competition between patentees and by such control demand from its licensees There is a threefold benefit enjoyed by these people here complained of: Second: The avoidance on the part of these major companies of paying any license fee or royalty because of ownership or allowance under the companies agreements to which they are a party; and Third: The increased profit on account of the gasoline manufactured by the licensor or its subsidiary, which is realized by passing on to the public the increased cost of cracked gasoline. That this latter is the chief item of interest to these major companies can scarcely be denied. They produce and control 90 percent of the gasoline. The remaining 10 percent is in the hands of the few nonlicensed, independent refiners. These majors are few in number and can establish a stable high price for gasoline much easier than they can control the competition of a great many small companies. In fact, these licensing companies would just as soon have the independents out of business, by reason of this profit which could be enjoyed through such a condition than to license them. This is a matter which affects every user of gasoline. It is even the small percentage of gasoline manufactured by independent refiners that in the eyes of the majors constitutes a disturbing influence on prices, and it is of the greatest importance to the majors that the price of this independent gasoline be maintained at as high a level as possible, and as has been touched on before if these majors by means of their patent structure and tribute-levying ability can make gasoline cost the independent refiners one-half cent per gallon more by reason of this royalty charge, then the increased effect on the price obtained by the major companies, through their gasoline production is much greater than is the large amount of royalty derived from the small refiners, because the great majority of gasoline is produced by the majors. They also get the benefit of lower costs, as they pay no royalties. It is easy to understand how, in this enormous business, these patent holders can spend the vast amount of money they do in order to maintain this artificial condition against the rights of the public and for their own enjoyment. Having given particulars of Universal's only favorable decision-Root-its only complete defeat should also be mentioned, this being sustained in an action brought by it against the Hancock Oil Co. at Los Angeles in the United States district court. The bill of complaint filed on March 12, 1935, alleged infringement and asked for an accounting of the identical C. P. Dubbs and Egloff patents sued or in the Root case, together with another C. P. Dubbs patent. Much reference was made by Universal in this Hancock suit to its then important Root decision. The Hancock Oil Co. having wise management and competent counsel well knew it did not in any manner infringe on what it considered the invalid and worthless patents of Universal, and seriously defended itself. Hancock was, at all times, perfectly confident of its ability to successfully defeat this action and show that it did not infringe, and particularly prove the invalidity of the patents sued upon, and disclose their futility, plagiarism, and general worthlessness. This case was actively fought for over 7 years--going even to the Supreme Court of the United States for rulings. It came to an abrupt conclusion on May 4 last when Hancock was fortunate enough to find the alleged inventor, C. P. Dubbs, in California and serve him with a subpena for his deposition. It had a lot of very pertinent questions to ask, as it had the idea that no one should be quite as well able to tell what the inventor had in mind as the inventor himself. The answers to these questions by Mr. Dubbs necessarily had to be quite at variance with what the Universal's experts had theretofore given, particularly in the Root case, in their very strained effort to make an operable process. If they weren't correctly and truthfully given by Mr. Dubbs, Hancock was in position to create a very embarrassing situation for him and Universal. The questioning of Mr. Dubbs was barely under way when Universal, noticing how involved the answers were becoming, dismissed the suit with prejudice rather than receipt for a long-deferred licking and let the world know the truth about its vulnerability and the invalidity of its patents. This was the first time that Universal has admitted defeat in its long career of successful litigation in imposing its patent racket on the oil industry, and you may rest assured that no publicity was by it or its publicity department given to the outcome of this action. It should not be lost sight of, however, that the preparation for the defense of such an action is a most expensive matter and required long, costly and troublesome work necessitating the employment of experts and travel and research, as well as the taking away from their regular duties much of the time and attention of the company's officers and employees. To this can be added the attendant damage done by reason of Universal's well-known policy of making, outside of the court, claims of unauthorized use, allegations of theft, statements about the large amounts of money they will recover through the medium of such suit, Universal's taking over of the refineries, etc, etc.,—all of which has adverse effect with the public upon the defendant's reputation and its financial and business affairs. It will not be denied that Universal loudly advertises the cost of defending such action as they bring, as being