Court Opinion

ID: 4599571
Source: CourtListenerOpinion
Date Created: 2020-11-20 19:23:37.321813+00
Date Added: 2024-06-11T07:52:09.035718
License: Public Domain

JOSEPH H. ADAMS, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.Adams v. CommissionerDocket No. 32894.United States Board of Tax Appeals23 B.T.A. 71; 1931 BTA LEXIS 1928; May 7, 1931, Promulgated *1928  1.  The disclosures in a patent application are addressed to those skilled in the art to which the inventions therein disclosed pertain, and therefore the valuation of such an application must be made in the light of the value which would be considered as attaching thereto by those skilled in that particular art.  2.  A collateral attack may not be made in a proceeding before this Board upon the validity of a patent and, therefore, in the absence of controlling judicial determinations to the contrary, we must accept the patents as validly issued on the basis of the patent applications and that the disclosures in the patent were also properly disclosed in the applications.  3.  A patent application is a property right to which a fair market value on a given date may be assigned.  4.  The fair market value on March 1, 1913, of certain patent applications determined.  Nathan L. Miller, Esq., H. Barton Farr, Esq., and Dean Acheson, Esq., for the petitioner.  Eugene Meacham, Esq., and C. E. Lowery, Esq., for the respondent.  SEAWELL*72  This proceeding involves deficiencies in income tax and fraud penalties as determined by the Commissioner*1929  as follows: DeficiencyPenalty1919$32,634.75$16,325.8719208,571.364,285.68192114,905.787,452.89192211,116.465,558.231923230,809.17115,404.591924$100,505.41$50,252.71192591,159.0045,579.50Total489,701.93244,859.47At the hearing, the Commissioner was permitted to amend his answer and allege, as an alternative to his former determination of fraud penalties, that penalties for negligence should be asserted for each of the years before the Board.  However, in his brief, the Commissioner conceded (and we think rightly so) that the record discloses no justification for the assertion of either the fraud or negligence penalties and that this concession not only serves to remove the penalties asserted for all years now before us, but also eliminates the deficiencies asserted for the years 1919 to 1921, inclusive, which are barred by the statute of limitations in the absence of fraud.  This leaves for consideration the correctness of the deficiencies determined by the Commissioner for the years 1922 to 1925, inclusive.  The primary question involved is the value on March 1, 1913, of certain patent applications then owned*1930  by the petitioner.  FINDINGS OF FACT.  1.  The petitioner, an individual, is a resident of Miami, Fla., and is now and was on March 1, 1913, and prior thereto, an inventor.  For many years prior to 1909 he had been at work upon the invention of processes and the apparatus pertaining thereto relating to the treatment of petroleum oils and the conversion of oils of the less volatile types into products of the more volatile types.  2.  In December, 1909, petitioner filed in the United States Patent Office two applications for patents upon inventions theretofore made by him.  The first application covered an apparatus for cracking oil, that is, for breaking down and rearranging the molecular structure of the crude oil so as to produce the lighter and more volatile products of the crude oil, chiefly gasoline, and the second application covered a process by which oil might be cracked by the use of the apparatus referred to under the first application.  3.  The apparatus application was filed in the Patent Office on December 1, 1909, and was given Serial No. 530,852.  A patent was issued upon this application on October 28, 1919, being Patent No. 1,320,354.  During the period while*1931  the application was under consideration in the Patent Office it was considered, rejected and reconsidered on *73  many occasions, and on March 1, 1913, was in a state of rejection in the Patent Office.  In a report by a special master in chancery (report submitted in United States v. Standard Oil Co. of Indiana, Joseph H. Adams, et al., 33 Fed.(2d) 617), which was submitted in evidence in this proceeding, the following facts were found with respect to the history of the foregoing application in the Patent Office, which facts we adopt as our findings: The controversy revolves about the claims for means for continuously forcing oil into the heated chamber under pressure, "a condenser in free communication with said chamber and means for maintaining pressure in said apparatus to and through the condenser." In the application as originally filed, there were fifty-four claims and Claims 50, 51, 52 include elements for keeping the oil under pressure in the apparatus and "for subjecting the oil in said receptacle (converter) while under pressure to the action of a member maintained at an incandescent temperature." It is unnecessary to refer to the Office actions*1932  and responses of the applicant set forth in the file, between the date of filing and the date of November 13, 1915, when, as the Government now erroneously claims, and as the Examiner then erroneously claimed, the applicant first began to claim cracking under pressure.  (* * *) Under date of February 29, 1916, applicant cancelled all of the original claims and substituted new claims to the number of thirty-three.  (* * *) These new claims more clearly and specifically present the applicant's claim to the combination of means for forcing the oil under pressure from the source of supply into the cracking chamber, means for maintaining a vapor pressure upon the oil in the cracking chamber while being subjected to a temperature sufficient to vaporize the oil; and a condenser in free communication with the cracking chamber and a pressure producing valve beyond the condenser.  The Examiner rejected the Amendments and a new drawing attached thereto, to, on the ground that they covered new matter which was not disclosed in the original application.  (* * *) In response to the foregoing action, on July 18, 1916, the applicant referred to the statements of the Examiner that in his original*1933  application the applicant had not disclosed pressure, that his last amendment to claim a pressure valve beyond the condenser would operate to cover up the work of subsequent investigators and hold them as infringers of his patent.  On subsequent occasions further adverse action was had in the Patent Office, but after appealing to the Board of Examiners in Chief of the Patent Office and to the Commissioner of Patents a patent was issued on October 28, 1919.  The facts with respect to the final action on the patent are stated by the aforementioned special master as follows: Adams having gained the main issue that his original specification did sufficiently disclose condensation under pressure to justify the claims including a valve beyond the condenser, was not satisfied with the rejection of Claims 12, 18, 19, 20 and 27, and from the decision of the Board affirming that rejection, he appealed to the Commissioner.  (* * *) The decision of the Board of Examiners in Chief affirming the rejection of these claims by the Primary Examiner was, by the Commissioner, affirmed *74  on January 22, 1919.  (* * *) The applicant acquiesced, cancelled the rejected Claims 12, 18, 19, 20*1934  and 27, renumbered the remaining claims, twenty-eight in number, and the patent went to issue as it now appears in the Record.  [Issued October 28, 1919.] 4.  The process application (referred to in finding 2 above) was filed in the Patent Office on December 31, 1909, and was given Serial No. 535,879 (later refiled as Serial No. 618,011).  A patent was issued on this application on January 6, 1920, being Patent No. 1,327,263.  This application was likewise considered, rejected and reconsidered on many occasions before the patent finally issued, and on March 1, 1913, was in a state of rejection.  In the report of the special master referred to under a discussion of the other application the following facts were found, which facts we adopt as our findings: On March 8, 1910, the Primary Examiner (who was the same primary examiner with whom Adams had such a severe struggle to obtain his Patent No. 1,320,354 as above reviewed in these findings) rejected all the claims on the following references: [Citing various references.] Applicant made no response to the Office action until by letter of March 8, 1911, received in the Patent Office March 10, 1911, he requested an extension*1935  of sixty days until May 8, 1911.  The Examiner under date of March 14, 1911, replied that the application had become abandoned by failure to respond within one year to the Office action of March 8, 1910.  (* * *) On March 30, 1911, Adams refiled his application, which took Serial Number 618,011 (Series of 1900), renumbered as Application No. 289,455 (Series of 1915), which matured into Letters Patent No. 1,327,263.  * * * On May 2, 1911, the Examiner rejected all the claims upon citation of applicant's Patent Number 976,975, November 29, 1910, "in view of the following patents: * * *" [Citing various references.] Applicant then filed a completely new specification and claims, and the Examiner, on September 20, 1913, declined to enter the substitute specification but did enter the amendments into the original claims and repeated the rejection.  (* * *) On September 19, 1914, applicant filed an amendment to certain of the claims and an amendment of the specification.  On October 23, 1914, the Examiner said that the "applicant's last amendment was not such a response as the condition of the case required.  The application is accordingly held to be abandoned." Thereupon Adams, *1936  who had all the time been acting as his own solicitor, filed a petition with the Commissioner, and on February 12, 1915, the Commissioner held that the application was not abandoned and directed the Examiner to proceed with the cause.  While the last mentioned appeal was pending before the Commissioner on February 6, 1915, the applicant filed amendments to the specification, cancelled all pending claims and filed fourteen new claims.  (* * *) On April 5, 1915, the Examiner rejected all the claims on the citation of * * * [Various authorities].  On March 4, 1916, the applicant amended his specifications and Claims 1, 2, 3, 4, 5, 6, 9, 10, cancelled Claims 7, 11, 12, 13 and 14, renumbered the remaining claims and filed new claims numbered 10, 11, 12, 13, 14, 15 and 16.  (* * *) Thereupon the Examiner April 12, 1916, stated: *75  "In considering the claims in this case, the point which stands out most conspicuously in the whole case, is the fact that as filed applicant did not regard the use of pressure beyond the condenser as a matter of any moment.  He might use pressure or he might use vacuum, and apparently there was no particular point in the use of pressure in any*1937  given case." The Examiner then said: "As now presented applicant makes pressure all important, but even now there is nothing at all definite as to the pressure." (* * *) On this point he cited Dubbs No. 1,123,502 granted on an application filed November 20, 1909, and said: "The claims are all rejected, and the rejection is made final.  The application is in condition for appeal." (* * *) On November 10, 1916, applicant Adams tendered a new claim No. 17 * * *.  * * * On December 9, 1916, the Examiner notified applicant that the affidavits filed November 27, 1916, had been received and made a part of the record.  That he had referred the affidavits to the Law Examiner for his opinion on the sufficiency thereof.  He quoted the report of the Law Examiner holding that the affidavits were not sufficient to overcome Dubbs, and that the application being under final rejection the case was not open to the admission of affidavits.  The Examiner stated that he had entered the new claim only for the purposes of appeal, and rejected it for the same reasons as the others.  He notified applicant that in case he appealed, the Examiner would call the attention of the Examiners in Chief*1938  to Patent No. 954,575, Lang of April 12, 1910, but was frank enough to state that "if applicant's affidavits should, on appeal, be held sufficient to overcome Dubbs, they would also probably overcome this patent to Lang." (* * *) * * * Adams now appealed to the Examiners in Chief.  (* * *) * * * The Board of Examiners (* * *) held that the original application sufficiently disclosed pressure to furnish a sufficient basis for the present claims.  It further held that the affidavits were sufficient under Rule 75 to overcome the Dubbs and Lang patents.  The Examiners in Chief stated as the upshot of the whole matter (* * *): "After the hearing applicant submitted nine claims limited to an open communication from the cracking chamber through the condenser, which seems to avoid the Nikiforoff reference, and we recommend the allowance of these claims unless a better reference may be found.  "The appeal is dismissed as to the present claims." Referring back to page 3416 of the Exhibit Book it is seen that while the case was pending before the Board of Examiners in Chief and upon an oral suggestion made by a member of the Board (Mr. Newton) Adams canceled all of the present*1939  claims (that is the claims then pending before the Board on appeal) and submitted nine new claims.  Those were the claims which the Board of Examiners recommended should be allowed.  The Special Master can find no reason to doubt that it is thus clearly shown that the seventeen rejected claims against which Dubbs had been cited as a reference and for the overcoming of which the affidavits were filed were withdrawn by applicant Adams.  The action of the applicant in withdrawing those claims and filing entirely new claims, took out of the case the Dubbs reference and the affidavits to overcome the same and the case from that time on proceeded upon the to overcome the same and the case from that time on proceeded upon the allowability of the nine new claims.*76  The recommendation of the Board of Examiners in Chief for "the allowance of these claims unless a better reference may be found" stimulated the Examiner to find a better reference and so he again produced Seigle No. 567,751 which had earlier been cited in the case and which had been held to be an impractical device and not a sufficient reference.  (* * *) After an argument to the Examiner who was obdurate and adhered*1940  to his action in rejecting the nine new claims, there was another appeal to the Examiners in Chief on November 15, 1917.  On this appeal from the rejection of the nine new claims upon reference to Seigle 567,751, September 18, 1896, the Board of Examiners held (* * *) that the disclosure of Seigle is not insufficient.  * * * The applicant then filed a petition for rehearing before the Board of Examiners which was denied.  He then, on May 7, 1918, appealed to the Commissioner of Patents (* * *).  The hearing was set for June 7, 1918. * * * * * * On July 10, in view of a suggestion made orally by the Commissioner at the hearing, applicant amended Claims 1, 2, 3, 5, 6, 7 and 9 to clearly avoid Seigle.  Claim 4 was not amended since it already specified that the connections to and through the condenser are in open communication securing uniform pressure through the condenser.  Claim 8 was not amended because Seigle does not disclose the step of passing the material into an enlarged vapor dome and maintaining the same pressure on the dome.  (* * *) On June 15 in view of the oral suggestion made at the hearing before the Commissioner of Patents, he filed ten additional claims relating*1941  to the matter of uniform pressure from the heater through the condenser, and means for removing the collected carbon in the pipe-like heater.  (* * *) * * * Notice of an allowance of all of these claims was issued on December 7, 1918, and the patent was ready for issue.  Prior to December 7, 1918, the Texas Company had become interested (in a manner hereinafter shown) in the invention of Adams, and about February, 1919, and subsequent thereto, an attorney for the Texas Company, Mr. Dearborn, was active in the prosecution of the application here in question.  The history of the application thereafter is stated by the special master as follows, which facts we adopt as our findings: Dearborn's first step was to petition for an order that the application in this case be withdrawn from issue under Rule 165 and 166 to permit the introduction of three claims copied from Dubb's Patent No. 1,123,502 of January 5, 1915 for the purpose of interference.  With this petition and argument Dearborn tendered the three claims and his own affidavit to show diligence in filing his petition; also supported by an affidavit of Adams excusing failure to make the claims within one year after the*1942  issuance of Dubbs patent.  (* * *) The Examiner denied the Petition, which action was approved by the Commissioner March 8, 1919.  (* * *) In the meantime the date for paying the final fee for the issuance of the patent which was six months from the date of the notice of allowance (September 7, 1918) had expired March 7, 1919, and accordingly on March 25, Mr. Adams petitioned for a renewal (* * *) and on April 11, 1919 tendered amendments of the Specification, and additional Claims 21, 22, 23, 24, 25, 26, 27, 28, 29, 30 and 31.  (* * *) *77  On June 16, 1919, Primary Examiner (G. A. Lovett) rejected all the claims on two grounds.  