United States v. Chas. Pfizer & Co.

PETITIONER:United States
RESPONDENT:Chas. Pfizer & Co.
LOCATION:Former Ada County Courthouse

DOCKET NO.: 70-72
DECIDED BY: Burger Court (1972-1975)
LOWER COURT: United States Court of Appeals for the Second Circuit

CITATION: 404 US 548 (1972)
ARGUED: Jan 12, 1972
DECIDED: Jan 24, 1972

Friedman –
John E. F. Wood – for respondents

Facts of the case


Audio Transcription for Oral Argument – January 12, 1972 in United States v. Chas. Pfizer & Co.

Warren E. Burger:

We’ll hear arguments next in Number 70-72, United States against Charles Pfizer and Company and others.

Mr. Friedman, you may proceed.


Mr. Chief Justice and may it please the Court.

After a seven-week trial, a jury sitting in the Southern District of New York convicted the three respondents, Charles Pfizer & Son, the American Cyanamid Company, and the Bristol-Myers Company under an indictment in three counts with violating Sections 1 and 2 of the Sherman Act, by fixing prices and excluding competitors in a market known as broad-spectrum antibiotic drugs.

Each of the respondents was fined the maximum of $50,000.00 on each count, a total of $150,000.00 fine on each respondent.

Broad-spectrum antibiotic drugs are a group of drugs that are unusually, it came in fairly recently, because they are effective against a wide variety of microbial or micro biotic bacterial infection.

Each of the four –- the three respondents in this case plus another firm, Parke-Davis, that was not indicted had a broad-spectrum antibiotic drug during the period involved in this case.

Each of these drugs was patented.

Most of them are fairly well-known.

One that, Your Honors are probably familiar with.

It is something called Aureomycin which in fact was the drug of Cyanamid.

The drug that is principally involved in this case, the focus of this case, however, is the last of these broad-spectrum antibiotics to come on the market, a drug called tetracycline and the basic theory of the government’s case in this case was that the respondents together with the Upjohn Company and the Squibb Company engaged in a conspiracy to limit access to the broad-spectrum antibiotic market and to fix prices on broad-spectrum antibiotic.

A divided Court of Appeals for the Second Circuit reversed this conviction.

The Court held that certain errors made by the District Court in its instructions to the jury required a new trial and the government has brought this case here on certiorari because of its concern over the way the Court of Appeals reviewed and evaluated the instructions in this case.

Now, we think as I shall develop that the basic error committed by the Court of Appeals in this case was in its failure to view the instructions in their entirety in the context of the entire case.

William H. Rehnquist:

Mr. Friedman, are you asking this Court to simply substitute its judgment for the Court of Appeals as a reviewing Court at the first instance?


No, Mr. Justice.

We think — but we’re suggesting — we’re asking this Court to hold that the Court of Appeals applied the wrong standard in considering the validity of this charge, that’s all.

We’re not asking this Court of course to substitute its judgment for that of the Court of Appeals.

And the flaw we think the Court of Appeals committed in this case was that — it didn’t look at the thing in the context, it found particular phrases which it thought were improper.

It said that the Judge had not stressed certain factors sufficiently and stressed others too much, that this is the basic flaw we think that was committed which outcome to develop.

Now, there’s no question in this case as the Court of Appeals recognized as to what happened.

The problem in this case is as to what inferences should be drawn from the circumstantial evidence.

Warren E. Burger:

Mr. Friedman, it will help me, if you would — id you touched on it, but perhaps there is more to it.

If you’d state, what is the standard this Court is to apply and when it reviews the action of the Court of Appeals of this kind?

You’ve said that they must looked at the instruction as a whole and not by bits and pieces, but that isn’t — for me at least really a standard, how do I —


Well, I think it’s a fair way to put the standard is to see whether — looked at as a whole.

The charge properly put to the jury, the job it was to do, explain to it, the basis on which it was to decide the case.

That is obviously in hindsight, various judges, appellate judges may decide that it would’ve been better to state one thing, one way rather than the other way.

If they had been charging the jury, they would’ve emphasized one thing rather than the other, but I think the basic question, the basic question is looked at as a whole and it has to be looked at also in the light of all the evidence before the jury because the jury obviously considered the instructions in the light of the evidence that was presented, looked at as the — in the — as a whole in the entire case that this charge told the jury what it were suppose to do.


What kinds of decisions that it were suppose to make, on what basic was it to make this decision, how was it to consider this voluminous evidence before, and I think that’s the thing and if I may just say so, with all due respect to the Court of Appeals, this is a lengthy charge, this charge occupies 65 pages in the printed record.

This charge took the District Judge, Judge Frankel three hours to develop, to deliver.

I think it is an exemplary charge.

I really think it is completely fair.

I do not think it is a fair criticism of it that it may have swayed the jury.

The judge tried to do everything he could be to be impartial in this charge.

He set it out in detail and indeed the Court of Appeals at no point suggested that there was any legal error in the charge in the sense that the Court applied the wrong legal theories or anything like that.

