Full opinion text
WALLACE, District Judge. The plaintiff, Hughes Tool Company, a Delaware corporation, brings this action against the defendant, R. W. Ford, a resident of Ada, Oklahoma, to: (1) Enjoin the defendant from future infringement and to recover damages for past infringement of plaintiff’s Letters Patent No. 1,856,627, No. 1,983,316 and No. 2,333,746 relating to roller rock bits used in drilling for oil and gas. (2) Enjoin the defendant from acts of trespass upon and conversion of and to recover damages for past trespasses and conversions of plaintiff’s drill bits. (3) Enjoin the defendant from further interference with and to recover damages for past interference with the plaintiff’s lease agreements, whereby the plaintiff leases, rather than sells, the drill bits which it manufactures. The defendant admits certain acts of welding on the worn cutter teeth of bits of various series of plaintiff’s manufacturer but expressly denies that such acts constituted an infringement of lawfully issued patents. The defendant counterclaims alleging in substance that the plaintiff corporation has used its “lease” agreement as part of a plan to dominate and control the roller rock bit industry and charges that the plaintiff corporation is operating in violation of the antitrust statutes. Defendant in his counterclaim requests the Court to find the plaintiff to be in violation of the antitrust laws, to decree that the patents and the “lease” contract here involved to be unenforceable, to enjoin any future monopolistic practices by the plaintiff, and to decree an accounting for the purpose of determining the damage done to this defendant for the purpose of awarding relief in accordance with Section 4 of the Clayton Act, 15 U.S.C.A. § 15. The evidence introduced at the time of trial of these issues consisted of oral testimony, testimony given in discovery depositions, the records of testimony given in former cases introduced upon stipulation of counsel, and a large number of exhibits. I The plaintiff is the owner of Fletcher Patent No. 1,856,627, Scott and Garfield Patent No. 1,983,316, and the Scott, Garfield and Cockrum Patent No. 2,333,746 and in this action sues for past infringement. The validity of Patent No. 1,856,627 and Patent No. 1,983,316 was not attacked by the defendant. The defendant admittedly retipped partially worn down teeth of drill bits of plaintiff’s manufacture made in accordance with Patent No. 1,856,627 and Patent No. 1,-983.316. However, defendant argues that inasmuch as he merely retipped partially worn down teeth of drill bits made in accordance with Patent No. 1,856,627 and merely retipped partially worn down teeth, that were still interfitting, on drill bits made in accordance with Patent No. 1,-983.316, that such acts did not constitute an infringement of these two letters patent, but were only permissible repair. Such a contention is foreclosed by the ruling in the first Williams case which involved retipping in regard to these same two patents. In his opinion Chief Judge Phillips said: “Williams, by his process of retipping, undertakes to restore the worn-out teeth as nearly as possible to their original form, size, and position. He thus reconstructs and replaces that element of each patent wherein lies the novel features of the combination. We hold that so doing is not permissible repair, but reconstruction, constituting infringement. This conclusion finds support in Hughes Tool Co. v. Owen, 5 Cir., 123 F.2d 950, in Southwestern Tool Co. v. Hughes Tool Co., 10 Cir., 98 F.2d 42, 45; American Cotton Tie Co. v. Simmons, 106 U.S. 89, 1 S.Ct. 52, 27 L.Ed. 79, and Hughes Tool Co. v. United Machine Company, D.C.N.D.Tex., 35 F.Supp 879.” Thus, any such acts of retipping by the defendant prior to the expiration dates of these patents constituted an infringement. The defendant vigorously contests the validity of “Patent No. 3” in suit, the Scott et al. Patent No. 2,333,746, referred to as the “interrupted heel tooth patent.” The plaintiff alleges infringement of claims 1 and 4. Claim 1 provides: “In a well drill, a tapered cutter rotably mounted thereon, said cutter having a row of heel teeth circumferentially thereof to cut the outer portion of the well bottom, some of the teeth in said row having a portion pro-j ecting from the cutter surface a shorter height than the others, thus providing on said shorter teeth an open area normally out of contact with the well bottom so as to allow cleaning of the cutter by the flushing fluid, and a gage cutting surface on the outer ends of all said teeth to engage the wall of the well.” Claim 4 provides: “In a well drill, an inwardly tapering cutter having a row of teeth circumferentially around the same, the outer ends of which are positioned to cut the side wall of the hole, there being crests on said teeth positioned to engage the bottom of the well, the crests on some of said teeth being comparatively short and extending from the inner ends of said teeth approximately one-half of the length of the tooth, there being formation receiving spaces at the outer ends of said short crested teeth some of said teeth being spaced more closely together in the row to throw the teeth out of step on bottom.” Counsel for plaintiff in making a preliminary statement regarding the object of this patent said: “Also Hughes Tool Company wanted to increase the speed in those formations [sticky formations], clean them better, and then they did what was really, well really it was a crazy sort of thing, having new teeth on the cutter, going to the trouble of making the invention, in order to accomplish it they then cut them off, or part of them. The witness can give more explanation of it, but in the heel row now, they take, in this illustration, it’s every alternative two and they cut away the outer end of that tooth crest. See, the way that’s cut away as shown here on this bit, so they cut away alternative ends of the teeth in the heel row. The patent points out that there can be variations as how that is done. “Well now, what was the result? Certainly no one had ever thought of doing it before. Actually, just cutting away part of those two crests, they got a very material increase in speed in these formations, the drilling was faster. Another curious thing in instances they would stay in the hole-longer, actually have less teeth, they’d get more footage out of it, and while this is not as pronounced, perhaps, as the increase in speed in those formations, there was a very pronounced increase in speed.” An aim of the patented invention is to generally preserve the spacing of such rock teeth and the traction for the cutters which such teeth provide, and to improve the penetration and resulting drilling speed. The advantage in reducing tooth contact is that with a given weight upon the bit the unit loading upon each tooth is thereby increased; and this results in a more effective fracture of the well bottom. As stated in the patent application: “We also aim to provide greater amount of space on the cutter in which the material displaced by the cutter teeth may move and thus be better carried away by the flushing fluid and by so doing avoid clogging of the cutter by the formation being di-illed.” Although the plaintiff has submitted a considerable amount of evidence tending to prove the marked superiority of the bits employing the “interrupted heel teeth” the Court is of the opinion that this improvement does not rise to the dignity