Bush & Lane Piano Co. v. Becker Bros.

• Decision Date: 09 May 1916
• Docket Number: 265.
• Citation: 234 F. 79
• Court: U.S. Court of Appeals — Second Circuit
• Parties: BUSH & LANE PIANO CO. v. BECKER BROS.

234 F. 79

BUSH & LANE PIANO CO. v. BECKER BROS.

No. 265.

United States Court of Appeals, Second Circuit.

May 9, 1916

Cross-appeals from a decree awarding to plaintiff damages for infringement of its design patent, No. 37,501. The patent in suit covers a 'design for a piano case.' Defendant made and sold 958 pianos for $158,302.95. The factory cost to defendant of that number of pianos was (by its own books) $113,044, and the expense of marketing, with allowance for overhead charges, brought up production cost to $122,441.98, leaving a profit of $35,860.95, on the pianos containing the infringing design.

It was proven that the piano cases (as distinct from the piano mechanism) were assembled and finished by defendant from partly prepared material procured from other manufacturers that the construction of the finished piano was such that the case and works were merely component parts of an integral whole, and that there was no instance of a sale of a piano without a case, or a case without works. The names indicate no more than two portions of a product commercially unitary.

This cause was before this court in 222 F. 902, 138 C.C.A. 382 and was remanded for further proceedings before the master. By his report the court below was informed of the cost of the piano case and of the completed instrument, as well as the profits above set forth. Thereupon decree was entered for that proportion of the profits which the cost of the case bore to the cost of the completed piano. The appeal of defendant assails the method of fixing profits. Both parties complain of the amount awarded; plaintiff demanding all the profits derived from all pianos containing the patented design, and defendant contending that no more than $250 can be granted. The other matters raised by assignments of error require neither mention nor comment.

John J O'Connell, of New York City, for plaintiff.

John McCormick, of New York City, for defendant.

Before WARD and ROGERS, Circuit Judges, and HOUGH, District Judge.

HOUGH District Judge (after stating the facts as above).

The piano business of Becker Bros. is an incorporation of the trade created by Jacob H. Becker, its president. The stockholders have always been Becker himself, his wife, and his attorney. The corporate books of account show that Becker drew on the pay roll only $15 weekly, in what capacity does not appear. At the year's end, the excess of receipts over expenses was for a time transferred to the 'Capital Account of Jacob H. Becker. ' This practice continued until after this suit was threatened, if not begun, when the end of the year was marked by charging up salaries to president and secretary (the attorney), which for the year 1912 produced an apparent loss of over $20,000. The justification for this procedure is a directors' vote that J. H. Becker should receive for his services 85 per cent. of gross profits, and the secretary 5 per cent. Whether this vote was taken and entered on the very informal minute book of this corporation before or after suit brought is a matter of contest, into which we need not enter, because it makes no difference when 90 per cent. of gross profits was voted to the president and secretary for services. Such disposition was but one method of distributing earnings to stockholders in a 'close corporation' (as Becker called it) which has never paid a dividend. The formality was unnecessary, for if the owners of the concern drew 90 per cent. of profits, it made no difference to them by what name their gains were called.

Defendant's contention that it is only answerable for such profits as remain after paying out nearly all the difference between expenses and receipts in salaries credited at year's end is absurd. The District Court rightly took evidence as to the usual cost of superintending and managing a business of the kind and extent shown by Becker himself, added that to factory cost of product, and, having thus fixed manufacturing and selling expense, credited the same against receipts acknowledged by Becker. The difference is the profit of the business.

The question as to how to ascertain a patentee's share in the gains of an infringer, when the infringement constituted but a part, possibly a small part, of the business from which profits flowed, has several times received our attention on occasions other than the first appeal in this cause. Tuttle v. Claflin, 76 F. 227, 22 C.C.A. 138; Wales v. Waterbury Mfg. Co., 101 F. 126, 41 C.C.A. 250; Westinghouse v. New York Air Brake Co., 140 F. 545, 72 C.C.A. 61; Force v. Sawyer-Boss Mfg. Co., 143 F. 894, 75 C.C.A. 102; Underwood, etc., Co. v. Stearns & Co., 227 F. 74, 141 C.C.A. 622. Whether the decree below is consonant with these rulings as modified or enlarged by Westinghouse v. Wagner, etc., Co., 225 U.S. 617, 32 Sup.Ct. 691, 56 L.Ed. 1222, 41 L.R.A. (N.S.) 653, Dowagiac, etc., Co. v. Smith, 235 U.S. 641, 35 Sup.Ct. 221, 59 L.Ed. 398, and Hamilton-Brown, etc., Co. v. Wolf Bros. Co., 240 U.S. 251, 36 Sup.Ct. 269, 60 L.Ed. 629, is one way of putting the chief problem here presented.

