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of the bill is, we assume, primarily to permit the Government freely to use patented inventions. There might be less objection to a bill such as this one if the Government were merely to condemn to itself the right to use inventionswhich, as noted above, is unnecessary—for national-defense purposes. But this association can see no reasonable argument that national defense requires the permanent seizure of patents which are not being used adversely to national defense, or on what basis the Government should need the power to take patents from one private interest and sell them to another.
It is thought that if such a law had been in force in the past industries and facilities vital, or at least important, in the present emergency would not now be available. Many of those industries have been based on patents, and many of those facilities are available or have been expanded because of them. Numbers of products and processes important to the defense program have grown, to state it otherwise, from our patent system, and more will appear in the future provided that system remains as it is the strongest and best in the world.
It seems certain that the industrial position of the United States today is in large part the direct result of the establishment of a strong patent system early in the history of our country. It seems equally certain that anything which strikes at the fundamentals of that system will inevitably and more or less quickly result in a failure to produce inventions, with the result that whatever may be done by way of national defense may be inadequate. Statistics show that a great many millions of dollars are spent in this country each year on research. Those expenditures could not be justified if the discoveries growing out of them were freely available to competitors; they can be justified primarily on the protection which patents offer for discoveries growing out of the research. Thus new businesses are founded, existing manufacturing operations are improved, and the materials and tools available in industry are widened and rendered more effective. All of this results in turn in strengthening our position for national-defense purposes.
To render patents subject to seizure under the terms of S. 1579 would directly cut off the incentives to research and to expansion of productive capacities, which clearly would be adverse to national defense. Thus, what incentive would there be to spend money in creating a new industry that would depend on patents for its start where there would be the danger of having those patents seized permanently and given to another, as is possible under this bill? Such provisions of the bill strike at the very roots of our patent system, for a patent is of no value unless the owner can rely on it to protect the investment back of or based on it. And unless patent owners can continue to have such reliance it can be expected that scientifically and industrially retrogression will follow.
In effect, the provisions of this bill are similar to the amendments proposed by Mr. Shea to H. R. 3360 177th Cong., 1st sess.). Hearings were held for many days ou that bill and Mr. Shea's proposed amendments, and the views expressed apply equally to the present bill. The consensus of opinion was overwhelmingly to the effect that such a right to seize patents permanently and to deprive the owners of the rights guaranteed by the Government in granting patents would be grarely dangerous. Such were the considered views of industrialists, manufacturers, and technical societies, inventors, lawyers, and others appearing before or submitting written statements to the Committee on Patents of the House of Representatives.
It should be particularly noted that, according to our understanding, in the hearings on H. R. 3360 representatives of the War Department, the Navy Department, and the Office of Production Management stated that they knew of no case in which patents have interfered with the defense program or of any need for a bill such as would be represented by Mr. Shea's proposed amendments to H. R. 3360. The present bill is even broader in scope, so that there is all the less need for it. The hearings showed, we believe, that the act of 1910, as amended, renders condemnation or seizure not necessary, for the reason given above.
The present bill seems not to be directed to correcting evils in the patent laws, but rather to assist in combatting practices which can be taken care of by the antitrust laws.
This association believes that patent owners are single mindedly back of the defense program and will not in any case use their patents to impede it. It believes further that under such circumstances attention might better be directed to governing the extremely damaging effect of labor upon the defense program than to sabotaging the patent system, which is, to repeat, in the opinion of this
association, sufficiently important to national defense that it should not be disturbed.
Some argument has been advanced in favor of the right to condemn or seize patents that the act of 1910 is inapplicable to subcontractors. If that be the case, and it is by no means certain that it is, very simple amendment of that act could make it apply so that no patent could be asserted against onyone engaged in defense work.
Finally, it may be said that many persons are of the opinion that the Government cannot take over a patent, once granted, without destroying the grant. That is, when the Government takes over a patent which it has granted, it takes to itself the privileges which it conferred by that grant. There being no one outside of the Government who can enjoy to any degree the patent monopoly, the grant is apparently no longer existent. On this basis there would no longer be a monopoly in the patented invention, and it would avail nothing for the Government to grant licenses under or to sell the patents which it had seized.
