Untitled

BESSER MANUFACTURING CO. ET AL. v. UNITED STATES

No. 230

SUPREME COURT OF THE UNITED STATES

343 U.S. 444; 72 S. Ct. 838; 96 L. Ed. 1063; 1952 U.S. LEXIS 2810; 93 U.S.P.Q.
(BNA) 321; 95 U.S.P.Q. (BNA) 321; 1952 Trade Cas. (CCH)
P67,280

April 21, 1952, Argued
May 26, 1952, Decided

PRIOR HISTORY:

APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE EASTERN
DISTRICT OF MICHIGAN.

In a civil action brought by the United States under @ 4 of the Sherman Act to enjoin alleged
violations of @@ 1 and 2, the District Court entered judgment against appellants and others. 96
F.Supp. 304. Appellants appealed directly to this Court under the Expediting Act. Affirmed, p.
450.

DISPOSITION: 96 F.Supp. 304, affirmed.

CASE SUMMARY

PROCEDURAL POSTURE: Appellants sought direct review of a decision from the United
States District Court for the Eastern District of Michigan, which found that appellants had
conspired to restrain and monopolize interstate commerce in concrete block-making machinery in
violation of @@ 1 and 2 of the Sherman Act (Act), 15 U.S.C.S. @@1, 2, and monopolized and
attempted to monopolize the same industry in violation of @ 2 of the Act, 15 U.S.C.S. @ 2.

OVERVIEW: Appellee United States brought a civil action charging appellants and others with
conspiring to restrain and monopolize interstate commerce in concrete block-making machinery in
violation of @@ 1 and 2 of the Sherman Act (Act), 15 U.S.C.S. @@1, 2, and charging appellants
with monopolizing and attempting to monopolize the same industry in violation of @ 2 of the Act,
15 U.S.C.S. @ 2. The district court found appellee's charges clearly proved, and entered a
judgment requiring appellants to issue patent licenses on a fair royalty basis and grant certain
options to existing lessees of their machines. On direct appeal, appellants argued, inter alia, that
the district court's factual findings were clearly erroneous, and that the ordered remedies were
punitive, confiscatory, and inappropriate. The court affirmed, finding the judgment below well
supported by the evidence. The court held that compulsory licensing and sale of patented devices
were recognized remedies within the trial judge's range of discretion, particularly appropriate
where, as here, a penchant for abuses of patent rights had been demonstrated.

OUTCOME: Judgment in favor of appellee United States was upheld upon a finding that it was
well supported by the evidence and that the remedies selected by the court were within its
discretion, well recognized and reasonable.

CORE TERMS: royalty, patent, monopolize, concrete, machine, lease, restrain, decree,
block-making, machinery, framing, licenses, Sherman Act, interstate commerce, antitrust,
appointed, deadlock, commerce among, compulsory, licensing, abuse of discretion, parties
concerned, evidence adduced, process of law, full hearing, civil action, royalty-setting,
overwhelmingly, satisfactory, evidentiary

CORE CONCEPTS -

Antitrust & Trade Law: Sherman Act
See 15 U.S.C.S. @ 1.

Antitrust & Trade Law: Sherman Act
See 15 U.S.C.S. @ 2.

Antitrust & Trade Law: U.S. Department of Justice Actions: Civil Actions Civil Procedure:
Appeals: U.S. Supreme Court Review
The scope of review in the Supreme Court of the United States with respect to issues of fact in
antitrust cases is narrow.

Antitrust & Trade Law: Intellectual Property: Misuse of Rights Compulsory patent licensing is a
well-recognized remedy where patent abuses are proved in anti-trust actions and it is required for
effective relief.

Antitrust & Trade Law: Intellectual Property: Misuse of Rights Compulsory sale is a recognized
remedy in antitrust actions.

Antitrust & Trade Law: U.S. Department of Justice Actions: Civil Actions In framing relief in
antitrust cases, a range of discretion rests with the trial judge.

Antitrust & Trade Law: Intellectual Property: Misuse of Rights Compulsory licensing and sale of
patented devices are recognized remedies. They would seem particularly appropriate where a
penchant for abuses of patent rights is demonstrated.

