B-162349, MAY 6, 1968, 47 COMP. GEN. 627

B-162349: May 6, 1968

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CONTRACTS - DISPUTES - CONFLICT BETWEEN ADMINISTRATIVE REPORT AND CONTRACTOR'S ALLEGATIONS WHERE A CONTRACT IS NEITHER AMBIGUOUS OR EQUIVOCAL. IT IS NOT NECESSARY TO RESOLVE CONFLICTING STATEMENTS BY RESORTING TO THE PAROL EVIDENCE RULE. OR THE PRINCIPLE THAT ALL PRIOR NEGOTIATIONS AND COMMUNICATIONS ARE MERGED IN THE EXECUTED CONTRACT. NOR IS THERE NEED TO FOLLOW THE RULE THAT THE ADMINISTRATIVE VERSION OF THE DISPUTED FACTS IS FOR ACCEPTANCE UNLESS THE PRESUMPTION OF CORRECTNESS IS OVERCOME. 1968: THIS IS IN REPLY TO LETTERS DATED AUGUST 22. WEGEMATIC WAS BOTH AN ASSIGNEE OF ALL RIGHTS UNDER THE UNITED STATES PATENT AND A GRANTEE OF CERTAIN OTHER EXTRATERRITORIAL RIGHTS OF MTD. THIS CONTROVERSY IS GENERATED FROM THE FACT THAT THE ARMY IS SELLING THE ADDITIVE BEARING AMMUNITION.

B-162349, MAY 6, 1968, 47 COMP. GEN. 627

PATENTS - DEVICES, ETC., USED BY GOVERNMENT - USE AUTHORIZATION - FOREIGN INVENTION UNDER A NEGOTIATED RELEASE AND PATENT LICENSE AGREEMENT WITH THE ASSIGNEE OF AN INVENTION COVERING A BORE WEAR REDUCING ADDITIVE FOR AMMUNITION OWNED BY A FOREIGN FIRM, WHICH GRANTED THE UNITED STATES (U.S.) THE UNCONDITIONAL RIGHT TO MANUFACTURE, SELL, AND USE THE ARTICLE THROUGHOUT THE WORLD, A SALE WITHIN THE TERRITORIAL LIMITS OF THE U.S. PASSING TITLE TO FOREIGN COUNTRIES, WITHOUT LIABILITY TO PAY FOREIGN ROYALTIES, DOES NOT CONSTITUTE A BREACH OF CONTRACT, REQUIRING ADDITIONAL PAYMENTS TO THE LICENSOR UNDER THE CONTRACT OR ITS ASSIGNOR, THE TERRITORIAL LIMITATIONS OF SOVEREIGNTY PRECLUDING A COUNTRY FROM GIVING EXTRATERRITORIAL EFFECT TO ITS PATENT LAWS. THEREFORE, THE AGREEMENT NOT RESTRICTING SALES TO BUYERS WHO WOULD USE THE ARTICLE IN THE U.S., A TERRITORIAL LIMITATION MAY NOT BE READ INTO THE CONTRACT TO PROHIBIT THE SALE OF THE ADDITIVE AMMUNITION IN THE U.S. FOR EXPORT. CONTRACTS - DISPUTES - CONFLICT BETWEEN ADMINISTRATIVE REPORT AND CONTRACTOR'S ALLEGATIONS WHERE A CONTRACT IS NEITHER AMBIGUOUS OR EQUIVOCAL, IT IS NOT NECESSARY TO RESOLVE CONFLICTING STATEMENTS BY RESORTING TO THE PAROL EVIDENCE RULE, OR THE PRINCIPLE THAT ALL PRIOR NEGOTIATIONS AND COMMUNICATIONS ARE MERGED IN THE EXECUTED CONTRACT, NOR IS THERE NEED TO FOLLOW THE RULE THAT THE ADMINISTRATIVE VERSION OF THE DISPUTED FACTS IS FOR ACCEPTANCE UNLESS THE PRESUMPTION OF CORRECTNESS IS OVERCOME.

TO THE SECRETARY OF THE ARMY, MAY 6, 1968:

THIS IS IN REPLY TO LETTERS DATED AUGUST 22, 1967, FEBRUARY 14, 1968, AND ENCLOSURES, FROM THE ACTING GENERAL COUNSEL, ARMY MATERIEL COMMAND, REQUESTING AN ADVANCE DECISION CONCERNING PROTESTS AGAINST CERTAIN ACTIONS OF YOUR DEPARTMENT UNDER A RELEASE AND PATENT LICENSE AGREEMENT DATED MAY 1, 1966, CONTRACT NO. DA-11-173-AMC-781 (A), PRESENTED BY THE WEGEMATIC CORPORATION, LICENSOR UNDER THE CONTRACT, AND MILITARY TRAINING DEVICE COMPANY (MTD), AKTIEBOLAG OF STOCKHOLM, SWEDEN, ASSIGNOR TO WEGEMATIC OF THE PATENTS INVOLVED AND OWNER OF VARIOUS FOREIGN PATENTS COVERING THE SAME INVENTIONS.

