These policy questions are raised rather than answered here because any answer must depend for its validity upon further facts which are beyond the scope of this study. In collecting the data for this study, the subcommittee corresponded with licensees and potential licensees as well as with defendants. Comments were solicited with respect to the quality of the patents licensed under these decrees, the importance to the licensees of the licensed patents and problems which have arisen in administration. The subcommittee hopes that this study will provide a foundation of empirical data on which future investigations may build in evaluating this form of antitrust relief. However, it has been possible, based on available facts and the comments received from defendant-licensors, licensees, and potential licensees, to draw some conclusions and to formulate some suggestions which the Congress and the Department of Justice may wish to consider now. II. THE NATURE AND PURPOSE OF PATENT RELIEF IN ANTITRUST JUDGMENTS The Antitrust Division of the Department of Justice has the primary responsibility of enforcing the Sherman Act which, together with the Clayton Act, constitutes the basic congressional expression of the national policy that the competitive free enterprise system shall prevail in our economy. The Sherman Act contemplates that both civil and criminal proceedings shall be instituted. The criminal proceeding, usually begun by the return of an indictment, is for the purpose of deterring violations and punishing the wrongdoer. The civil proceeding is for the purpose of eradicating or dissipating the effects of a violation and preventing a continuation or revival in the future. A judgment, following a trial or upon consent of the parties, is entered specifying the acts which the defendants are prohibited from doing and those which the defendants are required to do. A failure to conform to the provisions of the judgment subjects the defendants to punishment for contempt of court. Patents, like any other form of property, have been and may be used in violation of the antitrust laws. Where so used, they may be the subject of antitrust judgment provisions intended to restore competition and cure the effects of the unlawful conduct. Those judgments which provide for compulsory licensing or dedication are usually designed to give others an opportunity to use the patents held by the defendant-licensor. Having been granted access to the patented art, it is assumed that the licensee or beneficiary of the judgment will stimulate competition by the production and sale of the product involved. The report of the Attorney General's National Committee To Study the Antitrust Laws states (p. 255): The Supreme Court has held compulsory licensing at reasonable rates to be within the range of remedies available where necessary to correct past and prevent future violations. By compulsory licensing, the exclusive nature of the patent grant is destroyed-at least until competitive conditions are restored. The result is "a most serious inroad on patent rights." Beyond this erosion, the Court has also recognized 52186-60 the real "difficulty of computing a reasonable royalty." This committee recognizes the problems and administrative difficulties inherent in compulsory licensing at reasonable rates. Yet we believe such remedy is within the Sherman Act's broad power to "prevent and restrain" violations of that law. Where patents have been used to thwart competitive conditions, compulsory licensing should be employed in accord with relevant standards for use of divestiture. Compulsory licensing is appropriate regardless of whether the patents have been used to impose illegal restraints upon domestic or foreign commerce. Judge Ryan, in dealing with the extension of this form of relief to restraints upon international trade, said in the I.C.I. decision:8 We do not accept as correct the proposition that compulsory license of U.S. patents is appropriate only in those instances where required to remove specific restraints upon the manufacture and sale of specified products in the United States caused by the unlawful use of patents to suppress domestic competition. To do so would be to make nugatory the dual aspects of our antitrust laws, which make unlawful restraints placed upon our foreign trade as well as our domestic commerce. It is true that in most cases in which compulsory licensing has been decreed, it has been found that the patents have been unlawfully used to suppress domestic competition. Not many actions have been instituted to suppress restraints upon our foreign trade, resulting from agreement among international industrialists to which Americans have made themselves parties. We have had few suits which have presented a situation similar to that revealed here, and which call for remedies we now find necessary. "Compulsory royalty-free licensing" bars the patentee not only from asserting the exclusive nature of his grant but also from collecting royalties. He retains title to the patent and conceivably depending upon his ability at some future time to show that competitive conditions have been restored, he may again be allowed to collect royalties. Dedication, in contrast, makes all patent rights immediately available to the public. There is considerable