552 F.2d 343 | Ct. Cl. | 1977
Lead Opinion
delivered the opinion of the court:
In Tektronix, Inc. v. United States, 195 Ct. Cl. 53, 445 F.2d 323, 170 U.S.P.Q. 100 (1971), claims in eight patents owned by plaintiff were held to be valid and infringed. The present task is to fix the reasonable compensation to which plaintiff is entitled under 28 U.S.C. § 1498, including a sum for the delay in payment. Former Trial Judge Cooper concluded that Tektronix should recover the basic amount of $4,831,773, plus compensation for delay computed at simple interest (varying from 4.60% in 1960 to 6.59% in 1969) on the amounts allocable to the individual years in which infringement occurred, such interest to be paid until the principal sum is satisfied. Both sides have sought review, both as to the principal amount and as to delay compensation. Though we agree with, and borrow from, much of the trial judge’s reasoning, we come to different results on both the basic compensation and the delay payments.
I.
The patents in suit relate to oscilloscopes and their electronic circuitry. Since defendant now concedes that all of the oscilloscopes here accused are covered by one or more claims of one or more of the patents, it is unnecessary
Plaintiff was organized in 1946, specifically to manufacture oscilloscopes designed by its then-president Howard Vollum. Research and development, funded by plaintiff, ultimately led to the model 516, 535, 535A, 545, and 545A oscilloscopes, all of which embody the patents in suit.
In 1958, apparently desirous of having alternative sources of supply and not wishing to pay plaintiffs price,
To fulfill this contract, Hickok purchased a 535 oscilloscope from Tektronix and began to manufacture copies. Subsequently, two other companies, Jetronic Industries and Lavoie Laboratories, Inc.,
The period of infringement extended from 1959 to 1969 and involved the procurement by defendant of 17,542 scopes at a net cost (for scopes only) of approximately $16,944,840. The infringing scopes bear the model designations 1805, 1805A, USM/81, LA261, LA265, LA265A, LA545, AN/USM-105, AN/USM-140, and AN/USM-141.
With the exception of the last three models, each of those scopes was supplied to the Government in direct competition with plaintiffs commercial scopes. The remaining three scopes, comprising 8,437 of the total, although embodying the circuits of the patents in suit, were militarized or more rugged versions developed by the Hewlett-Packard Company which had attempted to design around plaintiffs patents but, finding it could not, had requested and was granted a cross-license arrangement with plaintiff. Plaintiff did not market, and did not seek to bid on, scopes of this type, choosing to restrict its efforts to the commercial scopes. Hickok and Lavoie did, however, bid on and receive contracts for supplying these militarized scopes and, in so doing, extended their infringing activities.
II.
The parties
Defendant’s basic theory, premised on Badowski v. United States, 150 Ct. Cl. 482, 278 F. 2d 934, 137 U.S.P.Q. 656 (1960), and Saulnier v. United States, 161 Ct. Cl. 223, 314 F. 2d 950, 137 U.S.P.Q. 222 (1963), lumps all the infringing devices into one category and leads to a reasonable and entire compensation equivalent to a nominal sliding-scale royalty based on the selling price of the oscilloscope only, without regard to any unpatented ancillary equipment sold with the scope. As a guide for selecting a suitable royalty rate, defendant relies on the licensing practices of RCA and Western Electric, both of which granted licences in the commercial electronics field at rates ranging from 2% down to 1%, the latter rate being applicable to sales to the Department of Defense. Defendant suggests that a sliding scale of 1.5% on the first $2 million, 1.2% on the next $3 million, and 1% on the remainder, would be appropriate here.
Plaintiff, on the other hand, divides the contracts for the procurement of infringing scopes into two categories, the first being those contracts that, in its view, would have been awarded to plaintiff "but for” the infringement, while the second consists of those contracts for the rugged or militarized scopes on which plaintiff did not bid and which it could not have supplied. With respect to the first category, plaintiff asks for an amount that would place it in as good a pecuniary position as it would have been had it received the infringing procurement. In short, plaintiff seeks lost profits, its authority consisting principally of two cases: Imperial Machine & Foundry Corp. v. United States, 69 Ct. Cl. 667, 5 U.S.P.Q. 332 (1930), and Waite v. United States, 69 Ct. Cl. 153, 4 U.S.P.Q. 387 (1930), rev’d on other
III.
It is settled that recovery of reasonable compensation under § 1498 is premised on a theory of an eminent domain taking under the Fifth Amendment. Calhoun v. United States, 197 Ct. Cl. 41, 51, 453 F. 2d 1385, 1391, 172 U.S.P.Q. 438 (1972); Pitcairn v. United States, 212 Ct. Cl. 168, 547 F. 2d 1106 (1976). The Supreme Court has in many cases emphasized that basic equitable principles of fairness are ' the governing consideration in determining just compensation for an eminent domain taking. In Almota Farmers Elevator & Warehouse Co. v. United States, 409 U.S. 470 (1973), it was stated, at 473-74:
The Fifth Amendment provides that private property shall not be taken for public use without "just compensation.” "And just compensation means the full monetary equivalent of the property taken. The owner is to be put in the same position monetarily as he would have occupied if his property had not been taken.” United States v. Reynolds, 397 U.S. 14, 16 (footnotes omitted). See also United States v. Miller, 317 U.S. 369, 373. To determine such monetary equivalence, the Court early established the concept of "market value”: the owner is entitled to the fair market value of his property at the time of the taking. New York v. Sage, 239 U.S. 57, 61. See also United States v. Reynolds, supra, at 16; United States v. Miller, supra, at 374. And this value is normally to be ascertained from "what a willing buyer would pay in cash to a willing seller.” Ibid. See United States v. Virginia Electric & Power Co., 365 U.S. 624, 633.
* * * * *
And, at 478:
"The constitutional requirement of just compensation derives as much content from the basic equitable principles of fairness, United States v. Commodities*265 Trading Corp., 339 U.S. 121, 124 (1950), as it does from technical concepts of property law.” United States v. Fuller, post, at 490. It is, of course, true that Almota should be in no better position than if it had sold its leasehold to a private buyer. But its position should surely be no worse.
Those same principles have long guided this court in its assessment of reasonable compensation. For example, in Olsson v. United States, 87 Ct. Cl. 642, 659-60, 25 F. Supp. 495, 499 (1938), 37 U.S.P.Q. 767, 770, cert. denied, 307 U.S. 621 (1939), it was said:
* * * The rule to be applied in measuring the compensation depends upon the facts and circumstances of each case, but the end to be obtained in every case is always the same, namely, the determination and allowance of just compensation to the patentee for the value to him of the right or license to use appropriated by the Government. Richmond Screw Anchor Company v. United States, 275 U.S. 331; * * * The Berdan Fire-Arms Manufacturing Company v. United States, 26 C. Cls. 48, 82. * *
Where an established royalty rate for the patented inventions is shown to exist, that rate will usually be adopted as the best measure of reasonable and entire compensation. See, e.g., Carley Life Float Co. v. United States, 74 Ct. Cl. 682 (1932). But where no such royalty is shown, alternative methods must be employed.
In this case, it is necessary to adopt a method other than reliance on an established royalty for ascertaining what would be reasonable. However, neither defendant’s nominal sliding-scale royalty nor plaintiffs lost-profit theory provides a satisfactory basis on which to base a decision in this case.
A.
The Government’s proposal is rejected because the evidence on which it is premised is not at all analogous to the facts here. Defendant relies on the licensing programs of RCA and Western Electric but it seems clear that plaintiff — which was not a company comparable in size to those corporate giants, nor possessed of either a comparable patent portfolio or a comparable product line, nor under the spur of an anti-trust decree — should not be governed by the same considerations. Items such as transistors, tubes, and similar electronic components are comparatively simple in structure, have a relatively low per-unit cost, and are sold and used in very large quantities. Plaintiffs oscilloscopes, on the other hand, are much more complex, have a much higher per-unit cost, and the quantities sold are much lower.
B.
With respect to plaintiffs lost-profit contention, there is no doubt that plaintiff was ready, willing, and able to
We are constrained to point out, in addition, that in any event plaintiffs "lost profits” (assuming that they were absolutely certain) would be so high as to amount to excessive compensation, rather than the just compensation payable under the Fifth Amendment. See Part V, infra.
Like the trial judge we conclude that the best method of computing compensation in this case is to adopt the approach of establishing a reasonable royalty for both the commercial and the militarized scopes. That method, exemplified by the Georgia-Pacific case, supra, involves a willing-buyer/willing-seller concept, in which a suppositi-tious meeting between the patent owner and the prospective manufacturer of the infringing item is held to negotiate a license agreement.
