Decary,
J:—This
is
an
appeal
to
this
Court
from
a
judgment
of
the
Tax
Review
Board
whereby
an
amount
of
$378,000
received
by
plaintiff
from
the
Government
of
the
United
States
of
America,
for
licence
to
use
background
data
and
for
licence
under
patents,
was
held
to
be
income
under
the
Income
Tax
Act,
RSC
1952,
c
148.
The
evidence
produced
before
the
Tax
Review
Board
was
filed
in
Court.
Seven
years
earlier,
on
June
30,
1960,
plaintiff
had
acquired
from
A
B
Chematur,
hereinafter
Chematur,
a
firm
in
Sweden
of
some
twenty
engineers,
certain
rights
in
four
patents,
rights
to
future
patents,
rights
to
data
and
know-how,
all
pertaining
to
the
production
of
TNT
by
continuous
process.
The
said
agreement
reads
as
follows:
In
.
the
course
of
recent
conversations
between
representatives
of
our
respective
companies,
we
discussed
the
terms
under
which
you
would
be
prepared
to
sell
us
information
and
rights
under
your
continuous
TNT
nitration
and
purification
process.
We
now
wish
to
record
our
mutual
understanding
in
this
respect.
1.
Chematur
undertakes
to
communicate
to
C-I-L,
as
and
when
C-I-L
may
so
request,
complete
design
and
operating
information
on
its
continuous
TNT
nitration
and
purification
process,
including
detailed
flow
sheets
and
detailed
drawings
and
descriptions
of
equipment.
2.
In
full
consideration
of
the
information
supplied
above,
C-/-L
will
pay
Chematur
a
sum
equal
to
Chematur’s
engineering
costs
for
supplying
such
information
(including
the
time
devoted
to
writing
reports
on
the
technical
aspects
of
the
process)
plus
110%
of
such
costs
to
cover
overhead.
The
total
sum
paid
hereunder
will
be
deducted
from
the
price
of
such
equipment,
designed
by
Chematur,
as
C-I-L
may
purchase
from
Chematur.
We
understand
you
estimate
that
the
nitration
equipment
as
itemized
in
your
letter
of
19th
September,
1958,
but
for
a
larger
output
of
1400
lb/hr,
would
now
cost
us
approximately
$80,000
(Canadian),
and
that
on
a
similar
basis
the
purification
equipment
would
cost
us
in
the
vicinity
of
$15,000
to
$20,000
(Canadian).
3.
Chematur
shall
grant
to
C-l-L
non-exclusive
irrevocable
licenses
under
any
patent
rights
in
Canada
and
any
know-how
relating
to
the
continuous
TNT
nitration
and
purification
process.
Such
licenses
shall
include
the
right
for
C-l-L
to
export
its
products
to
any
country
other
than
Norway.
4.
If
C-l-L
builds
the
first
TNT
plant
to
commence
operation
using
the
Chematur
process
then
the
following
conditions
will
apply:
(a)
The
grant
of
licenses
to
C-l-L
pursuant
to
paragraph
3
above
shall
be
royalty-free.
(b)
Chematur
will
grant
non-exclusive
royalty-free
licenses
under
the
process
and
any
relevant
patents
to
Imperial
Chemical
Industries
Limited,
Great
Britain,
African
Explosives
and
Chemical
Industries
Limited,
South
Africa,
Imperial
Chemical
Industries
of
Australia
and
New
Zealand
Ltd.,
and
Imperial
Chemical
Industries
(India)
Limited,
at
their
request,
to
use
the
said
process
in
their
respective
countries.
(c)
C-l-L
and
Chematur
will
share
equally
license
fees
for
any
future
plants
using
this
process
to
be
built
on
the
North
American
continent
by
others
than
C-l-L.
Each
license
fee
will
be
set
by
mutual
agreement
between
Chematur
and
C-l-L,
taking
into
consideration
the
demonstrated
advantages
of
the
process.
C-I-L
will
negotiate
all
such
license
agreements
itself
and
will
supply
the
licensee
with
complete
design
and
operating
information
in
its
own
plant
(excluding,
however,
the
NITROPEL
operation).
The
licensee
will
have
the
right
of
either
engineering
his
own
plant,
basing
himself
on
the
information
obtained
from
C-l-L,
or
of
obtaining
Chematur’s
services
therefor
on
payment
of
Chematur’s
engineering
costs
plus
110%
for
overhead.
The
licensee
will
be
free
to
purchase
the
necessary
equipment
from
Chematur
or
from
any
supplier
of
its
choice.
C-I-L
will,
for
an
additional
fee,
train
operators
for
the
licensee
if
so
requested.
(d)
/n
full
consideration
of
the
rights
granted
above,
C-I-L
will
supply
Chematur
with
a
complete
set
of
working
drawings
and
operating
data
on
the
completed
plant
(excluding,
however,
the
NITROPEL
operation)
and
the
right
to
use
such
plant
as
a
reference.
5.
Should
the
first
TNT
plant
to
commence
operation
using
the
Chematur
process
not
be
the
one
built
by
C-I-L,
then
C-l-L
shall
pay
to
Chematur,
in
addition
to
the
payments
referred
to
in
paragraph
2
above,
and
in
consideration
of
the
grant
of
licenses
pursuant
to
paragraph
3
above,
a
lump
sum,
non-recurring
license
fee
based
on
performance
and
calculated
from
the
rates
of
efficiency
obtained
during
a
trial
run.
Such
fee
shall
be
the
equivalent
of
$250
for
each
kilogram
of
toluene
required
under
495
kilograms
per
1000
kilograms
of
refined
TNT
produced,
plus
$250
for
each
kilogram
of
nitric
acid
required
under
1,150
kilograms
per
1000
kilograms
of
refined
TNT
produced.
The
above
rates
of
efficiency
shall
be
determined
in
respect
of
the
production
of
refined
TNT
having
a
minimum
setting
point
of
80.2°
C,
passing
an
Abel
Heat
Test
of
20
minutes
at
160°
F
and
using
a
sellite
purification
process.
If
this
letter
correctly
sets
forth
the
understanding
between
our
companies,
will
you
please
signify
your
acceptance
by
signing
and
returning
to
us
the
duplicate
copy
attached.*
If
one
scrutinizes
the
contract,
it
may
be
noticed
that:
1.
plaintiff
acquires
information
and
rights
to
the
continuous
TNT
nitration
and
purification
process
and
design
and
operating
information
on
that
process;
2.
the
cost
for
such
information
to
plaintiff
is:
(a)
Chematur’s
engineering
costs
plus
(b)
110%
of
such
costs
to
cover
overhead
and
(c)
whatever
sum
paid
is
deductible
from
the
price
of
equipment:
3.
plaintiff
acquires
non-exclusive,
irrevocable
licences
under
any
patent
rights
in
Canada
and
any
know-how
pertaining
to
the
continuous
TNT
nitration
and
purification
process;
4.
