Full opinion text
OPINION MEANOR, District Judge. FINDINGS OF FACT JURISDICTION This is an action instituted on July 9,1969 by the United States of America under Section 4 of the Sherman Act, 26 Stat. 209 (15 U.S.C. § 4) for injunctive and other appropriate relief to remedy and prevent alleged violations of Section 1 of that Act, 26 Stat. 209 (15 U.S.C. § 1). The court has jurisdiction of the subject matter and the parties. DEFENDANT CIBA-GEIGY Corporation, a New York corporation has its principal offices in Ardsley, New York, and the principal offices of its pharmaceutical subsidiary in Summit, New Jersey. It was formed in 1970 through the acquisition of CIBA Corporation, a Delaware corporation, by Geigy Pharmaceuticals Corporation (“Geigy”), a New York corporation, following which the name was changed to CIBA-GEIGY Corporation. At all times relevant to this proceeding, CIBA was a research-oriented manufacturer and seller of ethical pharmaceutical drugs, principally in specialty form under its own trademarks. In 1967, CIBA’s total sales were approximately $125 million, and CIBA’s total assets in that year were about $137 million. In 1970, CIBA-GEIGY Corporation was the eighth largest ethical drug firm in the United States. CIBA’S LICENSEES AND VENDEES MERCK & CO. INC. At the time of the complaint, Merck & Co. Inc. (“Merck”) was a New Jersey corporation and had its general office in Rahway, New Jersey. In 1969 Merck had total assets exceeding $550 million and sales of $447 million. In 1970 Merck was the fourth largest ethical drug firm in the United States. ABBOTT LABORATORIES At the time of the complaint, Abbott Laboratories (“Abbott”) was an Illinois corporation and had its general office in North Chicago, Illinois. In 1969 Abbott had total assets of $388 million and sales of $404 million. In 1970 Abbott was the sixth largest ethical drug firm in the United States. WARNER-LAMBERT PHARMACEUTICAL CO. At the time of the complaint, Warner-Lambert Pharmaceutical Co. (“Warner”) was a Delaware corporation and had its general office in Morris Plains, New Jersey. In 1969 Warner had total assets of $572 million and sales of $808 million. In 1970 Warner was the 19th largest ethical drug firm in the United States. G. D. SEARLE & CO. At the time of the complaint, G. D. Searle & Co. (“Searle”) was a Delaware corporation and had its general office in Skokie, Illinois. In 1969 Searle had total assets of $173 million and sales of $164 million. In 1970 Searle was the 16th largest ethical drug firm in the United States. SMITH KLINE & FRENCH LABORATORIES At the time of the complaint, Smith Kline & French Laboratories (“SKF”) was a Pennsylvania corporation and had its general office in Philadelphia, Pennsylvania. In 1969 SKF had total assets of $242 million and sales of $315 million. In 1970 SKF was the seventh largest ethical drug firm in the United States. RICHARDSON-MERRELL, INC. At the time of the complaint, RichardsonMerrell, Inc. (“RMI”) was a Delaware corporation and had its general office in New York, New York. In 1969 RMI had total assets of $331 million and sales of $381 million. In 1970 RMI was the 21st largest ethical drug firm in the United States. McNEIL LABORATORIES, INC. At the time of the complaint, McNeil Laboratories Inc. (“McNeil”) was a Pennsylvania corporation and a wholly owned subsidiary of Johnson & Johnson, which was a New Jersey corporation with its general office in New Brunswick, New Jersey. In 1969 Johnson & Johnson had total assets of $482 million and sales of $664 million. In 1970 Johnson & Johnson was the 15th largest ethical drug firm in the United States. CARTER PRODUCTS, INC. Carter Products, Inc. (“Carter”), originally a Maryland corporation, adopted the title Carter-Wallace Inc. on July 20, 1965 and was incorporated in Delaware by merger into a company of the same name on November 29, 1968. At the time of the complaint, Carter-Wallace Inc. had its general office in New York, New York. In 1969 Carter had total assets of $93 million and total sales of $125 million. LEMMON PHARMACAL CO. At the time of the complaint, Lemmon Pharmacal Co. (“Lemmon”) was a Pennsylvania corporation and had its general office in Sellersville, Pennsylvania. In 1969 Lemmon had total assets of $2.9 million and sales of $3.3 million. HOFFMAN-LA ROCHE, INC. At the time of the complaint, HoffmanLaRoche Inc. (“Roche”) was a New Jersey corporation and had its general office in Nutley, New Jersey. In 1969 Roche had total assets of $260 million and sales of $290 million. In 1970 Roche was the second largest ethical drug firm in the United States. ELI LILLY AND COMPANY At the time of the complaint, Eli Lilly and Company (“Lilly”) was an Indiana corporation and had its general office in Indianapolis, Indiana. In 1969 Lilly had total assets of $538 million and sales of $537 million. In 1970 Lilly was the largest ethical drug firm in the United States. GENERAL DEFINITIONS 1. “Package form,” “specialty form,” and “dosage form” each mean pills, tablets, capsules, solutions, syrups, and other forms of pharmaceutical products packaged for use by or administration to humans or animals. 2. “Ethical Drug” means a drug sold on the prescription of a physician. 3. “Bulk form” means the form in which pharmaceutical products are manufactured prior to their being packaged into dosage form. 4. “Therapeutically active product” and “therapeutically active ingredient” each mean any chemical product possessing pharmacological or therapeutic utility in the treatment of humans or animals. 5. “Combination product” means any pharmaceutical product containing more than one therapeutically active product. 6. “Straight formulation” means a dosage form product containing only one therapeutically active product. Hydrochlorothiazide in straight formulation is a tablet or other dosage form that contains hydrochlorothiazide as the only therapeutically active ingredient. 7. “Combination Form” or “Fixed Combination” mean a specialty form or dosage form drug containing two or more therapeutically active ingredients. 8. “Free Combination” means the concurrent use of two or more specialty form or dosage form drugs, each of which contains one or more therapeutically active ingredients. 9. “As such” refers to any chemical product in straight formulation. 10. “Hydrochlorothiazide products” mean, collectively, bulk form and dosage form products containing hydrochlorothiazide in straight formulation or in combination with another or other therapeutically active ingredients. 11. “New Drug Application” (“NDA”) means that application required to be filed with and approved by the Food and Drug Administration {“FDA”) by 21 U.S.C. § 355 and 21 C.F.R. § 314 before a “new drug” (as defined in 21 C.F.R. § 310) may be sold in interstate commerce. 12. “Anti-bulk sale restriction” means a restriction on or limitation against the resale of hydrochlorothiazide in bulk chemical form. 13. “Anti-straight formulation restriction” means a restriction on or limitation against the resale of hydrochlorothiazide in straight formulation. 14. “Approved-combination-only restriction” means a restriction on or limitation against the resale of hydrochlorothiazide other than as a combination product that has been previously approved (in this case, by CIBA). 