Serr of Washington, D.C., Inc

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IN THE MATTER OF SERR O~' WASHINGTON , D. , INC., ET AL.

CONSENT OIWER, ETC., IN REGARD TO ALLEGED VIOLATION OF SECTIONS 5 AND 12 OF THE FEDERAL TRADE COMMISSION ACT Docket 8991. Complaint, Aug. 1974-Decision, July, 1975 Consent order requiring a Washington, D. , promoter of a hair implant replacement system, among other things to cease misrepresenting the nature, appearance 5tj FEDERAL TRADE COMMISSION DECISIONS Complaint 86 FTC.

and other related characteristics of its system; and failing to disclose that their system involves surgical procedures and continually requires special care. Further, respondents are required to devote 15 percent of aU of their advertisements to warning prospective customers of the inherent dangers associated with their system of hair implant replacement. Appeamnces For the Commission: Allen R. Caskie. For the respondents: Kamerow Kamerow and Sheldon B. Kamins Deckelbaum, Wolpert Ogens Wash., D.

COMPLAINT Pursuant to the provisions of the Federal Trade Commission Ad and by virtue of the authority vested in it by said Act, the Federal Trade Commission, having reason to believe that Serr of Washington , Inc., and Herb Mann, individually and as an officer of said corporation, hereinafter referred to as respondents, have violated the provisions of said Act, and it appearing to the Commission that a proceeding by it in respect thereof would be in the public interest hereby issues its complaint stating its charges in that respect as follows:

PARAGRAPH 1. Respondent Serr of Washington, D. , Inc. is a corporation organized, existing and doing business under and by virtue of the laws of the District of Columbia with its principal office and place of business located at 1219 Connecticut Ave., N. , Washington Respondent Herb Mann is an officer of the corporate respondent. He formulates, directs and controls the acts and practices of the corporate respondent including the acts and practices hereinafter set forth. His business address is the same as that of the corporate respondent. PAR. 2. Respondents promote, among other products and services, a process called "PERMA-SURG" which is an implant hair replacement system, hereinafter sometimes referred to as the HSystem." The system involves a surgical procedure whereby a synthetie suture (prolene) is stitched into the scalp of respondents' customers. Hairpieees are tben attached to the sutures. Respondents sell, install and maintain the system, except that the surgical procedure itself is performed by a medical doctor.

PAR. 3. In the course and conduct of their business, respondents promote the system by advertising in newspapers and magazines of general circulation which are distributed across State lines. As a result of sucb newspaper and magazine advertising, respondents have maintained a substantial course of trade in commerce, as "commerce" is SERR OF WASHINGTON , D. . INC., ET AL.

Complaint defined in Sections 5 and 12 of the Federal Trade Commission Act, and as a result of such newspaper and magazine advertising, have disseminated and caused to be disseminated false advertisements by United States mails, within the meaning of Section I2(a)(I) of the Federal Trade Commission Act.

PAR. 4. In the course and conduct of their business, and for the purpose of inducing the purchase of the implant hair replacement system, respondents have made numerous statements and representations in ad vertisements inserted in newspapers and magazines of general circulation.

Typical of the statements and representations contained in said advertisements, but not all-inclusive thereof, are the following: She Jj swear its your own hair 80 wil everybody else! PERMA-8URG" is not a hair weave-not a hairpiece. A revolutionary new medical process.

A licensed M.D. performs this simple cosmetic procedure painlessly and most important, effectively.

Comb it, brush it, wash it in the shower. Sleep in it, swim in it and it won t come off.

PAR. 5. Through the use of the above advertisements, and others of similar import and meaning but not expressly set out herein, and by oral statements and representations made by employees and agents of the respondents, respondents have represented, directly or by implication, that:

1. The system does not involve wearing a device or cosmetic which is like a hairpiece or toupee;

2. After the system has been applied, the hair applied becomes part of the anatomy like natural hair, and has the following characteristics of natural hair.

(a) The same appearance in all applieations as natural bair, upon normal observation, and upon extreme close-up examination; (b) It may be cared for like natural hair, particularly in that actions such as washing, combing, brushing and mussing may be performed on it in the same manner as might a person with natural hair. (c) The wearer may engage in physical activity and movement with the same disregard for his hair as he would if he had natural bair. 3. After the system has been applied, the wearer can care for it himself, and wil not have to seek professional or skilled assistance in incur maintaining the system, and that the customer wil not maintenance costs over and above the cost of applying the system. PAR. 6. In truth and in fact:

L The system does involve the wearing of a bairpiece or toupee. many 2. The hairpiece or toupee differs from natural hair in respects, including, but not limited to, the following: FF,DERAL TRAm; COMMISSION DECISIONS Complaint R6 F.

(a) It does not have the same appearance as natural hair in substantial number of instances. It is often discernible as a hairpiece or toupee upon normal observation, and upon extreme close examination. (b) It cannot be cared for like regular hair but requires special care and handling. Strong pulling on the hair, such as may be expected to occur in washing, combing, brushing and mussing, can cause pain because of the pressure exerted on the sutures in the scalp, may cause bleeding, and may cause the sutures to pull out. As a consequence washing the hair and scalp is difficult. Because washing is difficult foreign particles and dead skin tissue tend to accumulate beneath the implant hair application and become a signifieant source of irritation. The hair styles into which the hairpiece may be combed or brushed without professional treatments are limited. (c) The wearer may not engage in physical activities with as much disregard for bis bairpiece as might a person with natural hair. The wearer must at all times be careful that the hair does not pull or get pulled, or become tangled, or strained. Discomfort and pain may be caused by common actions, such as rollng- the head on a pilow during sleep.

3. The wearer cannot in most instances care for the hairpiece himself; he must seek professional or skilled assistance on many occasions. The System involves a surgical procedure by which a synthetic thread is sutured into the scalp. In some inst.ances, one or more of the sutures may become loose or may be rejected by the body. These and other medical problems associated with the surg-ery or the continuing presence of synthetic thread in the scalp may require subsequent visits to a medieal doctor. A substantial additional charge for such service could be incurred. Respondents' applied hair is subject to bleaching in sunlight and other discoloration normally associated with hairpieces, and where the hairpiece has been color dyed, loss of dye through washing and normal wear; thus replacement bairpieces are required at intervals in order to maintain a color match with any natural hair the wearer may have.

Therefore, the statements and representations set forth in Paragraphs Four and Five were and are false, misleading and deceptive. PAR. 7. In the course and conduct of their business, respondents have represented in advertisements the asserted advantages of the system, as hereinbefore described. In many cases, respondents have represented their system to be painless and have not disclosed in sucb advertisements that surgical procedure is a required step in tbe system. In no case have respondents' advertisements disclosed that: (a) Clients may experience discomfort and pain as a result of the SEIm OF' WASHINGTON , D. , INC., ET AL.

Decision and Order surgical procedure, from the synthetic sutures themselves, and from pulling normally incident to wearing the hairpiece; (b) Clients will be subject to the risk of irritation, infections, and skin diseases as a result of the surgieal procedure and as a result of the synthetic sutures remaining in the scalp;

(c) Permanent scarring to the scalp may result from the required surgical procedures, and as a result of the synthetic sutures remaining in the scalp.

The consequences described in this paragraph have in fact occurred and to a reasonable medical certainty can be expected to occur, and respondents knew, and had reason to know, that they could be expected to occur.

Therefore, respondents' failure to disclose such material facts was and is, unfair, false, misleading and deceptive. PAR. 8. In the course and conduct of their business, and at all times mentioned herein, respondents have been and are in substantial competition in commerce with corporations, firms, and individuals, in the sale of cosmetics, devices and treatments for the concealment of baldness.

