248 F. 125 | 3rd Cir. | 1918
This matter arises out of contempt proceedings instituted against the defendants below for violation of a permanent injunction against infringement of tire patent in suit (No. 628,027), and pertains to the amount awarded the complainant as compensation for its injuries.
This litigation was begun in 1906; it was bitterly fought through various state and federal courts (Fry Glass Co. v. McKee Glass Co., 239 Pa. 34, 86 Atl. 644; Blair v. Jeanette-McKee Glass Works (C. C.) 161 Fed. 355; Libbey Glass Co. v. McKee Glass Co. (D. C.) 216 Fed. 172, affirmed 220 Fed. 672, 136 C. C. A. 314); and it reached perhaps its final stage in a recent decree of the District Court (now before us on appeal) imposing upon the defendants a penalty for violating its injunction.
We are not concerned with this protracted litigation, except as it bears upon the proceedings for contempt of the court’s fihal decree, in which violation of the injunction is admitted and entire contempt for the court’s decree is shown.
The questions raised on this appeal are three: The first has to do with the principle upon which the court formulated a penalty against the defendants; the second and third relate to certain items in the amount of the penalty.
The' defendants do not deny their liability to the complainant for injuries proven to have been sustained; but maintain, that in imposing the penalty, the trial court exceeded its powers by adding to the remedial amount ascertained a sum that is purely punitive. .They argue that the purpose of a civil prosecution for contempt is remedial rather than punitive, and that the penalty to be imposed should correspond with and be no greater than the loss, expense, and injury which the complainant is shown to have sustained by reason of the
“In fixing penalties for civil contempts, it seems to the court important that care should be taken to give the plaintiff full compensation for the injuries sustianed, and not more.”
The only question, therefore, is: Whether the trial judge in awarding the complainant indemnity for its injuries, abused his discretion by making an award in excess of injuries proved.
The penalty imposed amounts to $25,151.70. It is made up of several items, which in round numbers are as follows :
Net infringing profits realised by defendants.if 8,000.00
Royalty at 6 per cent, on defendants’ entire sales of $41,713.97.,.. 2,500.00
Complainant’s expenses and costs, and master’s fee. 4,700.00
Additional compensation for complainant’s injuries. 10,Q00.00
The assignments of error embrace all items except those of complainant’s expenses and costs, and master’s fee; but at the argument they were limited to the compensation item of $10,000.00 and the royalty item of $2,500.00.
The defendants charge that the court abused its discretion by allowing $10,000.00 as compensation for the complainant’s injuries, in that, it arbitrarily made the allowance without any evidence of injuries sustained by the complainant to which such compensation is applicable. The defendants base this contention upon the theory that all matters of the complainant’s injuries and compensations were referred to a master, who showed by his report that all injuries sustained were compensated for in the items of profits, royalties, expenses, and costs, therein set forth, and, that, therefore, there was no evidence upon which to predicate the court’s award of $10,000.00 subsequently made for additional compensation. Of course, if this is the fact, the contention of the defendants is sound. What is the fact?
The contempt proceedings were conducted in open court and consumed three days. Many witnesses were heard, and there were offered in evidence the entire record of this case and of the case in the Pennsylvania state courts, in much of which litigation the trial judge had taken part and with all of which he was thoroughly familiar. It became clear at the hearing, that certain of the complainant’s injuries arose from infringing profits which had enured to the defendants, and that an accounting of such profits was necessary. The trial judge, therefore, appointed a master to ascertain these profits and damages — ■ “to assist [him] in arriving at proper pecuniary penalties which should
“The findings of the master as reported in aid of the court are based upon actual figures taken from books of the defendants and from the records of the case. They will not compensate the plaintiff for the injuries 'done it.”
Continuing, the court said: '
“The history of this litigation, shows that the defendants have been most persistent in their acts of infringement of the plaintiff’s rights, and that they have in a marked degree treated not only the decrees but the jurisdiction of this court with contempt. It is plain from all the testimony in this case [by which' we surmise the court meant that which was taken in open court as well as that which was taken before the master] that the plaintiff has suffered injury at the hands of the defendants to an .extent which cannot be accurately measured in dollars and cents.”
The court then added to the items of the master’s report the disputed item of $10,000.00.
“It is plain from all the testimony in the ease that the plaintiff has suffered injury at the hands of the defendants which cannot be accurately measured in dollars and cents.”
That testimony, is not before us in this record. As his opinion shows, not only by its general trend, but by positive expression, an effort on his part to limit the penalty to compensation for injuries sustained, and for nothing more, it is qlear to us that the trial judge based the $10,000.00 compensation item upon the evidence which he had heard and not upon the evidence which the master had heard. As there was evidence before the trial judge which is not before us, and as it is plain that in reaching his decree the trial judge considered that evidence, we must assume, on authority of Pound v. Turck, 95 U. S. 459, 24 L. Ed. 525, and Wagner v. Standard Sanitary Mfg. Co., 244 Pa. 310, 91 Atl. 353, that there was sufficient evidence upon which to base the award of $10,000.00.
If there had been no infringement, and if the articles had been manufactured under a license to use the patented process, the royalty provided therein would have been a factor of cost to the licensee in the production of articles under the patent, and profits made thereon would be only so much as remained after paying the royalty. This is the way profits under a license are ascertained. As the articles here were produced not under license but by infringement of the patent, a like royalty is chargeable in the same way as a factor of cost in order to ascertain what profits were made by the infringement. A royalty, whether it be agreed to or be imposed, becomes an element of cost to be paid before profits can be made; so it must be included in a calculation before profits can be ascertained. If royalty is included as a cost, profits are reduced by the exact amount of the royalty; if excluded, profits are increased by the same amount. Therefore, it appears to us, that in compensating a patentee for what he has lost by the measure of what he would have earned but for the infringement, the patentee is first entitled to the amount of the 'royalty and then the infringing profits earned over and above the royalty; but, that he is not entitled to a royalty to cover what he himself would have earned or would have received from another but for the infringement, plus infringing profits above such royalty, and phis royalty again as damages. As the master in this case very properly found that the owner of the patent was entitled by way of damages to a sum which, but for the infringement it would have earned elsewhere as royalty, he should have included that as a factor of cost
The difficulty which the master had in finding from the evidence before him a method of awarding damages for the infringing sales on which profits were earned, is explained perhaps by the fact that only a part of the evidence of the .complainant’s damages was before him; the other part had already been given before the court, and upon -it, the court made its award of $10,000.00.