author: RONEY, Circuit Judge:

text:
    UNITED STATES of America, Plaintiff-Appellee, v. VARIOUS GAMBLING DEVICES, Defendants, A. B. Fort, Claimant-Appellant.
    No. 72-2359.
    United States Court of Appeals, Fifth Circuit.
    April 12, 1973.

      See also, D.C., 340 F.Supp. 1200.
    Hunter M. Gholson, Ralph E. Rood, Columbus, Miss., for claimant-appellant.
    H. M. Ray, U. S. Atty., Alfred E. Moretón, III, Asst. U. S. Atty., Oxford, Miss., Michael Carnes, Dept, of Justice, Paul G. Kratzig, New Orleans Organized Crime Strike Force, U. S. Dept, of Justice, New Orleans, La., for plaintiff-ap-pellee.

      Before GEWIN, SIMPSON and RO-NEY, Circuit Judges.
   RONEY, Circuit Judge:

Claimant A. B. Fort appeals from a judgment forfeiting to the Government thirty-one pinball machines as gambling devices possessed by claimant in 1970 and 1971, when he was not registered under the Gambling Devices Act of 1962. 15 U.S.C.A. §§ 1171-1178.

Claimant’s specifications of error present three issues for review: (1) Was the forfeiture of the machines consistent with the Due Process guarantee of the Fifth Amendment to the Constitution? (2) Were the ten machines manufactured prior to the effective date of the Gambling Devices Act of 1962 subject to forfeiture under the terms of the Act? (3) Were the several machines found at claimant’s warehouse lawfully seized in the execution of a valid search warrant ? We affirm.

The Gambling Devices Act of 1962 makes it unlawful for a person to engage in a business in which he buys or receives any “gambling device” which he knows to have been transported in interstate commerce after the effective date of the Act, unless the person has registered with the Attorney General. Every person required to register must keep records of each gambling device owned or possessed by him or in his custody. Any gambling device possessed or used in violation of the provisions of the Act is subject to seizure and forfeiture to the United States.

Claimant, a Mississippi resident, operates several companies which install, repair, and recondition amusement machines, including defendant Bally (Bingo) pinball machines, which are mechanical devices designed and manufactured primarily for use in connection with gambling. In 1970 and 1971, claimant was not registered with the Attorney General as required by the Act. Acting under search warrants issued by a federal commissioner, FBI agents seized, in 1970, thirty-one machines owned by claimant from ten locations, including several restaurants and claimant’s warehouse. In this action, claimant seeks the return of these machines on the ground that they were illegally seized.

I. Due Process

Claimant contends that the Due Process Clause of the Fifth Amendment to the United States Constitution bars the taking of his property when he had not been notified that seizure and forfeiture would result unless he registered as required by the Act.

To support this argument, claimant relies principally on certain dicta in United States v. United States Coin & Currency, 401 U.S. 715, 91 S.Ct. 1041, 28 L.Ed.2d 434 (1971), and the holding of United States v. One Bally Sun Valley Pinball Machine, 340 F.Supp. 307 (W.D.La.1972). Coin & Currency was based on the constitutional privilege against self-incrimination. To avoid forfeiture of the money there seized, the claimant would have been required to incriminate himself. Such requirement violates the Constitution under the holdings of Marchetti v. United States, 390 U.S. 39, 88 S.Ct. 697, 19 L.Ed.2d 889 (1968), and Grosso v. United States, 390 U.S. 62, 88 S.Ct. 709, 19 L.Ed.2d 906 (1968). Arguing that Marchetti and Grosso applied only to criminal proceedings, the Government contended that the Coin and Currency forfeiture procedure was civil. The Government reasoned that, in the confiscation of money intended for use in violating Internal Revenue laws, the guilt of the actual owner was irrelevant. The Government argued, therefore, that Boyd v. United States, 116 U.S. 616, 6 S.Ct. 524, 29 L.Ed. 746 (1886), which likened the forfeiture of a man’s property by reason of offenses committed by him to a criminal action, was inapplicable. In addressing this argument, Mr. Justice Harlan said that

. . . before the Government’s attempt to distinguish the Boyd case could even begin to convince, we would first have to be satisfied that a forfeiture statute, with such a broad sweep, did not raise serious constitutional questions under that portion of the Fifth Amendment which commands that no person shall be “deprived of . property, without due process of law; nor shall private property be taken for public use, without just compensation.”

401 U.S. at 720, 91 S.Ct. at 1044. In other words, the Court was concerned with the due process problems that might be found in the argument that the innocence of the owner of the confiscated property withdrew the procedure from consideration in the criminal context.

Mr. Justice Harlan then found, however, that he need not deal with the argument. The statutory procedure by which an innocent owner can retrieve his property from the Secretary of Treasury convinced the Court that the forfeiture statutes, viewed in their entirety, were intended to impose a penalty only upon the non-innocent. It is “those significantly involved in a criminal enterprise,” 401 U.S. at 721, 91 S.Ct. at 1045, who are entitled to the Fifth Amendment privilege against self-incrimination, as applied in Boyd, Marchetti, and Grosso. Mr. Justice Harlan thus concluded that, contrary to the Government’s argument, the criminal guilt or innocence of the property owner was not irrelevant to the forfeiture statute. Mr. Justice Harlan’s due process concern with the forfeiture of an innocent person’s property has no application to the case at bar. Here, the machines which claimant owned and possessed were forfeited because claimant failed to register as required by the law. No “innocent” owner is involved in this case.

Although we have been advised that the Court entered judgment for the Government and the claimant’s motion for release of the subject property was eventually denied on the basis of United States v. One 1970 Buick Riviera, 463 F.2d 1168 (5th Cir. 1972), and corrected findings, the claimant seeks support from the reasoning of the published opinion in One Bally Sun Valley Pinball Machine, swpra, a decision of the Western District Court of Louisiana. The absence of an innocent owner in this case distinguishes it from One Bally Sun Valley Pinball Machine. In One Bally Sun Valley Pinball Machine, the United States seized pinball machines located on the premises of retailers who had not paid the federal tax on coin-operated devices. It was not the machines’ owner, but the owners of the retail establishments, who were liable for the tax. The seizure was made without any prior notification to the owner of the machines that the tax was due or that seizure would be the penalty for nonpayment. Thus, the claimant’s machines were forfeited because of the nonpayment of taxes owed by another. The District Court did not indicate that the “prior notification” concept it developed would have been applicable if the owner of the machines had failed to pay a tax which he owed, and only that factual setting would be analogous to the case at bar.

McKeehan v. United States, 438 F.2d 739 (6th Cir. 1971), also cited by claimant, has little precedential value for us. In McKeehan, the claimant was a gun collector who was technically covered by the registration requirements of a new law, even though its primary purpose was not to regulate those who lawfully and passively possessed firearms as collectors’ items. The Court thought that, under those circumstances, forfeiture without notice was an unconstitutional deprivation of personal property “without just compensation.” In the case at bar, however, claimant was actively engaged in the exact business which Congress sought to regulate. In such instances, no proof of specific intent is required, and the absence of this requirement in what is essentially a regulatory statute governing an highly regulated industry does not violate due process requirements. See United States v. International Minerals & Chemical Corp., 402 U.S. 558, 91 S.Ct. 1697, 29 L.Ed.2d 178 (1971); United States v. Freed, 401 U.S. 601, 91 S.Ct. 1112, 28 L.Ed.2d 356 (1970).

