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UNITED STATES v. GE

October 2, 1953

UNITED STATES
v.
GENERAL ELECTRIC CO. et al.



The opinion of the court was delivered by: FORMAN

Following the filing of an opinion in this case, reported in D.C.N.J. 1949, 82 F.Supp. 753, the Government and General Electric *fn1" submitted proposed forms of judgments to implement the said opinion. Philips, Westinghouse, Sylvania and Tung-Sol also offered suggested provisions in regard to portions of the proposed judgment which would affect them, and they and other defendants were heard with regard to aspects of the judgment by which they would be affected. Hearings concerning the proposed remedies and the Government's application for interim relief were had at which testimony was offered, oral arguments made and briefs were submitted. Following will be found the provisions of the judgment which are deemed to be applicable in this case. After each provision an annotation will follow discussing the origin and reason for its inclusion in the judgment.

FINAL JUDGMENT

 Plaintiff, United States of America, having filed its complaint herein of January 27, 1941, and the defendants, and each of them, having appeared and filed their answers to such complaint, and American Blank Company and Empire Machine Company having been dissolved prior to the commencement of the action, and an order having been entered herein dismissing the complaint as to them; and Corning Glass Works and plaintiff having entered into a consent judgment on March 7, 1946; and Westinghouse Electric Corporation (sued as Westinghouse Electric and Manufacturing Company) and plaintiff having entered into a consent judgment on April 10, 1942; and said Westinghouse Electric Corporation having acquired the lamp assets of defendant Ken-Rad Tube & Lamp Company, and an order having been entered herein dismissing the complaint as to said Ken-Rad Tube & Lamp Company; and this action having come on for trial; and the Court, after the taking of evidence, and considering the briefs and arguments submitted by the parties, having filed its opinion herein on January 19, 1949, which was certified as the Findings of Fact and Conclusions of Law; and the Court after taking further evidence, and after considering further arguments and briefs submitted by the parties, having filed an opinion on October 2, 1953 as to the remedies, and having directed entry of Judgment pursuant to Rule 52 of the Rules of Civil Procedure, 28 U.S.C.;

 Now Therefore, it is this . . . day of . . ., 1953 Ordered Adjudged and Decreed as follows:

 Section I

 JURISDICTION

 This Court has jurisdiction of the subject matter of this cause of action and each of the parties thereto, and the complaint states a cause of action against the defendants, and each of them, under Sections 1 and 2 of the Sherman Act, 15 U.S.C.A. §§ 1, 2.

 The foregoing language of the title and recital is proposed by General Electric except for a modification referring to this opinion suggested by the plaintiff. Section I, 'Jurisdiction', was proposed by the Government. The title and recital as modified and Section I were acceptable to the parties.

 Section II

 DEFINITIONS

 As used in this Judgment:

 A. 'Lamps' means any electrical device the primary purpose of which is to convert electric energy into light within the visible spectrum by means of an incandescent filament. As so defined 'lamps' does not include fluorescent or electric discharge lamps, photoflash lamps or the so-called arc or enclosed arc lamps.

 B. 'Lamp parts' means any part, material or element made for, used in, or constituting an integral part of, an incandescent lamp (such as, but not limited to, glass bulbs, tubing and cane, bases, wire and gases).

 C. 'Lamp machinery' means any machinery used in the manufacture or assembly of incandescent lamps or lamp parts, including glass parts.

 D. 'Patent' (or 'patents') means any existing United States Letters Patent and Applications, and any divisions, continuations, reissues and extensions of such patents, relating, but only in so far as they relate, to lamps, lamp parts or lamp machinery, owned or controlled by any of the defendants, or under which any of them has a right to grant licenses or sublicenses, at the date of this Judgment.

 E. 'Future patent' (or 'patents') means any United Stated Letters Patent and Applications, and any divisions, continuations, reissues and extensions of such patents, relating, but only in so far as they relate, to lamps, lamp parts or lamp machinery, owned or controlled by any of the defendants, or under which any of them has a right to grant licenses or sublicenses, within a period of five years from the date of this judgment.

 F. 'United States' means the United States of America, its territories and possessions.

 G. 'Subsidiary' of a defendant corporation means a corporation more than 50% of whose stock entitled to vote upon election of directors (other than preferred stock entitled to vote upon the failure of the corporation to pay certain dividends) is owned or, directly or indirectly, controlled by such defendant corporation.

