United States v. United States Gypsum Co

CourtUnited States Supreme Court
Citation92 L.Ed. 746,333 U.S. 364,68 S.Ct. 525
Docket NumberNo. 13,13
PartiesUNITED STATES v. UNITED STATES GYPSUM CO. et al
Decision Date08 March 1948

On Appeal from the District Court of the United States for the District of Columbia.

[Syllabus from pages 364-366 intentionally omitted] Mr. Roscoe T. Steffen, of New Haven, Conn., for appellant.

Mr. Bruce Bromley, of New York City, for appellees.

Mr. Justice REED delivered the opinion of the Court.

The United States instituted this suit on August 15, 1940, in the District Court of the United States for the District of Columbia against United States Gypsum Com- pany, five other corporate defendants, and seven individual defendants, as a civil proceeding under the Sherman Act. The complaint charged that the appellees had violated both §§ 1 and 2 of the Sherman Act, 15 U.S.C.A. §§ 1, 2, by conspiring to fix prices on patented gypsum board and unpatented gypsum products, to standardize gypsum board and its method of production for the purpose of eliminating competition, and to regulate the distribution of gypsum board by eliminating jobbers and fixing resale prices of manufacturing distributors.

The Attorney General filed an expediting certificate on December 16, 1941, and on September 17, 1942, a three-judge court was constituted to hear the case. By amendment to the complaint the government charged that the article claims of five patents owned by United States Gypsum were invalid and void. The appellees moved to strike the amendment to the complaint or in the alternative for partial judgment dismissing the amendment. On November 15, 1943, the court granted appellees' motion for partial judgment on the ground that the government had no standing to attack the validity of the patents in an antitrust proceeding. The case thereupon went to trial and upon conclusion of the government's case on April 20, 1944, the appellees moved to dismiss the complaint under Rule 41(b) of the Federal Rules of Civil Procedure, 28 U.S.C.A. following section 723c, upon the ground that on the facts and the law the Government had shown no right to relief. On June 15, 1946, the court filed an opinion holding that the motion should be granted, and on August 5, 1946, the court filed findings of fact and conclusions of law and entered judgment dismissing the complaint. The government appealed directly to this Court, 32 Stat. 823, 15 U.S.C.A. § 28, and probable jurisdiction was noted on December 16, 1946. 67 S.Ct. 371. The decisions below are reported as United States v. United States Gypsum Co., D.C., 53 F.Supp. 889 and Id., D.C., 67 Supp. 397. United States v. Line Material Co., 333 U.S. 287, 68 S.Ct. 550, will be of value to the reader in considering this opinion.

I.

The appellees are engaged in the production of gypsum and the manufacture of gypsum products, including gypsum plasterboard, gypsum lath, gypsum wallboard, and gypsum plaster. At the time of the alleged conspiracy, appellees sold nearly all of the first three products which were marketed in states east of the Rocky Mountains, and a substantial portion of the plaster sold in the same area. Gypsum products are widely used in the construction industry. In 1939, the sales value of gypsum products was approximately $42,000,000, of which $23,000,000 was accounted for by gypsum board (plasterboard, lath, and wallboard), $17,000,000 by gypsum plaster and the remainder by gypsum block and tile and other products. Over 90% of all plaster used in building construction in the United States is made with gypsum.

Gypsum is found in numerous deposits throughout the country. Gypsum board is made by taking the crushed and calcined mineral, adding water, and spreading the gypsum slurry between two paper liners. When the gypsum hardens, the mineral adheres to the paper and the resulting product is used in construction. Plasterboard and lath have a rough surface and are used as a wall and ceiling base for plaster; wallboard has a finished surface and does not require the addition of plaster.

Since its organization in 1901, United States Gypsum has been the dominant concern in the gypsum industry. In 1939, it sold 55% of all gypsum board in the eastern area. By development and purchase it has acquired the most significant patents covering the manufacture of gypsum board, and beginning in 1926, United States Gypsum offered licenses under its patents to other con- cerns in the industry, all licenses containing a provision that United States Gypsum should fix the minimum price at which the licensee sold gypsum products embodying the patents. Since 1929, United States Gypsum has fixed prices at which the other defendants have sold gypsum board.

