Sunday, May 11, 2014

Post 6. Zenith’s Second War, second installment

     At the close of the first installment, we left Phil Curtis and Frank Crotty in that "fleabag" room  sorting through the “wallpaper’ that RCA had produced to obfuscate Zenith’s  search for the RCA documents needed to prove its case.  But now the affair turned a corner in favor of Zenith.
     Zenith reported the matter to Judge Igoe, who quickly ordered RCA to produce all the documents.
     Europe was another consideration.  The patent pools of European co-conspirators were counterparts to the RCA patent pool in the United States.  It was thought that English, French, Dutch, German and Scandinavian patent pools had files on the overall conspiracy.  Zenith requested that letters rogatory [i] be issued to the appropriate courts in the countries cited so that Zenith could pursue its pretrial discoveries in Europe; in short, to enable Zenith to examine the participants and the documents relating to the patent pools of the conspirators.
     Judge Igoe issued the order to the High Court of Justice in London and the appropriate courts in the countries cited.  To proceed before the High Court in London, Zenith attorneys had to hire a British solicitor and a British barrister to present its case.  Wright, McConnell, and Curtis arrived in London to find that before they even started, their efforts had been violently opposed in the High Court by RCA patent cartel and the English companies who were members of the cartel.
     “When the judges assembled in their wigs and robes and were seated, we could look up at them, it seemed, as if we were in an orchestra pit staring up at a stage high above us where a collection of impressively robed and white-wigged, seemingly supernatural jurists sat in divine judgment on our cause.”
     Curtis Describes the High Court Proceedings
     Zenith’s British barrister briefly presented its case, and the impressive and eminent barrister for the opposition, Sir Hartley Shawcross, rose and presented the RCA-GE case.  He declared that British companies were being attached by a “Chicago company” and their “Chicago lawyers,” and declared that the pretrial discovery process was entirely foreign to the British system of justice.  Curtis noted that Capone wasn’t mentioned, but it wasn’t necessary to make his point, and observed:
     “As I looked up at the judges, their faces wrinkled by years of judicial service, they appeared to be pained and horrified by the revelations of our opponent’s barrister.  With saddened eyes, the judges seemed to be staring down at us as if we were Chicago gangsters boldly intent on attacking the cream of Britain’s peerage in the very capitol of the Empire.  Tom McConnell facetiously whispered to Wright and me, ‘We’ll be lucky if we escape from here without being put in a dungeon at the Tower in chains’.”
     But if recourse to British justice had failed, RCA executives in London were still subject to the authority of the Chicago court under Judge Igoe.  RCA’s European representative, Cornelius Mayer, was summoned for examination conducted by Tom McConnell.  The result was 244 pages of “arrogant, evasive testimony’; in other words, RCA’s minion was stonewalling.  McConnell suspended the deposition until Mayer’s files could be examined.
     But Mayer had transferred his records from RCA offices in London to a newly formed subsidiary in Switzerland where RCA thought that, under Swiss law as in British law, the records would be immune from examination.  The flagrant attempt to hid the Mayer files was brought before Judge Igoe, who ruled that the files must be returned to London forthwith.  After a clumsy attempt by RCA to withhold the files and to conceal those harmful to RCA’s case, Zenith attorneys were able to examine them.  What the found was evidence of a patent pool in gross violation of U.S. antitrust laws.
     Mayer was again examined.  This time he was faced with the actual documents which clearly showed RCA’s involvement in the attempt to bar Zenith from the European market.  Further evidence was obtained that showed the cartel had blocked Zenith’s efforts to export to Norway, Denmark and Sweden as well as the entire European continent. [Tom McConnell’s examination of Mayer is set forth in Appendix III of the Curtis book, and it is where “Bulldog” McConnell really showed his teeth.]
     Alarmed by Zenith’s progress in discovery, RCA tried to get Judge Igoe removed from the case on the basis that he had displayed “personal bias and prejudice” toward the defendants.  The obvious intent was to get another judge who would rule in favor of RCA – in short, another Judge Leahy.  Judge Igoe refused, and the federal appeals court supported the refusal.  So desperate was the RCA cartel to avoid the antitrust charges that it even appealed to the Supreme Court, which denied the appeal.
     [Note:  RCA’s attempt to replace a judge that is providing unfavorable rulings is a classic tactic in court practice. Zenith’s case was saved when Judge Igoe refused to step down.  But Zenith was not so fortunate in the Second War, as we shall see.]
Zenith wins!
     The Zenith case against RCA and the cartel was scheduled for trial in September of 1957.  RCA however avoided trial by agreeing to settle out of court, paying Zenith $10 million in damages; also, Zenith was awarded a worldwide, five-year, royalty-free license under all the patents in the cartel’s pool
     However, Zenith  intended to hold RCA’s feet to the fire by insisting that the courts address the antitrust issue.  A New York federal grand jury indicted RCA for criminal violation of the Sherman Antitrust Act.  Slippery as ever, RCA avoided a criminal trial by not contesting the case.  A fine of $100,000 was imposed – the tiniest slap on the wrist considering the hundreds of millions of dollars the RCA cartel had reaped in the 30 years it had imposed its criminal cartel, and the American companies it had destroyed. The fine  should have been more like $10 million or even a $100 million.
     In closing, Curtis noted that “we were grateful that the government did not fight us on behalf of the conspirators.”  That statement proved to be a self-fulfilling prophecy for--as incredible as it may seem--the U.S. government did just that in the second war, a war in which Zenith and hundreds and thousands of American workers were the tragic losers.

