[Federal Register Volume 59, Number 201 (Wednesday, October 19, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-25820]
[[Page Unknown]]
[Federal Register: October 19, 1994]
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DEPARTMENT OF JUSTICE
United States v. Pilkington plc and Pilkington Holdings, Inc.
Civil No. CIV 94-345 TUC WDB (D. Ariz.); Response of the United States
to Public Comments Concerning Proposed Final Judgment
Pursuant to Section 2(d) of the Antitrust Procedures and Penalties
Act, 15 U.S.C. Sec. 16(d), the United States publishes below the
written comments received on the proposed Final Judgment in United
States v. Pilkington plc and Pilkington Holdings, Inc., Civil Action
No. CIV 94-345, United States District Court for the District of
Arizona, together with its response thereto.
Copies of the written comments and the response are available for
inspection and copying in Room 3235 of the Antitrust Division, United
States Department of Justice, Tenth Street and Constitution Avenue,
N.W., Washington, D.C. 20530, (telephone 202/514-2481) and for
inspection at the Office of the Clerk of the United States District
Court for the District of Arizona, Tucson Division, Room 202, James A.
Walsh Courthouse, 44 East Broadway Boulevard, Tucson, Arizona 85701-
1711.
Mark C. Schechter,
Deputy Director of Operations.
United States District Court for the District of Arizona, United
States of America, Plaintiff, Pilkington plc and Pilkington
Holdings, Inc., Defendants. Civil No. 94-00345 WDB.
Response of the United States to Public Comments
Pursuant to Section 2(d) of the Antitrust Procedures and Penalties
Act (the ``APPA''), 15 U.S.C. Sec. 16(b)-(h), the United States hereby
responds to public comments to the proposed Final Judgment submitted on
May 25, 1994, for entry in the civil antitrust action.
This action began on May 25, 1994, when the United States filed a
Complaint alleging that the Defendants violated Section 1 of the
Sherman Act by maintaining and enforcing licenses and other agreements
that unreasonably restrict the construction and operation of float
glass plants and the use and transfer of float glass process technology
within the United States and around the world. In addition, the
Complaint alleges that Defendant Pilkington plc violated Section 2 of
the Sherman Act by wilfully acquiring and maintaining a monopoly in the
world market for the design and construction of float glass plants.
On the same day, the United States and both Defendants filed with
the Court, pursuant to Section 2(b) of the APPA, 15 U.S.C. Sec. 16(b),
a Stipulation submitting for entry a proposed Final Judgment, and a
Competitive Impact Statement. The proposed Final Judgment embodies the
relief sought in the Complaint.
During the 60-day period provided by Sections 2(b)-(d) of the APPA,
15 U.S.C. Sec. 16(b)-(d), which expired on September 1, 1994, the
United States received three comments concerning the proposed Final
Judgment. The United States attaches hereto a copy of each comment and
of each individual response that it made thereto.
Two of the comments were submitted by counsel for PPG Industries,
Inc. (``PPG'') and International Technologies Consultants, Inc.
(``ITC''), the respective plaintiffs in two civil actions against
Defendant Pilkington plc et al. currently pending in this Court. The
third comment was submitted on behalf of an unidentified client by a
Minneapolis, Minn. lawyer.
The PPG comment asserts that ``[w]hile the Proposed Final Judgment
does make it more difficult for Pilkington to continue these [trade-
restraining] practices * * *. the public interest counsels modification
or clarification'' thereof in accordance with eleven specific
proposals. The ITC comment states that ``[t]he proposed decree
represents an important initial step in eradicating the obviously
pernicious and indefensible license provisions, but unfortunately it
stops far short of providing the competitive relief required to
definitively eradicate the Pilkington cartel * * *'' and proposes two
specific changes in it. Both comments quote press statements by
Pilkington in justification of their proposals.
In response to both of these comments the United States initially
points out that the sole issue currently under consideration is whether
it is in the public interest to enter the proposed Final Judgment
submitted to the Court by stipulation. Entry is in the public interest
if the proposed Final Judgment is adequate to remedy the antitrust
violations alleged in the Complaint. United States v. Bechtel Corp.,
1979-1 Trade Cas. (CCH) 62,430 (N.D. 1979), aff'd, 648 F. 2d 660, 665
(9th Cir. 1981), cert. denied, 454 U.S. 1083 (1982).
ITC, a U.S.-based company that never had a Pilkington license and
that has persistently but so far unsuccessfully attempted to enter the
float glass plant design and construction market, proposes to add a
broad injunction against Defendants' entering or enforcing any contract
with a U.S.-based licensee that has the purpose or effect of inhibiting
market entry by U.S.-based non-licensees. PPG, a U.S.-based Pilkington
licensee, proposes rendering null and void all of the U.S.-based
licensees' obligations under their respective Pilkington licenses.
In response, the United States agrees that Pilkington's continued
efforts to hinder entry and to enforce geographic and use restrictions
against its U.S.-based licensees must be enjoined, and points out that
the proposed Final Judgment achieves those results, albeit with more
specifically drawn injunctive provisions that those proposed in the
comments. Thus, Subparagraph IV.A. forbids Defendants to enforce
license agreements with U.S.-based licensees insofar as they contain
any contractual limitations or any payment or confidentiality
obligations with respect to any technology that Pilkington disclosed to
any U.S. licensee under its licensee agreement, subject to some narrow
exceptions that lack the potential for competitive harm. Analogously,
Subparagraph IV.B. forbids Defendants to claim that persons dealing
with U.S.-based entities that have not been licensed by Pilkington are
subject to liability under Pilkington's exclusive rights to float glass
know-how, unless such claims are in good faith based on technology that
is a misappropriated Pilkington trade secret specifically identified by
Pilkington to the Department of Justice.
The other comments offered by ITC and PPG propose specific changes
of language to the proposed Final Judgment. The United States has
considered each of these, and for the detailed reasons set forth in the
attached individual letter responses, explains why the public interest
does not justify withdrawing its consent to entry of the proposed Final
Judgment.
In the third comment, Minneapolis, Minn. lawyer John A. Grimstad,
Esq. proposed several changes to the Judgment out of concern that they
are necessary to protect the interest of his unidentified client, a
domestic float glass producer that acquired its technology by a route
not fully explained in the comment, and is uncertain as to where it
fits into the Judgment's taxonomy of actual and potential technology
users. Our individual response to Mr. Grimstad, appended hereto,
demonstrates that the Judgment fully protects his client's right to be
free of anticompetitive interference with its operations by Defendants,
and that his proposed changes are therefore unnecessary.
In sum, the United States finds no basis in any of the Comments for
concluding that the public interest would be served by withdrawing its
consent to entry of the proposed Final Judgment submitted to the Court
by stipulation on May 25, 1994. and will request that the Court enter
it forthwith.
Supplement to Response
On September 30, 1994, PPG filed an ``Additional Comment''\1\
reiterating its earlier proposal that Subparagraph IV.D. of the
proposed Final Judgment be amended to add to the injunction against
restraining float glass exports to the United States a new provision
enjoining Defendants from restraining exports of float glass from the
United States. PPG asserts that documents ``recently produced'' by
Pilkington plc\2\ ``demonstrate the need for the suggested change'' by
showing
\1\This ``Additional Comment'' was to submitted in accordance
with the APPA, 15 U.S.C. Sec. 16 (b)-(d) in that it is dated well
after the September 1, 1994, expiration of the 60-day comment
period.
\2\In its ``Additional Comment,'' PPG states that these
documents were recently produced to it ``on a restricted basis'' by
Pilkington plc in CIV-92-753-TUC-WDB, a civil action between those
parties pending in this Court, and that, because of restrictions
imposed by Pilkington, PPG can only submit the documents to the
Court under seal. PPG also states that, because of these Pilkington-
imposed restrictions, it has not served copies of the documents upon
the Government. However, the Government's remarks herein concerning
the ``Additional Comment'' have been prepared after counsel for
Defendants, in response to the Government's request for copies of
these documents, furnished copies of them to Government counsel,
albeit with the restriction that they ``are not for further
distribution outside the Department of Justice.''
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That Pilkington's conduct * * * is designed to foreclose * * *
American manufacturers from competing with Pilkington in the
construction of new plants in foreign countries and, as well, in the
export of glass from the United States to those foreign countries.
They suggest that such exclusionary conduct is continuing to the
present day.
Without suggesting that these Pilkington documents lack the probative
value that PPG asserts, the Government finds in them no reason to
supplement its prior response to this suggestion. As stated in our
individual response letter to PPG's counsel, at 3, 5-6, the need for
the proposed change is obviated by the provisons of Subparagraphs IV.A.
and IV.B., which respectively assure U.S.-based Pilkington licensees
and U.S.-based non-licensees freedom to export float glass from the
United States to any point in the world.
Dated: October 6, 1994.
Respectively submitted.
K. Craig Wildfang, Special Counsel to the Assistant Attorney
General; Kurt Shaffert, Thomas H. Liddle, Molly L. DeBusschere, John
B. Arnett, Sr., M. Lee Doane, Attorneys, Antitrust Division, United
States Department of Justice, Washington, D.C. 20530, (202) 307-
1032.
United States District Court, District of Arizona, United States
of America, Plaintiff, v. Pilkington plc and Pilkington Holdings
Inc., Defendant. No. CIV 94-00345 WDB.
Comments of PPG Industries, Inc. on Proposed Final Judgment,
Stipulation and Competitive Impact Statement
PPG Industries, Inc. (``PPG'') comments on the Proposed Final
Judgment, Stipulation and Competitive Impact Statement in United States
v. Pilkington plc as follows:
Preliminary Statement
Pilkington has repeatedly brought vexatious litigation and has
attempted to restrain trade under the guise of protecting the
confidentiality of float technology and enforcing license restrictions.
While the Proposed Final Judgment does make it more difficult for
Pilkington to continue these practices, Pilkington has already publicly
indicated in its own press releases that it intends to continue
engaging in such behavior to the degree that the consent decree allows
it.
For example, on May 26, 1994, the Pilkington press release
announcing the terms of this consent decree stated:
The Government's allegations are unproven and would not have
survived a test in court. * * * The Consent Decree * * * recognizes
the subsequent evolution of [float] technology and that recent float
bath technology developed by Pilkington will continue to be treated
through normal licensing arrangements. * * * Pilkington's protection
and licensing of its total float technology, throughout the rest of
the world, remains unaffected. * * * Pilkington is reassured that
the confidentiality of the process is protected and that the normal
licensing arrangements for current and future float glass technology
are secure.
Pilkington Press Release, May 26, 1994. As reported in the Financial
Times on May 27, 1994, Sir Robin Nicholson, Pilkington's technology
director, said:
We have got what we wanted, in that we retain a substantial
amount of proprietary knowledge which we can license in the normal
way.
``Pilkington Emerges with Advantages,'' Financial Times, p. 6, May 27,
1994.
Based on Pilkington's own statements and to prevent continued
vexations litigation and trade restraints, PPG submits that protection
of the public interest counsels modification or clarification of the
Proposed Final Judgment in the following limited respects.
Comments
1. Float License Agreements
Change: Paragraph IV.A.1. should be modified to provide: ``All
obligations of U.S. LICENSEES in all LICENSE AGREEMENTS between any
defendant and any U.S. LICENSEE are hereby declared null, void and
unenforceable. No defendant shall take any action to invoke, enforce or
assert any claim under any such agreement.'' Alternatively, at a
minimum, paragraph IV.A.1 should be modified to add: ``Moreover, no
defendant shall enter into, enforce or claim any right under any
AGREEMENT to the extent that it requires any U.S. LICENSEE to: (i)
Report and grant back to any defendant all improvement in FLOAT
TECHNOLOGY; (ii) limit exports of FLAT GLASS to any geographic areas;
(iii) litigate disputes in an arbitration, as opposed to a U.S. Court,
unless such arbitration permits the application of substantive U.S.
antitrust law, including its provisions for treble damages and
attorneys' fees awarded to a prevailing plaintiff; or (iv) prove that
the SUBJECT FLOAT TECHNOLOGY had become publicly known before being
relieved of the territorial and use restrictions.''
The references in paragraphs IV.A.2.(b); IV.A.3; IV.B.1; IV.B.2(a);
and IV.C to ``trade secret under applicable law'' should be changed to
``trade secret under applicable law, provided that any applicable non-
U.S. trade secret law will not be applied to permit the protection of
items of technology that would be unprotectable under U.S. law.''
Reason for Change: As is set forth in the complaint in United
States v. Pilkington plc, CIV 94-00345-WDB (D. Ariz.) (the
``Complaint''), defendants have used float license agreements
(``FLAs'') to restrain trade and secure monopoly power unlawfully. The
Competitive Impact Statement and the Complaint both note that
Pilkington has no intellectual property of substantial value, that,
since 1982, Pilkington's remaining secret unpatented technology
consisted largely of engineering solutions with no substantial value
over other equally efficacious engineering alternatives and that one of
the devices Pilkington has used to perpetuate its control is its FLAs,
including their burden-shifting clauses, which require licensees to
establish the nonexistence of confidential information in any
arbitration. Competitive Impact Statement (``Comp. Imp. Stat.'') at 10;
Complaint Sec. 24. If Pilkington is to be allowed to continue to
protect its alleged trade secrets, it should be required to prove that
they exist. Pilkington should not be able to shift that burden of
proof, as it has done in its FLAs.
Pilkington's grant-back clauses require licensees to report and
grant to Pilkington all improvements in float glass technology. They
thus deprive any licensee of the incentives to create innovative
technologies, precluding any competitive advantage to accrue to an
innovative licensee and, in effect, discourage efforts to create such
technologies. The grant-back clauses should be invalidated for that
reason.
