin.
Mr. Hamilton. Can you give me the full name of Mr. Collin ?
Mr. Geer. Harry Collin, I believe.
Mr. Hamilton. You told us awhile ago that you were offered
$260,000 in the first part of 1934 for your glass-manufacturing ma-
chine business.
Mr. Geer. That is correct.
Mr. Hamilton. You say the litigation has cost you $50,000 already?
Mr. Geir. That is correct.
Mr. Hamilton. I would like to ask you this : You also told us, I
believe, that you have sold only one lehr so far this year.
Mr. Geer. That is correct.
Mr. Hamilton. That you sold no lehrs last year. What would you
say the value of the glass-manufacturing machinery business is now ?
That is, your business.
Mr. Geer. I will give you a comparison. In '28 we were doing
$800,000 worth of business and last year we had $18,000 worth of
business in the glass industry — quite a drop.
Mr. Hamilton. You are still continuing the fight?
Mr. Geer, We are going to continue as long as we can. We be-
lieve we are right and we are going to stick to it.
Senator King. Was Mr. Hazelton identified when he came to see
you?
Mr. Geer. He was vice-president of the Owens-Illinois Glass Co.
Senator King. Is he still?
Mr. Geer. I can't answer that.
Mr. Hamilton. Did the Hartford-Empire Co. circularize the glass
machinery purchasing trade after they filed their suit against
Swindell ?
Mr. Geer. They circularized them . sometime after that. I can't
say exactly when, but they had previously circularized the trade,
advising that we were infringing their patents long before that.
Mr. Hamilton. Thank you very much.
Mr. Goodrich. At this point, Mr. Chairman, in connection with this
last witness, I offer to you and ask that it be taken into the record
and printed, a copy of the decision of the fourth circuit court of ap-
peals in the case of Hartford-Empire Co. versus Swindell Bros.,
Inc., and the Amsler-Morton Co., intervenor, which is found in 39
U. S. Patent Quarterly, 87, and the decision on rehearing and the
argument which is found in 96 Fed. (2) 227.
The Chairman. Mr. Goodrich, we have been trying to keep the
record down as much as possible. You have observed that I have ex-
cluded many of the documents presented by the Department of Jus-
tice. In this case if you will be good enough to file the citations of
g02 CONCENTRATION OF ECONOMIC POWER
all of the cases I think they will be available to all the members of
the committee. We each have libraries and the Supreme Court
Library is available and the Library of the Senate, and it probably
would be unnecessary to put it in the record.
Mr. Goodrich. I am sure that is so, Your Honor, but this record
goes out to a great many people who are not members of the commit-
tee, and if this patent case is to be retried before this committee, cer-
tainly I would like to have the decision there.
The Chairman. I think the patent case is not being retried.
Mr. Arnold. The statement is in the record that the lower court
was reversed, and that is all you really want, isn't it?
Mr. Goodrich. Coupled with the statement, Mr. Arnold, that there
was a rehearing before the circuit court and the decision again
upheld.
Mr. Arnold. I think we can show that and you can give the cita-
tion in the record now.
Mr. Goodrich. 96 Federal Reporter (2d) 227, and the first report
was found in 39 U. S. Patent Quarterly 87.
Senator King. Have you extra copies of your brief?
Mr. Goodrich. These are not the brief, Senator ; these are the deci-
sions. I will be glad to leave these. We have extra copies.
Mr. Cox. I should like to make a vigorous objection to any char-
acterization of this testimony as a retrial of the patent case.
The Chairman. It. was stated by the chair as not a retrial.
Mr. Goodrich. I didn't mean to start a controversy on that.
The Chairman. I understand that, Mr. Goodrich.
Are there any other questions?
Mr. Hamilton. I have none.
The Chairman. Do any members of the committee desire to ask
Mr. Geer any questions?
Mr. Geer. I think I ought to make a further statement here before
leaving, and that is during the trial they brought out the importance
of their design of lehr and at the same, time they were getting ready
to offer to the trade a cheaper and more inexpensive lehr, amounting
to $2,500, and $2 per day royalty.
The Chairman. The committee will stand in recess until tomorrow
morning at 10 o'clock.
(Whereupon, at 4:20 p. m., an adjournment was taken until
Friday, December 16, 1938, at 10 a. m.)
INVESTIGATION OF CONCENTBATION OF ECONOMIC BOWER
FRIDAY, DECEMBER 16, 1938
United States Senate,
Temporaey National Economic Committee,
Washington, D. C.
The committee met at 10:15 a. m., pursuant to adjourimient on
Thursday, December 15, 1938, in the old caucus room, Senate Office
Building, Senator Joseph C. O'Mahoney presiding.
Present: Senators O'Mahoney (chairman), and King; Messrs.
Henderson, Arnold, Berge, Peoples, and Coe (U. S. Commissioner of
Patents) ; Representative Sumners.
Present also : Department of Justice staff for Temporary National
Economic Committee study — counsel, H. B. Cox (Special Assistant
to the Attorney General) ; Joseph Borkin, Ernest Meyers, Charles L.
Terrel, Benedict Cottone, David Clarke, George Dession, Fowler
Hamilton, H. C. Engelbrecht, Victor H. Kramer, J. M. Henderson,
Monroe Karasik, Irving Glickfeld, Hyman Ritchin, Norman Bursler,
and Seymour Lewis; also chief counsel for Federal Trade Commis-
sion Temporai-y National Economic Committee study, George W.
Williams.
The Chairman. The committee will please come to order. We
have convened this morning a little bit earlier than our usual hour,
and I regret to say. Senator King, Mr. Peoples, and other members
of the committee, the attendance is a little bit light this morning.
Three of the members are suffering from colds and asked me to send
word to proceed without waiting for them.
Have you your witness?
Mr. Cox. Mr. Safford. Mr. Pease. Mr. Pease is another official
'of Hartford. Mr. Pease has not been sworn.
The Chairman. Mr. Pease, do you solemnly swear that the testi-
mony you are about to give in this proceeding shall be ihe truth,
the whole truth, and nothing but the trutli, so help you God ?
Mr. Pease. I do, sir.
The Chairman. You may be seated.
TESTIMONY OF A. T. SAFFORD, SECRETARY AND COUNSEL, HART-
FORD-EMPIRE CO., HARTFORD, CONN.— Resumed ; AND A. M.
TEASE, ASSISTANT TREASURER, HARTFORD-EMPIRE CO., HART-
TORD, CONN.
Mr. Cox. Mr. Safford, I am going to hand you a document and
tisk you if it is a document that you are prepared to accept as a true
and correct photostatic copy of an agreement between the Hartferd-
Empire Co. and the Lynch Corporation, dated August 23, 1933.
Mr. Safford. The agreement is not complete.
Mr. Cox. You are referring to a later amendment of the agree-
ment? 1
^ The ameaded agreement, dated November 12, 1938, was subsequently enter-ecj, as "Bi
•hfblt No. 152." ^ee infra, p. 606.
603
gQ4 CONCENTRATION OF ECONOMIC POWER
Mr. Safford. A later amendment; yes.
Mr. Cox. But this, prior to the amendment which was made of a
date this year, and I will take that up in a moment, is a true and
correct copy of the agreement?
Mr. Safford. Yes; as executed.
Mr. Cox. I should like, before I offer this document for the record,
to read one provision which is found in section 2 of the agreement,
which reads as follows [reading from "Exhibit No. 150"] :
Lynch grants to Hartford a nonexclusive license to make for itself or have
made for it, to sell, and lease forming machines of designs made or acquired
by Hartford and embodying Lynch forming machine inventions, and to license
others to use, but not to make and/or sell, any forming machines embodying
Lynch licensed forming machine inventions.
Provided, That neither the grant herein to Hartford of the right to license
Others to use said inventions, nor any sublicense granted by Hartford there-
under, shall be extended by implication under any circumstances to include a
right in Hartford's sublicensee to make any forming machine embodying Lynch
licensed forming machine inventions.
The license granted in this section 2 shall be nonassignable except to the
successor of the entire business of Hartford.
I should like to have this contract marked as an exhibit though it
need not be printed in full in the record.
The Chairman. The document may be marked as an exhibit.
(The agreement referred to was rnarked "Exhibit No. 150" and is
on file with the committee.)
Mr. Cox. Mr. Safford, will you tell us briefly what the Lynch Cor-
poration is?
Mr. Safford. The Lvnch Corporation is engaged in the manu-
facture of forming machines and at the present time it is the largest
manufacturer of forming machines, I believe, in the world.
Mr. Cox. Was it the lara:est in 1933 when the contract was made?
Mr. Safford. So far as I know ; yes.
Mr. Cox. Now, Mr. Safford, will you tell us who Mr. Werbe is?
Mr. Safford. Mr. Werbe is president of the Lynch Corporation.
Mr. Cox. I am now going to read to you a part of a letter which
you addressed to Mr. Werbe under the date of September 20, 1933,
and afterwards I will hand you this document and ask you if it is the
letter which in fact you did send to Mr. Werbe.
The Chairman. Mr. Cox, mav I inquire ? You stated that the con-
tract which you just had identified was amended.
Mr. Cox. That is correct.
The Chairman. I was wondering if that amendment in any way
modified the contract.
Mr. Cox. It does, and I am coming to that. The reason I am tak-
ing the letter up first is because the letter antedates the amend-
ment Mr. Safford spoke of [reading from "Exhibit No. 151"] :
This is in answer to your letter of September 13 regarding Universal and
the procedure to be followed generally in granting forming machine licenses
to those persons who wish to obtain forming machines from you. If Uni-
versal advised you that they had a forming machine license they are evidently
laboring under some misconception as to the extent of their present license.
This license is merely to cover six feeders in the production of principally milk
bottles. We shall, however, send them a forming machine license some time
this week, along with our form letter and such other information in regard to
their particular situation as seems necessary.
I am going to omit the next two paragraphs, which are not ger-
mane [reading further from "Exhibit No. 151"] :
CONCENTRATION OF ECONOMIC POWER 505
As our general procedure for dealing with each person who wishes one of
your forming machines, we suggest the following: We shall send you a list of
our feeder licenses and keep it revised for you. When you get an order for a
forming machine you will advise us. If it is free from the feeder licensee we
shall then forward to the licensee our standard forming machine license agree-
ment adapted to the licensee's particular field of ware. This the licensee is to
sign and return to us. If he is not a licensee, then you will decline to furnish
llie machine in such language as appears proper to you under the circumstances.
If it is to a feeder licensee to whom we are sending a forming machine license,
you will send your usual sales contract for execution. When we have advised
you that our forming machine license is signed and you have a signed copy of
your own contract, you can then make delivery of the machine.
Is this the letter which in fact you did send to Mr. Werbe ?
j\Ir. Safford. Yes. I recognize that letter, Mr. Cox, and that letter
may be capable of misconstruction. Under the Lynch forming-ma-
chine agreement, as I recollect it, there was a covenant on our part
to extend the ficenses of all our feeder licensees automatically, so
that they without further payment 'would be entitled to use Lynch
forming machines with a license from us. That appears from the
agi-eement as written. Subsequently some misconception arose as to
the meaning of the agreement. As a matter of fact, the Department
of Justice itself raised the question of the construction of that con-
tract and subsequently we wrote another letter clearing up that
matter.
I might explain, Senator, that in 1935 some question came up by
which the Department of Justice became interested in us. I have
forgotten the exact details. At that time we voluntarily went to the
Department, offered to let them have access to all our contracts, and
we stated at that time we welcomed any suggestions which, they might
have with reference to our contracts. They sent an investigator to
Hartford who did make such an investigation and raised various
points which he felt made those contracts susceptible to misinter-
pretation. In those two or three instances, so far as I know, we
modified the contracts accordingly, and after his visit we wrote again
to the Department stating the original purpose of the visit of the
investigator, and stating also that Ave welcomed any suggestions which
they might make witli reference to our contractual system.
Mr. Arnold. What year was this?
Mr. Saffoiu). I think that was 1935, ISIr. Arnold. It was when
Mr. Dickinson was Assistant Attorney General.
Mr. Cox. Have you finished, Mr. Safford? I point out to the
committee that the answer was not responsive to the question, but I
am prepared to let it stand and let the contract speak for itself and let
the letter speak for itself, too, which I should like to offer now.
The Chairman. The letter may be received.
(The letter referred to was marked "Exhibit No. 151" and is in-
cluded in the appendix on p. 793.)
Mr. Cox. So far as this particular letter is concerned and so far as
section 2 is concerned, whenever the investigator of the Department
may have visited you, you didn't modify that until November of this
year, did you?
Mr. Safford. I think your investigators took at least one letter
from our files in which we wrote to the Lynch Corporation stating
that there was a misconception of the meaning of that term, and we
were stating what we felt was our meaning of the term, and also
g06 < ON* K.NT){AT70N OF ECONOMIC POWER
stating tho fncr ihnt the other parties to tlio contraot were unwilling-
to liiodify it ai that tinic.^
Ml'. C'»\. But you dU] modify the contract by a formal document
in this year, did vou not?
Mr. S/.ryoja.. ^Ve did.
Mr. Cox. I hand yon a document entitled "Amended agreement be-
tween Hart ford- Empire Co. and Lynch Corporation," dated Novem-
ber 12, 1938, and I ask you if that is a copy of the modification of
that contract.
Mr. Safford. Yes: it is.
Mr. Cox. Mr. SafFord, was this contract in fact made on November
12, or is it merely dated November 12'^
Mr, Safford. I don't know, sir.
Mr. Cox. You are not prepared to answer that quest" -n?
Mr. Goodrich. We are trying to get the date.
Mr. Safiord. I think that was the date it was signed.
Mr. Cox. You arc quite sure about that?
Mr. Safford. No; I am not. Tt can stand at that.
Mr. Cox. Very well : I offer this.
The Chairman. Is this for the record?
Mr. Cox. I prefer not to have tliat one printed unless the other is-
printed, but I would like to have both go in as exhibits.
The Chairman. Tt may be so received.
(The amen<led agreement was marked "Exhibit No. 152" and is
on file with the committee.)
Senator King. Mr. Cox, would it interfere with your program if I
should ask him very briefly the difference between the first contract
and the modification contract, not all the terms, but the point as to-
which you said there Mas a misconception? I am not clear as to-
just whp.t that misconception was.
Mr. Cox. I am content to have the witness do that, but before he
does I sliould like to say this: I have no doubt that the Department
wijl not agree with his explanation of either contract. Since we are
attempting under some difficulty to finish today, we are not going
to go into that matter with the witness, but I would not wish the
committee to think that we accept any statement he may make on that
matter without qualification, merely because I do not examine him
on it. With that qualification, 1 have no objection to Mr. Safford's
making a statement.
Senator King, if he is to be permitted to make a statement, he
ought to do so.
Mr. Cox. All I want you to understand is that by my failure to
ask the witness, I am not acquiescing.
Senator King. I am not asking you to be bound by anything he
states unless you want to be. Proceed.
Mr. Safford. To be perfectly frank. Senator, I don't think the
amending agreement does affect the question which Mr. Cox raised
the first time. 'Hie misconception which might have arisen with ref-
erence to that contract, I think I am corre'ct in stating, was cleared
np by a letter in 1936, and it is not embodied in the amending agi-ee-
ment, and if Mr. Cox wants to produce the letter, I am willino: toi
identify it.
1 SiiliiirQutinly ijiici-..! ill t-Moiil fis • K\hihit No : 62." See ."tppentlls. p. SOJ.
CONCENTRATION OF ECONOMIC POWER 607
Mr. Cox. I am not aware what the letter is, but I am perfectly
willing to have it go in the record/ if you have a copy of it.
Mr. Safford. Perhaps Mr. Kramer can find the letter.
Mr. Cox. We will find the letter. I would rather not stop now.
If you can give me a copy, I can put it in the record.
Mr. Safford. We understand, then, it will go in the record?
Mr. Cox. I beg your pardon.
Mr. Safford. I say, we understand from you it will go in the
record.
Mr. Cox. Will the reporter read to Mr. Safford the remark I made
two statements before the last ?
The Reporter. "I am not aware what the letter is, but I am per-
fectly willing to have it go in the record, if you have a copy of it."
Mr. Cox. Is that quite clear, Mr. Safford ?
Mr. Safford. Yes ; that is fine.
Mr. Cox. I may add for the committee's benefit, though, that we
propose to demonstrate by another witness later this morning how
this provision actually worked.
Mr. Safford, I am going to hand you a mimeographed copy of
document entitled "Hartford-Empire Co. Analysis of Financial State-
ments," and ask you if that is a document which you have seen be-
fore, and which you have agreed to be substantially accurate.
Mr. Safford. Yes; that is correct.
Mr. Cox. I should like to have this document marked.
Tlie Chairman. How do you identify this document? What do
you call it?
Mr. Cox. I read from the title at the top, "Hartford-Empire Co.
Analysis of Financial Statements."
The Chairman. You asked that it may be marked and printed^-in
the record?
Mr. Cox. Yes.
The Chairman. It may be so received.
(The document referred to was marked "Exhibit No. 153" and is
inchided in the appendix on p. 794.)
Mr. Cox. Mr. Safford, I am going to hand you another document
entitled "Hartford-Empire Co.7' again "Analysis of financial state-
ments," a one-page document, and I ask you if you have seen that and
are satisfied as to its accuracy.
Mr. Safford. That is correct.
Senator King. Mr. Cox. that first offer embraced all these pages,
did it not?
Mr. Cox. Yes. I should like to offer this one page. We don't have
to mark that, Mr. Chairman, because it is included in the document
which I have already offered.^
I call the committee's attention to the fact that the last page of the
document which Mr. Safford identified contains two compilations
with respect to the rate of return received by the Hartford-Empire
Co. The fourth column from tlie left contains a percentage figure
which is entitled "Return on total investment." The figure in the last
column toward tlie right is a percentage figure entitled "Return on
investment employed in operations."
' Sub<;Of|U(>ntly onterod as "Exhibit No. 102." See appendix, p. SCii.
- S'f ' Kxliibit Xo. 15^!, ' appeiidix. p. 794 at p. 798.
^08 CONCENTRATION OF ECONOMIC POWER
The Chairman. By whom was this analysis prepared?
JMr. Cox. This was prepared in the first instance by the Depart-
in(>nt of Justice, and it has been substantially accepted, so far as its
arithmetical accuracy is concerned, by the Hartford-Empire Co., is
that correct?
Mr. Safford. Yes; we accept in principle the method used in de-
termining these figures.
Mr. Cox. I point out that the two rates of return are figured on a
different base. The first one, "Return on total investment," is fig-
ured on the basis of the second column from the left which is entitled
"Total capital and surplus." The last figure on the right, "Return
on investment employed in operations," is figured on a base which
is shown in the fifth column from the left, headed "Net capital em-
ployed in operations." There are sevei-al differences between the
composition of the figure entitled, "Total capital and surplus" and the
figure entitled, "Net capital employed in operations," but I think
there will be no disagreement if I state that the most substantial
difference, and the thing that accounts for the greatest difference in
the two figures, is the fact that total capital and surplus includes the
amount of certain marketable securities held by the Hartford-Empire
Co. as of recent years, 1937, and amounts to upward of $2,000,000,
whereas the figure "Net capital employed in operations" does not
include the amount of those marketable securities. That would be
an accurate statement?
Mr. Safford. That is correct.
Mv. Cox. I also call the committee's attention to the fact that in
making this analysis, the Department has not attempted as is done in
utility rate proceedings to make any evaluation of the assets of this
company. We have accepted the valuation which has been given
fo us.
The rate of return for the period from 1912 to 1937 figured on
the basis of the net operating income or loss amounts to 9.99 percent.
I point out for the committee what we regard as a significant fact
that beginning in 1932, which was the date which the Hazel-Atlas
Co. gave up the struggle and took a license and at the same tijne
that the contract was made with the Lynch Corporation, put in evi-
dence this morning, the next year 1933, in the same year 1933, the
Ball Bros, took a license and there has been testimony in the record
that after the Hazel-Atlas case a large number of smiall manufac-
turers took licenses, and beginning with that period of time the rate
of return on the investment employed in operation rose from IG
percent in 1933 to 67.77 percent in 1937.
Representative Sumnf.rs. Mr. Cox, have you any explanation as
to how it came about tliat in 1931 — T believe I have the correct
column — the net income was 4.25, and the next vear 10.37?
Mr. Cox. In 1932?
R«'[)resentalive Stjmners. What happened between 1931 and 1932?
Mr. Cox. We have had testimony liere that Hazel-Atlas, which
was the second largest manufacturer in the fi d, took a license in
1932 and a large number of other manufacturers also took a license.
Mv. OuriTANT. Have you available figures on the trend of cor-
porate profits generally from 1931 to 1932? ^ Ts that up or down?
»Sco ill Ira, p. 610.
CONCENTRATION OF ECONOMIC POWER g09
Senator Kikg. Do you mean with respect to this corporation?
Mr. Oliphant. No; corporations generally.
]\Ir. Cox. I am afraid we have nothing of the sort.
Mr. Oliphant. The trend of corporate profits in general.
Mr. Cox. I am afraid we have nothing of that sort available this
.morning.
I am about to abandon the subject of these financial statements, so
perhaps if the committee have any questions they would like to ask
they may do it now.
Senator King. Following the inquiry of Congressman Sumners,
and perhaps this is a duplication of his inquiry, may I inquire again,
because I didn't understand your answer, how it is that in 1932, with
a total capital and surplus of $5,243,000 plus, the return on investment
employed in operations was 10.37, whereas in 1937, with capital and
surplus substantially the same, the return on investment employed in
operation as reported by fliis document is 67.77 percent?
Mr. Safford. I think the explanation. Senator, which Mr. Cox gave
is substantially correct, with perhaps this one additional statement,
that the amount of glassware produced in this country has been
steadily increasing over the last 10 years, and particularly after the
repeal of prohibition. It jumped to the extent of, I should say, some
16,000,000 gross at the present time, due to liquors and beers.
Senator King. Would that make that increase, that difference be-
tAveen 10.37 and 67.77 percent, with substantially the same surplus?
Mr. Cox. Mr. Safford, just for my own information, did the up-
swing in production because of the change in the prohibition law
Mr. Oliphant (interposing). May I interrupt to suggest that the
Senator's ([uestion has not been answered?
As I understand it, the percentages in the last column are percent-
ages of the figures shown in the third column from the end, and
that the apparent discrepancy to which the Senator points is ac-
counted for by the decrease in the amount of net capital employed
in operation.
The CiiATi;MAN. I think possibly the Senator would like to have
the witness answer the question.
Semitor Kino. My able confederate on my right has projected
himself very properly into the witness box.
Mr. Oliphant. I wanted the Senator's question answered.
Senator King. Do you agree with the answer to the statement just
made by Mr. Oliphant?
Mr. Saffoud. The total capital and surplus stayed the same, ap-
proximately, in the period of 1932-37. In other words, the company
issued no additional stock and the surplus remained substantially the
same, as I remember, but the net capital employed in operations in
the period between 1931 and 1937 shows a decrease. I should say the
difference was due to our investments. In other words, more of the
surplus was placed in investments, so that in 1937, while the total
capital and surplus remained $5,400,000, the net capital employed iu
operations, upon which the percentage is based, was $2,500,000.
Senatoi- King. May I inquire whether or not any part of that 67.77
return on investment employed in operations was distributed to any
of the associates of th& Hartford, to those companies that had taken
licenses? Did they get any part of that 67 percent?
Mr. Saffoud. Xo, sir; they did not. This is the net figure, sir.
QIQ CONCENTRATION OF ECONOMIC POWER
Senator Kino. That was received and enjoyed exclusively by
Hartford?
Mr. Safford. That's right, sir.
Senator King. That is all.
The Chairman. The only division was with the other two cor-
porations, was it not, the Owens-Illinois and the Hazel-Atlas?
Mr. Safford. Yes ; there was a division of the gross returns, and of
course Owens was out by that time.
The Chairman. The Senator was asking whether or not there was
any division of profits with your licensees. There was no such di-
vision ?
Mr. Safford. Noiie.
Senator King. That is all, Mr. Cox.
Mr. Cox. In response to the question which Mr. Oliphant asked
a moment ago, I might state that we have here a copy of the financial
letter of National City Bank of New York for April 1938, which
contains a computation showing the rate of return for the years
between 1926 and 1935, for all active corporations in the United
States, compiled from annual statistics of income received by the
Treasury Department, and that shows that the average return for
all active corporations for that period of time was 1.50 percent. That
is the closest we have to the figure you asked for, and does not cover
the entire period involved here.
Senator King. Does that paper show the losses, the deficits of the
more than two hundred and thirty or forty thousand corporations?
Mr. Cox. It does show certain losses; yes. Senator. It shows
nothing about the trend from year to year;
Senator Kixg. Of the corporate period from 1931 to 1933 ?
Mr. Cox. Yes. It shows here that in 1931 — well, beginning 1930,
for example, where the rate of return was 0.86, it dropped to a
deficit or red figure of minus 1.95. In 1932 it was minus 3.75; 1933 it
was minus 1.68. The figure minus 3.75 I should have read for 1932.
In 1934 it rose to 0.13 ; in 1935, 1.18 percent.
Mr. Cox. I think I should like to put on another witness at this
point, and I think I shall probably want to have Mr. Pease and
Mr. Safford back for a short time afterward, but there is one witness
here it would be convenient if we could go through with now.
The Chairman. Very well.
Mr. Cox. Mr. Coleman.
The Chairman. Do you solemnly swear the testimony you are
about to give during this proceeding shall be the truth and nothing
but the truth, so help you God ?
Mr. Coleman. I do.
The Chairman. You may be seated.
TESTIMONY OF S. A. COLEMAN, JR., PORT ISABEL, TEX.
Mr. Cox. Mr. Coleman, you were at one time connected with the
Knape-Coleman Glass Co., were you not?
Mr. Coleman. Yes, sir; I was president of the Knape-Coleman
Glass Co.
The Chairman. Will you spell that?
Mr. Coleman. K-n-a-p-e.
CONCENTRATION OF ECONOMIC POWER 611
Mr. Cox. Where was that glass company located ?
Mr. Coleman. At Santa Anna, Tex.
Mr. Cox. Will you tell us how you first got into the glass business,
Mr. Coleman?
THE EUMINATION OF A TEXAS INDEPENDENT
Mr. Coleman. My original start in the glass business Avas in 1927,
after finishing Texas A. and M. College with an engineering degree.
1 went to work for the Three Rivers Glass Co. at Three Rivers,
Tex. Was with that company until I believe perhaps in 1931 or 1932
when they Avent into receivership and Mr. Knape, it so happened, was
an engineer for that company, too, and shortly after that time Aye
became interested in this plant at Santa Anna, Tex., that Avas not in
operation, and shortly after that, I believe it Avas in 1933, Ave acquired
the assets of the company and put th^^plant into operation in 1934,
in the early part of 1934.
Mr. Cox. What kind of equipment were you using in that plant,
jNIr. Coleman?
]\Ir. Coleman. We had — I Avill say first, the equipment that we
had; Ave had tAvo Lynch LA machines, one Miller milk bottle ma-
chine, and two Miller feeders. HoweA'er, we did not attempt to op-
erate the Lynch machines on packers' Avare, or similar items, as I
think it has been brought out iiere before the committee that there
is very little or ho profit for a small manufacturer in such type of
ware. ^ HoAvever, there was no plant in Texas making milk bottles, so
Ave decid' 1 to make milk bottles.
Mr. Cox. You did make milk bottles, did you, Mr. Coleman?
Mr. Coleman. Yes, sir; that is true.
Mr. Cox. Before we go on Avith the company, will you tell us what
the capitalization of your company Avas?
Mr. Coleman. We were capitalized at $72,000.
Mr. Cox. And the stock Avas all held in Texas, I suppose?
Mr. Coleman. That is .true; yes, sir.
Mr. Cox. Held locally. Very Avell, noAv you said a -moment ago
you began to make and sell milk bottles. I suppose your market Avas
largely in Texas, is that correct ?
ISIr. Coleman. Primarily the Texas market ; yes, sir.
]VIr. Cox. AVas there anyone else competing Avith you for that
market ?
Mr. Cole:man. Very strenuously. I should say the Liberty Glass
Co., of Sapulpa, Okla.
Mr. Cox, Can you tell us what the relationship Avas betAveen the
prices at Avhich you sold your milk bottles and the prices at AAiiich
the Liberty Glass Co. sold its milk bottles?
Mr. Ct>LEMAN. Well, I might add this information at this time,
that in my opinion the price of milk bottles in Texas had not up to
that time been based so much on cost as on the fact that it Avas a
very fertile territory and the only good milk-bottle territory, as far
as pi\-)fits are concerned, between St. Louis and the Pacific coast.
The Liberty Glass Co. sales and other manufacturing sales in the
St. ]A>uis area Avere at a very Ioav price, and the profit I believe is
doubtful in many case^. HoAvcA'er, in Texas, where you find milk
bottles ill the St. Louis area being delivered at, I would say offhand,
around six and a half a gross, you Avould find in many instances the
r.niiii: type of Avare being sold at $10, and I don't believe that freight
512 CONCENTRATION OF ECONOMIC POWER
rates on tlie distance was materially different ; that is, the cost to
lay the ware down, but the other milk bottle companies in the East,
outside of instances like the Port of Houston, could not compete due
to rail deliveries. That left the Liberty Glass Co. with the Texas
territory, which I believe they would admit themselves was the most
profitable sales territory that they had.
Mr. Cox. Were their prices higher than the prices at which you
sold?
Mr. Coleman. They were substantially higher ; yes, sir.
Representative Sumners. These milk bottles were sold at one price
in one territory. Was Texas the $8 territory? I so understood but
wasn't sure.
Mr. Cox. The $6 territory was what was called the St. Louis.
The Chairman. Sold by the same persons?
Mr. Coleman. Sold by the Liberty Glass Co., and I believe a
factory of Owens-Illinois, were competing in those territories. I don't
believe Obear-Ncster was in the milk-bottle business.
Mr. Olipiiant. Does that mean milk bottles were selling at about
$6 in one territory and the same bottles were selling at about $8 in
another ?
Mr. Coleman. I will say that is a very conservative estimate. The
average Texas price, if anything, was higher than that.
The Chairman. The point is tliat the same bottles from the same
manufacturer wore sold at different prices in different areas?
Mr. Coleman. That is true; yes, sir.
Mr. Cox. Will you tell us again the date when you started to sell
milk bottles in Texas?
Mr. Coleman. We started in the spring of 1934, we sold our first
milk bottles in Texas.
Mr. Cox. What happened after you opened your plant and began
operations?
Mr. Coleman. Well, we naturally began to have visitors and cor-
respondence. Our first visitors were from Ball Bros., but when they
found out we weren't going to make fruit jars they wished us all
manner of success. [Laughter.] And then about that time, some
3 months — 2 to 3 months after starting operations — we received a
letter from the Hartford-Empire Co. notif3'ing us that we were in-
fringing upon certain of their patents.
The Chairman. Did you get an invitation?
^fr. Coleman. I think we delayed that some 6 or 7 months, but
we did receive one; yes, sir.
Mr. Cox. Now, toll us, as rapidly as you can. what happened be-
tween the time you got this notice of infrinooment and 6 or 7 months
later when you got your invitation from Hartford.
Mr. Coleman. Well, a curious situation had arisen in Texas. The
Liberty Glass Co. liad just shortlv before we beffan operation, paid
Three "Rivers Glass Co. $50,000 for their milk-bottle rights, even
though they had no license to make milk bottles, but they had seen
fit for a number of years to make milk bottles anyway. So tliis
$50,000 had just been spent, and here another company jumps up
out of the brush somewliero making bettor milk bottles," in mv esti-
mation, than Three Rivers had made, and much better located from
a sales standpoint. We were in the exact center of Texas.
co^'CE^•TRATIO^• of economic power gl3.
The Chairman. You mean up out of the sagebrush.
Mr. Coleman. That's true. So Liberty felt very unkind toward
us because we were taking over this territory that they had just
paid $50,000 for, and they promptlj' — I think they wasted very little
time complaining to the Hartford-Empire Co. of the fact that we
were operating in this territory without a license, and they had, I
believe, exclusive license in that territory; I don't think it has ever
been demonstrated tliat Liberty Glass Co. did not have exclusive
milk-bottle rights in that section.
Mr. Oliphant. You mean in all of Texas?
Mr. Coleman. In all of Texas. The fact remains that there has
never been a plant operated there with a milk-bottle license, and I
dare say there won't.
Mr. Cox. Go ahead and toll us what happened in the intervening
time.
Mr. Coleman. We continued to make milk bottles and our sales
increased naturally. We were selling practically the output of the
plant. We had only one machine, and our output I would say was
not over half of the demand in the State at the most. And we had
three to five visits from various representatives of the Hartford-
Empire Co. They sent us copies of their patents to explain just
where we were infringing upon their patents. This went on for
some time. In fact, we did not have the money to engage in any
extended litigation with them, and, frankly, we tried every means-
possible to delay the thing and carry it along, to keep them away
from us and out of court as long as possible, for I realized that
we couldn't pay $100 or $150 a day to stay in the Federal court.
Of course, they realized that, too. I believe it was in November or
December of i934 I came to St. Louis to discuss with the Obear-
Nester Glass Co. the possibility of buying a Stuckey feeder. After
quite a bit of difficulty they did discuss it with us. I think later on
Mr. Knape discussed it Avith Mr. Stuckey, and he was willing to sell
us a feeder. However, they could give us no guaranty as to what
Hartford-Empire Co. might do to us.
I came on to Washington to discuss it with the attorneys of the
Florida Glass Co. whom Hartford was suing at that time for making^
milk bottles. These attorneys were patent attorneys attempting to
work out some sort of feeding device that would not infringe upon
the Hartford patents. However, I think that is impossible to do
and I don't believe they ever got the feeder.
While here I was invited, as I mentioned, awhile ago, to go to
Hartford.
Mr. Cox. What happened at Hartford?
Mr. Coleman. Well, it was a discussion— in fact I will say thisr
in all the talk that we had at Hartford, that I had at Hartford, they
consistently refused to discuss even the remote possibility of a milk-
bottle license in Texas. They could offer no explanation and denied
at that time that the Liberty Glass Co. did have exclusive right, bu*-
they could not grant us one.
Mr. Cox. They wouldn't even discuss that ?
Mr. Coleman. No, sir.
Mr. Cox. What did you say to them?
124491— 39— pt. 2 24
^J4 CONCENTRATION OF KCONOMIC POWER
Ml". Coleman. Well, I think perhaps Hartford's experience in
Texas had been more or less of a sad one. I think as a rule some
Texans are resourceful people and I tried to impress upon them the
fact
The Chairman. The members of this committee have discovered
that.
Representative Sumnep.s. It takes a long time.
Mr. Coleman. I endeavored to impress upon tliem that we would
fight with any weapons that we had at our disposal and that I
thought that they were taking on more tlian they could handle, and
I believe that after a fashion the fact that Ave did stay out of court
for approximately a year after suit was filed made them hesitate
-suing us, they did not know what our resources were. It is an oflf-
hand opinion of mine that the Hartford-Empire Co. had no desire
perhaps to sue' us, but the Liberty Glass Co. kept so much pressure
upon them in the fact that they were taking this valuable sales ter-
ritory, that they were forced finally in April of the next year to take
this into the Federal court.
The Chairman. What year was that?
Mr. Coleman. In '35.
Mr. Cox. You talked to Mr. Goodwin Smith there?
Mr. Coleman. Yes, sir. I discussed this with Mr. Goodwin Smith,
iind I guess with five or six others. They had a generous supply
<3f attorneys. I will say this, that I tried to alter the scheme. My
7)artner, Mr. Knape, had been up there a few months before, and it is
a sort of variation of my understanding of the third degree to spend
1 hour in this room and 1 hour in the next room, and when he got
back he was a nervous Avreck, so I insisted I talk to all of them at one
time and I have my health.
Mr. Cox. Was anything said specifically to Mr. Smith about the
situation in Texas? ,
Mr. Coleman. I did tell Mr. Smith (from his reaction perhaps he
believed it) that in Texas within my lifetime I had seen men hanging
in trees for doing less than what the Hartford-Empire Avas trying to
•do to my small company, and I was serious about it.
Mr. Cox. Now Avhat happened after that, after vou went back to
Texas?
Mr. Coleman. I returned to Texas and we continued to make milk
bottles and to sell more milk bottles.
Mr. Cox. Were vou sued for infringement ?
Mr. Coleman. We were sued for infringement of some 9 or 10
claims. I don't recall at the present time.
Mr. Cox. Tell us about the outcome of that litigation.
Mr. Coleman. We naturally were. finally forced to hire a patent
attorney. We had to acquire the services of a Texas attorney, and
T think there are some two or three patent attorneys in the State.
They brought us into court in April of 1935, as I recall. Well, when
I arrived in San Angelo and met them there in the hotel, I can
conservativelv say there was a half train load of attorneys and
equipment. There were motion picture projectors and attorneys all
over the place. I don't know anyone of the Hartford legal staff that
was not there. They were prepared to give us a nice battle. Well,
T had only one attorney and he was considerably lost in that croAvd.
CONCENTRATION OF ECONOMIC POWER 615
I wish you might have seen his face that morning. So I promptly
asked for a recess until the afternoon, in order to see if we couldn t
settle the ease out of court.
Mr. Cox. Did you settle the case out of court ?
Mr. Coleman. We were able to settle the case out of court ; yes,
sir.
Mr. Cox. What were the terms of the settlement ?
Mr. Coleman. We received $10,000 in cash and were allowed a 6
months' license on the milk bottles which we paid royalty on at that
time for that 6 months' period. At the end of that period we were
to ship these two feeders back to the Hartford-Empire Co.
Now, as I recall, we were granted the right, at the end of that
time, if we wanted to make some of that packers' ware, they would
let us nse one of the feeders for that — a sort of slow death arrange-
ment.
Mr. Cox. At the end of the 6 months you discontinued the use
of the machine?
Mr. Coleman. Yes.
Mr. Cox. Were any milk bottles made after that?
Mr. "Coleman. Yes, sir. The company at that time hia-ed what is
known as hand gatherers ; where this glass flows by machinery to the
flowing machine, these men dip into the furnace and get a quantity
of glass and drop it into the mold. It is cut off with shears. It is
a very ancient method, and expensive, as you can readily see. I
think it requires about three men there constantly to do that work.
Mr. Cox. Is that Knape-Coleman Co. operating today?
Mr. Coleman. No, sir; it is not. The company operated approxi-
mately a year, perhaps. I wasn't with the company at that time.
At approximately the time our agreement expired wuth the Hartford-
Empire Co. on this license I left the company. However, they did
continue to make milk bottles, and I will say a very good milk bottle.
The element of cost was excessive. Negotiations were started. I
don't remember whether the Knape-Coleman Co. initiated them, or
the Liberty Glass Co., but they were ready to buy the Knape-Coleman
Glass Co. and its assets because they had accomplished through their
feeder arrangement the end they desired. They wanted to put the
plant out of business and the fact that we continued to make milk
bottles still made us a competitive sore spot.
Mr. Cox. What are you doing now?
Mr. Coleman. I am assistant superintendent of the Coast Refin-
ing at Port Isabel.
Mr. Cox. Would it be accurate to say that throughout >our nego-
tiations with Hartford-Empire you were prepared to take a license
and pay royalties to them if they would permit you to make milk
bottles and sell them in Texas?
Mr. Coleman. I would say we were always ready.
Mr. Cox. I am finished, I think.
The Chairman. The Liberty Glass Co. is represented on the chart,
"Exhibit No. 113," ^ as one of the licenses of the Hartford-Empire?
Mr. Cox. That is correct. It is one of the licensees of the Hart-
ford-Empire which has, I believe, an unlimited right to make milk
bottles.
1 See appendix, p. 762.
QIQ CONCENTRATION OF ECONOMIC POWEK
Senator King. Did you say "Liberty" or "Libbey"?
Mr. Coleman. Liberty.
The Chairman. Do any of the members of the committee desire to
ask questions?
Senator King. Who were the principal factors in the Liberty Co.?
Do you recall the names?
Mr. Coleman. The president of the Liberty Glass Co. is Mr.
Collins, Mr. George Collins, I believe.
Senator King. Is that the Collins who was here ?
Mr. Cox. No.
Just a moment. How many men did j^ou employ in the factory?
Mr. Coleman. We employed about 25 men, as I recall it.
Mr. Oliphant. What size town was it in?
Mr. Coleman. The population was 2,500, as I recall.
The Chairman. Mr. Arnold, do you care to ask the witness anj'-
questions ?
Mr. Arnold. No.
Representative Sumners. What would it cost to equip a milk
bottle manufacturing plant, a small unit, but one that would be com-
mercially adequate?
Mr. Coleman. I would say, offhand, between $200,000 and $250,000;
that is, to build an entirely new plant.
Senator King. May I ask you another question: What kind of
machine was it that you were operating?
Mr. Coleman. It was a Miller machine, which is a standard machine
in milk-bottle manufacture.
Senator King. It was not one manufactured by the Hartford Co.?
Mr. Coleman. No.
Mr. Oliphant. What would it cost to take some of the plants not
in operation, and assuming no difficulty about patents or licenses, to
equip it so as to employ a few of the people in a town of 2,500 ?
Mr. Coleman. Well, take for instance that plant there. If the
forming equipment had not been moved to Sapulpa I would say fifty
to seventy -five thousand dollars' worth of operating capital would
keep the plant in operation until it was self-sustaining. I base those
figures on the fact that we had no highly paid officei^ in our com-
pany. Whereas my salary was $50 a week, I think Mr. Collins received
three or four hundred. We had bought no plants ourselves. The
sales of the Liberty Glass Co. have to include the $100,000 paid for
these two milk-bottle plants. That has to come back some way.
Representative Reece. How much did it cost you to go into business
and get into a place where you were able to compete in the market?
Mr. Coleman. I would say $50,000.
Senator King. Could you buy the machines for that?
Mr. Coleman. That was in the nature of operating capital. I
didn't mean by that the purchase of the plant.
Representative Reece. I intended my question to include the cost
of putting the plant into operation.
Mr. Coleman. You mean a plant that is closed down. Is that the
question — or to build a new plant?
Representative Reece. I was taking as a basis for my question your
own plant. You did acquire the assets of another company and go
CONCENTRATION OF ECONOMIC POWER 617
into operation and get into a competitive field where it appeared you
vere operating successfully. How much did it cost you ?
Mr. Coleman. 1 would say we had involved some $100,000 to $125,
000. However, at that 'figure I wouldn't say that we had too much
oapital. However, our chief difficulty in S( ^Ung our merchandise
was not the quality of our merchandise, but the fact that it was adver-
tised by the Hartford-Empire Co., through the Liberty Glass Co.,
that we were just going to be in business long enough for them to get
us in the Federal court. Naturally it is hard to get jobbei"s to take
your merchandise when you are just going to be with them for a short
time.
Representative Reece. How did your prices compare with the
prices which had obtained before you went into the field ?
Mr. Coleman. I say our prices were from $1 to $2 a gross, depend-
ing on the location, less than tlieir prices, and that was not a cut-rate
proposition. Most of our -difference and savings within the State were
based on freight differentials within the State. Sapulpa is some
considerable distance from such points as Houston and El Paso, and
even Fort Worth and Dallas, compared with where we were, 125
miles from Dallas, and they were 300 miles away and outside the State.
Mr. Arnold. The net result of this whole story is to compel people
in Texas to buy glass from places outside of Texas and pay the
freight.
Mr. Coleman. That is true.
Senator King. Did you buy the machines, or hav^e a license on the
Miller machine ? You said you took over the assets of the corporation.
Mr. Coleman. They belonged to the company. They had been
bought outright. Here is the question involved on Miller feeders, as
I understand. Miller, Hartford-Empire Co. claims, was infringing
on their patents at the time he manufactured and sold the feeder, and
in that manner gave a defective title when he sold them.
Senator King. At any rate, the plant which you operated
Mr. Coleman (interposing). We bought and paid for the feeders
and thought they were ours.
Mr. Davis. Mr. Coleman, do you know whether there has been any
court adjudication of the claims of the Hartford-Empire Co. with
respect to infringement by the Miller machine?
Mr. Coleman. I don't have any knowledge of that. Most of those
things stopped, as I recall, before the litigation could go on, by taking
a license of some sort. Whether it has ever been settled I don't know.
The Chaieman. Dr. Lubin?
Dr. Lubin. No.
The Chairman. Mr. Coleman, who contributed this capital to your
enterprise ?
Mr. Coleman. They were Austin people — Mrs. HafreU, of Austin,
Tex. ; all residents of Texas. Mr. Knape and myself wei.e the man-
agers.
The Chairman. What was the State of their residence?
Mr. Coleman. We were both Texans and educated in Texas.
Mr. Cox. Where did the employees come from?
Mr. Coleman. With the exception of perhaps two or three men, they
were all Texas people, local people. There were one or two experts
necessary in the plant, like the plant superintendent; that was an
618 CONCENTRATION OF ECONOMIC PO^VER
out-of-the-State man. However, he had worked in Texas for several
years prior to that time.
The Chairman. With the exception of the machines themselves,
where did the material come from which you were using in the
manufacture of glass ware ?
Mr. Coleman. That was one of the chief reasons for the plant loca-
tion. At Santa Anna they have a fine deposit of glass sand; they call
it a mountain there. It is about a 100-foot pile, actually, across the
street from our plant.
The Chairman. You do magnify things in Texas anyway.
Mr. Coleman. Locally there was an unlimited deposit, almost, of
natural gas that we were able to buy for 5 or 6 cents a thousand
cubic feet, and we were on th§ main line of the Santa Fe Railroad
there.
The Chairman. Is that deposit being worked now for the manu-
facture of glass?
Mr. Coleman. I don't know whether it is or not. Wliile we wer&
there there was some sand shipped, I believe; a plate glass plant
operating at Wichita Falls bought sand from there.
The Chairman. What was the market in Texas for glass container
ware ?
Mr. Coleman. Well, I would say something like 300 cars a year,
perhaps, of milk bottle business there in the State, That is not a
great amount of business considering the size of the State. However,
nie business is concentrated in about, roughly, three cities — Fort
Worth and Dallas and Houston, and I might say San Antonio.
The Chairman. In the negotiations which you conducted with the
representatives of the Hartford-Empire after you received the invita-
tion to go to Connecticut, was there any discussion of the issuance of a
license to you to use the Hartford-Empire machine?
Mr. Coleman. That is for manufacturing milk bottles?
The Chairman. Yes ; or any glassware.
Mr. Coleman. We attempted to discuss that with them any numl^er
of times, but they would not discuss milk-bottle licenses.
The Chairman. They would not under any circumstances?
Mr. Coleman. They offered no encouragement whatsoever as to-
milk-bottle license. •
The Chairman. Were you offered a license on any other ware ?
Mr. Coleman. Not at that time ; no.
The Chairman. Were you later ?
Mr. Coleman. Later, at the time of settlement — I mentioned th»
terms of settlement a moment ago — they told us we might if we saw fit
use one of those feeders, for packers' ware.
Mr. Cox. That is what you call the slow-death process.
Mr. Coleman. Yes, sir.
The Chairman. So what it amounted to in the final analysis wa»
that you couldn't receive a certificate of convenience and necessity
from the Hartford-Empire Co. to operate a Texas plant with Texas
caoital to develop a Texas production.
Mr. Coleman. That is true.
Senator King. Did Liberty have an exclusive license?
Mr. Coleman. As I recall, Mr. Smith said that no such agreement
existed. Whether or not it is a written agreement, it is a matter of
CONCENTRATION OF ECONOMIC POWER 519
fact that the agreement does exist, because no one has ever been
allowed to operate down there except Liberty Glass Co.
Senator King. I asked that question because you stated that Liberty
seemed to be the organi5;ation that was pressing the suit.
Mr. Coleman. Yes, sir.
The Chairman. If there are no other questions, Mr. Coleman, you
are excused.
(Mr. Coleman was excused.)
Mr. Cox. The next witness is Mr. Day.
The Chairman. Do you solemnly swear, Mr. Day, that the testi-
mony you are about to give in this proceeding will be the truth, the-
whole truth and nothing but the truth, so help you God?
Mr. Day. I do.
TESTIMONY OF GEORGE DAY, ATTORNEY AT LAW, DETROIT, MICH.
Mr. Cox. Mr. Day, will you give the reporter your name and ad-
dress and occupation ?
Mr. Day. George Day, Detroit, Mich., attorney at law.
Mr. Cox. Mr. Day, at one time were you and certain other persons-
in Detroit, Mich., interested in estaolishing a glass factory there?
Mr. Day. That is true; in the year of 1935.
Mr. Cox. Can you tell us Aer}^ briefly the circumstances which
created your interest in that enterprise?
REFUSAL TO LICENSE IN DETROIT
Mr. Day. A client of mine had referred me to a man by the name
of Howard who had been in the glass business all of his life, I
presume, as a plant superintendent. At the same time another gen-
tleman in Detroit by the name of Charles F. CHppert, in the brick
business and vice president of one of our largest breweries, was-
interested in the formation of a glass plant, primarily to niake beer
bottles.
Mr. Cox. Why was Mr. Clippert interested in a glass plant?
Mr. Day. At that particular time they were having difficulty in.
securing an ample supply of beer bottles from the regular manufac-
turers, and we found that was true not only with that particular
brewery but with four or five others located in the city.
Mr. Cox. Do you know where the beer bottles come from, the geo-
graphical location of the factory they come from, that were being
sold in Detroit?
Mr. Day. I understand Obear-Nester of St. Louis and Owens-
Illinois. I don't know the location of the plant that furnishea
bottles thefe.
Mr. Cox. What steps did you take then in connection with this
enterprise ?
Mr. Day. At that particular time the N. R. A. was in effect and
we were notified that we would have to get permission from the
N. R. A. before we could establish a glass factory.
Mr. Cox. Did you get that permission ?
Mr. Day. We did.
Mr. Cox. I want to ask you this before we go on with the story,
Mr. Day. Were there any particular circumstances aside from the
interest of these men you have mentioned a moment ago which
made Detroit a good site for the operation of a glass factory?
^20 CONCENTRATION OF ECONOMIC POWER
Mr. Day. I think I should qualify my statement. The glass fac-
tory was to be located in the village of Trenton, which is located 20
miles south of Detroit. It is ideally located because of the presence
of the ingredients which go into the making of glass bottles. Silica
sand was within 2 miles of our proposed location; soda ash; paper
boxes for containers were all located within an area of 5 miles.
Mr. Cox. Did you have fuel there?
Mr. Day. Fuel was to be supplied by the Socony Vacuum Co. who
liad what was known as a waste gas which could have been supplied
to us at a very low cost and which did contain a higher B. t. u. value
than natural gas.
Mr. Cox. Were you successful in liaising capital for .this venture?
Mr. Day. We were successful in raising capital.
Mr. Cox. Can you tell us approximately how much capital you
had available for the enterprise ?
Mr. Day. We had the land turned in to. the proposed corporation —
we did not incorporate, we didn't get that far — and in addition we
liad approximately $120,000 in cash.
Mr. Cox. What steps did you take to carry on this enterprise after
you had gotten approval from the N. E. A. ?
Mr. Day. We then met a gentleman by the name of William
Schwenzfeier who was brought to my office. At that time he was an
•employee of Hartford-Empire Co. He was brought into my office
by a former salesman of Obear-Nestor Co.
Mr. Cox. And you discussed this project with Mr. Schwenzfeier ?
Mr. Day. We did. Prior to this time, of course, we had consider-
rable work in getting our plans laid, what would be the cost of ma-
terials, and so forth, Mr. Schwenzfeier proved to be a very valuable
man to us as far as advice was concerned.
Mr. Cox. You were attempting ate that time, I take it, to obtain
glass-making machinery.
Mr. Day. That is right.
Mr. Cox. And as a result of your conversations with Mr. Schwenz-
feier, did you talk to any other representatives of Hartford-Empire ?
Mr. Day. Not prior to that time, no. Mr. Schwenzfeier advised us
it would be necessary for us to obtain a license agreement to operate
glass-forming machinery anywhere.
Mr. Cox. Did you attempt to get glass machinery from any other
source except Hartf ort-Empire ?
Mr. Day. We had some glass machinery prior to the time we
talked to Mr. Schwenzfeier. We obtained that through this man,
Howard, who at that time was on our pay roll.
Mr." Cox. What was that machinery?
Mr. Day. We had two Lynch machines and one O'Neill machine.
Mr. Cox. Did you have enough equipment to start the plant in
operation ?
Mr. Day. We did, with the exception of a couple of lehrs which
•could have been obtained very easily.
Mr. Cox. You could have obtained the lehrs ?
Mr. Day. That is right.
Mr. Cox. So you had the machinery and your only problem was
to obtain the right to use that.
Mr. Day. That is right.
CONCENTRATION OF ECONOMIC POWER 621
Mr. Cox. After you talked to Mr. Schwenzfeier, did you talk to
other representatives of Hartford-Empire at any other time or place?
Mr. Day, No; Mr. Schwenzfeier related our problem and story to-
Hartford- Empire direct, and after his conversation, I presume by
correspondence, I received a wire from the sales manager of Hart-
ford-Empire stating he would give us a further report.
Mr. Cox. Were you at any time invited to Hartford ?
Mr. Day. I was invited to Hartford; yes.
Mr. Cox. Now tell us what happened when you were invited to-
Hartford. Just tell us generally what happened.
Mr. Day. I wanted to give the date. I was in Hartford, Conn., I
think on February 9, 1936. At that meeting was Mr. Smith, Mr.
Brown, Mr. Eldred, and Mr. Pease. The discussion, of course, was
as to the advisabilit}^ of going into the glass business, and the con-
versation throughout was very discouraging.
Mr. Cox. What did they tell you ?•
Mr. Day. They told us, to begin with, that there was an over-
capacity, and that there were no beautiful profits as we had antici-
pated, although we didn't anticipate "beautiful" profits.
Mr. Cox. What did you say in reply to this discouraging comment?
Mr. Day. I had reports there of the past profits of various ^lass
concerns and I told them that because of our location and the market,
no freight rates to contend with, we could operate at a reasonable
profit.
Mr. Cox. And vou asked them at that time for a license?
Mr. Day. I did!
Mr. Cox. And what did they say in reply to that request?
Mr. Day. They indicated that they would not refuse us a license,
but that they would rather not extend a license to us, pointing out
that Owens-Illinois was very close to us, that if we did start a factory
they no doubt would put in a warehouse and the competition would
be too strong and we of course would be wiped out.
Mr. Cox. How long would you say in point of time this conference
lasted ?
Mr. Day. I would say a couple of hours. They were very cordial.
Mr. Cox. And did you ask them more than once for a license?
Mr. Day. I asked them directly just prior to the breaking up of
that meeting and then later on directly in the form of a letter.
Mr. Cox. And they said they wouldn't refuse you a license, but
when you left the meeting you didn't have a license.
Mr. Day. That is true. However, they made a suggestion that .they
would not care to grant us a license direct but we could go out and
buy up a couple of broken-down glass factories who had a license and
we could obtain it that way.
^ Mr. Cox. What did you say in reply to that ?
Mr. Day. Of course, that is expensive. We didn't have the money
jtb buy a plant and move it to Detroit.
Mr. Cox. Those were glass factories outside the State of Michigan?".
Mr. Day. That is right. I have some notes on a letter, taken at
the meeting, and they were the Hart Glass Co., Dunkirk, Ind., and
another one at Paden City, W. Va.
Mr. Aenold. You didn't need the equipment of these plants.
Mr. Day. We needed a license agreement only.
g22 CO>'CENTRATION OF ECONOMIC POWER
Mr. Arnold. They knew you didn't need the machinery or equip-
ment.
Mr. Day. That is right.
Mr. Arnold. They were in effect suggesting you buy their license.
Mr. Day. That is true.
Mr. Cox. Now, I am going to hand you a photostatic copy of a
letter and ask you if this is a letter which you in fact received from
Mr. Pease of the Hartford-Empire Co. in 1936?
Mr. Day. Yes, sir; that is a copy.
Mr. Cox. This letter was received after the conference which you
"have just described?
Mr. Day. No; that was just prior to the conference.
Mr. Cox. This letter reads follows [reading from "Exhibit No.
154"] :
Since first receiving a report from Mr. Schwenzfeier relative to your proposi-
tion for a glass plant in Detroit, we liere at Hartford ha/ve been giving the
matter some serious thought.
Possibly we do not have the full story but from wluit we know of the glass
industry in general being greatly overcapacitated, it does not seem to us feasi-
ble nor advisable to increase the tonnage that already exists.
If you and your associates care to come to Hartford, we will be more than
pleased to get your story first-hand, but doubt whether our ideas will be altered.
I should like to offer this letter as an exhibit and call the chair-
man's attention to the fact that the handwriting on the side of the
photostatic copy is a note the witness made.
Mr. Day. That is true.
Mr. Cox. It was not made by the department.
The Chairman. The witness testifies that this note on the side of
this photostatic copy is one that he made in his handwriting upon
the original copy?
Mr. Cox. That is right.
The Chairman. The letter may be received.
(The letter referred to was marked "Exhibit No. 154" and is in-
•cluded in the appendix on p. 798.)
Mr. Cox. Now, after this conference, did you have any more nego-
tiations with Hartford-Empire Co.?
Mr. Djsy . At the time that meeting broke up, Mr. Pease suggested
that we give the matter further consideration. I returned to Detroit
and my associates got together and we decided once more to ask them
directly for a license for feeding devices. Then in reply to that letter,
of course— that is my letter of February 28, where they want till of
the available information which they already had in their hands, but
it was a repetition of information that they had
Mr. Cox (interposing). I think that is not quite clear on the rec-
ord, Mr. Day. You wrote them a letter asking directly for a license
and they replied in a letter asking you for information which you
had already given, is that correct?
Mr. Day. That is true.
Mt\ Cox. Then thereafter did you obtain a license?
Mr. Day. We did not.
Mr. Cox. Why didn't you go ahead and operate the machinery
which you had, anyway?
Mr. Day. Well, the men going into the formation of that cor-
poration didn't desire to continue with the proposal when we could
CONCENTRATION OF ECONOMIC POWER g23
not receive a license agreement. That would be inviting, so \ve con-
sidered, a lawsuit.
Mr. Cox. You didn't want to buy into a lawsuit.
Mr. Day. That is true.
Mr. Cox. And you have never at any time received a license from
Hartford-Empire ?
Mr. Day. Never.
Mr. Cox. Is this group in Detroit still interested in starting a glass
factory ?
Mr. Day. They are still interested.
Mr. Cox. Is the capital still available ?
Mr. Day. It is still available. I had a visit to my office yesterday
of the same group of men who are interested in forming that com-
pany.
Mr. Cox. These men are all Michigan men^
Mr. Day. All Detroit men.
Mr. Cox. And the capital is Michigan capital ?
Mr. Day. That is right.
Senator King. Did they assign as a reason for refusing to give
you a license that they had given exclusive licenses to other persons,
and therefore they could not give you one ?
Mr. Day. No; that matter was not discussed. There was some'dis-
cussion of the location" of Owens-Illinois, that it was so close. How-
ever, there is not a warehouse or storage in the city of Detroit, or
Michigan, that I know of, for glassware.
Senator King. I had in mind whether or not they considered that
as a valid excuse, namely, that they had given exclusive licenses to
others and therefore were prohibited from giving you licenses.
Mr. Day. No ; that matter was not discussed.
Representative Sumners. What explanation was made as to why
they wanted you to buy up a plant that was not operating as dis-
tinguished from giving you the right to operate under their license?
Mr. Day. That then would give us a license agreement without
interfering with their relationship between themselves and Owens-
UHnois, or any other licensee.
Representative Sumners. Let's get that clear. Here are two plants
you mentioned that are not operating. It was suggested that you
buy one of the two nonoperating plants in order to have the privi-
lege of operating their machinery in your i)lant at a different place.
Mr. Day. "\^^lat we would do is this: We would have to buy up
tliut broken-down plant and move it to Detroit.
Representative Sumners. I know it, but what interest did Hart-
ford have in requiring you to buy a plant that wasn't producing
competition for anybody?
Mr. Day. That would allow them to let us o])erate under that
license agreement.
Representative Sumners. I am trying to find out why and how.
Did they have an exclusive contract with one of these concerns that
was not operating?
Mr. Day. I couldn't say.
Representative Sumners. Did you go into that?
Mr. Day. I did not. Their M'hole conversation was that they did
not want to conflict with Owens-Illinois who was their licensee.
^24 CONCENTRATION OF ECONOMIC POWER
Representative Sumners. But how would you avoid conflicting
with Owens-Illinois if you bought up the licenses of plants not
operating and moved the license privilege to your own territory?
Mr. Day. I don't know, unless that license agreement gives us the
privilege of moving to Detroit, and I suppose it w^ould.
Representative SuiiNERs. That would conflict with the other glass
people, wouldn't it?
The Chairman. If you had purchased the plant as was suggested
to you, then the Hartford-Empir©^ would have been in a position to
say to Owens-Illinois and to Hazel-Atlas and to the Ball Bros, that
it had not issued a new license.
Mr. Day. That is right.
The Chairman. But had merely consented to the transfer of aji
old license.
Mr. Day. That is right.
Mr. Oliphant. There would be no increase in outstanding licences.
Mr. Day. No.
Mr. Arnold. In mentioning the difficulties you might have in
competing with Owens-Illinois, did they inform ycu one of the dif-
ficulties was that Owens-Illinois might share your i-oyalties?
Mr. Day. They did not.
The Chairman. Are there any other questions?
Mr. CoE. I would like to ask the witness this question. Did you
explore the po°ssibilities of any other equipment at that time ?
Mr. Day. Yes ; .we did.
Mr. CoE. Wliat conclusions did you reach as to that ?
Mr. Day. The only possibility of securing any other machinery
would of course be used machinery ; no other new machinery.
Mr. CoE. Did you explore the possibility of using the Owens suc-
tion feeder?
Mr. Day. No; we did not.
The Chairman. The witness may be excused. Call the next wit-
ness please.
(Mr. Day was excused.)
Mr. Cox. Mr. Kingsland. I am going to ask Mr. Cottone, of my
staff, to examine him.
The Chairman. That will be quite acceptable.
Do you solemnly swear the testimony you are about to give in this
proceeding will be the truth, the whole trv.'^h, f.nd nothing but the
truth, so help you God ?
Mr. Kingsland. I do.
TESTIMONY OF LAWRENCE C. KINGSLAND, PATENT ATTORNEY,
OBEAR-NESTER GLASS CO., ST. LOUIS, MO.
Mr. Cottone. Will you give your name and address?
Mr. Kingsland. Lawrence C. Kingsland, St. Louis, Mo.
Mr. Cottone. What is your occupation, Mr. Kingsland?
Mr. Kingsland. I am a lawyer, specializing in patent practice.
Mr. Cottone. Wliat has been your connection with the glass in-
dustry, Mr. Kingsland?
Mr! KiNGSL\ND. I have represented the Obear-Nester Glass Co.
since approximately 1928. I nave been consultant in some other liti-
I
CONCENTRATION OF ECONOMIC POWER g25
gations. including the Sliawkee litigation, and in connection with
the so-called Swindell litigation on the lehrs.
Mr. CoTTONE. The Obear-Nester Co. is in the business of manu-
facturing glass containers, is it not?
Mr. KiNGSLAND. That is correct.
RECORD OF AN INDEPENDENT
Mr. CorroNE. Can you tell us where the company operates?
Mr. KiNGSLAND. They have a plant at East St. Louis, 111.
Mr. CoTTONE. And in what territory do they do business?
Mr. KiNGSLAND. Widespread from that point, but, of course, mainly
Avitliin that general area of the Middle West.
Mr. CoTTONE. Can you tell us what position the Obear-Nester Co.
occupies in the industry in terms of production?
Mr. KiNGSLAND. My understanding is that they have approximately
2 percent of the container production.
Mr. CoTTONE. Do you know how^ many people they employ ?
Mr. KiNGSLAND. I wouldn't know that.
Mr. CoTTONE. Would about 450 be somewhere near the correct
figure ?
Mr. KiNGSLAND. I would say, roughly, that would be correct.
Mr. CoTTONE. Does the Obear-Nester Co. own any patents relating
to glass machinery?
Mr. KiNGSLAND. They have a number of patents. They have the
so-called Stuckey patent on an air feeder; they have a construction
that they are now using urder that patent. They have some few
additional improvements in shears, other apparatus relating to glass
feedirg.
]\Ir. CoTTONE. The company is not a licensee of Hartford-Empire?
Mr. KiNGSLAND. They are not.
Mr. CoTTONE. They are shown on that chart, "Exhibit No. 113," ^
over on the right-hand side.
Mr. KiNGSLAND. That is correct. They never have been under a
license unier the present system of licenses.
Mr. CoTi'ONE. Can you tell us what type of feeders the company
uses ?
Mr. KiNGSLAND. At the present time they are using the so-called
air feeder.
Mr. CoTTONE, That is the so-called Stuckey air feeder?
Mr. KiNGSLAND. It is represented by the Stuckey patent generally.
Mr. CoTTONE. You own this machinery outright, do you not ? You
are not under any license arrangements with respect to it?
Mr. KiNGSLAND. No ; the machinery, the title, is owned by the com-
pany ; it was constructed by the company under contract.
Mr. CoTTONE. Over the past 12 years, the Obear-Nester Co. has been
involved in certain litigation wuth the Hartford-Empire Co., has it
not?
Mr. KiNGSLAND. That is true.
Mr. CoTTONE. And you have represented the Obear-Nester Co. in
all this litigation ?
Mr. KiNGSLAND. I represented the company in all of the litigation
except the initial stages of the first suit. That was in 1926.
1 See apB^dix, p. 762.
g26 conci:n"tration of economic power
Mr. CoTTONE. Can you tell us about that first suit, Mr. Kingsland?
Tell us when it was started.
Mr. Kingsland. The date of that first suit, the bill of complaint,
as I recall it, was filed April 1926. That involved the so-called
plunger feeder.
Mr. CoTTONE. That feeder was in use by your comi:)any at that
time ?
Mr. Kingsland. The plunger feeder was in use and had been since
1922. The feeder had been installed early in 1922 and the suit was
filed in 1926. There were two patents involved. There was a so-
called phase-change patent, and the Steimer patent which was men-
tioned. The phase-change patent had to do with the timing of the
shearing with relation to the extrusion of the gob. The Steimer
patent related to the adjustment of the plunger.
Mr. CoTTONE. Now, before that suit came to trial, did you do any-
thing with respect to changing your equipment and machinery?
Mr. KiNGsi^ND. Tlie equipment was changed about the time the suit
was filed. As a matter of fact, it was in the process of change before
there was any notice of the patent, and by the summer of 1926 the
Obear-Nester Glass Co. had adopted the air feeder.
Mr. CoTTONE. Did the Hartford Co. know of the installation of the
air feeder?
Mr. Kingsland. They had a number of physical inspections of the
air feeder. The fact of the matter is that in the original suit that
was tried in 1928 the defendant at the time sought to involve the
air feeder.
Senator King. Did what?
Mr. Kingsland. Sought to involve the air feeder as it was then
used, and bring that in so that the whde litigation would relate to
what they were then presently using.
Mr. CoiTONE. What was the purpose in involving the air feeders
in that suit?
Mr. Kingsland. It was an effort to get this issue cleared in one
litigation.
Mr. CoTTONE. To prevent any new litigation on that issue?
Mr. Kingsland. That is right.
Senator King. You contended that the air feeder was not in con-
flict with any legitimate patent that the Hartford Co. had?
Mr. KiNGsi^ND. That was the position.
Senator King. Was that one of the Stuckey patents?
Mr. Kingsland. That was the air feeder, generally represented by
the construction shown by the disclosure of the Stuckey patent.
Mr. CoTTONE. Can you tell us now what the result of this suit was
in the district court, the first suit?
Mr. Kingsland. The first suit resulted in a decree in favor of the
plaintiff — that is, in favor of Hartford -Empire.
Mr. CoTTONE. In other words, Obear-Nester was held to infringe
the phase-change i)atent and the Steimer patent of Hartford-Empire.
Mr. Kingsland. That is correct.
Mr. CoTTONE. And your company was enjoined?
Mr. Kingsland. Injunction was issued as ag-:iiust that construc-
tion, although at that time we were not using it.
CONCENTRATION OF ECONOMIC POWEIl ^27
Mr. CoTTONE. Now, Avhile this appeal was pending a second suit
was filed ? • i •
Mr. KiNGSL-AND. That is correct. A second suit was filed involving
four patents. All of the patents were predicated upon an air-feeder
disclosure.
Mr. CoTTONE. There were three Peiler patents involved in this suit?
Mr. KiNGSLAKD. Three Peiler patents and the Ferngren patent.
Mr. O.TTONE. Can you tell us tlie date of that suit?
jNIr. KiNGSLAND. Tliat suit, as I recall, was filed in 192&.
Mr. CoTTONE. About February 25, would you say?
Mr. KiNGSLAND. That date is correct.
Mr. CoTTONE. And none of these patents had been involved in that
first suit?
Mr. KiNGSLAND. None of the air-feeder patents had been involved
in the first suit.
Mr. CoTTONE. And the suit was directed against the air feeder ?
Mr. KiNGSLAND. That is correct.
Mr. Arnold. Did you say you had tried to get the air-feeder patents
inserted in the first suit?
Mr. KiNGSLAND. We did.
Mr. Arnold. And were unsuccessful ?
Mr. KiNGSLAND. Yes, sir.
Mr. Arnold. Over the objection of the plaintiff?
Mr. KiNGSL-^ND. Yes, sir; and that is shown in the subsequent
litigation.
Mr. CoTTONE. Was the Peiler phase-change patent that had been
included in the first suit included in the second suit?
Mr. KiNGSLAND. It was not included in th.e second suit.
Mr. CoTTONE. Was there any attempt to include it?
Mr. KiNGSLAND. Not on our part. They had selected, as we thought,,
the four air-feeder patents that were directed to what we were then
currently using.
Mr. CoTTONE. Did you feel that it should have been included in
the second suit ?
Mr. KiNGSLAND. I felt all along there was no justification of direct-
ing it as against the air feeder.
Mr. CoiTONE. What was the result of this suit?
Mr. KiNGSLAND. The second suit resulted in favor of the defendant.
Patents were held invalid in that by the district court. That case was
appealed and on appeal was affirmed.
Mr. CoTTONE. Do you have the citations?
Mr. KiNGSLAND. I recall it, I believe, as 71 F. (2d) 539. I can
check it.
Representative Sumners. Was there any attempt to bring that case
to the Supreme Court?
Mr. KiNGSLAND. In the second case the attempt was made to get to.
the Supreme Court on a petition for certiorari, and that was denied.
Senator King. Those four last patents, the validity has been
affirmed ?
Mr. KiNGSLAND. I think perhaps you have the wrong impression
of my testimony. We were defending, and the four glass feeder patents
628 COXGKXTIiATION OF ECONOMIC POWER
were held invalid. In other words, the decision was in favor of the
Obear-Nester Glass Co., and the air feeder was thereby cleared from
mtringement of those patents.
Senator King. I thought you said it was held valid, your patents
Mr. KiNGSLAND. Invalid. ' ^ i
Representative Sumneus. When Mr. King interrupted— the first
suit was directed against the use of machines which vou were not at
that time using; is that true?
Mr. KiNGSLAND. At the time the suit was filed there were some of
those machines in operation, but change-over to the air feeder, which
we found to be more efficient, had been completed before the first suit
was tried.
Eepresentative Sumners. By the terms of the injunction issued?
Mr. IVINGSLAND. We were not using the plunger feeder
The Chairman. And what was the air feeder'?
Mr KiNGSLANix The air feeder was a feeder that is generally rep-
resented by the Stuc;lvey patent, the Stuckey patent b?ing a patent
■owned by the Obear-Nester Glass Co. » l t. it
The Chairman. Issued when ?
