Patent RacketeeringGovernment Suit Against the Radio Trust—"The

Most Important Anti-Trust Suit in the History ofthis Country—If Prosecuted to Logical Conclusion,It Will Result in the Dissolution of the Most Pow-erful, Wealthiest, Most Sinister, and Most Arro-gant Monopoly Which Ever Oppressed the Public,Terrorized Its Competitors, or Flaunted the Lawsof A n y Country."

Explanation of Dill-Davis Bill (H. R . 13157)—" ThisBill Will Stop Patent Racketeering. It Will Put anEnd to the So-Called ' Patent Trusts.' It Will Stopthe Pernicious and Unlawful Practice Employed bySome Monopolies to Cover Their Illegal OperationsUnder the Pretense of Patent Ownership. * * *This Bill Should Have the Enthusiastic Support ofEvery Member of Congress W h o Believes in theEnforcement of the Anti-Trust Laws. I Shall Askfor Its Immediate Consideration by the House C o m -mittee on Patents when Congress Reconvenes inDecember."

Speech of

Hon. Ewin L. Davisof Tennessee

in the House of Representatives

June 19, 1930

(.Not printed at Government expense)

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UaiUd State*

G m r n a m t Printing 01

11 M M

The Radio Trust

" A bill (H. R . 11157) relating to mite for infringement of patent!where the patentee It violating the antitnut laws.

" Be it enacted • * * That it shall be a complete defense to any•nit for infringement of a patent to prove that the complainant in such•nit it mini or controlling the laid patent in violation of any law ofthe United States relating to unlawful restraints and monopolies or relat-ing to combinations* contracts, agreements, or understandings in restraintof trade, or in violation of the Clayton Act or the Federal trade commis-sion act.

"Sec. 2. Where the defendant in any patent-infringement proceedingsplead* any of the defenses set forth in section 1 hereof such defense ordefenses and the issue or issues raised thereby shall be tried iwparatelyand judgment entered thereon prior to the hearing on any other issuestailed by any other defenses."

SPEECHor

HON. EWIN L. DAVISThe House in Committee of the Whole House on the state of the

Union had under consideration the bill II. R . 12912, the seconddeficiency bill.

M r . D A V I S . M r . Chairman and members of the committee,as fully as time permits I shall discuss one of the gravest andmost important problems confronting the American people.Under the leave granted, I shall extend m y remarks by includ-ing certain documents and quotations which I shall not havetime to read.

G O V E R N M E N T SUIT AGAINST T H E RADIO TRUSTO n the 13th of last month there was filed in the United

States District Court of Wilmington, Del., the most importantantitrust suit in the history of this country, because, if prose-cuted to a logical conclusion, it will result in the dissolutionof the most powerful, wealthiest, most sinister, and most arro-gant monopoly which ever oppressed the public, terrorizedits competitors, or flaunted the laws of any country.

This action was commenced by the Attorney General of theUnited States against 10 corporations with aggregate assetsof $6,000,000,000, who are charged in the petition with vio-lating the Sherman antitrust law. The combination againstwhich this suit was directed are generally known to the publicas the Radio Trust.

The 10 corporations against w h o m this suit was broughtare the Radio Corporation of America, General Electric Co. ,

. American Telephone & Telegraph Co., Western Electric Co.(Inc.), Westinghouse Electric ft Manufacturing C o , R . C . A .Photophone (Inc.), R C A Radiotron Co. (Inc.), R C A Victor Co.(Inc.), General Motors Radio Corporation, and General M o -tors Corporation.

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According to their balance sheets of December 31, 1928, theassets of the chief defendants were:R . C . A.-Victor C o , « " • 563, 336General Electric Co «». «». «2Westinghouse Electric & Manufacturing Co 233, 690, 111American Telephone & Teleeraph Co 3. 826, 683, 58*General Moton Corporation 1, Z4Z, B94, 86»

5, 905, 287, 222

The assets of these companies have since been materiallyincreased; the assets of the American Telephone & Telegraphsystem, at the end of 1929, according to the company's state-ment, were $4,228,430,088.

This does not enumerate the assets of several of the defendantcompanies.

The petition in this case, which is signed by the AttorneyGeneral of the United States and five assistants to the AttorneyGeneral, as well as by the United States Attorney, is admirablydrafted, apparently after careful and deliberate thought andpreparation.

The petition in this case constitutes a ringing indictmentagainst this lawless Radio Trust. For the information of thosew h o m a y desire to read the entire petition, I beg to advise thatthis petition was inserted in the C O N G B E S S I O N A L R E C O R D , on M a y14, 1930.

However, a strange and disappointing feature of this suitis that the petition does not clearly cover the Radio Trustmonopoly in the communication field, and furthermore, twocompanies whose contracts and conduct clearly align them withthis powerful Radio Trust, and w h o were specifically chargedby the Federal Trade Commission with being members of thismonopoly, are conspicuous by their absence, as defendants.

One of these members of the Radio Trust is the United FruitCo., with assets of about $250,000,000. The United Fruit Co.also has a virtual monopoly of the banana business in thiscountry and in Europe. It has powerful influence in W a s h -ington. It operates a fleet of ships, primarily for the trans-portation of its bananas; m a n y of these ships are operatedunder foreign flags and with alien crews.

This company desired some valuable ocean-mail contracts, andwith the aid of two other hybrid shipping companies and ofthe Postmaster General, w h o eagerly rushed to their rescue,succeeded in having chloroformed the bill which very properlyprovided that no ocean-mail contract should be awarded to anycompany operating foreign-flag ships in competition with Ameri-can-flag ships, after such bill had been unanimously reportedby the Committee on the Merchant Marine and Fisheries, aresolution for it's consideration had been unanimously reportedby the Committee on Rules, and it had passed the House with-out a dissenting voice or vote. While this bill was still pendingin the Senate committee the United Fruit Co. succeededin inducing the Postmaster General to award it three valuablemail contracts amounting in the aggregate to about $9,000,000.This unseemly haste notwithstanding the fact that performanceunder two of said contracts was not to commence for aboutthree years, for the very good reason that the United Fruit Co.

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does not n o w have adequate American ships to perform theservice.

Great is the Radio Trust! Great is the Banana Monopoly!The other members of the Radio Trust not included among

the defendants in this suit is the International Telephone &Telegraph Co., with assets of $389,914,333, which has an agree-ment to buy the Radio Trust foreign communication services,worth about $15,000,000 for $100,000,000 worth of stock in saidInternational Telephone & Telegraph Co., if and when Congresscan be induced to so far forget the public interest as to repealsection 17 of the radio act of 1927, which' prohibits- such amonopoly. The Radio Trust has for more than a year been dis-seminating false propaganda and exerting strenuous efforts toeffect the repeal of said section, but has m a d e no appreciableimpression upon the Members of Congress.

Not only are these two companies omitted from the defendantsin the Government suit, but.likewise the communication subsi-diaries of the Radio Corporation of America, particularly R C ACommunications (Inc.) and the Radio Marine Corporation.

. N o explanation has been offered as to w h y these members ofthe Radio Trust were omitted. Surely the Department of Justicedoes not wish to safeguard this monopoly against the very salu-tary provisions of section 13 in the radio act of 1927, whichdirects that the licensing authority shall refuse a radio licensefor broadcasting, commercial communication or other purpose, toany corporation which has been adjudged guilty by a Federalcourt.of unlawfully monopolizing or attempting unlawfully tomonopolize radio communication, directly or indirectly, throughthe control of the manufacture or sale of radio apparatus,through exclusive traffic arrangements, or by any other means,'or to have been using unfair methods of competition. This pro-vision of the radio: law is self-inforcing. However, immunityfrom its provisions continues so Jong as the violator of the lawis not adjudged guilty, notwithstanding the fact that the m e m -bers of the Radio Trust are daily and flagrantly violating thelaws. These omitted companies hold licenses for the use of hun-dreds of most valuable wave lengths in the field of both domesticand international communication,.

Furthermore it is admitted that the, Radio Corporation 'ofAmerica and its communication' subsidiaries have an absolutemonopoly in international radio sei'vice between this and for-eign countries, David Samoff, vice' president and general m a n -ager of the "Radio Corporation of America, testified before theCommittee on the Merchant Marine' arid Fisheries " that theinternational rhdio service is a.natural monopoly and shouldbe." O w e n D . Young, the leading figure, in the Radio Trust, hasseveral times given utterance to similar sentiments. '

' This aspect of the case is accentuated by the boasts of theRadio Trust that it has dsed arid will continue to use itsmonopolistic control of radio patents to keep competitors out ofthe wireless communication field. In the hearings of the HouseCommittee on the Merchant Marine and Fisheries, in January,1920, fri' answer to a question put by m e , Manton Davis, vicepresident and general attorney for the Radio Corporation, testi-fied that—except for a recent restricted modification with re-spect to press associations— ' the refusal to sell or lease appa-ratus to competitors for international communication purposes

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Is Included in the well-defined policy of the Radio Corporationof America."

In the hearings of the Senate Committee on Interstate C o m -merce, December 10, 1929, page 1196, O w e n D . Young testifiedthat this policy of the Radio Trust was still maintained.

So w e hare the spectacle of this huge combination defiantlyannouncing that it intends to use its alleged patent monopolyto keep competitors out of the field of radio communication,even though they have licenses from the United States Gov-ernment.

However, with the exceptions noted, the petition in the Gov-ernment suit against the Radio Trust is, in m y opinion, ablyand admirably drawn and constitutes n severe arraignment ofthe infamous conduct of the trust and forcefully seeks to ter-minate same.

Another rather disconcerting feature of this suit is that atthe t 'me it was instituted the Department of Justice gave out astatement, in part, as follows :

It is announced at the Department of Justice that there is to-day(May 13) filed on behalf of the United States a suit under the ShermanAct in the district court of Wilmington, Del., to test the legality ofthe arrangement existing between the Radio Corporation, General Elcc-trict, Westinghouse, American Telephone & Telegraph Co., and six othercorporations.

The patent arrangements originally made between several of the de-fendants have been steadily increased in number and enlarged in scopeuntil the defendants now practically have control of radio and itsdevelopment. This control has been brought about by a novel methodof cross licensing patents. The suit is concerned chiefly with the legal-ity of these patent arrangements.

