[Trade Journal]
Publication: Verbatim Record of the Proceedings of the Temporary National Economic Committee
Washington , DC, United States
vol. 1, no. 9, p. 253-276, col. 1-3
VERBATIM RECORD
of the
Proceedings of the
TEMPORARY NATIONAL
ECONOMIC COMMITTEE
VOLUME 1
December 1, 1938 to January 20, 1939
CONTAINING
Economic Prologue
Automobile Patent Hearings
Glass Container Patent Hearings
Presentation on Patents by Department of Commerce
Published 1939 by
THE BUREAU OF NATIONAL AFFAIRS, INC.
WASHINGTON, D. C.
·
·
Eighth Day's Session
_____________________
VERBATIM RECORD
of the Proceedings of the
Temporary National Economic Committee
Vol. 1, No. 9 WASHINGTON, D. C. Dec. 14, 1938
WEDNESDAY, DECEMBER 14, 1938.
THE TEMPORARY NATIONAL ECONOMIC COMMITTEE MET AT 10:45 A. M. PURSUANT TO ADJOURNMENT ON TUESDAY, DECEMBER 13, 1938, IN THE OLD CAUCUS ROOM, SENATE OFFICE BUILDING, SENATOR JOSEPH C. O'MAHONEY PRESIDING.
PRESENT: SENATOR O'MAHONEY OF WYOMING, CHAIRMAN; SENATOR WILLIAM E. BORAH OF IDAHO; SENATOR WILLIAM H. KING OF UTAH.
REPRESENTATIVE HATTON W. SUMNERS OF TEXAS, VICE-CHAIRMAN OF THE COMMITTEE; REPRESENTATIVE B. CARROLL REECEOF TENNESSEE.
MR. THURMAN W. ARNOLD, ASSISTANT ATTORNEY GENERAL, REPRESENTING THE DEPARTMENT OF JUSTICE; WENDELL BERGE, SPECIAL ASSISTANT TO THE ATTORNEY GENERAL.
MR. RICHARD C. PATTERSON, JR., ASSISTANT SECRETARY OF COMMERCE, REPRESENTING THE DEPARTMENT OF COMMERCE.
MR. HERMAN OLIPHANT, GENERAL COUNSEL, REPRESENTING THE TREASURY DEPARTMENT; ADMIRAL CHRISTIAN JOY PEOPLES, DIRECTOR OF PROCUREMENT.
MR. LEON HENDERSON, EXECUTIVE SECRETARY OF THE COMMITTEE.
COUNSEL: H. B. COX (CHIEF COUNSEL); GEORGE W. WILLIAMS, JOSEPH BORKIN, ERNEST MEYERS, BENEDICT COTTONE, CHARLES L. TERREL, VICTOR H. KRAMER, J. M. HENDERSON AND SEYMOUR LEWIS.
ALSO PRESENT: DR . WILLARD THORP
The CHAIRMAN. The Committee will please come to order.
Mr. Cox, are you ready to proceed? Is Mr. Levis to be on the stand again this morning?
Mr. COX. Yes. Mr. Levis will take the stand.
The CHAIRMAN. Have you brought an additional witness?
Mr. COX. This is Mr. Williams, counsel for the company. I think we might have him sworn; he may not testify.
The CHAIRMAN. Mr. Williams, do you solemly [sic] solemnly swear that the evidence you are about to give in this proceeding will be the truth, the whole truth, and nothing but the truth so help you God?
Mr. WILLIAMS. I do.
Mr. COX. Just give the reporter your name and address.
Mr. WILLIAMS. Lloyd T. Williams, 2025 Parkwood Avenue, Toledo, O.
Mr. COX. You are counsel for the Owens-Illinois?
Mr. WILLIAMS. Counsel for the Owens-Illinois Glass Company.
TESTIMONY OF WILLIAM E.
LEVIS, PRESIDENT, OWENS-
ILLINOIS GLASS COMPANY,
TOLEDO, O., (Resumed.)
AND
LLOYD T. WILLIAMS , COUNSEL
OF OWENS-ILLINOIS
GLASS COMPANY, TOLEDO,
OHIO.
Mr. COX. Mr. Levis, there are one or two loose ends in yesterday's examination that I would like to go over before we go ahead. Yesterday when I was asking you about your directorships held in other companies, I neglected to ask you whether you were a director of the Lynch Company.
Mr. LEVIS. No, sir.
Mr. COX. You never were a director?
Mr. LEVIS. No. sir.
Mr. COX. I also think it might be useful if you would tell me whether in speaking of the group of persons we described yesterday as the Levis group you included Mr. Boeschenstein.
Mr. LEVIS. I would have included him.
Mr. COX. Yesterday you told us you were a director of the National Distillers and of the Gilbey Company. Do you recall that?
Mr. LEVIS. Yes, sir.
Mr. COX. Both of those companies use bottles in their business?
Mr. LEVIS. Yes, sir.
Mr. COX. Do they buy bottles from Owens-Illinois?
Mr. LEVIS. Yes, sir.
LEVIS GROUP HOLDINGS
Mr. COX. I think I also neglected to ask you what percentage of the total outstanding stock of Hazel-Atlas is owned by what we describe as the Levis group. Can you give me a figure on that?
Mr. LEVIS. The Illinois Glass Company owned, I think, a maximum of 22,000 shares. I may be wrong in that. It may have gone as high as 25,000, but for the longest period of time the holding was 20,000 shares, and that was the amount we distributed in liquidation.
Mr. COX. In the case, of the Lynch Corporation, will you tell us how many shares in that the Levis group held?
Mr. LEVIS. There was distributed in kind at the time of liquidation 4,500 shares.
Mr. COX. I have a figure here which we obtained from your company of about 6,000. I wonder if we could some timework out that discrepancy. That is a figure as of today, based on the holdings of members of the Levis group.
Mr. LEVIS. That probably is so. The Illinois Glass Company was a stock holder of record of 4,500 shares , and I own some shares personally, which together, maybe, with the holding, might be 6,000 shares.
Mr. COX. I am willing to check that.
Mr. LEVIS. I am willing that it stands as 6,000.
Mr. COX. The exact figure I have is 6,644 shares.
Mr. LEVIS. That is probably correct.
PATENT LICENSES
Mr. COX. Mr. Levis, I'd like to ask you some questions about the testimony which you gave me in respect to the company's attitude towards taking licenses on patents. As I understood, your testimony yesterday was that the attitude, or your own atitude [sic] attitude and that of the Illinois Glass Company was that all licensees of Hartford-Empire should be treated in the same way. Is that correct?
Mr. LEVIS. Would you make that a little clearer, Mr. Cox?
Mr. COX. Well, I will put the question this way: It is your attitude and the attitude of the Illinois Glass Company that no licensee of Hartford-Empire should receive preferential treatment over another licensee.
Mr. LEVIS. We weren't concerned with anybody else's business, Mr. Cox. As far as we were concerned, we had always made bottles of every description and we weren't going to sit back and be throttled by any licensing policy on the part of either Owens or Hartford. We went out until we got enough devices licensed to make everything that we had always made. What the other fellow did, that was his business.
Mr. COX. You then were not interested in whether you got the same treatment from Hartford-Empire as a licensee that the other licensees got?
Mr. LEVIS. No, we had a favored nation clause, that is, no one could have anything more favorable that we could have.
Mr. COX. And that was your attitude on that question?
Mr. LEVIS. It was the attitude on that or even the purchase of supplies.
Mr. COX. Was that the attitude of the Owens-Illinois Company after you became connected with that and acquired the assets of the Illinois Glass Company?
Mr. LEVIS. Well, as I said yesterday, to restate, I inherited a situation in Owens-Illinois which I didn't know very much about.
Mr. COX. The thing you speak of inheriting I presume is the 1924 contract.
Mr. LEVIS. Well, no, a patent licensing policy, the development organization and legal powers and applications, and things of that kind which we didn't know anything about.
Mr. COX. You didn't mean the 1924 contract?
Mr. LEVIS. The 1924 contract I didn't know of, other than it was in existence. I had never read it. That is when I went into Owens-Illinois.
Mr. COX. You feel today, I suppose, that your company should get the same treatment from Hartford-Empire that any other licensee gets, is that correct?
Mr. LEVIS. Yes.
Mr. COX. You have been successful, you think, in getting that kind of equitable treatment, Mr. Levis?
Mr. LEVIS. Yes, sir.
AGREEMENT OF 1924
Mr. COX. Now I want to develop very briefly some of the provisions of that 1924 agreement; in case you feel you can't answer the question, perhaps Mr. Williams can. I am going to put the agreement in the record ultimately, but I would like to develop briefly the character of some of the provisions. Do you wish to have a copy of the contract before you?
Mr. WILLIAMS. I have a copy here, Mr. Cox.
Senator KING. Which contract is this?
Mr. COX. This is a cross-licensing contract made in 1924 between Owens-Illinois and Hartford-Empire. Under that contract it would be accurate to say that the two companies exchanged licenses, Mr. Williams?
Mr. WILLIAMS. Yes, each granted to the other a license under the patents that they then had, or would acquire within the time stated, limited, however, to feeders and feeder-fed forming machines.
Mr. COX. The suction machine was excluded?
Mr. WILLIAMS. That is right.
Mr. COX. Under that contract the Owens Company was to pay certain royalties to the Hartford Company, is that correct?
Mr. WILLIAMS. They had a most-favored-nation clause that they got as low royalties or as good royalties as anybody got, with one or two exceptions.
Mr. COX. One of those exceptions was the fact that they had the use of forty-three units of machinery, did they not, or not to exceed forty-three units of machinery?
Mr. WILLIAMS. Yes, although by the answer I meant with respect to certain other concerns that might have lower rates.
Mr. COX. I see, I beg your pardon, but that was an exception, at least it was a limit, a qualification of the royalties I speak of, the forty-three units.
Mr. WILLIAMS. Yes.
Mr. COX. That was in Section 5 of the contract. Is that correct?
Mr. WILLIAMS. Yes.
Mr. COX. And under the contract, Hartford-Empire was to make certain payments to Owens. Is that correct?
Mr. WILLIAMS. Yes.
DIVISION OF INCOME
Mr. COX. And would it be a correct summary of one of the provisions as to those payments to say that Owens was to receive one-half of Hartford's divisible income from licensed inventions, as divisible income was defined in the agreement?
Mr. WILLIAMS. Yes.
Mr. COX. And divisible income was defined in the agreement as including gross royalties, license fees in excess of cost, profits on parts, damages collected in infringement suits, less the $600,000? That is in Section 1 if you would like to look at it, I think page 7 of that contract. I hope you have followed this, Mr. Levis, because I want to ask you some questions about it.
Mr. WILLIAMS. Yes, there were five items. I think you mentioned the five, that is the income from licensed inventions.
There was the income derived from royalties; license fees in excess of cost of the manufacturing of licensed machines; profits on manufacturing, lease or sale of machines or parts; settlement for damages, and profits arising out of infringements of licensed inventions, and other gross revenues with exceptions as provided.
Mr. COX. That same contract provided in Section 1 in certain circumstances for the joint purchase of patent rights owned by others, is that correct?
Mr. WILLIAMS. No, not in Section 1, I think.
Mr. COX. Can you find that, Mr. Williams?
Mr. WILLIAMS. It is not in Section 1.
Mr. COX. I think Section 21, I beg your pardon.
Mr. WILLIAMS. I think that is correct, yes.
INFRINGEMENT PROSECUTIONS
Mr. COX. And in Section 8 of the contract there was a provision that each party should vigorously prosecute infringements of patents owned or controlled by it, at its own expense.
Mr. WILLIAMS. Yes.
Mr. COX. But there was also in the same paragraph a provision that if the parties couldn't agree as to the suits which were to be brought, that disagreement was to be arbitrated. Is that correct?
Mr. WILLIAMS. Yes.
Mr. COX. I wish you would look at Section 22 of the contract, now, Mr. Williams, and tell me if that section provided that Hartford could not license anyone under the inventions which were covered in the cross-licensing agreement by Owens, without Owens' consent, except to existing licensees of Hartford for machines already installed or for additional machines, and to be used in the same fields covered by Hartford's existing licenses, or to any legitimate manufacturer who was defined as a glass manufacturer of good commercial and financial standing, who was not a commercial user of his own product, and the license was to be in his case the same kind of ware which he made one year previous to the date of the contract. Is that an accurate paraphrase of those provisions?
Mr. WILLIAMS. Yes, except that in the first class which you mentioned, not only the lines of ware or fields of ware covered by existing licenses, but also that might be covered by outstanding contracts. That limitation was taken out of the contract February 2, 1931.
CHANGES IN CONTRACT
Mr. COX. I was going to ask you about that. Maybe we might run through, very briefly, some of the subsequent changes in that contract. I will suggest them to you and you tell me whether they are correct in a general way.
In 1932 the Hartford-Owens license was changed from an exclusive to a non-exclusive license. Is that correct?
Mr. WILLIAMS. Yes, among other changes.
Mr. COX. Also certain other provisions were eliminated from the contract, such as the provision as to suits, and the joint acquisition of rights.
Mr. WILLIAMS. An entirely new contract was drawn, and this 1924 contract was cancelled.
Mr. COX. And a new contract eliminated the provisions as to joint acquisition of outside rights and the provision as to litigation.
Mr. WILLIAMS. I think that is correct.
Mr. COX. And, of course, in a separate contract in 1932, Owens got a license under certain suction patents of Hartford-Empire. Is that correct?
Mr. WILLIAMS. That is right.
Mr. COX. Is that an exclusive or non-exclusive license?
Mr. WILLIAMS. I think it was non-exclusive, but I can look at it and see.
Mr. COX. That was my understanding. At the same time the right to use forty free units was surrendered?
Mr. WILLIAMS. Yes.
Mr. COX. By the way, when you speak of a unit in that connection, it means one feeding and one forming machine?
Mr. WILLIAMS. It was so defined.
DIVISION OF INCOME.
Mr. COX. At the same time a change was made with respect to the divisible income so that Hartford-Empire was entitled to deduct $850,000 from its gross figure before dividing with Owens-Illinois. Is that correct?
Mr. WILLIAMS. Correct.
Mr. COX. And was any other change made at that time with respect — wasn't it at that time that the amount which Owens was to receive was cut from one-half to one-third?
Mr. WILLIAMS. Correct.
Mr. COX. So that between 1924 and1932 Owens got one-half of Hartford-Empire's divisible income, as to the agreement from 1932, and until 1935 it received one-third.
Mr. WILLIAMS. That is correct.
Mr. COX. In 1935 another series of contracts were instituted as a result of which the right of Owens to receive any part of Hartford's divisible income was surrendered?
Mr. WILLIAMS. That is right.
Mr. COX. And in consideration of the execution of those contracts and in consideration of that surrender of that right, and perhaps some other matters, Hartford paid Owens $2,500,000 approximately.
Mr. WILLIAMS. Yes, payable in installments.
Mr. COX. Payable in installments. Well, now, Mr. Levis, I'd like to ask you some questions about that contract. In the first place I am going to show you a schedule of the payments made by Hartford to you under that contract between 1924 and 1937, and the payments made by you to Hartford. This was given to us by Mr. Martin. I ask you to identify those figures as being from your record and as being substantially correct.
Mr. LEVIS. Yes, sir.
Mr. COX. This schedule which I am shortly going to offer for the record shows that between 1924 and 1937 you paid in royalties to Hartford-Empire $3,962,921; you received in return under the 1924 contract from Hartford $4,815,093, so that there was a net return to you under that contract of about $800,000. Is that correct?
Mr. LEVIS. Yes, sir.
Mr. COX. May I have this marked in evidence?
The CHAIRMAN. It may be marked and entered in the record.
(The schedule of Owens-Illinois payments to Hartford-Empire and receipts from Hartford-Empire from 1924 to 1937 was received in evidence and marked "Exhibit No.127" and is included in the appendix of this issue )
PROFIT ON PATENTS
Mr. COX. So at least on that contract, on that part of your patent licensing business, you did make some money, didn't you?
Mr. LEVIS. Not after the developments nor the legal expense that was involved. In fact, we never made any money, Mr. Cox, in our business in the whole of the patent situation or in a division of it.
Mr. COX. I will put it this way, the net result of the payments to and fro under that contract was that you ended the transaction on the credit side of the ledger so far as those payments are concerned.
Mr. LEVIS. Oh, yes, but I mean we can't segregate each carload of bottles and determine whether that is profitable or not. It is our bottle business as a whole, our patent business as a whole was unprofitable.
Mr. COX. That is taking the patent business in its entirety?
Mr. LEVIS. This is unprofitable if, accounting-wise, you would charge against the income our development and legal expense.
Mr. COX. Of course, this figure which I have read to you here doesn't include the two and one-half million dollars you received in 1935.
Mr. LEVIS. That was for the sale of patents, sir.
Mr. COX. Well, that wasn't a part of the consideration for that payment —
Mr. LEVIS (interposing). Wasn't royalty.
Mr. COX. Wasn't that cancellation of your right to receive one-third of the divisible income of Hartford-Empire?
Mr. LEVIS. Well, it was for a settlement of everything from the selling of our patents and the cleaning up of a lot —
Mr. COX (interposing). Including the surrender of your right to give up and receive.
Mr. LEVIS. But the two and one-half million dollars —
Mr. COX (interposing). You included that in determining whether or not you made a profit on your whole?
Mr. LEVIS. The whole patent business, yes.
Mr. COX. Of course, between 1924 and 1932 you also had the free use of up to forty units of the Hartford-Empire machines?
Mr. LEVIS. So far as I know, it was never exercised.
FREE PATENT UNITS
Mr. COX. Will you refresh your recollection on that, Mr. Levis, because we have some documents from your file which would indicate that it was used.
Mr. LEVIS. Mr. Williams said that the Owens Company, before I came in, did have some free units.
Mr. COX. We have a document which would indicate that in 1929, just before you came in, they were using at least fifteen of those units. Would you think that was substantially correct?
Mr. WILLIAMS. I couldn't tell you the number of them, Mr. Cox, but I simply know there were free units.
Mr. LEVIS. I might point out just this, which I think explains it. Under the provisions of the contracts, when Owens acquired the assets of Illinois, Ilinois [sic] Illinois feeder licenses could have been surrendered and free licenses substituted for them up to forty, and that we never felt that that was the proper thing to do.
Mr. COX. Do you know if any, of the free feeder units, to which you were entitled under the contract, were used by Owens-Illinois between 1929 —
Mr. LEVIS (interposing). It was always my recollection that none were used; that we always paid our part of the rate.
Mr. COX. You think not one of those units —
Mr. LEVIS (interposing). I may be mistaken, Mr. COX. Will you check on that, Mr. Levis?
Mr. LEVIS. I will check on that.
Mr. COX. You, on the other hand, Mr. Williams, are inclined to believe that at least up until 1929, with the five-year interval there, some of those free units were used by the Owens Bottle Company?
Mr. WILLIAMS. The Owens Bottle Company did have free units. I can't tell you just the period or just the number, but they did have some free units.
Mr. COX. They did use them to manufacture bottles?
Mr. WILLIAMS. Yes.
Mr. COX. Now, Mr. Levis, taking this contract in its entirety, let's consider it for a minute. Under that contract I may be
Senator KING (interposing). Are you speaking of the '24 or the later one?
Mr. COX. I am speaking first of the contract from 1924 to 1932. Under that contract your company received one-half of the divisible income of Hartford-Empire and also the use, if it cared to take advantage of the opportunity, of these free units?
Mr. LEVIS. Yes, sir.
GLASS BOTTLE INDUSTRY
Mr. COX. Don't you think that provision in the contract gave the Owens Company a certain competitive advantage in the manufacture and the sale of bottles?
Mr. LEVIS. It would only be an opinion, sir, because I had nothing to do with the negotiation, but my opinion always was that the Owens Company had as valuable a feeder patent structure that was contributed to the Hartford Company's patent picture as Hartford then had, and that they were entitled to compensation for their contribution, and Mr. Williams might verify that.
Mr. WILLIAMS. That is right. When the contract was made in 1924, Owens contributed patent rights by license that it had and which it claimed dominated the Hartford machine. Litigation had been started and they were in for a free-for-all fight when this settlement was made.
