Gerhard A. Gesell: Up to the recess, I had tried in a few brief minutes to tell the Court what 30 witnesses said what over 600 exhibits say, that's of course necessarily only a summary. We had most detailed proof on this phase of the case. And if you will look at our brief at the appendix page 9A, you will find summarized there a number of the key findings which the District Court made concerning the inter product competition. I direct the Court's attention particularly to the finding 838 on page 9A and to the findings which come immediately at the sequence after that. Now, as to price, the -- the Court said this. “Competitive influences in the flexible packaging markets place limitation upon du Pont's pricing policies and procedures.” They force reduction of du Pont's prices and deny it power to raise prices in the manner of a monopolist.
Speaker: From what record --
Gerhard A. Gesell: From record 302. If you will turn to page 19A of our appendix again, you will see set forth there many of the key findings concerning prices. Thus, the Court said that under market conditions which prevail, du Pont doesn't posses power to raise prices without regard to competitive pressures, and that the market would penalize any attempt to do so with lower sales and smaller profits. The detailed quotations from record 301 at the bottom of that page are illustrative of the price competition and there are other findings on the pages immediately follow. The Court refers to the fact that cellophane prices have not been arbitrary and noncompetitive and found specifically that we did not have the power to price in that fashion. Now, what is the Government's answer to this? It is I think an answer that can only be made by someone who has not a detailed knowledge of the record. The Government says there's a price gap. It says that here are some -- the prices of glassine and wax paper low in level and here is the price of cellophane and higher than that is the price of film such as Pliofilm and polyethylene. And it says that accordingly as a matter of theory, it's obvious that du Pont is in a price market by itself. The findings of the Court are all for the contrary. The lower price goods which were the big volume sellers, the dominant goods on the packages, the pack -- the goods that were the major items that each of these end users were lower priced and the whole history of du Pont's price at the time it got into this business in 1923 has been the reduce price, to reduce price, to reduce price, to reduce price, to get down to where it is able better to compete with the lower priced waxings and glass papers. And the Court found that with every one of those price reductions, du Pont was able to increase the sales of its cellophane and did found also that there was a high degree of cross elasticity of demand between the ratio of these prices and that as the cellophane price is reduced, its sales were improved. The Government tends very much to over emphasize the importance of this price gap. It makes a difference of two and a half meals on a local bread. It makes the difference between the higher and the lower prices, the range is in about one cent per 1000 square inches. The prices are close and close in degree, and they're made closer --
Earl Warren: In proportion --
Gerhard A. Gesell: Well, you see, the Government --
Earl Warren: Percentages.
Speaker: (Inaudible)
Gerhard A. Gesell: I can't give it to you in percentages because the -- the figures that are relied on are -- are pound figures and of course the figure that's important for the packager is per 1000 square inch. I think in -- in think in the range of two and a half percent higher, two and a half times higher than wax paper and glassine would be a fair statement of the percentage in the time we are concerned with, Mr. Chief Justice, for the major types.
Earl Warren: Yes.
Gerhard A. Gesell: But it -- it's important to recognize that there are other factors here that operate. There is not one cellophane. There is not one wax paper. There are 60 cellophane and 30 or 40 wax papers and glassine. They are priced differently. In addition --
Hugo L. Black: Glassine makes (Inaudible)
Gerhard A. Gesell: On the lower side, Mr. Justice Black. Yes, on the lower side. Now, in addition, these -- these products you see are important to the user, not always in their raw form but in terms of what it cost after they have been processed, after they've been prepared for a package, after they've been printed in a manner of these converted items which I showed to the members the Court before the recess. And the record shows that there is really what you would call a spectrum of prices, of -- of whole range of prices in close proximity to each other depending on what materials are combined, how they are processed, what type of material is used and so forth. And then of course, cutting across this is also the problem of quality and -- and it may be that in a particular material with a slightly higher price, one can get and a -- a greater composite of quality advantages and a greater value. But the inter product competition price wise is sharp and continuous and the findings are that it was intense and the findings are that businesses' loss and gain by reason of this price competition. Let me give you a couple of --
Hugo L. Black: But does the record show how to (Inaudible)
