Trio Process Corporation and Franklin Smelting & Refining Co., a Partnership v. L. Goldstein's Sons, Inc. And Metal Bank, Inc.

approached damage issue master ALDISERT, Before ROSENN by comparing operat- costs of Goldstein’s GARTH, Judges. Circuit ing patented process with costs similar, unpatented process. He found OPINION OF THE COURT process Trio saved Gold- that use of the ROSENN, Judge. Circuit $52,791 per in labor stein alone, other, smaller sav- costs and that history years After a of fourteen of liti- use ings accrued to Goldstein from gation in the district court and several patented as well. method again peals to this we are confronted patent infringement royal- In order “reasonable appeal with an in this to reach a infringement ty” patent by infringer, es- for use proceeding. The has been savings in longer tablished and is no at issue.1 We the master halved Goldstein’s are, however, costs, with the trouble- and concluded that revisited labor for each furnace damages. some issue of When this case was a reasonable year. Multiplying figure by appeal origi- was last before us on from the damages, years we vacated number of furnace nal determination of Sons, patent Corp. 1. Trio Process v. L. Goldstein’s 3. For a more detailed discussion of the Inc., denied, background (3d Cir.), of this cert. ed and the factual 461 F.2d 409 U.S. 66 997, 319, (1972). see Trio Process v. L. Goldstein’s 93 34 L.Ed.2d 262 S.Ct. Sons, Inc., 66, (3d Cir.), 461 F.2d 68-70 Sons, 34 L.Ed.2d 409 U.S. 93 S.Ct. Corp. v. L. 2. Trio Process Inc., 1976). F.2d 126 pat illegally made modifications, profits making slight mas- $1,564,804. Aro Manu at 129. See damages of Id. infringer.” found ter ent trebling Replace Top recommended master v. Convertible facturing Co. amount, by 35 allowed U.S.C. § as Co., 377 U.S. ment trebling and the addition (1970). After also affirmed (1964). We L.Ed.2d pro- interest, damage figure the total finding “that the license in its $5,062,954. posed by the master may the 1960’s by Trio in rate established damage court viewed The district by Gold- artificially depressed have been mon- regard computation not and that infringement, ongoing stein’s as a result ey by the defendant saved set therefore be royalty should had, but the master infringement, rate.”4 a level above the actual It looked lost. Trio had in terms of what III, F.2d at supra, Process $2,600per fur- sum of first to the initial added). (emphasis actually charged amount year nace —the held, however, court that the district We era. in the 1960-1970 licenses by Trio for First, it had respects. in two had erred then increased court The district two: royalty one rate but that the calculated not assumption $2,600figure on up- had reduced the mar- before our decision infringement period one for the open license, proceeded to price of the validity ket second holding patent’s $7,800 per year furnace damages at set single held that a after.5 We period for the by prior to the decision years be calculated royalty reasonable rate should validity, figure three times Court infringement. period for the entire during the 1960’s. charged rate point and the court has done that $15,000per furnace Damages were set at Second, im- and most longer no at issue. following the 1972 period year for deciding purposes of portantly for employment of these adjudication. The articulate the peal, there was a failure to primary resulted in total figures two of the underlying reasons determination $653,839. judge The trial damages of Thus, remand- the cause was royalty rate. multipli- to use a double proceeded then to the trial court for reconsideration ed trebling to the master’s er—in contrast specifically We noted damages issue. attorneys’ denied fees. With figure—and that interest, damages computed by total remand, the district [O]n $1,726,525. district court were regard to the rule give proper should Sons, Corp. v. L. Trio Process Goldstein’s that the extent of the deviation 126, Cir., 1976)(foot- Inc., 533 F.2d existing fees from a license reasonable omitted) (“Trio citations Process notes and solely on royalty must be determined III”). the basis of the submitted evidence and part and re- appeal On we affirmed upon an the factors that evaluation of III, supra. part. versed in Trio Process royalty could affect the reasonable error in the We held that there was “no rate, conjecture. upon not mere damage step of the district court’s first III, F.2d at 130 supra, 533 Trio Process calculation, loss- namely, focusing upon the done, omitted). This has not been (footnote than holder rather patent es suffered evidence, assertion, however, activities Contrary did that Goldstein’s to Trio’s was, artificially depressed royalty actual license rate rate hold that the reasonable law, higher the actual Trio. than as a matter only it be rate. We held license had, fact, higher rate if the actual based on 5. The district court had set artificially depressed by $7,800 year in- furnace reasonable Thus, fringement. in Trio Process III we held adjudication period prior to our be set at a the reasonable validity patent’s actual license rate level above the period thereafter. for the demonstrated, basis of the submitted on the however, distinguished nonpatented we therefore vacate de- from ele ments, damages.6 manufacturing process, termination busi infringement, receive but in no event ty. list of this case found a number of those factors to L.Ed.2d 114 Y.1970), of a ages: Georgia-Pacific wood has made use of the have used vices, patent property over working ^{[6] [4]} mercial product ty. ^[5] the extent term of sales. ^{[2] [3]} of ed] [1] [TJhe relevant 35 U.S.C. sales reasonable Corp., any factors The extent The nature of the The established The duration of the compensation for the modified, success; made under the calculating damages out of his evidence utility any, that and the the [process]. of 404 U.S. (1971). to the licensor as a relevant to the determination license. § similar results. less than a reasonable such derivative or non-patented own and its to which the probative II. (1976). benefits to those who value of the The district court in v. United States had been used for holder calculation profitability advantages [patented process]; old modes 1116, can be found current patent; patent [process] An exhaustive is entitled to items; generator (2d Cir.), infringer convoyed populari of dam its and the [patent (S.D.N. of the or de of the royal value com Ply ue to each of these benefits but indicated costs; (2) vantages however, scrap sumption from the of the obtained ing Thus, obtained defendant’s extent have been the use of the first two nomic benefits that were obtained facturing have had determination in the absence of the negotiations seller” cert. denied sub these Corp. v. The Applying experts. provements ^[8] ness L.Ed. 486 parties (4) Horvath v. McCord Radiator Manu use of “[they] factors the court Trio risks, remaining court rule, Horvath, four by was unable to processing by advertising scrap Co., per an process: ability would have opinion defendant between the plaintiff’s patented process.” plaintiff’s patented process.” the district court considered in the context of hypothetical all increased recovery distinct benefits added of a found that 100 F.2d ton of found a “minimal “willing buyer significant wire; (3) nom., Trio touch 308 U.S. to attract more electrical factors, determined (1) testimony above factors would process. that “the license fee Carrier Engineering processed through agreed upon assign infringing activity. 326, reduction in parties would to a court found that the court noted lower features infringer. Goldstein effect” the benefits from royalty. 60 S.Ct. by its dollar conducted (6th Cir.), fuel material; & qualified the eco through infring the ad- its use copper absent in the or im labor large con- val- As of that use. figure that “the dollar is the available ^[7] portion of the realizable profit value of the direct and indirect labor sav- that be ings credited to the invention achieved defendant.” law, precept The dissent asserts that this Trio of the that the extent trespassed upon fact-finding roy- Process III thority au- deviation alty license fees from a reasonable majori- solely court and that the of the determined on the basis ty again arrogated Here, conjecture. here once has that function not vacate evidence and perception damages to itself. Our role in court’s the determination because does however, comply this differs from that of the not the rule of law set forth Trio with not, asserts, dissent. In Trio Process III the court remand- as the be- Process III and dissent ed, up because of its desire to induce cause set ourselves as a fact-find- we have particular fact-finder to award a ing authority. amount legal but because of its concern with negoti- its belief that “a court noted began its calculation of

