Kroll’s US patents

Introduction

While it is generally acknowledged that Kroll gained early financial independence in the 1920s through patent royalty revenues, it is often reported that he was unfairly treated in the United States in the 1950s, in particular as far as patent royalties for his “Titanium” patent were concerned.

In order to understand why Kroll ended up in a lengthy litigation against the government of The United States, extending over 23 years, it is important to study the sequence of events which took place between 1942 and 1965.

However, we need to go back further in time in order to fully understand what happened. In particular, we need to look at two contracts that Kroll signed with Siemens & Halske (S&H) in the years 1930 and 1934, which contracts played an important role in Kroll’s US patent portfolio.

Contracts between Kroll and Siemens & Halske

In 1955 Kroll wrote the following: [43]

My publication on beryllium electrolysis [1926] brought me in contact with the German firm Siemens & Halske which tried to develop the Stock-Goldschmidt method of beryllium production. We agreed to exchange knowledge. Later these relations brought about a contract for more intimate collaboration in the general field of rare metals. The company paid me a small retainer to keep an assistant but the bulk of the expense fell on me. I hoped to be refunded some day by the sale of patent rights.

Kroll explained in these terms the origin of his first contract with Siemens & Halske (S&H) of 1930.

In 1934 he signed a second contract with S&H. The exact content of the contracts is not known since only those clauses of the contracts that became relevant in 1947 were revealed in the course of the litigation which Kroll conducted against The United States.

1930 contract

On 23 December 1930 Kroll entered into a first agreement with S&H; the following details are known from a first court case [44]:

“The contract relates to a specified field of plaintiff's [Kroll’s] inventions, and provides for assignment of patents to the German Corporation to exploit by granting licenses, the inventor to share in the license fees and the contract to run for 13 years unless sooner terminated as therein provided.”

Kroll thus committed to assign, i.e. transfer property of patents obtained by himself, to S&H in specific fields, but reserved his right to share in the royalty fees that the patents might generate. The contract was to run until 1943 unless sooner terminated. Kroll obviously was looking for the large German corporation to promote the use of his inventions and for himself to participate in the royalties.

The 1930 contract applied to the following patents (inventions made between 23 December 1930 and 26 March 1934, date of the second contract):

Alloy (iron, nickel, beryllium):

DE 603,810 with its counterparts US 1,945,653, CA 299,984, GB 306,035, FR 669,551 and LU 16,435.

Nickel alloys:

DE 537,716 and its counterpart US 1,986,585

Process for improving the mechanical and magnetic properties of iron-nickel-beryllium alloys:

GB 392,711 and its counterpart LU 18,876

1934 contract

In the second contract, which Kroll signed on 26 March 1934 with S&H, he modified his approach by retaining full property of any patented inventions made by himself under the contract and, in counterpart, granting exclusive licenses to S&H (with the right to grant non- exclusive sub-licenses) on any patents obtained under the cooperation.

Under this deal, Kroll’s only reward was to obtain full royalties from S&H and half the royalties obtained from sub-licenses, to be granted only by S&H. The relevant clause of the contract was summarised by a US court as follows: [45]

“On March 26, 1934, Kroll entered into a contract with a German corporation called Siemens & Halske (hereinafter referred to as S&H) under which he was to collaborate with S&H in the field of thermal and electro-thermal refining and metal production processes, the manufacture of alloys, etc. The agreement provided that S&H was to receive an exclusive license on any patentable invention developed by Kroll and that S&H would also have the right to grant non-exclusive sub-licenses. The royalty rate payable was to be computed “depending on the importance of the invention”. Any royalties paid by sub- licensees were to be divided equally between the parties, share and share alike.

... in case of disagreement there should first be arbitration by two arbitrators, one named by each party, and that if they could not agree, the question should be litigated in the courts of Berlin."

Kroll declared in 1947 that the contract had been cancelled in 1938 by mutual agreement with S&H. [46]

By the time he began work with Lanners [47], preparatory to taking his samples to the United States, Kroll had cancelled his consulting contract with Siemens & Halske which had agreed to compensate him for his research by releasing all foreign rights to the titanium patent.

An article published in 1954 in a Luxembourg weekly paper reported the following: [48]

Nach der Anfrage des Patentes wollte Siemens sich nicht gegenüber Kroll verpflichten und die Firma gab ihm schriftliche Vollmacht um über die Erfinderrechte zu verfügen. [49]

However, when challenged in 1947 to prove the cancellation of the 1934 contract, Kroll was not capable of providing a document signed by S&H evidencing the cancellation.

It is difficult to understand a priori what motivated Kroll to enter into such an open agreement on future patentable inventions. Kroll provided the following explanation in 1955 [50]:

A good introduction to vacuum techniques was brought about by a job I received from Siemens & Halske, namely to produce a few kilos of barium, and to fill it into thin nickel tubes for getters.

