April 3, 1944.
Robert A. Littleton, of Washington, D.C., for plaintiff.
Daniel F. Hickey, of Washington, D.C., and Samuel O. Clark, Jr., Asst. Atty. Gen. (Fred K. Dyar, of Washington, D.C., on the brief), for defendant.
Before WHALEY, Chief Justice, and WHITAKER and MADDEN, Judges.
Action by Aktiebolaget Imo-Industri against the United States to recover internal revenue tax paid.
This case having been heard by the Court of Claims, the court, upon the evidence and a report of a commissioner, makes the following special findings of facts:
1. Plaintiff, Aktiebolaget Imo-Industri (usually referred to in the documentary evidence herein as "IMO"), is a corporation organized and existing under the laws of the Kingdom of Sweden with offices and principal place of business at Stockholm, Sweden. It maintains no office or place of business in the United States, and is not engaged in a trade or business in the United States.
2. The tax in controversy amounts to $1,650 and was assessed and collected under the provisions of Section 144 of the Revenue Act of 1938, 26 U.S.C.A. Int. Rev. Code § 144, on $11,000 paid to the plaintiff during the year 1938 by Pittsburgh Equitable Meter Company under the provisions of a license agreement and negotiations leading up to the execution of that agreement, dated April 1, 1938.
3. The tax of $1,650, together with $21.93 accrued as interest thereon, was paid by the Pittsburgh Company on the 7th day of September 1939, but not having been withheld by it at the time it made the payment of $11,000 to plaintiff under the agreement, the amount of the tax was refunded to the Pittsburgh Company by plaintiff on or about October 6, 1939, and on or about November 2, 1940, plaintiff filed with the Collector of Internal Revenue for the Twenty-third District of Pennsylvania, a claim for the refund of the tax and interest. The claim for refund was rejected by the Commissioner of Internal Revenue on or about September 20, 1941, and this suit was filed on May 28, 1942.
4. The agreement of April 1, 1938, provided for the sole and exclusive right and license by the Pittsburgh Company during the continuance of the agreement, to manufacture, use, and sell in the United States of America and its possessions all types and sizes of meters for measuring all kinds of liquids embodied in inventions owned by the plaintiff. It provided, among other things, that the license therein granted was subject to the restrictions and conditions therein set forth. Except as otherwise provided therein the agreement was to continue in full force and effect until May 4, 1954. The Pittsburgh Company was given the right to cancel the agreement upon three months' previous written notice to plaintiff, to take effect as of the end of the second contract year, or thereafter at the end of any following contract year, if in the opinion of the Pittsburgh company it became no longer profitable to manufacture and sell meters manufactured under plaintiff's patent. By agreement of the parties the contract might continue beyond May 4, 1954.
5. The pertinent portions of the agreement are as follows:
"1. IMO hereby grant to PEMCO the full, sole, and exclusive right and license, during the continuance of this agreement, to manufacture, sell, and use in the United States of America and its possessions all types and sizes of meters (including composite parts and spare parts) for measuring all kinds of liquids embodying the inventions, or any of them, disclosed and covered in the U.S. Patents enumerated in Schedule A, together with all improvements embodying said subject matter which IMO may discover or acquire (whether the same shall be patented or not, during the continuance of this agreement; this license being subject to the restrictions and conditions hereinbelow set forth.
"2. PEMCO is also hereby licensed by IMO to use the trade name or mark `IMO' either alone or in combination with the trade names PEMCO, EMCO or any other trade name or trade-marks of the Pittsburgh Equitable Meter Company, this trade-mark license to run concurrently with the patent license of paragraph 1; and PEMCO hereby agrees that the mark IMO or the combined mark shall be affixed to all IMO meters manufactured by PEMCO or its sublicensees hereunder; it being understood and agreed that the mark IMO is and shall remain the property of IMO, and that PEMCO and sublicensees shall assign all trade rights therein to IMO on termination of license or sublicense.
"3. It is understood and agreed that PEMCO shall, during the continuance of and under this license, have the nonexclusive right to export IMO meters from the United States into any country wherein IMO has not secured patent protection covering such exported meters; subject to the payment of the same royalty thereon as on meters made or sold for the U.S. market; and for the purposes hereof IMO agrees to give reasonably prompt notice to PEMCO of all relevant patents hereafter granted to it or its representatives or licensees in foreign countries."
