*367OPINION.
Ivins:The taxpayer in 1913 acquired certain patents upon the man'ufacture of glass by the so-called cylinder method. In exchange for these patents it issued its stock to a par value of $750,000. At the hearing it adduced evidence sufficient to constitute -prima facie proof that the patents so acquired had a large value at the time of acquisition, but for reasons which will hereinafter appear, it becomes unnecessary for us to determine that value. Under these patents it licensed certain manufacturing companies to operate on a royalty basis. It collected undiminished royalties under the license agreements in the years 1914-1919. But suits in eq'uity were brought against the licensees by the American Window Glass Co. and the Window Glass Machine Co. (hereinafter referred to as “ the American Companies ”) to enjoin their-operations on the ground that they were infringing certain patents of the American Companies which were senior to the taxpayer’s patents. In 1919, the United States District Court and the United States Circuit Court of Appeals upheld the contentions of the American Companies to an extent sufficient to result in decrees enjoining the taxpayer’s licensees from further manufacturing glass without the consent of the American Companies. But by arrangement between the taxpayer, its licensees, and the American Companies, the American Companies, for certain consideration, licensed the taxpayer’s licensees to continue their operations from month to month. Simultaneously, the taxpayer reduced the royalties it should collect from its licensees to 40 per cent of the amounts provided for in the original license agreements. This arrangement continued and the taxpayer collected royalties at the reduced rates from its licensees until 1921, when the taxpayer went into liquidation.
The taxpayer contends that the decrees of the courts in 1919 rendered its patents valueless, and that it is entitled to a deduction for loss upon its 1919 return of the cost of its patents, diminished by depreciation written off. The Commissioner, in his letter of determination, took the position that the loss in 1919 was not total, since the taxpayer continued to receive diminished royalties thereafter, that the transaction was not closed in 1919, and that therefore any deduction for loss was premature at that time. But at the hearing before this Board, the Commissioner’s counsel shifted his ground and maintained that the decrees of the courts rendered the taxpayer’s patents void db initio, that the stock issüed for them was worthless *368from the beginning, that the taxpayer never had anything to lose, and consequently lost nothing and was entitled to no deduction for loss in 1919.
We think that the arguments for both parties at the hearing were faulty, but that the original position taken by the Commissioner in his letter of determination was sound.
The patents acquired by the taxpayer were duly issued by the patent office and presumably were valid. They entitled the taxpayer to restrain everybody from manufacturing glass by the particular means described therein. The court decrees did not declare them invalid — did not even mention them — nor did the opinion of the Circuit Court of Appeals, Consolidated, Window Glass Co. v. Window Glass Machine Co., 261 Fed. 362. Those decrees were merely to the effect that the taxpayer’s licensees were infringing the monopoly of the American Companies under older patents, and they were enjoined from continuing to do so witho'ut the consent of the American Companies. The taxpayer was still at liberty to enjoin anybody from manufacturing by its processes, even though he might be licensed by the American Companies to operate under theirs.
The licensees procured from the American Companies the right, on making certain payments, to go on with their business — but they continued to operate under their license agreements with the taxpayer, to manufacture by processes patented by the taxpayer, and to pay the taxpayer royalties for the privilege — reduced royalties, to be sure, but nevertheless substantial.
It may be that the decrees of the courts reduced the val'ue of the patents in 1919, but they certainly did not render them worthless at that time. We are satisfied that the taxpayer’s deduction for loss in 1919 was properly disallowed and that the determination of the Commissioner on that basis, and the deficiency accordingly found, should be approved.