General Motors Corporation v. Devex Corporation, 81-1661

• Citation: 217 USPQ 1185,103 S.Ct. 2058,76 L.Ed.2d 211,461 U.S. 648
• Decision Date: 24 May 1983
• Docket Number: No. 81-1661,81-1661
• Parties: GENERAL MOTORS CORPORATION, Petitioner, v. DEVEX CORPORATION et al
• Court: United States Supreme Court

461 U.S. 648

103 S.Ct. 2058

76 L.Ed.2d 211

GENERAL MOTORS CORPORATION, Petitioner,

v DEVEX CORPORATION et al.

No. 81-1661.

Argued Dec. 7, 1982.

Decided May 24, 1983.

Syllabus

Prior to 1946 the section of the patent laws governing recovery in patent infringement actions contained no reference to interest. In 1946 the section was amended and now provides in 35 U.S.C. § 284 that the court shall award a successful claimant "damages adequate to compensate for the infringement, but in no event less than a reasonable royalty for the use made of the invention by the infringer, together with interest and costs as fixed by the court." In respondent Devex Corp.'s action against petitioner for infringement of a patent covering a lubricating process used in the cold-forming of metal car parts by pressure, the District Court entered judgment for Devex pursuant to § 284, awarding, in addition to royalties and postjudgment interest, prejudgment interest. After determining what the annual royalty payments would have been, the court calculated prejudgment interest on each payment from the time it would have become due. The Court of Appeals affirmed.

Held: The award of prejudgment interest was proper in this case. Pp. 641-657.

(a) Section 284 does not incorporate the pre-1946 common-law standard enunciated in Duplate Corp. v. Triplex Safety Glass Co., 298 U.S. 448, 56 S.Ct. 792, 80 L.Ed. 1274, under which prejudgment interest could not be awarded where damages were unliquidated absent bad faith or other exceptional circumstances. Rather, § 284 gives a court general authority to fix interest, and this authority, on the face of § 284, is not restricted to exceptional circumstances. Pp. 651-654.

(b) Both the background and language of § 284 provide evidence that the underlying purpose of the provision is that prejudgment interest should ordinarily be awarded where necessary to afford the plaintiff full compensation for the infringement. Consistent with this purpose, prejudgment interest should ordinarily be awarded absent some justification for withholding such an award. In the typical case an award of prejudgment interest is necessary to ensure that the patent owner is in as good a position as he would have been if the infringer had entered into a reasonable royalty agreement. And award of interest from the time that the royalty payments would have been received merely serves to make the patent owner whole, since his damages consist not only of the value of the royalty payments but also of the forgone use of the money between the time of infringement and the date of the judgment. Pp. 654-657.

667 F.2d 347 (3rd Cir., 1981), affirmed.

George E. Frost, Detroit, Mich., for petitioner.

Sidney Bender, Garden City, N.Y., for respondents.

Justice MARSHALL, delivered the opinion of the Court.

This case concerns the proper standard governing the award of prejudgment interest in a patent infringement suit under 35 U.S.C. § 284.

I

In 1956 respondent Devex Corporation (Devex) filed a suit for patent infringement against petitioner General Motors Corporation (GMC) in the United States District Court for the Northern District of Illinois.¹ Devex alleged that GMC was infringing Reissue Patent No. 24,017, known as the "Hendricks" or "Devex" patent. The patent covered a lubricating process used in the cold-forming of metal car parts by pressure.² On June 29, 1962, the District Court held the Devex patent invalid and entered judgment for GMC. On appeal the United States Court of Appeals for the Seventh Circuit reversed the finding of invalidity and remanded for further proceedings. Devex Corp. v. General Motors Corp., 321 F.2d 234 (CA7 1963), cert. denied, 375 U.S. 971, 84 S.Ct. 490, 11 L.Ed.2d 418 (1964).

The case was then transferred to the United States District Court for the District of Delaware. After a trial the District Court ruled that there had been no infringement. 316 F.Supp. 1376 (D.Del.1970). The United States Court of Appeals for the Third Circuit reversed, holding that the patent was infringed by GMC's use of certain processes in the production of bumpers and cold-extruded non-bumper parts. 467 F.2d 257 (1972), cert. denied, 411 U.S. 973, 93 S.Ct. 2145, 36 L.Ed.2d 696 (1973).