"6. IMO hereby grants to PEMCO the right to grant sublicenses to manufacture and sell in the United States IMO meters and composite and spare parts in accordance with this agreement; and PEMCO hereby agrees to inform IMO immediately of any and all such sublicense agreements, and to furnish a full copy of each thereof, giving the address of each sublicensee; and it is understood and agreed as to such sublicensees as follows; (a) they shall be no less restrictive than this license, (b) they shall carry sublicense royalties no lower than this license, (c) sublicensee reports shall be rendered in duplicate, one copy each to IMO and PEMCO, (d) both PEMCO and each sublicensee shall be responsible to IMO for full performance by sublicensees, (e) sublicenses shall be specified to terminate upon the termination of this license subject to continuance at the will of IMO, and (f) this paragraph is subject to all restrictions and conditions hereinbelow set forth."
"17. By way of consideration for the granting of license to PEMCO by this agreement, PEMCO hereby agrees to pay IMO a royalty at the rates given in Paragraph 18 on the entire turn-over or gross sales price in the sale or other disposal, in the United States or by export, of all meters and composite parts and spare parts manufactured or sold by PEMCO and/or any of its sublicensees under said patents. In the case of an IMO meter which is sold as a part of compound meter, or any other equipment, the usual sales price of the IMO meter alone shall decide the royalty payable; but if the price of this IMO meter cannot be ascertained, then the royalty shall be based upon the price of the largest IMO meter constructed with a capacity no greater than such compound meter. A meter is to be considered sold when it has been invoiced to the customer, or if not invoiced when it has been shipped or placed in the custody of a common carrier or agent for the customer. The entire turn-over aforesaid is to be taken as the entire or gross sales prices of meters, etc.; from these however PEMCO may deduct an allowance for expenses, such as packing, carriage, duty, commissions, recovery costs, and stamps. This allowance or deduction from gross sales prices shall for all water meters be calculated as a flat 33 1/3%, and the schedule of royalty specified in paragraph 18 shall therefore be based upon 66 2/3 of the gross turn-over thereof, whether sold or exported by PEMCO or its sublicensees. For oil meters and all except water meters the royalties shall be calculated upon the entire sales prices after deducting a 10% allowance for expenses such as packing, freight, duty, and commissions. However, it is especially agreed, as to PEMCO but not sublicensees, in consideration of the down payments stipulated in paragraph 21, PEMCO shall not have to pay any royalties for sales made in the United States during the first two years of this agreement."
"21. As an assurance that PEMCO will make every endeavor to proceed with and expedite the manufacture and sale of IMO meters, PEMCO hereby agrees to pay IMO the following advance payments:
(a) At the time of the signing of this agreement for the territory of the United States and its possessions dollars .. $12,000
(b) On the day when PEMCO gives notice to IMO that PEMCO elects to use the right according to paragraph 5 for the territory of Canada .................. dollars .. 3,000
(c) Same, for the territory of Mexico ........... dollars .. 3,000
And for assurance of continued promotion of the business PEMCO guarantees further yearly payments of royalties amounting to the following minima:--------------------------------------------------------------------------------- | For United | For each of | States and its | Mexico and | possessions | Canada --------------------------------------------------|----------------|------------- For the third year ................... Dollars .. | $5,000 | None For the fourth year ..................... do .... | 7,000 | $500 For the fifth year ...................... do .... | 9,000 | 1,000 For the sixth year ...................... do .... | 10,000 | 1,500 For the seventh and succeeding years .... do .... | 10,000 | 2,000 --------------------------------------------------------------------------------- "And PEMCO agrees that when the royalties reported and paid for any year fall short of the minima thus specified, it shall within one month after the end of such year pay to IMO the deficiency or amount necessary to make up the full amount of such minimum royalty."
6. Negotiations for the agreement were initiated by R.W. Cramer, of R.W. Cramer Company, Inc., of 67 Irving Place, New York City, N.Y., an independent manufacturer's agent or broker, by a letter of September 4, 1935, addressed to Willard Rockwell, President, Pittsburgh Equitable Meter Company, and when it was finally agreed in March 1938 that the Pittsburgh Company would pay the amount of $12,000 for rights covered by the license agreement, it was instructed by plaintiff to pay $1,000 of said amount to R.W. Cramer Company, Inc., as commissions, and pay the balance to plaintiff.
7. For the first two years of the license agreement of April 1, 1938, the Pittsburgh Company possessed the right to manufacture, use, and sell meters in the United States without further payment to the plaintiff in regard to the meters manufactured, used, or sold; but after the end of the first two years of the agreement specific royalties on the meters manufactured and sold by the Pittsburgh company were payable, and for the third and subsequent years of the agreement, minimum royalty payments were provided for.
