United States v. General Electric Co.

FORMAN, District Judge.

The Pleadings

Pursuant to § 4

1

of the Sherman Act, § 15

2

of the Clayton Act and § 74

3

of the Wilson Tariff Act, the plaintiff, the United States of America, filed a complaint to prevent and restrain alleged continuing violations of §§ 1

4

and 2

5

of the Sherman Act, § 3

6

of the Clayton Act and § 73

7

of the Wilson Tariff Act respectively. It named the following defendants:

1. General Electric Company, described as a New York corporation, having lamp plants in Ohio, New Jersey, Missouri, Massachusetts, New York and California, which together with its subsidiaries is engaged principally in production and distribution of incandescent electric lamps, electrical appliances and other electrical products, and is the largest producer of glass bulbs, lamp bases, and incandescent electrc lamps in the United States and in the world.

2. International General Electric Company, Inc., a New York corporation whose outstanding capital stock is entirely owned

by

General Electric Company. It is described as a large distributor in and to foreign countries of American produced incandescent electric lamps, electrical appliances and other forms of electrical products.

3. Westinghouse Electric & Manufacturing Company,

8

a Pennsylvania corporation with its principal office in New York City and its lamp plants in New Jersey and Pennsylvania. It is described as the second largest manufacturer and distributor of incandescent electric lamps in the United States. Together with its subsidiaries it manufactures and distributes a full line of electrical appliances and other electrical products, some of which are competitive with similar products produced by defendant General Electric and its subsidiaries.

4. Corning Glass Works,

9

a New York corporation which together with its subsidiaries is described as the largest manufacturer and distributor of specialty glass products in the United States. It is principally engaged in the production and distribution of glass bulbs; tubing and cane, signal and optical ware, heat resisting ware, and other forms of specialty ware.

5. American Blank Company,

10

a corporation of the State of Maine, described as a patent holding company for defendants, General Electric and Corning. It is said to be wholly owned by defendant Corning, or Corning subsidiary, Empire Machine Company.

6. Empire Machine Company,

10

a corporation of the State of Maine, described as a patent holding company for the defendant Corning, 90% of the stock of which is owned by the stockholders of Corning.

7. N. V. Philips’ Gloeilampenfabrieken, a limited company of Plolland. It is described as having been engaged for many years in the business of manufacturing, among other things, glass bulbs, tubing and cane at several of its plants including those

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in Holland and distributing and selling such products throughout the world, including importations into the United States. (Jurisdiction over Philips was obtained by service on its officers who had taken refuge in this country to escape Nazi domination.)

8. Consolidated Electric Lamp Company, a Massachusetts corporation licensed by defendant General Electric to produce and distribute large type incandescent electric lamps in the United States.

9. Hygrade Sylvania Corporation, a Massachusetts corporation described as being licensed by General Electric to produce and distribute large type incandescent electric lamps in the United States.

10. Ken-Rad Tube and Lamp Corporation,

11

a corporation of Delaware described as licensed by General Electric to produce and distribute large type incandescent electric lamps in the United States.

11. Chicago Miniature Lamp Works, a corporation of Illinois licensed by General Electric to produce and distribute miniature incandescent electric lamps in the United States.

12. Tung-Sol Lamp Works Incorporated, a corporation of Delaware described as being licensed by General Electric to produce and distribute miniature type incandescent electric lamps in the United States.

For brevity the plaintiff will be usually referred to herein as the Government and the defendants’ corporate titles will generally be shortened to the following:

General Electric Company — General Electric o r GE

International General Electric Company, Incorporated — International General Electric or IGE

Westinghouse Electric & Mfg. Co. — Westinghouse

Coming Glass Works — Corning

American Blank Company — American Blank

Empire Machine Company — Empire

N. V. Philips’ Gloeilampenfabrieken — Philips

Consolidated Electric Lamp Company— Consolidated

Hygrade Sylvania Corporation — Sylvania Ken-Rad Tube and Lamp Corporation— Kenrad

Chicago Miniature Lamp Works — Chicago Miniature

Tung-Sol Lamp Works Incorporated— Tungsol

In paragraphs 17 to 83, inclusive, of the complaint, the Government described the history of the incandescent electric light lamp industry and its technical development. It outlined the business organization of the industry during the periods from 1879 to 1896; 1896 to 1911; and 1911 to 1926. In the earliest period General Electric succeeded to the interests of practically all of the companies engaged in the manufacture of incandescent electric light lamps with the exception of Westinghouse. General Electric had acquired the “Edison” patents controlling the carbon filament lamp. These, however, were about to expire in 1896.

During the period from 1896 to 1911 a patent agreement was executed between General Electric and Westinghouse and an association of lamp manufacturers was organized. In 1911 a suit was instituted charging General Electric, Westinghouse and a number of other companies with violating the Sherman Anti-Trust Act and a consent decree was entered in the suit.

The period from 1911 to 1926 was characterized by the acquisition by General Electric of the controlling patents on the tungsten filament incandescent electric light lamps and the licensing of Westinghouse and other lamp manufacturers under these patents. In 1924 the Government filed a petition against General Electric, Westinghouse and Westinghouse Lamp Company charging that the agency system of lamp marketing employed by the companies and the license agreement between General Electric and Westinghouse were il

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legal and in violation-of the Sherman AntiTrust Act. The case was tried in 1925 in the United States District Court for the Northern District of Ohio, Eastern Division, and the petition was dismissed, 15 F.2d 715 . The decision was appealed to the United States Supreme Court which, in 1926, affirmed the District Court, 272 U.S. 476 , 47 S.Ct. 192 , 71 L.Ed. 362 .

In paragraph 84 of the complaint the ■Government charged that since 1927 each -of the defendants unlawfully conspired to ■monopolize, attempted to monopolize, and unlawfully contracted, combined and conspired to restrain trade or commerce among ■the several states, or with foreign nations, in the incandescent electric light lamp industry and more particularly by unlawfully and in violation of § 1 and § 2 of the 'Sherman Anti-Trust Act

“(■a) acquiring and maintaining mono■.polies of (1) patents relating to incandescent electric lamps, (2) patents relating •to glass bulbs, tubing and cane, (3) the ■manufacture and distribution of machinery .for the production of glass bulbs, tubing and cane, (4) the manufacture, distribution and sale of glass bulbs, tubing and cane, (5) the manufacture, distribution, and sale ■of incandescent electric lamp bases, (6) the manufacture, distribution, and sale of incandescent electric lamps;

“(b) agreeing to restrain and by re■straining interstate and foreign trade and ■commerce in incandescent electric lamps -and machinery for the production of in•candescent electric lamps;

“(c) agreeing to restrain and by re-straining interstate and foreign trade and ■commerce in glass bulbs, tubing and cane .and in machinery for the production of :glass bulbs, tubing and cane;

“(c) [sic] agreeing to restrain and by re■straining interstate and foreign trade and ■commerce in incandescent electric lamp bases and in machinery for the production •of incandescent electric lamp bases;

“(e) agreeing to restrain and by re■straining interstate trade and commerce in argon gas; and

“(f) agreeing to maintain and by main-taining uniform prices in the distribution .and sale of incandescent electric lamps in :the United States.”

In paragraph 85 the Government charged that since 1927 General Electric and Westinghouse violated § 3 of the Clayton Act by making sales, contract for sales, or contracts for the distribution of incandescent electric lamps manufactured by them for use, consumption or re-sale within the United States and fixing the prices charged therefor or discounts from, or rebates upon such prices on the condition, agreement or understanding that the purchasers thereof or agents therefor shall not use or deal in other incandescent electric lamps, all with the purpose and effect of substantially lessening competition and tending to create a monopoly in interstate trade or commerce in incandescent electric lamps.

In paragraph 86 the Government charged that since 1927 General Electric, Corning and Philips have violated and are now violating § 73 of the Wilson Tariff Act by unlawfully combining and conspiring with and entering into and maintaining unlawful contracts or agreements relating to the importation from foreign countries into the United States of glass bulbs, tubing and ■cane and machinery for the production of such articles, whereby Philips has been and is prevented from importing such articles into the United States, all with the purpose and effect of restraining lawful trade and competition in the United States.

In paragraphs 87 to 102 the Government set forth in summary and in detail its charges that General Electric since 1927 has dominated and monopolized and continues to dominate and monopolize the incandescent electric lamp industry 'in the United States in which domination and monopoly Westinghouse has shared.

In paragraphs 103 to 117, inclusive, the Government charged that since 1927 General Electric has through its subsidiary, IGE, entered into and maintained unlawful patent licensing agreements, and is unlawfully maintaining other agreements earlier made with potential and actual foreign competitors; that General Electric and Corning have acquired and maintained and are maintaining foreign patents and have entered into licensing agreements with foreign companies in order to keep out of the United States glass parts and glass mak

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ing machinery and that General Electric and Westinghouse have since 1927 entered and have maintained and are maintaining unlawful patent pooling and licensing agreements and other agreements with potential domestic competitors.

In paragraphs 118 to 129, inclusive, the Government charged that General Electric and Westinghouse recognizing that General Electric’s controlling lamp patents were about to expire entered into negotiations with each other in 1927, with a view toward continuing their control over the manufacture, distribution and sale of lamps in the foreign market. On or about June 15, 1928, General Electric and Westinghouse executed a license agreement, dated as of January 1st, 1927, which superseded the license and agreement executed in 1912 providing as follows:

“(a) Westinghouse is licensed nonexclu-sively by General Electric to manufacture and sell all types of incandescent electric lamps under certain United States patents listed in a schedule annexed to the license and agreement, and under any United States patents and patent applications which General Electric might during the term of the license own or control, or under which General Electric might have the right to grant such licenses, for improvements in electric lamps and improvements in the machines, appliances, or processes for the manufacture of incandescent electric lamps;

“(b) Westinghouse’s quota for domestic production was for the year 1927 to be increased from 17.25% to 22.4421% of the aggregate net sales (expressed in dollars) of electric lamps by General Electric and Westinghouse in and for use in the United States, and thereafter the quota was raised by 1% for each succeeding year after 1927 and until 1930, when it reached a maximum of 25.4421%, at which percentage the quota is to remain constant for the duration of the license;

“(c) Westinghouse has agreed to pay as a royalty or license fee an amount equal to 1% of its net sales of lamps for use in or outside the United States and made under the patents covered by the license, and in the event that such sales by Westinghouse exceed its quota, the royalty rate is to be stepped up from 1% to an amount equal to 30% of such excess sales:

“(d) Westinghouse has agreed to maintain prices, terms, and conditions of sales as fixed and followed by General Electric in making its own lamp sales:

“(e) Westinghouse has agreed not to interfere with General Electric’s ‘consignment’ plan of lamp distribution by (1) offering Westinghouse’s ‘agents’ greater compensation than that allowed by General Electric to its own ‘agents’; (2) offering Westinghouse’s ‘agents’ more favorable terms than those allowed by General Electric to its own ‘agents’, and (3) appointing as Westinghouse’s ‘agents’ persons or companies of whom General Electric affirmatively disapproved;

“(f) Westinghouse is expressly not licensed under the foreign patents owned by General Electric, nor permitted to export lamps nor to sell lamps for export, except to those countries to which General Electric itself has a right to export lamps;

“(g) Westinghouse is expressly not licensed to sell filaments or other parts of lamps, nor to manufacture glass bulbs, tubing, or cane;

“(h) General Electric and Westinghouse have admitted the validity of the patents under which each is licensed, but such admission is to be limited to the life of, and to the fields of use covered by, the licenses;

“(i) The agreement is to continue in force until the date of expiration of the patents and patent applications, as listed in the schedule annexed to the license and agreement, but it has been agreed that Westinghouse can surrender the license by giving two years’ notice after 1935, and General Electric can terminate the-license and agreement on sixty days’ notice after arbitrators, appointed as provided in the license and agreement, have-determined that Westinghouse has willfully breached the agreement; and “(j) If in any year Westinghouse sells an amount 5% or. more in excess of its quota, such sale is to be deemed a breach of the agreement.”

In paragraphs 130 to 139, inclusive, the Government charged that in 1927 about

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eleven domestic companies, other than Westinghouse, were operating under patent licensing arrangements with General Electric to manufacture and sell lamps in the United States. By 1936 they had been reduced to five companies known as the “B” licensees of General Electric, and consisted of defendants Sylvania, Consolidated, Kenrad, Tungsol and Chicago Miniature. Except for the differences in the amount and type of lamps which-General- Electric permits each licensee to manufacture and sell in the United States the licenses and agreements are substantially identical and provide as follows :

“(a) Each licensee is licensed nonex-clusively by General Electric under its patents then owned or thereafter to be acquired which relate to incandescent electric lamps or to the manufacture thereof;

“(b) Each licensee is limited in its sales in any one year to a certain fixed quota or percentage which is based on General Electric’s total net dollar sales for that year;

“(c) If in any one year a licensee should sell less than its quota, it could, in the next succeeding year, sell an additional amount equal to the amount of the shortage, but not more than 10% of the quota for the year in which the shortage occurred;

“(d) If in any year a licensee should sell an amount 10% or more in excess of its quota, such act would constitute a breach of the agreement;

“(e) Each licensee is required to pay upon its lamp sales a royalty of 3%% with a discount of 10% for prompt payment and proper reporting, and such royalty is computed on the basis of the prices charged' by General .Electric for such types of lamps;

“(f) Each licensee is required to pay an additional royalty of 20% of its net sales in any year in excess of 5% over its quota for that year;

“(g) Each licensee is expressly precluded under General Electric’s patents covered by the license from (1) manufacturing lamp ■bulbs, glass tubing, cane glass or lamp bases, (2) exporting lamps or selling lamps for export, and (3) selling any part of an incandescent lamp or any machine, appliance, or material, or any part thereof;

“(h) Each licensee is licensed to manufacture, solely for its own use as a licensed lamp manufacturer, any lamp-making machinery, appliance or materials covered by any patent or patents listed in the license and agreement, or to purchase the same in each case, solely for such use, but only from such others licensed by General Electric to manufacture them for sale;

“(i) Each licensee has granted to General Electric a non-exclusive license with the right to grant sub-licenses, to make, use and sell incandescent lamps of all kinds and machines, appliances and materials for the manufacture of such lamps, under all patents and patent rights which the licensee or its officers and directors then, or thereafter during the term of the agreement might own or control for the life of the patents respectively;

“(j) Each licensee has agreed to grant to General Electric upon demand, non-exclusive licenses under any foreign patents such licensee might own, to enable General Electric to abide by its contracts with others;

“(k) Each licensee has agreed to keep its books, warehouses, and factories open to the inspection of General Electric;

“(1) Each agreement is to continue in force until December 31, 1944, unless sooner terminated ..by General Electric for breach of conditions thereof by the licensee ;

“(m) Each licensee can cancel the agreement upon six months’ notice in writing to General Electric;

“(n) Each licensee has agreed not to advertise or sell lamps bearing the mark ‘G. E.,’ ‘Mazda,’ ‘Edison,’ ‘National’ or any other mark or brand used by General Electric; and

“(o) General Electric and each licensee have admitted the validity of the patents under which each is licensed, but such admission is to be limited to the life of, and the fields of use covered by, the licenses.”

In paragraphs 140 to 217, inclusive, the Government charged that General Electric and Westinghouse have conspired and combined to control and dominate the manufacture, use and sale of lamp bases and lamp

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base making machinery in the United States; that General Electric, Corning, Empire and American Blank have conspired and combined to control and dominate the manufacture, use and sale of glass bulbs, tubing and cane, and glass making machinery in the United States; that General Electric has conspired and combined with others to restrain the production, use and distribution of argon gas for use in lamps in the United States and General Electric has conspired and combined with others to restrain the manufacture, use and sale of lamp making machinery in the United States.

