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been very successful: It is estimated that 85 percent of all fluorescent lighting fixtures for industrial installations are manufactured by R. L. M. manufacturers, and the Fleur-O-Lier Association now consists of about 30 manufacturers who make the majority of all fluorescent lighting fixtures for commercial installation. The public, despite the concerted efforts of the Mazda lamp manufacturers and the utilities, has found out that fluorescent lamps can be used as a source of general illumination and that their use as such is more economical than use of incandescent lamps.

The fact that the efforts of the Mazda lamp manufacturers and utilities to stifle the development of the fluorescent lighting industry and to keep from the public the fact that fluorescent lighting can be used to save on electricity bills has not been completely successful is largely due to the activities of Hygrade in energetically promoting and publicizing fluorescent lighting. Hygrade commenced manufacturing fluorescent lamps almost as early as General Electric and Westinghouse and, despite the efforts of General Electric and Westinghouse and the utilities to prevent it, Hygrade's business in these lamps has continuously grown and developed. At the present time Hygrade is selling large quantities of fluorescent lamps which are being extensively used to illuminate defense plants and buildings being employed in our war effort. But an effort to regulate even this supply is now in the making.

General Electric has sought to restrict the number of fluorescent lamps which Hygrade should sell by causing Hygrade to sign an agreement whereby it would be licensed by General Electric to make fluorescent lamps and would be entitled to manufacture only a limited, small number of lamps based upon a quota set by General Electric. This effort failed, and because the activities of Hygrade in the fluorescent lamp industry has prevented General Electric and Westinghouse from getting control of the fluorescent lighting industry and has thwarted to some extent the efforts of General Electric and Westinghouse and the utilities to regulate the use of fluorescent lighting, General Electric has instituted suit against Hygrade under certain fluorescent lamp patents which it purchased. By this suit it is seeking to have Hygrade enjoined from continuing to manufacture lamps. If the suit succeeds, General Electric and Westinghouse and the utilities will undoubtedly be left in complete control of the fluorescent lighting industry, and will then be able to completely control the use of fluorescent lighting on the basis decided upon by General Electric and Westinghouse and the utilities.

EXHIBIT No. 3

STATEMENT SUBMITTED BY HON. THURMAN ARNOLD REGARDING STANDARD OIL CO. AND THE DEVELOPMENT OF SYNTHETIC RUBBER

Perhaps the best criterion to use in judging the merits of S. 702 is to assume that it had been enacted and in operation prior to the present war. A good case can be made for the proposition that it was due primarily to the absence of a well-established technical organization such as is contemplated by this bill that the country finds itself in its present plight. Particularly in the field of synthetic rubber is this so. Looking back over the history of the rubber problem in the last few years, one of the most obvious shortcomings in the handling of the program is that of the absence of technical knowledge on the part of Government agencies and officials dealing with the problem.

Documents in the files of the Department of Justice, many of which have been placed on record in the various hearings before Senate committees, tell a story that is tragic as one contrasts it with what might have been. The synthetic-rubber story is largely one of the relationship of I. G. Farben, Standard Oil Co. (New Jersey) and certain other companies which negotiated with one or both of them. Briefly that story is as follows: I G. Farben developed the Buna type of synthetic rubber in the latter part of the 1920's. It made a series of agreements with Standard Oil (New Jersey) in 1929, one of which contemplated the domination by I. G. Farben of the future chemical developments sponsored by the two companies working together. A joint company for the exploitation of certain chemical processes was organized in 1930. An abortive arrangement for testing and working with the Buna rubber was made by the joint company and the General Tire & Rubber Co.

Goodrich and Goodyear were both experimenting with synthetic rubber and during the 1930's both companies made strenuous efforts to procure from I. G.

Farben and Standard an arrangement which would permit their participation in the development and exploitation of the Buna patents.

In 1938 the pressure from these companies became so strong and the threat of their going ahead independently of I. G. Farben and Standard so imminent that I. G. Farben and the Hitler government were induced to give some indication of willingness to permit exploitation of the Buna patents in this country. An official came to the United States in the fall of 1938 and under the auspices of Standard contacted all the large rubber companies. They were given to understand that the German Buna would be made available to them. In the spring of 1939 an expert was sent over to instruct the rubber companies in the processing of the German Buna and samples were sent to the various companies for making test tires. The know-how on making the synthetic rubber itself was not given to anyone outside Germany because the Hitler government prohibited it.