He said (* * *): "In view of the necessity for reexamining this case in substantially the same light and spirit as if it were a new application, it is found necessary not only to apply as a new reference (unknown to the Examiner at the time of former Office actions) a French patent to Danre et al No. 30,263, December 23, 1856, 196-31, but also to reject all claims on the ground of a lack of proper disclosure to support any method or process claims whatever." (Black face mine.) After the discussion of specific claims, with reference to the*1943  Danre citation and also with reference so far as Claim 5 is concerned to the objection that there was no sufficient disclosure, he said: "Claims like 10 to 20, which are understood to have been conditionally favored by Commissioner Newton, do not appear to be met by the patent to Danre; and if the adverse considerations above noted can be obviated or overcome it is believed that claims like 21, 22, 23, 24, 30 and 31 may be allowed therewith * * *." Adams' attorney, Dearborn, came back at the Examiner with a strong brief on the question of the doctrines of res adjudicata in the Patent Office as well as in courts of record, to meet the objection of insufficiency in the original disclosure.  He also attacked the Danre patent as disclosing nothing pertinent to the Adams application and claim.  Whereupon the Examiner (* * *) withdrew his rejection of all the claims on the ground of lack of proper disclosure but insisted upon Danre as a pertinent reference.  The rejection of Claims 5 "on the ground of containing new matter is made final" and anticipated by Danre; Claims 1 to 7 and 25 to 29 are finally rejected on the French patent; Claims 8 and 9 and Claims 10 to 24 allowed.  *1944  Thereupon an amendment to page 1, line 25 of the Specification was made; the rejected Claims 1 to 7 inclusive and 25 to 29 inclusive were canceled without prejudice and new claims inserted in lieu thereof.  In connection therewith Dearborn tendered the affidavit of Dr. George William Gray for the purpose of bringing out very clearly certain fundamental differences between the French patent to Danre and the applicant's invention.  This Gray affidavit is purely expert testimony, having nothing to do with the history of Adams' efforts, and is not criticised by the Government in this case.  (* * *) On October 27, 1919, Primary Examiner E. T. Ryan considers the amendment, suggests some amendments to limit the claim "to cracking in liquid form," and indicates that if the amendments are made the claims would be allowable.  Applicant complied and thereupon there was a final allowance of all the claims as they then stood being thirty-one in number, as they now appear in the issued Patent No. 1,327,263.  [Issued January 6, 1920.] 5.  The application as refiled by petitioner on March 30, 1911 (No. 618,011), on the basis of which Patent No. 1,327,263 was issued on January 6, 1920, contained*1945  the following general description of the invention to which it related: This invention relates broadly to the art of essentially converting fluids, such as oils, into products of a dissimilar character, in contradistinction from fractional distillation processes, but in its more intense aspect it consists in a thermal method of converting more or less refined mineral hydro-carbon oils, such as those of the benzin, kerosene, gas and fuel oil series into the more volatile products resembling light oils, benzins and the naphthas, which are characterized by a lower specific gravity and greater commercial value.  *78  It is also within the scope of this invention to treat the various crude petroleums having asphalt and tar bases in such a manner that the oils driven off in vapors when collected and condensed will have a lower specific gravity and greater volume than the products obtained from similar crude oil by any of the known methods of fractional distillation, while at the same time the residues will have greater commercial value than those obtained by the fractional distillation methods.  One object of this invention is to formulate a process of a commercially practical*1946  nature for carrying out the above stated conversion or transformation (as clearly distinguished from a mere distillation) by means of externally applying a high degree of heat to a chamber composed of a heat enduring material maintaining a pressure in said chamber, while containing hydro-carbon oils, and heating the walls of said chamber to an incandescent temperature of sufficient intensity to locally crack and convert the said oils into oils or oily spirits essentially different in nature from untreated oils, the pressure being maintained while the cracked vapors are being condensed as hereinafter explained.  By the term vapor I mean the gaseous form of a substance which is normally liquid at ordinary atmospheric temperature.  6.  While the applications which gave rise to the issuance of the patents referred to above were filed in 1909, the petitioner had been carrying on experiments in connection therewith prior to 1909 and had set up certain laboratory equipment in Brooklyn for that purpose.  During 1908 a representative of the Standard Oil Company of New Jersey witnessed a demonstration of the work being done by petitioner in his Brooklyn laboratory.  This representative was*1947  not particularly interested, though petitioner did at that time crack oil; it was his opinion that petitioner was doing what was then generally known through the application of heat to heavy oil.  The aforementioned representative was likewise seen by the petitioner during 1909 and during the several succeeding months when the work being carried on by the latter was discussed, but the former was not interested, since the process produced more gasoline than was then being obtained from crude oil and there was no market for this additional gasoline.  7.  In 1911 petitioner entered into the following option agreement with certain individuals: Oil Converting Process: - Adams Process Syndicate.  Gentlemen: I have invented a process and apparatus for the treatment and conversion of oils and other liquids by the external application of incandescent heat as covered by caveat and applications filed by me in the United States Patent Office on December 31st, 1909, Serial No. 535,879, Series 1900, and No. 618,011, March 30th, 1911, Series 1900, and offer you for yourselves and associates, as a syndicate, the following option to acquire for a company to be formed hereafter, full right*1948  and title to my said invention any my Letters Patent of the United States to be issued on the application which I have filed and also to all improvements and extensions of, or developments in my present invention which may be discovered or invented by me in the future and the right to my services on the following terms: *79  (1) You are to pay me within the terms of this option and until you organize a company to be formed or this option expires, a retainer of Three Hundred Dollars ($300.00) per month and also such necessary travelling expenses as I may incur while employed in the business of your syndicate.  You are to pay me One Thousand Dollars ($1,000.00) on the signing of this option for present disbursements preparatory to the installation of a conversion plant to demonstrate the process, which installation is to be made at some point to be agreed upon later and at your expense.  My estimate of the cost of such installation, including labor, (Small refractional distillation plant included) should not exceed Twelve Thousand Five Hundred Dollars ($12,500.00) inclusive of my retainer and Two Thousand Dollars ($2,000.00) herein specified.  If the conversion plant installed*1949  produces a finished product of the quantity and quality claimed by me, economically and in a satisfactory manner, then you are to pay me One Thousand Dollars ($1,000.00) as soon as such demonstration has been made.  (2) Unless you decide to permit the option to expire you are to form within the terms of this option a Holding Company under the title of "Adams Process Company" or other appropriate name, to take and hold the title to my invention and improvements thereon, which Company is to be provided with sufficient capital to take out necessary United States Patents and to take care of the expenses of carrying on the enterprise, which same is to be kept free from debt, i.e. it is mutually understood that all patents and patent rights are to be so held as not to become involved through any financial failure or obligation on the part of the Holding Company or Subsidiary or Operating Companies.  (3) I am to receive fifty (50%) per cent of the capital stock of the Company, which is to be issued to me as sold, that is, I shall receive one share of stock in said Company for each share sold, all said stock to be issued as fully paid and non-assessable stock.  (4) This Holding Company*1950  is to pay me a salary of at least Fifty Two Hundred Dollars ($5,200.00) per year as long as such an arrangement is mutually satisfactory, and so long as said salary continues to be paid the Company is to be entitled to my full services and to all such further inventions and improvements, incidental or collateral to my present invention, which I may make.  (5) The title to my said invention is to remain in me until the Company hereinbefore mentioned has been fully organized and its stock has been issued and the payments specified have been completed, whereupon the said Company is to receive full assignments from me and a clear title to the invention.  (6) During the life of this option, and if the payments to me are maintained, I will give my exclusive time to developing and operating the process and apparatus and will furnish tools and available equipment in my possession and you shall have my full assistance in making as thorough investigation as possible.  (7) If it is found advisable to obtain and hold title to my invention for the internal application of incandescent heat under United States Patent No. 976,975, "Oil Converting Process" Joseph H. Adams, Nov. 29th, 1910, I*1951  will negotiate for the purchase of outstanding rights to the sum of Twenty Five Thousand Five Hundred and Seventy Five Dollars ($25,575.00) this sum being required to cover the cash investment of parties other than the inventor, and which can be paid from 25% of the income of the Holding Company, and I will secure from the parties so interested an option on said process and any *80  extensions, so that the time may run along with this option, and until the income of the Holding Company warrants the first payment on the purchase of said process, and also such further extensions of time until the total principal sum is paid in full.  (8) It is mutually agreed that this option becomes active and binding when the syndicate is formed, which date shall be June 19, 1911, and that the first payment shall be made on that date.  (9) This option shall expire six (6) months after date, provided it has been possible within that limit of time to install and operate the conversion plant mentioned herein but if it has not been possible to properly demonstrate the value of this process for Company formation, then this option shall be extended to cover sufficient time to accomplish this purpose*1952  provided the funds are applied and the power granted to make such installation without any unreasonable delay.  During the life of this option or extensions, assignments from me may be placed in escrow in the hands of some Trust Company mutually satisfactory to both parties, if desired.  The contemplated conversion plant, together with my payments and expenses will come within the sum of Twelve Thousand Five Hundred Dollars ($12,500.00) and I hereby guarantee that, barring strikes, fire loss or delays over which I may have no direct control, and within the term of six months, or any reasonable extension of time from June, 1911, I will erect or cause to be erected, such contemplated plant in a favorable place in or near Pittsburgh, Pa., at a point to be mutually agreed upon and will put the converting plant in operation for the first demonstration and operative runs and conversions of petroleum oil into gasoline as stated exclusive of operating expenses after the first satisfactory runs have been made with crude oil or the light gravity (Baume) distillates, and demonstrate the value of the said process.  Signed in the presence of W. H. Young.  (Signed) JOSEPH H. ADAMS.  The*1953  foregoing option is hereby accepted, (Signed) W. J. DIEHL, JOHN L. PORTER E. H. MYERS, JR. Executive Committee.  The foregoing agreement was extended from time to time during 1912 and 1913, the last extension expiring on July 1, 1914.  Shortly after the execution of the above agreement, petitioner moved his apparatus from Brooklyn and set it up at Jacks Run near Pittsburgh, Pa.  After a small amount of gasoline had been produced, three large units were set up in the winter of 1911 and 1912 and thereafter various unsuccessful efforts were made to demonstrate the success of the undertaking.  Approximately $80,000 was expended in the project.  The operations as carried out were largely under atmospheric pressure, but they were unsuccessful.  The experiment was finally abandoned as a failure in July, 1913.  The option contained in the foregoing agreement was never exercised.  In order to dispose of whatever stock was on hand and to stop personal liability on the part of the syndicate members as far as possible, a *81  corporation, the Brighton Oil Company, was formed, but it continued for only a short time.  8.  On August 19, 1914, petitioner and the Texas Company entered*1954  into a written agreement by which petitioner agreed to demonstrate his process for cracking oil and supervise the installation of equipment for that purpose.  The agreement further gave to the Texas Company an option to acquire petitioner's process and patent applications thereon.  The inducement clauses of the agreement read as follows: WHEREAS the said JOSEPH J. ADAMS claims to be the inventor of a new and useful art, process and apparatus, known as the "Adams Process" for the treatment of petroleum oils and the conversion of oils of the less volatile types into products of the more volatile types; and has made application and contemplates the making of further application to the United States Patent Office for a patent or patents covering the said art, process and apparatus, and is desirous of demonstrating to the Company, its officers and representatives the commercial value of said art, process and apparatus; and WHEREAS the said Company is a corporation engaged in the business of refining, treating and selling petroleum and petroleum products; and is desirous of having demonstrated to it, its officers and representatives the commercial value of the said art, process and apparatus, *1955  and is also desirous of securing the option of purchasing or of using to the exclusion of all other persons the said art, process and apparatus in the treatment and conversion of petroleum and petroleum products and in the manufacture, treatment and conversion of any and all other products and substances that are or may be used as substitutes for or in competition with petroleum or petroleum products, should they prove of commercial value.  Under the agreement, the Texas Company agreed to provide a suitable place for the installation and construction of the equipment necessary for the demonstration and to pay for materials in the amount of $779.40.  The petitioner was to complete the installation of the equipment and be ready for the demonstration within 30 days, provided, however, an additional 30 days might be given under certain conditions.  Upon the completion of the said installation the petitioner would proceed within 30 days to demonstrate the commercial value of his process, though the Texas Company might require such additional tests or demonstrations as it might request.  While so engaged in the installation of the equipment and the demonstration of the process, the petitioner*1956  was to receive a weekly compensation of $100.  The option, if exercised, provided for payments upon a royalty basis upon all gasoline, naphtha and refined oils produced by said process, beginning at 25 cents per barrel and decreasing, as quantity might increase, to 10 cents per barrel.  *82  9.  On February 27, 1919, the Texas Company and the petitioner entered into the following agreement: WHEREAS, the COMPANY desires to secure the services of ADAMS in the development of apparatus and processes for the cracking of oils, such as for example, the conversion of heavier oils into gasoline, and ADAMS desires to enter the employ of the COMPANY, and the parties hereto each in consideration of the promises of the other herein contained, do agree with each other as follows: 1.  Adams agrees to serve the COMPANY faithfully for the period of three years from Mar. 1st, 1919, which period shall be extended, unless it is mutually agreed otherwise between the parties hereto, to such time as the COMPANY shall begin to pay royalties under Section 8 hereof, devoting his entire time, energy and skill to the services of the COMPANY and the promoting of its interests and performing from time*1957  to time such work as any executive officer of the COMPANY shall require at such places as the COMPANY or any executive officer shall direct, such work to be done and services performed in a manner satisfactory to the COMPANY but such services to be limited to the design, development and manufacture of apparatus and the development and use of processes relating to the cracking or treatment of oils.  2.  