of invention. Unquestionably, this alteration in the structure of the “heel teeth” has resulted in a better drilling bit; however, every improvement upon a known process or invention does not necessarily smack of the genius of invention. As said in Great A. & P. Tea Co. v. Supermarket Equipment Corp: “The function of a patent is to add to the sum of useful knowledge. Patents cannot be sustained when, on the contrary, their effect is to- subtract from former resources freely available to skilled artisans. A patent for a combination which only unites old elements with no change in their respective functions, such as is presented here, obviously withdraws what already is known into the field of its monopoly and diminishes the resources available to skillful men. * * * ” This same principle was recognized and applied by Judge Pickett in Kobe, Inc. v. Demsey Pump Co. when he said: “ * * * The arrangement control valve in the piston assembly is new but we agree with the trial court that this is nothing more than the application of mechanical skill and is not an invention. It required no greater skill or higher thought than that which would be expected of a mechanic trained and skilled in the art. The old and well known elements of the prior art perform the same mechanical functions in these claims as they have been known to perform in the prior art and they produce the same result and cannot be considered an invention. The changes made in this device would readily occur to one skilled and acquainted with the already crowded art. * * * “The language used by this court in Shaffer v. Armer, 10 Cir., 184 F.2d 303, 307, is particularly applicable where it was said: ‘ “The design of the patent laws is to reward those who make some substantial discovery or invention, which adds to our knowledge and makes a step in advance in the ttseful arts.” Atlantic Works v. Brady, 107 U.S. 192, 200, 2 S.Ct. 225, 231, 27 L.Ed. 438. The device must not only be “new and useful,” it must also amount to “invention or discovery,” Thompson v. Boisselier, 114 U.S. 1, 11, 5 S.Ct. 1042, 1047, 29 L.Ed. 76; and “perfection of worknwnship, however much it may increase the convenience, extend the use, or diminish expense, is not patentable.” Reckendorfer v. Faber, 92 U.S. 347, 356-357, 23 L.Ed. 719. * * ” (Emphasis supplied.) L. L. Payne, assistant vice-president of engineering for plaintiff corporation, was the plaintiff’s chief witness to support the validity of “Patent No. 3”. He is a very intelligent and well qualified engineer who made a most capable witness. However, apart from the many technical niceties and scholarly scientific expressions it is apparent that the vital principle of this improvement is the spacing the heel teeth farther apart, to reduce the amount of “sticking up” in the softer drilling formations, and a reducing in the size of the teeth at point of contact so as to obtain concentration of weight' and pressure at the point where the tooth rests upon the bottom of the hole. In “Patent No. 3”, the plaintiff deletes the opposite end of each successive wide heel tooth to gain this effect; in substance this is the same as simply staggering two rows of narrow heel teeth, although structurally, doubtless, the deleting method enjoys some advantage. The fact that the teeth should in effect be “staggered” or irregularly arranged to avoid tracking in the rock teeth formation on the well bottom was recognized in “Patent No. 1” in suit. In sustaining the validity of that patent, in the first Williams case, supra, Chief Judge Phillips said: “The teeth, being of approximately equal size, have substantially equal penetration and wearing life. This increases the effectiveness and the useful life of the cutters. The staggered arrangement of the teeth eliminates the tendency of the rows of teeth to track and to 'bounce from one row to the other as the cutter revolves, and effects uniform cutting of the entire bottom of the hole. * * * ” At the time the patent under consideration was being worked upon it was well known that a reduction in the area of the tooth crests touching the bottom of the well hole would increase cutting speed and permit better cleaning. Mr. Payne, upon cross-examination, testified as follows: “Q. Didn’t your organization learn at that time, and as a result of the Fletcher development, if you reduce the number of teeth on the bottom at one time, you would get better penetration with less weight down the hole drilled? A. Yes, we recognized if you had less tooth contact you would get more effective penetration into the formation under a given loading. “Q. So at that time, which was long before the time of this present patent, your research department knew the way to get better penetration was to reduce the tooth contact on bottom? A. It recognized that you could get more effective penetration, but there were other things that confronted them at the time that did not permit them to. utilize such a structure, reducing the tooth contact of that drastically, and it has been done in this structure. “Q. But they did reduce them quite drastically in the Scott and Wellensiek patent in the other suit? A. That is correct.” Also, in the first Williams case, supra,. Judge Phillips in recognizing the validity-of “Patent No. 1” in suit said: “ * * * It also results in the weight of the drill being 'brought to bear upon a lesser number of teeth as the rotation of the cutter brings the teeth in contact with the formation, thereby increasing their penetration and effectiveness. * * * ” The improvement attained in “staggering” the heel teeth of the bit is such an improvement as any skilled artisan with a knowledge of the state of the art in question might be expected to make. Such an improvement is not discovery. II We now come to the counterclaim of the defendant which charges the plaintiff corporation with operating its roller rock bit business in violation of the antitrust statutes. Section 1 of the Sherman Act declares contracts, combinations or conspiracies in restraint of interstate trade or commerce to be illegal. Section 2 of the Sherman Act condemns monopoly itself together with any attempt to monopolize “any part of the trade or commerce”. Section 3 of the Clayton Act makes it unlawful to contract for distribution of commodities in interstate commerce, whether patented or unpatented, where the effect of such “agreement, or understanding may be to substantially lessen competition or tend to create a monopoly in any line of commerce.” Section 4 of the Clayton Act provides that any person injured in his business or property by acts prohibited by any of the antitrust laws may sue for recovery of treble the amount of such damage. Counsel for plaintiff insist that this counterclaim merely raises again issues of law and fact which have previously been tried and determined; they emphatically argue that the second Williams case recently considered by the Court of Appeals of this district, conclusively -determines all the issues involved herein. Obviously, if such be true, this case would and should be disposed of summarily without a reopening or prolonged considering by this Court of such settled issues. However, a careful comparison of the evidence in the Williams case, supra, with the evidence in the instant case unmistakably indicates that there is very little if any parallel in the kind, scope and general character of the evidence adduced although concededly almost identical legal questions