ROYALTIES FOR THE USE AND MANUFACTURE OF PATENTED ARTICLES.
The payment by the
United States
of a royalty for the right to manufacture and use patented articles after the expiration of the term of the patent is not authorized.
The War Department is not authorized to enter into a contract for the payment by the United States of a royalty for the prior use and manufacture of patented devices, such prior use being in the nature of a tort for which the United States is not liable.
(Comptroller Tracewell to the Secretary of War, February 28,
1905.)
By your reference, dated February 21, 1905, of a .communication of the Chief or Ordnance dated February- 17, 1905, you request my decision of the questions therein presented. Omitting paragraphs 5 and 6, the communication is as follows:
"1. I have the honor to inclose herewith proposed articles of agreement between the United States and Messrs. VonLengerke & Detmold, of New York, providing for procuring from them the right to manufacture and use a breech-loading magazine arm, certain features of which are covered by United States letters patent owned by them, on the payment of a license fee therefor.
"2. The appropriations which it is believed authorize the proposed contract are as follows:
Manufacturing, repairing, procuring, and issuing arms at the
national armories (Stats, at Large, vol. 32, p. 942) $1,700,000
Manufacturing, repairing, procuring, and issuing arms at the national armories (Stats, at Large, vol. 33, p. 275) 1,700,000
"These appropriations are available until exhausted, not exceeding two years. (Stats, at Large, vol. 25, p. 833.)
" ' Hereafter all moneys arising from disposition authorized by law and regulation of serviceable ordnance and ordnance stores shall constitute one fund on the books of the Treasury Department, which shall bo available to replace ordnance and ordnance stores throughout the fiscal year in which the disposition was effected and throughout the following year.' (Stats, at Large, vol. 33, p. 276.)
"3. The letters patent enumerated and referred to in the proposed contract were originally taken out by Mr. Paul Mauser, but articles of assignment have been furnished by the Patent Office showing that Messrs. Von Lengerke & Detmold are the owners and are also entitled to all rights and claims which may have arisen under them prior to the transfer to them.
"4. The contract provides for a license fee of $200,000, payable at the rate of 50 cents per arm manufactured, but it is provided in the contract that in case the Government shall manufacture a less number of arms than 400,000 the license fee will be correspondingly reduced, but that for all arms manufactured in excess of 400,000 no license fee will be paid. It is possible, but not probable, that payments of the license fee might extend beyond the date of expiration of the patents. *******
"7. The contract also provides that in case all the arms for which the license fee will be paid can not be manufactured under the present appropriations, the United States shall have the right to renew the agreement under the same terms and conditions.
"8. The contract also provides that the contracting parties shall pay all judgments against the United States on account of any suits or claims which may be made by any persons for infringement of their patents in the manufacture and use of the breech-loading arm and cartridge clip, as covered by the letters patent recited in the contract.
"9. A bond will be required from the contracting parties in the sum of $50,000 to insure the pa3rment of such judgments should any arise.
*' 10. A decision is requested as to whether or not this Department can enter into such a contract to bind the United States. If there are any features in the contract which are not lawful. it is requested that the decision cover such modifications as may be necessary, so that this Department may be enabled to manufacture the magazine arm under the letters patent enumerated and referred to."
From this communication it appears that your Department contemplates manufacturing for the use of the United States, under authority of the appropriations specified therein, breech- loading magazine arms containing certain improved devices for which letters patent have been granted and are still in force, and are now owned by Messrs. Von Lengerke & Det- mold, and that you propose to enter into a contract with them by which, in consideration of a license to the United States to manufacture and'use said improved devices, the United States will agree to pay the said owners of said letters" patent as compensation for said license a royalty of 50 cents on each arm manufactured, not to exceed in the aggregate $200,000.
If the said owners of the said letters patent have thereunder the exclusive right to manufacture, use, and sell the improved devices to be used in the arms to be manufactured and used by the United States, I am of opinion that, under the appropriations specified, you are authorized to enter into a contract with them for the purpose specified, and to provide therein for the payment of reasonable compensation for said license.
