Earl Warren: Number 438, United States, Appellant, versus Singer Manufacturing Company. Mr. Friedman.
Daniel M. Friedman: Mr. Chief Justice and may it please the Court. This case is on a direct appeal from a judgment of the District Court for the Southern District of New York dismissing after trial, a Government antitrust case against the Singer Manufacturing Company. The District Court concluded that the Government had failed to prove the existence of the conspiracy charge and of the Government’s other contention with respect to a certain agreement is being an unreasonable restraint of trade have not been established. The principal question in the case is whether certain actions taken by the appellee, Singer and a competing Swiss manufacturer of sewing machines, a company called Gegauf, by which a key patent governing the particular type of machine involved here was transferred from the Swiss company Gegauf to the Singer Company because both parties believed that Singer would be better able to enforce this patent against the common competitive enemy of both, Japanese manufacturers of sewing machines that was selling them in this country for lower prices, whether this, together with subsequent action that the two took to enforce the patent, a matter to an illegal conspiracy and combination and restraint of trade. There's a second issue in the case which is whether a provision in the cross-licensing agreement that Singer and the Swiss firm, Gegauf entered into by which each party agreed to facilitate the allowance to the other of the broadest possible patent claims, its self-constituted and unreasonable restraint of trade. Now, this case involves a particular type of household sewing machines, something called the machine-carried multiple cam zigzag machine.
William J. Brennan, Jr.: Is that it?
Daniel M. Friedman: Yes, sir. I'll -- I'll call it --
William J. Brennan, Jr.: [Inaudible]
Daniel M. Friedman: No, I'm afraid not, Mr. Justice. I can't operate a sewing machine, but the wonderful thing about this machine, the zigzag type of sewing machine is that without any particular skill by the operator, the housewife can make the most remarkable patterns, these so-called zigzag patterns. I have --
William J. Brennan, Jr.: Can you sew?
Daniel M. Friedman: No, I'm afraid not. If I could sew, if I could operate a sewing machine, I can do that. I have here the first one, I don't know whether the Court can see it, these are some of the patterns made on the particular machine involving this case. The Court will notice in contradistinction to the usual straight stitch, these -- there's all sorts of zigzags. One goes up, has a die, up and down and so forth. I also -- this is part of the record in the case, I also have another one not made on this machine but made on a more advanced Italian machine which I brought here because the stitches are much larger and also much more reliable. And I'll hold this up to the Court, you'll notice that really quite remarkable stitches that can be done. And under this type of a machine --
William J. Brennan, Jr.: Is that the Vigorelli [Inaudible]?
Daniel M. Friedman: This is one of the Vigorelli machines, an advance Vigorelli machine, not the one that was the subject matter of this particular situation. The --
Arthur J. Goldberg: [Inaudible] Vigorelli.
Daniel M. Friedman: No, we are not -- no, we are not attacking at all the arrangement with Vigorelli. We are not attacking the cross-licensing agreement itself between Singer and Gegauf. We are attacking the provision to facilitate the broadest possible patent claims. We are attacking the transfer of the patent and we are attacking the subsequent actions, the latter three, the latter two and three as elements of the overall illegal conspiracy.
Arthur J. Goldberg: [Inaudible] Vigorelli and Gegauf [Inaudible] --
Daniel M. Friedman: Gegauf.
Arthur J. Goldberg: [Inaudible]
Daniel M. Friedman: The differences -- you mean, why we're not attacking Vig --
Arthur J. Goldberg: [Inaudible]
Daniel M. Friedman: Well, I can put -- state very simply. In the case of the arrangements with Vigorelli, it was just a cross-licensing. It was not a transfer of the patent. In addition to that, the -- our arrangement with Vigorelli was not in terms of an agreement to facilitate the allowance of the broadest possible patent claims. It was an agreement merely to settle interference proceedings before the Patent Office. And finally, the reason we're not attacking it here is we don't think there's anything in the record that establishes that the agreement with Vigorelli in anyway related to an attempt to exclude the Japanese competitors. That's the basic reason, I believe.
Arthur J. Goldberg: [Inaudible]
Daniel M. Friedman: Well, I think --
Arthur J. Goldberg: [Inaudible]
Daniel M. Friedman: I think -- Mr. Justice, we think there's two aspects of the case as I shall develop. At the point that Singer entered into the cross-licensing agreements, both with Vigorelli and with Gegauf, at this point Singer was concerned that the machine which it had been developing might be infringing these patents and it wanted to free itself from the threat of being an infringer. It was, if I may use the phrase, this was a defensive alliance, an attempt to protect themselves so they could make their own machine, but when you get to the situation which forms the guts, if I may say, of this case, Singer shifted from the defensive to the offensive. Singer then begun its campaign not to ensure itself protection that it could manufacture free of the threat of infringement by Gegauf but it begun this -- went -- entered into this joint program we think with Gegauf, to enable it to exclude its competitors. Note, in the one hand, it was going against its competitors, in the -- situation which Your Honors alluded, it was attempting to protect itself. Now, the --
Speaker: Can I ask you a question? Is this a factual case that we have to -- for you to prevail, do we have to overturn [Inaudible]?
Daniel M. Friedman: I don't think so, Mr. Justice. I don't think so. We have, I think no basic quarrel with our opponents as to what was done in this case and my statement of the case will be based on the documentary evidence and upon the findings of the District Court.
Speaker: Did you accept the findings?
Daniel M. Friedman: With one or two minor exceptions. We don't of course accept the ultimate finding that there was no conspiracy but --
Speaker: [Inaudible]
Daniel M. Friedman: With one or two minor exceptions, we do accept the findings, but we think that findings and the undisputed documentary evidence point to the contrary conclusion to that reached by the District Court. Now, I --
Arthur J. Goldberg: Let's assume [Inaudible].
Daniel M. Friedman: No, Mr. --
Arthur J. Goldberg: [Inaudible]
Daniel M. Friedman: No, Mr. Justice. If that were all we had in this case, we wouldn't be here. We recognize of course that what a patent gives you is the right to exclude, that's what the patent law say a patent did.
Arthur J. Goldberg: You may buy another.
Daniel M. Friedman: And you may buy another patent and presumably, when you buy another patent, one of the things you are buying is the right to exclude. We recognize that and if all we had in this case was that Singer acquired the Gegauf patent and it did it because it wanted to use it against the Japanese, we would not contend that applies. But we contend here that we are far more than that. We don't just have, as I shall develop, the simple purchase in sale, a simple transaction. Here, we think here, a joint program. Here, we have a series of relationships between them, all directed to this common aim. Now, I'd just like to indicate briefly since there would be some discussion here as to precisely what is involved in this case. This thing that I hold before me, this model, is a model of the key mechanism involved in the patent of this case. This is the multiple cam device. The Court will notice that there is on this side of the device a series of metal discs or cams, and the outside of each one of these has different protrusions of different sizes and different shapes. There's also attached to this a little finger-like called a cam follower which can be moved from one cam to the other. As this revolves, the cam follower bounces back and forth following the configurations of the cam. And this movement is transmitted by a mechanism to the needle. And the result of this is that as the cam goes around and it's transmitted, the needle, while it's going up and down at the same time is moving laterally back and forth. And that's how the zigzag stitches are made. It goes in effect like this, up and down. And the beauty of this device is this machine carried the cams, all being together here that the housewife may select a large variety of patterns by the simple expedient of turning dials and selecting one cam or the other. And there shall here before the Court, this is a model of the machine. The cams are in here and now they can see it. In here, it's transmitted to the needle here which goes up and down, and with zigzags from side to side laterally as the cloth is going through. Now, the Singer Company at the present time is the sole American manufacturer of this multicam machine-carried machines and --
Arthur J. Goldberg: [Inaudible]
Daniel M. Friedman: With one -- with one minor exemption, yes and this particular type of machine in the year 1959 represented about 45% of Singer's total sales of household sewing machines in the United States, roughly about $45 million. Now, before turning to the facts, I would like to discuss one matter which in a sense is lurking in this case. Singer makes a great deal of the fact that in the sewing machine industry, the Japanese manufacturers have made a remarkable achievement in getting into the American market. It points out that the Japanese have been vigorous competitors, that they have now gained a major share of the American market. That they are undercutting prices and that other manufacturers in America of sewing machines are going out of business. And from these facts, Singer suggests that what it did was permissible here because it was done to protect an American industry. As it puts it in these circumstances, any restraint it imposes is not an unreasonable restraint. We think that the answer to this is that the antitrust laws do not permit American manufacturer to justify, otherwise illegal conduct because of the fact that this is done to protect it from foreign competition. The Sherman Act permits as designed to protect both domestic and foreign competition. And if in fact, as a matter of national policy, it is considered desirable that some steps should be taken in order to protect this American industry from foreign competition, this is not the way to do it. There are other ways to deal with this problem, particularly under the Tariff Act. It may also be dealt with -- through international agreements doing action by the Executive branch. But we don't think the fact that the lower priced Japanese machines are making serious inroads into business of the American companies, justifies in any way what Singer has done in this case in an attempt to proceed and to stop this competition.