(a)
if
plaintiff
builds
the
first
TNT
plant
the
licences
referred
to
in
the
previous
paragraph
are
royalty-free;
(b)
Chematur
will
give,
if
requested,
non-exclusive,
royalty-free
licences
to
companies
related
to
plaintiff;
(c)
other
licence
fees
to
be
shared
equally:
5.
if
the
first
plant
to
commence
operating,
using
the
process,
is
not
built
by
plaintiff,
Chematur
shall
be
reimbursed
as
in
2;
for
the
licence
under
patents
and
for
the
licence
for
know-how
a
lump
sum,
non-recurring
licence
fee
is
to
be
paid,
based
on
performance
and
calculation
from
the
rate
of
efficiency
obtained
during
a
trial
run;
in
paragraphs
4
and
5,
the
word
“fee”
is
used.
The
word
“fees”
or
“fee”
is
used
five
times
in
that
contract.
In
Exhibit
R-1
there
is
a
reference
to
clause
4(c)
of
the
contract
between
Chematur
and
plaintiff
and
in
clause
4(c)
the
word
“fees”
is
used,
whereas
in
the
letter
of
August
9,
1967
the
word
“fee”
is
not
used.
It
seems
to
me
that
if
the
parties
themselves
have
used
that
word
“fee”,
they
knew
very
well
the
impact
of
the
use
of
the
word
“fee”
for
tax
purposes
and
that
use
of
the
word
“fee”
should
be
duly
taken
into
consideration.
The
rights
of
plaintiff,
proprietary
or
other,
up
to
June
1967,
pertaining
to
the
TNT
continuous
process,
should
be
grouped:
those
that
could
be
used
as
of
June
1960,
being
the
rights
to
the
information,
know-how
and
the
non-exclusive
licences
to
the
information
and
to
that
know-how
being
developed
by
plaintiff
from
June
1960
up
to
June
1967.
The
value
of
the
practical
application
of
the
patents,
information
and
know-how
acquired
by
plaintiff
was
increased
once
its
team
has
had
access
to
the
patents
and
other
rights
originated
by
Chematur.
These
rights
were
much
more
valuable
by
the
time
the
Government
of
the
United
States
of
America
was
licensed,
that
is,
by
June
30,
1967,
because
they
had
passed
from
the
state
of
theory
to
the
one
of
practical
application.
The
greater
team
of
plaintiff
could
see
to
the
application
of
these
rights
more
easily
than
the
smaller
team
of
Chematur.
The
contract
with
the
Government
of
the
United
States
of
America
provides
for
(a)
licence
to
use
the
background
data,
(b)
non-exclusive,
non-transferable
licences
under
patents
or
applications
for
patents
and
inventions
owned
or
controlled
or
to
be
owned
or
to
be
controlled,
(c)
technical
assistance,
and
(d)
know-how.
Since
1960
plaintiff
was
selling
TNT
produced
through
continuous
process
to
the
United
States
of
America.
That
country
was
in
fact
plaintiff’s
largest
military
customer;
the
rest
of
the
production
was
sold
to
the
Canadian
Armed
Forces.
The
Canadian
sales
were
so
negligible
compared
to
those
to
the
United
States
of
America,
plaintiff’s
biggest
client,
that
the
latter
could
be
said
to
be
the
only
one.
The
agreement
being
quite
extensive,
I
shall
quote
only
what
I
think
is
essential
to
grasp
the
problem
at
issue.
The
first
paragraph
reads
as
follows:
PATENT
AND
DATA
SUB-LICENSE
AGREEMENT
THIS
CONTRACT,
effective
this
30th
day
of
June,
1967
by
the
UNITED
STATES
OF
AMERICA
(hereinafter
called
the
Government)
and
CANADIAN
INDUSTRIES
LIMITED
(hereinafter
called
the
Contractor),
a
corporation
organized
and
existing
under
the
laws
of
Canada
and
having
a
principal
place
of
business
in
Montreal
in
the
Province
of
Quebec,
Canada.
WHEREAS,
the
Government’s
prime
Contractor
operating
under
Contract
Number
W-11-173-AMC-37(A)
has
entered
into
a
Sub-Contract
No.
397,
dated
30
June
1967
....
The
four
patents
of
Chematur
are:
WHEREAS,
the
Contractor
warrants
and
represents
that
under
a
license
Agreement
between
Contractor
and
Aktiebolaget
Chematur,
Stockholm,
Sweden,
a
corporation
of
Sweden
dated
27
June
1960,
Contractor
has
a
license,
together
with
the
exclusive
right
to
grant
sub-licenses,
including
the
within
license,
under
United
States
Patent
No.
3,034,867,
issued
15
May
1962
to
Erik
Samuelsen
for
Continuous
Trinitrotoluene
Manufacture
.
.
.
;
under
United
States
Patent
No.
3,087,971,
issued
30
April
1963
to
Erik
Samuelsen
for
Method
for
Trinitrotoluene
Manufacture
.
.
.
;
under
United
States
Patent
No.
3,087,973,
issued
30
April
1963
to
Erik
Samuelsen
for
Continuous
Trinitrotoluene
Manufacture
.
.
.
;
and
under
United
States
Patent
No.
3,204,000,
issued
31
August
1965,
to
Erik
Samuelsen
for
Manufacture
of
Nitrotoluenes.
The
next
paragraph
reads:
WHEREAS,
the
Contractor
warrants
and
represents
that
it
is
in
possession
of
certain
background
data
originated
by
Contractor,
including
data
claimed
by
Contractor
to
be
proprietary,
pertinent
to
the
process
of
continuous
manufacture
of
TNT
developed
by
Contractor
prior
to
the
effective
date
of
this
and
the
aforesaid
Contract
No.
397
.
.
.
.
WHEREAS,
the
Government
desires
to
construct
and
operate
or
have
constructed
and
operated
continuous
TNT
plants
having
a
unit
capacity
of
at
least
fifty
(50)
tons
of
TNT
per
day,
and
.
.
.*
Paragraph
1(a)
of
the
agreement
reads:
ARTICLE
1.
LICENSE
GRANT
(a)
Contractor
agrees
to
and
does
hereby
grant
and
convey
to
the
Government,
.
.
.
an
irrevocable
non-exclusive
license
to
use
by
or
for
the
Government
in
the
United
States
of
America
for
governmental
(non-commercial)
purposes
only,
all
or
any
part
of
the
background
data:
originated
by
contractor
prior
to
the
date
of
execution
of
the
license
herein,
including
any
such
background
data
claimed
by
Contractor
to
be
proprietary,
pertinent
to
the
aforesaid
process
for
the
continuous
manufacture
of
TNT
and
developed
by
Contractor
prior
to
the
effective
date
of
this
and
the
aforesaid
Contract
No.