Defendants object to employing a willing-buyer/willing-seller. approach, asserting that plaintiff has never been willing to grant any of the defendants a license under these patents. Of course, whether this is the fact or whether, as plaintiff contends, defendants were never willing to pay a reasonable royalty, is irrelevant. The willing-buyer-/willing-seller concept is, as Judge Learned Hand termed it, "a device in aid of justice,” Cincinnati Car Co. v. New York Rapid Transit Corp., 66 F. 2d 592, 595, 19 U.S.P.Q. 40 (2d Cir. 1933). As such it is employed by the court as a means of arriving at reasonable compensation and its
Although we accept the trial judge’s general approach, we depart from his application of the willing buyer/willing seller criterion. We reconstruct, as he did, a hypothetical negotiation in 1959 between Hickok, the first prospective infringer, and plaintiff; the subject of the negotiation would be the patent rights to the oscilloscope Hickok intended to supply to defendant. The negotiation formula which the trial judge borrowed from Georgia-Pacific is, as already mentioned, to start with the infringer’s selling price, deduct its costs in order to find its gross profit, then allocate to the infringer its normal profit, and end up with the residual share of the gross profit which can be assigned to the patentee as its royalty. We utilize the same formula as the beginning of our supposititious negotiation, and likewise start with Hickok’s proposed selling price — but thereafter our calculation differs from the trial judge’s:
Hickok’s proposed selling price $1,137
Costs:
Direct or variable manufacturing 486
Fixed burden, marketing, administration, etc. 533
Costs subtotal 1,019
Gross profit 118
Hickok Profit 31
Residual Share (7.65% of unit price) 87
The trial judge’s computation (using the above format but different figures, as explained in notes 8-10) resulted in a residual share of 27.5% of the unit price, all of which he
The defendant’s recomputation leads to a residual share of 4.6% of unit price which it is willing to give to plaintiff (if defendant’s primary contention based on the Western Electric-RCA-Raytheon licenses is rejected, as we have in Part IV, B, supra,). That conclusion we also reject because, in our view, it assigns a larger profit to the potential infringer (Hickok) than the latter actually experienced over the infringement period and would be willing (in our view) to anticipate; defendant’s computation therefore leaves too small a residual share for plaintiff. Hickok would be satisfied, we think, with a relatively low profit because the product to be made by it under plaintiffs patents would not involve any unusual risks or require large-scale investments in marketing, advertising, or tooling.
We do not, however, stop with the 7.65% of unit price which our own calculation produces for plaintiffs residual share. We think that a reasonable patentee in the position of plaintiff, which was realizing a profit in excess of 25% on its own non-Government sales of oscilloscopes, would have insisted on a somewhat higher royalty than 7.65%, and that a- reasonable potential licensee would have agreed, in order to be able to sell the item without legal question— even if at a somewhat higher price than if no royalty were to be paid. Such a potential licensee, if reasonable, would recognize that plaintiff, which took the risks and bore the expense of developing the scopes and creating a market for them, was entitled to substantial compensation for those efforts and for its ingenuity in creating this important and effective instrument. But we do not believe that such a reasonable potential licensee would be willing, or could be expected to be willing, to pay as a royalty the 25% or so plaintiff was making in profit on its own non-Government sales of scopes.
We select 10% as the proper royalty rate. This represents our best judgment, on the material we have before us, of what reasonable "parties might well have agreed upon” (Saulnier v. United States, supra, 161 Ct. Cl. at 227, 314 F.2d at 952, 137 U.S.P.Q. at 224), "what the parties would have agreed upon, if both were reasonably trying to reach an agreement” (Amerace Esna Corp. v. United States, supra, 199 Ct. Cl. at 182, 462 F.2d at 1380, 174 U.S.P.Q. 517). One may label this as akin to a "jury verdict” but, in the absence of hard proof warranting the use of more precise standards, the "whole notion of a reasonable royalty is a device in aid of justice, by which that which is really incalculable shall be approximated. * * * It is no more impossible to estimate than the damages in many other torts * * Cincinnati Car Co. v. New York Rapid Transit Corp., supra, 66 F.2d at 595, 19 U.S.P.Q. at 43.
In our view no rate higher than 10% is called for. As already indicated, plaintiffs profit in excess of 25% on its non-Government sales
Nor should it be forgotten, when plaintiffs high profits are brought forward for comparison, that the standard of 28 U.S.C. § 1498 — "reasonable and entire compensation”— was designed "to accomplish complete justice as between the plaintiff and the United States” under the just compensation clause of the Fifth Amendment. Waite v. United States, 282 U.S. 508, 509 (1931). That goal of "complete justice” implies that only a reasonable, not an excessive, royalty should be allowed where the United States is the user — even though the patentee, as a monopolist, might be able to exact excessive gains from private users. Much of the content of the constitutional requirement of just compensation derives from the basic equitable principles of fairness as between the Government and its citizens. See Almota Farmers Elevator & Warehouse Co. v. United States, 409 U.S. 470, 478 (1973); United States v. Fuller, 409 U.S. 488, 490 (1973); United States v. Commodities Trading Corp., 339 U.S. 121, 124 (1950). It is equally a fundamental component of fairness to avoid excessive compensation to the condemnee as it is to be sure not to pay him too little.
VI
With respect to the base to which the royalty is to be applied, it appears that the plug-ins are useless without the scopes and that the scopes require a plug-in before they have any utility. It also appears that the plug-ins are financially dependent on the market created by the patented scopes. Normally the patentee (or its licensee) can anticipate sale of such unpatented components as well as of the patented scopes. On these facts, there is sound authority for including the plug-ins in the base on which the royalties are calculated, even though the plug-ins are physically separate. See e.g., American Safety Table Co. v. Schreiber, 415 F.2d 373 (2d Cir. 1969), 163 U.S.P.Q. 129,
The trial judge recognized this principle but ruled that the plug-ins should be included only in the base for the "commercial” scopes, not the "militarized” ones.
VII
Accepting the 10% rate set in Part V, supra, and the base-including-plug-ins, as discussed in Part VI, supra, we conclude that the royalty base for the "commercial” scopes is $9,740,385, and for "militarized” scopes it is $11,557,695. The total is $21,298,080. Applying the royalty rate of 10% to this base, we reach $2,129,808 as reasonable and entire compensation under 28 U.S.C. § 1498 (to which delay compensation must be added, see Part VIII, infra).
VIII
As for the delay compensation which is a component of "reasonable and entire compensation” (Waite v. United States, supra), the parties agree that it is appropriately computed at something more than the traditional 4% employed in the past. Both sides have presented evidence to support their varying theories. The trial judge, basing his determination on the yield of Aaa corporate bonds and
Very recently in Pitcairn v. United States, 212 Ct. Cl. 168, 547 F. 2d 1106 (1976), Part V of that opinion, we adopted a series of interest rates in a comparable patent suit under 28 U.S.C. § 1498, the rates to be applied each year, at simple interest, to the sums then owing to the plaintiff.
Our conclusion is that plaintiff is entitled to recover $2,129,808 as the principal sum of its compensation under 28 U.S.C. § 1498, plus delay compensation. The amount of delay compensation will be determined (under Part VIII of this opinion) by the Trial Division under Rule 131(c).
Patent No. 2,883,619 is concerned with electrical probes used with these scopes. The evidence is insufficient to make any determinations regarding reasonable compensation for use of that particular patent.
Plaintiffs catalog prices remained constant at $1,400 for the model 535 and $1,550 for the model 545 scopes, respectively, from 1959 to 1968. Throughout this period, plaintiff maintained a volume discount policy on its sales.
Lavoie is now bankrupt and has not participated in these accounting proceedings.
The third parties have, for all practical purposes, embraced the position of defendant, so it is unnecessary to discuss their individual views.
Even an established royalty may be modified upward, Meurer Steel Barrel Co. v. United States, 85 Ct. Cl. 554, 34 U.S.P.Q. 123, cert. denied, 302 U.S. 754 (1937), or downward, Fauber v. United States, 112 Ct. Cl. 302, 81 F. Supp. 218, 79 U.S.P.Q. 410 (1948), cert. denied, 337 U.S. 906 (1949), depending on the circumstances of the case. Where no established royalty is found, one may be selected on the basis of royalty rates for related patents, Breese Burners, Inc. v. United States, 140 Ct. Cl. 9, 115 U.S.P.Q. 179 (1957). A settlement rate may be considered, Saulnier v. United States, 161 Ct. Cl. 223, 314 F. 2d 950, 137 U.S.P.Q. 222 (1963), or other contracts between the parties may be used as a guide, Barlow v. United States, 87 Ct. Cl. 287, 34 U.S.P.Q. 127 (1937). Savings realized by the defendant as a result of the infringement are sometimes used as a measure of compensation, Shearer v. United States, 101 Ct. Cl. 196, 60 U.S.P.Q. 414, cert. denied, 323 U.S. 676 (1944); Olsson v. United States, 87 Ct. Cl. 642, 25 F. Supp. 495, 37 U.S.P.Q. 767 (1938), cert. denied, 307 U.S. 621 (1939), and lost profits have been awarded. Imperial Machine & Foundry Corp. v. United States, 69 Ct. Cl. 667, 5 U.S.P.Q. 332 (1930); Waite v. United States, 69 Ct. Cl. 153, 4 U.S.P.Q. 387 (1930), rev’d on other grounds, 282 U.S. 508 (1931).
Defendant also puts forward the Raytheon licensing program, but Raytheon’s subminiaturized tubes are very different from oscilloscopes and hardly comparable.
This willing-buyer/willing-seller technique in determining a reasonable royalty has not been a stranger to the Court of Claims. Oisson. v. United States, supra; Badowski v. United States, 150 Ct. Cl. 482, 485, 278 F.2d 934 (1960); Ushakoff v. United States, 179 Ct. Cl. 780, 785-86, 375 F.2d 822, 825, 153 U.S.P.Q. 410 (1967); Amerace Esna Corp. v. United States, 199 Ct. Cl. 175, 462 F.2d 1377, 174 U.S.P.Q. 517 (1972). For cases from other courts, see, e.g., Jenn-Air Corp. v. Penn Ventilator Co., 394 F.Supp. 665, 185 U.S.P.Q. 410 (E.D. Pa. 1975).
This figure is the same as the trial judge’s and is based on plaintiff’s 1959 direct cost, Hickok’s cost not being available.
