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deems otherwise essential to maintain in the public interest. There is hereby established a committee to consist of one member each representing the War Department, the Navy Department, the Office, and any such other Federal establishments as the President may designate which shall advise the Administrator respecting any matter or measure necessary to carry out the purpose of this section.

FUNDS AND FINANCES

SEC. 9. (a) The sum of $200,000,000 is hereby authorized to be appropriated to carry out the provisions and purposes of this Act. Further sums are authorized to be appropriated as may be necessary and proper for the same purposes. Such sums or any part thereof, together with any moneys realized or received by the Administrator from his exercise of any power granted to him by this Act, may be designated and used at his direction as a revolving fund or otherwise to carry out any power so granted.

(b) Further to effectuate the purposes of this Act, the Administrator is authorized, whenever he deems it necessary and expedient, to create or to organize a corporation or corporations as instrumentalities for the more effective exercise and performance of his own powers and duties or those of the Office, or any part thereof. The Administrator may make loans to, or purchase in whole or in part from time to time, the capital stock of any such corporation for any purpose within the powers of the corporation, and on such terms and conditions as the Administrator may determine: Provided, That such capital stock shall be purchased and owned only by the Office.

SUBPENAS AND PENALTIES

SEC. 10. For the purposes of any investigations authorized by this Act, the Administrator and any official designated by him may administer oaths and affirmations, subpena witnesses, take evidence, and require the production of books, papers, and other documents which the Administrator or such officer deems to be relevant or material to the inquiry. Such attendance of witnesses and the production of such documentary evidence may be required from any place in the United States or any Territory or possession thereof at any designated place of hearing. In cases of contumacy by, or refusal to obey a subpena served upon any person, the district court for any district in which such person is found, resides, or transacts business, upon application by or on behalf of the Administrator, shall have jurisdiction to issue an order requiring such person to appear and give testimony or to appear and produce documents, or both; and any failure to obey such order of the court may be punished as a contempt thereof. Witnesses subpenaed under this section shall be paid the same fees and mileage as are paid witnesses in the district courts of the United States. No person shall be excused from complying with any requirements under this section because of his privilege against self-incrimination, and the immunity provisions of the Compulsory Testimony Act of February 11, 1893 (U. S. C., 1934 edition, title 49, sec. 46), shall apply with respect to any individual who specifically claims such privilege. Any person who willfully violates any order, rule or regulation promulgated by the Administrator under the authority of this Act shall, upon conviction thereof, be fined not more than $5,000 or imprisoned for not more than one year, or both.

PERIODIC REPORTS

SEC. 11. The Administrator shall render a report in writing to the President and to the Congress in January of each year summarizing the activities of the Office in the calendar year just ended and reporting on the status and progress of science and on scientific and technical problems affecting the public interest together with such recommendations as he may deem appropriate within the purposes of this Act. During a state of war, he shall make interim reports quarterly during each of the months of January, April, July, and October.

SEVERABILITY CLAUSE

SEC. 12. If any clause, sentence, paragraph, or part of this Act shall be adjudged by any court of competent jurisdiction to be invalid, such judgment shall not affect, impair, or invalidate the remainder thereof but shall be confined in its operations to the clause, sentence, paragraph, or part thereof directly involved In the controversy in which such judgment shall have been rendered.

Senator KILGORE. We have invited the members of the Patents Committee of the House of Representatives to be present for the hearings on S. 702. It will probably be impossible for them to attend today because of the debate now going on on the tax bill, but I hope that they will be present at future meetings.

Congressman Wright Patman has introduced a similar resolution in the House of Representatives, and I hope that he will also be able to be present at the future hearings on this bill.

At this time I want to include in the records of this subcommittee the hearings held in the last Congress on S. 2721, which was similar to the present bill in purpose, but which has been amended in accordance with those hearings and the amendments included in S. 702.

The first witness for today is Judge Arnold, who has been summoned. STATEMENT OF THURMAN ARNOLD, JUDGE OF THE UNITED STATES COURT OF APPEALS AND FORMER ASSISTANT ATTORNEY GENERAL IN CHARGE OF THE ANTITRUST DIVISION

Senator KILGORE. Judge, I want you to identify yourself for the record and then go along in your own way. The committee will be glad to have any information in reference to patents and patent monopoly, and their effect upon the national economy, both in war and in peace, and also any comments you have to make on this bill if you have had an opportunity to read it, and any suggestions you may have tending to improve it because, frankly, that is the purpose of the subcommittee hearings-improvements in the pending legislation.