 H. 'Person' means an individual, partnership, firm, association or corporation. For the purpose of this definition, and, as used in this Judgment, a corporate defendant and its subsidiaries shall be considered to be one person.

 J. 'Internation' means defendant International General Electric Company, Incorporated, a New York corporation with its principal place of business in New York, N.Y.

 K. 'Philips' means the defendant N. B. Philips' Gloeilampenfabrieken, a corporation organized under the laws of Holland, with its principal place of business at Eindhoven, Holland.

 L. 'Consolidated' means the defendant Consolidated Electric Lamp Company, a Massachusetts corporation, with its principal place of business at Lynn, Massachusetts.

 M. 'Sylvania' means the defendant Sylvania Electric Products, Inc., with its principal place of business at Salem, Massachusetts, and sued herein as Hygrade Sylvania Corporation.

 N. 'Chicago Miniature' means the defendant Chicago Miniature Lamp Works, an Illinois corporation, with its principal place of business at Chicago, Illinois.

 O. 'Tungsol' means the defendant Tung-Sol Electric, Inc., a Delaware corporation, with its principal place of business at Newark, New Jersey, and sued herein as 'Tung-Sol Lamp Works, Incorporated.'

 P. 'Defendants' means the defendants General Electric, International, Sylvania, Philips, Consolidated, Chicago Miniature and Tungsol.

 Q. The terms 'lamp agency agreement' means an agreement whereby any defendant appoints another person its lamp agent to distribute lamps owned by said defendant.

 Definitions A, B, C, F, H, I, J, L, M, N, O and P are not disputed substantially.

 Definition D combines plaintiff's proposed definitions D and E with the clarifications suggested by General Electric and Philips.

 Definition E incorporates plaintiff's proposed definition F over objection of defendants General Electric, Philips and Tungsol except that the period during which the provision shall be effective is reduced from ten years to five years. This will be dealt with further under Section V entitled 'Patents and Technology'.

 Definition G incorporates the words 'more than' before '50%' and strikes out the words following it, 'or more', in plaintiff's proposed definition H which was identical with General Electric's proposed definition F.

 Definition K incorporates the Government's proposed definition L except for the word 'formerly' which followed the words 'place of business' and eliminates the second sentence thereof.

 Definition Q incorporates General Electric's proposed definition Q which as originally submitted read as follows: 'The term 'lamp agency agreement' means a written agreement whereby General Electric appoints another person its lamp agent to distribute lamps owned by General Electric.'

 Philips requested (1) that there be inserted at the point in the judgment where patents are defined a list of those defendants which will be affected by Section V relating to patents and technology, as it appears hereinafter, and (2) that as to it, 'patents' should be defined as those it possessed as of December 31, 1950, (when the IGE-Philips agreement was terminated) and not the date of the judgment. These requests must be denied.

 Section III

 APPLICABILITY OF JUDGMENT

 The provisions of this Judgment applicable to any defendant shall apply to such defendant, and to each of its subsidiaries, officers, directors, employees, successors, assigns and all other persons acting under, through or for such defendant and shall apply to operations and activities in or affecting commerce as defined by the antitrust laws of the United States.

 After the words 'and all other persons acting' the Government's proposed judgment included the phrase 'or claiming to act.' The Government's proposal concluded with the clause 'and shall apply to all acts of such defendants whether acting directly, or indirectly, through its subsidiaries, or other agents.' These suggestions will be omitted as they are unnecessary.

 General Electric asked that its lamp agents be specifically exempted from the reach of the judgment by the provision 'other than lamp agents as herein defined' after the words 'through or for such other defendant'. If a lamp agent is not a party to this suit, as General Electric contends, of course he would not be bound by the judgment, and there is no necessity to so specify. It is, on the other hand, conceivable that a lamp agent might serve General Electric in such a manner as to constitute a genuine agent, and in such a situation it should not be inferred that he would be exempt from this judgment.

 General Electric and Philips sought to limit the applicability of the judgment to activities which are in or affect commerce as defined in section 1 of the Clayton Act, 15 U.S.C.A. § 12. As written the standard has been broadened to the 'antitrust laws of the United States' generally.