Mr. COX. Will you give us the names of those patents, if you can?
Mr. WILLIAMS. The Bock patent, the Lott patent, and the Brookfield patent are the ones I recall, and there were many others listed in the schedules attached to the contract.
PATENT LITIGATION
Mr. COX. And it is true, is it not, when you spoke of litigation you refer to the suit the Owens Company had started against certain users of the Hartford-Empire feeders?
Mr. WILLIAMS. Yes, against one, 1think.
Mr. COX. So one of the circumstances which lead to the making of the 1924 contract, in your opinion , was the fact that the parties had patents which appeared to cover, at least each asserted that the patents covered machinery which accomplished the same result, and they were both threatened with litigation as a result of that situation.
Mr. WILLIAMS. Yes, and if the claims of each were sustained in any major part, the result would be that neither could make a substantial or efficient feeder and each would be blocked by the other.
Mr. COX. Each would be blocked by the other?
Mr. WILLIAMS. That is correct.
Mr. COX. And as far as those companies were concerned, there wouldn't be any patents on automatic feeders effective?
Mr. WILLIAMS. Well, there would still be patents that each would have, but the difficulty came with the infringement that arose out of the use of any specific mechanism that either would make.
Mr. COX. The patent would be there, but it wouldn't be much good as a patent because there would be an effective right to sue for infringement?
Mr. WILLIAMS. Well, either party could have sued anyone who made a feeder that infringed his patent, so that the patents still had their value. The difficulty arose in the use of any mechanism that was covered in part or in whole by the patents of either.
Mr. COX. They might have been each suing each other?
Mr. WILLIAMS. Yes.
Mr. COX. Rather than face that situation, they made the contract and provided for the cross-licensing?
Mr. WILLIAMS. That's right.
REBATES ON ROYALTIES
Mr. COX. Well now, Mr. Levis, taking this provision providing for the division of the income of the Hartford-Empire, wasn't the effect of that that the Owens Company was getting a kind of rebate on all the royalties paid by other licensees of Hartford-Empire?
Mr. LEVIS. No, I don't think so, Mr. Cox. The Owens Company, back in 1904,developed a patent structure and they received royalties from many companies. They were in the royalty collecting and patent development game, just about like the Hartford people subsequently became.
Mr. COX. You mean they gave up that part of the business?
Mr. LEVIS. So far as they could have owned it in the licensing of feeders to their existing licensees and others. In fact, I don't know accurately, but it is my recollection that the Graham A. W. machine was licensed to Coshocton in 1917, to Glenshaw in 1918, to Turner in 1918, by the Owens Company, and that they were a feeder fed machine, and they went on in the development of their art and —
Mr. COX (interposing). Are those the last licenses in point of time?
Mr. LEVIS. No. The 1932 license to Hazel-Atlas in July, and the October 31, 1935, to Hazel-Atlas, of which you have copies —
Mr. COX (interposing). But aside from Hazel-Atlas, the three you have named are the last licenses that have been issued?
Mr. LEVIS. Yes, that is our record.
Mr. COX. Prior to that time most of your licenses had been issued before 1914 and 1915?
Mr. LEVIS. Yes.
Mr. COX. Now if I understand your answer a moment ago, it was in effect that the result of the 1924 contract really was that the Owens Company gave up the business of licensing under its patents which might have provided some revenue for it , and turned that over to Hartford-Empire to manage for them, and they went on conducting their licensing in the suction field, extracting royalties from the Illinois Company, of which you were then president.
Mr. LEVIS. They carried on the business in the suction field, and the Hartford group carried it on in the feeder field and they got part of the income from that that they contributed to, and Hartford had contributed nothing to the suction field, therefore didn't participate.
Mr. COX. As far as other business in patents is concerned, Owens' last business in the stock licensing field was in 1915.
Mr. LEVIS. The last license was 1918.
Mr. COX. Most of them had been granted before that, up to 1915. Now, isn't it a fact, Mr. Levis, that under the provisions of the division of income, every licensee who was paying royalty to Hartford-Empire was in effect paying part of that, royalty to you, to your company — I am speaking of the Owens Bottle Company and not the Owens-Illinois Company?
RETURN FOR ROYALTIES.
Mr. LEVIS. That is what actually happened, Mr. Cox, but as a matter of fact, as a bottle manufacturer, I think but very few of them ever thought of it as royalty. It was their contribution to the development of the art, the furnishing of a service on the part of Hartford which kept patent things straight and development things straight, and they didn't have departments like Owens, have big machine shops and patent linguists and patent draftsmen and solicitors, and all those things. They bought that for a fee to Hartford, who gave them splendid service and put them in a position to become better competitors in the industry because they acquired that service which made them better manufacturers.
Mr. COX. Part of the fee they paid for that went to you, to your company?
Mr. LEVIS. No, sir, we contributed certain patents and development and legal expense to them and they collected in the form of royalties for us. We never thought of it as our putting up nothing and taking in something.
Mr. COX. I am not suggesting that that was quite the situation, Mr. Levis. The point I wish to develop is this. Here were a large number of concerns engaged in manufacturing bottles, glass containers; they were licensees of the Hartford-Empire, and a great many of them, I suppose to a greater or less extent, were your competitors, were they not?
Mr. LEVIS. Yes, sir.
Mr. COX. They were paying license fees, a royalty fee to Hartford-Empire, and a part of those royalty fees were being given to you under the provision of the division of income.
Mr. LEVIS. Yes, but, Mr. Cox, I ran the Owens-Illinois Glass Company from 1924 to 1929 and I not only paid Hartford royalties on patents, part of which they got, but paid royalties on patents, all of which they got, and never was unhappy about it.
Mr. COX. I am glad you mentioned that, because I want to ask about it. You were perfectly content with that situation, were you?
Mr. LEVIS. I stated so yesterday. We believed that we got more efficient devices and service in dealing with organizations of that type than if we had taken pirate devices.
COMPETITION: ITS VALUE.
Mr. COX. And you think that from the competitive point of view, that that was a perfectly proper thing for your competitors to be paying royalties to Hartford and having those royalties divided or rebated to you?
Mr. LEVIS. You have got to clear up who "you" is in this.
Mr. COX. I am not trying to fix you with personal responsibility.
Mr. LEVIS. I mean, Owens or Illinois?
Mr. COX. I am talking about Owens. I want your judgment on the thing as a man who has been in the glass business for a good many years. You think competition is a good thing, don't you, in the glass business?
Mr. LEVIS. Yes, sir.
Mr. COX. I just want you to tell us whether you think that is the sort of condition that is conducive to healthy competition, when one company, and a large company, Mr. Levis, is getting a rebate of this kind.
Mr. LEVIS. It is improper to term it a rebate.
Mr. COX. I will withdraw that term. I will say a division of royalties of that kind.
Mr. LEVIS. If you want my personal opinion, Mr. Cox , as a man who has been in the glass business, I have never felt that the word "royalty" was a proper word.
PATENT DEVELOPMENTS
I always thought of our payment as a contribution to the development of the art, and that the people who collected that performed certain services for the manufacturer which he didn't have to perform himself. I always thought we got that service. We complained about it, but we complained about everything.
Mr. COX. Now, taking that definition, what service was Owens-Illinois performing for these licensees of Hartford-Empire that in your opinion justified the payment to Owens of a part of the royalties which the licensees were paying to Hartford-Empire?
Mr. LEVIS. They were collecting in installments the purchase price of the patents that they put into the group.
Mr. COX. Those are the gob feed patents that Mr. Williams spoke of?
Mr. LEVIS. Yes. And second, they were perfecting those, and any right that they developed in that connection flowed to Hartford as a part of the consideration for the payment.
Mr. COX. Throughout this period — if you don't know, perhaps Mr. Williams can tell us whether the Owens Company was doing development work on the gob feed patent as distinguished from the suction.
Mr. LEVIS. Oh yes, anything we do goes to Hartford and he takes and gives to our competitor to use against us.
PREFERENTIAL TREATMENT
Mr. COX. But of course, so far as that situation existed between 1924 and 1935
when your competitor used the device, you in effect collected a royalty on it through this division of income.
Mr. LEVIS. We received a part of the divisible income.
Mr. COX. Then would you say, Mr. Levis, (and I want you to think very carefully about this) that it was never your policy or the policy of the Owens-Illinois Company, as long as you were connected with it, to receive better treatment from Hartford-Empire than other licensees in the field received?
Mr. LEVIS. Mr. Cox, that is a very broad question. If you limit it, I will try to answer it.
Mr. COX. Well, I will put it this way. Was it your policy to turn the whole patent and licensing business over to Hartford-Empire for development and exploitation and to receive in return a preferential treatment so far as the payment of royalties was concerned?
Mr. LEVIS. Mr. Cox, as I explained yesterday, my bringing up in this thing was different from that. When I came into the Owens-Illinois Company I knew very little about patent matters. They had a large investment in a licensing business. I was the president of the company and wanted to liquidate. I even sought to inaugurate a policy so far as their licensing business was concerned that we would pay no royalty to anyone, that everybody else would pay a royalty to someone and we would get just as much of that as we could. Now I found out, at least along in '33 and '34, that I was just swapping dollars and I was riding railroad trains and I wasn't making a dime, and as soon as I could convince the people who had grownup in the other field that my doctrine of this thing was right, we finally sold out and started on in our business, and as I said to you yesterday we were more successful after we did it.
POLICY AS TO ROYALTIES
Mr. COX. You found it didn't pay to try to make money out of the patent situation.
Mr. LEVIS. Even with the policy as I stated it, it didn't pay, because the time of our principals who had to devote their thinking to these interferences and litigation and how to keep from being excluded in fields was consumed away from the business features of our company.
Mr. COX. Then, if I understand you correctly, your purpose at one time was to create a situation where every one else in the field would pay a royalty for the inventions which they were using, and that your company would not pay a royalty to avoid doing so?
Mr. LEVIS. No, I don't think that was ever my purpose, Mr. Cox. Just like I would like to sell certain items cheaper, but there are certain factors in connection with an investment that we owned that I felt we must liquidate profitably, that I tried even to create a policy, and even if that policy had been 100 per cent successful, then that division of our business would not have been profitable, and consequently, having tried it for five years without success, I sought the policy of abandonment.
Mr. COX. You did make a change in policy?
Mr. LEVIS. Yes, sir, changed my mind and it wasn't much different after I changed it than when I started, because the Illinois Company had been successful under the other policy.
Mr. COX. To the extent there was a change, it was a change from the policy which you say you inherited when youcame into the Owens company.
Mr. LEVIS. That is the way I think of it.
Mr. COX. I just want to get a precise definition of what that policy was that you inherited. I am going to show you a document which purports to be a copy of a pencil memorandum, and I call your attention to the paragraph I have marked.
Mr. LEVIS. Before I look at it, I want to correct you to this extent. This isn't the policy; this is my idea of to what extent we might go to try to make this division of our business possible.
Mr. COX. What are you describing now?
Mr. LEVIS. A restatement of your question that you were handing me something.
Mr. COX. Are you describing what this is that I have given you now?
Mr. LEVIS. No, I was answering your question in giving it to me.
Mr. COX. You look at that, Mr. Levis, and see that paragraph that I have marked. It is the paragraph which begins, "Our negotiations with Hartford-Empire Company and others . . . ."
Senator KING. Are you referring to the policy after 1934 or under the 1924 contract?
Mr. COX. I have to find out from the witness first when this memorandum was prepared. That is the next question I am going to ask him. It is undated. When was it prepared?
CHANGE IN ROYALTY POLICY
Mr. LEVIS. I don't know. I have no recollection of the memorandum. Some of your men went to Alton and took from my office personal files a lot of papers that my uncle had accumulated, evidently for sentimental reasons. I had no copy and this was one of them, and when I saw your typed copy of what one of my men who has been with me for many years said is not in my writing, it doesn't differ, though, sir, from what my thinking was as a kid in 1929, starting out to liquidate this undesirable part of this business.
Mr. COX. You think this substantially describes your attitude?
Mr. LEVIS. It describes what I might have been thinking but it doesn't describe what I think now.
Mr. COX. I understand that. What I am trying to find out now is what the precise policy was that you did change in1935 , and this is the policy that you did change.
Mr. LEVIS. We never were able to carry that out.
Mr. COX. That is what you were trying to do?
Mr. LEVIS. No, that is what I believed it would be necessary to do to make that division of our business profitable.
Mr. COX. I think perhaps we might read this so it will be clear what we are talking about. The paragraph reads: "Our negotiations with Hartford-Empire Company and others, so far as our patent situation and royalty income is concerned, should be to attempt to secure a position whereby we pay no royalty on any item we produce and we attempt to force all others to pay royalty on every item they produce, we participating with anyone else in the royalties they receive."
I suppose "they" means Hartford-Empire. That is the policy you thought you would have to adopt if you were going to make any money out of patents?
Mr. LEVIS. Yes. The early part of the memorandum tells of the policies I thought we would have to adopt if we were going to make money selling bottles.
Mr. COX. That is the policy you gave up in 1935?
Mr. LEVIS. No, I gave it up right along. I can't state what date I started to think differently. I had a right to change my mind. This was a memorandum evidently prepared for me to talk over with my uncle, who was an old head in the business, and when I got through spending the evening with him I probably left it with him. I don't see any economic significance to it.
Mr. COX. You have told us you changed the policy. I think I understand what the policy is today, so I am going to ask you about that in a moment, but I want to get a precise definition of some kind as to what the policy was you changed, and if this represents at least in one form the acme of that policy, or what you thought you might have to do to accomplish the result to which your prior policy was directed, I am content.
Mr. LEVIS. That is right.
ROYALTY POLICY SINCE 1935
Mr. COX. How would you describe your policy on patents today, Mr. Levis, or since 1935? I am going to ask you some questions later on about licensing. Let's confine it now to the collection of royalties paid by others manufacturing bottles. Are you interested in collecting royalties from other persons who are engaged in manufacturing bottles and who are competing with you?
Mr. LEVIS. No, sir.
Mr. COX. That has been your policy since 1935?
Mr. LEVIS. Yes, sir.
Mr. COX. Do you collect any royalties today from anyone engaged in manufacturing bottles in competition with you?
Mr. LEVIS. We have a few small contracts, like the Dominion Glass Company, who really aren't in competition with us, and we have some small income from gadgets like decorating and items of that kind, but certainly we have no competitive advantages as a result of royalty income.
ROYALTIES COLLECTED
Mr. COX. You don't get any royalties from any of the large companies manufacturing glass containers, such as Hazel-Atlas and Ball Brothers? I am speaking of the period of time since 1935.
Mr. LEVIS. Our royalties received in the years '36 and '37 amounted to $2,690,000 in the year '36 , of which $2,624,000 was paid by ourselves; $12,752 by the Dominion Glass Company; $1,179 by the Thatcher Company; $614 from foreign sources. There are a number of other small items that don't relate to glass. Does that answer your question?
Mr. COX. That answers the question. When you say you paid them yourselves —
Mr. LEVIS (interpolating). It is simply bookkeeping. In other words, in determining our cost we like to have in, as an element of cost, royalties, even though we charge them to ourselves.
RESTRICTION ON LICENSES
Mr. COX. All right; I think that answers my question.
Now, Mr. Levis, I want to ask you some questions about Section 22 under the 1924 contract, which I think you said a moment ago was withdrawn in 1931, or Mr. Williams said that.
Do you recall that was a provision which prevented Hartford from licensing people under your patents without your consent, except in the specific cases mentioned there, which in effect might be summarized by saying they could be given only to people who were in business or under license to Hartford at the time the contract was made? That section was taken out of the contract in '30 or '31, I think, after you came into the Owens-Illinois Company.
Mr. COX. Tell us why that was taken out.
Mr. LEVIS. All I know is that when I came there I was advised that it never had been exercised and Mr. Williams asked to have it removed from the contract, and I thought if it wasn't an essential feature was willing that that be done.
ANTITRUST LAWS
Mr. COX. Was one of the reasons, Mr. Williams, why you thought it better betaken out because it raised some question under the antitrust laws?
Mr. WILLIAMS. It was the one vulnerable spot, I thought, in the contract, or rather the provision that would raise objections. I objected to putting it in in the first place and was overruled.
Mr. COX. When you took that provision out, did it make any difference in the nature of your relationships with Hartford-Empire at all?
Mr. LEVIS. No. So far as I was concerned, I was advised that it had never been used and Mr. Williams, for some rea-on, didn't want it in, and I didn't see any reason why it should have been in anyway.
Mr. COX. Isn't one reason why you took it out because you felt sure Hartford-Empire wasn't going to grant licenses recklessly or in disregard of your interests?
Mr. LEVIS. Oh, no.
Mr. COX. I am going to read to you a paragraph of a memorandum which was sent to you by Mr. Carter, who, I understand, is your vice-president in charge of your patent section in your legal department. Is that correct?
Mr. LEVIS. He was.
Mr. COX. This memorandum is dated December 13, 1930. It reads as follows:
"The objection on our part to eliminating Section 22 is the fear that Hartford, once freed of our veto, might be inclined to grant licenses recklessly and without regard to the state of the market or good of the industry. Believe that this fear is much exaggerated. We have been dealing with Hartford under our 1924 agreement for more than six years now and have never found any tendency on their part to act recklessly or in disregard of basic conditions. Believe we may safely conclude that their attitude in the future will not be different."
I ask you if that is not a statement of a reason for agreeing to the abolition of the section which is in substantial agreement with my question to you a moment ago?
Mr. LEVIS. Mr. Cox, when I got to Toledo in April about every twenty minutes I got six memorandums like that. I just couldn't read them. They didn't have anything to do with the business. You take my early '29 memorandums, all of which you have, and they don't differ at all in the theories I explained. Maybe there is some trade talk in some memorandum Mr. Carter did, but my way of handling this business hasn't been a darned bit different, and the way my early memorandums indicated I was raised. That memorandum had no effect on me. I was simply a young fellow in there and they said, "Mr. Williams would like this paragraph out of the contract," and I said. "Well, have you ever used it?" They said, "No." I said, "It doesn't amount to anything anyway, so take it out."
As to what Hartford would do, as to whether they would do something we asked them to or not, I don't think that ever worried us.
Mr. COX. Weren't you interested in the persons to whom they granted licenses?
Mr. LEVIS. Yes. I think other bottle manufacturers were more interested in it than we were.
Mr. COX. But you were interested in it to some extent?
Mr. LEVIS. Oh, yes, but we had the largest percentage of our production on our own royalty-free machines. At that time we had a participation for the patents we contributed to in the 1924 Hartford contract.
Mr. COX . Isn't it a fact that even since the abolition of this provision in the contract you have talked to Hartford-Empire and consulted with them about the wisdom and propriety of granting licenses under their patents?
Mr. LEVIS. I may have, Mr. Cox. I complain and talk about things of that kind, just like I would about some enactment of legislation I might not like, but as for ever believing that I could, other than through my own personal persuasion ,get some fellow to do something because I had a contract with him to force him to do it, I didn't.
Mr. COX. You did at least offer your advice or suggestions on that?
Mr. LEVIS. Oh, I offer that freely, sir, to everybody in the glass industry, and lots of them take it.
Mr. COX. Have you ever suggested or advised Hartford that in your opinion they should be careful about granting licenses to people who want to go into the business of manufacturing bottles and containers?
Mr. LEVIS. I may have, sir, but I don't recall the incident.
Mr. COX. I am thinking generally now. I have one instance that occurred in 1933 and I am going to ask you about in a moment, but I just want to ask you now if you had any general statement on that that you wanted to make.
Mr. LEVIS. I don't believe, Mr. Cox,that I feel at all that I have anything todo with that.
BEVERAGE BOTTLES
Mr. COX. Now, Mr. Levis, I am going to read to you a letter which you wrote January 13, 1933, to Mr. F. Goodwin Smith. It reads as follows:
"My dear Goodwin: Referring to Mr. Northend's letter of January 10th regarding the persistent letters he has received from Mr. E. C. Devlin, I am replying to you rather than to him because I feel that you should know that the old Northern Glass Company plant never was operated successfully and that I do not think we should be at all concerned regarding their thoughts of resuming operation.