Mr. KiNGSLAND. That patent was issued in 1928, but the ai^plica-
tion had been filed ear y in 1926, so that they were installed under
the application before the i)atent issued.
S^*^t9"'^^^^^-^^'- '^'^^^*^ Piitent doesn't expire until 1945?
Mr. KiNGSLAND. That is con-ect.
Representative Sumners. But the Stuckey patent issued to vou-
or did you have to acquire it?
Mr. KiNGSLAND. We had the rights under the invention from the
beginning and are now owners of the Stuckey patent. Stuckey was
an engineer who installed or superNJsed ihe installation of the air
feeders that we installed m 192G.
Representative Sumners. And that inslallation meant the right to
Ube the machine, of course? "^
Mr. KiNGSLAND. In a sense.
m^KLlT.l "ti"?' "'^ "'>'« "o--. "'"l you acquired his rights?
iMi. KiNGSLAND. That IS correct
'^ &x ^^" h^anv^htiSf rsjrrolS7the
pfcf'i'*ip\^,^;"-^ ""^ '» "-" H^ ™^ -' '- tir:!! et
cislt:fc":rt,S^Sin:? ■"' ''""'^''°" '■"p"^'" "'-' «- —
Mr. KiNGSLAND. Not at all.
Representative Sumners. Now, have you ever Hcpik^p^ »i,^Ur.A./
■else to use the Stuckey machine? ^ licensed anybody
Mr. KiNGSLAND. We have not ; no.
in^ZtZlfr ^''"^'"'- "''^^" ^'" ^''^ ^"^ ^"i^^--i"^ ^--f-— to
Mr. KiNGSLAND. As to the Stuckey patent?
Representative Sumners. Yes.
CONCENTRATION OF ECONOMIC POWER g29
Mr. KiNGSLAND. None.
Kepresentative Sumneks. Are they being used generally by anybody
else?
Mr. KiNGSLAND. I think that that specific form is probably only
used, as far as we know, by the Obear-Nester Glass Co.
The Chairman. Is it now free of any threat of infringement suit?
Mr. KiNGSLAND. No; that resulted in litigation that has recently
been filed. I might explain that in this way, that after the air-feeder
suit had been won by the Obear-Nester Glass Co. there was an effort
made, after the accounting began, to throw the air feeder bac'i ii to the
ori^nal suit. That was denied by the district court and was also
denied by the court of appeals. Following the final decision in the air-
feeder suit, which was the second suit, there was a motion filed in the
first suit to extend the injunction to include the air feeder upon the
contention that the air feeder had carried over certain apparatus that
had been in the plunger feeder and that was denied and was taken to
the court of appeals and again denied. Following that a new suit has
now been filed against us in August of this year making the same con-
tentions, although the air-feeder suit had been determined a number
of years ago ; but we are still under suit and have been with respect
to that structure since 1926.
Mr. Arnold. You have been continuously sued since 1926 ?
Mr. KiNGSLAND. Under continuous suits since 1926, Avith a brand-
new suit now confronting us still in its initial stages.
Mr. Arnold. And one which, on the average of the other suits, will
last several years, you think ?
Mr. KiNGSLAND. Beg pardon?
Mr. Arnold. Your guess is this new suit will last several years
more?
Mr. KiNGSLAND. Judging the future by the past, there will be a
matter of a number of years before that suit may be determined.
Mr. CoTTONE. The first suit is still pending, isn't it?
Mr. KiNGSLAND. The first suit, I may say, is still pending on account-
ing and is in its initial stage on accounting on a rereference.
Mr. CoTTONE. In connection with that accounting, Mr. Kingsland,
did you make any attempt to procure or bring into the proceedings
the license contracts of the Hartford-Empire Co. ?
Mr. KiNGSLAND. In that accounting I made an effort to bring in the
license contracts. I obtained an order from the master upon the theory
they would be relevant because at the time there w^as a contention
being made that a reasonable royalty would apply as a damage meas-
ure of recovery. The order was entered by the master and the plain-
tiff at that time entirely withdrew their claim for damage recovery.
As a result of that the master held it to be irrelevant and we did
not follow it.
Mr. CoTTONE. In other words, as a result of their abandoning "tliat
attempt, the contracts were not brought into the proceedings?
Mr. KiNGSLAND. On the matter of damages; but the case proceeded
to one report and that report was set aside, and is back now for a
re-reference and has been in that stage for the last 2 years.
Representative Sumners. May I ask this question ? It is not clear
to me yet. This accounting, is it with reference to the use of these
patents prior to the time of the changes to which you refer?
124491— 39— pt. 2 25
030 CONCENTltATION OF ECONOMIC POWER
Mr. KiNGSLAND. That is correct. That goes back to the use in
1926.
Representative Sumners. Your answer was complete. Now, then,
what is the chief ground upon which this last suit is based ?
Mr. KiNGSLAND. Well, it is an allegation that the air feeder as now
presently used is an infringement of the 'first Peiler patent, the so-
called phase-change patent. The contention is that we have carried
over the phase change, although I might say that the Court of Appeals
for the Sixth Circuit and my interpretation of the Court of Appeals
of tl>e Eighth Circuit is that that phase change is limited to a change
whilfe the machine is in operation. This last construction does not
have that.
Representative Sumners. I didn't want to take too much time.
Thank you.
Mr. CoTTONE. Congressman Sumners brought up the question of
the patents involved in the third suit ; could that phase-change patent
have been brought into the second suit? In other words, did the
procedure or rules of the court permit the Hartford Co. to declare
on that patent in the second suit ?
Mr. KiNGSLAND. Undoubtedly, it could have been involved in that
case because the same situation existed then with respect to their alle-
gation of infringement.
Mr. CoTTONE. But the defendant would not be in a position to com-
pel the inclusion in a situation like that?
Mr. KiNGSLAND. As the law stood at that time, that is true.
Mr. CoTTONE. There could have been an adjudication, in your opin-
ion, of that patent in the second suit?
Mr, KiNGSLAND. Had the plaintiff brought it in, we could not have
forced it into the suit at that time.
Senator King. As a matter of right, were you entitled to have that
brought into the suit, or was it a matter of discretion for the court?
Mr. Ejngsland. It was a matter of discretion whether the plaintiff
should include it, because they had the patent with the same situation
with respect to the alleged infringement at that time, as they have at
the present day.
Senator King. Was any abuse of the discretion involved, do you
think ? I don't want to lead you into criticism of the court.
Mr. KiNGSLAND. I, of coursc, couldn't say what the policy was. My
assumption is that they had four air-feeder patents, and since the de-
vice that we were then using at that time was an air feeder, I assume
they felt they had sufficient in the air-feeder patents to support their
allegation of infringement. But that issue was fought out, and, as I
have indicated, was determined in favor of the defendant. It was
only since that time that the allegation with respect to the first patent
has been revised.
The Chairman. You maj' proceed.
Mr. CoTTONE. Mr, Kingsland, have any attempts been made to settle
these suits?
Mr. Kingsland. There have been no attempts as far as I know in
any serious way to settle the suits. There have been conversations
from time to time, but notliing you could really characterize as
negotiations.
Mr. Cottone. You have never been invited to go to Hartford ?
Mr, Kingsland. No.
CO-NCENTKATION OF ECONOMIC POWER 631
Mr. CoTTONE. Now, do you have any opinion as to why these suits
have been dragged out over a period of 12 years, Mr. Kingsland? Can
you account for it in any way?
Mr. Kingsland. Well, I, of course, do not know what the reason is,
except that we are outside of the fold of licensees; it is a fair assump-
tion that to keep the licensees satisfied there have to be suits pending
against those that do not happen to be within the fold. That is pure
surmise.
Mr. CoTTONE. I was thinking in terms of the length of time. Do you
consider that the different strategic moves that have been made are
designed as a harassing device ?
Mr. Kingsland. It has resulted certainly in that, because we have
been under constant litigation since 1926, substantially against the
same construction we were using since that date.
Senator King. Was there any delay by the plaintiff or by the
defendants in that suit?
Mr. Kingsland. I would not say that there was any extraordinary
delay in that suit. I think it was tried about on the schedule of the
ordinary patent suit — that particular suit.
Senator King. As defendant you wouldn't be interested in dragging
it out — or would you ?
Mr. Kingsland. We have been. Senator, from the very beginning,
anxious to clear this issue of infringement.
Senator King. I assumed that you were.
Mr. CoTTONE. Has this litigation affected in any way the operations
of the Obear-N ester Co.?
Ml'. Kingsland. T liave no way of judging that, other than the
difficulty of defense of litigation of this magnitude. They have gone
right ahead with their business.
Mr. Cottone. It does take the time of many employees, does it not,
in the preparation of cases and trial of cases?
Mr. Kingsland. There is no question about that.
The Chairman. About how many employees are required to defend
these suits ?
Mr. Kingsland. Oh, engaged in the defense — that is, taking the
employees — I should say that during the preparation of the case 8 or
10 major employees would be consulted.
The Chairman. It is continuous work, is it?
Mr. Kingsland. I would not say that; no. They continue to per-
form their ordinary functions.
The Chairman. Some wi<^nesses who have appeared here have given
an estimate as to the annual cost of litigation. Could you undertake
to give that ?
Mr. Kingsland. I could give the committee a general idea as to
what this litigation over a period of 12 years has cost. It has cost
in the neighborhood of $200,000, exclusive of the time of the cor-
porate employees, for experts, lawj'ers' fees, and matters of that kind.
Mr. Arnold. Is the fact that no one has asked you for licenses on
your machine, do you think, due to this continued litigation?
Mr. Kingsland. I should say that would be a deterrent, certainly,
to anyone who would attempt to go into the business.
Mr. Arnold. It is a pretty clear inference that if they took one of
your machines they would also be subject to continued suit?
g32 CONCENTRATION OF ECONOMIC POWER
Mr. KiNGSLAND, Because we are sued with respect to that construc-
tion.
Senator King, Are you sufficiently advised to determine whether
your patents and the products of your patents are as good as the
products of the patents held by the Hartford Co. ?
Mr. KiNGSLAND. I am absolutely satisfied that they are, and our
statistics show approximately a 5-percent increase in production.
Senator King. So that your vendees, in buying your products,
would be getting as good, if not better, products than those from the
Hartford licensees?
Mr. KiNGSLAND. I would not say a better product. The product is •
comparable, but the speed of production is somewhat increased by
our air-feeder process, m my judgment, and as we have established by
our own statistics and to our own satisfaction.
Mr. CoE. Have all of these suits been confined to the sixth circuit?
Mr. KiNGSLAND. They were all in (he eighth circuit. The Obear^
Nester Glass Co. is a Missouri corporation, and the suits have all been
filed in Missouri.
Mr. CoTTONE. The Obear-Nester Co. has been in a financial posi-
tion to withstand this litigation over this 12-year period?
Mr. KiNGSLAND. They are a strong company financially.
Mr. CoTTONE. Did you know that the Owens Co. was contributing
to the expense of prosecution of these suits against Obear-Nester?
Mr. KiNGSLAND. No ; that was never khown.
Mr. CoTTONE. Do you now know it ?
Mr. KiNGSLAND. 1 know it from reading the transcript of the
testimony here.
The Chairman. May I interrupt? The chairman has been called
away and I shall ask the vice chairm'an to preside in my absence. It is
my understanding that you hope to be able to conclude with this
witness in about 10 or 15 minutes.
Mr. CoTTONE. Mr. Kingsland, in addition to the patents on which
you have been sued, you have also been notified by the Hartford Co.
that you have been infringing a number of other patents, have you not?
Mr. KiNGSLAND. That is true. Subsequent to the time that the
Obear-Nester Glass Co. succeeded in the second litigation, there was
an additional notice sent to that company, including some 14 or 15
patents, part of them on the feeder section of the glass fabricating
units and part of them on the so-called forming-machine section of
the units.
Mr. CoTTONE. Do you recall the date of that notice ?
Mr. KiNGSLAND. I can check it. My recollection is
Mr. CoTTONE (interposing). Is it August 2, 1934?
Mr. KiNGSLAND. That is correct.
Mr. CoTTONE. Has any suit ever been filed on the patents that were
included in these various notices? Oh, by the way, do you know how
many patents in addition to those on whicluyou have been sued were
included in those notices?
Mr. KiNGSLAND. I think there were some 14 or 15. I haven't checked
them because there were two notices. There was a 1928 notice and
this last notice, but I think altogether about 14 or 15 patents that we
have been notified about on which there has been no suit filed.
CONCf:NTRATION OF ECONOMIC POWER 533
Mr. CoTTONE. In that 1928 letter of infringement, was there in-
cluded in phase-change patent, which was made the subject of the
third suit?
Mr. KiNGSLAND. The phase-change patent was included.
Mr. CoTTONE. And that letter was dated prior to the second suit ?
Mr. KiNGSLAND. That is correct. I am saying that without checking
those numbers, but that is my memory of it.
jNli". CoTTONE. I have here the notices of infringement. These are
documents that were supplied to us by the Obear-Nester Co., which
consist of tAvo notices of infringement dated February 14, 1928, and
August 2, 1984. I am referring to that first letter, dated 1928.
Mr. KiNGSLAND. In the 1928 letter was included the so-called phase-
change patent.
Mr. CoTTONE. That was prior to the institution of the second suit?
IMr. KiNGSLAND. Yes. I do not recall whether that was repeated
in the 1934 notice. I think it w^is not.
Mr. CoTTONE. You said there were certain forming-machine pat-
ents that were included in that second notice. Is that so?
^Ir. KiNGSLAND. That is correct.
Mr. CoTTONE. Wliat kind of forming machines had the Obcar-
Nestcr Co. been using?
Mr. KiNGSLAND. They are using a Lynch machine.
Mr. CoTTONE. Where had it obtained these machines ?
Mr. KiNGSLAND. The Lynch machine hacf been obtained as early as
1922 on the market.
Mr. CoTTONE. Purchased outright, not under any license?
Mr. KiNGSLAND. Under no license.
Mr. CoTTONE. Did you hear the testimony this morning with
respect to the Lynch-Hartford-Empire contract relating to forming-
machine patents?
Mr. KiNGSLAND. I did.
Mr. CoTTONE. Were you familiar with the arrangements under that
contract?
Mr. KiNGSLAND. I did not know the details. I knew that the
Lynch Co. would not furnish machines.
Mr. CoiTONE. Before you come to that, Mr. Kingsland, did you
attempt to obtain any additional forming machines from the Lynch
Corporation at any time?
Mr. KiNGSLAND. We did, I think, in 1935-36.
Mr. CoTTONE. Can you tell us the results of those efforts?
Mr. KiNGSL.vND. We were unable to obtain them. There was
some correspondence covering the details of those negotiations.
Mr. CoTTONE. I show you the correspondence to which you have
referred, Mr. Kingsland, and ask you, without reading it into the
record, to identify those documents and to indicate what they state.
Mr. KiNGSLAND. The letter of June 29, 1935, to the Lynch Cor-
poration, from the Obear-Nester Glass Co., asks that the Lynch
Co. quote them on Lyncli machines, three additional machines.^
The reply to that was a quotation. The reply is dated July 1, 1935,
and is a quotation with respect to the units inquired about, and
the statement that a license would be required, not stating to whom
application for the license should be made.^
1 Subsequently entered as "Exhibit No. 155, see appendix p. 798.
' Subs(>f|uently entered as "Exhibit No. 156," see appendix p. 709.
g34 CONCENTRATION OF ECONOMIC POWER
Then, on July 6, 1935, the Obear-Nestcr Glass Co. — I should say
on July 3, 1935 — the Obear-Nester Glass Co. wrote again to the
Lynch Corporation asking whether or not it was a prerexiuisite to tlie
obtaining of the machines that a license be obtained,^ and the reply
on July 8 was that it would be necessary to obtain a license before
we could purchase the machines.^
Senator King. Was there any indication to whom you should
apply for the license?
Mr. KiNGSLAND. We applied to the Lynch Corporation, because
they were the manufacturers of this machine at that date.
Mr. CoTTONE, There was no indication in these replies of the Lynch
Corporation as to the party to whom you were to apply for a license,
was there?
Mr. KiNGSLAND. No; but" we knew generally what the situation in
the trade was. We assumed it was Hartford.
Mr. CoTTONE. You know the arrangements that existed between
the Lynch Corporation and the Hartford Company ?
Mr. KiNGSLAND. We didn't know the details, but we knew there
was some arrangement whereby a Hartford license would be required.
Mr. CoTTONE. Did you attempt to obtain a license from the Hart-
ford Co.?
Mr. KiNGSLAND. We did not.
Mr. CoTTONE. Will you tell us why?
Mr. KiNGSLAND. Because we had been in controversy with them
with respect to the feeders. We knew the licenses were coupled
together and we were unwilling at that time, and still are, to come
under that license system. We went out to the open market and
bought second-hand machines to supply our needs at the time, and
we are using those machines today.
Mr. CoTTONE. You stated that there was no suit started on these
forming-machine patents.
Mf. KiNGSLAND. There were no suits filed on the forming-machine
patents.
Mr. CoTTONE. Have you received any information or indication
that suits might be filed by virtue of your use of these old Lynch
machines?
Mr. KiNGSLAND. Nothing further than the notice, and that was
dated — I believe you gave the date — August 2, 1934.
Mr. CoTTONE. That is all, Mr. Chairman.
May I offer these four letters which Mr. Kingsland has identified?
The Vice Chairman (Representative Sumners). For the record?
Mr. CoTTONE. They need not be printed.
Senator King. Is there any controversy there? Should they be
set out in the extension of the record ?
Mr. CoTTONE. I am perfectly willing that they should be identified
and kept in the files.
(The letters referred to were marked "Exhibits Nos. 155 to 158*'
and are included in the appendix on pp. 798-800.)
Mr. CoE. Mr. Chairman, there is one point I would like to have
the witness clear up in my own mind. I understand the litigation
against you has been confined to the eighth circuit. These patents
* Subsequently entered as "Exhibit No. 157," see appendix, p. 796.
• Subsequently entered as "Exhibit No. 158," see appendix, p. 800.
CONCENTRATION OF ECONOMIC POWER g35
forming the basis of the suits against you — ^have they been litigated
in any other circuit?
;Mr. KiNGSLAND. The phase-change patent has been litigated and
the Steimer patent has been litigated. They, were litigated in the
sixth circuit in the Nivison-Weiskopf litigation, and also in the third
circuit.
Mr. CoE. Is there any conflict as to the validity of those patents?
Mr. KiNGSLAND. There is a conflict, I understand. Even as between
the eighth and sixth, the construction of the claims and the claims
held valid do not agree. There is a contrarity .of opinion between the
two circuits with respect to the scope of the claims involved.
Senator King. In those suits to which reference has just been made,
was there an adjudication in favor of the validity of certain patents
and the invalidity of certain other patents ?
Mr. KiNGSLAND. Claims of patents. Certain claims were held valid
and certain claims were held invalid.
Senator King. Were the Steimer patents held invalid?
Mr. KiNGSLAND. It was held invalid in the sixth circuit and valid in
the eighth circuit.
Senator King. This isn't germane, but it seems to me it is very
important to aid tlie committee in determining what sort of legisla-
tion, if any, is required. Don't you think that it is a very unfortu-
nate thing that we have a system under the terms of which there
may be different opinions with respect to the same patents in different
Federal courts?
Mr. Kjngsland. I think it would be a happy solution of the matter
if it could be final, but as to the means of obtaining that I have no
opinion at the present time.
Senator King. Have you any objection to stating whether this plan
would have merit, to provide that suits may be filed in the district
courts, the Federal district courts, in any jurisdiction, and an appeal
taken from that court directly to a court" of patent appeals whose
decision would be final unless a writ of certiorari or some constitutional
question is raised, when the case might be carried to the Supreme
Court?
Mr. KiNGSLAND. That, of coui-se, is quite a controversial subject
at the patent bar, and I have no definite opinion on it. I see consider-
able advantage in it. I see some detriment. Taking and balancing
the favorable outcome that would result from that and that that
would not be favorablej I would say that it would probably be the
best way to get this litigation terminated more quickly. I do feel,
however, that if a plaintiff has a group of patents, that the simplest
solution is to require him to put all of his patents into one suit
against the single accused structure, which is a very simple way to
handle it. That is my judgment about it.
Senator King. Disassociating yourself — there is some facetious-
ness in this; it isn't meant by way of criticism — fi-om the lawyers'
cult, and considering only the interest of the inventor and the public,
do you not think some plan should be devised under the terms of
which these patent cases might be more expeditiously and cheaply
determined ?
Mr. KiNGSLAND. I most heartily approve of that idea.
g36 COJ^CENTRATION OF ECONOMIC POWER
Senator King. Would you have any objection to sending to the
committee a memorandum making such suggestions in the light of
your long practice, and of course your desire to serve the public,
your views as to what changes should be made in the present patent
laws?^
Mr. KiNGSLAND. I should be very glad to give it real consideration
and do what the Senator asks.
Senator King. I would be very happy, and I think I can speak for
all my brethren, for you to do that.
The Vice Chairman. It is a rather interesting thing, but that is
exactly the thing I was going to ask you to do for the Committee on
the Judiciary and for this committee, and I would liksj for the gentle-
men here, the lawyers who have views and have been trained, to give
us the benefit of their views in a fairly comprehensive memorandum,
especially on the point that you suggested first, and that is, compel-
ling the plaintiff to incorporate in his first suit all claims of known
infringement — I mean, infringement that he knows as much about
then as later on.
Mr. KiNGSLAND. I feel very strongly that that would be a solution.
The Vice Chairman. That would have to be safeguarded, I sup-
pose, but I think with proper safeguards you could do that, and I
would like for the gentlemen who have other views to do that. I
speak as the chairman of the Committee on the Judiciary in doing
that. We get the picture of what this is all about, but the next thing,
what are we going to do about it?
Senator King. Mr. Chairman, may I say that the two bar-asso-
ciation committees, the national and the other (and they have com-
mittees on patents), have been asked by the chairman of the commit-
tee and myself to submit to this committee their views in regard to
changes in the substantive law and particularly in regard to pro-
cedural matters, so that the committee may have the advantage of
their views in the consideration of the testimony which will be
adduced.
Mr. Arnold. And may I add to that a suggestion which the Anti-
trust Division is peculiarly interested in, and that is the question of
whether, under any patent law which provides for an equitable dis-
tribution between the inventor and the employer, there should not
be the power to bring in the antitrust proceeding such uses of patents
which actually restrain trade and competition to a serious and sub-
stantial degree, and I wish you would consider that, and I wish you
would consider in that the fact that under the antitrust proceeding
(and I think it is the only proceeding that I know about) each case
of restraint on competition can be taken up on its own facts, and one
at a time, which is, of course, not true under the more general matters
of patents.
Mr. KiNGSLAND. If there is anything I can add, I shall be very
happy to do it.
^ The Vice Chairman. There is another thing that we haven't had
time to go into, and won't take the time, and that is whether or not
there ought to be compulsory issuance of a license. That is a pretty
big question in this picture.
Mr. KiNGSLAND. That is quite controversial at the present time.
Senator King. There is a bill pending in Congress to that effect
now.
> See ioemorandum BubsequenUy submitted by Mr. F' -"island which appears in appendix.
CONCENTRATION OF ECONOMIC POWER ^37
The Vice Chairman. Are there any other questions? Has anybody
any questions to ask? If not, we will stand in recess until 2 o clock.
(Whereupon, at 12 : 22 p. m., a recess was taken until 2 p. m. of the
same day.)
AFTERNOON SESSION
(The committee resumed at 2:10 p. m. on the expiration of the
recess.)
The Vice Chairman. Are you ready, Mr. Cox?
Mr. Cox, Mr. Meyers is going to do the questioning this after-
noon.
Mr. Meyers. I would like to call at this time the following repre-
sentatives of the Corning Glass Works: Mr. Houghton, Mr. Falck,
and Mr. Custiss, and I would like them to be sworn in at this time.
Mr. Houghton, will you please give your name and address to the
recorder ?
TESTIMONY OF AMORY HOUGHTON, PRESIDENT, CORNING GLASS
WORKS, CORNING, N. Y.; TESTIMONY OF ALEXANDER D. FALCK,
CHAIRMAN OF THE BOARD, CORNING GLASS WORKS, CORNING,
N. Y. ; AND TESTIMONY OF WILLIAM H. CURTISS, VICE PRESI-
DENT, CORNING GLASS WORKS, CORNING, N. Y.
Mr. Houghton. Amory Houghton, Corning, N. Y., president,
Corning Glass Works.
Mr. Meyers. And Mr. Falck, will you do likewise?
Mr. Falck, Alexander D. Falck, Ehnira, N. Y., chairman of the
board, Corning Glass Works.
Mr. ]\Ieyers. Mr. Curtiss.
Mr. Curtiss. William H. Curti«9, Corning, N. Y., vice president
and secretary, Corning Glass Works.
Mr. Meyers. Mr. Hougliton, you have been president of the Corning
Glass Works since 1930 ?
Mr. Houghton, Since February 1930,
Mr. Mlyers. You are also general manager of that company?
Mr. Houghton, That is correct.
Mr, Meyers. You are a director of the Empire Machine Co,?
Mr, Houghton. Yes, sir.
Mr. Meyers, The American Blank Co. ?
Ml . Houghton. Yes, sir.
JMr. ]\fEYERs. And the Hartford -Empire Co.?
Mr. Houghton. Yes, sir.
JMr. Meyers. Mr. Falck, you are at present chairman of the board of
directors of the Corning Glass Works ?
Mr. Falck. That is correct.
Mr. IMeyers. You were president of that company during the period
1920 to 1928?
Mr-. Falck. Yes.
Mr. Meyers. You are president and director of the Empire Ma-
chine Co. ?
Mr. Falck. Yes.
Mr. Meyers. The American Blank Co. ?
Mr. Falck. Yes.
g38 CONCENTRATION OF ECONOMIC POWER
Mr. Meters. You are director of the Hartford-Empire Co.?
Mr. Falck. Yes.
Mr. Meyers. Have you held any other position with the Hartford-
Empire Co. ?
Mr. Falck. I am a vice president — ^have been since the Hartford-
Empire Co. was organized.
Mr. Meyers. Mr. Curtiss, you are vice president and secretary and a
director of the Corning Glass Works?
Mr. CuRTiss. That is correct.
Mr. Meters. And in addition to your duties as secretary you have
general executive responsibilities, including supervision of the legal
and patent departments?
Mr. Curtiss. Correct.
Mr. Meyers. Contracts, licenses, and relations with all subsidiaries
and affiliated companies, domestic and foreign?
Mr. Curtiss. Correct.
Mr., Meyers. You are also a director of the American Blank Co.?
Mr. Curtiss. Yes.
Mr. Meyers. Do you hold any position with the Hartford-Em-
pire Co. ?
Mr. Curtiss, I do not.
Mr. Meters. Mr. Houghton, what is the relationship between the
Corning Co. and the American Blank and the Empire Machine Co. ?
Mr. Houghton. Do you wish me to give the American Blank first?
Mr. Meters. Please.
Mr. Houghton. Corning Glass Works is an 80-percent holder of
the common stock of the American Blank Co.
Mr. Meters. Who holds the remaining 20 percent?
Mr. Houghton. The Empire Machine Co.
Mr. Meters. Does the Corning Co. own any stock in the Empire
Machine Co.?
Mr. Houghton. None.
Mr. Meters. Who owns that company, do you know ?
Mr. Houghton. There are seven stockholders; the control is in the
hands of the Houghton family. Ninety percent of the common stock,
including the stock I have just mentioned, is in the hands of stock-
holders of the Corning Glass Works, and 10 percent is held outside.
Mr. Meters. Who are the stockholders, generally speaking, of the
Corning Glass Works? Would that be the Houghton family?
Mr. Houghton. There are 403 stockholders of the Corning Glass
Works.
Mr. Meters. Well, in terms of ownership, how much does the
Houghton family own of the Corning Glass Works?
Mr. Houghton. As you will see on your chart,^ they own 40 per-
cent. That added to the other stock coming from the estate of my
grandfather adds up to a total of 52.2 percent, I believe, of the
common stock of the Corning Co.
Mr. Meters. Now, who owns stock in the Houghton Associates?
Senator ICing. Whom do you call the Houghton Associates?
Mr. Meters. That also is on the chart.*
See legend for "Exhibit No. 113," appendix, p. 763.
CONCENTRATION OF ECONOMIC POWER g39
Mr. Houghton. Houghton Associates is really an association of the
stock in the Corning Glass Works from my grandfather's estate, en-
tirely owned by my family.
Mr. Meyers. Do you personally own any stock in the Hartford-
Empire Co. ?
Mr. Houghton. Yes, sir; 500 shares, to be exact, I think.
Mr. Meters. Does, the Empire Co. own any stock in the Hartford-
Empire 'Co. ?
Mr. Houghton. Yes, sir.
Mr. Meyers. Wliat percentage of the total outstanding stock is
owned by the Empire Machine Co.?
Mr. Houghton. Forty-three percent.
Mr. Meyers. Can you tell me how many directors on the board of
Corning are also on the board of Hartford-Empire Co.?
Mr. Houghton. Four of the Corning directors are on the board
of Hartford-Enipire.
Mr. Meyers. And how many directors are there on the board of
Hartford-Empire Co.?
Mr. Houghton. There have been as a rule nine. I believe that
due to a recent resignation, today there are only eight.
Mr. Meyeus. Mr. Falck, the Hartford-Empire Co. and the Corn-
ing Glass AVorks entered into a cross-licensing contract in 1922, did
thev not i
Mr. Falck. They did.
Mr. Meyers. Other parties to this agreement were the Empire Ma-
chine Co. and the Hartford-Fairmont Co. ?
Mr. Falck. Yes.
Mr. Meyers. The Hartford-Fairmont Co. was the predecessor com-
pany of the Hart ford- Empire Co.?
Mr. Falck. Yes.
Mr. Meyers. And the Empire Machine Co. is the company that
we have just been discussing.
Mr. Falck. Yes.
Mr, Meyers. Now this 1922 agreement made a division between
Hartford and Corning of certain j)ooled rights in glass formulas,
machine patents and patent applications, then held and thereafter to
be acquired by the parties to the agreement.
Mr. Falck. Yes, sir.
Mr. Meyers. Article 4 of that agreement sets forth the apportion-
ment of the glassware divisions between Corning and Hartford, does
it not?
Mr. Falck. It is set forth in, I presume, article 4.
Mr. Meyers. I believe you will find that on page 69 of the contract.
Mr. Falck. Yes, article 4 contains the statement of apportion-
ment of fields. It is called apportionment of fields, meaning the
division or assignment to one company or the other of rights in a
certain field of production of glassware.
Mr. Meyers. Will you please explain, Mr. Falck, in layman lan-
guage the nature of the ware fields in which Corning received exclusive
and royalty-free rights ?
Mr. Falck. I can give you the nature of the fields in which
Corning received exclusive rights, but I can't couple with that the
statement tliat they were royalty free, because that is not correct.
g40 CONCENTRATION OF ECONOMIC POWER
THE SPECIALTY GLASS FIELD
ISIr. Meters. Will you please give us the exclusive fields first ?
Mr. Falck. The exclusive fields, to paraphrase the lengthy de-
scription of them contained in the contract, were these: The first
ware division was bulbs for electric lamps and other similar elec-
trical uses. The second field related chiefly to the railway business,
called the field of signal and optical glassware.
Senator King. That wouldn't come under the category of the ware
we have been discussing heretofore.
Mr. Falck. Not at all.
_ The third field in which Corning has under the contract exclusive
rights is what may be called the field of special resistance glasses —
heat resistance, chemical resistance, and other special properties.
Mr. Meyers. You have a trade name for that product, have you
not?
Mr, Falck. We have a trade-mark relating to heat-resisting glass,
Pyrex.
Senator King. Pyrex?
Mr. Falck. Pyrex is the trade name generally applied lo resistant
glasses.
Senator KfNG. From whom did you get the exclusive right?
Mr. Falck. That is dealing with the exclusive rights under the
contract between Corning Glass Works and Hartford-Empire Co. ?
Senator King. Did the Hartford-Empire Co., as patentee or as-
signee of patents, have the rights under which you might obtain
rights; under which the Corning Co. might obtain rights?
Mr. Falck. We obtained exclusive rights under whatever Hart-
ford's rights were in machines.
Senator King. I'ou conceded its superior rights to yours and be-
came then an assignee or licensee of a company which you regarded
as paramount to yours in that field.
The Vice Chairman. Wliat you did, isn't it, was to pool your pat-
ents and then divide the right to use ?
Mr. Falck. There was no issue as to paramount rights. We
granted exclusive rights under our patents for certain fields and took
from them exclusive rights under their patent. It was a cross-license.
Mr. Meyers. Will you proceed, Mr. Falck?
Mr. Falck. The third field, as I have said, was the resistance
glasses, and the fourth was specifically glassware intended for use as
cooking vessels, for cooking food.
There were several other subdivisions where some of the rights
were exclusive and some were nonexclusive. One of the exclusives
was for a field of our operations, that is laboratory and chemical glass-
ware, and the rest were minor, except for the field of drawn tubing
i.nd cane.
Mr. Meyers. And drawn tubing and cane is tlie small glass con-
tainer wliich houses the filament in a large electric bulb?
Mr. Falck. That is small tubing or cane. It isn't limited to use in
electric bulbs. We don't speak of it in the glass industry as a con-
tainer; it is a tube or rod of glass; a stick of glass, if it is not hollow.
If it is hollow, it is tubing.
Mr. Meyers, These fields cover so-called specialty glassware as
difForontiated from glass container ware?
Mr. Falck. Yes.
CONX'ENTRATION OF ECONOMIC POWER g41
Mr. Mkyers. "Will 3'ou please explain the nature of the fields in
whicli Ilartford received exclusive rights?
Mv. Falck. It received under Coming's inventions the exclusive
right lo Use them for the production of pressed ware and blown ware,
and ware that is both pressed and blown, and the field was discussed
between us as the container field. Generally speaking, that was the
intention, to give Hartford Coming's right to use its inventions in
the container fields.
Mr. Meyeus. And they got these exclusive rights from Corning to
use certain patents that Corning had pooled in that agreement.
Mr. Falck. They got the right to use whatever inventions Corn-
ing then owned or might make during the period specified in the
contract, for the containers.
Mr. Meyers. And that conti-act is still in force today ?
]Mr. Falck. Yes.
Mr. Meyers. And it has been amended from time to time.
Mr. Falck. There have been minor amendments. Basically, there
lias been ver}' little change.
Tlie Vice Chairman. Does that right to exclusive use include the
right to grant licenses to others to use?
iVIr. Falck. Yes.
Sr-uator King. Did the Coming Co. have a patent which would
authorize them to manufacture milk bottles and beer bottles?
M)'. Falck. The Corning Co. at tlie time this contract was made
had DO miicliine (m which bottles could be manufactured. We had
inventions that might by ingenuity be applied in the construction of
some sort of machine. We had no machijie working on the produc-
tion of bottles or jais.
Senator King. If you produced bottles or jars you would have to
resort to the machines of the Hartford-Empire Co.?
Mr. Falck. I should qualify what I have already said when I
said that Coming gave to Hartford exclusive rights under its in-
ventions for the container business; Corning retained a shop right
to use its own inventions in its own shop, but gave to Hartford the
rights beyond that and the right to sublicense others.
iVIr. Meyers. In other words, Hartford agreed to refrain from
licensing others to maiuifacture on Hartford equipment those prod-
ucts which well within Coming's exclusive fields, such as electric bulbs
and heat-resisting ware.
Mr. Falck. Generally speaking, the line of special glassware that
we were then producing.
Mr. Meyers. And likewise Corning disabled itself from manufac-
hiring or licensing others to manufacture under the patents it con-
mbuted to the pool, products which fell within Hartford's exclusive
fields, namely, any glass container products.
Mr. Falck. No, Corning did not part with any right of manu-
facture in its own plants. It gave to Hartford- Empire the entire
right except for that retained by Corning to use its own inventions
in its own plant for any purpose, the container field or otherwise.
Mr. Meyers. That is the shop right you have just mentioned.
Mr. Falck. The shop right.
Mr. Meyers. But Corning could not license others under its pat-
ents to manufacture, let us say
Mr. Falck (interposing). Not in the container field.
642 CONCENTRATION OF ECONOMIC POWER
Mr. Meyers. Mr. Falck, I wonder if you would explain briefly the
factors which influenced the execution of this agreement in 1922.
Mr. Falck. I shall try to be brief. It was a growth of acquaint-
ance with the development work being conducted and accomplished
by Hartford which began in 1916. In 1915 interferences were de-
clared in the Patent Office between Chamberlin, who was an inven-
tor employed by the Empire Machine Co., which was a Corning com-
pany, and Peiler, who was making inventions for the Hartford-Fair-
mont Co. The two groups then first learned of each otlier's exist-
ence through the interferences in the Patent Office and found after
sufficient contact that our two inventors, widely separated geographi-
cally, were also interested in two quite different branches of the glass
industry, Hartford being interested in developing apparatus for that
part of the glass industry making containers which had no mechani-
cal feeding devices, and Corning and the Empire Co. with its in-
ventors particularly interested at the time in trying to develop auto-
matic machinery for the production of bulbs which had all been hand
production to that time. We found, therefore, that the ideas of these
two men working for two different objectives had been declared by
the Patent: Office to conflict.
The two groups of executives and patent counsel in their meetings
thereafter found that apparently Hartford-Fairmont Co., it then was,
could be given our rights insofar as they conflicted with theirs in the
Patent Office for use in the container field without depriving us of
anything in which we were interested, and that likewise Corning
could take from Hartford rif^hts for bulbs and laboratory glass and
signal glass, and so forth, without taking anything in which Hart-
ford was interested. We therefore made a cross-license in 1916 which
covered only the subject matter of those patent interferences, inven-
tions then in existence and in the office.
From that time on we had contacts and began talking about this
sort of contract as early as 1919, at which time Hartford had a better
feeder and Corning very badly needed a feeding device for a fully
automatic — and which was the earliest fully automatic-blowing ma-
chine for the production of bulbs, but which in Coming's hands had
no feeding system, and needed one to supply the glass from the tank
to the machine. As a result we made this contract which was again
a division of rights along the lines of the fields of production in
which Corning was interested on the one side, and the licensees of
Hartford, the container industry, on the other.
Mr. Meyers. Would you agree with what the writer of this memo-
randum said about that combination, that agreement ? This memo-
randum is certified to by the Hartford-Empire Co., bearing the
initials of F. G. S., dated January 30, 1919. Paragraph 4 reads :
Hartford or Empire, working alone as individual units will to some degree
block each other on the question of patent rights. Whereas, working together
on a basis of exchange of patent rights, the position of each singly or together
would be greatly strengthened.
Mr. Falck. Tliat is not my statement of the situation, no ; but sub-
stantially there is a gi'eat deal of truth in that. As I have already
said, we made our first agreement because we were in interference in
the Patent Office. We made our second agreement liecause there were
other interferences in the Patent Office in siglit. We thought that it
would be wise to combine our small development organization with
CONCENTRATION OF ECONOMIC POWER g43
Hartford's larger organization and have one organization whose
efforts would be directed toward general glass machine development,
and that we could safely contract to give Hartford container rights,
Corning special glass rights, and it would strengthen both companies
in that way.
Mr. Meyers. I shall not ask you whether you agree with this state-
ment. This is also from a memorandum certified to by the Hartford-
Empire Co., bearing the name of F. G. Smith, dated March 16, 1920;
it is entitled "Hartford-Empire Agreement." Paragrapli 8 reads :
Any concern wblch can offer the use of automatic machinery and special
formulas ought to eventually control the key to the glass industry in this country
and foreign countries. Noncontrol of the formulas might permit formulas to
be licensed to manufacturers not using our machines. Such manufacturers
then might capture a large part of the trade of our licen.soes because of the
superior quality of glass, and thus work untold injury to us.
Mr. Falck. Well, if that is a fair question, I can't answer it. It is
a complicated statement containing several thoughts. I have not seen
it; I have not looked at it. If you want me to answer it in detail, I will
try to do so.
Mr. Meyers. What this statement means, does it not, is that if one
company
Mr. Falck (interposing). I couldn't tell you what it means without
its being read again, or my reading it carefully.
Mr. Meyers. I show you that document.
Mr. Falck. Do you want me to talce these eight items, one by one,
and say whether they represent my views?
Mr. Meyers. You might read that document and tell me whether
you have ever seen that statement before.
Mr. Falck. Not to my knowledge; no. It may be quite all right,
but I, off-hand, can't say that I agree with what you have read
rapidly, and, so far as I know, I have never heard before.
Mr. Meters. That is perfectly all right, Mr. Falck.
Mr. Falck. I don't Imow whether you read the first paragraph
m'arked "1." Mr. Smith has written this, apparently, and it says —
1. Will stregthen our patent situation and preclude future differences of opinion
regarding Empire and Corning rights under Empire agreement as well as under
ownership of Steimer application.
I think that is all quite true and desirable. We had no wish to have
patent litigation with Hartford so long as we could obtain, under their
inventions as well as our own, rights to go ahead with our glass busi-
ness, and we were quite willing, as we were not in the container business
or interested in it in any way, to give them rights under our inventions
for the container business.
Mr. Meters. I don't want to be argumentative about that docu-
ment. It represents the thought of one of the responsible officers
of a company which was a party to that agreement. You may dis-
agree with it, and if you do, say so.
Mr. Falck. I don't know, until I read what the sentences say.
The Vice Chairman. I think the witness has a right to make an
examination of each of the statements and indicate his attitude on
each of the statements.
Mr. Falck. I have Jio objection to answering any of your ques-
tions, but this document was written in 1920 by Mr. Smith. 2 years
before we made the contract, and is apparently directed to William
g44 CONCENTRATION OF ECONOMIC POWER
H, Honiss, his patent counsel. I don't know whether I ever saw it or
heard it read before — probably not; but I think I am entitled to know
what it says before I agree to it. Do you wish me to go on with it?
Mr. Meyers. Yes.
Mr. Falck (reading) :
Second. If we proceed alone, is our present patent situation as strong as it
should be and as we would like to have it?
I can't answer that. I suppose that was a question to their patent
counsel in 1920. [Continues reading:]
Third. Will not the combined ownership of the patent rights dominate the
Federal situation so as to preclude the Federal feeder becoming a competitor
here in the States as well as acro,ss the water?
Tliat also is a question to his patent counsel about which I know
notliing. I am apparently reading parts that you didn't.
Mr. Meyers. The other material is apparently exti-aneous to the
point under is.sue, since your company had glass fonuulas, and the
Hartford Co. did not.
Mr. Falck (reading) :
Any concern which can offer the use of automatic machinery and special for-
muhis ought to eventually control the key to the glass indu.stry in this country
and foreign countries.
To the extent lliat that macliuiery and tho«e glass formulas are all
there were of machinei-y and fornuilas for use, T tliink it would
control it.
Senator Kino. Is that directed to your paliMit counsel?
Mr. Fai/'k. No; to the patent counsel of the Haitfoi-d-Fainnont
Co., 2 yeai '^ ln-fui't.' we made the contract.
Mr. AFeyeus. Tiie report to the Depai'tment of Justice sliows tliat
the bulb and tubing division accounted for sales in tlie amount of
approximately $6,780,000.
Mr. Houghton. That is correct for tlie year 1937.
Mr. Meyers. And that accounts for wluit percentage of your total
business — about 35 percent, roughly?
Mr. Falck. I think that is approximately coiitX't.
Mr. Meyers. Your company manufactures clear-glass bulbs and
inside frosted-glass bulbs to be used for incandescent electric lamps?
Mr. Houghton. Yes, sir,
Mr. Meyers. Can you tell me, Mr. HouglitoiL approximately what
percentage of the sales of the bulb and tubing division is represented
by the sale of bulbs to be used for incandescent electric lamps? Your
bulb and tubing division is indicated in the answer to our ques-
tionnaire as taking in manufacture of incandescent electric lamps,
radio tubes, and Neon signs, and I would like to know the volume of
sales of electric bulbs for use in incandescent lamps.
Mr. Houghton. I cannot give you that from my figures here, Mr.
Meyers, in dollars. I can give it to you in thousands of bulbs, which
I should think would probably be satisfactory. I have that figure
here. In 1937, bulbs for use in incandescent electric lamps, 233,435,000.
Senator King. Is that the total production in the United States
or just the production of your company?
Mr. Houghton. That is just the production of Corning Glass
Works.
CONCENTEATION OF ECONOMIC POWER 545
The Vice Chairman. What percentage of the domestic production
or consumption is that?
Mr. Houghton. That is 39.2 percent, sir, of the domestic produc-
tion.
The Vice Chairman. How many other manufacturers are there of
incandescent lamp bulbs?
Mr. Houghton. We are talking about bulbs, Congressman — only
one substantial one, so far as I know.
The Vice Chairman. Who is that ?
Mr. Houghton. That is the General Electric Co.
The Vice Chairman. You and the General Electric manufacture
the bulbs used in the United States?
Mr. Houghton. Yes, sir.
Eepresentative Keece. What percentage of bulbs used in the United
States are manufactured in the States?
Mr. Houghton. Practically all of them. I think the last figure
I saw was imports of maybe a million bulbs out of a total of 600-odd
million, or 760,000,000.
Senator King. Has the price of bulbs decreased from year to year?
Mr. Houghton. Yes, sir; in 1913, for example — I just put these fig-
ures down thinking they might be asked for — a bulb for a 40-watt
lamp was $16 per thousand bulbs ; in 1921 it was $30 ; in 1925 it was
$18; and in 1938 it Avas $8.10, roughly just a little more than a quarter
of what it was in 1921.
Senator King. As there has been a material decrease in the price
has there been an improvement in the quality of the product?
Mr. Houghton. Decidedly. In fact, the equipment that is being
used today has to be designed for very accurate distribution of the
glass as it is made so that the bulb can in turn be put on automatic
lamp-making machinery.
Senator King. Measured, if you may measure it, by the quantity of
light which would be obtained by a bulb in 1913, how much would
be obtained now by a bulb?
Mr. Houghton. Senator, I would like to answer that, but I am not
in the lamp business. We are only glass makers. The glass is sub-
stantially the same in transmission, possibly somewhat better, but
that would be a question of what the lamp manufacturer did.
Senator King. The improvement is largely in the carbon used in
the manufacture
Mr. Houghton (interposing). I would rather not answer because
I would just be guessing.
Dr. LuBiN. May I refresh myself on those figures you used? In
1913 it was $16 and in 1935 it was
Mr. Houghton (interposing). In 1921 it was $30. I haven't the
1935 figure here. In 1938 it is $8.10.
Dr. LuBiN. When did the Japanese competition hit you people
seriously ?
Mr. Houghton. I could not answer that, Dr. Lubin. It was several
years ago.
Dr. Lubin. About the time the price fell markedly?
Mr. Houghton. Oh, no, sir ; no sir. Our prices had almost a yearly
coming down as we have been able to improve our efficiency.
Dr. Lubin. Apparently sometime in '30 you were charging the
same price you did in 1913, so the decline was from $16 in '13
124491— 30— pt. 2 26
646 CONCENTRATION OF ECONOMIC POWER
fT.^i'oi?*?''''"^'' (interposing). The reason I showed the 1913 and
the 1915 figures was that so often we talk of what things cost before
Irv ""vont^^oVfi^^ they cost now In the use of the modern machin-
eiy your 21 figure, I think, is far more indicative, which shows a
dechne from $30 to $8.10 per thousand. '
(Senator O'Mahoney, the chairman, resumed the chair )
Mr. Arnold. Are these bulbs protected by a fairly substantial tariff?
bnHM?°''''"''''''ii ^""^ f''- ■ '^^!'" ^' ^ *^"ff 5 I don't know what it is,
f . I n ' T^ '"''"'/ °" electric-light bulbs. I want to be sure that I am
talking the same language, because I am only talking about the glass
that goes into the lamps. We are glass manufacturers and not lamp
maiiufacturers. ^
Mr. Arnold. I may be going far afield here. I am simply interested
m the point raised by Mr. Lubin about the Japanese competition.
Was that competition in completed incandescent bulbs or in glass?
Mr. Houghton. Practically entirely in the completed lamp
nrnfrAAT"""- u^ '^'^'^' the completed lamp thereafter that was
protected by a substantial tariff?
Mr. Houghton. I can't answer that, sir.
Mr. Meyers. Does the manufacture of inside-frosted bulbs exceed
the manufacture of the clear-glass bulb today ? Is the inside-frosted
bulb today a more popular bulb than the clear-glass bulb?
Mr. Houghton. Yes, sir.
sales'? ^^^^^' ^^^^ ^^ ^^® percentage, would you say, in terms of
Mr Houghton I can give you our percentage, which I think is low
and that is-well, it is 121,000,000 frosted as against 111,000,000
unf rosted or clear. , v, uu
Mr. Mey^s. Who controls the patent, who owns the patent, for
making the f rostmg device which attaches itself to the bulb «
Mr. Houghton. You mean who controls— I think the question is
who controls the mside frost process, the patent on that. The Gen-
eral Electric Co.
Mr. Meyers. And you are a licensee of General Electric Co for
that purpose?
Mr Houghton. Yes, sir. We have a limited license from them to
manufacture.
Mr. Meyers. Limited in what sense ?
Mr. Houghton. Limited in that we are— there is a specific list of
lamp manufacturers whom we are licensed to sell. We are not pro-
chance ^^^ anyone, but we have not elected to take that
Mr. Meyers. That is, you are not prohibited if you want to
menTactfonT^^''*" infringement action, or to fight patent infring-
Mr. Houghton. I can answer that ; yes.
o}IfZ:^^'''^'-^.}^^ I^^ "^^ ^^""^ perfectly clear. General Electric
claims the right to-the exclusive right to the process, do they?
bulb ' ^^^"™^- ^^^y ^^^^^ ^ patent covering the inside frosted
Mr. Arnold. And if you with any of your devices which vou now
have, do frost the mside of the bulb you would run into one of their
claims ?
CONCENTRATION OF ECONOMIC POWER Q^'T
Mr. Houghton. I think it is not a question of device as much as
It IS a question of the basic etching, the method of etching the inside
surface of the bulb. It is a product patent.
Mr Arnold. Then they have agreed to allow you, without any
threat of patent infringement, to sell to certain people?
Mr. Houghton. Correct.
Mr. Arnold. And only to certain people?
Mr. Houghton. Yes, sir.
•Mr. Arnold. What is the reason for the limitation? Did thev
give any -^
• ^f^- Houghton (interposing) I will give you my reason. I can't
give the General Electric's, but I think it is correct. We are licens-d
to sell to the General Electric Co. licensees in their lamp business ^
Mr. Arnold. I think the reason is obvious, then, from that state-
ment. _ I wont ask any further. And to no others except General
Electric licensees?
Mr Houghton. Yes; to no others. But again I would like to point
out that It is not a prohibition. It is purely a limited license to us
to do certain things.
Mr. Arnold. I don't quite understand that. Why isn't it a pro-
hibition? Ihey claim that if you sell to other people you' will be
violating their patent, don't they? i i J ^
wo^uld ^°^^^™^- '^^^y ^^^^ ^^o<^ n^ade that claim, but I think we
roMbidon'?^^' ^°" *^""^' *^'^" '^'^"^^" ^^^^' ^^^" ^^'''^ ^^ ^^ ^^^^*^ ^
Mr. Houghton. I think not. I think it is an election of ours
Mr. Arnold. You don't want to violate the patent, do vou?
Mr. Houghton. No, sir. ' .- •
Mr. Arnold. And j'ou have to make
Mr Houghton (interposing). And that is the reason we haven't—
may 1 take a minute ?
Mr. ijiNOLD. I ana not trying to argue with you. It just isn't clear.
Mr. Houghton. It is a fairly interesting situation. We had this
license under the patent granted in 1928 and we sold only to th s
group to whom we were licensed to sell. The lower court in Ohio
decided against the patent and we immediately sold to anyone who
wanted to buy mside frosted bulbs. The circuit court of appeairof
hat same district, which district I can look up if you are inSsted
in It sustained the patent at which time we decided to go back to
our position of selling to only those to whom we were liceifsed to sell
Mr. Arnold. I think I understand the situation. It is a choice
u!a7ftT '' ^'^'^^^'^^ ^^"^ accepting this limited license, isn't
want^o'^Sra paL^^ ^"^P^"' "'^'^ '^' "^' '''^' ^ ^« ^^
wr|^g|dXco^u^.\rap^pl^^^^^^ ^-- -t was
Mr. Houghton I would rather express no opinion on that
end h?^W ': ^^'■- Jou^hton, your report for 1937 indicates the sec-
ond highest sales division in your company is your housewares
Iwiol """""^ ^"^ ^*" ^^ the^amJunt o'i approxWely
g48 CONCK.N'J'KAl I(»N OF ECONOMIC POWER
Mr. Houghton. Onr housewares division consists principally of
ovenware, Pyrex. "We market it under tlie trade-mark Pyrex. It
is a glass cooking dish tliat can be used in the oven. There are other
items in that line, nnnd)er two being flame ware, which is a new
development of ours for use over the top of the stove. That is really
in its incipient stage; and tlien teapots and nursing bottles, and other
miscellaneous items, but broadly speaking, Pyrex baking ware is the
bulk of that business.
Mr. Meters. Yes; and tliat accounts for. as I said, something like
$2,209,000?
Mr. Houghton. Tlie total field whieli I described.
Senator King. Tlie gross sales, you mean?
Mr. Meyers. Yes, sir.
Mr. Houghton, 'i'hat is the net sales to Corning, net return to^
Corning.
Mr. Meters. You mention the heal -resisting glass sold under the
trade-mark Pyrex. Is it true that the two nni^ortant patents owned
by Corning on this ware expired in 1936?
"^Mr. Houghton. Yes, sir; in May of 193G.
Mr. Meters. Now that these patents have expired, can licensees of
Hartford-Empire go into the business of manufacturing heat-resisting
Avare on Hartford equipment?
Mr. Houghton. No, sir; unless we license them, because we in the
1922 contract acquired exclusive rights in the heat-resisting field.
Mr. Meters. Do you recall the request made by the Indiana Glass
Co. in 1937 to manufacture heat-resisting ware on Hartford ma-
chinery ?
Mr. Houghton. I don't, but I would like to look at my i)apers, if
I may.
Mr. Meters. Here are certified copies from your files.
Mr. Houghton. Yes, sir.
Mr. Arnold. I don't think the record is entirely clear as to why the
Hartford licensees cannot manufacture Pyrex, in view of your state-
ment that the patent on heat-resisting wares had expired.
Mr. Houghton. In answer to that question they can. In answer
to Mr. Meyers' question, he added Hartford.
Mr. Arnold. Then to make the record clear, the reason is that Hart-
ford equipment is limited in its use to other wares by the Hartford
license.
Mr. Houghton. Because we have the exclusive rights in that par-
ticular heat-resisting field to the Hartford equipment; yes, sir.
Mr. Arnold. And therefore if they desire to manufacture heat-
resisting wares on the expired patents, they would have to buy new
machinery.
Mr. Houghton. I don't quite understand your question.
Mr. Arnold. I don't either, quite; I mean I don t quite understand
the situation. May I go back to clarify my own mind ? The patents
on the Pyrex — that is a trade name, the patents on heat-resisting ware
have expired, have they not?
Mr. Houghton. Yes, sir.
Mr. Arnold. Can machinery be purchased in the United States so
that that process on which patents have expired may now be generally
used ?
CONCENTRATION OF ECONOMIC POWER g49
Mr. Houghton. I think- the best way that I can answer that, I do
not know whether it could be gotten, but our principal competitor is
making heat-resisting glassware on automatic machinery that is not,
I understand, under any Hartford-Empire patents.
Mr. Arnold. But it would have to be made on some machinery not
furnished by Hartford-Empire.
Mr. Houghton. Unless we elected to license.
Mr. Arnold. Unless you elected to license.
Senator King. Did you manufacture the machinery which you
use for your Pyrex, and if not, where was it obtained ?
Mr. Houghton. That is a question that would cover quite a bit
of ground, Senator King. If we are talking of the baking ware alone,
I think most of our equipment has been purchased outside. We use
standard presses and we use the Hartford feeder, but it is an inter-
esting sidelight, while we are on this, that only 32 percent of our total
heat-resisting volume is made by Hartford equipment.
Senator Ejng. And the rest is made by— —
Mr. Houghton (interposing). The rest is made mainly by hand
and some on our own equipment that we have developed.
The Chairman. And is that equipment of yours in use by any
•competitor ?
Mr. Houghton. I think not, sir.
Senator King. But a competitor or some competitors do manu-
facture the same product.
Mr. Houghton. Yes, sir.
The Chairman. And what devices do they use in addition?
Mr. Houghton. I can't answer that.
Mr. Meyers. In other words, Mr. Houghton, you did not grant
Indiana Glass Co. permission to manufacture heat-resisting ware on
Hartford equipment.
Mr. Houghton. No, sir.
Mr. Meyers. Do you recall, Mr. Houghton, that the Anchor Hock-
ing Glass Co. attempted to engage in the manufacture of heat-resist-
ing ware?
Mr. Houghton. I have heard that they were contemplating it.
Mr. Meyers. I would like to read at this time a letter to your
company, dat6d November 20, 1937, signed "Goodwin," and addressed
to you [reading from "Exhibit No. 159"] ^
Eldred and Pease spent a day at Lancaster with Ike and Bill Fisher. Ike
was in a pretty ugly mood about a number of things and, incidentally, he had
samples of various kinds of baking ware and hard glass ware which had a
bluish tint such as your top-of-the-stove ware.
All these Tsamples had been made up by hand, and he had named this line of
ware Fryrock.
Ike is going to defy us all in this kind of ware and use the same tactics that
he is now using when he defies Hartford-Empire Co. on forming machine
patents.
Do you know who Ike is, referred to in this letter ?
Mr. Houghton. Mr. I. J. Collins.
Mr. Meyers. I should like to oflPer that letter for the record.
The Chairman. It may be received.
(The letter referred to was marked "Exhibit No. 159" and is in-
cluded in the appendix on p. 800.)
Mr. Meyers. Another letter certified as a true cOpy by your com-
pany, dated December^ 6, 1937, signed Bunn, bearing the heading
g50 CONCENTRATION OF ECONOMIC POWER
"Charles B. Belknap," addressed to "My dear Am." I suppose that
is you, sir.
Mr. Houghton. Correct.
Mr. Meyers (reading) :
With reference to the Pyrex situation, which you talked to me about in New
York at our last meeting, have secured a promise from Ike that he would not
start to market in that line without first discussing it with you and your
associates.
Mr. Houghton, apparently Mr. I. J, Collins was interested in making
heat-resisting ware.
Mr. Houghton. Oh, Mr, Meyers, yes; you don't need to bring out
those letters, Mr. Collins and myself have talked it over together.
Mr. Meyers. Apparently you spoke to Mr. Belknap and Mr. Good-
win Smith about I. J. Collins' interest in manufacturing heat-resisting-
ware.
Mr. Houghton. I had talked with Mr. Goodwin Smith because Mr.
Collins had come to him, and Mr. Goodwin Smith had told Mr. Col-
lins that he had no right, that it was entirely up to Corning. In the
case of Mr. Belknap, I can remember one day asking him if he saw-
Mr. Collins to tell him I would like to have a talk about it when we
next got together.
Mr. Meyers. Anchor Hocking did not manufacture heat-resisting
ware ?
Mr. Houghton. So far as I know.
Mr. Meyers. If Anchor Hocking decided to use Hartford equip-
ment in manufacturing heat-resisting ware, would it have been open
to a patent-infringement action by the Hai-tf ord Co. ?
Mr. Houghton. By the Corning Co. ?
Mr. Meyers.. No ; by the Hartford Co.
Mr. Houghton. Corning has exclusive rights. I suppose both might
have been parties to suit.
Mr. Meyers. At least Hartford could have revoked the license for
engaging in the manufacture of a product which was in its schedule of
exclusions.
Mr. Houghton. I can't answer what Hartford's powers were ; I do
not tnow.
Mr. Meyers. I think that is substantially so.
We introduced earlier this week a license agreement which indicated
a schedule of exclusions,^ and one of the most frequent exclusions is the
heat-resisting- ware field.
As a practical matter, then, Mr. Houghton, the patent-pooling
agreement, executed in 1922 between Hartford and Corning, permits
Corning to maintain an. exclusive position in the manufacture of heat-
resisting ware, although the ware-formula patents have expired.
Mr. Houghton. With the provision — under Hartford patents; yes.
Mr. Meyers. It seems that this kind of arrangement is the one
that was discu<5sed in a memorandum dated August 13. 1930, entitled
"Glass Ilevisioii. Eough Summary, to August 8, 1930," certified as a
true copy by your company, and I read from page 6.
Now for practical purposes, I am, as I see it now, willing to support Coming's
monopoly in bulbs, tube and cane, signal and optical, and cooking ware, with
the backing of our patents —
1 "Exhibit No. 120," supra, p. 408.
CONCENTRATION OF ECONOMIC POWER 651
and "our" refers to the Hartford-Empire patents,
regardless of whether those divisions are at a given time covered by a Corning
patent or whether the patent has expired. Equally I think it proper that our
field, namely, the container field, broadly defined so as to cover practically
all hollow ware except bulbs, signal, optical, and cooking ware, should likewise
be supported by Coming's patents regardless of whether our feeder or other
patents have expired or not.
Senator King. Have you asked the witness whether he assents to
that?
Mr. Meyeks. I am goin^ into that. It seems that one of the most
important advantages derived from a patent pooling arrangement is
the protection afforded the parties when their own patents which they
have contributed initially have expired. For example, you had a pat-
ent on a formula covering heat-resisting ware. That patent has ex-
pired, yet no licensee of the Hartford-Empire j. can manufacture
heat-resisting ware on Hartford equipment because Hartford origi-
nally disabled itself from licensing its equipment for that ware in the
original pooling agreement. Is that not true ?
Mr. Houghton. That is a very long question. Will you repeat
that?
Mr. Meyers. What we have are some patents on machine equipment.
Your patents on ware formulas expired before the patents on machine
equipment.
Mr. Houghton. Correct.
Mr. Meyers. Ordinarily, once a patent is expired, anybody can pro-
duce what was covered under that patent. Is that not true ?
Mr. Houghton. Anybody can produce what was covered under that
patent.
Mr. Meyers. Not Hartford licensees.
Mr. Houghton. Hartford didn't invent the heat-resisting glass.
That was an invention of Corning as a typical type of developnu-nt.
It was an entirely new business that was created by Corning, and Corn-
ing at a certain time in its development acquired exclusive rights for
that field, for more modern methods of making it.
It made it possible for it over a period of years to widen that
market very largely.
Mr. Arnold. This in effect extends the period of the heat-resisting
ware patent, doesn't it?
Mr. Houghton. No, sir.
Mr, Arnold. Well, if you are going to make heat-resisting ware,
you have got to duplicate your machinery if you happen to be a
Hartford licensee. Isn't that right?
Mr. Houghton. If you are going to use Hartford equipment; yes, sir.
Mr. Arnold, And most of these people are using Hartford equip-
ment, aren't they?
Mr. Houghton. Most of what people ?
Mr. Arnold. The people on that chart. ^
Mr. Houghton. But we are talking now of an entirely different
field^ Mr. Arnold. This is not the container field at all. It is a
special-glass field.
Mr. Arnold. But none of those people can enter into competition
with you, although your patents expired, without going to enormous
1 Exhibit No. 113, appendix, p. 762.
^52 CONCENTRATION OF ECONOMIC POWER
expense in duplicating machinery and getting machinery from some
other source than Hartford?
Mr. Houghton. I can't answer how enormous that expense is. Again
I repeat that our largest competitor is adequately making it auto-
matically, not under Hartford license,
Mr. Arnold. But at least these people are excluded without consid-
erable expense. You will admit it must be considerable ?
Mr. Houghton. Unless we see fit to license them'.
Mr. Arnold. Now, I am not saying this is illegal, because tluit is not
the purpose of this inquiry, but, frankly, as a matter of fact, doesn't
that, in effect, extend this expired patent so far as its practical effects
are concerned ?
Mr. Houghton. It depends entirely on whether you are talking of
the Hartford-Empire patent — yes; because we have exclusive rights.
If they want to use other methods, they can do so, or if we see fit to
grant a license if there should be reason therefor, it would change that
picture.
Mr. Arnold. And you do have a very substantial control in the
Hartford-Empire Co.?
Mr. Houghton. Forty-three percent, I think I said.
Mr. Arnold. And four directors?
Mr. Houghton. Correct, sir.
Mr. Arnold. Out of eight ?
Mr. Houghton. Nine, as a rule; eight now, but nine generally.
Mr. Arnold. So, admitting the question of legality, which I am
not raising, this particular combination between the two companies
has the effect of eliminating competition from a vast number of
possible competitors who could come in if the combination did not
exist.
Mr. Houghton. ISIay I go back again, Mr. Arnold, to my statement
originally, that 32 percent of our dollar volume of sales in heat-
resisting glass was made on Hartford equipment; the other 68 per-
cent is open to any of those people, or any other glass manufacturers.
Mr. Arnold. If they will buy more machines.
Mr. Houghton. No, sir. I am not talking about machinery now.
I am talking about 68 percent of this heat-resisting business that is
now open to anybody.
Mr. Arnold. I am not trying to argue, because I am honestly puz-
zled. You mean that there are other people not shown on that chart
who have machines already which they can use to manufacture ?
Mr. Houghton. I am afraid I am clumsy in this.
Mr. Arnold. I may be clumsy. I am trying to get the facts.
Mr. Houghton. \Vhat I am trying to say is that 32 percent of our
heat-resisting business is made on the Hartford equipment.
Mr. Arnold. That is the Corning?
Mr. Houghton. There is another 12 that is made on our own equip-
ment, and the remaining 56 percent is not made on any patented
equipment of any kind. It can be made by anybody, at any time, if
they have the "know how" and want to put the investment into the
making of hoat-rosisting glass which is entirely different from any
other glass manufacturing.
Mr. Arnoij). I think we are in agreement then, but to make it ab-
solutely clear, let me restate it. The only hazard which you put on
these people to prevent them from manufacturing heat-resisting
CONCENTRATION OF ECONOMIC POWER 653
equipment is, the fact that you compel them to go outside and buy
new machinery for it and prevent them from making it on their
existing machinery.
Mr. Houghton. Well, they don't make it on their existing ma-
chinery because the entire development of the heat-resisting glass
game has required very definite modifications of the existing ma-
chinery that you have been, talking about most of the week.
Mr. Arnold. Then you would be willing to give up that provision
limiting their licenses?
Mr. Houghton. No, sir; I would not, because there is a patent
right that we have. We have, however, Mr. Arnold, considered very
seriously this question of licensing, and the last time that I talked
with Mr. Collins I decided at that time we did not want to do it
because we had made a very large investment in additional capacity,
we had lowered our prices drastically, we were adequately taking
care of the market in the business We had, and I could see no reason
why we should be asked to grant a license to a person, whether it be
the Anchor Hocking or somebody else just because they wanted it.
Mr. Arnold. I can quite understand that. I was thinking from
the point of view not of Corning Glass Co. but a person interested
in establishing the maximum competition. There would be a good
reason from that point of view, would-n't'there, for establishing a
policy different from what you have expressed ? *
Mr. Houghton. You see, Mr. Arnold, in a business of the type we
are in, I feel we are on the fringe of glass development; we are
spending a good deal of money in development and this baking ware
is typical of the kind of thing that is being done. Naturally other
people would like to have licenses under that, and we have granted
licenses in some cases, but we still liope we can reserve the right to
decide whether we should license under our patents, but we try to
look at it very broadly and make sure we are adequately covering tlie
market and not holding it for the sake of holding it.
Mr. Arnold. Are you familiar with the cartel system in Europe?
Mr. Houghton. In a very, very slight way.
Mr. Arnold. Those are substantially the reasons given for the
existence of that system, allowing people to make agreements between
each other to adequately cover the market, stabilize their business,
and so forth.
Mr. Houghton. I should hate to dispute that, Mr. Arnold, but I
."ini talking now only of the rights under patents that we own. There
is a distinction, I think.
Mr. Arnold. There is a distinction. In other words, the thing you
are now doing is only possible under contract. I was only suggesting
that you had something under patents which was very similar to the
European cartel system under contracts. Do you think so?
Mr. Houghton. I can't answer, although I am inclined to say no.
Senator King. I am a little in doubt as to those who manufacture
the other percent of this frosted glass. As I understood it, you man-
ufacture with your own machinery and that which you are utilizing
which has been furnished by the Empire, about 40 or 50 percent, ana
perhaps a little more, I don't recall. I was wondering where the
machinery is obtained for your competitor who manufactures the
same kind of glass.
6,54 CONCENTRATION OF ECONOMIC POWER
Mr. Houghton. Are you talking about bulbs again now ?
Senator King. Yes ; the frosted bulb.
Mr. Houghton. The frosting is a subsequent operation made on
clear bulbs. The machinery on which we make clear bulbs was
developed by Corning and is used by Corning and General Electric.
That is not heat-resisting glass.
Dr. LuRiN. Mr. Houghton, I am a bit fuddled and I wonder if
you can clarify this subject. You just said a minute ago to Mr.
Arnold that you have seriously considered licensing your competitors
in the field of what you call Pyrex glass, heat-resisting glass. You
seriously considered licensing them to do what?
Mr, HororiroN. To manufacture and sell in that field.
Dr, LursiN. But you say your patent has expired.
Ml-. Houghton. They can manufacture by any means except the
Hartford equipment which we have exclusive rights to.
Dr. LuiuN. In otlicr words, you seriously considered giving them a
license to use machinery, patents on which are owned by somebody
else ?
Mr. Houghton. That is correct, sir.
Mr. Meyers. Mr. Chairman, I think tliat conchidos the testimony
of the Corning witnesses, if the committee has no further questions.
The Chairman. Mr. Houghton, may I ask you, so as to clear a
.situation in my own mind, with respect to the heat-resisting glass,
assum<' a manufacturer which does not iiave a license under the
Hartford-Empire machine, nor under your machine, is enabled to
o[)erate only under and by virtue of these other methods which you
describe as being free to the industry, to what extent would such a
manufacturer be able to compete with your organization?
Mr. Houghton. I think I can best answer that, Mr. Senator, by
saying that our largest competitor in this heat-resisting field — I am
speaking specifically of baking ware because that was the one that
Mr. Meyers started with — is manufacturing that on equipment that
is not under Hartford-Empire license, I am sure, and he seems to
be able to meet our competition and sell below us in many instances,
and 1 have seen no signs of distress or unhappiness.
The Chairman. If there are no other questions
Dr. LuBiN (interposing). May I ask one other question. This
competitor you just mentioned, does he use Hartford-Empire equip-
ment on making other types of products?
Mr. Houghton. No, sir.
Dr. Lubin. In other words, what if he were a licensee of Hartford,
let^s say, in making packers' ware and he wanted to produce heat-
resisting glass under n process that he developed, an independent
process, or by hand, would he be infringing upon the patents of
Hartford -Empire?
Mr. Houghton. Using Hartford-Empire equipment?
Dr. Lubin. He is using that equipment, not in making heat-resist-
ing glass, but in making other products, then he goes into the de-
velopment of heat-resisting glass and nuikes it by hand, let's say,
hand presses; would ho have that right and still retain the use of
Hart ford -Em pi re e(iuipment in making packers' goods?
Mr. Houghton. If I understood you correctly, under heat-resisting
gl^ss we have exclusive riirhts and he would not. Tlie answer, I am
told, is "yes."
I
CONCKXTRATION OF lOCONOMIC POWER 655
Mr. Arnold. Mr. Houghton, I want to ask you a question of policy
■which I only wish you to answer if you have thought it over because
it is hypothetical. I am^ however, interested in it if you can answer
it. Suppose that your large competitor who is now happy should
find his machinery has become obsolete because of a new invention
which the Harl ford-Empire Co. controlled, in that situation you are
in a position of very substantial power with the Hartford-Empire.