BY THE SUBJECT CONTRACT WEGEMATIC GRANTED THE UNITED STATES GOVERNMENT CERTAIN RIGHTS TO AN INVENTION COVERING A BORE WEAR REDUCING ADDITIVE FOR AMMUNITION. WEGEMATIC WAS BOTH AN ASSIGNEE OF ALL RIGHTS UNDER THE UNITED STATES PATENT AND A GRANTEE OF CERTAIN OTHER EXTRATERRITORIAL RIGHTS OF MTD, THE OWNER OF BOTH FOREIGN AND DOMESTIC RIGHTS TO THE INVENTION BY VIRTUE OF AN ASSIGNMENT FROM THE INVENTORS.

THIS CONTROVERSY IS GENERATED FROM THE FACT THAT THE ARMY IS SELLING THE ADDITIVE BEARING AMMUNITION, UNDER CONTRACTS PROVIDING FOR PASSING OF TITLE WITHIN THE TERRITORIAL LIMITS OF THE UNITED STATES, TO FOREIGN COUNTRIES. THE PROTESTING PARTIES TAKE THE POSITION THAT THE LICENSE GRANTED TO THE UNITED STATES DOES NOT AUTHORIZE ANY SALES FOR EXPORT TO FOREIGN PURCHASERS, WHETHER TECHNICALLY THE SALE OCCURS WITHIN OR OUTSIDE OF THE TERRITORIAL LIMITS OF THE UNITED STATES, AND THAT THE GOVERNMENT'S ACTION IN THIS REGARD CONSTITUTES A BREACH OF CONTRACT. FURTHER, IT IS ALLEGED THAT WEGEMATIC COULD NOT, FOR WANT OF AUTHORITY, LICENSE THE GOVERNMENT TO SELL TO FOREIGN COUNTRIES; THAT DURING NEGOTIATIONS OF THE SUBJECT CONTRACT ARMY NEGOTIATORS WERE MADE AWARE THAT WEGEMATIC DID NOT INTEND TO TRANSFER FOREIGN SALE RIGHTS; AND THAT THE ANNUAL ROYALTY CEILING UNDER THE SUBJECT AGREEMENT ILLUSTRATES THAT THE CONTRACT DID NOT CONTEMPLATE WORLDWIDE FOREIGN SALES. ACCORDINGLY, IT IS REQUESTED THAT THE GOVERNMENT NEGOTIATE ADDITIONAL TERMS TO COVER BOTH PAST AND FUTURE FOREIGN EXPORT SALES.

EXECUTION OF THE CONTRACT IN QUESTION FOLLOWED SEVERAL YEARS OF TESTING BY THE UNITED STATES OF THE ADDITIVE, WITH THE AUTHORIZATION AND PARTICIPATION OF THE INVENTORS AND THEIR ASSIGNEES, AND APPROXIMATELY 2 YEARS OF NEGOTIATIONS CONCERNING THE CONTRACT TERMS AND CONDITIONS. THE CONTROVERSY CENTERS ON THE INTERPRETATION OF THE FOLLOWING PROVISIONS:

NOW, THEREFORE, IN CONSIDERATION OF THE RIGHTS HEREIN GRANTED, THE PARTIES DO HEREBY AGREE AS FOLLOWS:

A. WEGEMATIC AGREES TO AND DOES HEREBY GRANT AND CONVEY TO THE GOVERNMENT AND ITS ASSIGNS, AS REPRESENTED BY THE SECRETARY OF THE ARMY, A NONEXCLUSIVE, IRREVOCABLE, NONTRANSFERABLE LICENSE UNDER THE FOLLOWING APPLICATIONS FOR PATENT TO PRACTICE BY THE GOVERNMENT AND CAUSE TO BE PRACTICED FOR THE GOVERNMENT ANY AND ALL OF THE INVENTIONS THEREOF IN THE MANUFACTURE, USE, AND DISPOSITION OF ANY ARTICLE OR MATERIAL, AND IN THE USE OF ANY METHOD, IN ACCORDANCE WITH LAW: ------ ------------------------ ------------------------------------------- U.S. APPLICATION SERIAL

NUMBERS FILING DATE PATENT NUMBER ----- ---------------------------------

46,008 28 JULY 1960

46,009 28 JULY 1960 126,747 29 MAY 1961 3,148,620153,299 20 NOVEMBER 1961 3,204,558 377,278

23 JUNE 1964 ---------------------------------------------------- ------- -------------- NOTHING CONTAINED HEREIN SHALL LIMIT ANY RIGHTS WHICH THE GOVERNMENT MAY HAVE OBTAINED BY VIRTUE OF PRIOR CONTRACTS OR BY OPERATION OF LAW OR OTHERWISE. THE LICENSE HEREBY GRANTED SHALL REMAIN IN FULL FORCE AND EFFECT FOR THE FULL TERMS OF ANY AND ALL PATENTS HEREAFTER ISSUED ON APPLICATIONS FOR PATENT REFERRED TO ABOVE UNLESS SOONER TERMINATED AS ELSEWHERE HEREIN PROVIDED:

C. FOR THE SAME CONSIDERATION, IRRESPECTIVE OF ANY OTHER U.S. OR ANY FOREIGN PATENT GRANTED TO THE INVENTORS STIG Y. EK AND DAVID E. JACOBSON WHICH COVER THE "INVENTIONS," WEGEMATIC AGREES TO AND DOES HEREBY GRANT TO THE GOVERNMENT:

