Full opinion text
WYZANSKI, District Judge. Findings of Fact, Conclusions of Law, and Opinions. I. ■ Introduction. December IS, 1947 the Government filed a complaint against United Shoe Machinery-Corporation under § 4 of the Sherman Act, Act of July 2, 1890, c. 647, 26 Stat. 209, 15 U.S.C.A. § 4 in order to restrain alleged violations of §§ 1 and 2 of tliat Act, 26 Stat. 209, SO Stat. 693, IS U.S.C.A. '§§ 1, 2. Stripped to its essentials, the 52 page complaint charged, first, that since 1912 United had been “monopolizing interstate trade and commerce in the shoe machinery industry of the United States” [Par. 27 \(a)]. This first general charge was then subdivided, as it were, into these charges: (a) “monopolizing the manufacture and distribution in interstate commerce of all major shoe machines, except upper stitching and cement sole attaching .machines” [Par. 27(b)]; (b) “attempting to monopolize the manufacture and distribution in interstate commerce of cement sole attaching machines” [Par. 27(b)]; (c) ' “monopolizing the manufacture and distribution in interstate commerce of numerous minor machines” [Par. 27(c)]; (d) “attempting to monopolize the manufacture and distribution in interstate commerce of * * * minor shoe machines” [Par. 27(c)]; and (e) “monopolizing the manufacture and distribution in interstate commerce of parts used in shoe machinery leased by United” [Par. 27(d)]. The second principal charge laid by the complaint was that United had been (a) “monopolizing the distribution in interstate commerce of numerous * * * shoe factory supplies” and (b) “attempting to monopolize the distribution in interstate commerce of * * * other such supplies” [Par. 27(e)]. Third, the complaint alleged United was “attempting to monopolize and monopolizing the manufacture and distribution in interstate commerce of tanning machinery used in the manufacture of shoe leather” [Par. 27(f)]. In support of this three-pronged attack, directed to shoe machinery, shoe factory supplies, and tanning machinery, the Government set forth detailed allegations with respect to acquisitions, leases, patents, and a host of other aspects of United’s business. The- part of this opinion containing findings of fact sets forth, in the same order as does the complaint, the Government’s allegations concerning, and this Court’s finding upon, each of these aspects. ■ ; After stating its charges, the Government prayed ior an adjudication of United’s violations of both § 1 and § 2 of the Sherman Act; an injunction against future violations; a cancelation of United’s shoe machinery leases; a requirement that United offer for sale all machine types “manufactured and commercialized by it and be enjoined from leasing shoe machinery except upon terms * * * approved by the Court”; a requirement that, on such terms as the court may deem appropriate, United make available to all applicants all patents and inventions relating to shoe machinery; an injunction against United manufacturing or distributing shoe factory supplies; a cancelation of exclusive contracts governing shoe factory supplies; and a divestiture of United’s ownership of virtually all branches and subsidiaries concerned with shoe factory supplies or tanning machinery. Defendant answered seasonably, denying all the significant allegations, and relying upon the judgments rendered by the Supreme Court of the United States in an earlier case brought against this company’s predecessor under the Sherman Act, IS U.S.C.A. §§ 1-7, IS note, United States v. United Shoe Machinery Company of N. J., 247 U.S. 32, 38 S.Ct. 473, 62 L.Ed. 968 and another case against this company under the Clayton Act, 15 U.S.C.A. § 12 et seq., United Shoe Machinery Corp. v. United States, 258 U.S. 451, 42 S.Ct. 363, 66 L.Ed. 708. A trial of prodigious length followed. The court attempted to shorten the hearings by requiring defendant in advance of trial to submit to the Government’s exhaustive requests for discovery, by requiring the Government at the opening of its case to file a brief correlating all its proposed evidence, by encouraging the use of sampling devices, and by insisting that the Government should, in formal answers, indicate in each branch of the case on what evidence it principally relied. Nonetheless, the hearings took 121 days and covered 14,194 pages of transcript and included the offer of 5512 exhibits totalling 26,474 pages (in addition to approximately 150,000 pages of OMR’s and over 6,000 soft copies of patents) and 47 depositions covering 2122 pages. At the close of the evidence the Court asked for briefs, and requested findings of fact and conclusions of law. The Government offered briefs totalling 653 pages, and requests totalling 667 pages. United submitted briefs totalling 1240 pages, and requests totalling 499 pages. In an anti-trust case a trial court’s task is to reduce, as far as fairness permits, a complex record to its essentials, so that the parties, the Supreme Court, other courts, the bar, and the general public may understand the decree, and may recognize the premises on which that judgment rests. It is not the Court’s duty to make a precise finding on every detail of four decades of an industry. It is not its duty to approach the issues as an historian, an archaeologist [See A. N. Hand, Trial Efficiency pp. 31, 32, Business Practices Under Federal Antitrust Laws, 1951 Symposium, N. Y. State Bar Assoc.], an economist, or even a master appointed to settle every factual dispute. A trial judge who undertakes such tasks will unnecessarily sacrifice the rights of litigants in other cases clamoring for attention. Moreover, he will encourage just that type of extravagant presentation which has come to plague the field of anti-trust law. Hence this opinion is to be construed as denying on the ground of immateriality every request not granted. Endeavoring to keep within reasonable and readable limits, this opinion, after this introductory part, sets forth in Part II findings of fact addressed to (A) defendant’s corporate structure, (B) fundamentals of shoe manufacture, (C) aspects of the shoe manufacturing industry, (D) a definition of the shoe machinery market relevant to this case, (E) defendant’s share of that market, (F) acquisition of property and patent rights, (G) restrictive agreements, (PI) leasing, (including written provisions, unwritten practices, service, effect of these provisions and practices on United, its lessees, and its competitors, and United’s pricing policy), (I) research, (J) policing of competition, (K) patents, (L) secondhand machinery, (M) shoe machinery parts, (N) shoe machinery supplies, and (O) tanning machinery. The aforesaid sections F to O follow the order of the Government’s complaint, and in no sense reflect order of importance. Part III considers questions of law pertinent to defendant’s alleged violations of the Sherman Act; Part IV, questions of remedy. II. [The ordinary reader can skip the whole of Part II, since its gist is summarized at the start of Part III. The role of Part II is primarily to dispose of 1166 printed pages of Requests for Findings.] Findings of Fact. A. Defendant’s Corporate Structure. February 7, 1899 United Shoe Machinery Company was formed and took over the business of Goodyear Shoe Machinery Company, International Goodyear Shoe Machinery Company, Consolidated' & McKay Lasting Machine Company and McKay Shoe Machinery Company. March 1899, it acquired the business and property of Eppler