But when

action on the checks, or at all, could have been maintained. against it by the Riggs National Bank. Bank of Republic v. Millard, 10 Wall. 152, 156; First National Bank v. Whitman, 94 U. S. 343, 344; St. Louis &c. Railway v. Johnston, 133 U. S. 566, 574; Fourth Street Bank v. Yardley, 165 U. S. 634, 643. The checks were made at St. Louis and sent by mail from that city to the accused in discharge of an obligation assumed by his client at that city, and, as between him and his client, in the absence of any special agreement on the subject, compensation for services rendered by him before the Department could only be deemed to have been really made when the checks were paid by the bank on which they were directly drawn. It is true that when the Riggs National Bank received the checks and credited the account of the accused on its books with the amount thereof, there arose, as between that bank and him, only the relation of debtor and creditor. his account at that bank was so credited, he became liable, by implied contract-if the St. Louis bank failed to accept or pay the check when presented-to pay back to the bank an amount equal to the credit he received on the books of the Riggs National Bank. If the St. Louis bank had refused to accept or pay the checks when presented, and if the accused had then sued his client on its original contract with him, the latter could not have resisted recovery upon the ground that he received compensation by having his account at the Washington bank credited with the amount of the checks. Suppose the accused had been indicted in Washington on the day after the checks were indorsed to the Riggs National Bank, and the checks were not honored or paid when presented at the St. Louis bank, could he in that case have been convicted under the statute by proof that he received such credit at the former bank for the amount of the checks? Clearly not. Yet he could have been, if it be true that he was compensated, within the meaning of the statute, when his account with the Riggs National Bank was credited with the amount of the checks. As between the accused and his client, he was not, in any true

sense, compensated for the services alleged to have been rendered in violation of the statute, until by payment of the checks by the St. Louis bank he was relieved of all liability to the Riggs National Bank arising from his indorsing the checks to it. The accused is to be regarded as having received, at St. Louis, compensation for his services, because the check made in his behalf was paid there to his representative. The offense was, therefore, consummated at that city, and the Federal Court at St. Louis had jurisdiction.

Nor, in my opinion, does the record show any error, in respect of instructions that were to the substantial prejudice of the accused; no error for which the judgment should be reversed.

It seems to me that in reversing the judgment upon the grounds stated in the opinion the court has sacrificed substance to mere form. The result, I submit, well illustrates the familiar maxim: Qui haeret in litera haeret in cortice.

UNITED STATES v. HARVEY STEEL COMPANY.

APPEAL FROM THE COURT OF CLAIMS.

No. 275. Argued January 3, 4, 1905.-Decided January 16, 1905.

The United States made a contract with the steel company for the use of a process described as patented. The contract provided that in case it should at any time be judicially decided "that the company was not legally entitled under the patent to the process and the product the payment of royalties should cease. In a suit by the company for royalties the United States attempted to deny the validity of the patent while admitting there was no outstanding decision against it. Held, that this defense was not open.

Held further, that under the circumstances of this case, the contract, properly construed, extended to the process actually used even if it varied somewhat from that described in the patent.

THE facts are stated in the opinion.

196 U. S.

Argument for the United States.

Mr. Assistant Attorney General Pradt for the United States: The Court of Claims ignored the fact that the contract called for the steel company to furnish a patented process and that in so doing it not only warranted the validity of the patent but made an express agreement that there should be no liability on the part of the United States for royalties if the patent were judicially declared invalid. There is no estoppel against the United States asserting that the patent is invalid. Through the adoption of the process by the Government the company not only received $96,000 but the value of the process was demonstrated and made known to the world and thus enabled the company to make contracts with foreign govern

ments.

The contention of claimant that a licensee cannot set up the invalidity of the patent does not apply to this case. Walker on Patents, 3d ed. § 307. Such a holding would practically nullify the principal provision of the contract. Nor is it true that the validity of the patent can only be questioned in an action for infringement. Such an action is impossible in this case as the only users of this patent in this country are those building ships for this Government. The clause cannot properly be construed to apply to a case in which the manufacture of armor plate for the United States should be enjoined in an action for infringement by parties claiming under some patent, and asserting that the Harvey patent was invalid, because if the agents of the United States were thus enjoined, that fact itself would amount to an eviction and bring the contract to an end and thus render the clause superfluous and useless. Walker on Patents, 3d ed. § 307; Am. Electric Co. v. Gas Company, 47 Fed. Rep. 43; Consumers' Gas Co. v. Electric Co., 50 Fed. Rep. 778. The essential element in estoppel that the claimant has changed his position for the worse is wanting. If the patent was valid it was so narrow as not to include the process actually used.

