Bros Incorporated v. WE Grace Manufacturing Company

• Decision Date: 03 July 1963
• Docket Number: No. 19672.,19672.
• Citation: 320 F.2d 594
• Parties: BROS INCORPORATED, Appellant, v. W. E. GRACE MANUFACTURING COMPANY and William E. Grace, Appellees. W. E. GRACE MANUFACTURING COMPANY and William E. Grace, Appellants, v. BROS INCORPORATED, Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

320 F.2d 594 (1963)

BROS INCORPORATED, Appellant, v. W. E. GRACE MANUFACTURING COMPANY and William E. Grace, Appellees.

W. E. GRACE MANUFACTURING COMPANY and William E. Grace, Appellants, v. BROS INCORPORATED, Appellee.

No. 19672.

United States Court of Appeals Fifth Circuit.

July 3, 1963.

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Joseph H. Schley, Dallas, Tex., Andrew E. Carlsen and Douglas L. Carlsen, Minneapolis, Minn., Schley & Schley, Dallas, Tex., of counsel, for appellant.

Howard E. Moore, Dallas, Tex., Channing L. Richards, Charlotte, N. C., for appellees.

Before CAMERON, BROWN and WISDOM, Circuit Judges.

JOHN R. BROWN, Circuit Judge.

This litigation bearing service stripes from its now second appearance here, Bros, Inc. v. W. E. Grace Mfg. Co., 5 Cir., 1958, 261 F.2d 428, as well as two trips to the 6th Circuit, Gibson-Stewart Co. v. Wm. Bros Boiler & Mfg. Co., 6 Cir., 1959, 264 F.2d 776, cert. denied, 1959, 360 U.S. 929, 79 S.Ct. 1448, 3 L.Ed. 2d 1544, Wm. Bros Boiler & Mfg. Co. v. Gibson-Stewart Co., 6 Cir., 1963, 312 F.2d 385, and an oblique visit more recently to the 8th Circuit, Bros, Inc. v. Browning Mfg. Co. & Shovel Supply Co., 8 Cir., 1963, 317 F.2d 413, aff'g D.C. Minn.1962, 134 U.S.P.Q. 231, deals with the validity (and infringement) of Bros Patent No. 2,610,557. The main appeal by the Patentee (Bros Incorporated) presents simple routine accounting questions. The cross appeal of the Infringer (W. E. Grace et al.), more complex and intricate, presents difficult problems concerning the extent to which courts within the 5th Circuit may properly re-examine under equitable doctrines an earlier judgment entered in Texas on principles of res judicata on the basis of an Ohio judgment sustaining validity of the patent which was subsequently affirmed by the 6th Circuit under orders denying efforts to reopen the case to prove facts subsequently ascertained by the Minnesota court to establish invalidity of the patent because of prior domestic publication.

Hearkening as we should to the principle epitomized in Justice Story's apothegm that "It is for the public interest and policy to make an end to litigation * * *" so that "* * * suits may not be immortal, while men are mortal." Ocean Ins. Co. v. Fields, 18 Fed. Cas. 532, we nonetheless conclude that before the curtain falls on this juridical drama, there must be another act.

The Patentees Appeal

I.

The questions presented on the main appeal are both simple and substantially meritorious. They all have to do with ascertaining the correct amount of damages occasioned by the infringement. By our prior decision, Bros, Inc. v. W. E. Grace Mfg. Co., 5 Cir., 1958, 261 F.2d 428, and solely on the basis of the Ohio judgment under principles of res judicata,¹ we affirmed the Texas District Court's finding of validity and infringement as well as the order granting a permanent injunction against further infringement. But as the Court had anomalously denied damages, we reversed and remanded that part of the decree for proper accounting.

After remand a Master was appointed who heard extensive evidence both documentary and from live swearers. The Master found that 78 infringing machines had been sold, and that the Patentee would have made a profit of at least $2,000 per machine. On this he awarded a recovery of $156,000. Each party excepted to the report, but only those of the Patentee are brought forward here. On the exceptions, the Court substantially confirmed the underlying findings of the Master, but differed radically in one significant respect. The Judge, on a record which showed that there were two other Texas concerns selling these compactors for use in highway construction and similar work, reasoned that had not the Infringer wrongfully appropriated and sold the patented machines, 2/3rds of them would probably have been sold by these two competitors. Hence the Court reduced the award by 2/3rds to $52,000.

