B-147271, JAN. 10, 1962

B-147271, JAN. 10, 1962

TO METALSTAMP INC.:

FURTHER REFERENCE IS MADE TO YOUR LETTER ADDRESSED TO THE PRESIDENT, DATED SEPTEMBER 20, 1961, AND ITS ENCLOSURE, WHICH WAS REFERRED TO US FOR ATTENTION RELATIVE TO AN ALLEGED INFRINGEMENT OF YOUR PATENT NO. 2,896,808 BY LANE CONTAINER COMPANY, DALLAS, TEXAS, IN THE PERFORMANCE OF CONTRACT N600 (22) 56452 WITH THE DEPARTMENT OF THE NAVY.

YOU ALLEGE IN YOUR LETTER THAT SINCE 1956 YOU HAVE BEEN WORKING ON AND MANUFACTURING A DEVICE FOR A REUSABLE, COLLAPSIBLE CRATE AND ON JULY 28, 1959, SECURED A PATENT NO. 2,896,808; THAT THE CRATE WAS SO SUCCESSFUL IT HAS BEEN SPECIFIED BY THE NAVY FOR THE LAST THREE YEARS; AND THAT IN THE OPINION OF THE PACKAGING AND PRESERVATION SECTION IT SAVES THE NAVY OVER $5,000,000 A YEAR. YOU ALSO ALLEGE THAT DURING THE LATEST NAVY PROCUREMENT LANE CONTAINER COMPANY BECAME CONFUSED AND IN AN EFFORT TO SAVE MONEY ASKED NAVY'S PERMISSION TO MANUFACTURE ITS OWN HARDWARE "WHICH IS THE SUBJECT OF OUR PATENT.' YOU ALLEGE FURTHER THAT NAVY INFORMED LANE CONTAINER COMPANY THAT THE GOVERNMENT HAD GIVEN ITS CONSENT TO THE USE OF ANY PATENTED DEVICE WITHOUT PREJUDICE TO THE NAVY'S RIGHTS OF INDEMNIFICATION UNDER THE CONTRACT AND THAT ANY SUIT FOR INFRINGEMENT MUST BE BROUGHT AGAINST THE UNITED STATES IN THE COURT OF CLAIMS. IT IS STATED IN YOUR LETTER THAT CONSULTATION WITH YOUR LAWYERS REVEALS THAT THE AMOUNT OF YOUR CLAIM OF APPROXIMATELY $9,000 IS NOT ENOUGH TO JUSTIFY A SUIT AGAINST THE GOVERNMENT SINCE THE LEGAL CHARGES AND EXPENSES WOULD BE APPROXIMATELY $10,000 TO $20,000. YOU EXPRESS THE VIEW THAT IT "SEEMS OUTRAGEOUS TO US THAT A SMALL COMPANY LIKE OURS, WHICH AFTER YEARS OF WORK AND A GREAT DEAL OF EXPENSE, HAS BEEN PUT IN THE POSITION OF REAPING SOME REWARD, FINDS ALL THESE EFFORTS HAVE BEEN WIPED OUT BY THE DECISIONS OF THE COMPTROLLER GENERAL OF THE UNITED STATES WITH THE FULL COOPERATION OF THE CHIEF BENEFICIARY OF OUR PATENT, THE UNITED STATES NAVY.'

STATUTORY PROVISIONS CARRIED IN 28 U.S.C. 1498 PROVIDE, IN PERTINENT PART, THAT WHENEVER AN INVENTION COVERED BY A PATENT OF THE UNITED STATES IS USED OR MANUFACTURED BY OR FOR THE UNITED STATES WITHOUT LICENSE OF THE OWNER OR LAWFUL RIGHT TO USE OR MANUFACTURE THE INVENTION, WHICH INCLUDES USE OR MANUFACTURE FOR THE UNITED STATES BY A CONTRACTOR, A SUBCONTRACTOR, OR ANY PERSON, FIRM OR CORPORATION FOR THE GOVERNMENT AND WITH THE AUTHORIZATION AND CONSENT OF THE GOVERNMENT, THE OWNER'S REMEDY SHALL BE BY ACTION AGAINST THE UNITED STATES IN THE COURT OF CLAIMS FOR THE RECOVERY OF HIS REASONABLE AND ENTIRE COMPENSATION FOR SUCH USE AND MANUFACTURE.

