Senator KING. Do you not think that effective publicity should be given to every application before the issuance of a patent so as to encourage any possible objections or make it possible for any person to submit objections to the granting of the patent?

Mr. FARLEY. I could answer that now; if that means opposition proceedings with the right of the manufacturer to oppose a patent either shortly before or shortly after the grant, it has some advantages, some great advantages, if we are not going to have tacked to it a provision such as exists in the German law that if opposition is not made within the 5-year period the patent is unassailable. If any provision of that type were attached to the law, I would be very much opposed to it.

Senator KING. Do you think it would be wise to annex as a provision to the granting of the patent a provision that if the validity is to be tested it must be done within 5 years?

Mr. FARLEY. No; I think it would be most detrimental to have a provision of that type.

Senator KING. I wish you would examine the question as to the assumption of validity of patents and preliminary injunction. As you know, now that question is greatly befogged, and it is insisted by some that before a preliminary injunction even should be granted the validity of the patent shall first be determined by the courts. I wish you would give us your views with respect to that. Do you think there ought to be cumulative damages and costs in order to discourage intentional infringement of patents and malicious infringement suits? Do you think we ought to recommend adoption of a system of cumulative damages and cumulative costs in cases of the character just indicated, where they are malicious suits for infringements or unjustifiable suits?

Mr. FARLEY. I am rather inclined to favor that.

Senator KING. Have you any views to suggest-I won't ask you to express them now-on the question of Court of Patent Appeals? Mr. FARLEY. Yes; I have some views on that subject.

Senator KING. If you will elaborate those I will be glad. I wish you would also consider the question of bringing suit for infringement in various jurisdictions. Ought there not to be a limitation so that if A claims that B has infringed his patent he may not sue in one jurisdiction and get an adverse decision and go into another court in another part of the United States and bring there a suit for infringement?

Mr. FARLEY. That certainly should be an end to that practice.

Senator KING. So there ought to be some amendment to the law in respect to that matter.

I have a number of others, but I will be very happy to talk to you before preparing your brief, and I would like to make some suggestions so you can inform the committee-at least inform me as to what changes you think should be made in the procedure, because I think procedural matters are very important.

Mr. FARLEY. May I have a written statement of those questions? Senator KING. Yes.

The CHAIRMAN. Mr. Patterson, do you care to ask any questions? Mr. PATTERSON. Not at this time.

Representative REECE. I should infer from your statements this morning, Mr. Ford, that it is the attitude of the Ford Motor Co. that there should be a wide and unrestricted competition among automobile manufacturers. If your father had joined the Automobile Manufacturers Association, and no other manufacturer had come along sufficiently strong to have disregarded that association, would that not have tended to restrict competition in the industry?

Mr. FORD. I feel very definitely that would have.

Representative REECE. Now, I don't want any possible political significance to be imputed to this phase of my question. If the Ford Motor Co. had seen fit to have signed up under the N. R. A. Code, might not that possibly have had the same restrictive influence on competition?

Mr. FORD. I feel definitely so.

Representative REECE. It would be interesting to know if as a result of the Ford Motor Co. not having agreed to the N. R. A. Automobile Code, the opportunity to sell or to bid for the sale of automobiles or motorcar vehicles by the Ford Motor Co. or any of its agents was restricted either by large private prospective purchasers or by governmental agencies.

Mr. FORD. I am sorry, but I have missed that last point.
The CHAIRMAN. I think, Mr. Ford, we will excuse you.

Mr. Cox. May I ask Mr. Farley one more question that I would like to clean up? We were talking about the relative advantages litigation has between litigants with resources, and large resources, and litigants of small resources. You said it was usually cheaper for the plaintiff to litigate than it was for the defendant.2

Mr. FARLEY. That is right.

Mr. Cox. Would you say that if the plaintiff were a litigant with large resources and the defendant a litigant with small resources, the defendant was at a substantial disadvantage?