 ADJUDICATIONS

 Objection was made by General Electric and other defendants to inclusion in the judgment of the Government's section entitled 'Adjudications', which amounts to a recital of the illegal acts of the various defendants. Inasmuch as the earlier opinion in this case constitutes findings of fact and conclusions of law, no purpose can be served by including this section in the decree. Consequently it has been deleted.

 Section IV

 INJUNCTION AGAINST PERFORMANCE OF AGREEMENTS

 A. Each of the contracts, agreements or patent licenses referred to in Exhibit A hereto annexed is hereby terminated, and each of the defendants who is or was a party thereto is enjoined and restrained from observing, performing, renewing or adhering to each such contract, agreement or patent license.

 B. Each of the contracts, agreements or patent licenses referred to in Exhibit B hereto annexed is hereby terminated in so far as it pertains to lamps, lamp parts, and lamp machinery, and each of the defendants who is or was a party thereto is enjoined and restrained from observing, performing, renewing or adhering to each such contract, agreement or patent license in so far as it so pertains.

 C. Nothing contained in this Section IV shall be deemed (a) to terminate the rights of any defendant to use on a non-exclusive and unrestrictive basis, any patent or foreign patent under which any such defendant has heretofore been licensed, or (b) to terminate the power, if any, of any such defendant to issue sub-licenses or immunities under any such patent or foreign patent.

 The Government's proposed judgment groups together both domestic and foreign agreements found to have violated the antitrust laws of the United States and read as follows: 'The contracts, agreements and patent licenses listed in Exhibit A to this Judgment are hereby declared and adjudged to be illegal and in violation of Sections 1 and 2 of the Sherman Act, and are hereby declared to be cancelled.' Pursuant to General Electric's suggestion the two types of contracts will be grouped separately, as they will receive different treatment.

 The domestic agreements listed are terminated in their entirety in language following General Electric's proposal with the addition of the word 'renewal'. Philips objected to the failure of the Government's proposal to limit its application to lamps, lamp parts and lamp machinery. In Philips' proposal, however, the foreign and domestic agreements were listed together as in the Government's. The force of Philips' objection is dissipated in classification of the agreements into domestic and foreign and the limitation of the effect of the judgment on foreign agreements.

 The Government would also terminate the foreign agreements in toto, but as they deal not only with incandescent lamps but also with other products, and as these other aspects of the foreign contracts are being litigated in other suits, it is unnecessary and beyond the scope of this case to dispose of them here. Consequently, General Electric's proposal as to them is accepted, adding the word 'renewing'.

 Subsection C incorporates the substance of a provision proposed by both the Government and General Electric with the addition twice of the words 'or foreign patent', as agreed by the parties.

 Section V

 PATENTS AND TECHNOLOGY

 Dedication of existing patents on lamps and lamp parts.

 A. The defendants are each, jointly and severally, ordered and directed, forthwith upon entry of this Judgment, to dedicate to the public any and all existing patents on lamps and lamp parts.

 Paragraph A is the Government's proposal, except that the provision as applied to lamp machinery is eliminated and the requirement for dedication goes only to patents for lamps and lamp parts. Licensing of patents on lamp machinery is treated separately in Paragraph B of this Section.

 This direction is in an area left open by the decision of the Supreme Court in United States v. National Lead Co., 1947, 332 U.S. 319, 67 S. Ct. 1634, 91 L. Ed. 2077, which substantially diluted its pronouncement in Hartford Empire Co. v. United States, 1945, 323 U.S. 386, 65 S. Ct. 373, 89 L. Ed. 322, in which the Court determined that dedication as directed by the district court was confiscatory. In the National Lead case the Court said:

 'While it has been contended that because of the decision of this Court in Hartford-Empire Co. v. United States, 323 U.S. 386, 65 S. Ct. 373, 89 L. Ed. 322, the District Court was not free in the present case to require the issuance of royalty-free licenses, we feel that, without reaching the question whether royalty-free licensing or a perpetual injunction against the enforcement of a patent is permissible as a matter of law in any case, the present decree represents an exercise of sound judicial discretion.' 332 U.S.at page 338, 67 S. Ct.at page 1643, 91 L.Ed 2077. Cf. United States v. Aluminum Co. of American, D.C.S.D.N.Y. 1950, 91 F.Supp. 333.

