#### JOHN B. SEMPLE v. THE UNITED STATES

[No. 34442.

Decided May 12, 1924]

*On the Proofs*

*Patent; license agreement; validity of patent.*— Where the Government. enters into an agreement with the owner of a patented device by which it obtains a license to manufacture, or have manufactured, use and sell said device, it can not question the validity of the patent issued therefor.

*Same; payments from future appropriations.*— Sections 3679 and 3732, Revised Statutes, relating to contracts involving payments from future appropriations, do not apply to license agreements permitting the Government to use patented inventions.

*The Reporter's*statement of the case:

*Mr. Edwwd P. Robbins*for the plaintiff. *Mr. Bayard II. Ghristy*was on the briefs.

*Messrs. Amasa, M. Holcombe*and *James A.*Watson, with whom was *Mr. Assistant Attorney General Robert H.*Lovett, for the defendant.

The following are the facts of the case as found by the court:

I. The plaintiff, a citizen of the United States, has been since July 16, 1907, the sole owner of the Letters Patent No. 860,354, granted to him by the United States upon that date. These letters patent cover the so-called Semple plunger.

II. On December 2, 1909, the plaintiff entered into an agreement in writing with Brig. Gen. William Crozier, *665Chief of Ordnance, United States Army,.representing the United States, and acting under the direction of the Secretary of War, whereby the plaintiff licensed and empowered the United States to manufacture or have manufactured and to use and sell fuses possessing any or all of the features covered by and described in United States Letters Patent 860,354, granted July 16, 1907, to the plaintiff for a royalty of 5 cents for each fuse covered by said letters patent. A copy of said contract is attached to the petition marked Exhibit B, and is made a part hereof by reference. And on March 10, 1915, another contract in writing was entered into by and between the same parties being in effect a renewal of the contract of December 2, 1909. A copy of this contract is as follows:

11866.

*Contract with John- B. Semple for license to manufacture, do., fuses, dated March 10, 1915*

Final signature affixed, March 20, 1915.

Copy sent to Returns Office, March 22, 1915.

Dist. Mar. 22, 1915.

Whereas on December 2, 1909, a contract was entered into between John B. Semple, of Pittsburgh, in the county of. Allegheny, State of Pennsylvania, and the United States of America, by Brigadier General William Crozier, Chief of Ordnance, United States Arm}’, acting by authority of the Secretary of War, licensing and empowering the United States to manufacture, or to have manufactured, to use, and to sell fuses possessing any or all of the features covered by and described in United States Letters Patent No. 860,354, for certain considerations set forth in that contract ; and Whereas in the contract above mentioned it was agreed that in the event of the Congress of the United States making future appropriations applicable to the manufacture or purchase of fuses the United States should have the right to renew the aforesaid contract under the same terms and conditions; and

Whereas the Congress of the United States, by the act approved March 3, 1915, has made appropriations applicable to the procurement of fuses possessing features covered by and referred to in the letters patent hereinbefore referred to;

Now, therefore, these articles of agreement, entered into this 10th day of March, 1915, between John B. Semple, of Pittsburgh, in the county of Allegheny, State of Pennsyl*666vania, of the first part, and the United States of America, by Lieut. Col. J. E. Hoffer, Ordnance Department, United States Army, acting by direction of-the Chief of Ordnance, United States Army, and by authority of the Secretary of War, of the second part,

Witness, That the said parties hereto have mutually agreed, and by these presents do mutually covenant and agree, to and with each other, as follows, viz:

Article 1. That the party of the first part hereby licenses and empowers the United States to manufacture or to have manufactured, to use, and to sell fuses possessing any or all of the features covered by and described in United States Letters Patent No. 860,354, granted July 16, 1907, owned by the party of the first part and claimed by it not to- be open to public use, in consideration solely of the payment of a royalty of five (5) cents for each fuse, any feature of which is covered by the aforementioned letters patent.

