Binks Mfg. Co. v. Ransburg Electro-Coating Corp.

PETITIONER:Binks Mfg. Co.
RESPONDENT:Ransburg Electro-Coating Corp.
LOCATION:John H. Kerr Dam and Reservoir

DOCKET NO.: 501
DECIDED BY: Warren Court (1958-1962)
LOWER COURT: United States Court of Appeals for the Seventh Circuit

CITATION: 366 US 211 (1961)
ARGUED: May 03, 1961 / May 04, 1961
DECIDED: May 08, 1961

Facts of the case

Question

  • Oral Argument – May 04, 1961
  • Audio Transcription for Oral Argument – May 04, 1961 in Binks Mfg. Co. v. Ransburg Electro-Coating Corp.

    Audio Transcription for Oral Argument – May 03, 1961 in Binks Mfg. Co. v. Ransburg Electro-Coating Corp.

    Earl Warren:

    Number 501, Binks Manufacturing Company, Petitioner, versus Ransburg Electro-Coating Corporation.

    W. Donald Mcsweeney:

    May it please the Court —

    Earl Warren:

    Mr. McSweeney.

    W. Donald Mcsweeney:

    — Mr. Chief Justice.

    Before proceeding with my argument, I’d respectfully ask leave of this Court for permission to file a reply brief herein, no later than tomorrow.

    We received the answering brief of the respondents only this past Saturday in Chicago.

    We’ve made arrangements to print it overnight and I will make every effort to give the typewritten copy to my opponent this evening.

    Earl Warren:

    You may do that.

    W. Donald Mcsweeney:

    Thank you, Your Honor.

    This is an antitrust case and involves also the misuse of patents.

    With the additional point urged in part 5 of our brief that respondent fraudulently procured the Starkey patents.

    That 0.5 will be handled in this oral argument by Mr. Meroni.

    I will confine myself to the first four points of our brief.

    The issues which I shall discuss are a matter of the restraint of trade and monopoly which we say the totality of the conduct of this respondent has brought about and it has achieved a monopoly position today in the field of airless electrostatic spraying and painting.

    Secondly, and we say additionally and standing alone, its practices of tying in equipment leases with patent licenses are illegal.

    And we say also that it is engaged in a program of compulsory package licensing of patents which standing alone is illegal.

    And that it has violated the laws because of its dominant position and its position holding basic patent of requiring in its patent license agreements grant-back clauses of future inventions.

    John M. Harlan II:

    (Inaudible)

    W. Donald Mcsweeney:

    No, I’m not, Your Honor, I think there were erroneous legal tests applied here.

    I think I shall demonstrate or even from construing the agreements, you’ll find for example with respect to the tie-in argument that ? that the agreement, the so called alternative agreement of theirs compelled a prospective licensee to go back to Ransburg, the respondent to get equipment.

    The petitioner, Binks — Binks Manufacturing Company commenced this action by filing a declaratory judgment action.

    It was there or it’s been a — and that was in 1946 — in 1956, October.

    There was a counterclaim filed by a respondent, Ransburg, beyond alleging infringement of the Starkey method patent.

    Binks, the petitioner, denied infringement alleged invalidity and misuse of the patent and charged violations of the Sherman and Clayton Acts.

    The — later, when the Starkey apparatus patent issued in June of 1957, it was brought in to the lawsuit in May of 1958.

    The District Court found in favor of the respondent Ransburg, on all issues.

    And the Court of Appeals affirmed except with respect to the matter of allowing Ransburg attorney’s fees and the matter of attorney’s fees is not here before this Court, matter of Ransburg’s attorney’s fees.

    Now, the respondent Ransburg is in the business of leasing equipment used in electrostatic spray coating or painting.

    There are, and we shall be discussing, two different painting processes which the respondent leads us.

    First, which is called the number one process and then later commencing in 1951, they began marketing their number two process.

    W. Donald Mcsweeney:

    The number two — number one process which they commenced marketing in 19 — approximately 1944, consists basically in employing an electrostatic field for depositing liquid particles delivered or sprayed into the field by a conventional air spray gun.

    Charles E. Whittaker:

    Is the number one process before us?

    W. Donald Mcsweeney:

    I think the number one process is before us in — insofar as it’s part of the buildup of this monopoly position of their — the respondent, there’s no — it’s before us in that respect.

    We alleged that by the position they attained in marketing the number one process, they got ? they got a dominant position there and the impetus from that gave them the dominant position immediately upon marketing the airless process in 1951, Mr. Justice Whittaker.

    The number two process, a rotating or centrifugal bell or disk is substituted for the air gun of the number one process.

    The number two process commonly referred to as the airless process has no spray gun used in it.

    Now, respondent’s marketing program, since respondent began licensing its electrostatic spray coating process in 1944, it has combined a patent licensing and an equipment leasing arrangement.

    The respondent never sells this equipment.

    It always leases it.

    And it charges an initial fee ranging from $5000 to $40,000 depending upon the size and type of the installation.

    And then in addition, either a minimum monthly fee or a percentage of the cost of the coating material which passes through the process whichever those monthly fees is higher.

    As of the time of the filing of this case, the respondent is granted 733 electrostatic coating licenses.

    Now that includes airless and with air.

    And there 463 still in enforced, it had granted some 337 airless licenses of which beginning of this suit, there 272 still enforced in effect.

    William O. Douglas:

    Can you get the — the patent licensing without the equipment?

    W. Donald Mcsweeney:

    Well, that’s — that’s the contention we make, Your Honor that you cannot.

    William O. Douglas:

    Just what are the findings on that?

    W. Donald Mcsweeney:

    The findings are that the that they did not require, that Ransburg did not require as a condition of getting a patent license, the taking of respondent’s equipment.

    But we or I shall argue and I — our brief doesn’t — I think we can demonstrate that the so-called alternative agreement which they’ve printed and stopped commencing in 1953, really gave no choice.

    And I’m going to come — excuse me, Your Honor.

    John M. Harlan II:

    Of course, (Voice Overlap) precisely to the contrary.

    W. Donald Mcsweeney:

    The Court, however, didn’t construe, did improperly construe this — this agreement if the Court please and it’s an agreement the — as a matter of contract law, I believe that this Court can conclude that that agreement has — requires the potential or prospective licensee to come to Ransburg for the equipment and that there was no freedom of choice there.

    And the agreement which I’m going to discuss in a little detail, planned to, is set forth in the record volume 3 at page 31.

    It’s in —

    Charles E. Whittaker:

    (Inaudible) directly understand that there are two patents involved?

    One the 1954 patent, ending in the numbers 536 for a process or a method and another of the 1957 patent, ending in the numbers 417 is for an apparatus?

    W. Donald Mcsweeney:

    Combination apparatus.

    Charles E. Whittaker:

    Is that correct?

    W. Donald Mcsweeney:

    Yes, Your Honor.

    Charles E. Whittaker:

    Thank you.

    Charles E. Whittaker:

    Now, in its marketing program, the respondent prepares a standard printed form of contract.

    And these terms have been substantially the same from the time of leasing the number one process up through the leasing of the number two process.

    And there are, however, some — over that period, some 45 different agreements used.