 The foregoing language certainly casts a shadow on the ruling in the Hartford Empire case as being a hard and fast determination against royalty free licenses, and suggests, if indeed it does not invite, the application of such a measure when and where the circumstances of patent abuse prescribe it.

 Where the profit margin on the production of lamps is as narrow as it is at the present time any licensing fees may prove an important factor in limiting or inhibiting the growth of competition. In view of the fact that General Electric achieved its dominant position in the industry and maintained it in great measure by its extension of patent control the requirement that it contribute its existing patents to the public is only a justified dilution of that control made necessary in the interest of free competition in the industry.

 In another instance in the case of United States v. Imperial Chemical Industries, D.C.S.D.N.Y. 1952, 105 F.Supp. 215, the court followed literally the language of the Hartford Empire case and declined to order royalty free licensing. However, that case was based on violation of Section 1 of the Sherman Act. Violations of both Sections 1 and 2 have been found in this case.

 General Electric and the other defendants are mounted upon an arsenal of a huge body of patents that can easily overwhelm and defeat competition by small firms desiring to stay in or gain a foothold in the industry. These operators may well be unequipped to engage in litigation on the validity of one patent after another at what could be incalculable expense. In order to avoid it they could be required to shoulder royalties which could prove to be the very factor that would push them out of the competitive circle of the market.

 In the circumstances such as these it would appear that royalty free licensing of patents on lamps and lamp parts is an essential remedy as a preventive against a continuance of monopoly in this industry. It would appear to be no more objectionable as confiscatory than where compulsory licensing is ordered. In the latter case the owner admittedly is permitted to receive a royalty but he nevertheless loses a monopoly inherent in his ownership of the patent, and the royalty he is forced to accept at times is not one that he fixes. Royalty free licensing and dedication are but an extension of the same principle, not to be directed indiscriminately, of course, but well within the therapeutic measures to be administered under circumstances such as were made to appear in this case.

 As a conference held September 21, 1953, concerned with the provisions of this judgment General Electric asserted a wide difference between a provision for the dedication of patents and for compulsory free licensing thereof. It vigorously opposed invoking the remedy of dedication. In this it was supported by other defendants.

 The Government strenuously opposed any departure from the theory of dedication which it argued was equitable and feasible.

 General Electric urged four main reasons why the application of a provision for dedication would be unfair and inequitable as follows:

 First, manufacturers of products other than lamps would be benefited by such dedication which should not be within the contemplation of this judgment since it should concern itself only with the lamp field. Secondly, that Westinghouse and Corning should make available any patents they have of an existing character in reciprocation for grants by the defendants. Thirdly, that manufacturers who sought to practice the patents merely to make lamps for their own use should not profit by dedication. Fourthly, that since the definition of patents includes applications a problem would arise as to how to dedicate an application, and that there would be no incentive to complete the prosecution of applications if they were to terminate in the futility of dedication. In each of these instances it was argued that royalty free licensing would accomplish all the necessary relief sought by dedication and without the above complications.

 The first objection is met by the consideration that the abuse of patents relating to lamps and lamp parts was the basis for judgment against the defendants. These actions justified invalidation of the patents themselves and if their use in other fields now becomes practical it flows from the fact that all monopoly originally granted in the patent has been dissolved.

 As to the second objection, Westinghouse and Corning terminated the case against them by giving consent decrees many years ago. In those decrees provision was made for drastic royalty free licensing of their patents among the other disabilities which were prescribed governing their conduct. In Section IV of the Westinghouse decree it was among other things, required to issue licenses 'royalty free and without restriction as to the products to be treated or manufactured, * * * or as to the use to be made of such patents, * *.' Under dedication as provided herein Westinghouse and Corning will, it is true, enjoy free access to defendants' patents in this classification. This is an advantage achieved by them by virtue of their accepting early the burdens of the decrees filed against them. Any inequities arising thereby may be said to be outweighed by the factor of advantage that may accrue, particularly to Westinghouse, in its engagement in competition with General Electric. The plea of Sylvania and Tungsol that failure to compel reciprocity by Westinghouse falls with particularly heavy inequity on them must be treated with considerable diminution from a practical sense. Over the years they could have had Westinghouse's patents which existed at the time of the Westinghouse decree on a royalty free basis, and while it is true that under the terms thereof they would be required to reciprocate by granting theirs, it must be remembered that at that time Westinghouse was in a position as the holder of patents to make many more grants than the smaller defendants. There seems to be no reason strong enough at this time to encompass Westinghouse and Corning in a judgment that would reform, or even partake of the nature of a change in the decrees which were entered against them in this case.

