of acrylates and methacrylates is often loosely referred to as the acrylic field. However, the distinction between the acrylates and methacrylates is manifest in the various intercompany agreements.

The acrylates are used in the forms of aqueous emulsions and solutions in organic solvents as flexible, permanent finishes for textiles and leather. Adhesives are also made from this synthetic resin.

The first extensive commercial production of the acrylates began in Germany in 1927 when Röhm & Haas, of Darmstadt, Germany, introduced an acrylic resin in a viscous solution, which was used as the laminating layer in shatterproof glass. This resin was marketed under the trade name of Plexigum and the laminated glass made with Plexigum as the binder was marketed under the name of Plexite. Plexigum is today manufactured by Röhm & Haas, of Philadelphia, Pa., but the volume of sales is small as compared to the volume of Plexiglas sales. In 1940 Röhm & Haas Co., Inc., sold only $197,000 worth of Plexigum as compared to sales of $1,782,000 worth of Plexiglas. The decline in the sales of Plexigum is largely attributable to the superseding of Plexigum by vinyl acetal, a cheaper and more serviceable synthetic resin. However, when the first intercompany agreements were executed, primary consideration was given to the use of acrylates and methacrylates in the making of laminated glass.

B. Cartel Agreements

Röhm & Haas, Darmstadt-Rohm & Haas, Philadelphia, agreement of 1927.— The spirit of close though informal cooperation between the German and American company, was translated into a written agreement signed in Philadelphia, on October 14, 1927, and in Darmstadt on November 14, 1927.1

It provided for a division of sales territories whereby Röhm & Haas, A. G., received as its territory-Europe, Africa, and Asia-without Japan, and Rõhm & Haas Co., Inc., received North and South America, Central America, Australia, New Zealand, and Japan. The agreement provided, also, that in the case of products manufactured or sold at the date of this agreement, neither party would sell directly or indirectly within the territory of the other without the consent of the other party.

In the case of new products thereafter developed, the developing party was to acquaint the other with a view if possible to effecting an agreement whereby the other company would acquire the exclusive sales right within its territory. If such an agreement could not be effected, then the developing party was free to make an independent sales arrangement within the territory of the other, but was to refrain from using the firm name.

The agreement was to remain in effect up to April 30, 1937, and for a period of 5 years thereafter unless canceled prior to April 30, 1936. It was signed by Otto Haas for Röhm & Haas Co., Inc., and Otto Röhm of Röhm & Haas, A. G.

This agreement was drawn up primarily to prevent competition between Röhm & Haas, Co., Inc., and Rõhm & Haas, A. G., on products used in the leather-tanning trade, but it is important in the acrylic field because it made provision for negotiations pertaining to later development products.

During the early years of the 1930's Röhm & Haas, A. G., engaged in extensive research on the methacrylates and finally developed the new product called Plexiglas.

Röhm & Haas, Darmstadt-I. G. Farben agreement.-I. G. Farben had also been actively engaged in research in the acrylic field and had received a number of German patents covering the acrylates. The correspondence of this period indicates that I. G. had achieved a dominating position in Germany in the field of the acrylates, while Darmstadt dominated the methacrylic field by means of its German patent application 76098. Sometime in 1934 Darmstadt and I. G. reached an agreement which was expressly to avoid competition. Darmstedt retained control over the methacrylates and especially over cast sheeting of methyl metal crylate, while I. G. controlled the acrylates.

I. G. Farben-Röhm & Haas, Philadelphia, agreement of 1934.—On October 30, 1934, a cross-licensing patent pool was established between I. G. Farben and Röhm & Haas, Philadelphia, on their American and Canadian patents covering the preparation and application of acrylic acid and methacrylic acid. The purpose of the agreement was "to avoid any patent controversies between themselves as to the territory and subject matter covered by this contract and to regulate the conditions of manufacture and sales."

1 Exhibit 1.

2 Exhibit 2.

* * *

The contract extended to the United States and Canada.

I. G. agreed not to use or put on the market acrylic-acid products for use in the preparation of nonsplintering glass. The right to market and use methacrylic acid products as glass substitutes (i. e., cast sheets of methyl methacrylate) and the use of acrylic and methacrylic acid for adhesives was reserved to Philadelphia. Philadelphia in turn agreed not to use the contract products for the preparation of (1) Photographic articles, (2) celluloid-like masses and products made therefrom, (3) dyestuffs, (4) artificial rubber, (5) pharmaceutical articles, (6) abrasives.

The agreement provided for an exchange of licenses under existing patent rights, and also for an exchange of information on preparation of contract products. An agreement on future patent rights was to be made in each individual case. In case of possible future connections through other contracts, an explanation was to be given on an agreement reached by letter.