prohibitive and beyond the means of any independent refiner to defend, and they coldbloodedly threaten and advise that it is much cheaper to take a license than to defend a suit. These threats and threatened litigation and the expense of the litigation itself are their very effective arguments in causing their unwilling licensees to come into the fold. Independent refiners have spent enormous amounts of money in defending themselves against Universal and have then taken out licenses, despite the fact that they well knew they did not infringe and also well understood the value or rather the lack of value of Universal's patents, but were simply unable to maintain the actions further by reason of the enormous expenses they had been put to. It cost over $50,000 of cash expenditures by Hancock, aside from outside and extraordinary costs and expenses, to defend itself before Universal rather than have its patents and practices shown in their true light, dismissed its bill of complaint, and folded up like a spent accordion. THE GOVERNMENT SHOULD PROSECUTE The Department of Justice should be encouraged to bring an antitrust action against these offenders. This Department some time ago had made much progress on the matter but decided to shelve the proceedings temporarily in the belief that, at a time of national emergency, it was desirable to have the continued good will of the major oil companies. The good will of the majors is probably very desirable, although how Universal Oil Products Co. could be considered as an oil company is beyond the ken of the writer, despite its ownership being in the hands of the majors. The rights of the public-who, by the very nature of things, cannot know what is happening to them and are not in possession of information regarding this peculiar situation, or even financially able to personally do any thing about it if they were-are entitled to as much protection and consideration as are these monopolistic patent-holding and patent-licensing companies who have never cracked any oil or contributed anything to the cracking art except a retarding influence and who, under the present set-up or combination, illegally and against the welfare of the public levy a tax on and create an increase in the price of gasoline which is paid by each and every person who drives his car into a filling station. TITE PUBLIC PAYS This monopolistic procuring of patents, combinations in restraint of trade, embarrassments to and restrictions of refiners, enforced by threats and intimidations, by price increases and unfair practices, the securing of findings of validity through tampering with the courts-all to the end of restraining the production of gasoline and increasing the price of this very important and vital wartime commodity to the Nation as well as to the private consumer for the benefit only of the parasitic Universal Oil Products Co. and its owners and adverse to the Nation and the public-should in time of war be a matter for the National Defense Council to also have brought before it for consideration, as well as having the attention of the Department of Justice and the Senate committee investigating patents. WORKING THE OTHER SIDE OF THE STREET The Universal's present and new idea has to do with catalytic, alkylation, isomerization processes, and now that the war is on and high-octane gasoline most necessary for its successful conduct, these high minded and patriotic people 84949-44-pt. 8—4 can be found digging around into the patent archives with the ghoul-like activity that characterized their set-up of the patent structure in the pyrolitic field, to the end of getting together and setting up another group of patents to continue their patent structure strangulation and take care of the present trend in gasoline production, and the royalty tribute in this field will be greater than has heretofore been the case. The patentees are almost without exception-not in any sense of the word inventors--a charitable description would be investigators and gleaners a probably more correct term would be “jackals"-to whom any information whatever is a new and novel thought and certainly of sufficient importance to be the basis of a patent. We find the Government providing today vast sums of money to oil refiners in the hope that Universal's untried catalytic patents, scarcely more than laboratory experiments, will provide 100-octane gasoline. They may, when the oil refiners work out an operable process, just as the other refiners did, after a long period of years, develop for Universal an operable lowlevel process-about 13 years after it commenced business. THE SYNTHETIC RUBBER DEBACLE It should not be overlooked that, while this Standard-Shell group, headed by Universal, is a chief offender, there are a thousand other similar illegal combinations with the same extortionist ends in view, operating actively across the land, interlocked with and backed by large corporations and violating the Sherman Antitrust Act in their every move. The same life-long continuation of the policy of Standard to control can be read from the testimony that has come out before the Senate in its present German synthetic rubber patent coalition. The ludicrous feature and no more so than exists in this present pyrolitic patent cracking situation-is that the original rubber patents lately controlled by Germany were first discovered by the Russians and, as pointed out by Pearson and Allen, the Russian Government Chemical Journal was the first to publish the process for making buna rubber, which I. G. Farben later is supposed to have given to