 As to the third objection, that manufacturers who incorporate lamps in their products, such as airplanes or automobiles, will be able to practice dedicated patents and thereby enjoy unwarranted profit, much the same reasoning may be applied as in the case of the first objection, to wit, the use of the patents in fields other than lamp making. There is no inconsistency, as alleged by General Electric, in the provision for dedication and the provision which will follow in Section V, Subparagraph D-(1) which permits a license to contain a provision that if the licensee manufacturers lamps primarily for his own use including the use of the lamp as a component part of other products, the license shall be effective only as to lamps not so used. The latter subparagraph refers to future patents, while it is to be remembered that the requirement of dedication prevails only as to existing patents as defined in the judgment. As previously explained the validity of these has been impaired by their abuse. Consequently, the more drastic treatment with regard to their use is justified.

 The fourth objection goes to the problem of dedicating applications for patents which come within the definition of patents as provided in the judgment. Admittedly the applicant may see fit to decline to prosecute his application in the light of the fact that it must terminate in dedication to the public. No more baleful or inequitable result occurs here than in the dedication of the patent itself.

 Sylvania further argued that under the definition of patents in the judgment there is included not only patents that are owned but those under which a party may have the right to grant licenses and that obviously one not owning the patent itself could not fulfill the direction to dedicate it. Of course, this is so, and a defendant can only be required to dedicate pursuant to this provision of the judgment such interest in the patent of which he may be possessed.

 Philips objects to its inclusion in this patent dedication requirement on the basis that it was only peripherally associated with the conspiracy and that such inclusion constitutes an attempt by this court to regulate the economic policies of foreign nations where conduct proscribed by the antitrust laws is perfectly legal. The Government rightly contends that Philips is subject to the in personam jurisdiction of this court, that the decree in this respect purports to require licensing of Philips' United States patents, and that the court can and should provide effective relief for violation of the antitrust laws. As set forth in the opinion in this case Philips knowingly violated the United States antitrust laws. It is eminently appropriate that its United States patents be made available to the incandescent lamp industry as part of the program of restoring strong competitors, so long suppressed as a result of the conspiracy of which Philips was a part. It is, therefore, included in the requirements of Section V, Paragraph A.

 General Electric's former 'B' licensees also object to their inclusion in the patent dedication section. They contend, in substance, that they took General Electric licenses and agreed to those provisions found to violate the antitrust laws as a means of survival. They insist that they now constitute the best available sources of competition to General Electric and that this competition should not be weakened by requiring them to dedicate their patents to any applicants in the industry. While this argument has some force in relation to future patents, it is insufficient to warrant freeing the former 'B' licensees from the requirement of dedicating existing patents. The 'B' licensees as well as General Electric benefited from the illegal arrangement described in the opinion, and it is no coincidence, therefore, that they now provide stronger competition to General Electric than the firms which were not involved in the conspiracy. One reason for their success was access to General Electric patents relating to incandescent lamps in addition to whatever patents they themselves developed. It is reasonable to attempt to place the independent lamp manufacturers in as good a position to compete by making available to them all the patents that were available to the licensees. To this end, the former 'B' licensees should be required to dedicate their patents as provided in Section V, Paragraph A.

 Licensing of patents on lamp machinery.

 B. Each defendant is ordered and directed to grant, to the extent that it has the power to do so, to any applicant making written request therefor in connection with the manufacture by the applicant in the United States of lamps, lamp parts or lamp machinery a non-exclusive license under any, some or all of said defendants' patents on lamp machinery for their full unexpired terms to make, use and vend lamp machinery. A license shall also be granted to a United States applicant who contracts with a foreign manufacturer for construction for such applicant of lamp machinery to be used in the United States.

 In the interest of freeing United States applicants for machinery licensees, to order their machines constructed abroad for use afterwards in this country, provision is made in this section and hereinafter to immunize not only the applicant for the license but any foreign manufacturer who constructs the lamp machinery from liability for the infringement of United States patents or their foreign counterparts covering such machinery to the extent that he is filling an applicant's order.

