age had already been done by the release of the paper, and, furthermore, possible advantages might accrue to Askania through the granting of this request in its future relations with Sperry.

The German authories finally consented and allowed Mr. Roux to bring the pilot to Sperry during his visit in June 1939.

The CHAIRMAN. After Sperry had received the description of the pilot through error, Askania felt that they might as well show Sperry a model in the hope of getting more out of Sperry in the future?

Mr. MARTIN. That seems to be correct. No one knows how the error occurred, but it seems the German Government had not permitted the release of the information.

What had happened in the 5 years following the signing of the 1934 automatic pilot license was summarized by Sperry, Ltd., in 1939 as follows:

In the original pilot license we were licensors and Askania licensees. Now that Askania have apparently produced an automatic pilot of their own and have possibly more patents than we have, they are in a much stronger position and are asking for an agreement for cooperation instead of a license agreement. However, it is still true that in the field of aircraft instruments and pilots it is Sperry that have the goodwill, the name, the licensees, and the connections. Askania's proposals completely ignore all this; in effect they ask us to give up a dominating commercial position that we have won over many years and give them an easily earned equality. Not only is this the case, but they wish us to give them superiority in territory where we now possess it.

(The document quoted from was marked "Exhibits Nos. 610, 611, and 613" and appears on p. 2373.)

The CHAIRMAN. I think the phrase "easily earned equality" shows considerable modesty. The phrase "stolen equality" seems more accurate. You testified that Askania was a small factor when the first agreement was signed in 1933.

Mr. MARTIN. They were a precision instrument firm but had practically nothing in the way of aircraft instruments.

Askania repeatedly used the German Government as a pretext for its failure to deal equitably with Sperry. This argument was countered by Sperry, of London, as follows:

A frequently used argument of Askania's is that their Government will not permit them to agree to certain things. This should not be considered to be a commercial or bargaining asset. It is probably true that certain terms, otherwise fair and reasonable, would not be allowed for such reasons, but it is fitting, and we expect, that Askania should regret that this is so, and, in inviting concessions from us in these respects, should make corresponding concessions in other respects. This they have not done.

(The letter quoted from was marked "Exhibits Nos. 610, 611, 613" and appears on p. 2375.)

Mr. MARTIN. Askania also appears to have attempted to exploit the extension of Germany's political sphere of influence. The company continually demanded additional sales territory. In October 1935, Askania became irritated because Sperry refused to extend the countries allotted to them.

although we (Askania) explained to you the advantages created by the present commercial and political relations toward the countries in southeast Europe this decision of yours, in our opinion, is not in accordance with the understanding prevailing when signing the first agreement.

(The document quoted from was marked "Exhibit No. 612" and appears on p. 2376.)

The CHAIRMAN. It appears that Askania in 1933 anticipated Germany's march of aggression.

Mr. MARTIN. That seems to be correct.

Dr. SCHIMMEL. Are you submitting a copy of the agreement to the committee?

Mr. MARTIN. I don't believe I have a copy of the agreement here.

The CHAIRMAN. Can you furnish it? I wonder if you could procure for us a copy of that agreement to be submitted as an exhibit at the end of the statement.

Mr. MARTIN. I believe that could be done. I will have to find out the status of it.

In 1939 Sperry of London analyzed Askania's demands for territories as follows:

The question of territory is one of which Askania's proposals are most unacceptable. Instead of being based on commercial and economic conditions, they appear to be based on a highly optimistic (from the German point of view) valuation of the immediate political situation

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At any rate, whatever arrangements are made about territory, they should be definite and not be expressed by loose wording such as "axis" or "associated territory" which Askania might later interpret in any manner they might choose. (The document quoted from was marked "Exhibit No. 614" and appears on p. 2378.)

Mr. MARTIN. Askania also continually requested sublicenses for firms in Germany to manufacture the Sperry artificial horizon and directional gyro. Askania justified these requests on the ground that the German Government demanded them. These requests were made and belatedly granted when Askania's royalty payments to Sperry were low and indicated a production far below Askania's capacity. The CHAIRMAN. Why did Sperry grant these sublicenses?

Mr. MARTIN. Apparently they had no alternative since the German Government presumably could force the granting of the sublicenses. The CHAIRMAN. In other words, Askania would just give the knowhow and the plans to these other firms regardless of whether Sperry agreed or not, so Sperry just acceded, is that correct?

