A-37622, AUGUST 4, 1931, 11 COMP. GEN. 44

A-37622: Aug 4, 1931

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PATENTS - INFRINGEMENT - LICENSES THERE IS NO AUTHORITY IN HEADS OF DEPARTMENTS. THE OWNER'S ONLY REMEDY FOR SUCH INFRINGEMENT IS BY SUIT IN THE COURT OF CLAIMS IN ACCORDANCE WITH THE ACT OF JULY 1. ANY ADJUSTMENT TO AVOID SUIT BY THE OWNER OF A PATENTED INVENTION ALLEGED TO HAVE BEEN USED IN THE CONSTRUCTION OF SAID LIFEBOATS IS FOR THE CONSIDERATION OF THE CONTRACTOR. AS FOLLOWS: AN ADVANCE DECISION IS REQUESTED AS TO WHETHER ARMY TRANSPORTATION FUNDS ARE AVAILABLE FOR THE PURCHASE FROM THE WELIN DAVIT AND BOAT CORPORATION. ALL OF THE FOREGOING CONTRACTS WERE AWARDED TO THE C. WHICH COMPANY WAS THE LOWEST RESPONSIBLE BIDDER. INVESTIGATIONS WERE CONDUCTED BY THE OFFICES OF THE QUARTERMASTER GENERAL.

A-37622, AUGUST 4, 1931, 11 COMP. GEN. 44

PATENTS - INFRINGEMENT - LICENSES THERE IS NO AUTHORITY IN HEADS OF DEPARTMENTS, AFTER INFRINGEMENT HAS TAKEN PLACE, TO ADJUST BY CONTRACT A CLAIM FOR THE INFRINGEMENT OF PATENT RIGHTS BY OR FOR THE GOVERNMENT WITHOUT THE OWNER'S LICENSE OR RIGHT TO USE. THE OWNER'S ONLY REMEDY FOR SUCH INFRINGEMENT IS BY SUIT IN THE COURT OF CLAIMS IN ACCORDANCE WITH THE ACT OF JULY 1, 1918, 40 STAT. 705. WHERE A CONTRACTOR, WHO HAS BEEN AWARDED A CONTRACT FOR THE CONSTRUCTION OF LIFEBOATS, OBLIGATED HIMSELF TO PROTECT THE GOVERNMENT AGAINST THE USE OF ANY PATENTED INVENTION, ARTICLE, OR APPLIANCE FURNISHED OR USED IN THE PERFORMANCE OF THE CONTRACT, ANY ADJUSTMENT TO AVOID SUIT BY THE OWNER OF A PATENTED INVENTION ALLEGED TO HAVE BEEN USED IN THE CONSTRUCTION OF SAID LIFEBOATS IS FOR THE CONSIDERATION OF THE CONTRACTOR.

COMPTROLLER GENERAL MCCARL TO THE SECRETARY OF WAR, AUGUST 4, 1931:

THERE HAS BEEN RECEIVED YOUR LETTER OF JULY 11, 1931, AS FOLLOWS:

AN ADVANCE DECISION IS REQUESTED AS TO WHETHER ARMY TRANSPORTATION FUNDS ARE AVAILABLE FOR THE PURCHASE FROM THE WELIN DAVIT AND BOAT CORPORATION, BROOKLYN, NEW YORK, OF A LICENSE UNDER ITS PATENT NO. 1140469 WHICH APPEARS TO COVER COMPLETELY CERTAIN LIFEBOATS PURCHASED FROM THE C. M. LANE LIFE BOAT COMPANY, INC., BROOKLYN, NEW YORK.

IT APPEARS THAT DURING THE FISCAL YEARS 1929 AND 1930 THE QUARTERMASTER CORPS PURCHASED 29 LIFEBOATS UNDER THE FOLLOWING CONTRACTS: W626 QM 6894, DATED JULY 20, 1929 -- 17 LIFEBOATS AT $2,200.00 PER BOAT. W626 QM 8635, DATED JUNE 7, 1930 --- 4 LIFEBOATS AT 1,997.50 PER BOAT. W626 QM 8781, DATED JUNE 27, 1930 -- 4 LIFEBOATS AT 1,606.25 PER BOAT. W626 QM 8929, DATED JUNE 28, 1930 -- 4 LIFEBOATS AT 1,997.50 PER BOAT.