This Court has previously refused to extend Coin & Currency beyond the self-incrimination privilege to the due process clause. United States v. One 1970 Buick Riviera, supra. The same result has been reached in the Ninth Circuit. United States v. One 1967 Ford Mustang, 457 F.2d 931 (9th Cir. 1972), cert. denied, 409 U.S. 850, 93 S.Ct. 59, 34 L.Ed.2d 92 (1973).

It has traditionally been held that in rem proceedings constitute not a taking of private property for public use under the Fifth Amendment, but an exercise of the police power. See Van Oster v. Kansas, 272 U.S. 465, 47 S.Ct. 133, 71 L.Ed. 354 (1926); Goldsmith-Grant Co. v. United States, 254 U.S. 505, 41 S.Ct. 189, 65 L.Ed. 376 (1921); Associates Investment Co. v. United States, 220 F.2d 885 (5th Cir. 1955).

Claimant’s argument, to the extent it is based on unconstitutional vagueness, is without merit. In considering such an argument directed at Section 1171, which defines “gambling devices,” and Section 1177, which requires a forfeiture, the Sixth Circuit held that the contention that the statute was not clear and readily understandable is an “insult to the intelligence of even a beginner reader.” United States v. H. M. Branson Distributing Co., 398 F.2d 929, 934 (6th Cir. 1968).

II. Machines Manufactured Prior to Act’s Effective Date

Claimant contends that the Gambling Devices Act is not applicable to the ten pinball machines manufactured prior to the effective date of the Act, December 17, 1962, because they neither affected nor were transported in interest commerce after that date.

The structure of the Act defeats this argument. It is not the machines, but the persons possessing them who are required to be registered with the Attorney General. 15 U.S.C.A. § 1173(a)(3). The registrant is then required to maintain records of all gambling devices in his possession or use:

Every person required to register under subsection (a) of this section for any calendar year shall, on and after the date of such registration or the first day of such year (whichever last occurs), maintain a record by calendar month for all periods thereafter in such year of .
(B) each gambling device owned or possessed by him or in his custody

15 U.S.C.A. § 1173(c)(1).

This provision is directed toward regulation of the registrant’s activities. Since he was required to register upon the receipt of machines after the effective date of the Act, he had to maintain records for all of his machines, including the ten received before the Act. Thus, any machine which he was required to record, and did not, is “possessed or used in violation of the provisions of this chapter” and may be seized and forfeited to the United States. 15 U.S.C.A. § 1177. There is no indication that Congress intended to restrict forfeiture to only those machines which trigger the registration requirement.

III. Search Warrant

Claimant contends that the pinball machines found at his warehouse were seized illegally because (1) the search warrant was based on an FBI agent’s observation of a Bally Magic Ring machine which allegedly had never been on the premises; (2) the observations were made by means of an alleged trespass and were therefore illegal under Mississippi law; and (3) the affidavit on which the warrant was issued does not meet the requirements of Aguilar v. Texas, 378 U.S. 108, 84 S.Ct. 1509, 12 L.Ed.2d 723 (1964). Since claimant concedes that the seizure was made under warrant, he bears the burden of establishing the illegality of the search. United States v. Crane, 445 F.2d 509 (5th Cir. 1971); United States v. Thompson, 421 F.2d 373 (5th Cir. 1970), vacated on other grounds, 400 U.S. 17, 91 S.Ct. 122, 27 L.Ed.2d 17.

Claimant’s first argument is based on a conflict in the evidence which was resolved against him by the trial court. An FBI agent reported to his superior and later testified at trial that he had twice observed a Bally Magic Ring machine at the warehouse and that he had made a contemporaneous report of this fact. Although claimant’s employee testified that there was no machine of this description at the warehouse, he said that he could not be sure of the types and number of machines in the warehouse in 1970 and that some were inoperative and were kept for use of their parts. The trial court’s finding, consequently, was not clearly erroneous.

Claimant’s second argument is that the agent’s observations of the machine were illegally made under Davidson v. State, 240 So.2d 463 (Miss.1970), which held that information obtained by trespassing on the defendant’s land could not be used to obtain a search warrant. In the case at bar, however, the trial court specifically found that there was no evidence that a trespass was committed. On the agent’s first visit to the warehouse, he was there on official business, remained in a public area, and observed the machine in a back room through an open door. Although he concealed the true purpose of his second visit, he openly entered and remained in the public area. In any event, federal law controls. Elkins v. United States, 364 U.S. 206, 80 S.Ct. 1437, 4 L.Ed.2d 1669 (1960); United States v. Melancon, 462 F.2d 82 (5th Cir. 1972). The federal courts have consistently held that a law enforcement officer may enter commercial premises open to the public and observe what is in plain view. See Lewis v. United States, 385 U.S. 206, 87 S.Ct. 424, 17 L.Ed.2d 312 (1966); On Lee v. United States, 343 U.S. 747, 72 S.Ct. 967, 96

Claimant’s third argument is that the search warrant was insufficient on its face because the affidavit failed to meet the Aguilar standards. Aguilar, however, is not applicable to claimant’s case. The affidavit in Aguilar merely repeated the conclusions of an unidentified informer who was not shown to be either creditable or in a position to possess the information attributed to him. The affidavit here contained the observations of a veteran FBI agent who said that he personally observed the machine. Observations of fellow Government officers engaged in a common investigation are a reliable basis for a warrant issued by a Government official. See United States v. Ventresca, 380 U.S. 102, 85

In executing a valid warrant for the described machine, the agents were authorized to seize similar gambling devices found in plain view even though not described in the warrant. United States v. Kane, 450 F.2d 77 (5th Cir. 1971), cert. denied, 405 U.S. 934, 92 S.Ct. 954, 30 L.Ed.2d 810 (1972). Even if the described item is not found, the seizure of other items is not necessarily unlawful. See Bryant v. United States, 252 F.2d 746 (5th Cir. 1958).

Affirmed.

      . 15 U.S.C.A. § 1171(a)(2) :
      “any other machine or mechanical device (including, but not limited to, roulette wheels and similar devices) designed and manufactured primarily for use in connection with gambling, and (A) which when operated may deliver, as the result of the application of an element of chance, any money or property, or (B) by the operation of which a person may become entitled to receive, as the result of the application of an element of chance, any money or property . . . . ”

      . 15 U.S.C.A. § 1173(a) (3) :
      “It shall be unlawful for any person during any calendar year to engage in the business of repairing, reconditioning, buying, selling, leasing, using, or making available for use by others any gambling device, if in such business he buys or receives any such device knowing that it has been transported in interstate or foreign commerce after the effective date of the Gambling Devices Act of 1962, unless, after November 30 of the preceding calendar year and before the date on which he buys or receives such device, such person has registered with the Attorney General under this subsection.”

      . 15 U.S.C.A. § 1173(e) (1) :
      “Every person required to register under subsection (a) of this section for any calendar year shall, on and after the date of such registration or the first day of such year (whichever last occurs), maintain a record by calendar month for all periods thereafter in such year of—
      (A) each gambling device manufactured, purchased, or otherwise acquired by him,
      (B) each gambling device owned or possessed by him or in his custody, and (O) each gambling device sold, delivered, or shipped by him in intrastate, interstate, or foreign commerce.”