Mr. FARLEY. Yes; that is true in certain litigation I have recently been conducting where I have been defending a very small company and where the very large company has started a train of suits, one suit after the other, three suits, and they have declared on certain of the claims of the patent before going in; we have had to prepare complete defenses on certain of these claims, and then at the opening of the trial they have relinquished their claims of infringement as to certain claims, and my client in this one particular case spent over $5,000 in preparing only for that one phase of the investigation which was dropped at the trial and for which there can be no recovery under the present law on the part of my client for any of those expenses.

The CHAIRMAN. Mr. Ford, obviously from your testimony it is your belief and the belief of the Ford Motor Co. that this system of free and open patents has been beneficial to your company. What is your opinion as to its effect upon the motor industry as a whole?

Mr. FORD. I feel it has benefited the motor industry a great deal. The CHAIRMAN. Would you care to tell the committee whether or not on the basis of your experience in the motor industry you would recommend a similar policy to other industries?

1 See, supra, p. 259.

2 See, supra, p. 277.

Mr. FORD. Every other industry has its own problems. I know nothing about those particularly, but as it has affected the motor industry I think it has been a beneficial policy and might be well worth looking over as far as other industries are concerned.

The CHAIRMAN. Thank you, Mr. Ford. The committee is very much indebted to you, and to you also, Mr. Farley, for your testimony today, and you now stand excused.

(The witness was excused.)

Mr. Cox. Will Mr. Alfred Reeves step forward, please?

The CHAIRMAN. Mr. Reeves, will you be sworn, please?

Do you solemnly swear that the testimony you are about to give in this proceeding will be the truth, the whole truth, and nothing but the truth so help you God?

Mr. REEVES. I do.

TESTIMONY OF ALFRED REEVES, VICE PRESIDENT AND GENERAL MANAGER, AUTOMOBILE MANUFACTURERS ASSOCIATION, NEW YORK, N. Y.

Mr. Cox. Mr. Reeves, will you give the reporter your name and address?

Mr. REEVES. Alfred Reeves, vice president and general manager of the Automobile Manufacturers Association, New York.

Mr. Cox. Will you tell us briefly just what the Automobile Manufacturers Association is, Mr. Reeves?

Mr. REEVES. It is a trade association of some 34 manufacturers, the purpose of which is to do those things that can be done better by single units probably than by a good many units working along the same line. Would you like some of the departments?

Mr. Cox. You might indicate briefly the kind of work you do. Mr. REEVES. Well, the work has to do with highways; it has to do with safety, activities on traffic, sports, running the New York automobile show, the patent division, and activities of that kind, public relations, and all those things that a trade association naturally does.

Senator KING. Are all its members manufacturers of automobiles, or some members merely distributors?

Mr. REEVES. Only manufacturers of automobiles, cars, and trucks. Mr. Cox. I hand you this document, Mr. Reeves, and I ask you whether that is a correct copy of the constitution and bylaws of the association of today.

Mr. REEVES. It is.

Mr. Cox. I should like to have this marked as an exhibit, with the committee's permission.

The CHAIRMAN. It may be so marked and entered in the record. (The constitution and bylaws referred to were marked "Exhibit No. 91" and are included in the appendix on p. 672.)

Mr. Cox. How long has the association been in existence?

Mr. REEVES. Since 1913.

Mr. Cox. How long have you been connected with the association? Mr. REEVES. Since 1914.

Mr. Cox. There was a point in its existence where it changed its name, was there not?

Mr. REEVES. Yes, sir.

Mr. Cox. What was it known as before it acquired its present name?

Mr. REEVES. It was originally known as the Automobile Chamber of Commerce. A short time afterwards they put the word "National" to it, and during the N. R. A. code its name was changed to Automobile Manufacturers Association, so as not to confuse it with jobbers and dealers and other types of allied trades that were having codes under the N. R. A.

Mr. Cox. I hand you another document and I ask you whether this is an accurate list of the present members of the association and of the officers and directors at the present time.

Mr. REEVES. It is.

Mr. Cox. With the Chairman's permission, I should like to have this marked as an exhibit.

The CHAIRMAN. It may be marked.

(The membership list referred to was marked "Exhibit No. 92" and is included in the appendix on p. 682.)

Mr. Cox. What are the qualifications for membership in the association, Mr. Reeves?

