871.542 Universal Oil Products Co./1

The Minister in Rumania (Harrison) to the Secretary of State

No. 40

Sir: I have the honor to submit the following report for the records of the Department with regard to recent action which the Legation has taken to protect the interests in Rumania of the Universal Oil Products Company of Chicago, Illinois, owners and licensors of the Dubbs petroleum cracking process, whose basic Rumanian patents appeared to be in imminent danger of arbitrary cancellation.

Difficulties in connection with these patents first came indirectly to the attention of this office in November, but the Legation was approached directly for assistance only on December 6, 1935, by Engineer Ion Edeleanu, local representative of the American concern. At that time Mr. Edeleanu called and presented a letter dated November 28, 1935, (copy enclosed),1 stating that petitions had been filed with the Rumanian Ministry of Industry and Commerce by certain local oil companies, which have apparently been infringing the Dubbs patents in their refineries here, requesting administrative invalidation of the four basic Dubbs patents on the ground that they had not been “exploited” in Rumania in accordance with certain provisions of the Rumanian patent law.

In interviews during the ensuing week with Mr. Edeleanu and attorney Sacha Roman, who, in collaboration with Mr. Micha Djuvara (now Vice President of the Chamber of Deputies) and with Mr. Gregore Iunian (former Minister of Justice), is the legal advisor of the Universal Oil Products Company, the following history of the difficulties was recounted.

The antagonists of the American concern from the outset have been a group of local oil companies controlled by the English “Phoenix Oil & Transport Ltd.”, including “Rumanian Consolidated Oilfields [Page 424]Ltd.”, “Unirea”, “Orion”, “Concordia”, “Redeventa”, and “Dacia-Romano Petroleum Syndicate Ltd.”

Negotiations had for many years been conducted with the controlling concern for the conclusion of a contract licensing the Dubbs process for its refineries, but without success. Meanwhile Universal Oil Products Company had reason to believe that, without concluding a licensing agreement, these concerns had actually installed and were operating cracking plants which infringed the Dubbs patents, and in the spring of 1935 applied to the Bucharest Tribunal for an “inquest in futurum” against the “Unirea” concern. This process, which is roughly equivalent to a grand jury investigation, involved the appointment by the court of an expert to determine by actual investigation whether or not the patents were being infringed by “Unirea”, particularly in its “Orion” refinery at Ploesti. In the case of an affirmative finding a base would have been established for a suit for damages against “Unirea”.

The Tribunal of first instance rejected the application of the Universal Oil Products Company, but the inquest was granted by the Court of Appeals and the investigation took place in August 1935. The expert appointed by the Court concluded that the Rumanian patents of the American firm were, in fact, being infringed by the “Unirea” company.

The next legal step would be the filing of a damage suit against the infringing concern for a sum approximating $450,000, representing unpaid royalties from 1929 to the present. Such action has not yet been taken.

In the meantime, as a method of reprisal for the action taken by the Universal Oil Products Company, the Rumanian Consolidated Oil Fields Ltd. had, on May 8, 1935, submitted petitions to the Ministry of Industry and Commerce requesting the annulment, respectively, of patents Nos. 5570, 11153, 16833 and 18062 on the ground that they had not been “exploited” within the term of four years from the date of issue of the patents as provided in Article 9, paragraph c) of the Rumanian Patent Law of 1906. The other companies associated with Phoenix Oil & Transport Ltd. strengthened the requests of the Roumanian Consolidated Oil Fields concern by submitting identical petitions to the Ministry, attempting thus to give the impression that a large sector of the Rumanian oil industry was affected. The infringing interests retained outstanding legal counsel and tried in every way possible to influence administrative action to the end that these patents, which they had been found to be infringing, should be annulled.

The legal provisions on which the action of the Phoenix group is premised read as follows:

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(Rumanian Patent Law of 1906.)

Article 9. The patent loses its value:1a

. . . . . . . . . . . . . .

c) When the owner of the patent has not exploited his patent in the country within a period of four years from the date of the patent, or when the exploitation thereof has been interrupted for a time of two years.…

… In the cases indicated in a), b), c) and d) of this article, the nullity is pronounced directly by the Ministry for Agriculture, Industry, Commerce, and Domains.

In all other cases the nullity can be pronounced only after a definitive legal judgment.

The Regulations for the application of the Patent Law, promulgated on April 21, 1906, do not elaborate upon the provisions of the above quoted article. No definite procedure has been established for the administrative invalidation of patents, and I have been informed that there have been no Rumanian precedents for the case in question.

