Case: BREESE BURNERS, INC. v. THE UNITED STATES
Abbreviation: Breese Burners, Inc. v. United States
Decision Date: 1954-06-08
Docket Number: No. 50191
Citation: 128 Ct. Cl. 649
Volume: 128
Reporter: United States Court of Claims Reports
Court: United States Court of Claims
Jurisdiction: United States
Parties: BREESE BURNERS, INC. v. THE UNITED STATES
Judges: MaddeN, Judge; LittletoN, Judge; and JoNes, Chief Judge, concur.
Pages: 649–675

Head Matter:
BREESE BURNERS, INC. v. THE UNITED STATES
[No. 50191.
Decided June 8, 1954]
Mr. Huston Thompson for plaintiff.
Mr. Bernard* Wohlfert, with whom was Mr. Assistant At~ tomeg General Warren E. Burger, for defendant.

Opinion:
Whitaker, Judge,
delivered the opinion of the court:
Plaintiff sues for damages for the unauthorized use of its patents in the manufacture of oil burning tent stoves by or for the defendant in the latter part of 1950.
Defendant defends on the ground that it had the right to use these patents under a license granted it by plaintiff on or about September 11, 1943. Plaintiff replies that the unauthorized use of which it complains was after the expiration of the term of the license. Plaintiff also says there was no consideration for the license, and that it was given under duress.
In view of the relatively large number of patents and applications plaintiff alleges it owned (13 patents and 4 applications) , at the suggestion of the Commissioner, in order to save time and expense, the parties agreed in the pretrial memorandum of October 30, 1952, that the basic defense of license be first determined upon full proof taken before the Commissioner, submission of findings of fact by the Commissioner, and subsequent arguments of counsel on this issue. The parties further agreed that evidence as to any unauthorized use by or for the Government of any of the plaintiff's patents herein involved and the amount recoverable therefor be deferred until the court determines the validity and. duration of the license.
, Prior' to September 11, 1943, defendant's army tents were heated by coal-burning stoves. It desired to adapt these stoves to oil burners so. as to minimize the smoke emitted from the stoves. Accordingly, some time in August 1942 it re quested, plaintiff, whicli was a research and sales organization, to undertake this task. Plaintiff agreed and began work on the development of such an oil burner.
Some time prior to May 19,1943, it had developed such a burner and had submitted it to the Army for testing. On that date it was notified that while the Army was on the whole pleased with the product, it thought it might be improved by certain modifications, but the letter concluded, "all members of this office are in accord on its adoption and use."
' About a month later, to wit, on June 18, 1943, Colonel Doriot, of the Quartermaster General's Office, wrote plaintiff requesting a royalty-free nonexclusive license covering the' patents used in the manufacture of these tent stoves. Plaintiff gave careful consideration to working out a plan whereby it could give the Government such a license and still protect itself against the day when governmental controls would be lifted and it could again do a general commercial business. But nothing was done at the time.
Later, on September 3,1943, after conferences between the parties, plaintiff was notified that it was to be awarded a contract for 74,620 of these burners and it. was given a bid form, which it was instructed to fill out and return. The notice read as follows:
Your company is to be awarded contract of 74,620 each Outfits, Burner, Oil, Stove, Tent, M-1941, at a unit price of $14.34, in accordance with Spec. JQD No. 431, dated 31 August, 1943, Stock No. 65-N — 1852. Deliveries are to be as follows:
November, 1943_ 35,000
December, 1943___ 39,620
Packaging to. be in accordance with Spec. JQD No. 431 and in addition a separate quotation will be made by your company to cover export packaging, which will become a part of the contract.
Contract Number is W-12-036-QM-182, O. I. 1587-4 — x. Priority rating assigned, is AA-1. Master Allotment is W-710-0914-3Q-4Q-43.
You are requested to furnish this branch a list of subcontractors together with Cost Analysis of the item on this contract and the contract is to bear Re-Negotiation Clause, Article No. 33, Revision of Entire Price by Negotiation, which is a part of your bid.
' Plaintiif was requested to furnish the following information, among others:
Give general description of nature of engineering and development expenses and special tools considered as applicable to this proposal and state approximate period in which they were incurred or are to be expected to be incurred. If such expenses are to be amortized under this proposal, give the estimated basis of amortization:
To this item plaintiff replied as follows:
Engineering and development expense $45,000 incurred since Aug. 27, 1942 to date. Development of several models of complete tent heaters at Santa Fe and Chicago laboratories. Work with Research and Development Section O. Q. M. G. and Bureau of Standards. Collaboration with accessory manufacturers. To be amortized on this order.
The development cost item was allocated in the itemized portion of the bid at 60 cents a burner, making a total of $44,772. The bid price was. $14.34 a unit, the total quantity being 74,620 units involving a total sum of $1,070,050.80. This bid form was signed by Perry, plaintiffs' Chicago representative, on September 13, 1943, and was returned to defendant a few days later.
On September 4, 1943, defendant renewed its request for a license to use the patents to be incorporated in the stoves. Its request read:
Supplementing this Depot's letter to you of yesterday, 3 September 1943, referring to prospective award to you of contract for 74,620 each Outfits, Burner, Oil, Stove, Tent, M-1941, upon the delivery schedule and with the packaging specifications and under the prospective contract number therein indicated, you are advised that, of course, such an award cannot be made until and unless your concern enters into an agreement with the Government extending the Government a royalty-free license on each and all of your claimed patents which may be applicable to this contract item and all and any parts, features, etc., of the same.