Gerhard A. Gesell: The record doesn't show that, but I think we could compute it because we know what the total cellophane sales were for bread. The -- the interesting thing about the bread situation, Mr. Justice Black that shows the -- the closeness of this, is shown by the record in this fashion. The record shows that as the price of flour change, and therefore the price of the bread to the baker went up or down. That was often the determining factors to whether we stayed with cellophane and went to wax paper or whether we went to glassine, similarly in the candy bars. As the cost of the raw ingredients change, many of these user, not all of them but many of them would shift back and forth due to these economic factors because this difference was so slight in their margin of profit that they were very conscious of this price differential. But in every one of these end users that we've been looking at, people side by side are using different materials for the same use. It is possible to go into a supermarket and see bread wrapped in glassine and wax paper side by side selling to the consumer. And these price findings which were the end result of the Court's analysis of all this material, in our judgment conclusively show as a matter of specific fact that there was no power to raise, there was no power to obtain predetermined rates of profit or to price arbitrarily. du Pont was forced to lower its price and it was forced to keep its price low by this competition and it's clear if it raised its price, it would lose business and lose profits. And I think that's the answer to the price leadership argument that you've heard this morning.It's one thing to have a price leadership where you have lets say two companies, one with 75% and one 25% and whichever way, the 75% produced or goes the other follows. If the man with 75% has freedom of action to price as he chooses, but if his price is dictated by competitive factors, it makes no difference. I submit for the best competition from cellophane or competition from some other material, because what we're concerned with is the existence and the continuation of the kind of competitive economy which the Sherman Act is designed to promote and encourage. And these competitive influences and pressure from other materials have -- have on the findings which are conceded, deprived upon of that freedom of power over price which one might surmise existed otherwise at some given percentage whatever that is. Of course, even in the field of cellophane, we have analyzed the evidence in our brief. I don't intend to deal with that now, but to show on the Court's findings in the field of cellophane standing alone the power of a price is not established, as a matter of fact. Now, that -- unless there are some questions from anyone in the Court that covers the Section of my argument, concerned with power over price and I -- I wanted to turn next and deal with the other major power that we're concerned within the case, the power to exclude.
Earl Warren: May I ask this question. You stated, you just stated that even within the field of cellophane itself, that du Pont did not have power to fix the prices. What law is there against that?
Gerhard A. Gesell: Well, in fact, you see there was price competition between it and Sylvania. They did not always sell at the same price. They were not always the leader. Sylvania led at some occasions. du Pont led on other occasions. It is -- there's nothing to show the existence, Mr. Chief Justice, of any power. You can't surmise a power from -- from a percentage.
Earl Warren: No, that -- that's true, but what I was thinking about was the -- was the contract that you have with Sylvania which --
Gerhard A. Gesell: That have no --
Earl Warren: -- which prohibited them from selling beyond 25%, unless they paid 30% royalty.
Gerhard A. Gesell: Well, the findings don't support Your Honor's characterization of the agreement in this respect. They never under that contract manufactured an amount that came within those prohibitions. The Court found that there was one-third of their total production in excess of what they did produce --
Earl Warren: I guess --
Gerhard A. Gesell: -- would have been available to them. So, we're dealing with a --
Earl Warren: You could afford --
Gerhard A. Gesell: -- purely a -- of no consequence in the operations of this market.
Earl Warren: Well, they couldn't afford to, could they, if they had to pay 30% royalty?
Gerhard A. Gesell: Yes, before they came to the 30% royalty, Mr. Chief Justice. There was a large area of one-third of their production, which they did not utilize, which did not carry any increase.
Earl Warren: I -- I see your point.
Gerhard A. Gesell: And in addition, the finding --
Earl Warren: Above the 25% --
Gerhard A. Gesell: Yes.
Earl Warren: -- they did sell.
Gerhard A. Gesell: Well, what they -- above what they did sell.
Earl Warren: I see.
Gerhard A. Gesell: And measured and -- and looking at the findings, the Court said, “Why didn't they do it? Was it the agreement or was it something else?” And the witnesses said, “The reason we didn't do it was, that we went broke, going into the artificial horse hair business. We didn't have the funds to do it and there were other factors, not the agreement that operates.”
Hugo L. Black: I -- I have not fully understood the argument here in the pricing of that (Inaudible)
Gerhard A. Gesell: Yes.
Hugo L. Black: (Inaudible) I understood you to say (Inaudible)
Gerhard A. Gesell: Near as a lower competitor.
Hugo L. Black: (Inaudible)
Gerhard A. Gesell: Yes.