ALL OF THE FOREGOING CONTRACTS WERE AWARDED TO THE C. M. LANE LIFE BOAT COMPANY, INC., BROOKLYN, NEW YORK, WHICH COMPANY WAS THE LOWEST RESPONSIBLE BIDDER. THE WELIN DAVIT AND BOAT CORPORATION, OF BROOKLYN, NEW YORK, FILED SUIT IN THE COURT OF CLAIMS AGAINST THE UNITED STATES ALLEGING THAT THE LIFEBOATS FURNISHED INFRINGED ITS PATENT NO. 1140469. INVESTIGATIONS WERE CONDUCTED BY THE OFFICES OF THE QUARTERMASTER GENERAL, THE JUDGE ADVOCATE GENERAL, AND THE ATTORNEY GENERAL WITH REFERENCE TO THE CLAIM. AS A RESULT OF THESE INVESTIGATIONS, THE CONCLUSION WAS REACHED THAT INFRINGEMENT EXISTED AND THAT THERE IS LITTLE PROBABILITY THAT THE GOVERNMENT CAN PREVAIL IN THE SUIT FOR INFRINGEMENT. THE CIRCUMSTANCES WHICH LEAD TO THIS CONCLUSION INCLUDE THE FACTS THAT THE PATENT INVOLVED HAD BEEN HELD VALID BY A DISTRICT COURT, THAT A CAREFUL SEARCH FAILED TO DISCLOSE ANY NEW REFERENCES WHICH WOULD BE SUFFICIENT TO WARRANT THE COURT OF CLAIMS IN ARRIVING AT A CONCLUSION AS TO VALIDITY OF THE PATENT WHICH WOULD BE DIFFERENT FROM THAT OF THE DISTRICT COURT, AND THAT THE LIFEBOATS FURNISHED UNDER THE CONTRACT WERE PRACTICALLY IDENTICAL WITH THE PRODUCT AND PATENT OF THE CLAIMANT EVEN TO DETAIL.

RECENTLY THE WELIN DAVIT AND BOAT CORPORATION HAS INFORMALLY STATED TO THE DEPARTMENT OF JUSTICE THAT IT WOULD BE AGREEABLE TO THE SETTLEMENT OF THE CASE BY THE PURCHASE OF A LICENSE UNDER THE PATENT INVOLVED, THE CLAIMANT SUGGESTING THAT SHOULD THE GOVERNMENT PURCHASE A LICENSE UNDER THE PATENT, THE CLAIMANT WOULD BE WILLING TO GIVE A RELEASE FOR PAST INFRINGEMENT. THE LOWEST FIGURE WHICH THE CLAIMANT STATES HE WOULD ACCEPT UNDER THESE CIRCUMSTANCES IS $7,500.00. IT HAS BEEN ESTIMATED THAT SHOULD THE CLAIMANT PREVAIL IN THE COURT OF CLAIMS, THE DAMAGES AWARDED BY THE COURT WOULD BE FROM $12,000.00 TO $15,000.00 TO WHICH WOULD BE ADDED THE EXPENSE TO THE GOVERNMENT OF THE TRIAL OF THE CASE. THE PATENT HAS APPROXIMATELY ONE YEAR TO RUN BEFORE ITS EXPIRATION AND IT IS PROBABLE THAT ADDITIONAL BOATS WILL BE NEEDED.

IN VIEW OF ALL THE CIRCUMSTANCES, IT WOULD APPEAR TO BE IN THE INTEREST OF THE GOVERNMENT TO PURCHASE A LICENSE UNDER THE PATENT AND TO TAKE A RELEASE FOR PAST INFRINGEMENT.

NONE OF THE APPROPRIATIONS AVAILABLE TO THE QUARTERMASTER CORPS EXPRESSLY AUTHORIZE THE PURCHASE OF LICENSES UNDER PATENT. IT HAS BEEN SUGGESTED THAT ARMY TRANSPORTATION FUNDS MIGHT BE MADE AVAILABLE FOR THE PURCHASE OF A LICENSE ON THE THEORY THAT THE AMOUNT OF THE PURCHASE OF THE LICENSE APPROXIMATES THE ADDITIONAL COST OF THE BOATS BY ACCEPTING THE LOWEST BID. THERE ARE SUFFICIENT UNOBLIGATED FUNDS IN THE ARMY TRANSPORTATION APPROPRIATION TO COVER THE AMOUNT STATED.

THE MATTER IS SUBMITTED TO YOU FOR YOUR CONSIDERATION.