It’s just basically, basically it seems to us that what you have here is that the Court of Appeals is here substituting its judgment for that of the Trial Court as to the emphasis to be given to particular factors as to the way in which certain thing should be said and of course, it was the judge who presided at this case who saw all the evidence who is really in the best position to know how to frame this case to the jury.

Now, if I may just briefly indicate what the facts in this case show. During the period of the indictment, now the indictment period covered from 1953 to the middle of 1961, Pfizer which has a patent on tetracycline, licensed only two other firms to make tetracycline, to manufacture it, that was the respondent Cyanamid and the respondent Bristol.

It also licensed only those two plus the two alleged co-conspirators, Squibb and Upjohn to sell tetracycline.

This is all alleged in the indictment.

In addition, there is no dispute that during the entire period of this indictment, only one firm, Bristol, sold tetracycline in bulk that is not selling it to the drug trade in the normal capsule dosages, which are other dosages of selling it in lump product, and that Bristol, sold in bulk only to the two co-conspirators, Squibb and Upjohn.

Now, in addition to that, the evidence shows that during the period of this conspiracy, most of this period, from 1953 to 1960 and indeed for the two years before 1963, the prices of all five of the conspirators, on all four broad antibiotic — broad-spectrum antibiotics drugs was substantially unchanged.

That is the typical example, the most popular dosage form was a bottle containing a 100 capsules and the pricing system they used is they had a price to the — read to the costumer, to the person who gets the prescription and they gave discounts.

Well, throughout this period, all of these five companies on all these four antibiotic drugs charged $30.60 to the druggist for this 100-capsule bottle.

And this price remained static for a nine-year period, despite the following fact; that shares of the market shifted, one of them got more, the other one got less.

Despite the fact that for example Pfizer, who was a low cost producer in a period from 1958 to 1960, saw its share of the market drop from 22% to 15%, while at the same time, Upjohn that was a high cost producer increased its share from 15% to 22%.

In addition to which, the evidence shows that there where substantial cost variations among the five co-conspirators and indeed, the cost of producing these drugs during this period was rapidly and substantially dropping, but despite that no variation in the prices.

Now, the government’s theory is, the government developed, I’ll develop in a minute, is that which you had in here was a series of implied agreements, the first of which was reached between Pfizer and Cyanamid as the result of some — of a settlement of a patent interference, preceding in 1953, and then another series of agreements reached between Pfizer, Bristol, Squibb and Upjohn in December of 1955 when patent infringement litigation that Pfizer had brought against the last three of these people where settled.

The, as I say, the — there’s no question what happened and the government’s theory of the case was that there were these implied understandings and agreements under which each parties agreed, first that only the three respondents would — would be licensed to manufacture tetracycline.

Secondly, that only those three plus Squibb and Upjohn would be licensed to sell it.

That only Bristol would be authorized, who had been permitted to sell it in bulk and that Bristol would in return sell only the Squibb and Upjohn.

That’s one element and secondly, that during this entire period they agreed to and did maintain identical prices.

Now, the question before the jury, the question before the jury was whether this admittedly identical conduct and all of these things that happened, whether this was the result of a conspiracy, of an agreement or an understanding, or whether it was the result of independent business judgment by each of these individual firms as they contend.

There was a vast amount of evidence introduced at the trial on this issue.

This is where these typical big cases that we get frequently in the antitrust field, the record that is spread out here on the table before the Court contains 21 volumes of printed testimonies, it’s more than 12,000 pages.

There was detailed and comprehensive evidence, put in on virtually every aspect of the case; evidence relating to pricing, relating to profits, relating to negotiations on the settling of these patent suits, many meetings of the parties had.

There is a whole great deal of testimony relating to the circumstances surrounding the issuance of the patent to Charles Pfizer & Son in which the government introduced evidence indicating that in connection with obtaining this patent, misleading statements have been made to the patent office and that information materials for the patent office’s determination had been withheld.

Much of this information of course was technically, highly scientific, and as to be expected, the defendants offered detailed explanations as to why they did what they did.

First, their offices denied there had been any agreements or understanding, and then they gave lengthy explanations to why as a matter of business judgment, they did what they did.


And the Court repeatedly told the jury that it was for them to decide on the basis of all the evidence, of all the evidence whether this was the result of agreement of concerted action or of independent business judgment.

I would just like to read one incidence to the Court, one excerpt from the charge at page 4987 which I think is rather typical of the way the Court put it to the jury, and this related to the discussion of question of issuing the bulk, bulk sales, making bulk sales and what Judge Frankel charged to the jury was all relevant evidence and your recollection of it will be part of your consideration as you undertake to consider whether this situation concerning both tetracycline reflected only normal and lawful business conduct by the several companies involved, or whether it tends to show the presence of the conspiracy the government alleges or whether it shows nothing either way and that same theme was we reiterated by the judgment as charged at least 15 or 20 times as it took up each of the 12 means that the government had alleged where the way in which this conspiracy was to effect, that is to each one after he explained the theories, explained the arguments, explained this on common — had briefly on the evidence, he then pointed out it was in the final analysis for the jury to give whatever weight they thought was appropriate to that evidence.

The charge we think was an exceptional charge as I’ve indicated was clear, it was fair, it was objective and explained to the judge — jury on what basis they reached their decision.

Now, we’ve had a lengthy briefs in this case in which they discussed it considerable length, various alleged errors in the charge.

Obviously, it is not feasible in the brief composite of oral argument to the deal with them in detail and I will come to two or three of them in a moment that are listed, but I just like, I think it would be helpful in considering the sufficiency, the adequacy of the charge to put a little of this conspiracy into its proper factual framework.

The first broad-spectrum antibiotic drug came on the market in 1948, and by 1953, there were three broad-spectrum drugs available.

Pfizer had one, Cyanamid had one and Parke-Davis, which the government said was not a conspirator as recognized then in this case as the third one.

In 1953 and in 1952, the drug that Parke-Davis had had gotten some unfortunate medical report, as a result of which it sales dropped sharply.

In 1953, Pfizer and Cyanamid together had approximately 85% of the broad-spectrum antibiotic market.

This business was extremely profitable to them, represented a major if not the major share of their profit and was also a major part of their total sales.

Now, in summer of 1952, tetracycline was discovered.

Word of it got around in the industry and it became quite apparent that this was a great advance in the broad-spectrum antibiotic field, and a drug that was likely to catch on very quickly and within two years after its introduction, I think it had something like 50% of the broad-spectrum antibiotics.

But the existence of tetracycline, of course, threatened the market position that Pfizer and Cyanamid had at that time because if this were a superior drug, and if in fact this drug was not patentable, it could not be patented, and this drug came on the market with no patent protection, it was obvious, it would properly be widely sold and a number of companies would come into it, and what you would have basically, the writing indicates, what you had in the case of penicillin.

Penicillin was not a patented drug.

Penicillin had a lot of sellers, the price went down and down and down and the result of this, just for example, Bristol at the time, we say it joined the conspiracy in 1955, practically its whole business was penicillin.

It was loosing a lot of money, it was desperate to strike.

Pfizer, Cyanamid and Bristol, each filed patent application; one, beginning in 1952 and continued to 1953, and Pfizer and Cyanamid had reason to believe that an interference was about to be declared at the patent office, that is that patent office was going to determine which of these have priority of invention.

So, they got together and settled the case and they settled it on a basis that they would exchange proofs of priority which ever one turned out to be the winner would get the patent, the winner would license the looser, they would exchange know how and in addition at this point, Pfizer had no tetracycline, only Cyanamid did, and Cyanamid agreed to sell to Pfizer a very large amount of bulk tetracycline to enable Pfizer to get right on the market because Pfizer was concerned that if it did not have immediate tetracycline while Cyanamid did, Cyanamid would get what they call Le con (ph).

They’d get their product under the market.

They would get the doctors used to prescribing this and this would result in putting them at a tremendous disadvantage.

They sold them a supply of many months.

It came to a total of $3,800,000.00 and they begun to shipping this drug even before the interference was declared.

Well, things didn’t work out quite as they had thought.

Originally, after Pfizer, let me go back on it, they did this, they exchanged proofs and Cyanamid conceded priority to Pfizer, Pfizer claimed the concession.

At this point, Pfizer anticipated that it would be shortly getting the patent and it was around this point that the Chief Executive Officer of Pfizer had a meeting in his plant with a group of securities analysts and after the end of the meeting, there was some questions and answers and he was asked, did you got the patent, would they licensed others, and he said, no, we’ll not licensed anyone other than Cyanamid, a report that was widely spread in the drug trade.

Well, things don’t always work out as planned because despite their best hopes the patent office to declared an interference, not only with two of these patents, but also with Bristol and then several months later, the examiner came down with the decision in which he said, he was going to dissolve the interference and rule that the tetracycline wasn’t patented at all.

It was not patentable at all because he said, he surmised that tetracycline was co-produced with Cyanamid’s broad-spectrum antibiotic Aureomycin and the process by which these companies were manufacturing tetracycline was to subject Aureomycin to some further things, in effect extract out of it the tetracycline, they changed its molecular structure.

This of course posed a great threat to both of them, and it was after this thing that Pfizer set out to try to persuade the examiner to change his mind, that he was wrong, that in fact, to prove to him that tetracycline was not produced together with Aureomycin and this is where they made the misrepresentations, relied on certain misstatements that Cyanamid had made.

Now, under the licensing agreement that Pfizer and Cyanamid had in settling the interference, when, as soon as the Pfizer patent was issued, Pfizer was to license Cyanamid and Cyanamid was to pay 2.5% royalties on all the tetracycline it sold.

Well, one might wonder why Cyanamid who would immediately be subject to paying royalties upon the grant of the license to Pfizer would attempt to help Pfizer and to press for a license to Pfizer and Cyanamid’s private counsel in this testimony explained quite candidly why, in a little passage quoted at the top of page 16 of our brief.


