United States v. United States Gypsum Co

• Decision Date: 27 November 1950
• Docket Number: No. 30,30
• Citation: 340 U.S. 76,95 L.Ed. 89,71 S.Ct. 160
• Parties: UNITED STATES v. UNITED STATES GYPSUM CO. et al
• Court: U.S. Supreme Court

340 U.S. 76

71 S.Ct. 160

95 L.Ed. 89

UNITED STATES

v UNITED STATES GYPSUM CO. et al.

No. 30.

Argued and Submitted Oct. 19, 1950.

Decided Nov. 27, 1950.

Motion to Amend Denied Jan. 2, 1951.

See 340 U.S. 909, 71 S.Ct. 289.

Where summary decree was an adjudication of violation of the Sherman Anti-Trust Act by concerted action of defendants through fixed-price patent licenses, accepting as true the underlying facts in defendants' proof by proffer, the government was entitled only to relief based on that finding and the proffered facts. Sherman Anti-Trust Act, §§ 1—4, 15 U.S.C.A. §§ 1—4; Fed.Rules Civ.Proc. rule 56, 28 U.S.C.A.

[Syllabus from Pages 77-79 intentionally omitted]

Mr. Charles H. Weston, Washington, D.C., for appellant.

Mr. Bruce Bromley, New York City, for appellees United States Gypsum Co. et al.

Mr. Norman A. Miller, Chicago, Ill., for appellee Certain-Teed Products Corp.

Messrs. Andrew J. Dallstream, Chicago, Ill., Walter G. Moyle, Ralph P. Wanlass, Washington, D.C., Albert E. Hallett, Chicago, Ill., for appellee Celotex Corp.

Elmer E. Finck, Buffalo, N.Y., Joseph S. Rippey, Rochester, N.Y., David I. Johnston, Oklahoma City, Okl., for appellees National Gypsum Co. et al.

Mr. Justice REED delivered the opinion of the Court.

This proceeding was filed in 1940 in the District Court of the United States for the District of Columbia by the United States under the authority of the Attorney General. 15 U.S.C. § 4, 15 U.S.C.A. § 4. The complaint charged, 44, a long-continued conspiracy by defendants in restraint of trade in gypsum products among the several states and in the District of Columbia, and a similar monopoly, all in violation of §§ 1, 2 and 3 of the Sherman Anti-Trust Act, 26 Stat. 209, as amended, 15 U.S.C. §§ 1, 2, 3, 15 U.S.C.A. §§ 1—3. The defendants, appellees here, were United States Gypsum Co., patentee, and various other gypsum board manufacturers, its licensees, and certain of their officers. It was alleged that the combination carried out its unlawful purposes as indicated in the excerpt from the complaint quoted below.¹ Civil relief, through prohibitory and mandatory orders, was prayed in various appropriate forms. After the United States concluded its evidence in chief at the trial, a three-judge District Court, 15 U.S.C. § 28, 15 U.S.C.A. § 28, granted appellees' motion to dismiss under Rule 41(b) of the Federal Rules of Civil Pro- cedure, 28 U.S.C.A., on the ground that no right to relief had been shown. 67 F.Supp. 397. On direct appeal, 15 U.S.C. § 29, 15 U.S.C.A. § 29, we reversed the judgment of dismissal March 8, 1948, United States v. United States Gypsum Co., 333 U.S. 364, 68 S.Ct. 525, 92 L.Ed. 746, and remanded the case to the District Court for further proceedings in conformity with our opinion.

On remand a conference took place at the Government's suggestion. The Court acted under procedure similar to pretrial, Rule 16, and its inherent power to direct a case so as to aid in its disposition. As a result of that conference, without objection from any party, the Government filed a motion for a summary judgment under Rule 56 on the ground that there was no genuine issue as to any material fact, and the appellees filed an offer of proof, directed at matters as to which appellees were of the opinion a genuine issue existed. A summary judgment, without other findings than those contained in the decree, was entered November 7, 1949, on appellant's motion.² Both plaintiff and defendants took direct appeals from the decree to this Court. 15 U.S.C. § 29, 15 U.S.C.A. § 29. Defendants' appeal objected to summary judgment on the ground of their right to introduce material evidence. That appeal was dismissed by this Court. 339 U.S. 959, 70 S.Ct. 995. The reasons for our action lay in the fact that our holding in our first opinion, 333 U.S. 364, 68 S.Ct. 525, 92 L.Ed. 746, justified a summary judgment for plaintiff on the issue of the violation of the Sherman Act when the record was considered in the light of our opinion and defendants' offer of proof on the remand. This point is discussed later in this opinion under subdivision I.

Probable jurisdiction was noted on the appeal of the United States. This is the case we are now discussing. For the same reasons that we dismissed defendants' appeal, this Court affirmed Article III of the District Court decree. Our order also carried the sanction of an injunction against violation of the decree, 'pending further order of this Court.' 339 U.S. 960, 70 S.Ct. 996.