Pilkington also should be precluded from utilizing the FLA
arbitration clauses to enforce so-called trade secret claims. Those
clauses have permitted Pilkington to assert claims in a forum that: (a)
Is hostile to the application of U.S. antitrust law; (b) does not
recognize the extraterritorial application of U.S. antitrust law and
may not recognize even this Final Judgment; and (c) enforces
anticompetitive restrictions not permissible under U.S. antitrust law.
Any issues involving U.S. trade secret law and U.S. antitrust . . . law
should be litigated in a forum that will permit an adjudication and
award under those laws.
2. Assertion of Claims Against PPG With Respect to the Use or Licensing
of the LB Process
Change: Change paragraph IV.A.1 to provide: ``with respect to the
use, licensing or sublicensing of any SUBJECT FLOAT TECHNOLOGY or any
process developed with the use or aid of SUBJECT FLOAT TECHNOLOGY.''
Paragraphs IV.A.2.(a) and IV.A.3 also should be modified accordingly.
Reason for Change: In the Shenzhen Arbitration, which Pilkington
filed in 1985 and which continued until 1992, Pilkington asserted that
PPG's LB process was ``tainted'' because it was developed using
Pilkington float technology, irrespective of whether PPG's use was
wrongful. That ``taint,'' according to Pilkington, subjected the LB
process as a whole to an obligation of confidence coextensive with that
applicable to information that was transferred by Pilkington to PPG.
The design and effect of Pilkington's ``taint'' argument was to make it
virtually impossible for any licensee to develop competing innovative
technology free of Pilkington's aggressive claims and litigation, thus
further discouraging and inhibiting the development of innovative
technologies by those most likely and able to engage in such
developmental efforts.
Although Pilkington's ``taint'' claim was rejected by the Shenzhen
arbitrators, the language of the Proposed Final Judgment does not
clearly resolve the issue and may be used to revive Pilkington's anti-
competitive claims. The ambiguity may be easily remedied by amending
the term ``Subject Float Technology'' to encompass technologies
developed by licensees whether or not developed with the use or aid of
subject float technology.
3. Confidentiality Provisions
Change: Paragraph IV.A.3.(b) should be changed to read:
``CONFIDENTIALITY of the transferred SUBJECT FLOAT TECHNOLOGY.''
Reason for Change: The reference to FLOAT TECHNOLOGY (instead of
SUBJECT FLOAT TECHNOLOGY) appears to be an oversight because, as
drafted, the provision would require licensees to protect the
confidentiality of all float technology, whatever its source.
4. Litigation Commenced Before the Stipulation Date
Change: Paragraph IV.A.4 should be deleted and paragraph IV.A.1
should be changed to ensure that Pilkington may not enforce new
unadjudicated claims arising under any FLA regardless of whether a
proceeding was instituted prior to the date of the stipulation.
Reason for Change: In August 1992, only two days after the High
Court denied Pilkington leave to appeal from the award in the Shenzhen
Arbitration, Pilkington notified PPG of is intent to commence a new
arbitration. Although a 1978 Settlement Agreement between PPG and
Pilkington explicitly permits PPG to use the LB process in Canada and
Italy, Pilkington now alleges that PPG's operation of its LB lines in
those countries is not permitted because the width of the glass ribbons
in those lines has not always been ``from 70% to 90% of the constant
spacing between the sidewalls,'' which Pilkington argues is required
under the Agreement, notwithstanding the fact that any variation in the
width of the ribbons at those lines does not implicate any Pilkington
trade secrets or other intellectual-property interests.
United States antitrust consent decrees commonly provide that the
defendants are enjoined from any future enforcement of anticompetitive
restraints. However, paragraph IV.A.4 of the Proposed Final Judgment
would permit Pilkington to continue its monopolistic practices by
pursuing its recently commenced arbitration proceedings against PPG and
its subsidiaries to punish PPG for its efforts to end Pilkington's
monopolistic interference with United States trade in the worldwide
float technology market. No good reason exists why Pilkington's claims
in those proceedings, in which earnings have not yet commenced, should
be exempted from the Proposed Final Judgment.
5. Subsidiaries and Affiliates
Change: Paragraph II.Q should be changed to read: ``U.S. LICENSEE''
means any LICENSEE that was or is incorporated in the United States,
and shall include any subsidiaries, affiliates or parents of any such
LICENSEE. * * *''
Reason for Change: As currently constituted, the Final Judgment
offers no protection for subsidiaries and affiliates of U.S. companies,
although Pilkington's actions directed at such entities have had and
could continue to have anticompetitive effects in the United States.
PPG and other U.S. competitors often participate in float glass
manufacturing projects outside the United States through joint ventures
and through their non-U.S. subsidiaries or affiliates. The use of U.S.
licensees of subsidiaries, joint ventures and affiliates is often
necessary to accommodate participation of local investors.
Because effective competition with Pilkington by U.S. Licensees
will necessarily entail the use of subsidiaries and affiliates in
foreign countries, PPG's ability to participate in such ventures would
be impaired (and U.S. commerce thereby affected) if Pilkington were
free to continue to enforce its monopolistic restrictions against these
U.S.-related entities.
6. Protection of Flat Glass Exports
Change: Paragraph IV.D. should be changed to add ``or from'' to the
caption after the word ``to'' and in the second line of text after the
word ``to.''
Reason for Change: The Consent Decree should protect exports from
the United States as well as imports to the United States. Exports from
the United States are part of the foreign commerce of the United States
and Pilkington and its subsidiaries and affiliates have engaged in a
variety of exclusionary practices, unlawful under the United States
antitrust laws, intended to interfere with export of Float Glass from
the United States into, e.g., Mexico, Brazil, Argentina and Australia.
7. Perpetual Confidentiality Obligations Should Not Revive Upon the
Expiration of This Final Judgment
Change: Paragraph VII.(A) should be changed to provide: ``Other
than the provisions of paragraphs IV.A. and B., which provisions shall
remain in effect permanently, this Final Judgment shall expire on the
tenth anniversary of its entry.''
Reason for Change: The ten-year expiration of the Final Judgment
should not leave open an argument that the otherwise perpetual
confidentiality obligations of Pilkington's FLAs somehow revive upon
its expiration, as provided in VII(A).
8. Pilkington Should Not Be Able To Assert U.S. Trade Secret Rights
Against Any U.S. Licensee or Non-Licensee
Change: Paragraph IV.A.2 should be changed to read: ``No defendant
shall assert against any U.S. LICENSEE any proprietary FLOAT TECHNOLOGY
know-how rights that it may have or claim with respect to any FLOAT
TECHNOLOGY.''
Reason for Change: Paragraph 24 of the DOJ Complaint states that
``Pilkington's maintenance and continued enforcement of the licensee
restraints described above was not justified by any intellectual
property rights of substantial value.'' Pilkington's core float glass
technology was disclosed in numerous patents that have long expired,
placing that technology in the public domain. Moreover, unpatented
Pilkington float glass technology has been publicly disclosed in
substantial part. The Department of Justice has determined that the
remaining secret unpatented technology consists largely of
``engineering solutions with no substantial value over other, equally
efficacious engineering alternatives.'' Complaint 24. Moreover,
Attorney General Reno, in announcing the consent decree, said that
``Pilkington had agreed that much of its technology is in the public
domain.'' ``British Company Agrees to Settle Justice Department
Antitrust Suit,'' New York Times, p. 1, May 27, 1994.
If Pilkinton no longer holds intellectual property of substantial
value, there is no reason why it should be allowed to assert trade
secret rights against any United States licensee or United States non-
licensee with respect to any Float Technology in existence as of the
date of the Final Judgment.
Forfeiture of patent rights is a common remedy for the abuse of
patent rights giving rise to antitrust violations and there is no
reason that that remedy should not be applied to Pilkington's abuse of
its alleged trade secret rights, particularly in view of the
Department's view that its technical information is without redeeming
value. Comp. Imp. Stat. at 10; Complaint 26. Given Pilkington's
demonstrated propensity to pursue its monopolistic practices through
unjustified assertions of propriety trade secret rights and given the
trivial nature of Pilkington's claimed ``trade secrets,'' there is no
sufficient justification for allowing Pilkington to retain these
weapons empowering it to use threats and litigation based on asserted
trade secrets to continue to its monopolistic practices. Paragraph
IV.A.2 should be modified accordingly. This suggested change is not
meant to prevent Pilkington from seeking to protect any bona fide trade
secrets developed after the date of entry of this Final Judgment.
9. As An Alternative, Pilkington Should be Barred From Asserting Any
Trade Secret Rights Based on Information in Existence Prior to December
31, 1982 and Identify Any Other Trade Secrets on the Basis of Which
Pilkington Imposes Any Restraint of Trade
Change: Paragraph IV.A.2 should be changed to read: ``No defendant
shall assert against any U.S. LICENSEE OR U.S. NON-LICENSEE any
proprietary FLOAT TECHNOLOGY know-how rights based on information in
existence prior to December 31, 1982, the date referred to in 26 of
the Complaint. Within sixty (60) days of entry of this Final Judgment,
Pilkington shall identify and specifically describe any trade secrets
developed after December 31, 1982, which it claims may justify a
restraint of trade to the Department of Justice, Antitrust Division;
and identify such trade secret to all U.S. LICENSEES and to all U.S.
NON-LICENSEES who shall request the same in writing.
Reason for Change: Should the Department believe it inappropriate
to bar defendants from asserting any trade secrets in existence as of
the date of the Final Judgment, the Department should at least bar
defendants from imposing restraints of trade based on technical
information in existence prior to December 31, 1982, and require
defendants to identify and specifically describe any trade secret
developed after December 31, 1982, which any defendant may claim
justifies a restraint of trade, to the Department of Justice, Antitrust
Division; and identify such trade secret to any U.S. LICENSEE and any
U.S. NON-LICENSEE who requests the same.
Such relief is minimally necessary to prevent defendants from
continuing to rely on stale claims of trade secrets and refusing to
disclose with reasonable specificity any trade secret created after
December 31, 1982, upon which it may seek to impose a restraint of
trade. Without such relief, defendants will be enabled to continue
their past practice of threatening their competitors with litigation
based on some ambiguous assertion of trade secret rights. Defendants'
public announcements make it clear that they intend to continue the
assertion of some unidentified body of trade secrets, notwithstanding
the Final Judgment. (See pp. 1-2 above.)
10. Justice Department Scrutiny of Litigation Brought by Pilkington
Change: Alternatively, paragraph IV.A.2(b) should be changed to add
subparagraphs (iii) and (iv):
(iii) defendant has, within fourteen (14) days after any such
assertion:
(a) made a showing in writing to the Department of Justice,
Antitrust Division in support of the arguments described in
subparagraphs 2(b)(i) and 2(b)(ii), above;
(b) identified, enumerated, and described such item or combination
of items (in sufficient detail and with sufficient clarity to
distinguish them from information not a trade secret under applicable
law) on a list submitted to the Antitrust Division and to the U.S.
LICENSEE against whom such right is asserted; and
(iv) such U.S. LICENSEE is unwilling to make lawful and
commercially reasonable efforts to maintain the CONFIDENTIALITY of any
such item or combination of items for which it has received actual
notice of a defendant's claim of proprietary rights therein pursuant to
subparagraph 2(iii)(b), above, and for which a defendant has made the
requisite showing pursuant to subparagraph 2(iii)(a), above.
Reason for Change: The change is necessary to provide for the same
scrutiny for Pilkington suits against licensees as is provided for
suits against non-licensees (as is set forth in paragraph IV.B.2(c)).
No adequate justification exists for discriminating against licensees,
especially given that competition has been stultified principally
through use of Pilkington's licensing scheme.
11. Adjudications in Which Information Alleged To Be Confidential by
Pilkington Has Been Held To Have Been Publicly Disclosed or Otherwise
Unenforceable and Related Disclosure Obligations
Change: Paragraph IV.G.1. should be changed to replace ``public
knowledge in the FINAL AWARD'' with ``public knowledge found to have
been such or otherwise found to be not an enforceable trade secret in
the FINAL AWARD or in any other prior proceeding . . . '' Paragraph
IV.G.2(b) also should be modified accordingly.
Paragraph IV.G.2 also should be changed to replace ``public domain'' in
subparagraphs (a), (b), and (c) with ``public knowledge or otherwise
not a trade secret'' in each subparagraph.
Reason for Change: The present formulation does not account for
unenforceability arising from anything other than the public disclosure
of trade secret information. Information that is claimed as a trade
secret also may not be enforceable if it is readily ascertainable or
had not been the subject of adequate precautions to preserve
confidentiality. The change also gives effect to all proceedings to
which information alleged to be confidential by Pilkington has been
held to have been publicly disclosed or with respect to which
Pilkington's rights have been held unenforceable for any reason.
August 13, 1994.
Respectfully submitted,
Jack E. Brown,
Lawrence G.D. Scarborough, Brown & Bain, P.A., 2901 North Central
Avenue, Post Office Box 400, Phoenix, Arizona 85001-0400.
Thomas D. Barr,
Paul M. Dodyk,
Cravath, Swaine & Moore, Worldwide Plaza, 825 Eighth Avenue, New York,
New York 10019.
By---------------------------------------------------------------------
Attorneys for Plaintiff, PPG Industries, Inc.
Paul M. Dodyk
Copies sent by Federal Express this 13th Day of August, 1994 to:
Gail Kursh, Chief,
Professions and Intellectual Property Section, Room 9903, U.S.
Department of Justice, Antitrust Division, 555 4th Street, N.W.,
Washington, DC 20001.
John H. Shenefield, Esq.
Morgan, Lewis & Bockius, 1800 M Street, N.W., Washington, D.C. 20036.
Counsel for Defendants Pilkington plc and Pilkington Holdings
Inc.
Sheila M. Frishman.
