the custodian to the Chemical Foundation and subsequently licensed to the United States by the Chemical Foundation.

It seems clear, and I think it was generally admitted at the time, that the former owners of these patents are entitled to compensation. The real and most difficult question has been, Upon what basis should compensation be made? At least three alternative policies have been advanced: (1) That the United States should pay the difference between the amount actually paid by the Chemical Foundation and the "fair compensation" which should have been paid; (2) that the former owners should receive exactly the same treatment as is accorded under the act to the owners of other property; and (3) that the liability of the United States should be recognized only for the use of the patents.

Alternative (1) would result in effect in "upsetting" the sale by the Alien Property Custodian. The policy of the act is based upon treating all sales by the Alien Property Custodian to private interests as closed transactions. It is the opinion of the Treasury that this policy should not now be departed from. Alternative (2) would result in the determination by the arbiter of the compensation which should be paid by the United States for the licenses of patents which it actually received. It would treat the transaction as if it were in law actually what it was in fact-a license to the United States by the custodian through the Chemical Foundation. It would accord to the former owners of these patents exactly the same treatment accorded to the owners of other property (including other patents) sold by the custodian to the United States. Under the existing law both classes are entitled to compensation for the use by or for the United States of any invention described in and covered by any patents, which the custodian took over, up to the time the custodian sold, assigned, or licensed the patent, excluding use during the period of hostilities (April 6, 1917– November 11, 1918, in the case of Germans; December 7, 1917-November 3, 1918, in the case of Austrians or Hungarians).

Alternative (3) would result in the determination of the compensation which should be paid for the use of the patents by the United States after their sale by the custodian. Many of the patents licensed by the Chemical Foundation to the United States have never been used, and very likely never will be used, by the United States. The patents in question were licensed to the United States "en bloc" and wholly without regard to their probable or possible use. Some of the licenses would undoubtedly have been of substantial value to a private enterprise but have been of no value to the United States. This alternative has been suggested in order to make it certain that no compensation would be paid for patents not used by the United States and that compensation for the patents actually used would be measured by the extent of the use.

It is the opinion of the Treasury that our Government is under no obligation to pay except for the benefits it has actually received. Although alternative (2) seems somewhat broader than alternative (3), it is believed that there is no very substantial difference in effect. Under alternative (2) a claimant would receive fair compensation for the license granted to the United States by the Foundation (in addition to fair compensation for the use by or for the United States before the sale April 10, 1919, and later-by the custodian to the Chemical Foundation, excluding use during the period of hostilities). Compensation for use would be to the extent of the actual use made by or for the United States and ordinarily will be determined on a royalty basis applied to the actual use as of the time of the use. Compensation for such a license would be measured by what, at the time of the license, an American citizen, as a willing seller desiring to grant a license, would have been willing to accept for the use of his invention and what royalty the Government, as a willing buyer, would have been willing to pay; and each case would fall into one of three categories, each measured by the probable extent at the time of the license of the future use to be made of the patented invention by the United States: (1) An invention which at the time was of unquestioned value and use to the Government, where the recovery would be comparatively substantial, (2) an invention of probable future interest to the Government but for which it had no present use, where the recovery would not be so substantial, and (3) an invention of no interest to the Government, as to which neither a willing seller nor a willing buyer could foresee that the Government could ever have use for it, in which case, however, the claimant will be entitled to recover nominal compensation.