You would then be in a situation of refusing him a license and bet-
tering the condition of your own company by limiting that competi-
tion. Do you think you would refuse him a license ?
]\Ir. Houghton. Well
Mr. Arnold (interposing). That is so hypothetical I am perfectly
willing to excuse you from ans\vering.
Mr. Houghton. I will answer equally indirectly. You are talking
now of our competitor?
Mr. Arnold. I am talking about *a chance of eliminating him be-
cause of your
Mr. Houghton (interposing). We have offered him a license on
baking ware which he has not seen fit to take.
Mr. Arnold. Now, you would, however, discourage by your control
over the Hartford Co. any other competitors than that one; that is
your present policy?
Mr. Houghton. That is our present policy, ?or reasons which I
think I have stated.
Mr. Arnold. And the reason you would discourage theni is that
you think that you are in a position to look over this industry, deter-
mine the proper demand, determine the proper supply, and fix that
according to your ow^n judgment ?
Mr. Houghton. I believe in the patent system, sir.
Mr. Arnold. But do you think it should be extended that, far, so
you as a private individual could have all that power ?
Mr. Houghton. I do, sir. Wlien you come into the position of
development like the glass game is in, if you recall it is within the last
40 years that the entire complexion -of this game has changed ; it has
become mechanized, prices have gone down, and there is — any stimulus
you can give to development in it, I think, is very important. I do
think the man in the industry is in the best position to judge.
Mr. Arnold. Therefore you think that the history of the glass
industry is a closed book so far as other new competitors springing up ?
Mr. Houghton. On the contrary, sir.
Mr. Arnold. Well, insofar as you can make it a closed book?
Mr. Houghton. No, sir.
Mr. Arnold. I am sorry; I thought your policy was not to grant
licenses to these new people who would spring up.
Mr. Houghton. Mr. Arnold, you are generalizing, and I have been
trying to talk about a specific problem.
Mr. Arnold. I know ; I am generalizing.
Mr. Houghton. I can't answer a general question like that, because
I think each case must be specifically looked into.
Mr. Arnold. You would say, however, that as we go to press, in
the present situation it would be your policy to keep the people manu-
facturing heat-resisting ware down to the two who are now mak-
ing it?
556 CONCENTRATION OF ECONOMIC POWER
Mr. Houghton. Well, as we go to press, yes; but I am not at all
sure whether it will be tomorrow or the day after tomorrow, or a
month from now, when thei*© may be some different situation.
Mr. Arnold. You see, I am making a distinction. I can quite mi-
derstand that representing stockholders, and from that point of view
making all the money you can for them, the policy of keeping the
competition out, if it is a legal thing to do, is perfectly explainable.
I was talking to you from the point of view of public policy, whether
you should have that power, and you think you should, as we go to
press ?
Mr. Houghton. Yes, sir.
Mr. Meyers. Mr. Houghton, in answering Mr. Lubin's question,
whether you have a competitor, you said you have in the field of
manufacturing heat-resisting ware; what is the name of that com-
pany?
Mr. Houghton. McKee Glass Co.
Mr. Meyers. They do not use Hartford-Empire equipment?
Mr. Houghton. I believe not.
Mr. Meyers. Do they operate under the same formula covering a
heat-resisting ware that you operate under?
Mr., Houghton. I can't answer that. They are free to. The basic
patents expired in 1936.
Mr. Meyers. But you have licensed them, have you not?
Mr, Houghton. Those licenses expired in 1936.
Mr. Meyers. Have you a trade-secret agreement with them ?
Mr. Houghton. None, sir.
Mr. Meyers. That is all.
The Chairman. The witnesses may be excused.
(The witnesses were excused.)
Mr. Cox. Mr. Bellmap.
The Chairman. Mr. Belknap, do you solemnly swear the testimony
you are about to give in this proceeding shall be the truth, the whole
truth, and nothing but the truth, so help you God ?
Mr. Belknap. I do.
TESTIMONY OF CHARLDS B. BELKNAP, EXECUTIVE VICE PRESI-
DENT, OWENS-ILLINOIS GLASS CO., TOLEDO, OHIO
The Chairman. You may be seated, Mr. Belknap.
Mr. Cox. Will you tell the reporter what your present occupation
is, Mr. Belknap ?
Mr. Belknap. Executive vice president, Owens-Illinois Glass Co.
Mr. Cox. Mr. Belknap, are you a director of the Owens-Corning
Fiberglas Corporation?
Mr. Belknap. I am.
Mr. Cox. To satisfy my curiosity, Mr. Belknap, will you tell me
why Fiberglas is spelled with one "s" ?
Mr. Belknap. It was a coined name.
Mr. Cox. Is this document which I hand you a true and correct
copy of the contract between the. Owens-Illinois Glass Co. and Corn-
ing Glass Works for the formation of the Owens-Corning Fiberglas
Corporation ?
Mr. Belknap. It is.
CONCENTRATION OF ECONOMIC POWER g57
Mr. Cox. If you have^ no objection, I should like to have this
marked as an exhibit. I have no desire on my part to have it printed.
The Chairman. The contract may be marked as an exhibit and
filed with the committee.
(The contract referred to was marked "Exhibit No. 160" and is on
file with the committee.)
Mr. Cox. Will you tell us, Mr. Belknap, what the business of the
Owens-Illinois Fiberglas Co., or rather, the Owens-Corning Fiber-
glas Co., is?
GLASS FIBER AND WOOL
Mr. Belknap. The Owens-Corning Fiberglas Corporation was
formed to carry on the development work with the hope of making
a commercial operation which would support itself and develop
a new industry in the United Sta^'os in making fiber glass.
Mr. Cox. Do you have some samples here that the committee may
see so that they can understand what fiber glass is?
Mr. Belknap. I have.
Senator King. It is like silk, isn't it ?
Mr. Belknap. It is. Senator.
Senator King. Is that the product of this company?
Mr. Belknap. It is.
The Chairman. Are these the price marks ?
Mr. Belknap. -No, sir; I am not a salesman.
The Chairman. You may proceed,
Mr. Cox. It is true, is it not, that the stock of the Owens-Corning
Fiberglas Co. is owned in equal shares by the Corning Glass Works
and Owens-Illinois? Is that approximately correct?
Mr. Belknap. That is approximately correct. I think in the or-
ganization papers 15 j^ercent was set aside for the management.
Mr. Cox. That is a Delaware corporation?
Mr. Belknap. It is.
Mr. Cox. Prior to the organization of the corporation, Mr. Belknap,
is it true that the Owens-Illinois Co. had for some period of time
been engaged in developing and doing experimental work in con-
nection with the production and use of this material ?
Mr. Belknap. We started in '30 or '31 to develop this.
Mr. Cox. What is the material designed to be used for? Can you
tell us, Mr. Belknap?
Mr. Belknap. It is designed to be used for places where the diele-
tric qualities of glass are useful, where the chemical-resistant quali-
ties of glass are useful, where the heat resistant qualities of glass
are useful. It may eventually go into other uses, such as draperies,
but because it is a higher-priced material than most of the material
that it is competing with, we attempt to confine its use to those places
where its qualities give it a chance to succeed against cheaper
materials.
The Chairman. What are these small balls?
Mr. Belknap. They go into the forming machines and become 98
miles of fiber.
Mr. Cox. That process which the chairman described is covered
by certain patents, is it not?
Mr. Belknap. It is covered by certain patents and a great many
applications which our employees have made, and some 30 issued
patents.
658 CONCENTRATION OF ECONOMIC TOWEU
Mr. Cox. Would it be accurate to say that most of tlie patents,
prior to tlie organization of the Fiberglas Co. were owned by Owens-
Illinois Co. ?
Mr. Belknap. That is correct.
Mr. Cox. Under the organization agreement would it also be ac-
curate to say that the Owens-Illinois Glass Co. and tlie Corning Glas&
Works transferred to the new company, the Fiberglas Co., all of
their patent rights so far as they related to the production of this
material, and all rights which they might have under contract relat-
ing to patent rights?
jNIr. Belknap. That is correct.
Mr. Cox. Prior to that time, it is true, isn't it, that the Owens-
Illinois Glass Co. had interests in certain contracts with foreign in-
terests with respect to patents relating to the production of this
material. Is that correct?
Mr. Belknap. We have entered into contracts with foreign peo-
ple to use tliis particular process.
Mr. Cox. And under those contracts, would it be accurate to say
that you grant them a license under your patents and patent rights,
and they in turn have granted you a license under their patents and
patent rights?
Mr. Belknap. Yes; we considered that that type of license is
necessary to protect not only our own investment but our own
employees in this country.
Senator King. What is the status of the law? I think there is a
Federal statute under the terms of which licenses between iiationals^
American nationals, may be made; that is. .reci])roeity between other
companies and the United States in the matter of patents. Do you
recall?
Mr. Belknap. I don't recall any law which makes it any different
tlian a contract between citizens of the United States, excepting
something that would relate to national defense, or something ot that
sort.
Mr. Cox. Mr. Belknap, would it be accurate to say that under those
contracts you obtained an exclusive license under the patents of the
foreign interests which I shall hereafter refer to as the foreign pat-
ents, with your permission, and that you gave them an exclusive
license under your patents for the particular material which is
involved?
Mr. Belknap. That is correct. We not only give them an exclusive
license but we also give them our technical knowledge and have, as a
matter of fact, had our employees in Europe for months training
oi;)erators.
Mr. Cox. I want to be sure I am clear about this. Under those con-
tracts you obtain exclusive right for certain territory undet their
foreign patents. Is that correct ?
Mr. Belknap. That is correct, as to the people we license.
Mr. Cox. One of those license agreements is with a Dutch com-
pany, is it not, Mr. Bellpiap?
Mr. Belknap. It is.
Mr. Cox. Mr. Belknap, I am now going to take an unfair advan-
tage of you. I want you to tell me what the name of that Dutch com-
pany is. I have been waiting to hear somebody pronounce it.
i
CONCENTRATION OF ECONOMIC POWER 659
Mr. Belknap. After about 4 years, I am still unable to pronounce it.
Mr. Cox. We will just call it the Dutch company, then.
The Chairman. You might spell it.
Mr. Cox. I am not sure I want to try that.
One of those contracts was with an Italian company, was it not?
Mr. Belknap. It is.
Mr. Cox. And one of them is with a French company, is it not ?
Mr. Belknap. It is.
Mr. Cox. And one of them is with a company wliich is located in
Scotland, is that correct ?
Mr. Belknap. It is. That is Chance Bros.
Mr. Cox. I spoke a moment ago of a Dutch company. As a matter
of fact, there are two Dutch companies with whom you have such
contracts.
Mr. Belknap. There are. One of them is a licensee for Holland
alone, and the other is a general licensing company, located in Tlie
Hague.
Senator ICing. You in return get licenses from foreign countries
to utilize their patents in the United States?
Mr. Belknap. Yes, sir ; we do. Senator.
Senator King. And do other manufacturers, in the United States
obtain patents obtained in foreign countries, so far as you know?
Mr. Belknap. I think that is quite customary.
Mr. Cox. Mr. Belknap, just so the record may show now the exact
standing and scope of these contracts, would it be true to say that with
one of the Dutch companies you have a contract whicli gives them an
exclusive license under your patents for Germany and Holland and
its colonies, in return for Avhich you obtain an exclusive license from
them under their patents?
Mr. Belknap. That is correct.
Mr. Cox. And in the case of the Italian company, the exclusive
license you grant to them is for Italy, its colonies and possessions?
Mr. Belknap. It is.
Mr. Cox. And in return you get an exclusive license from them
under tlieir patents?
Mr. Bex knap. Yes, sir.
Mr. Cox. xVnd in the case of the French company the exclusive
license you grant is for France and its colonies and possessions, and
in turn you receive an exclusive license from them?
Mr. Bklknap. From those companies that hold our license; yes,
sir.
Mr. Cox. And in the ca.se of Chance Bros. & Co., Ltd., you have
granted an exclusive license for the British Empire and British man-
dated territories Avith certain named teixitory excluded; is that
correct ?
Mr. Belknap. That is correct. Canada is the one I chiefly think of.
Mr. Cox. And in the case of the other Dutch company you have
granted an exclusive license for the remainder of the world, is that
correct ?
Mr. Belknap. We have granted them the right as a licensing com-
pany to grant licenses in the remainder of the world.
Mr. Cox. That is in -all parts of the world, not covered by yf)ur
other license agreements?
Mr. Bklknap. That is correct.
QgQ CONCENTKATION UF ECOiNOMIC POWER
Mr. Cox. And that is an exclusive right on their part ?
Mr. Belknap. It is.
Mr. Cox. And in return in each of these cases the license which
has been granted to you is an exclusive license for certain designated
territory, is it not?
Mr. Belknap. Yes; to this extent, we provide in the license that
anyone who gets the advantages of our niachine and our technical
knowledge, we must get their patents back for the United States and
Canada, and I believe Mexico.
Mr. Cox. South America included, or do you recall ?
Mr. Belknap. No; South America is licensed by the Dutch com-
p.my, but we do share in the royalties.
Mr. Cox. So your rights are exclusive under the foreign patents for
Canada, United States, and Mexico, but not for South America ?
INIr. Belknap. That is correct.
Mr. Cox. And in the case of South America the Dutch company
may license there and you divide the royalties, is that correct?
Mr. Belknap. That is correct.
Mr. Cox. Now, Mr. Belknap, I have here a document which we
obtained from your files and which has been certified by your com-
pany, v.hich purports to be a copy of your contract between your com-
pany and the Italian company. I wish you would examine it and see
if you are satisfied that it is a true and correct copy of that contract.
Mr. Belknap. It is.
Mr. Cox. Mr. Belknap, I want to read to you a provision from this
contract and then ask you a question about that provision in relation
to the other contracts, so I will try to read it as carefully as I can.
It is contained in section 13 [reading from "Exhibit No. 161"] :
Modigliaui agrees that it will not export and will use its best endeavors to
prevent the exportation from its territory of —
(a) Fibers as such made under rights covered by any part of this agreement.
(b) Fabrics, the major part of which are fibers made under rights covered by
any part of this agreement.
(c) Articles, in which the value or mass of fabrics contained therein or form-
ing part thereof and under such agreement constitute more than 25 percent of
the value or mass of the completed article.
And further agrees that in granting licenses in the field of this agreement it
will impose the above obligations.
Fabrics or articles falling within the field of fhis agreement, the exportation of
which are not to be prohibited by this article, may be imported into any country
notwithstanding that eitlier party hereto holds a patent on an invention within
the field of this agreement covering such article or the fiber contained therein or
processes of producing the same.
You understand that article?
Mr. Belknap. I understand it, but I would like to make an explana-
tion about it, if it is satisfactory.
Mr. Cox. I would be glad to have you do that. May I ask one
question before you do, Mr. Belknap? Would it be accurate to say
tliat the otlier contracts to which we have referred contain a provi-
sion, either identical witli or similar to, that provision?
Mr. Belknap. That is correct.
Mr. Cox. That is correct. Now, Mr. Belknap, if you wish to make
n statement about the provision, it is perfectly all right.
Mr. Belknap. The inclusion of a nonexport clause back into the
United States is one of the things which is very difficult in trying to
CONCENTRATION OF ECONOMIC POWER 661
deal with foreign licensees. The American patent system requires
the full disclosure when you file your application. Therefore, if you
do not file abroad the issuance of the United States patent throws
all of your work open to people in Europe, who can in turn come
back into the United States. We select our licensees with the idea
that we will give tliem our knowledge and that in return for that
we get the benefit of the developments which they make, and we have
included the nonexport clause so as to prevent our being estopped
from certain United States patents against them. It is a problem
that has bothered me for several years, as to how to deal fairly on
that particular subject.
Mr. Cox. I should like to have this contract admitted in evidence
and again I suggest that it not be printed, but merely be certified.
(The contract referred to was marked "Exhibit No. 161" and is on
file with the committee.)
The Chairman. It may be so admitted. You have read into the
record the material or a section of this contract.
Mr. Cox. I want to be sure that I understand that to the effect of
that provision. Mr. Belknap, would it be correct to say that under
that provision the prohibition against imports from the territory
covered by the license agreement extends to articles made not only
under your patents in foreign countries, but under the patents of
the company with which you have the agreement ?
Mr. Belknap. That is correct in this particular art. The techni-
cal knowledge as to the glass and surface treatments of the glass is
probably much more important than the patented part. We are try-
ing to develop not a patenting system but a business, and I think
that some provision is necessary to prevent the people who obtain
your know-how from taking that and using it on some other process
and thereby turning back into America the results of the American's
work.
Mr. Cox. Now one more question and I think I shall have finished,
Mr, Belknap. Whatever the reasons may be for the inclusion of
those provisions in the contract, if I should suggest to you that it
seems to me that the effect of the provision is to establish a kind of
private tariff system, would you object to that characterization?
Mr. Belknap. I think I would, for this reason, Mr. Cox. Glass
fibers have been known in America, at least prior to the World's Fair
in Chicago in 1893, and they have been manufactured both in Amer-
ica and abroad for probably — well in excess of 50 years, and we
have taken during the depression years and invested about three or
four million dollars in a new industry, and I think we have a riglit
in licensing other people not to do what they will do with things other
than our own licensees, but I think we not only have that right but
that we have that duty.
Mr. Cox. One more question, Mr. Belknap. You speak of glass
fiber having been manufactured for a considerable number of years.
The old process, in your opinion, is not as efficient or likely to be as
commercially successful, is it, as the process which is covered by your
patents ?
Mr. Belknap. I would not think so.
Mr. Cox. I think that is all I have to ask.
124491— 39— pt. 2 27
QQ2 CONCENTRATION OF ECONOMIC POWER
The Chairman. Mr. Belknap, I have been reading this section to
which Mr. Cox called your attention. The first paragraph reads as
follows [reading from "Exhibit No. 161"] :
Modigliani agrees that it will not export and will use its best efforts to
prevent the exportation from its territory of (a) * * * (b) ♦ * * (cV
* * *.
What did Owens expect the Italian company to do under that
provision, by which it was bound to use its best efforts to prevent
exportation ? ®
Mr. Belknap. We expected that if they licensed the Fiat Co., for
example, which is engaged in making electric wire, among other
things, in Italy, if they sold this fiber to them that they would not
lake that produce, that they would require the licensee to follow that
insofar as the laws of their country will permit. I think their coun-
try will permit the question of control of resale. I do not think that
is true in the United States.
The Chairman. Of course there is another provision in this sec-
tion which reads [reading further from "Exhibit No. 161"] —
and further agrees that in granting licensees in the field of this agreement it
will impose the above obligations.
So apparently there are two covenants made by the Italian com-
pany ; well, there are three. One, that it will not export these items
itself; two, that it will use its best efforts to prevent the exportation
of these items ; and three, that in granting licenses in the field it will
impose this obligation upon the licensees, so that apparently the
covenant is much broader than licensees', is it not?
Mr. Belknap. I think that is correct, Senator. It is quite custo-
mary in Europe to form sales companies which handle the selling
rather than the manufacturing company, even though they may be
owjied by the same people.
The Chairman. Was the Italian company expected by the terms
of this contract and by your understanding of it to go outside of
its own licensees and try to prevent generally, by competitors or others,
the exportation of these items ?
Mr. Belknap. No; not by any competitors there. Solely by the
people that they furnish the materials to. I might use as an example,
if this material becomes efficient for curtains, draperies, where fire-
proofing is needed, as in hospitals, if the Italian company could
take our material and sell it to a company which made drapes in that
country without anything, I question if the American textile com-
panies would have any business; if they can make fibers by any other
process than those that we have in this country, we are perfectly
willing.
The Chairman. Now, in explaining the adoption of this contract,,
you testified, as I understood you, that when a United States patent
is issued it becomes in effect open to all the world, unless the patentee
files for a patent in the other country?
Mr. Belknap. I didn't intend to give that impression. I meant
that it became open to everybody, and the people in the other country
could manufacture under it and ship the product into the United
States if we hadn't taken a patent whereby we could conti-ol.
The Chairman. In other words, the situation which you describe
is tliis: That Congress, to which the Constitution of the United States
CONCENTRATION OF KCONOMIC POWER 663
has given the power to regulate foreign commerce, has not imposed
any restriction upon foreign countries, and in this particular field you
have undertaken by this contract to impose that regulation of foreign
commerce which Congress has not imposed ?
Mr. Belknap. We have attempted to do so, and I hope rightly, but
if it is not a proper provision, then I think an American company
has no alternative but to keep their processes secret and not deal with
foreign countries.
The Chairman. I think that inference is quite justified. I was just
developing the situation. Thank you very much.
Mr. Patterson. Mr. Belknap, the evidence during the past few
days has revealed that the glass industries in this country are the
lowest cost producers. What, in your judgment, is the main reason
for this?
Mr. Belknap. Because they are willing to spend the money to hire
technical graduates to develop their machinery to a higher extent
than they are abroad. We have had license with the German people
on bottle machines abroad for a great many years, and I do not recall
receiving a single invention from them that we have incorporated in.
our machines. There may have been one or two minor things.
Mr. Patterson. In other words, it is research work?
Mr. Belknap. It is research work.
Mr. King. And you have more eflScient employees, do you not, and
utilize a larger amount of electric energy in your plants than they do
in other countries?
Mr. Belknap. I think that is true, Senator. In this particular
glass wool field, we probably have 100 graduates of technical colleges
working on this one problem.
Mr. King. My recollection, since I looked into it, is that assuming
that Germany or England utilizes one — I will give that as a unit to
follow — in an activity, we utilize three or four.
Mr. Belknap. Probably greater than that. Certainly it is in the
glass industry.
Mr. Arnold. Mr. Kettering, of General Motors, testified, as I re-
member, in regard to the patent law that a concern of any consider-
able size interested in manufacturing would have to do this research
work anyway and would do it anyway. Would you agree with that
statement ?
Mr. Belknap. I would agree with him if he was referring to an
established business, but we would have to go out of business; we
couldn't afford to put three or four million dollars into a new
business.
Senator King. This corporation of which you have been speaking
was organized only for the purpose of manufacturing this glassware
that you have exhibited to us here ?
Mr. Belknap. That is the sole purpose, to develop that product
and manufacture it.
Senator King. And the expenditure was made of several million
dollars in order to bring about that result?
Mr. Belknap. That is correct.
Senator King. Are you continuing your experiments?
Mr. Belknap. We are continuing our development work and ex-
periments and making what commercial sales we can to help carry
part of the cost.
gg4 CONCENTRATION OF ECONOMIC POWER
Senator King. Have you found sufficient sales yet to compensate
you in part at least for the expenditures which you have made ?
Mr. Belknap. I think that was true in 1937. We had enough
volume so that we carried about $375,000 of the $750,000 experimental
cost in that year.
Senator King. Was there any purpose in your foreign patents to
build up a system under the terms of which the tariff laws might be
ineffective ?
Mr. Belknap. I think not, Senator. I think our sole interest is to
be freed from interference with patents and be able in the United
States to manufacture and sell this product.
Senator King. Did you fear any competition in this product from
foreign corporations, assuming there was no tariff? In other words,
did you consider that your production, your development of the in-
dustry, of the art, had reached such a high degree of perfection that
you had no fear of any foreign competition, even though you might
give them your patents or permit them to utilize your patents?
Mr. Belknap. Unfortunately our contracts provide for the techni-
cal information and therefore their people have the right to it. If
we didn't have that I wouldn't fear it at all.
Mr. Cox. Mr. Belknap, you have testified that this glass fabric —
do I understand you to mean your patents include your methods of
producing that old article ?
Mr. Belknap. They cover not only the method but they cover the
form of the peculiar surface treatment of the glass which enables it
to be drawn into a much finer form than it was ever drawn, and we
have some patents which cover the finest of the fiber itself.
Mr. CoE. Does an American patentee have protection, one who has
a patent on a process only, have protection against the fabrication of
that article by that process abroad and importation into the United
States?
Mr. Belknap. That is the question that I believe is unsettled. I
think there have been one or two cases in which we have stopped in
the tariff the admission of material made abroad on a process which
would be covered in the United States, but I would question that that
is an established law in this country, although it is in most foreign
countries.
Representative Reece. If you were unable to restrain the produc-
tion of a commodity under your patented process then the product
could be produced by a foreign concern and imported into this
country in competition with a our plant here, and further American
capital, American technicians, and American machinery, which as
3-ou say is more highly deAeloped than machinery made for this pur-
pose abroad, could be exported and produce this product which could
be reimported in competition to yours.
Mr, Belknap. I think that is peculiarly true in a material of this
iype. A boatload of that would have an entirely different value from
fi boatload of bottles.
The Chairman. It amounts to saying that when the patent law was
originally passed. Congress did not foresee the wonder of technical
development which has taken place in our time and made no pro-
vision to protect American genius and American inventions from such
a condition, and you have undertaken to do it by a contract of this
kind.
CONCENTRATION OF ECONOMIC POWER 665
Representative Reece. And if you were unable to do so you might
lose the enjoyment of the benefits of your patent.
Mr. Belknap. If we were unable to do so I think we would have to
operate strictly on a secret process.
The Chairman. I think that inference is quite justified.
Mr. Cox. Have you applied for any patents in foreign countries
under your processes for producing this material?
Mr. Belknap. A great many of them.
Mr. Cox. Of course, if you had a patent in a foreign country except
for the engineering services which you offer the foreign interests that
patent in the foreign country would afford you protection against the
use in the foreign country of your process, would it not?
Mr. Belknap. Yes, it would.
The Chairman. Are there any further questions? We are very
much indebted to you, Mr. Bellmap. You may be excused.
Mr. Arnold. Mr. Chairman, that concludes the presentation, that
is the oral presentation by witnesses of the material which the De-
partment of Justice desired to present under the resolution. I want
to say in that connection that our idea was to select a typical example
of an aggressive use of the patent privilege, and a nonaggressive use
of the patent privilege. That we have selected the glass industry is
not because we considered it outstanding or because we considered it
the only example of this kind of practice, but because we considered
it a typical example.
To fill out the entire picture within the limits possible in a com-
mittee of this kind, we would like to have leave to submit memoranda
concerning other industries which can be considered by the committee,
keeping the practices we have gone into detail here in mind, and we
hope by that means to fill out the general picture of the patents used
in restraint of trade.
I want finally to say that we appreciate the attitude of the glass
people particularly because, of course, there has been no secret about
a very pronounced difference in point of view of the social utility of
the restraint of trade indicated here between the glass people and
not the committee but the Department of Justice in the courts, of
the antitrust laws, and in spite of that they have given us every
cooperation, they have let us into their , files and they have come
here at considerable trouble, and we are'^orry, of course, that they
had to be selected but some industry had to be picked and we can
assure them that they were not picked because they were the worst.
Mr. Cox. Before the committee adjourns, the chairman will recall
that Mr. Safford, of the Hartford-Empire Co., and I had a colloquy
this morning with respect to a letter which that corporation addressed
to the Lynch Corporation in 1936.^
I offered at that time, if I could find a copy of the letter, to intro-
duce it in the record. I was successful at the noon interval in find-
ing a copy of the letter, which I now offer. It is a letter dated March
n. 1936, to the Lynch Corporation, Anderson, Ind., signed by the
Hartford-Empire Co., and apparently prepared by R. D. Brown,
their patent counsel.
Mr. Goodrich has agreed with me
Supra, p. 605, et geq.
^gg CONCENTRATION OF ECONOMIC POWER
Mr. Goodrich (interposing). That is the one we saw right after
the recess?
The Chairman. You had better identify Mr. Goodrich. He has
not been called as a witness.
Mr. Cox. He did some little testifying yesterday afternoon.
The Chairman. For the benefit of the record let it be shown that
Mr. Goodrich is an attorney for the Hartford-Empire Co.
Mr. Goodrich. I'm sorry; I don't think that is the one.
Senator King. While they are making that investigation I would
like to make this comment upon the suggestion made by Mr. Arnold.
It seems to me that is a very wise provision which he has suggested,
but it seems to me that in all fairness, when the memoranda have
been submitted and examined, I assume they will be made public, and
if so, the companies or individuals to which the same may relate
should have the opportunity, if they desire, to appear before the
committee or submit such countervailing testimony as they may
desire.
The Chairman. The resolution, Senator King, as I understand it,
authorizes the various departments which are represented upon this
■committee to present evidence to the committee, either by way of
public hearing or by way of memorandum or report. That is a pro-
■ceeding authorized by section 3 (b), and, of course, the committee in
its executive session, when it was considering the method of proce-
dure, seemed to be of the unanimous opinion that when the time came
to determine what the future course of the committee would be under
section 2 it would consider to what extent further public hearings
would be necessary to present countervailing evidence ; but I think it
is quite agreed that all of these reports which may be submitted will
be public and can be examined by all persons who are interested.
Senator King. I did not want the idea to become prevalent that
we were having testimony in camera and denying persons to whom the
testimony referred presenting their views.
Mr. Arnold, I am glad you made that clear, Senator. It may make
a further observation on my part useful for the record. Any memo-
j-anda which we submit to supplement the picture which we have now
given will be fully documented. We will try to so arrange them that
any parts of those memoranda about which the committee may desire
further testimony may be taken up in part. We are adopting that
method only because it is obviously impossible to conduct on all indus-
tries as elaborate a hearing as we have on this.
Mr. Cox. I think you should state, also, Mr. Arnold, that we have
not at all exhausted the evidence which we have collected upon the
glass industry; that we propose to file a report which will cover
not only the material which has been presented orally here, but other
material which we have collected, and the observation that Senator
King made will, of course, apply to that material.
Senator Kjng. May I say that when the matter was first under
consideration by the committee I indicated that it seemed to me that
very much of the matter that we were investigating might be brought
to our attention by memoranda, by statements which the various
departments might prepare and present, but at the same time I
stated that if that were the case and we were not satisfied with the
testimony, that it needed clarification or it related to industries which
perhaps might desire to make reply, that the opportunity should be
CONCENTRATION OF ECONOMIC POWER QQJ
offered them ; that we did not want the public to understand or any
industry to understand that we were taking advantage of them in
having secret hearings and denying them the opportunity to present
to the committee whatever information they desired, to challenge any
data or information that was presented to us outside of the open
hearings.
Mr. Cox. That is my understanding.
The Chairman. I think it may be definitely stated that the com-
mittee and each member of the committee is desirous of seeing this
problem from every possible aspect, and will therefore welcome com-
ment and suggestions and reports from any interested person.^
Mr. Cox. Mr. Goodrich and I have now agreed upon the letter.-
It is a letter dated March 31, 1936, addressed to Lynch Corporation,
Anderson, Ind., sighed by the Hartford-Empire Co., R. D. Brown,
patent lawyer.
The Chairman. This letter may be admitted. I suggest to the
reporter, however, that it be printed in the record in connection
with the testimony of Mr. Safford at that point in the record.
(The letter referred to was marked "Exhibit No. 162" and is in-
cluded in the appendix on p. 801.)
The Chairman. I am very glad that Mr. Arnold took occasion to
express his satisfaction with the attitude of the witnesses who have
been called before the committee.. I am sure he expressed the opinion
of every member of the committee. We feel very grateful to all of
the witnesses for the ver}^ candid attitude which they have adopted.
It is only by this candor that we can hope properly to study the very
difficult problem that is before us. And I think it would not be
proper to close this phase of the study without expressing, Mr.
Arnold, the appreciation which the members of the committee feel for
the excellent work that has been done by Mr. Cox and the staff "^f the
Department of Justice. We are all grateful to you.
Mr. Goodrich. May I thank you, Mr. Chairman, on behalf of the
gentlemen of our company, for the unfailing courtesy and kindness
of this committee, individually and collectively, throughout these
hearings.
The Chairman. Mr. Goodrich, you have just capped a very pleasant
afternoon.
The committee stands in recess at the call of the Chair.
(Wliereupon, at 4: 10 p. m., an adjournment was taken subject to
the cair of the chairman.)
1 Mr. E. G. Ackerman, of the Glass Container Association of America, subsequently
submitted, for inclusion in the record, a pamphlet entitled "Survey of Glass Container
Indn.<try," which was entered at hearings, February 18, 1939, as "Exhibit No. 303,"
and is included in the appendix, infra p. 803,
2 Supra, pp. 605, et seq., and 665.
I
APPENDIX
Exhibit No. 90
[Submitted by Mr. Edsel Ford, President, Ford Motor Co.]
Patent threats received biyFord Motor Company, 1926 to date
(Car)
Subject Matter Case No.
Anchorage 45
Automobile Top 133
Air Preheating 86
Apparatus for Drawing Wire 167
Axle Shaper 172
Alloys (Meehanite Metal) 186
Armature Winding 202
Adjustable Seat 220
Air Silencer 236
Automobile Body 237
Automobile Top 252
Air Filter 289
Ammeter 297
Automobile Body 304
Air Nozzles 305
Bumpers 5
Brake (Oiling of Bands— "T")-- 11
Bearing & Clip 19
Bumperettes 28
Battery Box Cover. . 39
Balancing Device 9
Brakes (Landry Patent) 85
Bumper Bar (Front) 90
Bodies K. D_- 100
Brake Construction 127
Block (Water Tunnel) 1 30
Bakelite 92
Belt Pulley Clutch Control for
Tractors 176
Bumpers 175
Brake, Front Wheel 177
Bumper Arm 179
Ball Joints 195
Brake Drums 204
Baffle Plates 206
Bumper 226
Bearings 268
Brakes 275
Baffle Plates 284
Battery Box Clamps 286
Beach Spraywater Automatic
Machine 301
Bearing (See Dual Thrust Bear-
ing) 307
Belt Control (See Tractor Belt
Control) . 310
Brake Drum Construction 316
Brake Controlling Means 344
Brake Mechanism 350
Subject Matter
Brakes
Conductors (Electrical) .
Connecting Rod
Curtains
Cowl Ventilator
Case No
... 333
37
42
62
65
Carburetor (Choke & Needle) 64
Carburetor (Fordson) 8
Chassis 67
Combustion of Fuels 113
Cafeteria (Wesson) 122
Carburetor Choke Control (Lin-
coln) _.__ 138
Clutch & Drum Lugs 139
Casket Table Arrangement 148
Curtains 150
Carrier (Spare Wheel — Lincoln). 158
Chassis and Drive Shaft 77
Cowl Drip Trough 84
Cowl Ring (Diehl vs. Hicks In-
terference) 168
Clay Gun 188
Centrifuge (Cleaning Paper) 200
Cvn-tains (Door) ._ 212
Cooling System 293
Connector 303
Combustion Process (Gruetter)__ 322
Contour Curtain (Weidhaas) 323
Combustion Chamber Design 345
Coin Machine 63
Driving Seat ^_ 18
Dock (Reinforced Concrete) 13
Distributor 41
Distillation Oven 71
Drop Pit Jack ^__ 95
Doors 105
Dash Drip Trough 144
Dust Shields 149
Door Latch 169
Doval Furnace 170
Drive Mechanism (Free Wheel-
ing) 191
Double Entry Bodies. 201
Diaphragm, Flexible 227
Door Lock 299
Defroster, Windshield 312
Exhaust (Lincoln Motor).... 63
Electric Furnace Practice 109
Electric Furnaces 111
Electrical Lighting System - 147
670 CONCENTRATION OF ECONOMIC POWER
Patent threats received by Ford Motor Company, 1926 to date — Continued
Subject Matter
Electrical Switches
Engine (V-8)
Electric Switch Locks
Engines (Eight cylinder V-type) .
Engine Hood-Radiator Shell In-
terconnection
Emergency Brake Construction.
Engines (Internal Combustion) _
Enamel Finish
Fan Pulley & Hub
Floor Board
Fan Blade '.
Fan Shroud
Filter (Gasoline)
Fan (Shroud Attachment)
Fender Guards
Fog (Electric Generated)
Frame Brace
Free Wheeling (Ramsey-Martin
Corp.) -
Free Wheeling (Stokes)
Free Wheeling (Mechano)
Front Cross Brace
Fuel Supply Pipe
Fuel Tank
Fuel Pump
Furnace
Fuel Tank
Fendel- Design
Fenders, Braces & Supports
Fuel Pump Shield
Fender Design
Gas Tank ■
Gasket (Cowl Ventilator) .--
Gajge (Oil)
Geai (Speed Change)
Glass (Safety)
grinding- Valves
lass Tnrning
Grinding (Edrv)
Gear Grinding.
Grease Gun -
Gearing — Startm'g Mechanism. _
Gauge
Governors
Glare Shields
Gears
Glare Shields
Gear Chucks
Gasoline Tanks
lood Hinges ,
Hood Pads
Hood
Horn (Motor Driven)
Robbing Machines
Robbing Machines L .
Hub Cap (Spare Wheel Lock). _
Hardened Metals _. .
Ingots
Index System'-
Ignition Devices :
Ignition Spark Coils
Intake Manifold (Swan)
Ignition System
Ignition System
T,,foVo Manifold (Down Draft)-
Case No.
82
196
244
245
249
257
283
313
14
20
23
29
34
40
62
68
118
126
132
134
78
87
164
210
241
248
264
290
306
308
25
24
55
91
106
161
192
192
203
199
232
261
270
276
298
302
330
336
114
131
152
17^
180
221
2(53
329
66
56
136
155
184
189
215
224
Subject Matter Case No.
Intake Air Pre-heating Device.. 272
Ignition System 279-
Ignition System 341
Joining (Machines) 154
Jigs 169
Knockdown Body 101
Key Case : 33&
Lathe (Camshaft & Crankshaft
Throws) 27
Locks (Nut) 35
Lubricating 50
Locks (Door) 7
Lens 115
Liner for W^heel Rim 124
Lock for Ignition Circuits 165
Latches lOa
Liquid Nickel Polish 208-
Louvres (Lincoln) 217
Lock Washers 23a
Locks 234
Lubricator 255
Lubricant Flow Check 72
Laminated Glass 273
License Plate Frame 340
Money Changing Machine 49
Metal Cleaner (Liquid) 187
Motor Support — Front 213
Muffler 223
Means for Lowering Height of
Chassis of Motor Vehicles 225
Mufflers 266
Manifolding on Multiple Cylin-
der Engines 274
Motor Vehicle 292
Mine cars. 321
Nut 102
Nickel Plating :: 253
Oil Retainer for Steering Gear.. 247
Packing Ring 48
Pistons (Ribbed) 135
Paint Grinding Machine 198
Passenger Compartment 207
Pickling Coils 23S
Projectors 278
Penetrators 314
Power Take-oflF 354
Piston . _ : : 22
Rubber (Vulcanizing) . 26
Rust Proofing • 54
Ring Gear 59-
Radiators 104
Rear View Mirror Bracket 125
Radiator Protector 137
Rubber Compounds 81
Rudder Constructions 89
Radiator Caps 197
Radiator Condenser 205
Reamers — Cutting Blades . 211
Radiator Grill 218
Radiator Grill — Snap-on Type.. 219
Radius Rod 231
Resin 129'
Radio , 25»
Rear Axle 269
Roof Construction 2SU
Radio (1^ cceivine Circuit) 282
CONCENTKATION OF ECONOMIC POWER
671
Patent threats received by Ford Motor Company, 1926 to date — Continued
Subject MatUr Case No.
Radiator Mounting 285
Radiator Units 287
Roof Construction 348
Sound Records (Dyer) 325
Spring Lubricating Means 339
Stabilizer for Crankshaft (Pajet) _ 349
Spring Oiling Device 353
Starter Switch 356
Spark Controlling Switches 260
Seal (Trunk) 320
Spring Construction (Knee Ac-
tion) 317
Starter Clutch 334
Steering Column Lock 356
Spray Gun
Steering Wheel
Steering Wheel (Spider Arms)...
Steering Gear
Seamless Pipe Connection
Spark Plugs
Spring Shackles
Steel Ingots (Pouring) .-_
Starting Device
Spring
Standri ve
Steering Range for Automobiles-
Starter Mechanism l
Spring Shackle
Sun Glare Visors
Steering Gear — Boats
Spray Booth Application
Steering Mechanism
Shaft Coupling — Steering Gear.,
Seepage — Intercepting Cowl
Strainer for Gasoline Tank
Steering Wheels
Starting Device
Steering Gear ...
Steel — Chrome Nickel Molybde-
num
Shock Absorbers
Shock Absorbers
Seat Arrangement
Sash Regu lator
Stop Light <k Tail Lamp._
Soy Bean Oil
Stabilizers
Ship Construction
Stabilizer
Shackle Bolt
Truck Chassis
Transmission (Lincoln)
Tire Carrier
Top Bows
Transmission (Fordson Clutch) _
Tube Connection & Nut
Thrust Bearing Sleeve (Propeller
Shaft)
3
4
10
47
58
112
123
153
157
160
74
171
178
182
185
193
209
230
243
44
250
251
254
267
271
288
291
294
295
296
300
318
319
352
6
21
31
61
69
110
119
Subject MatUr
Transmission Bands
Trough
Tire Structure
Truck Frame
Tire Rack Brace.
Transmission
Tail Lamps
Tuyereage Construction
Twist Drill Machines
Trunk Lock
Triplex Safety Glass.
Transmission Synchronizer
Universal Joints
Underslung Attachment for Mo-
tor Vehicles
Universal Joint
Uncurling Films — Means of
Vacuum Tubes
Ventilating Equipment
Vaporizer
Valve Stem
Visor
Visor
Vehicle Wheel
Wheels (Disc)..
Wheels (Wire)
Wheels (Wire)
Wheels (Wire) . . . .
Windshield Wing Clamp
Wind Guards
Wind Guards
Welding (Arc) ■
Wheel (Fordson)
Windguards
Wheel Structure
Welt (Hidem)
Windshield Wiper
Windshield Construction
Water Pumps
Welding Equipment
Windshield Wing Clamp
Water-proofing Paper & Card-
board
Water Pump
Water Pump
Wheels
Window Regulator
Wrist Pin Connection
Windshield Defroster (Grant)
Wheel Alignment Machine
(Duby & Creagmile)
Water Pump
Wheel Alignment Machine
Window (Rear)
Windshield
C(ue 2Vo.
151
156
76
94
99
183
194
229
262
309
311
342
216
240
265
315
96
141
8&
235
32
246
258
60
15
70
33
38
36
43
46
51
57
97
121
140
142
143
146
75
163
228
242
73
277
281
324
327
351
326
337
343
Total Threats received
(Car and Aeroplane) 346
g72 CONCENTRATION OB^ ECONOMIC POWER
Exhibit No. 91
ARTICLES OF INCORPORATION, CONSTITUTION, AND BY-LAWS
Automobile Manufacturers Association, Inc., New York. Printed February 1938
AUTOMOBILE MANUFACTURERS ASSOCIATION, INC.
A corporation duly organized under the Membership Laws of the State
OF New York, Chapter 35, of the Consolidated Laws of New York, 1909,
Article XII, Section 180, entitled "Boards of Trade," Consolidated Laws
OF New York, 1909, Volume III, page 3444.
Certificate of Incorporation of *Automobile Chamber of Commerce, Inc.
We, the undersigned, all being of full age and citizens of the United States,
and at least one of us a resident of the State of New York, desiring to form a
corporation commonly called a board of trade, pursuant to the provisions of the
Membership Corporation Laws of the State of New York, do hereby makt', sign,
acknowledge, and file this certificate for that purpose as follows:
First. — The name of the proposed corporation is *"Automobile Chamber
OF Commerce, Inc."
Second. — The particular objects for which the corporation is to be created are:
To foster the interest of those engaged in the trade or business of manufacturing
automobiles and all other self-propelling vehicles;
To reform abuses relative thereto;
To secure freedom of its members from unjust or unlawful exactions;
To diffuse accurate and reliable information as to the standing of merchants and
others dealing with members, as to all inventions, patents, processes, or devices
designed or intended for use in, upon, or in connection with such vehicles and the
manufacture thereof, as to the state of the art relative thereto, and as to the
condition and development of the trade in which the members are engaged, in
the United States and foreign countires;
To proc re uniformity and certainty in the customs and usages of such trade;
To promote the construction of better highwaj^s;
To advocate the enactment of just and equitable laws affecting members;
To settle differences between members;
To promote a more enlarged and friendly intercourse among business men
engaged in such trade or dealing with prsons engaged therein ;
To acquire by grant, gift, purchase, devise, or bequest, to hdd and to dispose
of such property as the purposes of the corporation shall require, subject to such
limitations as may be prescribed by law, including inventions, letters patent and
processes, or rights thereunder, for the benefit of its members and not for
pecuniary profit.
Third. — The city in which its principal office is to be situated is Borough of
Manhattan, City and County of New York, N. Y.
Fourth. — The names and places of residence of the persons to be its directors,
until its first annual meeting are:
Charles Clifton Buffalo, N. Y.
Charles C. Hanch Indianapolis, Indiana
Hugh Chalmers Detroit Michigan
Sidney D. Waldon Detroit, Michigan
Samuc! T. Davis, Jr Bridgeport, Connecticut
W. C. Leland Detroit, Michigan
WindfsorT. White Cleveland, Ohio
Wm. K. Motzger Detroit, Michigan
H. O. Smith Indianapolis, Indiana
Albert L. Pope Hartford, Connecticut
L. H. Kittredge Cleveland, Ohio
R. D. Chapin Detroit, Michigan
G. W. Bennett Toledo, Ohio
H,. H. Rice Indianapolis, Indiana
• FootDoto on p. 673.
CONCENTRATION OF ECONOMIC POWER 673
♦Fifth. — The number of its directors is to be fourteen.
Sixth. — The first annual meeting of the corporation shall be held on June 4,
1914. Thereafter the time for holding its annual meetings shall be on the first
Thursday after the first Wednesday of June in each year.
♦Seventh.— The duration of this corporation shaU be twenty-five years.
Constitution of Automobile Manufacturers Association, Inc.
article i
Name of the Corporation
Section 1. The name of this corporation shall be Automobile Manufacturers ,
Association, Inc.
Principal Office
Section 2. Its principal office shall be situated in the Borough of Manhattan,
City and County of New York and State of New York.
ARTICLE 11
Objects of the Corporation
Section 1. The purposes and objects of this corporation are:
To foster the interests of those engaged in the trade or business of manufacturing
automobiles and all other self-propelling vehicles;
To reform abuses relative thereto;
To secure freedom of its members from unjust or unlawful exactions;
To diffuse accurate and reliable information as to the standing of merchants
and others dealing with members, as to all inventions, patents, processes, or devices
designed or intended for use in, upon, or in connection with such vehicles and the
manufacture thereof, us to the state of the art relative thereto, and as to the con-
dition and development of the trade in which the members are engaged, in the
United States and idreign countries;
To procure uniformity and certainty in the customs and usages of such trade;
To promote the construction of better highways;
To advocate the ejiactment of just and equitable laws affecting members;
To settle differences between members;
To promote a more enlarged and friendly intercourse, among business men
engaged in such trade or dealing with persons engaged therein;
To acquire by grant, gift, purchase, devise, or bequest, to hold and to dispose
of such property as the purposes of the corporation shall require, subject to such
limitations as may be prescribed by law, including inventions, letters patent, and
processes, or rights thereunder, for the benefit of its members and not for pecuniary
profit.
ARTICLE III
Membership
■ Section 1. Members of the Corporation shall consist of "Manufacturing Mem-
bers" and "Representative Members." Any individual, co-partnership firm, or
corporation actually engaged in the manufacture and sale of self-propelled vehicles
shall be eligible for membership as a "Manufacturing Member." Each co-
partnership firm and corporation "Manufacturing Member" shall be entitled to
designate, in form and manner prescribed by the Directors, one Member of such
co-partnership firm, or one Director, Officer, or Stockholder of such corporation,
as the case may be, as a "Representative Member," and upon such designation
the person so designated shall be enrolled as a "Representative Member" (in
such case the "Manufacturing Membership" shall be known as "simple"); pro-
vided, however, that in case such "Manufacturing Member" shall produce at
separate plants, respectively, different "makes," so-called, of self-propelled
vehicles to be sold under distinctive generic trade names, then such "Manufac-
turing Member" shall be entitled to designate as aforesaid one "Representative
•The oricinal Certificate of Incorporation was approved by the Supreme Court on the 17th day of March,
1913, and filed in the oflSce of the Secretary of State, on the 18th day of March 1913, and in the oflBce of the
Clerk of New York County, on the 19th day of March 1913.
Thereaft*r Certificates of Changes were filed, changing the number of directors to fifteen, and later to
twelve, and the name of the corporation to "National Automobile Chamber of Commerce, Inc.", and later
to "Automobile Manufacturers Association, Inc.", and extending the existence of the Corporation a further
twenty-five years to the 18th day of March 1963.
674 CONCENTRATION OF ECONOMIC POWER
Member" for each such distinctive "make" of self-propelled vehicle manufactured
by it (in such case the "Manufacturing Membership" shall be known as "mul-
tiple").
Type of Membership
Section 2. (1) In case of an application for membership by an individual,
co-partnership firm, or corporation, the Directors of the Corporation shall deter-
mine whether the applicant shall take "simple" or "multiple" membership.
(2) Where the statiis of a "Manufacturing Member" shall change with respect
to the production of different "makes" of self-propelled vehicles to be sold under
distinctive generic trade names and produced at separate plants, the Directors
of the Corporation shall have the power to determine whether such "Manufac-
turing Member" shall contine to hold membership of the existing type or to require
said "Manufacturing Member" to change from the "simple" to the "multiple" or
from the "multiple" to the "simple" as the case may be.
Termination of Representative Membership
Section 3. The membership of a "Representative Member" shall cease:
(1) Upon the termination of the membership of the "Manufacturing Member"
so designating him;
(2) Upon the revocation of such designation by such "Manufacturing Member";
(3) Upon a change in membership of the "Manufacturing Member" from
"multiple" to "simple" or vice-versa.
Voting Power
Section 4. At any meeting of the members of the corporation each "Manufac-
turing Member", whether an individual, co-partnership firm or corporation shall
be entitled to cast on each and every question as many votes as it has "Repre-
sentative Members" which votes may be cast by the designated "Representative
Members" representing said "Manufacturing Member" if said "Representative
Members" be present, and in the absence of any designated member, his vote
may be cast by any duly authorized agent or proxy or other "Representative
Member" of said "Manufacturing Member." Cumulative voting shall not be
allowed.
Quorum
Section 5. At all meetings of the members of the corporation, one-third of the
members, whether "Manufacturing" or "Represenative Members" present in
person or by proxy, shall constitute a quorum for the transaction of business, but
a less number shall have power to adjom-n to a future date, which date shall be
stated.
ARTICLE IV
Directors
Section 1. The general affairs of this corporation shall be managed by twelve
Directors, who shall be members of the corporation, of whom at least one shall
be a resident of the State of New York. The first Board of Directors shall be
classified into three classes, whose tenure of office shall be respectively one, two
and three years. Hereafter at each annual election, four members shall be elected
by ballot for a term of three years to take the place of those four members whose
terms of office expire on the date of such annual election. All members of the
Board of Directors shall hold office until their successors are elected.
Section 2. Included in the list of Directors as herein provided shall be at least
one from each active Division of the industry, such divisions to be determined
from time to time by the Directors.
Section 3. Upon any Director ceasing to be a Member of the corporation, he
shall thereby cease to be a Director, and the vacancy thus caused shall be filled
by the Directors until the next annual meeting, when a Director for the unexpired
term shall be elected by the members.
Section 4. Said Directors shall organize by the election of a Chairman, and
Vice-Chairman, who shall be of their own immber, and a Secretary and Treasurer,
who need not be Directors. The officers so chosen shall respectively be. President,
First Vice-President, Secretary, and Treasurer of the corporation.
Section 5. The Board of Directors shall annually elect from its membership
a Second Vice-President from each active Division of the industry, and one or
more, but not over three. Third Vice-Presidents, who need not be elected from
CONCENTRATION OF ECONOMIC POWER g75
the Board of Directors, nor from an active Division of the industrj'. A majority
of the Directors shall constitute a quorum for the transaction of business.
Section 6. The Directors shall make a report at each' annual meeting of the
members in accordance with Section 11 of the Membership Corporation Laws
of the State of New York.
Contracts
Section 7. No Director or other officer of this corporation shall be interested
•directly or indirectly in any contract relating to the operations conducted by the
corporation, nor in any contract for furnishing supplies thereto, unless expressly
authorized so to do by the concurring vote of all the Directors.
Contracts Involving Over $10,000
Section 8. No contract for any purpose involving the expenditure of a sum of
money in excess of ten thousand dollars in any one matter, shall be made or
■entered into by the Officers or Directors of the corporation, except upon the ap-
proval by a vote of at least two-thirds of the members present and voting at a
regular or special meeting duly called and held as provided in the By-Laws, but
the corporation shall have no power or authority to make any member a party to
a contract and the approval by a member of any contract, expressed by the mem-
bers' voting to appro\e the same, shall be merely an ajjproval of proposed action
by the corporation and shall not constitute a consent or grant of authority to
the corporation to make a member a party to a contract or to give power to the
corporation to represent or act as agent for the approving memljer in respect to
such contract in any way whatever.
Dues of "Ma7iufoctaring Members"
Section 1. The Directors shall fix and determine the dues to be paid by the"
^'Manufacturing Members" during the current fiscal year, which dues sliall be
based on, but not necessarily in proportion to the sales of the "Manufacturing
Members," respectively of self-propelled vehicles sold or otherwise disposed of
during the then fiscal year; but in n > casi- sljall such dues be ^xed or determined
at a greater amount than otie-tenth of one per cent, of such sales, which sales
shall be the list price of the vehicles sold, less the commission or discount allowed
to dealers or to any selling branch controlled by the "INLinufacturing Members."
The dues so fixed\and determined shall be payable quarterly. Subject to the
limitations herein provided, the Directors may, subsequently to fixing the amount
of said dues during the current fiscal year, increase or diminish the amount
thereof. The dues of any "Manufacturing Member" for any fiscal year beginning
July first, shall be not less than five hundred ($500) dollars net cash, but shall
automatically cease for the balance of that year when the member shall have
paid into the treasury as dues, the sum of forty thousand ($40,000) dollars net
cash during the year; provided however, in the case of "Manufacturing Members"
holding "multiple" memberships and producing different "makes" so-called, of
self-propelled vehicles to be sold under distinctive generic trade names, the
niinimum sum of $500, and the maximum sum of $40,000 shall apply separately
to each such distinctive "make" of self-propelled vehicle.
Reports by Members
Section 2. Each "Manufacturing Member" shall render to the corporation
within the first fifteen days of January, April, July and October of each year,
written reports under oath setting forth the number and kinds of self-propelled
vehicles made and sold or otherwise disposed of, by such member, during the
preceding three calendar months, and the aggregate net amount charged therefor,
not including, however, any sales of parts or any repairs, and shah within fifteen
days thereafter pay to the' corporation on account of annual dues, the just and
true percentage thereof, not exceeding one-tenth of one percent, which shall have
been so fixed and determined by the Directors, except as otherwise provided in
Section 1 of Article V; provided, however, that "Manufacturing Members"
producing more than one "make" so-called of self-propelled vehicles to be sold
under distinctive generic trade names shall render separate reports for each such
"make." These reports shall cover all self-propelled vehicles primarily intended
to operate upon the road, and shall not apply to self-propelled machinery primarily
intended for use on the farm, farm tractors, self-propelled boats or other water-
576 CONCENTRATION OF ECONOMIC POWER
borne vessels, or self propelled aircraft. A discount of ten percent, shall be
allowed to each "Manufacturing Member" if payment accompanies report within
the time above specified. Each "Manufacturing Member" shall keep true and
accurate records of the number and kinds of such vehicles made and sold or
otherwise disposed of by it and accurate books of account of all its sales of such
vehicles, and shall permit a reasonable inspection thereof by the duly authorized
representative or representatives of the corporation for the purpose of verifying
any report so made by such member or obtaining the information required to be
reported in case a member shall neglect or refuse to make such a report, and such
right of inspection for the purposes named, shall survive the termination of
membership of such "Manufacturing Member."
ARTICLE VI
Defense oj Suits
Section 1. Upon advice of counsel of the corporation that it would promote the
purposes and objects of the corporation so to do, and upon the. recommendation
of the Directors, approved by a vote of two-thirds of the members of the corpora-
tion present and voting at a regular or special meeting of the corporation called
and held as provided in the By-Laws, the corporation shall undertake the defense
of any suit brought by a member or a non-member against any "Manufacturing
Member" thereof, or other party, based upon any patent claim or claims. The
Directors sh-all thereupon make provision for defending such suit upon such terms
and conditions relative to the control and management of the defense of said suit
as the Directors shall determine, and the corporation shall pay all disbursements
and expenses, including fees of counsel, which shall be incurred in and about the
defense of such suit except so far as the defendants may otherwise agree but sucii
payment by the corporation shall not include any sum awarded to the complainant
by the decree of the Court as either damages or costs.
"In the defense of any suit, the corporation shall not have the power to act as,
agent for any member 'other than a member named as defendant in the suit and
formally of record; and it shall obtain in writing from the member or other party
sued authority to control the defense of the suit. No member not naiYicd as
defendant in the suit and formally of record shall have &ny authority or power to
control or intermeddle in any way with the defense of the suit; and no meml)cr not
so named and formally of record as a party to the suit shall be liable for any ])art
of the expenses of such suit, all of which, so far as payable by the corporation,
shall be paid by the corporation out of its general funds. The approval by a
member of a recommendation of the directors of the corporation in respect to
the defense of a suit, expressed by the member's voting to approve the same,
shall be merely an approval of proposed action by the corporation and shall not
be consent or grant of authority to the corporation to represent or act for the
approving member as to the patent or patents in suit or in any way whatever.
Suits Now Pending
Section 2. The benfits of this corporation as herein~contemplated may be
granted to its menibers in respect to patent suits and claims now pending against
them ,as well as those which may hereafter be presented or prosecuted, to the
extent only of any future proceedings to be taken.
ARTICLE VII
Licenses and Shop Rights
Section 1. Upon the acquisition of any patent or transferable rights thereunder,
the corporation, so far as it shall have the lawful right to do so, shall, ui)on a reso-
lution being adopted by an affirmative vote of not less than a majority of the
Directors and duly appro ve!d by the affirmative vote of two-thirds of the members
present, and voting at a regular or special meeting called and held as provided in
the By-Laws, grant to each then "Manufacturing Member" of the corporation in
good standing desiring it, a license or shop right there-under, upon such terms and
conditions as shall be determined by the affirmative vote of two-thirds of the
meinl)ers present and voting at such meeting, but the terms and conditions shall
be alike to each then "Manufacturing Member"; and grant to each suhseq\ient
"Manufacturing Member" of the corporation in good standing desiring it, a
license or shop right thereunder, upon such terms and conditions as shall be deter-
mined by the affirmative vote of not less than a majority of the Directors and dulv
CONCENTRATION OF ECONOMIC TOAVER g77
approved by the affirmative vote of two-thirds of the members present and voting
at snch regular or special meeting.
ARTICLE VIII
Dissolution
Section 1. Upon dissolution of this corporation the "Representative Members"
shall not be entitled to participate in the distribution of the funds or assets of
this corporation. Each then "Manufacturing Member" in good standing shall
be entitled to share in the distribution of the funds and assets of the corporation
in proportion to the aggregate amount of money paid by him to the corporation
from time to time as dues or assessments.
ARTICLE IX
Obligations of^ Members
Section 1. The Constitution and By-Laws and any amendments thereof here-
after made shall be deemed a contract with the corporation and among the mem-
bers, for the benefit of each and all, and shall be observed and adhered to by each
member, and each member of this corporation by virtue of his membership
covenants and agrees with the corporation and with each and every member
thereof that he will observe, adhere to and be bound by the same.
ARTICLE X
Amendments
Section 1. This Constitution or any article thereof may be altered, amended
or repealed at any regular or special meeting of the members of the corporation
by the affirmative vote of three-fourths of the members of the corporation present
and voting, provided that written notice of the .alteration, amendment or repeal
signed by not less than eight members of the corporation shall have been served
upon the corporation at least forty days prior to the meeting at which the altera-
tion, amendment or repeal is to be considered. Notice of any proposed amend-
ment shall be given the members at least fifteen days prior to the meeting at which
the amendment is to be considered.
By-Laws of Automobile Manufacturers Association, Inc.
article i
Annual Meeting
Section 1. The annual meetings of the members of the corporation and the
election of Directors shall be held at the office of the corporation in the City of
New York in accordance with the Articles of Incorporation. Notices of the time
and place of the meetings, signed by the Secretary, shall be mailed to each member
of the corporation at least ten days before such annual meetings, and such other
notice shall be given as may be required by law.
Special Meetings
Section 2. Special meetings of the members shall be convened by order of the
Directors or of the President at the corporation's office in the City of New York
or elsewhere upon notice signed by the Secretary and mailed to each member of the
corporation at least ten days before such meeting. It shall be the duty of the
Directors or of the President to call a special meeting of members whenever re-
quested in writing by one-tenth of the manufacturing members so to do.
ARTICLE II
Admission to Charter Membership
Section 1. The Directors of this corporation, at any regular or special meeting
held within ninety days after the incorporation of this corporation shall, upon
application, elect to manufacturing membership any member in good standing
of the Automobile Board of Trade or National Association of Automobile
Manufacturers.
124491— 39— pt. 2 28
.g78 C:ONCKNTnATION OF ECONOMIC POWER
Applications for Membership
Section 2. Applications for Manufacturing Membership in this corporation by
others than those who may be elected in pursuance of the foregoing section of this
article must be made in form to be prescribed by the Directors, addressed to the
corporation, signed by the applicant and endorsed with the approval of at least
two members in good standing.
Election to Membership
Section 3. Except as provided in Section 1 of this Article, no individual, co-,
partnership firm, or corporation shall be elected a member of this corporation
except by the affirmative vote of not less than a majority of the Directors. In
case an applicant for membership shall fail of election by the Directors, the cor-
poration may elect such applicant by a two-thirds vote of the members present
and voting at any meeting.
Conditions of Membership
Section 4. The Corporation may, by contract or agreement duly entered into
with any one or more "Manufacturing Members" of the Corporation, bind itself
to impose upon future applicants for membership any conditions not in them-
selves unlawful; and while such contract or agreement is in force, no applicant
shall be eligible for membership except upon fulfilling the conditions so imposed,
'provided always that such contract or agreement is authorized and approved by
the affirmative vote of liot less than a majority of the Directors.
Qualification of Members
Section 5. No individ\ial, co-partnership, firm, or corporation elected a "Manu-
facturing Member" shall be deemed to have become a member of the corporation
unless and until he or it shall have qualified by paying to the Treasurer, within
fifteen days after notice of his or its election, the sum of One Thousand Dollars
($1,000) to apply upon his or its dues.
Delinquency
Section 6. Any "Manufacturing Member" whose dues or any part thereof are
in arrears shall be deemed not in good standing. Any "Manufacturing Member'
who shall continue not in good standing for a period of twenty days after due
notice thereof that he or it is not in good standing and that he or it is in danger
of the forfeiture provided in this section, shall be deemed to have forfeited his or
its membership, and such member can only be reinstated by the affirmative vote
of not less than a majority of the Board of Directors after full settlement of any
delinquent dues. In case a delinquent shall fail of reinstatement by the Board
•of Directors, the corporation may reinstate such delinquent by a two-thirds
vote of the members present and voting at any meeting. The notice to be
served on a member not in good standing shall quote this section and shall be
delivered to the member personally or served by mail in a postpaid envelope
addressed to him or it at his or its last known place of business.
Expulsion
Section 7. Any "Representative" or "Manufacturing Member" who shall do
any act in the judgment of the Directors amounting to a wilful violation or breech
of any of the terms of the Constitution or By-Laws, may be expelled from mem-
bership by a two-thirds affirmative vote of all the Board of Directors, provided,
however:
(1) That notice in writing of the proposed expulsion shall have been mailed
to each member of the Board of Directors at his last known address, ten days
before such action shall be taken;
(2) That formal charges drafted by a committee appointed for that purpose
stating the name, address, and description of the business of the accused member,
the charges in full detail and the grounds for the same shall have been presented
to the corporation at least thirty days before such action be taken;
(3) That there shall have been posted by registered letter to the member under
•charges at his address appearing on the books of the corporation a statement of
■the charges at least fifteen days before final action thereon be taken; this state-
CONCENTRATION OF ECONOMIC POWER gyg
ment shall be accompanied by a notice of the time and place when and where
the Board of Directors is to take action in the premises;
(4) That the said member shall have been given an opportunity to present his
or its defense at the time and place mentioned in such notice.
Votes upon questions of expulsion shall be by secret ballot.
If the member on trial is a member of the Board of Directors he shall have no
right to be present and vote when ballots are passed upon the question of his
■expulsion, and in such case all questions of quorum, ratio of votes cast, etc., shall
be determined as though the Board of Directors consisted of one less than the
stated number.
By application for or acceptance of membership in the corporation every
"Manufacturing Member" shall be deemed to have waived and does thereby
waive for himself or itself, as the case may be, in case of his or its expulsion from
the corporation as hereinbefore provided, all further rights and privileges of mem-
bership and all claims of every nature and description to any fees, dues or charges
paid to the corporation and to any participation in its assets or benefits, and to
any and all claims for damages for or because of such expulsion.
Termination of Membership
Section 8. In case any member shall cease to have the qualifications making
■him or it eligible for membership in this corporation as provided in the Consti-
tution and By-Laws, such person shall thereby cease to be a member of the cor-
poration, subject, however, to reinstatement upon restoration of eligibihty and
payment of all arrears in dues.
Effect of Terndnation of Membership
Section 9. The right of a member to vote, and all the right, title and interest of
a member in or to the corporation or its property shall cease upon the termination
of his membership therein unless otherwise provided by law or by the Constitution
or By-Laws of the corporation, or by a vote of the Board of Directors or of the
members.
ARTICLE III
Powers of Directors
Section 1. The Directors may appoint such officers, agents, attorneys, and
counsel as they may judge proper, prescribe their compensation and fix the
amounts of such bonds as they may require. They may fill vacancies in their own
body. In the absence of the President and First Vice-President they may appoint
a Chairman pro tem. During a prolonged absence or inability of the President
.and First Vice-President they may appoint substitutes pro tem.' On the death or
■resignation of any officer they shall fill the vacancy. A majority of the Directors
shall be required to constitute a quorum for the transaction of business, but less
than a'quorum may adjourn from time to time.
Meetings of Directors
Section 2. The regular meetings of the Board of Directors for the transaction of
business shall be held at the office of the corporation or elsewhere, as designated
by the Board of Directors, on the first Wednesday of every month, unless such
day is a holiday, in which case the meeting shall occur on the same day of the
following week, or unless a meeting of Representative Members is scheduled on
that day, in which event the Directors shall meet the day before. The President,
and in his absence the First Vice-President, shall preside at all meetings of the
Directors and in their absence a Chairman pro tem. shall be appointed.
Section 3. Special meetings shall be held at such times and places as the Presi-
dent may direct or upon the written request of any two Directors.
Rules
Section 4. The Directors shall make such rules or regulations for the calling of
special meetings of their body as they deem proper.
Absence from Meetings
Section 5. Any Director absenting himself from three consecutive meetings of
the Directors, unless his absence is excused by the board, shall be deemed to have
resigned his directonship. and the vacancy thus created shall be filled by the
Directors.
ggO CONCENTRATION OF ECONOMIC POWER
Divisions
Section 6. Any group of "Manufacturing Members" producing a distinct type
of vehicle may, with the consent of the Directors, form a Division of the member-
ship, for the purpose of fostering the particular interests of such Division.
Committees
Section 7. The President, subject to the approval of the Directors, may appoint
such special committees as he deems necessary to protect and further the interests,
purposes, and objects of the corporation and its members. The members of such
committees need not be Directors.
Order of Business
Section 8. The Directors may by resolution prescribe the order of busmeas at
their meetings.
Article iv
President
Section 1. The President shall preside at all meetings of the Members and
Directors. He shall have power to call meetings of the Directors or Committees
from time to time, when he shall think proper, and it shall be his duty to call
such meetings, when requested in writing to do so by any two Directors. He
shall have the general care, supervision, and direction of the affairs of the corpora-
tion under the direction of the Directors and shall have such powers and perform
such duties as may from time to time be conferred upon him or be prescribed by
such Directors. He shall discharge the duties of the Treasurer in case of his
absence or inability or during a vacancy in the office.
First Vice President
Section 2. The First Vice President shall discharge the duties of the President
in case of his absence or during a vacancy in the office.
Second Vice Presidents
Section 3. The Second Vice Presidents shall be Chairmen of their respective
Divisions and shall discharge such duties as may be prescribed by the Directors.
Third Vice Presidents
Section 4. The Third Vice Presidents shall discharge such duties as may be
prescribed by the Board of Directors.
ARTICLE V
Treasurer
Section 1. It shall be the duty of the Treasurer to receive all the moneys, checks,
and drafts paid in on behalf of this corporation and immediately endorse the same
for deposit, and enter the same in the books of the corporation, and immediately
deposit the same in a bank or banks designated by the Directors to the credit of
the corporation. He shall render such accounts and present such statements to
the Directors as may be required by them, and his books and accounts shall
always be open to the inspection of any Director. Disbursements shall be made
by him only under resolutions of the Directors. He shall be required to give
bond for the faithful performance of his duties, and the expense thereof shall be
paid by the corporation. . He shall hold his office until his successor shall have
been appointed and shall have qualified. He shall make a report to the members
of his receipts and disbursements at each regular meeting of the members. His
accounts shall be audited from time to time, and at least annually, by an auditor
or auditors appointed by the Board of Directors. The President shall discharge
the duties of the Treasurer in case of his absence or inability or during a vacancy
in the office.
CONCENTRATION OF ECONOMIC POWER ^31
Checks
Section 2. All checks, drafts, and orders for the payment of money shall be^
signed by the Treasurer or the ^resident or the First Vice President or any person
who shall be thereunto authorized, from time to time, by general or special reso-
lution of the Board of Directors.
Notes
Section 3. AU notes negotiable or non-negotiable, shall be signed by the Presi-
dent, or the J'irst Vice President, and the Treasurer or such other person as the
Board of Directors shall from time to time authorize by general or special resolu-
tion.
ARTICLE VI
Secretary
Section 1. It shall be the duty of the Secretary to give notice of a" meetings
of the members of the corporation and of all meetings of the Board ot Directors
and when required so to do by the President or by resolutions of the Board of
Directors to attend such meetings when practicable, keep true records of the
proceedings thereof, attest such records after every meeting by his signature,
and safely keep all documents and papers which shall come into his possession.
He shall also perform such other and further duties as shall be required by the
President and Board of Directors.
The seal on all instruments requiring a seal shall be affixed and attested by the
Secretary.
ARTICLE VII
Seal
Section 1. The seal of the corporation shall be a circle containing the name of
the corporation around the inner edge thereof, and the word "Seal" and the
figures "1913" in the center thereof, and the words "New York" on the bottom
thereof.
ARTICLE VIII
Order of business
Section 1. The order of business of all regular meetings of the members of the
corporation shall be as follows:
1. Roll caU.
2. Action upon Minutes of previous meeting.
3. Reports of officers.
4. Reports.
5. Unfinished business.
6. Election of new members.
7. New business.
ARTICLE IX
Amendments
Section 1. These By-Laws may be altered, amended, or repealed by a two-
thirds vote of the members of this corporation, present at a regular or special
meeting, provided that written notice of the alteration, amendment, or repeal,
signed by not less than eight members of the corporation, shall have been served
upon the corporation at least forty days prior to the meeting at which the altera-
tion, amendment, or repeal is to be considered.' Notice of any proposed altera-
tion, amendment, or repeal shall be given to the members at least fifteen days
prior to the meeting at which the alteration, amendment, or repeal is to be con-
sidered.