(1) THE UNCONDITIONAL RIGHT TO USE AMMUNITION INCORPORATING SAID "INVENTIONS" FOR THE UNITED STATES ARMED FORCES IN ANY COUNTRY THROUGHOUT THE WORLD;

(2) THE UNCONDITIONAL RIGHT OF THE GOVERNMENT TO RENOVATE, AND THEREBY INCLUDE THE INVENTIONS" IN ANY OF ITS AMMUNITION, IN ANY COUNTRY THROUGHOUT THE WORLD; AND

(3) THE CONDITIONAL RIGHT OF THE GOVERNMENT TO DISPOSE OF SAID AMMUNITION TO OTHERS THROUGHOUT THE WORLD, WITH THE ROYALTY-FREE RIGHT OF THE RECIPIENT TO USE SAID AMMUNITION IN ANY COUNTRY THROUGHOUT THE WORLD, THE CONDITIONS BEING SET FORTH AS FOLLOWS:

(A) SAID AMMUNITION IS PAID FOR BY THE GOVERNMENT;

(B) SAID AMMUNITION IS MANUFACTURED WITHIN THE TERRITORIAL LIMITS OF THE UNITED STATES; AND

(C) THE DISPOSITION BY THE GOVERNMENT TO OTHERS IS WITHOUT REMUNERATION.

D. FOR THE SAME CONSIDERATION, WEGEMATIC AGREES TO AND DOES HEREBY RELEASE EACH AND EVERY CLAIM AND DEMAND WHICH WEGEMATIC MAY HAVE OR MAY HEREAFTER HAVE AGAINST THE GOVERNMENT, ITS OFFICERS, CONTRACTORS,AGENTS, SERVANTS AND EMPLOYEES FOR (1) ANY UNAUTHORIZED USE OF DATA BY THE GOVERNMENT AND/2) ANY INFRINGEMENT BY OR FOR THE GOVERNMENT OF ANY PATENTS HEREIN RECITED OR FOR ANY PATENTS GRANTED ON PATENT APPLICATIONS SPECIFICALLY IDENTIFIED IN THIS CONTRACT.

E. FOR THE SAME CONSIDERATION, WEGEMATIC ADDITIONALLY PROMISES AND GUARANTEES THAT NO LEGAL ACTIONS WILL BE BROUGHT BY ANY DOMESTIC OR FOREIGN PARTIES AGAINST THE GOVERNMENT BASED UPON ANY PATENT ISSUED TO THE INVENTORS AND/OR ASSIGNED TO OTHER PARTIES, INCLUDING THE INVENTORS AND THE MILITARY TRAINING DEVICE CO. AKTIEBOLAG, THAT COVERS SAID "INVENTIONS," IN ANY COUNTRY THROUGHOUT THE WORLD.

IT IS THE CONTENTION OF THE LICENSOR WEGEMATIC AND ITS ASSIGNOR MTD THAT THE RIGHT OF THE GOVERNMENT TO DISPOSE OF AMMUNITION CONTAINING THE PATENTED ADDITIVE TO ANY FOREIGN NATION IS DERIVED SOLELY FROM PARAGRAPH C OF THE QUOTED LANGUAGE AND LIMITED BY THE CONDITIONS (A), (B) AND (C) OF CLAUSE (3) THEREOF; IN OTHER WORDS, THAT THE GOVERNMENT CANNOT SELL SUCH AMMUNITION ,THROUGHOUT THE WORLD,"BUT CAN SO DISPOSE OF IT ONLY BY GRANT OR GIFT "WITHOUT REMUNERATION.'

YOUR DEPARTMENT ON THE OTHER HAND CONTENDS THAT THE CONDITIONS (A), (B) AND (C) APPLY ONLY TO THE GOVERNMENT'S AUTHORITY TO CONFER ON THE RECIPIENT OF SUCH AMMUNITION THE ROYALTY-FREE RIGHT TO USE IT IN ANY COUNTRY, IRRESPECTIVE OF ANY OTHER UNITED STATES PATENT OR ANY FOREIGN PATENT GRANTED TO THE INVENTORS FOR THE ADDITIVES. THE RIGHT TO SELL IN THE UNITED STATES, IT IS CONTENDED, IS CONFERRED BY PARAGRAPH A, WHICH IS AN UNRESTRICTED LICENSE TO THE GOVERNMENT TO PRACTICE OR HAVE PRACTICED FOR IT THE UNITED STATES PATENTS "IN THE MANUFACTURE, USE, AND DISPOSITION OF ANY ARTICLE OR MATERIAL.' IT IS CONCEDED THAT A SALE IN THE UNITED STATES CANNOT CONFER ON ANY PURCHASER THE RIGHT TO USE SUCH ARTICLES IN ANY OTHER COUNTRY IN WHICH SUCH USE WOULD INFRINGE A PATENT GRANTED BY SUCH COUNTRY, AND IT IS REPORTED THAT IN OFFERS OF AMMUNITION TO FOREIGN NATIONS THE GOVERNMENT HAS STIPULATED FOR DELIVERY AND PASSAGE OF TITLE IN THE UNITED STATES AND HAS INCLUDED A SPECIFIC NOTICE THAT USE IN A FOREIGN COUNTRY OF SUCH AMMUNITION CONTAINING THE WEAR REDUCTION ADDITIVE MAY BE SUBJECT TO PAYMENT OF ROYALTIES UNDER A FOREIGN PATENT.