The trial judge based his figure ($256) on an estimate of plaintiff’s indirect costs for 1959 (plaintiffs actual indirect costs for 1959 are not available) but did not include the amounts paid to employees under the profit-sharing program. Our figure of $533 includes the profit-sharing expenses (treated as wages) and is based on extrapolation backward from plaintiffs 1961 actual cost. In the absence of acceptable cost data from Hickok, we use (as did the trial judge) plaintiffs more accurate cost data for 1959 and 1961, but unlike the trial judge we assume that the 1961 indirect costs increased over 1959 in the same proportion as did the direct costs.
Based on Hickok’s average profit from 1960 to 1968 of 2.7%. The trial judge’s number of $82 was based on the profit rate of 7.23%, taken from Hickok’s figures for the particular contract which was the basis of the calculation and adjusted for profit-sharing. The defendant would use $65, Hickok’s actual profit under the particular contract used as the initial basis of the calculation.
In the trial judge’s opinion plaintiffs profits could go as high as 60% but plaintiff insists that, if its overhead were properly distributed over all sales, profits would be in the range of 25-27%.
As we have pointed out (see note 11), the trial judge thought Tektronix’ profits could even rise to the 60% level if the volume was high enough, though plaintiff disputes that figure.
Plaintiff would undoubtedly have insisted on, and would have made, an acceptable profit if there had been no patents or if the patents had expired.
We have already held, supra, that plaintiff has failed to prove that it would necessarily have supplied the scopes if the defendant had limited its procurement to authorized manufacturers, or that it would have made the "lost profits” it now claims.
The only grounds he gave for the differentiation were "the royalty rate [which he had set at 27.5%], the magnitude of the procurement involved, and other factors present in this case.” The royalty rate we fix (10%) is considerably lower than the trial judge’s.
Trial Judge Cooper’s figure for reasonable and entire compensation (aside from delay compensation) was $4,831,773.
The trial judge recommended the following rates:
Year Percentage
1960 4.60
1961 4.37
1962 4.45
1963 4.21
1964 4.37
1965 4.70
1966 4.74
1967 5.70
1968 6.20
1969 6.59
The rates established in Pitcairn were:
1947-1955 4%
1956-1960 4-‘/2%
1961-1965 4-%%
1966-1970 6-M¡%
1971-1975 7-‘/2%
Beginning in 1944 the rate of 4% was automatically used until somewhat over a year ago.
Except where the parties stipulate otherwise or in other special cases, which we do not now pass upon, such as where Congress has established a different rate.
Concurrence Opinion
concurring:
I join in the court’s opinion but think it appropriate to add a few comments on the issue of delay compensation. The court today establishes for all future cases rates of simple interest for given periods to be awarded for delay in receipt of payment for property taken by the Government, as part of the just compensation mandated by the fifth amendment. Seaboard Air Line Ry. v. United States, 261 U.S. 299 (1923); King v. United States, 205 Ct. Cl. 512, 504 F. 2d 1138 (1974). In dissent Judge Skelton takes the court to task on its power to fix a rate of interest for delay compensation in cases not presently before it. Pointing to such enactments as the so-called Declaration of Taking Act, 40 U.S.C. § 258a (1970), Judge Skelton concludes that "[tjhese statutes demonstrate that if a fixed inflexible rate of interest is to be established in condemnation cases, it must be done by Congress and cannot be done by this court by way of judicial legislation.” The dissent errs, I think, by failing to take into account the history of delay compensation law.
Though Congress has from time to time established by statute the rate of interest for delayed compensation in certain situations and geographic areas, the norm is for the court to be without explicit statutory guidance in setting the interest rate. Early decisions of the Supreme Court in United States v. North American Transp. & Trading Co.,
The field for investment by an Indian tribe was and is limited in the absence of an agreement to a deposit of the amount due the Indians in the Treasury of the United States and the payment thereon by the government of interest at the rate of 5 percent. The field for investment by citizens [sic] of funds received for property taken, and paid contemporaneously with the taking, is unlimited, and he is in a position and capable of taking full advantage of the local rate of interest. If, therefore, his money is not paid at the time of the taking, but later, the courts add to the value of his property at the time of taking an additional amount measured by interest, usually at 6 percent per annum, and, in some cases, a higher rate which he probably would have earned with his capital to the date of payment. * * *. [85 Ct. Cl. at 380.]
By 1946 it was clear that recovery on an inverse condemnation action brought in the Court of Claims could be founded on the fifth amendment, United States v.
Not until King v. United States, supra, did the court approve a variance from the then standard 4-percent rate. The difference in King was that the parties stipulated to the use of interest rates more nearly akin to long-term Government bond interest rates paid during the period of delay in compensation. In Pitcairn v. United States, Ct. Cl. No. 50328, 212 Ct. Cl. 168, 547 F. 2d 1106 (1976), investment return rates found as facts by the trial judge were employed to measure the plaintiffs delay compensation due. However, the use of neither the stipulation nor the fact-finding to adjust the interest rate, during a period when the prevailing market rate obviously had jumped to a higher plateau than was true in the preceding several decades since the Great Depression, precluded the court
A brief review of selected cases from this court since the demise of the "implied contract” theory of inverse condemnation reveals that the constitutionally appropriate rate of delay compensation interest has been periodically ascertained by the court and then held constant over a span of time. Moreover, this has occurred quite without the direction of the statute that the dissent thinks necessary. For non-Indian claims, which Shoshone Indians v. United States, supra, sets apart from Indian claims, the court allowed 6 percent from taking dates in 1917 and 1918, respectively, in Vandiver v. United States, supra, and Schroth v. United States, supra. A 5-percent rate was allowed in several cases whose taking dates preceded the foregoing, but whose judgments came down substantially after the cases. Marconi Wireless Tel. Co. v. United States, 99 Ct. Cl. 1 (1942), rev’d in part on other grounds, 320 U.S. 1 (1943) (taking dates ranged from 1911 to 1919); National Elec. Signaling Co. v. United States, 99 Ct. Cl. 621 and 646, 49 F. Supp. 754 and 768 (1943) (two cases — taking dates of 1918 and 1914, respectively). The rate in Barlow v. United States, supra, the taking in which occurred in 1919, was also fixed at 5 percent. Then, with the advent of the Great Depression, the general market rate diminished somewhat, and so did the delay compensation rate allowed. In Willow River Power Co. v. United States, 101 Ct. Cl. 222 (1944), rev’d on other grounds, 324 U.S. 499 (1945), the rate was set at 4.5 percent from the taking date in 1938 to the date of payment. Thereafter, the 4-percent rate became entrenched in the case law, and came to be applied almost automatically until the King decision. See Atwater v. United States, 106 Ct. Cl. 196 (1946) (taking in 1941); Schaffer v. United States, 104 Ct. Cl. 229, 60 F. Supp. 760 (1945) (wartime property requisition, 1942); Arkansas Valley Ry. v. United States, supra; Turney v. United States, 126 Ct. Cl. 202, 115 F. Supp. 457 (1953) (taking in 1947); Miller v. United States, 135 Ct. Cl. 1, 140 F. Supp. 789 (1956) (1948 seizure of airplanes for security reasons); Carlstrom v. United States, supra; A.J. Hodges Indus., Inc.
As I think the foregoing demonstrates, the court’s exercise of its power today in fixing past period interest rates for future cases is neither extraordinary, without historical foundation, nor ill advised. The Arkansas Valley Ry. rationale of avoiding discrimination among diverse taking claimants is as valid today as it was when first stated. Today’s decision will place less of a burden on the litigating parties and the court, by exercise of power well grounded in the court’s past, and yet take account of financial market realities too long ignored in the eminent domain, inverse condemnation, and patent decisions of this and other courts. For these reasons, I concur in the court’s opinion.
Concurrence in Part
concurring in part and dissenting in part:
I agree with all of the majority opinion in this case except that part of it that deals with delayed compensation. The court adopts the rates of interest awarded in Pitcairn v. United States, 212 Ct. Cl. 168, 547 F. 2d 1106 (1976), and holds that such rates should be applied from now on, without any proof, in just compensation cases. The effect of this holding will require this court to award seven and one-half percent interest in all condemnation cases during the period 1971 to 1975, and in all pending and future condemnation cases, without any proof of the proper interest rate.
In the past, Congress has fixed interest rates in condemnation cases. See 16 U.S.C. § 79c(b)(2) (1970) wherein Congress provided for the payment of six percent interest for the taking of any property by the United States in the Redwood National Park of California. Also in the Declaration of Taking Act, 40 U.S.C. § 258a (1970), 46 Stat. 1421, Congress specified that six percent would be paid as a part of just compensation for a taking of land by the United States. These statutes demonstrate that if a fixed inflexible rate of interest is to be established in condemnation cases, it must be done by Congress and cannot be done by this court by way of judicial legislation.
Furthermore, the majority decision in the instant case is in direct conflict with the decision of the Ninth Circuit Court of Appeals in United States v. Blankinship, 543 F.2d. 1272 (1976), wherein that court held that the proper rate of interest in a condemnation case should be the same as a direct obligation of the United States Treasury having a duration approximating the period during which the deficiency was unpaid (i.e., long term Government obligations).
Also, the trial judge arrived at an interest rate for the year in which each taking occurred and held that it must remain constant until paid. This was correct as a matter of principle, but the majority changed the rate every five or six years. This is contrary to interest payments on long term Government securities where the interest rate remains constant until maturity of the securities. It is
I would remand this part of the case to the trial judge with instructions to fix the interest rate for the periods in question according to the yield of Government obligations with duration approximating the periods of time from the date of each taking until paid, and that once the interest rate was determined for each taking, it would remain constant until paid.
See my dissent in Pitcairn v. United States, supra,.
