Certiorari was granted in this case February 5, 1945, 324 U.S. 832, 65 S.Ct. 587, 89 L.Ed. 1398, on a petition addressed to the question of the constitutionality of the Royalty Adjustment Act of October 31, 1942, and of Royalty Adjustment Order No. W-3, issued by the War Department July 28, 1943. We find now, however, that the Circuit Court of Appeals had before it, not only the constitutional question, which was decided, but also a nonconstitutional question, which might properly have alone served as an adequate ground on which to dispose of the appeal. This non-constitutional question was neither considered nor decided by the court below, nor argued here. We have concluded, therefore, that we should not pass on the constitutional question at this time, but should vacate the judgment of the Circuit Court of Appeals, and remand the case to it for decision of any non-constitutional issues material to the appeal.
To explain the reasons for this conclusion, we must state the history of the present proceedings in some detail.
They were begun by a complaint in a District Court filed by respondent, The Timken-Detroit Axle Company, against petitioner, Alma Motor Company, asking a declaratory judgment as to their respective rights under a patent held by Alma and a coextensive license from Alma to Timken. The complaint alleged the existence of the patent, purporting to cover certain 'transfer cases', or auxiliary automotive transmissions, and the license, by which Timken was authorized to manufacture the patented articles and required to pay certain specified royalties. It further alleged that Timken was engaged in manufacturing various designs of transfer cases, that some of these were once believed to have been covered by Alma's patent and had been made the subject of royalty payments, but on the basis of later information Timken had concluded that none of them were covered, and that the patent was invalid. It asked for a judgment confirming this conclusion.
Alma answered, claiming that all Timken's transfer cases were covered, that the patent was valid, and that Timken was estopped from challenging validity, and counterclaimed for a money judgment for unpaid royalties.
Following a trial, the District Court filed findings and an opinion, and entered judgment December 2, 1942. It held Timken estopped from challenging the validity of Alma's patent; that certain specified types of Timken's transfer cases (generally those denominated T-32 and T-43) were covered by the patent and license; that Timken was indebted to Alma for royalties thereon; and that other types (generally those denominated T-79), were outside the patent and license. The court indicated that unless the parties could agree on the amount of the royalties so held to be payable, a special master would be appointed to determine the amount.
Shortly before this judgment was entered, Congress enacted the Royalty Adjustment Act, which Alma seeks to attack here. The primary purpose of this Act was to reduce royalties for which the United States was ultimately liable on inventions manufactured for it by a licensee, from pre-war rates to rates appropriate to the volume of production in war-time. Whenever during the war a government contractor manufactured under a license, and the royalties seemed excessive to the head of the department concerned, the latter was empowered to stop payments by notice to the licensor and licensee, and after a hearing, to fix by order 'fair and just' royalties, 'taking into account the conditions of wartime production.' Thereafter, the licensor could collect royalties from the licensee only at the rate so determined. If the licensor felt that the reduction was unfair, his remedy was by suit against the United States in the Court of Claims, where he could recover 'fair and just compensation * * * taking into account the conditions of wartime production.' Whatever reduction was effected by the order was to inure to the benefit of the United States.
The notice, stopping payment of royalties from Timken to Alma, was issued by the War Department December 30, 1942. Royalty Adjustment Order No. W-3 followed on July 28, 1943, fixing a 'fair and just' royalty at zero. The basis of this determination was the alleged invalidity of Alma's patent, which the United States claims that the Act permits it to assert.