B-159356, SEPTEMBER 20, 1966, 46 COMP. GEN. 227

B-159356, SEPTEMBER 20, 1966, 46 COMP. GEN. 227

PATENTS - INFRINGEMENT - ACTION AGAINST CONTRACTORS, ETC. THE INCLUSION BY A SUBCONTRACTOR AT THE REQUEST OF THE GOVERNMENT OF A NON-AUTHORIZATION AND CONSENT CLAUSE IN ITS REQUEST FOR PROPOSALS THEREBY PERMITTING A PATENT HOLDER TO PROCEED AGAINST THE SUBCONTRACTOR IN A FEDERAL DISTRICT COURT FOR INJUNCTIVE OR OTHER APPROPRIATE RELIEF IS NEITHER CONTEMPLATED BY NOR PERMITTED UNDER 28 U.S.C. 1498/A) GIVING A PATENT HOLDER THE RIGHT TO SUE THE UNITED STATES IN THE COURT OF CLAIMS FOR REASONABLE COMPENSATION FOR PATENT INFRINGEMENT WITH THE CONSENT OF THE GOVERNMENT IN ORDER TO MEET CONTRACT SPECIFICATIONS. TO GIVE CONTRACTING OFFICERS THE OPTION TO WITHHOLD THE GOVERNMENT'S "AUTHORIZATION AND CONSENT" FOR SUBCONTRACTORS, AS WELL AS CONTRACTORS AND OTHERS, TO USE OR MANUFACTURE PATENTED PRODUCTS THE GOVERNMENT IS OBLIGED TO ACCEPT WOULD VITIATE THE EFFECT OF THE ROYALTY ADJUSTMENT ACT OF 1942 ADDED TO 28 U.S.C. 1498. PATENTS - INFRINGEMENT - GOVERNMENT LIABILITY - AUTHORIZATION AND CONSENT TO USE PATENTS WITHHELD. THE WITHHOLDING BY THE GOVERNMENT OF "AUTHORIZATION AND CONSENT" TO MANUFACTURE A PATENTED INVENTION TO MEET GOVERNMENT CONTRACT SPECIFICATIONS IS AN ATTEMPT TO WITHHOLD POSSIBLE LIABILITY FOR INFRINGEMENT WHICH THE COURTS HOLD CONGRESS HAS PLACED UPON THE GOVERNMENT AND SHIFTS THE LIABILITY DIRECTLY TO THE CONTRACTOR, AND ALTHOUGH THERE IS NO PROHIBITION AGAINST SHIFTING INFRINGEMENT SUIT LIABILITY TO THE CONTRACTOR INDIRECTLY BY MEANS OF AN INDEMNITY PROVISION, IT IS INCONSISTENT FOR THE GOVERNMENT NOT TO CONDONE INFRINGEMENT, BUT NEVERTHELESS ACCEPT A PRODUCT REGARDLESS OF A PATIENT INFRINGEMENT. THEREFORE, THE CONTRACTUAL OBLIGATION TO ACCEPT A PRODUCT WHICH MAY INFRINGE ON A PATENT IS SUFFICIENT TO PROVIDE THE GOVERNMENT'S AUTHORIZATION AND CONSENT, AND THE ACCEPTANCE OF INFRINGING GOODS BRINGS AN INFRINGEMENT WITHIN THE AMBIT OF 28 U.S.C. 1498, PROTECTING GOVERNMENT CONTRACTORS AND SUBCONTRACTORS FROM SUIT IN A DISTRICT COURT. CONFLICTING DICTUM IN B-147536, MARCH 22, 1962 AND B 158790, APRIL 15, 1966 SHOULD BE IGNORED. PATENTS - INFRINGEMENT - SUITS IN DISTRICT COURTS OF THE UNITED STATES. THE REMEDY OF INFRINGEMENT SUITS IN THE COURT OF CLAIMS PRESCRIBED IN 28 U.S.C. 1498/A) IS EXCLUSIVE AND PRECLUDES SUIT IN THE DISTRICT COURTS FOR PATENT INFRINGEMENT BY A GOVERNMENT CONTRACTOR, REGARDLESS OF WHETHER THE INVENTION WAS EMBODIED IN THE ITEM TO BE DELIVERED TO THE GOVERNMENT OR WAS MERELY USED AT THE OPTION OF THE CONTRACTOR AS A MEANS TO AID IN THE MANUFACTURE OF THE ITEM, AND AN EXPRESS WITHHOLDING OF AUTHORIZATION AND CONSENT BY THE GOVERNMENT TO USE A PATENTED PROCESS WOULD NOT GIVE THE PATENTEE A RIGHT TO SEEK RELIEF FROM THE CONTRACTOR IN A DISTRICT COURT. THE REQUIREMENT TO USE A PATENT IS EQUIVALENT TO AUTHORIZATION AND CONSENT TO USE, THEREFORE, THE GOVERNMENT AFTER AUTHORIZING USE OF A PATENTED ITEM, CANNOT NULLIFY THAT AUTHORIZATION BY PROFESSING TO WITHHOLD IT. PATENTS - SUBCONTRACTORS USE - NONAUTHORIZATION AND CONSENT CLAUSES. WHETHER A DISTRICT COURT UNDER THE RATIONALE OF WOOD V. ATLANTIC GULF AND PACIFIC CO; 296 FED. 718, AND CONSOLIDATED VACUUM CORP. V. MACHINE DYNAMICS, INC; 230 F. SUPP. 70, WOULD ASSUME JURISDICTION OF AN INFRINGEMENT SUIT AGAINST A GOVERNMENT SUBCONTRACTOR WOULD DEPEND ON WHETHER THE ALLEGED USE OF A PATENTED ARTICLE WAS AT THE OPTION OF THE SUBCONTRACTOR RATHER THAN WITH THE AUTHORIZATION AND CONSENT OF THE GOVERNMENT, AND IF THE COURT FOUND THE USE WAS THE ONLY FEASIBLE MEANS TO PERFORM THE CONTRACT, IT WOULD NO DOUBT HOLD THAT THE GOVERNMENT GAVE ITS AUTHORIZATION AND CONSENT FOR THE USE OF THE ARTICLE AND THEREFORE IT WAS WITHOUT JURISDICTION TO CONSIDER THE INFRINGEMENT SUIT, WHETHER THE REMEDY REQUESTED WAS DAMAGES OR INJUNCTION. TO PREVENT THE INCLUSION IN BID PRICES OF CONTINGENT COSTS TO COVER POSSIBLE INFRINGEMENT SUITS, A NONAUTHORIZATION AND CONSENT CLAUSE SHOULD BE CONDITIONED TO THE EFFECT THAT THE WITHHOLDING OF CONSENT APPLIES ONLY IF THE USE IS NOT ECONOMICALLY OR REASONABLY NECESSARY TO MANUFACTURE AN ARTICLE UNDER A GOVERNMENT CONTRACT.

TO THE CHAIRMAN, UNITED STATES ATOMIC ENERGY COMMISSION, SEPTEMBER 20, 1966:

WE HAVE RECEIVED AN ADMINISTRATIVE REPORT DATED JULY 12, 1966, FROM MR. R. E. HOLLINGSWORTH, GENERAL MANAGER, CONCERNING A PROTEST BY GENERAL ATOMIC DIVISION OF GENERAL DYNAMICS CORPORATION, AGAINST AEC'S DIRECTING ONE OF ITS SUBCONTRACTORS TO INCLUDE IN ITS REQUEST FOR PROPOSALS FOR PYROCARBON COATED URANIUM CARBIDE PARTICLES THE FOLLOWING CLAUSE, WHICH WE SHALL HEREINAFTER REFER TO AS THE "NON AUTHORIZATION AND CONSENT CLAUSE":

WITHOUT PREJUDICE TO ANY RIGHTS UNDER ARTICLE XX PATENT INDEMNITY, THE GOVERNMENT SPECIFICALLY WITHHOLDS ITS AUTHORIZATION AND CONSENT TO USE IN THE PERFORMANCE OF THIS CONTRACT OR ANY PART THEREOF, OR ANY AMENDMENT THERETO, OR ANY SUBCONTRACT THEREUNDER, ANY INVENTION CLAIMED IN UNITED STATES PATENTS NOS. 3,129,188 AND 3,163,609 WHICH MAY BE USED IN THE MANUFACTURE OR EMBODIED IN THE STRUCTURE OR COMPOSITION OF ANY ARTICLE, THE DELIVERY OF WHICH IS ACCEPTED BY THE GOVERNMENT UNDER THIS CONTRACT.

ARTICLE XX PROVIDES:

ARTICLE XX---PATENT INDEMNITY ARTICLE

DELETE ARTICLE 14 OF WANL TERMS AND CONDITIONS NE-1, REV. 3, AND SUBSTITUTE THE FOLLOWING:

SELLER AGREES TO INDEMNIFY THE BUYER AND THE GOVERNMENT, ITS OFFICERS, AGENTS, SERVANTS AND EMPLOYEES AGAINST LIABILITY FOR ANY KIND (INCLUDING COST AND EXPENSES INCURRED) FOR THE USE OF ANY INVENTION OR DISCOVERY AND FOR THE INFRINGEMENT OF ANY LETTERS PATENT (NOT INCLUDING LIABILITY, ARISING PURSUANT TO SECTION 183, TITLE 35 (1952) U.S. CODE, PRIOR TO THE ISSUANCE OF LETTERS PATENT) OCCURRING IN THE PERFORMANCE OF THIS PURCHASE ORDER OR ARISING BY REASON OF THE USE OR DISPOSAL BY OR FOR THE ACCOUNT OF THE BUYER AND THE GOVERNMENT OF ITEMS MANUFACTURED OR SUPPLIED UNDER THIS PURCHASE ORDER.