The court infringe- testimony, credit- of defendant’s savings expert with ated the absence labor master, higher indicated that which been several times ed would have ment j $52,- savings of had realized labor actually Goldstein received license fees than the its in- per year by virtue of not, however, furnace We have plaintiff.” process.7 Because fringing use of any this record to evidence in able discover operated a number Goldstein support this conclusion. to eight and one-half furnaces over true license It is actual $41,- figure this to period, court reduced a rea necessarily constitute rate does not wages year, reflecting the furnace Corp. royalty. sonable See General Motors 1969, mid-point in the in- prevailing Blackmore, 1939). (6th v. fringing then found that period. The court Thus, is artifi negotiations un- when the actual rate voluntary royalty “[i]n low, royalty may be set infringing practices, cially a reasonable tainted defendant’s willing III, supra. have been defendant well above that rate. Trio Process saving plaintiff paid split Nevertheless, rate is an the actual license $20,000 approximately plaintiff a in the determination important factor year.” reasons, for each For two furnace Roy royalty, at least when those however, the court further reduced prove prove alties or tend to an established First, year. the court Georgia-Pacific v. Unit royalty. furnaces, that, held as a seller of “[Trio] Corp., supra, Plywood ed States accept some- at 1120. nego- what than the maximum less We are mindful the district promote tiable sales.” in order its royalties re trio court concluded that lawsuit, Second, “plaintiff prior agreements under the license did not ceived unaware ... of the exact extent of Never royalty. constitute an savings the labor were obtainable theless, existing license rate does tend through mul- process.” use After to show an $15,000by infring- established license rate. The tiplying the number of little, furnaces, any, evidence indicates ing then doubled the variation in court or the inf primary damages charged added the rate before after interest 6% Further, per damage the district ringement.8 annum. total award was $2,901,336plus issue, damage costs. first consideration rate apparently found the actual license to Georgia-Pacific among first the fac lists conclusive, probative, although not evi be rea tors relevant to the determination of a Thus, royalty.9 of a reasonable dence royalties by royalty sonable received “[t]he royalty by determined reasonable rate patentee licensing in its consideration of the district court first suit, tending prove an proving damage was to the actual issue related Georgia-Pacific Corp. royalty.” established charged. approach That was license rate States, supra, F.Supp. v. United 318 at 1120. earlier correct. As indicated our case, In this court to disre district chose however, erred opinion, the district court Trio be gard the license fees received demonstrate, failing on the basis not an “they cause did show there was evidence, the extent of the deviation of re since the fees roy existing a depressed by de license fees from reasonable artificially ceived were ” exist in infringement. alty. That same void continues to ongoing fendant’s royal- recognized prevailing comparing figure “a 7. This 9. The was arrived court similar, noninfringing ty probative operating may fur- rate a cost of of what constitutes However, disputes royalty.” nace. the basis as we have Goldstein reasonable comparison per previously we need not address this issue but fixed a indicated it rate of disposition royalty. in view our of the case. as a 8. See section IV infra.

