Brief for the United States — De Forest Radio Telephone Co. v. United States

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AUTHORITIES CITED

Cases, etc. :

fem © PPO, NS TR, Wiiiankk taiwan cetcncunsenn 15

Cramp & Sons v. Curtis Turbine Co., 246 U. S, 28__-------- 13

Dodge Manufacturing Co. v. Puster, 42 Fed. 54____-------- 15

Une, I I I aa tes sin a i ntiionm 12

United States v. Palmer, 128 U. 8. 262_....-..-..-.--.--_- 15

Walker on Patents, Sth ed., sec. 312__...-_.--........._-- 15

Statutes :

Act of June 25, 1910, c. 423, 36 Stat. 857, as amended by the

act of July 1, 1918, c. 114, 40 Stat. 704.....--..-.---_--- 2,3

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27682—27——-1 (1)

—

Inthe Supreme Court of the Gnited States

OctToBER TERM, 1926

No. 142

DeForest Rapio TELEPHONE AND TELEGRAPH

Company, Appellant

v.

THE UNITED STATES

APPEAL FROM THE COURT OF CLAIMS

BRIEF ON BEHALF OF THE UNITED STATES

OPINION

The opinion below (R. 12-14) is reported in 59

Ct. Cls. 914.

JURISDICTION

The judgment to be reviewed was entered on May

4, 1925. (R.15.) The petition for appeal was filed

on May 16, 1925. (R. 15.) The jurisdiction of this

Court is invoked under Sections 242 and 243 of the

Judicial Code as they stood prior to the effective

date of the Act of February 13, 1925. (Chap. 229, 43

Stat. 936.)

(1)

ae,

2

THE QUESTION

Was the use of patents for the United States un-

der the circumstances alleged in the petition filed

in the Court of Claims a use without license, or with-

out lawful right to use, so as to give rise to a cause of

action under the Act of June 25, 1910 (Chap. 423,

36 Stat. 851), as amended by the Act of July 1,

1918 (Chap. 114, 40 Stat. 704, 705) ?

Did the facts set out in the petition filed in the

Court of Claims show the granting of a license, per-

mission and lawful right to the United States to

use such patents?

STATEMENT

The Court of Claims sustained a demurrer to the

petition in this case which sought to recover for

an alleged unlawful use by the United States of

certain patents which appellant claimed to own,

concerning vacuum tubes or audions, used in radio

communication.

The suit is brought under the Act of June 25,

1910, (Chap. 423, 36 Stat. 851) as amended by the

Act of July 1, 1918 (Chap. 114, 40 Stat. 704, 705).

The pertinent portions of the Act of June 25, 1910

(Chap. 423, 36 Stat. 851) are as follows:

That whenever an invention described in

and covered by a patent of the United States

shall hereafter be used by the United States

without license of the owner thereof or law-

ful right to use the same, such owner may

recover reasonable compensation for such

3

use by suit in the Court of Claims: * * *

Provided further, That in any such suit the

United S' +s may avail itself of any and

all defenses, general or special, which might

be pleaded by a defendant in an action for

infringement, as set forth in Title Sixty of

the Revised Statutes, or otherwise * * *

The pertinent portions of the Act of J uly 1, 1918,

(Chap. 114, 40 Stat. 704, 705), amending the Act

of June 25, 1910, are as follows:

That whenever an invention deseribed 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

bis reasonable and entire compensation for

such use and manufacture: * * * Pyo-

vided further, That in any such suit the

United States may avail itself of any and

all defenses, general or special, that might

be pleaded by a defendant in an action for

infringement as set forth in Title Sixty of

the Revised Statutes, or otherwise * * *.

The two patents involved in the suit were granted

to Lee DeForest (R. 1), and by duly recorded as-

signments the entire rights, title, and interest in

and to the same were transferred to appellant (R.