In other words, Kroll needed to acquire knowledge on vacuum technology in order to progress in his quest for producing pure malleable titanium.

The complicated life of Kroll’s US patent applications and patents

(Vesting orders)

Luxembourg was invaded and occupied by the German Army on 10 May 1940, and so Kroll’s US patents fell under the “Trading With the Enemy Act” and became the property of the Alien Property Custodian, a US governmental body established on 11 March 1942 to administer seized (vested) “enemy” property.

The Alien Property Custodian’s Annual Report of 30 June 1944 shows the nationality of the owners whose property was seized:

For the “Alien Property Custodian”, Kroll was a national of Luxembourg and thus had the nationality of a citizen of an “Enemy-occupied” territory. The following orders were issued against him:

Order 1

On 2 November 1942 a first general vesting order (Vesting Order 296) [51] was taken against all Luxembourg nationals having applied for patents in the USA, the order including two pending patent applications filed by Kroll.

The order concerned Kroll’s patent applications:

• N° 322,930 for “Electrical resistance element” (issued later as patent N° 2,310,094).
• N° 322,931 for “Bimetallic elements and alloys useful therein” (the patent application did not proceed to grant).

Order 2

A general vesting order, Vesting Order 670 (5 April 1943) [52], was taken affecting all US patents in the name of Luxembourg entities, individuals or companies, which were in force at the time.

Kroll was the owner of two patents that were listed and formally seized:

• US Patent N° 2,246,886: "Manganese base alloy and method of making and using the same"
• US Patent N° 2,505,854: "Method for manufacturing titanium and alloys thereof"

Order 3

Another US patent of 1935 based on an invention by Kroll which had been assigned to the German company Siemens & Halske (S&H, see above) was seized by the US authorities through Vesting Order 152 (17 September 1942) [53]:

• US Patent N° 1,986,585: "Nickel alloy"

The vesting order specifically mentions W. Kroll as inventor.

Order 4

Vesting Order 2193 (12 October 1943) [54] was directed towards: 

• US Patent N° 2,029,724 (nitrided beryllium steels)

The patent had issued to Kroll, but according to Vesting Order 2193, Kroll had assigned his patent rights to Siemens & Halske A.G., Heraeus-Vacuumschmelze A.G. and Alfred Stock who in turn had granted a license to the US company Beryllium Corporation. [55]

Order 5

Vesting Order 2444 (12 October 1943) [56] was directed towards: 

• US Patent N° 1,945,653:

The patent had issued to Metal & Thermit Corporation, but according to Vesting Order 2444, it had been further assigned to Siemens & Halske A.G. [57]

The vesting order specifically mentions W. Kroll as co-inventor.

Appeal by Kroll

Kroll immediately appealed against the “vesting order” imposed on his patent application 322,931 (Bimetallic elements and alloys useful therein), see “Order 1” above.

The appeal consisted in an administrative procedure before the Office of the Alien Property Custodian. Kroll’s appeal led to “Divesting order 8” issued on 19 August 1943. [58]

Kroll thus recovered full property of one of his pending patent applications. [59]

Kroll did not appeal against the seizure of his second patent application which issued as patent No 2,310,094, “vested in the Alien Property Custodian”. [60]

There is no reason to doubt that the grounds developed by the Custodian in Divesting Order 8, admitting an error (“... the error committed in vesting said property should be corrected ...”), could also have justified a “divesting“ decision for all of Kroll’s patent interests in the USA, including his granted patents.

The “divesting order” namely reads as follows:

2. Having determined, before issuing said Vesting Order No. 296, that William Kroll was a resident of Luxembourg and was a national of a foreign country (Luxembourg):

3. Having thereafter received an executed claim by or on behalf of William Kroll, residing at Niagara Falls, New York, hereinafter called claimant, in which it was recited that the above entitled property was on the date of vesting owned by the said claimant;

4. Finding, as a result of further investigation, conducted subsequent to the date of vesting, that said property and all right, title and interest therein were at the time of vesting owned by claimant, and that the said claimant was at that time, and at all times since then has been and now is an individual residing in the United States;

5. Determining upon the basis of the facts at present known to the Alien Property Custodian that claimant is not a national of a designated enemy country;

6. Determining that the aforesaid vesting was effected by the undersigned under mistake of fact.

7. Having received no other claim or notice of claim on Form APO-1 or otherwise to the said property or to any Interest therein, or arising as a result of said vesting order, and having no knowledge of any interest in such property held by any national of any foreign country;

8. Having neither assigned, transferred, or conveyed to anyone the said property or any part thereof or any interest therein, nor issued any license with respect thereto, nor in any manner created any right or interest in any person whomsoever;

9. Determining that the error committed in vesting said property should be corrected by assigning and conveying said property to said claimant, and that such disposition of the said claim, being for the purpose of correcting a mistake in vesting such property originally, does not require the filing of any further claim, nor any further hearing; ...