This is pursuant to conversations with the Office of The Quartermaster General, Washington, D. C., in which royalty-free license covering each, and all of the said claimed patents was requested of you, to be applicable to manufacture by or for the Government for governmental use, sale or disposal of this item, its parts, features, etc.
In conversation yesterday at this Depot, with Mr. N. McManamy, Procurement Specialist and Captain Edward W. Moses, Officer in Charge of Legal Section, your Mr. Perry advised that the giving of such royalty-free license to the Government was under close consideration.
Within the nest few days the form of the royalty-free license which is requested for the Government will be forwarded to you.
It is anticipated that this office will hear from you favorably in the immediate future so that this matter may be disposed of to the mutual satisfaction of both parties.
The license not having been sent in by plaintiff, defendant wired it on September 10,1943, as follows:
RE CONVERSATION MUST HAVE NAMES ALL PARTNERS TOUR COMPANY AND PATENT NUMBERS IMMEDIATELY OR LETTER OP AWARD WILL BE WITHDRAWN
Jeffersonville QM Depot Food Equip. Pur. Br.
On the following day defendant sent plaintiff a license for its signature, which was executed and returned by plaintiff on September 17, 1943.
The part of this license relative to the term of it reads:
now, THEREFORE in consideration of the premises and the sum of One Dollar, and other good and valuable considerations the receipt and sufficiency thereof are hereby acknowledged, Licensor hereby grants to the United States of America, as represented by the Secretary of War, the irrevocable, non-exclusive, royalty free right and license under said Oil Devices burner patents and applications to make, use, and sell, or otherwise dispose of in accordance with law, and to cause to be made, used and sold, or dispose of, burner outfits substantially in conformance with specification JQD 431 hereto attached and marked Exhibit A, and all other gravity feed, pot type, low_ draft burner outfits suitable for tent or other space heating, baking and cooking, and any and all component parts thereof; said right and license to extend throughout the United States, its territories and possessions, and to remain in full force and effect for the duration of the present war and the period of six months thereafter only, reserving to Licensor the unrestricted use and enjoyment of all other rights not hereby expressly granted to the United States of America.
Finally, on September 25, 1948, defendant sent plaintiff an order for 74,620 tent stoves at $14.34 each, which was accepted by plaintiff on September 30, 1943. This order, some eleven pages long, set out in detail the contract between the parties. It was designated as contract No. W12-036 QM 182, Order No. 1587-4-x.
Plaintiff says, and the Commissioner has found, that defendant gave plaintiff no valuable consideration for the license. We are compelled to disagree.
Defendant first requested this license on June 18, 1943, which was 2% months before defendant had notified plaintiff it was to be awarded a contract, and the matter had also been discussed with the manager of plaintiff's Chicago office when he went to Washington on August 23, 1943, for a conference with defendant. No mention was made of it in the bid form which defendant instructed plaintiff to fill out, but its two previous requests were reiterated on the following day and before the bid form had been filled out and returned by plaintiff and before the above-mentioned contract No. W 12-036 QM 182, Order No. 1587-4r-x, had been executed.
The fact that the demand for the license was made on the day after plaintiff had been notified that it was to be awarded a contract, is of no significance since twice before plaintiff had been notified that defendant would expect a license. Besides, the demand of September 4,1943, was several weeks prior to the date of the formal contract, and the license was given a week or two prior to the contract. It was given in part consideration for the contract, or as an inducement for its execution.
Defendant's letter of September 3, 1943, quoted above, was not a contract, but a notice that defendant was willing to enter into a contract. The contract was later executed on September 25,1943. This notice was given after defendant had twice before demanded a license, "in order to protect [its] interests."
. We do not think it can be said that the license was without consideration or that it was obtained through duress.
The period during which the license was or is in effect is- a more difficult question. It reads that it is "to remain in lull force and effect for the duration of the present war and for six months thereafter only ."
Defendant says "duration of the war" has a well recognized meaning and that this meaning must be read into the contract, citing The Protector, 12 Wall. (79 U. S. 700, at 702); Stewart v. Kahn, 11 Wall. 493, at 507; McElrath v. United States, 102 U. S. 426, at 438; Commercial Cable Co., v. Burleson, 255 Fed. 99, 104; Hamilton v. Kentucky Distilleries, 251 U. S. 146, at 165-166; Woods v. Miller Co., 333 U. S. 138; Ludecke v. Watkins, 335 U. S. 160. Defendant says its officers, in drawing the contract, used the expression in this sense. It says that it had two forms of license agreement, one reading, "for the duration of the war," and the other, "for the duration of hostilities," and that it always tried to get the first one if it could, and only accepted the second if the licensor was unwilling to grant the first.
Plaintiff, on the other hand, says it understood the phrase to mean the duration of hostilities.
Neither side communicated its understanding to the other.