In the present instance the Ministry of Industry and Commerce, upon receipt of the petitions presented by the Phoenix associates, called upon the Universal Oil Products Company to present evidence of the exploitation of the patents in question, in accordance with the law. Although the latter felt that the burden of proof should be placed upon the persons challenging the validity of the patents, since the law was presumably passed for the protection of the inventor, they nevertheless presented a memorandum to show that their legal obligations had been fulfilled, supported by correspondence, certificates, and contracts. Apparently this memorandum was shown to the challengers, who thereupon submitted one of their own. Universal Oil Products Company were in turn called upon to furnish further information, and there has been a continuing submission of memoranda from both sides, culminating, on the part of the patentees, with the presentation of a long, detailed summary on December 11, 1935, covering all phases of the question, and supported by 31 documents and 23 photographs, including such evidence as correspondence with and declarations of licensee concerns, copies of contracts concluded, local publications, and photographs of operating plants. In this summary they declare that the four Dubbs patents were all “exploited” within the legal period, and show, in short, the following:

1) Patent No. 5570 was obtained on September 24, 1920, so that the term for exploitation extended to September 24, 1924. Licensing negotiations started in 1923, the first contract was signed on August 20, 1925, and the first installation was completed in November, 1926. Since that time the process has been in continual use in several Rumanian refineries.

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This patent expired on September 24, 1935, 15 years after the date of issue.

2) Patent No. 11153 was issued on January 5, 1925, to be exploited before January 5, 1929. In this case, not only were negotiations started in time, but the necessary installations were actually in operation prior to the expiration of the 4 year limit, and have been since.

3) Patent No. 16833 was issued on May 3, 1929, and, like No. 11153, was in operation before the 4 year period terminated on May 3, 1933.

4) Patent No. 18062 was obtained on February 11, 1930, to be exploited before February 11, 1934. In this case, negotiations were undertaken in due time and the plans and specifications for the first Rumanian installation were completed prior to the expiration of the legal limit. The new refinery using this process started production in the summer of 1935.

The attorneys for the American concern point out that the principal question raised concerns the interpretation given to the term “exploitation” (Rumanian:—“explotare”). They allege that there is, unfortunately, no precedent for the present case in this country, and that there would be no Court decisions, anyway, since, contrary to general practice in Europe, the Rumanian law provides for administrative rather than judicial invalidation of a patent for failure to “exploit” the invention within the legal term. However, in view of court decisions in similar cases in other European countries having comparable legislation, the representatives of Universal Oil Products Company are convinced that their position as regards the exploitation of an expensive and complicated process is juridically sound. They assert that they would be more than willing to have the whole question settled by the Courts, and that they have in fact attempted to do so. Last summer application was made to the local Tribunal for the appointment of a technical expert to determine “whether the inventions are being exploited in the country, since when and with what interruptions of at least two years.” On September 24, 1935, a negative decision was returned, the Court holding that it was not competent in the matter, since the law specifically vested responsibility for such investigations in the Ministry of Industry and Commerce.

Nevertheless, in order to keep the dispute out in the open, an appeal from the decision was filed by the Universal Company representatives, which is now pending. At the same time a further step was taken to keep the question in litigation; an application was made to the Civil Court for a second “inquest in futurum”, through which the patentees hoped to have recorded, under oath, all evidence concerning the patents and their exploitation. This application is likewise pending.

During all the time since the filing of the invalidation requests last May, the Universal Oil Products Company has had no official information from the Ministry of Industry and Commerce as to the procedure to be followed, or the action contemplated. As stated above, [Page 427]they have merely been permitted to read the memoranda submitted by the Phoenix associates, and invited, orally, or by letter, to reply thereto. From private sources of information, however, they have learned of all movements in the case, and a number of factors have kept them in constant fear that unwarranted, arbitrary action might be taken at any moment, which would leave them facing the disastrous “fait accompli” of the cancellation of their patents.

Messrs. Edeleanu and Roman claimed, for example, that the memoranda of their opponents were filled with irrelevant, impertinent trivialities, intended to confuse the issue. The chief attorney selected by the Phoenix group was Mr. Aurel Bentoiu, a prominent and influential member of the Liberal Party who was recently, during the course of the litigation, appointed Undersecretary of State at the Ministry of Justice. It was asserted that Mr. Bentoiu appeared in Court on September 24, 1935, the day following the publication of the decree of appointment, to plead as a representative of the Phoenix interests against the Universal Company’s application for the appointment of a technical expert. While technically correct, since he had not yet taken the oath of office, his appearance obviously tended to exercise a weighty influence. Shortly after Mr. Bentoiu’s assumption of office, the complete dossiers of this case were, at his request, taken from the hands of the Patent Office and turned over to the Legal Division of the Ministry; the latter, while located in the Ministry of Industry and Commerce, is responsible to the office of the Undersecretary of State at the Ministry of Justice.

