Zenith Radio Corporation v. Hazeltine Research, Inc.

PETITIONER:Zenith Radio Corporation
RESPONDENT:Hazeltine Research, Inc.
LOCATION:United States District Court for the Northern District of Illinois, Eastern Division

DOCKET NO.: 49
DECIDED BY: Warren Court (1967-1969)
LOWER COURT: United States Court of Appeals for the Seventh Circuit

CITATION: 395 US 100 (1969)
ARGUED: Jan 22, 1969
DECIDED: Jan 22, 1969

Facts of the case

Question

Audio Transcription for Oral Argument – January 22, 1969 in Zenith Radio Corporation v. Hazeltine Research, Inc.

Earl Warren:

Number 49, Zenith Radio Corporation, petitioner, versus Hazeltine Research, Inc., et al.

Mr. McConnell.

Thomas C. Mcconnell:

Mr. Chief Justice and members of the Court.

I represent the Zenith Radio Corporation which is the petitioner in this case.

Respondents are the Hazeltine Research, Inc., a corporation which is a wholly owned subsidiary of the Hazeltine Corporation.

And, it was stipulated by the parties in this case in a pretrial stipulation that, for all purposes in this lawsuit and all purposes in the instant case, that the two corporations should be considered one and the same.

The instant suit was brought for the alleged infringement of a patent, a monochrome patent alleged to have been infringed by the Zenith Corporation.

And, both the District Court and the Court below, the Court of Appeals held that that patent was invalid and not infringed.

Abe Fortas:

Mr. McConnell, I’m sorry but you — there is an issue that’s submitted to us, isn’t there, as to whether both Hazeltine Corporations are bound here or whether it’s just a subsidiary and not the parent?

Thomas C. Mcconnell:

That’s right, Your Honor.

Abe Fortas:

Is there a difference on that?

Thomas C. Mcconnell:

I’m going to reach that in the course of my argument.

Abe Fortas:

That’s why I didn’t really understand why you made your opening statement because there is that issue.

Thomas C. Mcconnell:

There is that issue, Your Honor.

I simply made a statement because — as part of the facts in the case that there was that pretrial stipulation and I’m treating, for this portion of the argument, the two corporations as the same.

In that suit, Zenith answered by setting up a patent and other patents of Hazeltine have been misused by putting them into foreign patent pools, which foreign patent pools had refused to license imports and had restricted commerce between United States and foreign countries, namely Canada, England, and Australia, contrary to the provisions of the antitrust law, the federal antitrust law that any restriction or any combination, conspiracy, or arrangement between competitors which restrain commerce not only between the states of the United States but between the comp — the country of the United States and foreign countries, violated Section 4 of the Clayton Act, Sections 1 and 2 of the Sherman Act.

And, under those two sections, also Section 16 of the Clayton Act, alleging the same facts as we’d set up in the misused answer we filed in counterclaim and, in that counterclaim, asked for travel damages and asked for an injunction against the activities of these foreign patent tools.

After a trial and findings of fact in detail made by the District Court, a judgment was entered on April 5, 1965 pursuant to Rule 54 (b) of the Federal Rules of Civil Procedure for damages which have been occasioned by the plaintiff or by the counterclaim in the amount of $19,042,173 for the loss of sales and profits in the Canadian market in the sale of home receiving sets in television and radio.

At the time the findings came down, Hazeltine obtained new counsel and came in and made various motions which are discussed in the briefs, purport of which was to reopen the case on evidence which was available at the time of the trial and for further proceedings on the claim that there were embargoes imposed by the government as opposed to private patent pools and conspiracies in England and Australia.

And, for that limited purpose, the case was reopened and after further hearing, on December 13, 1965, the Trial Court awarded petitioner trouble damages in the amount of $15,919,458 for loss of sales and profits in England and Australia during the damage period.

In the first judgment, an injunction was added against the continuance by the respondent companies and these pools for putting their patents in the pools or in any way furthering the activities of these pools, and this is important.

No supercedias was ever foiled to that judgment, even though there was an appeal, and since that first judgment was entered on April 15, 19 — or April 5, 1965, Zenith has been operating under the protection of the injunction of the United States District Court in their activities in Kent.

On appeal or in entering the last judgment after the Trial Court had heard all the evidence that was produced on the original trial press, all of the different matters which were urged and argued in a three or four-day hearing on the motions to reopen the case and after hearing everything that was submitted in the case, Trial Court made this comment, “there could be no question in my mind that Zenith suffered damages during the damage period by a virtue of the pools which I have found and, reiterate, existed at the time of the damage period.”

The Court of Appeals reversed both the judgments on the ground that there is no substantial evidence in this record that Zenith was injured by the activities of these pools in its business or property, and held as a matter of law that, on this record, Zenith was not even threatened with injury by the activities of these pools.

Now, the proof of injury to Zenith’s business in Canada was, in a large part, documentary and I’m going into it in some detail in the course of this argument, and was not denied by any single witness or document in this case.

So, It is my submission to this Court that what is presented is whether on admitted facts, which we claim in the District Court, found was unequivocal in its proof of actual substantial damage to the Zenith Corporation, whether under those admitted facts, as a matter of law, the federal antitrust laws, namely 1 and 2 of the Sherman Act and 4 and 16 of the Clayton Act, do not reach and have no sanction which will stop that country.

Now, before going to the individual markets, I want to — if the Court will bear with me, I want to take just a few minutes to give some of the background of this conspiracy.

And, this Court in 1962 and in subsequent cases has held, namely in the Continental Ore case, that conspiracies which are designed to control a complete market and which are put together by competitors to exclude competition permanent should not be judged by taking particular parts of the proofs and examining them and passing on to something else, but that the proof should be looked at as a whole and, in the Continental Ore case, that it was highly relevant to go back and look at the proofs at the inception of the conspiracy and the proofs out of which the conspiracy was created to show its intendment, its purpose, its effect, and its result.

Now, I’ve been in this litigation with these pools on behalf of Zenith since 1953 and I’m not going to refer any of my own personal knowledge.

Everything I’m going to tell this Court with reference to the beginning is in this record.

Thomas C. Mcconnell:

And, may I say at the threshold of this case, the documentary evidence in this case came in by a pretrial stipulation without any objection that documents as to their varied, all admitted, no objection to them whatever, no contravening evidence of any kind, and some of it and most of it and the part I’m now going to talk about, put in by my opponents in the Trial Court.

From 1919 until 1935, through some-50 cross licensing agreements, the leading electronic companies of the world divided up the markets of the world, I’m leaving out the Iron Curtain countries.

I’m talking now about the free world countries where competition is possible.

Among those companies were the telephone companies: the Westinghouse Company, RCA, General Electric Company, English Electric Company, the Telefunken Company, the General Electric Company of Germany, GTS, the French Company, Standard Cables and Wireless, the Australian Company, and the Philips Company of Harland which we find everywhere which is the largest electronics company and probably the largest aggregation of capital and business in the entire world.

Now, all of these companies shoulder-to-shoulder and by cross licensing agreement divided the free world up into markets and part of that was the North American Continent which was assigned to the so-called radio group.

And, the radio group was composed of the telephone company, that’s American telephone and telegraph company, General Electric, RCA, the Westinghouse Company, and the Philips Company.

Zenith came into conflict and confrontation with this worldwide conspiracy when, in 1933, RCA with 10,000 patents in the pool which was composed of patents contributed by all the companies that I have now mentioned, some-10,000 of them, asserted them against Zenith and demanded that we take a license.

And, we took the position and said so in our pleadings which are in this case that the whole industry in the United States had paid tribute to this pool for years and $1,300,000.00 or so have been paid in tribute to the pool, that the pools were illegal and we filed a suit in the United States District Court down in Delaware asking for a determination that the pools were illegal, and the case was before Judge Leigh, now dead.

Immediately, the pool countered with 63 patent suits against us in that proceeding.

Parenthetically, we got the trial and one of them, it took 18 months to try it.

If we tried them all, there wouldn’t have been a lawyer left alive who’d ever had any connection with the case.

They countered out of that suit by suing Zenith in the United States District Court in Chicago on two patents: the telephone company, RCA and General Electric.

And, in that suit, Zenith counterclaimed and set up a suit for trouble damages claiming that they had been excluded from the market in Canada and couldn’t sell their goods there because of the pool which was part of the overall conspiracy, the pool known as Canadian Radio Patents Limited.

That suit got down to trial that they go to trial on September 9, 1957.

The Sunday before it went to trial, the parties settled the case by paying Zenith $10 million, giving Zenith the patent rights inventing these black and white monochrome patents in all markets and in the — and, the suit down at Delaware was dismissed upon there and, in effect, dedicate the patents, 10,000 of them, to the train.

Now, I brought that in for a purpose because Zenith is represented here as, in some way, taking advantage of the antitrust laws when, I submit, on the entire record, they have done very constructive service under the antitrust laws, and they free the entire American market so that, from that time on, and the relevance of this is on the damage proof that from that time on, we had a free market in United States.

And, with a free market, Zenith came from a little small company hardly known to the leading company in television and, I think, the second or third producer in the United States in radio.

Abe Fortas:

Well, is there any issue as to the effect of the release that Zenith executed in this litigation that was settled that has a bearing on the present problem or are you agreeing that what the release operated to benefit Hazeltine?

Let me put to you this way.

Hazeltine was not a party to the litigation that you’ve just described which was settled, was it?

Thomas C. Mcconnell:

No.

Abe Fortas:

But, various companies who were members of the Canadian radio patent pool were parties.

Thomas C. Mcconnell:

Well, I —

Abe Fortas:

Is that right?

Thomas C. Mcconnell:

I haven’t been frank with Your Honor entirely.

I believe that Hazeltine was named, if not in the pleading, certainly in the proofs as a co-conspirator.

Abe Fortas:

Alright, well — but, however it may be, as part of the settlement of that litigation, as I understand the papers before us, Zenith executed a release and that release, in substance, exonerated or relieved of the defendants, with whom Zenith settled, of liability for any past acts — of any further liability to Zenith for any past acts.

Is that right?

Thomas C. Mcconnell:

No.

There is no such evidence in this record.

Thomas C. Mcconnell:

There is no release in this record.

There is some settlement papers in this record put in by my opponents, not me.

Abe Fortas:

Well, I — one important issue here or if it is an issue is whether you do or do not, whether there is or is not agreement that that settlement operated to benefit Hazeltine as a — as a joint tort visa or whether it did not, are you agreeing on that or is that an issue in dispute before this Court?

That’s my question.

Thomas C. Mcconnell:

There is an issue in dispute on that, first, as to the fact.

I don’t agree that any release ever released Hazeltine.

Definitely, I do not.

Secondly, no release was ever pleaded in this case and no release was ever mentioned in this case until one year after the case had been tried, at which time, they came in with an offer of proof of a release.

Now, we cited cases in our brief that under Rule 8, I believe, and 15, affirmative defenses have to be pleaded in a case so the party opposed can meet them.

And, no such plea was made.

The case wasn’t tried on any release theory.

Abe Fortas:

Mr. McConnell, you’ve got a very elaborate job and I — here, and I don’t want to interfere with you in this elaborate case, but I — all I want to know is whether we do or do not have to worry about the effect of the release.

And, from what you tell me, I gather that we do.

Thomas C. Mcconnell:

You do.

Abe Fortas:

Your adversary says that that release does release Hazeltine and you say that it does not.

Thomas C. Mcconnell:

Exactly.

Abe Fortas:

Alright.

Thomas C. Mcconnell:

I say, further than that, not only does it not release Hazeltine but it isn’t even an issue in the case, except brought in later by offers of proof, alright.

Hugo L. Black:

Well, it could be amended, couldn’t it?

Thomas C. Mcconnell:

Under the rules, Your Honor, under the federal rules unless an affirmative defense is pleaded during the trial, so you could meet it.

Hugo L. Black:

During the trial or during the time?

Thomas C. Mcconnell:

During the trial or so close to it that the parties are there trying their lawsuit.

It’s waived, and the Court of Appeals in the Seventh Circuit has handed down three cases that says even a Court can’t relieve them of the waiver.

There’s nothing that can be done.

They’ve waived it, and the reason for it is we try our lawsuit on the pleadings and we go in there.

They put this settlement in to show that the two cases were different.

That’s what they said.

They told the Court, why is it a different case?

That’s the funniest plea of release I ever heard, and there was never any plea of release and there was never any evidence offered on it, and no Court ever opened it up either in the District Court or in the Court below to permit such a defense to be made.

And, I say the issue is not before this Court.

Hugo L. Black:

But you’re going to argue the thing on the basis that the Court might disagree with you?

Thomas C. Mcconnell:

If this Court disagrees with me, well, I say it had absolutely no bearing on the subject.

There is no question about that.

This is the last resort.

Hugo L. Black:

I thought the rules were exceedingly liberal?

Thomas C. Mcconnell:

Not in this respect and for a reason.

I mean, you can’t try cases on offers of proof made after the case has been submitted and you’re up in the upper Court with no chance to show what the release was or where it was admitted or what the objections to tort are and what it included in all the factual matters that were involved.

Hugo L. Black:

Are you saying now that this offer was only made after the case was appealed and in the Court of Appeals?

Thomas C. Mcconnell:

I am saying that this offer was made after findings of fact had been made and the case have been tried.

Hugo L. Black:

But it’s still in the Trial Court?

Thomas C. Mcconnell:

Yes, still in the Trial Court, but the release was available at the trial and not offered new theory.

And —

The Court of Appeals isn’t the place that you relied on?

Thomas C. Mcconnell:

No, the Court of Appeals said nothing about the release.

Alright, so much for the background in this case, I do want to say, however, that there is an anomaly from what I have said already, in that, some of the leading lawyers in this country: Whitney Norcimo or — who’s later President of the Bar Asso — the American Bar Association and John K. Hill, leading lawyer in there, advised their clients to pay $10 million for damages suffered by Zenith up until 1957 and this lower Court now holds, as a matter of law, that sort of a conspiracy couldn’t cause any damage whatever.

Hugo L. Black:

That is your cru — that is your main issue.

Thomas C. Mcconnell:

No.

Hugo L. Black:

As to the sufficiency of the evidence to support or show you have damage.

Thomas C. Mcconnell:

Right.

That’s all the Court dealt with the parent, assume tacitly, I believe it had to, to reach this point.

And, the government has filed a brief here.

I mean, there really isn’t any question really about the illegality of these pools under the decisions of this Court.

Alright, I first want to address myself to the Canadian market.

Were we damaged?

Was there substantial evidence of damage in the Canadian market?

In 1926, there was, put together up in Canada, Canadian Radios Patent Limited and it was composed of our competitors, people who sold radio and television sets in competition with us here and in Canada, if we ever got into the market.

I have never seen a case, and I’m sure this Court hasn’t either, where the evidence of the conspiracy is written down sponsored and put in evidence by the respondents.

Usually, the conspiracy case we have to try is a case where he went for a conspiracy from a number of different acts.

