Mr. Adee to M. Patenôtre.
Washington , July 23, 1897 .
Excellency: Referring again to your note of the 9th ultimo, I have the honor to inform you that, as appears from the letter of the Secretary of the Navy, bearing date the 8th instant, his attention had already been called by the counsel of Messrs. Schneider & Co. to the legal proceedings [Page 138] brought to test the validity of letters patent granted to that firm for the manufacture of nickel-steel armor plate.
Your excellency will be gratified to know that proceeding is an ordinary suit pending in a court of the United States in which the rights of all parties are thoroughly guarded, and in which the interests of the plaintiffs, Messrs. Schneider & Co., who are citizens of the French Republic, will be as fully and impartially protected as would be the case if they were citizens of the United States.
The action of this Government in intervening in order to protect its own interests in the suit of Messrs. Schneider & Co. is precisely what it would be were the plaintiffs citizens of this country.
In November, 1890, a contract was entered into between the Carnegie Company and the United States, represented by Mr. Benjamin F. Tracy, then Secretary, of the Navy, for the manufacture of armor plate. This contract provided for the incorporation of nickel in the armor. Messrs. Schneider & Co. had been granted letters patent by the United States for making steel armor, but Mr. Tracy had doubts as to the validity of those letters.
It were needless to say that the grant of letters patent by Government is never a guaranty of their validity, were it not that the attorneys of Messrs. Schneider & Co., in their letter to your excellency of the 14th ultimo, in speaking of the Schneider patent as “a grant of the Government,” conveying “the rights which it (the Government) has vested and pledged itself to secure,” and also your excellency in speaking at the close of your note of “the rights which the Federal Government guaranteed to him (Schneider) in 1889 by granting to him a patent,” seem to imply that the grant of letters patent is a guaranty of their absolute validity. It is, on the contrary, well settled that a patent is not an absolute grant which a Government is bound to warrant and defend, but only a conditional grant, a prima facie title, sometimes called a mere right, to sue for alleged infringement, the condition being that it is invalid and nugatory if it shall appear that the patentee is not the original inventor, etc. The United States having granted a patent is, therefore, not only at liberty, but is bound to refuse to pay royalties under the same if it prove invalid. So, for instance, the late Secretary of the Navy, representing this Government, contracted to pay a large sum of money to an American patentee for a projectile, but made the contract conditional upon the validity of the patent, which the United States itself had already granted.
It was, therefore, plainly the duty of Mr. Tracy, in the case in question, to protect the United States from the payment of a royalty in the event that the Schneider patents should prove to be invalid. Any other action on his part would have been a neglect of duty. The royalty claimed by the patentee was 2 cents per pound of armor, and it was therefore provided in the contract between him and the Carnegie Company that 2 cents per pound of armor manufactured according to his process should be deposited to await the test of the validity of the patent. If invalid, or in the case of an amicable settlement, the balance of said amount remaining after such settlement and payment of legal expenses, as provided in the contract, was to be returned to the Government; if valid, said amount was to be used to pay the judgment, costs, and expenses, and if all was required to pay the judgment, then the United States was to pay certain expenses of the Carnegie Company, including reasonable attorney’s fees.
It is difficult to see the slightest ground for criticism of the action of Mr. Secretary Tracy. On the contrary, it appears to have been the [Page 139] ordinary precaution of a prudent man and faithful official, who honestly believed that his Government was liable to be subjected to a large, invalid claim. The Carnegie Company, in making their contract at a fixed price for nickel-steel plate, insisted on being protected against a claim for the above-stated royalty by reimbursement of all damages thereby accruing. Mr. Secretary Tracy very properly agreed that they should be so reimbursed, but he further provided, with equal propriety, that if the claim for the royalty should, upon being tested, turn out to be an invalid one, the United States should be relieved from making any such reimbursement, except to the extent of the cost of making the test.
The case stands exactly as it would if at the time there had been a half dozen patentees claiming various rights in respect to such manufacture, and a general clause had been embodied in the contract between the United States and the Carnegie Company that, in addition to the price for the armor, there should be compensation for whatever sum should be judicially determined to be due from Carnegie & Co. to any of said patentees, and that there should also be added the fees and expenses which that company might be obliged to pay in testing the validity of such patents.
An omission of a provision of this kind would have been an inducement to the Carnegie Company to pay all such claims, without testing their validity, and then look to the United States for reimbursement. It is not easy to see how the case is made any stronger for Messrs. Schneider & Co. by reason of the fact that in this instance the amount reserved was a definite sum, amounting to $270,000, instead of an indefinite, unlimited sum.