In paragraphs 218 to 253, inclusive, the Government charged that in order to carry out the conspiracies, monopolies and combinations in restraint of trade, as alleged in the complaint, and particularly insofar as they relate to the distribution and sale of large lamps, General Electric and Westinghouse have adopted and maintained a system of lamp distribution involving a so-called agency arrangement by which General Electric has acquired a monopoly in the distribution and sale of lamps in the United States, and Westinghouse has acquired a share of such monopoly. By means of this system and by means of the license and agreement between General Electric and Westinghouse, General Electric fixed and controlled re-sale prices of all lamps sold by General Electric and Westinghouse.

In paragraphs 254 to 266, inclusive, the Government alleged that in order to carry out the conspiracies, monopolies and combinations insofar as they related to the manufacture and sale of miniature lamps General Electric and Westinghouse have since 1927 distributed such miniature lamps with the exception of mine type lamps by means of so-called agency contracts and have fixed and maintained re-sale prices of miniature lamps.

In paragraphs 267 to 293, inclusive, the Government charged that the distribution arrangement of General Electric and Westinghouse for all types of lamps whereby contracts of so-called agency have been and are executed by them with their respective distributors has not created and does not create or represent a relationship of true agency between General Electric or Westinghouse and their respective distributors. Plaintiff alleged that General Electric and Westinghouse have employed this device to defeat the provisions of the anti-trust laws.

In paragraphs 294 to 314, inclusive, the Government alleged that in order to maintain and extend General Electric’s control and domination of the domestic lamp industry General Electric and Westinghouse from time to time since 1927 have engaged in other unlawful acts and practices which are thereinafter set forth.

In paragraphs 315 to 322, inclusive, the Government alleged that continuously from the dates of their original agreements, licenses and understandings, as thereinbefore set forth, General Electric and Westinghouse have unlawfully maintained such agreements and understandings with other large and powerful companies which are potential lamp manufacturing competitors whereby such companies have been disabled and have refrained from engaging in competition.

In paragraph 333 the Government concludes that:

“By establishing and maintaining the conspiracies, monopolies, and combinations in restraint of trade, and by the various acts hereinbefore alleged, the defendants herein (a) have obtained and now hold a monopoly of patents relating to glass bulbs, tubing and cane and the manufacture thereof in the United States; (b) have obtained and now hold a monopoly of patents relating to incandescent electric lamps and the manufacture thereof in the United States; (c) have established and now hold a monopoly in the manufacture, distribution, and sale of such lamps in the United States; (d) have unreasonably restricted and now restrict the production of such lamps in the United States; (e) have unreasonably restricted and now restrict the distribution and sale of such lamps in the United States; tff) have fixed and now maintain non-competitive prices on approximately 80% of such lamps manufactured and sold in the United States; (g) have obtained and now maintain monopolies on glass bulbs, tubing and cane on lamp bases; (h) have restrained and now restrain trade in other essential parts and materials for incandescent lamps; (i) have eliminated the importation into the

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United States of glass bulbs, tubing and cane, machinery relating to the manufacture of such glass parts; lamps, lamp parts and lamp-making machinery; (j) have discouraged and impeded the progress of science and the useful arts, and have used the patent laws of the United States for purposes inconsistent with the constitutional basis of these laws; and (k) have monopolized interstate and foreign trade and commerce and have unreasonably restrained such trade and commerce in violation of the laws of the United States.”

Finally, among the sixteen prayers of the Government are the following:

“(1) That the aforesaid monopolies, attempts to- monopolize, combinations and conspiracies to monopolize, and contracts, combinations, and conspiracies to restrain trade and commerce among the several States and with foreign nations be adjudged and decreed to be unlawful, and that the agreements, understandings, acquisitions, purchases, and practices alleged in this complaint be adjudged and decreed to be in violation of the Sherman Anti-Trust Act, the Clayton Act and the Wilson Tariff Act.

“(2) That the Court adjudge and decree that the defendants have monopolized, attempted to monopolize, combined and conspired to monopolize, and contracted, combined, and conspired to restrain trade in violation of Sections 1 and 2 of the Sherman Antitrust Act, Section 3 of the Clayton Act, and Section 73 of the Wilson Tariff Act.

“(3) That the Court adjudge and decree that the defendants, General Electric, International, Corning, Philips, American Blank, and Empire have monopolized, attempted to monopolize, combined and conspired to monopolize, and contracted, combined, and conspired to restrain trade in violation of Sections 1 and 2 of the Sherman Antitrust Act with respect to patents relating to the manufacture of machinery for the production of glass bulbs, tubing and cane and with respect to the manufacture and sale of glass bulbs, tubing and cane.

“(4) That the Court adjudge and decree that the defendants, General Electric and Westinghouse have monopolized, attempted to monopolize, combined and conspired to restrain trade in violation of Sections 1 and 2 of the Sherman Antitrust Act with respect to the manufacture and sale of bases for incandescent electric lamps.

“(5) That the Court adjudge -and decree that the defendants, General Electric and Westinghouse have monopolized, attempted to monopolize, combined and conspired to monopolize, and contracted, combined, and conspired to restrain trade in violation of Sections 1 and 2 of the Sherman Antitrust Act with respect to patents relating to. lamps and to the manufacture of lamps.

“(6) That the Court adjudge and decree that the defendants, General Electric and Westinghouse have monopolized, attempted to monopolize, combined and conspired to restrain trade in violation of Sections 1 and 2 of the Sherman Antitrust Act and Section 3 of the Clayton Act with respect to the manufacture and sale of incandescent electric lamps.

“(7) That the Court adjudge and decree that the defendants, General Electric, Corning and Philips have combined and conspired to restrain trade in violation of Section 73 of the Wilson Tariff Act with respect to the importation into the United States of glass bulbs, tubing and cane and machinery for the production thereof.

“(8) That each of 'the agreements, licenses and understandings between defendants General Electric and Westinghouse, between defendants General Electric and Consolidated, between defendants General Electric and Hygrade, between defendants General Electric and Ken-Rad, between defendants General Electric and Chicago Miniature, between defendants General Electric and Tung-Sol, between defendants Corning and Philips, between defendants General Electric and each or all of the following defendants: Philips, Corning, American Blank, and Empire Machine, and between any of such defendants, and any other -agreements, licenses and understandings between and among the corporate defendants, or any of them, be each adjudged to represent an illegal combination and conspiracy to restrain and monopolize interstate and foreign trade -and commerce, and that the observance of each of such agreements, licenses and understandings in any respect, and the execution of similar agree

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ments, licenses and arrangements be perpetually enjoined.

“(9) That the agreements between defendants General Electric and International, and between defendant International and the various foreign lamp companies described hereinafter, be each adjudged to represent an illegal combination and conspiracy to restrain and monopolize interstate and foreign trade and commerce, and that the observance of each of such agreements in any respect and the execution of similar agreements be perpetually enjoined.

“(10) That defendants General Electric and Westinghouse and their respective subsidiaries be enjoined from making a contract or other arrangements with any dealer engaged in handling lamps which will have the effect of fixing a sales price thereof after sueh lamps shall physically pass out of the hands of defendants General Electric and Westinghouse or their respective subsidiaries.

“(11) That the defendants, and each of them, and their officers, directors, agents, representatives, and all persons and corporations acting and claiming to. act on behalf of them, be perpetually enjoined from monopolizing, attempting to monopolize, combining and conspiring to monopolize or agreeing, combining, or conspiring to restrain trade, and be perpetually enjoined from engaging in or participating in practices, agreements, licenses, contracts, relationships, or understandings, or claiming any rights thereunder, having a tendency to continue dr revive any of the aforesaid violations of the Sherman Anti-Trust Act, the Clayton Act and the Wilson Tariff Act.

“(12) That plaintiff have such other and further relief with respect to the organization, functions and operations of defendants as the Court may deem appropriate and necessary to establish effective competition in lamp parts, lamp machinery and lamps in the United States.

“(13) That the plaintiff have such in-junctive relief as the Court may deem appropriate and necessary to prevent General Electric, Corning and Westinghouse by the abuse of their patent rights from restricting and eliminating competition between each other and between and among the other defendants from depriving others of a fair opportunity to compete freely and unrestrictively with General Electric, Corning and Westinghouse and the other defendants and from engaging in any other activities which are designed to or have the effect of impairing the ability of such competitors to compete with defendants.”

Answers were filed by all defendants, Corning filing for American Blank and Empire. Since these latter two defendants were dissolved by judicial decree of the State of Maine on November 7, 1940 and January 8, 1941, an order was signed dismissing the complaint as against them. For the purpose of totality of determination, however, it has been necessary to give consideration in detail to their activities prior to such dissolution. Sylvania also filed a cross-claim against Corning and General Electric alleging restraints of trade in the glass bulb, tubing and cane industry as it affected Sylvania but these parties later stipulated to its dismissal without prejudice. Jewell Incandescent Lamp Company sought to intervene as a representative of a class of incandescent lamp manufacturers but its motion was denied.

The complaint was filed January 27, 1941 and trial commenced in 1942, but was suspended at the request of the Secretaries of War and Navy and not resumed until March 1946.

Introduction

The incandescent lamp industry has its foundations in the invention of the carbon filament vacuum electric lamp by Thomas A. Edison in 1879. A number of companies were organized to exploit this invention, patented in 1880. In 1891, a consolidation of the Edison General Electric Company, Thomson-Houston Company and the Thomson-Houston International Electric Company resulted in the organization of the General Electric Company. By this consolidation General Electric obtained control of the basic Edison patents and until expiration of the patents had a virtual monopoly of the domestic supply in electric lamps. Upon expiration of the basic patents in 1894, General Electric entered into a cross-licensing patent agreement with Westinghouse and organized the Incandes

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cent Lamp Manufacturers an unincorporated association consisting of several independents who entered the field upon expiration of the Edison patents. In 1901, General Electric acquired a majority stock interest in the National Electric Lamp Company which in turn obtained control of the Lamp Manufacturers Association. By 1911 National Electric controlled eighteen subsidiaries engaged in the incandescent lamp industry. Although National Electric was an alter ego of General Electric, National Eleotric and its subsidiaries held themselves out to the public as competing establishments.

As a result of the cross-license agreement with Westinghouse and stock interest in National Electric, General Electric controlled approximately 80% of the incandescent lamp business by 1911, although the basic Edison patents had expired. The Government, in 1911, charged General Electric, Westinghouse, National Electric and its affiliates with violations of the Sherman Act. By a consent decree National Electric was ordered dissolved and General Eleotric directed to acquire the assets of its subsidiaries to prevent the public from being misled as to the real nature of General Electric control (Ex. G 1). General Electric continued its 80% control of the industry so that the decree had no effect upon its dominance of it, but lamp manufacturers were enjoined by the decree from engaging in certain price fixing practices.

Meanwhile, General Electric, through General Electric Research Laboratory, conducted experiments in the use of metallized carbon filaments. The incandescent lamp of the period 1900 to 1912 was relatively fragile, short lived and not an efficient source of light. Between 1907 and 1909, General Electric brought out the filament lamps. Two Austrians, Just and Hanaman, had developed practical commercial models of the tungsten filament lamps and had applied in the United States for patents. These patent rights were acquired by General Electric and in 1912, the Just and Hanaman patent was issued.

In 1912 aside from General Electric’s control of approximately 80.% of the incandescent lamp business as a result of the previously mentioned consolidations resulting from the 1911 decree, the remaining 20% was done by a numbér of companies which were infringing the Just and Hana-man patent on the tungsten filament. A new license with Westinghouse was executed so as to permit it to manufacture lamps under this and other patents. The Just and Hanaman patent was sustained in 1916, General Electric Co. v. Laco-Philips Co., 2 Cir., 233 F. 96 , and as a result, General Electric, as the owner of this patent was in a position to prevent any other persons from making lamps of the then commercially successful types.

The predecessors of General Eleotric had established several foreign contacts. Upon organization of General Electric, these contacts were extended until General Electric had some form of representation in England, France, Germany, Holland, Italy, Austria and Japan (R. 1422-1455). Eventually wholly owned General Electric foreign subsidiaries were established as follows: Anderson, Meyer and Company, Ltd. (China) ; Australian General Eleotric Company, Ltd.; General Electric, S.A. (Brazil); General Electric Company of Cuba; General Electric, S.A. (Mexico); and South African General Electric Company (Ex. 20-G, R. 1425-1426).

In 1919, International General Electric was organized by General Electric for the purpose of exploiting the foreign markets. It was an autonomous organization and its prime responsibility was to operate successfully in the foreign field. It took over General Electric’s foreign assets, its foreign business, and the functions of its foreign department in all areas of the world except Canada.

While General Electric, through the monopoly granted by the Just and Hanaman patents, as well as other patents to be mentioned hereinafter, continued to maintain dominance over the incandescent lamp ■industry in the United States, her overseas markets were expanded through her foreign subsidiaries. General Electric maintained a close contact with this market and negotiated several agreements with foreign companies other than its subsidiaries (R 1434-1455).

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Philips, the Dutch Company, offered the potentiality of being a menacing competitor to General Electric in Europe. Exhibit 2112-G points to the seriousness with which International General Electric felt the Philips* competition. J. W. Woodward, in charge of IGE’s European incandescent lamp business warned A. W. Burchard, President of IGE in 1924 that there was serious danger of competition in the American market from Philips for Anton Philips’ leadership was greatly expanding the scope of Philips’ operations.

Several European lamp manufacturers had organized in 1921 a price regulating cartel. This proved inadequate and it broke down in 1924 (Ex. 2111-G). Mr. Woodward of IGE, representatives of Philips and the German interest (Osram) conducted extensive negotiations (Ex. 2112-G) which eventually led to an agreement for the stabilization of the lamp industry throughout the world (Ex. 2117-G). This agreement was the Phoebus contract

12

(Ex. 2278-G) and Anderson, Meyer & Co., Ltd., Australian General Electric Co., Ltd., General Electric Company of Cuba, General Electric, S.A. (Brazil and Mexico), South African General Electric, and deJ' fendant Philips, were among the signators.

Meanwhile in 1922, General Electric invited the Attorney General of the United States to investigate it for the purpose of ascertaining whether it was acting in violation of the anti-trust laws and such an investigation was initiated. (Ex. GE 3 tp 9). It led to an action by the Government in the Northern District of Ohio in 1924 which charged General Electric and Westinghouse with engaging in a combination and conspiracy in violation of the Sherman Anti-Trust Act. There the suit was dismissed and unanimously affirmed by the Supreme Court in United States v. General Electric Co., 272 U.S. 476 , 47 S.Ct. 192 , 71 L.Ed. 362 . (Hereinafter referred to as the 1926 case or the General Electric Co. case. See Ex. G-l.)

The case in the trial court was submitted upon a stipulated set of facts United States v. General Electric Co. et al., Northern District of Ohio, Eastern Division, Second Government Lamp Suit, Record, Vol. 1, page 85 et seq., Ex. G-l. In 272 U.S. at page 478 , 47 S.Ct. at page 192 , 71 L.Ed. 362 , the basis of the action is detailed:

“This is a bill in equity, brought by the United States in the District Court for the Northern District of Ohio to enjoin the General Electric Company, the Westinghouse Electric & Manufacturing Company, and the Westinghouse Lamp Company from further violation of the AntiTrust Act of July 2, 1890, 26 Stat. 209 , c. 647. The bill made two charges, one that the General Electric Company, in its business of making and selling incandescent electric lights, had devised and was carrying out a plan for their distribution throughout the United States by a number of so-called agents, exceeding 21,000, to restrain interstate trade in such .lamps and to exercise a monopoly of the sale

thereof;

and, second, that it was achieving the same illegal purpose through a contract of license with the defendants, the Westinghouse Electric & Manufacturing .Company and the Westinghouse Lamp Company.”