1359 however, damage present. district most recent cal- such factors are court’s agreed upon rate culation. license between Trio and open Goldstein arrived at in free and again We unable discover are negotiations prior any infring- conducted conclu any support for the court’s ing activity Furthermore, by Goldstein.13 existing that the license rate was de sion allegations there no in this case of in- Thus, infringement. pressed Goldstein’s dustry-wide infringement. Tights, Unlike Tights, its reliance on the rationale of Inc. there is no indication that the license rates Corp., (M.D. 159 Kayser-Roth F.Supp. 442 v. here declined after infringe- N.C.1977), Tights misplaced.10 Indeed, ment. even*after Trio learned of rate, disregarded standard infringement, it offered Goldstein a finding artificially depressed it had been license at the same rate as had earlier “because it was established in atmo agreed Further, upon.14 years in the fol- industry-wide infringement sphere lowing our upholding decision the validity disrespect patent.” for the . . patent, there apparently were no at 165. thereupon Id. The court calculated granted. III, new licenses See Trio Process hypothetical a reasonable based on supra, Thus, at 127. F.2d thrust of negotiations a “willing between licensee” the evidence in case indicates the ab- a “willing licensor.”11 Unlike the in of depressing sence effect caused Gold- depressing Tights stant effect in infringement. stein’s Nor have we been There, evident. the low license rate permissible any referred to evidentiary ba- negotiated against background contrary. Thus, sis compelled we are open industry-wide infringement. Fur to vacate the court’s assessment dam- ther, there existing was evidence that the ages. dramatically license rate had declined be infringement.12 Thus, cause of that III. justi awas substantial factual basis which disregard fied the court’s decision to Having so done we must now decide us, In the rate. case before again whether to once remand the dis- 11. In 12. The termined was item. holder was not to enter into ments a nominal rate of seeking however, only oly. See id. at 1123. buyer fringer’s competition, license.” 188 is adversely or a fact of economic life that an F.2d 589 deters ment tends to subsequent distinguishable. There the court stated: “It is Drew & F.Supp. supports no Hartford Nat’l Bank & Trust no Georgia-Pacific,supra, indication that the but Indeed, potential potential (3d Cir.), damages Co., the district court’s affected rather, L.Ed.2d licensees (D.Del.1960), reduce rate after agreements. licensees were deterred from to maintain its apparent policy seller” rule. $.50 by subsequent infringement on the basis of the licensees from F.Supp. (1961), Tights who at 362 n.50. Here there and such patentee’s negotiated parties agreed aff'd must meet the in dozen 353, modified, had declined from the court also de- which Trio for the opinion, licensing agree- 368 U.S. This patent monop- open infringe fees from its Co. garments curiam, was fees were taking patented v. “willing also is patent argues used, E. F. 14. The record indicates 13. Goldstein Exhibit DM-15 that it cease its ter Trio’s counsel wrote to Goldstein with a metal fabricator for the construction of from Trio. the record that Goldstein’s began any earlier than 1964 1960. There is no indication in $.02 agreements in Corp., supra, previous two incinerators. poration violate the license ment of Pat. No. ing you license the additional incinerator un- activities in this matter der the Goldstein’s [T]his copy stated, This of a furnace Goldstein had ^[*] will letter is dozen. same inter dated formally Sons, ^[*] (emphasis added). alia: infringing terms January 2, written in Tights, Inc. and Trio Process Cor- ^[*] 3,076,421. Further, your charge you entered into two license agreement that, and conditions as the at 162. Inc. v. ^[*] activities. That let- the interest of hav- appear when contracted on March ^[*] Kayser-Roth between L. requesting purchased activities infringe- 8, 1965, directly ^[*] IV. damages trict court for a determination whether, urges, to set the as Goldstein begin We with the rule that we not damages The time and level of ourselves. opinion, ed in our last that the extent of the litigation expense already consumed licensing deviation of the actual rate from a argue against remand. Further- strongly explained solely must be more, complete appears the record and suf- on the basis of the submitted evidence. In briefs ficient for such a determination. III, supra, Trio