8. The Pittsburgh company acquired, by the agreement of April 1, 1938, the exclusive right to the use of the inventions in the United States for a period of ten years if it elected to continue to manufacture, use, and sell the meters produced under said inventions after the second year of the agreement.
9. The agreement of April 1, 1938, was executed by plaintiff at its domiciliary office and place of business in Stockholm, Sweden, and the preliminary agreement for such license agreement, signed by R.W. Cramer, was authorized by radiogram from plaintiff of March 21, 1938, and the preliminary agreement thus signed by R.W. Cramer was subject to acceptance by plaintiff in Sweden. The final agreement of April 1, 1938, was first signed in duplicate by plaintiff in Sweden, and thereafter one copy was signed by the Pittsburgh company at Pittsburgh and returned to plaintiff.
10. The tax involved in this proceeding was exacted by the United States upon the theory that the amount of $11,000 paid plaintiff by the Pittsburgh company, as provided in the agreement of April 1, 1938, was in the nature of a royalty payment for the right to manufacture, use, and sell meters under the inventions of plaintiff. Plaintiff's contention is that the $11,000 was consideration for the assignment of a property right or interest in the patents.
11. It has not been proved that the Kingdom of Sweden accords to citizens of the United States the right to prosecute claims against the Kingdom of Sweden in the courts of Sweden.
The plaintiff, a Swedish corporation, made an agreement with the Pittsburgh Equitable Meter Company whereby the latter company was given the privilege of using the plaintiff's patents in the manufacture of meters. The Pittsburgh company paid $11,000 to the plaintiff for this privilege for the first two years of the arrangement, and was to pay, if it did not cancel the arrangement, royalties at a specified rate per meter thereafter. The Commissioner of Internal Revenue took the position that the $11,000 paid was a royalty payment, from which the American payer should have withheld a tax of $1,650 as required by Sections 119(a)(4), 143(b), and 144 of the Revenue Act of 1938, 52 Stat. 447, 26 U.S.C.A. Int.Rev. Code §§ 119(a)(4), 143(b), 144. It collected the $1,650 from the Pittsburgh company, which was reimbursed by the plaintiff.
The plaintiff, asserting that its transaction with the Pittsburgh company constituted an assignment or sale of a part of its patent rights which were incorporeal property situated in Sweden, and that upon that transaction no tax to the United States was due, filed a timely claim for refund, which was rejected. This suit followed.
Since the plaintiff is a corporation formed under the laws of the Kingdom of Sweden, Section 155 of the Judicial Code, 36 Stat. 1139, 28 U.S.C.A. § 261, seems to be applicable. That section says:
"Aliens who are citizens or subjects of any Government which accords to citizens of the United States the right to prosecute claims against such Government in its courts, shall have the privilege of prosecuting claims against the United States in the Court of Claims, whereof such court, by reason of their subject matter and character, might take jurisdiction."
We think the plaintiff has the burden of showing that this apparent condition precedent to jurisdiction exists. It has made no such showing. Instead, it urges that Section 155 is not applicable, since Section 145 of the Judicial Code, 36 Stat. 1137, 28 U.S.C.A. § 250, confers jurisdiction upon the court to hear and determine, inter alia, claims founded upon "any law of Congress," and a claim for the refund of taxes illegally collected is such a claim. But Section 155 assumes that the alien's claim is one which satisfies the jurisdictional specifications of the statute defining the jurisdiction of the court as to "subject matter and character." We think that Section 155 denies consent to an alien, who does not show the reciprocal right to sue in the courts of his country, to sue on any claim in this court, unless the statute consenting to the suit on his particular type of claim is interpreted as not being qualified by Section 155. In the case of Russian Volunteer Fleet v. United States, 282 U.S. 481, 51 S.Ct. 229, 75 L.Ed. 473, the court construed the act of June 15, 1917, 40 Stat. 183, which provided for wartime expropriation of ships and for just compensation to be recovered in this court as not being qualified by Section 155. It was guided to that construction by the fact that the 1917 act provided a procedural method of fulfilling the requirement of the Fifth Amendment that "just compensation" be made to the owner, whether citizen or alien, when his property is expropriated for public use. We could not give that construction to the provision of the statute giving us jurisdiction over claims "founded upon * * * any law of Congress," Judicial Code, Section 145, 28 U.S.C.A. § 250, under which provision the plaintiff is suing, without substantially nullifying Section 155. Choremi v. United States, D.C., 28 F.2d 913.
We conclude, therefore, that the evidence fails to show that we have jurisdiction, and that the petition must be dismissed.
It is so ordered.