The court first considered the agency relation in detail and observed that the delivery of stock to the agent was no more than a consignment and that the agency contracts were genuine.

On the second issue presented, the court made the following remarks concerning the patent position of General Electric:

“The General Electric Company is the owner of three patents — one of 1912 to Just & Hanaman, the basic patent for the use of tungsten filaments in the manufacture of electric lamps; the Coolidge patent of 1913, covering a process of manufacturing tungsten filaments by which their tensile strength and endurance is greatly increased; and, third, the Langmuir patent of 1916, which is for the use of gas in the bulb, by which the intensity of the light is substantially heightened. These three patents cover completely the making

*774

of the modern electric lights with the tungsten filaments, and secure to the General Electric Company the monopoly of their making, using and vending.” 272 U.S. at pages 480, 481, 47 S.Ct. at page 193 , 71 L. Ed. 362 .

The court then directed the following inquiry to itself:

“Had the Electric Company as the owner of the patents, entirely controlling the manufacture, use and sale of the tungsten incandescent lamps, in its license to the Westinghouse Company, the right to impose the condition that its sales should be at prices fixed by the licensor and subject to change according to its discretion ?. * * * ” 272 U.S. at- page 488, 47 S.Ct. at page 196 , 71 L.Ed. 362 .

The Court relying upon Bement & Sons v. National Harrow Co., 186 U.S. 70 , 22 S.Ct. 747 , 46 L.Ed. 1058 , concluded that the restrictions in the license to Westinghouse were not illegal.

' This decision in the General Electric case has engendered considerable analysis in the courts, and on several occasions the Government has asked that it be expressly overruled. The history of its recurrences in litigation is comprehensively set forth and reconsidered in two recent cases, United States v. Line Material Co., 333 U.S. 287 , 68 S.Ct. 550 , and United States v. United States Gypsum Co., 333 U.S. 364 , 68 S.Ct. 525 .

At the opening of its case, General Electric attacked the complaint of the Government with the assertion that the matters offered in proof in this action would be shown to be in all substantial -respects the same as those of which the complaint was made or could have been made in the former action against it in 1926. At the end of its case, ilGeneral Electric argued that this was established and that the doctrine of re-s adjudicata applied to the principal issues in this case. General Electric pointed out that its operations under its agency system of distribution and under its license agreements with Westinghou-se and its “B” licensees were substantially indentical in all material respects to its operations prior to 1926; that its position in legal effect remained the same and that its position in the lamp industry, if it has changed, has become less prominent than it was prior to the 1926 suit. It cited the case of Straus v. American Publishers’ Ass’n, 2 Cir., 201 F. 306 , as authority for the proposition that successive -suits may not be maintained when they are based upon a continuing conspiracy where the defendants’ course of -conduct remained substantially similar although the basic agreements had been modified in some respects. The fact that additional parties were added and that different statutes were invoked in the second suit, it is pointed out, were held to -be immaterial. I't cited a number of other cases to support this view -and claims that the present suit violates the rule against splitting a cause of action. It contended that even if 'the two causes of action are somewhat different that those matters -actually litigated in 1926 are res adjudicata here.

The Government, on the other hand, insisted that the causes of action are not the same. First, it claimed that a new conspiracy arose in or about 1927 in anticipation of the approaching expiration of the alleged patent monopoly of General Electric, that a design was created whereby Westinghouse and General Electric’s “B” licensees would guarantee its dominance in production and sale of lamps although there was no longer completely covering article patents upon which to base controls; that the resale price device was expanded to include a monopolization of market outlets; that action was taken to secure complete control over lamp machinery and -that control over each part of the lamp was utilized to -replace in part the power given by patents that were expiring or that had expired; that patents themselves were made conspiratorial devices 'to function by weight of number and that General Electric’s dominating position was further sustained by its efforts to suppress research by others. The Government further contended that the charge of monopoly was of necessity a charge of a new cause of action and that the prevailing facts and circumstances surrounding such a charge are determinative and that the most cogent ones in the instant case among others were the expiration of

*775

patents, the use of adjuvant monopolies, expansion of distributive controls and the exercise of opportunity to abuse powers.

Secondly, the Government charged that even without a new conspiracy, when the General Electric’s patent monopoly allegedly expired in 1933 it thereupon became illegal for it to continue to pursue its previous course of conduct.

Thirdly, the course of conduct followed •by General Electric after 1927 was significantly different from that followed prior to that date. The Government insisted that the documents submitted by General Electric in 1922 to the Attorney General could not give knowledge of what would be the continuation of that “course of conduct” over the years from 1924 to 1941 and that other activities had been shown by the Government to be in some instances independently illegal or essential to the complete picture of the alleged growing monopoly and were not barred from consideration by the decision of the 1926 case.

Fourthly, the Government contended that during the period 1927 to 1941 the transactions if assumed to be similar were not the same as those occurring before the 1926 action and for the purpose of res adjudicata they must be identical not merely similar; that the alleged conspiracy required constant adherence to its purposes and was a constantly self renewing offense.

Fifthly, that the present action is brought under different statutes — the 1926 case charged only violations of the Sherman Act; the present suit charges violations of the Sherman, Clayton and Wilso-n Tariff Acts; that different parties, subject matter and relationships are involved; in the former case only General Electric and Westinghouse and one of its subsidiaries are named as defendants, while here Corning, Philips, the “B” licensees, two patent holding companies, and Westinghouse are named in addition to General Electric and one of its subsidiaries. The former case dealt only with the 1912 General Electric-Westinghouse license and a comparatively small number of General Electric agency agreements, whereas the present one deals with domestic agreements, international agreements, the operation of a vast “agency” system largely comprised of a new form of “agency” and numerous activities in restraint of trade and in furtherance of monopolistic objectives. It further claimed that the relief sought in this case is different from that sought in 1924. The former case was brought to cancel the Westinghouse-General Electric Agreement of 1912 and the “agency” agreements of Westinghouse and General Electric. The present case sought a complete reorganization of the structure of the industry, including the cancellation of, and injunctive relief against, foreign and domestic contracts between General Electric and various alleged co-conspirators, compulsory licensing of patents and dissolution of the monopoly achieved and maintained by General Electric.

The Government contended that it could distinguish the case of Straus v. American Publishers’ Ass’n, supra, and the others cited by General Electric. In connection with the Straus case it argued that the “agreements and conduct” complained of in both actions were “exactly the same” except that instead of covering both copyrighted and uncopyrighted books the later agreements applied to copyrighted books. The earlier case also involved copyrighted books and therefore the issue in the second suit had already been litigated. Both suits covered the same period of time except that the second action asked for damages for a ■longer period. Additional parties were privy to the judgment in the first suit. It asserted that there is no comparison between the two cases because both actions involved in the Straus litigation concerned the same statutes, parties, subject matter and identical issues.

It is true that the complaint in the 1926 case and the present one were filed for violation of the anti-trust laws. It is equally true that new matters are brought forward in the present controversy which make it different. Also a different period of time is involved. That very passage of time has evolved new activities upon the part of the defendants and is essentially a factor bearing upon the continuing validity of patents and their efficacy as a basis for contractual relationships. It is sufficient to say that there are such differences in the time element, the parties, and their activi

*776

ties and relationships and the prayers for relief that the doctrine of res judicata cannot be applied as a complete bar to this entire action.

Though the doctrine does not operate as a complete bar to the present litigation, some of the issues there determined may well bar a reconsideration of those same issues here. In the case of Sutton v. Wentworth, 1 Cir., 247 F. 493, 501 , the court stated:

“There is a difference, sometimes overlooked, between the effect of a judgment as a bar to the prosecution of a second action for the same cause and its effect as an estoppel in another suit between the same parties upon a different cause of action. In the former case a judgment on the merits must be pleaded, and is an absolute bar to a subsequent action; it concludes the parties, not only as to every matter which ■was offered and received to sustain or defeat the suit, but also as to any other matter which might have been offered for that purpose. In the latter case, the judgment in the prior action may be offered in evidence, and operates as an estoppel only as to those matters which were there directly in issue and either admitted by the pleadings or actually tried.”

This principle was recently approved by the Court in Commissioner of Internal Revenue v. Sunnen, 333 U.S. 591, 597, 598 , 68 S.Ct. 715, 719 , where the rule was stated as follows:

“But where the second action between the same parties is upon a different cause or demand, the principle of res judicata is applied much more narrowly. In this situation, the judgment in the prior action operates as an estoppel, not as to matters which might have been litigated and determined, but ‘only, as to those matters in issue or points controverted, upon the determination of which the finding or verdict was rendered.’ ”

Where the former decision has been dis-positive of any issue in this case it will be pointed out as the various issues raised herein are taken up.

The result of the 1926 case was to grant General Electric a legal monopoly in the manufacture and sale of the incandescent lamps. General Electric operated under a system of licenses permitting use of its patents, 527 in number at the commencement of this action, under specified conditions. The license system involved two types, “A” and “B” with considerable differences in their requirements.

At the time the instant suit was filed, the following licenses were in existence:

Westinghouse

Sylvan! a

Consolidated

Kenrad

Tungsol

Chicago Miniature

13

“A” License dated August 1, 1927 (Ex. 25-G)

“B” Licenses (Exs. 27-G, GE-65, GE-66)

dated August 1, 1933

dated July 1, 1933

dated July 1, 1933

dated October 1, 1933

dated January 1, 1934

These licenses were continuations or renewals of substantially similar licenses granted prior to 1922 as follows: Westinghouse, March 1, 1912; Sylvania, January 2, 1917; Consolidated, April 1, 1918; Kenrad, December 1, 1916; Tungsol, January 1, 1921; and Chicago Miniature, January 2, 1919.

The Westinghouse license, Exhibit 25-G, established price and quota restrictions, and provided for a non-exclusive license to General Electric of Westinghouse patents and an exchange of manufacturing information. Provisions were made for an increasing percentage in 1927 at 22.442% and by 1930 and thereafter 25.442% in dollars of the net aggregate sales of General Electric. In addition, no license was granted under General Electric’s foreign patents and “no license is granted to export electric lamps, or sell such lamps for export, except to countries to which the Licensee [GE] would itself have a right to export them”.

The “B” licenses (Exs. 28-G, 29-G, 30-G, 30b-G, 31-G, 32-G) contained no price restrictions but limited production to a per

*777

centage in dollars of the net aggregate sales ^of General Electric and contained an export restriction similar to that of Westinghouse.

14

The Alleged Adjuvant Monopolies

The Government primarily contended-that General Electric monopolized the incandescent lamp industry. In order to support and maintain this monopoly, it asserted that General Electric maintained separate illegal monopolies which it termed “Adju-vant Monopolies” claiming that separate ■ anti-trust actions could have been maintained on each and listed them as follows:

(1) “All modern high-speed automatic lamp-making machinery manufactured and distributed in the United States is made and directly controlled by General Electric.

(2) “All machinery for producing all types of glass bulbs, tubing, and cane manufactured in the United States for electrical purposes is made or directly controlled by General Electric and Coming.”

(3) “All lamp base-making machinery manufactured in the United States is made or controlled by General Electric.”

(4) “General Electric is the only manufacturer in' the United States that sells a complete line of lamp bases.”

(5) “General Electric and Corning produce practically all of the large glass bulbs, tubing, and cane used in the manufacture of incandescent lamps in the United States.”

(6) “General Electric manufactures or controls approximately 90% of the tungsten filament wire, lead-in wire, and support wire used in incandescent lamps in the United States.”

(7)

“General Electric expanded its distribution outlets from 39,777 to 83,391 in the period in question, and by this means, together with the 30,000 odd Westinghouse agents, who are tied to the General Electric marketing scheme, dominates lamp marketing in the United States.”

(8) “General Electric has a monopoly of lamp patents. This was secured by means of its license agreements with Westinghouse, the B Licensees and foreign companies, agreements with large domestic industrial concerns, namely, American Telephone & Telegraph Co. and Radio Corporation of America, and by its deliberate effort to obtain from the Patent Office Patents covering every aspect of the lamp and its manufacture no matter how trivial and without regard to validity.”

(1) Lamp Making Machinery

Under the first of the so-called “adjuvant monopolies” the Government charged that General Electric controls the manufacture and distribution of all modern high-speed automatic lamp making machinery in the United States. Two manufacturing concerns were alleged to have been eliminated for all essential purposes from competition with General Electric. One was Alfred Hofmann & Company, and the other was the Eisler Engineering 'Company, both located in Newark, New Jersey. It appears from a series of letters of General Electric officials in late 1923 and early 1924 that the matter of licensing Hofmann and Eisler to make and sell lamp making machinery was given consideration. In speaking of the proposed license from GE to Hofmann, Mr. Morrison wrote to Mr. Appleton of GE on January 21, 1924 (Ex. 338-G).

“Our purpose, of course, in granting this license is to get the manufacture of our lamp making machinery under control with a view to protecting our foreign as well as our domestic interests.”

And, again in another letter of the same day to Mr. Burchard (Ex. 339-G) :

“Our purpose in entering into the proposed arrangement with Hofmann is to limit his right to supply machinery to the Licensees of the General Electric Company in the United States and its affiliated companies in Europe.”

In April of 1924 a license was executed which provided, among other things, that Hofmann would receive the business of selling lamp machinery to the “B” licensees in return for agreeing not to sell lamp making machinery to others in the United States (Ex. 327-G). Subsequently General

*778

Electric itself sold lamp making machinery to the “B” licensees. The agreement was cancelled in 1930. General Electric claims the relationship was entirely valid and legal in that the contract concerned only such machinery upon which General Electric had patents and that the $65,000 paid Hofmann upon the cancellation of the agreement by General Electric was not in consideration for its cancellation but to settle a claim for damages asserted by Hofmann against General Electric.

The other competitor in lamp making, Eisler, was made defendant in four suits filed by General Electric in this district on twelve patents. Two of the cases were finally decided against General Electric by the Third Circuit Court of Appeals. General Electric Co. v. Eisler et al., 3 Cir., 1927, 20

F.2d

33 and General Electric Co. v. Eisler et al., 3 Cir., 1928, 26 F.2d 12 . Still a third decision went against General Electric in General Electric Co. v. Eisler et al., 3 Cir., 1930, 43 F.2d 319 . The fourth of the suits was dismissed because the patents had expired before the suit came to trial. General Electric denies that its suits against Eisler were instituted because it desired to eliminate a competitor in, the lamp making machinery field but that they were instituted because it had patents which it believed were valid as issued by the Patent Office and that it was wholly within its rights to prosecute its suits against Eisler which it believed was infringing its patents.

General Electric produced catalogues of both Hofmann and Eisler to show that both firms still offer lamp making machinery for sale although it was admitted by its Chief Engineer of Equipment Works that the machinery built by them was less efficient than that built by General Electric itself (R.1894) and Mr. Poor, President of Sylvania, testified that he believed that the machinery exhibited by Hofmann and Eisler in their catalogues could not be effectively utilized in the profitable manufacture of electric lamps (R. 3292,

3294). It

was brought out that General Electric sold lamp making machinery to its “B” licensees only on condition that in the event of a termination of the license agreement General Electric was to have the option to repurchase such lamp machinery except that which had been owned by th^ “B” licensees for ten years or more. Neither Westinghouse nor the “B” licensees were licensed to make lamp making machinery for sale to others. General Electric denied that it had any intent to limit others so that it could exert a monopoly over the manufacture and distribution of lamp making machinery. It contended that others still make it, among them, Standard Tool and Manufacturing Company (R.3408), York Electric (R.3654) and Kahle Machine Company (R.3409). Sylvania installed a machine shop in which some machinery was manufactured in 1923 and 1924 and at the time of trial herein had nearly completed a new and large plant for this purpose (R.3329).