"We are in splendid shape to take care of Milwaukee trade from our Streator, Illinois, plant, and while I want to keep posted from time to time about people who inquire for licenses for the manufacture of beverage bottles, I think the position that you are taking — that there is at present considerable over-production in the industry — should be maintained in replies to similar requests."
I ask you if you in fact wrote that letter to Mr. Smith.
Mr. LEVIS. Yes, sir.
Mr. COX. That was a situation, was it not, where Mr. Devlin had been writing to Mr. Smith about getting a license and Mr. Northend had written to you about it?
Mr. LEVIS. He probably had, Mr. Cox. I can't remember that.
Mr. COX. You don't remember anything about it?
Mr. LEVIS. It is just one of many things in ten years' work.
Mr. COX. The correspondence you had with Hartford involved a request that had been made to them for license for use in a glass factory plant somewhere in the neighborhood of Milwaukee. Does that refresh your recollection at all?
Mr. LEVIS. No, sir. There may have been many such letters, and I may have answered them in that same way.
Mr. COX. Was it your position at that time that you wanted to keep posted from time to time about people who inquired for licenses for the manufacture of beverage bottles?
Mr. LEVIS. Yes, sir.
Mr. COX. Why did you want to be posted?
Mr. LEVIS. I wanted to be posted on everything.
Mr. COX. Was that just curiosity, or did you have some specific purpose in mind that you wanted the information for?
Mr. LEVIS . I don't think I had any specific purpose, Mr. Cox.
Mr. COX. If I should suggest to you that what you really wanted to know was who was asking Hartford for a license for that purpose, so you could discuss with Hartford whether the license should or should not be granted, would you repudiate that suggestion?
Mr. LEVIS. I wouldn't repudiate any suggestion, Mr. Cox. You have 8,000 pieces of my papers. I will try to help you in working any of those out, but I just can't remember each isolated letter that I wrote to Goodwin Smith. Show me the incident, and if I can refresh my memory I will tell you the truth.
Mr. COX. I am sure you will, Mr. Levis. I am not asking you now about a particular incident. I am asking you about the general statement you make that you want to keep posted from time to time about people who inquire for licenses for the manufacture of beverage bottles. You said you wanted to keep posted about everything, and I still want to know whether you wanted to know about people who inquired as to beverage bottles merely out of curiosity or because you were interested in seeing that too many of them didn't go into business.
Mr. LEVIS. I had no way of controlling whether they went into business. I was interested in protecting my own business.
Mr. COX. Of course, you could talk to Mr. Goodwin Smith about it?
Mr. LEVIS. I could talk to anyone in the industry about it.
Mr. COX. In your very persuasive manner, Mr. Levis?
Mr. LEVIS. Well —
OVER-PRODUCTION POLICY
Mr. COX. (interposing). Now I call your attention to this last sentence in the letter: "I think the position that you are taking — that there is at present considerable over-production in the industry — should be maintained in replies to similar requests." Was that your position at that time?
Mr. LEVIS. Yes, I think that was the position of all glass manufacturers at that time. I think that any licensee of the Hartford Company would have told Mr. Smith that same thing.
Mr. COX. It was a situation where it wasn't desirable to grant any more licenses?
Mr. LEVIS. The banks had just all been closed and we were in the peak of the depression with a tremendous over-production.
Mr. COX. Is that your attitude today? Do you think there is over-production today?
Mr. LEVIS. In the glass industry? Yes, sir.
Mr. COX. And would you say that you think because of that over-production licenses should not be granted by Hartford-Empire to people who apply for the right to go into business?
Mr. LEVIS. I have nothing to do with Hartford-Empire, sir, and I don't know what they would do. So far as I am concerned, I think that there are plenty of people in the business and there is an over-production.
Mr. COX. Would it be correct for me to say that if you had occasion to write a letter today to Mr. Smith like the letter you wrote in 1933, your advice to him would be the same?
Mr. LEVIS. My advice to him would be that I think there is an overproduction.
Mr. COX. And that no more licenses should be granted?
Mr. LEVIS. I don't think would add that now.
PATENTS AS STABILIZERS
Mr. COX. As a matter of fact, you have from time to time been interested in the use of patents as a device for stabilizing conditions in the industry, haven't you, Mr. Levis?
Mr. LEVIS. Yes, sir.
Mr. COX. And of course the best way that can be done is through Hartford-Empire, since they are the license-granting organization in the real sense, aren't they?
Mr. LEVIS. We are too, Mr. Cox.
Mr. COX. You haven't granted any, though, since 1918.
Mr. LEVIS. Nobody has either the capital with which to buy one of our complicated machines, or the organization capable of making it work.
COST OF GLASS MACHINES
Mr. COX. That is very interesting. Are your machines very expensive to buy?
Mr. LEVIS. Expensive to build.
Mr. COX. To build, I mean.
Mr. LEVIS. Yes.
Mr. COX. Can you tell us about that? Why is that?
Mr. LEVIS. Because they are precision machines.
Mr. COX. Have to have special dies?
M. LEVIS. Yes. I think we made $65,000 for the last ten-arm machine.
Mr. COX. If a man wanted to go into business, to get a license from you and build a suction machine would cost him about $65,000 to build one machine?
Mr. LEVIS. It might cost him more than that to build the first one.
PRICE-CUTTING
Mr. COX. Returning for a moment to the use of patents to stabilize the industry, you said you were interested in that from time to time. In that kind of stabilization do you include elimination of price cutting, stabilization of prices on any line of ware?
Representative SUMNERS. Mr. Cox. At some time would you develop the cost of installing an efficient unit to produce these glass bottles? I mean to establish a business, a small business, but a business sufficiently complete to produce the finished article that would require some place to melt the sand and whatever goes with it.
COSTS OF PRODUCTION
Mr. COX. I will do that through these witnesses if I can, so far as their particular kinds of machinery are concerned, and through other witnesses as to other kinds of machines.
Representative SUMNERS. I wouldn't want to take too much time, but it would be interesting.
Mr. COX. Perhaps Mr. Levis can tell us about that.
Mr. LEVIS. Very briefly, sir, (we have always analyzed it) it costs about $500,000 per furnace to go into the glass container business, that is the furnace that melts the glass, the forming devices for making the ware, and the annealing ovens, with their buildings and packing house facilities. Another $100,000 should be added to cover compressors, and office facilities and machine shop, and about half a million dollars working capital, or $400,000 to make a round number, requiring about a million dollars invested capital, which you would turn once in the production from that furnace, about a million dollars in sales. That wouldn't make any difference, sir, whether that had our suction machine on it, or, say we put two suction machines to draw 100 tons, or whether we put six or seven Hartford machines on to draw that same tonnage.
EXPENSE OF ROYALTIES
The CHAIRMAN. It would make a big difference, however, Mr. Levis, whether or not you had to pay any actual royalty.
Mr. LEVIS. Yes, sir, except that you would be paying the royalties — well, it is like a suit of clothes in the expense account; if you have to go through the development and work out the applications and work out the interferences in the patents, you spend it that way, or you pay Hartford a fee for their service.
The CHAIRMAN. I was comparing this typical plant which you have just described with your plant, and considering the position that it would occupy as a competitor of your company. When you were giving your figures on royalty a few moments ago, I was struck by the fact that as a rule you recited that about two and a half million dollars will be charged against yourself as royalties, as an item of cost. In other words, actually you didn't pay that royalty.
Mr. LEVIS. We paid more than $600,000 of it to Hartford.
The CHAIRMAN. Yes, but two and a half million, as I recall —
Mr. LEVIS (interposing). It is 5 percent of selling cost, roughly.
The CHAIRMAN. This is the point I am getting at. Whatever it was, two million or two and a half million, there was a substantial portion of that royalty which actually never was paid to anybody. You charged it against yourself as an item of cost. Now I gather from an accounting procedure your purpose in doing that was to make certain that into the price of the article which you sold would go this element of royalties which your competitors were actually paying upon all their machines. Is that right?
Mr. LEVIS. Yes, sir, but if I might carry on briefly, we then credit that to a so-called holding division as income to that division, and then we charge that division for our experimental and development expense, and our patent and license expense, and our legal expense, and the holding division consumes that. In other words, we spent $1,811,000 of that $2,000,000 last year that we charged ourselves two million six for use in research and development alone.
The CHAIRMAN. I thought that you had practically shed yourself of that element.
Mr. LEVIS. Oh, not on the suction, sir. I tried to make it clear yesterday that we are always taking out patents on that.
EXPENSE OF RESEARCH
The CHAIRMAN. So that of this two and a half million charged to yourself as royalties, but not actually paid as royalties, there were actually $1,800,000 expended in research or similar activities. Is that correct?
Mr. LEVIS. Yes, sir. We then paid, of that that we received —
The CHAIRMAN (interposing). I am not interested in the exact figure, Mr. Levis. I was merely trying to determine whether or not that was an actual item overhead, actually laid out or not.
Mr. LEVIS. No, we actually charged the bottle division of our parent company with royalty at 5 per cent of their selling price, and if they owe Hartford something, the holding division, which we call it, pays Hartford the royalties, and it spends the rest of that money in research and development, patent and legal and general overhead.
The CHAIRMAN. If the actual amount were computed only, instead of just this arbitrary amount of 7 per cent, would that be smaller?
Mr. LEVIS. No, it would be about the same. It figures 5 per cent.
The CHAIRMAN. So that I would not be justified in drawing an inference that if you didn't make this charge for royalty on an arbitrary basis but charged only the actual expenditures for these various items, you would be in a position to sell your bottles more cheaply.
Mr. LEVIS. No, they are about the same, sir. In this million-dollar mythical factory which I described, the royalty would be roughly $50,000. I don't believe that a small manufacturer today for $50,000 could have adequate engineering and patent counsel and other talent, such as they buy from Hartford for that fifty.
The CHAIRMAN. Are you in such a position with respect to royalties and your relations with the Hartford-Empire that you actually have an advantage over other licensees of Hartford in the production of glass containers?
Mr. LEVIS. That is a very difficult question to answer.
The CHAIRMAN. Of course, I would say it would be a perfectly natural thing for you to try to get into that position because you are in the business of producing bottles and making money, and if you can make money out of royalties that are paid by your competitors, that is a perfectly normal and natural thing for you to do. We are just anxious to find out whether that is actually the fact.
FACTORY COSTS
Mr. LEVIS. I might answer that by saying this, sir, that the mythical factory I said would put up $500,000 for a furnace. I believe that the smaller manufacturers 'in the industry investment in their furnace is probably $300,000, while ours, sir, is about a million. We have elaborate machine shops and machine tools for doing precision work, and a trained personnel that can operate necessarily complicated machines. In fact, on the Pacific Coast where we have built a new plant it cost us about ten million dollars.
We have put in Hartford equipment not because we don't believe our equipment would not be superior, but because we don't want to make the further investment for precision tools to make parts on the Coast, and molds, and we aren't capable of training on the Coast yet labor that can operate these complicated machines. Therefore, if we have an advantage, sir, it is because we have a different article for producing containers than Hartford licenses.
CHANCE FOR NEW PLANTS
The CHAIRMAN. The whole glass industry is now in such a position with respect to demand and production and the number of plants that are going, and the method by which patents are operating, that it would be an extremely difficult thing for any new independent concern to break into the field. Is that a correct assumption?
Mr. LEVIS. No, sir.
The CHAIRMAN. You think it would be possible?
Mr. LEVIS. I think they could get in, yes, sir.
The CHAIRMAN. Where would they get the license?
Mr. LEVIS. I don't think Hartford would object to granting them a license.
The CHAIRMAN. You think that Hartford, in the light of the testimony that was given here by Mr. Smith on the opening day, would be willing to grant licenses to new concerns for the production of containers, of which you say there is now an over-production?
Mr. LEVIS. I don't see that it would be anything to Mr. Smith's advantage. In other words, he can't get any more royalty and he might as well deal with others.
LICENSES FOR NEW COMPETITORS
The CHAIRMAN. He testified very candidly that his purpose in managing the patents and the licenses was to prevent the ups and downs in the industry, to prevent depressions, to do for the glass industry what this Committee is trying to find a way of doing for all industry, if it can be done, with the preservation of the antitrust laws. So in those circumstances, with that purpose in mind — to protect over-production and thereby to prevent a dropping of price — would it in all these circumstances permit a new competitor to enter the field?
Mr. LEVIS. I don't know that he would, but I believe that Hartford and Company have always been liberal in granting licenses to anybody who should be of a business type.
The CHAIRMAN. But liberal within these broad boundaries of maintaining the stability of the industry, which is a polite way of saying of maintaining the price and of maintaining the market and of preventing competition from coming in.
FAILURES IN INDUSTRY
Mr. LEVIS. No, sir, I don't think that is the fact, because the Glass Container Association have prepared a very interesting report on the industry, and they show that since 1920 — that in 1920 there were 80 companies, and during the eighteen-year period 20 new companies came into the industry, 29 companies have failed or gone out of the industry and 26 companies have been consolidated in other companies of the industry. So in 1938 we have 45 companies in the industry. All of these data that these gentlemen have prepared show schedules of this mortality, that these men who enter —
Mr. OLIPHANT. How many went out of business?
Mr. LEVIS. Twenty-nine, sir.
Representative SUMNERS. Did any of the concerns use the old method?
Mr. LEVIS. I couldn't answer that, but the report which I have a copy of here shows the mortality and the names, and from those names I could answer.
POLICIES ON LICENSES
Mr. ARNOLD. Putting the same question a little differently, not in terms of guessing what Mr. Smith's policy might be or in terms of what your policy might be in case you changed it again, or someone else took your place, it is certainly true that these private companies have the power to do exactly what Senator O'Mahoney was speaking of. Haven't they?
Mr. LEVIS. I don't know, sir.
Mr. ARNOLD. They have the power now to grant the licenses along the suggestions made in your letter of January 13, 1933. Now whether they do that or not is, of course, a guess, but they have the power.
Mr. LEVIS. They might have the legal right not to license someone, I presume.
Mr. ARNOLD. And so this power does exist in private hands to stabilize an industry with respect to price and with respect to production. Now, I understand that you believe in using that power liberally, but the power does exist there, doesn't it?
Mr. LEVIS. I don't believe that I can answer that, sir.
ROYALTIES AND RESEARCH
Mr. ARNOLD. Never mind, let me ask you another question with respect to the charge of $2,000,000 for royalties to your-self. It seems to almost equal the amount that you spent on research, doesn't it?
Mr. LEVIS . It is a little bit less than what we spent on research and pay to Hartford.
Mr. ARNOLD. Approximately they are equal then. Does that indicate that it would be patient policy as a matter of law to make the amount which could be collected on research about equivalent to the amount you collected in royalties where the invention was held by a group and where the question of equitably rewarding some particular inventor was not an issue?
Mr. LEVIS. I think, sir, you only have one qualification to that, a new business that is starting up couldn't survive with just that protection. An industry that has arrived in the stage of development that our industry has could probably con-sider adopting that policy.
Mr. ARNOLD. Then, with that qualification, if it is a good policy for your industry — with the qualification that you mentioned — might it not be a good legislative policy?
Mr. LEVIS. I don't believe I can answer that, sir, unless you insist.
Mr. ARNOLD. No, I wouldn't; it is an opinion. If you haven't any opinion, I wouldn't press you.
Senator KING. May I ask a question? Has your organization licensed any of its patent devices?
LICENSES ON PATENT DEVICES
Mr. LEWIS. Not since 1935; I mean, their only licenses were, as Mr. Cox explained, up to about 1914, and three small licenses were granted: One, in '17 and another in '18 and another in '18, and in '32 that Hazel revision.
Mr. COX. Of course, that was a revision of the existing license. That first license to Hazel was made before 1914. It was made about 1909.
Senator KING. Do you utilize your own devices in the manufacture of glass?
Mr. LEVIS. Exclusively, sir.
Senator KING. Do you regard them as comparable to the patents of the Hartford Company?
Mr. LEVIS. We regard them as superior, sir.
Senator KING. Why did you not use your own devices — I think you explained it; pardon me for asking if it is a repetition — in the new plant which cost you ten million dollars in California?
Mr. LEVIS. Because we didn't want to add further invested capital for the ma-chine tools to take care of the necessary equipment, and we didn't have trained personnel for the operating of precision equipment.
THE COST OF EQUIPMENT
"Senator KING . What would it cost for the purpose of manufacturing necessary dies and constructing the plant?
Mr. LEVIS. Our investment has always been an investment of about a million. I believe the smaller manufacturer has an investment of $300,000. Our investment is approximately a million, and that difference between his $300,000 and our million is in this precision equipment, better working facilities in shops, which they engage on the outside. In other words, we manufacture corrugated boxes, they buy them; we make molds, they buy them; we make machine parts; they buy them.
SELLING COSTS
Senator KING. Is it essential in the establishment of an industry to have a selling agency or to have an organization for the purpose of finding markets for the production; and, if so, state whether there is a considerable item of cost which must be taken into account in the launching of the firm.
Mr. LEVIS. Yes, we have always figured selling, administrative and general expense at about 10 per cent, and we have always believed we should have our own branches which are manned by salaried people rather than commissioned employees.
Senator KING. But it would require a larger sum in the initial stages of the development of an organization than would be required later on after it had been running full blast.
Mr. LEVIS. I think it gets a little cheaper as you go along, sir.
Representative SUMNERS. I meant to ask you a question or two a moment ago but my line of interrogation was interrupted. May I ask you this question? You speak of the installation of your factory. Do you have to make your own equipment, mechanical equipment, or is there some plant that manufactures it for the market?
Mr. LEVIS. We manufacture all of ours, sir, except certain machines that Hartford manufactures.
Representative SUMNERS. Do they have a plant where they manufacture these machines?
Mr. LEVIS. Yes, you can buy bottle-forming machines or you can make them. We make our own.
PRODUCTION OF MACHINES
Representative SUMNERS. You spoke of the requirement with reference to exactness of the machine. Is there any market where you can go and buy such machines as you would like to install on the Pacific Coast?
Mr. LEVIS. No, sir, not our suction machine. We are the only one who makes it.
Representative SUMNERS. Do you make that for the trade or only for yourselves?
Mr. LEVIS. For ourselves. If someone wanted a license I presume we would grant it.
Representative SUMNERS. I am trying to get the picture. Do you keep a plant that is constantly operating, where somebody goes in there and says, that is the plant that manufactures machinery that makes glass?
Mr. LEVIS. We do, yes, sir, at Alton, Illinois.
Representative SUMNERS. Now if a person wanted to go into the manufacture of glass and wanted the machinery which would enable him to compete in that production, that field of activity, how many concerns could keep him from doing that if they wanted to? There is your plant, you are one sort, then there is the Hartford plant which has another sort. If those two would not be willing for him.to engage in the production of glassware containers, could he do it?
Mr. LEVIS. He can buy certain other machines: The Roiramt machine has been advertised in this country for years, and some of them are installed. I am informed that over 500 of them are operating in Europe.
Representative SUMNERS. Is that comparable in efficiency and economy to the machines that operate in your plant and that Hartford-Empire Company control?
Mr. LEVIS. It is different in type from Hartford. It is about the same as our six-arm machines, a number of which we have in operation.
ENTRANCE OF COMPETITORS
Representative SUMNERS. I don't know about the six-arm machine. What I am trying to find is the one thing. A person with a factory equipped with machinery that can be bought in the open market, would he have as a matter of competitive conditions an opportunity to stay in the market?
Mr. LEVIS. We are operating six-arm suction machines that are about the same as the Roiramt machine, at certain of our plants today. We believe that we can do that because over a period of forty or fifty years we have trained personnel capable of doing it. I don't believe that a new-comer can just walk out and hire a glass factory machinist and hire a glass factory engineer and enter into this business, regardless of license restrictions.
Representative SUMNERS. What we are trying to get here on this committee is as nearly a correct picture as we can get of the situation. Now taking this machine that you have just mentioned, if three persons of equal ability were under taking to produce glassware containers, one who had your machine, one who had the Hartford machine, and one who had this machine that you mentioned that may be bought in the market, as a matter of practical business competition would the third man with the machine that you have just mentioned have a chance to stay in the market?
Mr. LEVIS. If he was of equal ability, he would have a chance.
Representative SUMNERS. Make everything equal; just the question of difference in machine.