The thing which had caused some relaxation in the Hitler policy of not per-mitting any exploitation of the Buna patents in this country was an agreement made between Standard officials and I. G. Farben officials in Berlin in the spring of 1938. In order to persuade I. G. Farben to try to procure the consent of the Hitler government for exploitation here of the Buna patents Standard gave I. G. Farben and hence Germany a full disclosure of its own syntheticrubber process for making Butyl rubber and also supplied samples. On receipt of this information, I. G. Farben agreed tto do what it could do to persuade the Hitler government to relax its prohibition against exploitation outside of Germany of the Buna rubber. When consent was obtained in the fall of 1938 the official came over as previously stated. The war broke out before any further steps were taken to supply the German Buna rubber to American processors.

In September 1939, shortly after the out-break of the war, Standard and I. G. Farben officials met at the Hague. Arrangements were made for Standard to take over the exploitation of the buna and other I. G. Farben patents in United States, Great Britain, and France. By this transaction the independent development of synthetic rubber was made much more hazardous than it would have been had no such transaction taken place. If the buna patents had remained in the name of I. G. Farben the rubber companies of this country would have had little to fear in the way of harassing infringement suits. It is quite certain that the courts would not lend themselves to the suppression of the production of vital war material at the suit of patentees who were nationals of the countries we are arming against. By assigning their patents to Standard, I. G. Farben made it possible not only to attempt to avoid seizure of the patents by the Alien Property Custodian but immediately injected a threat of infringement into the picture which otherwise would not have existed. Nor was it a mere threat. In October just a few weeks before Pearl Harbor, Standard's subsidiary, Jasco, sued the Goodrich subsidiary, Hycar Chemical Co., to enjoin the latter from making synthetic rubber because of an alleged infringement of the I. G. Farben patents which had been assigned to Standard. Goodyear was notified of the possibility of a similar suit against it. Thus a short time before Pearl Harbor the assignee of the I. G. Farben patents, which was not itself manufacturing synthetic rubber, was not in any position to manufacture large amounts of synthetic rubber for tires and similar uses was attempting to block the manufacture by American rubber companies which had for nearly a decade been attempting to participate in the synthetic rubber program.

Having made disclosure of its information concerning butyl rubber to the Germans, Standard continued working on its development with no disclosure to others in this country. Although its technical and commercial employees realized the desirability of working with a rubber company to facilitate its development the management refused to permit this and it was not until the summer of 1940, more than 2 years after the disclosure to the Germans, that arrangements were made with Firestone and United States Rubber for testing butyl rubber for tires. The tests then made were intended to determine whether reasonably satisfactory pasesnger tires could be made of butyl rubber. It was the conclusion after a few weeks of testing that a fairly satisfactory tire could be made from butyl rubber and that superior inner tubes could be made from it. And yet the first plant for producing butyl rubber on a commercial scale has been put in operation within the past month.

In June 1940, Vice President Wallace, then Secretary of Agriculture, told the agricultural subcommittee of the Senate Appropriations Committee, "The current price (of natural rubber) is perhaps 24 cents per pound; but I think with those

improved strains undoubtedly it will be possible to produce it for less than 12 cents a pound. And frankly, I do not think any of the synthetic rubbers can meet a price of 12 cents a pound." He was familiar to some extent with butyl rubber because its coinventor, W. J. Sparks, had left the employ of the Standard Oil Development Co. and was employed at the Northern Regional Research Laboratory of the Department of Agricultural at Peoria, Ill. What Mr. Wallace and possibly Mr. Sparks did not know was that butyl rubber was one type of synthetic which could be produced for less than 12 cents a pound, the rockbottom price of crude rubber. Just 2 weeks before Mr. Wallace made his statement to the Senate committee Standard's engineers had submitted cost figures indicating a probable production cost of butyl rubber in a 300-ton-perday plant of 6.6 cents per pound. Ten percent depreciation would add only slightly more than 1 cent per pound. A few months later on November 27, 1940, the same engineers estimated production cost of butyl in a 50-ton-per-day plant at 5.72 cents per pound, exclusive of depreciation and 7.07 cents with 10 percent depreciation.

Butyl rubber is unquestionably the cheapest of all synthetic rubbers and has already demonstrated its usefulness. One of the small number of tires which have been made from it has run 25,000 miles at speeds up to 50 miles per hour. Inner tubes made of it are superior to natural rubber tubes because practically no air is lost through the wall of the tube. For gas masks and barrage balloons it is also superior. Flotation gear such as life rafts for airplanes is inflated by releasing carbon dioxide. Butyl rubber is nearly 60 times as impermeable to carbon dioxide as is natural rubber.

From the foregoing it seems clear that the plight we are in with regard to shortage of synthetic rubber is largely due to Government agencies not having information which was known to private companies and part of which had been given to Germany.