1). On March 16, 1917, appellant executed and

delivered to the Western Electric Company a writ-

4

ten instrument conveying certain rights in said

patents, all of which rights were, on May 24, 1917,

assigned and conveyed by the Western Electric

Company to the American Telephone and Tele-

graph Company. (R. 3.) This instrument ex-

ecuted by appellant to the Western Electric Com-

pany is set out as an exhibit to the petition. (R.

6-11.) It recites that the appellant represents that

it owns and controls the entire right, title, and

interest (subject to certain exceptions not here

material) in and to the patents here involved, and

that in consideration of One Dollar and other good

and valuable considerations appellant—

on behalf of itself and its successors, legal

representatives and assigns, grants and

agrees to grant to the Western Company, a

license (free of royalties or other payments

other than those herein specified) to make,

use, install, operate and lease, and t_ sell or

otherwise dispose of to others for sale, in-

stallation and operation, apparatus and sys-

tems embodying or made or operating in aec-

cordance with the following inventions:

enumerating among many others the patents here

involved (R. 6,7). It further provided that said

license was granted

for the full terms of the said patents granted

or to be granted, and the license is granted

for all transferable rights of said De Forest

Company of any kind or nature whatsoever

in said inventions, patents and applications,

5

except the rights hereinafter expressly re-

served to itself by the De Forest Company.

The said license granted and to be granted

to the Western Company is exclusive except

for the aforesaid rights now held by the

American Telephone and Telegraph Com-

pany and except for the rights expressly re-

served herein by the De Forest Company.

(R. 7.)

The instrument further provided that the ap-

pellant reserves to itself the following rights

(R. 7):

(1) Nonexclusive, assignable rights to

make, use and sell for the synthetic produe-

tion of music under such of the patents and

applications of Schedules A and B as were

filed prior to August 14, 1914;

which ineludes the patents here involved. Subdi-

visions (2) and ( 3) of the contract do not relate

to the patents here concerned. (Appellant’s Brief,

p. 7.)

(4) N onexclusive, nontransferable, per-

sonal rights with respect to radio communi-

cation, under all the patents, applications

and inventions included in this agreement,

for the following purposes only:

(a) To make for and sell to the United

States Government for its use (B.S) * © @.

Subparagraphs ( b) to (g), inclusive, reserve the

right to make for and sell] to other classes of users

and to make and use for the reproduction of news

and music and are not material here. (R. 8.)

Paragraph IV of the written instrument pro-

vided that—

It is understood and agreed that, except

with respect to apparatus furnished to the

United States Government [and to others

not here material] no apparatus shall be

sold or leased by the DeForest Company

under its reserved rights, except upon writ-

ten agreement by the purchaser or lessee, as

the case may be, that neither said apparatus

as a whole nor any part thereof shall be

used in the commercial transmission or re-

ception of messages for pay, or used by

others than the original purchaser or lessee,

or used for any purposes other than radio

communication. (R. 8.)

Paragraph VII of this instrument provided that

(R. 9):

It is understood and agreed that the West-

ern Company, its successors, legal repre-

sentatives and assigns, and the DeForest

Company, may, respectively, institute and

conduct suits against others for infringe-

ment of any of said patents within the fields

in which it possesses rights, but all of such

suits shall be conducted at the expense of

the party bringing them, which party shall

be entitled to retain any judgment recovered

in any such suits.

Paragraph XII of this instrument further pro-

vides that (R. 10):

It is understood and agreed that the West-

ern Company, its successors and assigns may

———————

7

transfer to others, in whole or in part, the

rights granted by this instrument, and may

assign rights hereunder, or grant licenses to

various persons, firms or corporations for the

several uses to which the inventions are ap-

plicable.

Lee DeForest, both as an individual and as a

director and stockholder of the Company, executed

at the foot of the written instrument an approval,

ratification and confirmation of the same. (R. 11.)