15. “Edema” means the condition of an excess of water in the body which occurs when the body does not eliminate a sufficient quantity through the kidneys, thereby resulting in a back pressure through the veins pushing water and fluid through the capillaries out into the tissues causing such conditions as congestive heart failure, chronic lung disease, chronic cirrhosis and kidney failure. 16. “Diuresis” is the washing of salt and water out of the body by urinary excretion. 17. “Diuretic” means a chemical substance which produces diuresis. 18. “Hypertension” means an elevation of the blood pressure within the arterial system of the body which is in excess of the generally accepted level of 140 cystolic or pumping pressure and 90 diastolic or resting pressure. There are different degrees of hypertension generally referred to as mild, moderate, moderate to severe, and severe, depending upon the extent of the elevation of the blood pressure. It is generally believed in the medical profession that, as has been demonstrated by short-term and long-term studies, such elevation of the blood pressure is directly contributory to the early onset of strokes, heart attacks, kidney failure, etc. 19. “Antihypertensive” means a chemical substance which reduces blood pressure and is used for the treatment of hypertension. 20. “Saluretic” means a pharmaceutical product which causes increased excretion of salt in the urine. TECHNICAL DEFINITIONS 21. “Benzothiadiazine” means any derivative of a 3,4-dihydro-2-H-(l,2,4)-benzothia-diazine-1,1-dioxide. 22. “Cyclothiazide” means, and is the generic name for, the benzothiadiazine with the chemical name 6-chloro-3,4-dihydro-3-(5-nor-boren-2-yl)-7-sulfamoyl-l,2,4,-benzothiadiazine-1,1-dioxide. 23. “Hydrochlorothiazide” (hereinafter referred to as HCT) is the generic name for one benzothiadiazine derivative covered by United States Letters Patent 3,163,645, which issued to CIBA on December 29,1964 and which will expire on December 29,1981. 24. “Chlorothiazide” means, and is the generic name for, the benzothiadiazine with the chemical name 6-chloro-2-H-l,2,4,-ben-zothiadiazine-7-sulfonamide 1,1-dioxide. TECHNICAL BACKGROUND Benzothiadiazines are one group of drugs which are used as diuretics, saluretics, and antihypertensives. In such therapy they are administered orally either alone or in conjunction with other drugs. The therapeutic effectiveness of the benzothiadiazines can be increased by administering them together with one or more other drugs. One widely used benzothiadiazine is HCT. A commonly employed drug treatment for hypertension is the use of HCT plus reserpine, an antihypertensive and calming agent. The ratio of the HCT to the reserpine that produces the maximum therapeutic effect varies from patient to patient. The various combination products of this type, however, are marketed in the form of a fixed ratio of the two therapeutically active ingredients. Hypertension is also treated by the use of combinations of HCT and other drugs, such as deserpidine, syrosingopine, butabarbital, meprobamate, methyldopa, guanethedine sulfate, and hydralazine-hydrochloride. As in the case of reserpine, for any given patient there exists an optimum ratio of the benzothiadiazine to the other therapeutically active product or products. Nevertheless, the various combination products containing HCT and one or more of these therapeutically active ingredients are marketed in a form which contains a fixed ratio of the ingredients. Another benzothiadiazine which is used as a diuretic and antihypertensive agent is cyclothiazide. Cyclothiazide is marketed by Lilly in dosage form, in straight formulation and in combination with reserpine and other products for use as a diuretic and antihypertensive agent. COMMERCE RELATING TO HYDROCHLOROTHIAZIDE At least until the filing of this complaint in 1969, HCT was sold in the United States in dosage form, as such, by only three companies: by CIBA as “Esidrix,” by Abbott as “Qretic,” and by Merck as “Hydro-DIURIL.” In 1969, CIBA, Merck and Abbott accounted for over $22 million in sales of HCT in dosage form, as such. HCT has also been sold in dosage form in combination with other drugs by the companies and under the trade names listed below: In 1969, the above companies accounted for approximately $64 million in sales of HCT combination products. For the years 1965 through 1969, CIBA and its licensees and vendees accounted for approximately $150 million in sales of HCT products (as such and combination products) in the United States. CIBA’S POLICIES RELATING TO THE LICENSING AND BULK SALE OP HCT Prior to CIBA’s discovery of HCT in 1958, the general practice of CIBA was not to license other companies to practice patents received by CIBA on new pharmaceutical drugs, or to sell such drugs in bulk form to such companies. CIBA’s policy was to practice the patent itself by sales in specialty form. The reasons for this general policy were based on CIBA’s own commercial interests. If CIBA licensed others, even at a substantial royalty, to make the same product CIBA was already marketing, CIBA believed that it would not be able to make enough royalty income to offset the loss of income from the possible decline of its own specialty sales. Similarly, with respect to bulk sales, CIBA believed that its profits from such sales would be insufficient to offset the possible decline of its own specialty sales. In addition, CIBA considered that both the medical profession (which had to learn about and prescribe new medicines) and the pharmacists (which had to stock and dispense them), disliked identical pharmaceutical products marketed under different brand names, the so-called “me-too” products. CIBA’s general practice was therefore not to license its new patented discoveries or to sell in bulk to other pharmaceutical companies absent unusual circumstances. On occasion unusual circumstances have caused CIBA to depart from this general policy of reserving for itself the right to practice its new patented pharmaceutical drugs. In the hormone field, where several companies, including CIBA, held various patents, it would have been impossible to produce cortisone products unless the patentees cross-licensed each other. Therefore, CIBA licensed other companies under its patent. In the case of reserpine, an entirely different situation existed. CIBA’s patent on reserpine covered the alkaloid, but not the whole rauwolfia root which contained the same alkaloid in an unisolated form. Squibb was marketing; and any other pharmaceutical company could market, a product containing the unpatentable whole root despite CIBA’s patent on the alkaloid. CIBA decided to license its reserpine patent at a 6% royalty in order to obtain some financial reward which it would not have received if companies chose to market a whole rauwolfia root product instead of reserpine. A third exception to CIBA’s general practice was related to the discovery of an antibiotic which had limited use in the treatment of tuberculosis. CIBA did not have the facilities to produce this antibiotic, and was able to have another company make the antibiotic for CIBA only in return for a license. These situations are the only ones during the decade prior to 1958 in which CIBA licensed other pharmaceutical companies under its patents covering new pharmaceutical drugs. THE DEVELOPMENT OF HCT Prior to 1957, Merck, CIBA and other pharmaceutical companies were engaged in extensive research work to develop an effective oral diuretic. At this time, the most prevalent treatment for edema or hypertension was the injection of organic salts of mercury. Understandably, this was not an