Oil Well Improvements Co. v. Acme Foundry & Machine Co.

• Decision Date: 19 March 1929
• Docket Number: No. 8274.,8274.
• Citation: 31 F.2d 898
• Parties: OIL WELL IMPROVEMENTS CO. v. ACME FOUNDRY & MACHINE CO.
• Court: U.S. Court of Appeals — Eighth Circuit

31 F.2d 898 (1929)

OIL WELL IMPROVEMENTS CO. v. ACME FOUNDRY & MACHINE CO.^*

No. 8274.

Circuit Court of Appeals, Eighth Circuit.

March 19, 1929.

Arthur C. Brown, of Kansas City, Mo. (A. J. Biddison, of Tulsa, Okl., on the brief), for appellant.

Luther Ely Smith and Rodney Bedell, both of St. Louis, Mo. (A. L. Berger, of Kansas City, Kan., on the brief), for appellee.

Before STONE, LEWIS, and COTTERAL, Circuit Judges.

STONE, Circuit Judge.

The Oil Well Improvements Company secured a decree against the Acme Foundry & Machine Company, finding infringement of patent No. 1,165,253 (Alfred G. Heggem) for an oil well casing head. That decree was affirmed by this court 2 F.(2d) 530, and the matter then proceeded to an accounting to ascertain profits and damages. For that purpose, reference was to a master who recommended recovery on three items: For profits of defendant, $4,000; for damages by reason of sales lost to plaintiff, $35,738.64; for damages because of loss through selling price reduction by plaintiff, $23,959 — the second item was divided into two amounts, representing the loss before this suit was filed ($11,518.78) and after that time ($24,219.86). The court sustained exceptions to the report, set the findings aside, and ordered re-reference to the master to take additional testimony for "an ascertainment of the damages allowable to the plaintiff in this case under the rule as to what would have been a reasonable royalty to be paid by the defendant." The reason for this order was that the court deemed the evidence too indefinite and inaccurate to support the findings of profits and of damages. As he stated it: "The question is not that the plaintiff has sustained substantial damages, but is, rather, the difficulty, if not the impossibility, under which plaintiff labors in procuring evidence to establish the amount of damages sustained, to that degree of certainty required in the law." Additional evidence was taken and the court, determining that 15 per cent. was a proper royalty, entered a decree (upon that basis) for $5,029.48. From that decree this appeal is brought by the plaintiff below.

Broadly stated, appellant contends that the evidence before the master was sufficiently definite and accurate to support findings on profits and on damages (both as to lost sales and as to reduction in price) and that the findings made by the master in those respects should be upheld. As there are three separate items (profits, damages for lost sales and damages for price reduction) of recovery found by the master and as the evidence concerning each is naturally different, it is necessary to examine the evidence as to each of these items separately to ascertain if it be sufficient to support a finding thereon and, if thus found to be sufficient, whether the amount found by the master is correct under that evidence.

Profits.

The parties have stipulated that the profits derived by defendant from its sales of the infringing device were $4,000. The dispute as to this matter is whether such profits should be reduced by two items called "bad debts" and "goods on hand."

Appellee claims that it may charge against profits bad debts totaling $3,457.68. Of this total, it is claimed that $1,957.68 represents accounts due from the purchaser, B. F. Palmer, for whom appellee manufactured the device. If this sum represents loss actually incurred in connection with the manufacture or sale of this device by defendant, of course, it is a proper reduction of its profits in that business. The amount is not in dispute. The controversy is as to whether it arose from this business and is properly chargeable against it in an infringement accounting. The evidence is practically undisputed. The entire amount was charged on appellee's books under a heading "Palmer Lawsuit Expense." Of this amount, $1,421.50 was largely for legal fees, apparently, in connection with this suit. Obviously, such a charge in connection with this accounting is improper. The remaining $536.18 may or may not be proper but it is not shown by appellee to have been. This information was entirely within the control of the appellee. Its book entry was that it was for "Palmer Lawsuit Expense." That entry was not explained away by any witness for appellee. It was its duty to make that explanation and to show that such was a proper charge herein. It should not be allowed.

The balance of $1,500, entering into the bad debts total of $3,457.68, consists of the balance on a note executed by the Northwestern Supply Company of Casper, Wyoming (a purchaser from Palmer), which, it is claimed, was assigned by Palmer to appellee. Originally for $2,000, Palmer had paid the interest and $500 thereon to appellee. This item appears in appellee's books only under the heading "Palmer Lawsuit Expense." However, the general manager of appellee testifies definitely that "Palmer turned that note over to us towards his account and we credited his account with that at that time, and put it in the notes receivable." The evidence tends to show the note has little or no value. It is a proper item of deduction herein. As there may be value therein, this item should be allowed in reduction of profits on condition that appellee deposit this note, legally assigned to appellant, to satisfy the judgment herein to the amount of $1,500 thereof.

As to "goods on hand," the contention is that the manufacturing cost of casing caps and parts (less junk value), which were on hand when the opinion of this court was handed down affirming the decree of infringement, should be deducted from the profits — in the sum of $2,472.95. There is no dispute as to the existence of this left over stock nor as to its value as above. The controversy is as to the propriety of allowing it as a deduction. This contention is settled adversely to the claim of appellee by Crosby Steam Gage & Valve Co. v. Consolidated Safety Valve Co., 141 U. S. 441, 12 S. Ct. 49, 35 L. Ed. 809. There the infringement was in the manufacture and sale of valves. The infringer claimed a deduction against profits for certain valves which had been made experimentally and later destroyed and others which had been defective and returned by customers and destroyed. The infringer there stated that the claim "is for this actual loss so sustained, decreasing their profits, which they now ask to have allowed. The loss is inseparable from their whole valve business and belongs to it." Page 456 (12 S. Ct....