Arthur J. Goldberg: [Inaudible]
Daniel M. Friedman: They do, Mr. Justice.
Arthur J. Goldberg: [Inaudible]
Daniel M. Friedman: Oh, sure -- surely not. Each -- we say a competitor should compete as vigorously as possible, as vigorously as possible. If Singer is able to undersell the Japanese firm, if Singer can manufacture a better machine, the customers feel that despite their higher prices, they prefer the Singer machine as this time, we do say that this American company and its Swiss competitor cannot enter into a joint course of dealing for the purpose of using their combined power against the Japanese. Now the -- I like now to turn to the facts of the case. The story that we are going to tell basically fits into three phases. The first phase involves the cross-licensing agreement between Singer and Gegauf. The second phase involves the transfer of the patent from Gegauf to Singer and the third phase involves certain actions the parties took after the transfer. The background of the case is just quite simple. In late 1955 and early 1956, Singer Company had pending before the United States Patent Office an application basically the four gadgets that I've shown the Court earlier covering machine-carried multiple cams which it hoped would be granted and which will protect this machine which had already developed and which was then in the process of towing up to manufacture. In 1955, it had settled certain patent disputes with the Italian firm, Vigorelli, by entering into a cross-licensing with it. And it had reason to believe that its patent application which is known as the Harris patent would have priority in the United States over the applications filed by other manufacturers. In January 1956, it learned to its great consternation that the Gegauf Company had on file a patent application in the United States which had a priority date, nine days earlier than the Singer application. And it was of the view that if this matter came to a head, the chances are that Gegauf would prevail over it. It was afraid that -- it was informed that its application was ready for issuance and it was afraid that when the patent office came to examine its application preliminary to issuance, they would quickly discover that the Gegauf patent was also pending, covering the same invention. And that they would then be what the Patent Office describes as an interference proceeding which is a proceeding by which the Patent Office determines which of two competing applicants for a patent claim is the first inventor and therefore entitled to the invention. And it was afraid as I've indicated that it would come out second best in this conflict with Gegauf.
Speaker: Well, what year was this?
Daniel M. Friedman: This was early in 1956. In January -- it found out in January and it therefore decided to seek a cross-licensing agreement with Gegauf which would free its machine from the threat that Gegauf might ultimately obtain a patent which would cover this machine. And in April of 1956, the cross-licensing agreement was signed. In a contemporaneous memorandum written by Mr. Waterman, the Vice-President of Singer who conducted the negotiations with Gegauf explaining why this agreement was entered into, he made the following statement, page 10 --
Speaker: [Inaudible]
Daniel M. Friedman: -- on page 1062, Mr. Justice. As --
Speaker: [Inaudible]
Daniel M. Friedman: The second in the sum -- I'm sorry, in the second volume. It's Government Exhibit 24 and it's this first full paragraph on page 1062 in volume 2. Mr. Waterman said, Gegauf's big fear is that the Japanese machines coming into the United States will be sold at a lower price than his machines will be because of their low price labor. I think its fear is well founded and we did not do anything to cause them to be other than along the line that he was thinking. Because one of the strong points of our argument for an agreement between our two companies is in order to fight against this Japanese competition and they're building a machine that in anyway reads on the patents of ourselves and of Bernina and Bernina, I might add is the trade name for Gegauf which are in conflict. In other words, he emphasized that the purpose of the agreement was in order to fight against this Japanese competition. Then down at the bottom of page 1063 in the top of 1064, Mr. Waterman also told them that Singer was prepared to fight with them, they're going to litigate with them if they didn't reach an agreement and as he said that, we left them no doubt that we're going to offer objection to the issuance of their patents, not only in the United States but in other countries where they have pending applications. And we let them know that we thought we could knockout their claims, but then in so doing we were probably going to get hurt both of us. The result of this was the cross-licensing agreement which is set forth in the following two pages of the record 1066 and 1067. The actual cross-licensing agreement itself which we are not attacking is set forth in paragraphs two and three, and it took the form of an agreement by Singer and Gegauf not to attack each other on the basis of the patents listed in the agreement, which included the Gegauf patent application to Harris and certain others. In addition to that, and we are attacking paragraph one of the agreement, contains two sentences. In the first one, Singer and Gegauf agreed not to do anything, which might restrict each other's claims in any country relating to the subject matter of these patent applications. And the second paragraph, each undertook in accordance with the laws and regulations of the Patent Office concerned to facilitate the allowance in any country of claims as broad as possible as regards the subject matter of the patents and patent application referred to above, in other words, not just these particular patents but the subject matter, the whole subject matter of this machine-carried multiple cams. Now, at the time this agreement to facilitate the allowance to the broadest possible claims was entered into, Singer and Gegauf, as far as this patent is concerned, were merely applicants. They didn't have this patent. At this time, the Japanese of course were not infringers of any patent and Singer, Gegauf and the Japanese all had the equal right to sell this machine in the United States until any patent issue. Necessarily, any broad patent which would issue, as a result of this agreement, would define the scope of what conduct the competing Japanese might engage and the broader of the patent, the greater the likelihood of course that more and more of the Japanese machines would turn out to infringe this patent. And the agreements that they made to help each other in obtaining broad patents, we think, must be considered in the light of the statement which I have just read to the Court, that the reason -- one reason for this agreement was to fight against the Japanese competition. Now, we think that the purpose of this provision is very plain. Each of these people was concerned about the Japanese competition they wanted to insure that one or both of them would get the broadest possible patent which would be the most effective method for opposing the Japanese. Now, at the time the that Singer entered into the cross-licensing agreement, the record shows that it gave consideration to purchasing the Gegauf patent, decided not to do it, however, for various business reasons. The following week, Singer met with Vigorelli with whom it had entered into a cross-licensing the year before and they had a conversation with Vigorelli's lawyer, who asked them what the patent situation was in the United States and they told Vigorelli that they'd entered into this cross-licensing agreement but they're going to have a terrible time they thought Gegauf would have a hard time enforcing it. And they indicated to Vigorelli's lawyer that they thought they could do a better job in enforcing this patent and Gegauf could. Vigorelli's lawyer asked whether they would have any objection to passing this information on to Gegauf, Singer replied he wouldn't but they wanted to be sure it didn't appear that it was coming from Singer. And Vigorelli's man said, “Don't worry about that” and this information was passed on to Gegauf. That was in the Spring of 1956. That summer, Mr. Gegauf's son came to the United States on a visit and Singer had a conference with him. And young Mr. Gegauf expressed to Singer his concern that he had seen a great many Japanese sewing machines in the United States. Singer in turn pointed out to young Mr. Gegauf that in view of the large number of importers, it would be very difficult for Gegauf to enforce this patent effectively against these Japanese machines and he asked -- Singer people asked young Gegauf whether he thought his father would be interested in selling the patent to Singer. That was in the summer of 1956. Early in September, Gegauf wrote to Singer in response to this suggestion, and this letter is set forth at page 1079 of the record again in volume 2. It's a short one page letter marked “confidential” in which after thanking the Singer Company for the courtesies they had shown to Mr. Gegauf, the last paragraph, Gegauf stated, “We agree that something should be done against Japanese competition in your country and maybe South America and therefore looking forward to your early reply.” Within two days, Gegauf indicated that this was what they had in mind in the next page of the record at 1080, Singer replied -- I'm sorry, Singer replied to Gegauf, “We do believe it may be possible that we can both strengthen our positions with respect to the Japanese competition which you mention and I hope that we can again meet and discuss our respective situations.” They did have a meet --
William J. Brennan, Jr.: May I ask you, [Inaudible] among these competitors to put the Japanese competition [Inaudible] in an effort to broaden the patent to make it more difficult to the Japanese competition for the possible infringement by Japanese?
