Document: 333 U.S. 364 68 S.Ct. 525 92 L.Ed. 746 UNITED STATESv.UNITED STATES GYPSUM CO. et al. No. 13. Argued Nov. 13, 14, 1947. Decided March 8, 1948. Rehearing Denied April 5, On Appeal from the District Court of United States for Columbia. [Syllabus pages 364-366 intentionally omitted] Mr. Roscoe T. Steffen, New Haven, Conn., appellant. Bruce Bromley, York City, appellees. Justice REED delivered opinion Court. 1 The instituted this suit on August 15, 1940, in Columbia against Gypsum Company, five other corporate defendants, and seven individual as a civil proceeding under Sherman Act. complaint charged that appellees had violated both §§ 2 Act, 15 U.S.C.A. 1, 2, by conspiring to fix prices patented gypsum board unpatented products, standardize its method production purpose eliminating competition, regulate distribution jobbers fixing resale manufacturing distributors. Attorney General filed an expediting certificate December 16, 1941, September 17, 1942, three-judge court was constituted hear case. By amendment government article claims patents owned were invalid void. moved strike or alternative partial judgment dismissing amendment. November 1943, granted appellees' motion ground no standing attack validity antitrust proceeding. case thereupon went trial upon conclusion government's 20, 1944, dismiss Rule 41(b) Federal Rules Civil Procedure, 28 following section 723c, facts law Government shown right relief. June 1946, holding should be granted, findings fact conclusions entered complaint. appealed directly Court, 32 Stat. 823, § 28, probable jurisdiction noted 1946. 67 371. decisions below are reported v. Co., D.C., 53 F.Supp. 889 Id., . Supp. 397. Line Material 287, 550, will value reader considering opinion. I. 3 engaged manufacture including plasterboard, lath, wallboard, plaster. At time alleged conspiracy, sold nearly all first three products which marketed states east Rocky Mountains, substantial portion plaster same area. widely used construction industry. In 1939, sales approximately $42,000,000, $23,000,000 accounted (plasterboard, wallboard), $17,000,000 remainder block tile products. Over 90% building is made with gypsum. 4 found numerous deposits throughout country. taking crushed calcined mineral, adding water, spreading slurry between two paper liners. When hardens, mineral adheres resulting product construction. Plasterboard lath have rough surface wall ceiling base plaster; wallboard has finished does not require addition 5 Since organization 1901, been dominant concern it 55% eastern development purchase acquired most significant covering board, beginning 1926, offered licenses concerns industry, containing provision minimum price at licensee embodying patents. 1929, fixed defendants board. 6 National Certain-teed Products Corp., Celotex Ebsary Newark Plaster Co. Appellee Gloyd owner unincorporated business trading name Texas Cement produced 23% area 11%, four companies correspondingly smaller amounts. Seven active when licensing plan evolved 1929 before companies, defendant industry 1939 fully effect acquiring assets American Company. presidents defendants. tabulation margin lists shows changes taken place.1 7 Prior 1912, manufactured open edge, leaving core exposed sides. received assignee patent issued one Utzman, 1,034,746, process closed side edges, lower liner being folded over core. Closed-edge superior quality open-edge cheaper produce, did break so easily shipment, less subject crumbling edges nailed place. also FOOTNOTE Date Sales 8 Name Firm Individual Companies 9 co. 1901 $10,600,000 Sewell L. Avery,president Niagara 10 1920-36; chairmwn 11 1936 date Oliver M. Knode, president 12 date. 13 1925 4,500,000 Melvin H. Baker, Universal 14 Lime Co.(1935) Atlantic Corp. (1936). 16 1926 2,100,000 Henry J. Hartley, Beaver (1928); 17 (1928). 18 19 1937 750,000 Frederick Tomkins, Kelley Co.(1937) 20 21 1928 670,000 G.Ebsary 22 23 585,000 (1939). 24 1924 230,000 Samuel Gloyd, 25 (unincorporated). number relating making closed-edge 1917, sued competitor claiming infringement Utzman 1921 Circuit Appeals affirmed valid infringed.2 settled infringer, granting license practice Shortly settlement Beaver, suits gave notice contest but accepted provisions, small followed 1927. would settle, American's partially infringed Gypsum's execution payment damages part industry-wide 1929. year, sets agreements signed licensed substantially identical terms maintained rigid control sale virtually complete. 26 Up point there dispute facts. acted concert entering into agreements, knowledge accept similar licenses, result such action, competition eliminated regulating To support allegations, introduced evidence more than 600 documentary exhibits consisting letters memoranda written officers defedndants, examined witnesses, whom sustained, evidence. They cross-examine witnesses. present full picture circumstances surrounding negotiation chiefly relied prove 27 Although network achieved until show formulation began 1925. 