Concurrence in Part
concurring in part and dissenting in part:
I do not agree with the 10 percent royalty rate used by the majority. I also believe that the methodology used by the majority to arrive at that rate is not proper. Rather, it is my opinion that the graduated'rate recommended by the Government is the proper rate.
This court has held that where the patentee has by agreement established a royalty rate, that established rate is the measure of reasonable and entire compensation under 28 U.S.C. § 1498 (1970). In Calhoun v. United States, 197 Ct. Cl. 41, 55-56, 453 F. 2d 1385, 1393-1394 (1972), this court held as follows:
A. Claimants prefer to have compensation fixed by the Government’s cost-savings attributable to the invention; this has been found to be about $0.73 for each use. We agree, however, with the commissioner that while this court has, at times, looked to cost savings in determining compensation (Shearer v. United States, 101 Ct. Cl. 196, 60 USPQ 414, cert. denied, 323 U. S. 676 (1944); Olsson v. United States, 87 Ct. Cl. 642, 25 F. Supp. 495, 37 USPQ 767 (1938), cert. denied, 307 U. S. 621 (1939)), it has used a reasonable royalty as the basis in all cases where the evidence established a royalty rate used by the patentee in commercial licensing. * * * Here, the evidence shows that, starting in the 1940’s Christensen licensed the patent throughout the industry at a royalty of 0.25 cent for each O-ring used in an infringing structure. Furthermore, Christensen filed in the U. S. Patent Office in 1947, for announcement to the public, a form of license by which he offered to license the patent to anyone at a*282 royalty of 0.25 cent per "packing construction.” Many licenses were so granted; and between 1946 and 1956, Christensen and his successors were paid royalties by commercial users at the rate of 0.25 cent per O-ring for 261,938,168 infringing structures. See Calhoun v. State Chem. Mfg. Co., 153 F. Supp. 293, 115 USPQ 120 (N.D. Ohio 1957). Thus, the patentee established a royalty which he deemed to be appropriate for use of the invention; and that royalty should form the basis for determining the compensation due plaintiffs. [Citations omitted; emphasis supplied.]
See also Carley Life Float Co. v. United States, 74 Ct. Cl. 682 (1932); Saulnier v. United States, 161 Ct. Cl. 223, 314 F. 2d 950 (1963); Badowski v. United States, 150 Ct. Cl. 482, 278 F. 2d 934 (1960); Pitcairn v. United States, 212 Ct. Cl. 168, 547 F. 2d 1106 (1976). For convenience the above rule will be hereinafter referred to as the Calhoun rule. The rationale behind the rule is that where the patent owner voluntarily grants a license for consideration, it is only logical to conclude that he considers the consideration to be reasonable. It is a simple and just rule.
The Calhoun rule is also easy to apply. So in this case if it is shown that plaintiff, the patent owner, granted a license or licenses to others for consideration within the time frame relevant to this case, the royalty rate so established must be used to compute reasonable and entire compensation under 28 U.S.C. § 1498. Proof that plaintiff voluntarily granted three such licenses in this case is not only uncontradicted but admitted by plaintiff. Unfortunately, there has been a misinterpretation of the effect of the licenses because the label "royalty free cross license” is used to describe these licenses. I refer to portions of the majority opinion wherein these misinterpretations are apparent. The majority in the first sentence of Part II in its opinion states:
The parties are in agreement that plaintiff has no established licensing program or royalty applicable to the patents in this accounting. [Footnote omitted; emphasis supplied.]
The majority reiterates what the trial judge states in his opinion. However, I believe the majority’s amendment to the trial judge’s Findings of Fact 5 to be inconsistent with
2. In finding 5, insert the following after the first sentence: "However, the plaintiff granted to the Western Electric Company and RCA a royalty-free license in its patents in return for a license in certain groups of patents of those firms. Plaintiff also licensed the Hewlett-Packard Company, a major competitor, with a royalty-free cross-license in all patents of each firm.” [Emphasis supplied.]
By cross licenses plaintiff granted RCA, Western Electric and Hewlett-Packard the right to use plaintiffs patents in return for plaintiffs right to use their patents. The quid pro quo was the license each company exchanged. Therefore, if the licenses granted to plaintiff can be valued, their respective values, in turn, would establish the royalty value of plaintiffs license herein issue. This court must then, under the Calhoun rule, use the established rate to compute reasonable and entire compensation. In analyzing the cross license arrangement between plaintiff and RCA, Mr. Glassman, the expert Government witness, succinctly phrased it:
* * * under the royalty-free cross license, which included a royalty-free license to RCA under the Plaintiffs oscilloscope patents, RCA was giving up in return the opportunity to receive an effective royalty of 1.375 percent from the Plaintiff, and the Plaintiff was therefore in effect licensing RCA at an effective royalty rate of 1.375 percent of the Plaintiffs own sales. [Tr. 3876.]
In other words, in a royalty free cross license consideration passes between the parties. If the consideration is reduced to monetary terms, the established royalty of plaintiffs license to RCA, Western Electric or Hewlett-Packard may be effectively determined.
Plaintiff, by entering into cross license agreements with RCA, Western Electric and Hewlett-Packard, evaluated its own license; that value should now bind the plaintiff in the instant reasonable and entire compensation determination. Plaintiffs contracts with RCA, Western Electric and Hewlett-Packard should bind plaintiff as the .25 cent per O-ring license bound the patent owner in Calhoun and the
It is a truism that patents can change or decline in value, and that seems to have been the case for Autogiro, even in its own eyes, during the post-war years. It wanted a package deal for any and all of its patents, and some of these were expiring from time to time. Engineering data for autogiros (manufactured in the pre-war era) were not useful for helicopters (the article made after the war). The post-war procurement of devices using plaintiffs inventions was bound to be very much larger than the pre-war purchases — and the royalty rates could therefore decline significantly. Nor is it a sign of invalidating compromise that, especially where a packet of patents is involved, there may have been some doubts as to the validity of some of the claims. Autogiro probably had some of those doubts itself and adjusted its demands accordingly. For these reasons the 2% United agreement seems to us highly probative under the rule we reiterated in Calhoun v. United States, 197 Ct. Cl. 41, 55-57, 453 F. 2d 1385, 1393-94 (1972). Calhoun teaches that the mere surmise that a bargained license may possibly include some discount for litigation-avoidance does not per se preclude use of an accepted commercial rate as establishing reasonable and entire compensation. Earlier, Saulnier v. United States, 161 Ct. Cl. 223, 314 F. 2d 950 (1963), took heavy account, in setting compensation, of the plaintiff’s previous settlement of infringement claims against the British government where that settlement appeared to be satisfactory and reasonable. See 161 Ct. Cl. at 226-27, 314 F. 2d at 951-52. [Footnote omitted; emphasis supplied.] [212 Ct. Cl. at 184-86, 547 F. 2d at 1117-18.]
In the instant case, there are three royalty agreements outstanding, but the majority elects to perfunctorily dismiss them as not relevant. They did not even refer to the Calhoun rule in summarily avoiding the three cross licenses. However, the Government’s expert witness, Mr. Glassman, used these three cross licenses and testified that
1.5 percent on the first $2 million,
1.2 percent on the next $3 million, and
1 percent on the remainder.
The majority rejected Mr. Glassman’s rates. It appears that the majority in taking that position did not seriously consider the three cross licenses by plaintiff with RCA, Western Electric and Hewlett-Packard, apparently because these licenses were labeled royalty free cross licenses. The following reasoning given by the majority at p. 266 bears this out:
The Government’s proposal is rejected because the evidence on which it is premised is not at all analogous to the facts here. Defendant relies on the licensing programs of RCA and Western Electric but it seems clear that plaintiff — which was not a company comparable in size to those corporate giants, nor possessed of either a comparable patent portfolio or a comparable product line, nor under the spur of an anti-trust decree — should not be governed by the same considerations. Items such as transistors, tubes, and similar electronic components are comparatively simple in structure, have a relatively low per-unit cost, and are sold and used in very large quantities. Plaintiffs oscilloscopes, on the other hand, are much more complex, have a much higher per-unit cost, and the quantities sold are much lower. [Footnote omitted; emphasis supplied.]
The majority intimates that the percentages presented by the Government have no relevance to plaintiffs oscilloscope patents. But as shown below, the three cross licenses were tied into plaintiffs oscilloscope patents by the testimony of defendant’s expert witness. Furthermore, the majority’s reference to the irrelevancy of transistor tubes in this litigation shows that the majority did not consider the portion of the record in this case in which the defendant’s expert witness analyzed the transistor license values; transistor values were tied into plaintiffs license of its oscilloscope patents by the cross licenses. Nevertheless, corporate sizes, patent portfolio sizes, anti-trust decrees, simplicities of transistors, volumes of sales and complexities of oscilloscopes are all of no relevance under the
Mr. Glassman showed that from 1953 up to September 1, 1957, plaintiff was a licensee under RCA’s licenses which covered measuring and testing devices (Tr. 3812). Licenses for measuring and testing devices included patents on oscillographs. Plaintiff actually paid RCA royalties for these RCA licenses from 1953 to 1957; this was shown by royalty reports made by plaintiff to RCA. (Defendant’s Ex. DA-31E, F and G.) The royalty plaintiff paid RCA in said years was based on 1.5 percent for commercial units but 1 percent for Government sales (see Ex. DA-31D). On September 1, 1957, plaintiff and RCA entered into a cross licensing agreement (Ex. DA-31D) (Tr. 3874). Mr. Glass-man considered the prior payments to RCA by plaintiff to establish the reasonable royalty value of plaintiffs patents under the cross license.