Jack E. Brown,
Lawrence G.D. Scarborough, Brown & Bain, P.A., 2901 North Central
Avenue, Post Office Box 400, Phoenix, Arizona 85001-0400, (602) 351-
8000.
State Bar Attorney Nos. 001074 and 006965.
Thomas D. Barr,
Paul M. Dodyk
Cravath, Swaine & Moore, Worldwide Plaza, 825 Eighth Avenue, New York,
New York 10019, (212) 474-1000.
Attorneys for PPG Industries, Inc.
United States District Court, District of Arizona
United States of America, Plaintiff, v. Pilkington plc and
Pilkington Holdings Inc., Defendants. No. CIV 94-00345 WDB.
Additional Comment of PPG Industries, Inc. on Proposed Final Judgment
(Exhibits Filed Under Seal)
PPG Industries, Inc. (``PPG'') submits this Additional Comment on
the Proposed Final Judgment in United States v. Pilkington plc as
follows:
Paragraph IV.D of the proposed Final Judgment provides that ``[n]o
defendant, with the intent of restraining or limiting the amount of
exports of FLOAT GLASS to the United States [etc.]''. We have suggested
[Comments at 8] that the paragraph should be changed to add ``or from''
after the word ``to.''
Enclosed are documents recently produced by Pilkington in the suit
by PPG Industries against Pilkington in the District of Arizona (No.
CIV-92-753-TUC-WDB). Those documents demonstrate the need for the
suggested change. They show, we believe, that Pilkington's conduct, as
alleged in the U.S. complaint and in PPG's complaint, is designed to
foreclose PPG and other American manufacturers from competing with
Pilkington in the construction of new plants in foreign countries and,
as well, in the export of glass from the United States to those foreign
countries. They suggest that such exclusionary conduct is continuing to
the present day. The documents are filed under seal because they were
produced to us on a restricted basis. We therefore suggest that the
Court should seek from Pilkington a statement of the reasonable terms
and conditions under which the Court may inspect the documents and
obtain comments thereon from counsel appearing for the United States.
September 30, 1994.
Respectfully submitted,
Thomas D. Barr
Paul M. Dodyk
Cravath, Swaine & Moore, Worldwide Plaza, 825 Eighth Avenue, New
York, New York 10019.
Jack E. Brown
Lawrence G.D. Scarborough
Brown & Bain, P.A., 2901 North Central Avenue, Post Office Box 400,
Phoenix, Arizona 85001-0400.
By---------------------------------------------------------------------
Lawrence G.D. Scarborough,
Attorneys for PPG Industries, Inc.
Copy of the foregoing (without exhibits) sent by Federal Express
this 30th day of September, 1994, to:
Gail Kursh,
Chief, Professions and Intellectual Property Section, U.S. Department
of Justice, Antitrust Division, 555 4th Street, N.W., Room 9903,
Washington, D.C. 20001, Attorneys for Plaintiff United States of
America.
Copy of the foregoing (with exhibits) sent by Federal Express
this 30th day of September, 1994, to:
John H. Shenefield, Esq.,
Morgan, Lewis & Bockius, 1800 M Street, N.W., Washington, D.C. 20036,
Attorneys for Pilkington plc and Pilkington Holdings Inc.
Lucinda F. Mason.
Judiciary Center Building, 555 4th Street, NW, Washington, DC
20001.
October 6, 1994.
Jack E. Brown, Esquire,
Brown & Bain, P.A., 2901 North Central Avenue, P.O. Box 400,
Phoenix, Arizona 85001-0400
Thomas D. Barr, Esquire,
Cravath, Swayne & Moore, 825 Eighth Avenue, New York, New York 10019
Re: Response to Comment on Proposed Final Judgment U.S. v.
Pilkington plc and Pilkington Holdings, Inc., CIV 94-345 TUC WDB (D.
Ariz.), filed May 25, 1994
Dear Messrs. Brown and Barr: This letter responds to the
Comments of PPG Industries, Inc. [``PPG''] on Proposed Final
Judgment, Stipulation and Competitive Impact Statement
(``Comments'') submitted to the Antitrust Division over your names
on August 13, 1994. The Comments include a ``Preliminary Statement''
that summarizes certain representations by Defendants to the press
that, in your words, indicate that ``Pilkington * * * intends to
continue engaging in [its prior anticompetitive] behavior to the
degree that the consent decree allows it.'' You further assert that
``[b]ased on Pilkington's own statements * * * protection of the
public interest counsels modification or clarification of the
Proposed Final Judgment'' in eleven specific ways.
Before addressing your eleven specific proposed changes, we
would point out that the text of the proposed Final Judgment
(``Judgment''), rather than Pilkington's characterization thereof in
its own press releases, controls what it will be permitted
and required to do. Thus, contrary to Pilkington's public claim,
which you quote, that the restraints Pilkington has imposed under
the guise of ``protection and licensing of its total float
technology, throughout the rest of the world, remain unaffected,''
the Judgment will in fact enjoin Pilkington from anticompetitive
practices throughout the world to the extent that those practices
are aimed at U.S.-based entities seeking to use float technology
anywhere, or are aimed at anyone else seeking to use float
technology in North America. That is, Pilkington's specified
anticompetitive conduct is enjoined insofar as it is within the
jurisdiction of the U.S. antitrust laws. The competitive effect of
Pilkington's ability, also referred to in the portion of
Pilkington's press release that you quote, to acquire ``normal
licensing'' of its ``recent float bath technology,'' must be
considered in the light of its ready concession to the United States
during settlement negotiations that very little significant
technology of that kind exists. A good measure of the near-absence
of such significant recent technology, as you must certainly
realize, in that float glass manufactured in this country by PPG and
others who have not been licensed to use this ``recent technology''
has been quite competitive with Pilkington's subsidiary's
production.
The standard we have applied in assessing your eleven specific
proposals for modification or clarification is whether it is in the
public interest to enter the Judgment that has been submitted for
entry by stipulation. Entry is in the public interest if the
Judgment is adequate to remedy the antitrust violations alleged in
the Complaint. United States v. Bechtel Corp., 1979-1 Trade Cas.
(CCH) 62,430 (N.D. Cal. 1979), aff'd, 648 F. 2d 660, 665 (9th Cir.
1981), cert. denied, 454 U.S. 1083 (1982).
1. You propose, in the alternative, to change subparagraph
IV.A.1 of the Judgment to provide that all obligations of U.S.
LICENSEES\1\ under all LICENSE AGREEMENTS are declared null, void,
and unenforceable, or alternatively ``at a minimum'' to make four
specific changes in that paragraph. As to your first proposed
alternative, the Department of Justice does not agree that it is in
the public interest to withhold entry of the Judgment on the ground
that it does not totally render these agreements null, void, and
unenforceable. We believe, rather, that the existing provisions of
subparagraph IV.A. protect the interest of the public by restoring
competition and remedying the violation with regard to the ability
of U.S. LICENSEES to compete freely in float glass process
technology and float glass markets. In that regard, we would point
out that in the Complaint in PPG Industries, Inc. v. Pilkington plc
et al., Civil Action CIV 92-753 TUC WDB (D. Ariz.) the relief you
seek is for the Court to declare null, void, and unenforceable only
``the anticompetitive restraints in the Pilkington license
agreements,'' and not the agreements themselves, relief that is
essentially like that provided in the Judgment rather than that
which now you propose.
---------------------------------------------------------------------------
\1\Capitalized terms have the meanings assigned to them in
Paragraph II of the Judgment.
---------------------------------------------------------------------------
As an alternative to the above, you make a four-part proposal,
to which we have the following responses:
(i) The first part of this alternative proposal is that
Defendants be enjoined from entering, enforcing, or claiming rights
under any AGREEMENT requiring any U.S. LICENSEE to report or grant
back rights to FLOAT TECHNOLOGY improvements. Inasmuch as all such
improvement reporting and grant-back provisions in licenses to U.S.
LICENSEES expired long ago, this proposes an unnecessary addition to
the provision of the Judgment.
(ii) The second part of this alternative proposal is that
Defendants be enjoined from entering, enforcing, or claiming rights
under any AGREEMENT requiring any U.S. LICENSEE to limit exports of
FLAT GLASS to any geographic areas. We note that Defendants have not
imposed express contractual restraints upon the export of glass from
the United States by PPG nor by any other U.S. LICENSEE.
Nevertheless, there have been instances when defendants relied upon
their patents in the destination countries to limit or prevent such
exports when the U.S. LICENSEE was unable to persuade Defendants to
grant or sell a full waiver of those foreign patent rights. The
patents on which Defendants relied for this purpose, however, have
now expired along with their counterpart U.S. patents, denying them
the means to carry on this form of export restraint.
(iii) The third part of this alternative proposal is that
Defendants be enjoined from entering, enforcing, or claiming rights
under any AGREEMENT requiring any U.S. LICENSEE to arbitrate rather
than litigate disputes unless substantive U.S. antitrust law is
applied. The Judgment will foreclose most such disputes in the
future by the prohibitions and conditions that it places on
Defendants' ability to require U.S. LICENSEES to pay FEES, observe
LIMITATIONS, or maintain CONFIDENTIALITY with respect to the use or
sublicensing of any SUBJECT FLOAT TECHNOLOGY. Moreover, even prior
to the entry of any judgment herein PPG has obtained the very result
that this request seeks. Specifically, we refer to Judge Browning's
finding
That arbitration * * * will not operate as a prospective waiver
of PPG's statutory claims due to Pilkington's express representation
and consent to the substantive arbitration or PPG's claims pursuant
to U.S. antitrust law.
PPG Industries, Inc. v. Pilkington et al., CIV 92-753-TUC-WDB (D.
Ariz. July 9, 1994) (Order Granting Stay and Compelling
Arbitration).
(iv) The fourth part of this alternative proposal is that
Defendants be enjoined from entering, enforcing, or claiming rights
under any AGREEMENT requiring any U.S. LICENSEE to bear the burden
of proving that SUBJECT FLOAT TECHNOLOGY has become publicly known
before being relieved of territorial and use restrictions.
Subparagraph IV.A. accomplishes precisely that result.
2. You propose to expand the coverage of subparagraph IV.A.1. to
include processes developed with the use or aid of SUBJECT FLOAT
TECHNOLOGY so as to preclude Defendants' future reassertion of
arguments that technology developed in minds ``tainted'' by prior
knowledge of Pilkington technology also belongs to Pilkington.
However, the Judgment precludes Defendants from making such
assertions. Any ``taint'' claim by Defendants is enjoined by
subparagraph IV.A.1., inasmuch as it would ``require * * * any U.S.
LICENSEE to * * * observe LIMITATIONS,'' LIMITATIONS being defined
in subparagraph II.K. as including ``any restriction or limitation,
or purported restriction or limitation, of the use of FLOAT
TECHNOLOGY, whether the result of an affirmative prohibition or a
limited authorization.'' In the discussions leading to the
Stipulation to submit the Judgment to the Court for entry,
Defendants' representatives repeatedly acknowledged to the
Department that the taint issue had been resolved against Pilkington
in the ``Shenzhen'' arbitration (a point you also make in your
comment) and in subsequent judicial review thereof, and that they
considered this a final determination precluding them from again
asserting ``taint'' against your client.
3. You propose limiting IV.A.3.(b) by adding the word
``SUBJECT'' just before the words ``FLOAT TECHNOLOGY,'' stating that
we appear to have omitted the word by oversight. Contrary to your
assumption, however, the text of this provision intentionally covers
all FLOAT TECHNOLOGY. By omitting the word that your proposal would
add, this provision protects against future Pilkington
misappropriation charges any U.S. LICENSEE who transfers any FLOAT
TECHNOLOGY (e.g., in connection with building a float glass plant
abroad). This protection will cover not only charges of
misappropriating SUBJECT FLOAT TECHNOLOGY, i.e., FLOAT TECHNOLOGY
disclosed to the U.S. LICENSEE under its LICENSE AGREEMENT, but also
FLOAT TECHNOLOGY that found its way to the U.S. LICENSEE via a third
party (e.g., by hiring a former Pilkington employee) as long as the
U.S. LICENSEE, when transferring such technology, includes in the
agreement of transfer ``a lawful and commercially reasonable
provision requiring the transferee to maintain CONFIDENTIALITY.''
Such confidentiality provisions are customarily included in
technology transfer agreements, so that this provision imposes no
significant burden on U.S. LICENSEES, while protecting them against
such claims by Pilkington.
4. You propose deleting subparagraph IV.A.4. and changing
subparagraph IV.A.1. to ensure Pilkington cannot pursue monetary
relief in proceedings regardless of when they were instituted,
pointing out that in 1992 Pilkington instituted an additional
arbitration proceeding against PPG on a claim growing out of a 1978
settlement concerning LB technology. Subparagraphs A.1. and A.2. of
the Judgment enjoin Defendants' further pursuit of injunctive and
declaratory relief against U.S. LICENSEES' ``violations'' of license
restrictions. Subparagraph IV.A.4. creates a narrow exception that
permits Defendants to continue to pursue solely monetary (but not
injunctive or declaratory) relief, but only for past conduct, and
only in proceedings instituted before May 25, 1994. Your comment
indicates that your concern about this exception is raised by a
single dispute that Pilkington initiated in 1992, one that arose out
of a 1978 settlement of an earlier litigated dispute. The Department
of Justice's role in this civil Sherman Act case extends to securing
prospective relief that assures open competition for the benefit of
the public. ``[T]he antitrust laws * * * were enacted `for the
protection of competition, not competitors,''' Brunswick Corp. v.
