Case Name: THE HARVEY STEEL COMPANY v. THE UNITED STATES
Court: Supreme Court of the United States
Jurisdiction: United States
Decision Date: 1905-01-16
Citations: 40 Ct. Cl. 516
Docket Number: 
Parties: THE HARVEY STEEL COMPANY v. THE UNITED STATES.
Judges: 
Reporter: United States Court of Claims Reports
Volume: 40
Pages: 516–517

Head Matter:
THE HARVEY STEEL COMPANY v. THE UNITED STATES.
[38 C. Cls. R., 662; 196 U. S. R., 310.]
On the defendants’ Appeal.
The action is upon an express contract for tlie right to use an invention patented and known as the “Savvey process for hardening armor plates." The defendants interpose all the defenses that would be admissible in an action on an implied contract or in an action for an infringement.
The court below decides:
1. If an action for the use of a patented invention is founded on implied contract, substantially all of the defenses may be interposed which would be admissible if the action were for an infringement; but if the action is upon an express contract the court will not enter into an examination of the patent; of the construction which should be given to F; of the state of the art, or of any of those questions which-would properly be subjects of consideration if the action were ex delicio, i. e., for an infringement. The case must be determined by the law of contract.
2. Where the defendants entered into a contract with” a patentee for the future use of the Harvey process for hardening armor - plates; advertised for G,000 tons of armor plate “to l>e treated l>y the Savvey process; ” notified manufacturers in the advertisement that their bids “must not include anything for royalties," as the defendants had “acquired the right to use said process; ” entered into contracts with manufacturers for armor plate to be so treated by the process; accepted and paid for the plate manufactured as plate which had been so treated, thereby precluding the patentee from proceeding against the manufacturers for an infringement, they are estopped from questioning the obligations of their contract by setting up defenses which should have been set up, if at all, in an action by the patentee against the manufacturers for an infringement. The defendants can not hold the pat-entee to the obligations of the contract and then involve him practically in the risks and expenses of an action ex delicto.
3. Where the defendants, knowing that plates had been manufactured by a process varying slightly from that described in the patent, accepted the plates from the manufacturers and paid the royalty without objection to the patentee, and continued to manufacture, ostensibly under their contract with him, they can not allege as to subsequently manufactured plates that the same variations constituted a process not covered by the patent. They should have notified the patentee of the new attitude they intended to assume and have left him free to test the materiality of the variations by proceedings against the manufacturers.
4. Where the contract provides that 10 per cent of royalties due shall be withheld-until “said process shall ha ve been tried and found to be efficient, and in the judgment of the Secretary of the many of satisfactory value,” and the Secretary ■ so decides, his decision unreversed is conclusive upon the defendants, and they can not set up the defense of failure of consideration by attacking the validity of the patent.
5. Where the contract contains a warrantee of a right to manufacture and use undisturbed, it is incumbent upon the defendants to show that they have been ousted from the purchased right by some superior patentee or disturbed in the exercise of it.
(1. When armor plates treated by a patented process are manufactured and delivered and accepted and paid for, the patentee’s cause of action, for his royalty, apart from some reservation in the contract, is complete.
7. AVhere the contract provides that “if it should at any time be judicially decided that the party of the first part is not legally entitled under the letters patent aforesaid lo own and control the exclusive right to the use and employment of said process," “ then the payment of royalty under the terms of the agreement shall cease,” the “judicial decision” must exist when the cause of action becomes complete. The defendants can not subsequently set tip such a defense, which • does not yet exist, by seeking to obtain such a decision in a suit for royalty that has become due.

Opinion:
The'decision of the court below is affirmed on the same grounds.
Mr. Justice Holmes delivered the opinion of the Supreme Court January 16, 1905.