Document 2J8pQLMkE52o3jwVq6MD5NY9N

FILE NAME: National Safety Council (NSC) DATE: 1943 DOC#: NSC291 DOCUMENT DESCRIPTION: Legal - USA Before Federal Trade Commission In the Matter of Acme Asbestos Covering & Flooring Cov et al. Brief for Respondents UNITED STATES OF AMERICA BEFORE Jfeberal {Trabe Commtion I n the Matter of ACMFELOAOSRBIENSGTOCSOMCPOAVNEYR,INetGalA. ND Docket No. 4613. BRIEF FOR RESPONDENTS. ACME ASBESTOS COVERING AND FLOORING COMPANY; ASBESTOS, ASPHALT AND INSULATION MANUFACTURING COMPANY; ATLANTIC ASBESTOS CORPORATION; A. H. BENNETT COMPANY; THE PHILIP CAREY MANUFACTUR ING COMPANY; THE CLARK ASBESTOS COMPANY; EMPIRE ASBESTOS PRODUCTS, INC.; JOHNS-MANVILLE CORPORA TION; L. A. RUBBER & ASBESTOS WORKS, INCORPORATED; G. A. MAC ARTHUR COMPANY; W . S. NOTT COMPANY; PACIFIC ASBESTOS & SUPPLY COMPANY; THE RUBEROID CO.; AND DONALD TULLOCH, JR. CADWAL.ADER, WICKERSHAM & TAFT, Attorneys for said Respondents. r e p r o d u c e d AT THE N A T I O N A L A R C H I V E S 5* ' PRODUCED AT THE NATIONAL A R C H IV E S TABLE OF CONTENTS PACK S tatem en t op t h e Case............................................................................................ 1 P opi rnitc e I .--The fixing c Record onspira si cy lows with conclusi respect vel to y m itphaatti - nthteedr e was no asbestos pipe covering materials................................................................ 6 P oint II.--The alleged conspiracy in preparing and using a code merchandising plan is not supported by any evidence w h a te v e r ..................................... 27 P oint III.--The charge of an alleged conspiracy in preparing a voluntary agreement after the Schecliter decision is based upon an erroneous statement of facts....................................... 34 P oint IV.--The Tooliey invention was the result of years of labor in the Jolms-Manville laboratories and represents an outstanding improvement in the quality of asbestos insulat ing materials ......... 39 P oint V.--The Jolms-Manville licensing agreement was en tered into in the ordinary course of business and without collusion with any manufacturer............................................... 44 P oint VI.--The Respondent Tulloch was not controlled by his sublicensees and the control lie exercised was within the lawful scope of the patent monopoly.................... ........ ..... 62 P oint VII.--The Jolms-Manville exclusive license and the sub licenses were within the lawful scope of the patent monopoly and were not in violation of the anti-trust laws....................... 75 P oint VIII.--The Norristown flexible jacket patent and licenses have not been connected in any way with the Tooliey patent and licenses and no illegal activities regarding them have been shown.............. ................. .............................................. 81 P oint IX.--Exceptions to the Trial Examiner's Report on the evidence.................................................................................... 62 P oint X.--The complaint should be dismissed........................... 83 A ppendix A--Exceptions to Trial E xam iner's Report, 11 T able of I llustrations. Map showing location of Asbestos Insulation Manufacturers page by States........................................................................................... 9 Graph showing prices of Jolms-Manville on principal types of pipe covering during Code Period....................................... 13 Graph showing prices on patented and unpatented 3-ply Air Cell Pipe Covering to Jobbers on L. C. L. purchases in Zone I territory, January 1, 193G to January 1, 1940........... 17 Map showing Carey price zones March 1,1932 to May 8,1933.... 22 Map showing Johns-Manville price zones August 18, 1930 to December 29, 1933........................................................................... 23 Reproduction of the top of first page of two sections of original Code Merchandising Plan............................................. 28 Photograph of results of actual shrinkage test published in Johns-Manville catalogue beginning in 1932........................... 41 Reproduction of page 12 of original License Merchandising P lan ................................................................................................... 51 Reproduction of page 6 of original License Merchandising Plan 52 i R E P R O D U C E D AT THE N A T I O N A L A R C H I V E S 111 T able of Cases Cited. Bernent v. National Harrow Co. (1902), 186 U. S. 70............... pag80e Edison v. Ira M. Smith Mercantile Co. (1911), 188 Fed. 925....... 79 Ethyl Gasoline Corp. v. U. S. (1940), 309 U. S. 436................... 76 General Electric Co. v. W illey's Carbide Tool Co. (1940), 33 GeFneedra. lSFuopopd. s96C9o..r.p......v......B...r.o...d..e..r..,..8..0....F..e..d.......(.2..d..)....4..9..2................................................ 71 66 Leeds S Catlin v. Victor Talking Machine Co., 213 U. S. 301.... 66 Salt Producers Association v. Federal Trade Commission (1943), 134 Fed. (2d) 354............................................................... 72 SStcahnedcahrtedrSPaonuitlatrryyCMofrgp.. Cv.oU. v..SU. .(1S9.,3252)6, 2U9.5SU. .2S0....4..9..5...............6306,,6317,, 6358,, 8309 Straight Side Basket Corp. v. Webster Basket Co. (1936), 82 Fed. (2d) 245.................................................................................... 75 United States v. General Electric Co. (1926), 272 U. S. 476....... United States v. Masonite Corporation (1942), 316 69, U. S. 75, 76, 265.... 79, 80 80 United States v. Univis Lens Co., Inc. (1942), 316 U. S. 241..... 67, 68 Veneer Mach. Co. v. Grand Rapids Chair Co., 227 Fed. 419....... 66, 67 T exts Cited. Feuer, " The Patent Monopoly and the Anti-Trust Laws", 38 Col. L. Rev. 1145............................................................................. Toulmin, " Trade Agreements and the Anti-Trust Laws" (1937) ............................................................................................... 69 Walker on Patents (Deller's Ed.) Volume II............................. 67 REPRODUCED T THE NATIONAL ARCHIVES UNITED STATES OF AMERICA before Jfebeval 3Trabe Commission A cme In the M atter of A sb e s tos Co C over mpany, ientgala. n d F looring Docket No. 4613. BRIEF FOR RESPONDENTS. ACME ASBESTOS COVERING AND FLOORING COMPANY; ASBESTOS, ASPHALT AND INSULATION MANUFACTURING COMPANY; ATLANTIC ASBESTOS CORPORATION; A. H. BENNETT COMPANY; THE PHILIP CAREY MANUFACTUR ING COMPANY; THE CLARK ASBESTOS COMPANY; EMPIRE ASBESTOS PRODUCTS, INC.; JOHNS-MANVILLE CORPORA TION; L. A. RUBBER & ASBESTOS WORKS, INCORPORATED; G. A. MAC ARTHUR COMPANY; W. S. NOTT COMPANY; PACIFIC ASBESTOS & SUPPLY COMPANY; THE RUBEROID CO.; AND DONALD TULLOCH, JR. Statement of the Case. The amended complaint issued December 27, 1941, charges one individual and nineteen corporations with engaging in unfair methods of competition in violation of Section 5 of the Federal Trade Com mission Act by conspiring and agreeing to fix prices and merchan dising terms of those asbestos and wool felt insulating materials which were classified as forming part of United States Patent No. 1972500 in sub-license agreements between respondent Tullocli and the other respondents. The amended complaint alleges that respond ent Tullocli received an exclusive license under this patent (some times referred to as the Toohey patent) from respondent JolmsManville Corporation, the patent owner, on September 11, 1925, to make, use and sell materials under the said patent, and gave sublicenses from time to time to the other respondents. The " licensed materials" are defined with particularity in Paragraph One of the Amended Complaint, hereinafter referred to as (lie Complaint. REPRODUCED 2 The Complaint also charges that the conspiracy and price-fixing applied to " noil-licensed materials" which are defined in Paragraph One as including such items as ``solid brass, zinc and lacquered bands, flexible range boiler jackets, and canvas covering". These items are the essential accessories of completed pipe covering and have at all times been sold in the Industry as integral parts of completed pipe covering units, except flexible range boiler jackets which are large pieces of pipe covering used to cover range boilers, which may be made either in accordance with the Tooliey patent or in the ordinary unpatented manner, but which always include a flexible mechanical feature which is subject to a patent owned by the respondent Norris town Magnesia & Asbestos Company. The materials which the Complaint charges were the subject of the unlawful conspiracy are specifically referred to throughout as " licensed materials" and " non-licensed materials". Before amendment the Complaint referred to " licensed materials", " wowlmicaetnesreidalsm"atceoruiladls"haavned b"eewnwlcicoennssterduemdattoeriianlcsl"u.deThaell "uunnplaicteennsteedd materials, but by the amendment the words " unlicensed materials" were in all cases changed to " non-licensed materials", the term defined in Paragraph One. The alleged conspiracy was therefore specifically limited to " licensed materials" and " non-licensed materials" as defined in Paragraph One. The Complaint charges that prior to and during the year 1934 respondents Tulloch, Johns-Manville, Carey and Norristown, " together with some of the other respondent corporations" entered into a conspiracy to eliminate price competition in licensed and nonlicensed materials and in low-pressure asbestos pipe covering embody ing any of said materials; that the Toohey patent issued to JohnsManville September 4, 1934, and that as part of the conspiracy Johns-Manville issued an exclusive license to respondent Tulloch under the patent on September 11, 1935, with the right to issue sublicenIstesistothoetnhearlsl.eged that in 1935 and 1936 the respondent corpora tions that had not originally entered into the conspiracy did join in, and all respondents took part in all the practices engaged in to carry out the conspiracy. These practices are alleged to have been: (1) Price-fixing. (2) Uniform method of fixing prices by using a Manual of Unit Prices. (3) Uniform definitions of customers. T THE NATIONAL ARCHIVES 3 (4) Fixed price differentials between customers. (5) Uniform contracts. (6) Delivered price system. (7) Price zones. (8) Simultaneous change of price zone areas. (9) Standard sizes for materials and fixed price differentials between sizes. (10) Adopting a merchandising plan by all respondents before the Toohey patent issued (Sept. 4, 1934) and while the National Industrial Recovery Act was in effect but without obtaining the approval of the Administrator of N. R. A., to be used and which was used for the sale of both licensed and non-licensed materials. Also agreeing in said merchandis ing plan upon : (a) Classification of buyers for pricing; (b) Price zones; (c) Terms of sale; (d) Price control with penalties; (e) Special discounts to selected customers; (f) Price filing. (11) vAigllreeetoinTguullpoocnh,ffoorrmm oofflsicuebn-sliecetnosebetogibveengivbeynJbohynTs-uMlloacnhtsoaleo.thers, and schedule of prices, terms and conditions of (12) Entering into and carrying out said license and sub-license agreements and conforming to said prices, terms and con ditions of sale. (13) Adopting a merchandising plan as part of said sub-license agreement, substantially the same as the one described in esunbfo-prcairnaggrthaephsa(m10e.) with respondent Tulloch operating and (14) Discussing and agreeing in advance upon changes in sub lTicuelnlosceh.agreements before the changes were announced by (15) Ianncdluthdeinregbnyofni-xliinceyntsheod nmriaptoeriaolfsi>n!<s!aid merc1handising plan 4 REPRODUCED The answers of most of the respondents are as the Trial Exam iner correctly finds (Report, p. 4), of substantially the same import. His brief summary of their contents, however, (Report, p. 4) is sub stantially incorrect except in that they deny any violation of law. After general denials the answers state that some of the respond ents and others were engaged in the low pressure asbestos pipe cover ing industry for many years before 1934; that through economic forces certain trade practices became established in the industry such as the use of price zones, delivered prices, freight equalization and customer classification; that the Code approved under the N. I. R. A. for the Asbestos Industry on November 1, 1933, authorized the Divi sion which included low pressure asbestos pipe covering manufac turers, to adopt a merchandising plan, that this was done according to the provisions of the Code, and that the Merchandising Plan there upon became legally binding on all members of the Industry until the Schechter decision in May 1935. It is alleged that this Merchandising Plan included many trade practices long established in the Industry and that there was no price uniformity during the period. untilTDheeceamnsbweerr1s9f3u5rtthheerParlelseigdeenthtaatnadftthere NthaetiSocnhaelcRhteecrovdeercyisiAodnmainnd istration encouraged industry members to cooperate in maintaining standards of fair competition, and public hearings were held by N. R. A. and by the Federal Trade Commission upon proposed vol untary agreements submitted by certain industries for the approval of the President. It is alleged that meetings were held by members of the Asbestos Low Pressure Pipe Covering Industry to discuss ways and means of adopting policies approved by the Government and a proposed voluntary agreement for the Asbestos Industry incorpo rating many of the principles of the Asbestos Code was submitted to N. R. A. for the President's approval, but that before it was approved an executive order was promulgated December 21, 1935, terminating the National Recovery Administration as of January 1, 19T3h6.e statement in the Brief of Counsel for the Commission (p. 4) that the answers claim the respondents operated " under the volun tary agreement invited by the President from May until September 1935'.' is without the slightest basis of fact. It is prejudicial and unwarranted. The answers allege that long prior to N. R. A. the members of the Industry recognized shrinkage to be a serious defect in the industry's products; that Johns-Manville invented a series of prod- fi-nn Errvm fliio rfo fe et n il n h tn in e rt flip T'rvntlPV n n tp rit C o v e r in g AT THE N A T I O N A L A R C H I V E S 5 those products on September 4, 1934; that in order to extend the market tor the patented products Jolms-Manvillo decided it would be to its interest to license other members of the Industry to manu facture the improved products subject to price control; that because of the unwillingness of manufacturers to allow a competitor to exercise and enforce price control on the patented products JohnsManville selected the respondent Tullocli, who as Secretary and Manager of the Sub-Code Authority had become favorably known to all members of the Industry, to receive an exclusive license under the patent with the right to grant sub-licenses subject to price con trol. After negotiations between Jolms-Manville and Tullocli the license agreement of September 11, 1935, was entered into. It is alleged that Tullocli proceeded to issue sub-licenses from time to time to twenty-four members of the Industry, establishing minimum prices and a merchandising plan but that the patented product was not promoted sufficiently by the licensees to create a general acceptance by the public because of price competition of Cue lower cost unpatented products. The licensees therefore began with drawing from, their agreements in 1930 and only two remained in 1941. It is further alleged that respondent Tullocli consulted his licensees from time to time to determine their views as to marketing conditions but always found conflicting views and interests and in all instances made decisions himself as to prices and terms and conditions of sale on patented products. Finally, it is alleged that active price competition existed between all members of the Industry as between patented and unpatented materials and that at all times there was active price competition between all members of the Industry in the sale of unpatented materials. The above allegations of the answers were sustained by the respondents fully and convincingly by documentary evidence and oral testimony. In great part the facts are undisputed. Unfavorable inferences are sought to be drawn in some instances by Counsel for the Commission from isolated documents or bits of testimony. The whole evidence on any one issue, however, is overwhelmingly in favor of the respondents and to such an extent that we contend with assurance that no material issue of fact can be found against'them. The case resolves itself into a decision of questions of patent law. For these reasons we make no overall statement of the facts established, but deal in specific points with questions raised by Counsel for the Commission. 6 POINT I. fixingThcoensRpeicroarcdy wshitohwrsescpoencctlutosivuenlyp,attehnattedthaesrbeeswtoass pniopepcroicve ering materials. The brief of Counsel for the Commission attempts to draw from inferences and suspicion the conclusion that there was a general price fixing conspiracy as to all asbestos pipe covering materials originat ing with the Asbestos Industry Code in 1933, and then carried into a Voluntary Agreement and culminating in the Tulloch licenses. When dealing with the Code period and the Voluntary Agreement the evidence is confused in the brief and the facts are so distorted as to present a grossly erroneous report of the acts of the respond ents during the period between the passage of the National Indus trial Recovery Act on June 16, 1933 and its expiration on April 1, 1936, The evidence covering that period will be dealt with later. There are certain facts in the case which are so completely incon usinstpeanttenwteidthmtahteereixailsstetnhcaet of a price-fixing the contention of conspiracy relating to Counsel for the Com mission on this branch of the case may be summarily dismissed. These facts are as follows : A. Out of fifty-five manufacturers of asbestos pipe covering materials spread all over the country only nineteen are charged With attempting to fix the price of unpatented materials. With thirty-six manufacturers, including at least four of the larger producers, competing actively with the nineteen alleged price fixers, it is self-evident that the price of unpatented materials could not have been controlled and that practical business men would not have engaged in such a futile effort. B. During the first two years of the alleged conspiracy the general price level of unpatented materials was continuously ydeeacrlisnianfgtearntdhereimncaeipnteidonatoiftsthloiswiemstagleinvealryunctoinl stphirreaecya,ndAa choanlf spiracy to reduce the price of competitive products is a novelty in proceedings before this Commission. C. The actual prices charged by the respondents for unpat ented materials throughout the period of the alleged conspiracy wtheeretensetivmeronuyniafonrdmacatnudalwsearleesw. idely different as shown by both D. The price zone areas used Dy me XC D --iinmgpousnspibalteenutneddermaatzeorniainlsg wsyesrteemnowt iutnhiofuotrmun. ifPorrimcepurinciifnogrmzoitnyesm, The evidence under these headings will be dealt with in order and it will be seen that there is no justification for attempting io extend the alleged price-fixing conspiracy to unpatented materials. ing mA.aterialsOuspt roefadfiftayl-lfivoevemr atnhuefaccotuunretrrys oofnlaysbneisntoesteepnipearceover cmhaatregreiadls.wWithithatttheimrtpyt-isnixg mtoanfuixfactthuereprsr,iciencloufditnhge aut nlepaasttenfoteudr oseflft-heevildaerngtetrhpartotdhuecperrsic, eoouftstihdee uonf ptahteenatleldegmedatceorinaslpsicraocuylditnoist hhaavvee ebnegenagceodnitnroslluecdh aanfduttihleatepffroarct.tical business men would not Nineteen licensees of Mr. Tulloch out of twenty-five licensees (Corns. Ex. 3) and out of a total of fifty-five manufacturers of asbestos pipe covering (R. 3085) are charged in the brief of Counsel for the Commission with a conspiracy to fix the price of both patented and unpatented asbestos pipe covering materials. Since only license:* of Mr. Tulloch could sell the patented materials, it was at least i A impossible for the nineteen corporate respondents to enter int; a conspiracy as to patented materials. But to argue that nine! n manufacturers out of a total of fifty-five conspired to fix the pri `3 of the Industry for unpatented materials is fantastic. The testimony runs throughout the record and is undisputed that the licensees always encountered active price competition in the sale of unpatented asbestos pipe covering materials, both from licensees and non-licensees (R. 625, 982, 1064, 1208, 1226, 1332-4, 1365, 2050, 2179, 2356). Some of the larger companies in the low pressure pipe covering business who were not licensees were C. Stanley Morgan of Detroit, U. S. Gypsum Company, Charles Brower Co. of Seattle, and Standard Asbestos Company of Kansas City (R. 904-905). Compared with these manufacturers the department of JohrisManville which manufactured the same kind of materials would not be so outstanding in production, and the same was true of the Carey Company (R. 913-914). The only larger manufacturers who were licensees were Norristown, Carey, Sail Mountain, liuberoid, Keasbey &Mattison, and Johns-Manville (R. 111). While Mr. Tulloch testified that the asbestos materials manufactured and sold by the respond ents would be in excess of 50% of all that was sold and manufactured 8 REPROD in the United States (R. 112), he said this referred to asbestos materials manufactured by the Asbestos Paper & Allied Products Division, and that the percentage would be very much less than 50% if all five divisions of the Asbestos Industry were considered a(Rny.w4h0eGr-e40n7e).ar N50o%r>doofesthtehiusumpaetaenuttehdatasrbeessptoonsdmenattsermiaalsnupfraocdtuurceedd by the Industry. The respondents Jolms-Manville and Bennett, whose production is included in Mr. Tullocli's estimate, produced only patented (R. 5G8). All the other respondents produced patented and unpatented. Respondents' Exhibit 249 shows that in 1937, for example, Carey manufactured 5,748,000 pounds of unpatented asbestos paper and 4,097,000 pounds of patented asbestos paper, that is to say, only about 58% of Carey's production was unpatented. Between January 1, 1937 and June 30, 1940, the Ruberoid Company sold $512,027 of asbestos insulating' materials, of which $188,773 represented sales of materials covered by the Tulloch license agree ment--less than two-thirds was unpatented (R. 568). Therefore, it cannot be inferred that the production of unpatented materials by the respondents in any way approached 50% of the total produc tion of the Industry. The members of this Commission know that nineteen manufac turers of a nationally sold product producing substantially less than 50% of the product cannot fix the price of the product when there are thirty-six other manufacturers, including four of the larger producers, scattered all over the country and competing actively in the sale of the product. The location of forty-seven of the fifty-five manufacturers appears on respondents' Exhibit 255. The record does not show the names or location of all manufacturers. On page 9 is a map of the United States showing with small circles the location of the nineteen manufacturers charged with this conspiracy and by solid dots the location of twenty-eight of the thirty-six competing manufac tIutrwerilsl bwehoseeanrethnaott thcheamrgaendufwacitthurperasrtwichiopaatrioennoint saonychcaorngesdpirwaecrye. scattered all over the country and located where they could engage in active price competition with the alleged conspirators. In the Chicago area there were four respondents and three competing manu facturers who were not charged with conspiracy. In the Detroit area there were seven manufacturers no one of whom was charged with price-fixing and all of whom could compete with Chicago. In the New York area there were four respondents and seven other manu facturers admittedly competing with them. All these fifty-five manu- 10 facturers were producing standard products always subject to the most intense price competition. The conspiracy is alleged to have begun in the summer of 1933 and to have continued until the commencement of this proceeding, a period of more than eight years. Seventeen producers of unpat ented materials attempting to control the prices and selling terms of an industry in which thirty-seven producers were not parties to the alleged conspiracy! The tail wagging the dog. No business man could be convinced of the existence of such an extraordinary conspiracy without the most persuasive evidence. But there is no such evidence. There are only tenuous inferences and arguments, all of which are at variance with common sense and business experience. On the other hand, the evidence that there was no such conspiracy is abundant and convincing. Officers of the various respondents testified that their unpatented products were customarily sold at lower prices than those established by Mr. Tulloch for the patented products, and that his prices had nothing to do with the price at which they sold the unpatented. We give only a few of the many possible citations to this effect (B. 629, 1064, 1206, 1355, 2209). This testimony was supported by invoices and sales bulletins showing that the prices at which unpatented products were actually sold were not uniform and were far lower than the patented prices (Besps. Exs. 87-126, 148-151, 211 A to N, 212 A to G, 213 A to J, 214 A to H, 246 A to Z7, 247 A to Z16, 248 A to V). Twenty-one independent purchasers of asbestos insulating ma terials were subpoenaed and testified that throughout the period involved in this proceeding they purchased all the unpatented mate rials they wanted at non-uniform prices from different respondents and other companies in the Industry (B. 2287, 2310, 2390, 2416-7, 2434-5, 2457, 2493, 2527, 2604, 2620-2, 2656-7, 2668, 2688, 2707, 2736, 2746, 2779, 2799, 2955, 3020). They produced hundreds of invoices showing thousands of actual purchases of unpatented products from respondents at non-uniform prices which were far below the current price of patented materials (Besps. Exs. 215 A-Z6, 226 A-H, 227 A-Y, 228 A-E, 229 A-F, 230 A-G, 231 A-Z3, 232 A-F, 236 A-Z4, 237, 238, 239, 240 A-J, 241 A-D, 242 A-C, 243 A-N, 244 A-K, 245 A-Q, 252, 257-272). The testimony of these independent jobbers and dis tributors was unequivocally to the effect that they had never been forced to pay a uniform price to get unpatented products similar to the patented products. There is no conflicting testimony. REPRODUCED AT THE NATIONAL A R C H IVES 11 geneBra.l priceDluervinelg othf eufnirpsat ttewnotedyeamrsatoefritahlse awllaesgecdonctoinnuspoiursalcyy the declining and remain half years after the ed at its inception low of est level until this imaginary thcroenespainradcya. nAovceolntyspiinracpyroctoeerdeidnugcsebtehfoereprtihceis oCfocmommipsseitoitni.ve products is a The brief of counsel for the Commission says at page 22: " There is in this record conclusive evidence of the intent on the part of the respondents to eliminate competition in price and otherwise in the manufacture, sale and distributionof the products in question. " It can readily be seen that the respondents were al lowing a common course of action from the date of the rirai merchandising plan in evidence on down through 1941. Jn' when and where the plan for this common course of adirv- [ was promulgated is not clear, but it began to reveal itoci f in 1933." : What actually revealed itself in 1933, through price filing under the Code, was the low price being charged by some members of the Industry. Instead of correcting this through a price fixing coin piracy, as Counsel for the Commission would have it, the other members of the Industry hit these low prices on the nose and there was a terials continuous drop until the end of 1in93t5heangdentehreallopwreicset lleevveell coofnutinnpuaetdenutnetdil mthae beginning of 1937, when the market on these products in company with the market on other building materials began to move up. Mr. Abraham, President of The Ruberoid Company, testified: " Under the Code period when the prices were filed, which happened for the first time and the exact prices were made known to competitors, there came out in the open some facts which were previously not generally known, and as the result of the price filings prices declined, the reason being that the asbestos paper division industry is a highly competitive one and just as soon as a member of the industry makes a low price and that fact becomes cognizant to his competitors they jump on the band wagon and reduce their prices accordingly, and that happened during the Code" (R. 2345). 