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In short, compulsory patent licensing relief, when negotiated by consent, without a prior specific judicial finding that it is appropriate relief in a particular case, may have created competitive disadvantages as well as benefits. When and if the Justice Department concludes that such relief is desirable, the following precautionary measures in negotiating and administering compulsory licensing decrees are recommended for its consideration.

1. Greater aid by the Justice Department in royalty determination after entry of the decree

The Justice Department's present policy of refraining from participating in negotiations between the defendant-licensor and applicant appears to be essential, but the Department should also be alert to prevent defendant-licensor's frustration of the purpose and spirit of the decree by demanding too high a royalty or resorting to other dilatory tactics. Procedures should be considered which would keep it advised of defendant-applicant negotiations which do not result in licenses because of failure to agree upon a royalty rate. Presently, unsuccessful applicants may be reluctant to institute royalty proceedings. Thus, under existing procedures the Department may never learn about situations where license negotiations have failed because the royalty demanded was excessive. If the Department is persuaded that an excessive demand was made it should attempt to obtain a judicial declaration to that effect.

2. Clarification of judgment provisions regarding patent applications

Several cases have reflected confusion concerning the obligation of a defendant with respect to the licensing of patent applications. If the Department seeks relief concerning applications, the decree should clearly delineate the intent and the obligation of a defendant with respect thereto. In view of the requirement that all applications are normally maintained in secrecy consultation in this regard with the Patent Office would be desirable. While the secrecy requirements create problems with respect to licensing applications, the AEC is currently offering for license both patents and patent applications.33 3. Meaningful grouping of patents available for licensing

A simple numerical listing of large numbers of patents available for licensing may in some cases be an inadequate basis for selection of the particular patents in which an applicant has an interest. This might be particularly true when the applicant is a small company, or is not too familiar with the industry. În appropriate cases the Department should require defendants to group patents in a meaningful manner, or to respond to reasonable inquiries by an applicant for a designation of patents which relate to specific products or processes. 4. More publicity should be given patents available for licensing

One possible explanation for the lack of interest shown in available patents is that many who might be interested in obtaining licenses are not aware of the availability of the patents. It is recommended that attention be given to developing procedures which would make known on a broader basis the fact of the availability of patents for licensing. Section V-C of this report discusses specific suggestions.

33 AEC release IN23, Sept. 30, 1950.

5. Reciprocal licensing carefully restricted

The Department ought not to accept judgment provisions which allow reciprocal licensing in any case of monopolization or technological dominance by a defendant already holding a large number of patents. In those instances where reciprocal licensing is allowed, extreme care should be exercised to restrict the scope of such licensing to assure that the defendant is not obtaining benefits on a broader baisis than it is giving, and that it is not obtaining patents from a licensee which the latter is not willing to license to other members of the industry. Also, precautionary steps should be taken to prevent the defendant from gaining competitively significant information from competitors under the guise of determining under which patents it might desire a reciprocal license.

6. Ascertainment of probable industry interest in compulsory patent licensing prior to entry of judgment

As suggested above, the large number of antitrust cases in which members of an industry apparently have no desire to obtain licenses under patents available for compulsory licensing indicates that the Department of Justice may be underestimating the importance of relief other than compulsory licensing in restoring competitive conditions; or, perhaps, the Department is not obtaining compulsory licensing of the specific patents that are of interest to others in the industry. These deficiencies, if applicable, might be remedied if the Department had the views of the affected members of the industry. It is recommended, therefore, that the Department of Justice consider altering its policy of conducting consent decree negotiations on a confidential basis, at least to the extent of ascertaining where compulsory licensing is contemplated, what, if any, companies desire licenses, and, if so, under what patents and related know-how. If a lack of interest is found, the Justice Department should then seek other forms of relief.

7. Need for judicial or congressional guidance before using compulsory patent licensing to regulate illegal monopoly power

Finally, where, as in the A.T. & T. case, an industry has been monopolized by business practices and relationships which go beyond the possession or misuse of patents, the monopoly should be attacked as such. It is not sufficient in such cases to substitute compulsory licensing relief for relief which would dissolve the monoply. If the Department believes that such dissolution relief is needed to dissipate the monopoly but that a court will not grant it, the problem might well be brought to the attention of Congress. Before such a monopoly is immunized by decree, Congress should be given an opportunity to decide whether the monopoly might be more appropriately dealt with by legislative measures.

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Antitrust judgments with patent licensing provisions, 1941-59-Continued

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N.D. II. E.D.

Reforming rail joint bars.

3,4

X

Mar. 5, 1943

U.S. v. Aerofin Corp., et Aerofin Corp. (subsidi- 20-458. al.

ary of Buffalo Forge Co.), 490 Broadway,

Buffalo, N.Y.

Carrier Corp., 300 South
Geddes St., Syracuse,
N.Y.

B. F. Sturtevant Co.
(subsidiary of Cana-
dian Westinghouse
Co., Ltd.), Hamilton,
Ontario, Canada.
Buffalo Forge Co., 490
Broadway, Buffalo,
N.Y.

Sept. 20, 1944 U.S. v. The Rail Joint Rail Joint Co. (subsidi- 43-C-1295.

Co., et al.

ary of Poor & Co.), 1310 Railway Exchange, Chicago, Ill.

Poor & Co., 1310 Rail-
way Exchange, Chi-
cago, Ill.
Woodings-Verona Tool
Works, 1947 Thomas
St., Verona, Pa.

Defendants are also enjoined from enforcing any rights under certain patents.

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