And, this Court held in — a long time ago in the Interstate Circuit case that the old days of proving conspiracy by having people gathered around the table had gone to a darker age.

Now, we prove conspiracies, particularly business conspiracies, by showing a plan which it is designed to destroy or interfere with competition and a joiner in it would not of its intent or purport.

Thomas C. Mcconnell:

That’s what you have to prove, but we have nothing in the way of inference in that sort of proof.

But, to understand the impact on the damage issue, this Court has to see what this conspiracy was designed to do, namely to control a complete market, pursuant to an overall conspiracy to control all the markets of the world.

Plaintiff’s exhibit 50 (a), which was put into evidence by my opponents, I didn’t put it in.

They put it.

It was a report by the Royal Canadian Commission.

On a submission made by Canadian Radio Patents Limited where somebody up their distributor had complained that they were keeping him from importing sets into Canada, and they heard all the evidence and they issued a report and I want to read some of it, if the Court would bear with me.

This is the whole conspiracy so far as Canada is concerned.

Hugo L. Black:

What was the report?

Who made it?

Thomas C. Mcconnell:

A Royal Canadian Commission and it was issued and dated December 31, 1959 within this damage period in this case.

Earl Warren:

From what are you reading, Mr. —

Thomas C. Mcconnell:

I am reading from plaintiff’s exhibit 50 (a) which is found in the record at appendix 2811 and 2829-30.

Canadian Radio Patents Limited, hereafter called CRPL, was incorporated in 1926 for the purpose of acting as a patent licensing agency.

At the time of the presentation of its brief to this commission, it acted as a central patent licensing agency in the administration of patent rights in the radio, television, and general electronics steels in respect to patents owned by its then five shareholders: Canadian General Electric Company, Canadian Westinghouse Company, Northern Electric Company.

And, if I may interpolate it, Northern Electric Company is a wholly owned subsidiary of the American Telephone and Telegraph Company, Canadian-marked Coating Company which is a wholly owned subsidiary of the English-Canadian mark — English-marked Tony Company.

And, Canadian Radio Manufacturing Company, which is a wholly owned subsidiary of the Philips Company of Harland, enacted as licensing agent in Canada for RCA Victor Company and Hazeltine Electronics Corporation, the respondent in this case.

The portfolio in respect of which CRPL had the right to grant licenses consisted of 5,000 patents and, in the absence of a license from CRPL, it is doubtful if anyone could sell in Canada a radio or television receiver.

CRPL indicated that it does not grant a license to any importer of radio or television receivers except in the limited situation where the type or kind of radio or television receiver sought to be imported is not manufactured by any radio or television receiver manufacturer in town.

It is particularly in respect to this policy of CRPL in precluding importers from bringing into Canada radio and television receivers that the complaint was made to this commission.

It was stated to be the policy of CRPL to enforce its patent right against any person who sells in Canada an imported radio or television receiver which infringes any one or more of a patent in its portfolio.

Now, how did they enforce it?

And, the record is clear on it.

There isn’t any denial.

They had patent agents and investigators, and they went around and they’re shock to see if there are any imported radio sets.

If there were, they’d turn them in to the pool and the pool, then, started suits and most of the suits, according to the documentary evidence coming from the files of the pool, ended in an agreement by the distributer, never to handle a set again that was imported into Canada.

And, our res — and, our distributers had to enter into such agreement, and we have a family name of Cosby.

Documents are in the case.

He had to agree that he wouldn’t handle it unless it was licensed and the only way it could be licensed, and we have our answers replete with demands by Zenith to get licenses and they couldn’t get licenses and, while it’s said that we didn’t formally asked for a license after 1953, we had a lawsuit that ran through 1957 which was designed to break up this illegal restriction on licensing and, and we did get —

Hugo L. Black:

A license from whom?

Thomas C. Mcconnell:

The pool.

Hugo L. Black:

The pool?

Thomas C. Mcconnell:

Yes.

Hugo L. Black:

He couldn’t ship any —

Thomas C. Mcconnell:

We couldn’t ship any sets up there that were licensed because they said —

Hugo L. Black:

That were not licensed.

Thomas C. Mcconnell:

Yes, because they said, Mr. Justice Black, they said “you cannot have a license from these 5,000 patents in this pool unless you build a factory in Canada and produce your product there.

You can’t produce it in Chicago and ship it into Canada and sell it in our market.”

How could you stop commerce between countries any more effectively than that?

Hugo L. Black:

Was that justified by the law of Canada?

Thomas C. Mcconnell:

No, it’s not justified by any law that I know of.

Hugo L. Black:

I mean, had they passed a law authorizing?

Thomas C. Mcconnell:

We had the issue made, Mr. Justice Black.

We had the issue made in the District Court, that this was authorized by Canadian patent law and we tried it out and they lost that issue.

And, the District Court made a specific finding that there was nothing in the Canadian patent law which justified any such cite of a proceeding, and even if there has been and they could do it with their individual patents, it’s elementary that when they join in a conspiracy with our competitors to use this as to stop our competition, and I’m going to get into that in a minute —

Hugo L. Black:

That’s in Canada?

Thomas C. Mcconnell:

In Canada, yes, but it’s the flow of commerce from the United States into Canada that’s being interfered with.

Hugo L. Black:

But suppose they wanted to put a terrier, a prohibitory terrier on it.

Thomas C. Mcconnell:

That’s a government thing.

Hugo L. Black:

The government?

I’m talking about —

Thomas C. Mcconnell:

The government could do anything they want, and I’m not talking about the government.

Hugo L. Black:

That’s what it was —

Thomas C. Mcconnell:

No, this is not a government organization.

Hugo L. Black:

What I was trying to get at was, was it operating within authority?

Thomas C. Mcconnell:

No, absolutely not.

Hugo L. Black:

Is that admitted?

Thomas C. Mcconnell:

This is a private conspiracy.

Hugo L. Black:

Is that denied?

Thomas C. Mcconnell:

Is it denied?

There’s no proof of any sec — (Voice Overlap) why, of course.

Thomas C. Mcconnell:

There’s no proof of that.

Hugo L. Black:

What’s the —

Thomas C. Mcconnell:

No contention.

Hugo L. Black:

— of the other side’s take on that?

Thomas C. Mcconnell:

The view of the other side took wise that under Canadian patent law, they had to restrict licenses for import, otherwise, they encourage different sanctions on their patent rights.

That was their contention.

Now, we tried it out on expert testimony and we had Canadian experts come down here, and there was not one single thing to it.

It was a complete sham from top to bottom, and the District Court so held.

They didn’t appeal it.

It didn’t have a — there was no issue on it in the Lower Court and the Appellate Court and they abandoned it here in their brief.

Hugo L. Black:

That’s foreclosed so far you think?

Thomas C. Mcconnell:

Yes.

Alright, as I say, they sent out these investigators to scatter out imports and then bring suits or write letters.

The record shows from their records there wasn’t any denial to any of this.

Nobody from the pool ever got on the stand on any issue in this case.

Worrying notices were widely published in newspapers.

The pool boast newspapers from coast to coast carry the commandos total of 4,343,084 advertising messages to help put a stop to importation of cheap substandard imported radio blanketed at the Customs.

They were our potential customers in Canada.

Then, they sent out a warning note and they sent one out just shortly before the suit started, and this was addressed to importers, vendors, or users of radio and television receivers.

That’s all people we could possibly sell to: an importer, a vendor, or a user.

That’s our entire market.

Now, here’s an inducement to boycott our product in the entire country of Canada.

We wish to bring to your attention that Canadian Radio Patents Limited is a central patent licensing agency administering various important Canadian patents of invention relating to radio and television receivers, and then they listed their licensee.

Of course, we weren’t licensed.

So, we weren’t licensed.

So, we weren’t listed.

And then, they say “the above companies our working the patented inventions in Canada on a commercial scale and are preparing and willing to meet the public demand for the patented articles in Canada on agreeable terms.”

Now, here is the threat.

“Canadian Radio Patents desires to inform importers, vendors, purchasers, or users of radio and television receivers which infringe patent rights owned or administered by Canadian Radio Patents Limited and are listed above that they will be held liable to Canadian Radio Patents Limited on account of said infringement.”

Then, they sent out notices “only Canadian made Canadian sold sets are licensed under the basic patents of Canadian Radio Patents Limited.”

Thomas C. Mcconnell:

My opponents in the Trial Court, in attempt to sustain the issue that Mr. Justice Black referred to, that there was some law up there in Canada which would justify this sort of comeback.

Put a man on a stand by the name of Gordon Fripp Henderson who was a member of a firm that had represented this pool for years and years and years.

But just a minute, before I get into that, Hazeltine put its patents in this pool in 1943 without — with extensions up until 1963, past the damage period.

I don’t know what’s happened since because we have no proofs.

They say, now, they’re not in it because they’ve been enjoined.

They say they filed an affidavit where they’ve done something about it, but there is no injunction now, which has never been superseded, to get out of the pool.

And, they’re pleading here that because they’re now obeying a Court injunction that that in some way absolves him from getting into this pool.

But, anyway, they got into the pool —

Hugo L. Black:

Where was the injunction?

Thomas C. Mcconnell:

The injunction enjoined them from staying in these pools.

Hugo L. Black:

Where was it?

What Court?

Thomas C. Mcconnell:

United States District Court in Chicago, entered by Judge Austin, I — right after he made his little speech about the patent law where he finally weakened and, unwindless, admitted that there was nothing in the law that justified their position and retracted his whole position.

We went into the cross-examination of this witness, who was the attorney for the pool and who’d made the submission by the pool to the Canadian — a Royal Canadian Commission, thoroughly familiar with all of it, worked for him for years, and years, and years.

I crossed examined him and I want to read some of his cross-examination because it shows the impact of this conspiracy and what it was intended for, what it was intended to do, and what had actually did do within this damage period, in which the Court of Appeals says, as a matter of law, can’t under our antitrust laws constituted damage.

He said “my law firm presented the submissions on behalf of Canadian Radio Patents Limited and it certainly sought to say that Canadian Radio Patents Limited was not doing anything illegal.”

He said that part was submitted on December 31, 1959, that’s within our damage period.

Question: “Now, you told us this morning that you knew what the policy, the licensing policy of Canadian Radio Patents Limited was and then, as I understand you to state it, the policy was not to license import where there was manufacturing in Canada.”

Question: “Now, imports that came in within the electronics field would represent competition to the owners of this pool, would it not?”

Answer: “Certainly.”

Question: “No question about it is there?”

Answer: “I would’ve thought not.”

Question: “The portfolio in respect to which CRPL had the right to grant licenses consisted of 5,000 patents and, in the absence of a license from CRPL, it is doubtful if anyone can sell in Canada a radio or television receiver.

Was that considered?”

Answer: “Of course they considered it.

They wrote it.

They considered that aspect of the matter and they referred to it in the report.”

And I said, “well, do you consider that a company like Zenith Radio exporting into Canada is competition for the members of the pool?”

“Well, I didn’t get any answer to that.

So, I asked him another question.

Thomas C. Mcconnell:

“And that would include Zenith Radio Corporation, wouldn’t it?”

Answer: “It would include anyone at that time who sought to sell in Canada radio receiving sets.”

“And, you have told us that if Zenith is a competitor and if it doesn’t manufacture, if there are manufacturers in Canada, then this pool will not license Zenith to import anything into Canada.

Isn’t that right?”

Answer: “They will not license.”

“The importation into Canada, in respect of the type and kind of television set or radio set that is being made in Canada, that is correct, and this includes home radio and television sets.”

Question: “The report says it was stated to be the policy of CRPL to enforce its patent right against any person who sells in Canada an imported radio or television receiver which infringes any one or more of the patents in this portfolio, except in the limited area where permission has been granted to import the apparatus which CRPL agrees is not of a type or kind made in this country.

Is that what they arrived at?”

Answer: “It so states, the report so states.”

“And, that was CRPL’s statement, wasn’t it?”

Answer: “That is CRPL that made the submission.

“That made the submission that that is what they were doing?”

Answer: “That is correct.”

“Now, under that, Zenith couldn’t get a license to import at all unless they manufacture up there, could they?

I am talking about seeking to import something that is competitive with the members of the pool.”

Answer: “And something that is being made in Canada?”

“Yes, by the pool.”

Answer: “Then, their stated policy is that they would not grant a license to import.”

They’re competitors.

They’re joint shoulder-to-shoulder with a great mass of patents.

Whether they’re valid or not, they could keep the litigation forever and ever in forcing those patents.

And, by the way, the District Court found that the instant suit, which was brought in a Hazeltine patent which was in the pool, was brought pursuant to the pool.

Hazeltine came into this pool in 1943.

The record shows that they volunteered their patents to be used in litigation against importers, documentary evidence.

The record shows that they were in these pools by their own admission knowing that the purpose of the pool was to exclude importation.

No question about it, admitted by their general counsel on his cross-examination and upon his deposition.

And, they said they were in the pool, the Canadian pool, and they intended — right in the trial they said they were in the pool and they intended to stay in that pool, flaunted their participation in the pool, and they said the reason for it was to get more bucks for Hazeltine.

Well, I suppose every illegal activity from the beginning of time down to date has had something about getting more bucks or more money out of the illegal activity, and that, certainly, is no justification with all due deference.

There are some rather interesting —

Earl Warren:

May I ask, where we’ll find the finding of the District Court with relation to this in its applicability to Canadian patent law?

Thomas C. Mcconnell:

Yes, right in the back of our brief which we set out, and I’ll read it to Your Honor.

It’s on page — it’s — this is the record I’m reading from.

Let me read it to you from the record which — it’s made an appendix to our original brief.

Earl Warren:

Is it — it is your —

Thomas C. Mcconnell:

Finding 32.

Earl Warren:

Finding 32, in which one of your briefs says it?

Thomas C. Mcconnell:

Original brief, not the petition but the original brief in this Court.

Abe Fortas:

It’s at page A-17 of your brief.

Thomas C. Mcconnell:

Yes, that’s it.

Abe Fortas:

A-17.

Thomas C. Mcconnell:

The Court held the proofs established as a fact that, in the circumstances of this case, the Canadian Patent Act does not require the pool to refuse to license importation that’s contended by plaintiff, nor does the Act penalize in any way a patentee who license for importation whereas, in this case, there’s been carried on extensive manufacturing in Canada under its patents rules squarely.

Abe Fortas:

Why is that statement finding restricted to the Canadian Patent Act?

Is it there — is there a contention relating to any other provision of Canadian law?

Thomas C. Mcconnell:

No, not another thing, Your Honor.

Abe Fortas:

Just the Canadian Patent Act?

Thomas C. Mcconnell:

Not another thing.

There was a time — this is digression.

There was a time when Canada restricted imports under the patent law.

Then, they had a commerce of the different countries of patent companies, and they all recognize that they all had mutual interest in breaking down these patent restrictions, which is restrained trade between different countries.

So, they changed it and they said, under the Congress — wasn’t it Congress?

Congress at 24?

