earlier applications filed September 3, 1915 and November 2, 1915. February 3, 1919-more than four years after respondents' commercial use the "continuation" application was filed and March 13, 1923, the patent was granted. By this process of "divisionals" or "continuations" a seventeen year patent monopoly is permitted to begin in 1923, theoretically based on original applications which were filed in 1915.

Congress has provided that two years' public use of an invention prior to application bars the right to patent" and no patent rights are awarded for disclosures in an application which are not claimed. Here, however, approval is given patents for inventions-as the District Court found and the record shows-publicly used for more than two years before applications actually claiming the invention were filed. This approval is based on the fact that disclosures (unclaimed) were made in prior and separate applications which had not been preceded by two years' public use. "Divisional" or "continuation" applications-unauthorized by any statute-are permitted to give priority from the date of original applications, in effect barring all other inventions from that date and nullifying the statute of two years' public use. Thus for years respondents obtained no patent on their inventions for lack of claim. No one else could safely obtain a patent because of the certainty that respondents would later claim under a "divisional" or "continuation."

The statute provides no exception of public use by the inventor and, if he uses his completed invention in the ordinary conduct of his business-for more than two

35 U. S. C., c. 2, § 31.

Cf., The Corn-Planter Patent, 23 Wall. 181, 224; Miller v. Brass Co., 104 U. S. 350, 352; McClain v. Ortmayer, 141 U. S. 419, 423, 424; Buffington's Iron Building Co. v. Eustis, 65 Fed. 804, 807; Ely Norris Safe Co. v. Mosler Safe Co., 62 F. (2d) 524, 526.

years prior to his application-the discovery is abandoned to the public and he cannot thereafter obtain a patent." Such an exception-grafted onto the statute-would be directly contrary to its aim and purpose, and would enable inventors to obtain all the benefits of monopoly by simply making unclaimed disclosures, blanketing the field, and waiting until someone else attempted to claim a patent on the same invention. Then, by means of "divisional" or "continuation" applications, patent could be obtained. No such expansion of the patent statutes is justified.10 I believe the judgment of the Court of Appeals should be reversed.

"A single sale to another of such a machine as that shown to have been in use by the complainant more than two years prior to the date of his application would certainly have defeated his right to a patent; and yet, during that period in which its use by another would have defeated its right, he himself used it, for the same purpose for which it would have been used by a purchaser. Why should the similar use by himself not be counted as strongly against his rights as the use by another to whom he had sold it, unless his use was substantially with the motive and for the purpose, by further experiment, of completing the successful operation of his invention?" Smith & Griggs Mfg. Co. v. Sprague, 123 U. S. 249, 257; International Tooth Crown Co. v. Gaylord, 140 U. S. 55; see A. Schrader's Sons, Inc. v. Wein Sales Corp., 9 F. (2d) 306, 208.

10 Cf., "The patent law was designed for the public benefit, as well as for the benefit of inventors. . . .

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... A term of fourteen [now seventeen] years was deemed sufficient for the enjoyment of an exclusive right of an invention by the inventor; but if he may delay an application for his patent, at pleasure, although his invention be carried into public use, he may extend the period beyond what the law intended to give him." Shaw v. Cooper, 7 Pet. 292, 320, 322.

Opinion of the Court.

PACIFIC NATIONAL CO. v. WELCH, FORMER COLLECTOR OF INTERNAL REVENUE.

CERTIORARI TO THE CIRCUIT COURT OF APPEALS FOR THE NINTH CIRCUIT.

No. 528. Argued March 3, 1938.-Decided May 2, 1938.

A taxpayer who, in his income tax return for 1928, reported income from sales of property according to the deferred payment method, although he might have used the installment method, is not entitled, upon a claim for refund, after the time for filing the return has expired, to have the income computed according to the installment method, at least where it is not shown that the deferred payment method, rightly applied, does not clearly reflect his income. P. 192.

91 F. 2d 590, affirmed.

CERTIORARI, 302 U. S. 679, to review the affirmance of a judgment rejecting a claim for refund of income taxes.

Mr. Donald V. Hunter, with whom Mr. Melvin D. Wilson was on the brief, for petitioner.

Mr. Edward J. Ennis, with whom Acting Solicitor General Bell, Assistant Attorney General Morris, and Messrs. J. Louis Monarch, F. E. Youngman, and Stephen M. Farrand were on the brief, for respondent.

MR. JUSTICE BUTLER delivered the opinion of the Court.

March 14, 1929, petitioner filed its income tax return for 1928. The return reported $137,007.17 as profit resulting from sales of lots in that year. That figure was arrived at by adding to the cash paid in 1928, on account of the sales, the amounts later to be paid, and by deducting from the total the cost of lots and improvements and expenses of the sales.

In 1931 petitioner filed a claim for refund of the entire tax on the ground that the sales had been made on the installment basis, but the profits had been reported as if the sales were for cash, and that this was erroneous. The claim was rejected. Petitioner sued; trial by jury having been waived, the district court made findings of fact and held that petitioner reported income as authorized by the Revenue Act of 1928 and applicable regulations, and thereby made an election which became binding on the expiration of the time allowed for filing the return. Accordingly it gave judgment for respondent. Upon the same ground the circuit court of appeals affirmed. 91 F. (2d) 590. The decision below being in conflict with that of the Court of Claims in Kaplan v. United States, 18 F. Supp. 965, we granted a writ of certiorari.

De

Under the applicable statutes and regulations, petitioner could have chosen either of two methods for the ascertainment and report of gain or loss on the sales. The Revenue Act of 1928, 45 Stat. 791, establishes both. fining one, the "deferred payment method," it declares that gross income includes profits from sales, § 22 (a); regulates the computation of gain or loss, § 22 (e); defines gain to be the excess of the amount realized over the basis, §§ 111 (a), 113; and provides that the "amount realized" shall be the sum of any money received plus the fair market value of property (other than money) received, § 111 (c). Regulations 74, Art. 352. Defining the other, the "installment method," it provides that, in the case of a casual sale or other casual disposition of personal property for a price exceeding $1000 or in the case of sale or other disposition of real property, if payments received during the taxable year in which the sale was made do not exceed 40 per cent. of the selling price, the income may, under regulations prescribed, be returned on the installment method (§ 44 (b)); i. e., the taxpayer may return

in any taxable year that proportion of the installment payments actually received in that year which the gross profit realized or to be realized when payment is completed bears to total contract price. See § 44 (a).

Regulations 74 permit the vendor to return income from installment sales on the straight accrual or cash receipts basis; when so reported the sales are treated as deferred payment sales not on the installment plan. Art. 353. In ascertaining the amount of profit or loss from that class of sales, the obligations of the purchaser to the vendor are taken at their fair market value; if they have none, the payments in cash or other property having a fair market value shall be applied against and reduce the basis of the property sold, and if in excess of such basis, shall be taxable to the extent of the excess. Gain or loss is realized when the obligations are disposed of or satisfied, the amount being the difference between the reduced basis and the amount realized therefor. Art. 354.

The question is whether, having filed a return according to the deferred payment method, the taxpayer by filing claim for refund is entitled to have the profit from the sales computed on the installment method.

Petitioner contends that the installment method alone discloses its income from the sales of lots and that the deferred payment method failed clearly to reflect income.

Conceding that its return might have been made in accordance with either method, petitioner says that, being ignorant of both, it treated the sales as if made for cash at figures mentioned in the contracts. Its argument, therefore, rests upon the assertion, which we assume to be true, that the promises of purchasers to pay installments were worth less than face value. But that fact has no bearing upon the question whether proper appli

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