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(5) Normally subclause (c) of clause (2) of the form given in paragraph (1) would be omitted. Subclause (c) is intended for use solely in those cases where the identified license specified in subclause (a) is limited by its terms so as to convey rights for the performance of one or more specified War Department contracts and no others, or is for a fixed term expiring during the pendency of proceedings, and where it is deemed likely that prior to issuance of the order another license has been or will be entered into between licensor and licensee conveying rights under the same inventions for the performance of subsequent War Department contracts.

(6) Appropriate provisions may be inserted in special cases, for example, where there are a plurality of licensees and the amount of royalties found to be fair and just is a fixed maximum sum to be received by licensor within each speci. fied (e. g. annual) period, or where the War and Navy Departments make contemporaneous orders each referring to the other, etc.

(v) Submission of order for approval. In submitting an order to the Director for approval, the delegate or originating technical service shall prepare and transmit to the Director the following papers:

(1) A memorandum of transmittal showing action taken in compliance with the applicable requirements of paragraph (n);

(2) Two copies of each notice issued (additional to any copies previously transmitted);

(3) Two copies of the transcript or minutes of the hearing if any held on the request of, and two copies of any papers not incorporated in such transcript submitted by, licensor or licensee;

(4) Two copies of any additional data basically relied upon;

(5) Three copies of official report, statement or memorandum containing the following information:

(i) The date on which the notice is found to have become effective under the statute;

(ii) The manner in which and the extent to which the invention is being utilized by or for the War Department;

(111) If the invention is patented, or the subject of a patent application, the number of all patents and patent applications pertaining thereto;

(iv) The identifying number of each War Department contract, so far as known, whose price is reduced by the order;

(v) The parties, terms, date and a copy, if obtainable (unless a copy is included among the papers mentioned in subparagraph (3)

above), of each instrument of license which is affected by the order;

(vi) The facts and circumstances upon which are based the conclusion set forth in the order that the rates or amounts of royalty, if any, fixed in the order are deemed fair and just taking into account the conditions of wartime production and other pertinent facts and circumstances;

(vii) A statement of estimated savings or benefits to the War Department if the order be approved; and

(vill) A statement of reasons why it is deemed desirable under the circumstances that the future benefits of the order shall inure to the War Department in the form (as the case may be) of price reduction or running recapture of excess royalties from the licensee; and a statement of the methods proposed for supervision and control of the course adopted.

(6) The order signed by the delegate or delegates exercising authority in the matter.

(w) Copies to the Chief, Patents Division, Ofice of The Judge Advocate General. One copy of each of the documents mentioned in subparagraphs (1), (2), (3), (4), (5) and (6) of paragraph (v) shall be forwarded to the Chief, Patents Division, Office of The Judge Advocate General, concurrently with the transmittal of copies of the same documents to the Director.

(x) Procedure upon approval of an order. Upon approval and execution of an order by the Director, the following procedure will be observed subject to such deviation as may be necessary and proper:

(1) The Director will transmit to The Adjutant General the original order, and suficient copies thereof for certification, together with one copy of each of the papers mentioned in subparagraphs (2), (3), (4) and (5) of said paragraph (v).

(2) The Adjutant General will retain, as the War Department's permanent file in the matter, the original of the order (subparagraph (6) of paragraph (v)) and the copies transmitted to him of the papers mentioned in subparagraphs (2), (3), (4) and (5) of said paragraph; and he will certify the required number of copies of the order (one for each party named therein as licensor or licensee) and transmit the same to the Director, who will forward them to the originating technical service or delegate.

(3) The originating technical service or delegate will forward a certified copy of the order to each party named therein at his last known address, by registered mail, return receipt requested.

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(4) The Director will cause to be distributed a copy of the order to each of the following:

The General Accounting Onice.
Navy Department.
Treasury Department.
Maritime Commission.
Defense Plant Corporation.
Office of Strategic Services.
Director, Renegotiation Division, Head-

quarters, Army Service Forces.
Chler, Patents Division, Office of The

Judge Advocate General.
Chief patent oficer of each of the technical

services.
Air Judge Advocate.
All Royalty Adjustment Boards.

(y) Monies recovered from licensees or licensors. Monies received by any technical service of the War Department from any source, either as a result of an order or pursuant to an agreement effecting a voluntary adjustment of royalties, shall be paid to the Treasurer of the United States and deposited to the credit of Miscellaneous Receipts under Treasury Symbol No. 214238, “Refund of Royalties". Provision may be made in any order, or any contract adjusting royalties (see $ 811.1113) for transmittal of remittances through any designated oficer.