The other corporate appellees are National Gypsum Co., Certain-teed Products Corp., Celotex Corp., Ebsary Gypsum Co., and Newark Plaster Co. Appellee Gloyd is the owner of an unincorporated business trading under the name of Texas Cement Plaster Co. National produced 23% of all gypsum board sold in the eastern area in 1939, Certain-teed 11%, and the other four companies correspondingly smaller amounts. Seven companies which were active when the licensing plan was evolved in 1929 and before have been acquired by other companies, and defendant Celotex entered the industry in 1939 when the licensing plan was fully in effect by acquiring the assets and licenses of American Gypsum Company. The seven individual defendants are presidents of the corporate defendants. The tabulation in the margin lists the corporate and individual defendants, and shows the corporate changes which have taken place. 1

Prior to 1912, gypsum board was manufactured with an open edge, leaving the gypsum core exposed on all four sides. In 1912, United States Gypsum received as assignee a patent issued to one Utzman, No. 1,034,746, covering both process and product claims on board with closed side edges, the lower paper liner being folded over the exposed gypsum core. Closed-edge board was superior in quality to open-edge board, as it was cheaper to produce, did not break so easily in shipment, and was less subject to crumbling at the edges when nailed in place. United States Gypsum also acquired a

FOOTNOTE 1

Date Sales of

entered board in

Name of Firm gypsum eastern Individual Companies

board area in defendants acquired

industry 1939

United States Gypsum co. 1901 $10,600,000 Sewell L. Avery,president Niagara

1920-36; chairmwn of board Gypsum Co.

board, 1936 to date

Oliver M. Knode, president

1936 to date.

National Gypsum Co. 1925 4,500,000 Melvin H. Baker, Universal Gypsum and

president Lime Co.(1935) Atlantic

Gypsum Products Corp. (1936).

Certain-teed Products Corp. 1926 2,100,000 Henry J. Hartley, Beaver Products Co. (1928);

president Beaver board Co. (1928).

Co. (1928);

Newark Plaster Co. 1937 750,000 Frederick Tomkins, Kelley Plasterboard Co.(1937)

president

Ebsary Gypsum Co. 1928 670,000 Frederick G.Ebsary

president

Celotex Corp. 1939 585,000 American Gypsum Co. (1939).

Texas Cement Plaster Co. 1924 230,000 Samuel M. Gloyd,

(unincorporated). owner number of other patents relating to the process of making closed-edge board. In 1917, United States Gypsum sued a competitor claiming infringement of the Utzman patent and in 1921 the Circuit Court of Appeals affirmed a judgment holding that the Utzman patent was valid and infringed.2 United States Gypsum settled with an infringer, Beaver Products Co., in 1926, by granting Beaver a license to practice the closed-edge board patent with a provision that United States Gypsum should fix the price at which Beaver sold patented board. Shortly before the settlement with Beaver, United States Gypsum instituted suits against American Gypsum Co., Universal Gypsum and Lime Co., and gave notice of infringement to Niagara Gypsum Co. Universal did not contest the suit but accepted a license with price fixing provisions, and two other small companies followed suit in 1927. American and Niagara would not settle, and in 1928 judgment was entered against American holding that American's partially closed-edge board infringed one of United States Gypsum's patents. United States Gypsum also instituted suits for infringement against National Gypsum Co. in 1926 and 1928 which were settled by the execution of a license and payment of damages as part of the industry-wide settlement with all other defendants in 1929. In that year, two sets of license agreements were signed in which United States Gypsum licensed all but two companies manufacturing gypsum board in substantially identical terms and from that date United States Gypsum has maintained rigid control over the price and terms of sale of virtually all gypsum board. Since 1937 the control has been complete.

Up to this point there is no dispute as to the facts. The government charged that the defendants acted in concert in entering into the licensing agreements, that United States Gypsum granted licenses and the other defendants accepted licenses with the knowledge that all other concerns in the industry would accept similar licenses, and that as a result of such concert of action, competition was eliminated by fixing the price of patented board, eliminating the production of unpatented board, and regulating the distribution of patented board. To support its allegations, the government introduced in evidence the license agreements, more than 600 documentary exhibits consisting of letters and memoranda written by officers of the corporate defedndants, and examined 28 witnesses, most of whom were officers of the corporate defendants. Since the appellees' motion to dismiss when the government had finished its case was sustained, the appellees introduced no evidence. They did cross-examine the government's witnesses. The documentary exhibits present a full picture of the circumstances surrounding the negotiation of the patent license agreements, and are chiefly relied on by the government to prove its case.

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