United States v. Singer Manufacturing Company – Oral Argument – April 29, 1963

Media for United States v. Singer Manufacturing Company

Audio Transcription for Oral Argument – April 25, 1963 in United States v. Singer Manufacturing Company

del

Earl Warren:

United States, Appellant versus the Singer Manufacturing Company.

Mr. Pettit, you may continue your argument.

Arthur E. Pettit:

Mr. Chief Justice Warren, may it please the Court.

I would like to make clear one point concerning the defendant’s intention that maybe this need not be done, but I want to make sure.

Mr. Justice Harlan asked Mr. Friedman on Friday whether it was the government’s contention that the Trial Court did not realize that an agreement could be implied from the facts.

Mr. Friedman answered that that seemed to be the tone of the opinion and I think even affirmatively said, yes.

But after another question, he corrected that and he stated that the Trial Court had found that there was no express agreement and that there was no implied agreement.

The government accepts these findings and there is therefore no contention from the government in this case that the Trial Court overlooked the possibility of inferring an agreement from the facts.

[Inaudible]

Arthur E. Pettit:

I said before the Trial Court and I say here with pleasure that Singer wished to obtain this patent in order to enforce it.

It had obtained an order to enforce it and having obtained it, it has tried to enforce it.

Its every purpose was to obtain this patent and by the use of it, exclude machines infringing that patent.

No other machine, no other competitor, only those who are dealing in infringing machines.

[Inaudible]

Arthur E. Pettit:

That’s correct.

There had never been any question on that from the beginning.

I stated that at the opening of the trial and I state it here.

Now —

Byron R. White:

Mr. Pettit isn’t it true that the Gegauf patent dominated the Singer patent for multicam machines?

If you have not — if Gegauf had wanted to that they had stopped you from making your multicam machines?

Arthur E. Pettit:

Yes, indeed.

That was the whole trouble.

The Gegauf patent was as Mr. Friedman said nine days ahead of Singer’s Harris patent and it discovered this during negotiations with Vigorelli.

It was therefore in the position in which a machine which it had itself invented, developed was producing and selling could be excluded by Gegauf from the United States market.

Byron R. White:

But he first got a license.

Arthur E. Pettit:

That’s the first thing that they did, was to –-

Byron R. White:

Was this a renewable license or a perpetual license?

Arthur E. Pettit:

Complete license for the life of the patent.

Byron R. White:

Was that license —

Arthur E. Pettit:

So once that agreement was made, Singer had a license under which it could operate for the duration of the patent.

Byron R. White:

So it is true then that the acquisition of the patent was motivated by another purpose other than to —

Arthur E. Pettit:

To be able to manufacture, yes indeed.

The purpose of the acquisition was to protect the Singer’s machines.

Was it an exclusive or non-exclusive?

Arthur E. Pettit:

It was a non-exclusive license.

And Singer had cross-license, they cross-licensed their respective patents.

[Inaudible]

Arthur E. Pettit:

No, I did not —

[Inaudible]

Arthur E. Pettit:

White, yes.

[Inaudible]

Arthur E. Pettit:

No, White is a company that formerly manufactured it in the United States and it went out of business because of manufacturing, because of the influx of the Japanese machines.

It now buys these machines from the manufacturers in Japan and distributes them in the United States.

[Inaudible]

Arthur E. Pettit:

It would.

[Inaudible]

Arthur E. Pettit:

Well, I of course do not know what this particular machine that they’re advertising, but they have of course been importing, did import during these years infringing machines.

There are machines that are multiple-cam machines that are not infrangible.

That’s not infringing.

Arthur E. Pettit:

Certainly.

[Inaudible]

Arthur E. Pettit:

And I would like in connection with that to just give a little background on this.

Immediately or say in 1947, the Japanese imported no sewing machines into this country.

And before the war, they had imported none, one year one machine another year one machine.

But few imports they had, had been to countries adjacent to Japan, they were imports into those countries.

They started with none in 1947 and by 1959; they were importing 1,100,000 machines per year.

The affect of that was utterly disastrous to the sewing machine manufacturing industry in the United States.

When it started, there were seven manufacturers in addition to Singer.

When 1959 arrived, there was not one single manufacture of sewing machines left in the United States.

Singer alone survived with one minor exception of a company that manufactures for a particular company on specifications, but does not manufacture to sell Gegauf.

Arthur E. Pettit:

With that exception, every single manufacturer had been put out of business by this competition.

Now I think that the purchase of this patent must be viewed in that light.

Singer survived it, but it survived it solely because it was so well established, so big and had such resources that it could survive this delegate.

It’s percentage of the market went down from — by competing — I’ll get to the exact figures here, if I may, just one minute from — they went down from 57% to around 30%.

Their manufacturing of machines, their portion of the market also went down the same way in the manufacturing in the United States.

They resorted to bringing in machines from abroad to a very large extent, bringing in as many as 193,000 in one year.

