Carey v. United States
| Decision Date | 06 April 1960 |
| Docket Number | No. 112-58.,112-58. |
| Citation | 276 F.2d 385 |
| Parties | Henry A. CAREY, Jr., Edwin D. Hicks, J. Pierre Kolisch and Joseph Schulein v. UNITED STATES. |
| Court | U.S. Claims Court |
Paul D. Hanlon, Portland, Or., for plaintiffs. Gerhard P. Van Arkel and Van Arkel & Kaiser, Washington, D. C., were on the briefs.
Asst. Atty. Gen. George Cochran Doub for defendant. M. Morton Weinstein, Washington, D. C., was on the briefs.
The plaintiffs sue for royalties which, they claim, are owing to them pursuant to a contract. The Government says that it has no contract with the plaintiffs; that the contract on which the plaintiffs base their claim is a contract with the Attorney General of the United States, acting in his capacity as Alien Property Custodian, and that in that capacity he is a legal entity separate and different from the United States. The Government also asserts other defenses.
A Dr. William Kroll, a citizen and resident of Luxembourg, was an inventor. In 1934 he made a contract with a German corporation, Siemens & Halske, hereinafter called S&H, under which he gave to S&H an exclusive license to use his then present and future patents, and the power to sublicense others to use them, Kroll to receive royalties in accordance with a provision in the contract.
In 1936 Kroll invented a process for the production of the metal titanium, and in 1940 he received United States Patent No. 2,205,854 covering this invention. The contract which Kroll had made with S&H in 1934 applied to this invention, hence S&H had an exclusive license to use it, and the power to sublicense others to use it, both subject to the royalties reserved to Kroll in the 1934 contract.
In 1943 the United States Alien Property Custodian "vested", i. e., took title to, Kroll's titanium patent as the property of Kroll, the Custodian assuming that Kroll was a national of Luxembourg, a country which had been occupied by the Germans. Unknown to the Custodian, Kroll had left Luxembourg and come to the United States in February, 1940. In 1947 Kroll instituted a suit in the United States District Court for the District of Columbia, under section 9(a) of the Trading With the Enemy Act, as amended, 50 U.S.C.A.Appendix § 9(a), seeking the return of his property on the ground that he was not an alien enemy. The Custodian by that time had learned of Kroll's contract with the German firm S&H. The Custodian was willing to return Kroll's patent to him, subject to the rights of S&H in the patent, which rights the Custodian insisted upon retaining. Kroll took the position that S& H had no rights in the patent, and hence the Custodian had no rights.
The judgment in the District Court, rendered in 1951, affirmed, Kroll v. McGrath, 91 U.S.App.D.C. 172, 199 F.2d 187, was that the Custodian should return the ownership of the patent to Kroll, but that the Custodian, as the successor to the alien enemy firm S&H had the exclusive license and the power to sublicense which Kroll had granted to S& H. The judgment provided that the royalty rates at which the Custodian might grant sublicenses should be agreed to by Kroll and the Custodian, but that if the parties could not agree within 30 days the court would, upon application, set the royalty rates.
The parties were not able to agree and, upon application, the court set the rates to be computed on annual production, retroactive to April 3, 1951, at five percent of the gross sales price on the first 50,000 pounds of titanium, three percent on the next 50,000 and one percent on amounts in excess of 100,000 pounds, those rates being separately applicable to each sublicensee. The order provided that Kroll's one-half of the royalties from sublicensees, pursuant to his contract with S&H, should be paid directly to him.
The Attorney General, who had succeeded to the functions of the Alien Property Custodian, conveyed the legal title to the patent to Kroll. Kroll sold the patent to a corporation which in turn sold the patent to the instant plaintiffs.
The United States, acting through its Bureau of Mines, produced titanium, without any license from the Attorney General, and without paying any royalties to anyone. In addition, and of principal importance in this litigation, the Attorney General licensed several manufacturers to produce titanium for the United States, using the Kroll patented process. The titanium so produced was purchased from the manufacturers by the United States, acting through its General Services Administration, and was stockpiled by the United States.