Well, anyway, there was a Congress that’s in the record that, under that Congress, no country who wanted to stay at the time could put any restriction on patents or upon the import of goods which were patented.

And, that was written in —

Abe Fortas:

I don’t want to in —

Thomas C. Mcconnell:

To the Canadian Patent Law, and the Canadian Patent Law says nothing in this Act shall be construed in con — to controvert any trade, and this was a trade.

So, it was clear onto the path.

Abe Fortas:

And I hesitate to anticipate your argument, but the situation is different during the damage period in Australia, isn’t it?

Thomas C. Mcconnell:

No, sir.

Abe Fortas:

Isn’t it contended that Australia had, during the damage period, had some sort of a governmental —

Thomas C. Mcconnell:

Yes.

Abe Fortas:

— import provisions?

Thomas C. Mcconnell:

For a year-and-a half.

Abe Fortas:

That extra — that by governmental measure, precluded importation.

Thomas C. Mcconnell:

Right.

And that was excluded from the damages.

Abe Fortas:

And, that was excluded from the damages?

Thomas C. Mcconnell:

That was excluded from the damages, and there are no damages in this judgment which cover any period where there was a government embargo, but we’re not talking about a government embargo here, which I think Your Honor understands.

Talking about a private conspiracy designed by electronic competitors all over the world.

Alright, to go back to my lawsuit in Chicago, we thought we’d settled the case and that we could now go to work in Canada and develop our market.

That’s what we thought.

Potter Stewart:

That’s your 1957?

Thomas C. Mcconnell:

That’s in 1957.

That was settled in September 9, 1957.

Potter Stewart:

By the payment to your client —

Thomas C. Mcconnell:

Of $10 million and —

Potter Stewart:

$10 million and the —

Thomas C. Mcconnell:

And also, the licensing —

Potter Stewart:

Licensing —

Thomas C. Mcconnell:

By General Electric and by RCA and by Westinghouse.

Potter Stewart:

And that was —

Thomas C. Mcconnell:

A patent up to that date, not including colored television.

Potter Stewart:

But, including radio and television?

Thomas C. Mcconnell:

Up to that date.

Potter Stewart:

Monochromatic television.

Thomas C. Mcconnell:

Exactly right.

So, we start to go into Canada and Mr. Wright testified, and no denial of his testimony, no witness got up on the witness stand.

And, they say we ought to brought some distributers in, but here’s something I want to bring out before I get into this.

There was a conspiracy within a conspiracy.

They had distributor’s organizations up in Canada which were cooperating hand-in-glove with this pool, and they comprised the people you have to deal with.

When you sell sets, you have to go to distributors.

Thomas C. Mcconnell:

And, the court below criticizes us because we didn’t bring in distributors.

The distributors were all banning against us, and the record shows, by documentary evidence of their minutes, where they’re trying to cooperate with the pool and say “tell us what we can do.

Tell us what we can do to help you and stop the import of American products into Canada.”

They were all in it.

So, when we go up there, Mr. Wright testified and there’s no denial of its testimony, and they tried to impugn its testimony and I’ve seen some funny things in lawsuits but never in my life have I seen witnesses attempted to be impugned by documents which are not in the evidence, which were never even presented until a year after the case had been tried where no ef — no chance has ever been made to meet any of the documents which they claim impeach Mr. Wright’s testimony.

In other words, ordinarily, cases are tried on a record made in the Trial Court and, here, they come in with pages of offers of proof with new counsel, trying to get a new grasp of the case a year after it’s been tried and the Trial Court said that that — these things all were available at the trial.

Why weren’t they produced?

No excuse given.

Earl Warren:

Findings had been made then?

Thomas C. Mcconnell:

Yes, the findings had all been made.

The case had been put to bed and a year had gone, and they come in with new counsel with this new attempt to try the case all over again, and the District Court wouldn’t do it and rightly sought the matter of discretion with the District Court whether to reopen the case.

And, the new evidence rule is conclusive on all the sellers, whatever it was, was available at the time of the trial and never produced until a year after the trial.

And then, it’s largely counsel’s statements and what they would do and what they wouldn’t.

I mean, ordinary cases are tried on the records made at the trial.

This is an exception, apparently.

Abe Fortas:

Mr. McConnell, after the luncheon recess you’re going to tell us about damages, aren’t you, specifically?

Thomas C. Mcconnell:

Yes, I am.

I certainly am, but I’m getting to the question now of the fact of damages.

And, the fact of damage, the way the Courts have been construing it, and I say that was always done, but the fact of damage is the foundation and you start from there with the proof of the actual damage.

What was the fact of damage?

The fact of damage, number one, we didn’t have any licenses on pool patents.

Number two, everybody in that trade for years, since 1926 at least, had been conditioned to the fact that, without a pool license, anybody who handle sets was subject to suit, was subject to harassment, was subject to letters being sent out to the potential customers, not only of ours but of the distributors themselves, the user.

They were published in the trade papers.

They were published in the press.

It was inducement to boycott an entire market.

Hugo L. Black:

When the suit is filed against you?

Thomas C. Mcconnell:

Against us.

The suit from Chicago was filed pursuant to this.

Hugo L. Black:

I mean, infringement?

Thomas C. Mcconnell:

Infringement suit, yes, on a patent in the pool.

Hugo L. Black:

They made it on infringement?

Thomas C. Mcconnell:

Yes.

Abe Fortas:

Was it — that was in connection with your United States business though, isn’t it?

Thomas C. Mcconnell:

No, it was the Court — the Trial Court held it was pursuant to this conspiracy and it was admitted.

I’m going to get to that after the luncheon break.

Abe Fortas:

I understand that, but I mean to say that this — you have some patents from Hazeltine, don’t you?

And, Zenith haven’t used patents from Zenith — from Hazeltine?

Thomas C. Mcconnell:

Not now.

We did.

Abe Fortas:

You did?

Thomas C. Mcconnell:

Years ago, in 1949 or 1959.

Abe Fortas:

As of the time that this litigation was started by Hazeltine?

Thomas C. Mcconnell:

We had no tax from Hazeltine.

Abe Fortas:

I see, and so — and this action wasn’t cheated by Hazeltine and it was instituted claiming infringements here and elsewhere — in this country and elsewhere?

Thomas C. Mcconnell:

Claiming infringement on a patent which was in the Canadian pool.

Abe Fortas:

I understand that, but did they claim that you were infringing it by the distribution and sale of sets in this country only or also in Canada?

Thomas C. Mcconnell:

In this country only.

Abe Fortas:

In this country only.

That was what I was trying to get at.

Earl Warren:

We’ll recess now, Mr. McConnell.

Mr. McConnell, you may continue with your argument.

Thomas C. Mcconnell:

Mr. Chief Justice and members of the Court.

After the 1957 settlement, as I said this morning, the Zenith Company undertook to go into the Canadian market with their radio and television sets.

Now, here are two contiguous markets, Canada and United States, fighting alongside each other so far as the boring areas are concerned, Canadian listeners can pick up broadcast from television and radio along the border of American stations.

There’s no difference in the sets.

They had the same lines.

They had the same cycles.

Testimony was that the two products — of the two products, that the American product was far superior than to the Canadian product, that the contiguous markets had essentially the same competition, although there was more competition in the United States market than there was in United States.

Mr. Wright testified that he went up there and tried to establish distribution in that market.

There was a ready demand for a product, survey had shown that, and he couldn’t find distributors.

Thomas C. Mcconnell:

Distributors, as I pointed out this morning, were in these associations.

We have the minutes of some of their meetings tied up with the pool.

He couldn’t get distributors for the reason that they had been conditioned like Pablo’s dog for years and years to the sounding of the gong of the Canadian Radio Patents, the threat the constant inherent threat against everybody in the trade with the warning notices, with the investigations, with the lawsuits, and that was the market.

And, the pool was there, still in existence, run by a General Electric even though the government had started the suit against them and had gotten a consent decree whereby three of the conspiring companies had agreed to license their sets without importation which, by the way, negative any thought that there was anything in Canadian law that would prevent them from licensing for importation, but permitted the General Electric Company to continue to run that pool and General, I think, continued to run the pool with a permitted organization, managers, investigators, and what have you.

So, Mr. Wright testified that he couldn’t get distribution, the kind of distribution to which a product of Zenith was entitled to in a market.

And, the reason he couldn’t get it was because of the threats of the pool against the potential distributors which he tried to get.

He said he could get some distribution in the western provinces where there are very sparse settlements out there and some in the maritime province.

But, along the contiguous territories, he couldn’t get them.

So, he had to use the hearing aid distributor.

We had a hearing aid distributor.

That’s another product of Zenith.

We had a Canadian Zenith which distributed hearing aids and he used them to try and build up some distribution.

Abe Fortas:

Well, in that period of time, Mr. McConnell, were you handicapped by the lack of licenses under any patents for importation into Canada —

Thomas C. Mcconnell:

Yes.

Abe Fortas:

Or did you have them by reason of your settlement?

Thomas C. Mcconnell:

We didn’t have them, and I’m coming to that in just —

Abe Fortas:

Now, you’re talking — we’re talking about, now, we’re in the period 57 —

Thomas C. Mcconnell:

Right.

Abe Fortas:

And subsequent years, is that right?

Thomas C. Mcconnell:

That’s right, and I’m going to get right to that.

How — I’ll show, Your Honor, why and how and the effect of not having them is.

Potter Stewart:

I thought — what is the damage period?

When did it begin, 1959 in May?

Thomas C. Mcconnell:

1959-1963, May of 1959 —

Potter Stewart:

May of 1959 to May of 1963, that’s right.

Thomas C. Mcconnell:

So, he couldn’t get distributors so he had to use his hearing aid distributors.

And, even under that impediment, he was able to sell some sets by 5% of the market, the proof show, as against 20% which Zenith was selling in the United States.

Where 90 more had gotten on their way up there then a man by the name of Bryan McConnell, no relation to mine, he ran the pool.

He was an employee of General Electric.

He ran the pool and he came to Mr. Kellee Arts, manager of our hearing aid company, and he said “what are you doing here?

Thomas C. Mcconnell:

Are you going to manufacture in Canada?

You can’t import sets in here because we know that you got some licenses under your settlement in 1957, but we have other patents which you’re controlling.

We have Marconi patents, we have Hazeltine patents, we have Philips patents, and they can’t be licensed for import.

You have to manufacture in Canada.”

No dispute to that Congress sanction.

McConnell doesn’t deny it.

Nobody denies it.

It’s a merit on this record that that’s what he told us and that “we want diagrams of your sets to examine,” and we gave them to him and he took them home and then he came back and he said “you are infringing these patents,” and he sent us a notice within the damage period in which he, with regular notice, threaten the suit.

“You are infringing the patent.”

That’s the way you start an infringement suit, names the patents, and then encloses a pool license which is limited to manufacture in Canada.

Byron R. White:

But you, nevertheless, went ahead into the Canadian market.

Thomas C. Mcconnell:

Yes, we went in but we only made 5%, and the Court of Appeals below seems to think that there must be a total exclusion from a market.

We’re saying that the impedimenta of the pool and the effect that’s it had to create boycotts of our product during the damage period was impedimenta which we were faced continuously, cumulatively, as this Court said in the United Shoe Machinery case.

And, true, we could’ve sued back in 1957 as they said — this Court said in the Shoe Machinery case but we could still sue in 1959.

If the effect of this illegal conspiracy, which haven’t been terminated, which is still existing, which is still continuing, which is still going forth, and the threat inherent to the whole trade and known to the whole trade, and the type was serious.

The testimony is that, under Canadian patent law, any distributor could have all of the product confiscated by the owner of the patents.

He couldn’t sell them because he didn’t have a license to sell them.

We took that risk and we took that risk, Mr. Justice White, relying on the enforcement of the antitrust laws of this federal government on my advice.

Byron R. White:

I gather, you prove your damages by saying that without the impedimenta you would’ve had this similar share to Canadian market to that you had in the United States.

Thomas C. Mcconnell:

Exactly, and we have testimony and —

Byron R. White:

That’s the — well, that’s the core of your damage proof.

Thomas C. Mcconnell:

Right.

Byron R. White:

Without any embellishment to show any distributors who actually laid off your products because of the threat.

Thomas C. Mcconnell:

That’s right.

Byron R. White:

Do you think that?

Thomas C. Mcconnell:

Wright’s testimony wasn’t denied.

Kaplan testified the same way.

It wasn’t denied.

Nobody from the pool came in and said we could get distributors, nobody.

Byron R. White:

I suppose that there’s testimony to show that you had the product to sell then you had volume enough to —

Thomas C. Mcconnell:

We are a competitor beautifully equipped to compete.

That’s the rule that’s been laid down in the antitrust cases.

Are we dealing with a competitor equipped to compete?

And, we were.

Byron R. White:

That’s where you equipped with the distribution system or were you —

Thomas C. Mcconnell:

No, we couldn’t get the distribution system because of an illegal conspiracy, and that’s what we’re complaining about, one of the things.

Byron R. White:

Well, but was there testimony suggesting that you put as much effort into developing a distribution system in Canada as you put in the United States?

Thomas C. Mcconnell:

No, because we were threaten with infringement suits on every single set we sold, and we have sold — I don’t know how many sets.

Byron R. White:

Yes, but you went ahead.

You went in.

You sold a lot of television sets and —

Thomas C. Mcconnell:

Yes.

Byron R. White:

Radio sets in Canada.

Thomas C. Mcconnell:

Yes, but the potential liability still exists.

We could be sued on — for the profit on every —

Byron R. White:

Was there testimony — is there testimony indicating that you laid off the Canadian market?

Thomas C. Mcconnell:

Exactly, by Mr. Wright.

He said he didn’t dare develop it to sense.

Byron R. White:

You went ahead to some extent, but not —

Thomas C. Mcconnell:

To some extent, yes, trying to preserve what market he had and, by the way, it’s grown under the protection of the corporate decree in the District Court to $14 million a year, corroborating the testimony of Mr. Wright and Mr. Kaplan.

Now, I want to go back for a moment.

23 years ago, I appeared before this Court in the so-called Bigelow case.

It involved Jackson Park Theatre in Chicago, and we had a jury verdict and it went up on appeal to the same Court of Appeals in the Seventh Circuit.

And, the Court of Appeals said the only method of proving damages is to compare an open market for the close market and, for a quarter of the sensory, the motion picture industry had destroyed an open market in Chicago.

There was no such comparison.

And so, obviously, nobody could’ve made that kind of proof.

So, the card held that there was no fact of damage and reversed the case and came up here by certiorari.

And this Court, in that case, said that where wrongdoers, violators of the Act have destroyed an open market comparison, estimates can be used.

And, in that case, the only evidence we had was the estimate of our theater manager.

That, absent the restrictions of the conspiracy, we could’ve done as much business as a competing theater.

Thomas C. Mcconnell:

And, the Court held —

Byron R. White:

But you did have the competing theater.