Another factor in the case has been the influence apparently brought to bear upon Mr. M. G. Gheorghiu, an ambitious younger member of the Liberal Party now Secretary General of the Ministry of Industry and Commerce, and the resulting interest which he has shown in the cancellation of the patents. The representatives of the Universal Company claimed to have been reliably informed that the Secretary General, and the Minister as well, had on occasion made statements to subordinate officers of the Ministry of Industry and Commerce to the effect that it was desired to “find a way to cancel these patents”.

Neither Mr. Edeleanu nor Mr. Roman implied that the Minister of Industry and Commerce was personally interested in annulling the patents, but both feared that he might be led to lend himself to the schemes of their opponents on the basis of interested advice. They believed that such an eventuality could be guarded against if the Minister, Dr. I. Costinescu, were aware that the Legation had an interest in the matter, and asked my assistance in that sense.

Under the circumstances it did appear that Universal Oil Products Company was in real danger of receiving arbitrary and unfair treatment, the consequences of which would seriously affect this American [Page 428]concern. Accordingly, I assured them of the Legation’s interest, and took advantage of the first opportunity to mention the case informally in conversation with Dr. Costinescu, on the occasion of a dinner at which we were both guests on Wednesday, December 18. The Minister stated that he knew of the dispute, which was being handled by Mr. Gheorghiu, the Secretary General of his department. “It is a matter”, he said, “for the lawyers and the Tribunal, and the American interests have an excellent legal representative in Mr. Djuvara.”

There was no opportunity to discuss the matter further at that time, although it was not clear from the Minister’s remarks that there was no possibility of invalidation by administrative action, or what the procedure would be to throw the case into the courts for decision.

Mr. Edeleanu was advised of this conversation on the next day, and promptly called at the Legation to express his appreciation for the action which had been taken pursuant to his request.

However, on the morning of December 20, 1935, Messrs. Edeleanu and Roman called at the Legation in a state of great excitement and agitation to say that they had learned that attorney Theodorescu of the Legal Division of the Ministry of Industry and Commerce had just been ordered by Secretary General Gheorghiu to prepare a report (referat) for the cancellation of all four contested patents. Dr. Costinescu was scheduled to leave Rumania on the following day for an extended vacation abroad; it appeared that the interested parties had planned to take advantage of this event to have the Decree of Cancellation signed by the incoming ad interim Minister (Dr. V. Sassu, Minister of Agriculture and Domains) on the advice of the Legal Division, then signed by the King and promulgated before the Christmas holidays.

In such circumstances the most expeditious and effective action possible seemed to be the sending of a personal note to Dr. Costinescu, and this was done. I ventured therein, with reference to the Minister’s kind reception of my expression of interest in the Dubbs patent case, to say that I had hoped to have an opportunity to speak with him further regarding the case. I asked that he be good enough to request Mr. Gheorghiu, should there be any possibility of the matter coming to a decision during the Minister’s absence, to advise me as to when it would be convenient for him to receive the Counsellor of the Legation,2 to the end that such information as I had received might be put before him.

My note (copy enclosed)3 was delivered to the Minister at noon of the same day, and has apparently had the desired effect of blocking any immediate action to annul the patents.

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As may be seen from the enclosed copy of a communication from Universal Oil Products Company,3a Dr. Costinescu told attorney Djuvara that afternoon, in effect, that he did not intend to become entangled in the dispute and that he would defer the case to the Courts. In addition, I have been informed by attorney Roman that the Secretary General of the Ministry countermanded his order to the Legal Division on the following morning, expressing considerable annoyance, but saying that nothing would be done during the Minister’s absence.

Mr. Edeleanu tells me that his principal, Mr. H. J. Halle of the Chicago office, is prepared to take lip this matter with the Department of State should there appear to be further danger of these patents being summarily canceled, and I have therefore prepared this despatch in some detail in order that the Department may be fully informed of the action I have already taken.

Respectfully yours,

Leland Harrison
  1. Not printed.
  2. Omissions indicated in original despatch.
  3. George Wadsworth.
  4. Not printed.
  5. Not printed.