682
CONCENTRATION OF ECONOMIC POWER
Exhibit No. 92
(Source: Automobile Manjifaeturers Association magazine]
MEMBERS OF THE AUTOMOBILE MANUFACTURERS ASSOCIATION
CORRECTED TO NOVEMBER 1938
NEW YORK
366 Madison Avenue at 46th Street
General Motors Building Transportation Building
DETROIT WASHINGTON
PASSENGER CAR MANUFACTURERS
Trade Name
Member or Manufacturer
Address
Buick
Flint, Mich.
Cadillac
Cadillac Motor Car Division*
Detroit Mich
Chevrolet
Chrysler
Chrysler Sales Divisionf
De Soto
De Soto Divisiont
Detroit Mich
Dodge
Dodge Divisioht
Detroit Mich
Hupmobile
Hupp Motor Car Corporation
Detroit Mich
LaSalle
Cadillac Motor Car Division*
Detroit Mich
N^h
Nash-Kelvinator Corporation
Detroit Mich
Lansing, Mich.
Detroit, Mich
Packard -.
Packard Motor Car Company
Plymouth
Plymouth Divisionf
Detroit Mich
Willys
Willys-Overland Motors, Inc
Toledo Ohio
TAXICAB MANUFACTURERS
Checker Checker Cab Mfg. Corporation
G. M. C Yellow Truck and Coach Manufacturing Company...
Kalamazoo, Mich.
Pontiac, Mich.
AMBULANCE AND FUNERAL VEHICLE MANUFACTURERS
Cadillac...
Packard..-.
Studebaker
Cadillac Motor Car Division*.
Packard Motor Car Company
The Studebaker Corporation..
Detroit, Mich.
Detroit, Mich.
South Bend, Ind.
MOTOR FIRE APPARATUS MANUFACTURERS
Corbitt
Mack..
Walter.
White..
The Corbitt Company.
Mack Brothers Motor Car Company
Walter Motor Truck Company
The White Motor Company
Henderson, N. C.
Long Island City, N. Y.
Ridgewood, N. Y.
Cleveland, Ohio.
MOTOR TRUCK MANUFACTURERS INCLUDING LIGHT COMMERCIAL VEHICLE AND-
STATION-WAGON MANUFACTURERS
Autocii^
Chevroletl
Corbitt
Diamond T
Dodge
Federal
G. M. C
Hudson Terraplane.
Indiana
International
LjjFrance-Republic.
Mack
Plymouth
Reo
Sterling
Stewart
Studebaker
Walter
White
Willys
The Autocar Company
Chevrolet Motor Division, General Motors Corp
The C.Qrbitt Company...
Diamond T Motor Car Company.
Dodge Divisiont
Federal Motor Truck Company
Yellow Truck and Coach Manufacturiifg Company...
Hudson Motor Car Company.
The White Motor Company
Intprnalional Harvester Company
Sterliite Motor Truck Company
Mack Brothers Motor Car Company
Plymouth Divisiont
Reo Motor Csir Company
Sterling Motor Truck Company
Stewart Motor Corporation
The Studebaker Corporation
Walter Motor Truck Company
The While Motor Company
Willys-Overland Motors, Inc
Ardmore, Pa.
Detroit, Mich.
Henderson, N. C.
Chicago, 111.
Detroit, Mich.
Detroit, Mich.
Pontiac, Mich.
Detroit, Mich.
Cleveland, Ohio,
Chicago, 111.
Milwaukee, Wis.
LonglslandCity.N.Y.
Detroit, Mich.
Lansing, Mich.
Milwaukee, Wis.
BufTalo, N. Y.
South Bend, Ind.
Ridgewood, N. Y.
Cleveland, Ohio.
Toledo, Ohio.
t Chrysler Corporation.
General Motors Corporation.
CONCENTRATION OF ECONOMIC POWER
TRUCK TRAILER MANUFACTURERS
683
Trade Name
Member or Manufacturer
.\ddress
Corbitt.
The Corbitt Company
Henderson N C
G. M. C
Mack
Yellow Truck and Coach Manufacturing Company....
Pontiac, Mich.
Long Island City, N.
Lansing, Mich.
Reo
Reo Motor Car Company
MOTOR BUS MANUFACTURERS
Chicago, III.
Federal
Federal Motor Truck Company
G M. C
Yellow Truck and Coach Manufacturing Company...
I. H. C.
International Ilarveater Company
Chicago, 111.
Long Island City, N
Lansing, Mich.
Buffalo N Y
Mack
Mack Brothers Motor Car Company
Reo.
Stewart
Stewart Motor Corporation
Studebaker .
The Studebaker Corporation
South Bend Ind
White
OFFICERS
President Alvan Macauley, Packard Motor Car Company.
First Vice President Alfred P. Sloan, Jr., General Motors Corporation.
Vice-President Charles W. Nash, Nash-Kelvinator Corporation.
Passenger Car Division
Vice-President Robt. F. Black, White Motor Co.
Commercial Car Division
Vice-President Alfred Reeves, New York.
Vice-President Pyke Johnson, Washington, D. C.
Secretary Byron C. Foy, DeSoto Motor Corporation.
Treasurer F. J. Haynes, Detroit, Michigan.
BOARD OF DIRECTORS
A. Edward Barit Hudson Motor Car Company.
R. F. Black The White Motor Company.
Walter P. Chrysler Chrysler Corporation .
E. C. Fink Mack Bros. Motor Car Company.
Byron C. Foy DeSoto Motor Corporation.
Robert C. Graham Graham- Paige Motors Corporation.
Paul G. Hoffman . The Studebaker Corporation.
William S. Knudsen General Motors Corporation .
Alvan Macauley Packard Motor Car Company.
William F. McAfee International Harvester Company.
Charles W. Nash ' Nash-Kelvinator Corporation.
Alfred P. Sloan, Jr General Motors Corporation.
Vice-President and General Manager Alfred Reeves.
Assistant General Manager James S. Marvin..
"Exhibit No. 93", introduced on p. 287, is on file with the Committee.
"Exhibit No. 94", introduced on p. 287, is on file with the Committee.
'Exhibit No. 95", introduced on p. 296, is on file with the Committee.
'Exhibit No. 96", introduced on p. 296, is on file with the Committee.
,g34 CONCENTRATION OF ECONOMIC POWER
"Exhibit No. 97", introduced on p. 296, is on file with the Committee.
"Exhibit No. 98", introduced on p. 296, is on file with the Committee.
Exhibit No. 99
Percent Automotive to Total Patents Issued
PEKCtMT PERCENT
f^
^
A
f-^ --
r
\
PERCCN
T AUTOM
1 — '
>TIVE
\
^^
L/
■ ^
TO TOTAL PATENTS
ISSUED ANNUALLY
1
1900 1905 1910 1915 1920 1925 1930 1935 1940
Number of patents issued declining in recent years
[Source: Automobile Facts magazine]
[In general it takes 2 to 3 years for an application to become a patent]
Total pat-
ents issued 1
Automo-
tive
total 2
Percent
automo-
tive
Total pat-
ents issued '
Automo-
tive
total «
Percent
aut;>mo-
tive
1S99
25, 435
26,418
27, 292
27, 776
31, 582
30, 824
30, 270
31,806
36, 469
33,514
37, 261
35. 807
33, 927
37, 573
35, 624
41, 660
44, 752
45, 729
42, 5S1
39, 776
38, 395
3,681
3,451
3, 250
3,288
4,008
3,578
3,682
3,850
4,996
4,854
6,184
5,915
7.289
V, 073
6,713
7,296
■ &, 221
10, 352
9,335
10, 380
9,788
14.5
13.1
11.9
11.8
12.7
11.6
12.2
12.1
13.7
14.5
16.0
16.0
21.5
18.8
18.9
17.5
13.9
22.6
21.9
26.1
25.5
1920
39,649
41, 162
40, 041
40, 561
45, 265
49, 274
47, 352
44,118
45, 564
48, 191
47, 955
54, 703
5fi, 417
51, 197
47, 348
44, 502
44, 349
42, 832
10, 146
11,642
10, 268
10, 982
9,167
9,370
9,034
8.624
8,941
9,336
9,118
11,911
11.552
10, 679
9,468
8.334
7,905
7,264
25.6
1900
1921.
28.3
1901
25.7
1902
1923
27.0
1903
1924
20.2
1904
19.0
1905 . .
1926
19.1
190fi
1927
19.5
1907
1928
19.6
1008
1929
19.3
1900
1930
19.0
1910
1931
21.8
3911
1932
20.5
1012
1933
20.8
1913
1934
20.0
1914
1935 . .
18.7
1915
1936
17.9
19ir,
1937
17.0
Total
1918
1, 564, 951
298, 923
19.1
1919
' Source: Patent Office Oazette. Figures include design patents.
' Represents patents selected for Research Library, Automobile Manufacturers Association,
Include patents concerning the construction, design, and use of motor vehicles.
CONCENTRATION OF ECONOMIC POWER 6g5
Exhibit No. 100
5ouro3r Automobile Manufacturers Association Magazine]
The Following Participated in the Cross-Licensing Agreement 1915-1925
Allen Motor Company.
The American Electric Car Company.
Anderson Electric Car Company.
Anderson Motor Company.
Apperson Bros. Automobile Company,
Auburn Automobile Company.
Austin Automobile Company.
Barley Motor Car Company.
The Bartholomew Company.
Bethlehem Motors Corporation.
Brewster & Company.
Briggs-Detroiter Company.
Briscoe Motor Company, Inc.
Briscoe Motor Corporation.
Buick Motor Company.
CadiUac Motor Car Company.
Cartercar Company.
J. I. Case Threshing Machine Company.
Chalmers Motor Company.
The Chandler Motor Car Company.
Checker Cab Manufacturing Corporation.
Cleveland Automobile Company.
Cole Motor Car Company.
Commonwealth Motor Company.
Consolidated Car Company.
Crow Motor Car Company.
James Cunningham Sons & Company.
Daniel Motor Car Company.
Daniels Motor Company.
Geo. W. Davis Motor Car Company.
Detroit Electric Car Company.
Detroiter Motors Companj'.
Dodge Brothers.
Dorris Motor Car Company.
Dort Motor Car Company.
duPont Motors, Inc.
Durant Motor Company of Indiana, Inc.
Durant Motor Company of Michigan.
Durant Motor Company of New Jersey.
Durant Motor Company of New York, Incorporated
Elgin Motor Car Corporation.
Elkhart Carriage & Harness Manufacturing Company.
Empire Automobile Company.
Essex Motors.
The Gardner Motor Company, Incorporated.
Grant Motor Car Corporation.
Gray Motor Corporation.
Great Western Automobile Company.
Hackett Motor Ca^ Conipanj'.
Hal Motor Car Company.
The Handlcy Knight Company.
Hanson Motor Company, Atlanta, Georgia.
The Haynes Automobile Company.
H. C. S. Motor Car Company.
Hewitt Motor Company.
Holmes Automobile Company,
Hudson Motor Car Company.
Hupp Motor Car Company, Michigan.
Hupp Motor Car Corporation, Virginia.
Imperial Automobile Company.
Jackson Automobile Company.
Jackson Motors Corporation.
The Thomas B. Jeffery Company.
Jqdbs Motor Car Company.
Jordan Motor Car Company.
685 CONCKNTIIATION OF ECOxXOMIC POWER
King Motor Car Company.
The Kissel Motor Car Company.
Kline Motor Car Corporation.
Kline Car Corporation.
Krit Motor Car Company.
I^aFayette Motors Company.
The Lexington-Howard Company.
Lexington Motor Company.
Liberty Motor Car Company.
Lincoln Motor Company, a Michigan Corporation.
Lincoln Motor Company, Delaware.
Lincoln Motor Company, Michigan.
Locomobile Company of America, West Virginia.
The Locomobile Company, Delaware.
Locomobile Company of America, Inc., New York.
Lozier Motor Company.
Maxwell Motor Company, Inc., Delaware.
Maxwell Motor Corporation, West Virginia.
McFarlan Motor Company, Indiana.
McFarlan Motor Corporation, Delaware.
Mercer Automobile Company, New Jersey.
Mercer Motors Company, Delaware.
Mitchell-Lewis Motor Company, Wisconsin.
Mitchell Motors Company, Incorporated, New York.
Monroe Motor Company.
Moon Motor Car Company.
The Motor Car Manufacturing Company.
Mutual Motors Company.
The Nash Motors Company.
National Motor Vehicle Company.
National Motor Car and Vehicle Corporation.
Nordyke & Marmon Company.
Oakland Motor Car Company.
Olds Motor Works.
Paige Detroit Motor Car Company.
W. A. Paterson Company, Flint, Michigan.
The Pathfinder Company.
The Peerless Motor Car Company.
Piedmont Mo'tor Car Company, incorporated.
Pierce Arrow Motor Car Company.
Pilot Motor Car Company.
Premier Motor Manufacturing Company.
Premier Motor Corporation, Delaware.
Premier Motors Incorporated, Indiana.
Pullman Motor Car Company.
The Ranch & Lang Carriage Company.
Ranch & Lang, Incorporated.
Regal Motor Car Company.
Reo Motor Car Company.
Rickcnbacker Motor Company.
Reamer Motor Car Company.
The Rollin Motors Company.
Root & Van Dervoort Engineering Company.
R <fe V Motor Company.
Saxon Motor Company, Detroit, Michigan.
Saxon Motor Car Corporation, New York.
Scripps Booth Company.
Scripps Booth Corporation.
Simplex Automobile Company.
William Small Company.
F. B. Stearns Company.
Stephens Motor Car Company, Incorporated.
Stevens-Duryea Company.
Stevens-Duryea, Incorporated.
Thr Stndebaker Corporation.
•'ti ;z Motor Car Company, Indiana.
•jiutz Motor Car Company of America, New York.
Tile Templar Motors Corporation.
CONCENTRATION OF ECONOMIC POWER 687
Templar Motors Company.
The Touraine Company.
United Motor Company.
Velie Motor Vehicle Company.
Velie Motors Corporation.
The Waverley Company.
Westcott Motor Car Company, Indiana.
Westcott Motor Car Company, Ohio.
C. H. Wills & Company.
WillB Sainte Claire, Incorporated.
The Willys-Overland Company.
The Winton Company.
Yellow Cab Manufacturing Company.
TRUCK MEMBERS
Acme Motor Truck Cotnpany.
American-LaFrance Fire Engine Company, Inc.
Argo Motor Company, Incorporated.
The Argo Electric Vehicle Company.
Atterbury Motor Car Company.
The Autocar Company.
Avery Company.
The Borland Grannis Company.
Brockway Motor Truck Company.
The Clyde Cars Company.
The Commerce Motor Car Company.
Corbett Motor Truck Company.
Denby Motor Truck Company.
Diamond T Motor Car Company
Duplex Truck Company.
Federal Motor Truck Company.
General Motors Truck Company.
General Vehicle Company, Incorporated.
Graham Brothers.
Gramin Motor Truck Company.
International Harvester Corporation.
Inter-8tate Motor Company.
KoUy-Springfield Motor Truck Company.
Kentucky Wagon Manufacturing Company.
Kleiber & Company, Incorporated.
Le"u is Spring and Axle Company.
Lyons-Atlas Company.
Maccar Truck Company.
Mack Brothers Motor Car Company.
Maibohni Motors Company.
Mason Motor Truck Company.
The Mi]l)urn Wagon Company.
The Moline Automobile Company.
Molino Plow Company.
Mercian d Motor Truck Company.
Oneida Motor Truck Comi)any.
Rainier Motor Corporation.
Republic Motor Truck Company.
Rowe Motor Manufacturing Company.
Sanford Motor Truck Couipany.
The Savers & Scovill Company.
The G.'A. Schacht Motor Truck Company.
Seiden Motor Vcliicle Company.
Seldcn Truck Corporation.
.Service Motor Truck Company.
Service Motors, Incorporated.
Standard Motor Truck Company.
Standard Steel Car Company.
Sternber.s Motor Truck Company.
Stev^•art Motor Corporation.
Traylor Engineering and Manufacturing Company.
Waiter Motor Truck Company.
683 CONCENTRATION OF ECONOMIC POWER
Ward Motor Vehicle Company.
The White Company.
The White Motor Company.
J. C. Wilson Company.
Members of- the Association Who Signed the Extension or Substitute
' 'ross-Licensing Agreement 1925-1930
Anderson Motor Company.
Apperson Automobile Company.
Auburn Automobile Company.
Brewster and Company.
J. I. Case Threshing Machine Company.
Chandler-Cleveland Motors Corporation.
The Chandler Motor Car Company.
Checker Cab Manufacturing Corporation.
Cleveland Automobile Company.
Chrysler Corporation.
Cole Motor Car Company.
James Cimningham, Son and Company.
George W. Davis Motor Car Company.
Dodge Brothers.
Dodge Brothers, Incorporated (a Maryland Corpor.ition).
duPont Motors, Incorporated.
Durant Motor Company of Indiana, Inc.
Durant Motor Company of Michigan.
Durant Motor Company of New Jersey.
Elcar Motor Company.
Falcon Motors Corporation.
H. H. Franklin Manufacturing Company.
The Gardner Motor Company, Inc.
Goneial Motors Corporation.
Gray Motor Corporation.
Haynes Automobile Company.
H. C. S. Cab Manufacturing Company.
H. C. S. Motor Car Company.
Hupp Motor Car Company, Inc.
Jordan Motor Car Company, Inc.
The Kissel Motor Car Company.
Kleiljer Motor Company.
Lincoln. Motor Company.
Locomobile Company of America, Inc.
Maxwell Motor Corporation.
The McFarlan Motor Corporation.
Mercer Motor Car Company.
Moon Motor Car Company.
The Nash Motors Company.
Nordyke and Marmon Company.
Paige-Detroit Motor Car Company.
Peerless Motor Car Company.
Peerless Motor Car Corporation,
The Pierce-Arrow Motor Car Company.
Premier Motors, Inc.
Ranch and Lang, Inc.
Reo Motor Car Company.
Rickenbacker Motor Company.
Roamer Motor Car Company.
Rollin Motors Company.
Tho F. B. Stearns Company.
The 8t udebaker Corporation.
Stutz Motor Car Comp'T^ny of America, Inc.
Velic Motors Corporation.
Tli(( Westcott Motor Car Company.
WillH Mainte Claire, Incorporated.
The WillyH-Overland Company.
CONCENTRATION OF ECONOMIC POWER ggg
TRUCK MEMBERS
Acme Motor Truck Company.
American-LaFrance Fire Engine Company, Incorporated.
Atterbury Motor Car Company.
The Autocar Company.
The Clydesdale Motor Truck Company.
Commercial Truck Company.
Corbitt Motor Truck Company.
Diamond T Motor Car Company.
Duplex Truck Company.
Fageol Motors Company.
Federal Motor Truck Company.
The Garford Motor Truck Company.
Garford Truck Company.
General Motors Truck Corporation.
Graham Brother^.
The Kelly-Springfield Motor Truck Company.
Kloiber Motor Truck Company.
LaFrance-Republic Corporation.
T.arrabee Dej'o Motor Company, Incorporated.
Mason Motor Truck Company.
Mcreland Motor Truck Company.
The National Cab and Truck Company.
Raintr Trucks, Incorporated.
Relay Motors Corporation.
Republic Motor Truck Company, Incorporated.
Sanford Motor Truck Company.
The Saj-ers and Scovill Companj*.
The G.'A. Schacht Motor Truck Company.
Selden Truck Corporation.
Service Motors, Inccrporatcd.
Standard Motor Truck Company.
Stewart. Motor Corporation.
Traylor Engineering and Mamifacturing Comj-any.
Waike Vehicle Company.
Walter Motoi- Truck Company.
Ward Motor \'chicle Company.
The White Motor Company.
Yellow Cab Manufacturing Company.
Members of the Association who Signed the Second Extension Cross-
Licensing Agreement 193&-1935
Acme Motor Truck Corporation.
American-LaFrance ancTFoamite Corporation.
Atterbury Motor Car Company.
Auburn Automobile Company.
The Autocar Company.
Checker Cab Manufacturing Corporation.
Chrysler Corporation.
Continental Automobile Company.
Corbitt Truck Company.
James Cunningham, Son & Company.
Diamond T Motor Car Company.
Daesenberg, Incorporated.
Duplex Truck Company.
duPont Motors, Incorporated.
F.lcar Motor Company.
Fageol Motors Company.
Federal Motor Truck Company.
H. H. Franklin Manufacturing Company.
The Gardner Motor Co. Incorporated.
Graham-Paige Motors Corporation.
General Motors Corporation.
Hujjp Motor Car Corporation.
Jordan Motor Car Company, Incorporated.
690 CONCENTRATION OF ECONOMIC POW EU
The Kissel Motor Car Companj'.
Klciber Motor Company.
LaFrance-Repu'olic Corporation.
The LeBloiid-Schacht Truck Company.
Lincoln Motor Company.
Locomobile Company of America, Incorporated.
Maccar Truck Comi:);tny.
Marmon Motor Car Company.
Moon Motor Car Company.
Moreland Motor Truck Company.
The Nash Motors Company.
Pceri'^ss Motor Car Corporation.
The Picrce-Arrow Motor Car Company'.
Plymouth Motor Corporation.
Reo Motor Car Comj;any.
Tlie Sanford Motor Truck Company.
The Savers & Scovill Company.
Seldcn Truck Corporation.
Standard Motor Truck Company.
The F. B. Stearns Company.
Stewart Motor Corporation.
S. P. A. Truck Corporation.
Tiie Stndebakcr Corporation.
Stuiz ;\IoTor Car Company of America, Incorporated.
Walker Vf-hicle Company.
Ward Motor Vehicle Company.
The White Motor Company.
The Willys Overland Compan}'.
Members of the Association Who Signed the Thikd Extension Cro.-j
Licensing Agkeement 1935-1940
The Autocar Company.
Auburn Automobile Company.
Checker Cab Manufacturing Corporation.
Chrysler Corjioration.
The Corbitt Com]3any.
Diamond T Motor Car Company.
Duesenbcrg, Incorporated.
Federal Motor Truck Company.
General Motors Corporation.
Graham-Paige Motors Corporation.
Hudson Motor Car Company.
Hup[) Motor Car Company.
International Harvester Company.
The Le Bionfl-Schaciit Truck Company.
Lincoln Motor Company.
'J'he Nash Motors Company.
Pierce-Arrow Motor Corporation.
Reo Motor Car Company.
Stewart Motor Corporation.
Studebaker Corporation.
Stutz Motor Car Company of America, Incorporated.
The White Motor Company.
Tiie Willys-Overland Comijany.
I
CONCENTIJATION OF KCOXOMIC POWER
691
Exhibit No. 101
(Source.: Automobile Mauulacturers Asbcciation ma'.'azinc]
Growth of Membership, Automobile Manufacturers Association
Number of members by years
Year:
No. of Members
1913 (Charter Members).
1914
1915
1916
1917
1918
1919
1920
1921
1922
1923
1S24
1925
75
97
98
104
108
121
120
129
128
131
127
129
110
Year:
1926
1927
Ac. of Members
;Charter Members)... 102
77
1928_
76
1929
74
1930
72
1931
65
1932
61
1933
53
1934
44
1935_
1936
39
36
1937
34
1938-
34
'Exhibit No. 102'", introduced on p. 362, is on file with the Committee.
"Exhibit No. 103", introduced on p. 362, is on file with the Committee.
Exhibit No. 104
[Prepared by James McEvoy, Patent Counsel, Cieiicral Motors Corporation]
Reasons fou Tailing out or Acquiring PatexNts; Also, Ll-^t of Corporations
Patents Other Than Those Held Under License Nov. Used in Their
Products (Not Including Delco Products, Fricidaire and So.me of the
Other Dayton Group) Applications, Library, Searches and Investiga-
tions
The Corporation owns a large number of patents which were acquired in various
ways; namelj',
1. Patents owned by companies whose stock or property it accjiiired,
2. Patents wliich it purchased,
3. Patents which were applied for by its employees and assigned to it.
Many of the patents owned by the companies it acquired, such as Delco-Remy,
Harrison Radiator. New Departure, etc., were of considerable vahie. None of
them, how-ever, owned any patent which prevented a competitor from making a
like product, although 'o avoid the patent a more costly or inefficient device might
have been necessary.
Neither the Corporation nor any of its subsidiaries ever purchased any patent
unless it was felt necessary to do so to protect some article or device, or part
thereof, thej' intended to manufacture. No attempt has ever been made to
"build up" a patent situation or acquire all of the patents which, might relate to a
particular thing so that no one else could manufacture something like the article
it was proposed to produce. Nothing has ever been manufactured that could in
any sense be considered as a "monopoly." The nearest that it has ever come to
this is "Ethyl Gas" and "Freon Gas." Ethyl Gas is not the only anti-knock fuel
that can be made, but it is the cheapest and most practical. No one is obliged to
use it and it might really be considered as a luxury. It might be noted, however,
that General Motors has never itself marketed these products but granted licenses
to the two corporations which are doing so. Ihe same might be said of the Freoii
Gas i!sed b.v Frigidaire.
•All of the mechanical and electrical devices upon which patents are held only
cover details of construction, some of which are of course very valuable, but none
of them control the only way to do the job, so to speak. Probably the three most
valuable mcclianical i)atents the Corporation now owns are the Fisher Ventilation
System, the Synchrom.esh'and the Fuel Pump patents. Although I believe it is
generally agreed that the Fisher window is a considerable improvement over any
other type of window, the only automobile company which has, so far, infringed
ovi it is Chrv.''ler.
592 COJNCENTRATION OF ECONOMIC POWER
The Synchromesh, in some form, was used by nearly all competitive cars with-
out the Corporation's consent and without any of them asking for a license except
Packard. These transmissions were made by Borg- Warner who undertook to
hold their customers harmless against our patents, but after suit was instituted, a
settlement was made by granting them a license. I might say here that charges
of infringement were served on all of the automobile companies purchasing the
transmission from Borg- Warner, but none of them were made parties to the suit.
The patents the Corporation owns covering the starting, lighting, and ignition
situation are also quite valuable, particularly the vacuum ignition control patent,
but a license has been given under all these patents to its only real competitor,
The Electric Auto-Lite Company. (I will deal with the Frigidaire situation in a
separate memorandum.)
The many patents taken out by its employees are upon structures or devices
which were mostly invented in the course of the development of the article to
which they apply. They were taken out, not because the Corporation intended
to exploit them against its competitors, but to protect itself against persons who
might think of the same thing and obtain a patent thereon and then sue the Cor-
poration for infringement. The Corporation's patents have proven to be very
valuable from this aspect alone as many charg(3S of infringement have been
abandoned upon the complainant's being shown our patents; also, a good many
of the suits filed against the Corporation were abandoned after consideration by
tlie Plaintiff of the patent the Corporation held on the device or article involved.
The Corporation has been involved in four hundred and forty-six interference
proceedings since 1922 in the Detroit office. (The interferences at Dayton,
Frigidaire, Delco-Reniy, etc., I will deal with in a separate memorandum.) Every
one of these, of course, related to an invention made by one of the emploj^ees of
the Corporation, or in a few cases, to applications which it accjuired from outsiders.
In almost all of these cases, except those which have not as yet been determined,
a settlement was made to the advantage of the Corporation, that is, it was suc-
cessful in the proceedings or settled them by taking a license in .most of the cases
and paying no royalty. The few proceedings which have been decided against
the Corporation have, so far, given us no trouble as the article or device covered
thereby is not being used. If it had not filed these applications, a patent, of course,
would have been granted to the other party and the Corporation would have been
faced witli a charge of infringement and doubtless a good many suits would have
been brought against it. Tlic Corporation, of course, has not used all of its
patents. The larger majority of them are ineffective to cover its actual products
for various reasons. Many applications are filed for experimental devices which
never go into productioji because of failure to give satisfactory results. Many
others are filed to cover devices going into production but which later become
obsolete by reason of changes and improvements. It, of course, might happen
that an improvement amounting to invention is made, especialh' in respect to
a machine or method of manufacture which is very good, but the use thereof
would require the scrapping or discarding of a large quantity of machinery, the
replacing of which would be so costly as to make it unprofitable to use the inven-
tion. I do not believe, however, that there are many such cases and I cannot
at the moment think of any instance of the kind within the Corporation. It
is a point, however, which the Government will, in all probability, lay some
stress »>pon, and it may attempt to use the testimony of Frazer which I have dealt
with in a separate memorandum as well as some of the other p rsojis who testi-
fied in a similar manner before the House Committee. I think the only thing
to do is to wait and see what they say regarding tliis matter, and I will bo much
surprised if they will be able to produce anything that cannot be refuted.
A large number of the Corporation's patents are used in its various products
and some are being infringed. These infringements mostly relate to accessories or
parts, such as replacements parts for Delco-Remy starters, certain types of bear-
ings, fuel pump injector, spark plugs, etc. While charges of infringement have
been served on most of these infringers, it has not been deemed wise to institute
but few suits, because the number of infringing articles produced is not great
enough to cause -serious competition, al.-o tiie greater number of infrincements
relate to parts, and the Corporation's experience with this type of litigation has
not been very hai>py and the results accomplished have not at all been connuen-
surate with the expense. Further, the patents covering these infringement'^ are,
in most cases, not so strong as to make the Patent Section feel confident that they
will be sustained.
The Patent Section has never thought it worth while to keep a record of all
the Corporation's patents used in its various products. I have what I believe to
be a fairly complete list of these patents but, to maintain an absolutely accurate
CONCENTRATION OF ECONOMIC POWER
693
one would seem to serve no good purpose, particularly as a large number of such
patents merely cover very minor details, also the design of the products is being
continually changed. The same thing applies to our competitors, and while we
could make and maintain such a list by constant revsion, it would profit us very
little if any. This does not apply, of course, to any important patents. We
would know if any such was being used, but I am referring to patents relating to
small details of slight importance and little value.
The Patent Section watches very closely all structures covered by patents under
the license agreements held by the Corporation, so as to be sure that it does not
pay royalty upon something it is not using.
The licenses held by the Corporation and those it has granted are dealt with in a
separate memorandum.
I am also enclosing a separate memorandum setting forth what I believe to be
most of the Corporation's patents (other than those it has purchased or holds
under license) used in its present projects, or which have been used at various
times during the past few years. It is, of course, obvious from the number of
patents relating to some of the products (i. e. headlights) that all of them could
not be "controlling" but relate to details of construction in most cases and which
are frequently changed.
Delco-Remy and Frigidaire patents, as well as some of the other Dayton group,
are not included and these will be treated in another memorandum.
Devices or Articles Covered by Corporation's Own Patents (Other
Than Frigidaire and Delco) and Now Being Used in its Various Prod-
ucts OR Which May Have Been Used During the Past Few Years
Headlights, Taill
ights and Devices used in connection therewith
I. (Design patents,
Testing
Apparatus, etc.)
1,471,679 P
Bell
1,913,196 GM
Falge et al.
1,531,307 GM
Persons
1,927,319 GM
Michel et al.
1,591,572 L
Stimson
1,954,806 GM
Falge and Godley
1,615,548 GM
Michel
1,987,697 GM
Mead and Michel
1,640,831 GM
Hunt
2,014,429 GM
Falge and Godley
1,671,086 L
Stimson
2,014,592 GM
Schwarze
1,743,834 L
Stimson
2,033,381 GM
Koubek & Michel
1,795,940 GM
Falge
2,033,382 GM
Koubek
1,807,350 L
Stimson
2,033,387 GM
Michel
1,812,476 GM
Godley
2,061,001 GM
Michel
1,848,675 L
Stimson
Des. 104,009 GM
Agramonte
1,859,674 GM
Michel
Des. 106,925 GM
Mead
1,871,505 L
Falge & Brown
1,894,910 P
Morgan et al.
1,874,138 L
Stimson
1,894,911 P
Morgan et al.
1,884,076 GM
Michel
1,919,200 P
Childs
1,896,887 GM
Falge et al.
2,111,585 GM
Falge
1,902,997 GM
Godley
2,050,724 GM
Mead & Michel
2,086,-345 GM
W^inkelmeyer
2,054,919 GM
Anibal
2,050,726 GM
Michel
Engine Crankca.se Ventilation Patents
1,529,188 GM
Kettering
1,849,000 GM
Ellis
1,682,998 GM
Summers
1,869,553 GM
Ellis
1,683,039 GM
Hack
2,056,755 GM
Welch
1,713,262 GM
Cochrane
2.056,762 GM
Barr
1,761,944 GM
Taylor
Balancinc,
J Machine Patents
1,731,833 GM
Van Degrift
1,839,134 GM
Van Degrift
1,750,608 GM
Summers
2,008,161 GM
Van Degrift
1,761,945 GM
Van Degrift et al.
2,037,443 GM
Van Degrift
1,822,860 GM
Summers et al.
Plain i
Bearing Patents
1,761,926 GM
Landers
1,783,438 GM Landers
lL'44ni— 39-
-pt. 2 29
CONCENTRATION OF ECONOMIC POWER
1,668,521 GM
1,571,175 P
1,950,590 GM
Instrument Panel Patents
Zubaty 1,967,548 P
Valve Lash Adjuster Patents
Bazzoni
Berry
1,996,807 GM
Bartels
Hallett
Spark Plug Insulators and Method and Apparatus Used in Their Manujacture
2,069,059 GM
2,106,598 GM
2,122,960 GM
1,872,065 GM
1,609,735 GM
1,862,981 GM
1,619,969 GM
1,358,116 GM
1,581,073 P
2,033,321 GM
2,044,897 GM
2,108,515 GM
2.020,606 GM
2,087,821 GM
2,048,605 GM
1,581,083 P
1,981,913 GM
1,996,807 GM
2,054,926 GM
2,024,334 GM
2,001,866 GM
1,871,163 GM
2,104,787 GM
Des. 106,918GM
2,045,557 GM
1.930.276 GM
1.930.277 GM
Fessler
Fessler
Schwartzwalder
1,458,376 P
1,710,995 GM
1,713,851 GM
DuflFendack
bezzana
Spark Plug Electrodes
& Ra- 1,976,295 GM
2,001,888 GM
Spark Plug Manufacture
Rabezzana
Rabezzana
Champion
Schmidt
Re.15,585 P
2,071,571 GM
Plastic Bronze Bearing Development
2,106,590 GM
2,126,660 P
Gilman
Boegehold et al
Boegehold et al
Engine Mounting Patents
Summers
Harris
Simpson
Fisher
Gilman
Fielden
Hallett
Lock Patents
Ventilating Wiyidows
1,542,595 P
Re. 18,866 P
Winton Diesel Engine
2,014,932 GM
2,043,014 GM
2,126,609 GM
12-cylinder Airplane Engine
Caminez
Caminez
Caminez
2,098,718 GM
2,011,855 GM
Electro-Motive
Dilworth
Blomberg
Hamilton et al
Almen et al
Lenz & Adams
Lens & Adams
106.919 GM
106.920 GM
Clutches
2,073,146 GM
2,100,464 GM
2,045,557 GM
Brakes
Anderson
McDougal
McDougal
Raldolph
Raldolph
Sauereisen
Rabezzana, P'onl A:
Kirk
Boegehold et al
Pogue
Anibal
Wright
Hallett
Shoemaker
Brill
Caminez
Gilman
Hamilton et al
Hamilton et al
Gardiner
Almen
Almen et al
1,937,997 GM Townpend
CONCENTRATION OF ECONOillC POWER
695
Valve Manufacture
1,644,021 GM
1,679,977 GM
W. S. Knudsen 1,351,949 L
W. S. Knudsen
Radiator Cores
Renault Compar
2,011,853 GM
Emmo!is 2,071,584 GM
Electric Gages and Ammeters
Shippy
2,047,763 GM
1,942.529 GM
1,919,504 GM
1,847,251 GM
1,805,447 GM
1,742,697 GM
1,737,303 GM
1,735,919 GM
Bacon 1.791,786 GM
Bacon 1,761,917 GM
Eshbaugh 1,761,909 GM
McKinley 1,761,908 GM
Eshbaugh 1,749,366 GM
Eshbaugh 1,723,035 GM
Eshbaugh 1,685,992 GM
Eshbaugh
Bourdon Tube Gages
Bacon
Helgeby
Eshbaugh
Eshbaugh
Zubaty
Helgeby
Eshbaugh
2,079.914 GM
2,079,913 GM
1,937,928 GM
1,937,888 GM
McKinley 1,937.879 GM
McKinley 1,922.616 GM
Wedin 1,909,857 GM
Harada
Temperature Indicators
Eshbaugh
Chisholm
Eshbaugh
1,847,438 GM
Moulding
Cable Winding Machine
t
1.847.453 GM
1.847.454 GM
Webb 1,847,455 GM
Webb 1,848,982 GM
Oil Filters
Webb
Webb
2,047,793 GM
1,940,316 GM
McKinlev 1,830,742 GM
McKinley 1,806,560 GM
Liquid Level Gages
McKinley
McKinley
1,930,546 GM
Bacon 1,902,933 GM
Odometer
Zubaty
1,919,493 GM
Zubaty
Fuel Fumps
1,695,534 P
1,847,445 GM
1,957,753 GM
Carter 2,003.420 GM
Randolph et al 2,104,446 GM
Babitch 2,104,448 GM
Paint Spraying Machines
Babitch et al
Babitch etal
Babitch et al
2,083,633 GM
Brackctt. 2,083,634 GM
Brackett.
Independent Suspension and Adjustments Thereof
2,063,704 GM
2,083,627 GM
Slack. 2,092,611 GM
Youngren. 2,092,612 GM
Radio
OUev.
Olle'y.
2,104,800 GM
Grandy & Doane. 2,108,530 GM
Car Heaters
Ellis & Archer.
2,034,228 GM
Darrah & Hardiman. 2,034,252 GM
Schutt & Darrah.
696 CONCENTRATION OF E(;oncj:\iic power,
Fra}nes
2,096,996 GM Parker.
Rear Axle Construction
2.061,009 GM Rothrock. 1,993,912 YT Austin.
The following is a list of patents used on a number of the Corporation producta
which are not mentioned above, none of which are of any great importance:
1,916,520 GM Manning (Valve Guide).
1,746,220 GM Manning (Valve Spring Vibration Damper).
1,905,92.5 GM Manning (Connecting Rod).
2,069,066 GM Harbour (Pedal Pad).
2,004,258 GM Waterbury (Radiator and Front Fender Support).
1,942,550 GM Helgeby (Heat Treatment of Cables).
1.694.770 GM Cram (Oil Pump Screen).
1,684,550 P Mallorv (Carburetor).
1,983,606 GM Geise (Fans).
1,991,567 GM Morgan (Crankshaft Twisting Machine).
2,058,932 GM Wilson (Muffler).
2,063,743 GM Kamrath (Filter Element).
2,071,583 GM Schutt (Method of Making Bellows).
2,126,643 GM Kamrath (Air Cleaner and Silencer Assembly).
1,826,403 GM O'Brien (Tube Bending Apparatus).
2,081,237 YT Jantsch (Propeller Shaft Center Bearing).
1,967,548 P Bartels (Arrangement for producing multiple total reflections)
1,973,847 GM De Orlow & Lakin (Rear View Mirror Mounting).
1,976,360 GM Neuman (Painting mask).
1,979,989 GM Neuman (Painting mask for wheels).
1,991,582 GM Sterling (Valve Tappet).
1,998,703 GM Bramlev-Moore (Vehicle Jack).
2,004,298 GM Shoemaker (UniversalJoint).
2,030,647 GM McMillin & Taub (Splash Oiling System).
2.047.771 GM Dolza (Body Stabilizer).
2,050,723 GM McMillin (Splash Feed).
2,069,052 GM Webb (Casing Machine).
2,069,059 GM Fessler (Method of Producing Ceramic Ware).
2,018,524 GM Burton (Combined Shock Absorber and anti-roll device).
2,093,859 YT Austin (Vehicle Bodv).
2,018,547 GM Nyland (Gear Lapping Mach.).
2,027,577 GM Crane (Anti-roll device).
2,083,718 GM KuU & Rasmussen (Steering Lever .Joint).
(200 patents in all.)
It is to be noted that the Corporation had outstanding a number of licenses
taken from various individuals and corporations during the years 1924 to 1937
inclusive and which were used in connection with some of the patents above
mentioned.
The Corporation owns a large number of patents relating to processes, machin-
ery, and designs. Many of these are very valuable from a practical standpoint
but are not controlling, nor could we prevent anyone from accomplishing the
same result, so far as the processing and machinery patents are concerned, al-
though perhaps in some cases our structures are superior. The design patents
are not of very much account except in the case of some of the hardware (hinges,
doorknobs, radiator ornaments, etc.) produced by Ternstedt, except in a good
many cases I have no doubt the patents have prevented some competitors from
using a similar design. The legal position regarding design patents is so weak in
the United States, where if a very slight change is made in the design, the patent
is held not to infringe, that really only patents on small articles can be maintained.
APPLICATIONS
There arc now pending in the United States Patent Office 489 applications
relating to the group of units handled by the Detroit office and 561 for Dayton,
New Departure and Frigidaire, or 1,050 in all. About two hundred of the struc-
tures covered by these applications are now being used, none, however, are of
any real importance, and by the time the patents are issued, in all probability
CONCENTRATION OF ECONOMIC POWER 697
the structures will be so changed ns to take them out of the patents. The priii-
cipal value of the applications and the patents issued thereon will be to prevent
someone else from getting a patent on a similar structure thereby rendering the
Corporation liable to a charge of infringement.
LIBRARY, SEARCHES AND INVESTIGATIONS
The Detroit OflSce maintains a very extensive library of patents and its collec-
tion thereof of things relating to the automobile is very complete and numlx-rs
about eight hundred thousand (800,000) United States and Foreign patents.
At the Dayton and Bristol offices, the collection of patents on the articles they
look after is also very complete and they possess about four hundred thousand
(400,000). These patents are supplemented by English, Canadian, and German
publications showing in very brief form each patent granted iiv those countries.
France has no such publication but we have all the French patents of importance
relating to the automobile. The patents of the other countries are not of suf-
ficient importance to warrant maintaining a complete collection thereof, but on
all of the more important searches and investigations, they are examined.
We possess a number of books of value from a patent standpoint and also main-
tain and keep up to date a digest of all articles appearing in the leading United
States and European Journals relating to the automobile and the other products
of the Corporation, particularly radio.
While the Patent Section maintains a search office in Washington, the main-
taining of the library is of the utmost importance as with the great number of
investigations it is required to make, if it were not for the library, we would be
compelled to send all searches to Washington which would mean increasing the
force there from six men to probably twenty-five or more; also, the delay in re-
ceiving reports on the searches would in many cases not only be embarrassing
but frequently might prove quits dangerous as we are very often required to
make a search of something which it is desired to put into production almost
immediately, and we have sufficient material in the Library to come to a conclu-
sion without sending it to Washington.
Exhibit No. 105
[From flies of General Motors Co.]
Litigation Instituted on Behalf of Genera!, Motors Corp.
Twenty-five suits (treating the suits instituted by Delco-Remy as one, which
is practically the case as only one was tried, see explanation on p!i,ge 2 of the memo-
randum immediately following — entitled "List of Patent Suits in which General
Motors or its Subsidiaries were PlaintiflFs").
Eight of these suits were instituted, really, to protect our licensees and largely
because of their, insistence, as they did not think it fair that they should be
paying royalties while a number of other concerns were infringing. The cases
80 brought were:
1926 — Harrison Radiator Co. vs. Trenton Auto Radiator Works.
1927 — Frigidaire vs. A. L. Namm & Sons.
1930 — Frigidaire Corp. vs. Fedders Mfg. Co.
1931 — Frigidaire Corp. vs. Zerozone Corp.
1933 — Frigidaire Corp. vs. Adams & Tagliabue Mfg. Co.
1933 — General Motors vs. Brooklyn Union Gas Co.
1933 — Frigidaire Corp. vs. A. I. Namm & Sons, Inc.
1934 — General Motors vs. S. Davidson & Bros.
1934 — General Motors vs. Younker Bros.
None of the above cases ever came to trial, all were settled by defendants'
taking license or ceasing to infringe.
The suit of the Corporation vs. The Hortcn-Knodel Distributing Company is
against a Norge Refrigerator dealer in Dayton under certain Frigidaire patents.
This suit is really a counter one to the one instituted by Norge against General
Motors.
Three of the cases were really not instituted by General Motors. These were:
1. General Motors and Laminated Shim Co. vs. Lehr Auto Supply, Inc. The
Laminated Shim Company held an exclusive license under this patent and
brought the suit, the Corporation being joined because title to patent is in its
name.
598 CONCENTRATION OF ECONOMIC POWER
2. General Motors Research Corp. and Dayton Rubber Mfg. Company vs. B. F.
Goodrich Company. Dayton Rubber Mfg. Co. holds an exclusive license and
instituted the suit, General Motors being joined as owner of patent. (The title
to patent was originally in the Research and it was the original plaintiflf; when
patent transferred to G. M., bill was amended.)
3. Berry and General Motors vs. Bohn Aluminum and Brass Co. Berry owns
patents and G. M. has exclusive license, but must grant sub-licenses at request of
Berry.
The Corporation is taking no part in the trial of any of the three above cases.
It is not contributing to their expense, nor will it profit from any recoveries, except
if Berry recovers, he will pay back expense of interference case advanced by
General Motors.
The two suits on Radiator ornaments brought against Franklin Die Casting
Company and Faith Manufacturing Company were brought because these two
concerns are copying the ornaments and .selling them at very low prices. These
are not of much importance except a number of the Corporations dealers have
complained that their replacement sales are being affected. Both suits are pend-
ing.
The Temstedt suit against Nyers on Window Regulators was lost, the patent
being Ijeld invalid. The structure was deemed quite important and Nyers was
selling, I understand, a large number of the devices.
The other Temstedt suit is against the Motor Products Corporation under the
Window Ventilation patents. It is set for trial in October, the day not definitely
determined.
AC Spark Plug Company vs. Cooper, who was a dealer for Motor Improvements.
We decided to sue him on several of the AC Filter patents but afterwards con-
cluded to discontinue the suit.
Delco-Remy Cases
For yeafs Delco-Remy has been much disturbed over the great number of parts
of the starting system that were being made by concerns all over the country
and sold at a price very much less than that charged by it, also some of these
parts were not as good as they should be. It, therefore, decided to bring suit
against the principal manufacturers under the patents covering these parts.
About 125 separate suits were filed. The defendants joined together and after
negotiations, it was determined to try one case in New York which was illustrative
of all of them. The Lower Court held the patents vaUd and infringed but the
Court of Appeals for the Second Circuit held them invalid. The real reason,
however, as to why the suit was lost was because the Court, and particularly
Judge Hand, felt that the owner of a car had the right to repair the starter if one
of the parts broke or wore out and that he could buy these from anyone he chose
or have them made and irrespective of whether or not the parts were patented.
This viewpoint is not reflected in the opinion but Judge Hand dwelt upon it at
great length at the hearing. A very similar suit brought by Auto-Lite and
decided a few weeks before ours was decided against it by that same Court so
that now, at least in the Second Circuit, the "gyp" parts business is on a firm
foundation and we can do nothing about it. One of the cases was instituted in
Chicago and we have not as yet determined whether to try it or not. I, personally,
have very little hope of winning it.
Most of the suits instituted by the Corporation were brought to protect its
licensees, as mentioned above, or to try to prevent the defendants from making
"gyp" parts. The only ones which in any way could be considered as an attempt
on' the part of the Corporation to set up a "monopoly" were the suits on the Wolf
patent, the Thompson Synchro-mesh and the Oil Pump.
A brief statement of eac*h of these might be helpful —
Wolf patent. — This was one of the patents purchased from the old "Isko Re-
frigerator Co." which went bankrupt in Chicago. Wolf was the chief engineer and
really the originator of the company; Mr. Henry Joy, I believe, was the principal
financial backer. Wolf took out a good many patents covering various features of
the refrigerator, but the one we sued on was a very broad patent covering the
general idea of a Household Refrigerator which had never been done before. He
did not originate anything really new, his invention consisting in reducing well
known refrigerator parts to a size that could be used for household purposes and
he employed SOj gas instead of ammonia as a refrigerant. All of the refrigeration
companies except Electro-Lux and General Electric were using the Frigidaire
construction and most of them, including Copeland and General Necessities, had
copied the Frigidaire refrigerator without any change at all.
CONCENTRATION OF ECONOMIC POWER 699
Mr. Rector felt that the Wolf patent was too broad to sustain, but after his
death, his partner, Mr. Samuel Hibben, made a study of this patent, as well as
some six or seven others which Frigidaire owned, and came to the conclusion that
they were all valid and should be sustained. It was, therefore, determined to
bring suit although I felt very doubtful of the outcome in the face of Mr. Rector's
opinion. Suit was instituted against both Copeland and General Necessities as
these presented the best cases, their refrigerators being exact copies of Frigidaire
Before the suits were reached, Mr. Hibben died and Drury Cooper was substituted
in his place. After considering the matter. Cooper came to the conclusion that
we should be able to su tain the W^olf patent, but he did not believe the others
were strong enough to warrant going to trial upon them. So they were with-
drawn. (These patents are detailed under the Delco-Light Company vs. Cope-
land Sales in the list of suits. The patents were, at the time this suit was brought,
in the name of Delco-Light, but were transferred to Frigidaire before the General
Necessities suit was instituted). The case was tried before Judge Tuttle who
felt that while Wolf had done a very clever job, it did not amount to invention
and this was also the attitude of the Court of Appeals. Of course, if this patent
had been sustained, the Corporation would have contested this type of refrigerator
and concerns like General Necessities, Copeland, Nizer, etc. would have been
enjoined and forced to take a license. As I have said before, however, General
Electric and Electro-Lux did not infringe, also Kelvinator had been given a
license, so with Frigidaire's three principal competitors either not infringing or
holding a license, it would seem that not much could be said about "monopoly."
Upon losing this case, the suit against Copeland Sales Company was discontinued.
The Thompson Transmission. — This was brought to the attention of the Cor-
poration in January 1924 by Mr. Henry Crane upon whom Thompson had called
and shown his device. From a patent standpoint, there was nothing especially
new about it except some improvements, mostly controls, which he had originated,
but which apparently made it much more efficient than any previous similar
device. The transmission, however, as Thompson had it in 1924 was not per-
fected sufficiently to install it in a car and arrangements were made with him to
develop it with the assistance of the Research and Cadillac. This was finally
done in the latter part of 1928 and in December of that year, an agreement was
made with him whereby the Corporation possessed an exclusive license for three
years and thereafter either exclusive or non-exclusive at its election. Thompson
was to be paid a minimum annual royalty of $65,000, $75,000 and $85,000 for
the years 1929, 1930 and 1931 respectively, and $100,000 per year thereafter if
the license remained exclusive. In 1929 Thompson received $65,849.25 in royal-
ties. In 1930 he became an employee of the Corporation and the patents were
purchased for $360,000; he was also to receive one-half of any royalties collected
by the Corporation up to $150,000. He did receive about $15,000 and then they
were compounded for $50,000.00.
While a very careful search of the prior art was made at the time the agreement
with Thompson was made, it afterwards developed that a number of applications
were filed in the Patent Office which went into interference with some of his
applications. It was thought wise to acquire some of these applications as well
as certain English patents to protect some itt'provements made in the device.
Others of the interferences we contested and were successful in all of them except
one of no importance. The cost of these proceedings and the purchase of appli-
cations and patents amounted to something over $100,000. The entire develop-
ment, including patent expense, amounted to more than $1,000,000. The trans-
mission was a very distinct advance over anything else on the market and while
the Corporation felt that its investment and initiative should be protected it
was not averse to granting licenses and did grant the same to Packard, Rolls-
Royce and Peugot. It would have granted others had it been approached, but
Borg- Warner, "without contacting at all with the Corporation, through its sub-
sidiary, Detroit Gear and Machine Company, approached aU of the other auto-
mobile companies and told them it could make the transmission for them and
would protect them against any possible patent complications. When these
transmissions began to appear, we complained to both Detroit Gear and Machine
Company and Borg- Warner and had a number of interviews but could make no
headway with them whatever. They contended that our patents were of no
account and that they were dominated completely by a group of patents issued
to one Murray and that the best they would do would be to exchange licenses.
The Murray patents had been offered to the Corporation several times and we
had maoe ah exhaustive study of them and could see no merit whatever in any
700
CONCENTRATION OF ECONOMIC POWER
of them. At the last interview we had with Murray we did offer $100,000 as
we felt to get rid of their nuisance value, it would be worth that amount.
Fuel Pump. — For many years (at least since 1924) the Research and AC Spark
tried to discover some form of pump that would taki the place of the Vacuum
Tank. Both organizations found that the essential element of the pump was the
diaphram. All kinds of metals and other things were tried, but none of them
would "stand up" long enough to be practical, either cracking or becoming
crystallized. All of this work cost a great deal of money. Finally, when the
development looked rather hopeless, a man named William C. Carter came to
AC with a diaphram made of a very good grade of linen impregnated with linseed
and upon which he had a patent recently granted (1932). This diaphram proved
satisfactory and the patent was purchased for $100,000. Stewart- Warner had
also been working for years on pumps and had produced an electrical pump which
I understand is quite good but more expensive than the AC pump.
As soon as the AC pump was introduced, it met with immediate favor, both on
account of its cheapness as well as its efficiency, and the greater numjber of cars
were equipped with it. No licenses were granted except to Ford Motol Company
who paid no royalty but promised (no binding contract) to give AC ills business.
Stewart- Warner deliberately infringed. AC did not discuss giving it a license and
I do not think the corporation would have granted it one even if asked. Suit was
instituted and while Judge Tuttle decided in favor of the Carter patent and
disregarded some patents of Stewart- Warner which they had set up in a counter
claim, before the decree was signed, we made a settlement with them by their
agreeing to quit making pumps which infringed. AC also took over the equip-
ment which Y/'as being used, and paid, I believe, $50,000 for it.
The suit of Guardian Trust Company of Cleveland, Ohio, against Anthony
Cottone is included because, while the Corporation is not a party, it holds a license
from the Trust Company under certain refrigeration patents. The Trust
Company agreed to sue infringers of these patents and, Frigidaire, ascertaining
that such infringement existed, insisted that suit be brought. The Corporation
is taking no part in the case nor contributing anything to the expense thereof.
The suit instituted by Frigidaire and Penn Electric Switch Company (one of
its licensees) against Moore was under its so-called Cold Control patents. These
patents were believed good and a number of refrigeration companies had taken
licenses. The Court held the patents not infringed.
Exhibit No. 106
[Prepared by James McEvoy, Patent Counsel, General Motors Corporation]
Schedule of Litigation Costs of General Motors Corporation
1924 Litigation $103, 320. 32
1925 " 29,325.14
1926 " 28,354.29
1927 " :.. 124,885.03
1928 " 136,493.77
1929 " 174,193.97
1930 " 112,152.25
1931 Litigation 199, 910. 94
1932
1933
1934
1935
1936
1937
369, 821. 86
224, 315. 77
220, 323. 53
332, 679. 64
209, 521. 84
262,711.74
"ExHiBit No. 107," introduced on p. 367, is on file with the Committee.
"Exhibit No. 107-A,", introduced on p. 367, is on file with the Committee.
'Exhibit No. 108," introduced on p. 369, is on file with the Committee.
'Exhibit No. ,109," introduced on p. 369, is on file with the Committee.
CONCENTRATION OF ECONOMIC POWER 701
Exhibit No. 110
History of the Growth of the Long Pending Patent Application Evil
Prepared and Distributed by the Patent Section of the General Motors Cor-
poration
The charge against the long pending application, repeated by court after
court and commissioner after commissioner, is that it stifles progress of science
and the useful arts instead of promoting it. Fundamentally the principles of
the tactics involved are:
1. A patent right hidden from the public during a long period of development
of the art.
2. Asserting that right when the development has enriched the trade to a
poino where exploitation of the patent promises to be most profitable.
Tne objections to the practice, aside from the unpleasantnegs of surprise
attack, are —
1. The reward which should go to the inventor of a successful device is too
often wholly or partially diverted to an applicant who has done mothingjaut make
an unsuccessful attempt. Unfortunately .the bounds of an invention are set by
words. The applicant with the unsuccessful device need but emp\oy an adroit
patent attorney, keep his application pending many years, and when a successful
device appears on the market, have his attorney make a careful search for words
that will describe real or fancied similarities between the successful development
and the abandoned attempt. The man who promoted progress of the useful
arts must then pay tribute to the man who contributed nothing, but whose
attorney is adept in discovering analogies.
2. Owing to the secrecy of the proceeding the public is unable to find out what
may be manufactured without fear of domination by i)atents. This seriously
hampers legitimate business.
3. The period of monopoly is increased beyond that authorized by Congress,
and the ones that benefit the most are the very ones that most abuse the patent
system.
These tactics have been employed in at least three different ways in the past
century. Two of these ways have been cut oflF, one by legislation, and one by
judicial legislation. The third has so far been unsuccessfully attacked.
1. the first method: the revived application
Under the law of 1836 there was no time limit within which the applicant must
r^ly to the Office action. The result was that many applications were presented
anew after a lapse of years, given the benefit of the early filing date of the original
case, and issued as patents to dominate industries that had grown up in the
meantime. This procedure was brought to an end by the Patent Act of 1870,
setting two years as the time within which an applicant must reply to an OflSce
action.
2. THE second METHOD: THE BROADENED CLAIM REISSUE
Under the reissue statute a patent issued with narrow claims could be reissued
at any time with broadened claims and asserted against industry which had
developed without its aid. This evil was cut off by the decision of the Supreme
Court in Miller vs. Brass Company (104 U. S. 783), holding that claims may not
be broadened by reissue unless the reissue is applied for within two j^ears of the
grant of the original patent.
3, THE THIRD METHOD: WILFUL DELAYS BY APPLICANTS IN PROSECUTION OF PATENT
APPLICATIONS
This is the method now in vogue. The application is simply kept pendiijig by
amending it within the time allowed by law. This has been the practice since-
1870 In the Telephone case (79 O. G. 1362) an attempt was made to combat
the practice by having the patent declared void on the ground that the delay in
the Patent Office amounted to fraud. The charge was not sustained, and the
Court established as the law that an applicant is entitled to wait until the last
day of the period allowed by the law before amending his case, without being
chargeable with laches or fraud. Since then in an effort to combat the evil of
long pendency, the period for reply has been successively reduced to one year and
recently to six months. The practice has also been attacked by several commis-
702 CONCENTRATION OF ECONOMIC POWER
sioners of patents under their power of regulating proceedings in the Patent
Office. Not onlj' has no lasting improvement been accomplished, but the situa-
tion is worse than it has ever been.
The following record of the efforts to maintain the patent system as a sj-stem
for promoting the progress of science and the useful arts is an interesting record
of human struggle.
PRIOR TO THE ACT OF 1870
The examination system was adopted in 1836. This Act set no time limit for
reply by applicants to Office actions. If the applicant withdrew' his application,
two-thirds of the filing fee was returned to him.
Hobinson says (Vol. 2, p. 194):
"Prior to the act of 1861 this question of the abandonment of the application
by delay was determined upon gene al princij)les regarding diligence and good
faith with the public. By that act, however, it was provided that all applica-
tions nmst be completed and prepared for examination within two years
after the fihng of the petition, and in default thereof should be considered as
abandoned by the applicants unless the Commissioner were satisfied that the
delay was unavoidable. This provision was reenacted in the act of 1870, and
appears in the Revised Statutes, with the addition that a failure to prosecute
the application within two years after any action thereon, of which notice
has been given to the applicant, shall also work its abandonment."
The last change was not accomplished without the usual previous abuse and a
struggle to correct that abuse.
The abuse that had grown up was the practice of reviving applications after the
lapse of a long period of years, asserting there had been no abandonment of the
invention, obtaining a patent, and attacking enterprises that had developed in the
meantime. In Colgate vs. Western Union, 14 0. G. 943, decided in 1878, a number
of instances of the practicc'are set out. The Colgate case was itself an example of
an aggravated form of the abuse. The inventor filed his application in 1848, with-
drew two-thirds of his fee in 1851, roamed in the West for seven years, refiled his
case in 1858, and finally received his patent in 1867. The invention was a very
simple one — providing copper wires with an insulating coating of rubber — but the
Court held the inventor had not abandoned the invention and sustained the
patent.
In Adams vs. Jones (1 Fisher's Patent Cases 527), "an application was made in
1850, and was never withdrawn, and the patent was granted in 1857, and was
sustained. Mr. Justice Grier says, that by the application filed in the Patent
Office, the inventor makes a full disclosure of his invention, and gives public
notice of his claim for a patent; and that the delay afterward interposed by the
mistakes or obtuseness of public officers, where gross laches cannot be imputed to
ihe applicant, cannot affect his right." The reference to public notice by filing
application for patent is interesting, for according to a decision of the Secretary of
the Interior in 23 O. G. 629, the rule of secrecy was not adopted by the Office
until 1851. The Rules of Practice for 1852-53, published on page 445 of the Com-
missioner's report for that period, contain a provision for secrecy of pending
applications for patent.
With the adoption of the rule of secrecy the whole basis of the reasoning on
which the decision in Adams vs. Jones was based disappeared. But though the
basis for the right disappeared, the right persisted. In Johnsen vs. Fassman
(1 Woods 138) an apphcation made in 1856 was rejected in 1857 for want of
novelty. The applicant took no further steps until 1866, when he took an appeal
which resulted in the granting of a patent. In the meantime patents for sub-
stantially the same invention were issued to other inventors. During four of the
nine years the applicant was a citizen of a State in rebellion. There was no with-
drawal of his application. It was held that no direct or implied abandonment
was shown.
In McMitllin vs. Barclay (5 Fisher's Patent Cases 189) an application was made
in 1855, and was finally rejected in 1856 on appeal. It was not withdrawn, but
nothing more was done in regard to it until 1867, when the specification was amend-
ed and patent granted. It was held there was no abandonment and that the
lapse of time was satisfactorily explained.
But there were other cases in which long delays in prosecution were held fatal.
In Bevin vs. The East Hampton Bell Company (9 Blatchford 50) application was
filed in 1862 and the patent granted in 1869. During ten years of this period the
CONCENTRATION OF ECONOMIC POWER 703
inventor watched others develop the invention, and, although able to do so, did
nothing to secure his patent. The delay was held fatal.
There was a similar holding of laches in Marsh vs. Sayles (5 Fisher's Patent '
Cases 610) where 18 years' delay remained unexplained.
In 1876 the United States Supreme Court sustained a patent having a gap of
eight years in its prosecution (Smith vs. Goodyear Dental Vvlcanite Co., 3 Otto 486),
but it is very interesting to read the dissenting opinion of Justice Bradley, for it
was Justice Bradley who wrote the decision in Miller vs. Brass Company, of which
more will be said:
"I dissent from the judgment of the court in this case, on the ground that
the patentee, having duly made his application for a patent in 1855, and the
same having been three times rejected, must be considered as having aban-
doned the same, inasmuch as no further effort was made to obtain a patent
until eight years afterwards, without any pretense that the patentee was
engaged in perfecting his invention and in the meantime the invention which
he claims as his had come into general public use. The application for patent
made in 1864 was a new and independent application, and should be treated
as such. As the public had enjoyed the use Of- the invention for more than
two years prior to this application, the patent should be declared invalid.
Great injustice will, in my judgment, be done to the public to allow a patent
obtained under such circumstances to stand. The public had a right to sup-
pose that no further application would be made. The levy of a tribute now
on all the dentists of the country who have brought the plate into public
notice and use seems to me a species of injustice. The delay of the patentee,
in fact, is made to operate to his benefit instead of his prejudice, his patent
being made to run eight years longer than it would have done had it .been
granted when first applied for: So that the public is still further injured by
sustaining the patent as finally granted. It is too cemmon a case that asso-
ciated companies, in order to maintain some valuable monopoly, look about
to see what abandoned invention or rejected application, or ineffective patent,
can be picked up, revamped, and carried through the patent office, and by
the aid of ingenious experts and skillful counsel succeeded in getting the
desired protection. I think that the courts ought to be strict in maintaining
the rights of the public in such cases. And the present case seems to me to
be one in which we ought to hold the patent invalid as against those rights."
During the decade preceding the passage of the Act of 1870 providing two years
for reply to Office actions, the Commissioners of Patents had not been idle in
combating the long pendency of applications. Although the Statute of 1861
merely provided that all applications must be completed and prepared for examina-
tion within two years after filing the petition, upon penalty of abandonment,
Commissioner Holloway construed the law to authorize him to hold applications
abandoned in which no action was taken by the applicant for two years after a
rejection by the Office. In his report for 1865 Commissioner Theaker expressed
doubt as to the legality of this practice and recommended legislation authorizing it.
The Commissioner, in the same report, recommends the extension of the two-
year rule to broadened claim reissues:
"This period of two years is recognized in several instances as the measure
by which the rights of an inventor shall be determined; and I am convinced
that if the same idea is extended to another case not now within its scope, the
occasion for much serious injustice will be removed. Under the existing law
a patent is taken out in which the inventor makes a clearly defined claim to a
particular feature. The claim, it may be, does not cover all that is described
in the specification or shown in the drawing, and whatever is thus left un-
claimed may be used by any person, unless protected by a previous patent.
Some enterprising manufacturer, who is keen enough to recognize the value
of that which the inventor did not deem it worth his while to appropriate,
invests his capital and begins to furnish the public with a valuable article;
and after this the inventor applies for a reissue of his patent and an extension
of his claim so as to give him the monopoly of that which he had before left
open to the use of the world. If it appears, upon examination, that the
original specification described the art or device in question, and that the
holder of the patent was actually the original inventor, he is entitled to a
reissue in such terms as to preclude the use of such device, except upon such
conditions as he may grant. It would not be difficult in this manner to
entrap a person into such an arrangement of his business or employment of
his means as to le^ve him at the mercy of the inventor, or to compel him to
704 CONCENTRATION OF ECONOMIC POWER
fiay an exorbitant royalty, when the patent is reissued with a broader claim,
n my opinion it would be a judicious amendment of the law, and would
prove an effective safeguard, to the rights of innocent parties, if the privilege
of reissuing a patent in such terms as to broaden the claim were restricted to
the first two years of the life of a patent, leaving reissues for other purpose
to be granted at any time, as at present."
Commissioner Fisher took up the fight on long pending applications. In his
report for 1869 he is verj^ emphatic in his condemnation of the practice:
"Some provision is also needed limiting the lime during which applications
shall be permitted to lie in the Patent Office, after adverse action, before the
next step by way of appeal or amendment is taken. Much injury to the
business of the country is likely to result front the construction lately given
to the law by the Judge of the Supreme Couit of this district, by iutlicting
patents upon the nation for inventions which have long been in public use.
This is, in effect, to create a monopoly, instead of affording encouragement
to inventors.
"There are hundreds of these cases in the Office, many of which are being
bought up upon speculation, and vigorously pressed for issue. One of these,
lately filed, was withdrawn in 1851, and has new been refiled, after a lapse of
nineteen years, when the substance of the invention which it seeks to monopo-
lize has gone into use in nearly every form in w lich a well-known agricultural
implement is now manufactured."
The decision of the District Supreme Court to which the Commission referred
was undoubtedly £^x, parte John W. Cochran. Cochran's application was filed in
1859, and rejected me same year. No appeal was taken, and on February 20,
1860, the application was withdrawn and the balance of the fee was refunded.
In 1868 Cochran filed a new application which was rejected by the Commissioner
upon the ground of abandonment. During the eight year gap in prosecution
Cochran busied himself with the making and marketing of other inventions.
The Supreme Court of the District of Columbia reversed Commissioner Fisher
but in spite of that fact he declined to issue the patent. Later the Act of 1870
was passed, containing a validating clause, and under it Commissioner Fisher's
successor issued the patent. Commissioner Fisher was vindicated, hown-er, for
the patent was held invalid for laches in United States Rifle Company vs. Whitney
Arms Company, 11 O. G. 373.
SINCE 1870
Undoubtedly the passage of the Act of 1870 with its two year rule put a stop to
the old form of abuse. There must also have been considerable doubt as to
whether an applicant was entitled to take his full two years for reply to office
actions for Robinson says on page 194, Vol. 2, of his treatise, published in 1890:
"But this provision of the statutes does not confer upon the applicant a
right to two years of inaction between each action of the Patent Office.
Unreasonable delay for any period is still abandonment. These statutes
merely declare that a delay of two years is prima facie unreasonable, and
thus throw upon the applicant the burden of proving that in his particular
case the delay was justified."
It remained for the Telephone case, decided in 1897, to make it absolutely safe
to be dilatory in prosecuting patent applications.
In the early part of this period the favorite abuse seems to have been the
broadened claim reissue. In his report for 1877, Commissioner Spear refers to
the growth of this practice:
"It is perhaps unavoidable, even under our system, which provides for an
examination as to patentability, that patents of little or no value, and for
unimportant improvements, should be very frequently granted. Many of
those patents are used more to retard the progress of the arts than to advance
them, aad in such ways as to tend rather to bring the patent system into
disrepute. For illustration, patents are often granted for inventions more or
less crude, for machines capable of operation mechanically, but noc capable
of profitable operation, and not valuable commercially, or for processes
which, for like reason, fail to become of practical value. These patents
sometimes lie dormant until, in the progress of the arts and by the efforts of
more practically successful or ingenious inventors, the goal is ultimately
reached, and inventions are perfected and made practically useful, in which,
however, are embodied the germs found in some of these old patents.
CONCENTRATION OF ECONOMIC POWER 705
"One of the greatest' hardships, and the source of much complaint, has
been the reissue of such old patents with claims covering machines subse-
quently invented and practically the first to operate successfully. To such
an extent has this been carried, that when a man had really made a valuable
invention, it was necessary for him to examine the records of the Office, and
ascertain what old patents could be found which might be reissued to cover
his invention; and it has been a matter of prudence to secure such patents
before investing in the manufacture of an invention liable to be dominated in
that way."
Five years later, in 1882, Justice Bradley delivered the opinion of the United
States Supreme Court in Miller vs. Brass Company, 104 U. S. 783, holding invalid
a broadened claim reissue applied for more than two years after the grant of the
original patent. His appreciation of the injustice of this situation was just as
keen as in the Vulcanite case in which he handed down the strong dissenting
opinion quoted above. He says:
"Patents have been so expanded and idealized, years after their first issue,
that hundreds and thousands of mechanics and manufacturers, who had just
reason to suppose that the field of action was open, have been obliged to dis-
continue their employments, or to pay an enormous tax for continuing them.
* * * * Every independent inventor, every mechanic, every citizen, is
affected by such delay" (in applying for reissue), "and by the issue of a new
patent with a broader and more comprehensive claim. The granting of a
reissue for such a purpose, after an unreasonable delay, is clearly an abuse of
the power to grant reisi=ups, and may justly be declared illegal and void. It
will not do for the patentee to wait until other inventors have produced new
forms of improvements, and then, with the new light thus acquired, under
pretense of inadvertence and mistake, apply for such an enlargement of his
claim as to make it embrace these new forms. Such a process of expansion
carried on indefinitely, without regard to lapse of time, would operate most
unjustly against the public and is totally unauthorized by the law. In such a
casi», even he who has rights, and sleeps upon them, justly loses them."
This decision closed the door to the second method of abuse.
THE MODERN FORM OF LOSQ PENDING APPLICATION EVIL
In his report for 1887, Commissioner Hall gives a good description of the third
and modern method of procedure:
"Under Section 4894 R. S., apjjlicants who desire to prolong their applica-
tions and postpone action therein have an ample opportunity to do so. There
are two classes of persons who apply for patents, one composed of those who
are exceedingly anxious to obtain their patents at the earliest practical
moment, the other, of those who desire to prolong the issue of their patents
and to keep the application pending in the Patent Office to the very latest
date possible. The second class eml)races the more powerful, rich, and
influential parties, who arc either the inventors or the assignees of the inventors.