Kroll, however, waited until 1947 to reclaim full property of his two most important US patents, namely the “Nickel alloy” patent and the “Titanium” patent. He probably expected to recover his rights automatically after the war. [61]

Life of the patents after the vesting orders

The “Nickel alloy” patent (US 1,986,585)

Under Kroll’s contractual obligations with S&H (see contract of 1930 above) the patent had been assigned to S&H and it issued therefore in the name of S&H, but naming Kroll as inventor.

As described above, shortly after the creation of the Alien Property Custodian, US patent 1,986,585 was seized on 17 September 1942 under Vesting Order 152 directed towards all US patents of S&H. [62] 

The Nickel alloy patent was important to Kroll since he still wished to settle a dispute he had with the International Nickel Company which had been using his invention without license for many years. Kroll wrote the following in 1965 [63]:

... Looking for a substitute for beryllium in age-hardenable nickel-base alloys, I discovered one day a considerable precipitation hardening with commercial nickel to which I had added 0.2 per cent magnesium for deoxidation ... I disclosed this fact in 1932 to the International Nickel Company, which later used this alloy for many years and sold it under the name Z-Nickel for corrosion-free springs to be used especially in fine machinery. A license agreement was ready in 1940 but the outbreak of war and seizure by the Alien Property Custodian put an end to this attempt at legalising an infringement situation.

According to the 1930 contract with S&H, Kroll had retained some rights under the patent, namely the right to regain the property of the patent after 13 years. Kroll decided to enact this clause. [64]

Kroll’s claim to the patent

In 1947 (probably in August) Kroll thus filed a claim with the Alien Property Custodian for the return of property of the patent, and in support of this claim he submitted a copy of the contract dated 23 December 1930 between him and S&H for evidencing his rights to the patent as of 24 December 1943.

The contract related to a specified field of his inventions, and provided for assignment of patents to S&H to exploit by granting licenses, the inventor to share in the license fees and the contract to run for 13 years unless sooner terminated. [65]

The question arises as to why Kroll waited until 1947 to take action. There are several plausible explanations:

• he knew that 30 April 1949 was the deadline set for appealing against vesting orders
• he expected to retrieve his patent rights automatically after the war, in 1945/46
• he did not have at his disposal the S&H agreement of 1930 [66]
• the “Nickel alloy” patent was going to expire on 13 March 1948 which could have prompted Kroll in 1947 to try to regain property of the patent prior to its expiry date.
• one Luxembourg author reports that Kroll was encouraged by his employer, the Bureau of Mines, to file a claim against the Custodian, at least as far as the “Titanium patent” was concerned. [67]

The Alien Property Custodian, having been alerted of the 1930 S&H agreement, issued almost immediately Vesting Order 10558 [68] on 9 February 1948, based on patent N° 1,986,585, but also referring to all of Kroll’s patents possibly falling under the 1930 S&H agreement ...

Vesting Order 10558

Siemens & Halske A. G. and Dr. Ing. W. Kroll

In re: Rights and Interests created in Siemens & Halske Aktiengesellschaft of Berlin, Germany, by virtue of an agreement dated December 23 1930, with Dr. Ing. W. Kroll, Luxembourg.

... the property described as follows: All interests and rights (including all royalties and monies payable or held with respect to such interests and rights, and all damages for breach of the agreement hereinafter described, together with the right to sue therefor) created in Siemens & Halske Aktiengesellschaft by virtue of an agreement dated December 23, 1930, by and between Siemens & Halske Aktiengesellschaft and Dr. Ing. W. Kroll, Luxembourg, which agreement relates, among other things, to United States Letters Patent No. 1,986,585, is property payable or held with respect to patents or rights related thereto in which interests are held by, and such property itself constitutes interests held therein by the aforesaid national of a foreign country (Germany).

All determinations and all action required by law, including appropriate consultation and certification, having been made and taken, and, it being deemed necessary in the national interest.

There is hereby vested in the Attorney General of the United States the property described above to be held, used, administered, liquidated, sold or otherwise dealt with in the interest of and for the benefit of the United States.

On 20 September 1949, almost 20 months after “Vesting Order 10558”, Kroll filed an appeal before the Washington District Court (District of Columbia) (“action for the recovery of United States Letters Patent No. 1,986,585”). [69]

The appeal was rejected on 4 April 1950, primarily on the grounds that the appeal had been filed outside the “general” statutory time limit, which had expired on 30 April 1949. Kroll’s legal advisers must have been of the opinion that the appeal could be filed within the “specific” 2-year time limit from the vesting order date, i.e. up to 9 February 1950. The Court disagreed. [70] No further appeal was filed.