12 REPRODUCED Mr. Abraham further testified that prices on unpatented materials declined steadily throughout the code period and continued at a low level until the end of 1936, when prices started to crawl upward (R. 2383-4). Testimony to the same general effect was given by Mr. Hoff, President of the Jolms-Manville Sales Corporation, and by other witnesses, some of whom were not connected with the re spondents. (R. 2054, 2059) Mr. Stuart George, who was not con nected with any respondent, testified that at times there seemed to be no bottom to prices, but that the market went up again around 1937. (R. 2455-6) The prevailing market price on a number of products in 1934 was approximately 81% discount off the standard list (R. 3057-8); whereas, in July 1935 Commission's Exhibits 289296 show a price drop to a discount of 85.6% and 86% off the stand ard list. No other citations need be given because there is no conflicting evidence. The chart at page 13 shows in graphic form the drop in respondent Johns-Manvilio's prices on several of the Industry's products from 1933, when this imaginary conspiracy dis closed itself, to`May 27, 1935, the date of the Schechter decision. This chart well illustrates the absurdity of the argument that the respondent Johns-Manville Corporation engaged in a conspiracy in 1933 to fix prices on asbestos and wool felt insulating materials. It also illustrates the absurdity of the argument that the Code Mer chandising Plan was used to implement the conspiracy, because it was not until the Merchandising Plan became effective in the latter part of 1933 that prices in the Industry began their continuous descent. This chart is based upon testimony and exhibits which show that the price on 3 ply air cell pipe covering declined from $.079 per foot in July 1933 to $.045 per foot in July 1935, that the price of %" wool felt pipe covering declined from $.108 per foot in July 1933 to $.065 per foot in July 1935, and that the price of anti sweat pipe covering declined from $.153 per foot in Jan. 1933 to $.106 per foot in April 1935. (R. 2111-2, 2115, 2118) Counsel for the Commission does not attempt to explain these facts, but ignores them. He does not pretend to have direct evidence of the alleged conspiracy, nor does he question that its existence was denied by officers of the respondents under his examination. The inferences iwbhiilcithy*.are sought to be drawn seem to lack even the merit of plaus AT THE N ATIO N AL N.I.R.A. Enacted ARCHIVES Asbestos Code Schechter Decision 14 C. The actual prices charged by the respondents for pspaitreanctyedwemreatnereivaelsr uthnirfoourgmhoauntd twheerepewriioddelyofditfhfeereanllteagsedshocownn by actual sales. All officers of respondents wlio were examined on the subject testified that there was active price competition for unpatented ma terials throughout the period involved in this proceeding (R. 625-8, 1056, 1208, 1332-4, 1365, 1441, 2049, 2179, 2356, 2858, 2904), but in order that there might be no doubt on this subject counsel for respondents subpoenaed twenty-one witnesses who were engaged in buying asbestos and wool felt insulation materials from the respond ents and others in the Industry. These witnesses were jobbers and distributors of plumbing, heating and building supplies, represent ing the class of trade that dealt with the manufacturers of asbestos and wool felt insulation materials. (R. 2285, 2304, 2387, 2414, 2433, 2497, 2592, 2615, 2642, 2682, 2703, 2732, 2743, 2772, 2796, 2944, 2990) Their testimony was uniformly to the effect that there was always active price competition for unpatented materials, and no witness was called in behalf of the Commission to dispute this fact. Henry G. Hoffman, a jobber in Chicago, named four respond ents from whom he had bought unpatented pipe covering materials, and stated as to prices: " They were not stable as the invoices show there (indi cating). There are different discounts" (R. 2799). Stuart H. George, who did business in the State of New York, said he had bought from at least five of the respondents and " could always find different prices from different manufacturers" (R. 2456-7). Harry Lampert, a jobber in New England and New York, had bought from at least six of the respondents and stated as to prices: " There was always a differential. If you would go out shopping you could always get a better price from one than from the other." Louis Messe, a jobber in Chicago, had bought from at least three of the respondents, and stated he had always found they had different prices (R. 2745). Morris Curtis, a distributor in the Boston area, had bought o f lo n o f -frm r roannrr1f> ,n+Q rm rl am rl REPRODUCED f l; i *\, V% 15 AT T H E N A T I O N A L A R C H I V E S " It seems that everybody had a different discount" (R. 2655-6). Philip Kaplan, a Chicago jobber, had bought from at least three respondents, and said the manufacturers had different discounts (R. 2720). Frank H. Shipe, who did business in Washington, had bought from at least four respondents. Asked if there was any difference in the prices of manufacturers of asbestos materials, he said: " Very decidedly, sometimes ranging as high as twenty and twenty-five per cent for the same so-called material" (R. 2993). Maurice J. Karpen, who bought for a jobber in Chicago, and had done business with at least five different respondents, said he kept himself informed of prices charged by the manufacturers, and they were not uniform (R. 2779). Morris Sussman, a jobber in White Plains, N. Y., stated he 1 id bought unpatented products from at least four respondents. He s.-.id he found the prices were different during the entire period (R. 2501 !). He referred to one period when the respondent Empire Asia- os Manufacturing Company allowed a discount of 83 and 10; Nor-istown, 85; and Johns-Manville, 77 (R. 2506). Irving Roth, a buyer in the Chicago area, named at least tl ee respondents from whom he had bought the unpatented materials and said their prices always varied. He testified that he had pur chased the same materials at one time within a period of two or three weeks from Empire Asbestos at 77 less 10, from Acme Asbestos at 77 and from Sail Mountain at 79 less 10 (R. 2735-6). Jacob L. Hittner, a New York City jobber, had bought from several different respondents and testified: or te"nTpheerycheandt."different prices, sometimes a difference of five He said he never knew any time when the manufacturers were selling at the same price (It. 2390). Saul R. Shapiro, a jobber in New Jersey, said he never got the same price from any of the manufacturers. In answer to a question from the Trial Examiner he said the prices varied as much as 15% (R. 2434). 16 Nine other independent witnesses testified to the same general effect. The brief of counsel for the Commission relies on the fact that a few of these witnesses said they had seen price lists of some of the rtheseppornicdeenlitsstsswhoewi'einfogruunnifpoartmentperdicmesa,tebruiatlst,herOebvisionuoslye,vtihdeenucneifothrmat prices represented the price fixed by Tulloch for the patented mate rials. It is conceded that the respondents when selling patented materials published the Tulloch prices. In order to confirm the oral testimony of these jobbers and dis tributors hundreds of invoices taken from their files were placed in evidence showing sales by respondent manufacturers of unpatented materials at prices far below the Tulloch prices for patented mate rials and which differed widely among the respondents themselves. Each invoice listed numerous items sold and the price for each, and therefore showed the prices charged by the respondents for thousands of items of asbestos, and wool felt insulating products (Resps. Exs. 215A-Z6, 226A-H, 227A-Y, 228A-E, 229A-F, 230A-G, 231A-Z3, 232AF, 236A-Z4, 237, 238, 239, 240A-J, 241A-D, 242A-C, 243A-N, 244A-K, 245A-Q, 252). Respondents' Exhibit 270, the substance of which is reproduced at page 17, is a chart based on those invoices showing the prices charged by different respondents in sales of unpatented 3-ply air cell pipe covering in Zone 1. As will be seen, the prices were constantly changing and, with one exception, were always far below the price of the corresponding patented materials. ing uDn.patenteTdhempartiecreiazlosnewaerreeasnoutseudnbifyortmhe. rePsrpiocenduennitfsoirnmmityark iwnagszoimnepso.ssible under a zoning system without uniform pric Price zone areas were not used in the asbestos pipe covering industry for the sale of heavy products, such as asbestos paper and roll board. Zones for pricing purposes have been used by many mem bers of the Industry over a long period of years in the sale of air cell pipe covering and other light products (R. 271, 842, 1016, 2327, 2905-6).. The record does not show when this merchandising policy 18 was first used in the Industry, but some of the respondents used zones for pricing purposes at least as early as the following dates: Norristown Asbestos- 1927 (Com. Ex. 384) Johns-Manville October 5, 1928 (Com. Ex. 381) Carey August 10, 1929 (Com. Ex. 379) Sail Mountain October 21, 1929 (Com. Ex. 385) Plant Rubber about 1930 (Com. Ex. 387) Empire Asbestos 1932 (Com. Ex. 380) W. S. Nott Co. 1932 (Com. Ex. 386) Keasbey & Mattison August 1932 (Com. Ex. 382 J) Acme Asbestos MacArthur Co. 1933 (Com. Ex. 376) August 1, 1933 (Com. Ex. 383) Asbestos Asphalt 1934 (Com. Ex. 377) Ruberoid October 25, 1934 (Com. Ex. 375 A) Ozoruvich Never used zones (Com. Ex. 378) Bennett &Co. Never used zones (R. 3385) Clark Asbestos Never used zones (R. 3385) L. A. Rubber &Asbestos Co. Never used zones (R. 3386) Pacific Asbestos Never used zones (R. 3386) Contrary to the statement made in the brief of Counsel for the Commission the areas of the price zones used by the Respondents were never uniform except as required by the N.R.A, Code and for the sale of patented materials during the period when they were licensees of Mr. Tulloch. The complaint in this proceeding charges that the Johns-Manville Corporation and the Philip Carey Manufac turing Company manufactured and sold approximately 50% of all low pressure asbestos pipe covering in the United States (Complaint, par. 3). Although this charge was wholly unsupported by the evi dence, those companies were singled out in the trial of the proceed ing as leading manufacturers and members of the alleged conspiracy. AfafctteurretdheoTnolyohtehye inpvaetenntitoend tahsebeJsothonss-pMipaenvciollveerCinogrpomraattieornialms an(Ru. 2042-3), and, as a sublicensee of Tulloch, necessarily observed the license zone areas in selling the patented materials. The Carey Company, as we have shown, sold large quantities of unpatented materia pricing ls th a e nd pa while tented it m necessar aterials, iilty uus seedd ntohez oTneu lalorceha szoinn e t hae r esaasl e f oorf uEnxp. a3t7e9n)t.ed materials from the time it became a Tulloch licensee (Com The Carey Company began using zone areas as early as August 10, 1929, but discontinued their use during the period December 1, 1930 to March 1, 1932 (Com. Ex. 379) during which period a large number of its competitors were using zone prices as appears above. Commission's Exhibit 379 states with reference to the respondent Philip Carey Manufacturing Company: " From the time of the Tulloch license this Company has used zone areas prescribed by the licensor from time to time for licensed materials. This Company has not used a zoning system in the sale of unpatented products since the date of the Tulloch license." It follows inevitably that the Carey Company could not have had one price list for both patented and unpatented materials and cuonupladtennottedhamveatheardiatlhs eassamitse prices or merchandising competitors Norristown policies for its Asbestos, Sail Mountain, lveasbey & Mattison, Ruberoid and others who were using zones for pricing their unpatented materials. The two respond ents charged in the complaint with marketing half the products of the Industry therefore had different marketing policies and could not have had the same marketing policies as their competitors in the sale of unpatented materials, because one of them (Johns- Manville) did not sell unpatented materials, and the other (Carey) did not use a zone pricing system for such materials. On the last page of Commission's Exhibit 379 appears a detailed tabulation of Carey marketing policies with respect to each item of asbestos pipe covering material from August 1929 to December 1935. From December 1, 1930 to March 1, 1932, asbestos paper and caonrdrualglaotethdearsmbeastteorsiaplsaptveerrwe esroelesof.lod.bf..of.abc.tfoarcyt;orwyh, efrreeaigs,hitneq19u3a4lizaendd, 1935 asbestos papers and factory, freight equalized, three other and all the products were other products sold were s.oo.ubl. by zones, freight allowed. There were five different periods in width radical changes were made in marketing policies for selling the different materials, as appears on the last page of Commission's Exhibit 379. Comparing these merchandising policies with those of the Johns- Manville Corporation prior to December 1935 we find substantial differences (Com. Ex. 381). The Jolms-Manvillc zone areas in effect from August 18, 1930 until December 29, 1933 (referred to on the second page of Com- 20 mission's Exhibit 381 as Exhibit 3 thereto attached, and being also Kespondents' Exhibit 251 A to D), were as follows: " Zones-- D escription Zo"n1e. 1Maine ZonNeo2rth Carolina ZonKeen3tucky 23.. VNeerwmoHnatmpshire GSoeuotrhgiaCarolina OInhdiioana 45.. MRhaosdsaechIsulsaentdts AFlloarbiadma a IMlliicnhoiigsan 67.. CPeonnnnseycltvicauntia TMeinsnsiessssiepepi WIowisaconsin 98.. DNeelwawJaerresey MMiisnsnoeusroit(aa) 1101.. MDiasrty. loafnCdolumbia Ne(bOramskaaha only) 123.. WViergstinViairginia 14. New York Zone 4Louisiana ZonMe o5ntana ZoCneal6ifornia OAkrklaahnosmasa WIdayhooming WOraesghoinngton (e) TKeaxnsaass(b) UCotalohrado Nevada NNeobrtrhasDkaa(kco)ta ANreiwzonMaexico SMoiussthouDria(kdo)ta Wa(EshaisntgtoofnCascades) Te(xEasl Paso County only) Rive(ra.) That part of Missouri which is within ten miles of the Mississippi ((bc)) EExxcceepptt OEml aPhaas,owDhiicshtriicstinwhZiocnheis3.in Zone 5. Rive(dr,)wEhixcchepfat lltshaint pZoornteio3n. which is within ten miles of the Mississippi (e) West of the Cascade Mountains." The Carey zone areas during the same period were radically different. Instead of six zones there were only three Carey zones from March 1, 1932 to May 8, 1933 (Coins. Ex. 379 Z to Zl). The areas in effect from May 8,1933 to November 30, 1934 were radically changed from earlier zones and included four zones (Corns. Ex. 397 Zl). The Carey zone areas from March 1, 1932 to May 8, 1933 were as follows: " Z one I--CInodninaencat,icuKte,nDtueclkawy,arMe,aiDneis,trMicatryolfanCdo,luMmabsisaa,cIhlulisneottiss,, Michigan, New Hampshire, New Jersey, New York, the national a rch iv es 21 Ohio, Pennsylvania, Rhode Island, Vermont, Virginia, West Virginia, Wisconsin and all jioints within ten miles ol` the west bank of the Mississippi River north of the northern boundary of the State of Arkansas." " Z onk II--Alabama, Florida, Georgia, Louisiana (East of the Mis sissippi River), Mississippi, North Carolina, South Car olina, Tennessee and all points within ten miles of the west bank of the Mississippi River south of the southern boundary of the state of Missouri." " Zone III--Arkansas, Iowa, Kansas, Louisiana (West of the Mis sissippi River), Minnesota, Missouri, Nebraska, North Dakota, Oklahoma, South Dakota, Texas." In order that the marked differences between the zone areas being used by Johns-Manville and Carey at that time may be visualized, maps showing the respective zone areas are set forth at pages 22 and 2E3v. en after Carey changed its zones on May 8, 1933 they v ore very different from the Johns-Manville zones which had been in <*; oct for nearly 3 years and which remained in effect for seven months thereafter. This difference in zone areas between two outstanding compet itors in the sale of asbestos pipe covering materials is of peculiar significance and of course completely disproves the existence of .my price fixing conspiracy between those respondents during that period. Counsel for the Commission attempts to analyze the respondents' zone areas in pages 13 to 17 of his brief, and asserts that the record shows concert of action on the part of the respondents in establishing these areas, but the analysis is curiously incorrect and does not even attempt to show that similar zone areas were established by any two respondents at or about the same time. The brief asserts that the Norristown zone areas effective July 1D9e,ce1m93b3erw2e9r,e19t3h3e, same as those established except that Norristown had by Johns-Manville North Carolina in Zone those 1 and dates Jthoelnm, sJ-Mu lay n1v9il,l1e93h3adanNdorDtehceCmabroerlin2a9, i1n93Z3o,ntehe2.zonBeetawreeeans were not the same, and even after Johns-Manville established its December 29, 1933 zones, prices of tin* two respondents were neces sarily different in North Carolina. There is no evidence that prices were the same where zones were the same. The casual disregard of a zoning difference involving an entire state suggests the time ,, ,, Marchi 195 " PflHFY Z08ES _ s 19SS ( * * " ? " ' ' -- i. Zone 3 " " zone 1 L-- 1 zone --------- i Izone 1- -cdt -415 Zone I U worn excuse of the unmarried girl when reproved for having a baby. She said, " but it was such a little baby." A price difference between competitors in the entire state of North Carolina may seem unim portant to an attorney overzealous in proving his case, but to a business man it would not suggest concert of action. In further support of the alleged concert of action it is stated at page 14 of the brief that the states placed by Carey in Zone 1 are all found in Johns-Manville Zones 1 and 2. Inasmuch as the purpose of using different zones was to charge different delivered prices in the different zones, this is an amazing method of showing concert of actioInt. is further stated that the zone areas used by Keasbey & Mattison beginning August 10, 1934 corresponded in every detail with the zones used by Norristown, Johns-Manville and Carey. It would have been fair to add that the Code Merchandising Plan was in effect at that time and every member of the Industry was legally required to use the same zones. It is unnecessary to go through the whole curious analysis con tained in the brief. As a final word, however, attention may be called to the following seriously erroneous statement at page 16: " A Comparison of the zones used by the respondents Norris town, Johns-Manville, Carey, Sail Mountain, Keasbey &Matti son, and the Ruberoid since the year 1940 shows that all these respondents were using zones identical in every detail." Respondents' Exhibit 375 B shows that zone areas were estab lished by Ruberoid January 2, 1940, that these were changed May 1, i1n9g40o,nanRdeaspgaoinndAenutgsu' sEtx1h,1ib9i4t13.7R5eVferteon3c7e5toZth8essheozwons ethaarteatsheayppweearre different from zoning areas used by any other respondent at any time. For instance, zone areas established by Ruberoid on May 1, 1940, as shown in Respondents' Exhibit 375 X 1 to Z 6 were without zone numbers and were as follows: Air cell Pipe Covering 2 or 3-ply. Discount from list prices LCL 82%. State of Pennsylvania other than Metropolitan Philadelphia. State of New Jersey and New York other than Metropolitan New York. Discount in quantity 85%. State of Connecti cut, the following counties in the State of New York: Nassau, Rockland, Suffolk (Huntington-BabyIon Townships only), Westchester, the Boroughs of Richmond, Manhattan, Brooklyn, Queens, Bronx. The following- counties in the State of New Jersey: Bergen, Essex, Hudson, Middlesex. Monmouth, Morris, Passaic, Somerset, Union. LCL 84%--Metropolitan Philadelphia, Counties of Bucks, Ches ter, Delaware, Montgomex-y and Philadelphia, State of Pennsylvania; also Camden County in New Jersey. LCL 82%--States of Maine, Vermont and New Hampshire. LCL 84%--States of Massachusetts and Rhode Island. There is nothing like this in the zone areas of any other respond ent. It is difficult to understand the x'eason for the incorrect and prejudicial statement quoted from page 16 of Counsel for the Com mission's brief. The statement is equally erroneous and incompre hensible with reference to the other respondents named. It appears from respondents' Exhibit 382 B that in January 1939 Keasbey & Mattison ceased using the Tulloclx license areas and published its own zone descriptions. The only descriptions in evidence are shown on the Raerespaso,ntdheenrtes'aErexhfoibuirttsee3n82stFa,teGs ,inH,KIeaasnbdeyJ.& Without Mattison quoting Zone 1, whereas the Norristown corresponding zone in effect after Norris ttoowonnlwyitnhidnreewstafrtoesm, the license agreement (Com. Ex. 81 A) and whereas the Keasbey & Mattison applied Zone 1 applied to all of New York and Pennsylvania, the Norristown zone areas applied only to Eastern New York and Eastern Pennsylvania. Norristown also had a zone applying only to the metropolitan New York area (Com. Ex. 81 B) and Keasbey & Mattison had no such szeovneen. Keasbey southern & Mattison Zone 2 (Com. Ex. 382 F) applied to states. Norristown's corresponding zone included nineteen states. The differences are so radical that it is evident Counsel for the Commission was laboring under a complete misap prehension with respect to the zoning situation. The obvious fact is also ignored that competitors who priced bbeycazuosneesfuwndouamldenutsaellythtehesyamaree zeostnaeblaisrheeads ftoor aecocnonomsidicerraebalseonesxtjeunstt as zones for freight charges are established by the Interstate Com merce Commission and postal zones are established by the Postmaster General under authority of law. They are natural market areas. The New England states, for instance, form a natural market area, also cei'tain Southern states and the West Coast. Also in the marketing of standard products there is a tendency on the part of manufacturers in all industries to meet the prices of their competitors on a decline and to follow a price increase if the 26 market is favorable. In order to do this the zones used for pricing must be the same, hence there is a tendency among competitors to follow zone changes to the same extent as price changes. If the zones had been similar in the Asbestos Pipe Covering Industry it wo in uld fact n , ot su have bstan been tial d surprisin ifferences g, a but t all the tim evidenc es, and eins hnoowisn stthaenrcee were, were changes made by these respondents at the same time. Counsel for the Commission concedes on page 21 of the brief that the Merchandising Plan under the Tulloch license agreement stated that it applied to products manufactured in accordance with the Toohey patent, but adds that the acts of the respondents show that they did not so limit it. The act of the Carey Company in dis continuing the use of zones for unpatented material while using the Tulloch zones for patented material shows that the Carey Company did so limit it. Another instance appears in the zone descriptions of Keasbey & Mattison (Com. Ex. 382) showing six zones used by Keasbey & Mattison while a licensee, whereas the Tulloch Merchan dising Plan established September 11, 1935 contained only four zones (Com. Ex. 375 A and E) Tulloch established a fifth zone area August 20, 1936 (Com. Ex. 375 A and J), and a sixth zone area April 20, 1937 (Com. Ex. 375 A and M). Comparison between the Keasbey & Mattison zones 5 and 6 and the Tulloch zones 5 and 6 shows radical differences involving the States of Colorado, Montana, New Mexico and Texas. Even if it be assumed that some of the respondents used the Tulloch zones in marketing unpatented as well as patented materials, it does not follow that they did so as part of a conspiracy. That some of the respondents did not use the Tulloch zones affirmatively disproves the inference, and the fact that they were charging com petitive prices for unpatented materials throughout the license period further disproves the inference. The affirmative evidence being now conclusive that no price uniformity in the sale of unpatented materials existed from the year 1933 until the commencement of this proceeding, we direct ourselves to the allegations charging a conspiracy with respect to patented materials and to the activities of respondents under the N. R. A. Code and with respect to the so-called Voluntary Agreement. UCED AT THE N A T I O N A L A R C H I V E S 27 POINT II. A^ chanTdihseinagllpelgaendicsonnostpsiruapcpyoirntepdrebpyaarninygeavniddeunsciengwhaactoedveerm. ac* whilePathreagNraaptihonNailnIenodfutsltireiaCloRmepcloavinert,ysuAbcpt awraagsrianpheff1e0c,taallnedgebsetfhoraet September 4, 1934, the respondents collusively adopted a merchan dising plan to be used in the sale of licensed and unlicensed materials. The record shows that this charge is entirely fanciful. Counsel for the Commission identifies the merchandising plan in question as Respondents' Exhibits 3 and 4, being two schedules of the Code Merchandising Plan adopted by all members of the Asbestos Pipe Covering Industry pursuant to the terms of the Asbestos Code. The National Industrial Recovery Act became effective June 16, 1933, and, among other things, authorized the President to approve codes of fair competition for certain industries (48 U. S. Statutes at Large 195). The Asbestos Institute was thereupon organized for the purpose of preparing a code for the Asbestos Industry to effectuate the terms of the National Industrial Recovery Act (R. 3052). A code of fair competition for the Asbestos Industry was prepared and was approved by the President on November 1, 1933 (R. 3053, Resps. Ex. 2). It applied to five divisions of the Industry, one of them being the Asbestos Paper & Allied Products Division, which included the manufacturers of asbestos paper and wool felt insulating products. The other divisions were Asbestos Cement Products, Asbestos Magnesia Products, Asbestos Textile Products, and Brake Lining and Related Friction Products (Resps. Ex. 2). Article YI, section 4(b) of the Asbestos Code authorized the members of each Division to prepare a merchandising plan incor porating the merchandising policies best calculated to promote fair competition in such Division, and subject to the review of the Admin istrator, such merchandising plan, when approved by three-fourths of the Code members of the Division and filed with the Sub-Code Authority, became " binding upon all members of the Industry who are members of the Division'' (Resps. Ex. 2). Sucli a merchandis ing plan was prepared for the Asbestos Paper and Allied Products Division and was duly adopted pursuant to Article VI, Section 4(b) of the Asbestos Code. 28 The Trial Examiner found as to this (p. 10, par. 2): " The members of the Asbestos Paper and Allied Products Division of the Asbestos Code, which was the Division that embraced the manufactures of asbestos paper, corrugated asbestos paper, asbestos pipe covering and associated prod ucts, completed preparation of a merchandising plan in December 1933. This merchandising plan was approved by three-fourths of the members of the Asbestos Paper and Allied Products Division and was tiled with the Sub-Code Authority and was put into effect by all members of the Divi sion, including all of the corporate respondents, and was oper ated under by them until May 27, 1935 (R. 273-5, 473-4, 1258, 1493-4, 2051-3, 2144-5, 2154, 2324-5, 2330, 2370, 3054, Resp. Exs. 3, 4, 153, 216A, 216B)." Page 29 is a photostatic copy of the title and first two para graphs of the respective first pages of Respondents ' Exhibits 3 and 4, the only schedules of this merchandising plan which are in evidence. Exhibit 3 contains 20 pages, and Exhibit 4, 13 pages. Inasmuch as these schedules state on their face that they con stitute a merchandising plan adopted pursuant to Article VI, Section 4(b) of the Asbestos Code, and the Code did not come into existence until November 1, 1933, it is impossible that they could have been adopted before that date. Furthermore, Respondents' Exhibit 3 shows that the final revision and correction was made on December 21, 1933, and Respondents' Exhibit 4 bears only the date December 21, 1933. It is evident then that this Code Merchandising Plan was not completed, and therefore not adopted until December 21, 1933,; and it is refen'ed to in the testimony as the December Merchandis ing Plan (R. 2329, 2370). The frequent reference to this Mer chandising Plan in the brief of Counsel for the Commission as having been adopted in June 1933 is contrary to the evidence and appears to be an attempt to create an erroneous impression. An examination of this Code Merchandising Plan will show that it controls all the manifold details affecting the merchandising of asbestos insulating materials except the prices to be charged. During the period of the Code, however, all fifty-five members of this Industry, including the respondents, were compelled by law to adhere to the terms of the Code Merchandising Plan. REPRODUCED AT THE NATIONAL ARCHIVES .Juno 2*, 1933 r 2lSnrdt i Rev. * C o rrectio n 11-27-33 12-13-33 SCHEDULE XV - jj V*' '/ 12-21-33 MERCHANDISING PUN OF THE 0) ASBESTOS PAPER AND ALLIED PRODUCTS DIVISION OF THE ASBESTOS INDUSTRY J THIS MERCHANDISING PUN IS ADOPTED PURSUANT TO ARTICLE VI, SECTION A B OF THE ASBESH8*. ODDE^* 3" *^ I3* > A. PRODUCTS jCT.ION 1 - SCOPE OF MERCHANDISING*1PLAN j . > \ Th* f s lle e in g products i r t su b ject to a l l o i the p ro vision s ol th is 2 M erchandising Plan, X. Corrugated A ircell type Asbsstos Pipe Covering Sheets and Blocks (4 -6 . Ply per 1* thick ness) I I . K ioolfelt Pipe Covering with Asbestos and/or laterproof Linings. I I I . Anti Seeat types oi covering. C. Zf., 1933 SCHEDULE IV - / Of 3 Are 1.i.;. ^ ASBESTOS mTAePrE'RkaAnNdDigAinLgLIEfDlatPROoDfUtCTieS DIVISION Or THE ASBESTOS INDUSTRY AT-R:1TSITLMEHSVOIil,ASiPElS'ITNIOGNFL4AK? OISF TAHDEOP*TE3DrESPUTORSSUACNOTDET.O PEOPLE*j SECTION T, SCOPE OF THE: MERCHANDISING TL.U THo follow ing products are su bject to a l l of th e provisions of th is Merchandising Flarit- I . AH types of corrugated Asbestos Paper. at f i r i t paga of two sections of o rig in a i Code 30 Section 3(b) of the National Industrial Recovery Act provided: " (b) After the President shall have approved any such code, the provisions of such code shall be the standards of fair competition for such trade or industry or subdivision thereof. Any violation of such standards in any transaction in or affecting interstate or foreign commerce shall be deemed an unfair method of competition in commerce within the meaning of the Federal Trade Commission Act, as amended; but noth ing in this title shall be construed to impair the powers of the Federal Trade Commission under such Act, as amended. and subsection (f) of the Act provided: " (f) When a code of fair competition has been approved or prescribed by the President under this title, any violation of any provision thereof in any transaction in or affecting interstate or foreign commerce shall be a misdemeanor and upon conviction thereof an offender shall be fined not more than $500 for each offense, and each day such violation con tinues shall be deemed a separate offense." The evidence is that the members of the Industry adhered to the terms of the Code Merchandising Plan until the Schechter decision and tFhoern mceaansyedyteoardsobseof.ore the Asbestos Code was adopted certain merchandising practices had grown up in the Asbestos Pipe Covering Industry and were followed in a general way by most members of the Industry (R. 2325-6, 2905). However, the different members of the Industry varied widely in their detailed application of these general practices (R. 2326-8, 2364, 2374, 2906). One of these merchan dising practices was selling products on the basis of a discount from a single universally recognized list price. This standard list price was originated in 1907, apparently to cope with difficulties in quoting prices on the many sizes and thicknesses in which pipe covering was made and used (R. 2184, 2410, 2871, Trial Exs. Report, par. 50). There were always wide variations in price, however, between different manufacturers because of differences in discounts (R. 2327). One manufacturer would give a discount of 77% off the standard list, another 85% off, and another 83% off with an extra 10%, and sometimes an extra 5% (R. 2506). There were multitudes of price variations arrived at in this way. The standard list price had been the basis of all pricing in the Industry for so long that the DUCED AT THE NATIONAL A R C H I VES 31 Code Merchandising Plan naturally required that all prices e tiled in terms of discounts from this standard list price table. Other trade practices which had long been in use were freight equalization, geographical zones for quoting delivered prices, classi fication of customers, price differentials between classes of customers, furnishing two and a half bands per section of pipe covering without extra charge, price protection on future orders to certain classes of customers, and many other practices (R. 271, 20G1-2, 2145-6, 2149, 2234, 2325-7, 2905-6). The interpretation of these general trade prac tices, however, varied widely among different manufacturers (R. 2145, 2328). For instance, the territory included in delivered price zones varied between the different manufacturers (Coins. Exs. 379, 381, 385), price differentials for different classes of trade varied (R. 2328), and definitions of the different classes of trade varied very considerably (R. 2327, 2368). Mr. Abraham, President of the Ruberoid Company, explained the manner in which these divergent applications of generally recog nized principles were brought into a temporary uniformity under the Code as follows (R. 2364-2365, 2374) : " Exhibits 3 and 4 are the Merchandising Plan which was adopted by the Asbestos Paper & Allied Products