Welt Machine Company and' International Eppler Welt Machine Company. This phase of United’s history has been explored in the Sherman Act case reported in D.C., 222 F. 349 and 247 U.S. 32, 38 S.Ct. 473, 62 L.Ed. 968. No- material new facts respecting this early period were shown in the present proceedings. By merger in 1917, this defendant, United Shoe Machinery Corporation, a New Jersey corporation, organized on May 2, 1905, became the successor of United Shoe Machinery Company. The business now conducted by United Shoe Machinery Corporation has been continuous since the organization of United' Shoe Machinery Company on February 7, 1899, and for the purposes of this case no distinction usually need be made between the enterprise formerly conducted by it and its predecessor. The enterprise is therefore usually hereafter referred to as United whether the reference is collective to the several corporations prior to 1917 or to the defendant alone after that date. The predecessor is sometimes referred to as the United Company. United and. its subsidiaries, viewed collectively, are engaged in the development, manufacture, and distribution of shoe machinery and parts for that machinery; the servicing of that machinery; the manufacture of shoe factory supplies; and the distribution of those and other shoe factory supplies. United manufactures at its main factory at Beverly, Massachusetts, all its shoe machinery, except treeing machines, tree feet, and irons, which it manufactures under the name of O. A. Miller Treeing Machine Company, at Plymouth, New Hampshire. Before January 1950 it manufactured certain machines under the name of Booth Brothers Company, at Rochester, New York; but in 1950 it transferred those manufacturing operations to Beverly. Through branoh factories, United itself manufactures dies, at Binghamton, N. Y. and St. Louis, Mo., eyelets, under the name of J. C. Rhodes & Co. at New Bedford, Mass, and the S. O. & C. Co. at Ansonia, Conn., awls and drivers, under the name of United Awl & Needle Có. at West Med-way, Mass., shanks, under the name of United Shank & Findings Co. at Whitman, Mass, and Plymouth, N. H., and boxboard and fibreboard, under the name of Davis Boxboard and Fibreboard Division at West Hopkinton, N. H. United has a majority of the voting stock of the following subsidiary corporations: B. B. Chemical Co., manufacturers of cements, blacking, adhesives, inks, stains, finishes, re-inforcing materials, waxes etc.; S. A. Felton & Son Co., brushes; Hoague-Sprague Corp., shoe-boxes, shoe box blanks, and box forming machines; Fred W. Mears Heel Co., Inc., wood heels and wedge blocks; Shoe Form Co., Inc., plastic shoe and hosiery forms, plastic utility boxes, and fish hooks; Shoe Lace Co., shoe laces; The Turner Tanning Machinery Co., tanning machinery; United Last Company, shoe lasts and bowling pins; W. W. Cross & Co., Inc., cut tacks and nails; and Krippendorf Kalculator Co., supplier of technical services for shoe factories. United owns about 20%, of the voting stock of Tubular Rivet and Stud Company, manufacturers of hooks, rivets, and grommets. Defendant and E. I. du Pont de Nemours Company each own one-half of the voting stock of Celastic Corporation, manufacturers of celastic material and celastic box toes. At February 29, 1950 United and controlled subsidiaries had 6274 employees. In the five fiscal years ending February 28, 1946, 1947, 1948, 1949, and 1950, United’s assets, as reported to shareholders, fluctuated between 103 million dollars and just over 105 million dollars; earnings before federal taxes between 9.4 and 13.5 million dollars; and earnings after federal taxes between 6.2 and 8.79 million dollars. B.. Fundamentals of Shoe Manufacture. In relation to this case it is necessary only to summarize certain aspects of shoe manufacture. Basic facts are that shoes are made to provide an approximate fit for every foot; no two feet are alike; consumers wish shoes for widely varying purposes, of widely differing styles, and of widely differing materials. Shoe styles have become increasingly varied as shoes have developed to serve not only strictly utilitarian, but also aesthetic, purposes, which alter as fashion alters. Almost all shoes are made over wooden lasts. Lasts are made in graded sizes, and in models appropriate for the particular type of last style desired by the shoe manufacturer. A shoe consists principally of the upper and the bottom. The shoe upper (of which the main components are the tip or toe, vamp, quarter, tongue, backstay, counter, box toe, ' lining, and doublers) is usually made from leather, though other fabrics are also used. Leather characteristics vary widely not only between skins of different types, but even in different areas of the same skin. There is less variation in fabrics. The parts of the shoe bottom (of which the main components are the insole, outsole, heel, and shank-piece, and in some shoes the mid-sole and platform) are made sometimes of leather, and sometimes of other materials. Fastening operations are made by tacks, nails, wire, cement, thread, or fibre. Shoe manufacturing proceeds by cutting parts from flat stock, joining them together as sub-assemblies, and shaping them over a last. The successive steps are performed differently in the manufacture of different shoes, but, so far as concerns this case, it will be sufficient to state that the steps often are performed, in succession, in the upper-cutting room, the upper-fitting room, the stock-fitting room, the lasting room, the bottoming room, the making room, the finishing room and the treeing room. There are at least 18 principal shoe manufacturing processes, each of which involves distinctive operations in lasting or sole attaching or both. Those processes principally in use are: McKay, turned shoe, pegged shoe, nailed shoe, screwed shoe, Goodyear welt, McKay welt, single-sole stitchdown, two-sole stitchdown, three-sole stitchdown, prewelt, lock-stitch, cement shoe, cement welt, slip-lasted, soft-sole, rubber shoe, and moccasin. Shoes for every known end use are manufactured by more than one principal manufacturing process. Each shoe manufacturer may vary the steps and operations used in the various processes according to his preferences, the materials used, the type of shoe, the profit-making potential, and many other variables.. Shoe manufacture is a long chain of detail operations, each preparatory to a succeeding operation and often requiring individual correction or adjustment. The final goal is the production of pairs of shoes of uniform and agreeable appearance, and appropriate fitting characteristics. This requires progressive correction of inaccuracies due to lasts, materials, industry practices, and operator performance. Such correction makes the manufacture of shoes different from'the usual fabrication and assembly process current in many other types of manufacturing industry. C. Aspects of The Shoe Manufacturing Industry. Since machines were introduced, begining with the advent, during the Civil War period, of the first McKay machine, shoe production has steadily risen. In 1899, 217 million pairs were produced; in 1927, 367; in 1937, 424; in 1947, 485. Peak all-time production was reached in 1946 at 529 million pairs. There is no evidence that this increased production has been accompanied by an increase in the number of machines. In fact, the market for the more complex and expensive machines may have contracted. In 1911 