Foreign Trade and Patent Agreements
SHALL WE BE TRADERS OR HERMITS
By GILBERT H. MONTAGUE, Lawyer
Delivered before the National Industrial Conference Board, New York City, March 23, 1944
Vital Speeches of the Day, Vol. X, pp. 511-512.
AFTER the war we shall still have antitrust laws, but it may help our thinking about them if we clarify several points regarding the Department of Justice and the Supreme Court.
An official no longer in the Department of Justice used to like to praise himself for "at last enforcing the antitrust laws", thus implying that before he came to the Department his predecessors were not enforcing them.
In a very true sense it is only the Supreme Court that really enforces the antitrust laws.
Ever since the first antitrust law was enacted in 1890, the antitrust laws on any particular date have forbidden only such transactions as the Supreme Court up to that date had held were forbidden by these laws.
From 1890 until now, the Supreme Court's interpretation of what is forbidden by the antitrust laws has been in 9 state of almost constant flux.
Eight new justices have been appointed to the Supreme Court since 1937, and in that period the Supreme Court has greatly expanded its interpretation of what the antitrust laws forbid.
Especially rapid since 1938 has been the Supreme Court's change of view regarding limitations and conditions in patent agreements.
Since 1938 the Supreme Court has been narrowing its interpretation of the patent laws, and stretching its interpretation of what the antitrust laws forbid, so that today there is legal doubt about limitations and conditions in patent agreements which before 1938 rested securely on Supreme Court decisions in which had concurred such precursors and stalwarts of the New Deal as Justice Holmes, Justice Brandeis and Justice (now Chief Justice) Stone.
Limitations and conditions in patent agreements which the Department of Justice as recently as 1940 declared could be outlawed only by new legislation have since been invalidated by the Supreme Court under its new interpretations of the patent laws and the antitrust laws.
In this new area into which the Supreme Court has been beckoning and leading since 1938, it is hardly strange that the Department of Justice is now instituting many new prosecutions.
This explains most of the Department of Justice's recent suits regarding international trade agreements, for most of these agreements rest on patent license limitations and conditions based on Supreme Court decisions whose authority was unquestioned before 1938.
Foreign trade that in no way involves patent agreementsseems also to be engaging the Department of Justice's attention.
A typical foreign trade pattern is this:
An American national gets a foothold in a foreign country, and its success attracts competition in that country from other American nationals, and from nationals of that country, and from nationals of other foreign countries.
American nationals continue competing in that foreign country with one another, and with nationals of that country, and with nationals of other foreign countries, until the nationals of that country,, or the government of that country, or both, become restive and critical of the extent to which American nationals are winning the market in that country.
Thereupon the nationals of that country, or their government, or both, intimate to these American nationals that unless they consent to an arrangement restricting their proportion of the market in that country, or limiting their competition in that country with one another and with nationals of that country and with nationals of other foreign countries, the government may enact a tariff, or impose import quotas, or establish a government monopoly, or take other measures to oust American nationals from continuing the business they have built up in that country.
On other continents outside North America such arrangements are customary, lawful, and encouraged by governments, and By public opinion, and by generations of judicial decisions and trade custom.
Arrangements analogous to these have repeatedly been upheld by judicial decisions of the House of Lords and the Judicial Committee of the Privy Council, which are the highest courts of Great Britain and the British Commonwealth of Nations.
Not as a complaint against our Supreme Court and our antitrust laws, but as a plain statement of fact, it is axiomatic that American nationals doing business abroad must frequently condition themselves to customs and pressures of foreign governments, foreign public opinion, and foreign competitors, compelling arrangements which if made and operative within the United States might be contrary to recent decisions of our Supreme Court and other federal courts.
If American nationals, under these circumstances, are liable to prosecution by the Department of Justice, they will be as completely barred by the United States from doing business abroad as were the nationals of China and Japan during the centuries when these were the "hermit nations".
Secretary Hull for years has preached that the only preventive of autarchy and national isolationism and a Third World War is trade by American nationals in and with foreign countries.
Without delay, therefore, the Department of Justice and the State Department should now collaborate in framing legislation to meet this situation.
Upon their collaboration today depends the fate of all the postwar world.
The issue can very truly be stated in Abraham Lincoln's solemn words:
"Fellow-citizens, we cannot escape history . . . . The fiery trial through which we pass will light us down in honor or dishonor to the latest generation . . . . We shall nobly save or meanly lose the last best hope of earth."