We have no doubt plaintiff's officers understood the expression as they said they did. This is the ordinary and commonly accepted meaning of those words. The courts have held that the clauses, "duration of the present war," "duration of the war," "termination of the war," and "engaged in war," when used in contracts, do not have a definite legal meaning, but depend upon the subject matter to which the words relate, the purpose of their use, and the intent of the parties under the facts and circumstances of each case. Girdler Corp. v. Charles Eneu Johnson & Co., 95 F. Supp. 713, 715-716, aff'd., per curiam, 194 F. 2d 533; Stinson v. New York Life Ins. Co., 167 F. 2d 233, 235, 238-239; Samuels v. United Seamen's Service, Inc., 165 F. 2d 409, 411-412; Ehrlich v. Barbatsis Holding Co., 63 So. 2d 911; Rupp Hotel Operating Co., v. Donn, 158 Fla. 541, 29 So. 2d 441; Michael Truck Foundation v. Hazelcorn, 187 Misc. 954, 65 N. Y. S. 2d 387; La Jolla Casa deManna v. Hopkins, 98 Cal. App. 2d 389, 219 P. 2d 871; Lincoln et al., v. Harvey et al., 191 S. W. 2d 764.
It is not commonly understood that the words "duration of the war" necessarily mean until the formal treaty of peace is. signed.
The treaty of peace with Japan was between 5 and 6 years after the surrender of Japan. Germany surrendered on May 7,1945, but a formal treaty with Germany has not been signed even as yet, although, it is true, on July 1, 1952, a contract with the Federal Republic of Germany, intending to end the war status, was ratified by the United States Senate. If defendant's position is correct, the license did not expire until July 1,1952, and may be still in effect.
• Plaintiff knew that defendant wanted these oil burners to use in tents for its troops while the war was going on, so that the site of an encampment would not be betrayed by the smoke emitted from a coal burning stove. It naturally supposed that when the fighting stopped, and the enemy had formally surrendered, defendant would have no need for additional burners, and, therefore, wanted the license only for this time.
•And indeed defendant did not need further burners after the surrender. It was not until after the Korean war started, waged by a different enemy, that the defendant wanted additional stoves. The order of which plaintiff complains was given in 1950, seven years after the license had been granted and five years after the surrender of Germany and Japan, and the lifting of controls on the manufacture and sale of these burners to the public. No ordinary man would have thought the license was meant to continue so long.
But defendant says that technically "the present war" mentioned in the contract had not ended when the order was given, since the treaty of peace had not been signed, and that it used the phrase, "duration of the present war", in its technical sense. Even if it did, it did not notify plaintiff it was using the words in this sense; and there is no showing that plaintiff was aware that the words were being used in this sense. Plaintiff's testimony is to the contrary.
Where words in a contract have an ordinary and commonly accepted meaning, they will be given this meaning unless the party who drew the document notifies the other party that the words were intended to convey a different meaning. Moran v. Prather, 23 Wall. 492, 499; Calderon v. Atlas Steamship Co., 170 U. S. 272, 280; Hongkong & Whampoa Doch Co., Ltd., v. United States, 50 C. Cls. 213, 222-223; Hotpoint, Inc., v. United States, 127 C. Cls. 402; Leroux & Co., Inc., et. al. v. Merchants Distilling Corp., 165 F. 2d 481, 482 (7th Cir.); Samuels v. United Seamen's Service, Inc., supra; Stinson v. New York Life Ins. Co., supra; Girdler Corp. v. Charles Eneu Johnson & Co., supra; Restatement of Contracts, sec. 235; 3 Williston & Thompson, sec. 618 (Rev. Ed. 1936).
Also, when the meaning of words in a contract is doubtful, that doubt must be resolved against the party who drew the contract. Garrison v. United States, 7 Wall. 688, 690; Moulor v. American Life Ins. Co., 111 U. S. 335, 342; Hongkong v. Whampoa Dock Co., Ltd. v. United States, supra, at 223; Callahan Construction Co. v. United States, 91 C. Cls. 538, 611-612; Merritt v. United States, 95 C. Cls. 421, 428; Standard Rice Co. v. United States, 101 C. Cls. 85, 95, aff'd., 323 U. S. 106; Peter Kiewit Sons' Co. v. United States, 109 C. Cls. 390, 418.
The cases relied on by defendant all concern the construction of statutes, not contracts.- They do hold that in the construction of statutes, Congress is supposed to have meant the phrase "duration of the war" to include the period between the cessation of hostilities and the execution of a formal treaty of peace, in the absence of circumstances showing a contrary intent. But the meaning of words in a statute is not always the same as the meaning of the same words in a contract. In construing a contract we must ascertain the meaning understood by both parties, the meaning on which the minds of the parties met; in construing a statute we look for the meaning in which Congress used the words. Legislative history of an act and of other acts relating to the same subject may indicate that Congress used words in a sense of which the ordinary man was wholly unaware. But when we come to construe a contract we give to words their ordinary and commonly accepted meaning, unless it is shown that both parties understood that they were used in a different sense.
• The phrase "duration of the war" is not ordinarily understood to extend beyond the time the enemy formally surrenders. In the case of Germany, this was on May 7, 1945, and in the case of Japan, on September 2,1945.
We are of opinion that the license plaintiff granted was intended to expire 6 months after the latter of these dates.
The case is remanded to a commissioner for further proceedings not inconsistent with this opinion.
MaddeN, Judge; LittletoN, Judge; and JoNes, Chief Judge, concur.
Judge Laramore took no part in the consideration or de- : cisión of this case.