are raised by the pleadings. The Roller Rock Bit Industry The industry which the defendant charges the plaintiff with dominating contrary to the antitrust laws is the roller rock bit industry. The most common method of drilling oil and gas wells is by rotating a string of pipe with a cutting tool on the lower end of the pipe known as a bit; liquid, known as drilling mud, is forced through the drill pipe to wash the cuttings from the tool, lubricate the tool and bring the cuttings to the surface of the earth. A great industry has developed in the past fifty years in the manufacture and distribution of drill bits which have rolling or rotating cutters; no other type of drill bits competes directly with roller rock bits and the commerce therein constitutes a distinct and separate industry. Neither cable tools or other ordinary types of rotary drill bits can be considered in direct competition with the roller rock bits. The peculiar and distinct advantage and useability of the roller cone rock bit is aptly illustrated by an advertisement published by Sharp-Hughes Tool Company, the plaintiff’s legal predecessor, early in the development of the roller rock bit industry. “Cable tools make holes by slowly pounding the formation. There are only three types of ordinary rotary bits, i. e., the Fish-tail, Diamond Point and the Rotary Shoe. Each drag or scrape their way through the formation, consequently as soon as the keen edge is worn such bits lose 80% of their cutting power. The cutting edges of the S-H Bit roll in a true circle and do not slip or drag, but crush the bottom of the hole into fine grains which are washed to the surface in the circulating water. The crushing operation preserves the edges of the Cone teeth, and enables the Cones to cut an enormous amount of hole. (See page 8.) “The keen edge of any style of scrape bit is worn off almost instantly when rubbed on hard sand rock. The fish-tail, rotary-shoe, diamond point or inserted blade is of the scrape bit type. The principle of the Cone bit is entirely different. The edges, or the Cone points, roll in a true circle like a cone bearing, and crumble or chip away the rock. The edges give way very slowly. Frequently our bit will drill fifty feet, where a scrape bit will not drill six inches, and frequently rock formation is struck in which the fishtail or inserted blade will not make 2 inches a day. It is therefore more economical in the end to get the S-H Bit to finish the well. Our bit will drill holes right through an emery wheel at the rate of a foot and a half per hour, with but slight wear. A fishtail or inserted blade would ¡be unable to drill an emery wheel composition at all. “The scrape type of bit running on rock is responsible for many of the fishing jobs, directly caused by crystalized pipe." Similarly, it is obvious from the plaintiff’s “competitive activity reports”, beyond question the most accurate and complete compilation of its kind, that the roller rock bits form a competitive market all of their own. The testimony of various drilling contractors in the Midcontinent area, a rotary drilling area, clearly indicates that although any tool that is capable of making a hole in the ground theoretically may be considered competitive that in reality only roller rock bits are used. J. W. Garr, drilling contractor in Oklahoma and Texas, with headquarters at Oklahoma City, testified: “Q. Do you run drag bits now? A. No, sir. “Q. How long has it been since you have run one? A. Well, we used to use them under surface holes sometimes, ’but we haven’t run any under suface (sic) pipe for a long time. “Q. For ten or twelve years? A. I would say that long anyhow. “Q. But when you did run drag bits, sometimes you might run a drag bit and sometimes a roller cutter bit. Is that right? A. Yes, sir. ****** “Q. Have you ever used a diamond bit? A. No, sir. “Q. Do you know they are used? A. Yes, sir. “Q. You know there are a lot of oil and gas wells drilled by cable tools? A. I used to own cable tools and operate them. “Q. Did you run them here in Oklahoma? A. Yes, sir. ****** “Q. (By Judge Wallace.) Mr. Garr, in regard to cable tools, how much cable tool drilling is there now comparatively? A. Very little. They used cable tools quite a lot to drill wells in, after the rotary is run and set the cement; maybe around Bartlesville and around Okmulgee and a few places like that, they use cable tools, but all your deeper holes are rotary. “Q. Counties like Grady and Carter? A. Yes, sir. “Q. (By Mr. Davis.) These cable tools, fish tail bits, diamond bits, are they at all similar to roller cone or roller bits? A. Well, cable tool bits have a walking beam or studder and on the end of a drilling line to a hole, a string of balls, possibly wouldn’t be over 55 or 60 feet long and work off along. They rotate principally by drill pipe. “Q. Do you consider them something of the same sort as far as digging a hole is concerned? A. A rotary is entirely a different proposition from cable tools. “Q. And the diamond bit, it could be used in a rotary? A. Used altogether in a rotary. “Q. But the manner in which it cuts, is it similar to a roller cone bit? A. No, sir. ****** “Q. (By Mr. Haight.) Then if you are drilling with a rotary rig, depending upon the formation, you then have a choice of a drag bit, a disc bit, a roller cutter bit, a diamond bit, and a diamond core bit. Is that correct? A. Yes, sir. * * * * * * “Q. (By Mr. McKnight.) Mr. Haight asked you if in the rotary method of drilling you did have a choice of five or six bits. That is, the diamond bit, the fish tail bit, the drag bit, cable bit, and so on. Have you ever made any choice other than a roller cone bit to any appreciable extent? A. No, sir.” J. J. Miller, drilling contractor, testified : “Q. Are there any other types of bits, drilling tools of any kind, that you would consider competitive with a roller rock bit, in other words is there anything else that you can do the same job with in a practical way? A. Other than that type of bit ? “Q. That’s right. A. None that I know of.” Section 2 of the Sherman Act prohibits the monopolization of “any part” of trade or commerce; this has been defined by the Supreme Court to “have both a geographical and distributive significance and apply to any part of the United States as distinguished from the whole and to any part of the classes of things forming a part of interstate commerce.” As mentioned in the Kobe case, supra, “To constitute a violation of the Act the monopolistic practices need not extend to an entire industry. The statute prohibits the monopolization of ‘any part of the trade or commerce’ ”. In order to have a violation of the antitrust statutes it is not essential that the article or commodity involved be completely free from alternatives or substitutes, inasmuch as almost every article has competition in some degree from other available articles. No one would question the legal impropriety of a single automotive manufacturer dominating the sale and distribution of all automobiles, even though the purchasing public could always substitute the horse drawn wagon or buggy in the event the prices of automobiles were raised to exhorbitant figures. Outstanding examples on this point are found in the following antitrust cases: (1) American Tobacco Co. v. United States, where the defendant companies were found guilty of monopolizing the cigarette market. Naturally, there were many other forms of tobacco available to