The “Titanium” patent (US 2,205,854) [71]

In 1947 (probably in August, at the same time as the “Nickel alloy” appeal), Kroll applied to the Washington District Court for retrieving the full property of his “Titanium” patent. The appeal was filed timely (i.e. before the statutory limit of 30 April 1949), but it is not known on which grounds Kroll claimed the return of his patent.

Was the claim based only on the fact that his patent had been seized in error, in that he was not “a national of a designated enemy country”?

While it had been necessary to disclose the 1930 contract in the “Nickel alloy” appeal, there was no need for Kroll to reveal the 1934 contract with S&H, under which the “Titanium” patent initially fell. In Kroll’s view the contract had been cancelled in 1938 so that S&H no longer had any rights to this patent.

However, by revealing the existence of the 1930 agreement in the “Nickel-alloy” case, Kroll and his advisers must have anticipated that the Alien Property Guardian would immediately apply the content of this agreement to the “Titanium” patent as well.

In any case, from the ensuing Vesting Order 10554 (see below) it becomes apparent that the US authorities “learnt” about the existence of the 1934 agreement.

Two court decisions of the ensuing litigation give an indication on the sequence of events:

• a court decision of 1962 states: [72]

In 1947 Kroll instituted a suit in the United States District Court for the District of Columbia, ..., seeking the return of his property on the ground that he was not an alien enemy. The Custodian by that time had learned of Kroll's contract with the German firm, S&H. [73]

• a court decision of 1964 states: [74]

When Kroll initiated action to obtain the return of his vested patent, the Custodian became aware of the existence of the contract between Kroll and S&H., involved in the present suit.

The first decision would indicate that Kroll did not mention the 1934 contract with S&H.

There are a couple of reasons, however, why Kroll had an interest in disclosing the existence of the 1934 contract:

• the Alien Property Custodian was aware of Kroll’s 1930 agreement with S&H and might have been tempted to apply it to the titanium patent (to Kroll’s disadvantage, the 1934 agreement being more favourable to Kroll);
• failing to disclose the existence of the 1934 agreement could have had dramatic legal consequences and entailed a total loss of the patent (“violation of duty of disclosure”) ...

Further research may clarify this situation. In any case, the Office of Alien Property (successor to the Alien Property Custodian) became aware of the 1934 S&H agreement and issued a new vesting order.

Vesting Order 10544

The Attorney General, as Director of the Office of Alien Property and as successor to the Alien Property Custodian, issued Vesting Order 10544 on 29 January 1948 claiming to have certain rights to the patent under the 1934 S&H agreement.

In 1948, as soon as the vesting order became known to Kroll, he instituted a suit against the Attorney General in the relevant Court (Washington District Court) for the full return of the patent, i.e. without an exclusive licence attached thereto held by a third party, i.e. the Attorney General of the United States.

Essentially, Kroll argued that the contract with S&H was void under German law, but in any event that any rights of S&H in the patent were yet to be agreed since he and S&H had not completed certain arrangements which Kroll asserts were conditions precedent to creation of a completed license.

Kroll submitted further that the 1934 contract with S&H had been cancelled in 1938 by mutual agreement. However, the Court considered that Kroll could not substantiate this claim as he could not present a copy of a written agreement, which was one of the conditions for amending the 1934 agreement. [75]

On 3 April 1951, the United States District Court concluded: [76]

...the Attorney General, as successor to the Alien Property Custodian was entitled to retain an exclusive license in the Kroll patent, a right to sub-license others under the patent, a right to share equally with Kroll in the royalties from sub-licensees, and a right to bring other actions to protect the patent. The District Court held that the royalty rates at which the Attorney General could grant sub-licenses were to be agreed to by Kroll and the Attorney General or were to be set by a court order. This was in line with the original agreement between Kroll and S&H, the main difference being that the Washington Court was to replace the Berlin Court.

The District Court further held that the Attorney General was to return to Kroll title to the patent subject to the rights and interests of the Attorney General specified above, and held that Kroll was to pay to the Attorney General one-half of the compensation already received by Kroll from E. I. du Pont de Nemours & Company for a release for past infringement of the Kroll patent.

Although Kroll retrieved the property of his patent, this court decision was very damaging to him. It was not only damaging from a financial point of view but it also had a demoralising effect on Kroll. He felt discriminated against as a non-US citizen.

