Metallic Rubber Tire Co. v. Hartford Rubber Works Co., 165.

• Decision Date: 23 June 1921
• Docket Number: 165.
• Citation: 275 F. 315
• Parties: METALLIC RUBBER TIRE CO. v. HARTFORD RUBBER WORKS CO. [1]
• Court: U.S. Court of Appeals — Second Circuit

275 F. 315

METALLIC RUBBER TIRE CO. v. HARTFORD RUBBER WORKS CO. ^[1]

No. 165.

United States Court of Appeals, Second Circuit.

June 23, 1921

Livingston Gifford, Ernest Hopkinson, and Charles S. Jones, all of New York City, for appellant.

Henry F. Parmelee and George D. Watrous, both of New Haven, Conn for appellee.

Before ROGERS, HOUGH, and MANTON, Circuit Judges.

ROGERS Circuit Judge.

The Metallic Rubber Tire Company filed a bill in equity against the defendant, in which it alleged the infringement of letters patent No. 609,320, issued to Calvin T. Adams on August 16, 1898, for an improvement in vehicle tires. The bill asked for an injunction and an accounting; the plaintiff claiming as assignee of the patent. The lower court dismissed the bill on the ground of noninfringement. 189 F. 402. On appeal to this court in 1912 the patent was held valid and infringed, the decree below was reversed, and the cause remanded, with instruction to enter a decree for the complainant for an injunction, an accounting, and costs. 200 F. 743, 119 C.C.A. 187. Accordingly the District Court, on January 30, 1913, entered a decree adjudging the patent valid and infringed, and that the complainant recover from the defendant profits and damages. A perpetual injunction was issued, and the matter of stating the account of profits and of assessing the damages was referred to a master. On the coming in of the master's report in 1917, exceptions were taken, which the District Judge sustained, and the case was again remanded to the master, who was directed to state an account in accordance with the views expressed in the opinion. 245 F. 860. In 1920 exceptions were taken to the master's second report, whereupon the report was modified and confirmed. 266 F. 543.

A final decree, filed June 16, 1920, has awarded to the plaintiff the sum of $244,970.25. The court awarded to the plaintiff the profit made on the whole tire during the period of infringement, amounting to the sum of $183,383.53, together with interest at 6 per cent. from November 11, 1912, except for a period of two years; said interest amounting to $61,586.72. Interest was computed from the date of the decision of this court (November 11, 1912), decreeing the validity of the Adams patent and establishing the fact of the defendant's infringement. The period of two years during which interest was withheld covers the time when the matter was in the hands of the master on the reference after the evidence before him was closed. The defendant has brought the case to this court, and claims that the award of the entire profits realized from the sale of the infringing tire was error, and that it was like-wise error to award interest from the date of the filing of the opinion in this court establishing the validity of the patent and the fact of infringement.

The specification of the Adams patent states that it relates--

'to means for preventing the yielding tires of bicycles and other wheeled vehicles from slipping on the roadway, as they are particularly apt to do when the roadway is smooth and wet.'

And the invention claimed is:

'The combination, with a cushioned vehicle tire, of a tread applied to the entire periphery of the tire, and having metallic wire interwoven with itself, parts of said interwoven wire lying substantially flush with the outer surface of the tread, and forming cushioned anti-slip bearings covering the sides, and bottom of the tread.'

Adams did not invent a tire, but a particular type of an anti-skid feature imbedded in the periphery of a plain tread tire. The structure which was held by this court to infringe the Adams patent was a pneumatic automobile tire having hard, rigid coiled wires imbedded in its tread, and was known as the Midgley tread tire.