acceptable form of treatment for people suffering from long-term, asymptomatic hypertension. Patients would not submit to the frequent injection of these salts to treat a disease that caused them no present discomfort. Merck was the first to succeed in discovering such an oral diuretic, when in 1956 it isolated and later patented chlorothiazide. Merck marketed this drug in 1957 under the trade name “Diuril,” after obtaining the necessary FDA approval. Merck for many years had been a major manufacturer of pharmaceutical products and maintained a very large research organization. Prior to its merger in 1953 with Sharpe & Dohme, Inc., however, Merck did not have a good specialty form marketing organization. Sharpe & Dohme, Inc. did not have Merck’s manufacturing and research capability, but did have a very effective marketing organization. The object of the merger of these two companies was to form one company exceptionally well able to develop, manufacture and market its own specialty form products. Being the first company to market an oral diuretic, Merck developed a reputation with physicians as the leader in the oral diuretic field. The resultant sales of chlorothiazide were quite substantial. Merck never licensed any other drug company to manufacture, vend or use chlorothiazide, nor did it ever sell this chemical in bulk. Following the marketing of chlorothiazide, Merck continued its research in the field, for it was aware that there might be other drugs, related to chlorothiazide but not covered by the Merck patent, which would prove more effective than chlorothiazide and displace that product from the market. Merck felt that it had blazed the trail in this oral diuretic market and that it would be a terrible blow to it if some other company were able to patent a superior compound and exclude Merck from the market. Other companies, including CIBA and Abbott, continued their independent research for an improvement on chlorothiazide. CIBA was the first to discover hydrochlorothiazide (HCT) and filed for a patent on September 29, 1958. HCT is approximately ten times as potent per dosage unit as chlorothiazide. As the proofs later showed, Merck had discovered HCT shortly after CIBA, but had filed first for the patent, on September 26, 1958. Both companies had learned from clinicians doing field work that the other company was testing the same compound, although neither company knew the other’s discovery date. With the prospect of an interference being declared by the Patent Office in mind, CIBA and Merck individually decided to approach the other for a settlement agreement. Mr. Connor of Merck testified that he and his associates decided to approach CIBA with a proposal for a royalty-free, unrestricted cross-licensing agreement. Merck felt in a strong position to bargain for an unrestricted license because it had issued to it product patents covering at least one intermediate in the production of HCT. Like Merck, CIBA had spent a great deal of money in the development and testing of HCT. CIBA was planning to spend several million dollars during the first few months of its marketing of HCT (under the trade name Esidrix) in order to convince the medical profession to switch to Esidrix from Merck’s Diuril. And, while the people at CIBA may have felt that CIBA would be awarded the priority eventually, they knew, as well, that it would be a gamble to go ahead and market Esidrix without first settling the interference with Merck. Mr. Haines, the President of CIBA, also testified that CIBA was unable to manufacture HCT without infringing Merck’s patents on one or more of the intermediates. CIBA had previously approached Merck for a license for chlorothiazide itself and had been refused, so there was little to suggest that, outside the context of a settlement agreement, Merck would wish to license CIBA for the production of these intermediates. For all of these reasons, Mr. Haines and his associates decided to approach Merck with a proposal for a settlement. It happened that Mr. Connor had a previously arranged appointment to visit Mr. Haines at Haines’ New York office on December 12, 1958. Mr. Haines was to broach the subject to Mr. Connor at this meeting. The question of asking for a royalty payment on the HCT patent was discussed at CIBA, but being uncertain as to which party would eventually get the patent and faced with the prospect that Merck would respond by asking for a royalty on the license of its intermediates, CIBA management decided not to ask for a royalty. Haines and Connor met alone on December 12, 1958 for the purpose of discussing a subject unrelated to HCT. Following this discussion, one or the other of these men raised the issue of the pending HCT patent interference. They agreed that both companies would present to the other all the evidence available on the issue of priority of invention. The two companies would then determine which of them had priority, as between themselves. They also agreed that the company with priority would grant to the other a non-exclusive, non-transferable license under any patent issued as a result of the applications in question to make, use and sell the patented invention free from any royalty payments. Finally, Merck agreed to grant CIBA a similar license to make and use the intermediates covered by its patents. The government attempted to establish at trial that there was an oral agreement between Haines and Connor that Merck would not sell HCT in bulk in competition with CIBA. Evidence to support the existence of such an agreement can be found in some of the correspondence between CIBA and its parent company in Basle, Switzerland, CIBA, Ltd. A Mr. Von Werdt, an attorney in Basle, suggested that the agreement with Merck be drawn to exclude the possibility of bulk sales and bear a royalty. Haines, having previously agreed upon other terms with Mr. Connor, rejected such a suggestion. In another letter, Mr. Lucien Sichel, Haines’ assistant, suggested that Haines and Connor had come to an unwritten understanding regarding the exclusion of bulk sales. Mr. Haines and Mr. Connor both denied this under oath, and Mr. Sichel, who was not present at the Haines-Connor meeting cannot recall the basis for this statement. This court finds that no such agreement existed. Nor does the evidence that Merck subsequently sold bulk HCT only once warrant a different conclusion. The agreement, arrived at in principle at the Haines-Connor meeting, was subsequently reduced to writing and executed by both companies on February 11, 1959. The cross-licenses contained no limitations on the sale of HCT. Mr. Haines testified that CIBA believed itself to be a number of months ahead of Merck in the testing needed to obtain the approval of the Food and Drug Administration for the marketing of this new drug. As he said: “We thought ... that we were far ahead of them in doing the clinical and toxicity work and if all went well we’d be able to get out on the market well ahead of Merck and be able to get our brand established.” This “lead time” was crucial to CIBA’s expectation of grabbing a large portion of the diuretic market away from Merck, for Merck already had a strong identification, in doctors’ minds, between diuretics and itself. The process of marketing specialty drugs is largely directed at the prescribing physician. While the doctor is not the consumer of the product, the patient-consumer is generally legally incompetent to choose between different