Hobbs v. United States, 20840.
| Decision Date | 07 April 1967 |
| Docket Number | No. 20840.,20840. |
| Citation | 376 F.2d 488 |
| Parties | James C. HOBBS, Petitioner, v. UNITED STATES of America, Atomic Energy Commission, Respondent. |
| Court | U.S. Court of Appeals — Fifth Circuit |
COPYRIGHT MATERIAL OMITTED
Richard B. Montgomery, Jr., New Orleans, La., H. Struve Hensel, Washington, D. C., B. D. Watts, Cleveland, Ohio, for petitioner.
Joseph F. Hennessey, Gen. Counsel, AEC, Sidney G. Kingsley, Asst. Gen. Counsel, AEC, Roland A. Anderson, Asst. Gen. Counsel, AEC, Alan S. Rosenthal, Edward Berlin, Robert V. Zener, Attys., Dept. of Justice, John W. Douglas, Asst. Atty. Gen., Washington, D. C., for respondent, John A. Horan, Atty., AEC, Washington, D. C., of counsel.
Before WHITAKER,* Senior Judge, and WISDOM and THORNBERRY, Circuit Judges.
James C. Hobbs seeks just compensation for the Atomic Energy Commission's taking of rights in certain inventions useful in the production of fissionable material. He asks this Court to review an adverse decision of the AEC's Patent Compensation Board1 and the Commission's refusal to review the Board. See Atomic Energy Act of 1954, § 189(b), 42 U.S.C. § 2239(b). We reverse the Patent Board's decision and remand the case to the Board for further consideration.
* * *
In 1943 the United States hurried toward completion of its first atomic energy facility at Oak Ridge, Tennessee. The goal of the Manhattan Engineering District was to produce the world's first nuclear weapons. A private contractor, the Kellex Corporation, was in charge of building the Oak Ridge complex. One of the major problems facing Kellex in the Summer and Fall of 1943 was the engineering of a process to separate fissionable Uranium 235 from ordinary Uranium 238. In order to solve this problem as quickly and as efficiently as possible, Kellex persuaded Hobbs, a mechanical engineer of excellent reputation, to work half time as a consultant on the project. Hobbs joined Kellex as a consultant in September, 1943, but refused to sign the patent waiver form Kellex requested. He had made numerous inventions during his career, he explained, and it was his custom to retain all patent rights. Although there is a dispute whether Hobbs and Kellex specifically agreed that Hobbs was to retain all rights to any inventions he might make, the record shows that Hobbs made his position clear. He refused to assign or license any of his anticipated patent rights either to the government or to Kellex.
Kellex's government contract was also clear. It provided that the Contracting Officer had the right to determine whether inventions conceived during the course of the contract should be patented and that he would determine the rights of the parties under any patents obtained. The contract also required Kellex to secure patent waiver forms in favor of the government from those of its employees from whom Kellex would ordinarily require such forms. It was not until July 1944, however, that the government became aware of Hobbs' refusal to execute a waiver form.
After September 1943 Hobbs concentrated on improving the piping systems at the Oak Ridge project, often devoting more than half time to the job. Almost from the beginning, he formed the opinion that the valves Kellex contemplated using were inadequate. In attempting to devise more workable valves, Hobbs had several conferences with employees of the contractor in charge of manufacturing valves for the project, the Crane Company. Sometime during a three-day conference with the Crane Company in early November 1943 Hobbs conceived of a new sort of gate valve, which he suggested as a solution to the problem. Hobbs and the employees of Crane made several modifications in the original design, and Crane built working models of Hobbs's conception. Eventually, Crane put the final design into production. The Atomic Energy Commission has used the valves extensively, both at Oak Ridge and at its other facilities for the production of special nuclear material.
Hobbs also conceived of another valve, essential to the functioning of Oak Ridge, sometime in early May 1944. Like the gate, or "G" valve, this instrument, or "H" valve was developed in cooperation with employees of the Crane Company. The AEC used this valve extensively at all plants. In 1945 and 1946 Hobbs filed applications for patents for his two valves. The Patent Office issued patents in 1950 and 1952. In 1956 he filed with the AEC an application for just compensation under the Atomic Energy Act of 1946.