PAR. 9. The use by respondents of the above unfair and deceptive representations and practices and their failure to disclose material facts, as aforesaid, bas bad, and now has, the capacity and tendency to mislead consumers, and to unfairly influence consumers to sign contracts for the application of the implant hair replacement system and to make partial or full payment therefor, without being informed of the seriousness of the surgieal procedure, and the possibilties of discomfort, disease or disfigurement related thereto, and related to the continual presence of the synthetic suture in the scalp. PAR. 10. The respondents' acts and practices alleged herein are to tbe prejudice and injury of the purchasing public, and to respondents competitors, and constitute unfair methods of competition, and unfair and deceptive acts and practices in commerce in violation of Section 5 of the Federal Trade Commission Act, and false advertisements disseminated by United States mails, and in commerce, in violation of Section 12 of the Federal Trade Commission Act. DECISION AND Order The Federal Trade Commission having issued a complaint charging that the respondents named in the caption hereof have violated the provisions of the Federal Trade Commission Act; and The Commission having duly determined upon motion submitted by respondents that, in the circumstances presented, tbe public interest would be served by a withdrawal of the matter from adjudication for 3GO FEDERAL TRADE COMMISSION DECISIONS Decision and Order HI) F.T.C. the purpose of negotiating a settlement by the entry of a consent ordcr; and The respondents and counsel for the Commission having executed an agreement containing a consent order, an admission by the respondents of all the jurisdictional facts set forth in the complaint, a statement that the signing of said agreement is for settement purposes only and does not constitute an admission by respondents that the law has been violated as alleged in the complaint, and waivers and other provisions as required by the Commission s rules; and The Commission having considered the agreement and having provisionally accepted same, and the agreement containing a consent order having thereupon been placed on the public record for a period of sixty (60) days, now in further conformity with the procedures described in Section 2.:H(b) of its rules, tbe Commission hereby makes the following jurisdictional findings, and enters the following order: 1. Respondent Serr of Washington, D. , Inc. is a corporation organized, existing and doing business under and by virtue of the laws of the District of Columbia, with its offce and principal place of business located at 1219 Connecticut Ave., N. , Washington, D. Respondent Herb Mann is an officer of said corporation. He formulates, directs and controls the policies, acts and practices of said corporation and his business address is the same as that of said corporation.

2. The Federal Trade Commission has jurisdiction of the subject matter of this proceeding and of the respondents, and the proceeding is in the public interest.

ORDER It is ordered That respondent Serr of Washington, D. , Inc., a corporation, its successors and assigns and its officers, and Herb Mann individually and as an officer of said corporation, and respondents agents, representatives, and employees, directly or through any corporation, subsidiary, division or other device or through franchisees sale or licensees, in connection with the advertising, offering for sale, hair or distribu jon of the implant replacement system or other replacement product or process involving surgery (hereinafter some- ), in or affecting commerce times referred to as the "System commerce" is defined in the Federal Trade Commission Act, or by the United States mails within the meaning of Section I2(a)(I) of the Federal Trade Commission Act do forthwith cease and desist from representing, directly or by implication that: I. The system does not involve wearing a device or cosmetic which is like a hairpiece or toupee;

5f) Decision and Order 2. After the system has been applied, the hair applied becomes part of the anatomy like natural bair, and has the following charactcristics of natural hair.

a. the same appearance in all applieations as natural hair, upon normal observation, and upon extreme closeup examination; b. it may be cared for like natural hair, particularly in that aetions sucb as washing, combing, brushing and mussing might be performed on it in the same manner as might a person with natural hair; c. the wearer may engage in physical activity and movement with the same disregard for his hair as he would if he had natural hai,- 3. After the system has been applied, the wearer ean care for it himself, and wil not have to seek professional or skilled assistance in maintaining tbe system, and that the customer wil not incur maintenance costs over and above the cost of applying the system. It is furlher ordered That respondents, in advertising, offering for sale, selling or distributing the system, disclose clearly and conspicuously that:

1. The system involves a surgical procedure resulting in the implantation of synthetic sutures in the scalp, to which hair is affixed. 2. By virtue of the surgical procedure involving implantation of synthetic sutures in the scalp, and by virtue of the synthetic suture remaining in the scalp, there is a risk of discomfort, pain, infection scarring, and other skin disorders.

3- Continuing special care of the system is necessary to minimize the probabilities and risks referred to in subparagraph two of this paragraph, and such care may involve additional costs for medications and assistance.

4. The purchaser is advised to consult with his personal physician about the system before deciding whether to purchase it. Respondents shall set forth the above disclosures separately and conspicuously from the balance of each advertisement or presentation used in connection with the advertising, offering for sale, sale, or distribution of the system, and shall devote no less than 15 percent of each advertisement or presentation to such disclosures. Prol)ided however That in advertisements which consist of less than ten column inches in newspapers and periodicals, and in radio and television advertisements with a running time of one minute or less, respondents may substitute the following statement, in lieu of the above requirements:

Warning: This application involves surg-ery whereby synthetic sutures are placed in the scalp. Discomfort, pain, and medical prohJems may occur. Continuing care is necessary. Consult your own physician.

No less than 15 percent of such advertisements shall he devoted to this disclosure, such disclosure shall be set forth clearly and conspicu- , ;Ui2 FEDERA L TRADE COMMISSION DECISIONS Decision and Order RG F.

ously from the balance of each of such advertisements, and if such disclosure is in a newspaper or periodical, it shall be in at least eleven point type.

It is further ordered That respondents, in connection with the sale of the system, provide prospective purchasers with a separate disclosure sheet containing the information required in the immediately preceding paragraph of this order, subparagraphs one (I) through four (4) thereof and that respondents require that, prior to exeeuting any contract to purchase said system, such prospective purchasers, sign and date the disclosure sheet after the sentence I have read the foregoing disclosures and understand what they mean," and that Serr of Washington, D. , Inc. provide a copy of said disclosure sheet to the customer and retain such signed disclosure sheet for at least three years.

It is further ordered That, in connection with the sale of the system no contract for application of the system shall become binding on the purchaser prior to midnight of the third day, excluding Sundays and legal holidays, after the day on which said contract for application of the system was executed, and that:

1. Respondents shall clearly and conspicuously disclose, orally prior to the time of sale, and in writing on any contract, promissory note or other instrument executed by the purchaser in connection with the sale of the system, that the purchaser may rescind or cancel any obligation incurred by mailing or delivering a notice of cancellation to the offce responsible for the sale prior to midnight of the third day, excluding Sundays and legal holidays, after the day on which said contract for application of the system was executed.

2. Respondents shall provide a separate and clearly understandable form which the purchaser may use as a notice of cancellation. :J Respondents shall not negotiate any contract, promissory note, or other instrument of indebtedness to a finance company or other third party prior to midnight of the fifth day, excluding Sundays and legal holidays, after the day on which said contract for application of the system was executed.

It is further orde,' That respondents, in connection with the advertising, offering for sale, sale, or distribution of the system, serve a copy of this order upon each present and every future licensee or franchisee, and upon each physician participating in application of respondents' system, and obtain written acknowledgment of the receipt thereof; and that respondents obtain from each present and future licensee or franchisee an agreement in writing, (1) to abide by the terms of this order, and (2) to cancellation of their license or franchise for failure to do so; and that respondents canecl the license or franchise ;iG;' SERR OF WASHINGTOIo, D. , INC., ET AL. 355 Decision and Order of any licensee or franchisee that fails to ahide by the terms of this order. Respondents shall retain such acknowledg;ments ami agreements for so long as such persons or firms continue to participate in the application or sale of respondents' system.

It is further ordered That respondents, in connection with the advertising, offering for sale, sale, or distribution of the system forthwith distribute a copy of this order to each of their operating; divisions or departments.

It is further ordered That the corporate respondent notify the Commission at least thirty (30) days prior to any proposed change in said respondent, such as dissolution, assignment, or sale resulting in the emergence of a successor corporation, the creation or dissolution of subsidiaries, licensees, or franchisees, or any other change in the corporation which may affect compliance obligations arising out of the order.