Standard as its great and secret contribution to the patent pool. All it took to get the secret was 15 cents to purchase the Russian Chemical Journal and the ability to read Russian. On the surface, Standard thought it was getting a secret out of Germany, but it is difficult to think that its high-powered patent department was not aware of such priority and disclosures. There is very little mystery about the manufacturing of synthetic rubber. A research by any intelligent person in any public library worthy of the name will show that for the past 20 years there has been abundant disclosure of this art and hundreds of patents, already expired, taken out to teach almost anyone to make synthetic rubber. Apparently the Standard did not want to license anyone until it could have a small hand-picked group in which it would join and control the market. Synthetic Rubber, by Schotz, published in 1926, on page 90 discloses : "During the Great War, when the Central Powers were compelled to find substitutes for rubber, dimethylbutadiene proved the most advantageous raw material. "The favorite process of polymerization appears to have been very simple indeed. According to J. F. Norris (J. Ind. Eng. Chem., 11, 1919, p. 819) dimethylbutadiene was placed in galvanized iron drums, which were sealed and then heated at about 60 degrees C, for 4 to 6 months. At the end of this time the polymerized product was obtained as a tough, white, clear, transparent mass. The methyl rubber so formed had all the properties of the best caoutchouc. It was used in "the making of automobile tires and other rubber goods." To one who has made a study of and is familiar with this patent-cracking condition-and with particular reference to Universal's "clean circulation" feature, the wonder of it all is that it has taken them so long to catch up with the art and have an operable process. Their approach and understanding is much like that of the green farmerette who, after being asked why she was feeding the pail of fresh milk back to the cow who had just given it, replied that it seemed a little thin and she was circulating it through the process again. C. J. COLVILLE, West Los Angeles, Calif. JULY 1, 1942. EXHIBIT NO. 158 REPORT OF THOMAS RAEBURN WHITE, MASTER, SUR ORDER OF REFERENCE OF NOVEMBER 26, 1941 IN THE UNITED STATES CIRCUIT COURT OF APPEALS FOR THE THIRD CIRCUIT Nos. 5618, 5546 ROOT REFINING COMPANY, DEFENDANT-APPELLANT v. UNIVERSAL OIL PRODUCTS COMPANY, PLAINTIFF-APPELLEE This case is a consolidation of two cases begun in 1929 and 1931, respectively, in the United States District Court for the District of Delaware by Universal Oil Products Company (hereinafter referred to as "Universal") v. Winkler Koch Engineering Company, and Root Refining Company. The plaintiff charged that certain process påtents owned by it had been infringed, demanding an injunction and an accounting. The consolidated case was so proceeded with that on April 29, 1934, a decree was made in favor of the plaintiff, the court finding that the two patents relied upon were valid and infringed. Appeals were taken to this court on July 12, 1934, were argued on January 7, 1935, before Judges Buffington, Davis, and Thompson, and were decided on June 26, 1935, in one opinion which was filed by Judge Davis affirming the decree of the court below. A petition for rehearing was filed but denied on August 6, 1935. On September 3, 1935, a petition for a writ of certiorari was filed and was denied by the Supreme Court on October 21, 1935. The litigation was afterwards settled by the parties. The consolidated case is hereinafter referred to as the "Root" case. Universal was engaged in the licensing of patented processes for the cracking and refining of petroleum; its license fees ran into very large sums and if the patents in question had been declared invalid or not infringed, the effect on Universal's business would have been serious. It had suits pending against other refiners in different parts of the country and was engaged in a vigorous effort to establish the validity of its patents in order to maintain its licensing system. On June 20, 1941, certain counsel who had represented the Root Refining Company in the above-mentioned litigation, Hon. Arthur C. Denison, of Cleveland, Ohio; J. Bernhard Thiess, Esq., and Thorley Von Holst, Esq., of Chicago, Illinois, filed a petition with this court as amici curiae averring certain facts which they contended should cause this court to investigate its decision in the Root case to ascertain whether there had been any fraud in connection with it. Although the case had been settled, the decision was used as a precedent and in some cases was claimed to be res judicata on the ground that other companies had participated in its defense. An answer to this petition was filed by Universal; the matter was argued before this court and an order made on November 26, 1941, appointing the undersigned Master "with authority to examine, investigate, and to make and report to this court his findings and conclusions concerning the relationship and dealings, if any, between Universal Oil Products Company, the plaintiff-appellee above named, Morgan S. Kaufman, and former Circuit Judge J. Warren Davis, and any and all persons acting for or on behalf of any of them in connection with the aboveentitled causes and the entire subject matter of the prosecution and disposition of the said causes, and in particular whether there was in connection therewith such fraud, corruption, obstruction, or distortion of Justice as tainted and invalidated the judgments rendered by this