FINDINGS OF FACT
The court having considered the evidence, the report of ' Commissioner Hayner H. Gordon, and the briefs and argument of counsel, makes findings of fact as follows:
' 1.' This is a suit by virtue of the act of June 25,1948, Section 1498 of the Judicial Code revised (28 Ú. S. C.)5 for the alleged unauthorized use of certain inventions covered by United States letters patent alleged to be owned by the plaintiff. The petition as filed is not in the usual form of petition in a patent suit, but was amended in a pre-trial conference memorandum filed October 30, 1952, in accordance ' with the above-mentioned act.
2. The plaintiff, Breese Burners, Inc., is a corporation organized under the laws of the State of Delaware, with its . principal place of business at Santa Fe, New Mexico, and is the süccessor in business of Oil Devices, a partnership.
The plaintiff, like Oil Devices, its predecessor in business, is a research and sales organization engaged in the research .and development of oil burners. While plaintiff and its .predecessor in business had an experimental plant with an .operating staff, this was for the primary purpose of development of oil burner equipment and accessories to a point where it w;as commercial. Neither plaintiff nor its predecessor, Oil Devices, has owned or operated a plant or factory for the commercial manufacture of oil burners.
The plaintiff licenses manufacturers to make its oil burners as subcontractors, and carries on a sales program with stove manufacturers, contracting with them to use its oil burners.
3. The petition in this case alleges unauthorized use of plaintiff's patents by the manufacture of tent stoves for the defendant sometime in the latter part of 1950. The basic defense urged by defendant against such alleged unauthorized use is that at that time defendant had a royalty free license. Such defense was presented before the Court by defendant in a motion to dismiss, in the nature of a motion for summary judgment. The Court dismissed such motion without comment as to the effect of the license. In view of the relatively large number of patents and applications as alleged in its petition to be owned by the plaintiff (13 patents and 4 applications) and at the suggestion of the Commissioner in order to save time and expense, the parties agreed in the pre-trial memorandum of October 30, 1952, that the basic defense of license be first determined upon full proof taken before the Commissioner, submission of findings of fact to the Court by the Commissioner, and subsequent arguments of counsel on this issue. The parties further agreed that evidence as to any unauthorized use by or for the Government of any of the plaintiff's patents herein involved be deferred until the Court determines the validity and duration of the license.
4. On April 15,1942, and August 5,1942, the War Production Board issued limitation orders L-74 and L-173 prohibiting the production of oil burners for civilian use. These orders, however, permitted the fabrication of replacement parts. They were general in nature and applicable to all manufacturers of oil burners and were not directed specifically at plaintiff or its predecessor. These orders, however, seriously affected the business of plaintiff and its predecessor.
5. Sometime during August 1942 the defendant, through a Mr. W. E. Breuner, of the Office of the Quartermaster General, made inquiries of Oil Devices concerning the availability of an oil burner which could be employed to convert the Army tent stove from a coal-burning stove to an oil-burning stove. There then followed an immediate conference between Mr. Breuner, an engineer, and Mr. Breese, of Oil Devices, after which Oil Devices began the development of a suitable oil burner for the Army tent stove in its laboratories. Thereafter, samples for test were ordered by the defendant from Oil Devices.
Oil Devices was advised by the Office of the Quartermaster General in a letter dated May 19, 1943, of the substantial completion and success of the development work. A part of this letter is quoted:
With respect to the oil burner developed by your company, we have received six test reports from the various using services, and with the exception of the report from the Medical Board, which arrived when you were last here, they were all favorable in the main. I am inclosing excerpts from the Infantry Board, Armored Forces Board and Signal Corps reports for your information and guidance in possible refinements.
The item was approved and standardized in yesterday's technical committee meeting. In general, the disposition to its performance and adaptability has been most favorable and the Engineers intend to procure 20,000 units immediately. Some of the other services like the unit, but requested slight modifications, some of which may prove quite practical. Suggested changes indicated were for
1. Slightly heavier gauge construction.
2. Increased primary air supply.
8. Reinforced support for center air tube (we discussed this sometime back).
4. Possibly a greater supply through the center air tube or a provision for regulating the tertiary air.
5. Consideration of the possible use of a universal control knob for valve which can be adjusted for all ranges of fuel.
6. Raising control valve fittings to permit clearance from the floor and adopting a double bottom as previously discussed.
With the above improvements, it is felt that the capacity may be increased somewhat and its general adaptability to all fuels simplified, however, no drastic changes should be undertaken which will in any way delay further procurement. _ The Engineers are interested in testing a_ burner, incorporating the above mentioned modifications, if this can be done without appreciable delay. Major Clausen requested that samples be sent to the Engineers Board, Fort Belvoir, Va., as soon as possible. In the interest of facilitating future procure ment, it is requested that you concentrate on consolidating specifications as soon as practicable. A sample burner unit was sent to Captain Cornell at Jeffersonville, who undoubtedly will be instrumental in preparation of final specifications.
The way the matter now stands, the item has been given very favorable recognition and all members of this office are in accord on its adoption and use .
6. On June 18,1943, Colonel Doriot, on behalf of the Quartermaster General, wrote Oil Devices as follows:
Representatives of your Company and the technicians in this Branch have collaborated on the design of the Tent Stove. It is understood that this item incorporates principles which are covered by existing patents and patent applications.
In order to protect the interests of the United States, it is requested that your Company grant a royalty free, non-exclusive license to the United States under all patents now and hereafter issued which contain a claim or claims infringed by Tent Stoves.