397;
and
any
and
all
such
data
which
may
be
developed
by
Contractor
under
the
terms
of
the
aforesaid
Contract
No.
397
to
construct
a
plant
to
meet
Government
requirements
of
at
least
fifty
(50)
tons
of
TNT
per
day,
said
TNT
of
a
grade
commensurate
with
Government
specifications;
said
license
to
cover
data
to
be
delivered
at
a
time
and
place
designated
by
the
Government
and
to
include,
but
not
limited
to,
the
following:
(1)
Copies
of
all
publications,
reports,
memorandums,
documents
and
other
writings
relating
in
whole
or
in
part
to
the
design,
construction,
operation
and
maintenance
of
the
process
for
the
continuous
manufacture
of
TNT
and
of
the
apparatus
and
plant
therefor.
(2)
Detailed
design
drawings
sufficient
to
teach
the
complete
construction
and
operation
of
a
plant
embodying
Contractor’s
process
for
continuous
manufacture
of
TNT.
(3)
Data
describing
step-by-step
procedures
for
operating
and
maintaining
said
plants,
safety
procedures
and
known
hazards,
material
and
operating
balances,
process
conditions
and
unique
process
steps,
results
of
efficiency
tests
conducted
by
Contractor,
operating
problems
experienced
or
anticipated
by
Contractor,
critical
special
relationships
of
equipment,
control
and
instrumentation
design,
and
waste
disposal
features.
(4)
Information
identifying
critical
design
features
of
said
process
and
equipment,
and
critical
material
quantities
and
concentrations
including
means
for
increasing
the
capability
of
units
by
varying
equipment
capacities
and
numbers
of
material
concentrations
and
quantities.
PROVIDED,
that
nothing
contained
in
this
Article
1(a)
or
elsewhere
in
this
contract
is
intended
to
imply
or
be
construed
as
granting
a
license
to
the
United
States
Government
or
others
under
any
patents
or
patent
applications
of
any
country
other
than
the
United
States
of
America.
That
paragraph
has
been
quoted
at
length
because
it
describes
and
identifies
the
main
object
of
the
contract,
to
wit,
the
licence
to
the
Government
of
the
United
States
of
America
to
use
data
plaintiff
has
gained
in
the
past
and
data
to
be
acquired
in
the
future.
Subparagraph
(b)
of
paragraph
1
reads
as
follows:
(b)
Contractor
further
agrees
to
and
does
hereby
grant
and
convey
to
the
Government,
as
represented
by
the
Secretary
of
the
Army,
an
irrevocable,
non-exclusive,
nontransferable
license
under
any
and
all
United
States
patents
and
applications
for
patent
of
Contractor
based
on
inventions
now
owned
or
controlled
by
Contractor
or
with
respect
to
which
Contractor
on
the
date
of
execution
of
the
license
herein
has
the
right
to
grant
licenses,
or
inventions
to
become
the
property
of
or
controlled
by
Contractor
or
with
respect
to
which
Contractor
will
acquire
the
right
to
grant
licenses
for
a
period
of
ten
(10)
years
from
the
date
of
the
aforesaid
Contract
No.
397,
which
form
an
integral
part
of
the
process
which
is
the
object
matter
of
the
aforesaid
Contract
No.
397
as
said
process
exists
at
the
effective
date
of
this
and
said
Contract
No.
397
and
as
it
was
be
modified
to
meet
Government
requirements
of
at
least
fifty
(50)
tons
of
TNT
per
day,
to
practice
by
the
Government
for
governmental
(non-commercial)
purposes
only,
and
to
cause
to
be
practiced
for
the
Government
for
such
purposes
only,
any
or
all
of
the
inventions
thereof
in
the
use
of
any
method,
in
the
manufacture,
use
and
disposition
of
any
product,
and
in
the
disposition
of
any
plant
or
part
thereof
in
accordance
with
law
.
.
.
That
paragraph
is
concerned
with
four
patents
upon
which
plaintiff
has
a
licence;
any
other
United
States
of
America
patents
that
plaintiff
may
own
or
control
in
the
future;
application
for
same
and
the
obligation
towards
the
United
States
of
America
for
a
period
of
ten
years
from
the
date
of
Contract
No
397.
Plaintiff
may
have
to
provide
personnel,
subparagraph
(d):
(d)
Contractor
pursuant
to
the
provisions
of
the
aforesaid
contract
No.
397
will
provide
the
Government
or
its
selected
Contractor
with
any
technical
assistance,
in
the
form
of
personnel
or
otherwise,
necessary
to
scale-up
the
design
of
Contractor’s
existing
facilities
for
the
continuous
manufacture
of
TNT
to
design
an
operable
plant
capable
of
producing
at
least
fifty
(50)
tons
of
TNT
per
day,
said
TNT
to
be
of
a
quality
and
grade
in
accordance
with
Government
specifications.
Article
4
provides
for
payment:
ARTICLE
4.
PAYMENT
The
Government
in
consideration
of
this
license
subject
to
the
availability
of
funds,
shall
be
obligated
to
pay
the
Contractor
a
total
capital
sum
of
Six
Hundred
Thousand
Dollars
($600,000)
for
the
incorporation
and
use
of
said
data,
know-how
and
inventions
in
the
construction
and
use
by
the
Government
of
plants
or
facilities
for
said
continuous
manufacturing
process,
said
total
capital
payment
of
Six
Hundred
Thousand
Dollars
($600.000)
to
be
made
as
follows:
One-half
(
/2)
on
the
effective
date
of
Contract
No.
397;
and
the
remaining
one-half
(Y%2)
upon
acceptance
of
the
data
specifically
called
for
in
the
aforesaid
Contract
No.
397.
The
stated
total
capital
sum
will
be
payment
in
full
for
the
receipt
and
use
of
said
data
in
accordance
with
the
terms
of
this
agreement,
and
additional
plants
or
facilities
shall
be
free
from
any
obligations
for
payment
on
the
part
of
the
Government.
The
payment
is
for
use
and
for
incorporation,
that
is,
in
my
view,
to
have
access
to
the
data,
know-how
and
inventions
and
to
blend
it
in
the
construction
and
use
for
the
plants
and
facilities.
We
have,
in
above
Article
4,
the
first
instance
where
the
expression
“know-how”
is
used
in
the
contract.
I
think
that
one
may
look
at
a
dictionary
to
see
how
“know-how”
is
defined.
In
A
Supplement
to
the
Oxford
English
Dictionary,
1976,
Vol
II,
H-N,
we
read
at
page
538:
Orig
US
(f
vbl
phr
to
know
how
(Know
v
12)
Knowledge
of
how
to
do
some
particular
thing;
technical
expertness,
practical
knowledge.
