The scope of this tax imposition embraces royalties. Rohmer v. Commissioner of Internal Revenue, 2 Cir., 1946, 153 F.2d 61, certiorari denied 1946, 328 U.S. 862, 66 S.Ct. 1367, 90 L.Ed. 1632. The tax imposed by § 211 is to be withheld at the source of income within the United States under 26 U.S.C.A. § 143. Since tax on gain from the sale of personal property is not subject to withholding under § 143, Commissioner v. Celanese Corp., 1944, 78 U.S.App.D.C. 292, 140 F.2d 339, 340, the sale-license issue with regard to the transfer of patent rights arose in the Bloch case out of the question of whether the payments made to the inventor were subject to withholding, and did not arise under the provisions of the capital gains law, 26 U.S.C.A. § 117, which govern this case. This distinction between the Bloch case and the cases arising under 26 U.S.C.A. § 117 was noted in United States v. Carruthers, 9 Cir., 1955, 219 F.2d 21, 26. Moreover, in the Bloch case the court quotes with seeming approval its earlier statement in General Aniline Film Corp. v. Commissioner of Internal Revenue, 2 Cir., 1944, 139 F.2d 759 that "* * * `the passing of title does not preclude the existence of royalties.'"

And in the analogous situation of lump-sum payments for the absolute transfer of some but not all of the exclusive rights conferred by the patent law, courts have held such proceeds not subject to withholding under § 143(b). GeneralAniline Film Corp. v. Commissioner, 139 F.2d 759 (C.A. 2d Cir.); cf. Commissioner v. Celanese Corp., 78 U.S.App.D.C. 292, 140 F.2d 339. The Regulations, to be sure, give "royalties" as an example of proceeds which are within the phrase "fixed or determinable annual or periodical gains, profits, and income."

Moreover, clauses in an agreement permitting termination by the grantor upon the occurrence of stated events or conditions will not preclude the transaction from being considered a sale; such clauses are uniformly treated as conditions subsequent, akin to provisions in realty conveyances calling for reversion of title previously vested. Kronner v. United States, supra, 110 F. Supp. at 734, 126 Ct.Cl. at 163; Commissioner v. Celanese Corp., 78 U.S.App.D.C. 292, 140 F.2d 339, 341-342 (1944); First National Bank of Princeton v. United States, 136 F. Supp. 818, 822-823 (D.N.J. 1955); Massey v. United States, 226 F.2d 724, 727 (7th Cir. 1955). The fact, too, that the grantee has the right to terminate the agreement at will does not defeat a sale.

Thus, in United States v. Carruthers, 9 Cir., 219 F.2d 21, in a suit to recover income tax wrongfully assessed, the court had under consideration an agreement in which the taxpayer granted to a corporation an exclusive license to manufacture, use and sell machinery and to practice the methods set forth in certain patents but limited the licensee to the use of the patents in a single industry; and it was argued by the Commissioner that this arrangement, since it did not conform to the Waterman rule, was not a transfer of title to the whole patent, and hence the conveyance was a license and not a transfer of capital assets; but the Court held that it was not obliged to follow literally the test announced in the Waterman infringement suit, particularly as the weight of the testimony showed that the patents had no established value for use in any other industry. Again, in Commissioner of Internal Revenue v. Celanese Corp., 78 U.S.App. D.C. 292, 140 F.2d 339, the Court affirmed the conclusion of the Tax Court that a transfer of capital assets had taken place by reason of and agreement to assign certain patented processes to the purchaser with full and exclusive right and authority to manufacture and sell in the United States. This agreement was followed by a formal assignment whereby the exclusive right, title and interest in the patents within the described territory was assigned. It was taken for granted that the formal assignment of the whole title to the patent confirmed the purpose of the original agreement and no mention was made of the omission therefrom of the right to use the patented processes.

One not engaged in holding patent rights "`primarily for sale to customers in the ordinary course of his trade or business,'" 6 T.C. 266, as distinguished from a "professional" inventor who is so engaged.See Kronner v. United States, 126 Ct. Cl. 156, 110 F. Supp. 730; Allen v. Werner, 190 F.2d 840 (C.A. 5th Cir.). The Commissioner's position was sustained by the Second Circuit in Bloch v. United States, 200 F.2d 63. Prior to 1946, several courts had taken the same position. Commissioner v. Celanese Corp., 78 U.S.App.D.C. 292, 140 F.2d 339: Commissioner v. Hopkinson, 126 F.2d 406 (C.A. 2d Cir.).The relevant portions of § 1235 are: "A transfer (other than by gift, inheritance, or devise) of property consisting of all substantial rights to a patent, or an undivided interest therein which includes a part of all such rights, by any holder shall be considered the sale or exchange of a capital asset held for more than 6 months, regardless of whether or not payments in consideration of such transfer are — "(1) payable periodically over a period generally coterminous with the transferee's use of the patent, or "(2) contingent on the productivity, use, or disposition of the property transferred."