the number of shoe manufacturing enterprises was Í300; in 1927, 1377; in 1937, 993; in 1947, 1462. Shoe factories are located in over 30 states. In 1947, 437 were in Massachusetts, 391 in New York, 122 in Pennsylvania, and 121 in Missouri. No other state had more than 100. In 1947, there were 664 known factories having capacity of 1,000 pairs per day or less; 226, between 1,000 and 2,000 pairs daily; 107, in excess of 5,000 pairs daily. While there are a few shoe manufacturers such as International Shoe Corporation and General Shoe Corporation with assets, employment rolls, and bargaining power comparable to defendant, the overwhelming majority of concerns are small in production, assets, and employment rolls. The industry tends to disperse to small towns and to migrate gradually westward and southward. It has been easy to enter the shoe manufacturing business. Many have started with small capital; and some, from a small start have become large producers. The shoe manufacturing business has been highly competitive with respect to style, cost, choice of processes, production techniques, and other factors. There is no standard set or Humber of shoe machines which every shoe manufacturer must have. He not only has personal choice as to which process, processes, or sub-processes he will use, but he has wide choice as to whether a particular operation will be performed by hand, or by one or another type of machine. Some machine types have 'been familiar for a long time; others have been newly called into being by a new process or sub-process; others have been adapted to- a different process. The consequence is that the concept ■ of “shoe machinery” includes complicated relationships between different types of machines : in function, some types are parallel to other types; some are sequential to other types; and occasionally a pair of types which are competitive when used in two different shoe -manufacturing processes, are complementary when used in a single shoe manufacturing process. Moreover, shoe machinery types may be as simple as a marking machine or a tack-detecting machine; or as complicated as a pulling over, toe lasting, heel seat lasting, or side lasting machine. With respect to the more complicated machines these generalizations may safely be made. To design them requires advanced engineering skill, familiarity with the problems of shoe-making, and generally, prolonged expensive research. Such complicated machines must have versatility and adjustability to meet varying last-styles, size-width combinations, combinations of materials and fastening materials, and shoes processed with varying degrees of skill. These machines will work with greatest satisfaction if shoes presented to them have been properly prepared in preliminary processes, and sometimes by appropriate auxiliary machines. No matter how skillfully designed, these complicated machine types will require frequent repair service. And breakdowns of such machines should be promptly attended to, because, in the shoe manufacturing industry, stoppages are particularly costly. The shoe manufacturer produces in small units or case lots; he must meet a market notoriously volatile, seasonal, and'fashion-ridden; his consumer is traditionally impatient; and his own labor cannot be efficiently and economically used if there is much down time. Moreover, there is a high degree of interdependence of machine operations in each factory, which accentuates the factors stressed in the last sentence. In support of the foregoing generalizations, defendant offered a wealth of corroborative detail. Recitation of that detail is unnecessary for the Government challenges not the accuracy, but the relevance of the generalizations. D. A Definition of The Shoe Machinery Market Relevant to This Case. The Government in paragraph 27(a) of its complaint charged defendant with monopolizing apparently all of the “interstate trade and commerce- in the shoe machinery industry,” and then in the following sub-paragraphs suggested that there are four appropriate sub-markets: (1) major shoe machines, except upper stitching and cement sole attaching machines; (2) cement sole attaching machines; (3) minor machines-made by United; and (4) other minor machines. If it were important, it would not be difficult to find that there were various sub-markets, each of which as a matter of fact constituted an identifiable “part of the trade or commerce among the several States” within the meaning of § 2 of the Sherman Act. But in this case it is expedient to move directly to the question whether there is a more comprehensive market including not all of. the trade in shoe machinery, but all of that trade, except dry thread sewing machinery. For the moment the exception may be disregarded, and attention focused on the propriety of broadly including in one aggregate market all other types of shoe machinery. In the previous section dealing with, characteristics of the shoe machinery industry, it was noted that some types of machines perform parallel functions, some sequential functions in relation to each other, and that some types are used only in one process, others in more than one. But regardless of. the relationship of a particular machine type to another type or to a particular process, they are in the same market, because all processes are in competition with one another. Each shoe manufacturer, regardless of what class of shoe he makes, is aiming for that part of the ultimate consumer’s dollar that is spent on footwear, - and the processes that he uses, and the machines -he selects, therefore, compete with the processes and machines which others select. Indeed, United itself repeatedly emphasizes in its requests for findings how highly competitive the shoemaking industry is in production techniques and other factors. Furthermore, United, by itself offering virtually all machine types (except dry thread sewing machines), helps to define the shoe machinery market. To define a market in terms of ’what the most important producer offers does not involve circular reasoning. For the problem of defining a market turns on discovering patterns of trade which are followed in practice. Nor is it inappropriate so to define the market as to exclude dry thread sewing machinery. Again, without any circular reasoning, this exclusion might be rested on the fact that the dominant and most experienced shoe machinery manufacturer, United, does not offer such dry thread sewing machinery, and shows in its records, its internal and external communications, and its research and other activities that such sewing machinery is apart from the broad field of other shoe machinery. But the exclusion rests also on additional bases. No major manufacturer of sewing machinery makes other types of shoe machinery; and no major manufacturer of other types of shoe machinery makes sewing machinery. Sewing machinery, unlike other shoe machinery, is used in many industries other than shoe manufacture, and its manufacture does not require detailed knowledge of the whole art of shoe making. E. Defendant’s Share of That Market. As an aid to calculating United’s share of the market, plaintiff offered records of machines in shoe factories as of certain dates. These were the Outside Machine Installation Reports (OMIR’s), Outside Machine Supplemental Reports (OMSR’s), and Outside Machine Removal Reports (OMRR’s), collectively referred to as OMR’s. Each of the OMIR’s and OMSR’s reports a particular