Pueblo Bowl-O-Mat, 429 U.S. 477, 488 (1977), quoting Brown Shoe Co.
v. United States, 370 U.S. 294, 320 (1962). To that end, the
Judgment enjoins Defendants not only from prospective enforcement of
previously obtained equitable relief but also from the imposition of
FEES, as defined in subparagraph II.C., for the prospective use or
sublicensing of SUBJECT FLOAT TECHNOLOGY. Contrarily, the claim to
which you allude is limited strictly to monetary relief for your
client for past conduct. Thus, no matter how ill-founded or unjust
this Pilkington monetary claim against PPG may be, its assertion is
a private matter and consequently concerns only the private parties
involved.
5. You propose including within the definition of U.S. LICENSEE
(subparagraph II.Q.) the licensees' subsidiaries, affiliates, and
parents, pointing out that participation by U.S. LICENSEES in off-
shore float glass manufacturing projects is often likely to occur
through their subsidiaries or affiliates. While this is undoubtedly
correct, such subsidiaries or affiliates participate in such
projects under sublicenses granted to them by their respective U.S.
LICENSEE parents or affiliates. Your proposal is unnecessary since
subparagraph IV.A. of the Judgment expressly enjoins Defendants from
conduct interfering with U.S. LICENSEES' sublicensing activities to
the same extent as it enjoins interfering with their use of SUBJECT
FLOAT TECHNOLOGY. It may be noted that, in the course of discussions
leading to the Stipulation to submit the Judgment to the Court,
Pilkington's representatives acknowledged that under the Judgment
U.S. LICENSEES will be free, through subsidiaries or affiliates, to
participate in the design, construction, and operation of overseas
float glass plants such as the Shenzhen plant.
6. You propose broadening the injunctive provisions of
subparagraph IV.D., which deal with exports of float glass from
abroad into the United States, to cover exports of float glass from
the United States as well. Subparagraph IV.A. leaves U.S. LICENSEES
free to export float glass from this country. Subparagraph IV.B.
analogously protects U.S. NON-LICENSEES from interference with their
export of float glass from this country.
7. You propose that the injunctive provisions of subparagraphs
IV.A. and IV.B. be made perpetual by exempting them from the ten-
year Judgment duration provision of subparagraph VII.A. because, in
your words, the ``Judgment should not leave open an argument that
otherwise perpetual confidentiality obligations'' revive upon the
Judgment's expiration. Trade secrecy obligations are, of course,
never perpetual; they last only while the information to which they
pertain has value and is not public. As set forth in Paragraph 24 of
our Complaint, the SUBJECT FLOAT TECHNOLOGY, all of which had been
communicated by Pilkington to U.S. LICENSEES by no later than 1982,
no longer has substantial value. The prospect that Defendants would
be able to resume interfering with open competition by assertions of
confidentiality for the, by then, even more highly superannuated
technology, especially in view of the pro-competitive effects that
this Judgment can be expected to confer during the next decade, are
too remote to justify your proposal. Consequently, the Department
does not consider such a change necessary.
8. You propose, in effect, to remove the exceptions to the
injunction in Subparagraph IV.A.2. against Defendants' asserting
know-how rights against U.S. LICENSEES with respect to any FLOAT
TECHNOLOGY on the ground that we have determined that Pilkington's
core float glass technology currently lacks substantial value. We
continue strongly to believe that this assessment of the value of
Pilkington's technology is correct, of course. For that reason,
Subparagraph IV.A.2.(a) enjoins Defendants from asserting against
all U.S. LICENSEES that are not subsidiaries of Defendants any
proprietary claims as to the FLOAT TECHNOLOGY disclosed to the
licensees under the license agreement (except for the reservation in
Subparagraph IV.A.4. of money damage claims for past conduct that,
as has already been discussed in Item 4, above, does not affect the
public interest). In addition, Subparagraph IV.A.2.(b) enjoins
Defendants from asserting any proprietary claims against such
licensees as to other FLOAT TECHNOLOGY, (i.e., technology that the
licensee did not obtain under the license but that Defendants
nevertheless claim is theirs, unless the claim is based on a good
faith argument that the technology in question is a legally
cognizable trade secret and that it was unlawfully acquired).
Subparagraph IV.A.2. therefore properly protects U.S. LICENSEES from
unjustified assertions of know-how rights by Defendants.
9. You propose, as an alternative to your Proposal No. 8,
changes to the language of Subparagraph IV.A.2. that would
categorically bar Defendants' assertion against U.S. LICENSEES of
(1) rights in pre-1983 know-how and (2) trade secrets developed
after that date that a Defendant, in your words, ``claims may
justify a restraint of trade,'' unless such trade secrets have been
disclosed to the Department and to all U.S. LICENSEES and U.S. NON-
LICENSEES who request it. You state that without such a provision
Defendants will be able to continue to threaten competitors with
ambiguous assertions of trade secret rights. We agree that it is
important that Defendants be prevented from continuing such illegal
conduct, but are certain that the Judgment will enjoin it.
Subparagraph IV.A.2. absolutely bars Defendants from making such
claims against U.S. LICENSEES with respect to SUBJECT FLOAT
TECHNOLOGY (which in view of the already-discussed 1982 cut-off of
improvement disclosures to all U.S. LICENSEES refers to pre-1983
technology), and limits such assertion by Defendants, when dealing
with other FLOAT TECHNOLOGY, to instances where they have good faith
arguments that they are asserting rights to subject matter that
qualifies as legally recognized trade secrets and also that the U.S.
LICENSEE in question has obtained the subject matter unlawfully.
Subparagraph IV.B.2. similarly protects U.S. NON-LICENSEES from such
future conduct. Given the protection afforded by subparagraphs
IV.A.2. and IV.B.2., the additional disclosure requirements are
unnecessary.
10. You propose to add to subparagraph IV.A.2. requirements that
Defendants must satisfy before asserting know-how rights against
U.S. LICENSEES that are as exacting as the subparagraph IV.B.2.
requirements that apply when Defendants assert such claims against
U.S. NON-LICENSEES. Although it may initially seem appropriate to
impose the same requirements on Pilkington regardless of whether it
asserts such alleged rights against U.S. LICENSEES or U.S. NON-
LICENSEES, the differences in how the two groups gain access to
Pilkington technology provides the basis for imposing different
requirements in the two situations. U.S. LICENSEES originally
obtained the SUBJECT FLOAT TECHNOLOGY under their respective
licenses, an information flow, as we have already noted herein, that
ended in 1982. Subparagraph IV.A.2.(a) absolutely bars Defendants'
claims against U.S. LICENSEES based on such old technology; thus,
Defendants would have to establish that any claim they make against
a U.S. LICENSEE not only meets the requirements of subparagraphs
IV.A.2.(b) but also that the technology in question was obtained by
the U.S. LICENSEE after 1982. The requirement for such a showing
substantially diminishes the need for the kind of additional showing
in claims against U.S. LICENSEES that you propose. By contrast,
claims that Defendants might make against U.S. NON-LICENSEES could
cover pre-1983 technology as well as that of later origin, making
the provisions of IV.B.2. (c) and (d) far more important as
safeguards against anticompetitive assertions of such know-how
rights.
11. Finally, you propose to extend Defendants' obligation
pursuant to subparagraph IV.G.1. to identify the FLOAT TECHNOLOGY
found to be public knowledge in the FINAL AWARD entered in the
Shenzhen arbitration so that it also requires such identification
for material ``otherwise found not to be a trade secret in the FINAL
AWARD or in any other proceeding.'' You further propose a similar
change for subparagraph IV.G.2(b). Such changes would be
counterproductive. Contrary to loose assertions made on Defendants'
behalf that the Shenzhen arbitrators determined what Pilkington
technology still merits trade secret status, they made no such
determination but rather determined only that certain items had not
been proven to be in the public domain. There is no basis in law for
the assertion implied by the proposed change, i.e., that any subject
matter not in the public domain is entitled to trade secret
protection. Such a formulation would ignore, inter alia, the
requirement that alleged trade secrets must have value to merit
legal or equitable protection. PPG, having been a party to this
arbitration, already knows what this provision of the Judgment
requires Defendants to disclose; it is thus primarily for the
benefit of PPG's competitors.
For the reasons noted above the Department of Justice does not
believe that it would be in the public interest to forego entry of
the Judgment for failure to incorporate any of your proposed
changes. We nevertheless greatly appreciate your interest in this
matter.
Sincerely,
K. Craig Wildfang,
Special Counsel to the Assistant Attorney General, Antitrust Division.
Kurt Shaffert,
Attorney, Antitrust Division.
Steven M. Edwards,
Thomas J. Sweeney, III,
George F. Hritz,
Paul B. Sweeney
Davis, Scott, Weber & Edwards, P.C., 100 Park Avenue, New York, New
York 10017, (212) 685-8000.
Kenneth C. Anderson,
Anderson, Aukamp & Gingold, 1201 Pennsylvania Avenue, N.W., Suite 821,
Washington, D.C. 20004, (202) 662-6776.
Attorneys for Plaintiff, International Technologies Consultants, Inc.
United States District Court, District of Arizona, International
Technologies Consultants, Inc., Plaintiff, v. Pilkington plc and
Pilkington Holdings, Inc., Defendants. Civil Action No. CIV-94-
00345-TUC-WDB.
Comments of International Technologies Consultants, Inc. Regarding
Proposed Final Judgment, Stipulation and Competitive Impact Statement
International Technologies Consultants, Inc. (``ITC'') comments on
the Proposed Final Judgment, Stipulation, and Competitive Impact
Statement in United States v. Pilkington plc and Pilkington Holdings,
Inc. as follows:
Preliminary Statement
ITC, in the parlance of the proposed final decree, is a U.S. NON-
LICENSEE. ITC competes in the sale of float process technology on a
worldwide basis, using float technology which it independently
developed from information in the public domain, supplemented by sound
engineering practice and extensive expertise in the construction of
float process facilities. ITC is not, nor has it ever been, a
Pilkington licensee. ITC's business activities are confined to the
worldwide marketing of float process technology and associated
engineering and technical services. ITC has no involvement in the
production or distribution of manufactured glass.
The government complaint, proposed decree and the competitive
impact statement evolved from a CID investigation of the license
arrangements between Pilkington and its licensees, the principal focus
of which was the variety of license provisions utilized by Pilkington
illegitimately to perpetuate its patent monopoly of float process
technology. (See complaint, 27.) The Department's conclusion that the
Pilkington licensing scheme constitutes an illegal effort to perpetuate
and maintain its monopoly far beyond the expiration of the core float
process patents and its consequent decision to confront this deeply
entrenched, aggressive foreign-based cartel is to be commended. The
proposed decree represents an important initial step in eradicating the
obviously pernicious and indefensible license provisions, but
unfortunately it stops far short of providing the competitive relief
required to definitely eradicate the Pilkington cartel, thereby finally
permitting a competitive environment to exist in the flat glass
industry.
The need to revisit and rethink the efficacy of the proposed decree
with a view to tightening its provisions was amply demonstrated by the
reaction of senior Pilkington officials to the filing of the
litigation. The company's May 26, 1994 press release dismisses the
government case as unprovable, and unworthy of the cost and time
required to achieve judicial vindication. The Release then describes
the official Pilkington interpretation of the decree as follows:
The Consent Decree * * * recognizes the subsequent evolution of
float technologies and that some recent float bath technology
developed by Pilkington will continue to be treated through normal
licensing arrangements. Pilkington's protection and licensing of its
total float technology throughout the rest of the world, remains
unaffected. * * * Pilkington is reassured that the confidentiality
of the processes is protected and that the normal licensing
arrangements for current and future float glass technology are
secure.
These comments must be read against the evidentiary record developed by
the Division via its CID investigation which unambiguously demonstrates
that Pilkington deliberately, and with full knowledge of the illegality
of its actions under United States antitrust law, proceeded to adopt
and aggressively implement its illegal licensing scheme in order to
shore up its monopoly position to combat the erosion of its patent
base. Given its longstanding distaste for antitrust law as enforced in
the United States (a common malady among British corporate officials),
which continues unabated as evidenced by the above referenced reaction
of its senior officials to the instant litigation, common sense and
prudence dictates that the Department must take unusual precautions to
ensure that the substantial time and public monies expended in the
investigation and prosecution of this worldwide cartel translates into
lasting and meaningful pro-competitive results.
Because ITC is a U.S. NON-LICENSEE, its specific comments relative
to the proposed decree reflect its perspective as one as one of the few
non-Pilkington licensees to make a sustained effort to enter the float
process design market in competition with Pilkington and its licensees.
ITC defers to the U.S. LICENSEES in respect of the efficacy of the
proposed decree in addressing the anti-competitive license provisions
of particular concern to them.
Specific Comments
1. Agreements or Understandings Between Defendants and U.S. LICENSEES
Aimed at Preventing. Handicapping or Otherwise Interfering With Efforts
by U.S. NON-LICENSEES to Enter the Float Process Technology Market
Worldwide
a. Discussions
Part B--Litigation of the Competitive Impact Statement (``CIS'') at
pp. 12 and 13 describes the litigation by Pilkington against AFG and
Guardian, respectively, to prevent them from violating the territorial
provisions of their respective licenses with Pilkington, thereby
eliminating (or at least carefully controlling) competition between
each of them and Pilkington. The CIS alludes to the fact that both
cases were settled on the basis, inter alia, that each licensee
defendant would abandon its aggressive competition with Pilkington,
thereby preserving the Pilkington cartel against uncontrolled
competition from its own licensees.\1\ Significantly, the CIS omits any
mention of another important element of the aforesaid settlement,
namely agreements with each such defendant licensee to cooperate
(conspire) with Pilkington to forestall the emerging competition from
non-licensees which threatened to undermine the Pilkington cartel by
entering the float process technology market and ending the cartel's
control over both the production and sale of flat glass.