As for the plaintiff-Western Electric cross license, Mr. Glassman showed that Western Electric owned patents on transistors which plaintiff used in the manufacture of its oscillographs. Plaintiff. found the use of these patents necessary. Western’s patents on the transistors were licensed to plaintiff by Western Electric. The rates on these one-way Western Electric to plaintiff transistor licenses were high; so plaintiff negotiated a lower, 1.5 percent, rate in exchange for royalty free use of plaintiffs patents by Western. This was the Western Electric-plaintiff cross license (Tr. 262, 264, 270). Defendant’s witness also used the value of royalties on the transistor patents owned by Western Electric to establish the values of royalties on plaintiffs patents in issue in this case.
No one questioned Mr. Glassman’s expertise in the field of royalty rates on patents, especially in the electronics field. His testimony covered 219 pages (Tr. 3773 to 3992). In Pitcairn, supra, his qualifications are fully listed at 219-20. I do not think it necessary to repeat his qualifications. In the instant case, Mr. Glassman testified that in establish
I feel that the majority, when they rejected the above-quoted rates suggested by the Government, were overly influenced by plaintiffs profits. They stated at 266:
* * * Moreover, the evidence is that during the -1960’s, plaintiff was realizing on its commercial sales an average profit of 23.7% on the 535 scope and 27.7% on the 545 scope, those figures reflecting plaintiffs margin on these products after both direct and indirect costs had been considered. In view of those figures, defendant’s suggestion that plaintiff should be forced to accept a declining royalty starting at 1%% for its inventions could not, without the greatest difficulty, be accepted as just compensation for use of the patents.
The majority’s view above expressed conflicts with Mitchell v. United States, 267 U. S. 341 (1925), the leading case in the federal law of eminent domain on the subject whether business profits may be used as evidence in an eminent domain proceeding to determine reasonable compensation. In Mitchell v. United States, supra, at 345, the Court held:
* * * The settled rules of law, however, precluded his considering in that determination consequential damages for losses to their business, or for its destruction. Joslin Manufacturing Co. v. Providence, 262 U. S. 668, 675. Compare Sharp v. United States, 191 U. S. 341; Campbell v. United States, 266 U. S. 368. No recovery therefor can be had now as for a taking of the business. There is no finding as a fact that the Government took*288 the business, or that what it did was intended as a taking. If the business was destroyed, the destruction was an unintended incident of the taking of land. There can be no recovery under the Tucker Act if the intention to take is lacking, Tempel v. United States, 248 U. S. 121. Moreover, the Act did not confer authority to take a business. In the absence of authority, even an intentional taking cannot support an action for compensation under the Tucker Act. United States v. North American Co., 253 U. S. 330.
Mitchell has been followed for 52 years
In 4 Nichols, Eminent Domain (3d ed. rev. 1976), § 12.3121, relating to Profits as criteria of value, it is stated:
Past profits.
If the owner of property uses it himself for commercial purposes, the amount of profits from the business conducted upon the property depends so much upon the capital employed and the fortune, skill and good manage*289 ment with which the business is conducted, that it furnishes no test of the value of the property. It is, accordingly, well settled that evidence of the profits of a business conducted upon land taken for the public use is not admissible in proceedings for the determination of the compensation which the owner of the land shall receive. * * * [Footnote omitted.]
Future profits.
The admission of evidence as to anticipated future profits is objectionable, not only upon the grounds stated with respect to past profits, but also on the further ground that such profits are necessarily conjectural. Future profits depend on so many contingencies that an accurate valuation cannot be based thereon. Experience and observation both show that paper future profits are more often illusory than real. [Footnote omitted.]
* * * * *
Capitalization of hypothetical income.
The capitalization of hypothetical income method of valuation has generally been rejected by the courts. In Matter of City of New York (Blackwell’s Island Bridge), a leading decision in this area, the court said:
"In regard to the vacant lots, parcel No. 31, a witness was asked what would be the best use to which these lots could be put; he replied: The erection of 'three apartment houses, * * * making each building about 33 feet’. He was then allowed to testify, over objections and exceptions, that the cost of constructing three such buildings would be $75,000, and that the rental value of such buildings would be between $14,000 and $15,000 a year. This was clear error. It involved so much of. the elements of uncertainty and speculation as to be inadmissible as proof of any fact. * * *” [Footnote omitted.]
In view of the Calhoun rule, it may not be necessary to discuss plaintiffs hypothetical profit computation using Hickok as the hypothetical licensee. Nevertheless, I make the following interesting observations. The hypothetical method used by the majority was adopted from the approach in Georgia-Pacific Corp. v. United States Plywood Corp., 318 F. Supp. 1116 (S.D. N.Y. 1970), aff’d, 446 F. 2d 295 (2d Cir.), cert. denied, 404 U. S. 870 (1971). The district court clearly stated that the hypothetical method may be employed only where there is no established royalty, citing
The parties agree that there was no "established” royalty for USP’s Weldtex or GP striated. Consequently, it is necessary to resort to a broad spectrum of other evidentiary facts probative of a "reasonable” royalty.
Two of the earlier and typical cases relied upon by both parties are Dowagiac Mfg. Co. v. Minnesota Moline Plow Co., 235 U. S. 641, 35 S. Ct. 221, 59 L. Ed. 398 (1915) and United States Frumentum Co. v. Lauhoff, 216 F. 610 (6th Cir. 1914). In Dowagiac Mfg. Co. supra, 235 U. S. at 648, 35 S. Ct. at 224, the Supreme Court said that, where a patentee could not prove lost profits, infringer’s profits or an established royalty, the patentee could "show the value by proving what would have been a reasonable royalty, considering the nature of the invention, its utility and advantages, and the extent of the use involved.” * * * [Emphasis supplied.]
In Dowagiac Manufacturing Co. v. Minnesota Moline Plow Co. 235 U. S. 641, 648 (1915), the Court stated:
* * * So, had the plaintiff pursued a course of granting licenses to others to deal in articles embodying the invention, the established royalty could have been proved as indicative of the value of what was taken, and therefore as affording a basis for measuring the damages. Philip v. Nock, 17 Wall. 460, 462; Birdsall v. Coolidge, 93 U. S. 64, 70; Clark v. Wooster, 119 U. S. 322, 326; Tilghman v. Proctor, 125 U. S. 136, 143. But, as the patent had been kept a close monopoly, there was no established royalty. In that situation it was permissible to show the value by proving what would have been a reasonable royalty, considering the nature of the invention, its utility and advantages, and the extent of the use involved. * * *
Therefore, even Georgia-Pacific does not permit using the hypothetical Hickok profit analysis approach where there is an established royalty shown, as in this case, by plaintiffs three cross licenses. I am also of the opinion that the hypothetical Hickok profit approach used by the majority cannot be used because it is a departure from the federal law of eminent domain. Hickok was an infringer but unlike defendant it was a non-Governmental infringer subject to damages only under 35 U.S.C. § 284 (1970). The history of the use of an infringer’s profits to determine a
Although the concept of the infringer’s profits does become involved in determining a reasonable royalty, it should be observed that the point of interest is not the profit which actually was realized but that which was anticipated. The Georgia-Pacific case illustrates the point, for G-P apparently contended that the market for the products involved in the suit, and presumably their profitability, decreased during the period of infringe*292 ment. The court, however, emphasized the situation at the time the reasonable royalty would have been negotiated, and relied on the anticipated profits rather than those actually realized. [Footnotes omitted.]
I submit that since in Georgia-Pacific damages were assessed under 35 U.S.C. §'284, the limitations in establishing market value under the federal law of eminent domain were not considered. As shown above, the Mitchell rule which prescribes the use of profits as a measure of damages also limits use by this court of the hypothetical Hickok profit approach. The majority’s sole statutory authority for allowing plaintiff compensation is 28 U.S.C. § 1498, under the federal law of eminent domain. Therefore, Mitchell applies and prevents such a hypothetical profit approach.
In addition, the following "apportionment rule” prevents the use of the Hickok hypothetical profit approach. In Westinghouse Elec. and Mfg. Co. v. Wagner Elec. and Mfg. Co., supra, involving an electrical converter to promote the efficiency of transformers, the Court stated at 614-615:
(d) But there are many cases in which the plaintiffs patent is only a part of the machine and creates only a part of the profits. His invention may have been used in combination with valuable improvements made, or other patents appropriated by the infringer, and each may have jointly, but unequally, contributed to the profits. In such case, if plaintiffs patent only created a part of the profits, he is only entitled to recover that part of the net gains. He must, therefore, "give evidence tending to*293 separate or apportion the defendant’s profits and the patentee’s damages between the patented feature and the unpatented features, and such evidence must be reliable and tangible, and not conjectural or speculative; or he must show, by equally reliable and satisfactory evidence, that the profits and damages are to be calculated on the whole machine, for the reason that the entire value of the whole machine, as a marketable article, is properly and legally attributable to the patented feature.” Garretson v. Clark, 111 U. S. 120.