Division for the Industry under the Code, and these two exhibits crystallized for the first time many details pertaining to mer chandising which were not followed by our Company prior to that. * * * The Merchandising Plans in question I believe represented which were a in composite of vogue in the Ianllduthsetrmy apnriioforldtovtahreyiCnogdpe.ra*cti*ces* The Code Merchandising Plan was put together like a jigsaw 1 puzzle representing practices of one company, plus the prac tices of another company, plus some generally accepted prac i tices, and represented a composite varying practices that were in vogue opinion prior to of the Cthoedem. a*n*ifo*ld" " Prior to the Code there were general principles only followed by the Industry, general principles not in particular detail." " After the Schecter decision they became loosened up. The three decimal points got back to two, and got back to one, and then had a variation of 10% possibly in being interpreted. The same principles were generally followed after the vSacrhieacthiotncr. "decision with much latitude and much deviation and IliiSIWpPWWP 32 This testimony was confirmed by other witnesses without excep tion, and the Trial Examiner found (p. 10, par. 4): " The merchandising plan used by the Asbestos Paper and Allied Products Division of the Asbestos Code, recognized and included many merchandising practices and customs in the industry already developed such as classification of buyers, use of geographical zones for pricing purposes, and allowance of special discounts to certain distributional accounts. Manu facturers had previously differed in their detailed application of these general practices and customs (R. 291-2, 101(5, 2060-2, 2150-1, 2234, 2276-7, 2364-6, 2372-4. Resp. Exs. 3, 4, 5, 153)." The detailed discussion of the Code Merchandising Plan con tained in the brief of Counsel for the Commission, pages 17 to 21, cannot be reconciled with an intelligent understanding of the testi mony in this proceeding relating to it. The discussion bears the following heading: `*M er c h a n d isin g P l a n P erfect S et-Up for P rice- F ix in g . " This headline is followed by a statement to the effect that all manufacturers used " one standard list price" without any explana tion of the undisputed fact already mentioned that the 1907 standard list price was merely a basis for quoting widety varying selling prices on products that were made in hundreds of different size and thickness combinations. The statement is misleading without an explanation of the function of the list price and its ancient origin. On the next page (p. 18), in the same spirit, is a statement relating to freight equalization, which reads: " The factory prices being the same, the delivered prices would be the same", followed by a quotation from Mr. Tulloch's testimony to the effect that the net result of the freight equalization was that a buyer at any point " could buy at the same price from any licensee". There is not a scintilla of evidence that factory prices were the same during the Code period and we Tulloch's testimony submit there is no about the uniform possible price on epxactuesnetefdorpqroudouticntgs uanndienrcothrreeLcticsetnasteemAegnreteambeonutt epxreiccuestedonSeupntpematbenerte1d1,p1r9o3d5utcotssudpuprionrgt the Code period which began November 1,1933 and ended in May 1935. Mr. Tulloch concededly fixed the minimum price at which licensees could sell patented materials, and of course the price was uniform. At page 34 of the brief appears a quotation from Mr. Abraham's ' +Lr. -n-riiio n f rliq'pT 'P T lt REPRODUCED AT THE NATIONAL A R C H I V E S 33 s; O)' ) I members ol?the Industry were, generally speaking, the same, but the brief does not mention Mr. Abraham's next answer to the effect that he was speaking of prices filed with the Code Authority (R. 2340) or liis explanation that this resulted from meeting the lower prices published by competitors, lie testified (R. 2345): " Under the Code period when the prices were filed, which happened for the first time and the exact prices were madeknown to competitors, there came out in the open some facts which were previously not generally known, and as the result of the price tilings prices declined, the reason being that the asbestos paper division industry is a highly competitive one and just as soon as a member of the industry makes a h>w price and that l'ael becomes cognizant to his competitors iney jump on tlie band wagon and reduce their prices accordingly, and that happened during the Code." The evidence is undisputed that prices declined all through the Code period (Resps. Exs. 204, 20(J). The Trial Examiner stated in paragraph 7 of his Report: " 7. Prices for asbestos pipe covering and associated products declined during the period of the Asbestos Code and the various companies in the industry usually followed price declines instituted by another company from time to time. Different companies led in publishing a lower price at one time or another. As a rule during this period published sheets of manufacturers were at same price for same material (R. 2111-8, 2161-4, 2335-7, 2345, 2383-4, 21356-7, 3057-9. Resp. Exs. 204, 205, 206)." Hence, the undisputed evidence is that the Code Merchandising 1'lan which is trumpeted as above mentioned as " a perfect set-up ftohre epnrtiicree-fipxeirnigo"d orefsiutlsteedxisintenacec.ontinuous decline in prices during This Merchandising Plan was approved under the terms of the Code and became a law binding on the members of the Industry in Dec-ember 1933, eight months before the Toohey patent issued, unci it expired in May 1935 with the Scliccliter decision, three and a half months before the first Tulloeli license agreement. The origin of the Code Merchandising Plan has not been connected in the remotest degree with the Toohey patent or the Tulloeli licenses. It was di evelo.p..e..d: in1 a perfectly normal way under coiultions existing in the 34 Commission. Certainly it was not a restraint of trade on the part of the members of the Industry or a violation of Section 5 of the Federal Trade Commission Act for the members of the Industry to comply with the legal requirements of the National Industrial Recovery Act up to the time of the Schechter decision. The position of Counsel for the Commission is strangely ambiguous for, while the Complaint charges (par. Nine, subparagraph 10) that the re spondents adopted this Merchandising Plan before the granting of the Toohey patent, " to be used and which was used'' for the sale of licensed and non-lieensed materials, and the brief attacks it as a " perfect set-up for price fixing", nevertheless, the brief states at page 42: " Had the matter stopped at the demise of the NBA and after the Court had characterized the NBA Act as a method adopted by Congress for alleviating the penalties of the Sherman Act, I do not offer any argument that the respondents should have been criticised for their acts,-" This is a recognition of the fact well established in the record that there had been no illegal acts on the part of the respondents up to the time of the Schechter decision. POINT III. tary Tahgerecehmarenget oafftaenr atlhleegeSdchceocnhstpeirradcyeciinsiopnrepisarbinagseadvoulpuonn an erroneous statement of facts. At page 42 of the brief of Counsel for the Commission there is the following statement: " While the obituary of the NBA was still ringing in their ears they formulated the `Voluntary Agreement' which had all the earmarks of the previous Merchandising Plan. T h e voluntary agreement contrary to public policy DECLARED IN THE SlIERMAN A ct. A s has been pointed out hereinbefore, the Voluntary Agreement formulated by the respondents carried all the necessary elements of a price-fixing agreement." The brief is noticeably in error in these statements. The " Voluntarv Agreement" had no earmarks of' the'previoTu7sMONerchandising D AT THE NATIONAL A RC HI VE S 35 Immediately following the Schechter decision tlie President asked tlie business men of the country to continue voluntarily the fair trade practice and labor provisions of their codes until -someF thing could be worked out to meet the situation caused by the Schechter decision (R. 2054, 3053). Air. Lewis Brown, Chairman of the Code Authority of the Asbestos Code, thereupon telegraphed the members of all live divisions of the Asbestos Code calling atten tion to the President's request and asking that certain provisions of the Code be continued, but specifically omitting Articles VI, IX and XI, which were the only ones relating to a merchandising plan (R. 2055, Com. Ex. 152). Thirteen of the fifty-five members of the Asbestos Paper and Allied Products Division, including nine of the respondents, re sponded that they would abide temporarily by the articles of `.he Code relating to labor, fail- trade practices, and open price filing (Com. Ex. 354). Price filing was continued by a steadily diminish ing number of these companies for sixty to ninety days after Cu Schechter decision and then ceased entirely (R. 2158, 2333-4). TAs voluntary action for a very short period by a very few members of the Industry has been confused in the brief of Counsel for the Com mission with the preparation of a " Voluntary Agreement'' author iAzecdt. byThsuebtdeirvmisiVonol(uan)taSreyctAiognre4emofetnhtewNhaetnionuaseldInidnucsotrninaelcRtioecnovweirtyh the N.R.A. period has a technical meaning, because the National Industrial Recovery Act authorized the President in Section 3 of the Act to approve codes, and in Section 4, to approve " Voluntary Agreements". Section 4 says: " The President is authorized to enter into agreements with and to approve voluntary agreements between and among per sons engaged in trade or industry * * This section was not invalidated by the Schechter decision but remained in effect until April 1, 1936 (Resps. Exs. G, 10). It seems not too much to expect a lawyer to grasp the meaning of the term " Voluntary Agreement" when used in connection with the National Industrial Recovery Act, and it is difficult to under stand how such a document could be confused with the willingness of a few members of the Industry to comply with the President's request to continue voluntarily without agreement the labor and unfair trade practice provisions of their codes. The record shows that the two subjects were dealt with separate)v and at differ t 36 Covering Industry. As stated, only a few members of the Industry and only a few respondents took part in the voluntary continuation of the fair trade practice and labor provisions at the request of the President, but all members of all five divisions of the Asbestos Code took part in preparing the " Voluntary Agreement" for sub mission to the President under Section 4 of NIRA (R. 3053-5). We respectfully protest against the confusion of these two subjects in the brief of Counsel for the Commission and against the implica tion that they were connected with a continuation of the Code Merchandising Plan. The evidence is explicit and undisputed that adherence to the Merchandising Plan stopped with the Schechter decision (R. 2157, 2330, 3163, Resps. Exs. 218 A-B). The Voluntary Agreement which was drafted contained no merchandising plan, and could not contain one, because it applied to all five divisions of the Asbestos Code, which dealt with five fundamentally different kinds of products (R. 3053-5). Continuing FaiarnTdraOdpeePnraPcrtiiccee aFnildinLg.abor Provisions The Schechter trial Recovery Act. dItecoinsiloynindviadlidnaottedintvhaeliCdaotdeest.heScNhaectihotnear lPIonudlutrsy Corp. v. U. S. (1935) 295 U. S. 495. Immediately following the deci sion the President asked industry to adhere voluntarily to their Code provisions relating to hours and wages and standards of fair competition (R. 2054, Corns. Ex. 152). The telegram of the Chair- man of the Code Authority asked the members of the Asbestos Code pending consideration by Congress of the whole situation to continue the provisions of their code entitled, Hours of Labor, Minimum Wages, Child Labor, Unfair Trade Practices, Publicity of Prices, Terms and Conditions of Sale, and Labor Provisions (Coins. Ex. 152), The open price filing included in this request of May 28, 1935, had been approved in principle the month before in Release No. 1103G, April 24, 1935, of the National Industrial Recovery Board. This stated (Resps. Ex. 5): " E. Price-Filing not Price-Fixing " It is hardly necessary to say that open price filing is not price-fixing. Nor should evidence of collusion in their making be inferred from a uniformity in the prices which are filed. Competition is supposed to effect uniformity of prices rurnnp-b^pyjjgei^Bnarket,- and an approximation to uniformity i-'KODUCED AT THE* N A T I O N A L A R C H I V E S 37 is almost certain to result from the proper maintenance of open price filing. It is when the prices quoted by the members of an industry move in concert faster than competitors can easily accommodate themselves to each other's activities or when prices move uniformly and sharply upward in contrast to trends in related industries that evidence of collusion, is present. Open price filing is a device; price-fixing is a busi ness policy in operation." That price-filing as practiced in the Asbestos Pipe Covering Division was not price-fixing was strikingly confirmed by the con tinuous decline in prices during the N.R.A. period and by the contin uation of the decline after tlie Sclicchter decision which is evidenced by the price-filing that took place in July 1935. The following price notices were filed and distributed, all representing a price decline. fo .TiEdmy 1p,ir1e93A5,sbefefsetcotsivCe oJmulpyan1,y1i9s3s5ue(dConiontsi.ceExo.f a price decline 28.9; Coins. Ex. prior 288). R. A. Keasbey Co. met the price reduction, July 1, 1935 (Corns. Ex. 290). Jolms-Manville met the price reduction, July 5, 1935 (Conn:, Ex. 291). i Norristown Magnesia met the price reduction, July 8, 1935 f: (Coins. Ex. 292). Ex. 2S9m4)it.h & Kanzler met the price reduction, July 9, 1935 (Coins. Ex. 2K9e7a).sbey &Mattison mot the price reduction, July 9, 1935 (Corns. Ex. 2P9h6i)l.ip Carey Co. met the price reduction, July 11, 1935 (Coins. The foregoing is dealt with by Counsel for the Commission as evidence of price-fixing. There could lie no stronger evidence of price competition, because it shows a lower price being published by one company and being met by competitors as soon as they heard of the competition over a period of nearly two weeks. The Trial aEsxafomllionwers fwouitnhdrneospeevcidt etnocethoisf ppreircieo-dfi:xing but on the contrary found " Prices of asbestos pipe covering and associated products continued to decline for a few months after the Sclicchter decision. There is evidence that these prices reached their lowest level during the summer of 1935 and they did not begin tfoactruisreeduunntidlereatrhlye Tinoo1h9e3v7,meUxmcefpt on the products manu iapippappreirudovva^anuld(Rsu.b3m05i3tt-e5d, CVoorlnusn, tEarxy. Alogjr.eemie.-n--t-s (Resps. Ex. 8). Eeioiu tohredePrrwesaids epnrtomhaudlgaaptepdroDveecdemthbeerVo2l1u,n1t9a3r5y tAergmreinemateinngt athneeNxeactuiotnivael Recovery Administration as of January 1, 1936, and that was the end oTfhteheprmoaptotseerd. Voluntary Agreement specifically disavowed any control over prices. Article IX, as drafted and submitted to the President, p"rPorviicdeesd, ;discounts and other terms of sale shall at all , tuiamlleys, baenddenteortmhiinngedcobnytaeiancehdpianrttyhitsoAthgirseeAmgerneetmshenaltlinbedicvoidn strued to limit the right of each party hereto to determine the prices, discounts, and other terms of sale of all products manu factured and sold by him, nor limit the right of such party to change such prices, discounts or other terms of sale at any tine" (Corns. Ex. 18). The decisive facts are that it was never operated under by any respondent, it contained no merchandising plan, and was merely an ineffective attempt to conform to the policy of the Federal Govern ment (R. 386-7,1075, 2339, 3055, Trial Exs. RQeopronristeplaforrs.th1o1,1O2o)m. mis- proof (R. 1938,1972). The patent which was granted to Jolms-Man- ville Corporation as assignee on September 4, 1934 (Resps. Ex. 12) describes in several closely printed pages the numerous ingredients used and the method of manufacture. An essential feature of the patent was the application of heat at certain stages of manufacture, which varied in the production of the three distinct products--paper, corrugated paper and pipe covering (R. 1972). As found by the Trial Examiner (Report, par. 17), " After the particular product, paper, corrugated paper or pipe covering, was completed it was subjected to a further heat treatment at specified gradations of temperature to complete the setting or fusing of the wax compound into the product. '' Shrinkage was universally recognized as a serious defect in ordi pnraordyuacstbioensttoos tphiepeTcooovlieeryinpgrse,sshoruJnokhnms-aMtearniavlisllsehboergtlaynarfetsetrritchteinyghiatds been since d1e9v3e2lo(pRe.d2, 0a4n1d-2h, a2s06p8r,o3d2u7c0e)d. thIet pbeagteanntetdo products advertise etxhcelumsievreiltys of the invention widely even before the patent was granted (R. 3230, Resps. Exs. 74, 234, 235). Williams testified that he had seen shrink age of as much as 10 inches per 100 feet of unpatented covering (R. 1979) and had made photographs of the comparative results obtained when using the two types of materials. These photographs were pub l1i0sSh0e1d ionndJonhnnpso-Mf tahnevmillies creantarloodgnueeesdonvternima elo4n1g. period of years (R. eInradlusptrriyncbiuptlews itohf mthuechMdeervcihaatniodnisianngd Pvlaarniatwioenr.e fIonlloowtheedr winoi'tdhse, the Industry reverted to the conditions that existed before the Code Merchandising Plan. The testimony previously referred to estab lished that the general principles incorporated in the Code Mer chandising Plan had been followed by the Industry for many years but had been applied differently by the different members of the Industry. When the Code Merchandising Plan ended the same gen eral principles of merchandising continued but as before the Code tishenyo weveirdeenacpepwlihedatedvieffrerseunptplyortbinygdtihffeerceonnttemntaionnuftahcatturtehres.IndTuhsetrrye continued to operate under the Code Merchandising Plan. POINT IV. the JTohhensT-Mooahnevyillienvlaebnotiroantowriaess tahned rreespurltesoefntyseaarns oouftsltaabnodrinIng improvement in the quality of asbestos insulating materials. Shrinkage has been the outstanding defect in^isbestos rtin< BII it P re -S h ru ] Asbestoc re?natns intael ''iinpfrs .. nf insulation testai umha ...nun, > / v1.1, , > /,, ,, ,, /. t ; / * . *"" - PHOTOGRAPH OF RESULTS OF ACTUAL SHRINKAGE TEST and reppruobdluicsehdedininiJtsohnesa-tMsainnvdiulcice6' s S 1 , catalogue after. xs Cata-Lgues every year there- (flesp s. Exs. 7 4 - 7 9 , 11 33 88 ) j j n i n J f J f i v n v ; I 1 T N 1 M 1 I V U -J JM U U f l il fti 42 As early as 1932, Williams developed a method of demonstrating the advantages of pipe covering made according to the Tooliey inven tion which was used by the Sales Department in promotion work (R. 1980), News of the new type of covering spread in the Industry after the filing of the patent application and aroused great interest (R. 1308-9, 2348). Mr. Corydon Hall was employed by the JohnsManville Corporation to conduct demonstrations all over the country sehxhowibiintigonthsewaedrveangtiavgeens aotf tthhee TCohoelimeyicianlvSenhtoiwon, t(hRe. 2N8a9t9io).naNl aPtioownearl Show, the National Electric Light Association Show, the Air Con ditioning, Heat &Ventilating Show (R. 2172). Mr. Simoni was also employed to demonstrate the advantages of the Tooliey type cover ing and used a special apparatus for this purpose which was prepared by the Research Department of the Corporation (R. 1951). Mr. Simoni gave a demonstration with this apparatus at one of the hear ings in this proceeding (R, 1953-54). In 1936 he gave demonstrations of the advantages of the product to approximately 8,000 jobbers and their customers the plumbing and heating contractors, and in 1937 to approximately 14,000 jobbers and plumbing contractors. In 1939 about 2500 members of the trade were present at demonstrations, and in 1940 about 4,000 were present (R. 1952-54). In 1941 between three and four thousand members of the trade saw Mr. Simoni's demon strations at approximately 250 meetings. The witness Corydon Hall originated the expression " preshrunk" to describe the patented products in 1932 (R. 2897) and that word has been used in the Indus tthrye sTinricael tEhxenamtoindeers'csrRibeeptohrets:e products. To quote paragraph 20 of " In the years following 1932, there is evidence of an increasing consumer interest in the `preshrunk ' type of asbestos and wool felt insulating products. Various purchasing agencies of the United States Government began to specify preshrunk asbestos pipe covering in bid inquiries in about 1933. The number of Government bid inquiries which speci fied preshrunk pipe covering increased after 1933 to the point where a substantial percentage of all government inquiries today so specify. Between 1936 and 1940 the preshrunk type of pipe covering was specified in bid inquiries or orders by many departments and agencies of the Government 43 ture, and the U. S. Engineer Office, Chicago (R. 1354, 1357, 1391-2, 2072, 2348, 2424, 2568, 2581, 2597-8, 2850, 2955, 3000, 3230-2, 3234, 3236-40, 3243A-3251, 3267-8, 3271. Resp. Exs. 234, 273-87)." The merits of the patented preshrunk material were generally recognized in the Industry except by the members of the trade who did business with plumbers on a strictly price basis. As the patented preshrunk products cost more to produce and were higher priced than the unpatented they were of no interest to such jobbers as Harry Lamport who testified that it was his policy not to pay more for the sake of getting quality products (R. 2624). Such dealers found it was easier to sell the standard unpatented product at a low price than the quality product at a higher price. Contractors, however, who came in contact with the actual consumers of pipe covering and had to make repairs because of shrinkage without exception knew of the preshrunk type of material. Government agencies and municipalities began specifying proshrunk asbestos pipe coveripg about 1933 and the number of Govern ment inquiries specifying preshrunk asbestos pipe coverings creased after that date to a point where about 50% of all Govern ment inquiries today make such specification (R. 3230, Trial Ex Report, par. 20). Bid specifications and written orders of the Navy Department, Department of Justice, War Department, Veterans' Administration, United States Housing Authority, Department of Aregqruiciruelttuhraet, panredshthreunUknipteroddSutcattsesbeEsnugpinpelieerdinagreOfefxiche,ibCithsiciangoth, ewchaicshe (ResSpisn.cEexsth. e27d3-a2t8e7)o.f the Toohey invention some manufacturers claim to have found other methods of treating asbestos insulating materials to reduce the shrinkage, but despite the greater expense the Johns-Manville Corporation continues to manufacture all its asbestos insulation materials under the Toohey patent (R. 2041-2). and the Philip Carey Co. continues to manufacture a large part of its insulation products under the Toohey patent, even though it dis likes promoting a product the patent on which is owned by its leading compTehtietosrta(tRem. e1n07t0a,t2p8a5g5)e. 31 of the brief of Counsel for the Com- 44 Jobna-Manville Corporation which has marketed the more expensive patented products exclusively for eleven years, and upon the engi neering departments of almost every agency of the United States Government. They are unsupported by the evidence and should $ ' have no place in this proceeding. P OI NT V. in thTehoerdJionhanrsy-Mcoaunrvsielleoflibceunsisninegssaagnrdeemwietnhtouwtacsoellnutseiroend winittho any manufacturer. The application for the Toohey patent was filed by Toohey and Williams September 26, 1931. The patent issued to Johns-Manville as assignee on September 4,1934. (Resps. Ex. 12) Between the date of the application and the granting of the patent manufacturers of asbestos insulating materials generally became interested in the invention as a means of correcting the principal defect in their product. Before the patent issued certain manufacturers competing with Johns-Manville began selling products which they claimed to be " pre-shrunk", while the competition of other manufacturers took the form of disparaging the value of the pre-shrunk material. (R. 349, 1044, 3075, Resps. Ex. 180) Soon after the patent issued the respondent Tullocli had a talk with officers of Johns-Manville Corporation and suggested that they give him an exclusive license under which he would issue sub-licenses ttoermmesmfobrertsheofpathteenItneddumstartyeraianlds.esHtaebltioslhd pthriecmes: and merchandising " A. Well, I was interested in attempting to secure the right to license manufacturers under this new and improved product, and I advised the Johns-Manville people that I thought I could make the patent or the patented product more valuable to them than it would be if they alone handled it. The advantages which I felt I could give them were it would be possible to stop the infringement which we all knew existed after the patent was issued, which they had advised me was ipnrotdhuecotfwfihngic;htshoamt eitmweomublderps roefvtehnetinthdeusdtirsypawreargeeemnednetavoofritnhge to use as a competitive factor; that I felt I could by means of tinhattheexepvaenndt tthheey mdiadrkgeivtefomre tthhee priagthent tteodlipcerondseucttheanpdrotcheasst and the product, in the event that price control became a part of the license, I could assure them of the elimination of the price cutting on the patented materials." (R. 349, see Trial Exs. Report, par. 29) lie was told that Jolms-Manville would take the matter under consideration. (R. 2044) Several months later, in 1935, respondent Johns-Manville Cor poration decided to negotiate a licensing agreement with Tulloch. (R. 2100, 2045) Mr. Hoff, President of Johns-Manville Sales Cor pdoercaistiioonn,: testified as to Johns-Manville's reason for reaching the " A. Well, the discussion with Mr. Tulloch covered the point of the fact that we had reason to believe that other manu facturers were infringing our patent. We either had to let them go scotfree or spend a very considerable amount of money and a long time to either win or lose our patents. The second was the fact that the advantage to our company would be that if other manufacturers were licensed to make the materials that would immediately obviate the necessity of the law suits as long as they recognized the patents; and at the same time the more people that were manufacturing the pat ented goods and the more facility with which the materials could be provided for the consumer at large, the larger we thought the demand for the product would be, and we felt that hwaedshboeeunldhhooldldinagb,oauntdthtehastamwee pweorucledntraegaep otfhabtuspienrecsesntthaagte woef uacvtesrwy hmicuhchhaladrgbeerenvocluutmientoof bbuysitnheesssuinpptlhaentpiavrctimcualaterriparlos.d" (R. 2094, see Trial Exs. Report, par. 31) licenMsinr.gHoothfferfumrtehmerbetresstoiffietdheaIsntdouJsotrhynsd-iMreacntlvyi,llaes'sforellaoswonss: for not " A. Well, for several reasons. The first was because v,c felt, after we had decided that we would extend the license, that we did not believe that some of the concerns would be wauiltlhinogrittyo ttoakceararylicoennstehefrloicmenuses.and have us be the arbitrary up in``Touhre csoemcopnadnwy awshbeerceabuysewewecohualdd nacoqourirgean[iazdamtioinnisotrers]eta laifcteenrs.e" in(Ra.ll20o7f5t)hose phases that it would be required to look nrf'R onucin at tiii n a t i o n a i a r c m i v t s The tertns of an exclusive license agreement and sub-license agreement were discussed by Johns-Manville with their counsel and with Tulloch from time to time until September 11, 1935, when they were completed in an all-day conference in the Johns-Manville office, at which only Tulloch and Johns-Manville representatives were present. (R. 2101, 2104) Attached to the sub-license agreement from Tulloch to Johns-Manville was a detailed mechandising plan, im portant parts of which were written at the conference on September 11, 1935. (R, 2102, 3076-7) So far as Johns-Manville was concerned, the negotiation about the license agreement were exclusively with Tulloch and members of their own organization. No other manu factuMrerr. LwoausiscoRn.suHltoefdf., the President of Johns-Manville Sales Cor poration, testified (R. 2048) : " Q. It has appeared that the exclusive license granted Tulloch by Johns-Manville was dated September 11, 1935, and I will ask you whether prior to that time what, if any, manu facturing company engaged in the asbestos pipe covering busi ness you consulted or discussed the license with? " A. None. " Q. Did you discuss the terms or any of the terms of the proposed license agreement with any manufacturer? " A. I did not." Mr. Vandiver Brown, General Counsel of Johns-Manville Cor poration, testified as follows (R. 2104) : " Q. With what other manufacturer, if any, had you dis cussed the proposed Tulloch License Agreement before it was executed on September 11? " A. With none. I had no contact with any other manu facturer. My contacts were solely with Mr. Tulloch." Mr. Tulloch testified (R. 356) : know", Qn.egWotaiastitnhgewJiothhnasn-yMoanneviblluet yCooumapbaonuyt, thsoe lficaernsaes? you a lic"enAs.e IfrtohminkGIhewmasfothretohnelypuornpeoisneteorfesrteed-liicnentsriynigngottohegrest, Ianadmthaewyarwee.re having no contact with anyone else so far as indep"eQn.deTnhtaot fisJ,oyhonusr-Mcoanntvaicltles?with the Carey Company were " A. Oh, the Carey Company was not negotiating with them. They were negotiating only with me." 47 The license agreement gave Tulloch the exclusive right to license others to use the Toohcy patent provided such sub-licenses were " in the form of and upon terms and conditions no more favorable to the sub-licensee" than those contained in the sub-license to Johns-Manville which Avas executed contemporaneously with the exclusive license. Tulloch thus obtained the right to collect royalties on sales of patented pipe covering by his licensees, pipe covering being the only product manufactured by all members of the Industry. (Corns. Ex. 1J)ohns-Manvillc received from Tulloch under the terms of the erxeicmlubsuivrese lJicoelnnsise-Mananvainllneuadlurrionygatlthye roefm$a1i2n5in0g, wtehrimchofwtohueldpaftuelnlyt for the $20,000 expended in developing the Toohey invention, and the agreement of Tulloch to prosecute infringers. (R. 3072, 3075, Corns. Ex. 1) The primary advantage to Johns-Manville, however, was in obtaining the services of a man who was experienced and favorably known in the Industry to determine the pricing and merchandising terms for the sale of the patented materials. (R. 270, 350, 2329, 3074-5). The prices and merchandising terms were fixed in the first instance by Johns-Manville in the sub-license agreement with Tulloch to Johns-Manville executed September 11,1935. (R. 2102, 3077, Corns. Ex. 1) It was necessary, however, to give the exclusive licensee the right to use his judgment in changing prices and other selling terms. (R. 2075) In order that the patent should be of any value to