Neither party was to grant sublicenses except with the consent of the other. However, I. G. reserved the right to grant sublicenses to "friendly firms" (General Aniline Works and Standard-I. G.) under the license granted to I. G. by Philadelphia. I. G. was also free to grant sublicenses for manufacture of contract products used in preparation of artificial rubber.

It was agreed that until further notice Philadelphia alone would manufacture the contract products in the United States. Philadelphia further agreed to deliver contract products to I. G. and "friendly firms" at cost plus 10 percent.

I. G. agreed not to ship contract products into the United States or Canada, and Philadelphia agreed not to ship them outside of Canada or the United States and was to prevent its customers from doing so.

Within the scope of the subject matter and territory of the contract, both parties agreed not to attack the status of foreign and domestic patents of the other party, but on request were to assist one another. Any pending patent controversies were to be dropped.

The contract was to extend until June 13, 1950, and was signed for Röhm & Haas, Philadelphia, by Otto Haas at Ludwigshafen au Rhein.

As a result of this agreement and the Darmstadt-I. G. contract, competition in the United States market in the cast-sheet field by the enormous I. G. inerests never materialized.

Insofar as other uses of the acrylates and methacrylates were concerned, the Philadelphia company accepted the restrictions placed upon it by this agreement. On December 16, 1935, S. C. Kelton prepared an interoffice memorandum for Mr. Haas in which he said: 3

"We already have an agreement with I. G. in which we divide the acrylic and methacrylic field between ourselves and I. G. Under the agreement with I. G. certain uses of the products are reserved to I. G. and certain ones to us. ourselves, no longer have the right to use the products in the field for certain purposes,

* *

We,

Another restrictive feature of this agreement was that which specified that neither party was to grant sublicenses to third parties without obtaining the consent of the other. Mr. Haas in discussing this feature with I. G. stated:

66 * * * But one thing was clearly provided, namely, that third parties should be prevented from entering into the fields and therefore the exceptions were stated in the contract. Only the "friendly firms" and acquirers of licenses as to synthetic rubber should be included in the contract

**

*

During 1936 du Pont entered into negotiations with I. G. for a license under I. G. Patent 1,933,252 relating to mixtures of vinyl chloride and methacrylates made by the emulsion polymerization process. I. G. could not license du Pont under this patent without receiving the consent of Philadelphia. Since these mixtures could be employed as widely as the pure methacrylates, Philadelphia refused to assent to such a license unless du Pont was restricted from using it in cast sheeting. Negotiations pertaining to this patent and other related patents of I. G. continued until 1939 when it appears the three companies finally agreed upon a license to du Pont restricted in the manner the Philadelphia company had demanded.

During the years following the execution of the Philadelphia-I. G. 1934 agreement the restriction placed upon the Philadelphia company that it was not to use the acrylate and methacrylate resins in any of the six fields reserved to I. G. proved to be a definite hamper to the normal development of commercial

3 Exhibit 3.

4 Exhibit 4.

outlets for these resins. Writing to I. G. on December 30, 1938, Mr. Bergin complained about the effect of these restrictions, saying: '

"To illustrate how these restrictions hamper us we should like to review for you what happened in the photographic field. Back in April 1936 we were approached by the Eastman Kodak Co. for information concerning the acrylic resins. We immediately wrote to Dr. Duisberg to inquire as to what we should do. Considerable correspondence followed and the matter was discussed when Mr. Haas was in Germany in the summer of 1936 and again when Dr. Kleber visited us later in the year. It was not until December 1936 that Dr. Duisberg told us orally that I. G. would waive all restrictions in the photographic field. From April until December we were in the position of not knowing whether we could supply Eastman and as a result, could not give them our wholehearted cooperation. The uncertainty of our position eventually discouraged Eastman and by the time we obtained your oral consent, they had lost all interest and turned to another product. Had we been able to cooperate, we are confident that some profitable business would have materialized."

Bergin also pointed out that I. G. was not exploiting many of the fields reserved to it and since Philadelphia was prevented from working them by the agreement, no one was benefiting thereby.

Negotiations aimed at a modification of this agreement continued through 1938 and 1939 finally reaching a conclusion in 1940 when a written supplementary agreement was executed. It provided for a modification of the 1934 agreement as to three fields.

Photographic articles.—I. G. granted the Philadelphia company the right to deliver acrylic and methacrylic products for use in the photographic field to any interested parties in the United States and Canada with the reservation, however, that Röhm & Haas, Philadelphia, and its customers were not entitled to use existing or future patent rights of I. G. or of General Aniline and Film Corporation relating to the use of the contract products for the preparation of photographic films or articles. Röhm & Haas agreed to stop deliveries of the contract products whenever informed by I. G. that a certain customer was infringing an I. G. patent in this field.