 General Electric's proposals contained a provision to the effect that a defendant need not grant a license under existing patents unless the applicant, upon request, agreed to license that defendant under any, some or all of its patents. General Electric contended that absent such a provision other members of the industry would be able to develop while blocking General Electric's development. It noted that Westinghouse and Corning, which have signed consent decrees, could demand patent licenses from General Electric, while the latter would be unable to compel them to reciprocate. It maintains that its position is supported by United States v. National Lead Co., supra, in which reciprocal patent licensing was ordered.

 Inasmuch as provision has been made for dedication of existing patents on lamps and lamp parts, this proposal is pertinent only to provisions as to the licensing of patents on lamp machinery. As to these I am inclined to agree with the assertion of the Government that provision for reciprocal licensing would tend to perpetuate the situation of industry dominance by General Electric which the decree is designed to end. For many years General Electric conducted the bulk of the research in the industry. In addition, it received cross licenses in whatever patents were held by its licenses. To attempt to dissipate the effect of the great advantage which accrued to General Electric primarily, but also to its former licenses, and which must necessarily project itself into the future even after the formal termination of the illegal arrangements, it is advisable to require the defendants to license whatever machinery patents they have without possessing the correlative right to demand licenses in return. As a practical matter prohibition against demanding reciprocal licensing upon the part of the defendants will exclude the defendants only from the right to the development made by independent lamp producers and machinery manufacturers, for they are entitled under the judgment to demand licenses from each other. Were General Electric granted the right of reciprocity, since it would be the overwhelmingly largest source from which to demand licenses, once again it would be in a position of being able to channel all developments through itself. Therefore the proposal of General Electric for reciprocal licensing will be declined. Precedent for this refusal is found in United States v. United States Gypsum Co., 1950, 340 U.S. 76, 93-94, 71 S. Ct. 160, 95 L. Ed. 89.

 Consideration has been given to the proposals of General Electric, Sylvania and other defendants that a proviso should be added to this paragraph requiring Westinghouse and Corning to grant reciprocal licenses under their patents on lamp machinery as a condition to obtaining a license under a defendant's patents on lamp machinery. For reasons heretofore discussed in considering the defendants' objections to dedication the proposal for reciprocal licensing by Westinghouse and Corning in this paragraph must be denied.

 Licensing of General Electric's future patents.

 C. (1) General Electric is ordered and directed to grant, to the extent that it has the power to do so, to any applicant making written request therefor in connection with the manufacture by the applicant in the United States of lamps, lamp parts or lamp machinery, a non-exclusive license under any, some or all of said General Electric's future patents, as herein defined, and for their full unexpired terms, to make, use and vend lamps, lamp parts or lamp machinery.

 Reciprocity

 (2) The provisions of this Section, however, shall not require General Electric to license any applicant, including any other defendant or Westinghouse Electric Corporation or Corning Glass Works, under any of its future patents, unless said applicant agrees upon request to grant to General Electric, upon a reasonable royalty and for the full unexpired term of each licensed patent, a non-exclusive license to make, use and vend lamps, lamp parts and lamp machinery under any, some or all, (as General Electric may request), of the patents and applications, if any, relating to lamps, lamp parts and lamp machinery owned or controlled by said applicant or under which it then has the right to grant licenses or sub-licenses.

 Section V, Paragraph C relates to licensing of future patents. The Government proposed that all defendants be required to license for a reasonable royalty future patents. The former 'B' licenses and Philips strongly objected to their inclusion in this provision, maintaining that once they had disassociated themselves from General Electric they constituted either actual or potential competition to General Electric and that the force of such competition should not be weakened by compulsory patent licensing of General Electric, as well as others. There is substance to this argument. By the time this decree is signed the prohibited agreements between General Electric and the other defendants will have been terminated for a substantial period of time, and the effects of the illegal practices should have begun to wear off. If these former licensees can develop new products and processes, it would be desirable that they carry them forward without the necessity of licensing, among others, General Electric. Having made available to the independent manufacturers the patents they were able to use while joined in the conspiracy with General Electric as well as those developed for a period after that time, it would seem that no more should be required of the defendants other than General Electric to place the independent producers in a competitive stance as to patents. Consequently, these defendants will not be required to license their future patents.