    In this agreement, the respondent represents that it is the owner or otherwise has the right to grant licenses under inventions and let his patent pertaining to and covering methods and apparatus used in the number one or the number two process depending on which it’s licensing.

    But it usually does not spec — specify the patents or doesn’t specifically identify the patents or any inventions.

    It has never submitted a — any license agreement under any specific single patent.

    I said, usually because in some seven patents or seven agreements, it has listed patents.

    In one of these agreements, it will show in this case, none of the 36 patents listed, was applicable to the system or — or even to the process that it was licensing.

    And then in the agreement — in the agreements with six other companies, the respondent in at least three — with at least three of these companies, it included patents which were clearly inapplicable to the process that it was licensing and that will — I believe, be a significance in our argument on compulsory package licensing of patents.

    Now, continuing with the facts, I say in addition to retaining title to the equipment, respondent reserves the right to make changes in the ? in the equipment.

    And in consideration of the fees it gets, it agrees to supply replacement parts including staple commodities, as well as it agrees to — to supply services.

    When you say staple commodities, do I understand you to mean non-patented things?

    W. Donald Mcsweeney:

    Yes, Your Honor.

    Charles E. Whittaker:

    Thanks.

    W. Donald Mcsweeney:

    And there’s an exhibit where we list those — even things like hoses, pliers and that type of common ordinary — in volume 1 page 182, there’s a list, a typical list of those parts.

    Felix Frankfurter:

    Are they conditioned upon the license?

    W. Donald Mcsweeney:

    Well, you —

    Felix Frankfurter:

    Is the license conditioned upon utilizing those?

    W. Donald Mcsweeney:

    You don’t have to utilize them I suppose, Your Honor, but you have to pay for them in the first place.

    Felix Frankfurter:

    You mean that — you mean you have to pay for them you have —

    W. Donald Mcsweeney:

    You yes, Your Honor.

    Felix Frankfurter:

    (Inaudible)

    W. Donald Mcsweeney:

    Now in addition to these agreements.

    Felix Frankfurter:

    Meaning —

    W. Donald Mcsweeney:

    — the respondent was —

    Felix Frankfurter:

    You don’t get — you don’t get the patent?

    You don’t get the license, if you don’t pay for those fees?

    W. Donald Mcsweeney:

    That is correct, Your Honor.

    Felix Frankfurter:

    Alright.

    Charles E. Whittaker:

    Well, do you have to buy those non-patented things from transfers or can you get it from hardware store?

    Charles E. Whittaker:

    (Inaudible)

    Felix Frankfurter:

    Well that —

    W. Donald Mcsweeney:

    It’s physically possible, Your Honor, to get them there.

    Their sachets would be in a hardware store, I suppose I might —

    Felix Frankfurter:

    But my question — my question —

    W. Donald Mcsweeney:

    Well, you have to — yes —

    Felix Frankfurter:

    My question was whether the grant of a license was conditioned upon buying these things or paying for these things.

    I got your distinction, but it’s thrown away after you buy them —

    W. Donald Mcsweeney:

    Yes, Your Honor.

    Felix Frankfurter:

    Whether you have to pay for these things from the licensor.

    W. Donald Mcsweeney:

    Yes, you do, Your Honor.

    Now —

    Felix Frankfurter:

    But you’ve just answer the contrary to Justice Whittaker.

    W. Donald Mcsweeney:

    Well, you pay in advance.

    When you first get the license, you pay a fee which includes an amount which takes care of the replacement parts and the services.

    Felix Frankfurter:

    Well then the answer to my question whether buying for these non-patented bought parts, is a condition to the getting the license, the answer is yes, is that it?

    W. Donald Mcsweeney:

    It is yes, Your Honor.

    I would like to say that in 1953, respondent printed and stopped a so-called alternative agreement, which did not have in it, a provision expressly saying, this you take our equipment.

    Felix Frankfurter:

    Well, is this —

    W. Donald Mcsweeney:

    It never —

    Felix Frankfurter:

    Is the decree that we’re reviewing, if we’re asked to review here, is the decree based on a licensing system which requires payment for non-patentable parts.

    W. Donald Mcsweeney:

    Yes, it does require payment for non-patentable parts.

    Whenever you take any equipment from them, you always take —

    Felix Frankfurter:

    But must you take the equipment from them?

    W. Donald Mcsweeney:

    I say you must, Your Honor.

    Felix Frankfurter:

    Alright.

    I just want to be clear.

    W. Donald Mcsweeney:

    And I’m going to come to that.

    There’s a big argument in this lawsuit over that very point.

    The question is under this alternative so-called alternative agreement, does it compel you — does it drive you back to Ransburg for your equipment?

    W. Donald Mcsweeney:

    You will note that it — it talks about it — it says, you get — you you are — have the right to use a system as prescribed in the Ransburg drawings, subject to such changes and specifications as Ransburg may make.

    That I say, gives Ransburg the power.

    Hugo L. Black:

    What page is that?

    W. Donald Mcsweeney:

    That’s on page — volume 3, page 18, Your Honor.

    Hugo L. Black:

    Page 18?

    W. Donald Mcsweeney:

    Oh, excuse me.

    The one I referred to before was on page — commencing on page 31.

    That’s Exhibit D, runs for about till page 36.

    Hugo L. Black:

    Which part of it has the language which you’ve just referred?

    W. Donald Mcsweeney:

    On page 32, Your Honor, paragraph numbered 1, where it says license.

    And the last part — sentence — last part of that paragraph, it says, you have these licenses — to use said process as shown in Ransburg volume number blank, subject to such changes therein and such further specifications as Ransburg may prescribe.

    John M. Harlan II:

    The lower court did not give him the interpretation you suggest to that provision, could it?

    W. Donald Mcsweeney:

    I take it they did not, Your Honor or they never could’ve arrived at the result I’m suggesting here.

    This this — I want to say at this time since we’ve got into this a little — I think at preliminary, we must make clear is that, there’s no practice to go by under this agreement.

    They never put this contract into effect, Ransburg says no one wanted.

    There’s no — we don’t know what in fact they actually did with this contract.

    We know that this is the contract which they said, “Here is the alternative.

    If you don’t want our equipment, sign this contract.”

    I say that this contract drives your right back to Ransburg for the equipment.

    It’s the power they retained if you signed this contract which is the vicious thing, which makes the tie-in in this case.

    John M. Harlan II:

    What do you do with finding 66?

    W. Donald Mcsweeney:

    I say that with finding 66, the District Court just misconstrued or ignored the agreement —

    John M. Harlan II:

    Then you are asking us to overturn the (Inaudible)

    W. Donald Mcsweeney:

    I know —

    John M. Harlan II:

    We have to review the evidence.

    W. Donald Mcsweeney:

    I’m asking you to interpret a contract, a written contract which is before this Court.

    And you will then overturn that finding, I — I believe.

    In that respect —

    John M. Harlan II:

    You don’t want to that.

    The finding in the stand is what would contrary to what you were arguing, (Inaudible)

    W. Donald Mcsweeney:

    It is flatly contrary, but I don’t believe it involves your overturning it, Your Honor.

    I don’t believe involves your determining any basic facts.