IN THE LIGHT OF PARAGRAPHS D AND E OF THE CONTRACT QUOTED ABOVE, IT SEEMS CLEAR THAT THE ONLY BASIS FOR ANY ACTION OR CLAIM BY WEGEMATIC AGAINST THE GOVERNMENT, OR CONSIDERATION FOR AMENDMENT OF THE CONTRACT AS REQUESTED BY WEGEMATIC, WOULD BE THAT SALES BY THE GOVERNMENT TO FOREIGN POWERS CONSTITUTED A BREACH OF THE ALLEGED IMPLIED OBLIGATION OF THE GOVERNMENT NOT TO SELL ADDITIVE-TREATED AMMUNITION TO FOREIGN BUYERS.

IN SUPPORT OF THEIR RESPECTIVE CONTENTIONS AS TO THE INTENTIONS OF THE PARTIES TO THE CONTRACT BOTH THE ARMY AND COUNSEL FOR WEGEMATIC HAVE SUBMITTED A NUMBER OF DOCUMENTS AND RECORDS OF COMMUNICATIONS AND STATEMENTS MADE DURING THE COURSE OF NEGOTIATING THE CONTRACT, WITH SEVERAL AFFIDAVITS FURTHER STATING THE RECOLLECTIONS OF INDIVIDUALS PARTICIPATING THEREIN. MUCH OF THIS EVIDENCE IS IN SUCH DIRECT CONFLICT THAT IF IT WERE NECESSARY TO BASE OUR DECISION THEREON WE WOULD BE FORCED TO FOLLOW THE RULE THAT WE MUST ACCEPT THE ADMINISTRATIVE VERSION OF DISPUTED FACTS UNLESS THE PRESUMPTION OF CORRECTNESS ATTACHING THERETO WAS CLEARLY OVERCOME. HOWEVER, UNDER THE PAROL EVIDENCE RULE, OR THE PRINCIPLE THAT ALL PRIOR NEGOTIATIONS AND COMMUNICATIONS ARE MERGED IN THE FINAL EXECUTED CONTRACT, SUCH EVIDENCE MAY BE RESORTED TO ONLY WHERE THE INSTRUMENT CONTAINS SUCH AMBIGUITIES OR DEFICIENCIES OF EXPRESSION THAT ITS MEANING CANNOT REASONABLY BE DETERMINED FROM THE WORDS USED. WE DO NOT FIND THE CONTRACT IN THIS CASE TO BE SO AMBIGUOUS OR EQUIVOCAL AS TO MAKE IT NECESSARY TO RESOLVE THE CONFLICTING STATEMENTS OF INTENTION.

IT IS ADMITTED THAT THE CONTRACT DOES NOT EXPRESSLY PROHIBIT SALES TO FOREIGN PURCHASERS WITHIN THE TERRITORIAL LIMITS OF THE UNITED STATES, BUT IT IS ARGUED THAT THE CONDITIONS IMPOSED BY CLAUSE C (3) ON THE DISPOSAL OF AMMUNITION "THROUGHOUT THE WORLD" QUALIFY THE LICENSE GRANTED IN PARAGRAPH A. BY INDICATING AN INTENT THAT SALES FOR EXPORT WERE NOT INTENDED TO BE AUTHORIZED. ON THE FACE OF THE CONTRACT WE CANNOT READ THE CONDITIONS IN CLAUSE C (3) ABOVE AS APPLICABLE TO ALL DISPOSITIONS TO FOREIGN RECIPIENTS. THE CONDITIONAL RIGHT THEREBY GRANTED TO THE GOVERNMENT IS NOT THE RIGHT TO DISPOSE OF THE INVENTION OR ITS PRODUCTS, BUT THE RIGHT TO CONFER UPON THE PARTY ACQUIRING IT AUTHORITY TO USE IT OUTSIDE THE UNITED STATES WITHOUT LIABILITY FOR PAYMENT OF ANY FOREIGN ROYALTIES.

