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Vol. 9, No. 9
NEWS EDITION
Important Oil-Cracking Patent Decision by Supreme Court ItAY ΒBLMOI^ÏT WHITMAN, Patent Attorney, 230 Park Ave., New York, Ν. Υ. A most important decision h a s been handed down by t b e United States Supreme Court in connection 'with the famous oil-cracking process, which has been, largely responsible for the low price of gasoline and t h e resultarrt wide use o f the automobile today. This decision w a s an appeal from tine Dis-fcrict Court of t h e United States for the Northern District of Illinois, rendered by Mr. Justice Brandeis, who delivered "the opinion of t h e court on April 13, 1931, in t h e case of Stanclard O i l Co. of Indiana et al., appellants, vs. the United States. The original suit was brought b y t h e United States i n 1924 in Illinois to enjoin further violation of fthe Sherman Anti-Trust Act of 1890, the violation charged being an illegal combination to create a monopoly a n d t o res-train interstate commerce b y controlling that part of the supply of gasoliue "which is produced by the process of cracking. The Uniifced »St_ates alleged that control was being exerted b y means o f seveo.ty-nine contracts concerning patents relating t o the crackzing art, and the parties to these contracts were named a s defendants. Four o f these parties owned patents covering their resspccti-ve cracking proc esses, and they are called tfae primary defcrxdarits, and com prised the Standard Oil Co. of Indiana*, the Standard Oil Co. of N e w Jersey, t h e Texas Co., a n d a lâcensinig concern named Gasoline Products Co. The secondary^ defendants comprised the remaining forty-six defendan-ts w h o manufacture cracked gasoline under licenses from one or* more* of t h e primary defendants. Every effort was made to Hasten the termination of t h i s case, the Attorney General even filing expediting certificates i n 1925, but i t was not until January, 1930, that time District Court entered its final decree. T h e hearings before t h e master extended over approximately three years, the evidence filling 43O0 pag«es of tine printed record. The master, in his report of 240 pages» discussed the seventythree patents and the seventy-nine pateait licemse interests, and found that the primary defendants had mot pooled their patents relating to cracking processes; u\a.t t h e y had not monopolized or attempted to monopolize a n y part of the trade o r commerce in gasoline; and that none o»f the defeotdants had entered into any combination i n restraint of trade. He, -therefore, recommended that the bill be dismissed f o r waant of e q u i t y . T h e Government filed two hundred and seventy—three exceptions to h i s opinion, and the District Couxt granted some o>f the relief asked. The primary defendants and some of thse secondary defendants then appealed to t h e United States Supreme Court, an injunction being stayed meanwhile. T h e violations of the Sherman act htavc since been largely eliminated, and a l l that remains i s the complaint against t h e primary defendants on t h e making and e^ffect o f three contracts entered into by them. A statement as t o this oil-cracking pro-cess n a y be of interest. For about hall a century before 1910, gasoline had been manufactured from crude oil exclusively by ctistilla'tion and condensation at atmospheric pressure. WTien t h e demand for gasoline grew rapidly with t h e widespread u s e of tlhe automobile, methods for increasing the yield o f the gasoline firom t h e available crude oil were sought. I t had long been known that, from a given quantity of crude, additional oils of hugh volatility could b e produced by cracking; that i s , b y appl:ying hteat and pressure to t h e residuum after ordinary distilla tioxa. B u t a commercially profitable cracking method and avpparattus f o r manufacturing additional gasoline had n o t y e t been developed. T h e first such process was perfected by the I n d i a o a company in 1913; and for more than seven years this was the only orae practiced in America. During this period, the Indiana company not o n l y manufactured cracked gasoline o n a large scale, out aUso had licensed fifteen independent concerns to use rts process a n d ha.d collected, prior to 1921, royalties aggregating over $1S,000,000. Meanwhile, since the phenomenon of cracking was n o t controlled b y a n y fundamental patent, otlher concerns had been working independently t o develop comm«ercial iprocesses o f their own. Among these the most prorninenit were the three other primary defendants above mentioned; each secured numerous patents covering i t s particular cracking iprocess. About 1920 all four companies g o t inito corusiderahle conflict concerning t h e validity, scope, and ownearship o f issued patents. One infringement suit w a s begun; cross motices of infringement, antecedent t o other suits, were given; and interferences were declared on pending applications in thte Patient Office. T h e primary defendants assert that it was ithesc difficulties which led t o their executing the three principal agreements which t h e United States attacks, a n d tfaat their s o l e object was t o avoid litigation and losses incident to conflicting parents. T h e first contract was i n 1921 b e t w e e n the Xndiana company and t h e Texas company; the s e c o n d in 1S923, b e t w e e n the Texas company and Gasoline Products C o . ; amd t h e third, between
the Indiana company, the Texas company, and the N e w Jersey company, was also entered into i n 1923. All three agreements were about the same. Each party was released from liability for past infringement of patents of the other; each acquired a license to use the patents in t h e future; and each had. the right t o extend these privileges t o others on a royalty basis, the royalties t o be charged being definitely stated and to b e divided in a fixed proportion among all the primary defendan-ts. The court held, in answer to certain defenses raised b y the defendants» that the limited monopolies granted to patent owners do n o t exempt them from t h e prohibitions of the Sherman act, and that t h e necessary effect of patent interchange agreements and t h e operations under them must be carefully examined in order t o determine whether violations of the act result. T h e Government contended, among other things, that: the inclusion of provisions for t h e division of royalties in these