There is no ambiguity in the contract and it is not permissible to consider circumstances and negotiations leading up to the

Argument for Appellee.

196 U. S.

contract. 17 Am. & Eng. Ency. of Law, 2d ed., 23; Springsteen v. Samson, 32 N. Y. 703; Muldoon v. Deline, 135 N. Y. 150; Railroad Co. v. Trimble, 10 Wall. 367; Davis v. Shafer, 50 Fed. Rep. 764.

Mr. James R. Soley and Mr. Frederic H. Betts for appellee: The court below did not err in refusing to enter into an examination of the state of the prior art to determine whether the Harvey patent was valid or invalid. A party who has contracted to pay royalties for the use of a patented process with full knowledge of what he was contracting for, and who has had the benefit of the use of such process, cannot resist payment of such royalty on the plea that the patent granted is invalid. A license under a patent never implies a warranty of validity. 3 Robinson on Patents, 692; Walker on Patents, 4th ed., 305; Stott v. Rutherford, 92 U. S. 107; Kinsman v. Parkhurst, 18 How. 289; Eureka Co. v. Bailey Co., 11 Wall. 488; Crossley v. Dixon, 10 H. of L. Cas. 306.

The validity of a patent cannot be determined in a suit against licensee for royalties, nor can the holder of a license deny the validity of a patent which he enjoys under it. Moore v. Boiler Co., 84 Fed. Rep. 346; Birdsall v. Perego, 5 Blatch. 251; Sargent v. Larned, 2 Curtis, 340; Marsh v. Dodge, 41 Hun, 278; Bartlett v. Holbrook, 1 Gray, 118; Marston v. Sweet, 66 N. Y. 207; Pope Mfg. Co. v. Owsley, 27 Fed. Rep. 105; Marsh v. Harris Co., 63 Wisconsin, 283; Magic Ruffle Co. v. Elm City Co., 13 Blatch. 151.

In order to construe the clause relating to the validity of the patent as requested by the Government it would be necessary to disregard all well settled rules of construction. Charter Gas Engine Co. v. Charter, 47 Ill. App. 36.

No contract for the use of a patent right upon the payment of royalties would create a monopoly unless it was a contract for an exclusive use, which this was not. But the principle that a licensee, acting under a license, is estopped from setting up the invalidity of the patent as a defense in a suit for royalties

is just as applicable whether the license is for the exclusive use or for any partial use, or, as in this case, for such use as the licensee desired. Marston v. Swett, 82 N. Y. 526, 533.

The Court of Claims committed no error in declining to examine the prior art in order to construe the patent, as in an action for infringement. The Government has admitted it used the Harvey process. Greenleaf on Evidence, 6th ed., 207; and it well knew what it had contracted for and what it received by its license and is now estopped from denying it used the process. Eureka Co. v. Bailey Co., 11 Wall. 492; Hobbie v. Smith, 27 Fed. Rep. 659; Andrews v. Landers, 72 Fed. Rep. 670; Sproull v. Pratt & Whitney, 97 Fed. Rep. 809. The Court of Claims, in fact, found that the process used was that described in the Harvey patent.

MR. JUSTICE HOLMES delivered the opinion of the court.

This is a claim for royalties upon a contract made between the parties to the suit under the following circumstances: The Harvey Steel Company is the owner of a patent, numbered 460,262, for a process for hardening armor plates and for armor plates. After careful experiments, made by the Navy Department, before the patent was granted, a contract was made on March 21, 1892, the material elements of which are these: It recited that the company was the owner of the patented rights to a process "known as the 'Harvey process' for the treatment of armor plate for use in the construction of vessels;" an agreement that armor plate "treated under the said 'Harvey process' " shall be applied to certain vessels; the previous giving of an option to the Navy Department "of purchasing the right to use and employ the 'Harvey process' for treating armor plates, as follows: 'We hereby agree to give to the Navy Department an option for the purchase of the application of the Harvey process for treating armor plates, which was tested at the Naval Ordnance Proving Ground, Annapolis, Md., February 14, 1891,'" on terms set forth, one of which