AN EXAMINATION OF THE FOUR CONTRACTS IN QUESTION DISCLOSES THAT IN EACH OF THE SAID CONTRACTS PROVISION WAS MADE THAT THE UNITED STATES SHALL BE PROTECTED BY THE CONTRACTOR AGAINST THE USE OF ANY PATENTED INVENTION, ARTICLE, OR APPLIANCE FURNISHED OR USED IN THE PERFORMANCE OF THE CONTRACT.

THE ACT OF JUNE 25, 1910, 36 STAT. 851, AS AMENDED BY THE ACT OF JULY 1, 1918, 40 STAT. 705, PROVIDES AS FOLLOWS:

THAT WHENEVER AN INVENTION DESCRIBED IN AND COVERED BY A PATENT OF THE UNITED STATES SHALL HEREAFTER BE USED OR MANUFACTURED BY OR FOR THE UNITED STATES WITHOUT LICENSE OF THE OWNER THEREOF OR LAWFUL RIGHT TO USE OR MANUFACTURE THE SAME, SUCH OWNER'S REMEDY SHALL BE BY SUIT AGAINST THE UNITED STATES IN THE COURT OF CLAIMS FOR THE RECOVERY OF HIS REASONABLE AND ENTIRE COMPENSATION FOR SUCH USE AND MANUFACTURE: PROVIDED, HOWEVER, THAT SAID COURT OF CLAIMS SHALL NOT ENTERTAIN A SUIT OR AWARD COMPENSATION UNDER THE PROVISIONS OF THIS ACT WHERE THE CLAIM FOR COMPENSATION IS BASED ON THE USE OR MANUFACTURE BY OR FOR THE UNITED STATES OR ANY ARTICLE HERETOFORE OWNED, LEASED, USED BY, OR IN THE POSSESSION OF THE UNITED STATES: PROVIDED, FURTHER, THAT IN ANY SUCH SUIT THE UNITED STATES MAY AVAIL ITSELF OF ANY AND ALL DEFENSES, GENERAL OR SPECIAL, THAT MIGHT BE PLEADED BY A DEFENDANT IN AN ACTION FOR INFRINGEMENT, AS SET FORTH IN TITLE SIXTY OF THE REVISED STATUTES, OR OTHERWISE: AND PROVIDED FURTHER, THAT THE BENEFITS OF THIS ACT SHALL NOT INURE TO ANY PATENTEE WHO, WHEN HE MAKES SUCH CLAIM IS IN THE EMPLOYMENT OR SERVICE OF THE GOVERNMENT OF THE UNITED STATES, OR THE ASSIGNEE OF ANY SUCH PATENTEE; NOR SHALL THIS ACT APPLY TO ANY DEVICE DISCOVERED OR INVENTED BY SUCH EMPLOYEE DURING THE TIME OF HIS EMPLOYMENT OR SERVICE.

THE MATTER HERE PRESENTED DOES NOT INVOLVE THE INCURRING OF AN OBLIGATION UNDER AN APPROPRIATION FOR THE TRANSPORTATION OF THE ARMY AND ITS SUPPLIES REQUIRING, AS INCIDENTAL THERETO, THE USE OF A PATENT, NOR A CLAIM FOR ROYALTIES FOR THE USE OF THE CLAIMANT'S PATENT UNDER A CONTRACT EXPRESS OR IMPLIED (SEE 5 COMP. GEN. 713), BUT THE SETTLEMENT OF A CLAIM FOR THE INFRINGEMENT OF PATENT RIGHTS BY OR FOR THE GOVERNMENT WITHOUT THE OWNER'S LICENSE OR RIGHT TO USE, AFTER THE INFRINGEMENT HAS TAKEN PLACE. THIS IS NOT A MATTER WHICH THE DEPARTMENT IS AUTHORIZED TO ADJUST BY CONTRACT. FOR ANY RECOVERY BASED SOLELY UPON INFRINGEMENT BY THE UNITED STATES THE OWNER, UNDER THE PROVISIONS OF THE ACT OF JULY 1, 1918, SUPRA, IS RESTRICTED TO A SUIT IN THE COURT OF CLAIMS AS THE ONLY REMEDY. ANY ADJUSTMENT TO AVOID SUCH A SUIT WOULD APPEAR TO BE FOR THE CONSIDERATION OF THE CONTRACTOR WHO HAS OBLIGATED ITSELF TO PROTECT THE GOVERNMENT AGAINST SUCH CLAIMS.