*1 yearly 447(c), and the base tion period rate base and the of return rates (both the tentative rates of return 447(d) final and the in section scribed 447(a) in section rates described industry are (b)) classification for each
as follows: America,
UNITED STATES of Appellee,
v. Inc., CO., American
CHAS. PFIZER & Bristol-Myers Cyanamid Company and Appellants. Company, 636-38,
Nos. Dockets 32493-95. Appeals, States Court of
United Circuit. Second
Argued May 1969. April
Decided 1970. *2 MOORE, and FRIENDLY
Before HAYS, Judges. Circuit Judge. MOORE, Circuit Co., (Pfizer), Inc. & Chas. Pfizer (Cyanam- Cyanamid Company American (Bris- Company Bristol-Myers id) and tol) after appeal from convictions Act trial for violations Sherman 1, 2). indictment (15 The U.S.C. §§ counts, (I) “Combina- three contained Conspiracy of in Restraint tion and (II) Con- Trade”; and “Combination (III) Monopolize”; and spiracy were “Monopolization.” The defendants guilty found on all three counts. co-conspirators named Two were indictment, Chemical Olin Mathieson (Squibb) Upjohn Corporation The Company (Upjohn). execu- The chief City Wood, York New F. E. John Pfizer, Cyanamid and officer of tive Stewart, Jr., Par- A. (Charles Judson E. respectively aas also named Griffin, Mc- sons, Jr., Paul D. J. David indictment Before trial defendant. Wolf, Johnston, Grath, Robert S. Neal to these individual was dismissed as Korff, Joseph Rein Catherine A. fendants. Ballantine, Bushby, & Palmer Dewey, conspiracy The indictment City, Con- Wood, Arthur G. York New co-conspirators re- G. Arthur nolly, F. L. Peter Stone spectrum anti- strain trade broad Lodge, Connolly, Connolly, Jr., Bove & drugs drug are market. These biotic counsel), Del., appel- Wilmington, for specifically In more later. enumerated Co., Inc. Chas. Pfizer & lant conspiratorial substance that: City McDonald, Roy New York W. Irvine, (Ralstone P. Mc- Breck tetracycline (a) R. The manufacture Holcomb, Allister, Kenneth Pfizer, Richard Y. Cyanamid confined to be Jr., Mengel, Edward C. N. Hart and Bristol. Irvine, Leisure, Donovan, Newton & (b) tetracycline products The sale counsel), appel- City, of for New York Pfizer, Cyanamid, confined to be Cyanamid Co. lant American Upjohn Squibb. Bristol, tetracycline (c) City be Jr., bulk Clark, sale York New Merrell E. Benbow, tet- Zafian, confined to Bristol and bulk (Henry H. Terence J. racycline Dreyer sold Miller, A. William M. Edward Squibb. Stimson, Winthrop, Gray, and Robert W. City, Roberts, York & Putnam New (d) spectrum anti- The sale broad Bristol-Myers counsel), appellant Co. for products the defendant biotic co-conspirator companies and the Sklarsky, Atty., Dept, Harry G. substantially companies at (Richard Washington, Justice, D. W. C. non-competitive identical McLaren, Atty. Gen., E. Howard Asst. prices. Gelfand, George Shapiro, Herman G. particulars Edelstein, bill and William Robert Easton E. for its Justice, provides the of reference frame Attys., Dept, Weissman, R. Cyanamid, Washington, counsel), As to Pfizer and C., ap- claims. D. antitrust laws be- to violate pellee. Bristol, tetracycline obtaining gan 1953 and as to of the Pfizer in November patent. Upjohn in December 1955 alleged illegal 16). (BP acts ¶, lqpgth These officials testified illegal (a) in November 1953 “the business situations which arrangement cross-license and bulk sales during pe- fronted them the indictment ini between Pfizer riod tak- reasons for the actions 1953” tiated in November judgments inen exercise *3 confining (b) (BP ¶27(a)); Pfizer’s meet it situation and each as arose tetracycline and market to Pfizer light which in called for solution Cyanamid January 1954; (c) an al- confronting the facts then them. illegal agreement legedly in November government’s case, Thus the insofar whereby Squibb deprived 1955 Bristol concerned, as actual is rests al- right and of their manufac- entirely upon most oral and written tetracycline; (d) illegal ture ar- and statements from defendants themselves. rangements Pfizer and Bristol circumstance, Because may this the facts settling the Bristol- December 1955 virtually undisputed. said litigation patent depriving Pfizer and Squibb right Upjohn of man- indictment, by as limited the bill tetracycline. Up- ufacture particulars, the mold constituted john co-conspirators were named —not pattern govern- which formed (Pfizer), McKeen defendants. Malcolm namely, case, ment's that a (Cyanamid) (Bristol) and Schwartz (McKeen) was formed Pfizer pricing (e). policies fixed three These Cyanamid (Malcolm) meetings at be- illegal individuals authorized acts tween them in November 1953 and that (f). (Schwartz) joined conspir- Bristol government’s case, except mi- for acy meetings between McKeen and large details, nor was constructed in Schwartz in December 1955. Since the measure: happenings facts to the of these two meetings (1) series of are to the upon testimony critical of John E. government’s case, they kept McKeen, must be of the President Chairman spotlight. under a Pfizer, Board of Directors of Malcolm, Wilbur G. (to September Vice-President impossible It condense trial 1, 1957), (to April 1961), President (the testimony transcript and exhib- Cyanamid and Chairman of the Board 12,000 printed its consists of some Schwartz, Frederic N. President highly pages) except in man- a selective (and prior 1, 1958, January concentrating ner, on and then Laboratories). President of Bristol the determinative facts. (2) agreements upon written entered subject matter of suit was corporate into between some all Pfizer, marketing by Cy- production and defendants, many of which anamid a broad disposition patent related to the tetracycline. drug, Prior antibiotic controversies which had arisen inter drugs in 1952 there were three effective sese; Cyanamid September this field. In 1949 (3) upon a mass of statistical infor- aureomycin patent had a on obtained relating production costs, mation Septem- which marketed in had first it gross profits, prices, etc., of the anti- July In se- ber 1950 Pfizer had 1948. involved, designed biotics here to show terramycin patent cured a it on which reaping the defendants were unusu- 1950. introduced the market March ally high profits from their antibiotic Parke, (a company pharmaceutical Davis drugs; and either a not involved this case (4) eight days testimony co-conspirator) some in Octo- fendant or as a dealing exhibits patent related for chlo- ber 1949 had received a thereto