Thomas C. Mcconnell:

Yes, and we have an open market in the United States which is contiguous with the Canadian market which is comparable in all respects as to competition, as to markets, as to broadcast, and all the rest, and to compare one —

Byron R. White:

Is there any new American competitors have plants in Canada?

Thomas C. Mcconnell:

Some of them have gone in and some of them have failed, but the point in this case, Mr. Justice White, is whether or not we can be compelled to exceed to stopping commerce.

Byron R. White:

Well, I understand that.

I’m just thinking about the damages.

Now, let’s assume that America — an American competitor of yours who has 10% of the American market builds a plant in Canada, just like his American plant, but he doesn’t do it — do — and he tries to get 10% of the Canadian market, just like he’s got in the United States, and doesn’t do it, can’t he somehow get more than 5%?

Thomas C. Mcconnell:

There’s no such evidence in this record.

There’s no such contention made in this record.

Nobody got into the witness stand and said “if you build a plant up there, you couldn’t have gotten more than 5%.”

No countervailing evidence to ours.

The cases say, “why, sure —

Byron R. White:

But there’s some evidence —

Thomas C. Mcconnell:

On the estimate that’s made —

Byron R. White:

There must be some evidence around, however, as to how American — your American competitors have there when they went into Canada and built a plant.

Thomas C. Mcconnell:

Not in this record, there isn’t.

Byron R. White:

And there’s not in this record, but I just suggest that there may be some evidence available to that extent.

Thomas C. Mcconnell:

Well, the evidence that’s available, and there is some inferences on the evidence.

There’s the testimony of Mr. Kaplan that he made a survey and found it was absolutely utterly uneconomical to produce sets in Canada with Canadian labor and all the rest of it, and there was other evidence that three companies that went in there and tried it failed.

Byron R. White:

Well, that may be.

And, which way do you run that, for you or against you?

Thomas C. Mcconnell:

I run it for me because why should we be compelled to go into Canada in violation of the antitrust laws?

We have the protection of these laws, if Your Honor please.

Byron R. White:

So that, the company that builds a plant and fails to command a decent share of the market — who builds a plant in Canada and fails to have a decent share of the market doesn’t necessarily mean that that same company could’ve done better if it hadn’t build a plant.

Thomas C. Mcconnell:

Well, may be so, Your Honor, but the Court below, the District Court, and the Courts of Appeals have said this time and time again, and you said it in this Court in the Bigelow case, the weight of the testimony of this kind is for the District Court, not to be weighed on some suppositation — supposititious case of — but, with all due deference now, I’m not —

Byron R. White:

Or on some basis of reasonableness.

Thomas C. Mcconnell:

Or that’s a difference of opinion, too.

Well, I have one further contention to make.

My time is running out.

Thomas C. Mcconnell:

We show by the inference in transposing it, and bear in mind, Mr. Justice White, that there was no objection to the inference.

The computations came in without objection.

Byron R. White:

What was your recovery, or do you know, on Canada in the District Court?

Thomas C. Mcconnell:

19 million, trebled.

Byron R. White:

That included the treble.

Thomas C. Mcconnell:

Treble, yes.

The third —

Abe Fortas:

Mr. McConnell, the position, I take it, is this, and I’d like to see whether you agree.

Let us assume that the pool is a violation of the antitrust laws.

Let us assume that Hazeltine’s participation in it is a violation of the antitrust laws.

Let us assume that you have established the faint of damage to Zenith.

The remaining problem is that the Court of Appeals held that the finding of the District Court as to amount of damage was clearly erroneous in the case of the Canadian pool.

Thomas C. Mcconnell:

No, I beg your pardon.

Abe Fortas:

Is that right?

Thomas C. Mcconnell:

No.

Abe Fortas:

No?

Thomas C. Mcconnell:

The Court of Appeals held that they don’t get to that question because there is no fact of damage, and without a fact of damage we don’t get to Bigelow or any other.

Abe Fortas:

They held that there was no fact of damage as distinguished from —

Thomas C. Mcconnell:

Solely either actual or threatened.

Abe Fortas:

As distinguished from no proof of the amount of damage.

Thomas C. Mcconnell:

Right, no holding —

Abe Fortas:

Alright, in any event, we — if we get past that, let us assume, just for purposes of this inquiry, that we believe that you have established the fact of damage.

Then, on the question of the amount of damage in whether there is — whether the finding of the District Court on that was clearly erroneous or not, what you have submitted to us is that you were totally excluded from the market and that the proper measure of damages in those circumstances is the percentage of the market that you have in the United States.

Is that correct?

Thomas C. Mcconnell:

Right.

Abe Fortas:

And there —

Thomas C. Mcconnell:

And that is important.

Abe Fortas:

Are there, in this record, any facts that tend to show that if you were allowed to compete in Canada, you would’ve — might be able to achieve the same percentage of market that you achieved in the United States or is that — does that rest totally on hypothesis?

Thomas C. Mcconnell:

No, it rests on the testimony of Mr. Wright — Joseph Wright who was the partner of Mr. Sam Kaplan who, at that time, was training.

Abe Fortas:

Now, did they — they testified that if they could compete in Canada they would achieve the same percentage of market.

Thomas C. Mcconnell:

Yes, knowing all the factors, there’s what —

Abe Fortas:

What I’ve been trying to get — suggest that you get to is to tell us briefly, if you will, what their testimony says, if anything, with respect to the basis for that conclusory judgment of theirs.

Thomas C. Mcconnell:

The basis of their testimony was that the markets were contiguous, that the markets were essentially their claim, that the advertising in the United States overlapped into Canada, created a market for our product, that the competition was comparable, that our sets were better, that the shipping problems and terriers were not involved.

They took them all into consideration and, on the basis of that and with — Kaplan with 40 years in the business and Wright, too, with 20-something, testified from their knowledge that they could’ve have done it and could’ve gotten the same share and there was no cross-examination and there was no other witness who testified any different.

And, the testimony stands uncontradicted on the record and the Trial Court adopted it.

Let me turn to 9 — finding number 36, which is found on the back of the brief.

The foreign commerce of finding — the foreign commerce of Zenith in — has been drastically curtailed by the patent pools in England, Canada, and Australia.

The damages Zenith has sustained were estimated by experienced officials of Zenith, thoroughly familiar with the business problems and sales potentials in the markets involved.

They determine the approximate damages sustained by a thorough of each of the markets involved and all relevant factors including terrier, shipping costs, manufacturing problems.

Zenith’s foreign commerce has been damaged by the pools in the following amounts during the four-year statutory damage period.

Now, that was based upon the same kind of testimony that this Court unequivocally said was proper in the Bigelow case and other cases since have said whatever its weight may be, it’s competent.

And, it came in without any objection.

Nobody objected.

Nobody objected to the computations.

Nobody put on any countervailing evidence.

Abe Fortas:

Now, if you don’t mind, could you tell us briefly at this point on the basis stated by the Court of Appeals for its conclusion that the District Court was clearly erroneous in finding the fact of damage?

The Court of Appeals held that you had not applied adequately for licenses that you — that there was no showing that you were excluded in fact, or what was it?

Thomas C. Mcconnell:

Well, I can’t answer Your Honor’s question because I have no comprehension of how the Court could vote on this record that there was no fact of damage, or not even a threat of damage.

I just don’t understand it, to be perfectly candid and frank with the Court.

Potter Stewart:

The Court of Appeals ordered some changes in the injunction, but it didn’t reverse the judgment granting an injunction entirely, did it?

Thomas C. Mcconnell:

In part.

It —

Potter Stewart:

But only in part.

Thomas C. Mcconnell:

Yes.

Potter Stewart:

How could it —

Thomas C. Mcconnell:

But, on the pools, it completely reversed it.

Potter Stewart:

If it allowed the — on the pools, it completely reversed.

Thomas C. Mcconnell:

Yes, gave us no protection at all.

Now, here we fill up, under the protection of this injunction, a business of $14 million, which approximates what — and corroborates what the estimates were that were made by our officials.

The consequence, and I can’t understate this, the consequence of sustaining of taking away our protection from this injunction is that we can be sued on every single set we’ve ever sold under the pool patent and we are subject to a potential liability of any profit that we made on those sets and we can be forever barred from that market, and here are set three companies.

Thomas C. Mcconnell:

We, to see what this Court — we’ve taken $10 million from the bank in 1957 and they wait to see who is going to get the business that Zenith has developed in Canada.

And if that isn’t a threat, I mean, I should never have started to practice law if I gave it up at the beginning.

Abe Fortas:

Is that $14 million figure in this record, Mr. McConnell?

Thomas C. Mcconnell:

Yes, it’s in the record because we attached it to our brief as public record —

Abe Fortas:

Now —

Thomas C. Mcconnell:

Which this Court takes judicial notice of.

Abe Fortas:

Well, passing at for the moment, does — is that $14 million a figure that is attributable to products that are covered by the patents in the patent pool?

Thomas C. Mcconnell:

Yes.

Abe Fortas:

Are they products that would be affected by the Hazeltine patents?

Thomas C. Mcconnell:

They’re a part of it, yes.

The colored television market, they said, and I’m not an expert on the patents, but they said they have nine colored television patents which control the markets of the free world and they’re all in the pool.

Potter Stewart:

I suppose the annual reports of Zenith to its stockholders would also be public records, of course, this Court could take judicial notice of it.

Thomas C. Mcconnell:

You could take judicial notice, but you might also, with all due deference, take judicial notice of a statement in those reports that they have been — Zenith has been restricted in these markets by restrictions of these pools and that they are trying their best to fight out from under them but, so far, they haven’t been able to do it.

Potter Stewart:

You would agree that we can take judicial notice of those annual reports?

Thomas C. Mcconnell:

Well, I don’t think that —

Potter Stewart:

By a parity of reasoning that a support to your answer to Justice Fortas just now.

Thomas C. Mcconnell:

The reason that I have to take the position that I took with Justice Fortas is this record is closed.

There’s no other way to show what happens there, no other way.

This situation Your Honor is talking about, they came in a year after the case is tried with these reports.

We are to have no chance to answer the reports or to explain who wrote them or anything else about it.

Potter Stewart:

They’re signed I think.

Thomas C. Mcconnell:

What?

Potter Stewart:

They’re signed.

The report to the stockholder is signed presumably by the president of the company.

Thomas C. Mcconnell:

I mean, they were — they’re not conclusive on anything.

They’re one out of the evidence which never got into the record.

I have a little time left which I’m going to reserve if I may.

Earl Warren:

You may.

Mr. Chadwell.

John T. Chadwell:

Chief Justice.

John T. Chadwell:

May I remove these papers, Mr. McConnell?

Thomas C. Mcconnell:

Pardon me.

John T. Chadwell:

Thank you.

May it please the Court.

Before starting on the main part of my argument, I would like to get a few basic points before the Court.

The first is that this case was tried before a district judge without a jury.

The second is that, after the trial, Zenith prepared and submitted findings for the judge to sign and the judge signed every single finding — every single finding that he did sign was a finding prepared by Zenith and he didn’t even change a comment.

The judge did not —

William J. Brennan, Jr.:

Is that something new, Mr. Chadwell?

John T. Chadwell:

I beg your pardon?

William J. Brennan, Jr.:

Is that something new and unique?

John T. Chadwell:

In this case?

Well, it’s unique so far as the Courts that I’ve been practicing before is concerned.

The Court reversed on the ground that the findings were clearly erroneous.

That showed an impact on Zenith’s business.

The Court followed the rule announced by this Court in Gypsum to the effect that a finding is clearly erroneous and, although there is evidence to support it, the reviewing Court on the entire evidence is left with a definite and firm conviction that a mistake has been committed.

And, the Court said that that was the situation with them in the Court of Appeals in this case.

Now, Mr. McConnell said nothing about England, although the amount of damages awarded by the Court on the English pool was approximately the same in the neighborhood of $15 million.

The reason, I think, that Mr. McConnell said nothing about England, the reason was that the testimony in connection with the English pool demonstrated, I think, to the Court of Appeals that the statements of Mr. Wright, President of Zenith, and Mr. Kaplan, Executive Vice-President of Zenith were not believable.

And, in the — in connection with the analysis of the Court of Appeals of the record with respect to England, that fact is demonstrated.

These two men not only testified with respect to the English pool, they testified with respect to impact, as Mr. McConnell said, and with respect to the amount of damage.

They testified on those subjects with respect to the Canadian pool as well.

Now, the Zenith evidence submitted by Mr. Wright through Mr. Wright and Mr. Kaplan, is unbelievable on crucial issues in this case.

It was either repudiated and recanted by the witnesses themselves, it was shown to be incorrect by later evidence and undisputed findings, or it was directly contradicted by a contemporaneous documents which are in evidence.

Now, in connection with the English pool, the — we went in on a motion to reopen the case as to the English pool upon getting into the case.

And, we made the motion on the ground that we would be able to show that embargos, governmental — English governmental embargos prohibited and made impossible the importation of radio and television sets for 20 years before 1959 and there were, as a result, two separate hearings as to England.

The first was in 1964, after which the Court entered finding 36, read by Mr. McConnell exactly as submitted by Zenith, awarding damages in the amount of $24 million.

Now, that finding and that award in England was based upon testimony of these two men as follows.

I want to briefly summarize it and then show what they said when they came back on the second trial which was awarded to us limitedly on embargos as to England, but which we were not permitted to have as to Canada.

Hugo L. Black:

When you say England, do you mean Canada?

John T. Chadwell:

No, sir, I mean England.

You see, there were three pools alleged.

One was the pool in England, one was the pool in Canada, one was the pool in Australia.

Hugo L. Black:

You’re talking now about the —

John T. Chadwell:

I am talking now about the English pool, about which Mr. McConnell said nothing although his judgment includes about $15 million for England.

And, I’m taking up England first because I think that the testimony of these witnesses at the first trial before findings were entered compared to their testimony at the second trial as to England, after the Court reopened on the question of these embargos, shows that they were not believable witnesses, that they were not credible witnesses, and the review of the Court of Appeals of the entire record, I submit, brought out that fact.

Now —

Abe Fortas:

Did the Court of Appeals say anything about their credibility?

John T. Chadwell:

The Court of Appeals did not expressly mention it, except that they did refer to one particularly outrageous instance of it by saying that Zenith’s cause was not helped by that testimony.

They did not expressly refer to the credibility of the witness as otherwise, although they could not have made — some of the findings have been made without having serious doubts, grave doubts, as to their credibility.

And, I would like to outline to the Court what they said the first time and what they said the second time, and the extent to which they were contradicted by contemporaneous documents.

Now, if the Court will bear with me, I would like to bring up those two points.

Byron R. White:

Well, let’s assume the two were believed in the sense.

Is it critical that their testimony be impeached?

John T. Chadwell:

Well, I think it’s important that their testimony were impeached.

I think, as Mr. McConnell said, that the — their main contention was based upon the testimony of these two men.

Earl Warren:

Well, is there any other testimony?

Did you offer any countervailing testimony on this subject?