    John M. Harlan II:

    How do you do that?

    How do you live it, did not believe it to be (Inaudible)

    W. Donald Mcsweeney:

    You can overturn it.

    I think it’s just a conclusion.

    And they’ve wrongly — that court has wrongly applied a rule of law in a — a legal construction of a written contract.

    And this Court, I submit, is as — in a — an eligible position as — able a position to construe that contract and to construe it, in a way I suggest, which will in effect, overturn that finding.

    Yes, Your Honor.

    Felix Frankfurter:

    I must have misconceived your answer because I got from your answer when you said the power they have drives you back the compulsory paying for this non-patentable things.

    The questions of power and question for construction of an agreement which in the power means de facto exercise of coercive influence and that I should think, is in the realm of evidence, isn’t that true?

    W. Donald Mcsweeney:

    Well, the other evidence, yes, Your Honor that that — what was it done in practice is in other evidence.

    Felix Frankfurter:

    Well —

    W. Donald Mcsweeney:

    — because this agreement was never put into effect.

    Felix Frankfurter:

    Well therefore the — to pursue Justice Harlan’s question, therefore that finding I don’t know its number, partly rests on reading a document, but also rests on the whole evidence as to what was done under it, isn’t that true?

    W. Donald Mcsweeney:

    I think they’re separate — those are separate matters, Your Honor, because under this contract, this contract which I’ve referred to was never executed.

    No one ever took it.

    This is the contract that Ransburg said, if you don’t want equipment, take this alternate contract.

    So everybody who took that contract, took the contract which had the equipment provision in it.

    Felix Frankfurter:

    But Mr. McSweeney, one can’t gather from reading a document that it was never enforced and can’t get that from a piece of paper.

    That must come from surrounding evidence.

    W. Donald Mcsweeney:

    Oh, the evidence is —

    Felix Frankfurter:

    And therefore, I’m not saying it isn’t fair.

    I’m not suggesting it isn’t fair.

    I don’t know a thing about it.

    I’m suggesting that we do have to, as Justice Harlan has been pressing you.

    We do have to go into the evidence since I’m — we’ve (Inaudible)

    W. Donald Mcsweeney:

    In that respect, you do.

    Felix Frankfurter:

    — challenge the findings but I can’t I cannot understand that we’re not to challenge finding, is it, for the 66, which on its face doesn’t give the conclusion from which you for which you argued.

    And of course, you have to go outside of that finding to find that which appeared on paper or the sham.

    Felix Frankfurter:

    That’s your point.

    W. Donald Mcsweeney:

    Yes, that’s my point, Your Honor.

    Felix Frankfurter:

    Well, but you don’t prove sham merely by reading a piece of paper.

    W. Donald Mcsweeney:

    Well, I — the other evidence shows that this was never used.

    This contract was never accepted.

    Felix Frankfurter:

    And did the judge find — so find on that other evidence?

    Did the District Court make findings that this contract on which it relied in 66 was a functus, was a fiction?

    W. Donald Mcsweeney:

    Not that he ever called it that.

    Hugo L. Black:

    What about finding 67, does that have any reference to it?

    Im not I don’t quite understand whether it does or not.

    That says that all of them had required their supplying of the equipment.

    Is that what you’re talking about?

    W. Donald Mcsweeney:

    Well, that — I — it’s true the District Court found that as a requirement, it never was a requirement.

    Hugo L. Black:

    So what I’m as what I’ve understanding — I understood you to say that no one had ever signed any, except those that required the equipment and your claim is that they had to do that to get any contract at all, is that it?

    W. Donald Mcsweeney:

    Oh, my claim is that even had they taken this alternative form of contract, they would have, by the expressed terms of this so-called alternative contract, been driven to Ransburg, to take the equipment.

    Hugo L. Black:

    And there was any finding that says anything about this particular form of contract on which you rely.

    W. Donald Mcsweeney:

    Well, they there’s they don’t — the District Court didn’t make any finding with respect to that.

    Hugo L. Black:

    Did you ask did you ask for any?

    W. Donald Mcsweeney:

    I don’t recall.

    I don’t know if we asked for one.

    I didn’t get one.

    In continuing with respect to certain of the facts which I think are to remain to my argument, I want to mention that in 1951, when the respondent began licensing its number two process, it inserted in its agreements, in all of its agreements with respect to the airless, the number two system, a provision for grant-back — for the grant-back of any inventions, improvements or patents, domestic or foreign, from any source relating to methods or apparatus involving this airless electrostatic spray coating.

    And this grant-back was not restricted to improvements upon the apparatus being licensed and in the extent that during the term of the agreement and for two years, thereafter.

    Now, it’s true in 1945, respondent used a type of contract which didn’t have the grant-back provision in it, but it did not at that time, cancel the outstanding agreements containing grant back.

    John M. Harlan II:

    Were there any?

    W. Donald Mcsweeney:

    There were 133 which remained in effsect, full force and effect through the — this lawsuit and through the closing of proof and through the time the findings were added.

    I noted in respondent’s brief the — it goes outside the record to say they’ve been eliminated in sometime in 1959.

    Well that would have been after these findings were entered.

    If they were, it’s not in the record, and if they were, I suggest it’s too late, as far as it’s no purge to do it at that time.

    In 19 — prior to 1953, this form, this so-called alternative form, which supposedly didn’t require the licensing of equipment, had never been in existence.

    W. Donald Mcsweeney:

    But in 1953 was the first time they printed and stocked such a form.

    And that time, they sent letters to their existing licensees, asked him if they’d want to take that kind of equipment.

    Now, these existing licensees already had taken equipment from Ransburg and they had paid large sums for it.

    They — they would have had to under the terms of this proposal — they would’ve had to return that equipment, but they wouldn’t get a refund of their money.

    Of course, none of them took advantage of that so-called offer.

    William J. Brennan, Jr.:

    And you claim that was not enough to purge and that was not —

    W. Donald Mcsweeney:

    It was not enough to purge and I mentioned that the United States Government has filed in an amicus memorandum here on that point and on the point with respect to the — that is that they didn’t do enough to purge and on the ? on the point with respect to grant that clauses.

    Charles E. Whittaker:

    Mr McSweeney.

    W. Donald Mcsweeney:

    Yes, Your Honor.

    Charles E. Whittaker:

    Has not the district judge foreclosed you on your argument of tie-ins of parts by finding 65 where it says that, Although much of the specialized equipment required for the practice of the process was and is not available on the open market.

    And then has produced the same and furnished it to its licensees in order to be able to market its processes.

    It has always been the expressed policy of the defendant and so understood by all its officers that if a prospective licensee prefers to obtain equipment elsewhere, then from the defendant he was free to do so and that reduced fees could obtain a license from defendant without equipment, et cetera.?

    Now does –what about that finding in connection with your argument of tie-in on parts?

    W. Donald Mcsweeney:

    Well, Your Honor, I think that that one the one is not based on any fact in the record, as far as — I would have two answers to that with respect to this — that it was not available on the open market.

    Secondly, if there was a tie-in — if it was a condition, the availability on the open market on lack of availability doesn’t matter.