Hugo L. Black: Which indicated I suppose that a large part (Inaudible) willing to save two and a half times the price of the next low competitor. And the illustration I had in mind was this. Suppose (Inaudible) sell it at two and a half times (Inaudible) and there are some people that just wanted that price, they're going to get from him. And the -- those who does (Inaudible) agree among themselves to fix the price average. It'd be fair they didn't have any power or (Inaudible)
Gerhard A. Gesell: You see, ours is not that situation. Ours is a situation quite different from that, Mr. Justice Black, in this respect. Your question presumes that price is the only factor that determines whether a person buys a Ford or a Cadillac and I dare say in our own individual experience that may be true. I'm sure I would buy a Cadillac instead of a Ford if I could afford it. But that is not what the buyers and the sellers said in this market who are buying flexible packaging materials. There, we move out of the realm of our individual experience and we have to accept proof. And the proof was, that the buyers and sellers consider price an important factor, but not the only factor. They consider also quality and the combination of properties, the degree of moisture proof protection, the machine running characteristics, the expense at which it can be processed and a whole series of factors and that what they buy is a price quality combination and they look for the optimum degree of quality in these combinations that they can find for a given price. Now, glassine, two and a half times is again not a correct position on the market entirely because many glassine sold right up at the level of cellophane, seeking to get at those combination of properties which were particularly true of cellophane. So that in the market, where you have this price quality combination type of competition, the price wasn't the only decisive factor and if two men of bakers in a given town, put out their white bread to the tray and one is taking cellophane and the other is taking glassine, I don't think you can any longer theorize that these -- that there is a difference, appreciable difference in a distinctive market present on the basis of the disparity of price. If two people competing, they're doing --
Hugo L. Black: (Voice Overlap) I understand is there could be (Inaudible)
Gerhard A. Gesell: Yes.
Hugo L. Black: (Inaudible)
Gerhard A. Gesell: Yes.
Hugo L. Black: (Inaudible) on the market which give this market (Inaudible) And if that was shown by the evidence, found in the fact that there would have been (Inaudible)
Gerhard A. Gesell: Yes.
Hugo L. Black: If you say in this case to be the evidence or the findings will justify that.
Gerhard A. Gesell: Precisely. It's the difference between the theory and the facts.
Felix Frankfurter: Mr. Gessell, can you tell (Inaudible) what's the importance of the manufacturing (Inaudible)
Gerhard A. Gesell: It doesn't -- it doesn't show that. It does show that the price of cellophane package for example, if I remember the figures correctly is .000015 cents per package.
Felix Frankfurter: So that would at the time maybe an unimportant thing as to determine (Inaudible)
Gerhard A. Gesell: These other factors we're talking about and clearly that must be true in -- in the bread instance where you see it's actually operating in a given supermarket. Now, the power to exclude. Again, it seems to me I have to deal with the facts. And on the facts, it seems to me we have clearly the better of this phase of the argument. Now, what would you look for if you're looking for power to exclude, not just the position? I ask the Court to recall. There's no agreement. There's no artificial barrier to restraint. What would you look for? Well, the first might be, that you control an essential raw material, so that under no circumstances can anyone else get this raw material and get into the business. It's clear on the findings that we had no such control. You'd say, “Do we control some essential equipment? Do we have some kind as a shoe machine company did or others have in monopoly cases?” Some control over the machinery that's used in the distribution. The findings are again clear that we did not and that they're functionally interchangeable. You'd say, “Is there any excess capacity overhanging the market which can be turned on and off with a faucet to drive out competitors?” The findings again are explicit. That we've expanded only for the purpose of meeting short-range demand and that there is no excess capacity in the market. The Court said, “The capacity was not expanded with the purpose of stifling competition, creating excess capacity to overhang in the market or forestalling potential competitor. We look to see whether we bought up any plans or bought out any competitors. There's no evidence of any of that. You look to see if by reciprocity in some kind of trade arrangements, we had some particular hold on essential customer, by requirement contracts or what you will. There's nothing of that sort. The findings are all specifically to the contrary, on the distribution side, on the raw material side and on the plant capacity side.
Stanley Reed: I understand the Government to say that that is too vague to show that the market (Inaudible) arise out of the contract with cellophane first (Inaudible)
Gerhard A. Gesell: They -- they recite -- they say those are two acts of exclusion.
