There is one other thing that I would like to have cleared up between us from a purely personal point of view. Bennett told me that from several remarks you had made you feel a certain amount of annoyance because of two things: (a) The activities of the United American Bosch Corporation in the aviation field. (b) Our patent policy over here in Europe. With regard to the first matter, I would like to suggest that you speak to Mr. J. E. Wild, whom I think you will find open to any proposal within reasonable limits. I have no idea what form of arrangement you can propose to him or what they can accept, but I am quite certain that you will find him entirely openminded on any proposition that takes the interests of both parties into account. With regard to the second matter, I have on several occasions tried to explain our position and to point out that, contrary to what you seem to think, our attitude is not one of antagonism to your interests, but follows the lines of a well-defined policy which is applied to all comers. We do not oppose your patents because they are your patents, but we oppose all patents which, of any origin whatsoever, can affect our interests unless we are conceded an inside position. In other words, we will always oppose the erection of fences by anybody on our possible territory unless we can get inside of the fence, and in that case we will render every assistance to make it as high as possible. Our attitude is, I think, exemplified in a number of hydraulic brake cases which have caused Stanton some annoyance. We, as you know, make vacuum servo brakes which in quite a number of instances have to operate in conjunction with hydraulic brakes. Until now these hydraulic brakes have been manufactured by Teves, Francfort, who is your hydraulic brake licensee, while the servo-brake portion has been furnished by us. This has given rise to certain difficulties, but they are a matter of detail, so I will leave them aside. There has been, however, a marked tendency on the part of Teves to try to find some substitute for the vacuum element as servo for his hydraulic brakes, an element which he would manufacture himself. This tendency is quite legitimate, and we can raise no objection to it, but if he succeeds in his efforts or becomes licensee of the B. K. interests (and the patent situation should, upon further investigation, not be sufficiently strong to stop him), it would leave us landed high and dry for anything to use in connection with the servo brake on certain applications where the hydraulic brake has been used. This might possibly force us to make hydraulic brakes in connection with our vacuum servo cylinders in order to retain our market for the latter. From this point of view we have an interest in keeping the field of the hydraulic brake as free from obstruction as possible, and we are consequently forced to oppose every hydraulic brake patent to the best of our ability unless we can get a license of rights under it. I have cited this example at some length in order to give you an insight into our attitude, which is the same in all fields where we expect to manufacture or where we see a possible hindrance to our activities. We would, for instance, oppose a gramophone patent because it might conceivably interfere with our horn manufacture-a case which has actually happened and causes us a lot of trouble. I do not believe that any big company manufacturing in a number of different lines can conceivably act otherwise without jeopardizing their interests, and from what I know, you pursue exactly the same policy in the States. There may be differences of opinion on the value of the material entered in opposition and the validity of the claim made to a license of rights on a basis of such material, but that is not a question of principie, but simply one of expediency, and it is only the principle which I am trying to outline here. I do not like the idea of misunderstandings, or even worse, of animosities standing between us and not being thrashed out right in the open, and I trust that you will appreciate this point of view. With best regards, Yours very sincerely, EXHIBIT No. 636 [Letter from E. C. Rassbach, director, Robert Bosch A. G., Stuttgart, Germany, to A. T. Murray, United American Bosch Corporation, Springfield, Mass., dated April 4, 1933. Same as exhibit 597 of the German Penetration of the American Aircraft industry storyl EXHIBIT No. 637 [Letter from Otto Fischer, NAKIB, to Frank Hamilton, American Bosch Corporation, Springfield, Mass., dated September 8, 1939] N. V. ADMINISTRATIEKANTOOR VOOR INTERNATIONALE BELEGGING, DEAR MR. HAMILTON: This morning we received your telegram: "Referring your cablegram August 25, it is important for legal reasons which sure you will appreciate that Biemond receive direct confirmation from Cromvoirt of Biemond authority to purchase from and sell to your subsidiaries all merchandise irrespective of provisions of contracts with Cromvoirt stop Furthermore