shoe machine not made by United, and said to be in a particular shoe factory. The report is on a form with spaces for recording its date and serial number, the name and address o’f the shoe manufacturer involved, the title of the' outside machine, the name of its manufacturer, its serial number, the name of the company installing the outside machine, the date of installation, the terms upon which it was installed, the payments made by the shoe manufacturer, whethér the outside machine is in use, the shoe manufacturing function it performs, and the type of shoe upon which it is used. The OMRR’s. recite information on the removal of an outside machine, the date of its removal, whether it has been replaced by another machine or hand labor, and the reasons for its removal. There are about 76,000 OMR’s ■ in United’s files, all but 3 of which were prepared by United’s employees, usually upon the basis of what they saw, sometimes upon the basis of what they were told by the supposed users of the machines, rarely from other sources. OMR’s are prepared in quintuplícate. One copy goes to United’s Patent Department, another to its Research Division, a third to the interested operating department, and two are filed by the Miscellane-’ ous A Department. The record of this case abounds in instances where these OMR’s have been used in United’s business by the Miscellaneous A Department in preparing weekly bulletins, by United’s operating departments in preparing annual reports, by personnel in the Research Division, by the Patent Department and by others. Therefore, regardless of whether the author of a particular OMR himself observed what he reported, the OMR is admissible in evidence as an adoptive admission. United States v. United Shoe Machinery .Corp., D.C.Mass., 89 F.Supp. 349. In considering the reliability, as distinguished from the admissibility, of the OMR’s, these factors deserve mention! The OMR’s cover only the factories to which United’s representatives have access. Yet, without laboring the point, it is clear that these are factories where more than 95%, of all American shoes are made. The OMR’s are not absolutely current with respect to installations and removals of competitors’ machines; but the constant checking by United’s representatives keeps the inventory at least as up-to-date as is apt to be the case with any other industry-wide reporting system. The OMR’s do not report accurately the details in any particular shoe factory, as was evident from 45 depositions taken in 1948 — 1949; but these depositions also show that the aggregate industry picture was substantially as portrayed in the OMR’s — such discrepancies as existed being due, in part, to the fact that the sample was over-weighted in favor of factories using the cement process. Furthermore, the picture given by the OMR’s as to one very important area, that in which United competes with Compo, was proved to reflect with high accuracy the number of machines Compo had competing with United — for the testimony of Compo’s own witnesses tended to corroborate the OMR’s. Most important of all, is United’s own use of these OMR’s in connection with business decisions at the operating, patent, and research levels. They enter, albeit often indirectly, into the planning of production, the setting of terms of distribution, and a host of other business judgments. Although explicit use of OMR’s usually occurs at a subordinate level, and not by officers or the general manager, nonetheless the management makes its decisions on the basis of subordinates’ recommendations, which the latter make partly on the basis of the OMR’s. When a business allows its own important judgments constantly to be affected by a statistical survey unflaggingly made, diligently kept current, and repeatedly consulted at least by subordinate advisers to the officers, then the statistical material may be used by a court to some degree as reliable evidence against the business. For the foregoing reasons, the Court finds that, subject to minor corrections not affecting the general picture, the following tabulation, drawn from the OMR’s, approximately reflects the relation between United’s machines and competitors’ machines in American shoe factories about May 1, 1947. USMC and Other Shoe Machines Outstanding In Footwear Factories as oe About 5/1/47. USMC Machines Others Machine Types Total USMC Share of Total 16,346 1. Clicking ..................... 16,346 539 16,885 97% 2. Eyeletting ................... 2,296 545 2,841 81% 3. Cutting Press (Dinking)....... 3,319 316 3,635 91% 4. Pulling Over................. 3,145 19 3,164 99% 5. Lasting — Total ............... 12,561 796 13,357 94% Bed Lasting.................. 5,233 54 5,287 99% Hand Method Lasting......... 1,763 52 1,815 97% Heel Seat Lasting............. 1,463 3 1,466 99% Platform Cover .............. 361 332 693 52% Pre-Welt Lasting ............ '99 90 189 52% Staple Side Lasting............ 2,627 6 2,633 99% Stitchdown Lasting........... 542 259 801 68% Welt Toe Lasting............. 473 473 100% 6. Welt Sewing................. 1,470 40 1,510 97% 7. Inseam Trimming ............ 595 3 598 99% Machine Types USMC Machines Others Total USMC Share of T otal 8. Outsole Laying............... 1,029 99 1,128 91% 9. Rough Rounding ............. 1,430 31 1,461 98% 10. Outsole Stitching............. 3,537 309 3,846 92% 11. Cement Sole Attaching........ 870 1,319 2,189 40% 12. Littleway Lockstitch .......... Sole Sewing 580 58 638 91% 13. McKay Chainstitch........... Sole Sewing 498 65 563 88% 14. Loose Nailing................ 1,224 23 1,247 98% 15. Outsole Leveling .. /.......... 1,082 29 1,111 97% 16. Fibre Fastening .............. 470 470 100% 17. Heel Attaching. — Total........ 3,168 230 3,391 93% Leather & Rubber............ Heel Attaching 1,682 27 1,709 98% Wood Heel Nailing........... 814 172 986 83% Wood Heel Attaching......... 672 31 703 96% 18. Slugging..................... Other Machine Types Listed By USMC Departments 773 72 845 91% 19. Cement Shoe................. 3,415 2,130 5,525 63% 20. Cutting Die .................. 673 87 760 89% 21. Eyeletting ................... 839 839 100% 22. Fitting Room ................ 13,555 9,730 23,285 58% 23. General ..................... 19,416 7,781 27,197 71% 24. Goodyear .................... 7,722 1,077 8,799 88% 25. Heeling ..................... 3,502 695 4,197 83% 26. Lasting ...................... 3,192 438 3,630 88% 27. Littleway .................... 853 50 903 94% 28. Metallic ..................... 3,380 986 4,366 77% 29. Pulling Over................. 4,138 138 4,276 97% 30. Rubber Shoe ................. 