John T. Chadwell:

To the — yes, we made offers of proof.

We made everything — we offered everything that the Court would let us offer.

This is of the second trial.

Now, if the Court will permit me —

Earl Warren:

How about the first trial?

John T. Chadwell:

Well, we were not at the first trial.

We went in on a motion to set aside the findings on the ground that we could show, as to England now, we could show that they were kept out of the pool for many years before 1959 by governmental embargo and it was the governmental embargos that kept them out.

It was not the acts of the pools, and their entire contention with respect to England was that they had been kept out for many years prior to 1959, that if they had been permitted to — by the pools to sell during that period, they would’ve build up a business.

From which, they could’ve made profits during the damage period from 1959 to 1963.

Thurgood Marshall:

Mr. Chadwell, in — the original was on damages.

These two men testified at the original hearing, right?

John T. Chadwell:

They testified at the original hearing not only about damages.

John T. Chadwell:

They did testify about damages, yes, sir.

Thurgood Marshall:

Well, did Hazeltine put any evidence concerning damages at all?

John T. Chadwell:

They put on these two men who testified concerning the amount of damages.

Thurgood Marshall:

I thought that was Zenith.

John T. Chadwell:

I beg your pardon?

I’m sorry.

I misunderstood you.

Thurgood Marshall:

Well, did your side put on anything concerning damages that were contrary to what they put on?

John T. Chadwell:

Not at the first trial.

Thurgood Marshall:

So, this stands uncontradicted?

John T. Chadwell:

Well, at the first trial, but it stands contradicted by their own testimony that they gave at the second hearing.

Earl Warren:

Is that the only reason that there wasn’t any countervailing testimony in the first trial?

John T. Chadwell:

Well, I don’t know —

Earl Warren:

That you took the position that —

John T. Chadwell:

Well, I personally was not at the first trial.

Earl Warren:

No, but you —

John T. Chadwell:

And I can’t say the reason for it.

I assume, Mr. Chief Justice, I assume the reason was because they didn’t, I think — a case had been made up.

I’m sure that was the reason.

May I say that the — first, it was said that for many years, as I said, Zenith had tried to import to England.

On each occasion, it was said the British pool threatened distributors until they seized buying Zenith products.

And, it was claimed that Zenith — that the English pool had prevented Zenith from building up its market.

They testified that during the four-year period, 1959-1963, Zenith had in fact attempted to market its TV sets in England converted from the American standard, the 525-line standard in America, to a unique British 405-line system.

They testified that Zenith had so-converted its sets, and said sets converted to its English distributor with kits and parts to make conversions where necessary.

They testified further that the conversion was so simple.

Ramsey, the English Distributor, did it in his backroom.

That he had made such conversions, had made an effort to sell these sets after the embargo was lifted in 1959, but was unable to do so because he was precluded by the pool.

Now, that was the testimony of these men at their — at the first hearing, precisely what I have said.

Now, they all — with all — then, they make two basic contentions by their testimony, that these things had happened, that that’s what had hurt them, that that’s how they were damaged.

Now, turning to the first point that, for many years prior to 1959, the pool had blocked Zenith’s attempts to sell and that they had been unable to build up a market.

John T. Chadwell:

Now, the government’s brief, the Solicitor General said that this contention of long exclusion of the pool was Zenith’s basic theory of recovery which, indeed, it was.

Now, after the Court’s findings were entered, as I say, we file this motion.

We urge that we could prove that there was nothing to this contention with respect to the impos — the blocking by the pool in England before 1959 where there’s nothing it, we could prove that government embargos was what did it and it was not the pools at all.

Now, on that motion and in the course of that argument, Zenith counsel denied that there were any embargos.

He objected to reopening the case on the ground there were no embargos and he said, and I quote from page 3034 — 3035 to 3039 of the record, “there never was an embargo, never.

We can prove just the opposite.”

Zenith’s counsel further asserted to the Trial Court, “contrary to the representations made in open Court by counsel for Hazeltine, there never has been an embargo, that is, there never has been a governmental prohibition against importation of radios and television receivers either in England or Australia.”

Now, that’s what he argued to the Court.

That’s what he said in opposing our motion to reopen, but the Court did reopened to enable us to put in proof of embargos limited to that question, and we did put in proof of the embargos and we did show that the embargos existed and that was the reason we were kept out of the English pool for 20 years, from 1930 — 1920 — 1939 to 1959.

That was proof beyond a doubt, and the Court then held that the iron curtain of the governmental embargos and nothing else kept Zenith out of England prior to June 1959 and out of Australia prior to April 1960, which was the date of lifting the embargos of Australia.

Hugo L. Black:

Which Court held that?

John T. Chadwell:

The trial judge held that.

Now, the testimony of Zenith’s witnesses of exclusions by the pool prior to 1959 was, thus, shown to be untrue.

And, the government agrees that that was what was Zenith’s basic theory.

Government agrees in their brief filed in this Court.

What was Zenith’s basic theory was shown to be without merit on the basis of the governmental embargos?

It was Wright and Kaplan, these two men to whom Mr. McConnell refers.

It was Wright and Kaplan who led the Trial Court to believe that the pool had kept Zenith out of England during those periods, and I would like to make this reading from the record, this question on the second trial.

Question: “Now, is it a fact, Mr. Kaplan,” this is cross-examination by Mr. Kayser, “that Zenith has taken the position from the beginning of this litigation that, for many years, it was excluded with a patent pool from importing radio and television sets into all three countries?”

The court, well, it has not only taken that position, but they persuaded the Court to so-find and Mr. Kaplan said, “that is correct.”

When Mr. Wright was recalled he said “now, you told this Court that you had been excluded from England, Canada, and Australia for many years by the patent pools.”

Answer: “yes, sir.”

“You told this Court that, based on that exclusion, you were entitled to damages during the statutory period.”

“Yes, sir, and, the fact is that they were precluded and kept out of England by the embargos and nothing but the embargoes.”

Now, at the second hearing, faced with proof of the embargos, they testified that they’d known about the embargos all the time.

Now, they hadn’t mentioned it at the first trial, hadn’t mentioned it.

They said, “why, we knew about that all the time.”

Mr. — Zenith counsel, at the first — at the — in opposing our motion to reopen, what did he say?

He said, as I read to the Court, “there were no embargos.

We could prove that there were no embargos.”

John T. Chadwell:

And, what did Zenith official say on recall?

They said that the matter had been discussed with their attorneys before they testified at the first trial.

They — they’d so testify that they had taken the embargos into consideration in their first testimony and assumed that they were a complete failure, although they said nothing about it and their counsel, with clear instructions, had denied it.

Now, their second contention that —

Earl Warren:

I’m just wondering about that.

John T. Chadwell:

Yes, sir?

Earl Warren:

If it was so wrong what they said, why wasn’t that contraverted at the first trial?

Why was it that you would sit by and let that stand without saying anything against it and lead the Court to a wrong finding?

John T. Chadwell:

Well, I can’t answer that, Mr. Chief Justice.

They — I assume, as I said in a little while ago, that the reason they didn’t put into evidence on that was that they thought a case had not been made up anyway.

So, they didn’t do it.

That, it is a fact, that there was no proof of the embargos at the first trial.

There was in — irrefutable proof at the second time after the Court, exercising his discretion, after the Court had reopened and let us put in evidence as to this question, and there was no question about it whatsoever.

Now —

Byron R. White:

What did the — the Trial Court said “yes, there’s an embargos but that, after the embargos were lifted, he still thought that the pools kept Zenith out.”

John T. Chadwell:

Well —

Byron R. White:

It still gave a judgment with respect to England.

John T. Chadwell:

That’s right.

He gave us the judgment with respect to England, although there were those embargos there up to 1959 and, as I shall say well now, there was written contemporaneous records, correspondents between Mr. Ramsey, the English —

Byron R. White:

I’m just saying that what the Trial Court came out — all that they did was to award a judgment for England.

John T. Chadwell:

Right.

Byron R. White:

After the date of the embargos.

John T. Chadwell:

Yes, sir.

That’s what they did, but I —

Abe Fortas:

Mr. Chadwell —

John T. Chadwell:

I beg your pardon.

Abe Fortas:

Mr. Chadwell, what are the facts?

Now, you’ve been attacking the credibility of these men and their counsel.

John T. Chadwell:

No, I’m not —

Abe Fortas:

But, I’m not clear about what the facts are.

Abe Fortas:

Mr. McConnell said in his argument just a little while ago that, as I understand it, that there was some sort of an embargo in Australia for a year-and-a half of the damage period.

John T. Chadwell:

That’s completely wrong.

Abe Fortas:

Alright, tell me what the facts are, first, about Australia.

John T. Chadwell:

Yes, sir.

Abe Fortas:

Is that right or wrong?

John T. Chadwell:

In Australia, there was an embargo from 1951 — from 1939 until April 1960.

Abe Fortas:

Well —

John T. Chadwell:

The embargo there was lifted a year or so later.

Abe Fortas:

Alright, your damage period begins in May 1959.

John T. Chadwell:

Yes, sir.

Abe Fortas:

So that, there was an embargo in Australia for that portion of the damage period?

John T. Chadwell:

Correct.

Abe Fortas:

Now, turn to England.

John T. Chadwell:

Yes, sir.

Abe Fortas:

Was there or was there not an embargo in England during the damage period, namely May 1959 to May 1963?

John T. Chadwell:

There was no governmental embargo during that period, Your Honor.

Here’s what there was.

I don’t want to interrupt Your Honor.

Abe Fortas:

No, that’s the end of my question.

You’ve been talking about embargo here in this and I want to know precisely what the facts are, as this record shows.

John T. Chadwell:

Well, the precise facts are those we’ve just stated.

The embargo was until 1959 in England.

There was in April 1960 in Australia.

Now then, after that, I would like to point out the second contention which Zenith had made.

Abe Fortas:

Alright, but — so that, when these men were testifying that there was no embargo, I don’t know what the context of that testimony is.

I’m interested in the facts, but —

John T. Chadwell:

Yes, sir.

Abe Fortas:

And you attacked that testimony.

John T. Chadwell:

Yes, sir.

Abe Fortas:

You do not want us to get the impression that they falsely testified that there was no embargo in England during the damage period.

Abe Fortas:

You don’t want to convey that.

John T. Chadwell:

No.

There was — I’m not saying there wasn’t embargo during the damage period, sir, no.

During the damage period, the facts are that there was correspondence between the distributor, Ramsey, in England and Zenith which showed very clearly that the reason that Zenith didn’t import to England during that period was because they didn’t want to.

They were — they had no intention of doing it.

They were waiting for the change in the television standards.

Abe Fortas:

I am familiar with that point and I understand that point.

I just did not understand your previous argument.

Earl Warren:

What was the real purpose of your argument on the embargo in light —

John T. Chadwell:

Yes, well, the purpose of it — excuse me, Your Honor.

Earl Warren:

Yes.

John T. Chadwell:

The purpose of it was that we tried to reopen the case, and did reopen the case, to — for the purpose of proving embargos, though they were denied.

We did that, and the reason we did that was that we wanted to show that their contention was incorrect, that the pool had been keeping them out, as finding 36 said, the pool had been keeping them out all these years.

The pool didn’t keep them out.

It was the embargos that kept them out from 1939 until 1959.

They had contended that they were — that they — had the pool not kept them up — kept them out all those years, they would have build up a market in England to a very high level which would have yielded them profits during the damage period that they were unable to earn.

Now, that is the reason for it, if the Court please.

Now, I want to say this.

This is a point specifically mentioned by the Court of Appeals in the Court of Appeals’ opinion.

Their contention was that Zenith had intended to import TV sets to England beginning in 1959 but were blocked by the pool and, as I say, the testimony was the uncontradicted documents or the contrary but Zenith’s counsel characterized Kaplan’s testimony as being that he was able to convert to the English standard.

He was able to convert from the 525-line to the 409-line and it was so simple that Ramsey could do it in his backroom with a screwdriver, as Mr. McConnell characterizes, that they were converting these American-made sets to the English standard throughout the damage period and that they were trying to sell them, but couldn’t sell them because of the activities of the pool.

Now, on recall, they were forced to say, contrary what they had said at the first hearing, no television sets had been converted by Zenith to the English 5 — 405-line standard, no conversion kits had been furnished to Ramsey, as they had said, no sets had been adopted by the English distributor to the English 405-line standard, and no sets had been offered by Zenith in the English market at all.

Now, I think this testimony of Mr. Wright, when confronted with this testimony he had given at the first trial compared to what he said at the second trial, is revealing.

Question: “When you told the Court back in 1964 that Zenith had sent a few television sets to Mr. Ramsey which he had attempted to market, you did not know whether or not those sets were equipped to receive English television?”

“No, sir, I did not.”

“When you told the Court that Mr. Ramsey had attempted to market these sets, did you know whether or not he did in fact attempt to market them?”

Answer: “I did not know specifically what he had done.”

Now, the government agrees that there were variations in the testimony of these men.

I’m talking about the Solicitor General’s brief now, that there were variations in their testimony, that they had modified their testimony by the 1965 assertions, and the Solicitor General states that this change in their testimony could justify the conclusion for the Trial Court that other aspects of their testimony were also unworthy of relief.

Now, in Zenith’s brief to this Court, and I’m referring to their — to pages 86-88, they quote from the some of the same discredited testimony about the distributor converting sets and asserts “there was no denial of this testimony and there is no other evidence in this record on the issue where the other evidence in the record on the issue is their recanting the testimony when they got to trial the second time.”

Abe Fortas:

Mr. Chadwell, I — based on some experience, may I ask you really, in the subs — these people were not cross-examined in the first trial.

John T. Chadwell:

They were in the second trial.

Yes, sir.

Abe Fortas:

Now, on the second — what you call the second trial, which is the production of evidence —

John T. Chadwell:

Yes, sir.

Abe Fortas:

— after the findings were made, pursuant to permission of the Court and, I take it, your point must be that, on cross-examination which is really what it was, wasn’t it, there was no cross-examination in the first trial was this man?

And then, substantially, on cross-examination, these men testified, as you have now here narrated and perhaps, in most, what you’re trying to say to us is that the things that were brought out on cross-examination where more deviational, more deviant from what they said on direct testimony than as a common ordinary experience of lawyers and witnesses in the trial of cases.

Isn’t that right?

John T. Chadwell:

It certainly is, Your Honor.

Abe Fortas:

Because, every time you examine a witness particularly on an expert subject of this sort, you bring out lots of facts that they don’t had duce on their direct examination.

John T. Chadwell:

True, but I submit to the — to Your Honor that when they make statements that are as flat as these were, both times, is something more than you’d normally expect to get by some modification of their testimony.

Hugo L. Black:

Mr. Chadwell, are you emphasizing the English part of this?

John T. Chadwell:

Yes, sir.

Hugo L. Black:

And your adversary emphasized the Canadian part.

John T. Chadwell:

Right.

Hugo L. Black:

What’s the reason for that?