Biemond currently receiving inquiries from various other parties in European and remainder territory for fuel injection equipment and other goods and expects such inquiries to increase stop Biemond interested know soonest possible Cromvoirt views concerning acceptance such orders by Biemond." to which we replied as follows: NLT Comontane New York: "Account political situation Cromvoirt cannot authorize Biemond as suggested your telegram stop Therefore we having undisputable and undisputed rights under agreements with Cromvoirt have authorized Biemond in our telegram August twenty-fourth and our letter August twenty-sixth stop If our authorization is not sufficient there is no way for Biemond legitimately to supply to or be supplied by our subsidiaries stop Regarding inquiries from independent parties recommend greatest caution as we cannot Cromvoirt will not authorize Biemond stop Biemond in this respect acting on own responsibility while we take full responsibility for contents our cablegram August twenty-fourth and letter August twenty-sixth and are willing to give written undertaking to this effect stop Hamers familiar with contents this cable. "NAKIB." We are aware of the fact that the authorization wired and confirmed in writing to ABC by us is not what ABC and particularly its counsel would like to have. However, it is impossible to get a waiver from Stuttgart, because such an action would be interpreted as high treason. On the other hands our agreements with Bosch clearly stipulate in paragraph 2: "If Bosch for any reasons should temporarily be unable to make deliveries to the Nakib firms within an adequate period of time, then the Nakib subsidiaries are not bound any more by the exclusive selling agency agreements." In addition to that, we have on file a correspondence with Stuttgart to the effect that if our subsidiaries cannot receive goods from Stuttgart they are free to buy from our manufacturing subsidiaries, which at the same time means that these manufacturing companies are entitled to deliver their goods to our trade subsidiaries. We just had a conversation over the phone with Mr. Rassbach on this subject and he confirmed the contents of this statement. Moreover, he knows the contents of our cablegram and approved of them. From the foregoing it appears to us that ABC is amply protected by our authorization, which we are willing to confirm in writing and in legal form within the limits of our agreements with Bosch given above. With regard to inquiries from or deliveries to third parties outside our group, we want to give a warning to ABC to be very cautious. It goes without saying that ABC cannot make deliveries into neutral countries, which can be supplied by Bosch. On the other hand, we doubt whether Stuttgart would or could do much to prevent ABC from making shipments to countries not open to Bosch. We assume that within a comparatively short time Bosch will get in touch with ABC on that subject. Very truly yours, N. V. ADMINISTRATIEKANTOOR VOOR INTERNATIONALE BELEGGING, (Signed) FISCHER, HAGDORN. EXHIBIT No. 638 [Letter from D. P. Hess, president. American Bosch Corporation, Springfield, Mass., to Carl Jacobsson, president, Hesselman Motor Corporation, Stockholm, Sweden, dated June 24, 1939] Mr. CARL JACOBSSON, President, Hesselman Motor Corporation Aktiebolag, JUNE 24, 1939. Stockholm, Sweden. DEAR MR. JACOBSSON: Our Mr. Wild has just returned to this country, and during our discussions we have come in contact with a situation on which I will have to ask your help. You will recall that in our letter of March 31, paragraph 7, we requested that, if at all possible, the royalty rate be reduced from 6 to 5 percent after we had made a total payment to you of $50,000. However, when Mr. Dillstrom came over he told us that you did not want to set this up in the agreement but that you would be willing to discuss this with us after the payments had reached the above-mentioned figure. This is putting us in a rather difficult situation, which I think you can understand from the following: For a good many years we have been paying to the Robert Bosch G. m. b. H. a flat royalty of 5 percent, and in view of the competitive conditions in our country, with which you are quite familiar and which have arisen over the past few years, we have requested our Stuttgart friends to reduce this royalty to 21⁄2 percent. Mr. Wild tells me that after considerable discussion in Germany the people in Stuttgart were very much inclined to do this for us, but, as you know, every situation of this kind must have the approval of the German Government, and we are therefore being requested to set up in documentary form all of our costs, selling prices, and other data for presentation to their Government. This we are, of course, perfectly willing to do, and I am personally satisfied that our case is a good one. However, here is where the bad situation develops, as described to me by Mr. Wild. The same Government officials who