agreements constituted an unlawful combination under t b e Sherman act because it evidenced an intent to obtain a monopoly; but t h e court held this contention t o be unsound a n d stated that such provisions i n themselves are not conclusive evidence of illegality, and that such arrangements are often m a d e by way of settlement rather than litigation. The Government also tried to show that the agreements to maintain royalties violated the Sherman law because the fees charged are onerous, but t h e court stated that this argument ignores the privileges incident to the ownership of patents and that, unless the industry is dominated, or interstate commerce directly restrained, t h e Sherman act does not require crosslicensing patentees to license at reasonable rates others engaged in interstate commerce. Finally, t h e Government in its main contention stated t h a t , aside from the above, the three contracts were still obnoxious to the Sherman a c t because specific clauses enable the primary defendants to maintain existing royalties and thereby t o restrain interstate commerce. Thus, one of the contracts provided that patents issued to both parties shall be licensed under a fixed royalty, equal to t h e amount charged by the original patent owners when they were alone in the field. T b e court admitted that t h e power to fix and maintain royalties through the pooling of patents was tantamount t o the power to fix prices, and that, where domination exists, such an arrangement i s beyond the privileges conferred by the patents and constitutes a violation of the Sherman act. For the individual monopolies granted by the patent, statutes cannot be unitedly exercised t o restrain competition. B u t the court held that t h e a c t c a n be s o violated only when such pooling is used to effect a monopoly» or to fix prices, o r to impose otherwise an unreasonable restraint upon interstate commerce. But the court held, after carefully reviewing all of the evidence, that n o monopoly or restriction of competition resulted through the execution of these agreements. T h e court showed that one of the primary defendants, t h e Indiana company, alone ovsmed all the cracking plants in the United States up to 1920; and "that i n 1924 and 1925, when these cross licenses were in effect, the four primary defendants owned or licensed altogether o n l y 5 5 per cent of t h e total cracking capacity and the remainder was distributed a m o n g twenty-one independently owned cracking processes. Also t h e court showed that there was no decrease in competition apparent after the agreements were made; also, only about 26 per cent of the total gasoline production was cracked gasoline during the years in question. It was further shown that t h e defendants were in active competition among themselves and with other refiners, proving against the lack of a monopoly o r any restraint of interstate commerce. The Supreme Court further showed wherein the District Court erred i n reversing the decision of the lower court, a n d finally reversed its decision in this important case and held largely for the defendants as against the Government's contention that the Sherman a c t was being violated b y these agreements.
Dissolution of Sugar Institute Asked The Department of Justice has filed a petition under the Sherman Anti-Trust A c t in t h e U. S. District Court, Southern District, asking dissolution o f the Sugar Institute, Inc., a n d a permanent injunction against fifty corporations, firms, and individuals. The petition charges that during the past tfaree years the defendants have maintained a comprehensive p l a n designed to fix oppressive a n d uniform prices of refined c a n e sugar, and comes after two years of investigations conducted b y t h e Federal Trade Commission and t h e Department of Justice. Tfae defendants are cane-sugar producers and produce 8 5 per cent of t h e sugar consumed in the United States. T h e Sugar Institute w a s organized in 1927.
May 10, 1931
INDUSTRIAL
AND ENGINEERING
Reproductions of Prints of Chemical Interest Available For almost a year The Percolator, the official organ of The Chemists' Club, N e w York, h a s been featuring reproductions of paintings, etchings, or engravings of alchemical or historical chemical interest o n its front covers. T h e originals, thus repro duced, are scattered through tlie famous a r t galleries of Europe, although a number of the famous paintings and some engraved reproductions of them are available in this country. T h e reproductions have been collected here and abroad after much effort on the part of the editor of The Percolator. In fact, it has become quite a hobby of his t o secure rare and interesting s u b j e c t s , and i n this he has had hearty c o o p e r a t i o n from many friends. Reproductions, s u i t a b l e for framing, have been avail able at cost t o members of T h e C h e m i s t s ' Club for some time past, but because many others have expressed an active interest in them, it has now been decided to sup ply them on the same basis to any who wish to o w n them. Photographic prints of these subjects, 8 X 10 inches, are supplied at $2.50 each and enlargements, 16 X 2 0 inches, a t $5.00 each. Those wishing to subscribe for t h e entire series (including those already published) may do so and pay S2.00 for e a c h p r i n t . No item of profit is induded i n these prices ; hence any wishing to secure t h e s e i n t e r e s t i n g prints must send their re mittances with the order to The Editor, Tlie Percolator, 52 East Forty-first St., N e w York, Ν. Υ. T h e series now includes the following subjects: 1—-Reproduction o f the Me d i e v a l Pharmacy in the C a s t l e of Saint Angelo, Rome. 2—The Alchemist, b y D a v i d Teniers, the Younger. 3—The Laboratory, b y W. Huat, for a long time erroneously s u p p o s e d to r e p r e s e n t Michael Faraday working, a s a boy, in t h e laboratory of Sir Hum.' phrey Davy. 4—Benjamin Thompson, Count Rumford, by Gainesborough, purchased in 1912 by the late E. C . Converse. 5—The Alchemist in Meditation, b y David Teniers, the Younger, β—The Alchemist, b y David Teniers, the Younger. Entirely different from No. 2. 7—Lavoisier and His Wife, b y Jacques Louis David. Owned by John D . Rockefeller» Jr. 8—Impossible, by Jan Pynas, from an etching made about 1639 by Abraham Jacobsz. 9—The Alchemist, a self portrait of David Teniers, the Younger, painted in 1680.