It said, the reason it was important to Cyanamid to see that the patent issue to Pfizer was he explained, we wouldn’t have people like Bristol in the market for one, we wouldn’t have the Italians importing it over here for another and of course anybody with no patent on tetracycline, any Tom, Dick and Harry with a little bit of money could get into the business and the government’s theory which was presented to the jury was that this whole thing was part and parcel of an implied understanding between Pfizer and Cyanamid when they settled the interference proceeding that they would limit licensing to the looser before the patent office and that they would set non-competitive and fixed prices on the sale of tetracycline and thereby in effect preserving the position they had.

Now, these different aspects of the case of course are all interrelated because the only way that the price structure could be kept up, the only way that prices could be kept high was if you are sure that you didn’t have any other people coming into the industry who would cut the prices and the only way you could be sure that no one else could get into the industry if you could control it with a patent.

Now this is under the government’s theory how Pfizer and Cyanamid began the conspiracy.

The government — what happened was Bristol which at this point had no broad-spectrum antibiotic and was in desperate financial shape, although Pfizer had warned that it would sue anyone for infringement who manufactured the drug, in the summer of 1954, began itself to sell tetracycline under its own brand and then in September of that year, it gave licenses to Squibb and Upjohn, the two co-conspirators, I’m sorry, it didn’t give the license, it sold, it sold tetracycline that it had bulk to these two firms.

The day that the Pfizer patent was issued, Pfizer sued Bristol, Squibb and Upjohn for patent infringement.

The three of them filed answers in which they challenged the validity of the patent asserting among other things that had been procured by misrepresentations in the patent office, the response of Pfizer to this was to sue the three of them for tremendous damages.

It sought 15 million from Bristol, 30 million from Upjohn, 6 million from Squibb.

At this point the suit was being contested rather frivolously.

Now, later in 1955, Bristol got word that Upjohn had been talking to Pfizer about possibly settling the patent suit.

Upjohn was quite concerned about this $30 million potential liability and then we had a series of agreements which led to determination for Pfizer litigation.

First, their agreements between Bristol on the one hand and Squibb and Upjohn on the other under which Squibb and Upjohn gave Bristol the authority to settle and handle the Pfizer litigation.

William H. Rehnquist:

Mr. Friedman, in this — did the Court of Appeals’ opinion in reversing the District Court didn’t turn on the insufficiency or the other?


No, it does not.

Indeed, by implication the Court presumably thought that the evidence was sufficient because it sent it back for a new trial, and if it felt that the evidence was insufficient, but I think these facts on bringing out a meaningful and helpful in terms of some of the objections they raised to the charge.

So — and in the course of this licensing, this, I am sorry, from the course of this agreement under which Bristol is authorized to handle the Pfizer and Squibb interests in settling, negotiating, and conducting the litigations against Pfizer.

There was a statement in there that any license that Bristol obtained for Squibb and Upjohn during the course of the litigation, during the course of the settlement, might be limited, however, to giving Squibb and Upjohn the right, the right to sell and use, but not to manufacture.

So in addition to which Squibb and Upjohn were bound, were bound under this agreement for the duration of the litigation with Pfizer, the patent litigation and three years thereafter to purchase all their requirements of tetracycline from Bristol.

So at this point Bristol had the thing locked up in the sense that it had control of the litigation.

It was protected that Squibb and Upjohn couldn’t settle themselves with Pfizer and perhaps purchasing both from Pfizer and therefore loosing a customer and at the same time it had put in there a provision that would protect it from having to give its two major customers, Squibb and Upjohn, the right to manufacture and thus oust this important sort of business.

Now, ultimately the litigation was settled and the settlement was precipitated by the fact that there was, brought out shortly before the settlement, the fact that a detective who was paid by the general counsel of Pfizer had undertaken to tap the telephones of Bristol and Squibb.

And when this was brought to the attention of Pfizer, Pfizer immediately said let’s get together and settle it, and they settled it and they settled it as I have indicated that a license was given to Squibb and Upjohn to make use in sales of the drug trade and a license was given to Bristol to manufacture using itself.

Now, during the period, thereafter, from — I mean, for the whole period to the end of the conspiracy, no one else was licensed other than these five people.

No one sold in bulk other than Bristol and during the same period there were ten requests made for licenses or for both sales of tetracycline and they were rejected.

Now, let me just very briefly refer one or two of the grounds on which the Court Of Appeals said that this charge was insufficient.

Let me take the major argument that the respondents make here.

Parke-Davis was not a conspirator.

Parke-Davis during the period of the conspiracy did many of the things that the government said when done by the three respondents as part of the conspiracy, they followed the same prices, they did not grant licenses to start with.

And the theory of the respondents in this case, one of their principle defenses was that Parke-Davis is doing the same things, admittedly not pursuant to a conspiracy as these conspirators had done with strong evidence that in fact this identical conduct was a result of independent business judgment, but not and not agreement of concerted action.

The government of course pointed to the fact that Parke-Davis in many respects had not done the same thing.

Parke-Davis for one thing was not in tetracycline.


Secondly, Parke-Davis gave no licenses.

Parke-Davis was not involved in any of the patent litigations and the various negotiations.

The District Court charged the jury at length about this issue.

It pointed out that they had heard a lot of evidence with respect to Parke-Davis.

