754 Findings of Fact referred to as "Philips Eindhoven" or as the "Philips Company." During the German occupation in World War II, the Eindhoven Laboratories of the Philips Company in Holland secretly carried on development work on an external combustion engine, sometimes referred to hereafter as a "heat engine" or as a "hot gas engine." 2. In September 1944 after the Germans had been driven out of Holland, an Allied mission headed by Sir Robert Watson-Watt and including a representative of the United States Navy, referred to hereafter as the "Navy," went to Holland for the purpose of obtaining technical intelligence. Reports of the development work being done at Eindhoven were sent to Washington where they reached the Research Section in the Navy's Bureau of Ships. 3. Due to the Navy's interest in the Philips Company's experimental work on external combustion engines, demonstrations were arranged at Eindhoven in February and April 1945 for Navy representatives. At that time drawings, preliminary specifications, and other information concerning the engines under development at Eindhoven were supplied to the Navy representatives by the Eindhoven Laboratories. Subsequently, this information also was sent to the Navy in Washington. 4. The Navy recognized that the external combustion engine was in the development stage and that there was no assurance that it would ultimately achieve practical application. Nevertheless, with the objective of meeting a then current Navy requirement for small reliable engines, the Navy promptly took steps to arrange for its further development in the United States. Philips Eindhoven cooperated with the Navy's efforts to arrange for continuance of the development of the engine in the United States where more readily obtainable materials, machines, and labor could make possible more rapid advances in the work and where it would be easier to coordinate the development with the Navy's needs. Philips Eindhoven recognized that such action endangered its patent and commercial rights and throughout the negotiations took various steps designed to protect and preserve such rights but, in going along with the arrangements for carrying on develop Findings of Fact 154 Ct. Cl. ment of the engines in the United States, accepted certain risks concerning them. Among the factors motivating Philips' cooperation were: (a) at the outset, a desire to further Dutch contribution to the war effort; (b) threats emanating from the U.S. military establishment that development of the engines in the United States might be taken over by someone else if it did not progress satisfactorily; (c) the more ready availability in the United States of materials, tools, labor and other facilities for rapid development of the engine; and (d) commercial market possibilities believed to exist in the United States which Philips' representatives thought could best be exploited by American methods and with a well-founded American organization. 5. Early in May 1945 the Navy in Washington sent an urgent message to the Navy Technical Mission in Paris, requesting shipment from Eindhoven to the United States of any available model of the new engine, together with any technical data available and the necessary technical people to carry out development work with a view to manufacture of the engines in the United States. 6. Representatives of Philips, in company with representatives of the Navy, made contacts late in May 1945 with several established manufacturing companies in the United States to try to arrange for their participation in the development and manufacture of the new type external combustion engine. No such arrangements were ever perfected. 7. Later in May 1945 the Navy advised Philips' representatives that arrangements for the development and manufacture in the United States of the engine must be made within a reasonable time after the arrival of the existing models and technical information from Holland, or the Navy would step in and take over the development and designate a manufacturer to proceed with the development work. 8. On May 30, 1945, representatives of the Navy and of Philips met in Washington. It was agreed at that meeting that the Philips interests in the United States would perform the development and preliminary manufacturing work on the engine. It was suggested that either North American Philips Co. or a new corporation then being 754 Findings of Fact formed, to be known as Philips Laboratories, Inc., should be the contracting party, preferably the latter. The Navy advised Philips' representatives that the lack of any performance specifications on the new engines precluded use of a procurement contract and that a development contract would have to be used. Two types of development contracts, cost-plus-a-fixed-fee and fixed-price, were discussed; and sample copies of such contracts were furnished to Philips' representatives. Philips' representatives informed the Navy that Philips intended to give the United States Government a nonexclusive, nontransferable, royalty-free license on the heat engine for the duration of the war and six months, or termination of the last Government contract, provided Philips succeeded in establishing 50 percent ownership of the company that would do the development and manufacturing. 