IT MAY BE CONCEDED THAT IF THE PARTIES INTENDED TO AUTHORIZE SALES TO BE MADE OUTSIDE OF THE TERRITORIAL LIMITS OF THE UNITED STATES THEY SHOULD HAVE EXPRESSLY PROVIDED THEREFOR--- AS THEY DID FOR THE RIGHTS TO USE AND RENOVATE AMMUNITION ABROAD--- BUT WE DO NOT BELIEVE THAT THE FAILURE TO DO SO EITHER EXPRESSLY OR IMPLIEDLY RESTRICTS THE RIGHT TO MAKE SALES WITHIN THE UNITED STATES. IT IS A FUNDAMENTAL CONCEPT THAT TERRITORIAL LIMITATIONS OF SOVEREIGNTY PRECLUDE A COUNTRY FROM GIVING EXTRATERRITORIAL EFFECT TO ITS PATENT LAWS. ALUMINUM CO. OF AMERICA V SPERRY PRODUCTS, INC., 285 F.2D 911, CERTIORARI DENIED, 368 U.S. 890; COLD METAL PROCESS CO. V UNITED ENGINEERING AND FOUNDRY CO., 235 F.2D 224, AFFIRMED, 351 U.S. 445. COURTS HAVE ALSO HELD THAT A FOREIGN PATENT CONFERS UPON ITS OWNER NO RIGHTS OR PROTECTION WITH RESPECT TO ACTS DONE IN THE UNITED STATES. DR. BECK AND CO. V GENERAL ELECTRIC CO., 210 F.SUPP. 86, AFFIRMED, 317 F.2D 538; SPERRY PRODUCTS, INC. V ALUMINUM CO. OF AMERICA, 171 F.SUPP. 901, AFFIRMED IN PART, REVERSED IN PART, 285 F.2D 911, CERTIORARI DENIED 368 U.S. 890.

WITH RESPECT TO THE EFFECT OF THE BLANKET LICENSE UNDER THE UNITED STATES PATENTS GRANTED BY PARAGRAPH A OF THE CONTRACT, COUNSEL FOR WEGEMATIC AND MTD STATE THAT AS A GENERAL RULE A LICENSE RESTRICTED TO MANUFACTURE AND SALE FOR USE IN ONE COUNTRY DOES NOT PERMIT THE LICENSEE TO SELL IN SUCH COUNTRY WITH KNOWLEDGE THAT THE GOODS SOLD ARE TO BE EXPORTED (SEE ELLIS, PATENT LICENSES, 3RD EDITION, SECTION 248).

IT IS OUR UNDERSTANDING, HOWEVER, THAT IN ANY GIVEN CASE IT IS A QUESTION OF WHETHER A PATENT HOLDER OR ASSIGNEE IN LICENSING ANOTHER TO MANUFACTURE, USE OR SELL THE ARTICLE INCLUDED ANY STIPULATION WHICH WOULD INDICATE SUCH A RESTRICTION WAS INTENDED. ELLIS CITES TWO CASES IN WHICH THE COURT RECOGNIZED THE RIGHT OF THE PATENT HOLDER TO RESTRICT SALES FOR EXPORT. IN THE FIRST CASE OF DORSEY REVOLVING HARVESTER ROPE CO. V BRADLEY MFG. CO., FED. CASE NO. 4,015 (1874), DEFENDANTS WERE GRANTED THE RIGHTS TO MANUFACTURE MACHINES, FOR SALE AS MIGHT BE REQUIRED FOR USE IN ONLY FOUR STATES. THE FACT THAT THE DEFENDANT'S LICENSE (IN THE DORSEY CASE) WAS NOT COEXTENSIVE WITH THE PATENT MONOPOLY BUT WAS EXPRESSLY LIMITED TO FOUR STATES WITHIN THE MONOPOLY, WE THINK SUBSTANTIVELY DISTINGUISHES IT FROM THE PRESENT SITUATION. IN THE INSTANT CASE WE ARE CONCERNED WITH AN UNCONDITIONAL RIGHT TO MANUFACTURE, SELL AND USE IN THE UNITED STATES, AND SINCE THE RIGHTS REFERRED TO ARE COEXTENSIVE WITH THE RIGHTS CONFERRED BY THE PATENT IN THE UNITED STATES THERE APPEARS TO BE NO BASIS FOR INFERRING AN INTENTION TO IMPOSE ANY RESTRICTION ON THE GOVERNMENT.

IN THE SECOND CASE, ELLIOTT CO. V LAGONDA MFG. CO., 205 F.152, AFFIRMED 214 F. 578, DEFENDANT WAS LICENSED "TO MANUFACTURE, USE, AND SELL TO OTHERS FOR USE THROUGHOUT THE UNITED STATES.' AT THE TIME OF THE GRANT, THE PARTIES WERE COMPETITORS IN FOREIGN COUNTRIES AND BY THE LICENSE AGREEMENT, WHICH INVOLVED SEVERAL PATENTS, WERE SETTLING PENDING LAW SUITS. THE COURT WAS OF THE OPINION THAT UNDER THE CIRCUMSTANCES OF THE CASE THE USE OF THE WORDS "SELL TO OTHERS FOR USE THROUGHOUT THE UNITED STATES," MUST HAVE BEEN AN INTENTIONAL RESTRICTION PARTICULARLY BECAUSE THE ABOVE-QUOTED WORDS WERE EXCLUDED FROM THE TERMS OF THE LICENSE OF ANOTHER PATENT IN THE SAME INSTRUMENT WHICH WAS NOT THE SUBJECT OF THAT LITIGATION. IN THE PRESENT CASE, WE FIND NO SUCH INDICATION OF ANY INTENTION OF THE PARTIES TO RESTRICT SALES TO BUYERS WHO WOULD USE THE ARTICLES ONLY IN THE UNITED STATES. IN AMERICAN CYANAMID CO. V ELLIS- FOSTER CO., 298 F.2D 244, THE COURT STATED THE RULE THAT IN THE ABSENCE OF AN EXPRESS PROVISION A TERRITORIAL LIMITATION MAY NOT BE READ INTO TRANSFERS OF INVENTIONS. APPLYING THIS PRINCIPLE TO THE PRESENT CASE WE CONCLUDE THAT THE ARMY IS JUSTIFIED IN ITS VIEW THAT THE PROVISIONS OF PARAGRAPH A OF THE CONTRACT DO NOT RESTRICT THE SALE OF ADDITIVE AMMUNITION IN THE UNITED STATES FOR EXPORT.

