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that they would have to stay out of the laminated glass field and the acrylic-acid field, i. e., that they cannot expect any licenses from us in these two fields and that it is advisable to have an informal understanding how to act in the fields where both firms have the right to proceed. We arranged that in the case of products where we compete, we shall consult with each on prices, etc., in order to avoid destructive price cutting. A matter like this cannot be put into the contract, because it would be against the law. We have to rely on our verbal assurances and our experience with du Pont during the last 15 years has proven that they can be relied upon to live up to an arrangement of this kind. "Please treat this confidentially."

This illuminating letter explains rather pointedly the purpose and objectives of this cross-licensing agreement. Further credence is lent to this letter by the already discussed reports found in the du Pont and Philadelphia files pertaining to the negotiations preceding the agreement.

The procedure for the disposition of the interferences between du Pont and Philadelphia was followed out in the months subsequent to the execution of the agreement. After conferences of their respective attorneys, Philadelphia conceded priority to du Pont on the methyl methacrylate case, du Pont conceded the laminated-glass case to the Philadelphia company, and the other five less important interferences were handled similarly.

I. C. I.-Darmstadt Agreement of 1936.—It is necessary at this point to interrupt the story of the du Pont and Rohm & Haas, Philadelphia, conspiracy in order to round out the picture of the international cartel on methyl methacrylate cast sheeting. As previously stated, I. C. I. was conducting negotiations with Darmstadt contemporaneously to the du Pont-Philadelphia settlement.

On October 10, 1935, Maj. A. E. Hodgkin, of I. C. I., meeting with Dr. Roehm and other officers of Darmstadt, stated that I. C. I. wished to avoid competition on methacrylic acid products. I. C. I. had not yet engaged in the actual commercial operations for manufacture of cast sheets but was interested in an exchange of patents and possibly the purchase of Darmstadt's process of making sheets. The Philadelphia company's attitude on these negotiations is illustrated by the following excerpt from a cable to Darmstadt on October 14, 1935: 42

66* * * Suggest you intimate I. C. I. that any agreement which you will make will be conditioned upon satisfactory arrangement in United States field between their licensees and ourselves * * * ""

The interrelation of the I. C. I.-Darmstadt and du Pont-Philadelphia parleys is brought out by the interchange of cables between Darmstadt and Philadelphia in late November 1935. Darmstadt cabled: 43

66* * * I. C. I. wants Empire, Scandinavia, Holland, leaves us remaining Europe and Russia, division to cover entire methacrylate field. I. C. I. offers us £3,000 for Plexiglas process * * * I. C. I. suggests mutual simple license on methacrylate patents. Du Pont can deliver to Europe according to contract with I. C. I. but may not manufacture there * * * We are inclined to accept I. C. I. suggestion for market division and discussion of patents and to sell Plexiglas process for £5,000. You should prevent du Pont exporting to our territory."

Philadelphia replied:

44

"We expect coming definite understanding du Pont patent situation within 2 weeks and hope for favorable outcome provided you can hold open I. C. I. negotiations. If you conclude arrangement before, danger is that du Pont will try to bluff us out. With your negotiations pending we can always threaten du Pont with I. C. I. pressure. Utterly inadvisable you selling your process. Preferable you both exchange manufacturing experience after signing agreement. Hold Canada open to us. We are trying to prevail on du Pont not to go to Europe but can do this better if you hold open your I. C. I. negotiations until we are finished

* * * ""

On March 30, 1936, Mr. Haas wrote to Darmstadt his recommendations on the pending I. C. I.-Darmstadt agreement. Mr. Haas pointed out that Darmstadt and Philadelphia had a unique process for casting sheets that neither I. C. I. nor du Pont could duplicate. Du Pont's and I. C. I.'s process was to cast a block and cut the sheets from the block. However, this did not produce a sheet with as smooth a surface as that achieved by Darmstadt. Rather than have

42 Exhibit 42.

48 Exhibit 43. 44 Exhibit 44.

Darmstadt sell their process for a sum, Mr. Haas believed it was better to have a broad agreement, as he expressed it:

45

*

"The ideal arrangement would be one that covers not only sheets, but also moulding powders, that you divide the territories * *, and that the arrangement includes licenses, exchanges of experience, and selling price understanding." Most of these suggestions were incorporated in the agreement executed August 31, 1936, between I. C. I. and Darmstadt.46

The contract products were sheets consisting substantially of polymerized methacrylic acid. It did not include blocks, rods, film, or tubes.

The territory of the agreement included the whole world except Canada and the United States and their possessions in which I C. I. and Darmstadt were bound by prior commitments. The rest of the world was divided as follows:

Exclusive to I. C. I.—United Kingdom, British Empire and mandated territories. Exclusive to Darmstadt-Europe (inclusive of whole of Union of Soviet Socialist Republics), less Holland, Denmark, Norway, and Sweden.