JohnsManville it was essential that the prices and terms, if changed, should be established by a man of integrity and sound judgment. (R. 350-1, 3074-5) Tulloch had been associated in different capacities with the low pressure pipe covering industry for a number of years and was Manager of the N. R. A. Sub-Code Authority of the Asbestos paper and Allied Products Division of the Asbestos Industry. (R. 47, 270) He was a business man, and the license agreement Avith JohnsManville was a business proposition which would be unprofitable to him unless he could obtain a reasonable number of licensees. (R. 3g5e3t)thJeohbnesn-eMfitasnvtiollew, htihcehreiftorwe,ashaldegraelalysonenttoitlbeedlieuvnedethraittsit pwaoteunldt mpaotnenotp.oly by placing Tulloch in control of the licensing of the Toohey When Johns-Manville told Tulloch in the latter part of 1934 that it Avould consider giving him an exclusive license he began making inquiries among a few of the larger manufacturers located 48 in or near New York as to whether they would be interested in taking a sub-license in the event that he was granted an exclusive license by Johns-Manville. (R. 353-4) In this way he tried to discover how interested some nearby members of the Industry were in the patented pro-shrunk products. Mr. Mills of the Philip Carey Co. testified concerning his first talk with Tulloch about the Toohey patent: " He told me he had not obtained a license on the patent to sub-license to us but that he was negotiating for it. " I said it would be necessary for me to be satisfied he had a license, to give me the proper authority to license us and that it will be arranged that we will retain that license if we go into it. `If they take your license away, we won't lose out. It must be in that form,' and some other things." (R. 1097-8) Mr. Abraham, President of Ruberoid, testified concerning Tul loch 's first approach to him: " A. Tulloch called at my office and told me that he was trying to make an arrangement with the Johns-Manville Cor poration to obtain an exclusive license under the Toohey patent. He wanted to know whether we would be interested in becoming a sub-licensee, and I told him that if he succeeded in obtaining an exclusive license from Johns-Manville and he was able to submit to us a license agreement which was satisfactory to myself and my counsel, that we would be very glad to consider it. # # * * * " A. Well, I called attention to the fact that our organiza tion was all `burning up' to make a shrink proof covering so atisont,o -wbheoahbaled taolrkeeaedpy ufpeawtuirthedththeeiJrohsnhsr-iMnkanpvriolloef Ccoovrperoirnag by exhibits and advertisements, and it evoked a great deal of interest among the trade. " We had also made some tests in our laboratories after the Johns-Manville pipe covering was on the market and the Manville product looked like a very good product. " Therefore I personally was interested in trying to work out some arrangement with Tulloch to become a sub-licensee, 49 provided that the terms and conditions of the license agree ment were satisfactory to me." (R. 2348-9) Mr. Crabbs of the Carey Co. testified concerning Tulloeh's first visit in June 1935: " A. On the occasion of his first visit to my office, he said that he was negotiating for a license agreement with the Jolms-Manville Company under the Tooliey patent, and asked if and when he was successful in securing such a license agreement with the privilege of so licensing, would our com pany be interested, and I said to Mr. Tulloch that we were very much impressed with the Tooliey process and if he was successful, I was quite sure we would be very much interested and would give it every consideration." (R. 3095) In the summer of 1935, after Johns-Manville had decided to nego tiate a license agreement with Tulloch, he discussed the current mer chandising policies of a few of the companies with their representa rtievpersesaetnttahtrieveesmweeetriengps rienseNntew(RY.or3k06a8t-7w0)hichThneo rmeaosroenthfaonr faonudr content of these discussions was described by Tulloch as follows : " Q. Now, when you had a meeting, for instance, of some of those who were nearby, what did you discuss with them? " A. Well, they discussed the material, the advantages of the material, the conditions under which licenses were to be granted. Of course, I wasn't in position to be particularly specific about that because I had at no time any authorization to grant a license, and for that reason I couldn't be particularly laiccecunrseaetes iwnesraeyni'nt gpwarhtaictuIlarcloyulddedfion,itaendinfosraytihnagt wrehaastonthmeyy would do, but they did indicate interest." (R. 353-4) ``Q. Did you toll them at those preliminary meetings winhgatplyaonu?were going to do in the way of terms in a merchandis licen"seAes. ?DoI ywouasyouunarbelfeertototetlhle tihnedmiviadnuyatlhcinogndoitfiotnhsatofsotrhte, because I had not worked out a license. their"mQ.erAchnadnddiidsinygouproarcdtiicdesyoaut nthoattintqimueir?e from them about " A. I asked them about their merchandising conditions and endeavored to secure all the information possible about 50 methods of merchandising that could best develop the market I was interested in developing." (R. 3067-8) Tulloch did not know until September 11, 1935 what terms he t could make with Jolms-Manville. (R. 3077) The vital question of minimum prices was decided at the all-day conference when the agreement was signed and the merchandising plan was developed at the same time. (R. 2102-3, 3076, Corns. Ex. 1) No merchandising plan was shown by Tulloch to any manufacturer before September 11, 1935 and the merchandising plan could not have been shown because it was worked out at the conference held on that day. (R. 368-9) A glance at the merchandising plan attached to the JohnsManville sublicense agreement (Corns. Ex. 1) shows how much of the plan was developed on September 11th. All of the many changes, erasures and additions made in ink or pasted in were made at the conference on September 11, 1935, and therefore can be readily identified. (R. '2102, 3076) At pages 51 and 52 two pages of the mer chandising plan are reproduced, showing the changes made at the conference. ' Almost every page of the merchandising plan was worked out in the same way the day the agreement was signed. (Corns. Ex. 1) After Tulloch obtained' his exclusive license agreement from Johns-Manville he approached other members of the Industry to obtain sub-licensees. (R. 368) He relied on the advantages of the pre-shrunk material as a selling argument in getting licensees. Mr. Fitzgerald of Standard Asbestos Co. testified concerning Mr. Tulloch's first visit: " A. Well, Mr. Tulloch either called or wrote me a letter to meet him in Chicago on a certain date, and he mentioned the fact that--oh, he asked us whether we would be interested in any process for eliminating the shrinkage of aircell pipe covering, which up to that point had been a big problem to us. " I went down to see him, and he outlined that he had a process which we could use in the manufacture of our paper which would eliminate this shrinkage. We were particularly interested, we bold him, because we had competition at the hpardesebnetentimafefecintintgheoumrabrkuestinoesfs.a shrinkproof material which " We also told him we were in the contract business, as well as the manufacturing business, and we had got into numerous difficulties where we had finished a job and were i ?. STAUDAPJ CONSTRUCTIONS (cant'd) tha iwliuniH budy t'miTtrueTlOn laywis ur wltlwu'watiuwt-d iag ult in~aM.wPwtad. 1 I I. itTM *-ji -|n .r J.., J `-- I-- tt-I frit H i^ 1* th? 4 il IW * " 11 in`T *f *ht ahvfi1 vr shf .1g hwtivg- 1 l-y^r rf rithvr fvrgarnVIrmtd f1t , Thlrlmmssos-f unti swsa lenir than 1" thick slT Iw fluii!cBtmnHiTHiu. Thlrlmsssws of sntl sw j * 1" thick id a*ci munii be double shell-constsMstian. Ths ace a f "sm li- uwca l" W ily sim ilar daa c fip tii e boiai liviuiineefciaB wi th ^pr-T-4r>Q T -m rt--n ri nrl t r*--- ~ " J 'n " 1 'I j i ' f t * * 1 -- WT -- I l f tlM lU fU'IT < n 'n .' I -- and l/w sf waalfsl* awtaw iwyaw A. PRICES A ll prlcee are sp ecified as discounts from standard l i s t s attached ani made a part of th is Schedule and include f u ll freigh t allowance unless sp ecific exception i s made. (a) FACTORY ZONES All territory within 50 miles o f the following factory points is established as factory senes. Ambler, Norristown, Elizabeth, Jersey C ity, Brooklyn, Erie, Cleveland, C incinnati, New York C ity, Chicago, D etroit, Waukegan, Minneapolis, Holyoke, Milwaukee. (b) ZONE DESCRIPTION Kentucky Stal Alabama AC.roklsonranad*o CDoenlanweacrteicut Diat. el Cel. GFleoorridgiaa IIollidoiaooiea KIoawna** Louisiana MMaalrymland MMaicahaiagcaknnaetta MMieinanlafaioipupl(Note I > Miimuri INote2> Su te NMeobnrtaaankaaIN(Notoete.3 < NNeewwiHearamepyahir NNewwYMoerxkico(Noi NNoorrttbhCDaarkooliUna OOkbllabema PRbtaoidiaeylalrlattnidt SSoouutthhCDaarkooltinaa' Tcnnoaaee VTrexram*ont WVir*gtinViairginia WWiyaoemoninaign (Note 6 Note 3. I.xrcpt the following munite* whrb are NBeaatht eerabdend MLinaedoittenn MKmutulliila Lake Mineral Sander* Note 4. Except Omaha whirb it in Zone 111. Note 3. Except McKinley C.nuntv which . in Zone V. Notai. Following Wyoming Countiea only: Albany CCaarmaopnbell CCoronoeekrae JCoobanbaeonn Laramie NNaiolrbornaara ^Pihamttedan W>t,,n J E AMICI* JOKUUm/t i. 1. DATIVOSi Manufacturare shell not grant futura invoice dating* on any s. shipment of tha Uatarial*. s. >. COMSIOHUCVT STOCKSs Vo conslgnod stock* may ba shipped under any condl- r> 4. JtLcioru j^w B. 9. VAHEHOUSK PRIOtSi Quotations and sales freo aarehouses^shall be made 6 at not last than tha leas earload tone prices for the tone In which the 7. dolivory Is sadtjfc>A>a fbrft . e. 4. SOB STAKDAK& UATER1ALSi Vo saeonds or sub standard ante rials may be *. offered at lover than tho ostablishod prloos ozoopt by specific wrltton xo. pomlsaioa of tho Llconsor. n . 8. TAXSSi d ll federal sales, azelsa. processing or other direct taxes opera la. tive upon a ll Idcense*s or upon the sal* of the Licensed Materials, shell i l . be added to prioes oontalnad In attached echedules. State or other govom- 14. mantal tam a. not applioable to a ll Licensees may bo absorbod by Lloonsooe 18. apon whom tboy apply. IB. ( . CB11IT roa mOOMSD UA3IRIALS errors on tho part of shlppor as to quanti 17. ty . sito or typo of Lieonsod Uatorlal may bo rootiflod by fu ll allowanoo .10 1*. for the ac>tual material returned pSluos'rUa&clteu'aml *frreri^ghHtbbeojctth-\vraWya.-e h n rt Xrror on the pert of buyer, involving return of usable mhterla^may be , ccishsty^Adse-.- , *>t XI. rectified by making allovanoe oflactoersta-itoNbouTyer lees < / * < / f+J* buyor paying freight both vays Se)c()<utfl5c A? CCSfl \ T OUT PNtCttf i i t m t r-f-r-u-i-WM--d-C--u-e-n-e-ai-tiM$-rd-i-o--o-*---TM-V--ut-f-sM-t--Pb--ft---f--ig--u--- decimal, lisa tho flfth^doelmel le'groator than toro, lncroeaofothuorthfm' i"rkftnh#rI to tho most hlghor d ig it. Xxtonaicna or lisap eums aball bo figured to ovoa eonta only ralalng all fractions of oonts to tho nozt hlghor eont. M. ^i)Vthe *edimnrmahl>V jnliTia* Hal `emilMlhiimf>il\lisU flho het^pfllifb T. bHusoeijeiM4T.r1k.s0rdec-sfSt-oiO-rbwdmaslKnlacrseietmeM/x'faFa*^i*ii./.S we*fewcf '/wr^hees, TV /. 9 ** page 6 of original License Merchandising Plan (Coma. Ex. 1 Z 9) 53 called back, and the asbestos aircell bad probably shrunk maybe an inch in a hundred feet or a half inch, and so on, and it was up to us to do the work over again. " Also, that certain engineers and architects in this town hsaamd eerliemasinonat.ed airccll products from specifications for the " Q. What do you mean by aircell products? I dor.'t belie"veA.thAatsbweostrods haairsceblelepnroudsuecdtsi.n Athlsaot,ctohnanteicntsitoena.d of using those products, they were specifying molded products, which we did not manufacture. " We told him that if he had a material that would help us to eliminate this trouble, we would be very much interested, based on what it would cost us and how it would affect our production. pro"ceHsse, roautthlienre,dthtahtatonhee ohfaodurthceomsapmeteitomrsatewraiasl,thtehne ussaimnge against us in this territory, and he outlined to us on what basis we could use this process." (R. 1391-3) Mr. Bennett of A. H. Bennett Company testified concerning Tullocli's offer of a license: " Q. What reasons did he give you for suggesting that you take it? " A. Well, he claimed he had a patent on a preshrunk cthoavterhiansg awlwhiacyhswboeuelndtehleimciansaetewaithlotanofatirrocuelbllecsovaenrdin, go.f coTuhresree, has been quite a little shrinkage, which would have to be fixed up. It costs money to go back on a job and fix those things up. '' (R. 1549) Mr. Collopy of Acme Asbestos Covering and Flooring Company testified concerning Tulloch's representations as follows: " The Witness: Well, he reported having such a license agreement and represented to us that it would be a very desir able feature for us to incorporate in our products, that having that "wBouyldMsrt.imCuollalitnes:our sales and help us considerably. cusse"dQ?. Now, is that the only desirable feature that he dis " A. Yes. 54 " Q. That it would just increase your sales? " A. That through its desirability sales would increase, that complaints regarding the shrinkage of the material would be practically eliminated and the expense incidental to the correction of shrinkage would be eliminated. " Q. Did he make any representations to you on that occa sion "wAit.h Nreofneerewncheatteovtehre."pri(cRe .fe1a2t8u0r-e1s)? By far the larger number of licensees never heard of the JohnsManville license until after September 11, 1935. ClarkTuAllsobcehst'sosmCetoh. oind Cofleavpelparnoda.ch(Ris. iEllux.st1r3a3t)ed by his letter to the " Nov. 5, 1935. Lette"rTs hPeawternitter$1h,9as72r,e5c0e0ntilnyvaoclvqiunigreidmtphreovreigmhetnstusnidnerceUrt.aiSn. asbestos products such as Aircell and Woolfelt covering. " I am offering licenses under this patent to manufacturers in the industry and would be glad to go into the matter more fully if you are interested. mati"onCyoopuy mofaythreeqpuaitreenrteigsaradttiancghietdwhilelrbeteo,suapnpdlieadn.y''infor licenMsera. gCrleaermk etnest.tifi(eRd.t1h2is12w-3a)s the first he had heard of a proposed fromSpMerc.ifTiculdloactehsawbhouent asolmiceenosef tahgereoetmheerntsuabre-liicnenthseeesrefciorrstd h: eard City,RoenspoorndaebnotutAJtalnanutaircy A17s,be1s9t3oGs. C(Ror.p5o8r2a)tion, New York OctoAbesrbe1s6t,o1s9I3n5s.ula(Rtin. g14M90a-t1e)rials Co., Milwaukee, on or about FebrRueasrpyon12d,en19t3A6.. H(R. B. e1n54n9e)tt Co., Minneapolis, on or about OctoRbeersp1o3n, d1e9n3t5.Sta(Rnd. a1r4d28A) sbestos Co., Chicago, on or about ChicRageos,poonndoerntabAocumt eOcAtosbbeersto1,s 1C93o5v.eri(nRg. a1n27d9)Flooring Co., Mr. Tulloch described his procedure as follows : Man"viQll.e WonheSnepytoeumobbertai1n1e,d19th35e, shigonweddildiceynosue gforomaboJuothnast- tempting to get signatures from sub-licensees? 55 " A. I went around and called on various prospects and endeavored to make a sale. I presented them with a copy of the license agreement and tried to answer any questions that might be raised by them or by their attorneys. " Q. And were there many of them who at that time had never seen the proposed merchandising plan or the merchan dising plan? " A. Yes, I would say that at that point all of them had failed to see the merchandising plan. " Trial Examiner Preston: Had failed to see it? "" TThriealWEixtanmesisn:erHPadresntootn:seAenll tohfethmemerchhaadndniostinsgeepnlaitn?. " The Witness: They had not seen it at the time that I went around to call on them." (R. 368) Tulloch testified that, prior to September 11, 1935, he inquired of a few of the larger manufacturers about their interest in manu facturing identified fporuer-smhraunnukfapcrtuordeurcstswuhnomderheahlaicdenthseu.s (R. 353) He later approached and to whom he had shown copies of a proposed license agreement. These companies indicated interest, but all reserved their decision until Tulloch could show them an agreement with Johns-Manville giving him the right to grant licenses. (R. 1097-8, 2348-9, 3068, 3095) The Trial Examiner reports that the evidence on this point shows (par. 33): " While these negotiations were in progress respondent Tulloch talked with some of the other manufacturers in the beaestinertenrepsatretd oifn tthaekUinngitaedlicSetnasteestoasmkiannguwfahcetuthreer `tphreeyshwruonukld' products ; submitted copies of the patent to these manufactur ers and also a draft of a license agreement to four of them, The Ruberoid Co., the Philip Carey Mfg. Co., the Keasbey & Mattison Co., and the Norristown Magnesia & Asbestos Co. There is evidence that these manufacturers informed Tulloch that they would not be able to negotiate a license agreement with him or to make any commitments until he had obtained t(hRe. r3i5g3h-4t,to35g7,ra2n3t48l-i9c,en3s0e6s4,fr3o0m69-J7o1h, n3s0-9M5a).n"ville Corporation 20 oFtitroomf tthweenfotyr-efgivoeinglicietnaspepeseacrosualds ahamvaethheamdatniocalpacerrttainintay cthonat spiracy to establish a licensing system because they had never seen the license agreements or merchandising plan or even heard of them until after Tulloch and Jobns-Manville had executed their license agreement. If Johns-Manville and Tulloch had planned such a conspiracy as is charged in the complaint, it is inconceivable that they would have gone about the matter as they did. Jolms-Manville owned a valuable patent and had a legal right to exclude all competitors from the production and sale of the patented material. As an alternative, it had the right to license competitors and control the prices and other selling terms of the patented product which they manufactured. No conspiracy was needed to accomplish the result. For business reasons, fully explained in the testimony, Johns-Manville decided to make use of Tulloch through an exclusive licensing agreement to obtain licensees and fix and maintain prices and terms of sale for the patented products. Unless the alleged conspiracy included price control pose in of the unpatented material, there engaging in a conspiracy about the wpaastenntoedcomncaetievraiabllewphuicrh Johns-Manville could legally control without a conspiracy. Obviously, no control of unpatented prices could be effective without the par ticipation of substantially all members of the Industry. A contention that a price-fixing conspiracy was carried out by five manufacturers in an industry of fifty-five cannot be taken seriously. estedWinhetnakTiunlgloachsuabsk-leicdemnsaentuhfeayctmuraedres withceltehaerr tthhaety awnoyulsdubb-eliicnetnesre they might take must not interfere with their right to produce and sell uMnrp.aStetneftfeednsm, aVteicreia-Plsr.esident of the Carey Co. testified concern ing a discussion which he and Mr. Mills had with Mr. Tulloch: " . Well, specifically, I took the position that we would definitely be interested in the right to manufacture the Toohey Patent but that any arrangement that was eventually nego tiated would have to take into consideration certain things of importance to our company; namely, we would want no prersotdruiccttiso.ns on either the manufacture or sale of our asbestos * * * * * * " Mr. Mills said that we would have to be given the ppraitveinletegde mofatmerainaulsf.a"ctu(rRin. g10u4n1p-2a)tented materials, as well as 57 Mr. Tulloch testified concerning his negotiations in January 1936 with Mr. Ozurovich of Atlantic Asbestos Corp.: " A. He explained to me something with which I was familiar in a general way, that quite a bit of his business depended on his ability to sell at cut prices below the general market at the time, and he was able, by putting certain con tractors in position where they had a low cost, to get them to help him by increasing his volume, and that he would not be able to make all of his products under the license. " Q. What did you say to him as to that? " A. Nothing. It was simply a fact, and there was nothing I could do about it." (R. 3133) That all manufacturers continued to produce the unpatented ma terial with the exception of Johns-Manville and one small conuun i1s51e,s2ta11b-l2is1h5e,d22b6y-23d2o,c2u3m6-e2n4t8a,r2y52e,v2id5e7n-2c7e2)(Ranedsptsh. eEuxnsd.is8p7u-1te2d6,te1s4t8i- mony of many witnesses. The continued sale of unpatented materials at competitive prices has already been referred to. What, then, could be accomplished by a conspiracy of five manufacturers to accept sub-licenses from Tulloch? Presumably counsel for the Com mCoismsipolnainrte,ailfizelidmiwtehdentowpraittienngtedhismabtreireifal,thcaotultdhenocthbaregseus stoafintehde, panadtenthteedreafonrde utnrpieadtentotesdhomwataericaolns.spHiraacvyingto tofitxaltlhyefapirleicdesasoftoboththe uthnepaptaetnetnetdedm, aantedriwales,sunbomthiitntghaist ltehfet otnolysuqpupeosrtitontheofcahnayrgseubasgtaainncset before this Commission for decision is the question of law as to whether the exclusive license agreement and the sub-license agree ments incorporating the merchandising plan were within the lawful scope of the patent monopoly. This will be dealt with under the next two points. Counsel for the Commission relies on the testimony of the wit ness Morgan to support the contention that the license agreements were that itnhe19r3e3subltefoof'rea tphreicNe RstAabiCliozdaetio(nnicnoensypeiarrascyb.efMoroergtahne insisted time of his testimony) Mr. Tulloch went to see him and asked him to par tthiceippauterpinosea polfanstatobiuliszeinag ppartiecnets oinn pthree-sIhnrduunsktrays.be(Rst.os12p5a1p,er12f5o8r, n12o6th8i)ngTwuliltohchMdoerngaiens itnhi1s93st3ateexmceepntt tahnedAtsebsetisftioeds Cthoadte.he(Rd.is3c1u2s4s-e7d) Tulloch testified as to this conversation: 58 " I told him according to my understanding, even though he did not become a member of the division, he would nat urally be interested in things that the division did in the Code, which was developed under the division and we wanted to offer him, as well as others, an opportunity to take part in the formation of the Code and the development of the mer chandising plans under the Code, and the administration of the labor and fair practices division and so forth. "" AQ.. WHehaitnddiicdatheedsasoym? e interest in assisting to develop these things, but never did take any active interest, never did so far as I know or recall become a member of the division. " Q. Did you discuss any subject with him other than the Code? " A. No, I did not." (R. 3124-5) When under the asked Toohe whether y patent wheithhaadn ydoinsceuassseeda the rly gr as anting of lice 1933, Tulloch nses tes tified : " No, I certainly did not discuss it with anyone in 1933. There was no patent in effect at that time." (R. 3119) Morgan's testimony is incredible. The patent was not issued until September 1934. (Resps. Ex. 12) Why then would Tulloch have gone to Morgan in the summer of 1933 to talk about stabilizing prices with a patent and at a time when everyone, including the Govern ment, thought prices would he stabilized by the Codes. Tulloch might have discussed this stabilizing effect of the Code with Morgan in 1933, but he could not have discussed any effect of a non-existent patent. Inasmuch as no attempt was ever made to stabilize the prices of unpatented materials, and inasmuch as the patent owner had the right to fix the prices of the patented materials, Morgan's testimony dporoecseneodtinmg.ake any sense as applied to the situation disclosed in this No evidence was produced by the Trial Attorney suggesting, even remotely, that Tulloch discussed the Toohey patent with anyone except Morgan before the patent issued. That he did not have any such discussion is established by the testimony. (R. 3119) James Parker, the Federal Trade Commission investigator, stated that Robert Clark told him that some other officer of the Clark Asbestos Company, who was not produced as a witness, had stressed 50 price control and stabilization rather than the shrinkproof advan tages of the patent in advising Mr. Clark to take a license. Of coarse, the price of the patented material would be stabilized under a license --but what of that? Mr. Clark was the one who took the license and he testified that the other executive referred to by Mr. Parker thought the patented material was a good thing. When asked why, Mr. Clark testified (R. 1230): " A. Well, because he thought you could make a material that wouldn't shrink. That's about all the discussion we had on it". Q. Did he say anything about, price? " A. No. " Q. No prices were mentioned? " A. No, he didn't say anything about prices." Mr. Parker also testified that Mladnieh, an employee of Respond ent Atlantic Asbestos Corporation, told him that the Toohey license agreements were " merely a method used by the Industry for every one to stabilize asbestos prices". This was a conclusion stated six years after the event. Mladnieh was not an officer of the corporation and it is not clear that his hearsay opinion should have been admitted in evidence or had the slightest probative value. It is true that the license agreements stabilized the prices of the patented asbestos products, and that may have been in his mind. Mr. Parker also tes tified that when he interviewed Mr. Ozurovich, the President of the Company, this officer who presumably alone knew the facts, gave his reason for signing the license agreement as follows: " Mr. Ozurovich stated that he was told that if the agreement was not signed be would be unable to manufacture the mate rial with the shrink proof, and he entered into the agreement only to protect himself in this respect on such orders as he might receive that would require processed goods. " He was mostly interested in maintaining his position by having that processed material on hand the same as his competitors." (R. 1610) Mr. Ozurovich also said he had no recollection of having been told by Mr. Tulloeh or anyone else when be signed the license agree ment that there would be any price control advantage to it. (R,, 1610) The evidence of Ozurovich's prices shows very convincingly that his prices on unpatented materials were not in any way affected by orponmirm at tut watiowai o r t o v r 60 the license agreement. (Reaps. Exs. 226 II, 227 A, B, D, E, F, II-V, X, 229 A-E, 230 C-G, 231 A, B, D, O, P, V, Z2, 232 A-C, 257, 258, 262, 264, 265, 267, 268) A few vague statements made years after the period in question about what witnesses believed the purpose of a license agreement was, cannot outweigh the uncontradictcd and con clusive evidence of continued manufacture of unpatented materials by all members of the Industry except the owner of the patent and one small concern; and the continuous and active price competition in the sale of unpatented materials. The evidence shows that the Johns-Manville license agreement was entered into in the ordinary course of business for the purpose of gaining for Johns-Manville the benefits to which it was legally entitled from its patent. The inferences of collusion which the Trial Attorney attempts to raise can be seen to lack all substance when faced with the uncontroverted facts shown by the evidence. Co. vC. oUu.nsSe.l, for 226 the U. Commission relies S. 20, as authority on for Standard Sanitary Mfg. the proposition that the Tulloch licensing agreements were unlawful. We welcome the chal lenge because the facts of that case are in such sharp contrast with tphaeteTnut lcloocvhersinitguaatimonet.hoTdhoefSmtaannduafardctuSrainnigtaurtyippaatetnentetdwbaasthatupbrsocaensds basins at a lower cost than by the methods previously used. The resulting products were no Therefore, price control over different than the products in tthhoeseStapnrdevairoduSslaynistoalrdy. ease was automatically price control on unpatented products. The Toohcy patent is a product patent (R. 1116; Rcsps. Ex. 12) which created something new and the control of the new Toohey products did not affect the market for similar unpatented products. In the Standard Sanitary case, Weyman, as manager of the Standard Enamelwarc Manufacturers Association, obtained an option lfircoemnsiSntgansdyasrtedmtounbdueyr thwehipchatepnrticfeosr otnhealpluernpaomseelowfarseettwinoguldupbae fixed and the manufacturers could abolish " ruinous competition". The As facture so rs ciatio and n appointed obtain their a c commi onsent tte to e of the five lice to ns i e nterview the agreements mwahnicuh were to become effective only when 85% of the production adopted, them. The members of the Association also agreed to discontinue long term contracts until it was decided whether the licensing system would go into effect. License agreements were executed fixing royal ties and penalties for violation and agreeing to employ a commission of six persons, of which Weyman was chairman, the other five being 61 appointed by a majority of the licensees. No change was to be made in the terms and conditions fixed by the licensor without the consent of a majority of the members of the Commission. In order to obtain the enamehvare from licensees all jobbers wstearteedreinqutihreedSttoansdiganrdcoSnatnraitcatsryagcarseee:ing to resale prices. The Court ware"wBeerfoeriendtehpeenadgernetemanedntscotmhpeetmitaivneu.facBtyurtehres aogfreeenmamenetls tahnedyrwegeurelactioomnbs,inaemdoanngdostuhberjesc, tneodt tthoemseslleltvheesirtoprcoedrtuacitntorutlhees jobbers except at a price fixed not by trade and competitive conditions, but by the decision of the committee of six of their own number, and zones of sales were created. The 'jobbers were brought into the combination and made its subjection complete and its purpose successful. Unless they entered the combination they could obtain no enamelware from any manu facturer who was in the combination and the condition of entry was not to resell to the plumbers except at prices determined by the manufacturers. The trade was therefore practically cscohnetmroellwedasfreosmtabplirsohdeudcebry ttohecocnoosupmereartioanndofth8e5%pootefntchye mofanthue facturers and their fidelity to it was secured not only by trade advantages, but what was practically a pecuniary penalty not inaptly termed in the argument, cash bail." (page 47) " The agreements clearly, therefore transcend wlmt was necessary to protect the use of the patent or the monopoly which the law conferred upon it." (page 48) The plan in the Standard. Sanitary case was the result of group action with price control and resale price control over the entire pro duction of every participant exercised by the group itself, and the whole plan was conditioned upon 85% of production signing licenses. When Tulloch obtained his exclusive license under the Toohey patent no member of the Industry except the patent owner was com mitted to anything. lie has shown a proposed license agreement (but not the one eventually used) to only four of the fifty-five members oanf dthme aIknidnugstaryprtoofidtetchidroeuigfhliheihsardoyaafltaiiers.chance of getting licensees Resale price control is not even suggested here by Counsel for the Commission. 