Judge ARNOLD. Thank you, Mr. Chairman.

I identify myself as judge of the United States Court of Appeals and former Assistant Attorney General in charge of the Antitrust Division.

As judge, I have no information on this bill at all, but in the Antitrust Division we made extensive studies on patents and the patent question. Since I would be disqualified in any event in cases coming before the court with respect to the investigations in the cases which I tried as the head of the Antitrust Division, I see no reason why I cannot give you as extensive a review of my experience as you care to hear.

I think I will first read a short general statement which I have prepared, and then I will go ahead more or less extemporaneously.

Senator KILGORE. For the benefit of the record, may I state that the principal reason that the committee had for summoning you was the fact that while you were head of the Antitrust Division we had summoned you in the rubber investigation conducted by the Defense Investigating Committee, and I felt at that time you indicated you had information in your hands which would make you a very valuable witness on this bill.

Judge ARNOLD. Thank you, Senator. I assumed that I was summoned to testify before this committee because of my experience with the abuse of patent privileges by domestic and international cartels. To sum up that experience, I think it can be said that the evidence is overwhelming that practically all our shortages in basic materials and in chemicals-the very things that are necessary to give us

strength in war and wealth in peace-are due to the control of research and invention by domestic and international cartels. If the committee cares to go into detailed hearings, it will find that the production and distribution of such vital products as magnesium, zinc, rubber, aviation gasoline, beryllium, titanium, electrical equipment, plastics, dyestuffs, machine tools, fuels, communications, and a variety of others necessary for both our war effort and our industrial progress have been impeded and delayed, and in some cases totally blocked, because private groups dominated industrial research.

To break that control, to free our economy in the new industrial age which every forward-looking technician believes is coming, as well as to speed up the war effort, we must break up the patent pools which put barriers against independent initiative in research and invention.

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But this alone is not enough. The patent itself is only an instrument of aggressive warfare to stop invention by persons not employed by our great cartels. The control of the "know how", knowledge of results of basic experimentations, is even more important than patents. Out of that control patent monopolies get their start. It is the foundation on which patent pools are built. This bill is designed to break the corner on research and experimentation now enjoyed by private groups.

Of course, private research should be encouraged. But it cannot be expected to turn over to the public the results of research on which it has spent great sums. Their duty to their stockholders compels them to keep a corner on such research if they can. Private research should be encouraged. But only the Government can preserve opportunity for the inventors and technicians who do not choose to work exclusively for the benefit of a private group necessarily trying to get control of the market if it can.

This bill, S. 702, attacks, I think, the root of the evils of patent monopoly. It recognizes what has been an obvious fact for years; that opportunity for invention by independent inventors is the cornerstone of industrial progress. It recognizes that that opportunity has been denied because the funds to develop the talent of our inventors have been forthcoming only from the groups which seek to get a corner on industrial progress. The bill gives the Government authority to promote such research and make it available to the people as a whole, large corporations as well as small, without discrimination or favor.

Inventions are no longer made in garrets by poor people. They are not possible without the wide dissemination of the results of research and experiment so that each new inventor can stand on the shoulders of those who went before him. And so a great industrial bottleneck has been created because experimentation has been possible only for those who have the financial backing of great corporations. This industrial bottleneck has become narrower and narrower during the past 20 years until the independent inventor for want of a laboratory in which to test his ideas has gone the way of the buffalo. This bill for the first time gives that laboratory to the inventors of the Nation who are not employed by the cartels.

Parenthetically, Senator, I would like to say that my memory of the T. N. E. C. hearings is that you will find that the decline of small

business enterprises in this country closely parallels the concentration of industrial research. I do not have the exact pages in mind, but I think you will find it if you study the T. N. E. C. report.

Industrial research is the most vital kind of education we have. Research must be free to the public if it is to accomplish its purpose. Through inertia and ignorance of what was going on we have permitted the control of the industrial education of our technicians to fall into the hands of cartel groups. We have assumed that the state could not afford to subsidize this kind of education. By this neglect of what I think is a vital function of government we have created a situation where the best inventive brains of our country are compelled to work for salaries paid by corporations that can have no interest in giving to others the fruits of their research.

