approve of the program of Government ownership of radio, and did authorize the Navy to deal with the matter, a contract such as had been worked out would be acceptable. Congress not having authorized the Secretary of the Navy to deal with the matter, the proposed contract was never executed, and the General Electric Co. proceeded to make arrangements with a view of forming a new company which would take over its inventions."

On October 17, 1919, the General Electric Co. incorporated the Radio Corporation of America under the laws of the State of Delaware. On October 22, 1919, the General Electric Co. made a "preliminary agreement" with the Marconi Wireless Telegraph Co. of America for the purpose of paving the way for the absorption by the Radio Corporation of America of the American Marconi Co. This agreement is found on page 116 of the Federal Trade Commission report. The agreement for the purchase of the American Marconi Co. was signed November 20, 1919, and is found on page 118 of the Federal Trade Commission report.

Under this agreement the Radio Corporation of America was to acquire all the assets of the Marconi Co., including its concessions, contracts, patent rights, and applications.

TO KEEP PATENTS OUT OF GOVERNMENT HANDS

This agreement includes an interesting article which we shall meet again in other contracts made by the parties to the Radio Trust. This article was intended to avoid the possibility that the Government of the United States might, by taking over the Radio Corporation of America, ever acquire any patent right which the Radio Corporation of America had obtained from any of the other companies to these agreements. In the agreement of November 20, 1919, this article is numbered Article IV. Under the title of "Conditions of transfer of patents" it provides:

"1. Inasmuch as the Marconi Co. is not willing to turn over its patents, patent rights, and licenses, for any definite sum of money, but is willing to transfer such patents, patent rights, and licenses only for a considerable interest in the profits to be derived from the use by the Radio Corporation of such patents, patent rights, and licenses, it is therefore understood and agreed that in the event of the taking over of the Radio Corporation by any superior authority all right, title, and interest of the Radio Corporation in any patent, patent right, or license herein granted or agreed to be granted by the Marconi Co. to the Radio Corporation shall cease and shall be reassigned and shall revert to the Marconi Co. as of the date of such taking over except to the extent provided below. If instead of taking over the Radio Corporation the Government takes over its radio stations in any field and/or territory, except in and for time of war or public danger, the same result shall follow so far as concerns that field and/or territory. But this action shall in no way affect the rights of Marconi's Wireless Telegraph Co. (Ltd.), or of Shielton (Ltd.), as set forth in the 'Radio Corporation and British Marconi Co. principal agreement' nor shall it affect the rights of the General Co. under Article II of the General Electric-Radio Corporation main agreement; such rights shall be reserved from any such reassignment by the Radio Corporation for the benefit of Marconi's Wireless Telegraph Co. (Ltd.), of Shielton (Ltd.), and of the General Co., respectively."

On November 30, 1919, the General Electric Co. also made an agreement with its new subsidiary, the Radio Corporation of America. It must be remembered that at this time the General Electric Co. controlled the Radio Corporation completely, neither the American Telephone & Telegraph Co., the Westinghouse Electrical & Manufacturing Co., or the United Fruit Co. having entered the combination. By the agreement of November 20, 1919, the General Electric Co. created the Radio Corporation its selling agency in the field of manufactured radio products and its subsidiary in the field of international communications. The contract was drawn up in the terms of a patent license agreement, but went far outside the scope of mere patent licensing.

GENERAL ELECTRIC-RADIO CORPORATION RELATIONS

In Article XI (Federal Trade Commission report, p. 122) the General Electric Co. grants to the Radio Corporation the exclusive right to use and sell, for radio purposes, radio apparatus purchased from the General Electric Co. and manufactured under the latter's patents, that is to say, the General Electric Co. agrees no longer to use and to sell, for radio purposes, apparatus made under

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its own patents. To make sure that the Radio Corporation would have no manufacturing rights the General Electric Co. licenses the Radio Co. to make radio apparatus only when and to the extent that the General Electric Co. is not in position to supply the desired devices with reasonable business promptness. General Electric Co. also grants to the Radio Corporation a nonexclusive right to use, but not to make or sell, apparatus for wire communication purposes under all its patents, applications, inventions, rights, and licenses.

In return the Radio Corporation grants to the General Electric Co. the exclusive right to make radio devices and to sell them only to the Radio Corporation. But it grants the General Electric Co. an exclusive right to make, use, and sell devices other than radio devices under all patents and without limitations.

