to develop the South American trade since there was a good chance that its right to sell in South America might be cut off when the war ended, and therefore the company was perfectly willing to stop all further sales of Plexiglas and Crystalite to South America, if Mr. Nelson's department thought it advisable. The ramifications of the Philadelphia company's South American trade in other products not covered by the Darmstadt agreement are developed later.

However, it is well to note here the effect of the restrictions of the DarmstadtPhiladelphia, and I. G.-Philadelphia agreements upon the marketing of another of the acrylic products, namely, Plexigum, which is used as the intermediate layer in laminated safety glass. In these agreements Philadelphia agreed not to export Plexigum and agreed to endeavor to prevent its customers from so doing.

Inasmuch as the Philadelphia company did not manufacture sheet glass, it entered into an agreement May 23, 1935, with the American Window Glass Co." whereby the latter agreed to use Plexigum exclusively in the manufacture of laminated glass. The agreement also provided that Philadelphia was to pay American Window Glass Co. one-third of the net profits from sales of Plexigum. The Philadelphia company also agreed not to sell except to certain-named customers without first consulting American Window Glass Co. as to the advisability of selling to others. Those to whom Philadelphia was free to sell were Libby Owens Ford Glass Co., Pittsburgh Plate Glass Co., American Window Glass Co., Bausch & Lomb Optical Co., and any automobile manufacturing company. It was further agreed that Philadelphia would sell Plexigum to those only who would exploit its use in the manufacture and sale of laminated glass "in a manner not inimical to the best interests of the several licensees."

Philadelphia agreed to take all reasonable efforts to prevent the importation into the United States and Canada of Plexigum and particularly by or on behalf of Darmstadt or its licensees.

American Window Glass agreed to endeavor to induce laminated-glass manufacturers to buy Plexigum from Philadelphia.

All improvements and inventions relating to the manufacture of Plexigum or method of manufacturing laminated glass were to become part of the subject matter of this agreement.

American Window Glass Co. agreed to assign to Darmstadt all of its rights outside of the United States and Canada insofar as they related to the process of making laminated glass with Plexigum.

American Window Glass Co. also agreed not to export, without the consent of Darmstadt, laminated glass made with Plexigum except when such glass was part of a finished product equipped therewith, such as automobiles or airplanes.

The contract was to last until 1951 and was signed by William L. Monro, president of American Window Glass Co., and Otto Haas, president of the Philadelphia company.

During 1935 the American Window Glass Co. sought to have the restrictions on exporting to South America lifted but this was never accomplished because both Darmstadt and I. G. Farben had to agree upon this modification of their agreements with Philadelphia through whom the American Window Glass Co. claimed. Darmstadt consented but the modification was blocked by I. G., and American Window Glass discontinued its efforts.

In 1936 the Pittsburgh Plate Glass Co. introduced into the laminated glass market a vinyl acetal resin which undersold Plexigum and proved technically superior in some respects. During the next few years Plexigum was largely displaced by this vinyl acetal resin so that at the present time Plexigum no longer retains the commercial importance it once possessed.

18

Imperial Chemicals Industries-du Pont agreements.-On July 1, 1929, Imperial Chemicals Industries, Ltd., of Great Britain and E. I. du Pont de Nemours executed a cross-licensing agreement whereby Imperial Chemicals Industries agreed, upon request, to grant du Pont an exclusive license to make, use, and sell within North and Central America, exclusive of Canada, Newfoundland, and British possessions, but otherwise inclusive of the West Indies, enumerated products made by either present or future patents and secret inventions controlled by I. C. I., and du Pont granted Imperial Chemicals Industries a reciprocal right as to the British Empire, inclusive of Egypt, but exclusive of Canada and Newfoundland. Each agreed to grant the other a nonexclusive license within all other countries except Canada and Newfoundland, not in the specified exclusive territories.

The agreement contained an extensive list of products covering many chemical fields. Among these products were "acids, both organic and inorganic, for both

17 Exhibit 17.

18 Exhibit 18.

the heavy chemical industry and special industries." This provision could cover acrylic acids and later it was so interpreted by du Pont and I. C. I.

The agreement was signed by Lammont du Pont, president, and M. D. Fisher, assistant secretary, for the du Pont Co., and by H. McGowan, president and director, and R. A. Lynex, assistant secretary, for the Imperial Chemicals Industries. The term of the agreement was 10 years.

A supplemental agreement was executed on December 27, 1934,19 between these companies which provided (1) that each party had the right to exclude from the operation of the agreement inventions and secret information relating to products for military purposes; and (2) that the licensor had the right in all cases and in all territories to sell products covered by any licensed invention.