Adams agrees to disclose and assign to the COMPANY all inventions relating to the art or business of cracking described in the last preceding paragraph, made or conceived in him and all his interest in any invention made by, under or jointly by him with one or more others while in the employ of the COMPANY under this or any other contract of employment, and that he will from time to time upon request of the COMPANY make application through the Patent Attorney of the COMPANY for Letters Patent, for such inventions, of the United States of America and assign all such applications to the COMPANY forthwith.  The necessary costs and expenses for making such applications and assignments and of procuring any such Letters Patent shall be borne and paid for by the COMPANY but ADAMS shall without*1958  charge for his services give the COMPANY, its attorneys and solicitors all reasonable assistance in preparing such applications, claims, drawings and specifications for any such application, and execute all papers and do all things that may reasonably be required in order to protect the rights of the COMPANY and vest in it and its assigns the inventions, applications and Letters Patent herein referred to.  3.  The COMPANY agrees to pay to ADAMS so long as he shall remain in its employ under this contract salary at the rate of ONE THOUSAND DOLLARS (1,000.00) per month payable at the end of each calendar month and at the same rate for any part of a month.  4.  ADAMS agrees to execute immediately upon the execution of this contract: (a) Assignment transferring all his right, title and interest in and to the invention set forth in the United States Patent No. 976,975 granted to him on November 29, 1910 for Oil Converting process.  (b) Assignment or assignments transferring all his right, title and interest in the inventions set forth in applications for Letters Patent in the United States identified as follows: Serial No.Filing dateTitle530,852Dec. 1, 1909Improvement in Oil Converting Process.535,879Dec. 31, 1909Process for Conversion of Liquids, Fluids, and Oils.618,011Mar. 30, 1911do.879,907Dec. 31, 1914Oil Converting Process. 17,699Mar. 29, 1915Apparatus for Conversion of Liquids, etc. 53,377Sept. 30, 1915Apparatus for Conversion and Transformation of Liquids.   74,337Jan. 6, 1916Apparatus for Conversion of Hydrocarbon Liquids and Fluids.   79,446feb. 19, 1916Oil Converting Apparatus. 89,334Apr. 6, 1916Do. 80,686Feb. 26, 1916Do. 89,335Apr. 6, 1916Do.103,725June 15, 1916Oil Converting Process for Conversion of Oils.103,726doOil Converting Apparatus.205,527Dec. 5, 1917Process for Conversion and Transformation of Liquids.  205,528doApparatus for Conversion of Oils.209,475Dec. 29, 1917Process of Converting Oils.209,476doApparatus for Converting Oils.241,836June 25, 1918241,837do248,788Aug. 7, 1918*1959 *83  and in any other inventions of the same nature hitherto made by him.  5.  The COMPANY further agrees to pay to ADAMS the sum of ONE HUNDRED THOUSAND DOLLARS ($100,000.00) as soon as the title to the aforesaid United States Patents and applications is vested in the COMPANY.  6.  ADAMS further agrees to make all rightful and necessary oaths, and sign all necessary papers to assist the COMPANY in obtaining full patent protection in the inventions aforesaid, in the United States of America.  7.  The COMPANY agrees by its patent attorney and with the assistance of ADAMS to take steps immediately upon the execution of this agreement to obtain the allowance of broad process claims in the ADAMS application Serial No. 618,011, substantially as follows: The herein described process of treating hydrocarbon oil which consists in subjecting such oil in a receptacle to a temperature in excess of 300 degrees F. permitting the volatilized products generated from the Oil under treatment to pass freely to a condenser where they are condensed, and maintaining substantially the entire pressure exceeding ten pounds to the square inch in both receptacle and condenser during the whole*1960  process solely by the vapors generated from the material under treatment.  The herein described process of treating hydrocarbon oil, which consists in subjecting a body of such oil in a receptacle having a space above the liquid to a pressure in excess of atmospheric, obtaining substantially the entire pressure desired by the products volatilized from the oil under treatment by the heating of the oil, substantially the entire space above the liquid in the receptacle being occupied during the whole process solely by said volatilized products, and subjecting said volatilized products while under their self-imposed pressure above atmospheric to a condensing action.  An improvement in the art of treating hydrocarbon oil by heating and distilling the products volatilized therefrom under pressure effected by the volatile constituents of said liquid, consisting in supplying the oil to a container, heating it for causing volatilization, confining the volatilized constituents in the presence of the oil for causing a pressure thereon materially exceeding atmospheric, continuously passing the volatilized products to a condenser and effecting condensation thereof under their self-imposed pressure, *1961  and controlling the pressure on the oil by regulating the discharge from the condenser.  *84  8.  The COMPANY further agrees as soon as the aforesaid broad claims are granted in a United States patent of which the title is vested in the COMPANY and the validity of such claims finally sustained by the United States Courts to pay thereafter the additional sum of EIGHTY THOUSAND DOLLARS ($80,000.00) liquidated royalty per annum, payable quarterly, during such time as the COMPANY shall operate under the claims of such patent.  9.  The COMPANY will concede a perpetual right to ADAMS or his heirs, agents or assigns, to produce a limited amount of gasoline or motor-fuel by any or all of his processes and apparatus assigned to the COMPANY up to and not to exceed one hundred (100) barrels of fifty gallons each at 60 degrees F. per 24 hour day, within the United States and under the rights vested in any and all of the ADAMS processes and apparatus so held by the COMPANY.  10.  The COMPANY will also concede to ADAMS his rights in all inventions hitherto made by him under any and all patents and patent application covering said inventions now and to be assigned by him or which may*1962  hereafter be assigned to the COMPANY for the manufacture of aromatic compounds, chemicals, dye stuffs or any other liquid, fluid or solid material not in conflict with petroleum and its products or any thing of which petroleum is a base.  The COMPANY will furnish ADAMS with copies of official correspondence including all amendments and office actions pertaining to the ADAMS patents and applications made and taken directly upon the filing or receipt of the same.  11.  It is further agreed that the COMPANY may, if it so elects, at any time cancel all its obligations to pay any royalty to ADAMS or his representatives under this agreement by giving him or them sixty days notice in writing to that effect and by assigning to ADAMS or his representatives, all rights to the ADAMS inventions, patents and applications as specified under Section 4 hereof.  12.  It is further agreed that the COMPANY shall pay to ADAMS in addition to the royalties specified under Section 8 hereof one-half of all income accruing to the COMPANY as damages or royalties for the infringement of, or the grant of rights under, any and all ADAMS patents which have issued or shall issue on the inventions identified*1963  under Section 4 hereof, provided, however, that all court costs and proper legal expenses involved in the recovery of said damages or royalties be first deducted from said income.  13.  ADAMS further agrees to give to the COMPANY any and all collateral, patentable inventions and improvements which he may make in connection with his inventions for processes or apparatus for oil conversion which the COMPANY may control at the time such collateral, inventions and improvements are made, and should he invent any radically new methods of oil conversion then the COMPANY shall have first right to acquire such invention or inventions, it being understood that nothing in this section shall limit or modify the agreement as to the period of ADAMS employment by the COMPANY covered by Sections 1 and 2 hereof.  14.  It is further agreed that this agreement shall supersede and cancel all contracts and agreements previously entered into between the parties hereto.  IN WITNESS WHEREOF this instrument is executed this 27th day of February, 1919.  10.  By agreement dated March 24, 1919, the foregoing agreement was modified to permit the withholding of a maximum amount of $5,000 of the $100,000*1964  mentioned therein pending the release of certain claims of the Hanover Trading Company with respect to petitioner's Patent No. 976,975, which was issued in 1910.  *85  11.  On November 10, 1920, a further written agreement was entered into between petitioner and the Texas Company, incorporating therein the subject matter of the two above mentioned agreements and superseding and canceling these prior agreements.  In addition, the new agreement provided for an additional payment of $35,000 to petitioner for the transfer of foreign patents upon his process.  Further payments were also provided for when patents should issue on the applications involved in the agreement and the claims set out in such patents when issued were fully sustained by the United States courts.  12.  On August 22, 1921, the petitioner and the Texas Company entered into another written agreement relating to the adjustments to be made in favor of petitioner by the Texas Company on account of royalties collected from others, said adjustments relating to cross-license agreements between the Texas Company and the Standard Oil Company of Indiana.  13.  On October 1, 1923, the petitioner and the Texas Company*1965  entered into still another written agreement with respect to the subject matter of the four prior agreements.  This agreement provided, inter alia, that Adams' salary of $1,000 per month should continue until December 31, 1924, after which no further payments should be made; that the Texas Company should pay certain amounts to petitioner which had been held in suspense on account of the Rogers litigation hereinafter referred to; and that certain liquidated royalties of $100,000 per annum should be paid to petitioner from January 1, 1923, with various provisions relating to the adjustment of such payments in the event of litigation being instituted and resulting adversely to the claims of the petitioner's patents.  14.  By virtue of the agreements referred to in the preceding paragraphs, the Texas Company paid to petitioner during the years covered by the notice of deficiency (aside from salary payments not here involved) the following amounts: 1919, lump sum, down payment$95,000.001920, do35,000.001920, annual payment8,333.331921, do156,559.091922, do285,910.281923, do243,342.411924, do265,953.921925, do401,702.6615.  At March 1, 1913, the*1966  oil refiners were aware of the great necessity for an increase in the quantity of gasoline to be produced at prices which would make gasoline cheap enough for wide use.  Prior to 1904 gasoline was a by-product which resulted from the distillation of crude oil in the production of kerosene.  Gasoline, being more *86  volatile than kerosene, was distilled off first in the distilling process, but during the latter part of the last century considerable quantities of the gasoline produced in this manner were destroyed for lack of a market.  Between 1904 and 1909 a change began to take place in the demand for gasoline.  During that period the internal combustion engine came into common use for marine and stationary power engines.  That was also the period during which the automobile driven by an internal combustion engine was in the process of experimentation and development.  The foregoing inventions and developments - particularly with respect to the automobile - served to increase the demand for gasoline, though, in spite of the increased demand, in 1908 more gasoline was being produced than was then required, and it was not until about 1909 or 1910 that it became apparent that*1967  the demand for gasoline would soon exceed the supply which was being produced by the methods then being practiced.  16.  On March 1, 1913, the automobile industry was firmly established and was reasonable sure of an important place in commerce.  The growth of the automobile industry, both prior and subsequent to 1913, is shown by the following tables: Production and registration of motor cars in the United StatesMotor cars in United StatesYearPassenger carsTrucksProductionRegistrationProductionRegistrationTotal Total production registration189544441896251625161897100901009018981,0008001,00080018992,5003,2002,5003,20019005,0008,0005,0008,00019017,00014,8007,00014,80019029,00023,0009,00023,000190311,23532,92011,23532,920190422,41954,59041141022,83055,000190524,55077,40045060025,00078,000190633,500105,9005001,10034,000107,000190743,300140,3007001,70044,000142,000190863,500194,4001,5003,10065,000197,5001909127,731305,9503,2556,050130,986312,0001910181,000458,5006,00010,000187,000468,5001911199,319619,50010,68120,000210,000639,5001912356,000902,60022,00041,400378,000944,0001913461,5001,194,26223,50063,800485,0001,258,0621914543,6791,625,73925,37585,600569,0541,711,3391915895,9302,309,66674,000136,000969,9302,445,66619161,525,5783,297,99692,130215,0001,617,7083,512,99619171,745,7924,657,340128,157326,0001,873,9494,983,3401918943,4365,621,617227,250525,0001,170,6866,146,61719191,657,6526,771,074275,943794,3721,933,5957,565,44619201,905,5608,225,859321,7891,006,0822,227,3499,231,94119211,452,9029,346,195140,9341,118,5201,593,836[*] 19222,302,92310,959,571241,2531,278,8042,544,17612,238,37519233,589,93613,479,608354,3191,612,5693,944,25515,092,17719243,144,99915,460,649350,3462,131,2323,495,29617,591,98119253,696,49017,512,638452,8662,441,7094,149,35619,954,34719263,765,05919,237,171454,3832,764,2224,219,44222,001,393*1968 *87  17.  The increase in the consumption of gasoline during the period from 1899 to 1928 is reflected in the following table, which shows the approximate number of barrels consumed in each of the years mentioned: Consumption of Gasoline in the United StatesYearAmount consumedBarrels18996,383,00019046,326,000190911,260,000191429,915,000191640,355,000191756,313,000191874,506,000191981,783,0001920101,208,0001921107,525,0001922127,906,0001923156,746,0001924185,003,0001925223,865,0001926261,813,0001927297,928,0001928328,489,00018.  During the twenty years immediately preceding about 1911, little creative work was being done in cracking oil or in attempting to increase the output of gasoline from crude oil.  However, as a result of the increase prior to March 1, 1913, in the consumption of gasoline as noted above and the very great possibilities which existed at March 1, 1913, in the expansion of the automobile industry, it was apparent at March 1, 1913, or shortly prior thereto, that the demands for gasoline could not be met from the crude-oil production then reasonable to*1969  be expected unless some better method could be devised to secure more gasoline from crude oil.  19.  Increases at March 1, 1913, were occurring in the production of crude oil in the so-called Gulf and California fields which produced heavy crude oils, comparatively low in gasoline content, whereas the eastern fields, which produced light crude oils, comparatively high in gasoline content, were decreasing in production and showing signs of exhaustion.  Increases in production were, however, occurring in the Mid-Continent fields which produced light crude oils, comparatively high in gasoline content.  While the net result at March 1, 1913, was that increases in crude-oil production were reasonably to be expected, due largely to renewed activity in endeavoring to produce more gasoline to meet the rapidly increasing demand therefor, it was apparent to the oil industry at March 1, 1913, that the increase in production of crude oil could not be expected to keep pace with the demand for gasoline.  At that time (March 1, 1913) the Burton process for cracking oil (hereinafter referred to) had been perfected and was in commercial operation, whereby a much greater percentage of gasoline could*1970  be secured from crude oil, and the reasonable expectation was that a large part of the increased demand for gasoline would be met by this or similar processes.  Another factor of importance was that in the use of the distillation method commonly practiced prior to March 1, 1913, large quantities of by-products (kerosene, the so-called *88  gas and fuel oils, and the lubricating oils) were produced as compared with the amount of gasoline produced.  In 1909 these by-products constituted 89.3 per cent by content of the crude oil refined while the gasoline constituted 10.7 per cent.  The price of gasoline depended to some extent upon the market for the by-products, the demand for which did not increase in the same ratio as that for gasoline.  A distillation or refining process which would result in the production of a greater proportion of gasoline was, therefore, much to be desired.  20.  Efforts were begun by at least two of the large oil companies shortly prior to March 1, 1913, to meet the increased demand for, and expected shortage of, gasoline.  