Abrasives.-I. G. also granted Philadelphia the right to use the contract products in the field of the abrasives upon condition that Röhm & Haas observe the same restrictions as were placed on their use in the photographic field.

Celluloid-like masses.-I. G. modified the 1934 agreement so that Philadelphia was free to market in the United States and Canada the contract products for the preparation of celluloid-like masses or products made therefrom. Three patents of I. G. not in existence at the time the original contract was executed were included in this license to Röhm & Haas, Philadelhpia. There was also to be an exchange of experience in the field of celluloid-like masses.

This supplementary agreement was to expire at the same time as the principal contract.

In June 1940 there was signed another license agreement by these two corporations concerning an I. G. patent covering interpolymerization products of vinyl chloride and esters of maleic acid, a newly developed synthetic resin. This agreement differed from the others inasmuch as I. G. retained the right to market the products in the United States and Canada. The Philadelphia company agreed not to sell the contract products for the manufacture of dyestuffs, pharmaceuticals, or medicinals, including dentures. The use of the contract products for the manufacturing of photographic films and abrasives was permitted to Philadelphia but Röhm & Haas and its customers were not entitled to use existing or future patent rights of I. G. and General Aniline & Film relating to the use of the contract products for the manufacture of photographic films and articles, or waterproof abrasives.

The Philadelphia company agreed to sell the contract products to the I. G. and its "friendly firms" in the United States and Canada at cost plus 10 percent so long as I. G. did not undertake to manufacture them in the United States and 'Canada.

Philadelphia also assented to a prohibition on exports out of the United States and Canada and agreed not to attack the validity of the I. G. patent. The agreement was to run until 1957, during which time Philadelphia agreed to pay a royalty of 5 percent of the net sales price of the contract products sold.

5 Exhibit 5.

6 Exhibit 6.

7 Exhibit 7.

During the period in which these negotiations were conducted Chemnyco., Inc., 521 Fifth Avenue, New York City, the law firm of Hutz & Joslin, 521 Fifth Avenue, New York City, and Dr. Walter H. Duisberg, 521 Fifth Avenue, New York City, at various times acted as representatives and agents for I. G. Farben.

It is apparent that many of the provisions of the Röhm & Haas, Philadelphia, and I. G. agreements were not concerned primarily with cast sheets. However, these agreements and negotiations in the general acrylic field are important since they demonstrate the rigid and harmful patent control exerted by the German interests over the development in America of new and commercially unexplored chemical fields.

8

Röhm & Haas, Darmstadt-Röhm & Haas, Philadelphia agreement, 1934.-Soon after the execution of the I. G.-Philadelphia agreement in 1934 the informal understanding between Philadelphia and Darmstadt on the acrylates and methacrylates was reduced to writing. In a contract signed by Otto Haas and S. C. Kelton on November 24, 1934, on behalf of Philadelphia, and by Dr. Roehm for Darmstadt on January 30, 1935, the subject matter was delineated as those processes and products developed by Philadelphia or Darmstadt for the manufacture and use of acrylic and methacrylic acids and their derivatives.

Darmstadt assigned to Philadelphia the exclusive rights in the United States and Canada and their respective territories and possessions to all United States and Canadian patents and applications pertaining to this field which were owned by Darmstadt. Philadelphia, in turn, assigned to Darmstadt exclusive rights outside of United States and Canada to all foreign patents relating to this field subject to rights granted to I. G. in the contract of October 30, 1934.

Darmstadt agreed not to ship any contract products into the United States or Canada and Philadelphia reciprocated by promising not to ship outside of the United States or Canada and also agreed to endeavor to prevent customers of Philadelphia from so doing.

It was agreed that inventions or improvements by Darmstadt in the field of the contract were to belong to Philadelphia for exclusive use in the contract territory, and Darmstadt was to have exclusive rights outside of the contract territory in any inventions or improvements made by Philadelphia in the field of the contract subject to whatever rights I. G. might have.

Darmstadt also agreed to assign to Philadelphia any Canadian or United States trade-marks or trade names which Darmstadt possessed or might possess relating to contract products.

The decision of all questions relating to United States and Canadian patents or applications was to rest entirely within the discretion of Philadelphia. Outside of Canada and the United States Darmstadt was to decide on all patent questions subject to rights granted I. G.

Philadelphia was to pay in installments $60,000 for the rights conferred on it. Subsequently Philadelphia further agreed to pay a 3-percent royalty on Plexiglas until December 31, 1953.