[i] A letter rogatory, “or letter of request,”  is a formal request from a court to a foreign court for some type of judicial assistance. (Wikipedia)
    So the First War ended in a triumph for Zenith. But that triumph was short-lived, for a more formidable cartel had been formed--the RCA-Japanese cartel.  The story of the Second War will be told in three forthcoming Posts comprising three installments.
McDonald's daughter, Marianne, wrote that if you mentioned David Sarnoff's name to her father, you would get instant anger.  And it is said that the name "Zenith" was was never allowed  in the offices of RCA.
                                                                   * * * * *
A Tribute!  To Michael Lambert Igoe was a federal judge to the United States District Court for the Northern District of Illinois. He served as a federal judge from 1939 to 1965.   He ensured that Zenith got justice in its suit against RCA (You can learn more about Judge Igoe in Wikipedia.)  

Two  Notes:  
1. Previous Posts of this blog, which are Post 1 through Post 5, can be found and opened by clicking in a location to the right of the first paragraphs at the front of the blog, where the Posts are listed.
2. I haven't been able to get photos and other images into the blog, but am working on it. (Google blog is fighting me, and winning. So off the computer goes to the Geek Squad.) 
Two questions:   If I may venture to ask:  How many of you wonderful readers knew the story of the Zenith's two wars?  How many of you have read the Curtis book?  
    Commenting as an author:  If it turns out that only a few of you knew about the Curtis book and its contents, it is an incentive for The Author to write a "popular" edition of the book, for it is a story that should be told for its implications both then and now--especially now in view of the fact that the U.S. government  seems to get ever more powerful, and hence more dangerous to our liberties. What it did to Zenith with regard to the Second War  is  inexcusable and the crime should be revealed to posterity by means of a special  book written for that purpose. 


Wednesday, May 7, 2014


In the previous Post 4 of the Zenith book blog, you were promised a disclosure of the First Zenith War against the RCA-Sarnoff  cartel and its flagrant violation of the Sherman Anti-Trust Act. But before we begin, some ground rules and facts must be must be established.
Basis for this Zenith Book Blog
The description of the two wars fought by Zenith  is essentially a summary of the writings of Phillip Curtis in his book The Fall of the U.S. Electronics Industry.  The Author of this blog humbly  acknowledges  his shortcomings in summarizing the brilliant work of  Curtis, and his temerity in doing so.  And it is with the kind permission of the heirs of Philip Curtis, who own the copyright to the book, that The Author  does so.

Brief Summary of the Curtis Book

Pages 1-18.  The origins and need for anti-trust laws.
Pages 23-232. The disclosure of the indictment that comprises  the 200 pages that are summarized in this blog.
Pages 236-337. Exhibits and Appendices that show what Curtis referenced in his exposition.


Availability.  The book is out of print and is being remaindered by Amazon.com for a cost of $144 per copy.  The Author received his copy from Mrs. Curtis many years ago.

Dedication by CurtisDedicated to the thousands of American workers who lost their jobs as a result of the predatory attack of a foreign cartel described here—a protected attack made possible by heavily lobbied federal law enforcement failures.  

Book Status. The Curtis book was issued before Zenith filed for bankruptcy.  Had it been available earlier and released to the public, it may have swayed public opinion in favor of Zenith and the now-dead Consumer Electronics Industry, and against the invidious foreign cartel. The fact that the obvious federal support occurred during the administration of  President Carter is not surprising, but that the final chapters occurred during the Reagan administration is surprising and dismaying. A possible explanation is provided by The Author at the close of the summary. 