That Parke-Davis in some respect was similar that in other respect, it was dissimilar.

It pointed out that Parke-Davis was not indicted and it urged the jury, told the jury, this is one of the factors they have to take into consideration.

The Judge refused an instruction which the respondents tended and which the respondents wanted them to line up the dissimilarities, I am sorry the similarities between Parke-Davis’ conduct and that of the respondents.

The judge refused to do that.

He said “that would be quite correct and we think that would be an unfair charge, that would be a loaded charge” because if they have to charge on the similarities I should also charge on the dissimilarities.

They also objected because they — and the Court of Appeals criticized the cause of the District Court for not permitting an instruction on the presumption of innocence.

They wanted the judge to instruct on a presumption of innocence, that Parke-Davis not a defendant was presumed innocent.

The judge said that presumption of innocence relates to the defendants and there was no occasion to instruct on the presumption of other persons that Parke-Davis was not indicted and that is as far as no need for the jury to speculate it on why they had not been indicted.

And had the judge given the instructions that the respondents submitted, this could have engendered a further problem of confusion because the jury might then, despite other instructions have drawn some interest, drawn some inference, that the fact that the respondents were indicted was itself of significance.

I’d like to reserve the balance of my time.

Warren E. Burger:

Thank you Mr. Friedman, Mr. Wood.

John E. F. Wood:

Mr. Chief Justice and may it please the Court.

I represent Charles Pfizer and Company, one of the three respondents in this case.

As to some matters in the case, the factual situations of the respondents differ from one another.

Mine will be to present matters that are common to the respondents and at least they are not inconsistent with the views of any of the respondents.

At the outset, I should like to refer to the point with which Mr. Friedman started and that was the approach of the Court of Appeals to this case, the nature of its review and the nature of the review because as I see it is being sought in this Court.

The argument has been made in the government’s briefs that in this case in effect the Court of Appeals review was over meticulous, that it found slight errors on the basis of considering particular language in isolation.

And that this was done without reference to the charge as a whole.

But with respect I urge that that is a wholly erroneous evaluation of what the Court of Appeals did.

The Court of Appeals tells us that their procedure was to review the charge as a whole and that they reviewed the entire record, the whole of it.

They considered the different kinds and subjects of evidence in relation to each other and they considered the course treatment of these different kinds and subjects of evidence in comparison with each other.

And the Court was concerned that whereas the instruction, when it discussed evidence and I’m not now referring to the general parts of the charge where the basic principles are applicable, but the parts in which evidence was discussed, when the court was discussing the parts of the evidence upon which the defendants principally relied, it did not give the jury much room to give weight to that evidence.

On the other hand, by in effect neutralizing the evidence upon which the defendants were principally relying, the field was left for the inflammatory materials concerning which much evidence had been put, which as the Court of Appeals noted really had the effect of converting this in the minds of a lay jury to a trial for profiteering and patent fraud.

The importance of the charge in this case was fundamental as the Court of Appeals expressly noted, and of course, in reviewing the charge, the Court of Appeals had to look at the language of it and in commenting on the charge it had to comment on some of the language.

But that is a far cry from taking words in isolation and I submit that the Court will find them that there was comprehensive review and the conclusion to which the Court came was that because of errors which it found taken as a whole, not picked up one at a time and laid aside, but taken as a whole.

These errors were sufficient to deprive the defendants of a fair trial.

John E. F. Wood:

Now, that was in the main, I submit a factual exercise and a factual decision.

The Court of Appeals did not cite a single case as I remember in its opinion.

The question the Court of Appeals was addressing itself to was having in mind the complexities of this case, the different kinds of evidence that are involved, the significance in some instance is very limited, significance of some of the evidence that was most heavily emphasized by the government has this trial been conducted in such a way as to have accorded to these defendants a fair trial and the Court felt itself of course to the conclusion that the answer to that was no.

Mr. Friedman was asked what sort of review was expected in this Court.

I would respectfully submit to the Court that the only review that could be done would be to go through the same process that the Court of Appeals went through.

Now a word, if the Court please, about to the basic issue and the basic problem that the jury had to deal with here, it has been clear throughout the case and it’s conceded by government counsel stated the by the court that the government’s sole reliance here in its attempt to prove any implied conspiracy was on circumstantial evidence.

There were agreements among the parties, written agreements.

First, negotiated between Pfizer and Cyanamid in November 1953, a later group negotiated between Pfizer on the one hand and Bristol, Squibb and Upjohn on the other in December of 1955.

Those agreements regulated the rights and obligations of the parties with respect to some of the subject matter of this case.

There is no contention that any of those agreements was in itself were unlawful.

It is conceded that the terms under which the parties settled their affairs where lawful.

The contention is rather that there were implied understandings in addition to what was put into these agreements and that the implied understanding was to be found on the basis of the conduct of the parties after their settlements and the logical proposition asserted was that companies acting independently and without conspiracy would not in fact have acted the way these companies did.

Now, as I’ve said the Court found that some of the evidence most heavily relied upon was — by the defendants was not given correct treatment in the charge.