      . 15 U.S.C.A. § 1177:
      “Any gambling device transported, delivered, shipped, manufactured, reconditioned, repaired, sold, disposed of, received, possessed, or used in violation of the provisions of this chapter shall be seized and forfeited to the United States. All provisions of law relating to the seizure, summary and judicial forfeiture, and condemnation of vessels, vehicles, merchandise, and baggage for violation of the customs laws; the disposition of such vessels, vehicles, merchandise, and baggage or the proceeds from the sale thereof; the remission or mitigation of such forfeiture's ; and the compromise of claims and the award of compensation to informers in respect of such forfeitures shall apply to seizures and forfeitures incurred, or alleged to have been incurred, under the provisions of this chapter, insofar as applicable and not inconsistent with the provisions hereof: Provided, That such duties as are imposed upon the collector of customs or any other person with respect to the seizure and forfeiture of vessels, vehicles, merchandise, and baggage under the customs laws shall be performed with respect to seizures and forfeitures of gambling devices under this chapter by such officers, agents, or other persons as may be authorized or designated for that purpose by the Attorney General.”


source: Caselaw Access Project

author: BARRETT, Circuit Judge.

license: Public Domain

text:
    Alfred BRITO et al., Plaintiffs-Appellants and Cross-Appellees, v. The ZIA COMPANY, Defendant-Appellee and Cross-Appellant. Manuel QUINTANA and Arthur Jara-millo, Plaintiffs-Cross Appellees, v. The ZIA COMPANY, Defendant-Appellee and Cross-Appellant.
    Nos. 72-1631, 72-1632.
    United States Court of Appeals, Tenth Circuit.
    Argued and Submitted March 28, 1973.
    Decided May 18, 1973.

      Melvin L. Robins, Albuquerque, N. M. (Lorenzo A. Chavez, Albuquerque, N. M., and Mario Obledo, San Francisco, Cal., on the brief) for appellants.
    John P. Burton, Albuquerque, N. M. (L. J. Maveety, Los Alamos, N. M., and
    William A. Sloan, Albuquerque, N. M., on the brief) for appellee and cross-appellant.
    Before SETH and BARRETT, Circuit Judges, and SMITH , District Judge.

       Eastern District of Michigan, sitting by designation.

   BARRETT, Circuit Judge.

Alfred Brito, Max Roybal, Richard Lopez, Tony Mier, and Robert Keahbone appeal from a Judgment in their favor brought pursuant to the Civil Rights Act of 1964, 42 U.S.C.A. § 2000e-2 et seq. The Zia Company filed a cross-appeal. Manuel Quintana and Arthur Jar-amillo are cross-appellees.

The District Court held that the employee performance evaluation test used by Zia had not been validated in accordance with the Order of the Secretary of Labor, 33 F.R. 14392 (1968). The Court entered a Judgment Nunc Pro Tunc in which it stated that certain EEOC guidelines, 29 CFR 1607 et seq., are controlling over the Secretary of Labor’s Order. The Court held that Zia allowed discriminatory employment practices in its machine shop in violation of Title VII of the Civil Rights Act of 1964. It enjoined Zia from hiring, promoting or discharging employees by use of any testing method until its test complied with the requirements of the EEOC, the Secretary’s Order and Title VII of the Civil Rights Act and until it shall develop empirical data supporting the validity of the test. It held that Zia’s conciliation agreement with Brito had been breached in violation of the Civil Rights Act and that the action did not meet the requirements of a valid class action. It awarded some back pay to the appellants, and $2,000 in attorneys’ fees. Brito was awarded nominal damages for breach of the conciliation agreement.

Zia is a contractor with the U. S. Atomic Energy Commission at Los Ala-mos, New Mexico. Zia employs between 900 and 1,100 workers of which about 500 are Spanish surnamed and Indian employees. When the work force had to be reduced, Zia used an employee performance evaluation test given by supervisors and foremen on volume of work, quality of work, job knowledge, dependability and cooperation. The evaluation was made while the employee was working. The appellants were laid off because of their low scores on the evaluations in May and August, 1970.

Brito was originally employed with Zia in December of 1967. He was laid off because of a reduction in force in July, 1968. He filed a charge of discrimination with the EEOC which found in his favor in October, 1969. On March 4 and 6, 1970, Brito entered into a conciliation agreement with Zia in which Zia contracted to eliminate discrimination in hiring, promotion practices and conditions of employment based on national origin and race and to reinstate Brito to his former job. Brito returned to his job on March 9, 1970. An air of hostility developed between some Anglos and Spanish surnamed employees. Brito received a written reprimand a week after he returned to work and was discharged in July, 1970, because of a low test score, along with Mier and Lopez, all machinists. Roybal, a machinist, was transferred, and Keahbone, a machinist, was terminated in September, 1970. Before the reduction in work force there were eight Anglos and six Spanish surnamed employees and one Indian in the machine shop. After the reduction, there were seven Anglos and two Spanish surnamed employees. Quintana and Jaramillo, ironworkers, were laid off in August, 1970, because of their low scores on the evaluation. Before the reduction in force there were eighteen Spanish sur-named and fourteen Anglo employees in the ironworkers shop; after the reduction, ten Spanish surnamed and twelve Anglos remained.

An evidentiary hearing was held on whether a class action should be allowed. The Court held the action did not meet the requirements of a class action pursuant to Rule 23, Fed.R.Civ.P.

The appellants contend that: (1) the trial court erred in failing to allow a class action; (2) the award of nominal damages for breach of the conciliation agreement was error; (3) the failure of the Court to award the entire back pay lost by Keahbone and Lopez was error; (4) the refusal of the Court to reinstate the appellants was error; and (5) the award of $2,000 in attorneys’ fees was inadequate.

The cross-appellant, Zia, alleges that: (1) the trial court erred in allowing appellants to change theories in the case;

(2) the trial court erred in entering judgment against Zia, since no violation of the Act was found; (3) the trial court erred in concluding that Zia’s performance evaluation violated the Act when it did not find that the violation was deliberate; (4) the Secretary’s Order was improperly applied to Zia’s performance evaluation; and (5) the trial court erred in awarding relief.

I.

The appellants contend that Brito represents a class of people composed of Spanish-speaking Americans, Spanish Americans, and Spanish surnamed Americans, who were employed or might be employed by Zia, and who had been or would continue to be adversely affected by Zia’s employment practices. They contend that joinder under Rule 23, Fed.R.Civ.P. is impractical because the people are too numerous; that the relief sought is common to all; that Brito adequately represents the class; and that Zia acted or refused to act on grounds generally applicable to the class.

The District Court ruled that this action does not meet the requirements of a class action. We will not disturb that holding on appeal unless it is clearly erroneous. The District Court was correct in holding that there was no basis to proceed as a class action because the requirements of Rule 23 were not met.

II.

Brito contends that the award of nominal damages for breach of the conciliation agreement does not adequately compensate him for loss of benefits. He also seeks punitive damages because Zia condoned an atmosphere of hostility. The contention has no merit in view of the fact that Brito was awarded damages for loss of wages and was reinstated to his former position.. Brito has not established any basis for a damage award for breach of the agreement. The record supports only the award of nominal damages. Oklahoma Natural Gas Corporation v. Municipal Gas Co. of Muskogee, Okl., 113 F.2d 308 (10th Cir. 1940).

III.

Keahbone and Lopez allege that they should have been awarded the entire amount of back pay they lost. Keahbone testified that after subtracting his earnings at other jobs from the pay he would have earned at Zia, he is entitled to receive $10,505; the Court awarded him $3,100. Lopez testified his lost wages amounted to $9,996. He asked for $9,000 and the Court awarded him $2,200.