Now it has survived that and it has come back to a certain degree, but not to what it was and as of the last year, the Japanese had over 60% of the sewing machine market in the United States.

Of course, the government will argue that while that maybe very unhappy, that’s what the Sherman Act permits and is intended to accomplish?

Arthur E. Pettit:

That is correct, but it also — my answer to that would be, that it is intended also to permit companies to use reasonable means to protect themselves in their own business.

Well, I’d like to ask you a question as to that.

Am I correct in understanding that the District Court found that other than these patent arrangements there is no a collateral understanding and no arrangement, formal or informal, between Gegauf and your clients to keep these Japanese machines off the American market?

Arthur E. Pettit:

That is correct.

It found it expressly and several different times.

It said that there was absolutely no agreement, no conspiracy, no arrangement of any kind between Singer and Gegauf and that —

Arthur J. Goldberg:

[Inaudible]

Arthur E. Pettit:

There is no such correspondence that I know.

Arthur J. Goldberg:

[Inaudible] communication.

Arthur E. Pettit:

Well, he referred to a communication from Gegauf saying that Gegauf had not disclosed that Singer was proceeding on Singer’s then owned patents.

He did not point out that that information came to Gegauf from a letter that Gegauf had received from Singer.

So Gegauf was merely saying that he had not disclosed to certain people in Germany that Singer had brought these actions on these patents and in doing it, he referred to your patent and ours, but by that purely colloquial he meant the patent that used to be ours and the information that these actions, that this action when brought came to him by a letter from Singer.

So there is no statement there that he knew these actions were going to be brought, but I think that’s immaterial.

I don’t think there is any question whatever that he knew that Singer was going to enforce the patent when it got it.

Now, Singer had said to Gegauf that the reason Singer wanted the patent was that Singer could enforce it better than Gegauf could.

Singer was paying Gegauf $90,000 for the patent.

Singer was manufacturing a machine that was under it and there were infringers coming in.

Now, it’s no secret.

I think the man who just has normal intelligence could not help but note that Singer was going to enforce the patent [Inaudible], he would otherwise would not be paying $90,000 to get it, its just simple.

And I say that that is the fact that anyone would have known and that Gegauf did know and that there is absolutely nothing wrong in the discussions that took place that merely recognized what the fact of the life were, of course it was going to that.

But it is crystal clear that Singer was protecting itself at every minute from getting into any entanglement with Gegauf and any kind of an agreement express, implied or otherwise that Singer would operate with these patents in a particular way.

Singer wanted to get the patents in order to be the complete owner of it.

Arthur E. Pettit:

The correspondence will show that time-after-time it referred to the fact that it wanted become the complete owner.

At one point, it was pointed out that the advantage of making a purchase and paying it and not paying all these works that they would be true with Gegauf.

Now the Trial Court has gone through all of those and has found that they are clear and you remember my saying the other day that he said, absolutely, there was no agreement, no understanding of any nature whatsoever.

Arthur J. Goldberg:

[Inaudible]

Arthur E. Pettit:

Well, I would say that the basic agreement was not for one you just mentioned it was the license agreement itself and that is another point that the Trial Court has made a finding on.

It made the finding that the purpose of the license — of the cross-license agreement which of course came first, that the purpose of the cross-license agreement was to obtain a license.

That was the essence of it, that’s what the party’s consider was important.

Now I would come to that whole point, because it is a separate point and I would — I intend to refer to it later.

Arthur J. Goldberg:

Well there are three — there are three basic agreements.

Arthur E. Pettit:

There are two agreements.

In the cross — in the first agreement was of April 16 1956, in which the cross-license agreement was entered into.

In that agreement there was the clause that was designed to be the normal non-litigating clause.

It said we will not litigate with each other.

They have tried to construe that into a sinister provision.

There was nothing sinister whatever about it.

It was merely intended to put in the usual provisions for not litigating, when they had settled their litigation or prospective litigation by entering into the cross-license agreement.

As you pointed out the other day Mr. Justice Goldberg, there is a provision in there that this is to be done in accordance with the laws and regulations of the State involved.

Now that is briefed and quite completely on several different points in our briefs.

The government itself concedes that there was nothing improper with the cross-license agreement and it only picks up this clause to say that that isolated in standing alone is itself an illegal agreement.

In connection with that I’d like to point out that the government’s argument before the Trial Court was that the first sentence of that clause was illegal.

That was the sentence that provided that neither party would do anything to restrict the scope of the claim of the other.

Now, they overlooked the fact that in various European countries there are proceedings, special types of proceedings that are known as proceedings to restrict the scope of claims.

It is quite clear that that provision was intended to take care of that situation.

The man who drafted this provision, he didn’t draft it, but who put it into final shape was Stanford, who had prepared similar agreements with, had prepared similar agreements with Vigorelli, who subsequently prepared another agreement with Masonite.

He found in the draft that was submitted by Gegauf, a provision that would have stopped any interference.

