Appendix — V. E. B. Carl Zeiss, Jena v. Carl Zeiss Stiftung

Supreme Court, U.S.

FILED

LIBRARY 1588

SUPREME COURT, U. ha APR 15 1971

MD: eccasdncweteendle

Se ner SER CER |

IN THE

Supreme Court of the United States

October Term, 1970

V.E.B. CARL ZEISS, JENA; STEELMASTERS, INC.;

ERCONA CORPORATION,

Petitioners,

V.

CARL ZEISS STIFTUNG, doing business under the name and

style of CARL ZEISS; and ZEISS IKON A.G.,

Respondents.

- APPENDICES

Harry I. RAND

200 Park Avenue

New York, N. Y. 10025

Attorney for Petitioners

CONTENTS

APPENDIX A—Judgment of Court of Appeals

Apprenpix B—Order and Judgment of District

Court

Appenpix C—Denial of Petition for Rehear-

ing in the Court of Appeals

Appenpix D—Opinion of Court of Appeals

Appenpix E—Opinion of District Court on

Trademark Ownership

Appenpix F—Opinion of District Court on

Antitrust Misuse Defense

ean

”

UNITED STATES COURT OF APPRALS

‘POR THE

SECOND CIRCUIT

At a Stated Term of the United States Court of Appeals,

in and for the Secon Circuit, held at the United States

Courthouse in the City of New York, on the second day of

November one thousand nine hundred and seventy.

Present: HON. J. EDWARD LUMBARD,

Chief ‘Judge

HON, STERRY R, WATERMAN,

Circuit Judge

. “HON, WILLIAM J, JAMESON,

; District Judge

Carl Zeiss Stiftung, doing business :

under the name and style of Carl Zeiss;

and Zeiss Ikon A.G.

Plaintiffs-Appellees,

v. : 62 Civ. 850

V.B.B. Carl Zeiss, Jena; Steelmasters,

Inc.; and Brcoona Corporation :

Defendants-Appellants,

Bxakta Camera Company, Inc.; Camera :

Specialty Company, Inc. and Carl

Zeiss Inc., :

Defendants.

Appeal from the United States District Court for the

Southern District of New York.

This cause came on to be heard on the transcript of record

from the United States District Court for the Southern District

of New York, and was argued by counsel.

ON CONSIDERATION WHEREOF; it is now hereby ordered, adjudged,

and decreed .that the judgment of said District Court be and it

hereby is modified and as so modified said judgment be and it

hereby is affirmed in accordance with the opinion of this court.

A, DANIEL FUSARO

U.S, District Court Clerk

Piled Jan. 6, 1971 A true copy

8.D. OF N.Y.

/e A. Daniel Pusaro

Docketed as a nt 2 lerk

on January 7, ion #71,209 4

Apr. 1, 1969

UNITED STATBS DISTRICT COURT S.D.N.Y.

SOUTHERN DISTRICT OF NEW YORK

CARL ZEISS STIFTUNG, Reene Pasigese $

under the name and style of CARL

ZEISS; and ZEISS IKON A.G., :

Plaintiffs, :

~against- , | :

62 Civ. 850

Vv.E.B. CARL, ZRISS JENA; STEEL- :

ERCONA CORPORATION ORDER AND JUDOMENT

MASTERS

EXAKTA barana’ COMPANY ;

CAMERA SPECIALTY COMPAuY, iae

? Defendants,

CARL ZEISS, INC.,

Additional Defendant

on Counterclaims. :

The separate issues in the above-entitiled action

(presented bythe complaint, the denials set forth in para-

graphs 1 through 61 of the amended answers of defendants

VEB Carl Zeiss Jena, Steelmasters, Inc. and Ercona Corpora-

tion, the defenses and counterclaims set forth in paragraphs

62 through 114 of the amended answer of defendant VEB Carl

Zeiss Jena, paragraphs 62 through 119 of the amended answer

of defendant Ercona Corporation, and paragraphs 62 through

83 of the amended answer of Steelmasters, Inc., the defenses

set forth in paragraphs 115 through 121 of the amended answer

of defendant VEB Carl Zeiss Jena and paragraphs 120 through

126 of the amended answer of defendant Breona Corporation,

and the defenses to said counterclaims as set forth in the

amended replies of plaintiffs and Carl Zeiss, Inc.), which

ae ale A a a sinc oeteliann tear

were heretofore severed from the remaining issues herein,

having been considered by the Court upon the pleadings, the

evidence presented at the trial and the briefs submitted by

counsel for the parties, and the Court having filed its ;

opinions, findings of fact and conclusions of law with res- |

pect thereto on November 7, 1968, and March 12, 1969,

*

IT IS ORDERED, ADJUDGED AND DECREED as follows:

1. Plaintiff CARL ZEISS STIFTUNG, trading under

the name and style «. CARL ZEISS (hereinafter "Carl Zeiss"),

is the owner of the United States trade names "Zeiss" and

"Carl Zeiss" and the United States trademarks "Carl Zeiss",

“Carl Zeiss" in a distinctive lens frame, the distinctive

lens frame alone, "Zeiss" and the monogram "CZ" and is entitled

to the sole and exclusive right to use such names and marks in

commerce within and with the United States and to prevent

others from using in the United States such names and marks

and all other names and marks of which the words "Carl Zeiss",

"Zeiss", the initials "CZ" or the distinctive lens frame form

any part.

2. Plaintiff ZEISS IKON AG is the owner of the

United States trade name "Zeiss Ikon" and the United States

trademarks "Zeiss Ikon" and "Zeiss Ikon" in a distinctive

lens frame and is entitled to the sole and exclusive right to

use such name and marks in commerce within and with the

United States.

3. None of the defendants, either jointly or sever-

ally, has any right, title or interest in or to, or the right

to use, any of the United States trade names "Zeiss",

@2-

"Carl Zeiss" or "Zeiss Ikon" or any of the United States

trademarks referred to in paragraphs 1 and 2 hereof,

4, Since at least 1953 defendants VEB Carl Zeiss

Jena, Steelmasters, Inc, and Eroona Corporation have during

various periods infringed each of the trademarks of plain-

tiffs, i.e., "Carl Zeiss", "Carl Zeiss" in a distinctive

lens frame, the distinctive lens frame alone, "Zeiss", the

monogram "CZ", "Zeiss Ikon" and "Zeiss Ikon" in a distinctive

lens frame, in the United States and have unfairly competed

with plaintiffs through the use of the trade names "Optik

Carl Zeiss Jena VEB" ami "VEB Carl Zeiss Jena" and trade-

marks consisting of the words "Carl Zeiss Jena" in a dis-

tinctive lens frame, the distinctive lens frame alone and

the letters "CZ" and "CZJ" in trade within and with the

United States.

5. Since in or about 1953 defendants VEB Carl

zeiss Jena, Steelmasters, Inc. and Ercona Corporation have,

in violation of § 43(a) of the Lanham Act, 15 U.S.C. 1125(a),

from time to time falsely described and falsely designated

the origin of goods imported by them into the United States

and sold in United States commerce as being goods produced

by plaintiff Carl Zeiss or its licensee when in fact such

goods were produced by defendant VEB Carl Zeiss Jena, a

nationalized East German concern, which has no legal or other

connection with plaintiff Carl Zeiss or any of its affiliated

firms.

6. Each plaintiff is entitled to enforecement of

its rights in its trade names and trademarks against the

defendants and to the relief demanded against the defendants,

including damages, defendants' profits and an injunction.

7. Defendants and each of them, their officers,

agents, servants, employees, attorneys, and privies, and

all those persons in active concert or participation with

them who receive actual notice of this order and judgment

by personal service or otherwise, are permanently enjoined

and restrained from importing into, or selling, distribut-

ing or offering for sale in, the United States, either in-

dividually or in concert with others, any products (other

than products manufactured by plaintiffs) bearing any of

the names or trademarks of plaintiffs, i.e., "Carl Zeiss",

"Carl Zeiss" in a distinctive lens frame, the distinctive

lens frame alone, "Zeiss", the monogram "CZ", "Zeiss Ikon"

amd "Zeiss Ikon" in a distinctive lens frame, or any other

marks of which the words "Carl Zeiss", "Zeiss", the initials

"CZ" or the distinctive lens frame form any part, or any

colorable imitations or variations thereof, or using any

such names or marks in the United States to refer to them-

selves or any of their products in any advertising or

promotional material or correspondence or communication, or

in any other manner.

8. Defendants, and each of them, their officers,

agents, servants and employees are directed to deliver up

for destruction all labels, signs, prints, packages, wrappers,

receptacles, advertising and other such material in their

custody or possession in the United States bearing or con-

taining as a reference to defendants the designations or

names "Optik Carl Zeiss Jena VEB", "VEB Carl Zeiss Jena" or

any designations or names containing the words "Zeiss" or

"Carl Zeiss" or bearing or containing as a reference to

~ oe

defendants' products trademarks consisting of the words

"Carl Zeiss Jena", "Carl Zeiss Jena" in & distinctive lens

frame, the distinctive lens frame alone, the initials "Cz"

or "czy", "Zeiss Ikon" or any trademarks of which the

words "Carl Zeiss" or "Zeiss" or the initials "CZ" or "czJ"

or the distinctive lens frame form any part, or bearing or

containing as a reference to defendants or their products

any reproduction, counterfeit, copy or any colorable imita-

tion thereof, and all plates, molds, matrices or other means

of making the same in their custody or possession in the

United States.

j 9. Defendants Ercona Corporation, its officers,

agents, servants, employees and attorneys are permanently

enjoined and restrained from prosecuting in the United

States Patent Office oppositions to applications bearing

Serial Nos. 36,037, 36,035, 657,816 and 49,329 for registra-

tion of the trademarks "Zeiss", the words "Carl Zeiss" in a

distinctive lens frame and "Zeiss Ikon" filed with the

United States Patent Office by piaintiffs, and from prosecut-

ing in the United States Patent Office petitions for

cancellation of Registrations Nos. 722,796 and 727,470,

issued, respectively, to plaintiff Carl Zeiss on October 17,

1961 and to plaintiff Zeiss Ikon on February 13, 1962.

10, The United States Commissioner of Patents is

hereby directed to register in the name of plaintiff Carl

Zeiss the trademarks "Zeiss" and the words "Carl Zeiss" in a

distinctive lens frame, and in the name of plaintiff Zeiss

Ikon the trademarks "Zeiss Ikon", for which registrations

the respective plaintiffs have heretofore filed applications

Ne

bearing Serial Nos. 36,037, 36,035, 657,816 and 49,329 and

to dismiss the oppositions and petitions for cancellation

filed by defendant Ercona Corporation and referred to in

paragraph 9 hereof. .

ll. The defenses contained in the amended answers

of defendants VEB Carl Zeiss Jena, Steelmasters, Inc. and

Ercona Corporation, and all counterclaims contained in said

amended answers with the exception of those set forth in

paragraphs 115 through 119 of the amended answer of defendant

VEB Carl Zeiss Jena and paragraphs 119 through 124 of the

amended answer of defendant Ercona Corporation, are dismissed

on the merits, except insofar as they pray that the rights of

the parties be declared,

12. Each of the defendants is directed to file with

the Court and serve on plaintiffs' attorneys, within sixty (60)

days after the service on the defendants' attorneys of a copy

of this order and judgment, a report in writing under oath

setting forth in detail the manner and form in which such

defendant has complied with this order and judgment.

13. The Court expressly determines, pursuant to

Rule 54(b) of the Federal Rules of Civil Procedure that there

is no just reason for delay in entering judgment on the

separate issues heretofore tried and decided, and the Clerk

is directed to make entry of this judgment in accordance

with Rule 58 of the Federal Rules of Civil Procedure.

14, The remaining issues in this action raised by

plaintiffs' claims for damages and an accounting of defen-

dants' profits and by the counterclaims set forth in para-

graphs 115 through 119 of the amended answer of defendant

-6-

yEB Cari Zeiss Jena and in paragraphs 120 through 124 of

the amended answer of Ercona Corporation shall be éeferred

for subsequent trial.

15. Plaintiffs may tax the cost to which they are

entitled as of the date of the entry of this judgment;

further taxation of costs shall await the entry of @ further

judgment following the trial of the remaining issues.

16, Jurisdiction is retained by this Court for the

purpose of the subsequent trial of the remaining issues in

this action and also for the purpose of enforcing compliance

with thig judgment and punishing any violation thereof.

pated: New York, N.Y.

April 1, 1969

/s Walter R. Mansfield

U. mz D. J.

Judgment Entered 4/1/69

/s John Livingston

Clerk

33676

UNITED STATES COURT OF APPEALS

SECOND CIRCUIT

- SESS SSF SSBSSBVSHSBVB|S|ASHAIVBIABAOBSGOOS oeceoaeX

Carl Zeiss Stiftung, doing business

under the name and style of Carl

Zeiss; and Zeiss Ikon A.G.,

Plaintiffs-Appellees,

ve

V.E.B. Carl Zeiss, Jena;

Steelmasters, Inc. and Ercona

' Corporation,

, Defendants-Appellants,

Exakta Camera Company, Inc., et al.,

Defendants.

eee eeeceeeaaeneenX

A petition for a rehearing containing a

suggestion that the action be reheard in banc having

been filed herein by counsel for the appellants, and

no active circuit judge having requested that a vote

be taken on said suggestion,

Upon consideration thereof, it is

Ordered that said petition be and it hereby

is denied.

/s 3. EDWARD LUMBARD

Chief Judge

December 16, 1970

33676

UNITED STATES COURT OF APPEALS

SECOND CIRCUIT

- x

Carl Zeiss Stiftung, doing business

under the name and style of Carl

Zeiss; and Zeiss Ikon A.G.,

Plaintiffs-Appellees,

Vv.

V.B.B. Carl Zeiss, Jena;

Steelmasters, Inc.; and Eroona

Corporation,

Defendants-Appellants,

Exakta Camera-Compary, Inc., et al.,

- Defendants.

A petition for a rehearing having been filed

herein by counsel for the appellants,

Upon consideration thereof, it is

Ordered that said petition be and it hereby is

DENIED.

December 16, 1970

UNITED STATES COURT OF APPEALS

For tHE Seconp Circurr

>

No. 767—September Term, 1969.

(Argued May 5, 1970 Decided November 2, 1970.)

Docket No. 33676

—

Cart Zeiss StirruncG, doing business under the name and

* ‘style of Cart Zerss; and Zeiss Ixon A.G.,

Plaintiffs-Appellees,

—against— '

VEB Cart Zeiss Jena; STEELMASTERS, Inc.;

Ercona Corporation,

Defendants-Appellants.

—

Before:

LumBarp, Chief Judge,

Waterman, Circuit Judge, and

JaMESON, District Judge.*

vies

Appeal from a judgment of the United States District

Court for the Southern District of New York, Walter R.

Mansfield, Judge, adjudging that plaintiffs-appellees are

the owneis and entitled to the exclusive use of certain

trade names and trademarks in the United States; en-

joining defendants-appellants from further use of the

names and marks; and providing for damages for unlaw-

* Senior District Judge of the District of Montana, sitting by desig-

nation.

4499

ful infringement. Judgment modified by deleting provi-

sion for damages and affirmed.

—>

MiLBank, Tweed, Haptey & McCuoy, New York,

New York (William E. Jackson, Isaac

Shapiro, Walter J. Derenberg, Von Maltitz,

Derenberg, Kunin & Janssen, of counsel),

for plaintiffs-appellees.

Boretn, Hays, Sxuar & Herzperc, New York,

New York (Harry I. Rand, Donald E. Nawi,

David Kremen of counsel), for defendants-

appellants.

<>—

JaMEsON, District Judge:

This trademark infringement action involves the owner-

ship and use in the United States of the “Zeiss” and “Zeiss

Ikon” names and marks on optical and mechanical preci-

sion instruments. Plaintiffs-appellees are the Carl Zeiss

Stiftung (or Foundation) doimg business under the name

of Carl Zeiss, located in Heidenheim, West Germany, and

its subsidiary, Zeiss Ikon A.G., located in Stuttgart, West

Germany. The defendants-appellants are VEB’ Carl Zeiss

Jena, located in East Germany, and two of its distributors

in the United States, Steelmasters, Inc., and Ercona Cor-

poration.’

Appellees claim ownership and the right to exclusive use

of the trademarks as a successor of the original Carl Zeiss

1 VEB, or Volkseigener Betrieb, means “Peoples-Owned Enterprise.”

2 Exakta Camera Company, Inc. and Camera Specialty Co., Inc., named

as defendants, did not participate in the proceeding in the district court

and are not parties on this appeal.

4500

Stiftung (Foundation) created in Jena in 1889. Appellants

claim the right to exclusive use, or in the alternative the

right to concurrent use, as the assiguces and licensees of the

Jena Foundation.

The district court held that the appellee Heidenheim

Foundation was identical to the Carl Zeiss Stiftung and was

therefore entitled to the exclusive use of the “Zeiss” name

and trademarks in the United States; that Zeiss Ikon A.G.

was entitled to the exclusive use of the “Zeiss Ikon” name

and mark in the United States; and that since 1953 appel-

lants had infringed those trademarks and had violated Sec-

tion 43(a) of the Lanham Act, 15 U.S.C. $1125(a), by de-

scribing and designating goods they had imported from

Jena and sold in the United States as goods produced by a

licensee of the Zeiss Stiftung. The court rejected the de-

fenses of laches, acquiescence and abandonment; held that

the appellants were barred from asserting any claim to

ownership of the “Zeiss” name and marks by provisions

of Section 5(b) of the Trading With The Enemy Act (50

U.S.C. App. §1 et seq.) and regulations promulgated there-

under (8 C.F.R. $507.46) ; and struck the antitrust defense

asserted by the appellants.