709 769 1,478 48% Totals ......................115,787 28,374 144,141 At the Court’s suggestion, the Government took and offered in addition to the OMR’s depositions of 45 shoe manufacturers operating 55 factories. The Court arbitrarily selected from a standard directory of shoe manufacturers, the first 15 names that began with the first letter of the alphabet, the first 15 names that began with the eleventh letter of the alphabet, all 8 of the names that began with the twenty-first letter of the alphabet, and the first seven of the names that began with the twenty-second letter of the alphabet. This sample covers 3 per cent of the shoe manufacturers. The sample includes small and large factories, and concerns manufacturing shoes according to substantially the most popular shoe manufacturing processes. Probably the sample unintentionally overrepresented machines used in the cement process, somewhat under-represented those in the Goodyear welt process, and greatly under-represented those used in the stitch-down, Littleway Lockstitch, and some minor processes. But these and any other distortions discussed at this bar, would have the effect of showing United with a smaller percentage of the aggregate market than a better devised sample. And in criticising this sample, United has not suggested, much less offered, a preferable sample. If antitrust trials are to be kept manageable, samples must be used, and a sample which is in general reasonable should not be rejected in the absence of the offer of a better sample. For the foregoing reasons, the Court finds that, subject to minor corrections not affecting the general picture, the following tabulation, drawn from the depositions, approximately reflects the relation between United’s machines and competitors’ machines in American shoe factories in the summer of 1949. USMC and Other Shoe Machines Outstanding In 55 Selected Shoe Factories Machine Types USMC Machines Others Total USMC Share of Total 1. Clicking ..................... 568 10 578 98% 2. Eyeletting ................... 48 12 60 80% 3. Cutting Press ................ 47 12 59 78% 4. Pulling Over................. 89 89 100% 5. Lasting ...................... 403 17 420 96% 6. Welt Sewing................. 36 36 100% 7. Inseam Trimming ............ 15 15 100% 8. Outsole Laying............... 18 19 95% 9. Rough Rounding ............. 35 35 100% 10. Outsole Stitching............. 100 4 104 96% 11. Cement Sole Attaching........ 19 60 • 79 24% 12. Littleway Lockstitch .......... 20 2 22 91% 13. McKay Chainstitch ........... 11 2 13 85% 14. Loose Nailing ............... 20 20 100% 15. Outsole Leveling ............. 41 44 93% 16. Fibre Fastening .............. 6 6 100% 17. Heel Attaching............... 110 6 116 95% 18. Slugging .................... 18 Other Machine Types Listed By USMC Departments 11 29 62% 19. Cement Shoe................. 95 139 234 41% 20. Cutting Die .................. 19 4 23 83% 21. Eyeletting ................... 5 5 100% 22. Fitting Room................. 587 726 1,313 45% 23. General ...................... 993 312 1,305 76% 24. Goodyear .................... 191 38 229 83% 25. Heeling ..................... 104 20 124 84% 26. Lasting ...................... 105 13 118 89% 27. Littleway .................... 31 1 32 97% 28. Metallic ..................... 108 91 199 54% 29. Pulling Over................. 160 7 167 96% 30. Rubber Shoe ................. 1 1 100% Totals 4,003 1,491 5,494 To make a highly accurate computation of the share of the shoe machinery market which United 'had at the time the complaint was filed, more is needed than the OMR’s and the depositions which show only machines in position. But much of this additional material is in the record. It includes United’s own estimate in words, and in rates set, of the relative importance to the shoe industry of different machine-types; .United’s own statements as to the degree to which each machine-type is useful in each of the different processes; the periodic flow of both sold and leased machines from United; and the periodic flow of revenues from both sold and leased machines. These are sufficient for calculating the share of a market of diverse products of which some are sold, and some leased. The calculation, for example, would not need to be based exclusively upon United’s share of the value of the outstanding stock of machines; it could be estimated from United’s share of the value of current services flowing from those machines, or on some hybrid method combining stock and flow. There is no advantage in a Court discussing these or other different methods of calculation and applying them with minute care to the subsidiary facts in the record. For the evidence is all in one direction. United offered no evidence; did not suggest that some other method of sampling should be used; and does not now offer any method of calculation. This, of course, does not relieve the Government of its burden of proof. But, on the uncontradicted evidence, it is transparent that, by any measuring rod, United supplies 75% to 95% of the total current demand for shoe machinery, exclusive of dry thread sewing machinery. Different methods of weighting the various factors would produce different results; but no reasonable, qualified person would, by any rational process, reach a figure outside that range; and probably most methods would reach a figure close to the middle of it. Moreover, even though this high figure is not attained in every part of the market, nonetheless the figure may be fairly used since United supplies in every significant generic class of shoe machinery, except machinery used in the cement process, and in rubber shoe manufacturing, and of course, excepting dry thread sewing machinery, far more than 50% of the demand. In short, it is not inaccurate in this market to say United has a 75-95% share; and it probably would be accurate to say an approximately 85% share. Before turning to the several different alleged means of monopolizing, (such as post 1920 acquisitions, leases, and other business practices,) of which the Government complains, it should be noted that by far the most important means by which United originally achieved its share of the market and its market power was that set of transactions in 1899 by which it brought under one corporate control the business.of the so-called constituent companies. But these transactions have already been adjudicated in favor of United, and are not now in issue. The issues of fact now under review relate to how United's market power has been maintained and exercised since the earlier adjudication. This requires a consideration of United’s acquisitions, agreements, leases, patents, research, and other business practices. F. Acquisition of Property and Patent Rights. In its complaint the Government listed 15 examples of United “disabling actual or potential competitors by the acquisition of their assets and the employment of their key men.” [Pars. 29-51], The trial brief added 15 more. The earliest of these 30 transactions occurred in 1916 or 1917; the latest in 1938, 9 years before the Government filed this complaint. All the property and patent acquisitions taken together appear to have involved just over 3% million dollars. This total is probably less than Veth of what was expended in the same time for research. Under the Court’s prodding, the Government listed as the four most important acquisitions those involving General Shoe Machinery Company, Alexander E. Little, Beacon Folding Machine Company, and C. C. Blake, Inc. Probably it would be satisfactory to state summarily the findings on each of these four instances. But the immediately succeeding paragraphs give the first instance in some detail not only because so much testimony was addressed to it, but because the Government contended (a contention which the Court expressly rejects) that there was a covert, discreditable design not immediately apparent. (1) General Shoe Machinery Company. General Shoe Machinery Company was organized before 1916. In 1921 its shares of stock were held as follows: 575, by International Shoe Company, one of the country’s largest shoe manufacturers; 235, by General’s president; 500, by an independent attorney, Gladney; 1500, by Gladney’s client, Ferguson; 583, by others. A reason for International’s original