On June 30, 1939, I. C. I. and du Pont renewed their agreement of 1929 as modified by the 1934 agreement.20 The new agreement incorporated a few minorchanges and was to remain in force until 1948.

The correspondence from the du Pont files indicates that du Pont remained out of the territory reserved exclusively to I. C. I. As soon as du Pont began commercial production of the methyl methacrylate resins in early 1939 it adopted the procedure of refusing all orders emanating from the British Empire and referring them to I. C. I. In special instances where I. C. I. was not yet in commercial production on certain types of methacrylate resins, I. C. I. instructed du Pont to fill British orders until such time as I. C. I. was in a position to supply them itself. Otherwise the division of markets was followed strictly, thus indicating that the right of the licensor to sell in the licensee's exclusive territory was not exercised but merely inserted to mask illegality.

Contemporaneously to the research efforts of Philadelphia, Darmstadt and I. G., Imperial Chemicals Industries had emarked upon extensive research pertaining to the acrylic field. United States Patent 1,980,483 issued on November 13, 1934, to Rowland Hill, who assigned to Imperial Chemicals Industries. This patented as a new composition of matter the polymer of methyl methacrylate. This patent dominated the manufacture of cast sheets of methyl methacrylate, e. g., Plexi-glas, since it would be an infringement of this patent for any unlicensed person to use polymerized methyl methacrylate.

Du Pont-Röhm & Haas, Philadelphia, agreement of 1936.-Pursuant to the Imperial Chemicals Industries-du Pont agreement of 1929, du Pont received the exclusive American rights under the Hill patent from Imperial Chemicals Industries. Du Pont also filed an application for a patent on the monomer of methyl methacrylate. Philadelphia filed an application for Hollander and Neher (both research chemists of the Philadelphia company) which copied the claims of the Hill patent and the du Pont application on the monomer. The Patent Office declared an interference, 70829, between these claims. The evidence indi-cates that Philadelphia's scientists had discovered the polymer of methyl methacrylate in June 1931, whereas Hill's priority date was November 17, 1931, but proof of the date of discovery claimed by Philadelphia was very weak. Since du Pont already possessed a patent on the polymer of methyl methacrylate, Philadelphia could not attack the validity of this patent in an interference proceeding but could seek a patent on this material for itself. This was Philadelphia's objective in this interference. Both du Pont and Philadelphia had filed applications covering the monomer of methyl methacrylate, but both apparently realized the monomer was unpatentable. No patent was subsequently issued on the monomer claims of either party.

Concerning the strength of the Hill patent as it pertained to the polymer, J. F. Bergin, the patent attorney for the Philadlphia company, asserted in various interoffice memoranda that the Hill patent was of very questionable validity and that should Philadelphia lose the interference, it could afford to disregard this patent. Later when the du Pont-Philadelphia agreement was about to be signed, Mr. Bergin changed his views and declared the Hill patent was valid.

The weakness of the Hill patent was also recognized by du Pont for in an interoffice memorandum writtten May 29, 1935, by W. R. Gawthrop to F. A. Wardenburg the writer admits the patent is of questionable validity. Furthermore, on June 19, 1935, E. G. Robinson, general manager of the organic chemicals department, wrote to F. A. Wardenburg.'

22

"If the Hill patent were strong and would give us a dominating position in the field of methyl methacrylate, we might hesitate to give up that position:

19 Exhibit 19.

20 Exhibit 20. 21 Exhibit 21. 22 Exhibit 22.

* * if, however, there is a considerable doubt as to its valadity, a settlement may be the best method of safeguarding our position.

23

* *

October 31, 1935, J. M. Castle, Jr., of du Pont's patent division, mentioned in a letter to A. E. Pitcher, president of du Pont Viscoloid Co.," that66* * ** the danger that the Hill patent is invalid due to anticipation seems appreciably greater than the danger of losing the patent to Röhm & Haas in this interference."

A number of interferences, seven in all, were declared between Philadelphia and du Pont during 1935. The most important of these, except for the interference on the polymer of methyl methacrylate, concerned the use of acrylic and methacrylic acid as the intermediate layer in laminated glass. Philadelphia held the upper hand in this interference. The other interferences concerned combinations of acrylic and methacrylic acid, which apparently had little commercial importance.

Beginning in July 1935 Otto Haas entered into negotiations with du Pont officials, principally F. A. Wardenburg, general manager of the ammonia department, looking toward a settlement of these interferences. Otto Haas reported on July 8, 1935, that "we (Haas and Wardenburg) shall both think the situation over, clearly keeping in mind what arrangements would be possible and suitable after the interferences and patents have been cleared up."

24

Otto Haas was determined that in case the interferences were settled by a cross-licensing agreement, du Pont should not receive any rights in the laminated glass field or in the acrylic acid field.