MR. HOLLINGSWORTH REPORTS THAT PATENT NO. 3,129,188 IS A PRODUCT PATENT FOR PYROCARBON COATED URANIUM CARBIDE PARTICLES MADE BY A PARTICULAR METHOD, THAT PATENT NO. 3,163,609 IS A PROCESS PATENT ON A METHOD OF PRODUCING SUCH PARTICLES, THAT BOTH PATENTS ARE THE PROPERTY OF MINNESOTA MINING AND MANUFACTURING CO. (3M-S), AND THAT, WHILE THE VALIDITY OF NEITHER PATENT HAS BEEN TESTED IN COURT, AEC AND GENERAL ATOMIC ARE OF THE OPINION, CONTRARY TO THAT OF 3M-S, THAT PARTICLES SUPPLIED IN THE PAST BY GENERAL ATOMIC DID NOT INFRINGE ANY VALID PATENT CLAIM OF 3M-S. WE ARE ALSO ADVISED THAT THE SPECIFICATION IN THE RFP DOES NOT DESCRIBE THE METHOD BY WHICH THESE PARTICLES SHOULD BE PRODUCED, AND THAT AEC HAS NO KNOWLEDGE AS TO WHETHER THE METHOD BY WHICH GENERAL ATOMIC CLAIMS TO MANUFACTURE SUCH PARTICLES CONFORMING TO THE SPECIFICATIONS IS OR IS NOT COVERED BY THE 3M'S PROCESS PATENT. WE UNDERSTAND 3M'S HAS GRANTED NO LICENSES OF THE SUBJECT PATENTS, AND THAT AEC'S ATTEMPT TO OBTAIN SATISFACTORY LICENSING TERMS WAS UNSUCCESSFUL.

MR. HOLLINGSWORTH SAYS THAT THE "NONAUTHORIZATION AND CONSENT CLAUSE", IF EFFECTIVE, WOULD PERMIT 3M'S TO PROCEED AGAINST A GOVERNMENT SUBCONTRACTOR IN A FEDERAL DISTRICT COURT FOR INJUNCTIVE OR OTHER APPROPRIATE RELIEF. HOWEVER, HE THINKS IT IS EXTREMELY UNLIKELY THAT AN INJUNCTION WOULD BE GRANTED BECAUSE NEITHER THE VALIDITY OF THE TWO PATENTS NOR THE FACT OF INFRINGEMENT HAS BEEN ESTABLISHED IN A COURT OF LAW. FURTHERMORE, HE SAYS DELAYS RESULTING FROM AN INJUNCTION WOULD BE CONSIDERED EXCUSABLE, AND THAT SUCH DELAYS NEED NOT OCCUR BECAUSE THE GOVERNMENT COULD ENTER THE INJUNCTION PROCEEDINGS AND FURNISH ITS AUTHORIZATION AND CONSENT. THE "NONAUTHORIZATION AND CONSENT CLAUSE" WAS INCLUDED IN THE RFP IN ORDER TO AVOID ANY IMPLICATION THAT AEC GAVE ITS AUTHORIZATION AND CONSENT TO OR ENCOURAGED INFRINGEMENT OF THE 3M'S PATENTS BY SUPPLIERS.

THE FIRST ISSUE BEFORE US IS WHETHER THE "NONAUTHORIZATION AND CONSENT CLAUSE" IS CONTEMPLATED OR PERMITTED BY 28 U.S.C. 1498 (A), WHICH PROVIDES IN RELEVANT PART:

(A) WHENEVER AN INVENTION DESCRIBED IN AND COVERED BY A PATENT OF THE UNITED STATES IS USED OR MANUFACTURED BY OR FOR THE UNITED STATES WITHOUT LICENSE OF THE OWNER THEREOF OR LAWFUL RIGHT TO USE OR MANUFACTURE THE SAME, 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.

FOR THE PURPOSES OF THIS SECTION, THE USE OR MANUFACTURE OF AN INVENTION DESCRIBED IN AND COVERED BY A PATENT OF THE UNITED STATES BY A CONTRACTOR, A SUBCONTRACTOR, OR ANY PERSON, FIRM, OR CORPORATION FOR THE GOVERNMENT AND WITH THE AUTHORIZATION OR CONSENT OF THE GOVERNMENT, SHALL BE CONSTRUED AS USE OR MANUFACTURE FOR THE UNITED STATES.

THE FIRST PARAGRAPH QUOTED ABOVE IS SUBSTANTIALLY THE SAME AS THE FIRST SENTENCE OF THE ACT OF JULY 1, 1918, CH. 114, 40 STAT. 705, WHICH AMENDED THE ACT OF JUNE 25, 1910, CH. 423, 36 STAT. 851. THE SECOND PARAGRAPH QUOTED ABOVE ORIGINALLY WAS ENACTED AS SECTION 6 OF THE ROYALTY ADJUSTMENT ACT OF 1942, 56 STAT. 1014, AND WAS ADDED TO 28 U.S.C. 1498 BY SECTION 50/C) OF THE ACT OF OCTOBER 31, 1951, 65 STAT. 727.

THE GENERAL MANAGER'S VIEW THAT THE STATUTE DOES PERMIT AN AGENCY TO WITHHOLD ITS AUTHORIZATION AND CONSENT IS GROUNDED ON THE SECOND PARAGRAPH OF 28 U.S.C. 1498/A). HE REASONS THAT THE EFFECT OF ADDING THE LANGUAGE IN SECTION 6 OF THE 1942 ACT TO 28 U.S.C. 1498 WAS TO MAKE EXPLICIT THE REQUIREMENT (WHICH PRESUMABLY HAD IMPLICITLY BEEN IN EXISTENCE SINCE PASSAGE OF THE ACT OF 1918) THAT UNAUTHORIZED USE OR MANUFACTURE OF A PATENTED INVENTION "FOR THE U.S;, MUST BE "WITH THE AUTHORIZATION AND CONSENT OF THE GOVERNMENT" IF THE GOVERNMENT IS TO ASSUME INFRINGEMENT LIABILITY UNDER THE STATUTE. HE THEREFORE STATES THAT IF THERE IS NO AUTHORIZATION AND CONSENT, A SUIT FOR INFRINGEMENT LIES AGAINST THE CONTRACTOR IN A FEDERAL DISTRICT COURT OF APPROPRIATE JURISDICTION RATHER THAN AGAINST THE GOVERNMENT IN THE COURT OF CLAIMS.

WHILE WE DO NOT QUESTION THAT SECTION 6 OF THE 1942 STATUTE RECOGNIZED "AUTHORIZATION AND CONSENT" BY THE GOVERNMENT AS A NECESSARY ELEMENT OF A SUIT AGAINST IT FOR INFRINGEMENT BY ITS CONTRACTORS OR SUBCONTRACTORS, WE BELIEVE THE GENERAL MANAGER IS IN ERROR WHEN HE CONCLUDES THAT, A FORTIORI, THE INTENDED EFFECT OF THE 1942 STATUTE IS TO GIVE GOVERNMENT CONTRACTING OFFICERS THE OPTION OF WITHHOLDING THE GOVERNMENT'S "AUTHORIZATION AND CONSENT" FOR CONTRACTORS TO USE OR MANUFACTURE A PATENTED PRODUCT WHICH THE GOVERNMENT IS OBLIGED UNDER ITS SPECIFICATIONS TO ACCEPT. IN BOSTON SAND COMPANY V. UNITED STATES, 278 U.S. 41, 48 (1928), JUSTICE HOLMES REMARKED THAT IF CONGRESS USED A CERTAIN PHRASE WITH A MORE LIMITED MEANING THAN MIGHT BE ATTRIBUTED TO IT BY COMMON PRACTICE, IT WOULD BE ARBITRARY TO REFUSE TO CONSIDER THAT FACT IN THE INTERPRETATION OF THE STATUTE IN WHICH THE PHRASE IS INCLUDED. WE THINK A REVIEW OF THE LEGISLATIVE HISTORY, AND OF THE RELEVANT COURT CASES, WILL DEMONSTRATE THAT CONGRESS DID NOT ENVISION A DENIAL BY CONTRACTING OFFICERS OF THE "AUTHORIZATION AND CONSENT" REFERRED TO IN THE STATUTE, AT LEAST WITH RESPECT TO PATENTED PRODUCTS MANUFACTURED FOR ULTIMATE USE BY THE GOVERNMENT, SINCE SUCH DENIAL WOULD VITIATE THE BROADING EFFECT OF SECTION 6 OF THE 1942 ACT WHICH INTRODUCED THE "AUTHORIZATION AND CONSENT" LANGUAGE, AS WELL AS THE PURPOSE OF THE 1918 STATUTE ITSELF. AS THE COURT OBSERVED IN TIMKIN-DETROIT AXEL COMPANY V. ALMA MOTOR COMPANY, 144 F. 2D. 714, 716, (3D. CIR. 1944), REGARDING SECTIONS 1 AND 2 OF THE ROYALTY ADJUSTMENT ACT OF 1942,"THIS LEGISLATION (THE ACT OF 1918) AND THE DECISIONS UPHOLDING IT GO VERY FAR IN TAKING AWAY ANY ELEMENT OF STARTLING NOVELTY WHICH MIGHT IMPRESS ONE FIRST CONFRONTED WITH THE 1942 STATUTE;,