Stanley Reed: That they were -- they were two acts of exclusion by (Inaudible)
Gerhard A. Gesell: That is what they say as I understand them, Mr. Justice Reed. I -- I'm going to discuss them right at this moment, but I want preliminarily again to point out as I sought to do before the recess that we are concerned with whether we have monopolized, whether we have a position which gives us monopoly power. If we do not have that position, if we -- if we do not have that position, then whether or not we excluded someone 20, 30, 40 years ago and I say we didn't. But whether we did or not, it's not germane. It only goes to how did we get where we are. But you can't start of by saying where you are is monopoly. And if I may say so, that is where throughout the trial, we had the greatest clear difference with the Government and it's the one we have now. The Government assumed the monopoly and said, “Look, you exclude it.” But the question is, do we have a monopoly position? I've just shown that we don't as to price. And I am now saying, “We do not have it as to exclusion of competitor.” And once you reach that question, it seems to me it makes no difference what your conduct of Section 1 was -- may have been, 20, 30, 40 years ago. And I hasten to say again that I don't -- I believe our conduct was entirely proper. But let me take a -- a far fetch but example in the case.
Speaker: You would have to -- you would have to exclude (Inaudible) or to put a higher burden on a person (Inaudible)
Gerhard A. Gesell: The Court found on all the witnesses that we had no such intent and that's accepted. So, they tend the issue it seems to me, unless you say as a matter of law it -- it rides against all other evidence. It's already decided our way. But you see I say there's another link in this, Mr. Justice Reed. You have to show a causal relation between your position and your agreement. You can't just read the agreement and say, by its terms, it excluded and therefore, that causes your position. We're not litigating whether or not it's a restraint under Section 1. There's no Section 1 charge. So, you have to -- to litigate a Section 2 (k) particularly with agreements dead and gone and buried. You've got to show some causal relation. Now, let me see if I can illustrate. Let me see if I can illustrate. This entire business was built on moistureproof cellophane. There wasn't any business without moistureproof cellophane. Moistureproof cellophane on the Court's findings and in fact is a wholly different, unique important product. It was invented and discovered solely by du Pont with no contribution from anybody. We had a broad concededly valid product patent and that was in existence from 1929 up until a year before the complaint was filed. Now, no one could sell into this country any moistureproof cellophane until that patent stood in the way. No one could manufacture moistureproof cellophane, because that patent stood in the way and the French product was a -- was a mere frill. It was used to wrap perfume bottles. It was a gadget to do that. It had nothing to do with our modern packaging markets. It couldn't be used. We tried to use it. It was no good. People wouldn't buy it. It broke, it stuck, get gummed up and let moisture through. It was nothing and we invented this new product and we had a patent on it. Now, can you still say, “Owe it back in 1923, there was an agreement that kept someone out.” The thing that kept anybody out of this business if anything did keep them out was not an agreement but the supervening fact of an important patent, as the Court found and there's no causal relation. Anymore, there would be a causal -- we -- we litigated very heavily, Mr. Justice Reed. The question is to whether or not prices were fixed in the argentine. The Court found they weren't.
Stanley Reed: (Inaudible)
Gerhard A. Gesell: But suppose they were.
Stanley Reed: (Inaudible)
Gerhard A. Gesell: There were -- there were two -- there were one license given under it only. The license was given to Sylvania. Olin was subsequently licensed under companion process patents, but the product patent, I'm quite sure had expired by the time of that license.
Speaker: (Inaudible)
Gerhard A. Gesell: No, it was given to Sylvania. Here is what happened. They started to manufacture cellophane. We sued them for infringement. The patent was valid. They were illegally manufacturing and in the settlement of the infringement action, they obtained a license, an exclusive license.
Speaker: (Inaudible)
Gerhard A. Gesell: Directly from du Pont. Now, they obtained process information by -- from a concern in -- in abroad known as (Inaudible), whose people had stolen it from the French.
William O. Douglas: (Inaudible)
Gerhard A. Gesell: No, cellophane did not.
William O. Douglas: (Inaudible)
Gerhard A. Gesell: There was --
William O. Douglas: (Inaudible)
Gerhard A. Gesell: No, the findings are that no one ever asked for a license. It was denied. There's no proof that anybody did. Now, Mr. -- Mr. Weston says, “Now the Court went all haywire below,” because he constantly talks about actual exclusions. Well, you know if you -- if you ever been at the trial the way -- the way I was for those many weeks, that would sound rather amusing to you, because they claimed specific exclusion and they said to the trial judge, “A, B, C, D and E were excluded.” And so naturally, people from those companies came and took the stand and testified and documents concerning the dealings with them were analyzed. And the Court on the evidence found that they weren't excluded. And this district judge wasn't misled in entering in the findings and say, “There wasn't any exclusion of this people because it was specifically charged.” And I propose to that if I may say so, when we were dealing with this important secret process that they're talking about, which they say was the act of monopolization. You know what the issue was we litigated below? They said our agreements with the French were illegal, because there was no bona fide secret process that it was all a sham and a delusion that we had divided these markets and there wasn't any proper process and we litigated that issue out and the Court found that it was an important process. And now the Government says, “You see. It was apparently important process and they are monopolist because they acquired it.” And I suggest that -- that any -- any fair question of how you litigate a case would show that that argument is simply made up for the purposes of argument and hasn't any substance. We were confronted with the same thing in prices. We were claimed to be a monopolist that we raised prices, that the lowered prices, that you kept prices the same. If we paid attention to competition, if we didn't pay attention to competition, it was all a theory. Now, coming back to exclusion if I may, there is a question of Olin. Olin was never specified in the court below as an excluded competitor. We never litigated that issue in the court below and there was no finding of any kind which indicates that du Pont did anything to exclude Olin. The Government --
Earl Warren: Is there any evidence on the record to that effect? You said there was no finding. Was there any evidence to that effect?