It appears that the number of tires containing the infringing tread manufactured by defendant was 29,537. Certified accountants were employed by the plaintiff, and other certified accountants by the defendant, and they spent months in an examination of the books of the defendant company. There was a figure upon which all the accountants agreed. That figure, $121,281.06, was an amount which, taking the same matters into consideration, represented the gross profit for the sale of the infringing tire. It appears that in submitting their report the plaintiff's accountants gave a detailed explanation of the method pursued by them in arriving at the defendant's factory costs and the selling and administration expenses, which resulted in a final showing in their main report of profits of $121,281.06. As the difference between defendant's and plaintiff's accountants in the matter of factory costs amounted to only $7,952.09 out of a total cost for the infringing tires of over $900,000, and of only $1,375.14 in selling and administration expenses out of a total of over $177,000, the defendant's accountants accepted the plaintiff's statement that the total unapportioned profits upon their agreed items of cost and expense should stand as $121,281.06.

The defendant did not question any of the items by which the accountants agreed upon the factory costs and selling and administration expenses. What the defendant did was to urge that the profits as found should be apportioned between the patented and unpatented features, and that the balance should be offset by certain royalty deductions. The plaintiff, on the other hand, starting with the agreed profits, urged that its own accountants had erred in allowing to the defendant certain costs and expenses totaling over $70,000.

The master, in his report of September 20, 1915, did not consider it necessary to pass upon the legality of all disputed items. He proceeded upon the theory that the complainant was entitled to recover only the profit due to the use of the improvement or addition made by Adams, and that there was no such profit; that, instead of the sales being a result of the inherent merit of the tire, they were the result of the strenuous forcing sales campaign of the defendant company. In the course of his opinion he said:

'It has not been shown that the patentee or the purchaser of the patent ever established a market value for the anti-skid feature of the patent in suit, and it is evident from the proofs in this accounting that the defendant was unable to establish a market value. No testimony has been given to me to satisfy me that the sole salability of the tires in question arose from their possessing the interwoven wire feature embodying the Adams patent. Garretson v. Clark, 15 Blatchf. 70, Fed. Cas. No. 5,248. I find no evidence that the patentee or the purchaser of the patent, would, as a matter of fact, have made any profit whatever if the defendant had not interfered with their rights.

'The development of the wire tread at the Hartford works necessitated a vast amount of experimental work throughout the entire period of the manufacture and sale of this type of tires. Changes and improvements were made as these tires were passing through the only efficient practicable test, that of actual use under varying conditions by the average automobile owner. This required time. Nothing of the kind had ever been made before.

'This action was not brought and prosecuted and financed by an individual or manufacturer, who had invented a thing of great merit; not by one who had spent time and labor and money to perfect a thing of great value; not by one who had made and sold anything, and whose business was being ruined or encroached upon by an unscrupulous, deliberate infringer. The principal value of the Adams patent seems to be based upon the possibility of recovering profits from the honest efforts of this defendant to create a successful metallic non-skid feature in connection with its tires. It is not a case where the purchasers would have a tire with this particular feature or go without a tire.'

In arriving at the conclusion that defendant had made no profits, the master deducted the royalties which defendant had paid under the Dunlop and Clincher patents for other features which it used in connection with the infringing tires which it sold. These royalties amounted to $16,800.03. He deducted $77,064.30 for profits on plain tread tires without the infringing device. He also deducted $20,957.15 paid by defendant to Midgley under an agreement made by it with him after the allowance by the Patent Office of his application for a patent. The result of the various deductions allowed by the master showed that a loss, and not a profit, resulted to the defendant from the manufacture and sale of the infringing tires, and that the plaintiff was entitled to nominal damages only. Exceptions were taken to this report, and the District Judge filed an opinion on February 19, 1917, in which he sustained the exceptions and said:

'It therefore seems imperative to hold that the patented improvement has given the entire value to the combination, in which case plaintiff is entitled to recover all the profits, unless the defendant can show-- and the burden is on it-- that a portion of them is the result of some noninfringing and valuable improvement made by him.'

On June 29, 1917, the District Judge filed an opinion in modification of the prior opinion of February 19, 1917, and in this subsequent opinion he said that it was imperative to hold that the patented improvement had given the entire value to the combination, and that the plaintiff accordingly was entitled to recover all the profits. He declared:

'It was my intention to hold that the plaintiff is entitled to recover of the defendant all the profits which have been shown to have been received by the defendant on the manufacture and sale of all tires made by the defendant with the patent in suit incorporated

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