side supplied representatives of Japan Gasoline Company with full information concerning the manufacture of various U. O. P. catalysts. Lectures were also given by various members of the U. O. P. staff and these lectures were attended by various members of the Japanese group. These lectures included alkylation, automotive research, catalytic cracking, dehydrogenation, gas fractionation, general hydrogenation, isomerization, manufacture of catalysts, engineers, patents, polymerization and test methods. In these lectures the subjects were covered fully and notes were taken by the members of the Japanese group and these notes were later checked by the member of the U. O. P. staff who gave the lecture in order that no misunderstanding would exist. After considerable tests had been made at Riverside and after several conferences, U. O. P. was informed on October 20, 1939, that the Japanese Army had decided to accept, upon recommendation from U. O. P., either the high or low temperature catalytic cracking process. Copy of Professor Horie's memorandum is attached hereto as well as Professor Horie's letter of October 27, 1939, outlining the Japanese Army's requirements. After receiving this information, design of a plant was started. This covered catalytic cracking, dehydrotransforming, gas recovery, polymerization, hydrogenation and propane butane dehydrogenation. A flow diagram No. 32555-L was prepared which gave the general layout of the proposed unit. This flow diagram was discussed in conference with members of the Japanese delegation and from time to time various changes were suggested and adopted. This flow diagram, while not giving full details, covered the general design proposed, and in engineering discussions with the Japanese delegation sizes of equipment, type of equipment, etc. were discussed. This work as well as additional tests at Riverside was carried on until the socalled "moral embargo" was invoked. Considering the quantity and quality of the information which was supplied to the Japanese representatives and considering the fact that these representatives were technical men, it is believed that they obtained sufficient information during their stay here to enable them to undertake the design of such equipment without any additional aid. It is also believed that from the information which they obtained as to catalyst manufacture that they could undertake the manufacture of the various U. O. P. catalysts. It is our belief that the information given to the Japanese representatives was as complete if not more complete than any information on these processes which we have supplied to anyone. Nippon Soda Co. (Toyoshoki Oil S. Kiyomizu, Student Ch. Eng. University of Japan Gasoline Company. A. Yatuti (Commander). T. Taira (Comm., Acct.). M. Akashi (Maj., Chemist) E. Y. Idaka, Student at University of Chicago.. 8-21-39 9-5-39 9-5-39 9-5-39 9-5-39 9-13-39 9-13-39 9-13-39 9-13-39 G. Isimaru 9-19-39 9-25-39 S. Takahashi (M. E.). [Copy of letter from W. M. Behrens, Secretary of Universal Oil Products Company, to R. L. Gilpatrick, attorney for Universal Oil Products Company] Japan Gasoline v. Universal. Mr. R. L. GILPATRICK, Cravath, de Gersdorff, Swaine & Wood, OCTOBER 30, 1940. 15 Broad Street, New York, New York. DEAR MR. GILPATRICK: This will acknowledge receipt of your letter of October 28 enclosing draft of answer in the above-entitled case to be filed by us which arrived here yesterday in the air-mail delivery about 1:30 P. M. It would seem that it is best not to attempt to allege the defense of the President's Proclamation at this time but to make a motion for leave to file a supplemental answer if and when our applications are denied. In paragraph 3 of the answer you deny the averments of the last paragraph of paragraph EIGHTH of the complaint which has to do with the dissolution of Universal of South Dakota and thereby admit the assignment from Universal of South Dakota to Universal of Delaware alleged in the first paragraph of said paragraph EIGHTH. If you will refer to paragraph 17 of the agreement of July 19, 1928, between Universal of South Dakota and Sekiguchi, you will find that that agreement is expressly nonassignable except upon the delivery of the written acceptance of the assignee to the other party. No such delivery has ever been made as far as I am informed. I also doubt if the Sekiguchi contract passed to Universal of Delaware under the bill of sale of January 1, 1932, although it may well be that a constructive assignment can be worked out, which was acquiesced in by Japan Gasoline as a result of the subsequent acts of the parties. In view of the present situation with respect to the 1928 contract and the possibility that Japan Gasoline may sue again on that contract if the applications presently pending before the State Department are denied, it