medications. The object of a marketing compaign, then, is to convince doctors to prescribe a particular company’s drug rather than one of its competitor’s. This object is aided by the use of trade names, rather than generic names. Doctors ordinarily prescribe “Esidrix” or “Hydrodiuril” rather than hydrochlorothiazide as such. The druggist, when he fills a trade name prescription, is generally bound to use only that trade named product. Drug companies employ what are called “detail men” whose job it is to visit doctors in a given area to promote the prescription of that company’s products. The detail man explains the uses for which the drug is intended, attempts to set it apart from any competitive medications and handles any complaints or problems the doctor encounters in using a particular drug. This prescription oriented process makes it imperative that any drug company looking for a large share of a specialty market have a large detail force. CIBA’s detail force was only a fraction of the size of Merck’s. This disparity of size in CIBA’s and Merck’s marketing capability was one more very substantial reason why CIBA needed many months of lead time over Merck in the introduction of HCT. CIBA introduced HCT under its trade name Esidrix in mid-February 1959. To its dismay, it learned only a few days later that Merck had also reached the market with Hydrodiuril. CIBA’s hopes of gaining a large share of the HCT market were shattered. Haines testified: “.... Knowing Merck’s very extensive sales force and their reputation and ability, we realized at once that Merck would have far higher sales of HCT than we would ourselves. It was a frightful disappointment.” As a result of Merck’s early appearance, CIBA’s sales of Esidrix were substantially below what was originally forecast. DEVELOPMENT OF CIBA’S HCT MARKETING PLAN CIBA countered the unexpected appearance of Merck on the market by intensifying its marketing effort, accelerating the introduction of various combination products, and entering into bulk sales and licensing agreements with other drug firms. In 1959, it introduced Serpasil-Esidrix, Singoserp-Esidrix and Apresoline-Esidrix. All three of these products were indicated for the treatment of hypertension. Additionally, in 1960, CIBA brought out Ser-Ap-Es, a triple combination drug, and Esidrix-K, a combination of HCT and potassium. These, too, were indicated for hypertension, the potassium in the latter being added to compensate for a loss of potassium in the body caused by HCT. These drugs had varying degrees of success on the market, with Ser-Ap-Es being the biggest seller. By 1969, all but Esidrix-K were still being marketed. Beginning in February 1959, CIBA entered into negotiations with Abbott for a supply agreement and a manufacturing license. Such an agreement was executed by July 1, 1959. An agreement to supply bulk HCT to Warner-Lambert was entered into on August 27,1959. Negotiations with the G. D. Searle Co. begun in June 1959 culminated in an agreement to supply bulk HCT dated March 21, 1960. Five more sales agreements were entered into during 1961 with SKF (March 21), RMI (May 1), McNeil (July 1), Carter (September 1), and Lemmon (October 1). CIBA and HoffmanLaRoche signed an agreement on April 28, 1965 for the sale of bulk HCT. And, finally, CIBA and Lilly entered into a license agreement, under the patent issued to CIBA in 1964, which granted Lilly the right to manufacture, use and sell CIBA’s cyclothiazide in specialty form. All of these steps were taken by CIBA in an effort to recoup some of the profits it lost on account of Merck’s early appearance on the HCT market. CIBA set out to maximize its gains by licensing its HCT patent to other companies and by selling to them HCT in bulk form, but to do so in the way which had the least impact on dosage form sales under CIBA’s own label. There were two mechanisms for achieving this limited impact on CIBA’s own sales: (1) limiting the license to Abbott to specialty vending only, and (2) selling bulk only when CIBA believed that the vendee’s use of HCT could not directly compete with its own HCT products. The overall CIBA marketing policy was described in a December 1961 memorandum (the “Sichel policy memo”) from Sichel to the CIBA Management Committee: This company’s policy, developed over the past three years, has been to supplement sales of the finished packaged forms by selling in bulk or granting licenses on specific products where, in the opinion of the Marketing Committee, such sales or licensing did not adversely affect sales of the same product in specialty form. In this same memorandum, Sichel also stated that, in regard to HCT, CIBA’s policy of preventing competition had been implemented by the various marketing and licensing arrangements discussed above: In the case of HCT, when it became apparent that we [CIBA] could not meet our original estimates [in the sale of Esidrix] because of the unforeseen early introduction of Merck’s HydroDiuril, we [CIBA] first sold in bulk and licensed Abbott on April 22, 1959, to sell HCT as such. We have since then made seven additional agreements, all of them limited to the sale of HCT in combination form. (Emphasis supplied.) In this memorandum, Sichel disclosed that CIBA had broadly announced its policy in regard to bulk sales of HCT. In response to requests from other drug companies for a supply of HCT, CIBA routinely mailed out the following form letter: We have never offered this product for sale in bulk as such, but have in a few instances made special arrangements where a pharmaceutical house conducting original pharmaceutical research wishes to combine Hydrochlorothiazide with a specialty developed by it, and when the combination has in our opinion valuable therapeutic qualities. In these limited situations the purchaser usually agrees to make a substantial payment to us for the use of our effective New Drug Application (which represents a very large investment by us); and agrees to purchase minimum quantities of Hydrochlorothiazide from us over a two to three year period following the introduction of the combination. . Attachment A to the Sichel policy memo, entitled “Terms of Hydrochlorothiazide Contracts,” graphically illustrates CIBA’s implementation and policing of its HCT policy. This chart shows that in 1961 CIBA compared the HCT combination products which it approved with those marketed by its vendees. Thus, CIBA kept itself apprised that its vendees were complying with the terms of their HCT agreements. On June 11, 1965, CIBA updated the chart that was attachment A to the Sichel policy memo. The updated chart shows that CIBA continued to compare the HCT combination products that it approved with those marketed by its vendees, and, thus, kept itself informed that its vendees were still complying with the terms of their agreements. When (and ever since) CIBA implemented its HCT policy, it had available to it drug industry publications (such as F.D.C. Reports, the “Pink Sheets”) from which CIBA kept itself up-to-date on the HCT products sold by its licensees and vendees. On February 22, 1967, Andrew J. Smith (then head of CIBA’s bulk chemical sales) informed Charles T. Silloway (then president of CIBA) that: Hydrochlorothiazide is sold under a licensing agreement only. To qualify the licensee agrees to purchase 1000 Kgs. [of] Hydrochlorothiazide within a three year period following introduction of their new product. The material can be