On 14 June 1951 he wrote to Hugues Le Gallais, Luxembourg’s ambassador in Washington: [77]

J’ai perdu ma cause contre le Alien Property Custodian, quant à mes droits de brevet dans le procédé pour faire du titane. Je dois m’arranger avec lui, et il prendra 50% de mes revenus. Cependant ni lui ni moi n’est satisfait du jugement et nous allons tous deux en appel. Ce jugement de trois pages m’a coûté 38,000 payés à mes avocats, et l’appel en coûtera bien encore une vingtaine de mille. Je ne sais pas si je pourrai tenir jusqu’au bout. Ceci est un cas très net, où l’étranger est étranglé par des avocats gouvernementaux, qui veulent se faire une carrière et qui emploient tous les moyens les plus inavouables à leurs fins. Cependant vous vous rappellerez que les intérêts du pétrole dès 1945 récupérèrent sans aucune difficulté leurs droits communs avec des firmes allemandes.

He further stated:

J’ai été invité de faire une conférence devant la Société Française de Métallurgie à Paris, et devant l’”Institute of Metals” à Milan en septembre prochain. La plus grande difficulté est d’obtenir le visa d’impôts payés. J’ai dû me rendre à Buffalo pour cela et la torture à laquelle j’ai dû me soumettre n'est pas encore terminée. Cela ne concerne que les étrangers. Les citoyens américains peuvent quitter sans rapporter à la commission des impôts fédéraux.

This perceived discrimination against a non US citizen must have prompted Kroll to apply without delay for US citizenship, which he obtained in 1952.

Appeal by Kroll

Both parties appealed to the Court of Appeals of the District of Columbia.

The decision of the lower Court was upheld and confirmed as such on 17 July 1952 and the parties were called to agree within 30 days of the judgement on the rate of the licensing fees. The parties could not agree. The Court therefore set the fees the following year.

On 1 December 1953, the United States District Court authorised the Attorney General: [78]

to grant sub-licenses under the Kroll patent

• at the rate of 5 percent of the gross sales price of the first 50,000 pounds of titanium, in sponge, powder and ingot form, produced in accordance with the process claimed in the Kroll patent,
• at the rate of 3 percent on the next 50,000 pounds, and
• at the rate of 1 percent on all in excess of 100,000 pounds.

The court order provided that the above 5-3-1 percent rates applied to production after 3 April 1951, and that each licensee should pay one-half of said sub-license royalty direct to Kroll.

On 15 March 1954 Kroll complained to the Luxembourg ambassador: [79]

Hélas, pour ce qui est de la rémunération monétaire de mon travail, il en est autrement. Le gouvernement des Etats Unis s’approprie d'abord 50% des redevances de mon brevet concernant la production de titane, puis l'impôt fédéral prend 85%, l’Etat de l'Orégon 5% de sorte qu'il me restera 5% du total. En outre l'impôt fédéral n'a accordé que 450 dollars par an comme capitalisation de mes frais de recherche. Le journal “Modern Metals” a fait savoir ces choses au public. [80]

In an interview published in the US newspaper “Henderson Home News” in 1954 the local reporter - who met with Kroll during his visit to the Henderson titanium factory - reports as follows [81]:

Dr. Kroll smiles wryly when the matter of his long fight with the US Alien Property Custodian regarding royalty rights is mentioned. This episode reveals that a patent, no matter how important and valid, can sometimes become an expense and a liability to the owner.

He explains that presently, under the government’s decision he would have to pay 90 per cent of royalties as federal tax and 5 per cent as state taxes.

After explaining this, he shrugs and remarks. “S-o-o!"

Kroll was bitter about the final decision and gave an additional interview to the New York Times, published in 1954. [82] He seemed to be resigned and wished to leave the whole matter behind.

Virtually all of the commercial production of titanium so far has been by the Kroll process, but its inventor has yet to receive a penny in royalties.

Dr. William J. Kroll of Luxembourg, a quiet genius of modern metallurgy, tried repeatedly in the late Nineteen Thirties to interest American companies in the strong, lightweight metal titanium, but without success. Nevertheless, just before Hitler invaded Luxembourg in 1940, Dr. Kroll disposed of his laboratory there and brought his titanium work to the United States.

Here his patents were confiscated by the Alien Property Custodian, and Dr. Kroll has been engaged for the last six years in litigation to clarify their status.

Recently the United States Court of Appeals ruled in effect that the inventor was entitled to only half of the royalties on his process. It ruled that a German concern under whose auspices the process was developed had never actually signed all of the patent rights over to Dr. Kroll but had merely indicated its intent to do so. The court also fixed the royalty rate at 1 per cent of the sales price of titanium metal sponge, now $4.46 to $4.72 a pound.

Dr. Kroll, a shy and scholarly man who speaks excellent English with just a trace of accent, said the other day that royalty negotiations with the titanium producers were well advanced and he hoped within a few weeks to be paid his one-half of 1 per cent, retroactively.

“I don’t expect the amount to cover the litigation costs and the $250,000 of my own funds I invested in developing the titanium reduction process,” he said.