the tobacco users in the form of cigars, pipes, etc. (2) United States v. United States Gypsum Co., where a specific type and kind of plaster board was involved. Other alternatives and substitutes of wall board and plastered lath were available to the public. (3) United States v. Line Material Co., which had to do with a single type drop-out electric fuse. Many types of automatic circuit breakers as well as other types of drop-out fuses were readily available. (4) Morton Salt Co. v. G. S. Suppiger Co., where salt tablets were involved. Obviously, salt in granular form could be substituted. (5) United States v. Aluminum Co. (Alcoa) which dealt with the aluminum market. Certain competition to aluminum was offered by copper, bronze and other light alloys. Judge L. Hand indelibly drew the guiding line when he said: “There are indeed limits to his [the monopolist’s] power; substitutes are available for almost all commodities, and to raise the price enough is to evoke them. * * * But these limitations, also exist when a single producer occupies the whole market; even then, his hold will depend upon his moderation in exerting his immediate power.” (6) Oxford Varnish Corporation v. Ault & Wiborg Corporation, where a graining paste used in finishing wood to achieve a grained effect was in view. Of course, this paste was in competition with many varieties of paint and varnish, but it was held to be a definable subdivision of the varnish industry and thus capable of being unlawfully dominated. (7) United States v. Klearflax Linen Looms, which dealt with linen rugs. It is noteworthy that the sales of linen rugs constituted only about one-half of one per cent of the total sale of rugs in the United States; however, due to the special characteristics and properties of the linen rugs which rendered them desirable for particular purposes, they were adjudged a separate article of commerce or trade. (8) Kobe, Inc., v. Dempsey Pump Co., which involved hydraulic pumps used in connection with removing oil from wells. Judge Pickett enunciated a principle in his opinion which is peculiarly applicable here,, when he said: “First they say [the plaintiff] that they did not have the power to create a monopoly because their pump was in active competition with other types of pumps used for the same purpose. The record illustrates that there are in use a number of methods of lifting oil from wells. The sucker or rod pump, the electric pump and the gas lift method are those most commonly used. To some extent Kobe was in competition with the manufacturers of these types of pumps. Particularly in shallow wells, all the pumps may be used under identical conditions, but each method had advantages over the other under different •conditions. It is agreed, however, and the court so found, that the hydraulic pump is particularly adapted for deep wells and in wells where the hole has not been drilled exactly perpendicular. The use of the rod type pump and the ■electrical pump becomes impractical at ■some of the extreme depths to which wells are now drilled.” By using this statement as a pattern, it could forcibly be argued that the roller cone rock bit makes up a definable and separate part of the trade or commerce as distinguished from the cross-roller rock bit. The roller cone rock bit is used almost exclusively at the greater depths where the harder formations are' encountered, although some true competition is given by the cross-roller bit at the more shallow •depths. Mr. Scott, director of research for plaintiff, in comparing the roller cone bit with the cross-roller bit made the following differentiation : “A. Well, when you compare the cone type with the cross roller bit, you get a longer run, there is less tendency of the bit to go flat while running in various formations. It cleans itself better.” Other evidence implies that the roller cone and cross-roller bits are not literally competitive. Mr. Montrose, vice-president in charge of sales for plaintiff, testified: “Q. Do you consider the Reed Roller Bit strick competition with Hughes? A. No. “Q. Are you familiar with the construction and operation of what is commonly called the cross roller bit of the Reed Company? A. Only generally. “Q. It is quite a different construction — A. Yes. “Q. — isn’t it, from the Hughes rock cone bit that is commonly manufactured by the Hughes Tool Company? A. Yes. “Q. In fact, in most instances, it is not very competitive with the Hughes rock bits, is it? A. In most areas, generally speaking, we don’t think it is competitive.” (Emphasis supplied.) For many formations cross-roller rock bits are not considered satisfactory by the great majority of drillers. Mr. Miller testified: “Q. How about as between roller cone bits and cross roller bits such as Reed makes, would you consider those two as competitive? A. In certain formations, yes. “Q. Are they competitive in all formations? A. No, not in my opinion they aren’t. “Q. Can you distinguish for us the places where they would be competitive with either one, could be used competitively and places where they can’t be used in competition? (sic) * * * * * * "A. Well, soft formations or in some types of sand, shale, they are competitive, but in real hard formations they are not in my estimation.” However, Mr. Trigg testified: “Q. Why do you use the Hughes Bits? A. Well, we think they are the best bits, in most instances. In some places, they are not, I will say that, I think maybe in Stephens County where it is crooked hole country, we call it, there it is hard to keep the hole straight, we will use Globe or Smith which has a flat bottom bit, but just in normal drilling we will use a lot more Hughes bits then we do any other bits.” (Emphasis supplied.) At this time the Court believes that the roller cone and cross-roller rock bits are sufficiently interchangeable to be considered competitive and thus fall within the same “part” of trade or commerce. However, beyond controversy roller rock bits because of their design and function make up a distinct and definable “part” of commerce. Ill The Plaintiff’s Position In The Roller Rock Bit Industry The roller rock bit industry, composed principally of two types of bits, the roller-cone and cross-roller, had its start shortly after 1900. In the early 1920’s the business custom of replacing worn ' cutter cones, worn cutter rollers, and worn bearings was an established rule; at that time it was a common practice to re-cut worn roller cones or roller cutters to provide new teeth on them In the early 1930’s it became an established business practice to weld in many instances new teeth upon the cutter cones and rollers. These repaired bits constituted an important part of the competition for business in this industry at that time. Throughout the years, and at the present time, the plaintiff’s closest competitor in the sale of new bits has been the Reed Roller Bit Company. This rivalry began in about 1915 when Clarence E. Reed, a former employee of the Sharp-Hughes Tool Company, the legal predecessor of plaintiff, began the business that eventually, in about 1919 or 1920, became the Reed Roller Bit Company. Competition between these two companies was very keen up through the early 1930’s, with Reed at times outselling the plaintiff. As mentioned, up until the early 1930’s, the bits sold by both the plaintiff and Reed were constructed in such a manner that they could be disassembled and repaired with the teeth on the cutter cones or