On remand the case was referred to a Special Master for an accounting. The Special Master ruled that three major divisions of GMC had used infringing processes in the manufacture of bumper parts, and selected a royalty rate "by reference to hypothetical negotiations" that it found would have taken place if GMC had sought to obtain a license from Devex. Special Master's Report at 71. See 667 F.2d 347 352 (CA3 1981). ³ The District Court modified the royalty rate selected by the Special Master and entered judgment pursuant to 35 U.S.C. § 284, awarding Devex $8,813,945.50 in royalties, $11,022,854.97 in prejudgment interest, and post-judgment interest at the rate allowed by State law. The court determined what the annual royalties payments would have been, and calculated prejudgment interest on each payment from the time it would have become due. The Court of Appeals affirmed. 667 F.2d 347 (1981). The court held that "the award of prejudgment interest as the yearly royalty payments became due was not an abuse of discretion." Id., at 363. We granted certiorari to consider the standard applicable to the award of prejudgment interest under 35 U.S.C. § 284, --- U.S. ----, 102 S.Ct. 2267, 73 L.Ed.2d 1283 (1982), and we now affirm.

II

Prior to 1946 the provision of the patent laws concerning a plaintiff's recovery in an infringement action contained no reference to interest.⁴ The award of interest in patent cases was governed by the common law standard enunciated in several decisions of this Court. E.g., Duplate Corp. v. Triplex Safety Glass Co., 298 U.S. 448, 56 S.Ct. 792, 80 L.Ed. 1274 (1936); Tilghman v. Proctor, 125 U.S. 136, 8 S.Ct. 894, 31 L.Ed. 664 (1888). Under the Duplate standard, prejudgment interest was generally awarded from the date on which damages were liquidated, and could be awarded from the date of infringement in the absence of liquidation only in "exceptional circumstances," such as bad faith on the part of the infringer. 298 U.S., at 459, 56 S.Ct., at 797.⁵

In 1946 Congress adopted amendments to the provision of the patent laws governing recovery in infringement actions. Act of August 1, 1946, c. 726, § 1, 60 Stat. 778, 35 U.S.C. (1946 ed.), §§ 67, 70.⁶ One of the amended provisions, which has since been recodified as 35 U.S.C. § 284, states in relevant part:

"Upon finding for the claimant the court shall award the claimant damages adequate to compensate for the infringement, but in no event less than a reasonable royalty for the use made of the invention by the infringer, together with interest and costs as fixed by the court."

The Courts of Appeals have reached differing conclusions as to whether § 284 incorporates the Duplate standard and more generally as to the standard governing the award of prejudgment interest under § 284.⁷

We have little doubt that § 284 does not incorporate the Duplate standard. Under that standard, which evolved as a matter of federal common law, prejudgment interest could not be awarded where damages were unliquidated absent bad faith or other exceptional circumstances. By contrast, § 284 gives a court general authority to fix interest and costs. On the face of § 284, a court's authority to award interest is not restricted to exceptional circumstances, and there is no warrant for imposing such a limitation. When Congress wished to limit an element of recovery in a patent infringement action, it said so explicitly. With respect to attorney's fees, Congress expressly provided that a court could award such fees to a prevailing party only "in exceptional cases." 35 U.S.C. § 285.⁸ The power to award of interest was not similarly restricted.

There is no basis for inferring that Congress' adoption of the provision concerning interest merely incorporated the Duplate standard. This is not a case in which Congress has reenacted statutory language that the courts had interpreted in a particular way. In such a situation, it may well be appropriate to infer that Congress intended to adopt the established judicial interpretation. See, e.g., Herman &amp MacLean v. Huddleston, --- U.S. ----, ----, 103 S.Ct. 683, 689, 74 L.Ed.2d 548 (1983); Lorillard v. Pons, 434 U.S. 575, 580-581, 98 S.Ct. 866, 870, 55 L.Ed.2d 40 (1978). In this case, however, the predecessor statute did not contain any reference to interest, and the 1946 amendments specifically added a provision concerning interest in patent infringement actions. We cannot agree with petitioner that the only significance of Congress' express provision for the award of interest was the incorporation of a common law standard that developed in the absence of any specific provision concerning interest.

Having decided that § 284 does not incorporate the Duplate rule, we turn to a consideration of the proper standard for awarding prejudgment interest under that provision. Although the language of § 284 supplies little guidance as to the appropriate standard, for the reasons elaborated below we are convinced that the underlying purpose of the provision strongly suggests that prejudgment interest should ordinarily be awarded where necessary to afford the plaintiff full compensation for the infringement.

Both the background and language of § 284 provide evidence of this fundamental purpose. Under the pre-1946 statute, the owner of a patent could recover both his own damages and the infringer's profits. See Aro Mfg. Co. v. Convertible Top Co., 377 U.S. 476, 505, 84 S.Ct. 1526, 1542, 12 L.Ed.2d 457 (1964); n. 4, supra. A patent owner's ability to recover the infringer's profits reflected the notion that he should be able to force the infringer to disgorge the fruits of the infringement even if it caused him no injury. In 1946 Congress excluded consideration of the...