United States v. General Instrument Corporation

• Decision Date: 28 October 1949
• Docket Number: Civ. A. No. 8586.
• Parties: UNITED STATES v. GENERAL INSTRUMENT CORPORATION et al.
• Court: U.S. District Court — District of New Jersey

87 F. Supp. 157

UNITED STATES v. GENERAL INSTRUMENT CORPORATION et al.

Civ. A. No. 8586.

United States District Court D. New Jersey.

October 28, 1949.

COPYRIGHT MATERIAL OMITTED

Marcus A. Hollabaugh, Washington, D. C., C. Brooke Armat, Washington, D. C., George L. Derr, Cleveland, Ohio, Special Attorneys, Department of Justice, Alfred E. Modarelli, United States Attorney, Newark, N. J., attorneys for plaintiff.

Milton, McNulty & Augelli, by John A. Milton, Jersey City, N. J., attorneys for General Instrument Corporation, Abraham Blumenkrantz, Samuel Cohen and Condenser Development Corporation.

Elmer G. Van Name, Camden, N. J., attorney for Radio Condenser Co., Stanley S. Cramer and Russell E. Cramer.

Charles Handler, Newark, N. J., attorney for Variable Condenser Corporation, Charles H. Hyman, Edward Hyman and Nathan Hyman.

FORMAN, Judge.

This is a proceeding instituted under Section 4¹ of the Sherman Anti-Trust Act to prevent and restrain continuing violations of Sections 1² and 2³ of that Act.

Each of the following named defendant corporations is organized under the laws of the state specified and has its principal place of business as shown below:

                                                                          State of           Location of
                          Name of Corporation                          Incorporation       Principal Office
                General Instrument Corporation4 (hereinafter       New Jersey         Elizabeth, N. J
                referred to as General)
                Radio Condenser Company4 (hereinafter              New Jersey         Camden, N. J
                referred to as Radio)
                Condenser Development Corporation4                 New Jersey         Newark, N. J
                (hereinafter referred to as Development)
                Variable Condenser Corporation (hereinafter             New York           Brooklyn, N. Y
                referred to as Variable)
                

Each of the individual defendants whose name and address is set forth hereunder is associated with or employed by one or more of the corporate defendants and holds the official title or position as shown below:

                                                                                    Corporation
                                                                                    With Which
                     Name                  Address           Title or Position      Associated
                Abraham Blumenkrantz      Elizabeth,        President, Treasurer    General
                or Abe                    New Jersey          and Director
                Bloom
                                                            Secretary, Treasurer    Development
                                                              and Director
                Samuel Cohen              Elizabeth,        Chairman, Board of      General
                                          New Jersey          Directors
                                                            Director                Development
                Stanley S. Cramer         Camden,           President and Director  Radio
                                          New Jersey
                                                            President and Director  Development
                Russell E. Cramer         Camden,           Vice President and      Radio
                                                              Director
                                                            Director                Development
                Charles H. Hyman          Brooklyn,         President and Director  Variable
                                          New York
                Nathan Hyman              Brooklyn,         Vice President and      Variable
                                          New York            Director
                Edward Hyman              Brooklyn,         Secretary and           Variable
                                                              Treasurer
                

The subject matter of this action concerns tuning devices used in radio receiving sets to select the incoming signals of a particular radio station. Tuning devices consist of both variable condensers and permeability tuners. In 1946 approximately 85% of all home radio sets manufactured and sold in the United States contained variable condensers.

