American Original Corp. v. Jenkins Food Corp.

• Decision Date: 26 September 1985
• Docket Number: No. 85-1281,85-1281
• Citation: 227 USPQ 299,774 F.2d 459
• Parties: The AMERICAN ORIGINAL CORPORATION, Appellant, v. JENKINS FOOD CORPORATION, etc., Sea Watch International Ltd., etc., H. Allen Smith, Inc., etc., et al., Appellees. Appeal
• Court: U.S. Court of Appeals — Federal Circuit

Page 459

774 F.2d 459

227 U.S.P.Q. 299

The AMERICAN ORIGINAL CORPORATION, Appellant, v. JENKINS FOOD CORPORATION, etc., Sea Watch International

Ltd., etc., H. Allen Smith, Inc., etc., et al., Appellees.

Appeal No. 85-1281.

United States Court of Appeals, Federal Circuit.

Sept. 26, 1985.

Rodger L. Tate, Banner, Birch, McKie & Beckett, Washington, D.C., argued, for appellant. With him on brief was Harold J. Birch.

Thomas T. Alspach, Franch, Earnest & Cowdrey, P.A., Easton, Md., argued, for appellees.

Before FRIEDMAN, Circuit Judge, NICHOLS, Senior Circuit Judge, and KASHIWA, Circuit Judge.

FRIEDMAN, Circuit Judge.

In this appeal from a judgment of the United States District Court for the Eastern District of Virginia, the appellant The American Original Corporation (American), which was the successful plaintiff in a patent infringement suit, challenges (1) the adequacy of the damages awarded, (2) the refusal of the district court to treble the damages and to award attorney fees, and (3) the ruling of the district court that the appellees did not violate, and therefore were not in contempt of, the court's earlier order enjoining infringement of the patent. We affirm.

I

A. The invention in this case involves a method of automatically eviscerating shelled shucked claims in preparation for their further commercial processing into fried clam strips. Shelled shucked clam meat consists of two parts: the belly, or entrails, and the remainder of the clam, called the tongue. Although edible, the belly is separated from the tongue during commercial processing to retard spoilage. For many years clams had been eviscerated by hand.

Both American and the appellees are in the business of shucking and eviscerating clams. The appellees are three interrelated The prior art process used to eviscerate, or debelly, clams is exemplified by United States Patent No. 3,688,344 to Carlson (Carlson patent). In that process shucked clams are drawn through a tube one at a time. At the end of the tube they are entrained in a high-speed stream of water and air, and hurled against a hard surface. The Carlson patent teaches that the bellies were separated from the tongues as a result of the severity of the impact against the surface.

companies and two officials of those companies, Walter Quimby and Lawrence De Marino, who formerly were employees of American. We refer to the appellees collectively as "Jenkins."

In 1975, American obtained a license under the Carlson patent and built several machines according to its teachings. Employees of American noticed, however, that although the bellies were removed from the tongues, the tongues were mutilated and deeply bruised, rendering them less suitable for commercial processing. In an effort to cure this deficiency, American's president, John Marvin, hypothesized that, contrary to the teaching of the Carlson patent, the clams were debellied by the stresses imposed on them as they were entrained in the air and water stream. According to Marvin's theory, the already debellied clams were being needlessly damaged by the superfluous impact against the hard surface.

To test this theory, Marvin had the impact surface removed from one of the systems. He found that even though the clams no longer impacted upon a surface, they were still debellied. On September 18, 1977, Marvin filed an application on his process, which matured into U.S. Patent No. 4,148,112 (Marvin patent), issued on April 10, 1979.

Prior to the issuance of the Marvin patent but subsequent to the filing of the application for it, Quimby and DeMarino resigned from American to join the Jenkins Company, which then began to convert from manual debellying of clams to automatic mechanical devices. It began to operate its first automatic clam eviscerator in April 1979.

B. American filed this suit in October 1979, alleging that Jenkins was infringing the Marvin patent. Jenkins responded that the patent was invalid, but admitted that if it were valid, it was infringed.

After a trial on validity, the district court upheld the Marvin patent, and enjoined Jenkins from further infringement. American Original Corp. v. Jenkins Food Corp., No. 79-950-N (E.D.Va. June 4, 1981). On Jenkins' appeal, the Fourth Circuit affirmed and remanded the case for a determination of damages. American Original Corp. v. Jenkins Food Corp., 696 F.2d 1053, 216 USPQ 945 (1982).