Appealing from that action, the Patentee asserts a number of other less decisive complaints. The next two are interrelated. They involve, first, the question of the time of notice of infringement and, second, the number of machines to be accounted for. A further complaint concerns the standard for computing damages — whether the Patentee's rather than the Infringer's probable profits. And the last three deal with the interest rate, attorney's fees, and equal division of costs as fixed by the trial Court.

The basic complaint may be quickly handled. The Master with ample basis found that had not the Infringer sold the machines, the Patentee would. Neither before the trial Court nor here has the Infringer carried the burden of showing that such finding is clearly erroneous. F.R.Civ.P. 53(a), (e) (2). Indeed, the trial Court's approach is a novel and startling one. The substantial sales made prove a demand. As a matter of economics, had the two other concerns waiting in the wings been as formidable as the Judge must have thought, we are unable to see why, on this theory, the Infringer likewise would not have lost out to these competitors. The consequence of the holding is strange. In effect it is that an admitted infringer who has made substantial profits from purloining another's patent is not made to account for his acknowledged acts because had he not poached, another would or, at any rate, sales of similar products would have been made, not by the patent owner, but by others. To avoid such an anomaly, we therefore restore the Master's finding that the Infringer is liable for all of the machines sold by it during the critical period.

The next two contentions center around the construction of 35 U.S.C.A. § 287.² The Master, confirmed by the District Court, held that damages would commence as of June 24, 1954, the date of the filing of the Ohio suit. In doing so on a record which by stipulation included the Master's hearing in the Ohio case, the Court below rejected the holding of Judge Jones (modifying his Master) that time began on June 10, 1953, the date of the first proper marking of the machines.

Section 287 provides that the patentee "may give notice to the public that the article is patented * * * by fixing thereon the word `patent' * * *." The statute further provides that "in the event of failure so to mark, no damages shall be recovered by the patentee * * * except on proof that the infringer was notified of the infringement and continued to infringe thereafter * * *." The Master below constructed an elaborate theory on which he sustained the Infringer's contention that there having been a failure properly to mark from the date of issuance of the patent (September 16, 1952) down to June 10, 1953, the Patentee had lost forever the constructive notice protection afforded by marking under § 287. As did the 6th Circuit,³ we concur in Judge Jones' decision as the one "supported by the better reasoning." The Court points out that there is "* * * nothing in the statute requiring marking or notice within any period after issue as a condition for recovery of damages for infringement * * *" and the only "penalty for failure * *" either to mark or serve notice is "limited to denial of damages for infringement at any time prior to compliance with the requirements of the statute." 312 F.2d 385, 386.

While we reject the effective date selected below, other findings on substantially uncontradicted evidence enable us by a process of simple computation to fix the number sold at 94 machines subsequent to June 10, 1953.

Little need be said about the next contention that the Master erred either in calculating damages on the basis of profits lost by the Patentee, rather than those made by the Infringer or, in any event, in rounding them off to $2,000 per machine rather than $2,164.62. The Patentee insists that had the Master applied the legal standard of the profits made by the Infringer, other portions of the Report demonstrate that the allowance would have been fixed at $2,914.32 per machine. As the Patentee views it, since this and other Courts have allowed damages based upon the infringer's profit,⁴ or the profits the patentee would have made,⁵ the choice is open to the patentee who will obviously take the greater. But this, much like the criticisms on the computation of the dollar amounts, is to ignore the subtle judicial function in ascertaining damages. The statute, 35 U.S.C. § 284, allows considerable latitude. The Master carefully weighed all factors and by a well reasoned analysis came out with a figure per unit which was fair As did the District Judge, we likewise approve it.

This brings us to some tag ends. Under the circumstances of this case, we see no error in specifying the interest rate at 4%, rather than 6%, the usual Texas rate. As to attorney's fees, it may be that when the Judge (without prior recommendation of the Master) allowed $7,500 he was doing so in relation to the amount of damages finally allowed ($52,000). On such an approach, attorney's fees would ordinarily be increased three times. But in view of the unusual complications of this case, which we later discuss, we are hardly in a position to make any sound revision. We do think, however, that there is no basis at all for dividing the costs of the reference, including the Master's fees. Nothing about the position asserted by the Patentee in the reference proceedings or the outcome in the Master's report reasonably calls for the imposition of any of these charges on it. Except for the relative minor dispute concerning the time for commencement of damages, the Patentee sustained all of its contentions. Nothing the Patentee did either precipitated the necessity for the reference, nor did it prolong it. Indeed, as between the two the criticism on that score if any is made should more properly be directed at the Infringer whose inaccurate, inadequate, incomplete or nonproduced records brought about so much of the confusion. As flexible as a court must be on...