Upon the commencement of this action, the chairman of theexecutive committee of the Radio Corporation of America gaveout a statement in which he, among other things, declared:

The Radio Corporation of America welcomes a suit of the Governmentof the United States to test the validity of its organization, which hasnow existed for more than 10 years—

And so forth.This notwithstanding the fact that it is a matter of c o m m o n

knowledge that the Radio Trust has all along exerted everyeffort to prevent action.

However, I a m going to assume that this suit was broughtin good faith, and that the Department of Justice officials incharge of same will patriotically, honestly, efficiently, andvigorously perform their full duty.

This belief is strengthened by the attitude of PresidentHoover, which he so aptly and forcefully stated a few years agoat a hearing before the Committee on the Merchant Marine andFisheries.

In view of the position of M r . Hoover and his former connec-tion and great familiarity with radio, I want to particularlyinvite the attention of the Members to what he said upon thissubject. M r . Hoover, then Secretary of Commerce, and in fullcharge of radio regulation, among other things declared:

Not only are there questions of orderly conduct between the mul-titude of radio activities in which more authority must be exerted in

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the interest of every user, whether Render or receiver; but the.of monopoly in radio communication mnst be aquarely met.

It is inconceivable that the American people will allow thU new-b o m system of communication to fall exclusively into the power of anyindividual, group, or combination. Great as the development of radiodistribution has been, w e are probably only at the threshold of thedevelopment of one of the most important of h u m a n discoveries bear-ing on education, amusement, culture, and business communication.It can not be thought that any tingle person or group shall ever have theright to determine what communication m a y be made to the Americanpeople.

In this connection, I wish to state that I a m glad I a m notspeaking over the radio, but in this forum, where I shall notbe cut off from m y auditors, as former Senator James A . Reedwas the other night while speaking over the radio, when hecommenced an arraignment of the Radio Trust.

Reverting to the quotation from M r . Hoover, he furtherstated:

W e can not allow any single person or group to place themselves inposition where they can censor the material which shall be broadcasted tothe public

Radio communication Is not to be considered as merely a businesscarried on for private gain, for private advertisement, or for entertain-ment of the curious. It Is a public concern impressed with the publictrust, and to be considered primarily from the standpoint of publicinterest to the same extent and upon the basis of the same generalprinciples as our other public utilities.

ATTOBNET GENEEAL DAUGHERTl'S ATTITUDE

The commencement of this suit, I trust, terminates an im-munity which has existed with respect to this trust for approxi-mately nine years. [Applause.] W h e n they first began theformation of this trust they sought an assurance of immunityfrom Attorney General Harry M . Daugherty, and while in hisletter of reply—which I shall insert in the R E C O R D — h e admittedthat he had no authority to grant such immunity or to renderan opinion upon the validity of the contracts into which theyhad entered, yet he then proceeded to express such great friend-liness and sympathy and gave such strong personal assurancesof protection that they treated it as an immunity and have eversince boldly asserted that they have been operating with theapproval of the United States Government. I a m glad w e nowhave an Attorney General w h o views his official responsibilityand duty differently from the former Attorney General, w h owas so completely discredited and driven from his office indisgrace.

FIDB&U TKADB COMMISSION INVESTIGATION

, O n February 12,1923, the gentleman from Maine [Mr. W H I T B }introduced a House resolution requesting the Federal TradeCommission to investigate'and report to the House of Repre-sentatives as to the various contracts and activities of th»Radio Trust. '

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The Committee on the Merchant Marine and Fisheries unani-mously reported said resolution to the House February 22, 1923,accompanied by the following report:

[To accompany House Resolution 548]The Committee on tbe Merchant Marine and Fisheries, having con-

sidered House Resolution 548, reports the same to the House withoutamendment, with the recommendation that the resolution be passed.The members of the committee are unanimous in their approval of theresolution.

The House recently passed House bill 13773. In the preparation ofthat bill the members of your committee felt constrained to limit itsscope because of a lack of accurate information on certain Importantphases of the general subject of radio. That bill, therefore, dealt onlywith those matters concerning which w e were advised and upon whichwe deemed it vital that there should be prompt action by the Congress.

It is a matter of c o m m o n assertion that the development of the art,its use, and enjoyment is being hampered and restricted through theacQuisition of a few closely affiliated interests of basic radio patents, andthat the intent and effect of the practices of these interests is to establish amonopoly in radio instruments and parts thereof. It is charged thatagreements have been entered into between manufacturers and dealersin radio apparatus the purpose and effect of which is to eliminatecompetition, to restrict the sale, and to unwarrantably maintain theprice of instruments and their parts. There is evidence of record ofcontracts or agreements made which purport to give exclusive rightsin the transmission, reception, and exchange of radio messages, with theresult that no competition in service is possible in the localities coveredby such contracts.

Your committee feels that an investigation should be made to ascer-tain the facts in connection with the matters specifically suggested andmore generally covered by the reported resolution. W e desire to knowthe truth. W e must have this information in order to satisfy ourselveswhether unlawful agreements have been entered Into, whether unlawfulpractices have been and are being engaged in, and to guide us In fram-ing legislation for the consideration of the House. The Members ofthis House must have the facts if they are to legislate advisedly in thepublic interest on this subject.

This resolution was called up by the gentleman from Pennsyl-vania, M r . Edmonds, under a unanimous-consent request andadopted by the House without opposition March 3, 1923.

REPORT OF THE FEDERAL TRADE COMMISSION

The Federal Trade Commission conducted the investigationand made its report December 1, 1923, in accordance with saidresolution. This report on the radio industry, together withthe appendix, contains 347 printed pages. The appendix of thisreport includes the admitted written contracts between the dif-ferent members of the Radio Trust, which in themselves con-stitute violations of the antitrust laws in various particulars.

While the said House resolution did not request the FederalTrade Commission to take action against the radio trust, yetthe investigation disclosed such flagrant violations of the lawsthat the Federal Trade Commission, upon its o w n motion, fileda complaint against the General Electric Co., the AmericanTelephone & Telegraph Co., the Western Electric Co., Westing-house Electric & Manufacturing Co., the International Radio

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Telegraph Co. , the United Frnit Co. , Wireless Specialty A p -paratus Co., and Radio Corporation of America.

It m a y be noted that the Western Electric Co. (Inc.) is asubsidiary of the American Telephone & Telegraph C o . ; theInternational Radio Telegraph Co. is a subsidiary of the West-inghouse Electric & Manufacturing C o . ; and the Wireless Spe-cialty Apparatus Co. is a subsidiary of the United Fruit Co.

According to stock exchange quotations, the market value ofthe stock of the said five parent companies, against w h o m saidcomplaint was filed, then amounted to about $2,500,000,000; thishas since been greatly increased.

With respect to this complaint filed by it, the Federal TradeCommission gave out a statement, which I shall insert at theend of m y remarks.

However, the charges are briefly summarized in the f ollowinglanguage of the complaint: '

The respondents bavc combined and conspired for the purpose andwith the effect of restraining competition and creating a monopoly inthe manufacture, purchase, and sale in interstate commerce, of radiodevices and apparatus, and other electrical devices and apparatus, andin domestic and transoceanic radio communication and broadcasting.

After numerous delays the Federal Trade Commission com-pleted the taking of about 10,000 pages of sworn testimony andexhibits in support of the charges in the complaint. There-upon, following a decision of the Supreme Court of the UnitedStates in another case involving the jurisdiction of the Fed-eral Trade Commission, in which the court held that saidcommission had no jurisdiction over violations of the anti-trust laws and that the remedy for. such violations must beadministered by the courts in appropriate, proceedings therein,instituted, the Federal Trade Commmission dismissed its saidcomplaint against the members of the Radio Trust.

Shortly thereafter I prepared and introduced House Cqncur-.rent Resolution 47 on January 11, 1920, which resolutionbriefly recited the facts with respect to the investigation andcomplaint of. the Federal Trade Commission anij the,n. re-quested the commission to immediately transmit to the/Attqr-.ney General of the United States all such testimony, exhibits,and 'Other information obtained by it in connection with itssaid investigation, and requested the Attorney • General to haveimmediate consideration given to the evidence so' presented,and to have the Department of Justice take such action on thecharges ot violation of the antitrust laws of the United Statesas such evidence and information m a y .warrant, and to reportto Congress as soon, .as convenient his decision and action inthe premises. I shall insert at the end of m y remarks saidresolution. , . , . . . - . • ' ; . .

Within a few days after the introduction of said resolutionthe Federal Trade Cqmngqsion transmitted to the AttorneyGeneral of the United Stiji s all of the testimony which hadbeen taken by it. . , , ,. , . •

O n April 22, 1929, I addressed a, letter to the Attorney Gen-eral. Inclosing a copy < > £ , « & resolution, advising that I w a s

* informed "that the Federal yrade Commission .had transmittedto him fbe record in the cage and expressing the hope that the

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matter might have the early consideration of the Departmentof Justice and appropriate action taken. I also offered tofurnish such information relating to the subject as I had. Ishall insert at the end of m y remarks the reply which Ireceived from the Attorney General.

Thereafter efforts were made from time to time, particularlyby the Commerce Committee of the Senate, to expedite actionby the Department of Justice. In the meantime, according tocommon report, the Radio Trust was making strenuous effortsto prevent action by the department.

However, the matter finally culminated in the action beforereferred to being commenced by the Department of Justice, onM a y 13, 1930.

The illegal and indefensible immunity from prosecution soughtto be given to the radio monopoly by the malodorous Harry M .Daugherty nevertheless proved to bo effective from August 25,1921, to M a y 13, 1930, a period of nearly nine years, during whichtime the Radio Trust has grown more powerful, more effective,more oppressive, and more arrogant. However, I sincerely trustthat it will be demonstrated that it is not stronger than theGovernment of the United States. I sincerely hope that thisgreat and defiant law violator will be brought to justice.