Furthermore, the enactment of alternative (3) would necessarily result in considerable delay in the final disposition of the matter. Some of the patents have a remaining life of several years, and the extent of the actual use, of course, could not be determined until after the expiration of the statutory period. In a

few cases, for example, it is understood that the patents will not expire until 1937. Under the circumstances, the Treasury recommends the adoption of alternative (2). A problem of importance to be determined upon is whether the $100,000,000 limitation placed upon the aggregate liability which the Government assumed in providing compensation for the ships, the radio station, and the patents should remain applicable. It might be contended that the limitation should be increased by reason of including at this time a provision for the payment of compensation not provided for at the time the act was passed. If the aggregate awards of the arbiter should not exceed the $100,000,000 limitation, there is no difficulty. On the other hand, if the awards should exceed this amount, they must be reduced pro rata, and of course all awards would necessarily be reduced by a greater amount if the proposed amendment is adopted. However, it is the opinion of the Treasury that no objection would have been urged had the act as it was passed included compensation to the former owners of these patents for the licenses in question and, in view of that fact, that objections could not conscionably be made now.

It has been pointed out that, if compensation based upon this policy is to be made, the amendment should be enacted at the earliest possible date in order that the proceedings of the arbiter may conform thereto and the ultimate disposition of the cases pending before him not unduly delayed. It is believed that the matter is of substantial importance.

A suggested draft of an amendment to carry into effect the proposal approved by the Secretary is transmitted herewith. The draft is in general terms so that if others (although the Treasury knows of none) are in the same situation as the former owners of the Chemical Foundation patents, they will be accorded similar treatment. Copies of Judge Parker's decisions Nos. I and II are inclosed herewith, for your convenience.

Very truly yours,

A. W. MELLON, Secretary of the Treasury.

UNITED STATES OF AMERICA, APPELLANT, v. CHEMICAL FOUNDATION, INC.

[Argued December 9, 10, and 11, 1925. Decided October 11, 1926]

Appeal by complainant from a decree of the United States Circuit Court of Appeals for the Third Circuit affirming a decree of the district court for the district of Delaware dismissing a bill filed to set aside a sale of property by the Alien Property Custodian. Modified and affirmed.

The facts are stated in the opinion.

Mr. Justice Butler delivered the opinion of the court:

Suit was brought by the United States in the district court for Delaware to to set aside sales made by it to the Chemical Foundation of a number of patents, copyrights, trademarks, and other similar properties-which for brevity will be referred to as "patents"-seized pursuant to the trading with the enemy act of October 6, 1917 (ch. 106, 40 Stat. at L. 411), as amended by the act of March 28, 1918 (ch. 28, 40 Stat. at L. 460; Comp. Stat. sec. 31151⁄2ff; Fed. Stat. Anno. Supp. 1918, p. 863), and the act of November 4, 1918 (ch. 201, 40 Stat. at L. 1020), and other acts. The complaint alleges that a number of domestic manufacturers as a result of war conditions had been able to combine and monopolize certain chemical industries in this country; and, fearing that at the end of the war German competition would destroy the monopoly, they conspired to bring about transfers and sales of the patents at nominal prices to themselves or to a corporation controlled by them; that the patents so obtained would control the industries in question and perpetuate the monopoly, and that the sales were procured through the fraudulent deception of the President, the Alien Property Custodian, and other officials. The answer denies conspiracy and fraud and asserts that the transfers were made in good faith and pursuant to law and that they are valid. There was a trial at which much evidence was taken. The district court dismissed the complaint (294 Fed. 300), and its decree was affirmed by the circuit court of appeals (5 F. (2d) 191). Both courts found that no unlawful scheme, combination or conspiracy was shown, and that there was no deception or fraud. The United States took an appeal under section 241, Judicial Code, and has applied for a writ of certiorari under section 240. The decree of the circuit court of appeals was entered March 26, 1925, prior to the taking effect of the act of February 13, 1925, amending the Judicial Code (ch. 229, 43

Stat. at L. 936, Fed. Stat. Anno. Supp. 1925, p. 84). Since this is not a case in which the decree of that court is made final by section 128, the United States had the right of appeal. The application for certiorari is therefore denied.