It is further ordered That in the event that the corporate respondent merges with another corporation or transfers a11 or a substantial part of its business or assets to any other corporation or to any other person said respondent shall require such successor or transferee to file promptly with the Commission a written agreement to be bound by the terms of this order; Provided That if said respondent wishes to present to the Commission any reasons why said order should not apply in its present form to said successor or transferee, it shall submit to the Commission a written statement setting forth said reasons prior to the consummation of said succession or transfer. It is .tLtrthcr ordered That the individual respondent Herb Mann promptly notify the Commission of the discontinuance of his present business or employment and of his affiliation with a new business or employment. Such notice shall include respondent' s current business address and a statement as to the nature of the business or employment in which he is engaged as well as a description of his duties ami responsibilities.

It is fi(jther ordered That the respondents herein shall within sixty (60) clays after service upon them of this order, file with the Commission a report, in writing, setting forth in detail the manner and form in which they have complied with this order. :364 FEDERAL TRADE COMMISSION DECISIONS Complaint H(; F.T. IN Tile MATTER OF XEROX CORPORATION CONSENT ORDER, ETC", IN R.;GARD TO ALLEGED VIOLATION m' THE Fr;DERAL TRADE COMMISSION ACT Dockef 8909. Cmnplaint, Jan. 197,'- Decisinn, J'nl?! , 1975 Consent order requiring a Stamford, Conn., manufacturer and developer of offce copier equipment, among other thing:; to cease engaging in anti('ompetitive licensing, patent and marketing arrangement:;. Appeamnces For the Commission: Charles W. COTddry III, Jonathan E. Gaines Robert D. Jacobs, Robert T. Joseph, Richard L. Williams, David I. Wilson, Lloyd E. Oliver (Economist).

For the respondent: John R. Ml1rphy, G. Emmett Smith and Kaye Scholer Stamford, Conn. Milton Handler, Fierman, Hays Haruller New York City.

COMPLAINT The F'ederal Trade Commission, having reason to believe that Xerox Corporation, hereinafter referred to as Xerox or respondent, has violated and is violating Section 5 of the Federal Trade Commission Act, and that a proceeding in respect thereof would be in the public interest, issues this complaint, stating its charges as follows: Definitions PARAGRAPH 1. For purposes of this complaint, the following definitions shall apply:

(a) "Office copier" (hereinafter sometimes referred to as "copier means a machine for the convenient reproduction of an original document. The term "offce copier" includes electrostatic and thermographic process copiers and aeeessories physically attached to such copiers. Said term does not include either specialized use copiers, such as engineering drawing and microfilm copiers, or offset, mimeograph or spirit duplicator macbines.

(b) "Plain paper eopier" means a copier which makes copies on plain untreated paper.

(c) "Coated paper copier" means a copier which requires the use of chemically treated or coated paper.

364 Complaint II Respondent PAR. 2. Xerox is a corporation organized and existing under and by virtue of tbe laws of the State of New York, with its executive office located at Stamford, Conn. Respondent was incorporated in 1906 as the Haloid Company, and its name was changed to Haloid Xerox Inc. in 1958 and to Xerox Corporation in 1961.

PAR. 3. In 1971, Xerox s total revenues were approximately $2 billion net income after taxes was approximately $213 milion, and total assets were approximately $2.2 bilion. Xerox s after tax return on stockholds equity averaged 21.2 percent for the period 1967 through 1971. In 1971, approximately 50 percent of Xerox s total revenues were derived from its domestic business in office copiers and supplies and approximately 25 percent of Xerox s total revenues were derived from Rank Xerox. In 1971 , Xerox was approximately the 52nd largest domestic industrial firm in terms of total revenues and approximately the 17th most profitable such firm based on return on stockholder equity.

III Other Persons PAR. 4. The Rank Organisation, Ltd. (Rankl is a corporation organized and existing under the laws of tbe United Kingdom, with principal offices in London, England.

PAR. 5. Fuji Photo Film Co., Ltd. lFuji) is a corporation organized and existing under the laws of Japan, with principal offices in Tokyo Japan.

PAR. 6. Rank Xerox, Ltd. (Rank Xerox) is a corporation organized and existing under the laws of the United Kingdom with principal offices in London, England. It was organized by Rank and Xerox for the purpose of manufacturing and distributing office copiers throughout the world except the United States (including United States territories and possessions) and Canada. In 1964, Xerox purchased from Rank certain property rights and assets, including the right to manufacture and distribute Xerox copiers in Central and South America, for $3.3 millon plus 5 percent royalties on rentals and sales in said territory. From 1956, when it was organized, until December 1969 Rank Xerox s voting stock was owned equally by Rank and Xerox. In December 1969, Xerox acquired for $12.5 million a 51 percent ownership of said voting stock. In 1971, Rank Xerox had revenues of approximately $500 milion, assets of approximately $690 milion, and net profits of approximately $196 milion.

PAR. 7. Fuji Xerox Co., Ltd. (Fuji Xerox J is a corporation organized and existing under the laws of Japan. It was organized by Rank Xerox (j6 FEDERAL TRADE Commission DECISIONS Complaint H6 F.

and Fuji for the purpose of manufacturing and distributing office" copiers in Japan, Thailand, Cambodia, Laos, Philippines, Vietnam Indonesia, Korea and Taiwan (Formosa). Fuji Xerox s voting stock is owned equally by Hank Xerox and Fuji.

IV Nature of Trade and Commerce PAR. 8. The relevant market is the sale and lease of office copiers in the United States, hereinafter referred to as the office copier market. This market includes as a relevant submarket the sale and lease of plain paper office copiers in the United States, hereinafter referred to as the plain paper submarket. The office copier market is dominated by the plain paper submarket and Xerox dominates tbe plain paper submarket.

PAR. 9. (a) In 1971, revenues from the sale and lease of office copiers were approximately $1.1 bilion and total revenues from the sale and lease of office eopiers and supplies were approximately $1.7 bilion; Xerox aceounted for approximately 86 percent of the former and 60 percent of the latter. In 1971, revenues from the sale and lease of plain paper copiers and supplies were approximately $1.0 bilion; Xerox accounted for approximately 95 percent of said revenues. (b) Approximately 25 firms are presently engaged in tbe offce copier market. Of these 23 sell or otherwise distribute coated paper copiers and three sell or otherwise distribute plain paper copiers. After Xerox the next largest firm in the offce copier market aecounted for approximately 10 percent of J 971 revenues from the sale or lease of office copiers and the sale of supplies therefor. PAR. 10. The office copier market has had and continues to have high barriers to entry and barriers to effective competition among existing competitors.

V Jurisdiction PAR. 11. In the course and conduct of its business, Xerox has shipped or caused to be shipped office copiers to customers located throughout the United States and has also entered into licensing and distribution arrangements with foreign corporations. There is now and has been for many years a constant substantial and increasing flow of Xerox offce copiers and Xerox technieal information and marketing rights in commerce" as that term is defined in the Federal Trade Commission Act. Except to the extent that competition has been hindered frustrated, lessened and eliminated by the acts and praetiees hereinbelow alleged in this complaint, Xerox has been and is in competition with :3(;4 Complaint other corporations, partnerships, individuals or firms engaged in the sale and distribution of office copiers and supplies. VI Violations PAR. 12. (a) Xerox has monopoly power in the relevant market and submarket.

(b) Xerox has the power to inhibit, frustrate, and hinder effective competition among firms participating in the relevant market and submarket.