And
in
Webster’s
Third
New
International
Dictionary
1
(latest
unabridged)
we
read
at
page
1252:
esp:
technical
knowledge,
ability,
skill
or
expertness
of
this
sort
(the
company
needed
to
use
all
of
its
ingenuity
and
know-how
to
succeed
in
laying
the
oil
lines).
In
A
&
E
Plastik
Pak
Co,
Inc
v
Monsanto
Company
(1968),
396
F
(2d)
710,
Merrill,
Cir
J
says
at
page
714:
[5]
The
agreement
between
Monsanto
and
A
&
E,
on
its
face,
appears
to
be
a
license
of
technology
or
“know-how,”’
to
which
restraints
of
competition
are
attached
as
conditions
of
the
license.
Thus,
on
its
face,
it
does
not
appear
to
be
an
agreement
between
competitors
not
to
compete,
for
absent
the
licensed
know-how,
A
&
E
is
in
no
position
to
compete.
5.
Know-how
has
been
defined
to
include
‘‘accumulated
technical
experience
and
skills
which
can
best,
or
perhaps
only,
be
communicated
through
the
medium
of
personal
services.”
Creed
&
Bangs,
Know-How
Licensing
and
Capital
Gains,
Patent,
Trade-Mark
and
Copyright
J
of
Research
and
Education
93
(1960).
In
the
matter
of
Evans
Medical
Supplies,
Ltd
v
Moriarty
(HM
Inspector
of
Taxes),
37
TC
540,
I
find
very
useful
to
read
the
remarks
of
Lord
Denning
as
to
what
“know-how”
may
consist
of,
at
page
587:
The
Case
refers
to
the
agreement
under
which
the
£100,000
was
paid.
It
was
paid
as
an
entire
sum
for
a
specified
consideration.
The
consideration
was
the
imparting
of
information
and
technical
data,
all
of
which
may
be
summed
up
in
the
new
and
expressive
word
“know-how”.
The
Court
of
Appeal
would
seek
to
divide
it
into
two
parts:
(1)
information
about
secret
processes;
(2)
information
about
other
things.
The
information
about
secret
processes
had
in
the
past
been
kept
confidential
to
Evans
Medical
and
their
staff,
and
was
especially
valuable
on
that
account.
The
information
about
other
things
was
technical
Knowledge
which
was
not
secret
but
was
no
doubt
valuable
in
that
it
could
only
be
obtained
from
firms
who
were
expert
in
it.
I
can
see
no
sensible
distinction
between
money
paid
for
information
of
secret
processes
and
money
paid
for
the
other
information.
The
only
difference
is
that
in
the
one
case
the
money
was
paid
for
information
which
up
till
then
had
been
secret,
being
obtainable
only
from
the
one
firm:
whereas
in
the
other
case
it
was
paid
for
information
which
was
scarce,
being
obtainable
from
three
or
four
firms.
But
the
money
was
paid
for
the
same
sort
of
thing
in
either
case.
At
any
rate,
the
parties
to
this
agreement
did
not
seek
to
draw
any
distinction
between
the
two.
£100,000
was
paid
for
the
lot.
It
was
a
single
payment
for
“know-how”.
The
Case
Stated
follows
suit.
It
does
not
attempt
to
divide
the
£100,000
into
parts.
In
the
instant
case,
there
is
no
apportionment
of
the
amount
received
as
consideration
by
plaintiff.
In
my
view,
these
remarks
by
Lord
Denning
are
appropriate
for
the
present
instance,
at
pages
588-9:
The
way
I
look
at
it
is
this.
Evans
Medical
were
faced
with
a
difficult
problem.
The
Burmese
Government
were
determined
to
make
these
products
themselves.
This
would
mean
that
Evans
Medical
would
be
forced
out
of
the
Burma
market
or
at
any
rate
would
lose
a
good
deal
of
business
there.
Their
goodwill
in
that
country
would
be
diminished
in
value.
But
that
would
not
be
due
to
any
sale
by
them
of
a
capital
asset.
It
would
take
place
no
matter
which
of
the
competing
firms
obtained
the
contract.
To
make
up
for
this
coming
loss
of
market,
Evans
Medical
did
a
sensible
thing.
They
secured
the
contract
to
supply
the
“know-how”
to
the
Burmese
Government.
This
did
not
purport
to
be—and
was
not
in
fact—a
sale
of
secret
processes.
All
that
Evans
Medical
did
was
to
tell
the
Burmese
Government
about
those
processes
so
that
they
could
use
them
too.
Evans
Medical
still
retained
the
right
to
use
the
processes
themselves
and
stipulated
that
the
Burmese
Government
should
not
divulge
the
information
without
their
consent.
So
regarded,
the
supply
of
information
about
the
secret
processes
was
nothing
more
nor
less
than
the
supply
of
“know-how”—a
particularly
valuable
part
of
it,
no
doubt—but
still
the
supply
of
“know-how”.
And
that
is
how
the
parties
to
this
agreement
treated
it.
They
drew
no
distinction
between
it
and
the
other
kinds
of
“knowhow”
to
be
supplied
in
return
for
the
£100,000.
What,
then,
is
the
position
of
“know-how”
for
tax
purposes?
It
is
undoubtedly
a
revenue-producing
asset.
The
possessor
can
use
it
to
make
things
for
sale,
or
he
can
teach
it
to
others
for
reward.
But
he
cannot
sell
it
outright.
.
.
.
So
with
a
company
which
has
special
manufacturing
skill
and
experience
but
has
no
secret
processes.
Its
“know-how”
is
inseparable
from
the
“know-how”
of
its
staff
and
servants.
It
cannot
prevent
them
from
using
it
any
more
than
it
can
prevent
them
using
their
own
brains:
see
Herbert
Morris,
Ltd
v
Saxelby,
[1916]
1
AC
688,
at
page
704.
It
cannot
sell
it
as
a
Capital
asset.
It
can
only
use
it
or
teach
it.
Even
with
a
company
which
owns
secret
processes,
the
supply
of
“know-how”
is
not
like
the
sale
of
goodwill
or
a
secret
process,
for
such
a
sale
imports
that
the
seller
cannot
thereafter
avail
himself
of
the
special
knowledge
with
which
he
has
parted:
see
Trego
v
Hunt
[1896]
AC
7,
at
pages
24-5;
and
it
may
then
rightly
be
regarded
as
the
sale
of
a
capital
asset:
see
Handley
Page
v
Butterworth,
19
TC
328.
But
the
Supplier
of
“know-how”
always
remains
entitled
to
use
it
himself,
as
was
the
case
here.
I
find
it
not
possible
for
me
not
to
compare
the
present
instance
to
the
Evans
Medical
Supplies,
Ltd
case.