Antitrust & Trade Law: Intellectual Property: Misuse of Rights The court should provide for its
determination of a reasonable royalty either in each instance of failure to agree or by an approved
form or by any other plan in its discretion.

Civil Procedure: Appeals: Appellate Jurisdiction
The framing of decrees should take place in the district rather than in appellate courts.

SUMMARY: The validity of provisions of a decree in an anti-trust suit in which patent abuses
were proved, for compulsory licensing of the use of the patented inventions, giving lessees an
option to purchase leased machines, and the action of the trial judge in leaving the matter of
royalties to a committee, reserving to himself the casting vote in case of deadlock, are approved
by eight members of the Court in an opinion by Jackson, J.

Clark, J., did not participate.

LEXIS HEADNOTES - Classified to U.S. Digest Lawyers' Edition: [***HN1]

preventive remedies -- compulsory patent licensing. --

Headnote:
Compulsory patent licensing on a royalty basis is a well-recognized remedy where patent abuses
are proved in anti-trust actions and it is required for effective relief.

[***HN2]

preventive remedies -- permitting lessees of patented machinery to purchase it. --

Headnote:
A recognized remedy for monopoly through the leasing of machines embodying patented
inventions is to give lessees the option of purchasing them.

[***HN3]

due process -- fixing royalties for use of patents. --

Headnote:
No taking of property without due process of law results from the fixing, for the purposes of the
decree in an anti-trust suit against persons controlling patents through which a combination in
restraint of trade is made effective, of reasonable royalties on the compulsory licensing of such
patents, by leaving the matter to a committee and reserving to the trial judge the right to cast the
deciding vote in case of deadlock.

[***HN4]

review -- sufficiency of evidence. --

Headnote:
The Supreme Court will not pass on the sufficiency of evidence in the absence of glaring error.

[***HN5]

relief -- discretion of trial court. --

Headnote:
In framing relief in anti-trust cases a range of discretion rests with the trial judge.

[***HN6]

provisions of decree -- proper function of appellate court. --

Headnote:
It is not within the appellate functions of the Supreme Court of the United States to direct the
procedure to be utilized, in an anti-trust suit involving the abuse of patents, in fixing the royalties
to be paid by persons availing themselves of provisions of the decree for compulsory licensing.

SYLLABUS: 1. In this civil action brought by the United States to enjoin violations of the
Sherman Act, the conclusions of the trial judge that appellants conspired to restrain and
monopolize interstate commerce in machinery for making concrete blocks, and that they
monopolized and attempted to monopolize that industry, are overwhelmingly supported by the
evidence. Pp. 445-447.

2. This Court sustains provisions of the decree requiring appellants to issue patent licenses on a
fair royalty basis and to grant to the existing lessees of their machines an option, on terms
"mutually satisfactory to the parties concerned," (1) to terminate their lease, (2) to continue their
lease, or (3) to purchase leased machines. P. 447.

3. Pursuant to a provision of the decree for fixing reasonable royalty rates under appellants'
patent licenses, a committee consisting of two persons selected by appellants and two by the
Government was appointed; and, on the basis of the evidence adduced before the committee, the
trial judge resolved a deadlock which developed. Held: The procedure was fair and reasonable,
and did not deprive appellants of their property without due process of law. Pp. 447-449.

(a) In the absence of glaring error, this Court does not pass upon the question of the sufficiency
of the evidentiary material considered in arriving at the royalties finally established. P. 448.

(b) It was not incumbent upon the trial judge to have a full hearing of the royalty matters
himself or to refer them to a master for such a hearing. Pp. 448-449.

(c) In framing relief in antitrust cases, a range of discretion rests with the trial judge, and there
was no abuse of discretion shown here. P. 449.

4. The Government's suggestion that this Court consider the royalty-setting procedure outlined
by it in the trial court, and direct that it be utilized hereafter in the proceedings in this case, cannot
be accepted, since the framing of the decree is properly a function of the trial court rather than the
appellate court. Pp. 449-450.

COUNSEL: Carl R. Henry argued the cause for appellants. With him on the brief were William J.
Donovan, Roy W. McDonald, John W. Babcock and Peyton H. Moss.

Marcus A. Hollabaugh argued the cause for the United States. With him on the brief were
Solicitor General Perlman, Assistant Attorney General Morison, James L. Morrisson, Charles H.
Weston and Wharey M. Freeze.