Bearing in mind that the narrow issue presented by the Government under this heading is its contention that General Electric accomplished a separate and complete monopoly of the manufacture and distribution of all modern high speed lamp making machinery in the United States, examination shows that the Government’s proofs fall short of showing monopoly of machinery. ThS Hofmann license on its face permitted the licensee to manufacture machinery under General Electric patents and in so far as that machinery is concerned restricted its distribution. General Electric’s contention that statements made by its officials always referred only to machinery under the patents of General Electric and that Hofmann was otherwise free to sell lamp making machinery not so patented is not convincing but on the contrary exhibits an attempt to restrain trade. But at best, on the Government’s side, this does not connote monopoly but the attempt to restrain Hofmann from trading in lamp making machinery with particular emphasis in the field of supplying potential foreign competitors of General Electric and can involve

no

more than a

violation

of Section 1 of the Sherman Anti-Trust Act.'

As far as the Eisler litigation is concerned, comments made in this opinion under the patent heading apply and the Gov-. ernment’s contention is not supported by a showing of other than ordinary disposi

*779

tion to litígate patents issued by the Government.

The incorporation of the provision for buying back machinery from the “B” licensees tied to a termination of the patent license before the licensee owned the machinery for ten years is likewise susceptible to successful attack as to its validity because it is an effort to extend the patent monopoly prohibited in such cases as Ethyl Gasoline Corporation v. United States, 309 U.S. 436 , 60 S.Ct. 618 , 84 L.Ed. 852 and Mercoid Corporation v. Mid-Continent Inv. Co., 320 U.S. 661 , 64 S.Ct. 268 , 88 L.Ed. 376 . But even though there is spelled out from this provision a restraint of trade under § 1 of the Sherman AntiTrust Act, the burden is upon the Government to show, aside - from whatever other implications there may be in General Electric’s conduct toward the manufacture of lamp making machinery, that' there is a specific and separate and complete monopoly in this particular field. The undisputed contention of General Electric that the Hofmann concern, Eisler and other companies continued to manufacture Tamp making machinery stands in the way of a conclusion that the Government has proved that General Electric monopolizes this field.

(2, 5) Glass Machinery and Products

The next of the so-called “adjuvant monopolies” mentioned by the Government deals with the charge that machinery for producing all types of glass bulbs, tubing and cane manufactured in the United States for electrical purposes is made or directly controlled by General Electric and Corning. The fifth alleged “adjuvant monopoly” deals with glass bulbs, tubing and cane produced by the machinery to which reference is made in (2).

The Government submitted that its proofs laid the foundation for its argument that General Electric, through its own activities and through the activities of Corning, had secured a monopoly of the glass bulb, tubing and cane used in incandescent electric lamps in the United States; that General Electric and Corning had mutually agreed with each other not -to invade their respective fields of making incandescent electric lamps and making glass bulbs, tubing and cane for such lamps; and that the monopoly was constructed by General Electric and Corning and controlled and guided by General Electric.

It alleged that the extent of the monopoly was practically complete in that General Electric and Corning manufactured approximately all of the glass bulbs used-in the manufacture of incandescent electric lamps in the United States; that General Electric and Corning manufactured all the glass tubing used in radio tubes and for incandescent electric lamps; that only a small percentage of bulbs was imported into the United- States; and that the majority of miniature bulbs used in the United States was manufactured by General Electric and Corning but Westinghouse and Tungsol manufactured miniature bulbs for their own use out of tubing made by Corning and some negligible quantity of miniature bulbs was also made by independents out of tubing made by Corning.

It further alleged that General Electric produced practically all but 6% of its requirements of bulbs, tubing and cane, the balance of which it was under contract to purchase from Corning; that it did not compete with Corning and made few and limited sales only of bulbs, tubing and cane, and that Corning was thus the only source of supply for glass parts available to lamp manufacturers except General Electric. It also alleged that General Electric, through agreements entered into by Corning, had the power to and did fix the price at which Corning sold glass parts to lamp manufacturers through their agreements; and that it was through such control of prices at which other manufacturers purchased glass parts that General Electric had been able to tighten and make more secure the monopoly over the manufacture and sale of incandescent electric lamps.

In answer to the Government’s argument, General Electric submitted, among other things, that it had been entirely innocent of any part in the establishment of a general program of monopolization or restraint of trade; that its consistent course had been its interest in developing glass for its lamps and that neither its contracts nor course of business were

*780

designed to do anything more than improve the quality and production of glass for its own use. It challenged the presence of proof in the case justifying aggregation of Corning and General Electric for the purpose of establishing claims of monopolization. It further contended that each of the agreements complained of by the Government was a legitimate and legal transaction consistent with General Electric’s purpo-se of improving the quality of glass parts and reducing the cost of glass and incandescent electric lamps. General Electric insisted that its interest was primarily in the business of making and selling lamps and that its production of parts necessary to the assembly of the finished lamp was only incidental to its primary objective. In the case of some of the parts, such as bases, filaments and welds, General Electric claimed it found it practicable- to produce in excess of its own requirements and to sell such excess to others. However, it stated that it had been its general policy with respect to glass to produce -only for its own use and that this had not been the result of any agreement or understanding with Corning.

Under the provisions of a contract dated April 6, 1910 (Ex. 565-G) between General Electric, National Electric Lamp Company, Corning Glass Works and The Libbey Glass Company, it was provided, among other, things, that General Electric and Corning should become entitled' to certain rights in new improvements or inventions of machinery covered by United States patents for use in the manufacture of glass bulbs or tubing devised or acquired by either of the parties. That contract also provided that prices paid by General Electric for glass purchased from Corning and Libbey should be based upon sellers’ manufacturing costs, and that such prices “shall in no case be based upon a cost exceeding 7-%% of the lowest cost * * * realized at the plant of any of the parties * * * .” Empire Machine Company

15

had been organized in 1909 by some of the owners of Corning for the purpose of developing glass blowing machinery and had succeeded in developing a semi-automatic bulb blowing machine called “Empire E”, which appeared to have possibilities of success. General Electric was anxious'to have the right to use the “Empire E” and negotiations resulted in the contract dated Jan. 9, 1914 (Ex. 568-G) which was entered into by General Electric, Corning, Empire and American Blank

15

, a corporation organized by Empire to hold title to its patents. Provision was made in the contract for Empire to transfer 25% of its stock in American Blank to General Electric and to deposit 37^% of its stock in trust for the joint benefit of General Electric and itself. The basis of the contract was specified therein as follows:

“Whereas, the Empire Company owns or controls many Letters Patent and Applications for Letters Patent of the United States for inventions relating to glass-blowing by machinery, the use of which inventions the General Electric Company and the Corning Company are desirous of securing for the field covered by this agreement, and whereas, the parties hereto desire to co-operate to secure the introduction of improved machinery and methods which will decrease the cost of manufacturing incandescent electric lamp bulbs," * ’’i

It was also provided:

“All inventions, including machines, processes and apparatus relating to glassblowing by machinery which are now or may hereafter become the property of or under the control of the General Company or the Corning Company, or the Empire Company, shall, subject to the rights of other parties under contracts now in force, inure within the United States to the exclusive benefit of the American Company for the production of incandescent electric lamp bulbs, intended and adapted to be manufactured into electric lamps (but not the electric lamp itself or any step in the manufacture thereof, as distinguished from the manufacture of the bulb) as well as mold-blown articles of glass in so far as

*781

the same are or may be used for electrical purposes or in connection with electric illumination, and proper license agreements shall be executed by the party holding control of any such inventions to vest in the American Company these rights. Neither the General Company, nor the Corning Company nor -the Empire Company shall acquire any rights within the United States to inventions of the class specified unless the other parties to this agreement shall have, opportunity to acquire equal rights to use the same upon the same terms; * * *

>>

American Blank was obligated to grant to General Electric and Corning:

“sub-licenses under any and all the United States patent rights owned or controlled by the American Company. * * :¡: »

The parties to the agreements of April 6, 1910 and January 9, 1914, modified and amended the terms thereof, and on January 22, 1922, a new contract was entered into by General Electric, Corning, Empire and American Blank as of Januarv 1. 1921. referred to as the “Four Party Agreement” (Ex. 555-G). By this agreement the contract of April 6, 1910 was terminated and that of January 9, 1914 was merged therein and terminated.

It appears from the recital of the new contract that in 1916 Empire acquired for the sole use of American Blank exclusive rights to the so-called Paddle Feeder of the Hartford Fairmont Company,' Cf. United States v. Hartford-Empire Co., D. C., 46 F.Supp. 541, 548 , for the production of bulbs in the United States and that pursuant to agreement between General Electric, Corning and Empire, General Electric acquired for the sole benefit of American Blank the exclusive right to use the inventions of the so-called Westlake bulb blowing machine and the so-called Danner tube drawing machine •in the United States for certain fields. Exclusive rights to the inventions of the so-called Fagan cane machine for a certain field in the United States were also to be transferred to American Blank from General Electric. By this contract all United States rights under inventions relating to glass working by machinery, which on January 1, 1922 became the property of, or under the control of General Electric, Corning or Empire, were made to inure to the exclusive benefit of American Blank, for the production of bulbs, intended and adapted to be manufactured into incandescent electric lamps and other electrical devices comprising sealed enclosures (but not the electric lamp itself or any step in its manufacture as distinguished from the manufacture of the bulb) as were inventions relating to the production by machinery of glass tubing and cane. No rights were granted with reference to any patent relating to incandescent electric lamps or to the manufacture thereof as a part of which the bulbs, tubing and cane were used. American Blank agreed to issue non divisible and non-transferable licenses to General Electric and Corning under all the United States patent rights owned or controlled by it. It was further provided in the agreement that all United States rights under invention relating to glass working by machinery developed, owned or controlled by General Electric or Corning between January 1, 1922 and January 1, 1931 should also inure to the exclusive benefit of American Blank, which should grant sub-licenses under inventions to be thereafter acquired by it to Corning and General Electric without royalty. No rights should inure for the manufacture of the lamp or other device itself, or any part thereof as distinguished from the manufacture of bulbs, tubing and cane as such. Provision was made for payment to General Electric for the price of the rights to the so-called Westlake, Danner and Fagan machines in the sum of $1,315,000. in the following manner. Stock held in trust by Empire to the extent of 37%% of all of the stock of American Blank of a par value of $232,500. was to be transferred to General Electric and the balance of $1,082,500. was to be paid to General Electric out of royalties received by American Blank in accordance with a detailed scheme set out in the contract. The contract also provided that General Electric would be entitled to a license under all British patents controlled by Empire prior to January 1, 1922, and that Empire would be entitled to a license under all United States patents relating

*782

to machines, apparatus or processes for making mold-blown articles of glass issued or to be issued to General Electric on inventions made prior to January 1, 1922. Finally, the contract provided that American Blank would be entitled to a license under all patents (excepting British) issued or to be issued on inventions owned or controlled by the Empire Company or to which the Empire Company was entitled and made prior to January 1, 1922.

The 1921 agreement was amended as of June 30, 1928 (Ex. 519-G) by the following provisions:

1. General Electric Company shall pay no license fee to the American Company.

2. United States rights under inventions relating to machines, apparatus, or processes for glass working by machinery developed by Corning or General Electric between January 1, 1922 and July 30, 1928 shall inure without charge or royalty to the exclusive benefit of the American Company for the production of bulbs, tubing and cane

and other glass parts.

16

3. All United States rights for improvements (as differentiated from inventions themselves) on any 'and all existing inventions now or thereafter patented, developed by Corning or General Electric between July 1, 1928 and December 31, 1940

17

which by reason of contracts in force on January 1, 1922 have become or shall become the property of or under the control of either of them prior to January 1, 1941

18

shall inure without charge to the exclusive benefit of American for the production of bulbs, tubing and cane

and other glass

parts

16

for use in making electric lamps and other electrical devices comprising sealed containers.

4. The word “improvements” was particularly defined as not including basically new machines, the intention of the parties being to limit the same to inventions which are improvements on existing machinas, apparatus, and processes now or hereafter patented.

5. Non-exclusive rights for the United States shall inure without charge to American for the production of bulbs, tubing and cane

and other glass

parts

16

for use in making electric lamps and other electrical devices under inventions now owned or hereafter and prior to January 1, 1941

19

developed by Corning or General Electric or which by reasons of contracts in force January 1, 1922 have or shall become the property of or under the control of either of them prior to January 1, 1941

19

relating to :

a. Machines for glass working, etc.

b. Glass melting furnaces, molds, etc.

c. Machines for making up glass batch, etc.

d. Methods of glass furnace operation, etc.

■ e. Machines for packing bulbs, etc.

6. No rights relating to refractories shall inure to American under inventions controlled by Corning prior to April 1, 1932

or between December 31, 1940 and January 1, 1951.

20

7. No rights shall inure to American for the manufacture of the lamp or other devices or to American under any patents relating to frosting,

and no license is granted American under any foreign patents

21

8. Non exclusive rights shall inure to General Electric without royalty under United States patents controlled by American on June 30, 1928 and prior to January 1,. 1941

22

provided no rights shall inure to General for the production of bulbs, tubing and cane

or other glass parts

20

for sale as such but only for the production of bulbs, tubing or cane,

or other glass

partsto be manufactured by General within the United States, Canada, or

Mexico

20

into electric lamps or other electrical devices.

9. Corning and General are at liberty to acquire from third parties rights under inventions of the kind or class inuring to American. In negotiating for such rights prior to January 1, 1941

19

each'will en

*783

deavor to provide an opportunity for the other to participate in the acquisition thereof

23

10. Corning grants General non-exclusive licenses to make and use within the United States all inventions now and prior to April 1, 1932 developed by Corning relating to refractories for the production by General Electric of bulbs, tubing and cane,

and other glass parts

20

in the United States, Canada and Mexico.

20

11. Payments to General Electric shall be reduced in the amount of 25% of the annual expenses of American but shall not exceed $1500 annually. Empire agrees to pay General (1) % net profits of American derived from foreign rights, and (2) an amount equal to 62%% of net profits of American from patent rights transferred to American by Empire and General.

In addition to the amendments footnoted the following provisions were incorporated in 1935:

1. Rights of American within the field described to inventions developed by Corning or General between January 1, 1941 and January 1, 1951 or which shall become the property or under the control of either of them between January 1, 1941 and January 1, 1951 by reason of contracts in force on January 1, 1922 shall be non exclusive.

2. Corning grants General a non exclusive license to make and use within the United States all inventions developed by Coming between December 31, 1940 and January 1, 1951 relating to refractories for the production of bulbs, tubing and cane.

In 1928 General Electric and Corning entered into a further agreement (Ex. 539-G) which superseded an agreement of 1922, and in which, as amended, each agreed to grant the other non-exclusive licenses under patents acquired prior to January 1, 1951, “relating to glass composition, or to batch, or recipe, or formula for glass”. The license granted was limited to bulbs, tubing, cane and other glass parts to be used in the manufacture of lamps. No license was granted to General Electric to sell bulbs, tubing, cane and other glass parts, except to RCA Radiotron. The agreement provided for a complete exchange of information on production of products covered by the agreement.

The automatic bulb blowing machine field was again revolutionized with the development by Corning in 1930 of the high speed ribbon machine which strikingly increased the production of bulbs.