9. On June 14, 1945, Philips' representatives in the United States again communicated with Philips Eindhoven through Navy channels and obtained clearance to cooperate fully with the Navy in the development of the new engine in the United States. Thereafter, Mr. Donovan, Philips' designated project manager, went to Eindhoven to expedite the arrangements. At the Navy's insistence it was arranged that Professor Gilles Holst, Director of Philips' laboratories in Eindhoven, and Mr. Herre Rinia, one of the inventors of the new engine, should come to the United States from Holland as soon as possible to assist in making preliminary arrangements for its development in the United States. 10. In July 1945 the Navy Technical Mission in Europe advised the Bureau of Ships in Washington that it had not acted promptly in the matter of the external combustion engine, because, in its opinion, technical development of the engine would take too long to be of use in the war effort. The Commander of Naval Forces in Europe agreed with the opinion of the Navy Technical Mission. The Bureau of Ships in Washington did not concur, however, and continued to exert pressure on Philips' interests in this country to begin development of the engine in the United States promptly. Findings of Fact 154 Ct. Cl. 11. During the first week of August 1945, a representative of the United States Army Ordnance Laboratory at Detroit expressed to Philips' representatives the intention of that organization to develop the Philips external combustion engine through the General Motors Corporation on the basis of data previously supplied by Philips Eindhoven to the Watson-Watt Mission. Philips' representatives pointed out to both the Army Ordnance Laboratory and the Navy Bureau of Ships that such activity would not help the war effort and would greatly damage Philips and that there had been no delays whatever on its part in meeting the requests of the Government. They also pointed out that Philips would proceed quite differently if the development of the engine were a purely commercial matter, but that Philips had agreed to develop the engine in the United States even though its patent and commercial rights were thereby jeopardized because of Philips' desire to help in the war effort and because of pressure exerted by agencies of the United States Government. 12. Despite some delay on the Navy's part in perfecting the necessary clearance for Holst's and Rinia's travel to the United States, they finally arrived late in August 1945. 13. After several conferences between Philips' representatives, including Holst and Rinia, and the Navy in late August and early September 1945, it was finally settled that the Philips organization itself would handle the development of the engine in the United States and that the most expeditious way to do so would be bring from Holland to the United States the entire technical staff that had worked on the engine in Eindhoven, together with their families. 14. World War II hostilities ended in August 1945. The Navy's interest in immediate development of the engine was not thereby diminished. Other branches of the United States military establishment also continued to show great interest in its development. 15. On September 14, 1945, after further discussions and negotiations with the Navy in regard to the arrangements for commencing development work on the new engine, Mr. Donovan, who acted as Philips' principal spokesman 754 Findings of Fact throughout the negotiations, wrote to the Bureau of Ships as follows: Re: Importation of Working Group for Development of Philips Hot Gas Engine in the United States * * 1. Pursuant to our discussion in Washington on 12th September, we wish to record here the next steps necessary for the development of the Philips hot gas engine in the United States. 2. Conditions have changed of course with the cessation of hostilities and we wish to emphasize the fact that this does not alter our objective of obtaining the most rapid completion and development of the engine in the United States as instigated and originally requested by you. 3. As you know, while hostilities were still going on both N. V. Philips' Gloeilampenfabrieken and this Trustee pushed this matter diligently in line with your wishes and both organizations will continue to do so under the present conditions. 4. May we also point out in this connection, that without the interest of the United States Government we would handle this matter in quite a different manner, pursuant to our own policies. Because of your interest and desire for quick action we have willingly assumed some risks on our future commercial position (without prejudice to future action either on the part of N. V. Philips' Gloeilampenfabrieken or ourselves). 5. As a further evidence of our good faith, this Trustee is willing to consider any proposal you may wish to make for one or more development contracts, and it is our understanding that such a proposal is forthcoming. 6. As noted in the above reference, the critical point up to now has been the arrival of Professor Holst and Mr. Rinia in this country, and this was finally accomplished through the Navy with the arrival of these gentlemen in the United States on August 22nd. 7. Our ensuing discussions with Professor Holst and Mr. Rinia have now developed the following salient points: (a) There are now in the process of completion in Eindhoven, Holland, three engine models, namely, 2 hp., 12 hp., and 40 hp., and it is hoped that these models will be completed shortly so that they may be shipped into the United States. Professor Holst and Mr. Rinia did not bring a model with them because the existing model was worn out and rather critical to operate. |