Now he deliberately redrafted that and divided them into two sections with the concept that he was getting exactly the same result with this provision as he was getting with the Vigorelli agreement.

An agreement that Mr. Friedman and the Government has consistently said, is almost a model of perfection in making the reach of the agreement not to restrict, go to those countries that had that type of procedures.

Now the Trial Court went into this.

It heard the testimony of the people, yet held that that clause was intended to cover the foreign countries and not to apply to the United States.

In the course of making its argument before the Trial Court, it expressively told the Trial Court that that was the only provision in the cross-license agreement that it considered to be illegal.

Arthur E. Pettit:

It set it up, it quoted the sentence in quote, in the entire time of this discussion we cannot find one single instance in which the Government even set forth in full the second sentence of this clause.

Can you tell me quickly what pages of the record, referring to this episode, this clause, to not run into your argument, we’ll do it later.

Arthur E. Pettit:

Where it sets forth the clause?

The clause is set forth at 1067.

Well I’ve got the clause, but the testimony on the basis of which the District Court, there is no evidence to show this is and they do apply to United States.

Arthur E. Pettit:

That’s Mr. Stanford’s testimony and I’ll find in just a minute and I will give it to you but it is testimony of Mr. Stanford.

No don’t stop now.

Arthur E. Pettit:

The Government both in it’s — in the document submitted just before the trial and in another one the post trial brief just after this, as I say, expressly told the Court that that was the only provision that it being illegal.

Now it raises before this Court for the first time the argument that the second sentence is illegal.

It seems rather strange system to me that the Court — that before the Trial Court the Government can just frankly say that it doesn’t conceive that there is anything illegal and then when it loses in the point that it is making, it comes before this Court and asks that the Trial Court to be reversed in the ground that it did not find the clause illegal, which it told the Trial Court it didn’t contend as illegal.

Furthermore, the clause is clearly not illegal.

They never say that there is a clause that says that we will facilitate the allowance of claims as broad as possible, but this is in accordance with the laws of the country and patent office involved.

It couldn’t be clear from the evidence that Singer was wanting a valid patent and not an illegally broad patent.

There certainly is no compulsion in the finding that — compulsion to find that when a person says a patent is broad as possible he means one beyond the reach of the law and into the prior art.

And more than one says to get to particular destination as soon as possible, he doesn’t mean necessarily there is no compulsion to find that he means by violation of all the law without reference to anybody that stands there.

Now when they ask, when they provide that they should get and support and facilitate and there’s nothing but facilitate, claims as broad as possible, I think that without anything else, it would be construed as meaning within the limits of the law and within the permission of the prior art.

Otherwise, you are saying that they are flatly making an agreement to support illegal claims.

The evidence is quite clear that they didn’t.

Stanford testified, Stanford wrote letters during the period in which he pointed out the necessity of getting a valid patent.

The government makes a strange argument in connection with this.

It seems to imply, but it doesn’t say so.

It has never once said that it construes this as requiring either company to support an illegal claim, yet it seems to imply.

And at the same time, it argues that the reason they did that was that Singer wanted to fight this tremendous Japanese influx of sewing machines.

Now the last thing in the world the Singer would want would be an invalid patent in order to use it against the power as terrific as the Japanese exports.

The Japanese sewing machine industry has been the second, third or fourth largest export industry in Japan for ten consecutive years.

Does the record show any — has the record got any evidence in it that by price manipulation or in any other way Singer tried to keep Japanese machines out of this country?

Arthur E. Pettit:

None, whatever.

This case involves absolutely nothing.

No predatory practices of any means, nothing in the world except the acquisition and enforcement of this one patent to protect its machines.

Quite from actual efforts, is there any indication that the party had that sort of thing in mind?

Arthur E. Pettit:

None whatever.

The evidence is clear that there was nothing about it.

There is not even any claim of any predatory practice of any kind, price control, division to territories, anything.

This case is solely a case of the acquisition of a patent by Singer to enforce that particular patent.

Now the background for that too is rather important.

This machine and this mechanism was actually invented by Johnson, member of the experimental department of Singer.

As is so often the case, inventions come from two, and three and four people at the same time.

It turned out that the patent the Singer had lost by nine days, otherwise it would have and had the patent on this machine itself.

Now in the meantime, this was to be its prime machine.

It had spent $9 million on it by 1959.

In 1959, 45% of its entire sewing machine revenue came from this machine.

There is nothing unusual to buy the patent that someone else has just beaten them too from nine days that covers squarely the mechanism in that in order to protect that mechanism.

And I just cannot believe, I don’t think I’ve ever heard it said that there was no predatory practice, it wasn’t a question of trying to exclude competitors or try to exclude other kind of machines and the Court found, that’s another finding that the government has faced with, the Trial Court found that Singer’s sole interest was the protection of its ‘401′ machine.

[Inaudible]

Arthur E. Pettit:

For making the same kind of mechanism that you are making, that is correct.

Now, I would like to address myself for a moment to the government’s claim that the evidence in this case is, was it expressed at clear overwhelming that there was joint action for a common purpose.