The cooperation [of] your Company in the development of this type of stove has been very much appreciated.
Oil Devices discussed this letter among themselves in the light of other licenses which it had with their civilian customers and to see if Oil Devices could give the Government what it wanted but still protect themselves when civilian business returned. There was also a telephone conversation with Colonel Doriot. The evidence, however, shows no written reply to the above letter.
7. On August 23, 1943, Perry, Manager of the Chicago office of Oil Devices, was called on the telephone by the Research and Development Department of the Quartermaster Depot, and requested to come to Washington. He met there a Captain Bladel who represented Procurement. Perry was asked how soon Oil Devices could get into production and whether Oil Devices could produce 74,620 of the heaters for the tent stoves by the first of the year. Perry and Bladel telephoned plaintiff's subcontractors and after Perry had satisfied the Government officials at the conference with regard to sources of supply, he returned to Chicago from Washington. Several days later George Henry, Purchasing Agent of the Procurement Division of the Quartermaster Depot at Jeffersonville, Indiana, called at Oil Devices' Chicago office and informed Perry that there was a directive, which he had not seen, for an order for Breese burners, and asked for information and inspection of the burner. The discussion also covered the subject of costs, including development cost and how the bid should be prepared.
Following this conference, Perry went to Jeffersonville for several days' negotiations and also worked with the engU neering department there to prepare the specifications. He concluded his visit there on September 3 when he was given the notice of intention to give plaintiff the award referred to in subsequent finding 9.
8. The War Department, through the Jeffersonville Quartermaster Depot, furnished plaintiff with a form termed "QMC Bequest for Informal Bids (negotiated contracts)" to be filled out by Oil Devices. This was dated September 3, 1943. The bid was to be for 14,620 oil burner outfits for the tent stoves, and the date of opening of the bids was stated to be September 8,1943. The bid form, in evidence as defendants exhibit 11, requested among other things the following information:
Give general description of nature of engineering and development expenses and special tools considered as applicable to this proposal and state approximate period in which they were incurred or are to be expected to be incurred. If such expenses are to be amortized under this proposal, give the estimated basis of amortization:
To this item plaintiff replied as follows:
Engineering and development expense $45,000 incurred since Aug. 27, 1942 to date. Development of several models of complete tent heaters at Santa Fe and Chicago laboratories. Work with Eesearch and Development Section O. Q. M. G. and Bureau of Standards. Collaboration with accessory manufacturers. To be amortized on this order.
The development cost item was allocated in the itemized portion of the bid at 60 cents a burner, making a total of $44,772. The bid price was $14.34 a unit, the total quantity-being 74,620 units involving a total sum of $1,070,050.80. This bid form was signed by Perry September 13, 1943, and was returned to defendant a few days later.
9. On September 3,1943, Oil Devices was given the following notice of intention to give plaintiif the award by the Jeffersonville Depot, signed by Carl W. Goerling, Major, Q. M. Corps, Purchasing & Contracting Officer, Food Equipment Purchase Branch:
Your company is to be awarded contract of 74,620 each Outfits, Burner, Oil, Stove, Tent, M-1941, at a unit price of $14.34, in accordance with Spec. JQD No. 431, dated 31 August, 1943, Stock No. 65-N-1852. Deliveries are to be as follows:
November, 1943_ 35,000
December, 1943_ 39, 620
Packaging to be in accordance with Spec. JQD No. 431 and in addition a separate quotation will be made by your company to cover export packaging, which will become a part of the contract.
Contract Number is W-12-036-QM-182, O. I. 1587-4-x. Priority rating assigned is AA-1. Master Allotment is W-710-0914-3Q-4Q-43.
You are requested to furnish this branch a list of subcontractors together with Cost Analysis of the item on this contract and the contract is to bear Re-Negotiation Clause, Article No. 33, Revision of Entire. Price by Negotiation, which is a part of your bid.
On April 21, 1943, there was published in 8 F. R. 5224, the following regulations:
Section 81.303 is amended as follows:
§ 81.303 General retirements for contracts. Every purchase transaction except those where payment is made coincidentally with receipt of supplies will be evidenced by a written contract.
(a) Types of contracts. Contracts may be either formal or informal.
(b) Formal contracts; when required. A formal contract is one which is contained in one instrument executed by both parties. Formal contracts may be used for any purchase transaction and will be used for all purchase transactions other than those for which informal contracts are authorized by paragraph (c) below.
(c) Informal contracts; when permitted: Informal contracts are of two types:
(1) An informal contract consisting of a written instrument signed by the contracting officer on behalf of the United States, and not by the contractor. This type of informal contract may be used for any of the following purchase transactions:
(1) Any transaction the contract price of which does not exceed $5,000.
(ii) Any transaction the contract price of which exceeds $5,000 but does not exceed $100,000: Provided, That not more than one payment is involved: And Provided That the time of performance does not exceed 180 days.
(iii) Any transaction made at public auction at a produce exchange or under similar conditions.
(2) An informal contract embodied in more than one instrument. At least one instrument is signed by the contracting officer on behalf of the United States and at least one other instrument is signed by or on behalf of the contractor. This type of informal contract may be used for any of the following purchase transactions:
(i) Any transaction the contract price of which does not exceed $5,000.
(ii) Any transaction the contract price of which exceeds $5,000 but does not exceed $500,000, provided that the time of performance does not exceed 180 days.