Mr. LEVIS. You can't make it equal unless he can buy the engineering service from Hartford, or from us.
Representative SUMNERS. Well, assuming that he can buy everything.
Mr. OLIPHANT. Assuming he can't buy from Hartford or them.
Mr. LEVIS. If he could buy that service from someone who was trained in the business —
Mr. OLIPHANT (interposing). Can't he? Isn't there such a thing?
Mr. LEVIS. I would sell it to him.
Representative SUMNERS. But I am trying to draw a distinction between human ability and machine efficiency.
Mr. LEVIS. But you lost track, sir, that the "know how" is the esential [sic] essential thing.
Representative SUMNERS. That is human ability. You can't manufacture it. You can train it but you can't run it through a machine shop.
Mr. LEVIS. And very few people can acquire it.
Representative SUMNERS. But you don't get any patent right on human ability.
Mr. LEVIS. That is why you don't need a patent right if you have the "know how."
Representative SUMNERS. Let's get that pretty straight. When you, then, train a personnel, you no longer need a patent, is that right?
Mr. LEVIS. I have explained technically to Mr. Borkin —
Representative SUMNERS (interposing). Explain it untechnically so I can understand it.
Mr. LEVIS. If I may refer to this, sir, I say, "The management of the large company in an established business is not concerned regarding the license or patentor compulsory licensing laws. If a company engaged in an established business on a large scale has the right to use all inventions at a fair royalty, it would save large sums of money."
Representative SUMNERS. I quite remember that testimony. In other words, you are already established and you have your market and you have your trained personnel; if nobody else can have a patent, then you are willing not to have any patents for anybody, is that right?
Mr. LEVIS. No, sir. I don't want to make it appear technical, sir, but I can't answer it otherwise.
Mr. ARNOLD. Mr. Levis, you put in a condition that I am interested in.
NEW COMPETITORS
Representative SUMNERS. But he hasn't answered my question, if my col-league will pardon me. I want to get this answered. You see, I am not smart like you boys. It seems to me from our standpoint, what we are trying to find out are just a few things, and we have got a good deal of evidence on some things.
First, we discover from the testimony here that there are a few big concerns that largely control the patents, that govern the manufacture of glass containers. Then of course there has been testimony about suits and about the notions of persons who have this control.
What I want to know — and I believe my colleagues on the committee, would like to know — is whether or not there is a possibility of an individual person who wants to establish a plant or factory, being able to procure the machinery that would enable him in turn to be a competitor of you people in so far as machinery is concerned. Of course, if you hire the brains, that is different. You can't patent that, I guess.
Mr. LEVIS. Or if he wants to pay us what is a fair compensation for the "know how," for the training, the engineering drawings that we have worked up in our business, we will gladly let him have one of our machines.
Representative SUMNERS. To establish a serious competition, a new serious competition for your plant?
Mr. OLIPHANT. To get that Milwaukee bottle business?
Mr. LEVIS. Oh, yes, sir.
Mr. COX. Of course, you haven't granted any license to new people in the industry.
Mr. LEVIS. There hasn't been anybody that I know of who has developed the technic capable of operating one of our machines.
Representative SUMNERS. Now wait a minute, Mr. Cox, you have just been asking more questions. You know, we are just trying to get that. I would like to have it myself. If you can answer it you haven't —
Mr. LEVIS (interposing). I can answer it, sir, if you will be patient with me and tell me what you want answered.
Senator BORAH. Let's take lunch first.
FOREIGN MACHINES
The CHAIRMAN. Before we take lunch, may I ask one question, Mr. Levis? As I understood your first answer to Congressman Sumners, you said that there was one foreign machine which this mythical competitor could obtain, that it was possible, and then you compared that machine, that foreign machine, with some six-arm suction machine of yours, did you not?
Mr. LEVIS. Yes, sir.
The CHAIRMAN. That was the first time that I remember having heard anybody mention the six-arm machine. Now my own question to you is this: Is that six-arm machine your most efficient machine?
Mr. LEVIS. Yes and no. It is the most efficient for making a variety of various sizes for scheduling, and less efficient for making long straight runs. In other words, we couldn't operate our factory without it, and we couldn't operate and be competitive exclusively with it.
The CHAIRMAN. And how many other machines do you use in comparison with this, proportionately?
Mr. LEVIS: It is all to the capacity, sir. We have fifteen-head machines that make two bottles at a time and ten-head machines that make two and a half, and six-head machines.
The CHAIRMAN. But the answer to the original question of Judge Sumners is this: that a competitor who was using only that single foreign machine (since it is comparable to your six-arm machine which is a machine which, while necessary for your business, is not sufficient to enable you to maintain it as a whole), would not be able to enter the field in which you are operating.
Mr. LEVIS. No one else has ever sought to enter the field we are operating.
Representative SUMNERS. Could you make milk bottles? Could you stay in business using that sort of machine making milk bottles in competition with an organization like Owens?
Mr. LEVIS. Yes, sir.
MACHINES VS. MEN.
Representative SUMNERS. Have you really got my question? By using this machine that you have just been discussing, a competitor could successfully compete with you, using your other machinery and making milk bottles?
Mr. LEVIS. Mr. Representative, I don't believe anybody could successfully compete with me in this thing. It isn't just a machine.
Representative SUMNERS. I know. They couldn't get your ability, possibly, and I am not speaking facetiously at all; we appreciate that, but we are talking about machinery now. That is what the patent is on, you know. We are not talking about nice personnel and good lawyers and efficient people; we are talking about machinery. If that is so, why don't you use that machinery instead of the other kind you use?
Mr. LEVIS. We do.
Representative SUMNERS. I mean to make milk bottles.
Mr. LEVIS. Because we happen to make milk bottles at Columbus and Clarion and probably it would cost us one million dollars to take the machine out and put this in.
Representative SUMNERS. Is that a new machine?
Mr. LEVIS. Newer than the ones we are operating. But, sir, it isn't the machine. I can take good personnel and at twenty-year-old machine and make bottles more efficiently than an average personnel and a modern machine.
Representative SUMNERS. Why have patents around here bothering people anyhow?
Mr. LEVIS. I am not bothering them. I stated my patent policy yesterday.
Representative SUMNERS. Some people are concerned about keeping patents and we had a notion that maybe patents had something to do with efficient manufacturing, but I guess I am wrong.
Mr. LEVIS. I don't think that; others may.
The CHAIRMAN. Judge Sumners has assumed the equality of personnel. Now, with that assumption, taking out of consideration, therefore, all this "know how" business, assuming that the personnel is absolutely equal in competency and efficiency, then the question comes down to this: Could a competitor who is compelled to use exclusively the foreign machine, and can not use this other machine which you have, successfully compete with you?
Mr. LEVIS. If the question is "Could he successfully stay in business?" then 1can say he can. If you ask "Can he successfully compete with me?" —
The CHAIRMAN (interposing). Why do you change the question?
Mr. LEVIS. If the question is "Can he successfully compete with me?" I don't know.
Senator BORAH. You are not afraid?
Mr. LEVIS. Not a bit, sir.
Senator BORAH. That would be true if there were no patents whatever?
Mr. LEVIS. That is right, sir.
Senator BORAH. If there were no patents whatever, then the manufacture of milk bottles would go on just the same?
Mr. LEVIS. That is right, sir.
NEED OF CAPITAL
Senator KING. Would a person with limited capital, even if he had all of the engineering ability and the "knowhow" to which you have referred, be inclined to go into business and establish a plant if the existing facilities created an over-production?
Mr. LEVIS. I don't think that he would.
Senator KING. Wouldn't that influence a person in going into business, whether there was any available market for his commodity?
Mr. LEVIS. It is more influencing to him, though, sir, than the patent situation.
Senator KING. A man, if he is going into any business, whether it is building a smelter or opening a mine or building a shoe factory, wants to know whether he has a market, and if the market is sur-charged with commodities which can not be sold except at a loss, he isn't disposed to invest his capital. Is that right?
Mr. LEVIS. It is, sir.
Senator KING. It is a business proposition, business common sense, whether you go into business when you find that the market is over-supplied.
Mr. LEVIS. That same man might be a greater success in some other field.
Mr. ARNOLD. Then, as I get the substance of your testimony, it is this: Since both you and the Hartford-Empire are really selling research and brains, since you have this established organization which has concentrated them to a high degree, then neither you nor the Hartford-Empire need any patent to preserve your present position.
Mr. LEVIS. I can't answer for Hartford, sir.
Mr. ARNOLD. That would follow from your testimony that you have just given.
Mr. LEVIS. I don't think I have ever attempted to answer for Hartford.
Mr. ARNOLD. Would that not follow from your present testimony?
Mr. LEVIS. I can't answer that, sir.
Mr. OLIPHANT. But, answering for yourself?
Mr. LEVIS. I don't believe, being an established business, sir; if it were a new development, a new industry, it must have that protection in order to create an incentive for genius, an incentive for capital to develop. It is a good deal like the excess profits tax or the undistributed earnings tax. If you have got plenty of money you don't worry. If you have to go borrow the money to pay it, it does worry you.
Mr. OLIPHANT. Why were you worried about the piece of Milwaukee business? Did you get that business?
Mr. LEVIS. I wasn't worried about it. I inquired as I would about a lot of things, don't you?
Mr. COX. You have that business now,
Mr. OLIPHANT. Did you get the Milwaukee business?
Mr. LEVIS. I couldn't tell you. We have some beer bottle business in Milwaukee, but not all of it.
Mr. OLIPHANT. Let me ask a little along the lines suggested by the Congressman. Suppose Henry Ford decided he wanted to go into the business of making nursing bottles for babies so the poorest could have the best. Would Hartford-Empire and you have the power to refuse to give him licenses?
Mr. LEVIS. No, sir.
Mr. OLIPHANT. You wouldn't have that legal right?
Mr. LEVIS. Yes, sir.
Mr. OLIPHANT. You would have to give him the license?
Mr. LEVIS. We are not the only grantors of licenses, sir.
PROPERTY RIGHTS IN MACHINE PATENTS
Mr. OLIPHANT. But of the machines controlled by those two organizations.
Mr. LEVIS. If he wanted our machine, I presume we would have the option of telling him whether or not he could have it.
Mr. OLIPHANT. Suppose he thought your action was arbitrary, could he appeal to anybody from your decision?
Mr. LEVIS. Not much difference, sir, than if he liked my house on Parkwood better than his own and wanted it.
Mr. OLIPHANT. But your house on Parkwood is not 70 per cent of the houses of the United States.
Mr. COX. It wasn't given you by the Government.
Mr. LEVIS. My business wasn't.
Mr. COX. Your patents are.
Mr. OLIPHANT. Could he appeal to the Supreme Court if he thought your action was arbitrary and unreasonable?
Mr. LEVIS. Sir, I stated yesterday, he can build an Owens machine. We have no patents covering the Owens machine, sir. They are about all gone. I said we had only one that amounted to anything, and that was the stationary pot, and that we were still operating revolving pots, trying to find a way to make them stop revolving. We have done it in a small way. There isn't any way a man with brains who wants to build an Owens machine can't go build one, and enter into competition with us, and I am not afraid if he does.
Senator KING. Mr. Ford could build an Owens machine if he wanted to?
Mr. LEVIS. Yes, sir.
Senator KING. Or anybody else?
Mr. LEVIS. Yes, sure, Mr. Ball operates a number of them which he has had and the patents have expired. We don't need a court or anything.
The CHAIRMAN. The Senator from Utah suggests that the time has come to take a recess.
Mr. PATTERSON. Will Mr. Levis be on this afternoon?
The CHAIRMAN. Do I understand that Mr. Levis will be back this afternoon?
Mr. COX. Yes.
The CHAIRMAN. We recess until 2 o'clock.
(Whereupon, at 12:25 noon, a recess was taken until 2 p. m. of the same day.)
AFTER RECESS
The Committee resumed at 2:15 p. m. on the expiration of the recess, Senator O'Mahoney (chairman) presiding.
The CHAIRMAN. The committee will please come to order. Mr. Cox, will you resume your examination?
TESTIMONY OF WILLIAM E.
LEVIS, PRESIDENT, OWENS-
ILLINOIS GLASS COMPANY,
TOLEDO, OHIO, — (Resumed)
AND
LLOYD T. WILLIAMS, COUNSEL,
OWENS-ILLINOIS GLASS
COMPANY, TOLEDO, OHIO, —
(Resumed).
Mr. COX. Mr. Chairman, I should like to offer now a letter which I read into the record this morning, dated January 13, 1933, written by Mr. Levis to Mr. F. Goodwin Smith.
(Letter dated January 13, 1933, was received in evidence, marked "Exhibit o. 128" and is in the appendix of this issue.
Mr. COX. Mr. Levis, I asked you to check some facts with respect to the free feeders you had under the '24 agreement. Tell us what you found out.
Mr. LEVIS. Yes, sir. During the recess, Mr. Phillips, our vice-president and treasurer, advised me that there were fifteen feeders that we used under the free provision of the '24 contract. Ten of them were at the Evansville plant working connection with Owens A. W. machines, which plant was closed prior to 1932. Five of them at Huntington. Therefore, there were approximately fifteen feeders in which that right was exercised.
GRANTING OF LICENSES
Mr. COX. I also understood you to testify before the committee rose that it was the policy of your company now to grant licenses to persons who applied for licenses under your patents.
Mr. LEVIS. I don't think we have any policy, Mr. Cox, but we would not refrain from granting a license to someone who applied.
Mr. COX. Was that like the other policy that I described this morning?
Mr. LEVIS. No, sir; I don't think we would change our minds on that.
Mr. COX. That is not a recent development?
Mr. LEVIS. No, sir.
Mr. COX. Well now, Mr. Levis, I want to read to you some correspondence which was given to us by your company. The first is a letter dated June 8, 1935, addressed to the Owens-Illinois Glass Company, Toledo, Ohio, and reads as follows:
"Dear Sirs: I have under contemplation the erection of a glass factory with a view to manufacturing a line of goods in keeping with the requirement of such retail entities as Woolworth, et al. I understand that you and Hartford-Empire control the fabricating machinery incidental to the equipping of a plant for the output of such products, and that it is necessary to arrive at terms with you before such machinery is obtainable. I would therefore appreciate hearing from you and being advised as to the course I should pursue initially.
"Very truly yours,
"A. L. Romine."
I am also going to call your attention to the following letter, which was apparently signed by Mr. Martin, assistant secretary of your company, and reads as follows:
"June 17, 1935,
"Aubrey L. Romine, Barr Building, Washington, D. C.
"Dear Sir: Referring to your communication of June 8, this company is engaged in the manufacture and sale of glass containers, but we are not licensors of glassmaking machinery. We do construct certain glass forming mechanisms, but such equipment is for use in our own factories exclusively. We are unable, therefore, to render the service which you require.
"Yours very truly,
"Legal and Patent Department."
It is signed by Mr. Martin, Assistant Secretary, and I ask you whether you will identify those documents as having been taken from your files. I call attention to the certification.
Mr. LEVIS. Mr. Martin can; I can't.
Mr. COX. Could we have Mr. Martin come forward and identify these? May I have Mr. Martin sworn, please?
The CHAIRMAN. Mr. Martin, do you solemnly swear that the testimony you are about to give in this proceeding shall be the truth, the whole truth, and nothing but the truth?
Mr. MARTIN. I do.
Testimony of E. F. Martin, Assistant Secretary and Assistant Treasurer, Owens-Illinois Glass Company, Toledo, Ohio.
Mr. COX. Will you examine those documents and see if you can identify them as having been taken from your files?
Mr. MARTIN. Yes, they are copies of letters taken from our files.
Mr. COX. Very well, I should like to offer these letters in evidence.
(Letter referred to, dated June 8, 1935, was received in evidence and marked "Exhibit No. 129.")
(Letter referred to, dated June 17, 1935, was received in evidence and marked "Exhibit No. 130.")
The CHAIRMAN. The letters may be admitted as requested.
Mr. COX. Mr. Martin, I now call your attention to a letter which I shall show you in a moment, dated June 25, 1934. addressed to Mrs. Len Smith, 960, South Oxford Avenue, Apartment 325, Los Angeles, California.
"Dear Madam: Your letter of June 14th addressed to our Chicago sales office has been referred to this department.
"For the past several years we have not built the Owens Machines for use outside of our own Company, and we regret, therefore, that we are unable to furnish you with particulars concerning this type of bottle building mechanism.
"Yours very truly,
"Legal and Patent Department, Assistant Secretary."
Mr. COX. I ask you whether you can identify that as a copy of a document which was taken from your files?
Mr. MARTIN. Yes, that was taken from our file.
Mr. COX. I now call your attention, — first, I should like to offer that letter, if I may.
(The letter referred to, dated June 25, 1938, was received in evidence, marked "Exhibit No. 131.")
The CHAIRMAN. It may be admitted.
Mr. COX. I should now like to call your attention to a letter dated December 10, 1934, which reads as follows:
"Sparks Construction Co., Inc., R. C. A. Building, 30 Rockefeller Plaza, New York City.
"Gentlemen: Referring to your communication of November 30, this company does not manufacture glass-making machinery for use outside its own plants.
"Yours very truly,
"Legal and Patent Department, Assistant Secretary."
Mr. COX. I ask you if you can identify that.
Mr. MARTIN. Yes, sir.
Mr. COX. I should like to offer this letter, too.
The CHAIRMAN. The letter may be admitted.
(The letter of December 10, 1934, to the Sparks Construction Co. was received in evidence and marked "Exhibit No. 121.")
Mr. COX. I should like to state for the record that the letters which elicited the replies which are contained in the last two exhibits, which would be letters addressed to the Owens-Illinois Company our investigators for some reason were not able to find. However, if Mr. Martin can find them, I should be glad to add them to the exhibits.
Mr. MARTIN. Letters we received from these people?
Mr. COX. Yes, to which these letters apply.
Senator KING. It is your intention to show it was the duty of this company or any company that had a patent to manufacture a machine at small cost; that they must continue to manufacture them for other persons?
Mr. COX. Certainly not.
Mr. ARNOLD. The Department of Justice isn't at all interested in the present duties at all.
Senator KING. Then there is no legal obligation to manufacture these costly plants for other persons?
Mr. ARNOLD. May I answer that, Senator?
Senator KING. I wanted to ask if that was the purpose of his question.
Mr. COX. That is my understanding of the law, that there is no legal duty to manufacture anything.
Senator KING. You have answered my question. I think you are right.
PRICE-CUTTING ELIMINATION
Mr. COX. Mr. Levis, at one point this morning you and I were talking about your interest in stabilizing the industry, and I was about to inquire whether in that connection you regarded the elimination of price cutting as something which led to stabilization.
Mr. LEVIS. If I ever did, Mr. Cox, it hasn't in my opinion amounted to much, because there is and always has been price cutting.
Mr. COX. Has it ever been your policy to encourage the use of patents or patent rights to prevent price cutting?
Mr. LEVIS. I know of no case where we have coupled with a patent or license any control of price.
Mr. COX. I am thinking now particularly perhaps of the use of patent or patent rights by others.
Mr. LEVIS. Would you give me an example?
Mr. COX. I have another letter here, Mr. Levis, which you wrote to your Uncle Harry, R. H. Levis, is that right?
Mr. LEVIS. Yes, he is my uncle; he still is.
Mr. COX. This letter is dated August 2, 1932, addressed to Mr. R. H. Levis, Illinois Glass Consolidated Corporation, Alton, Illinois. I am going to read two paragraphs and then I will give you the letter to examine.
"As I see the situation now, it appears that we are on the eve of straightening out the Hartford patent situation. Hazel-Atlas has come in and taken a license, and yesterday the Knox Glass Company agreed to come in, pay back damages, and take a license. In so doing they have withdrawn from the Miller Feeder Users Defense Association, and other Miller feeder users have expressed their willingness to come in and take a Hartford license if Knox and Hazel-Atlas took a license from Hartford.
"The only important manufacturers who remain out of Hartford's licensing plan are Ball Broothers [sic] Brothers and the Root Glass Company. We are negotiating with both of these companies and I am quite confident that they will come in if all the other feeder operators come in, if for no other reason than to protect fruit jar licensing, as well as to curtail the licensing of beverage bottle manufacturers.