A. The Atomic Energy Act of 1946 drastically affected the property concepts surrounding patent law in the field of atomic energy.2 Section 11(a) (1) provided:
No patent shall hereafter be granted for any invention or discovery which is useful solely in the production of fissionable material or in the utilization of fissionable material or atomic energy for a military weapon. Any patent granted for any such invention or discovery is hereby revoked, and just compensation shall be made therefor. 60 Stat. 768.
Section 11(a) (2) provided:
No patent hereafter granted shall confer any rights with respect to any invention or discovery to the extent that such invention or discovery is used in the production of fissionable material or in the utilization of fissionable material or atomic energy for a military weapon. Any rights conferred by any patent heretofore granted for any invention or discovery are hereby revoked to the extent that such invention or discovery is so used, and just compensation shall be made therefor. Ibid.
Section 11(d) provided:
The Commission is authorized to purchase, or to take, requisition, or condemn, and make just compensation for, (1) any invention or discovery which is useful in the production of fissionable material or in the utilization of fissionable material or atomic energy for a military weapon, or which utilizes or is essential in the utilization of fissionable material or atomic energy, or (2) any patent or patent application covering any such invention or discovery. 60 Stat. 769.
The Atomic Energy Act of 1954 replaced the Atomic Energy Act of 1946. That Act also regulates patent rights, but to a less severe degree. Section 151 of the act, 42 U.S.C. § 2181, denies and revokes patent rights only for inventions useful "in the utilization of special nuclear material or atomic energy in atomic weapons." Section 160, 42 U.S.C. § 2190, permits the untimely application for patents barred by the 1946 Act. Both acts lodge the initial responsibility for determining just compensation in the Patent Compensation Board of the AEC. Atomic Energy Act of 1946, § 11(e) (1), 60 Stat. 769; Atomic Energy Act of 1954, § 157(a), 42 U.S.C. § 2187(a). Both provide standards by which the Board is to determine the amount of compensation due. Atomic Energy Act of 1946, § 11(e) (3), 60 Stat. 770; Atomic Energy Act of 1954, § 157(c), 42 U.S.C. § 2187(c).
Hobbs based his application for compensation on sections 11(a) (2), 11 (b), and 11(d) of the 1946 Act.3 The Patent Compensation Board, after a hearing, dismissed his application.
The main thrust of the Board's opinion was that the United States had obtained shop rights in Hobbs's inventions. Since the government had an implied nonexclusive, royalty-free license to use the Hobbs valves, so the Board's theory goes, the AEC's use of them took nothing from Hobbs for which compensation must be paid.
These findings are not tailored to the requirements of the 1946 Act. The Act does not provide compensation for government infringement of patents. It totally obliterates patent rights in certain areas and provides that just compensation be paid for the obliteration. The Act does not specify that facts establishing a defense for the government against an infringement suit shall constitute a complete defense against an application for just compensation. Rather, it provides that infringement defenses should be one factor taken into account in determining the amount of just compensation for patent rights wiped out by the Act.
The Act must be viewed as a whole. Section 11(a) (2) automatically terminates the inventor's rights in his invention to the extent that the invention is useful in the production of fissionable material. These terminated rights derive their value not only from potential royalties from the government, but from potential sale or licensing to private parties as well.4 Thus even if the government owns an implied license in the invention, other valuable rights remain the property of the inventor. Section 11(a) (2) terminated these rights.
The Board ignored the existence of the rights which the inventor retains after the government license is subtracted. It found that to justify compensation, "the property taken must be clearly that to which the Government has no title," and that since the government had shop rights, nothing was taken. We hold that this statement of the law was erroneous. So long as the inventor held some rights, he is entitled to compensation for section 11(a) (2)'s termination, regardless of the existence of a license in the government.
The existence of shop rights is not, of course, irrelevant to a proceeding for just compensation before the Board. Section 11(e) (3) provides:
(B) In determining what constitutes just compensation under subsection (a), (b), or (d) above, the Commission shall take into account the considerations set forth in paragraph (A) above, "any defense, general or special, that might be pleaded by a defendant in an action for infringement, the extent to which, if any, such patent was developed through federally financed research, the degree of utility, novelty, and importance of the invention, and * * * (in its discretion) the cost to the owner of the patent of developing such invention or discovery or acquiring such patent." and the actual use of such invention or discovery * * *.
Certainly the Board's consideration of the shop rights defense was proper. Indeed it was mandatory under ...
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Hobbs v. United States Atomic Energy Commission
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