Process 533 F.2d at 130. In argument and oral before this court on explanation, the absence of such an we parties agreed that appeal, their last both the record must examine ourselves to deter necessary no additional evidence it mine whether contains such evidence. Trio Process damages. the calculation of III, supra, 533 F.2d at 131 n.24. Nor did patented Trio itself did not utilize the necessary re- the district court find it Instead, process. its use of the mand to receive additional evidence. was to license it for use others. The year five periods. licenses sold were for with a similar presented This court was $20,000. The first license was sold for This Laboratories, Randolph situation in Inc. v. amount covered the license and the furnace Specialties Development Corp., 213 F.2d 873 $7,000 Cir.), necessary process; rep- utilize the (3d U.S. $13,000 99 L.Ed. 678 There this court set resented the cost of the furnace and aside the district court’s determination of license, e., $2,600 cost i. damages ground “grossly on the that it was year. furnace In purchased Goldstein excessive.” 213 F.2d at 875. The furnaces, two sets of licenses and one however, declined to send back $20,000 $15,000. and the other for Between damages district court but set the itself. buyers purchased 1962 and 1969 four more There, here, controversy had licenses and furnaces at the rate. Writing pending years.15 for a number of company bought pack- another court, Judge Maris noted that for the “[t]he age $25,000. with a modified furnace for record . . contains all the evidence package Later that purchased necessary proper and other materials to a $19,500. buyer another After a deci- judgment.” appropri it is Id. We believe price, sion Trio to raise the two more that, protracted litigation in view the ate purchasers were sold 1972 to other than having vacated for the second time the Goldstein, $25,000.16 Thus, price for a damages, district court’s determination of throughout period, the license rate of appropriate we should now determine the $2,600 per year appears to have However, level ourselves. relatively remained constant. perform will calcula the mathematical began activities Randolph but will tions as was done However, leave that task court. Trio and Goldstein had in .the attributable, instead, brought original 15. action for to an increase in the cost infringement May present appeal Assuming 1965. The of the furnace. that the rate was increased, however, only marks the fourth time the case has been before this court. See Trio Process two licenses were Corp. v. L. Gold granted Further, figure. at this no licenses Sons, Inc., 1976); stein's granted upholding were validity after our decision Sons, Inc., Trio Process v. L. Goldstein’s patent. learning Even after 1974); Trio Process indicated, infringement. Goldstein’s Trio a Sons, Inc., Corp. v. L. F.2d 66 Goldstein’s 8, 1965, willingness letter of March its to con- (3d Cir.), U.S. $2,600 licensing tinue at the Goldstein rate of (1972). 34 L.Ed.2d 262 year. Thus, per supra. furnace See note 13 appears charged by that the license rate Trio damages 16. In its first the dis- consideration of years span commencing up over the price trict court found that this increase including by to and the the last consideration royalty charged included an increase in the by rate September court in reflects little district change. $3,600 per year. Trio to furnace At about argument appeal, disput- on oral ed Goldstein this, asserting price that the increase was Thus, open previously Trio, negotiations possibility free that had it chosen $2,600 so, agreed per a fur- do to license rate to have higher obtained a year. charged nace rate actually Trio license rate than charged, that is decline Gold- We other licensees did not after irrelevant. believe by the rate fixed infringement began. Consequently, parties prior stein’s to any infringement is infringing activity depress- pertinent highly persuasive. Further, if the did have a ing rate effect the license it could our examination of the record has dis- not charging have Trio deterring any from closed reason to distrust negotiated otherwise have a rate it license rate as measure of actual dam- Thus, court, open ages.18 in the market. The district we hold that the $2600 however, disregarded year the license fees re- rate negotiated furnace between Trio Trio, they prior ceived because it believed did and Goldstein to the infringement, royalty, not reveal royalty. constitutes a reasonable artificially depressed by ongoing were V.