"With the plans we now have, there is certain to be a curtailment of the promiscuous manufacture of milk bottles on non-licensed feeders, which will result in our company's and the Thatcher Company's securing a greater proportion of the available milk bottle business. This should stabilize the price and increase the earnings of the Thatcher Company."
I ask you if that is a letter which in fact you wrote to Mr. R. H. Levis.
Mr. LEVIS. Yes, sir.
Mr. COX. Now Hazel-Atlas did there-after, to use your word, come in and take a license, didn't they?
Mr. LEVIS. Yes, sir.
Mr. COX. And Knox took a license, did it not, from Hartford-Empire?
Mr. LEVIS. Yes, sir.
Mr. COX. And Ball Brothers took a license afterwards from Hartford-Empire, did they not?
Mr. LEVIS. Yes, sir.
Mr. COX. I should like to have this letter marked.
The CHAIRMAN. The letter may be admitted.
(Letter dated August 2, 1932,from W. E. Levis to R. H. Levis, was received in evidence and marked "Exhibit No. 133" and is included in the appendix of this issue.)
THE ROIRANT MACHINE
Mr. COX. Mr. Levis, this morning we were talking about the Roirant machine, the French machine. Do you know anything now about the patent situation with respect to that machine? Is it covered by any patents which are owned by any manufacturer who is now manufacturing glass?
Mr. LEVIS. No. As near as I know they are a company who have offices in Paris, who have offered the machine for sale in this country through advertisements in trade magazines for the last several years. We have one of the machines.
Mr. COX. Do you recall having conversation with Mr. Bracken, of Ball Brothers Company, in September or August of 1935, about the patent rights on that French machine?
Mr. LEVIS. I don't recall the conversation with Mr. Bracken, but I recall the circumstances. I couldn't identify it as to him.
Mr. COX. You don't ever recall having stated to Mr. Bracken that that machine was covered by some patents which the Owens-Illinois Company owned, so that the use of the machine would infringe those patents?
Mr. LEVIS. Not the Roirant machine — I don't recall. recall the Moorshead machine was involved.
Mr. COX. Mr. Levis, I have a letter here, a certified copy of a letter which was taken from the files of Ball Brothers Company, written by Mr. F. C. Ball to Mr. McAllister, who testified yesterday, in which Mr. Ball makes this statement. I am going to read it to you and ask you if it refreshes your recollection as to that conversation. This letter is dated September 14, 1935, and is addressed to Mr. E. W. McAllister, Grant Building, Pittsburgh, Pa.
"Mr. Levis, president of the Owens-Illinois Company, stated to me over the telephone that the Roirant machine which dips from a hearth extending from the furnace could not be used in America owing to the fact that his company secured in their purchase from the O'Neil Machine Company patents covering this extension hearth for feeding glass."
Do you have any recollection of that?
Mr. LEVIS. I haven't any recollection of it, but I do know that that is the O'Neil stationary pot machine, but the Roirant machine doesn't use that. It is a revolving machine of the same type as our Owens six-arm machine, and it runs from a revolving pot. The single-head Roirant machine, which would probably be impractical except for small orders, dips into a stationary pot. If Mr. Ball is referring to the single-head machine, his statement is correct; if he is referring to the machine I have been talking about, it is incorrect. The six-arm Roirant machine , which runs from a revolving pot and which anybody can have for the asking, is the one I am talking about. If this statement is made with respect to the single head, it would be accurate . I have no independent recollection. If Mr. Ball would ask me that question today I would tell him that if he dipped from a stationary pot of a construction as covered by the O'Neil patent, I would believe it were an infringement.
Mr. COX. And to the extent that anyone wanted to use that process they would have to get a license?
Mr. LEVIS. Yes, sir, but in that same connection Mr. Ball wanted to bring in the Moorshead machine, which interfered with a patent which we own, a lock patent, and we gave Mr. Ball the release in order that he could bring in the Moorshead machine into this country.
Mr. COX. When was it that you did that?
Mr. LEVIS. Three or four years ago. We even sent in the engineers' reports that our engineers made on the Moorshead machine, so he could see them be-fore he took it.
Mr. COX. Ball Brothers got exclusive rights for that machine, didn't they?
Mr. LEVIS. I had nothing to do with it other than to give them our report.
Mr. COX. You don't know whether they had exclusive rights?
Mr. LEVIS. I don't know.
Mr. COX. I think they did. Now I want to ask you a few more questions, and then I think I will have about finished, about certain cooperative activities between the Owens Company and the Hartford-Empire Company under the 1924 agreement as made. If you don't know the answers, perhaps Mr. Martin will be able to answer the questions.
It is true, is it not, that after that contract was made, the two companies cooperated to the extent of sharing the expense of suing infringers?
Mr. LEVIS. I would prefer Mr. Williams answering up until '29. I will go from '29 on.
Mr. COX. Very well; can you answer that question?
Mr. WILLIAMS. I am sorry; my mind was diverted for a moment. I heard only half the question.
INFRINGEMENT LITIGATION
Mr. COX. Perhaps, Mr. Levis, I might give to you and to Mr. Williams this memorandum which I think, if you have it before you, will assist you in answering these questions. This memorandum was written by Mr. Carter to you, dated April 12, 1930, and is entitled "Status of Patent Infringement Suits Now Pending."
Will the reporter read for Mr. Williams the question which I asked a moment ago?
(The reporter reread Mr. Cox's last question .)
Mr. WILLIAMS. That is true, yes.
Mr. COX. For example, Mr. Williams, there was a suit brought by Hartford-Empire in the Federal Court in St. Louis in 1926 against Obear-Nester, and the two companies shared the expense of that suit.
Mr. WILLIAMS . I can't answer in de-tail , Mr. Cox, as to whether participation was had in any particular suit, or the extent of it. I simply know there was participation.
Mr. COX. I think if you look at that memorandum, which I assume is correct, you will see that these suits are listed there. I ask you again if that doesn't refresh your recollection as to the Obear-Nester suit?
OBEAR-NESTER SUIT
Mr. WILLIAMS. I won't say it refreshes my recollection. I don't know that I ever knew what particuar [sic] particular cases or what particular suits they participated in. I know Owens did participate in the expense.
Mr. COX. Perhaps we can solve this this way. Mr. Martin, are you prepared to identify that as a photostatic copy?
Mr. WILLIAMS. The statement is made in the letter that we did participate in the St. Louis suit, and I assume it means the Obear-Nester case.
Mr. COX. This is dated April 12, 1930, and states that Hartford-Empire and of Owens-Illinois shared the expenses suits brought by Hartford-Empire against Obear-Nester Company, not one suit there but two, one brought in 1928 and one in1929; the expenses of the suit brought by Hartford-Empire against Nivison-Weiskopf, 1926; a similar suit against Kearns-Gorsuch Company, 1926; the expenses of a similar suit brought by Hartford-Empire against the Lamb Glass Company; the expenses of a similar suit brought by Hartford-Empire against the Hazel-Atlas Company; and the expenses of a similar suit brought by the Hartford-Empire Company against the Reed Glass Company. I should like to have this memorandum admitted in evidence.
The Chairman. The memorandum maybe admitted.
(The memorandum , dated April 12, 1930, was received in evidence, marked "Exhibit No. 134.")
Mr. COX. Now do you know, Mr. Levis, the circumstances under which the Hart-ford-Empire and Owens-Illinois, after 1924, shared the expense of acquiring certain patent rights and the assets of certain other companies engaged in manufacturing glass making machinery?
Mr. LEVIS. No. Mr. Williams does.
Mr. COX. I shall address the questions, then, to Mr. Williams. Can you tell us, Mr. Williams, if it is not a fact that the two companies contributed equally to the cost of acquiring the William J. Miller Engineering Company and the patent rights of William J. Miller?
Mr. WILLIAMS. No, not the company, but the patent rights. What we acquired there, principally if not entirely, was relinquishment of Miller's rights in the Patent Office and interference. We had been in interference there, both Hartford and Owens, on patents for quite a long time-extensive hearings, and quite expensive, and I may say that in the negotiations in which I participated in part the statement was made by Miller's attorney that he hadn't any great expectations of getting a patent out of Miller, but it would keep us in the Patent Office for five years, and it was quite important to us to get our patents out, and we bought Mr. Miller's position in the Patent Office.
Mr. COX. And shared the expense equally.
Mr. WILLIAMS. That is right.
Mr. COX. Then you bought patents to a feeder known as the Tucker, Reeves and Beatty feeder, and the expense of that acquisition was shared by the two companies.
Mr. WILLIAMS. That is correct. We were in much the same situation there, in long-winded interferences and particularly with reference to Hartford's patent and our own. We couldn't get the patents out, and licensees were becoming very much dissatisfied.
Mr. COX . Now I come to the O'Neil Machine Company, Mr. Williams. That was a case where Hartford purchased all the patent rights covering gob feeding and forming machines, and the Owens Company purchased the remainder of that business, including the patent rights relating to suction machines. Is that right?
Mr. WILLIAMS. I think that is right.
Mr. COX. So that when the transaction was over the two companies between them owned everything that the O'Neil Machine Company had previously owned-patent rights and physical assets.
Mr. WILLIAMS. That was true only as to the United States patents. We didn't purchase O'Neil's foreign patents.
Mr. COX. Now I come to the Whitall-Tatum patent rights on forming machines. That acquisition was one that was financed by the two companies in equal shares, was it not?
Mr. WILLIAMS. Yes, that is frequently referred to as the Headley and Thompson application. I hate to refer to interferences so much, but there again was a situation in which Headley and Thompson had some very broad claims on forming machines, and I think on the feeders, at least upon the joint use of the two as a unit. Owens was in interference, Hartford. I think two or three others. The claims were such that if allowed they would have absolutely overlain not only the use of the Hartford Feeder, but also the use of the Graham machine which we were trying to develop, and which we did develop through three successive stages that we called, as they got larger, the A. W., A. Y., and A. Z. machines. I think I told you something about their exploitation, especially abroad. The transaction was that Hartford took an option from Headley and Thompson — no, from Whitall-Tatum Company, which owned the Headley and Thompson application and was pursuing their allowance in the Patent Office to have either an exclusive or non-exclusive license, as Hartford might elect when the patents came out and the Hartford people could make up their minds how valuable the patents would be, and we paid a certain sum — I have forgotten for the moment — each year to maintain that operation, and Owens participated half and half.
Mr. COX. I want to ask you, I think for the sake of record, to give us the year, if you can, when the William J. Miller patent rights were acquired.
Mr. WILLIAMS. That was in July, 1925.
Mr. COX. And that was a going concern, manufacturing machinery, at the date of that acquisition?
Mr. WILLIAMS. Yes. We didn't acquire Miller's business, however, just his patent rights, his application in the Patent Office. That is what we acquired.
Mr. COX. When was Tucker, Reeves and Beatty acquired?
Mr. WILLIAMS. That was in August of the same year, 1925.
Mr. COX. When was the O'Neil Machine Company? That was in 1933, wasn't it?
Mr. WILLIAMS. '33, I think, yes.
Mr. COX. When were the Whitall-Tatum rights acquired?
Mr. WILLIAMS. The option of which I spoke was abandoned, and the Headley and Thompson patents in the hands of Whitall-Tatum were purchased — I have a very bad memory for years.
Mr. COX. I think that was 1933, too.
Mr. WILLIAMS. I thought it was '34. 1933 then.
Mr. COX. Very well. Now, I wish to touch briefly on one more of these transactions, and that is the one relating to the Ed Miller machine mould. Do you know whether that company manufactured glass machinery?
Mr. WILLIAMS. It manufactured glass working machinery, yes. I think they were principally in the press and pressing blowing machines.
Mr. COX. And that company was bought by the Lynch Corporation, is that correct?
Mr. WILLIAMS. Yes.
Mr. COX. In order to eliminate details ,some of the details of that transaction, would it be accurate to say that Hartford-Empire Company and Owens-Illinois between them furnished the money which the Lynch Corporation used for that acquisition?
Mr. WILLIAMS. I do know about it. I think Mr. Levis can tell that better than I can. I drew some of the papers, but I have forgotten some of the details.
Mr. LEVIS. Hartford bought the feeder rights involved and Owens bought the suction rights involved, and there was a sale of shares of about $200,000 in cash in which I was one of the underwriters.
Mr. COX. And with that money the Lynch Corporation obtained, it bought the Ed Miller machine mould?
Mr. LEVIS. Yes, sir.
Mr. COX. I want to ask a few brief questions about the acquisition by Owens-Illinois of two other companies: One is the Atlantic Bottle Company. Do you remember the circumstances of that acquisition? I am asking if you do remember it, that is all.
Mr. LEVIS. Yes, I do remember it.
Mr. COX. That was a company which had been notified that it was infringing the patents of Hartford-Empire?
Mr. LEVIS. Yes, sir, it was a member of the Miller Defense Group.
Mr. COX. A member of the Miller Defense Group. And after that notification ,you purchased the assets of the company and made settlement with Hartford-Empire as to the infringement claims?
Mr. LEVIS. We purchased the assets subject to a settlement being made, and that settlement was subsequently made.
Mr. COX. And I now want to call your attention to the Raleigh Glass Company. They used a Nivison-Weiskoff feeder, was it not?
Mr. LEVIS. I don't know what feeder the name was, but they used a feeder.
Mr. COX. And that company was notified that they had infringed the Hartford-Empire Company?
Mr. LEVIS. Dr. Raleigh told me that.
Mr. COX. And you then bought the assets of the company and made an adjustment with the Hartford-Empire?
Mr. LEVIS. No, sir, we got — it wasn't the company, sir. They are worth as much as we are. We couldn't have bought it. It was a bottle factory that they had to make their own bottles, and it hadn't been operated for two or three years.
Mr. COX. Just what did you buy?
Mr. LEVIS. We bought some old batch handling devices and some machines and trucks and mould shop equipment, a couple of Keller cutting machines, a lot of assets.
Mr. COX. And did you settle an infringement claim that the Hartford-Empire Company had against that company?
Mr. LEVIS. No, I think he settled the claim. We might have assisted him in doing it.
Mr. COX. Did you write him?
Mr. LEVIS. I don't know; there are some letters that I saw at that time that I think he wrote. I don't think I wrote any.
Mr. COX. I will show you a letter and ask you if this doesn't refresh your recollection that you talked to Mr. Goodwin Smith about settlement of that infringement claim before the acquisition. (Mr. Cox submitted a letter to Mr. Levis.)
Mr. LEVIS. Yes, sir, that is my letter.
Mr. COX. That refreshes your recollection that you did discuss the claim with Mr. Goodwin Smith prior to the acquisition, and then you did settle it afterwards.
Mr. LEVIS. Yes, sir. I don't think there were any settlement papers drawn, sir. There may have been.
Mr. COX. One more thing that I want to ask you. Yesterday we heard some testimony about the Wesley machine. That machine is covered by some patents which your company own, is it not?
Mr. LEVIS. They are owned in the name of the Liberty Glass Company.
Mr. COX. And the last one of those patents expires in 1942 that correct?
Mr. LEVIS. I presume so, but there shouldn't be any very important patents on it.
Mr. COX. There isn't, but there are some patents that expire in 1942?
Mr. LEVIS. Not to go into detail, but there are two different groups of patents: There are the machine patent and there the so-called burn-off patent. That is the patent that severs the top of the tumbler and forms the edge. The burn-off patent has some value.
Mr. COX. They are still in existence?
Mr. LEVIS. Yes.
Mr. COX. I think that is all as far as I am concerned.
The CHAIRMAN. Do any members of the committee desire to ask Mr. Levis any additional questions?
FOREIGN GLASS MARKET
Mr. PATTERSON. Mr. Levis, touched on the French machine a little while ago and that reminded me to ask you one or two questions on the foreign market situation with reference to your business. I should like to ask if any of your glass-making equipment or processes which you use are subject in any way to control by foreign individuals or by foreign firms?
Mr. LEVIS . Well, a number of years before I came to the Owens Company they sold their European rights to their developments and machines to the so-called European Verband Company.
That resulted in some litigation which was settled along about 1930 which resulted in a ten-year period to run from then, in which they had the right to the then existing patents with non-exporting arrangements; that is, they could not export the products of that machine into our territory and we could not into their territory, but I might add that it never has been a very practical thing because of the service features in containers. There is very little import of the type of containers that we manufacture, nor could we export to advantage in their territory.
Mr. PATTERSON. Now, also for the record, have any of the glass-making processes or equipment which you control been leased, sold, licensed or in any other manner made available to foreign manufacturers?
Mr. LEVIS. Yes, we have sold our equipment and have licensed manufacturers under our suction equipment.
Mr. COX. In what countries, Mr. Levis?
Mr. LEVIS. Well, you can explain that, Lloyd, better than I can.
EQUIPMENT SOLD ABROAD
Mr. WILLIAMS. I will have to go back a little so you will understand names. The basis of the Owen suction machine was the invention by M. J. Owens of what we call the suction feeder.
Up to this time, while there were semi-automatic machines that they had that helped somewhat in the blowing of a bottle, no one had ever mechanically gotten the molten glass out of the tank into the mold even where they had a semi-automatic machine.
It took an expert gatherer with a puney rod to reach into the furnace and get a gob of glass and pull it out and drop it into the mold, and he had the problem of getting the right quantity, whether he wanted two ounces or two and one-half or five or ten. Owens was the first one to get the glass mechanically from the tank to the mold.
FIRST BOTTLE MACHINE
Mr. E. D. Libby backed him with the finances and in 1895 they organized the Toledo Glass Company to carry on Owens' experiment. They finally got a bottle machine that would work about 1903, and then the Owens Bottle Company, or rather the Owens Bottle Machine Company, was organized at their instance to take the American United States license for the use of those patents.
Then the foreign rights still belong to the Toledo Glass Company. Some of it was directly sold as in Canada, Dominion Glass Company; sold to Mexican firms, and later, I believe, the rights were sold in Japan. Then they organized the Owens European Bottle Company which they transferred all the rest of the foreign rights, and that concern then sold those rights to the Europaisher Verband Der Flashen Fabrieken Ltd. or the G. M. B. H.
Mr. Levis said there was some litigation then arose later between the Verband and the Owens Bottle Company, the Verband claiming the improvements of the Owens Bottle Company. That was denied. It was not a party to the European agreement, but it was settled and did give them —settled about 1930 after litigation in the Federal Courts — the inventions which we then had and were expressed either in patent form or in application form. We had quarreled overwords and indeterminate phrases, so we limited it to those things in writing or in patents or in application form in this country they could have throughout Europe in their territory.
Then there is one more thing about it, if you care to know.
Mr. PATTERSON. Yes, surely.
Mr. WILLIAMS. When the Owens Company in 1916 acquired the rather inchoate invention and ideas of Joseph Graham, he using was rather crudely developed automatic machine and feeder. Owens Company took those and developed them and their first development they called the A. W. Graham type machine. Rights and machines were sold for use in Sweden, in Brazil, rights were sold in Canada. I have forgotten whether machines went there, and then on the second or larger development, something like a ten-arm machine, rights were sold to the Soviet Glass Trust. I have forgotten the name for the moment. It was in Russia. Rights were sold and a machine or two or three delivered in Cuba. That I think about completes our foreign developments.
Mr. PATTERSON. Thank you, Mr. Williams.
There is just one other question, possibly two, which I have. Has your company entered into any agreements which in effect restrict exports and imports of glass products from or to the United States?
Mr. WILLIAMS. The only one I recall is the settlement made with the Verband, settling the pending case in the United States Circuit Court of Appeals for the Sixth Circuit, and there was the agreement that neither would export ware into the territory of the other. As Mr. Levis says, there has been practically no exportation of empty bottles back and forth because it isn't a commodity that lends itself well to export. That, I think, is the only agreement we have ever had and, as far as I know, no bottles have ever been exported to Europe. In any event they can make them as cheap over there as we can and vice versa
Mr. PATTERSON. That leads me to this question. What is the basic policy of your firm, if you have any, in allocating foreign markets to foreign licensees? Is there such a policy?
Mr. WILLIAMS. No, these machines that I tell you about that were sold — these A. W. machines in Sweden about 1917; the last, I think, was the Russian, something like 1924 or 1925 — I don't recall if in any of those agreements we had non-export provisions. The only one I now recall, I may be in error, was in the Verband settlement, and it was of practically no moment because empty bottles can't be carried across the ocean properly.