During the intervening period, Jenkins attempted to comply with the injunction by modifying its eviscerating devices so that the clams struck a solid surface. It also began to pay royalties under the Carlson patent.

American sought damages not only for past infringement, but also for Jenkins' alleged continued infringement of the Marvin patent in contempt of the injunction by use of its modified eviscerating devices.

Following the trial on damages, the district court found (1) that a reasonable royalty of $300 per week, or a total of $33,600, "is the measure of [American's] damages"; (2) that American "is not entitled to have said damages trebled or increased [under 35 U.S.C. Sec. 284 (1982) ] because there was no willful or deliberate infringement or bad faith on the part of defendants"; (3) that "[t]he facts found by the Court as the basis of a denial of treble damages are equally as applicable to the request for attorney's fees" and require its denial; and (4) that Jenkins was not "infringing the Marvin 112 patent" by operating its modified eviscerating devices and therefore did not violate the injunction and was "not in contempt of court."

In this appeal, American challenges each of those rulings.

II

The determinations of the district court that American challenges are largely dependent on difficult factual conclusions. They reflect the district court's evaluation of conflicting evidence, both testimonial and documentary, that addressed the strongly disputed questions that were litigated in the trial of the damages and contempt issues. Under Rule 52(a) of the Federal Rules of Civil Procedure, those factual findings are binding on us unless they are "clearly erroneous." "This standard plainly does not entitle a reviewing court to reverse the finding of the trier of fact simply because it is convinced that it would have decided the case differently." Anderson v. City of Bessemer City, --- U.S. ----, 105 S.Ct. 1504, 1511, 84 L.Ed.2d 518 (1985).

Although American, at least in its reply brief, pays lip service to this principle, its attack upon the district court's factual determinations in actuality is but a reargument of the case it lost on the facts in the district court. It discusses in detail the evidence supporting its version of the facts, and largely ignores or downplays the contrary evidence that the district court accepted. It also ignores the district court's credibility determinations. American makes no serious attempt to show that particular findings are clearly erroneous, but rather contends that the district court should have decided the factual issues the other way.

As the Supreme Court recently stated in Anderson v. City of Bessemer City, however:

If the district court's account of the evidence is plausible in light of the record viewed in its entirety, the court of appeals may not reverse it even though convinced that had it been sitting as the trier of fact, it would have weighed the evidence differently. Where there are two permissible views of the evidence, the factfinder's choice between them cannot be clearly erroneous....

This is so even when the district court's findings do not rest on credibility determinations, but are based instead on physical or documentary evidence or inferences from other facts.

Id. 105 S.Ct. at 1512 (citations omitted).

It is in the light of the foregoing principles that we review American's challenges to the district court's findings and conclusions.

III

The district court pointed out that since American had not licensed the Marvin patent, there was no existing royalty rate. It therefore "turn[ed] to the best evidence of what a reasonable royalty would produce--that is, royalties paid by others for use of a comparable patent in the industry." That was the amount, the court concluded, that "a licensee such as defendants and a licensor, such as plaintiff, would have agreed upon, at the time the infringement began...." The court stated that "the Carlson patent was a similar or comparable system, and one used by many in the industry. The sums paid by plaintiff to Carlson, by defendants to Carlson, and by others to Carlson, are evidence of what a fair royalty would be. These were negotiated sums in arms length transactions."

The court then determined that $300 a week "would be a reasonable royalty to be paid by defendants to plaintiff...." It found that "[American], up until it cancelled its agreement, was paying Carlson $300.00 per week for the use of the Carlson impact extractors. [Jenkins was] paying Carlson $250.00 per week, and evidence established others were paying $300.00 per week for the Carlson impact extractors."

American challenges this conclusion on two grounds. It contends: (A) that the proper measure of damages is not a reasonable royalty, but the cost savings Jenkins allegedly realized by using the patented Marvin process, which it calculates as ranging from $137,200 to $234,818 (depending upon the basis on which the royalty was set); and (B) that if a reasonable royalty is the proper basis for determining damages, the total amount of that royalty should be A. American's first argument, that it demonstrated that significant cost savings resulted from the use of the Marvin patent, is based on a comparison of the operations under the Carlson and Marvin patents during a period when it asserts it was using both processes simultaneously. Prior to October 1976, American used the Carlson process (which eviscerated the clams by hurling them against a hard surface) in its Grasonville and Willis Wharf plants. American...