The effect of these clauses in the agreement is to make the General Electric Co. the exclusive manufacturer of all electrical devices under patents of the two companies, but only the Radio Corporation can either use or sell the radio devices so produced.

The Radio Corporation agrees to pay to the General Electric Co. "cost plus 20 per cent" for all articles purchased by it and resold. To make certain that there will be no competition outside the radio field between the Radio Corporation and the General Electric, the contract contains section 9 of Article IV (Federal Trade Commission report, p. 125), which reads as follows:

"It is agreed that the Radio Corporation shall not resell patented articles except as a part of the radio system.

TO PROTECT RADIO CORPORATION MONOPOLY

In section 10 of the same article, the contract further provides:

"The Radio Corporation agrees to use care not to enter with any patented device, process or sytem into the field of the General Co. or to encourage or to aid others to do so, and specifically that in selling radio devices it will use such precaution by contract of sale, restricted license notices, etc., as may be necessary or advisable to prevent its customers from acquiring (by purchase from it of devices or otherwise) licenses to use the same for purposes of which the Radio Corporation has no right to grant such licenses.

"The General Electric Co. agrees to observe similar precautions in selling apparatus and devices especially adapted to radio work but capable of other work."

Under Article VIII (p. 127) the agreement is to continue until January 1, 1945. Article XI (p. 128) is practically identical with Article IV of the General Electric-Marconi agreement already quoted, on page 120.

DIVIDES WORLD WITH BRITISH MONOPOLY

At this point, it is important to consider the terms of the agreement made November 21, 1919, between the Radio Corporation of America and the Marconi Wireless Telegraph Co. (Ltd.), of London, found on page 229 of the Federal Trade Commission report.

This agreement may easily be overlooked in this compilation because it is incorrectly labeled "Traffic agreement." It is far more than a traffic agreement, as will appear from the subtitle, "Principal agreement," immediately preceding the text of the agreement itself. This is, in fact, the "principal agreement between the Radio Corporation-General Electric interests in the United States and the powerful Marconi interests of Great Britain. It divides the entire world into fields of exploitation for these two powerful interests. Its main purpose is to create unlimited cooperation and interchange of patents and of traffic between these great interests. But to make sure that they shall be allied and not competitors, it proceeds to apportion to each of them separate geographical spheres of development.

To the Radio Corporation of America is apportioned (p. 233) the United States of America together with all its territories and possessions, including any mandatories that might come to the United States under the treaty of peace with Germany (p. 234, par. E).

The territory of the British company is defined (p. 236, par. E) as the British Empire, including all British mandatories under the treaty of peace, but excluding the British possessions in the Western Hemisphere.

The treatment of the British possessions in the Western Hemisphere is specified in other paragraphs of the agreement. Paragraph A (p. 235) apportions Canada to the Canadian Marconi Co., but with the proviso that the British

company use all its influence to induce the Canadian company to make exclusive arrangements with the Radio Corporation of America. In the other British possessions of the Western Hemisphere, the British company is to have communication rights with other British possessions, but the Radio Corporation is to have all other communication rights with those territories. (Par. E, p. 236.) Central America is apportioned to the Radio Corporation. (Art. IV, p. 236.) Article V (p. 237) provides for the treatment of China. Here, the British company is acknowledged to be the owner of half the stock of the Chinese National Wireless Co. and its monopoly is recognized, except that the British company agrees to vote its stock for exclusive traffic arrangements with the Radio Corporation and the Radio Corporation agrees to sell an Alexanderson alternator to the Chinese company.

"NO MAN'S LAND" AND 66 NEUTRAL TERRITORY"

Article VI divides the rest of the world into two major spheres, one under the head of "No Man's Land" and the other "neutral territory." In the countries embraced in both these divisions, the British and the American companies are to be allowed to compete with each other. The distinction between the two divisions lies in the fact that in the countries included in "No Man's Land" neither company is bound by any agreements concerning operations in those countries. In the countries defined as "Neutral territory" both companies have the right to use each other's patents.

The countries included in "No Man's Land," where the two companies are to compete without the right to use each other's patents, are Holland, Spain. France, Italy, Russia, Norway, Japan, Germany, Austria, Poland, and the Argentine.

All the rest of the world is "neutral territory" except that certain provisions are included for transferring various specific sections from "No Man's Land" to "neutral territory."

