374 U.S. 174 (1963), 438, United States v. Singer Manufacturing Co.
|Docket Nº:||No. 438|
|Citation:||374 U.S. 174, 83 S.Ct. 1773, 10 L.Ed.2d 823|
|Party Name:||United States v. Singer Manufacturing Co.|
|Case Date:||June 17, 1963|
|Court:||United States Supreme Court|
Argued April 25, 29, 1963
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF NEW YORK
The United States sued to restrain appellee, the sole American manufacturer of household zigzag sewing machines, from conspiring with two of its competitors, an Italian manufacturer and a Swiss manufacturer, to restrain interstate and foreign trade in the importation, sale and distribution of such machines in this country. The evidence showed a course of dealings between these three manufacturers, including the cross-licensing of their patents on a nonexclusive, world-wide and royalty-free basis and ultimately the sale and assignment to appellee of an American patent owned by the Swiss manufacturer, in order that it could be enforced more effectively in the United States against Japanese manufacturers of such machines, who were underpricing appellee and the Italian and Swiss manufacturers. The District Court dismissed the complaint.
Held: on this record, there was a conspiracy to exclude Japanese competitors, in violation of § 1 of the Sherman Act, and the judgment is reversed. Pp. 175-197.
(a) In concluding that no conspiracy was established on this record, the District Court applied the wrong standard as a matter of law. Pp. 192-193.
(b) The course of dealings disclosed by this record shows that appellee and the Italian and Swiss manufacturers had a common purpose to suppress the competition of Japanese machines in the United States through the use of the patent which appellee obtained from the Swiss manufacturer and under which the Swiss and Italian manufacturers were the sole licensees. Implicit in such a course of dealings was a conspiracy which violated § 1 of the Sherman Act. Pp. 192-196.
205 F.Supp. 394, reversed.
CLARK, J., lead opinion
MR. JUSTICE CLARK delivered the opinion of the Court.
This is a direct appeal from the judgment of the United States District Court for the Southern District of New York,, 205 F.Supp. 394, dismissing a civil antitrust action brought by the United States against the Singer Manufacturing Company to prevent and restrain alleged violations of §§ 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1 and 2. The complaint alleged that Singer combined and conspired with two competitors, Gegauf of Switzerland and Vigorelli of Italy, to restrain and monopolize and that Singer unilaterally attempted to monopolize interstate and foreign trade in the importation, sale and distribution of household zigzag sewing machines. The District Court dismissed after an extended trial, concluding that the charges were without merit. The United States appealed under § 2 of the Expediting Act, 15 U.S.C. § 29, but has abandoned its claim as to attempted monopolization. We noted probable jurisdiction in light of the fact that, unless we did so, the parties would be deprived of any appellate review in the case. 371 U.S. 918. We have examined the record (1,723 pages) in detail, as is necessary in these direct appeals,1 and, upon consideration of it as well as the briefs and argument of counsel, have concluded that there was a conspiracy to exclude Japanese competitors in household zigzag sewing machines, and that the judgment must be reversed.
The details of the facts are long and complicated. The amended and corrected opinion of the District Court includes not only a description of the sewing machines involved and their operation, but also an analysis of the patents covering them. We shall, therefore, not relate the facts in detail, but satisfy ourselves with the overriding ones.
A. As the District Court stated, this action
concerns only the United States trade and commerce arising from the importation into the United States of a particular type of household sewing machine known as the "machine-carried multi-cam zigzag machine." 205 F.Supp. at 396. The zigzag stitch machine produces various ornamental and functional zigzag [83 S.Ct. 1775] stitches, as well as straight ones. The automatic multi-cam zigzag machine, unlike the manually operated zigzag and the replaceable cam machine, each of which requires hand manipulation or insertion, operates in response to the turning of a knob or dial on the exterior of the machine. While the multi-cam machines involved here function in slightly different ways, all are a variant of the same basic principle.
B. Singer is the sole United States manufacturer of household zigzag sewing machines. In addition to the multi-cam variety at issue here, it produces replaceable cam machines, but not the manually operated zigzag. Singer sells these machines in this country through a wholly owned subsidiary, and in various foreign countries through independent distributors. Singer's sales comprised approximately 61.4% of all domestic sales in multi-cam zigzag machines in the United States in 1959. During the same year, some 22.6% were imported from Japan, and about 16% from Europe. In 1958, Singer's percentage was 69.6%, Japanese imports 20.7%, and European imports 9.7%. Further, Singer's 1959 and
1960 domestic sales of multi-cam machines amounted to approximately $46 million per year, in each of which years such sales accounted for about 45% of all its domestic sewing machine sales.
C. It appears that Singer, by April 29, 1953, through its experimental department, had completed a design of a multiple cam zigzag mechanism in what it calls the Singer "401" machine. It is disclosed in Singer's Johnson Patent. In 1953, Singer was also developing its Perla Patent, as used in its "306" replaceable cam machine, and, in 1954, its "319" machine-carried multiple cam machine. In September of 1953, Vigorelli, an Italian corporation, introduced in the United States a sewing machine incorporating a stack of cams with a single follower. Singer concluded that Vigorelli had on file applications covering its machine in the various patent offices in the world, and that the Singer design would infringe. On June 10, 1955, Singer bought for $8,000 a patent disclosing a plurality of cams with a single cam follower from Carl Harris, a Canadian. It was believed that this patent, filed June 9, 1952, might be reissued with claims covering the Singer 401 as well as its 319 machine, and that the reissued patent would dominate the Vigorelli machine a well as a Japanese one introduced into the United States in September, 1954, by Brother International Corporation. Thereafter, Singer concluded that litigation would result between it and Vigorelli unless a cross-licensing agreement could be made, and this was effected on November 17, 1955. The license was nonexclusive, world-wide and royalty free. The trial court found that Singer's only purpose was to effect a cross-licensing, but certain correspondence does cast some shadow upon these negotiations.2 The agreement
also contained provisions by which each of the parties agreed not to bring any infringement action against the other "in any country," or institute against the other any opposition, nullity or invalidation [83 S.Ct. 1776] proceedings in any country. In accordance with this agreement, Singer withdrew its opposition to Vigorelli's patent application in Brazil, and Vigorelli later (1958) abandoned a United States interference to the Johnson application which cleared the way for the Johnson Patent to issue on December 2 of that year.
D. While Singer was negotiating the cross-license agreement with Vigorelli, it learned that Gegauf, a Swiss corporation, had a patent covering a multiple cam mechanism. This placed an additional cloud over Singer's Harris reissue plan, because the Gegauf patent enjoyed an effective priority date in Italy of May 31, 1952. This was nine days earlier than Singer's Harris patent filing date in the United States. In December, 1955, Singer learned that Gegauf and Vigorelli had entered a cross-licensing agreement covering their multiple cam patents similar to the Vigorelli-Singer agreement. In January, 1956, Singer found that Gegauf had pending an application in the United States Patent Office, and assumed that it was based on the same priority date, i.e.,
May 31, 1952. If this was true, Singer could use its Harris reissue patent only to oppose through interference the allowance of broad claims to Gegauf. It therefore made preparation to negotiate with Gegauf, first approaching Vigorelli in order to ascertain how the latter had induced Gegauf to grant him a royalty-free license and drop any claim of infringement. Singer made direct arrangements for a conference with Gegauf for April 12, 1956, and the license agreement was made April 14, 1956.
The setting for this meeting was that Gegauf had a dominant Swiss patent with applications in Germany, Italy, and the United States, all prior to Singer. In addition, Singer's counsel had examined Gegauf's Swiss patent and advised that it was valid. Singer opened conversation with indications of coming litigation on the Harris patent, concealing the Johnson and Perla applications. Gegauf felt secure in his patent claims, but insecure with reference to the inroads the Japanese machines were making on the United States market. It was this "lever" which Singer used to secure the license, pointing out that, without an agreement, Gegauf and Singer might litigate for a protracted period; that they should not be fighting each other, as that would only delay the issue of their respective patents; and, finally, that they should license each other and get their respective patents "so they could be enforced by whoever would own the particular patent." Singer, in the discussions, worked upon these Gegauf fears of Japanese competition "because one of the strong points" of its argument was that an agreement should be made
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