Consider for example, of the Trial Court’s treatment of the evidence as to Parke-Davis and Company to which Mr. Friedman has made some reference.

Bear in mind, if the Court please, that the proposition being put to the jury here was that a company acting independently and without conspiracy would not have done the things that these defendants did with respect to the pricing of their products, with respect to sales in bulk, with respect to the granting of patent licenses.

That meant of course that the jurors had asked themselves, well, what would an independent company not in conspiracy had done and it happened that we had in this case an independent, non-conspiratorial model, the second largest company in the industry, one of the most successful companies in the industry which was assertedly not a conspirator and the evidence showed without any question that as to pricing, that company Parke-Davis and Company from the beginning of its participation in this industry right down to 1960, acted exactly the same way these defendants did with respect to the levels of prices and all the other aspects of pricing.

And far as bulk sales and patent licensing were concerned, the evidence showed that Parke-Davis’ behavior was, if anything, even more niggardly than that of the defendants.

It granted no licenses to anybody.

It sold no bulk to anybody and the court and jury did not have to speculate as to why this was so.

The President of Parke-Davis was called by the government and he testified about these policies of his company and stated the reasons for them, so it was all laid out.

Warren E. Burger:

Were the counsel inhibited in anyway from arguing that evidence to the jury?

John E. F. Wood:

Yes, Your Honor, I would come to that Mr. Chief Justice, but the key point is that an important fact about the evidence was not put to the jury and I am coming to that right now and I will.

The key to the significance was that in this case, the government counsel affirmatively asserted that Parke-Davis absolutely was not a conspirator.

It was not merely said that Parke-Davis was not indicted or has not been charged as a co-conspirator.

Government counsel said and the Trial Court noted in colloquy which is quoted in our brief that Parke-Davis absolutely was not a conspirator and I state that on record said government counsel.

Well, that meant that this company, the parallel acts of this company was the action of a company assertedly not a member of any conspiracy.

We sought to have that fact brought to the attention of the jury.

We asked the court in its charge to the jury to inform them of the fact that Parke-Davis was not — was asserted not to be a conspirator.

The Court declined to do that.

We even tried some other ways because well, may we argue then some of presumption of innocence and the Court said, “no, you may not.

John E. F. Wood:

I will stop you if you try that.”

Well, may we argue about the presumption of regularity of business conduct?

“No, I will stop you if you try that” and the most that the Court would do in informing the jury about this was to say that Parke-Davis had not been indicted and was not charged as a co-conspirator.

And the charge went further and made greater difficulty for us because after having limited the information to the Jury to just — the technical fact that there was no indictment against Parke-Davis and no charge of being a co-conspirator, the judge went further and told the jurors that in emphatic times, that the fact that Parke-Davis was not indicted and these were quoted from charge, has no relevance whatsoever in any direction as a fact itself.

Now, what could the Jury make of that?

All we know about Parke-Davis is, that it’s not indicted and the judge tells us that the fact that it’s not indicted has no significance in any direction.

How can we relate this evidence?

And then the Court took one final step, or before I — may I just refer to a fancy at page 70 of the brief of the Government in this case, the main brief, it is said there inadvertently that there was constant reminders that Parke-Davis was not considered a conspirator.

That the Court will find is not what the record shows.

What we were trying to do was to get the Court to inform the Jury that Parke-Davis was not a conspirator and that we did not succeed in.

Well, the final words of the Judge about this Parke-Davis testimony, said that since Parke-Davis is not on trial here and since the defendants are on trial, your verdict, and I quote, “must be based in the end on the law and the evidence relating to them, to the defendants.”

That left the Jury very little room to give weight to the action of Parke-Davis.

They were told that what they must look at is not Parke-Davis’ actions, but the defendants.

Warren E. Burger:

Well, my question to you earlier Mr. Wood was this.

“Was counsel for Pfizer inhibited in arguing to the Jury any of the evidence, the testimony that came from the Parke-Davis Vice President?

John E. F. Wood:

Well, not — no sir, no, Mr. Chief Justice.

That the limitations — well, there were — I referred to the fact that the — we were told that we could not make certain arguments.

We were told by the Court also that we could risk argument if we wished, but we were given the definite impression that the Court was going to be very strict in limiting us and we simply did not know what to do.

We did try to argue it to a limited extent, but since the key fact had not been put to the Jury and we were not free to put it to the Jury, our argument was necessarily much less effective than it could have been.

William J. Brennan, Jr.:

May I ask Mr. Wood, are the arguments to the jury reproduced in the in the record?

John E. F. Wood:

Yes, Mr. Justice, they are.

William J. Brennan, Jr.:

I do not see any page citation to run a long record?

John E. F. Wood:

We can supply those —

William J. Brennan, Jr.:

Thank you.


John E. F. Wood:

Well, I have really just as briefly as I can adequately on the Parke-Davis aspect that I should like to turn to another part of the charge as to which the Court of Appeals concluded that evidence favorable to the defense was seriously undermined by the charge and that had to do with testimony by the principal officers of the defendants.

These men were called by the Government as the persons who made the decisions that were alleged to be conspiratorial and they were examined at length by government counsel, and they were cross-examined.