24

In accordance with the terms of the Four Party Agreement, Corning, by an agreement dated September 23, 1933 (Ex. 525-G) granted an exclusive license to American Blank under its patents relating to the Ribbon Machine. American Blank on September 25, 1933 granted a non-exclusive license under such patents to General Electric with the same restrictions on General Electric sales as those contained in the Four Party Agreement (Ex. 526-G). On the same date Corning granted General Electric a non-exclusive license under these same patents (Ex. 527-G). This license

*784

agreement restricted General Electric to the manufacture of bulbs and machinery, and prevented its selling bulbs (except to RCA Radiotron) and machinery.

The Government claimed that Corning and General Electric control 100% of the trade in glass bulbs, tubing and cane; since the contract of 1914 each was already assured of license under whatever patents issued permitting operation by both under such patents; therefore, it was unlawful afterwards to cross license, there being no controversy between the parties. It claimed that the parties’ recognition of this was demonstrated by the fact that the 1928 amendment provided that non-exclusive licenses should be granted to Corning. It contended General Electric and Corning continued to grant American non-exclusive licenses but treated them as exclusive, and that each followed a general policy of not licensing other companies to manufacture or sell bulbs, tubing, or cane for use in the electric field.

In disputing the Government’s charge that it monopolized the manufacture or sale of glass parts for incandescent lamps and that its production cannot be aggregated with that of Corning, General Electric represented that in 1941 it made and sold approximately 56.6% of the large incandescent lamps sold in the United States; that it produced about 94% of its own requirements and that its sales to others were inconsequential. Thus, it made in that year about 53.2% of all the large lamp bulbs used in the country, and it argued that 46.8% were made by others in this country or were imported, from which it concluded that its percentage could not possibly amount to a monopoly of manufacture. General Electric also contended that its cross licensing or pooling agreements were entirely legal because they had no purpose or effect of restraining trade in glass or in lamps. Indeed, it argued, it would have been prejudiced by restraint of trade in glass from outside sources aggregating some $2,000,000 in the years 1935-1940 and would have suffered actual pecuniary detriment from any restraint on competition.

The evidence disclosed that in 1924 a firm called the Electric Glass Company sought to order through the Tungsten Materials Division of the General Electric Company one S — 11 Bulb Blowing Machine. Mr. W. Ennes of the GE Tungsten Materials Division, to whom this order was directed, advised American Blank Company of the receipt of this order and that since the National Division at Cleveland had all the necessary parts for the assembling of this machine and were in position to make delivery he believed it would be good policy for it to give that Department an order from it as soon as it received the order from the Electric Glass Company (Ex. 839-G). Electric Glass Company promptly ordered from American Blank such a machine pursuant to instructions given it by Mr. Ennes (Ex. 840-G). This order found its way into the hands of Mr. A. D. Falck, then president of the Corning Company who stated that S — 11 bulbs had always been a glass factory product and that “millions are produced by Corning Glass Works annually”. He gave it as the opinion of the Corning Glass Company that the American Blank Company should advise Electric Glass Company that it was not at liberty to grant the license asked for or to authorize the use of a machine, as the rights for this purpose were vested exclusively in the existing licensees of American Blank Company (Ex. 842-G). Mr. Appleton, counsel for General Electric Company, concurred that no licenses should be-issued by American Blank Company but upon a different ground. He believed that the Electric Glass Company should be advised by American Blank Company that it was not its policy to lease machines to. manufacture bulbs of this size (Ex. 843-G). The American Blank Company indicated to Mr. Appleton its concurrence in his opinion and promptly advised Electric "Glass Company to that effect (Ex. 844-G, 845-G). Again in 1929 an inquiry was directed to the Corning Glass Works by a banking firm concerning the possibility of procuring automatic machines for the manufacture of bulbs for incandescent lamps, radio tubes and other similar devices and met with the answer that they were held under license and were not open for sale or license to other companies for radio tube-

*785

manufacture at that time (Exs. 848-G, 849-G).

In 1938 Western Electric Company advised Hartford-Empire Company of its desire to obtain a machine for making lamp bulbs. The inquiry was forwarded to the Corning Glass Works by the Hartford-Empire Company with the information to the inquirer that it did not market a machine for fabricating bulbs (Exs. 855-G, 856-G). On April

27,

1938 American Blank Company acknowledged the inquiry propounded by Western Electric Company, which had been forwarded by Hartford-Empire Company to the Corning Glass Works which in turn, referred it to the American Blank Company and advised Western Electric Company concerning the output of the machine and asked to be further informed if Western Electric would be interested in the lease or license of one or more of these machines (Ex. 857-G). On May 18, 1838 a further communication was sent Western Electric Company by the American Blank Company stating that if Western Electric Company were interested it might be possible to work out an arrangement whereby one of these machines could be purchased (Ex. 858-G). On July 28, 1938 the American Blank Company advised Western Electric Company that “a careful consideration of the patent and license situation concerning the machine controlled by this company for the manufacture of small bulbs from tubing renders it impractical to offer you a license for its use.” (Ex. 859-G).

General Electric offered objection to the admission into evidence of the writings and statements of others to which reference has been made as being not binding upon it. No question is raised but that General Electric and Corning associated themselves as parties to the written agreements under consideration. The statements to which objection is taken were made by parties to those agreements, or in the case of inquiries from third parties, were induced or answered by parties to the agreements (Corning and American Blank). The statements, were essentially in furtherance of the mutual objectives of Corning and General Electric. Therefore, they were admissible and reasonable and valid inferences could be drawn from them. In the case of Hitchman Coal & Coke Co. v. Mitchell, 245 U.S. 229 , at page 249, 38 S.Ct. 65 , at page 72, 62 L.Ed. 260 , L.R.A.1918C, 497, Ann. Cas.l918B, 461, the court said:

"In order that the declarations and conduct of third parties may be admissible in such a case, it is necessary to¡ show by independent evidence that there was a combination between them and defendants, but it is not necessary to show by independent evidence that the combination was criminal or otherwise unlawful.

The element of illegality may be shown by the declarations themselves. The rule of evidence is commonly applied in criminal cases, but is of general operation; indeed, it originated in the law of partnership.- It depends upon the principle that when any number of persons associate themselves together in the prosecution of a common plan or enterprise, lawful or unlawful, from the very act of association there arises a kind of partnership, each member being constituted the agent of añ, so that the act or declaration of one, in furtherance of the common object, is the act of all, and is admissible as primary and original evidence against them.” (Italics supplied.)

The statements are significant, for in spite of the wording of the machine contracts between Coming and General Electric -they point to a consistent, continued and uniform consideration by both Corning and General Electric as to decisions to be made by American Blank in the disposition of licenses, machines or permission for the use thereof. It is not enough for the General Electric Company to point to the fact that the machine contracts expressly gave American Blank the power to grant sub-licenses under any and all of the patents and that indeed American Blank had granted such licenses as evidence in Exhibits 765-G, 768-G and 782-G. They were licenses to Tungsol and to Westinghouse, licensees of General Electric. It is ■clear that a course of conduct was followed by Corning and General Electric which controlled implicitly the action of American Blank in granting licenses precisely as if Corning and General Electric had the exclusive licenses in their own hands.

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The

Government complained that the agreements and cross licenses between General Electric and Corning were contrived to establish in them the control of the manufacture and sale of glass for electrical purposes, which they divided into two fields. Coming’s part was for the sale of the glass parts and General Electric's for the manufacture and sale of incandescent electric lamps. It observed that the agreements provided that:

(1) no license was granted to General Electric to sell glass, and

(2) no license was granted to Corning to manufacture or sell lamps.

It contended that the agreements themselves not only plainly disclosed the intention of the parties but that further evidence of the principles governing their activities is gleaned from a reference to interdepartmental communications between officials of each of the respective parties.

On December 13, 1926, the president of Corning wrote to its counsel, Mr. Dorsey, a lengthy letter in the course of which he referred to the relationship existing between Corning and General Electric in the following language:

“I think that Cross expects to concede the point as to. this particular machine. The incident, however, serves to illustrate the strictness with which General Electric clings to . the principle that it is not giving any rights to Coming for lamp making. The converse of this principle with us is that we are not giving any rights to General Electric for glass making except for use in its own lamp factories.” (Ex. 1087-G.)

Again on June 22, 1928 in an exchange between Mr. Dorsey, Counsel, and Mr. Curtiss, President of Corning, Mr. Dorsey mentions that:

•“You told me some time ago that you were not afraid of their [General Electric] going out of their licensed fields * * (Ex. 549-G.)

Evidence of the understanding of General Electric of its boundaries was suggested by -the Government in a memorandum dated December 23, 1938, forwarded by Mr. J. E. Kewley of that Company to Mr. Gerard Swope, President, wherein it is said:

“As arranged in our. agreements with Corning Glass Works and American Blank Company, no sales of glass parts for lamps are made by us excepting to Corning Glass Works. The only domestic sales of glass we make are to the R. C. A. Radiotron Co. as previously explained.” (Ex. 572-G, p. 2465.) ■

In this memorandum it is also disclosed that:

“G. E. Co. has followed the practice of selling Radio Bulbs and Tubing Glass to R. C. A. at the same price as used by Corning.” (Ex. 572-G, p. 2463.)

In a letter of March 13, 1939, Mr. Hughes of General Electric wrote to Mr. Soil of the Empire Division:

“Our agreements are such that we cannot furnish incandescent lamp bulbs to outside customers, and whenever we receive requests such as you sent to Mr. O. P. Anderson, and which originated with Pierce & Stevens, Buffalo, N. • Y., we refer the person making the request to Corning Glass Works, Corning, N. Y. They are in position -to furnish bulbs to anyone on the outside.” (Ex. 865-G!)

The Government further submitted that orders for glass lamp parts of types of which only General Electric had a supply on hand, would be placed with Corning which would bill and collect the amounts due, but the merchandise would be purchased from and would be shipped by General Electric directly as an indication of General Electric’s complete disinterestedness in competition with Corning. This is further emphasized by the fact that when General Electric with Coming’s consent sold bulbs to Chicago Miniature under an “informal arrangement” ' Corning expected General Electric to make regular reports of such transaction (Ex. 879-G).

General Electric again declined to be bound by the statement of Corning representatives and asserted that the Government misinterprets statements made by its own agents, Messrs. Kewley (Ex. 572-G), Reider (Exs. 876-G-878-G) and Hughes (Exs. 865-G, 1087-G, 549-G). It insisted that the Government was unable to point to any substantial evidence of any agreement by General Electric not to engage in

*787

the glass business. It reiterated that it was prompted to adopt the policy of not furnishing glass by business reasons of its own and not any agreement with Coming and argued vehemently that Corning made its independent decision to adopt the policy Qf not entering the lamp business and submitted that there was no evidence to support the contention that there existed between Corning and General Electric an agreement not to compete with each other.

The facts show that General Electric made some sales of bulbs and tubes with the specific consent 'and knowledge of Corning. At least two areas, for this type of business occurred; one was in connection with the shipment of bulbs to Chicago Miniature and the other in the sale of bulbs to R. C. A. Radiotron. In each instance •the prices were upon the same basis as the prices charged by Corning and were with the full knowledge and consent on the part of Corning. Indeed, the R. C. A. transactions were pursuant to an agreement granting the right to General Electric to supply R. C. A. Radiotron and when General Electric made shipments of bulbs to Chicago Miniature it was expected to, and promptly did, report to Coming the details concerning such shipments.

The Government alleged that by virtue of sales agreements with Corning General Electric enabled itself to secure control over Coming’s prices. It specifically complained about an agreement between Corning and General Electric made as of June 30, 1928 (Ex. 570-G) extended by agreement to operate through 1950, by which General Electric agreed to purchase 11% of its requirements of bulbs from Corning. The percentage was to be gradually reduced to 6% for the year 1931 and the following years with an option to General Electric to increase it to 12%. The Government further alleged that Corning was guaranteed by General Electric sales of 33-%% of the total United States bulb consumption. Prices were established for the sale of glass to General Electric by Corning under formulae based in part on General Electric’s cost of manufacture and a complete exchange of cost information was provided for. In 1925 Westinghouse agreed to buy all of its annual requirements of glass from Corning (Ex. 783-G) at a price as low as any other purchaser from Corning with the right to purchase elsewhere from any other manufacturer who would supply 75% of its requirements at a lower price. Corning agreed to supply Sylvania and Consolidated with all their requirements of bulbs, tubing and cane at a price as low as that to any other customer (Exs. 811-G, 826-G) conditioned on the purchase in carload lots. Corning agreed to supply independent lamp manufacturers at prices no more than 10% above the lowest price (Exs. 837-G, 838-G).

Under these contracts the Government complained that General Electric’s cost of production influenced the cost to others, and that General Electric in effect underwrote the position of Corning as exclusive seller of bulbs. The Government argued •that it was the purpose of General Electric to keep independent glass manufacturers from gaming a part of the market large enough to enable them to supply independent lamp manufacturers on a mass production basis and that this purpose was accomplished. General Electric, on the other hand, asserted that the contracts between Corning and Westinghouse and General Electric’s “B” licensees expired before the institution of this suit by their own terms, and that if Corning had discriminated in the past against any other customer that the situation had been completely cured as a result of the filing of the Corning consent decree. However, it argued that there is no evidence that General Electric 'had in any way participated or had knowledge of Coming’s sales contracts with its other customers and that General Electric at most had Coming’s price lists.

The expiration of the contracts was yithin the period of a month of the filing of this suit and 'the consent decree filed on the part of Corning cannot be held to cover the issues raised in this case. The evidence discloses that the relationship between Corning and General Electric generated a condition whereby Coming preferred Westinghouse and General Electric’s “B” licensees’ business and that its other and independent customers were required to pay prices in excess of those with which Westinghouse and General Electric’s licensees were favored.

*788

General Electric contended -that there is no evidence that it made any attempt to influence Coming’s prices to Westinghouse or to any other customers of Coming. It denied that there was any connection between the percentage of General Electric’s purchases and its power to fix Coming’s prices. It-asserted that the exchange of price information with Corning was solely for the purpose of promoting efficiency of production and lower cost of manufacture. It alleged that its contract with Corning was in the usual course of a purchaser including in its contract provisions beneficial to itself. In connection with the Government’s contention that General Electric guaranteed Corning 33%% of the United States market and that it underwrote the position of Corning as exclusive seller of bulbs in the United States with -the purpose of keeping independent glass manufacturers from gaining a part of the market large enough to enable them to supply independent lamp manufacturers on a mass-production basis, General Electric insisted that the Government’s statements are based upon a misinterpretation of Article 5(b) . of the sales contract (Ex. 570-G) which reads as follows:

“The Corning Company shall maintain adequate facilities for supplying (in conjunction with any other substantial sources of supply which may be available but excluding and in addition to the facilities of the General Company)- a substantial part of the bulbs required in the manufacture of electric lamps in the United States. It is agreed that from thirty per cent (30%) to thirty-five per cent (35%) of the total requirements shall be the part thereof for which the Corning Company shall so maintain facilities and in consideration thereof, and for the purpose of inducing it to maintain such facilities, it is agreed that if, in any year after the calendar year 1928 the total sales by the Corning Company of bulbs used in the manufacture of electric lamps within the United States, plus the total of all such bulbs manufactured by any and all other manufacturers of bulbs within the United States (other than bulbs manufactured by or for the General Company by manufacturers other than Corning Company), plus all' importations of bulbs (other than importations by or for the use of the General Company) for sale or. use, shall be less than thirty-three and one-half per cent (33-%%) of the total consumption in said territory of bulbs manufactured therein and imported (including in such total any importation of bulbs made by or for the use of the General Company), then in the following year the General Company shall purchase from the Corning Company such additional quantity of bulbs as shall equal such shortage.