This section of the statute enables the second class of persons to keep their
applications pending in the Office for years before their patents issue. In
the meantime they are engaged in manufacturing and putting upon the market
the article or improvement, but warning the public that the patent is applied
for, the effect of which is to give them the absolute control and monopoly of
the invention and to deter all other inventors from entering upon the same
field of invention and from manufacturing the article.
"The manner in which this delay is effected may be briefly explained: The
applicant files his application and is allowed two years within which to com-
plete or perfect it. Any action of the Office requiring change or modification
or some formal correction can be followed under this section by a further delay
of two years before the applicant is required to take any action in response.
At the expiration of the two years he perhaps makes some amendment or
change in the character of his claims. This involves a corresponding action
on the part of the Office, and, however prompt and speedy this action may be,
the applicant is permitted another two years before any responsive action
can be compelled from him; and so the matter may be continued. There are
applications now in the Office which have been kept alive nine or ten years,
and the Office is powerless to compel speedier or earlier action on the part of
theanplifpnts."
706 COXCENTUATION OF ECONuMIC POWER
Obviousl}' the practice was still in its infancy, for nine or ten years no longer
represents the extreme length to which this practice is carried.
Commissioner Hall's remedy is much the same as that favored by Commissioner
Robertson today:
"I earnestly recommend that Section 4894 be so modified that there shall be
vested in the commissioner of patents a discretion to declare any application
forfeited for want of prosecution whenever he shall be satisfied that such
order should be entered. This power is possessed by all tribunals who have
the control of litigation and matters of this character."
In 1891 Commissioner Simouds recommended the following legislation to cure
the abuse;
"An amendment compelling an applicant to take action upon his applica-
tion at least once in every six months, in lieu of once in two years, as at present;
and a further provision that a patent shall in no case live for more than twenty
years from the date of the first application therefor. The adoption of such
amendments would put an end to keeping applications for patents pending
many years prior to issue."
Commissioner Seymour remarked upon the abuse in his reports for 1894, 1895,
and 1896. On April 15, 1895, he put into effect amendments to the rules of prac-
tice providing that if applications were not amended within six months after an
Office action, the Examiner should reexamine them on his own motion, and, pre-
sumably, make the action final. The amendments also provided that in every
case pending more than five years in which the record raises the presumption of
intentional "delay in prosecution, the Examiner may require the applicant to
Fhow cause why the case was not more rapidly prosecuted, and if he determines
that the delays have been intentional and unreasonable, he may reject the case for
that reason. Commissioner Seymour had some doubt as to the legality of the
new rules and on June 18, 1897, following the decision in the Telephone case,
they were dropped.
The Telephone case (79 O. G. 1362) was a suit by the United States to cancel the
Berliner patent No. 463,569 on the ground that it was delayed in issuance by
connivance between the assignee and the Patent Office officials so that the Tele-
phone Company would get the benefit of the extended period of monopoly. If
was held that no fraud was shown, and that an applicant was entitled to take the
full two years specified by statute in amending his application.
Commissioner Duell was very active in his efforts to shorten the period of
pendency of patent applications. In his report for 1898 he recommended the
following legislation :
"An amendment to limit the life of all patents so that they shall expire not
later than twenty years after the applications for the same are filed.
"At the present time it is possible to keep applications alive for an indefinite
number of years. That this practice does not promote the progress of inven-
tion is self-evident."
He again attacks this practice in his report for 1899:
"At the present time an application can be kept alive in the Office for an
indefinite number of years, although there is no good reason why at least
ninety per cent of all patents cannot be issued within one year after filing
applications therefor. The practice of keeping applications pending in the
Patent Office is, in my opinion, reprehensible, as it certainly does not promote
the progress of invention, but rather tends to stifle it. If an application does
not become involved in an interference it should not be permitted to remain
in the Patent Office more than three years without abridging its life of seven-
teen years. Were it not for the number of appeals, all interferences could be
disposed of within that time. To meet any case of unusual hardship discre- '
tion might be lodged with the Commissioner of Patents to extend the proposed
limit of three years."
Although the Act of 1897 changed the time for amendment from two j'ears to
one year, and it was hoped that this would remedy the situation, in his next report
Commissioner Duell is even more emphatic that the situation demands remedy:
"The most serious defect, however, follows from the power to keep applica-
tions in the Office fur indefinite times through delays in amending the same.
The Act of March 3, 1897 (decreasing the time for amendment from 2 years
to 1 year), was intended to prevent or check this evil; but it has failed of its
C'(JNCENTHATION OF ECONOMIC POWER 707
purpose. At the present time about 75% of the patents granted are issued
within one year after being filed, and were it not for the fact that applications
are unduly delayed at least ninety per cent would issue within that time.
The rights of the public would be protected and very seldom would an in-
justice be done to an inventor if a provision was incorporated into the patent
laws providing that unless an application became involved in an interference
it should not be permitted to remain in the Patent OfTice more than three
years without abridging its life of 17 years.
"The records of the Office show that there are pending 4,829 applications
filed prior to Jan. 1, 1898. Three of these applications were filed in 1880, 1
in 1881, 4 in 1882, 3 in 1884, 3 in 1885, 13 in 1886, 7 in 1887, 13 in 1888, 19 in
1889, 23 in 1890, 45 in 1891, 64 in 1892, 103 in 1893, 154 in 1894, 368 in 1S95,
992 in 1890 and 3,011 in 1897.
"It will be seen, therefore, that an application may be kept alive indefinitely,
if it be desired. While the list above given embraces only such applications
as were filed under the law as it existed prior to Jan. 1, 1898, yet 10 years
from now a similar list will undoubtedly be given, provided the statutes are
not amended, for the only difference lies in the fact that amendments now have
to be made within a year after the official action instead of 2 years under the
prior Act. A law which permits this should be corrected."
Commissioner Duell's prophecy as to the condition of work in the Patent Office at
the end of the next decade was amply fulfilled.
In 1911 Commissioner Moore takes up the battle, confident that changing the
time for amendment from one year to six months will solve the difficulty:
"I also respectfully recommend the passage of the bill * * * * j-e-
cjuiring that an application for patent shall be prosecuted within six months
after an}' action by the Patent Office. The present period within which the
applicant is allowed to amend is one year, and under the existing practice
there have been- many instances of cases being amended just within the one
year limit in order to keep them alive, they thus serving as drag-nets in many
cases to catch inventions along similar fines which may be subsc()uently
applied for, thereby involving inventors in expensive interference proceedings.
It lias been the effort of the Ofl'.co to get t!ic old cases out of the Office when-
ever possible consistent with good work. The Office has been severely crit-
icized recently, especially in the last 3'ear or two, for allowing applications,
particularly those owned by corporations, to rest in the Office for such long
periods as to really have the effect of extending the patent period in case such
applications are later passed to issue. Instructions have been repeatedly
given to the examining corps to as far as possible got rid of all such cases as
are delayed intentionally by the applicant or his attorney. Had this bill
' it would have amost entirely overcome that criticism."
Commissioner Ewing's crusade against the long pending application is fresh in
the minds of practicing attorneys. The following quotations from his reports
declare his purpose, and set forth his methods of attack:
"I hope to be able to make it impossible for an applicant to prosecute his
application bj' dilatory or time-consuming amendments bj- refusing to enter
amendments which are not proper responses to Office actions, and in appro-
priate cases holding the applications to be abandoned. I am also considering
the propriety and wisdom of making these old apj)lications pubfic. The
statute contains no provision against it. There is, however, a rule of the
Office, under which they have all been filed, which declares that the applica-
tions shall be preserved in secrecy.
"Little advantage will result from getting rid of the old cases now pending
if others are permitted to take their places. I believe that with proper ad-
ministration it is possible to limit the time during which an appfication may be
kept pending in the Office to less than 5 years, and perhaps to less than 3 years,
without unduly reducing the applicant's right to consideration of his case.
*****
"Few applicants who keep their cases in the Office for many years -deliber-
ately are entitled to favorable consideration. It is believed that the conse-
quence of the appfication of this conviction on the part of the Commissioner
to the delayed cases will satisfy applicants of the wisdom of prosecuting
their cases promptly. -Every effort will be iBade to eliminate this evil of long
pending applications. If during the course of a year this has been sub-
st.ant!ally accomplished, it is believed that no legislation will be necessary to
708 CONCENTRATION OF ECONOMIC POWER
prevent the recurrence of the evil. Should my efforts, however, along this
line prove to be ineffectual, I shall in my next report to Congress recommend
appropriate corrective legislation.
"In conclusion it may be stated that on an average applications are in the
Office about two years, and in the vast majority of cases thi.s length of time
is sufficient for thorough consideration of the applicant's claims (Report for
1913)
"I believe that it is possible with proper administration so to limit the time
during which applications are kept in tlie Office that very few will exceed
three years, and this without impairing an applicants' right to consideration
of his case. * * * 1'lie progress made toward eliminating the evil of
long-delayed applications has been sufficiently encouraging to warrant the
present belief that legislation is unnecessary." (Report for 1914.)
Commissioner Ewing was very sanguine about the results to be obtained by
employment of his methods. In his report for 1916 his tone was triumphant:
"When the Supreme Court began the reformation of the practice respecting
reissues with the dicision in Miller v. Brass Company, it had to deal with an
abuse quite analogous to that of delayed applications in the Office. One
result of the line of decisions in which they corrected these abuses was that a
smaller number of reissue applications were filed and that the applications
were more carefully scrutinized by the Patent Office. Down to 1882 there
had been granted 250,000 patents and 10,000 reissues, or about 1 in 25;
From 1882 to 1916 there were granted 900,000 patents and less than 4,000
reissues, or about 1 in 225.
"It will bo found from the foregoing tables that when the Office began to
reform the conditions respecting old cases there were about 4,300 which had
been on file 5 years or longer. It will be seen that they have been reduced
to less than- 1,700. I believe that during the coming year this number will
be reduced by another thousand and the evil be substantio.Uy eliminated.
"The reform in the treatment of applications in the Office to prevent long
delay is believed to be as extensive and as important as the reform effected
by the Supreme Court respecting reissue patents. It is, in fact, an a}>plica-
tion of the spirit of the decision in Afilhr v. Brass Company in dealing with
another development pf the same evil tendency which the Court there
combated."
After his resignation no comment on the evil of long ponding applications
appears in the Commissioners' reports. For a few years the number of old cases
is faithfully reported and then that, too, disappears. The campaign is dropped.
The stream of business in the Patent Office drifts back into its old chaimels.
Patent applications again become stagnant in the Office, at times for almost a
generation. In 1927 a fresh effort is made to cure the condition. Again the
remedy applied is to shorten the time for reply to Office actions, this time to six
months. The following charts show the success achieved in a half centurv of
effort by many Commissioners, many Congresses and many organizations of the
patent bar:
CONCENTltATION OF EOOXOMIC I'OWKIt
709!
CN..
124491— 39-^pt. 2 30
710
CONCENTRATION OF l>'ONOMK: I'OWKU
CONCENTRATION OF ECONOMIC POWEK JH
Chart No. 1 * is submitted, not as statistically complete, but as accurately
•depicting a trend. Substantially the same trend is shown by Chart No. 2. 2
The reports of the Commissioners of Patents throw some light on the subject:
In 1880, Commissioner Marble was disturbed by this condition in the Patent
Office:
"Some of the examining divisions are several months behind with their
work, which accounts in some measure for the proportionately less number
of patents granted as compared with former years, many of the applications
filed during the year remaining undetermined at its close. This is a serious
difficulty, because inventors as a class are impatient of delay."
In 1900 Commissioner Duell reports that 75% of the patents granted issue
within one year.
In 1913 Commissioner Ewing reports that applications are in the Office two
3'ears on an average.
Mr. W.' D. Shoemaker is responsible for the following figures:
AVERAGE TIME OF PENDENCY OF PATENT APPLICATIONS
1917 1 year, 9 months.
1921 1 year, 10 months.
1928 2 years, 7 months.
1929 2 years, 10 months.
The patents from which the data to plot Chart No. 2 was obtained are listed at
the end of this report. They were obtained from a number of sources. It is
believed that the list is thoroughly representative of the important patents issued
■during the periods indicated. The average for the decade ending in 1930 Jiiay be
attacked on the ground that too few patents are included in the study and too
many of them are aggravated cases of long pendency. This may prove to be a
fair criticism. It is, Kowever, a difficult matter to ascertain what are the impor-
tant patents among those so recently issued. It is quite likely that a more liberal
selection would reveal a lower average of pendency, possibly seven years or eight
years, instead of nine or ten. But it is not believed that any representative selec-
tion of important patents will do other than confirm what this curve shows — that
the length of time important patents are pending in the Patent Office is much
greater than the average, — the data available indicates they are pending two or
three times as long; and that that length of time is rapidly increasing.
The Court of Appeals of the Seventh Circuit in the recent litigation on the
Cowles patent 1,103,567, accurately depicted the situation in a decision, later
^thdrawn, from which the following is quoted:
"This tendency to thus extend the monopoly period seems to be a growing
one. Not how promptly may a patent be secured, but rather how long may
the proceedings in the Patent Office be extended, seems to be the 'preferred'
mode of procedure. And this is particularly true if the patent is to be
operable in a rapidly developing art. During the pendency of the applica-
tion, the inventor enjoys, to a limited extent the privileges and advantages
arising from his 'patent applied for' notices and warnings. When demand
for the article is established, he presses his application, and a patent issues.
Frequently, amendments to the claims and specifications appear several
years after the original application , is filed, and strangely enough, these
amendments particularly fit some other devices or combinations that have
just appeared on the market and give promise of extensive use."
Is it not fair to draw the following conclusions from the facts presented?
1. The evil of the long pending application has its roots deep in the history
of the patent system.
2. The abuse is more prevalent now than ever before.
3. Remedies previously applied have proven utterly inadequate.
Is it not also proper to deduce that the criticism of the patent pool springs
largely from the great prevalence of the long pending patent application evil?
It is true the United States Supreme Court has approved the principle of the
patent pool, but this will not save it from attack in Congress. There can be no
question but that the long pending patent application greatly aggravates the
condition complained of. A seventeen year monopoly as a reward for invention
is accepted as desirable for the general welfare, but is it accepted that a pool of
patents, some of which may have been pending in the Patent Office anywhere from
' Supra, p. 709.
• Supra, p. 710.
712
COxNCENTKATION OF ECONOMIC POWER
five to twenty-five years, really promotes the progress of science and the useful
arts and is a benefit to the country?
In 1925 Mr. Arthur C. Fraser, of New York, then Chairman of the Section of
Patent, Trade-Mark, and Copyright Law of the American Bar Association,
addressed the members on the subject of Patent Law Reform in these words:
"For many years the general feeling in our profession was adverse to any
suggestion for amendment of the patent laws. The idea prevailed that ii*
we were to start something in this direction, it would be seized upon by the
enemies of patent monopolies and made the occasion of legislation which
would seriously injure our patent system. I long shared that opinion;
but I now have reached the view that the growing evils which have become
excrescences upon our patent system must be abated or the system itself
will be in danger. It is better that it be amended at the instances of its
friends than left to the tender mercies of its enemies."
Is it not time that the patent profession put its own house in order whether
by changes in the Rules of Practice or in the Patent Statutes?
Prepared and distributed by the
Patent Section of the General Motors Corporation.
Detroit, Michigan, May 26, 1931.
The important patents upon which Chart No. 2 • is based
Patent
No.
Subject
Time pend-
ing
1,647
3,633
4,750
6,102
9,041
11,766
36, 163
36, 836
79, 265
88,929
105. 338
111,197
124, 4C5
127, 568
130, 661
138, 405
157, 124
174, 465
200,521
206, 112
219, 208
223,898
224.573
239, 659
240,546
252,576
259, C54
271,363
274,290
297,382
313; 849
341, 214
347, 140
372, 786
382, 280
421, 797
424, 695
436, 532
441,831
463,569
488,909
493, 426
495,341
495, 443
638, 569
537, 693
549,160
550,288
657.994
.WO, 291
660,908
Morse
Goodyear
Howe
Co-iiss
Wilson
Tilghman
McKay
Galling
Sholes
Westinghouse.
Hyatt
Goodyear, Jr..
Westinghouse.
Chesebrough..
Robinson
Jauney
OHdden
Bell..
Edison
Hyatt
Brush
Edison
Berliner
Houston etal..
Reece
Firman
Seely
Rittyetal
Edison...
Oolding
Brown
Bell etal
Thomson
Berliner
Tesla
Condict
Hal!
Wellman
Van Depoele...
Mergenthaler..
Eastman
Berliner
Strowger
Edison..
Ives
Van Depoele...
Jenkins
Malignani
Selden
Peoolman
Lanston
Acheson
Curtis
Telegraph
Vulcanizing Rubber
Sowing Machine
Corliss Valve Gear
Sewing Machine...
Decomposing Fat
McKay Stitcher
Machine Gun
Type-Writer...
Air Brake
Celluloid
Goodyear Welt
Air Brakes
Vaseline.-.
Electric Train Signaling
Car Couplings
Wire Fences
Telephone
Phonograph -
Reinforced Concrete
Arc Light
Electric Lamp
Telephone Transmitter
Centrifugal Separator
Button Hole Sewing Machine
Telephone Switchboard
Electric Flat Iron
Cash Register
Three Wire System for Distributing Electricity
Expanded Metal
Blast Furnace Charger
Wax Record for Phonograph
Electric welding
LateralCut Phonograph Record
Induction Motor
Controller for Electric Motors.
Production of Aluminum..
Open Hearth Furnace Charger
Trolley Switch
Linotype
Photographic Film
Telephone Transmitter
Automatic Telephone
Kinetoscope
Half Tone Process of Printing...
Trolley
Motion Picture Machine
E vacuatlng I ncandescent Lam ps
Automobile Drive
Photographic Film
Monotype
Carborundum
Steam Turbine
June 20,1840
June 15,1844
Sept. 10, 1846
Mar. 10, 1849
June 15,1852
Oct. 3, 1854
Aug. 12,1862
Nov. 4,1862
June 23.1868
Apr. 1,1, 1H69
July 12,1870
Jan. 24,1871
Mar. 5, 1872
June 4, 1872
Aug. 20,1872
Apr. 29,1873
Nov. 24, 1874
Mar. 7,1876
Feb. 19,1878
July 16,1878
Sept. 2,1879
27, 1880
17. 1880
5,1881
26. 1881
17. 1882
6, 1882
Feb.
Apr.
Apr.
Jan.
June
Jan. 30, lo83
Mar. 20, 1883
Apr. 22,1884
Mar. 17, 1885
May 4, 1886
Aug. 10,1886
Nov. 8,1887
May 1,1888
Nov. 20, 1888
Apr. 2. 1889
Feb. 18,1890
Apr. 1, 1890
Sept. 16, 1890
Dec. 2, 1890
Nov. 17, 1891
Nov. 29, 1892
Mar. 14, 1893
Apr. 11,1893
Apr. 11,1893
Mar. 26, 1895
Apr. 16,1895
Nov. 5,1895
Nov. 26, 1895
Apr. 7, 1896
May 19,1896
Sept. 1.1896
2 yrs. 8 mo.
5 mo.
11 mo.
6 mo.
4 mo.
2 mo.
2rao-
2 mo.
1 mo.
2 mo.
Hmo.
6 mo.
3 mo.
2 yrs. 2 mo.
8 mo.
1 mo.
1 yr. 1 mo.
1 mo.
2 mo.
1 mo.
3 mo.
2 mo.
5 mo.
3 yrs. 6 mo.
10 mo.
lyr.
6 m«.
11 mo.
3-mo.
7 mo.
1 yr. 4 mo
10 mo.
4 mo.
6 mo.
6 mo.
6 mo.
7 mo.
10 mo.
3 yrs.
10 mo.
1 mo.
14 jTS. 5 mo.
9 mo.
1 yr. 6 mo.
1 yr. 8 mo.
6 yrs. 1 mo,
4 mo.
8 mo.
16 yrs. 6 mo.
9 yrs. 8 mo.
5 yrs. 7 mo.
1 yr. 10 mo.
7 mo.
> Supra, p. 710.
CONCENTRATION OF ECONOMIC POWER 713
The important patents Upon which chart No. 2 is based — Continued
Curtis
Marconi
Knight et al.
Knight et al.
Edison
TirrilL-
Goodwin
Tirrill
Zeppelin
Dyer
Pupin
Sprague
McFeely
Taylor etal
L'jbbers
.5:ingstei--
McCurdy
Holland
Wood
Fessenden -
Coleman
Seiberlingetal.
Mai-coni
Owens
Lundquist
Gillette..
Baker
Eastwood-
Marsh ...,
Wright Bros..
DeForest ,
Dunwoody
DeForest
ITaefely
Colburn et al.
DeForest
Dyer
Cottrell
Edeleanu
Baekeland
Reynders
Dow_
Knight
Seager
Seiirset al
Raney
Alexanderson.
Just et al
Hewitt.
Burtcn.
Miller
Coolidge...
Lanch ester.
Boyce
Knight
Cowles
Hoover
Armstrong.
Furber
Colpitis
Randall et al...
Jay
Oubelmann
Alexanderson..
Langmuir
Lyon
Fritts
Lowenstein
Riker
Sperry L
Ricketts
Gubelmann
Bergius
Fortescue et al .
Gaisman
Subject
Steam Turbine..
Wireless Communication.
Street Car Controller
Street Car Controller,.^
Motion Picture Camera
Automatia V'oltage Regulator for Dynamos
Photographic Film
Voltage Regulator for Dynamos
Airship '. -•
Automobile Transmission
Loading Coils for Long Distance Telephony
Multi-Control for Electric Trains
Pulling Over Machine Used in Making
Shoes.
High Speed Steel Tools
Cylinder Glass Making
Motor Vehicle Drive
Daylight Developing Tank for Roll Films..
Submarine..
Automatic Stereotyping
Radio Wave Production
Electric Starter for Automobiles
Machine for Making Automobile Tires
Wireless Telegraphy
Bottle Making.-
Automatic Telephone Exchange ,
Safety Razor
Motor Vehicle Drive
Lifting Magnet ^
Two Element Vacuum Tube ^.--
Electric Resistance Element
Aeroplane
Radio Tube Detector^...
Crystal Detector
Amplifying Radio Tube
Wrapping Electrical Conductors
Sheet Glass Making
Radio Tube with Grid...
Automobile Transmission
Smoke and Fume Arrester
Treating Petroleum
Bakelite
Electrical Insulator
Electrical Insulator
Sleeve Valve Engine
Automobile Vacuum Tank
System of Motor Control
Automotive Reclosing Circuit Breaker
High Frequency Generator .-
Tungsten Lamp
Mercury Vapor Lamp
Oil Cracking
Heterodyne Radio Circuit j)
Fabric Gear .'.
Tungsten Lamp
Torsional Vibration Dampener j
Motometer
Sleeve Valve Engine
Automobile Wheel
Automobile Bumper
Regenerative Radio Circuit
Thermostatically Controlled Automobile
Radiator Shutters.
Radio Circuit
Electrical Insulator
Vacuum Tank for Automobiles
Cash Register
(Heterodyne) Radio Circuit 1
Gas Filled Incandescent Lamp..
Automobile Bumper...
Recording Sound Photographically..
Telephone Relay. ...;
Automobile Ignition Apparatus .•
Gyroscopic Compass
Arc Extinguisher
Cash Register
Making Gasoline from Crude Oil
High Tension Insulator
Autographic Camera
Granted
Sept. 1,1896
July 13,1897
Aug. 3, 1897
Aug. 3, 1897
Aug. 31, 1897
Jan. 4, IMS
Sept. 13, lbt'8
Feb. 28,1899
Mar. 14, 1899
Feb. 13,1900
June 19,1900
Oct. 10,1900
Dec. 11,1900
Feb. 19,1901
June 10,1902
July 22,1902
Aug. 26,1902
Sept. 9,1902
Feb. 17,1903
Mar. 8, 19(J4
Nov. 24, 1903
June 14, 1£04
June 28, 1904
Aug. 2,1904
Dec. 6, ieC4
Nov. 15, 1904
Feb. 21,1605
July 4, 1905
Nov. 7,1905
Feb. 6, 1906
May 22, 1906
Nov. 13, 1906
Dec. 23,1906
Jan. 15,1907
July 2, 1S07
Jan. 7, 1908
Feb. 18,1908
Apr. 28,1908
Aug. 11,1908
Feb. 2rl909
Dec. 7, 1909
Mar. 22, 1910
Mar. 22, 1910
Aug. 23, 1910
Feb. 14,1911
June 27,1911
Oct. 10,1911
Nov. 14,1911
Feb. 27,1912
June 18,1912
Jan. 7, 1913
Jan. 14,1913
May 13. 1913
Dec. 30,1913
Jan. 27,1914
Mar. 17,1914
Mar. 24, 1914
July 14,1914
Aug. 4, 1914
Oct. 6, 1914
Oct. 20,1914
Feb.
Fob.
Mar;
Not.
Reb.
Apr.
Sept.
Oct.
July
Apr.
Sept.
July
Mar.
June
Apr.
Nov.
16, 1915
23, 1915
16. 1915
9, 1915
22. 1916
18, 1916
12, W16
31,1916
3, 1917
30. 1918
17, - '18
1,19:0
23.1921 I
29, 1920
19,1921
8,1921
Time pend-
ing
7 mo.
7 mo.
5 yrs. 2 mo.
5 yrs. 2 mo.
6 yrs.
8 mo.
11 yrs. 4 mo.
10 mo.
1 yr. 2 mo.
5 mo.
6 mo.
2 yrs. 5 mo,
1 yr. 2 mo.
1 yr. 4 mo.
1 yr. 8 mo.
5 mo.
2 yrs. 4 mo.
1 yr. 1 mo.
4 yrs. 11 mo.
7 mo.
2 yrs. 9 mo.
6 mo.
3 yrs. 7 uio.
1 yr. 3 mo.
4 yrs. 7 mo.
2 yrs. 11 mo.
1 yr. 9 mo.
6 mo.
6 mo.
11 mo.
3 yrs. 2 mo.
9 mo.
8 mo.
2 mo.
2 yrs. 9 mo
3 yrs.
2 jTS: 3 mo.
1 >T. 1 mo.
8 mo.
2 yrs. 1 mo.
1 yr. 8 mo.
2 yrs. 8 mo.
6 yrs. 4 mO.
3 yrs.
8 mo.
3 yrs.
2 yrs. 6 mo.
6 yrs. 7 mo.
14 yrs. 2 mo.
6 mo.
7 yrs. 5 mo.
3 yrs. 10 mo.
1 yr. 6 mo.
3 yrs. 2 mo.
I >T. 2 mo.
7 vrs. 9 mo.
12 yrs. 10 mo.
4 mo.
II mo.
7 mo.
1 yr. 1 mo.
4 yrs. 9 mo.
lyr.
26 yrs. 4 mo.
2 yrs. 3 rao.
2 yrs. i: mo.
3 mo.
36 yrs.
5 yrs. 2 mo.
15 yrs. 9 mo.
7 yr«. 2 mo.
3 yrs. 4 mo.
20 yrs. 2 mo.
6 yrs. 4 mo.
3 yrs. 2 mo.
2 mo.
714 CONCENTRATION OF ECONOMIC POWER
The important patents upon which chart No. 2 is based — Continued
Patent
No.
Name
Subject
Granted
Time pend-
ing
1, 415, 232
Ellis
May 9,1922
Sept. 12. 1922
Oct. 30,1923
Sept. 2.1924
Sept. 2.1924
Feb. 24,1925
Feb. 24,1925
Feb. 24.1925
May 12,1925
Oct. 20,1925
Feb. 23,1926
June 1,1926
Feb. 26,1929
8 yrs. 7 mo.
22 yrs. 8 mo^
2 yrs. 9 mo.
8 yrs. 11 mo.
1,429,201
Gubelmann
Cady
Cash Register
1,472.583
Frequency Controller for Radio Sending
Circuit.
Radio Signaling System
1,607.016
DeForest
1, .507, 017
De Forest
Radio Circuit
1, 527, 556
14 yrs. 8 mo.
, 14 yrs. 8 mo.
14 yrs. 8 mo.
5 yrs. 8 mo
12 yrs.
3 yrs. 10 mo.
5 vrs
1, 527. 557
Kadow
Glass Blowing Machinery
1, 527, 558
Kadow
1, 537, 708
fechottky
Langmuir
T. Midgley, Jr...
Elmen
Halliburton
1,5.58.436
High Vacuum Radio Tube
1,573,846
1, 586, 884
Alloy Used in Telegraph Cable
1, 703, 234
Drilling Oil Wells
8 yrs. 3 mo.
Exhibit No. Ill
Pkoposed Patent Legislation — Why It Is Needed, the Advantages of
THE Proposed Legislation and the Objections to It
[By George H. Willits In collaboration with a number of other menabers of the
Michigan Patent Bar]
the patent system
The inventor tells what he has invented by filing in the Patent Office a written
description of his invention, illustrated with drawings. He is also required to
define in accurate language just what it is that he has invented. His definition
of the invention con.stitutes the claims of the patent. The following statemeat
regarding claims made by the Supreme Court in 1882 is just as true now as it was
then:
"Those who have any experience in business at the Patent Office know the
fact, that the constant struggle between the office and applicants for patents
has refeience to the claim. The patentee seeks the broadest claim he can
get. The office, in behalf of the public, is obliged to resist this constant
pressure."
After the patent issues, "the inventor is held with more or less strictness to be
limited in his monopoly to what is defined in the claims. If after taking out his
patent he finds he has made a mistake in the claims he can correct it by reissuing
his patent if the claims are not broad enough or by reissuing or disclaimhig if the
claims are too broad. However, if he wants to broaden his claim to cover construc-
tions that did not jjreviously come under it, he must be prompt about correcting it.
As a reward for telling the public about his invention, Congress grants the
inventor the right to prevent others from using the invention for a period of
seventeen years from the date of grant.
From the beginning of the patent system it was recognized that several in-
ventors may seek patents on the same thing and Congress has provided that the
Patent Office shall decide who is the first inventor and .issue the patent to him.
Under this authority the extremely technical and elaborate interfereTice practice
has been developed.
congress has absolute authority in patent legislation
This authority is derived from the Constitution which provides that Congress
has power to promote the progress of science and useful arts by securing for
limited times to inventors the exclusive right to their discoveries.
Most attempts to get the Courts to correct abuses in the patent system by
judicial legi.slation are met by statements that the matter is entirely within the
control of Congress. This was exactly the position taken by the Supreme Court
in the case of Overland Company, f. Packard Company, 274 U. S., 417.
I
CONCENTRATION OF ECONOMIC POWER 715-
ABUSES OF THE PRESENT PATENT SYSTEM
/ . Holding applications in the Patent Office for years and years
The inventor almost always wants to get his patent out pronaptly. Until he-
gets his patent he finds it practically impossible to get anyone to put money into
the new enterprise. The inventor wants to get his patent quickly, interest capital,
and supply the public with the new invention. Often he cannot get his patent
out because he is tied up by interference proceedings. This cause of delay will
be treated later.
Besides serving the bona fide inventor, the patent system affords excellent
opportunity for those who wish merely to speculate in paper patents. This is
best done by filing applications for patent on devices, that you do not intend to
make and sell, but that you think are in the line of future development, and then
lying in wait for the inventor who combines with a complete and practical inven-
tion the energy to build and market it. Before the judicial legislation in Miller v.
Brass Company, 104 U. S., 783, the patent speculator used to buy up issued
patents and reissue them with broadened claims to cover inventions developed
by others in the meantime. It is very easy to find similarities between dissimilar
things if you have the two things before you and strain your imagination to find
the similarities. You will recall the sto y of the three blind men examining the
elephant. One felt his trunk and contended he was like a snake; another ex-
amined his tail and compared him to a piece of rope; and the last grasped his leg
and likened him to the trunk of a tree. The blind men could not have made these
claims without previous knowledge of the shape and feel of the snake, the piece
of rope and the tree trunk. The patent speculator who bought a new article on
the market and compared it carefully with prior patents was almost always able
to find one prior patent that had sufficient farfetched similarity to the new article
so that he could reissue the patent and obtain broad claims to cover the new
product. The Supreme Court remarked in the above case that
"patents have been so expanded and idealized, years after their first issue,
that hundreds and thousands of mechanics and manufacturers, who had
just reason to suppose that the field of action was open, have been obliged
to discontinue their employments, or to pay an enormous tax for continuing
them."
The Supreme Court put a stop to this practice by judicial legislation. The
Court held that you can't correct your patent by reissuing it with broader claims
unless you apply for reissue within two years from the date of grant. This is
purely court-made law. The court so ruled because Congress failed to correct
the abuse by legislation.
By keeping patent applications in the Patent Office a long time the patent specu-
lator can now do the same thing that he could formerly do by reissue. He can
file great numbers of applications. He can keep them pending in the Patent
Office by amending his application at the last minute, deliberately avoiding final
action by the Examiner. He can then watch the market sharply for the appearance
of new products, purchase samples of them, and make minute comparisons of
the new products and his pending applications to find any imaginable similarities
that may exist, and draw claims on those similarities. Or he may have broad
claims in the application all the while, refraining from taking out the pate it ^or
any one of a number of reasons: Thus he may observe that his patent rights are
being respected as it is, and see no need of securing the immediate issuance of b's
patent. Obviously the longer he can. keep his patent pending the longer will his
monopoly extend. Or he may conclude that the development is ahead of its
time and lie in wait with his patent while more energetic business men create a
market for it.
This is what Selden did with his patent on the use of a clutch in an automobile.
In this famous case, Columbia Motor Car Company v. C. A. Duerr and Company,
184 Fed., 893, the court said:
"This patent was applied for in 1879 and granted in 1895 For over 16
years the application lay in the Patent Office and the applicant took full
advantage of the periods of inactivity permitted by the rules and statutes.
It is apparent that he delayed just as long as possible the issue of the patent
to him. During this long time the automobile art made marked advances
along different lines, and when, in 1895, the patent was granted, it disclosed
nothing new. Others had then made the patentee's discovery and had
reduced it to practice in ignorance of what he had done. While he withheld
716 CONCENTRATION OF ECONOMIC POWER
-his patent, the pubHc learned from independent inventors all that it could
teach. For the monopoly granted by his patent he had nothing to offer in
return. The public gained absolutely nothing from his invention, whatever
it was. From the point of view of public interest it were even better that
the patent had never been granted. Judge Hough was quite within bounds
in saying:
" 'No litigation closely resembling these cases has been shown to the court,
and no instance is known to me of an idea being buried in the Patent Office
while the world caught up to and passed it, and then embodied in a patent
■only useful for tribute.'
"It is urged that we should regard unfavorably the patent on account of this
•delay in the Patent Office, should seek to avoid giving it a broad construction,
and should permit tlie alleged abuse of the law to weigh against the standing
of the complainants in a court of equity. But the patentee acted wholly
within his rights. He merely took advantage of the delays which the law
permitted him. He followed strictly the statutes and rules of procedure, and
the courts cannot exact a greater measure of diligence from him. When the
patent was granted under the authority of the law, it became entitled to the
consideration accorded to any other patent. If the statutes and rules permit
tinnecessary delays, they should be changed; but we reject the view that this
court owes any duty to relieve against their operation. This patent, even
if it be useful only for tribute, must be viewed without prejudice and with
absolute judicial impartiality."
In this clear statement of abuses the Court was wrong in one important par-
ticular.- The situation was by no means unique. The case was but one example-
of a widespread condition. The only reason the Selden patent ever got into the
Courts was because Henry Ford refused to recognize it. Otherwise the automo-
bile industry would have quietly paid tribute. Such patents very often never
reach the Courts. Their very age makes them proof against successful attack.
'The patents are usually of very broad scope so that loss of suit might easily
result in destruction of the business man who had the hardihood to engage in it.
It is not possible to state how many industries are today under the domination
of patents withheld in the secret archives of the Patent Office for long periods of
years. There is no data available on this point. The following are but a few
examples that happen to have come to our attention. Of these the Gubelmann
patent and the Cowles patent are the only ones that have been adjudicated.
One of the most successful forms of talking motion picture is today under the
domination of the Fritts patent No. 1,203,190 which was pending in the Patent
OffiC3 36 years. It was filed in 1880 and granted in 1916. If you built Fritts'
apparatus today you would not have a talking motion picture machine. Fritts
had only the idea of recording sound on a photographic film. To mak-e talking
motion pictures possible it was necessary that in the last 50 years Edison, DeForest,
and countless. other American inventors should make many important contribu-
tions to illumination, photography, electricity, radio and chemistry. Many of
these other men contributed far more to the development of talking motion pic-
tures than Fritts did but their patents have for the most part long since expired.
The calculating machine industry is today under the domination of the Gubel-
mann patents Nos. 1,160,071, 1,334,533, and 1,429,201 which were pending in the
Patent Office 26 years, 20 years, and 22 years, respectively. It is only fair to say
that Gubelmann's applications were tied up in the Patent Office by interference
proceedings much against his will.
The automobile wheel industry is today under the domination of the Cowles
patent No. 1,103,567, which, was pending in the Patent Office 15 years.
The automobile startifi^, lighting and ignition industry is today under the
domination of the Riker patent No. 1,264,560, and the Heanv patents Nos,
1,287,988, 1,287,989, 1,301,053, 1,305,601, 1,347,460 and 1,525,129, which were
Ending in ttie Patent Office, 16, 8, 8, 9, 9, 10, and 14 years, respectively.
The steel industry is today threatened with domination by the Greene patents
1,185,394, 1,449 094, 1,449,319, 1,532,052, 1,616,796, 1,639,340, and 1,654,419,
which were pending in the Patent Office 5, 7, 7, 16, 8, 14 and 5 years, respectively.
These patents purport to cover the production of steel and other metals- in the
electric furnace.
The situation is now as bad or worse than it ever was. That it is worse is the
contention of the Court of Appeals for the Seventh Circuit (at Chicago) in a
•decis'ioi) handed down a few years ago in Overland Motor Company v. Packard
Motor Company. The decision held the Cowles patent 1,103,567 invalid because
of delays in the Patent Office. The Supreme Court overruled the Court of Appeals
CONCENTKATION OF ECONOMIC POWER 717
holding that the present law permits these dela3's,.and the decision was withdrawn
but the following statement of the court on existing conditions remains unchal-
lenged :
"This tendency to tlius extend the monopoly period seems to be a growing
one. Not how promptly may a patent be secured, but rather how long may
the proceedings in the Patent Office be extended, seems to be the 'preferred'
miode of procedure. And this is particularly true if the patent is to be oper-
able in a rapidly developing art. During the pendency of the application, the
inventor enjoys, to a limited extent the privileges and advantages arising from
his Talent Applied For' notices and warnings. When detaand for the
article is established, he presses his application, and a patent issues. Fre-
quently, amendments to the claims and specifications appear several years
after the original applictaion is filed, and strangely enough, these amendments
particularly fit some other devices or combinations that have just appeared
on the market and give promise of extensive use."
When Fritts filed his application for patent in 1880, the applicant was entitled
to two years within which to answer actions by the Examiner. This period has
been successivelv reduced until now it is six months. In spite of this change in
the law the applicant who deliberately delays final- action on his case and lurks
in the shadovvs of the Patent Office ready to spring out at the unwary with his
patent, is still with us. Mr. W. D. Grosbeck is Primary Examiner in charge
of the division handling inventions in calculating machines. He was in charge
of the division during most of the period the Gubelmann apphcations were in the
Office. At a recent conference of patent law organizations in Cleveland a number
of recommendations were made for improvements in Patent Office practice. One
of these was that the Examiner should cite the best prior patents when making his
first action on the case. In an article in the March 1930 issue of the Journal of
the Patent Office Society, Examiner Grosbeck points out one of the difficulties in
the wa,y of doing this:
"Only one other practice approaches the above (presentation of too many
claims) as an office irritant, and the two are closely allied. The second is
comprehended in the sentence: 'Add the following claims,' when the examiner
is beginning to hope the primary prosecution of a case is at an end. In
properly prepared cases, it should be the exception, rather than the rule,
that the inventor does not know at filing the limits of his invention. If he
is aware of the limits, then the justifiable suspicion is that he adds claims
merely to prevent issue as long as possible, in the hope of dominating some
later filed application; but if such is not his purpose, the inevitable result is
'belated rejections on newly cited art,' which your agenda pretends to
deplore."
Earlier in the same article Examjner Grosbeck states:
■"It was a very recent experience of the writer that he was obliged to cite
new art and require division on a case already pending more than nine
years, because of a shift by counsel in the subject-matter of claims presented."
Attorneys thus continue to use these old, old tactics. .
We have emphasized the case of deliberate holding of applications in the
Patent Office because that is the most striking abuse. In a good many cases
applications are kept in the Office for reasons of convenience only. Attorneys are
busy. The patent business is continually growing. Incoming business usually
makes it impossible to amend old cases until near the end of the statutory period
allowed for reply. Often it does not matter to the client whether the patent is
taken out or not. Or the case may be a difficult one and the attorney and the
Examiner, through procrastination, defer giving it thorough treatment until it has
been pending some years. Then there is the further advantage that many
Examiners are apparently more liberal with an old case than with a new one.
The Examiner. has found that he cannot get the appUcant to accept the lesser
protection he would like to give him, and in an effort to dispose of a case that has
been in his division for years the Examiner often takes a more liberal attitude and
allows the applicant the protection he is seeking.
Whatever be the cause of delay, keeping an application in the Patent Office
for long periods of time greatly prolongs the life of the patent, makes it impossible
for the manufacturer to find out what is the prohibited field and what is not, and
clogs the Patent Office so that other inventors cannot get their cases acted on.
In no other country in the world is this condition possible." In all other coun-
tries applications for patent must be prosecuted pronqjtly. Usually the tena
718 CONCENTRATION OF ECONOMIC POWER
of the patent begins with the filing of application so that the corresponding foreign
patents expire years before the United States patents.
8, Using Interference Proceedings to Prevent an Inventor from Getting His Patent
Industry moves very fast today. Plant and product become obsolete at a very
rapid rate. An invention must be of very fundamental character indeed to
dominate an industry until the very last year of its life. More often industry has
gone to something different and better before the patent expires. Now, if it were
posslble~io prevent an inventor from getting his patent until after the vogue of an
invention had passed, a manufacturer could enjoy the bubiness while it was good
and the subsequent issuance of the patent would not affect hiin. Even if the
invention is of more fundamental character it is quite natural for the manufacturer
of an article on which another has patents pending to want to put off the day of
reckoning by preventing the issuance of a patent to the inventor as long as he can.
It is possible under the present practice to prevent the issuance of a patent to
the inventor by filing a patent application on the same or a similar construction
and having the Patent Office set up an interference or contest between the two
applicants to see which made the invention first. It is estimated on the basis of
figures submitted by Commissioner Robertson that in 299 cases out of 300 the
first to- file patent application is the first inventor. Moreover, in only one case
out of 900 does the later applicant now encounter serious trouble in getting his
patent. The sole excuse for the tremendously technical and expensive inter-
ference practice is to enable the one man .in 300, who has been negligent in apply-
ing for his patent, to be able to prevent anyone else from patenting the idea while
securing the grant to himself. In protecting the rights of one laggard, actual or
potential injustice is done to two hundred and ninety-nine diligent applicants by
•making it possible to use interference proceedings to prevent the issuance of their
patents.
In spite of this high probability that he is not the first inventor the Patent
Ofiice shows the utmost consideration for the later applicant. Even though the
later applicant, in his preliminary pleading in the interference, admits that he
was not the first to make the invention, the Patent Office extends to him, as a
member of the public, the right to oppose the issuance of a patent to the other
party on the ground that the idea is not patentable, and on similar grounds which
need not be discussed. Note the contrast in treatment here: If you, as a mem-
ber of the pubUc, write the Patent Office that a patent should not be granted
John Smith because his invention is not patentable since it is shown in an old,
•expired patent or for any other reason, the Office will treat the protest in the
rigorous fashion set out in Rule 11 of the Rules of Practice of the Patent Office
-and pay no attention to it. If, to prevent John Smith from getting a patent,
you take the much more dubious course of filing a patent application in an attempt
to patent the same or a very similar idea, the Patent Office will treat you with
the utmost consideration; they will put your application in interference with
Smith's application, allow you to attack his right to a patent, grant you hearings,
and, if unsuccessful, permit you to appeal to the Board of Appeals and from
there to the Court of Appeals, a process which, with the usual delays, may take
anywhere from 3 to 5 years or more. During this period the market for the inven-
tion may have risen to a peak and dwindled to nothing. Here, as in the case of
design applications, the delays and technicalities of the Patent Office are massed
in formidable array against the inventor. Contested interference proceedings
may cost anywhere from $1,000 to $30,000 or $40,000, averaging, at a guess, from
$2,003 to $5,000 for a hotly contested case where testimony is taken. This
money must be raised by the inventor before he has obtained the patent which
he needs to enlist capital in his enterprise. He is in a very difficult position.
If the inventor succeeds in getting his patent and the market for the invention
has passed, he has no redress. If the invention is of fundamental character,
and such inventions are very rare indeed, the losing party must stop manufactur-
ing or stand suit. If he stops manufacturing, he nevertheless retains his past
profits. If he cannot stop manufacturing and the market for the article has
Krown during the continuation of the interference, he may find himself in a very
bad position — much worse than if he had not pursued obstructive tactics in the
Patent Office.
In Remington Cash Register Company v. National Cash Register Company, 6
Fe«l. 2nd, 585, at pages 607 to 617, there is a very good description of how inter-
ferences are used to prevent patents from issuing. The inventor was prevented
from getting his patents for a period of 15 or 20 years. The case, while an extreme
one, is well worth l-eading. The court comments that:
CONCENTRATION OF ECONOMIC POWER 7X9
"The whole situation presents a clear example of the abuses which are
possible under the name of Patent OflBce procedure, and show how easily
advantage may be taken of a meritorious, but impeciinious, inventor, when
opposed by learned counsel."
In Thomson Spot Welder Company v. Ford Motor Company, 268 Fed. Rep., 836,
"beginning at page 853, there is a very good description of how a patent monopoly
may be extended by means of interference proceedings between applications
owned by the same interests. This is a somewhat rarer abuse of the interference
practice. The sole advantage is extension of the period of monopoly.
In fairness to the patent profession it should be stated that interference pro-
ceedings are seldom the result of deliberate filing by one person of a patent
application claiming an invention he knows belongs to another.
Sometimes interferences are the result of the develeppient of the same invention
by independent inventors in different parts of the country in absolute ignorance
of each other's activity. This is often possible because the inventions are of so
feeble a character that anyone working in the art and encountering the difficulty
is bound to make the same invention. This was especially the case when many
Applications were filed on accessories for automobiles. Every garageman knew
that the front motor support on a well tnown car often broke in jolting over
rough roads, and many of them filed applications for patent on brackets to repair
the support. Another idea many people sought to cover by patent application
was an extension to a passenger car chassis to enable it to carry long truck bodies.
In one case where 30 applicants were claiming the same attachment, the Patent
Office, with the wisdom of Solomon, held that if so many people could think of
the same idea it could not possess the spark of genius essential to an invention.
In many other cases this situation arises: The modern engineer keeps abreast
of his fellows through his engineering societies and through the efforts of salesmen
And inventors to get him to adopt new devices. The thmgs he hears about may
arouse his^magination and he may conceive some other way of doing the same
thing thafeis better and is an improvement on the construction that was brought
to him. He may not make clear to his patent attorney just what it is that he.
lias contributed. Patents occupy but a very minor place in the life of a busy
engineer. The attorney prepares claims that cover not only the improvement
but also the invention that was brought to the applicant. The ordinary applicant
rarely understands the claims of a patent so he executes the application without
reading the claims and it goes into the Patent Office with some claims in it covering
the invention that was brought to him. Usually several years elapse before the
Patent Office decides what claims may be allowed, and it then sets up an inter-
ference between the two applicants. By this time the events have become hazy
in the engineer's memory, particularly in the case of the ordinary invention of
somewhat microscopic proportions. The applicant h)as then forgotten just ex-
actly what was brought to him and often not understanding what it is all about
or to avoid the possibility of losing everything including some ideas that are his
own, he makes affidavit as to the time he made the invention and goes into
interference.
In the instance given above the applicant swore he made the invention brought
to him by someone else. In many cases, under present practice, it is not neces-
sary that he swear it is his invention. Often the applicant did not claim anything
but his own when he swore to his original application. The claims that form
the basis of the interference may have been put in his case after filing, and under
present practice no additional oath is usually required. He need not file a sworn
statement as to the time he made the invention if he does not want to. Never-
theless, he is entitled to pursue obstructive tactics and prevent the other fellow
from getting his patent.
It is now proposed to require that an applicant swear he made the invention
before he can go into interference but at best it is only the applicant's personal
feeling about the sanctity of an oath that tends to prevent him from claiming
that which he did not invent. As a practical matter perjury in Patent Office
proceedings goes unpunished. We are not aware of a case within the last 10 or
15 years where the Office caused an indictment for perjury to be brought against
any applicant for patent although unquestionably there were many instances of
false swearing. The Patent Office decides the question which it conceives to be
the only one before it; who made the invention first?
Once the interference is set up the opportunity is presented to block the issuance
of a patent and the attorney seldorn fails to avail himself of the opportunity if it
aids his client. This is recognized practice.
720 CONCENTRATION OF ECONOMIC POWER
The inventor who is prevented from getting his patent is just »)s badly off
whether the opposing party has sworn truly or falsely and whether his motives
are good or bad.
Last year 1,519 interferences were declared involving approximately 4,000
applications.
Many of the most important patents are held up in the Patent Office by inter-
ference proceedings. The commercial importance of inventions tied up in inter-
ference is far greater than their percentage of the total would indicate. The
reason for this is a weakness of human nature pointed out by the United States
Supreme Court in its decision on the famous Goodyear patent, on the vulcaniza-
tion of rubber {Providence Rubber Compamj v. Goodyear, 76 U. S. Supreme Court
Reports, 566):
The original patent was issued in 1844. The invention has since been
covered by a succession of patents, the last of which, the reissues in question,
are still unexpired and are the foundation of this litigation. The discovery
was one of very great value. It is a mine of wealth to the possessors. Since
the first patent was issued there have been numerous cases of litigation
involving its validity. They were earnestly contested. In every instance
the patent was sustained. This litigation was remarked upon by the counsel
for the appellants, and it was added that this question is now, for the first
time, presented to this court for consideration. It is a just commentary to
say that such a litigation is always to oe expected in cases like this. There
are always those who are ready to gather where they have not sown. The
number and ardor of the conflicts is usually in proportion to the value of the
prize at stake.
EFFECT OF ABUSES ON THE INVENTOR AND ON THE MANUFACTURER
The interests of the inventor and of the manufacturer are inextricably entangled
for the reason that the bona fide inventor wants to get his invention in use as
soon as possible and make som.e money out of his patent and to do this he must
either become a manufacturer himself or interest some manufacturer in it.
1. It Is Imposr.ihle for the Inventor or Mnnnfactnrcr to Find Out Whether They Can
Market an Invention Without Infringing Some Prior Patent
All applications filed in the Patent Office are kept secret. There is no statute
requiring secrecy. The Commissioner has established this rule under his general
authority to regulate proceedings in the Patent Oflfice. It is probably a reasonable
rule to prevent fraud if the period of secrecy is not too long. But where a patent
application is concealed in, the Patent Office for five or ten years or more the rule
is utterly unreasonable, extending to the applicant a protection he no longer needs,
I and enabling him to lie in wait for the unsuspecting.
The following assumed case is not at all fanciful; this situation occurs time after
time. It bears down particularly hard on the inventor and on the small manu-
facfurer because their resources are slender. Suppose during the pendency of
tlie Gubelmann patent an inventor developed a new calculating machine, patented
it, and succeeded in interesting a manufacturer in it. Before investing his money,
the manufacturer, exercising his usual prudence, had-the prior patents thoroughly
investigated, and found that the new machine did no^ infringe anyone else's
patents. He thereupon contracted to pay the inventor a royalty, built his factory,
bought his machinery, engaged in an extensive sales and advertising campaign,
and developed a good business in the new machine. Two or three years later the
Gubelmann patent comes out. The manufacturer is notified of infringement and
ordered to de.-si.st manufactin-ing. He consults his patent attorney, is informed
that the patent is valid, and that he nnist either stop manufacturing or take out a
license under the patent if the owner sees fit to grant one. In any case the manu-
facturer feels he has been badly treated. He has gone ahead in good faith and
taken every precaution. He has just gotten his business nicely started and now
has to stop or ppv a pr^ihibilix r^ royalty. He mav be f.nced with financial ruin.
It is not at all unlikely that some calculating machine manufacturer did find him-
seK in precisely this position upon issuance of the Gubelmann patent.
The inventor of the improvement is as badly hurt. Either his royalties cease
entirely or he is compelled to reduce the amount, for the business may not be able
to stand the add^d burdf-n.
Under the present system every time an inventor develops a new product and
a manufacturer begins making it they must take this chance.
CONCENTUATION OF ECONOMIC POWER 721
Patents are highly speculative things at best. A competitor may at any time
run across some defense to a patent that maj' render it void, and the inventor
and manufacturer may long before tliis have sunk their money into the enterprise.
Because the patent monopoly is becoming a thing of fleeting character in this day
of rapid obsolescence, the chance of making money out of patents is greatly
reduced.
The unnecessarj' added hazard resulting from long pendency of applications in
the Patent Office makes it harder for the inventor to sell his invention, and renders
his patent less valuable becau.se of the added risk.
2. The Extension of the Monopoly liesvlting From Long Pendency of the Application
Cuts Down the Reward of the Inventor of Improvements, Retards Progress, and
Handicaps the American Manufacturer in Foreign Trade
When an industry is dominated b}- broad patents, the market for improvements
is limited to the owners of the broad patents and those operating under them.
This tends to reduce competition so that the inventor of an important improvement
has a poor m.arket for his invention.
There is a limit to the amount of royally a new article can bear. There is
almost always some competitive article not quite so cheap or good that offers
competition if the price of the patented article is too high. This furtlier reduces
the reward of the inventor of improvements.
There is a natural continuous growth of the arts. The minds of the workers in
a field build steadily from one new thing to the other. A patent which was long
pending in the Patent Office is an anachronism. The development of the art has
long since swept beyond it. With this patent outstanding there is no incentive
for improvement in the art, because the improver is either entirely excluded from
the field or must pay a i)rohibitive tribute to the owner of the patent. The manu-
facturer consequently avoids this field and development in it lags. Development
work follows lines where no patent barrier has been set up.
The American inventor and manufacturer has always been at a disadvantage
in dealing with foreign patents as compared with the foreign inventor dealing
with United States patents. The I'nited States is the only country that grants
the inventor a patent without any strings on it. Every other country grants the
inventor about three years of full protection such as the United States gives, and
then ta.xes the patent year after year for tlie rest of its life, the amount of taxes
during the life of the patent sometimes totaling x^evcral thousand dollars. More
important, most foreign countries, and this includes the principal manufacturing
countries, recjuire that the in\ f^ntor manufacture the new article in their country
on pain of cancellation of his patent. In many cases American companies have
established foreign branch factories for the sole purpose of continuing their patent
monopolies abroad.
It is not possible to eliminate these handicaps. They are written into the
patent laws of foreign countries. But in addition to these handicaps, the United
States further and unnecessarily handicaps its own foreign trade by permitting
the patent monopoly here to be extended by allowing the applicant to keep his
case in the Patent Office five, ten and fifteen years before issuance. This means
the patentee has a vu tual monopoly for twenty-two, twenty-seven or thirty-two
year, respectively, as the case may be, instead of the seventeen contemplated by
Congress. The term of the foreign patent in almost every case begins with the
date of filing of the application, and the longest term granted by any important
foreign country is IS years. As a result, in practically every case, American
industry is paying royalty in the United Sti.tes years after the patents have
expired abroad. Foreign industry is rapidly learning American production meth-
ods that have protected this country against the effects of higher labor costs and
patent handicaps. They are rapidly learning the advantages of high tariff against
foreign made goods. With these temporary advantages wiped out, our export
business is bound to be seriously affected by the handicaps imposed by our patent
system. It will no longer be able to carry the burden. The inventor will suffer
in that he will find the manufacturer less ready to assume the burden of the
monopoly he has to sell. The burden of long pendency of patent applications is
a self-imposed and unnecessary one that this country should cast off. •
3. Interference Delays
The bad results of the-long delays in issuance of patents resulting from the
excessively technical mterference practice have been pomted out. The delay
may deprive the inventor of the entire value of his monopoly by granting him his
patent after the jnarket for the article has been exhausted, or after the article has
722 CONCENTRATION OF ECONOMIC POWER
become obsolete. The commercial development of his invention may be held
back many years because of his inability to interest anyone in his new device
because of the lack of a patent to protect it. The inventor usually cannot collect
royalties until his patent issues. If, while the interference is pending, the inven-
tor does succeed in putting his invention on the market, he is forced to fight his
way through the heavy expense of development and marketing the new product
without any aid from the patent at the time he needs it most.
4. Long Pending Applicaiions Clog the Patent Office and Prevent the Inventor, Who t>
Really Seeking to Get His Patent Out Promptly, From Having the Prompt Service
He Should Have
Every applicant pays the same fee for his patent, and theoretically is entitled
to the same service. In 1916, when the Office fees amounted to $35, Commis-
sioner Ewing estimated that about $20 of that amount was spent in paying for the
services of the Examiner who examines the application. With the recent increase
in Office salaries, this figure may now be $25 or $30. The attorney in Washington
making similar searches or examinations charges from $25 to $35 or more per day.
The applicant who keeps his case pending in the Office a long time, gets many
times his $25 worth of examination at the expense of the applicant who is really
trying to get his patent out. There may be a dozen or more actions by the
Office, each action hotly contested, the attorney, however, taking care to so
prepare his amendments that final action by the Office is theoretically impossible:
Rare is the Examiner who calls a halt to such tactics and summarily disposes of
the case.
Often the" Examiner has a number of applications for patent on very similar
devices. If he could compel the oldest applicant to take his patent out promptly
he could cite that patent against the others and force them to restrict their claims
to improvements over the first patent or to drop their applications altogether.
He cannot do this today for he cannot cite pending applications and he cannot
make the inventor take out his patent promptly; if he attempts to do so by rigorous
application of the Rules of Practice, he is met by complaints from attorneys and
applicants. If he could get that first patent out, his work would be very greatly
simplified.
6. Long Pendencrj oj Patent Applications Increases Interferences
Today many interferences are set up between recently filed applications and
applications that should have gone to patent years before. These contests, even
with the present interference practice, would be avoided if patents were issued
promptly. The time thus gained could be used to much better advantage in
examining applications now piled up in the Office.
Another Unnecessary Handicap to the Inventor and Manufacturer
It is not possible to tell whether a United States patent is valid or not even after ex-
tensive study for insufficient information is given in the patent or application unless
the case has been in interference. In most countries an invention must have been
new at the time of filing application. If you can prove the invention was not new
at that time you know the patent is invalid. In the United States it is sufficient if
the invention was new at the time it was invented and it does not matter whether
it was new or not at the time application for patent was filed, provided it had not
been publicly used or sold for two years, published two years, or patented two
years before in some other country. Unless a case has been in interference it is
not possible to find out when the invention was made, and hence it is not possible
to determine whether the invention was new at the time it was made. Many
interferences are sought by one party just to find out when the other party made
his invention. Taking rights under a patent often involves large sums of money,
running into the hundreds of thousands and sometimes millions of dollars. The
party who is urged to respect a monopoly and pay royalty or stay out of the field
is eri|.itled to know whether that patent is good or not. And to find out whether
the patent is good or not it is necessary to know when the invention was made.
In buying land, the purchaser has the title searched, often as far back as the
grant from the King of England. In purchasing bonds the banker secures the most
complete facts about the character of the obligation and the collateral back of it.
The attomoy, before recommending the payment of thousands of dollars in royalty
or for the purchase of patents, must study the patent and what went before it with
the utmost care. He cannot rely upon a twenty-five dollar examination by the
CONCENTRATION OF ECONOMIC POWER 723
overburdened Government OfBce. According to the law, the attorney must study
not only the prior United States. and foreign patents, which is all the Examiner
searches, but he must in addition study all the prior publications and the prior
work by people active in the particular field to make sure that the patentee was
really the first inventor. The task placed upon the attorney is an impossible one.
It can only be approximately done. When the attorney has finished his study, he
must finally take a chance. And often he loses out, some prior use or prior publica-
tion turning up that he knew nothing of. The money spent for such patents must
then be charged off to loss, and the attorney's reputation necessarih- suffers through
no fault of his own.
Every patent application should contain a statement by the inventor as to
when he made his invention. The game of hide and seek which the present law
provides simply increases litigation. No one is going to pay good money for a
patent if he thinks the patent is invalid, and every human being, in ignorance of
the time the inventor made the invention, is going to think and to hope that the
inventor really did not make the invention before the date of some prior publica-
tion, or prior patent or pubhc use that can be put in evidence. The result is
another law suit.
REMEDIES THAT HAVE FAILED
Attempts of Patent Office to Limit Pendency of Applications
The most serious attempt to remedy this evil was madu by Commissioner
Thomas Ewing (1913-1918). Mr. Ewing stated in nn address before tiie Ameri-
can Patent Law Association on February 28, 1916, that:
"To count on Congress for large improvement in conditions seems to me,
in the ligHt of experience, to be mere folly."
Accordingly, he attempted to accomplish the result by tightening up the adminis-
tration of the Office. All cases over three years old were made special and given
precedence over more recent cases. Cases over five years old had to be called to
the attention of the Commissioner before the Examiner acted upon them.
In addition, Mr. Ewing secured a ruling of the Court of Appeals of the District
of Columbia that, in case of dilatory prosecution, the ordinary rule that all doubts
as to patentability be resolved in favor of applicant, should be reversed.
Mr. Ewing made this ruling initially in Ex parte Pope, 222 O. G., 1055, in which
he made an example of a 15-year-old application in which the inventor tried to
tie up the combination of an automobile engine and a magneto, emulating Selden's
at that time successful attempt to cover up tl^^ combination of such an engine
and a clutch. The Court of Appeals sustained him in 225 O. G. 739.
Mr. Ewing made the same ruling in Ex parte Fritts, 227 O. G. 737. This appli-
cation had been pending 34 years, and covered making a sound record on a photo-
graphic strip. The application matured into the Fritts patent No. 1,203,190,
previously referred to. The decision is worth reading.
First Assistant Commissioner Kinnan commented adversely on nine years
pendency in Ex parte Smart, 363 O. G. 694 (1926).
The drive on long pending applications still continues although our experience
indicates that the Commissioner's Orders on the subject arc now but fitfully
applied by Examiners.
Attempts By the Courts to Remedy the Evil of Long Pendency of Applications.
It has been noted that the Supreme Court recently had an excellent opportunity
to legislate judicially in Overland Motor Company v. Packard Motor Company
(274 U. S. 417), but declined to do it. The patent sued upon was pending in the
Patent OflSce 14 years. The Supreme Court held the remedy should be sought
from Congress, not from the courts.
Following the failure of the Supreme Court to sustain them in their attempt at
judicial legislation in Overland v. Packard, the Seventh Circuit Court of Appeals
paid no attention to a delav of almost fifteen years in the issuance of a patent in
Cline Company v. Kohler, 27 Fed., 2nd, 638.
The Court of Appeals for the Second Circuit (New York), which is probably the
most active circuit in patent litigation, has evidently disagreed with the Supreme
Court and has applied its i)wn remedy to long pending patents. Obviously one
remedy is to hold the patents invalid for lack of invention and, personally, I think.
724 COXCKXTItATIOX OF ECONOMIC POWER
this is sometimes done. But note the following judicial legislation in the Second
Circuit:
In Wcalinghouse Electric and Mfg. Cofupany v. Jeffrey-DeWilt Insulator Com-
pany, 22 Fed., 2ad, 277, decided in 1927, the Court held a patent void because a
divisional application containing the claims wa^ not filed until the new article had
been on sale two years. This is new law. It is based on the Supreme Court's
dicta in Webater Electric Compan;/ v. Splildorf Company, 264 I;'. S., 463.
In Dwight and Lloyd Sintering Company v. Greenaivalt, 27 Fed., 2nd, 823, de-
cided in 1928, the same rule was applied. The Court says:
"The evidence of a puri)ose to keep it in the Office to the last moment
lawfully possible is very strong."
In this case the Court also applied the rule that a divisional case cannot be renewed
excoi^t within two years of the date of allowance of the original case. This, too is
new law, with the same purpose — that is, curing the abuse of long delays in the
Office. The Court here comments on an interference proceeding:
"All this took nearly 7 years, and the question is whether anything was
really settled."
The case is worth reading for it shows how far soyae courts will go in applying strict
constructions of the law to patents long pending in the Office.
In Weston Electrical Instruments Company v. Empire Electrical Instrument Com-
pany, 136 Fed., 509, the same Court of Appeals held a patent invalid which was
allowed on an ai)plication filed more than two years after the allowance of a prior
application for the same invention. The Court really rewrote the law on renewals
by judicial legislation.
The Third Circuit (Pa., N. J., Del.), Court of Appeals has likewise tried to apply
a judicial remedy for long pendency:
In Union Special Mach. Company v. Willcox cfe Gibbs Sewing Machine Company,
32 Fed., 2nd, 921 (decided 1929), the District Court for the Eastern District oi
Pennsylvania applied the rule of that Circuit Court of Appeals that it would not
give a broad construction to claims put in at the last minute in an obvious attempt
to cover a competitor's device wliere no such claims were put in -in the first place.
In Victor Talking Machine Company v. Brunswick- Balke-Collender Company,
8 Fed., 2nd, 41, d.icided in 192.'), the Court of Appeals hold that an invention was
abandoned where ihe applicant struck out the claims and did noL reins:vt them in
the application for four years. The lower Court said in 290 F. R. at page 575:
"Under the circum.stancos then existing the public interest required that
Browning should not be lacking in diligence."
Browning's application was pending 14 years.
In Hestonville, etc. v. McDuffee, 185 Fed., 798, the Court held a patent void
becau.se its scope had been enlaj'ged during prosecution to cover up later develop-
ments in the art. They took tlie position that long delayed applications should
be carefully scrutinized for such dopjirtiu-cs. The delay here was 10 years.
The District Court for the Western District of Michigan, in Wirehound Patents
Company v. Saranac Corp., 24 Fed., 2nd, 872, held 9 years' delay in tiling a divi-
sional application to h--'. fatal to the patent.
The troul)le with attempts l)y the Courts to remedy these bad. conditions is
that because of the Supreme Court's ruling in Overland v. Packard they cannot
seize upon mere delay in the Patent Office as a sufficient ground for holding a
patent invalid. As illustrated by some of the above cited cases, the Courts do
virtually legislate against particular patents by holding them invalid, not for
failure to comply with particular provisions of the law as the law is written but as
the law is changed or "interpreted" by the Court. This is done to prevent injus-
tice in particular cases. But the changes in law thus made by the Courts relate to
details that apply to a very few cases only. Viewed as legislation against applica-
tions long pending in the Office; the action of some of the courts in bearing down
on patents which were long pending in the Patent Office is discriminatory and
applies only to a few patents that happen to come before them.
SOME VERY INTERESTING PAPERS AND REPORTS ON ABUSES OP THE PATENT SYSTEM
Reference is made further on in this report to the following papers:
"The Patent Situation from the Standpoint of the Manufacturer" by Livingston
Gifford.
"Patent Law Reform," by Arthur C. Fraser,
CONCENTRATION OF ECONOMIC POWER 725
Mr. Fraser and Mr. Gifford are patent lawyers of the highest standing. They
both point to delay in issuance of patents as the outstanding abuse of the system.
Their analysis of the abuses of the Patent system is in harmony with the views
expressed in this argument. Both of these gentlemen would undoubtedly be
glad to appear before the Committee on Patents and give their opinion on this
matter. Mr. Eraser's position has a good deal of support in the profession but
it is rather radical, much more so than anything here proposed.
Reports of the majority and minority of the Committee on Interference Practice
of the Patent Section of the American Bar Association are also referred to.
The existing abuses of the Patent system may be ended in many different
ways. There is now more agitation for improvement in conditions than there has
. been for many years.
The inventor wants to get his patent. He does not want to be subjected to
the delays that result in no small part from the monopolizing of the time of the
Office by dilatory prosecution of applications. He does not want to be held up
in interference while his competitor enjoys the business that should be his.
The Examiner in the Patent Office would like nothing better than to call a stop
to the applicant who drags his case along, year after year, and would like to
devote his time to the applicant who eagerly awaits his patent.
The attorney's chief business is getting patents, not preventing their issuance.
He could serve his clients better if he could get their patents out quickly and
establish their monopoly while their business is young and their enthusiasm
strong.
The present effort is devoted to getting action NOW on some proposals which
hit at the fundamental weaknesses of the present patent system and do it in a
way to secure the greatest possible amount of support from inventors, industry,
' the Patent Office and the Patent Bar. Prior proposals have been carefully
studied and an effort has been made to find common ground among them, and to
avoid extreme measures.
The problem has been approached primarily from the standpoint of the in-
ventor who is seeking to get his patent out and his business started, and of the
manufacturer who is engaged in marketing new products. However, the right
of the patent profession to be as little disturbed as possible in the practice of a
branch of the law that it takes years to learn has also been respected.
There are two major abuses and these abuses present two problems:
1. How to prevent the keeping of patent applications in the Patent Office an
unreasonable length of time.
2. How to change interference proceedings so that they cannot be used to
prevent the inventor from getting his patent.
The proposed legislation is aimed at destroying not only the abuse but also the
incentive for the abuse.
It is fundamental that an apphcant will not keep his application in the Patent
Office an unreasonable length of time if he is penahzed for so doing.
It is fundamental that if it is made practically impossible to use interference
proceedings to delay the grant of a patent to the first inventor, applications will
not be filed for this purpose and interferences will lose a good deal of their present
popularity.
The specific proposals are as follows:
1. To get apphcations out of the Office: Force the apphcant to take out his
patent in a reasonable time by providing that the term of the patent shall not
exceed the 17 years now provided nor extend beyond 20 years from the date of
filing the application. This provides three years for prosecuting the application
before the Examiner. It enacts into statute the three-year rule established by
Commissioner Ewing in that, after 3 years, pressure is put on the applicant to
get his case out.
2. To further strengthen the first provision and to assist the Office in disposing
of the many old cases now on file, it is provided that when an application has been
pending three years the Commissioner shall require the applicant to put the case
in condition for final action or appeal within a period not less than thirty days
nor more than 90 days, upon penalty of abandonment. At the expiration of that
period, the Commissioner is under duty to dispose of the case within thirty days.
The last provision applies pressure to the Examiner to decide the case within a
time limit, and takes care of complaints, sometimes heard from attorneys, that
the Examiner makes inconclusive actions and will not squarely meet the issue.
With the exception of the time limit on the Examiner, this section enacts into
726 CON'CEXTHATION OF ECONOMIC POWER
law Recommendation 95 of the Report made to the Secretary of Commerce in
1926 by the Committee on Patent Office Procedure.
With the last provision in effect, the public is assured that there will be no
applications in the Office that have been pending more than three years and 10
months, with the exception of divisional cases, cases on appeal or in interference,
or forfeited and subject to renewal. To give the public access to these excepted
cases so that they may know what they can do and what they cannot do the next
two changes are provided:
3. Publish cases on appeal, if they have been pending three years or more. In
view of the change in interference practice to be discussed later this can do no
harm to the applicant, and gives the public information it is entitled to have for
the prudent conduct of its business. Publication is necessary for the convenience
of the Office, attorneys and applicants, and this, of course necessitates an increase
in the appeal fee.
4. Abolish renewals. Under the present statute an applicant may let a patent
application lapse for failure to pay the final fee, and therubring it to life within a
year by payment of a fee. This right to renew is historical only. It is little used.
