K. Craig Wildfang
Minnesota State Bar No. 117043
Kurt Shaffert
Thomas H. Liddle
Molly L. DeBusschere
John B. Arnett, Sr.
M. Lee Doane
United States Department of Justice
Antitrust Division
Professions and Intellectual Property Section
555 Fourth Street, N.W., Room 9903
Washington, D.C. 20001
202/307-0467
Janet A. Napolitano
United States Attorney
230 North First Avenue, Room 400
Phoenix, AZ 85025-0085
Attorneys for Plaintiff
The United States of America
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF ARIZONA
UNITED STATES OF AMERICA,
Plaintiff,
v.
PILKINGTON plc
and
PILKINGTON HOLDINGS INC.,
Defendants.
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Civil Action No. 94-345
Filed: 5/25/94
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COMPLAINT
The United States of America, acting under the direction of the Attorney
General of the United States, brings this civil action to obtain equitable
and other relief against the Defendants named herein, and complains
and alleges as follows:
I.
JURISDICTION, VENUE, AND DEFENDANTS
- This Complaint is filed under Section 4 of the Sherman Act (15 U.S.C.
§ 4) to prevent and restrain violations of Sections 1 and 2 of
the Sherman Act (15 U.S.C. §§ 1 and 2). These violations result
from conduct that, insofar as it involves trade or commerce with foreign
nations, is within the purview of Sections 1 and 2 of the Sherman Act
pursuant to the Foreign Trade Antitrust Improvements Act of 1982 (15
U.S.C. § 6a).
- Defendant Pilkington plc ("Pilkington") is an English corporation
with its principal place of business in St. Helen's, Merseyside, England.
Pilkington is the world's largest float glass producer. Pilkington
may be found or transacts business in the District of Arizona. Venue
as to Pilkington is proper under 15 U.S.C. § 22 and 28 U.S.C.
§ 1391(d).
- Defendant Pilkington Holdings Inc. ("Holdings") is a Delaware
corporation with its principal place of business in Toledo, Ohio.
Holdings is the wholly-owned subsidiary of Pilkington Overseas Holdings
Ltd., an English corporation that is itself a wholly-owned subsidiary
of a wholly-owned subsidiary of Defendant Pilkington. Holdings holds
Pilkington's United States-based assets, including 80 percent of the
outstanding shares of voting capital stock, and thereby full control,
of Libbey-Owens-Ford Co. ("LOF"), a Delaware corporation headquartered
in Toledo, Ohio. LOF is the second-largest producer of float glass
in the United States. The remaining outstanding shares of LOF are
owned by Nippon Sheet Glass Co., Ltd. of Tokyo, another of the world's
major float glass producers. Holdings may be found or transacts business
in the District of Arizona. Venue as to Holdings is proper under 15
U.S.C. § 22.
II.
TRADE AND COMMERCE
- The Defendants and their subsidiaries receive large amounts of
money in the form of payments for float glass and float glass technology
that flow across state lines and national borders. The Defendants'
business activities and operations involve or affect the interstate
and international flow of funds, and are within the flow of, and have
a substantial effect upon, interstate and foreign commerce.
III.
BACKGROUND
A. Flat Glass
- Flat glass is glass formed in a flat shape, such as for cutting into
window panes, and glass formed flat and then bent or curved, such as
for fabrication into automobile windshields. Float glass is flat glass
made by a float process as described below. Almost all of the flat glass
currently made and sold throughout the world is float glass.
B. Float Glass Processes
- Float glass processes involve placing molten glass on the surface
of a pool of molten tin or other metal. The molten glass forms a flat
layer that floats on this surface of molten metal, as oil floats on
the surface of a pool of water. This flat layer of floating glass
is allowed to cool until it is sufficiently rigid to retain its flat
shape, and is then removed from the surface. In a float glass plant,
the float glass process proceeds uninterruptedly: a stream of molten
glass is delivered continuously to one end of the molten metal surface,
forming an endless, cooling ribbon of glass that is continuously removed
from the opposite end of the surface when sufficiently cooled. The
ribbon of glass is then subjected to further processing, including
annealing, inspection, and cutting to desired dimensions.