In 1911 the Standard Oil Company of Indiana began conducting experiments under Dr. Burton, and at the same time the Gulf Refining*1971  Company, through the Mellon Institute at Pittsburgh, had a staff of scientists working on the problem under the direction of Dr. Bacon.  21.  The early experiments carried on by Dr. Burton were along different lines from the process as finally perfected.  He tried the tube method, the catalytic method, and other possibilities in an attempt to develop a process without the use of pressure, but these were unsuccessful.  The use of pressure at that time was the most feared thing imaginable for the reason that the metal then used in the stills was very soft and the tendency was for a layer of coke to settle on the bottom of the still.  This collection of coke would cause the bottoms to blow out.  However, in the early part of 1912, Dr. Burton developed a liquid phase cracking process under pressure.  Experimental stills were set up and were run through the summer of 1912, trying various modifications of the process.  By the end of the summer of 1912 the experiments were regarded by the Standard Oil Company of Indiana as a success and in the fall of 1912 a large appropriation was made and work was started upon the erection of 120 pressure stills.  The first battery of these stills was*1972  completed in December, 1912, and was put in operation in January, 1913.  Throughout the year 1913 production under this process increased as additional batteries went into operation.  By January, 1914, other oil companies had obtained licenses under this process and were building similar stills.  22.  In the meantime, an application for a patent upon the Burton process was filed on July 3, 1912, and a patent was issued thereon on January 1, 1913.  23.  From 1913 the 1919, inclusive, the Burton process was the only process in commercial operation for cracking oil.  The following table shows the total amount of gasoline produced in the United States by this process from 1913 to 1927, inclusive, together with *89  its percentage of the total production of cracked gasoline; and the amount of crude oil conserved as a result of the use of this process with its percentage to the total crude-oil production of the United States for the same period: YearBarrels of Percentage of totalBarrels of crudePercentage of totalBurton cracked production of oil conservedcrude productiongasoline producedcracked gasolineof United StatesPer centPer cent19131,552,0001001 9,132,0003.719142,028,00010011,861,0004.519154,143,0001001 24,288,0008.619166,947,00010040,865,00013.619179,845,00010053,505,00015.9191811,788,00010054,323,00015.3191915,486,00010073,743,00019.0192015,645,00096.970,157,00015.8192120,042,00094.389,874,00018.8192222,687,00089.495,727,00017.2192321,677,00076.587,407,00011.9192421,970,00064.086,157,00012.1192522,100,00032.296,930,00012.7192620,500,00021.986,864,00011.3192715,800,00015.666,386,0007.4212,210,000947,219,000*1973 24.  In the year 1913 the Standard Oil Company of Indiana began to grant licenses to other oil refiners for the use of the Burton process.  These licenses were first given upon a payment by the licensee of 25 per cent of its net profits to be accounted for in a certain way.  Soon, however, for accounting reasons, the basis of payment in many of the license agreements was changed to a per barrel basis of 50 cents per barrel to make an approximate equivalent of the 25 per cent of the net profits of the licensees.  This showed a profit to the licensees (exclusive of the royalty paid) of $2 per barrel.  From 1914 to 1924, inclusive, the Standard Oil Company of Indiana received from its licensees the following amounts: 1914$73,563.831915332,048.8719161,786,982.6219172,418,627.1719183,154,202.5419193,850,081.6619203,441,925.7619211,990,631.1019224,353,778.0719233,051,857.8519242,414,708.4125.  The Burton process contained two basic principles, which were likewise embodied in the Adams patents hereinbefore referred to *90  as issued*1974  on the basis of the applications filed in 1909.  The Adams patents disclosed seven new features of invention as follows: First, The indirect hearing of a large body of oil in a pressure cracking process.  Second, The partial condensation under pressure of the material boiling just above gasoline, mixing this condensed oil with the feed and sending it through again for further cracking.  Third, The condensation of the distillate and the separation from it of uncondensible gas under pressure in a gasoline-making process.  Fourth, Continuously feeding and drawing tar in a liquid phase gasoline-making process.  Fifth, The use of very high furnance and tube temperatures in heating up the feed in a liquid phase cracking process.  Sixth, The heating of a vertical still between its ends below the oil level.  Seventh, The use of carbon scrapers in the hot oil zone and the removal of tar out of the hot zone by such carbon scrapers.  26.  Of the features named above, the second and third were employed in the Burton process, and as to these features the Adams process dominated the Burton process.  27.  Both the Burton process and the Adams process*1975  are to be classified as bulk pressure processes, but they are to be distinguished in that the Burton process is a batch process whereas the Adams process is a continuous process.  That is, the Burton process was one by which a given quantity of fuel oil was put in a still, the still fired and the oil cracked.  After these operations, the fires were drawn, the stills were cleaned and the operations were repeated.  Under this process no mechanical means existed for removing the coke which formed on the bottoms of the stills as the operation progressed but it had to be removed by mechanical means after the fires were drawn.  On the other hand, the Adams process operated with a continuous flow of feeding stock and made use of revolving scrapers against the side of the stills which removed the heavy petroleum particles that would otherwise become coke.  28.  The Texas Company began work along the line of a continuous process about 1914 or 1915 and by about 1917 had such a process in operation on at least a small-sized experimental scale.  The process as finally developed by the Texas Company is known as the Holmes-Manley process and is generally regarded as the highest embodiment of the*1976  art of pressure oil cracking.  It is a very complicated process and involves a large number of inventions.  The seven features referred to under finding No. 25 as disclosed in the Adams patents are embodied in this process as now operated by the Texas Company, and other principles are involved which are covered by other patents.  The Holmes-Manley process was dominated as to the aforementioned seven features by the Adams patents.  *91  29.  The Holmes-Manley process was considered by the special master in the report referred to above as having been submitted in evidence and the following facts were found with respect thereto, which facts we adopt as our findings: The Texas Company began the first installation of the Holmes-Manley batteries in July of 1918 and they were put into commercial operation at Port Arthur in February, 1920.  The first appropriation made by the Texas Company at the time of beginning the work, was $570,000, and the next appropriation for completing the first installation in August of 1919, was $2,493,000.  From that time to the beginning of the year 1926 the Texas Company had spent over $14,000,000.00 for installing plants operating the Holmes-Manley*1977  process, exclusive of steam plants, power plants, water supply and general tankage used in connection with the cracking operation.  It now has plants at West Tulsa, Lockport, Illinois, and Caspar, Wyoming.  The daily rated gasoline production of all these plants is 1,092,000 gallons.  From 1920 to 1924, it produced 620,022,990 gallons of cracked gasoline.  It has received for the use of its patents, from its licensees, the following royalties: 1921$426,236.391922943,641.141923601,379.361924986,891.78This Holmes-Manley continuous cracking process is almost universally agreed to be the highest embodiment of the art of bulk pressure distillation.  Whereas, the Burton and Clark, and Clark processes enabled the operator to handle 20,000 gallons of cracking-stock in a cycle of two days (or about 10,000 gallons a day), with the result of obtaining thirty to thirty-five per cent. of gasoline, the Holmes-Manley process puts through approximately 70,000 gallons per day, or seven times as much as the Burton-Clark process, and makes around forty per cent. of gasoline and runs for a period of fifteen to thirty days and frequently longer before having to be*1978  shut down because of coking.  The Holmes-Manley commercial cracking-still embodies in its structure and operation, the inventions of a number of the patents of the defendants.  A number of its features are disclosed in the various patents to Adams; others are in the patents issued to Manley, to Holmes, to Behimer, and to Holmes and Manley jointly.  It embodies also some of the Claims of Clark, Humphreys, Burton (1,160,689), Lewis & Cooke, Burton & Clark (owned by the Standard of Indiana), and some of the claims of Ellis (owned by the New Jersey Company).  30.  The following table shows the total amount of gasoline produced in the United States by the Holmes-Manley process from duced in the United States by the Holmes-Manley process from 1920 to 1927, inclusive (production having begun in 1920), together with its percentage of the total production of cracked gasoline and the total number of barrels of crude oil conserved as a result thereof: YearBarrels of Percentage of total Barrels of crude oilHolmes-Manley crackedcracked gasoline madeconservedgasoline producedin United StatesPer cent1920501,9713.12,251,00019211,184,3515.65,311,00019221,783,6437.07,526,00019233,798,60013.415,317,00019247,839,64022.830,704,000192510,282,33014.945,098,000192611,755,45012.549,811,000192714,058,03013.959,067,000Total51,204,015215,085,000*1979 *92  31.  In addition to the two cracking processes referred to above there are other important process which have been developed, but the filing dates for the patents therein involved (with the exception of one Dubbs patent hereinafter referred to) were subsequent to those of the petitioner here in controversy.  32.  One of these processes was the tube and tank process which was developed by the Standard Oil Company of New Jersey and is a tube cracking process as distinguished from the bulk pressure cracking process.  The applications for the patents involved in this process were filed subsequent to those involved in the Adams process.  The process employs the use of the first, second, and third features as set out in finding No. 25 as disclosed by the Adams patents.  Operations under this process began in 1921.  The following table shows the total amount of gasoline produced by this process in the United States from 1921 to 1927, inclusive, together with its percentage of the total production of cracked gasoline; and the amount of crude oil conserved as a result of this process with its percentage to the total crude-oil production of the United States for the same period: *1980 YearBarrels of tube andPercentage ofBarrels of Percentage oftank gasoline total crackedcrude oiltotal crudeproducedgasoline madeconservedproduction ofUnited StatesPer centPer cent192123,6000.1106,0000.021922178,000.7751,000.131923778,0002.73,137,000.4319241,950,0005.77,647,0001.0719253,830,0005.616,798,0002.2192614,200,00015.160,169,0007.8192719,700,00019.582,773,0009.2Total40,659,000171,381,000*93  33.  The Cross process, likewise a tube process, was developed by the Gasoline Products, Company, but the applications for patents thereon were not filed until long subsequent to those of Adams here in question.  The process employs the first of the Adams features as set out in finding No. 25.  Operations under this process began in 1921.  The following table shows the total amount of gasoline produced by this process in the United States from 1921 to 1927, inclusive, together with its percentage of the total production of cracked gasoline; and the amount of crude oil conserved as a result of this process with its percentage*1981  to the total crude-oil production of the United States for the same period: YearBarrels of CrossPercentage of Barrels of crudePercentage of totalcracked gasolinetotal crackedoil conservedcrude productionproducedgasoline producedin United Statesin United StatesPer centPer cent19212,7500.0112,000Negative.1922125,183.45528,0000.11923406,1941.431,638,000.219241,575,4004.66,178,000.919255,950,0008.726,096,0003.4192611,950,00012.750,636,0006.6192715,950,00015.867,017,0007.5Total35,959,527152,105,00034.  Other commercial cracking processes which came into use subsequent to 1920 were the following: Dubbs Process, licensed to about 50 different companies.  Gulf-McAfee, owned and operated by Gulf Oil Company.  Ison, owned and operated by Sinclair Oil.  Jenkins, licensed to about 15 companies.  Coast and another, owned and operated by Mid-Continent Petroleum Company.  Miscellaneous.  35.  One or more of the features outlined in finding No. 25 as disclosed by the Adams patents are used in all of the various cracking processes*1982  now being practiced.  The Dubbs process, referred to under the previous finding, makes use of the first and second features.  35. (a) The efficiency of the various processes, with respect to the amount of gasoline recovered from the charging stock of crude oil, has been greatly improved over the period since the first cracking process was put into commercial operation.  In 1914 the rate of recovery of gasoline from crude oil was approximately 17 per cent by means of the Burton process, whereas by the same process it was increased to 30 to 35 per cent in 1924 and by the Holmes-Manley process to approximately 40 per cent in 1924.  *94  36.  From 1913 to 1927, inclusive, there were produced by the Burton and Holmes-Manley processes 263,414,015 barrels of cracked gasoline.  This production resulted in a conservation of approximately 1,162,304,000 barrels of crude oil.  During the same period there were produced by all cracking processes, including those hereinabove referred to, 440,808,000 barrels of gasoline, and up to and including 1929, cracking processes had produced approximately 707,121,000 barrels of gasoline.  37.  Under date of August 26, 1921, the Standard Oil Company*1983  of Indiana and the Texas Company entered into a contract whereby the licensees of Standard Oil of Indiana were gravted immunity for any infringement claimed under the Texas Company's patents; the royalties received and to be received by Standard Oil of Indiana under licenses theretofore given were to be shared in by the Texas Company; and the royalties collected by either company under licenses thereafter granted under the patents of both companies were to be equally divided.  38.  Under date of January 26, 1923, the Texas Company and the Gasoline Products Company, the owner of the Cross patents, entered into a contract wherein the Gasoline Products Company was authorized to grant licenses under the patent rights of the Texas Company and the Texas Company was to receive a royalty for all operations carried on under the Cross process.  The Texas Company further agreed to make no claim for infringement of its patents against the licensees of the Cross process who took the benefit of the agreement and agreed also to negotiate with Standard Oil of Indiana and Standard Oil of New Jersey for the acquirement by the Gasoline Products Company of a license under the patents of those companies. *1984  39.  On or about September 28, 1923, seven contracts were entered into between the Texas Company, Standard Oil Company of New Jersey, Standard Oil Company of Indiana, and Gasoline Products Company.  These companies as before stated were the owners, respectively, of the Holmes-Manley, the tube and tank, the Burton, and the Cross cracking processes.  Under these contracts each company licensed each of the other companies to use its patent rights both in the United States and in foreign countries and all past infringements against the licensees of the Cross process were waived.  40.  Subsequent to the making of the aforementioned agreements, an action was brought in 1924 by the United States against the Standard Oil Company of Indiana, the Standard Oil Company of New Jersey, the Texas Company, and the Gasoline Products Company, designated as primary defendants, and their licensees, designated as secondary defendants, for an alleged violation of the Sherman Anti-Trust Act.  The petitioner (whose patents had been assigned *95  to the Texas Company) was also later made a party defendant on the ground that fraud was practiced in the procurement of the patents hereinbefore referred*1985  to as issued on the applications filed by him in 1909.  Because of the voluminous testimony to be introduced, the matter was referred to a special master in chancery to hear the evidence and to make findings of fact and conclusions of law thereon.  His very exhaustive report (heretofore referred to) and the decision of the court on the basis thereof (United States v. Standard Oil Co. of Indiana et al., supra) were submitted in evidence in this proceeding.  41.  In the aforementioned report of the special master various facts were found and conclusions reached, some of which (in addition to facts already quoted) are set forth below: Late in 1919, after the allowance of the claims in Patent No. 1,327,263, Mr. Dearborn, attorney for the Texas Company, advised that Company that the Burton process of the Standard Oil Company of Indiana, infringed these allowed Adams claims, and the Texas Company therefore gave notice to the Standard Oil Company of Indiana to that effect.  The Standard Oil Company of Indiana promptly countered with a notice that the Holmes-Manley process infringed certain specified patents which it owned.  A comparison of some of the claims*1986  of Adams No. 1,327,263 and Burton No. 1,049,667 will readily convince anyone of the seriousness of the conflict.  The attorneys for the Indiana Company knew that Adams' application date was prior to the application date of Burton and they did not know how much farther back Adams would be able to carry his date of invention.  The attorney for The Texas Company, after careful study, reached the conclusion that in some of its features the Holmes-Manley process did infringe some of the patent rights of the Indiana Company.  The result of litigation might have been that each company was infringing some patent right of the other and that neither could continue to operate its own process without the consent of the other.  The two companies were confronted with a choice between a settlement and litigation.  Litigation would paralyze progress in the industry and the profits and damages which might be recovered in such an action ran into large figures and would inevitably cause a serious financial loss to one or the other of the companies.  Litigation, under such circumstances, would have been very unwise if any kind of reasonable settlement could be arrived at.  It was perfectly obvious that*1987  the sensible thing for both to do was to exchange immunities and grant reciprocal licenses under their respective patent rights if they could agree upon terms.  Other facts were also found and conclusions reached as follows: The processes of the primary Defendants, respectively, are the embodiment of the group of patents held by them, respectively, with the exception of a very small number.  It is very certain that no one could practice the commercial process of either of the primary defendants without running foul of the patents on indispensable features embodied in it.  It is quite true that there is a recognizable distinction between the usefulness of the plant structures of the defendants respectively, considered as mechanical *96  units, and the utility of separate patented features embodied therein, and likewise a distinction between the usefulness of the commercial process included in each of the respective operations of the primary defendants and the utility of the several and respective inventions described in their process patents.  While it is abundantly shown that the respective structures of the primary defendants as mechanical units and the processes which*1988  are effectuated by these structures are of very great utility in the art, it does not necessarily follow that such utility is due in equal degree to each of the inventions embodied therein.  Nevertheless where it is shown, as it is in this case, that the mechanical units could not exist without the embodiment therein of the patented mechanical features and that the processes effectuated and carried out by these structures could not be carried on without involving claims of the process patents of the several defendants, there is necessarily imported to each of the inventions so embodied in the structure or involved in the process, a utility of more or less relative importance.  Therefore, the utility of these commercial processes includes and demonstrates strates the utility of the patents of the primary Defendants, respectively, pertaining thereto.  * * * From all the evidence the Master finds that the inventions of the patents owned by each of the primary Defendants, respectively, are of great utility; that the respective groups of patents owned by the several primary Defendants relate to the same art and general subject matter and the domain covered by each group is so adjacent*1989  to the domain covered by each of the other groups as that wasteful litigation was likely to be provoked between them and their development of competing refining processes hindered and perhaps frustrated to the detriment of the public interest; that whether and in which instances a patent or patents of one primary Defendant was infringed by either or any of the other primary defendants in the absence of a license it is not now necessary to decide.  * * * The Special Master finds that with the exception of not more than five or six, the patents owned by the "Primary Defendants," are not for "minor improvements," in processes and operations for the manufacture of cracked gasoline, but are for substantial, valuable and highly useful improvements, which have made possible the manufacture of cracked gasoline in commercial quantities, have increased the yield of gasoline per barrel of crude many times over and have enabled the supply of gasoline to meet the ever increasing demand.  That the processes employed by Defendants for cracking gasoline by the application of super-atmospheric pressure and high temperatures, described in the letters patent of the Primary Defendants, are not, *1990  in all substantial respects, the same processes as those known and employed long prior to the application for, or issuance of any of their said patents, but were for new and useful and patentable inventions, the utility of which has been shown by the Petitioner itself.  The Special Master finds that the procuring and treating of said patents as valid by the Defendants, is not a device to lend color of legality to any combination, conspiracy or monopoly, but that said patents were procured in the regular and lawful manner, and were acquired by the Defendants in good faith, for the laudable purpose of producing a larger proportion of gasoline from a given amount of crude petroleum, and for supplying the critical demand in the United States for more gasoline than could be produced by the straight distillation method.  *97  42.  The special master also reached the conclusion that the agreements among the several defendants were not in violation of the Sherman Anti-Trust Act.  This conclusion was reversed by the District Court(*1991 United States v. Standard Oil Co. of Indiana et al., supra), but the finding of the special master that the Adams patents were not obtained by fraud was not disturbed.  In reaching its conclusion the court made the following statements: Respecting queries two and three, little need be said in view of our ultimate conclusion as to the validity of the patents.  This court is divided respecting the right of the Government to attack the validity of the patents in these proceedings.  We are satisfied, however, that we may inquire into the prior art to ascertain the scope of the claims of the various patents involved.  Having made that study, we conclude that: (a) All of the patents cover improvements only.  (b) None of them are basic or pioneer patents.  (c) All claims should be construed accordingly.  It by no means follows, however, that because the claims of a patent merely cover improvements, and must be denied a wide range of equivalency, that they are unimportant or that the inventor did not make a real contribution to the art.  Moreover, if a narrow patent is valid, it furnishes as sufficient a consideration for a contract based on it as would a pioneer*1992  or basic patent and it is as legitimate a subject of cross-license agreement as is a basic or pioneer patent.  Without discussing each patent at length and in detail, we will content ourselves with a statement of our conclusion.  For the purpose of this suit, we are not willing to disturb the Master's finding that the patents are valid.  * * * It appears, however, that the principal patents of the primary defendants which are the subject of the cross-license agreements may each be practiced without infringing the other.  For example, the so-called Burton patents of the Standard Oil of Indiana are not infringed by the Holmes-Manley process of the Texas Company nor the Cross patents of the Gasoline Products Company, nor by the Tube-and Tank Process.  Subsequent to the execution of the agreements, each of the primary defendants continued to follow the teachings of its own patent.  The processes described in the claims of many patents were not adopted by any primary defendant not the owner of such patents.  Some of the claims of some of the patents are not followed by any of the primary defendants.  42 (a).  The aforementioned decision of the District Court with respect to a violation*1993  of the Sherman Anti-Trust Act was recently reversed by the Supreme Court (Standard Oil Co. of Indiana et al. v. United States,283 U.S. 163">283 U.S. 163), and in so holding the court made the following comments with respect to the validity of the patents: * * * The master found, after an elaborate review of the entire art, that the presumption of validity attaching to the patents had not been negatived in any way; that they merited a broad interpretation; that they had been acquired in good faity; and that the scope of the several groups of patents overlapped sufficiently to justify the threats and fear of litigation.  The district court stated that the particular claims should be interpreted narrowly, and that the respective inventions might be practised without infringement of adversely owned patents.  But it confirmed the finding of presumptive validity and did not question the finding of good faith.  *98  It held that the patents were adequate consideration for the cross-licensing agreements and that the violation charged could not be predicated on patent invalidity.  Inasmuch as the Government did not appeal from these findings, we need not consider any of the*1994  issues concerning the validity or scope of the cracking patents; and we accept the finding that they were acquired in good faith.  Neither the findings nor the evidence on this issue supply any ground for invalidating the contracts.  43.  On November 20, 1909, Jesse A. Dubbs filed an application in the Patent Office relating to improvements in treating oil and referring more particularly to a process of subjecting the oil to heat and pressure, and a patent (No. 1,123,502) was issued thereon on January 5, 1915.  One process described was for dehydrating oil.  Much litigation has arisen as a result of this patent, the contention being that it contained certain features on which could be based a broad claim to cover various kinds of processes, including dehydrating, cracking and fractional distillation processes.  A finding in the report of the special master (hereinbefore referred to) with respect to this patent follows: This Dubbs patent was cited against one of the Adams applications, and is probably offered by Petitioner in connection with the Adams file wrapper, having a bearing upon the contention that two of the Adams patents are void for fraud in obtaining the allowance of*1995  them.  The object of Dubbs was to separate water from emulsified California oils.  Whatever cracking ensues in his process is merely incidental.  The Adams patent claims were distinguished from Dubbs in the [Patent] Office.  * * * Jesse Dubbs and/or his son, C. P. Dubbs, secured other patents relating to oil-cracking processes.  45.  Prior to Adams' contract in 1914 with the Texas Company (hereinbefore referred to) his application had been assigned to one Myers as a trustee for the Jacks Run Syndicate (referred to under finding No. 7) under an agreement to reassign if the invention was not purchased.  The purchase was not made, but in 1916 the formal reassignment had not taken place.  In April, 1916, C. P. Dubbs, son of Jesse Dubbs above referred to, approached Myers with a view to obtaining an inspection of the Adams confidential files in the Patent Office.  Myers, through his unrevoked power as trustee, obtained for Dubbs' attorney copies of the papers in the Adams files in the Patent Office.  These papers were exhibited to the attorney for the Standard Oil Company of Indiana in April, 1916, who immediately informed his company that he regarded them as dominating the Burton*1996  process.  At the time of the hearing in this proceeding, the United States District Court for the District of New Jersey had under advisement a suit brought by the Texas Company against the Warner-Quinlan Company to enjoin the use of the Dubbs process as an infringement of the Adams patents and for an accounting.  *99  46.  In or about 1922, George T. Rogers Brought suit in the Supreme Court in and for the County of New York, State of New York, against the petitioner and the Texas Company, in which Rogers claimed that by virtue of a contract, or contracts, he had made in July, 1907, with petitioner, he (Rogers) had agreed to advance money to assist petitioner in completing his inventions (here in question) of apparatus and processes for cracking oil, and obtaining patents therefor, and that petitioner, in consideration for this financial assistance, had agreed to grant to him (Rogers) an interest in said inventions and patents therefor to the amount of 40 per cent.  On July 21, 1922, that court entered a decree in favor of Rogers, and against Adams and the Texas Company, holding that Rogers was the owner of an undivided interest to the extent of 40 per cent, in the inventions*1997  of Adams and the patents therefor, and was entitled to an accounting from the defendants for royalties, rents, or license fees derived from the inventions, and defendants were enjoined from executing licenses without the consent of Rogers.  The foregoing opinion was affirmed without opinion by the Appellate Division of the said Supreme Court.  At the beginning of the foregoing trial it developed that the litigation was being prosecuted by the Standard Oil Company of New Jersey, which had succeeded to whatever rights Rogers had in the patents in question.  After the decision by the Supreme Court (referred to above) the Texas Company and the Standard Oil Company of New Jersey entered into negotiations looking to the settlement of the differences between the parties.  As a result and on account of other conditions then existing, agreements were reached which ended the controversy.  Certain pertinent findings of the special master (in the report heretofore referred to), with respect to the negotiations and the settlement, follow: The Standard Oil Company of New Jersey opened negotiations with The Texas Company looking toward a settlement of their respective rights in the Adams patents, *1998  and the approach of the Standard Oil Company of New Jersey was welcomed by The Texas Company as an opportunity of extricating itself from a most embarrassing situation, and also of adjusting its difficulties with Gasoline Products Company.  * * * The negotiations, between The Texas Company, Standard Oil Company of New Jersey, and Standard Oil Company of Indiana, resulted in the execution by these three corporations of Contract No. 74, which settled the controversies between them consequent upon the decision of the case of Rogers vs. adams in the State Court of New York, and it also settled the conflict between these companies arising out of the Indiana's group of patents, the New Jersey Company's group of patents, and The Texas Company's group of patents.  * * * *170  By that contract also (No. 74) The Texas Company performed its agreement with Gasoline Products Company, to procure from the Indiana Company and the New Jersey Company, licenses under their respective patent rights in connection with the Cross process.  All claims for past infringements by all of the parties are waived.  The New Jersey Company secures for The Texas Company an assignment to it of*1999  the Rogers interest in the Adams inventions and patents therefor, and The Texas Company surrenders to the New Jersey Company the share of its royalties theretofore paid to the Indiana Company.  47.  In the determination of the deficiencies here in question, the Commissioner allowed no deductions from the royalties or payments received by petitioner from the Texas Company on account of a value attaching at March 1, 1913, to the patent applications filed by him in 1909 as referred to in the above findings, since it is his contention that such applications had no fair market value on March 1, 1913.  On the other hand, the petitioner contends that the said applications had a fair market value on March 1, 1913, of at least $25,000,000 and that such value should be taken into consideration (either as a return of capital in that amount before any royalties or payments are considered taxable income, or as a pro rata deduction over the life of the patents from the date of issuance) in determining whether deficiencies are due from petitioner.  48.  Petitioner's applications for patents (Nos. 530,852 and 618,011) had a fair market value on March 1, 1913, of $750,000.  OPINION.  SEAWELL: *2000  The parties are in agreement that the primary issue here presented for determination is the March 1, 1913, value of certain patent applications which were held by the petitioner on March 1, 1913.  The history of the applications in question from the time they were filed in the Patent Office in 1909 until they ripened into patents in 1919 and 1920, and the manner in which the issue here involved arises, are set forth in much detail in our findings and will not be repeated except in a brief summary.  