"There is nothing in the House report or in the Senate report which supports respondent's assertion that a taxpayer, in order to have the tax benefit of the capital gains provisions must sell his asset for one lump sum. As a matter of fact, this and other courts have held that where, as here, the consideration for the sale of a capital asset was in the form of periodic payments based on a percentage of the gross sales made during the year, the taxpayer was entitled to a capital gains limitation on the sums received in each year. See Commissioner v. Celanese Corporation, [ 140 F.2d 339] supra; George James Nicholson, 3 T.C. 596, and cases cited therein. We can find no valid reason for holding otherwise in this case.

Section 1235 is substantially a statement of the case law on the subject at the time of its enactment in 1954, although the Commissioner of Internal Revenue had shown some reluctance to recognize the rulings. Waterman v. Mackenzie, 138 U.S. 252, 256, 11 S.Ct. 334, 34 L.Ed. 923; Kavanagh v. Evans, 188 F.2d 234, C.A. 6th; United States v. Carruthers, 219 F.2d 21, C.A. 9th; Commissioner v. Hopkinson, 126 F.2d 406, C.A. 2nd; Commissioner v. Celanese Corp., 140 F.2d 339, C.A.D.C. The Commissioner, of course, recognizes in the present case, now covered by Section 1235, that the transfer of all substantial rights to a patent by a holder shall be considered the sale or exchange of a capital asset held for more than six months, even though the payment therefor is not made at the time of the transfer, but is made periodically later over a period of time. His contention in this case is that the rights in the patent, which were transferred by the taxpayer and Dr. Cooksey, was not a transfer "of all substantial rights to a patent," as is required by the statute, but that in making the transfer the taxpayer and Dr. Cooksey retained the right to manufacture the filters under the patent.

However, other courts have accorded substantial weight to the parties' own characterization and treatment of the agreement as indicative of what the parties intended. Commissioner of Internal Revenue v. Celanese Corp. of America, 78 U.S.App.D.C. 292, 140 F.2d 339, 340-341; Commissioner of Internal Revenue v. Hopkinson, 2 Cir., 126 F.2d 406, 408-410; Kimble Glass Co. v. Commissioner (1947), 9 T.C. 183, 185-186, 190. A patent is an intangible asset. It is usually transferred by an assignment. If there is a transfer of all the substantial rights in a patent, it is considered an assignment and qualifies the transferor for capital gains treatment.

For the rulings of the Bureau see Mim. 6490, 1950-1 Cum. Bull. 9; Revenue Ruling 55-58, 1955-1 Cum. Bull. 97. However, at the time of the passage of P.L. 629, supra, there were a number of court decisions to the contrary: Myers v. Commissioner, 6 T.C. 258; Kronner v. United States, 110 F. Supp. 730, 126 Ct. Cl. 156; United States v. Carruthers, 9 Cir., 219 F.2d 21; Commissioner of Internal Revenue v. Celanese Corp., 78 U.S. App.D.C. 292, 140 F.2d 339; and Commissioner of Internal Revenue v. Hopkinson, 2 Cir., 126 F.2d 406. But, notwithstanding these court decisions, the Bureau of Internal Revenue persisted in its interpretation and continued to require taxpayers to report such income as ordinary income. It is well settled law, needing no citation of authority, that a taxpayer is bound to follow the interpretations of the law by the agency charged with its administration.

In the alternative, and citing and quoting in support from Thomas v. Mercantile National Bank, 5 Cir., 204 F.2d 943; United States v. Dubuque Packing Co., 8 Cir., 233 F.2d 453, and Hollander v. United States, 2 Cir., 248 F.2d 247, taxpayers, assuming that the amendment of the statute was not declaratory but in derogation of the law of the cases, place their reliance upon the argument that the claimed right to refund did not exist before but was created by the amendatory statute and that it must be held therefore that the right did not accrue and limitation did not, indeed could not, begin to run until the passage of the act. On its part the United States, taking flat issue with taxpayers' claim that the amendatory section created the right to refund, points to Myers v. Commissioner, 6 T.C. 258; Kronner v. United States, Ct.Cl., 110 F. Supp. 730; Commissioner of Internal Revenue v. Celanese Corp. 78 U.S.App.D.C. 292, 140 F.2d 339, and Commissioner of Internal Revenue v. Hopkinson, 2 Cir., 126 F.2d 406, to which we may add from this court, Allen v. Werner, 5 Cir., 190 F.2d 840, all pre-statute cases, and the recent case from this court of Bannister v. United States, 262 F.2d 175, Cf. United States v. Carruthers, 9 Cir., 219 F.2d 21 and Rollman v. Commissioner, 4 Cir., 244 F.2d 634. So pointing, it declares, correctly we think, that the statute in question did not establish, it merely confirmed, the already existing right to seek a timely refund and that, under the facts and the controlling law, there is no basis for taxpayer's theory that the ordinary statute limiting claims and suits for tax refunds is not applicable. Urging upon us that there is no basis in Sec. 322(a)(1) I.R.C. 1939 for the gloss which the district judge in the Dempster case put on the word "overpayment", the United States points out that in Jones v. Liberty Glass Co., 332 U.S. 524, 68 S.Ct. 229, 92 L.Ed. 142 the Supreme Court reviewed the