Now I said when you look at the claims they are making, you’ll find out that they have made everyone of them to the Trial Court and that the Trial Court has found against them in each instance.

I think first, just to illustrate this, a claim that is basic to the government’s entire argument.

It is that Gegauf contributed a large sum through giving the excess value of its patent to Singer on the understanding that Singer would then enforce that patent and would thus cripple the Japanese, so that the Japanese couldn’t compete in Europe.

Now you will notice that the objective was not to protect Gegauf in the United States.

This had been and was the objective as expressed by the Government before the Trial Court that it was to protect and help Gegauf in the United States, but it ran into the situation that Gegauf sent into the United States just 1,600 machines in a year 1957; that he was a small company and expressed the philosophy.

He did not want to grow.

He thought to pick up the small companies and got into difficulty by trying to always enlarge and enlarge.

He had his tools, he had his equipment, they were fully employed, he didn’t want to get bigger, and that’s his prime interest was in Europe.

That sort of blew up in the argument that there was a great motive and incentive for Gegauf to enter into conspiracy to get the benefit in the United States of selling additional machines.

Now the Government with that finding there, and I don’t believe that one would be inclined to reverse it or say there was no evidence to — substantial evidence to sustain it, and they realize that.

They now make quite a different argument.

They now say that the objective was to cripple the whole sewing machine industry and Japan so that it couldn’t compete in Europe.

Now let’s see, what this industry is and how it’s going to cripple it and see if we think that the Trial Court had no substantial basis for disregarding that claim.

As I have just said, Japanese sewing machine is second, third or fourth for ten consecutive years as the biggest exporters.

Arthur E. Pettit:

All the machines, infringing machines set into the United States in the years 1957 and 1958 represented 1.8, 2.4 and 1.8 of the total exports of sewing machines in Japan throughout the world.

Furthermore, if – would have enforced the patent completely, that doesn’t mean that even that percentage would have been lost or they have been crippled, because they can just as easily make non-infringing machines as they have.

In 1957 they didn’t make a single non-infringing machine.

In 1958, over 8% of their imports of the multicam machines were non-infringing.

In 1952, they were 59, they were 32%, and the number imported of non-infringing was 500% of the number that had been imported in the year before.

There is no reason in the world why they can’t manufacture non-infringing machines, they are on the market.

In fact the Japanese are manufacturing and importing as Mr. Friedman conceded on Friday.

Therefore, we have the spectacle of Gegauf being inspired in the disagreement not to keep these particular machines going to Europe, that didn’t help the Government and he was afraid.

One of his objections to this agreement was that the machines imported in the United States might be sent to Europe.

That has some velocity backup, but that wouldn’t help the Government, because that’s no motive for Gegauf to go into an agreement.

Gegauf would have been hurt by that, so the Government has to find something better than that and it finds that the motive was to injure or as it puts it cripple the sewing machine industry.

It says that Gegauf gave excess value.

The excess value it says was a magnificent value of this patent over and above what Singer paid for out of $90,000.

What’s its evidence of this value?

His evidence is that Gegauf, when it first started suggested that they would like to have $1 million.

When they put the document and evidence and showed that, the Trial Court said, well, we think may be as New York Counsel suggested that you ask for million dollars and see what you could get.

Well, it was not without pressure that we put in a letter later showing that, that is just almost exactly what happened, you can just see it from the latter complaint.

Trial Court’s reaction to that it didn’t bother the government.

It decided that the Gegauf had said to Singer.

When it was asking Singer $125,000 for the patent, well we can get many times $125,000 each year, Gegauf sells to patent to Singer in trying to get Singer’s pricing.

So, the government accepts Gegauf as its valuation expert and attributes this tremendous value to it, and so argues that Gegauf contributed a tremendous valuable patent far in excess of the $90,000 paid for it, in order to get Singer to enforce the patent, cripple the whole sewing machine industry in Japan, less than 1.8% of their exports.

Now the government and the Trial Court dealt with that in its reference to probably the counsels have suggested it to do it.

With reference to one additional item it maybe an express finding, that the fact that it sold a series.

In fact that in two years, the government pointed out in two years, Singer got a considerable amount of money out of this, almost twice, so just about twice what it paid for.

The government — the Trial Court dealt with this argument.

It said the fact that in two years Singer received almost twice as much from Sears Roebuck licenses Gegauf collected from the sale of its patent to Singer, does not buttress the conclusion gone with the government, that Gegauf was willing to part with a valuable property right at a low price in exchange for action for by Singer against their common competitors.

Hugo L. Black:

What page is that?

Arthur E. Pettit:

That is 1706, 1707.

Now the government stands before this Court and just it either asked that defining that, that is no substantial evidence, no substantial evidence supporting the Trial Court or in the alternative, and I’m, not sure which, that the Trial Court thought all these facts were so convincing, just as the government does, but didn’t understand that you could have an implied win. I don’t think there is any basis for the government’s contention whatever.