These regulations were amended on June 8, 1943, 8 F. K. 8526, as follows:
Section 81.303 is amended as follows:
§81.303 Contracts, formal and informal-a) General. Contracts may be either formal or informal.
(b) Formal contract. A formal contract is one which is contained in one instrument executed by both parties. An illustration is War Department Contract Form No. 1 (see §81.1301). Formal contracts may be used for any purchase transaction, regardless of amount and will be used for all purchase transactions, the contract price of which exceeds $500,000.
(c) Informal contract. For any purchase transaction the contract price of which does not exceed $500,000, an informal contract consisting of two separate instruments, one signed by the contractor and the other signed by the contracting officer on behalf of the United States may be used.
(d) Further specifications. (1) When a purchase order is preceded by a written quotation or is followed by a written evidence of acceptance executed by the contractor, it is to be regarded as an informal contract, consisting of two instruments; and accordingly, may be used, in accordance with paragraph (c) of this section, for any purchase transaction the contract price of which does not exceed $500,000. If the contractor's assent is not evidenced either by a written quotation or by acceptance of the purchase order in writing, the purchase order may nevertheless be used for any purchase transaction the contract price of which does not exceed $500,000 provided that the purchase order is preceded by an oral quotation or is based upon a price list.
Another amendment was made on June 24, 1943, as follows (8 F. R. 8629):
Section 81.303 is amended by adding a paragraph preceding paragraph (a), the section headnote being amended, as follows:
§ 81.303 General requirements for contracts. Every purchase transaction except those where payment is made coincidentally with receipt of supplies will be evidenced by a written contract.
On September 4,1943, defendant sent the following letter to Oil Devices:
Supplementing this Depot's letter to you of yesterday, 3 September 1943, referring to prospective award to you of contract for 74,620 each Outfits, Burner, Oil, Stove, Tent, M-1941, upon the delivery schedule and with the packaging specifications and under the prospective contract number therein indicated, you are advised that, of course, such an award cannot be made until and unless your concern enters into an agreement with the Government extending the Government a royalty-free license on each and all of your claimed patents which may be applicable to this contract item and all and any parts, features, etc., of the same.
This is pursuant to conversations with the Office of The Quartermaster General, Washington, D. C., in which royalty-free license covering each and all of the said claimed patents was requested of you, to be applicable to manufacture by or for the Government for governmental use, sale or disposal of this item, its parts, features, etc.
In conversation yesterday at this Depot, with Mr. N. McManamy, Procurement Specialist and Captain Edward W. Moses, Officer in Charge of Legal Section, your Mr. Perry advised that the giving of such royalty-free license to the Government was under close consideration.
Within the next few days the form of the royalty-free license which, is requested' for the Government will be forwarded to you.
It .is anticipated that this office will hear from you favorably in the immediate future so that this matter may be disposed of to the mutual satisfaction of both parties.
On September 10,1943, Oil Devices received the following telegram from the Jeifersonville Quartermaster Depot:
RE CONVERSATION MUST HAVE NAMES ALL PARTNERS YOUR COMPANY AND PATENT NUMBERS IMMEDIATELY OR LETTER OP AWARD WILL BE WITHDRAWN
JEFFERSONVILLE QM DEPOT POOD -EQUIP PUR BR.
10. In a letter of transmittal dated September 11,1943, the Jeffersonville Depot forwarded to Oil Devices a royalty-free -license prepared by the defendant's representatives. This letter follows:
Enclosed herewith is an original and three copies of the License feature of the proposed contract for 74,620 Outfits, Burner, Oil, Stove, Tent, M-1941.
It is requested that three copies be signed and notarized. The original and two copies are to be returned to this office at the earliest opportunity.
The controversial portion of this license, which is in evidence as defendant's exhibit 1, reads as follows:
Whereas, Oil Devices, a limited partnership, organized under the Illinois Partnership Act, and having its chief place of business in Santa Fe, New Mexico, with a branch office in Chicago, Illinois, and having as its general partners J. L. Breese and Bruce Hayter, and having as its limited partner Troy L. Parker, and having formerly also had as a limited partner Lawrence W. Scudder, now deceased, which partnership is hereinafter called the "Licensor", now is the owner of United States Letters Patent and applications therefor directed to gravity feed, pot type, low draft burner outfits suitable for tent or other space heating, baking and cooking, and may hereafter be the owner of other such patents and applications, all hereinafter sometimes referred to as "Oil Devices burner patents and applications"; and
Whereas, to further the national defense and to promote the common good, Licensor desires to grant to the Government of the United States an unrestricted right and license to make, use, and sell, or otherwise dispose of in accordance with law, certain burner outfits embodying the subject matter of the inventions of said Oil' Devices burner patents and applications, subject to limitation as to time only set forth below; and
Whereas, Licensor warrants that it has the right to' grant such a license;
Now, therefore in consideration of the premises and the sum of One Dollar, and other good and valuable considerations the receipt and sufficiency thereof are hereby acknowledged, Licensor hereby grants to the United States of America, as represented by the Secretary of War, the irrevocable, non-exclusive, royalty free right and license under said Oil Devices burner patents and applications to make, use, and sell, or otherwise dispose of in accordance with law, and to cause to be made, used and sold, or dispose of, burner outfits substantially in conformance with specification JQD 431 hereto attached and marked Exhibit A, and all other gravity feed, pot type, low draft burner outfits suitable for tent or other space heating, baking and cooking, and any and all component parts thereof; said right and license to extend throughout the United States, its territories and possessions, and to remain in full force and effect for the duration of the present war and the period of six months thereafter only, reserving to Licensor the unrestricted use and enjoyment of all other rights not hereby expressly granted to the United States of America.