Common territory-Holland, Denmark, Norway, Sweden, and all other territories not previously mentioned.

Neither party was to manufacture sheets or sell them in the exclusive territory of the other, nor license others to do so, nor sell to third parties for export as such. The parties recognized it was not practical to attempt to control fully the exportation by third parties of fabricated goods made from sheets. They did undertake, however, to restrict exports to each other's exclusive territory of such goods when fabricated by third parties for use as a substitute for safety glass in the aircraft, motor vehicle, and protective-goggle industries. But no restriction was placed upon exports of which the contract products formed a part only or which might be required as spares or replacements for use in manufactures originating in parties' own exclusive or nonexclusive territory.

Darmstadt warranted that Philadelphia would be bound by the provisions relating to I. C. I.'s exclusive territory.

Darmstadt further agreed to demonstrate their process for sheet manufacture to I. C. I. and I. C. I. agreed not to disclose this process to any third party, nor to use this process in, or export the products of this process to United States and Canada.

The parties agreed to grant each other free nonexclusive, and nontransferable licenses to work all patents under their control relating to the cast sheet process. Darmstadt agreed not to disclose to Philadelphia or any third party information regarding pending I. C. I. applications, and I. C. I. agreed not to disclose to du Pont or any third party information regarding pending Darmstadt applications. If any third party should enter the market in contract products in the exclusive territory or either party the latter was to be free to act in such exclusive territory as he should deem fit in regard to such competition.

If competition should arise in nonexclusive territory, the parties were to confer to devise means whereby it might be met whether by inclusion of such third party in a modification of this agreement or otherwise.

The parties undertook not to license, instruct, or assist financially, except for their respective exclusive territories, any third party desiring to manufacture the contract products.

In nonexclusive territories the parties were to agree upon prices from time to time at which the contract products were to be sold.

Nothing in the agreement, with the exception that I. C. I. was not to disclose the cast-sheet process to du Pont, was to restrict the existing relationships and obligations of I. C. I. to du Pont which included the obligation to grant nonexclusive licenses under I. C. I. patents to du Pont if the latter so desired in territories which comprised the exclusive territories of Darmstadt.

The agreement was to remain in force for 10 years or for the duration of any of the patents whichever was longer, unless previously terminated by mutual consent.

Two features of this contract as it affected the marketing restrictions on du Pont and Philadelphia should be noted. First, the true meaning of the next to last paragraph relating to du Pont's nonexclusive right to market contract products in Europe is not clear. Du Pont correspondence interprets the provision as it is written, but a letter from Darmstadt to Philadelphia on July 16, 1936, throws an entirely different light on it. Darmstadt wrote: "

45 Exhibit 45.

46 Exhibit 46. 47 Exhibit 47.

"According to information given by I. C. I. section 11 (of I. C. I.-Darmstadt agreement) is merely a matter of form in regard to du Pont. The I. C. I. remains obligated to prevent as far as possible du Pont or any other third party from entering the contractual territory and it regards it as highly improbable that du Pont will enter the European market."

The similarity of this letter to the statements made by Mr. Wardenburg to Mr. Haas concerning the understanding between du Pont and I. C. I. that I. C. I. would keep out of the American market, would indicate that the master agreement between I. C. I.-du Pont masked an illegal division of world territories. Second, Philadelphia was acquainted with the provisions of this agreement and apparently assented to the provision whereby Darmstadt warranted Philadelphia would not enter I. C. I.'s exclusive territory, for on July 30, 1936, Mr. Haas wrote to Darmstadt:

48

"We have studied your draft and think it satisfactory in a general way * * As to division of territory * * * Japan and possibly South America may become important in time and it may be worth while for you to secure exclusive rights in these territories."

Thus, through a series of bipartite agreements executed at different times there was constructed an international cartel covering products of the acrylic field, the principal thread running through these agreements being the conspiracy pertaining to cast sheets of methyl methcrylate. The investigation developed the fact that though some of the conspirators never had direct dealings with one another, an over-all division of territories was worked out, whereby Phila, delphia kept out of the world markets and du Pont remained out of the British Empire except when given permission in special instances, and I. C. I., Darmstadt, and I. G. Farben, remained out of the American market.

The next development to be followed is that of the domestic conspiracy between the Philadelphia company and du Pont.