35 tetracycline ered was obtainable put on the mar- it had romyeetin which aureomycin by subjecting (patent held January 1949. ket proc- Cyanamid) dechlorination a tetracycline, drug, was In a new Application in October made ess. three developed. The activities process product patent for a drug cre- respect this publicity of the As result of claims. indictment’s basis ate discovery, March charges. process product applied for 1953 Situation The Pre-November tetracycline. there for Thus patents for (Cyanamid) pro- pending applications two Aureomycin conflict, drug. exclusively by Cyanamid, To resolve same and sold duced interfer- (Duggar declared an patents Office Patent was covered process) ence. Niedercorn-fermentation public Decem- was available Briefly Pfizer believed stated 1952) ber 1948. (Dr. priority Conover —June *4 (March 1953), the Cyanamid but patent) (Parke, over Chloromycetin Davis However, Pfiz- public uncertain. outcome was to the and sold manufactured was completely er, win, was it to even were from 1949. Cyana- production, dependent for produced (Pfizer) Terramycin was or by purchase aureomycin either mid’s by sole 1950 as the Pfizer from and sold attempt In an manufacture. license to manufacturer. problems, McKeen these business resolve were or cross-licenses licenses No Cyanamid met of and Malcolm of Pfizer companies granted by of these conten- 1953. There in November drug manufactur- other each other or to time at the by tion ers. years pre- meeting and for of this drugs prescrip- a of these was Each any conspiracy or ceding there was it a drug, namely, tion available similarity agreement despite of although some- prescription and doctor’s drugs and price of the three structure interchangeable their sales were what li- companies’ policies of not despite the dependent upon the doctor’s views as censing 1951 Prior October others. respective effectiveness by by met price one were reductions particular of the ailment treatment others. patient. extent To this company, taking competitive. ad- Each Meetings 1953 The November believing vantage patents its practices business None efficacy product full of its but with Cyanamid occurred Pfizer knowledge similarity of the in medical meetings by prior 1953 November drugs, competitors’ its usefulness specification were own kept eye competitive on the part conspiracy in issue from the issu- the others and refrained by govern- any, here. If there were price ance of There had licenses. by it ment’s created concession was terramy- stability aureomycin, between Malcolm at McKeen and November Chloromycetin years cin several meetings Two and not before. prior alleged conspiracy. meetings Cyanamid Pfizer and Into this stable situation somewhat (McKeen held, and Mal- the first early tetracycline, came 1950s preliminary, colm) was somewhat superior many sidered the other Malcolm, (McKeen, Powers of second three. Cyanamid) Pfizer and Martin of resulted (January in written Tetracycline 1954). meetings The facts to these developed one were Pfizer claimed that June through scientists, Conover, discov- these four witnesses. sub- its Dr. negotiations ject matter tetracycline patent interference situa- Bristol, Cy- mindful Pfizer’s and won, victory If could Pfizer tion. tetracycline anamid’s activities Cyanamid con- been hollow because field, patent ap- filed in October 1953 its aureomycin it unless trolled vital plication. Although application this Cyanamid reached rejected, separate patentability it filed a to obtain it. with its tetracycline hydrochloride. claim for aureomycin being risked blocked from brought This claim about in March 1954 making tetracycline Pfizer’s Con- involving Bristol, an interference Pfizer patent. protect respec- over To Cyanamid. Despite Cyanamid’s pat- agree- companies, tive interests of both position, proceeded ent to manu- provided ments were reached which tetracycline facture process. a fermentation (1) parties exchanged substance proofs priority, as to the Patent Office February having Bristol, learned in being the ultimate arbiter and that the Pfizer-Cyanamid concession party prevailing give should a non-exclu- priority whereby appeared most sive license to the other in consideration likely receive a that Pfizer would royalty, (2) Cy- a certain report paper a trade and concerned over anamid license Pfizer would also non-ex- any other not license that Pfizer would clusively, aureomycin to make for use in potential- Cyanamid, company thus than producing tetracycline supply and to cer- excluding competitors, com- ly all tain technical Another im- information. reaf- municated with Pfizer. *5 portant underlying item the settlement anyone policy not to license firmed its point from Pfizer’s of view was the ob- against bring suit its intention to and taining agreement by Cyanamid of an to tetracycline or sellers of manufacturers large sell Pfizer a quantity initial of legal position to do Never- if in theless, so. tetracycline rapidly bulk to enable Pfizer agreed to in mid-1954 Bristol get to proofs into the market. Thereafter tetracy- Squibb Upjohn to bulk and sell cline, priority exchanged of were and being them indemnified Bristol aas result filed a concession resulting any against damages in- priority pat- in Pfizer’s favor in the fringement Thus, was sub- suit. Bristol February 4,1954. ent Office on infringement patent jected potential to liability. The does not claim that agreements these in themselves un- were January 11, Issuance The Although happenings lawful. Patent — at 1955 meetings these developed through were extensive nation, 11, examination January and cross-exami- On 1955 Pfizer received there was no tetracycline patent these the same and its meetings prices, fixing involved infringement against day filed suits prices, competitors exclusion of Bristol, Squibb Upjohn. or li- Bristol and censing of only persons customers, The Upjohn others. its with two essential present, reciting to addition Squibb, the busi- and was most anxious at stake ness scribing meetings reasons for the litigation, patent particular- to settle the length at pending negotiations how ly the then there some since were patent interference two-party affected their re- Pfiz- for a settlement between spective companies, specifically possi- Upjohn. stated To er and forestall this exclu-, fixing drug agreements that the prices, bility, into were entered be- competitors sion licensing Upjohn or the Bristol Bristol tween non-licensing Squibb 1955) whereby (November had others not been dis- left, cussed and that patent had the meet- Bristol lit- assumed control ings entirely agents igation, indemnitor, free no with un- Bristol became derstandings any prices sort independent or li- no settlements with Pfizer censing. and, settled if Bristol were be made
37 purchase, Upjohn Squibb licenses purchase, Pfizer, limited to licenses (GX 52). 51, use tetracycline and sell and sale of use Upjohn. Squibb and reviewing up obtained Briefly the situation policy Bristol’s December Broady Incident The setting the same level as its Davis, Parke, Pfizer, Cyanamid Pfizer had its 1955 to December Prior refusing Upjohn, position adamant taken an Quite to tet- bulk customers unrelated and its limitation two license Bristol. Broady, legal pursuant concededly racycline, G. trial of John was (Novem- just lawyer-investigator, conspiracy. had 1955) place in the taken ber-December not claim that does Broady been con- had York courts. New 14-15, of December tapping telephone wires victed se; illegal per in fact it concedes amongst were those of (BP 7). contrary It further admits Broady apparently re- Squibb. prior actions thereto Bristol’s general counsel. Pfizer’s tained illegal. It does stress the absence in newly dis- to use this threatened right granted of the to man- the licenses litigation. material covered particulars in its ufacture but bill public- of the adverse Pfizer was fearful sought concedes never this ity if the incident were disclosed. agent right through bargaining its Bris- brought Broady a radical incident about tol. change meet- in Pfizer’s attitude and a arranged quickly Mc- Bristol’s Post-December Activities (Bristol) (Pfizer) Schwartz Keen change prac- There was Bristol’s discuss settlement. meetings. tices after December years Prices remained as stable as 15th, December 1955 Meet 14th preceding conspiracy. Bris- ings drastically tol reduced costs in 1954 *6 gave selling Broady price incident to Bristol a but made no reduction. As The trump developing it not hitherto a result a sales force and card which played boldly. enabling Squibb possessed it to market and Bristol meetings bring tetracycline products, percent- Bristol’s Since the events of these age for first into the con- time substantial- market increased spiracy, government, according consequent of Pfiz- ly to the diminution with a they must Cyanamid’s be examined with care. shares.' er’s principal partici- There were two Trial The pants meetings, (Bris- at these Schwartz tol) (Pfizer) pat- and McKeen and their stage in the indict- The had been set price-fix- evidence of ent counsel. No particulars for trial a ment bill of competitors, ing, restriction exclusion of agree- conspiratorial upon the issue of monopoly exercise of on licenses (Novem- specific times ments reached at government by power 1955) was adduced December ber 1953 and development of what occurred at in its (McKeen-Malcolm; specific persons meetings. Both these McKeen McKeen-Schwartz). particu- bill The concerning the situa- testified Schwartz alleged lars that: facing companies as a result tion both per- (a) Malcolm “27. McKeen and litigation added and Schwartz negotiated illegal sonally cross-li- Broady indignation inci- his over arrangement be- bulk sales cense and however, Agreement, reached dent. Cyanamid ini- which Pfizer and tween (GX 95) signed intent and a letter of conspiracy in November tiated an ex- was followed which 1953. (GX 50). on ecuted March 1956 requested received for
88
“(d) personally- During early trial, and Schwartz McKeen weeks arrangements government negotiated illegal proceeded a offer vast testimony December Squibb which resulted amount and scores of ex- relating Upjohn being deprived factory production of hibits right tetracycline, profits. to manufacture costs and To all of this being required purchase objections all defendants made tetracycline requirements from Bristol were overruled and at the end of the they and also resulted in settlement of all ease moved strike litigation involving relating prof- all evidence validity tetracycline during period (No- pat- conspiratorial of the Pfizer 1953-September 1961) ent. dur- vember prior 1953 when the person has “(e) who McKeen is conceded exist- pricing responsible Pfizer’s for been ence. The motion was denied. antibiotics; broad-spectrum policy on person who has Malcolm Summation Government’s pricing Cyanamid’s responsible for Profits antibiotics; policy broad-spectrum government devoted much of its person has been who Schwartz is the profits summation to the obtained policy pricing responsible for Bristol’s respective defendants from their broad-spectrum antibiotics.” particular drugs (illustrative: “in those counsel, openings Before the years seven Bristol made approximately way preliminary in- trial court profits” million, million pro- $57 $69— jury that structions had stated to the million). duction cost “In $12 creation of included “the Cyanamid $2.26, cost in 1955 it cost uniform, non-competitive and unreasona- them That listed $1.57. $51. bly high prices to the users broad druggist paid 2,000% mark-up. $30.60— opening * In its * * antibiotics.” I think it is a fair inference “enormous” had stressed from this chart that and Pfiz- by comparing factory profits cost and er starting and Bristol in 1956 were selling gave price as an illustration making unreasonably high profit.” Cyanamid’s figure 1954 cost a of $2.- production capsules, I. cost for 100 a 1956 cost of 1958 cost $1.76 Amongst grounds against selling drug- price $1.59 seek reversal because claim that the gist of $30.60 the consumer. $51 court in its submission of the issues to jury departed radically in- *7 produc- conceded that allegations dictment’s the of bill tion cost “not include such items as particulars as the formation of the research, promotion, advertising, execu- conspiracy. point This is based things tive overhead and like that” but specification particu- the bill jury signifi- asked the to consider the conspiracy lars the that came into exist- production cance of low cost in relation ence in November and December selling prices. jury told also that was the result of meet- that pre-conspiracy, pre-tet- even in the ings specific De- individuals. racycline days “unreasonably there were they (except claim that fendants rested high profits involved.” recalling witness) one at the close of case, government’s At expecting the conclusion of the the the opening go jury theory. the on that moved for a case to mistrial court, allegedly misleading They because of its instead of prej- that the assert charging inflammatory conspiracy udicial and that the the statements as scope unreasonably high alleged the profits. found within must be particulars, The motion of the indictment and bill denied. you if that found the opposite instruct- exist- in fact any requirement ed and was continued for of an substan- ing the central that however, five-year mean, portion period tial of the “does not ending August 17,1961.” com- at create unlawful in order that parties conspiracy, or a bination