- The first float glass process patent was issued in 1902 to an
American unaffiliated with Pilkington. Over 50 years later, Pilkington
applied for and obtained over 1,000 patents in various jurisdictions,
including over 100 United States patents, on float glass process improvements.
Pilkington's float glass process is sometimes called the "PB Process."
- Pilkington began the first successful commercial production of
float glass in 1962. Since then, others have developed their own float
glass processes, which have been shown to be technologically and commercially
viable.
- Commercial float glass manufacture requires relatively large-scale,
single-purpose plants that are not efficiently convertible to other
use, nor are other manufacturing facilities efficiently convertible
to float glass production. Float glass plants are operated continuously
for periods of 8 to 12 years or more before requiring "cold shut-down"
for extensive rebuilding and repair. The cost of designing and constructing
a typically-sized float glass plant is between $100 and $150 million.
C. Float Glass Production
- The largest demand for float glass is for fabrication into windows
for dwellings and commercial structures, automobile glass products
(e.g., car and truck windshields and windows), architectural products
(e.g., siding panels for office towers and glass doors), and mirrors.
The demand for float glass depends largely on such factors as the
volume of housing starts, commercial construction, automobile production,
and catastrophic storm damage. As with other homogeneous, fungible
commodities, the key factors in marketing float glass are price and
quality; brand names and trademark recognition are relatively unimportant
to purchasers.
- In 1991, United States' float glass producers shipped approximately
$2.9 billion of float glass, with the four largest United States producers
accounting for about 85 percent of this total.
- Float glass shipments worldwide in 1991 were approximately $15
billion, with the four largest producers accounting for about two-thirds,
and the nine largest producers accounting for over 95 percent, of
total world shipments. Worldwide float glass demand is increasing,
largely in the developing economies of Asia, Africa, and eastern Europe.
D. Float Glass Process Technology Market
- From 1984 to 1991, 55 new float glass plants were designed, built,
and placed in service throughout the world. Of these plants, nine
were built in North America, including seven in the United States.
The construction worldwide of approximately 30 to 50 additional float
glass plants is planned or projected for completion between now and
the end of the century. Many are planned for locations, such as in
Asian and eastern European countries, where the sponsoring entities
are likely to award contracts to outside bidders for plant design,
construction, and construction supervision services. Such services
include the specifying, ordering, and procuring of equipment and supplies
for use in such plants.
- Persons in the United States and elsewhere can compete, if not
restrained, for the award of these float glass design and construction
contracts. Among the persons engaging in such competition are firms
that currently manufacture float glass, as well as others. Such contracts
may be on a pure fee-for-service basis, or may provide the contractor
an equity position in the plant to be built, or may provide other
consideration for the contractor.
- The relevant service market is the provision of float glass plant
design, construction, and construction supervision services.
- The relevant geographic market for these services is worldwide.
- Competition to design and construct float glass plants, if not
restrained, creates or increases demand for innovations in float glass-making
technology. Such innovations tend to reduce the manufacturing cost
and improve the quality of float glass.
- Persons in the United States who successfully compete for contracts
to design and construct float glass plants to be built outside the
United States are engaged in United States export trade or commerce
with foreign nations for such services. Such export trade or commerce
generates substantial domestic economic activity, providing numerous
opportunities for employment of individuals and firms highly skilled
in contributing to the creation of the designs, drawings, specifications,
and other work product required to perform the exported services.
Moreover, persons in the United States who design and construct float
glass plants abroad are likely to specify domestic fabricators' and
suppliers' products for use in these plants, thereby creating substantial
additional opportunities for domestic economic activity. The design
and construction of a typically-sized float glass plant abroad requires
an investment of about $100 million. When a United States firm provides
those services, approximately $35 to $50 million of that total eventually
flows into the United States economy in orders for domestic materials,
equipment, and services.