“The ascertainment and computation of the quantities of jmlbs manufactured and/or imported, for the purpose of this Section (b) of Article 5, shall be made to the reasonable satisfaction of General Company and General Company shall not be obligated to purchase any additional quantity of bulbs unless and until it has been determined to the reasonable satisfaction of General Company, that the total sales of the bulbs by the Corning Company, plus the total of bulbs manufactured and imported as aforesaid, have been 1-ess than thirty-three and one-half per cent (33-%%) of the total consumption in said territory of bulbs manufactured therein and imported.”

General Electric insisted that this provision did not constitute a guarantee to Corning of any percentage of the bulb business but that its obligation to make additional purchases from Corning arose only when Coming’s sales plus the total domestic bulb production by others than General Electric and Corning, plus all importation of bulbs fell below 33%% of the total domestic consumption. General Electric further contended that the evidence shows that the purpose of this provision of the sales contract was to provide for an outside source- of supply of glass adequate to protect General Electric against such curtailment in its own production as might result from tank failures, strikes, war-shortages and similar hazards, and that in practice the provision has been ignored by the parties because General Electric has never been called upon to purchase any bulbs under it.

Nevertheless the evidence shows that Corning could remain secure in the knowledge that if its sales fell below the formula

*789

as cited by General Electric, it could rely upon it to purchase bulbs in such amount as would fulfill General Electric’s commitment in the contract. It is also significant that Corning produced all of the bulbs for sale in the country except those produced by General Electric and such as may have been imported; the latter two categories being of insignificant consequence. Even in the absence of any showing of direct connection between General Electric, Corning and .General Electric’s licensees the hard fact remains that following in the wake of Coming’s and General Electric’s sales agreements there was an advantageous differentiation in price structures made by Corning to General Electric and its licensees over those who purchased independently from Corning and the base upon which these prices were fixed inevitably was formed out of General Electric’s cost figures. General Electric produced over 55% of the bulbs consumed in the country for its own use, and its agreement to absorb any deficiency in sales by Corning up to 33%% of the total number of bulbs produced in accordance with the specific provisions aggregated nearly the entire production of bulbs. All of these considerations lead to the conclusion that General Electric wielded a very powerful influence over the price structure of the bulbs susceptible of and producing the resulting constriction of the market which the Government charged.

The Government alleged that in order to bring patent rights and licenses of other glass companies within the field created by General Electric and Coming, and in order to prevent competition Corning entered into agreements with the Hartford-Empire Company. It is claimed that by virtue of its agreements with Corning, General Electric secured the benefits 'of the agreements with Hartford. Hartford-Empire Company held patents for the manufacture of glass containers and in 1922 Corning secured for itself exclusive rights in the field of bulbs, tubing and cane for electrical purposes (Ex. 763-G). This charge is supported by reference to certain documents taken from the Corning files. One of these is Exhibit 545-G which consists of a letter written by Coming’s attorney, Mr. Sayles, in December 1927 to Mr. Falck in which he reviews the then existing agreements with Hartford-Empire and gives his opinion as follows:

“I have studied as best I could the Corning-Hartford-Empire agreement, and as I interpret it Hartford-Empire gets no rights in machines that Corning develops in the field of bulbs or mold blown articles usable in connection with electricity, and therefore there is no reason why Corning could not enter into a further agreement with General Electric to pool their future inventions.”

General Electric contended that there is no evidence to show that it participated in or knew of the contractual arrangements between Corning and Hartford-Empire. It insisted that the statements of Coming’s officers relative to the purpose of the Hartford-Empire contract were inadmissible against it and if these statements are considered they show no more than that Corning believed General Electric received some indirect benefits from the Hartford arrangements. General Electric submitted that such benefits without participation in or knowledge of the agreements between Corning and Flartford rendered it no party to them. It further denied that it received any benefit whatever from the Corning-Hartford relationship.

The evidence is convincing that the relationship between Corning and General Electric inspired the negotiations between Coming and Hartford-Empire in order to protect the field in which Corning and General Electric had agreed they would operate and it also appears that Hartford-Empire in its dealings with Corning and other glass producing interests always reserved the rights within Coming’s field. Cf. Hartford-Empire Co. v. United States, 323 U.S. 386, 396, 398, 400, 421 , 65 S.Ct. 373 , 89 L. Ed. 322 , modifying United States v. Hartford-Empire Co., D.C., 46 F.Supp. 541 . See 46 F.Supp. 541 , at page 554.

This was not the only instance where sources of potential competition and intrusion into the field were eliminated. Two others remained involving (1) Libbey Glasj Company (Libbey) and (2) Kimble GlaaS Company (Kimble). The Government

*790

showed that Libbey in 1918 entered into a series of agreements with General Electric under which it leased to General Electric its bulb and tubing producing facilities until July 1st, 1928 (Ex. 757-G). There was also an option agreement between the parties under which Libbey could require General Electric to purchase the property and if its option was not exercised prior to July 1st, 1927 then General Electric would have an option to purchase any time prior to July 1, 1928 (Ex. 750-G). Apparently neither of these options was exercised and in 1932 by a series of agreements with Libbey, Corning purchased the business.including plants, equipment and good will of Libbey in the glass field which included tubing and cane (Ex. 762-G).

General Electric strenuously objected that there was no tie between the Corning-Libbey contract of 1932 and the 1918 contract between Libbey Glass Company and General Electric. It called attention to the fact that the 1918 contracts were submitted to the Attorney General in the course of the investigation which preceded the 1926 suit and claimed that due to shortages before World War I it made many attempts to augment the production of bulbs for its purposes. One of these efforts was to lease one of Libbey’s plants and the lease arrangement called for options upon the part of Libbey to sell within a certain period and thereafter for General Electric to purchase within one year. General Electric contended that its contractual relation with Libbey did not prevent that firm from producing bulbs, tubing and cane for many years.

Even though it be conceded, as argued by General Electric, that there is no showing connecting General Electric with the purchase by Corning of the Libbey plant, it is nevertheless implicit in Coming’s activity in reaching out for the absorption of this source of production yet available in the field that the effort was made to further close off the area in bulbs and lamps which Corning and General Electric had allocated to themselves. In 1926 and Í928 General Electric entered into cross licensing agreements (Exs. 994-G, 995-G) wherein Kimble granted General Electric non-exclusive licenses under its patents for the manufacture, use and sale of tubing and cane for incandescent lamps and other electrical devices “but not for other purposes” and General Electric granted Kimble a nonexclusive license under its patents for'the manufacture, use and sale of vials, and other chemical glass ware “but for no other purpose”. Kimble continued to make sales of bulbs and tubing to independent lamp companies until 1932.

The Government charged that in order to eliminate the competition furnished by Kimble, Corning entered into agreements with Kimble in 1932 in-which each party agreed that for a period of 17 years it would not produce or sell tubing, cane and glass ware falling within the exclusive field of the other (Ex. 996-G). Coming’s exclusive field was delineated as including products made from tubing and cane for use with electrical devices. Kimble’s exclusive field included products to be used in the medical profession such as ampoules, droppers and vials. In 1940 the agreements were superseded by a new agreement which carried on the same division of fields (Ex. 999-G). The Government offered evidence to show that both parties carried out the terms of their agreements strictly, steering business into the respective channels they had contrived. General Electric challenged .the Government’s allegations with regard to the Kimble-Corn-ing agreements with the assertion that there is no evidence whatever to show a relationship between the General Electric and Kimble agreements and the Kimble-Corning arrangements. It sought to explain the fact that licenses by Kimble to General Electric were for the electrical field and those from General Electric to-Kimble were for vials, ampoules, droppers, and chemical glassware with the argument that these were the fields for which General Electric and Kimble had been licensed' by Libbey under the Danner patents.

While there is an appearance of independent action as between General Electric and Corning, the fact is that General Electric’s agreement with Kimble is in conformity with the restrictions established between General Electric and Corning in .the Four Party Agreement of 1921 as. amended and the agreement between Corn--

*791

ing and Kimble likewise follows that pattern. The design of the pattern is brightened when it is considered that through the seeming independent negotiations by Corning with Hartford-Empire, Libbey and Kimble the domination over the manufacture and sale of bulbs, tubing and cane ■for electrical purposes was promoted to a point where the products could be purchased only from Corning with the resulting benefits by way of stabilization of the field to General Electric.

The Government claimed that the acquisition of the Peiler and Pipkin patents showed how General Electric and Corning have conspired to maintain the monopoly. General Electric obtained an exclusive license to the Danner machine, rights to which Cbrning acquired through American Blank from General Electric. This patent issued in 1917 and General Electric and Corning regarded it as controlling the manufacture of tubing and cane. The Peiler Patent, issued to Hartford-Empire in 1926 upon an application dated 1912, preceded the Danner patent and dominated several of its claims. It is argued that General Electric and Corning were moved to purchase the Peiler patent in order in effect to extend the Danner patent from 1934 to 1943 — nine years. The Government argued that in order to obviate the objection to the Peiler patent’s questionable validity, Corning and General Electric licensed Libbey, Kimble and Demuth Glass Works following á successful infringement suit against the latter by Hartford-Empire and Corning. General Electric contended in defense of the charges against it revolving around the Peiler patent that its officers estimated that if their use of the Danner machine were held to constitute an infringement of the Peiler patent General Electric would make itself liable in damages to as much as $3,750,000 and that it was prompted to purchase royalty-free non-exclusive licenses under the Peiler patent as an insurance against the possibility of this liability. General Electric claimed that no letter was introduced in evidence between General Electric and Corning upon this subject. It discounted the letter

from

Mr. Dorsey, counsel to Corning, addressed to Mr. A. D. Falck, its president (Ex. 1082-G) as inadmissible as against General Electric and of no probative force as to its purpose in obtaining a sub-license 4 years after the letter was written. It asserted that the fact that it was offered a sub-license under the Velio tube drawing machine purchased by Corning and that it declined to acquire such a sub-license demonstrated clearly that it had no interest in acquiring extended patent rights relating to tube drawing. It is critical of the Government’s attack upon it in connection with the Demuth patent suit and charged that the Government unreasonably. attempted to show that it had an interest in this suit and its outcome. It argued that in view of the fact that it merely had a paid-up, non-exclusive, sub-license giving it no control over the Peiler patent and no right to any royalties resulting from sub-licenses, made it obvious that it could have no motive to agree with Corning that it should refuse to sub-license others under the Peiler patent.

General Electric’s association with Corning in the procurement of this patent was altogether too close for it to be permitted to relieve itself of the imputations of mutual interest of Corning and General Electric found in the documents from Coming’s official files written by its responsible lawyers and officers wherein the advantages of the Peiler patent to the production of bulbs and incandescent lamps were reiterated (Exs. 1086-G, 1087-G, 1089-G, 1092-G and 1093-G). To be sure these documents are written by Corning officials, but in some instances they are addressed directly to General Electric executives and contain convincing recitals of what was going on in the minds of the parties. There can be no doubt of the joint estimate of Corning and General Electric of the Peiler patent and of the joint effort to get Kimble and Libbey to take out licenses and acknowledge its validity. Similarly there can be little doubt that General Electric approved the course pursued by Coming’s counsel in the suit against Demuth when it was recalcitrant about taking a license and acknowledge the validity of the patent. It strains the imagination to conceive that General Electric did not know of and acquiesce in the arrangement to give Demuth

*792

a royalty free license under this patent after it was unexpectedly declared valid and infringed, thus staving off any higher court decision upon it.

The Government contended that General Electric attempted to enlarge the patent monopoly on the inside frosting of bulbs by the use of the pipkin patent despite the fact that in 1925 an inter-office communication between its officials indicated that “the idea of inside frost is too old to be broadly patentable to anybody” (Ex. 1145-G).

In 1928 General Electric acquired the Pipkin patent, No. 1,687,510, relating to the inside frosting of bulbs. As of June 30, 1928 (Exs. 1107-G, 1108-G) General Electric licensed Corning under the Pipkin patent, and agreed to grant to Corning licenses under any other patents relating to inside frost owned or acquired by General Electric during the term of the agreement, to manufacture inside frosted bulbs and to sell such bulbs to the lamp licensees of General Electric. Corning agreed to grant licenses to General Electric under any inside frost p'atents which it might acquire during the term of the agreement which, as amended, was to run until January 1, 1951. Thereafter Corning refused to sell inside frosted bulbs to any company not licensed by General Electric unless it approved (Exs. 1116-G-1118-G). In 1937 General Electric entered into an agreement with the Inwald Company of Austria whereby General Electric acquired the United States rights to the Inwald patents relating to the inside frosting of bulbs and Inwald agreed not to sell its frosted bulbs for export to the United States. General Electric agreed to pay $94,500 as consideration (Exs. 1139a-G, 1139b-G).

The Government charged that General Electric obtained the Inwald patent although it had decided that it infringed the Pipkin patent (Ex. 1141-G) and that General Electric made no commercial use of the Inwald patent. The Government also pointed to a letter signed by one of the executives of 'General Electric in which it is stated:

“ * * * the importance of securing some kind of product protection -on the In-wald frosted bulb, either by showing that the Pipkin patent covers the Inwald product or by including product claims in the InT wald application, is emphasized because if our United States Pipkin patent is sustained and if the Inwald foreign rights will not be in the hands of our Associated Companies abroad, it is probable that foreign made In-wald frosted bulbs will, in one way or another, reach the unlicensed American lamp manufacturers. Our agreement with the Inwald Company does everything possible to control this through the Inwald Company itself, but it will be a difficult job at best.” (Ex. 1140-G.)

General Electric, for its' part, called attention to the fact that in Exhibit 1145-G no reference is made to the Pipkin invention and argued that this concerned a totally unrelated subject. It conceded that the idea of inside frosting per se was old but argued that the Pipkin patent was not for the mere idea; it was for an inside frosted bulb of specified characteristics, which resulted in the first inside frosted bulb of practical value. It referred to the fact that the Pip-kin patent had been held valid and infringed by two Circuit Courts of Appeal (Ex. 225-G, at pp. 1279 and 1313), although finally the patent was held invalid by the Supreme Court, General Electric Co. v. Jewel Incandescent Lamp Co., 1945, 326 U.S. 242 , 66 S.Ct. 81 , 90 L.Ed. 43 , but this was after its expiration. General Electric argued strongly that it cannot be said that it realized all along that the patent was invalid. It concluded that the Pipkin invention related to incandescent lamps and that the lamp licensees were entitled to it and decided to offer Corning a license to make inside frosted bulbs for its lamp licensees so that they could “get them more cheaply by having Corning do the frosting” (Ex. 550-G); and General Electric submitted that its license to Corning was therefore not in furtherance of any conspiracy between it and Corning to restrain trade but merely as a convenient way to permit General Electric lamp licensees to obtain the patented articles. It insisted that this license agreement with Corning under the Pipkin patent was in no way repugnant to the anti-trust laws. It further asserted that in 1928 General Electric licensed Coming to practice the Pipkin patent without any restriction as to those to whom Corning de

*793

sired to sell. As to the Inwald patent General Electric asserted that its officers thought this method might have certain advantages over the process under the Pip-kin patent. After considerable experiment it was found that the Inwald process did not meet expectations and General Electric admitted that no substantial commercial use of this patent had resulted. It claimed that it was not its purpose in entering into the Inwald agreement to avoid competition from foreign made bulbs. It asserted that actually Exhibit 1140-G strongly supports the opposite view, for in it is disclosed that the writer had little confidence that the agreement with the Inwald Company would be adequate to protect the rights for which General Electric had paid a large sum and emphasized the importance of securing protection under the United States patent laws. General Electric asserted that it did not follow any program of acquiring patent rights for the purpose of keeping inside frosted bulbs out of the hands of independent manufacturers and that this is evidenced by the fact that when it was offered an opportunity to acquire rights under a certain Wetherbee patent on a method of inside frosting it decided to decline (Exs. 1123-G, 1-124-G). Again in the letters comprising Exhibit GE-233 a similar instance, it insisted, is shown.