Along the lines same were the instruc- or together time at some meet must tions that they indeed, meet to- must or, place that requirement central “This of an conspir- proof all”; of a gether “that at ‘agreement’ mean, however, does not necessarily proof require acy does that in order to create an unlawful al- agreements or that express conspiracy, combination par- or a any face-to-face conspirators had leged together ties must meet at some time gov- all”; despite the meetings or, indeed, place they must written introduction ernment’s together meet at all. Nor does it way rarely the “This is agreements that undertaking mean that must be conspiracies are criminal in which express embodied in or formal con- formed.” statements, express tractual or words gener- government relied on a Had the any kind. throughout al course of conduct ****** years, these instructions well have agreements express “Because are nei- apposite. But this was such necessary ther nor common in estab- The vast amount time taken case. lishing conspiracies unlawful stressing high prices may crime one which be shown profits frauds, from circumstantial evidence as to a charge together depre- with the court’s dealings. course conduct or business cating testimony of defendants' offi- words, prosecu- In other whether the may cers, well have succeeded divert- prov- tion has sustained its burden of ing the real issues ing frequently must be indictment and framed bill judged by what finds the particulars. actually parties did rather than from contend Defendants they used. words given loose from the cut ****** theory tried the case on which it had “Along with all the other evidence jury to convict on the and allowed the you case, sworn tes- during heard indictment basis of conduct timony principal officers making essential de- without companies, you defendant three cision as whether deny in broad them have heard each of meetings. actually made at any understand- there was terms charging govern- Instead agreement among them, either or (Bill Particulars) relied ment had implied, express would there individuals, specified specific dates prices, or that uniform and identical charged that: the court any exclusion of com- there would to- alleges petitors, would seek approx- or that prosecution “While the way monopoly gether to achieve commencement for the imate dates *8 give must, obviously, due power. charges You conspiracy, that the the thought testi- this deliberate up of to the date conspiracy continued ultimately it mony, attribute August it the indictment your im- weight permits in as it such necessary precise dates or the that not performing this judgment. In through- partial conspiracy the of extension the defini- you in mind task, will proved period in order to be out the conspiracy or of a combination you tion charges. find all If the establish given you in these in- established, has been it as it elements the other among recalling, structions, 1 and 2 for Counts sufficient would things, Although charge this that the final answer to question the case. in its the spent discussing in this case must be court time central much the evidence, slighted actual of the based the conduct circumstantial during deprecated testimony the covered defendants rather the about indictment, things meetings by any and that the the the which was vital said jury the at the defendants the of decision existence as weightier may in a case be conspiracy. time such things they say thereafter.” than the suggestion by the court that the charge excep- took To this jury reject should not testimony of tion, saying: tried entire “We case defendants’ officers was followed pivoting I those1 dates and around might regarded what well have been as a against think it would be a variance skeptical view toas their “assertions of particulars the bill of indictment and gone innocence.” But the had officers the contentions of counsel beyond far “assertions of innocence.” mind, opening jury’s it in to leave They length concerning had at testified joined any they if doubt decide problems the business created the tet- joined and Pfizer later.” racycline patent situation, how it affect- exception that “it respective companies ed their and how necessary essential long-drawn-out settlements of instead precise established.” dates be costly litigations appeared to be the Defendants had asked the court to in- Furthermore, wiser course. the offi- jury defendants, struct that “The cers’ “assertions innocence” of included law, rely under the entitled on specific particular statements sub- particulars, Government’s bill tak- jects had not been discussed and that together indictment, en aas they meetings entirely left the had as fair statement what the issues in this agents understandings free no about, they case are and what are not any licensing. on sort To al- about.” “You And that must evaluate finding low the to convict without light charges the evidence in the these denials untrue would made in both indictment and the bill government free the from it& theo- basic particulars. any You cannot find ry rely any case and allow it to on guilty fendant on the basis some understanding might be inferred charge not made the indictment as judge from other conduct. When in- supplemented by particulars, the bill of structed that “assertions of innocence you may nor on convict basis which is legal partly may such officers reflect contrary specific different or charges contentions,” meaning well as factual supplement- in the indictment as “agree- using that the officers particulars.” (Cyanam- ed bill sense, overly an ment” in narrow he was 2) Suppl. Reg. id No. disregarding testimony that under- standing request sort was at the was denied. formed meetings, probably did confuse the part had its di- testimony parts what about only rect called case witnesses the factually bore on whether a key present officers of defendants at the Thus, effect, had charge been formed. meetings face-to-face critical in Novem- testimony nullified defend- ber 1953 and December 1955. In their ants’ officers as to the business reasons long cross-examination of their own of- intercompany for ficers, defendants had focused refut- permitted to infer a what claimed afterevents, which were relevant happened meetings, and then rest- meetings tended assumption insofar as to show ed that the important part would be as an treated at the meet- was reached *9 5011a, 1953; 1. November December 1955: 5012a. tetracycline charge amount
