As famed as the stock pools which used to catapult Radio Corp. of America shares is the patent pool that RCA has had with General Electric Co. and Westinghouse Electric & Manufacturing Co. In the spring of 1930 the Department of Justice set forth to prove the patent pool was in restraint of trade. Last week rather than stand a long and costly trial with the risk of losing the case and being heavily fined, the defendants agreed to mend their set-up as the Government suggested, stoutly insisting nevertheless that they had violated no law. Their consent will be a boon to the entire radio industry, hitherto befuddled by patent confusion. And Owen D. Young becomes more available for the Roosevelt Cabinet, since now he will not have to appear as a defense witness in one of the biggest anti-trust suits of all time.
As part of their consent, General Electric and Westinghouse must get rid of their RCA shares which together equal 51% of the total. Within three months they will distribute half their RCA holdings to shareholders, disposing of the remainder within three years. The manufacturing companies will also withdraw their members from Radio’s board. Previously the three companies licensed some of the pooled patents to outsiders (the minimum royalty rate was reduced from $100,000 to $10,000 after the suit began and the fee from 7½% to 5% of sales), but did not pay each other for their use. Now RCA will be the sole licensing agent, General Electric and Westinghouse will pay for what they use on the same basis as outsiders, and all patents available to them will be available to the trade at the same rates. RCA will be able to enter important fields hitherto barred to it, including the manufacture of tubes, transmitters and equipment for non-radio electronics.
Radio likewise made several financial adjustments last week. The two electric companies agreed to wipe off $8,938,000 of RCA’s $17,938,000 debt to them. GE bought Radio’s uptown Manhattan building for $4,745,000. Rockefeller Center Inc. at the same time agreed to let RCA reduce the amount of space it has leased, accepting $5,000,000 worth of preferred RCA stock for this concession.
There is no chance that RCA will ever pass into foreign hands. Should that threaten the board can limit the voting power of all foreign-owned stock to 20%. This provision is in keeping with the reasoning which prompted President Wilson, assisted by Assistant Secretary of the Navy Franklin Delano Roosevelt, to call on U. S. companies to form Radio Corp. in 1919 to keep ownership of the Alexanderson Alternator and other important radio patents within the U. S.
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