O n March 5, 1926, in the Sixty-ninth Congress, the Committeeon the Merchant Marine and Fisheries reported H . R . ,9971, toregulate radio communication, and for other purposes, whichbill culminated in the radio act of 1927. This bill contained sev-eral provisions designed to prevent monopoly of radio, in thedrafting and adoption of which I a m glad to state that I hada part. However, I filed minority views on said bill, in whichI set forth in substance many of the facts which I have recited,as well as m a n y other facts relating to the radio monopoly, andtook the position that w e should Incorporate in the bill addi-tional and more stringent provisions against monopoly. A m o n gother things I took the position that no radio license should begranted to any applicant w h o was violating the antitrust laws.In m y said views and by amendments offered in the House duringthe consideration of the bill, I proposed several amendmentsalong that line. With respect to same I made this observa-tion :

TIIG enactment and enforcement of such provisions would force adissolution of the powerful radio monopoly. It surely will not be con-tended that the United States should license applicants to continue toviolate its laws. Applicants should be required to " come with cleanhands " before the Government throws its mantle of protection aroundthem.

However, most of m y amendments offered on the floor wererejected, although by close margins.

A n unfortunate feature of this whole situation is that thelicensing authority, first the Secretary of Commerce (the mat-ter doubtless being handled by subordinates) and then theFederal Radio Commission have greatly favored members ofthe Radio Trust. While I regret to have to state it, yet I a mconvinced that the major policies of a majority of the RadioCommission are controlled by the Radio Trust.

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11HISTORY or XADIO TRUST

The history of the Radio Trust is an Interesting story of com-mercial, political, and legal intrigue—domestic and inter-national.

At the close of the World W a r the American Marconi C o . —whose corporate name was Marconi Wireless Telegraph Co. ofAmerica, a N e w Jersey corporation—was the dominant factorin our international radio communications. It was a subsidiaryof the British Marconi Co. and was so completely under Britishdomination that during the war the Government had refused todo business with it as an American corporation.

In March, 1919, the British Marconi Co. undertook to buyfrom the General Electric Co. the exclusive right to the use ofthe Alexanderson alternator, a powerful radio-telegraphic de-vice, which was believed to be the only one able to span tbeAtlantic and give efficient service.

Rear Admiral Bullard. w h o was then Director of Naval C o m -munications, asked the officials of the General Electric Co., as"patriotic American citizens" not to sell these rights to theBritish company. The General Electric officials declared thatthey were in the business to sell radio apparatus to anybodyw h o could buy it, and that the British company was the onlypurchaser in the field, but that if the Navy Department wouldsanction an American radio monopoly it would create such acompany and sell the alternator only to that corporation.

Secretary Daniels rejected that proposal because he said hefavored Government control and that, even if he.did not, onlyCongress could sanction such a monopoly. That was the end of

. the proposal for a Government-sanctioned Radio Trust. H o w -ever, on October 17, 1919, the General Electric Co. incorporatedthe Radio Corporation of America under the laws of the Stateof Delaware. O n October 22, 1919, the General Electric Co.made a preliminary agreement with the Marconi Wireless Tele-graph Co. of America for the purpose of paving the way forthe absorption by the Radio Corporation of America of theAmerican Marconi Co. Under this agreement the Radio Cor-poration of America was to acquire all the assets of the M a r -coni Co., including its concessions, contracts, patent rights, andapplications.

O n November 20, 1919, the General Electric Co. also made anagreement creating its said new subsidiary as its selling agencyin tbe field of manufactured radio products and its subsidiaryin the Held of international communications.

RADIO CORPORATION Or AMERICA IN FOREIGN MONOPOLY

O n November 21, 1919, the Radio Corporation of Americam a d e on agreement with the Marconi Wireless Telegraph Co.(Ltd.), ot London, which divided the entire world into fields ofexploitation between the Radio Corporation of America, GeneralElectric interests in the United States, and the Marconi interestsin Great Britain. This agreement divided the world into foursections: American territory, apportioned exclusively to dieRadio Corporation; Briitak territory, given exclusively to the

^British Marconi C o . ; neutral territory, m a d e up chiefly of suchimportant countries as Holland, Spain, France, Russia, Ger-m a n y , Japan, and so forth. In which both companies were to beallowed to use each other's patents, and no man's land, which

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covered the rest of the world, and in which the companiesmight operate without the use of each other's patents.

in a desperate effort to effect the repeal of section 17 of theradio act of 1927, the Radio Trust has insisted that it wasnecessary for Iheni nnd the cable companies to combine in orderto combat the British or foreign monopoly.

As a matter of fact the Radio Corporation of America andits affiliated and subsidiary companies are leading membersof the British monopoly and of whatever world monopoly exists.

In fact, they originated the idea and took the lead in organiz-ing such a monopoly.

A n Associated Press dispatch of September 30, 1921—nearlynine years ago—reads as follows:WORLD BADIO COMBINE TO BE FORMED IN PARIS UNITED STATE3 INITIATES

PROJECT TO EXD DUPLICATION AND FUHNISU CHEAPER SERVICE

P A R I S , September 30 (by the Associated Press).—An Internationalwireless company for control and development of the greater part ofthe world's radio facilities is in process of organization hpre by repre-sentatives of the wireless interests of Great Britain, France, Germany,and the United States. The delegates expect to complete arrangementsin two weeks.

The American delegation is headed by O w e n D . Young, vice presidentof the General Electric Co. , and includes Edward J. Nally and J. W .Elwood, president and secretary, respectively, of the Badio Corporationof America, and a large staff of experts. The Westinghouse interestsalso are represented.

The proposed agreement is the outgrowth of a desire of the four coun-tries to place wireless on a sound commercial basis. The governmentsconcerned have approved the conference ar.d, it Is understood, willback the organization to be formed.

Wireless facilities of the four countries will, in effect, be pooled, buteach country will retain control over its respective territory. It isthug hoped to eliminate great waste occasioned by duplication and toplace at the disposal of the international company unlimited funds forresearch.

A s the United States initiated the meeting, it is expected AmericanInterests will have the most prominent part In the proposed company.

ILLEGAL CONTRACTS

From 1919 to 1921 the American Telephone & Telegraph Co.,the General Electric Co., the Radio Corporation of America, theWestinghouse Electric & Manufacturing Co., the United FruitCo., and the International Radio Telegraph Co. entered into aseries of what they term " cross-licensing agreements," to theend that every vestige of competition between these companieshas been eliminated in all of the commercial fields pertaining toradio, in the fields of patents and invention, in the field ofdevelopment, and in the field of communication. Furthermore,under these agreements the combined resources of all these greatcompanies must be used as a single instrument to destroy out-side competition.

These companies, by an elaborate series of restraints writteninto these agreements, jointly conspired to monopolize the n e wart of radio, not only in the field of manufacture of radioapparatus but in the field of communications, of modern broad-

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casting, and in all other branches of this revolutionary art.These agreements are all set forth in the report of the FederalTrade Commission on the radio industry of 1923.

EFFECT OF THE RADIO MONOPOLY

According to the complaint of the Federal Trade Commission,and, as clearly shown by the admitted written contracts betweensaid various parties, copies of which m a y be found in the ap-pendix to the Federal Trade Commission report, these partieshave already firmly established monopolies in the field of m a n u -facture, sale, and use of apparatus for wire and wirelesstelephony, wire and wireless telegraphy, and wireless broad-casting. The more offensive provisions of the contracts are—•

(a) These for the pooling of all patents of all the parties forall wire and wireless telegraph devices, for all wire and wirelesstelephone devices, as well as for all radio devices of whatsoeverkind and for whatsoever use, for a period fixed or arranged toterminate in 1915.

(b) Those giving to different members of the combination amonopoly in one or more of the fields and containing covenantsof all the parties to the contract not to compete or aid othersto compete in such fields and to prevent such competition byothers.

(c).,Those providing for a representation of ali the membersin the. purchase of patents by ,- any m e m b e r ; and for the re-quirement by all the members that employees should assigntheir.inventions.and patents to their employer.

The effect of this combination upon the public is in partdisclosed by a reference to a few of the m a n y monopolisticfeatures:. . . - . -

The public-service system of the telephone company is pro-tected from radio competition. •

With relatively unimportant exceptions, the monopoly ofmanufacturing radio devices is secured to the General Elec-tric and to the Westinghouse Cos.

With relatively unimportant exceptions, the Radio Corpora-tion has no right to manufacture radio devices, and while itlias.t^e monopoly, with relatively, unimportant exceptions, ofusing and selling radio devices* it is oot allowed to use themin competition with the public service, telephone business ofthe telephone company and the public are thus cut off from thepresent and future advantages of ''like radio service. TheRadio Corporation has an absolute nifcnopoly hi wireless com-munication between this country and foreign countries, exceptthat radio service between -this and a few Central Americanand West Indies points is reserved to, the United Fruit Co. ,another m e m b e r of the monopoly.

Even if a prospective broadcaster can procure a license fromthe Department of Commerce, it is necessary for him to pur-chase his broadcasting apparatus froni the'monopoly, and if themonopoly sees proper to'sell to him at all he must buy the ap-paratus and" operate same 'upon :isuch terms and' under sucliconditions as the monopoly dictates.

Tine inventor and sclentM'ts'in'the grip of a monopoly whichcan exclude his Wventi6rtfluia:'patents'froni1 use or sale, ex-fepting at a tremendous disadvantage to him, with correspond-ing bea^nt t& the monopoly. ^ ' f > ' : •< ' •'•' ' •

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As a result of these agreements, radio was placed in thisposition: Anyone desiring to go into any field of radio activitywas and is faced with the problem of meeting the combinedfinancial and patent resources of all of these concerns, involv-ing billions of dollars and thousands of patents—not only thosein existence, but those that m a y be brought into existence.The exclusive licenses that were given in the various fieldswere not only on existing patents, but on future inventions andfuture patents, to that the exclusive grants would continueuntil at least 1950. Under the covenants in these agreements,the members of this combination not only admit the scope andvalidity of issued patents claimed by the respective membersof the monopoly, but of their future and unborn inventions.In other words, they have eliminated all possible litigation andcontest between themselves.

