Hartford-Empire Co. United StatesU. The trial court required royalty-free licensing of present patents and reasonable royalty licensing of future patents. A divided Supreme Court reversed the requirement for royalty-free licensing as "confiscatory," but sustained the requirement for reasonable royalty licensing of the patents.
The technology involved in this case concerned the manufacture of glass containers—notably, the "gob feeder" machinery for manufacturing jars, bottles, and other glass containers.
The gob feed type of machine automatically makes glass containers by dropping a gob of molten glass through a hole into molds in a forming machine, the size and shape of the glass delivered being controlled by a mechanism known as a feeder machine; the feeder and the forming machine together constitute one fully automatic unit. At the time of the suit, Hartford-Empire Company owned or controlled all of the gob feeding patents in the glass container industry, and its business was the exploitation of these patents.
Another type of machine is known as the "suction" machine, and it automatically sucks molten glass into a mold for blowing bottles. The suction machinery was the first fully automatic glassware manufacturing machinery produced. Owens put it on the market in and controlled the patents on it. Owens licensed the use of the machinery to different manufacturers for only specific kinds of glassware, and thus set a market-division pattern that was later followed by Hartford in the licensing and leasing of its automatic feeders.
For example, Owens licensed Ball Brothers to make fruit jars and licensed Hazel-Atlas to manufacture wide mouth glassware.
After Hartford developed the gob feeder, which largely superseded the suction machinery, Hartford licensed and leased gob feeders in much the same manner that Owens had licensed its suction machines, that is, by issuing licenses to make only specific kinds of glassware.
After patent interferences developed between Hartford and Empire. This gave Hartford a free hand in the glass container field. From tocompetition arose between Hartford and Owens over gob feeder technology, including patent interferences and extensive litigation. InHartford and Owens entered into an agreement giving Hartford an exclusive license on Owens's patents relating to feeders and forming machines, and giving Owens the right to use the Hartford patents for the manufacture of glassware.
Owens was not to sell or license any of its gob feeding machinery and was not to engage in the pressed and blown glass fields that had previously been Jr Bunting Glider Company to Corning. It was understood that Owens would be the only company operating with suction machinery. Hartford and Owen then proceeded to buy up the other patents in the glassware industry.
Hazel-Atlas resisted Hartford and Owen untilwhen Hartford, Owens and Hazel-Atlas entered into a series of agreements settling patent infringement litigation. Hartford granted to Hazel-Atlas the right to use Hartford patents and inventions, but Hazel-Atlas was not to license or sell such patents and inventions to anyone.
Hazel-Atlas granted to Hartford the right to use Hazel-Atlas patents and inventions. Hazel-Atlas agreed to pay Hartford royalties for the use of the Hartford inventions. Hazel-Atlas was excluded from the pressed and blown field, which had previously been reserved to Corning. At this point the remaining opposition to Hartford collapsed and substantially everyone in the industry took a license from Hartford. According to the district court, it was impossible for anyone to obtain glassware-making machinery except by virtue of a license from Hartford.
Owens Xinlun Trade Company refused to sell or license its suction machinery. The result was that no new concern could engage in the manufacture of glass containers except with the consent of Hartford, and that kept newcomers out of the industry. After days of trial and a 12,page record, the district court found "that this violation of the laws was as deliberate as any that I can find in a review of anti-trust cases.
The evidence is so conclusive that I can arrive at no other conclusion. The court found that the agreement between Hartford and Empire to settle their patent interferences was a division of glassware markets "leaving the container field to Hartford and the non-container field Deep Creek Lodging Company [Corning's subsidiary] Empire.
It is a cooperative effort for the purpose of maintaining monopolies. The result of these contracts was to give Corning the power to exclude all others from Corning's fields. During the years that followed down to the filing of the complaint herein, there are many instances where manufacturers were kept out of Corning's fields, either by Hartford alone or by Corning's refusal to consent to their entrance into its fields.
The court found that while defendant Hartford's monopolistic purpose was to maximize its patent royalty income, defendant Owens's "main purpose was different.
Owens wanted stabilization of the industry in the marketing of glass products so that higher prices might be charged. A means to that end was the control of the [gob] feeder business in the hands of one concern, with enough control retained to enable it to keep everyone in line.