(z) Rehearing or reconsideration. Any delegate who recommended or made an order may reconsider such order, permit the licensor or licensee to present further facts or circumstances having a bearing upon the matters dealt with therein, and recommend or make an order supplemental thereto within the scope of the delegate's existing authority as set forth in paragraphs (i) or (j).

(aa) Action required upon a determination that royalties are fair and reasonable. (1) In every case which has been cleared for investigation under subparagraph (2) of paragraph (n) where the delegate having the matter in hand finds upon investigation that the royalties in question are fair and reasonable, a closing report shall be transmitted to the Director (in triplicate), including so far as practicable the following information:

a. Name(s) and address(es) of licensor(s). b. Name(s) and address(es) of licensee(s).

c. Identification of patents or applications for patent, or other rights involved.

d. Brief description of the subject matter of the invention involved.

e. U several patents or applications are involved, which, if any, dominate the Gov

ernment procurement involved and which, if any, are not involved therein.

1. Date of the license agreement, a copy thereof or a brief summary of its provisions, including the scope and limitations of grant, all royalty provisions and price fixing provisions, if any.

g. Summary of any pertinent interviews or correspondence with or statements submitted by the licensor, or a statement that the 11censor was not interrogated.

h. Statements of:

(1) Total royalties received, preferably annually from 1936 to the latest period available.

(2) Segregation of royalties between Government and non-Government, during the period when the licensed subject matter was affected by wartime production, so far as readily obtainable from the licenses concerned

i. Reasons for concluding that royalties are fair and reasonable, and a statement of any relevant facts in support thereof. (Proc. Reg. 11, C 39, Aug. 4, 1944, 9 F.R. 9587, and C 40, Aug. 31, 1944, 9 F.R. 10954]

§ 811.1113 Voluntary adjustments of royalties effected before an order is made-(a) Available procedures for voluntary adjustments. The delegate having the matter in hand may, subject to such rules and regulations governing the exercise of delegated powers under the act as have been or may from time to time be prescribed by or on behalf of the Secretary of War, negotiate a voluntary adjustment of royalties before an order is made, in any of the following manners:

(1) Before notice under the act has been given:

(1) By receiving supplemental agreement entered into between licensor and licensee (s) and executed by each of them;

(ii) By receiving a unilateral agreement executed by licensor (see paragraph (i)); or

(iii) By causing the United States to execute a contract with licensor alone, or with licensor and all licensees materially affected, in the manners provided in paragraphs (c) to (h).

(2) After notice under the act has been given (but before an order is made):

In any of the manners above set forth provided, in addition, the notice is withdrawn in the manner provided in subparagraph (3) of $ 811.1112 (i).

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(b) Delegate not to prejudice the Government's rights. Where prior to the making of an order the licensor voluntarily agrees to reduce the rates or amounts of any royalties which are charged or chargeable to the War Department, and the Government does not execute the agreement which effects such reduction, the delegate or technical service having the matter in hand shall not, in correspondence or otherwise, purport to agree that the Secretary of War or the head of any other department or agency of the Government will for any period forbear to exercise his powers under the act.

(c) Voluntary adjustments executed by the Government-(1) Contracts which effect a voluntary adjustment of royalties may, provided no order has been made under the act and under the conditions stated in the following subparagraphs, be executed on behalf of the United States. Such contracts may be prepared in substantial conformity with War Department Contract Form No. 29 (see $ 813.1329 hereof). The following

agraphs pply whether or not that form is used.

(2) If entered into before a notice under the act has been given, such contract (a) may include as parties (in addition to the United States) either the licensor alone, or the licensor and all licensees materially affected, (b) shall be executed on behalf of the United States by a delegate having authority in the matter, and (c) does not require approval of the Director except where that approval is expressly required by subparagraphs (4) or (5) below or by subparagraph (1) of paragraph (g). If the contract is with licensor alone, the provisions of paragraph (h) apply; if the contract is with licensor and licensee(s), the provisions of paragraph (g) apply.

(3) If entered into after a notice under the act has been given (but before an order is made), such contract is subject to the provisions of subparagraph (2) above, and in addition shall contain or be accompanied by a signed consent or release substantially conforming to the form thereof set forth in subparagraph (3) of $ 811.1112 (i), unless the Director has authorized a deviation from or omission of the same.

(4) No such contract shall, without the approval of the Director, contain any provision which would prejudice or impair in any way the right of the head of

any department or agency of the Government to make other or further ad.. justment of the rate or amount of royalties specified in the original license or in the contract adjusting the royalties.

(5) Any such contract containing provision whereby, in consideration of substantial reduction in royalties, the Secretary of War agrees not to make further adjustment of the rates or amounts of the royalties in question is subject to the written approval of the Director, and may be approved by him provided the total amount of royalties which will be charged to the War Department while the Secretary of War is thus bound is a fixed amount or an amount determinable at the time the contract is executed, and there is reason to believe that such amount is not and will not become unreasonable or excessive.