Although the Court must accept the uncontroverted testimony of the appellants, it may exercise its discretion in finding that the appellants should have and could have exercised greater diligence in seeking other employment. Jurinko v. Edwin L. Wiegand Company, 331 F.Supp. 1184 (W.D.Pa.1971). The Court did not err in its award.

IV.

The appellants contend that the trial court should have ordered that they be reinstated as required by the Act.

The Act states that reinstatement may be ordered; it is discretionary with the court. 42 U.S.C.A. § 2000e-5(g). All of the appellants found other work except one, who could have found work. The Court did not err.

V.

The appellants contend that the award of $2,000 in attorneys’ fees is inadequate because the attorneys spent 162 hours on the case, equalling about $12 per hour.

Hours are not the sole basis for determining a fee. Weeks v. Southern Bell Telephone and Telegraph Company, 467 F.2d 95 (5th Cir. 1972). It is within the discretion of the trial court to set a reasonable fee. Barela v. United Nuclear Corporation, 462 F.2d 149 (10th Cir. 1972). There was no error.

VI.

Zia alleges that the trial court erred in allowing the appellants to try their case on one theory, then to obtain a decision on a second theory, and finally to obtain an injunction on a third theory. Zia contends that the appellants proceeded on the theory that the Civil Rights Act controlled, then switched to the Secretary’s Order, and finally argued that the EEOC guidelines controlled. The Judgment Nunc Pro Tunc was entered in accordance with EEOC guidelines. Zia argues that the pretrial order controls, and that the decision should be based on the Civil Rights Act.

It is within the discretion of the trial court to allow the parties to switch theories. The Secretary’s Order and the EEOC guidelines interpret the Civil Rights Act and set forth guidelines for the validation of the test procedure. The EEOC guidelines and the Secretary’s Order set forth substantially the same guidelines. There was no prejudice to Zia.

VII.

Zia contends that since the trial court found no violation of the Act, it erred in entering judgment against it. Zia states that the appellants had the burden to prove the discriminatory effect of the test. Only when thus established must Zia prove its validity. Zia alleges that the appellants did not prove the test’s discriminatory effect, therefore, it did not have to prove its validity.

In Griggs v. Duke Power Co., 401 U.S. 424, 91 S.Ct. 849, 28 L.Ed.2d 158 (1971), Negro employees sued under Title VII of the Civil Rights Act of 1964 challenging Duke Power’s requirement of a high school diploma or passing an intelligence test as a condition of employment or transfer. The tests were not designed to measure the ability to learn to perform a particular job. The Court held that neither the high school diploma nor the general intelligence test was shown to bear a demonstrable relationship to successful performance of the jobs for which it was used. The Court stated:

The Act proscribes not only overt discrimination but also practices that are fair in form, but discriminatory in operation. The touchstone is business necessity. If an employment practice which operates to exclude Negroes cannot be shown to be related to job performance, the practice is prohibited. 401 U.S. at 431, 91 S.Ct. at 853.

Zia’s test was invalid and resulted in a discriminatory employment practice. It caused a disproportionate reduction in Spanish workers in the machine shop and ironworkers shop. See Findings of Fact, Nos. 5, 13-15, 20, 21, Brito v. The Zia Company, (D.N.M.1973).

The Zia Company failed to validate the test according to the EEOC guidelines because it failed to introduce evidence of the validity of its employee performance evaluation test consisting of empirical data demonstrating that the test was significantly correlated with important elements of work behavior relevant to the jobs for which the appellants were being evaluated. Zia’s own Performance Evaluation Manual for its raters stated that Volume of Work is:

. the volume or output of acceptable work considering the job performance standard. The employee’s volume is rated according to the average daily amount of acceptable work he has produced during the review period. Don’t compare him with employees in higher, lower or different classifications. We all have our good and bad days, so it is important that the rating be based on the average or typical daily output.

Zia admits that only one of the evaluators in the machine shop kept records; there were no other backup records to the performance evaluations which were maintained. As a result of the evaluations, reductions in force were accomplished late that summer and early fall.

The machine shop employees were evaluated in May, 1970 by Thomas, Pickett and Barrows. The ironworkers unit was evaluated in August, 1970 by its superintendent. The night foreman of the machine shop, Pickett, kept private records but he only observed the day workers for about half an hour per day. Pickett testified that he made the best evaluations he could but that the men he graded did not work for him and it was a “slim judgment.”

Mr. Thomas, the machine shop supervisor, rated the machine shop employees. He was absent from the plant for about half of the time for about four months before the evaluation took place in May, 1970. When he was at the plant he observed the employees and he based his evaluation on their work and from talking to the inspector and engineer assigned to the machine shop. It is clear that the evaluations were based on the best judgments and opinions of these evaluators but were not based on any definite identifiable criteria based on quality or quantity of work or specific performances that were supported by some kind of record.

The test was not validated according to Zia’s own guidelines in that the evaluators did not grade the employees according to their average daily amount of acceptable work produced during the review period. Therefore, the test was based almost entirely on their subjective observations.

The test was not administered and scored under controlled and standardized conditions, with proper safeguards to protect the security of test scores and to insure that the scores did not enter into any judgments of employee adequacy that are to be used as criterion measures, as required by § 1607.5(b)(2) for the minimum requirements for validation. Empirical evidence supporting the test’s validity based on studies employing acceptable procedures were not presented by Zia as required by the EEOC guidelines.

Title VII prohibits informal testing procedures which might discriminate against minority groups. Discrimination can be shown to exist “when there are differential rates of applicant rejection from various minority and nonmi-nority or sex groups for the same job or group of jobs . . . ” 29 CFR 1607.13. The appellants have shown that the informal testing procedures resulted in higher rates of reduction in force of minority groups.

VIII.

Zia alleges that the trial court erred in concluding that the evaluation violated the Act because there was no finding that the violation was deliberate. Section 2000e-5(g) states in part:

If the court finds that the respondent has intentionally engaged in or is intentionally engaging in an unlawful employment practice charged in the complaint, the court may enjoin the respondent from engaging in such unlawful employment practice, and order such affirmative action as may be appropriate ....

“Intentionally” has been interpreted to mean that the practice was used deliberately, not accidentally. Jones v. Lee Way Motor Freight, Inc., 431 F.2d 245 (10th Cir. 1970), cert. denied 401 U.S. 954, 91 S.Ct. 972, 28 L.Ed.2d 937 (1971). Intent can be inferred from the operation and effect of the test. Local 189, United Papermakers and Paper-workers, AFL-CIO, CLC v. United States, 416 F.2d 980 (5th Cir. 1969), cert. denied 397 U.S. 919, 90 S.Ct. 926, 25 L.Ed.2d 100 (1970). In Griggs, supra, the Court said:

Under the Act, practices, procedures, or tests neutral on their face, and even neutral in terms of intent, cannot be maintained if they operate to “freeze” the status quo of prior discriminatory employment practices. * * * [B]ut good intent or absence of discriminatory intent does not redeem employment procedures or testing mechanisms that operate as “built-in headwinds” for minority groups and are unrelated to measuring job capability. * * * But Congress directed the thrust of the Act to the consequences of employment practices, not simply the motivation. More than that, Congress has placed on the employer the burden of showing that any given requirement must have a manifest relationship to the employment in question. 401 U.S. at 430, 432, 91 S.Ct. at 853, 854.