Now another point –-

Hugo L. Black:

Was Sears Roebuck the only [Inaudible]

Arthur E. Pettit:

Sears Roebuck was the only licensee.

There was, call your attention to one point, I would mention later if I get to it and I doubt.

There was a right in Gegauf to permit one company in Japan to shift machines into the United States, in Germany to ship machines to Pfaff, to ship machines into the United States, he never gave that right, nothing is ever done about it except to eliminate it from the contract at a later date, that is one of the — another one of the facts that the government relies upon and I’ll refer to it in just one minute.

The government as another one of its facts that it wants this to Court to act upon, is that there were some kind of a — I don’t know what to call it, whether to call it a phantom agreement or some kind of an obligation, but they can see that there is no agreement express or implied and yet they say that Singer was so bound to Gegauf by some kind of an obligation that he couldn’t possibly license Singer, couldn’t license without getting Gegauf’s consent.

Now how they worked that out at the time that they concede that there was no agreement expressed or implied, and I don’t know but they do, and they were very dramatic about it before the Trial Court and said to the Trial Court, Singer, talking about the double cross, he said, Singer couldn’t pull a stunt like that and the Trial Court leaned over said, why couldn’t it? They’re in business to make an honest dollar, by honest legitimate means.

Therefore he ended completely their philosophy that there was any acquisition or any obligation whatever not to license.

The Trial Court expressly found that there was no restraint whatever upon Singer’s right to license.

Now in another point, another place in the government’s brief where it is riding on another point, it expressly states that there is no restraint upon the right of either to license and yet it stands before this Court when it’s arguing on one point, it argues that there was a restrain on licensing which the Trial Court found just to the contrary.

On the cross agreement this is another that they argue shows cooperation.

When Singer — after Singer brought its Tariff Commission action.

The Tariff Commission asked whether there were any licenses and Singer explained the Sears Roebuck license and why it had given it.

And I might say incidentally that the reason for that is the Tariff Commission doesn’t like to ask — act as just an enforcement agency.

If you’re going to license your patent well go ahead and do it, but if you’re going to protect yourself and be — and protect an industry and that what’s you say when you go before your Tariff Commission, that you were there to protect an industry from unfair competition and one of the methods of unfair competition is to use your patents, infringing — your patents and then sell infringing patents to the products – suggestion to the competition.

The government — the Tariff Commission asked this question, Singer explained the circumstances under which it had granted the license to Sears Roebuck.

They ask whether there was — whether Pfaff had a license because the facts the agreements where there to show this arrangement with Gegauf.

Singer said that it did not, but after all Singer couldn’t be the final word on that because Gegauf was the final one and although it hadn’t been permitted yesterday, it could be permitted today or tomorrow.

It wrote Gegauf a letter asking Gegauf if he would eliminate the provision about Pfaff from the agreement.

The government first uses Singer’s — the finding about Singer’s motive in doing that was to help it in the Tariff Commission proceeding.

It converts that into a finding that that’s the reason Gegauf ultimately did it, but I just point out the finding was that, that was Singer’ s motive in write off, not that it was Gegauf’s motive in agreement.

Gegauf ultimately agreed, but through exercise first of a bludgeoning power over Singer.

And the license agreement then entered into between them, Gegauf suggested that the provision be put in that they would disclose on execution of the agreement any previous licenses or arrangement that had been made with respect to the patents.

This was Gegauf’s idea. Gegauf had outstanding a license to Phoenix in Germany.

He didn’t disclose it to Singer.

He didn’t disclose it when Singer purchased the patent.

It was a very broad license applying to any of the rights, any of these patents.

There was an argument that Gegauf made and possible to sustain it depending upon the intention of the parties, that it applied only to Germany but if you read the wording you wouldn’t think so.

So finding himself in a position where Singer now needed something from him, he took advantage of it to compel Singer to indemnify him from any liability that he might have incurred by selling this patent to the Singer and bear in mind he sold it without telling Singer about this outstanding license.

He then demanded that Singer give him indemnification from any liability whatever to Phoenix.

Singer obviously was annoyed, but it had no choice and it entered into an indemnification agreement that was protected from any claim against Phoenix.

Arthur E. Pettit:

Now when you see all these backgrounds that doesn’t — this background, it doesn’t show this willing [Inaudible] standing by waiting to jump in and help Singer, when he did it, he did it on his own terms.

And the Trial Court considered this whole affair, it’s written its opinion about it and it’s what it finds, is further evidence that the arms length dealing which it characterized all Singer’s dealings with Gegauf.

Now here is again a very contrast between what the Court finds and what the government is now urging this Court to go into and find just the reverse, and it has just item after item, in which that kind of a thing is asked to this Court, and when you look at them, you not only will prove I believe that there is no basis for saying there is no substantial evidence supporting it.

I don’t see how the conclusion could be other than what the Trial Court found itself, even if the decision was to be de novo.