E. Pilkington Licenses
- Beginning in l962, Pilkington entered into patent and know-how
license agreements with all of its principal competitors. Although
these agreements differed as to details, they generally provided for:
(l) allocation and division of territories, restricting each licensee
to a specified country or group of countries for the construction
and operation of float glass plants generally corresponding to the
territory in which the respective licensee previously manufactured
flat glass ("territorial restrictions"); (2) limitation on the use
of Pilkington's float glass technology strictly to the manufacture
of float glass ("use restrictions"); (3) restrictions on sublicensing
of Pilkington's float glass technology; and (4) the reporting and
grant-back of all improvements in float glass technology.
- Pilkington's territorial and use restrictions discouraged competitor
licensees from developing and using their own innovations in float
glass technology. The territorial restrictions discouraged the development
of competing technology by geographically limiting the opportunities
for economic exploitation of innovations. The use restrictions had
a similar effect since, according to Pilkington, the use of its technology
to develop a new or broader range of float glass technology was a
violation of the licensing agreement. The consequent reduction in
innovation in float glass technology deprived consumers of the benefits
of more efficient production techniques and higher quality glass.
- Similarly, the reporting and grant-back provisions in the Pilkington
license agreements disadvantaged competitors in creating and competitively
marketing float glass technology that could be used free of Pilkington's
licensing restrictions by eliminating or reducing economic incentives
to innovate.
- In many of its licensing contracts, Pilkington also imposed restrictions
on the export of float glass from the allocated territories. Thus,
Pilkington imposed restrictions on export of glass made in the United
States by certain licensees, and export of glass made abroad to the
United States.
- By the end of 1982, Pilkington's principal United States patents,
the specified duration of Pilkington's contracts with United States
licensees, and the obligation of royalty payments under those contracts
expired. Nevertheless, Pilkington continued to enforce the territorial,
use, and sublicense restrictions in those contracts, until a licensed
competitor could prove that all of Pilkington's float glass technology
had become public knowledge.
- Pilkington's maintenance and continued enforcement of the license
restraints described above was not justified by any intellectual property
rights of substantial value. Pilkington's core float glass technology
was disclosed in numerous patents that have long expired, placing
that technology in the public domain. Moreover, unpatented Pilkington
float glass technology has been publicly disclosed in substantial
part. The remaining secret unpatented technology consisted largely
of engineering solutions with no substantial value over other, equally
efficacious engineering alternatives.
- Pilkington's license agreements provided a framework for a worldwide
cartel, created and controlled by Pilkington, for float glass technology
and the design and construction of float glass plants. The agreements
enabled Pilkington to exercise control over float glass markets as
well as over the design and construction of new float glass facilities
and to control the extent to which float process innovations were
permitted to be commercially exploited.
IV.
FIRST CAUSE OF ACTION
(Contracts In Restraint Of Trade)
- Beginning at least as early as 1982, and continuing until the
date of this Complaint, the Defendants, without sufficiently valuable
intellectual property rights, maintained and enforced licensing contracts
and other agreements to restrict the construction and operation of
float glass plants and float glass process technology in unreasonable
restraint of interstate and foreign trade and commerce in violation
of Section 1 of the Sherman Act. This violation is likely to continue
unless the relief asked for is granted.
- For the purpose of forming and effectuating these contracts and
agreements, the Defendants did the following things, among others:
- allocated and divided territories for, and limited the use of,
float glass technology worldwide;
- interpreted and enforced the territorial and use restrictions
so that their combined effect prevented competitors from using
or developing competing float glass technology;
- required competitors to prove that all of the licensed technology
had become publicly known before being relieved of the territorial
and use restrictions;
- imposed and enforced restrictions on competitors' ability to
sublicense float glass technology;
- imposed and enforced reporting and grant-back provisions in
the license agreements;
- imposed and enforced restrictions on exports of glass by licensees
from and to the United States; and
- continued enforcement of the territorial, use, and sublicense
restrictions indefinitely, even after no further licensing royalties
were payable and the patents had expired.
V.
SECOND CAUSE OF ACTION
(Monopolization)
- The allegations of ¶¶ 26-27 of this Complaint are re-alleged
and incorporated by reference.