Article 2. That Articles 2, 3, 4, 5, 6, and 7 of the contract of December 2,1909, are made part of this contract.

JoiiN B. Semple,

*Party of the first fart.*

Jay E. Hopper,

*Lieut.*Ool., *Ordnance*Department, *U. S. Army.*

Witness:

Robert B,. Miller.

Subject number is 38363.

HI. On March 27, 1917, an agreement in writing was entered into between the plaintiff and Lieut. Col. Jay E. Hoffer, of the Ordnance Department, United States Army, representing the United States, and under the direction of the Secretary of War, which agreement in writing recited the provisions of the contract of December 2, 1909, and agreed that the articles of said agreement were renewed as provided for in article 3 of said agreement with all their stipulations and conditions. A copy of said agreement of March 27, 1917, is attached to the petition marked Exhibit C, and is made a part hereof by reference.

IY. At thé time o'f the execution of said last-named agreement there were appropriations made by Congress then in force and applicable for payment for fuses to be procured by the United States under said license given by plaintiff in the contract aforesaid sufficient to pay for all Semple plungers then or thereafter ordered, and these were appropriations *667made by Congress then and thereafter in the fiscal year ending June 30, 1917, sufficient to cover all the liabilities of the Unted States to- the plaintiff incurred by the subsequent procurement by the United States of such plungers. The authorizations for the expenditure of money for the purchase and procurement of said plungers covered by said letters patent were contained in the following acts of Congress: Act of July 10, 1916; act of August 29, 1916; act of February 21, 1917; act of June 15, 1917.

Y. A payment to plaintiff by voucher dated November 19, 1917, was made as being for royalty for full rights to manufacture or to have manufactured, to use and to sell fuses possessing any or all of the features covered by and described in U. S. Letters Patent No. 860,354 and as a settlement for such fuses manufactured by the War Department at Frank-ford Arsenal, Pa., during the period beginning January 1, 1917, and ending June 30, 1917. After June 30, 1917, many fuses manufactured for the United States continued, under an arrangement between the plaintiff and the War Department, to be stamped with the letters and figures “Pat. 7-16-07,” which is the date of the granting of said patent No. 860,354 to the plaintiff. A War Department drawing-dated July 31, 1918, issued thereafter to certain manufacturers of fuses for the War Department, which shows the details of construction thereof, shows the plunger of said fuse as to be marked with said letters and figures “ Pat. 7-16-07,” which is the date of the granting of said patent No. 860,354 to the plaintiff.

VI. Since June 30, 1917, the War Department has caused to be manufactured for its use, without paying any i-oyalty or any compensation to the plaintiff therefor, fuses possessing features covered by and described in said U. S. Letters Patent No. 860,354, in quantities as follows:

*(a)*By Scoville Manufacturing Co., 3,740,752.

(&) By International Arms and Fuse Co., 2,667,262.

*(c)*By Bartlett Haywood Co., 5,917,790.

The War Department has also made at Government arsenals since June 30, 1917, without payment to the plaintiff of any *668royalty or any conrpensation an unknown quantity of fuses possessing features covered by and described in said patent.

VII. The plaintiff is not now and never has been in the employment or service of the Government of the United States, and has at all times borne true allegiance to the Government of the United States, and has not in any Avay voluntarily aided, abetted, or given encouragement to rebellion against- said Government.

VIII. The Government made one or two efforts to compromise with the plaintiff and to induce him to charge less, but the plaintiff refused to accept less than the amount provided for in the contract,. whereupon the Government declined to make any further payment of royalties to the plaintiff.

IX. The Navy Department of the United States had a contract with the plaintiff of date April 16, 1915, wherein the United States agreed to pay to the plaintiff a royalty of 5 cents per fuse for each fuse any feature of which is covered by said United States Letters Patent No. 860,354. A copy of said contract is attached to the petition marked Exhibit D, and is made a part hereof by reference. The United States has j>aid all royalties as provided for in this contract without any extension or renewal thereof.