25

October 29, 1935, Otto Haas reporting on a conference with F. A. Wardenburg,2 stated that in reply to Wardenburg's question as to how the companies could cooperate in the event they reached an understanding on methyl methacrylate, Haas replied:

66

* * we could think of a price agreement on the finished product, or a division of our interests. I told him we have not only our own interests at stake, but also the ones of our German house and the I. G."

26:

It should be noted here that Philadelphia had asked permission from I. G. to settle the interferences between Philadelphia and du Pont. I. G. replying through Chemnyco on September 13, 1935, gave assent to such a settlement but recommended that a restriction on the resale of the products was highly desirable." Also at this time, I. C. I. was negotiating with Darmstadt for an agreement on methyl methacrylate cast sheeting. This agreement which is described later was signed after the execution of the du Pont-Philadelphia contract.

It is clear from the correspondence in the files of the du Pont and Philadelphia companies that Otto Haas had in mind an agreement which went far beyond settlement of the interferences. J. M. Castle, Jr., of the patent division of du Pont's legal department, in a letter of October 31, 1935, to A. E. Pitcher recounts the proposals made by Mr. Haas in a conference with Mr. Wardenburg. Referring to the methyl methacrylate field, the writer states: 27 "Mr. Haas suggested a possible commercial arrangement whereby each party would have its customers which the other would leave strictly alone."

On December 19, 1935, Mr. Haas forwarded to du Pont a tentaive rough draft of the proposed agreement which provided inter alia:

28

66* * * it is agreed that R. & H. and du Pont will cooperate in the exploitation of the solid polymer of the methyl ester of methyl methacrylate and that the du Pont Co. will not engage in the manufacture or sale of the polymeric forms of the other esters of acrylic or methacrylic acid

*

*

The illegality of such a proposal was recognized by W. R. Gawthrop of du Pont in a memorandum to F. A. Wardenburg in which the writer argues that du Pont should not concede so much to Philadelphia and then proceeds to say:

29

"Even if the substance of the foregoing restrictions were acceptable to us, the method proposed for setting them up could not be approved. As proposed by Mr. Haas, the agreement would be a violation of the Clayton Act. So far as we are concerned any such apportionment of rights would have to be accomplished by actual licenses, or omissions of licenses, under patents or applications, and not by an agreement not to engage in some particular line of manufacture.”

Although du Pont's position on the wording of the agreement prevailed in the final draft, the actual effect of the agreement was that du Pont remained out of the field of laminated glass using an intermediate of acrylate, and in a broader way stayed entirely out of the acrylates as differentiated from the methacrylates. Mr. Wardenburg in a meeting with Mr. Haas as late as February 7, 1941, indicated that du Pont still resented being kept out of the acrylate field and wished this restriction removed.

30

31

On March 5, 1936, the differences between Philadelphia and du Pont were finally ironed out and the agreement was signed by Otto Haas and S. C. Kelton for Philadelphia and W. F. Harrington, vice president, and E. A. Howard, assistant secretary for du Pont. The interferences were to be terminated by concessions of priority in favor of the party entitled to prevail as determined by the respective attorneys after considering the evidence of priority submitted by both sides. Du Pont and Röhm & Haas, Philadelphia, granted each other nonexclusive royalty free licenses under all United States patents and future patents granted on applications in the interferences to manufacture, use and/or sell the products or inventions insofar as they related to the acrylic and methacrylic acid fields. However, du Pont received no license from Philadelphia under any patent claim to laminated glass or to polymers or interpolymers containing acrylic acid. The licenses carried no right to sublicense except that each party had the right to grant its customers purchasing contract products a sublicense to process and sell the products throughout the United States. The agreement was to remain in effect until expiration of the last patent under which a license was granted.

On the same day the contract was signed F. A. Wardenburg wrote to Otto Haas that in order to avoid any misunderstanding he wished to point out that though the preamble stated du Pont had exclusive rights in the United States as to the I. C. I. patents within the field of the agreement, the exclusive licenses to du Pont did not exclude I. C. I.'s right to sell the patented products within the United States. To this Mr. Haas replied on March 7, 1936.3

*

32

"Whenever in the past we have acquired foreign licenses under an exclusive license arrangement, it was understood that the seller kept out of our market. Therefore* * I took it for granted that the exclusive rights * * * meant that the I. C. I. would stay out of the United States. * * *k The value of the agreement depends a good deal on the I. C. I.'s plans and intentions in the United States. If they wish to sell here moulded articles, it is one thing. If they intend to sell moulded powders and polymers in solution, it is another." On March 9, 1936, Otto Haas reported that F. A. Wardenburg had assured him by telephone "* there is not any chance at all that I. C. I. will attempt to disturb the market, either by importations or otherwise." In another telephone conversation held with Mr. Wardenburg on April 3, 1936, Mr. Haas reported that Mr. Wardenburg stated.34

* *

*

66* * * I. C. I. reserves to itself the right to sell in the United States in emergency cases, but Mr. Wardenburg assured me that although this has been in force for many years, such an emergency has never arisen * In a letter of April 9, 1936, Mr. Wardenburg again wrote to Mr. Haas: 35 "I can only reiterate what was stated in my letter of March 5, namely, that in our license from I. C. I. they reserve the right to sell patented articles in the licensed territory."