Statement by the Author of the Blog.  The Author has tried  to efface himself as much as possible in the blog as the subject, opinions, and content  relating to the two wars are mainly attributable to  Philip J. Curtis.  Curtis laid out the case for Zenith as only a brilliant lawyer could, with statements and assertions back with meticulous evidence “chapter and verse.”  It is a stunning indictment!       Despite the fluid and skilled writing of Curtis, it is challenging reading for the non-lawyer (of which The Author is one). But the Author’s years summarizing and explaining complex engineering documents, and his experience as a patent agent and the writing of applications and patent briefs, have emboldened him to attempt a summary of the Curtis book—in short, to “popularize” the book. It is hoped that a simplified edition of the Curtis book will be published.  Surely the message of Curtis concerning the egregious and unlawful actions of two administrations of the federal government and its agents should not go unrecorded and unacknowledged by posterity.
(Which leads to the question:  Is the chicanery still  going on? You bet!)

Criticisms of the result will be gratefully received and acknowledged.

 So, “unto the breech, dear friends,” in the First Zenith War!

                               Zenith Declares War on the RCA Patent Cartel


   World War II had ended, and Zenith was converting from wartime products to consumer products.  Zenith was faced with the RCA package license which required a payment of a 7.5 percent of the sale price of not just the electronic circuits, but the whole product, including the cabinet, which in the top- line sets were expensive.  So the tribute payable to RCA for a $450 radio was $33.75.  The extortionate nature of this assessment is pointed up by the fact that a profit on such a radio was normally 10 percent, or $45.00.  Further, the RCA license required that the licensee grant back to RCA any patents it developed. This outrageous levy had the effect of making the licensee a subsidiary of RCA.


   The penalty for refusing the license was to be tied up in court in prolonged and devastating litigation.  Few independent radio manufacturers could afford this, so they had no option but to go out of business.  Once there were 500 small, independent radio manufacturers in the 1920’s.  All were wiped out by the RCA’s predatory licensing.


   This scheme had gone on for 30 years until it was challenged by Zenith.  Zenith refused to be a licensee.  Rather than waiting for a legal attack by RCA, Zenith filed an action in the Delaware federal court for a judgment against RCA and the other pool participants:  AT&T, Western Electric, General Electric, and Westinghouse.  (Little Zenith picking a fight with this mob – a David-and-Goliath confrontation, if there ever was one!)  The suit was based on a declaration that all the patents in the RCA patent license were unenforceable because they were pooled by an unlawful conspiracy with the intent to monopolize the American electronics industry.  Further, Zenith was barred from doing business in Canada and in foreign countries by the far-reaching tentacles of the monopoly.


   Such a monopoly was a clear violation of the Sherman Antitrust Act, which came into being to break up the monopolies in the last century:  the Steel Trust, the Sugar Trust, the Railroad Trust, and the notorious Rockefeller Oil Trust, all of which mutually agreed among their co-conspirators to fix prices, divide up world domestic and foreign markets amongst themselves, and to use their combined power to crush competitors.


   The Sherman Act is beautifully simple.  It  states that “every contract, combination in the form of trust or otherwise, or conspiracy in restraint of trade or commerce among the several States, or with foreign nations, shall be guilty of a misdemeanor …”.  (To put some needed teeth into the law, anoffense against the act was later upgraded from the mild “misdemeanor” to “criminal”).  It was on this basis that Zenith filed suit against the RCA patent cartel in the Delaware federal trial court, Chief Judge Leahy presiding.


Zenith loses the first round, The RCA conspirators counter-attacked by alleging infringement of 40 patents in the RCA pool consisting of 24 patents by RCA, 10 by Western Electric, and 6 by General Electric.  The began a “legal war of attrition” against Zenith which entailed the filing of numerous motions and pretrial “discoveries” designed to make it too expensive for Zenith to carry on.  And basically, it was designed to obscure Zenith’s original antitrust claim.


  Then came what was looked upon as Zenith’s “death sentence”.  It was imposed at the defendants behest by Judge Leahy of the Delaware federal trial court.  Before Zenith’s antitrust claim could even be considered, said the judge, the aforedescribed forty patents that Zenith had supposedly infringed must each be tried in court.  Also, any newly issued patents could be asserted against Zenith, and each in turn must be tried.  The cost of the full-scale trials would be enormous, and most pertinent, RCA could continue for years to impose it’s criminal conspiracy on the industry and reap the benefits thereof.