---------------------------------------------------------------------------
\1\PPG thus remained the sole Pilkington licensee to persist in
an effort to become an independent competitive factor in the
industry, thereby engendering a sustained counterattack by the
cartel which has effectively blocked PPG's entry date.
---------------------------------------------------------------------------
ITC recognizes that the Department opted to file suit against
Pilkington before it had proceeded very far with its broader
investigation of the above-described collusive conduct among Pilkington
and various key licensees designed to protect the cartel against the
entry of NON-LICENSEE competitors over whom the cartel would have no
control. Through discovery undertaken largely subsequent to the filing
of the government suit, ITC gained access to and reviewed many of the
documents previously submitted to the Department in response to the
CIDs. The CID documents pertaining to the conspiracy issue deeply
implicate two of the U.S. LICENSEES--AFG and Guardian--who are
principal beneficiaries of the proposed decree, along with various
other U.S. NON-LICENSEES. This documentary record is sufficiently
compelling that in the normal course the Division would have been
expected to proceed with CID depositions and otherwise aggressively
pursue the investigation. In our view, had the Division completed the
comprehensive formal investigation justified by the evidence in its
possession before filing its complaint, not only would there have been
a broader complaint involving more parties, but the proposed decree
would of necessity have been much more comprehensive. As it is, ITC
must now secure relief against this broad conspiratorial conduct
through its own litigation efforts.
Be that as it may, the complaint and proposed decree as filed
nonetheless represents an important first step in a long overdue attack
upon longstanding anti-competitive license provisions which Pilkington
used in its increasing futile effort to prop up its monopoly position
vis-a-vis its own licensees as its key patents expired. As noted, the
principal beneficiaries of the lawsuit and the decree as currently
structured are the U.S. LICENSEES who have finally achieved an
important measure of freedom to engage in meaningful competition with
Pilkington. However, neither the complaint nor the proposed decree
displays any understanding of the critically important competitive role
played by the U.S. NON-LICENSEES, nor does the decree contain
provisions essential to enable U.S. NON-LICENSEES to freely enter and
compete in the float process technology market, thereby achieving an
even broader pro-competitive effect. It is, in short, all well and good
for the government to take action which permits AFG, Guardian and other
U.S. LICENSEES to free themselves from the anti-competitive constraints
central to the Pilkington licensing scheme. However, U.S. NON-LICENSEES
also have a right to expect their government to protect them from
blatantly anti-competitive conduct undertaken by certain U.S.
LICENSEES, albeit at the insistence of a foreign cartel manager
desperate to protect itself against the competitive in-roads of NON-
LICENSEE competitors. Indeed, one would expect that the Department
would have a particularly acute interest, not to mention a solemn
obligation, to ensure that, at the very least, Pilkington is enjoined
from enforcing or implementing any agreements or understandings
extracted from any of its Licensees as a condition to the settlement of
litigation it initiated. Further, given what the evidence in the
government's possession reveals, it is incumbent upon the Department to
take corrective action to eliminate the remaining barriers to entry by
U.S. NON-LICENSEES, thereby finally achieving and creating a truly
competitive marketplace.
b. Proposed Corrective Language
ITC proposes that a new paragraph 5 be added at the end of IV A at
page 7, to wit:
5. Defendants shall neither enter into any agreement or
understanding, whether written or oral, and any U.S. LICENSEE, nor
enforce or implement any existing such agreement or understanding,
having the purpose or effect of preventing, interfering with, or
otherwise handicapping efforts by U.S. NON-LICENSEES to enter the
float process technology market anywhere in the world.
In addition, the Department should accelerate this critically
important phase of its investigation and indicate via issuance of a
press release that the investigation of alleged conspiratorial conduct
among Pilkington and its licensees is continuing. The Department would
be derelict in its duties were it to stand idle given the evidence in
its possession.
2. Preventing Defendants From Using Assertions of Proprietary Float
Technology Know-How Rights or Claims of Confidentiality To Preclude or
Retard Efforts by U.S. NON-LICENSEES To Enter the Float Technology
Process Market
a. Discussion
For decades Pilkington has been highly successful in discouraging
prospective clients from dealing with U.S. NON-LICENSEES simply by
asserting that Pilkington had been the first to develop float process
technology and thus had the exclusive worldwide right to use or license
that technology, and that for anyone to secure such technology from
non-Pilkington sources was to invite litigation. This mantra has been
repeated so often and so categorically by Pilkington and its allies
that at this point in time many potential clients simply accept the
primacy of Pilkington in float process-technology as an immutable
given--baseless though it may be. This pattern of Pilkington conduct--
fraudulent claims of exclusivity and confidentiality, accompanied by
threats of litigation (should the use of non-Pilkington float process
technology be contemplated) to prospective customers, competing sources
of technology and float technology and sources of capital, materials
and supplies, has continued at least through the spring of 1994.
Given this unbroken record of illegal conduct, the resulting deeply
entrenched cartel, and the substantial economic harm caused thereby, it
is obvious that the relief proposed in Section IV.B.2 of the proposed
decree falls woefully short of the mark. In the first place, defendants
having such a record of illegal conduct are hardly entitled to any
benefit of the doubt regarding their alleged good faith in asserting
proprietary float technology know-how rights and claims of
confidentiality; to the contrary, the burden of proof regarding such
assertions must necessarily rest upon Pilkington, rather than upon the
victims of its repeated acts of illegality. Indeed, as proposed, the
decree language invites precisely the sort of protracted exercise which
places prospective new entrants at a fatal disadvantage. Further, the
decree must contain a mechanism for fairly, quickly and effectively
resolving any disputes regarding proprietary know-how or
confidentiality in a neutral setting, and defendants must be enjoined
from making any assertions regarding know-how rights and
confidentiality unless and until their position is vindicated through
the dispute resolution mechanism.
More particularly, Section IV.B.2 should be replaced in its
entirety by the following:
2. No defendant shall assert against U.S. NON-LICENSEES (other
than in respect of Agreements referred to in subparagraph B.1.
above) any alleged proprietary FLOAT TECHNOLOGY Know-how rights
(including any claim of Confidentiality) that it or any U.S.
LICENSEE claims to have with respect to any FLOAT TECHNOLOGY offered
by U.S. NON-LICENSEES anywhere in the world, or communicate to third
parties regarding any such assertions or claims, unless for each
such claim the following occurs:
a. Defendants shall have the burden of describing in writing
with specificity the item of float technology covered by each claim
and shall provide a detailed statement setting forth the basis for
the claim;
b. a copy of the aforesaid statements shall be served upon the
Court, the U.S. NON-LICENSEE involved and the Department of Justice;
c. the U.S. NON-LICENSEE and the Department shall serve any
reply thereto to the court and Pilkington within fourteen (14) days
of receipt of the Pilkington specification of allegations;
2d. unless the matter is resolved via negotiations between or
among the defendants and the U.S. NON-LICENSEES within five (5)
days, the court shall appoint a special master knowledgeable in
float technology to conduct an inquiry to determine whether
defendants have met their burden, and will promptly file a written
report and recommendation to the court;
e. the court will enter an appropriate order;
f. only if the court order supports the claim will defendants
then be permitted to notify others of the trade secrets rights and
claims of confidentiality against any U.S. NON-LICENSEE; and
g. Pilkington will pay all costs should it not prevail.
ITC recognizes that such a dispute resolution mechanism has a
regulatory flavor and that the Department often disfavors regulatory
decrees. However, several factors militate strongly in favor of such an
approach in the unique circumstances here presented. First, the
proposed truth seeking process would be triggered at the earliest stage
of the dispute, before the invariably corrosive and damaging false
accusations circulate among prospective clients, sources of financial
support and suppliers. A somewhat similar approach proved potentially
useful in evaluating Guardian's trade secrets claims against ITC and
Euroglas. Procedural ambiguities, confusion about the format and
Guardian's reluctance to participate at the critical early stage in the
process substantially compromised the proceeding, but all such
potential problems have been eliminated from the mechanism proposed
above. The clean bill of health ultimately achieved by ITC in the
Euroglas situation unfortunately had little practical effect because
Guardian had had a year to fraudulently disparage the ITC design before
the report was issued. This difficulty is avoided in the proposed
mechanism by enjoining Pilkington from making such characterizations
until and unless it had met its burden of proof, which both creates an
incentive for Pilkington to cooperate in seeking an early resolution of
the dispute and prevents the circulation of fraudulent assertions until
the process has been completed.
Second, there is little danger that the court and the parties will
be inundated by a flood of hypertechnical disputes about know-how and
confidentiality claims. Once the burden of proof is placed upon
Pilkington--where it obviously belongs, coupled with the requirement
that a detailed specification of the basis of the claim be prepared and
shared with the accused party, the era of generalized and vague
allegations of impropriety and veiled threats of litigation will
finally end. Indeed, there is every likelihood that the dispute
resolution mechanism would need to be used perhaps only once, to
initially and definitively clear the air regarding the usual litany of
Pilkington allegations of impropriety by U.S. NON-LICENSEES. Once the
U.S. NON-LICENSEE passed its initial litmus test, there is little
likelihood that Pilkington would have much stomach for insisting upon
rematches, and the U.S. NON-LICENSEE would be free to immediately enter
the market place and would do so. Apart from the sui generis Muliaglass
situation, the Pilkington cartel, aided by various U.S. LICENSEES and
others, has succeeded in preventing every effort by U.S. NON-LICENSEES
from entering the float process technology market, all of which
entrenches the myth that Pilkington, by virtue of divine right, is the
exclusive worldwide source of such technology. In sum, once the
Pilkington canards about know-how rights and confidentiality are
exposed for the empty shells they are, as ITC is confident they would
be by the proposed procedure, the walls of the cartel will finally
crumble and the forces of competition will finally prevail.
Conclusion
ITC recognizes that the proposed decree is the product of
considerable negotiations between the Department and Pilkington and
that to press Pilkington further in hopes of achieving the additional
relief described above may jeopardize the deal. So be it. The Antitrust
Division has rarely been exposed to a cartel with the reach, longevity
and anti-competitive consequences of the Pilkington cartel. The
evidence of willfulness and of liability, as we both know, is unusually
rich and unambiguous. The world business community, upon whom the
Antitrust Division quite properly devotes considerable time and public
resources in order to both demonstrate the commitment of the U.S.
government to aggressive enforcement of the U.S. antitrust laws and the
important public benefits to be derived therefrom, has long been aware
of Pilkington and its success in creating and maintaining its worldwide
cartel. Thus, should the Division lack the tenacity and commitment to
principle to insist that the decree be amended in order to meaningfully
eradicate this particularly pernicious, long-lived cartel, the message
received by the many observers of the antitrust scene will be most
unfortunate. That message, however unfair from your perspective, is
that the Antitrust Division lacks the will to litigate potentially
protracted cases, preferring instead to settle for the appearance of
progress by accepting what has been characterized as a ``sleeves off
the vest'' type of decree. At some point, in some case, the Department
must demonstrate that this message is incorrect; that in the
appropriate circumstances, the Division will litigate aggressively and
fearlessly in order to fully vindicate the public interest. ITC submits
that the Pilkington case--should Pilkington be unwilling to renegotiate
the decree to satisfy the concerns expressed above--is the perfect
vehicle for the Division to use for this purpose and ITC urges it to do
so.
Dated: Washington, DC, September 1, 1994.
Anderson, Aukamp & Gingold
By---------------------------------------------------------------------
Kenneth C. Anderson,
1201 Pennsylvania Avenue, NW., Washington, DC 20004, (202) 662-6776 and
Davis, Scott, Weber & Edwards, P.C., 100 Park Avenue, New York, New
York 10017, (212) 685-8000.
Attorneys for Plaintiff, International Technologies Consultants.
Judiciary Center Building, 555 4th Street, NW., Washington, DC
20001.
October 6, 1994.
Kenneth C. Anderson, Esq.,
Anderson, Aukamp & Gingold, 1201 Pennsylvania Avenue, N.W., Suite
821, Washington, DC 20004
Re: Response to Comments on Proposed Final judgment U.S. v.
Pilkington plc and Pilkington Holdings, Inc. Civ 94-345 TUC WDB (D.
Ariz.), filed May 25, 1994
Dear Mr. Anderson: This responds to the Comments of
International Technologies Consultants, Inc. Regarding Proposed
Final Judgment, Stipulations and Competitive Impact Statement
(``Comments'') submitted to the Antitrust Division over your
signature on September 1, 1994. The Comments, in addition to making
a Preliminary Statement that characterizes the proposed Final
Judgment (``Judgment'') and summarizes certain representations by
Defendants to the press concerning the effect that they expect it to
have on their future conduct, proposes two specific changes to be
made before the Judgment is entered.
Before addressing your specific proposals for change, we would
point out that the text of the proposed Final Judgment
(``Judgment''), rather than Pilkington's characterization thereof in
its own press releases controls what it will be permitted and
required to do. Thus, contrary to Pilkington's public claim, which
you quote, that the restraints Pilkington has imposed under the
guise of ``protection and licensing of its total float technology,
throughout the rest of the world, remain unaffected,'' the Judgment
will in fact enjoin Pilkington from anticompetitive practices
throughout the world to the extent that those practices are aimed at
U.S.-based entities seeking to use float technology anywhere, or are
aimed at anyone else seeking to use float technology in North
America. That is, Pilkington's specified anticompetitive conduct is
enjoined insofar as it is within the jurisdiction of the U.S.
antitrust laws. The competitive effect of Pilkington's ability, also
referred to in the portion of Pilkington's press release that you
quote, to continue ``normal licensing'' of its ``recent float bath
technology,'' must be considered in the light of its ready
concession to the United States during settlement negotiations that
very little significant technology of that kind exists. A good
measure of the near-absence of such significant recent technology is
that float glass manufacture by those who have not been licensed to
use this ``recent technology'' has been quite competitive with
Pilkington's and its subsidiaries' production.