    That — if it was — it had some intrinsic value.

    Over and above that of competitors, they wouldn’t have had to tie it in.

    The question I think is whether they tied it in.

    This — the petitioner here has for many years, been in the spray painting supply business and it sells spray guns and allied equipment.

    And it developed a simple electrostatic liquid spraying device or emitter.

    And it was capable as its president testified, “I’m ready to supply equipment for an electrostatic spray coating system on order.”

    And it had interested a prospective customer in buying this.

    So the petitioner was if it could have gotten into this market, it was ready, willing and able to supply equipment.

    We contend that’s where our injury is.

    If — if there hadn’t been a tie-in, we would have been able to sell our equipment.

    And that’s where this conduct impinged upon us and that’s why we were injured under the antitrust laws.

    We’re also urging here in the misuse of patents.

    We contend that the first, that the totality of this conduct gave the respondent a monopoly position and it constituted a restraint of trade.

    And that monopoly position which it had had because it was the only supplier of this equipment in the market and that’s admitted and there was no other supplier of replacement parts or no other service organization when this company went into marketing of its number two process in 1951.

    Charles E. Whittaker:

    (Inaudible) in respondents’ brief that they initially came to you, tried to induce your company to do their manufacturing?

    W. Donald Mcsweeney:

    The evidence shows that they asked us to make something for them in 1944.

    I believe, the president of our company testified and didn’t or couldn’t at that time or didn’t want to make one of these items for a voltage pen in 1944.

    Charles E. Whittaker:

    There are findings here I observed that Ransburg decided not to make anything that could be purchased and it would only manufacture what wasn’t available on the market.

    Is that so or not?

    W. Donald Mcsweeney:

    That’s unsupported in the record, Your Honor.

    That’s not mine.

    Charles E. Whittaker:

    Not supported by evidence?

    W. Donald Mcsweeney:

    That’s correct.

    Now, the amount these — these licensing fees consisted — amounted to some on the number two airless system in 1956, the amount of this — something over $2,200,000.

    And the total amount of these fees for the period of 1951 to 1957 was over $8,000,000.

    Ransburg said in his brief — or said they admitted it had some $2,250,000 invested in at leased equipment, figured on a cost basis.

    I’m going to pass a common — we have — write out in our brief at pages 7 to 9 and he pranks the various activities of the respondent in acquiring when it embarked upon this licensing program of acquiring patents from others.

    And acquiring those patents on a non-exclusive basis for the right to sublicense, which we say should — well, excuse me, they are on exclusive basis, where the — in their field were the right to sublicense, which was we contend for the purpose of monopolizing this field.

    It didn’t just take a non-exclusive license.

    In each instance, they got an exclusive license.

    Now, we say that our injury is that because of the totality of the conduct of respondent we, Binks, are unable to market our equipment in the airless electrostatic field.

    Now, specifically with respect to this time, I say it with — in every instance under the number two airless system and every instance where they actually leased it, a respondent joined a patent license with an equipment lease.

    The practice under the number one system prior thereto had been substantially the same.

    A few licenses that were without leases, one was in a settlement of a lawsuit, the others were with a few licensees who had previously taken their equipment for use in another system.

    Prior to 1953, then the only form — the standard form had in it a paragraph on equipment leasing.

    There were in the company, certain internal memoranda saying, if the — we have a policy of making available patent licenses without leases.

    These were distributed just to their own salespeople and to the distributors.

    But at the same time, they were outstanding, these brochures which we’ve referred in our brief and that are in the record, volume 2 at pages 854 and 862 was given.

    The emphasis has placed upon the equipment.

    The trade gets the idea if it does business with Ransburg, it must take its equipment.

    Now, in 1953 and the Ransburg makes a big point of this, it changed its policy.

    We called it in our brief an attempt to purge.

    At that time, guess what did it would do?

    Well, it wrote to the existing licensees.

    All of whom had license — licenses with leases and said, “You can go to another — this other form without equipment.”

    W. Donald Mcsweeney:

    The other form now was this form which I contend, didn’t give them that free choice.

    Now, these licensees had no reason in — in the world to do that because they’d already in effect, paid for the equipment.

    They wouldn’t have to return their equipment without a refund of money.

    At that time, for the first time and since after 1953, respondent, Ransburg, prepared a pricing schedule which would give the necessary information to one of its salesmen to price out a license without equipment.

    And it did tally salespeople to advise perspective licensees that they had this alternative agreement.

    However, no one ever took it.

    Now, this alternative agreement in page —

    Charles E. Whittaker:

    Would you tell me, do you contend it was monopolistic or otherwise illegal for them to have a form of agreement requiring the supplying of the apparatus if they gave to the customers a choice to take with it — the process without it — without the equipment — apparatus?

    W. Donald Mcsweeney:

    I think the practice which they pursued here was illegal because in the setting of this case, they always licensed only with equipment —

    Charles E. Whittaker:

    Wasn’t that —

    W. Donald Mcsweeney:

    — with equipment lease.

    Charles E. Whittaker:

    Wasn’t that as the Court found because the customers so elected thus, between the choices?

    W. Donald Mcsweeney:

    No, the other choice I say was no alternative, Your Honor.

    It forced them to Ransburg equipment.

    That — that agreement —

    Charles E. Whittaker:

    In find — in finding 70, the Court deals with this.Of — at record 2003, doesn’t it?

    Unless the terms upon which defendant would have quoted in number two process non-equipment license, had the request, therefore, have been made were academic until 1954 and then it goes on.

    W. Donald Mcsweeney:

    Well, it was — it was academic — well, I say Your Honor to that that this — not this — this so-called alternative agreement didn’t really give you any choice.

    It says in the agreement, if I may refer again to volume 3, page 32, it’s argued — you’d get — you get a license and you may use it as shown in Ransburg’s drawing.

    They draw and then they have the power to make a drawing.

    They can draw in — they can make a drawing which is Ransburg’s equipment and only its equipment.

    For example, it could draw in the patented apparatus on the Starkey — enact that apparatus patented.

    You’d have to come to Ransburg to get it.

    Hugo L. Black:

    How do we know without a finding that that was the alternate?

    The alternate finding seems to be other way.

    W. Donald Mcsweeney:

    Finding —

    Hugo L. Black:

    I can understand the force of your argument, if you had something to show that this concept was tendered to and they’d say you take this or that because all of the contract seems to have the tie-in probe.

    That was —

    W. Donald Mcsweeney:

    They do —

    Hugo L. Black:

    — (Voice Overlap) answer (Inaudible)

    W. Donald Mcsweeney:

    That’s right.

    It is, Your Honor.

    Hugo L. Black:

    When do you show or how do we find out, except from findings about this alternative that you should give?

    Did you — did you try to ask for anything findings and have them rejected?

    W. Donald Mcsweeney:

    We never had — we asked for a lot of findings.

    None of them were.

    Hugo L. Black:

    Did you ask for any on this point that were rejected?

    Did you ask for a —

    W. Donald Mcsweeney:

    I don’t have —

    Hugo L. Black:

    — finding to the effect that by reason of there being 300 or whatever it was, contracts all of which, contained the — tie-in clause, it’s nothing but its tie-in clause, did you ask for findings as to the effect of that?