ings. did not focus identifiable not The aureomycin, may present patent in a were jury’s on this well attention but the contrary Pfizer. issued to on their would not a view have led to government claims that to enable The part. patent, Cyanamid to obtain the charge leaves of the entire A review represented falsely to the Examiner although impression that the definite present tetracycline and that was “unrea- evidence and the circumstantial of this collaboration. Pfizer was aware high aspects of. case sonably profits” the as to the instructed were key stressed, the the issue as were duty applicants prior art to disclose particu- conspiracy as formation allowance material to the given other facts the was larized withholding of patent and as the of a importance of proper and the attention charged with intent to deceive. establishing information conspiracy so as They dispute the asked to as were resolve assur- there can minimized that fact, was, information in of in- to “what not misled to was ance that the the to the Examiner and prejudice. terest whether fendants' serious questions his deliber- answers were specifically, one-third the More misleading.” unresponsive ately necessary charge to such was devoted procedure in was the Patent Office doubt, generalities circum- as reasonable claims, patent outlined, scope of the the evidence, the indictment and stantial proceeded way Examiner to de- a Patent on the fraud applicable Possible law. applicant an termine claims to which one-quarter and Office consumed Patent entitled, steps an might the further high prices unreasonably the claim might rejection, applicant take after three-quarters Thus one-sixth. namely, or reconsideration amendment issue, key charge relate to the did not rejection appeal final and an after namely, formation explained. Appeals. All were Board specified particulars. bill of Examin- before Patent The evidence mentioning Except the November detail, including his er was described dates, there December Duggar patentees, speculations nothing charge focused which was Niedercorn, co-pro- have had primary jury's on the issue attention aureomycin tetracycline duction resolve, namely, were which previously recognizing it. As without meetings con- participants as those charge lengthy quarter of the stated carry al- program out the spire patent aspects, devoted to the but was leged by government ? told in clear lan- nowhere guage proceed- the Patent Office concentrating on the In contrast ings only insofar as the were relevant alleged, Cyanamid supported Pfizer and acts of in its summation and court at the November 1953 an inference that ignored allegedly virtually agree- meetings they into had entered meetings. Instead, conspiratorial prices or to exclude others. ments fix high patent prices situation charge, stressed. ten end of the Towards the expended pages on the relation pro- respect Office to the Patent With high unreasonably prices. The allegedly ceedings, purpose for this the case “ * * * uniform court virtually from an diverted antitrust prices, maintained at a constant level spiracy case to a fraud case. long periods of time —if such over supply theory are artificial unrelated fraud on Office, brief, demand or to other variations Patent based changes pertinent presence economic fac- question of tet- may you as racycline aureomycin. some be considered The Patent tors — agreement or expressed that if evidence the view Examiner *10 understanding or concerted action to re- “neither the any Sherman Act nor may strain trade be inferred.” law that us in impos- concerns this case any es price limit on company may a The court read to the the last charge for commodity” its three of that the the “means and methods” jury should not “by charged indictment, any influenced namely: drug prices notion that high were too or “1. Pfizer maintained too plained just right” low or even and ex- substantially un- identical and allowing its reason for cost and high reasonably prices Terra- profit thereby data evidence because mycin products Aureomycin government sought (pre- to establish products, respectively. sumably by inference a conclusion of Pfizer, Bristol, Cyanamid, Up- “2. conspiracy) stability prices over a john Squibb each introduced long period despite disparity time tetracycline products its on the production costs and market shares prices market at which were amongst the defendants. substantially identical with each particular exception Defendants take other and which conformed to portions charge relating to two profits of the prices Terramycin prod- They say prof- and costs. as to Aureomycin products ucts “Unreasonably its that the effect as November high extraordinarily or profits or companies all these maintained charged uniformly by competing sellers substantially such identical and may over a substantial of time unreasonably high prices until at evidence, taken with all the other circum- July least 1960. case, supporting stances of the an infer- Pfizer, Cyanamid, Bristol, Up- “3. parties ence had an john each introduced competitive rather than a situation with tetracycline products on the respect prices,” justified and was not dosage cus- forms and market jury. have could well misled tomer classifications substantial- charged: As to costs the court ly Terramycin identical with the “There has been evidence products so-called Aureomycin prod- ‘production ‘factory’ or costs’ or dosage duct forms and customer kept ‘standard’ costs from records classifications in effect as of companies, comparisons November and have contin- these records between such costs and substantially ued to use such selling prices. Many of these dosage records identical forms and clas- many omit factors that should be in- sifications date.” compute cluded in costs in order to Referring conten- profits. factors, net Such without ex- tion “that broad antibiotic hausting them, research, promo- comprised major portion sales business, expenses, tion and other kinds of major prof- and a source of the costs. You should have these omis- its, companies vary- of the defendant sions in mind and take them into ac- ing proportions,” the court you figures count when consider the I “may these assertions part be considered as just mentioned.” general background and set- ting in which the events of instruction, the case argue, This transpired.” The court permitted told jury, without the benefit could ask any proof “many themselves “whether factors that price price changes cuts or any should be included in kind costs in order to would seem to have compute profits” indicated net or the factors sirable for companies represented in- which defendants have volved from viewpoint constituting cost, of their specu- self- of true 90% interest.” The court proper instructed late as to what costs would have place in that factors, discussion think has absence been. legal ap- omitted, be