In short, what occurred was that the petitioner, an inventor, had been engaged prior to 1909 in making certain inventions relating to oil-refining processes and in December, 1909, filed two applications for patents in the Patent Office on inventions alleged to have been perfected by him with respect to what is referred to in the art as "cracking oil." The first application was filed on December 1, 1909, and the second on December 31, 1909, and patents thereon were issued on October 28, 1919, and January 6, 1920, respectively.  The former is referred to as an "apparatus" patent and the latter as a "process" patent.  Prior to the issuance of the foregoing patents, namely, on February 27, 1919, petitioner*2001  entered into an agreement with the Texas Company under which he sold and assigned his rights under the applications *101  in question.  Pursuant to the foregoing agreement and certain supplements thereto, the petitioner received lump-sum or down payments in 1919 and 1920 of $95,000 and $35,000, respectively, and a salary of $1,000 per month from the date of the original agreement in 1919 to December 31, 1924.  In addition to the foregoing payments, petitioner also received annual payments under the contract or contracts varying from approximately $8,000 in 1920 to $400,000 in 1925.  The years involving the lump-sum payments are not before us and there is no question raised as to the salary payments.  What the petitioner contends is that the annual payments received were a return of capital and therefore would not constitute taxable income to him until a fair market value of the patent applications of $25,000,000 on March 1, 1913, is returned to him or, in the alternative, that a deduction should be allowed in each of the years during the term of the contract of one-seventeenth of the fair market value of the said applications on March 1, 1913.  On the other hand, the Commissioner*2002  included the entire amount of annual payments in gross income for each of the years involved and allowed no deductions therefrom, on the ground that the patent applications had no fair market value on March 1, 1913.  In other words, the first and basic point on which the parties differ is as to the fair market value on March 1, 1913, of the patent applications in question, since unless it is found that the applications were of value on March 1, 1913, the parties are agreed that the annual payments received shall be included in gross income without any deductions therefrom on account of prior ownership by petitioner of the applications.  That there is a real difference between the parties on the foregoing question is shown by the petitioner's allegation that the applications had a fair market value on March 1, 1913, of at least $25,000,000, whereas the Commissioner contends that such applications had no fair market value on that date.  The Commissioner at first urged that as a matter of law patent applications, irrespective of their character, have no fair market value and therefore it is unnecessary to consider evidence with respect to the value of the applications here in question, *2003  though in his brief he concedes that the Board has taken the opposite view on many occasions (Hershey Manufacturing Co.,14 B.T.A. 867">14 B.T.A. 867, and cases therein cited (affd., Hershey Manufacturing Co. v. Commissioner, 43 Fed.(2d) 298)). However, without receding from the foregoing position, he now urges that in any event the patent applications with which we are here concerned had no fair market value on March 1, 1913.  We do not consider it necessary to discuss our reasons for the conclusion that there is a property right attaching to a patent application which may be of value; our reasons are fully set forth in the case referred to above, and it will suffice here to affirm our previous position.  What that value *102  may be under given circumstances and with respect to a given patent application is a question of fact and presents the real issue in this case.  In support of their respective positions, a voluminous record has been prepared, consisting of more than 1,500 pages of transcript, in addition to lengthy exhibits in the form of carefully compiled data and graphs, reports of hearings and decisions in related proceedings, treatises on*2004  the art of "cracking oil" and much other information.  Expert witnesses of the highest order, some of them not only skilled in the art with which we are concerned, but also versed in a knowledge of patent law, were introduced by both parties.  That is, we do not have the situation which often occurs in our proceedings where witnesses are produced only by the petitioner, but both parties were well fortified with experts who shared their respective views as to value.  And it might be added further that the views of the experts were, without exception, in accordance with the allegations of the respective parties, the Commissioner's witnesses insisting that no fair market value existed at March 1, 1913, whereas the petitioner's chief witness, around whom his case as to value is built, testified that after allowing for all possible contingencies the fair market value at March 1, 1913, was even in excess of $25,000,000.  With these sharply conflicting and widely divergent views, we are faced with the situation such as faces a jury in a trial court where our duty is to consider all of the evidence and seek to form our conclusion as to the fair market value of the applications in question*2005  on March 1, 1913.  And in making our determination we must keep in mind the well established principle that such a value must be based only upon the facts in existence or in reasonable contemplation on March 1, 1913, as shown by the evidence.  On a consideration of the entire record, we are convinced that the petitioner is far too optimistic with respect to the situation as it existed on March 1, 1913, and as to the manner in which we believe parties would have dealt with respect to the purchase or sale of the applications in question on that date.  At that time the patents had not issued and the applications themselves were in a state of rejection in the Patent Office.  While rejections such as had here occurred are not to be considered final and a skilled patent attorney might well have been able to have foreseen the ultimate outcome with a reasonable degree of certainty, we certainly have in this situation an unfavorable factor existing at March 1, 1913, even when looked at in the most favorable light for the petitioner.  How common it is for patent applications to be beset with the difficulties which attended these applications in their course through the Patent Office we do*2006  not know, and well may it be that these applications were "diamonds in the rough" awaiting discovery by and the touch of skilled hands *103  which would bring them to light and guide them to their fruition in the form of patents, but, to say the least, we regard it as of some significance that a period of ten years elapsed from the time the applications were filed until the patents finally issued and that during that period almost every type of difficulty was encountered.  Much of this occurred prior to March 1, 1913, as shown from our findings, and that which transpired after March 1, 1913, merely emphasizes that whatever the petitioner had on March 1, 1913, was subject to many infirmities which had to be corrected before the patents finally issued.  We do not think a valuation of such applications can be made without taking the foregoing condition into consideration as an unfavorable factor.  In marked contrast, we find that the Burton application (referred to in our findings) was filed in July, 1912, and the patent was issued in January, 1913.  Even though we think it clearly established that the specifications of a patent are addressed to those skilled in the art, we do think*2007  that imperfect specifications, even though possible of correction by one skilled in the art, are to be weighed against a patent application in placing a value thereon.  On the other hand, we are of the opinion that we must accept the patents as valid and as properly issued on the original applications.  In other words, collateral attack may not be made in this proceeding upon the action of the Patent Office in the issuance of the patents and, since such an attack may not be countenanced, we must consider that the applications which were filed in 1909 and were in existence on March 1, 1913, properly disclosed the inventions which were protected by the patents as issued in 1919 and 1920.  While the foregoing conclusion may be at variance with the recent decision of the United States District Court for the District of New Jersey in the case of Texas Co. v. Warner Quinlan Co., decided January 8, 1931, wherein the court held that the petitioner, "through extensive manipulation and alteration of specifications and claims, came out of the Patent Office with something entirely different from that which he took there in the original instance," we know nothing of the facts upon which*2008  this conclusion is based and the opinion sets out the conclusion of the court with very meager reasons therefor.  Further, the foregoing decision is at variance with the report of the special master referred to in our findings and which was approved by the District Court having jurisdiction thereof.  (United States v. Standard Oil Co. of Indiana et al., supra.)In view of the foregoing, we shall proceed on the theory that the patents were valid when issued and that the inventions as disclosed therein were properly disclosed in the original applications.  Cf. also Standard Oil Co. of Indiana et al. v.United States, referred to in our findings *104  as decided by the Supreme Court on April 13, 1931, which accepted the patents as presumptively valid on the basis of the action of the District Court.  When viewed in that light, we find that the petitioner had on March 1, 1913, patent applications for cracking oil which antedated those on any process which has been perfected, except an application by one Dubbs, but, because of differences in the character of process there involved, we do not think the Bubbs application materially affects the value*2009  with which we are concerned.  The petitioner's applications contained seven basic features, one or more of which are embodied in every successful commercial process which has since been placed in operation.  The Holmes-Manley process, now owned and operated by the Texas Company and almost universally recognized as the highest embodiment of the art of bulk pressure distillation, makes use of the seven features disclosed and contributed by the petitioner's patents.  The Burton process which was perfected and placed in successful operation prior to March 1, 1913, makes use of two of the aforementioned features of petitioner's patents.  The foregoing process demonstrated the practicability of a cracking process on a large commercial scale.  It also demonstrated what had theretofore been considered impossible and what had been carefully avoided by men in the oil industry, namely, the use of pressure in an oilcracking process.  Prior to that time pressure in its relation to cracking oil was well known, but it was very much feared because of the dangers attending its use.  The two features in the petitioner's process which are common to the Burton process are those having to do with the use*2010  of pressure.  In the next place, we think it fairly established and we have found as a fact that there was a shortage of gasoline on March 1, 1913, both present and reasonably to be anticipated, and that the oil industry then realized that the demands for gasoline could not be met from the crude-oil production then reasonably to be expected unless some better method could be devised to secure a higher percentage of gasoline from crude oil.  At that time the automobile industry was well established.  The status of that industry on March 1, 1913, and our conclusions as to its reasonably certain facorable future prospects are set forth by us in the case of James Couzens,11 B.T.A. 1040">11 B.T.A. 1040, and need not be here repeated other than to state that the data here furnished amply confirms what we said in the Couzens case where, in discussing the automobile industry, we said that "it had passed the incipient stage and in 1913 its only uncertainty was the breadth of its future expansion." Since the automobile was the most important factor in the increased demand for gasoline, it is worthy of notice that the consumption of gasoline *105  increased from 11,260,000 barrels*2011  in 1909 to 29,915,000 barrels in 1914 (no figures being available for 1912 and 1913) and that the registration of motor cars increased from 312,000 cars in 1909 to 1,700,000 cars in 1914.  During that time the producers of crude oil were aware of the rapidly increasing demand for gasoline and in 1911 and 1912 leaders in the oil industry were actively at work in an effort to meet the expected shortage.  As the Supreme Court said in Standard Oil Co. of Indiana et al. v. United States, supra, "For about half a century before 1910, gasoline had been manufactured from crude oil exclusively by distillation and condensation at atmospheric pressure.  When the demand for gasoline grew rapidly with the widespread use of the automobile, methods for increasing the yield of gasoline from the available crude oil were sought." The experimental work along that line which is referred to in the record had to do largely with efforts to develop cracking processes, though we do not understand that the activity was confined to those lines either in the development of new processes or in efforts to increase production or to conserve that which was being produced.  We do think that with*2012  an existing and prospective shortage of gasoline the development of a successful commercial process which would permit of a great increase in the recovery of the gasoline content of crude oil and the conservation of a corresponding amount of crude oil was something of undoubted value.  Some idea of what the various cracking processes have meant to the oil industry since the Burton process was put in operation in 1913 to and including 1929 is shown by a production of 707,121,000 barrels of cracked gasoline.  It further appears that from 1913 to 1927, inclusive, the production of cracked gasoline by the Burton and Holmes-Manley processes alone amounted to 263,414,015 barrels and resulted in a conservation of approximately 1,162,304,000 barrels of crude oil.  Manifestly, if the demand for, and production of Cracked gasoline could have been accurately forecast on March 1, 1913, and if on the same date a person had had the right under a patent or patents under which he could have produced the additional gasoline needed to the exclusion of all other persons, it is easy to see that such a property right would have been of great value.  In substance, such is the contention of the petitioner, *2013  namely, that it could have been reasonably foreseen on March 1, 1913, that approximately 800,000,000 barrels of gasoline would be supplied by a cracking process or cracking processes during the next 17 years and that the dominating or controlling factor in such production lay in the petitioner's patent applications here in question.  At that time the Burton process was in commercial operation and the owner thereof had, in 1913, *106  granted licenses for operation under the patents covering that process.  These licenses were granted upon the basis of the payment to the owner of 25 per cent of the net profits of the operating company, which was later found to be approximately 50 cents per barrel.  On the basis of a production of 800,000,000 barrels this would show royalties to the party or parties controlling the patent situation of $400,000,000.  The petitioner's witness, on the basis of the interchange of license agreements between the Texas Company, which held the Adams patents, and the Standard Oil Company of Indiana, which held the Burton patents, when their respective claims came in conflict, allocates one-half of these royalties to the Adams patents and one-half to the*2014  Burton patents, and then, to take care of all possible contingencies, further reduces the amount each would receive by one-half, thus seeking to show that the petitioner was in the possession of property on March 1, 1913, from which he could reasonably have expected to have received during the following 17 years at least $100,000,000.  The foregoing amount of $100,000,000, when reduced to a present worth basis at March 1, 1913, makes a value in excess of the $25,000,000 claimed by the petitioner as the March 1, 1913, value of the applications here in question.  In the first place, we are unwilling to say that there was such a reasonable expectation on March 1, 1913, of a shortage of 800,000,000 barrels of gasoline to be met over the following 17 years through the use of a cracking process or cracking processes that patents on a cracking process would have been dealt with on that basis.  By this we do not mean to reflect on the ability or integrity of Mr. Westcott, who gave his opinion to that effect.  We are convinced that he is a man of the highest attainments as an analyst in the oil industry, to which he has devoted his attention for the past 13 years.  However, the opinion as*2015  given was not that of a man who was familiar with the situation in the oil industry on March 1, 1913, but rather of one who would now say what he insists could have been said on March 1, 1913, on the basis of facts then known.  Of course, such testimony may be competent, but its weight will depend on a multitude of factors which are present to a greater or less extent in evidence of this character.  