Leesona Corp. v. United States
| Decision Date | 16 May 1979 |
| Docket Number | No. 130-70.,130-70. |
| Parties | LEESONA CORPORATION v. The UNITED STATES. |
| Court | U.S. Claims Court |
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A. W. Breiner, Arlington, Va., atty. of record, for plaintiff.
John Fargo, Washington, D. C., with whom was Asst. Atty. Gen. Barbara Allen Babcock, Washington, D. C., for defendant. Thomas J. Byrnes and Vito J. DiPietro, Washington, D. C., of counsel.
Before FRIEDMAN, Chief Judge, and DAVIS, NICHOLS, KASHIWA, KUNZIG, BENNETT, and SMITH, Judges, en banc.
In Leesona Corp. v. United States, 530 F.2d 896, 208 Ct.Cl. 871 (1976), this court held that certain claims of three patents owned by plaintiff Leesona were valid and infringed by the defendant United States. The issue in this case is the determination of "reasonable and entire" compensation due plaintiff for that infringement under 28 U.S.C. § 1498, i. e., what is called in these cases the "accounting phase." Trial Judge Browne, to whom this phase was assigned under our Rule 131(c), determined that Leesona was entitled to judgment in the amount of $3,534,753.52, which included attorneys' fees of $100,000 and delay compensation for the period of November 6, 1969, up to and including December 31, 1977. He also ordered additional delay compensation at the rate of $470.51 per day from January 1, 1978, until payment on the judgment. The government has excepted to the trial judge's determination of what items constitute "reasonable and entire" compensation, and to much of the accounting used in the opinion.
Our conclusion is that the trial judge's award is largely excessive because of his erroneous assumption that he was adjudicating a tort claim for patent infringement under various provisions of Title 35 of the Code. We do not adopt the opinion of the trial judge, although we do adopt the trial judge's findings of fact except as stated. These findings are not printed herein, as the facts necessary to our ultimate determination are incorporated in the opinion. We have made our own determination in the amounts that will appear below. We state by separate order what findings we reject without replacement, and what findings we adopt as corrected by us. Any fact statements not having counterpart in the findings may be taken as additional findings of the court.
The infringed patents relate to mechanically rechargeable metal-air batteries termed BB-626/U's. Each BB-626/U consists of a battery box, a cover, attendant hardware, twenty-two cathode envelope structures, and a can containing twenty-two zinc anodes.
The designs for which a patent has been found to be valid and infringed are (a) a cathode structure with an admixture of catalyst and Teflon binders (patent 3,419,900), (b) a specified arrangement of the cathode, using a Teflon-backed electrode (patent 3,276,909), and (c) a specified relationship of the replaceable anode to the cathode, requiring a minimum volume of electrode; this is the "cathode envelope" concept (patent 3,436,270). In the liability trial, Trial Judge Cooper determined, and we agreed, that the three infringed patents were of substantial importance to the success of the BB-626/U battery, making them lighter, capable of handling more power and at higher power levels, and greatly reducing recharging time. 208 Ct.Cl. at 895, 530 F.2d at 910.
The operation of the battery is as follows: when packed for shipment, the BB-626/U's have "dummy anodes" in their cathode envelopes; the real anodes are separately packed in a hermetically sealed envelope. An electrolyte is formed in the cells when the battery is filled with water. Then the real anode is taken out of the storage envelope and replaces the dummy anode, and only when all twenty-two anodes replace the dummy anodes is the battery operative. The battery is recharged by replacing the anodes, and the government anticipated that it would require 50 "recharges," i. e., replacements of the twenty-two anodes, for the battery to be militarily useful. The method of packaging the anodes comes within the scope of a patent to which the United States has a royalty-free, nonexclusive license. Leesona Corp. v. United States, supra, 530 F.2d at 910, 208 Ct.Cl. at 894-95.