John T. Chadwell:

I think the reason is that, when I started out, I wanted to show how they had buried their testimony with respect to the English part and where we had a second hearing or an additional hearing and did not have one on the Canadian part.

I wanted to show that because I think that has a bearing — had a bearing on the decision of the Court of Appeals to reverse after reviewing the entire record.

Of course, I think the Court had serious question as to the credibility of these witnesses after noting the differences in their testimony at the two hearings.

Now —

Earl Warren:

Did the Court say so?

John T. Chadwell:

As I said, Mr. Chief Justice, they did not say so except with respect to the second point and, on that, they said that Zenith didn’t gain anything by putting in this testimony concerning convertibility of such.

Byron R. White:

And, plus, the fact that the District Court, saying this again, after it was all threw with the second phase of the case, nevertheless, thought that these two witnesses weren’t believable enough in respects, to award a judgment with respect to England.

John T. Chadwell:

They did.

Byron R. White:

In addition to Canada?

John T. Chadwell:

It did, but — now, that judgment with respect to England, Mr. Kayser is going to cover Canada.

It’s the reason I’m not doing that.

Byron R. White:

I see.

John T. Chadwell:

But that testimony with respect to England was all important to the two there.

Byron R. White:

Well, were you — are you going to argue that, given their testimony even as change to the second trial, given the truth of it that nevertheless they are not entitled, that the proof was insufficient —

John T. Chadwell:

Yes.

Byron R. White:

— to show impact of the fact of damage?

John T. Chadwell:

There — yes, sir, and the reason is that there, as I said —

Byron R. White:

But of course the Court of Appeals’ take, I suppose.

Assuming that testimony was correct and, nevertheless, they don’t — they didn’t prove damage or —

John T. Chadwell:

No.

They did not assume the testimony is correct.

As a matter of fact, they held that the real reason that Zenith did not export to England was that they were waiting for a change by the British Government in the television standards from the 405 to the 625-line which was an exceedingly important change which made obsolete all the television sets, unless they were converted at considerable expense.

And, the fact of the matter is that, during the damage period, in fact, in 1961 in the middle of the damage period, Ramsey wrote to Zenith and reported on the continued testing and examination of the 625-line standard.

Byron R. White:

Is the Court of Appeals bound to view the testimony on a — in a case like this in the light, most favorable to the —

John T. Chadwell:

No, sir, and that —

Byron R. White:

Employee or not?

John T. Chadwell:

And that is a point that I would like to discuss, which you’ve just briefed, although Mr. McConnell did not refer to it.

I think that the Court was right in relying upon the decision of the Gypsum case that a finding is clearly erroneous when, although there is evidence to support it, the reviewing Court on the entire record is left with a definite and firm conviction that a mistake has been committed.

Now, that is the rule that has been followed in the question of the power of the Court of Appeals to reverse a decision of the Trial Court since the DuPont decision which, I believe, was some-25 years ago.

Now, the contention is raised here that the jury rule should apply in this case despite the fact that this was a case tried by the Court and without a jury.

The — Mr. McConnell also has made that contention and that, I assume, is — and I think also the suggestion of the Solicitor General.

But, for the — there’s no doubt at all that Rule 52 (a) makes the provision that I’ve referred to.

There’s no doubt at all that, under the decision in the Gypsum case, the rule is that the Court of Appeals has the right to reverse even though there’s some evidence to support the findings when they’re left with this definite and firm conviction that a mistake has been committed, and the Court said — stated that it was left with the definite and firm commitment — conviction that a mistake had been committed.

And, I must say, that the government, as much as it admits, that applying the standard — the established standard under 52 (a) as gov — as stated in the Gypsum case that the Court of Appeals was right in reversing on that ground if you assume that that ground is the correct one.

Hugo L. Black:

Did they testify already before the judge?

John T. Chadwell:

Yes, sir, they did.

Hugo L. Black:

He heard their evidence?

John T. Chadwell:

He heard their evidence.

Hugo L. Black:

And solved that immediately.

The Court of Appeals, you’re relying it on — I don’t want to bother you.

I understand that your Court of Appeals that a right to set this is accepted and it did so, on the basis that you’re arguing now.

John T. Chadwell:

Yes, sir.

Hugo L. Black:

Largely because of that belief that these two witnesses in here were not credible?

John T. Chadwell:

Well, I don’t think it was only that, Mr. Justice Black.

Hugo L. Black:

Well, I said largely.

John T. Chadwell:

Well, I think another very important point to this — to the Court of Appeals, in fact they said so, is that there was the delay in — or complete failure to do anything about shipping sets to England because they were awaiting the change of the 625-line broadcast system, and the correspondent shows that, the contemporaneous correspondent shows it without any question of a doubt.

That’s what they wrote back and forth about it.

Finally, there was a firm statement by Mr. Ramsey that that — they could not import and sell until the change was made.

Nothing could be clearer that there was a contemporaneous document, contemporaneous correspondence directly contradicting and directly contrary to the theory that Zenith was interested in and wanted to import to or export to England during the damage period.

Hugo L. Black:

Yes, but there is a difference, is there not, between the law in England and the law in Canada on that subject?

John T. Chadwell:

On the subject of —

Hugo L. Black:

Well, on the subject of the importation.

What could’ve bothered them?

What could’ve kept them out of Canada?

John T. Chadwell:

Well, the —

Hugo L. Black:

What could’ve kept them out of England?

John T. Chadwell:

The only thing that could’ve kept them out of England that I know of was their desire not to go there until there was a shift in the broadcast standard.

That’s what the correspondence shows.

They — the plaintiff claims it was the pool that kept the out.

Hugo L. Black:

Because its difference with reference to Canada.

John T. Chadwell:

Well, the government — the plaintiff claims that the pool kept them out, but the pool had nothing to do with it.

They decided themselves —

Hugo L. Black:

In Canada or in England?

John T. Chadwell:

In England, I’m talking about.

Hugo L. Black:

In England, alright.

You are using all of this as a basis also to answer them on Canadian shipments.

John T. Chadwell:

Well, no.

Mr. Kayser is going to talk about Canada.

I merely said that the two witnesses who had testified with respect to England also testified with respect to Canada.

The reason that they stayed out of England is clear.

It’s undenied.

It’s — it was denied by Mr. Wright.

He said he wasn’t holding up until the 625-line standard came in, but the contemporaneous correspondence denies that.

Hugo L. Black:

I’m a little mixed up on these things.

John T. Chadwell:

Yes.

Hugo L. Black:

How much — how many millions in England is the judgment and how many millions in Canada?

John T. Chadwell:

Well, it’s approximately $15 million in England and — in TVs, plus about $2 million in radios.

Hugo L. Black:

And then in —

John T. Chadwell:

No, I think it’s 13 million and 2 million.

Hugo L. Black:

How about in Canada, how much was the judgment?

John T. Chadwell:

$19 million in Canada.

Byron R. White:

Mr. Chadwell.

Do you know of any case where a Court of Appeals is — had been approved in really reassessing the credibility of witnesses where, if you assume the existence of certain evidence that a — that has been testified to by one person, the Trial Court was right but the Court of Appeals, absent any contrary evidence, says “we just disbelieve that witness and won’t — we’ll not accept his testimony.”

John T. Chadwell:

Your Honor, in the jack —

Byron R. White:

So, Gypsum isn’t such a case.

John T. Chadwell:

Well, in the Jackson case, which was just decided by the Court of Appeals of the District in 1965 and it’s discussed at pages 82-83 of our main brief, says that where the — that a question of credibility can’t.

It doesn’t depend necessarily entirely on demeanor.

It depends on whether the testimony is inconsistent with known facts as well.

It depends on whether it’s inconsistent with contemporaneous documents.

It depends on whether it’s inherently believable.

And, if the Court of Appeals reaches that — reaches the conclusion against it on those theories without respect or regard to —

Byron R. White:

Yes, but the Court of Appeals hasn’t said any one of those things here.

John T. Chadwell:

No, I say —

Byron R. White:

You said any reason whatsoever for disregarding the testimony of these people —

John T. Chadwell:

The statement I just made was he only one.

Byron R. White:

But I would agree that even with — that you still certainly might win by saying that even if their testimony is believed.

John T. Chadwell:

I think that’s right.

Byron R. White:

But the Court of — but —

John T. Chadwell:

I think that’s right.

Byron R. White:

I take your argument to mean that the Court of Appeals not only rejected this testimony but was wholly justified in doing so.

John T. Chadwell:

I think they were wholly justified in doing so.

William J. Brennan, Jr.:

Tell me, what standard do we apply here?

John T. Chadwell:

I think you apply the standard of the DuPont case that I stated.

William J. Brennan, Jr.:

Well, with no authority do we — the Gypsum case.

John T. Chadwell:

I’m sorry, the Gypsum case, yes.

William J. Brennan, Jr.:

You mean, then we redo what the Court of Appeals —

John T. Chadwell:

No, sir.

I don’t think you have to redo what the Court of Appeals did.

William J. Brennan, Jr.:

Well, if we don’t redo it, then there must be something less we do.

What’s that?

What’s the something less?

John T. Chadwell:

Well, I think that in order to sustain the Court of Appeals, what they did, you either accept their review of the record and their conclusions with respect to the record or you’ve got to review it.

William J. Brennan, Jr.:

That’s what I’m trying to get to.

John T. Chadwell:

Yes, sir.

William J. Brennan, Jr.:

We look at their review and say whether, in some respect, it erred.

Is that it?

That’s one way of doing it.

Is that right?

Well, now —

John T. Chadwell:

Yes.

William J. Brennan, Jr.:

We look at it and test what they did against what standard.

That’s what I’m trying to get to.

Against what standard do we test whether or not what they did is correct?

John T. Chadwell:

I think the same standard that they tested it against.

They te —

William J. Brennan, Jr.:

That sounds to me, Mr. Chadwell, like doing over again what they did, taking this record and applying the Gypsum test and independently concluding whether the Gypsum test required a reversal.

John T. Chadwell:

Well, I think the question is whether the Court of Appeals followed the test that it laid down with this Court in Gypsum.

That’s what they did, I think.

That’s what they said they did.

William J. Brennan, Jr.:

Yes.

John T. Chadwell:

They said they did.

They said —

Byron R. White:

That is a non-jury?

John T. Chadwell:

Yes, sir.

Byron R. White:

You can say, in a jury case it would be different.

John T. Chadwell:

Yes, in a jury cast it’s different.

This is a non-jury case, and I say that Rule 52 (a) plus the decision in the Gypsum case is what controls.

And, I think this Court can consider whether the Court of Appeals did that.

They said they did it and they have outlined in — they have outlined in their opinion exactly what they find as to each one of the three pools.

All of which is amply supported by the record.

In fact, I don’t see how the record could point to anything else.

William J. Brennan, Jr.:

Well, in doing that, how much did the record that would tie do you think we’ve got to look at?

John T. Chadwell:

Well, I would think that you would have to do the job that the Court of Appeals had done in order to decide whether they were right or wrong in what they did.

William J. Brennan, Jr.:

Well, that sounds to me like doing over again what they did.

John T. Chadwell:

Well, we had — we pointed out in our briefs, I think, what the record shows on these things.

Earl Warren:

Well, Mr. Chadwell, as a result of your argument on the embargo in England, do you want us to hold that they’re entitled to no damages or do you want us to hold that the damages should be diminished by raise of the fact that they have not tried to build up any business while the embargo was in effect?

John T. Chadwell:

I think that there should be no damages because the evidence does not show through findings or through evidence what the damage should bon this other theory.

It does not show it, and that is — that’s pointed out in the government’s brief where they’re recommending remanding for further testimony on these points.

Earl Warren:

Well, is that —

John T. Chadwell:

I do not disagree.

Earl Warren:

Is that agreeable to you?

John T. Chadwell:

Well, we think that it’s — that it is not necessary to do that.

We think that, on the decision of the Court of Appeals based upon these contemporaneous records as to England, based upon the facts as to Canada, which Mr. Kayser will discuss, and based upon the fact that in Australia there was never any effort to get down there at all to do anything.

Since 1951, anyone could’ve had an import license into Australia.

There’s been no problem about it whatsoever.

Earl Warren:

Mr. Chadwell, is that concluded and based on the fact that we ought to wipeout of our consideration the testimony of these two men?

John T. Chadwell:

I think you’ve got to consider it against the other testimony in the record and the other facts.

I don’t see, as to England, how in the world the general statements of these men can be credited against or over contemporaneous documents exactly to the contrary.

That’s what exists here.

Earl Warren:

But there was no embargo during the statutory period.

John T. Chadwell:

That’s right, and that show —

Earl Warren:

Well now, they do contend, do they not, that the pool prevented them from doing business in England during the statutory period.

John T. Chadwell:

During the damage period.

Earl Warren:

Yes.

John T. Chadwell:

They — damage period.

Earl Warren:

Yes.

Well now, why should we wipeout that testimony so far as that is concerned?

John T. Chadwell:

Because that testimony is contradicted by their contemporaneous documents to the contrary, as I have just said.

There, there’s correspondence.

In 1961, 60 —

Earl Warren:

Now, when did those contemporaneous documents come in?

John T. Chadwell:

They came in from 1950 —

Earl Warren:

No, when did it come into this record?

John T. Chadwell:

Into this record?

They were offered by Zenith counsel in a bulk, a package, at the first hearing.

Earl Warren:

Were they admitted then?

John T. Chadwell:

They were admitted then.

And, there are a great many of these letters and we cite them in our brief.

There are some that we’ve made an offer of proof with respect to because they had not been introduced.

There in the records as an offer of proof, the documents that I just referred to, written in 1961, in which it was said that we can’t start selling in England until they change the broadcast standard to 625-line.

That was — that’s in evidence and was put in evidence by Zenith counsel.

Thurgood Marshall:

Mr. Chadwell, since it is true in this case that the case was closed, findings of fact were issued, and you had it reopened for the purpose of taking additional proof, wouldn’t it, on the basis of that, be just as fair for us to adopt the government’s position and remand this case?

John T. Chadwell:

Well, I think this Court could certainly do that.

It seems to me that on the record, as I have stated — speaking now about England, on that record, as I have stated, that you’ve got to weigh the contemporaneous documents against what they said and, when you weigh the two, I don’t see how the Court could come to any conclusion, except that which the Court of Appeals did come to.

Hugo L. Black:

Do you think one is bound to reach the same judgment with reference to the Canadian judgment and with reference to the English judgment?

John T. Chadwell:

Yes, sir.

I think —

Hugo L. Black:

Do you think we must do that?

John T. Chadwell:

Yes, sir.

Hugo L. Black:

Because you think your argument is better in one than the other?

Why could we not decided in favor of the plaintiff in one better than in the other?

John T. Chadwell:

Well, of course, you could, but I —

Hugo L. Black:

Well, why wouldn’t it be justified?

Isn’t there a difference?

John T. Chadwell:

Well, they are entirely different.

They’re entirely different.

They’re not the same pool.