62 S a n iIt f a rj uy dcgaesde , oMn rth. eTbuallsoisc h o fwtahse lfeagcatsl l yanads rcelaesaonn iansg a o f the Sta hound's ndard tooth when he signed his agreement with the Johns-Manville Corporation. POINT VI. licenTsehees RanedsptohnedecnotntTroulllohcehexwearscisneodt wcoanstrwoliltehdinbtyhehilsawsufubl scope of the patent monopoly. The most convincing proof imaginable that Tulloch fixed prices and terms of sale independently is the fact that the changes he made in prices and selling terms from time to time were not in any instance satisfactory to all the licensees and that many of the changes he lmicaednesewese.re(Rco.n3t9r1a-r3y,3t9o7-t8h,e46ex6p,1r1e2s4se,1d21d6e,si2r1e6s9-o7f0m) ore than half the The testimony of Mr. High of The Ruberoid Co., one of the larger licensees, is illuminating on this point: " Q. Were any changes in the merchandising terms or pprriecveisoumsakdneowbyledMgre. oTfutlhloecmh?from time to time without your A. Yes, sir. I recall one price decline which came to me acosmainshgowckh.atIsoheavdern.o knowledge that such a price decline was Q. Do you know when that was, or what the product was ? someAt.imItewinas19o3n8,asIbtehstinosk.p"ap(eRr., 2a1n6d9)the price decline came Mr. High also testified that Tulloch lowered the price of pipe caonvdersitnagtedin: New York without any previous knowledge on his part, office"oIrrbecyatlleltehpahtonIedoidr bpyrolteetsttert,oIMdro.nT'turlleoccahll ewithhiecrh,abtuhtisI porugtainnizaaptiroonteasntdbeIcaduidseniottsfeereilouthslayt aitffewcatesdntehceespsaroryfi.ts of our By Mr. McGrath: Q. What if anything was done about it? A. Nothing. The price stayed where it was." (R. 2170) Mr. Steffens of the Carey Co. testified: 63 " Q. Do you recall a lowering in price which Mr. Tulloch put into effect for asbestos paper about 1938? AQ.. WI dhoa.t was it, and when did it take place? A. It took place in September, 1938. Q. And what was it? AQ.. WThheatamwoausnttheofchita?nge in the regulation? A. The change was from a base price of $100 per ton to a baQse. pArirceedoufct$io8n5 pinerprtiocne. to that extent? AQ.. WA arsedtuhcattioan siunbpsrtaicnet.ial matter to your company? A. A very substantial matter. Q. Did you know anything about it until Mr. Tulloch did iAt?. We did not. Q. He did not consult you in any way? A. He did not consult us." (R. 1124) Mr. Clark of Clark Asbestos Co. testified: " Q. So far as you know, who fixed the minimum p vwhich were published by Tulloch? A. On the-----AQ.. OMnr. tThuellpoachte.nted goods? Q. Did you at any time have anything to do with fixing those prices? QA.. DNoo, ysoiru. recall whether in the year 1937 you asked Tulloch to establish warehouse prices? A. I believe I do remember. Yes; that's right. Q. And did he do it? A. No, sir." (R. 1216) As the Trial Examiner has stated in paragraph 55 of bis Report: " There is evidence that the changes in prices, terms and conditions of sale on patented products which were made by Tulloch from time to time under the license agreement, were not in any instance entirely satisfactory to all licensees and one or more of the said changes were contrary to the desires of more than half the licensees. On several occasions pro- t>4 tests were made to Tulloe.li by larger licensees against changes he had announced. Tulloch maintained the changes. In other cases Tulloch refused to make changes requested by licensees." Tulloch travelled around the country from time to time and met with local groups of licensees to dismiss problems which had arisen in the merchandising of patented products and to gain information about the effect on the sale of patented products of the terms he fixed. No more than 10 licensees were ever represented at one of those meetings. (R. 3148-9) at The these emviedeetnincgesisaundnanthimatouTsulyllotochthaeloeuffeecftixtehdatpnroicveosteanwdassetallkineng terms on patented products. Mr. Coliopy of Acme Asbestos testified about one meeting that was representative of several he attended while a licensee: " A. Well, there was a general discussion of the problems of the industry, that is, of the licensees, I should say, some dthisecyuwsseioren baebsot umtatdhee, apnrdodsuocftos,rthth.e different products, how AQ.. WNoa,snaonvyovteost.e taken at that meeting? thingQ?. Was any decision reached at that meeting about any A. No." (R. 1320) but nMort. aBreersgpmoanndeonft)Atsebsetisftioesd:Insulating Materials Inc. (a licensee at th"eQm. eAetcicnogrdwihnigchtoyoyuousraybeysotureccaonlledcetfiionnit,ewlyharte,ctaollo?k place planAs.. Well, there was a discussion of various merchandising Q. Was any vote taken? AQ.. WNoasvoatneys.decision reached? A. No, sir." (R. 1495) poinPt aarnadgrraepahds5:3 of the Trial Examiner's Report deals with this " Respondent Tulloch made it a practice to visit his vari ous licensees in different parts of the country at different 65 times throughout the period that they were licensees and held moceceatsiinognss dwuitrhinglotchael egxriostuepnsceooff tthlieesier lliicceennsseeeasgroenemneunmtse. roNuos more than ten licensees were ever represented at any one meet ing. At these meetings all problems encountered in the merchandising of the materials were discussed and the mer chandising practices fixed by Tulloch were also discussed. The licensees frequently complained to Tulloch of things they did not like and set before Tulloch facts as to costs and market conditions which would aid him in arriving at his decisions. Tulloch rarely announced any change in merchan dising conditions at these meetings and there appears to be no record of any votes being taken by licensees upon matters under discussion (It. 122, 390, 583, 1071-2, 1215, 1320-1, 1370, 1476, 1495-6, 1512, 2049, 2104, 2168-9, 2257, 3142, 3148-9. Resp. Ex. 145)." The Trial Attorney has attempted to show that the licensees oopf elircaetnedseethsedliidceinnstehaegSrteaenmdeanrtdhSeareniftoarrythceaisre,owbuntbheenehfaits abseeangfrrouusp trated by the facts. In the Standard Sanitary case the patent was turned over by the patent owner to be operated by a committee of licenses for the benefit of all the licensees and was so operated. Here Johns-Manville allowed the other members of the industry to use the Toohey patent because it was in the interest of Johns-Manville to do so. The prices and terms were fixed by Tulloch independently, as the exclusive licensee of Johns-Manville, whether the sub-lice.; : likedTthheemfaocrt nthota.t Tulloch wrote courteous and even conciliatory letters to his licensees instead of adopting the tone of a Prussian martinet in communicating with them shows no more than that he was Iann fianctteltlhigeenwthobluesibnaessiss mofanth. e relationship between Tulloch and his licensees was clearly stated in a letter Tulloch wrote at the outset to Sail Mountain Company, a prospective licensee which sought to impose some conditions on its signature to the license agreement. This letter was written by Tulloch on October 11, 1935 and reads: " October 11, 1935. " I return herewith conditional delivery of license agree ment under letters patent No. 1,972.500. >M i ' l i n n h i ' i n * t i i l l N A T I n WA I * n r ti I 06 " A patent monopoly, as you are aware, gives me certain rights and I cannot limit or abrogate them by an agreement sucb as you proposed. " Suggestions from licensees as to merchandising methods and other similar matters will be welcomed and will be given every consideration. I cannot, however, permit licensees to dictate such conditions. " I would appreciate it if you will detach the qualifying supplement and return the licenses to me." (Resps. Ex. 26) The Sail Mountain Company complied with this letter and signed a license agreement unconditionally. (R. 368) The control which Tulloch exercised over prices and terms of sale of patented products was within the scope of the patent monopoly. Neither the validity nor the scope of the Toohey patent has been challenged in this proceeding. It stands as a fully valid patent carrying with it all the privileges and immunities which the laws of the United States under the decisions of the Supreme Court bestow upon valid patents. The Toohey patent covers every one of the products described in and licensed in the various license agreements issued under it. (R. 1108-1110) As the Report of the Trial Examiner states (page 14, par. 23) the evidence shows that: " The Toohey Patent contained ten different claims. Claim 1 covered corrugated paper. Claims 3, 4, 5, 6, 7, 8 and 9 covered atossbeasntods wanoodlwfeolotl pfeipltepcaopveerr.inCg.l"aims 2 and 10 covered asbes The merchandising plan under the Toohey patent applied only to specific products coming within these claims and it is well rec ognized patent law that each claim of a patent is in effect a separate patent. As the Supreme Court stated in Leeds <&Catlin v. V ictor Talking Machine Co., 213 U. S. 301 at 319: " Claims are independent inventions. One may be infringed, iontjhuerrys hneots,uafnfedrst,hneortebdyretshseoafbtshtreacptatreinghtetes wishliicmhitheadvetobethene granted him in other claims. '' Veneer Machinery Fed. 419, Co. v. Grand Rapids Chair Co., 227 General Foods Corp. v. Broder, 80 Fed. (2d) 492. 67 Walker on Patents (Deller's Ed. Vol. 2) states at page 1275: " In contemplation of law, each claim of a patent is considered as setting forth a complete and independent invention." The Court stated in the Veneer Machinery Co. case at page 425: " The rule is that each claim embodies a complete invention and in effect is an independent patent for the device it covers." Claims 3 through 9 cover, as the Trial Examiner has stated, asbestos and wool felt papers. (R. 1108-9) These are separate and distinct products for which there is a particular market. They are used for different purposes than the other products manufactured under the Tooliey patent. (R. 924, 1087, 1126-7, 1207, 1311-2, 1434, 2188, 2296, 2430, 2452) Claim 1 of the patent covers corrugated paper. (R. 1108) This is a separate and distinct product which is sold to the general public as such and used for purposes for which plain paper and pipe cover ing are not adapted. (R. 625, 924,1126,1207, 1312,1434, 2188-9, 2296) Claims 2 and 10 of the patent cover asbestos and wool felt pipe covering (R. 1108-9) which are also separate and distinct products. A flexible range boiler jacket is merely a large sized piece of asbestos pipe covering for use on domestic hot water tanks. (R. 113, 483-4, 1996-7, 2004, Trial Exs. Report, par. 58) the pArsicheassabteewnhsichhowannyunodferthPeoseintprIo, dnuocctsonwtreorlewsaosldexeexrcceispetdwohveenr they were manufactured The Trial Attorney under the Toohey patent. has invoked the case of U. 8. v. Univis Lens Co. Inc., (1942) 316 U. S. 241, in support of his contention that under the Toohey patent the price of patented pipe covering could not be fixed if the price of patented paper used by the licensee finixemd.anTuhfeacUtunriivnisg LthenespCaote. nctaesde pipe does ncootvesroinhgoldh.adInpfraecvtiothueslyUnbieveins Lens case does not apply to the present case because only one pat ented product was involved in that case. One licensee partially manufactured the article and sold it at a fixed price to another laitceansfiexeedwhporicceo.mTplheetehdatlhf ecommapnlueftaedctuarreticalnedsosoldldbtyhethfeinfiisrhsetdlicaerntiscelee hOandlynoonuetilpitayteenxtceapntdtoobnee cpomatpenletteedd aanrtdicsloeldwbeyrethienvsoeclvoendd laincednstehee. court held that the price could not be fixed twice on this one article. In the present case asbestos and wool felt papers were com pleted patented products. There was a market and uses for them as such. The same is true of corrugated asbestos paper. Either of these products might be sold as completed products or might be used in the course of manufacturing asbestos or wool felt pipe cov ering. If they were used in manufacturing pipe covering the result ing product was a completely different product created under a different patent claim. The licensing of the use of a patent claim on paper does not carry with it a license to use a separate patent claim on pipe cover ing which the law states is a separate patent. Therefore, the licensor can license the use of the pipe covering claim and exercise price control over the patented pipe covering product even though he has prev The iously Supre lic me e nsed a Court differe clearly nt c stat om es pa in n t y h etoUunsiev i sthLe epnas t eCnot . on ca p se aper. that it is not passing on the proposition for which the Trial Attorney has cited the case here. The Court stated at page 248: " As appellees concede, the invention of only a single lens patent is utilized in making each blank and finishing it as a lens. We therefore put to one side questions which might arise if the finisher of a particular lens blank utilized the invention of some patent other than the patent which was pasrsaucmticeedforinppraesretnbtyputhrepomseasn, uwfaitchtuouret doefctidhiengb,latnhka.t Athnedpwate aenntdispnoolitshfuedllythperabctlaicnekd usontitlhtahteiftinwisihllinsgerlivceenistese phuarspgorsoeunads a lens." In this connection it should be noted that no resale price control was exercised under the Toohey patent, nor does the Trial Attorney so argue. (R. 337, 500, 1322, 1370, 1436) Even when a licensee pausrscuhcahs,edthae pseactoenndtedlicpernosdeuec'st sfarolems parniocethewraslicneontsefeixeadn.d (rRes.o3ld087it, tRoemspask. eExsu. r2e54t)haItnnfoaclticsepnesceiealreefcfeoirvtesdwaenrey epxreircceisseodr btyertmhes loicfensasoler naoptplmicaanbulefacttourpea.ten(Rte.d30p8r6o-9d,u3c1ts10w-2h,iRchestphse. Epxa,rt2i5c4u)lar licensee did beyoTndher(leie wscaospenoofatttheempptatehnetr.e Ptoriceexstewnedrethfeixepdatoennlty mupoonnoptohlye first sale by the manufacturer who used one of the claims of the patent in manufacturing the product sold. No subsequent sale of any patented product was controlled in any way. 69 Tlio fact that the merchandising plan dealt in detailed fashion with all the merchandising factors that could affect the price of patented products does not render it illegal. In the first place simple logic requires that the right to control prices means the right to do so effectively. Every provision of directly or indirectly to sales price. the (R. m30e7r7c,haCnodrnissi.nEg xps.la1n, related 2) The mSueprrcehmanediCsionugrt pilnanU.un8.devr. GtheenelriaclenEselecatrgirceeCmoe.,nt(19u2p6h)eld272byU.thSe. 476, was even more detailed than the one involved here. The original merchandising plan in that case fills 43 pages of the record, the odrisiginingapl lamnerinchtahnedGisienngerpallaEn lehcetrreicisCo3.0capsaegepsrolvoindge.s The merchan for the use of uniform sales contracts; fixes prices in terms of discounts from a basic list price with specific extra charges for special features; requires classification of customers with different prices for differ ent classes ; provides for allowance of freight charges on some prod ucts ; requires the use of geographical price zones ; establishes terms of payment; describes the specification of the many products made under the patent in great detail; etc. The Supreme Court did not question the legality of that mer chanAdsisiinsgstpaltaend. in Toulmin, Trade Agreements and the Anti-Trust Laws (1937) at page 201: " The patentee in licensing another person to make, use and vend may lawfully impose the condition that sales by the licensee shall he at prices fixed by the licensor and subject to change at liis discretion. The mere comprehensiveness of the patentee's control of the business of selling the patented arti cle is not necessarily an evidence of illegality in method. The mit ewreithsiinzethanedAcnotmi-TprreuhsetnLsiavwens.e"ss of the scheme do not bring sarilTyhceararyutwhoitrhitiyt tthoe faixutphroircietys toonfipxattheonsteedprpicreosduefcftesctmivuelsyt. neTcheiss cinagnncoutsbtoemdeornse, ijfugthgelinesgtafbrleiisghhetd cphraicregecsa,nabceceepvtaindgedlobnygmteisrcmlaspsrificyecommitments, etc. The entire merchandising plan, under the Toohey patent, deals with potential fields of evasion such as these. (R. 3077, CornTs.heETxsr.ia1l, A2t)torney throughout his brief speaks of Commission 's Exhibit 2 as being the Merchandising Plan under the License Agree ment and carefully points out that there are 274 pages in that exhibit. pr nnnnnrrn at tvr *4at tnua* oItnliys30copnacgedesedlonthgat(Ctohiens.MEexrsc.h1aZn3ditsoin1gZ3P2la).n Cisomdemtaisilseiodn, 'sbuEtxhitibiist 2 is not " the merchandising plan", but is a compilation of every reprinting of and amendment to the original Merchandising Plan fprroomducNeodveinmbreersp, o1n9s3e5 ttoo aMsaurbcpho,e1n9a41duwchesichtecTuumlloinclithaisssepmrobcleeeddianngd. The table of standard list prices which was used in defining minidnuimsturymbpyrimceasnuinfactthueremrseracnhdancduisstionmg eprlsanalihkaedfobreeonveurse2d6 iyneatrhse. Prices had been quoted in terms of discounts from this particular list since 1?07. (R. 271, 2184, 2410, 2871, 2883, Resps. Ex. 1) Natu rally Johns-Manville and Tullocli provided for the fixing of prices on patented products as discounts from this list which all manufac turers and customers used and knew. The implication in the Trial Aartdtolrisnteyp'rsicberiienf 1th9a34t Joorh1n9s3-M5 iasnvaiblsleuradn.d Tullocli devised this stand The Manual of Unit Prices which Tullocli suggested that his licensees use in pricing their products in order to enable them to translate the discount-from-list price into the actual dollars and cents price to a customer on any sale instantaneously, was not and could not be a price-fixing device since, as the Report of the Trial Examiner correctly states (page 23, paragraph 52), the evidence shows that : " The manual is a set of precalculated mathematical compu traattieolnysthwehidcholleanrasbalensdthceenutsserprtiocederteesrumltiinneg qfuroicmklytaaknindgacacnuy discount from one to one hundred percent from the standard list price on the particular size and thickness of pipe covering o1r32a4s-5b,e1s4to9s8, b2l1o8c5k, 2in88v3o,lvReeds.p"s.(EEmx.p1h)asis supplied) (R. 1071, planTmhaedTerpiarlovAitstioonrnfeoyreamdpihfafesrizeenst tchhearfagcet ftohratpitphee cmoevrecrhinagndwishineng vmeorryemthinaonrtmheatntoerr,mbaultntuhme breeralosfitbuaantidosnwsehroeulsdolbdewuinthdeirts.tooTdh.is Iits ias ncoevceesrsinargyotno peimpepsl.oy (sRom. e19m86e-c7h)aniMcaeltailnsbtraunmdsenatraelittyhetomheoclhdanpiicpael instrumentality which has been customarily used for this purpose in the industry throughout its history. (R. 1986-7, 2030, Trial Exs. Report, par. 62) Metal bands are usually furnished with pipe cover ing for this purpose at the rate of 21/2' bands per 3-foot section of 71 pipe covering. (R. 324-5, 2009, 2030) However, under special cir cumstances it is sometimes necessary to use more than this number of bands, as, for example, when cut sections of pipe covering are used at joints or corners. (R. 324-5, 2009-10, Resps. Ex. 203) These bands are an integral part of the pipe covering and the pipe covering itsheofpnipoeus tailrietyeumnplleosysetdh.e b(aRn.d1s1o5r-6,so3m24e-5o,th1e9r86m-7e,an22s3o8f) affixing it to mercIhnanfidxiisnigngthpelapnr,iciet oisf pparotevnidteedd ptrhea-tshtrhuenknoprmipael c2oVvaerbinagndisn pthere 3-foot section may be delivered with the pipe covering without any change in the price of the pipe covering and without any charge ftohranth2el/ zbbanandds.s (Corns. per sect i Ex on . a 1) re It del i is ve pro red vid the ed, pr i ho ce we of ver the , tha pipe t c if ov more ering of which they are a part must be increased. (Trial Exs. Report, par. 62) As the price of pipe covering is established by fixing the discount from the standard list price at which it is to be sold, the additional at which tphreicpe ifpoer ecxotvrearibnagndms is ay arrived at be sold. by reducing the (R. 327, 427-8, discount 3130-1) Only in the case of flexible range boiler jackets is a specific price fixed for extra bands and that is because these are larger sized pieces of pipe covering than are listed in the standard list price table. (Corns. Exs. 1, 2) As there is no list price on them prices must be quoted in terms of dollars and cents rather than as discounts. This being so, the extra charge for additional bands to be used on the flexible range boiler jackets had to be fixed in the terms of dollars and cents. However, it is very clear from the evidence that except in the case of flexible range boiler jackets, the charge fixed for extra bands had no meaning or definable character other than as an element in the discount on the pipe covering itself involved. No control was exercised over bands except when sold in connection with a sale of pipe covering or flexible range boiler jackets on which they were to be used. (Corns. Exs. 1, 2, Trial Exs. Report, par. 62) It is obvious that price fixing of a patented product would he ineffective and subject to evasion if the licensee could not be pre vented from making a gift of unpatented fixtures which are integral phaasrtcsonofsidtheerepdattheinstepdropbrleomdu, chtas.s rTechoegnCiozuedrt,thien ntehceesosnitlyy ocaf sperewvheincth ing free gifts of essential fixtures and has upheld the patent licensor in fixing the price of the unpatented fixture when sold in conjunction iwnitGheannedraalsEalpecatrrticofCaop. rvi.ceW-fiixlleedy'psaCteanrtbeiddeprToodoulctC. oT. h(e19C4o0u)r3t3slaFteedd. Supp. 969 at page 977: " The requirement that the licensees shall not modify the established price of the patented material indirectly by the inclusion of other items at less than their regular prevailing prices is obviously a reasonable and proper one. Obviously, the right of a patent owner to require his licensee not to under sell him would be an empty thing if with each sale the licensee could include something else of value, needed by the customer, at a fraction of its real worth. " It is my opinion that in mounting the patented material on simple unpatented steel supports the plaintiff has gone no farther than is reasonably and properly necessary in putting the patented material to practical use in such a way as to enable users to enjoy the full benefit of the patented material. Under the circumstances involved in this case the public interest is served since the public has been and is free to purchase the patented material at prices which include no allowance for supports, and to invite the keenest competition for the business of supplying the supports and affixing the patented material to them. Yet the Carboloy Company's right to protect its hoped-for profit is preserved and made effective." The decrease in the discount on the pipe covering when special quality bands or canvas covering were supplied with it were specified in the Merchandising Plan for the same reason. Canvas covering is a20ls1o9,a3n13i0n-t1e,g3r1a6l7p) art of completed pipe covering. (R. 323-4, 1989, The use of geographical zones to facilitate the fixing of delivered prices on certain patented products was simply an adaptation of a mmaetnhyoydeaorfsm. e(rRc.h2a7n1d,i8si4n2g, 2w1h45ic-h6, h2a32d7,b2ee9n05u) seTdheinCtohuertIninduSsatlrtyPfroor ducers Association v. Federal Trade Com. (1943) C. C. A. 7th 134 Fed. w(2enrde)e3st5a4brliesfhuesdedthtroopurgohhaibpitritchee-fuixseinogfcporniscpeirzaocnye.s eTxhceepCtowurhtenstathteedy at page 358 : " We must take judicial cognizance of the fact that the Government postal service has established statutory zones and uniform prices fixed within said zones. (39 U. S. C. A., <,<,292, 293) Likewise, railroad tariffs are also based on zones." 73 The Merchandising Plan in the General Electric Cq. case used geo graphical price zones and yet the entire license agreement was held to be legal. It can only be concluded that there is nothing inherent ly evil in the use of geographical delivered price zones. As there was no conspiracy present here, there is no basis for condemning the use of theseTzhoenecso.mpanies in this Industry had equalized freight for many years on such heavy products as asbestos paper and rollboard and the License Merchandising Plan naturally provided that this practice should be used in selling patented asbestos paper and rollboard. The effect of freight equalization in increasing the number of manu facturers who can compete in any given territory is well explained by witness High at page 2189 of the record. (See Trial Exs. Report, par. 48) Thus it can be seen that the provisions of this Merchandising Plan were adapted to long existing merchandising customs in the Industry and that every provision of the plan was specifically directed to making the price control on the first sale of a patented product effecTtihvee.Trial Attorney has attempted to tie together activities under LthieceAnssebeMsteorschCaonddeiswinigthPtlahne L" iccoernrseespAongrdeseimneenvterbyy psatarttiicnuglatrh"atwtihthe the Code Merchandising Plan " with the exception that this Plan specifically designated the prices and specifies that it applies to products manufactured in accordance with the Toohey patent." There are some details of the two merchandising plans that are similar as there would have to be in any two plans dealing with the merchandising of the same type of products in the same industry. But these two plans are actually utterly different. In fact they are so different in arrangement and content that it is difficult to segregate sections dealing with the same general subject matter for purposes of coFmorpaerxisaomnp. le, the Code Merchandising Plan (Resps. Exs. 3, 4) ctoomntearisn,swfihvieleptahgeesLidceeanlsinegMweirtchha1n5ddisiifnfegrePnltancla(sCsoifiincsa.tiEonxss. oIfz3cutso lz32) contains a little over one page dealing with 7 different classi fications of customers. The definitions of each class are too lengthy, particularly in the Code Plan, to set forth here but a comparison of the classifications will show a " particular" in which the two plans are extremely different. Jfc- Classifications of Customers AAAA--III DApisptCrroiobvdueetdoPrslCaonLnitsrtaecdtors AA AApppprroovLveeicddenDIsneissturPlialbatuinotonrs Listed AA-III EqLuiisptmedent Accounts B EqCuiopnmtreancttoArsccLoiusntetds AA-IV SpLecisiateldDistributional UC AUp.prSo.veGdovJoerbnbmeresntLiPsteerdmanent A-I JobAbcecrosunLtissteLdisted u u U.DSe.pGarotmveernntms ent Corporations A-II IndLeipsteenddent Contractors z AllorotAhegresn.cies AB--IIII UInndiutesdtriaSlstatLesistGedovernment BB--IIII1 RRaaiillrrooaadds Equipment B-IV StaAteccoaunndtsMLuisntiecdipal C-I DeGpoarvtemrnemntenatnsd Retail C-II PluSmtobriensg and Heating C-III HaCrdowntararectoHrsouses D All others. Another comparison which refutes the Trial Attorney's state ment that these plans are the same " in every particular" relates to freight equalization points. F reight E qualization P oints Code Plan 1. Ambler, Pa. 2. 3. NEroirer,isPtoaw. n, Pa. 4. Chicago, 111. 5. 6. Waukegan, 111. Manville, N. J. 7. 8. Jersey City, N. J. Lockland, Ohio 9. 10. Rockdale, Ohio Detroit, Mich. License Plan 1. 2. Erie, Pa. Ambler, Pa. 34.. Norristown, Pa. Elizabeth, N. J. 65.. JCehrisceaygoC, 1it1y1., N. J. 7. 8. Lockland, Ohio Rockdale, Ohio 9. 10. Detroit, Mich. Milwaukee, Wis. 11. 12. St. Paul, Minn. Minneapolis, Minn. 13. 14. Brooklyn, N. Y. Bronx, N. Y. 15. 