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

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Brief for the United States
- **Published:** January 1, 1927
- **Citation:** 273 U.S. 236

## Text

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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

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386006_0606%3A3. Public record. Not legal advice.