(d) Contract articles providing for royalty refund or price reduction (1) It is contemplated that, in the use of War Department Contract Form No. 29. the royalty adjustment would ordinarily take effect as of some convenient past date (for example, the beginning of one of the quarterly royalty periods provided in the license) and that the adjustment will apply to all government royalties accruing since that date. Provision is made in Form No. 29 for a definition of the term "subject royalties" in such manner that, when the agreed past date is inserted in one of the definitions forming a part of the contract (see especially subparagraphs (e) and (f) of $ 813.1329, Art. 1), the term “subject royalties" may then be used in other articles of the contract without repeating the definition. The contract articles appearing below are intended for use only when accompanied by the definitions set forth -in $ 813.1329, Art. 1, with an agreed date inserted.

(2) The following contract articles providing for royalty refund or price reduction, when accompanied by the definitions of terms used therein as set forth in Article 1 of $ 813.1329, are appropriate for use in the manner set forth in paragraphs (g) to (i) below:

ARTICLE Refund of royalties.

A. Licensor agrees (1) forthwith to deliver to (name and address of officer or board/ a written report signed by Licensor showing the amount and manner of computation of that part of the subject royalties which have prior to the date of this contract been received by Licensor and, (ii) to pay to the Treasurer of the United States, at the same 194-

time and place, so much of said part of the subject royalties as are in excess of the reduced royalties specified in Article 2 hereof.

B. Licensor agrees that, forthwith upon receipt by Licensor on or after the date of this contract of any of the subject royalties, Licensor shall (i) deliver to (name and address of officer or board) a written report signed by Licensor showing the amount and manner of computation of said royalties, and (11) pay to the Treasurer of the United States, at the same time and place, so much of the said subject royalties as are in excess of the reduced royalties specified in Article 2 hereof.

C. Licensor agrees to and does hereby authorize and direct Licensee (or, the licensee named in said license) (1) to deliver to (name and address of officer or board) a written report signed by Licensee showing the amount and manner of computation of that part of the subject royalties which are due for payment by Licensee to Licensor and have not been paid prior to the date of this contract and, (11) to pay to the Treasurer of the United States, at the same time and place, so much of said part of the subject royalties as are in excess of the reduced royalties specified in Article 2 hereof.

D. Licensor agrees to and does hereby authorize and direct Licensee (or, the licensee named in said license), as and when any of the subject royalties fall due for payment to Licensor on or after the date of this contract, (1) to deliver to (name and address of officer or board) a written report signed by Licensee showing the amount and manner of computation of the said subject royalties and (11) to pay to the Treasurer of the United States, at the same time and place, so much of the said subject royalties as are in excess of the reduced royalties specified in Article 2 hereof.

E. Licensee agrees (1) forthwith to deliver to [name and address of officer or board) a written report signed by Licensee showing the amount and manner of computation of that part of the subject royalties which are due for payment to Licensor and have not been paid prior to the date of this contract and (11) to pay to the Treasurer of the United States, at the same time and place, so much of sald part of the subject royalties as are in excess of the reduced royalties specified in Article 2 hereof.

F. Licensee agrees that, as and when any of the subject royalties fall due for payment to Licensor on or after the date of this contract, licensee shall (1) forthwith deliver to [name and address of officer or board] a written report signed by Licensee showing the amount and manner of computation of the said subject royalties and (11) pay to the Treasurer of the United States, at the same time and place, so much of the said subject royalties as are in excess of the reduced royalties specified in Article 2 hereof.

ARTICLE Refund of royalties and price reduction.

G. (a) Licensee agrees (1) to deliver to [name and address of officer or board) a write

ten report signed by Licensee showing the amount and manner of computation of that part of the subject royalties not heretofore paid to Licensor, which have heretofore accrued or many hereafter accrue in respect of supplies, equipment, materials or parts thereof delivered prior to.-(date when price reduction is to become effective) and (ii) to pay to the Treasurer of the United States, at the same time and place, so much of said part of the subject royalties as are in excess of the reduced royalties specified in Article 2 hereof.

(b) Licensee agrees (1) to reduce the contract price of all supplies, equipment, materials and parts thereof delivered to the Gov. ernment on and after the date set forth in clause (a) of this Article, to the extent necessary to secure to the Government the full benefit of the reduced royalties specified in Article 2 hereof, and (11) to pay or credit to the Government, as the Contracting Officer concerned may direct, the amount of such price reduction.