Daniel M. Friedman: No, I think it's somewhat different than that, Mr. Justice. Our theory is this, that there was an overall conspiracy, concerted action that these two competitors embarked in a common course of conduct, the purpose of which was to eliminate the Japanese competition. What they did, what they did --
William J. Brennan, Jr.: Overall conspiracy -- this overall conspiracy independent of the patent.
Daniel M. Friedman: Yes -- indep -- no. The conspiracy related, I would say, to eliminating the Japanese by the use of the patent.
William J. Brennan, Jr.: [Inaudible]
Daniel M. Friedman: The needs.
William J. Brennan, Jr.: To affect an overall conspiracy [Inaudible] --
Daniel M. Friedman: Well, I -- no, no. To put it back -- put to -- to handicap in as much as possible as to this -- as to this machine.
Arthur J. Goldberg: [Inaudible]
Daniel M. Friedman: No. That would not, but --
Arthur J. Goldberg: [Inaudible]
Daniel M. Friedman: Pardon?
Arthur J. Goldberg: [Inaudible]
Daniel M. Friedman: Well, I say that all of the circumstances have to be looked at. I would suggest Mr. Justice another, another analogy which we think would be a violation of the Sherman Act. If Singer came to Gegauf and said, “We are both concerned with the Japanese competition and something ought to be done about it.” And Gegauf said, “Yes” and Singer said, “Well now, look, you've got a better patent than we have but you don't -- just can't enforce it. Why don't you give it to us so that we can enforce it?” And Gegauf said, “Well, that seems like a splendid idea.” We've got some problems but they finally negotiated the thing out and then Gegauf -- Singer did enforce it and Gegauf cooperated in this enforcement and we think it -- when they did that, and I think that's what this record shows --
Arthur J. Goldberg: Well, if that is the importance of the record here. Does this record say that [Inaudible] the purchase of this patent, you don't deny that [Inaudible] --
Daniel M. Friedman: That's right.
Arthur J. Goldberg: And Gegauf is trying to get the best price he could and then bargain [Inaudible] --
Daniel M. Friedman: Yes.
Arthur J. Goldberg: [Inaudible] isn't that correct?
Daniel M. Friedman: That is -- but I have to end -- I say that that is -- that is correct but that is only part of the story I think, Mr. Justice.
Arthur J. Goldberg: [Inaudible] and what Singer does to help Gegauf [Inaudible] --
Daniel M. Friedman: Unless to the -- not unless to the -- infringed on -- in restraining American trade but if co --
Arthur J. Goldberg: [Inaudible] arrangements between Gegauf and Singer relating to Singer's [Inaudible], it might restrain business in Europe [Inaudible] --
Daniel M. Friedman: That would -- that's correct. But Mr. Justice, I have to emphasize and this is I think the key to the case, when Singer was able to persuade Gegauf to sell the patent to it, he spoke of bargaining about the price but the lever that Singer used to persuade Gegauf to sell was that it was to Gegauf's interest to have the patent in Singer's hands to enforce it against the Japanese. I would like to emphasize precisely what happened.
William J. Brennan, Jr.: May I ask – I gather [Inaudible]
Daniel M. Friedman: Well, does the ultimate finding -- of course, that there was no conspiracy.
William J. Brennan, Jr.: But if there was -- there was -- was there a finding [Inaudible]?
Daniel M. Friedman: I tell -- may I -- I think I can fairly state what the District Court held here. The District Court held that each of these agreements contained the whole understanding between the parties. The Court also held that there was no agreement at the time of the transfer of the patent that Singer would use it against the Japanese. He said these people had an attitude of hostility and suspicion. They bargain out at arm's length and they did nothing improper.
William J. Brennan, Jr.: [Inaudible] you accept that --
Daniel M. Friedman: We didn't think -- we think we can accept that Mr. Justice because we think that even without any express agreement that what they did here did amount to putting together a combination in conspiracy in violation of the Sherman Act. There's no need for an express --
William J. Brennan, Jr.: Relates in one way to the Japanese [Inaudible] --
Daniel M. Friedman: Related to the Japanese --
William J. Brennan, Jr.: [Inaudible] that there was no actual conspiracy to --
Daniel M. Friedman: That's --
William J. Brennan, Jr.: [Inaudible]
Daniel M. Friedman: That's correct and our answer to that, Mr. Justice is that the facts, the facts, the undisputed facts as shown by the documents and as found by the District Court, do show a conspiracy as a matter of law.
William J. Brennan, Jr.: [Inaudible] that would reject it.
Daniel M. Friedman: Of course, of course, but that we think is a question of law, Mr. Justice. That's a question of law and not a question of fact as to which the findings are supportable, sustainable unless clearly erroneous. I'd like to come back as to --
Speaker: The master issue in this case surely is the purpose of these arrangements, isn't it? Were they entered into for the purpose of restraining trade or were they entered into for legitimate purposes to protect the patent position of the Singer Company?
Daniel M. Friedman: That I think --
Speaker: And your findings of the District Court are against you on that and I don't yet understand how you can escape the District Court's findings and accept them and still argue your case [Inaudible]
Daniel M. Friedman: Well, we are -- we do not accept the District Court's finding that this was a perfectly legitimate business arrangement. We do -- we do not challenge the finding that there was no agreement, particular, specific agreement between the parties not expressed in a written docu -- relationships they entered into. We say that you don't have to have such an agreement with the joint course of conduct which they entered into in order to go against the Japanese as enough as a matter of law to establish a violation of the Sherman Act. I'd like to just refer to the basis, to the arguments, the way in which Singer was able to persuade Gegauf to sell the patent to it. We start with a year after they had held their first meeting in October at which Singer was unwilling to pay the $250,000 that Gegauf had requested. There was a series of letters in which suggesting that now -- that the Gegauf patent had issued -- I'm sorry, now that the patents were about to be issued and that the interference had been settled, it would be appropriate to discuss mutual enforcement of the patents. And throughout these discussions, the argument that Singer made against the transfer and in -- I'm sorry, the argument that Gegauf made, against the transfer and in support of its high price was two-fold. First, it said, “We can get a lot more than the $125,000 we're asking by licensing this patent.” Singer's reply to that was, “Don't look at this as though -- treat this as though this is just the money you're getting out of this. Look at this as insurance. Look at what we're doing for you.” Secondly, Gegauf suggested that if Singer did get the patent and that if Singer did enforce it against the Japanese in the United States, all that this would do, would be to drive the Japanese to Europe. And that in Europe, this would be down to Gegauf's detriment and Singer against it on the contrary, on the contrary, we will be able to give the Japanese such a blow in this country by enforcing our patent against them, you won't have to worry about that. And as the District Court found in this case that Singer continued to drive home the point that Gegauf stood to benefit more by enforcement of the patents in the United States and it stood to lose because the possible danger of the Japanese coming to Europe and the sale was made. Now, we think that when these negotiations are looked at in the light of the undisputed documentary evidence and what the Court found, several things are clear. First, there can be no doubt that Gegauf was induced to sell the patent to Singer and at this price below what they were asking because Singer convinced Gegauf that Singer would be better able to enforce this patent against the Japanese than Gegauf and it was to the mutual interest of both of them that Singer should do it. It's also we think quite clear that even though there was no expressed agreement by Singer to enforce the patent against Gegauf that both of them understood that this was precisely what was going to be done, there was no need to enter into any agreement on the part of them that Singer would enforce the patent. This was the reason that Singer made quite clear they wanted to purchase the patent and this was the argument it used in inducing Gegauf to sell it to it.
