Reliance Const. Co. v. Hassam Paving Co.
| Decision Date | 07 January 1918 |
| Docket Number | 3026. |
| Citation | 248 F. 701 |
| Parties | RELIANCE CONST. CO. et al. v. HASSAM PAVING CO. et al. |
| Court | U.S. Court of Appeals — Ninth Circuit |
Ralph R. Duniway, of Portland, Or., for appellants.
Carey & Kerr, of Portland, Or., and Louis W. Southgate, of Woncester Mass., for appellees.
Before GILBERT, ROSS, and HUNT, Circuit Judges.
This appeal presents only the question of the amount of damages awardable for the infringement of letters patent No. 861,650 issued July 30, 1907, to the Hassam Paving Company, a corporation of Massachusetts, for an invention entitled 'process for laying pavement,' and the question of the liability of the three defendants to the suit-- the city of Hood River, on whose streets the infringing pavement was laid, the Reliance Construction Company, the corporation by which it was laid, and the National Surety Company, which guaranteed to hold the city harmless against damages for infringement. The complainants were the patentee and the Oregon Hassam Paving Company, a corporation of Oregon, to whom the patentee had granted an exclusive license to use and to vend the right to use, the patented invention within the state of Oregon. After decreeing an injunction, the court below referred the cause to the master for accounting. The master found that the profits of the Construction Company were $2,362.40, but found that a reasonable royalty for the use of the patented process was 25 cents per square yard, and that on that basis $4,527.73 was recoverable as damages. The master's report was affirmed, and the final decree was that the complainants recover from the defendants and each of them $4,527.73 damages, with costs and disbursements.
The Construction Company assigns error to the rejection of a portion of its overhead expenses in fixing the amount of the profits which it derived from the contract. In the view which we take of the case, it is unnecessary to consider that question. The profits are ignored in the final decree, which is for damages based solely on a reasonable royalty chargeable for the infringement, following Dowagiac Mfg. Co. v. Minnesota Plow Co., 235 U.S. 641, 35 Sup.Ct. 221, 59 L.Ed. 398.
It is contended that the royalty should have been fixed in the sum of 15 cents, instead of 25 cents, per square yard, and the contention is based upon the fact that 15 cents was the amount charged by the patentee to the licensee, and by the patentee to other subsidiary companies, to whom it gave similar licenses. We agree with the master that the evidence shows that the royalty of 15 cents a yard was charged by the patentee, not to the public generally, but to construction corporations, to whom it gave licenses, and that that sum should not be taken as a proper measure of damages in the case of an infringement of the patented right. It is obvious that the sum charged by the patentee as royalty to auxiliary companies, who receive exclusive licenses for a designated territory, and who invest capital and incur the expense of preparing plants, and enter into the business of supplying the patented article, would be an inadequate royalty and measure of damages for infringement. The patentee, in consideration of the benefit which it obtains from the act of co-operation of an auxiliary company, in introducing the patented improvement and exploiting it, thereby securing a far greater return for the use of its invention than could be obtained by dealing with individual users, may well afford to fix a low rate of royalty to such licensees. For the infringer in this case to pay the licensee damages measured in the figures of a royalty of 15 cents would not meet the demands of justice.
The evidence is that the customary profit of the licensee for laying the patented pavement was 45 cents per square yard and that such was its charge for permission to use the process. We are not advised of the terms of the license contract, further than that it gives to the licensee the exclusive right to use, and to license others to use, the patented invention within a designated territory, and that the patentee is to receive therefor a royalty in the sum of 15 cents per yard. What the respective rights of the appellees are as to damages recovered for infringement is not disclosed. On a basis of 15 cents as a reasonable royalty for damages in this case, if the licensee is entitled to receive and...
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