Statement of Facts with Respect to Ownership

and Use of Trademarks

The basic facts as set forth in the court’s formal findings

and supplemental discussion with respect to the ownership

and use of the trademarks* may be summarized as follows:

3 Following a six week trial on the issues relating to the ownership

and use of the trademarks, the court made 481 findings of fact and

filed an opinion on November 7, 1968. That portion of the opinion re-

lating to the applicable law is reported in 293 F. Supp. 892, with the

notation that, “At the court’s request the factual background, becaus®

of its length, is not published.” The court made 27 additional findings

4501

In 1846 Carl Zeiss established a workshop for the manu-

facture of optical and mechanical precision instruments in

Jena in the Grand Duchy of Saxe-Weimar-Eisenach.* In

1875, Dr. Ernst Abbe, a mathematician and physicist teach-

ing at the University of Jena, joined Zeiss as a partner.

In 1884, with Otto Schott, they organized the companion

Schott Works for the manufacture of optical and other

types of glass.

In 1889 the Carl Zeiss Stiftung was created in Jena with

the required approval of the Duchy of Saxe-Weimar-EHisen-

ach. In 1891 all assets of the Zeiss firm were conveyed to

the Carl Zeiss Stiftung (FF 10) and since then the Founda-

tion has been the sole owner of the Zeiss firm (FF 11).

JA 817. In 1896 a new basic governing instrument desig-

nated a “Statute” was prepared and approved.® The stat-

ute was amended from time to time, the last time in 1941.

The Carl Zeiss Foundation was not charitable or public

in nature, but was established as a private foundation for

the purpose of owning and operating the Zeiss optical] busi-

of fact on the issues raised by appellants’ antitrust counterclaim and

filed an opinion on March 12, 1969, which is reported at 298 F. Supp.

1309, In this opinion FF refers to formal findings of fact on the issu2s

relating to use of the trademarks and JA to joint appendix.

4 In 1920 the Grand Duchy of Saxe-Weimar-Eisenach was dissolved

and incorporated into the newly established Land of Thuringia, a state

in the German Federal (Weimar) Kepublic. In 1952, the Land of

Thuringia was dissolved, and since then Jena has been located in the

District of Gera, a new political subdivision of the German Democratic

Republic, which had been established in October, 1949.

5 The Statute provided that the domicile of the Foundation should be

Jena (Section 3), that this provision could not be amended or rendered

inoperative (Section 121), and that its Works (including the Zeiss and

Schott Works) should not be transferred outside the immediate neigh-

borhood of Jena (Section 39). Upon dissolution one half of the “re-

maining value of assets” was to be distributed between Jena and a

neighboring community, the other half to go to the University of Jena

(Section 116).

4502

AE Det

¢ a Cig ee

ness for profit.* The profits were to be used primarily to

maintain, develop and increase the business enterprises and

to provide economic benefits for the workers. Any surplus

was to be used for promotion of technical knowledge and

science outside of the works, and for participation in com-

munity organizations and measures intended to help the

working population in Jena, where the works were then

located.

The Zeiss and Sthott firms were each under the direction

of a separate “Board of Management.” A “Special Board”

was to administer the nonindustrial assets of the Founda-

tion and to supervise the noncommercial activities. A

“Foundation Deputy” appointed by the Special Board was

to represent it on the Boards of Management of the indi-

vidual commercial enterprises.’

Between 1891 and 1945 the Foundation acquired inter-

ests in numerous other commercial enterprises, including

the Schott firm and Zeiss Ikon A.G. Since the early 1900s

(with interruptions during the two World Wars) the Zeiss

6 As set forth in the district court’s discussion of the facts: “TA]

private ‘Stiftung,’ or Foundation, is a legal entity or juristic person

with some attributes similar to those of a corporation under American

law, including the capacity to own property, enter contracts, engage in

business activities, sue and be sued, etc. It differs from a stock corpora-

tion (known as an ‘AG’ under German law) in that it has no stock-

holders. On the other hand, the absence of stock ownership does not

mean that it is therefore a public, non-profit, charitable or eleemosynary

enterprise. It is more in the nature of a trust to which the attributes

of separate legal existence as an entity are extended.” JA 969.

7 Each Board of Management was to consist of three or four members

appointed for a fixed period or for life. Only an employee having a

lifetime contract of employment was eligible for appointment. Two

members of each Board were appointed by the Special Board as the

“Mandatory” and “Deputy Mandatory.” Membership on a Board could

terminate only by voluntary resignation accepted by the Special Board,

expiration of a fixed period of appointment, or termination or cancella-

tion of the lifetime employment contract, which could be effected only

for gross violation or neglect of duty or disreputable behavior.

4

4503 a

firm has sold high quality optical and other scientific in-

struments in the United States under the Zeiss name and

the trademarks “Zeiss,” “Carl Zeiss Jena,” “C.Z.” and

others. Zeiss Ikon has sold photographic and related equip-

ment in the United States since 1926 under the “Zeiss Ikon”

and other names and marks.’

Beginning on April 13, 1945 the city of Jena was occu-

pied by the Allies. It was first occupied by the Armed

Forces of the United States, who remained for two and one-

half months, relinquishing control in July, 1945 to the

Soviet Military Forces, after it was decided that Thuringia

was to be part of the Soviet Zone, pursuant to the Allied

statement on Zones of Occupation, issued on June 5, 1945,

which divided Germany into four military occupation zones.

At the time of Germany’s surrender, the Zeiss Founda-

tion deputy was Professor Abraham Esuun, and its Board

of Management consisted of Professor Walter Bauersfeld,

Paul Henrichs, Dr. Heinrich Kueppenbender, and Pro-

fessor Georg Joos. The Schott Board consisted of Dr. Erich

Schott, Richard Hirsch and Mr. Henrichs. The adminis-

trative offices and principal manufacturing establishments

of both firms were in Jena, but Zeiss also had branch estab-

lishments in Berlin, Cologne, Hamburg, Vienna, and a num-

ber of foreign countries, all outside what was to become the

Soviet Zone, and Schott had a branch factory in Landshut,

Bavaria, which was within the American Zone.°

8 The use of the trade names and marks by both parties in the United

States is set forth in more detail later herein.

9 The total number of employees of the various enterprises in which

the Carl Zeiss Foundation had an interest was approximately 45,000

when the American Armed Forces first occupied Jena. Approximately

15,000 were employed in Jena and its vicinity, and 30,000 at outside

iccations. The employees in the plant at Jena included 2,000 foreign

workers and 3,000 conscripted laborers. By June, 1945 the 5,000 non-

4504

In mid-June, 1945, when it was evident that Jena was

shortly to become a part of the Soviet Zone, American Mili-

tary authorities evacuated all members of the Boards of

Management of the Zeiss and Schott firms and approxi-

mately 122 top scientific, production and administrative

personnel, to Heidenheim, Wuerttemburg, in the United

States Zone of occupation, where they established a tuctory

to assist in the continuing war effort against Japan. The

management and scientists did not depart voluntarily but

under military orders.

The members of the Board of Management of Zeiss desig-

nated three Zeiss employees, Dr. Friedrich Schomerus, Vik-

tor Sandmann, and Dr. Hugo Schraue, to act during their

absence. The Board of Schott made a similar designation

of three of its employees.’® Appellants contend that the

members of the Boards orally resigned. On conflicting tes-

timony the district court found that the departing Boards

of Management did not resign, “but arranged with three

trusted employees to exercise their functions during the

Board’s absence on the understanding that upon the Board’s

return it would assume exercise of its management func-

tions in Jena.” * (FF 82). JA 839.

regular workers had left the employ of the Zeiss Firm (FF 49, 50, 51).

JA 830-831.

10 Esau and all members of both Boards had been members of the Nazi

party. Their designees had not been identified with the Party. Each

designee had been employed for over ten years but did not have a life-

time contract. Lifetime contracts of employment were executed by

Schomerus and Schrade.

Kueppenbender, Schott and Schrade testified at the trial. All re-

maining members of all Boards were then deceased.

11 The district court said in part: “After careftlly reviewing the evi-

dence and appraising the witnesses (including Kueppenbender, Schott

and Schrade), we find that the credible evidence establishes that while

the Zeiss Board members evacuated to Heidenheim granted broad man-

agement powers to Schomerus, Sandmann and Schrade * * * and later

On June 9, 1945 the United States Armed Forces at-

tempted to set up a provincial government and “purported

to appoint” Herman Brill as Prime Minister of Thuringia.

Brill in turn appointed Dr. Walter Wolf as Minister of

Education (FF 66). There is no evidence, however, that

the Armed Forces of the United States had authority to

organize a new provincial government (FF 67). Under

the agreement of June 5, 1945 Thuringia had already been

allotted to the USSR for occupation, and the agreement

provided for the exercise of governmental authority by

each Commander-in-Chief only “in his own zone of occu-

pation” (FF 68). JA 834-835.

On July 1, 1945 the military forces of the United States

turned over control of Thuringia (including Jena) to the

Soviet Armed Forces, who continued Dr. Wolf as Min-

ister of Education for Jena, which had the effect under

the statute of constituting him the Zeiss Special Board.

Wolf purported to revoke the appointment of Professor

Esau as Foundation Deputy and to name Dr. Arno Barth

in his place.

Some time after the deportation and when it became ap-

parent that the enforced absence of the Zeiss and Schott

Boards of Management from Jena would be longer than

expected, a dispute arose over management between the

boards in the American Zone and their designees in the

Soviet Zone. On conflicting evidence, and after careful

analysis of all letters exchanged between the two groups

even agreed temporarily to refrain from exercising their own powers as

Board members and to permit the latter to hold themselves out as the

‘Board of Management’ in order to appease Soviet occupation authori-

ties, the Zeiss Board never resigned.” JA 987-988. The court rejected

Schrade’s testimony because of his “obvious interest and his d:meanor

as a witness” and because it was “inconsistent with his prior testimony

on the subject.” JA 989.

4506

and testimony relating to the intention of the parties, the

district court held that the Heidenheim groups remained

as the official and legal boards, although they had in the

exchange of letters acknowledged that the Jena caretakers

were the sole responsible management in Jena.”

In December, 1945 the Soviet Military authorities se-

questered the assets of Zeiss firm as reparations, the plants

having supplied equipment for the Nazi military effort.

Notice was given'to the Zeiss Works, and Schrade was

appointed sequestrator. Commencing on October 22, 1946

the Zeiss and Schott plants in Jena were almost totally dis-

mantled and 94% of all plant equipment and more than 300

employees were transported to the Soviet Union. Under

Order 124, the trademarks used in connection with the

sequestered assets were included in the sequestration (FF

226). JA 899.

Thuringia authorized a partial rebuilding of the Jena

plants. Between 1945 and 1948 plants for the manufacture

of Zeiss products were continued and established in the

Western Zones."* The Jena group continued to manage

12 The court’s findings on this issue are summarized in its discussion

of the facts as follows:

“The makeshift arrangements served temporarily to appease the

Russians. The Jena management, although but caretakers, main-

tained its appearance as the Boards of Management to the Russians,

thereby avoiding removal by the Soviet occupation authorities and

replacement by communist functionaries, but secretly recognized

the Boards in Heidenheim as the official management by not re-

quiring a resignation, by not pursuing their removal, and by

assuring them that upon their return to Jena they would resume

actual management of Zeiss business in the Soviet Zone. In the

meantime the Boards in Heidenheim continued to lend themselves

to the facade for the purpose of avoiding Soviet scizure by acting

in the West under the powers of attorney from Jena rather than

asserting their true powers as the Board.” JA 1008.

13 ‘In the summer of 1946 the Zeiss group obtained space in a factory

in Oberkochen. In October, 1946 a limited liability company was or-

ganized in Heidenheim under the name of “Opton GmbH.” Its prin-

4507

Foundation interests in the Soviet Zone and to hold itself

out as the Boards of Management. Foundation interests

in the Western Zones were managed by the Heidenheim

group under power of attorney from the Jena group, even

though the Heidenheim group considered itself responsible

for those interests as the Board of Management (FF 180).

JA 882. Heidenheim and Landshut became in fact new

centers of the Foundation, equal in importance to Jena in

the administration of the Foundation’s interests (FF 235).

JA 901. |

In early 1948 the Expropriation Commission for Thurin-

gia, established by the Soviet authorities, voted to include

Zeiss and Schott on a list of business enterprises whose

sequestered assets were to be expropriated (FF 237), and

on April 17, 1948 the Soviet Military Administration issued

Order No. 64 ratifying this action (FF 239). JA 902. In

February, 1948 the Soviet Military Administration had

created the German Economic Commission to supervise the

establishment of a new Socialist economy in the Soviet Zone

(FF 240). This Commission issued two decrees providing

that trademarks were to be included among sequestered

assets which were expropriated, unless expressly excepted

(FF 241). JA 902-903.

Decrees entered June 1, 1948 by the Government of the

Land of Thuringia confirmed the expropriation of the

Zeiss and Schott Works, including assets which had been

sequestered in accordance with Order No. 124. There was

no evidence that any exceptions of trademarks had been

made (FF 242-244). JA 903. After the expropriations the

Jena managements no longer had any function to perform

cipal assets consisted of the Oberkochen production facilities (FF 200-

203). JA 889-890.

4508

with respect to the Foundation enterprises Zeiss and Schott

(FF 249). JA 904.

Since the expropriation and transfer to state ownership,

VEB has been the instrumentality through which the East

German Government has operated the expropriated Zeiss

plant in Jena (FF 264-269). JA 908-909.

Neither the nationalization decrees nor the deed or ex-

propriation purported to terminate the existence of the

Zeiss Stiftung. In discussing its finding that the Founda-

tion’s capacity to function was destroyed, the district court

said in part:

_ “Thus the Foundation’s capacity to function in the

Soviet Zone in accord with the Abbe Statute was com-

pletely destroyed by the Soviet expropriation decree,

which finally and unequivocally stripped it of its com-

mercial enterprises, which were the source of its ex-

istence in Jena, thereby working a basic change in

substance, not merely one in form. Beginning in June

1948 and continuing until May 1951 the Zeiss and

Schott enterprises in Jena were transferred from the

Foundation to the V.V.B. Optik, an association of

peoples-owned enterprises engaged in manufacture of

precision mechanical and optical instruments. On No-

vember 30, 1948 the firm name Carl Zeiss was cancelled

in the Commercial Register of the County Court of

Jena, and a new entry was made stating that the firm

was the ‘property of the people,’ in line with the Soviet

authorities’ socialization of the East. This was fol-

lowed by a further entry on November 20, 1949 chang-

ing the name of the firm to ‘Optik Carl Zeiss Jena

VEB,’ meaning ‘peoples-owned enterprise.’ In May,

1951 the Zeiss and Schott enterprises were separated

by the German Democratic Republic from V.V.B. Optik

4509

SU ci ot Nae en a in ee

ee ee

association, and converted into independent V.E.B. en-

tities under the direct supervision of the Ministry of

Machine Construction in East Berlin, subject to con- '

trol by other East German governmental agencies.

Appointed by East Germany as the ‘Works Director’

of both VEB enterprises, Schrade was responsible

solely to the Ministry for Machine Construction, and

not to the Foundation or to any Board of Management, }

Deputy, or Special Board.” JA 1014-1015. '

ee eS .

The Foundation had industrial and other assets located

outside the Soviet Zone of occupation valued at more than ;

thirty million marks, which could not be reached by the

expropriation decrees. The district court found that the

existence and operation of these commercial assets in the

West could not serve to prolong the Foundation’s existence :

in the East since, as far as Soviet authorities were con-

cerned, the assets had been expropriated and no longer

belonged to the Foundation but represented state-owned

properties.

On June 16, 1948 the German Economic Commission

adopted a resolrtion recognizing the “existence and opera-

tion of the Car Zeiss Foundation” and directed that the

rights and duties of the “people’s-owned” Zeiss and Schott

enterprises should be established in a “new version to be

drawn up of the Statute of the Foundation” and providing

that until the new version was prepared “the powers of all

the governing bodies of the Foundatiou will be exercised |

14 The court said further: “The properties in Jena were thenceforth

not to be managed by a Deputy and Boards of Management but by

direction of the State, which specified what funds would be appropriated :

and furnished for their continued operation. The Abbe Statute never ;

authorized a state-directed and state-controlled eleemosynary institution. ;

On the contrary, Abbe expressly stated he did not intend such an :

enterprise.” JA 1017. }

4510

by a Foundation Commissioner to be appointed by the

German Economic Commission.” No new “version” was

ever prepared and approved. Although a Foundation Com-

missioner was appointed, he never functioned. J A 1020.

On July 30, 1948, following the expropriation decrees,

the Board at Heidenheim, after conferring with legal coun-

sel, applied to the Minister of Education of Wuerttemberg

for a decree creating:a new domicile for the Foundation in

Heidenheim. On February 23, 1949 Wuerttemberg’s Min-

ister of State issued a deerce amending the Foundation’s

statute to create a new domicile in Heidenheim,** and pro-

viding that the affairs of the Foundation should be admin-

isteréd by Messrs. Bauersfeld, Kueppenbender and Hen-

richs of the Zeiss Board pursuant to section 114 of the

Statute.* The district court found that “The Wuerttem-

berg decree of February 23, 1949 gave legal recognition to

the Zeiss Board’s identity as the official Board and to its

de facto control and administration of the Foundation’s

assets in the West.” ?” JA 1030.

15 The bases for the new domicile are summarized in the district court’s

discussion of the facts as follows: (1) the Zeiss Foundation was a

German federal entity; (2) Germany, despite its occupation by the

four Allied Powers remained a single unitary sovereign state being

administered by the occupants pursuant to Article 43 of the Hague

Regulations; (3) Article 87 of the German Civil Code authorized crea-

tion of an additional domicile, or a change in domicile, for the Founda-

tion because the Soviet expropriation made it impossible for it to fulfill

its purposes in the East by preventing it from conducting its essntial

commercial operations; and (4) Wuerttemberg, as a member state of

the German Federal Government, had the power to effectuate such im-

plementation of Article 87. JA 1029-1030.