Arthur J. Goldberg: And then Singer would be entitled to [Inaudible] would it not, the license of the Japanese now [Inaudible].
Daniel M. Friedman: I would think it would be under the terms of its agreement. I think that Gegauf would be terribly disappointed.
Arthur J. Goldberg: You'd think that this is only what? There would be no agreement [Inaudible] --
Daniel M. Friedman: It would be contrary to the basic whole plan of the arrangements between the parties, indeed Mr. Justice.
Arthur J. Goldberg: While you're pointing the fact that the inducement [Inaudible] an equal sense quite not to do it? Not that -- likely the Japanese?
Daniel M. Friedman: Well, I think it was the clear implication not alone was the purpose of this thing weren't going to license the Japanese. The purpose of this whole course of conduct was to go against the Japanese. Indeed, I think it's significant but after the agreement was entered into and the patent was assigned, Singer licensed Sears Roebuck to import a machine from Germany and Sears -- they did it because Sears was a good costumer, and Sears paid Singer substantial royalties. And when Gegauf found out about it, it wrote to Singer complaining because they said, “Why did you license this other German firm, maybe Sears would have taken from us, you should have given us the opportunity to get that.” And that --
Arthur J. Goldberg: That then violates the agreement, as I take it?
Daniel M. Friedman: I think no. I don't think there was -- had been any agreement for breach of contract they would have at length but it certainly violates the whole spirit of the relationship between them and the purpose which they entered into this. I'd like also to invite the Court's attention to a letter that Gegauf wrote to Singer in the summer of 1958 at page 1128. This was after the patent had been assigned after it had issued and after Singer had brought the first infringement suit against the Japanese. And in this letter, Gegauf in telling about some discussions he had with the firm called Pfaff, which had been allowed to be licensed under the assignment agreement said about the next to the last paragraph, halfway down, in these discussions with Pfaff, “I did not mention of course that you intend to proceed against the Japanese on the basis of your patents and ours, what happened already in the meantime. According to my opinion, the Japanese can be hit only if we succeed in preventing them manufacture of certain machines for reasons of patent rights.” I said if we succeed, once again, this letter we think clearly and it shows that Gegauf was aware that Singer was planning to institute these proceedings against the Japanese, that it view itself participating in this campaign and then it was see -- saw the whole thing as a joint program, the design to protect them against the Japanese. Now, the assignment of the patent to Gegauf to -- I'm sorry by Gegauf to Singer, was not the end of the joint cooperative endeavors of this parties. After the patent was issued to Singer in the summer of 1958, so I've indicated Singer brought an infringement suit against the principal Japanese manufacturer which is still pending and in January of 1959, it filed a complaint with the Tariff Commission under Section 337 of the Tariff Act. That's the provision of the Tariff Act which permits the Tariff Commission to recommend to the President and the President to bar imports into this country where the importation of articles in commerce results in unfair competition or in unfair acts to the detriment which will result in destroying or substantially eliminating an industry efficiently operated in the United States. The purpose of this proceeding, the complaint before the Tariff Commission, requested the President to issue an order barring from the United States all infringing machines which violated the so-called Gegauf patent which Singer now had. And while it's true that it sought relief against all infringing machines which under the theory of the case would have to do before the statute, the District Court found that in bringing this proceeding, Singer had been motivated by the deluge of infringing Japanese imports and that the principal threat of Japanese machines came from the Japanese import -- I'm sorry, principal threat to the Singer machine came from the Japanese imports and not from European production. Now, during the course of this proceeding, the Tariff Commission raised the question with Singer whether in view of the provision in the agreement for the transfer of the patent which reserved to Gegauf the right to license this German firm Pfaff, whether in fact Pfaff had been licensed because the Tariff Commission takes the position it will not direct exclusion of a foreign product if in fact the American manufacturer is permitting licenses under the patent. Singer told that it hadn't been, but Singer was afraid that this answer was not convincing to the Tariff Commission. So Singer wrote to Gegauf saying that the only way they could satisfy the Tariff Commission, that there had been no license to Gegauf, was to delete Gegauf's name from the agreement. Gegauf wrote -- I'm sorry, to delete Pfaff's name from the agreement, Gegauf wrote back that it was agreeable to help Singer as much as possible in its fight in the United States, imposed a condition that wanted a certain guarantee of immunity from Singer, which Singer reluctantly gave them and then the agreement was signed deleting the reference to Pfaff. And the last document I'd like to refer the Court to, is at page 1206 of the record, paragraph number four of that document. This was an affidavit which Gegauf executed contemporaneously with the signature of the agreement, which deleted Pfaff's name from the assignment and it shows we think beyond any question that Gegauf and Pfaff was still -- Gegauf and Singer were still cooperating in this campaign against the Japanese. To read -- the language reads, “at the request of Singer and for helping them in their fight on the United States market against foreign competitors, I have today signed this contract. ” Now, I've indic -- already indicated our basic theory of the case on this issue. The Sherman Act requires that each competitor compete on his own. The competitors cannot join hands, cannot combine forces against a common enemy. I think this Court put it very well in a somewhat different context in the Associated Press case when it stated that the Sherman Act was specifically intended to prohibit independent businessmen from becoming associates in a common plan which is bound to reduce their competitor's opportunity to buy or sell the things in which the groups compete. This principle -- this basic principle of the Sherman Act, that a competitor must act individually, was applied by the District Court in the National Lead case to hold that competitors cannot agree with each other not to license under their patents. And we think that in this very case, the same principle requires the conclusion the when you have two competitors and have a common enemy, one competitor cannot transfer the patent by agreement with the other where the reason for the transfer is because the other competitor is better able to enforce it than the first against their common enemy and thereafter the two continue to cooperate in this joint campaign.
Byron R. White: [Inaudible]
Daniel M. Friedman: Yes.
Byron R. White: [Inaudible]
Daniel M. Friedman: No. That's right Mr. Justice, because I think the basic distinction which the Sherman Act draws is between individual action by a businessman and between concerted action.
Byron R. White: [Inaudible]
Daniel M. Friedman: Yes but that -- that is right but the con --
Byron R. White: [Inaudible]
Daniel M. Friedman: Pardon Mr. Justice, I think the significant point is that the concerted action in our case relates to the enforcement of the patent against the Japanese, the combining to go against the common enemy and your --
Byron R. White: [Inaudible]
Daniel M. Friedman: Well, I think in the Sherman Act, the purpose for which acts are done is very significant, yes.
Byron R. White: [Inaudible]
Daniel M. Friedman: That's right because it's each and doing independently. But when they have -- each one has let --
Byron R. White: [Inaudible]
Daniel M. Friedman: I think that is the touchstone under the Sherman Act, Mr. Justice.