    W. Donald Mcsweeney:

    I don’t know that we did.

    I don’t know.

    Hugo L. Black:

    And there is none.

    W. Donald Mcsweeney:

    There is none.

    That — that’s right.

    Hugo L. Black:

    Well, it seems to me that you’re arguing unless you are challenging the findings and point as to the evidence instead of showing that the findings are wrong.

    W. Donald Mcsweeney:

    Well, I think that —

    Hugo L. Black:

    I can’t quite understand your argument.

    W. Donald Mcsweeney:

    Starting in 1953, they had two forms of contract.

    One, without the paragraph for equipment which is this agreement which I refer to at the record —

    Hugo L. Black:

    Page 32.

    W. Donald Mcsweeney:

    Yes, Your Honor.

    The other is a contract with a paragraph specially — specifying you take equipment.

    Hugo L. Black:

    That’s the time that all contracts they had were of that kind?

    W. Donald Mcsweeney:

    Yes, Your Honor.

    Hugo L. Black:

    The Government seems to argue I assume, that from the fact that all the contracts were of that kind, that it was enough to show that the tie-in contract had to be made.

    Is that what you’re arguing?

    W. Donald Mcsweeney:

    I think that that is true and I’m arguing that, but I’m arguing additionally, Your Honor that there was no real alternative.

    Hugo L. Black:

    Will that — the problem is let’s assumed — you’re assuming though that there was no real alternative, with no findings to back it and not showing us the evidence it proves, if I — unless I’m wrong.

    And I’m interested in that point because it seems to me that the —

    W. Donald Mcsweeney:

    Well, the findings —

    Hugo L. Black:

    (Voice Overlap)

    W. Donald Mcsweeney:

    The other way — the findings, the other way are based upon the existence of this so-called alternative agreement.

    So if this alternative agreement is not really an alternative, the findings are clearly wrong.

    Hugo L. Black:

    Now, where do we — where can we know that it’s based on the alternative agreement rather than evidence?

    It seems to be based on evidence, if the judge heard.

    W. Donald Mcsweeney:

    Well, the evidence is that these are the only forms available.

    When they sent two forms, they only let this out of their company on two instances.

    They sent two forms to Binks, petitioner.

    Here, they are and they — they were each one of these — these types.

    Felix Frankfurter:

    But you — you argued, at least I understood you to contend that the second alternative wasn’t chosen and in fact not a true alternative, isn’t that right?

    W. Donald Mcsweeney:

    That’s correct, Your Honor.

    Felix Frankfurter:

    But that, could one gather that merely from reading the alternative — the piece of paper?

    W. Donald Mcsweeney:

    I contend you can gather that, Your Honor, from reading the contract itself.

    Felix Frankfurter:

    And on the face of it, that shows that that is no alternative.

    W. Donald Mcsweeney:

    Absolutely, Your Honor.

    That’s right.

    William J. Brennan, Jr.:

    You mean Mr. McSweeney, just those words that you’ve pointed to us at page 32, subject to such changes therein and the incorporation of the Ransburg’s drawing — drawings, is that all there is?

    W. Donald Mcsweeney:

    Subject to such changes therein and such further specification as Ransburg may prescribe —

    William J. Brennan, Jr.:

    Well now, I’m — what I’m asking is, is that what you tell us shows that there’s nothing but a Hobson’s choice?

    W. Donald Mcsweeney:

    That’s right, Your Honor.

    Well, that coupled — if we go beyond that, to any practice, I say that shows it in the contract itself.

    Felix Frankfurter:

    That — that is so only if the specifications which they require were specifications for non-patentable parts.

    If they were for patentable parts, then they were there within their right.

    W. Donald Mcsweeney:

    I don’t believe that’s true, Your Honor.

    They’re — they’re giving a license under a method patent here?

    They haven’t any right to tie-in parts to it.

    As I understand the law — as I understand the B.B Chemical against Ellis, they had a method patent.

    They haven’t any right to tie-in parts.

    The method patent doesn’t patent any of their parts.

    Felix Frankfurter:

    No, but the part — patent may have patented.

    W. Donald Mcsweeney:

    Then they’re combining — then they’re combining two licenses under a compulsory —

    Felix Frankfurter:

    Is that your point?

    I thought your point earlier was that there — it required them to pay for non-patentable facilities, didn’t you?

    W. Donald Mcsweeney:

    That’s a further point we have —

    Felix Frankfurter:

    But that —

    W. Donald Mcsweeney:

    — Your Honor.

    Felix Frankfurter:

    But now, I —

    — but as to that, one cannot get that from merely reading the contract can we?

    If they leave — unless they have such coercive monopolistic power, that there is no choice, Hobson’s choice, I guess (Voice Overlap) —

    W. Donald Mcsweeney:

    Well that’s the setting of this case, which we argue

    Felix Frankfurter:

    But maybe, but — but the — the finding doesn’t — finding — the finding to which you refer doesn’t establish that.

    W. Donald Mcsweeney:

    Well, the facts if doesn’t, it’s clearly wrong.

    The facts show that Ransburg dominates this airless electrostatic spray coating industry.

    That it’s the only one in it.

    Felix Frankfurter:

    But for some reason, you’ve declined to answer Justice Harlan’s question that you’re not challenging the findings as not sustained by the evidence.

    W. Donald Mcsweeney:

    I’m challenging the findings, Your Honor.

    Felix Frankfurter:

    Alright.

    W. Donald Mcsweeney:

    It’s not sustained by the evidence, but I’m adding that this Court can construe this contract as a matter of law and rule with me.

    There was —

    Charles E. Whittaker:

    Was there or was there not, in this voluminous record, much evidence on the course of practice in daily life, or I guess, this Ransburg Company?

    W. Donald Mcsweeney:

    There was considerable and the practice with respect to what kind of a contract they ever entered into is all one way.

    They always entered into a contract which had in it the provision for leasing equipment.

    William J. Brennan, Jr.:

    That nobody ever took this alternative agreement.

    W. Donald Mcsweeney:

    That’s right Mr. Justice Brennan.

    William J. Brennan, Jr.:

    Now, what — what does the record show?

    Don’t let — get back to the findings too far, if you will.

    But what is the nature of the evidence which explains why no one took this form of agreement?

    W. Donald Mcsweeney:

    Well, existing licensees first considered them.

    They had already paid a lot of money to get the equipment.

    W. Donald Mcsweeney:

    If they took as the letters to them said, they had to return the equipment to Ransburg, but not get a refund.

    That alone would keep them from taking it.

    William J. Brennan, Jr.:

    Anything else?

    W. Donald Mcsweeney:

    The other, I believe would be that you would recognize from this contract that your — your so-called alternative contract that you give Ransburg the power to come out and change the drawing, change the specifications after you’ve got someone else’s equipment in there.

    They could come out and say, “Well that isn’t right.

    That’s our right to have under this.

    Here, we’re changing that.”

    So you can’t use Mr. Binks’ equipment.

    It doesn’t meet this drawing.

    You’ve got to — you want to use our patents, you’ve got to use our equipment.You’ve got to use equipment that’s in this drawing.