infringement. The court found that Trio negoti- a seller furnaces and thus in provides 35 U.S.C. § ating (prior infringe- a rate court may damages increase up to three ment) accept “would times the amount found or assessed. We less somewhat than the maximum agree with the district court that the multi negotiable in promote order to its sales.” It plication damages depends degree on the lawsuit, further prior observed that to this of bad faith exhibited defendant. Trio was unaware of the exact extent of Although master trebling recommended savings patented labor effected damages the district in its first process. But the record indicates that even damages, consideration of determined learning infringement, after Trio of- “the facts of this not case do tre warrant fered Goldstein a license for the bling the the primary full amount of dam furnace “under the same terms and condi- ages.” Thus, the court used double multi previous tions two incinerators.” plier. In we Trio III affirmed that Process (Emphasis added.)17 being decision as “within sound discre tion of the district court.” 533 F.2d at 131. patentee true It is who has “[a] consideration, again next the court costly attempted avoid and time-consum multiplier used double we find no ing litigation by settling than for less reason to disturb that decision. penalized should not be infringer litigation.” remand, when an forces full On cal- should Tights, Kayser-Roth v. Corp., supra, Inc. damages royal- culate based on a reasonable Here, however, at ty there is infringe- furnace Primary no reason believe that license rate damages ment. should then be negotiated by parties anything multiplied oth by a factor of two with 6%inter- er than a balanced consideration both from infringement, plus est the date of the competing Goldstein and Trio of those con Accordingly, judgment costs.19 normally cerns that enter into the determi will district court be vacated and the case price open marketplace nation of in an remanded proceedings for further in- not consistently economy. Trio offered licenses opinion. party consistent with this Each $2,600 per year. appeal. bear its costs of this rate supra. that, argues penalty having 17. See note 19. Trio as a brought appeal, require frivolous calculated, pay Goldstein substantial additional interest 18. “Actual must judgment on the imagined, and double costs on this and an can- arithmetical calculation peal. See 28 U.S.C. Given our § not be made without data on which to certain however, disposition Ransom, Mayor of this make York v. it.” of New appeal clearly Thus, (23 How.) 487, 488, not frivolous. Trio’s U.S. 16 L.Ed. 515. argument III, supra, is without merit. at 130. Process 533 F.2d 1362 court, view,