The chemical industries in question are closely related to the production of explosives, gases, and other things directly used in waging war, as well as to the production of dyestuffs and medicines essential to the welfare of the people. At the outbreak of the war many necessary medicines and other substances as well as most of the dyestuffs used in this country were imported from Germany or were manufactured under patents owned by enemy Germans. The amount of such things here produced was small. Importations were hindered by the blockade, and ceased when this country entered the war. To meet the demand, numerous plants were developed, and, by 1919, chemicals, dyestuffs, medicines and the like were being produced here in large quantities. A number of associations of manufacturers were formed for the advancement of such industries; they included in their membership the producers of nearly all the dyestuffs and like chemicals made in this country. Mr. A. Mitchell Palmer was the Alien Property Custodian until he was appointed Attorney General, March 4, 1919. In order to protect the United States against enemy and foreign control of its chemical industries and to stimulate production here, he favored the seizure and sale of the patents in question. To that end, a number of conferences were held between his representatives and those of the industries. The plan that was carried into effect was formulated under his direction.

In February, 1919, the Chemical Foundation was incorporated under the laws of Delaware. The certificate of incorporation discloses that it was created and empowered to purchase enemy-owned patents seized by the custodian and to hold the "property and rights so acquired in a fiduciary capacity for the Americanization of such industries as may be affected thereby, for the exclusion or elimination of alien interests hostile or detrimental to the said industries, and for the advancement of chemical and allied science and industry in the United States"; to grant to the United States non-exclusive licenses to make, use and sell the inventions covered by the patents, and also to grant like licenses, on equal terms and without advantage as between licensees, to American citizens and corporations under control of American citizens. The board of directors is authorized to prescribe the terms and conditions of such licenses. It may refuse to issue any license or may revoke any license granted by it. The corporation is required to enforce its rights and to protect the rights of its licensees. The authorized capital stock is $500,000 consisting of 5,000 shares of the par value of $100 each; 4,000 shares constitute non-voting preferred stock, the holders of which are entitled to a cumulative dividend of 6 per centum per annum, and 1,000 shares constitute the common stock, the holders of which are entitled to dividends not exceeding 6 per centum per annum after dividends on the preferred stock have been provided for. The preferred stock is subject to redemption at par plus accumulated dividends, if any, and after such redemption net earnings not needed for working capital "shall be used and devoted to the development and advancement of chemistry and allied sciences, in the useful arts and manufactures in the United States, in such manner as the board of directors may determine." The holders of the common stock have all the voting power. The certificate provides that, without the approval of the board of directors, stockholders may not sell any of their stock. The board of directors consists of three members. The executive officers are president, vice president, and a secretary and treasurer. The president and vice president are required to serve without pay. The shares of the Foundation were subscribed by those interested in the chemical and dye industries. But a voting trust agreement was made, pursuant to which all common stock was deposited with, and all voting power was vested in, five trustees. Directors and officers were chosen March 8, 1919. Francis P. Garvan, Douglas I. McKay and George J. Corbett were made directors and constituted the board. Mr. Garvan, then Alien Property Custodian, was elected president. Mr. McKay was elected vice-president, and Mr. Corbett secretary and treasurer. Otto T. Bannard and four others were made voting trustees. All the directors, officers and voting trustees were chosen by or in accordance with the direction of Mr. Palmer, given while he was custodian.

The President, by executive order, December 3, 1918, declared: "I hereby vest in Frank L. Polk all power and authority conferred upon the President by the provisions of Section 12" of the Trading with the Enemy Act as amended. Mr. Polk was then Counselor for the Department of State, but was not so described in the order. He made two orders dated respectively February 26, 1919 and April 5, 1919, to authorize the custodian to sell at private sale to the Foundation,

without advertisement, at such places and upon such terms and conditions as to the custodian might seem proper, all patents found to relate to the objects and purposes of the Foundation as expressed in its charter. These orders contained a statement of the reasons therefor in the public interest. Briefly they were: that the patents could not be sold to the best advantage at public sale after advertisement; that the Foundation had been incorporated to hold the patents as a trustee for American industries affected by the patents, to eliminate hostile alien interests, and to advance chemical and allied industry in the United States, and that it was obligated to grant nonexclusive licenses upon equal terms to qualified American manufacturers and was empowered to grant free licenses to the United States; that the public interest would be best served by a wide use of the inventions, which most readily could be promoted by licenses which the Foundation was obligated to grant; that a private sale would prevent the patents from falling into the hands of purchasers unwilling or unable to use the inventions, or who would use them for speculative purposes; that it would be impossible to make a public sale that would secure these benefits, and that a private sale would avoid unnecessary expense, delay and inconvenience.