11. At the" time these negotiations were in progress Captain Moses was chief of the legal section at the Jeffersonville Quartermaster Depot. It was his custom to have his secretary, Miss Whedon, record telephone conversations in shorthand with the use of extra earphones. She generally listened to the entire conversation and in some instances recorded the same but in other instances if non-legal matter was discussed she did not record that portion.
On September 15, 1943, after the license form had been forwarded to Oil Devices, a telephone conversation took place between Mr. Perry, of Oil Devices, Chicago, Illinois, Captain Moses, and Mr. McManamy, of the Jeffersonville Depot. A transcript or partial transcript of this conversation bears a notation in the handwriting of Miss Whedon. This transcript, which relates to the terminology of the license, is as follows:
Mr. P. This is Mr. Perry of Oil Devices.
Capt. M. Oh, yes, what is the status of your license— did you send it on to Santa Fe ?
Mr. P. That is correct. We received it yesterday by registered mail and I sent it on out to Santa Fe for you by registered mail. I want to talk with you about the bid form, too. There is a page in here on the bid form about disclosure of royalty payments — that we are supposed to have a statement by all subcontractors as to what license fees are paid. I have checked with the principal ones verbally, by phone, and so far as I can learn, there is no other royalty or anything being paid.
Capt. M. You mean all, or any part of royalty payments would be under what you claim is covered by your own patents?
Mr. P. Of course we aren't charging anything. They only sent me two copies of this bid. Take Paragraph 31 — Disclosure of Royalty Payments — I presume I should write Major Goerling a letter and use the expression that is used in here to the effect that, as far as we are able to ascertain, there is no royalty, rental, license fee, and so on, paid.
Capt. M. Just a minute (Slight Pause) I have just checked with Mr. McManamy and he thinks that approximate statement should serve the purpose. That is, as contained in the bid form.
Mr. P. Yes. But they didn't give me four copies. Apparently one is just an instruction sheet to follow.
Capt. M. Mr. McManamy says that it is an oversight and suggests you can reproduce them in your office all right, if that is convenient. Just have a girl run off the others.
Mr. P. All right. And in the meantime, we will make the statement to the effect that no royalty payments are being made. Another thing — this agreement you wrote, this license agreement, was considerably broader than we anticipated.
Capt. M. The form of agreement was supplied to us by The Quartermaster General's Office, Legal Division, Patents Branch.
Mr. P. They included bake ovens — which we wouldn't argue much about because that is a relatively small item. But they also had a clause which seems to cover everything we ever built or intend to build.
Capt. M. I don't believe there would be any intention to do more than cover any patent you may have which the Government might need to use for this war effort during duration and six months. You have no objection to that, do you ?
Mr. P. No, but I want to make a suggestion. When they originally talked to me, it was just the tent heater development. They make this include all other devices which might be useful in the war effort. We have another development which is being tested out on the West Coast — it is a special heater, which will take the place of a lot of tent heaters and be more or less portable. That would be an entirely new device.
Capt. M. The license, although it was worded generally — and I am sure it was designed to be worded generally — would still only apply for Governmental purposes during the duration and six months. One should not be loathe to give that, it would seem.
Mr. P. No, not at all. We wonder if we could work out something that we make these licenses direct to the manufacturers who secure them and have them agree to respect our licenses and not use them after the war.
Capt. M. I am not sure we made that point clear when you were here and we discussed that with Mr. Mc-Manamy. I thought that might be something you might try to work out and establish between yourself and other commercial firms. The Government is not asking any royalty free license from you except for Government use. A license in which commercial licensees would be involved, is not something the Government is entering or wants to enter. It is not a three party contract.
Mr. P. What I am doing is this — I asked the partners to sign this license and get it back as quickly as possible. I want to file a letter of exceptions. Due to our peculiar business set-up, some of these fellows might want to continue making these after the war.
Capt. M. I would say this. The Government would have no objections in the least to your asking such firms for such an agreement on their part. That, however, would be between you and them.
Mr. P. Would it be possible for the Government in issuing contracts to-
Capt. M. No — I don't want to anticipate your question — but I think I know what you mean, to attach to the contract a provision that the contractor is to manufacture so many and he will cease manufacture upon completion of the war and six months.
Mr. P. Upon completion of the contract.
Capt. M. That would be a provision in a contract in favor of someone not a party to the contract. It would mix the situation up quite considerably. I think it would be improper. I realize what is disturbing you, but I don't think that disturbance would be grounds for not giving the Government a royalty free license.
Mr. P. We are trying to give it to them.
Capt. M. What I am getting at is — don't send the license in with that provision or condition.
Mr. P. I am asking Mr. Breese and Mr. Hayter to execute it as is. .
Capt. M. Just don't send it in and say it is executed on such a condition because we can't take it that way and that would throw the whole thing back.
Mr. P. The first thing I want to do is get that on file.
Capt. M. The prospective or tentative award is, of course, being held up pending receipt of this. If this license is received with some condition attached to it, not contained in the license, it would retard the whole matter.