12, 1925, Augustus S. Blagden, sent memorandum Avery, Gypsum. adjudged infringer patent, Blagden Avery negotiated settling suit. testified settle price-fixing limitation pay past acknowledge analyzed detail consequences flow possible if decree adjudging appealed. whether upheld denied claim, 'would lose, perhaps irrevocably, opportunity organize stabilize prices.' further pointed out favorable any decision Appeals. agree use best endeavors' induce manufacturers licenses; successful persuading execute could 'maintain lawful avoid necessity deduction plaintiff (United Gypsum) current meet competition.' Under circumstances, able take dominating position least participate through legitimate means licenses.' proof approved Blagden's memorandum, July, he talked representatives urged them Frank Griswold, general manager promoting scheme industrywide licensing. May Griswold wrote letter American, stating added 'This matter discussed independent meeting Chicago next Wednesday afternoon.' concluded statement: 'According plans we figure possibility us steady fourteen fifteen years much industry.' 29 succeed 1926. September, played negotiating settlement. suggested offer shorter term license, unwilling make concession. During 1927 continued their negotiations. corresponded each regard proposal. informed long-term Gypsum, replied apply away. Previously trying secure license. original Beaver. 30 January purchased previously selling licensees. refused agreement compel e rtain-teed posted million dollar bond commenced plants. George Brown, Certain-teed, several conferences they attempted compose differences, without result. dated 1928, Brown expressed confidence sell afraid sign up provisions because his competitors grant secret rebates. answer enforce interest royalties sole trade domination monopoly control. statement 'determination gather monopoly, possible, leads risk everything big rewards can succeed.' file couched those terms. conversation month stated might possibly consider 'all manufacturers, certain ones them' took conference said 'they willing enter particular providing Ebsary, hundred per cent.' 31 No reached signed. A principal non-licensee place October, directors adopted resolution authorizing officials company agreement. Besides National, Niagara, Company hold force provided only during scheduled expire 6, although remaining features remain expiration last included 1937. negotiations various effective view imminent patent. 9, F. Haggerty, Eugene Holland, Universal, asking views continuing after Holland reply follows: 33 'You remember very clear worked available agreed expires practical reason conflict.' 34 stated: 'I am quite sure interested settlements unless everyone involved included.' fact, Holland's interpretation Avery's incorrect; months later unlicensed Kelley. Other suggest prospective licensees accepting time. Haggerty 35 'The question now my mind makers, who outside agreement, feel advantageous go Gypsm It seem me chief discuss point.' 36 held 'for discussing submitted Mountains Co.' minutes quoted chairman saying 'he definitely except contract form Board.' authorized proposed contract. 37 Two days day telegram 38 'Our mail Reeb (of Niagara) ready Stop We working hope everybody set Saturday justify your calling makers Monday you like.' 39 dispatched telegrams licensees, 40 'Mr. Kling American) material declares attend these cannot regret Tuesday futile wish proceed outlined license.' 41 Plaster, since 1927, themselves favorably 'to adjustment' 'it improbable may tomorrow soon thereafter.' day, Kelley, Chicago. present—Certain-teed, Niagara—signed agreements. 42 meeting, explained applications so-called 'bubble board' applications. covered introducing soap foam lighter subsequently mailed 4th acknowledged receipt proposal noncommittal reply, composed own files commented savings doubtful, then added: 43 'They our business, advantage disadvantage future. just anxious get benefits anticipate stabilizing whole uniform away fierce warfares different like recently had. saving too slight cause great worry even never permitted door certainly merit believe has. sufficiently liberal, once.' 44 6th met again thereafter license; July read 45 President bee Industry entire new known 'Bubble System.' contain clauses seventeen years.' 46 passed executive committee negotiate 'provided virtue Corporation shall possessions.' 47 another C. O. vice-president prepared describing what happened meeting. According litigation National's Universal's starch That starch. combine processes; combination technological advantages, already 'so systems give work Wallboard immediately, whereas Bubble interim issuance Patent where There is, course, considerable benefit having continue break.' proposition buy processes. 