Then he added sadly: “It is the wasted time I mind most. I’ve had neither the time nor the funds to continue my research while this litigation was dragging on. Six years is a long stretch when one is 65 and eager to get on with his work.”

Sale of the patent

On 11 August 1954 Kroll “sold” his patent and thereby assigned all of his patent rights (patent ownership and royalties due from the exclusive license held by The United States) to the largest titanium production licensee in the U.S.A., Titan Metals Corporation, a Nevada corporation. [83]

On 6 August 1954 Titan Metals Corporation changed its name to Vista Corporation. Vista Corporation was dissolved in November 1955 and the stockholders of Vista Corporation acquired Kroll’s patent rights in their personal names.

The new owners of US patent 2,2054,854 were: [84]

Henry A. CAREY, Jr.

Edwin D. HICKS

J. Pierre KOLISCH 

Joseph SCHULEIN

At that time the US Government decided to promote the production of titanium which was needed for jet planes, etc. It was the time of the Korean war.

In May 1954 the Business and Defence Services Administration issued an order, requiring producers of titanium to channel all of their output to defence contractors in accordance with allocations and priorities set up by this agency. [85]

The patent expired on 25 June 1957. By that time the exclusive licensee of the patent and its sub-licencees had paid the amount of $1,786,083 to Kroll and his successors.

On 15 March 1958, after the expiry of the patent, the 4 owners, Carey et al. (successors to Kroll), filed a suit against The United States claiming that the State had not paid the correct royalties during the period extending between 1 August 1951 and 25 June 25 1957.

On 6 April 1960, the Court had to look at two issues: [86]

1) who was the beneficiary of the titanium produced under Kroll’s “Titanium” patent?

So the test is, whether the production is by the original licensee (exclusive license) or for the use of the original licensee (sub-license) or for the sub-licensee himself or for someone else.

Plaintiffs [Carey et al.], on the other hand, contend that the manufacturers produced titanium on behalf of the Government and completely for its purpose. Therefore, they conclude that the production by the contractors was production by defendant itself [The United States]and, hence, defendant is bound to pay the full royalty to the owners of the patent.

The Court agreed with the plaintiffs (Carey et al.) and essentially decided that the total amount of titanium produced was to the benefit of The United States, whether produced directly by it or commissioned from sub-licensees. The full royalties had therefore to be paid to the patent owners.

2) which royalty rate was to be applied?

Beginning in 1951, defendant [The United States]entered into a series of contracts with private manufacturers under which these producers would construct or expand facilities for producing titanium by the Kroll process. There were a total of eleven separate agreements made with five domestic producers.

The parties agree that, during the period here involved, these various producers paid $1,786,083 to Kroll and his successors in title and a like amount to the United States.

The parties agree on the total quantity produced but they disagree on the question of a proper royalty under the contract. The agreement between Kroll and S&H expressly left this matter for future determination; Article 5 provides that "The amount of the royalties to be paid by S&H to Dr. Kroll is to be computed depending on the importance of the invention.”

We remanded the case to our Commissioner to determine: (a) a proper royalty under the contract; (b) whether all the titanium was produced under the exclusive license or all or a part under sub-licenses granted by the exclusive licensee; and (c) the total amount of production by the patented process.

Our Commissioner, acting pursuant to the terms of the reference, heard testimony and received other evidence pertaining to the proper amount of a royalty for use of the Kroll process.

He found that the graduated 5-3-1 percent royalty rate fixed by the District Court in 1953, when applied to the prices received by defendant's licensees throughout this period, produced an average royalty of 1.14 percent.

He concluded that this royalty rate was a proper one, considering "the importance of the invention”, and should be applied to all production during the relevant period, even though such production was pursuant to defendant's exclusive license.

The average royalty rate of 1.14 percent of the sale price, based on the graduated 5-3-1 percent sub-license royalty rate authorised in 1953 by the U.S. District Court, is a proper royalty rate for application in the present case, considering the importance of the Kroll invention noted in finding 8 and considering the volume of titanium production summarised in Table B.

Application of the 1.14 percent royalty rate and the average $4.05 price per pound to this figure produces a total royalty of $1,510,106.98.

The Court concluded:

Plaintiffs are entitled to recover $850,562.60, and judgment will be entered in their favour for this amount.

In 1965 Kroll - having already left the US for Belgium - commented on the final decision as follows: [87]

There was also a human side to this story, that of the seizure by the United States Government of my titanium patent rights, and the subsequent seven years of prolonged litigation. This ended recently with a judgement of the Court of Claims, which gave me a partial satisfaction for the time lost, and stated that the Government could not take royalties on any titanium sponge bought for the stockpile or produced by the Government itself.