PAR. 13. Xerox has engaged in marketing acts, practices and methods of competition including, but not limited to (a) following a lease only policy pursuant to which Xerox refuses to sell and discourages the sale of its office copiers (b) using package leasing plans and quantity discount rental price plans (c) discriminating in price among customers (d) maintaining a stock of depreciated copiers and planning to use or using such copiers to inhibit, frustrate, or hinder price competition (e) announcing new copier models and taking orders thereon before availability of such copiers in response to introduction of competing copiers by actual or potential competitors (f) requiring that it be the exclusive source of maintenance and repair service for leased Xerox office copiers (g) falsely disparaging competitive supplies (h) tying supplies to the lease of offce copiers. PAR. 14. Xerox has engaged in acts, practices and methods of competition relating to patents including, but not limited to (a) monopolizing and attempting to monopolize patents applicable to office copiers (b) maintaining a patent barrer to competition by attempting to recreate a patent structure which would be equivalent in scope to expired patents (c) developing and maintaining a patent structure of great size complexity, and obscurity of boundaries (d) using its patent position to obtain access to technology owned by actual or potential competitors (e) entering into cross-license arrangements with actual or potential competitors (f) including in licenses under United States Patent Number 121 006 provisions having the effect of limiting licensees to the manufacture and sale of only coated paper copiers (g) offering patent licenses applicable to plain paper copiers with Complaint 86 F.

provisions which, in effect, limit the licensee to the manufacture or sale of low speed eopiers (h) including in patent licenses provisions having the effect of precluding the licensee from utilizing Xerox patents in the office eopier market (i) entering into and maintaining agreements with Battelle Memorial Institute, Inc. and Battelle Development Corporation, Delaware corporations with principal offices at Columbus, Ohio, hereinafter referred to collectively as Battelle, pursuant to whicb Battelle is required to convey to Xerox all patents, patent applications, and knowhow coming into its possession relative to xerography. (j) preventing actual and potential competitors from developing plain paper copiers while permitting them to develop coated paper eopiers. PAR. 15. (a) For many years, and at least as of 1969, Rank Xerox was a substantial, viable, separate corporation capable of competing in the office copier market and plain paper submarket. (b) Xerox has entered into and maintained agreements with Rank and Rank Xerox which have effectively divided up the world market for plain paper copiers among Xerox, Rank Xerox and Fuji Xerox. (c) In December 1969, Xerox acquired a 51 percent interest in Rank Xerox voting stock and continues to maintain such interest. PAR. 16. Xerox has engaged and is engaging in acts, practices and methods of competition as hereinabove alleged, for the purpose and with effect of (a) monopolizing the offce copier market and the plain paper submarket (b) preserving, maintaining, and furthering a highly concentrated market structure with high barrers to entry, (c) hindering, restraining, foreclosing and frustrating competition in tbe office eopier market and plain paper submarket and the entry of new competitors into said markets (d) materially reducing the independence of Rank Xerox, the influence of Rank Xerox as a potential competitor and the probability that Rank Xerox would enter competition in the office copier market or plain paper sub market (e) foreclosing Rank, Fuji, Rank Xerox, and Fuji Xerox from competing with Xerox in the Western Hemisphere, including the United States, and foreclosing Xerox from competing in export trade from the United States (f) depriving consumers of the benefits of competition. PAR. 17. The aforesaid acts, practices, and methods of competition in commerce are unfair and constitute violations of Section 5 (a) of the Federal Trade Commission Act.

(-1 Decision and Order DECISION AND ORDER The Federal Trade Commission having; issued a complaint charging that the Respondent named in the caption hereof has violated the provisions of Section 5 of the Federal Trade Commission Act, 15 D. 945; and Respondent and complaint counsel, by joint application filed Oct. 6 1974, having moved to have the matter removed from adjudication for the purpose of submitting an executed agreement containing consent order, and the administrative law judge having certified such application to the Commission; and The Commission, by order issued Oct. 10, 1974, having withdrawn this matter from adjudication pursuant to Section 2.:14(d) of its rules; and The Commission having considered and accepted said agreement and placed it in the public record for a period of sixty (60) days, having duly considered the comments filed tbereafter pursuant to Section 2.34(b) of its rules and the recommendations of its staff, and having withdrawn its acceptance of said agreement; and Respondent and complaint counsel having thereafter submitted a revised agreement containing consent order dated Mar. 27, 1975, and modifications thereof dated Apr. 21, 1975 and July 14, 1975; and The Commission having considered and accepted the agreement dated Mar. 27, 1975 and placed it on the public record for a period of sixty (60) days, having held a public hearing; respecting said agreement on June 4, 1975, and having duly considered the comments filed pursuant to Sections 2.34(b) and 3.25(d) of its rules during the 60 day period and the matters presented at the public hearing; and The executed agreement dated Mar. 27, 1975, as modified, containing the following consent order, an admission by respondent of all the jurisdictional facts set forth in the complaint, a statement that the signing of said agreement is for settlement purposes only and does not constitute an admission by respondent that the law has been violated and waivers and other provisions as required by the Commission rules N ow in conformity with the procedure prescribed in Section 3.25(d) of its rules, the Commission hereby makes the following jurisdictional findings and enters the following order:

1. Respondent Xerox Corporation is a corporation organized existing and doing business under and by virtue of the laws ofthe State of New York, with its principal place of business located at High Ridge Park, Stamford, Conn.

:no FEDERAL TRADE COMMISSION DECISIONS Decision and Order 6 F. 2. The Federal Trade Commission has jurisdiction of this proceeding and of the respondent and this proceeding is in the public interest. ORDER It is or-dered That the following definitions shall apply in this order: its subsidiaries A. "Xerox" means respondent Xerox Corporation, (except Rank Xerox and Fuji Xerox ), successors and assigns and its directors, officers, employees, agents and representatives. "Rank Xerox" means Rank Xerox Limited, a corporation organized and existing under the laws of the United Kingdom. "Fuji Xerox" means Fuji Xerox Company Limited, a corporation organized and existing under the laws of .Japan. "Rank Xerox" and "Fuji Xerox" each includes the subsidiaries successors and assigns of said corporations and their directors, officers, employees, agents and representatives. B. "Person" means any individual, partnership, firm, association corporation or other legal or business entity (other than the Commission Xerox, Rank Xerox, Fuji Xerox The Rank Organisation Limited (so long as it is a party to a joint venture with Xerox relating to office copier products), Fuji Photo Film Co., Ltd. (so long as it is a party to a joint venture with Xerox or Rank Xerox relating to office copier products), and any foreign government (or any entity wbose ownership is controlled thereby)), their subsidiaries suecessors and assigns, and directors, officers, agents and representatives. person more than fifty percent (50%) Of, at C. "Subsidiary " means a the option of the licensee with respect to its wbs-idiaries at least twenty percent (20%) of whose outstanding shares or stock, representing the right (other than as affected by events of default) to vote for the election of directors or other managing authority, are now or hereafter owned or controlled, directly or indirectly, by Xerox, Rank Xerox, ruji Xerox or Person as the case may be, but such person shall be deemed to be a subsidiary only so long as such ownersbip or control exists.

licensed by Xerox, Rank Xerox D. "Licensee " means any person and/or Fuji Xerox pursuant to the terms of Paragraph II of this order including all affiliates of such person. Affiliate means (I) any person and subsidiaries thereof, engaged in the development, manufacture use, lease or sale of office copier products at least fifty percent (50%) , at the option of the licensee at least twenty percent (20%) of whose outstanding shares or stock, representing the right (other than as affected by events of default) to vote for the election of directors or other managing authority, are now or hereafter owned or controlled :3(;4 Decision and Order directly or indirectly, by the lieensed person; and (2) any person and subt;id'iaries thereof, which now or hereafter own or control, directly or indirectly, more than fifty percent (50%) or, at the option of the licensee at least twenty percent (20%) of the outstanding shares or stock, representing the right (other than as aff,cted by events of default) to vote for the election of directors or other managing authority of the licensed person but only so long as such ownership or control exists.

E. "Patent" means some, all or any portion of all patents (including utility models, design patents, certificates of addition and the like), and all patents resulting from continuations-in-part, divisions, renewals reissues and extensions based on said patents or the applications therefor, but only insofar as it relates to an office copier product. F. "Issued" means published and either issued, granted, sealed or registered.

G. "Corresponding- Patents " means two or more patents each of which has issued in a different country, is entitled to the same priority date (or could have been if timely filed) and is based upon the same conception and reduction to practice.

H. " Present Patent" means a United States or foreign patent 1:s8ued on or before the date of issuance of this order and all corresponding patents regardless of the date they are issued. I. " Future Patent" means a United States or foreign patent other than a present patent issued on a patent application baving an effective filing date prior to three years after the date of issuance of this order or is,sued during the six years following the date of issuance of this order, and all corresponding patents regardless of the date they are issued.