In
the
present
instance,
the
consideration
is
said
to
be
paid
for
data,
know-how
and
inventions
but
like
the
Evans
Medical
Supplies,
Ltd
case
no
part
of
the
total
sum
paid
is
allotted
to
any
item
in
particular.
It
is
labelled
a
“non-exclusive
licence”
to
use
background
data,
a
“non-exclusive
licence”
on
four
patents
and
the
right
to
be
provided
technical
assistance.
In
my
way
of
thinking,
the
data
and
assistance
are
definitely
services
to
be
rendered
and
the
licences
on
the
four
patents
not
being
exclusive,
the
plaintiff
does
not
part
with
any
asset
which
in
fact
would
impoverish
it.
I
believe
that
the
licences
to
the
patents
are
necessary
for
the
application
of
the
data
and
the
technical
assistance
is
strictly
for
services.
The
components
being
each
one
of
a
nature
that
connotes
services,
none
can
be
considered
as
being
a
capital
item
and
I
therefore
fail
to
see
how
the
three
together,
because
in
the
same
contract,
can
become
Capital.
The
name
used
to
describe
a
payment
is
not
decisive.
In
Commissioners
of
Inland
Revenue
v
British
Salmson
Aero
Engines,
Ltd,
22
TC
29,
we
read
these
remarks
of
Finlay,
J
at
page
35:
Mr
Needham
has
contended
that
the
decision
of
the
Special
Commissioners
as
regards
these
sums
of
royalties
was
wrong.
He
said,
and
he
rightly
said,
that
the
circumstances
that
they
were
called
“royalties”
in
the
agreement
is
not
decisive.
It
is
not
decisive,
I
entirely
agree,
but
I
must
say
that
while
one
is
of
course
entitled,
and
indeed
bound,
to
look
at
the
thing
to
ascertain
the
real
substance
of
the
matter,
the
fact
that
people
who,
after
all,
know
all
about
it
choose
in
their
agreement
to
refer
to
these
annual
sums—for
annual
they
are,
I
think—as
“royalties”,
is
a
matter
not
to
be
entirely
neglected.
Mr
Needham
says
that
whatever
they
are
called,
they
are
simply
the
purchase
price
of
a
thing
sold.
Now
if
I
rightly
follow
that
argument,
it
depends
upon
the
fact
that
here
there
was
granted
to
the
licensees
an
exclusive
right.
I
am
unable
to
adopt
the
view
which
Mr
Needham
urged
upon
me
as
to
that.
If
I
rightly
follow
his
argument,
supposing
there
had
simply
been
granted
a
right,
not
exclusive,
to
construct
and
use,
then
in
that
event
there
would
not
have
been
a
sale
of
property
and
royalty,
if
royalty
there
were,
would
have
been
appropriately
taxed.
I
cannot
regard
the
fact
that
this
is
an
exclusive
right
as
turning
a
licence
into
a
sale
of
property;
it
seems
to
me
to
be
not
the
reality
of
the
thing.
In
tha
instant
case,
the
word
“fee”
is
used
in
the
contract
with
Chematur
and
then
in
a
letter
there
is
a
reference
to
it.
Plaintiff
and
Chematur
know
the
right
word
to
be
used.
It
is
interesting
to
note
on
the
same
page
of
CIR
v
British
Salmson
Aero
Engines
(supra)
what
is
a
grant
of
a
licence
to
construct
and
use:
I
would
add
this,
that
if,
contrary
to
my
view,
it
could
be
regarded,
not
as
a
licence
to
use
but
as
a
sale
of
the
whole
substratum,
so
to
speak,
of
the
business,
of
the
whole
property,
that
would
not
conclude
the
question,
because
it
is
quite
clear
that
there
may
be
a
sale
of
property
in
consideration
of
an
annual
payment.
The
question
would
therefore
remain.
But,
in
my
opinion,
when
one
looks
at
it,
this
is
really
the
grant
of
a
licence
to
construct
and
use.
That
is
the
primary
object
and
that
is
the
meaning
of
the
thing.
I
do
believe
that
we
have
here
a
licence
to
construct
and
use.
In
Commissioners
of
Inland
Revenue
v
Rustproof
Metal
Window
Co,
Ltd,
29
TC
243,
as
Atkinson,
J
says,
there
was
no
change,
like
in
the
present
case,
in
the
patent
(page
253):
The
patent
remained
what
it
was
before,
something
out
of
which
he
was
making
money
by
manufacturing
the
articles
or
using
the
processes,
as
in
this
case,
and
that
user
continued
to
be
of
precisely
the
same
character
after
the
licence
had
been
granted.
Therefore
I
think
on
that
point
the
Crown
is
entitled
to
succeed.
Concerning,
like
here,
a
lump
sum
paid
for
a
non-exclusive
licence,
we
read
these
remarks
of
Lord
Greene,
MR
at
page
267:
Returning
to
the
argument
of
Counsel,
I
cannot
understand
why
it
should
be
said,
as
the
proposition
implies
and
was
specifically
argued,
that
a
sum
received
in
respect
of
the
right
to
use
a
patent
which
is
payable
whether
or
not
the
patent
is
in
fact
used
and
without
reference
to
any
question
of
user
must
necessarily
be
a
capital
receipt.
A
sum
received
in
consideration
of
the
grant
of
the
right
to
use
a
patent,
whether
user
does
or
does
not
take
place,
is
surely
just
as
capable
of
being
an
income
receipt
as
a
sum
received
in
consideration
of
the
grant
of
the
right
to
use
any
other
kind
of
property,
for
example,
a
motor-car.
Whether
or
not
it
is
an
income
or
a
capital
receipt
must,
I
should
have
thought,
be
ascertained
by
reference
to
all
the
relevant
circumstances
and
not
by
some
fixed
rule
of
law
such
as
is
suggested.
As
to
practical
knowledge,
Lord
Greene
says
at
pages
269-70:
There
are
many
patents
which
are
applied
more
efficiently
after
some
experience
of
their
practical
application
or
some
practical
instruction
by
the
patentee
than
they
could
be
by
a
person
who
had
merely
read
the
specification.
But
the
acquisition
of
practical
knowledge
of
this
kind
is
not
the
same
thing
as
the
acquisition
of
the
knowledge
of
a
secret
process.
It
is
nothing
more
than
what
normally
happens
in
the
case
of
a
licence;
a
person
who
has
used
the
patent
is
likely
to
be
more
knowledgeable
and
efficient
in
its
use
than
a
person
who
has
not.
But
the
acquisition
of
this
practical
knowledge
by
a
licensee
cannot,
as
it
appears
to
me,
be
said
in
any
sense
to
affect
a
depreciation
of
the
value
of
the
patent,
nor
can
practical
instruction
given
to
the
licensee
be
said
to
depreciate
any
business
asset
of
the
licensor.
