United States v. Harvey Steel Co.

Background

The dispute is between the Harvey Steel Company, owner of a patent for a method to harden naval armor plates called the 'Harvey process,' and the United States Navy. After the Navy tested the process, the parties made a 1892 agreement and later a 1893 contract allowing the Navy to use the process in exchange for royalties and a lump payment. The contracts required the company to disclose its secret method and improvements, and included a clause saying royalties would stop only if a court expressly decided the patent owner lacked legal title to the patented rights.

Reasoning

The Court addressed whether the Government could refuse payment by claiming the patent was invalid or more limited than the process the Navy actually used. The Court read the contract literally: the royalty-stopping clause takes effect only if there has been a judicial decision that the patent is invalid. The Court also held that the contract’s references to the 'Harvey process' meant the practical, commonly used method disclosed to the Navy, so the Government’s technical narrowing of the patent did not excuse payment. The Court therefore affirmed the lower court’s award for unpaid royalties.

Real world impact

The ruling requires the United States to pay the royalties found due and prevents the government, in this suit, from escaping payment simply by arguing the patent’s invalidity or narrowness without a prior court decision. It enforces contractual promises to disclose and license a secret industrial process, and confirms that ordinary descriptive language in contracts can cover the practical method actually used.