No one seems to -know quite why the right was ever created. If renewals were
not abolished a patent application could be concealed from the public a year
longer, allowing it to remain in the Office a total of four years and 10 months.
5. If the applicant for patent wants to rely upon a date of invention prior to
the filing of his application, he is required, before issuance of the patent, to submit
an affidavit setting forth the salient facts relating to the time of invention and is
thereafter bound by that statement. The dates required are those now required
by the present interference practice. This information is absolutely essential in
order to determine the validity of the patent and decide whether to pay royalty
or stand suit.
6. To correct interference practice: Issue the patent to the first applicant. If
an applicant filing later convinces the Commissioner, by sworn showing, that he,
rather than the first to file, is entitled to the patent, let the Commissioner set up
an interference between the patentee and the applicant according to the present
practice. As previously pointed out, even now, without ofi"ering any inducement
to an inventor to file promptly, in 299 cases out of 300, the first to file is the first
inventor. With the inducement offered by this provision, it is to be expected
that the percentage will greatly increase.
This proposal takes a middle ground between the reports of the majority and
minority of a committee appointed by the Patent Section of the American Bar
Association to study the interference practice. The majority favored retention
of the interference practice with changes in the rules to relieve some of worst
abuses, but by no means all of them. The minority favored the entire abolition
of interferences in the Patent Office and the trial of such issues in the Courts.
There follows a discussion of each of the provisions of the bill which gives in
detail a catalogue of the advantages and disadantages of each. In each case it
is submitted that the advantages outweigh the disadvantages. The bill was framed
after a careful consideration of all conceivable factors. It is not contended that
it is a perfect solution but it is submitted that it strikes the best balance of any
solution that has come to our attention, and would produce an immense improve-
ment over present conditions. The bill is the work of no one person. It is a
collection of ideas from a number of men and sources.
SECTION 1 OF THE BILL
If an application is pending in the Office three years or less the applicant receives
his full seventeen years of protection. The great majority of applications are
pending in the Office three years or less. If the applicant takes a longer time in
prosecuting his application, the additional time is deducted from the life of his
patent. For example, if four years is used in prosecuting the dase, the resultant
patent has a term of sixteen years. This provides an incentive for the applicant
to get his case out. At present, by the opportunities offered to extend his monop-
oly, to add claims to his case to catch later ijiventors, and to secure more liberal
treatment by the Office, the applicant is encouraged to keep his case in the Office
as long as possible.
Very similar proposals are made in the papers of Mr. Gilford and Mr. Fraser,
previously referred to.
CONCENTRATION OF ECONOMIC POWER 727
OBJECTIONS ANSWERS TO OBJECTIONS
This section and all the rest of the Thismeans that the rights of inventors
bill are unnecessary. Everything will and of the public shall depend upon how
be corrected if the Office is given suf- generous Congress is with its appropria-
ficient force. tions, who is commissioner, and how
fast the work comes in. It is a plea for
the status quo. The bad conditions
pointed out in this brief have prevailed
for the past fifty years at least, under
generous Congresses and under parsi-
monious Congresses, under able Com-
missioners and under inefficient Com-
missioners, under falling off of applica-
tions received and under increase in
applications received.
This is penalizing the applicant with The applicant with the complicated
the complicated case. case now usually takes his full six
months in replying to the office. Let
him respond promptly while the mech-
anism is fresh in the mind of the
Examiner, thereby saving the Exam-
iner's time and expediting the case.
This applicant pays the same small fee
as the applicant with the simple case
and gets several times the amount of
service he is entitled to at the expense
of the applicant with the simple case.
Because he is asking and receiving
special favors he should respond
promptly,, and completely.
With the Office a year behind this Three actions are sufficient in the
means that barely three actions will be great bulk of cases. Recommendation
made on the case by the Office and this 93 of the Committee oh Patent Office
is insufficient in most cases. Procedure recommends that the Office
make a determined effort to conclude
cases after the third action. With the
passage of the pending bill to increase
the force of Examiners, Commissioner
Robertson predicts that within a year
every case will be acted on in two
months. This will make ten or fifteen
actions possible in three years. The
provisions of this section will then
merely serve as a spur for a small
minority of cases purposely delayed in
the Office.
This provision will penalize the appli- If he replies promptly and com-
cant who appeals. pleteiy, the appeal can be heard and
disposed of within three years in the
majority of cases. Upon passage of
the bill to increase the personnel on the
Board, as well as the force of Examiners
this will be possible in all cases which
are handled promptly by the attorney.
There may be delay in appeals to the
Court. There is considerable support
for the abolition of such appeals and
with this effort we are generally in
favor but are leaving this very excep-
tional condition for remedy by the
patent profession.
728
CONCENTRATION OF ECONOMIC POWER
OBJECTIONS — continued
This provision will penalize the
applicant in interference.
If the Patent Office requires division
in the third year of pendency of the
application, the divisional case will
suffer from insufficient time for prosecu-
tion.
There will be no certainty as to the
term of a patent. One will run seven-
teen years and another ten.
This will result in an applicant being
compelled to take his patent out so
promptly that if he is far ahead of his
times he will receive no reward.
ANSWERS TO OBJECTIONS — Continued
Under the present bill the patent
will, in case of conflict, go to the first
to file. The only thing the Commis-
sioner can do is grant a second patent
on the same thing to the later applicant
who proves that he really invented the
thing first. At present this situation
arises in Ys of 1% of the cases filed.
By the present provision prompt filing
would be encouraged and this percent-
age should be further reduced. Three
or four years should be sufficient to
dispose of the case, but if it is not, the
applicant merely suffers from his own
delay in filing. A dilatory minority
as small as Yz of 1% should not hold
back everyone else.
The Commissioner can readily reg-
ulate the Office so that there would be
no such tardy requirements of division.
It will be necessary to print on the
patent the date of granting and the date
of expiration. This should be on every
patent now for the public does not
remember how long a patent runs.
To promote science and the useful
arts Congress is empowered by the
Constitution to secure for limited tijues
to inventors the exclusive right to their
discoveries. It is discouraging to later
inventors who make something prac-
tical and usable to find that it is tied
up by an old patent that shows a con-
struction that will not work. Fritts
did not invent talking moving pictures;
the inventors in many other fields helped
much more than he did. Should his
patent now dominate the work of the
real, practical workers in that field,
fifty years after he made his invention?
Another thing, industry has so speeded
up that.it is a rare inventor who is more
than a few years ahead of business in
his field, let alone twenty years ahead
SECTION 2
This section requires that every applicant for patent, who wants to laterclaim
he completed the invention before he filed his application, swear just when he
completed it before he gets his patent. This is absolutely necessary in order to
determine whether the patent is good or not under our laws.
Mr. Gifford makes the same proposal in his paper.
OBJECTIONS
This will encourage perjured testi-
mony in the defense of patent suits,
and in interferences in which the patent
may become involved. Both the Patent
Office and the Courts now require that
parties simultaneously disclose their
dates so that neither will be encouraged
to commit perjury by knowing before-
hand the other's dates.
ANSWEJIS TO OBJECTIONS
In practically every patent suit today
the defendant, by order of court, finds
out from the patentee before trial when
he made his invention so that the same
opportunity for perjury is now pre-
sented. By this time the parties have
taken their stands. Had this informa-
tion been available to the defendant at
an earlier time compromise might have
been possible.
CONCENTRATION OF ECONOMIC POWER
729
OBJECTIONS — continued
ANSWERS TO OBJECTIONS — Continued
Where the patent was in interference
in the Patent Office, the public now
knows the patentee's dates of invention.
In practically every other foreign
country the public is apprised of the
earliest date the applicant can claim.
We do not understand there is any more
perjury abroad than there is here.
The present practice encourages per-
jury in that applicants get into inter-
ference with- the man they admit they
got the invention from just to find out
what- his dates are. The average
business man and attorney feel they are
entitled to find this out and the interfer-
ence practice is so arranged that it is
not usually necessary to commit perjury
to get far enough along in an interfer-
ence to find out the other man's dates.
Having found this out there is, of course,
a temptation to stay in the interference
and avail one's self of technicalities to
prevent the other fellow from getting his
patent. This may lead to perjury.
This provision is in line with the
present trade-maric practice where the
registrant is required to sta+e when he
first began using his mark. While there
are many contests between parties seek-
ing to register the same mark, there are
no charges that perjury is prevalent.
It is much more difficult to build up
a case of perjured testimony in connec-
tion with inventions than in the ordi-
nary civil or criminal case. Inventions
are often complicated. Anyone claim-
ing to have made or used an invention
before the patentee must be skilled in
the art. In other words, the perjurer
must come from a small, select group.
There must be supporting physical evi-
dence; drawings and models must be
fabricated. There must be corrobo-
rating witnesses. Altogether, perjury
is a difficult thing in a patent case and
more of a bugaboo than a common
occurrence.
Under the proposed legislation any-
one who gets in interference with an
issued patent is also subject to suit for
infringement at the same time. His
liability is increasing as the interference
goes on. He is not likely to embark on
an interference on flimsy evidence under
these circumstances.
... vw... If the patent is an important one it
ventor Yhree" years or will probably be necessary, and always
It will be difficult Xo get this informa
tion from the in
so after the case is filed.
be prudent to get this information dur-
ing the course of the prosecution of the
application in anticipation of use in the
future. Valuable inventions are often
subject to attack. All this section re-
quires is that the applicant publish that
which he has usually gathered together
even now before his patent issues.
730
CONCENTRATION OF ECONOMIC POWER
SECTIONS 3 AND 6
When an invention has been before the Office by application for patent for
three years, the Commissioner shall re-examine the application and require the
applicant, on pain of abandonment, to place the case in condition for issuance of
patent thereon or for appeal within a period not less than thirty days nor more
than ninety days, to be set by the Commissioner. In handling old cases now,
the Commissioner is compelled to coax and entreat the applicant to get his case
out. These sections give the Commissioner a club to compel closing up of old
cases in the interest of other inventors and of the public. At the expiration of
the period set, the Commissioner is given thirty days in which to take final action
on the application. It is necessary to make this duty mandatory on the Com-
missioner for the reason that according to Section 1, the term of the patent which
may be granted applicant is being shortened day by day. The Examiner must
be compelled to decide promptly. It is not enough to penalize the applicant for
keeping his case in the Office. It is essential that the case be patented within a
reasonable time so the other inventors and the public may know what they can
do and what they cannot do.
This proposal is substantially the same as Recommendation 95 of the Committee
on Patent Office Procedure that reported to the then Secretary of Commerce
Hoover in 1926.
OBJECTIONS
The Office often does not find the best
reference until the case is several years
old, and the real prosecution of the case
begins at that time. The time for pro-
secution is then unreasonably shortened.
What about the applicant in inter-
ference?
A divisional or continuing appUcation
filed in the Patent Office after the parent
case has been pending three years be-
comes subject immediately to this pro-
vision and insufficient time is given for
adequate examination.
ANSWERS TO OBJECTIONS
The duty of prompt and efficient ex-
amination lies squarely on the Office.
The correction of poor examination
necessarily lies in the hands of the Office.
The Commissioner has adopted the
policy of appointing supervisors to see
that the best references are cited in the
first actions.
The Office now unnecessarily pro-
longs the pendency of patent applica-
tions by refusing to act on them while
the interference is going on. It will be
necessary for the Office to continue the
prosecution of such applications concur-
rently with the carrying on of the inter-
ference. Otherwise the period of the
monopoly of the applicant will' be cut
down unnecessarUy.
In such cases the Commissioner must
examine the case immediately and the
applicant has ninety days in which to
reach some conclusion with the E.xami-
ner. This is a liberal allowance of time
for the dilatory applicant. If divisional
cases are not thus tied down to the time
of filing of the original case the present
abuse will continue but in slightly dif-
ferent garb; as in Packard v. Overland,
the applicant will file continuing appli-
cations in the last days of prosecution
and keep his case concealed in the Office.
Other inventors and the public will con-
tinue to be in a haze of uncertainty. In
practically all other countries continxiing
applications go back to the date of the
original. Article 4 of the Convention
for Protection of Industrial Property
signed at The Hague on November 6,
1925, provides that divisional applica-
tions go back to the date of the original
application.
CONCENTRATION OF ECONOMIC POWER 731
OBJECTIONS — continued answers to objections— continued
The Office should not be required to It is not possible to secure anything
dispose of a case within a time limit, but a sketchy examination of a patent
Suppose after expiration of the period application for the $25 the Office has to
they find a new reference that renders spend w'hether the work is done by the
the patent invalid? Office or by outside attorneys. For a
fairly thorough examination $300 or
$400 is a reasonable figure. The Office
now often fails to find the best reference.
Absolute anticipations are rather rare.
Frequently a better reference is now
found by the Examiner after the case
has been allowed and before patenting.
In most cases the application is allowed
to go to patent for the Office rightly
feels that there must be an end to the
prosecution of applications some time
Under this change in the law the Office*
need but continue its present practice.
SECTION 4
By this section renewal of patent applications is abolished. After the Commis-
sioner has advised an applicant he may have his patent upon paying the final fee,
the applicant has six months to pay it in. If he does not pay it within that time,
the applicant may, upon payment of an additional fee within the next year, have
the case reopened and reexamined. Often the reexamination is but formal and
the Commissioner again notifies the applicant he maj' have his patent if he pays the
final fee, and the applicant has six months more to pay it. The right of renewal,
whatever may have been its original purpose, actually functions merely as another
way to keep a case pending in the Patent Office.
OBJECTIONS
Then if an applicant fails to pay his
final fee within the six months allowed,
his case is dead, for the Commissioner
has no right to revive it.
If an applicarit fails to properly claim
his invention before the first allowance,
his only remedy is by reissue and this
may make it impossible for him to
recover against those who have in the
meantime used his invention.
Then by simply filing continuing
application after continuing application
at six month intervals an applicant can
keep his case in the Patent Office
indefinitely.
ANSWERS TO OBJECTIONS
Six months is plenty of time within
which to decide w-hether an invention is
worth spending $25 more on. In most
cases if the fee is not paid, the applicant
can file another application and merely
loses the right to go back to the date of
filing of the first application as the date
of completion of his invention, or "re-
duction to practice" as it is called.
This is no more than a proper penalty
for tardiness.
If his application has been pending
in the Office three years, he has had
plenty of time to find out what his in-
vention is. If it has not been pending
three years, the applicant may file a
continuing application after the allow-
ance of the first, and prosecute it the
fame as he did the original; if three years
have elapsed since the first case was
filed, then by filing a continuing appli-
cation the applicant has, under Section
5, from 30 to 90 days to correct his
claims. In addition, he may reissue the
day the patent is granted if he sees fit.
That is true, but his monopoly is
expiring, and he is paying for the privi-
lege of lying in wait by being compelled
to file a new case each time and pay a
new fee. It would really be better i^' a
positive stop ware erected here also but
this would mean added complication.
732
CON'CENTKATION OF ECONOMIC POWER
SECTION 6
This section eliminates interferences between applicants, the patent being
f ranted to the first to file. In 99^3% of the cases the first to file is the first inventor,
f the later applicant can satisfy the Commissioner bj' prima facie showing under
oath that he made the invention before the first to file, the Commissioner conducts
interference proceedings as at present to see if a second patent for the same
invention should be granted the later applicant.
Mr. Arthur C. Fraser's paper and the minority report of the Bar Association
Committee on Interference Revision go much further than this proposal, and
recommend abolition of interferences in the Patent OflSce. This would make the
granting of additional patents to other inventors for the same invention a mechani-
cal act, and take away the judicial function of the Office. There is much support
for this change. The present proposal is an attempt at compromise.
OBJECTIONS
This will be hard on the applicant who
.is unavoidably late in filing his case.
The patentee will be able to prevent the
applicant from getting his patent for a
long time by dilly-dallying with the in-
terference.
ANSWERS TO OBJECTIONS
It is estimated that in only Yz of 1%
of the cases is the later applicant the first
inventor. This section is hence much
more efficient in giving substantial
justice than any other legal proceeding
with which we are acquainted.
The dilatory applicant is the one who
should suffer for his delays. By the
present system it is the prompt and
enterprising inventor who is made to
suffer for fear of injuring some laggard.
In interferences with patents many of
the time-killing motions may not now be
brought. This results in shortening the
contest. Further improvement can be
made by following the recommendations
of the majority of the Bar Association
Committee on Revision of Interference
Practice.
The American patent system has from At the beginning of the Patent system
its very beginning been conducted on an interference was decided informally
the theory that the patent should be by arbitration by a Board of three men.
granted the first inventor. This should There were no appeals, and presumably
not be lightly overturned. the delays were slight. Now the inter-
ference practice is so cluttered and
obscured by technicalities that it does
not function satisfactorily.
This is not necessary,
the present practice.
Just improve The present practice is the result of
almost 150 years of evolution. The
flower of the practice is the famous
Gubelmann case in which the inventor
was held up in the Patent Office 22
years. This amply demonstrates that
a positive stop must be raised. With-
out such stop the same pressure that
created the present practice will soon
mold the "reformed" practice into the
old distorted shape.
CONCENTRATION OF ECONOMIC POWER
733
OBJECTIONS — continued
This provision will tend to cause in-
ventors to run into the Patent Office
with half-baked developments instead
of encouraging them to really have some-
thing usable before [hey apply for
patent.
This would result in many patents
being issued for the same thing.
This would increase suits under 4912
to cancel patents where two have been
issued on the same invention. Litiga-
tion would thus be increased in the now
over-burdened Federal Courts.
ANSWERS TO OBJECTIONS — Continued
A great many inventors now run into
the Office with half-baked devices, even
perpetual motion machines, and no way
has been found to stop them. It is a
rare inventor now that delays filling his
application. The inventor , almost
always fears someone is going to steal
his invention, and so files promptly. On
the other hand, many progressive busi-
ness concerns that have established de-
partments to consider new devices sub-
mitted to them, make it a rule to rec-
ommend that the inventors file their
patent applications before submitting
their ideas, to avoid any misunderstand-
ing at a later date as to what was sub-
mitted. It is good to encourage prompt-
ly filing.
In England and most foreign countries
inventors are under much greater com-
pulsion to file promptly. The first to
file gets the patent. If the inventor
before filing describes his invention in a
lecture or publication, he is barred from
getting a patent. Yet these fcfreign
countries seem to be no more bothered
by premature filing of applications than
we are.
That is the case now. Every week
patents are issued that should not have
been issued, and, later, patents on the
same inventions are issued to others
after interference proceedings. By stim-
ulating prompt filing by the first in-
ventor there should be less accidental
improper granting of patents than now.
This remedy is rarely used and there
are plenty of patents now issued for
identical inventions. The reason is
that the better remedy is suit for in-
fringement. Usually the party holding
one of the patents knows that the other
is the first inventor and does nothing
with his patent, so it does not pay the
first inventor to bother with him.
The changes in this section permit the applicant to appeal after one rejection.
This is necessary to make Section 5 workable for it may sometimes be necessary
for the Commissioner, in his thirty days, to take final action on some point that,
technically, has been only once considered. Even though the applicant does take
his appeal after a first rejection, the Examiner can still write the applicant and
suggest compromise after the appeal has been taken.
The important provision is for the publication of appeals after a case has been
pending three years. The purpose of this is to let the public know within a rea-
sonable time after a patent application has been filed, what they are forbidden
to do. By publishing the cases they will be available to the Patent Office to
reject other later filed cases on.
734 COxXCENTRATION OF ECONOMIC POWER
OBJECTIONS ANSWERS TO OBJECTIONS
This is a breach of the policy of keep- In view of the fact that the patent is
ing applications secret in the Patent issued to the first to file, by virtue of
Office and exposes the applicant to section 6 of the bill, there is nothing
attack by unscrupulous persons. that any member of the public can do to
prevent the grant of a patent to the
applicant whose case is on appeal,
except to file a reissue application and
demand an interference. This contin-
gency is very amote.
The applicant has 3 years of secrecy,
and at the end of that time the public
interest demands that he no longer be
permitted to conceal his application in
the Patent Office.
THE FULL TEXT OF THE BILL
A HILL amending Sections 4884, 4894, 4903. 4904, 4909. 4934, and to repeal Section 4897 of the acts relating
to letters patent for inventions.
Be it enacted by the Senate and House of Representatives of the United States of
America in Congress assembled, That Section 4884 of the Revised Statutes of the
United States be amended to read as follows:
"Section 4884. Every patent sJmll contain a short title or description of the
invention or discovery, correctly indicating its nature and design, and a grant to
the patentee, his heirs or assigns, of the exclusive right to make, use, and vend the
invention or discovery throughout the United States and the Territories thereof,
referring to the specification for the particulars thereof. The term of such patent
shall begin with the issuance thereof and shall terminate at a date not more than
twenty years from the date of filing by the applicant in the United States Patent
Office of his earliest appHcation disclosing the invention covered by any of the
claims of said patent; but in no case shall such term be more than seventeen years.
A copy of the specification and dr^Lwings shall be annexed to the patent and be a
part thereof."
Section 2. That Section 4892 of the Revised Statutes of the United States be
amended by adding at the end thereof the following
"Before issuance of a patent the applicant may file a statement, under oath,
setting forth the dates of his
"(a) Original conceptixjn of the invention defined in the claims finally allowed.
"(b) Completion of the first drawing of said invention.
"(c) Making the first written description of said invention.
"(d) First disclosure of said invention to others.
"(e) Reduction to practice of said invention.
"In puits for infringement of a patent the patentee shall be restricted to dates
not earlier than those set up in such statement. If an earlier date be proven such
froof shall be held to establish the date alleged in the statement and none other,
f ho statement shall have been filed, his date of invention shall be conclusively
presunied to be the date of filing the first patent applh-ation effective as a construc-
tive reduction to practice of the invention in issue in the United States."
Section 3. That Section 4894 of the Revised Statutes of the United States be
amended to change the phrase "of which notice shall have been given to the appli-
cant," to read as follows: "or upon failure of the applicant to place his application
in condition for issuance of patent thereon, or for appeal, within a time limit set
by tiie commissioner in accordance with Section 4903 of the Revised Statutes of
the United States as amended, of which action notice shall have been given to
the applicant."
Section 4. That Section 4897 of the Revised Statutes of the United States be,
and the same is hereby, repealed.
Section 5. That Section 4903 of the Revised Statutes of the United States
be amended to read as follows:
"Section 4903. Whenever, on examination, any claim for a patent is rejected,
the commissioner shall notify the applicant thereof, giving him briefly the reasons
for sucHi rejection, together with such information and references as may he ii's^ful
in jufiging of the propriety of renewing his application or of altering his specifica-
tion; and if, after receiving such notice, the applicant persists in his claim for a
patent, with or without altering his specifications, the commissioner shall order
a rt;-oxHmfnation of the case: Provided, however, whenever any application for
CONCENTRATION OF ECONOMIC POWER 735
patent has been pending three years, or claims an invention disclosed in an
application by the same inventor which has been on file in the Patent Office three
years or more, the commissioner shall order a re-examination of the application
and shall require the applicant to place his application in condition for issuance
of patent thereon, or for appeal, within a period, not less than thirty days nor
more than ninety days, to be set by the commissioner. And it shall be the duty
of the commissioner within thirty days after the expiration of said period to take
final action on said application."
Sectiox 6. That Section 4904 of the Revised Statutes of the United States
be amended to read as follows:
"Section 4904. Whenever an application is made for a patent which, in the
opinion of the commissioner, would interfere with any pending application, he
shall issue a patent to the interfering applicant who was the first to file an appli-
cation disclosing the common invention, provided said applicant is entitled to rely
upon the filing of said application as a constructive reduction to practice of the
invention; and he shall reject the other application or applications on the pptent
thus issued. Should an applicant claim to be the first inventor of an invention
claimed in a patent issued to another on a previously filed application and estab-
lish to the satisfaction of the commissioner by prinaa facie showing under oath
that he made the invention before the date of filing of the earliest application on
which the patentee is entitled to rely as a constructive reduction to practice of the
invention, the commissioner shall direct the examiner in charge of interferences
to proceed to determine the question of priority of invention. And the com-
missioner may issue a patent to the applicant if adjudged the prior inventor,
unless an adverse party appeals from the decision of the examiner in charge of
interferences, within such time, not less than twenty days, as the commissioner
shall prescribe.
Section 7. That Section 4909 of the Revised Statutes of the United States
be amended to read as follows:
"Section 4909. Every applicant for patent or for the reissue of a patent, any
of the claims of which have been rejected, and every party to an interference,
may appeal from the decision of the primary examiner, or of the examiner in
charge of interferences in such case, to the Board of Appeals; having once paid
the fee for such appeal. In the case of an application for patent which has been
pending three years or more or claims an invention disclosed in an application
by the same inventor which has been on file in the Patent Office for three years or
more, the commissioner shall, upon payment of the appeal fee, proceed forthwith
to have the said application with all of the claims thereof published with a nota-
tion that the case is on appeal, and the said application and all proceedings relating
thereto shall thereafter be thrown open to public inspection. Where the applica-
tion, at the time of appeal, does not have an effective filing date more than three
years old, it shall, upon attaining said age, be forthwith published as in the case of
issued patents and thrown open to public inspection.
Section 8. That Section 4934 of the Revised Statutes of the United States be
amended by striking out the following words:
"On an appeal for the first time from the primary examiners to the Board of
Appeals, $15.
"On every appeal from the Examiner of Interferences to the Board of Appeals,
$25."
and substituting therefor the words:
"On an appeal for the first time from the primary examiners to the Board of
Appeals, $40.
"On every appeal from the examiner of interferences to the Board of Appeals,
$50."
Section 9. Section 1 hereof shall take effect upon approval of this act but shall
apply only to applications thereafter filed; Sections 2, 3; and 5 hereof shall take
effect one year after approval of this act; Section 4 hereof shall take eifect upon
approval of this act but with respect to applications then forfeited or renewed
there are reserved to the applicants or other parties at interest the right to revive
the applications, if forfeited, and the right to prosecute the renewed applications
the same as if this section had not been enacted into law, except that such renewed
applications shall be subject to the remaining provisions of this act; Section 6 shall
tak^ effect upon approval of this act, but shall not apply to interferences then
pending; Sections 7 and 8 shall take effect ninety days after approval of this act
but shall not apply to cases then on appeal.
736 CONCENTRATION OF ECONOMIC POWER
Exhibit No. 112
The Manufacture op Bottles
[Prepared by the Department of Justice for the use of the Temporary National
Economic Committee]
MEMBERS OF THE COMMITTEE
Joseph C. O'Mahoney, Senator from Wyoming, Chairman.
Hatton W. Sumners, Representative from Texas, Vice Chairman.
Thurman W. Arnold, Assistant Attorney General.
*Wendell Berge, Special Assistant to the Attorney General.
Representing the Department of Justice.
WiLliam E. Borah, Senator from Idaho.
William O. Douglas, Chairman.
*Jerome N. Frank, Commissioner.
Representing the Securities and Exchange Commission.
Edward C. Eicher, Representative from Iowa.
Garland S. Ferguson, Chairman.
*EwiN L. Davis, Commissioner.
Representing the Federal Trade Commission.
William H. King, Senator from Utah.
JsADOR LuBiN, Commissioner of Labor Statistics.
*A. Ford Hinrichs, Chief Economist, Bureau of Labor Statistics.
Representing the Department of Labor.
JfKHviAN Oliphant, General Counsel.
•"Christian Joy Peoples, Director of Procurement.
Representing the Department of the Treasury.
Ku'ii/VRD C. Patterson, Jr., Assistant Secretary.
Hepresenting the Department of Commerce,
li- CARROLL Reece, Representative from Tennessee.
Leon Henderson, Executive Secretary.
■* Alturnates.
The Manufacture of Bottles
Preliminary Statement. — This .statement has been prepared by the Department
of Justice for jse in connection with its study of patent practices in the glass con-
tainer industiy. It contains (1) a description of the process of manufacturing
glass containijrs and (2) certain general economic facts with respect to the glass-
container inriustry in the United States.
Iw^ testimony which it is expected will be elicited in the hearings before the
Committee will, in many instances, relate to the various steps in the process of
manufacturing glass containers and will involve the use of terms peculiar to the
technology of that process. It is believed that the explanation of the process of
manufacture and the diagrams and pictures contained herein may be of material
assistance in following the testimony.
Process of Manufacture. — Until the turn of the century, bottles and other glass
containers were made exclusively by hand — a process which was one of the most
highly skilled manual arts employed in large-scale industrial production. In the
first step of the hand-blown process, the glass blower dipped the end of his Pontil,
sometimes called the "Punty" (a five-foot hollow steel tube), into a tank of
molten glass (Fig. 1). Rapidly revolving the pontil, he gathered a mass or Gob
of molten glass on its end, withdrew it from the furnace, and blew through the
tube, thus forming an enlarging bubble. By swinging, twirling, and rolling the
bulbous mass on a Marver, or flat slab, the glass was worked into a hollow, pear-
shaped form, hanging in suspension from the pontil. This partly shaped mass
then was lowered into a hinged iron Mold, which was closed around it, and the
glass was blown up to its completed shape within the mold.
CONCENTRATION OF ECONOMIC POWER
737
Figure l.— Glass blower at work. Illustrates bottle-making methods prior to 1905.
738 CONCENTRATION OF ECONOMIC POWER
The transition from this age-old handblown art to automatic machine methods
was quite sudden. About 1905 Michael J. Owens, a glass-blower, had developed
a successful and fully automatic machine for blowing bottles (Fig. 2). It could
produce more than 30,000 bottles every 24 hours as compared with the six or
eight hundred which a skilled handblower could turn out in an exhausting day's
work.
For the common varieties of glass containers the principal raw materials are
sand, soda ash, and limestone, thodgh broken glass, called Gullet, generally is
added to the mixture. These materials are melted in a Furnace or Tank
(Fig. 3). The mixture of raw materials is fed into the hottest, or melting, portion
of the furnace, flows slowly into a cooler section of the furnace, and thence by
way of a channel to the place from which it will be fed to the bottle-making
machine.
Tiie Owens machine (see Fig. 2) employs the so-called Suction Process.
Molten glass flows from the cooler section of the tank into a shallow Revolving
Pot. Iron molds mounted on arms radiating from a central pillar revolve so
that each mold, during a part of its revolution, passes over the revolving pot.
At this point the mold lowers itself until the open end touches the pool of molten
glass, sucks up a Charge of glass, rises and moves on. As it rises, a knife slides
across the bottom of the mold, closing it and cutting the glass off' from that in the
pool. The upper part of the cavity in the mold contains a Plug against which
the charge has been forced, thus forming the opening which later becomes the
neck of the bottle (Fig. 4). In this manner the charge of glass has been shaped
into a preliminary form known as the Parison, which roughly approximates the
shape of the finished bottle. This mold, termed the Parison Mold, then divides
and withdraws and another mold, called the Finishing Mold, comes into place
around the parison or embryo bottle which is hanging by its lip or neck. There-
upon the parison is blown into its completed shape within the finishing mold
(Fig. 5). At this point in its revolution the arm passes over a Conveyor on
which the bottle is deposited. The parison mold then swings hack into operating
position, to dip into the pool of molten glass once more. The machine may con-
sist of from six to sixteen arms depending upon the type of ware to be produced
and the speed of operation desired.
I
CONCENTRATION OF ECONOMIC POWER
739
740
CONCENTRATION OF ECONOMIC POWER
ll~^
2S
CONCENTRATION OF ECONOMIC POWER
741
Action Of Owens Machine
In Filling Mold By Suction
TO source:
OF VACUUM
FIRETCLAY
REVOLVING POT
FiGDRB 4. — Action of Owens machine in filling mold by suction from the revolving pot.
124491— 39— pt. 2 32
742 CONCENTRATION OF ECONOMIC POWER
Since 1917 the so-called Gob-Fed Process for the automatic production of
glass containers has been used in competition with the Owens suction method.
The gob-fed process requires a Forehearth — a covered channel conducting the
molten glass from the tank to the device which feeds the charge of glass to the
molds. Equipment for the process consists essentially of two separate mecha-
nisms: a Feeder for introducing molten glass into the molds, and a Forming
Machine for shaping the bottle. Molten glass is fed from a hole or Orifice in
the bottom of the forehearth by a mechanism which causes the molten glass to be
extruded in gobs, or separate drops, with a shape roughly approximating that of
the molds into which they will drop. In some types of feeders (Hartford "Single
Feeder") a-RECiPROCATiNG Plunger or Needle operates over the orifice to control
the quantity and shape of the extruded gob. Just beneath the orifice is arranged
a pair of Shears which is operated in timed relation to the movement of the
plunger so that it cuts off the suspended gob at the desired point in the cycle
(Figs. 6 and 7). In some types of plunger feeders the shape of the gob is con-
trolled by adjustments in the operation and timing of the plunger and shears.
In those types of feeders known as Air Feeders (Stuckey, Shawkee, et al) controi
over the extrusion of glass from the orifice is obtained through the use of an
alternate air pressure and vacuum effect rather than by a plunger.
The forniing operations in the gob-fed process are similar to the same operations
in the suction process, although there are many variations in the mechanics em-
ployed. In some machines (Lynch, O'Neill) the parison and finishing molds are
mounted on separate revolving systems or tables with the parison being transferred
from one set of revolving molds to the adjacent revolving set, by automatic means.
This is the so-called Two Table Machine (Figs. 8 and 9). In another type of
machine (Hartford) a row of- parison molds is in fixed position on a rectangular
table (Fig. 10). The molds receive gobs distributed to them in turn from the
feeder chutes or Delivery Troughs. After the parisons have been formed in
these molds by an initial blowing operation they are swung in an arc and de-
posited in the finishing molds located on the other side of the table. The final
blowing operation is accomplished in the second set of molds and the finished
bottle is placed upon a conveyor by means of an Automatic Take-Out.
CONCENTRATION OF ECONOMIC POWER
743
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CONCENTRATION OF ECONOMIC POWER
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CONCENTRATIpN OF ECONOMIC POWER
745
746 CONCENTRATION OF ECONOMIC POWER
For Narrow-Neck containers the so-called Blow and Blow process generally
is employed (See Fig. 5) in which compressed air is used in each of the blowing
operations. For machines used to make Wide-Mouth ware (Miller) the so-
called Press and Blow method generally is employed (Fig. 11). In this process
the first blowing operation is supplanted by a "pressing" operation in which a
plunger is used to form the cavity in the parison (Fig. 12). Many articles, such as
tumblers and dishes, are made by a Pressing operation alone (Hartford and Miller).
This method uses a plunger to perform the entire operation of forming (Fig. 13).
The completed bottles are carried by the conveyor into a Lehr or oven (Fig. 14),
where they are Stacked, or arranged in closely spaced rows, on a belt which moves
slowly through a long chamber or tunnel. The temperature of the bottle is
lowered slowly in this oven so that internal strains in the bottle are relieved.
This process of Annealing tends to prevent the finished product from cracking
or breaking when subjected to sudden jars or rapid changes in temperature.
CONCENTRATION OF ECONOMIC POWER
747
748
CONCENTRATION OF ECONOMIC POWER
1
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CONCENTRATION OF ECONOMIC POWER
749
Figure 10.— Hartford "IS" (forming) machine.
750
CONCENTRATION OF ECONOMIC POWER
FiGDBB 11. — Miller "JPM" (forming) machine.
CONCENTRATION OF ECONOMIC POWER
751
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CONCENTRATION OF ECOP^OMIC POWER
CONCENTRATION OF ECONOMIC POWER
753
754
CONCENTKATIOX OF ECONOMIC POWER
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COXCEXTRATION OF ECONOMIC POWER 755
A schematic diagram of the manufacture of glass containers by the gob-fed
process is shown in Figure 15.
Development of the Glass Container Industry. — The principal divisions of the
glass industry are glass containers such as bottles and jars; pressed and blown ware
other than containers, including electric light bulbs, tableware, etc.; and flat glass,
comprising window glass, plate glass, and similar products. The container
branch of the glass industry accounts for slightly less than half of the value of all
glass produced in the United States (Fig. 16). The princij^al products of th^'?
division include ware for commercial packers of foods (28 percent) ; medicines
and toilet preparations (24 percent); liquor ware (IS percent); milk bottles (9
percent); fruit jars and jelly glasses for household use (8 percent); and beer bottles
(3 percent) (Fig. 17).
Increase in volume and value of the production of glass containers in tlie past
thirty-nine years has been marked. In 1899 there were produced one billion one
hundred miUion containers valued at twenty-one and one-half million dollars.
By 1935 this production hnd increased to slightly less than six billion containers
valued at one hundred twenty million dollars (Fig. 18). Preliminary figures for
1937 indicate there were produced more than seven and three-fourths billion glass
containers having a value of over one hundred sixty million dollars. Despite this
increase in production the number employed in the industry was greater thirty-
nine years ago than in 1935. In 1899 there were 28,370 wf^c earners as com-
pared with 24,044 in 1935. (See Fig. 18) Consequently there has been a corre-
sponding increase in the average production per man employed. At the turn of
the centurv the average production per man was about 40,000 containers per
year. By'l935 this figure had increased to 245,000 (Fig. 19\
Concomitant with this increase in volume and value of glass containers j)ro-
duced the number of companies in the industry has declined precipitously. In
1904 there were 155 companies producing glass containers. At the present time
there are forty (Fig. 20). Of these forty, five produce more than two-thirds of
the total, leaving less than one-third to the thirty-five smaller companies (Fig. 21)
Sources: United States Census of manufactures for divisions of the class indusiry, volume and value of
output in 1890 and 1935; Survey of Current Business for preliminary 1937 daia on volume and value of out-
put; United States Census of Manufactures and Bureau of I.ahor Statistics Bulletin No. 4A\ for early dala
on number of wape earners employed and production per nnn; Class Factory Yearbook (Direclory'of the
Gla.ss Trade) for number of wage earners in 193.'i and number of comi anies; Glass Container Association for
production of five largest companies.
756
CONCENTRATION OF ECONOMIC POWER
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CONCENTRATION OF ECONOMIC POWER
757
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CONCENTIIATION OF ECONOMIC POWER
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CONCEXTHATION OF ECOXOMTC POWER 759
1899
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1935
GOOD ami]
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FiorPB 19.— Production per man.
760
CONCENTRATION OF ECONOMIC POWER
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CONCENTRATION OF ECONOMIC POWER
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CONCENTRATION OF ECONOMIC POWER
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CONCENTRATION OF ECONOMIC POWER
[Legend for " Exhil»t No. 113," which appears on opposite page.]
763
This chart indicates the more important relationships in the glass container
industry. The circles on the left side of the chart represent the plants of Owens-
Illinois Glass Co., the largest manufacturer of glass containers. This company
has an agreement with Hartford-Empire Co., expressed in successive cross-
license contracts of 1924, 1932, and 1935. The circles on the right side of the
chart represent other companies manufacturing glass containers which are licensees
of Hartford-Empire Co. Those on the extre j right represent manufacturers of
glass containers who are not licensees of Hartford-Empire Co.
The circle in the upper center of the chart represents Houghton Associates,
Inc., a holding company owning 40 percent of the stock of Corning Glass Works,
which manufactures specialty glass products under license from Hartford-Empire
Co. Stockholders of Corning Glass Works own 90 percent of the stock of the
Empire Machine Co., a holding company for glass-machinery patents, which in
turn owns 40 percent of the stock of Hartford-Empire Co. The latter licenses
Corning Glass Works as well as some 30 glass-container manufacturers, under its
extensive glass-machinery patents. Corning Glass Works and Owens-Illinois
Glass Co. each own a one-half interest in Fiberglas Corporation, a company
recently organized to develop glass wool. In the lower center of the chart is a
circle representing Lynch Corporation, the largest manufacturer of glass-forming
machinery. It has a cross-license agreement with both Hartford-Empire Co.
and Owens-Illinois Glass Co.
Owens-Illinois Glass Co. and the other licensees of Hartford-Empire Co. manu-
facture approximately 96 percent of all glass containers produced in the United
States, while the independents indicated on the extreme right of the chart produce
about 4 percent of the total.
(This chart should be retained for use throughout the conduct of the Glass Container Industry hearings.)
Exhibit No. 114
(Submitted by A. T. Saflford, Secretary and Counsel, Hartford Empire Co.]
Rates of Royaltt
The weights below specified are the weights of the finished articles
Blown or
Pressed and
Blown
Purely
Pressed •
^ oz. wt. and under
Per Gross
IVi Cents
8 Cents
9 Cents
10 Cents
11 Cents
12 Cents
13 Cents
14 Cents
15 Cents
16 Cents
18 Cents
21 Cents
Per Pound
Ha of a
Cent
Hofa
Cent
Per Gross
7H Cents
7h Cents
Over }i oz. wt. and not exceeding 1 oz. wt
Over 1 oz. wt. and not exceeding 1}4 oz. wt
7H Cents
7J4 Cents
Over IJ^oz. wt. and not exceeding 2 07.. wt .
Over 2 oz. wt. and not exceeding 4 oz. wt
8K Cents
9 Cents
Over 8 oz. wt. and not exceeding 12oz. wt -. ,
9Ji Cents
Over 12 oz. wt. and not exceeding 13 oz. wt . ... .
lOH Cents
Over 13 oz. wt. and not exceeding 16 oz wt -.
ll>i Cents
12 Cents
13H Cents
15Ji Cents
Over 26 oz. wt. and not exceeding 30 oz. wt . .
Per Pound
Htofa
Over 96 oz.wt. and not exceeding 128 02. wt ...
Cent
Hot a
Cent
• Purely Pressed, that is, produced by an operation which consists solely of pressing without the inter-
vention of any air in the mold for the purpose of changing the shape of the article to be produced.
764
CONCENTRATION OF ECONOMIC POWER
Exhibit No. 115
[Compiled by Department of Justice staff from wrtified data taken from flies of Hartford-Empire
Company]
Hariford-Empire Company — Annual Receipts from royalt
ies and lice
nse fees
Year
Royalties
License Fees
Totnl
1923
$637. 692
720, 230
W6, 624
1, 423, 956
1,671,402
1. 742, 386
1,952,307
2,043,338
1, 776, 723
1,902,000
3,114,590
3,631,943
3,959,876
4,872,325
5, 548, 684
$128,812
169. 256
428,761
366, 362
491,282
469, 100
379.900
256,329
108, 600
105, 565
197, 179
223,588
329,540
364, 054
516, 678
$766. 534
1924._ _
1925 -
889, 488
1, 375, 385
1926
1,790,318
1927 -
2, 162, 684
1928. -
2,211,486
1929 ---
2, 332, 207
1930
2, 299, 717
1931 -
1932 .. - ---
i; 885! 323
2, 007, 566
1933 . -
3,311,769
1934- ^ -
5, 855, 531
1936
4. 289, 416
1936 : .
6, 236, 379
1937
6,005,263
Total -
35,944,026
4,535,036
40,479,062
CONCENTRATION OF ECONOMIC POWER
765
NO
766
CONCENTRATION OF ECONOMIC POWER
S
s
II
%9 a
18
CONCENTRATION OF ECONOMIC POWER 7^7
"Exhibit No. 118," introduced on p. 405, is on file with the Committee
'Exhibit No. 119," introduced on p. 406, is on file with the Committee
'Exhibit No. 120," introduced on p. 408, is on file with the Committee
"Exhibit No. 121," introduced on p. 410, is on file with the Committee
'Exhibit No. 122," introduced on p. 411, is on file with the Committee
Exhibit No. 123
[From files of Hartford-fempire Company]
August 26, 1932.
S. S. Searcy,
Attorney-at-law, Sa7i Antonio, Texas.
Dear Mr. Searcy: I received j'our courteous letter of August 23rd, and should
like to employ you on behalf of Hartford-Empire Company in its contemplated
suit against Three Rivers Glass Company.
In this afternoon's mail there came another letter from Three Rivers Glass
Company, as a result of which it may be necessary for us to change our opinion
but for the present we are still contemplating bringing suit.
There are a great many factors whicli I believe would be of considerable assist-
ance to you in understanding the picture and in bringing the suit. For this reason
I should like to meet you in St. Louis sometime between September 5th and
September 10th.
If you could meet me there I could give you the contracts and the papers
involved, and also explain to you the whole situation. We could also meet one
another and assure ourselves to our own satisfaction as to the calibre of tho
persons with whom we are respectively dealing.
Th'.^refore, would you be good enough to either wire or write me if you can
possibly meet me in St. Louis between the stipulated dates, and tell me what
day is best for you? I have selected St. Louis as being the half-way point between
Sail Antonio and Hartford, but if any other business should carry you North to
some other point I could perhaps meet you there.
I enclose herewith opinions of the Circuit Court of Appeals in the cases of
Hartford-Empire Company v. Hazel- Atlas Glass Company and Hartford Empire
Company v. the Nivison-Weiskopf Company, and also would like to refer you to
Hartford-Empire Company v. Obear-Nester" Company, 39 F (2d) 769 and Homer
Brooke Glasss Compa;iy v. Hartford-Fairmont Company, 255 Fed. 901, affirmed
262 Fed. 427. These, I believe, will give you an adequate background of the
glass art and the kind of machines which we call Feeders.
Hartford-Empire Company is engaged in the development and manufacturing
of machines for making glass articles, and our two principal sources of income
are from what we call Feeders and Lehrs.
These machines we lease and license under a standard form in which we retain
title and in which the licensee agrees to return the machinery in the event we
revoke its license. The licensee pays royalties on each article of glass manu-
factured with the Feeder, but in the case of the Lehr there is a flat monthly
amount payable for the use of the lehr. We have a provision in the contract that
if the licensee fails to pay its royalties we are entitled to revoke its license.
In August 1929 Three Rivers Glass Company was operating four machines
which infringed our patents. They came to us and wanted a license under our
patents and agreed to pay damages for their past infringing use. They also
wanted a license to make milk bottles, but by reason of our prior commitments
we were not in a position to give them a license for milk bottles..
We finally licensed tlitmr to use three Feeders, but the fourth Feeder we did
not license, and since then they have continued to make milk bottles on a machine
which we believe to infringe our patents. We have not brought suit against them
for this infringement mainly on account of the expense involved in bringing such
768 CONCENTRATION OF ECONOMIC POWER
a suit for just one machine, and also because we have been fully engaged in trying
suits and arguing appeals in cases in the Third, Sixth and Eighth Circuits —
opinions to which I have referred you above.
In 1930 Three Rivers Glass Company substituted our Hartford Single Feeders
for their other Feeders. Since then they have been consistently behind in their
payment of royalties. Last Fall we told them that we were going to revoke,
and at that time they promised most faithfully to keep up their payment of
royalties, and we permitted them to continue. They are far behind now and
we have sent them notice that their license is revoked, the revocation to take
effect September 1st.
We control 90% of the glass feeding machines used in this country, although
there are certain other methods of making glassware. In return for the various
manufacturers paying us royalties we render to them general engineering service
and are in much closer contact with them than if we were merely a selling house.
We get all their problems and hear all their troubles, and wherever possible try
to assist them.
Three Rivers Glass Company has been a perpetual thorn in the side of all the
manufacturing companies. It won't assist the other manufacturers in any man-
ner in maintaijiag general price levels. It isn't because they are more efficient
than any one else (which is a justifiable reason of course for lowering the price),
but because they are just simply selling at an actual loss in order to stay in
business.
We should like, for reasons of the general commercial situation and also because
we feel there is no hope of Three Rivers ever paying us, as they should, to take
the machinery out of their factory. This may, of course, seem to you to be a
hard-boiled attitude, and of course it seems that way to the Three Rivers Com-
pany. We would prefer not to take euch a drastic step, but the fact that they
are using an infringing feeder, that they are always behind in their royalties and
in their paying for spare parts, and the fact that they are a perpetual nuisance to
the other manufacturers makes it imperative for us to proceed against them.
I am having prepared copies of the contracts and all of the correspondence
which might possibly relate to this matter, and this material I could bring vrith
me when I saw you.
We have also pending in the District Court for the Eastern District of Pennsyl-
vania a similar suit which is to be tried in October, and I enclose herewith a copy
of the complaint in that case.
Your suggestion that the suit be bro-ght in Federal Court I believe is very
wise, and a suit for specific performance of the contract to return the Feeders is
the kind of action which seemed most advisable in Pennsylvania.
I enclose herewith a copy of our Standard Hartford Single Feeder contract
which is practically the same as the one which Three Rivers entered into with
for its Three Hartforfd Single Feeders, and I also enclose herewitu a Hartford
Lehr Contract. These will give you the opportunity of seeing on what basis we
make our legal claims for the return of the Feeders.
You, of course, know your courts and their slant toward any particular question,
so that if during the course of our dealings with you you feel it is wiser to do one
thing or the other I should not want you to refrain from giving your opinion.
Very, truly yours,
Habtford-Empire Company,
, Secretary.
(Mr. A. T. Safford, Jr., left before he was able to sign this letter. R. L. B.)
Exhibit No. 124
[Paper from files of Hartford-Krr.pire Company Reproduced at request of agent of Temporary National
Economics Committee. A. T. Saffokd, Jr., SecTeiary.]
(Written across face: for Mr. Safford.]
March 26. 1928.
Memoranuu.m as to Hartfoud-Fairmoxt and Hartford-Empire Histort
AND Policy
The Hartford-Fairmont Company was organized in 1912. You can get the
best background for the history of this company by reading my brief and findings
in our Board of Tjix Appeals case in the appeal of the Hartford-Fairmont Cunipany.
I vfinnt to add also sonic further considcr.'iticris o.f this hiotcrv
CONCENTRATION OF ECONOMIC POWER 769
(1) The glass industry (excluding sheet and plate glass, with which we have
nothing to do) was in 1912 in a backward state mechanically and just about right
for change to automatic machine processes in order to meet the change of American
industry toward mass production. Our development, therefore, came ai the
moment when it was needed and the result has been that the glass industry has
absorbed from us a very large amount of expensive machinery.
(2) Our process had one important rival. — The Owens Bottle Company, the
most powerful glass concern in the world. Its process was entirely different
from ours. It came into commercial use about 1905 and dominated the industry
until about 1917 when our process began to get a foothold. Up to 1924 there was
sharp condict between us and Owens, witli some patent litigation. In 1924, after
long negotiation, the two companies got together in a cross-licensing arrangement
and have since then worked in exceptionally close understanding. There is,
however, no combination between the two.
(3) We began our commercial expansion in 1917 when our first feeders were
put into production. It was at once apparent that if we put out these machines
broadcast, without restriction, we would disorganize tlie whole industry, which
was then divided into a large number of small units, and most of these manufac-
turers would not be able to refrain from using practically all the savings produced
by these machines in fighting with each other. In fact, our first group of licensees
said so expressly and urged us to take measures to prevent such a result.
(4) Consequently we adopted the policy v.hich we have followed ever since
of restricted licensing. That is to say,
(a) We licensed the machines only to selected manufacturers of the better type,
refusing many licensees whom we thought would be price-cutters, and
(b) We restricted their fields of manufacture, in each case, to certain specific
articles, with the idea of preventing too much competition.
(c) In order to retain more complete control of the situation, we retained title
to the machines and simply leased them for a definite period of years, usually
8 or 10 years, with the privilege of renewal of a smaller additional term.
(5) In specifying the various fields of ware for a given licensee, we have, with a
few exceptions, based the c'assification upon the use of the article rather than
shape or other p'lvsical chaiacteristic. Cllass containers have so many shapes
that it is practically impossible to classify them bj' shape and very often numerous
different shapes will be used for the same purpose, so that use of the container
is the basis for our classification except in a few cases.
(6) Quite early in our history we foresaw that the glass industry, like others,
would doubtless go through a process of combination, which as a matter of fact
has occurred. We felt it to be to our best interest, as well as for the best interest
of the whole industry that we should use our influence to steady the industry
as much as possible, with a long-distance view towards its general prosperity.
The men at the head of our concern took this long-distance view deliberately and
have ever since maintained it. For example, although the Hartford-Fairmont
Company was organized in 1912, it paid its first dividend on its common stock in
1924. Up to that time it had put back into development all of its profits and
considerable amount of cash received from sale of patents abroad.
(7) We have thus gradually evolved the theory of what may be called a "glass
equipment concern." In this change of the industry to mechanical equipment,
two courses were theoretically possible for the manufacturer —
(a) He might at his own expense develop automatic machinery and protect
the same by patents for his own benefit. Such development and patent pro-
tection is an extremely expensive process and if the manufacturers generally
had followed this course, there would have been a very large duplication of
effort and expense.
(b) On the other hand, the manufacturer might select some outside concern,
like the Hartford-Empire Company; entrust to it the work of developing and
protecting machinery of the glass industry generally and support that concern
in its development by paying a proportionate contribution which in this case
was best measured by royalties on production.
(8) The latter course was the one which the manufacturers very wisely chose.
The result has been that the Hartford-Empire Company has now become the
most important glass equipment concern in this country and probably in the
world. This means that H-E has a duty toward the whole industry not -only
of developing and supplying machines immediately needed, but of keeping in
advance of that need by inventing further improvements. It also must act as
a source of service and information for its licensees in all technical matters re-
lating to their business and must help to steady, as far as possible, the general
770 CONCENTRATION OF ECONOMIC POWER
glass industry. H-E has done this to the best of its ability; has spent enormous
sums in macliine development and patent litigation, as well as in research along
mechanical, physical, and' chemical lines.
(9) As to the foreign situation, we have pursued a somewhat different policy.
In most cases we have sold our foreign patents outright, it being too difficult to
establish a workable licensing system abroad where we could not be in touch
with our licensees and could not give them service. We have sold foreign patents
in some 15 or 20 countries and have especially close working arrangements with
British Hartford-Fairmont Syndicate, a London concern, and St. Gobain Glass
Company in Paris. Wc have still a number of foreign patents unsold, especially
in Central Europe.
(10) One special line of recent development has been in refractories. Glass is
melted in a large tank holding 200 or 300 tons of molten glass and the tanks
built of ordinary fire brick wore out rapidly, usually lasting not more than a year,
with a very large expense to the manufacturer for replacement and especially for
loss of overhead and business during the replacement.
(11) In combination with Corning Glass Works — with whom we have rather
close working alliance — we have gone into a development of glass tank refractories
of a much higher quality and the two companies have joined in erecting a plant
Jor making these refractories in Louisville, Ky., by means of the Corhart Refrac-
tories Company and are just beginning production.
GENERAL CONTRACT POLICY
It will be easily understood that with the foregoing history, the contract rela-
tion of H-E are very complex and numerous. They involve several dilferent
classes of contracts —
(a) The ordinary standard licenses of feeders, forming machines, lelirs, stack-
ers, conveyors and the like which are almost always represented by printed
forms which differ usually only in the field of ware i^ennitted.
(b) Contracts which have arisen as the result of conflict or duplication of devel-
opment between H-E and other imp(jr{ant companies. These are specially
represented by our contracts with Owens and v»ith the Corning Glass Works,
which, broadly speaking, are in the nature of cross-licenses.
(c) Contracts 'which have arisen as the result of our acquisition of other con-
cerns and processL'S, illustrated by our contracts by which we purchased i)atents
and assets of the Howard Feeder Company and the patents, assets and licenses
of Tucker, Reeves & Beatty.
(d) A fourth class, which is much like the first one, or what are known as
"General Agreements." These arise simply where some licensee becomes so
large that instead of issuing to that licensee a separate printed license for each
machine, we make a general agreement with the licensee and simply issue a short
form single page license to cover each machine taken. These General Agree-
ments usually raise two or three important special questions. For example,
the licensee in such case usually wants to be assured that he will get as many
more machines as he may want, and secondly, that he will be able to get on reason-
able standard terms our future developments along his line.
(12) One paiticular feature requires considerable attention, nanieh' the- so-called
"exclusives." In the early history of the Company and in order to secure busi-
ness, we granted to certain interests the exclusive right in certain of our machines
for particular fields of ware. For example, we granted to four milk bottle manu-
facturers the exclusive right in certain of our feeders and forming machines for
milk bottles. These concerns were later taken over by one concern which still
holds that exclusive. We also granted exclusives on certain high qualities of
glass and certain special lines of ware of the Corning Glass Works, such as bulbs,
glass cooking ware, signal ware, etc. ; also exclusives on lantern globes and one or
two other minor lines of ware.
W^e have had so much trouble with these exclusives when dealing with other
parties that our policy is now decidedly against them. We found that in making
cross-licenses and adjustments of patent conflicts, these exclusives frequently
stood in the way of such adjustments and caused us a great deal of trouble.
It is, in fact, necessary to have these exclusives constantly m mind in considering
any proposed contract.
(13) Another special feature is the so-called most favored provision. In
number of the "General Agreements" the /licensee has insisted that he get as
favorable rates and terms as any oUier licensee of ours under like conditions.
Also that if we later make such more favorable terms to others, then the same
shall, ipso facto, come to him.
CONCENTKATION OF ECONOMIC POWER 771
This, as you see, means that we must constantly be on our guard in granting
new licenses or in widening old ones, because whatever concessions (generally
speaking) we grant to a particular licensee, must at once be granted to all those
enjoying the "the most favored" provision.
Exhibit No. 125
Paper from files of Hartford-Empire Ccmrany reproduced at request of agent of Temporary National
Economics Committee— .\. T. Safford, Jr., Secretory]
Memorandum on Policy op Hartford-Empire Company, February 18, 1930
The history of the Company shows a rapid growth. The first real royalty
returns were received December, 1917 — $11,392. Gross royalty returns for 1929
were $1,972,307.
The Company has been forced by trade and production conditions to develop
many types of machines. First, the original paddle feeder — then the paddle-
needle feeder — then the single feeder — then two distinct types of full automatic
forming machines which greatly increased output and speed of the feeders — then
an entirely new lehr — then the paste mold machine, intended for greater bulb
and paste mold tumbler production — then a rather radical type of an individual
section forming machine which has great merit in a limited field, but which did
not prove to be "universal" — then automatic stackers, transfers, conveyors, etc.,
as well as very important developments of new refractory materials — then some
original work in furnace design and electric melting.
The business conducted by the Hartford-Empire Company may be divided
nto four distinct and important divisions, as follows:
(1) THE EXECUTIVE-OPERATING DIVISION
This Division handles all negotiations, and financial and legal matters. It
includes the Accounting, Service, Installation, and Manufacturing Departments.
(2) THE PATENT DIVISION
This Division handles all patent matters and inventions and patent litigation
It is responsible for the creation, filing, and prosecution of all applications to
patent issue.
(3) THE DEVELOPMENT DIVISION
This Division consists of highly trained mechanical and technical engineers
and inventors, as well as the drafting force. It is responsible for all invention
and development work,
(4) FOREIGN DIVISION
This Division handles all foreign correspondence and shipments, and foreign
patent work, and carries on preliminary negotiations for sale or license of patent
rights or machines in foreign countries — thus far in seventeen such countries.
POLICY OF A DEVELOPMENT DIVISION
The question to be considered is a question as to the Development of General
Equipment. How far a general development and equipment company, like
Hartford-Empire, should go in spending time and money in inventing and de-
veloping machines and processes for the glass industry, beyond immediate and
specific needs where definite savings or income can be risasonably estimated.
To put it differently, aU developments may be classified as follows:
Class A
Continual minor improvements to Hartford equipment now in operation.
Examples: Forehearth improvements, giving better temperature control —
better shearing mechanism, feeder clay parts, lehr belts — etc. etc. (Note.)
Licensees demand this kind of engineering work. It reduces their costs, retains
their support, insures the maintenance of present royalty rates for Hartford, and
often increases total royalty returns.
772 co^'CE^'TRATION of economic rowEK
Class B
Machines or apparatus of new design to be used with ostahHshcd machines,
and which will give the whole unit much greater speed and efficiency, as well as
a larger ray^ge of articles. p]xami)le: Canfield H. Paste Mold Machiiie; Hartford
Individual Section Machine; also Automatic Stackers, Autoniatic Conveyors,
and Automatic Take-Outs. Tliese types should invariably increase royalty
income.
Class C
Specific equipment providing an entirely new source of income. Example:
Hartford Lehr.
Class D
Tank design, reductions in melting cost, and glass compositions. These liave
a distinct relation to machine equipment. In fact, any advance in furnace con-
struction or glass composition may require a complete change in machines and
auxiliary euuipuK-nt. (Note) It therefore seems essential tliat Hartford s^hould
keep in close touch with all progress in tanks, melting, and glass composition.
It shoulfl be able to- make contriijutions along these lines, as they are parts of the
total production chain. Hartford has alreadv protected itself to a degree io this
field.
Class E
General Research work and study and experiments covering means of pro-
ducing an entirely new or radical process of fabricating glassware, which process,
if siiccessfuK will supersede present methods, and will secure higher royalty rates.
Dnrinir the last five years all development undertakings of every nature by
the DeveloiMnent Division show a (iirect cost of 8927,000 and an overhead exi)ense
(salaries and exi)enses not directly chargeal)l(' to these specific undertakings) of
$259,000. Incident;-.!]}-, the lead men of tliis IJivision have assisted in an advisory
capacity and otherwi.so to all other Divisions.
Direct charges $927,000
Indirect charges ._ 259, OOO'
Total 1, 186,000
Direct receii>ts from development work put into use_. 1, 37o. 3S7
Total cost 1, 18G, 000
Profit 189,387
Several of these development undertakings, to the cost of $75,000 and more
are still in process of completion; may yet have considerable earning power.
COMMERCIAL SITUATION
Prior to 1905 practically all glassware was produced by hand. At that time
the Owens Suction Machine came into commercial use. By 1913 the Owens
machine was producing a little less than one-third of the country's total produc-
tion of containers, estimated as 19,000,000 gross.
Now that total is about 30,000,000 gross, divided as follows:
40% made by suction machines.
35% " " Hartford gob feeders.
25% " " "outside" feeders and by hand.
Note. — "Outside" feeders are gob feeders which infringe our rights, or any
other form of automatic feeders controlled by others.
Thus in the last twenty-five years, and mainly in the last ten or twelve, the
whole glass industry has become mechanized. This change has carried with it
all the new problems necessarily arising from such a radical advance.
SITUATIONS WHICH HARTFORD WAS FORCED Tbi^ RECOGNIZE
Class A. Division — Minor Improvements. — There can hardly be any grounds for
criticism for development and engineering work falling under\Class A.
Class B. Ditnsion — Forming & Handling Machines. — As regards Class B — on
the success of the Hartford feeder in 1918, it became clear that the then existing
Forming Machines could not meet the speeds or capacity of the feeders. The
Illinois Glass Company refused to take any interest in our feeders until we had
COXCENTKATION OF ECONOMIC POWEK 77^
efficient Forming Machines with the feeders. Hartford then developed two types
of Forming Machines, and immediately the Illinois Glass Company entered into
a general agreement with Hartford.
The paste mdd bulb and tumbler machine ("H" machine) was undertai<en for
two reasons. First, as a more etiicient machine to supercede the Caniield F.
machine for bulbs. Second, to produce at a lower cost paste mold tumblers,
which tumblers then had a considerable market. During the three year develop-
ment of this machine two adverse things happened: (a) the Corning 399 bulb
machine came into being; and (b) the "hot mold tumbler" captured a large part
of the paste mold tumbler market. The "H" machine thus became obsolete^
This is a good example of the unexpected changes in the industry.
The Individual Section Forming Machine developed by Hartford was imder-
taken because of a demand by Hartford's licensees for a four-mold !nachine
especially adaptable for small orders. This machine, although it earned us last
year $25,000 in royalties, has not proved to be a universal machine. It has,,
however, to some degree increased our feeder royalties. Certain types of ware
can be made on it which can not be made on any other machine. Many original
principles have been developed in it, applicable to other machines. These prin-
ciples are now our property and are an important link in the development of any
future Forming Machines bj' Hartford or by outsiders.
Some of the values of this type of machine have lately been depreciated by the-
Owens Plural Mold Process, for sucking up and forming of two, three, or four
bottles at a time.
We do not consider this Individual Section Machine development as a loss,
even though the machine itself will never show a cash profit.
Also falling under Class B, the Hartford company has developed Automatic
Stackers (which automatically handle the ware from forming machines into lehrs)
as well as Automatic Conveyors, and Take-Outs. These have proved not only-
profitable themselves, but have increased feeder royalties because they have-
insured a higher percentage of ware packed.
Because of the advent of the Knox-O'Neill machine, Hartford is again being
forced to develop for its licensees a Forming Machine which, with Hartford
feeders, will produce containers at less cost. Hartford would have much preferred
to spend this money in more radical developments in furnaces or fabricating
processes. But to meet an emergency, and to appease Hartford's licensees, it
seemed to Hartford that it must furnish its licensees as soon as possible a new
Forming Machine which would fulfill their requirements.
Class C. Division — Specific Equipment to Earn New Income. — The Hartford
Lehr speaks for itself as an outstanding development, exceptionally profitable.
Domestic lehr royalties in 1929 amounted to $157,000. Foreign sales of lehr
rights have amounted to $204,000. This lehr development represented as much
of an advance in the art of fabricating glass as the feeder did over the hand '
process.
Class D. Division — Tanks, Glass, Etc. — There are many sound reasons why we
should apply money to Class D. The prestige of Hartford is such that many
licensees have remained loyal and paid royalties without established patent
protection. This is because of their belief that Hartford as a general equipment
and development company stands ready to advise and assist' them in all problems
of fabrication of glass containers.
For example — it is recognized today that the cost of melting glass is excessive
and represents far too high a ratio to the other costs. Our engineers know that
substantial savings may be made by radical developments in tank design, by
improved means of heat application, involving problems of combustion, by the
use of improved refractories, and by the development of improved glass formulas
for the increase of tensile strength and reduction of weight.
Hartford's expenditures in the development of new and better refractories
seems entirely justified. Hartford has already acquired options on fairly valuable
rights covering electric melting, and now owns rights for melting by revolving
tanks.
Class E. Division — Research & Experimental. — Hartford recognizes that the
art of fabricating glass by the gob feed method is well established, and that there
is probably no chance for radical developments along this line per se.
Hartford also recognizes that the big Owens Suction Machine is well established,
and that there is probably no chance for radical development there.
On the other hand, Hartford in looking towards the future has a very strong
incentive for carrying on considerable research and experimental work along two
distinct lines.
124491— 39— pt. 2 34
774 CONCENTRATION OF ECONOMIC POWER
One line is a combination of methods somewhat approaching gob feeding,
known as the Howard Auto-Blow.
Another line is a simplification of and elimination from the big Owens Suction
Machine method.
The preliminary work done on these lines justifies further research and experi-
ment. If Hartford's patent position should fail, then it should have ready a new
process which so far exceeds the gob feed process that Hartford will not only main-
tain its licensing position, but inc^rease the royalty rates.
Hartford always has very practical considerations for developing, if possible, a
radical suction method clear from Owens patents. If this can be accomplished
commercially Hartford would be relieved of paying Owens a tribute of some
$500,000 a year.
Hartford feels justified, therefore, in making a budget allowance for Division E.
EEMAHKS
It should be thoroughly understood that Hartford's development problems are
of a universal nature. They are not confined to any one specific set of problems
pertaining to any one article.
When a manufacturing company undertakes to create for itself improved
machinery, that machinery merely (a) has to meet a certain specific and com-
paratively narrow line of product; (b) under one particular set of conditions; and
(c) will be developed and used practically by the same personnel that is directing
the main production work of the company.
Equipment developed by Hartford, on the other hand, must produce efficiently
all kinds of glass containers of various shapes, capacities and weights. Hartford
could not afford to consider any particular manufacturer's problem in regard to
one particular article unless the manufacturer guaranteed to reimburse Hartford
for the full cost of the development plus a profit.
The Hartford feeder is now delivering glass from }4 oz. up to 5 lbs. The con-
tainer manufacturers are not interested in Hartford equipment unless it will
handle their entire line of ware. This adds many burdensome problems to the
development and engineering staff of Hartford. You may have a most efficient
means for producing a 5 oz. bottle. You may have a most efficient means for
producing a 16 oz. or 20 oz. bottle. But a machine to produce both must be a
compromise.
Action required to meet conditions
It is impossible to meet such diverse conditions without a very general (as
distinguished from specific) knowledge of glass and mechanical problems. In
other words, that knowledge must approach much more nearly that which results
from general research.
The element of time adds a further uncertainty. The average time between
the first conception of a new machine and its final commercial success is about
3 years. This period permits of important changes in the whole art. Only fairly
general knowledge, experience, and experiment can qualify an organization to
meet the contingencies that thus arise.
LACK OF PRECEDENTS FOR POLICY
It is difficult to make convincing the proper policy for the Development Division
(which in itself is really a Development Company) because such companies are
exceedingly rare. Precedents are almost wholly lacking, and Hartford has been
obliged to chart its own course in a large and fast changing field of conditions.
The main fact, however, that Hartford has come up from insignificance, beginning
with a few patent applications and no income, ta its present position of large
income, wide range of patents, and its unique standing in the industry, all in the
course of less than fifteen years, and apparently has made only a few serious mis-
takes, and none fatal, is a fair evidence that its policy in general has been sub-
stantially correct.
It has been by no means an easy or routine task to steer a correct course during
the enormous changes in methods, combhiations, and business conditions arising
in this period. Hartford has followed one definite policy, namely, that the future
success of the Company could not rest on feeder income alone, but that the
growth and asset position of the Company could only be insured by a develop-
ment of methods and equipment applicable to the entire art of fabricating glass
containers. Hartford has considered that the entire ch. in comprised the furnace
link, the melting link, the feeding link, the forming link, the annealing link, with
CONCENTRATION OF ECONOMIC POWER 775
such auxiliary equipment as was applicable to each of these links, and that it
would be a short-sighted policy to merely confine our efforts to the feeding link
alone.
Hartford feels that this policy has justified itself, even though the profits over
the past five years Iiave probably been less than if Hartford's policy had merely
concentrated on dne line. Hartford is definitely convinced that the narrower
policy would have been unsatisfactory to its licensees, and would not have assured
Hartford of their support. Neither would Hartford's organizatioii have developed
its potential ability or knowledge of glass fabricating problems. Neither would
the value of the capital stock of the Hartford-Elmpire Company have approached
its present considered value — a recent sale in the open market having taken place
at $62 a share.
Hartford points to the example of what took place in the Owens Company.
This Company years ago thought that their suction machine would for all time
dominate the industry. They therefore practically abandoned development and
research work as too costly. When the original Hartford feeder came into being,
they took no stock in it — did not recognize the future of gob feeding — and
deliberately let gob feeding come into commercial use. They thus sacrificed
welfare and profits.
After gob feeding was established the Owens Company spent $1,000,000 in
building a Forming Machine for gob feeders. A few were built, but have been
abandoned.
LONG DISTANCE POLICY
The IManagement at Hartford feels that if we are to have the same success in
the future that we have had in the past, and if we are to provide for a long future
of satisfactory income, we must keep in the forefront of development.
We believe that a certain proportion of our development budget must go to
pure research and experimental work.
Three years is the normal period from invention to commercial success of a
machine or process. Hartford must be ready to supply improvements when
needed, or others, more prepared, wiU get the business. Hartford must there-
fore look ahead and be ready.
All licensees have an inherent dislike to paying royalties, but they will pay
roj^alties if they are assured that Hartford will apply some of those royalties to
an extensive development program. They probably would prefer to have Hart-
ford do development work for them, rather than attempt it themselves, and they
recognize that Hartford has built up a strong organization, skilled and adapted
to such work.
They therefore have a right to expect Hartford to be continually working on
methods and equipment to reduce their costs.
It is a most difficult thing for Hartford intelligently to budget the costs or
results to be obtained under Classes D and E until such developments have passed
through the experimental stage, and have received the general report of the
Patent Department, and a design has taken a definite form.
An example of this is the Howard Auto-Blow. Howard is now experimenting
with crude and inexpensive apparatus in testing out an invention which seems to
be based on sound fundamentals.