The use of the performance evaluation test was not accidental and the fact that the test was used with an intent to discriminate may be inferred from the statistics evidencing a greater reduction in the number of Spanish workers than Anglo employees.

IX.

Zia alleges that the Secretary’s Order is not controlling because the Judgment Nunc Pro Tunc stated that the EEOC guidelines control over the Order. Zia contends that even if the Order controls it was complied with; the test was self-validating in that they measured job related criteria by evaluating the employee’s actual performance on the job.

This contention has no merit in view of our prior holding that the Order and the EEOC guidelines interpret the Act and the test was not validated according to the guidelines. Even though the trial court concluded that the EEOC guidelines controlled, the result would have been the same if the Secretary’s Order controlled because they set forth substantially the same guidelines. The test was based primarily on the subjective observations of the evaluators, two out of three of whom did not observe the workers on a daily basis.

X.

Zia contends that the trial court erred in awarding injunctive relief in that it benefited only non-parties. Zia alleges, accordingly, that the injunction is too broad and should be limited solely to those tests which discriminate. Zia contends, too, that Roybal’s claim constitutes a different cause of action not supported by the evidence. Roybal was awarded lost wages resulting from his transfer, and Zia contends he was allowed to switch theories.

An injunction may properly be issued to benefit those not before the court. Sprogis v. United Air Lines, Inc., 444 F.2d 1194 (7th Cir. 1971), cert. denied 404 U.S. 991, 92 S.Ct. 536, 30 L.Ed.2d 543 (1971). The injunction was not too broad because the test was used throughout the plant. Roybal’s award of damages was proper. He was damaged and he is entitled to relief even though he did not demand it. Rule 54(c), Fed.R.Civ.P.

Affirmed.

      . 42 U.S.C.A. § 2000e-2(h) provides in part as follows:
      it shall not be an unlawful employment practice . . . for an employer to give and to act upon the results of any professionally developed ability test provided that such test, its administration or action upon the results is not designed, intended or used to discriminate because of race, color, religion, sex or national origin.

      . Section 1607.5 provides in part as follows :

        Minimum standards for validation.

      (a) Eor the purpose of satisfying the requirements of this part, empirical evidence in support of a test’s validity must be based on studies employing generally accepted procedures for determining criterion-related validity,
      (b) Although any appropriate validation strategy may be used to develop such empirical evidence, the following minimum standards, as applicable, must b.e met in the research approach and in the presentation of results which constitute evidence of validity:
      (1) Where a validity study is conducted in which tests are administered to applicants, with criterion data collected later, the sample of subjects must be representative of the normal or typical candidate group for the job or jobs in question.
      (2) Tests must be administered and scored under controlled and standardized conditions, with proper safeguards to protect the security of test scores and to insure that scores do not enter into any judgments of employee adequacy that are to be used as criterion measures.
      (3) The work behaviors or other criteria of employee adequacy which the test is intended to predict or identify must be fully described; and, additionally, in the case of rating techniques, the appraisal form(s) and instructions to the rater (s) must be included as a part of the validation evidence.
      (4) In view of the possibility of bias inherent in subjective evaluations, supervisors’ prejudice, as, when, as new carefully developed, and the ratings should be closely examined for evidence of bias. * * * The general point is that all criteria need to be examined to insure freedom from factors which would unfairly depress tlie scores of minority groups.
      (5) Differential validity. Data must be generated and results separately reported for minority and nonminority groups wherever technically feasible.


author: BY THE COURT:

text:
    Sam H. JOHNSON, Plaintiff-Appellee, v. PENROD DRILLING COMPANY, Defendant-Appellant. James L. STARNES, Plaintiff-Appellee, v. PENROD DRILLING COMPANY, Defendant-Appellant.
    Nos. 71-2243 and 71-2245.
    United States Court of Appeals, Fifth Circuit.
    May 18, 1973.
    John M. Smith, Longview, Tex., Mat M. Gray, III, New Orleans, La., Sam B. Hall, Jr., Marshall, Tex., Joseph W. Mil-ner, Shreveport, La., for defendant-appellant.
    Scott Baldwin, Marshall, Tex., Joseph D. Jamail, Gus Kolius, Houston, Tex., for plaintiffs-appellees.
    ON PETITIONS FOR REHEARING AND PETITIONS FOR REHEARING EN BANC
    (Opinion Nov. 21, 1972, 5 Cir., 1972, 469 F.2d 897)
    Before JOHN R. BROWN, Chief Judge, and WISDOM, GEWIN, BELL, THORNBERRY, COLEMAN, GOLDBERG, AINSWORTH, GODBOLD, DYER, SIMPSON, MORGAN, CLARK, IN-GRAHAM and RONEY, Circuit Judges.
   BY THE COURT:

A member of the Court in active service having requested a poll on the applications for rehearing en banc and a majority of the Judges in active service having voted in favor of granting a rehearing en banc,

It is ordered that these causes shall be reheard by the Court, en banc with oral argument on a date hereafter to be fixed. The Clerk will specify a briefing schedule for the filing of supplemental briefs.


author: PER CURIAM.

text:
    NATIONAL LABOR RELATIONS BOARD, Petitioner, v. JOHNSON’S INDUSTRIAL CATERERS, INC., Respondent.
    No. 72-2083.
    United States Court of Appeals, Sixth Circuit.
    Argued June 11, 1973.
    Decided June 28, 1973.
    Elliott Moore, Asst. Gen. Counsel, N. L. R. B., Washington, D. C., John C. Getreu, Director, Region 9, N. L. R. B., Cincinnati, Ohio, John H. Ferguson, Atty., N. L. R. B., for petitioner; Peter G. Nash, Gen. Counsel, Patrick Hardin, Associate Gen. Counsel, Marcel Mallet-Prevost, Asst. Gen. Counsel, William F. Wachter, Atty., N. L. R. B., on brief.
    Robert Sidman, Columbus, Ohio, for respondent; Joseph M. Mellious, Robert L. Sader, Mayer, Tingley, Hurd & Emens, Columbus, Ohio, on brief.
    Before McCREE and MILLER, Circuit Judges, and NEESE, District Judge.

       The Honorable O. G. Neese, United States District Judge for the Eastern District of Tennessee, sitting by designation.

   PER CURIAM.

This case is before the court on the application of the National Labor Relations Board for the enforcement of its order reported at 197 NLRB No. 60. Reference is made to the reported decision of the Board for a statement of pertinent facts.

Upon consideration, the court finds that the decision of the Board is supported by substantial evidence on the record as a whole. Universal Camera Corp. v. N. L. R. B., 340 U.S. 474, 71 S.Ct. 456, 95 L.Ed. 456 (1951).

The record discloses that the company violated §§ 8(a)(5), (3), and (1) of the Act by making unilateral changes in the working conditions of some of its employees for the purpose of undermining the union. We also determine that the Board properly denied the motion filed June 27, 1972 to reopen to take additional evidence because the matters involved would not require a result different from that reached by the Board in its decision dated June 9, 1972.

Enforcement granted.


author: PER CURIAM:

text:
    UNITED STATES of America, Plaintiff-Appellee, v. Charles Francis O’NEILL, Defendant-Appellant.
    No. 73-1390
    Summary Calendar.

    United States Court of Appeals, Fifth Circuit.
    June 26, 1973.
    Jack G. Hand, Jr., Jacksonville, Fla., court-appointed, for defendant-appellant.
    John L. Briggs, U. S. Atty., Harvey E. Schlesinger, Asst. U. S. Atty., Jacksonville, Fla., for plaintiff-appellee.
    Before WISDOM, AINSWORTH and CLARK, Circuit Judges.