court in the above-entitled causes on June 26, 1935." This court also, by the same order, directed the Master to investigate the records, documents, and other evidence which had been developed by the Department of Justice in connection with the investigation of the conduct of Judge Davis and his prosecution, together with the said Morgan S. Kaufman, for obstruction of justice in two cases tried in the United States District Court for the Eastern District of Pennsylvania, including Grand Jury proceedings in New York and Philadelphia, and gave the Master appropriate power to issue subpoenas and to take testimony in any judicial district of the United States for the purposes aforesaid. Pursuant to the direction of the court, I examined the records, documents, and other evidence in the possession of the Department of Justice, the proceedings before the Grand Juries in New York and Philadelphia, the record of the two trials above noted and took testimony at twenty-two hearings, one of which was held in Chicago and the others in Philadelphia, 4479 pages of testimony were taken and transcribed, and 288 exhibits were admitted in evidence, all of which I file herewith, together with transcripts from certain proceedings before the Grand Jury in New York admitted to be correct (Record 42, 65). The pleadings and briefs in the Root case were also by reference made a part of this record. The hearings were attended by the above-named Amici Curiae until the death of Judge Denison, which occurred on May 27, 1942, and thereafter by the surviving Amici Curiae (hereinafter referred to as Amici), and by counsel for Universal. I have been greatly assisted by the thorough and intelligent presentation of the matter by counsel on both sides and by able and extensive briefs which have been filed with me, the last one being received on August 21, 1943. Many objections to the testimony were made, upon some of which I reserved judgment. I now sustain the objection to the testimony relating to the business of the Martz Bus. Line (R. 2537-2550) and the circumstances under which an order was made in reference thereto by Judge Johnson as being immaterial to the present investigation. I also sustain the objection to the testimony beginning on page 3738 of the record relating to remarks made by Judge Davis to one of his fellow judges as too remote from the issues now under consideration. For the same reason I sustain the objection to the testimony relating to the Mifflin Chemical Company cuse (R. 3745–3750). Other rulings will be referred to later. Amici and counsel for Universal have submitted to me numerous requests for findings of fact and conclusions of law which go more into detail than may appear to be necessary, but in order that a reviewing court may have before it all of the facts which counsel deem relevant, I have concluded to answer all their requests. These requests and my answers are included herein as a part of my report, page 33. Any statements of fact or conclusions of law contained in the body of my report, if not fully covered by the answers to requests, may be considered to be findings and conclusions. The fact from which it is claimed the inference may be drawn that the decision in the Root case was tainted with fraud sufficiently appear from the following recital and discussion. At some time during the progress of the Root case Morgan S. Kaufman, a lawyer who practiced in Scranton, Pennsylvania, was retained by Universal. Kaufman for some years had been a referee in bankruptcy and had appeared in a number of cases in the Pennsylvania and Federal courts, but he had no knowledge of patent law and was not an outstanding lawyer. He was, however, an intimate friend of Judge Davis, then a member of this court. When Kaufman was retained is not satisfactorily disclosed by the testimony. It is contended by Universal that he was retained by one of counsel for Universal, now deceased, Frank L. Belknap, Esq., in the spring of 1932, and that Belknap at that time agreed with Kaufman that he was to accept no other retainer from oil companies and was to hold himself available for services for which he would be well paid. Amici contend that Kaufman was not retained at that time but much later, after the Root case was in this court-possibly after the case had been argued. Amici point to the fact that there is no documentary evidence that Kaufman was connected with the case or with Universal until April 15, 1935, when there is an entry in the diary of Halle, president of Universal, indicating that Kaufman called on him on that date in company with one of his other counsel, the late Judge Haight (R. 560). There were a number of counsel for Universal who were active in the litigation. Some of them had never heard of Kaufman's connection with the case until 1935 or even later, while others were very guarded in their statements. The leading trial counsel in the Root case, Judge Haight (now deceased), made a statement to the Assistant United States Attorney during the investigation of the conduct of Judge Davis, which by agreement was placed on this record. Being asked whether Kaufman had been retained, he replied: "I can only give us that by hearsay, and taking it on that basis I say yes" (R. 653). Other counsel were similarly careful in their statements. None of them knew except by hearsay when Kaufman was retained. Amici introduced Mr. Belknap's diaries, from which it appears that the date now fixed by Kaufman as the date when he met Mr. Belknap in the BellevueStratford Hotel, Philadelphia, and was retained by him cannot be correct, for at |