   In a master-stroke, RCA’s lawyers thus persuaded a sympathetic judge to impose on Zenith this course of legal obfuscation and delay.  Zenith had failed miserably in its first attempt to break RCA’s monopoly.  Maybe it would be better to apply for a license, and pay the royalties.


I attack!

   Not so, said Commander McDonald.  Perhaps, as a Naval officer, he was inspired by Marshall Petain.  During the First World War, when his forces were driven in on all fronts, Petain said:  “The situation is excellent.  I attack.”


   To lead his attack team, McDonald enlisted Joe Wright, who later became president of Zenith.

Joseph S. Wright came to Zenith from the Federal Trade Commission (FTC) in Washington, D.C., where he was in charge of ensuring compliance with the Commission’s order to cease and desist from unfair competition.  Wright in turn brought in Philip J. Curtis, who had worked with Joe Wright in his antitrust section of the FTC.  Curtis characterized Wright as “the government’s bulldog, and Zenith needed a man with bite.”


  And bite he did.  He got together with Curtis and Zenith’s long-time counsel Irving Herriot to decide strategy.  They had two chances.  The first was to petition the Delaware Third Circuit Court of Appeals to force Judge Leahy to put Zenith’s antitrust claim ahead of the trial of 40-plus patents.  This was considered a hundred-to-one chance, and so it eventually proved.


   The second strategy was to springboard Zenith’s antitrust claim on a patent infringement suit against Zenith that RCA had filed in Chicago.  Phil Curtis had dug up evidence that the RCA patent cartel was behind the barring of Zenith from the lucrative Canadian market and other foreign markets in clear violation of the Sherman Antitrust Act.  This evidence made it possible to show that the Chicago case was different from the Delaware case, and that the antitrust issues could be tried separately in Chicago.


   Another bulldog was brought on board, this one in the form of Thomas C. O’Connell, described by Curtis as “a fearless, brilliant trial lawyer.”  And so he proved.  Cross-claims were filed on the antitrust issue against the RCA cartel, including GE and Western Electric.


   The case was under the jurisdiction of Chicago’s Judge Michael Igoe, who allowed Zenith’s case to proceed independently of the Delaware trial and Judge Leahy’s ruinous decision.  It was a great victory for Zenith; however, Zenith had absolutely no evidence admissible in court that a conspiracy actually existed.  But Zenith now had the court behind it, and therefore the power to examine files, as questions and examine witnesses under oath, a legal procedure known as “pretrial discovery.”  Failure of RCA to produce the documents would be considered contempt of court and an obstruction of justice.


   Not that this much bothered RCA and its raft of attorneys.  It took Zenith’s attorneys no less than three years to discover that evidence, but find it they did.  RCA’s counsel drew upon every possible expedient including what Curtis called “sandbagging” and “the wallpaper treatment.”  The wallpaper strategy was to “swamp them (Zenith) with plenty of nothing until they gave up in exhaustion and despair.”  Documents detailing communications relative to the conspiracy, and between RCA’s executive officers were withheld, and attempts made to actually hide them!


   An example of the RCA’s tactic in making it as difficult as possible to examine its files is shown what might be called the “fleabag’ incident.  Rather than offering space at RCA’s luxurious New York City headquarters for Zenith’s examination of the files, the files were piled into the worst possible room of a New York hotel that RCA could find.  Phil Curtis’s description is vivid:  “The hotel itself was a third avenue fleabag . . . that had not been cleaned or decorated for human habitation for many, many years.  There was a small window covered with years of New York grime and jammed shut so that we could not open it.  Hanging from the center of the ceiling on a black, twisted cord was the original light fixture.  This ‘document” room’ had the sepulchral stench of many decades of living and, possibly, dying.  The ‘air conditioning’ was a contradiction of terms.  Counsel for RCA must have thoroughly searched New York City and could find none worse for our accommodation.”  Along with Zenith patent attorney Frank Crotty, Curtis spent many miserable weeks sorting through this “wallpaper.”  It was obvious that RCA was deliberately withholding  from Zenith the documents needed to proceed with its case.


End of First Installment of the two installments that describe Zenith’s first war and victory against the RCA cartel.  The next post, Post 6, will complete the story of the first war, and tell of Zenith's triumph.


Now for something completely different!