       Rule 18, 5 Cir., Isbell Enterprises, Inc. v. Citizens Casualty Company of New York et al., 5 Cir., 1970, 431 F.2d 409, Part I.

   PER CURIAM:

In compliance with the mandate set forth in Anders v. California, 1967, 386 U.S. 738, 87 S.Ct. 1396, 18 L.Ed.2d 493, we have carefully reviewed this cause in its entirety, and conclude that there is no arguable merit in the appeal. It is therefore ordered, that the motion filed by Jack G. Hand, Jr. Esquire, for leave to withdraw as court-appointed counsel for Appellant is granted, and the appeal is dismissed as frivolous. See Local Rule 20. See also United States v. Mills, 5th Cir. 1971, 446 F.2d 1397; United States v. Minor, 5th Cir. 1971, 444 F.2d 521.


text:
    Thomas N. MELIN and Virginia W. Melin v. The UNITED STATES.
    No. 53-71.
    United States Court of Claims.
    May 11, 1973.

      Fred S. Gilbert, Jr., Washington, D. C., attorney of record, for plaintiffs. Charles P. Duffy, Portland, Or., of counsel.
    Robert N. Dorosin, Washington, D. C., with whom was Asst. Atty. Gen. Scott P. Crampton, for defendant.
    Before COWEN, Chief Judge, and DAVIS, SKELTON, NICHOLS, KASH-IWA, KUNZIG and BENNETT, Judges.
   OPINION

PER CURIAM:

This case comes before the court without oral argument on plaintiffs’ motion, filed April 6, 1973, moving that, pursuant to Rule 141(b), the court adopt the recommended decision filed February 28, 1973, by Trial Commissioner Mastín G. White under Rule 134(h), defendant having failed to file a notice of intention to except and the time for so filing under the rules of the court having expired. Upon consideration thereof, since the court agrees with the decision, as .hereinafter set forth, it hereby (granting plaintiffs’ motion to such extent) affirms and adopts the same as the basis for its judgment in this case. Therefore, it is concluded that plaintiffs are entitled to recover, together with interest as provided by law, and judgment is entered for plaintiffs accordingly, with the amount of recovery to be determined pursuant to Rule 131(c).

OPINION OF COMMISSIONER

WHITE, Commissioner:

The ultimate question to be decided in this case is whether the payments which the plaintiff Thomas N. Melin (“Mr. Melin”) received in 1964 and 1965 under agreements between Mr. Melin and two companies, Owens-Parks Lumber Company (“Owens-Parks”) arid Rainier Manufacturing Company (“Rainier”), were taxable as long-term capital gains (the position taken by the plaintiffs) or as ordinary income (the position taken by the defendant).

It is my opinion that the payments in question were taxable as long-term capital • gains, and, accordingly, that the plaintiffs are entitled to recover in the present action.

The agreement between Mr. Melin and Owens-Parks was dated March 20, 1964, and was denominated a “sales agreement.” It provided in part that “MEL-IN hereby sells, assigns and conveys to OWENS-PARKS * * * all of his right, title and interest in and to * * * Patent No. 2,658,630 and in and to the Lumber Stacking Device described and claimed therein * * * ”; and that, “as consideration for the purchase of the patent,” Owens-Parks was to pay Mr. Melin a lump sum of $30,000 and a royalty of 10 cents per thousand board feet of Douglas Fir lumber shipped by Owens-Parks during the period from January 1, 1964, to November 10, 1970, the expiration date of the patent on the lumber-stacking device.

The agreement between Mr. Melin and Rainier was dated December 8, 1964, and was in the form of a license. It provided in part that “Licensor [Mr. Melin] hereby grants to Licensee [Rainier] the exclusive right and license to develop, manufacture, use, market, sell and otherwise commercialize, throughout the United States, its territories and possessions,” an invention that is commonly referred to as a mechanical off-bear and slab-handling apparatus. Rainier agreed to pay Mr. Melin a lump sum of $85,000 and royalties at the rate of 25 cents per thousand board feet on all lumber produced at Rainier’s plant.

Prior to entering into the agreement with Rainier, Mr. Melin in December 1962 had applied for a patent on the mechanical off-bear and slab-handling apparatus. A patent was issued to him on September 14,1965, some 9 months after Mr. Melin and Rainier entered into the agreement dated December 8, 1964.

In 1964, Mr. Melin received $41,312 from Owens-Parks and $113,093 from Rainier under the respective agreements previously mentioned; and he received $10,112 from Owens-Parks and $32,821 from Rainier in 1965 under such agreements. Mr. Melin and his wife, Virginia W. Melin, reported these amounts as long-term capital gains in their joint federal income tax returns for 1964 and 1965. However, the Internal Revenue Service assessed income tax deficiencies against Mr. Melin and his wife for 1964 and 1965 in the respective amounts of $63,019 and $13,315, the IRS having determined administratively that the payments from Owens-Parks and Rainier under the respective agreements of March 20 and December 8, 1964, were taxable as ordinary income, rather than as long-term capital gains. The amounts of the deficiencies, together with interest, were paid by Mr. Melin and his wife in September 1968, thus providing the bases for the present action.

There does not appear to be any disagreement between the parties over the following points:

(1) Mr. Melin was the inventor of the lumber-stacking device and of the mechanical off-bear and slab-handling apparatus referred to in the respective agreements of March 20 and December 8, 1964.

(2) The respective inventions were made by Mr. Melin (i. e., they were conceived and reduced to practice), and the patents were obtained or applied for by Mr. Melin, more than 6 months prior to the execution of the 1964 agreements.

(3) Prior to the execution of the agreements with Owens-Parks and Rainier, Mr. Melin had not expressly granted, or attempted to grant, to anyone any rights in the patent referred to in the agreement of March 20, 1964, with Owens-Parks, or in the invention referred to in the agreement of December 8, 1964, with Rainier.

(4) The patent referred to in the agreement of March 20, 1964, and the invention referred to in the agreement of December 8, 1964, constituted capital assets.

(5) The agreements of March 20 and December 8, 1964, constituted sales or assignments to Owens-Parks and Rainier, respectively, of all the rights (if any) that Mr. Melin had in the patent and invention mentioned in the respective agreements. Although the agreement of December 8, 1964, between Mr. Melin and Rainier was in the form of a license, it granted to Rainier the exclusive right to make, use, and sell the mechanical off-bear and slab-handling apparatus, and, therefore, it was, in substance, a sale or assignment of the entirety of Mr. Melin’s rights (if any) in this invention, rather than a mere license. Waterman v. Mackenzie, 138 U.S. 252, 256, 11 S.Ct. 334, 34 L.Ed. 923 (1891); Kronner v. United States, 110 F.Supp. 730, 734, 126 Ct.Cl. 156, 163 (1953); Bell Intercontinental Corp. v. United States, 381 F.2d 1004, 1011, 180 Ct.Cl. 1071, 1077 (1967).

There is, however, a sharp controversy between the parties over the question of who owned the patent and the invention as of the times when the respective agreements were entered into by Mr. Melin with Owens-Parks and Rainier, and whether Mr. Melin had any rights in the lumber-stacking patent or in the mechanical off-bear and slab-handling invention that could be the subject of a sale or assignment.