The government on the law point argues that there is a joint effort, joint purpose and it uses mostly the parallelism cases.

But I want to point out that there is no question of any parallel action here.

Gegauf first owned this application and when it owned it, it was free to do with it whatever it wanted to.

There was no economic power forcing Gegauf, there were no economic power Gegauf enforcing Singer.

When Singer acquired the patent, it was free to what it wanted to do with it.

This is not a question of competing patents.

It’s a question of competing applicants for the same patent and with the winner being willing to sell that patent to Singer, because Singer wanted it.

Now they make great store over the fact that Gegauf anticipated that it would be enforced and they say that he didn’t need an agreement, of course, he would enforce it.

So you’re just as bad whether you have an agreement or not.

If you buy a product that can be used only for one purpose and you hope it will be used for that purpose that becomes joint action for a common purpose.

Now I think that the Parke, Davis case pretty clearly shows although the express finding wasn’t on that point.

It shows that if there is anything in the world that’s left now, it is the right of a man to hope, if all he does is hope that people will maintain prices and he does nothing what else, but to state his price and then takes no other step, but hope that they will do it, he is not violating the law.

It takes some kind of an action to tackle that before there is any violation.

And I think that applies here, and that’s in price maintenance, which is a far more touchy situation and an unreasonable or reasonable restraint with the acquisition of the patent.

There is no economic power here of either of these parties over the other and I think the Government is faced with the fact that if it’s dealing with a conspiracy as distinguished from combination, there is no agreement of any kind express or implied and I think that ends the conspiracy portion of it.

If it is dealing with a combination as distinguished from the conspiracy, I think that in every combination case you will find that there is some element of a power of coercion.

You will find two or more people having some power, economic or otherwise, which permits them without any justification or any right other than their own power to cause other people to act in a desired method, such as taking away the merchandise from them or other controls that you might have owned.

There is no suggestion even of an economic power of Gegauf over Singer.

Singer had made no agreements, no power; Singer is free to do what it wanted to.

I cannot see that a mere hope or expectation even if it existed would count as a violation of the law.

And the fact is that the Trial Court has found that Gegauf had no interest in the United States market, so even the concept of a hope or an expectation is entirely beside the point and it is not correct and the Court has found against it.

It found expressly that Gegauf’s interest was in Europe and was not in the United States.

Byron R. White:

[Inaudible]

Arthur E. Pettit:

It get involves and I think what you are probably talking about is the ability to take information from two cams at the same time.

That is in the —

Byron R. White:

This was over and beyond the Gegauf patent, wasn’t it?

Arthur E. Pettit:

Well I suppose that’s the right way of saying it.

It is an addition, it is different; it’s not in the Gegauf patent.

That was intended along with Johnson at the same time the other — it’s all part of one mechanism and his invention covered two features.

Byron R. White:

The major part of the Johnson’s patent was dominated by the Gegauf?

Arthur E. Pettit:

That’s right, the major part of the patent —

Byron R. White:

How about the Japanese issue — the Japanese was not going to complete with that machine, it was different than that one.

Arthur E. Pettit:

I don’t quite understand the question, I answered it this way.

The Japanese —

Byron R. White:

I was wondering what kind of power that Singer acquired from Gegauf?

Did it require some — acquire the power to exclude machines although competing, but they were machines which Singer was not making?

Arthur E. Pettit:

No, indeed, no indeed.

It had acquired — there was the Gegauf that is just one claimant.

It was the claim for this multi-cam mechanism that is in there, the static cams, a cam follower, it can be retracted; it can manually be shifted to select one cam from the other.

That was the same idea that was in Vigorelli, the same idea that was in Gegauf, the same idea that was in Johnson.

There is nothing else in the Gegauf patent whatever.

So the answer I think to your question is that Singer obtained no power to do anything other than stop the manufacturing of the precise mechanism that Johnson had invented and was incorporated in the Singer —

Byron R. White:

It didn’t get anything — it didn’t get anything if it wouldn’t have had if Gegauf’s patent never existed and they would have had the same —

Arthur E. Pettit:

If the Gegauf’s patent had never existed, they would have had the same concept in their Harris patent that Mr. Friedman conceded.

Byron R. White:

And with that patent they could have —

Arthur E. Pettit:

The same machine, I mean it would have been, that will be the same Singer, if you exclude a machine that has the stack of cams with a single cam follower retractable and movable.

William J. Brennan, Jr.:

But your point is that’s the only Japanese machine that could be excluded namely —

Arthur E. Pettit:

That is–

William J. Brennan, Jr.:

One that embodied that —

Arthur E. Pettit:

That is —

William J. Brennan, Jr.:

Particular cam —

Arthur E. Pettit:

Exactly right, there is no — it could not exclude any other type of machine and no one ever was made to exclude any other type of machines and Singer had no desire to exclude the patent.

William J. Brennan, Jr.:

And I gather that Gegauf — that Gegauf was — asking you, I guess to say again what you’ve already said to Mr. Justice White, if get your position correctly, it is that Gegauf added nothing whatever to that.