Mr. PATTERSON. That is all. Thank you, Mr. Williams.
The CHAIRMAN. Mr. Sumners, do you want to ask the witness anything?
Representative SUMNERS. No, sir.
Senator BORAH. How many firms are there in the United States manufacturing milk bottles?
Mr. LEVIS. I think Mr. Smith stated in his testimony day before yesterday, ten.
Senator BORAH. What proportion of those milk bottles are produced by yourself and by the Empire patents, those under the Empire patents?
Mr. LEVIS. So far as I know, they are all produced under machines that are under the Hartford-Empire patents.
We can produce them on our suction machines, sir, but there is color and service and style and items of that kind, and the Hartford-Empire machines seem to be better equipped to produce them than our larger suction machines.
Senator BORAH. How is the price of milk bottles fixed in the United States?
Mr. LEVIS. I guess by competition, sir.
Senator BORAH. Are you sure about that?
Mr. LEVIS. I hope so.
Senator BORAH. Well, I hope too. Do you think milk bottle prices are fixed in the competitive world?
Mr. LEVIS. Well, I can answer it this way, sir. Milk bottles, beer bottles and soda bottles are a type of glass container that is what we call a reuse item. It doesn't make much difference to the purchaser of that whether he pays $10 a gross or $2 a gross. Its only question of price is as to the cost per trip. If my milk bottle will give one hundred trips, it is worth fifty times more than one that gives two trips. It is a question of style and color and quality. All we have are the Department of Agriculture's figures which show that the average last year was thirty-four trips. Our selling price on a quart bottle is $5.33 a gross which would be .00109 each, one-tenth of a cent, on the Department of Agriculture trips.
The CHAIRMAN. What is that figure again?
Mr. LEVIS. 00109, roughly a tenth of a cent, roughly a mill.
The CHAIRMAN. Per trip?
Mr. LEVIS . Per trip, yes. On 34 trips at $5.33 per gross.
The CHAIRMAN . That is what the statistician would call the trip bottle.
Mr. LEVIS. Well, sir, they are all that. Coca-Cola's average of their parent company-owned plants was 110 trips per bottle last year. I have seen dairies in thrifty places like St. Louis and Milwaukee runover 100 trips. It isn't much a question of price; it is the question of price per trip.
The CHAIRMAN. What variation is there in the price charged by these ten firms which you say are engaged in the manufacturing of milk bottles?
Mr. LEVIS. Where we have tested, sir, we run about 58 trips per bottle and the Department of Agriculture's record is 34.
The CHAIRMAN. You didn't understand my question. I say, what difference, if any, is there in the price charged by these ten manufacturing companies for the bottles which they sell?
Mr. LEVIS. It will range 25 and 30 cents a gross difference.
PRICE COMPETITION
The CHAIRMAN. I don't understand your answer.
Mr. LEVIS. I am sorry, sir.
The CHAIRMAN. I have evidently not made my question plain to you. Is there any variation in the price charged by these ten companies for the milk bottles which are produced by them?
Mr. LEVIS. Yes, sir, the variation in price is as much as from 25 to 35 cents per gross.
The CHAIRMAN. I see. How many companies charge the low price and how many companies charge the high price?
Mr. LEVIS. It depends, sir, upon how bad they need the business and where it is.
The CHAIRMAN. So your answer is that there is competition among these firms as to price.
Mr. LEVIS. I believe so and hope so.
Mr. COX. I'd like to ask one or two questions along that line, if I may, of Mr. Levis before any one else resumes a different subject.
Senator BORAH. I'd like to know just how definite your knowledge is as to there being competition in the sale of these milk bottles among these ten men, or let me ask first — is it within the power of the Empire Company to enforce one price among them all?
Mr. LEVIS. No, sir.
Senator BORAH. Why not, if it wouldn't issue a license except upon such terms as it sees fit?
Mr. LEVIS. It never has done it, sir. They may have the legal right, but as I testified, and I think they do, at no time has there ever been coupled with what right there may have been any price control factors.
Senator BORAH. That may be true, but what I am asking is, is it not within the power of the Empire Company, owning all these patents, and all others dealing with the subject, to enforce a price if they see fit to do it, among all? Mr. Smith testified that they would pass upon the question of whether a man's field of business was sufficient to justify the issuing of a license. Wouldn't the question of price, and so forth, enter into that?
Mr. LEVIS. Not to licenses granted without that restriction, sir. I imagine that license may remain in existence and not be subject to change.
Senator BORAH. I understand that, but suppose a man comes and asks fora license from the Empire Company and says he wants to go into business, and the Empire Company passes upon the question of whether he should have the license. It may say yes or not, and for any reason in the world that suits it. It may say, "We are not granting license except upon the understanding or the agreement that such and such a price be charged."
Mr. LEVIS. It may, sir, but it never has.
Senator BORAH. Yes, I know.
Mr. LEVIS. The other situation, sir, that comes into the equation is one of the competitive container. If we were to have a high price, a paper bottle might take all of the business and then we would deprive ourselves of our market through our error.
Senator BORAH. I understand that, and of course that would interest you, but I am saying now, have they not the power, if they see fit, having only ten customers in the United States, or ten firms in the United States carrying on the business, to say to all these people who get a license from them, "We are granting licenses only on the understanding that you charge a certain price."
"We must do that," as Mr. Smith says, "in order to look properly after our licenses."
Mr. LEVIS. It is not my opinion that there is any legal right they have, and even if there were, they have never exercised it.
Mr. COX. May I ask a couple of questions along the line that Senator Borah has been pursuing as to milk bottle prices, Mr. Levis. Let's see, you and Thatcher together manufacture about 70 per cent of the milk bottles in the United States, don't you? I am including your Pacific Coast company.
Mr. LEVIS. Yes, sir.
Mr. COX. Now, Mr. Levis, you wouldn't seriously dispute it, would you, if I suggested to you, if we charted the prices charged by your company and Thatcher, it would show that all the changes in the price lists over a period of time occurred for both companies in the same month and the same year?
Mr. LEVIS. No. If you want to embark into the theory of price policy, which is quite a large subject, I will be just tickled to death.
Mr. COX. I wouldn't want to go too deep.
Mr. LEVIS. But the Thatcher sets a price on milk bottles and Ball does on certain lines and we do on certain lines and Hazel does on certain lines. We can't ask any more than they ask as leaders in the line, and we are not going to take any less, because we think our goods areas good as theirs.
Senator BORAH. That is just the way they fix the price.
Mr. ARNOLD. But you are interested, or have been, or at least there has been a good correspondence to the effect that you are interested, in what you might call stabilization of the industry.
Mr. LEVIS. Mr. Arnold, the correspondence is working papers with me. I am not interested in anything that has happened.
Mr. ARNOLD. Letters to your uncle — those ideas have at least passed through your mind, and letters to your uncle and your father.
Mr. LEVIS. I wrote that letter to my uncle in 1931, or someone in 1931, and someone else in '32.
Mr. ARNOLD. And you have refused licenses — I mean there is some correspondence to that effect.
Mr. LEVIS. Now every crackpot that writes us and wants to let us believe that he has a million dollars to put in a glass factory, and writes in longhand, we are not going to send a man to see him. I mean you have got to terminate the thing. If I ran a law office I wouldn't take as my client every guy that came in the door.
Mr. ARNOLD. But the correspondence doesn't indicate that they were turned down because of lack of financial ability. As I heard it, it indicated that you just weren't granting licenses at all.
Mr. LEVIS. We gave that as words to express the desire to no longer correspond on something we thought wouldn't materialize.
Mr. ARNOLD. I see, but at least there is this in the picture. The correspondence which we have introduced is very much at variance with your now stated policy, isn't it? It may be wrong, but that is the fact. Isn't that true?
Mr. LEVIS. I could only say that, sir, and perjure myself. My record was clear when I came here this morning that qualified that I had a right to have trading talk and I had a right to have my mind made up on something and I had a right to change my mind. Now I have done that.
Mr. ARNOLD. All I am bringing out now is that at various times there is a good deal of evidence of a good deal of interest in price stabilization policies, in keeping patents exclusively for yourselves, in joining up with other companies in bringing patent infringement suits —that all appears at different times as part of what the company has done, and that your present policy is a matter which can be very easily changed. It is entirely within your power either to follow your present statement or the line taken by that correspondence. Isn't that true?
Mr. LEVIS. Oh, sir, no more than anyone else enjoys that right, politically or otherwise. If I have done something wrong —
Mr. ARNOLD (interposing). I wasn't suggesting you had done anything wrong. The purpose of my questions was directed to only one thing, and that is this: The Antitrust Division is interested in the power to limit competition. This is not an investigation of any unethical or immoral conduct on your part. It is an investigation of the extent of your power, and it had occurred to me that there was a good deal of evidence in here that from time to time you had exercised that power.
Now specifically, where were you interested in joining up with the Hartford-Empire and taking half of the burden on infringement suits, designed, frankly, to stop other people from manufacturing glass?
Mr. LEVIS. Mr. Williams explained this morning why we were interested, and I explained yesterday and this morning that I had no interest, and if they would cutoff the connecting link between the two at the date October 1, 1935, the chart would be right, because since then we sold out. We have no interest in it.
Mr. COX. You still have a cross-licensing agreement there, though.
Mr. LEVIS. No more than would put us out on those other lines. They have one too, haven't they?
Mr. COX. I am just sensitive about my chart.
Mr. LEVIS. I am not critical of your chart, but in 1935, that is three years ago, Mr. Arnold, we discontinued contributing to those things, we discontinued taking it, we sold our patents for two and a half million dollars worth of money to be paid over a period of two and a half years. That is what I had always desired to do. I explained it at length. The only point I want to make, you people have been awfully nice to us and awfully fair, and your boys have been in our office for twelve or thirteen weeks, and we have turned over to them and we have cooperated in every way we could and they have been nice and fair with us. If not of that twelve weeks ' investigation there is nothing more serious than I have been confronted with today, I go away happy.
Mr. ARNOLD. I think you are taking a very erroneous assumption on the basis of which this question was asked. There is certainly nothing serious developed involving you personally in any violation of the law. That is perfectly true. That wasn't the purpose that we sent people around there. But it does seem to me — and I wonder if it doesn't seem to you — that there is a power over the glass business developed through this holding of patents, through the power to refuse licenses, through the desire to stabilize the industry (I don't use the word in an offensive sense) the ganging up of these companies on infringement suits, which does not create what a person would calla competitive situation. Would you agree with that?
Mr. LEVIS. Yes. If these fellows would tell you the facts, Mr. Arnold, they think I am the greatest opponent to that power that has come into the industry.
Mr. ARNOLD. You may be an opponent of the power; your testimony seems to indicate it, but the power is there.
Mr. LEVIS. You traced it for twenty-five years and I thought you disposed of that thing. You finally did it. I am not here to pass —
Mr. ARNOLD (interposing). We might be on the same side, Mr. Levis.
Mr. LEVIS. I think we are, sir.
Mr. ARNOLD. And you would like to give up that power.
Mr. LEVIS. I have given it up — in 1935, sir.
Mr. ARNOLD. And as a matter of social policy do you think it would be a good thing if the Hartford-Empire would do so?
Mr. LEVIS. I can't answer that.
Mr. ARNOLD. You can answer as a matter of social policy for the industry.
Mr. LEVIS. Is that fair, sir?
THE COMMITTEE'S PURPOSE
The CHAIRMAN. I think you have answered; and supplementing what Mr. Arnold has said, I think it ought to be made clear to you and to all other persons who have been summoned here as wit-nesses that the purpose of the Committee was to be just what these representatives of the Department of Justice have been to your company, according to your statement — fair, seeking to understand a condition.
There is no question of moral turpitude involved here, and I hope, I really hope, that you never entertained the belief that there was, because this Committee is merely trying to discover, as Mr. Arnold said and as Senator Borah said, whether or not there exists, as a result of the patent law, the power to control prices of glassware in this country. Now that is all we are interested in, and we have not sought at any time, and I am sure Mr. Cox will agree, to fasten upon you any sense of guilt.
Mr. LEVIS. No, sir; you have been very fair, and I only hope that giving you the benefit of my experience has been what you want.
The CHAIRMAN. I think it has been very helpful, speaking for myself, and I am sure the other members of the Committee feel likewise.\
Mr. ARNOLD. With respect to my question, I was in the hope that I could get your opinion on the glass industry, even the Hartford-Empire situation. If you have no opinion, that is sufficient. You have met pay rolls and I haven't.
OUTPUT, OF GLASS CONTAINERS
Senator KING. I would like to ask whether or not the output of glass containers has increased from year to year during the past fifteen years or twenty years.
Mr. LEVIS. Very much, sir.
Senator KING. What is the output now, contrasted with the output ten years ago or five years ago or two years ago?
Mr. LEVIS. I don't know if I could quote that. I think I have a schedule here that would show that. I don't find it right now, but production, as I recall it, has almost doubled in the last ten years, somewhat due to the return of beer and whiskey.
Senator KING. It has considerably more than doubled, has it not, in the past ten years the output?
Mr. LEVIS. Yes, sir. This curve shows it, sir. I think I can read from it.
Senator KING. I thought I had the figures in my file.
Mr. LEVIS. In 1928 it was roughly 30,000,000 gross. It went up to about 32,000,000 gross in '35; it went down as low as 25,000,000 gross in 1933, and last year it was up to about 47,000,000.
PEAK OR PRODUCTION
Senator KING. Is that the highest out-put?
Mr. LEVIS. Yes, sir; ever in its history.
Senator KING. Forty-seven million gross. Would that embrace all —
Mr. LEVIS (interposing). That is all of the capacity east of the Rocky Mountains. The West Coast follows almost parallel to it, sir.
Senator KING. Then that does not comprise all of the output in the United States, if I understand you.
Mr. LEVIS. We can add them together. I have a West Coast figure here also, the peak of which was roughly 3,500,000 gross.
DECREASE IN PRICES
Senator KING. Then that would be over 51,000,000 gross. With the increase in the output, what do you say as to the price, whether it has increased or been reduced?
Mr. LEVIS. It has decreased, sir.
Senator KING. What per cent of decrease in the price of the commodity, from year to year?
Mr. LEVIS. The price has gone down from 1925 from around about $3.75 a gross to a low of about $2.80 a gross in 1933. In 1935 it returned roughly to $3.00 a gross, and is now around about $2.90. I am reading this chart roughly, sir.
There are things that influence price, such as the packages and closures, caps and types of packing. In other words, a beer bottle used to be sold bulk, piled loose in a car. Today it is sold in a corrugated box. A whiskey bottle takes amore expensive package than a ketchup bottle.
This is the price of the glass in its package, ready to be delivered, so if you were to take out even that trend of the increased quantity or quality of merchandise that you give for the dollar, I think the price will even continue on that decline.
COST OF ACCESSORIES
Senator KING. What proportion of the cost would you say should be attributed to those accessories?
Mr. LEVIS. About 12½ per cent in packages — about the same as the freight.
Senator KING. So you would deduct 12½ per cent from the gross price now in order to reach the level of the price of the glassware?
Mr. LEVIS. Talking about naked bottles packed.
Senator KING. You stated there was competition between the ten producers. Was that constant, that competition? Was there weekly or yearly competition?
Mr. LEVIS. Yes, sir. I think, sir, that we are in competition with each other and in competition with other containers.
Senator KING. What other containers are in competition with yours?
Mr. LEVIS. The tin can, paper milk bottle, and plastic jars.
FIELD OF COMPETITION
Senator KING. Have they entered the field to any great extent?
Mr. LEVIS. The beer can did, sir. The paper milk bottle seems to have made great strides. I know I used to buy tomato juice in glass, and now it comes in a can. That is why we went into the can business. We thought maybe some fellow might change and we could get him anyway.
PRICES OF MILK BOTTLES
Mr. COX. Since Senator King has asked about price trends, I would like to ask you if it isn't a fact that the list price of milk bottles in the industry, at least as between you and the Thatcher Company, remained constant from November, 1924, to January, 1931, and again from November, 1933, to April, 1938?
Mr. LEVIS. I couldn't answer that specifically, but I think maybe Mr. Martin could. I didn't come prepared for that.
Mr. COX. I realize you didn't.
PATENTS AND LICENSES
Representative REECE. May I ask Mr. Cox if you expect to develop the question with reference to the right of a concern to license a patent; that is, the intangible patent, as compared to his right to license a tangible article which may have embodied in it a patent? Do you plan to develop those two questions?
It seems to me, as I indicated in one of my questions the other day, that there are two questions involved; that is, even under our present laws, or maybe under any policy that Congress might consider adopting, there is one dealing with the right of a concern to license the patent itself, and another dealing with a concern's right to lease an article, a machine, a tangible article, as distinguished from the intangible right, the patent itself.
Mr. COX. I think the best answer I can make to your question, sir, would be that we plan to show, and I think have shown, if I understand your distinct question, that both practices have been followed in this industry. That is, they have a leasing of machines and a granting of a license to use a machine, and you also have the exchange of patent rights as such, quite apart from any object. I don't know that we are going to develop it anymore than to show that those two practices exist so far as the presentation of evidence is concerned. I think it may be a matter of comment in our report. I wouldn't want you to believe that we were going to have any witnesses to testify particularly as to that distinction.
The CHAIRMAN. Are there any other questions? If not, the witnesses are excused. We thank you very much.
Mr. COX. I think, perhaps, since there was so much talk about these contracts, that, without having them printed, they should be inserted as original exhibits and identified.
The CHAIRMAN. To which contracts do you refer?
Mr. COX. All contracts between 1924 up to 1935 between Owens-Illinois and Hartford-Empire.
The CHAIRMAN. They may be admitted.
(The contracts referred to were received in evidence and marked "Exhibits Nos. 135 to 141," both inclusive.)
VALUE OF PATENT SYSTEM
Senator KING. Would you care to express any opinion as to whether or not it would be advantageous to the glass industry, particularly to the milk bottle part of the glass industry, if there were no patent system at all? That is to say, any person could manufacture glassware without licenses and without patents.
Mr. LEVIS. I have a lot of theories on that. It doesn't only involve that, but it involves our opinions on many phases of the patent situation which Mr. Borkin and his associates asked me to talk to them about later. I will be willing todo it now if they want it done now.
Senator KING. If you have talked to them at their solicitation I have no doubt that later the matter will be developed. I shall not press the question now.
CROSS-LICENSING
Mr. COX. We have no objection; we would be glad to have Mr. Levis tell us now what he feels about it.
Mr. LEVIS. I more or less prepared for the situation in connection with my discussions on the theories of cross-licensing. I feel that when a concern has become large and it has its business established, and it has an organization that is capable of carrying on its developments, that that concern naturally prefers to have compulsory licensing. It is a means that without an expense to them they can acquire a right to do certain things without being excluded by these small interferences; or, in other words, if we can go ahead and develop the theory of the building of our machines, us having arrived and been established and having been capable of affording to have a development in engineering and design organization, we would much prefer that we could ask for a compulsory license on anything that interferes with the progress of our development.
On the other hand, we believe that is — what shall we call it — an incentive for genius. an incentive for capital to invest in the ideas of genius, that any infant industry or any new idea should be given the benefits of a patent protection, and we believe that those items are not inconsistent if the legislation is such that it requires a shorter space of time in which a patent of one type can be subject to compulsory licensing or subject to the protection of genius than one that is purchased, say, in order to build up a field.
I think that states it fairly accurately, Mr. Borkin, as I have stated to you.
Mr. BORKIN. That is right.
Senator KING. Are you acquainted with the report of the Science Advisory Board of the Patent System, appointed by the Secretary of Commerce a number of years ago?
Mr. LEVIS. No, sir, I am not.
Senator KING. In which they discussed some of these questions about compulsory licensing?
Mr. LEVIS. No, sir, I am not, but I wish I were, I would like to know more about it.
Senator KING. I shall later draw the attention of the Committee to it and perhaps put some extracts of it in the record. I will not burden the record today.
The CHAIRMAN. Thank you very much, Mr. Levis. We have profited very much from your testimony.
(The witness was excused.)