Gerhard A. Gesell: That we did nothing as against Olin.
Earl Warren: I thought you did.
Gerhard A. Gesell: No, there was no evidence of any kind that we did anything to deter Olin. It's affirmatively from their people that we did not. They didn't even come to us for a license, Mr. Chief Justice. They were asked why and they said, “Well, they've had a lot of (Inaudible) with du Pont over the years.” They didn't think they ought to come talk to him. It's unlikable. They didn't like the du Pont Company, but they never cam, never. Now, the Government didn't even ask below for a finding that we excluded all of them.
Felix Frankfurter: I suppose that the Government means by saying by mere fact (Inaudible)
Gerhard A. Gesell: I suppose. I would rather put it, but --
Felix Frankfurter: Is that your argument?
Gerhard A. Gesell: I -- I suppose it is. In the first place I say that they can't have that argument as to Olin because it -- it wasn't an issue below and second of course, the patent was expand, this brought product patent and we -- we had that patent. And it would seem to me that the being we have was not du Pont, it was the ownership of our own invention. The -- the Government talks in its brief at great length about the lack of entry and places a great emphasis upon --
Felix Frankfurter: What? Lack of what?
Gerhard A. Gesell: Lack of entry.
Felix Frankfurter: Entry?
Gerhard A. Gesell: Entry into this business. There are, I think, on the findings, a -- a good number of explanation for that. Not only did the -- the record show that in this period, we had of some 18 years, we had about seven years of depression and recession and six years of war and emergency restriction. But there were periods from 1932 to 1936 for example where du Pont wasn't able to sell the production of its old plant because -- even with price reduction. And we had one company come in before these conditions developed and one company come in immediately afterwards. Businessmen testified as to why they didn't come in. They said it was because of the lack of funds or they weren't interested in going into this field or that they -- and I think this is the reality. They preferred to compete like Goodyear did with Pliofilm or like Dow Chemical did with Saran, with their own product in this market rather than to come with cellophane and they competed nonetheless strenuously. And I think -- I think it is particularly significant that over this whole period, there isn't a single person that came forward and the Government certainly went up and down the country looking for them. Who said that du Pont had done anything for which they could complain? There wasn't a single complainant on any face of this case before the Court. References made to profits and it's suggested that our profits were temptingly high. There isn't any proof that relates our profits to anything that relates to the profits of Sylvania, that relates into the profits of the other manufacturers and that clearly is an argument and nothing more. As far as the secret -- engrossing of the secret process is concerned we have a situation where the evidence showed the year after we got it. It was stolen and became available to this company, which set up plants in three places abroad. Now, the Sylvania agreement, to which Mr. Justice Reed referred is the remaining phase of this exclusion case. That was a license of a product patent on an exclusive basis to Sylvania. There was nothing in it about plain cellophane. At the time Sylvania had no patents to license back, it did license back three or four. There is no consequence in the case. The agreement contained this provision with respect to royalties which had no causal relation because it never became operated, and the provision which of course is entirely lawful in the licensing of a product patent.