According to a US publication, Kroll received in 1965 “royalties said to total more than $200,000” [88] and the publication adds: “which he donated to several U.S. and European universities for research and scholarships”. [89]

Tax Court decision of 24 July 1962

The 4 owners of the “Titanium patent”, Henry A. CAREY, Jr., Edwin D. HICKS, J. Pierre KOLISCH and Joseph SCHULEIN, appealed against an assessment by the US Tax Authority of the value of the Kroll patent when they bought it in 1954. The case ended in a US Tax Court in 1963. [90] The facts listed in the Tax Court’s decision provide a very comprehensive summary of Kroll’s case against The United Sates.

It also contains the following sentence which explains Kroll’s disappointment and frustration in relation with his invention made back in 1937. Although the US Government had started using Kroll’s process in 1951 it had not as yet paid any license fees up to 1954:

Prior to the August 11, 1954 contract between William Kroll and Titan Metals Corp., the inventor had received no royalties from said patent and had incurred substantial expenses in connection therewith.

Final note

The decision to claim the property of the “Nickel-alloy” patent in 1947 on the basis of the 1930 contract with Siemens & Halske (S&H) was the start of Kroll’s problems with The United States.

The fact of revealing the existence of his first contract with S&H of 1930 put him in a position forcing him to bring forward the second contract with S&H of 1934 as well. In Kroll’s view the 1934 contract had been cancelled in 1938 and S&H did not have any rights to his “Titanium” patent. The US Courts interpreted the contract (which obviously had been poorly drafted) in a very restrictive and legalistic manner to the disadvantage of Kroll.

In 1943 the Alien Property Custodian (in Divesting Order n° 8) conceded that Kroll’s property should not have been seized and that he was therefore entitled to regain his patent property in the USA. Kroll could have avoided the legal problems with the “Titanium” patent, if he had not tried to claim back the “Nickel-alloy” patent; in the end, he did not even succeed in the latter action and had to wait until 1962 to obtain the final backdated royalties for the “Titanium” patent.

It must be concluded that Kroll was ill advised by his legal team.

The fact that the US Government was determined to pay as little as possible to Kroll is understandable as well since the Government invested a lot of financial means into perfecting Kroll’s invention of 1938 into a viable commercial process as late as 1951.

The following quote of Kroll’s involvement in the litigation speaks for itself: [91]

Kroll ist als echter Wissenschaftler nicht sonderlich um seine materiellen Interessen besorgt.

In the end the “Titanium” patent generated a total of $ 2,636,645.60 [92] in royalties to Kroll and the 4 associates to whom he sold the patent in 1954.

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____________________________________________________________________________________________________________

[43] Journal of the Franklin Institute, Vol. 260, September 1955, page 180

[44] KROLL v. McGRATH, U. S. Atty. Gen., United States District Court, District of Columbia. April 4, 1950.“91 F.Supp. 173 (1950)”

[45] Cases decided in The United States Court Of Claims January 1, 1964, to February 28, 1964, page 322

[46] Black Sand : “The history of titanium”, Kathleen L. Housley, 2007, page 124, footnote 21

[47] Nicolas Lanners was a Luxembourgish engineer who had founded in 1931 the company Cerametal in Bereldange; Cerametal was equipped for drawing molybdenum and tungsten filaments for use in incandescent light bulbs.

[48] d’Letzeburger Land, 1954, N° 50, pages 3-4, TITAN, das strategische Leichtmetall Nr. 1 und sein Pionier, der Luxemburger, GIG KROLL (author not mentioned, but article probably written by Robert Stümper, a close friend of Kroll)

[49] no evidence of such a written amendment to the original agreement was provided to the US courts

[50] Journal of the Franklin Institute, Vol. 260, September 1955, page 178

[51] Federal Register, Volume 7, No 232, 26 November 1942, page 9842

[52] Federal Register, Volume 8, No 76, 17 April 1943, pages 5003-5004

[53] Federal Register, Volume 7, No 202, 14 October 1942, page 8322

[54] Federal Register, Volume 8, No 208, 13 October 1943, page 13987

[55] Presumably pursuant to his 1930 contract with Siemens & Halske

[56] Federal Register, Volume 8, No 238, 1 December 1943, page 16224

[57] This patent, filed prior to 1930 did not fall under the scope of Kroll’s 1930 contract with Siemens & Halske

[58] Federal Register, Volume 8, No 208, 13 October 1943, page 13991

[59] The patent was never granted (withdrawn or refused?)

[60] It is possible that Kroll appealed, but that the Custodian’s decision to return the patent application to Kroll did not reach the US Patent Office in time before the grant date of the patent.

[61] In 1951, in a letter to the Luxembourg ambassador in Washington, Kroll complained about the difficulties he encountered for retrieving his patent rights after the war, and in this context he wrote: “... vous vous rappellerez que les intérêts du pétrole dès 1945 récupérèrent sans aucune difficulté leurs droits communs avec des firmes allemandes.” Kroll probably alluded to cases where some US and German (oil?) companies were automatically reinstated in their rights after the War.