interest was its dissatisfaction with United’s then form of lease. After the Government secured a decree against United in the Clayton Act case, 258 U.S. 451, 42 S.Ct. 363, 66 L.Ed. 708, and after United’s subsequent change in its leases, and in the face of General’s losses in every year after 1917, International was unwilling to give General further financial backing. General could not proceed without outside aid. International’s president, Rand, approached United on March 9, 1923. At that time, General’s commercial business was derived principally from its business in treeing machines, of which it leased over 100, mostly to International. But General’s inventor, Ballard, had made other inventions, including a welter, a sole layer, channeling machines, upper trimming machines, inseam trimming machines, hand tackers, and a device for creasing vamps. Moreover, from these inventions General had developed a complete line of shoe machines which was currently producing a cheap and a medium grade of welt process shoes at the Spencer, Massachusetts plant of Groat Shoe Company. United’s president, Winslow, did not commit himself in March or later in 1923 to acquire all, or substantially all General’s assets. He was mindful of the risks of being charged with an anti-trust violation. March 9, 1923, United wrote General a letter that United had information that General’s machines at the Groat factory were infringing United’s patents. In accordance with permission given by General’s representatives, United’s representatives examined the Groat factory machinery and the General patents. United’s representatives reported that Ballard’s invention was an improvement on United’s existing two types of channeling machines, and that Ballard’s application antedated United’s but that machines embodying Ballard inventions would infringe United’s patent, and that, therefore, there was a blocking situation. These representatives also reported that Ballard’s inventions in regard to upper trimming machines, inseam trimming machines, and hand tackers would constitute improvements in United’s machines. United purchased the foregoing Ballard inventions and application, any rights General had to Ballard’s future inventions, and a non-exclusive license under Erikson patent No. 1,084,259 with respect to a heel-breasting machine. United paid General $100,000 on June 8, 1923, and $300,000 more on August 11, 1923. When General disposed of these assets, it terminated Ballard’s employment but not his position as director. Ballard applied to United for employment, and received it. After these 1923 transactions, General continued its development work on its welter and its sole layer, experimented with the former in International’s factories, and installed the latter at International and two other shoe manufacturers. Its power treeing machine business virtually ceased. It sold 128 of these machines to International which had been leasing them. It sold similar machines to other lessees. It made almost no new leases of similar machines in 1926 and 1927; so that by October 31, 1927 only 32 such machines were on lease. In February 1927 Rand asked United to buy General’s assets; but Winslow, United’s president, refused to make such an agreement. In July 1927 Rand told Wins-low International was considering liquidating General and taking over what was necessary to maintain such General machines as International owned. Rand asked for Winslow’s advice, and Winslow said he did not know what help he could give but he would be glad to look over a list of General’s assets. Rand sent Winslow on July 28, 1927 a list of General’s assets, and on September 1, and again on September 20, a request for an appraisal by a United employee. December 27 Rand asked for the appraisal. ' December 31, Winslow, having seen the appraisal by United’s employee, Booth,’ wrote Rand that the Booth report would go forward but Winslow knew the figures would be disappointing to Rand as they were to him. January 31, 1928 Rand telegraphed Winslow that International was purchasing the assets and wanted United to service the machines. March 1928 International purchased for $150,000 General’s assets, except its machine tools, transmissions, small tools, furniture, fixtures, raw material, and shipping supplies. In March 23, 1928, United paid International $75,000. $35,000 was for spare parts, and the tools necessary to make additional spare parts, for General treeing machines. $40,000 was for non-exclusive licenses under General’s Ballard patents and a confirmatory license under General’s Erikson patent. These licenses covered improvements in treeing machines, inventions which later were embodied in United’s Model K welter and United’s ORL stitcher, and inventions which led to the development of two types of breasting and automatic heel compressing machines. May 1, 1928 United’s British subsidiary paid International $75,000 for assets in England which International had bought from General. On the basis of the detailed facts stated, and reasonable inferences therefrom, these are found to be the ultimate facts with respect to the acquisitions by United in 1923 and 1928 of certain assets of General. United did not initiate either transaction. United’s acquisitions were not the reason that General did not survive as an independent entity. By 1923, unless it could acquire outside capital, which was not shown to be available, General had to dispose of some, if not all, of its assets. United did not then make any commitment to acquire General’s treeing business, welters, sole layers, or miscellaneous assets, but hired Ballard and bought only those inventions useful in channeling machines, upper trimming, inseam trimming, and hand tacking machines and a non-exclusive license under the Erikson patent with respect to a heel-breasting machine. If in 1923 United -contemplated purchase of other General assets, United’s plan was indefinite, and contingent on a bargaining situation favorable to United. By 1928 when that favorable situation had developed United did plan to buy for $150,000 General’s business of supplying parts for General treeing machines, non-exclusive licenses under various General patents, and General’s British tangible assets. Though technically International was not United’s agent in acquiring those assets from General and transferring them to United, nonetheless, Booth’s role, the matched prices, and like factors justify treating the 1928 transactions as involving, for purposes of the anti-trust laws, a transfer from General to United of the business in treeing machine parts, the non-exclusive licenses, and the British tangibles. Looked at in their total aspect, the 1923 and 1928 transactions show United’s power to acquire, at times and prices convenient to it, inventions of some competitive value. But, in. appraising both United’s actual intent, and the effect of its acquisition upon the shoe machinery market, it is worth emphasizing that United proceeded in a far from exclusionary manner. In 1923 United ran the risk that General’s business in treeing machines, welters, and sole layers, might fall into the hands of potential competitors; and in 1928 United took licenses that were non-exclusive. (2) Alexander E. Little. In 1921 Little, a shoe manufacturer, and United were both working on the problem of fastening the upper to the insole by means of staples which did not extend through the insole. Little was prosecuting the Reed patents for