roller cutters re-cut or sharpened. Although, new bits were leased or sold by the plaintiff, at the buyer’s option, between about 1913 to 1915, from 1915 until the early 1930’s the plaintiff’s bits were sold outright; during all of this time these bits were repaired, being furnished with new or re-cut cones by the plaintiff or other companies in the repair business. In the early 1930’s the general economic and competitive conditions became very severe; for several years the plaintiff operated at a loss, and for a time lowered prices to the point that new cones were sold at the market price of re-cut ones. In about 1933 both the plaintiff and Reed altered their bit designs and produced bits that were no longer adapted for disassembly. These bits were known as “unitized” bits. The plaintiff continued to manufacture “cone” bits and Reed continued to manufacture “cross-roller” bits, thus retaining the fundamental difference in design which had existed between the products of these two competitors from the outset- At the time the unitized bit came into prominence, the plaintiff started the practice of distributing drill bits under a “lease” agreement rather than selling them outright. The lease agreement appears on the delivery ticket which is signed by the “lessee” when the bits are delivered at the rig; this agreement provides: “Hughes roller rock bits and all core bit heads are never sold but are leased. When the original cutter teeth and/or bearing have served their useful life, the user will surrender the ■bits to Hughes Tool Company upon request. In accepting delivery, the user agrees not to surrender any of the tools mentioned above to other than duly authorized representatives of the Hughes Tool Company.” The evidence in this case establishes beyond question that since about 1936 the plaintiff has utterly domineered this industry. At such time the Reed Roller Bit Company, the plaintiff’s only major new bit manufacturer competitor, began to follow exactly the prices set by this plaintiff on all sizes of roller rock bits. The 7th Edition of the Oil Weekly published in 1936 indicates that on August 1, 1935, Reed changed the price of its rock bits in every comparable size of bit to correspond precisely with the prices charged ,by plaintiff. This identical price setting becomes even more significant when it is recalled that the bits produced by the plaintiff and by Reed are fundamentally different in design and construction. At about this same time the remaining new -bit manufacturers, a small minority, began to follow the prices set by the plaintiff. This complete price control has continued up until the present time; the plaintiff has raised its prices at irregular intervals between 1936 and the present; Reed has consistently followed the plaintiff within twenty-four hours; and, the remaining minority manufacturers have followed within several weeks. A brief summary of the price changes in this industry reveals : (1) that in 1936 there existed an exact agreement between plaintiff’s and Reed’s prices throughout the various range in sizes of bits. (2) that the next change in prices occurred when the plaintiff raised its prices on January 7, 1947; Reed followed on January 8th; H. C. Smith Tool Company followed on January 15th; Chicago Pneumatic Tool Company followed on February 1st. (3) that the next change in prices took place on July 24, 1948, when the plaintiff increased its prices; Reed followed on July 25th; Smith followed on August 1st; the other manufacturers followed soon thereafter. (4) that the next price increase in this industry occurred on December 1, 1950, when the plaintiff and Reed both changed prices on the same day; the other manufacturers followed at once. In this connection another factor strikes the Court with great force. The testimony is uncontradicted that a considerable amount of time and effort must be put forth before a price change can be effected; it is impossible to immediately bring about a change without painstaking research and preparation; the evidence further shows that the information regarding the date and amount of the price changes are carefully guarded and that the plaintiff changes its prices suddenly and without notice to the public ; the obvious purpose for being secretive is to prevent a rush by the bit purchasers to lay in store bits at the lower prices. However, an anomaly appears when an attempt is made to reconcile the above facts with the further fact that Reed, in spite of such secrecy, is able to change its prices to correspond with the plaintiff’s prices within twenty-four hours from the time the plaintiff’s changes are made public information. Mr. Hamaker, vice-president in charge of sales for Reed, testifying by deposition, confirmed the fact that a great deal of time and effort of necessity must go into the preparation leading up to a price change, but went on to admit that the price which the plaintiff sets actually determines Reed’s1 prices. This pointedly illustrates the absolute dominance enjoyed by the plaintiff in regard to the fixing of prices in this industry. The unlawfulness of being in a position of price control is capably described by Judge L. Hand in his opinion in the Aluminum Co. case: “ * * * Starting, however, with the authoritative premise that all contracts fixing prices are unconditionally prohibited, the only possible difference between them and a monopoly is that while a monopoly necessarily involves an equal, or even greater, power to fix' prices, its mere existence might be thought not to constitute an exercise of that power. That distinction is nevertheless purely formal; it would be valid only so long as the monopoly remained wholly inert; it woulcl disappear as soon as the monopoly .began to operate; for, when it did — that is, as soon as it began to sell at all — it must sell at some price and the only price at which it could sell is a price which it itself fixed. Thereafter the power and its exercise must needs coalesce. Indeed it would be absurd to condemn such contracts unconditionally, and not to extend the condemnation to monopolies; for the contracts are only steps toward that entire control which monopoly confers : they are really partial monopolies.” Thus, it is the power to control prices which the law forbids, regardless of whether such power is used to realize excessive profits. The plaintiff unmistakably has such power. The additional feature which makes the plaintiff’s conduct even more reprehensible is that by these controlled price raises the plaintiff has increased its profits almost steadily from very little if any profit in the early 1930’s to over 53% net profit of gross sales in 1951; thus, a net profit before taxes of over 53% was realized by the plaintiff on each bit sold in 1951. The actions of plaintiff and of Reed which have occurred repeatedly inescapably indicate that the plaintiff and Reed have a concerted scheme to fix prices on their bits; and, that in reality there is no true price competition between them; the inevitable result of the plaintiff’s complete dominance is that from a business viewpoint Reed may have no other practical alternative. From the introduced evidence this Court holds a steadfast conviction that the plaintiff in fact has no other true price competition than that which arises from retipped bits; at this time quantities of dull bits and retipped bits are in interstate competition with new bits and continue to move in a somewhat