ALDISERT, Judge, improperly trespassed in dissenting. my Circuit upon fact-finding authority District of ago, Charles twenty years Professor Over by vacating his Judge John P. Fullam an incisive article published Wright Alan employing award and what Professor Ap- Omniscience of Doubtful The entitled concept of Wright an “elaborate labeled which, Courts,1 quoting Dean in pellate solely causation.” This done appellate Green,2 he observed Leon inducing of the fact-finder purpose practi- unto themselves drawn courts have have my colleagues award what system. power judicial of cally all they the fact-finders Wright explained: awarded had Professor the district court.4 bur- presumptions and rules about Subtle concepts of causa- proof, elaborate den of Fullam, remand, Judge Upon one rest, have consideration and tion and trial experienced judges able and most way a unless in such been devised system, evaluated the factors the federal handling the is a judge case appellate Georgia-Pacific Corp. v. United set forth always at dullard, is hand some doctrine Plywood Corp., 318 1116 States they as justice, the ends of to achieve (S.D.N.Y.1970),modified, (2d appear appellate to an court. Cir.), cert. U.S. decade the Within last (1971), findings L.Ed.2d 114 made new No judges have become bolder. appellate fact, award, a he fashioned new which assumption they longer do hide their explained with a statement of reasons.5 su- power beneath an elaborate doctrinal short, respected he let conscientiously appellate today’s perstructure. Instead spirit this ter and court’s mandate. inventing procedural new de- courts upon appeal in a But this fourth —the mastery litiga- by which their vices unnecessarily dreary history protracted be made direct rather tion can through the litigation speaking —this than devious. present majority, again disagreed has review the such device is] [One time, findings. But this instead his factual size verdicts. pellate court of the snipping by contriving facts artifi at the legal precepts, cial have invaded the Wright, supra at note 751. up ourselves district courtroom set present appeal, The like Process rump fact-finding authority. Because Sons, Inc., Corp. L.v. Goldstein’s 533 F.2d this empowerment is neither nor reason (3d 1979) (Trio III), Cir. Process is a action, I dissent. verdict, review of the size of a albeit an colleagues majority, regret My by judge, verdicts award made Anglo-American traditionally say, have now tossed the responsibility been the sole III, to the four appellate a fact-finder.3 In Trio Process tradition of review personal Wright, Appel- precise it is in a Doubtful Omniscience ascertainment than Courts, (1957). injury late Minn.L.Rev. 751 case. Green, Judge Jury 2. L. specific was: 4. The directive in Trio Process III remand, give the district court should On by Judge expressed traditional view was proper regard to the rule that the extent Co., Goodrich Scott v. Baltimore & Ohio R. the deviation of license fees from 1945) (footnotes 151 F.2d 64-65 solely must be determined omitted): on the basis of the submitted evidence members of the Court think verdict upon could an evaluation of the factors that very high. is too But also feel clear that rate, upon affect the reasonable not nothing do there is the Court can about it. conjecture. mere longA list of cases in the federal omitted). (footnote F.2d clearly courts the federal demonstrates courts, appellate including Supreme opinion 5. The full text of the district court Court, judgment will review exces- appeal is is set forth as which based siveness of even in cases where the opinion. appendix to this damage capable of much more amount a They prerogative claim new as an Court finds that winds. the license fee the [T]he parties agreed upon have appellate goes beyond court even Pro- would absent that 1957; defendant’s Wright’s would a concerns in have to fessor large extent have determined the facts are simply found the to their economic benefits that were obtained liking. legitimacy procedure Whatever through the of plaintiff’s patented use d’appel, in the French cour the process. Tights, Kayser-Roth Inc. v. d’appello, Italian corte or the German Ober- Corp., F.Supp. 159, (M.D.N.C. [442 landesgerichte, courts of all the second in- 1977)]. right that have the stance find facts Defendant obtained anew, following the ben- practice foreign is and inappro- plaintiff’s from using process efits re- priate to our law tradition common of wire; scrap move (a) insulation from pellate review. costs; (b) reduction in labor an increased My disagreement majority with the recovery wire; of copper scrap from the panel with in Trio Process (c) lower consumption per fuel of ton III, philosophical arises from a fundamental material; processed (d) ability about role difference of United scrap attract more process- electrical Appeals of vis a States Court vis United ing by advertising advantages of I States District Court. do not believe that plaintiff’s process. It should be noted judges justice are of circuit ministers clearly that defendant was aware of authority permit- armed warrants these benefits when it in- commenced ting our us substitute notions fact for fringement plaintiff’s patent it since judges. those of district Our commissions had previously plaintiff’s process used un- authorize us to sit in a court is “high- der two properly purchased licenses. judicial system er” because our is ar- Thus, if negotiated defendant had ranged hierarchy. as a The commissionsdo additional licenses instead sophisticated endow us with a more plaintiff’s patent, defendant would have understanding economics, a more pro- pay substantially more exposure found to the tensions and circum- it paid than had for the initial licenses marketplace, stances a superior or process proven since its worth ability to find facts. and the defendant would have assumed transparent In a effort to purchasing substitute their little no risk in the addi- just view of factual result for that tional licenses.