X. During the years 1915,1916, and 1917, large quantities of fuses containing features covered by and described in United States Letters Patent No. 860,354 were made by American manufacturers under licenses from the plaintiff in quantities and for royalties as set forth in Exhibit A attached to the petition and made a part hereof by reference. Except as a concession of a royalty of only 5 cents per fuse was made to the War and Navy Departments of the United States the established royalty for licenses to make, use, and sell fuses containing features covered by and described in said letters patent payable to the plaintiff as owner of said patent was 8 cents per fuse, subject to a discount only upon payment of cash in advance.

A just compensation to the plaintiff for the manufacture or use by the War Department of the invention disclosed and claimed in said letters patent is the payment to the plaintiff *669by the United States of 5 cents for each fuse so made or used possessing any features covered by and described in said letters patent.

XI. Letters Patent of the United States No. 860,354, granted July 16, 1907, to John B. Semple, assignee of S. D. Cushing, adequately disclose a patentable invention, which is validly defined and claimed in claim 6 thereof.

The invention disclosed in U. S. Letters Patent No. 860,354 and defined in claim 6 is present in the Army combination fuse and the Army base percussion fuse.

The patented invention has been used in great numbers and is of great merit and value.

The invention was new with the said Cushing; it is not disclosed in any prior patent or publication laid before the court, and was in fact new to the practical art when it came to be applied.

XII. Charles P. Watson made applications for patents filed March 11, 1905, and May 20, 1905, Serial Nos. 249,676 and 261,284, respectively, but these do not disclose the invention described and claimed in United States Letters Patent No. 860,534, and both of said Watson applications were abandoned.

XIII. The patent of the plaintiff was acquired by him from S. D. Cushing for no other consideration than the payment of Cushing’s salary, and the attorney’s fees for procuring the patent, Cushing being at that time in the employ-, ment of the plaintiff.

Hay, *Judge,*

delivered the opinion of the court:

Under articles of agreement entered into by the plaintiff Avith the United States the United States agreed to pay to- the plaintiff a royalty of 5 cents for each fuse covered by United States Letters Patent No. 860,354 granted July 16, 1907, to the plaintiff.

The first contract entered into by the parties Avas December 2, 1909. On March 10, 1915, another contract was made between the parties covering the same patent and agreeing to pay the same royalty.

And on March 27, 1917, still another contract was entered into between the parties covering the same patent and pro*670viding for the payment of the same royalty. The said last-named contract contained the following provisions: “ Article 1. That the articles of agreement dated December 2, 1909, hereinbefore referred to, are hereby renewed as provided for in Article 3 thereof with all their stipulations and conditions.”

Article 3 of the contract of December 2, 1909, is as follows:

> “It is further agreed that in the event of the Congress of the United States making further appropriations applicable to the manufacture or purchase of fuses, the United States shall have the right to renew this contract under the same terms and conditions.”

The Government has paid royalties under its contract with the plaintiff of 5 cents per fuse on fuses made for the Army before July 1, 1917, but has paid no royalties to the plaintiff since June 30, 1917, on the fuses made for the Army possessing features covered by and described in the Patent No. 860354.

Since July 1, 1917, there have been made for the use of the Army something over 12,000,000 of these fuses, and in addition other fuses have been made for the use of the Army at Government arsenals, the number of which does not appear in evidence.

The contract made by the Government with the plaintiff has remained in full force and effect without any effort being made on the part of the Government to repudiate it or to- put an end to it. The Government continued from the date of the first contract to have the fuses manufactured, and. also continued to pay the royalties each year up to and including June 30, 1917. In the latter part of the year 1917 the Government endeavored to have the plaintiff reduce the amount of the royalty; this the plaintiff declined to do. Thereupon the Government refused to make any further payments, although from June 30, 1917, up to the time of its refusal to pay it had continued to have the fuses made, and so continued up to the time of the bringing of this suit.

