Broadview Chemical Corporation v. Loctite Corporation

• Decision Date: 02 January 1970
• Docket Number: Civ. No. 10713.
• Citation: 311 F. Supp. 447
• Court: U.S. District Court — District of Connecticut
• Parties: BROADVIEW CHEMICAL CORPORATION v. LOCTITE CORPORATION.

311 F. Supp. 447

BROADVIEW CHEMICAL CORPORATION v. LOCTITE CORPORATION.

Civ. No. 10713.

United States District Court, D. Connecticut.

January 2, 1970.

William J. Doyle, New Haven, Conn., Granger Cook, Jr., Chicago, Ill., for plaintiff.

J. Rodney Reck, Newington, Conn., W. Robert Hartigan, Hartford, Conn., Walter D. Ames, Washington, D. C., for defendant.

RULING ON DAMAGES, COSTS AND ATTORNEY'S FEES FOR CIVIL CONTEMPT

BLUMENFELD, District Judge.

On June 19, 1968, after a hearing, Broadview was found in civil contempt for having violated a consent decree by selling "Sta-Lok", an anaerobic sealant, made by it from admittedly infringing formulae of Loctite's concededly valid patents. Loctite was held entitled to recover damages and attorney's fees and costs incurred in prosecuting the motions for contempt. The amount of the award for those items, and for damages resulting from the infringement was left open pending attempted accord between the parties. See Laufenberg, Inc. v. Goldblatt Bros., 187 F.2d 823 (7th Cir. 1951); Abbott v. Barrentine Mfg. Co., 255 F.Supp. 890, 901 (N.D.Miss.1965).

They have been unable to reach agreement as to the amount of costs and attorney's fees to be awarded, and disagree as to the appropriate measure and amount of damages. Agreed statements of fact and briefs in support of their respective positions have been submitted and at a hearing counsel limited themselves to arguments on the effect to be given to the agreed statements. No further evidence was offered at the hearing.

Damages

The first question considered is what damages Loctite has proved. At the outset, it is well to remember that this is an action for civil contempt and not directly one for patent infringement. In civil contempt proceedings, the general rule is that damages may be awarded in the form of a fine payable to the party injured by the acts of the contemnor, and are to be remedial and compensatory, not punitive, in nature. United States v. United Mine Workers of America, 330 U.S. 258, 302-304, 67 S.Ct. 677, 91 L.Ed. 884 (1947); Leman v. Krentler-Arnold Hinge Last Co., 284 U.S. 448, 52 S.Ct. 238, 76 L.Ed. 389 (1932); Sunbeam Corp. v. Golden Rule Appliance Co., 252 F.2d 467, 469 (2d Cir.1958). While the court has wide latitude in the assessment of damages, E. Ingraham Co. v. Germanow, 4 F.2d 1002 (2d Cir. 1925); Long Island R. R. v. Brotherhood of R. R. Trainmen, 298 F.Supp. 1347, 1350 (E.D.N.Y.1969), damages cannot be arrived at by conjecture. American Optical Co. v. Rayex Corp., 291 F.Supp. 502, 509 (S.D.N.Y.1967), aff'd, 394 F.2d 155 (2d Cir.) cert. denied, 393 U.S. 835, 89 S.Ct. 109, 21 L. Ed.2d 106 (1968). Since this is a civil contempt proceeding, the court is not bound by the statutory provision, 35 U. S.C. § 284,¹ relating to damages for patent infringement. Leman v. Krentler-Arnold Hinge Last Co., supra; Georgia-Pacific Corp. v. United States Plywood Corp., 243 F.Supp. 500, 539-540 (S.D.N.Y.1965). However, since that statute relates to the subject matter underlying the contempt and both parties refer the court to it, it is not inappropriate to utilize it to measure the damages in this case.

The parties have advanced two theories as to the measure of damages. Plaintiff Loctite urges the court to adopt the so-called "lost profits" theory under which the injured party is awarded damages on the basis of the profits it would have made had it made the sales which the infringer made in contempt of the order not to infringe. Defendant, on the other hand, would have the court adopt the "reasonable royalty" measure whereby the contemnor is required to pay a reasonable royalty on the infringing sales.

It has been held in this circuit that in order to recover lost profits in patent infringement cases, "the holder of the patent must show that he would have made the sales if the infringer had not." Power Specialty Co. v. Connecticut Light & Power Co., 80 F.2d 874, 875 (2d Cir.1936). Similarly, the court in Electric Pipe Line, Inc. v. Fluid Systems, Inc., 250 F.2d 697 (2d Cir.1957), while allowing lost profits, was careful to point out that the findings of fact "justify the conclusion that but for Electric Pipe's infringement, Fluid Systems would have made all these installations." Id. at 699 (emphasis added). See also American Safety Table Co. v. Schreiber, 415 F.2d 373 (2d Cir.1969), where lost profits were awarded on the basis of a special master's finding that "but for defendants' sale * * * purchasers would have bought from plaintiff in order to supply their need * * *." Id. at 378.