There is said to be a radical difference between the principles governing recovery on design, as compared with other, patents. This is thought to arise from the act of February 4, 1887. That act (after granting $250 for any infringement of design) provides that in case the total profit made by an infringer from the manufacture or sale of the article or articles to which the design has been applied exceeds $250, the infringer shall be further liable for the excess of such profit over and above $250. Plaintiff asserts that, having shown infringement by something sold with and as part of a piano, the 'article to which the design' was applied must be the whole piano. Defendant insists that under the statute all recoveries for design infringement are penalties, and therefore strictissimi juris; consequently, plaintiff not having shown any separate or special profit derived from the case, recovery can be $250 only, because it was to the case, and not to the piano as a whole, that the design was applied.

As pointed out on the previous appeal, the act of 1887 was intended to mitigate the harsh rule of the Dobson Cases, 118 U.S. 10, 6 Sup.Ct. 946, 30 L.Ed. 63. It is true that in Dunlap v. Schofield, 152 U.S. 244, 14 Sup.Ct. 576, 38 L.Ed. 426, the minimum recovery of $250 was said to be 'in the nature of a penalty,' and it has usually been referred to as a penalty since that time. Lichtenstein v. Phipps, 168 F. 62, 93 C.C.A. 483; Frank v. Geiger (C.C.) 121 F. 126. But when a design patentee seeks to recover more than $250, because either he lost a greater sum by the infringement, or the infringer made a greater profit thereby, no reason is seen for departing from the construction of the statute announced by us in Untermeyer v. Freund, 58 F. 212, 7 C.C.A. 190:

'The manifest purpose of Congress was to enlarge the remedy against infringers of design patents, and to declare that the measure of profits recoverable on account of the infringement should be the total net profits upon the 'whole article."

But there is no statutory definition of the phrase 'whole article.' Each litigation presents its own problem; it is impossible to define in advance. Probably each solution depends on the relation to the business whole of the part embodying the patent, and that relation must be considered from all viewpoints, technical, mechanical, popular, and commercial. Thus a patented design for a 'portable house' would seem to apply to the whole structure; otherwise, if for an 'entrance door.' A patent for a 'book binding' cannot, either justly or logically, be so identified with the entire book as to give all the profits on a work of literary genius to the patentee of a binding, although the binding was manufactured with and for that one book, and has no separate commercial existence. The binding and the printed record of thought respond to different concepts; they are different articles.

Accordingly we held on the former appeal herein that the article to which the patented design had been applied was the piano case, and all the evidence taken since mandate confirms that view.

Impediments to recovery of both damages and profits have arisen, not so much from difficulty in ascertaining in what the infringing thing or article consisted, as in assigning to that infringement any particular or specified portion of the gains made or prevented by a defendant's wrongdoing. The main source of such difficulties has been the narrow field of evidence, suggested by counsel or approved by the courts, in endeavors to precisely assign profits or damages to their source; after the act of infringement, the thing or article containing the infringement and the existence of profits or losses have been amply demonstrated. Great hardship has been wrought by the rule of impossibility enunciated in Garretson v. Clark, 111 U.S. 120, 4 Sup.Ct. 291, 28 L.Ed. 371, concerning the popularity of which case with infringers we entirely agree with the remarks of the court in Yesbera v. Hardesty, 166 F. 120, 92 C.C.A. 46. The other extreme is to treat an infringer as a trustee ex maleficio in the manner approved in Westinghouse, etc., Co. v. Wagner Co., supra.

It is not often that giving all the profits to the patentee can be justified, as in ...