restrained market at prices far below those of new bits. That the plaintiff undeniedly is in a monopolistic position in the roller rock bit industry and that “retipped” bits offer the last vestige of price competition, is further verified by the plaintiff’s own records deal-mg with the competitive picture of the industry from 1940 through 1950; although, admittedly such summaries are not, and could not be, absolutely complete, they are the most accurate and most dependable data in existence to establish this fact. The following is a recapitulation of such records : New Bits Retipped Hughes Others Total Year Hughes Reed Others 10,877 1,682 176,901 1940 129,458 27,137 7,747 6.0% 0.9% — 73.3% 14.1% 4.0% 17,667 2,104 1941 149,378 30,070 10,160 8.14% 1.0% — 14.3% 4.8% 11,698 1,589 140,118 1942 98,110 23,678 5,043 8.3% 1.0% — 70.0% 16.8% 3.5% 15,495 1,580 1943 135,305 16,814 7,669 8.7% • 0.8% — 76.5% 9.5% 4.3% 23,612 2,160 262,230 29,976 10,729 9.0% 0.8% — 12.0% 4.0% 22,945 1,852 273,875 1945 200,059 34,933 14,086 8.3% 0.6% — 73.0% 12.7% 5.1% 28,479 1,886 294,322 1946 214,594 29,420 19,940 9.6% 0.6% — 6.7% 28,144 2,975 367,272 1947 267,930 36,769 31,454 7.9% 0.8% — 72.9% 10.0% 8.5% 34,576 4,495 445,562 1948 334,333 33,014 39,144 7.7% 1.0% — 75.0% 7.4% 8.7% 43,854 7,283 480,313 1949 349,763 33,110 46,303 — % 72.8% 6.8%. 50,756 5,968 569,721 1950 430,220 40,525 42,252 8.9% 1.05% — 75.5% 7.1% 7.41% Thus, in 1940 out of approximately 177,-000 bits used, the plaintiff sold about 129,-500 of them or 73.3%; this supremacy has continued up through 1950 wherein out of about 570,000 bits used, the plaintiff sold over 430,000 of them. From this résumé it also appears that in 1950 plaintiff’s re-tipped bits used amounted to over 10,000 more than the total number of new bits sold by Reed, the plaintiff’s largest new bit competitor; it is manifest that such re-tipped bits, although not large in amount percentagewise, which sell for about $40 each, constitute the last true price competition confronting the plaintiff’s new bits, the most popular size of which sells for about $160. Although, counsel for plaintiff has somewhat questioned the fact that “retipped” bits are literally in competition with new bits in the roller rock bit industry, the Court cannot take such a contention too seriously. Mr. Montrose, vice-president in charge of sales for plaintiff, disclosed that from' a selling standpoint the retipped bits were strictly competitive. Also, one of the most probative pieces of evidence establishing that retipped bits are competitive comes from the plaintiff’s own records, which in effect amounts to an admission ; for ten years the plaintiff kept an accurate count of all retipped bits used, along with new bits used, and headed up such compilations “Competitive Activity Report Summaries.” From the general competitive viewpoint not only has the plaintiff’s hold on the bit market from the standpoint of number of bits sold percentagewise gradually increased, but as shown by the figures previously referred to the number of bits used yearly during the ten year period between 1940 and 1950 has increased over threefold. This is all the more startling when it is realized that the plaintiff’s profit per bit increased from 30.8% to 53.1% of the individual bit selling price during the very time of this tremendous increase in volume of business. The Court is an enthusiastic adherent of our American philosophy of free-enterprise ; and, has absolutely no sympathy for that minority which take the position that the capital investor should not receive a fair recompense for his financial investment and for the application of his personal ingenuity. Our economy is bottomed upon the sturdy conviction that the aggressive entrepreneur deserves liberal compensation where his rugged individualism has resulted in raising our standard of living or in creating a new commercial demand. The Court has no disposition to discourage the very heart-beat of our way of life by approaching the question of permissible profit in a miserly fashion. However, by any norm used, the exorbitant profit realized by the plaintiff corporation, can in no way be justified. The Court seriously questions whether any person, associated with or removed from the plaintiff company, can in the utmost of good faith urge that such excessive profit is the plaintiff’s logical reward for having given a fine product to the oil and gas industry. Such a stand makes sheer mockery out of the true goal and purpose of our capitalistic system, — the perpetuation of “free competition”. IV The Lease Agreement The plaintiff’s absolute domination of the roller rock bit industry has been achieved and maintained by intensive engineering research, an aggressive patent policy coupled with wide-spread patent litigation, an abusive use of the “lease” agreement, an invasive sales policy and an embracing of each opportunity for expansion with such readiness as to discourage competition. Of the means just enumerated the zealous and abusive use of the “lease” agreement has been one of the most effective. This “leasing” by the plaintiff has a twofold obj ect and result. (1) It enables the plaintiff to make certain that the majority of such bits are never repaired and used again in competition with the plaintiff’s new bits. (2) It permits the plaintiff’s field organization to pick up the used bits of plaintiff’s manufacture, examine them, and return some to plaintiff’s laboratory in Houston for further examination, including physical, metallurgical and chemical analyses. The Court has not ignored or by this opinion attempted to ride roughshod over the many previous decisions which have held the “lease” agreement to be a lawful and legitimate business device. The “lease” agreement was held to be valid in Robertson Rock Bit Co. v. Hughes Tool Co. in which the Court said: “As to the leasing agreements and the practices of recovering used bits under them, the district court properly held them valid.” In Williams v. Hughes Tool Company Chief Judge Phillips in his well-reasoned opinion said: “The reasons which motivated Hughes in leasing, rather than selling its bits, and in requiring the return thereof for inspection, testing and research are obviously to enable Hughes to improve the quality of its bits, to provide the proper bit for drilling in particular formations or in a particular area, to provide valuable information to drillers who use the Hughes bits, to maintain the high standard of its products and protect their reputation. Failures of retipped bits would tend to injure the reputation of Hughes’ bits. The lease agreement and the practice of recovering used bits, as stated by the Fifth Circuit in Robertson Rock Bit Co. v. Hughes Tool Co., supra, is practical, reasonable and fair.” In the second Williams case Judge Bratton went on to say: “Williams presents only one specification of points for reversal of the challenged order. Its substance is that since the patents have expired there is no justification for continuing the injunctions restraining Williams from interfering with the -property rights of Hughes in its leased bits by retipping or rebuilding the teeth thereon. * * * It is admitted frankly in the brief of Williams that if these two features of the injunction had been completely separate and independent holdings, the expiration of the patents would not affect the feature relating to interference with the property rights of Hughes in its leased bits by