16 Notice of this decree apparently did not come to the attention of

VEB in Jena until sometime in November, 1951, when it was apprised

of the decree in connection with a proceeding pending in the German

Patent Office in Munich (FF 310). JA 921.

17. A further Administrative Decree was issucd in May 1954 by the

Minister of Education of Wuerttemberg amending the Statute of the

Carl Zeiss Foundation to eliminate Jena as a legal domicile (FF 311).

4511

In May, 1951 East Germany’s Minister of Machine Con-

struction directed the President of Thuringia to appoint

a new “Foundation” Deputy and new “organs” of “Carl

Zeiss Stiftung,” pointing out the urgency occasioned by

threatened litigation by the West. On June 27, 1951 the

Minister of Education wrote a letter to five persons ad-

vising them that they were appointed “as organs of the

Carl Zeiss Foundation for the management of industrial

activities *.* *, such appointment to take effect June 27,

1945.” JA 1033-1034. There was testimony from legal ex-

perts, however, that as far as East Germany was concerned

the Foundation had ceased to exist after expropriation of

its commercial enterprises there.” In July, 1951 the prac-

tice of holding Foundation meetings, which had been dis-

continued in June, 1948, was resumed.

Although appellants argue that even though the Zeiss

and Schott Works were nationalized, the Stiftung in Jena

has remained alive, we agree with the district court “that

the so-called ‘Foundation’ which the East German govern-

ment sought to ‘revive’ or ‘warm up’ in 1951 is not the

Foundation established by Dr. Abbe and is not identifiable

with, or a successor to, that Foundation.” ?® JA 1035.

JA 921-922. On August 3, 1967 the Parliament of the Federal Republic

of Germany adopted legislation purporting to confirm the validity of

measures taken to transfer such domiciles to West Germany (FF 320).

JA 923-924.

18 This testimony was given by “Richter, an experienced German

lawyer who was then head of the legal department of the East Ger-

many Ministry, and Schacht, another trained German lawyer acting as

a Jena VEB’s counsel in the matter.” JA 1034.

19 In its discussion of the facts, the district court continued: “It repre-

sents a pseudo-type organization, deliberately established by East Ger-

many as a sham or facade for litigation purposes, with a view to trying

to create a color of right to assets outside of East Germany, including

Zeiss trademarks. * * * The record reveals beyond any serious doubt

4512

Appellee Zeiss Ikon A.G. was organized in 1926 and regis-

tered in the Commercial Register of the County Court in

Dresden, Saxony, Germany, and has been engaged in the

manufacture and sale of photographic equipment and re-

lated goods, using the trademark “Zeiss Ikon.” In June,

1947 the Ministry for Economics and Economic Planning of

the Government of the Land of Saxony, located within the

Soviet Zone, expropriated the enterprise Zeiss Ikon A.G.

of Dresden without compensation, effective July 1, 1946.

The “Zeiss Ikon” trademarks were included in the expro-

priation (FF 330-336). JA 926-927.

On March 3, 1948 at a special meeting of stockholders

in Stuttgart, in the American Zone, a resolution was

adopted transferring the domicile of Zeiss Ikon A.G. from

Dresden to Stuttgart. The bylaws then in effect provided

that meetings of stockholders could be held in Dresden,

Berlin, Stuttgart, or Jena. In a judgment rendered Febru-

ary 14, 1958 the Federal Supreme Court of West Germany

upheld the validity of the transfer of domicile from Dres-

den to Stuttgart. The district court found that the transfer

of domicile of Zeiss Ikon A.G. was legal under German law

and that appellee Zeiss Ikon A.G. is identical with the cor-

poration of that name organized in 1926 and domiciled in

Dresden until its expropriation in 1947. (FF 338-343). JA

927-928.

At a meeting in October, 1949 at which Bauersfeld, Kuep-

penbender, Henrichs, Hirsch, Schott, David and Sandmann

that following the Soviet expropriation and break-up of the Foundation

in 1948, the East German authorities had no intention of ever permit-

ting its resurrection as a viable entity conforming to the original Stat-

ute, but they considered it dead. This is vividly confirmed by the fact

that the June 27, 1951 appointment of the so-called ‘organs’ for the

Zeiss and Schott Works were expressly retroactive to June 27, 1945.”

JA 1035-1036.

4513

were present, “the Heidenheim management made it clear

that in their view only they and not the expropriated works

in the East were entitled to the Zeiss name and marks and

that they were not willing to give up the good will of the

firms symbolized by the trade names and trademarks. They

offered, however, to permit the VEB in Jena to use the

marks on the basis of a license agreement.” (FF 346-347).

JA 928-929.

On February 17, 1950 Messrs. Bauersfeld and Kueppen-

bender (signing for the Zeiss firm) and Messrs. Henrichs,

Hirsch and Schott (signing for the Schott firm) addressed

a letter to VVB Optik (the Association of State owned

enterprises of which VEB Carl Zeiss Jena then formed a

part), claiming ownership on behalf of the Foundation of

the firm names and trademarks and proposing discussions

looking toward a license agreement pursuant to which the

state-owned Zeiss enterprise at Jena would be permitted to

use the trademarks in the West. (FF 348-350). JA 929.

By letter dated December 3, 1951 members of the Zeiss

Board in Heidenheim renewed the proposal to license the

Zeiss VEB, which the district court found was “tacitly

accepted by East Germany’s Minister of Machinery Con-

struction, who on February 25, 1952, instructed Dr. Schrade

that the East German government deemed it expedient to

adhere to the proposal as a ‘modus vivendi’ and to proceed

accordingly.” JA 1037. The court found that until some-

time in 1953, with minor exceptions, products of the VEB

were sold outside the Communist Bloc countries in accord-

ance with the conditions laid down in Heidenheim’s letter

of December 3, 1951 (FF 980). JA 937.

After the East and West failed to reach an agreement

on licensing terms, the Zeiss firm in Heidenheim on Febru-

ary 12, 1954 advised the East that it intended to take legal

4514

Se waa

IB eis essa cercsonssinidss drm sn cir satin

steps to protect its rights in the Zeiss name and marks

(FF 384), and on February 18, 1954 advised all foreign

distributors to cease handling Zeiss products made in the

East (FF 38°). JA 938. On February 27, 1954 the Zeiss

firm in Heidenheim obtained an injunction in the district

court in Goettingen restraining a West German distributor

from selling VEB made products bearing Zeiss marks in

West Germany (FF 387). JA 939. .

In April, 1954 the Council of the District of Gera (a

political subdivision of Kast Germany) brought an action

in the district court of Stuttgart, West Germany, against

the Zeiss firm in Heidenheim and the members of the Board,

seeking to have the entry of the Zeiss firm stricken from

the Commercial Register in the County Court of Heiden-

heim, and to have certain trademarks, including those at

issue here, transferred to and reregistered in the name of

the Carl Zeiss Stiftung of Jena. On July 31, 1954 the

action was dismissed on the ground that the plaintiff was

not a legal representative of the Carl Zeiss Foundation

and had no authority to bring the action. Ultimately this

decision was affirmed by the Federal Supreme Court of Ger-

many on November 15, 1960.

In May, 1954 the Zeiss firm in Heidenheim brought an

action in the District Court of Duesseldorf against Zeiss

VEB (appellant in this action) and DIA” seeking an in-

junction against the use of the Zeiss trade names and

marks. This resulted in judgment for the plaintiff, ulti-

mately affirmed by the Federal Supreme Court on J uly 24,

1957 in a decision holding that the board members in

Heidenheim had never resigned and were authorized to

20 At the beginning of 1953, the Carl Zeiss Firm in Heidenheim was

advised that the sale of products produced in Jena by VEB for export

had been taken over by a state trading organization known as “DIA”

(FF 381). JA 937.

4515

aE APT IGLOS LLL LAN RIEL ELLIE OL TIE <A HARMAN DORE RELIED DAT PSL WINONA OUI og,

represent the Foundation as the proprietor of the Zeiss

firm (FF 399-402). JA 942-943.

In April, 1954 the Supreme Court of East Germany ren-

dered an advisory opinion to the effect that the Foundation

continued to exist in Jena, that the members of the Zeiss

and Schott boards had resigned in 1945, and that the 1949

Wuerttemberg decree establishing a new domicile was an-

nulled. A default judgment was entered in the District

Court of Leipsig, East Germany, in favor of the District of

Gera and the Zeiss VEB against the Zeiss firm in Heiden-

heim, which was affirmed by East Germany’s Supreme

Court in March, 1961. There was no participation by the

plaintiffs or any representatives of the Foundation or

Board in the West in any of the East German proceedings.

Since February, 1954 there has also been litigation with

respect to the Zeiss marks in various other countries

throughout the world (FF 404). JA 943.

The firm of Carl Zeiss first registered the trademark

“Zeiss” in the United States in 1912 (FF 421), “Carl Zeiss

Jena” in the distinctive lens frame in 1907 (FF 422), the

distinctive lens frame alone in 1914 (FF 423), “CZ” in 1913

(FF 424). In 1919 the United States purported to vest title

in the Alien Property Custodian (FF 425). Despite this

vesting the Carl Zeiss firm continued to use the trademark

in United States commerce at least until 1941 (FF 426).

JA 946-947.

Zeiss Ikon A.G. first registered the trademark “Zeiss

Ikon” in the United States in 1929. In 1950 the United

States purported to vest title in the Attorney General

(FF 427). JA 947-948.

Carl Zeiss, Inc., was organized as a New York corpora-

tion in 1925 or 1926. Thereafter until the end of 1941 goods

manufactured by the Zeiss firm and Zeiss Ikon A.G. were

4516

;

sete hn et nite Wis Tae nll seb alt teeta atte

primarily sold in the United States through Carl Zeiss, Inc.

On August 28, 1942 the United States Government vested

the capital stock of Carl Zeiss, Inc., in the Alien Property

Custodian. It remained so vested until its sale on December

30, 1960 (FF 429-430). JA 948.

After the expropriation in 1948 the Zeiss firm in Heiden-

heim did not resume manufacturing optical instruments

until 1953. From 1949 until September, 1953 optical instru-

ments produced by’ Zeiss Opton at Oberkochen and else-

where were sold in the United States by Carl Zeiss, Inc.

(FF 433). Since 1953, when it resumed production in West

Germany, the Zeiss firm in Heidenheim has sold in the

United States goods bearing the various Zeiss trademarks

(FF 435). JA 949.

In 1949 appellant VEB commenced to sell goods bearing

the Zeiss trademarks in the United States through Carl

Zeiss, Inc. In 1950 it commenced to sell through appellants

Ercona and Steelmasters (FF 436). JA 949. Since 1961

VEB has sold products in the United States principally

through Ercona, and has also sold some products to other

dealers (FF 439-441). JA 950-951.

Goods made by appellees in West Germany and those

made in Jena bearing Zeiss trademarks have generally con-

formed to the standards for Zeiss products (FF 442).

JA 951.

Prior to 1960 the Attorney General of the United States

claimed to be the owner of the trademarks in the United

States in his capacity as custodian of alien property. On

April 4, 1956 an action was commenced by Ercona and

Steelmasters against the Attorney General, Secretary of the

Treasury, and Commissioner of Customs seeking to enjoin

the United States from preventing the importation of goods

manufactured by appellant VEB and bearing the trademark

4517

Zeiss on the ground that the mark had not been validly

vested in the United States in 1919 because there was no

business to which the mark was appurtenant. Judgment

was entered in favor of Ercona and Steelmasters by the

district court and affirmed on appeal. Rogers v. Ercona

Camera Corporation, 277 F.2d 94 (D.C. Cir. 1960).

The district court in that case expressly stated that “the

respective rights, if any, in the ‘Zeiss’ trademark of the

several Carl Zeiss firms now located in East Germany and

in West Germany are not in issue in this case, and the Court

expresses no opinion with respect thereto. Nor are the deci-

sions rendered by foreign courts with respect to such rights

relevant here.” 120 U.S.P.Q. 100, 105 (D.C. Cir. 1958). In

affirming the Court of Appeals also noted that the respec-

tive claims of Heidenheim and Jena were not in issue. 277

F.2d at 97.

On December 30, 1960 the United States sold the stock

of Carl Zeiss, Inc. to the plaintiff Carl Zeiss Stiftung. In

authorizing the sale, the Attorney General, acting on behalf

of the President of the United States, stated the view of

the United States Government that, consistent with the

foreign policy interests of the United States and in order

that the American consumer not be confused or misled,

only Carl Zeiss Foundation in West Germany should be

recognized as the legitimate Carl Zeiss Foundation and its

operating firms as the producer of genuine Zeiss products

(FF 453). JA 953-954.

The district court found that confusion and mistake has

resulted among members of the consuming public in the

United States from the sale of competing products by plain-

tiffs and defendants bearing substantially identical trade-

marks (FF 479) and that continued sale by the defendants

4518

will probably result in continued confusion, mistake and

deception (FF 481). JA 959-960.

Between October 1, 1953 and September 30, 1966, sales

of products of the Zeiss firm of Heidenheim bearing the

various Zeiss trademarks in the United States totaled $56,-

803,069.00, and Carl Zeiss, Inc., expended $5,893,498.00 in

advertising and promoting the trade names and products

(FF 468). JA 957. ©

The total volume'of goods produced by appellant VEB

and sold by Ercona in the United States between 1948 and

1966 amounted to $6,709,491.00 or an average of less than

$350,000.00 a year, with an annual volume since 1957 less

than $300,000.00 (FF 473). JA 958. The annual volume

of appellant VEB’s sales ex-factory to Steelmasters and

Ercona has exceeded $150,000.00 in only one year and has

been less than $100,000.00 in seven of the remaining years

(FF 474). JA 958.

Which Foundation Is Legal Successor to

Original Abbe Foundation?

As the district court stated in its reported decision (293

F. Supp. at 896), a central and primary issue is whether

the appellee Foundatio: or that established in East Ger-

many in 1951 is legally identical with, and the successor to,

the original Abbe Foundation. In contending that the Jena

Foundation is identical with the original Abbe Foundation,

appellants argue that the district court erred in (a) failing

to determine this issue in accordance with the law prevail-

ing in Jena; (b) finding that the nationalization of the Jena

works terminated the capacity of the Foundation to func-

tion; (c) applying rules of “German law” which are con-

trary to the law in Jena; and (d) finding that the domicile

could be moved from Jena and that the charter of the Carl

4519

Zeiss Foundation was amended to move the domicile to

Heidenheim.

Calling attention to the fact that the Soviet expropriation

purported to encompass all Zeiss trademarks owned by the

Zeiss firm and the well-settled United States policy against

extraterritorial recognition of such decrees,” the district

court concluded that (1) “the Foundation or its legal suc-

cessor, if it has legally continued to exist (whether in East

Germany, West Germany, or elsewhere), must be recog-

nized as the owner of the United States marks”; and (2)

“while a United States court may give effect to expropri-

ation of property located within the territory of the expro-

priating state, * * * United States trademarks, for the

purpose of determining the applicability of our anti-expro-

priation policy, are deemed to be located within the United

States, even though the trademark goods may be manufac-

tured elsewhere * * *.”** p. 896. It therefore became the

task of the district court “to identify the surviving owner”

as between the conflicting claims.

In our opinion there is substantial credible evidence to

support all of the findings of fact set forth above. Accord-

ingly we agree with the district court that if the issue of

legal identity or successorship may be resolved solely as

a question of fact, the facts dictate a decision in favor of

appellee “as the true Zeiss Foundation”; and if fundamental

fairness and equity are the criteria, “the de facto existence

and operation of the (appellee) Foundation in the West as

21 In considering the effect of the nationalization of the Zeiss and

Schott enterprises in Jena, Judge Mansfield properly .stinguished the

post-war expropriation in 1948 from the military reparations in 1945.

22 The cases cited by Judge Mansfield support both conclusions. We

deem it unnecessary to repeat in this opinion his discussion of the appli-

cable law on this and other issues. Instead we shall refer to the page

at which each principle of applicable law is discussed in the reported

opinion.

4520

z BEERS PPR LILIA NE CLOG RAE LBD ABELL DPE LOL ALY PAG LE hed OAL Lon

a good faith effort to continue what remained of the overall

Abbe Foundation enterprise, after expropriation of its as-

sets in the East and its inability to function in its original

domicile, would call for its recognition.” p. 897. The au-

thorities cited by the district court support these conclu-

sions.

Law of West Germany Properly Applied

The parties agree that the issue of identity must be deter-

mined by German law. They disagree as to whether the

German faw is that promulgated and interpreted by West

Germany or by East Germany.

It is true, as Judge Mansfield stated, that the “legal

existence, status, identity, and domicile of a foreign cor-

porate entity or juristic personality, such as the Foundation

here, must be determined by the laws of the country where

it has been created and continues to exist.” p. 898. Here we

have a unique situation by reason of the partition of Ger-

many after the creation of the Foundation pursuant to

German law and the subsequent expropriation in East

Germany. The original Foundation owned the commercial

enterprises. This was permissible under German law.

Those enterprises in Kast Germany are now held by VEB,

a state or people-owned entity. The present Foundation

in East Germany claiming ownership of the Zeiss name and

marks does not claim ownership of the commercial enter-

prises and is dependent upon the state owned enterprise for

its support.

The district court properly held that whether German

law as declared or construed by the courts of unrecognized

East Germany or recognized West Germany” should be ap-

23 The district court recognized that “our Government’s diplomatic

recognition policy is entitled to considerable weight in determining what

4521

plied depends to some extent on the nature of the ques-

tion to be resolved; that normally “the acts of an unrecog-

nized regime which pertain to its purely local, private,

and domestic affairs will be given effect”; but that here

the court is “dealing with decisions of East German courts

with respect to matters extending beyond the borders of

East Germany, such as the nature of a Foundation under

federal law and the effect to be given to acts of Wuerttem-

berg.” pp. 900-901.