 As to General Electric, however, different considerations govern. It maintains that it too should not be required to license future patents, on the basis that such a provision would tend to make the rest of the industry dependent on it and discourage other concerns from engaging in research. This possibility does not weigh as heavily as the fact that partly as a result of its past illegal behavior General Electric is far ahead of the other firms not only as to available technological developments but also as to research facilities. This is a matter which does not cure itself as soon as the actual illegal practices are stopped. As the Government points out, the momentum achieved carries on. As in the case of United States v. National Lead Co., supra, it is appropriate here to require this defendant to license, at reasonable royalties, patents acquired during a limited period following the judgment. This should operate to overcome some of the obstacles placed in the way of competitors by past illegal behavior.

 Philips also objects to the provision that patent licenses under this Section are limited to applicants who manufacture in the United States, asserting that it would be required to license its patents to United States firms which manufacture in this country but that it could not take advantage of compulsory licensing itself, for its plants are outside of this country. While Philips can take advantage of the licensing provisions only if it contemplates manufacturing within this country, it is advisable as a practical matter that the judgment be so limited.

  The Government would deny to General Electric as to future patents the right to condition its compliance with a request for patent licenses upon an applicant's agreement to license General Electric under any, some or all of its patents. Such a provision was not included as to existing patents, but as was noted, all the other defendants are subject to existing patent dedication requirements, and therefore no requirement for reciprocity was necessary in order to permit any defendant to obtain licenses from any other defendant. as to future patents, however, unless a provision providing for reciprocity is included, all of the defendants other than General Electric as well as independent producers will be able to acquire licenses from General Electric, but General Electric will be unable to acquire licenses from them. This is an unnecessary boon to these other defendants. As a result of the provisions relating to dedication or licensing of existing patents both the defendants and the independent firms will be assured of access to the technical developments of General Electric up to the date of the decree, for which, in the case of the independents, they will not have to surrender any patent licenses of their own. While it is advisable to permit competitors to have access to General Electric patents developed within five years of this judgment, it would not seem necessary to prevent General Electric from asking for licenses from an applicant in return. General Electric's proposal that it be permitted to condition licensing of its patents upon receipt of a license or licenses from an applicant will, therefore, be accepted as to future patents.

  License Regulations

  D.(1) This Section, however, shall not prevent the inclusion, in any such license to make, use or vend lamps, of a provision that if the licensee is or becomes a person who engages in the manufacture of lamps primarily for use, (which includes the use of a lamp as a component part of other products or equipment) by or for him, his parent, subsidiary or affiliate, then such license shall be effective only as to lamps not so used.

  (2) The defendants are each enjoined and restrained from including any restriction or condition whatsoever in any license or sub-license granted by them pursuant to this Section, except that each such license or sub-license may contain any, some or all of the following provisions; (a) a provision for the payment to the licensor of a reasonable, nondiscriminatory compensation in the nature of a royalty or otherwise (herein referred to as a 'royalty'); (b) reasonable provisions for periodic inspection of the books and records of the licensee by an independent auditor, or by any other person acceptable to the licensee and licensor, who shall report to the licensor only the amount of royalty due and payable; (c) reasonable provisions for cancellation of the license upon failure of the licensee to pay the royalties or to permit the inspection of his books or records as hereinabove provided; (d) that the license shall not be transferable; (e) a license under any patent or patents on lamp machinery may also contain a provision that such license does not grant to such licensee or his vendee any license or implied license under any patent on lamps or lamp parts, and that a notice to that effect shall be affixed by such licensee to each machine sold under such license; and (f) such other terms and provisions as this Court shall approve if application for such approval is made after reasonable notice to the Attorney General.

  (3) Each license issued pursuant to this Section shall provide that: (a) the licensee may cancel the license at any time after one year from the initial date thereof by giving thirty (30) days' notice in writing to the licensor; and (b) the licensor shall notify each licensee of the issuance and terms of each license granted pursuant to this Section and each licensee shall have the right, upon written request, to exchange its license for any other such license granted by the licensor and involving the same patent or patents, in the event such other license be upon more favorable terms.