*671There is no question that the Chief of Ordnance was authorized to make the contract with the plaintiff. *Berden Fire Arms Mfg. Co.*v. *United States,*26 C. Cl. 48, 78.

Evidence has been offered by the defendant tending to attack the validity of the plaintiff’s patent under which the license was granted. Such evidence is not admissible if the contract is binding upon the parties. That it is so binding seems beyond question. This court, speaking through Chief Justice Campbell in the case of *Foley, Adm*'x. v. *United States,*58 C. Cl. 303, 316, used this language: “ The instant case illustrates the importance of determining whether in fact a contract was made between the parties, because if one was made the court is not concerned with the question of the validity of the patent. When it is found that the defendant agree to use a patented method or process, and did use it, the amount agreed upon as royalty becomes payable.” The licensee when sued for royalties is estopped to deny the validity of the patent which he has been using. *United States*v. *Harvey Steel Co.,*196 U. S. 310.

The Government, howeyer, claims that under certain statutes, R. S., secs. 3732 and 3679, the contract in suit is forbidden to be made if it involves the payment of money from future appropriations, and that the royalties provided for under the contract must be paid from the appropriations in effect at the time when the contract was entered into. The sections of the Revised Statutes referred to are as follows:

R. S. Section 3679:

> “ No executive department or other Government establishment of the United States shall expend in any one fiscal year any sum in excess of appropriations made by Congress for that fiscal year or involve the Government in any contract for the future payment of money in excess of such appropriations, unless such contract or obligation is authorized by law * * * ”

R. S. Section 3732:

> “No contract or purchase on behalf of the United States shall be made unless the same is authorized by law or is under an appropriation adequate to its fulfillment except in *672the War and Navy Department for clothing, subsistence, forage, fuel, quarters, or transportation, which, however, shall not exceed the necessities of the current year.”

We do not think that these statutes apply to a license agreement which permits the Government to use a patented invention. See *United States*v. *Harney Steel Co., supra.*See also *United States*v. *Harvey Steel Co.,*227 U. S. 165.

As a matter of fact appropriations had been made when the- contract of March 27, 1917, was entered into which were ample to pay the plaintiff the amount of the royalties which the United States owed to the plaintiff and which were incurred by the Government after the ending of the fiscal year of 1917. For by the act of February 14, 1917, whereby large sums were appropriated which were available for payment to plaintiff of his royalties it was provided that the appropriations should be available until expended, and it appears that these appropriations were not expended at the-end of the fiscal year. Another act was passed on June 15, 1917, appropriating $106,550,000, “ for purchase and manufacture of ordnance stores to fill requirement of troops.” This act provided: “ That the appropriations contained in this act, unless otherwise specified herein, shall be available during the fiscal years 1917 and 1918,” and the act further provided: “That the appropriations contained herein shall be available for the payment of obligations on account of the present emergency incurred prior to the passage of this act, and which are properly chargeable to such appropriations.” 40 Stat. 217.

Another act of Congress approved July 9, 1918, appropriated $93,400,000 for purchase and manufacture of ordnance stores for the year ending June 30, 1919, and further provided: “ the appropriations contained herein shall be available for the payment of obligations on account of the existing' emergency incurred prior to the passage of this act, or prior to June thirtieth, nineteen hundred and eighteen, and which are properly chargeable to such appropriations.” 40 Stat. 878.

From these statutes it appears that when the royalties of the plaintiff became due there were appropriations available *673for the purpose of this payment. Under the contract the Government, when it availed itself of the privilege granted it by the contract, was bound to pay the royalties which it had agreed to pay, and there is nothing in the record which even tends to show that the Government should be relieved of its obligation.

The plaintiff is entitled to recover the sum of $616, 290.20. And it is so ordered.

DowNey, *Judge;*Booth, *Judge;*and Campbell, *Chief*Justice, concur.