on the bill, of providing for prompt and final termination settlements so that the economy of the country can be converted expeditiously from war production to production for peacetime purposes.

The discussion in this opinion has been confined to the issue of the legal authority of the contracting agencies and the Director of Contract Settlement to provide for the settlement of all claims arising under terminated war contracts. I shall not now comment on the procedures that should be followed or the safeguards that should be adopted in settling claims that arise under the completed portions of war contracts or on the administrative arrangements that might properly be made between the Office of Contract Settlement, the contracting agencies, and the Comptroller General of the United States. These are matters that have been committed by Congress, within the framework of the act, to the discretion of the Director of Contract Settlement and, subject to his regulations, to that of the contracting agencies.

Respectfully yours,

FRANCIS BIDDLE.

APPLICATION OF ANTITRUST LAWS TO AIR CARRIERS Agreements between United States air carriers, or between United States air carriers and foreign air carriers, that are designed to control or to prevent competition in air transportation between the United States and foreign countries, are subject to the antitrust laws unless they fall within exceptions expressly provided by Congress.

Agreements of foreign air carriers, in which no United States air carrier is involved, are subject to the antitrust laws if they affect the foreign commerce of the United States.

The exemption of certain agreements from application of the antitrust laws, as provided in section 414 of the Civil Aeronautics Act, must be secured in the precise manner and method prescribed by Congress.

The SECRETARY OF STATE.

OCTOBER 31, 1944.

MY DEAR MR. SECRETARY: In your letter dated October 30, 1944, you requested my opinion on the following question: "Would the United States anti-trust laws apply to conference agreements (with respect to rates, schedules, services,

etc.) entered into between United States air carriers, and between United States air carriers and foreign air carriers, and designed to control or prevent competition in air transportation between the United States and foreign countries in a manner which would be prohibited by the anti-trust laws were purely domestic commerce involved?"

The Sherman Act by its terms applies to foreign as well as to domestic commerce. See sections 1 and 2 of the act of July 2, 1890 (26 Stat. 209, 15 U. S. C., secs. 1 and 2). It is well established that transportation is trade or commerce within the meaning of the statute. United States v. TransMissouri Freight Association, 166 U. S. 290; United States v. Joint Traffic Association, 171 U. S. 505; Northern Securities Co. v. United States, 193 U. S. 197. The Sherman Act applies to transportation to or from this country even though the transportation is carried on, in part, outside the jurisdiction of the United States by companies operating within, and pursuant to the laws of, a foreign country. United States v. Pacific & Arctic Railway Co., 228 U. S. 87.

It has been held that an agreement between foreign steamship lines and an American steamship line that restricted competition in passenger traffic between the United States and Europe is subject to the Sherman Act.. United States v. Hamburg-Amerikanische Packet-Fahrt-Actien-Gesellschaft, 200 Fed. 806 (C. C. S. D. N. Y. 1911); 216 Fed. 971 (Dist. Ct. S. D. N. Y. 1914) (later dismissed without prejudice by the Supreme Court on the ground that the European war rendered the controversy moot, 239 U. S. 466). In that case the court said (200 Fed. at p. 807):

"The prohibitions of the anti-trust statute apply broadly to contracts in restraint of trade or commerce with foreign nations. This contract directly and materially affects such commerce and if it unlawfully restrains it, it comes within the statute. We see nothing to warrant the contention that the act should be narrowly interpreted as prohibiting only contracts which are to be performed wholly within the territorial jurisdiction of the United States nor-if it were for us to consider any reason for concluding that a broader construction would lead to international complications.

"As the contract directly and materially affects the foreign commerce of this country by being put into effect here, it is

immaterial where it was entered into or by what vessels it was to be, or has been, performed. Citizens of foreign countries are not free to restrain or monopolize the foreign commerce of this country by entering into combinations abroad nor by employing foreign vessels to effect their purpose. Such combinations are to be tested by the same standard as similar combinations entered into here by citizens of this country. The vital question in all cases is the same: Is the combination to so operate in this country as to directly and materially affect our foreign commerce?"

Similarly in Thomsen v. Cayser, 243 U. S. 66, the Supreme Court held that a combination consisting solely of foreign steamship lines operating between the United States and foreign countries was illegal under the Sherman Act, saying, at p. 85, "The defendants were common carriers and it was their duty to compete, not combine *" The court dismissed as irrelevant the fact that the combination had been formed in a foreign country.