48 Another expired. summarizing assign latter issue single 'All Independent basis' Attorneys exceptionally strong life Contract difficulty.' action legal stabilization markets.' 49 Soon thereafter, executed become receiver transferred assigned All year. thus free to1 937. 50 contracts became contained preferential royalty consideration transfer patents; every (except Texas) licensor Universal), licensee. Each stipulated percentage plasterboard kind' processes claims. fifty applications, applications; run junior As 1937, ran 1954. distributors consent purchaser. previous contracts, reserved licensor's patents, agreeing greater itself sell. important forth appendix Nothing omitted appears issues considered. 51 1934 1935 supplemental metallized almost perforated These allowing according licensed. 52 marked turning tending raised, standardized type requiring seconds standard methods customer sell, series bulletins defined minute printed thousand record. basing system pricing, required quote determined mill nearest rail freight destination. computed specified billing weights, order prevent variations arising differences weight directed charge exactly switching, cartage, extra delivery charges. Specified sizes quantities prescribed, forbidden employ commission salesmen licensor, regulations prescribed size, quantity markings packing shipments, long credit prohibited, consignment enjoined deliver site. 54 practicable hundreds comprehensive ace pted directions corollary control, seller contracts. directives well illustrated directive computation subtle reduction. excerpts Board License Bulletin 10, 1939.3 55 insure compliance bulletins, established wholly subsidiary 1932 named Survey, Inc. Licensees invited send complaints violations pricing Survey forwarded delinquent thorough check-up deem necessary proper protect rights record discloses instance threatened licensee, many instances requesting explanation violations. Meetings doubtful explained. 'in main' complied bulletin conditions. 56 discontinued dealers, induced observe stabilized 57 undisputed ceased board; competition. realized paid sold, unpatented, tend discourage higher cost eliminate anticipated h elimination 58 obtain allowed 10% discount classes. however, requirement respect jobbers, retained 59 jobbers' 1930, ordered eliminated. still desired, dealers advance prices. some odd lots lot bulletins. points definition 'jobber' 'those do straight cars mixed retail,' uncontradicted testimony 60 stop plaster, cited showing accompanied miscellaneous increase together prevailing usually claim cutting together, operated rebate hence legally large competitors' failure maintain forbidding rebates allowances violation reduced revealed audit licensees' books listed 'Price concessions connection sales.' II. 61 Appellees admit absence whatever protection afforded arrangements described Accordingly, sought amend allege valid. estopped proceeding, constitute review Commissioner Patents statute,4 thought controlled Bell Telephone 167 224, 809, 144, bring equity cancel invalidity. 62 While need decided dispose case, seems inadvisable leave precedent. Hurn Oursler, 289 238, 240, 586, 587, 77 1148. g ree court. employed Act canceling rather charges invalid. If invalid, finding cancellation patents.5 63 repeatedly licensed, public though so. Sola Electric Jefferson 317 173, 172, 87 165; Edward Katzinger Metallic Mfg. 329 394, 416; MacGregor Westinghouse & Manufacturing 402, 421, 424. vindicate enjoining asserted shield patentability exist. Of appeal must considered assumes involved. III. 64 ruled pursuant 41(b), weigh failed establish preponderance evidence, burden proving conspiracy within grant.6 rulings. importance think indicated 65 unable accept, ruling declarations admissible declaration.7 really involves heart treatment vitally affect outcome. Some doubts alone sufficient admission separate greatly strengthens position. adherence others, prima facie conspiracy. references meetings discussion preliminary aware intention wide. themselves, face, showed purpose. binding licensees; measured unpatented; consent; opened accounts licensor; protected clause live arrangements. See Appendix. Furthermore, operation unmistakable di foregoing definite us, Certainly overwhelming operations 66 evidenced illegal admissibility all. Its stemmed logically understanding 272 476,8 192, 71 362. opinions expressed, Court's differs With rule Electric, balance privileges grants prohibitions combinations attempts monopolize Conspiracies distribution, here, beyond privilege. lack good faith exploitation determination adverse defendants.9 association common permissible, event associated plan. faith, reliance supra, Bement Sons Harrow 186 70, 747, 1058, intended bind parties promises made; explicit scope grant, among actions grant. Specifically, raise arbitrary non-competitive levels, market, distributors, acting things charged. conclude regardless motive, bars kind here attempted. violate established, acts members, done prior co-conspirators aid conspiracy.10 ultimate attempt formed. least, advancing ultimately eventuated IV. turn phase case—the correctness findings. accurate bar reversal order. 