You could — the Court could certainly do that, but I don’t think the Court should do that and Mr. Kayser will resume — will finish our argument dealing with Canada.

Earl Warren:

Mr. Kayser.

Victor P. Kayser:

May it please the Court.

Before getting to the subject of Canada, I’d like to devote just another minute on the subject of England and, I think, possibly clarify what may be somewhat of a misunderstanding.

The fact is that, as to England, the testimony of Wright and Kaplan which had formed the basis of the findings was two-fold.

First, the testimony about having been kept out of England by the pools for many years, which was disproved by the later proof of the embargo, this was one part of their factual damage theory as to England, that the pools had kept them from developing a market by June 1959 from which developed market they could then profit.

And then, the second part of their assertion was that, in fact, during the four years, they were interested in an intent in going into England and does — the testimony that Mr. Chadwell has referred to, having to do with the contention they built a few sets or converted a few sets and that the English distributor had tried to sell them, that evidence had been put in to indicate interest in the English market.

And, that was the evidence that they relied on to show interest and readiness to go into the English market during that four-year period.

Now, when they got back on the stand and were forced to admit that that testimony was not true, they were forced to admit it because we had taken the distributor’s deposition and he admitted that there was nothing to it.

When they were forced to admit that there was nothing to their original testimony, that did two things.

Number one, it seriously impaired, we submit, their credibility on all aspects but, secondly, it knocked out the second of the two aspects upon which their English claim was based.

So, at that point in fact, they have no evidence in this record on which to base any claim as to England other than their — they had this question of exhibit 220, the inferences to be drawn from that, which I will come to later.

Now, secondly, before going into Canada, I would like to answer the questions or respond to the inquiry this morning as concerns the matter of a release.

Now, if I —

Abe Fortas:

Before you get to that, Mr. Kayser — before you get to that, if I may interrupt you.

I take it that what you’re really saying is that, with respect to England on your point two, as you’ve just stated it, it says if Zenith were a stranger that this is the only evidence in the record that goes to their desire to do business in England, their readiness and the ability to do business in England absent the alleged retraints.

Victor P. Kayser:

Yes.

Abe Fortas:

And that this evidence, with respect to the set conversion — convertibility of the sets, being refuted, there’s no evidence in that so —

Victor P. Kayser:

Repudiated by the witnesses themselves.

Abe Fortas:

So, it goes to the question of the fa — what has been called the fact of damages.

Victor P. Kayser:

Yes, that plus —

Abe Fortas:

Now, suppose if we should disagree with you on that without getting into the subtleties of that statement, if we should disagree with you on that, I take it that neither you nor Mr. Chadwell is submitting to us that the patent pool — you’re not trying to defend the legality under the antitrust laws of the patent pool and of Hazeltine’s participation in it.

Victor P. Kayser:

I would like to answer that in two parts, if I may.

Number one, I should say that on the point of intent to enter, there is an addition to the fact that they have repudiated.

They recanted their testimony.

There is also, as Mr. Chadwell has said, there is the documentation in the record from Zenith’s own bulk exhibit which clearly showed that, during this entire period, they were waiting for the perspective change of the broadcast standard.

Abe Fortas:

I understand that —

Victor P. Kayser:

Now, on your second question —

Abe Fortas:

— you’ve made that clear.

Victor P. Kayser:

On your second question, the fact is that we — as shown in our brief, entirely cited from any aspect, we believe that it is — that the record shows that, from January 1958, if they in fact had had an interest in entering the English market from then after the embargo and through the damage period, they could’ve obtained the license.

They never inquired where licensing could happen.

Abe Fortas:

Yes, but I want to be very clear on one thing.

Are you or are you not arguing that the English pool, let’s take that, A and B, the Canadian pool are lawful or not unlawful with respect to the participation of Hazeltine therein?

Victor P. Kayser:

We — frankly, Your Honor, as we have seen this case, we have not seen it fit to go into that question.

We consider that the issue of the fact of damage which was found in favor of the Hazeltine Corporations by the Court of Appeals is a threshold question.

Abe Fortas:

That’s adequate.

I understand your language.

I’m not asking you to concede the illegality for it.

Victor P. Kayser:

We do not, but we are not arguing it.

We most certainly do not concede it.

Earl Warren:

What did you argue before the Court of Appeals on that subject?

Victor P. Kayser:

On the Court of Appeals, we — frankly, Your Honor, we made a very brief argument.

We did defend the legality of the pools.

We believe that they are lawful but there, again, our thrust was on the question, was Zenith in fact hurt and also on the issue of the amount of damages, as well as other several issues.

Earl Warren:

Could we take your briefs in the Court of Appeals on the question of legality as the total of your argument here if we come to that?

Victor P. Kayser:

No, Your Honor.

I — as I say, we did not brief it exhaustively there and we have not briefly exhaustively here.

Earl Warren:

Well, I would’ve thought in the Court of Appeals you would have to reach it exhaustively because you had the findings against you.

And, I would think that you’d want to prove to the best of your ability that these were legal, if they were legal.

Victor P. Kayser:

Your Honor, we — faced with the situation into which we had been thrust there, frankly, we had to form a judgment as to what emphasis to place.

We had a client who had the judgment of $34 million against him.

We felt it was clear that, irrespective of the question of legality which, certainly, I need not say.

And if an area like this is a very complicated area.

It was a matter of judgment to put our thrust where we thought it was the most clear that the judgment below — judgments below were wrong, and that’s what we did.

Now, on the issue of release, I think, it, and I will spend just a moment on that but, it should be clear that the releases were in fact pleaded in the District Court by leave of Court and before entry of judgment there.

And, we have covered that point in our reply to the Solicitor General’s brief where the point was made.

Also, I think it should be pointed out that, on Zenith’s reply brief filed in this Court on page 16, Zenith admitted that the Trial Court permitted the filing of the briefs — of the pleas as of a date a year after the trial and then properly overruled a motion to dismiss the counterclaim on these grounds.

Victor P. Kayser:

The releases were, in fact, pleaded admittedly after the original trial but before judgment by leave of the Trial Court.

Earl Warren:

Why were they not pleaded in the first trial?

Victor P. Kayser:

Your Honor, again, we were not counsel but I think the reason they were not pleaded at the first trial was because, under the theory of action which was set forth in the original counterclaim, there would’ve been no conceivable basis to plead them because, as set forth in that counterclaim and in that motion to file it and, in the affidavit of Mr. Carodi, counsel — one of counsel for Zenith, it was recited that the acts complained of which formed the basis of this counterclaim which was not filed until 1963, three years after the answer had taken place, after the filing of the answer.

Well now, that was a span of three years before filing of the answer, and I would submit it would be quite obvious that, under those circumstances, the release would have no possible applicability.

And, it was only after, as we pointed out in brief, Zenith switched its theory of action to claim not that the action in the past three years had caused damage but that, by reason of the Acts going back to 1926, as you — if you heard, Zenith had been damaged in the effect of those.

It wasn’t until that point that the release became applicable and, at that time, when we got into the case we pleaded it and we’re permitted to plead it.

Now, as to the question of Canada, I think we must remember that the issue that we have here is whether or not there was a damaging impact by the Canadian pool upon Zenith’s Canadian business during the four-year period.

And, by reason of the testimony given by the Zenith witnesses, the final ultimate issue or question there is, we believe, as the Solicitor General correctly stated it, namely whether Zenith was unable to obtain a full-fledged Canadian distribution system during the period from June 1959 through May 1963 and, if not, whether such inability was attributable to the actions of the Canadian pool.

Now, that is the issue as to Canada as to fact of damage.

Now, we’ve heard a great deal this morning about this alleged gigantic international worldwide conspiracy and, incidentally, the proofs and the findings do not support that.

But, in any event, we have heard that language about these alleged conspiracies or giant conspiracy.

Well, there are several observations to be made there.

First, Mr. McConnell has said, as to Canada, that its evidence is almost entirely documentary and, yes, it is and it is all before 1957.

Secondly, I think we should remember that Zenith is not entitled to any recovery here by reason of any alleged illegality of the Canadian pool or any other pool or by reason of any overt act which may have been done.

It is entitled to recovery.

It is asking that it’d be paid money.

It’s entitled to that only if it can show that there was an impact — a damaging impact by those pools upon Zenith’s business during the four years.

Now, what does the record show, incidentally, as to Canada after the 1957 releases?

It shows, yes, as Mr. McConnell says, it shows that there was a trade builder ad in August 1958 warning about infringement, but it also shows that Mr. Wright sent a telegram and a letter, a very strong letter, to the Canadian pool and said “we are fully licensed under all Canadian patents which the pool controls.

Thus, we consider this advertisement detrimental and, if you ever send another one or issue another one, we’ll see you in Court.”

And, there never was.

Byron R. White:

Well, did the pool directly communicate with Zenith?

Victor P. Kayser:

No, Zenith has communicated with the pool.

Byron R. White:

But was Zenith ever warned that it required a license from the pool to operate in Canada?

Directly?

Victor P. Kayser:

Directly, there were meetings.

Byron R. White:

I thought we were told there was a communication to Zenith in which it was —

Victor P. Kayser:

There were —

Byron R. White:

Proposed a license form for a —

Victor P. Kayser:

Yes, but —

Byron R. White:

For domestic production.

Victor P. Kayser:

Those communications, Mr. Justice White, were between Zenith and the pool, not made known to the distributing public.

But, yes, there were a couple of meetings and there was, as Mr. McConnell has said —

Byron R. White:

So the pool said stay out unless you’re going to build a factory up here.

Victor P. Kayser:

No, the pool sent Zenith a license form in —

Byron R. White:

For what?

Victor P. Kayser:

Which called for manufacture in Canada, yes.

Byron R. White:

And was it informed that — wasn’t it informed that — wasn’t Zenith informed that the pool held controlling licenses — controlling facts for which —

Victor P. Kayser:

No, that —

Byron R. White:

Zenith required a license?

Victor P. Kayser:

No, that letter, as I recall, referred to three patents which it was believed — the letter said it was believed that Zenith would infringe.

Byron R. White:

And so — and they needed it — in order to operate, they needed those licenses?

Victor P. Kayser:

Zenith said they didn’t need those licenses, —

Byron R. White:

I see.

Victor P. Kayser:

— Your Honor.

Zenith took the position that it was fully licensed and, the fact of the matter is, that Zenith entered the Canadian market and they sold tens and tens —

Byron R. White:

Well, way of 10% if the pool’s view was that you need something with us before you can operate in Canada.

Victor P. Kayser:

That was suggested, but no action —

Byron R. White:

Not only suggested, but said.

Victor P. Kayser:

It was said, yes, and no action was ever taken.

Zenith continued to grow into Canada.

Byron R. White:

Well, how did this suit get started?

Victor P. Kayser:

This suit has absolutely nothing whatsoever to do with the foreign business of Zenith or with the Canadian pool, the English pool, or the Australian pool, and I think, possibly, I would like to turn to that point since the question is raised right now because Mr. McConnell, when he was asked on that question, said “yes, there was a finding to the effect that there was a connection between the instant patent suit and the Canadian operation.”

Byron R. White:

He finally said it was on domestic production.

Victor P. Kayser:

Yes, that there was a connection.

However, the number of the finding he gave you, which I believe was 32, had absolutely nothing to do with the domestic litigation.

Further, the finding which Zenith itself submitted and was entered in this case, finding number 13, after reciting the domestic activities of Hazeltine Corporation including a reference to the incident suit, said that Zenith’s — the injury to Zenith’s business and property from the domestic suit and these other activities was $50,065.00 namely the cost of defending the litigation, and there wasn’t a word in any of those findings which, in any way, purported to connect the domestic situation or the domestic suit with the Canadian situation.

And, in fact, not only is there nothing in the record, but when — in the colloquy which I had with the Trial Court in March on the reopening, that’s referred to at page 26-27 of our brief, he made it quite apparent that, in his opinion, he did not understand that there was any connection between the domestic activities of Hazeltine Research and the foreign activities of the Canadian pool.

And, the Court of Appeals, accordingly, said quite correctly, we submit, that there is no evidence in this record to indicate any connection and that, in fact, the Trial Court never took that suggestion seriously.

Abe Fortas:

Well, that doesn’t matter one way or the other, does it?

Abe Fortas:

Does it matter one way or the other with respect to the outcome of this suit?

Victor P. Kayser:

Whether —

Abe Fortas:

Whether this suit grew out of a domestic controversy or a controversy that enter its origins related to the foreign countries?

Victor P. Kayser:

We don’t think it does, Your Honor, but Zenith has argued that point in its briefs.

They think it’s totally irrelevant.

There is no connection.

To get back to the Canadian situation, the question of this correspondence, the question of this trade builder, and it’s apparent that Zenith never considered it, offered threat to it because when it filed its answer in this case in April 1960, some-years to month later, if it had felt that these acts constituted a threat and damage to it, it would’ve been a compulsory counterclaim required at that time.

And, there never was any such compulsory counterclaim until May 1963 when they ascribed their damage solely to acts occurring after April 1960.

Now, Wright was asked by his counsel as to exactly what were the clouds or difficulties or effects which the alleged activities of the pool had on Zenith’s business in Canada.

Thurgood Marshall:

What about the distributors?

Is there anything to dispute the fact that the distributors were, what, contaminated by the alleged conspiracy —

Victor P. Kayser:

Mr. Justice Marshall, this is part of my next point.

Thurgood Marshall:

Good.

Victor P. Kayser:

Thank you.

Mr. Wright testified as to two alleged effects of the Canadian pool and its activities during the period, and he said they had to do with the holding fact on advertising and promotion and they had an effect on the ability to get distributors.

At least that is the way Zenith has characterized that testimony.

Now, on the first point of holding back on advertising and promotion, I submit that that point is no longer in the case because when we got Mr. Kaplan back on the stand in November 1965, we asked him about Zenith’s advertising in Canada, and he said it was typical to what you would expect in the new market.

In fact, he implied it was a bit larger and, further, Zenith only did a 218 in this case.

Shows that we’re, in fact, substantial expenditures and advertising, radio, television, newspapers, magazines, billboards, you name it, they used it.

The Government feels that — has indicated that they recognize the rights that this is out of the case and we most certainly agree, but I think it should be pointed out, and the Court of Appeals took note of this fact, that this was evidence given by a witness later shown to be untrue by his own fellow executive.

We turn then to the second question, that of whether or not has — and the government, I think, put it fairly, whether or not Zenith was in fact unable to obtain a full-fledged Canadian distribution during the four-year period.

And, I submit, that is the crux of Zenith’s entire claim as to Canada.

Now, Zenith asserts that Mr. Wright testified that he tried to get distributors but he had problems.

He could get some at western Canada but he couldn’t get them in the other portions of Canada because of the Canadian pool.

But, actually, if you read Mr. Wright’s testimony very closely, you will say that even though someone might get that impression, he didn’t say that.

He made some comments to the effect that the August 1958 trade builder ad, things of that type, would cause a serious problem of getting distributors, but he never testified that, in fact, there’s a single — that there was a single instance where he had failed to get a distributor or where a distributor had left Zenith.

