Evening star. [volume] (Washington, D.C.) 1854-1972, 1930-04-17
DEAL RAISES NEW LEGAL ISSUE
Justice Department Puzzled by Move
Involving r. C. A.
RY DAVID LAWRENCE.

The newest legal problem in cor
porate law has been developed by the
latest move of the Radio Corporation
of America, and while the lawyers at
the Department OF Justice, at the behest
of members of Congress, are studying
its ramihcationS. they are frankly puz-
zled as to whether they have any right
of interference.
In a nutshell, the question is unlike
any ever presented since the Sherman
antitrust law and the Clayton law
were enacted. 1t tranScendS the holding
company idea and is something new in
the field of patents. Can an owner of
one group of patents sell his rights to
the owner of another group OF patents
when the combination of the two means
an outright monopoly in the manufac-
ture of devices or articles of merchan-
disc? That's the point involved and 1t
takes into consideration that singly an
individual may have an absolute
monopoly by virtue of patent rights.
The radio corporation under its
expansion plan has bought out the
radio manufacturing facilities of the
Westinghouse and the General Electric
Co. together with their patent rights
relative to the making of radio appara-
tus, sets and tubes. No new company
has been erected merely to hold the
stock of those units or companies which
have hitherto owned the manufacturing
plants in question. The radio corpora
ton has purchased the plants and owns
them, as it does other property. If cash
had been paid, there probably wouldn't
have been any question raised at all.
Stock Payment.
The issue now is whether the pay
nent In stock makes any difference.
For the Radio Corporation now pro-
poses to pay the General Electric and
Westinghouse for their property by CIV
ing them stock in the radio corpora
ton, in which they already hold a
substantial amount. The radio cor
poration. has bought all General Elec-
trio and Westinghouse stock In all sub
salaries, so that the latter now are 100
per cent owned by r. c. A. The
r. c. A, therefore, bears to the Gen
eral Electric and Westinghouse the
same relationship hereafter that any
~or,,~sny does to simple stakeholder.
On the corporate side it Is not believed
here there is any basis of attack, unless
the payment by stock on the one hand
is construed as buying up Of Compel
itor by an exchange of stock and I'M
less the grouping of patent rights under
q single ownership is restraint OF
trade
The Department of Justice can only
determine these points finally by court
action, but it will not proceed unless II
feels absolutely sure of its ground and
there are no presidents to indicate It's
course The courts have decided in the
oil cracking case that a cross licens-
ing of patents is illegal and that's the
only chart the Government lawyers
have. That, however involves phase
of patents not covered by the present
set-up which eliminates cross licensing
and involves purchase of patent rights.
Indeed, the Radio Corporation contends
the new move is a Simplification which
tends to conform to the demands OF
opponents that patents be definitely
traced to their responsible owners SO
that the individual alleged to be IN
fringing can know whose patent he is
supposed to be violating.
Litigation Possibilities.
If the case ever gets into the courts
1t can go all the way to the Supreme
Court Of the United States under the
broad statutes governing restraints Of
trade rather than under the patent
laws alone, which do not as a rule per-
NIT of any appeal beyond the Circuit
Court. 1t has not been unexpected
that there would be discussion of the
case in Congress, as It brings to a head
the claims that have hitherto been ex-
pressed by manufacturers who object
to paying a license fee TO the owners
Of patents when they group themselves
together. The other side argues that
while it is a large manufacturing enter
prise, it Is entitled to as much pTotec-
ton for the inventions it has developed
or owns as any individual
Ultimately Congress could of course
have the final say in forbidding 6
grouping of patents under any single
owner, but this would embrace many
other things besides radio sets anC
probably would provoke a good deal Of
controversy in which all companie.
whose main business is the patented
articles would have much to say.
The case opens wide the whole prob
lem of grouping of patents under cor.
porated ownership, and the Depart
ment of Justice will not announce it:
findings until after a thorough investi.
cation The Radio Corporation gave al
the facts to the Department of Justice
but did not ask for any formal or in.
formal opinion, so that the initiative
must come from the department in the
usual course If any further steps are
to be taken.