The standard we have applied in assessing your specific
proposals for modification or clarification is whether it is in the
public interest to enter that Judgment that has been submitted for
entry by stipulation. Entry is in the public interest if the
Judgment is adequate to remedy the antitrust violations alleged in
the Complaint. United States v. Bechtel Corp., 1979-1 Trade Cas.
(CCH) 62,430 (N.D. Cal. 1979), aff'd, 648 F. 2d 660, 665 (9th Cir.
1981), cert. denied, 454 U.S. 1083 (1982).
Your first proposed change is to add, at the end of Subparagraph
IV.A., a provision enjoining Defendants from entering, enforcing, or
implementing any contract having the purpose or effect of
preventing, interfering with, or otherwise handicapping efforts by
U.S. NON-LICENSEES\1\ to enter the float process technology market
anywhere in the world. It is the Department's view that, although
the conduct proscribed by the proposed amendment would clearly be
unlawful, this proposed amendment would be redundant inasmuch as
Subparagraph VI.B. adequately protects against such conduct by
enjoining Defendants from employing the means it heretofore relied
upon to achieve its anticompetitive ends, i.e., making unjustified
assertions of intellectual property rights against putative entrants
and their customers, financing sources, suppliers, and the like.
---------------------------------------------------------------------------
\1\Capitalized terms have the meanings assigned to them in
Paragraph II of the Judgment.
---------------------------------------------------------------------------
Second, your Comments propose different conditions than those
contained in Subparagraph IV.B.2. of the Judgment to govern the
circumstances under which Defendants can avoid violating that
provision's injunction against asserting certain know-how rights
vis-a-vis U.S. NON-LICENSEES. The proposed amendment would require
this Court, each time such an assertion is made, to appoint a
Special Master to determine whether Defendants have proven an
adequate basis for the assertion unless the matter is resolved by
negotiation. (Your proposal would require ``Pilkington [to] pay all
costs should it not prevail'' in such a proceeding, but is silent as
to who would pay the Special Master's costs if Defendants do
prevail.) Your proposal would thus delete from the Judgment
provisions that require defendants to justify in writing to the
Department of Justice assertions of the kind that your proposal
would submit to Special masters. In the Department's view, requiring
this Court to appoint a Special Master whenever such an assertion
fails to be resolved by negotiation would not assure, to a
sufficiently greater extent than the provisions of the proposed
Final Judgment, that Defendants will henceforth desist from claiming
know-how rights that are unjustified.
For the reasons stated above the Department of Justice does not
believe that it would be in the public interest to forego entry of
the Judgment for failure to incorporate any of your proposed
changes. We nevertheless greatly appreciate your interest in this
matter.
Sincerely,
K. Craig Wildfang,
Special Counsel to the Assistant Attorney General, Antitrust Division.
Kurt Shaffert,
Attorney, Antitrust Division.
August 10, 1994.
Ms. Gail Kursh,
Chief, Professions and Intellectual Property Section, Room 9903,
U.S. Department of Justice, Antitrust Division, 555 4th Street, NW.,
Washington, DC 20001
Dear Ms. Kursh: These comments are given to the proposed Final
Judgment set out in the Notice of the Department of Justice,
Antitrust Division, dated June 14, 1994, respecting United States v.
Pikington plc and Pilkington Holdings, Inc., United States District
Court for the District of Arizona, Civil Action No. 94-345, filed
May 25, 1994 (the ``Civil Action'').
Definitions
Capitalized terms used in these comments without definition will
have the meanings accorded to them by the proposed Final Judgment.
The ``Competitive Impact Statement'' is the Competitive Impact
Statement filed in the Civil Action pursuant to Section 2(b) of the
Antitrust Procedures and Penalties Act (15 U.S.C. 15(b)).
Introduction
In Article I.A. of the Competitive Impact Statement, the
Department of Justice (``DOJ'') summarizes the seven (7) categories
of activity allegedly engaged in by the Defendants in violation of
the antitrust laws and the three (3) categories of relief sought by
the Complaint to eliminate such activities. At Article III of the
Competitive Impact Statement, DOJ summarizes how the competition
favorable elements of the Final Judgment will, in effect, stop the
seven (7) categories of activity and thereby ``* * * eliminate any
residual anticompetitive effects of the restrictive license
agreements and other conduct challenged by the Complaint.''
The competition favorable elements are:
Element Number 1: * * * [T]he Final Judgment would eliminate all
territorial and use limitations [Defendants] imposed on [their] U.S.
licensees and allow them to manufacture on their own or sublicense
any third party to do so anywhere in the world * * *.''
Element Number 2: The Final Judgment will create ``* * * a
similar `safe harbor' for any other American individual or firm who
is not a Pilkington float glass licensee to use any float technology
in its position without liability to [Defendants]. (Emphasis
supplied).
Element Number 3: The Final ``* * * Judgment would enjoin
certain conduct having the purpose or effect of restricting exports
of float glass to the United States * * *.''
Element Number 4: The Final ``* * * Judgment would enjoin the
[D]efendants from making certain adverse representations * * * and
would require [certain disclosures].
DOJ has wrongly concluded that the issuance of an order
embodying these four (4) elements will achieve the goal of ``* * *
eliminat[ing] any residual anticompetitive effects of the
restrictive license agreements and other conduct challenged by the
Complaint * * *.'' because its selection of the elements rests upon
flawed premises, including at least the following:
1. The Pilkington License Agreements have terminated and no
valuable rights other than ``know-how'' rights may be obtained under
them by assignees or sublicensees.
2. The ``safe harbor'' as to Pilkington know-how created for
U.S. Non-Licensees offers sufficient protection for prospective
assignees and/or sublicensees of U.S. Licensees and their lenders to
cause them to risk tens of millions of dollars in the construction
of float glass plants.
3. The Defendants will take no retributive action after the ten
(10) year term of the Final Judgment.
4. The Pilkington float technology that is in the public domain
(expired Patents and proprietary know-how), if known to prospective
competitors, is sufficient to enable prospective competitors to
construct and/or operate competitive float plants. See Article
II.A.2. of the Competitive Impact Statement which states ``* * *
Pilkington has no intellectual property rights of substantial value
* * *.''
Commenting Party is One of the New Entrants Sought by DOJ
Our client (the ``Commenting Party'') is an entity formed under
the laws of one of the States of the United States which now owns a
Float Glass plant at which it manufactures and sells Float Glass.
Commenting Party is an assignee and/or sublicensee of two License
Agreements entered into between a subsidiary and/or predecessor of
one of the Defendants and one of AFG, Ford, Guardian, PPG or LOF
(the ``named Licensees'').
Under the License Agreements as to which the Commenting Party is
an assignee and/or sublicensee, the ``Licensed Patents'' covered by
such License Agreements are expansively defined to include all U.S.
Patents issued during the ``Term'' of the relevant License
Agreement, U.S. Patent applications filed during such Term and the
U.S. Patents that may be issue thereunder, Patents as to which the
contracting Pilkington entity has the right to grant a license or
sub-license and continuations, divisions and reissues of such
Patents. The Terms of License Agreements ``expire'' after 1985 but
the license rights concerning the License Patents become ``paid up''
and remain vital. This vitality extends for the life of each of the
License Patents and reaches into the 21st century.
The Commenting Party regarded and still regards these acquired
and/or sublicensed rights to be essential to its continued operation
of its Float Glass plant. It would not have expended the tens of
millions of dollars it did for its Float Glass plant in the absence
of its rights under such License Agreements.
The Final Judgment Does Not Adequately Protect New Entrants
In obtaining these valuable license rights by assignment and/or
sublicensing, Commenting Party in effect stepped into the shoes of
its assignor/sublicensor and may have inherited certain other
features of the License Agreements that DOJ has described as
characteristic of Defendents' allegedly unlawful activities. These
features include:
1. Purported limitations on assignment and/or sublicensing.
2. Restrictive confidentiality provisions respecting allegedly
confidential information i.e. know-how (confidentiality provisions
do not apply to technology disclosed in Patents laws restrict
competitive uses).
3. Choice of law provisions invoking the laws of England. (All
Agreements deriving important rights from the Defendants, their
predecessors or subsidiaries presumably invoke the laws of England
as the ``applicable law.'').
4. Arbitration provisions requiring arbitration venued in
England for all disputes. (All Agreements deriving important rights
from the Defendants, their predecessors or subsidiaries presumably
require arbitration in England.)
Commenting Party believes that other prospective entrants into
the Float Glass industry will conclude, as Commenting Party did,
that the construction and operation of a competitive Float Glass
plant requires such entrant to become an assignee and/or sublicensee
of Patent and other rights under a License Agreement derived from
the Defendants, their predesessors or subsidiaries (the ``Pilkington
Group''). When they do so they may become subject to restrictive
provisions like those described above. The Final Judgment appears to
permit the enforcement of these allegedly anti-competitive
provisions.
If a prospective entrant into the Float Glass industry requires
institutional financing in order to construct a Float Glass plant
having a cost, according to DOJ, of between $100 and $150 million
dollars, will the protections allegedly afforded by the Final
Judgment resolve the issues that institutional lenders,
institutional lawyers and borrower's counsel will find in the
License Agreements as modified by the Final Judgment? The answer
simply stated is no.
Commenting Party believes the flawed assumptions have led to a
flawed result. This conclusion is illuminated by the application of
the elements of the Final Judgment to the facts of Commenting
Party's case.
What Is Commenting Party's Assignor's/Sublicensor's Status?
Does the Final Judgment classify the Named Licensee with whom
Commenty Party contracted (``Commenting Party's Assignor/
Sublicensor'') as a ``U.S. Licensee''? To be a U.S. Licensee, one
must first be a person, company or entity who is a ``Licensee.'' A
person, company or entity is not a Licensee unless they have ``* * *
entered into a License Agreement with Pilkington.'' (Emphasis
added'').
The phrase ``* * * entered into * * * with Pilkington * * *''
appears to require privity of contract. This privity is restricted,
apparently, to persons, companies or entities in privity with
``Pilkington.'' Since ``Pilkington'' is only Pilkington plc, this
privity must be with the Defendant Pilkington plc.
Pilkington plc is not the name of the member of the Pilkington
Group with whom Commenting Party's Assignor/Sublicensor contracted
in the License Agreements. Therefore, it is possible that Commenting
Party's Assignor/Sublicensor is neither a ``Licensee'' nor a ``U.S.
Licensee'' because its contractual privity is with a subsidiary or
predecessor of ``Pilkington'' instead of with Pilkington plc.
What is Commenting Party's and What Will Be Future Assignees'/
Sublicensees' Status?
Even if a reader is to assume that the definitional flaw noted
above does not exist, Commenting Party's and any other future
assignee's/sublicensee's status apparently will not change because
none of them will have privity of contract with ``Pilkington'' no
matter how ``Pilkington'' is defined. Therefore, unless the Final
Judgment is changed, Commenting Party and all future assignees/
sublicensees will only be ``U.S. Non-licensees.''
Why Are U.S. Non-licensees Who Enter Into Assignments/Sublicenses
Under Pilkington License Agreements Not Expressly Protected Against
The Enforcement of Limitations?
It appears that DOJ believes that the prohibitions involving the
enforcement of ``Limitations'' will result in the assignment/
sublicensing of ``Float Technology'' required to construct and
operate competitive Float Glass plants. These prohibitions, however,
apply only to the allegedly anti-competitive activities of the
defendants against U.S. Licensees. See Final Judgment Article IV.A.
The protections relevant to U.S. Non-licensees are set out in
Article IV.B. of the Final Judgment. Article IV.B. does not prohibit
the Defendants asserting Limitations against U.S. Non-licensees!
Thus, if Article IV.A. permits U.S. Licensees to assign/sublicense
Float Technology, nowhere does Article IV.B. enable the prospective
assignees/sublicensees who may become new owners/operators of Float
Glass plants to exercise free from suit the rights they might hope
to acquire in an assignment/sublicense.
Article IV.B.1 appears to apply only to a subclass of U.S. Non-
licensees e.g. employees, contractors, suppliers, consultants, etc.,
who, as a group, have entirely different interests than prospective
owner/operators of Float Glass plants. In substance Article IV.B.1.
addresses only provisions of Agreements respecting Confidentiality
or non-competition. Since only the protections of Article IV.B.2.
appear to apply to assignees/sublicensees, the only subjects that
the Defendants can't make claims about against such U.S. Non-
licensees relate to proprietary Float Technology know-how rights
that Pilkington has in fact disclosed to someone who in fact fits
the definition of U.S. Licensee, and which are not bona-fide trade
secrets under ``applicable law'' (as to which Pilkington may still
enforce its rights under Article IV.B.2.). The protected class of
intellectual property is far less than the body of intellectual
property encompassed by the License Agreements under which
Commenting Party and others similarly situated would want to derive
rights.
If the Final Judgment is to be read these ways, the Defendants
will be able to claim against assignees/sublicensees that their
assignment/sublicense agreements and/or practice of Patents covered
by such assigned/sublicensed Pilkington License Agreements are,
among other things: wholly invalid, were obtained in breach of
Pilkington's Patent rights. (Article IV.H. of the Final Judgment
expressly preserves all of Pilkington's Patent claims).
Why Do the Protections Intended By The Concept of Limitations Not
Expressly And Literally Include Assignments and Sublicenses?
As noted above, DOJ appears to believe that the elements of the
final judgment will lead to assignment/sublicense agreements
concerning Float Technology. Surprisingly, the Final Judgment does
not literally say anything of the kind. We could not find any
reference to assignments or sublicenses. As DOJ has noted, the
License Agreements with members of the Pilkington Group contain
express, literal prohibitions respecting assignment and
sublicensing. The Defendants have reserved their rights respecting
matters not ``expressly'' covered by the Final Judgment. See Article
IV.I. of the Final Judgment. Institutional lenders or investors who
may be asked to lend to or invest in prospective Float Glass
industry entrants can be expected to look for express, literal
language in the Final Judgment to counter the express, literal
provisions of the License Agreements. Finding them absent, they will
refuse to lend or invest.