retipping and rebuilding teeth thereon. But the two features of the injunction were separate and independent. The equitable right of Hughes to protection against infringement of its patents was quite separate and apart from its system of leasing its bits rather than selling them. Hughes was entitled to restrain infringement of its patents whether the bits had been leased or sold. And if the practice of Williams in receiving from lessees . bits manufactured by Hughes, retipping them, and building new teeth thereon, constituted systematic encouragement to lessees to breach valid and effective provisions in the leasing agreements, Hughes was entitled in equity to restrain such wrongful conduct without .regard to whether the bits were manufactured under patents or not. The two rights were separate and distinct. Neither was dependent upon the other. Neither was an adjunct of the other. íjí >{< Jjí » These decisions establish beyond controversy that the “lease” agreement in and of itself is not illegal but may be a perfectly proper means of maintaining control over a manufactured article where the owner does not wish to sell outright. Also, these previous holdings find in effect that from the evidence introduced at the various trials there was no convincing evidence that the Hughes Tool Company was operating in violation of the 'antitrust laws. Not only is this Court bound by these decisions of the Court of Appeals of this District, but in fact has no criticism to make of the results reached therein. However, the Courts previously have not had the benefit of the evidence placed before this Court, in the instant case, resulting in proof of the complete dominance enjoyed by the plaintiff in the roller rock bit industry. It is elementary that a lawful instrument, such as the lease agreement has heretofore been found to be, cannot be used to realize an unlawful end, such as a-violation of the antitrust laws. As pointed out by Justice Burton in the American Tobacco Co. case: “It is not the form of the combination or the particular means used but the result to be achieved that the statute condemns. It is not of importance whether the means used to accomplish the unlawful objective are in themselves lawful or unlawful. Acts done to give effect to the conspiracy máy be in themselves wholly innocent acts. Yet, if they are part of the sum of the acts which are relied upon to effectuate the conspiracy which the statute forbids, they come within its prohibition.” As mentioned by Mr. Chief Justice White in Standard Oil Co. v. United States: “ * * * practical common sense caused attention to be concentrated not upon the theoretically correct name to be given to the condition or acts which gave rise to a harmful result, but to the result itself and to the remedying of the evils which it produced.” With no persuasive evidence of a violation of the antitrust statutes the previous Courts could, entirely consistent with the fundamental concepts of our law, recognize the validity, in 'and of itself, of the lease agreement. However, once a Court,-such as here, is literally flooded with a maze of testimony and other evidence leading to the inevitable conclusion of monopoly it is then a rather simple, — almost automatic, deduction to identify the vehicles used to arrive 'at such monopoly. Three pivotal points, from the position of introduced evidence, distinguish the effect and character of the evidence in the instant ca'se from all other cases which previously involved the plaintiff herein. (1) The Court for the first time has been shown beyond dispute that the plaintiff is selling 75% or more of all the roller rock bits used in drilling today. (2) The Court for the first time has been shown, from the plaintiff’s own books, that in 1950 on over 430,000 bits sold the plaintiff realized a profit of 48.4% per bit; and that this profit was increased to 53.1% per bit in 1951. (3) The Court has had the benefit of the testimony of a former executive in the plaintiff corporation who was closely associated with the object and use of the plaintiff’s lease agreement. This former employee has given plausible testimony on the true object and purpose of the lease agreement, heretofore not disclosed to the Courts. Unquestionably, as previously found by the Courts, the plaintiff used the lease agreement to aid in analyzing and improving its product. However, this is not the primary purpose of the lease agreement. This Court is satisfied that the paramount aim of the lease agreement as used by the plaintiff was to promote sales rather than to achieve engineering perfection. The evidence indicates that .the plaintiff in thinking of a new method of marketing, sent Mr. Mobley, a young lawyer, to work with Mr. Brown, the vice-president in charge of sales. Mobley was then sent into -the field to do investigative work and report his results, particularly to Mr. Brown, in order to provide sufficient information for the new plan or program. Mobley reported his field investigations to Col. Kuldell, general manager, and to Brown; the three of them then made the final decision regarding what to do. Mobley was consulted on the policy of the company respecting the new distribution scheme; a policy was determined to retain control over the bits for the purpose of preventing rebuilding of the bits, as distinguished from a mere policy to get the bits back. The reason for this action was to control the dull bits to prevent them from being repaired and entered into competition with new bits, rather than to protect the plaintiff’s reputation or to further the plaintiff’s engineering research. Mobley was primarily associated in his work with sales manager Brown and general manager, Kuldell ; and, his contact with the engineering department was merely incidental. The factual information which Mobley obtained in the field convinced .plaintiff’s management that the lease agreement was necessary to prevent the competition from rebuilding or reconditioning bits in some way; in this there was no thought regarding engineering research, but it had “all” to do with sales competition. Mobley was given very broad latitude in working with the sales force to develop the lease idea to the utmost. The only reason the lease agreement did not expressly preclude rebuilding was because in the early stages of the lease agreement this leasing was unpopular and the general resistance, which already existed, would have increased to the point that sales would have been seriously impaired. To exclude retipping competition, Mobley’s activities in the field were directed to in every-way build up the tradition of the lease agreement so that absolute control over the used bits was retained. Many actions of sequestration and replevin were brought by the plaintiff against the individual retippers in order to drive the retippers “to the bushes”, take their business off the front street to the back street.” After the war the plaintiff reactivated its field force for the purpose of stopping retipping. A special assignment department with Mobley at the head was organized. The objective of this special department, from 1946 until 1949, was to locate and pick up dull bits of the plaintiff’s manufacture, particularly dull bits which were in the possession of persons other than the original lessees. The Enforcement Of The Lease Agreement The retipping of bits; as such, began to flourish about 1937. Not only did small welders take part in this activity, but a number