SIMILAR COXTliACTS ADJUDGED 1I.LI1GAL

With reference to agreements of the latter type, the Federaldistrict court at Chicago recently held in the Oil Cracking easebrought by the United States Government against the StandardOil Cos. and 48 other companies under the Sherman Act, asfollows:

Such agreements can not bo sustained. While a patent 13 presump-tively valid, many of them, although duly issued, are invalid for vari-ous reasons. The public, in whose interest the patents laws ar: enacted(Kendall v. Wir.sor, 21 H o w . 322), is ordinarily protected against theburden of such void patent grants by the action of competitors of thepatentee who, prompted by motives of self-preservation, refuse to recoe-nizc these void patents and therefore successfully contest them. Thepublic is thereby relieved of the burden which their existence entails.

By these clauses of agreement 31 and similar clauses in the otheragreements, the parties purchased immunity from attack on their pat-ents. Tying the hands and sealing the lips of the only parties whowould ordinarily stand suit and contest the validity of the patents, theprimary defendants attempted to fasten on the public burdens which itwas not the purpose of the patent law to impose. Such agreementsviolate the letter and the spirit of the patent law and are contrary topublic policy. The far-reaching consequences of such agreements isillustrated by the present case.

W e have considered the nature and position of the parties tothis great combination. Let us consider h o w they have con-ducted themselves since they were organized.

MO.NOrOLY IX IXTEB.VATIOXAL WIRELESS COMMUNICATION

Take first the field of communication by wireless telegraphy.Under these agreements this field was given exclusively to theRadio Corporation of America. That company, either on itsown behalf or substantially through a subsidiary, the R C ACommunications (Inc.), owned entirely by it, has entered intoexclusive contracts with practically the entire world underwhich it is the sole medium which m a y be used for trans-oceanic radio communication to and from the United States.

Traffic agreements were also entered into by the companiesof this combination with the outstanding communications com-panies throughout the world, including those in .GreatBritain, Canada, Germany, France, Italy, Russia, Belgium,Australia, Holland, Spain, Norway, Sweden, China, Japan, and

13043—6881 .ft

15Sonth American countries, whereby communication with theseand other conntries of the world was controlled. These ar-rangements are in nearly all instances exclusive. Tile con-tracting parties agree to use each other's facilities exclusively,and in most instances the foreign contracting party has amonopoly in Its territory, and In some instances the agreementsare with sovereign powers.

DOMESTIC WIRELESS TELEGRAPH?

N o w let us consider the field of domestic communication bywireless telegraphy. The Universal Wireless Co., a domesticcorporation, was granted licenses to operate on 28 short wavelengths by the Federal Radio Commission. They were givenpermits to build commercial stations for the transmission ofmessages for toll in and between 110 cities in the United States.The Federal Radio Commission was created by act of Congressto grant such licenses. Immediately upon commencement ofoperations the Universal Wireless Co. was sued for patent in-fringement. It was not sued by an individual patentee or anindividual patent owner, it was sued conceitedly, by vari-ous members of this combination on various patents claimedto be owned by them individually. This sinister group, asa combination formed in defiance of law, through its com-bined illegal power, thus seeks to crush an independent com-petitor. •

Joseph Pierson, president of the Press Wireless (Inc.), onJanuary 13, 1930, told the Committee on Interstate Commerce ofthe United States Senate, of the attempt of his organization,representing such newspapers as the Chicago Daily N e w s , Chi-cago Tribune, Boston Monitor, Los Angeles Times, and the SanFrancisco Chronicle, to develop a wireless telegraphic pressservice. H e states as follows:

Owing partly to tbe rigid monopoly maintained by the GeneralElectric-Radio Corporation combine of equipment in the United States,even controlling that imported from abroad, it was decided to establishour North American stations in some near-by country where the lawswere more favorable to independent initiative and even more rigidlyenforced against unfair practices and oppressions of enterprise. W edecided, therefore, to 8et up our station at the terminus of the BritishGovernment cables.

M r . Pierson further stated:This license agreement does not appear to us to be for the purpose

of recouping for the Radio Corporation combine the costs of its wire-less development and research plus a fair profit. It seems to be for thepurpose of preventing competition and fencing in the field of wirelesscommunication. Consequently, some of m y directors say they can regardthis license agreement only as specially designed to make of the Ameri-can press a colony of tbe electric-power empire which seems to begrasping after complete control of the water and the air of the UnitedStates.

M r . Pierson set forth some of the conditions and terms uponwhich they alone could pwrthase apparatus from this combina-tion; as follows: ; iv \;" (a) Prtsa Wireless must n*r &»dlo Corporation of America the Gen-

eral Electric Co.'s price for N t M l n g the apparatus pips 43' per centprofit to tbe Radio Corporation of America; and "'"' "

16(b) Press Wireless must pay, as royalty or rental, 5 pet cent of the

gross receipts to Radio Corporation of America.3. Use can be lor press messages only.4. Press Wireless must charge its clients " with a view to earning

a reasonable profit " and not as a mutual company.5. Press Wireless must allow Radio Corporation of America to in-

spect its apparatus and its accounts at will.6. Press Wireless (Inc.) must surrender to Radio Corporation of

America, without any charge whatsoever, all pateDts or patent rightsIt now has or will ever have and must give Radio Corporation ofAmerica total and exclusive light to lease, transfer, or assign rightsof said patents.

7. Radio Corporation of America grants Press Wireless (Inc.) non-transferable right to use Radio Corporation of America patents.

8. Press Wireless (Inc.) must use apparatus in telegraphic codework only, and not for " transmission or reception of facsimiles, pic-tures, and the like."

9. Press Wireless (Inc.) must buy all parts from Radio Corporationof America.

10. "Article VII. The lessee hereby agrees to extend to the RadioCorporation of America at its request and through Radio Corporationof America Communications (Inc.) and for tne benefit of Its newspaperclientele, the same facilities, quality of press service, and like tariffswhich it extends to its other press customers at the time of therequest."

M r . Pierson further stated:In our effort to enter the wireless field in tbe United States w e have

been presenting our case to the appointed agency of the Government,the Federal Radio Commission. W e all would rather have had privategrants for the use of frequencies without putting our stations under tbepublic-service obligation, but those newspapers associated in our com-pany bowed to the far-seeing wisdom of the commission, particularlyJudges Robinson and Sykes, in their interpretation of public interest,convenience, and necessity. W e have submitted to the most rigorousscrutiny, and properly so, of our plans, our resources, and our experiencein the communications business. . W e have been found to meet the testimposed by law. The tribunal which Congress has created to decidesuch questions for tbe United States Government has found that w e areeligible and entitled to operate stations for certain purposes and on cer-tain channels.

But It seems we did not see the right people. In order to operate aradio station in the United States, it appears, w e have to wait upon thesecret radio commission of America. You will note that they not onlywant high tribute indefinitely prolonged, but they even would force usto give up to them use of these valuable frequencies which the FederalRadio Commission licensed to us only. W e are almost getting used tothese tactics. The dominating wireless interests have succeeded in plac-ing every conceivable obstacle in our way, but I venture to say that w ewill succeed eventually in setting up our network of press communica-tion without becoming serfs in this new system of industrial feudalism.

WIUELE3S TELEPHONE

Let us take up the question of wireless telephony. Apparentlyone of the principal reasons for the formation of this combina-tion through these agreements w a s to protect the monopoly ofthe American Telephone & Telegraph Co. in the business of wire-telephonic communications for toll. For that reason the Ameri-

lSlWi6881

17

can Telephone ft Telegraph Co. is given an exclusive license inthe field of wireless telephone eomnttiirteation, and these otherconcerns agree not to enter Into that field. T h e result is k n o w nto you- all. While in Germany traveling upon a train, you canpick up a telephone receiver and talk via wireless. The sameinnovations are being introduced in Canada. There has been noaoch development in this country. This is not because Ameri-cans nave not had sufficient ingenuity.

The real purpose of the combination, however, has beenachieved in giving to the American Telephone & TelegraphCo., and its subsidiaries, the control over any potential or possi-ble competition arising from the radio art.

MOSoPOtT Iff TALKING MOTTON-PICTPHE FIELD

This combination also asserts that it has the right to com-plete control" over the talking motion-picture field. The Ameri-can Telephone & Telegraph Co., through its subsidiaries, theWestern Electric Co. and Electrical Research Products (Inc.) isfast establishing such control. T h e Radio Corporation andthe-Telephone Co. have entered into exclusive arrangements inthe talking-picture field with the great motion-picture companiesof America, including such companies as Paramount-Famous-Lasky Corporation, the Fox Co., Warner Bros., Vitaphone, andso forth. They are fast tying up the motion-picture theaterswith as diabolical a contract as.has ever been'written. Thiscontract is modeled along the same lines as the old United ShoeMachinery leases, which were declared illegal by the UnitedStates Supreme Court (258 U . S. 451). Under them the Elec-trical Research Products (Inc.) a subsidiary of the WesternElectric-Co., a m e m b e r of this great combination, leases talkingapparatus for talking motion pictures. Under this lease themotion-picture exhibitor or theater owners can not buy anyparts, or accessories, or replacements from anyone except theElectrical Research Products (Inc.). The lease provides inpart as follows: - . •

Aim, In order further to secure proper functioning of the eqnlp-ocntr as aforesaid satisfactorily^ the parties hereto, It )s agreed that• a additional and renewal part* and assembled parts for the equipment•kali ie obtained froin Prodaets—-Electrical Research Products,

)Products m a y from time to time Install such spare and renewal parts

a* m a y . In its opinion, be'neceiaary to the satisfactory operation andmaintenance of the equlpinent.

T h e lease m a y be canned , among other reasons— "* U p o n the removal'of the equipment or .any 'part thereof without the

consent of products frtm the location and position In which It wasInstalled by products." . :

These tying clauses as effectively shot ont manufacturersaft.cttmpeting taIkiBg«B»tionTpictiir« apparatus as did the& M U andnefarious United Shoe Machinery leases. Any ex-Mtitor who does not naji: to sign such a lease must face pat-

t attacks of this naive. Nq patents have been adjudicatediifield. •;••• : : \ - ; ; : \ v ":;:' '

kill by Senator D I L L which b dedened to end o e b a b u m .13643—6881

18

C . C . Colby, chairman of the board of director! of the Audio ResearchFoundation, declared that the American Telephone & Telegraph Co. nowclaims the exclusive right to all patents covering sound amplification,including talklng-motion-pieture machines, and all announcing systems(Ued in theaters, churches, and elsewhere.