an incorrect I think would proach name- had been stated court the ly, *11 * * * subject. because to the expenses, and “research, promotion asking you jury I don’t think should be gave costs,” to kinds any jury inferences from to draw any proof of what the they say, without relating presumption to a of innocence been, uncontrolled have omissions ruling party not The is on trial.” keep omissions “these to discretion excluding by the court’s when was broadened account into them take mind presumption to busi- reference “a that figures.” Defendants you consider lawfully.” ness is conducted material of the contend 90% determination to an accurate Parke, during essential years Davis the critical jury exclu- from the alleged costs withheld conspiracy manufactured being “to reach sion, instructed it was antibiotic, Chloromycetin. sold lay notions crude its on own verdict largest its It the second in the antibiot- impressions to whether subjective field, accounting ic for some of all 24% ‘unusual,’ ‘artifi- profits were years preceding In sales. the al- ‘unreasonably or ‘extraordinary’ cial,’ leged conspiracy, prices paralleled its ” high.’ companies. those the other It had never p'atent licensed others under its upon jury its entered thus and had never made bulk sales. The diverted attention deliberations with its not conceded af- but patent fraud and from the real issues to firmatively stated “on the record” that high unreasonably inflam prices—both Parke, conspirator. Davis was not a Quite matory apart their issues. Naturally sought capital- defendants to relevance, means and these so-called Parke, Davis, ize on the fact that as a prejudiced could well have so methods non-conspirator, engaged in the same it to resolve either failed marketing practices govern- which the primary issue or subordinated it to beyond-reason- ment created a real stressed. of this Because issues able-doubt inference of Pfizer, possibility, defendants part. their Cyanamid are to new entitled a court instructed the trial. “Parke, Davis is not have to II. a been member of charged by government” also reversal because Defendants seek and that they receiving court, Parke, take after evidence could into account Da- marketing practices policies of its they vis and activities insofar defendant) Parke, (not which material factors Davis a but then said: engaged concededly in the al- “However, Parke, the fact that Davis leged improperly conspiracy, placed re- has been indicted and not a de- refusing permit strictions on them has no fendant relevance whatsoever argue effect them to as a direction fact in itself. innocence this evidence profit speculating There is no here in addition, guilt. defendants these In why Parke, as to in- Davis was not charge ac- reversible error claim Parke, dicted. Davis is not on trial Parke, tually given respect Da- concerning here, and the verdict field. vis’ role in the antibiotics which are on trial must be Although court said that “I will in the end on the law and the based arguments everybody to risk allow relating them as evidence comparisons be- summation based presented you in court- this Davis,” Parke, the defendants tween room.” objections “I sustain that will ruled Parke, evidence as Davis’ legal arguments notion on the based all-important the defend- duct was which I presumption innocence
ants. The had introduced ther indicted nor claimed to have been length Parke, prac- co-conspirator Davis’ case, this evidence during pre- policies of its tices actions its size in relative in, ceding, spectrum included indictment. the broad antibiotics market stipulation stipulated of facts A is relevant and should be considered Parke, during your had a on its Davis Chloromycetin; anti- deliberations. biotic, “Prior undisputed that “The evidence is Parke, August did not Davis Parke, patent on its Davis grant any under licenses Chloram- product, broad antibiotic *12 patent”; phenicol that (chloromycetin) Chloromycetin, during that the and by “Parke, no of made sales Davis bulk period covered indictment Similarity price Chloromycetin.” of granted under that licenses intentionally adopted for busi- structure Chloromycetin it did not in sell also ness reasons was established. undisputed It an fact that bulk. is charge given well could have during 1954-1961, Parke, The period stressing failure of effect Chloromycetin had sales Davis’ account- carrying indict, the connotation thus for ed sales broad 23.8% might Parke, that; Davis have alleged market in antibiotics guilty was not indicted undis- but indictment, Parke, Davis was Furthermore, reasons. limit- largest closed the second seller in that market jury’s to the consideration “Evi- during There that time. is also evi- relating them dence Parke; during [defendants] dence that Davis most of ** lessened, might court covered indictment giving of, any have foreclosed substantially had the same weight jury have at- Chloromycetin which products its as defend- Parke, evidence Davis’ to the dosage tributed comparable ants had on forms conduct. package spec- sizes of the broad products they trum taken, sold. saying: Exception was counsel “ * * * “You are entitled to consider the ex- juxta- we believe that may tent to which the evidence charges show position these two has the engaged Parke, informing Davis conduct jury effect proves which the Government claims to consider the fact are not' Parke, conspiracy, and the further fact that parallel Davis followed conduct one no Parke, claims marketing aspects this conduct many pursuant interchangeable drug Davis was the con- a basis for
an spiracy claimed the Government.” inference that in- such conduct was nocent.” argue Had defendants been allowed to without restriction the full effect of the bring had endeavored Parke, marketing policies pro- Davis non-conspira- similarity Parke, Davis’ cedures, defendants could stressed have jury torial before business activities Parke, quite independently Davis request in its that the instruct- any conspiracy paralleled ed: pricing licensing in its practices “You heard from time to counsel both before and after the commencement throughout time refer trial conspir- November 1953 do, Parke, did and what Davis acy. The Parke, interest of the and there has been admitted evidence by requests during Davis was evidenced including Parke, actions, as to Davis’ their deliberations on two occasions for testimony Loynd of Mr. its former Parke, Davis evidence. chief executive officer and facts as to Parke, stipulated placed upon Davis which were The restrictions de between respect Parke, defend- Government and fendants Da Although Parke, ants. present was nei- vis Davis and the failure they made that deal— re- time “until of defendants’ the substance McKeen that deal with Schwartz sufficient made quests constitute nothing there December require new trial. prejudice as to that we about the activities illegal.” say