Marketing arrangements of the Röhm & Haas and du Pont companies.—The Philadelphia company began the commercial production of Plexiglas in March of 1936 but it was not until 1938 and 1939 that its marketing policy became established. Insofar as Plexiglas was concerned this company sold second- and thirdgrade sheeting directly to small fabricators who manufactured it into numerous commercial objects such as furniture, jewelry, tableware, etc. When the aircraft manufacturers began production of military airplanes in 1939 Röhm & Hass, Philadelphia, sold first-grade Plexiglas to them directly also. But for the aircraft factories producing commercial airplanes, Röhm & Haas entered into a distributor agreement on May 12, 1939,49 with Air Associates, Roosevelt Field, Garden City, Long Island, N. Y., whereby the latter was given exclusive sales rights on Plexiglas in the United States to specifically enumerated aircraft manufacturers who were not makers of military planes, and not to the United States Government. It was agreed Philadelphia would sell Plexiglas to Air Associates at prices 10 percent below those quoted to the rest of the aircraft industry. It was also understood that Air Associates would not sell any competitive sheet acrylic plastic. Philadelphia informed Air Associates that they could probably not export to South America since this was Darmstadt's territory. However, Philadelphia did attempt to get Darmstadt's permission to have this restriction lifted which was accomplished only after the war began in September 1939. Canada was closed to Air Associates because Röhm & Haas in January 1939 had given Hobbs Glass, Ltd., Ontario, Canada, an exclusive license for this territory. The provisions of the contract with Hobbs were similar to the Air Associates agreement except there was no restriction on sales to military aircraft producers.

A letter of April 2, 1940, from Philadelphia to Hobbs indicates resale price maintenance:

60

"In reply to your letter of March 28 we are pleased to advise that it will be satisfactory for you to sell Plexiglas in Canada to the marine industry under the same terms as those given in our letters of January 5, 1939, regarding the aircraft industry. We shall supply you with our Plexiglas for resale to the marine trade in Canada, our prices to you to be 10 percent below our standard selling prices, and your selling prices to the trade to be the same as our standard selling prices * *

48 Exhibit 48.

49 Exhibit 49.

50 Exhibit 50.

On January 2, 1941, Dr. Frederick, making reference to another letter not in our files wrote to Hobbs Glass, Ltd.,' ,51 "In my letter of January 2, 1941, to Mr. Bernhardt, 1 discussed the pricing of the various types of Plexiglas in Canada *

In order to facilitate forming the cast sheets into bomber noses, cockpit enclosures, etc., for the aircraft companies on the west coast, Röhm & Haas erected a small forming plant in 1941. Mr. Haas invited du Pont to enter into a joint ownership of the plant but du Pont's attorneys advised against this. Du Pont considered building its own forming plant on the Pacific coast but the executive committee turned the proposal down because they believed there was no prospect of sufficient demand on the west coast after the termination of the war. Instead du Pont gave the Swedlow Aeroplastics Corporation, of Glendale, Calif., the exclusive right to do forming for the aircraft manufacturers of the Pacific coast. Swedlow was allowed a discount of 6 percent from the prices quoted to the airplane trade. Documents in our possession indicate that du Pont retained control over Swedlow's resale prices.

52

* *

In a report by Mr. Haas of March 26, 1941, he states: "Mr. A. E. Pitcher called to say they have decided to send one of their good salesmen out to the coast to keep an eye on the situation, *. His name is W. J. Ambersly * * * Through Mr. Ambersly, however, they will keep in close touch with his (Swedlow's) work, and particularly they will want to know the prices he is quoting *: * * ""

The exclusive arrangement with Swedlow brought a protest from another fabricator on the west coast interested in forming parts for the aircraft trade. This firm, the New Plastic Corporation, of Hollywood, Calif., wired du Pont on February 28, 1941, as follows:

53

"We understand that you are contemplating giving Swedlow Aeroplastic Corporation your fabricating and jobbing of Lucite in California stocking raw material and selling them at 6 percent under airplane prices. We have 17 men in the shop working 80 percent on airplane fabrication. We can qualify as to any airplane factory requirements regarding fabrication ability. We cannot compete with preferred fabricators such as Swedlow on the terms now allowed us. It is imperative that we be allowed the same consideration if we are to remain in the business and purchase from you. * * *""

Du Pont replied in the following vein :

54

"Answering your telegram February 28, we have arranged to have Swedlow Aeroplastics Corporation fabricate our Lucite methyl methacrylate plastic sheeting for the airplane trade on the Pacific coast. This precludes our selling you and others for this field. We are in position, however, to sell you and others Lucite for other uses at our published market prices which is the basis of price to Swedlow on purchases for other than the airplane trade."

Other than arrangements made with Swedlow, du Pont has stated to the investigators that it has no distributors of Lucite for the aircraft trade in the United States, since it sells directly to the individual airplane manufacturers.

However, in Canada du Pont has agreed to allow Canadian Industries, Ltd., to handle all sales of Lucite. Canadian Industries, Ltd., purchases at 15 percent off list price and du Pont claims that C. I. L. established its own resale prices. C. I. L. is jointly owned by du Pont and I. C. I.