The petition further alleges that the United

States informed the American Telephone and Tele-

graph Company that—

being then engaged in war, it desired to have

large numbers of said audions manufactured

promptly for it by said General Electric

Company and others, whereupon said Ameri-

can Telephone and Telegraph Company ad-

vised the United States, by writing to the

Chief Signal Officer of the Army on or about

September 21, 1917, to the effect that it would

not do anything to interfere with the im-

mediate manufacture of said audions for the

United States by said General Electric Com-

pany and other manufacturers provided it

were understood and agreed that said Ameri-

can Telephone and Telegraph Company

waived none of its claims under any patents

or patent rights owned by it, on account of

said manufacture, and that all claims under

patent rights and all patent question be re-.

served and later investigated, adjusted and

settled by the United States; and said plan

27682—27—_2

ay

8

was accepted by the United States and the

orders aforesaid for said audions were there-

after given by the United States to said Gen-

eral Electric Company and said Moorhead

Laboratories, Inc., respectively and said

audions were manufactured by said General

Electric Company and said Moorhead Labo-

ratories, Inc., respectively, and delivered to

the United States in pursuance of said plan.

(R. 3, 4.)

It is further alleged:

That, for the purpose of assisting the

United States to obtain said audions

promptly pursuant to the orders given by

the United States therefor, said American

Telephone and Telegraph Company fur-

nished information, drawings and_ blue-

prints to said General Electric Company and

permitted representatives and experts of the

United States and of said General Electric

Company to witness and study the manufac-

ture of said audions by it, American Tele-

phone and Telegraph Company, all to the end

that said audions might be the more

promptly manufactured and delivered to the

United States for use in the war in which

it was then engaged. (R. 4.)

After the manufacture and delivery of these

audions to the United States, and after the filing

of the petition in this suit, negotiations were in-

stituted between the United States and the Tele-

phone Company, and said Company

made, executed and delivered to the United

States an instrument in writing expressly

—

9

waiving and relinquishing all claims, both

against the United States and all manufac-

turers acting under orders of the United

States, for compensation for the manufac-

ture and use of all apparatus covered by the

two patents aforesaid and said waiver was

stated to include all claims which have arisen

or which may hereafter arise, for royalties,

damages, profits or compensation for in-

fringement of any or all letters patent

owned or controlled by the American Tele-

phone and Telegraph Company, whether ex-

pressly recited herein or not, for said manu-

facture and/or use prior hereto and for use

by the United States occurring hereafter.

(R. 4.)

The petition then alleges that the Telephone

Company did not become the owner of the patents

by virtue of the instrument and that the settle-

ment by the Telephone Company subsequent to the

filing of the petition in this case did not deprive

appellant of its rights (R. 4), and that the use

by the Government or for the Government above

set forth was an infringement of the patents in-

volved and of the rights of the petitioner which

it reserved and never parted with (R. 5). It

then alleges that appellant has been damaged in

the sum of $2,000,000 and that appellant and its

licensees have at all times been ready, able, and

willing to furnish the United States with all the

devices covered by the patents at a reasonable

aa

a,

10

price (R. 5), and that upon learning of this alleged

infringement by the United States appellant noti-

fied and warned the Government to desist, but the

Government continued such alleged infringement.

The Court of Claims, in sustaining the demurrer

to this petition, held that the Government was

licensed by the Telephone Company to do the acts

which it did, and that the Telephone Company had

authority to grant such a license, and that any use

which the Government made of the patents here in-

volved was not unlawful or without right, and that

for this reason appellant had stated no case in its

petition and same should be and was dismissed.

SUMMARY OF ARGUMENT

The facts show the granting of a license, per-

mission, and lawful right to the United States to

use the patents here involved. The use of the pat-

ents here complained of was under a license, permis-

sion and lawful right granted by appellant’s as-

signee and therefore appellant has no right to main-

tain this suit.

ARGUMENT

The principal question to be determined in this

ease is whether the facts alleged in the petition

show the granting of a license or other lawful right

to the United States to use and have manufactured

for them the inventions covered by the two patents

here involved.

Upon the demurrer no question as to the validity

of the patents was raised, and no question was

—

1l

raised as to whether the audions or vacuum tubes

manufactured for the Government were covered by

the patents.

