Livesay Window Company v. Livesay Industries

• Decision Date: 19 March 1958
• Docket Number: No. 16403.,16403.
• Citation: 251 F.2d 469
• Parties: LIVESAY WINDOW COMPANY, Inc., Appellant, v. LIVESAY INDUSTRIES, Inc., and Everett G. Livesay Window Company, Inc., Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

251 F.2d 469 (1958)

LIVESAY WINDOW COMPANY, Inc., Appellant, v. LIVESAY INDUSTRIES, Inc., and Everett G. Livesay Window Company, Inc., Appellees.

No. 16403.

United States Court of Appeals Fifth Circuit.

January 24, 1958.

Rehearing Denied March 19, 1958.

Walter Humkey, Miami, Fla., Ralph L. Chappell, New York City, Hollis Rinehart, Miami, Fla., Kenyon & Kenyon, New York City, Fowler, White, Gillen, Yancey & Humkey, Rinehart & Gibbs, Miami, Fla., of counsel, for appellant.

J. M. Flowers, Henry M. Sinclair, Miami, Fla., for appellees.

Before RIVES, TUTTLE and BROWN, Circuit Judges.

JOHN R. BROWN, Circuit Judge.

Now back with us for the second time, Livesay Industries, Inc., v. Livesay Window Co., Inc., 5 Cir., 202 F.2d 378, after an extended trial before a Master whose findings were essentially adopted by the District Court, the questions¹ concern (1) the basis for ascertainment of the damages as allowed for infringement down to the date, October 8, 1951, of the final decree;² (2) the time notice of infringement was given, 35 U.S.C.A. § 287, to start the running of damages; and (3) the allowance of attorney's fees as an "exceptional case," 35 U.S.C.A. § 285.

The question of validity and infringement is no longer open. The patent, owned by the Patent Holder, and under exclusive license to the Licensee, covers a pre-cast, concrete monolithic window frame suitable for residential and commercial buildings. The specific characteristic of the window frame held to have resulted in infringement was the imbedded metal Venetian blind guide channel. The Infringer's window frame which has throughout been tagged as "Exhibit A frame," instead of imbedding the metal blind guide in the vertical side pieces in the process of casting, was cast with relatively flat facing, but with metal pintles to which the metal channel blind guides were subsequently installed by nails or screws. When thus installed, the Infringer's blind guide was not flush with the face of the frame. The usual thing was for the surface of the face to be plastered, so that, on completion, the blind guide was, for all practical purposes, imbedded as in the patent. The Infringer's sales price included the cost of the frame and the subsequent installation of the metal blind guides on the pintles by an alleged independent contractor.

In developing a record which comprises over 1,250 printed pages and, by consent, includes the record from the 1952 contempt proceedings for some alleged post-decree infringements, the Master spent over 16 days in the hearings. His careful report³ reflects, as did the initial one on infringement in the first appeal, the necessity for his having devoted an estimated 75 additional days to the preparation of the report.

In the hearings the Master saw and heard the numerous witnesses testify. They included outstanding and reputable builders, contractors and architects familiar with building construction in the greater Miami area in the years 1948-1951 as well as the Master-appointed Accountant and the two accountant experts appearing on opposite sides to evaluate and translate records into probable sales and profit and loss figures. While fought with all of the professional proprieties by the contending advocates, this record is mute evidence that nearly everything of consequence was hotly disputed. The case then comes to us with the insulation of the clearly erroneous rule, Fed.Rules Civ.Proc. rule 53(e) (2), 28 U.S.C.A.

Of course the question was how much had the Patent Holder and Licensee suffered by the infringement. And that question was primarily: had the Infringer not infringed, what would Patent Holder-Licensee have made? That in turn involved the amount of the business actually done by the Infringer which the Licensee would have performed had there been no infringement. Once the probable volume or proportion was ascertained, other incidental questions would arise as to the relative cost, gross and net profits and the extent to which the operating experience of one party could be applied to the other.

