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Roporter's Statement of the Case 2. By the sale of, or disposal for profit of the rights of the party of the first part, and subsequent satisfaction rendered to the parties of the second part, as herein specified.

Third. It is understood that by an arrangement with the United States Government and by reason of the employment of the facilities of the Bureau of Standards in the making and perfecting of said inventions and discoveries, the party of the first part has agreed to give the said United States Government the privilege of using the said invention without cost and that the rights of the party of the first part embraces therefore the commercial rights to said invention only in the United States and that they embrace all foreign rights in any countries other than the United States wherein patents may be obtained, and it is understood that the rights and interests of the parties of the second part extend to and include such patent rights in the United States and foreign countries and they hereby admit and confirm the interest of the United States Government in the matter.

Fourth. It is further understood and agreed that certain moneys may be necessary to be raised for the purpose of prosecuting and defending the rights and interests of the said party of the first part in and to the said inventions and discoveries and it is agreed that all of such costs and expenses other than attorneys' fees to the parties of the second part shall be first advanced by the party of the first part and thereafter deducted from any proceeds of said inventions and discoveries, including any interest thereon and any expenses of obtaining such moneys before any division is made of such proceeds under the provisions of the Second Paragraph of this Agreement.

Fifth. It is further covenanted and agreed that any of the parties shall arrange for a sale but none of the parties hereto may sell or dispose of their interest in the said inventions and discoveries except by the concurrence of two of the three parties hereto.

Sixth. It is further covenanted and agreed that the party of the first part will execute any papers, assignments or transfers prior to or following the issuance of patents in the United States or foreign countries as may be necessary to carry out the purpose and intent of this agreement, provided, however, that the parties of the second part shall not sell, transfer or assign any interest in this contract until the final settlement of all controversies above recited with the said John T. Kewish, un107 C. Ols. Reporter's Statement of the Case less prior thereto the parties hereto agree upon a sale of said inventions and discoveries.

Seventh. It is further understood and agreed that should a sale of said patent rights be made for a consideration, including as a whole or a part thereof, shares of stock not having any definite market value quotation, the said shares of stock shall be pooled and any dividend and income therefrom shall be regarded as the proceeds of said sale and subject to be divided as hereinbefore provided.

Witness our hands and seals this 11th day of August, A. D., 1919. Some time in 1924, and approximately five years after the signing of the agreement, Bunn delivered one of the duplicate signed originals to the Patent Office for recording. It was returned with a statement that it was not an assignment of a patent but an assignment of an interest and not recordable under the regulations of the Patent Office.

10. On September 5, 1919, Garand filed a second application, serial No. 321,956, in the United States Patent Office. This application as stated in the specification, related to Garand's recent improvement over his original one, the improvement relating to a gun which obtained its energy for operating the gun mechanism not only from the blowback of the primer but also from the backward movement of the cartridge itself and the recoil of the gun.

The application papers were forwarded from the War Department by Maj. D. H. Decker, Ordnance Department. A power of attorney was granted to Alexander M. Bunn by Garand under date of November 7, 1919, and related to this application. This power of attorney was ratified by the War Department, it reserving the privilege of revoking the ratification at any time. The correspondence with the Patent Office and the amendments inserted in this application were signed by Bunn as attorney.

On October 19, 1926, this application matured into patent to Garand 1,603,684.

11. Subsequent to the signing of the Bunn, Richardson and Garand agreement of August 11, 1919, and on September 15, 1919, Garand submitted a written proposal to sell his domestic and foreign rights to the United States Government.

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Reporter's Statement of the Case This offer was contained in a letter addressed to the General Staff. The letter was dictated by Richardson and signed by Garand. The letter was as follows:

: I have been requested to inform the Department whether I am willing to give the Government the exclusive use and control over my machine gun, including all patent rights in this and foreign countries, and if so, upon what terms. In reply, I desire to state that I am willing to give an exclusive license to this Government for the United States and all foreign countries for a royalty of One Hundred Twenty Thousand Dollars ($120,000.00) per year, payable annually for a term of five (5) years and upon the conclusion of the fifth payment, I will sign and transfer to the Government, the exclusive rights in this and all foreign countries without further compensation.