We conclude that the district court properly sibiiiad

the law of West Germany. As stated in its opinion, effec-

tive January 1, 1900 the German Empire adopted a fed-

eral Civil Code, applicable throughout the German federa-

tion, containing provisions relating to foundations which

were expressly made applicable to existing foundations

created under the laws of member states. The Zeiss

Foundation Statute was amended in 1905 pursuant to the

new German Civil Code. After the adoption of the Civil

Code, a foundation was a creature of federal law even

though the administration of federal law was delegated to

the individual member states and the foundation had its

domicile in a particular state. p. 902.

The district court recognized that the domicile of a

foundation would usually be the state where its statute was

accepted or approved and that a prohibition against trans-

fer of domicile, such as found in Section 121 of the Zeiss

Foundation Statute (see note 5, supra) would ordinarily

law is to be applied”; that “the invocation of the policy is complicated

in the present case by the fact that the Court is dealing with a divided

country, West Germany being recognized as sovereign only over its

own territory and not over that of East Germany, which remains un-

recognized by the United States”; and that “(c)hoice of law rules nor-

mally assume the existence of a territory having an appropriate re-

lationship to the issue over which the recognized foreign government

claims sovereignty.” p. 900.

bar a transfer. Section 87 of the German Civil Code, how- .

ever, provides that where a Foundation’s purposes can no

longer be fulfilled, its statutory purpose may be amended

by “the appropriate authority” to enable it to function in

accordance with the founder’s intention as far as possible.

The appellees’ German law experts (whom Judge Mans-

_field found more credible) would give effect to the German

Civil Code and were of the opinion that its provisions super-

seded the private law systems of the states to the extent

that the field was occupied by the federal government.

The district court accordingly accepted their view “that

under the circumstances presented here (Soviet expropria-

tion which made it impossible to fulfill Dr. Abbe’s stated

purpose of maintaining the Zeiss Foundation’s commercial

enterprises and domicile in Jena, and left its operational

center and principal remaining commercial works in Wuert-

temberg), the State of Wuerttemberg, as a member of the

German federation, was empowered by §87 as ‘the appro-

priate authority’ to establish the Foundation’s domicile

where its administrative center and principal operations

were now located.” * pp. 903-904.

As noted supra, the Federal Supreme Court of West

Germany on July 24, 1957 granted injunctive relief in favor

of the Carl Zeiss firm of Heidenheim against the VEB Carl

Zeiss of Jena and the DIA. This decision “was based on

the conclusion that expropriation of the Foundation’s assets

had shifted the ‘economic center of gravity of the enter-

prise’ to the West, with the result that the firm’s principal

place of business became Heidenheim, and the Zeiss Board

24 The court rejected appellants’ contention that a foundation is strictly

a creature of the state which approved the founder’s statute or charter,

and the supporting testimony of German law experts offered by the

appellants, finding the testimony of Professor Steindorff, offered by

the appellees, to be more credible, persuasive, and reliable.

in Heidenheim * * * was still the official Board, with au-

thority under Section 114 of the Statute to act on behalf

of the Foundation with respect to the Zeiss trademark

and trade name in West Germany, regardless whether its

legal domicile had been validly transferred from Jena to

Heidenheim.” p. 908.

The district court of course found independently that

the members of the Heidenheim Boards had not resigned

and that the effect of the expropriation was to leave Heiden-

heim as the Foundation’s center or principal place of busi-

ness. Accordingly it is unnecessary to determine whether

this and other decisions of the West German courts had

estopped appellants from questioning the fact that the

Foundation enterprise known as the firm Carl Zeiss was a

continuation of that which had existed in Jena. We agree

with the district court that in any event these decisions did

not have the effect of precluding appellants from raising

legal issues not considered by the West German courts,

such as the existence of the Foundation as a federal entity

and the authority of Wuerttemberg to act under $87 of the

German Civil Code. In our opinion the district court

reached the correct conclusion on these issues on the basis

of the testimony of German law experts.

The district court found the opinions of the courts of

East Germany of limited assistance, calling attention to

the fact no member of the Boards or other authorized offi- .

cial of the Foundation ever received advance notice of the

advisory opinion rendered on April 6, 1954 by the Supreme

Court of East Germany, and no Board member or author-

ized representative participated in the proceeding which

resulted in the default judgment in Septembe:, 1959,”

25 Notice of commencement of the action was sent to the Zeiss firm in

Heidenheim, but acceptance was refused and the envelope was returned

4524

= nit oe Ne ew

affirmed by the Supreme Court of East Germany, in March,

1961. As a result, the “East German courts did not have

before them much of the essential proof relied upon” by the

district court with respect to the crucial issues in this case,

Judge Mansfield found also a lack of “reasoned objective

approach” on the part of the East German courts and that

their decisions were “thorough!y saturated with a combina-

tion of Communist propaganda, diatribes against the ‘capi-

talist oriented’ decisions of the West German courts, and

absence of judicial restraint,” quoting an extended excerpt

from the Supreme Court’s opinion of March 23, 1961 to

illustrate the nature of the Court’s approach. p. 907.

Foreign Decisions

It is true, as appellants contend, that courts in England,

Switzerland, Pakistan, Norway, India, ana Australia** have

accepted East German law, at least for the purpose of de-

termining the capacity of the Jena Foundation to institute

suit. As noted supra, the courts of East Germany have held

to the district court in Leipsig unopened, with a cover letter denying

jurisdiction of the East German courts on the ground that they were

not legally constituted (FF 409). JA 944.

26 Copies of these decisions have been included in an appendix to the

briefs: Carl-Zeiss-Stiftung v. Rayner § Keeler, Ltd., [1964] R.P.C.

299, aff'd [1966] 2 All E.R. 536; Carl-Zeiss-Stiftung v. Rayner ¢

Keeler, Ltd., [1969] 3 All E.R. 897; VEB Carl Zeiss, Jena v. Firma

Carl Zeiss, Heidenheim, [1965] Entscheidungen des Schweizerischen

Bundesgerichts 117 (Swiss Federal Supreme Court); Carl-Zeiss-Stiftung

of Heidenheim v. Carl Zeiss Stiftung, Jena, PLD 1968 Karachi 276

(High Court of West Pakistan); Jenaer Glaswerk Schott ¢ Gen.,

Maing v. VEB Jenaer Glaswerk Schott ¢ Gen., Jena, Oslo Town Court

(Norway), March 18, 1969; Carl Zeiss Stiftung, Heidenheim v. Carl

Zeiss Stiftung, Jena, not reported (Indian Joint Registrar of Trade-

marks), March 12, 1968; Re Carl Zeiss Pty. Ltd.'s Application, [1969]

43 ALJR 196 (Australia).

4525

that the Jena Foundation was identical with the Zeiss

Stiftung.

In particular, appellants rely upon the opinion of Mr.

Justice Cross in the High Court of Justice—Chancery

Division in Carl Zeiss Stiftung v. Rayner & Keeler, Ltd.

(1964) and opinions in the House of Lords affirming the

lower court (1966). In further proceedings in the same

ease Mr. Justice Buckley in an opinion rendered in 1969?’

clarifies the nature and sharply limits the effect of the prior

holdings in that case, as well as the decisions of India and

Pakistan.

In the English action Carl Zeiss Stiftung in Jena is one

of the plaintiffs and Carl] Zeiss Stiftung of Heidenheim is

one of the defendants. The matter was before Mr. Justice

Cross on a “summons issued by the defendants” seeking

dismissal and a stay of further proceedings on the ground

that the plaintiff did not have authority to represent the

Carl Zeiss Stiftung. The summons to stay was dismissed.

Before Mr. Justice Buckley was a motion of the plaintiff,

the Carl Zeiss Stiftung of Jena, to strike parts of the de-

fense of the defendant Carl Zeiss of Heidenheim. The

court granted the motion to strike the defense denying that

the plaintiff was a validly constituted Stiftung and that

the administration of the plaintiff had been transferred to

the Council of Gera. The court denied the motion to strike

the defenses alleging that the defendant and not the plain-

tiff was the original Stiftung; that the “Sitz” was trans-

ferred to Heidenheim; and, that the original Stiftung

ceased to exist as a result of the confiscatory decrees and

transfer of the optical and glass works. It is clear from

27 This is the most recent and we believe the most significant of the

foreign decisions. For that reason we deem it advisable to refer in some

detail to its clarifying and limiting effect.

4526

RT INL RY BRO GE Ps pad tt ss EOE R EPA MAAR RAL VES: i Te te re een y

QU tericsicinnisiszains CPLA

ities nae. --

this opinion that the English courts have not yet deter-

mined most of the critical issues here involved.

After holding that the decision of Justic: Cross was final

and binding on the parties and their privies with respect to

the finding that the plaintiff was a “body competent through

the council of Gera to instruct solicitors and to sue as a

plaintiff * * * ,” Mr. Justice Buckley continued :

“The learned judge’s order, read in the light of the

application on which it was made, does not appear to

me to carry any further necessary implication. * * * **

ze am consequently of opinjgn that nothing decided

by Cross, J., or the House of Lords renders any ques-

tion about the status or character of the third defen-

dant res judicata on three grounds: (i) that any such

question must be answéted by reference to West

German law, which was not investigated either by

Cross, J., or the House of Lords; (ii) that any decision

on such a question would not have been necessary for

the purposes of those proceedings but purely collateral ;

and (ili) that the plaintiff was not a party to those

28 In further clarification of the prior holding, Justice Buckley, after

pointing out that Justice Cross had concluded “that in the contempla-

tion of East German law the plaintiff is the original stiftung,” con-

tinued:

«* * * On the other hand, he held, that in contemplation of

West German law the ‘foundation,’ by which I think he clearly

meant the original stiftung, was ‘domiciled’ in Heidenheim under

the two Wurttemberg decrees. In these circumstances I think that

it is reasonably clear that the learned judge was not expressing a

concluded view that the plaintiff was for all purposes to be re-

garded as the original stiftung and that the third defendant was

not to be so regarded for any purpose, but merely the view that,

since the status of the plaintiff as a competent plaintiff in this

action was to be ascertained in the light of the plaintiff’s own

proper law, namely East German law, the plaintiff must be accepted

as having a corporate existence under that law, and that the council

of Gera must be accepted as having authority to instruct solicitors

on its behalf.”

4527

ee iy : Ty ~ Ea 2 eal aE, ete ele etna ei BECKI BEA RIPE LIEN, RIGS

proceedings nor privy to any party to those proceed-

ings.”

After discussing the judgments in Pakistan and India,

Justice Buckley concludes that “neither the Pakistani judg-

ment nor the Indian contains any decision which debars

the third defendant (appellee here) from alleging that it

is by West German law, or indeed any other system of law

except East German law, the original stiftung.”

Finally, Justice Buckley concludes that the law. of the

original domicile or “sitz” is not necessarily controlling

and that it must be “at least theoretically possible that by

operation of the proper law for the time being of a corpo-

ration another system of law may be substituted as the

proper law of the corporation.” He continued:

“If, however, this be the intention, the point must

involve consideration of what at any relevant moment

or moments should be regarded as the proper law of

the original stiftung or of the third defendant. Clearly

in the first instance the proper law of the original

stiftung was the law of the Grand Duchy of Saxe-

Weimar-Eisenach; but, having regard to the political

vicissitudes of Thuringia and to the possible conflict

between East and West German law, this aspect of the

case, which was not relevant to what Cross, J., and the

House of Lords had to decide, has, in my judgment, not

yet been judicially considered, either expressly or by

implication, in any litigation relied on in these pro-

ceedings, and cannot be res judicata. If, however, the

plea means something else (for instance that the ad-

ministrative centre or principal place of business was

transferred) this must involve questions of foreign

law which, so far as I can tell, have not yet been judi-

cially considered and so cannot be res judicata.”

4528

OBES Ca rey Eee re FT Rage EGE SNIPE ITT ie ae

eS

Sd -

Appellants in their brief quoted at length from the opin-

ion of Justice Cross finding that in the letter of January

28, 1946 (referred to by Judge Mansfield as the “blackmail

letter”) the Heidenheim gentlemen “did unquestionably

agree that they had vacated office.” He rejected the testi-

mony of Dr. David that David had explained the intent of

the letter orally at a meeting in Jena at which Dr. Schrade

was present, accepting instead Schrade’s testimony deny-

ing that he (Schrade) was present at any meeting.

The Jena Foundation had contended before J ustice

Buckley -that in making the finding that the Heidenheim

group had resigned, Justice Cross intended “to decide this

issue once and for all.” Justice Buckley, however, con-

cluded that it was a “matter for the trial judge to decide

whether he will admit any further evidence on this issue,”

suggesting that the trial judge “might be persuaded that

Cross, J. did not have all the relevant material before him”

or might otherwise conclude that the finding had no effect

on the action.

Judge Mansfield found that “Dr. Schrade’s earlier

denials under oath” that David delivered and personally

explained the letter “(upon which the High Court of Lon-

don rested so heavily in its decision) are now thoroughly

disproved, particularly by Dr. Klemm’s diary (uncovered

only recently).” Without accepting Dr. David’s testimony

in toto, Judge Mansfield found it generally credible and

corroborated. JA 989-990. We accept the findings of Judge

Mansfield.”

29 Without pursuing further the holdings in the foreign decisions, it

may “e said in general that the proof submitted in the district court

in this case apparently was the most complete of that offered in any

of the cases heard to date, and that few cases thus far have reached

any final determination on the merits.

4529

a a

“Act of State” Doctrine

The district court made a careful and detailed analysis

of the “act of state” doctrine, reaffirmed by the Supreme

Court in Banco Nacional de Cuba v. Sabbatino, 376 U.S.

398, 84 S. Ct. 923, 11 L. Ed.2d 804 (1964). pp. 909-914. We

adopt that portion of Judge Mansfield’s opinion and agree

with his conclusion that “although the Wuerttemberg

decrees and the German Parliament’s Act of 1967 are not

entitled to recognition as acts of state to the extent that

they purport to terminate the Foundation’s domicile in East

Germany since to that extent they acted extraterritoriaily,

they are entitled to such recognition insofar as they acted

to give a legal status to the Foundation’s de facto existence

in West Germany as a continuation in the West of the

original Zeiss cooperative enterprise, whose remaining

commercial assets (worth 30 million marks) and persounel

were almost entirely within the West’s territorial jurisdic-

tion.” p. 912.

Appellee Zeiss Ikon A.G.

We agree with the district court that appellee “Zeiss

Ikon A.G. is the same corporation as that which, prior to

the Soviet expropriation of its assets in 1947, had its seat

in Dresden (Soviet Zone), with manufacturing establish-

ments in Stuttgart and West Berlin”; that its domicile was

“validly transferred” to Stuttgart; and that it is the “owner

of the United States ‘Zeiss Ikon’ marks.” p. 915.

Trading With The Enemy Act

We adopt also that portion of Judge Mansfield’s opinion

holding that appellants are “barred from asserting any

claims to the United States trademarks in dispute by $5(b)

4530

ee ———

Ae agen

of the Trading With The Enemy Act (50 U.S.C. App. §1

et seq.) and regulations thereunder (8 C.F.R. $507.46).”

p. 916.

Claim for Joint or Concurrent Use and Defenses of

Laches, Acquiescence and Abandonment

In oral argument counsel for appellants relied primarily

upon their alternative claim that in any event appellee

Foundation is not entitled to an injunction, and appellee

VEB should be accorded “joint” or “concurrent” use of the

names and trademarks by reason of laches, acquiescence or

abandonment on the part of the appellee.

The district court correctly summarized the applicable

law with respect to these defenses:

“Where a person entitled to exclusive use of a trade-

mark is guilty of unreasonable delay in asserting

his rights against an infringer or junior user, or.

acquiesces in the latter’s use, or evinces an intent to

abandon his rights in the marks, a court of equity has

the discretionary power, after weighing the respective

interests of the parties, to deny injunctive relief or

an accounting. Saxlehner v. Eisner & Mendelson Co.,

179 U.S. 19, 21 S. Ct. 7, 45 L. Ed. 60 (1900); La

Republique Francaise v. Saratoga Vichy Spring Co.,

191 U.S. 427, 24 S. Ct. 145, 48 L. Ed. 247 (1903).”

p. 917.

The court then pointed out that the existence of laches

or acquiescence, and whether it is sufficient to bar relief,

“depends upon a consideration of the circumstances in

each particular case and a balancing of the interests and

equities of the parties.” The court continued:

“Among the factors to be weighed in determining

whether laches will bar relief are the strength and value

of the trademark right asserted . . . the plaintiff’s

diligence, or lack of it, in seeking to enforce the mark

... the harm that will result to the senior user if relief

is denied . . . whether the junior user is an innocent

infringer who acted in good faith ignorance of the

senior’s rights ... the extent to which the senior and

junior uses of the mark are competitive ... and the

extent of harm or prejudice suffered by the junior user

as a result of the senior’s delay...” p. 917.

oe ees ey

The court also distinguished laches from acquiescence:

“As distinguished from laches, acquiescence con-

stitutes a ground for denial of relief only upon a finding

of conduct on the plaintiff’s part that amounted to an

assurance to the defendant, express or implied, that

the plaintiff would not assert his trademark rights

against the defendant. Aunt Jemima Mills Co. v.

Rigney & Co., 247 F. 407 (2d Cir.), cert. denied, 245

U.S. 672, 38 S. Ct. 222, 62 L. Ed. 540 (1917); Alfred

Dunhill of London, Inc. v. Dunhill Tailored Clothes,

119 US.P.Q. 325 (S.D. N.Y. 1958). Although

acquiescence may bar relief even where the plaintiff

acts diligently, whether conduct amounts to acquies-

cence warranting denial of relief turns on an examina-

tion of all the surrounding circumstances, and requires

a balancing of the equities.” p. 917.