118 'fails blanket indicates assumed arguendo page 500. examining follow Interstate States, 306 208, 467, 83 610, Masonite 316 265, 1070, 86 1461, quantum conspired achieve ends. cases, party parties. This Circuit, express 'prerequisite unlawful conspiracy.' (306 474). meaning reversed One cases principle group enters inference arises concerted action. strengthened contemporaneous indicate supposedly 69 far Finding based belief justified misapplication errors occurred. can, correct, others refer inferences drawn documents facts, heretofore out, 52(a) Procedure applicable. prescribes tried jury 'shall aside clearly erroneous, due given judge credibility witnesses.' intended, jury, mae applicable practice.11 judicial courts statutory constitutional limitations administrative agencies12 jury,13 reverse 'clearly erroneous.' court, dependent oral candor witnesses judged, appellate conclusive, however.14 erroneous' it, reviewing left firm conviction mistake committed. 70 largely exhibits, called authors documents. Both direct cross-examination counsel phrase questions extremely leading form, import witnesses' conflicting. securing done. Where conflict little weight, particularly crucial involve fact. Despite appraise otherwise erroneous. Findings 54, 56, 62, 63, 64, 65, 66, 89 90, board.15 tenor discontinue conceded 'inferred' expect strongly indicative ample understanding, formal sold. Such arrangement increased 72 75—79, 99—102,16 problem jobbers. Those state, effect, intent discontinuance exercise product, holdings. undertaken furtherance purpose, specific necessary. Nor falls uncontrolled draw class 73 73, 94—97,17 dealt raised prohibiting reduction designed materials. reject addressed convince prices, conjunction immaterial. 74 objected yet determine erroneous unnecessary.18 Perhaps looked isolation proven fullness point. light longer reaching decision. required. Enough think, enable pass come proceedings accord ruling. V. 75 foreshadows conclusion. What above III invalidity tested here. plainly Price offends. fixing, statutes illegal, se. note 21, 550. privilege owners organizing patent-free regulation distribution. Here put uses collide Act's evil consequences. Lead 332 319, 327, 1634, 1637; Hartford-Empire 323 386, 406, 373, 384, 322; Standard Oil (Indiana) 283 163, 170, 174, 424, 425, 926; Sanitary 226 107. undertake utilize agency, Inc., effective. Fashion Originators' Guild Trade Commission, 312 457, 465, 703, 707, 85 949. indicia hereinbefore detaile declarations, convinces 76 affords cloak course conduct voluminous gives patentee, members completely regimented, competitive suppressed, squeezed stabilized. 'rule reason' Jersey 221 502, 619, L.R.A., N.S., 834, Ann.Cas.1912D, 734, efforts non-patent fields. Even abuses fall traditional constituting former restrain commerce follows despite legality familiar doctrine concert.19 deterrent competition; 281, 1079, 1461: power manufactures, sells actual potential competitors, powerful inducement abandon * Active vigorous impaired preference mutual profit *' 78 patentee suppression reasonably normally adapted pecuniary reward patentee's monopoly. 79 presented, clear. dismissal came end presentation appellee's 41(b)20 remanded conformity 80 Reversed remanded. 81 JACKSON 82 FRANKFURTER, concurring. Part II confessedly deals 'need case.' Deliberate dicta, I supposed, deliberately avoided. Especially passing gratuitos ly crowded complicated elaborate decided. join opinion, 84 challenged violative Law find shelter law, howsoever be. short, irrelevant them. recognizing this, needlessly considers may, precedent decision' 'the proceeding.' But, surely, easy enough sterilize court's declaration lead indulge dicta whether, contested Government. bearing undesirability announcing issue, pertinent relies pronouncement hardly problem. resisted purported Royalties owed. Different considerations play seeks supra. remotely intimating decisive. merely suggesting weighing await duty adjudication. undesirable deliberate dicta. refers 1148, case,' (trial court's) precedent.' problem, Oursler opposite pronounced inescapably 88 this: copyrighted brought federal joined non-federal unfair play, merits rejected federally-based infringement? not, dismissed want merits. sustain (which Appeals) necessarily affirming jurisdiction. district found, modified determining ws reach decide Here, 'precedent' essentially irrelevant, therefore error pronouncing 90 Agreement. 