Continuous Glass Press Co. v. Schmertz Wire Glass Co.
| Decision Date | 08 January 1915 |
| Docket Number | 1896. |
| Citation | 219 F. 199 |
| Parties | CONTINUOUS GLASS PRESS CO. v. SCHMERTZ WIRE GLASS CO. et al. |
| Court | U.S. Court of Appeals — Third Circuit |
A. B Stoughton, of Philadelphia, Pa., for appellant.
Drury W. Cooper and Arthur J. Baldwin, both of New York City, for appellees.
Before McPHERSON, HUNT, and WOOLLEY, Circuit Judges.
This is an appeal from the final decree entered against the defendant in two suits for infringement of patents owned by the complainant, for apparatus and process for the manufacture of wire glass. The court held the patents valid and infringed and, upon a revision of the master's finding, ascertained profits made by the defendant from its infringement in the amount of $7,835.35, and damages to the complainants in the amount of $15,812.81, and awarded judgment thereon against the defendant for the total sum of $23,648.16, with interest thereon at the rate of 6 per centum per annum from the 21st day of October, 1913, and allowed to the complainants their costs of the actions, including the costs of the proceedings before the master.
The questions presented for review pertain only to the parts of the decree awarding profits, damages, and costs.
The Schmertz patents covered apparatus and process for the manufacture of polished wire glass, which, after litigation extending over a period of 18 years, were held to be valid. To produce polished wire glass, the defendant employed an apparatus and process which were charged, and have since been held, to infringe the patents of Schmertz. In making polished wire glass by either process, the first product is a sheet or pane of glass, into the central plane of which a sheet of wire fabric has been introduced during its manufacture. This sheet of glass is rough, and is known as unpolished wire glass. To complete the process, the rough sheet is ground and polished, and then becomes the finished product, and is known as polished wire glass. In response to questions propounded at the hearing under the order of the court for an accounting, officers of the defendant company disclosed the quantity of glass of both kinds produced by the infringing process and the disposition of a portion thereof, by statements consisting of tables of figures. These statements form the bases upon which the master made his several findings; and as they are very complicated, they will be rearranged in an effort to produce simplicity, adhering, of course, to the precise figures given.
By its first statement, the defendant showed the quantity of rough or unpolished glass produced by the infringing process and the manner of its disposition, measured by square feet, the substance of which is as follows:
Unpolished Wire Glass.
From the 65,871 feet of rough glass 'used for polishing,' it appears from the defendant's tabulated statement that but 57,318 feet of polished glass were produced, the difference between the two figures being waste, for which no claim was made by complainants either as profits or damages.
The total product of polished wire glass and the disposition of it appear by another tabulated statement of the defendant, as follows:
| Polished Wire Glass | |
| Polished wire glass made ................................. | 13,940 feet |
| Polished wire glass made ................................. | 13,507 " |
| Polished wire glass made ................................. | 29,871 " |
| Polished wire glass sold .................... | 36,200 feet |
| Polished wire glass on hand ................. | 8,886 " |
| ----------- | |
| Total polished wire glass sold and on hand .. | 45,086 feet |
| Polished wire glass unaccounted for ......... | 12,232 " |
| ------------------------ | |
| 57,318 feet 57,318 feet |
The important figures in this statement are 57,318 feet, the total amount of polished glass made by the infringing process; 36,200 feet, the amount of polished glass sold; 8,886 feet, the amount of polished glass 'on hand'; and 12,232 feet, the amount of polished glass 'unaccounted for.' The figures of these two tables constitute the whole evidence in the case of the quantity of unpolished and polished wire glass produced by the infringing process. They were undisputed and were accepted by both parties as proper figures upon which to base a calculation of profits.
With respect to the cost of producing wire glass, the parties stipulated, for the purposes of this accounting, that the cost to each of producing one-half inch wire glass (unpolished) was 15 cents per square foot, and the cost of grinding and polishing the same was 18.79 cents per square foot, making the cost of producing the finished product 33.79 cents per square foot.
As additional data upon the cost of production, as well as upon returns from sales, the defendant produced testimony, which was undisputed, and therefore entered into the master's calculations, that the cost of making all the glass, polished as well as unpolished, unaccounted for as well as accounted for, merchantable as well as waste, aggregating 80,983 feet, amounted to the sum of $26,085.99, and that the total receipts from the sale of 36,200 feet of polished glass, which was all the polished glass that was sold, amounted to but $25,370.62, thereby causing the defendant a loss of $715.37. The defendant therefore claimed that, as it made no profits by the infringing process, it was not chargeable for profits.
With the deduction of a loss made by the defendant from its figures, based upon the two items of cost of total production and cash returns from sale of a part, the master did not agree, but found, under the evidence, that the defendant, both upon its own showing and upon examination of its officers as witnesses, had failed satisfactorily to account for a very considerable portion of the unpolished and polished glass which it admitted to have produced, and, upon the theory that an infringer must account for the disposition of all the product manufactured, held that, as it had credited itself in the total cost item of $26,085.99 with the cost of producing the unaccounted for portion, it was chargeable with a like amount as unaccounted for profits, as follows:
| Unpolished glass "unaccounted for," 9,433 feet at 15 cents ......... | $1,414 95 |
| Polished wire glass "on hand," 8,886 feet at 33.79 cents ............ | 3,002 58 |
| Polished wire glass "unaccounted for," 12,232 feet at 33.79 cents ... | 4,133 19 |
| --------- | |
| Total ........................................................ | $8,550 72 |
| From this the referee deducted the apparent loss shown by the | |
| defendant's statement above referred to ............................. | 715 37 |
| --------- | |
| Net profits .................................................. | $7,835 35 |
The master's finding of profits was approved by the District Court, and the decree of the court was attacked upon the ground that, in the ascertainment of an infringer's profits, the infringer is not chargeable with material manufactured but not sold, or in any way a source of saving or income or remaining an asset to the infringer.
Against this contention as an abstract proposition, unrelated to the facts of this case, very little need be said. The infringer in this case is chargeable only for profits actually made and not for profits which it might have made. In ascertaining profits, the element of cost must enter-- not merely the cost of manufacturing the part of the product sold, but the cost of manufacturing the whole product-- and when the part of the product unsold is satisfactorily accounted for by the infringer, showing that it was not converted into money or other thing from which profits might properly be calculated, then the cost of producing the whole is set off against the returns from the sale of the portion sold, and a profit or loss is deduced. This rule, however, is to be applied only when the infringer makes a disclosure of his transactions of production and disposition, with the fullness and completeness required of a trustee accounting for the property of his cestui que trust, for the generic rule for ascertaining the amount of profits recoverable in equity for the infringement of a patent is that of treating the infringer as though he were a trustee for the patentee, in respect to the profits which he realized from his infringement. Walker on Patents, Sec. 715.
In the case under consideration, the defendant primarily is entitled to credit for the cost of making all the glass it manufactured by the infringing process. The quantity produced is fixed, and the cost of its production is known. In order, however, to maintain its right to a credit for the cost of producing the whole, the defendant must show what it did with the whole, and, if converted into money, what it received from its sale. If it shows an amount produced in excess of the amount sold, it must make a satisfactory accounting for the amount unsold; that is, it must make a satisfactory disclosure...
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