Evening star., 1931-04-15
oil PATENT POOLS
VERDICT ANALYzED
Court Decision Means Trade
Agreements Are Legal if
Not Monopoiis!iS.
BY DEAN DINwoODEY.

Legal authorities pointed out today
that the practice by competitors In an
industry Of pooling basic patents was
not sanctioned, in all instances, by the
Supreme Court Of the United States In
its decision in the so-called oil-cracking
case. The implications of the courts
ruling are Of even more far-reaching
Importance than its direct result.
Though the Supreme Court in the
case before 1t held that the pooling by
four large companies in the oil indus
try OF patents covering the cracking Of
gasoline did not constitute a violation
OF the Sherman antitrust act, It new
ertheless quite emphatically declared,
through Justice Brandeis, that II DOM
ination Of the industry had resulted
tnerefrom the patent pool would have
been illegal.
No Monopoly Found.
In the course Of its 5,o00-word opin-
ion, the court stated:
Where domination exists, q pooling
OF competing process patents or an ex-
change Of licenses for the purpose Of
curtailing the manufacture and sup
ply OF an unpatented product, Is beyonc
the privileges conferred by the patents
and constitutes violation Of the Sher-
man act"
In the oil-cracking case, the high
tribunal found the evidence did not
snow tnat the four companies. the
Standard Oil Cos. Of New Jersey and
Indiana, the Texas Co. and the Gaso-
line Products Co., had effected by their
patent pool a domination Of the man
ufacture and supply of gasoline. They
did not, therefore, violate the antitrust
law.
Had the patent cross-licensing agree
ments between them measurably re-
strained competition, the court very
clearly indicated that it would have
held with the Department Of Justice
In its contention that a monopoly ex-
lsted or was threatened. But the Gov
eminent, according to the opinion, fail
cd 70 prove there was any MONOPOLY or
restriction Of competition, in the busi-
ness OF licensing patented cracking
processes, or In the production and sale
OF either ordinary or cracked gasoline
The Supreme Court once more has
shown, following the 'rule Of reason
announced years ago in the Standard
Oh case, that the business world need
have no apprehension that methods of
cooperation or combination within an
industry viii be held to constitute vio-
lat1onS OF the Sherman act so long as
competition is not unduly or unrea-
Sonably restrained thereby. The court,
in fact, recognized the legitimate ad-
vantages that may flow from the pool
ing OF patents and which the oil COM
panies declared had impelled them to
enter the patent pool.
Interchange Of Rights.
"An interchange of patent rights and
division OF royalties according to the
value attributed by the parties to their
respective patent claims" Justice Bran
deis said, sis frequently necessary II
technical advancement Is not blocked
by threatened litigation. If the avail
able advantages are open on reasonable
terms to all manufacturers desiring to
participate, such interchange may pro-
mote rather than restrain eompeti-
ton"
Patent pooling Is legal where domina-
ton Of an industry does not result from
such an arrangement, the court has
held. But patent pools are Illegal under
the antitrust laws If competition ia
throttled, the court has also warned.
Whether domination does nor does not
result, and whether competition is or Is
not throttled, in any particular case,
can be answered only by the court.
(Copyright, 1s31.)