Mr. P. Mr. Breese will be glad to give the Government the license. But I manage the outside end and I will have to take care of these difficulties when they come up. Personally, I think the best protection is to play ball with the Government so closely and give them such good service that they won't want to deal with anyone else.
Capt. M. I think that would be an admirable solution. But the Government would have no objection to your getting such an agreement with the contractors that they will cease production on completion of the Government order.
Mr. P. I see one "out". We might offer to give such contractors engineering assistance in return for an agreement.
Capt. M. That might be the very practical solution. But that must be between you and other commercial firms and not attached to this license.
Mr. P. We will write a letter offering to do this if you have to make contracts with anyone else.
Capt. M. You write it in the form you wish and we will consider it — only the Government can't be a party to it.
Mr. P. I am going to wi'ite Major Goerling a letter and offer to give other contractors our engineering assistance.
Capt. M. I think that is the best solution — that might take care of your difficulties. Mr. McManamy is here and wants to speak to you.
Mr. M. How are you getting along on the bid form ?
Mr. P. We are nearly through with it.
Mr. M. This is Wednesday — will you be able to get it in the mail tonight ?
Mr.P. We hope to.
Mr. M. Did you get the telegram on the number of employees?
Mr. P. No, I was just going to wire him again for that.
Mr. M. I. went down there and. told Mr. McCarty of American Forging & Socket Co. They left here last night and were going to send the message.
Mr. P. Do you have any idea of the number ?
Mr. M. I don't know whether' it was 419 or 491 — I know it was under 500.
Mr. P. That will be all right. Suppose I just mark it under 500. I told Captain Moses the Depot should have the license tomorrow — they are mailing it. in direct.
Mr. M. That is fine. You say the bid form should be in the mail tonight? George Henry is quite anxious •about that. We don't want to make any unreasonable demands, but there is quite a bit of pressure on us on this.
Mr. P. I would have sent it yesterday, but we couldn't tie it up. I wanted to try to finish up Lt. Carpenter's papers tonight, too. _
_ Mr. M. George will want to know about that.
Mr. P. Trying to get $750,000 job rolling by October 1st is no small job.
Mr. M; Yes, and we don't want to seem unreasonable at all. I don't have that information you requested on the number which would be packed for overseas.
Mr. P. We would like to have that as soon as possible. We would like to have the shipping schedule early in October. We are going to try to make all export shipments from Coleman. I will have the export trading charge and all that dope in the bid, but we would like to find out what proportion — even if you can give it to us roughly — of them will be packed for overseas.
Mr. M. Well, we will try to get that to you.
12. The license agreement, receipt of which was acknowledged by Mr. Perry, Manager of the Chicago branch of Oil Devices, as of September 14, 1943, was forwarded the same day to the Santa Fe, New Mexico, office. This license agreement was returned to the Jeffersonville Depot with a letter of Mr. Breese dated September 17, 1943, which letter reads as follows:
Enclosed herewith is an original and two copies of the License feature of the proposed contract for 74,620 Outfits, Burner, Oil, Stove, Tent, M-1941, signed and notarized as requested in your letter of 11 September 1943.
The license (defendant's exhibit 1) was signed "Oil Devices, by James L. Breese, general partner," before a notary public. No date of signing appears thereon, but the license was obviously signed sometime between the 15th and 17th of September 1943.
13. On November 30,1943, Captain Moses, of the Jefferson-ville Depot, wrote the following letter to Oil Devices relative to the license:
Supplementing our previous pleasant conferences and correspondence, in connection with the license which you patriotically gave to the Government, it will be much appreciated if you will send this Depot a list of your present applications and patents which are covered by this license. It is requested that this list be forwarded in duplicate.
Pursuant to this letter, Oil Devices furnished to the defendant the list of the 13 patents and 4 applications set forth in the petition in this case.
14. Under date of September 25,1943, the Government issued an order addressed to Oil Devices Co., which order called for 74,620 Outfits, Burner, Oil, Stove, Tent, M-1941, at a unit price of $14.34, in accordance with Specification JQD 431, dated August 31, 1943 (Stock No. 65-N-1852). Deliveries were to be as follows:
November 30, 1943_ 35,000
December 31, 1943_ 39, 620
This order which was accepted by the contractor on September 30, 1943 was designated in the upper right hand corner of the first page as Contract No. W 12-036 qm 182 Order No. 1587-4-x. It is in evidence as plaintiff's exhibit 23.
15.In its dealings with the owners of patents, the Government used two forms of royalty free licenses. The one is typified by defendant's exhibit 8 (two licenses), in which the duration of the license was expressed as for the duration of the war and six months thereafter. In the other form of license used, which is typified by defendant's exhibit 9 (two licenses), the licenses were for the duration of hostilities and six months thereafter. The Government always attempted to get the first form if it could and only accepted the second if the licensor was unwilling to grant the first.
CONCLUSION OP LAW
Upon the foregoing findings of fact, which are made a part of the judgment herein, the court concludes as a matter of law that the license granted by plaintiff to defendant was valid, but expired six months after the surrender of Japan on September 2, 1945.
The case is remanded to a commissioner for further proceedings not inconsistent with this opinion.
On April 15, 1942, and August 5, 1942, the War Production Board had prohibited the production of oil burners for civilian use. These controls were lifted on May 11, 1945.