Mr. MARTIN. That seems to be correct. In other words, the requests were made at a time when Askania's production was lower than its own capacity and therefore that left some puzzle as to why sublicenses were necessary to other companies in Germany.

On July 24, 1939, the previous agreements between Sperry and Askania were revised and merged into one agreement which superseded all previous agreements.

The agreement omitted the licensing of Sperry, Ltd., under Askania's patents. This situation was of great concern to the officials of Sperry, Ltd., especially as the provisions took effect immediately, which was just prior to the outbreak of war in Europe, and at a time when every effort was being made by the British to develop their home industry. The general effect of such a situation was expressed by Sperry, Ltd., as follows:

The general effect would, therefore, be that New York would be the sole manufacturer of new products. Neither the London company nor foreign licensees would be able to manufacturer up-to-date products so that we should lose our licensees and their good will, while you would lose the advantages of having a factory in Europe.

(The document quoted from was marked "Exhibit No. 614" and appears on p. 2382.)

Dr. SCHIMMEL. It appears that the German company maneuvered the American concern to keep the British out of the manufacture of this vital aircraft industry.

The CHAIRMAN. Had that information been in the hands of our Government, we certainly could have forecast the war.

Mr. MARTIN. Sperry took the position that their English subsidiary would have to conform to the provisions of the agreement in order to placate Askania. Askania, on the other hand, turned around and licensed Japanese firms under its patents, giving its Axis partner what it would not give to England.

The CHAIRMAN. It certainly appears that Askania was following the Nazi political line.

Mr. MARTIN. That is correct.

The contract was in effect less than 2 months when the current war began. Difficulties immediately began to be encountered. Under the 1939 agreement, both parties agreed to maintain the same selling prices for exported instruments of similar design and cost in common territory. Sperry, Ltd., was also bound by this provision. Due to the state of war between Great Britain and Germany, Sperry, Ltd., was unable to negotiate with Askania as to the prices which should prevail in mutual territory. Sperry, Ltd., complained about this situation to Sperry in Brooklyn as it was unable to take the instrument business then developing in Sweden, Norway, Denmark, and other free countries. Thus the English company felt disposed to stand by and relinquish her European market to a large extent simply because it couldn't get a fixed price from the firm in an enemy country. The CHAIRMAN. In contrast to the Germans, the English still adhered to the letter of the contract even though the two countries were at war.

Mr. MARTIN. That is correct.

The CHAIRMAN. And they were still willing to sell to Sweden, Norway, Denmark, and other nominally free countries, although they must have realized that the material sold there would probably find its way to Germany.

Mr. MARTIN. In response to further inquiries from Sperry, Ltd., on this subject, Sperry pointed out that the war prevented the carrying out of that portion of the agreement relating to price for the time being. Sperry stated:

We consider this portion a dead letter for the time being, especially in view of the fact that Askania has gone ahead and are selling to Rumania without waiting to find out London prices.

(The document quoted from was marked "Exhibit No. 615" and appears on p. 2384.)

Mr. MARTIN. As late as June 27, 1940, Askania wrote Sperry:

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It is true that the war prevents our new agreement coming into full action especially regarding the exchange of information all further provisions could be carried out.

(The letter quoted from was marked "Exhibit No. 616" and appears on p. 2384.)

Mr. MARTIN. As a result of these agreements, the Department of Justice in 1942 filed a complaint, and a consent decree was entered

into enjoining further performance of the agreements and making available through the Alien Property Custodian licenses under the Askania patents.

The CHAIRMAN. Do you know whether or not that contemplates the payment after the war of royalties to Askania?

Mr. MARTIN. I believe that that would be a matter for litigation after the war in view of the fact that the Alien Property Custodian, having seized all the interests of Askania in this, of course might be subject to suit on any claims that might be brought by the Askania people. That, of course, would depend on the state of the legisdation that would be enacted to take care of claims of that sort.

The CHAIRMAN. Don't you believe that it is important for that to be looked into?

Mr. MARTIN. That seems to be a possible point for inquiry, yes.

The relations between the Bendix Aviation Corporation and Siemens Apparate und Maschinen G. m. b. (S. A. M.), like those between Sperry and Aswania, resulted in the flow of much more technical information to Germany than to this country. S. A. M.-a subsidiary of the great German electrical firm of Siemens & Halske A. G.-and Bendix are important manufacturers of aviation accessories and components.