Mr. COX. If I could have five minutes adjournment I can bring another witness.
The CHAIRMAN. The committee will stand in recess for five minutes.
(A recess was then taken.)
The CHAIRMAN. The committee will come to order, please. Mr. Cox, are you now ready to proceed?
Mr. COX. I am.
The CHAIRMAN. Will you call your next witness.
Mr. COX. The next witness is Mr. McNash. Mr. McClure, will you come up also.
The CHAIRMAN. Do you and each of you solemnly swear that the testimony you are about to give in this proceeding will be the truth, the whole truth, and nothing but the truth, so help you God?
Mr. McNASH. I do.
Mr. McCLURE. I do.
TESTIMONY OF J. H. McNASH,
PRESIDENT, HAZEL-ATLAS
GLASS COMPANY, WHEELING,
WEST VIRGINIA
AND
TESTIMONY OF WALTER H.
McCLURE, VICE-PRESIDENT
AND GENERAL SALES
MANAGER, HAZEL-ATLAS
GLASS COMPANY, WHEELING,
WEST VIRGINIA.
Mr. COX. Will each of you in turn give the reporter your name and address, and your occupation?
Mr. McNASH. J. H. McNash, Wheeling, West Virginia, president, Hazel-Atlas Glass Company.
Mr. McCLURE. Walter H. McClure, vice-president and general sales manager, Hazel-Atlas Glass Company, Wheeling.
Mr. COX. Mr. McNash, the Hazel-Atlas Company is a company engaged in manufacturing glass containers, is that right?
Mr. McNASH. Yes.
Mr. COX. And it is a large manufacturer, in fact it is about the second largest.
Mr. McNASH. The second in size, that is right.
Mr. COX. Can you give us an approximate percentage of all glass containers produced by your company?
Mr. McNASH. Around 18 per cent.
Mr. COX. How long has the Hazel-Atlas Company been in the business?
Mr. McNASH. Probably fifty years-predecessor and the present corporation.
Mr. COX. And you at the present time are licensees of the Hartford-Empire Company, is that right?
Mr. McNASH. That is right.
Mr. COX. You were at one time, and still are, I understand, a licensee of the Owens-Illinois Company, is that right?
Mr. McNASH. That is right.
Mr. COX. Your first license was from the old Owens Bottle Company in 1919.
Mr. McNASH. That is right.
Mr. COX. And that license was received in consideration for the exchange of one-third of your capital stock, is that correct?
Mr. McNASH. Correct, $500,000 in our stock, to be exact.
Mr. COX. Thereafter that stock was repurchased, was it not?
Mr. McNASH. It was.
Mr. COX. When was that?
Mr. McNASH. In 1926, I believe. We paid approximately $3,600,000 for that stock.
Mr. COX. Now when did you first become a licensee of Hartford-Empire?
Mr. McNASH. 1932.
Mr. COX. Prior to that time, had you been engaged in litigation with Hartford-Empire with respect to patents?
Mr. McNASH. On a wholesale basis, yes.
Mr. COX. How many of those suits were there, can you tell us?
Mr. McNASH. There was a suit against the Kearns-Gorsuch Bottle Company, located at Zanesville, Ohio, a subsidiary of our company We owned all the shares. I think there were four or five patents involved in that suit. Then the Hazel-Atlas Glass Company was sued under Peiler patent.
Mr. COX. That is the one we were speaking of as the heated hood patent?
Mr. McNASH. No, it was the famous stuffing patent. And I think at a later time than that a suit was entered against the Hazel-Atlas Glass Company in Wheeling, West Virginia. That suit was never tried.
Mr. COX. Can you tell us approximately how much money this litigation cost your company?
Mr. McNASH. We have a very good record, I believe, of the legal expenses involved, but we do not have the record of the expense involved in the time of people on our staff taken from their jos [sic] jobs, their various positions in the organization. It would be almost impossible to calculate that part of the expense. We have no record of that.
Mr. COX. Can you tell us what the legal expense was?
Mr. McNASH. I believe it ran somewhere from fifty to one hundred and fifty thousand dollars a year.
Mr. COX. For as long as this litigation lasted?
Mr. McNASH. Yes.
Mr. COX. And that again was a suit against the Kearns-Gorsuch Bottle Company?
Mr. McNASH. Yes.
Mr. COX. That was about 1925 or '6?
Mr. McNASH. I think about '26 or '27.
Mr. COX. And continued until you accepted the license in 1932.
Mr. McNASH. We were willing to pay the Hartford-Empire Company this amount that we were spending for legal services, to free ourselves from the troubles incident to these various suits.
Senator KING. May I ask, do you have any suits against persons for alleged infringement of your patents?
Mr. McNASH. Not to my knowledge. I am sure we did not have.
Senator KING. The company, then, never brought suits for alleged infringements of your patents?
Mr. COX. You brought suit back in 1923 with Owens against the J. T. and A. Hamilton Company.
Mr. McNASH. Did it ever amount to very much?
Senator KING. I didn't ask the amount. I asked if you brought any suits.
Mr. McNASH. Evidently the Hazel-Atlas did in 1923. I don't think of any important one.
Mr. COX. They were joint plaintiffs in suit with Owens-Illinois Company.
Mr. McNASH. But I am on the subject now of why I took the license.
Mr. McNASH. In 1932.
Mr. COX. And that figure you gave us a little while ago doesn't include the expense which you referred to a moment ago as having been incurred by reason of the time and effort of your regularly employed officers?
Mr.McNASH. And the distraction from the manufacturing plant, that is correct.
Mr. COX. Will you tell us, Mr. McNash, just briefly if you can why it is that you didn't take a license from Hartford-Empire before 1932?
Mr. McNASH. We were fairly well satisfied that the feeding device used by the Hazle [sic] Hazel-Atlas Glass Company was a mechanism entirely of our own development. We saw no reason why someone should come in and attempt to control our use of that device.
Mr. COX. But in 1932 you changed your mind, is that correct?
Mr. McNASH. The Circuit Court of Appeals for Philadelphia District changed our mind.
Mr. COX. After that decision you decided there wasn't any point in going on with this?
Mr. McNASH. No, we were going on.
Mr. COX. You were going to petition for certiorari through the court.
Mr. McNASH. Correct.
Mr. COX. Tell us why, then, you did take a license in 1932 from Hartford-Empire.
Mr. McNASH. The Hartford-Empire Company approached us in connection with taking a license and eventually under such conditions that I think we would have been foolish to refuse.
Mr. COX. What were those conditions that you think it would have been foolish to refuse?
Mr. McNASH. When these negotiations began, our view was a willingness to settle, paying Hartford annually about the amount of our legal expenses. Those negotiations were handled by me and that was quite clear in my mind that was all we could do.
Mr. COX. You thought you might as well pay it to them as to the lawyers.
Mr. McNASH. That is correct, to befree from the troubles incident to law-suits.
Senator KING. I suppose the fact that the Court of Appeals decided against you was one of the factors that influenced you to seek a compromise.
Mr. COX. I was asking under what conditions you thought it would be foolish for you to refuse a license from Hartford.
Mr. COX. That is right; you were still there.
Mr. McNASH. We were willing to pay Hartford that amount. In addition to that, relieving us of this embarrassing suit situation, the idea was that we would have called on Hartford development if we wanted it. As a matter of fact, those negotiations kept changing from time to time and day to day and it was apparent that Hartford-Empire could not make such an arrangement with us. Before we got very far it was necessary for the Hazel-Atlas Company to agree to pay damages, because according to their judgment we were in the position all these years of having used their device and paid nothing for the use.
Mr. COX. How many years did the claim that the Hartford people make cover?
Mr. McNASH. Of course, these suits were brought at different times and the suit against Kearns-Gorsuch didn't necessarily pile up the damage against him. The Hazel damages piled up after the suit was filed in Pittsburgh, or the notice of that infringement. I don't know what the total amounted to; I would say in a general way two million dollars or two and a half million dollars, or thereabouts.
Mr. COX. That was the contingent liability which you faced if you lost the contest.
Mr. McNASH. That is right.
Mr. COX. Go on now.
Mr. McNASH. So we said that if other things were reasonable we would agree to pay damages, to cut that out. In addition to that, we insisted that our position in this industry be no different than the position of the then Owens-Illinois Glass Company.
Mr. COX. Why did you insist on that?
Mr. McNASH. We were a licensee of the Owens-Illinois Glass Company, for all their development.
Mr. COX. That was under the 1904 agreement?
Mr. McNASH. 1908 or '09. For all their development. Of course the Owens contention was that development applied to suction only. Our view was broader than that. However, that point never has been litigated. Maybe it is just as well it hasn't, but it hasn't been litigated.
Mr. COX. You haven't had to pay lawyers for that?
Mr. McNASH. Not on that point. At one time in the relation between Owens and Hazel as the result of that 1909 license, Mr. M. J. Owens arranged with our Mr. J. C. Brady for us to turn over to Owens the title to our Brookfield patent. The understanding was that the Owens Bottle Company, then the Owens Bottle Company, would sue the Hartford-Empire Company. They did sue, but under the Lott patent, not Brookfield. Before that suit had gotten very far, it was apparent that negotiations were on between the Owens Bottle Company and the Hartford-Empire Company, and you heard Mr. Williams say that among the patents in the cross-licensing of Owens Bottle and Hartford-Empire was this Brookfield patent they had gotten from us. As I said, a while ago, we also contended we were entitled to all of the development. Our working arrangement with the Owens Bottle Company as a result of the 1909 agreement and the fact that they had 500,000 shares of our stock, was necessarily a very close working arrangement, so we felt fully justified in insisting that if this suit in question was to be compromised, it had to be compromised on the basis that at least we were in as good a competitive position as the Owens-Illinois Glass Company, and that eventually was worked out.
Mr. COX. Now tell us, briefly, if you can, what the provisions of that settlement agreement were. Perhaps it would be quicker if we did it this way. Would it be accurate to say under that agreement, you agreed to pay the regular royalty rate to Hartford for the machines which you were using then?
Mr. McNASH. That is right.
Mr. COX. Although those were not machines which you got from Hartford-Empire in the first instance?
Mr. McNASH. That is correct.
Mr. COX. Not machines that they had had built?
Mr. McNASH. That is correct. We are using today, I think, one Hartford-Empire feeder.
Mr. COX. And yet you are paying royalty to Hartford on all your machines.
Mr. McNASH. That is right.
Mr. COX. And in return for that agreement on your part to pay royalty at regular rate, Hartford-Empire was to pay you one-third of its divisible income. Is that correct?
Mr. McNASH. That is correct.
Mr. COX. And that divisible income was the same kind of income that was defined this morning, that is it was income from royalties, profit on manufacturing, license fees over the cost.
Mr. McNASH. You have it better than I have.
Mr. COX. Those were the items. In other words, roughly speaking, it was Hartford's income from patents and patent rights, including infringement suits, and deduction was to be made from that and you were to get one-third of that?
Mr. McNASH. That is right.
Mr. COX. Is that contract still in effect?
Mr. McNASH. Yes, sir.
Mr. COX. How long does it run?
Mr. McNASH. About 1945.
Mr. COX. You have prepared and sent to us some figures.
Mr. McNASH. Before we get on to that, I think this contract thing probably should be talked about a little more. I don't know that our relation with Owens had any particular effect on Hartford-Empire. I think the thing that disturbed Hartford-Empire was we were going to make every effort to get to the Supreme Court of the United States. I think in addition to that they fully realized the resourcefulness of our experience in the practical application of feeding devices of all kinds.
Mr. COX. You were a large company?
Mr. McNASH. A large company.
Mr. COX. You were in a position, if you cared to, to fight on?
Mr. McNASH. That is right. And we had that experience. That experience might have been very attractive to Hartford-Empire Company. In addition to that we had a fairly large array of patents. Just what they were worth I don't know. We never utilized them to any extent in establishing them generally.
Mr. COX. If you had been a smaller company with less resources, the story would have been quite different, wouldn't it?
Mr. McNASH. I don't know as to that. But I do believe, though, that the Hartford-Empire Company had a very large and great respect for our ability to apply these things. I might add, too, that we had after this Philadelphia decision was against us, made quite a few changes in our feeding device. We made quite a lot of progress along that line, I think in the direction of probably having those patents, rather those feeders, come outside the patent involved in the Pittsburgh case. That is our only view. I have never wished to test it. It might have meant other lawsuits had that continued; it probably would have. But we did surprise ourselves in what we were able to accomplish in the way of changing our feeders to come outside the scope of that Pittsburgh patent. I have every reason to believe that Hartford was aware of just what we were doing in that respect.
Mr. COX. Of course, if you had done that you would have faced some more litigation.
Mr. McNASH. Lawsuits, that is right.
The CHAIRMAN. Mr. McNash, I understood you to testify that in conducting your negotiations with the Hartford-Empire for the settlement of this litigation, you intended that your company should be put in at least as good a position as that occupied by the Owens-Illinois Company.
Mr. McNASH. That is right.
The CHAIRMAN. Now what was that position as you saw it?
Mr. McNASH. The position that they secured in their arrangement with Hartford-Empire as of 1924.
The CHAIRMAN. And just what was that?
Mr. McNASH. They were contributing to the patent experience of Hartford-Empire and also the engineering experience of Hartford-Empire, in exchange for half the so-called divisible income of Hartford.
The CHAIRMAN. And what position were you fearful of being put into if you had not insisted upon this equal treatment?
Mr. McNASH. We either had to beat Hartford-Empire's contention in the courts or pay royalty to the extent of approximately eight or nine hundred thousand dollars a year, maybe a million dollars a year, that the Owens would not be paying.
Mr. COX. It placed you at a competitive disadvantage against Owens.
The CHAIRMAN. And the final result was that although you use only one of the Hartford-Empire machines, and all of the other machines which you use are those which you developed yourself but the patent on which was in litigation, you now pay to the Hartford-Empire royalties upon all of these machines and receive in return one-third of the divisible income of the Hartford Company.
Mr. McNASH. That is correct.
Representative SUMNERS. Mr. McNash, you said a while ago that during this period of uncertainty and of negotiation you had made some improvements in order to bring, as you hoped, your processes outside of the patents of the other concern. Were they patented or were patents applied for on these improvements?
Mr. McNASH. No, we have never been very patent-conscious.
Senator KING. Your company did have patents, did it not?
Mr. McNASH. Oh, yes.
Senator KING. Were they patents which were the invention of representatives of your company as predecessors or members of the corporation?
Mr. McNASH. That is right, employees of the corporation.
Senator KING. And how long had your company been in existence when this litigation commenced. based upon patents which you had taken out?
Mr. McNASH. You mean the company in existence or the patents?
Senator KING. The patents.
Mr. McNASH. They had been in existence quite some time.
Senator KING. And was it the contention of the Hartford-Empire that your patents infringed patents which owned? they
Mr. McNASH. Patents and the devices we were using infringed there.
Senator KING. You contended there was no infringement.
Mr. McNASH. That is right.
Senator KING. And litigation then followed for several years.
Mr. McNASH. Quite some years.
Senator KING. At considerable cost to your company, and finally the Circuit Court of Appeals decided you had infringed their patents.
Mr. McNASH. That is right.
Senator KING. And then this compromise was effected to which you have referred.
Mr. McNASH. That is right.
Senator KING. Did the action of the Owens Company which had a $500,000 interest or stock in your corporation have any influence in effecting the compromise?
Mr. MCNASH. None, because they owned no stock in our company at that time. The Owens Bottle Company holdings in our company were repurchased by us I think in 1936.
Senator KING. So at the time the compromise settlement was made, the Owens Company did have no interest whatever in your company?
Mr. McNASH. That is right, and have not had since, neither the Owens-Illinois or Owens Bottle.
Senator KING. What Circuit Court of Appeals decided aversely to you?
Mr. McNASH. The one in Philadelphia.
Mr. COX. The Third Circuit opinion, written by Judge Buffington.
Senator KING. Have you the date?
Mr. COX. Just a moment and I will give you the citation. It is in 59 Fed. 2nd, 399.
Mr. McNASH. Would it be accurate to say after this contract was made, the result was that the divisible income of Hartford was split in three ways, one-third to you, instead of having been split two ways as before?
Mr. McNASH. That is right.
Senator KING. Were you to be the beneficiary of any patents which the Hartford Company might acquire after that settlement? If they acquired new patents which contributed to the development of the industry, were you to have any benefits?
Mr. McNASH. Yes, that is right.
Senator KING. So any patents that they have acquired or may acquire, your corporation becomes a beneficiary?
Mr. McNASH. That is right, during the life of the contract.
The CHAIRMAN. What is the life of the contract?
Mr. McNASH. Until 1945.
Representative SUMNERS. What is the divisible income?
Mr. COX. The divisible income, Congressman, in a sentence, is all of the income of Hartford-Empire from patents and patent rights, less a deduction which in the beginning was $600,000, and from 1932 to '35, I think was $850.000. It that right?
Mr. McNASH. I think so.
The CHAIRMAN. Was that the overhead?
Mr. COX. I don't know. We have tried to develop that. I don't know what the $600,000 was, or the $850,000. That is just a thing that was deducted.
Now while this contest was going on between you and Hartford-Empire, Mr. McNash, it was true, wasn't it, that there were a number of smaller glass companies who were also charged with infringement of the Hartford patents, who were rather waiting to see what the outcome of the battle was going to be?
Mr. McNASH. That is right.
Mr. COX. So that if before the decision of the Court of the Third Circuit we have just referred to, a chart like that had been drawn, there would have been a far larger number of companies on the extreme right which would not have been licensees.
The CHAIRMAN. You are now referring to Exhibit No. 113.
Mr. COX. That is right, Exhibit No. 113. Have you seen the chart?
Mr. McNASH. I see it in front of me.
Mr. COX. And after you took a license from Hartford-Empire, it is true, isn't it, that a substantial number of those smaller companies also took licenses?
Mr. McNASH. That is true.
Mr. COX. Did you at any time take any part in attempting to persuade any of those companies to take a license in the Hartford-Empire, Mr. McNash?
Mr. McNASH. I did not.
Mr. COX. You didn't talk to them about it or advise them?
Mr. McNASH. I did not.
Mr. COX. You felt that was none of your affair?
Mr. McNASH. None of my affair.
Mr. COX. You didn't ever, in the case of the Brockway Glass Company, attempt to persuade them?
Mr. McNASH. I don't think the Brockway people ever talked to me.
Mr. COX. Would you make the same answer with respect to the Tygart Valley Glass Company?
Mr. McNASH. The Tygart Valley Glass Company never did discuss this question with me. Of course, their plant being in the same town in which we have three plants, their manager, I think, occasionally did talk to our general factories manager located there, but I am satisfied that our general factories manager did not advise the Tygart Valley Glass Company what they should or should not do.
Mr. COX. I think I will ask you again about these figures which you gave us which show the royalties which you paid to the Hartford between 1932 and date, and payments received by you from Hartford. Will you look at those?
Mr. McNASH. If Mr. Quay sent this, it is correct.
Mr. COX. We will just use the letter, then, if that is satisfactory.
Mr. McNASH. Right.
Mr. COX. This letter shows that you have paid to Hartford-Empire from 1932 to the end of the first nine months of '38 $5,770,140.97; that Hartford-Empire has paid you $6,528,660.94.
Mr. McNASH. That is correct.
Mr. COX. So that you have a net gain on that transaction of about a million dollars.
Mr. McNASH. Well, to be exact, it is $750,000.
Mr. COX. $750,000. May I have this letter marked in evidence?
The CHAIRMAN. It may be so marked.
(Letter dated December 13, 1938, signed G. S. Quay, was received in evidence and marked "Exhibit No. 142" and is included in the appendix on p. 276.)
Senator KING. You received more than you paid? Was that one-third of the divisible income?
Mr. McNASH. That is right.Senator KING. I didn't quite under-stand, if you explained , why you got more.
Mr. McNASH. I think I should say thatthe contribution we received was greater than anyone had in mind that it might be at the time the 1932 license was negotiated with the Hartford-Empire Company. My own view of it was that it would cost us between $100,000 and $200,000 a year. The transaction turned out better than I thought it might.
Senator KING. You paid in royalties, if that is the proper term, to the Hartford Company, at $5,000,000 plus, and received in return dividends of that divisible income, $6,000,000 plus.
