United States v. Harvey Steel Co.
196 U.S. 310 (1905)

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U.S. Supreme Court

United States v. Harvey Steel Co., 196 U.S. 310 (1905)

United States v. Harvey Steel Company

No. 276

Argued January 3-4, 1905

Decided January 16, 1905

196 U.S. 310



The United States made a contract with the steel company for the use of a process described as patented. The contract provided that, in case it should at any time be judicially decided "that the company was not legally entitled under the patent to the process and the product, the payment of royalties should cease." In a suit by the company for royalties, the United States attempted to deny the validity of the patent while admitting there was no outstanding decision against it. Held that this defense was not open.

Held further that, under the circumstances of this case, the contract, properly construed, extended to the process actually used, even if it varied somewhat from that described in the patent.

The facts are stated in the opinion.

Page 196 U. S. 313

MR. JUSTICE HOLMES delivered the opinion of the Court.

This is a claim for royalties upon a contract made between the parties to the suit under the following circumstances. The Harvey Steel Company is the owner of a patent, numbered 460,262, for a process for hardening armor plates and for armor plates. After careful experiments, made by the Navy Department before the patent was granted, a contract was made on March 21, 1892, the material elements of which are these: it recited that the company was the owner of the patented rights to a process "known as the Harvey Process' for the treatment of armor plate for use in the construction of vessels;" an agreement that armor plate "treated under the said `Harvey process'" shall be applied to certain vessels; the previous giving of an option to the Navy Department

"of purchasing the right to use and employ the 'Harvey process' for treating armor plates, as follows:"

"We hereby agree to give to the Navy Department an option for the purchase of the application of the Harvey process for treating armor plates, which was tested at the Naval Ordnance Proving Ground, Annapolis, Maryland, February 14, 1891,"

on terms set forth, one of which

Page 196 U. S. 314

was that Harvey, the inventor, should furnish all details in his possession, or which he might develop in the perfection of his methods; the acceptance of the offer by the Navy Department, and an agreement by the United States to pay the expense of applying "the said process," etc. The contract then went on to agree that the United States, upon the terms stated, might use "the hereinbefore-mentioned process known as the Harvey process,'" gave the company a royalty of one-half of one cent a pound up to $75,000, when the royalty was to cease, and stated other terms.

This contract had conditions for further tests, etc. Numerous further experiments were made, and on October 8, 1892, the company was informed by letter that "the Harvey process for armor plate has been definitely adopted by the Navy Department." In pursuance of the offer mentioned in the contract, the Navy Department required and received from Harvey a revelation of the secret process and improvements, and thereafter, on April 12, 1893, the parties made a new contract upon which this suit is brought. This recited, as before, that the company was owner of the patented rights to a process "known as the Harvey process," and referred to the patent by number and date. It then recited the making of the agreement of March 21, 1892, "whereby the party of the first part granted to the party of the second part the right to use and employ the Harvey process aforesaid," etc. It then cancelled the old contract, and agreed that, in consideration of $96,056.46 royalty, the United States might use "the aforesaid Harvey process" for all naval vessels authorized by Congress up to and including July 19, 1892, and further, that it might use the "aforesaid Harvey process" upon vessels authorized after that date, "paying therefor" a half a cent a pound. The company covenanted to hold the United States harmless from further claims, and from demands on account of alleged infringement of "patented rights appertaining to said process;" to furnish full information regarding the composition and application of the compounds employed in the Harvey process,

Page 196 U. S. 315

and all improvements which it might make upon "said process as covered by the aforesaid letters patent," and that the United States might adopt and use such improvements. Finally, it was agreed that,

"in case it should at any time be judicially decided that the party of the first part is not legally entitled, under the letters patent aforesaid, to own and control the exclusive right to the use and employment of said process, and the decrementally hardened armor plates produced thereunder, as set forth in the letters patent aforesaid, then the payment of royalty under the terms of this agreement shall cease, and all sums of money due the party of the first part from the party of the second part, as royalty for the use and employment of said process and armor plates, as aforesaid, shall become the property of the party of the second part."

The United States has built battle ships armored by the Harvey process communicated to it, and, subject to the questions which will be mentioned, by the terms of the contract there was due a royalty of $60,806.45, to which sum the Court of Claims found the claimant entitled. 38 Ct.Cl. 662. It never has been judicially decided that the claimant has not the rights mentioned in the last-quoted clause of the contract. The United States asked additional findings which, it now contends, would establish that the patent was invalid, or, if valid, valid only if restricted to the use of a heat above 3100

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