controversy, both as to the advisability and as to the constitutional justification for royalty-free licensing and dedication. Nevertheless, both forms of relief have been embodied in antitrust judgments. III. THE PRODUCTS AND INDUSTRIES AFFECTED AND THE PATENTS AND KNOW-HOW MADE AVAILABLE FOR LICENSING UNDER THESE JUDGMENTS As a first step in the making of this study, the subcommittee and the Department of Justice compiled a list of the judgments containing "patent relief." This list, the first one of its kind ever published, is United States v. Imperial Chemical Industries, Ltd., et al. (S.D.N.Y., 1952), "Opinion on Remedies," 105 F. Supp. 215 at p. 221. See, for example, the "majority" and "minority" views in the "Report of the Attorney General's National Committee to Study the Antitrust Laws" (pp. 256-259). printed herein as an appendix and shows the fields covered by the patents which have been made available for licensing under such judgments. These judgments, the first of which was entered in August 1941, involved a total of over 300 defendants ranging from some of the largest corporations in the United States such as General Electric, International Business Machines, Du Pont, and RCA, down to relatively small concerns. Since certain of these judgments require licensing of future acquired patents, 10 and since no one can accurately predict the number of patents subject to these judgments which will be issued by the Patent Office, it is impossible to determine the number of patents which have been or will be subject to licensing or other forms of relief under these judgments. Based upon the best estimates, it would appear that the total number of issued patents directly affected may be between 40,000 and 50,000. In recent years the number of unexpired patents existing at any given time has exceeded 600,000.11 There are definite signs that the antitrust enforcement program may also have had an indirect effect on the licensing of patents generally. Judging from the number of patents voluntarily being offered for licensing, it would appear that the antitrust enforcement program has resulted in several companies adopting a more liberal licensing policy than was the case prior to the initiation of the program. Consequently, it is safe to say that aside from any other results, antitrust enforcement has had a far-reaching impact upon the licensing of patents generally. A mere listing of some of the products directly affected by these judgments will indicate their importance and the broad range of patents involved. They include milling machines (spindle and tool), petroleum and petroleum products, magnesium and magnesium products, incandescent and fluorescent lamps and machinery, airconditioning equipment, titanium pigments, chemicals and pharmaceutical products, aircraft and marine instruments, flat and safety glass, cash registers and other registering devices, fire alarm systems, stainless steel, ophthalmic goods, chemical products, barbasco root and synthetic steroid hormones, and radio and television equipment. IV. THE EFFECTIVENESS OF COMPULSORY LICENSING PROVISIONS IN ANTITRUST JUDGMENTS In The subcommittee's survey reflected mixed results concerning the importance and effectiveness of compulsory licensing provisions. some cases compulsory licensing has proved beneficial to licensees, particularly small business, and thus stimulated competition, while in others it has resulted in no discernible benefits. The number of licenses issued under a particular judgment ranges from zero to over 300. In those cases where licenses have been issued, licensees have reported varying degrees of success in their utilization of the licensed patents. In some cases they have stated that the patents have not contributed significantly to their operations. In others, however, licensees have indicated that the licensed patents have been very 10 See the Western Electric judgment of Jan. 24, 1956, in which all patents of the defendants, both present and future, are made subject to compulsory license to all domestic applicants, with no limit as to time or the use to which they may be put. 11 See vol. 738, Official Gazette of the U.S. Patent Office, No. 1, January 1950, important to them, and have enabled them to make a product or expand into a field that otherwise might have been closed to them. The survey disclosed that among the companies which have benefited from compulsory licensing are a large number that might be classified as "small business," whose own research facilities are limited by comparison with those of large antitrust defendants. This comment is particularly applicable in those situations where utilization of the licensed patents did not require large capital expenditures. There are discussed below, first, illustrative cases in which compulsory licensing decrees have been effective; and, second, cases in which such compulsory licensing requirements have had no discernible effects, since little if any interest has been displayed in the patents available for licensing. Finally, a few cases are discussed where there was licensing activity under a judgment which apparently would have occurred without the judgment. A. Examples of cases in which compulsory licensing decrees have been effective 1. United States v. Phillips Screw Co., Civil No. 