JUDGES: Vinson, Black, Reed, Frankfurter, Douglas, Jackson, Burton, Minton; Clark took no
part in the consideration or the decision of this case.

OPINIONBY: JACKSON

OPINION: [*445] [**840] [***1065] MR. JUSTICE JACKSON delivered the opinion of the
Court.

The United States brought this civil action under @ 4 of the Sherman Act charging appellants
and others with conspiring to restrain and monopolize interstate commerce in concrete
block-making machinery in violation of @@ 1 and 2 of the Act, and charging appellants with
monopolizing and attempting to monopolize the same industry in violation of @ 2 of the Act. n1

- - - - - - - - - - - - - - - - - -Footnotes- - - - - - - - - - - - - - - - - -

n1 26 Stat. 209, as amended, 15 U. S. C. @ 4: "The several district courts of the United States
are invested with jurisdiction to prevent and restrain violations of sections 1-7 of this title; and it
shall be the duty of the several district attorneys of the United States, in their respective districts,
under the direction of the Attorney General, to institute proceedings in equity to prevent and
restrain such violations. . . ."

15 U. S. C. @ 1: "Every contract, combination in the form of trust or otherwise, or conspiracy,
in restraint of trade or commerce among the several States . . . is declared to be illegal . . . ."

15 U. S. C. @ 2: "Every person who shall monopolize, or attempt to monopolize, or combine
or conspire with any other person or persons, to monopolize any part of the trade or commerce
among the several States . . . shall be deemed guilty of a misdemeanor . . . ."

- - - - - - - - - - - - - - - - -End Footnotes- - - - - - - - - - - - - - - - -

The defendants below were the Stearns Manufacturing Company, second largest producer in
the country of [*446] concrete block-making machines, Besser Manufacturing Company, the
country's dominant producer of such machinery and substantial stockholder in the Stearns
Company, Jesse H. Besser, long-time president and virtually sole stockholder of the Besser
Company, and two individuals, Gelbman and Andrus, co-owners of certain important patents in
the concrete block-making machine field.

The United States District Court for the Eastern District of Michigan found the Government's
charges clearly proved, and entered a judgment intended to correct the Sherman Act violations
found to exist. n2

- - - - - - - - - - - - - - - - - -Footnotes- - - - - - - - - - - - - - - - - -

n2 96 F.Supp. 304.

- - - - - - - - - - - - - - - - -End Footnotes- - - - - - - - - - - - - - - - -

Only the Besser Company and Jesse H. Besser have appealed, bringing their case here directly.
n3

- - - - - - - - - - - - - - - - - -Footnotes- - - - - - - - - - - - - - - - - -

n3 Pursuant to @ 2 of the Expediting Act of 1903, 32 Stat. 823, as amended, 15 U. S. C. @ 29.

- - - - - - - - - - - - - - - - -End Footnotes- - - - - - - - - - - - - - - - -

Appellants assert that the factual conclusions of the trial court are erroneous. Only recently we
reiterated the narrow scope of review here with respect to issues of fact in antitrust cases. United
States v. Oregon State Medical Society, 343 U.S. 326. In this case we think it enough to say that
the conclusions of the trial judge that appellants conspired to restrain and monopolize interstate
commerce in concrete block-making machinery and that they monopolized and attempted to
monopolize that industry are overwhelmingly supported [*447] [***1066] by the evidence. Not
the slightest ground appears for concluding that the trial judge's findings were "clearly erroneous."
Rule 52 (a), Fed. Rules Civ. Proc.

We turn now to the provisions of the judgment entered below which are attacked by appellants.
It is unnecessary for us to review appellants' activities in detail, for they are adequately set out in
the opinion below. Suffice it to say that appellants sought to eliminate competition through
outright purchase of competitors and strict patent-licensing arrangements with the Stearns
Company and the patent owners, Gelbman and Andrus.

[***HR1] Appellants contend that the provisions of the judgment requiring them to issue patent
licenses on a fair royalty basis and requiring [**841] them to grant to existing lessees of their
machines an option, on terms "mutually satisfactory to the parties concerned," (1) to terminate
their lease, (2) to continue their lease, or (3) to purchase leased machines, are punitive,
confiscatory and inappropriate.