pass on our request for lower royalty will also have to pass on article XX of our Hesselman agreement, and they will quickly notice the flat 6-percent royalty in this agreement. As a result, it is Mr. Wild's considered judgment that it will be almost impossible to get them to agree to reduce our royalties on Bosch-designed equipment to 21⁄2 percent-on the theory that if we pay a Swedish company 6 percent we certainly should be willing to pay a German company 5 percent. Frankly, this kind of reasoning does not hold good in our own country, but I am afraid Mr. Wild is correct, and this is exactly the way they will view the situation in Germany. As a result of the above-outlined condition, and in the thought that you will thoroughly understand our position, I would be very appreciative if you will agree to reinstate this royalty provision, as outlined in our letter of March 31, in the copy of the agreement which Mr. Dillstrom took with him. It will help us tremendously, as I am sure you can appreciate our position today-and especially in relation to the German conditions existing in that country, and I am confident in the long run you will have no regrets in going along with us in this regard. Very truly yours, —, President. P. S.-Will you kindly cable us in this matter, as we are very anxious to clear up all these details at the earliest possible moment? EXHIBIT No. 639 [Letter from D. P. Hess, president, American Bosch Corporation, Springfield, Mass., to E. C. Rassbach, director, Robert Bosch A. G., Stuttgart, Germany, dated March 23, 1939] Dr. ERICH C. RASSBACH, Robert Bosch G. m. b. H., Stuttgart, Germany. MARCH 23, 1939. DEAR DR. RASSBACH: During the past several months we have been studying very thoroughly and carefully our present and future position regarding the manufacture and sale of fuel-injection apparatus. As you know, the production of Diesel engines during the past year has declined greatly, and it does not appear at this time that the output for the current year will be more than 10 to 15 percent over last year. The fundamental problem affecting the further development of Diesel engines in our country today, particularly in the volume-production type of equipment used in tractors and trucks, is almost entirely one of price. The cost of the smaller high-speed Diesel engines is entirely out of proportion to the cost of the same horsepower in the gasoline type. In many cases the Diesel engine is three or four times the cost of similar gasoline engines. The effect of this condition is that all Diesel-engine manufacturers are doing everything possible to reduce their costs, and one of the methods used has been to encourage other concerns to go into the manufacture of fuel-injection equipment on the theory that past and even present prices of this equipment are too high. Naturally, this has proven a great handicap to us, and today we face a very serious problem of materially reducing our cost. In this connection we urgently request you to work out with us a new basis of royalty payments that will make it possible for us to more successfully compete with other manufacturers of similar equipment who, of course, pay no royalties. In order that you may fully appreciate the problem facing us, we call your attention to the following facts: In 1934 and 1935, when we began domestic manufacture of fuel-injection equipment, and at which time the present 5-percent royalty basis was established, we had no competition. Today there are the following makers of fuel-injection equipment: Timken, Excello, Deco, Bendix. All of these concerns have obtained production orders that would have been placed with us. Timken, during the past 2 years, has supplied a large percentage of the equipment for Hercules production, and Timken equipment was definitely specified by the Ford Motor Co. on a recent order for 150 Diesel engines for their trucks; International Harvester is also using Timken equipment; Allis Chalmers have been using Deco equipment, and we know that they are seriously considering the use of Timken equipment; American Locomotive has been using Deco nozzles. At the present time Excello has obtained all the Chrysler pump business and is getting all the Navy business. This latter type of business is placed on open competitive bids and Excello has consistently quoted prices well below ours. Following is a list of prices, covering a period of years, which very pertinently summarizes the situation which faces us today: As you know, we are doing everything within our power to reduce our costs to meet this condition but the burden of a 5 percent royalty on sales, plus the taxes on royalty, which means approximately 13 percent increase in manufacturing costs, is a very difficult one to carry and which simply means our competitors have an advantage of 13 percent in their manufacturing costs. Another point of great importance and a major problem to us, is the fact that with the advancement in the development of Diesel engines