    They could’ve — and whether they drew it to make them use Ransburg patented equipment or unpatented equipment, they still had the power to keep the licensee from using the equipment of anyone else.

    Earl Warren:

    Is there a finding on that first point that you made Mr. McSweeney that — that anyone who was to return the property, had to return it without a refund whether he had had — they’d had only acquired at great expense, and that it would be to their injury?

    W. Donald Mcsweeney:

    That’s uncontested, Your Honor.

    Didn’t enter a find, there’s no contest on that.

    Earl Warren:

    There is not question on that.

    W. Donald Mcsweeney:

    No question, but that is —

    Earl Warren:

    And to what — to what extent would they be insured to — would you (Voice Overlap) —

    W. Donald Mcsweeney:

    Well, they could’ve paid anywhere from $5000 to $40,000 in an initial fee, plus the monthly fee, all that would probably — if they were a big customer, it wouldn’t — they wouldn’t be under the minimum monthly fee.

    They’d be paying on the amount of paint used.

    Could — they couldn’t devise post.

    They could lose over well anything from $40,000 up, I don’t know how much.

    It depends on who it was.

    Earl Warren:

    Mr. Meroni.

    Charles F. Meroni:

    Yes, Your Honor.

    If the Court please, this phase of the argument pertains to part 5 of our brief.

    To be valid and enforceable, a patent must claim from a background free of thought or inequitable conduct.

    This Court has so held in the Keystone, Hazel-Atlas and the precision cases cited in our brief.

    Here, the respondent procured the allowance of its patents on the basis of affidavits showing commercial success of the number two system.

    But the affidavits neglected to point out that the number two system did not embody what was alleged to be the heart of the Starkey invention.

    We say it was those omissions in the affidavits that constituted the perpetration of a fraud on the patent laws.

    Charles F. Meroni:

    Though, I might say that in that regard, that the only finding that I’ve been able to locate pertaining to this, is finding 91 of the findings here and they were all proposed by the defendant for the most part and adopted by the Court.

    And that appears at page 1013.

    In that finding, the Court held that there was no willful representations of the patent office or withheld from the patent office knowledge of a pertinent prior right.

    Well, that has nothing to do with this point, which has to do with the withholding or concealment of evidence as to what the true character of the number two system was.

    In the affidavits that were filed, the party Starkey or the respondent, failed to disclose what that system was.

    Now, it should be borne in mind that these applications particularly the method case, was pending over 10 years.

    It was filed on September 29th, 1944 and it wasn’t though issued until August 3rd, 1954.

    During that period of time, there were repeated rejections both by the examining staff and by the Board of Appeals.

    In the course of their representations, the applicants who were Starkey and Ransburg said to the patent office, and I’m quoting from page 55 of my brief a short sentence, The heart of applicant’s invention lies in the concept of employing a single electrostatic field which acts as the soul agent to atomize paint, disperse the particles formed by atomization and deposit those particles on the work.

    That statement was repeated constantly and Dr. Miller also admitted, as pointed out on the same page of our brief, that the thing that was considered new when he recorded the Starkey idea was the concept of using electrostatic forces alone to atomize, disperse and deposit these materials.

    In other words, they — they believe it to be new, to use the field by itself, apart from anything else, as the atomizing and dispersing and coding medium.

    Now, there’s no question here, there’s no dispute about the fact that none of the structures shown on the Starkey patents and incidentally, the drawings of the two patents are identical.

    One is an apparatus patent that was divided out arbitrarily from the method patent without any requirement of division by the Patent Office.

    So that the history of the apparent case which is the method case also carries over to the apparatus case, it being a true division.

    Now, there’s no question that none of the structure shown in those patents were ever commercialized.

    That’s unequivocally admitted by the respondent and that with respect, I’d like to call your attention for volume 1, page 199, request for admission 30.

    Does defendant admit that it never commercialized by sale or lease, any electrostatic sprayer apparatus of the structure shown in — in anyone of the figures of either of its earlier process patent number or it’s later apparatus patent number?

    And the answer was, yes.

    Now, for some eight years after the Starkey application was allowed or was filed, only one narrow claim was allowed.

    In 19 — in 1949, the pew patent expired, that was the patent that the respondent acquired from Western Electric Company and which covered the number one system.

    Also at that time, the respondent brought forth this number two system, making use of both a centriphical means and a field to affect atomization and spray.

    Now, our position, Your Honor, as to that point and which we believe is very critical to this case is shown on page 349 to 351 of volume 1, beginning at the middle of the page at 552 and ending in the middle of page 351.

    There it — there, it is conclusively shown that the number two system did not depend on the field alone for atomization, dispersion and deposition.

    Hugo L. Black:

    Are you arguing then in connection with your charge (Inaudible)

    Charles F. Meroni:

    Yes, Your Honor.

    They — they fail — the respondent failed to tell the Patent Office that the number two system did — did not accomplish coating by the use of the field alone.

    Hugo L. Black:

    So, what do you do with the findings in that 91?

    Charles F. Meroni:

    There are —

    Hugo L. Black:

    — or rather 291 (Voice Overlap)

    Charles F. Meroni:

    Well that — that makes no finding as to the omissions from the application relative to the commercial number two system.

    Charles F. Meroni:

    It pertains to the question of whether or not they omitted telling the Patent Office about earlier priority.

    We say that there is no finding on this particular point that we’re raising here, under the fraud point.

    Hugo L. Black:

    Did you ask for one?

    Charles F. Meroni:

    We submitted complete findings to the Court.

    Hugo L. Black:

    Did you ask for finding on this particular thing and are you claiming (Voice Overlap) —

    Charles F. Meroni:

    My recollection is that we did, although it doesn’t appear on this record, because the findings were not adopted by the Court.

    Now, there’s one other point Your Honor that I’d like to make it my limited time here and that is — and that is on page 36 of the — of our opponents’ brief, reference is made to the juvenile patent and an argument is there given, which we believe is entirely out of order.

    That patent does not appear before this Court and is not certified as a part of this record.

    And we believe that the argument on page 36 of respondent’s brief should be ignored by this Court.

    And we’d like to reserve some time for rebuttal.

    Hugo L. Black:

    Yes, you may.

    You’d better rest your time.

    Elbert R. Gilliom:

    May it please the Court —

    Earl Warren:

    Mr. Gilliom.

    Elbert R. Gilliom:

    — Mr. Chief Justice.

    I would like first to supplement the statement of facts which Mr. McSweeney made briefly and then to treat each of the questions raised by the writ of certiorari in the order in which they appear in the briefs.

    The issues before this Court arise out of a series of the events starting back in about 1957.

    The Ransburg —

    William O. Douglas:

    But may I — Mr. Gilliom, may I ask —

    Elbert R. Gilliom:

    Justice Douglas.

    William O. Douglas:

    — I haven’t found any answer on your part to the two points made by the Government in its amicus brief.

    Have you filed a brief other than this main brief?

    Elbert R. Gilliom:

    No, Mr. Justice Douglas.

    We answered the Government’s brief at two — there are two points in our brief in reply to the petitioner’s brief.