47-C-147, N.D. Ill. This action was filed in January 1947 and alleged price fixing, patent pooling, and territorial agreements with respect to crossrecessed head screws and screwdrivers. A consent judgment was entered on March 28, 1949, which among other things required the licensing of patents on a reasonable royalty basis and the furnishing of technical information to licensees under the patents. Prior to the entry of the consent judgment there were 39 licensees under the screw patents and 10 licensees under the screwdriver patents. By August 15, 1958, the numbers of screw licensees had increased to 133, more than three times the predecree number, and the number of screwdriver licensees had increased to 21, more than double the predecree number. The rates of royalties with respect to screwdrivers were reduced on March 28, 1949, and with respect to screws on July 1, 1949. A number of licensees attributed substantial business advantages to the licenses and technical information obtained under the patents covered by the decree. The following comments from licensees are typical: (a) "While there is no way of measuring the cash value of our production under the license, we do know that it has been of considerable value to us. It has enabled us to secure other desirable business which we could not have had without the license." (b) "It is the undersigned's belief that we would have made some expansion in our facilities and plant; however, it is an undeniable fact that our ability to produce Phillips screws has made our expansion, sales, etc., more rapid." (c) "However, we can say that the Phillips screw product has contributed to the growth of our company and has enabled us to strengthen our position in small screw production." (d) "Our opinion is that the manufacture of Phillips products has contributed very materially to our growth in the past 10 years. It is quite certain that without this product, we could not have hoped to increase our sales and production nearly as much." (e) "We believe that increases would have been made in manufacture of products, employment, and investment whether or not we had a license. However, there is no question in our minds that having a license accelerated the increase." (f) We have spent on new machinery from 1950 to 1955, inclusive, $251,155.31. Probably 50 percent of this amount was purchased to aid in the manufacture of Phillips head screws. * * * These increases would not have been made except for the license." 2. United States v. Eastman Kodak Co., Civil Action No. 6450, W.D.N.Y. On December 21, 1954, a case was instituted against Eastman Kodak alleging violations of the Sherman Act. According to the complaint, Eastman had achieved and maintained a monopoly of the amateur color film processing field through distribution practices by which it controlled prices and conditions of film sales to prevent competing photo finishers from entering this market. The complaint alleged that Eastman sold Kodachrome and Kodacolor film on the understanding that it obtain all of the processing business in connection with such film and that it marketed film at prices which included charges for the subsequent processing of the film by Eastman. It was alleged that these practices foreclosed competitors from processing such film. On the same day the complaint was filed a consent judgment was entered which among other things required Eastman to grant reasonable royalty licenses under applicable patents; to make available manuals describing its commercial color film processing technology; and to lend technical assistance in connection with applying the methods described in the manuals. Eastman has advised that the procedures with respect to the granting of licenses under the decree have been quite routine and simple and that there have been no refusals of requests for licenses nor any negotiations as to the terms of the licenses which have been granted. Eastman prepared simple license forms which did not provide for continuing royalties or royalty reports, as a nominal sum of $100 was fixed as the paid-up royalty for each license granted under the decree. When an inquiry is received concerning the availability of a license under the decree, Eastman immediately sends forms of its license agreement. In no case have there been negotiations looking toward the execution of the license which did not result in the actual issuance of a license. Some prospective licensees to whom the license forms were forwarded did not thereafter respond. Eastman assumes that these prospective licensees were not interested as licenses would have been granted had they followed up. As of the middle of August 1958, less than 3 years after the entry of the decree, Eastman had granted approximately 43 licenses to processors who may be classed as small businessmen. While it is still too early to assess finally the results of the compulsory licensing features of this decree, it would appear that these licenses have created some competition in a field which, according to the complaint, was securely in the hands of one company. Former Assistant Attorney General Victor R. Hansen, testifying on October 21, 1957, before the Antitrust Subcommittee of the House Committee on the Judiciary, stated (p. 24): Eighteen months after the judgment, eight companies had |