Memorandum by Mr. Paul H. Nitze, Deputy to the Assistant Secretary of State for Economic Affairs, to the Under Secretary of State (Lovett)
In Article IV of the Soviet Master Lend-Lease Agreement, the Soviet Government is committed to protect U.S. nationals holding patents upon lend-lease articles by taking any necessary action or making any necessary payments when requested by the President of the United States. In the Lend-Lease settlement negotiations, the Soviets chose to meet these obligations by dealing directly with U.S. patent holders and on June 25 of this year informed the U.S. that the Soviet Government Purchasing Commission had been authorized to conclude the necessary agreements. Negotiations between three U.S. patent holders and the Purchasing Commission have so far failed chiefly because the Soviets have insisted upon (1) receiving new technological developments, (2) making compensation agreements effective only upon conclusion of an overall intergovernmental lend-lease settlement, and (3) in two instances insisting upon rates of compensation less than those charged all other users on an MFN” basis. Other patent holders have expressed their opposition to initiating negotiations with the Soviets in view of their weak bargaining position. These firms [Page 1014] state that they would be willing to negotiate if the Government took a firm position, first, with respect to the necessary rates of compensation and, second, with respect to the necessity of prompt compensation regardless of the outcome of the overall lend-lease settlement negotiations. Most of the patent holders have agreed not to supply any new technological information.
In Lend-Lease Administrator Stettinius’ letter of June 8, 1943, he forwarded copies of license agreements between the U.S. Government and the patent holders and authorized the Soviet Government to use the processes during the war and for war purposes. These license agreements covered 18-month periods after initial operation of the plants, these periods representing estimates of the expected duration of the war. The Stettinius letter requested the Soviet Government, under Article IV of the Master Lend-Lease Agreement, not to use the processes after the termination of the present national emergency, as determined by the President of the United States, except upon compensation to the patent holders, and set forth a general guide as to what that compensation should be.1
The U.S. objectives with respect to oil refinery patent matters are primarily to obtain satisfactory compensation to the patent holders and, failing this, to place the Soviet Government in the position of obviously evading its obligations. The attached note2 has been drafted with these objectives in mind. It takes advantage of the recent determination of the end of the emergency by the President and will implement the U.S. position set forth in the Stettinius letter of June 1943; establishes a basis for rates of compensation to U.S. patent holders, makes clear the U.S. position that Soviet obligations to compensate the patent holders exists and will continue to exist, whether or not an over-all lend-lease settlement is reached; provides a deadline for Soviet compliance which, if not met, will permit the U.S. to demand specific payments to patent holders within the framework of Article IV of the Soviet Master Lend-Lease Agreement.
The forwarding of the note at this time appears desirable since it will provide support to U.S. patent holders, will obtain the maximum benefit from the recent determination of the end of the emergency by the President and, being sent before a Soviet reply to our note of September 3, 1948, will obviate, to the greatest degree possible, a Soviet reply evading this issue.[Page 1015]
- Signature of the accompanying note is recommended.
- Indication of your approval of the attached memorandum concerning the end of the emergency is likewise recommended.3