And this portion of it is in addition to the act of October 1940–

or any patents, plans, designs, or rights controlling the production of such materials or supplies and (b) to use on such terms as he shall deem satisfactory, or to sell or otherwise dispose of any materials so requisitioned or taken over, or any right or interest therein, pursuant to the provisions of this Act.

Now, section 2 of the proposed substitute bill excluded anything about patents, which subject is not carried in the bill of October 1940. But in reference to patents, we have before us now an amendment that has been suggested by the gentleman who represents the New York Association, which, I understand, was acceptable to the War Department, therefore eliminating section 2 insofar as a comparison of the substitute bill pertains to the bill of October 1940, Seventysixth Congress. I will read the bill that we passed:

[PUBLIC-NO. 829-76TH CONGRESS]

[CHAPTER 836-3D SESSION]
[H. R. 10339]

AN ACT To authorize the President to requisition certain articles and materials for the use of the United States, and for other purposes

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That whenever the President determines that it is necessary in the interest of national defense to requisition and take over for the use or operation by the United States or in its interest any military or naval equipment or munitions, or component parts thereof, or machinery, tools, or materials, or supplies necessary for the manufacture, servicing, or operation thereof, ordered, manufactured, procured, or possessed for export purposes, the exportation of which has been denied in accordance with the provisions of section 6 of the Act approved July 2, 1940 (Public, Numbered 703, Seventy-sixth Congress), he is hereby authorized and empowered to requisition and take over for the said use or operation by the United States, or in its interest, any of the foregoing articles or materials, and to sell or otherwise dispose of any such articles or materials, or any portion thereof, to a person or a corporation of the United States whenever he shall determine such action to be in the public interest. Any moneys received by the United States as the proceeds of any such sale or other disposition of any such articles or materials or any portion thereof shall be deposited to the credit of that appropriation out of which was paid the cost to the Government of the property thus sold or disposed of, and the same shall immediately become available for the purposes named in the original appropriation: Provided, however, That nothing in this section shall modify or repeal section 14 of Public Law Numbered 671, Seventy-sixth Congress, approved June 28, 1940. SEC. 2. Whenever the President shall requisition and take over any article or material pursuant to the provisions of this Act, the owner thereof shall be paid as compensation therefor such sum as the President shall determine to be fair and just. If any such owner is unwilling to accept, as full and complete compensation for such article or material, the sum so determined by the President, such owner shall be paid 50 per centum of the sum so determined by the President and shall be entitled to sue the United States for such additional sum as, when added to the sum already received by such owner, such owner may consider fair and just compensation for such article or material, in the manner provided by sections 41 (20) and 250, title 28, of the Code of Laws of the United States of America: Provided, That recovery shall be confined to the fair market value of such article or material, without any allowance for prospective profits, punitive or other damages.

SEC. 3. The authority granted in this Act shall terminate June 30, 1942, unless the Congress shall otherwise provide.

Approved, October 10, 1940.

In the bill of October 1940 it only permits the delivery of 50 percent of the estimated value, whereas this bill before us appears to be more liberal, in view of the fact that the amount so delivered is 75 percent. That is the act to which the Secretary of War referred a moment ago, is it?

Secretary PATTERSON. Yes, indeed.

The CHAIRMAN. Now, in reference to paragraph 2 of the substitute bill, at this juncture I would like to call the attention of the Secretary of War to a matter that arose here the other day. I don't know whether the Secretary was present at the time that the gentleman from New York representing the New York Lawyers Patent Association appeared before this committee.

Secretary PATTERSON. That was Mr. Byerly?

The CHAIRMAN. Yes.

Secretary PATTERSON. I was not present.

The CHAIRMAN. Mr. Byerly suggested an amendment.

The CHAIRMAN. Do you have your suggested amendment there?
Mr. BYERLY. Yes, sir.

Then I asked him to read for the benefit of the record his suggested amendment relating to patents, and he read it as follows:

Add at the end of the first section the following paragraph:

"Provided, however, That if, within ten days after the requisitioning under this Act of any property other than tangible personal property, the owner of the property shall file with the President a written declaration and consent that the property may be used by or for the Government for national defense or other governmental purposes on the basis of compensation to be determined in accordance with section 2 of this Act, the title to the property shall not be taken over or disposed of under the provisions of this Act unless the owner refuses to execute such leases, licenses, or other grants to the United States as may be necessary to give effect to the declaration and consent which he has filed."

