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UNITED STATES v. GE

UNITED STATES DISTRICT COURT, DISTRICT OF NEW JERSEY


January 19, 1949

UNITED STATES
v.
GENERAL ELECTRIC CO. et al.

The opinion of the court was delivered by: FORMAN

The Pleadings

Pursuant to Sec. 4 *fn1" of the Sherman Act, Sec. 15 *fn2" of the Clayton Act and Sec. 74 *fn3" of the Wilson Tariff Act, the plaintiff, the United States of America, filed a complaint to prevent and restrain alleged continuing violations of Secs. 1 *fn4" and 2 *fn5" of the Sherman Act, Sec. 3 *fn6" of the Clayton Act and Sec. 73 *fn7" of the Wilson Tariff Act respectively. It named the following defendants'

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

 2. International General Electric Company, Inc., a New York corporation whose outstanding capital stock is entirely owned by General Electric Company. It is described as a large distributor in and to foreign countries of American produced incandescent electric lamps, electrical appliances and other forms of electrical products.

 3. Westinghouse Electric & Manufacturing Company, *fn8" a Pennsylvania corporation with its principal office in New York City and its lamp plants in New Jersey and Pennsylvania. It is described as the second largest manufacturer and distributor of incandescent electric lamps in the United States. Together with its subsidiaries it manufactures and distributes a full line of electrical applicances and other electrical products, some of which are competitive with similar products produced by defendant General Electric and its subsidiaries.

 4. Corning Glass Works, *fn9" a New York corporation which together with its subsidiaries is described as the largest manufacturer and distributor of specialty glass products in the United States. It is principally engaged in the production and distribution of glass bulbs, tubing and cane, signal and optical ware, heat resisting ware, and other forms of specialty ware.

 5. American Blank Company, *fn10" a corporation of the State of Maine, described as a patent holding company for defendants, General Electric and Corning. It is said to be wholly owned by defendant Corning, or Corning subsidiary, Empire Machine Company.

 6. Empire Machine Company, *fn10" a corporation of the State of Maine, described as a patent holding company for the defendant Corning, 90% of the stock of which is owned by the stockholders of Corning.

 7. N. V. Philips' Gloeilampenfabrieken, a limited company of Holland. It is described as having been engaged for many years in the business of manufacturing, among other things, glass bulbs, tubing and cane at several of its plants including those in Holland and distributing and selling such products throughout the world, including importations into the United States. (Jurisdiction over Philips was obtained by service on its officers who had taken refuge in this country to escape Nazi domination.)

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

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

 10. Ken-Rad Tube and Lamp Corporation, *fn11" a corporation of Delaware described as licensed by General Electric to produce and distribute large type incandescent electric lamps in the United States.

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

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

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

 General Electric Company -- General Electric or GE

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

 Westinghouse Electric & Mfg. Co. -- Westinghouse

 Corning Glass Works -- Corning

 American Blank Company -- American Blank

 Empire Machine Company -- Empire

 N. V. Philips' Gloeilampenfabrieken -- Philips

 Consolidated Electric Lamp Company -- Consolidated

 Hygrade Sylvania Corporation -- Sylvania

 Ken-Rad Tube and Lamp Corporation -- Kenrad

 Chicago Miniature Lamp Works -- Chicago Miniatures

 Tung-Sol Lamp Works Incorporated -- Tungsol

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

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

 The period from 1911 to 1926 was characterized by the acquisition by General Electric of the controlling patents on the tungsten filament incandescent electric light lamps and the licensing of Westinghouse and other lamp manufacturers under these patents. In 1924 the Government filed a petition against General Electric, Westinghouse and Westinghouse Lamp Company charging that the agency system of lamp marketing employed by the companies and the license agreement between General Electric and Westinghouse were illegal and in violation of the Sherman Anti-Trust Act. The case was tried in 1925 in the United States District Court for the Northern District of Ohio, Eastern Division, and the petition was dismissed, 15 F.2d 715. The decision was appealed to the United States Supreme Court which, in 1926, affirmed the District Court, 272 U.S. 476, 47 S. Ct. 192, 71 L. Ed. 362.