Byron R. White: [Inaudible]
Daniel M. Friedman: No, I think Mr. Justice, all that the District Court found was at that the time of the sale, there was no agreement then and there that they would enforce it against the Japanese competitors. I don't read the District Court as finding that there was no -- well, he did find, we do challenge the finding and make the finding at one point that there was no unity of interest or common design. We do challenge that. We think that finding is contrary to the evidence. We think the evidence unequivocally shows a common design and common character.
Speaker: I will turn the question around, I asked you about the purpose and motive. What errors of law did the District Court made for each of these [Inaudible]
Daniel M. Friedman: I think the error of the District Court -- the error of law that the District Court made was that as a matter of law, this kind of concerted action by two parties, amounts to a conspiracy.
Speaker: Well, the District Court -- I mean you -- do you think that the District Court did not recognize that if two competitors get together to block the entry of a foreign competitor that that doesn't violate the Sherman Act?
Daniel M. Friedman: I think the District Court held that in order for that to violate the Sherman Act, something more would be required, that is an express under -- undertaking, an express agreement by Singer that it would do what the parties indicated they planned to.
Speaker: You mean that a conspiracy in this kind of situation has to be by express agreement rather than inferred from facts?
Daniel M. Friedman: But it -- well, it seems to be -- it seems to be the tone of the District Court's opinion. As we read it, this seems to be the finding because otherwise, otherwise we don't see how all of this evidence, all of these joint dealings when put together can be said not to amount to an illegal conspiracy.
Speaker: Well, I want to be very frank with you. My trouble is that, I think if you said it frankly that you didn't think the findings made with the District Court was supported by evidence, that I could understand, but I can't understand up today at least, how you can accept the findings of the District Court and still --
Daniel M. Friedman: Well, but this --
Speaker: I can't find out what your point is.
Daniel M. Friedman: We say that -- as we read the findings of the District Court, what the District Court said is, for example let's take the agreement of signing patent, the District Court said all you had was an agreement from Gegauf by which -- between Gegauf and Singer, by which Gegauf sold the patent to Singer. He said there was no other agreement express or implied other than that set forth in the transaction. There was no agreement by which Singer in effect agreed with Gegauf that it would enforce the patent against the Japanese. We say that such an agreement is not necessary in the circumstances shown here to establish a violation.
Speaker: But it all depends upon the motive and the purpose of the --
Daniel M. Friedman: Well, we do attack -- we do attack, Mr. Justice, we do challenge defiant to the extent that the District Court found that the sole purpose here was a legitimate one, a lawful business purpose, we do attack that.
Speaker: Well, that's a very basic crucial finding in this case, isn't it?
Daniel M. Friedman: Yes.
Speaker: I mean, given that finding, unupset, can you prevail in this case?
Daniel M. Friedman: No, I suppose we have to (Inaudible) --
Speaker: I think you've got -- I think you've got to overturn the basic findings, that's where I started out with and I was surprised --
Daniel M. Friedman: Well, we all -- but I think the basic finding --
Speaker: I'm not saying that you can't do it. I'm not --
Daniel M. Friedman: Yes. I think the base -- to whatever extent, we have to overturn the basic finding. The findings are very narrow findings. This is not a situation where there are large numbers of finding.
Speaker: No, but it is a very crucial finding. It's the finding. It's the basic finding in which your position seems to me has to meet.
Daniel M. Friedman: Well, as I say, I think that on this record there's no doubt that what the purpose and the motive of this transaction is --
Arthur J. Goldberg: That was your purpose or effect. Would be enough if you're able to show that it's necessary effect [Inaudible] --
Daniel M. Friedman: I would say -- I think probably so, Mr. Justice because let me give you as an example. I suppose the -- in the sense, you might say the effect of an agreement to sell a patent from one to the other with the determination on the part of the acquirer that he is going to enforce it against his competitors, this might be said to have an anticompetitive effect. So, I would not attempt to argue that merely because the effect is likely to be in our competitive facts or not.
Arthur J. Goldberg: You have to show a purpose.
Daniel M. Friedman: I think so. I'd now just like to turn to the second aspect of this case which is the validity of the provision in the cross-licensing agreement by which Singer and Gegauf undertook to facilitate the allowance in any country of claims as broad as possible and as I say, we think this agreement -- this provision was not only set the stage and has the beginning of the conspiracy but also itself for the illegal restraint of trade. I just --
Arthur J. Goldberg: How can this differ by the noninterference?
Daniel M. Friedman: Well, I'd like to come to that, Mr. Justice. This in effect, as I take it is an agreement that they will not in any way fight each other in the interference. Now, the nature of an inter --
Arthur J. Goldberg: And that is the --
Daniel M. Friedman: Pardon?
Arthur J. Goldberg: Would you think [Inaudible] --
Daniel M. Friedman: I'm not -- I'm not -- I don't understand you. We don't contest the validity of agreement not to -- well, I think it depends on the circumstances which I'd like to come to. In the normal practice in an interference proceeding is after an examiner has determined that the claim which is sought is patentable, a preliminary investigation. He then searches the file to see if any other claims are on issue for the same invention and if he concludes that two inventors have claims pending the matter is put it into interference and the purpose of the interference proceeding is to determine who is the first inventor and entitled to the invention. Now, if there's no issue as to the validity of the patents as to their scope, there's obviously no strong public interest in determining which of the two inventors gets it and indeed in that kind of situation, it's in the public interest we think to settle these disputes before the Patent Office. But under the practice before the Patent Office, when an interference is declared, the junior applicant for the patent not only may attempt to show that the senior claimant, the one who has filed first has in fact -- in fact is not the inventor, he may attempt to attack the patent of the senior claimant. He can contend that the patent is too broad or he can contend that it's invalid. Now, the significance of the latter is two-fold. From his point of view, this means, if he doesn't think he can prove he is the inventor, if the patent is invalid he at least can prevent the man who has priority of invention in keeping him from patenting the invention. But from the point of view of the public interest, this is far more important because this is one of the few checks that exist under our Patent Office procedure against the issuance of unduly broad or invalid patent. Most Patent Office procedures are ex parte. The Patent Offices that are well-known, the patent examiners unfortunately are over worked. They do the best job they can, but I think the Court knows that the very large number of patents that after preliminary inquiry had been issued by the Patent Office have been subsequently invalidated by the courts. Now, in this case, we think that when parties to a proceeding before the Patent Office, at a time when the interference hasn't even been declared, get together and agree that they will facilitate and help each other in obtaining the broadest possible claims. And I'm not saying parenthetically there is a question in this case as to the District Court held that the only provision which applies in the United States is the second sentence of the first paragraph which I think my adversary is going to stress and the first one doesn't but we don't think this makes any difference because we think that an agreement to facilitate the allowance of the broadest possible claims necessarily also covers the obligation in the first sentence of not restricting the claims of the others. And I will -- I will just also mention in passing because he may stress this that they made a claim that we have waived any attack on the first -- second sentence of the first paragraph. We deal with that in our brief, but let me come back to the thing that we think is the basic vice in this situation. When you have an agreement by which two applicants before the Patent Office, two people whose claims are pending and where the interference hasn't even been declared and they agree with each other that each will facilitate the allowance of the broadest possible claims to each other, this necessarily can lead to the issuance of broad claims that are illegal and I think I can demonstrate this graphic dramatically by the very facts in this case. Let met tell the Court what happened; at the time that this agreement was entered into, the Patent Office had notified both of the parties that the claim of each of them was ready for interference and suggested a particular wording of a claim, this is the Patent Office practice for interference between them. Each of them had accepted the claim and this is obviously the claim they had reference to when they stated -- recited in the agreement that interference proceedings were about to open. After the agreement was entered into, two weeks afterwards, the Patent Office itself advised these people that the claim that the Patent Office had proposed was too broad. It was too broad because the Patent Office had discovered an earlier patent which in fact covered this invention. An earlier patent, it had not previously discovered that it had been issued in 1912 and what the Patent Office did and said in view this earlier patent, we now suggest a much narrow -- a narrower claim which the parties then accepted. Now, if the Patent Office had not had the good fortune to turn up this 1912 patent in its search, the inevitable effect of this agreement is that this invalid patent would presumably have issued. This Court stated in the Precision Instrument case that applicants before the Patent Office have an uncompromising duty to report to it all facts concerning possible fraud or inequitableness underlying the applications and issues. And we think it's a violation of that uncompromising duty when two applicants for a patent whose claims have not even put in interference, agree at the outset that they will do everything to facilitate the allowance of the broadest possible claim.