16. WPaoteordssoidne,,NN. .J.Y. 17. Plymouth Moetinsr. Pn 75 The provisions in the two plans relating to Price Advances differ greatly also, but the length of this section of the License Plan makes it impractical to set forth the text of each here. These are but a few of the many differences between the two plans. The License Plan contains provisions, such as those relating to definitions of standard construction and of factory zones which the Code Plan does not contain in any form. We submit that the reckless statement that these plans are alike " in every particular" (except price and the patented or unpatented nature of the products) is grossly incorrect and must have been made without even examining the two plans. This is but a sample of many inaccurate and misleading statements in the brief of coun sel for the Commission which do not contribute to a search for the truth and obviously are unfair to the respondents. POINT VII. wereTwhiethJinohtnhse-Mlaawnfvuilllsecoexpceluosfivtheelipcaentesnet amnodntohpeolsyuban-ldicewnesrees not in violation of the anti-trust laws. Johns-Manville Corporation has been the owner of the Toohey patent since its issuance and has been engaged in the manufacture and sale of products covered by the Toohey patent. (R. 2036, Resps. Ex. 12) It is unquestionably the law that Johns-Manville was entitled to license other manufacturers to use its invention and to provide that they could sell the patented products which they manufactured only aBtempreinctesv. sNaatitsiofancatloHryartroowJoChon.,s-1M86anITv.ilSl.e.70,TsthaeteSdutphrisemtoebCe othuertlaiwn in 1902, and that decision has been followed by the courts since that time. United States v. General Electric Co. (1926), 272 IT. S. Str4a7i6g;ht Side Basket Cor-p. v. Webster Basket Co., C. C. A. (2d) (1936), 82 Fed. (2d) 245. " It is now considered settled law that a patent owner is within the scope of his patent monopoly when he grants one or more licenses to manufacture and requires his licensees to restrict their output in accordance with a schedule outlined by him, or to sell the manufactured product embodying his patent at a specified price." MoTrrtuimsterLaFwesu,e3r,8 The Col. Patent L. Rev. Monopoly and the Anti1145 at 1155 (1938). In fact, the Supreme Court in Ethyl Gasoline. Carp. v. U. S., 309 U. S. 43(i (1940), which is cited at page 42 of the Trial Attorney's brief, stated witli regard to the owner of a patent at page 45b: " lie may grant licenses to make, use or vend, restricted in point of space or time or with any other restriction upon the exercise of the granted privilege, save only that by attaching a condition to his license he may not enlarge his monopoly and thus acquire some other which the statute and the patent to gether did not give." The test of the legality of conditions that may be imposed on ltihceenasneteis-trsuasletslaowfsp, aistewnhteedthperrotdhuecctsonwdhitiicohnsthaerye m" nanorumfaacltluyrea,ndunrdeear sonably adapted to secure pecuniary reward for the patentee's monopoly." Certainly a provision that licensees could not hamper Jobns-Manville in its efforts to make a profit from its own sale of patented products by selling the patented products they manufac tured at a price below the level Jobns-Manville considered satisfac tory would come within this principle. If there is any following statement doubt of the on this point it Supreme Court minuUstnbiteedreSstoalvteesd vb. yGtehne eral Electric Co. (supra) at page 490: " If the patentee goes further, and licenses the selling of the articles, may he limit the selling by limiting the method of sale and the price? We think he may do so, provided the condi tions of sale are normally and reasonably adapted to secure pecuniary reward for the patentee's monopoly. One of the vacaqluuairbeleperloefmitebnytsthoef pthreiceexactluwsihviechritghhet aorfticalepiastesnotlede. isThtoe higher the price, the greater the profit, unless it is prohibitory. When the patentee licenses another to make and vend, and retains the right to continue to make and vend on his own account, the price at which his licensee will sell will neces sarily affect the price at which he can sell his own patented goods. It would seem entirely reasonable that he should say to the licensee, `Yes, you may make and sell articles under my patent, but not so as to destroy the profit that I wish to obtain bbyy smeallkoinugtrtihghemt toantdheselilclienngsetehethme marytsicellefs.'thHe eladttoeers mnoatytmhearkee and sell, or vest absolute ownership in them. lie restricts the panrodpperrotypoasneds tiontseerlel.s"t the licensee has in the goods he makes 77 Tlierefore, Johns-Manville Corporation as patent owner had the legal right to license others to use its patented invention and to fix the prices and merchandising conditions under which licensees sold the patented products which they manufactured. It was very clear to Johns-Manville that it would not benefit from licensing others to use the Tooliey patent if they could in any way evade the price control on the patented products (R. 349, 2045-6, 2095, 3072-5). Therefore, it was necessary that details of the mer chandising of the patented products be specifically prescribed and that compliance therewith by licensees be strictly supervised. An effective merchandising plan would have to include provisions for inspection of licensees' books and for the imposition and collection of liquidated damages in the event of violation of the merchandising conditions. For a time Johns-Manville considered hiring Tulloch to do the actual fixing and enforcement of prices on patented products as a Johns-Manville employee (R. 2100, 3073-4). However, the Johns-Manville officials were convinced that competing companies would not be willing to put themselves in a position where John;Manville, a direct competitor, would have access to their books an could dictate the details of their merchandising of patented good and change these details from time to time as it saw fit (R. 2046, 2075, 3073-4). Therefore, Johns-Manville decided to contract wild Donald Tulloch, Jr. as an independent expert to fix and enforce prices and selling terms under the license in accordance with his own judgment and not subject to its day to day control (R. 361-2, 2T1u0l1lo,c2h0,75J-r6.).knTewhe tJhoehnbsu-sMinaensvsilwleelolffeicnioalusgwhertoe seasttiasbfileidshthaantdDmonaailnd tain minimum prices on the patented products -which would allow Johns-Manville to make a satisfactory profit on its sales of patented products and yet would enable other companies, who wished to do so, to manufacture and sell the patented products legally without resorting to infringement (R. 349-351, 3074-5). As 1ms been explained, the Johns-Manville officials worked out a detailed merchandising plan with Tulloch and incorporated it in an exclusive license agreement which they gave to him on September 11, 1935, with authority to grant sub-licenses under the following conditions : a* * * provided, however, that each and every sub-license given and granted by Tulloch hereunder shall be in the form of and upon terms and conditions no more favorable to the sub-licensee than those contained in the sub-license to be granted to Johns-Manville under said Letters Patent, a copy of which sub-license is annexed hereto marked Exhibit A * * #" The original merchandising plan and price schedule was annexed to and made a part of the sub-license referred to as " Exhibit A " in Commission's Exhibit 1. Furthermore, Section III of the exclusive license agreement from Johns-Manville to Tulloch provided : " Tulloch covenants and agrees to give and grant to JohnsManville a sub-license in the form of and upon the terms and conditions set forth in Exhibit A annexed hereto" (Corns. Ex. 1). Within the bounds of these limitations Tulloch was authorized to make changes in prices and other merchandising terms on the patented products from time to time in accordance with his own judgment and to enforce observance of the merchandising plan by licensees in the sales of the patented products they produced (Corns. Ex, 1). Johns-Manville reserved the right to cancel this license to Tulloch during the following year in the event that it became dis satisfied with Tulloch's performance (E. 353, Corns. Ex. 1). Counsel for the Commission does not argue that it was illegal for Johns-Manville Corporation to benefit from price control under licenses on the patented pre-shrunk products nor is it suggested that any aspect of the merchandising plan was not beneficial to Johns-Manville Corporation, the patent owner, in its exploitation of the Toohey patent. Indeed it would have been impossible to support such an argument as the record is replete with evidence ssihoonwoinfgthtehelicbeennseefsitantod Jmoehrncsh-aMnadnisviinllge pClaonr.poration of every provi The argument is made that the merchandising plan was illegal because Donald Tulloch did not personally benefit from fixing the prices on all patented goods manufactured by the various licensees. He fixed minimum prices for patented asbestos papers, corru gated papers and pipe coverings, but received royalties only on the sale of pipe coverings, which were the only products manufactured by all licensees. (R. 3111) The fixing of prices for the other products was provided for by Johns-Manville in the merchandising plan attached to the original sub-license agreement (Corns. Ex 1) and it is self-evident that if Tulloch had not carried out the general 79 scope of that merchandising plan Johns-Manville would have can celled the exclusive license as it reserved the right to do. In that case Tulloch would have had no royalties. Tulloch was benefited financially by continuing the general scope of the merchandising plan established in the first instance by Johns-Manville as owner of the patent (R. 353), and Johns-Manville, the patent owner, was also Cbeonuenfsiteilngfo. r the Commission states with reference to deli' e.. price zones, freight equalization, customer classification, secret rebates and provisions dealing with unfair trade practices that (p. 51) " By no stretch of the imagination can I see how it can be said that such provisions are normally and reasonably adapted to securing the pecuniary reward to which the licensor is entitled." This Commission well knows that price control is impossible with out controlling secret rebates and impossible without controlling customer classification and everyone of the practices mentioned, in an industry in which they are in use. If patented price control is permissible and appropriate to securing the pecuniary reward to wthheinchthtehecolincternoslorofistheonsteitlperdacatsicethsemSuustp,rebme epeCrmouirstsibhlaes. said it is, Substan tially every merchandising policy regulated in the Johns-Manvilh - Tasulllaowchfuml ienrcthheanGdeinsienrgalpElalnecwtraics iCno.thceasme,er2c7h2aUn.dSis.in4g76p.lan sustained There is no requirement in the law that a merchandising plan under a patent license must benefit directly the individual through whom a corporate patent owner acts in imposing price control. The evidence shows that Tulloch was given the job of fixing and enforc ing prices on patented products and the opportunity to issue licenses in order to insure and enhance the value of the Toohey patent to Johns-Manville, the patent owner. (R. 349, 2045, 2075, 2095, 2097-8) The law permits a patent owner to vest in an exclusive licensee its has right only to control the prices on been questioned in one cpaasete, nEteddisognoovd.s.IraThMis. SpmroipthosMitieorn cantile Co. (1911), 188 Fed. 925. The court in that case disposed of the matter by stating at page 927: " It is urged that the sales were made and the licensed conditions inaugurated, not by the patentee, but by a licensee. The bill alleges that the complainant, as licensee, held under a ginrvaennttioofn etxhcrlouusgivheourtigthhte tUonmiteadkeS, tautsees,. anUdndseelrl stuhcehpaatgernatnetd, there is no difference, so far as this question Is concerned, between patentee and licensee." nnh !ic r o * T Tiir TI Throughout the brief of counsel for the Commission runs the thought that the Johns-Manville-Tullocli agreement was not the result of negotiations between the parties to it but was the fruit of an understanding between the respondents. This theory is not sup ported by the evidence the marked differences or by the probabilities. between the facts in this We have case and tmheenStitoannedd ard 316 Sa U. nitary case. S. 265, the In Un owner ited States v. of the patent MenatseorneidteinCtoorpaoprautripoonr, te(1d94d2e)l credere agency agreement with six competing manufacturers, but placed the agreement in escrow to become effective only when all six signed it. They knew this and the agreement was arrived at with the knowledge and cooperation of all. This was not true of the respondents here. It is beyond dispute that no respondent was com mitted directly or impliedly except Johns-Manville and Tulloch when the agreement was signed license agreement was not September passed on in11,the193M5.asoFnuitrethcearsme.oreT, hea Court said: " We do not have here any question as to the validity of a license to manufacture and sell, since none of the `agents' exercised its option Hence, we need not rtoeaachcqtuhireepsruocbhlema slicpernesseenftreodmbMy Baseomneitne.t Gv.eNneartaiol nEallecHtraicrrcoawse Co., 186 U. which dealt S. 70 and that with the license part of the to Westing- house Co." themIsneltvhees Masonite case the six agents by common delegated to the patent owner the right consent between to fix the prices of the product and the Court said: " The fixing of prices by one member of a group pursuant to express delegation, acquiescence or understanding is just as illegal as the fixing of prices by direct joint action." In the present case the sub-licensees took their sub-licenses one tboyTounleloocvhe,rbuatpaecrcieopdteodf hniesarrilgyhttwtoo yfiexaprsr.iceTshpeyurdsuelaengtatteodthneo praigtehntts llaicwe.nseIsf wthoeusled sbuebu-lniclaewnsfeusl, wbuertethuantlaiswnfuolt tthheenlaawn.y series of sub tuatiWnge psuribcme ictotnhtarot lJtohhrnosu-MghanthveillemewdaiusmwiothfinTuitlslocrhighatss eixncleufsfievce licensee, and that Tulloch as such licensee could exercise all the control that the patent owner could itself have exercised. As pre- 81 viously stated substantially all the restrictions in the Toohey patent mtheerlcicheannsdeisaignrgepemlaennwt earpepdrouvpelidcabtyedthien SthueprmemerechCaonudritsiinngthpelaGn eunnedrearl Electric case. POINT VIII. beenTchone nNeocrtreidstionwannfylewxaibylewjiathcktehtepTaoteonhteaynpdaltiecnetnasensdhlaicveennseost and no illegal activities regarding them have been shown. Counsel for the Commission states in his brief (p. 7): " There are two patents and license agreements involved in this proceeding." He then describes the Toohey patent and the Norristown patent. Based upon an assurance by the Trial Attorney that the Norristown patent would be connected with the alleged conspiracy, the TCrExaminer permitted testimony to be introduced extending over tru? dexrecdlussiovfelpyagtoesthaendNaotrrleisatsotwfniftpy-attwenot.doWcuemreenstps eacstfuexllhyibsiutsbmreitlattihmathis patent was not connected with the alleged conspiracy and serve? no puTrhpeosseo-ecxaclleepdtNtoorcroinstfouwsenapnadtebnetfofgorthfleexisibsuleesrainngtehebocialseer. jackets was issued March 21, 1933, more than seventeen months before the Toohey patent issued. It related to a mechanical feature in the con struction of a range boiler jacket which permitted it to be folded for shipment. Seven hundred of the flexible jackets could be shipped in a freight car that would hold only 350 of the ordinary rigid jackets. On January 20,1933 (II. Ex. 55) Mr. Arthur E. Page, patent attorney for the Norristown Company, wrote to the Philip Carey Company charging them with infringing the Norristown patent. This led to a long correspondence (R. Ex. 55 to R. Ex. 67 and C. Ex. 179 to 182) cdualtmedinAatuinggusitn 2a0, li1c9e3n3s,epaegrrmeeitmtienngt tbheetwueseenoNf othrreisptoawtenntanbdy CCaarreeyy without price control. This was more than a year before the Toohey pTautleloncthi,ssoureadnyanpdhhasaed onfotthheincgontospdiroawcyitahlltehgeedToinohtheye cpoamtepnltaionrt M(Rr.. 3099). An examination of the correspondence shows this to be true beyond the peradventure of a doubt. On February 16, 1934 (more than six months before the Toohey patent issued) the Norristown Company, by direct negotiation, en nrnnnnnr'rn kj*j mteirtetdinignttohea mlicaennusefaactgurreeemoefnftlewxiitbhleJorhanngs-eMbaonilveirllejaCcokreptsoruantidoenr ptehre bNyorNriosrtroiwstnowpantetnot iantdpurcieceCsafrixeeydtboyaNccoerpritstporwicne. cEofnftorrotls, wbuerteCmaardeye refused (R. 892, 876, 1106). Why refuse if there was a price-fixing conspiracy? Other manufacturers were infringing the Norristown patent and selling below the price fixed by Norristown for Johns- Manville under the flexible jacket license agreement (R. 884-5). Johns-Manville naturally protested to Norristown about its failure to stabilize the price of patented jackets (C. Ex. 51). A flexible range boiler jacket can be made under the Toohey patent and be shrinkproof and moisture:resistant or it can be made outside the Toohey patent and be subject to shrinkage and moisture jisussuteads oonthSerepotredminbaerry4p, i1p9e34c,ovthereinflgexiisb. leAjfatecrketthsewTeoroehmeyadpeatienntsowmaes instance# under the Toohey patent. In that case the jacket was, of course, subject to both the Norristown patent and to the Toohey ppraitceento,f Hanoywfelveexrib, lneoracnognetrboloiwlearsjaecvkeert euxnelrecsisseidt wbyasTmulalnocuhfacotnurtehde under the Toohey patent. Before the Toohey patent issued, Norristown asked Mr. Tulloch to try to induce manufacturers to take licenses under the Norristown flexible jacket patent and agreed to remunerate him if he succeeded in getting any licensees (R. 869). Tulloch tried to get licensees but was totally unsuccessful (R. 408). His efforts to get licensees for Norris town and his activities under the Toohey patent were entirely sepa rate and distinct (R. 467-8). In the mind of the Trial Attorney these facts seemed to tendency to view carneyatme aattmeryrsteelarytinwgittho aonmyinpoautsenitmapsliecvaitlioisnsc.haTrhacis teristic of the entire case he has tried to build up against the respond ents. Any farsighted manufacturer develops and patents new prod iuncgtscaonmdptahnoieussatnodus soef tphaetiernpt-aotwenntisn.g mItanisufnaocttuirlleergsallicteondseo csoom, panetd npoattehnint.g beyond this was done by Norristown with its flexible jacket POINT IX. Exceptions to the Trial Examiner's Report on the evidence. The exceptions to the Trial Examiner's Report are printed in afunldl aans nAoptapteendd. ix A to this brief. Each exception is fully explained 83 POI NT X. The complaint should be dismissed. The record in this case shows that active price competition has existed throughout the period covered by the amended complaint uinnpthaetesnatleedopfraoldluucntspahtaevneteadt parllotdiumcetss boefetnhesoIlnddiunstarcytivaendcotmhaptettihtieosne with the patented products and at lower prices. It appears that these unpatented products were always freely available at competi tive prices and that they were produced in quantity and sold at low non-uniform prices by 17 of the 19 corporate respondents and by 36 other members of the Industry. The evidence shows, and Counsel for the Commission seems to concede at page 42 of his brief, that nothing illegal was done during the N. R. A. Asbestos Code period. The evidence further shows that nenodagorfetehmeeAntsboefstaonsyCkoidned aenxdisttehdatatmheonsgo-tchaellerdes"pVonodluennttsarayftAergrtehee ment" was nothing more than a draft agreement prepared and sub mitted to the President at his request, which never became effectiv and never was put into operation. The record shows that the development of the Toohey patent an the licenses under it were part of a normal business transaction r which the patent owner sought by ordinary business methods gain the rewards permitted by law from its patent monopoly. The record further shows that never more than a minority of the Industry were licensed to use the Toohey patent and that the number of licensees diminished rapidly because of the price compe tition of lower cost unpatented materials. By 1940 there were only four licensees and when this proceeding was begun the Carey Company was the only sub-licensee except Johns-Manville, the patent owner. The case against the respondents was built upon three false premises namely that: (1) The Code Merchandising Plan was developed and used by the respondents as an instrument for price fixing. (2) When the Code ended the respondents substituted the Voluntary Agreement with a similar merchandising plan and operated under the Voluntary Agreement. respo(n3)dents sWubhsetintuttleied VthoeluTnutallroychAlgirceeenmseenatgrweeams eanbtanwditohnead the merchandising plan identical with the Code Merchandising Plan. In other words, the respondents are charged with a price fixing conspiracy originating in 1933 and continuing to the commencement of this proceeding, which was implemented by three allegedly iden tical merchandising plans--the Code Merchandising Plan, the Volun tary Agreement Merchandising Plan and the Tulloch Merchandising Plan. There is as much substance to this charge as there is to Grimm's fairy tales. There was no price uniformity at any time and therefore no pmreincet fcioxnintagineexdcepnto aMs etorcphaatnednitseindgpProladnu.cts.TuTllhoechV'solMunetracrhyanAdgisrieneg Plan instead of being identical with the Code Merchandising Plan, dwiasps urteadd.ically different. These statements cannot be successfully fullyTrheequpersetmtihsaest btheeinagmwernodnegd, cthoemcpolnacinlutsbioendiissmwirsosnedg.. We respect Respectfully submitted, jADWALADKR, V ICKKRSIIAM & T aFX, Attorneys for Respondents Acme Asbestos Covering and Flooring C om pany; Asbestos, A sphalt and Insulation M anufacturing C om pany; A tlantic A sbestos Corporation; A. II. Bennett C om pany; The Philip Carey M anufactur ing C om pany; The Clark. A sbestos C om pany; Em pire Asbestos Corporation; L. Incorporated; O. AAP..r oMRd auuccbAtbsr,etrhIun(r(c-. ;CAo.sm1boephsa.tnnosys-M: aWWnvo.irtk.glsv. N o t t C o m p a n y ; P a c ific A s b e s t o s <(' ,S' a p p l y C o m pan y; The Rubcroid Co.; and Donald Tulloch, Jr. F. S im s M cGrath, M alcolm I. R uddock, Of Counsel. Appendix A. UNITED STATES OF AMERICA before Jfeberal rabe Conuniion I n the M atter of A cme A sbestos Covering and F looring Company, et al. D ocket No. 461.1 EXCEPTIONS TO TRIAL EXAMINER'S REPORT. NOW COME Acme Asbestos Covering and Flooring Company: Asbestos, Asphalt and Insulation Manufacturing Company; Atii; Asbestos Corporation; A. H. Bennett Company; The Philip Cary Manufacturing Company; The Clark Asbestos Company; Empiv Asbestos Products, Inc.; Jolms-Manville Corporation; L. A. Rubbe & Asbestos Works Incorporated; G. A. MacArthur Company; W. S. Nott Company; Pacific Asbestos & Supply Company; The Ruberok Co., and Donald Tulloch, Jr., respondents in the above-entitle; matter and each of them jointly and severally, by Cadwalader, Wickersham & Taft, their attorneys, and except to the report upon tdhoelpfhacPtsreosftotnh,e fEilexdamwinitehr tohfe thCeomFemdiesrsiaolnTMraadrechCo1m5,m1i9ss4i3o,n,inRtahne following particulars, to wit: (1) To the fourth paragraph on page 8 of the report wherein the Trial Examiner states that " * * * it appears that in the Toohey process the same methods of manufacture were used as in the unpatented products, with the exception that in the Toohey process a wax sizer purported to make the pipe covering water repellant is beaten into the asbestos fiber in the vats and before it is rolled into paper." paraTgrhaisphst1a7temonenptagise c1o3notrfatrhye troepthoert ewvihdiecnhcceorarnedctilsy croenptorratrsythtoe facts shown by the evidence in the case. As a reading of paragraph 17 will show, this statement omits certain ingredients and ignores one of the essential features of the invention, the heat treatment at specified gradations of temperature after the particular product has assumed its final form to complete the setting or fusing of the wax compound into the product (R. 115, 1928, 1972-3, 3297-8; Resps. Exs. 12, 71). state(s2)thaTto the fifth paragraph on page 8 of the report wherein he u# * * respondents introduced 34 witnesses, many of them being the same persons who had theretofore testified for the Commission, and 254 exhibits." Only two of the 34 witnesses called by the respondents testified also for the Commission. 21 of the witnesses called by the respond ents were officers or employees of independent jobbers and distribu tors who are not parties to this proceeding. The only witnesses who were called by both the Commission and the respondents were Donald Tulloch, Jr. and Walter L. Steffens (See Report pages 35 and 36; also R. 2285, 2304, 2387, 2413, 2431, 2450, 2496, 2524, 2562, 2592, 2615, 2642, 2650, 2681, 2703, 2732, 2743, 2772, 2796, 2944, 2990). (3) To the paragraph which concludes at the top of page 9 of the report wherein he states that " * * * shortly thereafter a number of respondents in this proceeding, together with others, signed voluntary agreements for the alleged purpose of attempting to carry out those provi sions of the N.R.A. which had not been declared unconstitu tional. It does not appear in evidence that these agreements were ever approved by the President of the United States as they were required to be." The evidence is undisputed that only one voluntary agreement was ever prepared, that it was prepared for the purpose of carrying out provisions of the N.R.A. which had not been declared unconstitu tional, that it was submitted to the President and was never approved by him. The agreement provided that " This Agreement shall be effective upon approval by the President." and it is shown by the uncontradicted testimony of several witnesses that this agreement never went into effect and was never acted under by any respondent (R. 386-7, 1075, 2338-9, 3053-5; Corns. Exs. 18, 55, 56, 286, 287; Resps. Ex. 221). (4) To the failure of the Examiner to report in connection with the statement set forth in paragraph numbered 2 on page 10 of the report: This merchandising plan when approved by three-fourths of the members of the Division and filed with the Sub-Code Authority became legally binding on all members of the Division under the provisions of the Asbestos Code. Section 4 of Article VI of the Asbestos Code (Respondents ' h'; 2) provided in part: " The members of each Division of the Industry may prepare Simplification and Standardization Specifications and a Merchandising Plan for such Division, incorporating too merchandising policies best calculated to promote fair compe tition in such Division. Subject to the review of the Adminis trator, every such Merchandising Plan or Simplification and Standardization Specifications, when approved by threefourths of the ("ode Members of the Division and filed with the Sub-Code Authority, shall be binding upon all members of the. Industry who are members of the Division to which such Merchandising Plan or Specifications apply. Changes may be made in any such Merchandising Plan or Specifications in the same manner that the Originals were established." (5) To the failure to report in connection with the statement set forth in paragraph numbered 5 on page 11 of the report the following statement: 4 This revised Merchandising Plan was never used by the mem bers of the Division, including the respondents, in marketing their products. The finding is incomplete and misleading without the inclusion of this additional statement which is supported by the uncontra dicted testimony of several witnesses (R. 2156-7, 2254-5, 2329, 23692370, 3159-3163). (6) To paragraph numbered 6 on page 11 of the report wherein the Trial Examiner states that : " * * # meetings of the members of the Asbestos Paper &Allied Products Division were held during the existence of the Asbestos Code for the purpose of carrying out the provisions of the Code and the application of the provisions of the mer chandising plans to new products and new conditions in the industry. '' This statement is erroneous in its reference to more than one merchandising plan. The finding is correct as to the merchandising plan described in paragraph 2 on page 10. It is completely contrary to the evidence as applied to any other merchandising plan. There fore the words " of the merchandising plans" in the next to the last line of this paragraph should read " of the December, 1933 merchan dising plan" in order to make this statement conform to the evidence (R. 2156-7, 2254-5, 2329, 2369-2370, 3159-3163). (7) To the failure to report in connection with the statement set forth in paragraph numbered 8 on page 11 of the report the fol lowing statement: This distribution was required by the provisions of Article VIII of the Asbestos Code. This statement is supported by uncontroverted evidence and is epsasreangtriaalphto8 a(Rceosrprse.ctExin.t2e)r.pretation of the statement contained in (8) To tlie failure to report in connection with the statement set forth in paragraph 12 on page 12 of the report the following statement: This voluntary agreement included a provision to the effect that it was not to become effective until approved by the President and it was never put into effect or acted under by any respondent. This statement is supported by the uncontradicted testimony of several witnesses and hv the text of the voluntary agreement, which is in evidence (R. 386-7, 1075, 2338-9, 3053-5; Corns. Ex. 18). (9) To the failure of the Trial Examiner to report: The validity and scope of the Toohey Patent, U. S. Letters Patent No. 1,972,500, have not been challenged in this pro ceeding. the This fact actions of is of great importance in respondents and is borne douetterbmy itnhiengenthtierelergeacloitryd of in the proceeding. (10) To the inclusion of the words " as a rule" and " entirely" in the portion of paragraph numbered 24 on page 14 of the report wherein the Trial Examiner states that " For many years prior to 1934 asbestos and wool felt papers, corrugated asbestos paper and generally various types of aansbdetshtoesreainsdevwiodoelncfeeltthpaitpaescaovreurleintghsehraedspboenednenmtalnicuefnasceteusreodf Tulloch did not entirely cease manufacturing the ordinary types after taking license under the Toohey patent." The use of the words " as a rule" and " entirely" in this finding give the finding an inaccurate meaning. Without these words the statement is fully supported by the evidence. All the evidence or. ttihoins poofinJot hinnst-hMeacnavseillics Ctoorthpeoreaftfieocnt t(hwahticahll hliacdenbseeeens wmitahnuthfaecteuxrcienpg the pre-shrunk type products exclusively for several years prior to the licenses) and one small corporation, A. II. Bennett Co., continued to manufacture the ordinary unpatented types of paper and pipe covering after taking a license. There is no evidence in the case which supports the implication of the quoted statement that the manufac ture of the ordinary unpatented papers and pipe coverings were discontinued to a substantial degree by the respondent licensees (R. 624-5, 628, 981-2, 1064, 1133, 1206, 1434, 2173-4, 2246-7, 2356, 2377, 2457, 2492, 2845-6, 2960, 2985, 2995-6, 3015-7; Resps. Exs. 13, 15, 17, 18, 19, 80, 82, 83, 84, 85, 249). (11) To the failure to report: There are separate uses and markets for plain asbestos and wool felt papers, corrugated asbestos paper, and asbestos and wool felt pipe coverings whether manufactured in the ordinary way or under the Toohey patent. A portion of this statement is included in paragraph 24 on page 15 but it is incomplete and not clearly understandable. The evidence in the case shows without contradiction that there are specific separ ate uses for each of the products named in the proposed statement and separate markets for each. This includes testimony by inde penden,t jobbers and distributors who sold each product for use as s2u4c3h0, (2R4.529,243,36121)2.5-7, 1206-7, 1311-2, 1434, 1973, 2188-9, 2296, 2429- wher(e1i2n)thTeoTpriaarlaEgrxaapmhinnerumstbaetreesdth2a6t on page 15 of the report " This hostile attitude toward pre-shrunk continued with some competitors after they took a Tulloch license." There is no evidence to this effect. The evidence in the case upon which this statement appears to be founded relates to only one respondent and is to the effect that the Philip Carey Manufacturing Company did not stress the fact that its better-grade pipe covering was manufactured under the Toohey patent after it had taken a license because it did not wish to build up a trade demand for the Toohey product as such when it realized that it might some day lose its license to manufacture its products under the Toohey patent. It i is shown by uncontroverted evidence, however, that the Philip Carey Manufacturing Company considered the products manufactured under the Toohey patent to be superior to those manufactured in the ordinary way and that it supplied the Toohey type products when ever a buyer was willing to pay the higher price for them. It is note worthy that the evidence shows that the Philip Carey Manufacturing Company still retains its license under the Toohey patent (R. 989, 2855, 2876-7, 2894). (13) To paragraph numbered 28 on page 15 of the report wherein the Trial Examiner states as to Mr. Tulloch that: " He was manager of the Asbestos Paper and Allied Products Division under the Asbestos Code, and was acquainted with the difficulties caused by the shrinkage of asbestos pipe cover ing and with the fluctuations in prices of these products." The phrase " fluctuations in prices of these products" does not appear in the evidence on this point and it gives an incorrect impres sion of what the evidence shows. The evidence shows that the prices of the various members of the industry differed among themselves and that competition between them was keen. There is nothing in the evidence to justify the combining of a statement of his knowledge of price competition with a statement of his knowledge that the shrinkage of pipe covering caused difficulties (R. 879, 1365, 2053, 2179, 2310, 2903, 2949-2952; See Paragraph 65 on page 27 of Report). (14) To the inclusion of the word " directly" and the words " but there is evidence that there were communications with and through Tulloch with other prospective licensees" in the portion of paragraph numbered 32 on page 16 of the report wherein the Trial Examiner states that: "thOeyffidciiadlsnootfcoJnohsunlst-MoracnovmilmleunCiocarpteordairtieocntlyalwsoithteasntiyfiecdomtpheatt ing manufacturer during the period of its discussions and nreesgpootniadteionntsTwuliltohchTuinlldocehpenanddenittlym, abduet tihtserdeecisisieovnidetoncleicetnhsaet there, were communications with and, through Tulloch with other prospective licensees." There is no evidence in the case that the Jolms-Manville Corpora tion communicated either directly or indirectly with any competing manufacturer about the Tulloch license agreement before it was signed on September 11, 1935, and there is uncontroverted direct evidence that they did not do so (R. 356-7, 1098, 1100, 2048-9, 2075, 2104, 2106-7, 2352, 3096-7). (15) To the failure to report in connection with the statement set forth in paragraph 33 on page 16 that: This draft of a license agreement was never used. This additional fact is shown by uncontroverted evidence and is an essential part of the facts reported (R. 2349, 3064; Compare Corns. Exs. 1 and 52). (16) To the failure to report in connection with the statement set forth in paragraph numbered 35 on page 17 of the report that: Tcahlelerde biys Tuunlcloocnhtrionvoerrdteedr teovaididenhcime tihnadtettehremseinminegetthinegvsarwioeures mecliandising factors he would have to deal with in preparing a merchandising plan that would be adaptable to the different merchandising methods of the different prospective licensees and that the merchandising men who attended had no part in the actual preparation of the merchandising plan which Tulloch later put into effect under the license agreements. The omission of this additional statement, which is fully sup ported by the evidence, renders paragraph 35 susceptible to an inter pretation directly contrary to this additional statement (R. 98, 2274, 3067-9, 3071, 3149-3150). (17) To the failure of the Trial Examiner to report: Mr. Tulloch did not communicate in any way with Acme Asbestos Covering and Flooring Co., Asbestos Asphalt and ICnos.u, lTahtieonClMarfkg.ACsboe.,stAotslaCnot.i,cEAmspbiersetoAssbCeosrtpo.s, PAr.oIdIu. cRtse,nTnnect.t, GMiallceAn-rCthouler CCoo..,, WL.. AS.. NRoutbtbCeor.,&PaAcsifbicesAtossbeWstoorsk&s, SIunpc.p,lyG.CAo.., Plant Rubber & Asbestos Works or Standard Asbestos Mfg. Co. of Chicago concerning any proposed license under the Toohey patent before lie was granted an exclusive license by Jolms-Manville Corp. on September 11, 1935. This statement is supported by uncontroverted evidence and should be included because of the significance of the facts it states (R, 111, 582-3, 1212-3, 1279, 1428, 1475, 1491, 1539, 1540, 1549; Coins. Exs. 184, 300; Resps. Exs. 133-13G). (18) To paragraph numbered 37 on page 17 of the report wherein the Trial Examiner states with reference to the merchandising plan attached to the Jolms-Manville sub-license agreement of September 11, 1935, that: " There is also testimony that prior thereto Tulloch had con ferred and communicated with other prospective licensees with reference to said merchandising plan." MercThhaendeisviindgenPcleanswhoitwhsthteheaxtecTuutilvloecohf ahnayd pnroevsperectdivisecluicsseendseethaet that time, but had only discussed merchandising methods used in the winidthusatrfyewfoerxpheisrieonwcnedgumideracnhcaendinisipnrgepmaerninwghao Mweerrechcaonndniescitnegd Pwliathn companies that later became licensees. There is no evidence showing that Tulloch discussed the Merchandising Plan attached to the Jolms-Manville sub-license agreement with anyone connected will; any prospective licensee except Jolms-Manville prior to September l l ' 1935 (R, 3G8-9, 2103-4, 2274, 30G7-8, 3076-7). (19) To the failure of the Trial Examiner to report in connection with the statement set forth in paragraph numbered 38 on page 17 of the record: None of these manufacturers whom Tulloch approached after Stoepttheemlbiceerns1e1,a1g9r3e5emhaedntseperniotrhetoMtheracthtaimndeisainngd Ponlalny aattfaewcheodf tahgerseeemmeanntuufnadcteurrtehres Thaodoheseyenpatdernatftpsrioofr ato ptrhoaptotsiemde.license W/mmKmmmmmmmmmmmmrn r> r n r > r > r > i i r ' r r> Mj|t nu* I t rf 1U This statement is supported by a large amount of uncontro verted evidence in the proceeding, and it is a fact of sufficient signifi cance to merit its being reported (R. 361-9, 1212-3, 1279, 1428, 1475, 1491,1539,1549, 2102-4, 2274). (20) To the failure of the Trial Examiner to i-eport: There is uncontroverted evidence to the effect that licensees signed license agreements with Mr. Tulloch because they wished to manufacture and sell some or all of the " pre-shrunk" products covered by the Toohey patent. This statement is supported by uncontroverted evidence and s(hRo.u5l7d9,be58i2n-c3l,u9d8e4d, 9b8e7c-a8u,s1e00o5f-6th, e12s3i0g,ni1f2ic8a1n, c1e31o1f, 1th3e17f,a1c3t6s7i,t1s3t9a1t-e4s, 1431, 1492, 1550, 2348, 2877; Resps. Exs. 70, 71, 139). (21) To paragraph numbered 46 on page 21 of the report wherein the Trial Examiner states that the merchandising plan attached to the sub-license agreement executed September 11, 1935, contained: ``a. The fixed minimum prices and conditions under which products were to be sold. " b. Required uniform classification of customers for price fixing purposes. " c. Fixed the differentials in prices between different classes of customers." These statements might be construed to apply to both patented wanhdatsuonepvaetrenthteadt tpheapMereracnhdandpiispiengcPovlaenrinogr.anyThoefriets ipsronvoiseiovnidsehnacde any application to unpatented paper or pipe covering. On the con trary, it is stated in the Merchandising Plan that it applies only to pErxosd.u1c,t2s).manufactured and sold under the Toohey patent (Corns. 