Farrand Optical Co. v. United States

• Decision Date: 19 October 1962
• Docket Number: No. 314,Docket 27333.,314
• Parties: FARRAND OPTICAL CO., Inc., Plaintiff-Appellant, v. The UNITED STATES of America, Defendant-Appellant.
• Court: U.S. Court of Appeals — Second Circuit

317 F.2d 875 (1962)

FARRAND OPTICAL CO., Inc., Plaintiff-Appellant, v. The UNITED STATES of America, Defendant-Appellant.

No. 314, Docket 27333.

United States Court of Appeals Second Circuit.

Argued June 5, 1962.

Decided October 19, 1962.

March 27, 1963.

Pennie, Edmonds, Morton, Barrows & Taylor, New York City (Willis H. Taylor, Jr., John T. Farley, New York City, of counsel), for plaintiff-appellant.

Robert M. Morgenthau, U. S. Atty., S.D.N.Y. (David R. Hyde, David Klingsberg, Robert E. Kushner, Asst. U. S. Attys., of counsel), for defendant-appellant.

Before CLARK, WATERMAN and MOORE, Circuit Judges.

On Petition for Rehearing in Banc in No. 263, Docket 27333.

WATERMAN, Circuit Judge.

The Invention Secrecy Act of 1951, 35 U.S.C. §§ 181-188, authorizes the Commissioner of Patents to delay the grant of a patent on an invention the disclosure of which might be detrimental to the national security. When he believes such a danger to exist, the Commissioner is directed to "make the application for patent in which such invention is disclosed available for inspection" to certain officials of designated defense agencies of the United States. At the request of any of these officials a secrecy order may issue withholding the grant of a patent for as long a period of time as the national interest requires.

An inventor whose patent has been so withheld is prevented from exploiting his invention, for he may not disclose it to other persons as long as the secrecy order is in effect. Moreover, defense agencies of the United States to whom, pursuant to § 181, the invention has been disclosed by the Commissioner of Patents, may use it, prior to the issuance of a patent, secure from the threat of an infringement action brought against the United States under 28 U.S.C. § 1498. Gearon v. United States, 115 F.Supp. 910, 126 Ct.Cl. 548 (1953), cert. denied, 348 U.S. 942, 75 S.Ct. 364, 99 L. Ed. 737 (1955). However, the inventor is not wholly deprived of the fruits of his discovery, ingenuity, and labor. Section 183 of the Act provides that he may apply to the agency responsible for the issuance of the secrecy order for "compensation for the damage caused by the order of secrecy and/or for the use of the invention by the Government, resulting from his disclosure." If a satisfactory settlement with the agency cannot be effected, the claimant then may bring suit for this compensation against the United States in the Court of Claims or in the United States District Court for the district where the claimant resides. 35 U.S.C. § 183; Robinson v. United States, 236 F.2d 24 (2 Cir., 1956).

The one question that we find it necessary to decide upon this appeal is whether the Invention Secrecy Act only applies to claims for compensation for unauthorized governmental use prior to the issuance of a patent and resulting from the disclosure envisioned in § 181 of the Act or whether the Act applies more broadly so as to encompass all claims for governmental use of an invention upon which a secrecy order has been imposed.

Plaintiff below, the Farrand Optical Co., Inc., (hereinafter called Farrand) is a manufacturer of scientific and industrial optical instruments. Established during the Second World War with governmental assistance, the company's primary work during the period of hostilities was in the design and production of bomb sights or fire control equipment for the armed forces. In the latter part of 1943, plaintiff's president, Clair Farrand, and its chief engineer, Robert W. Tripp, learned that the Air Force was urgently seeking a new type of gun sight for the B-29 bomber. A sight was desired that would scan through a lateral hemisphere and would furnish azimuth and elevation information in polar coordinates for use in directing fire from the nose of the plane. No fire control device then known was capable of doing this. Tripp promptly set to work to solve the difficult optical problems involved in the creation of such a device. By April 1944, a "mock-up" of his proposed new type "hemisphere sight" was ready for demonstration to officials of the Air Force. Their reaction to Tripp's invention was a favorable one. Various problems remained, however, with respect to the most practical optical and mechanical design arrangement for the new sight.

After extended negotiations, Farrand, on March 10, 1945, entered into a research and development contract with the War Department with a view to the solution of these problems. Article 30 of that contract, relating to "Reproduction and License Rights," gave to the Government a "non-exclusive irrevocable and royalty free right and license" to all discoveries made or first reduced to practice by Farrand in the performance of the contract. As to patent or other rights already owned by Farrand at the commencement of the contract the Government was granted only a royalty free license "limited in term to the duration of hostilities in any war in which the Government is now engaged plus six (6) months thereafter."