Speaker: Was there evidence that there was suppression of some kind here as a result of this agreement?
Daniel M. Friedman: No, no. Mr. Justice, there was no evidence of any suppression in this case, but we think that the --
Speaker: The agreement has a tendency to further that --
Daniel M. Friedman: That is correct.
Speaker: That's your point.
Daniel M. Friedman: That's why we're attacking the agreement because we think this is the inevitable and the likely consequence of such.
Arthur J. Goldberg: [Inaudible]
Daniel M. Friedman: Yes, and we think all that that means, Mr. Justice is that since it referred to more than one country that in doing this, they would observe the requirements of the particular country's Patent Office involved. I'd like to reserve the balance of my time.
Earl Warren: You may. Mr. Pettit.
Arthur E. Pettit: Mr. Chief Justice Warren, and may it please the Court. I'm not sure whether there is a clear concept of what this case is all about. I like to stress at the very beginning that it involves fundamentally one thing and one thing only and that is the acquisition and enforcement by Singer, Gegauf patent number one, a patent which covered machine which it invented, developed, manufactured and sold and there is no other element that's involved here now. This case started out and the Government started it. It alleged that there were of course agreements and understandings outside of the written agreements. It alleged that these agreements and understandings were made to Vigorelli and Gegauf. It alleged that the agreements were to have transferred from Gegauf, two Gegauf patents to be used in combination with three Singer patents against the Japanese and the Japanese only and there was a complete pooling charge. Now the Government has lost on every single issue. The trial court found and after, you can see a very extensive examination, that there was no agreement or conspiracy of any kind, no agreement or understanding made in connection with anyone of the three acquaintances. It was not as counsel stated that the trial court found that merely in connection with the assignment agreement. There was no outside agreement. It found in respect to the Vigorelli license agreement, in respect to the Gegauf license agreement and in respect to the Gegauf assignment agreement. In each instance separately, it found that there was no understanding or agreement of any kind between Gegauf and Singer as to the use of the patent, whether it would be licensed, whether it would be enforced or anything whatever to do with Singer's use of the patent.
Speaker: How long does this case take the charge Mr. Pettit?
Arthur E. Pettit: 22 days it occupied; there are over 900 exhibits. The counsel before the trial court occupied at least 19 sessions and I think more in pre -- pre-trial conferences. It sat in on the drawing of stipulation which occupies a very substantial number of pages in this record. The counsel marked at the directions of the court, every single letter and submitted it. They crossed mark them. Government counsel marked in red, defense counsel marked in blue, every single line that was considered significant by either party in any document. Those documents were submitted to the trial court. They were argued for nine days and I can assure you there's no significance that any counsel connected with the case thought there was in any of those documents that was not called to the attention of the trial court. There's been probably as exhaustive and as careful an analysis of all the documents, as it's possible for a trial court to give to a case. It had also before it the testimony of the chief and principal negotiator who attended every conference who is not Mr. Waterman as stated by Mr. Friedman but was Mr. Stanford, a counsel and a patent counsel. He attended every single conference. He was on the stand for a large number of days and was cross -- cross-examined handling by the Government. On the basis of all these testimony and of all of this experience, the trial court found not only that there was no agreement and no conspiracy. It used the word that it had no significance except respect to the depth of its feeling. Having found in several occasions before that there was no agreement of any kind and no understanding it came to a point later where the Government is trying to relate a provision in the agreement to an underlying conspiracy to pool patents. The trial court said, “This is probably the fourth time it came to it, we have before found that there absolutely was no agreement or conspiracy.” Now, obviously, it absolutely doesn't add much except as a matter of feeling because if there was no agreement or no conspiracy, there was none. But when the trial court in this opinion after stating several times, says, “Absolutely, no agreement or no conspiracy”, you know the intensity of his feeling with reference to all of this testimony. I do not deem that it's possible to read the record in this case or read the statement of facts that we prepared without coming to the same conclusion because there just literally is nothing to the Government's case in any respect. Our -- I'm sorry that our brief is so long but after all this phase covered a period of four years. It involved not only the three contracts between Singer and Gegauf, it involved a cross-license agreement with Vigorelli, with Mr. Smith, license agreement with Sears and many other agreements. All of these had to be gone into in addition to many other considerations for the purpose of determining the attitude, purpose, intent of these parties in dealing throughout. Now, the Government would have you believe that the trial court was under the impression that if it found that there was no agreement, that that settled the case. Then we'd have another Parke-Davis case where the trial court was under the impression that if there was not an agreement, it settled it, and there could be no conspiracy and no combination without it. The trial court to the contrary, went into every single argument that the Government put up, trying to show that even outside of the agreement, there were a -- or was a what you would call a combination or a conspiracy between these two parties to get to a particular result. The court spent pages on it and you can find it and I can cite in the reference to 1693 and 1694, 1705 to 1740, are literally pages of the Court's opinion dealing with various facts that the Government raised in trying to show that there was a concerted action, unity of purpose, common design. There was hardly any combination of words that could be used, that the Government didn't use in this case because it soon found that it was hopeless to find any agreement, whatever, between Singer and Gegauf. The trial court made the very express finding that there was no common purpose and no unity of purpose here, whatever. And it found that the sole purpose and Singer's sole interest in acquiring this patent was to protect its own product. Now, if I may just add one word so we could bear with it and I want to point out that nothing is involved in -- with respect to the restraint of any trade whatever other than a sewing machine that infringes Gegauf patent number one. There's no -- there's no argument. There's need no allegation now. There's no contention, whatever, that the purpose was to exclude other machines. The phrase has been used. They use it through their brief frequently, Japanese competitors, but when it's analyzed, it is always in reference to Japanese competitors selling infringed sewing machines.


Earl Warren: Doris Daniel and Rosaline Kyles, Petitioners, versus Euell Paul Jr., etcetera. Mr. Gallman, you may continue with your argument.
James W. Gallman: Mr. Chief Justice and may it please the Court. Yesterday, we were discussing the Nixon Farm which under the calls was improved and became a more of a place of business as we've observed from the record. The -- with the advent of the Civil Rights Act of 1964, the Paul chose to operate their establishment under the guise of the private club as this evidence from the record here. This was rejected out of hand by the District Court and does not even a serious question in the District Court. It does have one surprising effect of the case though that I think is followed it all the way through. If we look at the record in the commencement of the case, we see that it counsel for the plaintiff or for Mrs. Daniel and Mrs. Kyles intended the trial based upon the private club exception of the 1964 Act. Now, this fell flat a gain in point in this regard, and that after, I think the record reflects at adequate proof was not brought in concerning the connection of this business with the commerce so that the Act apply. Now, the District Court in view that number one, that there was no coverage under the Act because this is not a place of entertainment. It considered it a place of participation or exercise or such as that and not one where the one is entertained. And it assumed that perhaps some of the items at the place of business had moved in interstate commerce.