would seem preferable that at this stage of the case we take the position that the 1928 Accordcontract is still in the South Dakota corporation by its express terms. ingly, it is suggested that all of paragraph EIGHTH of the complaint be denied. If we could sustain this position in Delaware, Japan Gasoline would be forced to bring an action on the 1928 contract in South Dakota because it probably cannot sustain the position that South Dakota is doing business in Illinois. If we so plead with respect to paragraph EIGHTH, should we not then deny the acts alleged to have been done by Delaware in paragraph NINTH on the theory that South Dakota retained the 1928 contract and that if Delaware did act, it did so not as successor of South Dakota but as the agent of South Dakota. The difficulty here is that the inventions sent to Japan Gasoline were inventions of Delaware because South Dakota had no pay roll as of March 1932. Of course, under Article X of the bill of sale, South Dakota has licensing rights for its "Present Licensees" under all patents of Delaware. As a matter of fact, South Dakota did not assign its patents and patent applications to Delaware until January 1936, because in the intervening period it had outstanding license agreements which effectually prevented it from so doing so that in any event the assignment from South Dakota to Delaware properly could not have taken place until, at, or about that time. For your information, in the event you are not already so informed, South Dakota is a wholly-owned subsidiary of Delaware, except for directors qualifying shares. Paragraph 5 of your draft presents a great deal of difficulty because it seems to me that you have admitted that the memoranda of August 1938, constitute a contract. The fact that they were only an agreement to make a contract is indicated by the title of all three documents, each of which contains the phrase "Tentative Understandings." There are innumerable matters of great substance on which the parties have not yet agreed, some of which you will find covered in the enclosed copies of Mr. Saneyoshi's cable to Mr. Halle of October 31, 1938; Professor Horie's letter to Mr. Halle of November 12, 1938; Mr. Halle's letter to Mr. Saneyoshi of November 22, 1938; Mr. Saneyoshi's cable to Mr. Halle of May 26, 1939; Mr. Halle's cable to Mr. Saneyoshi of even date therewith; Mr. Saneyoshi's cable to Mr. Halle of May 31, 1939; Mr. Halle's cable to Mr. Saneyoshi of June 2, 1939, and Mr. Halle's cable to Mr. Saneyoshi of June 20, 1939. By the acts of the parties there probably is a contract, but what its scope is will be very difficult to prove because when we came to drafting the definitive contracts last December, we found many points which have never even been discussed between the principals. This comment applies equally to paragraphs 6 and 7 of your draft. With reference to paragraph 8 of your draft, in view of the great mass of material furnished to Japan Gasoline and to its prospective licensees, including the representatives of the Japanese Army while they were here at Chicago, I think we should deny the allegation that the $300,000 balance is not yet due. I am informed here, although there has not been an opportunity to check with all of the personnel involved and all of the files, that sufficient information was furnished to these people of which there were some 20 or 30 in number, including drawings and specifications to enable the recipients to build a catalytic cracking unit from which it would seem there is a serious question as to whether in fact an additional $100,000 is not presently due from Japan Gasoline. In any event, it can do no harm to deny this allegation. With reference to paragraph 9 of your draft, we have collated the facts with reference to the various jobs referred to although we have not had time to make an exhaustive search. The information which follows is however, essentially correct and with it before you, you will be able to recast this paragraph. In the third paragraph of paragraph NINETEENTH of the complaint it is stated that the defendant refused to furnish the information required for the Nippon Oil Company's selective polymerization unit with the result that the construction was never started. The fact is, a complete delivery of all drawings and specifications for this job has been made with no omissions. Nippon Oil Company concluded not to have the job built by a Universal engineer as was suggested by us on several occasions. As far back as November 18, 1939, Japan Gasoline reported that the foundation work was started and in a further report on December 20, 1939, we were advised that the foundations for the receiver and boiler house had been completed. This job should have been finished long since and there is nothing further to be done by us in connection therewith. The