    The first point in which the Government expressed interest was the matter of alleged tying of equipment —

    William O. Douglas:

    Yes, that is —

    Elbert R. Gilliom:

    — to the patent licenses —

    William O. Douglas:

    You don’t even cite or discuss the Ellis case.

    I’m not — I don’t want to divert you from the argument, but just to put you the problems that I have —

    Elbert R. Gilliom:

    Yes.

    Elbert R. Gilliom:

    I will handle that.

    William O. Douglas:

    Would you — in due — due course get to the problems of the Ellis case?

    Elbert R. Gilliom:

    Yes, I will.

    William O. Douglas:

    And — and I assume that you start with the assumption that originally there was an unlawful illegal tie-in arrangement.

    Elbert R. Gilliom:

    No, we do not Your Honor.

    That is the very point, in other words —

    William O. Douglas:

    I mean in 1951?

    Elbert R. Gilliom:

    We — we —

    William O. Douglas:

    1950 —

    Elbert R. Gilliom:

    I beg you pardon?

    William O. Douglas:

    At — at some — at some stage.

    Elbert R. Gilliom:

    No, we do not start with that assumption at all.

    In fact, Your Honor, a point that we make in our brief is just to the opposite.

    The Government has assumed the effect which did not exist and against it, the expressed findings of the trial court are very clear.

    In other words, we do not concede any misuse prior to 1953.

    We very empathically state that there was not, our policy was consistent from the time this company was organized until the time of the trial has remained so.

    William O. Douglas:

    Then — then in your — as you go along, you might explain for my benefit the — the function of that untying letter, the letter that gave information on time.

    Elbert R. Gilliom:

    I’ll — I’ll be glad to.

    The Ransburg Company started out as the soul proprietorship, manufacturing housewares such as bread boxes, canister sets, waste baskets and so forth.

    And they spray painted these products with ordinary conventional spray guns made by the large manufacturers such as the Binks Company.

    There was a great deal of waste paint that came from that process, because of the fact that the air blast carried the paint beyond the product and wasted it and had to be exhausted and much of it was not recovered.

    It was as a result of experiments started by Mr. Ransburg’s sons back in 1937 that they developed this number one process, which was simply using a compressed air spray gun the same type, to atomize the paint.

    But combining with it, an electrostatic field which imparted charges to the paint particles and attracted them to the articles of manufacture, thereby, tending to overcome the effect of the air blast and making a more efficient painting operation.

    Now, that number one process which has been referred to here as the air type process is not before this Court, we submit for the reason that since 1950 as the trial court found, there have been at least six firms in competition with each other, marketing the air type systems.The Binks Company, representatives testified in this case that there was no obstacle to their marketing, the air type electrostatic systems, since they first became interested in it, but they elected not to do so until 1958.

    The issues before this Court are confined to the so-called airless systems or the number two system which briefly is this.

    Instead of a compressed air spray gun to atomize the paint, it’s atomized either by means of a stationary atomizing head or rotating disks or bells, which feed the paint at a control rate to a zone of atomization at the edge of the head where the power of the electrostatic field itself tears off this atomized particles of paint from the liquid film and disperses it in the form of the spray and deposits it upon the article of manufacture.

    The field is maintained in that case directly between atomizing head and the articles of manufacture on the conveyer.

    Now, it was on this improved process which in many cases results in almost 100% efficiency in the deposit of paint and therefore, saves a great deal in paint cost as well as labor cost.

    It’s on this process that these two patents were acquired by application of the Ransburg Company.

    One, for the method of painting in that manner and the other with respect to the apparatus, the method patent as I think the Court has observed, was issued in 1954 and the apparatus patent came out in 1957, probably these proceedings were pending in the trial court and was brought in by supplemental pleadings.

    Elbert R. Gilliom:

    Now, when the company brought out these processes for public use, it found as would anyone that had an idea to market, that in order to sell that idea to industry and to persuade manufacturers of consumer goods that this was a better way to paint their products, they have to supply the tools for doing that.

    Many of the components of this specialized equipment were not available on the open market.

    That was true when the number one system was brought out in about 1944.

    It was also true when the number two system came out.

    When the number one system came out, there was not a safe voltage supply or power pack.

    William J. Brennan, Jr.:

    Safe what?

    Elbert R. Gilliom:

    The voltage supply or power pack.

    In other words, the ones that were available for that time for x-ray purposes and so forth put out too much current and were likely to cause a lethal shock or a fire.

    The same thing was true with respect to the electrodes and the controls of the electrical equipment.

    Ransburg contacted such firms as General Electric Company, a number of others to attempt to interest them in making this special equipment.

    Ransburg’s interest being in licensing the process, it was not interested in the equipment.

    It had no success I’d suppose partially, because that was during the war period and these companies had bigger fish to fry.

    As a result, it had to design its own power pack, its own control, its own electrodes and produce them in order to get anyone to take this process or to consider it for their production lines.

    The same thing was true when the number two process came out.

    These special atomizing heads were not available.

    They were absolutely new.

    The same thing was true with respect to the accurately controllable paint supply system and that was a very crucial aspect of this rather delicate system.

    And the fact is that Ransburg did contact the other large manufacturers among whom were Binks.

    The Court asked whether there was any evidence of that supporting finding number 10 and if the Court will refer to volume 3 of the record page 240, Mr. Roche, the president of the Binks Company himself, testified that they sold the equipment in conjunction with the systems that Ransburg put out.

    And there is no question but what the spray guns, paint spray boots, air paint exhaust systems, air make up systems and so forth, were sold by companies like Binks.

    When the number two system was being marketed, Ransburg had problems with respect to the paint supply which had to be controlled very accurately and it discussed that with the Binks Company among other people, which appears from Volume 1 of the record, page 710 in the testimony of Mr. Rice where he said, they couldn’t — this is talking about the airless system.

    He said they couldn’t use a standard circulating system or pressure regulators — regulators that we had used in our line.

    They even requested us at one time, to make up a special regulator to operate at the low pressures, if they need it.

    Those were the steps that the company took to obtain assistance in getting the equipment necessary to interest industry in this very valuable device.

    It ended up that Ransburg itself, although a small concern had to design this equipment with the help of a man who was well-versed in electrical science and had been on a faculty of Purdue University.

    As it began the marketing systems and industry began to see the value, Ransburg made this equipment available along with its licenses on a leased basis.

    Now, the — the contact essentially was a written license to use the process as long as the process patent was the only one that Ransburg have.

    The contract also said, however, that the company owned inventions and patent applications that have to do with methods and apparatus for electrostatic painting.

    So that, whoever took one of the written licenses was licensed not only under the patents it had, but under the inventions and applications that were pending.

    Now, the equipment which was made available to these manufactures was entirely at the option of the manufacturers.

    Elbert R. Gilliom:

    The trial court found as a fact and the evidence supports it amply that there never was any requirement on the part of Ransburg, there was never any forcing that anyone take equipment in any instance whatever.

    William J. Brennan, Jr.:

    Now, this —

    Elbert R. Gilliom:

    Yes, sir.

    William J. Brennan, Jr.:

    — you’ve spoken now to the process number one or —

    Elbert R. Gilliom:

    Either one —

    William J. Brennan, Jr.:

    Either one.