- By entering into licensing contracts with its competitors and
continuing to enforce the restrictions imposed in those contracts
and by the other predatory and exclusionary conduct described herein,
Pilkington willfully acquired, and willfully maintained, a monopoly
in the world market for the design and construction of float glass
plants in violation of Section 2 of the Sherman Act, 15 U.S.C. §
2, with adverse effects that satisfy the requirements of the Foreign
Trade Antitrust Improvements Act of 1982, 15 U.S.C. § 6a. This
violation is likely to continue unless the relief asked for is granted.
- Over 90 percent of the float glass produced in the United States
and throughout the world is manufactured subject to restraints imposed
by Pilkington through its licensing contracts with competitors. These
restrictive contracts have enabled Pilkington to monopolize the worldwide
market for the design and construction of float glass plants, and
to exercise control over float glass technology and the extent to
which float glass innovations are permitted to be commercially exploited.
VI.
EFFECTS
- These violations had the following direct, substantial, and reasonably
foreseeable effects, among others, which satisfy the requirements
of the Foreign Trade Antitrust Improvements Act of 1982, 15 U.S.C.
§ 6a:
- restraint and reduction of competition in the United States' export
business for the design and construction of float glass plants outside
the United States;
- restraint and reduction of competition in the United States'
export business for the design, fabrication, furnishing, shipping,
and packaging of related equipment and supplies for float glass
plants constructed or renovated outside the United States;
- restraint and reduction of the export of glass to and from
the United States; and
- depriving United States' businesses and consumers of the benefits
of free and open competition.
VII.
RELIEF
WHEREFORE, Plaintiff prays that this Court enter final judgment against
the Defendants declaring, ordering, and enjoining them, and all persons
acting in concert with them, as follows:
- That the provisions in Pilkington's contracts and agreements with
float glass manufacturers that specify the territorial limits where
a manufacturer may manufacture and sell float glass and the provisions
that limit the use of information originally supplied by Defendants
for further innovation in float glass technology be declared and adjudged
to be in violation of Sections 1 and 2 of the Sherman Act, 15 U.S.C.
§§ 1 and 2, and no longer enforceable.
- That Pilkington, and all others acting in concert with Pilkington,
be permanently enjoined from enforcing said provisions and from interfering
with the efforts of any person in this country to perform or offer
to perform services connected with the design or construction of float
glass plants anywhere in the world, and from interfering with the
design, construction, or operation of any such plant or the sale or
shipment of glass from those plants.
- That Pilkington, and all others acting in concert with Pilkington,
be permanently enjoined from enforcing said provisions and from interfering
with the efforts of any person anywhere in the world to perform or
offer to perform services connected with the design or construction
of float glass plants in the Unites States, and from interfering with
the design, construction, or operation of any such plant or the sale
or shipment of glass from those plants.
- That Pilkington, and all others acting in concert with Pilkington,
be permanently enjoined from interfering with the efforts of any person,
including any contracting manufacturers' former employee, who has
never been or who no longer is under any lawful obligation to maintain
secrecy, to offer services in connection with the design or construction
of float glass plants, whether by representing that such services
would violate intellectual property rights or otherwise.
- That Pilkington, and all others acting in concert with Pilkington,
be enjoined from monopolizing or attempting to monopolize the market
for the design and construction of float glass plants.
- That Plaintiff have such other relief as may be just and proper.
- That Plaintiff be awarded its costs in this action.
_______________/s/________________
Robert E. Litan
Deputy Assistant Attorney General
_______________/s/________________
Mark C. Schechter
Deputy Director of Operations
_______________/s/________________
K. Craig Wildfang
Special Counsel to the
Assistant Attorney General,
Antitrust Division
_______________/s/________________
Gail Kursh
Chief, Professions and
Intellectual Property Section
_______________/s/________________
David C. Jordan
Assistant Chief
Professions and Intellectual
Property Section
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Kurt Shaffert
_______________/s/________________
Thomas H. Liddle
_______________/s/________________
Molly L. DeBusschere
_______________/s/________________
John B. Arnett, Sr.
_______________/s/________________
M. Lee Doane
Attorneys
U.S. Department of Justice
Antitrust Division
555 4th Street, N.W.
Room 9903, JCB
202/307-0467
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