``Limitations'' is defined by Article II.K. of the Final
Judgment without any use of the words ``assignment'' or
``sublicensing.'' The word ``use'' appears in the definition but as
Commenting Party has shown above, the word ``Limitations'' is used
only in Article IV.A. with respect to U.S. Licensees and not their
contracting parties, i.e. their prospective assignees/sublicensees
are U.S. Non-licensees.
Article IV.A.1. of the Final Judgment uses the word
``sublicensing'' but appears to do so only in connection with
``Subject Float Technology.'' As defined, ``Subject Float
Technology'' appears to encompass only ``know-how'' (see above
discussion). Therefore, Float Technology that is Patent technology
or that was subject to disclosure by Pilkington but not in fact
disclosed is not encompassed by Article IV.A.1. of the Final
Judgment.
Commenting Party notes, in passing, that Article IV.A.3.(b)
curiously refers to ``transferring'' and ``transferees'' of Float
Technology without thereby telling the reader what such words
encompass or connecting them to other Articles of the Final
Judgment. This creates further ambiguity.
Assignments/sublicenses and the role DOJ expects them to play
are too important for the Final Judgment to treat them ambiguously
or even silently. As noted above, the Defendants seem to retain
important rights to sue. These rights appear to be strongest on
subject relating to Patents and provisions of the Final Judgment
that are not ``express'' enough. Commenting Party believes that
without changes to the Final Judgment no prospective assignee/
sublicensee can be given any clear assurances that the Final
Judgment prohibits the Defendants from suing them for attempting to
enter the Float Glass industry. Why would anyone risk investing in
or lending to an entity which cannot receive or provide assurances
that its ostensible assignment/sublicense under a Licensee Agreement
with a member of the Pilkington Group protects it from suits by the
Defendants?
Unfortunately, even if ``Limitations'' is changed to literally
permit assignments/sublicenses, under Article IV.A. its protections
extend only to U.S. Licensees. As Commenting Party has shown above,
the protections afforded to U.S. Non-licensees appear in Article
IV.B. of the Final Judgment. Again, the needed words of art
``assignment'' or ``sublicense'' do not appear there.
In short, DOJ may intend that the Final Judgment will be
interpreted to permit assignment/sublicensing of Float Technology
that is either or both licensed Patent technology or know-how
technology, but, under the express, literal terms of the Final
Judgment, the assignee/licensee clearly has protection only with
respect to non-Patented know-how that was in fact disclosed by
Pilkington plc to a person, company or entity that is a U.S.
Licensee. In Commenting Party's case, it appears the Final Judgment
is too narrow in application to encompass Commenting Party's rights
under its assignment and/or sublicense agreement. If Commenting
Party were to consider further assigning/sublicensing its rights
under the relevant Agreements, Commenting Party could not assure any
prospective sub-assignee/sub-sublicensee that the Final Judgment
affords them any protection against the restrictions contained in
such Agreements.
Finally, the ambiguous phrase ``* * * other than Float
Technology * * *'' in the definition of ``Subject Float Technology''
threatens the entire concept. Is it intended that if the Pilkington
Group disclosed Flat Technology to LOF, then such Float Technology
is not ``Subject Float Technology'' even though such Float
Technology was also disclosed to AFG, PPG or Ford? This shouldn't be
the case. Presumably, the intent was to exclude only the Float
Technology that was only disclosed to a U.S. Licensee who was also a
Pilkington plc subsidiary at the time of disclosure.
Commenting Party does not believe that DOJ intended any of these
unfavorable interpretations. If DOJ wants there to be assignees and/
or sublicensees of License Agreements deriving from Agreements
between any of the named Licensees and any member of the Pilkington
Group, then the prohibitions respecting ``Limitations'' must be
extended to this class of persons, companies and entities. The
defects noted in this analysis can be eliminated by modest changes
to the definitions of ``Pilkington'', ``U.S. Licensee'', ``U.S. Non-
licensee'', ``Limitations'' and ``Subject Float technology.''
Change #1. The Final Judgement should be changed so that the
Named Licensees listed in Article II.A.2. of the Competitive Impact
Statement are in fact encompassed by the definition of ``Licensee/''
This is best accomplished by expanding the definition of
``Pilkington.''
Article II.N. of the Final Judgment should be changed in its
entirety to read as follows:
N. ``Pilkington'' means Defendants Pilkington plc, Pilkington
Holdings Inc. and their past, present and future predecessors,
affiliates and subsidiaries.
Change #2. If DOJ intends to vest in prospective assignees/
sublicensee of U.S. Licensees the benefits of Agreements that grant
rights under License Agreements entered into with a member of the
Pilkington Group, then the term ``U.S. Licensee'' should include all
persons, companies or entities who derive rights from any chain of
Agreements that extend ultimately to a License Agreement with a
member of the Pilkington Group. This will enable contracting parties
to obtain licenses under patents whose vitality extends into the
next century and protect such parties from any anti-competitive
assertion of the Patent rights expressly reserved to the Defendants
at Article IV.H. of the Final Judgment.
Article II.I. of the Final Judgment should be changed in its
entirety to read as follows:
I. ``Licensee'' means any person, company, or entity that has
either (1) entered into a License Agreement with Pilkington; (2)
become an assignee and/or sublicensee under a License Agreement with
Pilkington; or (3) become an assignee and/or sublicensee under a
License Agreement with any Licensee.
Change #3. The definition of ``Non-licensee'' contains the
overly restrictive concept of privity of contract, i.e. ``* * * not
entered into a[n] * * * Agreement with Pilkington.'' The definition
should merely encompass all persons, companies or entities who are
not in a chain of Agreements extending ultimately to an original
Pilkington License Agreement.
Article II.L. of the Final Judgment should be changed in its
entirety to read as follows:
L. ``Non-licensee'' means any person, company, or entity which
is not a Licensee.
Change #4. Article II.K. of the Final Judgment should be changed
in its entirety to read as follows:
K. ``Limitations'' means: (1) Any limitation or restriction, or
purported restriction or limitation under any License Agreement with
Pilkington or other Agreement or in any other form respecting
territories, fields, markets, or customers for the design and
construction, or supervision of construction, or ownership of Float
Glass plants, or the manufacture and sale of Float Glass; and/or (2)
any restriction or limitation, or purported restriction or
limitation under any License Agreement with Pilkington or other
Agreement or in any other form respecting the assignment, licensing,
sublicensing or other use of Float Technology, whether the result of
an affirmative prohibition or a limited authorization.
Change #5. Article II.P. of the Final Judgment should be changed
in its entirety to read as follows:
P. ``Subject Float Technology'' means Patented or Unpatented
Float Technology that in relation to any given Licensee was
licensed, was subject to disclosure or was in fact disclosed to that
Licensee under an Agreement with either Pilkington or any other
Licensee other than Float Technology disclosed by Pilkington plc
only to any U.S. Licensee while such U.S. Licensee was a subsidiary
of Pilkington plc.
Why Will English Law Be Permitted To Govern All Important Questions
of Law?
Persons, companies and entities who become assignees/
sublicensees under License Agreements with a member of the
Pilkington Group may become subject to the choice of law provisions
contained in the original License Agreements. While DOJ has
challenged the Pilkington Group's contracting practices, the Final
Judgment does nothing to change a central feature of the License
Agreements. Even more ominously, the Final Judgment introduces
vagueness and ambiguity concerning these features leaving the
Defendants free to argue entirely different meanings in venues
outside the jurisdiction of the District Court.
Throughout the proposed Final Judgement, particularly in
reference to the issue of Confidential Information, the phrase
``applicable'' law appears. Under the License Agreements available
to Commenting Party, the Pilkington Group chose the laws of England
to govern the interpretation and application of such License
Agreements. It is highly likely that this choice of law appears in
all relevant License Agreements and will through the assignment/
sublicensing process sought by DOJ run through any future relevant
Agreements.
For example, the words ``applicable law'' appears in the
phrase'' * * * trade secret under applicable law * * *.'' What does
this mean? The learned treatise The Legal Protection of Trade
Secrets (the ``English Treatise''), at Section 2.2.5 says ``The term
trade secret is not really a term of art in English law in contrast
with its usage in American law * * *. Thus, the effect of the Final
Judgment appears to be that the laws of England will apply to the
interpretation of the concept of ``trade secret'' and such English
law does not use such words as a ``term of art.'' Does this mean
that Defendants' lawyers will be free to fill in for English
arbitrators (the Final Judgment makes no attempt to eliminate the
London venue and English arbitrators that have apparently been used
with such anti-competitive effect in litigation with licensees) what
the term means?
The English Treatise offers two (2) formulations of the concept
of ``confidential information.'' Which of the two rules will apply?
Which of them, if either, furthers the purposes of the Final
Judgment? Why will the Defendants be left with the power to argue
their interpretation of what ``trade secret under applicable law''
means to arbitrators sited in London? Why should the District Court
be confident that the purposes of the Final Judgment will be given
effect by English arbitrators interpreting the vague and ambiguous
language of an order of, to them, a foreign court?
The issue also is raised in another context by Final Judgment
Article IV.B.1. which refers to restrictions on competition under
``applicable law.'' If English law governs this issue too, how will
the District Court be assured that such law is consistent with the
purposes of the Final Judgment?
In sum, these vague and ambiguous formulations favor the
Defendants and the perpetuation of the contractual regime challenged
by DOJ. The Final Judgment obscures this issue by not disclosing
that English laws governs every Agreement that is important in the
future assignment/sublicensing activity sought by DOJ. Nothing in
the Final Judgment purpose to guide (much less control) the
arbitrators in their interpretation of the License Agreements and
assignments/sublicenses under them in light of the Final Judgement.
Change #6. The Final Judgment should expressly reserve
jurisdiction to the District Court to decide what laws are
applicable in any future litigation involving the Defendants and any
person, company or entity that is an assignee/sublicensee under any
Agreement derived from a License Agreement with a member of the
Pilkington Group. The Final Judgment could permit interlocutory
appeals to the District Court of any questions of interpretation and
expressly subject the arbitrators to the District Court's
jurisdiction. The Final Judgment could permit de novo judicial
review by the District Court of any decisions of arbitrators
respecting any such assignees/sublicensees.
Change #7. The Final Judgment could also replace the arbitration
venue provisions of the License Agreements with the venue of the
District Court. This would ensure that any arbitrators are subject
to the District Court's jurisdiction. The Defendants are already
subject to the District Court's jurisdiction and venue and there is
no hint in the Stipulation that the venue is inconvenient to the
members of the Pilkington Group.
Why Is Retributive Conduct Not Prohibited After Expiration of the
Final Judgment?
Article VII.A. of the Final Judgment provides that the Final
Judgment will expire on the tenth anniversary of its entry. What
happens then to persons, companies or entities who have invested
millions of dollars in obtaining the purported benefits of the Final
Judgment by assignment and/or sublicensing under License Agreements?
There will then be no prohibition against the Defendants enforcing
their contract and other rights. Upon such expiration, can the
Defendants enforce all of their suspended rights to the extent that
they haven't lapsed by application of any applicable statute of
limitations? What is the applicable statute? Does the phrase
``applicable law'' mean that this issue is governed by the laws of
England. If English law governs, The Limitation Act of 1980 provides
for a six (6) year statute of limitations for breach of contract
claims. Will this not mean that assignments and/or grants of
sublicenses by U.S. Licensees in year five (5) after the entry of
the Final Judgement are subject to suit in year eleven (11)?
Is the applicable statute of limitations tolled during the
effectiveness of the Final Judgment? Is it the intention of the
Final Judgment to bar certain claims, not to suspend them? The Final
Judgment should make this clear, whether by providing that the
Defendants shall not assert that the Final Judgment has tolled any
statute of limitations, or otherwise. Alternatively, the Final
Judgment could simply be made permanent with respect to all facts
and circumstances arising during the ten (10) year period the Final
Judgment is effective.
Change #8. At the least, Article VII.A. of the Final Judgment
should be changed in its entirety to read as follows:
A. This Final Judgment shall expire on the tenth anniversary of
its entry provided, however, that not withstanding such expiration,
the Defendants and their present and future affiliates and
subsidiaries shall not thereafter take any action prohibited by this
Final Judgment with respect to any License Agreement or any other
Agreement entered into by any Licensee respecting assignment and/or
sublicensing under any License Agreement prior to such expiration
date. This Final Judgment does not toll any statute of limitations
as to any existing claims or claims of the Defendants that, but for
this Final Judgment, would have risen during the time this Final
Judgment is in force.
Is the Necessary Float Technology Really in the Public Domain?
Change #9. What is the basis for the conclusion set our in press
statements by DOJ that the Float Technology embodied in Patents
expiring in 1982 and before and other technology in the public
domain is sufficient to enable a prospective entrant to construct
and operate a competitive Float Glass plant? There appear to be
hundreds of Pilkington Group Patents in the United States and
hundreds of others in foreign countries. Has DOJ in consultation
with anyone in the Float Glass industry or who is a prospective
entrant, determined that none of these Patents describes Float
Technology needed for a competitive Float Glass plant?
Notwithstanding the Final Judgment and in the absence of an
assignment or sublicense of rights under a License Agreement with a
member of the Pilkington Group, a prospective entrant into the Float
Glass industry will have to engage Patent lawyer(s) to understand
each of the unexpired Patents and determine what Float Technology
cannot be practiced. The review of hundreds of unexpired Patents
promises significant costs to parties who cannot obtain rights by
assignment or sublicensing.
