August 10, 1929
INDUSTRIAL
AND ENGINEERING
CHEMISTRY
15
The "Patent Club" Decision
Recent Appointments at Mellon Institute
In t h e beginning, the Standard Oil of Indiana and the Texas Co. owned, respectively, the Burton and the Adams patents for cracking oil under pressure; and they decided to get together, exchanging licenses. Later, they were joined by the Standard Oil of New Jersey and the Gasoline Products Co. This was the " P a t e n t Club." I n 1924, the Government started a suit against these four as "primary defendants" and forty-six others, mostly licensees, as ' 'secondary defendants." The suit was on the theory "that there was an agreement in restraint of trade; that under the cloak of a lot of patents, some of which were invalid and secured b y fraud, there was a conspiracy which would boost the price of gasoline. Some seventy-seven patents were involved in the agreements between the parties defendant. The suit was given t o a master, Mr. Martindale, to hear. After a record, which threatened to deplete the supply of white paper, had been piled u p M r . Martindale rendered a report, December 6, 1926, exoner ating everyone and holding the patents valid en bloc. Martindale held t h e Government not entitled to the injunction asked. A special court in Chicago, by a majority opinion handed down June 11,1929, has reversed Martindale on most points; Judge Evans and Judge Page signing the majority opinion, while Judge Anderson dissented. The allegation made by the Government that the Adams p a t e n t s were obtained by fraud was not sustained by Martindale and t h e court affirmed Martindale on this point. The court held that i t would not disturb Martindale's finding of validity as to the patents involved ; but for the purpose of suit it would con sider them not basic or pioneer, as covering improvements only and t h a t all claims should be construed accordingly. The Government's position was t h a t the ''Patent Club" agree ments tied together a bunch of narrow patents in such a way as to accomplish a restriction of trade, which no one company could have secured. With this contention, in a measure, the court con curred. It held t h a t the "right to enjoy a patent monopoly carries with it certain rights incident thereto. Among them are t h e right to royalties, to grant licenses, as well as the right to handicap competitors by withholding licenses. * * * * * But the owner cannot, merely because of his ownership of a patent, enter into a n agreement with another party, perhaps also the owner of a patent, which has for its object or its inevitable result, the bur dening of commerce or the lessening of competition beyond the limits of the patent monopoly.'' Going into the seventy-nine contracts in existence between the parties defendant, the court took exception to the blanket ac knowledgment of validity of patents which they carried; some of these acknowledgments being of the patents not yet applied for o r issued. I t said:
The following appointments have been trade a t Mellon Insti tute of Industrial Research, Pittsburgh, Pa., during the current calendar year:
The a g r e e m e n t which was made August 26th, 1921, protected patents from a t t a c k which, might be issued as late as J a n u a r y 1st, 1937, and which would n o t expire until 1954. Such agreements cannot be sustained. While a patent is presumptively •valid, m a n y of them, although duly issued, are invalid for various reasons. T h e public, in whose interest the patent laws are enacted (Kendall v. Winsor, 2 1 H o w . 322) is ordinarily protected against the burden of such void patent g r a n t s by the action of competitors of the patentee who, prompted b y mo t i v e s of self preservation, refuse to recognize these void p a t e n t s and thereFore successfully contest them. T h e public is thereby relieved of the b u r d e n which their existence entails. By ttxese clauses of Agreement 31 and similar clauses in t h e other agree m e n t s , t h e parties purchased immunity from attack on their patents. Tying t i i e h a n d s and sealing t h e lips of the only parties who would ordinarily stand s u i t a n d contest the validity of t h e patents, the primary defendants at t e m p t e d to fasten on t h e public burdens which it was not the purpose of the p a t e n t l a w to impose. Such agreements violate the letter and the spirit o f the p a t e n t law and a r e contrary t o public policy. The far-reaching con s e q u e n c e s of such agreements are illustrated by the present case.
The court held t h a t the existence of this system of licenses and cross-licenses constituted a pooling agreement between the holders of t h e patents whereby royalties were fixed and the di vision of proceeds provided for was within the condemnation of t h e Sherman Anti-Trust Law. And it went further, holding that t h e amount of gasoline produced under these agreements was so large a percentage of the total as to affect the market price of gasoline. The court was impressed with the idea that each of the primary defendants had its own process and none used the processes of the others, while an independent producer could hardly engage in making gasoline by cracking without infringing one or other of t h e four. Therefore, the holders of the patents in fixing royalties by agreement are, in effect and for all practical purposes, "enter i n g into an agreement to fix prices," the royalties fb?ed being "a substantial part of the cost of refining." The court therefore, by the majority opinion, held the Govern ment entitled to the injunction for which it asked, dismissing, however, the fraud charges. Judge Anderson, in his minority opinion, stated t h a t he believed the master's report should be approved and a decree entered, dismissing the Government's bill.