As to the employment of counsel by this Government, what other course could it appropriately take in justice to itself It bound itself to reimburse the Carnegie Company in case the patents should be declared valid, and as some $200,000 are involved, this Government would be derelict in its duty if it did not take care of its rights. It is the courts alone that can decide whether the Schneider patents have been infringed. If they are valid, they certainly will be sustained; if not, the United States should not pay for them. This Government stands exactly as any individual would under the same circumstances. It exercises no influences and takes no action that would not be permitted to any individual under similar condition. Consequently it is difficult to understand the infelicitous suggestion contained in the letter of Messrs. Pollok & Mauro to your excellency, that the “power and influence of the Government are to be used in the pending suit of Messrs. Schneider & Co. v. The Carnegie Company.” This Government does not wish to believe that it was intended to say that any Government, that of the United States or that of France, because powerful or influential, should not defend itself against an invalid claim, or that either of them would make improper use of its power or influence in the conduct of judicial proceedings in its own courts.
Messrs. Pollok & Mauro say that “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.” I have the honor to suggest in reply that in the case of The United States v. The American Bell Telephone Company, this Government filed a bill in equity to repeal and declare void letters patent which it had granted. A little further inquiry on the part of the attorneys of Messrs. Schneider [Page 140] & Co. would have informed them that in a suit brought by Grosvernor et al. (American citizens) v. Dashiell, in the United States circuit court for the district of Maryland (62 Federal Reporter, 584), the Government took an active part, as appears from the reports of this case, when tried before the circuit court and when heard on appeal before the Supreme Court of the United States (162 U. S. Reports, 425), and that the interests of this Government were represented by Mr. Samuel F. Phillips, ex-Solicitor-General of the United States. The foregoing case is especially in point, as the defendant, who was charged with infringement of a patent upon improvements in breech-loading cannon, had (as had the Carnegie Company) made a contract with the United States to be paid a stipulated sum for the guns manufactured embodying the infringing device.
The Secretary of the Navy has further been informed by the law officer of his Department that research by the attorneys of Messrs. Schneider & Co. would have revealed that the reports of cases decided by the United States Court of Claims contain numerous instances in which the Government has defended itself against suits for alleged infringement by itself of patent rights. In this connection, I have the honor to call the attention of your excellency to the suit now pending before that court, brought by Messrs. Pollok & Mauro for the Société Anonyme des Anciens Etablissements Cail, a French company claiming reimbursement for the use, by the Government, of the De Bange gas check for ordnance. It is difficult to see any distinction between a case in which the Government directly defends itself against such a suit and one where it defends a suit in which its interests are involved, although it be not a nominal party thereto.
Reference to the Senate report of February 11, 1897, No. 1452, which is voluminous, containing some 25 printed pages of matter for the most part alien to the present inquiry, and upon which your excellency’s note is in part based, will show that the facts therein stated are in accord with those herein set forth. It is true that the report contains one expression of opinion which may be regarded, to some extent, as a criticism of the action of the officials of this Government. It is, however, general rather than specific, and is as follows:
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 patents held by foreigners.
Whether this opinion has any bearing at all on the matter in question, or is warranted by the facts, can best be determined by a consideration of them and of the whole report. Even as a matter of abstract opinion, that committee would probably agree to the propriety of nullifying any patent, whether held by a citizen of this country or by a foreigner, if it were not a valid one.
It is not the opinion of this Government that the contract and the suit in question differ in any essential particular from an ordinary contract or an ordinary suit. Nor can this Government agree with the suggestion that it has acted in the premises otherwise than with entire propriety and due regard to the protection of its interests and those of its citizens, and without unfair treatment of the rights of any foreign citizens. It fails to see any reason why the matter should be made the subject of diplomatic correspondence, but feels assured that, after the foregoing presentation of facts, your excellency will readily agree that this suit, like any other, should be left to the courts. Instead of [Page 141] appealing to diplomatic intervention for an adjustment of the rights of their clients, a much more direct course for Messrs, Pollok & Mauro to pursue would be to go on with the prosecution of the claim in the courts, where it will not fail to receive the justice and to secure the success which it may merit.
From the foregoing recital, your excellency will, I feel assured, clearly understand that this Government has not intervened in this instance, in a cause pending in the courts solely between American and foreign citizens, but the case being one in which its own interests are at stake, has simply taken the necessary and proper steps to care for those interests in compliance with the contract which was solemnly entered into for that purpose. Your excellency will therefore, I am sure, not press the request that the United States “will no longer be a party to the suit brought by Mr. Schneider.” While this Government is not a party upon the record of the court, it is the real party in interest, and to ask it to cease to be such, would be asking it to submit to a claim which it has reason to believe is not a valid one. Such a request, if made by one of its own citizens, would be extraordinary, and citizens of a foreign country can hardly expect privileges in such a matter that are not granted to citizens of the United States.
Accept, etc.,
Acting Secretary.