Commenting Party believes that changes must be made in the Final
Judgment if DOJ's goal is to be achieved. Commenting Party believes
that without modification of the Final Judgment no prospective
entrant will be able to provide the assurances that commercial
lenders and institutional investors require on the serious issues
raised by the express, literal provisions of the Pilkington License
Agreements.
Sincerely yours,
John A. Grimstad.
Judiciary Center Building, 555 4th Street, NW, Washington, DC
20001.
October 6, 1994.
John A. Grimstad, Esq.,
Fredrikson & Byron, P.A., 1100 International Centre, 900 Second
Avenue South, Minneapolis, MN 55402-3397
Re: U.S. v. Pilkington plc et al. (D. Ariz., filed May 25, 1994),
Civ 94-345 TUC WDB
Dear Mr. Grimstad: This letter responds to your letter of August
10, 1994, commenting on and proposing changes in the proposed Final
Judgment (``Judgment'') in the above-captioned matter. You
complained that (i) the Judgment rests on several ``flawed
assumptions'' listed in your letter that you said ``have led to a
flawed result''; (ii) contrary to the Department of Justice's
conclusion, the relief the Judgment provides does not eliminate the
residual anticompetitive effects of the challenged agreements or
behavior; and (iii) the Judgment is ``too narrow in application to
encompass [the] rights'' of a domestic glass manufacturer you
represent but declined to identify. In trying to support those
complaints, you applied the precise provisions of the proposed
Judgment to your anonymous client's vaguely and ambiguously
described licensing arrangements, and then concluded there are gaps
in the Judgment's coverage that do not in fact exist. We have
addressed separately below each of the changes you recommended to
the proposed Judgment. For the reason indicated, we believe there is
no basis for modifying the Judgment. The standard applied in
assessing your specific proposals is whether it is in the public
interest to enter the Judgment submitted by stipulation. Entry is in
the public interest if the Judgment is adequate to remedy the
antitrust violations alleged in the Complaint.
1. You proposed expanding the definition ``Pilkington'' to
include the two named defendants' ``past, present and future
predecessors, affiliates and subsidiaries,'' so that the ``named
licensees (AFG, Ford, Guardian, PPG, and LOF) ``are in fact
encompassed by the definition of `Licensee'.'' This change is
necessary, you said, because your client is ``an assignee and/or
sublicensee of two license agreements * * * between [i] a subsidiary
and/or predecessor of one of the defendants'' and (ii) one of the
``named licensees,'' and because the Judgment's definition of
Licensee requires contractual privity with Pilkington itself.
We believe the change is unnecessary to achieve your stated
objective since each of the ``named licensees'' already is clearly a
Licensee as defined in the proposed Judgment. All five of those
companies entered into float licensee agreements with defendant
Pilkington, not with a predecessor, affiliate, or subsidiary of
Pilkington. Since execution of those agreements, only Pilkington's
corporate name has been changed from ``Pilkington Brothers Limited''
to ``Pilkington plc.'' Thus, Pilkington plc is the same corporate
entity as, not a successor of, Pilkington Brothers Limited.
2. You also proposed expanding the definition of ``Licensee'' to
include not only anyone who has entered into a license agreement
with Pilkington, but also anyone who is ``an assignee and/or
sublicensee'' under a license agreement with either Pilkington or
any of the ``named licensees.'' That is necessary, you said, so that
anyone ``who derive[s] rights from any chain of agreements that
extend ultimately to a license agreement with [Pilkington]'' will
get the benefits of such a license agreement with Pilkington as
``prospective assignees/sublicensees of U.S. Licensees'' under the
proposed Judgment. But this change, too, is unnecessary.
Subparagraph IV.A.1. of the proposed Judgment, subject to a
narrow exception and certain conditions relating to maintaining the
confidentiality of legitimate trade secrets, expressly permits any
U.S. Licensee (including each of the five ``named licensees'') to
sublicense anywhere in the world (including the U.S.) the float
glass technology Pilkington disclosed and licensed to it, free of
any license restrictions or limitations and without payment of any
royalties, lump sum, or line fees for such sublicensing. Clearly
then, for that provision of Subparagraph IV.A.1. to have any
meaningful effect, anyone acquiring rights to use such technology
under such a sublicense must be as free to use it anywhere without
restriction or limitation by Pilkington or payment of royalties or
fees to Pilkington, subject to the same conditions concerning
confidentiality, as the U.S. Licensee from whom such rights were
obtained. The same would be true too for any further sublicensing by
such a sublicensee. Anything less than that, if the result of any
action taken by Pilkington, would be a clear violation of the
proposed Judgment, with which Pilkington is required by stipulation
to comply pending its approval by the court.
It seems clear to us that the result would be the same, insofar
as Pilkington is concerned, whether such a sublicense agreement were
executed before or after entry of the proposed Judgment. As for
assignments, the result should be the same, assuming, as a matter of
law, the assignee effectively stands in the shoes of or is
substituted for the assignor, and the rights involved are
assignable. However, the proposed Judgment does not purport to
address specifically the consequences of such assignments since they
were not the principal focus of the challenged agreements or conduct
involved here. Moreover, we cannot be any more definitive on their
implications for your client because you have not provided enough
information about its current licensing arrangements.
3. You proposed changing the definition of ``Non-Licensee'' from
anyone who has not entered into a license agreement with Pilkington
to anyone who is not a Licensee, because, you said, the current
definition ``contains the overly restrictive concept of privity of
contract * * *.'' But since anyone who is not in contractual privity
with Pilkington is not a Licensee, your proposal is the equivalent
of the current definition. Moreover, since a Licensee is anyone who
is in contractual privity with Pilkington, the proposed Judgment's
definitions of ``Licensee'' and ``Non-Licensee'' together cover the
entire universe of persons entitled to the benefits of the Judgment,
without any gap between them. For purposes of the proposed Judgment,
your client is either a ``Licensee'' or a ``Non-Licensee,'' whatever
else it may be (assignee, sublicensee, etc.) by reason of its
current licensing arrangements. Thus, no need for the proposed
change has been shown.
4. The change proposed in the definition of ``Limitations'' is
to include references to sublicensing and assignment so as to permit
those activities. But including such references in the definition of
``Limitations'' does not provided the authorization you seek and
confuses the concept of ``Limitations,'' which are restrictions on
the exercise (e.g., in certain territories or for certain uses) of
rights already granted. Whether the separate right of sublicense or
to make assignments also is authorized is, as noted above, already
controlled by Subparagraph IV.A.1. of the proposed Judgment in the
case of sublicensing and by operation of law for assignments.
You also complained that ``the needed words of art `assignment'
or `sublicense' do not appear'' in Subparagraph IV.B., which
provides certain injunctive relief for U.S. Non-Licensees (i.e.,
those who have not entered into float glass license agreements with
Pilkington). As you correctly observed, however, Subparagraph IV.B.
does not enjoin Pilkington from enforcing limitations against them.
But there is no need to do so; since U.S. Non-Licensees by
definition are not in privity of contract with Pilkington, there is
no contractual or other legitimate basis for Pilkington to enforce
any license-agreement limitations against them. For the same reason,
it is not necessary that Subparagraph IV.B. enjoin Pilkington from
restricting or prohibiting the exercise of the right to sublicense
or make assignments against persons with whom it is not in
contractual privity under any float license agreement. Thus, neither
the word ``assignment'' nor the word ``sublicensee'' is ``needed as
part of the definition or concept of ``Limitations.''
5. You proposed to expand the definition of ``Subject Float
Technology'' to include patented as well as unpatented float
technology and to include float technology that was ``subject to
disclosure'' as well as that actually disclosed to any given
Licensee. In support, you claimed, incorrectly, that ``the protected
class of intellectual property is far less than the body of
intellectual property encompassed by the License Agreements * * *''
(p. 6, your letter). Indeed, they are the same.
The purpose and effect of Subparagraph IV.A.1. of the proposed
Judgment is to free U.S. Licensees from any restraints (other than
confidentiality) concerning all intellectual property rights
acquired from Pilkington, to the extent that has not already
occurred. As noted in the Competitive Impact Statement (p. 9), all
U.S. Licensees' float license agreements have terminated, and the
royalty obligations thereunder have become fully paid up. Also,
Pilkington has acknowledged that its basic patent protection
relating to the original form of float process has largely expired,
and has represented that all mutual exchanges between Pilkington and
its U.S. licensees (whether patented or not) have been terminated,
the latest ten years ago. Pilkington has represented further (as
have some of its U.S. Licensees) that all of the U.S. float glass
patents licensed by Pilkington to any U.S. Licensee, either under
the original grant or the improvement exchange provisions of the
licenses, have expired. It is simply unnecessary, therefore, to
cover patented rights that essentially no longer exist.
As for technology that was ``subject to disclosure,'' that
language is so vague and indefinite it would be impossible to
identify the technology involved. In any case, it seems wholly
unnecessary. According to the relevant float glass license
agreements, Pilkington was obliged to disclose to each licensee (i)
all ``necessary or useful'' know-how Pilkington developed, owned, or
controlled at the time and (ii) all patented and unpatented float
process improvements Pilkington discovered, owned, or controlled
during the term of the mutual exchange provisions. Together, those
obligations likely covered whatever might have been ``subject to
disclosure.'' Of course, the proposed Judgment does not apply to any
technology disclosed by a U.S. Licensee to your client (or to anyone
else) that belongs to that U.S. Licensee rather than to Pilkington.
Finally, as you correctly observed (p. 8, your letter), the
exclusionary language of the definition of ``Subject Float
Technology''--other than float technology disclosed by Pilkington to
any U.S. Licensee while Pilkington owned 50% or more of that U.S.
Licensee--excludes float technology disclosed to a U.S. Licensee who
was a Pilkington subsidiary at the time of disclosure (e.g., LOF)
and not also disclosed to any other licensee who was not then a
subsidiary (e.g., AFG, PPG, or Ford). We believe that intent is
clear from the plain meaning of the exclusion (especially
considering the included language, ``in relation to any given
licensee,'' which limits the excluded technology), and so it is
unnecessary to add the word ``only'' to the definition as you
propose.
6/7. You objected to (i) language in the proposed Final Judgment
for resolving trade secret issues under ``applicable law,'' and (ii)
the arbitration provisions of Pilkington's float license agreements
plus the application of English law to disputes involving those
agreements; accordingly, you proposed that the Judgment expressly
reserve to the District Court jurisdiction over questions of
applicable law in future litigation involving the defendants
(including provisions for interlocutory appeals) and over any
designated arbitrators (including de novo review of their
decisions). Alternatively, you also proposed replacing the choice of
law provisions of the licenses with, for example, the Uniform Trade
Secrets Act and replacing the arbitration provisions with the venue
of the District Court.
Your proposal seems far too sweeping insofar as it would reach
future litigation. Moreover, the proposed Judgment (Subparagraph
VII.B) already provides that the Court retains jurisdiction over
this action and the parties. In addition, any court can, as this
Court did in a related case in which it referred antitrust claims to
arbitration, retain jurisdiction over arbitration proceedings for
purposes of reviewing the decisions in those proceedings. Finally,
the language (``under applicable law'') in the Judgment to which you
objected requires application of the relevant conflict of laws rule,
as to both U.S. Licensees and U.S. Non-Licensees, in determining the
nature and existence of trade secrets, rather than, in the case of
U.S. Licensees, merely following the license provision that requires
application of English law. In any case, contrary to the implication
of your letter based on the treatise cited therein (p. 10), we
believe there is little, if any, substantive difference between the
trade secret law of the United States and the comparable body of
English law. Thus, we are unpersuaded that either of the alternative
changes you propose should be adopted.
8. You proposed changing Subparagraph VII.A., which sets the
term of the Judgment, in ways that effectively extend its duration
beyond 10 years. In concluding that a period of 10 years is the
appropriate life for most consent judgments, the Department has
recognized that the anticompetitive effects of any challenged
conduct or practices usually are fully dissipated within that time
and that, because of the market changes likely to occur within that
period, the operation of the judgment itself can have an undesirable
competitive impact after 10 years. In this case, the Department
believes that Pilkington technology is to a very substantial extent
publicly known and therefore no longer of sufficient value to
justify any restraints on its use, including obligations to maintain
its confidentiality. Even more so would that be the case 10 years
from now. Clearly, Pilkington would be subject to renewed antitrust
challenge in the event it reinstituted, after expiration of the
Judgment, the practices and conduct that led to this case in the
first place. Thus, we believe Subparagraph VII.A. should remain
unchanged.
9. You complained that a prospective entrant into the float
glass industry who cannot obtain rights by assignment or
sublicensing would incur significant costs to the extent it was
necessary (i) to review what you said are hundreds of unexpired
relevant Pilkington float glass patents not licensed to U.S.
Licensees, and (ii) to determine what float glass technology in the
public domain is sufficient to construct and operate a competitive
float glass plant. By failing to propose a specific change to
address this complaint, you implicitly acknowledged that there are
none that would avoid this task entirely or eliminate all risks
associated with entry. Of course, without any modification, the
proposed Judgment will allow U.S. Licensees to sublicense the
requisite technology they used to construct and operate competitive
float glass plants in the United States.
In sum, we do not believe it would be in the public interest to
forego entry of the proposed Judgment for failure to include therein
any of your proposed changes. Nevertheless, we appreciate your
interest in this matter and in the enforcement of the antitrust
laws.
Sincerely,
K. Craig Wildfang,
Special Counsel to the Assistant Attorney General, Antitrust Division.
Thomas H. Liddle,
Attorney, Antitrust Division.
[FR Doc. 94-25820 Filed 10-18-94; 8:45 am]
BILLING CODE 4410-01-M
