Column 4 of Schedule A annexed hereto and by this reference made a part hereof],1 and which said royalties are charged or chargeable directly or indirectly to the War Department for or on account of the manufacture, use or sale to or for the United States of certain alleged inventions [pertaining to

-] [specified in Columns 1, 2 and 3 of said Schedule A], were believed to be unreasonable or excesssive, and that until the making of an order herein no royalties were to be paid by Licensee to Licensor under the license (s) above referred to which are charged or chargeable directly or indirectly to the War Department, and

Whereas, Licensor and Licensee, upon their request, have presented in writing and in person such facts and circumstances as they desired having a bearing upon the rates or amounts of royalties to be determined, fixed and specified by order pursuant to said Act; Now, therefore, pursuant to the authority of and for the purposes set forth in said Act, and upon taking into account the facts and circumstances presented as aforesaid, the conditions of wartime production, and such other facts and circumstances as are proper to be considered in determining a fair and just rate or amount of royalties in the premises, it is hereby Ordered as follows, viz:

(1) that fair and just rates or amounts of royalties for the manufacture, use, sale or other disposition for the War Department of the said alleged inventions are hereby determined, fixed and specified to be |-----

--------] [the rates or amounts set forth in Column 5 of said Schedule A];

or

(2) that, until further order, Licensee is hereby authorized to pay to Licensor, on account of the manufacture, use, sale or other disposition of said alleged inventions for the War Department heretofore occurred, hereafter occurring while Sections 1 and 2 of said Act remain in force, royalties, if any, at the rates or in the amounts determined, fixed and specified in paragraph (1) hereof, and no more, under

(a) the said license(s) [dated

--] [identified in Column 4 of said Schedule A], [and]

(b) any license between them, entered into on or after the effective date of said notice and so long as Sections 1 and 2 of said Act remain in force, which in any respect continues, supplements, modifies or supersedes [the license] [any of the licenses] referred to in subparagraph (a) hereof, [and

(c) any license between them, entered into on or after the effective date of said notice and prior to the date of this Order, which grants rights to practice the said alleged inventions; ]2

1 As to use of Schedule A see paragraph (u) (1) of this section.

2 As to use of subclause (c), see paragraph (u) (5) of this section.

[Alternate AJ

(3) that Licensee is hereby directed to pay over to the Treasurer of the United States (through -‒‒‒‒‒‒‒) the balance, in excess of the payments authorized by paragraph (2) next above, of all royalties specified in the licenses referred to in said paragraph (2) which were due to Licensor and were unpaid on the effective date of said notice, and which since said date have or may hereafter become due to Licensor, for or on account of the manufacturer, use, sale or other disposition of said alleged inventions for the War Department heretofore occurred or hereafter occurring while Sections 1 and 2 of said Act remain in force, and demand is hereby made for payment forthwith of the monies so directed to be paid; and

[Alternate B]

(3) that Licensee is hereby directed

(a) to pay over to the Treasurer of the United States (through

---) the balance, in excess of the payments authorized by paragraph (2) next above, of all royalties specified in the licenses referred to in said paragraph (2) which were due to Licensor and were unpaid on the effective date of said notice, and which since said date have accrued or may hereafter accrue in respect of supplies, equipment, materials or parts thereof delivered to or for the War Department prior to the tenth (10th) day next following the receipt of this order by the Licensee, and demand is hereby made for payment forthwith of the monies so directed to be paid; and

(b) to reduce the contract price of all supplies, equipment, materials and parts thereof delivered to or for the War Department on and after the tenth (10th) day next following the receipt of this order by the Licensee, to the extent necessary to secure to the Government the full benefit of the reduction in royalties effected by this order; and

(4) that reservation is hereby expressly made of the right to amend, modify, revoke or extend this Order and of the right of the head of any department or agency of the Government, including but not limited to the War Department, to take such other, further and different action as may be authorized by any statute of the United States with respect to the subject matter.

It is recommended that the Secretary of War make the foregoing Order.

[Signature (and title) of the delegate who recommends the making of the order, if different from the delegate who signs next below]

The foregoing Order is hereby made.

[Signature (and title) of a delegate specified in paragraph 1112.9]

(u) Preparation of the order. The following instructions are prescribed for use in the preparation of suitable orders in various types of cases, based upon use of the form of order set forth in paragraph (t), without prejudice to such other deviations from that form as may be necessary and appropriate in any given case.

(1) Schedule A is to be used only when it is impracticable to include the same information in the text of the order.

(2) To the extent that the licensee is a War Department prime contractor, the order shall (unless the Director otherwise directs) be drawn in such manner as to require that the benefits of any adjustment of royalties accruing after the date of the order will inure to the War Department in the form of a corresponding price reduction. To accomplish this purpose, Alternate B of clause (3) of the form of order as given in paragraph (t) would be used. Clauses (1), (2) and (4) would be used substantially as set forth.

(3) To the extent that the licensee is a subcontractor for the War Department, or for the War Department and

other departments, the order may be drawn in such manner as either (i) to effect reduction of the price paid to the licensee for articles or services furnished by licensee to or for War Department contractors or subcontractors where by reason of contract provisions or otherwise there is assurance that the benefits of the order will be transmitted by such contractors or subcontractors to the War Department, or (ii) to effect running recapture of excess royalties from the licensee by direct payment by him to the Treasurer of the United States when and as royalty payments fall due. In either case provision will be made requiring the licensee to pay over to the Treasurer of the United States the balance, in excess of royalty payments allowed by the order, of the accumulated fund in the hands of the licensee on the date of the order.

(4) In a case of the kind mentioned in subparagraph (3) above,

(i) If it is believed preferable to effect price reductions, Alternate B of clause (3) of the form given in paragraph (t) would be used.

(ii) If it is believed preferable to make running recapture of excess royalties from the licensee when and as royalty payments fall due, without price reduction, Alternate A of clause (3) of the form given in paragraph (t) would be used.

In either of these cases clauses (1), (2) and (4) of the form would be used substantially as set forth.

(5) Normally subclause (c) of clause (2) of the form given in paragraph (i) 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 specified (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 an official report, statement or memorandum containing the following information:

(1) 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;

(iii) 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

(viii) 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, Office 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 sufficient 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.

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

The General Accounting Office.
Navy Department.
Treasury Department.

Maritime Commission.

Defense Plant Corporation.
Office of Strategic Services.

Director, Renegotiation Division, Headquarters, Army Service Forces.

Chief, Patents Division, Office of The Judge Advocate General.

Chief patent officer 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 officer.

(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. If several patents or applications are involved, which, if any, dominate the Gov

625507-45 SUPP. VII-BK. 1- -70

(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:

(i) By receiving a 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).

Page 1087

(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 subparagraphs apply 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 re. lease 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: