Standard Oil Co. v. Markham

Decision Date07 November 1945
Citation64 F. Supp. 656
PartiesSTANDARD OIL CO. (NEW JERSEY) et al. v. MARKHAM, Allen Property Custodian.
CourtU.S. District Court — Southern District of New York

John W. Davis and Theodore S. Kenyon, both of New York City (Edward F. Johnson, Ralph M. Carson, Edgar F. Baumgartner, Douglas H. Kenyon, Harold W. Bissell, Davis, Polk, Wardwell, Sunderland & Kiendl, and Kenyon & Kenyon, all of New York City, on the brief), for plaintiffs.

Philip Werner Amram, Sp. Asst., to Atty. Gen. (John F. X. McGohey, U. S. Atty., of New York City, Herbert Wechsler, Asst. Atty. Gen., Harry LeRoy Jones, David R. Mason, and Roy C. Frank, Sp. Assts. to Atty. Gen., William L. Lynch, Asst. U. S. Atty., of New York City, and John Ernest Roe, Gen. Counsel to Alien Property Custodian, of Washington, D. C., on the brief), for defendant.

WYZANSKI, District Judge.


In this action under § 9 (a) of the Trading with the Enemy Act, 50 U.S.C.A. Appendix, § 9 (a), plaintiffs seek to recover from the Alien Property Custodian (1) many hundreds of patents relating principally to the Hydrocarbon Field, herein called Class A S.I.G. patents, (2) many hundreds of patents useful in the Hydrocarbon Field, herein called Class B S.I.G. patents, (3) many Jasco patents for processes relating to Acetylene Arc, Paraffin Oxidation, Oppanol and Buna, (4) 200 shares of S.I.G. stock, (5) 5 shares of Jasco stock and (6) 425 shares of USAC stock.

The 91 findings of fact and 43 conclusions of law, covering 62 typewritten pages, filed herewith, state the details of the case, and this opinion outlines only so much of the controversy as is necessary for an understanding of the principal legal questions discussed hereafter.


Factually this case is divisible into three chronological parts — the first from the beginning of the relations of I.G. and the Jersey group in 1926 until the outbreak on September 1, 1939 of World War II, the second from the outbreak of that war until the entry of the United States December 8, 1941, and the third from December 8, 1941, until the complaint was filed in this action on July 13, 1944.


In the first period there were three series of transactions of importance — those of 1929 involving S.I.G. patents and stock, those of 1930 involving Jasco processes and stock and those of 1938 involving USAC stock.

The 1929 transactions center about the Four-Party Agreement. I.G. and the Jersey group created a new corporation, S.I. G., which issued, at $100 a share, 200 shares of its stock to I.G. and 800 shares to the Jersey group. By its charter S.I.G. was prohibited from engaging in manufacturing operations of any kind, and that prohibition could be altered only by holders of 85% of the stock of S.I.G. I.G. and the Jersey group used S.I.G. for the exploitation outside of Germany of two groups of patents covering inventions by I.G. — the Class A S.I.G. patents which relate principally to the Hydrocarbon Field and the Class B S.I. G. patents which were merely useful in that Hydrocarbon Field. I.G. agreed to give to S.I.G. an assignment of the legal title to the Class A patents, but only licensing rights for the Class B patents. S.I.G. was to exploit both groups of patents by issuing licenses, but not by making the inventions, and S.I.G. was to divide the revenue so that roughly 1/5 went to I.G. and 4/5 to the Jersey group or its assignees. For this transaction involving I.G. inventions the Jersey group gave I.G. as consideration over 35 million dollars in stock and cash.

Pursuant to the Four-Party Agreement, I.G. before World War II assigned to S. I.G. many, but not all, of the Class A patents, and gave to S.I.G. exclusive licensing rights for the Class B patents.

The 1930 transactions center about the Jasco Agreement. I.G. and the Jersey group created a new corporation, Jasco, which issued at $800 a share 5 shares of its stock to I.G. and 5 shares to the Jersey group. I.G. and the Jersey group used Jasco for experimental work upon petroleum, bitumen and natural gas as starting materials. The Jasco agreement committed each side when it originated a process within the Jasco field to negotiate with the other party the specific terms on which Jasco might have the licensing rights — those terms were to cover royalty rights, questions of control and like problems.

Before World War II, I.G. and the Jersey group by what is called the Oppanol Memorandum made specific terms for one Jasco process, Oppanol, invented by I.G. I.G. also submitted to Jasco the processes for Acetylene Arc, Paraffin Oxidation and Buna as developed prior to 1934. These submissions constituted informal permissions to Jasco to experiment regarding the improvement and the uses of the processes.

The 1938 transactions involved I.G., the Jersey group and two other unrelated oil groups, all of whom joined to form USAC, a corporation in the hydrocarbon synthesis field. This corporation was interested in the Fischer-Tropsch process for making gasoline out of coal. USAC, issued at $100 a share a total of 1700 shares, of which 850 were held by S.I.G. to pay for those 850 shares the Jersey group contributed 4/5 of the money required, that is $68,000, and I.G. contributed 1/5 or $17,000.


In the second chronological part of this case, the Jersey group took steps in the light of the war situation which had developed in Europe. These steps included the Jersey group's purchase in September 1939 of I.G.'s 200 shares of S.I.G. stock, the Hague Conference of September 1939, the creation of the Currie Trust, the negotiations covering the Lauryl Amine patent, the creation of the Schaefer-Koechling Trust, the handling of Jasco processes including Buna and the purchase of 170 shares of USAC stock.

Mr. Teagle of the Jersey group initiated and others carried through before the end of September 1939 a transaction, unconnected with any other, whereby the Jersey group bought for $20,000, which was their full value, the 200 shares of S.I.G. to which I.G. had legal and equitable title.

Mr. Howard of the Jersey group and Dr. Ringer of I.G. met in the last week of September 1939 at the Hague. Responding to Jersey's earlier cabled request, Dr. Ringer had brought with him assignments in blank of all the non-German patents falling within Class A S.I.G., Class B S.I.G. and (with the exception of Buna-N and Buna-S) the Jasco Agreement. The negotiators prepared the so-called Hague Memorandum which was neither an accurate summary of the past dealings of their companies, nor a complete or faithful representation of the agreements made at the Hague. Its purported division of the world of Jasco patents upon a territorial basis was not intended to be a binding agreement.

The real agreement which was made by Mr. Howard and Dr. Ringer and which was later ratified by their principals can be gleaned only after a scrutiny of many documents and of the oral testimony of Mr. Howard. Such scrutiny, the details of which are noted in the findings of fact, filed with this opinion, reveals that the parties' real agreement was as follows. S.I.G. should have the complete legal title to and, subject to certain equitable interests reserved to I.G., the full equitable interest in all the Class A S.I.G. patents. S.I.G. should have the nominal legal title to the Class B S.I.G. patents and the Jasco patents, subject, however, to an obligation to reconvey at the end of World War II or on demand to I.G. S.I.G. should have in the Class B S.I.G. patents the licensing and royalty rights specified in the Four-Party Agreement; Jasco and the Jersey group should have in the Oppanol patents the licensing and royalty rights specified in the Oppanol Memorandum; and I.G. should retain the remaining equitable interest in the Class B S.I.G. patents and the Oppanol patents, and should retain the entire equitable interest in all the other Jasco patents at least until the parties could at some indefinite future date, in the spirit of the Jasco Agreement, negotiate specific terms for those Jasco processes. The Jersey group should advance the money, including $4,000 to I.G.'s New York friend, Dr. Duisberg, necessary to allow the Jersey group to hold for the account of I.G., until the end of World War II or until demand, the 5 shares of Jasco stock owned by I.G.

Upon his return from the Hague to the United States, Mr. Howard placed the assignments of the Class A and Class B S.I. G. patents in the vaults of the Jersey group. March 22, 1940, Mr. Howard delivered all those patents to Mr. Currie, an executive of the Jersey group, to hold the title of the patents in conformity with the Four-Party Agreement. I.G. consented to this trust and re-assigned the legal title to these patents to Mr. Currie as trustee.

Later a question was raised as to the status of a group of so-called "AD" patents, of which United States Patent No. 2,191,295 for Lauryl Amine is typical. I.G. submitted the Lauryl Amine patent to Mr. Currie as trustee to hold upon the same terms as if it were a Class B patent subject to the Four-Party Agreement.

After Mr. Howard's return from the Hague, the Jersey group paid out of its own funds $4,000 to Dr. Duisberg, and out of I.G.'s funds $146,440 to Hambros Bank of London in order to release the 5 shares of Jasco stock owned by I.G. On or before March 1, 1940 Mr. Carl Mueller, an attorney for I.G., endorsed and delivered the stock to Messrs. Schaefer and Koechling, two executives of the Jersey group, as "trustees." The next week, March 8, 1940, Messrs. Schaefer and Koechling agreed to hold the shares upon a trust which gave the Jersey group the right to voting control and dividend payments, but which stipulated that when patents of Jasco were sold Messrs. Schaefer and Koechling as trustees of Jasco stock should see to it that Jasco received "an equitable and separately specified monetary compensation."

Following the creation of the Schaefer-Koechling Trust, the executives of the Jersey group using the blank assignments brought by Mr. Howard...

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