Mitsubishi Oil Company job referred to in the next paragraph was completed under the direction of our supervising and erection engineer with the exception of a small amount of instrumentation and our engineer advises that he left complete instructions before leaving Japan for the completion of the job. The catalysts for the Nippon and Mitsubishi jobs are in Japan and there is no reason why these jobs should not have operated. With reference to the Mitsui Mining cracking unit referred to in the next paragraph, all of the drawings and specifications were shipped to Japan prior to the President's Proclamation. No erection engineer has ever been requested. With reference to the 2 jobs referred to in paragraph 6 of paragraph NINETEENTH, these are the jobs referred to above in connection with our comments relating to the $300,000 still unpaid under the first supplemental memorandum. With reference to paragraph 11 of your draft, if you will examine the contents of the enclosures, you will find that our position has been all along that the patents relating to the processes in the field set forth in the first supplemenal memorandum were not to be assigned to Japan Gasoline Company until the whole sum had been paid out, for otherwise Japan Gasoline Company would be in a position of receiving an assignment of all of our future patents in these very important fields for the sum of $100,000 and in the event of a default by Japan Gasoline, we would be forced to go to Japan to sue. For this reason the allegations in the first paragraph of paragraph TWENTY-FIRST of the complaint relating to the first supplemental memorandum should be denied. The allegations in paragraph TWENTY-FOURTH of the complaint should be denied because Japan Gasoline is presently indebted to Universal for various services rendered to it and for its licensees in the sum of $17,476.48. All of the items making up this amount have been invoiced to Japan Gasoline and there are other charges on the books which have not yet been billed. There is a further sum of approximately $10,500 due for work done in connection with pyrolytic cracking plants. By way of minimization of damages we suggest that you might bring out a little more clearly in paragraph 14 of your draft the fact that we have steadily gone forward with the work required to be done under the 1938 agreement with a view to being able to make delivery just as soon as the embargo against Japan is lifted. The foregoing has been dictated but not read by me and I will go over it promptly in the morning to see if any points have been missed. Meanwhile, we are sending copy thereof to Mr. Halle at New York and will be prepared to discuss any phase of the matter with you over the telephone any time during the day tomorrow. Yours very truly, EXHIBIT No. 457 [Copy of letter from D. Pyzel, Vice President, Shell Union Oil Company, to H. J. Halle, President, Universal Oil Products Company, dated December 15, 1938] Mr. H. J. HALLE, 50 WEST 50TH STREET, NEW YORK, December 15, 1938. Universal Oil Products Co., 50 West 50th Street, New York, New York. DEAR MR. HALLE: More than a year ago the question of exchange of information in certain parts of the field of catalytic work was discussed between us and at that time it was agreed that in the field of catalytic dehyrogenation of normally gaseous hydrocarbons complete information should be disclosed by you to the members of the Royal Dutch-Shell Group and in consideration of this disclosure your company should have for the benefit of any licensee which should thereafter account to Universal for the use of your processes in this field the power to extend immunity under all patents and inventions in the field of catalytic dehyrogenation then or thereafter owned by the members of the Royal Dutch-Shell Group. At that time you agreed that you would in each case, before extending such immunity, secure immunity under all patents and inventions in the field of catalytic dehydrogenation then or thereafter owned or controlled by the licensee designated for the benefit of the members of the Royal Dutch-Shell Group. Our reason for not granting to you at that time the power to extend such immunity to any company which holds complete license or immunity under the patents and inventions of Universal was that we did not want any such company to secure immunity for its operations under the patents and inventions of the members of the Royal Dutch-Shell Group unless it in turn granted an immunity commensurate in scope to the members of the Royal Dutch-Shell Group. We will be happy to discuss these cases directly with any such company which is interested. As a result of the incomplete information which you have thus far disclosed to us relating to the progress which you have made in the field of catalytic cracking and catalytic reforming during