Prior to and contemporaneously with the organization of the Foundation, the representatives of the chemical industries cooperated with those of the custodian in making lists of the patents to be seized, and sold by the custodian to the Foundation. Mr. Garvan, the custodian, from time to time commencing April 10, 1919, executed and delivered to the Foundation various assignments of the patents. The considerations paid by the Foundation to the custodian amounted in all to $271,850. The President, February 13, 1920, made an executive order which was held by both courts below to constitute a ratification of the transactions. And, pursuant to that order, the custodian confirmed the assignments theretofore made.

We come to the question whether, as held below, the act, as amended March 28, 1918, empowered the President to authorize, and the custodian under his supervision to consummate, these sales.

The pertinent provisions of the act are in section 12 as amended: "The alien property custodian shall be vested with all of the powers of a commonlaw trustee in respect of all property, other than money, which has been or shall be, or which has been or shall be required to be, conveyed, transferred, assigned, delivered, or paid over to him in pursuance of the provisions of this act, and, in addition thereto, acting under the supervision and direction of the President, and under such rules and regulations as the President shall prescribe, shall have power to manage such property and do any act or things in respect thereof or make any disposition thereof or of any part thereof, by sale or otherwise, and exercise any rights or powers which may be or become appurtenant thereto or to the ownership thereof in like manner as though he were the absolute owner thereof: Provided, That any property sold under this act, except when sold to the United States, shall be sold only to American citizens, at public sale to the highest bidder, after public advertisement of time and place of sale which shall be where the property or a major portion thereof is situated, unless the President stating the reasons therefor, in the public interest shall otherwise determine: * * * [40 Stat. 460].

"After the end of the war any claim of any enemy or of an ally of enemy to any money or other property received and held by the alien property custodian or deposited in the United States Treasury, shall be settled as Congress shall direct: * * 40 Stat. 424.

It is conceded that when seized the patents belonged to enemy Germans and that they were lawfully taken over by the custodian. The purpose of the Trading with the Enemy Act was not only to weaken enemy countries by depriving their supporters of their properties (Miller v. Robertson, 266 U. S. 243, 248, 69 L. ed. 265, 271, 45 Sup. Ct. Rep. 73), but also to promote production in the United States of things useful for the effective prosecution of the war. Section 10 (c) authorized the President, if he deemed it for the public welfare, to grant licenses to American citizens or corporations to use any inventions covered by enemy-owned patents. Subsection (c) of section 7 of the act, as amended November 4, 1918, authorized the seizure of enemy-owned patents and provided that all property so acquired should be held and disposed of as provided by the act. And there is no ground for contending that the seizure and transfers did not tend to lessen enemy strength and to encourage and safeguard domestic production of things essential to or useful in the prosecution of the war. There is nothing to support a strict construction of the act in respect of the seizure and disposition of enemy property. On the other hand, contemporaneous conditions and

war legislation indicate a purpose to employ all legitimate means effectively to prosecute the war. The law should be liberally construed to give effect to the purposes it was enacted to subserve.