Mr. Haas replied on April 13 that this letter was not satisfactory because he had "responsibilities to other parties to whom I have to explain the situation and I do not see how I could do this without embarrassment.'

Three days later Mr. Wardenburg called on Mr. Haas, the latter making this report: 37

66

'(Wardenburg) repeated over and over again that there is not the slightest possibility of the I C. I.'s coming into the American market but du Pont is afraid to write a letter to this effect because in case of an investigation of their firm by politicians, the politicians might make capital of such a statement, i. e., they might attempt to point out that the world was divided up between I. C. I. and du Pont.

"I told Mr. Wardenburg that I had implicit faith in all the assurances which they had made to me, but that for my own protection I had to have a letter from du Pont in which they can assure us, in one way or another, that the I. C. I. will not take this opportunity to come into this market. After a lengthy discussion of the different ways to accomplish this purpose, it was agreed that Mr. Wardenburg will write a letter saying that while it is true that the I. C. I. under their contract have a right to come into the American market, du Pont happens to know that the I. C. I.'s development in the methacrylic ester field has taken a direction which is quite different from the one that is being taken by du Pont and ourselves so that it will be highly improbable that the I. C. I. will attempt to come into the United States market. I told him such a letter would be satisfactory."

As a result of this discussion the following letter was received by Mr. Haas on April 17, 1936, from Mr. Wardenburg:

38

"My attention has been called to the fact that no reply has been made to your letter of March 7 with reference to the license agreement between our two companies. As pointed out to you in our letter of March 5, I. C. I. retains the right to sell the patented products in this country. However, it happens that one of our principal men was able to visit the I. C. I. plant on a trip to Europe, which he was making in connection with another matter. It was learned that their work in developing the marketing of the materials covered in our license agreement is along quite different lines than those which seem to us to be attractive in this country. We would assume from our observations, therefore, that there is little likelihood of their exercising the right which they retain to sell the products in question in this country."

To this Mr. Haas replied on April 18, 1936, to Mr. Wardenburg, "Your letter of April 17 is quite satisfactory."

99 39

This correspondence has been set forth in considerable detail because it indicates clearly, first, that the I. C. I.-du Pont agreements of 1929 and 1934 were essentially cartel arrangements providing for a definite division of world trade, second, the purpose of the du Pont-Philadelphia agreement of March 5, 1936, was more than a mere settlement of patent interferences.

The purpose of the du Pont-Philadelphia agreement is much more baldly explained in the interchange of correspondence at this time between Darmstadt and Philadelphia.

On February 22, 1936, Darmstadt voiced its fear to Philadelphia that du Pont might receive a license on the process of making Plexiglas as a result of the agreement. Darmstadt further asked:

40

"Who has the advantage of this exchange? The party which at present or in the future has the technically most valuable inventions appears to be at a disadvantage because they will have to share their rights with the other party without compensation. Therefore, the incentive to push the development forward would be influenced, and only the party who could sell the cheapest would have any advantage. We believe that an arrangement of this type would only be justified if at the same time there were made an understanding concerning the market and price. It does not appear that there has been any discussion on these points with du Pont."

Mr. Bergin in a letter of March 6, 1936, pointed out to Darmstadt that the process for making Plexiglas was not revealed to du Pont. He stated that the essential features of the Plexiglas process are:

(1) Polymerizing in a relatively narrow mold.

(2) Uniform application of heat.

(3) Controlling the temperature during polymerization.

None of these features were disclosed in any of the patents and applications covered by the agreement. Bergin further explained to Darmstadt that the agreement did not cover future inventions.

Then on March 10, 1936, Mr. Haas answered the other question raised by Darmstadt's letter of February 22. Writing to Dr. Röhm, Mr. Haas said: “1

"Before going into the interference situation at all I had told the du Pont executive who had made the overtures to us (Mr. F. A. Wardenburg) that it is necessary to consider what to do after we have exchanged licenses. I told them

38 Exhibit 38.

89 Exhibit 39.

40 Exhibit 40.

41 Exhibit 41.

84949-43-pt. 1- -5