Philadelphia began the commercial production of Plexiglas in March 1936 and, pursuant to this agreement, Philadelphia refused all export orders on Plexiglas, referring all inquiries to Darmstadt. On March 31, 1936, D. S. Frederick, of the Philadelphia company, wrote to Darmstadt: "

9

"We have decided to leave to you the Plexiglas sales which you may develop in the Philippine Islands. As you are handling the other foreign trade on the Plexiglas, it will be much better if you also deal with the Philippine customers." July 21, 1936, Philadelphia wrote to Darmstadt, saying:

10

* *

"We recently received a call from the Budd Wheel Co. asking that we send a representative to their office to interview two visitors from abroad, one from Italy and one from France, who were interested in Plexiglas * the Budd Wheel Co. was informed that all European Plexiglas developments were handled by Röhm & Haas, Darmstadt."

Philadelphia turned down more export orders in 1938 when it refused to sell any acrylic resins to Australia because of the restrictions imposed by the agreement with Darmstadt.11

In an interoffice memorandum of August 3, 1938,12 the Philadelphia company noted that Darmstadt had given revocable permission to Philadelphia to sell replacement parts of Plexiglas for airplanes manufactured in the United States but

8 Exhibit 8.

9 Exhibit 9.

10 Exhibit 10.

11 Exhibit 11. 12 Exhibit 12.

later exported. On these replacements Philadelphia was to pay a royalty of 10 percent instead of the usual 3-percent royalty on Plexiglas sales. Furthermore, in the case of shipments to France or Belgium a special permit was to be secured from the French licensee of Darmstadt.

On July 18, 1939, Philadelphia, having received permission from Darmstadt to quote prices on Plexiglas to Russia, reported to the German firm that if any orders were received Darmstadt would be paid a royalty of 10 percent.

With the outbreak of the European war in September 1939, Darmstadt found itself cut off from the South American and Asiatic markets by the British blockade. Accordingly, on September 14, 1939, Darmstadt sent the following letter to Philadelphia:

18

"Present-day conditions in Europe make it impossible for us for the time being to deliver to overseas markets which have been reserved for us. We would therefore like to make the following offer to you:

"You take over sales to the following countries-and this agreement can be revoked at any time: The Middle and South American States, Japan, China, and Siam.

"For the handing over of these markets you will pay us, apart from the regular license fee, 15 percent on all sales of Plexiglas to those countries.

* * *

"At the time when we will be able again to sell to the aforementioned countries you will let us have copies of all bills, price arrangements, etc., which are necessary for us in order to get back into the business again. As far as possible, abide by the prices which are known to you.

"Enclosed please find details concerning sales to the aforementioned countries. As far as possible, continue the agreements with our representatives in those countries.

"If you want to accept this offer, please cable ‘M 202 agree' and we shall notify our representatives of this agreement."

There followed a detailed account of Darmstadt's export activities in the aforementioned countries stating the distributor used, the prices charged, and the extent of business operations carried on in each country.

Philadelphia did not immediately assent to this proposal because it did not feel it could sell at Darmstadt's prices, nor could it allow a 15-percent royalty on the sales.

It was finally agreed that Darmstadt would receive a royalty figured on a sliding scale depending on the thickness of the Plexiglas, the royalty to range from 3 percent up to 25 percent of the sales price. On December 26, 1939, Philadelphia wrote to Darmstadt:

14

66* * * As we agree on the prices to be charged to your distributors, we shall make this arrangement effective immediately and we are writing to your distributors in the countries listed above. As far as possible, we shall sell through your distributors, but in some cases we may find it advisable to sell through other firms. * * * We shall keep copies of all correspondence and invoices on sales in the above-mentioned countries and shall be glad to submit these copies to you when you are ready to take over this business."

The control exerted by Darmstadt over the Philadelphia company, insofar as the world markets were concerned, is shown by the following exchange of cables in April 1940:

15

Philadelphia cabled Darmstadt on April 18, "Have inquiries for substantial Plexiglas for Dutch East Indies. May we quote?"

Darmstadt replied April 19, "Give our consent to delivery of Plexiglas to Dutch Indies today * *

The next day Darmstadt wrote to Philadelphia informing it that Darmstadt had some orders from a firm in the Dutch East Indies which Darmstadt had been unable to fill because of the war, and therefore the German company requested Philadelphia to contact this Dutch firm and inform it that Philadelphia would perform the contract in lieu of Darmstadt.

Later correspondence to Darmstadt indicates that Philadelphia was not particularly anxious to enter the export market at this time because its domestic customers were taking its entire capacity and orders were booked considerably in advance of delivery dates. On April 22, 1941, Philadelphia in a letter to Mr. Nelson Rockefeller, Coordinator, Council of National Defense, stated that it would not be worth while for the Philadelphia company to go to any great expense

13 Exhibit 13.

14 Exhibit 14.

15 Exhibit 15. 16 Exhibit 16.

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