Seen ne ee ee ee ee ee eee ee eee eee ere ee Te es eer, ee ST |

(a) Laches

Appellants argue that appellees were guilty of laches

in their “fourteen-year delay in bringing this action.” It

is clear that “mere passage of time cannot constitute

4532

PEP LDL PPL EH LIT LEM OL INLD | LORIN TNE IRG te ETERS A ID3 wed AMO ONTEA Me SEN ORO ARO IE fal LMM Ev A ORIEN ER Se Ns RETO dl

laches.” A district court in its discretion, however, may

find laches if the passing of time can be shown to have

lulled the defendant into a false sense of security, and the

defendant acts in reliance thereon. Friend v. H. A. Friend

and Company, 416 F.2d 526, 533 (9th Cir. 1969).

In this case the district court found that appellees’

failure to institute suit until 1962 “was justified by cireum-

stances revealing that they were neither sleeping on their

rights nor leading defendants to believe that no action

would be taken, but that, on the contrary, they were for

almost the entire period from 1949 to 1962 vigorously

asserting and prosecuting their rights.” * p. 918. We agree.

There is no evidence that appellants were gver lulled into a

false sense of security or acted in reliance thereon.

(b) Acquiescence or Abandonment

It is true that between 1948 and 1954 Jena manufactured

products were sold in the West with the approval of the

Heidenheim management. They were sold through Heiden-

heim sales outlets and were products which did not compete

with or were in short supply at Heidenheim."* Moreover,

it is clear that at all times during that period appellee

Foundation claimed the trademarks outside the Soviet

Zone (which Jena disputed). During most of the period

the Boards in Heidenheim were negotiating with VEB on a

licensing arrangement. While there was no formal accep-

tance of the licensing proposal, the district court properly

30 The opinion of the district court sets forth in detail the events be-

tween 1949 and 1962 im support of this conclusion, and we deem it

unnecessary to repest them.

31 Appellee Foundation did not itself distribute the Jena goods in the

United States. They were shipped to the United States directly by the

Jena enterprise.

found that the Jena VEB adhered to the program as a

“modus vivendi” until February, 1954. There was no show-

ing of any intent on the part of appellee Foundation to

abandon its rights in the marks.**? Under these circum-

stances the conduct of appellee Foundation cannot be said

to constitute either acquiescense or abandonment warrant-

ing denial of relief.

(c) Joint or Concurrent Use

Our conclusion with respect to the defenses of laches,

acquiescence and abandonment answers in part appellants’

contentions that the injunction was unwarranted and that

appellants are entitled to the “joint use” or “concurrent

use” of the Zeiss trademarks. As the district court well

said, these terms standing alone do not represent a defense

to trademark infringement claims. They simply describe

factors considered in determining the equities in a particu-

lar case. p. 918.

This court in a number of trademark infringement cases

has considered the “conflicting interests” ‘which must be

weighed and balanced in determining whether both parties

should be permitted to use trademarks in dispute.** In no

case, however, have we considered the precise situation here

presented—where both parties claim ownership or the right

to use the same names and substantially the same marks

and are directly competitive in the manufacture and sale of

32 See Tillamook County Cream. Ass’n vy. Tillamook Cheese & D. Ass’n,

345 F.2d 158, 162 (9th Cir. 1965), and cases there cited.

33 See Avon Shoe Co. v. David Crystal, Inc., 279 F.2d 607, cert. denied

364 U.S. 909, 81 S. Ct. 271, 5 L. Ed.2d 224 (1960); Polaroid Corp. v.

Polarad Electronics Corp., 287 F.2d. 492, cert, denied 368 U.S. 820, 82

8. Ct. 36, 7 L. Ed.2d 25 (1961) ; Triumph Hosiery Mills, Inc. v. Triumph

Int'l Corp., 308 F.2d 196 (1962); Chandon Champagne Corp. v. San

Marino Wine Corp., 335 F.2d 531 (1964); Miss Universe v. Patricelli,

408 F.2d 506 (1969).

4534

the same products. Most cases have involved names and

marks which are similar or the use of family names, and

the court has been concerned with whether the use of a

“reproduction, * * * copy, or colorable imitation of a

registered mark * * * is likely to cause confusion, or to

cause mistake, or to deceive” (15 U.S.C. §1114(1)(a)).

Obviously also those cases where the parties’ goods were

not competing or the defendant adopted his mark in

ignorance of the plaintiff’s mark are not in point.*

Under the Lanham Act (15 U.S.C. §1114(1)) confusion as

to source of origin is the “keystone” for injunctive relief.

Avon Shoe Company v. David Crystal, Inc., swpra, 279 F.2d

at 612. In determining whether there is sufficient evidence

of confusion and deceit to entitle an owner to injunctive

relief, several factors must be considered. This rule was

last summarized by this court in Miss Universe, Inc. v.

Patricelli, supra, as follows:

“Several factors enter the calculation of ‘likelihood of

confusion’: the degree of similarity between the marks

in appearance and suggestion; the similarity of the

products for which the name is used; the area and

manner of concurrent use; the degree of care likely to

be exercised by consumers; the strength of the com-

plainant’s mark; actual confusion; and an intent on the

part of the alleged infringer to palm off his products

as those of another.” 408 F.2d at 509."

34 In general the cases clearly support the conclusion of the district

court that “where the products of the respective parties are not directly

competitive, the plaintiff’s interest in securing equitable relief may be

entitled to less weight than where the infringer markets a competitive

product.” p. 918.

35 Another factor ‘entitled to consideration in determining whether joint

use should be allowed is the expense incurred by the respective parties

in advertising and promoting the trade names, marks and products.

4535

As noted supra, the district court found that: “Confusion

and mistake has resulted among members of the consuming

publ-e in the United States from the sale of competing

products by plaintiffs and defendants bearing substantially

identical trademarks” (FF 479) ; and the continued sale by

appellants of goods bearing the various “Zeiss” trademarks

“and the use of the trade name ‘VEB Carl Zeiss Jena’ or

any other trade name containing the word ‘Zeiss’ or ‘Carl

Zeiss’ in connection therewith, will probably result in con-

tinued confusion, mistake and deception on the part of

members of the public and the trade in the United States

(FF 481).” JA 959-960. There is ample evidence in the

record to support these findings. The factual findings of a

trial court should not be set aside unless they are clearly

erroneous. Rule 52(a) F. R. Civ. P.**

In Miss Universe, Inc. v. Patricelli, swpra, we held that

“while appellant’s use of any mark containing the contigu-

ous words or abbreviations ‘Miss United States of America,’

‘Miss United States,’ and ‘Miss U.S.A.’ is likely to confuse

the consuming public, the same cannot be said about the

Stork Restaurant, Inc. v. Sahati, 166 F.2d 348 (9th Cir. 1948); An-

heuser-Busch, Inc. v. DuBois Brewing Co., 175 F.2d 370 (3d Cir. 1949),

cert. denied 339 U.S. 934, 70 S. Ct. 664, 94 L, Ed. 1353 (1950).

It is clear in this case that appellees have incurred the major portion

of the expense of promoting the Zeiss trademarks. As noted supra,

between 1953 and 1966 sales of the Zeiss firm of Heidenheim in the

United Statee totaled $56,803,069, and Carl Zeiss, Inc. expended

$5,893,498 in adve:.ising and promoting the trade names and marks and

the products manufactured by appellees (FF 468). JA 957. Tho total

sales of appellants from 1948 through 1966 amounted to $6,709,491 (FF

473, JA 956)—-slightly more than Carl Zeiss, Inc. expended in advertis-

ing and promotion.

36 In Miss Universe, Inc. v. Patricelli, supra, we recognized that the

findings of the district court with respect to the “existence of actual

confusion and the alleged infringer’s intent—are subject to the ‘clearly

erroneous’ standard nurmally applicable to findings of fact.” 408 F.2d

at 509.

4536

mark ‘Miss World—U.S.A.’ which contains a different, dis-

tinguishable major element in placing the emphasis on ‘Miss

World.” 408 F.2d at 511. The instant case is clearly dis-

tinguishable. Here the key words are “Zeiss” and “Carl

Zeiss.’ These names represent trademarks which identify

optical and other precision instruments. Confusion is not

avoided by adding the words “VEB” and “Jena,” or by in-

dicating that the products are manufactured in East Ger-

many. There is of course nothing in the decree to prevent

appellants from using the word “J ena” or identifying its

goods as having been produced in Jena. Apparently during

the period 1956-1959 Ercona did in fact sell Jena made

products in the United States without the Zeiss name or

marks.”

After weighing all pertinent factors we agree with the

district court that a decree permitting joint or concurrent

use is not warranted and would result in confusion and de-

ception of the consuming public. \

Antitrust Defense

There was sufficient evidence to support the findings of

the district court on the issues raised by appellants’ defense

that appellees misused the Zeiss trademarks in violation of

37 The findings of the district court in the trial of the antitrust issues,

entered March 12, 1969, contain the following: “During the period from

approximately 1956 to 1959 defendants sold goods in the United States

manufactured by V.E.B. Carl Zeiss Jena from which the Zeiss trade-

marks had been obliterated and on which only the symbol ‘CJZ’ ap-

peared. Prior to 1956 and after 1959 instruments bearing the Zeiss

trademarks were sold by Ercona in the United States. A comparison

of Ercona’s volume of sales of such instruments for the entire period

fails to show any causal connection between the Zeiss trademarks

and Ercona’s sales volume fluctuated up and down from year to year,

revealing that two of the years (1956, 1959) in which the marks were

obliterated produced a greater annual volume than jive of the years

(1952-1955 and 1961) in which the marks were on the instruments”

(Finding 7). JA 1186-1187.

4537

the antitrust law. The district court properly rejected this

defense for the reasons set forth in its opinion reported at

298 F. Supp. 1309 (1969).

Right to Damages

Under the Lanham Act when trademark infringement is

established the plaintiff is entitled to injunctive relief (15

U.S.C. $1116) and “subject to the principles of equity, to

recover (1) defendant’s profits, (2) any damages sustained

by the plaintiff, and (3) costs of the action” (§1117).

This does not mean that a successful plaintiff is entitled

in all cases to a monetary award in addition to injunctive

relief. The award for damages is “subject to the principles

of equity.” Relief is properly denied “when an injunction

will satisfy the equities of the case” and where “there has

been no showing of fraud or palming off.” Champion

Spark Plug Co. v. Sanders, 331 U.S. 125, 131, 67 S. Ct. 1136,

91 L. Ed. 1386 (1947).

Ordinarily it is necessary to show “not only that the

infringer infringed, but that he did so with the deliberate

intent to cause confusion, mistake or to deceive purchasers;

in other words, to purposely palm off the infringer’s goods

as those of the infringed.” Everest & Jennings, Ine. v.

E @ J Manufacturing Co., 263 F.2d 254, 262 (9th Cir.

1958), cert. denied 360 U.S. 902, 79 S. Ct. 1284, 3 L. Ed.2d

1254 (1959). It has been held also that a plaintiff is not

entitled to a monetary award when the defendant appar-

ently acted in a good faith belief in his right to use the

mark. Consumers Petroleum Co. v. Consumers Co., 169

F.2d 153 (7th Cir. 1948), cert. denied 335 U.S. 902, 69 S. Ct.

406, 93 L. Ed. 4387 (1949).

In the decree entered April 1, 1969, it is recited that

since in or about 1953, appellants “have, in violation of

4538

§43(a) of the Lanham Act, 15 U.S.€. 1325{a), from time to

time falsely described and falsely designated the origin

of goods imported by them into the United States and sold

in United States commerce as being goods produced by

plaintiff Carl Zeiss or its licensee when in fact such goods

were produced by defendant VEB Carl Zeiss Jena, a

nationalized East German concern, which has no legal or

other connections: with plaintiff Carl Zeiss or any of its

affiliated firms.” The decree then provided that each plain-

tiff is entitled to enforce all of its rights against the de-

fendants, “including damages, defendants’ profits and an

injunction.” JA 1218. The determination of the claims for

damages and an accounting were deferred for subsequent

trial. JA 1221.

Appellees argue that the district court found that the

appellants were not acting in good faith, relying upon the

court’s conclusion that appellants having “at all times been

on full notice” of appellees’ claims were “hardly in the

position of innocent or ignorant infringers.” JA 1107. We

do not construe this as an express finding of bad faith.

Nor do we find any “showing of fraud or palming off.”

Again we are confronted with a unique situation, with

no prior cases precisely in point. The district court has

found, and we agree, that appellee Foundation is the suc-

cessor of the Carl Zeiss Stiftung and is the owner of the

trademarks. We agree also that appellants were on full

notice of appellees’ claims. On the other hand, appellants

were at all times denying appellees’ claims and asserting

their own claim to the exclusive use of the trademarks as

licensees of the Jena Foundation.

Appellants did not seek to have the American public be-

lieve that their goods originated in Heidenheim. Nor were

they claiming to be licensees of the Heidenheim Foundation.

Rather they claimed that as licensees of the Jena Founda-

4539

tion (which they contended was the successor of the Carl

Zeiss Stiftung) they were entitled to the exclusive use of

the trademarks in the sale of goods manufactured in Jena.

The determination of ownership and right to use of the

trade names and marks has involved the resolution of many

complex and difficult factual and legal issues. The Supreme

Court of East Germany expressly held that appellant VEB

was entitled to the use of the trademarks, and decisions

from other courts have lent some support to appellants’

claim. There was a difference of opinion on the part of

German legal experts with respect to the applicable Ger-

man law. Prior to the trial of this case there were many

unresolved factors upon which appellants might reasonably

rely in support of their claims.

Even though in this case the factual and legal issues

have now been resolved against appellants, we cannot find

under all the circumstances that they acted in bad faith

in asserting their claim. We conclude that the “injunction

- will satisfy the equities of the case” and that the claim for

damages should be disallowed.

Accordingly the decree of the district court is modified

by deleting from it those provisions of paragraph 14 which

relate to damages and accounting of defendants’ profits.

As so modified, the judgment of the district court is

affirmed.

SOUTHERN DISTRICT OF MEW YORK

=~ we weeeee@eeaeeeeoeseses ot

CARL ZBISS STIFTUNS, doing

business under the name and 8

style of CARL ZEISS; and 2818S

IKON AsGee t

Plaintiffs, ‘

~ageinst- 8

VE .B. CARL .ZEISS, JEMA; a 62 Civ. 850

STERLIASTERS, INC.: BRCOMA

CORPORATION: EXAKTA CAMERA 8

COMPANY, I8C.; and CAMERA

SPECIALTY COMPANY, INC., t

Defendants, t

CARL 7EISS, IMC... 8

AG@itional Defendant s

oa Countercilaias.

g

sel el erwrlUc TrlUlUc OlCUCchOOrlCUc HO lUC TO VF 2 BO 2 2B ee Se 2 wy

ARREARAECES

Milbenk, fweed, Nadley & McCloy

----A€torneys for Plaintiffs and Carl Zeiss, Inc.

, One Chase Manhattan Plaza

wew York, W.¥. 10005

William B. Jackson, Beq., Ieaace Shapiro,

Beg., Patrick Owen Burns, Beq.,

Walter J. Derenberg, B84. of Von mitit’,

Derenberg, Kunin & Jenssen, Bew York City,

Of Counsel.

Barry I. Rend, Bj.

Attorney for Defendants V.E.B. Carl zeiss

Jena, Steelmesters, Inc., ané@ Ercons

Corporation

200 Park Avenue

Mew York, N.¥. 10017

Donald E. Nawi, Bsaq., David Kremen, B34.,

Bays, 3kler & Herzberg, and Wvarren F.

Schwart , Exy., of Counsel.

MANSFIELD, D.J.

This trademark infringement action, commenced in

February, 1962, is another chapter in a series of world-wids

confrontations between two groups, one located in “est Germeny

and the other in the East German or Soviet zone, over the use

of the “Zeiss" trademarks and firm name on optical and precision

mechanical instruments. Each group eteine to be the “true*

Zeiss enterprise (celled a “stiftung" or “Foundation” in

Germeny) and hence entitled to the exclusive use of the verious

Zeiss trademrks. Resolution of this controversy with respect

to the United States Zeiss marks Gepends on a Getermination of

which group is identical with, or the legel successor to, the

original veise Foundation established by Dr. Emst Abbe in

Germany in the 19th century: the effect to be given to various

legel measures taken by euthorities in Bast and West Germany

following Germany's division into military occupetion zones in

1948; and the applicsbility of certain principles of American

lew.

The trademerks in isous ares “76ise"; “CiZs*; the **

words “Carl zeiss Jena* in s Gietinetive lens fsans; the dis- *

tinctive lene fréus alone, ana "zeies Then", They are used'en -

opticel an@ mechanical products of grest precision end high *«*

quality, such as satellite trecking telescopes, plenstariun © ©

projectors, aicroscopes, binoculars, photeygragfiie leness, and®

spectacle lenses, ‘The marke and veise trade name, and gesé'will

attaching to them, ere without dispute of concsiéerahle velvei

| pleintsees are the "Carl teises stifteng;” =

("Poundation® herein) “doing business wider the name end style.

of Carl Zeies,” ané its cubsidiary, teiss then A.G.; beth of

test Geememy. Bofentante'are-*¥i8s8: Carl vetes, Jens*” of

‘Best Germany (Soviet zone) end its four American distributors |

(Stecianeters; Broona, Exakta, and Camere Specialty). Geusd —

as an editions! defendant in counterclaine is Carl teiss; Inc.

of New York, a wholly-owned subsidiary ef plaintiff roundstien:

Bach side claims that it is legelly ideation! to the

original Zeiss Foundation, or, in the ease of Gsfenéaants Vi8.3B.