of the large oil companies and independent drilling contractors began to take advantage of the savings which could be made by using retipped bits. Included in the group of drilling contractors using retipped bits were prominent drillers such as Olsen, Noble, Mabee, Jones and Loffland. In fact, the plaintiff’s competitive activity report of January, 1939, shows that Noble and Loffland, the two largest contractors, were the two worst offenders. Mr. Garr, a drilling contractor of Oklahoma City, drills in Oklahoma and Texas; in the past he has drilled in the mid-continent area for many major companies, including Sinclair and Continental. He uses about 25 to 30% retips of Hughes dull bits and other manufacturers. Garr has retipped since 1941 with plaintiff’s knowledge and plaintiff has never brought suit. Garr has his own retipper and has used other retippers; the plaintiff has never complained to Garr about any of the leased bits being retipped. Jim Stephens, drilling superintendent of Phillips Petroleum Company, testified that Phillips is familiar with the lease agreement but has continued to retip with plaintiff’s full knowledge and acquiescence. He excuses this technical violation of the lease agreement upon the ground that Phillips, as a practical matter, is entitled to get all the economical service out of the bits, whether bought or rented; he considers retipping to be merely a repair of a rented tool. Fred Morgan, Oklahoma City drilling contractor, does most of his work in Oklahoma. Although familiar with the lease agreement, Morgan has been using about 25% retips for years; and, the plaintiff has never attempted to enforce the lease agreement against him. Joe Miller, a drilling contractor since 1906, testified he has used about 80 to 90% Hughes’ bits since 1933, and, that he has used about 30% retipped bits. Miller testified further that he was once threatened by an employee of plaintiff but nothing was ever done. Joe Trigg, drilling contractor, testified that he retips dull bits of plaintiff which he has obtained under the lease agreement and that the plaintiff has lodged no objection. In all the years that Trigg has been retipping the plaintiff lias never sued him for patent infringement or for violation of the lease agreement, although the plaintiff was well aware of his retipping activities. No legal action was brought, or even threatened, against such large oil companies as Gulf, Carter and Magnolia, during the very time they were doing a great deal of retipping; many of the companies continued to retip without any threat of legal action by the plaintiff. Magnolia, for example, had three retippers working constantly in the West Texas area; at this same time Gulf and Carter were also re-tipping, and the plaintiff never threatened any of them with court action. Furthermore, Skelly Oil Company, Phillips Petroleum Company and numerous other oil companies have been for a number of years and still are retipping dull bits; although, the plaintiff has attempted to discourage such activity in every way possible no legal action has ever been suggested to these large purchasers of the plaintiff’s product, who are well aware of the existence of the lease agreement. The fact that the plaintiff has never enforced its lease agreement through legal channels against any of these large purchasers of new bits, but only against the small independent retipper, again emphasizes that the lease agreement is being used primarily to further sales rather than to advance the workmanlike quality of the bits. If the lease agreement had been brought into being for the sole purpose of aiding the plaintiff engineering-wise and if the plaintiff had been firmly convinced of its right and title to the leased bits, the lease agreement should have been enforced in an undiscriminating manner against any and all violators; obviously, the most desirable and helpful engineering information could be gained from the heavy purchasers and users of the plaintiff’s bits. The resultant effect of failing to use the lease agreement to suppress retipping activity is vividly pointed out by a study of the sales in the Illinois area, from the plaintiff’s own “competitive activity” reports. For some reason the Illinois re-tippers were left unmolested, relatively; as a consequence the competition of re-tipped bits arose to as high as 35 to 40% of the total bits used in that territory; this is in sharp contrast with the West Texas area where the lease agreement was rigidly enforced and where retipping never exceeded about 3% of the total number of bits used. Doubtless, the difference in drilling formations had something to do with this wide disparagement in the competitive figures. However, it is also evident that not only is the retipper in direct competition with the new bit manufacturer, but it is further clear that the enforcement of the lease agreement is the primary means by which this competition from the retipper is suppressed. The effectiveness, saleswise, of the enforced lease is aptly illustrated by the content of a letter written by the plaintiff’s Illinois salesman to the plaintiff’s sales manager which stated that it would be a good idea to have Mobley come to Illinois and do something about the retipping because the “one-horse outfits” were already half scared and held down as much as possible. This same salesman later wrote that the plaintiff ought to do something about the retipping in Illinois and suggested that an “example” be made of some of the welders. Again, it is obvious that there is little connection between engineering research and the practical use to which the lease agreement is put. This history of limited enforcement merely corroborates the testimony of Mobley on the true purpose behind the lease agreement. The plaintiff has used the Courts to protect it from competition from repaired and retipped bits, by bringing suits against those who were in direct competition with the plaintiff who were not purchasers of the plaintiff’s product; thus, this specific source of competition., the second-hand bit market, has been not only held in check but has been gradually eliminated. Hand in hand with this direct attack through the Courts, the plaintiff has indirectly discouraged users of retipped bits, who also purchase new bits from plaintiff, from the continued use of retipped bits in all instances where mere persuasion, short of the threat of legal.action, held any opportunity for success. The inevitable result has been not only to radically suppress competition from the independent repairmen and retippers, such as the defendant herein, but has been to discourage companies and drillers from re-tipping in view of court decisions holding such to be in violation of the law. Significantly, as the plaintiff’s position in the roller rock bit industry became more dominant the plaintiff has become progressively more insistent that the sanctity of the lease agreement not be impinged. This Court will not legitimize these unconscionable business tactics which have resulted in the reaping of inordinate profits. V Factors, ■ Other Than The Lease Agreement, Which Have Enabled The -Plaintiff To Obtain And Maintain Its Position Of Dominance The plaintiff’s position of dominance has not been attained per chance but has been the direct result of an intelligently planned and perfectly executed business policy; many of the individual acts could not, in and of themselves, be considered unlawful; in' fact,