The Government’s expert witnesses described plaintiffs patent as .only an improvement patent (Tr. 3863) and plaintiffs own witnesses deposed that plaintiffs patents were improvement patents. Oscillographs were in use prior to and during World War II, before plaintiffs patents were ever in the picture. In fact, Jetronic Industries, Inc. was already in the business of manufacturing oscillographs before plaintiffs improvement patents were obtained. The war itself generated a tremendous amount of basic research in electronic circuitry, much of it financed under wartime Government contracts. Much of this basic work, performed at Radiation Laboratory at the Massachusetts Institute of Technology, related to the wartime need for improved radar and fire control systems. This pioneering work generated a large postwar spinoff in the form of a growing civilian electronics industry. Some of this basic work at the Massachusetts Institute of Technology Radiation Laboratory produced two basic oscilloscope patents to Chance and Washburn owned by the Government, which have previously been the subject of controversy in this case. Tektronix, Inc. v. United States, 173 Ct. Cl. 281, 351 F. 2d 630 (1965) [DA3-44, DA3-47, DA3-21A, DA3-21B], These patents are fundamental to the accused oscilloscopes and are cited as prior art references in many of the patents in suit [DA3-34, DA3-35, DA3-45, DA3-46, DA3-48, DA3-49, see deposition of Gunnar P. Ohman, DA3]. In this environment of radically changing technology during a period of tremendous growth for the entire electronics field, the plaintiff corporation was founded by Howard Vollum in 1946 specifically to design and ultimately to manufacture improved oscilloscopes. Tektronix, Inc. v. United States, 188 USPQ 25, 27 (Ct. Cl. Tr. Div., 1975);
In the second Georgia-Pacific district court decision, reported in 318 F. Supp. 1116, the court held at 1132:
This case does not permit application of the principle of apportionment inasmuch as the Deskey patent was not one for an improvement on an article nor was GP’s infringement of a patented feature sold together with unpatented parts. Decisions illustrating the rule applicable to patented improvements or to patented parts of articles also embodying unpatented parts are not apposite for the reason that the Deskey patent covered and Weldtex represented a marketable article — a panel of striated fir plywood — as an entirety. *****
In terms of a structural test, for example, the contribution of the Deskey invention cannot be isolated as a separate physical part. The invention permeated the plywood panel to such a degree that it should be considered as covering the article as a whole. In this situation, the invention was not only for an improvement.
The article involved in Georgia-Pacific was plywood so it could be said that the invention "permeated” the plywood panel, but the present case is like the transformer improvement patent in Westinghouse Elec. and Mfg. Co. v. Wagner Elec. and Mfg. Co., supra, where the Court recognized that electrical equipment is fundamentally made of many parts. The majority revived the much-feared problem of allocation of infringer’s profit, which Congress attempted to eliminate (see supra, footnote 3). The Chance patent and the Washburn patent owned by the Government were recited as prior art in the patents involved in the present case, and the said Government-owned patents were fundamental to the accused oscilloscopes. The mere fact that in Tektronix, Inc. v. United States, 173 Ct. Cl. 281,
These cases go far toward establishing the general principle that the Government as condemnor may not'be required to compensate a condemnee for elements of value that the Government has created, or that it might have destroyed under the exercise of governmental authority other than the power of eminent domain. If, as in Rands [389 U. S. 121 (1967)], the Government need not pay for value that it could have acquired by exercise of a servitude arising under the commerce power, it would seem a fortiori that it need not compensate for value that it could remove by revocation of a permit for the use of lands that it owned outright.
*****
We hold that the Fifth Amendment does not require the Government to pay for that element of value based on the use of respondents’ fee lands in combination with the Government’s permit lands.
I submit that the Chance and Washburn patents added value to plaintiffs patent, as were the Government-owned grazing lands added value to Fuller’s land. The grazing charges for those grazing lands were very minimal, virtually free.
With relation to the "entire market value rule” which the majority has suggested and used to avoid the apportionment of infringer’s profits under the Westinghouse rule, I answer by quoting from Marconi Wireless Telegraph Co. v.
The status of a patent in the art with which it is associated is of importance in determining the base which is to be used in an accounting. The reason for this is succinctly set forth in Garretson v. Clark, 111 U. S. 120, in which it is stated:
When a patent is for an improvement, and not for an entirely new machine or contrivance, the patentee must show in what particulars his improvement has added to the usefulness of the machine or contrivance. He must separate its results distinctly from those of the other parts, so that the benefits derived from it may be distinctly seen and appreciated. The rule on this head is aptly stated by Mr. Justice Blatchford in the court below: "The patentee,” he says, "must in every case give evidence tending to separate or apportion the defendant’s profits and the patentee’s damages between the patented feature and the un-patented features, and such evidence must be reliable and tangible, and not conjectural or speculative; or he must show, by equally reliable and satisfactory evidence, that the profits and damages are to be calculated on the whole machine, for the reason that the entire value of the whole machine, as a marketable article, is properly and legally attributable to the patented feature.” [Italics ours.] '
From a consideration of subsequent cases, the application of this rule relates more directly to an accounting based upon profits rather than the type of accounting which is based on reasonable royalty and which has been followed in the present case with reference to the Lodge patent. This becomes apparent if we consider a theoretical instance, in which the profits, due to the patented portion of a machine, have on apportionment been found to be 25 percent of the total profits on the machine, the remaining 75 percent being due to extraneous elements or elements patented by others. In such a case plaintiff would be entitled only to the profits on the features or elements covered by his patent. If, however, the recovery of compensation in the same instance were measured by a reasonable royalty, such a procedure would take into consideration both the nature of the patented invention and its relation to the entire machine as a whole. Thus, in applying a reasonable royalty rule to the same situation just outlined, the differential between the patented and unpatented features of the machine would*297 be taken into account by scaling down the percentage of royalty accordingly. It would make no difference in the ultimate compensation to plaintiff if the reasonable royalty were fixed at 5 percent of the selling price of the complete machine rather than 20 percent of one quarter of the sales price of the machine. [Emphasis supplied.]
In the present case, in its attempt to establish a royalty rate of a "willing-buyer/willing-seller,” the majority uses and depends on an accounting which is based upon profits of Hickok. Under jthe above-quoted passage from Marconi, before the majority can construct a hypothetical profit figure for Hickok, the majority must apportion the hypothetical profits between profits generated solely by plaintiffs oscillograph patents and profits attributable to "extraneous elements or elements patented by others.” In determining the "willing-buyer/willing-seller” royalty rate, the majority may use only the portion of Hickok’s profits allocable to plaintiffs patent; the majority may not include profits allocable to "extraneous elements or elements patented by others.” The "entire market value rule” may not be used to establish a rate which is based on unapportioned profits. Therefore, by using the unappor-tioned profits of Hickok without first segregating that portion of Hickok’s profits allocable to plaintiffs patents from that portion allocable to "extraneous elements or elements patented by others,” the majority repudiated the Marconi rule. Under the Marconi analysis, the majority should have allocated the gross profit figure of $118 between the portion attributable to plaintiffs patents and the other portions attributable to "extraneous elements or elements patented by others.” The record shows that patents "by others” in this case include patents by Chance (oscillographs), Washburn (oscillographs), Western Electric (transistors, photo transistors and diodes), RCA (oscillo-graphs) and Hewlett-Packard (oscillographs). In this respect, plaintiffs vice president, Mr. Weber, testified that the Western Electric, Hewlett-Packard and RCA patents were material considerations in plaintiffs cross license agreements. Mr. Glassman testified that an application of the lost profit theory in this case would be inappropriate because
*298 * * * there was considerable uncertainty about what the Plaintiffs profits would have been even if they had been capable of accepting these contracts, and I have already referred to the impracticality of trying to determine the exact costs of those parts of the oscilloscope which used the patents in suit. So all these things put together, it seems to me, indicate that the lost profits theory is quite inappropriate. [Emphasis supplied.] [Tr. 3884.]
Therefore, I submit that in order to be consistent with the Calhoun rule and Saulnier, supra, Badowski, supra, and Pitcairn, supra, where a royalty rate is established by plaintiffs own cross licenses, that royalty rate established is the measure of reasonable and entire compensation. The total recovery computed using such established rate should not be summarily upset or changed by comparing the final figure to plaintiffs total profits or rate of profit from plaintiffs business, as the majority did. Plaintiffs business profits should not be an element in establishing plaintiffs recovery because defendant did not take plaintiffs business. We must not depart from Mitchell v. United States, supra. Under the Calhoun rule, in view of the existence of an Established royalty determined by reference to the three cross licenses between plaintiff and RCA, Western Electric and Hewlett-Packard, the Government’s suggested graduated rate, 1.5 percent on the first $2 million, 1.2 percent on the next $3 million and 1 percent on the remainder, should have been accepted by the majority.
I submit that use of the Hickok hypothetical profit approach by the majority was in error. Even Georgia-Pacific discusses the necessity of considering apportionment of infringer’s profits (Hickok) where the patent in issue is only an improvement patent; the majority, however, did not take up this problem of apportioning Hickok’s gross profit figure of $118. Defendant’s witness testified that if the Hickok profit were apportioned, the resulting rate would be much less than the 7.65 percent rate selected by the majority (Tr. 3908).
I submit that a willing buyer-willing seller approach using a hypothetical infringer’s profits as a basis of analysis is not only novel but without precedent in a suit under 28 U.S.C. § 1498 governed by the federal law of
Under the Government’s graduated rate, plaintiff is entitled to recover $185,445. ((Tr. 3845), Ex. DA-25, -26 - 27A.) As for the method of compensating delayed compensation, I agree with the majority.
FINDINGS OF FACT
The court, having considered the evidence, the findings of former Trial Judge Hal D. Cooper, and the briefs and arguments of counsel, makes findings of fact as follows:
1. The oscilloscopes (hereafter scopes) for which plaintiff seeks compensation are the following models: 1805, 1805A, USM/81, LA261, LA265, LA265A, LA545, AN/USM-105, AN/USM-140 series, and AN/USM-141 series.
2. All of the scopes here in issue are covered by one or more claims of one or more of the patents in suit. The patents in issue cover only portions of the accused scopes. None of the patents cover the preamplifier units, referred to as plug-ins, used with the scopes and scopes can be purchased without plug-ins; however, the scope has no utility without a plug-in and the practice most often followed is to order plug-ins from the same source as the scopes. The plug-ins are financially dependent on the market created by the patented scopes. Patent No. 2,883,619 is directed to an electrical probe. Plaintiffs evidence is insufficient to make any determination with respect to the probes.
