A-81899, NOVEMBER 27, 1936, 16 COMP. GEN. 536

A-81899: Nov 27, 1936

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IN CONNECTION WITH WHICH NO PATENT INFRINGEMENT BONDS WERE FURNISHED. IS NOT SUFFICIENT TO JUSTIFY THE UNITED STATES IN REFUSING TO MAKE PAYMENTS TO THE RESPECTIVE CONTRACTORS IN ACCORDANCE WITH THE CONTRACT TERMS. A COPY OF THE ASSISTANT STATE PROCUREMENT OFFICER'S LETTER IS TRANSMITTED HEREWITH. IT WILL BE NOTED THAT THE CONTRACTS IN QUESTION DO NOT CONTAIN THE USUAL PATENT INDEMNITY STIPULATIONS. THAT THE CONTRACTORS HAVE AGREED TO FURNISH SUPPLEMENTAL AGREEMENTS TO PROVIDE FOR THE INCLUSION OF SUCH STIPULATIONS. WHICH HOWEVER HAVE NOT YET BEEN EXECUTED. THAT THE CONTRACTORS HAVE INFORMED THE STATE PROCUREMENT OFFICER THAT THEY HAVE BEEN UNABLE TO OBTAIN SPECIAL PATENT INFRINGEMENT BONDS.

A-81899, NOVEMBER 27, 1936, 16 COMP. GEN. 536

PATENTS - INFRINGEMENT BY GOVERNMENT CONTRACTORS - CONTRACT PAYMENTS THEREAFTER MERE NOTICE BY A PATENTEE OF ALLEGED PATENT INFRINGEMENTS IN THE PERFORMANCE OF GOVERNMENT CONTRACTS CONTAINING NO PATENT INDEMNITY STIPULATIONS, AND IN CONNECTION WITH WHICH NO PATENT INFRINGEMENT BONDS WERE FURNISHED, IS NOT SUFFICIENT TO JUSTIFY THE UNITED STATES IN REFUSING TO MAKE PAYMENTS TO THE RESPECTIVE CONTRACTORS IN ACCORDANCE WITH THE CONTRACT TERMS.

ACTING COMPTROLLER GENERAL ELLIOTT TO THE SECRETARY OF THE TREASURY, NOVEMBER 27, 1936:

THERE HAS BEEN RECEIVED YOUR LETTER OF NOVEMBER 21, 1936, AS FOLLOWS:

THE ASSISTANT STATE PROCUREMENT OFFICER AT SAN FRANCISCO, CALIFORNIA, HAS REPORTED TO THE PROCUREMENT DIVISION OF THIS DEPARTMENT, THE RECEIPT OF PATENT INFRINGEMENT NOTICES IN CONNECTION WITH THE PERFORMANCE BY RAGGIO CONCRETE PIPE COMPANY AND THE SAN JOSE CONCRETE PIPE COMPANY, BOTH OF SAN FRANCISCO, CALIFORNIA, OF CONTRACTS WITH THE GOVERNMENT. A COPY OF THE ASSISTANT STATE PROCUREMENT OFFICER'S LETTER IS TRANSMITTED HEREWITH, TOGETHER WITH THE NOTICE FROM THE PATENTEE, TUERCK-MACKENZIE COMPANY, DATED OCTOBER 15, 1936, AND COPY OF PATENT NO. 1,523,937.

IT WILL BE NOTED THAT THE CONTRACTS IN QUESTION DO NOT CONTAIN THE USUAL PATENT INDEMNITY STIPULATIONS; THAT THE CONTRACTORS HAVE AGREED TO FURNISH SUPPLEMENTAL AGREEMENTS TO PROVIDE FOR THE INCLUSION OF SUCH STIPULATIONS, WHICH HOWEVER HAVE NOT YET BEEN EXECUTED; AND THAT THE CONTRACTORS HAVE INFORMED THE STATE PROCUREMENT OFFICER THAT THEY HAVE BEEN UNABLE TO OBTAIN SPECIAL PATENT INFRINGEMENT BONDS.

