Farbwerke Vormals Meister Lucius & Bruning v. Chemical Foundation, Inc.

Background

Three German corporations formerly owned three U.S. patents that E. I. du Pont de Nemours & Co. was licensed to make and sell under a wartime license beginning January 21, 1918. The licensee paid substantial sums into the U.S. Treasury. In early 1919 the Alien Property Custodian seized the patents and, on April 10, 1919, transferred them to the Chemical Foundation. The Chemical Foundation sued for compensation for use after it acquired the patents; the German owners sued for compensation for use during the earlier license period before the custodian’s transfer.

Reasoning

The key question was whether the custodian’s seizure included the owners’ rights to collect royalties for the license period before the April 1919 transfer. The Court relied on the Trading with the Enemy Act and the custodian’s declaration that he seized “every right, title and interest” in the patents. The Court treated the seizure as an act of war rather than a private assignment and concluded that the custodian’s seizure did include accrued royalty rights. The Court rejected an interpretation that would allow the former German owners to recover those earlier royalties, noting also constitutional concerns about depriving the Chemical Foundation of property after it acquired the patents.

Real world impact

As a result, the Chemical Foundation and the United States (through Treasury funds) may recover for the period after April 10, 1919, while the German corporations may not recover for license use before that date. The ruling enforces the custodian’s broad seizure powers under the wartime statute and leaves the licensee’s deposited funds available for payment.

Dissents or concurrances

Mr. Justice Sutherland and Mr. Justice Stone did not take part in the consideration or decision of these cases.