The procedure to be followed in arriving at the ultimate goals of Hartford and Owens was the elimination of competition between themselves and their respective gob and suction processes, an attack against all outsiders until Hartford had complete control over all automatic machinery used in the production of glassware, and then the licensing by Hartford of every glassware manufacturer in the industry.
Immediately after the agreement of April 9,the two companies began a systematic program for the elimination of all competition. One of the purposes of the Oscar Theatre Company between Hartford and Owens, the court found, "was the elimination of competition between the gob feed process and the suction process.
It would, of course, be futile to eliminate competition in the gob feed process if competition between the suction and gob processes was to continue. In like manner, Owens shall restrict the licensing of its suction feed and all developments thereof in such a way as to maintain a similar position. The court found similar market-allocation conspiracies Joy Chemical Company milk bottles and fruit jars.
Because of counsel's stated concern that this would be an antitrust violation, the allocation was effectuated by oral rather than written agreement. The court found, pointing "to a manifestation of conscious wrongdoing upon the part of the parties involved":. The record is replete, as disclosed by the contemporaneous writings of the principals in this case, of an apprehension upon their part of a violation of the antitrust laws, an apprehension that in some instances amounted to a conviction that the laws were being violated — convictions that led to the taking of anticipatory steps upon their part to forestall the full force and effect of the penalties that would follow proof of violation.
The court found that the patent licenses did not contain any price fixing clauses, but nonetheless an understanding existed in the industry as to prices, which Hartford policed by its ability to refuse access to its patented machinery:.
A system of price leadership obtains in the industry based on the control that Hartford exercises over the glassware produced by virtue of its restrictive licenses and its retention of title to the machines which it licenses. A system of price leadership obtains in the industry whereby, for example, Owens publishes its price list chiefly covering narrow neck glassware; Hazel-Atlas operates as the price leader for wide mouth glassware; Ball Brothers serves as price leader for fruit jar output; and Thatcher serves as price leader for milk bottles.
The record is replete with instances where some of Hartford's favored licensees complained that another company was engaged in price-cutting. The record also discloses that upon receipt of such complaints Hartford took positive action. While there J Stevens Arms Company no compulsory following of these prices, the companies were able to apply moral Hartford Empire Company, with the cooperation of Hartford, which amounted to the same thing.
By the operation of the restrictive license plan, Hartford managed to protect the monopoly that Corning attained over the manufacture of the lines of ware particularly reserved to it; it was able to establish a milk bottle monopoly through its license to Thatcher, and a fruit jar monopoly through its license to Ball Brothers.
If a licensee violated any of his restrictions, Hartford could cancel the license, repossess the machines, and put the licensee out of business. This put the licensees in a position where they had to so conduct themselves as that they might be in a favorable position, upon the expiration of their eight or ten year term, to receive a renewal license.
There has been a violation of the anti-trust laws through an illegal aggregation of patents upon the part of the Hartford and Owens companies; there has been an illegal combination resulting in an unreasonable restraint of trade in the glass container industry through the control of machinery used in the manufacture of glass; and there has been a domination and control of the glass container industry that has resulted in an undue and unreasonable restraint of trade.
Until the court is satisfied that the illegal effects of those acts and things done have been dispelled and United Pacific Company the industry is freed from the domination and control of the defendants, and until the court is satisfied that these illegal acts and practices will not be resumed by the parties.
The court found the problem of appropriate relief in a case such as this one to be difficult. It believed "that no half-way measures will suffice. There has been a deliberate violation of the law, and it is the duty of the court to do what he can to make certain that these violations of the law will cease and will not be resumed in the future and that competition will be restored in the industry.
The record discloses that some of the individual defendants anticipated legal action by the Government, and went ahead in spite of that and violated the law. They also tried to anticipate the remedies that might be applied and did what they could to forestall the effect of such remedies and retain the benefits of their unlawful actions. The court intends to make certain that this does not occur. The Government asked for dissolution of Hartford.
The court refused to do that unless other measures could not be effective to restore competition in the industry. As a first step, the court would appoint receivers. The leasing system "must be abolished" because it has been abused to fix prices. Future distribution of machinery must be "put on a basis of outright sale at reasonable prices" to all comers, including all licensees and outsiders.