I t is the intention to continue this series indefinitely, enough material being in hand t o carry the series of t e n pictures a year well into 1933.
Joint Symposium on High-Temperature Chemical Engineering Announced T h e chemical industries themselves, a n d allied industries such as petroleum, ceramics, and metallurgy, have numerous engi neering problems i n the efficient use of metals at high tempera tures. I n many cases t h e engineer knows how he could improve his processes as soon as the metallurgist can give him materials of construction t h a t will stand up under the conditions of tem perature, stress, and corrosion that t h e engineer would like t o impose. A joint symposium, dealing with the needs of these and other industries and w i t h t h e properties of t h e alloys available for such service, will be held at the Hotel Stevens, Chicago, June 23, 1931, by the American Society of Mechanical Engineers and the American Society for Testing Materials. These so
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cieties have a Joint Committee on the Effect of Temperature on the Properties of Metals, which has arranged t h e symposium. T h e needs of the chemical industries will be set forth i n a paper by F. H . Rhodes, professor of industrial chemistry at Cornell; those of the petroleum industry by B . S. Dixon, metal lurgist of the Texas Co. ; those of the ferrous and non-ferrous metallurgical industries b y J. C. Woodson, Westinghouse Electric and Mfg. Co., and C. E . Brown, Electrometallurgical Corp., respectively; and of the ceramic industries b y C. E. Williams, Batteile Memorial Institute. The trend of high-temperature c h e m i c a l e n g i n e e r i n g in England will be described by Doctor Pearson and Doctor Inglis of Imperial Chemical I n d u s t r i e s , in a paper written in collaboration -with Mr. Dickenson a n d M r . Bailey of Vickers. Metal l u r g i s t s , experts in their fields, will describe the prop erties of the various ferrous and non-ferrous alloys avail able for high-temperature service. Although there are nearly 30 papers in the symposium, the individual papers will not be read or abstracted in detail a t the meeting. In stead, there will b e one gen eral summary of the papers on engineering trends and needs a t the first session, and one of the papers on metallurgical properties at the second, after which the subject will be thrown open for a general round-table dis cussion. All t h e papers are being preprinted and will be avail able upon application to C. L. Warwick, Secretary of the A. S. T. M., 1315 Spruce St., Philadelphia, P a . , so that they may be studied be fore the meeting. Since the sessions will be devoted entirely to discus sion, it is e x p e c t e d t h a t many new facts and valu able points of view will be brought out. Attendance a t the meeting and a study of the various papers deal ing with alloys applicable to his needs should p u t the c h e m i c a l engineer who i s confronted with high-temperature problems in a much better position to solve them. The opportunity t o ask questions and exchange views at sessions planned to give time for ample dis cussion will undoubtedly bring out a large attendance of chemists.
Too Much Magic! I n the chemists' laudable effort to popularize chemistry, and science in general, he has stressed the wonderful discoveries and achievements of science to the point where the modern business man has come to believe that the chemist has magical powers b y which he can transform his plant, or discover a new product, o r otherwise make millions for the company overnight. Such radio talks as Floyd Gibbons' "House of Magic" are of very doubtful value to the scientist from certain points of view. While some epoch-making discoveries may be the result of lucky accident, they usually result from patient, painstaking, thorough research, where progress is all too often painfully slow. We Americans» characteristically, like to pose as go-getters and miracle workers, and this is probably a contributing factor in our stressing t h e marvels of science and forgetting to mention t h e mountains o f patience expended to produce the marvels. It is well recognized that a research program to be successful must be backed b y "patient money." If we foolishly persuade the business man t o try us out, b u t fail to let him realize that h e must pay a price in. patience and not look for results overnight, w e will shortly find ourselves in a worse position than had w e failed t o advertise our wares. Too much magic is bound to b e a boomerang t o t h e chemist, which will sour the scientifically inexperienced business m a n on the possibilities of thorough scientific research and per manently damage science. _, _ _ HAROLD S. BOOTH Reprinted from Isolopics, April, 1931