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

 '(a) Acquiring and maintaining monopolies of (1) patents relating to incandescent electric lamps, (2) patents relating to glass bulbs, tubing and cane, (3) the manufacture and distribution of machinery for the production of glass bulbs, tubing and case, (4) the manufacture, distribution and sale of glass bulbs, tubing and cane, (5) the manufacture, distribution, and sale of incandescent electric lamp bases, (6) the manufacture, distribution, and sale of incandescent electric lamps;

 '(b) agreeing to restrain and by restraining interstate and foreign trade and commerce in incandescent electric lamps and machinery for the production of incandescent electric lamps;

 '(c) agreeing to restrain and by restraining interstate and foreign trade and commerce in glass bulbs, tubing and cane and in machinery for the production of glass bulbs, tubing and cane; '(c) (sic) agreeing to restrain and by restraining interstate and foreign trade and commerce in incandescent electric lamp bases and in machinery for the production of incandescent electric lamp bases;

 '(e) agreeing to restrain and by restraining interstate trade and commerce in argon gas; and

 '(f) agreeing to maintain and maintaining uniform prices in the distribution and sale of incandescent electric lamps in the United States.'

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

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

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

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

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

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

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

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

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

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

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

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

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

 '(i) The agreement is to continue in force until the date of expiration of the patents and patent applications, as listed in the schedule annexed to the license and agreement, but it has been agreed that Westinghouse can surrender the license by giving two years' notice after 1935, and General Electric can terminate the license and agreement on sixty days' notice after arbitrators, appointed as provided in the license and agreement, have determined that Westinghouse has willfully breached the agreement; and

 '(j) If in any year Westinghouse sells an amount 5% or more in excess of its quota, such sale is to be deemed a breach of the agreement.'

 In paragraphs 130 to 139, inclusive, the Government charged that in 1927 about eleven domestic companies, other than Westinghouse, were operating under patent licensing arrangements with General Electric to manufacture and sell lamps in the United States. By 1936 they had been reduced to five companies known as the 'B' licensees of General Electric, and consisted of defendants Sylvania, Consolidated, Kenrad, Tungsol and Chicago Miniature. Except for the differences in the amount and type of lamps which General Electric permits each licensee to manufacture and sell in the United States the licenses and agreements are substantially identical and provide as follows'

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

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

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

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

 '(e) Each licensee is required to pay upon its lamp sales a royalty of 3 1/3% with a discount of 10% for prompt payment and proper reporting, and such royalty is computed on the basis of the prices charged by General Electric for such types of lamps;

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

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

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

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

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

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

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

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

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

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

 In paragraphs 140 to 217, inclusive, the Government charged that General Electric and Westinghouse have conspired and combined to control and dominate the manufacture, use and sale of lamp bases and lamp base making machinery in the United States; that General Electric, Corning, Empire and American Blank have conspired and combined to control and dominate the manufacture, use and sale of glass bulbs, tubing and cane, and glass making machinery in the United States; that General Electric has conspired and combined with others to restrain the production, use and distribution of argon gas for use in lamps in the United States and General Electric has conspired and combined with others to restrain the manufacture, use and sale of lamp making machinery in the United States.

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

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

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

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

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

 In paragraph 333 the Government concludes that:

 'By establishing and maintaining the conspiracies, monopolies, and combinations in restraint of trade, and by the various acts hereinbefore alleged, the defendants herein (a) have obtained and now hold a monopoly of patents relating to glass bulbs, tubing and cane and the manufacture thereof in the United States; (b) have obtained and now hold a monopoly of patents relating to incandescent electric lamps and the manufacture thereof in the United States; (c) have established and now hold a monopoly in the manufacture, distribution, and sale of such lamps in the United States; (d) have unreasonably restricted and now restrict the production of such lamps in the United States; (e) have unreasonably restricted and now restrict the distribution and sale of such lamps in the United States; (f) have fixed and now maintain non-competitive prices on approximately 80% of such lamps manufactured and sold in the United States; (g) have obtained and now maintain monopolies on glass bulbs, tubing and cane on lamp bases; (h) have restrained and now restrain trade in other essential parts and materials for incandescent lamps; (i) have eliminated the importation into the United States of glass bulbs, tubing and cane, machinery relating to the manufacture of such glass parts; lamps, lamp parts and lamp-making machinery; (j) have discouraged and impeded the progress of science and the useful arts, and have used the patent laws of the United States for purposes inconsistent with the constitutional basis of these laws; and (k) have monopolized interstate and foreign trade and commerce and have unreasonably restrained such trade and commerce in violation of the laws of the United States.'