This association therefore conscientiously recommends that the Committee on Military Affairs disapprove of S. 1579. Respectfully submitted.
PATENT LAW ASSOCIATION OF PITTSBURGH,
Chairman, Committee on Laws and Rules.
STATEMENT SUBMITTED IN OPPOSITION TO S. 1579 BY THE NATIONAL LAWYERS GUILD
S. 1579 authorizes the President, whenever he wishes, to take over any property which "can be used or is adaptable for use directly or indirectly in any way for national defense" or in making, transporting, or storing anything which is to be used for national defense. It is difficult to see what would be free from requisition under this bill. Radios in the home, private automobiles, crops in the field, as well as factories and banks, became subject to seizure for a compensation to be fixed in the first instance by the President. S. 1579 places in the hands of the President a power such as no inividual has ever possessed in this country before.
On its face S. 1579 seems to be aimed only at property owners, but a study of the circumstances leading to the introduction of this measure reveals that, while the President has no objection to becoming the repository of the tremendous power which it gives him, the bill is aimed primarily at the rights of labor. It is this aspect of the proposed law that we wish to discuss.
Section 9 of the Selective Training and Service Act of 1940 gives the President the power to take possession of any plant equipped to make defense products or capable of being transformed into a plant for the manufacture of defense products, if the owners refuse to manufacture such products when ordered by the Government. It would seem that this law gives the President ample power to deal with companies which refuse to manufacture for defense, and no attempt has yet been made to determine whether such power is adequate, since section 9 has not been invoked thus far.
Why then the need for S. 1579? Section 9 of the selective-service law contains a proviso which states that in event of the seizure of a plant “that nothing herein shall be deemed to render inapplicable existing State or Federal laws concerning the health, safety, security, and employment standards of the employees in such plant.” It would seem that this proviso is displeasing to those who are pressing for the enactment of the proposed law, and that they are attempting to nullify it by avoiding the necessity of proceeding under section 9 of the Selective Service law.
It is obvious that S. 1579 can be used to break strikes, and even in the absence of strikes, to destroy collective bargaining and employment standards.
The President is given the right to use any property he may take under the authority of S. 1579. There is absolutely no limitation on this use. Thus the President can step into any strike situation, take over the plant temporarily, use Army troops to disperse the pickets on the ground that they are interfering with Government property, and compel the strikers to resume work or be accused of "striking against the Government.” After the strike is broken, the plant can be turned back to its owners with no loss whatever to them. It is true that the President could
take over a struck plant and settle the strike by granting the workers' demands, but we must deal with realities. The record of recent events forces the conclusion that the likelihood of the latter action is farfetched.
When the President seizes a plant, whether temporarily or permanently, and whether or not a strike exists, the workers lose their right to collective bargaining. Whether they get collective bargaining will depend on the whim of the Army officer in charge, or the whim of the former owner who will be entrusted with the management of the plant. Experience has shown that industrialists who are not compelled by law to bargain collectively are not likely to do so voluntarily. Wages in the seized plant can be fixed arbitrarily, safety standards disregarded. Union contracts become a nullity. Workers who protest or who are active in a union can be summarily discharged without any of the protection afforded by the National Labor Relations Act, since the act does not apply to Government employees. A foretaste of what is likely to happen was given in the North American Aviation strike, when the Army refused to permit the leaders of the union to go back to work.
It may be that S. 1579 was not designed to destroy organized labor, although a suspicion that it was so intended is certainly pardonable. At any rate, this bill can be used to bring about that result. Under it, Government edict can be substituted for collective bargaining, and compulsory labor for the right to strike. To put such power in the hands of the Executive is to follow a course which must inevitably be viewed with concern by all who seek to preserve and extend the basic tenets of our democracy.
The very fact that no provision was put in the bill to safeguard any of labor's rights makes us fear the effects of the measure on those rights. We have seen in recent days the passage of proposed legislation like the Connolly amendment to the Selective Service Act by devious means seeks to force compulsory arbitration on labor. Presumably this amendment operates against both labor and industry, but the fact is that when a strike-bound plant is taken over by the Government, the strike is broken, while the owner of the plant has lost nothing by the temporary Government operation of the plant.