Cartels have not tried to suppress experimentation. They have tried only to corner it. They have kept the savings of new techniques for themselves instead of passing them on to consumers. This has been going on for years and we have just waked up to it. It was not until 1939 that prosecutions and senatorial investigations began to uncover the patent cartels in all the necessities of life. The great synthetic rubber and gasoline patent cartel was formed back in 1929. That cartel was holding back the production of rubber until it could get the new product completely under its control. It was hiding its techniques during the preliminary stages even from the Army and Navy. Had this bill been in effect before the war the Army and Navy would have been as far advanced in the technique of rubber as is Standard Oil. That knowledge would have been spread to the independent industries that were trying in vain to get licenses under Standard Oil domination. The operation of the rubber cartel was not discovered until 1942. Today millions of citizens lack transportation, and the war effort is slowed down, because this cartel had a corner on the technique and the research in rubber.

This bill attacks the fundamental bottleneck by spreading knowledge of modern experimentation and the free use of the results of that experimentation to every competing industry. To allow the conditions which created our patent cartels to continue during and after the war would be the same kind of tragedy as if we permitted private groups to dominate engineering education or even liberal education.

There will be pressure against this bill by great industrial organizations whose control is threatened by the new enterprise and the new initiative which will be liberated by the opportunities which the bill

creates.

But I know of no bill before Congress which is so important, not only to promote technical development during the war but also to further industrial development after the war.

Today vast sums are being spent in research and technical development of our national productive plant. Necessarily most of the money is spent with the very corporations whose business policy is to control the market through patents. Such a business policy compels these groups to hold back new inventions until they have received their money from obsolete equipment. It compels them to tie up their inventors with contracts which prevent wide use of new techniques. The bill prevents this domination from being perpetuated after the war at the expense of the taxpayer during the war. It frees

industrial progress from private domination of research and experimentation after the war.

Now I am going to give you some brief and, I think, familiar examples of the suppression of research from competing industry and from the public. They are all found in various hearings at which I have testified and in articles which I have written, but I think it may be useful to have a few of them in this record.

I think one of the most amusing ones, not economically important but a perfect illustration of the kind of attitude which the corner on research creates in those who have it, is in a document which was introduced before the Bone committee. It is a memorandum from the files of the General Electric Co., and concerns flashlight bulbs. I will read it into the record.

I quote:

Two or three years ago we proposed a reduction in the life of flashlight lamps from the old basis on which one lamp was supposed to outlast three batteries, to a point where the life of the lamp and the life of the battery under service conditions would be approximately equal. Some time ago, the battery manufacturers went part way with us on this and accepted lamps of twobattery lives instead of three. This has worked out very satisfactorily.

We have been continuing our studies and efforts to bring about the use of one-battery-life lamps. I think you will be interested in the attached analysis which Messrs. Prideaux and Egeler have worked up covering the various points involved in going to the one-battery-life basis. If this were done, we estimate it would result in increasing our flashlight business approximately 60 percent. We can see no logical reason either from our standpoint or that of the battery manufacturer why such a change should not be made at this time.

Messrs. Parker and Johnson now have this matter up with the battery manufacturers and I would urge that every assistance be given them to put it over. Senator KILGORE. The purpose was to shorten the life of the flashlight bulbs and thereby increase the sales of the product?

Judge ARNOLD. Yes. Now, I am not going to start throwing bricks at somebody who wants to increase the profits of his corporation, but I am pointing out that you cannot expect private business to formulate policies except to profit themselves. I have never felt that this thing was cured by denunciation of these corporations. Obviously their every interest is for their own share of the profits. The answer is your bill, because I don't suppose that the public knew anything about flashlight bulbs. There wasn't any way that they could

find out about them.

That is a minor example but it is a perfect illustration of a familiar human attitude. When you turn to something vastly more import-. ant, fluorescent lighting, you see these same influences.

I will quote several more documents from the Bone committee, because they are illustrative of how, in order to preserve obsolete equipment and get the money out of obsolete equipment, technological advance is held back.

This is a letter from Howard M. Sharp, manager of the lighting bureau of the Buffalo, Niagara & Eastern Power Corporation of Buffalo, to Mr. Ward Harrison, of the General Electric Co. It is signed by Mr. Sharp as manager of the lighting bureau of that company, and it reads as follows:

DEAR WARD: Increasingly I seem to become the "father confessor" on fluorescent lighting as far as the utility men are concerned. This concerns one of the displays dealing with fluorescent lighting in your G. E. building at the New York

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