Mr. McNASH. Well, you can call it whatever you will. The fact is that we participated in the divisible income of the Hartford-Empire Company, in consideration for what they got from us.
Senator KING. I understand.
Mr. McNASH. It happened that that was greater than the amount of money paid in.
Mr. COX. Now, the effect of that agreement and of those payments has been, has it not, Mr. McNash, that you have been receiving a share of the royalty payment made by other licensees to Hartford-Empire.
Mr. McNASH. That being in the divisible income, we have.
Mr. COX. And, of course, since 1935 you are the only company which does share that income.
Mr. McNASH. The Owens having sold theirs for $2,000,000.
Senator KING. Did you surrender to the Empire Company in this transaction settlement your right, title and interest to the patents which you claimed?
Mr. McNASH. That's right.
Senator KING. So you claim to have sold patents which had value in this transaction?
Mr. McNASH. And then this accumulation of years of experience in the application of these devices.
Mr. COX. Was it your opinion, Mr. McNash, that the result of that situation has been to give you any competitive advantage as against licensees who do not share?
Mr. McNASH. Probably it has. I think that I should say this: I think I should say further in that connection, as was brought out today, the larger companies in the glass industry are able to take care of their own research and engineering problems, and do. The smaller concerns are not in that position. The Hartford-Empire Company is rendering us no service. The Hartford-Empire Company is rendering its smaller companies of licensees a real service.
If a licensee of the Hartford-Empire Company, as I understand it, using their devices, has mechanical difficulties, or glass difficulties, the Hartford-Empire Company have well qualified staff to assist in the solution of those difficulties. They are available at all times to the licensees. We don't call on that service. As a matter of fact, speaking for the Hazel-Atlas Glass Company alone, we are constantly building up an experience that is available to the Hartford-Empire Company to give to licensees. Anything we do is at their service.
Mr. COX. Are you speaking of the patents now?
Mr. McNASH. I am speaking of practical application of devices in operation.
Mr. COX. That is more a matter of experience than patents or patent rights?
Mr. McNASH. That is right.
Mr. COX. You don't get any of this service from Hartford-Empire, and you don't give it to anyone except Hartford-Empire?
Mr. McNASH. That's right.
Representative SUMNERS. On what basis is this service rendered? What compensation is given to the Hartford for this service?
Mr. McNASH. By its licenses. It is in the royalty the licensees pay.
Representative SUMNERS. Suppose a small concern wants the assistance of an engineer of the Hartford-Empire Company to help them with some difficulties they have?
Mr. McNASH. I don't believe there is any charge made for it. It is in the royalty they pay.
Representative SUMNERS. You mean, they have paid for that?
Mr. McNASH. That is what they are really paying for. It is royalty, but they really are paying —
Representative SUMNERS (interposing). I've got it.
Now another question, if you please. What did the patents and other things that you transferred to the Hartford-Empire Company cost you? Have you any estimate of that?
Mr. McNASH. I don't think very much, because in most of the instances it was a matter of our own development.
Representative SUMNERS. Of course, you did have to make some compensation to the person who made them, but you never have estimated that?
Mr. McNASH. No.
Mr. COX. You never made any income to speak of from those patents, from licensing them to others?
Mr. McNASH. We ever have been in the licensing business. We are glass manufacturers.
Senator KING. You utilized those patents before the alleged infringement and before the settlement and you got the benefit of your own patents in the production of your machines in your factory, which production was sold to the general public.
Mr. McNASH. That is right.
Mr. COX. Those patents, then, except for the use you made of the inventions which they covered for your own business, ultimately proved to be of value to you largely because of the bargaining position they gave you with the Hartford-Empire?
Mr. McNASH. That, plus our experience in the application of glass manufacturing devices.
Mr. COX. And those two things, plus the fact that you had resources enough to continue the battle, are the things you testified a moment ago you thought led finally to the ultimate settlement of the Hartford-Empire Company.
Mr. McNASH. I think so.
Senator KING. I would like to ask one question, if I may. As a result of this agreement, did your corporation assume a larger field in the production, a larger part of the field of production, and obtain any monopolistic advantages?
Mr. McNASH. I would say no. Understand, now, our manufacture of glass has increased, because the volume has increased in the industry.
Senator KING. Did you attempt, in view of that settlement, to restrict competition or join any other persons?
Mr. McNASH. Positively not.
Senator KING. And have you, during the life of your organization and particularly since the agreement to which you have referred, attempted unfair practices or engaged in the destruction of competition in the product of your factory or the product of others?
Mr. McNASH. We do not think we have.
Senator KING. Has there been reasonable competition, fierce or otherwise, between you and other manufacturers?
Mr. McNASH. There is reasonable competition in the industry.
Senator KING. Have the prices of your commodities been reduced during the past fifteen or twenty years?
Mr. McNASH. They have. I have in mind especially in the wide-mouth line, in which we are a large factor, used for the containing of food products. Our price level today is below the level in effect in 1913. In 1913 we were paying twelve to fourteen cents an hour for common labor. Today we are paying 57 1/2 cents for common labor. In spite of that, our price level today is below what it was in 1913.
Senator KING. Is it below what it was ten years ago?
Mr. McNASH. Ten years ago would make it 1928. It is very much below 1928.
Senator KING. You are cheapening, then, your product, as the years go by.
Mr. McNASH. That is our constant aim in order to increase the use of glass.
Representative SUMNERS. How much, and to what percentage, has your labor volume, in proportion to productivity, decreased during those years?
Mr. McNASH. I can not give you an exact figure in that respect. Of course, there has been a tremendous increase in the productivity per man.
Representative SUMNERS. By reason of improvement in machinery?
Mr. McNASH. That's right, but actually as a result of, especially for our company, the use of glass having increased so rapidly that today we are employing more people than we ever have in our history.
Representative SUMNERS. Can you give us an opinion as to the percentage of increase of productivity of the individual in that period from 1913 to now?
Mr. McNASH. No, I can not. I can give you, I think, a very interesting instance.
Representative SUMNERS. If it won't take too much time.
Mr. McNASH. Mr. Levis testified today in connection with the Owens machine .I can subscribe to what he said in that connection with respect to the operation of an Owens machine. The Hazel-Atlas Company, as the record shows, had a license from 1909 to use Owens machines. We had seven furnaces equipped with Owens machines.
Senator KING. That is a suction machine?
Mr. McNASH. That is a suction machine. Even during that time, however, the preponderance of our operation was feeder. We never were very successful in the operation of an Owens machine in our wide-mouth field, and as a consequence of that, we eliminated its use. We began at the Hazel No. 2 plant in Washington taking one furnace at a time and converting it from Owens operation to feeder operation.
When that whole plant was changed the production had increased to the point that we had to shut down two other plants to keep a semblance of activity in this Hazel No. 2 plant. The fact of the matter is that we made on one furnace under extreme conditions almost as much glass as we made on four Owens furnaces in that plant .
Representative SUMNERS. Did you increase the number of persons operating that furnace?
Mr. McNASH. It takes more people to operate feeders than it does an Owens machine, but in our judgment there are other compensational advantages.
Representative SUMNERS. May I ask you one question? Did you build that Owens machine yourself or did somebody else build it and install it?
Mr. McNASH. We purchased those machines, I think, from the Kent Machine Company.
Representative SUMNERS. Is that machine company engaged in the business of making —
Mr. McNASH (interposing). I don't know where they are now.
Senator KING. In the aggregate, is your pay roll now larger than it was in 1913, '14 or '15, or any intervening period?
Mr. McNASH. Oh, decidedly.
Senator KING. Wages are higher and pay roll is larger, and the same or more employees than you had a few years ago?
Mr. McNASH. I said now. I should have said in 1937 when we were employing more people than ever in our history, because 1938 is not as good a year as 1937, and our operations are not as large.
Mr. COX. I have about three questions I could ask Mr. McClure. I can dispense with him hereafter.
The CHAIRMAN. Proceed.
Mr. COX. Mr. McClure, you are the Vice President and Sales Manager of Hazel-Atlas?
Mr. McCLURE. Yes.
Mr. COX. Do you have with you a copy of the reply you gave to us to a questionnaire we sent you with respect to this?
Mr. McCLURE. I have, but I left it at the hotel.
Mr. COX. I will read to you some excerpts from your replies which you may recognize, because I want to ask you some questions about them. In answer to question No. 3 in that questionnaire you said ,"Hazel-Atlas Glass Company initiated the prices covering wide-mouthed container ware, and the Hazel-Atlas price list for ware of this glass constitutes the recognized market of the industry."
Is that to be understood as meaning that the tendency in the industry is, when you change your price for that class of ware, the other companies manufacturing that class of ware also change their prices, so that if your price goes up, their price goes up; if your price goes down, their price goes down?
Mr. McCLURE. Yes, sir.
Mr. McNASH. It doesn't vary that rapidly, though.
Mr. COX. That is generally true, is that right?
Mr. McCLURE. Generally speaking.
Mr. COX. You also say, "As to prices on proprietary and prescription ware, we adopt the schedules of the Owens-Illinois Glass Company, and make their prices ours."
Mr. McCLURE. sir.
Mr. COX. I will quote again, "The same conditions as regards proprietary and prescription ware apply in connection with our liquor ware lists and our beer bottle lists. We are relatively small operators in these lines, and follow the market as established by leaders in these branches of the industry." Does that mean, as you state above, that you adopt the schedules of the Owens-Illinois Glass Company for these lines of ware?
Mr. McClure. Yes, I might say we have only about three liquor accounts, and not many more than that in the beer business.
Mr. COX. I am quoting again from your reply. "As to fruit jars, for similar reasons we adopt the prices as published by the Ball Brothers Company as our prices for fruit jars, jelly glasses and fruit jar tops."
Mr. McCLURE. That is correct.
Mr. COX. "We initiate our own prices for automatically made pressed tumblers and tableware." That is not commonly regarded in the industry as a branch of the container manufacture.
Mr. McCLURE. No, but they are parallel lines, and you wanted information on all of them, containers and otherwise.
Mr. COX. "We initiate our own prices on opal ware for the domestic and drug trade." That is correct?
Mr. McCLURE. That is correct.
Mr. COX. You meant by that the tendency was for the other persons in the industry to follow your prices?
Mr. McCLURE. No, sir, we have only one competitor in that line, the Carr-Lowrey Company, in Baltimore.
Representative SUMNERS. To what degree, if any, is there competition in quality and style in this glassware? Has that gone into the record?
Mr. COX. I don't think there is much about that. I will ask some questions now about that. I will start first with the proprietary prescription ware. You say you adopt the schedules of the Owens-Illinois Glass Company as far as prices are concerned. Is there competition between the two companies as to the quality of that ware?
Mr. McCLURE. I don't know that there is, no.
Mr. COX. You think one piece of prescription ware is probably —
Mr. McCLURE (interposing). We make no prescription ware at all.
Mr. COX. What about the proprietary ware?
Mr. McCLURE. We haven't had a great line of business in that. We have moulds and publish a price list and solicit the trade and have some few accounts of a rather small nature in that line. I am speaking now of narrow-neck ware. Of course, there are some drug store items that we make in rather large quantities,1but they come under broad, wide-mouth schedules.
Mr. COX. Would you say there was competition as to quality there?
Mr. McCLURE. There is some competition.
Mr. COX. Each one trying to make a better jar, or whatever it may be, than the other manufacturer?
Mr. McCLURE. I assume so. We try to make the best we can.
Mr. COX. Does the physical quality differ very much from manufacturer to manufacturer in your opinion?
Mr. McCLURE. The quality between manufacturers? Oh, there is some difference.
Mr. COX. A great deal of difference, do you mean?
Mr. McCLURE. I wouldn't say a great deal, no.
Mr. COX. What about your beer bottle and liquor ware bottles? Is there a great difference in quality there between the bottles you make?
Mr. McCLURE. We think ours are about as good as are made. I wouldn't admit otherwise.
Representative SUMNERS. That is enough, Mr. Cox. Thank you.
Senator KING. Might I ask one question. It isn't quite germane. Has there been any increase in the price of the bottles which you have turned out from the factory for the drug trade since the pas-sage of the Miller-Tydings Bill and the Patman Bill?
Mr. McCLURE. I would say no. I know nothing about the Miller-Tydings Bill except that there is such a thing. I think not. When was the Robinson-Patman Act — it was passed in '36. There was some upward revision then. In '37 they advanced. They had been declining from '34, owing to the pressure of rising cost.
Mr. COX. I want to read you one more paragraph from the questionnaire, and I shall be through. You say, "We cannot, of course, get more for our goods in this category than can the Owens-Illinois or any other recognized competitor. and to greatly deviate below these levels would result only in our figures being met by competition. The reason for all this is because the Owens-Illinois and, to the same extent, as a matter of ratio of proprietary and prescription business to the total, some of our otoher [sic] other competitors are stronger in those lines than we are, and being more or less a secondary factor in these lines, we follow the lead of the larger interests." Do you remember that?
Mr. McCLURE. I do.
Mr. COX. And that, you think, is a substantially accurate statement?
Mr. McCLURE. I think so, according to my knowledge of the situation.
Mr. COX. I think that is all I have of this witness.
The CHAIRMAN. Are there any other questions to be asked of either of these witnesses?
Mr. COX. I want Mr. McNash tomorrow morning. I think I have finished with Mr. McClure.
The CHAIRMAN. The Committee stands in recess until 10:30 tomorrow morning.
(Whereupon, at 4:35 p. m., an adjournment was taken until Thursday, December, 15, 1938, at10:30 a. m.)
APPENDIX
(Exhibit No. 127)
(Exhibit No. 128)
Letter from W. E. Levis, Owens-
Illinois Glass Company, Toledo,
O., to Mr. F. Goodwin Smith,
Owens-Illinois Glass Company, Toledo, O.
Office of the President.
January 13, 1933.
Mr. F. Goodwin Smith,
Hartford-Empire Company,
Hartford, Connecticut.
My dear Goodwin:
Referring to Mr. Northend's letter of January 10th regarding the persistent letters he has received from Mr. E. C. Devlin, I am replying to you rather than to him because I feel that you should know that the old Northern Glass Company plant never was operated successfully and that I do not think we should be at all concerned regarding their thoughts of resuming operation.
We are in splendid shape to take care of Milwaukee trade from our Streator, Illinois, plant, and while I want to keep posted from time to time about people who inquire for licenses for the manufacture of beverage bottles. I think the position that you are taking — that there is at present considerable over-production in the industry — should be maintained in replies to similar requests.
Sincerely,
BILL.
W. E. Levis.
(Exhibit No. 133)
Letter of Mr. William E. Levis,
dated August 2, 1932, to Mr. R.
H. Levis, Illinois Glass Consolidated
Corporation.
WILLIAM E. LEVIS
P. O. BOX 1035,
TOLEDO, OHIO.
Mr. R. H. Levis,
Illinois Glass Consolidated Corporation,
Alton, Illinois.
Dear Uncle Harry:
The two matters that I talked with Edwin about in Chicago the other day that I think are of extreme interest to the Illinois Glass Corporation are the attached proposition that I received from Mr. Gordon, of Kidder, Peabody & Company, to purchase a block of our Owens-Illinois 5% debentures of 1939, and some negotiations that I have had recently with a Mr. I. T. Axton regarding the possibility of the Illinois Company's making an in-vestment in the common stock of the Hazel-Atlas Glass Company, as well as a former negotiation that I had with some other New York people with the thought of the Illinois Company's purchasing some of the convertible preferred stock of the Thatcher Manufacturing Company.
Mr. McAdoo was in Toledo to spend a day with me last week and I talked with him regarding this matter. He seemed interested in going along with the Illinois Company in making a purchase of both Hazel-Atlas Glass Company common and Thatcher Manufacturing Company preferred, if the Illinois Company were to be interested in either of these propositions.
As I see the situation now, it appears that we are on the eve of straightening out the Hartford patent situation. Hazel-Atlas has come in and taken a license, and yesterday the Knox Glass Company agreed to come in, pay back damages, and take a license. In so doing they have withdrawn from the Miller Feeder Users Defense Association, and other Miller feeder users have expressed their willingness to come in and take a Hartford license if Knox and Hazel-Atlas took a license from Hartford. The only important manufacturers who remain out of Hartford's licensing plan are Ball Brothers and the Root Glass Company. We are negotiating with both of these companies and I am quite confident that they will come in if all of the other feeder operators come in, if for no other reason than to protect fruit jar licensing, as well as to curtail the licensing of beverage bottle manufacturers.
With the plans we now have, there is certain to be a curtailment of the promiscuous manufacture of milk bottles on non-licensed feeders, which will result in our company's and the Thatcher Company's securing a greater proportion of the available milk bottle business. This should stabilize the price and increase the earnings of the Thatcher Company. In a recent talk with Mr. Mandeville he advised that they have on hand sufficient cash and Government securities to retire all of their preferred stock and still have adequate working capital for the operation of their business. The stock is $3.50, $50.00 par value preferred, convertible into common at $55.00. It is selling at approximately $25.00, thereby yielding 14%.
The Hazel-Atlas common is selling as outlined in the attached memoranda prepared by Frank Morfoot and other data that I have accumulated from time to time that is interesting.
Mr. Gordon called me on the telephone this morning and advised that he would be willing to make us a definite offer of 85 for $500,000.00 par value of Owens-Illinois 5 per cent debentures of 1939, and after I talked with him he said that if the bond market improved he might be willing to go as high as 90.
The thought that I want to put up to you for your consideration is:
Do you think it would be a good plan for the Illinois Glass Corporation to consider selling $250,000.00 par value of its Owens-Illinois 5 per cent debentures at a price of 90, take the proceeds of this sale, and make an investment in the common stock of the Hazel-Atlas Glass Company at a price of approximately $40.00 per share, and a smaller investment in the preferred stock of the Thatcher Manufacturing Company at, say $25.00 per share, investing roughly $150,000.00 in Hazel-Atlas common and $50,000.00 in Thatcher preferred?
If you are at all interested in this thought, will you read the attached papers and return them to me with your comments. Should your letter indicate that you would like to go into the matter further, I would be pleased to meet with you and Edwin in Chicago and work out further details of the proposition.
Edwin is willing for us to make this type of an investment, for he feels as I do, that the Illinois Glass Corporation amounts substantially to an investment trust in the glass industry, and that if we gradually increase our investment in such firms as Hazel-Atlas and Thatcher to a point where we secure representation in their companies, we will have a better idea of the possible future of our investments in the industry as a whole, and thus probably become a more dominant factor in the glass container industry than any other investor in it.
Mr. McAdoo feels that the thought is a good one and that his people would be interested in going along with us on a joint account basis. He would not want to be identified with the purchase in anyway and would want to feel that we would represent their investment so long as they cared to have us do so.
I promised Mr. McAdoo that when you had finished with the attached papers I would forward them to him, so that he would not have to gather the same information. Will you please, therefore, send them to me with a copy of your reply. Edwin had a chance to look over the attached papers when I was in Chicago, and, therefore, I am not sending a duplicate set to him, although I am sending him a copy of this letter so that he will be familiar with what I have written you.
Sincerely, WILLIAM
(signed)
W. E. Levis
(Exhibit No. 142)
Recapitulation of amounts paid to
and received from Hartford
Empire Company by the Hazel-Atlas
Glass Company on royalties by
years.
Hazel-Atlas Glass Company, Wheeling, W. Va.
December 13, 1938.
Mr. C. L. Terril, Department of Justice,
Washington, D. C.
Dear Mr. Terril: You called me at my home last evening and asked that I furnish you by telegraph today, a record of payments made by this company to the Hartford-Empire Company, together with a comparative record of amounts paid by Hartford-Empire to this company.
Our telegram this morning, I trust, arrived in such form as to permit you to readily pick out the information you require.
In confirmation of the figures in that message, we submit the following:
Amount of royalty paid to Hartford-Empire Company by The Kearns-Gorsuch Bottle Company, a former subsidiary of this company, for the years 1919 to 1927, inclusive..............................$265,138.50
A record of the parent company's transactions show —
We trust the foregoing record is in sufficient detail to fit in with your needs and fully answers your request.
Yours very truly,
G. S. QUAY,
Vice-President and Secretary.