" The motion-picture theaters have already paid or contracted to payto the telephone monopoly upwards of $25,000,000 more than they wouldhave had to pay independent manufacturers for the same service," M r .Colby said.

" In addition, they have been forced to contract for ' service' to theamount of $50,000,000 more under the threat of patent litigation with themonopoly."

MONOPOLY IN BROADCASTING APPARATUS

The manufacture of broadcasting apparatus employed by thebroadcasting stations is produced almost entirely by this com-bination. They have frightened away by their combined powerand terrorizing tactics any competition in the manufacture ofthat type of apparatus. The development of that art lies solelyin their hands. Instead of the General Electric Co. and theWestinghouse Electric & Manufacturing Co. and the AmericanTelephone & Telegraph Co. competing for that business, theywork in unison.

BROADCASTING SITUATION

The Hadio Corporation of America, and its subsidiary andaffiliated companies, all members of the Radio Trust, haveeither an absolute or a substantial monopoly in all branches ofthe radio industry, including radio communication. As I havealready shown, they have a monopoly in international radiocommunication services. They have a large part of the choicestbroadcasting facilities. In addition to the broadcasting stationsdirectly owned and operated by them, the Radio Corporation ofAmerica, the General Electric, and the Westinghouse Co. organ-ized and own all the stock in the National Broadcasting Co.,which renders a chain service. Of the 40 cleared channels,which are the only broadcasting channels upon which stationsare authorized to operate with 1,000 watts power or more,stations receiving the National Broadcasting Co. service areoperating on 27 cleared channels; these stations embrace prac-tically all of the high-powered stations. The approximately 550broadcasting stations not on these cleared channels are crowdedtogether on the remaining 49 broadcasting channels, 12 of whichchannels are shared with Canada; the result is that, generallyspeaking, such stations are so crowded together and so interferewith each other, and are so blanketed and heterodyned by thesuper-Power Trust stations, that they can rarely be satisfac-torily heard. The result is that the air is dominated by thechain program.

OPPRESSIVE TRUST TACTICSThe strangle hold of this Radio Trust is such that if an

American citizen or company obtains a license from theUnited States Government to operate a broadcasting station,that is not all; the licensee must buy the broadcasting licensefrom the monopoly at such a price and upon such terms as themonopoly dictates; then it must pay annual tribute to theradio monopoly. If the licensee then desires to procure achain program from the National Broadcasting Co. , it must

13643—6881

19

make a contract with the American Telephone & TelegraphCo., or one of its subsidiaries in the Bell system, to receivethe chain program over the wires before the National Broad-casting Co. will make a contract with such licensee. Thetelephone company will first exact a heavy tribute under theguise of an installation fee.

In order that this hold-up procedure m a y be more clearlyunderstood I will give a specific instance. The Radio Trust is sopowerful and arrogant that it is no respecter of persons. TheSupreme Lodge of the World, Loyal Order of Moose, have abroadcasting station at Mooseheart, 111. The call letters ofthis station, W J J D , are in honor of Secretary of Labor James J.Davis, the founder of the order. I herewith insert some corre-spondence which explains what happened to Station W J J D ,vvhien is typical of what has happened to other independentstations. The correspondence is as follows:

D E P A R T M E N T OF L A E O B ,OFFICE OF T H E SECEETABT,

"Washington, February 18, BIS.Hon. E W I N L. DAVIS,

House of Representatives, Washington, D . C.M Y D E A R C O N G K E S S M A N : Replying to your letter of February 9 with

reference to tlie use of a Western Union wire in tile hook-up of ourradio station at Mooseheart with the Palmer House in Chicago, wouldsay that I took this matter up with our radio manager at Mooseheartand a m just In receipt of a reply from him, copy of which I inclose foryour Information.

I trust this explanation is satisfactory.With kindest regards, I a m most cordially yours,

J A M E S J. D A T I S .

Here is the letter which he incloses and to which he refers:LOYAL OHDER OF MOOSE,

Station WJJD, February 10, 10i8.Mr. JAMES J. DAVIS,

United State* Secretary of Labor,Washington, D.C.

Dear M r . D A V I S : I d m returning the letter of Congressman D A T I Sregarding the use of Western Union and telephone lines in connectionwith our broadcasting Btation, W J J D .. W h e n we connected with the Palmer House In Chicago, neccssltat-

. ing private broadcasting lines in Mooseheart, w e procured estimatesfrom the Illinois Bell Telephone Co., also from the Western Union.However, as the telephone company had an Installation charge of some$10,000 which was not charged by the Western Union, we contractedfor the Western Union lines.

Since that time, however, It has not been possible for us to connectany telephone lines with our Western Union circuits, which has pre-vented the broadcasting of a n ; chain programs. It seems that thetelephone company hag a ruling that they will not permit any telephoneB»es to tie connected In any way with Western Onion lines, although Iw M e m a n d that the Western Union Co. has no objection to havingth» telephone lines connected with theirs. • ' •• •s^Ehe Western Union- lines tave proved very satisfactory, although,I believe it will be necessafcjr for us to repine* them witb telephone

• » • • ' ) 1 3 6 4 & — 6 8 8 1 .--•• .-. , - i i • : ' • * . - - . • : • < . . • • " . , - , J ,

20

lines in the operation of our new transmitter, inasmuch as until w ehave telephone lines w e will be prevented from participating in nationalbroadcasting.

Sincerely and fraternally yours,C. A. HOWELL.

Tlic actual cost of installation; that is, of connecting up awire in the radio station, is nominal, ami which the WesternUnion was willing to do without charge, in order to obtain theopportunity to render the wire service for the customary chargein like eases. However, the subsidiary of the American Tele-phone & Telegraph Co. demanded $10,000 for nothing and thenwas to charge the customary rates for the service. And theradio station could not procure the chain service, for which itwould have to likewise pay, unless it was willing to be held upin (his fashion.

The development of the radio art of the greatest interest toour citizens to-day is modern broadcasting. To receive the bene-lits of it one must purchase the modern radio receiving set whichis installed in the home.

RADIO KIXEIVIXG SETS

Let us examine the conduct of this combination in the fieldof manufacturing such radio receiving sets. The two greatestpotential manufacturers of radio-receiving sets were and arethe General Electric Co. and the Westinghouse Electric & M a n -ufacturing Co. They are the two greatest manufacturers ofelectrical apparatus in the United States, no other concerneven approximating either of them in size or resources. Thesecompanies not only refused to compete with each other as aresult of these " cross-license agreements," but agreed to sellon the basis of dividing 60 and 40 per cent between them allof the apparatus manufactured by them exclusively throughthe Radio Corporation of America, the Radio Corporation ofAmerica to buy all such apparatus sold by it from them at 20per cent over their cost.

L A W L E S S PATENT MANIPULATIONThe combination does not to-day control patents covering

the complete building of a modern radio set. There are nu-merous ofher patent holders whose patents have been upheldand with which complete and efficient receiving sets m a y bemanufactured. The Radio Corporation of America itself hasbeen held to infringe a patent covering every radio set at-tached to the electric-light socket, in the case of Lowell andDunmore and Dubilier versus Radio Corporation of America,in the United States District Court of Delaware, in a decisionrendered by Judge H u g h M . Morris. Yet they have forcedthe entire radio set manufacturing industry to sign licensescalling for a tribute of iy2 per cent royalty on their business,with a minimum royalty of $100,000 annually. Under theselicense agreements this great combination only assert thatthey have patents useful in making a tuned radio frequencyreceiver, the only kind of a receiver on which they licensemanufacturers; they do not covenant that they control thepatents; they do not agree to defend against other patentholders w h o m a y attack their licensees; they do not identifytheir own patents or any of their o w n patents; they do not

13043—6881

21

agree that in the event their patents are held invalid thatthe license is to be inoperative. In the event a single in-significant elaini of any one of their infinite number of patentscan be upheld, they can still enact this tribute. A s a matterof fact, the licenses run for a term of years, and as a practicalmatter do not depend upon the validity of any of theirpatents.

The situation in this field was described to the Senate C o m -mittee on Interstate Commerce, in its hearings on the Couasenscommunications bill, by B . J. Grigsby, president of the Grigsby-Grunow Co., the largest Independent manufacturer of radioreceiving sets. M r . Grigsby said:

W e are licensees under the receiving-set patents of the Eadlo Cor-poration of America, the General Electric Co., the Westinghouse Co., andthe American Telephone & Telegraph Co., sometimes known as the RadioTrust. In the year and a half In which w e have made radio sets w ehave paid that monopoly $5,302,879.15 in royalties. If w e had not beencompelled to add this royalty to our manufacturing cost, the retailpurchasers of Majestic sets would have been saved approximately$15,000,000.

W e did not pay this royalty because w e considered these patentsworth such a royalty. W e did sot believe w e needed these patents,-andnone of them had been adjudicated. But the radio combine bad so ter-rorized the Industry and had so Intimidated the dealers and Jobberseverywhere that they were afraid to handle what they called "un-licensed" sets.

Our bankers said they would not finance us unless w e took out alicense. They said they would not finance a patent fight against such amonopoly, and there was nothing left for us to do but to sign the licenseagreement. The merits of the patents were never examined by thebankers. The merits of the patents had nothing to do with the case.

Originally this license contract called for a royalty of 7% per cent ofour gross receipts, not only on the radio apparatus Involved, but on thecabinets and even the packing cases in which w e sold them. Of course,the Radio Corporation of America had no patent, on either cabinets orpacking cases, but it had the power to compel the payment of any royal-ties it pleased, and therefore, put the royalty on the manufacturers'price of the complete set.