THE ACT OF JUNE 25, 1910, CH. 423, 36 STAT. 851, FORECLOSED THE GOVERNMENT'S CONTINUING TO REFUSE TO BE SUED FOR PATENT INFRINGEMENT BY CLAIMING SOVEREIGN IMMUNITY. THIS ACT SPECIFIED THE COURT OF CLAIMS AS THE FORUM FOR SUITS WHERE A PATENTED INVENTION WAS "USED BY THE U.S. WITHOUT LICENSE;, IN MARCH 1918, AT THE HEIGHT OF WORLD WAR I, THE SUPREME COURT HELD THAT THE STATUTE PERMITTED SUITS FOR DAMAGES AND INJUNCTIVE RELIEF BY PATENT OWNERS AGAINST GOVERNMENT CONTRACTORS MAKING WAR MATERIALS. CRAMP AND SON V. CURTIS TURBINE CO; 246, U.S. 28, AND MARCONI WIRELESS CO. V. SIMON, 246 U.S. 46. IN APRIL OF 1918, FRANKLIN D. ROOSEVELT, THEN ACTING SECRETARY OF THE NAVY, WROTE TO THE CHAIRMAN OF THE COMMITTEE ON NAVAL AFFAIRS OF THE SENATE, IN WHICH HE SAID, REFERRING TO THE CRAMP CASE, THAT HIS DEPARTMENT WAS:

* * * CONFRONTED WITH A DIFFICULT SITUATION AS THE RESULT OF A RECENT DECISION BY THE SUPREME COURT AFFECTING THE GOVERNMENT'S RIGHTS AS TO THE MANUFACTURE AND USE OF PATENTED INVENTIONS, AND IT SEEMS NECESSARY THAT AMENDMENT BE MADE OF THE ACT OF JUNE 25, 1910 * * * THE DECISION IS, IN EFFECT, SO FAR AS IT IS OF IMPORTANCE HERE, THAT A CONTRACTOR FOR THE MANUFACTURE OF A PATENTED ARTICLE FOR THE GOVERNMENT IS NOT EXEMPT, UNLESS HE IS ONLY A CONTRIBUTORY INFRINGER, FROM INJUNCTION AND OTHER INTERFERENCE THROUGH LITIGATION BY THE PATENTEE.

A PRIOR DECISION OF THE SUPREME COURT, THAT IN THE CASE OF CROZIER V. KRUPP, HAD BEEN INTERPRETED AS HAVING THE OPPOSITE MEANING, AND THE DEPARTMENT WAS ABLE UP TO THE TIME OF THE LATER DECISION, ON MARCH 4TH LAST, TO PROCEED SATISFACTORILY WITH THE PROCURING OF SUCH PATENTED ARTICLES AS IT NEEDED, LEAVING THE MATTER OF COMPENSATION TO PATENTEES FOR ADJUSTMENT BY DIRECT AGREEMENT, OR, IF NECESSARY, BY RESORT TO THE COURT OF CLAIMS UNDER THE ABOVE MENTIONED ACT OF 1910. NOW, HOWEVER, MANUFACTURERS ARE EXPOSED TO EXPENSIVE LITIGATION, INVOLVING THE POSSIBILITIES OF PROHIBITIVE INJUNCTION, PAYMENT OF ROYALTIES, RENDERING OF ACCOUNTS, AND PAYMENT OF PUNITIVE DAMAGES, AND THEY ARE RELUCTANT TO TAKE CONTRACTS THAT MAY BRING SUCH SEVERE CONSEQUENCES. THE SITUATION PROMISES SERIOUS DISADVANTAGE TO THE PUBLIC INTERESTS, AND IN ORDER THAT VITAL ACTIVITIES OF THIS DEPARTMENT MAY NOT BE RESTRICTED UNDULY AT THIS TIME, AND ALSO WITH A VIEW OF ENABLING DISSATISFIED PATENTEES TO OBTAIN JUST AND ADEQUATE COMPENSATION IN ALL CASES CONFORMABLY TO THE DECLARED PURPOSE OF SAID ACT, I HAVE THE HONOR TO REQUEST THAT THE ACT BE AMENDED BY THE INSERTION OF A PROPER PROVISION THEREFOR IN THE PENDING NAVAL APPROPRIATION BILL.

SEE RICHMOND SCREW ANCHOR CO. V. UNITED STATES, 275 U.S. 331, 342 (1927).

CONGRESS PROMPTLY ENACTED THE ACT OF JULY 1, 1918, CH. 114, 40 STAT. 705, WHICH PROVIDED IN RELEVANT PART:

"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 * * *.

THE AVOWED PURPOSE OF THE AMENDMENT WAS TO PREVENT THE INJUNCTION PROCESS BY THE COURTS BEING USED TO PREVENT PRIVATE MANUFACTURERS FROM DOING GOVERNMENT WORK. SEE STATEMENT TO THE HOUSE BY MR. PADGETT, 57 CONG. REC. 7961 (1918). THE PURPOSE OF THE 1918 ACT APPEARED TO HAVE BEEN ACCOMPLISHED FOR WITHIN 7 MONTHS AFTER ITS PASSAGE A FEDERAL DISTRICT COURT DENIED INJUNCTIVE RELIEF AGAINST A GOVERNMENT SUBCONTRACTOR ALLEGED TO HAVE INFRINGED PATENTS ON FOUNDATION CAISSONS TO BE SUPPLIED TO THE GOVERNMENT. FOUNDATION CO. V. UNDERPINNING AND FOUNDATION CO. 256 F. 374 (S.D.N.Y. 1919). ALSO SEE FLOYD SMITH AERIAL EQUIPMENT CO. V. IRVING AIR CHUTE CO. 276 F. 834 (W.D.N.Y. 1921).

HOWEVER, THE EXTENT OF THAT ACCOMPLISHMENT BECAME LESS THAN COMPLETE WHEN THE COURT IN WOOD V. ATLANTIC GULF AND PACIFIC CO; 296 FED. 718 (S.D. ALA. 1924), GAVE FIRST EXPRESSION TO THE DOCTRINE OF "AUTHORIZATION AND CONSENT;, ATLANTIC GULF HAD BEEN AWARDED A GOVERNMENT CONTRACT FOR DREDGING SERVICES. THE CONTRACT SPECIFICATIONS WERE SILENT WITH RESPECT TO WHICH OF SEVERAL DREDGING MACHINES THE CONTRACTOR SHOULD USE TO PERFORM THE SERVICES. ATLANTIC GULF CHOSE TO USE MACHINERY PATENTED BY WOOD. UPON A MOTION TO REOPEN THE COURT'S DECREE OF INJUNCTION, THE COURT STATED:

BUT, CONCEDING THE NEED OF THE GOVERNMENT THAT WORK DONE FOR IT SHOULD BE PROTECTED * * * AND ALSO CONCEDING THAT * * * IT "/THE AMENDMENT OF 1918)" WAS INTENDED . . . TO PROTECT ONE WHO USED PATENTED ARTICLE IN WORK DONE FOR THE GOVERNMENT, STILL SUCH USE SHOULD NOT BE EXTENDED TO A CASE WHERE IT WAS NOT WITH THE KNOWLEDGE AND CONSENT OF THE GOVERNMENT.

* * * I AM THEREFORE OF THE OPINION THAT, IF THE FACTS BEFORE THE COMMISSIONER SHOW THAT THIS DEFENDANT HAD A CONTRACT WHICH REQUIRED CERTAIN DREDGING OPERATIONS TO BE DONE BY IT FOR THE UNITED STATES, WITHOUT FURTHER SHOWING THAT THE UNITED STATES EITHER REQUIRED THE USE BY THE CONTRACTOR OF THE WOOD RUNNER, OR HAD KNOWLEDGE THAT THE WOOD RUNNER WAS TO BE USED OR WAS BEING USED BY DEFENDANT IN DOING THIS DREDGING OPERATION, THE ACT DOES NOT AFFECT SUCH USE, AND THE COMMISSIONER WILL PROCEED JUST THE SAME AS IF THE ACT HAD NEVER BEEN PASSED. THE FOLLOWING CASES ARE CITED AS IN CONFLICT WITH MY VIEWS:

IN THE CASE OF FOUNDATION CO. V. UNDERPINNING AND FOUNDATION CO. (D.C.) 256 FED. 374, IT DOES NOT APPEAR WHETHER THE CONTRACT WITH THE GOVERNMENT REQUIRED THE USE BY THE CONTRACTOR OF THE PATENTED ARTICLE, BUT IT DOES APPEAR THAT A SPECIAL ASSISTANT UNITED STATES ATTORNEY APPEARED A AMIUS CURIAE; SO WE KNOW THAT THE GOVERNMENT WAS COGNIZANT OF THE USE BY THE CONTRACTOR OF THE PATENTED ARTICLE AND TOOK THE TROUBLE TO APPEAR IN THE CAUSE, WHILE THERE IS NO SUCH APPEARANCE HERE. NOR DOES IT APPEAR FROM THE COURT'S DISCUSSION THAT THE POINT I MAKE WAS CONSIDERED BY THE COURT. IF THE OPINION IS TO BE CONSTRUED AS HOLDING THAT, IF THE PATENTED ARTICLE IS USED BY AN INDEPENDENT CONTRACTOR WITHOUT THE CONSENT OR KNOWLEDGE OF THE GOVERNMENT, THE GOVERNMENT THEREBY BECOMES SOLELY LIABLE, THEN I DECLINE TO FOLLOW IT.