In connection with the amount stated, I wish to call your attention to the fact that under the present income tax law, the normal tax on each installment will be $6,060.00, the surtax on each installment will be $33,630.00, making a total tax on each installment of $39,630.00. I am therefore receiving $80,000.00 a year

net for the period of five (5) years. 12. Under date of October 21, 1919, Garand executed a nonexclusive license agreement relating to the two patent applications referred to in previous findings 8 and 10, and to the Kewish application. This license agreement, which conveyed certain rights to the United States, was recorded in the United States Patent Office November 5, 1919. The license agreement read as follows:

Whereas, I, John C. Garand, am the inventor of certain improvements in Automatic Guns for which I have filed application for United States Letters Patent on September 5, 1919, Serial No. 321,956, and

Whereas, I am also the inventor of another form of automatic gun which is embodied in United States application filed July 11, 1919, Serial No. 310,249; and

Whereas, I am also the inventor of the subject matter of the application filed in the name of John T. Kewish, on July 9, 1918, under Serial No. 244,047, in which the rights of the parties will be determined by an interference proceeding in which the said Kewish application and the said application No. 310,249 will most likely become involved, and

107 C. Cls. Reporter's Statement of the Case Whereas, irrespective of the result of said interference, I am the owner of an undivided one-fourth interest in said Kewish application, Serial No. 244,047 by an assignment duly recorded in the United States Patent Office in Liber G 105, page 105, and Whereas, I am employed by the United States Govern

Í ment and developed the invention embodied in said application Serial No. 321,956, during such employment and along the line of my duties, and was assisted in the mechanical work thereon by the Bureau of Standards, Department of Commerce, and said

application was prepared for me by the officials of the War Department.

Now, therefore, in consideration of the premises, I hereby grant to Newton D. Baker, the Secretary of War of the United States of America, and to his successors in office, the right and license (non-exclusive) to make, use and sell and to cause to be made, used and sold, for the Government of the United States of America, the subject matter of said inventions as shown and described in said three applications, Serial Nos. 321956, 310,349 and 244,047, said license and right to extend throughout the United States, its territories and all foreign countries, and to remain in force and effect for the full term for which any Letters Patent may be granted on said applications, reserving for myself unrestricted possession and enjoyment of all other rights not hereby licensed to the Secretary of War for the benefit of the United States of America: Provided, however, That this licensee shall not, except by written consent of this licensor or his duly accredited representatives or assigns, sell to the Government of any foreign country, or to any citizens, companies, corporations, firms or associations of or resident in any country foreign to the United States, any guns covered by any claim or claims of any patent or patents which may mature from the aforesaid applications, And provided further, That, in the event that it ever becomes necessary for the good of the Service, that certain of these guns be sold, by this licensee, to private individuals, companies, corporations or associations in the United States, then and in that event, the cost of production and sale of said guns shall be deducted from the selling price thereof, and that one-half of the balance, if any, shall be paid to this licensor or his representatives or assigns, on a royalty basis

And I do hereby irrevocably give the Secretary of War the control of the prosecution of the aforesaid" application, Serial No. 321,956, filed September 5, 1919.

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Reporter's Statement of the Case Signed at Washington, District of Columbia, this 21st day of October 1919.

JOHN C. GARAND. [Accepted by Newton D. Baker, Secretary of War.] 13. Thereafter Richardson drafted a modified proposal to sell, which was dated October 29, 1919, addressed to the Secretary of War and signed by Garand. This letter was delivered in person by him to Major Gray on October 30, 1919. The letter was in part as follows: The Honorable THE SECRETARY OF WAR,

Washington, D.O. SIR: At the suggestion of Col. Dougherty and Major Gray, Equipment Branch of the General Staff, I respectfully submit the following proposition in connection with my inventions, the principles of which are embodied in automatic and machine rifle, model of which is at the Bureau of Standards and in my application of patent dated July 11th, 1919, filed under Serial Number 310,249.

Under the arrangement covering the development of this rifle at the Bureau of Standards, the United States Government is licensed to make and use and, upon certain conditions, to sell but I have reserved to myself all commercial rights, as well as all foreign rights. I have been approached on behalf of two foreign governments and also by two industrial companies in this country with the view of negotiating for my foreign and domestic commercial rights, and, while the operation of the gun has been witnessed by numerous officers in tests which have been held at the Bureau of Standards, the exact principles of its operation have been disclosed only to a few persons with a knowledge and approval of the officers in charge of development. I have purposely refrained from taking out foreign patents or otherwise making public the nature of the principles upon which this gun is based until such time as this Government shall determine whether it wishes to acquire all of the rights to the invention, which I have been informed by various officers would be desirable. The matter, however, has reached such a stage that unless I file my foreign applications, I am advised by my attorney I may lose some of my most substantial foreign rights. As the model of the gun at the Bureau of Standards has been most thoroughly tested by a number of officers of the General Staff and Ordnance Departments, I feel that the Government should now decide whether it desires to pur736172-47-vol. 107-10

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