The Government claimed that General Electric ignores the fact that the' license operated contemporaneously with the Westinghouse license and that General Electric’s patent monopoly based on the Pipkin patent was exhausted when Corning sold the frosted bulbs yet General Electric effectively controlled the disposition of these bulbs by Westinghouse which it purchased from Coming both as to price and export.

It is to be conceded that the intrinsic facts in connection with the licensing by General Electric of the Pipkin patent to Corning under the circumstances as was done in themselves would hardly constitute a violation of the anti-trust laws. However, when consideration is given to the entire picture and the involvement of Westinghouse and its price fixing licenses, the activity engaged in by General Electric with Coming illuminatfs the general scheme and thus becomes added indicia of the intent and purpose to accomplish the objective of monopoly in the glass industry as it affects incandescent electric lamps, Cf. United States v. Griffith, 334 U.S. 100, 108 , 68 S.Ct. 941 ; United States v. Patten, 226 U.S. 525, 543, 544 , 33 S.Ct. 141 , 57 L.Ed. 333 , 44 L.R.A.,N.S., 325. While it is clear that the Inwald patent rights were never put to practical use the evidence discloses that a substantial sum of money was paid for them and contractual obligations obtained to protect the American market.. The same reasoning adopted here as to the Pip-kin patent leads to the inescapable conclusion that the transaction in Inwald is likewise a clear index to the intent of the parties to maintain a monopoly. United States v. Griffith, supra; United States v. Patten, supra.

In connection with the charge of the participation by Westinghouse in the agreements between General Electric and Corning the Government pointed out that Westinghouse purchased its glass from Coming under more favorable terms than those granted to any other lamp manufacturer except General Electric; together with General Electric’s “B” licensees it was granted the right to purchase frosted bulbs from Corning; and had licenses from Corning and General Electric and American Blank to manufacture miniature bulbs in conformity with its agreements. These were benefits which accrued to Westinghouse and in turn, the Government charged, Westinghouse helped to support the maintenance of the General Electric-Corning monopoly. As evidence of this attitude upon the part of Westinghouse the Government introduced certain documents concerning transactions in' spray gun manufacture by the De Vilbiss Company. It appears that in 1927 Westinghouse and De Vilbiss cooperated in the development of a spray gun for coloring inside bulbs. The work was done at the Westinghouse plant by employees of De Vilbiss and Westinghouse reimbursed De Vilbiss for its expenses (Ex. GE-96). On December 12, 1928 Westinghouse wrote a letter to De Vilbiss in which it discussed the policy to be followed in the distribution of the spray guns so developed. It appears that Nilco Lamp Works and Hygrade Lamp Company

0

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(Sylvánia) had asked to be supplied with such spray guns and De Vilbiss was advised by Westinghouse “since these Companies are 'B’ licensees of the General Electric Company it is agreeable to us for you to supply these Companies with such guns.” (Ex. 1164-G.) When the Save Sales Company applied in 1933 to De Vilbiss to purchase such a spray gun it was advised by De Vilbiss that “According to our agreement with the General Electric Corporation it is impossible for us to sell you one of the C-526 spray guns as used by them for coating the interior of lamp bulbs.” (Ex. 1162-G.) This was drawn to the attention of an official of General Electric in 1934. General Electric contended that it had no knowledge of the Westinghouse-De Vilbiss transaction and made inquiry of both Westinghouse and De Vilbiss concerning the alleged agreement with General Electric. From the De Vilbiss letter to General Electric under date of January 24, 1934 it appears that De Vilbiss considered that there was a “working arrangements between our Company and the General Electric Company and Westinghouse Electric and Manufacturing company as it pertains to the special extension spray gun nozzle used for coating the interior of lamp bulbs.” This letter describes the arrangement between De Vilbiss and Westinghouse whereby the appliance in question was developed with De Vilbiss supplying the engineering service paid for by Westinghouse on account of which De Vilbiss says:

“ * , *

*

we agreed orally that this particular nozzle would not be exploited generally to the trade.

“Our files contain no written agreement but this arrangement was made orally and has since been adhered to as being a fair and equitable obligation to the company paying for the development of this nozzle.” (Ex. 1163-G.)

General Electric claimed that the Government apparently abandoned its charge that General- Electric made any arrangement concerning the manufacture of the spray gun in question. It denied that the complaint in the case charges that General Electric asserted any responsibility for the Westinghouse-De Vilbiss arrangement or any evidence that General Electric had anything whatever to do with such agreement. In this contention General Electric is correct but this evidence is relevant and material in so far as it bears upon the participation of Westinghouse in the relationship between General Electric, Corning and itself. There is a clear indication here that Westinghouse .in contemplation of what it considered its normal course of duty extended itself to see that only the licensees of General Electric should be served where this particular appliance was concerned. The Government sought to implicate Tung-sol as a supporter of the alleged General Electric-Corning monopoly by exposing the relationship of Tungsol to American Blank as a lessor and eventual owner of American Blank machines for blowing " miniature bulbs. Such a machine was first developed by General Electric in 1923. It was under agreement to transfer the rights under the patent relating to this machine exclusively to American Blank. General Electric sold such machines to, or permitted them to be manufactured by Westinghouse and the Miniature Incandescent Lamp Corporation, which was the predecessor of Tungsol. The question was raised by American Blank or Coming as to why General Electric had not transferred exclusive rights under these machines to American Blank, since Tungsol had two such machines and others were being built for it. Corning agreed that General Electric should grant exclusive rights under the patents relating to this machine to American Blank, and American Blank would license Tungsol and Westinghouse. Such a license was made to Tung-sol by American Blank, first for seven and later for a greater number of miniature bulb blowing machines (Exs. 780-G, 766-G). Under this license title to the machines remained the property of American Blank and on the termination of the licenses it had the right to repurchase the machines. For t-his lease Tungsol paid over $10,000 and agreed to pay royalties based on the number of bulbs produced (Exs. 767-G, 768-G). Finally in 1935 Tungsol requested that it be given title to the machines and Corning approved such action (Exs. 778-G, 779-G). However, in the agreement transferring ownership to Tungsol it was obligated to continue paying royalty and to ob

*795

serve the same restriction on the use the machines as was provided in the previous lease agreement (Ex. 765-G). During the negotiations Tungsol’s attorney advised ■it that in his view the original transactions were in effect a sale and not a lease and that therefore American Blank had no right to charge royalties for the use of the machines. He stated: of

“If, however, you feel that your relationship with the American Blank Company can he taken up independently of your relationship with the Corning Glass Works and the General Electric Company, we feel very strongly that by appropriate negotiation future royalty can either be avoided or very much reduced, and, perhaps back royalties recovered.

“If the question were simply one between you and the American Blank, and involved no other business relationships, we should have no hesitation in going into it further with a definite idea of avoiding future payments of royalties and possibly recovering royalties heretofore paid, although that possibility is a very dim one.

“Before even discussing this, however, the question of general policy must be determined.” (Ex. 777- G.)

The Government asserted that Tungsol continued to pay a large amount of royalty to .American Blank through 1939 (R. 3648 and Ex. 2307b-G). The Government concluded that Tungsol considered that its other business relationships with Corning and General Electric would be affected if it discontinued payments of royalty to American Blank as suggested in its lawyer’s letter. From 1935 to 1939 Tungsol paid American Blank varying sums for royalties. These are bulked in the statement in evidence (Ex. 2307b-G). The only other evidence adduced by the Government in this isolated area is that Tungsol’s lawyer advised it that there was a possibility of escaping from the payment of royalties but that its position with Corning and General Electric might be affected if it sought to discontinue such payments to American Blank. There is no explanation by Tungsol as to why it chose the course of continuing to pay American Blank royalties in the face of its counsel’s advice and if this incident were to be analyzed by itself there would be lacking definite proof of Tungsol’s support of the general scheme. Only when it is considered in connection with Tungsol’s relationship as a “B” licensee does this incident raise a color of participation by Tungsol in the monopoly scheme. When Tungsol’s entire position and status is considered the arrangement is an index to its participation in the general conspiracy charged.

It was further claimed by the Government that the monopoly was also maintained by the elimination of domestic competition. Under this heading the Government showed that in 1935 three unlicensed companies, Premier Miniature Bulb Copipany, Dura Electric Company and Henry Lange, Inc., were producing miniature bulbs on machines considered by American Blank Company to infringe patents of General Electric. The Government submitted that Corning had the primary interest in the matter of preventing the use of tubing made by others than Corning in the manufacture of miniature lamps. Coming’s counsel ^advised the companies that they were infringing patents held by American Blank (Exs. 949-G — 951-G). The objective sought by Coming’s counsel was to draw the companies into accepting licenses wherein means would be used that would insure the licensees purchasing all tubing from Corning. Since a requirement could not be legally utilized in the licenses that would compel the licensees to purchase all ■of their tubing from Corning, it was recommended that the desired result could be accomplished by limiting the licenses to one year and then refusing to renew if the licensee bought tubing elsewhere than from Corning (Exs. 955-G — 958-G). At the time this situation arose title was still in General Electric and it granted American Blank licenses under these patents on November 1, 1935 (Exs. 963-G, 963a-G). Licenses prepared by American Blank and submitted to the three companies contained provisions for a term 'of one year and 'provided for royalties (Exs. 964-G-967-G). The licenses were not accepted and eventually suit was instituted against the companies (Exs. 975-G, 978-G, 986-G). Lange and Dura entered into a stipulation that they would be bound by the results of the suit against Premier

of

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(Ex. 989-G). The case was tried against Premier and a decision was rendered that the claims involved were invalid (Ex. 781-G). General Electric argued that the suit in no event could have resulted in the elimination of domestic competitors since it is a fact that it went against the plaintiff. It sought to excuse itself from any responsibility in connection with the activity of Coming’s patent counsel in the litigation. The exhibits offered by the Government in connection with this transaction run from 942-G to 990-G and none is more revealing than a letter dated January 8, 1936 written by Mr. Lange to counsel for Corning (Ex. 969-G) in which he sets forth the impact of the pressures by American Blank upon his company. General Electric may have been entirely free from many of the mechanics of this action but was an indirect party to the suit and it made the necessary license arrangements with American Blank preparatory thereto and cannot escape the implications that are patent as evidence of the entire arrangement with Corning to effectively armor their monopoly position.

The Government claimed that a serious threat to the alleged monopoly position of General Electric and Corning in the United States was the Dutch firm of N. V. Philips’ Gloeilampenfabrieken, a limited company of Holland. Philips owned patents relating to glass machinery which it threatened to exploit either by manufacturing in the United States or by licensing other American Companies to manufacture (Exs. 431-G, 447-G, 448-G). The Government submitted that Philips threatened not only the position of Corning as the only company in the United States selling bulbs, tubing and cane for electrical purposes, but also was a threat to General Electric’s alleged controlled sources of supply for bulbs, tubing and cane. When the matter of the sale of Philips’ patent rights to Corning was breached in 1933 it indicated that it felt under obligation first to discuss the matter with General Electric which expressed an interest in purchasing the patents (Exs. 438-G, 439-G). Negotiations were conducted with Mr. Minor of International General Electric in 1935 (Ex. 448-G). Reports of these negotiations were made by Mr. Minor to Coming (Exs. 449-G, 450-G) and arrangements were made for Corning officials to meet with officials of International General Electric in Europe to discuss the European bulb and lamp situation in which they might be interested (Ex. 451-G). After protracted negotiations a draft of the proposed agreement was transmitted by Philips to Coming (Exs. 459-G, 460-G) which provided for payments to Philips of $20,000 a year and gave exclusive licenses to Corning under Philips’ United States glass machine patents; provided that Corning would supply glass to a Philips’ United States subsidiary; and provided further that Philips would not be interested, directly or indirectly, in the manufacture or sale of glass or machinery in North America. Since such an agreement might be held to violate the antitrust laws (Exs. 463-G, 464-G), Philips made an agreement with another Dutch company to grant licenses and this agreement contained the non-import provisions. A Dutch company named Nieuwe Nederlansche Maatschappij Tot Vervaardigen Van Spiegelglas N.V. (Spie-gelglas) was arbitrarily selected to be the immediate licensee of Philips. It was then to grant licenses to Corning under the Philips patents (Exs. 463-G-469-G) with provisions for payment to be made in Holland except if funds should be frozeñ by the United States Government (Ex. 476-G). All of these agreements were finally executed in 1937, effective as of January 1, 1936. Specifically they were:

(1) All exclusive license executed July 9, 1937 effective January 1, 1936 from Philips to Spiegelglas, a corporation of Holland, under Philips’ United States glass patents (Exs. 420-G, 425-G).

(2) An agreement dated as above between Philips and Spiegelglas wherein Philips undertook not to be interested in the manufacture or sale of glass in North America (Ex. 421-G, 426-G).

(3) Sublicense and assignment executed July 19, 1937 as of Aug. 1, 1936 from Spie-gelglas to Corning of all rights under Philips’ patents (Exs. 422-G, 427-G).

(4) Agreement between Corning and Philips executed July 19, 1937 as of July 1, 1936 by which Corning agreed to supply bulbs to Philips’ American licensees (Éxs. 423-G, 428-G).

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(5) Sublicense from Corning to General Electric dated March 1938 as of August 2, 1936 under Philips patent for the electrical field (424-G).

The Government claimed that the real purpose of these agreements was to keep Philips out of the United States glass market and that General Electric actively participated with Corning in accomplishing this purpose. General Electric entered into an agreement with Corning (Ex. 424-G) by which it obtained a license under the Philips’ patents, agreeing to pay half of the sums due to Philips. In this way it was alleged that General Electric secured the benefits of the agreements with Philips and Spiegelglas, which contained the provisions restricting Philips from competing in the United States. General Electric argued that it merely took a sublicense from Corning without the knowledge of any possible illegality of the arrangement between Corning and Philips and so it could not be found to have joined in the conspiracy to prevent the importation of bulbs, tubing and cane into the United States. The Government’s references to the transactions revolving around the so called Spiegelglas agreements were put forward in order to fortify its position that General Electric and Corning collaborated in order to construct monopolistic positions for each other. Notwithstanding the denials of the General Electric officials who testified that they knew nothing of the Spiegelglas agreement it is inconceivable that General Electric was unaware of the import of the series of agreements to which it ultimately subscribed when it undertook its sublicensefrom Corning. The deal with Philips was an effective effort at the protection of the Corning-General Electric mutual position and a view of the entire transaction from its inception to the ultimate sublicense to General Electric leaves no room for doubt that General Electric was aware of all of the implications for which it bound itself by sharing to the extent of one half the annual stipend to be paid to Philips.

25

The Government also argued that General Electric entered into the transaction with respect to the European rights of the Westlake bulb and Danner tubing machines which similarly reflected its endeavor to maintain the alleged Corning-General Electric monopoly. Mention is also made of the Corning Ribbon Machine, the European rights for which General Electric admittedly never negotiated. It is unnecessary to discuss the issue raised by the acquisition of the Westlake and Danner European rights at this point in our consideration of the case as the matter is dealt with in the broader aspects of the Government’s allegations concerning foreign transactions.

The Government adverted to the Corning negotiations with the Russian government to furnish it with ribbon machines (Exs. 404-G, 406-G). It brought to light a letter signed by Mr. E. A. Baldwin of International General Electric in 1934 in which he stated that he felt disturbed that the Russians might not respect territorial restrictions and that he considered that the ribbon machine situation in Europe resolved itself into one capital issue,

“namely: the protection of the American bulb market and all that goes with it, and the protection of the American investment in the European bulb market and all that goes with that * * (Ex. 406-G.)