In brief, it may be said that one would be little short of a prophet and endowed with supernatural powers to be able to say in 1930 that if he had scanned the oil horizon on March 1, 1913, he could have foreseen not only the increased demand for gasoline, but also the manner in which this increased demand would be met.  Particularly is this true in the oil industry, which is referred to in the book of this witness as the least understood of all industries and where data even as to the available supply on a given date is necessarily only an estimate.  Further, even if we knew the available supply and if we could foresee the future demand *107  with fair accuracy, we would still have the problem of saying that this demand would be met through the cracking processes of the character*2016  here involved.  Some of the necessary uncertainties are met through a discounting of whatever is determined by the formula which is applied to the known facts on March 1, 1913, though we are yet left with the fact that we are necessarily in the realm of speculation and conjecture to some extent under any circumstances.  Even after the perfection of the Burton process only 17 per cent of the gasoline content of crude oil was being recovered in 1914 and with all the improvements which had been made by 1924 only 30 to 35 per cent was being recovered by the same process and by the Holmes-Manley process at the same time only about 40 per cent.  With only about one-sixth of the gasoline content being recovered at or about March 1, 1913, and recognizing the inventive genius of man - particularly when spurred on by necessity - a heavy discount of any shortage to be met by cracking processes in operation on March 1, 1913, must be made to take care of the possibility and even the probability of the perfection of a process which would make other processes obsolete.  But by the foregoing we do not mean that the testimony of this witness is to be disregarded; on the contrary, we are satisfied it*2017  contains much of value.  On the basis thereof, we are convinced that a substantial shortage of gasoline was reasonably to be expected in the years following March 1, 1913, without the use of an improved method for the recovery of gasoline from crude oil, and that it was reasonably to be expected that cracking processes, such as were disclosed by the cracking processes then being perfected, would play a part in meeting the increased demand for gasoline.  How much this shortage would be and what particular part the petitioner's applications might have in meeting such shortage we shall not undertake to determine.  We recognize, however, that parties often deal in property, such as we are concerned with here, where unknown and uncertain features are present and that the valuation of such property at a given date is often required, and to that end we have given to this evidence such weight as we consider proper.  The petitioner's principal witness, Wiles, recognized the foregoing siuation when he said, in giving his opinion as to the value in question, that every "big deal" in the acquisition of a patent is made on the installment basis, for the reason that "They will not take three to*2018  one gambles and put $1,000,000 on it where the alternative is losing it all.  The result is when you get into real figures for patents, really valuable matters, you have got to deal on the installment basis, so it is paid year by year as it becomes good, and if in litigation for what not it is held to be of no value, the payments cease, in other words, you can buy it on *108  the installment plan with some sort of privilege of termination.  That is the way every big deal has to be made." In the next place, what did the applications contain on March 1, 1913, which made them of value in meeting the shortage of gasoline referred to above?  The petitioner says that the value lies in the fact that his "inventions dominate the successful processes practiced today and did so on March 1, 1913," and that the important, successful processes as now operated could not be carried on except with his permission and upon the payment of royalties to him.  We have found as a fact that of the seven important features disclosed by the petitioner's applications, one or more of these were contained in each of the successful cracking processes which have since been perfected.  Whether this means*2019  that each of these processes was dominated by that of petitioner we shall not attempt to say, though we have found as a fact that the Burton process was dominated as to two features and the Holmes-Manley process as to seven features by the Adams patents.  In view of the importance attaching to the various processes which have been developed and the common features found in all of them, it may seem unusual that patent infringement litigation has not resulted therefrom, though the explanation seems to be that the powerful oil companies elected to compromise their conflicting claims through the exchange of reciprocal licensing agreements rather than resort to expensive litigation.  Because of this interchange of license agreements, and action was brought by the Government against the various companies involved on the ground that such action resulted in a violation of the Sherman Anti-Trust Act, which contention was sustained. United States v. Standard Oil Co. of Indiana et al., supra.In that action the court was divided as to the right of the Government to attack the validity of the patents in that proceeding and further found it unnecessary to determine their validity. *2020  The court did, however, state that an independent producer "could hardly engage in the process of refining gas by a cracking process without infringing one or more of the patented cracking processes." As shown by our findings, the action of the District Court was recently reversed by the Supreme Court as to the antitrust feature (Standard Oil Co. of Indiana et al. v. United States, supra), and the court found it unnecessary to consider the validity or scope of the cracking patents, though it accepted them as presumptively valid.  Further, the evidence is unmistakably to the effect that one of the major considerations which enabled the Texas Company to negotiate favorable reciprocal licensing agreements with the important oil-producing companies was that it was the owner of the patents which were issued on the basis of the applications here in question.  This is particularly true in the case of the *109  agreements between the Texas Company and the Standard Oil Company of Indiana.  The latter company had a process which was perfected in 1912 and 1913 and had as its first patent protection an application filed in 1912 and a patent issued thereon on 1913. *2021  Its process was the only cracking process in successful commercial operation until 1919.  On the other hand, the former company's process was not placed in commercial operation until 1920 and the petitioner's patents which are embodied therein were not issued until 1919 and 1920.  We think it clear from the evidence that an important consideration in such transaction was the fact that the patents which dominated the process of the Texas Company were prior in point of time to those of the Standard of Indiana.  And similar observation may be made with respect to other reciprocal licensing agreements to which the Texas Company was a party.  The testimony of the attorney for the Standard of Indiana was that when he first saw the petitioner's applications in 1916 he was convinced of the conflict between the inventions therein disclosed and those involved in the Burton process, which had a later filing date; that the foregoing opinion was confirmed by him in 1920 when he examined the patents after their issuance and that he then advised the Standard of Indiana that, because of the prior filing dates of the petitioner applications, it would probably lose in a suit with the Texas Company*2022  over the conflicting claims; and that while, because of the commercial position which the Standard of Indiana had developed through the successful operation of the Burton process for a period of six or seven years, the Standard of Indiana should have been given a decided advantage in the exchange of licensing agreements, the exchange was made on an even basis largely because of the priority of the filing date of the petitioner's applications.  To a similar effect was the testimony of the attorney for the Texas Company.  When we consider that prior to the execution of the cross-licensing agreement the Standard of Indiana had collected more than $15,000,000 in royalties from its licensees under the Burton process, the importance of the even exchange, which carried with it a waiver of any past infringement on the part of the Standard of Indiana to patents owned by the Texas Company, becomes apparent.  In other words, we do not think it open to question, under the record as here presented, that the Texas Company secured something of value through the acquisition of the petitioner's patents.  And to reach this conclusion we do not think it necessary to say that the petitioner's patents*2023  dominated the entire oil-cracking industry; we do think that because of the priority of the filing date of the applications and the recognition accorded the inventions disclosed therein the patents issued thereunder occupied an important place in the oil industry.  *110  Our problem, however, is not to determine the value of the petitioner's patents after they had issued and the process in which they were embodied was perfected, but rather the value of the applications at March 1, 1913, that is, six or seven years earlier.  And much that we have said above might be said to be immaterial on the ground that it has to do with events which are too far removed from the basic date in question.  We have, however, shown these circumstances in order that we might present more clearly the theory of valuation at March 1, 1913, which has been urged with so much earnestness and at great length by petitioner, namely, that one skilled in this particular art could have looked at the patent applications on March 1, 1913, and have foreseen not only that patents would issue thereon, but also that, in large measure at least, the process developed thereunder would prove an important factor in the*2024  oil industry.  We think it well established that the disclosures of a patent application are addressed to those familiar with the art (Lawther v. Hamilton,124 U.S. 1">124 U.S. 1; Eibel Process Co. v. Minnesota & Ontario Paper Co.,261 U.S. 45">261 U.S. 45; A. B. Dick Co. v. Barnett,287 Fed. 573; and Thomas A. Edison, Inc., v. Waterbury Battery Co.,281 Fed. 254), but we are unwilling to say that an unissued patent on an unproven process can be given the same value, or, under the circumstances of this case, even an amount approaching the same value, as when the patents are finally issued and the process has proven a success.  We shall not repeat what we have heretofore said as to the unfavorable situation existing on March 1, 1913, with respect to the issuance of the patents, but even aside from this feature we think that we would be imputing too much to one, however skilled in the art here concerned, to say that he could have foreseen on March 1, 1913, the ultimate outcome of the Adams process to the extent that he would have purchased or would have the company he represented purchase on the basis of a valuation at that time*2025  of $25,000,000, even though such payment should be on the installment basis.  And in making the foregoing statement we are not overlooking the very positive testimony of petitioner's chief valuation witness, Wiles, to the contrary, nor the high qualifications of this witness to speak as one skilled in the art.  But however skilled in the art he may be, we should hesitate to give the same weight to testimony of that character that we should to facts which show that the invention disclosed by a given patent or patent application was a demonstrated commercial and practical success on a given date.  Admittedly, the market by which we should test the fair market value on March 1, 1913, was reasonably made up of the large oil producers, and they were men skilled in the art.  At that time they were apparently unaware of the invention disclosed by the petitioner's applications, for the reason that such documents are not open for public inspection *111  in the Patent Office and there is no indication that any of the large oil producers became acquainted with their contents prior to 1914.  Some importance is attached by the Commissioner to the knowledge and lack of interest on the part*2026  of a representative of the Standard of New Jersey as early as 1908 and 1909 in what the petitioner was doing, but the facts show that there was a surplus of gasoline being produced at that time, and the representative merely saw a laboratory demonstration.  The representative was of the opinion that Adams was doing little, if anything, more than was being practiced in the oil industry at that time.  Without access to the applications themselves and with apparently nothing new being demonstrated, we do not think it of special significance that, when the need for a cracking process became apparent, the Standard of New Jersey did not seek to obtain rights under the petitioner's applications.  The first oil company to become interested in the petitioner's process was the Texas Company, which entered into an option agreement with petitioner in 1914, but even then it does not appear that the contents of the applications were disclosed to the Texas Company.  What happened with respect to the option agreement from 1914 to 1918 is not shown other than that petitioner continued in the employ of the Texas Company at the salary provided under the option agreement.  Whether the Texas Company was*2027  aware of the importance of the petitioner's applications and was seeking to develop a process of its own without having to exercise its option, or whether for some other reason it delayed action, we do not know.  The first examination by the Texas Company of the application file, as shown from the evidence, was in 1919 and at that time the attorney for the Texas Company advised it of the importance of the disclosures in the petitioner's applications and at or about that time the contract which gave rise to the income over which this controversy arose was executed.  Likewise, as heretofore stated, the attorney for the Standard of Indiana reached a similar conclusion when he first examined the applications in 1916.  Both of the aforementioned individuals testified at the hearing as to their conclusions on first seeing the applications and that like conclusions would have been reached by them at March 1, 1913, if the applications had been shown then.  We can not, however, overlook the fact that such testimony may well have been influenced by events which have since transpired - the perfection of a highly successful process and the enormous profits which have inured to the holders thereof. *2028  The fact that these witnesses saw the dominating character of the petitioner's applications when they first examined them in 1916 and 1919 may be strongly persuasive of what they or others skilled in the art would have perceived therein at March 1, 1913, but this is not direct evidence *112  of a known and determined value at March 1, 1913.  In fact, the inference may well be drawn that the Texas Company delayed action for five years in the exercise of its option to acquire the applications for the reason that it hoped to invent a process which would circumvent their use and thus reduce whatever value attached thereto, and it only seems reasonable that others skilled in the art would have considered such a possibility, on the part of other inventors, in making an acquisition.  In any event, it was not until 1919 that the Texas Company saw fit to make their acquisition in order to carry out the process which they were seeking to perfect.  In the next place, to meet the requirement often reiterated by us to the effect that the commercial and practical success of the invention disclosed by a given application must have been demonstrated on a given basic date in order to show*2029  a value therefor, the petitioner relies on the fact that on March 1, 1913, the Burton process was a demonstrated success and that two of its features were dominated by the petitioner's applications.  But in whatever light the Burton demonstration may be viewed in its relation to that which was disclosed by the petitioner's applications, we think it must be recognized that the petitioner, in approaching a prospective purchaser, could not have shown more than that two of his basic features had been demonstrated by another process which was in commercial operation and which was covered by outstanding patents.  Under such circumstances it would seem reasonable to say that such prospective purchaser would have considered that he was purchasing something which almost certainly would require litigation before he could come into complete enjoyment of his full rights.  In other words, at best he would not have been purchasing an issued patent on a demonstrated process then in operation, but only an application for a patent (then in a state of rejection) when some of the features therein were then in commercial operation under the assumed protection of issued patents.  On the other hand, the*2030  Commissioner contends not only that there had been no successful commercial demonstration at March 1, 1913, but also that the inventions disclosed by the applications were a demonstrated failure on that date.  