a shoe and a method of making a shoe; and these applications were of such scope that they would have blocked the Goddu method, then being developed by United. Little, in a small machine shop, had also developed and was using a lockstitch machine and a stapling machine. Examples of these machines were also in the possession of another shoe manufacturer. United was building a lock-stitch horn machine. Little approached United. In 1924 they executed an agreement. Pursuant to that agreement, they formed the Littleway Process Company for the purpose of owning, and granting licenses under, the shoe and method patents of Little. At the same time, United acquired title to a number of applications covering improvements in the Little stapling machine and lockstitch machine. United paid Little $1 million and got 49% of Little’s stock in Littleway Process Company, and an option to buy the remaining 51% which was issued to Little. United developed and commercialized its own staple lasting and lockstitch machines, and not those of Little. A disagreement followed. In 1927 United purchased for $1.4 million Little’s stock in Littleway Process Company, and certain machinery, jigs and tools relating to machines used in carrying out the Littleway process and certain patents and applications relating to those machines and that process. The Littleway Process Company derived royalties from licenses which about equalled the price United paid for its stock. United has also received revenue from its machines used' with the process. In 1946 over 50 million pairs of shoes were staple lasted in accordance with the Littleway process, and over 10 million pairs were staple lasted by such process and lockstitched. On the basis of the above specific facts, these are the ultimate facts. This was an important acquisition. It represents approximately two-thirds of United’s total expenditure for acquisitions in the 22 year period. It covered a technologically and commercially important process from which United would have been blocked; it also covered machine types and shoe making processes which, whether or not inferior to United, were practical and which would have formed either for Little or someone else the nucleus of a significant shoe machinery business. The total effect of the transaction was to eliminate the risk of substantial competition. (3) Beacon Folding Machine Company. Beacon Folding Machine Company was formed in 1920 by the late T. C. Rowen, Sr. and others. The only machine that it ever offered commercially was a folding machine that folded French cord, or French binding, over the edge of the upper, and there secured it adhesively. It also experimented with skiving and binding machinery. United in 1921 had 3 patents applicable to folding machines, and it was working on what later became its Rapid Folding Machine, Model G. When Beacon’s folding machine came out in 1921, United informally notified Beacon of its claim that United’s 3 patents were infringed. Then in 1923 a United subsidiary sued Beacon for infringement of those patents. After the suit was brought, United’s counsel advised United that “the chances are considerably less than even that you would succeed as to any of the patents in suit.” Beacon in 1923 considered selling its business to United. At that time four interferences had been declared in the Patent Office between applications filed by United’s inventors and Beacon’s inventors. In 1924 United’s Patent Department reported that many of the 30 pending Beacon applications contained claims which, if granted,, would prevent United from marketing its. Model G Folding Machine and its Skiving Machine, Model A. Meanwhile, Rowen, Sr. became ill. Beacon met severe competition from the Rotary Machine Company; it had to abandon the leasing system and the usé of roadmen; it ceased manufacturing gears, springs, main castings, etc.; and it moved its factory to-one room. Beacon again offered to sell out to United. In 1925 Beacon granted to United a license, excluding all except the grantor, in' respect of 6 patents and 31 applications; and United granted similar licenses to Beacon in respect of 4 patents (including the-3 patents alleged to have been infringed) and 2 applications. United paid Beacon $80,000 in cash, and agreed to pay royalties, up to $75,000. These royalties turned out to be $63,900. United also agreed to buy for $25,000 all patents and applications owned at Rowen, Sr.’s death by his estate or Beacon. And the infringement suit was settled by consent. In 1926 Rowen, Jr. went to work for United. After Rowen, Sr.’s death, the son asked United to buy Beacon’s tangible assets. It did so for $11,000. Reviewing the whole Beacon situation, the Court finds that United had legitimate reasons for bringing its infringement suit. Even if United’s counsel regarded the chances of success as less than even, he thought that there was “a fighting chance”. And no patentee is to be charged with bad faith merely because he is a fighter against odds. Moreover, United had legitimate reasons for settling that infringement suit by cross-licenses and payment of cash. For, unless it secured licenses from Beacon, United might have been unable to market its Model G Folding Machine and its Model A Skiving Machine. But the acquisition of exclusive licenses (exclusive, that is, except against the grantor) cannot be so justified. Such an exclusionary acquisition, followed up by later acquisition of the patents themselves, not only had the effect, but seems to have had the purpose, of preventing competition not by Beacon to be sure, but by possible third parties. This impact on third parties is significant. The impact on Beacon is not significant. For, after Rowen’s health began to fail, after United brought its legitimate infringement suit, and after Rotary began competing severely, Beacon itself was never an important factor. Hence nothing turns on United’s engagement of Rowen, Jr. or United’s purchase for $11,000 of the few tangible assets left at Rowen, Sr.’s death. (4) C. C. Blake, Inc. In 1912 C. Chandler Blake organized G. C. Blake, Incorporated. The company tried to develop welting machinery which would be to some degree automatic. It never "got beyond the experimental stage. The original backers withdrew about 1915. A subsequent backer, Godfrey M. Hyams, before his death in 1927 advanced directly, or through a trust, more than $950,000. But by 1924 he had received a practical shoe man’s report that the Blake process was not commercially feasible. By 1926 the Blake Company ceased activities. In 1929 it dissolved and conveyed its assets to the Hyams trust, a charity. H. Le Barron Sampson, Esq., the diligent and highly competent executor of Hyam’s will and counsel for the Trust, found that the Blake process had not been successful, and that there was- no hope of making- it successful without large expenditure, and that there was no known source from which the necessary money could be obtained. He asked United to buy the patents and machines. In 1932 United paid $15,000 for 77 patents, one trade mark, and machines. Neither the patents, nor the trade mark, nor the machines had any appreciable value, except that some of the patents might be infringed by machines which United wished to put out or might subsequently develop, and some of the machines were worth displaying in United’s model room. Since all of the activities of C. C. Blake, Incorporated had ceased 6 years before the sale to United, since