The appellant in its brief does not urge that the

Telephone Company did not have authority and

right to grant a license or permission to the United

States to have these audions manufactured. The li-

cense by appellant to the Telephone Company ex-

pressly grants to the Telephone Company such

right (see Paragraph XII, R. 10). It contends,

however, that what the Telephone Company did

can not be construed to be such a license or periis-

sion. The Government contends that the Tele-

phone Company did license this use by and manu-

facture for the United States and that whether such

action be construed as a license, it is such permis-

sion by the Telephone Company for the use and

manufacture here involved as to constitute a lawful

right to such use of these patents. The statute

authorizing the bringing of such suits provides that

the use or manufacture must be ‘‘ without license of

the owner thereof or lawful right to use or manu-

facture,’’ by the Government.

To constitute a license no certain form, either of

words or of the instrument, is necessary. As has

been said in appellant’s brief, ‘‘it may be either ex-

press or implied, oral or in writing’? (Appellant’s

Brief 10).

A patent right, as has been decided by the courts

and as stated in appellant’s brief ‘‘is nothing more

12

nor less than the right of exclusion’’ (Appellant’s

Brief 10) ; that is, the right to exclude others from

the use of the invention covered by the patent.

This Court has decided that ‘‘A license is not an

assignment of any interest in the patent. It isa

mere permission granted by the patentee. It may

be a license to make, sell and use, or it may be

limited to any one of these separable rights. If it be

a license to use it operates only as a right to use

without being liable as an infringer. If a

licensee be sued, he can escape liability to the

patentee for the use of his invention by showing that

the use is within his license. But if his use be one

prohibited by the license, the latter is of no avail

asa defense. As a license passes no interest in the

monopoly, it has been described as a mere waiver

of the right to sue by the patentee.”” (Henry Vv.

Dick, 224 U.S. 1, 24.) And, as appellant concedes

in its brief, this permission may be granted either

for value or gratuitously (Appellant’s Brief 10).

When the Government wanted to have these

audions manufactured, it first took up with the

Telephone Company which had the right to license

and permit this manufacture the question of the

use of these inventions. The Telephone Company

said, Go ahead, we will not interfere, provided

that it is understood and agreed that we do not

waive any of our claims under any patents or patent

rights, and that all such claims be reserved and

later investigated, adjusted and settled by the

13

United States. And thereafter the Government

did proceed, relying upon this assurance, livense,

grant, and permission. At that time (September,

1917), which was before the Amendment of July 1,

1918, the Federal courts were granting injunctions

against unauthorized use or manufacture under

patents by Government contractors (see Cramp &

Sons v. Curtis Turbine Co., 246 U.S. 28.)

The Government contends that this constituted

an agreement, a license, and a permission by the

Telephone Company that the Government might

use these patents in so far as necessary for this

manufacture, and that after the manufacture had

occurred, the whole transaction would be investi-

gated and if the articles manufactured were covered

by the patents (none of the claims of which patents

were waived) that the question of compensation

would then be settled and the Government should

pay the reasonable value of the use of such patents.

In other words it was a permission and a license to

use these patents, and the question of the amount to

be paid, if any, was reserved for later determination

by the parties. If they could not agree there was an

implied promise that the Government would pay

the reasonable value. This alone, we submit, is suffi-

cient to take away any right by appellant to main-

tain this suit. It constitutes a license for this manu-

facture for the Government, and it constitutes such

permission as to make the use of these patents a use

14

with lawful right. It was not a use ‘‘without

license of the owner thereof or lawful right to use

or manufacture the same,’’ as provided in the stat-

ute as a necessary condition before appellant has

any right to maintain this suit.

The subsequent acts of the parties in and of

themselves constitute a license and permission to

use these patents, and indicate the intention of

the parties that the original transaction between

the Government and the Telephone Company above

discussed amounted to a license and permission.