Arthur E. Pettit:

Gegauf added nothing to the Singer mechanism.

William J. Brennan, Jr.:

That’s in respect of any operation —

Arthur E. Pettit:

Nothing whatever.

William J. Brennan, Jr.:

Mechanism will exclude the Japanese machine.

Arthur E. Pettit:

Nothing whatever.

Gegauf was the simple claim based on this one mechanism — I’m telling you why and how clear that is true.

Gegauf claim came from the Singer Harris patent.

Now Singer drew its claim covering this mechanism of the single cam products, stack and cams with single follower.

That claim was taken word-for-word and suggested to Gegauf and when Gegauf had the nine-day hire order, it got the precise claim and you can see them in the — I think it was 133 which is, we have set forth in the record.

There is the tabulation that shows how these claims go just word-for-word and what happened is and I say this is a competition for the same claim, it is not competing patents.

Byron R. White:

I think that you are simply saying that in order to the government [Inaudible] here you will have to make it legal — the near acquisition of a patent by a competitor from another —

Arthur E. Pettit:

That is exactly, I cannot see —

Byron R. White:

There is nothing that was done here as anymore than what is normally consumed in acquisition of a patent.

Arthur E. Pettit:

That’s right.

I will go —

Byron R. White:

Whether they say anything about excluding Japanese or not if they’ve been absolutely silent necessarily of the — the necessary results and it was and would have vendor exclude competitor.

Arthur E. Pettit:

Absolutely, there is no point in getting the patent, so now they will pay $90,000 and get a patent and not use it, that’s how much stands for that.

Now I will go further, I never like to take the point to this and true in the case, but I would say that if Gegauf and Singer had sat down at a table, had talked this whole thing over, had concluded that Singer could do a better job than Gegauf and had entered into a written agreement under which Gegauf would sign its patent to Singer and Singer would agree to enforce the patent.

Now I’m leaving out of this any restrictions on licensing.

Singer would agree to enforce the patent.

There is nothing whatever that will be illegal with it.

From time immemorial the owner of the patent has agreed to enforce it.

There is no reason why the owner of the patent shouldn’t agree to enforce it.

Otherwise anyone is paying a license is just paying license while they let other people go and use it free in charge.

I don’t know the lawyer has drawn any license agreements that hasn’t put in agreement that one party or the other will enforce the patent.

Now as long as 50 years ago in that Vertube case, this Court decided that there was nothing wrong in the owner of a patent conveying it to and in having and reserving license and then having the new owner agree to enforce a patent.

Byron R. White:

Is this between competitors?

Do you have any case of this Court —

Arthur E. Pettit:

That’s

Byron R. White:

— indicating that one competitor needs only [Inaudible] to his other competitors?

Arthur E. Pettit:

Frankly and you ask whether they were competitors, I do not know.

In case cited on page 125 of our brief, but I would not see that it makes slightest difference on it, because after all if the manufacture — if the owner of the patent can license a competitor, it seems to follow that he not only has a right to it, but he is almost obligated to enforce it.

And I would see it wouldn’t make the slightest difference that if he found the other fellow was a better enforcer, that he could convey it him and ask him to enforce the patent, because after the object of the patent is to give a monopoly, that’s all it is.

Arthur E. Pettit:

That’s the subject matter that’s covered for that particular patent.

The very purpose is to give the monopoly and as long there is nothing wrong in the license, certainly there can be nothing wrong in agreeing to enforce the patent so that the licensee can get the benefit of it.

And I cannot see any possible argument that would prevent a person from owning a patent, transferring it to his licensee because the licensee could enforce it better.

As a matter of fact the financial strength is the one that determines who is the one that agrees to enforce it time after time, it’s almost —

Byron R. White:

Is this an acquisition of an asset of a competitor though?

Arthur E. Pettit:

Yes I suppose that it is an acquisition of an asset of the competitors.

Byron R. White:

And I think [Inaudible]

Arthur E. Pettit:

Right, not much of a competitor.

Now I think this competitive business can be overdone by just not realizing what the facts are.

Gegauf wasn’t much of a competitor.

Gegauf sent into this country 1,600 machines.

Singer was selling at the rate of 150,000 machines a year.

Byron R. White:

It had an asset however to put Singer out of business [Inaudible]

Arthur E. Pettit:

Before he got the license.

Byron R. White:

Yeah, business.

Arthur E. Pettit:

Before he got the license.

Byron R. White:

Is not much of a competitor to have that kind of a.

Arthur E. Pettit:

Well that would be true whether it’s competitor or not, I mean competitor or non-competitor could have —

Byron R. White:

Because you have this competitor.

Arthur E. Pettit:

Yes but —

Byron R. White:

You got a patent on a sewing machine.

Arthur E. Pettit:

You got a patent on a mechanism that would have been very embarrassing for Singer if it hadn’t got the license on it.

That is certainly, and that’s one reason that it worked so hard to get it.