J. " foreign Patent" means a patent issued by a country other than the United States.

Patent" means a patent which is owned or controlled by K. "Xerox Xerox, Rank Xerox or Fuji Xerox or under which one or more of them has the power to grant licenses or sublicenses to persons. Xerox power to comply with this order with respect to patents owned or controlled by Rank Xerox or Fuji Xerox or under which they have tbe power to grant licenses or sublieenses, is confirmed in the undertakings of Rank present or Future Xerox patent exceptXeroxL. "Orderand FujiPatent"Xeroxmeans a which have been submitted to the Commission. one licensed pursuant to paragraph X(b) of this order. M. A "Patent of the Licensee" means a patent which is owned or controlled by a licensee or a patent under which such licensee has the power to grant licenses or sublicenses.

patent on an invention which, if N. " Improvement Patent" means a :17 FF,DERAL TRADE COMMISSION DECISIONS Decision and Order 86 FTC.

practiced, would infringe a licensed patent and which -irnprovenwnt patent is owned or controlled by tbe licensee of such patent or is one under which such licensee has the power to grant licenses or sublicenses. Determination of what is an improvement patenl shall be made by reference to a licensed United States patent if any, or ifthere is no such United States prltent by reference to the licensed foreign patent.

O. "Office Copier" means a machine for the convenient reproduction of an original doeument and accessories physically attached to such machine. The term "Office Copier" refers to all xerographic and nonxerographie office copiers, including but not limited to polychromatic color office copiers, high speed office copiers (such as the Xerox Model 9200), hybrid offset office copiers (sucb as the AMCD) and office copiers adapted to receive micro input as well as hard copy input, but does not include specialized use copiers (such as engineering drawing and microfilm copiers), or offset, stencil, or spirit duplicator machines. P. " Office Copier Product" means an office copies and parts components, raw materials and consumable supplies for use therein including but not limited to photosensitive elements, refined selenium metal alloys for machine parts, toner, developer, paper, and containers (such as toner cartridges) for consumable supplies. Product" means (I) an office copier (2) toner Q. "Royalty-Bearing developer, paper, and similar consumable supplies, (3) containers (such as toner cartridges) for consumable supplies and (4) photosensitive elements, any of which are covered by a lieensed patent other than one which is royalty-free.

R. "Net Revenues" shall mean the total revenues received by the lieensee from the lease or sale, as the case may be, of a Royalty-bearing product or in the case of a lease of a royalty-bearing product at the option of the licensee, the publisbed sellr.g price for such royaltybearing product. Any of the following items, or any comparable items may be deducted from the aforesaid total revenues or publisbed selling price when they are separately stated on the invoice: (a) Packing costs;

(b) Actual transportation and insuranee costs from place of shipment to point of installation;

(c) Excise, sales, use and property taxes;

(d) Import and export duties and taxes;

(e) The fair market value of replaeement parts and components; which are not covered by a lieensed patent; (f) The fair market value of consumable supplies which are not covered by a licensed patent whether or not they are in a licensed container;

XF,ROX CORP. :173 364 Decision and Order (g) Actual credit to customers on account of any royalty-bearing product which is not accepted by tbe customer; (h) Costs of servjeing or repairing the royalty-benring product excluding the costs of parts or components eow"ed by a licensed patent.

To the extent that the amounts charged for the above items can be verified by referring to separate bona fide offers of such services or products, or to separate documents as in the case of taxes or duties such amounts need not appear on the invoice. S. "Polychromatic Color Office Copier Product" means an office copier pmduct specially adapted to produce multicolor copy. T. "Know-how" means all written materials used by Xerox Corporation in manufacturing, refurbishing, reconditioning, retrofitting and servjeing its office copier products which Xerox Corporation is not specifically prohibited by a legally enforceable obligation from disclosing, including but not limited to blueprints, drawings, formulae manuals, process descriptions, production methods, specifications quality control and test standards and computer programs. U. "Commercially available" means generally available for immediate sale or lease to consumers in an area at least as large as an area served by at least one sales branch of the seller or lessor and on publicly announced terms.

V. "IBM" means International Business Machines Corporation, a corporation organized and existing under the laws of the State of New Yark, and its subsidiaries successors and assigns, and directors officers, employees, agents and representatives. W. "United States" means the United States of America, its territories or possessions, the District of Columbia, and the Commonwealth of Puerto Rico.

It is further ordered That XEROX shall forthwith grant or cause to be granted to any PERSON making written application to Xerox at any time under this order a nonexclusive license for the full unexpired term under any, some or all order patents to make, have made, use or vend any, some or all of the following:

(1) Office copiers (including the right to have made parts, components and raw materials for use therein), (2) toner, developer, paper and similar consumable supplies, (3) toner, developer, paper and similar consumable supplies which may be used in future OF~' ICE COPIERS (4) containers (such as toner cartridges) for consumable supplies, and (5) photosensitive elements. However, at Xerox option exercised on a nondiscriminatory basis, the effective date of licenses pertaining to :174 FEDERAL TRADE COMMISSION DECISIONS Decision and Order 86 F.T.C. polychromatic color office copier products may be up to three years from the date of issuance of this order for present pfLlents and three years from the date the patent is issued for future patents. Nothing in any license granted pursuant to the terms of this order shall be deemed to prohibit a licensee from using a licensed office copier in conjunction with any other device for use in addition to the convenient reproduction of an original document.

Xerox, Rank Xerox and Fuji Xerox shall agree not to sue any l1:censee or customers or suppliers of the licensee for patent infringement or royalties with respect to any office copier photosensitive element, toner, developer, paper or container (such as toner cartridges) for consumable supplies manufactured by or for the licensee prior to the date of issuance of this order, or to maintain any such suit.

It is further ordered That no license of an order patent granted pursuant to tbe terms of this order shall contain or be conditioned upon any restriction, except as hereinafter provided: A. The licensee may, at his option, designate up to a total of three order patents which shall be licensed or sublieensed royalty-free; Provided, however That, in each country, the licensee may substitute another order patent as royalty-free for any order patent previously designated as royalty-free which the licensee has discontinued using in that country. On order palents other than the three designated as royalty- free by the licensee, Xerox may, in its sole discretion, charge a royalty not to exceed 1/2 percent per PATENT up to a maximum accumulated royalty of 1 1/2 percent of the licensee s net revenues for each royalty- bearing producl which is manufactured, leased or sold by or for the licensee. With respect to a' royalty-bearing product of the licensee which the licensee uses or consumes himself, the royalty shall be computed on the basis of the net revenues that would have been received by the licensee in an ordinary commercial transaction. The royalty shall be computed separately for each royalty-bearing product on the basis of order patents subject to royalty which are used in such royalty- bearing product. In no event shall more than three royalty-free patents apply to anyone royalty- bearing product at anyone time irrespective of the number of licenses granted by Xerox with respect to sucb royalty- bearing product. For the purpose of this Paragraph IV A patent and all Corresponding Patents in all countries shall count as XEROX CORP. 375 3(H Decision and Order one patent. The licensee need not take a license under any corresponding patent.

R. XeTOX may require that a Ucensee agree not to sue Xerox, Rank Xerox or Fuji Xerox or their customers or suppliers, for PATENT infringement or royalties with respect to any office copier photosensitive element, toner, developer, paper or container (such as toner cartridges) for consumable supplies manufactured by or for them prior to the date of issuance of this order, or to maintain any such suit. C. To the extent the licensee has the power to grant licenses or sublicenses Xerox may require the grant to Xerox, Rank Xerox and Fuji Xerox of a nonexclusive license for the full unexpired term under any, some or all patents, of the licensee to make, have made, use or vend any, some or all of the following: (a) office copiers (including the right to have made parts, components, and raw materials for use therein), (b) toner, developer, paper and similar consumable supplies, (c) toner developer, paper, and similar consumable supplies which may be used in future ojjice copiers (d) containers (such as toner cartridges) for consumable supplies, and (e) photosensitive elements, as hereinafter provided in this Paragraph IV C.