They gave detailed factual accounts of the actions, of their actions in determining the policies of their respective companies as to all of the matters involved in the case.

They described the business and economic considerations, many of them quite peculiar to the prescription drug business and many of them of special application to segment of that business that included these new wonderfully popular wonder drugs.

And they showed how those economic and business factors really govern their decisions and would have not indicated that other decisions could’ve been made without loss of profitability.

John E. F. Wood:

In the course of this testimony, they told in detail about the meetings at which conspiracy was alleged to had its inception.

The meetings in November of 1953, between Pfizer and Cyanamid, the meetings in December of 1955 at which Bristol, Squibb and Upjohn would claim to have adhered to the conspiracy.

They described what these meetings were about, how they came to be held, what problems they discussed, the objectives of each party, what was said, and what was done by the participants, very full detailed factual accounts of what transpired.

Now, in the course of this, they made certain denials asserting that the agreements, alleged to have risen by implication were not formed and that the parties remained free as to all these matters.

Now, this testimony was completely inconsistent with any implied conspiracy and taken as a whole, the testimony was a cornerstone of the defense case.

But although the court and charge to the jury began by saying that the Jury should give full consideration to this, the rest of the discussions of this evidence, again I am not talking about the general parts of the charge but the parts where the Court was specifically addressing itself to this evidence, really consistent as the Court will see of a series of reasons why the jury should give that evidence little if any weight.

Our time doesn’t permit me to touch on —

William H. Rehnquist:

Mr. Wood, isn’t it the general rule in Federal Courts that a federal judge can comment on the evidence?

John E. F. Wood:

Oh, yes, yes.

But our contention and the decision of the Court of Appeals was that the Court here commented erroneously.

Warren E. Burger:

At the close of the instructions, Mr. Wood were any requests made to the judge, the trial judge, to correct or supplement his instructions?

John E. F. Wood:

Yes, Mr. Chief Justice.

We spent several hours with the judge making the exceptions, making additional request,s urging the judge to correct some of the serious errors that we felt were involved and the judge did not change one word of the charge.

William J. Brennan, Jr.:

Now again, is that colloquy with the judge recorded in record?

John E. F. Wood:

I believe it is Mr. Justice.

The — this colloquy — 5007, I should note there that we had a stipulation that all the requests, charges, and all exceptions and so on made by anyone understand would be nearest to the law, so the fact that one lawyer speaking here and another lawyer there has no particular significance.

William J. Brennan, Jr.:

Now, I gather that during deliberations of the jury on occasion maybe more than once asked for the part the record of the –?

John E. F. Wood:

Yes, Mr. Justice.

They asked for the Parke-Davis matter.

It’s an interesting point there which has some significance as to the effect of the charge and the importance of looking the words.

The jury did not have to rely upon an impressionistic recollection of something they have heard hours before.

It was followed here the unusual of course that the Court provided to each juror a full copy of the charge to take into the jury room with him.

So they could take it up line by line and that they did so as indicated by the fact that when they asked for evidence to be given to them, they asked for it by reference to a specific passage.

William H. Rehnquist:

Was that by stipulation of the parties or at least by consent?

John E. F. Wood:

Yes, Mr. Justice.

Harry A. Blackmun:

You did not object to that maneuver?

John E. F. Wood:

That is correct.

In this with the Parke-Davis, no matter what else that the jury asked?

John E. F. Wood:

I believe that is all.


John E. F. Wood:

Well, may I just mention a couple of points about the difficulties with the charges and testimonies of our position.

I’m really limited to one, in view of shortness of time.

After having suggested several reasons why the testimony should be given — perhaps a limited way that it need not be given much weight, I believe that is a fair characterization of the effect of the charge.

The Court concluded on this subject by saying that in considering whether to give regard to the evidence, they should bear in mind the fact that these assertions of innocence by the officers may have included the intentions of law and of course he has made it clear to the jury that they would’ve take the law from the judge and not from any other source.

Nothing was said as to what part of this was contentions of law.

It was simply said, you — in considering this you must bear in mind that does this may include contentions of law.

Now, this testimony was intensely factual and even in the denials it was factual.

The question here was whether an implied understandings had been reached by these men.

There was no question of law as to what you can do under a patent or what you can do in certain circumstances.

Everybody knew that if this business was conducted independently, what the parties did was lawful.

It was conducted under some implied understandings it was not lawful so the fact of understandings was the essential issue in the case.

And the factual nature of such testimony was established by this Court in the Interstate Circuit case.

There the Court held in a Sherman Act case that the inferences adverse to the defendants could be drawn from the fact as to whether there had been an agreement for concerted action because the defendants did not produce witnesses under their control who were in a position to testify as to whether there had been agreements or concerted actions.

Now, the necessary and explicit premise of that decision was this would be factual testimony and it would be anomalous, I submit, to hold in the face of that decision that if such witnesses are called and do testify, the jury maybe allowed to rest their testimonies aside on the grounds that some undisclosed part of it is regarded as to making factual contentions, I mean, legal contentions.