As n result some of the manufacturers were not putting their setaIn cabinets and thug were saving this royalty. W e built our huge saleson the economies effected by oar large mass production. One of theseeconomies arose from the fact that our company was perfectly inte-grated, and that w e made everything. Including; our o w n cabinets, Inone plant. W e were the largest furniture manufacturers In the UnitedStates. . , . . ;

If the royalty on cabinets had been continued It would have forcedus out of the cabinet business and, therefore, would have destroyed theeconomies of our modern, method of production. It was because w eserved notice on the Radio Trust that unless it changed its policy w ewopJ4 manufacture our cabinets through a separate company, so thatit would not be able to collect these royalties that the Eadio Corpora-tion, of America changed Its,, policy and abandoned the royalty on

. 8 i a e i s . . . . . . . ; „ . . . . , : . , . . ; _ ,Even pith this deductioa, however, no industry city long pay 7% ,

per cent royalty to Its competitor.' The combine could sen its productsand m a k e a profit of 7% per cut at a price that would represent only

13643—6881

22

our cost and, therefore, eventually bankrupt us. If there were meritI D any of the combine's patents, w e would have no objection to dealingwith the individual companies that owned these patents, but w e doprotest that it is a violation of the antlmonopoly laws to compel usto deal with all of them as one group and to take all of their patentsand to pay a royalty, not on the merit ot a patent but solely on thepower of the combination to destroy us unless w e surrender.

W h e n we took our license in 1928 the Radio Corporation of Americacompelled us to buy the license o£ a bankrupt company, and w e werecompelled to assume the obligations of that bankrupt company, whichprotected the Radio Corporation against loss.

The patent situation in the radio industry is becoming intolerable.W h e n the Radio Corporation fixed its royalty rate at 7% per cent it didso on the pretense that it had a complete monopoly of the radio-patentsituation and that its patent covered every part of the radio-receivingset. This is not true. W e are now paying royalties to three otherpatent owners, and have been sued by five additional companies claiminginfringement of seven patents. In no case has the Radio Corporationprotected us against these patents or helped us in the suits which havebeen filed against us.

The patent licenses we were thus compelled to take out include oneundar the patents of the Radio Frequencies Laboratories on a circuit;.W e liave also had to take out a license under the Lektophone patent.This is a patent on the loud-speaker cone. W h e n w e manufactured otirloud speaker under the R . C . A . patents, we copied directly the 104—Atype of Radio Corporation speaker. W h e n the Lektophone Co. chargedus with infringement w e tried to get some help from the Radio Corpo-ration of America, hut they refused to give it to us, because theyhad taken out a personal license from the Lektophone Co. and hadthus acknowledged the validity of its patents. But the radio com-bine did not take out a license to protect its licensees, and so w ehad to pay additional royalties to the Lektophone Co. on the samespeaker which w e were making under the Radio Corporation of Americapatents. Later, again on this same speaker, w e were threatened bythe Magnavox Co. , who brought suit against us, but not against theRadio Corporation, although the construction of the speakers is Identical.

VACUUM TDBES

There is another aspect of radio which has become a vitalfactor in our modern life. That is the development of thevacuum tube. In fact, the vacuum tube is the heart of radio.Everything else is hardware and furniture. The vacuum tubejs used not only in broadcast-receiving sets, but in all broadcasttransmitters, in all radio-communication transmitters, and inevery form of wire communication. It is the tube which makespossible the motion picture of to-day, and particularly the talk-ing movies.

The tube is tiie closest approach to the h u m a n brain that m a nhas been able to devise. It has extended man's sight and hear-ing to span the globe. A new technique in the control of elec-trical apparatus has been built up around the vacuum tube.Elevators can be controlled with quick accuracy by its aid;Industrial operations can be controlled by it; continuous-flowprocesses m a y be reduced to absolute precision and uniformity;street-traffic signals can depend for their actuation upon ap-proaching cars; factory and agricultural products are counted,inspected, and graded automatically; colors m a y be selected W

13643—6881

23it; it m a y be used for fire and theft protection; a n e w scienceof metering, and measurements is being developed by it; phe-

, iiGmena of incredible-delicacy, mere Indications become depend-able yardsticks capable of everyday handling by plant work-m e n j airships, automobiles, water craft, and so forth can beguided and controlled by it.

• • The; vacuum tube has n o w established itself as a universaltool. It finds uses in the sciences of medicine; chemistry,geology, geophysics, minerology, and photometry. It is appliedin crime detection in m a n y ingenious ways to discover as wellas to convict the criminal.

The Radio Trust, knowing full well that the development of thevacuum tube would revolutionize the entire electrical art, andthat future developments will be built up around this miracledevice, have concentrated their efforts ever since their incep-tion upon securing a complete monopoly of that product.

In the first instance, on their cross-licensing agreements, theGeneral Electric and the Westinghouse Electric & Manufac-turing Co., w h o were the potential competitors in the vacuum-tube field, agreed not to compete, but rather to divide thevacuum-tube business between them on a 60 and 40 per centbasis, and to sell their products exclusively through the RadioCorporation of America on the same arrangements by whichradio sets were merchandized. A s an article of manufacture,the radio vacuum tube is probably. more like the incandescentlamp than any other product. These great concerns havemonopolized the incandescent lamp business, and with theirtremendous facilities in the lamp field, are the most powerfulfactors in the manufacture of vacuum tubes. As in every otherpart of the agreements, however, between the members of thiscombination, competition between them, in the manufactureand sale of vacuum tubes, was eliminated.

T h e field, wnich has been big enough for commercial exploita-tion in the radio tube art, has been the building of vacuumtubes for radio-receiving sets. W h e n this field developed,various independent companies started to manufacture and sellvacuum tubes. W h e n the Radio Trust succeeded, however; -Interrorizing the manufacturers of radio-receiving sets and forc-ing the execution of the license agreements, they compelled thelicensees, as one of the parts of those agreements, to agree tobti'y from the Radio Corporation of America the vacuum tubesneeded'to initially actuate the sets manufactured by the in-dependent manufacturer and licensee. Radio seta theretoforehad always been shipped1 by the manufacturers into the tradewithout tubes.' Tubes were shipped separately in interstatecommerce, to jobbers, distributors,,and dealers iu radio receivingsets. These merchants would buy vacuum tubes from the trustor one of its independent competitors, and insert the tubes inthe radio-receiving 'gets, '.tinder, the license agreements, how-eta*,.^ per cent of tjiejsets manufactured were thereafterfifijpped with tubes. ' ', :

nd. dealer, in.order to secure radio1th' tiat set vacuum tubes manufqc-»tlon of America In sufficient quan-**JiJ1 -"' 'ei«ij obtlterjateft i£e Inde-

et.'; T i e independent m a n -Wt 'oT this <;iause Jn the

distributors,to sell, had ft

t

24

United States District Court of Delaware, alleging that it w a sa violation of section 3 of the Clayton Act, in that it substan-tially lessened competition and tended to create a monopoly.This contention was upheld by the district court and by thecourt of appeals. There has been, therefore, an adjudicationof the intention of this combination to monopolize the vacuumtubes. It is also perfectly clear that, if at any time they haveor do secure a monopoly of the vacuum tube, they will thereby,as a practical matter, secure a monopoly of all branches of theradio art and of many branches of the electrical art, and willcontrol one of the greatest developments in the history of thehuman race.

Having failed to secure any favorable adjudication on theirpatents pertaining to vacuum tubes, having been thwarted intheir efforts to monopolize interstate commerce in vacuumtubes by compelling receiving-set manufacturers to buy andinstall their tubes, they started the same program of con-certed terroristic tactics. They threatened jointly to sue theindependent tube makers. They, through one of their bank-ing associations, merged and financed four of the five com-plainants w h o had beaten them in the litigation involving theviolation of the Clayton Act. They loaned $2,000,000 to thismerged company with an option on its stock and completelydominated its affairs. This concern they then had execute atube license, under which it w a s agreed to pay a 7^£ per centroyalty to the Radio Trust. They created conditions in thetrade similar to that which has been described as existing inthe trade with respect to radio-receiving sets. Without asingle favorable adjudication upon a patent in the tube art,having been repeatedly beaten in the courts whenever theyasserted infringement of their patents on tubes, yet by theirgreat size and power they have placed most of the inde-pendent tube manufacturers under a 7}4 per cent royalty bylicense agreements. I a m reliably informed that it is ex-tremely doubtful whether in the radio vacuum-tube field anycompetitor can give a iy2 per cent handicap to the radio com-bination and "survive.

The most' flagrant tiling however, in connection with theselicenses on vacuum tubes is that the licenses absolutely pro-hibit the making of vacuum tubes by the licensees for any!purpose except for installation in radio receiving sets.

All of the fields of application of the vacuum tube which I-have referred to are closed to those in the business with the ex-ception of tlie Radio combination. They are rapidly fasteningtheir tentacles upon this marvelous instrumentality. Thevacuum tube lias brought the vibration of sound around theglobe to the human ear. Through television it is expected tobring all things within the vision of the h u m a n eye. There hasbeen a stupendous change in the veritable organism of m a n , andthere is a cunning, wicked plot to place it all under the domina.-!tiou of a private monopoly.

PATENT RACKETEERING . i>

The Radio Trust claim to monopoly has been built up under;the pretense of an alleged patent situation. Asserting the o w n -ership of 4,000 patents it insists that it controls radio so com-pletely that no competitor can enter the field without infrlng-

13043—G881

25

ing one or the other of that multitude of patents, owned by itsvarious members. • • ; •

That Is what witnesses before House and Senate committeeshave called "patent racketeering." Other trusts have beenbuilt up on such a pretense, but none has ever attained the sizeand the arrogant insolence of the Radio Trust.

" T h e patent system of the United States was originally conceived toproTlde unusual rewards for h u m a n labor of n high order," said E . B .Reichmann, representing the Radio Protective Association and otherindependent radio Interests.

" It Is now being used by aggregations of capital as an Instrument formonopolistic control of great arts and Industries. This development Isexactly and completely destroying the original purpose of Issuing patentsand h u m a n labor Is being excluded from any of the rewards whichre«nlt."