91 18th A.D. Illinois corporation, Chicago, Illinois, hereinafter referred Licensor, Newark, Jersey, Licensee, Witnesseth, 2. Licensor hereby unto Licensee indivisible non-exclusive right, using king machines and/or inventions claimed Exhibit attached hereto plants factories plant factory hereafter subsidiary, affiliated company, places, America territories possessions thereof places improvements A, extensions reissues thereof. 93 expressly understood aforesaid condition reserves change existence continue, appliances embody presently issued, second either 1,500,452 1,230,297, commencing Roos Bayer body reserved, serve telegraphic covenants agrees accordance conditions hereof, indirectly, thereof, 94 Said moe determines market. 95 3. disclosures, information assistance herein contained, manufacturing, amount (hereinafter convenience fee royalty) equivalent one-half cent (3 1/2%) kind, hereof February 1,330,413 mentioned (2%) 1,500,452, (1%) 96 5. personal thereunder law; Provided, However, capital stock writing assume obligations bound Licensor. convey therewith, purchaser purchasers assume, writing, hereunder, contract, 97 6. keep records exact bundles, *. 98 7. duly representative, reasonable times hours inspect account preceding paragraph bundles copies therefrom; 99 9. Having manufacu rers wholesale desire them, (being retail) manufacturer distributor, improvements; invoiced manufacturer, jobber distributor regular dealer invoice, distributor. construed inprovements same, 100 12. neglect, fail refuse perform kept performed, party, election, default terminate specify refusal, thirty (30) cure notice, notifying election do, action; 101 15. shall, subsequent person Abel Davis receivers successors manufacture, hereunder extend person. nor p. 370 Bestwall Cir., 270 542. 'In computing freight, wherever mean rates published tariffs, weights above, include stopover, cartage shipment. 'Rebates, allowances, etc.: 'Any ostensibly nevertheless indirectly reduces rebates, unearned unwarranted refunds, credits discounts, reducing price, hiring customers' trucks, advertising purposes, splitting salesmen's compensation commissions customers, overshipment guise dunnage, allowance money price.' 889. Compare Becher Contoure Laboratories, 279 388, 356, 752. 397, 417, 441. concerning co-conspirators,' 451, 'Significance assuming connected,' id., establishes 'that make, vend conditions, lawful. ordinarily, and, (as case) necessarily, carry combined signing performing presumably profitable (since are, product) (i.e., divided monopoly), inferior materials (the licensee's incentive product), unlawful. Additionally, lawfully divide plurality usual discussion, terms, accomplish normal results, doing, And executed. competing terms; suffer disadvantages; dark extended others; moreover, large, i.e., trade, advantages disadvantages owner. will, advantages. 'combination' f fectuate purposes lawful, Further, end, stigmatized law—provided naturally 439, 440. Referring said, 457: 'These items bona fide restraints limits monopoly.' 500, 501. 'But consequent probability tribunal, desirable state declarant co-conspirators. light, proved USG sham color compaint, carried topics V VI proves fides regarded co-conspirators, declarant. so—in significance declarations. Since, demonstrated VI, convict declarants thereof.' Van Riper F.2d 961, 967; Lefco 68; Deacon 124 352, 358; Compagna, 146 524, 530. Doc. 588, 75th Cong., 3d Sess., Notes Procedure; Report Advisory Committee, Supreme April, notes; Preliminary Draft, 1936, notes. Corn Refining Comm., 324 726, 739, 967, 1320; Labor Relations Pennsylvania Greyhound Lines, 303 261, 268, 571, 575, 831, 115 A.L.R. 307. Lawrence McCalmont, How, 426, 453, 326; Reconstruction Finance Bankers Trust 318 515, 519, 680. Street, Equity Practice (1909) 1510, 1514; Furrer Ferris, 145 132, 821, 649; Tilghman Proctor, 125 136, 149, 150, 894, 901, 664; Pace, 320 698, 701, 408, 408; Virginian R. 658, 675, 222, 228, 463. typical: 54. designated patented, de bad faith. gross sales, convenient measuring equal propriety lump sum. impose drive off effect.' '89. improper standardization production, Government.' '75. effectuate restriction specifically, 'eliminate' discount.' '77. instant whereby distributive system. discounts discontinued. 1930 (Exhibit 430) product.' '73. respective p product. raise, knew limited licensees.' '95. larger therefor—a protective provision. device applied end. effect. contrary measure operation, materials.' Objection Binderup Patie Exchange, 263 291, 96, 308; Eastern Retail Lumber Dealers' Ass'n 234 600, 951, 1490, L.R.A.1915A, 788; Reading 324, 357, 98, 243; Swift 196 375, 396, 276, 279, 518. Fed. Serv. (Pike Fischer) 931; Gulbenkian Gulbenkian, 147 177, 158 990. know why unnecessary appellant

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