used only in a CIBA approved combination— usually with one of the applicant’s own specialty products. Although the agreements to which Smith referred in his memorandum to Silloway, and to which Sichel referred in his memorandum to the Management Committee, were in the form of supply agreements or requirement contracts (often with optional manufacturing licenses), that is not all that they were. The intent of CIBA throughout was to control the identity of the HCT combination products the vendee could make and sell. The reason that CIBA specified and limited a vendee’s product was not purely, or even primarily, to limit CIBA’s HCT supply obligations (or the vendee’s requirement entitlements) under the agreement to such quantities as would be commensurate with CIBA’s production capabilities. Other means were readily available to accomplish that purpose. Rather, as the evidence of the negotiations and implementations of the agreements demonstrates, CIBA’s intent was to limit the vendees’ use of the purchased HCT to the combination of that chemical with one or more other specified drugs. MERCK’S EXCHANGE ONLY POLICY Following Merck’s introduction of chlorothiazide in 1956, it never licensed any other company to manufacture this drug nor did it ever sell bulk to anyone. It had the entire chlorothiazide market to itself, and chlorothiazide was the drug of choice for the treatment of hypertension and edema. Merck followed a similar marketing policy with regard to HCT. The only exception to Merck’s no sale policy was where Merck was able to obtain rights to or a supply of an otherwise unavailable product from the vendee company. In other words, Merck was willing to sell HCT only when it was able to receive in return a drug that it wanted and could not otherwise obtain. This was Merck’s “exchange only policy.” The government would have it that this policy was a mask for an unwritten agreement between Merck and CIBA that Merck would refrain from selling bulk. The evidence does not support such a conclusion. Merck had the leading position in the diuretic field. Whether it would or would not have made economic sense for Merck to compete with CIBA for CIBA’s bulk vendees is at best a debatable point. Certainly, Merck could have made, as this court believes it did, a reasonable independent business judgment not to supply other drug companies with bulk HCT, except in the limited “exchange” situation outlined above. Merck unilaterally refused requests for HCT from 26 companies. In the case of seven other companies, it offered to consider selling bulk HCT in exchange for the rights to another compound, but in six such instances the exchange never materialized. Only in the instance of Carter’s request for a supply of HCT did Merck agree to sell, and then only in exchange for a supply of Carter’s meprobamate. Even though this court is satisfied, from the testimony of the Merck officials, that Merck’s “exchange only” policy was the result of a unilateral decision by Merck, the existence of this policy was of material aid to CIBA in maintaining its own policy of controlling the bulk HCT market. CIBA, Merck and Abbott were the only companies in the United States with the right to manufacture HCT. By the terms of its license agreement with CIBA, Abbott was limited from vending HCT it manufactured in non-specialty form, as a result of which Abbott could not compete with CIBA for bulk sales. Similarly, by imposing on itself this “exchange only” policy, Merck left the bulk sales market entirely to CIBA. So, vis-a-vis a company seeking a supply of bulk HCT, CIBA was an absolute monopolist. THE ABBOTT LICENSE When, faced with the early appearance of Merck in the market, it was compelled to reassess its position, CIBA came to the realization that it could use the detail capacity of another pharmaceutical house to increase the overall sales of HCT. Sometime in January 1959, Mr. George Cain, the president of Abbott, approached Sichel at a meeting in New York. Cain indicated that Abbott wanted a license to manufacture or a supply agreement for HCT. Abbott had a detailing capacity roughly equal to that of Merck and although CIBA turned Abbott down at the first request, the idea of having Abbott selling CIBA-supplied HCT became more attractive after the early appearance of Merck on the market. On February 18,1959, Cain spoke to Con-nor to request a license from Merck. Con-nor turned him down, but told him of the proposed settlement agreement with CIBA and suggested that he contact CIBA. Paul Gerden, who was then the general counsel of Abbott, called Sichel shortly after Cain had spoken to Connor. For a period of several months following this initial contact, CIBA and Abbott conducted negotiations over the proposed license and supply agreement. There was a suggestion at the beginning of the negotiations that Abbott limit itself to combination products only. Sichel reported that Gerden told him that Abbott was only interested in combination products because “of the lead time which CIBA, and Merck, too, will have on Abbott.” On March 31, Sichel discussed, in a memo to Haines, a meeting of Sichel, Haines and a Dr. Wettstein, at which they had agreed to supply bulk HCT and to grant a license to Abbott for the manufacture of HCT “if possible limited to combination products.” Subsequently, on April 3, Cain indicated in a letter to Sichel that Abbott was not interested in a license limited to combination-form-only products. CIBA did, however, insist at some point that the license agreement exclude the possibility of bulk sales of HCT by Abbott. Haines testified that he told Cain that “some of my colleagues aren’t happy that I didn’t in my previous discussion with you tell you that we wanted to limit your license to sales in package form.” Haines also testified that Cain made no objection to such a restriction. Haines identified these “colleagues” as the marketing people at CIBA. The supply and license agreement, limited to exclude the sale of HCT in bulk, was dated April 22, 1959, but was not fully executed until July 1, 1959. The agreement was in three parts. The first dealt with the sale to Abbott, for a payment of $100,000, of the right to use CIBA’s effective NDA on HCT in preparing and filing its own NDA with the Food and Drug Administration. The agreement also provided for the sale of 2,000 kilos of bulk HCT to Abbott at $250 per kilo, with an option to buy 5,000 more at the same price. Abbott felt that it needed this amount of HCT to get onto the market as quickly as possible, without waiting to perfect its own manufacturing processes. Finally, CIBA granted to Abbott a non-transferable, royalty bearing license to make, use and sell HCT in specialty form. It is fair to conclude from the evidence that both CIBA and Abbott, at all times, believed that the license agreement limited Abbott to the sale of HCT in specialty form. After the signing of the license agreement many drug companies requested a supply of bulk HCT from Abbott. In each instance, Abbott refused the request. Often, Abbott did so based upon its interpretation that its agreement with CIBA did not permit Abbott to make such sales and that any such sales would be an infringement of the CIBA patent. At least until the filing of the complaint in this case, Abbott sold HCT in specialty form and not in bulk form. On May 29, 1973, CIBA wrote to Abbott stating: “We hereby modify the [April 22,1959 HCT license agreement] so that you are