COUNSEL FOR WEGEMATIC ATTEMPT TO FIND FURTHER SUPPORT FOR THEIR CONTENTIONS BY ALLEGATIONS THAT THE ANNUAL ROYALTY CEILING PROVIDED IN THE CONTRACT DID NOT CONTEMPLATE WORLDWIDE FOREIGN SALES. IN THIS RESPECT, THE RECORD ESTABLISHES THAT ACCORD WAS REACHED AS TO THE COMPENSATION TO BE PAID FOR THE RIGHTS DESIRED BY THE GOVERNMENT FOLLOWING EXTENDED NEGOTIATIONS CARRIED ON DURING THE YEARS 1965 AND 1966. AT ONE POINT, IN THE LATTER PART OF MARCH 1966, COUNSEL FOR WEGEMATIC, MR. MESSENHEIMER, HAND-DELIVERED A PROPOSED DRAFT OF AN AGREEMENT TO THE ARMY NEGOTIATOR, MR. GIBSON, WHICH OFFERED A COMPLETE ASSIGNMENT OF ALL RIGHTS UNDER THE UNITED STATES PATENTS AT A PRICE IDENTICAL TO THAT AGREED UPON IN THE FINAL MAY 1 AGREEMENT. THE ARMY STATES THAT IT EFFECTED THE CHANGE FROM AN ASSIGNMENT TO A LICENSE BECAUSE THE GOVERNMENT GENERALLY DOES NOT REQUIRE AN EXCLUSIVE TRANSFER OF THE PATENT MONOPOLY. IN THE LIGHT OF THIS INDICATION THAT WEGEMATIC WAS WILLING TO TRANSFER FULL UNITED STATES PATENT RIGHTS VIA ASSIGNMENT AT THE PRESENT CONTRACT RATE, WE DO NOT THINK THE ANNUAL ROYALTY CEILING IN THE CONTRACT CAN BE CONSIDERED TO HAVE BEEN BASED UPON ANY RESTRICTION OF THE RIGHTS INTENDED TO BE TRANSFERRED. THE RECORD INDICATES THAT THE PAYMENT TERMS AGREED UPON WERE ARRIVED AT THROUGH THE NORMAL PROCESS OF BARGAINING, WHICH CENTERED MAINLY AROUND CONTENTIONS AS TO THE VALUE OF THE ADDITIVE TO THE GOVERNMENT, RATHER THAN AS TO THE EXTENT OF THE RIGHTS TO BE ACQUIRED.

ATTORNEYS FOR CLAIMANTS CONTEND THE PRESENT SITUATION IS ESSENTIALLY THE SAME AS THAT WHICH OCCURRED IN THE CASE OF AKTIEBOLAGET BOFORS V UNITED STATES, 139 CT.CL. 642, 153 F.SUPP. 397, WHEREIN THE COURT OF CLAIMS HELD THAT THE UNITED STATES HAD NOT OBTAINED A LICENSE TO EXPORT CERTAIN GUNS AND THAT UNDER THE CIRCUMSTANCES THE GOVERNMENT WAS LIABLE FOR BREACH OF AN IMPLIED AGREEMENT NOT TO EXPORT THE GUNS. IN THE BOFORS CASE THE COURT HELD THAT THE LICENSE TO THE UNITED STATES GOVERNMENT TO MAKE GUNS "FOR THE UNITED STATES USE" DID NOT AUTHORIZE THE GOVERNMENT TO SUPPLY GUNS BY LEND LEASE TO OTHER COUNTRIES. FURTHER, IT IS CLEAR FROM THE DECISION THAT THE LICENSOR EXPRESSLY COMMUNICATED TO THE GOVERNMENT NEGOTIATORS THAT THE EXPORT OF GUNS MANUFACTURED IN THE UNITED STATES COULD NOT BE ALLOWED AND, ALSO, THE WORDING IN THE DRAFT AGREEMENTS WAS MORE LIMITED IN SCOPE THAN THE TERMS AND PROVISIONS OF THE EXECUTED CONTRACT.

IN ADDITION TO THE ARGUMENTS AS TO THE PROPER INTERPRETATION OF THE AGREEMENT, THE CONTENTION IS MADE THAT WEGEMATIC WAS NOT AUTHORIZED BY ITS ASSIGNMENT FROM MTD OR ANY SUPPLEMENTS THERETO TO GRANT TO THE UNITED STATES ANY RIGHTS TO SELL FOR USE IN FOREIGN COUNTRIES.