The
only
person
to
whom
such
practical
knowledge
can
be
of
use
is
a
person
entitled
to
use
the
invention
comprised
in
the
patent.
During
the
Currency
of
the
patent
no
one
but
the
patentee
or
a
licensee
from
him
is
entitled
to
use
the
patent.
It
is
clear,
therefore,
that
during
the
currency
of
the
patent
the
fact
that
this
practical
knowledge
had
been
acquired
by
or
communicated
to
the
licensee
could
not
in
any
way
affect
the
value
of
the
patent.
After
the
expiration
of
the
patent
the
patent
process
can
be
used
by
the
public,
and
the
presumption
must,
I
think,
be,
in
the
absence
of
evidence
to
the
contrary,
that
the
specification
contains
the
necessary
directions
as
to
its
use.
That
a
member
of
the
public
using
the
process
would
be
in
a
better
position,
momentarily
at
any
rate,
to
use
it
to
the
best
advantage
if
he
had
obtained
some
practical
knowledge
than
an
uninstructed
beginner
may
be
conceded.
But
this
is
true
in
the
case
of
many,
if
not
most,
patents.
The
argument
in
fact
goes
too
far,
for
it
would
mean
that
there
was
an
element
of
capital
depreciation
of
a
business
asset
in
many
or
perhaps
most
grants
of
licences.
Every
patentee
who
has
granted
a
licence
will
find
that
on
the
expiration
of
the
patent
his
licensee
is
or
may
be
for
a
time
at
any
rate
in
a
better
position
to
compete
with
him
than
other
members
of
the
public
who
on
the
expiration
of
the
patent
are
minded
to
use
the
invention;
and
the
more
licences
he
has
granted
the
more
such
privileged
competitors
he
will
have.
But
I
have
never
before
heard
it
suggested
that
this
implies
that
the
licensor
has
suffered
a
capital
loss.
On
the
contrary,
if
there
is
in
any
case
any
substance
in
the
suggestion
that
a
licence
puts
the
licensee
in
a
better
position
to
compete
with
the
licensor
after
the
expiration
of
the
patent,
it
can
be
no
more
than
a
necessary
incident
of
the
grant
of
the
licence
and
a
necessary
consequence
of
the
exploitation
of
the
patent
for
profit
during
the
period
of
its
validity.
Secret
information
is
also
discussed
ibid:
The
Company,
therefore,
so
far
as
use
of
secret
information
by
the
licensee
is
concerned,
did
not
stipulate
that
it
should
not
be
used
after
the
expiration
of
the
patent.
In
paragraph
2
there
is
a
perpetual
covenant
by
the
licensees
to
use
their
best
endeavours
to
keep
secret
the
manner
of
using
the
invention.
This
does
not
appear
to
me
to
assist
the
argument
in
any
way.
The
inventions
or
discoveries
the
manner
of
using
which
the
licensees
by
the
same
paragraph
covenant
to
keep
secret
after
the
expiration
of
the
patent
are,
as
I
have
already
said,
inventions
or
discoveries
not
by
the
licensors
but
by
the
licensees.
The
argument,
therefore,
fails
to
convince
me.
In
Murray
(HM
Inspector
of
Taxes)
v
Imperial
Chemical
Industries
Ltd,
44
TC
175,
there
is
a
reference
to
fixed
capital
in
connection
with.
these
rights
by
Russell,
LJ
at
page
214:
The
result
of
the
contract
with
AKU
was
that
the
whole
of
this
group
of
rights
was
disposed
of
for
ever
by
ICI
and
effectively
vested
in
AKU.
In
exchange
ICI
acquired
a
contractual
obligation
on
the
part
of
AKU
to
pay
a
sum
of
£400,000
and,
in
addition,
royalties
related
directly
to
the
extent
of
user
in
the
case
of
the
CPA
patents,
and
consisting
of
an
annuity
in
the
case
of
the
ICI
patents.
ICI
had
deprived
itself
completely
of
all
ability
thereafter
to
turn
that
part
of
its
fixed
capital
to
account,
whether
by
direct
use
of
the
inventions
or
by
licensing
for
reward.
It
had
effectively
transferred
that
ability
to
another;
and
that
ability
had
been
that
part
of
its
fixed
capital.
The
substance
of
the
matter
was
that
ICI
disposed
of
a
part
of
its
fixed
capital
in
part
for
a
sum
(£400,000)
which
of
itself,
unlike
the
royalties,
did
not
bear
the
stamp
of
a
revenue
receipt.
I
entirely
agree
with
Cross
J
on
this
point.
I
do
not
believe
that
here
there
is
anything
that
can
be
said
to
have
been
disposed
of
by
plaintiff.
In
Jeffrey
(HM
Inspector
of
Taxes)
v
Rolls-Royce,
Ltd,
40
TC
443,
Donovan,
LJ,
at
pages
487-8,
as
to
the
treatment
for
tax
purposes
of
the
reward
says:
If
these
distinctions
be
borne
in
mind
it
does
not
matter
a
great
deal
by
what
name
knowledge,
skill
and
experience
be
called.
They
are
ciearly
part
of
the
capital
equipment
of
a
company
such
as
the
Respondent,
in
much
the
same
way
as
the
same
attributes
are
the
capital
equipment
of
an
individual
craftsman.
They
can
be
exploited
in
two
ways.
By
their
employment,
articles
can
be
produced
and
sold.
Alternatively
or
in
addition,
the
knowledge,
skill
and
experience
can
be
imparted
to
others
for
reward.
The
great
artist
with
his
pupils
is
a
familiar
example.
Similarly
with
a
company
such
as
the
Respondent.
It
can
and
does
use
its
great
experience,
and
the
knowledge
and
skill
which
comes
of
it,
to
make
and
sell
aero
engines.
In
addition
it
imparts
these
things
to
others
for
reward.
Admittedly,
it
does
this
in
the
course
of
its
trade,
and
the
sole
question
here
is
whether
that
part
of
the
reward
consisting
of
a
lump
sum
is
a
receipt
which
should
be
included
in
the
revenue
account
when
computing
the
Company’s
taxable
profits,
or
whether,
on
the
other
hand,
the
receipt
should
properly
be
credited
to
some
Capital
account.
As
to
the
nature
of
"know-how”,
Lord
Reid,
at
page
492,
ibid,
referring
to
the
Evans
Medical
Supplies,
Ltd
case
(supra),
says:
I
cannot
accept
the
contention
that
by
each
of
these
agreements
the
Company
sold
a
part
of
that
capital
asset
and
received
a
price
for
it.
There
is
nothing
in
the
Case
to
indicate
that
that
capital
asset
was
in
any
way
diminished
by
carrying
out
these
agreements.
The
whole
of
its
knowledge
and
experience
remained
available
to
the
Company
for
manufacturing
and
further
research
and
development,
and
there
is
nothing
to
show
that
its
value
was
in
any
way
diminished.