additionally licensed to make, have made, use and sell ‘Hydrochlorothiazide Products’ ... without limitation.” Several months later, Abbott agreed to sell HCT tablets to Parke, Davis & Company. Since that time Abbott has sold, pursuant to that agreement, a large quantity of HCT tablets in “bulk” (unbottled and in units of 50,000 tablets) to Parke-Davis. THE CIBA-WARNER AGREEMENT Warner is and at all times relevant to this proceeding has been a diversified pharmaceutical company engaged, inter alia, in the manufacture and sale of ethical drugs through its Warner-Chilcott Laboratories Division. Although Warner Nepera Chemical Division manufactures some bulk chemicals, Warner does not, as a matter of policy, purchase drugs for resale in bulk to other pharmaceutical companies. Warner was the first company not involved in the patent dispute to enter into an agreement with CIBA regarding the sale of HCT. Warner became interested in obtaining HCT in the summer of 1959. It first approached Abbott for a supply, but Abbott replied that it did not sell HCT in bulk. Warner then contacted CIBA on August 18, 1959 and there followed a meeting between Haines and Sichel of CIBA and Clark and Amow of Warner. CIBA thought at first that it would make the same deal with Warner that it made with Abbott, i. e., an interim supply agreement together with a license to manufacture in specialty form and a sale of the effective NDA for $100,000. Warner, however, felt that it was too late at that time to attempt to market a straight form of HCT in competition with CIBA, Merck and Abbott. Rather, Warner was immediately interested in marketing a combination of HCT with Peritrate, Warner’s trade name for an unpatented coronary vasodilator marketed by Warner as a specialty product. Warner sought a supply agreement but also wanted it understood between the parties that it could later obtain a license from CIBA to manufacture HCT. Sichel prepared a memorandum of this meeting for Haines. In this document he outlined the terms of the agreement reached with Warner. Warner agreed to pay $250 per kilo for 1,000 kilos of HCT, which it proposed to use in combination with Peritrate. Warner also agreed to pay $75,000 for the right to use CIBA’s effective NDA covering HCT to obtain its own NDA “on a combination of hydrochlorothiazide with an active ingredient” but agreed not to use the NDA to obtain its own NDA solely on HCT. Abbott had paid $100,000 for the right to consult the CIBA NDA in support of its own NDA on straight form HCT. Lastly, CIBA and Warner had agreed that if and when Warner should want to have a license to manufacture HCT and sell it in combination form, CIBA would extend such a license. On the other hand, as Sichel informed Haines in a memo dated August 19,1959, should Warner want a license “on the use of hydrochlorothiazide alone, the entire contract [would] have to be renegotiated in view of CIBA’s commitments to Abbott.” The first draft of the agreement submitted by CIBA to Warner contained in the “Whereas” clauses the recitation that Warner wished to purchase HCT from CIBA “to be combined with other products of its own and to be marketed in package form in such combination.” Warner officials deleted “of its own” and changed “combination” to read “combinations.” CIBA acquiesced in these changes. THE PARTIES’ UNDERSTANDING OF THE AGREEMENT At all times, CIBA understood that Warner could not resell the HCT purchased from CIBA in any form other than a specialty form combination. Thus, it was CIBA’s understanding that Warner could not (1) resell the HCT in bulk to a third party, or (2) market the HCT in the form of a straight formulation specialty. As was to be true of every vendee CIBA dealt with, Warner did not, as a matter of policy, engage in the practice of purchasing drugs in bulk for resale in bulk. Similarly, as was to be true of nearly every vendee CIBA dealt with, Warner had made an independent judgment not to market a straight formulation of HCT. Warner paid only $75,000 for the right to refer to CIBA’s NDA rather than the $100,000 paid by Abbott because Warner had only the right to refer to CIBA’s NDA in seeking approval of combination products and could not use CIEA’s NDA in seeking approval to market HCT in straight formulation. Warner understood that CIBA was selling it the HCT only for use in combination with another active ingredient. This understanding, which was shared by CIBA, formed the basis of the sale agreement. Warner first encountered delays in getting FDA approval of its NDA on the combination of HCT and Peritrate. Then, after it was marketed, the combination proved to be relatively unsuccessful. By July 1962, Warner had an excess inventory of approximately 600 kilos of HCT. CIBA’s going price for HCT had by this time fallen to $85 per kilo in comparison with the $250 paid by Warner. The price of imported HCT, which was available and not infringing as no patent had issued, was only a fraction of CIBA’s price. Clark approached Sichel to inquire whether CIBA would be willing to buy back. CIBA was not interested in doing so. Warner then made some failing efforts to sell to third parties, and, after some internal consideration of the huge write down it would have to take on this inventory one way or the other, Warner eventually decided to retain the inventory even if it meant taking years to use it up in the sale of the combination product. Warner never did use up all of this inventory and in 1966 was forced to destroy over 400 kilos which had spoiled because of old age. The conclusion to be drawn from this incident is that Warner would have sold the excess of bujk HCT to a third party if it could have done so economically. The going price for HCT from non-CIBA sources was at a level somewhere around 10% of the price Warner had paid for the HCT. Therefore, it made as much sense for Warner to hold onto the excess in the hope that its sales would increase as it did to take the huge loss involved in a sale. The final delivery of HCT by CIBA to Warner took place on March 15, 1961. Since that date, some 15 years ago, CIBA has sold no HCT to Warner. Nor did Warner ever exercise the option to take a license to manufacture HCT. THE CIBA-SEARLE AGREEMENT At all times relevant to this proceeding, Searle manufactured and sold ethical pharmaceutical drugs in specialty form. Although Searle manufactured some chemicals, it did not (with one exception) sell pharmaceutical drugs in bulk form to other firms. Nor did Searle ever engage in purchasing drugs in bulk for resale to other companies. On June 29, 1959, Daniel Searle (then assistant to the president of Searle) called Henry Gasden (then vice president of Merck) regarding the bulk purchase of HCT from Merck. In response, Gasden informed Daniel Searle that Merck was not interested in a simple bulk sale of HCT, but made some detailed proposals regarding an exchange for Searle’s spironolactones. Daniel Searle then called Sichel at CIBA. During this conversation, Sichel informed Daniel Searle of the possibility of an arrangement between CIBA and Searle by which Searle would use HCT purchased from CIBA “solely in a combination product” with one or more of Searle’s spironolactones. Six months passed during which time Searle’s interest in an HCT deal flagged. Daniel Searle and Dr. Wettstein of CIBA, Ltd., Basle, exchanged a number of communications regarding the possibility of a mutual exchange of products, much as Merck contemplated. Searle