    Elbert R. Gilliom:

    Either one, that’s correct.

    In other words, this record can be read from the first page to the last and there is not that first bit of evidence from any licensee or prospective licensee or otherwise, that he ever asked to have this license without equipment and couldn’t get it.

    That he was ever discouraged from asking for a license without equipment or that the terms upon which an alternative was available, were not fair and adequate.

    Now —

    Hugo L. Black:

    During the evidence that the contract on which he relied the form of a contract on which your adversary relied, was offered as this sole alternative to buying the apparatus, the additional apparatus?

    Elbert R. Gilliom:

    The evidence on that Mr. Justice Black is that up until 1954, no one had ever shown any interest whatever, in a non-equipment license.

    And in 1954, after the Ransburg Company had —

    Felix Frankfurter:

    Did you say no — no one had shown any interest?

    Elbert R. Gilliom:

    Yes.

    Felix Frankfurter:

    But the non-equipment license was available?

    Elbert R. Gilliom:

    It —

    Felix Frankfurter:

    Was it denied?

    Elbert R. Gilliom:

    A non-equipment license has been available as a matter of company policy since the beginning.

    Felix Frankfurter:

    And was known to be available?

    Elbert R. Gilliom:

    It was known to all the Ransburg personnel to be available and the salesmen were instructed to — to let their prospects know that.

    Yes.

    William J. Brennan, Jr.:

    But, I gather Mr. Gilliom the reason for this is if I understood what you are telling us, is that this equipment was not generally available —

    Elbert R. Gilliom:

    That’s correct.

    William J. Brennan, Jr.:

    — in other places.

    Elbert R. Gilliom:

    That’s correct.

    William J. Brennan, Jr.:

    And no one had had any interest in manufacturing in the competition with —

    Elbert R. Gilliom:

    Exactly.

    William J. Brennan, Jr.:

    Is that it?

    Elbert R. Gilliom:

    Exactly.

    William J. Brennan, Jr.:

    Or manufacturing it themselves as they were licensee.

    Elbert R. Gilliom:

    I think that’s correct.

    And I believe the reason for it appears from the very fact that in a period of approximately five years, when the number two process was introduced to 1951 up until the time of the trial, there had only been a few entered licenses granted.

    I think the simple explanation is that the equipment manufacturers were not interested in that kind of volume.

    In other words, this is not a shelf — a store shelf item, where you can count on so many thousand of year, which would warrant the research and development and everything that’s involved in putting an item on the shelf.

    Felix Frankfurter:

    But is there are —

    Elbert R. Gilliom:

    Each —

    Felix Frankfurter:

    — any evidence to bearing on Justice Black’s question.

    Is there any evidence that there would be the active discouragement or that your equipment were forced upon respective licenses?

    Elbert R. Gilliom:

    None, whatever.

    Hugo L. Black:

    What else — but you still haven’t quite answer that question.

    Whether the evidence shows that this alternative contract was the only one they were offered.

    Elbert R. Gilliom:

    The evidence —

    Hugo L. Black:

    A form of contract to which you referred on page a hundred and —

    Elbert R. Gilliom:

    Page 30 — 32 —

    Hugo L. Black:

    Volume 3.

    Elbert R. Gilliom:

    The only written form of contract was the one on page 32 or slight revisions of that.

    I think in full answer to your question, I would have to go back a little Mr. Justice Black and say this.

    That prior to 1953, the Ransburg Company did not prepare form contracts, standard contracts for non-equipment licenses.

    In 1953, out of what I would call a super (Inaudible) some caution, they prepared those forms for the first time although no one had ever asked for one or had shown any interest in them, even though it had always been the policy that anyone who wanted a non-equipment license could have it.

    But it’s applied those forms and there have been one or two revisions since then, but in substance, they have been the same.

    So that that is the only form that has ever been submitted to anyone if that is the answer to your question.

    Hugo L. Black:

    And then, have all the contracts that have been signed during all that period of time, required that they buy apparatus from it?

    Elbert R. Gilliom:

    The contract does not require it.

    Hugo L. Black:

    But does it provide that they do buy it?

    Had there ever been any that it did not?

    Elbert R. Gilliom:

    No.

    Each of the contracts with respect to the number two system at least, has included the obligation of Ransburg to supply the equipment on a lease basis.

    But at the time of negotiation, the prospective licensee was absolutely free to take either a license without that equipment or to take it, once he —

    Hugo L. Black:

    Well you mean, take — take the license at the — under this other form?

    Elbert R. Gilliom:

    Yes.

    Hugo L. Black:

    Which did provide that — that were subject to such changes and so forth, as you might make?

    Elbert R. Gilliom:

    Yes.

    If the Court will note though, that language which was referred to by Mr. McSweeney it says, Subject to such changes therein and further specifications as Ransburg may prescribe.

    In other words, if a man had a license to use a — use a unit of somebody else’s equipment under this non-equipment license and if there were some aspect of that which would improve operations, Ransburg reserve the right to specify what the change might be.

    Not to designate its equipment, but specification, a reasonable specification which could be met by anybody’s equipment.

    Hugo L. Black:

    Did — did your contracts if they did — if they did sign, provide for the supplying of the (Inaudible) set out on page 187, Volume 1 and was that obtainable at other places?

    Elbert R. Gilliom:

    That is a — what might be called a typical shipment memorandum of the items that went to a costumer who had elected to take the license with the Ransburg equipment.

    Hugo L. Black:

    But that — that shows does it not, a great deal of a — of an equipment that was — could’ve bought on the market.

    Elbert R. Gilliom:

    Oh yes, yes.

    Our point is, however, that the — that the man who wanted the license under the patent, was not required to take this at all.

    But once he had said he wanted it, it was shipped to him, in accordance with this list.

    Felix Frankfurter:

    Was there — were there — was there any witness or witnesses produced by Binks who testified that they couldn’t get a license from Ransburg, unless they also bought a paper, the things on that list.

    Elbert R. Gilliom:

    Not one.

    Felix Frankfurter:

    Was there any witness by — produced by Binks or offered by Binks of purchases who signed the equipment, the facilities that you furnished for getting the license who testified he had to take those facilities or not get the license.

    Elbert R. Gilliom:

    Not one.

    The Binks Company took the depositions of — as I recall three or four representatives of companies that had dealt with Ransburg and each one of those deponents testified that his company had taken the license with equipment.

    Two or three of them said they weren’t aware that they could’ve had a non-equipment license or nobody told them about it.

    But they did not say that they were forced or required to take it.

    On the contrary, each one of them as the Court found and as we point out in our brief, said that, we went to Ransburg for the equipment.

    It was the equipment that we were interested in.

    Witness Wallin, who represented the Webcor Company, said that Ransburg advised him in writing that he could’ve had either one.

    The contract with or without equipment and that his company didn’t want to get into the engineering that would be involved to get the equipment somewhere else, they wanted to experience company to franchise it and they elected to take it.

    But not a single costumer or prospect has testified either in their position otherwise that he felt forced or required to take the equipment or anything else to get a license.

    Now, the — the policy —

    Earl Warren:

    We’ll — we’ll recess now.