In our opinion, the sponsors of S. 1579 and the Connolly amendment to the Selective Service Act and similar proposed legislation render a disservice to the cause of democracy. These measures will have the effect of substituting enforced labor for free labor. We oppose such legislation because we believe that free labor is essential to democracy, and that democracy is incompatible with any system of enforced labor. We urge defeat of S. 1579.
MARTIN POPPER, National Executive Secretary, National Lawyers Guild.
BENEDICT WOLF, Chairman, Labor Law Committee, National Lawyers Guild.
NATIONAL SMALL BUSINESS MEN'S ASSOCIATION,
New York City, June 30, 1941. To the Committee on Military Affairs, The Senate, Washington, D. C.:
MEMORANDUM IN OPPOSITION TO Bill S. 1579 ON BEHALF OF THE NATIONAL SMALL
BUSINESS MEN'S ASSOCIATION
Recently four classes of legislative proposals have been presented for congressional consideration to deal with strikes slowing up defense programs. One legislative plan consists of a formula for seizure of plants where strikes take place and the operation of such plants by the Government. This procedure was followed in the case of North American Aviation, Inc. Although it may work again, the plan does not appear to be completely logical, since it is in effect a form of penalizing plant owners who neither strike nor spurn mediation. The other three classes of proposals imply coercion in some degree. They range from compulsory cooling off periods to actual arrest of strikers or strike leaders held to be guilty of activities classed as “subversive."
The principle that the Government must have the power to commandeer all resources of whatever kind that are vitally necessary to national defense cannot be disputed. It is recognized that the Government must be able to act in a crisis with speed and efficiency. But there is also the principle, which no democracy can afford to overlook, that any action of this sort must be taken in accordance
with the democratic process and provide democratic safeguards for the right of the individual.
The amended bill proposed by the War Department for authority to seize private property of all kinds would permit the President “to requisition and take over for the use of the United States or in its interest any military or naval equipment or munitions, or component parts thereof, or machinery, tools, or materials necessary for manufacture of such equipment or munitions, 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.” Few kinds of property are not embraced in these sweeping terms to which this power of seizure could not be made to apply.
The President may make such requisitions, not during some definite specific period but “during any period of national emergency” that he himself proclaims. The one restriction is that he must pay as compensation such sum as he "shall determine to be fair and just,” and if any person whose property is seized thinks this inadequate he can sue for the difference.
There are many kinds of property that should be clearly exempt from this power. If the right of free speech and free press is to be protected, then the bill should clearly not include magazines, newspapers, and radio stations which may now well come within its scope. There is no reason why more definitive standards should not be set forth limiting the powers to confiscate. As the law now reads the right of seizure may be exercised on the mere written finding by the Secretary of War or the Secretary of the Navy, that a sale or disposition is necessary to insure production in sufficient quantity of the patented commodity or articles for defense purposes and that production thereof cannot be otherwise obtained. Practically every important machine is protected by patents.
A key machine, for example, in any plant, however small and however indispensable to the productivity of the plant or its very existence, may be seized (compensation of 75 percent) unless the owner consents that it may be used by or for the Government for national defense or “other governmental purposes.”
Rath than blanket powers with a list of inferential exceptions, it would be far better if the War Department listed plainly the sort of property that it might consider necessary and ascertain conditions to seize, and draft a bill applying to that sort of property. The measure is nothing short of wartime control and does not appear to be warrantable even in our present emergency. The Government already has very broad powers under the Selective Service and other Acts to seize and operate plants making, or capable of making, munitions or Government supplies. It may need additional authority, but if it is necessary to expand such powers, they should be expanded carefully, specifically, and not recklessly with catch-all phrases.
Under existing law the Government's power to seize realty is complete, due compensation being provided. If the Government wishes to buy, as an extension of an Army camp or other Federal defense unit, a farm which has been in a family for generations that is being farmed by the current generation, there are legal methods of acquisition. Also, no provision exists for recapture by the original owners after the emergency has passed.