Speaker: (Inaudible)
Gerhard A. Gesell: That the -- that the royalties would increase after a specified percentage of the combined production -- combined sale. And that I think is nothing more or less if you take it on the most strenuous basis from the Government side in a quantity, license on a quantity basis, which is of course much more liberal than that. But even if you take it as a quantity license, certainly there's nothing in any of the decisions that says you cannot license a valid product patent with a quantity limitation in it. But after all, we put the amount of business entirely. Now, the affirmative side of this case on which I wish to spend the moment, seems to me equally impressive and really the most germane part of the argument on this phase of the case. The question is, why did we get where we are? How did we get this position? And it's clear on the findings that -- and the Court found that we were able to gain our share of this business because of efficiency in the manufacture of the product, because of the superior quality of our goods and because of the value of the services we gave our customers. Now, that is not a finding just taken out of the air. It's a finding based on testimony and exhibits that examined in detail why it was we were able to sell, why it was we were able to succeed. And of course --
Speaker: (Inaudible)
Gerhard A. Gesell: Yes. We've got a --
Speaker: (Inaudible)
Gerhard A. Gesell: Yes. And the correlatives have been taken out here in the United States.
Stanley Reed: You did have patents?
Gerhard A. Gesell: We -- we got some patents. And of course, Mr. Justice Reed, at the time we started, this was not just an agreement you know. We -- we had a joint -- we had a --
Speaker: (Inaudible)
Gerhard A. Gesell: No, they were processed patents of minor consequence and they're related only to plain cellophane. Then we came along later with our own invention --
Speaker: Which was?
Gerhard A. Gesell: -- of this moistureproof patent, which is the basic patent. Of course, these arrangements with the French weren't quite as they were portrayed this morning. We set up a company with the French. The French had 48% of the stock. We were not competitors when we set it out. Timken and those cases have nothing to do with -- with this kind of event or situation. There were no potential competitors. Nobody else find to get into the business. Two people who wanted to produce and pioneer a product, they get together and formed a company and put in manpower and money, patents and know-how, take out shares.
Speaker: There was also a limitation on (Inaudible)
Gerhard A. Gesell: Yes, the French licensed the process with a territorial limitation, which the evidence shows was a requirement that they imposed and the Court found that that was not done with any intent or purpose of restraining trade.
Speaker: (Inaudible)
Gerhard A. Gesell: We bought them out in 1935 and they were free to sell thereafter in this country except as they use processes that they had received from us or the exclusive process which they had, with which we have done.
Earl Warren: How about the agreements you made with the French Company and the English Company and the German Company, limited with territory?
Gerhard A. Gesell: Well, those agreements came about in this way, Mr. Chief Justice. They -- those companies were licensees of the French.
Earl Warren: Yes.
Gerhard A. Gesell: And the agreements provided that the French could have and could pass on to their licensee any information they got from us. And so, we simply dealt directly with them instead of passing it to them through the French. But those -- those agreements were not of our -- those agreements flew out -- came out in the original arrangement.
Earl Warren: Didn't all those agreements limit them territorial? Are they to function to keep them out of this company?(Voice Overlap) --
Gerhard A. Gesell: As far as used -- as far as using technology license from us is concerned, yes. By their terms, the agreement so read. But your -- Your Honor understands that across these agreements was -- was a powerful law that couldn't be surmounted on the Court's finding. There was a product patent of our own invention which -- which barred him for us. And that these agreements in fact had no causal relation at all to our position because other factors, intervening factors excluded so that the agreement --
Earl Warren: These forces were not entirely excluded because you raised the tariff (Inaudible)
Gerhard A. Gesell: Well, no. We didn't raise the tariff, Mr. Chief Justice. The -- the tariff agency failed to assess the proper tariff. We brought a suit and the Court said that the tariff agency have been assessing the wrong tariff and so it went up and we had nothing to do with anything more than our -- our right as a citizen to say we wanted the tariff applied in accordance with its terms. That was the legislative policy of the Congress and the importers came in and said, “Look at here. This is going to keep out imports.” As we show the Court and Congress said, “We're going to put the tariff on anyhow.” Now that -- that's clearly isn't the monopolization act on the part of du Pont. Now, coming -- coming to this patent, I have not spent much time on it, but I think its significance to the case is quite clear.
Speaker: (Inaudible)
Gerhard A. Gesell: We have a section on our brief that deals with the patent, which begins at page 111. Now, we acquired whatever position we had by the lawful exploitation of these patent. And I submit that any position so acquired is immune from challenge under the Sherman Act. It seems -- Section 2, it seems to me that any -- any other decision would be as we say in our brief an attack on the basic constitutional provisions with respect to patents. Here was an invention which we made ourselves, which no one contributed anything to but ourselves. No other patents were brought in to expand it or to exploit it. We did nothing that extended the scope of this patent beyond the scope of the patent grant and it was of our own invention and discovery. It is concededly valid and it went to the heart of this business. Some 90% of the business was business dependent on this patent. This moistureproof patent is the only patent, only product which was of any consequence. It took us two years to develop the theory of what we were going to do and another two years to get the plant and machinery into operation and after four years, we did and it is the thing that made the business what it is today. The French didn't contribute anything to that and the findings are explicit on that. Now, what did we do with this patent? We put it into operation. We expanded plant. We gave more jobs. We constantly lowered and lowered the price. We improved the quality. We adopted many different types for different uses. We did everything that the patent laws are supposed to encourage. And on the trial, we heard as we lowered price or as we improved quality or did any of these things, we are engaging an act of monopolization. And I submit that those are acts which the patent law expects us to perform. And that any position which is the result of that conduct is a position which cannot be attacked under Section 2 and the Court found explicitly that that was where our position came from. That we had no intent to do anything differently and that our conduct was all appropriate in the development of this patent of product. Our superior skills and our technical efficiency were what made us successful in this venture. And that patent is a patent which the Government has not challenged and cannot challenge. And it's because of those factors that the District Court below said that this entire record disclosed the existence of a condition in harmony with our whole notions of free enterprise and a competitive economy. And I submit that that's what the record shows and no basis exists for adjudicating that our position is unlawful or that our position was illegally achieved.
Earl Warren: Mr. Weston.
Charles H. Weston: May it please the Court. I first want to say something about the question of the continuation of the restraint imposed by the original contract with La Cellophane against manufacture in the United States. The agreement provided that La Cellophane would give du Pont an unqualified and unrestricted and exclusive right to every process relating to cellophane manufactured, owned by La Cellophane or which it may hereafter acquire. And it's conferred upon du Pont the exclusive right to manufacture cellophane in North and Central America. There's no time limitation on this. Now, this -- a cancellation has been spoken about. We refer to that pages 24 and 25 of our brief. And I want to call attention to the language of the cancellation notice. There are several of them. They're all the same. It's page 32 -- 3323 in volume 5 of the record. Based upon the provisions in contract, this just came from du Pont and it started with other side and in the light of legal developments in this country. We construe these provisions, these agreements as imposing no restrictions upon the sale of regenerated cellulose in any country in which the public is free to sell. Thus, we regard each party as free to export such film to any country in the world subject only to certain limitation. In other words, we said about cancellation of manufacturing rights, the exclusive rights given by the original process and original agreement.
Felix Frankfurter: Mr. Weston, what -- the decision of this Court has deemed it a violation of the Sherman Law and the owner of a secret process to give the exclusive right as to the event to this process.
Charles H. Weston: I don't -- do not know of any case that has --
Felix Frankfurter: Now, what -- on what information of that --
Charles H. Weston: -- held it --
Felix Frankfurter: -- in the -- certainly, what's illegal under the common law (Inaudible)
Charles H. Weston: It -- well --
Felix Frankfurter: Assuming it's an appropriate (Inaudible) time and circumstances appropriate with the subject.
Charles H. Weston: Well, that -- that is where I would say at the very least this was not appropriately limited in time and circumstances.
Felix Frankfurter: Why not? If there's a company that can -- got the business all over the world does and know have done (Inaudible) it seems to me.
Charles H. Weston: A limitation that covers -- covers an -- an entire continent is not --
Felix Frankfurter: It might at common law. That's the connection (Inaudible)
Charles H. Weston: And that was without time limitation.
Felix Frankfurter: (Inaudible) Common law may have made inroads under common law but I do not know (Inaudible)
Charles H. Weston: Well, at least at common law, there's no question about time limitation. It had to be limited and reasonably limited in time.
Felix Frankfurter: (Inaudible)
Charles H. Weston: Excuse me?
Felix Frankfurter: (Inaudible)
Charles H. Weston: Well, I am not familiar with that case, but I am familiar with the number of decisions at common law where the limitation and time has been entered so. Now --
Felix Frankfurter: It might -- you'd restrict that (Inaudible) I'm -- I'm asking because it's -- it seems to me that there's been (Inaudible)
Charles H. Weston: The assignment itself doesn't fit when you bar the assignor from making any -- any further assignment for the indefinite future.
Felix Frankfurter: It just seems that it was an exclusive assignment, that's all it means.
Charles H. Weston: Well, I don't think that that can run forever without involving imposition of continuing restraints and in this case, laying the foundation from monopoly which the Sherman Act applies to. Now, I would like to turn to this question.
Felix Frankfurter: Suppose you got away from that. What -- do you say that patents that were filed by the President of a company (Inaudible)
Charles H. Weston: I think both sides are in agreement on that, yes.
Speaker: (Inaudible)
Charles H. Weston: Oh, no. No, it isn't. No, the -- the La Cellophane was contributing what it had. It claimed that its patents had a good deal of value and when du Pont came to look into it, it decided they didn't. But La Cellophane in good faith turned over all its secret information which was a vital importance, its production line know-how assistance in getting the company started and its patents. The patents --
Felix Frankfurter: If -- if you the patents had been (Inaudible) is that available (Inaudible)
Charles H. Weston: Well, of course, a patent has a limited life and -- I -- at -- at the very latest patent in protection against the Sherman Act for 17 years on this theory of a secret process that burns forever can go even beyond the immunity which is sometimes get from having possession of patent. Now, I would like the Court to look at this folder that was passed around a little earlier and solely at the unconverted part in the back that Mr. Gesell referred to. This obviously has reference only on the question of transparency. On the first page, the only one that is clear is Pliofilm which is a film, in other words, not a product. The two top in the next page are both films. The paper one at the -- at the bottom are obviously not clear. Then, we come to the fourth page and here we do see a paper product which is quite clear, but I suggest that the Court members, the Court just lift up a little sheet of paper over the wax paper, maybe an inch then look at the red thing underneath and do the same with cellophane. One case is perfectly clear in the other case it's so murky you could just barely make out the outline. Another thing, just take your thumb nail, likely scratch it across this thing. Nothing -- it's of -- it's cellophane paper, in effect even the slightest, it leaves a permanent blur on the wax paper. Now, on the question of physical characteristic, difference between physical characteristic, cellophane is different from glassine and this -- this is all in the basis of the Court's finding and clarity, tear strength, bursting strength, premium ability -- permeability to gases, dimensional change with humidity difference, resistance to grease and oil and for two of the three types of glassine and water absorption and moisture permeability. Those facts are brought up at page 78 and 79 of our brief. Wax paper is different from cellophane in nine of the 11 physical characteristic properties set forth. Also, at page 45 of our brief, you'll see set of -- a little column near the bottom, the differences between cellophane and sulphite paper. Now, the -- so, I don't think there can be the possible question as to this being a -- really, a totally different product. The question is whether competition from the lower level so to speak really controls cellophane's price. The facts are incontestable on that point. Cellophane, when it was way above the price was increasing its sales and having high profits. Its price was not controlled by the lower price products. It shows to drop the price from time to time, get a larger market, partly from new users, partly from the old users that would reduce manufacturing cost and the increase value of lower manufacturing cost would also increase profits. I think very little has been said if anything by Mr. Gesell about what the du Pont management thought about the competition of these paper products. It's never been explained why the du Pont management, the top management left them out of consideration when it was considering cellophane's competition. If they control cellophane's price, why wasn't that the major consideration? It's never been satisfactorily explained why cellophane forged ahead as it did, if it did not materially differ functionally from any other competing products. The -- these material differences enabled a monopolist of the product to exercise a degree of pricing power over that product which is certainly within the reach of Section 2 of the Sherman Act. The monopolist has a wide range when this other products or maybe two and half times under its price, think of the range. It practically as if they didn't exist. Of course, there would be some uses where as I said in my opening, customers will fluctuate because they will compare one product which is different in character or for certain advantages against another offering less advantage but lower price. And of course, a numerable findings about how customers shifted back and forth are we think irrelevant. Now, something was said that Sylvania -- does that mean my time has expired?
Speaker: (Inaudible)
Charles H. Weston: Something was said that -- near the end Mr. Gesell's argument that Sylvania did compete with du Pont in price. I take issue with that. I think it is whatever this system might before it would be found if anywhere in -- in -- oh, yes, in du Pont, in the appendix to du Pont's brief under the heading as to existence of price competition with Sylvania. Well, if you look at that, all that you find is they quoted a finding with -- same with the -- after January 1, 1947 of a price differences in following respects without noticing the respects. Two of the respects were that Sylvania had a higher price at that time. That was a -- in a condition as severe undersupplied. It was a terrific seller's market and for short period during 1947, Sylvania's price was higher than du Pont. That is not price competition. I'm not talking about after the period of the monopolization charge in 1950 and 1949. The other earlier reference about numerous occasions, it was competition between Sylvania and du Pont's basic price just refers to be sporadic apertures by Sylvania from this list price. And the Court found -- the Court found that each time du Pont issues a new price list, Sylvania copies its list. There isn't the slightest question in the world that in any realistic sense there was never any price competition on the part of Sylvania. Thank you.