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 Curtis. Dedicated 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.
