United States v. Thomas Steel Corporation

• Decision Date: 20 August 1952
• Docket Number: Civ. No. 24760.
• Citation: 107 F. Supp. 418
• Parties: UNITED STATES v. THOMAS STEEL CORPORATION et al.
• Court: U.S. District Court — Northern District of Ohio

107 F. Supp. 418

UNITED STATES v. THOMAS STEEL CORPORATION et al.

Civ. No. 24760.

United States District Court N. D. Ohio, E. D.

August 20, 1952.

John J. Kane, Jr., U. S. Atty., Cleveland, Ohio, and T. Hayward Brown, Sp. Asst., Washington, D. C., and Clyde A. Norton of the Department of Justice, New York City, for plaintiff.

Earl W. LeFever, Cleveland, Ohio, for Thomas Steel Corp.

Hoyt A. Moore, New York City, Cravath, Swaine & Moore, New York City, John B. Putnam, Andrews, Hadden & Putnam, Cleveland, Ohio, for Youngstown Sheet & Tube Co.

Howard F. Burns, Cleveland, Ohio, Franklin B. Powers, Youngstown, Ohio, William H. Webb, Pittsburgh, Pa., for Cold Metal Products Co.

Andrew P. Martin, Squire, Sanders & Dempsey, O. P. Moon, Cleveland, Ohio, D. G. Dalton, Pittsburgh, Pa., for American Steel & Wire Co.

T. F. Patton, H. C. Lumb, Cleveland, Ohio, for Republic Steel Corporation.

Squire, Sanders & Dempsey, Cleveland, Ohio, Scott, MacLeish & Falk, Chicago, Ill., Hinkle, Horton, Ahlberg, Hansmann & Wupper, Chicago, Ill., for Signode Steel Strapping Co.

T. F. Veach and G. W. Humphrey, Jones, Day, Cockley & Reavis, Cleveland, Ohio, Earl F. Reed, Thorp, Bostwick, Reed & Armstrong, Pittsburgh, Pa., for National Steel Corporation.

William B. Cockley, Jones, Day, Cockley & Reavis, Cleveland, Ohio, H. Eastman Hackney, Joseph I. Marshall, Reed, Smith, Shaw & McClay, Pittsburgh, Pa., for Crucible Steel Co. of America.

Hyde, Meyer, Baldwin & Doran, Cleveland, Ohio, A. C. Neave, New York City, for John A. Roebling's Sons Co.

Paul J. Christiansen, West Orange, N. J., for Thomas A. Edison, Inc.

Andrew P. Martin and Frank Harrison, Cleveland, Ohio, Wm. J. Kyle, Jr., Pittsburgh, Pa., for Allegheny Ludlum Steel Corporation.

Andrew P. Martin, Squire, Sanders & Dempsey, Cleveland, Ohio, D. G. Dalton, Pittsburgh, Pa., B. L. Rawlins, Pittsburgh, Pa., for Carnegie-Illinois Steel Corporation.

Patterson, Crawford, Arensberg & Dunn, Pittsburgh, Pa., Brown, Critchlow, Flick & Peckham, Pittsburgh, Pa., Joseph E. Dickinson, Paul N. Critchlow, James S. Crawford, Jo. Baily Brown, Oberlin & Limbach and Jno. F. Oberlin, Cleveland, Ohio, for United Engineering & Foundry Co.

Earl W. LeFever, Cleveland, Ohio, R. C. Gormley, Chadbourne, Wallace, Parke & Whiteside, New York City, for American Brass Co.

Francis T. Reeves, Waterbury, Conn., Mark L. Sperry, 2nd, Waterbury, Conn., Andrew P. Martin and Frank Harrison, Cleveland, Ohio, for Scovill Manufacturing Co.

Wm. B. Cockley, Cleveland, Ohio, Paul, Lawrence & Wills, Pittsburgh, Pa., for Follansbee Steel Corporation.

Wm. B. Cockley, Cleveland, Ohio, Harry W. Lindsey, Jr., Chicago, Ill., for Inland Steel Co.

Earl W. LeFever, Cleveland, Ohio, Sullivan & Cromwell, New York City, for International Nickel Co.

Wm. B. Cudlip and T. Donald Wade, Detroit, Mich., for McLouth Steel Corporation.

Claude E. Clarke, Cleveland, Ohio, Wm. J. Caldwell, New Castle, Pa., for Elliott Brothers Steel Co.

Andrew P. Martin and Frank Harrison, Cleveland, Ohio, Wm. J. Kyle, Jr., Pittsburgh, Pa., for Wallingford Steel Co.

Root, Ballantine, Harlan, Bushby & Palmer, New York City, Andrew P. Martin and Frank Harrison, Cleveland, Ohio, for Associated Spring Corporation.

Breed, Abbott & Morgan, New York City, Andrew P. Martin and Frank Harrison, Cleveland, Ohio, for American Rolling Mill Co.

William H. Webb, Pittsburgh, Pa., Franklin B. Powers, Youngstown, Ohio, Howard F. Burns, Cleveland, Ohio, for Cold Metal Process Co. and Union National Bank of Youngstown, Ohio, as Trustee of the Leon A. Beeghly Fund.