11 (22) To paragraph numbered 46 on page 21 of the report wherein the Trial Examiner states that said merchandising plan " * * * required uniform contracts for the sale of products by respondents who held licenses. (This provision does not seem to have been enforced during a portion of the licensing period) This statement is contrary to uncontroverted evidence. The evidence shows that the Merchandising Plan under the license agree ment provided that the contracts of sale used by licensees in selling products manufactured and sold by them under the Toohey patent should be in a form approved by Mr. Tulloch. He did not enforce this provision. No uniform contract was ever established or used under the license agreements or otherwise. Each licensee that used any form of contract used its own form, and did not submit this form to Mr. Tulloch for approval (R. 489, 490, 1075-6, 1322, 1442, 2181-2, 3151-2, Corns. Exs. 1, 50, 363). (23) To paragraph numbered 46 on page 21 of the report wherein the Trial Examiner states that said merchandising plan: " e. Divided the TJjiited States into zones for the purpose of fixing same prices in each zone and required certain of said products to be sold in the zones at the same delivered prices regardless of location of seller or buyer. Also provided for freight absorption and freight equalization to the end that all licensees would sell at the same delivered price and that all purchasers of the same class and in the same zones would have to pay the same price for the same product at any given time. '' This statement might be construed to apply to both patented and unpatented products. There is no evidence whatsoever that the MoredrinchaarynduisnipnagtePnlta.end oprapanery oorf pitispeprcoovviesrioinngs. had any application to The second sentence of the quoted statement is not supported by the evidence. Freight equalization does not create a delivered prb-o but on the contrary implies that the buyer pays part of the freight The evidence shows that where freight equalization applied the materials were sold F. O. B. factory price (R. 342-7, 2226, 3417-8). 12 (24) To paragraph numbered 46 on page 21 of the report wherein the Trial Examiner states that said merchandising plan : " f. Established standards for the size and thickness of products and fixed the differentials in price for the said dif ferences. " g. Provided for rigid enforcement of price schedules and imposition of penalties for violations." These statements might be construed to apply to both patented and unpatented paper and pipe covering. There is no evidence whatsoever that the Merchandising Plan or any of its provisions had any application to ordinary unpatented paper and pipe cover ing. On the contrary, the Merchandising Plan states that it applies only to products manufactured and sold under the Tooliey patent (Corns. Exs. 1, 2). (25) To the failure of the Trial Examiner to report: The evidence on the subject is to the effect that Mr. Tulloch did not attempt to control the prices or terms and conditions of sale of any asbestos or wool felt paper or any kind of asbestos or wool felt pipe covering except that which was manufactured and sold by his licensees under the Toohey patent. This statement is supported by uncontroverted evidence and s(hRo.u3ld16b, e33i7n-c8l,u6d3e2d, b1e0c8a4u, s1e20o6f, t1h3e22s,ig1n3i5fi5c,a1n4c4e0,of21t8h3e, f3a1c7t7s-8i;t Cstoartness. E21x5s,. i1n,c2h5,12;2R6 etosp2s3. 3E, xins.ch1,1,23169,t8o72t4o8,12in6c, hin).ch, 148 to 151, inch, 211 to (26) To the failure of the Trial Examiner to report: Of the five schedules in the Merchandising Plan attached to the sub-license agreement when executed and delivered to Johns-Manville Corporation on September 11, 1935, only Schedule I contained general provisions applying to the sale of all products manufactured and sold under the Toohey patent. Schedule II set forth the prices and terms and con 13 ditions of sale on various forms of pipe covering and sheets and blocks when manufactured and sold under the Toohey patent. Schedule III set forth the prices and terms and con ditions of sale on corrugated asbestos paper when manufac tured and sold under the Toohey patent. Schedule IV set forth the prices and terms and conditions of sale on high pressure laminated type asbestos pipe covering, sheets and blocks when manufactured and sold under the Toohey patent. Schedule V set forth the prices and terms and conditions of sale on asbestos paper and rollboard when manufactured and sold under the Toohey patent. This statement is supported by uncontroverted evidence and should be included because of the significance of the facts it states (R. 71, 83, 395-6; 3086; Corns. Exs. 1, 2). (27) To the failui'e of the Trial Examiner to report: Mr. Tulloch testified that the reason for dividing the Mer chandising Plan into separate schedules applying to separate classes of products was that no licensee received a license to manufacture or sell any product under the Toohey pale s: unless it was manufacturing that general type of product at the time it executed a sub-license agreement; that any licensee could have a license covering any additional product wTohoichheyitpalatteenrt ;wainshdetdhattoncoomlicmenensecee emvearnurefaccetivuerdintgheunscdheerdtuhlee of prices and terms and conditions of sale of any type of product which it did not manufacture under the Toohey patent even though it purchased that product from other licensees and sold it. This statement is supported by uncontroverted evidence and should be included because of the significance of the facts it states (R. 82, 83, 527-8, 3086, 3110-2; See Corns. Exs. 10, 254). (28) To the failure of the Trial Examiner to report: Sixteen different sub-license agreements did not include asbestos paper and rollboard, wool felt paper or sponge rit 14 among the licensed products. The licensee under each of these sub-license agreements never received Schedule V and there is no evidence of an attempt being made otherwise to control its prices or terms and conditions of sale on products of these types. This statement is supported by uncontroverted evidence and should be included because of the significance of the facts it states (R. 202, 527-8, 1278, 3086-8, 3110-2; Corns. Exs. 198, 204; Resps. Ex. 254). (29) To the failure of the Trial Examiner to report: Fourteen different sub-license agreements did not include high pressure laminated asbestos pipe covering sheets and blocks among the licensed products. The licensee under each of these agreements never received Schedule IV and there is no evidence of an attempt being made otherwise to control its prices or terms and conditions of sale on this type of product. This statement is supported by uncontroverted evidence and should be included because of the significance of the facts it states (R. 3086-8, 3110-2; Corns. Exs. 60Q, 60R, 204; Resps. Ex. 254). (30) To the failure of the Trial Examiner to report: Six sub-license agreements did not include corrugated asbestos paper among the licensed products. None of these six licensees etevmerptrebceeiinvgedmSacdheedouthleerIwIIiseantdo tchoenrteroisl tnhoeiervipdreinccees oorf atenrmats and conditions of sale on this type of product. This statement is supported by uncontroverted evidence and should be included because of the significance of the facts it states (R. 3086-8, 3110-2; Resps. Ex. 254). (31) To the failure of the Trial Examiner to report: Mr. Tulloch testified and there was no conflicting evidence that all of the provisions of the Merchandising Plan under the sub-license agreements affected the price of products manu 15 factured and sold under the Tooliey patent and were designed to make the price control on products manufactured and sold under the Toohey patent effective. This statement is supported by uncontroverted evidence and should be included because of the significance of the facts it states (R. 329, 330, 3077, 3326-7; Corns. Exs. 1, 2). (32) To paragraph numbered 49 on page 22 of the report wherein the Trial Examiner states that: " These zone areas used prior to the issuance of the Toohey patent differed in some details from one another but followed the same general principle of zoning and were substantially similar." This statement is contrary to all the evidence on the point. The testimony and much documentary evidence shows that while many members of the industry followed the general principle of zoning in merchandising products prior to issuance of the Toohey patent, the particular zone areas and the products sold thereunder varied widely between different companies, except during the N.R.A. period (R. 3423, Corns. Exs. 379-386). (33) To paragraph numbered 52 on page 23 of the report wiser the Trial Examiner states: " Shortly after the license suggested to his licensees agreements were that they use the executed `Manual 7 f :aUioneint Prices', published by Asbestos Magazine, in pricing their products in order to enable them to translate the diseount- from-list price into the actual dollars and cents price To a customer on any sale instantaneously." This statement could be construed to mean that Tulloch suggested that his licensees use the " Manual of Unit Prices" for pricing their unpatented products as well as their patented products. The evidence in the case shows without contradiction that Tulloch did not make any suggestions to his licensees with regard to the pricing of un patented products. As applied to patent products the statement here excepted to is correct. (34) To paragraph numbered 53 on page 23 of tlie report wherein the Trial Examiner states with reference (o meetings attended by licensees that: `'At these meetings all problems encountered in the mer chandising of the materials were discussed and merchandising practices fixed by Tulloch were also discussed." This statement could he construed to apply to both patented and unpatented materials. There is no evidence whatsoever that the merchandising of any unpatented paper or pipe covering was ever discussed by Tulloch with his licensees. The evidence shows only that Tulloch held local meetings of small groups of licensees from time to time at which the licensees pointed out to him the mechanical flaws in his regulation of the merchandising of products manufactured and sold under the Toohey patent (R. 1071-2, 1320-1, 1495-6, 2049, 3148-9). (35) To the phrasing of paragraph numbered 53 on page 23 of the report wherein the Trial Examiner states that: " Tulloch rarely announced any change in merchandising con ditions at these meetings and there appears to be no record of any vote being taken by licensees upon matters under discus sion." All the evidence in the case is to the effect that no votes were ever taken by licensees upon matters under discussion. There is no justification in the evidence for limiting this statement to the non 2ex16is8t-e2n1c7e0,o3f1a4n8y-9r).ecord of votes taken (R. 1072, 1320-1, 1495-6, 2049, (36) To the inclusion of the words " usually after consultation with licensees" in the sentence in paragraph numbered 54 on page 23 of the report wherein the Trial Examiner states that: " There is evidence that the said changes in prices on patented pmreordcuhcatnsdaisnidnginplaannyuonfdetrhethteerlmicesnosre acognredeimtioennst wofersealme aidnetbhye Tulloch during the entire licensing period, usually after con sultation with licensees." The use of the word " consultation" in uus erroneous impression of what is shown by the evidence in the case. The evidence shows that Mr. Tulloch usually gave his licensees an opportunity to comment on changes he proposed making and to point out harmful results of the change which he might have overlooked, lie listened to any comments which his licensees cared to make but proceeded to make changes and rulings independently. There is no evidence that Tulloch's licensees had any participation in the making of changes in the Merchandising Plan (R. 122, 391-3, 397-8, 1124-5, 1216, 2078). (37) To paragraph numbered 54 on page 23 of the report wherein the Trial Examiner states: " Only a few decisions were arrived at during the meetings." There is no evidence that any decision was " arrived at" during any meeting. The only evidence on this point is to the effect that Tulloch announced his rulings and changes on only a few occasions at meetings. As the statement reads it implies that decisions were reached by group action at meetings on at least a few occasions. There is no evidence whatsoever to support this implication (R. 10 2, 1320-1, 1495-6, 2049, 2168-9). (38) To paragraph numbered 55 on page 24 of the report wherein the Trial Examiner states that: " The licensees agreed to and did give Tulloch the authority so to act and confirmed his action thus taken." This statement is contrary to the evidence. The only agreement by the licensees and the only gift of authority to Tulloch by them was that embodied in the text of the original sub-license agreements which they signed individually to obtain the right to manufacture and sell the patented pre-shrunk products. There is no evidence to the effect that the licensees " confirmed" Tulloch's actions or that any con firmation was necessary. The evidence shows many instances in wlicheinchseecsh,asnogmesetimmaedsetobymoTruelltohcahn whaelrfethveerlyiceunnsesaesti,safancdt,oarsy thtoe Tsormiael Examiner has reported, the evidence shows that these changes were R FPR OO UC FO AT THF N A T I O N A L A R C H I V E S 18 maintained by Tulloeb. There is no suggestion in the record that these changes, or any others, were " confirmed" by the dissatisfied licensees or that these licensees would have been willing to confirm them (E. 391-3, 397-8, 465-6, 907, 1001, 1124-5, 1216, 1512, 2169, 2170, 2257, 2275, 3148-9). (39) To paragraph numbered 56 on page 24 of the report wherein the Trial Examiner states that: " Certain licensees published `suggested resale prices' for their customers in their own price lists but these were not always observed by said customers, and there is no direct evidence of an attempt to force them to follow same." All the evidence on this point shows that no direct or indirect attempt was ever made by Tulloch or his licensees to control resale prices of the licensees' customers. Many of the 21 independent jobber and distributor witnesses in the case testified that they cus tomarily sold the products purchased from licensees at prices below the " suggested resale prices" and no witness testified that any attempt was ever made by any licensee to prevent this (R. 330-1, 336-7, 486, 488, 500, 527-8, 1215, 1322, 1370, 1436, 1501, 2060, 2183, 2296, 2310, 2399, 2414, 2436, 2532-3, 2571-2, 2585, 2603, 2612, 2624, 2R7e0s6p,s2.7E36x-.7,126714).6, 2807, 2960-1, 3006, 3030, 3228, 3323-5; Corns. Ex. 1; (40) To the failure of the Trial Examiner to report in connection with the statement set forth in paragraph 59 on page 24 of the report that: The Philip Carey Manufacturing Company had refused to take a license from the Norristown Company under the flexible range boiler jacket patent for some time and was only induced to take one by the imminent danger of an infringement suit. and Tmhuischstdaotecmumenetntiasryfulelvyidseunpcpeo.rteUdnbleyssunitcoinstriandcilcutdeedd tewsittihmotnhye rest of the statement, the statement gives rise to implications contrary to the facts shown by the evidence (R. 1021-2, 1104-5; Corns. Exs. 179-182; Resps. Exs. 55-66). 19 (41) To paragraph numbered 59 on pages 24 and 25 of the report wherein the Trial Examiner states with reference to the fact that the Philip Carey Manufacturing Company's license under the Norristown jacket patent never incorporated any price control, " * * * though Tulloch endeavored to have same inserted." that Tthheis NstoartreimstoenwtnisConmotpasnuyppeonrdteedavboyredthetoevhiadveencae.prIicteacpopnetarrosl clause inserted in its license to the Philip Carey Manufacturing Com pany, but it communicated directly with the Philip Carey Manufac turing Company and not through Tulloch (R. 408-9, 1105-6). (42) To the failure of the Trial Examiner to report in connec tion with the statement set forth in paragraph 61 on page 25 in his report that: The Philip Carey Manufacturing Company found that other companies were not interested in obtaining licenses and no license was ever granted under this patent. This additional statement is fully supported by uncontroverted evidence. The statement in paragraph 61 gives an incorrect impres sion of the facts shown by the evidence without this additional sen tence (R. 197, 399, 1019, 1101-2). (43) To the failure of the Trial Examiner to report: Various types of pipe covering that were not included in the Tulloch license agreements serve the same general purposes as asbestos and wool felt pipe coverings and are sold in com petition with them. Among these are magnesia, cork, kraft paper, rock wool, clay and asbestos, vermiculite, glass wool, and hair felt pipe coverings. shouTldhibse sitnactleumdeedntbeiscaususeppoofrttehde sbiygnuifniccaonncteroovferttheed feavcitdsenitcestaatneds (R. 245-7, 300, 1082, 1087-8, 1310, 1429, 2098, 2185; Resps. Ex. 132). (44) To the inclusion of the words " usually" and " at times" in the sentence in paragraph numbered 64 on page 26 of the report wherein the Trial Examiner states that: "usJuoablblyerasblaendto distributors throughout the obtain unpatented products country were similar to the Toohey patented products agreements and were able adtutriimnges the to period of buy them the license at different ipnrdicuesstrfyr.o"m various respondents and other companies in the The uncontradicted testimony of independent jobbers and dis tributors shows that there never was any difficulty in obtaining the ordinary unpatented paper and pipe covering during the license period and that they were always able to buy these unpatented prod ucts at different prices reached by individual bargaining with the different licensees. The testimony of these and many other witnesses shows that the price of the ordinary unpatented paper and pipe covering was never uniform as between the different licensees. The words " at times" give a meaning to the statement which is contrary to the evidence (R. 308-9, 317-320, 389-390, 485-6, 624-8, 631-3, 981-3, 1057, 1062, 1064, 1133,1206,1208,1210,1226,1229,1332-4, 1355,1365,1425, 1434, 1440, 2016, 2050-1, 2173-4, 2179-2180, 2189, 2202, 2204, 2209, 2247, 2249, 2257, 2265, 2286-9,2302-3,2305-2310, 2346, 2356, 2359, 2360, 2375, 2377, 23882390, 2398-9, 2401-2, 2415-7, 2419-2422, 2427, 2432-5, 2439-2442, 2453-8, 2463-4, 2469, 2479, 2484, 2487, 2492-4, 2498-2502, 2504-5, 2512-8, 2526-8, 2533-4, 2571, 2574-5, 2578, 2604-6, 2618, 2620-3, 2625-6, 2643-4, 2654-7, 2668, 2672, 2682-3, 2688-9, 2704-5, 2707, 2715, 2720-1, 2733, 2735-6, 2738-9, 2740, 2743-6, 2766-7, 2773-5, 2777-9, 2790, 2797-9, 2806-7, 2811, 2839, 2843-6, 2850-1, 2854, 2857-2860, 2872, 2887, 2889, 2921-2, 2947-8, 2952-4, 2955, 2960, 2968, 2970-1, 2984-6, 2991-9, 3001, 3003, 3009, 3015-7, 3020, 3028, 3035-8, 3045-8, 3081-2, 3108, 3133, 3229, 3360-1; R23e3a,p2s3. 6E-2x4s9.,1255,21,62,5138,,21597,-28702,.82-126, 148-151, 205, 206, 211-215, 226- of th(e45r)epToorttwheheprherinastehoeloTgyriaolf Epxaarmagirnaeprhstnautmesbethreadt:64 on page 26 " The prices charged by each licensee, except Johns-Manville, for unpatented products similar to these Toohey products, changed from time to time during this same period." 21 The evidence shows that the prices of unpatented products changed frequently during the license period. This fact is not made cshleoawrsbythathtethueseporficethseowf ourndpsa"tefnrtoemd ptirmoedutcotstivmaer"ie.d Tahlme oesvtidfernocme day to day, and varied widely between different respondents. (See citations under preceding paragraph). (46) The failure of the Trial Examiner to report in connection with the statement set forth in paragraph 64 on page 26 that: There was no established relationship between the prices of unpatented products and similar Toohey type pre-shrunk products. This fact dence (Eesps. is established Exs. 82-126, by a great deal 148-151, 205, 206, o2f1u1-n2c1o5n, tr2o2v6e-2r3te3d, 2e3v6i- 249, 252, 253, 257-272). (47) To paragraph numbered 65 on page 27 of the report where n the Trial Examiner states that: " The selling prices varied from time to time and were not always uniform but the original list prices were usually uniform." The whole tenor of this statement is to the effect that the dififere* manufacturers quoted uniform prices most of the time prior to i beginning of the license period. This is inconsistent with the evi dence in the case which shows that each manufacturer fixed his price for these products independently prior to the beginning of the license period and, except as to patented products, thereafter. There is evidence that different manufacturers copied each other's prices us quickly as they learned of them, especially during the period of price filing under N. R. A. (R. 879, 1365, 2053, 2161-4, 2179, 2255-6, 2371-2, 2903, 2949, 2951-2). (48) To the third paragraph on page 28 of the report wherein the Trial Examiner states that: " The respondents and others in the low pressure pipe cover ing industry with few exceptions had and have some sort of price lists which they send out to the trade and that the prices thus listed and appearing thereon were and are as a rule substantially identical." The evidence in the case shows that some of the respondents and others in the low pressure pipe covering industry had and have some sort of a price list, hut the evidence does not show, as the quoted statement would indicate, that substantially all of the respondents and others in the low pressure pipe covering industry have such price lists. Furthermore, the phrase " as a rule substantially identi cal" gives an incorrect impression of what is shown by the evidence. The evidence shows that throughout the period here involved and hfoardmmaentypyreiacerss ppruibolristhheedrebtoy tthheeivracroiomupsectoitmorpsanaineds ianfttehrisdiinscdouvsetrryy of the competitor's changed prices had published similar prices. The statement in the report is erroneous in its failure to state the full facts on the point (R. 2161-4, 2255-6, 2371-2, 2493). the T(4r9ia)l ExamTionetrhesttahtiersdtphaarta:graph on page 28 of the report wherein " There is some divergence in the evidence as to whether or not the general merchandising plan which contains the policies and practices of the industry was substantially the same among vaellmrbeesrp,o1n9d3e3n."ts prior to the N. R. A., that is beginning No The evidence is undisputed that there was no general merchandis ing plan in the industry. In fact, the testimony referred to in the citation included in the report under this point, R. 2145, is unequivo cally to this effect. At page 2145 the witness, High, stated: " There was no general merchandising plan in the industry." tFhuertehffeercmt othraettwhehriele icsermtauicnhguennceoranltrpaodliicctieeds aenvdidpenracectiicnesthwehiccahsehatdo grown up in the industry earlier were recognized by practically all cthoemspe a"nigeesneinratlhpe oilnicdiuesstrayndprpiorracttoic1e9s"33,ditfhfeerdedetawilieddelyapbpelticwaeteionnthpef various members of the industry, including the respondents. Para graph 4 on page 10 of the report and paragraph 49 on page 22 of the report deal with this point and, with the exceptions taken thereto, constitute a more correct statement of the facts shown by the evi dence (R. 2326-8, 2364-5, 2373-5, 2906, 3423; Coins. Exs. 375-387). (50) To the third paragraph on page 28 of the report wherein the Trial Examiner states that: " The quoted prices were usually the same." Throughout the record in this case a distinction is drawn be tween " quoted" prices and " published" prices and there is a great mass of uncontradicted evidence, much of it in the form of testi mony and documents from independent sources, which shows that the " quoted" prices were almost always different between the vari ous respondents and also between other members of the industry. The statement in the report is therefore directly contrary to the evi dence. (see citations under paragraph " (44) " above). (51) To the third paragraph on page 28 of the report wherein the Trial Examiner states that: " A number of witnesses testified that as customers of re spondents they were able to get special or supplemental dis counts in certain instances which did not appear upon tin price lists and which varied the actual prices paid from those appearing on said lists." The witnesses referred to in this statement testified that they invariably were able to obtain prices which were lower than those shown in the published price lists of those respondents who had price lists, when they were buying unpatented ordinary paper or pipe covering. The only witnesses who testified that they had to purchase at the published price were those witnesses who purchased eenxcteludspivreel-yshfrruonmk pJaoplmers-aMndanpvipilelecoCvoerrpinorgadtiuorninwghthicehpseorlidodoinnlvyolpvaetd (R. 2422-3, 2446-7, 2713-4, 2815-6, 2821-3). (52) To the failure of the Trial Examiner to report in connection with the statement set forth in the fourth paragraph on page 28 that: Witness Morgan insisted that this meeting with Tulloch took place in 1933 and that Tulloch's statements were about a patent on pre-shrunk pipe covering. Witness Tulloch contra dicted this testimony stating that he had talked with Morgan in 1933 only about adherence to the Asbestos Code, that the Toohey pre-shrunk patent was not issued until September 1934, and that he did not know anything about that patent in 1933 and did not talk to anyone about it until after it was issued in 1934. The evidence does not show any other instance in which Tulloch spoke to anyone about a patent on pre-shrunk pSieppetecmobveerrin1g934p.rior to the issuance of the Toohey patent in These additional facts are essential to an appraisal of Witness Morgan's testimony as they clearly indicate that his testimony is not correct. Witness Morgan insisted on repeated questioning that the meeting took place in 1933 before the Code. In all the extensive record in the case there is no other suggestion that Tulloch was even aware in 1933 that Jolms-Manville Corporation had applied for a patent on pre-shrunk covering (R. 1257-9, 3124-7). (53) To the fourth paragraph on page 28 of the report wherein the Trial Examiner states that: " Rioidan testified that so far as lie knew there was no dif ference between the price list for pre-shrunk and ordinary aircell. '' This statement constitutes an unwarranted expansion of the testimony referred to which appears at page 2695 of the record and reads as follows: " Q. On these price lists you received from the different companies, did they have a price for this pre-shrmik material about which you spoke awhile ago, and then a separate price for the other Aircell pipe covering? " A. No, they did not have it on the price list that was submitted to us." 25 This is tlic entire testimony on the point by Riordan and falls far short of the statement excepted to. (54) To the first paragraph on page 29 of the report wherein the Trial