If such an organization as the proposed Office of Scientific and Technical Mobilization had been functioning in 1940 and 1941 things might well have been different. Goodrich and Goodyear both were anxious to have a large development of synthetic rubber in this country and concerned by the restrictions which Standard was placing upon them could have gone to the Office of Scientific and Technical Mobilization with confidence that something would be done about the matter. W. J. Sparks, coinventor of butyl rubber, who had left Standard to take Government employment when the company failed to push development of butyl as he thought it should, would have had a logical agency to turn to in his advocacy of butyl rubber.

The various Government agencies such as the Office of Production Management, Office for Emergency Management, War Production Board, Rubber Reserve Company, and the Office of the Rubber Director which have dealt with the rubber problem could have looked to a trained body of Government technicians for factual information. Instead, they have been forced to get their facts from officials of private companies which are vitally concerned in the policies which will be predicated on such facts.

EXHIBIT NO. 4

STATEMENT OF WALTER R. HUTCHINSON, SPECIAL ASSISTANT TO THE ATTORNEY GENERAL, BEFORE THE SENATE COMMITTEE ON PATENTS, APRIL 20, 1942

SECTION I. INTRODUCTION

It has been proposed to examine patent abuses which have hampered the development of the plastics industry. However, the plastics industry is composed of dozens of large firms manufacturing scores of different kinds of plastics so that an adequate survey of patent abuses in this field would consume too much time to be practicable for the purposes of this inquiry. For this reason the Antitrust Division wishes to present a case history of an investigation made in one field of plastics, hoping thereby to illustrate a patent pattern which is known to be prevalent among many other types of plastics.

Before taking up the patent history of the case selected, we propose to outline very briefly the scope of the plastics industry as a whole.

It has been estimated that the total output of all plastics during 1941 was about 300,000,000 pounds representing an aggregate value of approximately $500,000,000. The industry has developed tremendously in the last 10 years and many industrial experts look to plastics not only to substitute for many critically

short metals during this war, but also to supersede metals, glass, and wood for many uses after the war.

The war effort is relying heavily on plastics for such implements of war as the following: Navy mosquito boats made of laminated phenol formaldehyde plastic, parachute flares, crash helmets for use by the Tank Corps, windbreakers, i. e. tips on shells, bayonet sheaths, gun stocks, and bayonet handles. These are merely some of the war needs for which plastics are being utilized.

Now let us consider the facts developed by the Antitrust Division's investigation into one of these plastics, namely, methyl methacrylate.

In the course of this investigation the Antitrust Division discovered there existed five corporations, two American, one English, and two German, which were linked by a series of secret cartel agreements. Before presenting the evidence of their activities, we wish to give a brief thumbnail sketch of these corporations for purposes of identification.

(1) Röhm & Haas Co., Inc., of Philadelphia, Pa. (hereinafter sometimes referred to as Philadelphia or R. & H.), a company organized under the laws of Delaware about 1917, is engaged in the manufacture of various chemicals and chemical products, including particularly acrylic resins. The history of this company dates back to the early 1900's at which time Dr. Röhm, a scientist, and Mr. Haas were partners in a chemical business in Germany. Subsequently Mr. Haas came to the United States and organized a partnership to exploit the chemical industry with products developed by Dr. Röhm in Germany. Dr. Röhm expressed interest in the acrylic resin field prior to the last war, but it was not until after that time that he applied for United States patents on his inventions. The patents which issued were licensed or assigned exclusively to Röhm & Haas Co. which was also engaged in experimentation for the purpose of promoting development in this field. Through the cooperation of the two firms Röhm & Haas Co. is probably the leading producer of acrylic plastics in this country.

(2) Resinous Products & Chemical Co., Inc., of Philadelphia, Pa., organized under the laws of Delaware in 1926 is a company engaged exlusively in manufacture of synthetic resins. The officers of this company are identical with those of the Röhm & Haas Co., and the majority interest in the capital stock is owned personally by Mr. Haas. This company holds exclusive licenses from a German and American chemical company under United States patents covering manufacture of probably the best synthetic resin used as a laminating bond in production of plywood. Plywood is being used extensively by British and German firms in production of aircraft. Production of plywood planes for use as military transports has been started by one of the largest United States aircraft producers, as a short cut to providing needed aircraft without using strategic materials.

(3) Röhm & Haas, A. G. of Darmstadt, Germany (hereinafter sometimes referred to as Darmstadt), organized under the laws of Germany, is a company engaged in manufacture of various chemicals and their products. This firm which is the outgrowth of the partnership between Dr. Röhm and Mr. Haas acquired many of the basic patents in the acrylic plastic field under which Röhm & Haas of Philadelphia was later licensed. Little information is available as to who now controls and prescribes the policy of this firm. (4) I. G. Farbenindustrie, A. G. of Frankfurt a Main, Germany (hereinafter referred to as I. G.), was organized under the laws of Germany in 1925 as a result of a merger of the six largest chemical and dye producers of Germany. This company virtually controls the entire chemical industry in Germany. I. G. owns and controls many basic patents under which both R. & H. and du Pont have been licensed relating to the acrylic plastic field.