Judge Fullam purely and to dress a factual Appendix, infra, at 1366. issue glitter tinsel and of a legal The district signifi- court found that the precept, majority state that “[w]e cant infringer economic benefits to the again unable any support to discover patented from use of the district court’s conclusionthat the exist- have been reflected in the license fee the ing depressed license rate Gold- parties negotiated would have but for the infringement.” Maj.Op., stein’s at 1359. infringement. finding The basis for the law, But in the the term “conclusion” is a economic is benefit in the record and art; word of it is the inferred result of a say cannot clearly that the trial court syllogism, or other form of argument, indi- wrong finding that that benefit would cating logical relationship legal pre- have been reflected in the license fee. cepts facts found the fact finder. Therefore, the majority’s statement A does facts, not conclude toas it “the thrust of the . evidence . indi- finds question the facts. theOn whether cates depressing absence of effect” on depressed, license rate was the value of a license and its statement that legal district court did not reach a conclu- no “permissible evidentiary basis to sion, question which would raise a of law contrary,” Maj.Op. at files in the Rather, duly subject to review. Judge made face of Fullam’s meticulous discus- finding of fact: sion economic benefits obtained Pendergrass v. New York Life Insurance reading that a fair I believe appellant.

the Co., 136, 1950). opinion (8th Fullam’s Cir. Judge show that 181 F.2d would evidentiary ba- “permissible illustrates appellate strays court To the extent an findings. I am satisfied sis” of his reviewing the traditional role of from its de- of given evidence benefits the record choice, le- interpretation, application and of permissible infringer, it was by the rived unnecessarily precepts, intrudes gal and the inference draw for the fact finder rights privileges of the trial upon the and to a deter- benefits relevant that these courts, impairment corresponding is a majority royalties. The of lost mination litigants public of and the in confidence interesting technique avoid the utilize an courts, the trial and in the decisions of They facts. significance of the record of an unwarranted belief broadcast sweep benefits to the findings of qualified than appellate courts are better rug, the trial court infringer under a for justice requires. what judges trial decide realized labor sav- that Goldstein had found today does I believe the court’s decision per year, yet the ings per furnace of precisely that. fact with “we this critical majority avoids in of this issue view our need not address judg- Accordingly, I would affirm 1358, Maj.Op. at case.” disposition respects, court all ment of the district in . Yet their “view of note 7. specifically set forth the reasons more support no is that there is evidence to case” Judge appendix opin- in to this Fullam the findings. the trial court’s ion. of Although today’s decision III previous decision in Trio Process and the APPENDIX only they point reflect a involve one in this with which am view in Sons, Corp. Trio v. L. Process point view disagreement. It is a strong 22, Inc., 38,166 (E.D.Pa. Sept. No. Civil appellate court reflecting a belief that an 1978) (memorandum opinion): preroga- right has encroach decision, Today’s finder. in tives of fact FULLAM, Judge. District particular, dangerous exten- constitutes cases that I believe were sion of a line of history long The case is tampered because wrongly decided in complicated. fully It has been discussed See, g., e. fact-finding orthodoxy. Opinions issued United States Court (3d Califano, Harganreder v. 575 F.2d 434 and, Circuit,1 Appeals for Third Industries, 1978); B. N. L. R. v. Armcor Cir. therefore, here it will be mentioned 1976). Inc., (3d My view is 535 F.2d 239 Cir. when it is relevant to the issue with which following passage: reflected concerned, Opinion is the determination deciding responsibility entire damages. nonjury in a case questions doubtful fact before, April Once this Court is, be, we think it that of the awarding plaintiff damages issued an Order any The existence of district court. infringement of United States Patent as to whether the trial court or this doubt 3,076,421. The sum No. awarded issues Court the ultimate trier fact based, part, on the conclusion that is, think, nonjury detrimental cases plaintiff was reasonable to which justice, orderly administration Third entitled increased after Circuit impairs litigants the confidence of was val- plaintiff’s patent held public the decisions of the district was in error. When id. That conclusion courts, multiplies the number of 18, 1975, April appealed, the Order of peals in such cases. Sons, Sons, Inc., (3d Cir.), Corp. stein’s F.2d Trio v. L. Goldstein’s Process Inc., 1976); Process denied 409 U.S. (3d 93 S.Ct. L.Ed.2d Cir. Inc., Sons, Corp. L. v. Goldstein’s 493 F.2d 1974); v. L. Gold Trio Process Third Circuit held that a holder ^[4] utility advantages single royalty for is entitled to a patent property over the old modes or tions occurs throughout redetermination (b) explain Circuit, therefore, remanded this case for a patent. single that submitted before this Court should how the reasonable 533 F.2d at 129-30. The Third whether that infringement period; evidence after figure judicial approval royalty applicable analyzed chosen related (a) with instruc- infringement determine terms of that use. has ess] who devices, working out similar results. ^{[6] [5]} made any have used the The . evidence extent to which the nature use any, . and the benefits to those that had been used for probative [process]. [patented process]; patented [proc of the value infringer of factors that can affect the reasonable ^[7] The portion of the realizable profit royalty rate. that should be credited to the invention as distinguished non-patented from ele royalty A reasonable is the license rate ments, manufacturing process, busi plaintiff that would have defendant risks, significant ness features or im agreed upon infringement at time be provements infringer. added gan they reasonably had been and voluntar stant case: ing a ily negotiating the license for the Southern District of New York lists several factors to be considered in establish Pacific F.Supp. 159, Opinion, the United States District Court L.Ed.2d 114 1970),modified, Corp., Tights, the extent of sales ed sales. [1] [T]he following process] reasonable 318 F.Supp. 404 U.S. Inc. v. of his of such derivative or to the licensor as a existing have v. United States royalty. (M.D.N.C.1977); Georgia- non-patented Kayser-Roth Corp., significance value of the Of those frequently items; agreement. in the in Cir.), generator (S.D.N.Y. convoyed Plywood [patent factors, cited have Opinion April adopted plaintiff’s patented of insulation from have determined nace ages and have lined lyzed reasonable Georgia-Pacific Corp. v. wood experts. Special not clearly ^[8] evidence in accepted below, the evidence in Corp., The the Master’s conclusions concluded, Master.3 that defendant royalty opinion supra, that them erroneous this case plaintiff process scrap 1975. testimony as I Although I have not light for the reasons out his 1120.2 I have ana United States did in wire. and, was wrongfully findings of these factors for is entitled for presented therefore, of my The each qualified removal earlier law, dam used to a fact Ply fur I I ^[2] duration patent and the first two of the above factors can be disposed term of the since quickly they license. have had ^[3] established profitability a minimal effect on my decision concerning appropriate product royalty. Plain- patent; made under the its com success; ownership patent mercial tiff’s populari and its current involved in ty. generate this case did furnace sales for Opin- have not the first I think included factor mentioned that the evidence in this discussed Georgia-Pacific Opinion, negotiated royalty in the the license fees ion that a demonstrates patentee, received since did not the absence of defendant’s higher show that there was have been several times than the license artificially actually plaintiff. since the fees were received de- fees received pressed by infringement. ongoing defendant’s have, however, F.2d at 129. I mindful Although hearing issues, was on the of the Third Circuit’s admonition that deviation concerning damages no new evidence was sub- of the reasonable from license mitted after the Third Circuit’s remand of this must fees be based Id. at 130. evidence. case. advertising ad- scrap for processing practice to sell