After digesting the voluminous data of this record, the Master found, and the Court confirmed, many basic facts which are not now seriously challenged. First, in the critical period September 2, 1948 to October 8, 1951, the sales by Licensee of the patented frames manufactured by it totaled $1,137,248. This gross, after provisions for Federal income taxes and all expenses for cost of goods sold as well as fixed charges, produced a profit of 19.1% on sales or a total of $217,218. Of the Infringer's total business, 82.65% involved the manufacture and sale of infringing "Exhibit A" frames. This ratio applied to its gross income, fixed infringing sales at $2,912,148. Using these two figures to reconstruct what the Licensee would have made (not what the Infringer made), the Court applied the Licensee's earning ratio of 19.1% to the Infringer's total infringement sales to produce a profit of $556,664. As the Licensee's profit ratio (19.1%) was based on the payment by it of a contract 6% royalty for the exclusive license from the Patent Holder, the Court fixed a like 6% royalty on the Infringer's sales for an additional $174,776. The decree cast the Infringer for the resulting $731,440.

When it is borne in mind that to allow a patent owner to recover lost profits from an infringer is no unique treatment of this one type of wrongdoing, and that it is essentially the same problem which inheres in other instances of an interference with a valuable business right, we see that this case is not solved, as the Infringer hopes, by a mechanical application of legal precedents⁴ which, here and there, may seem to be exacting or niggardly.

If in all reasonable probability, the Patent Owner would have made the sales which the Infringer has made, what the Patent Owner in reasonable probability would have netted from the sales denied to him is the measure of his loss, and the Infringer is liable for that. Profits, as such, are not recovered as the broadening amendment to the statute, 35 U.S.C.A. § 284, makes so clear. The profit is but the true measure of that which infringement has taken from the patent owner for, "whatever may have been the practice prior to the recent statutory amendments, the general damages now recoverable are the detriments suffered by the plaintiffs through the infringement." Laskowitz v. Marie Designer, Inc., D.C.Cal., 119 F.Supp. 541, 554. Where the wrong done is so absolute, the consequences of an inability to demonstrate the resulting loss with scientific accuracy rests on the Infringer, as on any other wrongdoer,⁵ Story Parchment Co. v. Paterson Parchment Paper Co., 282 U.S. 555, 51 S.Ct. 248, 75 L.Ed. 544. This principle certainly applies to patent cases.⁶ Horvath v. McCord Radiator & Mfg. Co., 6 Cir., 100 F.2d 326; Filtex Corp. v. Amen Atiyeh, 9 Cir., 216 F.2d 443.

A brief examination will demonstrate that the record fully supports the conclusions reached below. There is first the certainty based on the fact that the period for which damages were allowed is all in the past. There is thus no uncertainty as to a future forecast as is so common. Consequently, we are not concerned, as were many of the cases, note 4, supra, with the possibility that the prospective consumers, had they not purchased from the Infringer, might have yet procured a suitable article from persons other than the Patent Owner. For here, the "relevant market," cf. United States v. E. I. Dupont De Nemours & Co., 351 U.S. 377, 76 S.Ct. 994, 100 L.Ed. 1264, was for a specific product — a monolithic window frame with a Venetian blind guide, either imbedded during the casting or installed on precast pintles. The market under scrutiny then is confined to those products only which are patented or infringed. As to these, the Master found that over 95% were manufactured and sold by these two parties, Infringer and Licensee. The effort of the Infringer to make out a substantial potential competition from others, including three specified manufacturers simply fails. Pospisil, the largest, had not made a single frame with blind guides since the war and, in any case, his product was a mixture of sawdust and concrete. The Durall Company only began operations in 1951 and for that year, out of a volume of $36,000 over 75% was for frames without blind guides leaving but one-fourth, $9,000, as competition in contrast to the average annual volume of Licensee of some $370,000. Only 150 to 200 Mozar frames are shown to have been sold, and the number of these with blind guides later installed as an "Exhibit A" frame is not shown at all. Gaines Construction Company had used a number of Infringer's frames prior to 1950, but these were discontinued and concrete blocks and a wood buck was substituted. This builder not only did not believe in blind guides. He disliked them for, in building project houses for large residential housing projects, Venetian blinds are not provided with the house.

Architects, builders and contractors testified convincingly that, despite the Infringer's claimed advantage that plastering the faces of the frame gave a more attractive surface than the cement face of Licensee's frame, the two frames were "* * * as alike as two peas in a pod." Indeed, a common thing was for the architect's written specifications to call for "Livesay concrete window frames" meaning specifically either of the two frames. At least as to all of the residences comprising the 95% with built-in blind guides which went to make up the combined volume of Infringer and Licensee, the builder, or contractor, or architects called for this type of frame. As to this market demand, the source of supply was confined to these two parties and had not the infringement occurred, the Licensee would here have had a monopoly in an article having established trade acceptance of great extent. Of course, so long as the Infringer's poaching on the Licensee's exclusive domain made...