(e) Contract articles providing for release of infringement claims. In preparing royalty, adjustment contracts which contain a definition of the term "said inventions" (see clauses (a) and (b) of $ 813.1329, Art. 1), the following contract articles are appropriate for release of infringement claims in the cases specified below:

(1) If the license whose royalties are being adjusted is non-exclusive, the following contract article is appropriate whether or not licensee is a party to the contract:

ARTICLE Release of past infringement. Licensor hereby releases ach and every claim and demand which Licensor now has or may hereafter have against the Government, its officers, agents, servants and employees, for infringement of any patent covering the said inventions by reason of the manufacture, use or sale of any article or material or the use of any process prior to the date of this contract or the use or sale thereafter of any article or material manufactured.

(2) If the license, whose royalties are being adjusted is exclusive, the following contract article is appropriate provided both Licensor and Licensee are parties to the contract:

ARTICLE Release of past infringement. Licensor and Licensee hereby jointly and severally release each and every claim and demand which they or either of them now have or may hereafter have against the Gov. ernment, its officers, agents, servants and employees, for infringement of any patent covering the said inventions by reason of the manufacture, use or sale of any article or material or the use of any process prior to

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the date of this contract or the use or sale thereafter of any article or material so manufactured.

(f) Mandatory contract articles in royalty adjustment agreements executed by the Government. (1) The “Officials not to Benefit" article ($ 803.322) and the “Covenant against Contingent Fees" article (8 803.323) are required in every royalty adjustment contract which is executed by the Government.

(2) The “Anti-discrimination" article ($ 803.325) is required in contracts executed by the Government except where the performance of the contract does not involve the employment of persons (see subparagraph (8) of $ 809.994a (a)).

(3) The “Assignment of Rights" article ($ 803.355) is required if the contract is executed by the Government and provides for payments by the Government aggregating $1,000 or more (see 8803.

355).

(g) Contracts between the Government, the licensor and the licensee. (1) Where the licensee uses the licensed inventions solely in connection with articles which he sells directly to the Government, and the licensee is party to the contract adjusting the royalties, the contract shall (unless the Director otherwise directs) provide that the future benefits of the royalty adjustment shall inure to the Government in the form of a corresponding price reduction. In such case the appropriate contract articles are articles A and G of paragraph (d).

(2) Where the licensee uses the licensed inventions solely in connection with articles which he sells to contractors or subcontractors for the Government, the contract may provide either (a) for price reduction (using articles A and G of paragraph (d), the latter suitably modified in subclause (b) thereof to provide that the price reduction applies to deliveries "to contractors and subcontractors for the Government”), or (b) to effect running recapture from licensee of excess royalties (using articles A, E and F of paragraph (d).

(3) If licensee uses the licensed inventions in part in connection with articles which he sells directly to the Government and in part in connection with articles which he sells to contractors and subcontractors for the Government, the contract may provide either (i) for segregation by licensee of the two aspects of his business, with price reduction applied to

the first-mentioned part and running recapture from licensee of excess royalties applied to the second-mentioned part, or (ii) for running recapture from licensee of excess royalties in respect of both parts without price reduction or segregation. In such cases the appropriate contract articles are those mentioned in subparagraphs (1) and (2) above, suitably modified as circumstances require.

(4) Attention is called to the provisions of paragraphs (e) and (f) relating to release of infringement claims and mandatory articles in royalty adjustment contracts to which both the licensee and the Government are party.

(h) Contracts between the Government and the licensor which are not etecuted by the licensee. (1) Where the excessive portion of the future royalties is to be refunded by the licensor, and the licensee is not a party to the contract, the appropriate contract articles are articles A and B of paragraph (d).

(2) Where the excessive portion of future royalties is to be refunded by the licensee, and the licensee is not a party to the contract, the appropriate contract articles are articles A, C and D of paragraph (d).

(3) Contracts executed by the Govern. ment and the licensor, and not executed by the licensee, are not appropriate where the license is exclusive and a release of past infringement claims is to be obtained, since an exclusive licensee should join in giving such a release.

(4) Attention is called to the provisions of paragraph (f) relating to the use of mandatory articles in royalty adjustment contracts to which the Government is a party.

(i) Unilateral agreements executed by licensor alone. Voluntary adjustments of royalty may be informally and expeditiously accomplished by a form of unilateral agreement executed by the licensor alone and not by the licensee or the Government. Such agreements may be prepared using War Department Contract Form No. 29 as a basis, subject to the following modifications:

(1) The preamble and "Now, Therefore" clauses should be rewritten in form appropriate to a unilateral agreement.

(2) The first “Whereas" clause of $ 813.1329 should be modified to substitute the name and address of licensee in place of the word “Licensee".

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