(I) Xerox may (at any time) require the license of one patent of the licensee to Xerox, Rank Xerox and Fuji Xerox for each Xerox patent lieensed to the licensee in excess of the first three order patents licensed to the licensee but in so doing Xerox may not require the license of (a) a greater number of present patents of the licensee than the number of Xerox present patents licensed to the licensee or (b) a greater number of future patents of the licensee than the number of Xerox future patents licensed to the licensee. Notwithstanding the foregoing, for purposes of determining how many present patents and Fuji Xeroxfuture patents of the licensee which Xemx, Rank Xerox are entitled to license, the licensee shall have the right, if exercised at the time of first receipt of a license from Xerox under Paragraph II of this order, to have the first three order patents licensed from XeTOX count, at the licensee option, as Xerox present patents or as Xerox future patents or as any combination of Xerox present patents and Xerox future patents irrespective of the actual character of such order patents. For the purpose of determining the number of patents under this Paragraph IV C(I), (a) a patent and all corresponding patents in all countries shall count as one patent and (b) the substitution of a previously unlicensed order patent shall count as an additional patent unless the patent for which substitution is made was dedicated revoked, disclaimed, or has expired or lapsed, or was held invalid or unenforceable. Xerox, Rank Xerox and Fuji Xerox need not take a license under any corresponding patent. licensee shall have no Decision and Order 86 F.

obligation to grant a license to Xerox, Rank Xerox or Fuji Xerox in any country in which, by reason of governmental action Xerox has been prevented from granting or causing to be granted a patent license requested pursuant to this order. Xerox shall have no obligation to grant licenses in any country in which, by reason of governmental action, the licensee is prevented from granting licenses to Xerox, Rank Xerox or Fuji Xerox pursuant to the terms of this Paragraph IV C(l). (2) The lieense of present patents of the licensee shall not become effective until four years after the date of issuance of this order or four years after an office copier product (of the licensee or its licensee) using an invention covered by the patent first becomes commercially available whichever is later. The license of future palents of the licensee shall not become effective until four years after the date the future patent of the licensee is issued or four years after an office copier product (of the licensee or its licensee) using an invention covered by the patenl first becomes commercially available whichever is later. This Paragraph IV C(2) shall not apply to IBM, except that IBM may require that the effective date of licenses pertaining to polychrumatic color office copier products not become effective for up to three years from the date of issuance of this order for present patents and three years from the date IBM' filture patents are issued. With respect to corresponding future patcnts the date such patents are issued shall be the date that the first such corresponding fitture patent is issued. (3) Xerox may (at any time) require the immediate license to Xerox Rank Xerox and Fuji Xerox of any of the present or future patents of the licensee (a) which would be infringed by a Xerox, Rank Xerox Fuji Xerox office copier manufactured by any of them following the date of issuance of this order if the invention covered by the patent the same as that embodied in an office copier manufactured by any of them prior to the date of issuance of this order, or (b) which would be infringed by a Xerox, Rank Xerox or Fuji Xero:c office copier pruduct which any of them makes cummercially available during the six years following the date of issuanee of this order if the invention of the patent was embodied in a device which, as of the first publication or public use anywhere in the world of the invention covered by the patent of the licensee or application therefor (i) actually had been built and incorporated in an engineering model or prototype model of the office copier by Xerox, Rank Xerox or Fuji Xero:c and (ii) was part of a Xerox, Rank Xero:c or Fuji Xerox funded product program. As used in this Paragraph IV C(3), "engineering model" means the first complete assembly of all t.he sub-assemblies of the office copier; and "prototype model" means the product development stage which follows the engineering model, if any. Licenses granted pursuant to this Paragraph "J"- :J64 Decision and Order IV C(:J) shall not be subject to the provisions of Paragraph IV C(l) (except that they shall count for the licensee as patenls licensed to Xerox, Rank Xerox ami Fuji Xerox if and when they become entitled to a license pursuant to that paragraph) or Paragraph IV C(2), but shall be subject to all other provisions of this order. The burden of establishing the right to a license under this Paragraph IV C(:J) shall be on Xerox.

(4) Xerox may require a licensee to grant to Xerox, Rank Xerox and Fuji Xerox a nonexclusive license under all improvement patents Xerox patents licensed to the licensee. Such licenses shall not be subject to the provisions of Paragraph IV C(l) (except that improvement patents of the licensee shall count for the licensee as patents licensed to Xerox, Rank Xerox and Fuji Xerox if and when they become entitled to a license pursuant to that paragraph) but shall be subject to all other provisions of this order.

(5) Xerox shall grant to tbe licensee a nonexclusive license under all Xerox iTnprovement patents on patents licensed to Xerox. Such licenses shall be subject to all the provisions of this order except that they shall not count for Xerox as patents licensed by Xerox, Rank Xerox and Fuji Xerox for purposes of Paragraph IV C(l). (6) Tbe licensee may charge Xerox, Rank Xerox and Fuji Xerox reasonable royalty for patenls licensed to any or all of them pursuant to this order, computed on the basis of the nel revenues of Xerox, Rank Xerox and Fuji Xerox for eacb royalty- bearing product which they manufactured, leased or sold. With respect to any royalty-bearing product of Xerox, Rank Xerox and Fuji Xerox which they use or consume themselves, the royalty shall be computed on the basis of the net revenues that would have been received in an ordinar commercial transaction. The royalty shall be computed separately for each royaltybearing product on the basis of the patents which are used in such royalty-bearing product.

(7) Xerox, Rank Xerox and Fuji Xerox may require that they be permitted to sublicense any PERSON in which they own, directly or indirectly, 50 percent or less, but not less than 20 percent of the voting stock if such person makes its present and future patents available for licensing pursuant to Paragraph II of this order. All such persons shall be identified to anyone making written request, and a list of all such persons current as of the date of issuance of this order shall be fied on the public record of the Commission. Any changes in said list shall be fied with the Commission within 30 days after they occur. (8) A license to Xerox pursuant to this Paragraph IV C shall contain the provisions specified in Paragraphs IV H and IV I of this order and :178 FEDERAL TRADE COMMISSION DECISIONS Decision and Order 86 F.

may contain the provisions specifi d in Paragraphs IV D, IV E, IV F IV G, and IV .J of this order.

(9) If Xerox grants a license under order patents either pursuant to the terms of Paragraph I! of this order or otherwise, tbe license agreement shall contain the irrevocable covenant of the licensee to license such of its patents as are licensed to Xerox on reasonable tenns patentsand conditions (including the license to itself of its licensees improvement patents) to any other person who is entitled to a license from Xerox pursuant to Paragraph I! of this order, Provided That such license need not be effective prior to the effective date of the licensee license to Xerox. Within 60 days following execution of a license agreement subject to this Paragraph IV C (9), Xerox shall submit to the Commission a copy thereof in cam,era. D. Reasonable provisions may be made for the retention of books licensee to tbeand records and for periodic royalty reports by the manager of patent licensing of the licensor, and for inspection of such books and reeords by an independent auditor or any other person reasonably acceptable to both the lieensor and the lieensee who shall report to said manager only the amount of the royalty due and payable. The manager of patent licensing of the licensor shall not disclose tbe officercontent of said periodic royalty reports to any director, employee, agent or representative of the lieensor other than the members of his staff and employees necessarily involved in recording and depositing checks in a routine manner, who shall be similarly bound, unless the royalty owed is not timely paid. I n the event that the licensor does not have a manager of patent licensing, a mutually agreeable employee of the licensor sball be designated in bis stead. any party E. Notwithstanding any other provision of this order, taking a sublicense under the tenns of this order may be required to reimburse the sublicensor for any payments it is legally required to make and does make to the original licensor on account of activities of the sublicensee under any sublicense granted pursuant hereto. cancellation of tbe F. Reasonable provisions may be made for license granted to tbe licensee upon failure of tbe licensee to make the reports, pay the royalties, or pennit the inspection of his books and records as hereinbefore provided, and, upon a wrongful act of tbe licensee respecting the restrictions on use or disclosure of know-how for Xerox to apply to the contained in Paragraph VI! of this order, Commission for leave to cancel said license, in which event the decision Xerox of the Commission shall be final and non-appealable by either the lieensee.