The
Company
had
not
even
given
up
a
market
which
had
been
open
to
it.
It
could
not
sell
its
engines
in
these
countries
whether
it
made
these
agreements
or
not.
If
it
had
not
made
these
agreements,
it
would
have
got
nothing
from
these
countries;
by
making
them
it
was
able
to
exploit
its
capital
asset
by
receiving
large
sums
for
its
use
there.
In
essence,
what
it
did
was
to
teach
the
“licensees”
how
to
make
use
of
the
“licences”
which
it
granted.
The
Company
founds
on
the
decision
of
this
House
in
Evans
Medical
Supplies,
Ltd
v
Moriarty
(1957),
37
TC
540.
In
that
case
it
was
held
that
the
company
parted
with
a
capital
asset
and
received
for
it
a
capital
sum.
For
one
thing,
it
lost
its
Burmese
market.
And,
further,
it
was
said
to
be
obvious
that
the
capital
value
of
the
secret
processes
must
have
been
greatly
diminished
by
their
disclosure
to
the
Burmese
Government.
Every
case
of
this
kind
must
be
decided
on
its
own
facts;
and,
at
least
in
these
two
respects,
that
case
was
very
different
from
the
present
case.
There
is
also
the
difference
that
in
that
case
there
was
a
single
transaction,
whereas
in
the
present
case
there
was
a
series
of
similar
transactions.
That
in
itself
might
not
count
for
much,
but
it
is,
I
think,
important
that
these
transactions
arose
out
of
deliberate
policy.
Even
in
the
first
agreement
there
was,
in
clause
23,
a
provision
that
certain
further
payments
should
not
be
less
favourable
than
the
sums
demanded
from
other
manufacturers
for
a
similar
licence.
Teaching
the
Government
of
the
United
States
of
America
through
information,
data
and
non-exclusive
licence
is
of
the
essence
of
the
contract
of
plaintiff.
The
capital
aspect
of
“know-how”
is
discussed
by
Lord
Radcliffe,
on
pages
494-5:
The
“capital”
sum
is
what
is
now
in
question.
I
do
not
think
it
possible
to
attach
any
significance
to
the
qualifying
adjective.
If
we
did,
Revenue
appeals
on
this
particular
issue
would
soon
settle
themselves.
Presumably
it
did
not
matter
to
the
commission
how
the
sum
was
described:
on
the
other
hand,
it
certainly
did
not
bind
the
Company,
when
it
has
received
the
money,
to
apply
it
in
any
particular
way
in
its
accounts
or
otherwise.
I
think
that
one
has
to
be
on
one’s
guard,
in
cases
of
this
kind,
against
supposing
that
such
adjectives
as
“capital”
or
“lump”
contribute
anything
to
the
solution
of
the
issue.
“Capital”
here
seems
to
refer
merely
to
the
fact
that
the
monies
are
to
be
paid
outright
against
complete
delivery
of
the
drawings
and
other
documents,
regardless
of
whether
any
production
followed
or
not.
A
“lump”
sum
is
merely
a
non-recurring
payment
of
money,
but
the
adjective
does
not
afford
a
good
guide
to
the
decision
whether
there
is
taxable
income
or
not.
A
man
keeping
a
tobacco
shop
who
sells
a
packet
of
cigarettes
receives
a
lump
sum
as
the
purchase
price
of
his
property,
and
I
suppose
that
we
should
add
that
his
trading
stock
is
part
of
his
capital;
but
no
one
would
doubt
that,
just
the
same,
the
money
he
gets
should
find
its
way
into
his
accounts
for
the
purpose
of
ascertaining
his
trading
profit.
I
have
not
been
able
to
see
why
these
“capital”
receipts
should
not
be
brought
into
account
in
the
assessment
of
the
Company’s
trading
profits.
It
seems
to
me
that,
so
long
as
it
kept
its
“know-how”
to
itself,
it
used
it
for
the
manufacture
of
its
own
engines,
and
its
value
was
expressed
in
the
successful
sales
which
it
achieved
of
those
products.
I
daresay
that
the
Company
would
have
preferred,
ideally,
to
reserve
its
“know-how”
solely
for
the
purpose
of
its
own
manufacture.
I
am
not
sure
of
that,
when
I
read
some
of
the
chairman’s
speeches
at
the
annual
meetings.
However
that
may
be,
it
is
clear
that
it
saw
that,
having
the
“know-how”,
it
could
derive
profit
from
the
manufacture
of
its
engines,
even
by
others,
in
parts
of
the
world
where
it
either
could
not
or
would
not
sell
or
manufacture
them
itself,
provided
only
that
it
equipped
those
others
with
the
requisite
expertise.
So
it
turned
the
“know-how”
to
account
by
undertaking,
for
reward,
to
impart
it
to
the
others
in
order
to
bring
about
this
alternative
form
of
manufacture.
The
last
sentence
surely
applies
to
plaintiff.
As
to
the
description
of
“know-how”,
Lord
Morris
of
Borth-y-Gest
says
at
pages
496-7:
Whatever
description
is
given
to
that
which
in
this
case
has
been
denoted
by
the
words
“know-how”,
the
course
of
activity
embarked
upon
by
the
Company
was
to
put
its
current
“know-how”
to
the
most
advantageous
available
use
while
it
had
its
maximum
current
value.
The
Company
acted
in
the
way
in
which
it
considered
that
it
could
best
carry
on
its
trade
as
manufacturers.
This
may
have
involved
a
development
of
the
method
in
which
it
had
previously
traded,
but
the
fact
that
many
successive
licensing
agreements
were
made
suggests
to
my
mind
that,
of
set
policy,
the
Company
decided
that
its
methods
of
trading
as
manufacturers
should
include
that
development.
I
cannot
regard
the
licensing
agreements
as
involving
sales
of
successive
portions
of
a
fixed
capital
asset.
So
to
regard
the
licensing
agreements
seems
to
me
to
be
quite
unreal.
The
Company
did
not
part
with,
or
get
rid
of,
its
“know-how”.
Another
description
of
“know-how”
is
given
by
Lord
Guest
at
page
499:
It
is
not
doubtful
that
if
the
Crown
had
made
a
case
that
the
Company
entered
upon
a
new
trade
of
dealing
in
“know-how”,
it
might
have
been
assessed
on
the
lump
sums
paid
under
the
agreements.
The
Crown,
however,
expressly
disclaimed
any
intention
of
alleging
a
new
trade.
The
question
is,
therefore,
whether
the
licensing
fees
can
be
included
as
profits
of
the
Company
as
incidental
to
the
manufacture
of
aero
engines.
I
have
given
my
reasons
for
distinguishing
this
case
from
Evans
Medical
Supplies
[30
TC
540].