the past year, we have concluded that we should seriously consider at this time the installation on a large commercial scale in refineries of members of the Royal Dutch-Shell Group of one or more of the processes in this field which you have been operating either in your laboratory or on a pilot plant scale at Riverside, Illinois. For this determination we have asked you to divulge to us the full details of your research work and fundamental data relating to the design and operation of these processes. This you have indicated you are unwilling to do unless we would be willing to enlarge the arrangement heretofore made with reference to the field of catalytic dehydrogenation to include catalytic cracking and catalytic reforming. We are prepared to enter into a formal agreement with you embodying this understanding, including a more specific definition of the field in which this exchange shall take place from which is specifically excluded certain fields in which members of the Royal Dutch-Shell Group have present commitments such as, for example, catalytic processes employing sulphuric acid as a catalyst, hydrogenation, clay treating, and polymerization of normally gaseous hydrocarbons employing phosphoric acid as a catalyst. We are anxious to expedite our consideration of the erection of large commercial installations of certain of these processes and at the same time believe that they should be made available to the industry at large at the earliest possible moment for which reasons we have concluded to make this agreement with you. If our suggested arrangement is satisfactory to you, kindly indicate your agreement by signing and returning to us the enclosed carbon copy of this letter whereupon it shall become a contract between us. Very truly yours, Accepted: SHELL DEVELOPMENT COMPANY, D. PYZEL, A Member of Its Executive Committee. EXHIBIT No. 458 [Letter from J. G. Alther, Vice President, Universal Oil Products Company, to D. Pyzel, Vice President, Shell Union Oil Company, dated December 19, 1941] Mr. D. PYZEL, V. P. DECEMBER 19, 1941. Shell Union Oil Corporation, 50 W. Fiftieth St., New York, N. Y. DEAR MR. PYZEL: Having in mind our recent discussion here, with respect to your views as to Shell's rights under the immunity grants, I shall try to cover this and other subjects relating to the question of our technique with respect to immunity holders as well as paid-up licensees. Without endeavoring to give definitions for immunity holders and paid-up licensees, our policy has always been that neither are entitled to our service or our technique, unless we are properly protected and compensated for our efforts. We have never deviated from this policy. It is a normal, equitable, and accepted condition in most license agreements, current paying or paid-up, to require the licensee to grant back rights under its patents. Inasmuch as this is not the case with Shell's paid-up license, we would be willing to consider giving Shell all of our technique, to which they are not now entitled, provided Shell gives Universal licensing rights under all of Shell's patents. We cannot agree with your views that Shell, as a paid-up licensee under all of our patents, is entitled to all of our technique. The documents do not contain such provision and it is contrary to our policy and detrimental to our interests, and it certainly has never been contemplated by us at any time. If it had been otherwise, then there would never have been any necessity for Shell to enter into any written agreement to obtain Universal's technique. Even though we were not obligated to do so, we have been liberal with Shell for years in giving them our technique as we enjoyed a fine cooperative relationship with Shell and also due to our belief, through their actions, that it was Shell's intention always to protect our structure. There is much evidence accumulated over a long period of years that substantiates this belief, such as existing written agreements in certain fields and, up to a year ago, our joint efforts in negotiating further agreements. As time progressed, we were compelled to modify our policy with Shell. Other security or immunity holders, who were not given our technique unless they entered into written commitment to protect our structure, felt that we were unfair to them in our liberality with Shell. The fact that Shell was getting our technique without a broad agreement created a rather embarrassing situation, which was only partly relieved by the fact that Shell had made separate agreements with us in certain defined fields. Moreover, there was the question of patents, interference cases, etc., which likewise became a troublesome problem. Then too, others in the Shell organization became more active in this matter, resulting in misunderstandings which unfortunately crept into 84949-44-pt. 16-16 |