Before laying the case before your Department, as my Government has
instructed me to do, I thought proper to request Messrs. Pollok &
Mauro, counsel at Washington for the Creusot Company, to furnish some
information on the subject. You will find inclosed a copy of the letter
which I have received from them, and which contains a full statement of
the case. It appears from this statement that evidence of the official
pressure complained of by the interested parties is furnished by a
report recently made to the United States Senate by its Committee on
Naval Affairs, in which that committee criticizes such official pressure
as improper.
The report in question bears date of February 11, 1897, and its number is
1453. On page xii are the following words:
The report adds (pp. xxxi and xxxii) that Mr. Herbert, then Secretary of
the Navy, having considered the question, decided that it would be
proper to compromise, but that no agreement as to the amount to be paid
to Messrs. Schneider & Co., as compensation for the use of their
invention, was reached during his incumbency of office.
These conclusions leave no doubt as to the official intervention placed
at the service of the Carnegie Company. My Government would be [Page 135] glad to receive the assurance
that the present Administration is actuated by the same sentiments as
the Senate committee, and that it will no longer be a party to the suit
brought by Mr. Schneider in order to assert the rights which the Federal
Government guaranteed to him in 1889 by granting him a patent.
[Inclosure.]
Messrs. Pollok &
Mauro to M.
Patenôtre.
Washington, D. G., June 4, 1897.
Sir: In reply to your communication of the
29th ultimo, requesting further particulars in the matter of the
suit brought by Messrs. Schneider & Co., of Creusot, France,
against the Carnegie Steel Company, of Pittsburg, for infringement
of patents granted by the United States to Mr. Henri Schneider for
making nickel-steel armor, we have the honor to call your attention
to a report of the Senate Committee on Naval Affairs, dated February
11, 1897 (Report No. 1453), in which the details of this affair are
fully set forth.
Inasmuch as the report is a voluminous document, containing many
matters foreign to the subject of your inquiry, we will give a brief
summary of the pertinent facts.
(1) The Government of the United States, having confidently obtained
the information that a new armor of theretofore unknown resistance
had been invented by Messrs. Schneider & Co., obtained a plate
from the inventors and had the same tested at Annapolis in
September, 1890. These tests produced a revolution in the naval
armament of the world.
(2) Mr. Schneider had in the meantime applied for letters patent of
the United States for the invention, and the Secretary of the Navy,
Mr. Tracy, deemed it of such importance to the public service that
he made official request to the Secretary of the Interior to
expedite the examination of the application and the issuance of the
patent, which was issued November 19, 1889.
(3) Mr. Carnegie, of Carnegie, Phipps & Co. (now the Carnegie
Steel Company), who had been negotiating with Mr. Tracy, then the
Secretary of the Navy, for a contract for making armor, on learning
the result of the Annapolis tests, immediately proceeded to London
and negotiated, through correspondence, a license from the owners of
the Schneider patents, and agreed to pay a royalty of 2 cents per
pound of armor for the right to use the invention. No formal
contract was made. With this preliminary arrangement Mr. Carnegie
secured a contract from the Navy Department, dated November 20,
1890, for about 6,000 tons of armor. The contract is printed in the
said report of the Senate committee, beginning at page 15.
In this contract was a clause for which we believe there is no
precedent in this or any other country, and which has had the effect
of prejudicing the interests (vested by the grant of letters patent
of the United States) of citizens of France. In this clause it is
provided that the Government may require the armor to be made of
nickel-steel in accordance with the invention patented to Messrs.
Schneider & Co., and in order to relieve the Carnegie Company,
who had obligated them [Page 136]
selves to pay 2 cents per pound royalty to the patentees, the
Secretary of the Navy, to the injury of the patentees (who were not
parties to the contract and knew nothing of these matters),
expressed a doubt as to the validity of the patents, and set aside a
large sum of money—about $270,000—to be expended by the Carnegie
Company, aided by the power and influence of the Government, to
contest the patents in the courts. (See page xiii of report.)
We do not refer to other particulars, as they do not affect the
present situation.
(4) The Carnegie Company proceeded to execute this contract, and in
so doing violated the rights which the Government of the United
States had granted to Messrs. Schneider & Co.
Subsequently the Government made other contracts with the Carnegie
Company for many thousand tons of armor, but in these new contracts
the clause above referred to, and which guaranteed the contractors
against the claim for royalties under the Schneider patents, was not
included. For the royalties for armor made under these latter
contracts the manufacturers were themselves responsible to the
patentees, the Government having no liability therefor.