the assets including the patents had no significant commercial value, and, since‘there was m> discernible potential user of Blake’s developmental work, neither actual nor potential competition was affected by United’s purchase. In 1933 United hired Blake at $2500 a year for an option on any shoe machinery idea which he might have. Since Blake did not develop any valuable inventions in the 2 years he lived thereafter, this contract did not affect actual or potential competition. (5) Henne and Preo. While it is not one of the four instances regarded by. the Government as of greatest importance, the Henne and Preo transaction deserves a word. Miss.Henne was a shoe manufacturer; Preo was her.foreman. They developed, and in 1921 and 1922 offered, to United a method and machinery for attaching wood heels on turned shoes. They had made a heel seat fitting machine and a heel forming machine and ’had relevant patents and applications. While United had developed in 1913 a machine for fitting heel seats, the machine did not take care of turned seat work, and United’s efforts to improve it were blocked by the Plenne and Preo patents. Possibly, though less clearly, United’s patents blocked Henne and Preo. Instead of exchanging mutual licenses, Henne and Preo offered United its inventions, patents, and machines for $14,000 and a share in the -royalties received by United from its licensees of heel seat fitting machines. United agreed in 1923. United in 1926 acquired for $125,000 the outstanding royalty claims of. Miss Henne, she having in the meantime acquired Preo’s rights, and he having become a United employee. The effect of this acquisition of Henne and Preo’s inventions and machines, and Preo’s services, was to give United what its own counsel described as “the first * * * commercially successful set of machines for fitting the heel seats for wooden heels.” The effect of the transaction, unlike a non-exclusive license (which so far as appears was not offered by Miss Henne or discussed by United), was to exclude from this phase of the shoe machinery market actual successful competition. It also precluded' the possibility of this machine type becoming the nucleus of a machinery business competitive with United. (6) Summary of the Acquisition Phase of the Case. These 5 acquisitions, taken together with the other 25 acquisitions, not set forth in detail, do not show an extensive program of acquisitions. It has already been pointed out that they did not involve much money. Moreover, none of them involved the acquisition of a plant of a shoe machinery company. While there are some exceptions, (such as the machines for attaching wooden heels to shoes developed by Isabelle Henne and John Preo and acquired from them in 1923), generally United did not acquire commercial shoe machines of any importance. The only acquisition of outstanding technological significance was the Littleway process obtained from Little. Most, not all, of the acquisitions centered on relatively second string patents, patent applications and developments. Often these inventions and developments had been commercial failures, or were in the hands of moribund companies, or were valuable to United chiefly because they re-, moved a patent block, or enabled United to enter a new field. Yet, it must be added that these acquisitions taken in bulk, as well as the refusal by, United to acquire many important machinery and allied businesses offered to it, and listed by Mr. Winslow in his testimony, show that while United does not embrace every opportunity offered, it has such a position in the shoe machinery industry that those in this field who want to dispose of patents, shoe machinery, and the like, turn to it. Moreover, when United does purchase, its interest generally has gone beyond acquiring non-exclusive licenses enabling it to carry on its own research. United has usually acquired such inventions and developments outright. This has laid the ghost of some potential competition. In sum, the Court finds that acquisitions since 1916 have not been one of the principal factors in enabling defendant to achieve and hold its share of the market. But these acquisitions- are an evidence of market power. And there would -have been some increased competition against United if it had not had transactions with Little, Henne and Preo-, and Beacon Folding Machine Company. G. Restrictive Agreements. The Government in paragraph 52 of its complaint alleged United had “entered into agreements and understandings with various manufacturers of shoe machinery and shoe repair machinery designed to restrict, curtail, and prevent their competition in the manufacture and sale of such machinery.” The complaint listed 5 instances. They deserve only brief consideration. In paragraphs 53 through 55 of its complaint, the Government alleged an agreement with Singer Sewing Machine under which United would refrain from manufacturing and distributing upper fitting machinery, and Singer would refrain from manufacturing any other type of shoe machinery. No such agreement was proved by direct or indirect evidence. Winslow, now Chairman of United, denied that such-an. agreement existed, and the Court believes him. Paragraph 56 of the complaint is headed-“The Lamson Company”. Lamson Company developed in the early 1930’s a single rack horizontal conveyor and also- a vertical conveyor system. In 1934 United and Lamson entered into an agreement under which (in general) Lamson was to manufacture, market, and lease to the shoe trade, conveyors; United was to service the conveyors and to collect payment from lessees; United and Lamson were to divide equally costs and revenues from the 'business', except that royalties and profits on the sale of conveyor systems should be divided 60% to Lamson and 40% to United; and United should pay Lamson $220,000. The Lamson horizontal system turned out not to be satisfactory; therefore, United stopped distributing it; and now only one is in use. There is no foundation for any suggestion that United was responsible for the failure of the shoe factories to use more horizontal conveyors. The Lamson vertical system is satisfactory, and United still distributes it. United’s agreement with Lamson gave United control of the servicing of a novel conveyor system, and gave United an interest in the net revenues from the distribution of the system. The conveyor system has not been of great practical consequence, and so it has not in fact contributed in a substantial way to United’s position in, or affected competition in, the shoe machinery trade. The transaction, however, does show an example of United embracing an opportunity to establish exclusive relationships in connection with a product it did not itself develop. Paragraph 57 of the complaint relates to Tubular Rivet & Stud Company. On March 1, 1924 United became the selling agent in the United States for the Tubular Rivet & Stud Company for all its lacing hooks and studs, and, since then, it has installed and serviced Tubular’s Hook Setting Machines, which have been distributed under Tubular’s own lease agreement. So far as appears, these arrangements are at will, and do not preclude Tubular from giving any would-be competitor of United the right to sell hooks or service machines. In short, the arrangement has not excluded, and does not exclude, competition. Of course, this arrangement like any other non-exclusive distributorship, or non-exclusive system of servicing a