                                                            THE BIG BANG

Like most early Zenith factories, Plant 7, located near the intersection of Costner and North Avenues in Chicago, was an antique as buildings go. It was there that Zenith packed in the assemblers who put together radios and television sets by hand-wiring.  Most workers were women who lived close by on the West Side of Chicago.  And a more dedicated work-force could not be found. For example,  if they found a scrap of hook-up wire on the floor, it would be picked up and wired into a chassis. No waste there. 

   Emulating Henry Ford, in its early days, Zenith strove to manufacture  of its products in-house, buying as little as possible from outside vendors.   Chassis for radios, and the metal  structure for speakers were all punched  out by a formidable array of giant presses whose chunking could be felt through-out the neighborhood.  Not that anyone minded, for it was the sound of prosperity to those who lived close by and worked at the Plant.

   Plant 7 also assembled artillery and rocket  fuze components such as safety and arming mechanisms and installed their explosive components—government contract work brought in by Bill Van Slyck. Some of the components consisted of blasting “caps” that initiated the major explosion of an artillery shell or rocket. The assembly lines consisted essentially of glass shields intended to prevent installer injury.  The assemblers’ hands were inserted into thick gloves that extended into the shields to protect  the hands in case the cap exploded, and the installer’s hands were grounded by wrist straps.  It must have been an exciting place to work as the caps often exploded. There was also dump out in back of the plant to store the explosives. 

   But those explosives were not what caused the Big Bang.  And it was a BIG Bang.

   Facing the plant  on the North Avenue side was the factory  of Helene Curtis, a maker of cosmetics and other beauty supplies sold under the Curtis name—a seemingly innocuous neighbor. 

   The day was over-cast. Both factories were humming  busily. The Zenith workers heard a loud  “whump and swoosh” (as someone described it!) from the direction of the Curtis factory. Everyone on the north side of the Zenith factory did the natural thing—they rushed to the windows to see what all the noise was about.  There they were  witness to the second explosion—the big  explosion that  blew the window glass into their faces--an explosion strong enough to blow out the window sash as well. 

   The “whump and swoosh” was caused by fluid leaking from a highly inflammable solvent leaking from a tank, and the big bang was from the explosion of the tank itself.   

   There was blood everywhere; blood, said one victim, was  running  down the stairs. One person died. Others lived but others bore the scars for the rest of their lives.  Ed Schoeder, the Zenith Secretary who was the first on the scene, described the chaos as resembling a battle field.  It was obviously not "just another day" at work.

                                                             The author Apologizes

  • In Post 4, Bob Adler’s remote control was termed a “gizmo”. (Sorry, Bob!)   It was far more than that, for  it was a landmark  application  of ultrasonic technology  in a consumer product,  one that prefigured Adler’s touch screen.   And it saved Zenith’s reputation when Zenith was unable to mass-produced Gene Polley’s visible light control system, described in the previous post. Zenith’s competitor, Admiral Corporation thought so much Adler’s remote control that  it copied the control for use with Admiral  television sets.  Zenith sued Admiral for patent infringement, and won. (Hi, Nick!) It was an easy win because Admiral made a “Chinese” copy, one identical to Adler’s invention in all respects. The moral is, if you are going to infringe a patent, don’t make it identical in structure.  (And, apologies also to the Chinese for using the term Chinese  copy.)
  • An apology to Phil Curtis and heirs for not showing a photo of him. I never took one, and no one else seems to have one.   Perhaps a reader can supply it.
  • Memory often falters after so many years, and there will be errors in what is set down. If you  spot an error, please let the Author  of the Zenith Story be aware of it  in Comments section  at the close of the blog. Also, you can enter your correction in the Zenith Book Facebook in the “What’s on your mind” section. Here is the address of the Zenith Book Facebook:

Of course you will have to sign into Facebook and use a password, but we all know how to do that, don’t we? Piece of cake.  (Whoa!  The link directly to the Facebook page seems to be broken. So just copy the address  and paste it into your browser address bar.)

Help! Help!  Comments Wanted. 
At the end of this blog, you will see a box that says “Comments.”  Click on the word and a box will appear for receiving your comments. After you enter your comments, the word “Publish” will appear. Also, the word “Preview,” which gives you a chance to change your mind, or to correct any evil grammar and spelling.

And in the next Post, Post 6, we'll see Zenith score a well-deserved win. Not only will Zenith win, but so will the entire Consumer Electronics Industry and the American people.