MILLER, Circuit Judge. (Sitting by designation.)

This action was filed by the United States on March 3, 1947, pursuant to the provisions of the Royalty Adjustment Act, 35 U.S.C.A. §§ 89 through 96, against the Thomas Steel Corporation and numerous other defendants who were operating as licensees under certain patents pertaining to the cold rolling of steel, for the purpose of compelling such licensees to pay into the Registry of the Court royalties payable under the license agreements, and to determine the respective interests in said monies as between the United States and the owners and licensors of said patents.

Over a period of a number of years, beginning about 1928, the Defendant, the Cold Metal Process Company, owner of the patents herein involved, executed license agreements to numerous companies engaged in the manufacture of steel, who over a period of years paid to the licensor the royalties provided by said agreements. During recent years, the Cold Metal Process Company transferred the patents to the Defendant, The Union National Bank of Youngstown, Ohio, as Trustee of the Leon A. Beeghly Fund. These two defendants are hereinafter referred to as Cold Metal or the Licensor.

The complaint alleges that the defendant licensees made regular payment of the royalties called for under their respective license agreements until some time prior to August 18, 1943; that at that time pursuant to the authority conferred by the Royalty Adjustment Act of October 31, 1942, proceedings were taken by certain departments and agencies of the Government to fix the royalties payable under the license agreements at rates or amounts determined to be fair and just, taking into account the conditions of war-time production; that on December 29, 1944, the Cold Metal Process Company Joint Board, operating under the Act, entered an order which provided that the fair and just rate of royalties to be paid by the licensees should be zero and that the licensees should pay over to the Secretary of the Treasury for deposit in the treasury of the United States the balance of all royalties to which said order applied in excess of said amount; that although royalties of the character above referred to had accrued under the license agreements, the defendant licensees had not paid such royalties to the Secretary of the Treasury as directed by the order, but had withheld and retained such excess royalties; that the Cold Metal Process Company and the Trustee claimed some interest, the exact amount of which was unknown, in the monies affected by the provisions of the royalty adjustment order and were necessary and indispensable parties to the action. The complaint prayed that the licensees be required to deposit into the Registry of the Court all monies due or owing to the United States or to Cold Metal; that the Court determine the respective interest in said monies as between the United States and Cold Metal; and that the defendants be required to file at the time when said monies were being paid into court a report stating the basis of the computation of said monies as determined by each of them.

On May 16, 1947, Cold Metal filed an answer, which in addition to denials of certain allegations of the complaint, pleaded the following affirmative defenses:

By Paragraph XI it pleaded that the Royalty Adjustment Act was unconstitutional and void, and that the order issued thereunder was void and of no effect.

By Paragraph XII it pleaded that the order issued against it and its licensees was inapplicable to any of the royalty payments due and owing to Cold Metal "for the reason that no such royalties or sums were charged or were or are chargeable directly or indirectly to the United States for any supplies, equipment, or materials delivered to or for the Government."

By Paragraph XIII it pleaded that the order issued against it and its licensees was inapplicable to any of the royalties due and owing to Cold Metal "for the reasons that (a) the licensed inventions were not `manufactured, used, sold, or otherwise disposed of for the United States,' (b) no department or agency of the Government ordered `manufacture, use, sale, or other disposition' of the licensed inventions for the United States, (c) any `manufacture, use, sale, or other disposition of' the licensed inventions by said licensees was not `with the authorization or consent of the Government' or any head of any department or agency thereof, and (d) said notices and order did not otherwise comply with the provisions of said Royalty Adjustment Act as to the issuance of such notices or orders."

By Paragraph XIV it pleaded that the action was not maintainable by the United States under the Royalty Adjustment Act, since the Act was devoid of any provisions permitting such an action by the United States.

By Paragraph XV it pleaded that the order and the proceedings leading to the issuance thereof were arbitrary and in excess of any powers possessed by the agency authorized by the Act to fix the royalties to be paid.

By Paragraph XVI it pleaded that the order purportedly issued under the Act was void as being arbitrarily issued without any factual support and without any reasonable belief or knowledge that the royalties payable under the license agreements were unreasonable, or whether any of said royalties were subject to the provisions of the Act.

Cold Metal also included cross-claims (Paragraph XVII) against the licensees which alleged that the licensees owed the licensor substantial sums of money pursuant to the terms of the license agreements, the amounts of which were unknown to the licensor. It also filed a counter-claim (Paragraph XVIII) against the United States which alleged that the order purporting to fix the royalties under the license agreements at zero was void and not applicable to any of the royalties due under the license agreements; that the Royalty Adjustment Act was unconstitutional as attempting to authorize the taking of private property without just compensation; and that the royalties specified in the license agreements were reasonable and not excessive, by reason of which it was entitled to recover from the United States the entire difference between the royalties fixed in the order and the royalties specified in the respective license agreements.

On July 18, 1947, the United States moved to strike sections XI, XIII(b), XIII(d), XIV, XV, XVI and...