was seeking an agreement where it could have the sole rights to market the combination in the United States, Canada and England. Such a deal never materialized. On November 20,1959, Sichel and Haines met with Daniel Searle in Summit, N. J. Daniel Searle indicated his company’s willingness to enter into a contract to purchase all of its requirements of HCT for the next three to five years from CIBA. Daniel Searle indicated that the combination product containing HCT and Aldactone would reach the market in the spring of 1960. Daniel Searle also said that his company was not interested, at that time, in introducing HCT in straight formulation. Finally, on March 21, 1960, CIBA and Searle entered into an agreement by the terms of which Searle agreed to purchase and CIBA agreed to supply three years’ requirements of HCT. CIBA also furnished Searle clinical data relating to chronic toxicity characteristics of HCT. Searle paid no additional consideration for this information but agreed to use it only in the course of placing HCT on the market in combination form. By its terms, this agreement expired in 1963. Although it was never renewed, Searle has continued to purchase bulk HCT from CIBA on open account. The agreement was prefaced by three recitals which related the parties’ understanding that Searle was interested in combining the purchased HCT with one or more active ingredients. These recitals are not dissimilar from those that appear in other CIBA supply agreements. It is fair to conclude that it was CIBA’s intention that Searle use the purchased HCT only in combination products. The evidence shows, however, that Searle never considered itself constrained in any way in its rights to dispose of the purchased HCT. Searle considered that it could have combined the purchased HCT with a drug other than Aldactone, if it had so elected. Searle also considered that it could have resold the HCT in bulk form. Lastly, Searle was never interested in marketing straight form HCT. The negotiations between CIBA and Searle were conducted solely between these two companies. Searle was not informed by CIBA of the contents of its other licensing and vending agreements, aside from the occasion on which Sichel informed Daniel Searle that there was a “most favored nation” clause in an agreement with Abbott. Daniel Searle knew none of the other details of the Abbott license. THE CIBA-SKF AGREEMENT Sometime in late 1960 or early 1961, F. Markoe Ravinus (then the executive vice president of SKF) called Sichel at CIBA to inquire into the availability of HCT. Ravinus indicated to Sichel that SKF wanted to combine HCT with SKF’s newly patented potassium sparing diuretic, Dyrenium (triamterene). SKF was interested in combining it with HCT because HCT was the best known and most widely prescribed diuretic on the market. Sichel informed Ravinus that HCT was available in certain circumstances and arranged for a meeting between the SKF and CIBA people which took place in Philadelphia on January 27, 1961. On this date, officials of the two companies met to discuss SKF’s request for HCT. Mr. Grant (then director of R & D agreements at SKF) and Dr. Edgerton (then head of SKF’s patent section) were present on behalf of SKF. Sichel, Goldsmith (then head of CIBA’s patent department) and Kolodny (an attorney in CIBA’s patent department) were present for CIBA. Kolodny, in a memo later prepared for Sichel, recalled some of the conversation: The SKF representatives were told that CIBA might be receptive to the grant of a license, limited to the United States, (1) of the type granted to Abbott involving the right to make the drug or (2) of the type granted to Warner-Lambert involving supply of the medicinal, provided the combinations involved were not those marketed by CIBA. The SKF representatives asserted that they were certain that their combinations were not the ones in which we were interested, their primary interest being in a combination of hydrochlorothiazide with an agent on which they expected to obtain a patent in the near future. (Emphasis supplied.) On March 2, 1961, Sichel sent SKF a draft agreement which embodied the terms CIBA and SKF had been discussing during the month of February. The agreement was a supply agreement with a stand-by license to manufacture. In the recitals, it was stated that SKF was to combine the HCT purchased from CIBA with “at least one other therapeutically active product and in such combination [market the product] in packaged form....” The stand-by license authorized SKF “to manufacture, use and sell in packaged form hydrochlorothiazide in combination with another active drug.” On April 3, 1961, SKF wrote CIBA and proposed several changes to the draft agreement. One of these changes was the insertion of the phrase, “of SKF’s selection,” describing the other ingredient in the allowed combination product if SKF chose to have a manufacturing license from CIBA. SKF insisted on this change because it was a “[clarification of SK&F’s right of untrammeled selection as respects the other ingredient in the combination.” This change was accepted by CIBA. THE PARTIES’ UNDERSTANDING OF THE AGREEMENT It has always been CIBA’s understanding of the CIBA-SKF HCT supply agreement that SKF was “limited to the sale of hydrochlorothiazide [which CIBA sold to SKF] in combination form.” (Emphasis supplied.) CIBA understood that the HCT it supplied SKF “would be used only in the combination products suggested.” SKF encountered considerable delays in marketing its combination product. FDA approval was not received until December 1965. Consequently, it was not for a number of years after the execution of the 1961 agreement that anyone at SKF was called upon to interpret its meaning. In February 1966, the question arose whether SKF had the right under the agreement to market an additional combination containing HCT, triamterene and reserpine. Hershey, an attorney, met with several other people at SKF to review the 1961 contract. Their opinion was that the agreement itself contemplated only one combination but that CIBA might be sensitive enough to Justice Department attitudes to back off from such an interpretation. Following this meeting, Dr. Edger-ton, who had been part of the original SKF negotiating team, told Hershey that it was his distinct recollection that more than one combination product was mentioned during the negotiations with CIBA. It was Edger-ton’s opinion that SKF should proceed with the marketing of the second combination without seeking CIBA’s acquiescence. SKF did so proceed without telling CIBA. Finally, however, SKF was unable to market this combination because of CIBA’s patent on its HCT-reserpine combination. On September 19, 1966, Sears, another attorney who reported to Hershey, wrote a memorandum regarding the possibility of SKF’s marketing the HCT-triamterene combination for veterinary use. As regards the availability for veterinary use of the HCT sold to SKF by CIBA, Sears concluded that CIBA had no right to restrict SKF’s use of the HCT after its sale to SKF. It appears that SKF did, in the end, obtain CIBA’s approval for the marketing of this combination. It is fair to infer from these two incidents • that the people at SKF felt partially restricted by the terms of the agreement with CIBA. While, in each case, the final decision was to proceed as if the contract did not restrict SKF’s use of the vended HCT, these decisions were only taken in the face of