Examiner states that: " Witness MacDougal testified that salesmen did not usually discuss prices as it was known in advance what the price lists and discounts would be." Witness MacDougal testified that his company purchased all its pipe covering from the Jolms-Manville Company and in referring to talks with salesmen he was referring only to talks with the JolmsManville salesmen as clearly appears from his testimony. He testi fied that the reason he did not discuss price with the Johns-Manvillc salesmen was that he was notified of the Johns-Manville prices by the Johns-Manville home office and had no need to discuss price with the salesmen. His testimony on this point at page 2611 of the record which is cited in the report reads as follows: " Q. And that was the sales talk of the Johns-Manville salesmen that their pipe covering was a superior pipe cover ing a"nAd.wWoueldll,nawteurnaelvlyersedllisfcourssaedhigithemr upcrhicae1f?ter 1932 when asbcstoscel came in. Then we were sold on it and sold others. " Most of the calls made by salesmen are social calls. The prices are very--well, they are not discussed very often be cause we were informed by the home office of Johns-Manville of what the discounts are." The statement excepted to gives the impression that MacDougal talked to salesmen for all companies and that no salesmen ever dis cussed prices. As can be seen this is inconsistent with the evidence on which it is based. (55) To the second paragraph on page 29 of the report wherein the Trial Examiner states that: " There is also evidence on the part of a number of witnesses who were retail dealers or appliers that the retail prices were suggested to them by various respondents but that they 26 did not feel bound to comply with the same and did not always do so, but met competition by reducing prices when necessary. " The last part of this statement, i. e. " but that they did not feel bound to comply with the same and did not always do so, but met competition by reducing prices when necessary" implies that the respondents attempted some sort of partial control over resale prices. This is contrary to all the evidence on the point in the case. In fact it is contrary to the testimony on page 2746 of the record which is cited in its support of the Trial Examiner's statement. Afotllopwagse: 2746 Witness Messe, an independent jobber, testified as " Q. Who fixed the price at which you sold your materials? " A. We fixed our own price. Of course, there was always a suggested resale with some of the manufacturers, but that was just to give you an idea." Twenty-one independent jobber and distributor witnesses testi fied in this case and each and every one of them testified that his company fixed its own resale prices and that the manufacturers had nothing whatsoever to do with those resale prices. There is no evidence in the case to the contrary. One or two of these witnesses testified that they sometimes sold at or even above the suggested resale prices but the great majority of the witnesses testified that they consistently sold below the suggested resale prices. There is no evidence in the case of any pressure on any jobber or distributor to sell at suggested resale prices (R. 2296, 2310, 2399, 2414, 2436, 2532-3, 2571-2, 2585, 2603, 2612, 2624, 2706, 2736-7, 2746, 2807, 2960-1, 3006, 3030). (56) To the failure of the Trial Examiner to report: The classification of customers by Mr. Tulloch under the license agreement was based upon the function served by the particular type of customer in the distribution of the patented pinrotdhuisctisn.duIsttrhyadfobremenantyheyecaursstopmrioorf mtoo1st93o5f ttoheclacossmifpyancuiess tomers and to allow price differentials between the different classes. During the early part of the license period Mr. 27 Tulloch required the licensees to list with him their customers whom they claimed came under the Jobber Classification and were entitled to purchase the patented products at the Jobber price fixed in the license agreement. Jobbers' names were removed from this list only when they failed to qualify as Jobbers under accepted merchandising standards. Mr. Tulloch discontinued this practice early in 1938. This statement is supported by uncontroverted evidence and s(hRo.u1l2d6-b7e, 2in7c2l,u3d2e9d, 3b3e0c,a3u3s7e, o1f01t4h-e5,s1ig0n72if,ic1a0n7c4e, 1o5f00th-1e, f1a5c0t3s-4i,t2s0t6a0t-e2s, 2146-9, 2184, 2242, 2325-8, 2368, 2905, 3133-4, 3178, 3326-7, 3356; Corns. Exs. 1, 47, 252, 309; Resps. Exs. 155-160, 256). (57) To the third paragraph on page 29 of the report wherein the Trial Examiner states that: " As stated, there is undisputed evidence that there was n : neral classification of respondents' customers in order to ascer tain what prices should be given them, that is whether any customers should be classed as wholesaler, jobber, retailer, or purchasing agent, etc., each having a different discount." This statement is inconsistent with the evidence because it does not limit its application to the quotation of prices on patented pre shrunk products under the license agreement. There is ample evi dence in the case that customers were classified according to the functions they served in the distribution of the patented products and that there were different prices to classes of customers serving different functions in the distribution of patented products. There is no evidence in the case whatsoever that there was any general classification of customers for the sale of unpatented products (R. 3358). (58) To the third paragraph on page 29 of the report wherein the Trial Examiner states in speaking of classification of customers: " * * * and there is evidence that the industry recognizes the same classification as does Jolms-Manville." n r n p n n n r r n a t t u t w a t i o u ,' i n ' 28 This statement gives a very incorrect impression of what is shown by the evidence. The evidence shows that the products of this industry are distributed through various rehandlers and that these rehandlers perform different functions in the distribution of the goods. The function which many rehandlers perform is so clear and obvious that it is inevitably recognized as sucli by all companies in the industry. However there are many rehandlers who arc border line cases and are classified differently by different members of the industry. The evidence shows that under the license agreement Tulloch established specific definitions in order to define the function which must be performed for a rehandler to come within a certain classification for the purchase of patented products. In so far as other members of the industry were selling patented pre-shrunk products to a rehandler they would be obliged to place him in the same classification as Johns-Manville placed him. However, the evidence shows that in so far as a member of the industry was selling unpatented paper and pipe covering he could and did place any rehandler in any classification he wished. In view of these facts the statement excepted to is misleading (R. 2368-9, 3133-4, 3333, 3358). (59) To the third paragraph on page 29 of the report wherein the Trial Examiner states, in speaking of classification of customers: " Tulloch supervised and investigated the qualifications of various customers with reference to the above classification. '' This is utterly inconsistent with the evidence in the case unless it is limited to the sale of patented products under the license agree ment. There is no evidence that Tulloch had anything to do with the classification of customers, except with regard to the sale of patented products. The evidence also clearly shows that Mr. Tulloch ceased performing this function with respect to patented products within a prealtaetnitve(lRy. s3h1o3r3t-4t,i3m3e33a, f3t3e5r8;licReensspess. Ewxe.re25i6ss).ued under the Toohey (60) To the fourth paragraph on page 29 of the report wherein the Trial Examiner states: " Witness High testified that he cannot recall any difference in classifications between respondent Ruberoid Co. when he 29 was connected with it and that of other respond1>>; com panies." Witness 2241-2) only High testified at to the effect that the cited portion he was unable to of the say at rtheceorihdaa(pIpk.: testified whether there had been any difference in the classification between respondent Ruberoid Co. and respondent Norristown Com pany. Mr. High had been an employee of each of these companies at different times. He did not purport to testify as to any companies except Ruberoid Co. and Norristown Company. (61) To the first full paragraph on page 30 of the report wherein the Trial Examiner states: " It also appears there was a special and lower price made for the Metropolitan or New York area in order to meet competi tion at that point." This statement is entirely inconsistent with all the evidence in the case unless it is Mr. Tulloch under restricted to the special and lower price made the license agreement for patented product:-: b'oy meet the price competition of unpatcnted products. There is to evidence that prices were made for any area by Mr. Tulloch for any paper or pipe covering except the patented pre-shrunk paper d pipe covering nor is there any evidence that any price was made by any group of respondents for any product in any area (R. 3365). (62) To the first full paragraph on page 30 of the report wherein the Trial Examiner states: ``Clinchy testified as to the territory included in various zones and as to the prices therein." The testimony of Witness Clinchy related only to Johns-Manville prices and the statement is incorrect unless restricted to JohnsManville prices (R. 2110 2117). (63) To the fourth full paragraph on page 30 of the report wherein the Trial Examiner states: " Respondents Norristown and Johns-Manville seemed to have used the zoning system only on their insulation products. '' 30 The citation of the record which appears under this statement, i. e., page 2221, contains only testimony of Witness High relating to the merchandising methods of the Norristown Company between 1927 and 1934. There is no testimony in the case that Jolms-Manville used the zoning system only on their insulation products, but there is uncontradicted evidence that Johns-Manville did not use the zoning system on some of its insulation products. (64) To the fifth full paragraph on page 30 of the report wherein the Trial Examiner states with regard to Mr. Tulloch: " He also testified that he adopted in the main the zoning system which had been in effect under the N. R. A. and pre vious thereto, but that he made certain changes in boundaries of the zones, for example, in Wisconsin." The words " and previous thereto" are contrary to the evidence in the case. The uncontradicted evidence in the case clearly shows that the zones used by the different companies in merchandising tlieir p(Rro.d3u4c2t3s; pCroiornrs.toExNs.. 3R7.5-A3.87w).ere very different from one another (65) To the sixth full paragraph on page 30 of the report wherein the Trial Examiner states that Witness Tulloch testified: " That probably respondents use the same zones for the sale of their patented and unpatented articles, as it would be most confusing to use different zones for the two." solelTyhoins astcaotnemjecetnutreismnaodtesbuyppMorr.teTdulbloychthien ethviedceonucres.e oItf hisis btaessetid m33o5n8yo. f Tthheerteecsotrimd oisnyasoffotlhloewWs:itness Tulloch on this point at page "twIot wzoonuelds."seem it would confuse your salesmen if you gave This guess by the Witness Tulloch is far different from the Trial Examiner's statement that " probably" respondents did use the same zones for the sale of both patented and unpatented articles. There is no evidence in the case that the same zones were used for patented I 31 and unpatented products and there is an abundance of uncontradicted evidence that unpatented products were sold on the basis of bargain ing with individual customers, rather than on a zone basis. (66) To the first paragraph on page 31 of the report wherein the Trial Examiner states: "zoTnuinllgocshystteesmtifibeudthueseddidthnaott gaolreinatdoyaenxyisetxintegndanedd stthuedpyuobflitchae tions of the Department of Commerce on trading areas, etc.''' This statement constitutes an incorrect summary of the testi mony on which the citation indicates it is based. Witness Tulloch stated at the page of the record cited in the report (p. 3394) as follows: " Q. How did you go about in determining the freight in different zone areas, that is, determining the boundaries from a freight standpoint? " A. I did not go into any extended study of freight wi-h rnealtautrioanl ptolatchees diniffewrheincth stthateesp.eoYploeuwmituhsitnbaasepaitrtmicourlaeronstathee desire to trade. " Q. Well, how would you know that the people of Louisi ana would desire to trade in a territory different from the people in Mississippi? " A. Well, I won't ansAver specifically with reference to Louisiana, because I don't recall the circumstances surround ing the placing of Louisiana in the zone in which it fell, but I wstiulldiseasyatnhdis,athgarteatht emDaenpyarntemwesnptapoefrCs oamnmd eortcheerhapsudbelvicealotipoends haavvaeiladbelve,elaonpdedI shtuadvieesstounditerdadminagnyaroefa tzhoenme.s, aInhdavtheosseeenarae great many. I presume you ha\m too, and they do indicate the natural tendency of the buyers within a state or group of states, with respect to their business." This testimony4and all the other testimony on the point in the case indicates that Mr. Tulloch did go into an extended study of the zon ing system and that he did not use any " already existing" because the evidence shows that there was no common zoning of the country 32 at the time he obtained his license under the Toohey patent. All the testimony in the case shows that Mr. Tulloch used the zone descrip tions which had been in existence under the Asbestos Code as a base in preparing his zone descriptions and that he altered these in the light of his own research concerning trading areas, etc. Mr. Tulloch testified throughout that he did not go into any extended study of freight (R. 3313, 3390-4, 3397-9, 3427-8). (67) To the failure of the Trial Examiner to report: There is no evidence that a basing point system was ever uressepdonindetnhtes saanled oMf rp.atTeunltleodchorteustnifpiaedtenttheadt parobdauscitnsgbypotihnet system had never been used in the pipe covering industry. This statement is supported by uncontroverted evidence and s(hRo.u1l4d2,b3e4i2n;cCluodrends.bEexcsa.u1se, 2o)f. the significance of the facts it states (68) To the fourth paragraph on page 31 of the report wherein the Trial Examiner states : " As stated, freight absorption and freight equalization are tinheefoftehcetrdmeleivtheroedds upsreidceisn."arriving at delivered prices or was The citation refers to methods used by other industries which sold their products on a nation-wide basis. Mr. Tulloch, at the cited page in the record (p. 3417) was explaining the general system used by different industries in marketing their products and was not speaking about the marketing of products by the asbestos industry specifically nor about the marketing of patented prc-shrunk paper and pipe covering under the license agreements. Freight equaliza tion is not a delivered price system (R. 342-7, 2226, 3417-8). the T(6ri9a)l ETxoamthienefirftshtapteasr:agraph on page 31 of the report wherein " There is evidence that after the various respondents had from time to time withdrawn as Tulloch's licensees they were still carrying out substantially the same policies and practices as those contained in the merchandising plans." 33 The uncontroverted evidence in the case is very clear to the effect that Tulloch's licensees carried out their own individn-'i mer chandising policies after they ceased shows, including the testimony cited to in be licensees. the report at Tpahgeeev2i2d3e3ncoef the record, that after the licensees terminated their license agree ments they ceased receiving communications from Tulloch and they differed among themselves as to prices, extra charges and all the other details of operation. Paragraph 07 on page 27 of the report should be noted in connection with the statement quoted above as it is a more nearly accurate statement of the facts shown by the evi dence on this point than is the statement here excepted to (R. 1216, 1322, 2230-7, 3172). (70) To the sixth paragraph on page 31 of the report wherein the Trial Examiner states: " Tulloch testified that at meetings with the licensees before licenses were granted and afterwards, there were discussions as to the practices and policies under the merchandising y; and as to the other problems of the industry." This statement is inconsistent with all the evidence because i general language it uses implies far more than any evidence, b case shows to have been the fact. The cited page of the record, page 357, contains nothing abe a the matter referred to in the statement. The evidence in the c; -e shows that Mr. Tulloch held two or three meetings with experienced merchandising men who were employed by three or four companies which later became licensees before licenses were granted. Mr. Tulloch gave uucontradictcd testimony to the effect that these meet ings were called for the purpose of acquainting him with the various mabelrechtoanpdriseipnagrfeacatormsetrhcahtahnediwsionugldphlaanveutnoderrecownhciicleh inalol rdpeortetnotihael licensees would be able to operate without completely overthrowing their established merchandising procedure. The evidence also showed that Mr. Tulloch held certain meetings with local groups of his lmiceecnhsaeneiscaalftfelra,wthseyinbethcaemme elriccehnasnedeissifnogr pthlaenpuarnpdosoethoefrdpisrcoubslseimngs which were impeding the sale of the patented products. The evidence to which the statement here excepted to apparently refers is dealt OI % n r t ' n n m i P t n t tu i MA T n H A i n r n t w r - 34 with more accurately in paragraph 53 on page 23 of the report (R. 354-5,1215,1320-1,1370,1495-6, 2049, 2104, 2168-9, 3068-9, 3148-9). (71) To the sixth paragraph on page 31 of the report wherein the Trial Examiner states : " Some parties were taken off the jobber list to prevent their obtaining products at jobber prices." This statement distorts the evidence. The evidence in the case shows without contradiction that customers were taken off the jobber list only when they were not performing the function of jobbers as defined in the license agreement (R. 337, 7074-5, 1500-1, 2242, 3133-4; Resps. Ex. 155). (72) To the seventh paragraph on page 31 of the report wherein the Trial Examiner states: " Tulloch appointed High, Bergstresser and others connected with the respondents on a committee to work out provisions of a merchandising plan which when presented were accepted in part by him with the addition of some of his own sugges tions." The only testimony in the case concerning the subject matter of this quoted paragraph is the testimony of Mr. Tulloch. He re quested Mr. High, Mr. Bergstresser and one other to suggest a plan for merchandising patented asbestos paper on a delivered price basis. He never put their recommendations into effect and never e3s3t4a7b-l8i)s.hed delivered prices for patented asbestos paper (R. 3158-9, the T(7r3ia)lTEoxtahmeifniresrt sftualtlepsa:ragraph on page 32 of the report wherein " There is evidence that the Tulloch licensing system of the eTsoteodhehyapdahteonpteedd iptrwodouucldts bwea."s not as successful as those inter cess Tohrerfaeiliusrneooefvitdheen"ceTiunllothche cliacseenswinhgatssoyesvteemr .r"egaTrhdiisngstathteemseunct 35 in the report is apparently founded on evidence in the case to the effect, that the trade demand for the patented pre-slirunk Toohey paper and pipe covering proved not to be as great as had been expected when the various respondents signed licensed agreements. Rteerpmriensaetnetdattihveesir olifcenmsaenyagroefemthenetsrebsepcoanudseentthseytstfiofuiendd tthhaatt tthheeiyr cpuaspteormaenrds pwiepreecomvoerreinginwtehriecshtetdheyinwtehree sloewllienrg pthriacnedinutnhpeahte:rnhteodr quality and more expensive patented pre-shrunk paper and ; i >e covering. It is noteworthy that there is no citation to th' ,,la under the sentence here excepted to and the citation to th at the end of the paragraph in which the sentence appears has no relation whatsoever to the sentence excepted to (R. 641?, 1229, 1330-1, 1367, 2240, 2360, 2378). (74) To the failure of the Trial Examiner to report: There is evidence that licensees terminated their license; ag; mo ments chiefly because they found that the great majority ;f sales of asbestos and wool felt paper and pipe covering were hbieginhgermpardiceedonprae-lsohwrupnrkicetypbeasipsapaenrd atnhdat ptihpeeircosavleersinogf taVd.e become too small to justify the extra expense of carrying b-th apappaetresnatendd apnipdeacnovuenrpinagtesnatendy lloinnegeorf. asbestos and woo! This statement is supported by uncontroverted evidence and should be included because of the significance of the facts it states (It. 641-2, 772, 1216, 1229, 1330-1, 1367, 1536, 2240, 2282, 2359, 2360, 2378, 3360-1). wher(e7in5)thTeoTrthiael Esexcaomndinefurlsltaptaersa:graph on page 32 of the report " There is also testimony that * * * it was not considered pimrep-oshrtraunntkinormnaokti.n"g a sale whether their pipe covering was * Testimony to this effect was given by only one of the twenty-one independent jobber and distributor witnesses who testified. The 36 statement incorrectly reflects the facts shown by the evidence. Many witnesses testified without contradiction to the effect that customers, including the United States Government, demanded that the pipe covering they purchased be pre-shrunk (R. 2567-8, 2580-1, 2596-8, 2850-1, 2950, 2955, 2962). (76) To the second full paragraph on page 32 of the report wherein the Trial Examiner states: " There is evidence that certain respondents were not aware of the fact that any manufacturer except Johns-Manville could sell pre-shrunk or that there was a patent on same." There is no evidence to the effect that a single respondent was ournawwaasreunoafwthareefaocft tthheatfaoctthetrhamt aint uwfaacstucroevresrecdoubldy saelvlaplirde-pshartuenntk. Use of the word " respondent" in this sentence is obviously errone ous. Even if this word be read " customers" the statement is con trary to the evidence and contrary to the testimony cited in the report in support of the statement (R. 2686, 2962-6, 3011, 3022). wher(e7in7) thTeo TthriealthEixrdamfiunlelr psatraategsr:aph on page 32 of the report " Steffens of Philip Carey testified that he avoided in every way he could the sale of Toohey patented products, the reason given being that the patent finally belonged to Carey's prin cipal competitor, Johns-Manville, and if Carey built up a tdoemthaenidr fionrjusarmy."e and lost their right to make it it would inure This statement is contrary to the testimony of Witness Steffens o28n5t6heanpdoin2t8.77Adceamroefnusltrraetaedsinthgaotf hSetedfifdennso' ttetsetismtifoynythaattptahgeesP2h8i5li5p, bCuatreoynClyomthpaatnythaevoPihdieldipthCeasraelye oCfotmheppanatyenatveodidperde-sdhersuignnkaptirnogdutchtes patented pre-shrunk products which it sold as " pre-shrunk" products where possible because it feared its customers would come to demand " pre-shrunk" products by name and that it might some day lose its license and not be able to supply its customers with " pre-shrunk" products. The Witness Steffens testified that the Philip Carey 37 Company sold the patented pre-shrunk products whenever it could as it considered them superior products. (78) To the fifth full paragraph on page 32 of the report wherein the Trial Examiner states : " Tulloeh further testified that for many years he had made a practice of meeting executives in the pipe covering industry and discussing conditions of business with them, and that he had called numerous such meetings prior to September it, 1935, and had discussed the conditions which had arisen after the Schechter decision as everyone felt something would have to be done about the confused and chaotic condition of the industry." This statement is not supported by the evidence. At p. : ;i065 of the record, cited in the report, Tulloeh testified only about a few meetings he called of some merchandising men in the summev otafk1e9i3n5totoacdcoisucnutssinmperrecphaarnindgisainmg ecrocnhdaintidoinsisngthpaltanheunwdoeurldw different prospective licensees could operate. There is no i that Tulloeh called numerous such meetings or that he had < , practice of calling meetings of executives in the industry f< years. He had talked over business conditions with executive:; he happened to meet them individually but the implication that l.v called meetings of executives for years is not supported by the edence. The last part of the statement, i.e., " and had discussed condi tions which had arisen after the Schechter decision as everyone felt something would have to be done about the confused and chaotic condition of the industry" is not supported by any evidence what soever (R. 3065-3071). (79) To the sixth full paragraph on page 32 of the report wherein the Trial Examiner states : " Tulloeh said he called these meetings because he had been familiar with these conditions in the industry since December 1922." Mr. TulloIeh did not so testify at page 3071 of the record or elsewhere. 38 (80) To the first full paragraph on page 33 of the report wherein the Trial Examiner states: " There is evidence to the effect that Tulloch fixed the prices upon certain articles used in connection with the pipe covering sold under the Tooliey patent, such as brass bands, staples, canvas jackets, wool felt covering with waterproof jackets, tape and possibly others." The evidence shows that wool felt covering with waterproof jackets and tape (asbestos) were themselves manufactured and sold under the Toohey patent. The evidence shows that Tulloch did not fix the price of any of the other articles mentioned in the statement excepted to. All of these other articles are shown by the evidence to be integral parts of completed pieces of pipe covering and a certain quantity and type of them, fixed by business usage over a period of many years, is delivered with all pipe covering sold at no extra cost. If additional quantities or qualities of these are needed to apply the patented pipe covering sold, the price of that pipe covering was increased. This is well explained in paragraphs 62 and 63 of the report. Tulloch never fixed the prices of these other articles as such and if a licensee sold them separately it sold them at any price it saw fit to (R. 327, 427-8, 1437, 1457, 2030, 3130-1, 3167, 3179, 3184; Resps. Ex. 203). (81) To the failure of the Trial Examiner to report: Metal bands at the rate of two and one-half bands per three foot section of pipe covering and canvas outer covering are integral parts of a completed piece of asbestos or wool felt pipe covering and have been considered as such by the trade apnredssbuyrecopnipsuemcoervsertihnrgoiungdhuosutrtyt.he entire history of the low This statement is supported by uncontroverted evidence and should be included because of the significance of the facts it states (R. 115, 323-4, 614-5, 2030, 3130-1; Resps. Ex. 203). (82) To the second full paragraph on page 33 of the report wherein the Trial Examiner states, in discussing rings or bands which are used to attach pipe covering to pipes and hold it in place: 39 "toTtahlepprircieceoffixliecdenosnedthmeaseteruinallisc.e"nsed materials affected the The evidence shows that Tulloch did not fix any price for rings or bands as such. The citation to the record at page 407 has no relation to the subject matter of the statement here excepted to. (See citations under preceding paragraph.) (83) To the entire third and fourth full paragraphs on page 33 of the report. sion Tfahresdeifsftearteenmtefnrtosmartehaptarcotinavleaynedd ibnycotrhreecttesatnimd ognivyeinanthime pcareses. See pages 3181-3183 of the record. (84) To the second paragraph on page numbered 2 of the report wherein the Trial Examiner states that: "coTmhpelapirnitncwipaasl idnifrfeergeanrcde tboetrwesepenontdheentorPighiinliapl aCnadreaymMenadneud facturing Company, * * * ; therefore, the amended complaint substituted the Philip Carey Manufacturing Company as re spondent in this proceeding." While this substitution of parties was one of the differences, 11; ; principal difference was that the original complaint alleged a con wsphierraecays wthiteh amreesnpdeecdt tcoombpoltahintlicleimnsietded atnhde ualnleligceednsecdonsmpiartaecryial alimceennsdeedd mcoamteprliaailnst,anndam"enlyon``-sliocleidnsbedra"ssm, zaitnecr,iaalnsdalsacdqeufeinreedd binantdins,. flexible range boiler jackets, and canvas covering." These materials, with the exception of flexible range boiler jackets, are necessary pr rf-of completed licensed materials and flexible range boiler jackets are licen`s`eUdnmlicaetnersieadls" wmhaetnermiaalsnuwfaecrteurneodt udnedfienredtheinTeoiothheerv cpoamtepnlta.int. The word ``unlicensed" was used in twelve different paragraphs of the complaint, but was entirely eliminated in the amended complaint. Throughout the amended complaint the word ``non-licensed" was subsTtihtueterdeptohretreoffotrh. e Trial Examiner states (paragraph IT, page 4) tphaartatghreaphheaNriInNg'Es woefrethheealdmwenitdhedrecfeormepnlcaeintot, tshuebcshecatrigoenss c(o1n)tatoine(d15i)n. The conspiracy alleged in paragraph NINE relates exclusively to 40 " licensed" and " non-licensed" materials. Paragraph EIGHT of the amended complaint specifically alleges a price-fixing conspiracy with reference to " both licensed and non-licensed materials", and paragraph NINE refers either specifically to licensed and non-licensed materials or to " said materials", referring to the licensed and nonlicensed materials as alleged in paragraph EIGHT. (85) To paragraph numbered 6 on page 3 of the report in which the Trial Examiner states that paragraph 9 of the complaint alleges a violation of the Federal Trade Commission Act on the part of the respondents by: " Agreeing upon the inclusion of unlicensed material in the merchandising plan, and controlling license and methods of business as to the same." The amended complaint omits the words " unlicensed materials" and includes only such unlicensed materials as fall within the defini tion of " non-licensed materials" as defined in paragraph ONE of the amended complaint. The statement excepted to is, therefore, an unwarranted expansion of the complaint. (86) To the last full paragraph on page 3 of the report wherein the Trial Examiner states: " The complaint covers two broad fields; First, those viola ttihoenrseuconndneerc;tseedcownidth, oththeeTr ovoiohleaytipoantsenntotancdontnheecTteudlltohcehreliwceitnhs.e's' No violations are alleged in the complaint except those which athreerecuonndneerc.ted with the Toohey patent or the Tulloch licenses Dated: March 24, 1943. AttorneCysa dfwora lRaedsepro,nWdenictsk eArcsmhea mAsb&esTtoasf tC,overing IannsdulaFtiloonorinMg aCnuomfapctaunryin; gAsbCeostmosp,anAy;sphAalttlanatnidc AThsbeesPtohsiliCp oCrpaoreraytioMn;anAuf.acITtu.riBngennCeottmpCaonmy;paTnhye; uCcltasr,k IAnscb.e;stoJoshCnso-mMpaannvyil;leEmCpoirrepoArastbioesnt;osLP. roAd. RAurtbhbuerr &CoAmsbpeasntoys; WWo.rkSs.InNcootrtpoCroatmedpa;n0y.;AP.aMciafcicAansdbesDtoosna&ldSTuuplplolychC, oJmr.pany; The Ruberoid Co., h/ #