plaintiff plaintiff’s since process. It vantages plaintiff’s to use the a license purchaser to a furnace furnace, approxi- clearly aware noted that defendant process for the life of the infringe- could when it commenced mately years. five Since these benefits sales, plaintiff’s previ- be assumed it generate can ment of since had willing to two ously plaintiff’s process have been under plaintiff used price lower negotiate Thus, a somewhat de- properly purchased licenses. maximum obtainable. li- negotiated than the additional fendant had factor, However, the term of the second infringing plaintiff's pat- censes instead Plaintiff’s opposite ent, had effect. patent, defendant would 5,1963, to February Febru- patent ran from pay substantially paid more than it had ary 5, infringement of 1980. Defendant's licenses since the the initial by early 1965and contin- patent began proven its worth and the defendant would eight years. a reasona- over Since purchasing ued for no risk in have assumed little or fee that would ble is the license licenses. the additional the freely negotiated at time have been Unfortunately, evidence the available infringement began, it can assumed permit assign a dollar does not the Court to willing to pay defendant would have been value to each the benefits defendant as this one purchased, for a more license fact, largely because the obtained. In was, beginning the hypothetically near records, the condition of defendant’s sought period than for figure value of the dollar available at a later time. savings direct and indirect labor achieved factors, including remaining expert, opinion by defendant. An whose in opinion testimony experts by was credited who heard master benefits obtained all touch evidence, damages testified that defendant through infringing use of defendant $52,791 per savings labor furnace plaintiff’s process. At first patented the defendant in 1973 dollars.5 Since glance, may strange since dam- seem operated varying infringing number of ages case are in 8V2-yearperiod, I have furnaces over loss, patent holder’s measured $41,652to figure reduced this to reflect the infringer’s However, gain.4 the Court wages prevailing mid-point in parties finds that the license fee period infringement.6 defendant’s agreed upon in- absent defendant’s voluntary negotiations untainted large to fringement would extent have infringing practices, defendant defendant’s by the economic benefits been determined split this willing well have been to through the use of that were obtained plaintiff a saving plaintiff paid plaintiff’s patented process. Tights, approximately for each royalty of Kayser-Roth Corp., supra, Inc. v. at 163. year, but lead me to furnace two factors conclude that the reasonable following bene- Defendant obtained $15,000 per be further reduced using plaintiff’s fits to remove from First, earlier, wire; year. plaintiff was a noted scrap (a) a reduction insulation from costs; seller of furnaces and thus would have been (b) recovery an increased labor wire; accept (c) somewhat less than copper scrap from lower fuel con- material; royalty negotiable in order processed ton maximum sumption second, promote plaintiff And (d) ability to its sales. attract more electrical accomplished applying This F.2d 6. reduction was 533 at 129. finding as to extent the Master’s factual wage prevailing rates 1969 differed improvements no defendant made 5. Since wage prevailing from rates savings completely process, plaintiffs these process. to the use of that attributable

1367 Opinion April before this lawsuit I was unaware have awarded savings of the labor that were exact extent plaintiff percent of 6 interest from the end process. through the use of its obtainable infringing year present. of each primary have also damages doubled following table details the given the reasons Opinion which plaintiff is entitled. The number which by the were found Third Circuit not to be the find- furnaces is based on my earlier F.2d ings of the Master. As I did in erroneous. 533 at 181.

CALCULATION OF DAMAGES Multiplied $15,000 x Primary Number of Number of Years at Damages 6% (cid:127) Infringing Infringing Damages Interest Plus Multiplied Year Furnaces Furnaces Interest Due Interest 45,000 44,268 90,000 $ 1965 3 134,268 $ 11% 91,502 210,000 1966 301,502 7 10% 105.000 80,379 210,000 290,379 9% 105.000 142,500 94,844 9 Vi 379,844 8% 285.000 94,263 424,263 7% 165.000 330.000 72,352 372,352 6% 150.000 300.000 59,766 359,766 5% 150.000 300.000 1/1/72 58,335 70,084* 466,680 536,764 5/22/72 3.889 4Vi 5/22/72 175,005 7/20/73 11.667 $1,095,840 $2,191,680 $2,799,138 Totals 73.056 interest, purposes calculating *For period January 1972-July amount for the 20, 1973, $233,340, totaling April is considered to have due on 1973. Cynthia MESSER, K. Administratrix Braedyn, Estate James Richard

deceased, Appellant,

v. GEMS, INC.; Valley

AMERICAN Emerald Club, Inc.;

Camper’s Valley Emerald Inc., Corp., Rist,

Distribution Lois R.

Appellees.

No. 79-1189.

United Appeals, States Court of

Fourth Circuit.

Argued Dec.

Decided Jan.

Case Details

Case Name: Trio Process Corporation and Franklin Smelting & Refining Co., a Partnership v. L. Goldstein's Sons, Inc. And Metal Bank, Inc.

Court Name: Court of Appeals for the Third Circuit

Date Published: Jan 2, 1980

Citation: 612 F.2d 1353

Docket Number: 78-2566

Court Abbreviation: 3rd Cir.