Carl Zeiss ané Broona, its licensee ofr aessignes.

| fae complaint slleges thet pleintiftée Poun@ecton is a»

ll or Volkesigensr Setrieb, aeans “Peoplés-Gumed

-itagprieg,*"s Cpe of entity suthartnoe is te Savile mame

=j<

German entity, that from the time of its creation in 1689 until

at least 1945 the legal domicile and situs of its principal

in@ustriel end non-industrial activities were in Jena, now in

Bast Germany (Soviet Zone), and that in April 1945 Jena wes

occupied by American troops who relinquished control to soviet

forces in June 1945. The complaint further alleges thet prior

to relinquishing control of Jena, American forces evacuated

some 130 Poundation employees, including top management and

leading scientists, to Baden-Wuerttemberg, a Land (or State)

im the American Zone, where they commenced to establish new

Zeiss pro@action facilities; thet thereafter, in June 1948, all

of the plants, properties and industrial assets of the Foundation

im the Soviet Zone were expropriated, thus completely frustrating

the purposes of the Foundation there but not effecting assets

outside the Soviet zone; end that in 1949 and 1934 the govern-

ment of the West German State of Baden-Wuerttenberg’

(*Weerttemberg” herein), at the request of the evacuated Zeiss

management, issued en aduinistrative act effectively transferring

the Foundation to the Americen Zone so that it might continues its

activities there in accordance with ite cherter. Plaintiffs

* In September, 1945, the Ansrican Occupation Authority merged

parts of the former States of Baden and Weerttemberg (where

Beidenhein and Stuttgart were located) to form the State of

Waerttenberg-Seden; and in 1931 the pre-werld war II States

ef Baden and Weerttenberg were combined to form the State of

We Gott me et Came

-4-

Cee a RR oe eee Be eR

further allege that the United states Government has recogni:ed

the Federal Republic of Germany (est Germany) as the only

lawful government of Germany and has refused to recognize the

German Democratic Republic (East Germany), treating the letter

as under the control of the Soviet Union.

| Based on these allegetions plaintilfs claim that they

are the owners of the United States ei33s trademerns becau<e

plaintiff Poundation is the original Youndation and plaintiff

veiss Ikon the original veiss Ikon corporation, ond that there-

fore the use of these trademarxs in the United Stetes by

defendant V.E.B. Carl Zeiss Jena of west Germany ané its dis-

tributors is unlawful. The complaint seeks an injunction,

damages, and declaratory relief for trademark infringement,

unfair competition and false description and designation ci

goods, Jurisdiction is based on the Lanham Act, 15 U.5.C.4.

$$1051, et seq., and 29 U.S.C.A. §§1331 and 1338.

Defendants’ answers deny the principel allegation> ©:

the complaint and by way of affirmative defenses snd counter-

claims allege that plaintiff Foundation is not the original

“aiae Poundation organized in 1989 and does not have any ricjint,

title or interest in or to its property: that the Foundation 1

still located in Jena, Cast Germany, in accordance with it«

charter, that the "eiss marks belong to it and to defendant

\ gaieeneeneemall _

V.B.B. Cerl teies, Jena end Ercona by license and assignasnt;

end thet the use of the “eine marke by plaintiffs and Carl

seiee, Inc. of Mew York, edditional defendant om counterclaims,

ie wunlewful. Defendants also allege res judiceta, abandonment,

scoquiescence, end other ineyuitable conduct, including trademark

misuse in violation of the antitrust laws, and seek injunctive

ané@ Gecleretory relief and damages. Trial of the antitrust

Gefenres end counterclaims and of all damege iesues has been

@eferred. Defendants Exekta Camere Co. and Camera Specialty Co.

have agreed to be bound by any final judgment, except as to

Gauages, entered egeinst the other defendants, and heve not

perticipeted further in these proceedings.

Im their reply to the counterclaims, plaintiffs allege

that the courts of west Gerwany have determined the legal status

of the Foundation in their favor, that their determination is

conclusive here: and that the purported assignment from V.&.B.

Carl Zeiss, Jena to Erooma is unlewful because the V.E.B. hac

mo rights in the trademarks assigned for the reason that the

essignment of pre-1946 United states trademarks by an Bast

Geruen nations] is prohibited by the frading with the Enemy Act,

SO U.S.C. App. §6§1-40, and regulation 8 C.F.R. 9307.46 issued

thereunger, and because the assigqnesnt wes not eccompanied by

the trensfer lying business.

«$<

The issue thue presented as to the ownership and use

of the American Zeiss marks is one of meny between substantially

the seme parties with respect to similar rights in other

countries. After extensive pre-trial discovery and eventual

assignment of the case pursuant to Rule 2 cf the Court's Generel

Rules to one judge for all purposes, trial consumed sare than

ix weeks, G@uring which the Court heard 20 witnesses, including

sir experts on Germen law, totalling over 4,109 pages of testi-

mony plus extensive depositions. The record includes more than

550 documentary exhibits, many of them voluminous. Post-trial

briefs and proposed findings totel more than 600 pages.

Reckground, Mature, Purposes, and Organization

of the Zeiss foundation

Certain facts are not disputed. Both sides agree

that the Zeiss enterprise my be traced back to 1846 when Carl

.@iss moved to the city of Jena in what vas ( #n the Grand Duchy

of Saxe-Weimar-Zisenach, Empire of Germany, where he established

a workshop for the manufacture of optical and precision secheni-

cal instruments and related products. From st least 1863 the

business was carried on as the “Firma” Carl veiss. Under German

law a “Firma,” or fira, is the name under which a merchent,

whether a netural person or juristic legel entity, conducts

business and may sue or be sued. iIn 1875 he formed a partner-~

ship with Dr. Brnst Abbe, a mathematician and physicist at the

<<

University of Jena who wes deeply interested in the development —

of optical ecience. Beginning about 1804, Zeiss and Abbe,

together with Otto Schott, began the manufacture of optical and

other types of glass in @ business later known as Pirma Jenaer \ |

Glaswerk Schott & Gen. |

Both the zeies end Schott businesses grew and prospered,

|

employing a substantial number of people and yielding considera-

ble profite to the owners. In 1866 Carl Zeise died, leaving to

his son Aoderich his interest in the business. Upon Carl veiss’

a RA aie Ql Bs The: i

Geath it wes apparent to Dr. Abbe that unless the continuity of :

these commercial enterprises could be assured after the death of |

himeelf end Schott, their further development end growth, and

that of the precision optical science and technology mede

possible by them, might be threatened, with possible loss to

the workers employed in the plants, toward whom Abbe felt a :

strong obligation. In 1869 he therefore formed a legal vehicle |

known @s @ private “Stiftung,”* or Foundation for the conduct of :

these essentially commercial activities, which ceme into exist- |

ence pursuznt to laws of the Duchy of Sexe-Weimer-Sisenach, then |

part of the Germen Empire. iIn 1891 the Pounéstion acquired all :

the aseets of the Carl zeiss pertnership and @ one-half interest |

in the Schott firm, the remaining one-half interest eventually ! |

being conveyed te the Foundation by Otto Sehott in 1919.

-6-

Under German law a private “Stiftung,” ox Poundaticna,

is @ legal entity or juristic person with some attributes similar

to these of a corporation under Americen lew, including the

capacity to own property, enter contrects, eagage in business

activities, sue an@ be sued, etc. It differs from a stock cor

poration (known asc an “AG" under German lew) in that it hee no

stockholders. On the other hand, the absence of stock ownership

Goes not mean that it is therefore e public, non-profit,

charitable a eleemosynery enterprise. It is more in the nature

of 13 trust to which the attributes of separate legal eristence

as an entity are extended. The formation or orgenization of

such an entity is initiated tiffough the execution by the

individual founder (in this case Dr. Abbe) of a charter or

"gtatut” ("Statute” herein), # besic governing instrument

(either inter vivos or by will), which sets forth his intent end

any provisions for menagement of the enterprise he specifies.

Upon ecosptance end approval of this written declaration by the

appropriate state authority, the Foundéstion comes into existence,

and may separately own such property as is transferred to it.

Whether it is ® “private” or “public” Foundation @spends on the

terms of ite charter or Statute. Under Germen law any explana-

tory notes made by the founder are entitled to great weight in

interpreting the provisions of the Foundation's Statute. |

OTE DLT OA ANE

Resolution of some of the basic issues in this case

must turn in pert upon the nature, purposes, end charter terms

of the Poundetion created by Dr. Abbe. While at first blush

any attempt to spell out the founder's intent might appear to

be so fraught with tenucusness as to put a premium on temerity,

the Foundation’s Statute, or charter (as drefted by Br. Abbe in

1886S, and as redrafted and resubmitted by him in 1896, and

&pproved by the Grand Ducal Authorities of Saxe-weimer-Bisenach

on July 30, 1896), together with Dr. Abbe's Explanatory Hotes,

are so Getailed and clear that even the temerarious can proceed

without peril. From thea it is apparent that what he established

was a continuation of the two basic existing commercial enter-

prises, the Zeiss and Schott works, as the property of the

Poundation, to be cperated privately as = permanent cooperetive

business venture or easociation with a view to its realizing a

profit from such operetions. Instead of the profits being

distributed to himself, Roderich zeiss, Schott, ané their

families, who would have been the stockholders if e conventional-

type corporation hed bees. formed, the profite were to be used

primerily te maintain, Gevelop and increase the business enter-

prises or works and to provide economic benefits for the vorkers

employed in them. Any surplus «es to bs used (as a secendery

purpess) for promotion of technical knowledge and science outside

ee -10-

eR ONG ILA CS ONG Py EAN OEE OIG SCANT POLE AIR | LS NN EOP ETT OE OE SIGE EEN LENE LIES ’

“7 a i i

4

ce TONE A GRAS

of the works, and for participation in commmity organizations

and measures intended to help the working population in Jena,

where the works were then located.

Section 1 of the Statute provides:

"A. within the vorke

“1. To cultivate the branches of precise

technical industry, which have been introduced

into Jena by the Optical Works and the Glass Works

with the co-operation of the founder of the

Stiftung and thereby maintain the said "industrial

establishments under an impersonal title of

proprietorship: that is to say:

*2. Permanent solicitude for the economic

security of the above undertakings ss well as for

the conservation end further Gevelopment of their

industrial labocr organization—ss &@ source of

subsistence for @ large number of people and as

an efficient member in the service of scientific

and prectice intexests;

“3. To fulfill high sociel Guties, than

personal proprietors would permanently guarantes,

towards totality of co-workers in its employ, in

order to better their personal and economic rights.

"B. Qutside the tiorks

"1. ‘To promote the general interests of

the branches of precise technical in@ustry as

indicated above not only within the sphere of

action proper of the stiftung's ‘works but also

outside of it;

“2. To take pert in organizations and

measures Gesigned for the public good of the

working populstion of Jena and its immediate

neighbourhood :

*3. To promote study in natural and

mathematice] sciences both as regards research

and teaching.

elle

a ee ee ee Eee a Pe "

"The objects of the Stiftung es enumerated

under A exe to he carried out by the Gtiftung

by virtues of the statutory eGuinistration of ites

om industrial undertakings exclusively end within

the sespe of these undertakings.

“nevpecting carrying cut of the objects of

this 6tiftung es enweerated cub B, these chali

we limited to such curplus funds es any be

eveilable after the provisions as detailed

oub A have heen provided for."

That Dr. Abbe established a private-type Foundation

to engege in commercial business for a profit is cenfirued by

(1) various other sections of the Statute,

including Section 40 entitled “Generel guide for

the business policy of the Foundation“ which provides;

"In accor@ance with the @uties ascribed

to the Poundation in gl, it: business activity

shall heave for its object from an econcnicel

standpoint, not only the highest possible

inezeacse of the net profits of working

surpluses of its undertakings, but rether

the inerease ci the econemic total result...°, by

(2) Seetion 41, entitled “criterien for the

ecencmic working of the businesses of the Foundatica, °

whieh prescribes conditions for calculating “the net

prefit ef eech business of the Foundsticn;" and by

(3) Section 42 which refers te “efforts te

ineresse the effectiveness of the Foundation froa

en economic standpoint’ including “the purposes of

gqeia".

The profits were not to go to Abbe or any

privete stockholders, but were to be plowed beck inte

the enterprises, except to the extent that any remining

-12-

OEE AEE LOR ELLEN OA LE LE LILES NEE GAS RS UO BOUT Bi RE SAT Ee. I eS NEE tte RY ALTRI nines te tage gto He apa ebay Aa ptenapn tana

surplus might be expended to assist the commnity (Jena), where.

the entire works were then located. Or. Abe's intent not to...

establish a charitable or eleenosynary institution is confirmed

by his own independent writings with respect to the above-

quoted Section 1 of the statute:

“The Carl Zeies Foundation shall in ro

respect, particularly not with regerdé to the

eocial tasks assigned to it under A in the

third paragraph, sssume the character of a

‘charitable foundation. ‘

» “se. For the purpose of my efforts is by

no means to foster gharity within the aree of

my @ctivity but solely: to foster the legal

position of 311 those who have entered into

‘this ares or will in the future enter it."

(Abbe, Collected ¥ritings, Vol. IIZ, p. 331

(1921))

Thus, elthough Dr. Abbe believed that the coumercial enterprises

had a social obligation to the community, this grew out of,

and was based ugon, the fact thet enterprises were then loceted

there in their entirety, and not beceuse of s Gesire to

establish e charitable institution. The detailed charter and

explanatory writings, vhen considered in the light of the

undisputed surrounding circumstances, compel the inference thet

if the enterprises were forced, for xsessons bevond the contsol

of their management, to move their edministrative center end

activities to some other location in Germany, Dr. Abhe, who +es

Gevoted to the development of optical science, industry end.

a &

AS ee en

technology, would have desired the enterprises to continue in

the new loestions, provided the basic tenete of the charter

eoulé he substantially reepected.

; | Tee Foundation Gtatute established a rether elaborate

structure for the management of the copmsrcial enterprises

forming the basis of the entity'e existence and such non-

industrial assets as might be acjuired in furtherance of the

community purposes connected with those enterprises. Running

through these Getailed previsians is a desire for permanency,

continaity and a cooperative impersonal ownership, to be

achieved through use of a series of “checks and balances” in

the appointment, powers, and removal of management personnel

ané through specific aseurance of certain rights to the workers.

Under the Statute the zeise and Schott firme were to

carry on their respective business ectivities permanently under

their om °firm® names with their seperate sesets, each under

the direction of a separete “Board of mnegement” (Section 6).

The great aajority of the Statute's sections pertain to the

ectivitics end aenagemsnt ef these two commercial enterprises.

A "Special Boaré* wes to ad@uinister the non-inéustrial assets of

the Poun@etien and to supervise directly the non-commercial

ectivities epecified by Section 13, see above. A “Foundation

Deputy” eppeinted by the Special Board wes to represent it on

-14-

the Boards of management of the individual comercial enterprises,

to keep himself informed of their affairs, ané to supervise —

them; however, he had no power to intervene directly in their

management, although he had to be consulted and hie consent

obtained with respect to certain specified mutters ané as to |

all matters on “hich the members of a Board of Management did

not unanimously agree, (Sections 11, 12, 14-16). | |

Bach Board of Management was to consist of threes or !

four mesbers appointed by the Special Board irrevocably for life |

or e fixed period (Sections 4, 7, 27), with one member of the i

*eies Board to sit on the Schott Boaré as well. Only an employee |

of the Zeiss or Schott firms having 4 lifetime contract of :

employment was eligible for appointment to the Board of mnage- |

ment of that firm. ‘Two members of each Board were appointed by

the Special Board as the "Mandatory" and “Deputy Mendatory,”

each authorised to represent the Board in deslings with third

persons; in adéition, any two Board members wers so suthorired

jointly. Membership on a Board could terminete only by

voluntary resignation acespted by the Special Board, by

expiration of a fixed period of appointmsat, or by terminstion

or eancellation of the requisite lifetine employment contrect,

which sould he effected only for gross violation or neglect of

.@aty os disreputable behavior.

-15-

Under the Statute the functions of the Special Board

were to be performed by “that Department of the State Service

of the Grand Duchy of Save-veimar under which the affairs of the

University of Jens are, for the time being, placed" (Section 5).

In the event of “political changes in the State" the functions

of the Special Board were to be carried out by “that department

of State which with regard to the University of Jena occupies

the place of the State Department of the Grand Duchy acting as

the Special Board, provided that its seat is in Thuringia

otherwise by the highest administrative authorities in

Thuringia" (Section 113). In the event that there was no

Special Board a2 provided by the Statute, its functions were

to be assumed by the °eiss Board of Management until they could

be transferred to a new Special Board (Section 114).

In view of developments that later occurred in 1942,

a half century after the “eiss Poundation was established,

which give rise to issues between the parties (we refer to the

1948 expropriation of the Poundation's assets by Soviet

authorities end the operation of them thereefter as “peoples-

owned” or “state-owned” enterprises), it is impertent to point

out thet Dr. Abbe did not intend the Foundation to be « state-

owned or state-operated enterprise or entity. The proof is

clear that although « state agency wes designated as the Special

-16-

Board, this was devised as a means of assuring continuity of

an essentially private entity, since the agency would service

managerent personnel and presumably continue to exist indefinite-

ly. However, this was not intended to give the Foundation ®

governmental character. The state agency, in effect, was thus

obligated to act as a private person in exercising the functions

of the Special Board, and its exercise of powers as the Special

Board must be distinguished from its functioning as &@ govern-

mental au i under German law to supervise generally the

activities of all foundations in order to insure that they did

not violate their charters. Although in the eyes of many

Dr. Abbe demonstrated a far-sighted and progressive social

consciousness in providing that profits were to be plowed back

into the enterprise and devoted to improvement of the lot of

workers in it, with any remainder to help those commmity

activities directly affecting the business and its employees, it

must not be forgotten that he lived in and contemplated 4 world

of free enterprise and private capital, rather than one in which

his business would be owned or operated by a socialist or

communist state. This he made clear in his Explenatory Mote:,

written in 1900 and intended to be affixed to the Statute:

"As @ juristic person the Carl Zeiss

FounG@ation, like any other foundation, is

under government supervision, and sino the

juristic person cen in practice act only

@l7<-

through its governing bodies, these bodies are

‘under such supervision.

