Auto Vacuum Freezer Co. v. William A. Sexton Co., 250 F. 459

Auto Vacuum Freezer Co. v. William A. Sexton Co.

250 F. 459 | S.D.N.Y. | 1918

MAYER, District Judge.

The clear and comprehensive report of the master renders unnecessary a duplication of the recital of all the facts. Only such facts will be referred to as are necessary to explain the questions of law discussed.

[1] 1. The master allowed plaintiff $1,328.04 as damages for loss of profits. Defendant contends that an apportionment of profits must be made, because of the Lawless patent No. 1,108,765, for cover-fastening device for receptacles. It is, of course, difficult to say to what extent, if any, customers were influenced by their purchases because 'of the improved top. The fundamental feature of plaintiff’s invention, and of its commercial ice cream freezer, was the ability to make ice cream without the usual attendant labor, and these improvements should not, therefore, deprive plaintiff of a recovery for damages. If such were to be held, an infringer could entirely escape because a plaintiff, in selling its commercial article, had added some improvements *467which did not go to the heart of the invention. In such situations the courts now resolve the doubt, if any, in favor of the owner of the patent, and against the infringer.

[2] The master charged in the overhead account only $3,000 for advertising; whereas it appeared that plaintiff had spent $27,112.90 for advertising in 1916. The testimony showed that plaintiff had expended $750 for advertising in 1915, and in 1916, before type R appeared, $3,000 had been appropriated for advertising. The master therefore regarded $3,000 as the normal expenditure, and pointed out that the sum of $27,112.90 was spent in 1916 because of the defendant’s conduct, not only in infringing but in doing so by unfair methods. The conclusion of the master as to the facts is fully supported by the evidence, and there is no question that it was vital for the preservation of plaintiff’s business that it should counteract the efforts and actions of defendant by an advertising campaign involving an expenditure largely in excess of what plaintiff had theretofore found necessary. In the peculiar circumstances -of the case, therefore, 1 agree with the master that under this branch of the controversy it was proper to charge only $3,000 for advertising in the estimate of overhead. It seems to me that the figure of $1,328.04 is correct.

[3, 4] 2. On March 14, 1917, the day before the injunction was served, defendant sold 14,343 freezers to Specht & Tommins for export and sale in Cuba and Canada; the sale taking place in New York. Under the authority of Dowagiac Mfg. Co. v. Minnesota Moline Plow Co., 235 U. S. 641, 35 Sup. Ct. 221, 59 L. Ed. 398, the master concluded that plaintiff was entitled to a reasonable royalty. In this he was right. The problem, then, was to ascertain such reasonable royalty. It is almost impossible in such a case to work out a result which can be said to be mathematically accurate; but the courts recognize this difficulty, and, if proper and sufficient data are made the basis of calculation, it is appreciated that the result is the best that can be obtained. I think the master’s figures are as nearly right as such figures can be, and I agree with him in the conclusion that plaintiff is entitled to recover $2,151.45 as reasonable royalties on these freezers sold to Specht and Tommins.

[5] 3. The final question is one of considerable difficulty. 'Hiere is naturally a great temptation to award to a plaintiff, under the circumstances disclosed in this case, damage which may-lie morally, but not legally, proved, and I am quite sympathetic with the master in his desire and effort to award to plaintiff some amount because of the increased advertising expenses for 1916. In 1915 only $750 was spent for advertising, and 15,000 freezers were sold, for about $30,000. In 1917, after the injunction was issued, and up to July,.the sales of plaintiff about equaled the total sales for 1916, and at the close of the season, in October, the sales amounted to about $85,000, as against $63,-547.13 in 1916. Only $3,000 was spent in advertising, and the gain was about 30 per cent. As the master points out, some part of this gain was due to the increase in the retail price of 25 cents a freezer. The master then concludes that “about” $15,000 should be recovered on this branch against defendant, and he states:

*468“Taking the normal increase at 25 per cent, for an expenditure of $3,000 in advertising, it would have taken three to four years to bring the sales up from the $30,000 of 1016, in which time $12,000 would have been spent’ in advertising, or about $15,000 less than the actual expenditure. The plaintiff spent $10,000 to $12,000 in 1916 for display advertising and $1,743.15 for demonstration. The balance, about $15,000, was spent for circulars and trade prospectuses. I think this amount should be allowed. The evidence is meager; but, where the infringement has been deliberate, every doubt should be solved against the infringer.”