Two practical glass problems have arisen in actual experiments. Howard
thinks he can overcome these problems, but just when or how remains to be seen.
It may be two weeks, or it may take three months. His solution may be quite
simple, or fairly complicated. No one knows. But we all agree that if success-
ful, his contribution will be very valuable and far in excess of any cost involved
during the experimental stage.
The same consideration must be given Peiler and Canfield, who have produced
some very interesting preliminary experiments applied to suction.
It is quite a simple matter to make up the Development Company budget in
advance, by quarters of a year. It is not a simple matter to make up the budget
for the entire year, except of course we do, and always, have decided at the first
of each year that we wiU allocate to the Development Company for the year a
total amount of money. This total has been fairly rigidly adhered to barring
one or two exceptional cases, but at the end of each year we have found that we
have spent much more money on Projects 2 and 3 than we anticipated, and much
less on Projects 4, 5, and 6.
' PATENT DIVJSION
The question here is: How far should we go in prosecuting inventions to
patents, beyond those inventions which clearly cover machines in commercial use.
776 CONCENTRATION OF ECONOMIC POWER
THE MAIN PURPOSE IN SECUKINQ PATENTS
In taking out patents we have three main purposes —
(a) To cover the actual machines which we are putting out, and prevent
duplication of them.
The great bulk of our income results from patents. Between a feeder pro-
tected by patents, and one not so protected, there is the cash difference between
one ordinary manufacturing profit of, say, $1,500, and a royalty return of at least
$30,000 over 8 years. This theory also applies to other equipment.
(b) To block the development of machines which might be constructed by
others for the same purpose as our machines, using alternative means.
We have in mind such machines as the Hillman machine; the Roirant type of
machine; the Knox-0'Neill machine; improved stream feeders; vacuum and
pressure feeders; ribbon feeders; forced feeding or down suction feeding; and auto-
blow methods of feeding, as well as various types of pure forming machines.
To ignore this form of protection may result in a competitor's having an
estoppel or hold on our own developments.
(c) To secure patents on possible improvements of competing machines, so as
to "fence in" those and prevent their reaching an improved stage.
There is also another, rather minor, purpose in securing patents. It corre-
sponds with research in machine developments. Occasionally patentable ideas
wiU appear which deal more with general principles. They may have no imme-
diate and apparent application. But they may so relate to the possible future
as to merit some time and expense.
Uncertainty as to Patent Futures
Nothing is more plain from our actual 17 years' experience than the uncer-
tainty as to the future practical value of a given patent claim. In estimating this
we are faced with several unknown quantities.
(a) We do not know what claims by other inventors may be in the patent
office.
(b) We can not tell what "anticipations" of domestic and foreign patents may
finally be cited against us when we get into Court.
(c) We can not tell what Will be the final form of the machine we are trying to
cover, or what form of words will best cover it.
It has happened several times that we have actually developed an efficient
machine to a -working stage before our Patent Department could determine and
formulate its real patentable features, or decide whether the machine was free
from patents owned by others.
Take our lehr. Several large concerns attempted for years to develop a self-
heating lehr. Then our lehr came along and swept the market. But it was not
until after it had been considerably developed that our Patent Department and
inventors finally analyzed the features that were patentable and that made* our
lehr superior.
This shows how uncertain the future is as to patent claims, and how unsafe it
is to take a particular claim and assume it will be the one which three, five, or
ten years later we shall be glad to rely upon in Court.
Thus the only safe thing to do is to cover all possible forms of claims, well
knowing that many of them will be superfluous.
CONCRETE EXAMPLES
TTie "Plunger Principle"
The following examples illustrate the foregoing. The most striking is our
experience with the "plunger" principle, as exemplified by our paddle-needle
feeders and single feeders — an experience which still rouses active emotion and
disputes in our organization.
In the early days of 1912 and 1913, Mr. Peiler developed definite ideas as to
both the paddle feeder and the plunger feeder. For various reasons, those then
in charge deemed it wisest to proceed with the commercial development of the
paddle feeder. Mr. Peiler had demonstrated with tests the feasibility of both
paddle and plunger. It was a case in which, as it has now turned out, the poorer
of two alternatives was selected for the commercial_ development. The better
(plunger feeder) principle was pushed aside- for the-time by the paddle feeder
development. The plunger feeder was not actively worked upon again until
1916 and later.
CONCENTRATION OF ECONOMIC POWER 777
For various reasons unnecessary to mention, no patent application was filed
during 1913, 1914, 1915 and 1916 upon the plunger feeder.
The result of this failure to file on this alternative form, gave others a chance to
obtain positions in the plunger feeding art which put us to great expense in inter-
ference proceedings and made necessary the purchase of Howard and MiUer, and
has caused us a tremendous amount of work and added expense in our suits.
There is no doubt that had the conditions been but slightly different, we would
have lost the benefit of Peiler's work on this principle.
Example 2. The Lott Patent
A difterent example is that of the Lott patents. We probably could have bought
these in 1918 for around $15,000. Their future importance was not sfeen. We
turned down this purchase under definite orders to reduce expenditures. And
yet these patents finally became the main inducement in forcing us to go into the
■"Owens General Agreement," under which we have paid Owens large sums up to
date and will continue to pay still more in the future. There are a number of
other patents in this class.
Example 3. Heavier Than Glass Patent
The "Heavier Than Glass Patent" which, in its inception was not given more
than ordinary value, has now a quite important bearing on the entire refractory
situation.
Example 4- Knox-0' Neill Machine
Whitall-Tatum, back in 1911 and 1912, practically invented and developed the
Knox-O' Neill machine, but it was then completely covered by the original Owens
suction patents (now expired) and they abandoned the development.
In the meantime, the inventor who was associated with them, Mr. Cox, took
out a patent which lay dormant for some years. Then, on the rise of the present
Knox-0'Neill machine, it became suddenly of obvious importance. We had to
buy it for $5,000, and it may become worth a great deal more than that in our
general attack on the Knox-O'Neill machine.
Example 6. Peiler Punty Patent
This case is fresh in memory. This was a patent of 1926, but an invention of
1912. Suddenly its application to the Banner Tube Machine became apparent,
and we realized $350,000 on it.
Exatnple 6. Empire Machine Company Patents
There is the case of the patents of the Empire Machine Company, based on
which that Company was able to acquire a very large interest in Hartford-Empire
Company after having prior to that time, secured extraordinary earning from,
them.
"fencing in"
Many further examples can be cited where applications now owned will have a
distinct bearing on our future developments, as well as on developments in many
lines by others, and it would seem to us to be the wisest and safest policy to
protect all ideas which are so new as to have patentable possibilities.
We now have a number of applications which were filed to definitely forestall
the development of competing machines by others.
Continuing the Monopoly by Us or Others
It often happens that if minor improvements are protected by patents, ma-
chines and processes licensed under the original basic patents are given a much
longer earning life by the fact that the minor improvements continue the protec-
tion on the machines, and even when the basic patents expire, others are pre-
vented from using the latest commercial form of the machine.
Example: The Owens basic patents expired several years ago. Nobody,
however, dare use the present type of Owens machine because of improvements
covered by minor patents. Likewise, if the original patent protection obtained
on particular machines should not be sustained by the Courts, yet a second line
of defense patents covering details and improvements may become a most valuable
asset.
778 CONCENTRATION OF ECONOMIC POWER
It has always been our ambition to obtain patents which will be related to
furnace, melting and refining, feeding, delivery, forming, automatic handling,
carrying, stacking and annealing. Conceivably we might lose patent domination
of one or more important links, but still retain practical control of the whole
chain by means of controlling the most efficient form of the other links.
Refractories and Furnaces
In one sense, these two items overlap, and in another they are separate.
Considering the refractories separately as refractories, we believe that they
have undoubtedly a two-fold value. Obviously, better refractories for furnaces,
resulting in better conditioned and better controlled glass, will give better pack,
and higher feeder royalties.
The patent cases on furnaces deal primarily with furnace design, batch feeding,
and furnace handling. They are primarily valuable to us as supplemental
protection to feeder royalties, and are justified on such basis as well as constituting
a control in fields which may hereafter become important. Many of the cases
are more than merely secondary protection, as they relate as well to feeder
forehearths.
Examples of furnace cases which are applicable to forehearths and thus are
protection to our feeders are (1) Amsler case 1853 on a particular type of con-
tainer; and (2) the two Raeder cases 1896 and 1897 applying to electric melting
and conditioning of glass which obviously is as applicable to a forehearth as to a
furnace.
PATENT APPLICATIONS 1927-1929
Analysis
The following covers primarily our commercial devices and the new cases which
were filed as protection of these devices:
(1) Feeders — including P. N.'s, Single feeders, Howard feeders, Tucker &
Reeves feeders. Miller feeders, and Bethel feeders.
(2) Lehrs — including our combustion lehr and our new electric lehr.
(3) Our mechanical stacker.
(4) Escalator buck.
(5) Shaping machines — including our milk bottle, twin press, press and blow,
narrow neck, I. S., No. 12, and F. and H.
(6) Refractories — including the various types developed by Willetts.
Definitions
"Direct patent protection" means those patent applications which directly
read upon or cover our devices, parts thereof, or proposed physical improvements
thereon.
"Indirect patent protection" of a device, includes those applications which
prevent the use or improvement of an existent or possible substitute for the
device. This "indirect protection" seeks to block competing devices which
would lessen our income.
CONCENTRATION OF ECONOMIC POWER
779
Of the 223 cases filed in the three years 1927, 1928, and 1929, 200 are direct oi
indirect protection to the devices mentioned above; 88 applications being "direct
protection" and 112 "indirect protection." The following chart shows these
200 cases:
1927
1928
Direct
Indirect
Direct
Indirect
(1) Feeders -
9
7
6
1
2
3
9
8
1
2
2
0
7
9
1
1
8
6
(2) Lehrs
8
(3) Stackers
1
0
(6) Refractories .... ...
0
27 1 22
49
32 1 29
61
1929
Total
Direct
Indirect
Direct
Indirect
(1) Feeders
11
12
0
1
3
2
48
8
3
0
2
0
27
28
6
3
13
11
73
(2) Lehrs. :
24
5
(4) Escalator Buck
2
(5) Shaping Mach
8
0
29
9(
61
3
88 112
200
Of the 73 applications which have been cited as "indirect protection" of
feeders, 50 are directed to suction gathering machines and are aimed at the devel-
opment of the Knox-0'Neill machine, Owens, Hillman, Roirant, Etc.; 6 are
directed to the forced feed and down suction (Hartford process) develojjed by
Rowe and Lorenz, which method, if developed, or a modification thereof, might
offer some competition in the future with our present feeders; 6 are directed to
possible improvements in the "stream feed" and 4 to other feeding methods.
Two cases are directed to electric feed, and the remaining 5 cases to possible
modification of gob feed.
The remaining 23 cases may be classified as follows:
Electric Melting 2 cases.
Forming ware by rolling — 1 "
Our new experimental tank . — 1 "
Rotary melting ' 3 "
Shallow melting __ _ ...^ _ 9 "
Sheet glass __ 1 "
Tubing and Cane production. 6 "
23
There is no sound ground for criticism of the Patent Department in filing the
cases which have been filed during 1927, 1928, and 1929. Of course, some few of
the cases filed have turned out, and may hereafter turn out, to be of less value
than was expected. The reasons are two-fold.
(1) The failure of a device, as the H. machine, to make a prominent place in
the art, or the physical development of the art away from the particular invention.
(2) The practice which is sometimes followed in the Patent Department of
filing "light" cases without going to the expense of a complete preliminary
investigation of patentability. This policy is believed sound. It is as cheap to
file the application as it is to make the complete investigation.
General. — These examples all seem to lead to the conclusion that the only safe
thing is to go to the limit in covering at once all inventions that have a fair appear-
ance value, by patent applications, regardless of whether we can actually at that
time figure any definite income return therefrom.
780 CONCENTRATION OF ECONOMIC POWER
Hartford-Empire has very little "selling expense", as such item is ordinarily
known. We spend very little on advertising and practically nothing on sales-
'men in this country.
SUMMARY
(1) Hartford, a Development Concern. — Hartford-Empire is mainly a develop-
ment and servicing company for the glass industry. It has made its success by
doing such work thoroughly and v/ith a view to the changing future.
(2) A Changing Industry. — The glass industry is rapidly changing, in equip-
ment and in business conditions. A development status, effective now, will be
obsolete in a few years.
(3) Suppose We Stopped Development. — We could, indeed, stop development
now and perhaps pay larger dividends — for a while. But in a few years Hartford
•woud be superseded by a more progressive concern, and our sources of income
rapidly dwindle.
(4) Effect On Our Licensees. — Half the industry are our licensees. They dislike
■paying royalties. They would stop paying on any good excuse. The main thing
"that holds them in line is the prospect of our future developments. If we ceased
"to develop —
(a) We would, as stated above, lose in a few years, the main sources of our
income.
(b) We would almost at once, be deserted by many of our licensees. The larger
-combines would start their own development departments.
(5) Patent Protection. — Unless we thoroughly protect ourselves by patents, we
Tvill be developing chiefly for the benefit of others, and will reap little return our-
selves.
(6) Basis of Our Stock Value. — Our stock is selling now at prices far beyond its.
true value on its present return. That high price is fixed by men familiar with the
industry because they believe in our long distance policy, and that that policy
will secure for us the future.
(7) Means of Keeping Our Position. — To maintain that valuable position we
must develop and experiment in advance. The normal development period i3
three yea,rs. Unless our foresight covers at least that period, some one else who
does will be ready when we are not, and will take our business.
(8) Research. — The "research department" is now a part of large business where
the "art" is changing. For example, General Electric Company. Costs and
profits are not the ruling considerations in such departments. They are directed
at an unknown future. The glass industry has an unknown future and we must
meet it.
Exhibit No. 126
Mr. R. H. Levis,
Illinois Glass Company, Alton, Illinois.
Dear Uncle Harry: I attended the regular meeting of the Board of Directors
of the Hazel-Atlas Glass Company in Wheeling on Tuesday of last week, which
meeting followed their annual stockholders' meeting that was held in the afternoon
of the same day. There were very few stockholders present. The meeting was
well conducted and all features that required any explanation were explained
fully. The existing Board of Directors was reelected. Immediately following
the stockholders' meeting there was an organization meeting of the new Board
and the old officers were re-elected, except that Mr. McNash was also elected
Chairman of the Board, as their by-laws require a Chairman of the Board as
well as a Presideofr>
Their capital expenditures, being particularly large at Clarksburg for equipping
an additional furnace, were likewise approved, and the condition of their business
and their earnings were discussed at length. They earned for the month of Feb-
ruary $144,851.17, as compared with $222,240 for the same month last year. The
difference in the earnings was largely accounted for by the decline in shipment
of fruit jars and fruit jar caps during the early months of this year. I am satisfied
that their prospects for the next few months are such that they will comfortably
earn their dividend requirements. Their cash position is good, as usual, with a
total of cash and securities of $6,845,475 after deducting a reserve to bring the
securities slightly below their present market value.
Because of the recent publicity given Owens-Illinois and our investment in
Hazel-Atlas in a letter read into the Congressional Record of March 8th by Mr.
Borah, I advised Mr. McNash that it would probably be desirable for me to
resign as a member of their Board at either their April meeting or their July
CONCENTRATION OF ECONOMIC POWER
781
meeting, and we discussed the advisability of having Mr. George Quay, Secretary
of the Company, elected in my place, with the understanding that he would be
representing us and that I would receive through him the same type of informa-
tion I now receive as a Director. I will see you in the meantime and we will
have a chance to discuss just what should be done in this connection.
Sincerely,
(Signed) William.
W. E. Levis.
April 1, 1935.
This is a true copy of a document found in the files of the former Illinois Glass
Company, Alton, Illinois.
Certified:
F. G. MORFOOT,
Ass't Secy. — Owens-Illinois Glass Co
Exhibit No. 127
(Compiled by Department of Justice staff from data taken from flies of Owens-Illinois Glass Co. I
Owens-Illinois Payments to and Receipts from Hartford- Empire Company
Year
Royalties
paid to
Hartford
Payments
received
from
Hartford
Year
Royalties
paid to
Hartford
Payments
received
from
Hartford
1924
$22, 830
125. 379
215,915
263. 703
284,803
391, 850
385,601
391, 235
1932
$271, 173
526, 543
542,297
585. 347
758, 632
811.127
$389,208
1925
1933
718, 698
1926
1934
877,003
1927
1935
750,859
1928
1929 . -
$106. 630
176, 302
184, 870
1937
none
1930
Total
1931.!!-. I. '.I I'.'.'.
3,962,921
4, 815, 093
Exhibit No. 128
[From files of Hartford- Empire Company]
OflQce of the President.
Owens-Illinois Glass Company,
Toledo, Ohio, January IS, 1933.
[Written across letter. Devlin X8.]
Mr. F. Goodwin Smith,
Hartford- Empire Company, Hartford, Connecticut.
My Dear Goodwin: Referring to Mr. Northend's letter of January 10th regard-
ing the persistent letters he has- received from Mr. E. C. Devlin, I am replying to
you rather than to him because I feel that you should know that the old Northern
Glass Company plant never was operated successfully and that I do not think we
should be at all concerned regarding their thoughts of resuming operation.
We are in splendid shape to take care of Milwaukee trade from our Streator,
Illinois, plant, and while I want to keep posted from time to time about people
who inquire for licenses for the manufacture of beverage bottles, I think the posi-
tion that you are taking — that there is at present considerable over-production
in the industry — should be maintained in replies to similar requests.
Sincerely,
Bill.
W, E. Levis
Exhibit No. 129
[From files of Owens-HIinois Glass Co.]
Owens-Illinois Glass Company,
Toledo, Ohio.
Dear Sirs: I have under contemplation the erection of a Glass Factory with
a view to manufacturing a line of goods in keeping with the requirements of such
retail entities as Woolworth et al. I understand that you and Hartford-Emoire
782
CONCENTRATION OF ECONOMIC POWER
control the fabricfiting machinery incidental to the equipping of a plant for the
output of such products and that it is necessary to arrive at terms with you before
such machinery is obtainable.
I would therefore appreciate hearing from you and being advised as to the
course I should pursue, initially.
Very truly vours,
[s] A. L. ROMINE,
Barr Bldg., Washington, D. C.
June 8, 1935.
Exhibit No. 130
[From flies oi OjveDS-Illiuois Glass Co.]
Aubrey L. Romine,
Barr Bldg., Washington, D. C.
Dear Sir: Referring to your communication of June 8th, this company is
engaged in the manufacture and sale of glass containers, but we are not licensors of
glass making machinery. We do construct certain glass forming mechanisms,
but such equipment is for use in our own factories exclusively. We are unable,
you require.
therefore, to render the service which
Yours very truly,
June 17, 1935.
E. F. Martin :c
Legal & Patent Department.
, Assistant Secretary.
Exhibit No. 131
[From flies of Owens-Illinois Glass Co.]
June 25, 1934.
Mrs. Len Smith,
960 S. Oxford Ave., Apt. 325, Los Angclesf, Calif.
Dear Madam: Ycur letter of June 14th addressed to our Chicago Sales Office
has been referred to this Department.
For the past several years we have not built the Owens Machines for use outside
our own Company, and we regret, therefore, that we are unable to furnish you
with particulars concerning this type of bottle building mechanism.
Yours very truly.
Legal & Patent Department,
, Assista7it Secretary.
EFMartin
C
(Fr
Exhibit No. 132
.:m flies of Owens-Illinois Glass Co.]
December 10, 1934.
Sparks Construction Co . Inc.,
R. C. A. Building, SO Rockefeller Plaza, New York City.
Gentlemen: Referring to your communication of November 30, this company
do«8 not manufacture glass making machinery for use outside its own plants.
Yours very truly.
Legal & Patent Department,
, Assistant Secretary.
EFMartin
Exhibit No. 133
rCopy]
Letter of Wm. E. Levis, to R. H. Levis, August 2, 1932.
This is a true copy of a document found in the files of the former Illinois Glass
Company, Alton, Illinois.
Certified. .
Ass't. Secy., Owena-Illinois Glass Company.
CUXCi:NTliAT10N OF ECONOMIC POWER 783
William E. Levis
P. O. Box 1035, Toledo, Ohio.
August 2, 1932.
Mr. R. H. Levis,
Illinois Glass Consolidated Corporation,
Alton, Illinois.
Dear Uncle Harry: The two matters that I talked with Edwin about in
Chicago the other dsiy that I think are of extreme interest to the Illinois Glass
Corporation arc the attached proposition that I received from Mr. Gordon, c
Kidder, Peabody & Company, to purchase a block of our Owens-Illinois 5%
debentures of 1939, and some negotiations that I have had recently with a Mr.
I. T. Axton regarding the possibility of the Illinois Company's making an invest-
ment in the common stock of the Hazel- Atlas Glass Company, as well as a former
negotiation that I had with some other New York people with the thought of the
Illinois Company's purchasing some of the convertible preferred stock of the
Thatcher Manufacturing Company.
Mr. McAdoo was in Toledo to spend a day with me last week and I talked
with him regarding this matter. He seemed interested in going along with the
Illinois Company in making a purchase .of both Hazel-Atlas Glass Company
common and Thatcher Manufacturing Company preferred, if the Illinois Com-
pany were to be interested in either of these propositions.
As I see the situation now, it appears that we are on the eve of straightening
out the Hartford patent situation. Hazel-Atlas has come in and taken a license,
and yesterday the Knox Glass Company agreed to come in, pay back damages,
and take a license. In so doing they have withdrawn from the Miller Feeder
Users Defense Association, and other Miller feeder users have expressed their
willingness to come in and take a Hartford license if Knox and Hazel- Atlas took
a license from Hartford. The only innpDrtant manufactftrers who remain out of
Hartford's licensing plan are Ball Brothers and the Root Glass Company. We
are negotiating with both of these companies and I am quite confident that they
will come in if all of the other feeder operators come in, if for no other reason
than to protect fruit-jar licensing, as well as to curtain the licensing of beverage
bottle manufacturers.
With the plans we now have, there is certain to be a curtailment of the pro-
miscuous manufacture of milk bottles on nonlicensed feeders, which will result
in our company's and the Thatcher "Company's securing a greater proportion of
the available milk-bottle business. This should stabilize the price and increase
the earnings of the Thatcher Company. In a recent talk with Mr. Mandeville
he advised that they have on hand sufficient cash and Government securities to
retire all of their preferred stock and still have adequate working capital for the
operation of their business. The stock is $3.50, $50.00 par value preferred, con-
vertible into common at $55.00. It is selling at approximately $25.00, thereby
yielding 14%. '
The Hazel-Atlas common is selling as outlined in the attached memoranda
prepared b}' Frank Morfoot and otlier data that I have accumulated from time
to time that is interesting.
Mr. Gordon (Called me on the telephone this morning and advised that he
would be willing to make us a definite ofter of 85 for $500,000.00 par value of
Owens-Illinois 5% debentures of 1939, and after I talked with him he said that
if the bond market improved he might be willing to go as high as 90.
The thought that I want to i)ut up to you for your consideration is:
Do you think it would be a good plan for the Illinois Glass Corporation
to consider selling $250,000.00 par value of its Owens-Illinois 5% deben-
tures at a price of 90, take the proceeds of this sale, and make an
investment in the common stock of the Hazel-Alias Glass Company
at a price of approximately $40.00 per share, and a smaller investment
in the preferred stock of the Thatcher Manufacturing Company at,
say $25.00 per share, investing roughly $150,000.00 in Hazel-Atlas
common and $50,000.00 in Thatcher preferred?
If you are at all interested in this thought, will you read the attached papers
and return them to me with your comments. Should your letter indicate that
you would like to go into the matter further, I would be pleased to meet you with
Edwin in Chicago and work out further details of the proposition.
Edwin is willing for us to make this type of an investment, for he feels as I
do, that the Illinois Glass Corporation amounts substantially to an investment
trust in the glass industry, and that if we gradually increase our investment in
such firms as Hazel-Atlas and Thatcher to a point where we secure representation
784 CONCENTRATION OF ECONOMIC POWER
in their companies, we will have a better idea of the possible future of our invest-
ments in the industry as a whole, and thus probably become a more dominant
factor in the glass container industry than any other investor in it.
Mr. McAdoo feels that the thought is a good one and that his people would
be interested in going along with us on a joint account basis. He would not
want to be identified \\it.h the purchase in any way and would want to feel that
we would represent their investment so long as they cared to have us do so.
I promised Mr. McAdoo that when you had finished with the attached papers
I would forward them to him, so that he would not have to gather the same
information. Will you please, therefore, send them to me with a copy of your
reply.
Edwin had a chance to look over the attached papers when I was in Chicago,
and therefore I am not sending a duplicate set to him, although I am sending
him a copy of this letter so that he will be familiar with what I have written you.
Sincerely,
(Signed) William.
W. E. Levis
Exhibit No. 134
[Compiled by Department of Justice staff from patent data furnished by Hartford-Enpire Company]
April 12, 1930.
Mr. Wm. E. Levis.
Status of Patent Infringement Suits Now Pending
suits brought by HARTFORD ON FEEDER PATENTS
Following the settlements arrived at between Hartford, The Owens Bottle
Company, Tucker, Reeves & Beatty, and William J. Miller, Hartford was able
to get a number of applications out of interference and to issue patents upon them
during the winter of 1925-26, and immediately thereafter (spring of 1926) suits
were brought by Hartford against Obear-Nester, Nivison-Weiskopf, Keans-
Gorsuch, and the Lamb Glass Company, as follows —
■I. St. Louis Suits
1. Hartford-Empire vs. Obear-Nester (1st suit), filed in the U. S. District Court
in St. Louis, April 1926. This suit was decided by Judge Faris, October 1938,
who held both patents valid and infringed, except as to the first ten claims of
the Peiler patent, which he found invalid because functional. Appealed to the
U. S. Circuit Court of Appeals for the 8th Circuit, which aflSrmed the Lower Court
in an opinion filed February 24, 1930. Obear-Nester stand enjoined from using
the plunger feeder which they formerly employed. Steps to extend the injunc-
tion to their air- vacuum feed are being considered (see below).
The patents sued upon in the above case were —
Steimer No. 1,564,909 December 8, 1925
Peiler No. 1,573,742 February 16, 1926.
The Steimer patent relates only to i)lunger feeders. The Peiler patent listed is
known as the phase change patent, and may apply to any gob feeder, whether or
not it employs a phmger.
At the time this first Obear-Nester suit was filed, defendant was using a plunger
feeder, but some months later changed to an air-vacuum pressure feeder without
any plunger, designed by Stuckey. When these facts developed, Hartford filed
another suit against Obear-Nester, as follows —
2. Hartford-Empire vs. Obear-Nester (2d suit), filed in the U. S. District
Court, St. Louis, February 25, 1929, charging infringement of the following —
Peiler No. 1,405,936 February 7, 1922
" No. 1,662,436 March 13, 1928
" No. 1.662.437 March 13, 1928
Ferngren No. 1,677,130 July 17, 1928.
Hartford's efforts to get a trial in this case have not as yet been successful.
However the trial is now expected to take place early next fall.
CONCENTRATION OF ECONOMIC POWER 785
II. CINCINNATI SUIT
Hartford- Empire vs. Nivison-Weiskopf, filed in the U. S. District Court in
Cincinnati, April, 1926, charging infringement of the same two patents, to Steimer
No. 1,564,909, and Peiler No. 1,573,742, that were involved in the first Obear-
Nester suit in St. Louis. Later a supplemental bill was filed to bring in a third
patent — to
Peiler No. 1,589,304^ June 15, 1926
The single claim of this third patent relates to the vertical adjustability of the
shears with relation to the orifice.
This Cincinnati suit (involving the above three patents) was tried last June
before Judge Hickenlooper, who in October, 1929, filed an opinion in favor of
Hartford on the Peiler phase change patent, but finding the Steimer and the
Peiler shear adjustment patent invalid. This decision has been appealed to the
U. S. Circuit Court of Appeals for the 6th Circuit, and will probably be argued
before that court this spring.
Judge Hickenlooper's decision on the Peiler phase change patent was particu-
larly noticeable in that he held the first ten claims of the patent valid and infringed,
notwithstanding the decision of Judge Faris in St. Louis (subsequently affirmed
by the St. Louis Court of Appeals), followed by the decision of Special Master
Jones in the Columbus suits (see below), finding these first ten claims invalid as
functional. It now remains for the Court of Appeals at Cincinnati to decide,
among other questions, whether it will follow Judge Hickenlooper or the St.
Louis' courls in respect to these claims.
III. COLUMBUS SUITS
1. Hartford- Empire v. Kearns-Gorsuch, filed in the U. S. District Court in
Columbus, May, 1926, charging infringement of the same patents, to Steimer No.
1,564,909, and Peiler No. 1,573,742, that were involved in the Pittsburgh and
Cincinnati suits.
Subsequently a supplemental Bill of Complaint was filed, adding two more
patents —
Peiler No. 1,589,304 June 15, 1926.
PeUer No. 1,631,107 May 31, 1927.
The first of these is the patent on shear height adjustment which was also intro-
duced into the Cincinnati case, against Nivison-Weiskopf. The last mentioned
patent is what is known as the "whittling" patent. It involves the shaping of the
gob by adjusting the relative movements of the plunger and shears.
2. Hartford- Empire vs. Lamb Glass Company, filed in the U. S, District Court in
Columbus, ^charging infringement of the same patents, to Steimer No. 1,564,909,
and Peiler No. 1,573,742, and patents to —
Soiibier No. 1,574,709 February 23, 1926
Ferngren No. 1,574,739 February 23, 1926
These patents relate to the revolving plunger. The Peiler "whittling" patent
No. 1,631,107 was later introduced into the Lamb case also by a supplemental bill.
Subsequently both of thfese Columbus suits were assigned "to Hon. Berne Jones,
as Special Master, to hear the evidence and report his findings to the Court, with
recommendations as to the proper decree to be entered.
After hearing the evidence. Master Jones, in May 1929, handed down decisions
in both of these Columbus cases. In both cases the Peiler phase change patent
No. 1,573,742, was found valid and infringed, except as to the first ten claims which,
following Judge Faris of St. Louis, were held invalid as functional. .
The Steimer patent No. 1,564,909, and the Peiler "whittling" patent No.
1,631,107 were found not to be infringed by either the Kearns-Gorsuch or the Lamb
feeders.
In the Kearns-Gorsuch suit, the Peiler shear height adjustment patent No.
1,589,304 was held limited and not infringed.
In the Lamb case, the Soubier patent was found valid and infringed. The
Ferngren patent was found not to be infringed.
Both sides filed exceptions to the Master's report, and after various delays im-
posed by the Court, these exceptions were argued before Judge Hough in February
of the present year. As yet he has not handed down a decision on those argu-
ments, and he has intimated his intention not to make any decision until after the
Court of Appeals at Cincinnati has decided the Kearns-Gorsuch case. This would
786 CONCENTRATION OF ECONOMIC POWER
be unfortunate, but there is no way of forcing the hand of a Federal Judge who for
any reason chooses to hold back his decisions.
Hartford's lawyers felt that Hazel-Atlas should be held parties privy to the
Kearns-Corsuch case, and bound by the decision to be rendered as to the four
patents involved in that case, but Hartford sought to attack H-A directly and
did so by a suit in Pittsburgh, listed below.
3. Hartford-Empire vs. Lamb Glass Company (2d suit), filed in Columbus last
month, charging infringement of Peiier patent No. 1,655.391, dated January 23,
1928 (see below).
IV. PITTSBURGH SUIT
Hartford-Empire vs. Hazel-Atlas, filed in the U. S. District Court in Pittsburgh,
in 192S, charging infringement of Peiier patent No. 1,655,391, dated January 3,
1928.
We generally looked upon this Peiier patent as Hartford's best bet. It was
supposed to broadly cover the use of a phmger in such a manner as to bring^about
the shaping of the gob to fit the blank mold. The case was tried before Judge
Gibson, and Hartford's lawyers seemed well satisfied with tho record made up.
They were greatly disappointed when Judge Gibson handed down his decision,
in Februarj' of this year, finding the claims of this Peiier patent so limited as not
to be infringed by the Hazel-Atlas feeder.
Hartford has. taken its appeal of Judge Gibson's decision to the U. S. Circuit
Court of Appeals for the 3d Circuit, sitting in Philadelphia, and the appeal is
expected to come up for agrumcnt next fall. Mr. Byrnes, the lawyer who argued
the case for Hartford before Judge Gibson, and who is regarded as the leading
patent lawyer in the Pittsburgli district and 3il Circuit, expressed himself as
fairly confident that the decision of Judge Gibson would be reversed.
Our own feeling is that Mr. Byrnes is over optimistic in his view. While Judge
Gibson's decision indicates a considerably mistaken attitude on his part, particu-
larly as to the part played by Peiier in the revolution of the industry brought
about by the introduction of the gob feeder, we deem his decision, taken as a
whole, to be convincingly phrased and difficult tn upset. Wo would regard the
chances of reversal no better than one to tln-ee.
V. BUFFALO SUIT
Hartford's lawyers, still believing in the merits of the Peiier plunger patent,
No. 1,655,391, dated January 3, 1928, notwithstanding Judge Gibson's decision,
recommended the filing of two additional suits in other districts, charging in-
fringement of tliis same patent. These suits include the second Laml) case,
already referred to, filed during March of this year in Columbus, and the suit
of —
Hartford-Empire v. Reed Glass Company, filed last month in the U. S. District
Court in Buffalo.
If the trial of either of these suits should result in a decision materially different
from that rendered by Judge Gibson, it is believed that the U. S. Supreme Court
will listen favorably to a writ of certiorari on conflicting decisions rendered on
this i)atent.
Suits Against Kno.c-0'A'eill Machine
These include —
1. Owens-Hlinois v. O'Neill Machine Company and Frank O'Neill, filed last
November in the U. S. District Court in Toledo, charging infringement of Soubicr
patent No. 1,705,341, dated March 12, 1929.
An essentialfeature of this Soubier patent, upon which the cliarge of infringe-
ment is based, is the transfer of the parison from the blank mold table to the
blow mold table of a two-table forming machine. At the time the suit was
brought, O'Neill was making his transfer by the use of a cam which caused the
neck mold to travel with the blow mold about the center of the blow table during
the transfer period, following the Soubier nu)vement in this respect very closely.
Rut in view of the charge of infringement made in this suit, O'Neill changed
the form of his cam governing the travel of the neck mold during transfer, and
the question of whether O'Neill's new transfer movoinent will infringe Soubier's
claims, is much more serious. However, the i)n\sent ca.se will be tried out on
O'Neill's old construction, and Mr. C. B. Belknaj) expresses the opinion that we
have a fifty-fifty chance of wiiuiing on this issue. He asserts, furthermore,
that a favorable decision on this issue would be helpful in forcing the patent
against O'Neill's new construction of transfer cam.
COXCENTUATION OF KCONOMIC POA\ EU 737
Defendant's answer in this case has been filed, and Mr. Belknap will ask to
have the case set down for trial as soon ab' defendant's time for taking depositions
under the rule has expired. This will be within a few days, and it is hoped to
secure a trial in June or the early fall, accordingly as the engagements of the
Court will permit.
2. Hartford-Empire v. Carr-Lowrey, filed last month in the U. S. District Court
in Baltimore, charging infringement of Co.\ patent No. 1,212,189, dated January
16, 1917. So far as we are advised, the answer in this case has not yet been filed.
Litigation Expenses
As to all of Hartford's suits on feeder patents — at St. Louis, Cincinnati, Colum-
bus, Pittsburgh, and Buffalo — this company is making material contributions
towards Hartford's expenses by way of credits against roj'alties coming to us
from Hartford under feeder patent agreements.
But the two suits against the O'Neill machine, which being a suction machine,
outside or "licensed inventions" as defined by our General License agreement
with Hartford of 1924, are being brought independently b}^ this company on the
one hand, and b}' Hartford- Empire ou the other, without any division of expenses.
P.\.TEXT & LiCKXSE DEPARTMENT.
Henrv W. Carter
EP ■
'Exhibit No. 135." iiitrodiieod on p. 534, is on tile with the committee.
"ExHiuri' No. 13C," inin^duced on p. 534, is on file with, the committee.
"Exhibit No. 137," introduced on p. .534, is on file with the committee.
'Exhibit No. 138," introduced on p. 534, is on file with tlie committee.
"Exhibit No. 139," introduced on p. 534, is on file with the committee.
'Exhibit No. 140," introduced on p. 534, is on file witli the committee.
"Exhibit No. 141," introduced on p. 534, is on file with the committee.
Exhibit No. 142
[Copy of telegram from 0. S. Quay, vice president, Hazel-Atlas Glas.s Co., to Department of Justice]
December 13, 1938.
Mr. C. L. Tbrrel,
Department of Justice, Washington, D. C.
Dear Mr. Tebrel: You called me at my home last evening and asked that I
furnish you by telegraph today, a record of payments made by this company
to the Hartford-Empire Company, together with a comparative record of amounts
paid by Hartford-Empire to this compai y.
Our telegram this morning, I trust, arrived in such form as to permit you to
readily pick out the information you require.
In confirmation of the figures given in that message, we submit the following:
Amount of royalty paid to Hartford-Empire Company by The
Kearns-Gorsuch Bottle Company, a former subsidiary of this
company, for the years 1919 to 1927, inclusive $265, 138. 50
788 CONCENTRATION OF ECONOMIC POWER
A record of the parent company's transactions show —
Year
Amounts paid
toHaitford-
Empire
Amounts re-
ceived from
Hartford-
Empire
$217, 899. 95
664, 164. 49
828, 465. 94
920, 869. 53
1,139,316.08
1,240,958.62
759, 266. 36
$180, 404, 05
1933
715, 798. 15
1934
877, 003, 58
1935
1 006 687 67
]9:!6 .
1,305,317.79
1837
1,523,034 69
1938 (9 Mos.) - ---
919,815.01
Total
5, 770, 940. 97
6, 528, 660. 94
We trust the foregoing record is in sufficient detail to fit in with your needs
and fully answers your request.
Yours very truly,
G. S. Quay,
Vice-President and Secretary.
"Exhibit No. 143," introduced on p. 452, is on file with the Committee.
Exhibit No. 144
[From files of Hazel-Atlas Glass Co.]
(Personal) Septembeb First, 1932.
Mr. William E. Levis,
Post Office Box 1035, Toledo, Ohio.
Dear William: Your letter of August 31st is in connection with Root, and
BO on.
Referring to that part in connection with Hazel-Atlas, enclosed is a worliing
copy of our Assets and Liabilities statement as of .luly 23rd. These figures are,
of course, subject to audit, as they are prepared by our own accounting department.
I hope you do not let this out of your own hands. It is all right to give your
Illinois Companj' directors information from it, but I would not like for them to
have in their possession one of our work sheets.
Since July 23rd we borrowed one million dollars for the Hartford-Empire
transaction. Since then we have paid oft' that obligation by selling some of our
short term Treasury's and Fourth Liberty 4%% Bonds, on which we have a
profit. I will be glad to answer any questions in connection with this statement.
Thank you very much for information about Root. You certainly have things
progressing in fine shape and I hope you get your wishes concluded fairly soon.
About Ball, I really don't have any additional views. This Company,
however, is willing to go pretty far, as I indicated in New York, to give Ball what
he wants as long- as that want does not actually cramp our style. I don't mean
by this that your Company or this Company should actually pay Ball to come in,
but I believe the Hazel-Atlas Glass Company could restrict itself in such a way
that there actually would not be a penalty. For instance, have the quantity of
jars that we are allowed to make under the license from Hartford-Empire for
fruit jars be sufficiently large to have an excess each year to accumulate to the
benefit of some year when we have a repetition of the conditions that existed in
1931. I do agree with you that it is important to have Ball take a license and
I will do everything I can in that direction.
With kindest regards.
Sincerely yours,
, President.
J. H. McNash
MF
CONCENTRATION OF ECONOMIC POWER 789
Exhibit No. 145
(From files of Hazel- Atlas Glass Co.]
Hautford-Empire Co. — 804
memorandum
Feb. 9, 1933.
The Hazel-Atlas Glass Company have a non-restricted, non-exclusive license
from Hartford-Empire to make fruit jars.
Negotiations are under way loolcing forward to Ball Brothers' taking a license.
Hartford really offered Ball the residual rights excepting as to Hazel and
Owens-Illinois. Ball really wants more than that — he wants some restriction
placed upon Owens-Illinois and Hazel.
Various conversations have been had on this subject between the interested
parties.
During some of these conversations the atmosphere became very tense. Even
questions of good faith were involved.
AH these things finally came to the top Friday, February 3, in New York.
Messrs. F. C. and G. A. Ball questioned me about a quarter to six on that day,
in connection with the attitude of Owens-Illinois in case an agreement could
be reached.
I explained my view of the thing with respect to Owens-Illinois, and why.
Apparently there was a desire on the part of Messrs. F. C. and G. A. Ball to
arrive at a satisfactory situation.
As a consequence of this I was willing to change my view to some extent with
respect to Hazel's position in this matter, and restrict our license to 300,000
gross per year, without any mention in the contract of any conditions modifying
this amount.
Previous to this I had been insisting upon some understanding in event of an
increase in the use of fruit jars for the domestic trade; or some repetition of what
took place in September of 1930 in our New England territory, which might put
us over our restricted license; or, a repetition of what transpired in 1931 when, by
a combination of many circumstances, an unusual demand was had for domestic
fruit jars.
I told Mr. F. C. and G. A. Ball it was not necessary to have these modifications
in the contract as far as I was concerned, if they (Messrs. F. C. and G. A.) would
permit me to tell my story to Mr. F. Goodwin Smith in their presence, inasmuch
as he would have to be the umpire under the licensing arrangement, and for
them to see whether my statement was correct or not.
Mr. F. Goodwin Sinith came into the room. I presented my story as outlined,
particularly with respect to an increase in the use of jars generally, or some recur-
rence in some particular territory of what happened in New England in 1930, or
a repetition of 1931 generally — and the fact that the Ball Brothers had said that
in these respects a very liberal interpretation should be given to our restriction.
Messrs. F. C. and G. A. Ball confirmed my understanding in Mr. F. Goodwin
Smith's presence — and I am asking Mr. F. Goodwin Smith to make a record of
this, certify to it, to be in his files as a part of the atmosphere, at least of this
Ball situation — so that anyone following Mr. F. Goodwin Smith will know just
how the situation is to be handled.
I am cei^tifying to this record here for the same purpose.
[Certified true copy. Hazel- Atlas Glass Co.]
Exhibit No. 146
[From flies of Owens-Illinois Glass Co.J
December 13, 1930.
Mr. Wm. E. Levis.
SECTION 22, GENERAL LICENSE AGREEMENT WITH HARTFORD
The following is by way of comment upon the insistence of Hartford-Empire
management on the desirability of cancelling Section 22 of the General License
Agreement of April 9, 1924, entered into between Hartford-Empire Company, on
the one hand, and The Owens Bottle Company, on the other:
Mr. Williams has sent me copy of his letter to you of December 9 on this
subject, giving the legal reasons why he believes, with Hartford, that this section
should be cancelled. These are based mostly on his consideration of the Sherman
124491— 39— pt. 2 35
790 CONCENTRATION OF ECONOMIC POWER
and Clayton Acts, and the possible effect of the Dill Bill, if that measure, which
has alread}' passed the Senate, should become a law. I understand that the con-
clusions reached by Mr. Williams in this connection are substantially those
heretofore reached by Herbert Knox Smith, General Counsel for the Hartford-
Empire Company.
Both lawyers have made a particular study of the so-called antimonopoly
statutes, and I assume that their position is well taken.
Will, therefore, confine my views to more practical business considerations, and
am disposed to urge the difficulties which Hartford is meeting in maintaining its
licensing system, in the returns from which we are so largely interested.
Hartford's lack of any established patent position leaves them open to incessant
complaints from their licensees, first because these feel that Hartford is not giving
them sufficient protection against competitors who are using pirate feeders and
machines for which they pay no royalties, second, because they feel unduly
restricted in the fields of ware which the}' are permitted to make under Hartford's
license.
As to the first, Hartford is practically helpless to do anything further than is
already being done. They now have under way and are vigorously prosecuting
eight different suits in five different federal jurisdictions at an expense already of
nearly a million dollars (continuing at the rate of about twenty thousand dollars
a month). Until some definite conclusions are handed down in these litigations
by the courts of last resort, Hartford's ability to further protect its licensees must
be regarded as distinctly limited.
It is only along the second line that Goodwin Smith can accomplish anything
toward keeping peace in the family, and he naturally tries to do so by conceding
such additional rights as seem reasonable and are imperatively demanded. But
as a practical matter he is frequently embarrassed when such a question comes
up, by the fact that he cannot dispose of it without referring it to the manage-
ment of this company to give or refuse its consent under Section 22. Such
references usually entail more or less delay in answering the licensee, and since
the licensee generally has some definite immediate business in mind in asking for
the enlargement of its license, much exasperation towards Hartford results even
where the request is granted. And frequently, of course, it is necessary for
Goodwin Smith to refuse the request, either because of our veto, or because Hart-
ford feels bound by its relationships with other licensees.
The result undoubtedly is that Hartford's prestige with its licensees is being
continually weakened, and they are likely to be faced any day with a general
revolt, threats of which, couched in no uncertain terms and in the hard language
of anger and disappointment, are being faced by Hartford's management almost
daily. While he has made remarkably little complaint about the situation and
is taking it in a sportsmanlike manner, Goodwin Smith does not hesitate to say
that if we were obliged to sit with him and continually face the insistances and
threats of their licensees, we would have a much greater appreciation of what
they are up against.
The removal of the limitations placed on Hartford by Section 22 of our General
License Agreement, if cancelled as Hartford is now requesting, will not cure the
situation by a long ways, but I believe it will go a considerable distance toward
easing the strain at those critical points which are otherwise so liable to result in
a definite break. At least Hartford's management could then give immediate
reply, yes or no, to its licensees' demands, instead of being obliged, as now, to
wait to argue the situation with us.
The objection on our part to eliminating Section 22 is the fear that Hartford,
once freed of our veto, might be inclined to grant licenses recklessly and without
regard to the state of the market or good of the industry. Believe that this fear
is much exaggerated. We have been dealing with Hartford under our 1924
agreement for more than six years now and have never found any tendency on
their part to act recklessly or in disregard of basic conditions. Believe we may
safely conclude that their attitude in the future will not be different.
Moreover, it seems to me, too, that we have practically come to a parting of the
ways. If we are to conserve and maintain our royalty income of really half a
million dollars, we must look at the hcensing question from that point of view,
rather than from the opposition standpoint of what the granting or extension of
any particular license rights might cost us in a competitive way. I don't believe
we can much longer successfully continue to straddle these divergent policies.
If Hartford's patent position had been definitely sustained as a controlling one,
things would be very different, but with the public free, up to the present time,
to use such practical feeder eqaipment as that employed today by Hazel-Atlas,
Obear-Nestor, and Nivison-Weiskopf, it is very evident that Hartford is in no
CONCENTRATION OF ECONOMIC POWER 791
g)sition to crack the whip. On the contrary, it seems probable that the Hartford-
mpire Company will be obliged more and more to adopt a conciliatory policy
toward their licensees, or the latter will break loose and resort to some such out-
side equipment as these other competitors are now notoriously employing, with-
out payment of royalty or limitation as to ware. Loss of income during these hard
times is putting Hartford's licensees under great pressure to thus fly the coop.
Looking the facts squarely in the face, I believe that we will be in luck if Hart-
ford's licensees continue to pay royalties at all. And since they are certainly
more likely to continue if we give Hartford a free hand in placating their com-
plaints, I deem this another cogent reason, additional to the legal one, why it
would be wise to give up our veto power under Section 22 of the General License
Agreement of April 9, 1924.
Patent & License Department,
Henry W. Carter,
Vice President in Charge.
EP
cc— F. G. Smith.
L. T. Williams.
Exhibit No. 147
[From flies of Anchor-Hocking Glass Co.]
Cable address: Emhart.
*Hartford-Empire Company
Glass Working Machinery
Hartford, Conn., Thursday, Augiist 17, 19SS.
Mr. I. J. Collins,
President, The Hocking Glass Company, Lancaster, Ohio.
Dear Ike: I am enclosing copy' of a letter just received from Mr. F. C. Ball
relative to packers' jars sold into the domestic fruit-jar field.
We discussed this in New York and you assured me that j'^ou were using every
effort to keep jars out of this field.
I feel, therefore, that in fairness to you you should be advised about this com-
plaint from Ball, as I know you won't misunderstand my sending it to you.
When you see a chance to spend a day or two with me at Lancaster, let me
know and I will make every effort to fit it into my plans.
I hope everything is fine with you.
Sincerely youio,
Roger M. Eldred.
R. M. Eldred.
GP.
Enc.
Exhibit No. 148
[From flies of Anchor-Hocking Glass Company]
Ball Brothers Company,
Muncie, Indiana, August 16, 19S3.
Mr. R. M. Eldred,
Hartford-Empire Company, Hartford, Conn.
Dear Mr. Eldred: Before Mr. G. A. Ball left for Europe he had some talk
with you over the telephone regarding so called packers ware supplied by General
Glass Company.
I enclose herewith copies of letters regarding plain, unlettered, so called packers
jars, Mason fruit jar shape that fit the regular Mason fruit jar cap that are being
Bold for domestic use.
One of these letters is from a customer in Stevens Point regarding the so called
packers jar sold from Green Bay, Wisconsin. We are informed that the General
Glass Company are supplying quantities of these jars to a Green Bay jobber and
that they are sold for domestic use.
Please let us know what you can do to stop this encroachment on your license
agreement which prohibits the sale of these so called packers jars for domestic use.
Awaiting your reply, we remain,
Yours truly,
F. C. Ball, President.
792 CONCENTRATION OF ECONOMIC POWER
Gentlemen: For your information, we find in our every-day experieiicejthat
we are unable to sell Mason Jars in competition with other jobbers.
i They are selling Quart jars for instance at $6.65 complete, including caps and
rubbers. They are getting in car after car. It is the jar the public wants.
What are we to do for the balance of the season?
We are duty bound to meet competition, compelling us to buy a car of the same
jars.
We would like to hear from you with a suggestion so as to relieve the serious
situation confronting us.
The Copps Company
Wholesale Grocers
Stevens Point, Wisconsin, &-5-33.
Refer answer to: BDC: H
Ball Brothers,
Muncie, Ind.
Gentlemen: We are surely up against it on this "packer" jar situation.
We have had correspondence with you pertaining to it at various times during
this season and now they are coming into Stevens Point with these jars, some of
them from Green Bay, some from Milwaukee, and some from Chicago. Isn't
there something that you can do to get a few, at least, to us at the right price?
Please let us know quick.
Yours truly,
The Copps Company.
Exhibit No. 149
[From the files of Ball Brothers Company]
May 3, 1933.
Me. Goodwin Smith,
President, Hartford-Empire Company, Hartford, Conn.
Dear Mr. Smith: Since writing to you yesterday regarding Three Rivers
Glass Company I have been reliably informed that a Sherman, Texas, jobber is
now offering to sell to the retail trade Fruit Jars for domestic use to be manufac-
tured by the Three Rivers Glass Company under the brand name "Crack Shot."
The price at which they are offering these jars is Q5^ per gross less than the same
Jobber is offering "Ball Jars." This is disturbing the other jobbing customers
and they want to know what we are going to do about it.
I have learned at the Owens Illinois Dallas office this morning that Three Rivers
Glass Company are operating under receivership and I presume they are intending
to make these "Crack-Shot" Jars.
As I wrote you yesterday Three Rivers have in stock about fifteen carloads of
plain Pint and Quart Jars that fit Mason P/L caps which they have been offering
to the trade for domestic use. Possibly these plain Jars are being sold in con-
nection with the "Crack Shot" jars, .^t any rate I believe that you should
notify them of the exclusive license rights with us and inform them that they
have no right to manufacture Fruit Jars of any kind to be solcj for domestic use.
This being the beginning of the Fruit Jar season these prices that are being
offered by the Three Rivers Company will more than likely disturb market con-
ditions and I trust that you will take steps at once to stop them from manufac-
turing jars for domestic use by the Three Rivers Company.
I am leaving Dallas this afternoon for home and will be in Muncie next Friday.
Kindly send me a copy of your letter to the Three Rivers Company and when
you receive a reply from them please let me know what they have to say.
Very truly yours,
, president.
Dictd. by Mr. F. C. Ball.
I certify that this is a correct copy of the original document, with the exception
of possible typographical errors.
Ball Brothers Company,
By A. M. Bracken,
Assistant Treasurer.
"Exhibit No. 150," introduced on p. 604, is on file with the Committee.
CONCENTRATION OF ECONOMIC POWER 793
• Exhibit No. 151
[From flies of Lynch Corporation]
[Copy]
Cable Address: 5MHART
Hartford-Empire Company
Glass Working Machinery
Hartford, Conn., September SO, 19SS,
Mr. T. G. Werbe,
President, The Lynch Corporation,
Anderson, Indiana.
Dear Mr. Werbe: This is in answer to your letter of September 13 regarding
Universal and the procedure to be followed generally in granting forming machine
licenses to those persons who wish to obtain forming machines from you. If
Universal advised you that they had an H-E forming machine hcense they are
evidently laboring under some misconception as to the extent of their present
license. This license is merely to cover six feeders for the production of principally
milk bottles.
We shall, howevei, send them a forming machine license sometime this week
along with our form letter and such other information in regard to their particular
situation as seems necessary.
As to your new contract form, I believe that Mr. Miller has now approved of
it and that he will send it to you as quickly as possible, if he has not already
done so.
Mr. Parham has already ex'plained to you that we are issaing no formal licenses
for existing machines and that the license for future machines is now ready.
As our general procedure for dealing with each person who wishes one of your
forming machines we suggest the following: .
(1) We will send you a list of our feeder licensees and keep it revised for you.
(2) When you get an order for a forming machine you will advise us.
(3) If it is from a feeder licensee we shall then forward to the licensee our
standard forming machine license agreement adapted to the licensee's particular
field of ware. This license he is to sign and return to us.
(4) If he is not a licensee then you will decline to furnish the machine in such
language as appears proper to you under the circuiAstances.
(5) If it is to a feeder licensee to whom we are sending a forming-machine
license you will send your usual sales contract for execution.
(6) When we have advised you that our forming-machine license is signed and
you have a signed copy of your own contract, you can then make delivery of the
machine.
The above is merely our suggestion for handling the matter. If some part of
it disturbs your ordinary routine, or you believe it will harm your delivery of
machines, please write us and we will settle it in some mutually satisfactory
fashion.
It may take some time to get these various details ironed out, but once we get
started there will not be very much difficulty about our contractual relations
and those with the people who wish to use these machines.
Yours very truly,
(Signed) Arthur T. Safford, Jr.,
Secretary.
I certify that this is a correct copy of the original document, with the exception
of possible typographical errors.
Lynch CoSporation,
By E. Podmore,
Assistant Secretary.
"Exhibit No. 152," introduced on p. 606, is oil file with the committee.
794
CON'CENTKATION OF ECONOMIC POWER
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CONCENTRATION OF ECONOMIC POWER
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CONCENTRATION OF ECONOMIC POWER
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CONCENTRATION OF ECONOMIC POWER
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798 CONCENTRATION OF ECONOMIC POWEK
Hartford-Empire Company — Analysis of Financial Statements — Continued
1912-
1923..
1924..
1925.
1926-
1927..
1928.
1929.
1930.
1931.
1932.
1933.
1934.
1935.
193fi.
1937.
Total capital
and surplus
$248,954.55
5,976,020.99
5, 755, 463. 33
6, 207, 447. 40
6, 393, 342. 04
6, 459, 363. 80
5,258.028.10
4, 867, 172. 85
4, 957, 682. 50
5, 245, 469. 46
5, 243, 334. 26
5,467,065.44
5, 706, 487. 47
5, 409, 791. 70
5,457,431.89
5, 458. 717. 33
(Average) (1912-1937). 3,330.819.94 297,009.17
Total net in-
come or (loss)
($69, 530.
79, 239.
169,351.
231,099.
339,077.
337.301.
230,040.
326, 550.
311,309.
227, 877.
326, 964.
637, 731.
689, 155.
984, 832.
1, 682, 420.
1,934.120.
Return on
total invest-
ment
(27.92%)
1.33%
2.94%
3. 72%
5. 30%,
5.22%,
4. 38%
6.71%
4:34%
6. 24%
11.66%
16. 64%
17. 83%
30. 83%
35. 43%
Net capital
employed in
operations
$248, 954. 55
5, 650. 833. 49
5. 479, 908. 64
6, 080, 384. 90
6, 368, 342. 04
6, 376, 363. 80
5, 038, 328. 46
4, 282, 706. 83
4,181,380.66
4,159,161.07
3,503,433.08
3,540.217.51
3, 037, 798. 06
3, 544, 769. 04
3. 233, 166. 45
2, 594, 370. 66
8. 92% 2, 708, 064. 22
Net operating
income or
(loss)
($69, 530. 27)
70, 793. 60
154, 005. 67
222, 533. 03
312,730.42
336.301.43
229,040.20
324,717.28
276, 443. 46
176, 829. 80
363, 225. 61
573, 101. 90
605, 278. 36
836, 060. 28
1, 559, 580. 64
1.758,324.59
270, .543. 94
Return on
investment
employed
in opera-
tions
(27.92%)
1.25%
2. 81%
3. 66%,
4.91%
6. 27%
4.54%
7. 58%
6. 61%
4.25%
10. 37%
16. 19%
16. 64%
23. 59%
48. 24%
67.77%
9.99%
• Figures for the period 1912-1922 are the average yearly figures of the Hartford-Fairmount Company, as
furnished by Mr. A. T. Saflord, Jr.. Secretary of Hartford-Empire Company. The figures for the years
1923-1937 were arrived at through analyzing the financial statements of the Hartford-Empire Company for
each of the respective years.
Exhibit No. 154
[From flies of George E. Day, Detroit, Michigan]
(Cable address "Emhart.")
Hartford-Empire Company,
Hartford, Connecticut, February 1, 19S6.
Mr. George E. Day,
27th Floor, David Stott Building,
Detroit, Michigan.
Dear Mr. Day: Since first receiving a report from Mr. Schwenzfeier relative
to your proposition for a glass plant in Detroit, we here at Hartford have been
giving the matter some serious thought.
Possibly we do not have the full story but from what we know of the glasa
industry in general being greatly overcapacitated,' it does not seem to us feasible
nor advisable to increase the tonnage that already exists.
If you and your associates care to come to Hartford, we will be more than
pleased to get your story first-hand, but doubt whether our ideas will be altered.
Sincerely yours,
(Signed) A. M. Pease,
Hartford-Empire Co.
AMP/J
[Written in margin : How come in view of users statement?]
'Word "overcapacitated" underlined.
Exhibit No. 155
I [From files of Obear-Nester Glass Company]
June 29, 1935.
Lynch Corporation,
Anderson, Indiana.
(Attention: Mr. Werbe, President)
Dear Mr. Wkrbe: We are contemplating the installation of two or three
additional machines and we are writing you to find out if you are in a position to
furnish us with two or three of your late model Lynch 10 Bottle Forming Machines.
If so, we would like to know just what price you will charge us for these ma-
chines and about how soon you can make shipment after you receive our order.
We understand that you have mnde some changes over the early model Lynch
10 Machines, which you have furnished to the Glass Manufacturers and we would
CONCENTRATION OF ECONOMIC POWER 799
like for you to advise if you are in a position to furnish us machines with these
latest improvements or your regular Model 10 Lynch machines.
Trusting that you can advise us at once relative to the above, we beg to remain
Yours very truly,
Obear Nester Glass Company,
By , Vice President.
WAN/mho
Copy
Exhibit No. 156
(From files ol Lynch CorporationJ
Lynch Corporation,
Anderson, Ind., U. S. A., July 1, 1935.
Obear-Nester Glass Company,
East St. Louis, Illinois.
(Attention Mr. W. A. Nester.)
Gentlemen: Replying to your letter of June 29, the price on the Model 10
Lynch machine at the present time is $1*2,000.00 F. O. B. Anderson. This is
the same price as previously quoted, although the cost of manufacture has been
advancing. We are quoting this price, therefore, subject to change without
notice.
There has been a few changes and improvements to the machine since the
original model, such changes and improvements are of course incorporated in the
current models.
Regarding time of shipment, this depends upon conditions at time orcfer is
received. Just at present we are extremely busy and»have more than thirty
machines of different models on order. We could probably make delivery of
two or three Model 10 machines the latter part of August if ordered at the present
time. We are usually in position to make shipment within two to three weeks
from receipt of order.
The Lynch Model 10 machine, as well as all other models, require a forming
machine license as the machines include a number of patented features on which
the patents are held or owned by others.
If any additional information is wanted, do not hesitate to write us.
Yours very truly.
Lynch Corporation,
T. C. Werbe, Pres.
TCW:EP
Copy
Exhibit No. 157
[From files of Lyncb Corporation]
Wm. a. RoriENBERd, Vice-PreiiUeul D, X. Baoby, Secretary
W. A. Nkster, ^'ice-Presideat Paul S. Abt, Treasurer
Joseph K. Nester, Preiideru
Make all remittances to East St. Louis, 111., office.
Quotations are subject to immediate acceptance or change without notice and subject to prior sale.
We do uot agree to warrant as to exactness of capacity the articles to be delivered, nor that they shall be
equal to any particular sample but agree only that the goods shall be merchandise for the general use for which
they are designed.
We agree to take all reasonable care and diligence in fulfilling orders, but shall not be responsible for non-
delivery caused by or resulting from acts of Providence, strikes, lockouts, fires, floods, or any accident or
contingency beyond our control.
Obear-Nester Glass Co.
Manufacturers of Flint, Green, and Amber Bottles
FACTORY EAST ST. LOUIS, ILI*
East St. Levis, III, July S, 1935.
Lynch Corporation,
Anderson, Indiana.
(Attention: T. C. Werbe, Pres.)
Gentlemen: We have your letter of July 1, quoting us on your Model 10
Lynch machine and we note your remarks.
We would like to have you advise us, if it is necessary for us to take out a
license for the forming machines as a prerequisite to your shipping us the Lynch
Model 10, or if you will ship us the Lynch Model 10 machines, before we secure a
800 CONCENTHATION OF ECONOMIC POWER
forming machine license. We would also like to know too, if these conditions will
apply on your shipping us your other Lynch. Model machines, such as the LA or
"R" type, as it is possible that we will require some additional LA and "R" type
machines.
Trusting to hear from you promptly, we beg to remain
Yours very truly,
Obear-Nester Glass Company,
(Signed) By W. A. Nestek.
WAN/mhc
I certify that this is a correct copy of the original document, with the exception
of possible typographical errors.
Lynch Corporation,
By E. PODMORE,
Assistant Secretary
ICopyJ
Exhibit No. 158
[From files of Lynch Corporation]
July 8, 1935.
Obear-Nester Company,
East St. Louis, Illinois.
(Attention, Mr. W. A. Nester.)
Gentlemen: Replying to your letter of July 3rd, we would not care to make
shipment of any Lynch machines until you secure a forming machine license as
to do so would only result in litigation. All models of Lynch machines, including
the "LA" and "R" type, require a forming machine license.
Yours very truly,
LvNCH Corporation,
T. C. Werbe . Pres.
TCW:EP
I certify that this is a correct copy of the original document, with the exception
of possible typographical errors.
Lynch Corporation,
By E. PODMORE,
Assistant Secretary.
[Copy]
Exhibit No. 159
[From flies of Corning Glass Works)
Hartford-Empire Company,
Hartford, Conn., November 20, 1937.
Mr. Amory Houghton,
President, Corning Glass Works,
Corning, N. Y.
Dear Am: Eldred and Pease spent a day at Lancaster with Ike and Bill
Fisher Ike was in a pretty ugly mood about a number of things and, inci-
dentally, he had samples of various kinds of baking ware and hard glass ware
which had a bluish tint such as your top-of-the-stove ware.
All these samples had been made up by hand, and he had named this line of
Ware Fry rock.
Ike is going to defy us all in this kind of ware and use the same tactics that
he is now using when he defies. II-E Co. on forming machine patents.
Sincerely,
Goodwin.
P. S. Bart Arkell writes me as follows: "Do you happen to know who is the
President of the Steuben Glass Company? I notice the Yale University Press
art! offering for sale a most interesting book entitled "General Von Steuben"
•Hi! I should like to present it as a Yale gift to the President of the Steuben
Gl)t^rt Company, particularly if he is a Harvard man."
(Stamped: Certified true copy. Corning Glass Works.]
CONCENTRATION OF ECONOMIC POWEIl- gQl
"Exhibit No. 160," introduced on p. 657, is on file with the committee.
'Exhibit No. 161," introduced on p. 661, is on file with tlie committef?.
Exhibit No. 162
[From files of Hartford-Empire Company]
[Copy]
Mr. SaflFord.
•Hartfokd-Empike Company,
Hartford, Conn., March SI, 1936.
Lynch Corporation,
Anderson, Indiana.
(Attention: Mr. T. C. Werbe.)
Gentlemen: From time to time we have discussed with you some misunder-
standings which have apparently arisen as to the interpretation of the license
contract between our companies, and we feel that it is worth while to sum up the
matter in a letter.
We understand that it has been suggested that no glassware manufacturer can
obtain forming machines from the Lynch Corporation unless such manufacturer
is also a feeder licensee of the Hartford-Empire Company. Of course, this is not
what the contract says and is not what was intended. As is clearly stated in
Section 3 of the Forming Machine Agreement, the Lynch Corj)oration has a license
to deliver forming machines coming under Hartford-Empire patents "to any
person or concern that has obtained from Hartford a license under Hartford's
forming machirie inventions to use such forming machines." We think it will be
desirable that both you and ourselves make this plain whenever the question arises
as to who can obtain forming machines coming under Hartford patents.
As we now understand it, you are unwilling to eliminate from the Forming
Machine Agreement the provisions of Section 8, page 9, to the effect that Hartford
is required to pay license fees to Lynch for any excess of its annual production of
patented forming machines over a prescribed capacity. We regret that you cannot
agree with us that Section 8 should be removed from the contract but, of course,
if you are not wil'ing to have it removed, we can do nothing about it.
This letter will also confirm our understanding that the Supplemental Agree-
ment, dated August 23, 1933, between Hartford and Lynch, is no longer in effect.
Adding to what we have already stated above, we wish to assure you that it
is our policy to negotiate licenses "for Lynch forming machines with any reputable
glassware manufacturer, whether or not such manufacturer desires a feeder license
from the Hartford-Empire Company.
Very truly yours,
Hartford-Empire Company,
R. D. Brown.
RDB/PET.
Co Messrs. F. G. Smith, W. J. Belknap, and Safford.
SUPPLEMENTAL DATA
The following statement was entered in the record at hearings on
February 28, 1939, and is printed herewith in connection with the
testimony of Alfred ♦Reeves, see text, p. 303:
g02 CONCENTRATION OF ECONOMIC POWER
Exhibit No. 302
Automobile Manufacturers Association, Inc.
Statement of Income and Expense for the Year Ended June 30, 1938
Income:
Dues Received from Members .... $539, 473. 97
Interest from Securities Owned 16, 604. 04
Miscellaneous 9, 436. 18
Total Income (Carried Forward) 565, 514. 19
Administrative Expenses:
Salaries, Mileage and Fees, Directors and
Members Meetings $34, 363. 11
Departmental Expenses:
Motor Truck Department 11, 086. 39
Patent Department — General Expense 19, 963. 95
Patent Classification 29, 929. 00
Traffic Department 14, 960. 34
Legislative Information Department 24, 960. 78
Research Department 19, 573. 90
Facts and Figures Publication 3, 369. 57
Export Department 16, 124. 62
Information Bureau 7, 690. 51
Manufacturers' Committee 19, 193. 36
Public Relations Department 27, 276. 59
Statistical Division 22, 289. 63
Total, Departmental Expenses 216, 418. 64
Legal Expense 33,323. 15
Highways 51. 53
International Road Congress 5, 782. 48
General Expenses:
New York Office 51, 583. 15
Wasliington Office 54, 423. 09
Detroit Office 30,275.09
Unemployment Insurance Tax , 6, 773. 37
Group Insurance 2, 345. 25
Social Security Tax 1,530.40
Equipment Purchased 1, 814. 97
General Expense '-.. 3, 966. 31
Depreciation — Library 18, 157. 89
Total, General Expenses 170, 869. 52
Contributions:
Automotive Safety Foundation — Harvard
University Traffic Bureau 54, 250. 00
National Highway Users Conference 40, 000. 00
Society of Automotive Engi-
neers :
Safety Work $12, 500. 00
Standardization Work 7, 500. 00
Fuel Research 3,102.48
23, 102. 48
National Industrial Conference Board 1, 500. 00
Highway Education Board 10,000.00
Araferican Standards Association 500. 00
Economic Policy Committee 12, 500. 00
Total Contributions 141, 852. 48
Total expenses 602, 660. 91
Excess of Expenses over Income for the Year 37, 146. 72
CONCENTRATION OF ECONOMIC POWER 803
The following statement was entered in the record at hearings held
February 28, 1939, and is printed at this point in connection with the
glass patent story herein:
Glass Container Association
of america
19 West 44th Street
New York
See what you Buy — Buy in Glass
January 9, 1939.
Honorable Joseph C. O'Mahoney,
Chairman, Temporary National Economic Committee,
Room 281, Apex Building, Washington, D. C.
Dear Sir: In compliance with your statement at the close of the Glass Con-
tainer Industry hearing on patents — that "each member of the Committee is
desirious of seeing this problem from every possible aspect, and will therefore
welcome comment and suggestions and reports from any interested person" — we
hereby submit for the record an economic survey of the industry covering the
past period of frorn nine to eighteen years. The survey has been submitted to
the Department of Justice. Copies are enclosed for members of the Committee.
This survey covers the history of the companies and plants in the industry for
the past eighteen years. Some of the points disclosed are as follows:
1. At the present time there are 45 companies having 90 plants.
2. The 90 plants are located in 17 different states. Over 50% are located in
towns of under 25,000 population.
3. During the eighteen years, 22 new companies have come into the industry;
29 companies have gone out of business; and 28 companies have consolidated with
other companies.
- 4. From 5 to 28 companies compete for each line of containers.
5. Active capacity is nearly 50% in excess of any past demand. In 1937, the
industry's best year, it operated at 67.43% of active capacity. For the past ten
years the average operation has bctn approximately 55% of active capacity.
Licensed capacity, or potential capacity, is much greater than this.
6. In the last ten yearS the small companies have increased their volume
86%; the medium-sized companies, 89%; while the five largest companies have
increased their volume 40%. The industry shows an increase of 52%.
7. Milk bottles cost the dairies approximately Yio of a cent for each trip that a
bottle makes.
8. Since 1929 average selling prices have been reduced approximately 13%.
9. Since 1929 the labor cost per unit has increased approximately 13%.
10. In 1929, 27.7 employees were required to produce 1,000 gross of bottles in
one week. In 1937, 29.4 employees were required to produce 1,000 gross of
bottles in one week.
11. From 1929 to 1937, hours of work per week have been reduced from 49.7
to 41, or 17%. Wages per hour have been increased from $0,501 to $0,645, or
29%. Wages per week have been increased from $24.88 to $26.42, or 6%. The
number of employees has increased from 17,173 to 28,293, or 65%.
12. Employment has been continuous. Labor is organized. Labor relations
are good. The industry has been practically free from labor disturbances during
the past nine years. Less than one hour out of every 8,000 working hours has
been lost due to strikes, or approximately .012%.
Respectfully submitted.
(Signed) E. G. Ackerman,
E. G. Ackerman,
Glass Container Association of America.