The Government also showed that after International General Electric had conceded that it had no interest in the foreign rights to the Corning ribbon machine and Corning appeared to be closing with the Russians, officials of International General Electric Company and of International General Electric Company of New York, Ltd. sought to have Corning restrict the U. S. S. R. from exploiting any rights it. might receive from Corning in North and South America and other countries where General Electric and the foreign countries in which it had an interest were operating (Exs. 411-G, 413-G). Another instance associated with Russia was brought forward, by the Government when it showed that in 1935 RCA Radiotron sought .to obtain from Corning a miniature bulb blowing machine for the use of one of its licensees in Russia (Ex. 407-G). In a letter from Mr..

*798

Hewlett Scudder of General Electric to Mr. W. C. Duncan of International General Electric, wherein this transaction was discussed, the following language appears

“I understand that you and I agree that the General Electric Company own the machine or let the Corning Company have it in such a way that General Electric Company controls its sale and probable use.” (Ex. 408-G.)

From Exhibit 409-G it appears that General Electric came to a decision that it would decline to supply the machine and the Government assumed that this decision was based upon its fear that the Russians might use the machine in such a way as to be a .threat to European licensees (Ex. 408-G). The illumination thrown by the Government’s evidence with respect to the “Russian situation” casts only a feeble ray upon the relationships of Corning and General Electric in these instances and are but cumulative in demonstrating a cooperation between Corning and General Electric in the endeavor in this direction to protect their mutual monopoly.

General Electric submitted that the evidence wholly failed to support the charges of the Government with respect to its contracts and practices relating to glass and glass machinery, that they were legal in all respect-s and were the result of consistent effort to achieve “a productivity high in quality and quantity, and low in cost”. It denied that it had been a party to a conspiracy with Corning or any one else to monopolize the manufacture and sale of glass, to refrain from competing in the sale of glass or to exclude the products of glass manufacturers. It asserted that it has not imposed unreasonable restrictions upon licenses in granting others the use of its glass and glass machinery patents and has consistently opposed unreasonable restrictions on its use thereof. It denied any 'responsibility for difficulties which competitors may have had with, or their decision . to look to, Corning as their source of supply and generally contended that no grounds for relief have been shown by the Government with respect to this phase of the case.

The court -cannot find itself in agreement with the position taken by General Electric. The various contracts to ■which reference has been made in which Corning and General Electric participated were designed to effect an exchange of patents relating to machinery for the production of glass and glass as it pertained to the incandescent electric lamp so that the field was divided between General Electric and Corning. The design matured so that ■they produced practically all the machinery for the manufacture of glass in the incandescent electric lamp industry and Corning produced all of the glass bulbs, tubing and cane not produced by General Electric in the United States. Corning confined itself to the production and sale of the glass bulbs, tubing and cane for electrical purposes; General Electric, for all practical ■purposes, to the production and sale of incandescent electric lamps. Always great ■care was taken by each of the parties not to overstep the boundaries they had established for themselves. Corning was granted security and stability for its output under General Electric’s obligation to make additional purchases from Corning after the year 1928 when Coming’s sales plus the total domestic bulb production by others than General Electric and Corning plus all importation of bulbs fell below 33%% of total domestic consumption.

General Electric found the relationship •appealing to its interest too because it could calculate the cost of its purchased bulbs from Corning for its own use (which amounted to 6% of its requirements) at a price based partially on its own costs and its licensees received similar treatment from Corning with slight variations, while independents paid more. Corning negotiated with Hartford-Empire and Libbey and with Kimble to divide their glass production in such a manner that the electrical glass field would be strictly the domain of Corning and through it to General Electric. Any suggestion of competition in electrical glass by these companies was thereby effectively thwarted. This rendered a comfortable situation for Corning and at the •same time redounded to the benefit of General Electric .to the extent that it prevented encroachment on such influence as it had established on the single source of supply of electrical glass and its price from Corning. The incident of the contract for the

*799

American rights to the Philips patents and the concomitant commitment that this -country would not be exposed to competition with foreign glass demonstrated a vital cooperation between . Corning and General Electric.

At the time that General Electric acquired the exclusive license to the Westlake machines from Libbey in 1918 its patents were in interference with the Empire machine to which both General Electric and Corning held non-exclusive licenses. General Electric therefore considered that it became possessed of rights in the controversy between the two machine patents. Notwithstanding the previous commitments between Corning and General Electric which accorded each to the other rights in their respective patents and licenses General Electric insisted that the 1921 Four Party Agreement was entered into to -settle the controversy arising out of the interference proceedings between the Westlake and Empire machines. It appears that Corning resisted General Electric’s claim that it should be reimbursed for Coming’s share in the consideration given by General Electric for the acquisition of the Westlake license. This was considered by General Electric to constitute the kind of controversy to which the United States Supreme Court made reference when it used -the following language in the -case of Standard Oil Co. v. United States, 283 U.S. 163, 171 , 51 S.Ct. 421, 424 , 75 L.Ed. 926 :

“Where there are legitimately conflicting claims or threatened interferences, a settlement by agreement, rather than litigation, is not precluded by the Act. * * * An interchange of patent rights and a division of royalties according to the value attributed by the parties to their respective patent claims is frequently nece-ssary if technical advancement is not to be blocked by threatened litigation. If the available advantages are open on reasonable terms to all manufacturers desiring to participate, such interchange may promote rather than restrain competition. * * * ”

Nevertheless the court agrees with the Government that there was no patent controversy or threat of controversy between Corning and General Electric in connection with the interference proceedings, for each was assured of licenses under whatever patents issued which would permit operation by both under such patents. There was simply an adjustment to General Electric for its outlay in acquiring the Westlake license and the 1921 Four Party Agreement was a natural evolution of the relationship between Corning and General Electric memorialized in written form. Cf. United States v. Line Material Co., 333 U.S. 287 , 68 S.Ct. 550 .

These and other considerations heretofore discussed looked toward the -perpetuation of the domination that General Electric and Corning secured over the entire industry in the manufacture and distribution of glass bulbs, tubing and c-ane. The end result could be none other than monopoly in -their hands to the practical exclusion of all competition. United States v. Patten, 226 U.S. 525, 543 , 33 S.Ct. 141 , 57 L.Ed. 333 , 44 L.R.A.,N.A., 325. The machinery phase, however, did not rise to the level of a -separate monopoly but was a restraint of trade and competition which functioned to give the ultimate monopoly in glass products as they pertained to the incandescent electric lamp industry. United States v. Griffith, 334 U.S. 100, 105-107 , 68 S.Ct. 941 . General Electric and Corning have accordingly violated § 1 of the Sherman AntiTrust Act in restraining trade and competition in the manufacture and distribution of machinery for the manufacture of glass bulbs, tubing and cane and § 2 of the Sherman Anti-Trust Act in monopolizing the manufacture and distribution of glass bulbs, tubing and cane. Likewise, American Blank, Empire and International General Electric

26

were necessary parties to the restraints exercised and'thereby violated § 1 and § 2 of the Sherman Anti-Trust Act.

(3, 4) Lamp Base Machinery -and Bases

Items 3 and 4 in the foregoing list of “adjuvant monopolies”, as alleged by the Government, dealt respectively with the charge that all lamp base making machinery manufactured' in the United States is made or controlled by General Electric and that

*800

General Electric is the only manufacturer in the United States that sells a complete line of lamp bases. The Government claimed that in addition to being separate monopolies they were used as supports for the entire alleged monopoly structure.

It appears undisputed that in 1912 the General Electric Company centered its lamp base making and base machinery making in the Providence Works as specifically authorized by the 1911 decree and that the acquisition was brought to the attention of the Attorney General in .1922. The lamp bases used on standard lamps comprising the large bulk of base production are un-patented and have been unpatented since 1922. This is also true of the basic machines upon which the standard bases are manufactured. Only one patent relating to the refinement of the threading machine, the use of which is not at all necessary to the successful manufacture of bases existed at the time of the commencement of this suit and that expired in 1947.

The Government specifically charged that Westinghouse willingly participated in a conspiratorial plan that it should not sell lamp bases to companies other than its own subsidiaries (Exs. 256-G, 257-G). It appears that on April 15, 1920, General Electric and Westinghouse agreed (Ex. 252-G) that General Electric was to provide Westinghouse with information for the manufacture of bases or machines for the consideration of the sum of $25,000 to be paid to it by Westinghouse. The 1927 license did not include the right to sell lamp bases and as a matter of fact it is shown that Westinghouse did not sell bases to lamp manufacturers except in small quantities.

General Electric contended that since Westinghouse was licensed to sell lamps and paid for “know how” although there was no specific agreement or restriction upon Westinghouse not to sell bases or machines it would have been entirely proper to have such an agreement. Westinghouse could sell bases not made with General Electric patents or “know how” and as a matter of fact at the time o.f the trial is said to have been selling such bases.

The Government urged that General Electric’s intent to restrict the sale of bases or base making machinery is evidenced by its relationship with Waterbury Farrel Foundry and Machinery Company. In 1924 General Electric had developed a double-cut eyelet machine to be manufactured by the Waterbury Farrel Company and secured an agreement from that company not to sell this machine to any other customer for a period of five years unless General Electric was reimbursed for the expense of development (Ex. GE-175). In 1930 General Electric had Waterbury Far-rel develop another eyelet machine at the expense of General Electric and under the same conditions restricting sale to other purchasers for a period of five years. On February 10, 1941, after this suit was brought, General Electric notified Waterbury Farrel Company that :

“Without determining the existence of such an agreement or its terms, you are hereby notified that such agreement, if it exists, is hereby cancelled and terminated and that you are under no obligation by the terms of such supposed agreement or otherwise, to obtain -this Company’s approval of those to whom you wish to sell such machines.” (Ex. GE-177.)

Waterbury Farrel replied to the effect that the machine had been marked “private” in its records during all the years and that there was no written agreement, and that it felt that the understanding was a very satisfactory way of handling this very special machinery (Ex. 178-G).

General Electric contended that it paid for the development of all of these machines and that it had a right to agree with the Waterbury Farrel Company that these machines would not be sold to other customers for a period of five years unless the development costs were paid to it. It wrote Waterbury Farrel Company after the suit was started in connection with the pinning machine because it first had notice of this situation upon the filing of the complaint and felt obligated to inform Waterbury Farrel Company of its position as soon as it learned of the situation. General Electric stated that so far as the eyelet machine was concerned it bought only one of the machines and no one else ever bought one because it was impractical.

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The Government next drew attention to the relationship of General Electric with the U. S. Tool Company in 1938. (Exs. 315-G, 316-G), when General Electric aided that company in the development of a lap-seam machine. General Electric endeavored to obtain an exclusive license to this machine and in Exhibit 317-G, Mr. Atkins of the Providence Base Works of General Electric wrote to Mr. Kenyon of General Electric Parts Department and concluded:

“The writer should attempt to negotiate an agreement with U. S. Tool Co. to be sure that G. E. is protected from other companies, domestic or foreign, getting into base business.”

It was concluded that an exclusive license was hazardous and since General Electric and Westinghouse controlled 85% of all the bases in use in the country and through th'e “B” licensees controlled an additional 10%, the field in which the independent manufacturer of bases would sell his product would be rather limited (Ex. 318-G). Thereafter an agreement was finally negotiated with the U. S. Tool Company whereby General Electric was granted a non-exclusive license on all the inventions in question (Ex. 314-G).

Again General Electric pointed out that it had incurred large development costs in connection with this machine until it was brought to completion by the U. S. Tool Company. It denied any wrong implications in Mr. Atkin’s letter of September 27, 1938 wherein he said :

“If for any reason we do not purchase the machine, I do not think they will dare to approch anyone except Westinghouse for fear of incurring General Electric’s ill will.” (Ex. 316-G.)

General Electric contended that a fair interpretation of this language meant that since it was heavily involved in the development costs of this machine that the U. S. Tool Company would hesitate to sell it to others without permission of General Electric until costs had been recouped for fear of incurring General Electric’s ill will. Again this machine was unsuccessful and has never been used for actual production.

The Government alleged that price cuts were made on bases from time to time and that these were designed to discourage the rise of any competitor in the field (Exs. 272-G, 307-G, and 308-G). It also refers to Exhibits 278-G, 279-G, 289-G, 290-G and 291-G as instances of refusal upon the part of the Providence Base Works to supply lamp bases or parts. General Electric denied any motive upon its part to suppress competition by lowering prices and in the three instances when it was requested to furnish bases or parts, it claimed those parts were the subject of patented products that it had the right to decline to sell.

The proofs, however, show that in 1938 General Electric required all independent, unlicensed lamp manufacturers to sign letters in which they waived any right to a defense against an infringement suit which might be based on their use of purchased lamp parts or materials (Ex. 278-G) and unless this waiver was signed Orders would not be filled (Ex. 279-G, R. 2123).

Still another effect of General Electric’s alleged monopolistic position in the base field was suggested by the Government as disclosed when General Electric and Westinghouse determined not to encourage the development of the low-wattage 3-light lamp using a medium screw base. In correspondence by General Electric and Westinghouse officials the sales policy was expressed to be based on the theory that this lamp was inefficient and costly to the consumer (Exs. GE-183, 258-G and 261-G). The Government insisted that the major reasons for General Electric’s opposition to the lamp was stated in a letter of Mr. Harrison of General Electric, dated March 29, 1937, in which he commented that the demand for these lamps seems definitely on the wane.

“ * * * a fact which should not he unwelcome to the public utility companies since the tendency of these small sizes is to cut down rather than to build up the use of kilowatt-hours.” (Ex. 268-G.)

The Government charged that General Electric refused to supply the Northern Incandescent Lamp Corporation, an in

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dependent, unlicensed manufacturer, with medium screw bases for a three-light lamp. Meanwhile the Eagle Manufacturing Company began to manufacture these bases. Thereupon the Government alleged that General Electric decided to do likewise so as to eliminate Eagle as a source of competition. Despite its aversion to the manufacture of these lamps General Electric went into the field. It is also alleged that General Electric was prompted by the motive of desiring to keep itself informed of quantitative information such as it could get by knowing who was producing how many bases. The Government pointed to Mr. Harrison’s letter in which he said:

“As a matter of fact, Providence is making the bases because we have felt that the value of having accurate quantitative information on all such things exceeded the disadvantage of making them.” (Ex. 266-G.)

The Government cited several instances where such information concerning independent manufacturers was sought and obtained by officers of General Electric from Mr. Atkins of the Providence Base Works. The Government charged that in its position as the supplier of bases to the industry General Electric was enabled in fact to maintain observers in the factories of its potential competitors and pointed to the memorandum report of Mr. Kenyon of General Electric (Ex. 305-G) as revealing “the penetrating power of a monopolist”.

General Electric claimed with regard to the medium base for three-light lamps that it made such bases because in spite of its judgment of the poor economy of the lamp for the consumer there was a demand for it which moved General Electric to produce the bases and the lamps. It pointed to the very fact that Eagle Electric Manufacturing Company was manufacturing these bases as proof that General Electric had no monopoly on their manufacture and challenges the Government’s statement that it refused to supply Northern Incandescent Lamp Corporation *s having no foundation in the proofs. It insisted that any information it gathered concerning competitors was in the ordinary line of the usual business methods and that the sale of lamp bases was not used as a scheme of spying out the quantitative information as charged by the Government.

The lamp base works constitutes a highly desirable arm of General Electric whereby it supplies itself, Westinghouse, the “B” licensees and others with lamp bases. It is practically unchallenged in the manufacture and production of lamp bases and is the only manufacturer of a full line of lamp bases in the United States. Although it supplied lamp bases to all desiring them, it was able to annex conditions to purchase rights as evidenced by the waiver of defense requirement. This conditioning sales upon waivers of defenses, even though upon an unpatented device, was ah invalid. restriction b

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