The conduct and contentions of the members of this combina-tion raises one of the most serious problems that has ever beenpresented to this Congress. If the1 contentions of this group canbe upheld as a matter of law through the patent statutes, thenthe' antitrust statutes can and will be destroyed. They take theposition that the grant of a patent by the Patent Office entitlesthem'to center into commercial arrangements and bnild Institu-tions which have the effect of monopolizing interstate commerce.This Is clearly a perversion' of the patent statutes. A patentis Issued by an administrative body after a hearing which Issecret and ex parte. A patent examiner, in passing upon anapplication to determine whether it has novelty and invention.Is governed only by the art which has been disclosed by a searchIn the Patent Office, and what the examiner m a y know of theart of his o w n personal knowledge. Bis findings are not con-clusive, and are not adjudications as to persons not parties tothe Patent Office proceedings. The Government does not guar-antee the validity of a patent; it makes no pretense of standingback of a patent. The patent statutes clearly provide the onlymethod by which a patent m a y be enforced, namely, by Judicialproceedings to enjoin infringers, or by an action to recover d a m -ages for infringement, or both. Under the patent statutes analleged inf ringer has his day In court. B e Is entitled to all theprotection of a judicial hearing. N o matter to what a degree apatent m a y have been adjudicated against others, an alleged ln-fringer m a y not be excluded from interstate commerce. underthe patent statutes Without having his day in court. The pat-ent statutes provide only for the enforcement of the rights aris-ing out of a patent by actions in personam.

The members of this combination claim that a patent beinga monopolistic right1, thgy m a y enter into commercial arrange-ments and combinations and develop an economic situation,where by economic action and not by process of law, their com-petitors; w h o m they allege to be Inf ringers, are shut out of com-merce. This is a lawless aad a profoundly dangerous doctrine.In essence it means that the Patent Office, in a secret ex partepreceding, can grant a, right that was once only a prerogative ofthe Crown—and was take» away , from the Crown by the bloodand,.,tearjs of our ancestors,, 4 patent gives elusive rights—.

• y«S!#» if **Ud. it WMfeija f^«e4.th»uit the c o w h dpal io the add test of Ut^tlon. .Vl

1364.^-4881

26MONOPOLY METHODS DECLARED ILLEGAL BI COURTS

The patent statutes provide and the courts have consistentlyheld that the rewards of the patent must be confined to thespecification of the patents. It is perfectly clear that when youcombine as one single patent threat the m a n y thousands ofpatents controlled by this combination, backed by their enor-mous resources, such a situation develops power which is infi-nitely greater than the same patent or patents individuallyowned.

In the Oil Cracking case, which is the most recent decision onquestions involved, here, the court said:

Defendants contend that the grant of a patent is a grant of a monop-oly ; that while such n monopoly is a burden on commerce it is a lawfulburden; that the owner of a patent m a y grant licenses thereunder,whether few or m a n y , and the effect of each license agreement is topartially lift the lawful monopoly evidenced by the patent. In short,it is argued, licenses promote instead of restrict competition and licenseagreements, no matter what their conditions m a y be, necessarily extendthe freedom to manufacture and to sell the patented article. Theytherefore contend their arguments are not within the condemnation ofthe Sherman antitrust law.

The ownership of a patent unquestionably carries with it certainrights, monopolistic in character. Nevertheless, the owner of a patentcan use it as property, only subject to the Sherman antitrust law; thatis to say, A . B , C, and D can not legally contract respecting their patentsIn violation of the teims of this law.

To illustrate, A has r. valid patent used by numerous licensees.B has a valid patent which other licensees use. Notwithstanding Aand B each has a monopoly, there is competition. But it would bea plain violation of the antitrust act for A and B , thus having cer-tain monopolies which are in competition one with another, to com-bine to eliminate competition between their monopolies and impose ormaintain burdens which exist, not by virtue of the monopolies, butby virtue of the agreements dealing with their monopolies as property.

It is in this respect that these various agreements step outside thelimits of lawful monopolies which arise from the issuance of the pat-ents. The patent monopoly itself is a property right, and agreementsin respect thereto must be subject to the same antimonopoly tests asany other property rights.

There is substantial difference between agreements entered into bycompeting packing companies respecting the prices at which or terri-tories wherein their products m a y be sold and an agreement betweenholders of patent monopolies which fix the rates of royalties thatshall be charged to licensees.

In fact, w e m a y go further and say that pooling agreements betweenholders of patents whereby royalties are fixed and the division of pro-ceeds derived from royalties provided for are within the condemnationof the Sherman antitrust law. • • *

In so far as these agreements are license agreements, they. M eunobjectionable. To the extent that they go beyond license agree-ments, they are subject to the inhibitions of the Sherman Act.

BILL TO M E E T SITUATION , . (

I have Introduced a bill, H . R . 13157, which provides:That It lhall be a complete defense to any rait for irifrtafement of

4 patent to uroVe that the complainant in auch mitt to n » W «r teirtroUln*the said patent in violation of any law of the United State* tclatfnc U

13043—(1881

27ulawfol restraints Mid monopolies or relatinc to coaklnathuu, contracts,agreements, or understandings in restraint ml traoVor.ta vieUtion of theClayton Act or tke Federal Trade Commission act.-.This'bill is Resigned tq prevent abuses and lawless tacticswhich have been disclosed at Various hearings before the C o m -mittee, on 'the Merchant Marine and Fisheries of the Houseduring the past eight years, and which said committee broughtto the attention of the Congress in a Bouse resolution andreport thereon as early as February, 1923. 1 have repeatedlypointed out and condemned these abuses and evils, as haveother Members of the House and the Senate.

This bill is similar to one which Senator D I L L introducedsome time ago, and upon which the Senate Committee on In-terstate Commerce held comprehensive hearings, which re-vealed a startling, illegal, and oppressive abuse of patents byvarious monopolies, particularly by the Radio Trust. The C o m -mittee on Interstate Commerce has unanimously reportedSenator D I L L ' S bill.

A s before explained, the suit recently commenced by the D e -partment of Justice for the dissolution of the Radio Trust islargely upon an unlawful pooling of patents and the unlawfulmonopolization thereby of all branches of the radto Industry.

This bill is not revolutionary in character, but is designedto effectuate the antitrust statutes and to protect inde-pendent inventors and manufacturers against the lawless andterroristic tactics of powerful combinations. It makes no actunlawful, bnt simply tends to prevent the commission of actsalready made unlawful by our statutes. It merely providesthat a patent owner w h o is violating the existing antitrustlaws can not enforce its patents in the courts so long as itpersists in such violation. It merely requires a patent ownerto " come into court with clean hands.". That is no new prin-ciple of either law or morals. It is a rule of law that is recog-nized in every civilized country. It is older than the patentlaws themselves.

This bill will stop patent racketeering. It will put an endto,the so-called "Patent Trusts.". It will stop the perniciousand unlawful practice employed by some monopolies to covertheir, illegal operations under the pretense of patent owner-ship. It will not interfere with the legal monopoly possessedby the-owner of a patent This bill is not directed againstand will not affect lawful cross licensing of patents, which islegitimately employed in some of the industries This billshould have the enthusiastic support of every M e m b e r ofCongress w h o believes in the enforcement of the antitrustlaws. I shall ask for its immediate consideration by theHouse Committee « n Patents when Congress reconvenes inD e c e m b e r . » - • *• 1 • .- ; -•:•.• . . - . • - . • • . . • . . .

The different documents which* I have stated I would insertto the1 RECOKII areas'follows:

X j W THE JbTTQtySKI GENITAL, . . .Vfathington, D.'C, Suguit is, 13ZL"

28

Into between the Radio Corporation of America, the General ElectricCo., the Westinghouse Electric & Manufacturing Co. , the InternationalRadio & Telegraph Co. , and the American Telephone & Telegraph Co.

Your attitude in thus placing the matter before m e is m u c h appre-ciated. I regret to have to inform you, though, tliat it would not hepermissible for m e to comply with your request. To tlo so would vio-late the long-standing rule of the department that the Attorney Generalw(ll not express an opinion on legal subjects except to the President andtbe heads of executive departments.

However, 1 see no impropriety in saying to you that if in the futurecomplaint is made in reference to the agreements in question, or inregard to anything that may be done thereunder, the department willgive due consideration to all that you have submitted, both orally andin writing.

Indeed, I a m prepared to go a step further and say that in theevent any complaint should reach the department which it should eon-.sidcr i\quired ;in investigation, no conclusion will In' reached or actiontaken by the department under m y administration without advising youand giving yon full opportunity to present your views. While I a m thehead of die department, if I can prevent it, no hasty action will betaken in cases of doubt and good faitb, especially when, as in thepresent case, tbe facts are frankly presented to the department. As-suring you of m y personal esteem.

Yours very truly,

II. M . DiUGHERTY, Attorney General.COMPLAINT OF FEDERAL TRADE COMMISSION

With respect to this complaint, the Federal Trade Commis-sion made the following statement:

F ED ER A L T R A D E C O M M I S S I O N ,Washington, January 28, 191).

' Monopoly In radio apparatus and communication, both domestic andtransoceanic, Is charged in a complaint issued by the Federal TradeCommission to-day. Efforts to perpetuate the present control beyondtbe life of the existing patents are likewise charged.

Eadio Corporation of America, General Electric Co., American Tele-phone & Telegraph Co., Western Electric Co. (Inc.), WestinghouseElectric & Manufacturing Co. , the International Radio Telegraph Co.,United'Fruit) Co.;i and Wireless Specialty Apparatus Co., are nameda a'respondents and arc alleged to'have violated the law against unfaircompetition in trade to the prejudice of the public. . •

In the language of the complaint "the respondents have combinedand conspired for the purpose and with the effect of restraining com-petition nnd creating a monopoly in the manufacture, purchase, andsale in interstate commerce, of radio devices and apparatus, and otherelectrical devices and apparatus, and in domestic and transoceanicradio communication and broadcasting."

To attain the present control alleged, the complaint recites thatthe respondents (1) acquired collectively patents covering all devicesused In all branches of the art of radio, and pooled these rights tomanufacture, use, and sell radio devices, and then allotted certainof the rights exclusively to certain respondents; (2) granted to theRadio Corporation of America the exclusive right to sell the devicescontrolled and required the radio corporation to restrict its purchasesto certain respondents; (3) restricted the competition of certain re*spondents in the fields occupied by other respondents; (4) attemptedto restrict the use of apparatus in the radio art manufactured and

13043—6881

29sold under patents controlled by the respondents; (5) acquired exist-ing essential equipment for transoceanic communication and refusedto supply - to others necessary equipment for such communication ; anJalso excluding others from the transoceanic field by preferential con-tracts.