THE HOLDING OF THE WOOD CASE WAS RELATED TO INJUNCTIONS AGAINST WHAT THE COURT REFERRED TO AS A PATENTED "TOOL" USED TO PERFORM THE SERVICES REQUIRED BY THE CONTRACT. THAT IS, THE HOLDING DID NOT INVOLVE A PATENTED PRODUCT THE TITLE TO WHICH WAS TO PASS TO THE GOVERNMENT, BUT RATHER INVOLVED A PATENTED ARTICLE OR DEVICE USED BY THE CONTRACTOR, WITHOUT KNOWLEDGE OR DIRECTION BY THE GOVERNMENT, AS A METHOD OF PERFORMING THE CONTRACT. HOWEVER, THE DICTA OF THE COURT WAS BROAD ENOUGH TO INCLUDE PATENTED PRODUCTS CONFORMING TO GOVERNMENT SPECIFICATIONS AS WELL AS PATENTED ARTICLES OR METHODS OF PERFORMANCE, AND ITS DISAGREEMENT WITH ONE INTERPRETATION OF THE FOUNDATION CO. CASE INDICATES THAT THE WOOD COURT WOULD NOT HAVE RESTRICTED THE LOGIC OF ITS HOLDING TO PATENTED PROCESSES.

IN 1927 THE SUPREME COURT HAD OCCASION TO CONSIDER THE ACT OF 1918 (AND TO REFER TO THE WOOD CASE WITHOUT COMMENT). IN RICHMOND SCREW ANCHOR CO. V. UNITED STATES, SUPRA, ON PAGE 343, THE COURT STATED:

THE PURPOSE OF THE AMENDMENT WAS TO RELIEVE THE CONTRACTOR ENTIRELY FROM LIABILITY OF EVERY KIND FOR THE INFRINGEMENT OF PATENTS IN MANUFACTURING ANYTHING FOR THE GOVERNMENT AND TO LIMIT THE OWNER OF THE PATENT AND HIS ASSIGNS AND ALL CLAIMING THROUGH OR UNDER HIM TO SUIT AGAINST THE UNITED STATES IN THE COURT OF CLAIMS FOR THE RECOVERY OF HIS REASONABLE AND ENTIRE COMPENSATION FOR SUCH USE AND MANUFACTURE. THE WORD "ENTIRE" EMPHASIZES THE EXCLUSIVE AND COMPREHENSIVE CHARACTER OF THE REMEDY PROVIDED.

IT IS UNCLEAR WHETHER THE COURT, IN REFERRING TO PROTECTION FOR INFRINGEMENT "IN MANUFACTURING ANYTHING FOR THE GOVERNMENT", INTENDED TO INCLUDE ALL TOOLS USED TO MANUFACTURE AN ARTICLE AS WELL AS THE MANUFACTURED ARTICLE. IN ANY EVENT, THE COURT DID NOT EXPLICITLY DISAGREE WITH THE WOOD DECISION, ALTHOUGH IT EVIDENTLY WAS AWARE OF THAT DECISION.

THE WOOD CASE WAS AGAIN CITED IN ALLGRUNN V. UNITED STATES, 67 CT. CL. 1, 47 (1929), BUT THE COURT OF CLAIMS THERE FOUND IMPLIED CONSENT FOR THE GOVERNMENT CONTRACTOR TO USE A PATENTED METHOD OF PERFORMING THE RIFLING OPERATION IN THE MANUFACTURE OF GUNS, AND THEREBY DECIDED TO RETAIN ITS JURISDICTION OVER THE MATTER. THE CONSENT WAS IMPLIED, THE COURT SAID, BECAUSE THE CIRCUMSTANCES INDICATED THE GOVERNMENT KNEW AND ENCOURAGED THE USE OF THE INVENTION.

IN BROOME V. HARDIE-TYNES MANUFACTURING CO; 92 F. 2D 886 (5TH CIR. 1937), THE CIRCUIT COURT OF APPEALS FOR THE CIRCUIT IN WHICH THE WOOD COURT SAT, IGNORED THE DICTA IN WOOD WHICH IMPLIED THAT AUTHORIZATION AND CONSENT WAS NOT TO BE FOUND MERELY FROM THE GOVERNMENT'S CONTRACT AUTHORIZING THE FURNISHING OF ANY PRODUCT MEETING THE SPECIFICATIONS, REGARDLESS OF WHETHER SUCH PRODUCT INFRINGED A PATENT. THE APPEALS COURT AFFIRMED THE LOWER COURT'S DISMISSAL OF A SUIT TO ENJOIN AN INFRINGEMENT WHICH ALLEGEDLY WOULD OCCUR IF THE DEFENDANT WERE PERMITTED TO CONTINUE DELIVERING SLUICE GATES UNDER ITS CONTRACT WITH THE GOVERNMENT. THE DEFENDANT HAD SUCCESSFULLY URGED IN THE LOWER COURT THAT THE ACT OF 1918 GAVE PLAINTIFF AN EXCLUSIVE REMEDY OF A SUIT AGAINST THE GOVERNMENT IN THE COURT OF CLAIMS FOR COMPENSATION. THE APPEALS COURT HELD:

A CAREFUL EXAMINATION OF THE RECORD CONVINCES US THAT IT FULLY SUSTAINS THE FACT FINDINGS OF THE DISTRICT JUDGE. INDEED, THE EVIDENCE IS WITHOUT CONTRADICTION WITH RESPECT TO THE MATTERS ON WHICH HE FINDS. WE ARE CLEAR THAT THE CONTRACT WAS WITH, AND WAS TO BE PERFORMED ON BEHALF OF, THE UNITED STATES, AND THAT IF THE DEFENDANT MAY BE SUBJECTED TO AN INJUNCTION AGAINST GOING ON WITH THE CONTRACT, THE PURPOSE AND EFFECT OF THE INVOKED STATUTE WOULD BE DEFEATED. THE DECISIONS HAVE MADE IT CLEAR WHAT THAT PURPOSE AND EFFECT IS, AND WE THINK IT MAY NOT BE DOUBTED THAT THE MISCHIEF WHICH GAVE RISE TO THE PASSAGE OF THE STATUTE, AND WHICH IT WAS DESIGNED TO AVOID, WOULD BE PRESENT HERE IF THE STATUS WERE WITHOUT APPLICATION. THE PROJECT ON WHICH THE WORK IS BEING DONE IS A GOVERNMENT PROJECT. THE STATUTE WAS DESIGNED TO FURNISH THE PATENTEES AN ADEQUATE AND EFFECTIVE REMEDY WHILE SAVING THE GOVERNMENT FROM HAVING ITS PUBLIC WORKS TIED UP AND THWARTED WHILE PRIVATE PARTIES ARE CARRYING ON A LONG DRAWN OUT LITIGATION. THE CASE PRESENTED HERE OF AN EFFORT TO STOP THE PROGRESS OF THE WORK THROUGH AN INJUNCTION AGAINST THE CONTRACTOR PRESENTS THE EXACT CASE THE STATUTE WAS DESIGNED TO MEET.

THE DECREE OF DISMISSAL WAS RIGHTLY ENTERED. IT IS AFFIRMED.

IN OTHER CASES PREDATING THE 1942 AMENDMENT WHICH INTRODUCED THE "AUTHORIZATION AND CONSENT" LANGUAGE INTO STATUTE, DISTRICT COURTS HELD THAT ACCEPTANCE BY THE GOVERNMENT OF AN ALLEGEDLY INFRINGING PRODUCT FORECLOSED SUIT AGAINST THE CONTRACTOR, THE PATENTEE'S EXCLUSIVE REMEDY BEING IN THE COURT OF CLAIMS AGAINST THE GOVERNMENT. HAZELTINE CORP. V. GENERAL ELECTRIC CO; 19 F. SUPP. 898 (D.C. MD. 1937), PIERCE V. SUBMARINE SIGNAL CO; 25 F. SUPP. 862 (D.C. MASS. 1939), POLLEN V. FORD INSTRUMENT CO; 108 F. 2D 762 (2D CIR. 1940); AND WESTERN ELECTRIC CO. V. HAMMOND, 135 F. 2D 283 (1ST CIR. 1943), INVOLVING A SUIT FILED IN 1941.

FROM THE CASES DISCUSSED ABOVE IT SEEMS FAIR TO CONCLUDE THAT THE STATE OF THE LAW, AT THE TIME OF PASSAGE OF THE ROYAL ADJUSTMENT ACT OF 1942, GENERALLY WAS THAT A PATENTEE'S EXCLUSIVE REMEDY FOR ALLEGED INFRINGEMENTS OF PATENTS BY GOVERNMENT CONTRACTORS WAS IN THE COURT OF CLAIMS. THE ONLY EXCEPTION CARVED OUT OF THAT GENERAL RULE BY THE WOOD CASE RELATED SOLELY TO PATENTS ON ARTICLES USED AS A METHOD OF PERFORMING THE ACTS OR OF MANUFACTURING THE GOODS FOR WHICH THE GOVERNMENT HAD CONTRACTED.