WE BELIEVE THAT BY VIRTUE OF THE ORIGINAL ASSIGNMENT FROM MTD DATED DECEMBER 1, 1961, WEGEMATIC BECAME THE UNQUALIFIED OWNER OF THE ENTIRE RIGHT, TITLE AND INTEREST TO THE UNITED STATES PATENTS, WITH ALL LEGAL RIGHTS FLOWING THEREFROM. THE ASSIGNMENT SATES, IN PERTINENT PART, AS FOLLOWS:

NOW, THEREFORE, IN CONSIDERATION OF FIVE DOLLARS ($5.00) AND OTHER GOOD AND SUFFICIENT CONSIDERATIONS, THE RECEIPT OF WHICH IS HEREBY ACKNOWLEDGED, THE SAID ASSIGNOR, HAS SOLD, ASSIGNED, TRANSFERRED AND SET OVER, AND BY THESE PRESENTS DOES SELL, ASSIGN, TRANSFER AND SET OVER, UNTO THE SAID ASSIGNEE, ITS SUCCESSORS, LEGAL REPRESENTATIVES AND ASSIGNS, THE ENTIRE RIGHT, TITLE AND INTEREST IN AND TO THE ABOVE MENTIONED INVENTIONS, APPLICATIONS FOR LETTERS PATENT, AND ANY AND ALL LETTERS PATENT OR PATENTS IN THE UNITED STATES OF AMERICA WHICH MAY BE GRANTED THEREFOR AND THEREON, AND IN AND TO ANY AND ALL DIVISIONS, CONTINUATIONS, AND CONTINUATIONS-IN- PART OF SAID APPLICATIONS, OR REISSUES OR EXTENSIONS OF SAID LETTERS PATENT OR PATENTS, AND ALL RIGHTS UNDER THE INTERNATIONAL CONVENTION FOR THE PROTECTION OF INDUSTRIAL PROPERTY INSOFAR AS THEY RELATE TO THE UNITED STATES OF AMERICA, THE SAME TO BE HELD AND ENJOYED BY THE SAID ASSIGNEE, FOR ITS OWN USE AND BEHOOF AND THE USE AND BEHOOF OF ITS SUCCESSORS, LEGAL REPRESENTATIVES AND ASSIGNS TO THE FULL END OF THE TERM OR TERMS FOR WHICH LETTERS PATENT OR PATENTS MAY BE GRANTED, AS FULLY AND ENTIRELY AS THE SAME WOULD HAVE BEEN HELD AND ENJOYED BY THE ASSIGNOR, HAD THIS SALE AND ASSIGNMENT NOT BEEN MADE.

PRESENT COUNSEL FOR BOTH WEGEMATIC AND MTD, THE LAW FIRM OF SURREY, KARASIK, GOULD AND GREENE, CONTEND AT PAGE 12 OF THEIR BRIEF DATED OCTOBER 9, 1967, THAT THE ASSIGNMENT OF DECEMBER 1 "* * * CONVEYED TO WEGEMATIC - THE ENTIRE RIGHT, TITLE AND INTEREST IN AND TO- ALL UNITED STATES PATENTS THAT MIGHT BE GRANTED BY THE UNITED STATES PATENT OFFICE -INSOFAR AS THEY RELATE TO THE UNITED STATES OF AMERICA,-" BUT THAT NO EXTRATERRITORIAL RIGHTS WERE THEREBY TRANSFERRED TO WEGEMATIC. ON PAGE 13 OF THE BRIEF, COUNSEL STATES THAT THE DECEMBER 1 AGREEMENT "SPECIFICALLY LIMITED ALL OF WEGEMATIC'S RIGHTS, IN THE ADDITIVE INVENTION STRICTLY TO PRACTICE IN THE UNITED STATES OF AMERICA.'

WE ARE UNABLE TO AGREE THAT THE DECEMBER 1 AGREEMENT CAN REASONABLY BE READ AS IMPOSING RESTRICTIONS WHICH PRECLUDE THE MANUFACTURE AND SALE IN THIS COUNTRY FOR EXPORT. THE PHRASE ,INSOFAR AS THEY RELATE TO THE UNITED STATES OF AMERICA" IS CLEARLY INTENDED ONLY AS A DESCRIPTION OF THOSE RIGHTS DERIVED FROM THE INTERNATIONAL CONVENTION. ALSO, IT APPEARS THAT WEGEMATIC'S COUNSEL DURING NEGOTIATIONS--- STRAUCH, NOLAN NEALE--- WERE OF THE OPINION THAT THE ASSIGNMENT WAS COMPLETE AND UNRESTRICTED AS EVIDENCED IN A LETTER TO ARMY DATED APRIL 30, 1962. THIS LETTER STATES, IN PERTINENT PART, THAT "THIS ASSIGNMENT SHOWS THAT WEGEMATIC CORPORATION IS THE UNQUALIFIED OWNER OF THE WEAR REDUCTION ADDITIVE APPLICATIONS AND INVENTIONS.' IT IS WELL-SETTLED THAT THE GRANT OF AN EXCLUSIVE LICENSE TO MAKE, SELL AND USE A PATENTED INVENTION THROUGHOUT THE UNITED STATES--- AN ASSIGNMENT OF THE PATENT--- CONSTITUTES A TRANSFER OF THE ENTIRE PATENT RIGHTS OR MONOPOLY. ALL STEEL ENGINES V TAYLOR ENGINES, 88 F.SUPP. 745, AFFIRMED 192 F.2D 171. EQUALLY WELL-SETTLED IS THE PRINCIPLE THAT, IN THE ABSENCE OF AN EXPRESS PROVISION IN THE GRANTING CLAUSE TO THE CONTRARY, TERRITORIAL LIMITATIONS MAY NOT BE READ INTO TRANSFERS OF INVENTIONS AND DISCOVERIES. AMERICAN CYANAMID CO. V ELLIS-FOSTER CO., SUPRA. ACCORDINGLY, WE ARE CONVINCED THAT MTD RETAINED NO RIGHTS UNDER ITS UNITED STATES PATENTS--- INCLUDING THE RIGHT TO MANUFACTURE AND SELL WITHIN THE UNITED STATES FOR EXPORT--- AND TRANSFERRED ALL RIGHTS IN THE UNITED STATES PATENTS TO WEGEMATIC WITHOUT RESTRICTION.