The difficulty with the master’s reasoning is that it is founded on mere speculation. It is not possible for any one to say whether, if defendant had not infringed, it would have taken three or four years to bring the sales up from $30,000 to $63,000 on an advertising expense of $3,000, and with the added complication of an increase of the retail price. The meritorious character of the article might have increased the sales to $63,000 in less than threo or four years, on the one hand, while, on the other, it might have taken- longer to reach this increased figure. The result of a wide and intelligent advertising campaign may be, not merely to sell the article for the time being, but to create a knowledge concerning it, and a good will for it, which may be felt for a considerable period after the advertising has ceased or been diminished, and therefore the $27,000 spent for advertising may have been bread cast upon the waters.

There are many particulars in which the courts are satisfied with reasonable estimates and approximate calculations in ascertaining damages in infringement cases; but in every case, not only must damage be the proximate result of the tort, but there must be some fundamental data upon which it can be estimated. The best the master could do, in his-effort to work out what'seemed to him to be substantial justice, was to conclude that plaintiff should have a recovery on this branch to the extent of “about” $15,000. The “about” is the best argument as to the infirmity of the conclusion — a conclusion which the master frankly states is based upon evidence which “is meager.” The furthest which plaintiff may hope for is the allowance of only $3,000 in the charge for overhead, as discussed supra. That advantage has already been accorded to it. To go beyond that, and hold defendant liable for an increased advertising expense, which, inter alia, has produced increased sales, is to say that damage may be awarded upon the guess of the court, -rather than upon evidence.

I am of opinion, therefore, that the master erred in respect of this item, and therefore that the sum of $15,000 must be deducted from the total recommended by the master, to be awarded to plaintiff. The result is that the principal amount which plaintiff is entitled to recover against defendant is $3,479.49.

[6] 4. Plaintiff has moved to increase the damages in accordance with the provisions of section 4921 of the Revised Statutes (Comp. St. 1916, § 9467). The master has held that “this was a deliberate infringement.” The testimony fully sustains this conclusion. In 1915 Sexton, the defendant’s president, was manager of a concern having a permanent exhibition of household articles in the Grand Central Terminal in New York City. Plaintiff’s freezer was exhibited and sold *469there; but, some dispute having arisen, plaintiff refused to supply any more orders. Thereupon defendant was incorporated and began selling freezers in the spring of 1915. The first, known as type A, sold were identically the same as the plaintiff’s freezer, and on notification the sale was discontinued. Defendant made a freezer known as type B, which is the same as the freezer of plaintiff, except as to the covers to the two open compartments and the absence of a handle on the side. The methods adopted by defendant were very unfair and may properly be described as wanton. Defendant seeks to excuse its conduct because it had applied for a patent, which was subsequently granted, and secured a policy protecting against attacks of infringement from some concern known as the Patent Protective Company of New York. In Mowry v. Whitney, 14 Wall. at page 653, 20 L. Ed. 860, the court held:

“His infringement of the complainant’s patent was not wanton. Ho had before him the judgment of the Patent Oilice that his process was not an invasion of the patent granted to the complainant, and though this does not protect him against responsibility for damages, it ought to relieve him from liability to interest on prolits.”

The facts in that case, however, were quite different from the facts in the case at bar and from many other cases (too numerous to cite), of which Consolidated Rubber Tire Co. v. Diamond Rubber Co. (D. C.) 226 Fed. 455, affirmed 232 Fed. 475, 146 C. C. A. 469, is an illustration. Under all the circumstances disclosed by the evidence, the damages will be increased threefold, making a total o f $10,438.47.

[7] 5. As the award is for damages, interest will run on $3,479.49 from the date of the master’s report. Crosby Valve Co. v. Safety Valve Co., 141 U. S. 457, 458, 12 Sup. Ct. 49, 35 L. Ed. 809. Interest on the remainder will run only from the date of the filing of the decree to be made herein, because that amount was not found by the master, and will only be judicially determined when the decree is filed.

Plaintiff, therefore, may have a decree for $10,438.47, with interest on $3,479.49 from January 16, 1918, together with costs and disbursements.