The defendant contends that Owens-Parks was the true owner of the lumber-stacking patent prior to and at the time of the execution of the agreement dated March 20, 1964, and that Rainier should be regarded as the owner of the mechanical off-bear and slab-handling invention prior to and at the time of the execution of the agreement dated December 8, 1964. Accordingly, the defendant argues that the agreements of March 20 and December 8, 1964, actually were not sales or assignments of the patent and the invention by Mr. Melin to Owens-Parks and Rainier, respectively, but were merely devices for channeling extra compensation from the two companies to Mr. Melin.

On the other hand, it is the plaintiffs’ position that Mr. Melin was the owner of all the rights in the patent and in the invention until he sold or assigned such rights to Owens-Parks and Rainier under the respective agreements of March 20 and December 8, 1964.

The Lumber-Stacking Device

Mr. Melin was employed by Owens-Parks as a mechanic and equipment operator during the period in 1946 and 1947 when he invented the lumber-stacking device. Owens-Parks operates a large retail lumber business in Los An-geles, California. While Mr. Melin was working for Owens-Parks as a mechanic and equipment operator, he concluded that inefficiency in the use of manpower was prevalent in the retail lumber industry, including the Owens-Parks plant. In particular, he observed that about 30 individual tally and order men were used by Owens-Parks in assembling lumber to fill retail orders, which included placing lumber on a conveyor chain and repiling it into square packages for delivery to retail customers. It was apparent to Mr. Melin that Owens-Parks had poor labor and production efficiency in the assembly and packaging of lumber for retail customers.

On his own time, and outside of his regular working hours for Owens-Parks, Mr. Melin mentally reviewed, considered, and rejected various possible systems for the improvement of efficiency in the use of manpower by Owens-Parks. Finally, he conceived the idea of a lumber-stacking device that could' be uséd for the assembly and packaging of lumber for retail customers in such a way that the arrangement of the various pieces in a particular package would be of maximum convenience to the prospective user and, at the same time, would substantially reduce the amount of manpower needed for this operation. Mr. Melin next made sketches, on his own time, of the proposed device and refined its design.

After conceiving and designing the lumber-stacking device, Mr. Melin, with the consent of Owens-Parks, used the shop and welding facilities of Owens-Parks, and the assistance of two other mechanics employed by Owens-Parks, to build the first lumber-stacking device. It was built on company time, and from spare parts and discarded machinery that were owned by Owens-Parks and had a value of approximately $5,000.

Mr. Melin obtained the services of a patent attorney to prepare, file, and prosecute an application for a patent on the lumber-stacking device. Mr. Melin paid the fee and expenses of the attorney, and the other expenses that were involved in obtaining a patent.

In about February 1948, with the consent of Mr. Melin, Owens-Parks first began to use the lumber-stacking device in its business. It has continued to use such device since that time. Owens-Parks did not make any payment to Mr. Melin for the use of the lumber-stacking device until 1964.

The traditional rule is that where a person is employed by another to make an invention and he succeeds in accomplishing the assigned task during the period of employment, the employer is the equitable owner of the invention, and the employee is obligated to assign to the employer any patent that may be obtained on the invention, since the employee has only produced that which he was employed to invent; but that no assignment of the patent to the employer is required in a situation where an employee who is not assigned the specific task of inventing makes an invention, even though the invention relates to the employee’s field of employment and the employer’s time and resources are utilized in making the invention. Hapgood v. Hewitt, 119 U.S. 226, 7 S.Ct. 193, 30 L.Ed. 369 (1886); Solomons v. United States, 137 U.S. 342, 346, 11 S.Ct. 88, 34 L.Ed. 667 (1890); United States v. Dubilier Condenser Corp., 289 U.S. 178, 187-188, 53 S.Ct. 554, 77 L.Ed. 1114 (1933).

Since Mr. Melin was not employed by Owens-Parks to invent the lumber-stacking device — or to invent anything else— Mr. Melin was not obligated under the rule quoted in the preceding paragraph to assign the patent on the lumber-stacking device to Owens-Parks.

The defendant urges, however, that Mr. Melin was obligated to assign the patent on the lumber-stacking device to Owens-Parks under the “alter ego” theory enunciated in Dowse v. Federal Rubber Co., 254 F. 308 (N.D.Ill.1918). In that case, Dowse was the president and general manager, a one-fifth owner, the dominant member of the 3-member board of directors, and in complete control of the operations of a company engaged in the manufacture of rubber tires. While occupying such a relationship with the company, Dowse invented and obtained a patent on a method for reinforcing automobile tires, known as the “double cable base.” At the time of the suit, Dowse had left the manufacturing company. The question before the court related to the ownership of the patent, as between Dowse and the company. The court said (at page 310) that “the real test is whether Dowse occupied such a relation to the corporation that he was its alter ego, in such a capacity that it is only consistent with good faith that he should recognize its ownership of the patent issued to him.” On the basis of the facts, the court held that Dowse was the company’s “alter ego,” and that the company was the equitable owner of the patent.

This court applied the “alter ego” theory in LeFiell v. United States, 162 Ct.Cl. 865, 871 (1963), which involved the question of the ownership of a patent in a situation where the inventor was the president, general manager, and principal stockholder of a company at the time when the invention was made, and the company’s time, shop facilities, employees, and finances were used in developing the invention and obtaining a patent on it in the inventor’s name. The company was held to be the owner of the patent.

Mr. Melin’s situation in relation to Owens-Parks during the 1946-47 period when he invented the lumber-stacking device was not at all comparable to the situations that were involved. in the Dowse and LeFiell cases. Mr. Melin was not an officer or director of Owens-Parks, and he did not exercise control over the operations of that company, at the time mentioned. He was only a mechanic and equipment operator in the employ of the company, taking orders as to the performance of the job from higher authority in the company. He was not a stockholder in 1946, although in 1947 he acquired 100 shares of Owens-Parks stock out of a total of 4,800 shares that were issued and outstanding at the time. Mr. Melin could not, under any reasonable understanding of the term, be regarded as the “alter ego” of Owens-Parks at the time when he invented the lumber-stacking device.

It is true that by 1964, when the agreement between Mr. Melin and Owens-Parks was entered into, Mr. Melin had become vice president of Owens-Parks in charge of engineering and production, he was one of the seven members of the corporation’s board of directors, and a controlling majority of the Owens-Parks stock was held by members of the Melin family. However, Mr. Melin certainly was not the “alter ego” of Owens-Parks in 1964. The chief executive officer and largest stockholder of Owens-Parks at the time was Charles R. Melin, Mr. Melin’s father, an autocratic and very volatile individual. The evidence indicates clearly that Mr. Melin did not exercise any dominant control over his father in connection with the operations of Owens-Parks. On the contrary, Charles R. Melin discharged Mr. Melin as an officer and employee of Owens-Parks after 1964.

Furthermore, in determining the question of the ownership of a patent as between an employer and an employee under the “alter ego” theory, the Dowse ease shows that the relationship which existed between the employer and the employee at the time when the invention was made is determinative, and not the relationship at a subsequent time. Therefore, the relationship that existed between Mr. Melin and Owens-Parks in 1964 is really immaterial.

Since Mr. Melin was not employed by Owens-Parks to invent the lumber-stacking device, and since there is no valid basis for regarding Mr. Mel-in as the “alter ego” of Owens-Parks at the time when he made this invention, Mr. Melin — and not Owens-Parks — was the true owner of the patent on the lumber-stacking device at the time when the parties entered into the agreement of March 20, 1964.