ON MAY 8, 1964, MTD AND THE INVENTORS TRANSFERRED TO WEGEMATIC THE RIGHT TO GRANT THE UNITED STATES GOVERNMENT A RIGHT TO USE ADDITIVE AMMUNITION THROUGHOUT THE WORLD, AND ALSO THE RIGHT TO PERMIT THE USE OF THE INVENTION BY OTHERS THROUGHOUT THE WORLD UNDER CERTAIN STATED CONDITIONS, TO TAKE EFFECT UPON EXECUTION OF THE ANTICIPATED AGREEMENT BETWEEN WEGEMATIC AND THE UNITED STATES. ON JANUARY 5, 1965, MTD AND WEGEMATIC ENTERED INTO ANOTHER AGREEMENT RECONFIRMING THE PRIOR ASSIGNMENT OF UNITED STATES PATENT RIGHTS EXECUTED ON DECEMBER 1, 1961. ON JANUARY 8, 1965, THE INVENTORS, MTD AND WEGEMATIC RECONFIRMED THE AGREEMENT OF MAY 8, 1964, RELATIVE TO CERTAIN EXTRATERRITORIAL RIGHTS TO THE INVENTION AND PROVIDED FOR AN ADDITIONAL RIGHT OF THE GOVERNMENT TO RENOVATE ANY OF ITS AMMUNITION IN ANY COUNTRY. THESE AGREEMENTS OF JANUARY 5 AND 8, 1965, WERE EXPRESSLY INCORPORATED INTO THE FINAL LICENSE AGREEMENT BETWEEN WEGEMATIC AND THE UNITED STATES. CONTRARY TO THE CONTENTION OF THE CLAIMANTS THAT THE CONDITIONS STATED IN THE ABOVE-MENTIONED AGREEMENTS RESTRICTED THE RIGHTS OF WEGEMATIC OR OF THE UNITED STATES AS ITS LICENSEE UNDER THE UNITED STATES PATENTS TO SELL FOR USE OUTSIDE THE UNITED STATES, WE ARE UNABLE TO CONCLUDE THAT THOSE SUPPLEMENTAL AGREEMENTS WERE INTENDED TO DO ANY MORE THAN TO ADD TO THE PREVIOUS TRANSFER OF ALL UNITED STATES PATENT RIGHTS THE ADDITIONAL AUTHORITY TO COFER UPON THE UNITED STATES THE RIGHT, FREE OF CLAIMS UNDER ANY FOREIGN PATENTS OF THE ASSIGNORS, TO USE THE ADDITIVE FOR ITSELF THROUGHOUT THE WORLD; TO MODIFY AMMUNITION BELONGING TO IT ANYWHERE IN THE WORLD; AND TO DISPOSE OF AMMUNITION MANUFACTURED BY IT TO OTHER NATIONS THROUGHOUT THE WORLD (ALSO FREE OF FOREIGN PATENT CLAIMS) SO LONG AS SUCH DISPOSITION WAS WITHOUT COMPENSATION TO THE UNITED STATES. THE LAST STATED CONDITION, AS WE READ IT, IS APPLICABLE ONLY TO THE RIGHT TO CONFER UPON THE DONEES THE RIGHT TO USE FREE OF FOREIGN PATENT CLAIMS, AND NOT TO ANY RIGHT DERIVED FROM THE UNITED STATES PATENTS. WE THEREFORE FIND NO LIMITATION ON THE RIGHTS OF WEGEMATIC TO GRANT TO THE UNITED STATES ALL THE RIGHTS CLAIMED BY IT.

UPON CONSIDERATION OF THE RECORD BEFORE US WE CONCLUDE, FOR THE REASONS STATED ABOVE, THAT THE ALLEGED BREACH BY THE GOVERNMENT OF THE PROVISIONS OF THE LICENSE AGREEMENT OF MAY 1, 1966, IS NOT SO CLEARLY ESTABLISHED AS TO JUSTIFY ADMINISTRATIVE SETTLEMENT OF ANY CLAIM BY WEGEMATIC OR ITS ASSIGNORS THEREFOR, OR TO FURNISH CONSIDERATION FOR AMENDMENT OF THE AGREEMENT TO PROVIDE FOR ADDITIONAL PAYMENTS BY THE UNITED STATES.