Potter Stewart: Mr. Gallman, do I understand that to be your position as amicus representing the position --
James W. Gallman: Yes.
Potter Stewart: -- of respondent in this case that the private club exemption of the 1964 Act does not apply here.
James W. Gallman: That's correct.
Potter Stewart: You -- that's how was a finding of the District Court affirmed by the Court of Appeals and made no confession at all that that planning is erroneous.
James W. Gallman: That's correct.
Potter Stewart: So, that is out of this case.
James W. Gallman: I believe so. There was further the question of what connection the so-called lunch stand, snack bar or what have you here had this -- with the establishment. That is would it be come under 201 (b) (4) or 201 (b) (2) restaurant and cafeteria and lunch counters sold about so, principally it gave in selling food for consumption on the premises. The lower court felt that this business of swimming and sun bathing and so on, and that the food that was strictly incidental and not a major enterprise of the business. It also rejected the idea that there were two establishments here and so as to say that under subsection 4 that there was no covered establishment that would rankly entire establishment for that the cover of the Act. When this case got to the Court of Appeals, the reasoning was the same. There, the Court of Appeals looked at the two requirements or coverage under the '64 Act, namely the commerce connection or the offer to serve interstate travelers. Now again, I'd advert to the fact the record below was not developed with respect to the offer to sell/serve interstate travelers. There simply no questioning about it. It is true that it could be inferred from the testimony of Mr. Paul that they would serve any white person without inquiring about their origin. But there is no searching inquiry at all as to whether they would restrict their service to dam sealers of the area, that is would leave the interstate traveler go elsewhere. This really is considering the geography of the matter, a remote and isolated lunch room if that's what we're talking about. It's some 12 miles from the city. It's hard to get to as I explained yesterday hard to find. The Court of Appeals then approached it from the standpoint of what did the record show with respect to commerce, and I know that Court had in mind just as the Assistant Attorney General have here that common sense wise, the business must have some connection with interstate commerce. But are we dealing with the question of whether there is sufficient connection in the area for Congress to legislate? Are we dealing with the question of whether under the provisions of the Act, a substantial part of the food served at the lunch room which it serves as moot in interstate commerce? Now, there were four items mentioned. Hamburgers, hotdogs, softdrinks, and milk. It's argued by petitioners here that three of the four items had interstate arguments. There was no evidence about it. The District Court without any evidentiary support at all said that he suppose that some of the ingredients for the hamburgers, I suppose the flour had interstate origin. The drink I think he laid aside because of the legislative history of the Act indicating that it's the inquiry about the food, not about the drink. He said that there's some of the ingredients obviously came from out of state I'm sure, as a matter of common knowledge, but it's not in the record. I'm satisfied or I feel my common sense tells me that this establishment sold cigarettes, that it sold candy, that it sold some other items, gum, mints, item such as these, but it's not in the record. As a matter of fact, the record indicates the absent. So, I think this is what they get to when we look for coverage under the Act. We find that it was thought of as a case where there would be a serious contest over private or public exemption, and then law and behold, that fell through. And I've that the same experience myself that you think your case true, but did not go ahead and introduce a necessary evidence to show coverage under the Civil Rights Act of 1964.
Potter Stewart: Does the record show what kind of beverages were sold, what were they softdrinks?
James W. Gallman: No.
Potter Stewart: Doesn't show anything?
James W. Gallman: They were softdrinks. I think it reflects that too.
Potter Stewart: Didn't have a liquor license?
James W. Gallman: No. No, there's no liquor --the -- it's indicated that no beer was sold. Of course, Arkansas is a --
Potter Stewart: More or less dry state is.
James W. Gallman: -- package type of state you cannot dispense liquor buy to drink. But this place is always been noted for no alcoholic beverages of any kind. So, the Court of Appeals approach is this. Now, Judge Henny does dissented in the Court of Appeals. He was quite so sure that Judge Mahaphy, the majority judge, was wrong about this lack of evidence concerning movement of the food in commerce. He wanted to look at some Arkansas statutes that permitted or might be use to prevent so-called integration or admissions of Negroes to the so-called place. As saying well, there is an ominous enforcement act in Arkansas that might be use to prevent this sort of thing so we can say that this practice, this discriminatory practice of the falls resulted from state action. So, he but his disagreement only with this conclusion and contended of course all the while that there was sufficient evidence that interstate commerce had furnished the so-called lunch room. Now, the other question I think it deserves comment here is the question of what about this place of entertainment? Basically, this is a participant type amusement park, if we could call it that. I'd rather call it the farm but the record doesn't reflect that. But it doesn't have rights, it doesn't have the things that you had in the Fifth Circuit case of milk, where you have 11 or 12 complicated rights manufactured out of state and brought in without any question. Here, our record concerning the equipment used for boating and boating only that the evidence do is not clear is to where that came from. Now, there is some indication that they have about a dozen boats that called puddle boats. I don't know what they are exactly, except I think of a kind where children get only have some wheels, some pedals, they push and the puddle in the rear of the boat makes it go. Now, I think that's what it is and I'm not sure they have yatch whatever that is. Now, this is a very minor part of the activities as I understand the record. It suggested that these where perhaps purchased out of state. Judge Mahaphy in his opinion said that it was common knowledge, boats was made in Arkansas. There was a reference to an Oklahoma boat company to whom the Paul's paid a royalty. But it is not clear whether if one ends in -- at one point, the question is from whom did you purchase the boats or did you purchase a yatch? They say the same company, meaning the same company to whom the pay the royalties. But there's not testimony about rather boats was made, where the sale was made, where the boat came from, did it come from Oklahoma and Arkansas, there's nothing about it. Now, assume that the briefs that this indicate some interstate contact with reference to that and for that reason, we ought to say that the entertainment here, these boats, move in commerce, and that therefore, this activity ought to be a covered under subsubsection 4 of the Act of two or one of the Act. We suggest that it's not anywhere near like the Miller case that Judge Mahaphy in his opinion was correct that the evidence concerning movement with reference to amusement and entertainment movement in interstate commerce is not there. Now, the Court of Appeals did not have authority and has not have a possibility of drilling on the applicability of the Title 42 Section 1981 and 1982.
Thurgood Marshall: What about the jukeboxes Mr. Gallman?
James W. Gallman: A -- Again, Mr. Paul was asked where was the jukebox made and he said, “I don't know.” I think the testimony into that.
Thurgood Marshall: But when you assume that it's a possibility that one of the records in that jukebox came in interstate commerce?
James W. Gallman: In my common knowledge, I know that everyone of them perhaps came through interstate commerce and I know the jukeboxes made elsewhere. I don't have any doubt about it. I think that's true. I think --
Hugo L. Black: What where they used for it?
James W. Gallman: The jukebox to play and listen to I suppose.
Hugo L. Black: Where there any dancing then?
James W. Gallman: Yes, sir. On a Friday night perhaps a Saturday night between the last day of May and perhaps Labor Day or one of those two nights, the establishment would have a dance. The testimony is that a local band would play for that dance and we would not have entertainers who has move from another state to Arkansas to present the performers. These were so-called amateurs or local musicians. Of course, if you want to know what I know about, that would say that the jukebox played in intermission when the band quit. But that's not in the record.
Thurgood Marshall: Where was the dance held?
James W. Gallman: I believe they have a pavilion Your Honor that -- I would judge what it would put in, something of that sort.
Thurgood Marshall: And you said yesterday, the only building was the lunch counter or I didn't I understand you correctly?
James W. Gallman: No. I didn't mean to say that. There is a dressing room next to it there's a lunch counter. As I recall when the Paul's came in, they put some more drafts down the edge of this little lake in the shallow water, and down there, erected a floor, an outdoor type cover where this dancing took place.
Thurgood Marshall: For the purpose of entertainment --
James W. Gallman: Well --
Thurgood Marshall: -- admittedly so.