3. Plaintiffs 535 and 545 scopes which embody the circuitry disclosed and claimed in the patents here in suit were the culmination of 7 years of research and development and were first offered for sale in 1954. Up to the time of the liability trial in 1965, plaintiff had sold more than 26,000 type-535 and more than 40,000 type-545 scopes producing revenues in excess of $100 million. The inventions of the patents in suit made a substantial contribution to oscilloscope technology, increasing the reliability and precision of measurements made with scopes and making it possible to do jobs which were practically impossible otherwise. Despite attempts by others to produce high-performance oscilloscopes with Government funding, plaintiffs scopes employing the patented circuitry in suit were the most technically advanced scopes available in 1958 and for several years thereafter. Oscilloscopes which did not have the patented circuitry were technically obsolete after
4. (a) Defendant was not interested in procuring a scope which the third-party defendants designed and built. Defendant’s procurement procedure made it clear that it would accept only plaintiffs scope or a virtual copy thereof manufactured by one of the third-party defendants. In its early requests and invitations, defendant described the product it was seeking in language such as "Tektronix, Inc. Model 535 as manufactured by Hickok,” "Jetronic Model to meet characteristics of Tektronix Model 535,” "Tektronix Model 535 or equal,” or "Tektronix Model 545 or equal.” Later, when the third-party defendants had their own nomenclature describing their copy of plaintiffs scopes, defendant’s requests were phrased in the alternative such as "Tektronix 545A or Hickok 1805A or Lavoie LA265A.”
(b) In order to meet defendant’s requirements, Jetronics found it necessary to copy the physical layout and circuit design of the Tektronix 535 and used the Tektronix 535 performance specifications in manufacturing the USM/81. To comply with defendant’s requirements, Hickok copied the physical layout and circuit design of the Tektronix 535 in manufacturing its USM/81. Likewise, to meet defendant’s requirements, Hickok manufactured its 1805 as a copy of the Tektronix 545. Oh at least one occasion, in competing against plaintiff for a contract involving a Tektronix 545A-type oscilloscope, Hickok actually submitted to defendant a Tektronix-manufactured oscilloscope with a Hickok face plate and represented the scope as a bid sample of the scope that Hickok intended to manufacture. The three Lavoie scopes LA545, LA265, and LA265A are essentially the same instrument. No distinction was made by the court during the liability trial and the LA265 was considered representative of all. A comparison of the LA265 scope with the Tektronix 545A scope shows that the scopes are virtually identical in appearance and internal structure. A comparison of the LA261 scope and the LA261 manual with plaintiffs 516 scope and plaintiffs manual shows that the Lavoie LA261 is a copy of the Tektronix 516 in structure, appearance, specifications, and that in all material respects the two are identical. In addition to copying the mainframes of the scopes, both
(c) Because the copies of plaintiffs instruments so closely resembled genuine Tektronix instruments, many of defendant’s employees thought the copies were made by plaintiff. When problems arose with the copies, plaintiffs field engineers were often called to fix the instruments. When they were called upon by defendant’s employees and asked for assistance, plaintiffs field engineers usually assisted defendant and provided information, service, and even repaired some of the copies of plaintiffs instruments. Often it was only after having made a special trip to a Government installation that plaintiffs field engineer realized he had been asked for assistance relating to a non-Tektronix instrument. Some employees of defendant asked plaintiffs field engineers for assistance relating to the copies even after realizing that the instruments were not made by plaintiff when they were unable to get help from the third-party defendants. Plaintiffs field engineers and instructors conducted training classes on plaintiffs instruments, many of which were attended by military personnel who then used the copies of plaintiffs instruments manufactured by Hickok or Lavoie. On some occasions, plaintiffs field engineers, at defendant’s request, drove great distances to remote military installations to teach military personnel how to use plaintiffs instruments, only to find that mainly copies were being used.
(d) Plaintiffs commercial scopes could have satisfied defendant’s needs for the USM/81, 1805, 1805A, LA545, LA265, LA265A, and LA261 types of scopes. The AN/USM-105 and the AN/USM-140 and 141 series were militarized versions which plaintiff did not make and on which plaintiff did not seek to bid.
5. Although plaintiff has a policy of actively seeking patent protection for its inventions, it does not use its patent portfolio for the purpose of producing revenue by licensing; rather, it employs patents to protect its market position as a leading manufacturer of oscilloscopes. However, the plaintiff granted to the Western Electric Company and RCA a royalty-free license in its patents in return for a license in certain groups of patents of those firms. Plaintiff also licensed the Hewlett-Packard Company, a major competitor, with a royalty-free cross-license in all patents of each firm. The few instances in which plaintiff did enter into licenses, and the unique circumstances surrounding those licenses, lead to the conclusion that
6. Extensive testimony by Mr. E. E. Swanson, controller for plaintiff since 1961, as well as by others,, has satisfactorily established plaintiffs sales, its accounting procedures and methods, its cost-accounting techniques, its discount policies, its catalog prices, and, where necessary, the reason for the absence of certain records and the basis on which certain subsidiary records may be used to ascertain the needed information. This evidence establishes that:
(a) Plaintiffs policy was to sell its oscilloscopes to all customers, including defendant, at the catalog price less its standard discount. That discount policy provided no discount on the first nine units purchased, a 2% discount on the tenth unit through the twenty-fourth, a 4% discount for the twenty-fifth unit through the forty-ninth, and a 6% discount on all units beyond the forty-ninth. Plaintiffs catalog prices, which remained the same at all relevant times, were $1,400 for the 535, $1,550 for the 545, and $1,130 for the 516.
(b) Plaintiffs costs to produce scopes consist of material, labor, variable burden, and fixed burden. Fixed burden is the burden that does not vary with the volume of production but varies with or is related to a period of time. Fixed burden includes the capacity expenses and direct-period expenses of nonmanufacturing areas. Capacity expenses are the expenses associated with a general level of production or an ability or capacity to operate or produce at a certain level. Depreciation, insurance, and property taxes are capacity expenses and thus are part of fixed burden. Marketing, administration, and engineering expenses are direct period or fixed expenses and thus part of fixed burden.
(c) Other possible costs that may be incurred are expenses in making a sale, shipping, warehousing, field support, order processing, billing, carrying higher inventory, and accounts receivable.
(d) The difference between the selling price and the total variable cost or out-of-pocket cost is the contribution which a product makes toward fixed burden and profit.
(e) Sales to defendant have generally been about 10% of plaintiffs total sales. Even including indirect sales, defendant’s business has never exceeded 25% of plaintiffs total sales. If defendant had procured from plaintiff all of the nonmilitarized scopes, including plug-ins and accessories, that it procured from the third-party defendants, plaintiffs annual sales would have increased an average of
7. The evidence, including the testimony of plaintiffs witnesses Scott and Park, established that the increase in production required to fill the contracts for nonmilitarized scopes awarded to others could have been handled by plaintiff, with its existing facilities and personnel, either then currently employed or from a readily available labor pool. This was true throughout the period of infringement. The commercial models which plaintiff sold to its other customers would have met the requirements of defendant. However, plaintiff has failed to prove by clear and convincing evidence that, if the defendant had confined itself to authorized sellers, plaintiff would have actually made the sales to the Government which were made by the third-party defendants, or that if it had made such sales it would have made and retained the "lost” profits it seeks in the present suit.
8. Defendant’s gross cost for procuring the scopes, plug-ins, accessories, and spares under the 42 contracts was approximately $10,409,730. This represented a savings to defendant of more than $4,891,000, as compared to the cost of the scopes and plug-ins had they been procured from plaintiff. These contracts covered procurement of 9,105 scopes. Based on the scopes only, defendant’s procurement cost it $9,115,068, as compared to $12,542,617 at plaintiffs prices, a savings of $3,427,549 for defendant. For scopes and plug-ins together, excluding all else, defendant’s procurement costs were $9,740,385.
9. Based on the information available at trial, defendant, under 30 separate contracts, procured 8,437 militarized scopes from Hickok and Lavoie. These procurements were spread over the following period:
Year Oscilloscopes
1961 1,079
1962 645
1963 359
1964 1,609
1965 ' 639
1966 2,607
1967 1.499
Total 8,437
This represented a total procurement of $11,557,695, of which $7,829,772 was the cost of the scopes.
(b) The RCA, Western Electric, and Raytheon licenses on which defendant relies are not analogous to the situation present here. Each of those companies is, as compared to plaintiff, a corporate giant with a diverse product line and extensive patent portfolios. The licensing program of both RCA and Western Electric was in the context of an antitrust consent decree. The subminiatu-rized tubes of Raytheon are not in any way related to oscilloscopes. Items such as transistors, tubes, and similar electronic components have a relatively low per-unit cost but are sold and used in large quantity. That is distinguishable from an instrument such as an oscilloscope where the per-unit cost is much higher and the quantities sold are much lower. Defendants have not carried their burden of establishing any meaningful pattern of licenses, or royalty rates, that would be relevant in this case.
11. (a) Plaintiff offered the testimony of Elmer Gorn to assist the court in establishing a reasonable royalty rate to be used in determining the basic compensation due plaintiff for infringement on contracts involving the AN/USM-105, AN/USM-140, and AN/USM-141 scopes. Gorn proposed to establish a reasonable royalty on a "willing buyer-willing seller” model. That model contemplates a supposititious meeting prior to any infringement between the patent owner and the potential manufacturer of the infringing items in order to negotiate a license agreement. The prospective licensee and the prospective
(b) This formula presented by plaintiff, when properly used, furnishes a good starting-point for the determination of a reasonable royalty which would be agreed upon by a "willing buyer” and "willing seller.”