IT WILL BE FURTHER NOTED THAT PAYMENTS DUE THE CONTRACTORS, AS INDICATED IN THE LETTER OF THE ASSISTANT STATE PROCUREMENT OFFICER, ARE BEING WITHHELD, AND THE ASSISTANT STATE PROCUREMENT OFFICER DESIRES ADVICE PRIOR TO THE EXPIRATION OF THE DISCOUNT PERIODS AS SHOWN IN HIS LETTER, AS TO THE PROCEDURE WHICH HE SHOULD FOLLOW IN CONNECTION WITH PAYMENTS NOW DUE UNDER THREE OF THE CONTRACTS, AND PAYMENTS WHICH WILL BECOME DUE UNDER CONTRACT NO. ER-TPS-03-13706.

IN VIEW OF THE FACT THAT SUBSTANTIAL DISCOUNTS ARE INVOLVED AND THE FACT THAT REFERENCE OF THE COMPLETED CONTRACTS TO YOUR OFFICE FOR DIRECT SETTLEMENT WOULD INVOLVE DELAY AND POSSIBLY RESULT IN LOSS OF DISCOUNTS IF IT SHOULD BE DECIDED THAT PAYMENTS SHOULD NOT BE WITHHELD, YOUR DECISION IS REQUESTED AS TO WHETHER UNDER THE CIRCUMSTANCES PAYMENTS MAY PROPERLY BE MADE UNDER THESE CONTRACTS.

INFORMAL INQUIRY HAS DISCLOSED THE FACT THAT THE CONTRACTS REFERRED TO BY THE ASSISTANT STATE PROCUREMENT OFFICER (EXCEPT UNNUMBERED CONTRACT IN AMOUNT $62.40, UPON WHICH DISCOUNT TIME EXPIRES NOVEMBER 30), ARE ON FILE IN YOUR OFFICE.

IT IS REQUESTED THAT THE ATTACHED NOTICE FROM TUERCK-MACKENZIE COMPANY AND THE COPY OF PATENT BE RETURNED TO THIS DEPARTMENT WITH YOUR REPLY.

THERE HAVE BEEN EXAMINED CONTRACTS ER-TPS-03-13447 AND ER-TPS-03 13574, DATED SEPTEMBER 19 AND 29, RESPECTIVELY, WITH THE SAN JOSE CONCRETE PIPE CO., AND ER-TPS-03-13706, DATED OCTOBER 6, 1936, WITH THE RAGGIO CONCRETE PIPE CO., BUT THE UNNUMBERED CONTRACT IN THE AMOUNT OF $62.40 REFERRED TO IN YOUR LETTER HAS NOT BEEN LOCATED IN THIS OFFICE. NONE OF THE THREE NUMBERED CONTRACTS, SUPRA, CONTAINED THE STANDARD PATENT CLAUSE QUOTED IN 13 COMP. GEN. 173, 174, AND 14 ID. 340. NEITHER WAS THERE FURNISHED IN CONNECTION WITH ANY OF SAID CONTRACTS A PATENT INFRINGEMENT BOND SIMILAR TO THE ONE QUOTED IN THE LATTER DECISION. THERE HAVING BEEN ADMINISTRATIVE FAILURE IN THIS CONNECTION TO PROTECT THE UNITED STATES AGAINST CLAIMS FOR ALLEGED INFRINGEMENT OF PATENTS, THE SAN JOSE CONCRETE PIPE CO., AND THE RAGGIO CONCRETE PIPE CO. ARE UNDER NO LEGAL OBLIGATION TO PROTECT THE UNITED STATES AGAINST INFRINGEMENT OF PATENT NO. 1523937--- IF IT BE VALID--- AND CONCERNING WHICH ALLEGED INFRINGEMENT NOTICE WAS CONTAINED IN THE OCTOBER 15, 1936, FROM TUERCK-MACKENZIE CO. THE NOTICE OF ALLEGED INFRINGEMENT CONTAINED IN THE LETTER OF OCTOBER 15, 1936, IS NOT SUFFICIENT IN ITSELF TO JUSTIFY THE UNITED STATES IN REFUSING TO MAKE PAYMENT TO THE RESPECTIVE CONTRACTORS IN ACCORDANCE WITH THE TERMS OF THEIR CONTRACTS. YOU ARE ADVISED ACCORDINGLY.

THE PAPERS ENCLOSED WITH YOUR LETTER ARE RETURNED EXCEPT THE COPY OF LETTER OF NOVEMBER 14, 1936, FROM THE CALIFORNIA PROCUREMENT OFFICER.