In deciding whether the lost profits measure should be applied in this case, one factor to support its applicability is that there were no other sources of supply. There were only two manufacturers of these unique patented anaerobic sealants, Loctite and Broadview. Consequently, if those who bought them from Broadview would have bought them from someone else, they had nowhere to turn but to Loctite.

Although recognizing that "there is no presumption that appellant would have sold its devices to those who purchased the infringing articles," the court in Oil Well Improvements Co. v. Acme Foundry & Machine Co., 31 F.2d 898, 901 (8th Cir.1929), nevertheless observed:

"The cost of either device was negligible in comparison to its saving to the customer so it may be assumed, practically to a certainty, that those of that class who bought the infringement would have bought the appellant's device (it being the only other one on the market) if they had not bought the infringement." (Emphasis added).

Arguing that this still does not necessarily establish that they would have bought from Loctite, cf., Power Specialty Co. v. Connecticut Light & Power Co., supra, 80 F.2d at 875, Broadview calls attention to deposition testimony of an independent marketing consultant that the same results from the use of anaerobic sealants can be obtained by using "mechanical techniques for fastening. * * * Examples are clamps, clamping if you will, welding or brazing, lock washers, lock nuts * * *." (Deposition of David N. Reece at 18). But anaerobic sealant is unique not only in its composition, but also in the way it accomplishes the desired fastening. Indeed, Broadview's consultant also testified that his investigation disclosed "no other products that get the same results in the same way." (Def.'s Exh. L-8 at 9). Manufacturers who use one or more of the alternative ways of getting the same result may be potential customers who can be persuaded to change to anaerobic sealants, but it is likely that Broadview's customers who bought its "Sta-Lok" had either never used the alternative methods or had already made the switch to an anaerobic sealant. And it is worth noting that users of anaerobic sealants are manufacturers for whom a change to another method would most likely require a considerable change in their own manufacturing methods. Anaerobic sealants are not shelf items in a neighborhood hardware store; they are sold through distributors or manufacturers' representatives. In a less compelling situation, the court in Continuous Glass Press Co. v. Schmertz Wire Glass Co., 219 F. 199 (3d Cir.), cert. denied, 238 U.S. 623, 35 S.Ct. 661, 59 L.Ed. 1494 (1915), thought that the "but for" rule would be satisfied, stating at 206 of 219 F.:

"There is no doubt that, if the defendant had not manufactured the glass in question, the complainant would have produced and sold to its own profit an equal amount, for the complainant and the defendant at that time were the only manufacturers of this product."

If Broadview had sold its sealants at prices substantially lower than Loctite's, that might militate against a finding that Loctite would have made the same sales; but the fact is that the prices at which Broadview sold the infringing sealants were almost identical, for each grade, to Loctite's prices. Thus, what appears to me to be a high price policy strengthens the conclusion that Broadview's customers would have bought from Loctite if Broadview had not made the sales. Customers were willing to pay the price.

I do not understand that satisfaction of the "but for" rule requires the injured party to negate all possibilities that the purchasers would not have bought a different product, cf. Electric Pipe Line, Inc. v. Fluid Systems, Inc., supra, 250 F.2d at 699, or that the proof must be convincing beyond a reasonable doubt. Insofar as sales of the sealants to customers for use in the United States are concerned, I find that in all reasonable probability Loctite would have made the sales had Broadview not made them. See Livesay Window Co. v. Livesay Industries, Inc., 251 F.2d 469, 471-472 (5th Cir.1958). Some of Broadview's sales were to customers for use abroad. Since these must be considered separately, an analysis of the sales is in order.

Sales by Broadview

The total sales of anaerobic sealants by Broadview from February 14, 1967, the date of the consent decree, to April 21, 1969, when Broadview ceased selling the infringing sealants, may be divided into two classes. One class consists of sales in the United States for use there (hereafter "domestic sales"); the other, of sales for ultimate use in foreign countries (hereafter "foreign sales").

DOMESTIC SALES

Domestic sales, allowing for returns prior to April 21, 1969, amounted to $164,490.00. (See Loctite's and Broadview's presentation of agreed facts.) Broadview contends that this figure must be reduced by (1) material thereafter "returned or in process of being returned" in the amount of $34,187.62, and also by (2) "Estimated Material to be Returned" in the amount of $26,850.00. (Broadview's presentation of agreed facts at 2). Loctite, naturally, takes the position that there should be no deduction for any returns after the decree, arguing that these were the likely result of Broadview's own wrong in violating the decree.² However, consistent with my conclusion that Loctite would have sold those...