in our country, we are faced with designing our apparatus to meet the engine requirements of this country, which means that in most cases we can no longer follow your engineering experience and practice except in a very limited way. For example, competition has forced us into the design and manufacture of a removable unit pump. As of this moment, we have actually built and tested three different designs and finally have arrived at a satisfactory type. Again, we have had to design and build governors particularly adapted to American engine design. The same thing holds good for timing devices and filters. In other words, in recent years we have had to originate and do practically all our own engineering work, using Robert Bosch efforts on only a consulting basis. This of course has resulted in quite a different procedure than originally planned in 1934-35, when it was thought that we could use Robert Bosch designs for domestic products, and which was partly accountable for setting up a royalty of 5 percent. Summarizing the whole situation, we have, as of December 31, 1938, paid in royalties to Robert Bosch approximately $160,000 exclusive of taxes thereon which amounted to about $23,000. In addition, we estimate we will pay for the period from January 1939 up to and including June 30, 1939, an additional $21,000 to Robert Bosch. In view of the difficulties facing us, as outlined heretofore, we would ask that as of July 1, 1939, all royalty payments, covering present Diesel products, as now computed and paid, be discontinued, and we establish royalty payments on the new basis as discussed during the writer's visit in Stuttgart during last November to the extent that whenever we use any design of product originated in Robert Bosch and where we do not have to use our own engineering and development departments, we will pay Robert Bosch for this design a flat sum, either in one payment or on a royalty basis. We feel sure you can realize the difficulties of our position on the old basis, and appreciate that on the new basis as outlined, we can appraise our position for a few years in advance and thus work out with you just what we can afford to pay for any development. We can in this way, as we now see the future, be able to take on and manufacture in this country, more and more Robert Bosch products for which you in turn will receive compensation, whereas with the present situation, we are almost forced to abandon any thought of manufacturing Robert Bosch products because we cannot afford, not only to pay 5 percent royalty on Diesel products, but additional royalty on other items, where we use Robert Bosch designs. Our own feeling in the matter is that in the coming years Robert Bosch will receive revenue alone from us sufficient to compensate for eliminating the present 5 percent royalty on Diesel products. In addition to this monetary consideration, we have, as mentioned heretofore, developed new products of our own that fit into your line of production; and which we will gladly turn over to you, and we feel they will be to your great advantage. As an example, we know that our new magneto design will do a splendid job on the Ford tractor as made in England, and where you may be faced with the use of a lower cost magneto. This same holds good of a removal unit pump, wherever you may need it, and our new governor has materially less parts than designs you are now using in Germany. You already know of our efforts to protect your interests in the negotiations relative to a new Swedish pump design. All of these various reasons, we feel, will receive your careful consideration and we thank you for your cooperation. Very truly yours, EXHIBIT No. 640 President. [Letter from D. P. Hess, president, American Bosch Corporation, Springfield, Mass., to L. W. Rosenthal, Root, Clark, New York, dated March 29, 1939] Mr. LEON W. ROSENTHAL, New York Branch. AMERICAN BOSCH CORPORATION, DFAR LEON: As you know, I have been considering for some time just how to handle the royalty situation with Stuttgart and have discussed the matter with Dr. Fischer on his present visit. I am now considering the fact of writing Dr. Rassbach as per the enclosed and having Dr. Fischer hand it to him personally, but strictly unofficially, and get his reaction. I am told that the officials at Stuttgart are very reluctant to make any change in our present agreements because such change, if of a major nature, involve Government approval, and it is therefore a very delicate subject for them. It is with this thought in mind that I am asking Dr. Fischer to deliver the letter personally. so that if it is inopportune Rassbach can tell him so and yet not commit himself officially in writing in any way. I would naturally like to have you and Leo Gottlieb pick it to pieces and make nny suggestions you wish. This will have to be done promptly in view of the fact that Dr. Fischer is sailing for Europe on April 8. Very truly yours, c. c. Mr. Leo Gottlieb. President. |