The basis of this claim is the Jacks Run experiment, which was started in 1911 and 1912 by the petitioner, in conjunction with a syndicate, for the purpose of demonstrating what petitioner had invented.  The project was undertaken on the basis of an option agreement under which the syndicate members agreed to pay petitioner a small salary and to supply $12,500 for experimental purposes in return for an option to acquire a half interest in petitioner's invention when and if they were a demonstrated success.  The syndicate members advanced more than *113  was originally agreed upon, and after the expenditure of some $80,000 the project was pronounced a failure and abandoned in July, 1913, the option never being exercised.  Its exact status on March 1, 1913, is not shown.  Much evidence was introduced by the Government in the form of testimony given by syndicate members in the Government antitrust suit referred to above as to what was demonstrated at Jacks Run - particularly*2031  with reference to the use of pressure, which is the principal element claimed to have been demonstrated by the Burton process.  On a consideration of the entire testimony, we are not convinced that it constituted such a demonstration as either the petitioner or a prospective purchaser, skilled in the art and cognizant of the inventions disclosed by the applications, would recognize as a fair test of what the petitioner owned at that time.  The equipment was inadequate, the men connected therewith were largely inexperienced in the operation sought to be carried out, and because of the character of equipment used, if for no other reason, the operations were carried out largely under atmospheric pressure as distinguished from the higher pressure referred to in the perfected cracking processes.  On the other hand, we are of the opinion that this experiment may not be disregarded in fixing a value at March 1, 1913, since the petitioner had, in some measure at least, sought to demonstrate that which he considered was disclosed by his inventions and the result could certainly not be pronounced a success at March 1, 1913.  The Commissioner also contends that at most the petitioner had only*2032  a 60 per cent interest on March 1, 1913, in his inventions and applications for patents thereon for the reason that he had entered into a contract with one Rogers in 1907 under which Rogers had advanced $5,000 to petitioner and in consideration therefor petitioner had agreed to grant to Rogers an interest of 40 per cent in his inventions and patents thereon.  The evidence largely relied upon in support of the foregoing contention is a copy of the findings of fact and conclusions of law which were found and decided by the Supreme Court of New York in a suit instituted in 1922 by Rogers against petitioner and the Texas Company on account of the alleged contract referred to above.  By stipulation of the parties it was agreed that the copy of the said findings of fact and conclusions of law as submitted with other facts which were stipulated was a true copy, but we find nothing in the record to justify the conclusion that said copy was offered or accepted in evidence as proof of the facts therein found.  In fact, at the hearing the petitioner stated "they have asked us to stipulate the judgment in the Rogers case, and I have stipulated as to the fact, but when it is offered I am going*2033  to object.  The government is not a party and if they claim Rogers *114  had an interest in the patent, they must prove it in some other way." No further offer was made of the said findings of fact and conclusions of law.  We are of the opinion that the document referred to does not do more than establish that the New York court found certain facts and rendered that particular decision thereon.  Since the parties to the two suits are different, it is not res adjudicata in this proceeding.  Southern Pacific R.R. Co. v. United States,168 U.S. 1">168 U.S. 1, and Oklahoma v. Texas,256 U.S. 71">256 U.S. 71. The further evidence offered in this connection, including the findings of the special master in the Government antitrust suit, can not be said to do more than raise an inference as to existence of the contract, but we do not consider this sufficient to overcome the proof offered by petitioner as to his ownership of the applications on March 1, 1913.  Other features were urged upon as by the respective parties as tending to show value or lack of value on the basic date in question, but it would serve no useful purpose to extend our discussion further.  Suffice*2034  it to say that we have carefully considered all evidence and arguments presented and have endeavored to reach a conclusion which we think fair and reasonable.  And in failing to comment more at length on the expert testimony offered by the Commissioner, we have not overlooked the high qualifications of his witnesses nor the opinions expressed by them.  Nor have we attempted to assign a definite weight to any of the evidence offered, and admittedly no particular evidence or mathematical formula forms the basis of our conclusion.  The only valuation offered by the petitioner's witnesses was that of $25,000,000, whereas the Commissioner's witnesses testified only that there was no value.  Obviously, it is not possible to reconcile these widely divergent views.  The most we can say is that we are satisfied that a willing purchaser, skilled in the art with which we are concerned and fully cognizant of all conditions as they existed and were reasonably contemplated at that time, would have recognized a fair market value attaching to the applications at March 1, 1913, though we are not convinced that he would have considered a purchase on anything like the high valuation urged by the petitioner. *2035  Too little had been proven and the hurdles to be overcome before realization thereon were too great.  And, likewise, we think the petitioner, even when trading on equal terms with the aforementioned purchaser, would have gladly disposed of his rights for an amount far less than that now claimed.  Of course, if we would ascribe a state of omniscience to these parties, a different conclusion might be reached, but we do not understand that we are to fix value in that way even in the little known and highly technical oil field with which we are concerned.  And, too, we agree with the Commissioner that, other things being equal, the issuance of a patent *115  on a given application and having such patent sustained as litigation progresses from the lower to the higher courts, are important factors in adding value to such patent, but, as we stated at the outset, we do not think it is necessary for all of these events to have transpired before a fair market value may exist.  Further, it might be said that, since we have no yardstick by which to measure our value in this case, whatever value we determine in excess of zero and less than $25,000,000 may be said to contain an element of*2036  speculation, but as Judge Learned Hand said in Cohan v. Commissioner of Internal Revenue, 39 Fed.(2d) 540, "It is not fatal that the result will inevitably be speculative; many important decisions must be such." But looking at the situation as it existed on March 1, 1913, and considering all factors, both favorable and unfavorable, as well as certain and uncertain, we have reached the conclusion that the two patent applications in question had a fair market value on March 1, 1913, of $750,000. At the conclusion of his oral argument, counsel for the Commissioner called our attention to the fact that the contract of petitioner with the Texas Company provided for the assignment of some 17 applications for patents which were filed subsequent to March 1, 1913, as well as the two applications heretofore discussed which were filed in 1909, and that the evidence of value offered relates entirely to the two applications which were filed in 1909.  He accordingly urges that, since no segregation of income produced under the contract has been made, it is not possible to say whether the income derived from the contract was produced by the applications filed prior to March 1, 1913, for*2037  which we have determined a fair market value on that date or from applications filed subsequent to March 1, 1913, for which there was apparently no cost to petitioner, and that therefore the determination made by the Commissioner which would subject to tax the entire amount received under the contract should be sustained.  On a consideration of the entire record we are convinced that the only applications which were considered of any appreciable value under the contract were those filed in 1909.  That is certainly the basis on which the case was presented by both parties in the extended hearing and the evidence in the case tends to show that what petitioner had which was of value was those applications filed in 1909.  In fact, it would appear that the greater part of the value attached to one of these applications, namely, the process application.  Under the first contract, executed February 27, 1919, the "liquidated royalties" to be paid the petitioner were to be paid "during such time as the Company shall operate under the claims" of the patent issued on the process application.  When the supplemental or amended agreements were executed the process patent had *116  issued and*2038  it was accordingly provided that the payments under the contract were to be made during the period from January 1, 1920, the date of issuance of the process patent, to the expiration of its life on January 6, 1937.  Further, we think the various exchanges of reciprocal license agreements were made in large measure because of the prior rights which attached to the process application.  The seven basic features referred to as disclosed by petitioner's inventions were included in the process application.  In any event, with the evidence which we have before us and after the case has been presented on the apparently agreed theory by both parties that the applications of value were those filed in 1909, we are unwilling to find for the Commissioner or order a new hearing on the mere possibility that some small part of the income accruing under the contract may have been derived from applications filed subsequent to March 1, 1913.  In fact, so convinced are we that the value attaches largely to the process patent in a manner which would enable the petitioner to receive payments under the contract over the life of this patent, we are of the opinion that a subtraction should be made in each*2039  of the years before us of one-seventeenth of the fair market value which we have found for the two applications on March 1, 1913.  This conclusion is of course contrary to the petitioner's contention for a return of capital (in this instance the fair market value on March 1, 1913) before the payments received or any part thereof can be considered taxable income, but we do not have here a sale in the ordinary sense where the gain or loss at the date of the sale may be computed, but rather a transaction through which the amount to be received is indeterminate and uncertain and the benefits under the contract may flow to the petitioner over a period of years.  The correct view, we think, under the circumstances of this case, is that the petitioner had property on March 1, 1913, of a fair market value now determined by us; that, through the execution of a contract in 1919 by which the property was sold and assigned to the Texas Company, the petitioner would receive income over a period of years not greater than the life of the process patent; and that in the absence of better evidence as to a more equitable means of providing for the return of the capital involved, a subtraction should*2040  be made in each of the years here in question of $44,117.65 (one-seventeenth of $750,000).  Reviewed by the Board.  Judgment will be entered under Rule 50.MURDOCK concurs in the result only.  BLACK *117  BLACK, dissenting: I dissent from the views expressed in the majority opinion wherein it is held: The correct view, we think, under the circumstances of this case, is that the petitioner had property on March 1, 1913, of a fair market value now determined by us; that, through the execution of a contract in 1919 by which the property was sold and assigned to the Texas Company [italics supplied], the petitioner would receive income over a period of years not greater than the life of the process patent; and that in the absence of better evidence as to a more equitable means of providing for the return of the capital involved, a subtraction should be made in each of the years here in question of $44,117.65 (one-seventeenth of $750,000).  I find no basis in the applicable revenue act for providing that petitioner, who parted with title to his patents at the time of their sale to the Texas Company, shall have his return of capital (in this case March 1, 1913, value*2041  of his patent application) over a period of 17 years.  Of course if petitioner had licensed the use of his patents to the Texas Company and the payments received during the taxable years were payments received under that license contract, then he would have been entitled to deduct from his gross income one-seventeenth of the cost of the patents, which in the instant case was the March 1, 1913, value of these patent applications.  Service Recorder Co.,2 B.T.A. 96">2 B.T.A. 96. But these payments which petitioner received from the Texas Company were not payments under a license - they were sums of money received in payment for the assignment of petitioner's title to the patents.  For example, it is stated in the opinion, "Prior to the issuance of the foregoing patents, namely, on February 27, 1919, petitioner entered into an agreement with the Texas Company under which he sold and assigned [italics supplied] his rights under the applications in question." "Pursuant to the foregoing agreement and certain supplements thereto, the petitioner received lump sums or down payments in 1919 and 1920 of $95,000 and $35,000, respectively." Paragraph (4) of the agreement between Adams*2042  and the Texas Company reads: 4.  ADAMS agrees to execute immediately upon the execution of this contract: (a) Assignment transferring all his right, title and interest in and to the invention set forth in the United States Patent No. 976,975 granted to him on November 29, 1910 for Oil Converting process.  (b) Assignment or assignments transferring all his right, title and interest in the inventions set forth in applications for Letters Patent in the United States identified as follows: [Here follows description of various applications and Letters Patent.] So it seems to me this transaction between Adams and the Texas Company must be treated as a sale of patents, rather than as a license of patents.  The gain or loss from this sale must of course be determined under the provisions of the applicable revenue act and valid *118  regulations of the Commissioner made thereunder, as other gains or losses are determined.  If the contract which petitioner received from the Texas Company when he sold and assigned his patents to it is susceptible of valuation in the year when the transaction occurred, then the sums of money received in cash in that year, plus the value of this*2043  contract, would represent the selling price and from this aggregate sum would be deducted the March 1, 1913, value of his patent applications and the difference would represent petitioner's gain.  But if the contract which petitioner received in part payment for his assignment of the title to his patents to the Texas Company did not have a readily realizable market value in the year when received, then petitioner is entitled to recover his cost (which in this case is March 1, 1913, value of his patent applications) before reporting any taxable gain.  D. M. Stevenson,9 B.T.A. 552">9 B.T.A. 552. I know of nothing in the Revenue Act of 1918 which was in force at the time petitioner made his sale of patents to the Texas Company, nor in the Commissioner's regulations interpretative thereof, which would require the petitioner to recover his capital costs in installments of one-seventeenth each year and render the balance as income.  Of course if he had not parted with title to the patents by virtue of sale to the Texas Company and the payments received were mere royalty payments under a patent license, then all the sums which petitioner received during the taxable years would be*2044  a part of his gross income and from this gross income he would be entitled to deduct as exhaustion in each of the taxable years one-seventeenth of the cost of his patents (in this case March 1, 1913, value).  Service Recorder Co., supra. But, as I have already endeavored to point out, that is not the transaction which we have before us.  It will be readily conceded that the owner of patents having a March 1, 1913, value has the right to deduct from gross income one-seventeenth of such March 1, 1913, value as exhaustion of the patents during such years as the patents have to run.  Keystone Steel & Wire Co.,16 B.T.A. 617">16 B.T.A. 617. But in the instant case, the Texas Company was the owner of the title to the patents in question, not the petitioner, and by reason of such ownership it was entitled to take deduction for exhaustion of the cost to it of these patents and doubtless did so in its corporation income-tax returns.  Footnotes1. Based on the estimated percentage of refinery recovery of gasoline from crude oil. ↩