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

 Introduction

  The incandescent lamp industry has its foundations in the invention of the carbon filament vacuum electric lamp by Thomas A. Edison in 1879. A number of companies were organized to exploit this invention, patented in 1880. In 1891, a consolidation of the Edison General Electric Company, Thomson-Houston International Electric Company resulted in the organization of the General Electric Company. By this consolidation General Electric obtained control of the basic Edison patents and until expiration of the patents had a virtual monopoly of the domestic supply in electric lamps. Upon expiration of the basic patents in 1894, General Electric entered into a cross-licensing patent agreement with Westinghouse and organized the Incandescent Lamp Manufacturers an unincorporated association consisting of several independents who entered the field upon expiration of the Edison patents. In 1901 General Electric acquired a majority stock interest in the National Electric Lamp Company which in turn obtained control of the Lamp Manufacturers Association. By 1911 National Electric controlled eighteen subsidiaries engaged in the incandescent lamp industry. Although National Electric was an alter ego of General Electric, National Electric and its subsidiaries held themselves out to the public as competing establishments.

  As a result of the cross-license agreement with Westinghouse and stock interest in National Electric, General Electric controlled approximately 80% of the incandescent lamp business by 1911, although the basic Edison patents had expired. The Government, in 1911, charged General Electric, Westinghouse, National Electric and its affiliates with violations of the Sherman Act. By a consent decree National Electric was ordered dissolved and General Electric directed to acquire the assets of its subsidiaries to prevent the public from being misled as to the real nature of General Electric control (Ex. G1). General Electric continued its 80% control of the industry so that the decree had no effect upon its dominance of it, but lamp manufacturers were enjoined by the decree from engaging in certain price fixing practices.

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

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

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

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

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

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

  Several European lamp manufacturers had organized in 1921 a price regulating cartel. This proved inadequate and it broke down in 1924 (Ex. 2111-G). Mr. Woodward of IGE, representatives of Philips and the German interest (osram) conducted extensive negotiations (Ex. 2112-G) which eventually led to an agreement for the stabilization of the lamp industry throughout the world (Ex. 2117-g). This agreement was the Phoebus contract *fn12" (Ex. 2278-G) and Anderson, Meyer & Co., Ltd., Australian General Electric Co., Ltd., General Electric Company of Cuba, General Electric, S.A. (Brazil and Mexico), South African General Electric, and defendant Philips, were among the signators.

  Meanwhile in 1922, General Electric invited the Attorney General of the United States to investigate it for the purpose of ascertaining whether it was acting in violation of the anti-trust laws and such an investigation was initiated. (Ex. GE 3 to 9). It led to an action by the Government in the Northern District of Ohio in 1924 which charged General Electric and Westinghouse with engaging in a combination and conspiracy in violation of the Sherman Anti-Trust Act. There the suit was dismissed and unanimously affirmed by the Supreme Court in United States v. General Electric Co., 272 U.S. 476, 47 S. Ct. 192, 71 L. Ed. 362. (Hereinafter referred to as the 1926 case or the General Electric Co. case. See Ex. G-1.).

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

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

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

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

  'The General Electric Company is the owner of three patents -- one of 1912 to Just & Hanaman, the basic patent for the use of tungsten filaments in the manufacture of electric lamps; the Coolidge patent of 1913, covering a process of manufacturing tungsten filaments by which their tensile strength and endurance is greatly increased; and, third, the Langmuir patent of 1916, which is for the use of gas in the bulb, by which the intensity of the light is substantially heightened. These three patents cover completely the making of the modern electric lights with the tungsten filaments, and secure to the General Electric Company the monopoly of their making, using and vending.' 272 U.S.at pages 480, 481, 47 S. Ct.at page 193, 71 L. Ed. 362.

  The court then directed the following inquiry to itself:

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

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

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

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

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

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

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

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

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

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

  It is true that the complaint in the 1926 case and the present one were filed for violation of the anti-trust laws. It is equally true that new matters are brought forward in the present controversy which make it different. Also a different period of time is involved. That very passage of time has evolved new activities upon the part of the defendants and is essentially a factor bearing upon the continuing validity of patents and their efficacy as a basis for contractual relationships. It is sufficient to say that there are such differences in the time element, the parties, and their activities and relationships and the prayers for relief that the doctrine of res judicata cannot be applied as a complete bar to this entire action.

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

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

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

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

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

  The result of the 1926 case was to grant General Electric a legal monopoly in the manufacture and sale of the incandescent lamps. General Electric operated under a system of licenses permitting use of its patents, 527 in number at the commencement of this action, under specified conditions. The license system involved two types, 'A' and 'B' with considerable differences in their requirements. At the time the instant suit was filed, the following licenses were in existence: "A" License Westinghouse dated August 1, 1927 (Ex. 25-G) "B" Licenses (Exs. 27-G, GE-65, GE-66) Sylvania dated August 1, 1933 Consolidated dated July 1, 1933 Kenrad dated July 1, 1933 Tungsol dated October 1, 1933 Chicago dated January 1, 1934 Miniature n13

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