MR. HOLLINGSWORTH SUGGESTS THAT SECTION 6 OF THE ROYALTY ADJUSTMENT ACT OF 1942, 56 STAT. 1014, CHANGED PRE-EXISTING LAW NOT BY INTRODURING THE CONCEPT OF "AUTHORIZATION AND CONSENT", WHICH HAD ALREADY BEEN INCORPORATED BY THE COURT CASES, BUT BY PROVIDING THE GOVERNMENT WITH AN OPTION OF WITHHOLDING AUTHORIZATION AND CONSENT TO USE A PATENTED PRODUCT EVEN WHERE, BY VIRTUE OF ITS SPECIFICATIONS, THE GOVERNMENT BOTH AUTHORIZED THE ALLEGED INFRINGER TO SUPPLY, AND CONSENTED TO ACCEPT, ANY PRODUCT MEETING SUCH SPECIFICATIONS, REGARDLESS OF POSSIBLE INFRINGEMENT. SECTION 6 PROVIDED:

FOR THE PURPOSES OF THIS ACT, THE MANUFACTURE, USE, SALE, OR OTHER DISPOSITION OF AN INVENTION, WHETHER PATENTED OR UNPATENTED, BY A CONTRACTOR, A SUBCONTRACTOR, OR ANY PERSON, FIRM, OR CORPORATION FOR THE GOVERNMENT AND WITH THE AUTHORIZATION OR CONSENT OF THE GOVERNMENT SHALL BE CONSTRUED AS MANUFACTURE, USE, SALE, OR OTHER DISPOSITION FOR THE UNITED STATES AND FOR THE PURPOSES OF THE ACT OF JUNE 25, 1910, AS AMENDED (40 STAT. 705; 35 U.S.C. 68), THE USE OR MANUFACTURE OF AN INVENTION DESCRIBED IN AND COVERED BY A PATENT OF THE UNITED STATES BY A CONTRACTOR, A SUBCONTRACTOR, OR ANY PERSON, FIRM, OR CORPORATION FOR THE GOVERNMENT AND WITH THE AUTHORIZATION OR CONSENT OF THE GOVERNMENT, SHALL BE CONSTRUED AS USE OR MANUFACTURE FOR THE UNITED STATES.

MR. HOLLINGSWORTH'S INTERPRETATION OF THIS 1942 STATUTE NARROWS THE SCOPE OF 28 U.S.C. 1498 BY CREATING AN EXCEPTION TO ITS COVERAGE, TO WIT, THAT A GOVERNMENT CONTRACTOR IS NOT NECESSARILY PROTECTED FROM INFRINGEMENT SUITS IN DISTRICT COURTS BECAUSE THE GOVERNMENT MAY WITHHOLD ITS AUTHORIZATION AND CONSENT TO USE A PATENTED PRODUCT WHICH IT MAY NONETHELESS ACCEPT UPON DELIVERY. ON THE OTHR HAND, WE HAVE AGREED WITH THE STATEMENT IN DREXLER V. KOZA, 88 F. SUPP. 298 (W.D. PA. 1950), TO THE EFFECT THAT THE ROYALTY ADJUSTMENT ACT OF 1942 BROADENED RATHER THAN NARROWED THE SCOPE OF 28 U.S.C. 1498 (ALSO SEE 28 GEORGE WASHINGTON L.R. 120) AND HAVE HELD THAT 28 U.S.C. 1498 TOOK AWAY A PATENTEE'S RIGHT TO BRING AN ACTION AGAINST A GOVERNMENT CONTRACTOR IN THE DISTRICT COURTS OF THE UNITED STATES FOR AN INJUNCTION AND THE RECOVERY OF DAMAGES FOR PATENT INFRINGEMENTS, SUBSTITUTING IN ITS PLACE, WHERE THE STATUTE APPLIES, AN EXCLUSIVE AND COMPREHENSIVE REMEDY, I.E; A SUIT AGAINST THE GOVERNMENT IN THE COURT OF CLAIMS FOR REASONABLE COMPENSATION B-136916, AUGUST 25, 1958, AND B 151411, JUNE 10, 1963. IN THIS CONNECTION, WE BELIEVE A REVIEW IS WARRANTED OF THE LEGISLATIVE HISTORY OF THE ROYALTY ADJUSTMENT ACT OF 1942, AND OF SUBSEQUENT COURT CASES ON THE ISSUE.

THE DRAFT OF A BILL CONTAINING LANGUAGE SUBSTANTIALLY THE SAME AS THAT WHICH BECAME SECTION 6 OF THE ROYALTY ADJUSTMENT ACT OF 1942, AND A LETTER STATING THE PURPOSES OF THE BILL, WAS SENT TO THE SPEAKER OF THE HOUSE BY HENRY L. STIMSON, THEN SECRETARY OF WAR. THE LETTER STATED, IN RELEVANT PART:

THE PURPOSES OF THE PROPOSED LEGISLATION ARE:

(4) TO CLARIFY EXISTING LEGISLATION, NAMELY, THE ACT OF JUNE 25, 1910 (36 STAT. 851), AS AMENDED WITH RESPECT TO CONTRACTORS AND SUBCONTRACTORS MANUFACTURING, USING, SELLING, OR OTHERWISE DISPOSING OF INVENTIONS FOR GOVERNMENT USE.

THERE ALSO IS SOME DOUBT AS TO WHETHER THE PROVISIONS OF THE ACT OF JUNE 25, 1910, AS AMENDED, ARE SUFFICIENTLY BROAD TO COVER MANUFACTURERS * * * AND THEIR SUBCONTRACTORS * * *, AND TO AFFORD PROTECTION AGAINST INFRINGEMENT SUITS IN THE EVENT OF THE MANUFACTURE, USE, SALE, OR OTHER DISPOSITION UNDER SUCH CONDITIONS OF PATENTED ARTICLES ON ORDERS AND UNDER CONTRACTS WITH THE GOVERNMENT. TO ELIMINATE UNCERTAINTY AND PROPERLY AND FULLY PROTECT SUCH MANUFACTURERS AND USERS, INCLUDING SUBCONTRACTORS * * *, THE PROPOSED LEGISLATION IS DEEMED NECESSARY AND DESIRABLE.

THE PROPOSED LEGISLATION IS DESIGNED TO MEET THE EXISTING SITUATION AND TO AID IN EXPEDITING PRODUCTION FOR THE PROSECUTION OF THE WAR.

HEARINGS BEFORE COMMITTEE ON PATENT, HOUSE OF REPRESENTATIVES, ON H.R. 7620, 77TH CONG; 2D ESS; OCTOBER 1942, PAGES 3,4.

FROM THE ABOVE, IT APPEARS THAT THE SOLE PURPOSE OF THE DRAFTERS OF SECTION 6 OF THE ROYALTY ADJUSTMENT ACT WAS TO FACILITATE THE PROSECUTION OF THE WAR BY AFFORDING FULL PROTECTION FROM INFRINGEMENT SUITS AGAINST SUBCONTRACTORS. THE EXCLUSIVENESS OF THIS PURPOSE WAS CALLED INTO QUESTION BY A LETTER FROM THE PATENT LAW ASSOCIATION OF CHICAGO, DATED OCTOBER 9, 1942, WHICH WAS INCLUDED IN THE APPENDIX TO THE CITED HEARINGS OF OCTOBER 13, 14, 15, 1942, AND IN A SOMEWHAT AMBIGUOUS STATEMENT BY COLONEL EARL S. PATTERSON, WHO TESTIFIED BEFORE THE COMMITTEE FOR THE WAR DEPARTMENT. THE LETTER FROM THE ASSOCIATION ASKED FOR CLARIFICATION AS TO WHAT ACTS WOULD CONSTITUTE "AUTHORIZATION AND CONSENT", THUS CALLING ATTENTION TO THE FACT THAT THE LANGUAGE OF THE ACT WAS NOT LITERALLY CONFINED TO BRINGING SUBCONTRACTORS WITHIN THE AMBIT OF THE ACT OF 1918. THE STATEMENT OF COLONEL PATTERSON WAS TO THE EFFECT THAT THE AMENDMENT CHANGED EXISTING LEGISLATION IN "THAT THE USE OR MANUFACTURE OF AN INVENTION * * * BY A CONTRACTOR, A SUBCONTRACTOR, OR ANY PERSON, FIRM, OR CORPORATION FOR THE GOVERNMENT AND WITH THE AUTHORIZATION OR CONSENT OF THE GOVERNMENT, SHALL BE CONSTRUED AS USE OR MANUFACTURE FOR THE UNITED STATES;, SEE HEARINGS, PAGE 9 AND 83.

ALTHOUGH COLONEL PATTERSON'S STATEMENT WAS UNCLEAR AS TO WHETHER THE "SUBCONTRACTOR" LANGUAGE, OR THE "AUTHORIZATION AND CONSENT" LANGUAGE, OR BOTH, WERE INTENDED TO BE THE NEW ELEMENTS OF LAW IN SECTION 6, AND APPARENTLY CONTRADICTED THE SECRETARY OF WAR'S STATEMENT THAT THE PROPOSED SECTION MERELY CLARIFIED EXISTING LEGISLATION, COLONEL PATTERSON SUBSEQUENTLY BROUGHT THE MATTER BACK TO ITS PROPER FOCUS. ON PAGE 24 OF THE HEARINGS, THE FOLLOWING DIALOGUE IS RECORDED:

COLONEL PATTERSON. * * * THERE HAS ALWAYS BEEN SOME QUESTION IN THE MINDS OF PATENT LAWYERS AS TO WHETHER THE 1910 ACT AS AMENDED, APPLIED TO SUBCONTRACTORS, OR WHETHER IT APPLIED ONLY TO CONTRACTORS, PRIME CONTRACTORS WITH THE GOVERNMENT. IT WAS BELIEVED BEST TO SETTLE THAT CONTROVERSY, AND THAT QUESTION, ONCE AND FOR ALL, BY PUTTING IN A PROVISION, THAT INSOFAR AS THIS ACT IS CONCERNED, AND INSOFAR AS THE 1910 ACT AS AMENDED IS CONCERNED, THEY SHOULD APPLY TO SUBCONTRACTORS AS WELL AS CONTRACTORS OF THE GOVERNMENT.