G. The license may be nontransferable.

H. The license must provide that the licensee may cancel the license :3Gti Deeision and Order in whole or as to any specified PATENTS at any time by giving 30 days notice in writing to the licensor; however, the licensor shall have the option to continue in effect any right granted to the licensor pursuant to Paragraph IV C of this order.

I. The license must provide for the arbitration specified in Paragraph VIII of this order and for suspension thereof pursuant to Paragraph VIII C of this order.

J. In granting a license pursuant to Paragraph II of this order there shall be no discrimination by Xerox, Rank Xerox, Fuji Xerox any person in the royalty charged as among royalty-paying licensees who procure the same rights under the same patents; but nothing herein contained shall prevent Xerox, Rank Xerox, Fuji Xerox or any person from negotiating nonexclusive licenses and cross-licenses outside the terms (except Paragraph IV C(9) of this order) of this order with anyone who so elects.

It is further ordered That nothing herein shall be deemed to prevent any licensee or applicant for a license from attacking in any proceeding or controversy the validity, scope or enforceability of any present anyfuture patent nor shall this order be construed as imputing validity, enforceability or value to any such patent. It is further ordered That Xerox shall allow each person who is a licensee of a Xerox pa,tent on the date of issuance of this order to obtain a license pursuant to the terms of this order; however Xerox, Rank Xerox and Fuji Xerox shall have the right to continue in effect any industrial property rights undet the terms previously granted to Xerox, Rank Xerox or Fuji Xerox by the licensee, and such licensee shall have the right to continue in effect any industrial property rights licensee by Xerox, Rankunder the terms previously granted to the Xerox or Fuji Xerox.

VII It is further ordered That:

A. During the period ending five years after the date of issuance of licensees of United States this order Xerox shall make available to order palents under a license pursuant to the terms of this order who make written application therefor all know-how (1) in existence on the date of issuance of this order or (2) made available to any other United States manufacturer (except a supplier to Xerox) or United Stales :180 FEDERAL TRADF: COMMISSION DECISIONS Deeision and Order H6 F.

marketer of office copier produ, ct8 for use in connection with such PRODUCTS during the five year period. The delivery of the know-how requested shall begin within 30 days and shall be completed within 120 Xerox; thedays after the initial application therefor is received by response to subsequent requests shall be completed within a reasonable period of time. Such know-how shall be of such a nature as to enable one skilled in manufacturing electro-mechanical offce machinery and in the technologies embodied in office copies products or comparable technologies to manufacture, refurbish, recondition and serviee Xerox Corporation office copier products. Upon written application Xerox shall provide written clarification respecting such know-how wbere such clarification is reasonably necessary. Xerox may make a reasonable charge for the cost of collecting and duplicating know-how which it discloses and for the time spent in clarification. At the option of such licensee, Xerox shall disclose know-how pertaining to photosensitive elements, supplies, raw materials and particular office copies,. models and shall limit its charge to such know-how. Xerox may require tbe licensee to agree that all know-how disclosed to the licensee by Xerox shall be considered a Xerox trade secret and to undertake, in good faith to use the know-how only in connection with the manufacture in the United States of office copier products by or for the licensee and not to disclose or permit the disclosure of tbe know-how to anyone other than a supplier who is or wil be manufacturing in the United States and who enters into a similar agreement and undertaking respecting disclosure and use, unless the licensee can establish that such know-how (1) was previously known to the licensee prior to the disclosure by Xerox or (2) is or becomes part of the public domain through no wrongful act of licensee or (3) is subsequently otberwise legally acquired by licensee or (4) was or is disclosed by Xerox to third parties on a non-confidential basis.

B. Commencing 120 days after the date of issuance of this order Xerox shall make available to know-how licensees a list of the persons whose know- how Xerox claims to be prohibited from disclosing. Such list shah be subject to the restrictions on use and disclosure of knowhow provided in this Paragraph VII. Xerox need not make know-how a vaiJable to IBM.

VII It is further ordered That:

A. Upon receipt of a written application for a patent license or for a patent license and disclosure of k now-how under the terms of this order Xerox sball advise tbe applicant in writing of tbe terms of such license and/or know-how disclosure. If a dispute arises between Xerox ".."'nv. ,-V"'.

364 Decision and Order and a licensee or applicant regarding their respective rights under this order (except where certain matters are specifically referable to the Commission as provided in Paragraph IV F of this order), and if the parties to the dispute are unable to resolve it within 90 days after the existence of such dispute is communicated in writing to Xerox or to the Ucen" ee or applicant, the dispute shall be determined by arbitration pursuant to this Paragraph VIII. Notwithstanding- the provisions of Xerox and a licenseeParagraph V of this order, no dispute between applicant with respect to the validity, enforceability, infringement or scope of any patent shall be subject to arbitration pursuant to this order.

B. Unless otherwise agreed to by the parties, arbitration shall be held at a location in the United States designated by the licensee applicant and in accordance with the Commercial Arbitration Rules of the American Arbitration Association. The award of the arbitrator shall be final and binding on both parties. The arbitrator shall, upon a proper showing, issue protective orders and/or receive evidence cam,era in the same manner as an administrative law judge of the Federal Trade Commission.

Xerox shall C. Witbin 10 days after the initiation of arbitration notify the Commission of the parties to the arbitration, tbe name of the dispute. Xerox shall notify thearbitrator, and the nature of the Commission of the dates of arbitration hearings and other arbitration proceedings, if any, as soon as possible. Copies of all papers in the nature of pleadings shall be served upon the Commission, and the Commission or its designee shall have the right to attend any arbitration proceeding. The Commission may, in its sole discretion, at any time before evidence has been submitted, suspend the provisions of this Paragrapb VIII respecting arbitration and itself resolve any or all disputes subject thereto. The Commission will not assert any claim that Xerox has violated this order with respect to the subject matter of the arbitration where Xerox has complied with the award of the arbitrator. D. Pending the completion of any neg-otiation, arbitration or Commission action respecting a dispute subject to this Paragraph VIII Xerox shall make Xerox and the applicant sball enter into a license, and disclosure of know-how pursuant to the terms of this order with respect to the matters not in dispute. Upon conclusion of any negotiation, arbitration or Commission action, the disputed license or know- hoUJ disclosure may provide for such adjustments as tbe parties agree to or as the arbitrator or Commission, as the case may be, deems appropriate.

:m2 FEDERAL TRADE COMMISSION DECISIONS Decision and Order R(i F.T.G It is further ardered That for the period ending six years after the date of issuance of this order Xerox shall make available (a) English language translations of all order patents issued after tbe date of issuanee of this order to Xerox, Rank Xerox and Fuji Xerox France, The Federal Republic of Germany, Japan, and The N eitherlands, and (b) copies of all English language corr' esponding patents at a reasonable charge not to exceed the cost of reproduction and, if the translation is made at the instance of the requesting person the cost of translation.

It is further ordered That for the period ending 10 years after the date of issuance of this order Xerox shall not, directly or indirectly, acquire from any person (including The Rank Organisation Limited and Fuji Photo Film Co., Ltd.) any exclusive rights, whether by lieense or otherwise to any patents or know-how for use in office copies products except those (a) resulting from the work of Xerox, Rank Xerox or Fuji Xerox employees Xerox, Rank Xerox or F'/.ji Xerox consultants, or research organizations doing sponsored research for Xerox, Rank Xerox or Fuji Xerox or (b) under which Xerox grants or causes to be granted to any person making written application a non-exclusive royalty-free, unrestricted license to make, have made, use or vend office copier products under such patent or know-how. Any exclusive rights acquired by Xerox in accordance with part (a) of this Paragraph X shall be on such terms as will permit Xerox to comply with the licensing provisions of Paragraph II of this order. This Paragraph X shall not apply to any acquisition or exclusive license of a foreign patent or of the right to use the know-how in a foreign country by Rank Xerox or Fu)i Xerox.