(5) Imperial Chemical Industries, Ltd. of London, England (hereinafter referred to as I. C. I.), a corporation organized in 1927 under the British laws, is one of the largest industrial companies in Great Britain and is the chief factor in the British chemical industry. I. C. I. owns and controls certain basic patents relating to the acrylic plastic field under which du Pont and Röhm & Haas Co., Philadelphia, are licensed.

(6) E. I. du Pont de Nemours & Co., Inc. (hereinafter referred to as du. Pont) probably the largest United States corporation engaged in production of chemicals, is comprised of departments and subsidiaries, each of which retains its own identity, but is controlled by the parent company. For the purposes of subject matter involved here, especial attention has been given to activities of the ammonia and plastics departments. The ammonia depart

ment produces the basic plastic materials which are then converted by the plastics department into manufactured articles.

SECTION II. METHACRYLATES

4. Description of methyl methacrylate cast sheeting and its orientation in the acrylic field

Methyl methacrylate is indispensable to our war program since every military airplane (with the exception of some trainer airplanes) built in the United States is equipped with cast sheets of methyl methacrylate, a glass substitute, marketed under the trade names of Plexiglas if manufactured by Röhm & Haas Co. of Philadelphia, Pa., and Lucite if made by E. I. du Pont de Nemours of Wilmington, Del. These two companies are the only manufacturers of this material in the United States. According to the 1940 annual report of Rohm & Haas Co., this corporation handles 85 percent of the aircraft trade. Plexiglas and Lucite are employed exclusively on military airplanes for cockpit enclosures, transparent bomber noses, gun turrets, landing light covers, and windshields.

Cast sheeting of methyl methacrylate has supplanted the use of glass in this field because of its superior qualities. It is less than half as heavy as glass, it is shatterproof, and possesses a permanent, colorless transparency which is superior to optical glass. Lucite and Plexiglas are thermoplastic and can be easily formed into domes and "blisters" for bombers.

There are other synthetic resins which have been used as glass substitutes in the airplane field but none of them possess the particularly advantageous properties of methyl methacrylate sheets. Sheets of cellulose acetate are used in some trainer planes and nitrocellulose sheets have been installed on some of the cheap, privately owned airplanes, but both cellulose acetate and nitrocellulose sheets discolor, warp, and craze upon exposure to sun and weather, thereby rendering their use for military purposes inadvisable. The use of laminated glass, comprised of a plurality of glass sheets bound together by a resinous material, has proved disadvantageous for military airplanes because of the extreme weight of such material. However, it is used on some commercial airplanes.

For military airplane purposes, then, there is no suitable substitute for Plexiglas and Lucite.

In addition to this vital and indispensable role played by methyl methacrylate cast sheets, this material because of its peculiar properties has had a wide range of uses in the commercial, scientific, and industrial fields. Despite its similarity to glass in appearance, methyl methacrylate sheeting can be sawed or carved like wood, can be machined, drilled, and threaded like any soft metal. Designs, figures, and letters can be reproduced on this synthetic resin by stamping, painting, or engraving. As a result, the material is utilized in medical instruments, contact optical lenses, eyeshields, safety goggles, machine-inspection windows, tableware, furniture, household decorations, marine sprayshields, display fixtures, edge-lighted signs, and jewelry. These are but some of the uses.

The form of methyl methacrylate in cast sheets is the most important from a national defense standpoint because of its aircraft role, but this synthetic resin is also manufactured in the form of rods, tubes, commercial molding powders, and denture base materials. These are the polymerized, i. e., solid, forms of methyl methacrylate used commercially.

The chemical in its monomer or liquid form is also employed to impregnate wood, cloth, paper, electrical coils, and then polymerized to a solid to act as a resinous coating.

For an understanding of the intercompany agreements which are discussed later, the orientation of methyl methacrylate to other allied synthetic resins is necessary. Methyl methacrylate is a derivative of methacrylate, which in turn is strikingly similar to the molecular structure of the acrylates. Carbon, hydrogen, and oxygen are the elements which compose all these resins; differences are achieved by the grouping of the elements. Thus, chemically, methyl methacrylate is closely allied to the acrylates, but the methacrylates, of which methyl methacrylate is a type, possess certain physical properties different from the acrylates. The acrylates are soft, sticky, semiliquids, whereas the methacrylates are harder, tougher, and less elastic than the acrylates. Colorless transparency, stability against aging, thermoplasticity, and resistance to most chemicals, are characteristic of both acrylates and methacrylates as a group. This entire grouping

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