During the period from 1945 to 1950, work continued on the perfection and preparation for manufacture of the hemisphere sight. By the latter part of 1947, however, the Air Force determined that Farrand would not be able to supply all the needs of the Government for the device. The Air Force thus suggested, with Farrand's concurrence, that the Eastman Kodak Co. should be established as a second source of supply. Thereafter, Farrand and Eastman Kodak cooperated in the exchange of designs and other engineering information.

On August 19, 1946, Robert W. Tripp filed an application for a patent on the hemisphere sight in the United States Patent Office. The application was assigned to Farrand. In December 1948, Farrand was notified by the Patent Office that twenty-two claims had been allowed on Tripp's invention. Shortly thereafter, Farrand notified the Commissioner of Patents that the subject matter of the patent application was also the subject matter of certain Air Force contracts, the terms of which prohibited the disclosure that would occur if a patent was issued. The issuance of a secrecy order under the Invention Security Act was requested. On February 23, 1949, at the direction of the United States Air Force, a secrecy order was issued. The order remained in effect until December 2, 1954, after which, on October 4, 1955, a patent was granted on the Tripp application.

During the period 1950 through November 1, 1960, the Government purchased from Farrand at a cost of some twenty-five million dollars a quantity of hemisphere gun sights involving elements of the Tripp invention. During the same period the Government purchased some 1646 hemisphere sights from the Eastman Kodak Company, at a cost totaling in excess of forty million dollars. In addition, spare parts for the sights costing some five million dollars were purchased by the Government from Eastman Kodak.

On May 5, 1955, Farrand brought suit in the United States District Court for the Southern District of New York seeking compensation for the Government's use of the Tripp invention, under 35 U.S.C. § 183, and for the Government's use and disclosure of the invention, under 22 U.S.C. § 1758. The claim under 22 U.S.C. § 1758 was subsequently dismissed with plaintiff's consent. In this suit Farrand sought compensation for all sights and used parts involving the Tripp invention purchased by the Government from Eastman Kodak. After a denial of the United States' motion to dismiss for failure to state a claim and for lack of jurisdiction, Farrand Optical Co. v. United States, 133 F.Supp. 555 (S.D.N.Y.1955), and a separate trial on the issue of liability, 175 F.Supp. 230 (S.D.N.Y.1959), the court below awarded judgment for the plaintiff in the amount of $657,622.17. 197 F.Supp. 756 (S.D. N.Y.1961). This award included compensation for all sights and all parts involving the Tripp invention, purchased by the Government from Eastman Kodak during the period from 1950, when manufacture began, to November 1, 1960, the commencement of the proceedings upon the issue of damages. From that judgment both plaintiff and defendant appeal, the plaintiff claiming that the award is inadequate and the defendant claiming, inter alia, that the district court improperly assumed jurisdiction of the issue.

In adjudging the plaintiff entitled to compensation under 35 U.S.C. § 183, the district court ruled that the Government's use of the Tripp invention, being based upon an implied contract to pay reasonable royalties, was lawful. The court stated: "The past contractual relations between the parties, as well as those which followed the joint endeavor between plaintiff and Eastman Kodak negate the theory of a tortious taking by the defendant. Plaintiff's claim here is for payment of just compensation for lawful use, not for compensation for unauthorized use, as for a tort. Title 28, § 1498." 175 F.Supp. 230, 247. The United States now argues on appeal that inasmuch as there had been no "unauthorized use" or tortious taking, the plaintiff's claim is not one for compensation under the Invention Secrecy Act and thus the district court had no jurisdiction over the case. The Government maintains that plaintiff's loss of royalties was not a result of the secrecy order or the statutorily required disclosure of the Tripp patent application to the Government, but, instead, was a result of contractual negotiations conducted long prior thereto and before Tripp filed the application for the issuance of a patent. Plaintiff's claim for a compensatory award, it is argued, is based upon an implied contract and thus, being for an amount in excess of $10,000, lies within the exclusive jurisdiction of the Court of Claims under 28 U.S.C. § 1491; see 28 U.S.C. § 1346. We hold with the Government, and as the court below had no jurisdiction over plaintiff's claim for compensation we do not discuss the other errors alleged in the parties' cross appeals.

Whether the...