However, compulsory patent licensing is a well-recognized remedy where patent abuses are
proved in anti-trust actions and it is required for effective relief. Hartford-Empire Co. v. United
States, 323 U.S. 386, 413, 417-418; United States v. National Lead Co., 332 U.S. 319, 338;
United States v. United States Gypsum Co., 340 U.S. 76, 94.

[***HR2] The compulsory sale provision of the judgment, strenuously attacked, is likewise a
recognized remedy. International Salt Co. v. United States, 332 U.S. 392, 398-399. That
required by the judgment in this case must be considered in conjunction with the alternatives
associated with it. Appellants are left free to lease rather than sell if they can make a lease
sufficiently attractive.

[***HR3] Appellants further argue that the method adopted by the court below for fixing
reasonable royalty rates under [*448] their patent licenses deprives them of their property without
due process of law. The court directed Besser and the Government each to select two persons to
serve as arbitrators on a committee to establish fair royalty rates and the form and contents of
royalty contracts. It was also provided that in the event of a stalemate the four representatives
should choose a fifth to vote and break the deadlock. If they could not agree on a fifth
representative, the trial judge was to sit as the fifth or appoint another person to serve in his place.
After some delay, and under protest, Besser appointed his representatives, the Government
having appointed its shortly after the plan had been promulgated by the court. The
representatives selected by the Government were taken from the industry, the Government noting
to the court that they were serving on their own behalf and as agents of other prospective
licensees, and not as agents of the Department of Justice.

When an impasse was reached with regard to royalty rates on certain Besser patents, the judge
stepped in as the fifth arbitrator and voted for the rates proposed by the government-appointed
representatives. Appellants assail this procedure with the contention that royalties set must be
"made in judicial proceedings based on the hearing and evaluation of evidence in the light of
appropriate criteria."

[***HR4] Appellants' argument fails on two counts. First, it necessarily attacks the sufficiency of
the evidentiary material considered in arriving at the royalties finally established. We do not pass
on matters of that character in the absence of glaring error not shown here. Secondly, [***1067]
appellants appear to have misunderstood the true nature of what was done, for it was always
within the power of the trial judge to establish the royalty rates, and, in voting as he did, he did
just that. They contend that the judge should either have held a full hearing [*449] himself or
referred the royalty matters to a master for such a hearing. We do not, however, think that in
reducing the terms of a decree to concrete measures such procedures are mandatory. It is true
that the procedure adopted below is an innovation in certain aspects, but novelty is not
synonymous with error.

[***HR5] In framing relief in antitrust cases, a range of discretion rests with the trial judge.
United States v. National Lead Co., supra, at 338; International Salt Co. v. United States, supra,
at 400-401, 405; United States v. Crescent Amusement Co., 323 U.S. 173, 185. [**842] We can
see no abuse of discretion here. Compulsory licensing and sale of patented devices are
recognized remedies. They would seem particularly appropriate where, as here, a penchant for
abuses of patent rights is demonstrated. With respect to the procedure for establishing royalty
rates, the court below was likewise acting within the discretion vested in it. "[The District Court]
should provide for its determination of a reasonable royalty either in each instance of failure to
agree or by an approved form or by any other plan in its discretion." (Italics added.) United States
v. United States Gypsum Co., supra, at 94. The procedure here was entirely reasonable and fair.
A competent committee considered relevant evidence and the judge, on the basis of the evidence
adduced before the committee, resolved the deadlock into which the negotiations had fallen.

[***HR6] Although not condemning the royalty-setting procedure used here, the Government
indicates faint enthusiasm for it, and suggests that this Court consider the procedure outlined by it
below and direct that it be utilized hereafter in the proceedings remaining in this litigation. We
would exceed our appellate functions were we to adopt that suggestion in this case. "The framing
of decrees should take place in the District rather than in Appellate Courts." International Salt Co.
v. United [*450] States, supra, at 400; United States v. Crescent Amusement Co., supra, at 185.

We have examined appellants' other contentions and concluded that they are without merit.

In accordance with the foregoing, the judgment below is

Affirmed.

MR. JUSTICE CLARK took no part in the consideration or decision of this case.