May I take just a few minutes on subject of costs, profits, unreasonable profits, unreasonable prices.

One of the most amazing aspects of this case was the extent of which the prosecution was based on the constant hammering of the proposition that these companies made too much money and that that necessarily meant with their prices were too high.

Whatever reasons were advanced for the admissibility of the evidence about the costs and profits, those reasons were not what was put to the jury by government counsel, were unreasonably high.

Now the technique chosen for showing that the profits were so high was to take their manufacturing cost and compare that with the selling price and say that the difference is profit.

The manufacturing cost included nothing for research or warehousing and distribution, for selling and promotion, for administrative overhead, for taxes.

So, everybody knew that this comparison did not involve a comparison which could show true profit.

The government had available, had in its possession, accounting studies which were designed to show total costs and true profit.

It declined to use these studies but hammered away at this production cost, selling price comparison, and in the opening to the jury, in the summation with play cards, with magnified tables and charts, that was the subject that was dinned into the jury of both into their eyes and to their ears.

We tried as best we could to stir trial away from the question of the fairness of profits because that question has no bearing in this case.

Harry A. Blackmun:

But would you put in a closing testimony as to research, administrative etcetera costs?

John E. F. Wood:

Well, Mr. Justice we did not.

Our plan as the government counsel is indicated in his brief, since the — both government testimony upon which the defendants were going to rely was being put in — had been put in by the government.

We wish to put in our whole case of this part of the government case, so we would not in the eyes of the jury be protecting the trial with the unnecessary carrying on of what had been deducted.

We did in the course of cross examination seek to have received these accounting studies.

They were rejected not finally but at that time.

The one — the one offered by Pfizer for example, was rejected on the grounds that the government needed more time to study it.

John E. F. Wood:

The Government had had it for over seven years and the argument that it should not be received at that stage of the trial because the government needed more time to study it frankly did not make any sense.

William H. Rehnquist:

Did you re-offer it later?

John E. F. Wood:

No, Mr. Justice we did not.

We did not put in the case except to call one witness to put in one exhibit.

Well, the —

Warren E. Burger:

How much time was devoted to putting in your case Mr. Wood, after the Government rested?

John E. F. Wood:



Harry A. Blackmun:

Mr. Wood, incidentally, how long was the jury out?

John E. F. Wood:

About 14 hours, a great deal of which was at night.

William O. Douglas:

That was continuously without a recess.

John E. F. Wood:

Yes sir.

William J. Brennan, Jr.:

I gather Mr. Wood, truly what — you say that Court of Appeals held and practically held was that the things you have been talking about bias the jury in favor to have finding of agreement —

John E. F. Wood:

Yes, Mr. Justice.

William J. Brennan, Jr.:

— as to matters which done independently would not have been illegal?

John E. F. Wood:

Yes, sir.

And that these errors not taken separately, as government counsel asserts, but looking at the conduct of the trial as a whole, the charges as a whole, that the effect of it was to produce an imbalance from the evidence favorable to the defendants was downgraded and undercut when this inflammatory evidence principally relied on by the government was given much freer scope, the effect was an imbalance which in the judgment of the Court of Appeals resulted in the denial of a fair trial.

Harry A. Blackmun:

Do you have any comment about Judge Hay’s dissenting opinion?

John E. F. Wood:

Well, if this Mr. Justice Blackmun, he conceded at the outset that the government’s evidence was not particularly strong, at least not overwhelming as the way you characterized it.

As to some of the errors, I submit he did not disagree that they were errors as to Parke-Davis for example, but he said that it appeared to him that it wasn’t necessary to reverse on the ground of these errors.

Well, I submit that the errors were fundamental and that taken together they did result in an imbalance which was quite hurtful to the defense.

Thank you.

Warren E. Burger:

Thank you Mr. Wood.

Mr. Friedman your time was entirely consumed, but if you have anything of big urgency, we’ll give you one minute.


One minute, well, I’ll try to be very rapid.

First, Mr. Justice Brennan, the arguments for the jury is set forth at length at page 4719 to 4913.

William J. Brennan, Jr.:

Excuse, 47 —


4719 to 4913.

Secondly, I’d like to refer the Court to pages 60 to 65 of our brief in which we argue that Parke-Davis and the other defendants were not inhibited from making to the jury the arguments on Parke-Davis, that we argue this was basically a judgment strategy judgment made by themselves and finally, I just like to say that we disagree.

We disagree with Mr. Wood’s arguments that somehow this charge denigrated the evidence that was favorable to the defendants and stressed the inflammatory and prejudicial thing.


We think this is a fair charge and all I can urge upon the Court is that when it reads the charge, when it reads charge, it seems to me as completely objective.

They’ve discussed all of these evidence.

They’ve recognized the problems on the costs which Mr. Wood is referred.

The court specifically pointed out to the jury that the cost figures, the difference between factory cost and selling price did not take account of many other items of course and that was extensively brought out in the examination for witness and the court charged the jury, that those were factors to be taken into account.

Thank you.

Warren E. Burger:

Thank you Mr. Friedman.

Thank you Mr. Wood.

The case is submitted.