Mr. REEVES. It is open to any manufacturer of cars or trucks, although it has been the custom to require that they be manufacturing for at least a year. It doesn't make any difference as to size, because some were admitted that only make 150 cars.

Mr. Cox. Since your connection with the association, has it ever refused membership to anyone who applied?

Mr. REEVES. Nobody that applied, except on one occasion when we had a presentation made by some people who wanted to make application but were told that they probably had better not because they only made two cars, and at that time it was reported it was primarily interested in selling stock.

Mr. Cox. How long ago was that?

Mr. REEVES. Probably 18 or 20 years ago.

Mr. Cox. That was after 1914, this instance you speak of, and the person who was refused was not Mr. Ford.

Mr. REEVES. It was not Mr. Ford.

Mr. Cox. The instance we described this morning took place before your connection with the Automobile Association. It is true, isn't it, Mr. Reeves, that among the other duties of the association is the duty of administering a cross-licensing agreement among its members?

Mr. REEVES. Right.

Mr. Cox. Is everyone who is a member of the association a party to that cross-licensing agreement?

Mr. REEVES. Right.

Mr. Cox. Is everyone who is a member of the association a party to that cross-licensing agreement?

Mr. REEVES. No. There are a couple that are not.

Mr. Cox. That agreement takes the form, does it not, of an agreement between the association as such and each of the individual members that wishes to become a party to the cross-licensing arrangement?

Mr. REEVES. Yes.

Senator KING. Were those who were not a party to the cross-licensing excluded from the organization, or did they voluntarily withhold?

Mr. REEVES. They are still members of the association, and decided that the cross-licensing patents agreement didn't furnish them sufficient inducement to go into it.

THE CROSS-LICENSING SYSTEM

Mr. Cox. When was the first cross-licensing agreement made, Mr. Reeves?

Mr. REEVES. January 1, 1915.

Mr. Cox. I hand you this document and I ask you if that is a true and correct copy of the first cross-licensing agreement, the one that was made January 1, 1915.

Mr. REEVES. Yes, sir.

Mr. Cox. I should like to have this marked in evidence.

The CHAIRMAN. It may be marked.

(The first cross-licensing agreement referred to was marked "Exhibit No. 93," and is on file with the committee.)

Mr. Cox. Perhaps at this point it might be well if we introduced in evidence a list of the charter members of the association, that is, those manufacturers who were members as of March 1, 1913, and at that time, of course, the association was known as the Automobile Chamber of Commerce, and I ask you if that is a correct list? Mr. REEVES. It is.

Mr. Cox. Very well. I should like to ask that this be marked.

(The list of charter members referred to was marked "Exhibit No. 94," and is on file with the committee.)

The CHAIRMAN. Is it your desire to have these printed at length in the record?

Mr. Cox. It is not my desire. I should be satisfied to have them certified as original exhibits for the use of the committee.

The CHAIRMAN. I think that would be a very satisfactory method. Mr. Cox. Mr. Reeves, can you tell us briefly what the circumstances were which led to the making of the original cross-licensing agreement for 1915?

Mr. REEVES. Well, I think it came partially from the situation in the Selden case, the manufacturers were having great difficulty getting out production; they didn't want to be bothered with patents; they didn't want to sue one another. They had had enough concern over the Selden case itself, and there seemed to be a need for keeping patents out of the situation and trying to develop as good cars as they could produce at prices at which the public could buy because at that time most of the cars were very high priced cars.

Mr. Cox. You would say, then, that it was the desire to avoid litigation and the confusion and uncertainty which results from disputes as to scope and validity of patents that led to the formulation of the agreement in the first instance?

Mr. REEVES. Yes.

Mr. Cox. Now, Mr. Reeves, can you tell us briefly what the effect of that first cross-licensing agreement was, what rights did the members acquire under it?

Mr. REEVES. Well, the agreement was put through on the basis that 61 companies with at least 300 patents were obliged to sign before it became operative, so if one manufacturer had 10 patents he received licenses under 300 before he had to give licenses under his 10, and as a result of that, it became operative, and 61 companies and 547 patents were included when it started off.