MR. LANHAM. HAVE THERE BEEN COURT DECISIONS ON THAT?

COLONEL PATTERSON. NO, SIR; THEY HAVE NOT. THEREFORE, THE ARGUMENT PROCEEDS. AND, THAT ARGUMENT IS NOT ONLY AMONG PATENT LAWYERS AS SUCH, BUT ALSO BETWEEN DIFFERENT DEPARTMENTS OF THE GOVERNMENT. THERE HAS BEEN A NONCONFORMITY OF IDEAS AS IT WERE.

I MIGHT SAY THAT IT HAS ALWAYS BEEN THE OPINION OF THE WAR DEPARTMENT THAT THE ACT OF 1910 AS AMENDED, DOES APPLY TO SUBCONTRACTORS.

THE REPORT ON THE BILL WHICH BECAME THE ROYALTY ADJUSTMENT ACT OF 1942 HAD ONLY THE FOLLOWING COMMENT PERTAINING TO SECTION 6:

THE PURPOSES OF THIS MEASURE ARE:

5. TO CLARIFY EXISTING LAW; NAMELY, THE ACT OF JUNE 25, 1910, AS AMENDED (40 STAT. 705; 35 U.S.C. 68), WITH RESPECT TO CONTRACTORS AND SUBCONTRACTORS UTILIZING INVENTIONS FOR THE OVERNMENT; * * * HOUSE OF REPRESENTATIVES: HOUSE REPORT NO. 2602, 77TH CONGRESS, 2D SESSION, PAGE 3. FROM THE FOREGOING, WE CONCLUDE THAT IN THE ROYALTY ADJUSTMENT ACT OF 1942 CONGRESS CONFIRMED THAT THE ACT OF 1918 EXTENDED TO SUBCONTRACTORS, AND CLARIFIED BUT DID NOT CHANGE THE EXISTING LAW WITH RESPECT TO "AUTHORIZATION AND CONSENT;, IN VIEW OF THE EXPRESS PURPOSE OF FULLY PROTECTING CONTRACTORS AND SUBCONTRACTORS FROM THE INTERRUPTION OF THEIR GOVERNMENT CONTRACT WORK BY INFRINGEMENT SUITS, WE THINK THAT CONGRESS' UNDERSTANDING OF THE OPERATION OF SECTION 6 MAY HAVE CONTEMPLATED THAT A PROCURING ACTIVITY WOULD EXPRESSLY GIVE ITS "AUTHORIZATION AND CONSENT" REGARDING PATENTED "TOOLS" OR METHODS OF PERFORMANCE AND THEREBY PROTECT ITS WAR TIME CONTRACTORS FROM THE LIABILITY WHICH THE WOOD DECISION HAD FOUND WAS NOT PLACED UPON THE GOVERNMENT BY THE ACT OF 1918.

WE TURN NOW TO THE DECISIONS OF THOSE COURTS WHICH HAVE HAD OCCASION TO DEAL WITH THE ACT OF 1918 AND 28 U.S.C. 1498 AFTER THE PASSAGE OF THE ROYALTY ADJUSTMENT ACT OF 1942. THESE DECISIONS ESTABLISH THAT USE BY OR INTENDED DELIVERY TO THE GOVERNMENT OF ALLEGEDLY INFRINGING ARTICLES IS SUFFICIENT IN ITSELF TO BRING THE INFRINGING ACT WITHIN THE AMBIT OF 28 U.S.C. 1498, AND THEREBY PROTECT THE GOVERNMENT CONTRACTOR OR SUBCONTRACTOR FROM SUIT IN THE DISTRICT COURT. BERESLAVSKY V. STANDARD OIL CO OF NEW JERSEY, 82 F. SUPP. 939 (D. MARYLAND 1949), AFF-D 175 F. 2D 148 (4TH CIR. 1949); DREXLER V. KOZA, SUPRA; DEARBORN CHEMICAL CO. V. ARVEY CORP; 114 F. SUPP. 369 (N.D. ILL. 1953); J. AND G. DEVELOPMENT CO. V. ALL-TRONICS, INC; 198 F. SUPP. 392 (E.D. N.Y. 1961); CF. STELMA, INC. V. BRIDGE ELECTRONICS CO; 300 F. 2D 761 (3D CIR. 1962), WHERE THE CONTRACT EXPLICITLY PROVIDED AUTHORIZATION AND CONSENT TO USE ANY PATENTED INVENTION EMBODIED IN THE ARTICLE IT DELIVERED TO THE GOVERNMENT.

THE RANGE OF RATIONALES BY WHICH THE CITED COURTS HAVE REACHED THIS CONCLUSION IS EXTENSIVE, TO SAY THE LEAST. IN BERESLAVSKY, THE COURT FOUND THAT SINCE THE ACT OF 1918 EXPRESSLY APPLIES WHEREVER THE PATENTED INVENTION IS "USED OR MANUFACTURED BY OR FOR THE U.S;" AND SINCE THE SUBJECT INVENTION WAS USED BY THE UNITED STATES, THERE WAS NO NEED TO CONSIDER WHETHER THERE EXISTED THE "AUTHORIZATION AND CONSENT" REFERRED TO IN THE 1942 STATUTE, THE PURPOSE OF WHICH STATUTE WAS TO REMOVE DOUBT AS TO WHETHER THE ACT OF 1918 APPLIED TO SUBCONTRACTORS. THE COURT THEREFORE REJECTED PLAINTIFF'S ARGUMENT THAT SINCE THE CONTRACT DID NOT EXPRESSLY REQUIRE THE SUPPLYING OF AN INFRINGING PRODUCT, THE CASE SHOULD BE TREATED JUST AS THOUGH THE CONTRACTOR FOR HIS OWN BENEFIT HAD USED AN INFRINGING PROCESS OR AN INFRINGING MACHINE AS IN THE WOOD CASE.

IN REJECTING THE PLAINTIFF'S ARGUMENT, THE COURT POINTED OUT THAT THE INVENTION "WAS NOT ONLY -USED BY- BUT WAS ALSO -MANUFACTURED FOR- THE UNITED STATES;, THEREFORE, IT SEEMS THE BERESLAVSKY COURT WOULD ALSO HAVE DISMISSED A SUIT FOR INJUNCTION WHERE THE ALLEGEDLY INFRINGING ITEM HAD BEEN USED OR WAS BEING MANUFACTURED FOR, BUT HAD NOT BEEN USED BY, THE GOVERNMENT, SINCE IN ITS VIEW THE "AUTHORIZATION AND CONSENT" LANGUAGE OF THE ROYALTY ADJUSTMENT ACT WOULD THEN BE IRRELEVANT. HOWEVER, THE COURT QUOTES WITH APPARENT APPROVAL AN OPINION OF THE JUDGE ADVOCATE GENERAL OF THE ARMY (SEE PAGES 150, 151 OF THE DECISION) THAT CONSENT IS SUPPLIED BY THE GOVERNMENT'S ACCEPTANCE OF ARTICLES WHICH INCORPORATE THE ALLEGEDLY PATENTED INVENTION. (SEE OLSSON V. U.S; 87 CT. CL. 642, INDICATING THAT ACCEPTANCE VIRTUALLY ESTABLISHES "USE;,)

THE RATIONAL OF THE JUDGE ADVOCATE GENERAL WAS THE SAME ONE EMPLOYED BY THE COURT IN DREXLER V. KOZA, SUPRA. SINCE THE SUIT WAS AGAIN DUE FOR DAMAGES, RATHER THAN FOR AN INJUNCTION TO PREVENT DELIVERY OF GOODS MANUFACTURED FOR THE GOVERNMENT, THE COURT WAS ABLE TO RELATE ITS HOLDING TO ACTUAL USE BY THE GOVERNMENT. HOWEVER, IT DISTINGUISHED THE WOOD CASE NOT ONLY ON THE BASIS THAT IN THE EARLIER CASE THE PATENTED DREDGING MACHINE WAS NOT EMBODIED IN ANY PRODUCT ACTUALLY DELIVERED TO THE GOVERNMENT, BUT ALSO ON THE BASIS THAT IN THAT CASE THE MACHINE WAS NOT MANUFACTURED FOR THE GOVERNMENT.

