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Full text of "Investigation of concentration of economic power. Hearings before the Temporary National Economic Committee, Congress of the United States, Seventy-fifth Congress, third Session [-Seventy-sixth 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 investigation with respect to the concentration of economic power in, and financial control over, production of goods and services .."

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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 th e 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