In due course a suit was brought by Schneider & Co. for recovery
of the royalties due to the former for the use of their patented
invention. It will be understood that the Government, by its
contract of November 20, 1890, with the Carnegie Company, rendered
itself liable for the royalties upon the armor made under the later
contracts.
Notwithstanding that this suit embraces royalties for the greater
part of which the Government has no liability, the Navy Department
undertook the defense of the suit, and to pay all the expenses
thereof out of the funds set aside as above stated. In this
proceeding the public funds are used to contest the validity of the
grant of the Government, and to destroy, if possible, the rights
which it has vested and pledged itself to secure. If it were
possible understand the attitude of the Government with respect to
the claim of the patentees, upon armor made under the first
contract, it would not be possible to understand its attitude with
respect to royalties for armor made under later contracts, for which
the Government is not liable.
(5) The Carnegie Company, aware of the danger to which they were
exposed, notwithstanding the Government guaranty, in accumulating a
large indebtedness to the patentees, were negotiating with Messrs.
Schneider & Co. for a settlement, but were constrained by the
position taken by the Government averse to the patents, as above
stated, and by reason thereof the negotiations have been fruitless.
(See testimony of Secretary Herbert, p. 10 of report, first
paragraph.) It thus results that up to the present time the
patentees have received no compensation whatever for the extensive
use of their invention by the Carnegie Company.
(6) On May 12, 1896, we addressed to the Navy Department a
communication pointing out the injustice of the attitude toward
Messrs. Schneider & Co., as patentees of the United States
Government, and the impropriety of the interference of the
Government in a civil suit brought under the grant of the Government
and to enforce the rights guaranteed by it. We requested that the
Government withdraw from said suit and either adjust the matter (so
far as it was concerned) amicably with Messrs. Schneider & Co.,
or refer it to the Court of Claims. For a fuller statement of this
matter we refer your excellency to that letter, which is printed in
the committee report beginning at page xxix.
[Page 137]
The Senate committee, commenting on this subject in their report (p.
xii), say:
Messrs. Schneider & Co. earnestly complain, not merely
because the Navy Department does not pay them a royalty on
their patents, but because it virtually makes the Government
a party to a suit to destroy their patent for all purposes
whatever.
The then Secretary of the Navy (Mr. Herbert), on consideration of the
matter thus brought to his notice, decided that it would be proper
to compromise (see pp. xxxi and xxxii), but no agreement as to the
amount to be paid to Messrs. Schneider & Co. as compensation for
the use of their invention was reached during his incumbency of
office.
(7) After full inquiry into these matters the Senate committee, in
its report with reference to the “Schneider patent processes for
compounding nickel-steel,” say (p. xiii):
These were deemed indispensable by Secretary Tracy, and
continue to be so considered by Secretary Herbert, but the
plan adopted by Secretary Whitney of paying for their use
was abandoned. A fund of $270,000 was provided, by order of
Secretary Tracy, for contesting the validity of the patents,
and the litigation is still pending.
The committee believe that Government officials ought not to
promote a monopoly of the business of making armor through
patents issued to the use of the combined manufacturers
while using the power of the Government to destroy the
patents held by the foreigners.
The United States Government has never in its history interfered in a
civil suit to defend against a patentee suing under his grant from
the Government. The good faith of the Government is pledged to
protect its patentees in the enjoyment of the exclusive rights
granted by the act of the Government, and under the laws of the land
the Federal courts are required to exercise the power of the
Government to protect and enforce the rights of its patentees
against infringers, and this has uniformly been done throughout the
history of the Government until the present case arose. This
departure from the uniform and just treatment which the United
States Government has accorded to its patentees is made in the case
of French citizens who, confiding in the laws of the United States,
brought forward their invention and communicated it in confidence to
the authorities of the United States at such time as to render this
Government a signal service by preventing the adoption of an
inferior type of armor which has since been everywhere
discarded.
In conclusion, we would say that it would be gratifying to our
clients and to ourselves if, through the intervention of your
excellency, the Government of the United States should be induced to
pay due regard to the rights of Messrs. Schneider & Co. under
their patent, and to preserve neutrality in the suit between them
and the Carnegie Company.
With the assurances of our highest regard, etc.,