THE J. AND G. DEVELOPMENT CASE INVOLVED AN ALLEGEDLY INFRINGING DEVICE SOLD TO PRIVATE PARTIES. THE DEFENDANT ALLEGED THAT ALL OF THE DEVICES WERE SOLD TO A GOVERNMENT CONTRACTOR FOR INSTALLATION IN EQUIPMENT INTENDED FOR DELIVERY TO THE U.S. GOVERNMENT. THE TRIAL WAS TEMPORARILY ADJOURNED SO THAT COUNSEL COULD SUBMIT BRIEFS ON THE QUESTION OF THE COURT'S JURISDICTION. AFTER CONSIDERING THE BRIEFS, THE COURT RULED THAT INSOFAR AS SALES TO GOVERNMENT CONTRACTORS AND SUBCONTRACTORS ARE ESTABLISHED IN THE TRIAL, THE COURT WAS WITHOUT POWER TO GRANT A REMEDY, SINCE 28 U.S.C. 1498 LIMITED THE PLAINTIFF TO SUIT AGAINST THE UNITED STATES IN THE COURT OF CLAIMS. THIS CONCLUSION WAS REACHED APPARENTLY WITHOUT ANY ALLEGATION OF ACTUAL USE BY THE GOVERNMENT OF THE ALLEGEDLY INFRINGING DEVICE. ON THIS POINT THE COURT DID NOT DISCUSS THE ,AUTHORIZATION AND CONSENT" LANGUAGE, BUT MERELY CITED THE BEREALAVSKY CASE FOR THE PROPOSITION THAT IF THERE IS NO REAL DISPUTE AS TO THE FACT THAT ULTIMATE USE OR MANUFACTURE FOR THE UNITED STATES ENCOMPASSES ALL POSSIBLE ACTS OF INFRINGEMENT, THE COURT MAY GRANT A MOTION FOR SUMMARY JUDGMENT AGAINST THE PLAINTIFF. THE RATIONALE APPEARS TO RESIDE SIMPLY IN THE COURT'S VIEW THAT CONGRESS INTENDED TO PROTECT GOVERNMENT CONTRACTORS FROM INTERFERENCE THROUGH LITIGATION BY THE PATENTEE. (SEE ALSO THE DEARBORN CASE, CITED, SUPRA.)

THE PER CURIUM DECISION OF STALNA, INC. V. BRIDGE ELECTRONICS CO; 297 F.2D 163 (3D CIR. 1961), IS ALSO WORTH CONSIDERING. IN THAT CASE THE PLAINTIFF SPECIFICALLY SOUGHT TO ENJOIN A GOVERNMENT CONTRACTOR FROM DELIVERING AN ARTICLE, ALLEGED TO CONTAIN AN INFRINGING DEVICE, MANUFACTURED FOR THE GOVERNMENT PURSUANT TO CONTRACT. TO AFFIRM THE LOWER COURT'S DISMISSAL OF THE SUIT, THE COURT FOUND IT UNNECESSARY TO ADOPT THE LOWER COURT'S REASONING THAT THE MAKING OF THE CONTRACT BY THE GOVERNMENT WITH THE SUPPLIER CONSTITUTED AN AUTHORIZATION AND CONSENT TO THE USING OF THE PATENT IN THE PERFORMANCE OF THE CONTRACT. INSTEAD, IT EMPHASIZED THAT THE SUIT WAS ONE FOR A PRELIMINARY INJUNCTION, AND SIMPLY CITED THE 1939 BROOME CASE, SUPRA, FOR THE PROPOSITION THAT "THERE IS NO BASIS ON WHICH A COURT SHOULD INTERFERE WITH THE RELATIONS BETWEEN THE PARTIES TO THIS CONTRACT AND FORBID ITS PERFORMANCE NOW OR ANY OTHER TIME;,

IT SEEMS CLEAR FROM THE CASES DISCUSSED ABOVE THAT DISTRICT COURTS WILL NOT ENTERTAIN SUITS EITHER FOR DAMAGES OR INJUNCTION WHERE THE ALLEGED INFRINGEMENT PERTAINS TO ARTICLES CONTRACTED FOR BY THE GOVERNMENT, EVEN THOUGH THE GOVERNMENT DID NOT EXPRESSLY GIVE ITS AUTHORIZATION AND CONSENT TO SUCH INFRINGEMENT. NO CASE HAS BEEN FOUND WHICH ADOPTS THE 1924 WOOD DOCTRINE THAT A DISTRICT COURT MAY ENTERTAIN A SUIT TO ENJOIN A GOVERNMENT CONTRACTOR'S USE OF AN ALLEGEDLY INFRINGING DEVICE THE TITLE TO WHICH WILL NOT PASS TO THE GOVERNMENT UNDER ITS CONTRACT. HOWEVER, IN CONSOLIDATED VACUUM CORP. V. MACHINE DYNAMICS, INC; 230 F. SUPP. 70 (S.D. CALIF. 1964), THE COURT CITED THE WOOD CASE, AND HELD THAT IT HAD JURISDICTION TO CONSIDER A SUIT FOR DAMAGES AND AN ACCOUNTING WHERE PLAINTIFF ALLEGED INFRINGEMENT BECAUSE THE DEFENDANT MANUFACTURED AND SOLD TO GOVERNMENT CONTRACTORS ALLEGEDLY PATENTED TESTING EQUIPMENT, WHICH WAS NOT CALLED FOR BY THE GOVERNMENT CONTRACT AND THE TITLE TO WHICH DID NOT PASS TO THE UNITED STATES, BUT WHICH WAS USED MERELY TO TEST EQUIPMENT MANUFACTURED FOR THE GOVERNMENT UNDER CONTRACTS. THE COURT CONCLUDED THAT THE MANUFACTURE AND USE WAS NOT WITH SUCH CONSENT OF THE GOVERNMENT AS TO VEST SOLE JURISDICTION IN THE COURT OF CLAIMS.

IN THE INSTANT CASE, THE AEC EXPRESSLY OBLIGATES ITSELF AND ITS CONTRACTORS TO ACCEPT AND TAKE TITLE TO ANY ITEM MEETING CONTRACT SPECIFICATIONS, WHETHER OR NOT THE ITEM INFRINGES PATENT NO. 3,129,188. AS WE HAVE INDICATED, IT WOULD SEEM TO NECESSARILY FOLLOW THAT THE GOVERNMENT HAS THEREBY AUTHORIZED ITS SUPPLIERS TO FURNISH SUCH AN ITEM, AGAIN, REGARDLESS OF WHETHER IT INFRINGES A PATENT. YOU SUGGEST THIS LOGIC MAY BE CONTRADICTED BY EXPRESSLY WITHHOLDING SUCH AUTHORIZATION. HOWEVER, THE ISSUE RAISED BY YOUR SUGGESTION IS NOT ONE OF DETERMINING THE INTENT OF THE PARTIES TO THE CONTRACT, WHERE AN EXPRESS PROVISION IS GENERALLY GIVEN GREATER WEIGHT THAN AN IMPLICATION WHICH COULD BE DRAWN FROM OTHER PROVISIONS OR FROM SURROUNDING CIRCUMSTANCES. THE PERTINENT ISSUE INVOLVES DETERMINING THE MEANING OF CONGRESSIONAL LANGUAGE USED IN A STATUTE WHICH WAS ENACTED TO PREVENT INFRINGEMENT SUITS AGAINST GOVERNMENT CONTRACTORS AND SUBCONTRACTORS. WE BELIEVE THAT INSOFAR AS THE ATTEMPT TO WITHHOLD "AUTHORIZATION AND CONSENT" RELATES TO THE MANUFACTURE OF A PATENTED INVENTION FOR THE GOVERNMENT AND TO MEET THE CONTRACT SPECIFICATIONS, THE ATTEMPT IS ONE TO WITHHOLD THE POSSIBLE LIABILITY FOR INFRINGEMENT WHICH THE COURTS SAY CONGRESS HAS PLACED UPON THE GOVERNMENT, AND TO SHIFT SUCH LIABILITY DIRECTLY TO THE CONTRACTOR. THERE IS NO PROHIBITION AGAINST SHIFTING SUCH LIABILITY INDIRECTLY BY MEANS OF AN INDEMNITY PROVISION. SEE 38 COMP. GEN. 276, 277, CITING DEARBORN CHEMICAL CO. V. ARVEY CORPORATION, SUPRA. HOWEVER, WHILE WE FIND NO INCONSISTENCY IN THE GOVERNMENT'S SAYING IT WILL CONDONE (AUTHORIZE AND CONSENT TO) INFRINGEMENT BUT REQUIRE THE CONTRACTOR TO BEAR THE ULTIMATE LIABILITY FOR SUCH INFRINGEMENT, WE BELIEVE IT IS QUITE ANOTHER MATTER FOR THE GOVERNMENT TO SAY IT WILL NOT CONDONE INFRINGEMENT BUT NEVERTHELESS WILL OBLIGATE ITSELF TO ACCEPT A PRODUCT REGARDLESS OF WHETHER IT INFRINGES A PATENT.