SENIOR INDUSTRIAL FELLOWS
O. J. Cox, utensil multiple fellowship. This fellowship was established three years ago for the purpose of studying the ma terials used in the construction of cooking utensils. Before accepting this position Doctor Cox was associate in physiologica.l chemistry at the University of Illinois. Η , . B . Meller, smoke and dust abatement fellowship. T h e Institute's previous in vestigations (1911-14, 1923-24) in tfris field received such wide recognition that the work has been resumed. Mr. Meller was director of this work during 1923-24. INDUSTRIAL FELLOWS
J. D. Alley, steel treatment fellowship. He has recently been engaged in a study of cast-iron products at the Institute. R. F. Beard, carbonated beverage fellowship. Before taking his doc torate he worked for several years in t h e field of cereal chemistry. H. G. Botset, petroleum production multiple fellowship. Before going to the Institute he was engaged in industrial work. Mary I,. Dodds, industrial fellow on the utensil multiple fellow ship. She was previously engaged in work: on surgical supplies at the Institute. A. W. Johnson, rosin oil fellowship. Before accepting this fellowship he was instructor in chemical engineer ing at the University of Pittsburgh. T. H. LeCompte, hemp paper fellowship recently established for the purpose of studying this phase of paper technology. Prior to his appointment to this fellowship he was engaged at the Institute in a study of fur felt-hat manufacture. A. G. Loomis, petroleum production multiple fellowship. Before going t o the Institute he was a member of the staff of the Bureau of Mines, Pittsburgh. R. R. McClure, pigment fellowship. He was previously engaged in industrial work. S. U. McGary, petroleum production multiple fellowship. E. W. Morrison, food container fellowship estab lished for the purpose of studying certain phases of the manufac ture of viscose sausage casings. Before receiving his doctorate he had been engaged in industrial work in bacteriology. Beaure gard Perkins, Jr., petroleum production multiple fellowship. Before going to the Institute he was assistant professor of physics at Louisiana State University. P. F . Siegrist, Portland cement multiple fellowship. Before going to Pittsburgh he was engaged in industrial work. J. T. Stearn, scales multiple fellowship. He was previously in industrial work. L. W . Vollmer, petroleum production multiple fellowship. He was previously engaged at the Institute in work on cast iron technology. V. S. Wrenn, denial multiple fellowship. Before going to the Institute he was a bacteriologist in the Veterans' Bureau at Cincinnati. J. L. Young, heating fellowship. He was previously engaged in research on pyrometry at the Institute. FELLOWSHIP ASSISTANTS
J. R. Adams, petroleum refining; C. N. Bowers, petroleum production; S. M . Cooper, petroleum refining; F . K. Gallagher, petroleum production; Dorothy Hamilton, smoke abatement; S. R. Hathaway, sleep; Eleanor M. Jones, smoke abatement; J. A. Satosky, carbon black; W. F . Speer, edible gelatin; Mary E. Warga, smoke abatement; Helen B . Wigman, utensil; C. G. zur Horst, petroleum production.
Obituary Edward Dwight Kendall On July 29—five months before rxe had rounded out his 99 years—Edward Dwight Kendall died at his home in Elizabeth, N. J . He was born on December 5, 1830, in Florida, Ν. Υ., and was the son of Seth Holbrook and Anna Wemple Kendall. He studied chemistry in the Lawrence Scientific School of Har vard University, graduating with the first class of that school. He was one of the youngest in his class and was lecturing on chemistry at sixteen. H e carried on chemical research in Boston and Brooklyn for a number of years and in that capacity, a s well as examiner of mine prospects, his travels carried him to Mexico, South Africa, and elsewhere. H e was highly regarded by the members of his profession. He wrote articles on chemistry for magazines and textbooks from time to time. He is survived by his widow. The Bureau of Mines in cooperation with the University of California has prepared a diagram for predicting chemical condi tions under which zinc ores can be directly reduced to liquid metal.