III. criticize or are transactions, pre-December 1955 Upjohn Squibb The Licenses however, excised from no means great impor- government placed government pro- the case because conspiracy-to-ex- support tance in argue ar- that the “restrictive ceeded to argument upon the transactions elude rangement” 3, 1955 in the November Upjohn Bristol, Squibb connotation, had a sinister Bristol-Pfizer 1955 and the November part scheme to of Bristol’s The con- in December 1955. securely hold more clusions, implications and inferences purchasers tetracycline. of its bulk jury might from these which the draw brought even guided, agreements, necessity *13 picture by imputing into the that the li- by and controlled the court’s instructions cense to sell and use was a Bristol-Pfiz- legal agreements. to the effect of the plan Upjohn Squibb. er to restrict and Depending upon the court’s construction instructing Instead of agreements, consequences of the legal concededly Bris- November 1955 upon its delibera- would enter agreements tol-Upjohn-Squibb could not they supported, or to tions as whether part any conspiracy, be considered a of, indictment indicative or, charging, requested by Bristol charges. that: The situation November 1955 vis- agreed “The fact that Pfizer Bris- to Squibb Upjohn, Pfizer Bristol, a-vis request give tol’s Up- that Pfizer to outstanding (1) for contracts john purchase, compound, a license to by tetracycline to Bristol of bulk sale tetracycline, use and sell not does infringe- (2) Upjohn; Squibb and an amount to an or under- against Bristol, ment suit standing by Pfizer with Bristol under (3) Squibb Upjohn; extreme concern promised grant which Pfizer to liability potential by Upjohn to over its manufacturing rights Upjohn.” Pfizer, Upjohn to which concern caused Request Bristol's No. 32A. explore possibility of a with Pfizer the give the court not failed to in- such settlement; (4) separate ef- Bristol’s gave structions but its actual settlement; separate forts to avoid a own, opinion incorrect, its and in in- our (5) consummation Bristol’s terpretation agreements. Upjohn agreements with bulk sales referring After Squibb. contention that there awas restriction (November 3rd and These forbidding Squibb and manufacture Squibb respec- 18th) Upjohn and Upjohn, “The court hoped-for tively settle- towards looked inquiry on this is whether critical score Pfizer and ment Bristol and between Squibb Upjohn, the limitation on anticipation provided license for a manufacturing, which them from barred Up- from Pfizer to settlement such particular objective Bristol was the john (and Squibb) license which objective agreed and was an right however, your “may, limited be issuance and Pfizer Bristol tetracycline to purchase, and sell use that license.” drug trade.” however, agreements, disclose However, propriety of these nothing therein which questioned arrangements there was tractual Squibb] [Upjohn from Thus barred them as to Bristol. manufacturing forbid manu- which said: summation obligation Up- restric- tractual In fact there were was to secure for facture. john Squibb phrases Bristol under- to which whatsoever. licenses tive litigation parties agreed, namely, affirmatively patent pur- took if you chase, “(2) scarcely for to secure use and sell. It was were settled duty Pfizer’s [Upjohn] license said a direct under insist Bristol broadening however, type may, requested. patent limited which license Except right your purchase, independent sell tet- use or the abortive at- * * *” tempt (GX108) (empha- Upjohn’s part explore racycline. settle- possibilities possibility directly ment supplied). Pfizer, of secur- sis right there “purchase, was no use and sell” a license to cry undertaking prerequi- manufacture from forced was asserted is a far upon as a Upjohn Squibb by site condition connection with either manu- November 1953 or Pfizer which forbade and barred the December agreements. Any bar, which facture. there been, would have been the natural finally, And Squibb legal consequence patent. All Pfizer’s not need licenses as a matter of law to accomplished the licenses was to tetracycline sell they purchased which court, lessen the restrictions The Bristol, from a licensed manufacturer. having incorrectly assumed that this bar IV. existed, ques- submitted to the participation Bristol’s tetracy- tion of “whether the limitation on highly significant. cline race is Upjohn, It can them barred * * * construed, manufacturing it, would have was an *14 very as evidence of agreed competitive objective situa- between Bristol and tion, with Bristol in determined to Pfizer assert a issuance license.” position field, in govern- upon jury, being might in advised, so ment’s theory, proof well have acts concluded that from the December which an inference of was, 1955 Bristol-Pfizer in Cyanamid Pfizer and fact, can a bar be drawn. violated the antitrust laws and that Bristol and Pfizer had col- The indictment had that the imposing laborated in restrictions which “combination and effec- did otherwise not exist. tuated various means and methods including, to, but limited follow- Furthermore, the term “restriction” ing:” subsections set Twelve are forth. alternately was used characterize referring Those to Bristol are: and to and licenses describe what Pfizer “(a) Cyanamid licensed Pfizer and agree were Bristol forbidden to on. Aureomyein to use its Bristol net result was that the in the manufacture of syllogism: read to contain this Tetracycline and li- refused to agree and Bristol forbidden to re- applicants.” cense other all others; strict licenses to the licenses given imposed Squibb restrictions on “(b) Cyanamid Pfizer licensed Upjohn; agreed Pfizer and Bristol Tetracycline Bristol under its licenses; therefore, those Pfizer and patent and refused to license all Bristol what were forbidden to applicants.” illegal nothing do. But there was “(d) Pfizer, Cyanamid and Bristol undertaking Bristol’s November 1955 litigation suppressed involving try to obtain purchase, from Pfizer use validity Tetracy- of Pfizer’s customers, sell Up- licenses its patent.” cline john Squibb. When Bristol Pfizer met “(e) a few weeks Cyanamid later and con- Pfizer and and Brist settlement, cluded their Bristol's pertinent withheld ol.*]