[62] Federal Register, Volume 7, No 202, 14 October 14 1942, page 8322

[63] Journal of the Franklin Institute, Volume 260, No 3, September 1965, pages 169-192.

[64] The US authorities did not know about this particular clause of the agreement since Kroll did not have to produce a copy of the agreement with S&H when he assigned his patent rights to S&H in 1930.

[65] Kroll v. McGrath, 91 F. Supp. 173 - Dist. Court, Dist. of Columbia 1950

[66] d’Letzeburger Land of 10/12/1954, page 4: in 1947: “Gig Kroll kehrte nach Luxemburg zurück und es gelang ihm eine Abschrift seines Kontraktes mit Siemens aufzustöbern, welche er der Sequesterverwaltung sogleich übergab.”, (Kroll left the USA for Luxembourg in August 1947 and returned to the USA in February 1948.)

[67] d’Letzeburger Land of 10/12/1954, page 4: “Kroll ist als echter Wissenschaftler nicht sonderlich um seine materiellen Interessen besorgt. Über den Arbeiten am Magnesium und Zirconium vergaß er die Sache mit dem Titanpatent. Doch inzwischen hatte die Titanherstellung gewisse Ausmaße genommen. 1947 besprach Kroll die Sache mit den Leitern des Bureau of Mines.”

[68] Federal Register, Volume 13, No 61, 27 March 1948, page 1635

[69] Kroll v. McGrath, 91 F. Supp. 173 - Dist. Court, Dist. of Columbia 1950

[70] Clearly a fault of his legal advisers for ignoring the statutory time limit: the decision subject of the appeal was dated 9 February 1948

[71] The file history of the “Titanium” patent is summarised in the annex below

[72] American Federal Tax Reports, Vol 10, 1965, pages 5659-5664

[73] The phrase: “The Custodian by that time had learned” would suggest that Kroll did not declare the existence of the 1934 agreement with S&H, but that the Custodian was aware only of the 1930 agreement which formed the basis for reclaiming the property of the “Nickel-alloy” patent.

[74] Henry A.Carey, Jr., Edwin D.Hicks, J.Pierre Kolisch and Joseph Schulein vs The United States, Report of decisions of the Supreme Court in Court of Claims cases, 1964, pages 304-332

[75]  Kroll v. McGrath, 199 F.2d 187 (1952)

[76] Henry A.Carey, Jr., Edwin D.Hicks, J.Pierre Kolisch and Joseph Schulein v. The United States, Report of decisions of the Supreme Court in Court of Claims cases, 1964, pages 304-332

[77] Archives Nationales, AE-AW-0457

[78] Kroll v. Herbert Brownell Jr., Attorney General, Civil Action 4845-48. 79 Archives Nationales, AE-AW-0457

[80] Modern Metals, January 1954, pages 498 ??? (could not be located) 

[81] Henderson Home News, 25 March 1954, page 1

[82] New York Times, 21 November 1954, page 12

(N.B. : The title of the article : Titanium genius still to be paid, metallurgist who invented way to produce it has received nothing in royalties is misleading. Kroll had probably not as yet received royalties from the Government but had received a compensation from Du Pont de Nemours for past infringement of his patent since 1948, see above.)

[83] The conditions of this sale are not known but reports about the outcome of a suit filed by the new owners against the US State relating to licensing fees under the patent indicate that Kroll shared in the financial awards finally imposed by the Court in 1965.

[84] Schulein was an academic at the Oregon State University and well known to Kroll:

“En février 1951, Kroll s’associa au professeur Schulein pour continuer ses recherches en métallurgie à Oregon State University. Ayant acheté une maison à Cornvallis (Oregon), Kroll y créa la Métal Research Foundation dotée largement par les revenus de ses brevets. “ (L’Athénée et ses Grands Anciens, 2003, Volume II, page 364)

[85] Carey, et al. v. United States, 149 Ct.Cl. 587 (1960) 86 Carey, et al. v. United States, 149 Ct.Cl. 587 (1960)

[86] Carey, et al. v. United States, 149 Ct.Cl. 587 (1960)

[87] Journal of less common metals 1965, pages 361-367 88 some $ 1,700,000 at today’s rate (2021)

[88] some $ 1,700,000 at today’s rate (2021)

[89] Modern Metals 1965, page 98

[90] American Federal Tax Reports, Volume 2; Volume 10 - Prentice-Hall, 1963, Schulein vs U.S., page 5659 ff (case 10 AFTR 2d 5659)

[91] d’Lëtzeburger Land, 10 December 1954, page 4 

[92] around $ 20,000,000 at today’s rate (2021)