Hereafter any manufacturer of glassware may produce any item he desires. The Court unanimously affirmed the finding of an antitrust violation, but it divided closely on some aspects of the relief that the trial court ordered.
Justices Hugo Black and Wiley Rutledge each filed dissenting opinions regarding the reversal of some of the relief. Justices William O. DouglasFrank Murphyand Robert Jackson took no part in the case. Justice Rutledge again filed a dissenting opinion, in which Justice Black joined. Justice Owen Roberts Hartford Empire Company the opinion of the Court. He began: "Two questions are presented. Were violations proved?
If so, are the provisions of the decree right? These, with over Corning controlled patents, over 60 Owens patents, over 70 Hazel patents, and some 12 Lynch patents, had been, by cross-licensing agreements, merged into a pool which effectually controlled the industry.
This control was exercised to allot production in Corning's field to Corning, and that in restricted classes within the general container field to Owens, Hazel, Thatcher, Ball, and such other smaller manufacturers as the group agreed should be licensed.
The Court then turned to the issue of the proper relief, on which the Court was divided. DouglasFrank Murphyand Robert Jackson took no part in consideration or decision of the case. The majority found the relief decreed to be confiscatory of the defendants' property rights in their patents.
It found paragraph 24 bunder which a defendant hereafter acquiring a patent could not set the price for its use by others, refuse to license it, or to retain it and neither use nor license it. The Court said:. That a patent is property, protected against appropriation both by individuals and by government, has long been settled. In recognition of this quality of a patent the courts, in enjoining violations of the Sherman Act arising from the use of patent licenses, agreements, and leases, have abstained from action which amounted to a forfeiture of the patents.
The majority added that Congress had failed to enact proposals for forfeiture or cancellation of patents used as an instrument to violate the antitrust laws. The majority insisted that such a prohibition "sets such limitations upon the reward of a patent as to make it practically worthless except for use by the owner. Paragraph 33 prohibited the defendants' officers and directors from owning stock in any other "corporation engaged either in the manufacture and sale of glassware or in the manufacture or distribution of machinery used in the manufacture of glassware.
Paragraph 51 prohibited the acquisition of any glassware-related patent rights from others, except for non-exclusive licenses. The majority said this provision "is inappropriate to restrain future violations of the antitrust statutes. The paragraph should be deleted. Paragraph 52 dealt with "the problem of suppressed or unworked patents" and "it enjoins every defendant from applying for a patent 'with the intention of not making commercial use of the invention within four years' from issue of the patent, and makes the failure commercially to use the invention prima facie proof of the absence sic of such intention.
Unless we are to overturn settled principles, the paragraph in question must be eliminated. A patent owner is not in the position of a quasi-trustee for the public, or under any obligation to see that the public acquires the free right to use the invention.
He has no obligation either to use it or to grant its use to others. If he discloses the invention in his application so that it will come into the public domain at the end of the year period of exclusive right, he has fulfilled the only obligation imposed by the statute.
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Hazel-Atlas Glass Co. v. Hartford-Empire Co., 322 U.S. 238 (1944), was a much cited 1944 decision of the United States Supreme Court dealing with fraud on the Patent Office. A widely quoted statement in the Court's opinion is: "The public welfare demands that the agencies of public justice be not so impotent that they must always be mute and helpless victims of deception and fraud."Citations: 322 U.S. 238 (more)64 S. Ct. 997; 88 L. ……
HARTFORD-EMPIRE CO. v. UNITED STATES(1945) No. 10 Argued: Decided: January 8, 1945. Subsequent Opinion April 2, 1945 See 324 U.S. 570 , 65 S.Ct. 815. Appeals from the United States District Court for the Northern District of Ohio. [323 U.S. 386, 390] Mr. John T. Cahill, of New York City, for appellants Hartford Empire Co. and others.…
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Hartford-Empire Company et al., 46 F. Supp. 541, an antitrust prosecution begun December 11, 1939. On the basis of the disclosures at this trial, Hazel commenced the present suit. On the basis of the disclosures at this trial, Hazel commenced the present suit.…
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