If
the
licensing
fees
are
not
capital
receipts
on
the
basis
of
the
decision
in
Evans
Medical
Supplies,
I
do
not
see
any
other
conclusion
than
that
they
are
trading
receipts.
The
matter
can
be
expressed
in
different
ways.
I
prefer
to
base
my
conclusion
upon
the
view
that
the
licensing
agreements
were
a
development
of
the
general
trade
carried
on
by
the
Company.
The
royalties
are
admittedly
included
among
the
Company’s
profits
of
the
trade
as
manufacturers
of
aero
engines.
These
could
not
have
been
earned
so
easily
without
the
licensing,
which
enabled
the
foreign
governments
to
manufacture
the
aero
engines.
It
was
an
integral
trading
activity
and
the
licensing
agreements
were
incidental
to
the
manufacture
of
aero
engines.
In
Musker
(HM
Inspector
of
Taxes)
v
English
Electric
Co,
Ltd,
41
TC
556,
Lord
Denning
writes
about
the
use
of
“know-how”
at
page
582:
Now
it
seems
to
me
that
this
is
a
typical
case
of
“know-how”.
“Manufacturing
technique”
is
just
“know-how”.
“Know-how”
is
an
intangible
asset,
just
as
intangible
as
goodwill
and
just
as
worthy
of
recognition.
It
is
a
revenue-producing
asset,
just
as
goodwill
is.
“Know-how”
can
be
put
to
use
so
as
to
produce
revenue
in
two
ways.
The
manufacturer
can
use
it
himself
to
make
things
for
sale
and
make
profit
in
that
way;
or
he
can
teach
it
to
others,
so
that
they
can
make
their
own
things,
in
which
case
he
gets
paid
for
the
knowledge
and
information
which
he
imparts
to
them.
His
fees
and
rewards
are
then
revenue
in
his
hands.
I
assume,
of
course,
that
the
manufacturer,
although
teaching
it
to
others,
still
retains
the
knowledge
himself
and
intends
to
go
on
using
it
himself
and
making
things
from
it.
So
long
as
he
does
this,
he
retains
his
capital
asset
himself
and
is
only
using
it
to
produce
revenue.
The
nature
of
“know-how”
is
looked
at
by
Viscount
Radcliffe
at
page
585:
In
my
opinion,
there
are
two
considerations
which
govern
cases
of
this
kind
and
which
go
a
long
way
towards
destroying
the
force
of
the
analogies
by
which
the
Appellant’s
argument
seeks
to
prove
that
the
transactions
under
review
were
sales
of
fixed
assets,
and
that
receipts
arising
from
them
ought
to
be
treated
as
receipts
on
capital
account.
One
is
that
in
reality
no
sale
takes
place.
The
Appellant
had
after
the
transaction
what
it
had
before
it.
There
is
no
property
right
in
“know-how”
that
can
be
transferred,
even
in
the
limited
sense
that
there
is
a
legally
protected
property
interest
in
a
secret
process.
Special
knowledge
or
skill
can
indeed
ripen
into
a
form
of
property
in
the
fields
of
commerce
and
industry,
as
in
copyright,
trademarks
and
designs
and
patents,
and
where
such
property
is
parted
with
for
money
what
is
received
can
be,
but
will
not
necessarily
be,
a
receipt
on
capital
account.
But
imparting
“know-how”
for
reward
is
not
like
this,
any
more
than
a
teacher
sells
his
knowledge
or
skill
to
his
pupil.
Admittedly
the
Appellant
was
not
in
the
same
position
after
each
transaction
as
before
it.
It
had
“up-dated
the
background
knowledge”
of
a
possible
competitor,
to
use
the
graphic
phrase
of
one
of
its
witnesses.
Conceivably,
by
so
doing
it
had
affected
for
the
worse
its
trading
potential
in
some
fields
and
in
some
respects,
but
the
significance
of
that
is
almost
unavoidably
theoretical
at
the
time
when
the
transaction
has
to
be
judged,
and
the
consequences
are
far
too
speculative
to
allow
the
imparting
of
“know-how”
to
be
treated
for
that
reason
as
the
disposal
of
a
“capital”
asset
analogous
with
the
sale
of
all
or
part
of
an
undertaking.
Imparting
information,
data
and
inventions
for
a
fee
or
reward
is
exactly
what
the
plaintiff
has
done
and
fee
is
the
word
it
used
when
it
referred
to
the
payment.
I
cannot
help
concluding
that
the
amount
of
$378,000,
being
$350,000
at
exchange
rate,
was
an
amount
paid
by
the
Government
of
the
United
States
of
America
as
a
fee;
that
fee
was
paid
for
services
then
to
be
rendered
by
plaintiff;
these
services
consisted
in
having
access
to
data,
information
and
inventions;
in
common
parlance,
there
is
no
way
that
a
fee
can
be
a
purchase
price;
“fee”
is
defined,
inter
alia,
in
dictionaries
as
“a
reward
for
services”;
none
of
the
three
items
being
the
object
of
the
contract
could
have
been
the
object
of
a
contract
for
sale;
indeed,
plaintiff
kept
these
rights
afterwards
and
consequently
it
is
only
their
use
that
could
be
conveyed
by
way
of
services,
to
be
paid
for
with
a
fee;
plaintiff
and
its
Swedish
partner
Chematur
used
the
word
“fee”
in
the
agreement,
not
“payment”
or
“sale
price”,
when
they
referred
to
licences
or
other
rights
of
the
same
nature:
nobody
can
say
that
Chematur
and
plaintiff
.did
not
know
what
a
fee
was;
they
referred
to
it
in
their
agreement:
services
to
be
rendered
for
fee;
as
far
as
that
goes,
the
Government
of
the
United
States
of
America
knew
through
the
agreement
that
it
is
services
that
were
involved
and
that
the
consideration
for
the
performance
of
these
services
was
a
fee:
there
cannot
be
a
sale
of
services
because
services
are
rendered
and
they
are
rendered
for
a
fee:
plaintiff
was
not
parting
with
anything
at
all
when
it
entered
into
that
contract
with
the
Government
of
the
United
States
of
America
and
it
was
foreseen
in
the
contract
with
Chematur
that
services
were
to
be
rendered;
it
follows
that
plaintiff,
in
my
view,
by
using
that
designation
in
its
agreement
with
Chematur,
had
decided
then
to
enter
into
contracts
with
the
same
object
in
view:
fees;
I
think
that
in
acting
in
such
a
way,
plaintiff’s
business
could
include
entering
into
contracts
like
the
one
with
the
Government
of
the
United
States
of
America;
that
such
contracts
could
be
part
of
their
business;
consequently,
the
fee
is
a
profit
from
their
business
under
the
provisions
of
section
4
of
the
Act.
The
appeal
shall
be
dismissed
with
costs.
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