"Since, however, the general government

supervision is only concerned with legality,

regularity and compliance with the Statutes,

mo governing body of the Poundation in the

performance of acts in accordance with the

Statute is subject to the supervision or

inflvence of any government euthority, and

this sleo applies to the [Special Board) of

the Foundation.” (P. Ex. 94, pp. 1114-1115)

The private nature of the Foundation ves later confirmed in

1948 (efter it had been expropriated by Soviet authorities) by

Dr. Bago Schrede, Soviet-appointed head of the Peoples'-owned

Gefendant V.E.B. Carl Zeiss, who stated:

“When we can therefore realize from Abbe's

own words that he actually never meant or wanted

to Gesignete his institutions as socialistic, but

om the contrary, rejected socialise and invited

people to fight it with a special program of his

» we must é@leo realize that a socialist plant

cannot be imagined under bourgeois capitelien,

but is tied to a socialistic social order. The

commumnization of the means of production is one

ef the main points of this order and signifies

the transfer of owmership to the people. sat

there could be no ownership by the people under

the at-that-time monarchical weiusr Government, and

3

g

heve been possible at the tims. The Gspersonalix«a-

tion of a business through the creation of @ so-

ealled legal person, as performed by Abba in the

by-laws, is not communiretion, however, since it

ie up to the representatives of this legel person

to @ business in accordance with the lews in force

end the interpretation of the provisions of the

-18-

peer”

Neen ee ee ee ee ES ee i ee

by-laws, which means as capitalists, since

atic s no different type of

activity is possible. In this connection it

must still be taken into consideration that

public accounting, as demanded for instance of

corporations, could be omitted. This ought to

make it clear that the Foundation plants were

not, and could not be, socialist plants.*

(Bmphasis supplied)

In addition to the Statute's complex provisions for

the organi-ation of the zeiss Foundation, it also contained

what were, for ite time, enlightened provisions for the protec-

tion of ite employees, including regulations as to hours of

work, overtime, holidays, sick pay, severance pay and pensions,

and guarantees against discrimination on political or religicus

grounds. Vith regard to any surpluses remaining after satis-

fection of the obligations under Section 1A, entitled “within

the Forks,” detailed provisions govern their expenditure “in

favor of organizations ané measures in Jena - which are suited

to promote the personal welfare, the economic position or the

comforts of life of the industrial population" (i.e., the

workers employed at the veiss and Schott Works), and for the

furtherance of scientific development through contributions to

the University of Jena.

In view of the issues presented by the parties as to

whether the Poundation or its “firma” could have any legel

existence as entities outside of Jena, which is consiéered more

-19-

fully later, reference must be made at the outset to other

relevant provisions of the Statute. The Statute provided that

the domicile of the Foundation should be Jena (Zection 3), that

this provision ceuld not be legally amended or rendered

inoperstive (Section 121), and that its Works (including the

Zeiss and Schott Works) should not be transferred outside the

iumediate neighborhood of Jena {section 39). However, it

expressly contemplated that “new business undertakings" might

be “established or taken over by the Foundation in the future

within the German Empire“ but that “Should at any time the

further centinuation of a business of the Poundation filling

under the aforesaid provisions be impossible without damaging or

endangering the other businesses or even the Poundation itself, *

the business of such a firm should be liquidated and “the said

Virm finally struck off the registers” (Section 37).

The Statute did rot expressly contemplate, and contains

no provision with reference to, the possibility that the Founda-

tion might not be able to continue its Zeiss end Schott busi-

nesees, or Firms, in Jene (either because of feilure, destruction

or, as later occurred, Soviet expropriation), leaving it the

owner and operator of businesses elsewhere. It simply provided

that in the event of Gissolution of all the Foundstion businesses,

or @ Geterminetion that for other reasons there is no

~20-

justification for its continued existence, the Foundstion wes

to be dissolved and its assets distributed one-half to the

communities in Jens and vicinity and one-half to the University

of Jena (Section 116).

Following its establishment the Foundstion, thus

elaborately conceived - @ perpetual entity crested by a

transfer of property in trust, »hich would operate various

industriel enterprises in an enlightened and humane manner,

prospered and acquireé numerous corporate affiliates in various

perts of Germany including plaintiff Zeiss Ikon A.G. As time

passed it. developed a world-wide reputation in the optical and

precision mechanical field. Meanwhile political changes in

Germany resulted in some changes in the administration of the

Poundation, which wes to survive two World Wars. When the

Poundation was established, the Grand Duchy of Saxe-weimer-

Bisenach was part of the German Empire vhich, under the German

Constitution of 1871, had but a very general supervision and

control over the laws of its atates. ‘right, The Constitutions

of the States at War, 1914-18, p. 217 (Govt. Printing Office,

1919). In 1920, following Germany's defeat in World War I, the

Grand Duchy wes dissolved and merged with various other “4uchies

and principalities, pursuant to act of the German Hetional

Parliament, into the newly established Land of Thuringie (1920

@2)<-

or na cen

Reichs-Gesetehblaett, p. 841), a state of the German Federal

Republic. Barlier, in 1900, Germany had adopted the German

Civil Code, containing, among other things, provisions governing

foundetions. Im 1923, Thuringia, in ite implementation and

execution of the German Civil Code, adopted an ordinance govern-

ing its Land, which included sections dealing with foundations.

TN ee APO BIC. ha EE

The effect of the German civil Code's provisions upon foundations

esteblished in @ Land, and the interrelationship between the

Civil Code, the ordinances adopted Ly the various Laender, and

the earlier laws of Saxe-weimar, have been presented as iasues

by the parties and will be treated at a ister point herein.

For present purposes it is sufficient to note that upon the |

formation of Thuringia and the disappearance of the Duchy,

Thuringian euthorities replaced those of the Duchy as the

Special Board of the zeiss Foundation. with the edvent of

Hitler and the Third Reich the Special Board was the

“reichstaetthalter," or Reichs Governor of the Land of Thuringie.

The state of the Foundation Upon Germany's

Capitulation in Apri) 1945

With this background we come to April 1945, when

a oe ee

Germany capitulated in World War II and was occupied by the

Allies. Thereupon the city of Jena wes occupied by the armed

forces of the United States, who remeined for 2-1/2 menths,

sclAaeeahian control in July 1945 to the Soviet militery forces

after it wee decided thet Thuringia was to be part of the soviet

Zone, pursuant to the Allied Statement on Zones of Occupetion,

iesued on June 5, 1945, which divided Germany inte four ailitary

occupstion somes. At the time of Germany's surrender, the Zeiss

Foundation Deputy wes Professor Abraham Beau, and its Board of

Management consisted of. Professor Walter Baversfeld, Mr. paul

Benrichs, Dr. Beinrich Kueppenbender, and Professor Georg Joos.

The Schott Board consisted of Dr. Erich Schott, Mr. Richard

Hirsch and a. Benrichs. All members of both Boards had been

appointed for life, most of the appointments dsting back to at

least the 1920's. The administrative offices and principal

manufacturing establishments of both the zeiss and Schott firms

were in Jena, but Zeiss also hed branch establishments in Berlin,

Cologne, Hamburg, Vienna, and a number of foreign countries,

all outside whet was to become the Soviet Zone, and Schott had

a branch factory in Lendshut, Bavaria, which wes within the

American Zone. The Foun@ation itself owned interests in various

corporetions loceted outside the ares allotted to the Soviets,

which engeged in commercial activities direetly related to

those conducted in Jens, as follows:

Anschuets & Co. Gabi

M. Bensoldt & Soehne AG

Zeiss Iken AG

Alfred Gauthier Guhl

Friedrich Deckel

R. Winkel Guba 100%

Bans Kollaorgen Gabi Bot Specified

BESAG (Deutsche Spiegelgias A.G.) 100%

Sendlinger Optische Gleswerke

Berlin AG Bot Specified

Sreatheler Quar7itwerke Gubi Mot Specified

In addition to owning the foregoing, the Foundation owned nen-

commercial properties, almost all located in os near Jena,

consisting principslly of community facilities available for

use by Zeise and Schott workers, including 4 hospital, elinic, :

wacation camp, library, housing, sports fields, and the like.

Of 45,000 people employed by the various commercial enterprises

dette

in which the Foundation had en interest, including the 7eiss and

Schott firms, 30,000 were located outside of Jena or vicinity.

Of the 12,000 to 15,000 employed in or near Jena, 5,000 were

non-regular foreign or conscript workers who left by June 1945.

By mid-June 1945, when it was evident that Jena was

shortly to become part of the Soviet Zone, American military

autheritiss, acting mursuant to orders issued by the Supreme ]

Bee@quarters Allied Expeditionary Force (SHARF) in Paris,

notified the Boerds of Management of the Zeiss and Schott

firme and approximately 122 top scientific, pre@uction and

aéministrative personne] whom Board meabers were directed to

-24~

|

ee ee ed ee ee 4

assemble (d@eseribed as the “brain” of both enterprises), thet

they were to be evacuated with their families to the American

Zeme of Occupation and to assemble and peck a counterpart or

sample of each key record end piece of equipment for transporte-

tion by box cers to the American Zone. Thies military move wes

part of the established policy of the United States to search

out leading German scientists under Americen control and use

them in commection with the continuing war effort against Japan.

In this instance the plan was to establish a branch factory in

the American Zone for that purpose. The proof is clear thet

under the terms of Germany's unconditional surrender the

Boarée of mangement and other enployses were chligated to chey

the evacuation order, and that theirs was a forced departure,

mot a voluntary one.

Although the Board of Management, before being

evacuated, did not foresee 4 division of Germny into two

Germenies, or anticipate a prolonged abeence from Jena, they

Gid recognize that during their own indefinite absence it

would be Gifficult to annage the enterprise in Jena from the

American Zone, particularly in view of the disruption of con-

municetions in war-torn Germany, and the uncertainty about the

future. Recognizing elso the disadvantages of absentee manage-

ment, they sought to continue and preserve the Jena cperations

-23-

PRET aN 8 MER Ye Fy A OT DR SAL ORME IER YLT OE EE ROAR ORI EP EL SER END Plea EOL NERY, aa

and aesets Guring their absence by designating three Zeiss

employees whom they left behind, Dr. Friedrich Schomerus,

mr. Viktor Sendeann and Dr. Hugo Schrade, to act for then

@aring their absence, and to exercise all essential Zeiss

management functions. Similar steps were taken by the Schott

Board members (Meesrs. Schott, Hirsch and Benrichs), who

Gesignated three trusted Schott employees, August Klemm, Albert

Heintz end Frit: Dunger, to menage the Schott works during

its Board's enforced absence. After # discussion at a June 23,

1945 meeting attended by the Boerd members, Dr. Schott, just

prior to his being evacuated on June 25, 1945, advised Klemm,

Beinty and Dunger of their designation.

The Boards’ appointment of employees to menage the

two works @uring their absence was permitted by Section 6 of

the Poundation Statute, which ranted broad powers of delegation

te each Board. The Board members being evacuated to the vest

understoed that the Russians would adopt a hostile attitude

towerd ex-Maris and accordingly, in selecting three trusted

an@ competent employees to manage the Zeiss enterprise during

their abeence, chose persons «ho had never been Nazi party

meubers or sympathizers. On the other hand, although the

Geperting Boerd members hed been Mazi party members, they did

not believe thet this would «ffect their three caretakers for

-26-

the reason that the lesder of the three, Dr. Schrade, was |

prepared to, and later did, testify that the departing Board

members had protected the three from being victimized by the

Mazis (even though Dr. Schrade, as the husband of @ Jew, had

been particularly vulnerable) at serious risk to themselves.

Defendants contend that the Board members, before

their departure from Jena in June 1945, orally resigned, and

"there was conflicting testimony on the subject. As will later

be come apparent, such @ resignation, if it had occurred, might

have significantly (though not fatally) affected the capacity

of the departing Board members in later years, after Germany

was eiidaine divided and the Foundation destroyed in the East

by the Joviet Military Administration, to continue it in the

West as the orgenixation identified with, and the successor to,

the Zeiss enterprise. After carefully reviewing the evidence

and appraising the witnesses (including Kueppenbender, schott

and Schrade), we find that the crodible evidence establishes

that while the veiss Board members evacuated to Heidenhein

granted broad management powers to Schomerus, Sandmann and

Schrade (sometimes called the "three $s") and later even agreed

temporarily to refrain from exercising their own powers as Board

members and to permit the latter to hold themselves out r« the

“Board of Management" in order to eppease Soviet occupation

<27=

authorities, the Zeiss Board never resigned. On the contrary,

before they departed in June of 1945 these Z%eise Board mambers,

who held office for life and could be deposed only for gross

violation, neglect of duty, or disreputable behavior, executed

formal powers of attorney dated June 22, 1945 which, while

designating the three Ss as their representatives and suthorixing

them to perform the duties and functions of the Board during

the official Board's absence, made no mention of resignation.

The Foundation Statute (Section 27) required that a

resignation, to become operative, must be accepted by the

Special Board. Under German law a resignation is effective only

if it is unequivocal and unambiguous. A broad delegetion of

authority, granted under emergency circumstances, wes not the

legal equivalent of a resignation. Although a resignation ves

not required to be in writing, an intent to resign from such

important positions as members of the Board would not normally

be inferreé unless put in writing. In this case, having com-

mitted the arrangement between themselves and the three 32 to

formal written Gocuments drafted by experienced legal counsel,

the Zeies Board, if it hed intended to resign, would undoubtedly

have written an unequivocel] statement, such as “We hereby

resign as members of the Board”, which they did not do. The

Gocuments executed by them negate any such intent, and there was

~28~

proof, including Dr. Kusppenbender's testimony, that the Board

never resigned and never intended to resign, which is accepted,

corroborated, and found credible. Dr. Schrade, who was permitted

to travel from Bast Germany to New York to appear as a witness,

testified that on June 22, 1945 (the date on which powers of

attorney were executed by departing Board members in favor of

Schrade, Schomerus and guadmnen). Henrichs told him in a private

conversation that he (Henrichs) was resigning and, over Schrade's

protests, sienna upon Schrade to accept membership on the

Yeiss and Schott Boards in his place. If true, this testimony

ould be significant, However, we must reject it, not only

because of Schrade‘'s obvious interest and his demeanor as 5

ditness, but because it is inconsistent with his prior testimony

on the subject. In an affidavit executed by him and used in the

London proceedings in 1959, eight years closer to the events in

question, he made no mention of such « conversation (abviously

of importance) in recounting the same events; and in pre-trial

deposition testimony on the subject he not only failed to

mention any such conversation, significant and striking as it

would be expected to have been, but effireetively swore that

at no time had he ever been told thet the Geparting Boerd menbers

had resigned. Moreover, Schrade's testimony is unsupported by

the contemporaneous diary entry of Dr. Klemm, one ef those

-29-

Gesignated to manage the Schott works during its Board's absence,

which simply states that the departing Boards “leave by order

of the American Military authorities, Jena as of today". Lastly,

it is significant that although formalities were being observed

through the preparation of formal legal documents by competent,

erperienced lewyers and these documents were executed by the

Board members before their departure, nowhere do they contain

even the simplest reference to resignation (e.g., "We hereby

resign es Board members"), but they are limited to delegation

of powers of attorney necessary to enable the new temporery

manegement to act as such, legal steps which would have been

unnecessary if the depsrting Board menbers had resigned.

For the foregoing reasons the Court alse rejects

SchradGe's testimony as to a statement meade by Dr. Berth on

June 27, 1945 to the effect that the departing Board menbers

had resigned. Such rejection is mentioned for the reason that

notwithstanding the Court's refusal to adeit it for the truth

of what wes said, since it constituted hearsay, defendants’

counsel, Gisregerding the Court's ruling, insist on using it

in support of their contention as to resignation.

Defendants attempt to explain away the execution of

the powers of appointment and prokurs, and the absence of any

written resignations, on the theory thet sfter the execution of

-36-

Aca he ot APSE ORR ait NRE.

the powers ané before their evacuation the departing Board

nembers changed their plan to appoint the three Sa (Schomerus,

Schrade and vendeenn) 4s caretakers only, and Gecided that it

would be necessary to resign completely and heave the three 8s

appointed by government authorities rather than risk Soviet

disfavor by revealing the true situation, namely, that the three

Ss were Geriving their tuitischiy from ex-Bazie. This theery is

rejected as laeking credible support. It appears that on

June 9, 1945 the United States Armed Forces attesgted to set up

a provisional, or ad hec, government for Thuringia by appointing

one Berman Brill Prime Minister. Om June 21, 1945 a Br. Walter

Wolf, representing himself to be Minister of Bducation appointed

by Brill, purported to eppoint Dr. Arno Berth Deputy of the

Foun@ation, and on June 23, 1945 Barth appeared at the Schott

worke at Jena and attended 2 meeting with various Schott repre-

sentatives, including Dr. Schott and Henriche, which wee also

attenéed for some 20 minutes by Dr. Kueppenbender after the

meeting was in progress. There was no discussion with Berth

os anyone else, sither at this meeting or prier to the evacua-

tion of the Board members on June 24 and 25, about any resignation.