IT HAS BEEN JUDICIALLY DETERMINED THAT THIS SECTION IS IN EFFECT AN EMINENT DOMAIN STATUTE; THAT ITS PROVISIONS RELIEVE THE CONTRACTOR ENTIRELY FROM LIABILITY OF EVERY KIND FOR THE INFRINGEMENT OF PATENTS IN MANUFACTURING ANYTHING FOR THE GOVERNMENT AND LIMITS THE OWNER OF THE PATENT TO A SUIT IN THE COURT OF CLAIMS FOR REASONABLE COMPENSATION, WHICH REMEDY IS EXCLUSIVE AND COMPREHENSIVE IN CHARACTER. ALSO, THAT IT WAS THE PURPOSE AND INTENT OF CONGRESS BY THE PROVISIONS OF THIS SECTION TO STIMULATE CONTRACTORS TO FURNISH GOVERNMENT NEEDS WITHOUT FEAR OF BECOMING LIABLE THEMSELVES FOR INFRINGEMENTS TO PATENT HOLDERS AND LICENSEES, AND TO MAKE IT POSSIBLE FOR THE GOVERNMENT TO PROCEED WITH ITS PROCUREMENT WITHOUT RESTRICTION OR DELAY CAUSED BY PATENT INFRINGEMENT CLAIMS OR CONTROVERSIES. FURTHER, THAT THE STATUTE WAS DESIGNED TO FURNISH PATENTEES AND LICENSEES AN ADEQUATE AND EFFECTIVE REMEDY AND TO SAVE THE GOVERNMENT FROM HAVING ITS PUBLIC WORKS TIED UP AND THWARTED WHILE PRIVATE PARTIES WERE CARRYING ON LONG DRAWN OUT LITIGATION. AND IT HAS BEEN REPEATEDLY EMPHASIZED BY THE SUPREME COURT OF THE UNITED STATES THAT IT IS THE PUBLIC INTEREST WHICH IS DOMINANT IN THE PATENT SYSTEM. SEE RICHMOND V. UNITED STATES (1928), 275 U.S. 331, 343, AND THE OTHER AUTHORITIES CONSIDERED IN OUR DECISIONS OF AUGUST 25, 1958, B-136916, AND OCTOBER 6, 1958, 37 COMP. GEN. 276, COPIES ENCLOSED, AND THE CASES COLLECTED IN THE ANNOTATIONS IN 28 U.S.C.A. 1498.

WE ADHERE TO THE VIEWS EXPRESSED IN OUR DECISIONS OF AUGUST 25 AND OCTOBER 6, 1958, WHICH WE BELIEVE ARE CONSISTENT WITH THE CONGRESSIONAL PURPOSE AND INTENT OF 28 U.S.C. 1498, RELATING TO THE USE OR MANUFACTURE OF PATENTED INVENTIONS BY OR FOR THE UNITED STATES, AND THE CARDINAL PRINCIPLE THAT CONTRACTS FOR GOVERNMENT REQUIREMENTS BASED ON FORMAL ADVERTISING MUST BE AWARDED TO THE LOWEST RESPONSIBLE BIDDER.

REFERENCE IS ALSO MADE TO THE PROVISIONS OF 10 U.S.C. 2386 AND 7210 WHICH AUTHORIZE THE USE OF FUNDS APPROPRIATED FOR A MILITARY DEPARTMENT FOR THE ACQUISITION OF (1) COPYRIGHTS, PATENTS, AND APPLICATIONS FOR PATENTS; (3) DESIGNS, PROCESSES, AND MANUFACTURING DATA; AND (4) RELEASES, BEFORE SUIT IS BROUGHT, FOR PAST INFRINGEMENT OF PATENTS AND COPYRIGHTS.