12. (a) Cost/price studies were made by plaintiff during the period of 1959-1967. The purpose of these studies was to evaluate the profit performance of each product and to aid in pricing new products. These studies compiled actual manufacturing costs for each product sold by plaintiff; in addition, each product was allocated a certain percentage of the nonmanufacturing costs including research and development, marketing, and administration. The allocation is based on a percentage of the standard manufacturing cost of each product and merely represents a method of spreading these expenses across the entire product line. The "Total Company Cost” is a sum of both the actual costs for each product and the allocated costs assigned to that product. To determine the actual manufacturing costs for that product, the allocated costs should not be included.
(b) Plaintiffs cost for the model -545 scope during 1959 was $1019. That figure is based on the variable manufacturing cost of $486 plus $533 for fixed burden, marketing and administrative costs, etc. (including plaintiffs profit-sharing program).
(c) Hickok’s average profit during the period 1960-68 was 2.7%. In 1961, its profit was 4.7% of sales.
13. The result of the formula described in finding 11, when appropriately applied to this case, leaves a residual share of 7.65% of unit price as royalty (or part of the royalty) for the plaintiff as the presumed willing seller. Based on all the considerations applicable to the case it is concluded, however, that 10% would be the reasonable royalty accepted by the supposititious willing seller and willing buyer.
14. (a) Where it is not practicable to determine with certainty the cost of portions of a device, the general practice in the electronics industry is to use the cost of the entire "black box” or device as a royalty base. If only a minor portion of the device is covered by the patent, a lower royalty rate in recognition of this fact is usually adopted. While, in the present case, less than the entire scope is covered by the patents in suit, the patented circuits cover the major elements that make the scope a success so no diminution in royalty would be appropriate.
(b) It is the practice in the industry to negotiate the base to which the royalty rate is to be applied. In some instances, unpatented items such as plug-ins and accessories are included in the base while, in other instances, they would be excluded. There is no exact formula for determining this, the practice varying from license to license. One reasonable approach is to include in the base everything required for an operative device, which, in this case, would include plug-ins, probes, and accessories. Another reasonable approach would be to exclude from the base all unpatented items which are readily separable and for which separate prices are readily ascertainable; this would exclude plug-ins, probes, and accessories. Items such as packing and instruction manuals are not normally included in the royalty base.
15. Hickok presented some cost estimates it had made in early 1961 for an unsuccessful bid on a contract for production of the 1805 scope. No records were produced by Hickok to show either what its actual costs were or what its actual profits were on the sale of these scopes. Nor did Hickok produce any estimated costs for any contracts actually awarded to it.
16. As a part of its periodic cost/price, studies, plaintiff projected, for each product, an anticipated profit margin as a percent of the catalog price. During 1961-67, those margins were:
Model 535 Percentage Model 545 Percentage
29.9 1961 to Ü1 ^
20.7 1962 to Id
28.7 1963 to Í — 1
30.3 1964 to tO h>
28.3 1965 to O co
26.5 1966 to LO to
25.4 1967 to to o
23.7 27.1 Average:
The combined average, weighted to reflect the higher sales of the model 545, is 26.5%.
17. At the rate of 10%, applied to a base of $21,298,080 ($9,740,385 for the "commercial” scopes plus plug-in accessories; $11,557,695 for "militarized” scopes plus plug-in accessories), the reasonable and entire compensation to plaintiff for the patents infringed amounts to $2,129,808 plus compensation for delay in payment.
18. Compensation for delay in payment shall be made at the rates prescribed in Pitcairn v. United States, 212 Ct. Cl. 168, 547 F. 2d 1106 (1976).
CONCLUSION OF LAW
Upon the foregoing findings of fact which are made a part of the judgment herein, the court concludes as a matter of law that plaintiff is entitled to recover the sum of $2,129,808 plus interest as part of just compensation. The exact amount of recovery will be determined under Rule 131(c).
Mr. Glassman based his testimony on eight criteria:
"Yes. I believe that there are eight pertinent criteria to be used here in determining a reasonable royalty. The first one is the degree of importance, or the advance over the prior art, to put it a little differently, of the patents on which the compensation is to be based.
"Second, the total volume of infringing procurement. Third, the portion of the device which utilizes the patents held valid and infringed. Fourth, whether the royalty base is to be the entire device or only a portion of it. Fifth, the features of the device or related items, such as accessories and data, whose costs are to be deducted in arriving at the royalty base. Sixth, the Court of Claims decisions, and to a lesser extent the decisions of other Federal Courts, on the determination of reasonable royalty rates. Seventh, any licenses which were granted by the Plaintiff under the patents before the filing of the suit. And finally, eight, typical license agreements on electronic testing and measuring apparatus under patents of other companies.” [Tr. 3843-3844.]
See United States ex rel. T.V.A. v. Powelson, 319 U. S. 266 (1943); Bothwell v. United States, 254 U. S. 231 (1920). See also Omnia Commercial Co. v. United States, 261 U. S. 502 (1923); Price Fire & Water Proofing Co. v. United States, 261 U. S. 179 (1923); United States v. Honolulu Plantation Co., 182 F. 2d 172 (9th Cir.), cert. denied, 340 U. S. 820 (1950); 4 Nichols, Eminent Domain (3d ed. rev. 1976), § 12.3121[1], [2].
See Hearings on H.R. 5231 (later reported as H.R. 5311) Before the House Comm. on Patents, 79th Cong., 2d Sess. 2-3 (1946) (remarks of Rep. Henry explaining the prime reason for the elimination of infringer’s profits):
"Now, however, by far the greater number of patents that are in litigation are on special and often relatively insignificant parts of complex structures to which the patented feature is so related that it is absolutely impossible to apportion the profits due to the invention, those being the only profits to which the patentee is entitled.
"The result is that there is a complete failure of justice in almost every case in which supposed profits are recovered or recoverable.
"Absolutely artificial and unsound rules have been invented to solve the impossible problem of how to apportion profits.”
Portions of the hearing, including the above quotation and other pertinent information, are quoted at length in footnotes in Georgia-Pacific Corp. v. United States Plywood Corp., 243 F. Supp. 500, 521-527 (S.D. N.Y. 1965).
The majority in its footnote 7 states that:
"This willing-buyer/willing-seller technique in determining a reasonable royalty has not been a stranger to the Court of Claims. Olsson v. United States, supra; Badowski v. United States, 150 Ct. Cl. 482, 485, 278 F. 2d 934 (1960); Ushakoff v. United States, 179 Ct. Cl. 780, 785-86, 375 F. 2d 822, 825, 153 U.S.P.Q. 410 (1967); Amerace Esna Corp. v. United States, 199 Ct. Cl. 175, 462 F. 2d 1377, 174 U.S.P.Q. 517 (1972). For cases from other courts, see, e.g., Jenn-Air Corp. v. Penn Ventilator Co., 394 F. Supp. 665, 185 U.S.P.Q. 410 (E.D. Pa. 1975).”
None of the Court of Claims cases uses the infringer’s profit hypothetical approach. Olsson uses the willing buyer-willing seller approach using Government savings as a basis. In Badowski the willing buyer-willing seller approach was used using prior commercial licenses granted by the patent owner as a basis. In Ushakoff the willing buyer-willing seller approach was implemented using prior commercial licenses as a basis. Amerace Esna Corp. uses the willing buyer-willing seller approach using cost savings to defendant as a basis. Jenn-Air Corp. uses the willing buyer-willing seller approach but it was a damage determination under 35 U.S.C. § 284 and a suit between private parties; the federal rules of eminent domain are not applicable in such cases.
Rehearing
ORDER ON REHEARING
[June 24, 1977]
This case comes before the court on defendant’s motion for rehearing together with plaintiffs response, and on plaintiffs motion for rehearing together with defendant’s response. The court has considered these presentations en banc, without oral argument. The motions for rehearing are both denied except to the following extent:
1. The court’s opinion of March 23,1977 and findings are amended to delete the specific figures for the royalty bases for both the "commercial” and the "militarized” scopes.
2. The court’s opinion and conclusion of law are amended to delete the figure given for reasonable and entire compensation (before delay compensation).
3. The case is returned to the Trial Division (in addition to the remand already ordered to determine the amount of delay compensation) to recompute, on the basis of the present record, the royalty bases for both "commercial” and "militarized” scopes to include only the scopes themselves and all the plug-ins. In our original opinion we excluded (as had the trial judge) packaging and other miscellaneous costs, and we adhere to that position. We now specifically reject plaintiffs current request for inclusion of probes and carts, on the ground that plaintiff did not adequately, at the time the case was presented to us, ask for the inclusion of those items for either type of scope.
As for the "commercial” scopes, it now appears that the trial judge, in determining the base for that kind of scope to be $9,740,385 (a figure we adopted), may possibly have excluded a substantial number of plug-ins, despite the trial judge’s and our intention to include all the plug-ins for the "commercial” scopes. With respect to the "militarized” scopes, it now appears that the base figure of $11,557,695,
4. After recomputing the royalty bases, the trial judge will apply to those bases the 10% rate we established in our opinion of March 23, 1977, then determine the delay compensation under Part VIII of that opinion, and finally determine the total award.
5. In carrying out the above computations, the trial judge shall call upon the parties for any submissions or procedures he deems helpful in the expeditious computation of the amount of recovery.
IT IS SO ORDERED.