On the other hand, it appears that Owens-Parks had a shop right in the lumber-stacking device and patent, i. e., the right to have a royalty-free, nonexclusive, and non-assignable license to use this invention in the company’s business at all times during the life of the patent. As indicated earlier in this part of the opinion, Mr. Melin used the shop and welding facilities of Owens-Parks, and the assistance of two other mechanics employed by Owens-Parks, to build the first lumber-stacking device. It was built on company time, and from spare parts and discarded machinery that were owned by Owens-Parks and had a value of approximately $5,000. Therefore, the company’s investment in the device was substantial. Mr. Melin then permitted Owens-Parks to use the lumber-stacking device in its business, free of charge, from about February 1948 until 1964.

In a situation where it appears that an employer made a substantial investment in an invention conceived by an employee, and that the inventor consented to the employer’s use of the invention, the employer has a shop right in the invention. LeFiell v. United States, supra, 162 Ct.Cl. at page 869. This is so even though the invention was conceived on the employee’s own time. Gill v. United States, 160 U.S. 426, 433-434, 16 S.Ct. 322, 40 L.Ed. 480 (1896).

Therefore, the sales agreement of March 20, 1964, between Mr. Melin and Owens-Parks conveyed to the latter all rights in the lumber-stacking device and patent, except the right which Owens-Parks already had to use this invention and patent in the company’s business on a non-exclusive basis and without the payment of royalty to Mr. Melin. The principal right acquired under the agreement was the right to control the use of the invention and patent by others, either by issuing licenses to others or by withholding the issuance of licenses from others. The circumstance, as shown by the evidence, that Owens-Parks did not make any effort to issue licenses under the patent during the period between March 20, 1964 (the date of the execution of the agreement between Mr. Melin and Owens-Parks) and November 10, 1970 (the expiration date of the patent on the lumber-stacking device) cannot be regarded as proof that the rights which Mr. Melin conveyed to Owens-Parks in the sales agreement of March 20, 1964, were without value. On the contrary, the inference is warranted that such rights did have value.

For the reasons previously indicated in this part of the opinion, it is concluded that the amounts which Mr. Melin received from Owen-Parks in 1964 and 1965 under the agreement of March 20, 1964, should properly be regarded as long-term capital gains.

The Mechanical Off-Bear and Slab-Handling Apparatus

Rainier is a large-volume manufacturer of framing lumber. Its principal office and plant are located in Rainier, Oregon, which is 50 miles west of Portland and on the Columbia River.

In 1956, when Mr. Melin was vice president and general manager of Rainier, a large fire completely destroyed Rainier’s plant. Mr. Melin was assigned the task of supervising the construction of a new plant, and part of his task was to incorporate in the new plant as much labor-saving equipment as possible.

During the substantial period of time while Mr. Melin was organizing the work for the construction of the new plant, hiring personnel, and drafting layouts for the plant, he utilized his free time, outside of his regular working hours for Rainier, in attempting to think of innovations that would increase the production of lumber and decrease the need for manpower in the new plant. One result of Mr. Melin’s thinking along these lines was the conception, on his own time, of the idea for a device that is commonly referred to as the mechanical off-bear and slab-handling apparatus.

After conceiving the idea of the mechanical off-bear and slab-handling apparatus, Mr. Melin built the apparatus on the site of the Rainier plant and on company time; and he utilized for this purpose shop equipment owned by Rainier and mechanics employed by Rainier.

With Mr. Melin’s consent, Rainier first began to use the mechanical off-bear and slab-handling apparatus on an experimental basis in 1958, at about the time when the new plant commenced operations. However, the apparatus was not very effective in the beginning, and Mr. Melin continued to make improvements in it for several years. The apparatus was perfected for semi-automatic operation in 1963.

Mr. Melin engaged the services of a law firm to prepare, file, and prosecute an application for a patent on the mechanical off-bear and slab.-handling apparatus. The application for patent was filed on December 26, 1962, and the patent was issued to Mr. Melin on September 14, 1965, some 9 months after Mr. Melin and Rainier entered into the agreement of December 8, 1964. Mr. Melin paid the fee and expenses of the law firm, and also the other costs that were incurred in securing the patent.

Although Mr. Melin was directed by Rainier to incorporate in the new plant as much labor-saving equipment as possible, he was not employed by Rainier to invent the mechanical off-bear and slab-handling apparatus, or any other equipment. Consequently, Mr. Melin was not under any obligation to assign this invention to Rainier under the traditional rule discussed in the preceding part of this opinion. The crucial question as to ownership, then, is whether Mr. Melin should be regarded as the “alter ego” of Rainier at the time when the mechanical off-bear and slab-handling apparatus was invented.

During the period when the mechanical off-bear and slab-handling apparatus was conceived and reduced to practice, Mr. Melin was vice president and general manager of Rainier, he was directly responsible for all operations of the company, he was a member of the company’s board of directors, and he was a principal shareholder of the company.

Mr. Melin’s relationship to Rainier at the time of the invention of the mechanical off-bear and slab-handling apparatus can be distinguished from the situations which the courts dealt with in the Dowse and LeFiell cases, discussed in the preceding part of this opinion. The inventor-employee in each of those cases was the president and general manager of the employer-company. Here, although Mr. Melin, as vice president and general manager, was directly responsible for Rainier’s operations, his father, Charles R. Melin, was the president and chief executive officer of the company. As indicated in the preceding part of this opinion, Charles R. Melin was an autocratic, volatile individual who did not hesitate to exercise his authority in dealing with members of his family concerning company affairs. It has been mentioned previously that Charles R. Melin discharged Mr. Melin as an officer and employee of Owens-Parks; and it would be appropriate to state here that Charles R. Melin also discharged another son, Arthur K. Melin, from the employ of Owens-Parks. So .long as Charles R. Melin was serving as the president and chief executive officer of Rainier, it would not be realistic to regard Mr. Melin as the “alter ego” of that company.

It must be concluded, therefore, that Mr. Melin — and not Rainier — was the owner of the mechanical off-bear and slab-handling invention.

However, since Rainier made a substantial investment in this invention, and since Mr. Melin consented to the use of the invention by Rainier, without ■charge, from 1958 to 1964, Rainier had the right in 1964 and thereafter to use the invention in its business on a nonexclusive basis and without the payment of royalty to Mr. Melin (i. e., Rainier had a shop right in the invention).

What has been said in the preceding part of this opinion with respect to the rights conveyed by Mr. Melin to Owens-Parks in the agreement of March 20,1964, and the value of such rights, is equally applicable to the effect of the agreement dated December 8, 1964, between Mr. Melin and Rainier.

It necessarily follows that the amounts which Mr. Melin received from Rainier in 1964 and 1965 under the agreement of December 8, 1964, constituted long-term capital gains.

      . Mr. Melin, his wife, and his children owned a total of 206 shares of stock in Owens-Parks out of a total of 4,515 shares that were issued and outstanding in 1964. Other close relatives (Mr. Melin’s father, his mother, Ms grandmother, and his brother) owned a total of 2,769 shares.

      . See paragraphs (b) and (d) of finding 20 [omitted from published opinion] for a description of this device.

      . In 1956-57, Mr. Melin was the second-largest shareholder, with 5,824 shares out of a total of 25,000 outstanding shares. In 1958, he became the largest shareholder, with 6,824 shares out of a total of 30,-000 shares. He has been the largest shareholder, with 6,824 shares, since 1958, but the total number of shares has been reduced to 22,440 since .Tune 1966.