We have said that the contract between Kroll and S&H covered numerous patents which had been issued to Kroll. The contract gave S&H an exclusive license to use all these patents. It said, "The amount of royalties to be paid by S&H to Kroll is to be computed depending upon the importance of the invention * * *." The contract further provided that if the parties could not agree on the amount of the royalties, each party should appoint an arbitrator, and if the arbitrators could not agree,
The contract also, as we have seen, provided that S&H had the power, with the consent of Kroll, to grant sublicenses. The royalties from sublicenses were to be shared equally by Kroll and S&H.
As we have seen, the Attorney General, as successor to the rights of S&H, licensed several manufacturers to use the Kroll process, at the royalties fixed by the order of the District Court. The manufacturers paid one-half the royalties to Kroll and one-half to the Attorney General. The plaintiff says that it was the United States which owned the S&H exclusive license; that the United States caused the titanium to be manufactured for itself, pursuant to its exclusive license; and that the United States was, therefore, indebted to Kroll, or his successors, for the entire royalty, and not only for the one-half of the royalty which the manufacturers paid to Kroll.
The Government says that it did not own the exclusive license; that it was owned by a separate juristic entity, the Attorney General; and that when he licensed the manufacturers to manufacture titanium for the United States, and not for himself, he was granting a sublicense rather than exercising his exclusive license which he owned pursuant to the S&H contract, to the ownership of which he had succeeded. If the arrangements were sublicenses, as the Government contends, Kroll and his successors were entitled to only one-half the royalties, and they have already received that much.
We do not agree with the Government's contention that the Attorney General, in his capacity as Custodian of Alien Property, is a distinct juristic entity, and not an agent of the United States. The Government quotes section 12 of the Trading With the Enemy Act, 50 U.S.C.A.Appendix, § 12, which says that "The alien property custodian shall be vested with all of the powers of a common-law trustee in respect of all property" vested in him, and may exercise powers appurtenant to the property "in like manner as though he were the absolute owner thereof * * *." We see nothing more in this language than the creation of an agency with powers much greater than the usual powers of an agent. The ordinary agent, for the Government or for a private principal, cannot convey the title to his principal's property, unless he holds a power of attorney authorizing him to do so. A common law trustee may, if he is acting within the scope of the trust, convey the title of property the beneficial ownership of which is in another person. Congress has, by section 12, conferred upon the Custodian a broad and general power of attorney, by defining his powers in terms of those of a common law trustee.
The Trading With the Enemy Act must be examined more closely to see whether it, as the Government urges, created a legal entity separate from the United States. On the side of affirmative action, the power to take title to property, to bring legal actions to reduce property to possession, to collect money, to convey property, to enter into contracts, the Custodian's authority is ample. What of the negative side? What authority does he have to respond to claims? In the instant case, for example, the Custodian vested, took title to a contract made between an alien enemy, S&H, and Kroll, not an alien enemy, and whose patent was not subject to vesting and was not vested. The contract, which was vested, conferred rights upon S&H, and also created obligations. The Custodian succeeded to the rights, and also to the obligations. If he did not succeed to the obligations, then his vesting of the contract accomplished the forfeiture of valuable rights of Kroll whose property and rights were not subject to seizure.
The instant suit is a suit by Kroll's successors to enforce what they claim to be contract rights under their contract with the Custodian. If Kroll's rights under the contract were not forfeited, and there was no possible reason for forfeiting them and the Government does not claim that they were forfeited, where may they be enforced? The Government points to section 9(a) of the Trading With the Enemy Act, 50 U.S.C. A.Appen...
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Carey v. United States, 112-58.
...in accordance with the terms of the exclusive license. This case is before us for the second time. In Carey, et al. v. United States, 276 F.2d 385, 149 Ct.Cl. 587 (1960), we held that plaintiffs were entitled to maintain this action against defendant for contractual royalties arising from d......
- Leal v. United States