The facts show that when the Government was

ready to have these audions manufactured for it,

in accordance with the understanding with the

Telephone Company that it would not interfere,

it proceeded to do so, and that the Telephone Com-

pany then, for the purpose of assisting in the pro-

duction of these audions, furnished information,

drawings, and blue prints to the company manu-

facturing the same and permitted the representa-

tives and experts of the Government and of said

company manufacturing these audions to witness

and study the manufacture of said audions by the

Telephone Company; all to the end that the au-

dions for the Government might be more promptly

manufactured and delivered. Had it not been the

intention of the Telephone Company to grant a

license and permission to the Government to have

these audions manufactured under such patents, it

would not have done these things. These facts

15

alone, if there was any doubt as to the original

acts of the parties, conclusively confirm the con-

tention that the parties intended that this use of

these patents was licensed and with the permission

of the Telephone Company.

But, eliminating the original consent of the Tele-

phone Company, the furnishing of this informa-

tion, drawings, etc., and the assistance given in the

production of these audions in and of itself con-

stitutes a license and permission under the law

which makes such use lawful and takes away any

right of appellant to maintain its suit herein. It

has long been the settled law, not doubted or dis-

puted, that these acts preclude infringement and

make such use lawful. Whatever right there is to

recover compensation in cases of such permissive

use where the compensation is not agreed upon rests

upon an implied contract and not upon infringe-

ment or unlawful use. (United States v. Palmer,

128 U.S. 262; Dodge Manufacturing Co. v. Puster,

42 Fed. 54; Cline v. Horton, 274 Fed. 728;

Walker on Patents, Fifth Ed., Section 312).

Appellant contends that although it did grant

rights to the Telephone Company’s assignor, it

never parted with the right to exclude others from

manufacturing for the United States. Appellant

says the license granted to the Telephone Company

is nonexclusive, and that the reservation made by

appellant to make and sell to the United States is

not exclusive, but that by Article VII of the license

16

to the Telephone Company it (appellant) reserved

the right to exclude others from manufacturing

for the United States.

The license to the Telephone Company’s assignor

did reserve rights to appellant to make and sell

to the United States. The agreement expressly

provides that these rights are ‘‘non-exclusive, non-

transferable, personal rights.’’ (R. 8.) On the

other hand the agreement clearly gives the Tele-

phone Company the right to manufacture for and

sell to the United States, and expressly provides

that such Company “‘ may transfer to others, in

whole or in part, the rights granted by this instru-

ment, and may assign rights hereunder, or grant

licenses to various persons, firms or corporations

for the several uses to which the inventions are

applicable.”’ (R. 10.)

Article VII of this agreement provides that

either the appellant or the Telephone Company

‘‘may, respectively, institute and conduct suits

against others for infringement of any of said

patents within the fields in which it possesses

rights, but all of such suits shall be conducted at

the expense of the party bringing them, which

party shall be entitled to retain any judgment re-

covered in any such suits. (R. 9.)

In the first place the acts complained of here

were not infringements at all, as they were done

under a license and permission granted by the Tele-

phone Company. It is further submitted that this

provision of the contract (Article VII) means

17

nothing more than that if there was a use of these

patents by some one not duly authorized by the

Telephone Company and such use was in a field re-

tained to appellant, then appellant might maintain

a suit. It did not mean that appellant could sue

for a use duly authorized by the Telephone Com-

pany. The appellant itself could not authorize a

use by or for the Government. The Telephone

Company could and did authorize such use, and

the appellant granted the right and authority to

the Telephone Company to authorize such use.

Had appellant owned an exclusive right, the case

might be different, but it owned no such right.

To permit appellant to maintain this suit would

render meaningless and without effect the provi-

sions of the agreement authorizing the Telephone

Company to grant licenses and permission to others

to use said patents.

For the reasons above set forth, it is respectfully

submitted that the judgment of the Court of Claims

is correct and should be affirmed. - —

Respectfully submitted,

WituraMm D. MitTcHELL,

Solicitor General.

HERMAN J. GALLOWAY,

Assistant Attorney General.

J ANUARY, 1927.

O