THEREFORE, WE CONCLUDE THAT THE CONTRACTUAL OBLIGATION TO ACCEPT A PRODUCT WHICH MAY INFRINGE PATENT NO. 3,129,188 IS SUFFICIENT IN ITSELF TO PROVIDE THE GOVERNMENT'S "AUTHORIZATION AND CONSENT" FOR THE USE OR MANUFACTURE OF A PATENTED INVENTION BY THE CONTRACTOR, AND THAT INCORPORATION OF THE "AUTHORIZATION AND CONSENT" LANGUAGE IN THE ROYALTY ADJUSTMENT ACT OF 1942 INTO 28 U.S.C. 1498 DID NOT SO DRASTICALLY CHANGE PRE-EXISTING LAW AS TO PROVIDE CONTRACTING OFFICERS WITH THE OPTION OF WITHHOLDING OR, MORE ACCURATELY, WITHDRAWING THE "AUTHORIZATION AND CONSENT" WHICH THE GOVERNMENT ACTUALLY ESTABLISHES BY ITS CONTRACTUAL OBLIGATION. WE BELIEVE THIS VIEW IS SUPPORTED BY THE VARIOUS DECISIONS HOLDING THAT ACCEPTANCE OF ALLEGEDLY INFRINGING GOODS BY THE GOVERNMENT IS SUFFICIENT TO BRING THE ALLEGED INFRINGEMENT WITHIN THE AMBIT OF 28 U.S.C. 1498; IS THE IMPORT OF THE BROOME AND J. AND G. DEVELOPMENT CO. DECISIONS, SUPRA, BOTH OF WHICH DENIED A DEMAND FOR INJUNCTION AGAINST THE FURTHER DELIVERY OF ARTICLES BEING MANUFACTURED FOR BUT NOT YET ACCEPTED BY THE GOVERNMENT; AND ACCORDS WITH THE CONGRESSIONAL PURPOSE OF PROTECTING THE GOVERNMENT'S PROCUREMENT PROGRAMS FROM INTERRUPTIONS DUE TO INFRINGEMENT SUITS AGAINST ITS CONTRACTORS. ACCORDINGLY, DICTUM IN OUR DECISIONS B 147536, DATED MARCH 22, 1962, AND B-158790, DATED APRIL 15, 1966, SHOULD BE IGNORED TO THE EXTENT IT MIGHT BE CONSTRUED TO CONFLICT WITH THE VIEWS EXPRESSED IN THIS OPINION.

WE TURN NOW TO THE QUESTION OF WHETHER THE CONGRESSIONALLY CREATED REMEDY OF INFRINGEMENT SUITS IN THE COURT OF CLAIMS IS SO EXCLUSIVE AS TO PRECLUDE ANY SUIT IN THE DISTRICT COURTS FOR PATENT INFRINGEMENT BY A GOVERNMENT CONTRACTOR, REGARDLESS OF WHETHER THE INVENTION INVOLVED WAS EMBODIED IN THE ITEM TO BE DELIVERED TO THE GOVERNMENT OR WAS MERELY USED AT THE OPTION OF THE CONTRACTOR AS A MEANS TO OR AN AID IN THE MANUFACTURE OF THE ITEM. WHILE THE COURTS HAVE DRAWN A DISTINCTION BETWEEN THE INFRINGEMENT OF PATENTED PRODUCTS TO BE FURNISHED UNDER A CONTRACT, WHERE THE SOLE REMEDY IS IN THE COURT OF CLAIMS, AND PATENTED PRODUCTS OR PROCESSES USED AS A MEANS OF PERFORMING THE CONTRACTUAL OBLIGATION, WE DOUBT THE LAW HAS DEVELOPED IN SUCH A WAY THAT AN EXPRESS WITHHOLDING OF AUTHORIZATION AND CONSENT TO USE A PATENTED PROCESS WOULD ITSELF GIVE THE PATENTEE A RIGHT TO SEEK RELIEF IN A DISTRICT COURT.

WE ARE COGNIZANT THAT THE WOOD AND CONSOLIDATED VACUUM DECISIONS GRANTED RELIEF IN A SUIT BY A PATENTEE INVOLVING A GOVERNMENT CONTRACTOR'S OPTIONAL USE OF PATENTED MACHINERY AND TESTING DEVICES USED AS A MEANS OF PERFORMING THE GOVERNMENT CONTRACT. HOWEVER, WE THINK WE MAY PRESUME FROM THE FACTS RECITED IN THESE TWO DECISIONS EITHER THAT SUCH MACHINERY OR EQUIPMENT WAS SOLD COMMERCIALLY, OR THAT NONINFRINGING EQUIPMENT OR MACHINERY WAS SOLD COMMERCIALLY AND WAS CONSIDERED ECONOMICALLY FEASIBLE FOR USE IN PERFORMING CONTRACTS OF THE TYPE INVOLVED. IN SHORT, WE ASSUME THAT IN THE TWO CITED DECISIONS, THE GOVERNMENT DID NOT CONTRACT FOR TASKS THE PERFORMANCE OF WHICH COULD NOT BE ECONOMICALLY ACCOMPLISHED WITHOUT THE USE OF PATENTED AND COMMERCIALLY UNAVAILABLE EQUIPMENT. WE THINK THAT WHERE THE GOVERNMENT DOES SO CONTRACT, IT HAS EFFECTIVELY REQUIRED THE USE OF SUCH EQUIPMENT. ITS REQUIREMENT OF USE IS AT LEAST THE EQUIVALENT OF ITS AUTHORIZATION AND CONSENT TO USE. HAVING NECESSARILY AUTHORIZED THE CONTRACTOR TO USE THE PATENTED EQUIPMENT, IT CANNOT NULLIFY THAT AUTHORIZATION BY PROFESSING TO WITHHOLD IT.

IN THE INSTANT ISSUE WE APPEAR TO BE DEALING WITH A PATENTED AND UNLICENSED PROCESS OF MANUFACTURING A PATENTED AND UNLICENSED PRODUCT, WHICH IS QUITE A DIFFERENT MATTER THAN DREDGING MACHINERY OR TESTING EQUIPMENT ONE MIGHT PURCHASE FROM A MANUFACTURER'S CATALOG. ONE PURCHASES EITHER THE URANIUM PARTICLES THEMSELVES OR A LICENSE TO MANUFACTURE FROM 3M-S, IF ONE WISHES TO BE SURE OF AVOIDING A CHARGE OF INFRINGEMENT. AEC APPARENTLY DOES NOT EXPECT ITS SUBCONTRACTOR IN THIS PROCUREMENT TO AVOID POSSIBLE INFRINGEMENT EITHER BY PURCHASING THE PRODUCT OR A LICENSE FROM 3M-S. IT EXPECTS ITS CONTRACTOR TO MANUFACTURE THE REQUIRED ITEM, REGARDLESS OF WHETHER THE ITEM INFRINGES, BY A PROCESS WHICH MAY OR MAY NOT BE SUBSTANTIALLY DIFFERENT FROM THE PATENTED PROCESS. WHETHER A DISTRICT COURT, UNDER THE RATIONALE OF THE WOOD AND CONSOLIDATED VACUUM DECISIONS, WOULD ASSUME JURISDICTION OF AN INFRINGEMENT SUIT AGAINST A GOVERNMENT SUBCONTRACTOR, WOULD APPEAR TO DEPEND ON WHETHER THE SUBCONTRACTOR'S ALLEGED USE OF A PATENTED PROCESS WAS AT HIS OPTION AND FOR HIS OWN CONVENIENCE, RATHER THAN WITH THE AUTHORIZATION AND CONSENT OF THE GOVERNMENT. THE RESOLUTION OF THIS FUNDAMENTAL ISSUE COULD WELL TURN NOT UPON THE SILENCE OF SPECIFICATIONS AS TO HOW TO MANUFACTURE THE ITEM REQUIRED BY THE CONTRACT, OR UPON A PROFESSED WITHHOLDING OF AUTHORIZATION AND CONSENT, BUT RATHER UPON THE QUESTION OF WHETHER THE ONLY ECONOMICALLY FEASIBLE MEANS OF MANUFACTURING SUCH ITEM WAS BY USE OF THE PATENTED PROCESS. IF THE COURT FOUND THAT SUCH ALLEGED USE WAS THE ONLY FEASIBLE MEANS OF PERFORMING THE TASK REQUIRED BY THE CONTRACT, IT WOULD IN OUR OPINION, HOLD THAT THE GOVERNMENT GAVE ITS AUTHORIZATION AND CONSENT TO SUCH USE, AND THEREFORE, THAT IT HAD NO JURISDICTION TO CONSIDER THE INFRINGEMENT SUIT, WHETHER THE REMEDY REQUESTED WAS DAMAGES OR INJUNCTION.

IN VIEW OF THE FOREGOING, WE BELIEVE THE "NONAUTHORIZATION AND CONSENT" CLAUSE IS IN PART LEGALLY INEFFECTIVE, AND THEREFORE SHOULD BE AMENDED IN ORDER TO CONFORM TO THE PURPOSES OF 28 U.S.C. 1498, AND TO PREVENT CONTRACTORS FROM INCLUDING CONTINGENT COSTS IN THEIR BID PRICES FOR FEAR OF HAVING TO DEFEND INFRINGEMENTS SUITS WHICH WOULD NOT OCCUR BUT FOR THE SUBJECT CLAUSE, AND OF HAVING TO BEAR THE CONSEQUENCES OF POSSIBLE CONTRACT TERMINATION DUE TO INJUNCTION. ACCORDINGLY, THE WORDS "PATENTS NOS. 3,129,188 AND" SHOULD BE ELIMINATED FROM THE CLAUSE, TOGETHER WITH THE LANGUAGE "OR EMBODIED IN THE STRUCTURE OR COMPOSITION OF ANY ARTICLE, THE DELIVERY OF WHICH IS ACCEPTED BY THE GOVERNMENT UNDER THIS CONTRACT;, REFERENCE TO PROCESS PATENT NO. 3,163,609 SHOULD BE CONDITIONED BY LANGUAGE TO THE EFFECT THAT THE WITHHOLDING OF CONSENT TO ITS USE APPLIES ONLY IF, AS WE UNDERSTAND GENERAL ATOMIC MAINTAINS, SUCH USE IS NOT ECONOMICALLY OR REASONABLY NECESSARY TO MANUFACTURE THE ARTICLE SPECIFIED IN THE CONTRACT.