American Telephone & Telegraph Co. v. Radio Audion Co.

• Citation: 5 F.2d 535
• Decision Date: 16 May 1925
• Docket Number: No. 461.,461.
• Parties: AMERICAN TELEPHONE & TELEGRAPH CO. v. RADIO AUDION CO. et al.
• Court: U.S. District Court — District of Delaware

5 F.2d 535 (1925)

AMERICAN TELEPHONE & TELEGRAPH CO. v. RADIO AUDION CO. et al.

No. 461.

District Court, D. Delaware.

May 16, 1925.

William R. Ballard, of New York City, and William G. Mahaffy, of Wilmington, Del., for plaintiff.

Victor D. Borst, of New York City, William E. Decker, of Jersey City, N. J., and E. Ennalls Berl, of Wilmington, Del., for defendants.

MORRIS, District Judge.

A decree having been entered in the suit of American Telephone & Telegraph Company against Radio Audion Company and De Forest Radio Telephone & Telegraph Company enjoining, pending the suit, the defendants from infringing De Forest patents Nos. 841,387 and 879,532 (D. C. 281 F. 200) and that decree having been affirmed upon appeal (C. C. A. 284 F. 1020), it was stipulated by the parties that the pleadings, affidavits, and exhibits constituting the record on the preliminary application should stand as the record upon final hearing, and that a decree should be entered upon that record and upon the opinions filed on the preliminary application. A decree was thereupon made awarding to the plaintiff a permanent injunction against both defendants and adjudging that the plaintiff recover of the Radio Audion Company and its receivers the profits and damages arising from the infringement. The accounting has been had before the court and not before a master.

In support of its claim for damages, the plaintiff has not shown or attempted to show by the evidence an established royalty, or that it has lost any sales or suffered any lessened profits by reason of the infringement. It asserts, however, that it may nevertheless recover general damage or, as it is sometimes called, a "reasonable royalty." The defendants in the accounting challenge the soundness of this position, in that, as I understand their grounds: (1) It does not appear from the evidence that the plaintiff has in fact been injured or suffered damage, and that, consequently, it has no claim for damages as distinguished from profits; and (2) that the evidence is not such as to enable the court properly to determine what sum would be a reasonable royalty. I am unable to agree with the first of these contentions.

It has been conclusively settled that the exclusive right conferred by a patent is property, and that an infringement of the patent constitutes a tortious taking of part of that property. Dowagiac Mfg. Co. v. Minnesota Plow Co., 235 U. S. 641, 648, 35 S. Ct. 221, 59 L. Ed. 398; United States Frumentum Co. v. Lauhoff (C. C. A. 6) 216 F. 610, 615, 132 C. C. A. 614. It seems to me inevitably to follow that a finding of validity and infringement is a finding that the person whose patent rights have been infringed has suffered damage. It would seem to be equally clear that a decree adjudging a patent to be valid and infringed and directing an accounting is conclusive upon the question of whether or not a plaintiff has been injured, and that that question is not open for consideration or discussion in the accounting proceedings. With respect to damages the question upon an accounting had before the master, or before the court, as the case may be, is solely one of amount. In the question of amount there are involved the subordinate questions: (1) Were the damages sustained nominal or substantial; (2) if substantial, by what standard is the amount thereof to be ascertained? It is, of course, true that if upon an accounting it appear that the patent though legally valid and infringed, is without real commercial value, or that its rank in the art is negligible and insignificant, or if, on the other hand, it appears that the patent is a valuable one, but the infringement was only a mere trifling infraction of plaintiff's rights, the value of the property of the plaintiff so tortiously taken by the defendant or converted to his use is nominal and not substantial, and in such cases only nominal damages, as distinguished from profits, can be assessed against the infringer. But if it be made to appear that the patent infringed is a broad one of great merit and value, and that the infringement has consisted of long-continued use upon a large scale by a defendant of the invention of the patent, it is obvious, the patent being property and the infringement constituting a tortious taking or conversion of that property by a defendant to his use, that the damages are substantial and not nominal. The amount of such damages cannot, however, be ascertained by pure speculation.

In cases disclosing an established royalty, or that plaintiff has been deprived by defendant's infringement of sales or profits that he otherwise would have made, the question of the amount of plaintiff's damages has presented relatively little difficulty. The more troublesome problem has been to find a standard by which the amount of plaintiff's damages, when shown to be substantial, could be estimated and measured with reasonable certainty and in a sufficiently accurate way when there is no evidence of an established royalty, lost sales, or lessened profits. But that problem, as I understand the cases, has now been solved. The standard determined upon and fixed is that of general damage or reasonable royalty. Dowagiac Mfg. Co. v. Minnesota Plow Co., 235 U. S. 641, 648; United States Frumentum Co. v. Lauhoff, 216 F. 610, 132 C. C. A. 614; Bemis Car Box Co. v. J. G. Brill Co., 200 F. 749, 119 C. C. A. 229; McCune v. Baltimore & O. R. Co., 154 F. 63, 83 C. C. A. 175. The rule has been stated thus:

"Where damages cannot be assessed on the basis of a royalty nor on that of lost sales nor on that of reduced profits, the proper method of assessing them is to ascertain what would have been a reasonable royalty for the infringer to have paid." Walker on Patents (3d Ed.) § 563.

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