The issues left for determination in this appeal are those raised by the United States in its effort to have the provisions of the District Court decree enlarged. It seeks to extend the injunctions against violations of the Sherman Act to cover gypsum products instead of being limited to gypsum board as defined in the decree; and to include clude interstate commerce generally instead of limiting the territorial scope of the decree to the eastern portion of the United States. It also seeks changes that forbid specific practices, in addition to price fixing, such as standardizing products, classifying customers, or adopting delivered price systems, all pursuant to the principal conspiracy. It seeks to compel licensing of all patents by United States Gypsum; to empower the Department of Justice to inspect certain records; to extend the decree's terms to cover individual defendants; and to require the defendants to pay all costs.

I.

Procedure on remand.—In determining the present issues, it is necessary to consider the trial court's solution of the procedural problems presented by our remand. Our decree was a reversal of the trial court's dismissal of the complaint on the merits at the completion of plaintiff's, the United States', presentation of its evidence. In our opinion, 333 U.S. 364, 389, 68 S.Ct. 525, 539, 92 L.Ed. 746, we said that 'the industry-wide license agreements, entered into with knowledge on the part of licensor and licensees of the adherence of others, with the control over prices and methods of distribution through the agreements and the bulletins, were sufficient to establish a prima facie case of conspiracy.'

We said that the intention of United States Gypsum and its licensees to act in concert to attain the purpose of the conspiracy, restraint of trade and monopoly, was apparent from the face of the license agreements. 333 U.S. at pages 389, 400, 68 S.Ct. at pages 539, 544, 92 L.Ed. 746, 'The licensor was to fix minimum prices binding both on itself and its licensees; the royalty was to be measured by a percentage of the value of all gypsum products, patented or unpatented; the license could not be transferred without the licensor's consent; the licensee opened its books of accounts to the licensor; the licensee was protected against competition with more favorable licenses and there was a cancellation clause for failure to live up to the arrangements.'

We stressed the acting in concert as differentiating the case from United States v. General Electric Co., 272 U.S. 476, 47 S.Ct. 192, 71 L.Ed. 362, discussed on pages 400 and 401 of 333 U.S., pages 544 and 545 of 68 S.Ct., 92 L.Ed. 746, the concert of action being established by the favored licensee clause of the standard license agreement. 333 U.S. at 410, 68 S.Ct. 548, 92 L.Ed. 746.³ In United States v. Line Material Co., 333 U.S. 287, 68 S.Ct. 550, 92 L.Ed. 701, decided the same day as the Gypsum case, the opinion of the Court discussed the then standing of the General Eelctric rule as follows: 'We are thus called upon to make an adjustment between the lawful restraint on trade of the patent monopoly and the illegal restraint prohibited broadly by the Sherman Act. That adjustment has already reached the point, as the precedents now stand, that a patentee may validly license a competitor to make and vend with a price limitation under the General Electric case and that the grant of patent rights is the limit of freedom from competition * * *.' 333 U.S. at page 310, 68 S.Ct. at page 562, 92 L.Ed. 701.

We added, 333 U.S. at pages 311 and 312, 68 S.Ct. at pages 562 and 563, 92 L.Ed. 746, that while the General Electric rule permitted a patentee to fix the price the licensee of patents may charge for the device, separate patent owners could not combine the patents and thus reach an agreement to fix the price for themselves and their licensees. There was no holding in our first opinion in Gypsum that mere multiple licensing violated the Sherman Act.⁴ The facts and the language placed our judgment squarely on the basis that 'it would be sufficient to show that the defendants, constituting all former competitors in an entire industry, had acted in concert to restrain commerce in an entire industry under patent licenses in order to organize the industry and stabilize prices.' 333 U.S. at page 401, 68 S.Ct. at page 545, 92 L.Ed. 746.⁵

As appears from the preliminary statement of its decree, the trial court acted on that understanding of our holding. See Appendix, 340 U.S. 96, 71 S.Ct. 173. It was not necessary to reach the issue as to whether a mere plurality of licenses, each containing a price-fixing provision, violates the Sherman Act. It is not necessary now.

The reference, 333 U.S. at page 389, 68 S.Ct. at page 539, 92 L.Ed. 746, to the establishment of a prima facie case of conspiracy by conscious industry concert in price fixing was directed at the basis for the admission of the separate declarations of alleged conspirators. 333 U.S. Section V, at pages 399—402, 68 S.Ct. at pages 543—545, 92 L.Ed. 746, of the opinion, however, contains our determination that an industry's concerted price fixing by license violates the Sherman Act per se. United States v. Paramount Pictures, 334 U.S. 131, 143, 68 S.Ct. 915, 922, 92 L.Ed. 1260.

Of course, when we remanded the case of the District Court the defendants had the right to introduce any evidence that they might have as to why all or any one of...