As originally enacted, section 12 gave the custodian in respect of properties in his possession "all of the powers of a common-law trustee." He was authorized, acting under the supervision and direction of the President and under rules and regulations prescribed by the President, to manage the property and do any act or things in respect thereof or make any disposition of it by sale or otherwise, and to exercise any rights appurtenant to its ownership, "if and when necessary to prevent waste and protect such property and to the end that the interests of the United States in such property and rights, or of such person as may ultimately become entitled thereto, or to the proceeds thereof, may be preserved and safeguarded." The custodian was a mere conservator and was authorized to sell only to prevent waste. But brief experience made it clear that this restriction on the power to dispose of enemy property sometimes operated to defeat the purpose of the act and brought profit and advantage to the enemy. The amendment of March 28, 1918, eliminated the restriction upon the power of sale. It stated that the other powers given were "in addition" to those of a common-law trustee. And it authorized the custodian, under the President, to dispose of such properties by sale or otherwise "in like manner as though he were the absolute owner thereof."

20 L.

The

There is no support for a construction that would restrain the force of the broad language used. Congress was untrammeled and free to authorize the seizure, use or appropriation of such properties without any compensation to the owners. There is no constitutional prohibition against confiscation of enemy properties. Brown v. United States, 8 Cranch, 110, 122, 8 L. ed. 504, 508; Miller v. United States (Page v. United States), 11 Wall. 268, 305, et. seq., ed. 135, 144; Kirk v. Lynd, 106 U. S. 315, 316, 27 L. ed. 193, 1 Sup. Ct. Rep. 296; Stoehr v. Wallace, 255 U. S. 239, 245, 65 L. ed. 604, 612, 41 Sup. Ct. Rep. 293; White v. Mechanics Securities Corporation, 269 U. S. 283, 300, 70 L. ed. 275, 279, 46 Sup. Ct. Rep. 116. And the act makes no provision for compensation. former enemy owners have no claim against the patents or the proceeds derived from the sales. It makes no difference to them whether the consideration paid by the Foundation was adequate or inadequate. The provision that, after the war, enemy claims shall be settled as Congress shall direct conferred no rights upon such owners. Moreover, the Treaty of Berlin prevents the enforcement of any claim by Germany or its nationals against the United States or its nationals on account of the seizures and sales in question. (Part X, Sec. IV, art. 297, and Annex pars. 1 and 3, Treaty of Versailles, adopted by Art II. (1), Treaty of Berlin, 42 Stat. at L. 1939, 1943.)

While not denying the power to confiscate enemy properties, the United States argues that, as construed below, the provision in question is unconstitutional because it attempts to delegate legislative power to the Executive. But the act gave the custodian, acting under the President, full power of disposition. No restriction was put upon dispositions other than by sales. And sales to the United States were not regulated. The general rule laid down was, that all dispositions by sale or otherwise should be made in accordance with the determinations of the President; the proviso made an exception including a class of sales; and, upon the failure of the President otherwise to determine stating the reasons therefor in the public interest, it required that such sales should be made as there specified. It was not necessary for Congress to ascertain the facts of or to deal with each case. The act went as far as was reasonably practicable under the circumstances existing. It was peculiarly within the province of the Commander-in-Chief to know the facts and to determine what disposition should be made of enemy properties in order effectively to carry on the war. The determination of the terms of sales of enemy properties in the light of facts and conditions from time to time arising in the progress of war was not the making of a law; it was the application of the general rule laid down by the act. When the plenary power of Congress and the general rule so established are regarded, it is manifest that a limitation upon the excepted class is not a delegation of legislative_power. Field v. Clark, 143 U. S. 649, 692, 36 L. ed. 294, 309, 12 Sup. Ct. Rep. 495; Buttfield v. Stranahan, 192 U. S. 470, 496, 48 L. ed. 525, 535, 24 Sup. Ct. Rep. 349; Union Bridge Co. v. United States, 204 U. S. 364, 377, 51 L. ed. 523, 530, 27 Sup. Ct. Rep. 367; United States v. Grimaud, 220 U. S. 506, 516, 55 L. ed. 563, 567, 31 Sup. Ct. Rep. 480.

The language of the statute is too plain to be misunderstood. Except as affected by the proviso, the Custodian's dominion over the property, and power

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