  (4) Upon receipt by any defendant of a written request for a license under the provisions of this Section, such defendant shall advise the applicant, in writing, of the royalty which it deems reasonable for the patent or patents to which the request pertains. If the parties are unable to agree upon a reasonable royalty within sixty (60) days from the date such request for a license was received by said defendant, the applicant therefor may forthwith apply to this Court for the determination of a reasonable royalty, and said defendant shall, upon receipt of notice of the filing of such application, promptly give notice thereof to the Attorney General or the Assistant Attorney General in charge of the Antitrust Division. The reasonable royalty rates, if any, determined by the Court, shall apply to the applicant and to all other subsequent licensees under the same patent or patents. Pending the completion of negotiations or any such proceedings, the applicant shall have the rights requested under this Section to make, have made, use or vend under the patent or patents to which its application pertains without payment of royalty or other compensation as above provided, except as provided in Paragraph D(5) of this Section.

  (5) Where the applicant has the right to make, have made, use or vend as provided in Paragraph D(4) of this Section, said applicant for the defendant may apply to this Court to fix an interim royalty rate pending final determination of what constitutes a reasonable royalty. If the Court fixes such interim royalty rate, such defendant shall then issue, and the applicant shall accept, a license or, as the case may be, a sublicense, providing for the periodic payment of royalties at such interim rate from the date of the filing of the application for a license. If the applicant fails to accept such license, or sublicense, or fails to pay the interim royalty in accordance therewith, such action shall be ground for the dismissal of his application, and his rights under this Section shall terminate. The reasonable royalty rate determined by this Court shall apply to the license granted to such applicant from the date of his application for a license, and may be charged to each subsequent licensee under the same patent or patents, unless this Court shall fix a different rate of royalty upon application of any such subsequent licensee pursuant to this Section.

  (6) Upon the written request of any person using patents pursuant to the provisions of this Section, any defendant, except Philips, to which such request is made shall grant to such person to the extent it has the power to do so, an unrestricted unconditional and non-exclusive grant of immunity from such by such defendant, with respect to any lamps or lamp parts made in the United States or sold under a patent used pursuant to the terms of this Judgment, under any foreign patents corresponding to the patent or patents used by such person, provided, however, that General Electric shall not be required to grant any such immunity to any licensee under its future patents, including any other defendant or Westinghouse Electric Corporation or Corning Glass Works unless such licensee, upon request, shall agree to give General Electric a reciprocal grant of immunity under such licensee's foreign patents, if any, corresponding to its United States patents, if any, under which said General Electric is licensed by it.

  (7) If a licensee licensed pursuant to Section V, Paragraph B elects to have lamp machinery manufactured for it by a foreign manufacturer, the licensor shall to the extent it has the power to do so grant immunity from suit under corresponding foreign patents held by it to the foreign manufacturer on machinery manufactured for use by the licensee in the United States. This sub-paragraph D(7) shall not apply to Philips.

  The Government objected to (f) of subparagraph D(2) on the ground, chiefly that it would tend to invite unnecessary delay in the consummation of license agreements but it conceded that under the reservation of jurisdiction provision in the judgment an avenue of court intervention could be opened. Under such circumstances the objection is substantially diluted and the subsection may be retrained.

  Regulatory provisions D(1), the balance of D(2), D(3), D(4) and D(5) are not in controversy substantially.

  Subparagraph D(6) has been made applicable to persons using dedicated or licensed patents. As originally drafted, Philips argued that it would be required to grant to a licensee upon request an unrestricted, unconditional and non-exclusive grant of immunity from suit by it with respect to products made or sold under a license granted pursuant to this judgment, under any foreign patents corresponding to the patent or patents under which the licensee is licensed.

  Philips claims that this requirement would have been illegal as an interference by a United States court in patent administration of the Netherlands. It would require Philips to license all American applicants, though it need not license applicants of other nationalities. Philips asserts that the provision is grossly unfair and is unnecessary to accomplish the purposes of the decree. It points out that other defendants are United States concerns whose foreign patents would be ancillary to their United States patents, and that immunities from suit under their foreign patents corresponding to their United States patents would apply only to articles made in the United States in competition with other American manufacturers.

  As to itself, Philips continues, all its laboratories and other factories are located abroad, and whatever United States patents it has are ancillary to its foreign patents. This manufacturing conducted abroad competes with foreign concerns, some of which also engaged in the illegal activity described in the opinion in this case, ...


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