But there is one feature of the proposed contract that is not free from doubt. If the contract provided for the payment of a royalty for the manufacture and use of improved devices for which one letters patent only had been granted, I do not think you would be authorized to provide therein for the payment of the royalty for the manufacture and use of the devices after the expiration of the term of the patent. In the case presented seven distinct letters patent are specified, which were granted on six different dates. It is presumed that each letters patent was granted for a term of the same length, beginning on the date when granted. The terms of six of the letters patent 'frill therefore expire at different times. The improved devices for which the several letters patent were granted may also have different values. If. under this state of facts, the royalty which it is proposed to pay is the aggregate value of all the improved devices for which the seven letters patent were granted, I do not think the terms of the contract submitted would authorize the payment of the full amount of the royalty after the expiration of the term of one or more of the letters patent, and in such case the terms of the contract do not provide what amount of royalty should then be paid.
It may be, however, that in fixing the amount of the royalty allowance was made for the differences in the time of expiration of the terms of the letters patent and for the difference in the value of the improved devices, and that the amount agreed upon is deemed appropriate compensation to be paid for the manufacture and use of the improved devices during the varying terms of the several patents until the expiration of the term of the patent of latest date. If,so, I think this intention should be made clear in the terms of the contract.
There is another feature of the proposed contract which requires particular consideration. In paragraph 5 of the communication of the Chief of Ordnance he says:
" 5. The contract also provides for making payment of the license fee for all arms manufactured subsequent to March l*i. 1904. The reason for the insertion of this date in the contract is that on that date this Department addressed a letter to the AVaffenfabrik Mauser, the owners of the letters patent described and referred to before the transfer was made to Messrs. Von Lengerke & Detmold, in which letter reference was made to the making of an agreement providing for the payment of royalties in case any of the features of the magazine arm no*v being manufactured by the Government was covered by any of the letters patent owned by the Wafl'enfabrik Mauser."
The letter to the Waffenfabrik Mauser, to which he refers, is as follows:
"1. As an examination would seem to indicate that some of the features of the cartridge slip recently adopted for the United States Armv mav be covered bv vour United States letters patent Nos. -402605, 482376, and 547932. it is requested that your attorney in this country call at this office for the purpose of determining what, if any. of its features are eovered by your patents, and if .so, to arrive at an agreement as to the royalties which should be paid therefor."
In paragraph 6 the Chief of Ordnance further says:
"6. It is the understanding of this Department that the writing of this letter constitutes an implied contract under which a license fee may he paid the owners of the letters patent enumerated and referred to, and the proposed contract accordingly makes provision for this payment. A copy of the letter referred to is inclosed."
I do not concur with the Chief of Ordnance in the opinion that the letter to the Waffenfabrik Mauser, referred to by him, constitutes an implied contract for the payment of a royalty for the manufacture and use of the improved devices for which the letters patent mentioned therein were granted. This letter suggests that some of the features of the "cartridge clip" which had been " recently adopted" for the Army ''may be covered" by those patents. It does not indicate whether any of the cartridge slips had been manufactured or not. It then requests that an attorney of the Waffenfabrik Mauser call for the purpose of investigating the question of infringement, and, if it should be 'found that there was, ''to arrive at an agreement as to the royalties which should be paid therefor.'1'
The letter and the facts presented leave in doubt the question whether the proposed agreement for compensation had reference to cartridge clips which had been manufactured or were to be manufactured. In the former case no compensation would be authorized, for the infringement would be in the uuture of a tort, for which the Government would not be liable. In the case of Russell v. United States (182 U. S., 535), which was a case of the infringement of a patent by the manufacture and use by the United States of the Krag- Jorgensen rifle, the Supreme Court said:
"If petitioners have suffered injury it has l>een through the infringement of their patent, not by a breach of contract, and for the redress of an infringement the Court of Claims has no jurisdiction. This doctrine may be technical. If the United States was a person, on the facts of this record, * * * it could be sued as on an implied contract, but it is the prerogative of a sovereign not to be sued at all without its consent or upon such causes of action as it chooses. It has not chosen to be sued in an action sounding in tort. * * *"
Until an agreement has been entered into for compensating an owner of a patent for the manufacture and use of any device for which such patent has been granted the manufacture and use thereof is an infringement, and if the infringement is by the United States compensation can not be recovered for the injury.
I am therefore of opinion that you are not authorized to to enter into a contract to pay royalty for the prior manufacture and use by the United States of any of the devices referred to.
PM
Originally Posted by Michael Petrov