* *

The Shipping Act of 1916, 39 Stat. 728, 46 U. S. C., 801, provides a procedure whereby steamship companies may obtain exemption from the antitrust laws for agreements limiting competition. In the absence, however, of strict compliance with the procedure prescribed in this act, agreements that limit competition between steamship lines are subject to the provisions of the Sherman Act.

The rules of law laid down in the decisions that have been cited are applicable to the question asked by your letter. Except to the extent that Congress has specifically provided exemptions, agreements entered into between United States air carriers, or between United States air carriers and foreign air carriers, that are designed to control or to prevent competition in air transportation between the United States and foreign countries, are subject to the provisions of the antitrust laws to the same degree as are similar agreements between domestic air carriers. Furthermore, agreements of foreign air carriers, in which no United States air carrier is involved, are subject to the antitrust laws if those agreements affect the foreign commerce of the United States.

Section 412 of the Civil Aeronautics Act, 52 Stat. 973, 49 U. S. C. 492, provides that certain agreements between air carriers may be approved by the Civil Aeronautics Board

subject to the standards prescribed by Congress in the act. Section 414 of the act provides that if the agreements are so approved by the Board, they are exempted from the application of the antitrust laws. This exemption, however, must be secured in the precise manner and method prescribed by Congress. United States v. Socony-Vacuum Oil Company, 310 U. S. 150, 226. I call your attention to the fact that the exemption provided by the Civil Aeronautics Act is limited to agreements to which a United States air carrier is a party. No procedure is provided for giving immunity to agreements made by foreign air carriers among themselves.

Sincerely yours,

FRANCIS BIDDLE.

WAIVER OF ROYALTIES UNDER PATENTS BY ALIEN

PROPERTY CUSTODIAN

The Alien Property Custodian is authorized to relieve licensees and assignees of the obligation to pay royalties, including accrued royalties, under patents where another agency of the United States is required by contract to reimburse the licensees or assignees for such royalty payments, and his authority to do so is not conditioned upon a surrender by the licensees or assignees of their exclusive rights.

THE ALIEN PROPERTY CUSTODIAN.

NOVEMBER 28, 1944.

MY DEAR MR. MARKHAM: In a letter to me dated September 26, 1944, you ask whether you have the authority to enter into agreements whereby, without depriving licensees under vested patents of their exclusive rights, you relieve them of the obligation to pay royalties, including those accrued but unpaid, under patents that are used in manufacturing products for the United States. You also pointed out that in certain instances you have vested the right to receive royalties on patents assigned to American citizens by foreign nationals and you ask whether in those instances you have authority to waive past and future royalties that are payable on those patents with respect to articles manufactured for the use of the United States.

In situations that you describe the licensee or assignee is manufacturing products under contracts with the War and Navy Departments that provide that the United States shall

reimburse the contractor for the amounts paid as royalties on the patents used in the manufacture. You state that these payments require additional bookkeeping and involve other expenses incidental to the contractor's payment to the Custodian and his reimbursement by the United States. You also state that the War and Navy Departments "have felt it necessary in a number of such instances to institute royalty adjustment proceedings under Public Law 768 [approved October 31, 1942, c. 634, 56 Stat. 1013] to reduce the royalties payable by licensees under vested patents."

When these situations are analyzed, it appears that the licensees and assignees have, on the one hand, a contractual obligation to pay royalties to the United States, and, on the other, a contractual right to be reimbursed by the United States for these payments. Thus, the United States is in effect obligated to pay royalties to itself. This aspect of the matter can be illustrated by reference to the procedure for royalty adjustment mentioned in your letter. If the War Department, acting pursuant to the provisions of Public Law 768, succeeds in reducing the royalty payments, the United States will be required to pay less to the contractor and will receive from him a correspondingly lower amount by way of royalties.

It is my opinion that you are authorized to relieve licensees and assignees of the obligation to pay royalties, including accrued royalties, where another agency of the United States is required by contract to reimburse the licensees or assignees for those royalty payments, and that your authority to do so is not conditioned upon a surrender by the licensees or assignees of their exclusive rights. I reach this conclusion for the following reasons:

Section 5 (b) of the Trading with the Enemy Act (40 Stat. 411), as amended by the First War Powers Act, 1941 (55 Stat. 838), provides that vested property or interests "shall be held, used, administered, liquidated, sold, or otherwise dealt with in the interest of and for the benefit of the United States."

The vested interests that we are now considering consist in the right to receive royalties from licensees and assignees. The statute authorizes the Custodian to use and to administer this right "in the interest of and for the benefit of the United