Leesona, through the Leesona-Moos Laboratories division of the company, was engaged in the development of mechanically reconstructible batteries (the BB-626/U's). It determined to overcome the deficiencies of the then standard electronically "rechargeable" batteries (the BB-451/U's). The company's research was focused on the military potential of such a battery and the patents were considered an important contribution to Leesona-Moos, and to Leesona's diversification program. In 1966, Leesona manufactured and tested batteries under a contract with the government for 22 metal-air batteries, 10 of which were to be mechanically reconstructible. The test performance of the `626 batteries was highly favorable, compared to the standard '451 batteries. Due to the outstanding performance of the '626 batteries, the Marine Corps decided to replace all the BB-451/U's with BB-626/U's. From the information available at the time, Leesona estimated that the value of the Marine Corps' annual procurement of '626 batteries would be in excess of $25-30 million, and that the procurement needs of the Army would be even greater. (Such procurement levels never took place; the parties suggest a variety of factors which may have been responsible — new technology, the end of the Vietnam War, and the failure of the contractor chosen by the government to make the batteries, Eagle Picher, to deliver a reliable product.) Anticipating a government contract for a large quantity of batteries, Leesona committed over $3 million of its funds to establish full-scale production facilities for the batteries. Given the success of the '626 batteries, Leesona assumed that the patents would be of great assistance in enabling it to maintain a highly competitive position in the battery field. To ensure such a position, Leesona was unwilling to grant any other company a license to manufacture batteries within the United States, although agreements with other corporations do not prohibit the sale within the United States of batteries manufactured outside the United States.
The government's initial procurement procedure for the batteries, the procedure which produced the litigation at hand, was fiercely assailed by the trial judge and in all candor was hardly a model of efficient management and laudable public relations. In April 1969 the Marine Corps requested authority to issue a negotiated letter contract to Leesona for procurement of 2,500 BB-626/U batteries, 753,456 anode-electrolytes, 3,000 cathodes, and 575 "blower" covers. The Marine Corps justified the sole source procurement at that time, declaring that drawings and specifications would be inadequate at the present time for competitive bidding, and that start-up time would delay a bidder other than Leesona. A negotiated letter contract was issued to Leesona on May 12, 1969, for the manufacture of BB-626 batteries and associated components. Unit prices of each component were not fixed then, but the letter contract did give the figure of $3,700,000 as the government's maximum commitment for the items it desired. The same letter contract also limited government liability to $1.8 million in the event of termination.
Leesona received and signed the letter contract. However, after receiving the signed letter contract, the Marine Corps refused to ratify it. The letter contract incorporated ASPR § 7-802.2 (Mar. 1964) which required acceptance by both parties before commencement of work. Two other manufacturers had learned of the issuance of the letter contract for the BB-626/U batteries, from sources to which neither defendant nor plaintiff can point with certainty. But upon learning of the government's interest, these manufacturers requested that Invitations for Bids be issued, asserting that they had the potential to manufacture such batteries.
The government decided to withdraw the letter contract. Testimony from the parties' witnesses indicates that there were both economic and legal reasons for doing so. Apparently, one internal report at the Marine Corps suggested that greater cost savings could be effected if a competitive, rather than a sole-source, bid procedure were used. And defendant points out in the government's briefs that the Armed Services Procurement Regulations require procurement by formal advertising whenever such a method is feasible and practical. See ASPR 1-1001, 2-102.1, 3-102(a) (1973).
Leesona assisted the Marine Corps in assembling a data package used to prepare the government's request for bids. There is no indication in the record that Leesona received compensation for this service, nor that Leesona took any steps to identify the confidential nature of the information used in the preparation of the bid package.
Twelve companies were invited to make bids, five did so. The contract was awarded to the lowest bidder, Eagle Picher, Inc., on November 6, 1969. Leesona was the next-to-lowest bidder. Leesona contends that November 6, 1969, the effective date of the government's contract with Eagle Picher (contract No. M00150-70-C-0113), was the date of the government's taking, since on that date the government induced and contributed to the infringement of Leesona's valid patent by authorizing Eagle Picher to manufacture the batteries using plaintiff's patents.
The contract awarded Eagle Picher required delivery of the following items, with options for technical manuals, progress reports, etc.:
Item No. Supplies/Services Quantity Unit Price
0001 Batteries, BB-626/U Zinc Air 2,138 $385.22
mechanically rechargeable
0002 Kits, Anode charge BB-626/U 68,182 26.10
0003 Cells, single, used...To continue reading
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