It is further ordered That Xerox shall not dispose or permit the disposition of any patents or rights thereunder so as to deprive it of the power to grant or cause to be granted the licenses required by this order.

XII It is further ordered That for the period ending 10 years after the date of issuance of this order Xerox shall not, directly or indirectly, acquire any interest in a person (including Tbe Rank Organisation :JG4 cision and Order Limited and Fuji Photo Film Co. Ltd.) engaged in tbe manufacture sale, lease or development of office copiers or toner, developer, paper or photosensitive elements used in office copiers or form a joint venture involving any such products with any such person (except The Rank Organisation Limited or Fuji Photo Film Co. Ltd. so long as either is a party to a joint venture with Xerox or Rank Xerox relating to office copier products). This paragraph shall not apply (1) to the acquisition by XEROX of an interest in or joint venture with any person in which at the time of the acquisition or joint venture it had a stock interest other than a PERSON in which Xerox had such an interest by reason of an investment in employee funds such as pension or retirement plans (Xerox shall promptly file with the Commission a list of the persons which it has a stock interest as of the date of issuance of this order and to which this exception is to apply. Said list shall be updated as part of the annual compliance reports required by Paragraph XIX of this order), or (2) to any acquisition by Rank Xerox or Fuji Xerox of a person not engaged in the manufacture, sale, lease or development of office copiers but who is engaged in the manufacture, sale, lease or development, solely outside of the United States of toner, developer paper or photosensitive elements used in office copiers or to the formation of a joint venture by Rank Xemx or Fuji Xerox involving any such products with any such PERSON, or (3) to a joint venture involving new capacity for the production of paper with a person other than one engaged in the manufacture, sale, lease or development of office copiers or toner, developer or photosensitive elements used in office copiers or (4) to the acquisition by Xerox of an interest in any PERSON the sole purpose of which is an investment in employee funds such as pension or retirement plans. Such acquisitions, however, shall not be deemed immune or exempt from tbe provisions of the antitrust laws (including the Federal Trade Commission Act) by reason of anything contained in this order.

XI1 It is further ordered That during the period ending 10 years after the date of issuance of this order Xerox shall not, directly or indirectly, make contracts in the United State" restricting employees working in its office copier products business from in tbe future working for any other person provided that Xerox may make contracts which prohibit the use or disclosure of trade secrets and confidential information as prohibited by Xerox present form of "Proprietary Information and Conflct of Interest Agreement" which has been submitted to theCommission. :184 FEDERAL TRADE COMMISSION DECISIONS Decision and Ordcr H6 F.

XIV It is furth.er- ordered That during the period commeneing on a date not lat,,, than nine months after the date of issuance of this order and ending five years after said commencement date Xerox shall not directly or indirectly, utilize in the United States any price plan for the sale or lease of an office copier which depends upon the customer purchasing or leasing one or more additional office copiers of a different model. Any minimum qualifying level for a pricing plan or price schedule respecting any office copier shall be based solely on volume, revenues, number of office cop'ieTs or the like of the same model.

It is furth.er ordered That:

A. During the period ending 10 years after the date of issuance of this order Xerox shall, in addition to instructing its employees in the United States not to comment on the quality of competitive toner or developer, place a notice in a location conspicuous to tbe key operator on eacb office copier sold or leased by it in the United States stating the following: "Xerox Corporation manufactures and distributes toner and developer for use in this machine. Other suppliers may also provide toner and developer for this machine. It may be necessary to adjust the machine to accommodate toner or developer which is provided by either Xerox or any other supplier. B. In the event that Xerox shall publisb reasonable specifications for the toner and developer used in a particular machine Xerox (1) may include the following additional statement in the aforementioned notice: "The toner and developer used in this machine must comply with specifications published by Xerox Corporation. " (2) shall promptly notify all suppliers of toner and developer, who request such notification, of any changes in such specifications, and shall promptly notify a supplier when his toner or developer does not comply with such specifications in a letter signed by an officer of Xerox and (3) may not require suppliers of toner or developer for Xerox' office copiers provide to Xerox customers a certification that the toner or developer supplied by them meets such specifications.

C. Xerox sball promptly notify all suppliers of toner and developer who request sucb notification, of changes in Xerox offce copiers which may affect the useability of the toner and developer in such office copzers.

D. Nothing herein contained shall prevent Xerox from advising a customer, in a letter signed by an officer of Xerox that a non-Xerox , XEROX CORP. 385 364 Dccision and Order toner or developer is not useabl" in a particular Xerox office copier provided that Xerox simultaneously advises the supplier of such toner or develop'" in a Jetter signed by an officer of Xerox that (1) in the opinion of Xerox the supplier s toner or developer is not useable in a particular office copier model, and (2) disputes regarding the use ability of the toner and developer are subject to arbitration pursuant to this order. Disputes regarding the use abilty of non-Xerox toner and developer or the reasonableness of Xerox specifications shall be subject to arbitration in accordance with Paragraph VIII (b) and (e) of this order.

E. Xerox may not, directly or indirectly, require in the United States that it be the sole supplier of toner or developer for leased or sold office copiers; however, it may impose such a requirement with respect to a new model during the six months from the date such model first becomes commercially available. For purposes of this Paragraph new model" includes collectively the basic office copier model and all subsequent models not embodying material variations in the xerographic processor thereof.

XVI It is further ordered That during the period ending 10 years after the date of issuance of this order, (1) Xerox shall not in the United States take orders or announce that it wil take orders for the sale or lease of an OFFICE COPIER more than three months prior to the time when it is reasonably expected to be commercially available (2) Xerox shall not promote any new office copier in any area of the United States more than three months prior to the time that Xerox reasonably expects such new office copier to be first commercially available that area except for national advertising which includes a statement that the model is available only in the areas where Xerox reasonably expects such model to be commercially available and (3) at the time Xerox announces that it wil take orders for the lease of an office copier in the United States, it shall also announce the sellng price of such office copier.

XVII It is further ordered That within 30 days after the date of issuanee of this order and annually thereafter until the expiration of all future patents, Xerox shall submit for publication in the Offcial Gazette of the United States Patent Office a notice (1) identifying by number, title date of issue and category of subject matter (to an extent acceptable to the Commission) all United States patents which it is empowered to ;iH6 FEDERAL TRADE COMMJSSION DECISIONS Decision and Order Hfi F. license together with alljiJreign patents based on the patent application from whicb each Unite,j States patent originates; (2) stating that Xerox sball grant jieenses under (a) its order patents to make, have made, use and vend ojji:ce copier pmducts under the terms of this order, and (b) patents required to be lieensed pursuant to the terms of Paragraph X of this order, if any; (3) stating that Xerox shall disclose know-how to a licensee of its United States or' der patents for use in connection with the manufacture of office copier products in the United States under the terms of this order; and (4) stating that a copy of this order and a list of patents licensed to Xerox which are subject to the provisions of Paragraph II and IV C(9) of this order, if any, are available from Xerox upon written request. Beginning 30 days following the date of issuance of this order, and until the expiration of all Xerox future patents, Xerox shall send a copy of thie order and of the current edition of such notice to each person wbo inquires as to the availability of a license for office copier pJ'od'ttcts or to whom Xerox has offered such a license at any time after .Jan. 1 , 1970.

XVIII It is further ordered That Xerox notify the Commission at least 30 days prior to any proposed change in the respondent Rank Xerox Fuji Xerox which may affect compliance obligations arising out of this order, such as dissolution, assignment or sale resulting in the emergence of a successor corporation, the creation or dissolution of subsidiaries or any other such change.

XIX It is jurther ordered That Xerox shall file with the Commission reports, in writing, setting forth in detail the manner and form in which it intends to comply, is complying, and has eomplied with this order. Said reports shall be filed 60 days and 180 days after the date of issuance of this order, and yearly thereafter on the anniversary date of the order during the period in which Xerox has obligations under this order, and shall contain such information and documents as are requested by the Bureau of Competition or the Commission relating to compliance with this order.

Commissioner Nye not participating- '!87 Order