* Charges withdrawn as to Bristol. important government, the more because information material effect, put stamp legality had and otherwise Patent Office identity price prior and restricted bulk Office the Patent misled upon sales. It incumbent of Pfizer’s Tet thus to the issuance prove beyond patent.” a reason- racycline able doubt reverse some alchemistic Tetracycline “(g) Bristol sold bulk process legal that acts which had been Squibb. Upjohn only to some action taken at the Decem- meetings changed merely ber 14-15 “(h) agreements into entered by continuance into acts thereafter ille- Squibb Upjohn re- gal. required Up- spectively which john Squibb purchase There was no direct con all spiracy requirements to be found in the Tet- Schwartz their of bulk developed McKeen versions racycline extensive from Bristol.” ly on direct and cross-examination relat Bristol, Up- Pfizer, Cyanamid, “(k, 1) 14-15, to the December 1955 meet Squibb introduced john and ings. Nothing illegal tois found products on Tetracycline their embodying written substantially market understandings But, in reached. a case prices main- all identical dependent wholly so for conviction at least until tained such jury’s drawing in di inferences July 1960.” rect contrast to the statements of the sup- proof in government offered present witnesses idencing and the documents ev All, port methods. these means and agreement, impor their upon which preceded however, date tance of instructions cannot be overem to have entered phasized. appellate An has court Specifically, conspiracy. knowing were de means of what factors January was received license jury’s mind in collective cisive reaching sales to Bristol’s bulk However, here verdict. September commenced say that we can failure differentiate requirement No- contracts *15 legal illegal and the was between the marketing at substan- and vember tially prejudicial error. early prices as started as identical government conclusion, May elected the 1954. In charges agreements specific to make Although efficacy of instructions the specific specific, times between at made against at limiting evidence this alleged, agreements, it individuals questionable, receipt the time conspiracy the ille- to do the constituted only could effect harmful gal and indictment in the acts by in- the clearest been minimized tried, case, particulars. The as bill not should con- structions that the every phase practically the covered development part events in sider Bristol’s marketing the four and prior 14-15, proof 1955 as to December drugs, aureomycin, wonder so-called being any conspiracy. Bristol’s terramyein tetracy- Chloromycetin, and charge plus the so affirma- Failure to period of more than ten over a cline years. necessary charge “it is not that that tive precise the or extension of the dates throughout period necessity, Probably, the the play ignore proved virtually the or at least to establish had to order charges,” the asserted caused reasons well have down the business could motivating executives as that Bristol was involved the defendants’ to believe agreements long actions taken in a December their and the before possi- charge 14-15, comprehensive on the A them and to concentrate 1955. aspects prior bly jury appealing such as all to these events became more high abnormally prices profits conspired in restraint of trade patent spectrum market, fraud. It from such broad antibiotic with having conspir- conspired infer was asked to mo- that combined and to agreements govern- nopolize having market, which the atorial with il- through legally monopolized not
ment had
established
It
it.
principals
conspired
at the November 1953 or
defendants
to exclude
meetings
through
competitors
that,
December 1955
and to fix
having
so,
except
power
written
themselves
sufficient market
to do
accomplishing
read
connection
facts.
succeeded in
objects
conspiracy.
their
Under
these
circumstances
it was
highly important
jury’s
atten-
establishes
evidence
charge
pri-
tion be directed
tetracycline,
to
price
a broad
mary
government.
issue framed
defend-
controlled
antibiotic
ju-
But as
large sale,
the case
having
very
was submitted to the
did
ants and
ry,
gov-
this issue
change
was subordinated
1960.
not
at all from 1953 until
ernment
summation
Throughout
that whole
each
inflammatory
illegally
more
issues
ex-
charged exactly
the same amount
fendant
prices charged
orbitant
to a victimized
although
Cyanamid
con-
Pfizer
public
patent
fraud. But
sistently producing tetracycline
a cost
spiratorial
agreements,
charged,
substantially
production
than the
lower
not emanate from these
Bristol, Squibb
Upjohn.
issues.
costs of
Cyanamid
themselves
Pfizer and
allowed
A review of the entire record
leads
significant portions of
mar-
to lose
judgments
conclusion that
higher
producers
with-
ket
cost
against Cyanamid,
conviction
Pfizer
regain
por-
attempting
out ever
those
Bristol must be reversed and
new
prices. Although
by cutting
tions
trial be had as to them.
production
producers
all
marked-
costs of
savings
decreased,
resulting
ly
HAYS,
Judge
(dissenting).
Circuit
by any price
reductions.
reflected
respectfully
I
dissent.
competitors
exclude
centers on the
settlement be-
1. General
Cyanamid.
tween Pfizer and
li-
appeal
“On
from the
convictions
Cyanamid
produce
censed
tet-
sell
light
evidence is to be
viewed
racycline
while
licensed Pfizer
most
favorable to the
manufacture,
though
sell,
au-
permissible
all
are
inferences
reomycin.
Cyana-
Neither Pfizer nor
drawn in its favor. United States v. mid,
then,
Parke-Davis,
Kahaner,
(2d Cir.),
317 F.2d
producers
spectrum antibiotics,
*16
of broad
denied,
74,
836,
cert.
84
U.S.
S.Ct.
drug
previously
any
had
licensed
other
(1963);
4. Licenses was instructed that “[t]he inquiry on
critical whether this score is Squibb Upjohn, limitation them from manufactur- which barred CORPORATION, ing, objective SOUTHWEST LATEX particular of Bris- was the Respondent, Petitioner-Cross agreed objective tol and was an v. Bristol and Pfizer issuance license." instruction NATIONAL LABOR RELATIONS BOARD, Respondent-Cross to mean construed Petitioner. Squibb and restriction that but for the right No. Upjohn 27649. have had the would tetracycline, whereas manufacture United Appeals, States Court of specif- fact have had to be there would Fifth Circuit. grant permission. ic May 1970. unlikely quite It to me to be seems seriously this that the misled did not
instruction. The settlement right grant Upjohn Squibb manufacture, issue was real grant
whether had declined right request. at Bristol’s
5. Bristol on its own behalf
Bristol settled Squibb Upjohn behalf of against suits
suits Pfizer and Pfizer’s
against In the settlement Bristol them.
obtained and sell licenses manufacture
tetracycline, while prevented
obtained them licenses making sales. bulk imposed
The restriction
Upjohn precluding the resale of bulk tet-