Now after that, came the acquisition of the patent.

Finally I would like to just — two minutes I may have, if that’s what it is, I would like to point out that the Trial Court also went into the market and found that this machine competes not only with multiple cam machines, but it competes with all kinds of machines, replacing cam machines, manually operated machines, straight stitch with the zigzag attachments on it.

There is nothing unreasonable in restraint of this, if in all other respects, the enforcement of this patent was felt someway subject to restraint, which I think it is not.

Still the market here is such a small portion of the market in which it competes that I think if you would even find a relevant market basis that there is nothing wrong in this small portion of market.

It’s in the testimony compared to all the machines, and finally, bear in mind that this whole machine is a sewing machine.

This should not be conceived off as a zigzag sewing machine.

This machine is used and testimony shows that 90% for sewing.

Arthur E. Pettit:

It would like saying that an automobile with a heater was for the purpose of getting warm.

Now the machine is to sew it and straight stitch and 90% of all the sewing is done on this machine is straight stitch.

The pattern companies do not even issue patterns with the zigzag designs.

I mean all the patterns companies, if you go to pattern companies you get patterns for dresses they are all straight stitch.

This is a — this is just a little pricing thing, that is at sales point, a good sales point, but it doesn’t convert it from a sewing machine.

It’s still fundamentally and entirety a sewing machine and it’s used for that purpose.

It’s insignificant in the making of dresses by the way.

Thank you.

Should I just answer Mr. Justice Harlan as to where this testimony is?

Earl Warren:

Yes you may.

Arthur E. Pettit:

It begins at R-502.

Earl Warren:

We will recess now.

Daniel M. Friedman:

Mr. Chief Justice and may it please the Court.

In my brief rebuttal time, I just like to refer to two items.

The first is the question raised by Mr. Justice White in his colloquy with Mr. Pettit with respect to precisely what Singer’s position was in connection with the acquisition of the Gegauf patent and the power to enforce this patent against infringing machines.

The machine which Singer invented and was developing its 401 machine which had been of the stand before the recess, was a machine which had a stack of cams and two followers capable of combining intelligence.

That was the invention covered by the Johnson Patent.

The Gegauf patent was a more basic invention.

It covered the concept of a stack of cams and a single follower.

Now Singer, once it got the Johnson Patent of course, could have enforced that Patent against all machines which infringed the machine it had invented.

When Singer says it had to acquire the Johnson — the Gegauf patent, in order to protect its invention, I think what it really means is it had to acquire another patent because machines which it could not exclude under its patent was so similar and it felt was so competitive with its machine that it was necessary for it to get this additional patent, not because it needed it to protect infringes of its machine, but to protect itself against the infringes who infringe the competing machine.

Byron R. White:

[Inaudible]

Daniel M. Friedman:

But Mr. Justice, at the time it acquired the patent, it already had the license.

Byron R. White:

[Inaudible]

Daniel M. Friedman:

That is true before it got the license.

But once it got the license, it was free and after it had the license to manufacture.

Byron R. White:

[Inaudible]

Daniel M. Friedman:

Oh!

Yes.

Before they had the license, it’s clear they would have — they could not have manufactured their machine free of the threat of infringement from —

Byron R. White:

[Inaudible]

Daniel M. Friedman:

No, Mr. Justice, and if I may just conclude —

Byron R. White:

[Inaudible]

Daniel M. Friedman:

No, this doesn’t.

We do not contend the mere acquisition.

We do contend and we think does present to this Court the legal issue in this case and we think parenthetically that basically the District Court recognized that in this case there was this cooperative endeavor that Singer intended to enforce the patent and the Gegauf so understood and sold it to them because of that understanding.

We think the legal question presented here is, whether when one competitor assigns a patent to another, because it believes and understands that the other can enforce it more effectively than it can itself and then implements this purpose.

In the subsequent course proceeding, we think this presents a basic legal question whether such action taken together to achieve a common purpose is enough to establish a conspiracy and combination in violation of the Sherman Act.

Byron R. White:

[Inaudible]

Daniel M. Friedman:

Mr. Justice, this was the first agreement.

This was the cross-licensing agreement, and we rely on that insofar as it has the provision under which each agrees to facilitate the allowance to the other of the broadest possible claims, but then we go beyond that and we are also —

Byron R. White:

[Inaudible]

Daniel M. Friedman:

No, it was nothing that changed the effect of this.

There was an implementation we think of this agreement by the other two agreements to which we refer.

Hugo L. Black:

[Inaudible]

Daniel M. Friedman:

Mr. Bowman is I believe an official representative of Singer’s in Italy.

Hugo L. Black:

[Inaudible]

Daniel M. Friedman:

He is the representative of Singer’s in Italy.

Mr. Justice Black, we rely not only on the first agreement, but on the second agreement, which is the basic patent assignment agreement and finally on the third agreement, which I referred to on Thursday deleting Pfaff from the second agreement from the assignment agreement.

Thank you.