Although B@uerd Neintz, chairman of a workers’ committees who

attende@ the meeting, testified on Geposition that there was

mention of appointment of new Board members, Dr. Erich Schott,

aRin

who testified in person at trial, swore that the reference was

solely to designation by Schott of representatives to act in

the Board's absence, = version which is accepted as credible,

After the evacuation on June 24 and 25, 1945 of the

Zeies and Schott Boards of Management by military order fron

Jena to Seidenheim in wuerttemberg (American Zone), Barth and

the caretakers appointed to act in the Boards' absence decided

to make it appear to the incoming Russians that the caretakers

were appointed as Board members to replece the real members

who had been evecuated rather than reveal their own limited

autherity. This decision may have been mde for the reason that

the caretakers Gid not have 2s much confidence es the departing

Boerd wembers in being able to explain the latter's political

conmections; or the ceretakers may have decided to take

advantage of the unique opportunity to usurp the real Board

members’ positions in their absence. Since Barth wes free of

any Nazi taint, having been isprisoned in a Nazi concentration

camp, an sppointment by him would not be suspect. Accordingly,

on June 27, 1945, after the two Boards hed been evacuated,

Dr. Barth ceused written instruments to be prepared purporting

to appoint Mesers. Schomerus, Sandeeann ené Schrede ae menbers

of the Zeiss Board, and mesers. Albert Meintz, Frit: Dunger and

Dr. August Klemm (Schott employees) and Dr. Schrede, a2 members

-32-

BIE ERE OSD CIOL AEE LIP IE ca are hapenrs: . AEE IE PE Rem RORY

of the Schott Board, despite the fact thet the evecuated life-

time members of both Boards had not resigned. These appointzents

were for two years, conditioned on the appointees’ agreement to

resign upon the official Board members’ return to Jena. For

a number of reasons, however, these appointments were not

effective to Constitute the appointees lawful members of the

Boards. First of all, the official members had not resigned.

Moreover, the purported appointments were not made by a Special

Board (ae required by Section 4 of the Statute) but by a

puupeuted Renter. Dr. Barth. Furthermore, the appointees did

not hold fixed or lifetime employment contracts (required by

Sections 26 and 59 of the Statute before such appointments

could be effective) and they probably violated Section 27 of

the Statute, which prohibited appointmsnts “with the option of

revocation”, since the appointees agreed to resign upon the

official Boerds' return to Jena. Lastly, it is questionable

Whether the so-called “Brill” regime in Thuringia, which

assumed control in June 1945, prior to the arrival of Soviet

euthesitioa, was lawfully established pursuant to any lew or

Allied treaty or agreement permitting such establishment in an

ares agreed upon by the Allies as a Soviet Zone.

Defendants offered hearsay evidence indicating that

on June 9, 1945, a representative of the VIII vaited States

-33-

Army Corps, during its brief sojourn in the area, purported to

appoint Dr. Brill Prime Minister of a new government for the

Land of Theringie. Four days previously, however, an agreement

had Been consummated by the Allies, which desiqnated Thuringia

as part of the Soviet Zone and resulted in the American forces

turning it over to the Soviet forces on July 1, 1945; and it

was not until July 16, 1945 that the Soviet Military Administra-

tion, apparently disregarding an intervening notice dated

July 2, 1945 signed by Brill ennouncing the formation of a new

@vernment for the "province" of Thuringia, proclaimed the

establishment of ® new government for the “Land” of Thuringia,

with a Mr. Rudolph Paul ae its President.

Thus the picture upon transfer of Jena from American

to Soviet control was one of understandable confusion in which

an ad hoc temporary governmental authority (Brill, Wolf, Barth,

et al.) joined forces with ecually tenuous ad hoc temporary

7eiss caretakers (Meesrs. Schrade, et al) and, in anticipation of

the impending Soviet occupation, attempted to give themselves

some sort of legel standing that might be acceptable to the

Russians, despite the fact that the official Board members never

resigned. After careful review of the evidence the Court rejects

Gefendants' argument that the departing members of the Zeiss

Board were motivated to resign by the fact that they had engaged

-34-

in Mazi activities Guring World Var II, coopereting with Nezi

officials in the production of military supplies end equipment

for prosecution of the Mazi wer effort, for which Kusppenbender

received titles and awards, and in the employment of conscript

labor, including Russians. Defendants argue thet in view of

this offensive conduct it may be inferred that they believed that

the incoming Soviet Stis geass administration would not countenance

their continuation in office but would remove them and take

reprisals in Jena. Much of the “evidence” relied upon by defend-

ants consists of hearsay which they persist in citing despite

its rejection by the Court. Although it cannot seriously be

Goubted that the Zeiss management wes forced, as Dr. Kueppen-

bender himself testified, to lend its facilities and talents to

the Navi war effort, there is also evidence that Kueppenbender

helped Jewish employees of Zeiss during the war, including

Dr. Schrade who acknowledged this, 2nd that in two separate

war crime hearings (American and German) leter held in the

American Zone the 7yeiss Board members were cleared of any Mari

criminal activities. While Kueppenbender and other members of

the Boards were undoubtedly apprehensive -- end with justifica-

tion — about what the Soviet militery foresee would Go to Zeiss

when they took control of Jena in 1945, they did net believe

that e resignation wes required. Otherwise these experienced

-35-

businessmen with competent "eiss staff legal counsel at their

sides (Drs. David end Schacht) would have executed a simple

resignation to be shown to the Russians.

Yeon Jena’s Becoming Part of the Soviet Zone

in July 1945

On July 1, 1945 the military forces of the United

States turned over control of Thuringia (including Jena) to the

Soviet Armed Forces, who established Dr. Wolf as Minister of

Education for Thuringia, which had the effect under the Zeiss

Statute of constituting him the 7eiss Special Board. Barth

became the Stiftung Deputy under the new administration and

continued the new ceiss and Schott appointees as their Boards.

The next three years were to see many new and unforeseen

Gevelopments that would work drastic and profound changes in

Jena, in the “eiss and Schott works, and in relations between

the Soviet an4 Western Zones and those living in them, including

Zeiss officials. Within a yeer and a half after ite occupation

of its Zone, the Soviet Military Administration set about sei’ing

an@ dismantling most sizeable plants, including 94% of the

in@estrial works in Jena, which were shipped to Russia as war

separations. Mend in hand with this massive destruction of

Germen industrial capacity in the Soviet Zone went the establish-

ment of an entirely new political, economic and social order,

-36-

patterned after communist or socialist lines. The objective

of these efforts, of course, was to punish the Germans for their

unjustified and brutal infliction of » orld War II upon the Allies

and to assure that Germany would never rise again as a war

potential or at least that if it did so, the political and

economic comple:ion of the soviet ‘one ould be sufficiently

altered to a a bond or alliance »ith the U.S.S.R. that

would evoid any future German threat to the goviets. The

ruthlessness with which the Soviet authorities confiscated

property in East Germany under the guise of reparations soon ied

to criticism and protest by American authorities as «a violation

of the Yalta and Pot.dam Agreement« of 14945 and as contrary to

Allied policy which, while recogni:ing the necessity for teking

certain essential steps rejuired to dGemilitarize Germany,

favored post-war reconstruction of a demilitari..ed Germany as

an independent country operating with 1 free private enterprise-

type of economy, in contrast to the communi-ation in the Soviet

"one. Documents on Germany 1944-61, Committee on Foreign

Relations, U.S. Senate, 87th Cong., lst Sess. (1961), p. 85.

Furthermore, the United States was icutely conscious of the

fact that as a signatory to the Hague Convention it could not,

either by the Potsdam Agreement or otherwise, senction confisca-

tion of private property without compensation in its one.

-j37<-

36 Stat. 2277, 2295: Treatics in Force (1867), p. 301: U.S.

Const. Art. YI; Restatement (Second) Foreign Relations Law

$$141, 144: Arts. 42-51, Hague Regulations Feilcheufeld, The

Internetional Economic Law of Belligerent Occupation (1942) §13,

p. 5.

The Soviet's remaking of its Zone to its ow political

ané@ economic likeness was accompsnied by « rapid deterioration

im United States-Soviet relations, resulting in the erection of

the “Iron Curtain." When the Board members had Geparted from

Jena in June 1945, it wes thought that they would shortly

return. During the interim the caretakers would do whatever

was reuuired, keeping the Board informed to the extent possible

under the circumstances. The Board members in Seidenheia

would, of course, have charge of whatever Zeiss fecilities were

located in the west, including whatever wes to be built in or

near Beidenheim to help the Americans in the war against Japan.

As Soviet-American relations deteriorated, strains were placed

on the Jena-Heidenheim arrangement. Nevertheless the Board

mesbere in Weidenheim, despite the development of streined

relations with Jena, anticipated an eventual reunification of

Germany, and 41d not contemplate resignation becsuse of the

Gelay. Soon, however, it became apparent that the arrangement

would heve to be modified in an effort to satisfy the Russians.

-38-

Shortly efter the evacuation of the Zeiss Boerd to

Beidenheim Schomerus wrote Henrichs that the Deputy (arth) had

purported to appoint a new Board of Management and on July 2,

1945 Schomerus ‘intineiiaia @ power of attorney, as a member of the

Board, to Mesers. Gerhard Kuehn and Erich Schreiber in the vest

authorizing them to act for the Carl zeiss firm. It is unclear,

however, how long this letter and power took to reach the vest

in the turbulent times then prevailing, except thet Kueppenbender

testified that he did not learn from Henrichs of schomerus’

communication until April 1946, eight months later, and Schott

testified that he learned only in early 1946 of the purported

appointments of Dunger, Klemm and Heint: as members of the

Schott Board. Thus it appears probable that the Boards in

Béidenheim 4id mst learn precisely what their desiqnees and

Barth wers doing in Jena until many monthe later. But even if

they had learned of it, they undoubtedly eppreciated thet such

purported appointments were ineffective te oust the real Boerds

of their positions, and that since the latter had been forced

teaporerily to delegate broad jowers to their desiqnees to act

in the Boards’ absence, whether the designees chese to call

-39-

themselves “members of the Board" in order to appease the

Russians wes of no great moment as long as they understood that

they exercised their authority only by sufferance of the real

Boerds in Seidenhein, who had the right to revoke the delegation

of authority st will. At the outset the Boards in Heidenheia

took the position that while they had delegated to the Jena

group broad powers to exercise Board functions in dealing with

the Russians dGuring the inability of the reguler Boards to act

because of their confinement to the American Zone, they (the

Board members in the American Zone) were the official Board,

entitled as a matter of duty to continue exercising their

functions outside of the Soviet Zone and that it was equally

important to maintain the friendship of the Americans in the

West, where the Foundstion had extensive assets snd Western

occupation authorities were assuming the redevelopment of the

economy .

| | When this view was expressed by Senrichs, Hirsch and

Schott in a letter dated October 12, 1945 to the Schott manage-

ment in Jena, Dr. Barth and the Jena group became alerned,

apparently beceuse of fear of Soviet reprisals if the ectual

relationship were revesled. Although these were very substentiel

Foundation interests in the West and the prospect for successful

redevelopment of Zeiss business there appeared fevorable, they

-~40-

a irs

feared thet any step towerd independence for these interests,

including such manufacturing center as might be built in Beiden-

heim (to which 122 of the Foundation's top personnel hed gone

and others had follow 4), entailed the risk of a Russian takeover

in Jena that would terminate hopes of salvaging Zeiss interests

in the Soviet Zome. Furthermore, unless the Jena group ves

recognized by the Russians as having authority to act with respect

to Foundation interests in the western Zones as well as in the

Soviet zone, it might be ousted by the Soviet oooupation author-

ities and replaced by communist functionaries hostile to the

Foundation Statute and its tradition. Accordingly steps were técen

en paeeinh (eh seseeeiten ter the Been enctans in Beidenhein of

control over the Foundation's interests in the West. sarth's

first move was an attempt to legalize the ineffective June 27,

1945 appointments of the three Ss and Heintz, Dunger and Klemm eas

Board members. Viret he wrote to Dr. Wolf, suggesting that the

Geported Board members might be removed because ef their Bari

party membership during the war, and obtained a letter from

Wolf, dated Hovember 16, 1945, approving retroactively the

June 27, 1945 agreements between Barth and the three Ss appoint-

ing them Bosrd members. In a belated attempt te comply with

Section 26 of the Foundation's Statute, lifetime employment

contracts were entered into between the seise firm and

Dre. Schredée and Schowerus on November 20, 1945, stating they

were effective retroactively as of June 27, 1945.

Om December 27, 194%, Barth requested the President of

Thuringie to diemies the Heidenheim Board members because of

their establishment of competition in the American Zone, pointing

out that the positions of the Heidenheim group as “members of

the Boards of Management ... has not been taken from them" and

thet “they look upon themselves as the only competent Board of

Management", which tacitly recognized that the official Boards

in Beidenheim had not resigned.

The Gicpute between the Board in Heidenheim and the

caretakers in Jena led Sandmann to errange a meeting with

Menriches at Neidelberg in the American “one on December 26-29,

1945, at which Sandmann expressed the desire to avoid Russian

G@iemantling of the Jena plants, which might follow eetablishment

of “eiss plents in the west. According to his own minutes,

SanGeann took the position that the Heidonheim Board wust be

considered “suspended”, whereas Henrichs asserted thet it

“eoneiGers itself as still holding office because it has been

appointed for lifetime and there are no reasons for discharge.“

Undoubtedly under pressure from the Russians, who considered

cepitaliet infleence from the West unacceptable, the Jena group,

on January 12, 1946, wrote what has very appropriately been

—42-

_——

I he ee

characterized as a “blackmail letter” to the Meidenhein manage-

ment. It advised the letter that the Special Board in Thuringia

had drafted a proposed dismissal of the Beidenheim meabers of

the Boerd (a copy of which was attached) because of their past

membership in the MSDAP (Mavi Party) and Nazi activities, end

that unless the Neidenheia Board voluntarily geve up their

appointment as members of the Board, the dismissal would be put

into effect. Although the letter referred to the willingness

of the Jena group to “resign” when the Heidenheim management

returned, the term “resign” was not used in the request to

Heidenhein..

The “blackmail letter” of January 12, 1946 was a

ekillfully contrived piece of duress, designed opportunistically

to take advantage of the predicament in which the Boards in

Heidenheim found themselves, and to apply pressure accordingly.

For at that time the Board members in Heidenheim were facing

investigation and proceedings by both Americen and German Boards

in the American Zone to determine whether they had participated

in eny Mazi war crime activities. In order to clear themselves

(or be “Ge-nazified*) they were relying on help from Schomerus

and Schrade in Jena, who could corroborate the fact that during

World war II, at considerable risk to themselves and ian spite of

directives to the contrary, Drs. Baversfeld, Kusppenbender and

-43-

Erich Schott hed failed or refused to obey Nazi directives with

respect to Zeiss employees, had shielded Jewish employees in

Jena, and their relatives (including Schrade, whose wife was

Jewish), from seizure and abduction to Na:i concentration camps,

and had helped them in other ways. Sow the Neidenhei= Board

members were faced with the threat that unless they agreed to

recogni.e the Jena management 4s the only Board, they would be

G@ismissed on the basis of 4 new law in Thuringia aimed st purging

wari elements from industry. Such a dismissal might not only

affect the Beidenheim Board members in the pending proceedings

in the West but leed Schomerus and Schrade to withhold their

essential cooperation in the impending denavification proceedings.

Furthermore the effect of such a dismissal in absentia would be

to prevent the Heidenheim Board members from acting on behalf of

the Zeiss and Schott firms in the vest for the reason that it

would lead to cancellation of their registration as authori ‘ed

representatives in the Commercial Registers of the principal

cities in the vest, which would automatically follow cancellation

of such registration in Jena, still recognized as the domicile

of the Foundation and of its veisn and Schott firms.

Since the “blackmail letter® was apperently to be shown

to the Russians, San@menn wrote a private personal letter on the

same Gay to Senrichs expressing his pain at heving to write the

44~

blackmail letter but stating that “under the present circun-

stances" it represented the only solution and, if scospted,

would result in the Jena representatives giving powers of

attorney to the Heidenheim gentlemen enabling the letter to ect.

Then he added the following significant paragraph:

“What legal points of view will sesult for

you and the other gentlemen in such measure I

mast leave to your personal judgment. However,

nothing will change the basic attitude of the

gentlemen here with regard to the agreements of

June, 1945." (BP. Bx. 294)

The "agreements of June, 19495 appear to us to refer to the

caretaker arrangement established before the Boards were ordered

out of Jeha in June. There is no evidence thet Barth's June 27,

1945 agreements sei to appoint the caretakers members of

the Boards, and Dr. Wolf's letter of November 16, 1945 approving

them, were then known to the Board members in Heidenhein.

The reply of the Heidenheim mansgement dated January

28, 1946 was carefully prepered to create an impression that

might satisfy the Soviet authorities and yet not constitute a

resignation. Although it stated that the writers (Beversfeld,

Henrich and Hirsch) recogni:ed the Jena group as the one and

“only Board of anagenent*, it studiously refrained from stating

that the Bsidenheim group were resigning or tendering resigna-

tions. Inetead, it stated that a resignation “es pointless,

since the writers were not exercising the functions of the Boerd,

which were being exercised by the Jena group. The purpose of

the letter wes to enable the Jena group to hold itself out as

the Boerd if such was necessary to appease the Russians, in the

hope of avoiding the destruction of the Foundation and its works

in the Soviet Zone. If the Heidenheim group had intended to

resign, they would have ritten a simple one-line resignation

instead of a long document that is a study in circumlocution.

The HeiGenheim group, however, simply sgreed to refrain from

exercise of its Board ¢unctions and to hold the Jena group out

as the only Board.

If the Heidenheim Board members had resigned in

June 1945, as defendant; urge, the entire chain of events begin-

ning with their October 12, 1945 letter to Jena, Sandmann’s

visit to the West, the e-change of correspondence, and Dr. Davids

visit to Jena in February, 1946, were meaningless superfluities.

But even if one accepts the view that these latter events were

intended to button down scme resignations by the Heidenheina

Board members, they failed to achieve any such purpose. The

January 28, 1946 letter was not dispatched by mail but was

delivered to the Jena management personally on Pebruary 11, 1946

by Dr. David, the Foundation legal counsel in the West who

explained the purpose of the letter to the assembled members of

the Jena menagements of Zeiss and Schott, including Dr. Klemm,

—~46-

who recognized the status and relationship of the Beideshein

Board in his contemporaneous diary entry with reepect to a

meeting with Berth two days later, in which he noted:

“3. <A. Mt. (Meint-] asks about th

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