That is the amendment that I spoke personally to you about at the War Department on Saturday, I believe, Mr. Secretary.

Secretary PATTERSON. I have not made any study of the phraseology of that. It sounds reasonable enough.

The CHAIRMAN. I assumed that it was from what you said.

Secretary PATTERSON. It does, as I understand, make available to the Government or in its interest any patented process or patented invention without disturbing the title, but giving the Government a license.

The CHAIRMAN. You see, what Mr. Byerly has in mind is the interest of the owners of American patents. Perhaps it would not be applicable to the owners of foreign patents.

Secretary PATTERSON. No. What we have in mind particularly here are United States patents owned abroad. They are United States patents controlling production and manufacture here in this country, but held, controlled, or owned by foreigners.

We do not plan, of course, any confiscation of those rights. That would be intolerable. They would have to be paid a value just the same as if they were Americans.

Everything that we propose here is, of course, to be taken with fair compensation. I have heard the bill described as a confiscation bill. It is not that. Confiscation implies forfeiture. You confiscate illicit liquor or something like that. There is no confiscation feature in this bill whatsoever. It is properly called a requisitioning bill.

The CHAIRMAN. Insofar as compensation is concerned the present substitute as suggested by the Secretary appears to be more liberal in its terms.

Secretary PATTERSON. It permits a drawing down of 75 percent. The CHAIRMAN. And the bill of October permits 50 percent.

Secretary PATTERSON. It gives recourse to the owner to establish the true value and get back any remaining excess. It follows in that way, of course, very closely the regular statutes regarding eminent domain, where the Government takes land for a post-office site, deposits the value that the Government fixes, in court, and the judge commonly allows the owner to draw down a substantial part of that value and then establish a higher value if he is able to. There is nothing novel about that, nothing unique. There is no desire or intent to depart, nor is there any departure in any fashion,. from the established procedure.

Senator HILL. Mr. Secretary, as I read the patent laws, so far as a patent granted by the Government of the United States is concerned, the law provides now that irrespective of any emergency, the Government has a right to take over that patent. Of course, that is with payment of due compensation to the owner. That is so far as patents granted by our own Government are concerned. think that if you will look at the patent law, you will find that the Government has the right to take over this patent and pay the owner due compensation irrespective of any emergency.

I

As I say, what you are seeking to do now is to reach these patents. that are granted by other governments, owned or controlled by some other interest perhaps than those right here in our country.

Senator DOWNEY. Mr. Chairman, I would like to interpose a ques-tion.

The CHAIRMAN. All right.

Senator DOWNEY. Judge Patterson, do you not think that this law would be more equitable if provision were made that any citizen or corporation who had equipment, material, or machinery commandeered by the Government that it was actually using legitimately in production, should not only be entitled to the value of the articleseized, but likewise where consequential damages arise from the injury to his business?

Secretary PATTERSON. You suggested that last week, Senator Downey; and I was puzzled. I mean by that, it raised a question that I had not considered before, and that I have tried to give thought to.

I am not sure what the consequences of that would be. You mean. damage to the goodwill and going-concern value?

Senator DOWNEY. More than that, Judge Patterson. You may easily conceive cases which have occurred and probably will occur under this bill under which there may be a going business of a substantial character. The commandeering or seizing of certain machinery of that business might entirely prevent the further operation of that business.

Now, merely allowing the owner of that business the bare market value or reproduction cost of that machinery would be grossly unfair, because the taking of the article could destroy the entire business.

Secretary PATTERSON. There is certainly merit in that. I think that is a departure from what has been the rule in eminent domain proceedings.

Senator DOWNEY. No; I don't think so, Judge Patterson. I know that in California we allow consequential damages when a business is taken over for something of that kind, or for a breach of a contract

and the man is damaged as a going business. He is not restricted to merely the actual value of the property.

Secretary PATTERSON. I suppose that in California, just as in all the other States, you take private property for public highways. They all do that. They have to.

I am not sufficiently familiar with what is the standard out there. I had supposed that it was similar to a case in which a site or a tract of land is taken over for a public building or something like that, where the award is restricted pretty well to the market value of the particular property.

But I am not prepared to dissent from what you say. It just raises a problem to which we are giving very careful consideration.