Article VIII (p. 238) covering the purchase and sale of devices, contains an interesting provision which shows how important these divisions of the world are regarded by the two companies. Under it the Radio Corporation agrees to sell to the British company such patent radio devices as it may need, with the provision that if these are used within the British Empire, the British company is to pay the Radio Corporation cost plus 21⁄2 per cent; if for use or resale in China, cost plus 25 per cent.

In the light of the commotion that arose over the threat to sell the Alexanderson alternator to the British company, paragraph B of Article VIII (p. 238) is particularly interesting. This paragraph provides:

"In so far as the Radio Corporation is in a position to supply the same for the use desired the British company agrees to make the Alexanderson alternator and its accessories purchased of the Radio Corporation its standard high-frequency alternator for communicating for distances exceeding 2,000 miles.

TO ARBITRATE UNDER BRITISH LAWS

Article XV contains some interesting provisions concerning arbitration of disputes arising under the contract. These arbitrations are to be made under the British arbitration act of 1889. If they relate to the division between "No Man's Land" and "neutral territory" they are to be held in London. "Other arbitration," says the agreement, "shall be held at points agreed upon by the parties. If they fail to agree the Secretary of the League of Nations, if asked by either party to do so, may decide where the said arbitration is to be held." These agreements cover the situation as it existed in November, 1919. At that time the only parties in the Radio Trust were the General Electric Co. and its subsidiary, the Radio Corporation of America, together with such patent rights and traffic agreements and obligations as it obtained under the agreements with the British Marconi Co.

The situation at that time concerned almost exclusively the field of transoceanic wireless telegraphy. Wireless telephony had not even been mentioned, nor had there been any discussion of domestic wireless telephony. There was no suggeston of competition for any interests except the cable interests. Neither the Western Union nor the Postal Telegraph Co., nor the American Telephone & Telegraph Co., were competitiors, at this time, of the Radio Corporation of America.

AMERICAN TELEPHONE & TELEGRAPH CO. ENTERS RADIO TRUST

But radio was developing with amazing rapidity. The laboratories of the General Electric Co., as well as of the British Marconi Co., whose patents were available to the American combination, were making great headway in the field of wireless telephony. The laboratories of the American Telephone & Telegraph Co. and its subsidiary, the Western Electric Co., were making equal strides. The officials of the telephone company realized that if these developments were to continue and were to become generally available for public service it was but a question of time when wireless telephony would be a dangerous competitor for the wire telephone system of that company.

Wireless telephony carried the same threat for wire telephony which the progress of railroading had for steam navigation three quarters of a century ago. The next step in the formation of the Radio Trust was therefore easy to forecast. The General Electric Co. and the American Telephone & Telegraph Co. had close financial relations in New York City. The creation of a nationwide wireless telephone system would work serious damage to the value of the wire network of the American Telephone & Telegraph Co. The American Telephone & Telegraph Co. had embarked in the telegraph business largely by way of using its telephone wire system for leased wire telegraphy.

There should therefore be no surprise in the fact that only July 1, 1920, the American Telephone & Telegraph Co. and the General Electric Co. reached an agreement to eliminate competition between themselves and to strengthen each other in their respective fields against all outside competition. This contract undertook to divide the whole field of electric development between these two gigantic corporations. The American Telephone & Telegraph Co. was and is the greatest electrical communication company in the world. The General Electric Co. was and is the greatest producer of electrical machinery in the world, and through its subsidiary, the Radio Corporation of America, dominates radio communication within the Western Hemisphere and with the rest of the world.

The preamble to this agreement (p. 130) recites that the General Electric Co. "is engaged in the manufacture and sale in the United States of apparatus and systems for the generation, distribution, and utilization of electricity for light, heat, power, traction, and associated purposes, and in the manufacture and sale of a general line of electrical and power apparatus, machines, and appliances, and, directly and through affiliated companies, is engaged in the purchase of apparatus and devices of various kinds from others and in the sale thereof; and is also engaged in the manufacture and sale of wireless apparatus and appliances."

"The telephone company and its associated companies," says the contract simply, "are engaged in the operation of telephone and telegraph systems."

Then the preamble sets up the pretensions of the alleged patent situation, under which the trust has sought to conceal the fact that this and its subsequent agreements have violated the antitrust laws of the United States.

HOW FIELDS ARE DIVIDED

As the first step in the division of the huge field of electricity between these two great interests, the agreement sets up a series of definitions to describe these fields. Those definitions-which figure from time to time in subsequent agreements are worthy of recital, if only to show how careful the men who wrote this agreement were to define the territory to be allotted to those powers in the electrical and financial world. The definitions (p. 131) follow:

"Wire telephony' is the art of communicating or reproducing sound waves (created, directly or indirectly, by the voice or by musical instruments) by means of electricity, magnetism or electromagnetic waves, variations, or impulses conveyed or guided by wires, and includes all generating, measuring, switching, signaling, and other means or methods incidental to or involved in such communication.

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"Wireless telephony' is to be taken as meaning the same as the above, except that the waves, variations, or impulses are radiated through space.

"Wire telegraphy' is the art of communicating messages by code signals (such as the Morse code, for example) by means of electricity, magnetism or electromagnetic waves, variations, or impulses conveyed or guided by wires, and includes all generating, measuring, switching, signaling, and other means or methods incidental to or involved in such communication, but does not include such devices as annunciators, elevator signals, engine-room telegraphs, etc.

"Wireless telegraphy' is to be taken as meaning the same as 'wire telegraphy,' except that the waves, variations, or impulses are radiated through space.

"Power purposes' are defined as including all prime movers and their accessories and all generation, use, measurement, control, and application of electricity for light, heat, and power, but does not include any communication purposes. "Household devices,' are electric or electrically operated devices designed primarily for domestic use, but do not include devices for communication purposes. ""Transoceanic communication' shall be understood to include all communication between two continents, or between a continent and an island more than 100 miles from its shores; islands within 100 miles of the shores of a continent being considered parts thereof. North America, including the Panama Canal Zone and all of Central America north thereof, is to be considered as one continent, and South America and all of Central America south of the Panama Canal Zone as another. This definition does not include communication between ships, or between ships and shore.

""The United States Government' shall be understood to include not only the Federal Government, but also the government of the Philippines, Porto Rico, and other Federal possessions, present or future; but shall not include any municipal, county, or State government.

""Train dispatching' is telegraphic or telephonic conveyance of train orders or operating information between the office of a train dispatcher or similar official and way stations, or other points along the line of way, or railway vehicles (with or without incidental provision for operating at will in an emergency, and not automatically, signals, brakes, stops, and switches) for controlling the movements of trains or other automotive vehicles.

'Railway signalling' is the operation of signals, switches, brakes, stops, etc., controlling the movements of trains or other automotive vehicles, controlled by or in accordance with train or vehicle movements or track conditions, including block signalling, cab signals, and train stops. It does not include train dispatching above defined."

POOLS COMPETING PATENTS

Article II (p. 132) provides that the license granted under this agreement includes not only all existing patents and patent rights but all patents hereafter issued. This paragraph is highly important in considering the question of how far the patents pooled by this agreement are competing patents and therefore pooled illegally for the purpose of restraining commerce and creating an unlawful monopoly. Even if there were some merit in the contention that the patents at that time put together represented purely supplemental patents and not competitive inventions, there can be no question that the future patents of these great laboratories would include inventions that are directly competitive, and that there this agreement, is, on its face, a violation of the antitrust laws.

Article V (p. 133) is the heart of the agreement. This is the article which lays down the boundaries between the monopolies that are apportioned to the contracting parties. It must be remembered that when this agreement was written the Westinghouse Electric & Manufacturing Co. had not been brought into the picture. The agreement was made between the General Electric Co., which at that time owned and controlled the Radio Corporation of America, and the American Telephone & Telegraph Co., which, as part of the consideration for this agreement, subscribed for a stock interest in the Radio Corporation of America.

Article V, therefore, merely divides the electrical field into two divisions and allots one to the General Electric Co., which includes the Radio Corporation of America, and the other to the American Telephone & Telegraph Co.

Under section 2 of article V the General Electric Co. is given the exclusive monopoly of the field of wireless telegraphy, except that the telephone company is to be allowed to operate in the field of wireless telegraphy, for its own communications or for purposes of convenience or to save expense in connection with its commercial operations of wire telegraph and wire and wireless telephone systems, but not for profit or for transmission of messages for the public."

There is a sinister significance in the phrase "but not for profit or for transmission of messages for the public." This does not mean that in some way the profits of the telephone company are to be curtailed. It means that the telephone company is not to be allowed to give the public the benefit of the telephone company's operations in the field of wireless telegraphy, and the telephone company is thus precluded from becoming a competitor of the General Electric Co. and the Radio Corporation in that field.