United States v. Vehicular Parking

• Decision Date: 28 March 1944
• Docket Number: No. 259.,259.
• Citation: 54 F. Supp. 828
• Parties: UNITED STATES v. VEHICULAR PARKING, Limited, et al.
• Court: U.S. District Court — District of Delaware

54 F. Supp. 828

UNITED STATES v. VEHICULAR PARKING, Limited, et al.

No. 259.

District Court, D. Delaware.

March 28, 1944.

COPYRIGHT MATERIAL OMITTED

Wendell Berge, Asst. Atty. Gen., Ernest S. Meyers and Bartholomew A. Diggins, Sp. Assts. to the Atty. Gen., and E. Houston Harsha, Sp. Atty., of Washington, D. C., and Stewart Lynch, U. S. Atty., of Wilmington, Del., for plaintiff.

Samuel E. Darby, Jr. (of Darby & Darby), of New York City, and William S. Potter (of Southerland Berl & Potter), of Wilmington, Del., for Vehicular group of defendants, and Carl C. Magee.

Lyman W. Sherwood and Clarence J. Loftus (of Loftus, Moore, Olson & Trexler), both of Chicago, Ill., and Edmund S. Hellings, of Wilmington, Del., for Duncan Meter Co. and Donald F. Duncan.

Edwin D. Steel, Jr. (of Morris, Steel & Nichols), of Wilmington, Del., for Dual Parking Meter Co. and George E. Tribble.

C. Edward Duffy (of Logan & Duffy), of Wilmington, Del., and John E. Shepard, of Covington, Ky., for Mi-Co Meter Co. and F. L. Michaels and Alfred R. Miller.

Ivan Culbertson, of Wilmington, Del., and Stanley D. Fisher, of Hartford, Conn., for M. H. Rhodes, Inc., and M. H. Rhodes.

LEAHY, District Judge.

Defendants are charged with violating Secs. 1, 2 and 3 of the Sherman Anti-Trust Act, 15 U.S.C.A. §§ 1-3. This proceeding is brought under Sec. 4, 15 U.S.C.A. § 4, to prevent and restrain further violations.

The government's issue is whether on evidence adduced it has been proven that defendants¹ entered into a combination and conspiracy to restrain and monopolize trade with respect to (1) manufacture, distribution and sale of parking meters and (2) United States letters patent relating to such parking meters.

The government's case stands upon the illegality of the combination and the conspiracy as a whole and not on the illegality of individual combinations of which it is composed. In this type of case the court does not look at any particular act. It looks at the final harvest of all defendants' acts. United States v. Patten, 226 U.S. 525, 544, 33 S.Ct. 141, 57 L.Ed. 333, 44 L.R.A.,N.S., 325; United States v. Reading Co., 226 U.S. 324, 357, 358, 33 S. Ct. 90, 57 L.Ed. 243; United States v. MacAndrews & Forbes Co., C.C., 149 F. 823. Usually in cases of unlawful agreements to restrain trade, difficulties arise in presenting direct evidence. Hence, inferences from circumstantial evidence have been held sufficient to prove the alleged conspiracy. Interstate Circuit v. United States, 306 U.S. 208, 221, 59 S.Ct. 467, 83 L.Ed. 610; Eastern States Retail Lumber Dealers' Ass'n v. United States, 234 U.S. 600, 612, 34 S.Ct. 951, 58 L.Ed. 1490, L.R. A.1915A, 788; United States v. Corn Products Refining Co., D.C., 234 F. 964. But, in the case at bar, by a set of unusual circumstances, the government became possessed of certain definitive writings which contain recorded admissions which point to defendants' participation in the alleged illegal combination.²