The contract between S. A. M. and Bendix entitled Bendix, among other things, to the technical data and know-how requisite for the manufactures of the Siemens electrically operated automatic pilot. Bendix never received this information and therefore was unable to manufacture this pilot for the United States Air Forces, which was sorely in need of it. On the other hand, although Bendix was entitled to sell aviation accessories to Canada under the agreement, it refrained from doing so at the request of Siemens in 1940, which had labeled Canada as "our enemies."

The CHAIRMAN. The Germans were able to utilize successfully these foreign agreements to wage economic warfare even during the war. Mr. MARTIN. That seems to be correct.

The agreement entered into between Bendix and Siemens in 1936 covered virtually all aircraft instruments manufactured and projected by the two firms, patented or unpatented, including automatic pilots. Furthermore, technical information was to be exchanged and a division of territory into which each party might sell was agreed upon.

S. A. M. undoubtedly was prompted by the Nazi authorities to secure all forms of designs and information which would aid Germany in its aircraft program. Bendix was an important source of such information and designs. In fact, the late Gen. Ernst Udet, head of the technical office of the German luftwaffe, was present during preliminary negotiations to expedite Nazi Government approval of the proposed agreement.

The CHAIRMAN. Again we see the German Government utilizing a private German company to secure technical data and know-how which was needed for the war with the full knowledge of the American company.

Mr. MARTIN. That is right.

The aircraft technical data and designs which were to be exchanged between Bendix and Siemens were necessarily of a military nature.

While Bendix readily sent the designs and information requested, it was unable to secure full techncal data and information from the German firm.

Bendix continually asked for details on the Siemens automatic pilot as shown by documents, some of which were introduced in the Vinson committee hearings in 1942. Siemens was reluctant to disclose the information desired and in November 1938 (2 years after the agreement was signed) replied that the

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* forwarding of one model of each of the said instruments will require a certain period of time because negotiations are still pending with our competent (Nazi) authorities and these must first be brought to an end (The letter quoted from was marked "Exhibit No. 617" and appears on p. 2385.)

Mr. MARTIN. At a later date, Siemens explained to Bendix that the gyros used in the artificial horizon and the directional gyro (component parts of the automatic pilot) were supplied to them by Kreiselgeräte G. m. b. H., German gyroscopic instrument manufacturer in Berlin, and they were attempting to secure the manufacturing specifications and data which they intended to transmit to Bendix within a very short time.

Kreiselgeräte, however, had been acquired by Askania Werke A. G., which, in turn, was tied in with the Sperry Gyroscope Co., as outlined above. Askania wired Sperry on April 1, 1940:

Siemens is negotiating since years license agreement with Bendix for Siemens course steering device for which they use electrical gyro and patents from Kreiselgeräte company, Berlin, which company we bought only last year. We cannot judge consequences for your company but if this should bring any difficulties to you we shall prevent Kreiselgeräte from granting such license to Siemens for Bendix. Please wire your viewpoint.

The CHAIRMAN. In other words, playing one American company off against the other.

Mr. MARTIN. That seems to be the case. Sperry immediately wired back as follows:

Greatly appreciate your cable. We prefer that Kreiselgeräte grant no license to Siemens for Bendix for automatic course steering. *

In a letter written immediately after the cable, Sperry added:

It seems to us that the granting of the suggested license to Bendix would tend to weaken the joint patent situation that you and ourselves are trying to build up in the United States, and therefore we request that the proposed license be not granted. In addition, we thought we had an understanding with Bendix that they would stay out of the automatic-pilot field in this country, so we are surprised at their endeavors to acquire this license. ** * * (Three cables and letters were marked "Exhibits Nos. 618, 619, and 620" respectively and appear on p. 2385.) Mr. MARTIN. Askania replied:

As Siemens is for both of us a serious competitor we should carefully watch their steps and work together in order to strengthen our joint situation.

We therefore felt that we should inform you what was going on over here and have, in accordance with your request, instructed Kreiselgeräte G. m. b. H., which we bought sometime ago, not to grant S. A. M. the manufacturing rights for the Gyro S. A. M. is requiring for their license agreement with Bendix regarding the S. A. M. electrical course steering device.