The purpose of the measure is to enable the administration to carry out the defense program without the interruptions by disputes between capital and capital, labor and labor, or capital and labor. But under the National Defense Act and the Selective Service Act, the President already has authority to commandeer plants making, or capable of making, munitions, or refusing to produce war materials. Under the new bill he could take over any plant where there was a strike and have authority to:
(a) Repuisition inventories and current production of any plant, raw materials and shift such materials from place to place;
(6) To sell or otherwise dispose of requisitioned plants, raw materials, tools, and all real and personal property such as stocks and bonds, newspapers, etc.;
(c) Take over plants or any part of plants whether or not management refuses to manufacture defense materials at a “reasonable price” or refuses to bid on a defense order,
The wording of the bill is broad enough to permit the Government to requisition without showing specific cause any article of private property in the Nation and its Territories which can be related to national defense or governmental interests, in the opinion of the President.
The bill would seem to hold out some possibility of modifying its effect through the courts. The court could rule against the Government as going
beyond the “intent and purpose" of Congress. But the judicial remedies would apply only after the property had been taken over.
If Congress must pass a law, let it go to the root of the evil. Let it find ways to insure a man who pays dues to a union to have the right to a voice in the management of that union without running the danger of strong-arm tactics. What is sought by the present measure is Presidential power to plug a few loopholes allegedly now existing in his power to take over plants in case of work stoppage. It should be remembered that section 3 of the Selective Service Act gives the Government power to take over industrial plants, if the owners refuse to cooperate on defense contracts.
During the Allis-Chalmers strike, the labor union was willing to go back to work, if certain conditions were met. The employers, too, agreed to go back to work on condition. Technically, it is said by the proponents of the measure that neither side had “refused" to reopen the plant. But, technically, there was a refusal, for the consent to return to work was on condition, and conditional acceptance in the law of contracts is by every conceivable standard a refusal.
In the event of administrative arbitrariness of which we have in recent years had not a little evidence, judicial review of such an order of the President commandeering a plant, etc., is not encouraging. There are many limitations upon the right to and the adequacy of judicial relief.
There is always the presumption of validity in favor of the statutes. This presumption must be overthrown “beyond all reasonable doubt" before the statute is held void. An almost impossible task.
There is no safeguard of judicial review. Even if there were the review would not extend to the fact-finding function of the Secretary of War or Secretary of the Navy in making the requisition. His findings would be conclusive unless arbitrary.
The proposed measure, in the face of present circumstances-however crucial they may be—is an unwarrantable abdication of congressional powers. It illustrates what the President may, by means of party pressure, do except for the last vestige of judicial review, which, as above noted, under present circumstances seems highly doubtful.
The small businessmen of the country are not able, due to lack of financial stability, to resist arbitrary disruption of their plants, under the guise of “national defense or other governmental purposes."
They look to Congress to fulfill its pledged duty of safeguarding their constitutional guarantees and preventing a reptition of delegation run riot.
In view of the above the measure should be reported unfavorably.
J. RAYMOND TIFFANY, General Counsel.
Kalamazoo, Mich., July 1, 1941. SENATE MILITARY AFFAIRS COMMITTEE,
Washington, D. C. GENTLEMEN : My name is Monroe Shakespeare and I am president of the Shakespeare Co., fishing-tackle manufacturers at Kalamazoo, Mich. I am also secretary and general manager of the Shakespeare Products Co., manufacturer of automotive parts. I am vice president of the Associated Fishing Tackle Manufacturers, a trade association, and am a national director of the National Small Business Men's Association, with which I have been associated since its inception.
Our plants have operated on a two or more shift basis for the past several years, and for many months we have been converting our activities from nondefense to defense production. Our tool room and engineering departments have been practically 100 percent so engaged for the past several months, and we have already made substantial deliveries of new products to the airplane companies. We are doing everything within our power to put our whole facilities on to high priority essential defense production of a high-precision nature.
It was this urgent defense work which has kept me here and made it necessary to submit my testimony in writing. I should have greatly preferred to submit my testimony in person and to have been available to answer questions.
I have studied over Senate bill 1579, which appears to be aimed at expediting the defense effort by making isolated machines or part of inventories or whole plants available for defense, even though the plants may not be fully equipped