Earl Warren:

Is there any finding on that testimony in the Trial Court?

Victor P. Kayser:

No, Your Honor, that’s one of the things that the Solicitor General pointed out, that you couldn’t tell what the Trial Court’s supposed theory was.

That may very well have been the theory that they should be awarded damages because the pool, for many years prior to that, had prevented them from building up a mature market.

Of course, as we pointed out, any damage based on that theory is gone, is not relevant because of the 1956 releases.

Victor P. Kayser:

Secondly, it is said that Wright testified that he could get distributors in the western Canada but had trouble elsewhere.

But, the fact is that, if his testimony is examined, all he said was that they could get distributors in western Canada.

They had a less success in the central and eastern provinces, but he didn’t say why.

And, as a matter of fact, as we shall show in a minute, he didn’t have trouble getting distributors anywhere in Canada.

Earl Warren:

I didn’t get that last.

Victor P. Kayser:

We shall show in a minute the fact is that he did — that Zenith did not have difficulty getting distributors.

By 1959, they were boasting they had a nationwide network of distributors, effective and vigorous at all levels.

So, Wright’s testimony, as I shall show in a moment, was not true.

Now, the —

Earl Warren:

It’s either the Court’s find on that question was whether that testimony was true?

Victor P. Kayser:

Not as I recall.

No, the findings had to do with this pre-1957 period but there was, of course, as Zenith no doubt relies on, this very broad conclusory finding about drastic curtailment.

Abe Fortas:

Mr. Kayser, may I ask you this?

One of the questions before us on this branch of the case could be phrased this way.

Was there a basis for the Trial Court concluding that, on account of threats by the pool to prevent the importation into Canada of products, Zenith products manufactured in the United States, Zenith was unable — Zenith was deterred, prohibited, prevented, or — from shipping its products into Canada and selling those products there, number one.

Number two, because of the activities of the pool in Canada, the distributor that Zenith was unable to obtain a full-fledge distribution system, as you have put it, and that Zenith — And, third, that was an adequate basis for a District Court conclusion that Zenith wanted to and, but four of the activities of the pool either with respect to prohibiting forbidding importation or with respect to threats against distributors, Zenith would have distributed and sold its product in Canada.

Should not about what it comes down to in this branch of the case?

You’ve got two points.

One, the pool or the finding 29 with respect to the pool activities in prohibiting importation of product made in the United States and, two, the distribution system.

And, either of those at this remote distance, I suggest to you, arguably might support a finding that the pool has damaged Zenith in violation of the antitrust laws.

And then, the question is, has it demonstrated the — what the model damage is and, if so, what is that?

Victor P. Kayser:

Well, Your Honor, I don’t believe that I can agree that there is — there was a record which would justify any conclusion of the fact of damage because, granted a pool policy, we nevertheless have the fact that Zenith considered itself fully licensed, took that position, and was never in any way interfere —

Abe Fortas:

But, as I think my brother here — was developed in the colloquy with my brother White, the pool nevertheless took the position that it would not permit the importation of Zenith products into Canada.

Zenith could go up there and start a factory.

But, however it may be, I’m not asking you to agree to the conclusions right now, Mr. Kayser, but is this the correct analysis of the issues before us, that is to say that whether there is an adequate basis for the District Court’s findings on pool prohibition of importation, whether there is an adequate basis for what seem — what is arguably implicit in the District Court’s findings, namely that the pool threatened distributors and, third, whether there’s an adequate basis for the finding that, but four of these restraints, Zenith would have sold its product in Canada.

Victor P. Kayser:

I think —

Abe Fortas:

Are those the issues before us?

Victor P. Kayser:

I would think so, Mr. Justice, depending on what you mean adequate basis.

I think, certainly, this is — there is the issue as to the effect of Rule 52 (a) but, striking aside from that, yes.

Now, I would like then to come back to this matter of alleged inability to get distributors.

Victor P. Kayser:

Now, the Solicitor General in his brief recognized that the proof on this issue, I believe he recognized that it was lacking or certainly of very low standard, and he made the comment “no person can be certain whether Zenith would’ve been able to obtain a Canadian wide group of distributors notwithstanding the pool.”

He made that as a comment and as a justification and as an argument for possibly supporting the decision of the District Court.

But, may I please the Court, this brings us to the subject of Zenith’s annual reports which, yes, are not in evidence but they were in existence.

They were in an offer of proof, made before entry of judgment.

They are in the transcript before this Court.

We believe, and Mr. McConnell recognizes, the Court may take judicial notice of them and we believe, respectfully, that they are inescabpable unless the truth is to be ignored.

I think, respectfully, that there is a very basic question presented here, granted that these annual reports were not put in evidence during the trial.

That’s undeniable, but the fact is that these are contemporaneous documents out of the Zenith files.

They are the highest record of its stewardship to its shareholders and they —

Earl Warren:

Number 49, Zenith Radio Corporation, petitioner, versus Hazeltine Research, Inc., et al.

Mr. McConnell.

Thomas C. Mcconnell:

Mr. Chief Justice and may members of the Court.

I represent the Zenith Radio Corporation which is the petitioner in this case.

Respondents are the Hazeltine Research, Inc., a corporation which is a wholly owned subsidiary of the Hazeltine Corporation.

And, it was stipulated by the parties in this case in a pretrial stipulation that, for all purposes in this lawsuit and all purposes in the instant case, that the two corporations should be considered one and the same.

The instant suit was brought for the alleged infringement of a patent, a monochrome patent alleged to have been infringed by the Zenith Corporation.

And, both the District Court and the Court below, the Court of Appeals held that that patent was invalid and not infringed.

Abe Fortas:

Mr. McConnell, I’m sorry but you — there is an issue that’s submitted to us, isn’t there, as to whether both Hazeltine Corporations are bound here or whether it’s just a subsidiary and not the parent?

Thomas C. Mcconnell:

That’s right, Your Honor.

Abe Fortas:

Is there a difference on that?

Thomas C. Mcconnell:

I’m going to reach that in the course of my argument.

Abe Fortas:

I didn’t really understand why you made your opening statement because there is that issue.

Thomas C. Mcconnell:

There is that issue, Your Honor.

I simply made a statement because — as part of the facts in the case that there was that pretrial stipulation and I’m treating, for this portion of the argument, the two corporations as the same.

In that suit, Zenith answered by setting up the patent and other patents of Hazeltine have been misused by putting them into foreign patent pools, which foreign patent pools had refused to license imports and had restricted commerce between United States and foreign countries, namely Canada, England, and Australia, contrary to the provisions of the antitrust law, the federal antitrust law that any restriction or any combination, conspiracy, or arrangement between competitors which restrain commerce not only between the states of the United States but between the comp — the country of the United States and foreign countries, violated Section 4 of the Clayton Act, Sections 1 and 2 of the Sherman Act.

And, under those two sections, also Section 16 of the Clayton Act, alleging the same facts as we’d set up in the mis —

Byron R. White:

— were there any factors — was there any factor —

Victor P. Kayser:

There was no indication that the pool — that, beginning after the release —

Byron R. White:

Why was it at all?

Victor P. Kayser:

That is right and, incidentally, the Court of Appeals did make reference to the release in its opinion at page —

Byron R. White:

The annual report indicates that Zenith itself was saying “we wouldn’t have any more than this strong distribution system absent the pool.”

Victor P. Kayser:

Your Honor, given the proposition that Zenith, in making its claim and in having a market, starts from scratch would have to start, we say, from scratch in 1957 because of these releases.

I submit that these annual reports in this offer absolutely destroy any notion that, with that starting point, Zenith did not do as well as it could’ve.

In fact, this — these reports to the shareholders, to the public are an extended story of success after success after success.

They —

Abe Fortas:

Mr. McConnell referred to an annual report showing $14 million annual business, I gather.

Is that in the same status as the reports to which you’re referring?

Victor P. Kayser:

The report that he refers to, I believe, is the — is a report which I think they made to the Commerce Department or something like that.

It’s not in the annual report, as I — at least not the document that they attach to their brief.

Abe Fortas:

I see, and you — do you think we can or cannot properly take judicial notice of the report to which he refers?

Victor P. Kayser:

I think, Your Honor, you could take judicial notice of it bec — but, I don’t think it means anything.

Abe Fortas:

I said properly.

Victor P. Kayser:

Yes, but I don’t think it means anything.

But, these annual reports, which I say, are the highest report of the corporations of its stewardship to its shareholders.

What do they say?

I’ve pointed out that they show they had the distributions that were complete by 1959.

In 1960, they report that Zenith successfully countered the downward industry sales trend and made important gains.

1961, they talk about gratifying progress, consistent national advertising, and the enthusiasm to have distributors and dealers, as resulting in a doubling of their sales.

Now, the only —

Earl Warren:

Does that refer specifically to Canada?

Victor P. Kayser:

Yes, Your Honor, it does.

Yes, it does.

These are the excerpts on —

Victor P. Kayser:

Yes.

The —

In your main brief on pages, where are they?

Where is it?

Victor P. Kayser:

They are reproduced in full in the appendix A to our brief, the reports other than the statistics for those years.

Yes, the excerpts also appear beginning at page 55 of our brief.

I thought — I see.

Victor P. Kayser:

Now, Zenith’s counsel has tried to dismiss these annual reports by saying, well, a corporation doesn’t have to cry on its shareholder’s shoulder but, of course, what he overlooks is that these reports beginning 1957 are really a very, very revealing year by year history of Zenith’s operations, and they are in direct conflict either with the testimony of the witnesses or any inferences which anyone might seek to draw from that.

And, on this matter of crying on the shareholder’s shoulder, the fact is that Zenith did exactly that.

For —

And with respect to other things like Japanese competition and so on?

Victor P. Kayser:

Japanese competition, they also talked about the problem of the carafe in Canada, exchange control ratio.

In 1957, as they said, the cartel was annulled and they had never mentioned it again, all the problems in the cartel.

So, it really is a very, very revealing history.

Well, now, I would like to spend my remaining four-and-a half minutes on the — on behalf of the Hazeltine Corporation raising the jurisdictional question which is also before this Court.

And, I must do so very briefly and make only the points as quickly as I can.

First, that Hazeltine Corporation, the parent, was never named a party to the litigation, was never served of the process, never filed an appearance, and the litigation was solely between Hazeltine research and Zenith Radio.

The only purported basis for holding the parent liable was the stipulation entered into May 7, 1963 and, as Mr. McConnell himself said this morning, that stipulation was between the parties, namely Hazeltine Research and Zenith, and Hazeltine Corporation was never a party to it.

And, it should be noticed also that in the counterclaim filed in this case which was some-three weeks after the stipulation, although Zenith referred to Hazeltine Corporation as the parent, it never named it as a party and, in fact, in the claim for judgment for treble damages, a judgment was asked only — a judgment against counter-defendant Hazeltine Research, never Hazeltine Corporation.

Now, the fact is also that both Zenith and the Trial Court knew that Hazeltine Corporation was not before the Court.

Zenith, in its brief constantly distinguished between the parent and the subsidiary, said that Mr. Dodds represented the subsidiary, not the plaintiff.

The trial judge himself, in a colloquy, when I raised the question that Hazeltine Corporation was not a party, what did Judge Austin say?

“Well, of course, Hazeltine Corporation wasn’t a party to the lawsuit.”

That’s the trial judge speaking.

Now, finally, and I think this is really very significant in this picture, the first time Hazeltine Corporation even knew that there was any thought that it was to be bound by the judgments, was the day after the original findings calling for the enormous award of $49 million were entered.

And then, Hazeltine Corporation heard about it over a Doll Jones tape to the effect that Zenith counsel has advised that he intends to ask the Hazeltine Corporation be bound by the judgment.

The reason for this, I suggest, is obvious.

These findings for $49 million were 15-16-times the network of Hazeltine Research, in fact, substantially greater than the total assets of Hazeltine Corporation and its subsidiaries.

But at least, Hazeltine Corporation had more assets that Hazeltine Research and, therefore, Zenith decided at that point that the judgment should be asserted against the parent.

They succeeded in getting the Trial Court to do that, even though the Trial Court himself had admitted that Hazeltine Corporation wasn’t a party to the lawsuit.

I — Your Honor, I see I still have a moment more of time, but I would ask if anyone has any questions.

I’ve hurried to finish within my time.

Unless has any, I shall sit down.

Earl Warren:

Very well.

Mr. McConnell, you have a few moments.

Thomas C. Mcconnell:

I was taking the task by Mr. Chadwell for not mentioning England, but I ran out of time.

I mean, I had to choose something to —

William J. Brennan, Jr.:

Before you ran out of time, you’re going to get on this point where it’s made an impression.

Thomas C. Mcconnell:

I will, Your Honor.

After this case had been submitted, and we’ve heard about the findings being entered, Hazeltine entered the findings.

They presented complete findings of every aspect in this case.

And, in those findings, time after time after time, they asked the Trial Court to approve Hazeltine Corporation’s entry into the pools, the use of their patents in the pools, that there was no illegal use of Hazeltine Corporation’s patents, foreign patents, and Hazeltine Research, Inc. had no foreign patents.

They were the patents of Hazeltine Corporation.

If they had entered those findings, I couldn’t have said one single word about their not being res judicata.

I was there.

They presented them.

We’d stipulated that the companies were the same and they were there asking for relief from that Court, and it was owned.

You talk about the findings being written, but they wrote findings.

The Court asked both sides to present findings.

They wrote them.

We wrote them.

And, the Court entered our findings and it’s done and approved by the Court of Appeals in the Seventh Circuit.

Further than that, all of their officials were there during the whole course of the trial and knew that the two companies were stipulated to be one and the same, and that Hazeltine was there.

Their counsel for the parent cor — company trying to justify their participation in these pools, trying to get a complete bill of health from the District Court on their violation of the antitrust laws.

And, there isn’t the slightest question in the world about that and the rule is that a party that comes in and asks relief from a Court submits itself to the jurisdiction of the Court.

Not only that, this isn’t a case where a judgment was entered against somebody who wasn’t there, off in a left field somewhere.

They came into the Court before a judgment was entered and they raised the contention that we’re not bound by what’s going on in this Court, and they raised the question of whether or not the submission that these findings brought them into the case.

And, they lost on that issue and the District Court said they were in the case.

True, he referred to the stipulation, but here we were dealing with a situation in the stipulation.

And, why was the stipulation entered?

We don’t have to speculate about it.

They presented a stipulation in which they said, for the purposes of this suit, these two companies are to be considered the same, and why?

They spelled it out, to avoid the necessity of looking through the corporate veil from the subsidiary to the parent.

That was why.

So, he wouldn’t have to go into the — I could’ve made the proof that they were — one was the agent of the other.

One was the alter ego of the other.

No problem of proof, they were there.

Thomas C. Mcconnell:

This isn’t a case where you’re trying to hold somebody who wasn’t there.

Thank you.