EGA:MM
g04 CONCENTRATION OF ECONOMIC POWER
Exhibit No. 303
SURVEY OF THE GLASS CONTAINER INDUSTRY
Submitted to The Temporary National Economic Committee by the Glass
Container Association of America, 19 West 44th Street, New York, N. Y.,
December 5, 1938
Index
Page I
Definition of Scope of Study 1
History of Individual Companies with Plant Location Since 1920 2-10
Name "and location of Glass Container Manufacturers 11-12
Explanation of Glass Container Industry Classifications 13-15
Relative Importance of Each Class of Product i lG-18
Companies Producins and Shipping Each Class of Product 19-24
Relationship of Siiipnionts to Capacity Since 1928 25-30
Progress of Individual Companies Since 1928 31-33
Trend of Prices in tlie Glass Container Industry 34-35
Employment and Waces , 36-41
Glass Container Association Activities 42-44
« Pagination of oripinal docuniont is carried throughout in brackets on left marein.
The Glass Containeu Industry
(1] definition
The Glass Container Industry may be defined as the manufacturers who pro'-
duce and sell glass bottles, glass jars, and glass accessories for glass bottles and jars.
SCOPE OF INDUSTRY
The industry at the present time consists of forty-five known companies, oper-
ating ninety factories. The factories are located in seventeen different "States.
The location of these factories may be listed as follows:
Oklahoma 7
Pennsylvania 18
South Carolina 1
Tennessee 1
Texas . . 2
Washington 1
West Virginia 11
California 6
Florida 1
Illinois 6
Indiana 11
1
. 4
1
Maryland-.
Mississippi -
New Jersey.
New York-.
Ohio
DESCRIPTION OP INDUSTRY
The products of the industry are produced primarily by automatic machine.
Production by the hand method is continued by five companies, though four of
these five also produce by automatic equipment. Production by the hand method
has not been included in this study except where Census figures have been used,
and where it has been impossible to separate this production from automatic
production.
The value of hand production has been less than 2% of the total value of glass
containers during this period. The value in 1929 amounted to aporoximately
$1,800,000.00, and the value in 1937 amounted to approximately $1,000,000.00.
[2] History of Individual Companies, With Plant Location Since 1920
On the accompanying chart we show the operating history of the individual
companies in the Glass Container Industry, and the operation of individual plants
since the year 1920.
Change in name of company has been noted in the year when this change
occurred.
CONCENTRATION OF ECONOMIC .POWER gQS
Plants such as the Busch Glass Mfg. Company in St. Louis, and William Franzen
& Son, Inc., in Milwaukee, that specialized in beer bottles, and went out of business
shortly after 1920, have not been included in this study. Also, such plants as the
V. & S. Bottle Company of Roulette, Pa., and the General Glass Works of Ridgway,
Pa., that operated intermittently by the hand metliod during the early part of^
this period, have not been included. Also, such plants as the Puritan Glass Com-
pany of Massillon, Ohio, and the Birmingham Glass Works of Tarrant, Ala., that
operated only a few months, have not been included. The study does include
all plants that operated for an extended period during these eighteen years.
In the plant history, we have indicated the period of operation, and the period
of idleness, and have indicated the approximate size of all plants, or companies,
that went out of business, or that were dismantled.
In reviewing this history it should' be noted that individual plants have generally
increased in size, and have materially increased their productive capacity.
In summary, the number of plants has been reduced from 102 to 90. During
the later period there has been an increasing number of idle plants, so that at the
present time there are. 78 plants operating, and 12 plants that are idle.
In 1920, there were 80 different operating companies. During the 18-year
period, 22 new companies have come into the industry, 29 companies have gone
out of business, and 28 companies have been consolidated with other companies
in the industry, so that in 1938 we have a net of 45 companies.
For the greater part, plants in the industry are located in small towns, and
represent the principal industry in these small towns. The location of present
plants may be summarized by size of town as follows:
[3] Number of Plants: Population
27 Under 10,000.
22 - 10,000 to 25,000.
15 25,000 to 50,000.
7 50,000 to 100,000.
5 100,000.to 250,000.
5 250,000 to 500,000.
9 - - Over 500,000.
124401— 39— pt. 2-
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[11 J Name and Location of Glass Container Manufacturers
The following are the names and location of companies included in the Glass
Container Industry.
Companies located west of the Rocky mountains are noted separately, and are
treated separately throughout the greater part of this study. Statistical records
are kept by the Glass Container Association for each group and since the history
for the western division of the industry is somewhat different from the^eastern it
seems advisable for the greater part to show them as separate groups.
Anchor-Hocking Glass Corp., Lancaster, Ohio.
Armstrong Cork Company, Whitall-Tatum Company Division, Millville, N. J.
Ball Brothers Company, Muncie, Ind.
Brockway Glass Company, Brockway, Penna.
Buck Glass Company, Baltimore, Md.
Carr-Lowrey Glass Company, Baltimore, Md.
Chattanooga Glass Company, Chattanooga, Tenn.
Diamond Glass Company, Royersford, Penna.
Fairmount Glass Works, Inc., Indianapolis, Ind.
Florida Glass Manufacturing Co., Jacksonville, Fla.
Foster-Forbes Glass Co., Marion, Ind.
Gayner Glass Works, Salem, N. J.
Glenshaw Glass Company, Inc., Glehshaw, Penna.
J. T. &.A. Hamilton Co., Pittsburgh, Penna.
Hart Glass Manufacturing Co., Dunkirk, Ind.
Hazel- Atlas Glass Company, Wheeling, W. Va.
Alexander H. Korr & Company, Sand Springs, Okla.
♦Knox Glass Bottle Company, Knox, Penna.
*Knox' Glass Bottle Company, Jackson, Miss.
♦Marienville Glass Company, Marienville, Penna.
♦Metro Glass Bottle Company, Jersey City, N. J.
♦Oil City Glass Company, Oil City,- Penna.
♦Pennsylvania Bottle Company, Sheffield, Penna.
♦Wightman Glass & Bottle Mfg. Co., Parkers Landing, Penna.
Lamb Glass Company, Mt. Vernon, Ohio.
Laurens Glass Company, Laurens, S. Car.
Liberty Glass Company, Sapulpa, Okla.
Maryland Glass Corporation, Baltimore, Md.
Obear-Nester Glass Company, East St. Louis, lU.
Olean Glass Company, Olean, N. Y.
[12] Owens-Illinois Glass Company, Toledo, Ohio.
Pierce Glass Company, Port Allegany, Penna.
F. E. Reed Glass Company, Rochester, N. Y.
Sterling Glass Company, Chicago, 111.
Swindell Brothers, Baltimore, Md.
Thatcher Manufacturing Company, Elmira, N. Y.
Tygart Valley Glass Company, Washington, Penna.
Universal Glass Products Company, Parkersburg, West Va.
T. C, Wheaton Company, Millville, N. J.
companif'. located on the west coast
Glass Containers, Inc., Los Angeles, Calif.
Hazel- Atlas Glass Company of Calif., Oakland, Calif.
Latchford-Marble Glass Company, Los Angeles, Calif.
Maywood Glass Company, Los~Angeles, Calif.
Northwestern Glass Company, Seattle, Wash.
Owens-Illinois Pacific Coast/Co., -3an Francisco, Calif,
[13] Explanation op Glass Container Industry Classifications
The products of the industry are classified in the following groups:
1. NARROW NECK FOOD CONTAINERS
Includes: Catsup, chili sauce, cider (noncarbonated) clam juice, coffee QiQuid),
condiments, cruets, fountain concentrates, grape juice (noncarbonated), logan*
•Consolidated In one table for O. O. A. statistics.
CONCENTRATION OF ECONOMIC POWER
811
berry juice (noncarbonated), orange juice (noncarbonated) , oyster cocktail, pectin,
prune juice (noncarbonated), salad dressing, spices (liquid), syrlip, table saucis,
tomato juice, vinegars.
2. WIDE MOUTH — FOOD CONTAINERS AND JARS
Includes: Anchovies, candies, caviar, celery salt, chop suey (not sauce), colfee.
crushed fruits, horse radish, jams, maraschino cherries, marshmallow cream, uiay.^
onnaise, mince meat, meats, mushrooms (not sauce), mushroom spawn, mustard,
olives, onions, peanut butter, pickles, preserves, relish, salad dressing (w/in jars
only), salt and pepper style shakers (for packers use), sea foods, soups, spaghetti,
sugar, vegetables.
Also includes any other Wide Mouth Jars or containefs which are used by packers
for condiments and food products not specifically mentioned in the group of prod-
ucts herein listed.
3. PRESSED — FOOD CONTAINERS
Includes: Pressed tumblers, but does not include domestic jelly glasses,
4. PRESSURE AND NON-PRESSURE WARE
Includes: Chocolate-milk drinks (beverage style containers), ginger ale, water
(carbonated), water (noncarbonated), sipon bottles, soda, soft drinks (non-
carbonated) .
Special note should be taken that this does not include fruit juices, beer, wines,
cordials, champagne, gin, whiskey, or any kind of alcoholic liquor or beverage.
6. BEER BOTTLES
Includes: All bottles to be used as containers for beer, ale, porter, and all other
alcoholic cereal beverages bottled under carbonation. This not only covers the
generally accepted beer style container but also any other style of container used
for products as explained under this caption.
[14] 6. LIQUOR WARE
Includes: Benedictine, bitters, brandies, champagne, cordials, Creme de
Menthe, fiaska (for alcoholic beverages), gins, rum, vermouth, whiskeys, wines.
Also includes aU alcoholic liquors and beverages except beer, porter, ale and
other alcoholic cereal beverages bottled under carbonation.
7. MEDICINAL AND TOILET WARE
Includes: Acid bottles (not inch 5- and 10-gal. carboys), argyrol, bath salts,
bay rum, brilliantine, capsules, castor oils, chemicals, citrate of magnesia, cod liver
oil, cosmetics, cuticle oil, cuticle remover, deoderants, dentifrice, druggists' presc.
ware, embalming fluid, essential oils, face creams, flavoring extracts, hair tonics,
insecticides, iodine, liniments, lotions, merchurochrome, mouth wash, nail polish,
nursers, perfumes, peroxides, pharmaceuticals, proprietary medicines, pomades,
sachet, serums, shampoos, shaving cream, smelling salts, soaps, spraying machine
jars, sterilizers, tablets, talcum powders, toilet preparations, toilet waters, vase-
lines, witch hazel.
Also included are any other containers manufactured for products not specifi-
cally mentioned in this list which, however, because of their general charact€|r
belong to this group.
8. GENERAL PURPOSE CONTAINERS
. Includes: Ammonias, artists' colors, battery jars, bluings, carboys (5 gal.),
carboys (10 gal.), cement, cleaning fluids, dyes, fire extinguishers, flb&ts, floor
wax, flower pots, glue, inks, linseed oil, mucilages, oil dispensing bottles, oil stove
reservoirs, pantry jars (not packers ware), paints, polishes, refrigerator bottles
(not packers ware), sewing machine oil, shakers (for table use only), shellac, soap
dispensing globes, stain, table cream jars (1 oz. and 2 oz.), turpentine, varnish,
washing fluids.
Includes all other miscellaneous items which cannot be classified in any of the
other eight classifications.
812 CONCENTRATION OF ECONOMIC POWER
9. MILK BOTTLES
Includes: Cottage-cheese jrrs, cream bottles, milk bottles, milk shape liquid
malted milk or chocolate milk Dottles used by dairies.
The following containers should be excluded from the milk-bottle classification:
Narrow neck or soda style bottles used by dairies or soft drink bottlers for liquid
malted milk or chocolate drinks. (See beverage. ) Infants' nursing bottles.
(See medicinals and toilets.) Jars used for malted milk or other milk products in
powdered or granular form. (See wide mouth.) 1-oz. and 2-oz. table-cream jars.
(See general purpose.) Mushroom spawn bottles. (See wide-mouth food.)
[15] 10. DOMESTIC FRUIT JARS
To include all wide-mouth containers to be used for home preserving of fruits
and vegetables. Does not include packers ware for packaging commercial
products and which can be reused in the home for domestic purposes after the
package has been emptied.
11, DOMESTIC JELLY GLASSES
To include all jelly glasses to be used for home packing. Does not include
packers ware for packaging commercial products.
[16] Relative Importance of Each Class of Product and The Companies
Producing Each Class op Product
On the following chart we show the relative importance of each class of product
to the industry's total shipments. Alternate years have been taken, starting
with the year 1929. Eastern and Western classifications are shown on separate
charts.
Following the charts on product classification we show the companies that
produced and shipped each class of product during 1937.
Pressed ware companies actually should include the l^^ibbey Glass Company,
Corning Glass Works, Federal Glass Company, Bartlett-Collins Company, and
the United States Glass Company, who produce this general classification of
product, either pressed, or pressed and blown. Their figures are not included
because it is impossible to differentiate between tumblers used as containers and
tumblers used for drinking glasses.
It should be noted that Knox Glass Associates on the second chart represents
the following individual Companies:
Knox Glass Bottle Company, Knox, Pa.
Knox Glass Bottle Company, Jackson, Miss.
Marienville Glass Company, Marienville, Pa.
Metro Glass Bottle Company, Jersey City, N. J.
Oil City Glass Company, Oil City, Pa.
Pennsylvania Bottle Company, Sheffield, Pa.
Wightman Glass & Bottle Mfg. Co., Parkers Landing, Pa.
Companies in the East that ship West, are not included in the chart of com-
panies producing in the West. Many companies ship West, but Western com-
panies do not ship East.
CONCENTRATION OF ECONOMIC POWER
813
(17] SHIPMENTS BY CLASSES OF WARE, SHOWING RELATIVE IMPORTANCE OF EACH,
EAST OF ROCKY MOUNTAINS
Total Indus-
try
32, 163, 053
Narrow Neck Food
Containers
Wide Mouth Food
Containers i Jars.
Pressed Food Ware
Pressure & Non-
Pressure Ware
Beer Bcfttles
Liquor Ware
Medicinal & Toilet
Ware
General Purpose
Containers
Milk Bottles
Domestic Fruit Jars
Domestic Jelly
Glasses
5,322,881
1, 243, 655
4, 564, 853
1, 882. 932
2, 406, 08
1, 165, 9»
Per-
cent
8.20
16.55
5.85
7.48
3.63
30, 031, 566
5,447,541
77.4, 403
3,558,868
11,696,196
1, 794, 593
2, 072, 094
2,174,041
Per-
cent
18.14
2.58
5.97
6.90
7.24
.37
5, 969,
470.
1, 475,
4, 184,
U, 957, 265
2, 268, 928
1, 769, 968
1, 027, 884
Per-
cent
2, 775, ;
7, 064, ]
1, 259, 1
1,211,:
5, 244, 4
2, 141,
1,941,
1, 273,
Per-
cent
8, 517.
433.
2,832,
3,809,
2, 568,
2, 419,
1,201,
Per-
cent
6.05
8.14
15.80
5.49
6.17
2.56
[18] SHIPMENTS BY CLASSES OF WARE, SHOWING RELATIVE IMPORTANCE OFBACH,
WEST COAST GROUP
Total Indus-
try
1, 602, 843
100.00
1, 481, 942
100.00
1, 774, 387
100.00
2, 219, 682
100.00
3,364,995
100.00
Narrow Neck Food
Containers -
Wide Mouth Food
Containers & Jars.
Milk Bottles, Do-
mestic Fruit Jars,
Pressed Food
Ware
183, 930
519, 98C
1,56, 970
263, 672
11.48
32.44
9.79
16.45
120, 946
510, 290
187, 270
132,910
8.16
34.43
12.64
8.97
192, 849
466, 952
158, 819
55, 304
308, 462
10.87
26.32
8.95
3.12
17.38
30,, ao.
608, 483
197, 038
68,003
123, 954
13.89
27.41
8.88
3.06
5.58
427, 436
814, 407
238,066
234, 082
503, 971
209, 658
12.70
24.20
7.07
Pressure & Non-
Pressure Ware...
6.96
14.98
6.23
Liquor Ware
416, 896
466, 107
30,901
18.78
21.00
1.40
327,75l| 9.74
Medicinal & Toilet
Ware
428, 019
50, 2G6
20.70
3.14
452, 929
77, 597
30.56
5.24
517, 600
74, 401
29.17
4.19
674, 690
34, 934
17.08
General Purpose
Containers
1.04
[19] Companies Producing and Shipping Each Class of Product During
1937
EASTERN manufacturers
Narrow Neck Bottle Companies:
Anchor-Hocking Glass Corporation.
Ball Brothers Company.
Brockway Glass Company.
Chattanooga Glass Company.
Diamond Glass Company.
Fairmount Glass Works, Inc.
Foster-Forbes Glass Company.
Glenshaw Glass Company.
Hart Glass Manufacturing Company.
Hazel-Atlas Glass Company.
Knox Glass Associates, Inc.
Maryland Glass Corporation.
Obear-Nester Glass Company.
Owens-Illinois Glass Company.
F. E, Reed Glass Company.
Sterling Glass Company.
^l^ CONCENTRATION OF ECONOMIC POWER
Thatcher Manufacturing Company (Glean).
Three Rivers Glass Company.
Tvgart Valley Glass Company.
Whitall-Tatum Company (Armstrong Cork).
Pressed Ware Companies:
Anchor-Hocking Glass Corporation.
Hazel-Atlas Glass Company.
Wide Mouth Bottle Companies:
Anchor-Hocking Glass Corporation.
Ball Brothers Company.
Brockway Glass Company.
Buck Glass Company.
Carr-Lowrey Glass Company.
Chattanooga Glass Company.
Diamond Glass Company.
Fairmount Glass Works, Inc.
Florida Glass Manufacturing Company.
Foster-Forbes Glass Company.
Hart Glass Manufacturing Company.
Hazel-Atlas Glass Company.
Knox Glass Associates, Inc.
Laurens Glass Works, Inc.
Maryland Glass Corporation.
Owens-Illinois Glass Company.
[20] F. E. Reed Glass Company.
Sterling Glass Company.
Thatcher Manufacturing Co. (Olean).
'Three Rivers Glass Company.
Tygart Valley Glass Company.
Whitall-Tatum Company (Armstrong Cork).
Pressure & Nonpressure Ware Containers:
Anchor-Hocking Glass Corporation.
Ball Brothers Company.
Buck Glass Company.
Chattanooga Glass Company.
Diamond Glass Company.
Fairmount Glass Works, Inc.
Florida Glass Manufacturing Company.
Glenshaw Glass Company.
J. T. & A. Hamilton Company.
Hazel-Atlas Glass Company.
Knox Glass Associates, Inc.
Laurens Glass Works, Inc.
Maryland Glass Corporation.
Obear-Nester Glass Company.
Owens-Illinois Glass Company.
Pierce Glass Company.
F. E. Reed Glass Company.
Three Rivers Glass Company.
Whitall-Tatum Company (Armstrong Cork) .
Beer Bottle Companies:
Anchor-Hocking Glass Corporation.
Ball Brothers Company.
Brockway Glass Company.
Fairmount Glass Works, Inc.
Florida Glass Manufacturing Company.
Glenshaw Glass Company.
Hart Glass Manufacturing Company.
Hazel-Atlas Glass Company.
Knox Glass Associates, Inc.
Maryland Glass Corporation.
Obear-Nester Glass Company.
Owens-Illinois Glass Company.
Pierce Glass Company.
F. E. Reed Glass Company.
Swindell Brothers, Inc.
Three Rivers Glass Company.
Wbitall-Tatum Company (Armstrong Cork).
CONCENTRATION OF ECONOMIC POWER ^15
[21] Liquor Ware Companies:
Anchor-Hocking Glass Corporation.
Ball Brothers Company.
Brockway Glass Company.
Buck Glass Company.
Carr-Lowrey Glass Company.
Diamond Glass Company.
Fairmount Glass Works, Inc.
Foster-Forbes Glass Company.
Glenshaw Glass Company.
J. T. & A. Hamilton Company.
Hart Glass Manufacturing Company.
Hazel-Atlas Glass Company.
Knox Glass Associates, Inc.
Maryland Glass Corporation.
Obear-Nester Glass Company.
Owens-Illinois Glass Company.
Pierce Glass Company.
F. E. Reed Glass Company.
Sterling Glass Company.
Swindell Brothers, Inc.
Thatcher Manufacturing Co. (Glean).
Whitall-Tatum Company (Armstrong Cork\
Medicinal & Toilet Preparation Companies:
Anchor-Hocking Glass Corporation.
Ball Brothers Company.
Buck Glass Comjmny.
Brockway Glass Company.
Carr-Lowrey Glass Company.
Chattanooga Glass Company.
Diamond Glass Com])any.
Fairmount Glass Works, Inc.
Foster-Forbes Glass Company.
J. T. & A. Hamilton Company.
Hart Glass Manufacturing Company.
Hazel- Atlas Glass Company.
Knox Glass Associates, Inc.
Maryland Glass Corporation.
Obear-Ncster Glass Company.
Owens-Illinois Glass Company.
Pierce Gla.'is Company.
F. E. Reed Glass Company.
Swindell Brothers, Inc.
Three Rivers Glass Company.
Tygart Valley Glass Company.
Whitall-Tatum Company (Armstrong Cork).
(22] General Purpose Container Companies:
Anchor-Hocking Glass Corporation.
Ball Brothers Company.
Brockway Glass Company.
Buck Glass Company.
Carr-Lowrey Glass Company.
Diamond Glass Company.
Fairmount Glass Works, Inc.
Florida Glass Manufacturing Company.
Gayner Glass Works.
Glenshaw Glass Company.
Hart Gla.ss Manufacturing Conijiany.
Hazel-Atlas Glass Company.
Knox Glass Associates, Inc.
Maryland Glass Corporation.
Obear-Nester Glass Company.
Owens-Illinois Glass Company.
Pierce Glass Company.
F. E. Reed Glass Company.
Sterling Glass Company.
Three Rivers Glass Company.
Tygart Valley Glass Company.
Whitall-Tatum Company (Armstrong Cork).
glQ CONCENTRATION OF ECONOMIC POWER
Milk Bottle Companies:
Buck Glass Company.
Florida Glass Manufacturing Company.
J. T. & A. Hamilton Company.
Lamb Glass Company.
Liberty Glass Company.
Owens-Illiuois Glass Company.
F. E. Reed Glass Company.
Thatcher Manufacturing Company,
Universal Glass Products Company.
Fruit Jar Companies:
Ball Brothers Company.
Hazel-Atlas Glass Company.
Owens-Illinois Glass Company.
Alexander H. Kerr & Company.
F. E. Reed Glass Company.
Jelly Glass Companies:
Ball Brothers Company.
Hazel-Atlas Glass Company.
Alexander H. Kerr & Company.
[23] Companies Producing and Shipping'Each].Class of Prodvcts During 1937
west coast manufacturers
Narrow Neck Bottle Companies:
Glass Containers, Inc.
Hazel-Atlas Glass Company of Calif.
Latchford Marble Glass Company.
Maywood Glass Company.
Northwestern Glass Company.
Owens-Illinois Pacific Coast Co,
Wide Mouth Bottle Companies:
Glass Containers, Inc.
Hazel-Atlas Glass Company of Calif.
Latchford Marble Glass Company,
Maywood Glass Company.
Norhwestern Glass Company.
Owens-Illinois Pacific Coast Co.
Milk Bottles, Fruit & Jelly Glasses & PressedFcod Ware:
Hazel- Atlas Glass Company of Calif.
Owens-Illinois Pacific Coast Co.
.Pressurj & Nonpressure Ware:
Glass Containers, Inc.
Hazel-Atlas Glass Company of Calif.
Latchford Marble Glass Company.
Northwestern Glass Company.
Owens-Illinois Pacific Coast Co.
'i(iT Bottle Companies:
Glass Containers, Inc.
Hazel- Atlas Glass Company of Calif.
Latchford Marble Glass Company.
Northwestern Glass Company.
0\^-en£-Illinois Pacific Coast Co.
:'>4] Win-- Bottle Companies:
Glass Containers, Inc.
I':i:'..-l-ALlas Glass Company of Calif.
L.'d^'hford Marble Glass Company.
Mayw.jod Glass Company.
Northwestern Glass Company.
Owens-Illinois Pacific Coast Co.
Liquor Ware Companies:
Glass Containers, Inc.
Haze! .^tlas Glass Company of Calif.
latchford Marble Glass Company.
Maywood Gias.s Company.
I^crthwcstern Glass Company.
Q-wen.s-Illincis Pacific Coast Co.
CONCENTRATION OF ECONOMIC POWER gl7
Medicinal & Toilet Preparation Companies:
Glass Containers, Inc.
Hazel-Atlas Glass Company of Calif.
Latchford Marble Glass Company.
Maywood Glass Company.
Northwestern Glass Company.
Owens-Illinois Pacific Coast Co.
General Purpose Container Companies:
Glass Containers, Inc.
Hazel- Atlas Glass Company of Calif.
Maywood Glass Company.
Owens-Illinois Pacific Coast Co.
[25] Relationship of Shipments to Capacity Since 1928
The following chart shows the relationship of shipments to capacity in total
number of gross since 1928.
shipments
Shipments in gross, rather than production, have been selected for this study
because production records are not available prior to 1932. It was found, by a
study of the figures since 1932, for which production records are available, that
shipments quite accurately reflect the production within a fiscal year period.
capacity
The capacity for tlie industry has been computed by using a mathematical
formula for each plant. This capacity is divided into active and potential.
Active capacity is considered as capacity actually operating, or capable of operat-
ing within a period of 30 days. Potential capacity is considered as capacity where
major repairs are necessary, and which cannot be put into operation within the
30-day limit. On tlie chart, the potential capacity line is the total of active capac-
ity, plus potential capacity, and equals the total capacity for the industry.
The melting area of a glass furnace determines quite accurately the amount of '
glass that can be produced by the glass furnace each day. In 1928 good operating
furnaces were producing a ton of packed glass from 12 sq. ft. of melting area.
Through improvement in tank design, better methods of firing, and generally
improved efficiency in tank operation, this has been reduced so that currently
good operating tanks are producing a ton of packed glass from 8 sq. ft. of melting
area. This change has not been abrupt, but rather has been a steady and constant
improvement each year.
It may be noted that some furnaces in the industry have, and are obtaining, a
better performance than this, while other furnaces are not obtaining this perform-
ance. An average performance, would be impractical to obtain because many
furnaces are not called upon for capacity operation. By this we mean that
business is not sufl[icient to operate all of the equipment on the furnace, or to in
many tases justify the expenditure for new and improved equipment.
The operation of many tanks in the industry proves that if the business were
available, all tanks could meet the current capacity figure of a ton of glass for 8
sq. ft. of melting area.
The chart reflects the improvement yearly in the eflaciency of glass furnaces
from a ton of glass for 12 sq. ft. of melting area, to a ton of glass for 8 sq. ft. of
melting area.
The working days per year are based on 280 days. This is arrived at by
taking the total of 365 days, less 52 Sundays, less 5 [26] holidays, and less 28 work-
ing days for tank repairs, leaving a net of 280 working days per year. The opera-
tion is continuous, and the working day is 24 hours. While many glass furnaces
operate for a longer period than the 280 days, it is conservative to calculate
capacity on this basis. The number of gross for each company is computed by
using the average weight bottle produced by that company.
actual perfop.mance during 1937
FoUoNving the charts on shipments and capacity, we show by tabulation the
performance of individual companies against this capacit}' figure for the year
1937, and for the month ef June, which was the peak production month during
the year.
818
CONCENTRATION OF ECONOMIC POWER
In tlie East, companies showing a low percentage of operation are companies
that have specialized in certain classes of product, and have maintained a large
capacity for peak periods of operation.
Some of these classes have become smaller, and others have shown very little
growth, certainly not in proportion to the increase in capacity. (Refer to chart
on shipments by classes of ware.) While the majority of these companies have
started producing additional classes of product during the last two or three
years, this additional production has not become sufficient to bring their opera-
tion near the industry average.
In the West the growth of business and of productive capacity have been very
rapid. Construction of new capacity has not been in direct relationship to the
increase in business. In 1936-37 two of the medium and small companies added
new furnaces which more than doubled their capacity. Other companies are
adding to their capacity in 1938.
Companies in the industry have been classified as large, medium, and small;
192<S was used for this classification. Large companies are defined as those that
shipped 1,000,000 gross or more in 1928. Medium-sized companies are defined
as those that shipped between 200,000 and 1,000,000 gross in 1928. Small
companies arc defined as those that shipped less than 200,000 gross in 1928.
Individual company identity has not been disclosed because of the confidential
nature of the information.
f2Ql PERCENTAGE OPERATION POUNDS PRODUCED TO CAPACITY FOR 1937 (CA-
PACITY BASED ON 8 SQUARE FEET OF ACTIVE MELTING AREA PER TON PACKED)
;aST OF ROCKY MOUNTAINS
Total Industry...
Large Companies:
3....
4 -
5
Group percentage
Mc<lium Conipanie.s:
6
7
8
9 -.
10
n
12
13
14
15
16
17
Group percentage.
Year
June
1937
1937
71.2
80.9
78.8
89.9
73.9
90.4
78.7
95.9
38.6
42 3
48.6
53.0
69.8
SO. 8
100.4
89 1
60.0
f.7.4
80.5
5.5. 6
tii.n
71.9
. 75.3
SS. 1
102.0
100. 1
7.5.6
85. 5
78.3
71.1
100. 6
123.5
68 1
78.1
89.3
115.1
70.9
92.5
81.7
85.9
Small Companies:
18
19
20
21
22..., • -.
23...!
Group percentage.
Ynar
1937
122.
64.7
32.3
92.9
139.4
2.S.5
4.5.9
55.0
39.6
59.8
44.3
76.6
04. 0
107.9
111.6
169.2
69.3
26.4
109.1
141.5
44.1
4.5.9
67.5
43.7
04. 0
47.2
87.2
73.8
[30] PERCENTAGE OPERATION POUNDS PRODUCED TO CAPACITiT FOR 1937 (CA-
PACITY BASED ON 8 SQUARE FEET OF ACTIVE MELTING AREA PER TON PACKEl,^)
WEST COAST
Total Industry
84.9
103.0
Medium & Small Companies:
70.5
8t. 7
3'i. 2
51.1
lim r
Large Companies:
.«7.7
124.5
109.7
144.1
W-1
.s:{. 4
W-5
33 0
AV-6
es. t
Group percentage
Group percentage
95.3
116 8
63.2
74.4
[31]
CONCENTRATION OF ECONOMIC POWER
Progress of Individual Companies Since 1928
819
iven a number so that confident!
For this chart, individual companies are gi
information will not be disclosed.
Companies in the industry have been classified as large, medium, and small;
1928 was used for this classification. Large companies are defined as those that
shipped 1,000,000 gross or more in 1928. Medium-sized companies are defined
as those that shipped between 200,000 and 1,000,000 gross in 1928. Small
companies are defined as those that shipped less than 200,000 gross in 1928.
1
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Shipments for each year since 1928 are related to the base year. The percent-
age of increase or decrease-from this base year is shown on the chart. With this
percentage as an index number, the progress of the individual companies is clearly
shown.
For companies that have started since 1028, the second year of operation was
taken as the base.
820
CONCENTRATION OF ECONOMIC POWER
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CONCENTRATION OF ECONOMIC POWER
821
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822
CONCENTRATION OB^ ECONOMIC POWER
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CONCENTRATION OF ECONOMIC POWER
Trend of Prices in the Glass Container Industry
823
134]
The following chart shows the trend of prices in the Glass Container Industry
as reported by the Bureau of Census. We believe this quite accurately reflects
the general trend, though of course it does not permit an analysis of this trend by
classification of product. The average size bottle during this period has re-
mained practically constant, the maximum variation in weight being four pounds
per gross. The average weight in 1932, the year prior to the manufacture of
liquor bottles and beer bottles, showed an average weight per gross of 95.3 pounds.
In 1937, including liquor and beer bottles, the average weight was 95.9 pounds per
gross.
It should be noted that the popular demand for fancy shapes and designs has
added materially to the value of certain lines. It should also be noted that within
recent years many bottles are decorated with a permanent ceramic label or design,
which has added materially to the value of the bottle. It should also be noted
45C
40C
AVERAGE PRICE TREND
iflp"; Tn IQ17
3 5C
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i
SOURCE -
U& CENSt
S OF MANU
FACTURES
0
that in the earlier periods much of the glass in certain lines was shipped in bulk, or
crates, with the customer providing his own package. At the present time these
packages are supplied by the glass manufacturer. These added costs and services
cannot be reflected in an over-all figure such as that given by the Bureau of
Census.
REUSE containers
There has been considerable public comment about the cost of beer bottles and
milk bottles. The cost of these" bottles per trip to the brewery, and to the dairy,
may be stated as follows:
In 1935 the accounting firm of Touche, Niven & Co. made a study of costs for
four representative breweries. Their report showed that the cost of beer bottles,
and beer bottle cases, amounted to 1 and 77/100 cents per case of 24 bottles. This
is a cost of $0.00074 or seventy-four thousandths of a cent, for the use of each
bottle and case per trip.
824
CONCENTRATION OF ECONOMIC POWER
From a study made by the Department of Agriculture, milk bottles make an
average of 34 trips. For the year 1937 the Census figures indicated a cost for milk
bottles of $0.33 per gross. This indicates that the cost of milk bottles to the dairy
is $0.00109 per bottle, or approximately 1/10 of a cent for each trip that a milk
bottle makes.
[36]
Employment and Wages
The following charts showing employment and pay roll data quite clearly set
forth the labor hi.^tory of the industry since 1929.
We have related this labor data to volume of production, and to value of prod-
uct, to measure employment during the period.
For illustration, in 1929, 27Ji!o employees produced 1,000 gross of bottles in one
week. In 1937, 29^1o employees were required to produce 1,000 gross of bottles
in one week.
The average labor cost per gross has increased approximately 13% during this
period, while the average value of product has decreased approximately 13%.
Employment in the industry has been continuous, and without noted interrup-
tions. Labor turn-over has been small, and few employees ever leave the indus-
try. It is significant that the great majority of supervisors and executives have
come from among the employees in the industry.
Labor in the industry has been organized for a great many years. Labor rela-
tions have been friendly and good. During this nine-year period strikes not
authorized by the Union closed two individual plants for approximately one week.
The Union authorized one strike that closed one plant approximately 3 days.
137] GLASS-CONTAINER INDUSTRY-EMPLOYMENT AND PAY-ROLL DATA-TOTAL
INDUSTRY EAST AND WEST COAST, 1929-1938
1929
1930
1931
1932
1933
17, 173
823
17,390
781
16, 493
796
14, 713
786
14,919
742
Total Employees.
17, 996
18, 171
17, 289
15, 499
15, 661
429. 722
17, 966
443. 701
16, 204
400,442
16, 668
326, 808
16, 127
296, 569
Clerical Pavroll ($) Per Week
14,001
Total Payroll ($) Per Week
447,688
459, 905
417, 110
342. 935
310,570
859, 607
34, 668
887, 640
32. 813
805, 408
33, 489
687. 559
32, 806
689. 318
30,428
Total Hours Per Week
894, 275
49.7
50.1
24.88
I 649, 344
27.7
.689
920, 453
50.6
50.0
25.31
1614,537
29.6
.748
838, 897
48.5
49.7
24.13
1 606, 029
28.5
720. 365
46.5
47.6
22.13
610. 887
30.3
.671
719. 746
4fi.O
43.1
Averaee W^ee Per Week Per Employee
19.83
645, 129
24.3
A^era<'e Payroll Dollars Per Gross
.481
1934
1935
1936
1937
1938
Factory Employees ..
21, 647
1,080
23.080
1.299
25.293
1.571
28,231
1,736
26. 103
Clerical Employees .-
1.617
Total Employees
22,727
24. 379
26, 864
29.967
27. 720
Factory Payroll ($) Per Week
428, 147
23, 929
481,950
28, 821
572. 804
65, 038
729. 844
61, 966
708. 504
Clerical Payroll ($) Per Week
57,804
Total Pa>Ton ($) Per Week
452, 076
510, 771
627. 842
791. 810
766. 308
812, 374
42, 499
849. 249
50, 395
1, 031, 866
63, 3S7
1. 157, 832
70, 078
1.012,611
65. 501
Total Hours Per Week. . .
52.9
19.89
688, 129
3.3.0
.657
899. 644
36.9
56.8
20.95
745,073
32.7
.686
1, 095. 253
40.8
57.3
23.37
871,028
30.8
.721
1.227.910
41,0
64.5
26.42
1.017.977
29.4
.778
1.078.112
Averaee Hours Per Week Per Employee
38.9
Average Rate Per Hour Per Employee
71.1
27.64
« 800, 525
Average Employees Per 1,000 Gross
34.6
Average Payroll Dollars Per Gross
.957
1 1929-31 Shipments, 1932-38 Production.
• Based on 6 Months' Production.
CONCENTRATION OF ECONOMIC POWER
825
T *
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r "
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8-
"T":
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826
CONCENTRATION OF ECONOMIC POWER
r
TREND OF EMPLOYMENT AND PRODUCTION
TOTAL INDUSTRY = EAST AMD WEST COAST
1929 = 100 /^\
//
\~'
/
/
/
/
\
130
y
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EMPLOYM
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l»29 1930 1931 1932 1933 1934 I93S 1936 1937 193$
CONCENTRATION OF ECONOMIC POWER §27
ENTIRE INDUSTRY— EAST
)AST
[1929=100]
[40] AVERAGE VALUE PER GR0SS RELATED TO WAGES
AND WEST COAST
1929
1930
1931
1932
1933
1934
1935
1936
1937
1938
Average Value
Per Gross '...
3.41
100.0
.689
100.0
3.30
96.8
.688
99.9
0.671
97.4
2.85
83.6
.481
69.8
0,657
3.04
89.1
.686
.99.6
2.96
86.8
.778
112.9
%
Average Pay-
roll Dollars
per Gross
0.748
108.6
0.721
104.6
' 0. 057
138 4
1 U. S. Census Figures.
« Based on 6 month's production.
[42]
The Glass Container Association Activities
1. transportation
Througli the Association, transportation of raw materials, containers, and
packaged food products have been studied in detail. This has resulted in an
equitable adjustment of freight rates, and a relationship of practically all freight
rates in the industry to a definite railroad classification basis. The Association
has supplied the railroad classification committees with information, also has
represented the industry before the Interstate Commerce Commission.
The Association also, by presentation of facts to the railroads, and to the Inter-
state Commerce Commission, was instrumental in getting an equitable adjustment
of freight rates on foods packed in glass.
The Association is recognized by the railroads, by the Classification Committee,
and by the Interstate Commerce Commission as the representative of the Glass
Container Industry. This relationship has resulted in a fair basis of rates equi-
tably adjusted for every member of the industry.
2. standardization
Through the Association, finishes on glass bottles have been standardized and
improved. It is now possible for manufacturers of glass, and manufacturers of
caps and closures, to sell their products freely with the assurance that the package
will be satisfactorily closed, and that there will be no difficulty for the packer, and
no spoilage of product. This has been perfected so well that it is exceedingly
rare that we have a complaint on spoilage even though the closures and glass
are generally made by different manufacturers. Through this Committee,
closures and finishes on glass have also been tremendously improved.
The Industry, through the Association, is now working on the standardization
of many types of containers. The purpose of this effort is to redesign many o£
our standard lines so that:
(1) They can be produced more efl^ciently and at lower cost.
(2) .They will be more acceptable to consumers. We believe that better
standard designs at lower cost will attract more consumers to purchase
glass packed products.
(3) The standard containers can be produced on all types of equipment
existing in the industry.
[43] 3. labor surveys
The Association has made detailed labor surveys yearly showing hours of work,
rates of pay, and working conditions. These have been very helpful in assisting
the industry to develop better labor standards, and to clean up any bad conditions
that existed in the industry.
4. STATISTICS
The Association has kept its members fully informed on factual data on produc-
tion, shipments, capacity, and all other statistical information that will assist the
individual manufacturer in operating his business intelligently.
828
CONCENTRATION OF ECONOMIC POWER
5. TREASURY DEPARTMENT REGULATIONS
The Association has cooperated with the Alcohol Tax Unit of the Treasury De-
partment in developing and policing regulations governing the marking of liquor
Dottles. This cooperation has meant that the regulations have worked smoothly,
and without a single violation on the part of the glass manufacturers.
^
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6. TECHNICAL RESEARCH ON GLASS PACKED PRODUCTS
The Association carried practically all of the technical j).ickaging research until
this work was taken over by members of the industry. This work was primarily
the development of commercial packing- in glass. It involved the development of
equipment, and the development of a process fur packing many of our food
products. Since 1931 this work has largely been taken over by members of the
CONCENTRATION OP ECONOMIC POWER 829
industry, though the Association continues to supervise special projects given to
commercial laboratories on particular, products which we believe can be satisfac-
torily packed in glass, or on which we believe the method of packing can be
improved,
7. INDUSTRY TECHNICAL RESEARCH
Through the Association, the industry has developed a standard method for the
testing of commercial glass. This has involved the improvement and the develop-
ment of equipment, as well as the perfection of testing methods. This testing
procedure enables all glass manufacturers to test containers on a uniform basis, and
to be sure that all glass going to market is of good commercial quality. We
believe that it will also have the effect of improving production methods, and will
elevate the standards of commercial glassware.
8. ADVERTISING AND TRADE PROMOTION
Through the Association the industry has carried on an extensive advertising and
promotion program. This has no doubt had the effect of increasing the use of
glass packed products, and of [44] encouraging many packers to adopt the glass
container as a package. This vv^ork has involved not only advertising but extensive
market research. It also involves a Glass Kitchen which the industry sponsors to
develop new foods, and new combinations of foods packed in glass.
9. TARIFF
The Association has represented the industry on all matters concerning tariflf.
This has included information supplied to the Appraiser's Stores, witnesses for the
TarilT Court, facts for the Tariff Commission, and presentation of information to
the Committee negotiating reciprocal agreements.
10. LAWSUITS INVOLVING BROKEN BOTTLES
A very considerable racket has grown up in claims involving broken bottles.
Upon investigation it was found thai probably 95% of these cases were fraudulent.
The Association, through legal counsel and through technical experts, has been
al'l'^ to clean up the greater part of this racket. On legitimate cases the Associa-
li.Hi, through counsel and experts, has advised satiisfactory settlement.
11. COSTS
The Association, after consultation with cost experts in the industry, has
developed metliods of cost finding wliich are probably the best available. These
methods have been offered to the industry for voluntary acceptance.
12. The Association has represented the industry on matters concerning laws
or regulations eitlicr municipal, stale, or federal. For illustration. State Depart-
ments on Weigh IS and Measures, Federal Pure -Food and Drugs Act, Wage and
Hour Bill, National Recovery Administration, etc. The Association has also
kept the members informed on the operation of these regulations and laws, and to
the best of onr aiMlity have advised the industry on proper conduct under them.
The following memorandum was submitted by Mr. Lawrence C.
Kingsland under date of February 21, 1939, and was subsequently
entered in the record as "Exhibit No. 431." It is printed at this
point in connection with testimony herein, see text page 636.
330 CONCENTRATION OF ECONOMIC POWER
Exhibit No. 431
Memorandum of Sijggested Changes in the Patent Laws
Telephone, Chestnut 6191
Lawrence C. Kingsland
counsellor at law
705 Olive Street
St. Louis, Missouri, February 21, 1939.
Edmund C. Rogers
Estill E. EzeJl
Honorable Joseph C. O'Mahoney,
Chairman, Temporary National Economic Committee,
Washington, D. C.
Dear Sir: During my testimony before the Temporary National Economic
Committee, as appears on page 534 of the Preliminary Print of the transcript of
that testimony, I was requested by Senator King to send the Committee a mem-
orandum setting forth my views as to what changes should be made in the present
patent laws. At the same session, Honorable Thurman Arnold requested a mem-
orandum in regard to the relationship of the patent laws and the anti-trust laws.
This letter is in response to the request of the Committee, voiced by Senator
King, as the subject inquired about by Mr. Arnold will be separately treated in
another memorandum to the Anti-Trust Division of the Department of Justice.
At the outset, it is my view that it may be taken as granted that the funda-
mentals of our patent system are sound, and that, therefore, no changes should
be made in the general policy expressed in the patent legislation. Therefore,
any proposals in connection with the patent laws, ^pso facto', take the direction of
curing such evils as may e.xist in the administration of those laws. Certain evils
are recognized as existing in the patent system in'the form of abuse of laws that,
in themselves, are not objectionable.
In a general way, the evils that do exist reside in the protection of monopolies
beyond those reasonable monopolies that are the midway point between destruc-
tion of the rights of the public on the one hand, by absolutely uncontrolled patent
monopolies, and utterly emasculated monopolies on the other hand that are
insufficiently Verile to stimulate inventive effort. In other words, that inter-
mediate monopoly, which is the desideratum of the statute, is one th^t at once
adequately promotes the arts and useful sciences and yet protects the public
by assuring to it its share of the contract which is the proper enjoyment of the
subject matter of patents.
At the outset, and after a full consideration of the subject, I am definitely
opposed to the compulsory license. I feel that a compulsory license radically
changes the effectiveness of the patent system under which American industry
has been fostered and enlarged.
My first conclusion, therefore, is that this proposal does not present a solution
of the problem and' would be a radical change that would be detrimental to the
general economy of the country that has been based upon the legal monopolistic
principle of the absolute enjoyment for the limited period of years provided by
the patent monopoly.
I have further reached the definite conclusion that a shortening of the term of
the patent monopoly, except -as it may be influenced by the initiation of the
period of the monopoly by the application date, which I shall discuss herein-
after, should not be changed. I am convinced that the 17-year term of a patent
is only a reasonable reward to the patentee for the disclosure of the invention to
the i)ublic.
Tlicre are, however, several manifestations of the distortion of the time factor.
Inventions, when disclo-cd, ordinarily go into public use and it is a clear aljiise
of the rights of the public for industry extraneously to develop around the public
di.sc Insure, only to be circumscribed after years of evolution, to which evolution
the minds of the entire field have contributed improvements, by issuance at a
late iliite of a basic patent dominating not only the original idea, but also the
imj)ri)vcments. Under the later basic patent all are compelled to contribute for
an interval of 17 additional years, during which time many of the improvement
CONCENTRATION OF ECONOMIC POWER 831
patents may, in themselves, have expired. The owner of the improvement
patents thus effectively loses their value, which should exist at least for the
interval during which their lives continued after the expiration of the basic
patent. In order to capitalize upon the improvement patents, their owner is
virtually compelled to turn only to the owner of the fundamental patents and to
deal with him on his own terms.
Furthermore, without injecting subsequent patents into the matter, a user
who employs the published inventions during the interim years, perhaps com-
pletely innocent of the existence of any pending applications, suddenly finds
himself ejected from a business he has built up after years of effort to a point
where to stop it may mean destruction of the user's future business possibilities.
The remedy for this situation, in a measure would be accomplished, in my
judgment, by a grant of the patent for a term of 17 years, or for the balance of
a 20-year term dating from the application date, whichever is the shorter. This
so-called "20-year term" proposal would avoid an unseasonable delay in the issue
of a basic patent with a disturbing effect on industry, in some instances, many
years after the application was filed. A procedure whereby a patent may issue
on an application, in some cases as long as twenty to twenty-five years or more
after tlie filing of an application, is definitely wrong; and, while it is true that
there are not numerous instances of periods of twenty-years or more between
the filing of the application and the issuance of the patent, there are sufficient
of thein to have a serious detrimental effect. Therefore, I would strongly favor
the so-called "20-3'ear term" proposal.
But, in adopting such a proposal, it must be recognized that certain injustices
to the inventor may occur unless provision is made for reducing the normal prose-
cution of an application in all instances, in the Patent Ofl^ce. The present re-
quirement, that an applicant must respond to a Patent Office action withiti six
months, has a tendency, so far as that prosecution is linder the control of the
apj)licant, to reduce the time of the pendency of the application. But the re-
duction in the time for the applicant to act upon the application alone does not
solve the difiiculty, as the historical facts show that the reduction of this period
from two years to one year and finally to six months does not prevent, in some in-
stances, a long delay between the filing of the application and the issue of the
patent.
I feel that there would not be any injustice to an applicant if the period was
further reduced from the present six months period to a three months' period,
providing there was a reciprocal provision that the Patent Office response be
limited to a corresponding period. In many cases the Patent Office actions occur
within a three months' period, whereas, in other instances, longer delays than six
months in the Patent Office exist. I have no doubt with the present personnel
of the Patent Office that the application work is handled as expeditiously as
possible, but there is no question that the period of prosecution in many instances
is increased by reason of delayed actions by the Patent Office itself.
Without doubt, the interference proceeding in its present complicated form is
the major cause for delay in prosecution of applications beyond a reasonable
period of pendency. Numerous suggestions have been made with respect to a
complete revision of the interference proceeding. It is an extremely difficult
problem to solve.
There have been several methods of approach suggested:
1. The total abolishment of interferences;
2. A substitution of an opposition practice; and
3. A simplification of the present interference proceeding.
It is my view that the first solution is the only one that will effectively reduce
the delay in the issue of the patent, but there remains the question as to whether
this tlicory could be applied in practice without working an injustice in some
instances.
Under this solution the patent would be issued to the first applicant; but some
provision should be made for priority determination between a diligent applicant
and the issued patent, lest injustices arise to the applicant.
The present interference practice, that depends upon depositions found so
unsatisfactory as to become the exception in equity cases twenty-five years ago;
and ui)on depositions of scattered witnesses; and with appeals to the Patent
Office Board and even to the courts under Revised Statutes §§ 4911 and 4915,
only then to result in inconclusive opinions short of res adjudicata and hence
subject to retrial in the courts in later litigation, is extremely costly.
Since the statute now provides for interferences in the district courts by way of
appeal under Revised Statute § 4915, as de novo trials, and original actions between
832 CONCENTRATION OF ECONOMIC POWER
interfering patents under Revised Statutes, § 4918, a similar procedure could be
adopted in all interferences without introducing a judicial novelty.
I, therefore, suggest that interferences should, under restricted circumstances,
be allowed, but determined by the District Courts in the jurisdiction of one of
the parties. This cuts away the interference practice from the Patent Office,
with its three potential reviews on appeal, and sends it at once to a court conven-
ient to at least one of the parties, where it had two chances of ultimately going
under old procedure, but then only after a costly and tedious prior determination
in the Patent Office.
If the applicant was successful, his term should still be held to the "20-year
term." Under the simplified federal court procedure priority issues should be
promptly determined. Such action should be reviewable on appeal, and the decree
in such suit should be res adjudicata as between the parties.
The solution of the problem has the merit of removing the primary cause for
delay in prosecution of applications. Tt would safeguard the rights of the junior
applicants, and it would eliminate the time an4 expense of presentation of the
issue to the two tribunals in the Patent Office and on appeal to the Court of Cus-
toms and Patent Appeals that result in an inconclusivs opinion.
In order that the junior applicants, having interfering applications pending in
the Patent Office, upon the issue of the patent to the first applicant, may be notified
of the existence of the interfering patent, provision should be made for a formal
notice from the Commissioner of Patents of the issuance of the patent and of the
common subject matter found by the Patent Office in the issued patent and the
■application, or applciations, then in the Patent Offiv ='.
It is ray view that the right to obtain a determinai,ion of the issue of priority
by the courts should accrue only to applicants whose applications are filed within
one year (or other limited time) of the filing date of the senior party whose patent
has been granted; and also that there be a formal action by the Patent Office
determining the question of the existence of common subject matter. The pur-
pose of such provision is (a) to stimulate prompt filing of applications in the Patent
Office (and, coupled with the 20-year term rule, prompt issuance of patents) and
(h) to safeguard against setting up false interferences for purposes of delay where
common subject matter does not, in fact, exist. The time within which priority
actions may be instituted after such notice should be limited.
The second solution, namely, the substitution of an opposition proceeding for
the present interference proceeding, particularly the plan proposed by the Advisory
Committee to the Secretary of Commerce, has merit and, in my opinion, should
receive consideration as a solution of the problem. My feeling, however, is that
it would be time-consuming, perhaps to a lesser degree than the present practice
but, nevertheless, to a degree sufficient to defeat the purpose of prompt issue of
patents to the extent necessary to justify the "20-year term" proposal.
Under the third suggested solution, namely, simplification of the present inter-
ference practice, it seems almost hopeless to acompli?h the elimination of delay.
There are, of course, certain palliative measures that may be laken. Among
these are the proposals of:
1. Eliminating one appeal in the Patent Office;
2. Abolishment of optional appeals to the Court of Customs and Patent
Appeals or actions under § 4915;
3. Requirement for disclosure of invention tiates when applications are
filed, with proper provision for secrecy;
4. Limitations as to period of pendency of an application that may be
declared in interference, i. e., a junior application filed over one year after
the senior one, for example, may be denied the right to contest priority with
a senior application;
5. Curtailment of preliminary motions; and,
6. Definite limitation as to time within which testimony must be taken.
Each of these proposals has merit, and would tend to reduce the delays due to
the present practice, but they are inadequate, in my opinion, to correct the long
pending application evil.
There are instances in which interferences are obtained by filing a reissue and
involving another issue! patent in a priority contest in the Patent Office. While
this practice is not one that is directly connected with delay due to interferences,
it does, in many instances, work an injustice because the patentee of an issued
patent can be drawn back into the Patent Office and required to go through the
complicated interference proceeding, and thus prevent him from enjoying the
full effectiveness of his issued patent. Such practice accomplishes no useful
fiurpose because the patentees, if there is in fact common subject, may contest
CONCENTRATION OF ECONOMIC POWER 833
the question of priority either in infringement suits on the patent, or a suit for
cancellation of the interferiiig patent. This type of interference is merely a
waste of time and money because the Patent Office adjudication, under the present
law, is not res adjudicata between the parties, and the whole gamut of court
litigation is still available to either of the parties to the interference. Tins delay
can be simply corrected by, a provision that interferences shall not be dectared
under such circumstances.
In relation to delays of ex parte prosecutions, it is my view that the "20-year
term" proposal would materially reduce delays chargeable to the applicant.
A statutory change reducing the applicant's time for amendment to three months
instead of'six months would be helpful. Reciprocal provisions, that were dis-
cussed in connection with the "20-year term" proposal, supra, requiring prompt-
ness on the part of the Patent Ofiice, would be necessary in order to assure prompt
issue of the patent. Specifically, delays that result from renewing applications
can be corrected by withdrawing the privilege of renewal after allowance, and the
filing of continuations should not be permitted to extend the monopolies.
Divisional applications should be required to be filed within a linjited time,
not to exceed six months after requirement for division is made final. This
probably requires right to interlocutory appeal on such requirements.
I am in favor of amendment of Revised Statutes, § 4886, to reduce the time
period with respect to public use, public sale, and publication to one year. This
would tend to promote prompt filing of applications after the completion of the
invention, and yet secure to the inventor a sufficient time for testing the invention
and for properly preparing and submitting the application.
I am clearly of the opinion that the situation growing out of the interpretation
of the marking statutes by the Supreme Court in the Wine v. Railuay Applicance
decision should be corrected by legislation. Personally, I am in favor of denying
to a patentee any recovery based on a const*-uctive marking notice unless it be
established that the infringer had notice or knowledge of the patent or wilfully
infringed. In most instances no injustice is done by recjuiring the patentee to
give written notice of alleged infringement.
If the marking statutes are to be retained as a basis of constructive notice,
then clearly they should be revised, so that their benefits apply equally to all
patentees, regardless of the nature of the invention, to correct the presen.t situa-
tion where a process patentee is relieved from marking, as well as tlie owner of a
paper patent, who has not made embodiments of the invention, whereas one
making embodiments and failing to mark is denied recovery.
The foregoing has dealt mainly with Patent Office procedure looking to the
prompt issue of a patent.
There is another delay that exists which arises out of the group ownership of
patents, whereby such owner may protract litigation almost interminably by
suing in sequence on various ones of the group of patents.
Examples exist of instances in which infringement of a large number of patents
by the same structure is alleged, but the patents sued on one at a time. Termina-
tion of a suit on one is marked by the institution of another suit on other patents.
I am of the view that this condition can be remedied either through legislation
or through the Rules of Civil Procedure by requiring that the plaintiff must sue
on all of his available causes of action; that is to say, on all patents that are
alleged to be infringed, in one suit; or, if he does not sue at the one time on all
patents, he shall be barred thereafter to maintain action on any that are not
brought into the suit. A related burden is put upon the defendant by the present
rules.
Another possible solution of this evil of protracted litigation would be ta require
a patentee, as a basis of recovery, to give notice to an alleged infringer on all
patents thought to be infringed and, if suit is instituted only on part of the patents
included in the notice, then the defendant could have an election to counterclaim
for declaratory judgment on the remainder under Rule 13. If this right was
clearly fixed bv legislation, it would be possible to clear the issue of infringement
in a single suit and, if the charge of infringement is not weU founded, not only the
expense of the protracted litigation would be avoided, but the industry would be
stabilized to an extent that it could safely expand its production without the
hazard of belated establishm.ent of infringement.
It is recognized that safeguards would have to be included to prevent the
technical compliance with such provision by the transfer of patents at the time of
notice.
There is another matter in connection ■ ith patent litigation that, in my opinion,
requires drastic revision, and that is the question of accounting proceedings follow-
g34 CONCENTRATION OF ECONOMIC POWER
ing the interlocutory decree. The new rules of Civil Procedure have not met the
situation as it applies to patent accountings, but, as this is a subject that requires
ej)ecialized consideration and is not one that apparently has been raised so far by
the testimony before this Committee, I see no purpose at the present time in
making any detailed suggestions with respect thereto.
1 quite realize that the foregoing suggestions are stated in rather general terms
and that the technique of accomplishing the reforms embodying the principles
of the suggestions will require quite detailed consideration. If there are any of the
suggestions that tlie Committee would desire to have amplified, I shall be very glad
to do so, if requested.
Very respectfully,
Lawrence C. Kingsland.
LCK:0.
INDEX
Page
American Ball Bearing Co 309
Amsler-Morton Co 596-602
Anchor Hocking Glass Corporation 478, 554, 570-57G, 649
License, cancelation 571-575
Antitrust Division, Department of Justice. .' 253-254
Purpose 282, 377-378, 036
Antitrust laws 255,377-378,502-503, 556-557, 559
Arnold, Thurman, Assistant Attorney General 254-256
Arvedson, George C, chief of patent section, automobile manufacturers
association 301
Association of Licensed Automobile Manufacturers 268-269, 271-272
Atlantic Bottle Co 524
Automobile Chamber of Commerce 286
Automobile Manufacturers' Association 268-269, 284-303, 312-313, 332, 335
Association fees 294
Cross-license 292
Cross-licensing, their policy 272
Purpose of membership 207, 285
Ball Bros. Co 405, 414, 441, 466, 516, 521, 551-595, 608, 612
Patents:
License 553-554
Litigat ion 555
Royalties .- 560
Products, and percentage of total 551-552
Ball, Frank C, president, Ball Bros 551-595
Bantam Motor Car Co 1 294
Beech-Nut Packing Co . 428
Belknap, Charles B., executive vice president, Owens-Illinois Glass Co. 656-667
Bernev-Bond Co 466
Borg-Warner Motor Co 366
Bracken, A''. M., assistant treasurer and counsel, Ball Bros 551-560, 570-582
British Hartford-Empire Co 598
British Hartford-Fairmont Co 598
Buck Glass Co 404,408
Carter, Henry W 455
Chance Bros.' & Co., Ltd 659
Clerk, Sir Dugald 270
Coe, Conway P., Commissioner of Patents, United States Patent OfTice. 372-374
Coleman, S."A., Jr 610-619
Collins, L J., president. Anchor Hocking Glass Co 570-576
Corning Glass Works 401,403-404,442,479,484, 637-656
Corporations, average rate of income, 1926-35 610
Corporations, barred from filing patent applications 456
Cox, H. B., chief counsel, temporary national economic committee for
Department of Justice 377-379
Cross-Licenses. See Patents.
Curtiss, William H., vice presidenf, Corning Glass Works 637-656
Day, George, Attorney at Law 619-624
Delco-Remy 371
Diesel, Rudolph 354
Dodge Brothers 294
Dorsev & Cole 436
du Pont -. _. 276
Electric Vehicle Co... 271
I
jj INDEX
Page
Empire Machine Co. , 439, 638
European Verbaiid Co 526
Falck, Alexander D., Chairman of the Board, Corning Glass Works 637-644
Farley, I. Joseph, patent counsel for Ford Motor Co 256-285
Patent laws, comment on and suggestions 265, 282-283
Fiat Co 662
Florida Glass Co 404-405, 421, 437, 453, 613
Ford, Edsel, President of Ford Motor Co. and Lincoln Motor Car Co... 256, 285
Ford, Henrv 347
Ford Motor Co 256-285, 303, 309, 312, 313, 331, 335, 347
Date of organization .1 268
Patents:
License, number of . __ 274
Licensing policy 268
Litigation, number won and lost 258
Litigation, yearly expense.. 277
N umber owned 273
Policy regarding gratuitous use by other persons 257-258
Purpose for taking out patents 257
Fruit jar industry:
Competition 575-576
Cut-rate products 579
Price, stabilization 578-579
Prices 577
Gayner Glass Works 554
Geer, Paul L., Treasurer, Amsler-Morton Co 596-602
General Electric Co 645-647, 654
General Motors Corporation 294, 328-376, 663
Capital investment 339
Date of organization 332
Employees, number 339
Patents :
Cost of certain patents 366
License 362
Licensing policy 330, 333-337
Litigation, cost 335, 365
Litigations, number of 332, 335, 364-365
Purpose of taking out patents 320-330
Royalties 330, 336, 306-367
Research, policy 34 1-342
Research, yearly cost 332
Stockholders, number. ^ 339
Glass Container Association 403
Glass-container industry:
Business failures, percentages i'09
Equipment sold abroad 526
Exports and imports 431
Factory cost 507-509, 595
Failures, percentages ■" 50^
Feeders, types -- 441-442
Foreign glass market 525-520
Heat-resisting wares 401
Intercompany relations 383
Machines, cost of 506
Mechanical methods of production, history 526
New enterijriscs excluded because of patent monopoly 423
Output, yearly 533
Price decline. ^. 533
Price stabilization 415-416
Production, cost 506
Prohibition, effect of its repeal 609
Research, cost 507
Reuse containers, cost, etc . 528
Substitutes for glass 533
T. N. E. C, scope of its immediate inquiry 379
Various products and their percentage of total 402-403
INDEX
HI
t*age
Glenshaw Glass Co ^ 678
Goodrich, Edgar J., counsel for Hartford-Empire Co 395, 601, 602, 606, 667
Hart Glass Co 621
Hartford-Empire Co 379-490, 490-511,
616, 521-526, 536-546, 552-566. 561, 566-576, 578-662, 666
Assets, total sum 381
Delay of patent applications, comment 459
Employees, number 380
Inventions, their source 456
License 603-605
Patents:
Applications, purpose 455
Foreign 430
License, certain restrictions 401-405, 417
License, fees . 398-399, 427-428
License, revocation 571-575
Licensees, protection of 392
Licensing 383
Licensing, period of 392—393
Litigation 439-440
Litigation, policy regarding 443-445
Monopoly of certain kinds 381-383
Number owned 380
Protecting existing patent franchises 390-392
Purpose for taking out patents 386-387
Royalties 494-495
Royalties, income from 399
Royalties, percentage of total income 380-400
Specific 437-439,468
Hartford-Fairmont 4 17-465'
Hazel-Atlas Glass Co 401,404-405,437,441,463,478,481,490,
497, 522, 536-549, 552-555, 560-576, 585, 594, 608, 610
Output, percentage 536
Patent license, cost 536
License, restrictions 562-567
Headley-Thompson 455-456
Houghton, Amory, president, Corning Glass Works 637-656
Hougliton Associates 638-639
Hudson Motor Car Co 288
niinois Glass Co 477-478
Indiana Glass Co . 648-649
Injunctions, their use relative to patents 283
Inventions, patent system not responsible for 262-263, 332, 341-342
Jaspert, William B., Patent Attorney 596
Jeanette Glass Co 437
Justice, Department of, Anti-Trust Division 253-254
Purpose 282, 377-378
Kardo Corp 309, 362
Kearns-Gorsuch Co 437,439,522,538
Kerr, Alexander 383
Kerr Glass Co 441,573
Kettering, Charles F., vice president. General Motors Corp__ 340-361
Kimble Glass Co 478-479, 481
Kingsland, Lawrence C, patent attorney, Obear-Nester Glass Co 624-637
Knape-Coleman Glass Co 610-619
Knox Glass Associates 582-595
Character and 'function 582-583
Knox Glass Bottle Co -.v 586
Knudsen, William S., president. General Motors Corporation 328-340
Lamb Glass Co 404
Latchford Glass Co 408
Laurens Glass Works 406, 408
Levis, William E., president, Owens-Illinois Glass Co 474-535, 561
Directorships 481
Libbey Glass Co 442,474,525
124491— 39— pt. 2 38
IV INDEX
Page
Libbey-Owens-Ford Glass Co 376-377
Liberty Glass Co _- 504, 611, 614
Lincoln Motor Car Co 256, 273
Lucke, Professor 288
Lynch Corporation 524, 595, 599, 608, 633, 665
License 603-605
Macauley, Alvan, president, Packard Motor Car Co 304-313
Mandeville, William - 480
Marienville Glass Co 583
Martin, E. F., assistant secretary and assistant treasurer, Owens-Illinoi8
Glass Co 518-535
Maxwell Co 363
McCallister, E. W 464-473, 551-560, 570-582
McClure, Walter H., vice president and general sales manager, Hazel-
Atlas Glass Co _. : 536-549
McEvo3% James, director of patent section. General Motors Corporation.. 328,
340, 361-376
McFarlane Bill 278
McNash, J. H., president, Hazel-Atlas Glass Co 536-549,561-576
Metro Glass Bottle Co .... 583
Vliller Users' Defense Association 584-585
Patent litigation cost 585
Miller, William J., Engineering Co 522, 584-585
Modigliani . 660, 662
National Cash Register Co 340
National City Bank of New York 610
Nivison-Weiskopf . 439, 522
Northwestern Glass Co 506
Noyes, Judge 288
N. R. A. Code, etc '. 284
Obear-Nester Glass Co 437, 439, 522, 612-613, 619-620, 624-637
Products . 625
Oil Citv Glass Bottle Co 583
Olean Glass Co 404, 479
Owens Bottle Co 375
Owens Corning Fiberglass Corporation 656-658
Owens European Bottle Co 526
Owens-Illinois Glass Co 382,384,401,404-405,
411, 432, 474-549, 554-555, 560-561, 573,^599, 610, 623, 656, 667
Assets 474-475
Business, its nature 474
Licensing contract 491
Licensing, policy . 517-519
Net worth . 474
Origin 477-478
Output, percentage of total 474
Licensing, restrictions 502
Royalties 494
Royalties, policy regarding 499-502, 506-507
Research, cost . 507
Owens-Illinois Pacific Coast Co 474
Owens Staple-Tied Brush Co 481
Packard Motor Car Co 305-328,335,366
Licensing policy 325
Number of patents owned 304
Patents, yearly income and expense 307
Parham, Sidney F., Patent Attorney, Hartford-Empire Co 396, 414, 436-464
Patent Laws:
Comment on and suggested changes 265, 315-318
"History of the Growth of the Long Pending Patent Application
Evil" 374
Injunctions 283
'Origin 318
"Proposed Patent Legi;slation" 375
Purpose 298
INDEX V
Patent Office: Page
Appeal from. _ 440, 453
Appeal from, methods . 324-325
Circuit Court of Appeals, their decisions not binding on 453
Decisions, percentage held valid 373
Decisions, their validity 453
Delay in issuing patents, suggested improvement 45&--460
Interference proceedings, how initiated 452
Percentage of patents issued promptly 319
Practice and procedure 317-318, 372, 439, 440
Patents:
Ancillary 560
Applications:
"Applied for," its effect 449
Automobile, total number 302
Comment 449-450
Corporations barred from filing 456
Purpose 455
Basic, defined 444
Canadian system 278
Class B : 288
Competition 45 1-462
Delay in issuing, suggested improvement. 459-460
Eff^ect on past development of industry 353
English system 278
European cartel system 425
"Fence in" defined 460
Fewer and better : 282-283
Interference proceedings, how initiated 452
Inventions, patent system not responsible for 262-263, 332, 341-342
Laws. See Patent Laws.
License 268, 272, 292, 362, 383
License, certain restrictions 401-405, 417
License, cost 612-613
License, exclusive - 553-555
License, fees 398-399
License, limited 553-555
License, restrictions 562-567
Licensees, protection of - 392
Licensees, right to sue 453-454
Licensing, compulsory .- 277-278
Licensing, compulsory, its effect on small companies 323-324
Licensing, its effect on the automobile industry 310
Licensing, policy 517-519
Licensing, restrictions 502
Licensing, restrictions on bringing suit 455-457
Life, formerly 14 years in U. S-.r 326
Life in other countries 326
Life, suggested shorter period 318
Litigation, cost 277, 335, 365, 496, 585
Monopoly 256,381,383,446
Non-use, legality 559
"Paper patents" 265,327-328,387-388
Percentage issued promptly 319
"Petty," five year life 323
Protecting existing patent franchises 390-392, 450-452
Purpose of taking out patents 257, 327-329, 386-387
Research, effect on 453
Royal ties 269, 307, 330,
335-336, 366-367, 380, 398, 399, 494-495, 449-502, 506-507, 542
Royalty fees 427-428
Royalty fees, purpose for charging 336
Small investors, their effect on 262
Specific 437-439,465
Theorv of 446-447
Use and abuse 255-256
VI
INDEX
Page
Pease, A.M., assistant treasurer, Hartford-Empire Co 603
Peerless Motor Car Co 309
Peiler, Mr 389,428,462
Peiler Patent 437-440,465,627
Pennsylvania Bottle Co S?"
Pennsylvania Sand Co 476
Pope-Hartford Co 269
Prohibition, effect of its repeal on Glass Container Industry 609
Pupin, Professor . 288
"Pyrex" 1 640. 648, 654
Reed Glass Co 437, 522, 573, 578
Reeves, Alfred, vice president and general manager, Automobile Manu-
facturers' Association . 285, 303
Remy Bros 371
Royalties. See Patents.
Safford, Arthur T., Jr., secretary and counsel, Hartford- Empire Co 379-
433, 603-610
Salem Glass Works 554
Searcy 418
Selden case reported 270
Selden, George B 271
Selden patent, description 270
Shawkee Manufacturing Co. et al. v. Hartford-Empire Co 445
Sherman Anti-Trust Laws. See Anti-Trust Laws.
Smith, F. (ioodwin, president, Hartford Empire Co 379-433
Smith, Herbert Knox 386,417,433
Socony- Vacuum Oil Co. , Inc - 620
Sieimer case 440-441
Steimer Patent - 438-440, 565
Stookey Patent 628
Studebaker Co 292
Supreme Court decision, comment ^ 265
Swindell Brothers 599
Thatcher Manufacturing Co 404,478,480,590
Tibbetts, Milton, vice president and patent counsel, Packard Motor Car
Co -- 304-328
Three Rivers Glass Co 418-419, 611-612
T. N. E. C:
Committee members present 252, 315, 377, 435, 489, 551, 603
Resolution under which committee will conduct hearings 253
Scope of examination of the glass industry L 379
Toledo Glass Co 526
Tygart Valley Glass Co 543
Underwood, R. R., president, Knox Glass Associates 582-595
United States Glass Co 466, 468, 470
'^Jniversal Glass Products Co. 404
Vestlake Machine Co . 442, 526
Vhitall Tatum Co 409-410, 428, 456, 524
iVightman Bottle & Glass Manufacturing Co 583
iVilliams, Lloyd T., general counsel, Owens-Illinois Glass Co 491-
493, 495, 496, 521, 523, 526
Willitts, George H . 375
Wine V. Enterprise .' 265
Winton Co 2'^9
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