1939 agreement between du Pont and Philadelphia.-Until early 1939 du Pont employed a method of making sheets by casting a solid block of methyl methacrylate and then cutting it into thin sheets. This process was not technically comparable to the cast-sheet method employed by Philadelphia since the slicing method utilized by du Pont impaired the visual qualities of the sheets. In 1939 one of du Pont's technical experts visited the I. C. I. plant in England which made cast sheets according to the process disclosed to I. C. I. by Darmstadt in fulfillment of their 1936 agreement. Inadvertently I. C. I. disclosed this process to the du Pont representative and though du Pont subsequently assured I. C. I. it would not utilize this disclosure, soon thereafter it appears that du Pont employed the invention. In April 1939 Philadelphia received a United States patent on that particular phase of the process which had prior to 1939 been unknown to du Pont. Soon thereafter Mr. A. E. Pitcher approached Röhm & Haas, Philadelphia, and

51 Exhibit 51. 52 Exhibit 52. 53 Exhibit 53. 54 Exhibit 54.

stated that du Pont had been using the invention covered by Philadelphia's patent and desired a license under it. Mr. Haas was willing to grant du Pont a license under this patent if Philadelphia's commanding position in this field could be preserved. Therefore he offered a license with a clause limiting the production of du Pont. It was also suggested that the two companies cross-license each other under other less-important patents relating to the cast-sheet process. Du Pont assented to these suggestions and on November 17, 1939, the agreement was signed.

55

In addition to the cross-licenses on the five process patents involved the agreement specifically limited du Pont's production to a monthly average of 26,400 square feet of salable cast sheets per month. The agreement recited that Röhm & Haas, Philadelphia, was not willing to license du Pont to make more than one-half the quantity of cast sheets Röhm & Haas was then manufacturing. It was stated, however, that if Philadelphia should substantially increase its production, then du Pont should be permitted to increase its production to one-half of Philadelphia's new output. Provision was also made that if the United States Government in the case of an emergency should request a substantial increase in the number of cast sheets that could be produced by the parties, or should I. C. I. request du Pont to supply them with substantial amounts of cast sheets, then the parties were to reconsider the limitation on du Pont. The agreement was to run until the expiration of the last patent under which a license was granted.

On October 9, 1940, du Pont acknowledged information received from Philadelphia and noted that it was now entitled to enlarge its facilities so that it could manufacture a monthly average of 35,000 square feet.

The danger inherent in such a restrictive license materialized within a year. By the end of 1940 du Pont's capacity was insufficient to meet the demands of the defense program so that it was forced to open negotiations for the lifting of the restraint.

In January 1941, with a capacity of 35,000 square feet of salable cast sheets per month, du Pont was so far behind its orders that it was unable to quote deliverie before the 1st of October 1941.56

Mr. Pitcher visited Mr. Haas and told him that Philadelphia could either lift the restraint or du Pont would inform the Government of the license restriction. Mr. Haas was willing to lift the restriction for the duration of the emergency if a suitable compensation could be agreed upon.

Mr. Haas suggested two alternative solutions to the problem. First, du Pont should agree at the end of the emergency to curtail its production to one-half of the Philadelphia company's production; or second, Röhm & Haas, Philadelphia, would agree to permanently lift the production restriction in return for licenses under patents controlled by du Pont covering an improved method of manufacturing the monomer of methacrylate." This process is known as the "sulfuricacid process. The investigators of the Department of Justice has been informed by Röhm & Haas officials that a license under the sulfuric-acid process would result in a saving to Philadelphia of several hundred thousands of dollars in the cost of producing monomer.

57

To date the negotiations between the two firms have not culminated in a settlement so far as this Department has been informed.

Analysis of prices of du Pont and Röhm, Philadelphia, on methyl methacrylate sheeting. For the purposes of this analysis methyl methacrylate sheeting of 0.125 inch thick has been selected as the common factor since this is the generally accepted standard thickness and since it illustrates the trend for the other sizes. It should be noted, however, that the cast sheeting is manufactured in thicknesses ranging from 0.060 inch up to 0.500 inch.

In 1936, 1937, and 1938 Röhm & Haas, Philadelphia, alone was producing cast sheets in commercial quantities. It appears that Röhm & Haas did not adopt its present method of pricing until April 1937, at which time it charged $2.85 per square foot for 0.125 inch thickness, less a 10-percent discount for lots over 100 square feet; in May 1938 0.125 inch was reduced to $2.65, less 10 percent for over 100 square feet, making the quantity price $2.38 per square foot.

During 1938 du Pont was preparing to launch commercial production but did not announce prices to the trade until early 1939. On February 2, 1939, du Pont announced its price schedule which varied slightly from the Röhm & Haas prices. Du Pont priced its 0.125-inch Lucite at $3 per pound. In terms of pounds the Philadelphia price on 0.125-inch Plexiglas was $3.06. The prices du Pont set on

55 Exhibit 55.

56 Exhibit 56. 57 Exhibit 57.

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