strong feelings that the agreement had meant to restrict such use. The SKF employees exhibited a full awareness that CIBA might retaliate for what it took to be violations of the agreement. There is no evidence that SKF ever contemplated or desired to market HCT in straight formulation. SKF’s initial interest was in finding an effective thiazide to combine with triamterene, a product that it expected to obtain a patent on in the near future. The only other interest SKF ever expressed was in a combination of triamterene, HCT and reserpine. There is also no evidence that SKF was ever interested in reselling in bulk the HCT purchased from CIBA. It is inferable that it is not the normal practice for SKF to engage in such a brokerage transaction. SKF did understand that the optional license agreement imposed a specialty form only and a combination form only restriction on it. In 1968, SKF considered whether it should begin manufacturing HCT for its own use. Hershey and Sears came to the conclusion that: “[t]he 1961 agreement allows SK&F to sell only in packaged form. This means that we cannot sell the HCT combination in bulk.” In addition, Sears interpreted this language to mean that “the license will be limited to combination products only and will not grant SK&F the right to make a product with HCT as the sole active ingredient.” With an eye toward possible anti-trust problems, SKF asked CIBA to delete the packaged-form-only restriction. CIBA refused to do so. SKF never exercised the option to take a license, so the terms of the unexecuted option never constituted a restraint on trade, if, indeed, they would have been illegal at all. THE CIBA-RMI AGREEMENT At all times relevant to this proceeding RMI was a Delaware corporation with its principal place of business in New York, New York. RMI was engaged in human and veterinary ethical and proprietary pharmaceutical sales. The William S. Merrell Co. and The National Drug Company, divisions or subsidiaries of RMI, sold ethical pharmaceutical drugs for human use. Jensen-Salsbery Laboratories, Inc., a division or subsidiary of RMI, sold ethical pharmaceutical drugs for veterinary use. In the summer of 1959, RMI requested that Merck sell bulk HCT to RMI. By December 1960, at the same time that SKF approached CIBA for HCT, RMI again attempted to obtain HCT from Merck. Merck refused to deal except on an exchange basis, and RMI decided to look elsewhere. On February 27,1961, after a preliminary telephone contact with Sichel, R. H. Cox (of RMI) met with Sichel and Haines. At this meeting, Cox expressed RMI’s interest in HCT. In response, CIBA “offered HCT for combination use. ...” This offer was conditioned upon the general acceptability to CIBA of the “therapeutic rationale” for such combinations and some assurance as to the “market potential.” On March 17, 1961, Sichel wrote to Frederick D. Lamb (then secretary and attorney of W. S. Merrell Division of RMI) enclosing a draft of an HCT supply agreement. Sichel’s letter stated that “the total understanding between our companies” provided that RMI could sell and use the HCT which CIBA manufactured and sold to RMI “in combination with MER/29 in the United States and Canada....” On March 27, 1961, Lamb sent a copy of the proposed draft agreement to various RMI officials, including R. H. Cox, requesting their comments. On April 4, 1961, Cox replied, telling Lamb that in his original contact with Sichel and Haines he had discussed RMI’s potential interest in HCT on a multidivisional basis, and not just for combination with Merrell’s product MER/29. Cox also informed Lamb that CIBA had raised no objection to RMI’s multidivisional interest and had agreed that the HCT which CIBA might sell to RMI would be available to RMI’s pharmaceutical divisions “for combinations.” Cox, thus, recommended that the draft agreement be changed to supply HCT on an “enterprise-wide basis” and to assure RMI the right to market more than one product, subject to the “approval” of that product by CIBA as Sichel and Haines had provided at the first meeting. On April 18, 1961, Sherwood E. Silliman (then secretary of RMI) suggested that, in addition to naming as parties to the draft agreement those RMI divisions suggested by Cox, the J. T. Baker Chemical Co., a subsidiary of RMI then engaged in the manufacture and sales of bulk chemicals, also be named as a party to the stand-by manufacturing license, attached as Appendix A to the agreement. On April 19, 1961, Lamb sent Sichel a proposed draft agreement which incorporated the changes suggested by Cox and Silliman. By April 25, 1961, RMI anticipated that the agreement with CIBA would include the following: Hydrochlorothiazide will be available to our ethical pharmaceutical divisions (Merrell, National, Walker, Jen-Sal) for the U.S.A. and Canada for combinations products, where the therapeutic rationale and market potential are acceptable to CIBA. However, Cox informed the divisions of RMI (other than Merrell) that, if they were interested in using HCT they should outline their interest in detail. Cox stated: In view of certain aspects of the proposed agreement with Ciba, we feel that expressions of R-M interest other than that already formally approved (i. e. combination with MER/29) go to Ciba [through Lamb or Cox] and only after the basic agreement is finalized. On May 11, 1961, Sichel sent Lamb a redraft of the agreement Lamb forwarded to Sichel on April 19. Among the changes proposed by CIBA in this redraft was a deletion of the J. T. Baker Chemical Co. from the definition of “RMI” in the license agreement in Appendix A to the draft. Sichel informed Lamb the reason for this deletion was because Baker was “a bulk chemical supplier rather than a pharmaceutical manufacturer.” On June 19, 1961, Lamb sent Sichel an agreement signed by RMI officials. With the execution of this agreement, Lamb asked Sichel “to comply strictly with the terms” of the agreement and to send Lamb “Ciba’s written approval” for the combination of MER/29 and HCT. On June 21, 1961, Sichel informed Lamb, in writing, that the “combination by Richardson-Merrell of hydrochlorothiazide with your product MER/29 meets the approval of CIBA as provided for in the agreement in question.” The third “whereas” clause of the CIBARMI agreement provided that the purchase of HCT from CIBA was “for the sole purpose of preparing and marketing a product or products which make use of a combination of HCT with another or other therapeutically active ingredients, after approval of each combination by CIBA (hereinafter called ‘combination products ’).” (Emphasis supplied.) This phrase “combination products” is then used again in the first operative paragraph of the contract. This paragraph provides that “CIBA shall produce for and sell to RMI and RMI shall accept and pay for such quantities of Hydrochlorothiazide as RMI shall require for incorporation in the ‘combination products’ ” This was the first of four “approval by CIBA” agreements. The HCT purchased from CIBA was not for use in straight formulation, and could not be combined with any drug the vendee wanted, nor could it be disposed of in bulk. THE PARTIES’ UNDERSTANDING OF THE AGREEMENT At all times, CIBA understood that its agreement with RMI prohibited that company from reselling the HCT which CIBA sold in any form other than in a combination product which met with the explicit approval of CIBA. That is, RMI could not resell the HCT (1) in bulk form, (2)