THE AVAILABLE RECORD DISCLOSES THAT THE CONTRACT WITH LANE CONTAINER COMPANY CALLS FOR WOOD CRATES IN ACCORDANCE WITH FEDERAL SPECIFICATION PPP -C-580 AS AMENDED WHICH ARE USED FOR SHIPMENT OF HOUSEHOLD GOODS. THE SPECIFICATIONS PROVIDE FOR TWO ALTERNATE CLOSURE METHODS--- ONE BY LAG BOLTS AND SCREWS, AND THE OTHER BY METAL PLATES JOINED BY SHORT LENGTHS OF TENSION STEEL STRAPS TO WHICH METALSTAMP CLAIMS ITS PATENT NO. 2,896,808 IS APPLICABLE. WHILE THE CRATES ARE CONSIDERED TO BE EXPENDABLE "THE NAVY HAS FOUND THAT WHERE THE ALTERNATE METAL PLATES METHOD IS USED, THE CRATES CAN BE AND MORE FREQUENTLY ARE OPENED WITHOUT DAMAGE, THUS PERMITTING THE CRATES TO BE USED MORE THAN ONCE.' WE HAVE BEEN ADVISED BY THE NAVY THAT IT IS NOT POSSIBLE, HOWEVER, TO ESTIMATE THE SAVINGS BECAUSE IT IS ECONOMICALLY IMPRACTICABLE TO ACCOUNT FOR CRATES OF THIS CHARACTER. ALSO, THAT COGNIZANT PERSONNEL OF THE NAVY ARE UNAWARE OF THE ORIGIN OF THE STATEMENT IN YOUR LETTER THAT NAVY HAS REALIZED AN ESTIMATED ANNUAL SAVINGS OF $500,000 BY USE OF THE CRATE DEVICE IN QUESTION AND THIS FIGURE DOES NOT REPRESENT A CONSIDERED NAVY ESTIMATE.

THE RECORD DISCLOSES THAT THE INVITATION FOR BIDS CONTAINED AN "AUTHORIZATION AND CONSENT" CLAUSE DESIGNED TO IMPLEMENT THE PROVISIONS OF 28 U.S.C. 1498; THAT ISSUANCE OF PATENT NO. 2,896,808 WAS UNKNOWN TO THE CONTRACTING OFFICER WHEN THE CONTRACT WAS AWARDED, AND THAT THE NAVY AT THE PRESENT TIME IS NOT IN A POSITION TO DETERMINE ADMINISTRATIVELY WHETHER THE PATENT IS VALID.

THE NAVY HAS ADVISED US THAT IF YOU OR YOUR LICENSEE SHOULD ASSERT AN ADMINISTRATIVE CLAIM FOR INFRINGEMENT, UNDER ITS CUSTOMARY PROCEDURE THE NAVY WOULD INVESTIGATE THE VALIDITY OF THE PATENT AND, IF APPROPRIATE, WOULD ENTER INTO A SETTLEMENT OF SUCH CLAIM PURSUANT TO 10 U.S.C. 2386. THE NAVY HAS ALSO ADVISED US THAT IN VIEW OF FUTURE NAVY REQUIREMENTS OF THE ITEM INVOLVED THE NAVY WILL CONSIDER THE VALIDITY OF THE PATENT BEFORE THE ASSERTION OF SUCH CLAIM IN ORDER TO DETERMINE THE PROPRIETY OF INITIATING NEGOTIATIONS WITH YOU AND YOUR LICENSEE FOR A LICENSE TO THE GOVERNMENT UNDER THE PATENT INVOLVED.

THE FACTS AND CIRCUMSTANCES RELATING TO THIS PROCUREMENT, IN OUR OPINION, DO NOT SUPPORT THE CONTENTION THAT YOUR LEGAL RIGHTS HAVE BEEN VIOLATED AND WE FIND NO REASONABLE BASIS FOR QUESTIONING THE ADMINISTRATIVE ACTION.