From tbe scries of contracts referred to in the complaint it appearsthat the Radio Corporation of America has the right to use and sellunder patents of the various respondents which relate to the radio art.It has also given to various respondents the right to manufactureunder these patents. Thus there has been combined in the hands ofthese corporations patents covering the vital improvements In tbevacuum tube used In long-distance communications and other impor-tant patents or inventions in radio which supplement this centraldevice. Approximately 2,000 patents are involved.

The report of the Federal Trade Commission on tbe radio industrystated that the gross income of the Radio Corporation in 1922 was114,830,856.76, and that its capital stock on December 31, 1922, was$33,440,033.66. The holdings of the several respondents In the RadioCorporation of America are given as follows:

Qeneral Electrio CoWestinghouse Electric A Manufacturing CoAmerican Telephone & Telegraph CoUnited Fruit Co —

Number of shares

Preferred

620,8001,000,000

400,000200,000

Common

1,876,0001,000,000

160,000

It is further stated that up until 1922 the Radio Corporation had anabsolute monopoly in tbe manufacture of vacuum.tubes and for the flrstnine months of 1923 sold 5,509,487 tubes. During the same period theonly other concern having the right to make and sell tubes sold 94,100tubes.

In the communication field, whjle the Radio Corporation has somecompetition In the shlp-to-ihore communication, it . has a practicalmonopoly In transoceanic service. It controls all the high-power sta- 'tlons in this country except those owned by the United States Govern-ment. Agreements of an exclusive character have been entered intowith the following countries, or with other concerns in control of thosituation in those countries, namely, Norway, Germany, France, Poland,Sweden, Netherlands, Sooth America, Japan, and China. Arrangementshave also been made with the land telegraph companies in this countrywhereby messages will be received at the offices of the Western Unionand Postal Telegraph Cos.

A summary of the contracts between the respondents as recited intoe complaint is: First, the organization of the Badio Corporation ofAmerica in 1919 under the supervision of the General Electric Co. ,which company received large, holdings in the stock of the Radio Cor-poration for capital supplied and for its service in connection with theacquisition of the American Marconi Co. A n agreement entered into,between these companies granted to the Badio Corporation an exclusivelicense to use and sell apparatus under patents of the General JHectric,C o . until I M S ; and the Radia Corporation granted to toe General:Electric Co. the exclusive .riebt to sell through ithe Radio Corporation oftAmerica oaly, the corporation agreeing to purchase from..the-General

13643—6881

30

Electric Co. all radio devices which the General Electric Co. could sup-ply. Subsequently this arrangement was extended to include the West-lnghocse Electric & Manufacturing Co. , the business of the RadioCorporation being apportioned between the General Electric Co. andthe Westinghouse Co., 60 per cent to the General Electric and 40 percent to tbe Westinghouse Co.

Meanwhile, in July, 1920, the General Electric Co. and the Ameri-can Telephone & Telegraph Co. made an arrangement for mutuallicensing on radio patents owned by each and providing for trafficrelations. The terms of tbis agreement were extended to the RadioCorporation of America and the Western Electric Co. and thereafterto the Westinghouse Co.

The Radio Corporation in March, 1921, made an agreement with theUnited Fruit Co., which operated a number of long-distance radiostations in Central and South America, by which licenses under radiopatents of the Radio Corporation and of the United Fruit Co. and itssubsidiary, the Wireless Specialty Apparatus Co., were exchanged, andarrangements made for the exchange of traffic facilities, and the defini-tion of their respective fields adopted between the Radio Corporationand the United Fruit Co. Provisions of the agreements between theRadio Corporation of America, the General Electric Co., the AmericanTelephone & Telegraph Co., and the Western Electric Co. were extendedto the United Fruit Co.

[II. Con. Res. 47, 70th Cong., 2d sess.]Concurrent resolution

Whereas the House of Representatives of the Congress of the UnitedStates on March 3, 1923, unanimously passed a resolution requestingthe Federal Trade Commission to investigate and to report the factsconcerning attempts to monopolize the manufacture of radio apparatusas well as radio communication to " aid the House of Representativesin determining whether • • • the antitrust statutes of tbe UnitedStates have been or now are being violated by any person, company, orcorporation subject to the jurisdiction of the United States," and

Whereas pursuant to said resolution, the Federal Trade Commissiondid make such investigation and transmitted to the Speaker of theHouse of Representatives a report of 347 pages embracing various agree-ments made by and between the General Electric Co. , American Tele-phone & Telegraph Co., Western Electric Co. (Inc.), WestinghouseElectric & Manufacturing Co., International Radio Telegraph Co., UnitedFruit Co., Wireless Specialty Apparatus Co., and Radio Corporation ofAmerica, contracting to pool the radio patents of these companies, allo-cating to each other their respective fields of manufacture, sale, anduse of radio apparatus and facilities, and to restrain their use so asto give to this group what has been alleged to be a monopoly of radiomanufacture, and communications in the United States as well as be-tween the United States and foreign countries; and reciting variousacts and practices of said companies pursuant to said agreements; and

Whereas said Federal Trade Commission, after submitting said reportand upon its own motion, did, on January 28,' 1924, issue a formalcomplaint charging that said General Electric Co., American Telephone& Telegraph Co., Western Electric Co. (Inc.), Westinghouse Electric &Manufacturing Co., International Radio Telegraph Co. , United FruitCo., Wireless Specialty Apparatus -Co., and Radio Corporation ofAmerica " have combined and conspired for the purpose and with theeffect -of restraining competition ana creating a monopoly In tne m a n u -facture, purchase, and sale In Interstate commerce, of radio device* and

13643—6881

31

apparatus, and other electrical devices and apparatus, and In domesticand transoceanic radio communications and. broadcasting"; and- ;

Whereas said FedenU Trade Commission, *t great expense has spentAre years in hearing evidence to support these;; charges and. boa accumu-lated 10,000 pages of sworn testimony, and exhibits; aadi. Whereas said Federal Trade Commission, following a recent decisionof the Supreme Court of tbe United States that said commission hasno Jurisdiction over violations of the antitrust lairs, and that, theremedy for sucb violations must be administered by the courts In appro-priate proceedings therein instituted, has dismissed said complaint; and

Whereas, if the charges contained in said complaint are true, It Istbe duty of tbe Department of Justice to prosecute such violators, andto obtain from tbe United States courts such Injunctions or. otherorders as may be necessary to dissolve sucb alleged Radio Trust, andto obtain sucb other relief as may be proper to assure free competitionin radio manufacture, sale, and communications: Therefore be it

Resolved by the Boute of Representatives (the Senate concurring),That tbe Federal Trade Commission be, and it Is hereby, requested toImmediately transmit to the Attorney General of tbe United Statesall such testimony, exhibits, and other information obtained by it Inconnection with its investigation of the complaint aforesaid and sucbother pertinent information as It may have In connection with thissubjeet; and be it further

Resolved, That the Attorney General of the United States be, andhe Is hereby, requested to have immediate consideration given to theevidence so presented, and to have the Department of Justice take su:haction on the charges of violations of the antitrust laws of the UnitedStates as such evidence and information may warrant, and to reportto Congress as soon as convenient his decision and action in tbepremise!.

OFFICE OF THE ATTORNET GENERAL,Washington, D. C, April ST. 1939.

Hon. E W I N L. DAVIS,House of Representatives, Washington, D. C.

D E A K M B . C O N G R E S S M A N : Your letter of tbe 22d instant relative tothe radio trade has been received. The department is now making anInquiry Into this matter. Thank you for your offer of assistance,which I a m calling to tbe attention of the gentlemeh who are at workon the matter.

Very truly yours,! W I L L I A M D . M I T C H E L L ,

Attorney General.

[Prom the Washington Post, Juae 26, 1930]

P A T E N T A B U S E BIT T R U S T S ,

.. W h e n the United States Government issues a patent to an inventor,there should go with that special privilege an equal obligation not touse that patent to violate.the laws pi the Nation. Surely such a con-cession deserves at the hand* of the recipient a decent respect (or theGovernment which grants it. . ,i To enforce this obligation. Senator D I L L , of Washington, has intro-guqed a bill which would make patents unenforceable so. long as theirpwqers are using them to violate the antitrust laws: As a: result of# » testimony concerning th« operations of w t a u s > sotoalled " patentIrani" too Senate Committee:»n Patents, headed by.Chairman W A T B « -t ' l ' I i f l « 4 » — 8 8 8 1 : • • > • ! . . • » . . . . . • . i i • • . = ( • • [ . - i . -'

.'i'i ff

32. N , of Colorado, made a unanimous report to tbe Senate, favoring the

passage of the Dill M M . In tbat report the committee says:" This statute is intended to protect not only Independent com-

petitors of patent combinations tbat are illegal, but also those w h o areindependent inventors in the arts. At the present time independentInventors often find it almost impossible to secure a market for theirinventions. They must either sell their patents to an existing monop-oly on whatever terms it decides to fix, or they must find capital thatwill not be intimated by the fear of having to fight a firmly en-trenched monopoly, and to carry on defensive litigation to preventthat monopoly from destroying the new invention.

" The very fact that the Government has issued a patent to an in-ventor, an exclusive privilege, a monopoly, granting him the right, for17 years, to exclude anyone else from manufacturing, using, or sellinghis invention should put upon such n. patentee the burden of a scrupu-lous observance of the laws of the United States. It Is particularlyiniquitous if the holder of such a privilege should use it to violate theantitrust statutes or any other laws.

" It has been charged that legislation of this character threatens tobreak down the patent system upon which our industrial progress hasbeen largely founded. This is not true. The destruction of the benefitsof that patent system will lie inevitable if those w h o abuse it to createillegal monopolies are permitted to continue to protect their infractionsof the law under pretense of patent rights."

As Chairman W A T E R M A N of the committee puts it, the bill requirespatent owners " to come into court with clean hands." N o patent ownershould object to such a requirement. According to Its proponents, thebill does not propose to confiscate patents. It merely provides that apatent owner can not enforce his rights while he is violating the anti-trust laws. All he needs to do to restore his full patent privileges, isto stop violating the law.

136-13—6881

o