1. Gestatory Stage. Parkrite and Dual owned patents on parking meters.³ In 1936 they produced and sold these devices. On August 20, 1936 individual defendant Joynt wrote to individual defendants Taylor and Symington. He prognosticated: "The parking meter business is new and seems to offer ample opportunity for profit. From my study of the Patent aspects it seems that very little has been done to create a Patent monopoly. It is my opinion that a fair start toward such a monopoly could be gained by pooling the Patents and Patent Applications of Dual Parking Meter Company and Parkrite Corporation." These individual defendants were neither inventors nor owned patents on parking meters. But Joynt made a search in the Patent Office. After this, he wrote Symington and Taylor: "The Patent 1,752,071 the Doyle patent owned by Parkrite Corporation is the only Patent in this field that seems to have claims which in any way might be construed as broadly covering a parking meter of the honor system type. These claims are not such, however, as should be put into litigation because I am afraid they might be invalidated by certain prior art. At present they are accorded a prima facie validity which could be used to advantage in discouraging competition. The actual strength of the Patent Monopoly must be gotten from a number of Patents covering individual types of parking meters. If the Doyle patent were pooled with the other patents owned by Parkrite Corporation and the several Patents and Patent Applications owned by Dual Parking Meter Company, I feel that this pooling would result in a first rate step toward establishing a dominant position in the parking meter field." (Italics supplied.) They then formed Karpark, a Delaware corporation, which agreed with Parkrite on February 25, 1937 that each would assign "to a patent administrative corporation"—to be organized later—all their interests in inventions⁴ then owned or thereafter acquired relating to parking meters, Karpark to pay Parkrite $100,000, and the administrative corporation, in turn, to grant to Karpark and Parkrite⁵ a license to make and vend meters under the corporation's patents and under such terms of sale as determined by such company. This "patent administrative corporation" was formed on March 12, 1937. It was called Vehicular Parking, Ltd., a Delaware corporation, which, though empowered by the State of Delaware, has not since its inception manufactured or sold any product faintly resembling parking meters; and as far as the court can see, "has no facilities for research or development" of such devices. Bluntly, it is a patent holding company.

However, Parkrite wanted to reserve a license if it was to assign its patents to Vehicular. But Joynt immediately said it was "entirely foreign to the tenor of the * * * agreement between Parkrite Corporation and The Karpark Corporation. The essence of that agreement was to put all right, title and interest in these various patents and applications into Vehicular Parking, Ltd. Vehicular, then, would be in a position to establish price control over the entire industry, including Parkrite Corporation." For Parkrite to assign and reserve a license and not assign and then take back a license with conditions "would be disastrous to Vehicular's plans in the matter. It would permit Parkrite Corporation to go merrily on its way, without any regard whatever to royalty, price control, or anything else." So concluded Joynt. Time passed. Then Vehicular acquired Parkrite's patents and granted licenses to both Parkrite and Karpark. Months later Parkrite was dissolved. Its assets were absorbed by Karpark.⁶

Now, in 1937 Dual, owning patents on meters, had been leading the industry in sales. Effort was made to have Dual join in and assign its patents to Vehicular with an attractive license back to Dual with a small royalty fee. But Dual refused⁷ to join the "patent administrative tribunal."

2. The Combination Commences. By 1940 Vehicular had acquired other patents. The year before Rhodes was selling meters at prices lower than its competitors. Vehicular's negotiations with Rhodes for a price-maintenance agreement were unsuccessful. Thereupon Vehicular advised the cities of New Haven, Connecticut, and Raleigh, North Carolina, which were considering the installation of Rhodes' meters, that such use would constitute an infringement of Vehicular's patents. Vehicular then sued Rhodes in the District of Connecticut charging that the meters used by Rhodes infringed patents held by Vehicular. The purpose of "the suit was to show prospective licensees that it was Vehicular's intention to push the matter through litigation with the hope and expectation that those prospective licensees who were `on the fence' on joining a price stabilization set-up would be swayed into falling in line, even including Rhodes himself." Rhodes then re-opened negotiations, but it objected to a plan of price maintenance until the other competitors⁸ were brought into the combination. On January 20, 1940 Rhodes took a license from Vehicular but the price maintenance provisions were to be suspended until Dual and Duncan joined the combination.

Dual was next in line. It had important patents and was, as stated, a leader in sales. Duncan, Mico and Rhodes all thought Dual's participation in the price stabilization plan essential. Stock in Dual was purchased, but Dual still preferred to stand outside. Vehicular finally charged Dual with manufacturing meters which infringed two of Vehicular's patents, and brought suit in this court. Dual's answer avers that Vehicular had conspired with other manufacturers to create an unlawful monopoly in the parking meter industry, it sought to control prices and levy tribute from Dual. Dual countered by bringing an action for infringement in this court against Karpark. While these two suits were pending in 1940, individual defendant Tribble acquired the control stock of Dual, retained Magee as President, and directed the taking of a license from and the execution of the price maintenance agreement with Vehicular, after Dual for $55,000 had first assigned seven of its patents and an exclusive license under three other patents to Vehicular.

Then Duncan joined up. It had agreed to come in when Dual signed as Dual was Duncan's "only mean competition". It was part of the planned technique that Dual and Duncan had to be brought into the fold. Counsel had already advised Duncan that Vehicular's Doyle patent was of doubtful validity and that Vehicular was trying to use its patents "as a means to scare the parking meter manufacturers into taking a license rather than be sued." Nevertheless, Duncan executed the necessary papers. With Duncan and Dual both in, this lifted the bar to the operation of the price maintenance agreement with Rhodes.

In 1939, Mico had agreed to the plan but its obligation was not to become effective "until such time as at least five of the seven meter manufacturers mentioned * * * have signed an...