Senator DOWNEY. Judge Patterson, to take a case that you individually discussed with me: Assume that an automobile manufacturer had 10 particular tools that the Government needed for defense purposes, and maybe the Government required only 2, and that the manufacturer could speed up the other 8 and do the full work. Then there has not been any consequential or substantial damage.

But if the Government would go in and take those entire 10 tools and damage the manufacturer so that his business was entirely disrupted and he could no longer carry on, I certainly think that there ought to be an additional allowance; and I think that the citizens of the United States would be much happier to know that the Government was dealing with them on that basis.

If, as General Rutherford suggests, and as you evidently believe, there will not be very many occasions for the exercise of this summary power, that is all the more reason why the Government could fairly reimburse these citizens.

Mr. Chairman, I do think that there ought to be such a provision in this bill before it is passed.

Secretary PATTERSON. Of course, there could be, if thought wise, a definition of what should constitute, I think the expression is, just compensation-such compensation as the President shall determine to be fair and just. There could be a definition of what that expression specifically means.

Senator DOWNEY. I am only referring to the case of a going business. Secretary PATTERSON. Of course, if the tools or materials were held in storage for specific purposes

Senator DOWNEY. That would be entirely different.

Secretary PATTERSON. Yes.

Senator KILGORE. They would not have any consequential damages then.

Secretary PATTERSON. No. Not in such cases.

I think that whatever the administrative agency would be, it could be counted on to exercise what power it had in the fairest way. They surely would go to idle tools before they would go to tools already busy. They surely would go, if there were no idle ones, to tools that could be spared without damage to someone's going business before they would go to tools that were indispensable to the entire operation of the business, which would be a highly arbitary thing for them to do.

The CHAIRMAN. Suppose that in southern California there was an independent contract to be given out as a subcontract originally to one of the prime contractors, and you found that that independent

company, who is not engaged in the manufacture of goods for national defense, had, say, for example, six tools, and some prime contractor needed, say, two of those tools. Would you not look into the question as to whether or not that independent contractor could speed up his independently produced goods by increasing his shifts?

Secretary PATTERSON. I would assume so.

The CHAIRMAN. And by more man-hours in operation of those tools, so that consequently it would not interfere with his independent orders?

Secretary PATTERSON. I would assume so.

And yet I can show you gentlemen that the operation of the Priority Act right now involves far heavier responsibilities than the operation of an act like this. It is capable of doing infinitely more damage than an act like this. It will be exerted day in and day out. There is no question about that in my opinion.

Senator HILL. The fact is that as a practical proposition we know that the operation of that Priority Act is inevitably going to do a very considerable amount of damage.

Secretary PATTERSON. It will render tools now busy idle tools, if I am not mistaken.

Senator HILL. Yes. There is no question about that.

Senator DOWNEY. You might say that not only it could do that, but is doing it right now. I know that there are thousands of businessmen right now in my own State who are already now beginning to suffer very great agony because of the priority.

Secretary PATTERSON. My information on that is that most of it is still threatened and not actual. As you get in and analyze the complaints, the grievances that come in, most of them are still in the future. But I am not trying to diminish their importance.

Senator DowNEY. They cannot make contracts for sales ahead. They cannot make leases. We are already seeing the beginning of a tremendous dislocation through the exercise of the priority rights. And I am not criticizing them. I am not saying, Judge Patterson, that these things are wrong. I am merely asking you to realize that they are in a pretty serious situation.

Secretary PATTERSON. Of course, they are serious. There is no question about that. They are serious. But I think that the situation is serious.

The CHAIRMAN. Senator, have you any questions of the witness? Senator HILL. Not except along the lines that the Secretary suggested. My thought is that any damages from this act would very likely be very limited and would be very inconsequential compared to what they are suffering from the act which we have already put on the statute books, to wit, the Priority Act.

Secretary PATTERSON. That is one of the most potent acts that was ever passed in this country.

Senator HILL. I think this act will be more used as a shotgun in the long run usually, although we may anticipate exceptional cases, sueh as those cited to us here this morning, exceptional cases just like we had to pass this act of October 10 to meet. That was an exceptional situation.

So I cannot see how really and truly, having swallowed the Priority Act, we should now scream so much about this act. I may be wrong, but that is my opinion about it.