James W. Gallman: -- I think the people danced. I think the record shows that two nights a week events. I think the contention was that it wasn't for watching others dance, it was for people to dance now. I would --
Byron R. White: So, you do raise a question of the outset about whether this is a place of entertainment at all --
James W. Gallman: Yes.
Byron R. White: -- by the Act.
James W. Gallman: The District Court did and I think the Court of Appeals said perhaps this but still we don't have any interstate connection as where you know --
Byron R. White: Yes. But what's your position?
James W. Gallman: What is mine? I have to agree with the Court of Appeals that the evidence --
Byron R. White: It wasn't place of entertainment or you or do you --
James W. Gallman: Well, I think we can assemble some place of entertainment and then, look for the necessary connection as acquired by 201 (b) (4) or (3), excuse me. Now, it's --
Hugo L. Black: Does he knew --
James W. Gallman: -- well, I might refer to this, the reference to excise taxes for example where the cabaret tax applied to a 20% tax, we used to have.
Hugo L. Black: But there no evidence whatever as to the -- what music was furnished for the dancing?
James W. Gallman: They referred to the names of the band Your Honor as the Jinx, Pacers, names of this sort. I took it from those names that it would be rock and roll music.
Hugo L. Black: And no evidence about the jukeboxes playing at all?
James W. Gallman: No, sir. To return to the question of Mr. Justice White, the cabaret tax was applied and it speaks of entertainment was applied to places where a jukebox furnished the music for dancing. And there was no performance as such and those cases do exist that I know of. As I've said, the question of the application of the 1981 was not before the Court of Appeals. It appears in the language brought enough to prohibit all discriminatory contract, all discriminatory action concerning contracts. The Government I think raises some very searching questions in its brief concerning the impediments that might exist to holding that 1981 or Section 1 of the 1866 Act, might it itself be sufficient here. I noticed that they caution the Court that perhaps this should be characterized here as a sort of public contract and that the 1866 Act if it has liability ought to be looked at as referring to so-called public title contract.
Potter Stewart: Did I -- excuse me.
Thurgood Marshall: Direct the attention to page 29, Mr. Paul said there were two jukeboxes and I mean persons who put their nickels and dimes at any time during the day to get music and dance or whatever they want to do and answer, “Yes”, right? That was Mr. Paul himself.
James W. Gallman: Sir.
Thurgood Marshall: Mr. Paul himself said there were two jukeboxes and they were constantly going.
James W. Gallman: Oh, yes Your Honor. I knew that the Court understand to say there were not jukeboxes there.
Thurgood Marshall: No. But this because I understand this, it says that. One, there were two jukeboxes. Two, they were used all during the day and night and they were used for the purpose of people dancing or whatever else they wanted to do, which I would submit could be entertainment, couldn't it?
James W. Gallman: Oh, yes. I believe it, it could be it.
Earl Warren: And they did have a dance permit the day for that?
James W. Gallman: This without the country you wouldn't need a permit for the dancing.
Earl Warren: I -- I say -- I thought you said they have some kind of a permit to as I mistaken in that?
James W. Gallman: No, Your Honor. I didn't mean to --
Earl Warren: I guess, I mistaken.
James W. Gallman: And I know they had no permit. They got no license. I think they did have a periodic inspection by the health department that I point yesterday this post the problem because sometimes, their water didn't -- water supply wasn't sufficient to keep the pool there clean, it couldn't be chlorinated. So, there is one point I must raise and I may have been missed in this Your Honors. The -- I had assumed when I was invited to appear here that it was perfectly evident that the reason because where not in the case was that they have disposed of this property. I found that though arriving here and checking the opposing counsel that they were under the apprehension that the Paul's in fact still own the property but it is my information that they do not. That they dispose of it September 26, 1968 through a sale, that they reserve 2.75 acres namely the tree home sites own this property for themselves but otherwise disposed of the property. Now, I give that to you because I think you ought to know.
Hugo L. Black: You got this -- as far as I could -- I can't speak for my --
Potter Stewart: I can't speak for my colleagues, but so far as I'm concern, this is news to me. It's just suggestion that this moots the case or?
James W. Gallman: Well, it suggests from either we might have some effect on that area. I do not know what the plans or the new orders are, if they intend operate it perfectly. I can see utility in there in the city.
Potter Stewart: You know who the purchaser was?
James W. Gallman: Yes, it's a group of 10 individuals. They -- I'm told that they have a connection with a church. I believe they form a private corporation to acquire this. They call it the Lake Nixon Incorporated and that's as much as I know.
Earl Warren: Mr. Gallman, I -- my recollection of it is that we were either told or at least it was our understanding that Mr. Paul said that he just didn't want to pursue it any farther and if the court ruled against him, why he just closed it up.
James W. Gallman: Yes.
Earl Warren: I think that's what you're told from -- when we took the case and that's -- that's why we asked you to serve. And incidentally Mr. Gallman, I want to say that the Court appreciates your -- in willing to take this assignment from us because otherwise, we would have just one side of the case for it.
James W. Gallman: Thank you Your Honor, it's a pleasure to be --
Earl Warren: -- also we deeply appreciated. Mr. Harper?
Conrad K. Harper: Mr. Chief Justice and may it please Court. With reference to Mr. Gallman's last point concerning the disposition of the Lake Nixon property. Rumor came to our attention sometime in December after this Court had granted certiorari that the property had been disposed of. Where upon I call the former attorney for the Paul, Mr. Robinson, I believe his name was. He indicated he was not then their attorney, he's understanding was that they did not wish to pursue this case. However, he recommended and since he didn't know anything more, I might talk with Mrs. Paul and Mr. Paul. So, I took this extraordinary step of calling Mrs. Paul directly and asked her whether she had in fact disposed of the property. Her answer was “no”, that the thought it was under contract but the deal had not been consummated. And that is as much of I know and that was of as of late December, 1968. With reference to the other principal question, I'd like address myself to now, that is the food that was served at Lake Nixon. I think it's efficient for this Court if it wishes to --
Earl Warren: Would you speak a little a louder --
Conrad K. Harper: I'm sorry.
Earl Warren: Mr. --
Conrad K. Harper: I think it is sufficient for this Court if it wishes to undertake to look at this case the way it look to the case as Hamm versus Rock Hill. There, there was no evidence as to the origin of the food involved and yet, this Court in a divided opinion or a divided court undertook to say that the facilities in Hamm as well as a companion case where in fact opened to the public. They were located neither or five and dime in South Carolina or department store in Arkansas. And that was sufficient that court felt to demonstrate that in the ordinary course interstate connections could be shown as to the origin of the food. We think that situation is particularly at here because the District Court seating at Little Rock very close to Lake Nixon undertook to say that as far as he was concerned, there was sufficient -- a connection with interstate commerce to demonstrate that some of the food at least had originated outside the state. Therefore, our position of course is the case is not moot and the complaint I might mention inclusion, those run against successors in addition to the Paul's, who believe that might get situation here. I have no further comments unless the Court has some questions.
Hugo L. Black: Did the district judges conclusion that it was -- did involve interstate commerce to allow evidence under to rely on common knowledge?
Conrad K. Harper: With reference to the food, there was no evidence, what the court found was that some of the ingredients in the bread had originated outside of the state as far as he was concern, and that ingredients in the softdrinks are similarly originated outside of the state. But there was no testimony with reference --
Hugo L. Black: Now, which ingredients?
Conrad K. Harper: He did not specify which ingredients. Although, I might indicate that on file with the court are some 20 photographs of Lake Nixon. Some of which show Coca-Cola signs and it may have been had that in mind when he said some of the ingredients of softdrinks originate outside of Arkansas. Thank you.
Earl Warren: Very well.