The Pleadings

The plaintiff alleged that in 1934, Radio, General and De Jur Amsco (hereinafter referred to as Amsco) together manufactured more than 75% of all variable condensers made in the United States; that the remaining manufacturers in 1934 were Federal Instrument Company (hereinafter referred to as Federal), Reliance Die and Stamping Company (hereinafter referred to as Reliance), and American Steel Package Company (hereinafter referred to as American); that defendant Variable commenced manufacture of condensers in 1938; sic that defendant Development was organized in 1934 as a patent holding corporation by Radio, General and Amsco; that from March 1940 to March 1946 General, Radio (including its affiliates Western Condenser Company and Manufacturers Supply Company), Variable, Oak Manufacturing Company, and American were the sole manufacturers of condensers, and that all the above except American were patent licensees of Development; that from 1934 to the date of the suit 60% of all variable condensers for home radios were manufactured by General and Radio, and since 1938, 3% of all variable condensers were manufactured by Variable; that about March 1946 several additional concerns commenced the manufacture of variable condensers with a total combined production not exceeding 5% of the condensers produced in the United States; that although since 1934 variable condensers have not been patented devices, some of the defendants held patents covering specified parts of variable condensers or methods of manufacturing or assembling parts of variable condensers; and that prior to July 30, 1934, Radio, General and Amsco had been active competitors and had been involved in patent infringement suits.

The alleged conspiracy to evade the Sherman Act is claimed to have commenced in or about 1934 when the three above mentioned competitors resolved their differences by forming Development; that on August 7, 1934, Radio, General and Amsco agreed for a period of five years with the right to extend the agreement for an additional period of years:

"(a) To assign to Development all of their present and future patents and patent rights relating to variable condensers and other tuning devices;

"(b) To give Development the option to purchase from others all present and future patents and patent rights relating to variable condensers and other tuning devices;

"(c) To cause Development to sue for alleged infringement of the pooled patents and to defend suits for infringement brought against any one of the parties to the agreement;

"(d) To cause Development to refuse licenses to others under any of the pooled patents unless it should obtain the unanimous approval of the stockholders of Development; and

"(e) To admit the validity of all patents held or subsequently acquired by Development, and not to contest the validity of such patents."

On the same date Development is alleged to have granted Radio, General and Amsco royalty-free, non-exclusive licenses under the assigned patents for the life of the patents.

Immediately following the formation of Development, it is alleged to have notified Federal and Reliance that they were infringing the pooled patents of Development; that in settlement of the subsequent patent infringement suit against Federal, Development granted to it on April 15, 1935, a license under the pooled patents at an unreasonably high royalty rate; that Reliance was issued a license by Development for the pooled patents in settlement of a patent infringement suit on May 19, 1937; that Federal, becoming insolvent on January 4, 1938, Development cancelled the license and that Rae Manufacturing Company (hereinafter referred to as Rae) was refused a license after having purchased the variable condenser business of Federal; that at the time of issuance of the license to Reliance, it, along with Radio, General and Amsco agreed to price schedules set by Development; that soon after Variable entered the condenser field it was sued by Development for patent infringement; that Development purchased Wilhelm condenser patents in order to prevent their purchase by Variable; that Variable on February 4, 1938, was granted a license by Development providing that it observe Development's price schedules and not contest validity of Development's patents; that to eliminate competition in variable condensers General and Radio on or about May 28, 1939 jointly paid Amsco $50,000 for the patents and patent rights owned by Amsco, which, in turn, agreed not to manufacture or sell tuning devices in the United States and Canada for a period of ten years thereafter and that Amsco further agreed to discontinue use of its tools, dies, jigs and fixtures and not to sell them except for export to a foreign country other than Canada; that Radio, General and Development, on June 9, 1939, entered into two agreements to give General and Radio power to grant non-exclusive licenses to others under any of their respective licenses assigned to Development, and Development reassigned certain pooled patents to Radio and that in other respects, the agreement of August 7, 1934 was extended an additional five years; that since the 1939 agreement, General and Radio have refused licenses under the patents, referring all applicants to Development; that Development filed patent infringement suits against American in 1938 and Radio and General conducted a price war for the purpose of forcing American into a price fixing scheme and to limit its competition, and that the price war was continued until 1941 although the Second Circuit Court of Appeals held in December 1939 that the patent in issue was invalid (Condenser Development Corp., v. Davega-City Radio, 108 F.2d 174); that the price fixing provisions of the 1934 agreement, modified and extended in 1939, were terminated by Radio, General and Development on April 27, 1940, but until the date of the present suit General and Radio have continued consultations and agreements as to price fixing, types of tuning devices to be produced, and the allocation of customers; that an agreement on...