Saf-Gard Products, Inc. v. Service Parts, Inc.
| Citation | 491 F. Supp. 996 |
| Decision Date | 06 May 1980 |
| Docket Number | Civ. No. 70-455 PHX WEC. |
| Parties | SAF-GARD PRODUCTS, INC., an Arizona Corporation, et al., Plaintiffs, v. SERVICE PARTS, INC., an Indiana Corporation, et al., Defendants. |
| Court | U.S. District Court — District of Arizona |
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Samuel J. Sutton, Cahil, Sutton & Thomas, Phoenix, Ariz., for plaintiffs.
Eugene C. Knoblock, Oltsch, Knoblock & Hall, South Bend, Ind., John H. Killingsworth, O'Connor, Cavanagh, Anderson, Westover, Killingsworth & Beshears, Phoenix, Ariz., for defendants.
FINDINGS OF FACT CONCLUSIONS OF LAW
I. INTRODUCTION
The issues of liability in this case have been adjudicated through appeal, Saf-Gard Products, Inc. v. Service Parts, Inc., et al., 370 F.Supp. 257 (D.C.Ariz.1974), aff'd, 532 F.2d 1266 (9th Cir. 1976), cert. denied, 429 U.S. 896, 97 S.Ct. 258, 50 L.Ed.2d 179, 191 U.S.P.Q. 765 (1976). This matter is now on remand for determination of the amount of damages to be awarded plaintiff.
This court's judgment on liability provided: (a) that the litigated Patent No. 3,601,-181 (Avrea) is valid; (b) that the litigated patent has been infringed by the defendants; (c) that the defendant Service Parts, Inc. has committed acts of unfair competition in conjunction with its manufacture and sale of radiator accessory devices; and, (d) that this is an exceptional patent case under those discretionary portions of the statute which allow for an award of treble damages, interest, attorney's fees and costs. 35 U.S.C. §§ 284, 285 (R-2257*) This decision was appealed by the defendants under the special interlocutory provisions applicable to judgments for patent infringement which are final except for accounting. 28 U.S.C. § 1292(a)(4). The affirming appellate decision did not specifically address ". . . the district court's holdings pertaining to unfair competition, for these matters may become moot by reason of the district court's determination as to damages for infringement in the accounting phase of this trial." 532 F.2d, at 1273. Because the award in this case is based entirely upon the statutory provisions pertaining to patent damages (35 U.S.C. §§ 284, 285), the unfair competition issues are in fact rendered moot.
The damage issues were tried to the court commencing on March 18, 1980. Upon conclusion of the trial, the matter was taken under advisement, pending submission of memoranda by the parties. These memoranda having been received and reviewed, together with the documentary and testimonial evidence developed at trial; and, the court being fully advised in the premises, reaches the following findings of fact, conclusions of law and judgment:
II. FINDINGS OF FACT
the litigated Patent No. 3,601,181 which issued on August 24, 1971. The plaintiff, Walter C. Avrea, is owner of the entire right, title and interest in and to the litigated patent (PTO-20, paras. 2 and 3). The individual plaintiff has not asserted a separate claim for damages and accordingly the plaintiffs will be hereinafter referred to in the singular.
2. Although this action was originally commenced against some fifteen defendants, only five of the defendants remained at the time of the liability trial, the action having been dismissed with respect to the other ten defendants pursuant to a series of consent judgments. Shortly before commencement of the damage trial, a stipulated judgment was entered against the defendants Balkamp, Inc. and Genuine Parts Company, finding that these defendants "have not manufactured but have sold approximately one hundred thousand (100,000) devices which infringe the litigated patent." These devices were manufactured and supplied by the defendant Service Parts, Inc. (R-2221). Judgment in the amount of $200,000 was entered against Balkamp, Inc. and Genuine Parts Company on February 13, 1980. The remaining defendants are Service Parts, Inc. ("Service Parts"), Town and Country Chrysler Plymouth ("Town and Country") and Marvin Hawkes, dba Hawkes Radiator Service ("Hawkes").
3. The plaintiff does not assert a claim for infringement prior to issuance to the litigated patent and the defendants concede that they are liable for patent infringement in some amount (PTO-20, paras. 4 and 5).
4. The defendant Service Parts manufactured the infringing devices involved in this action (R-2220). Although the defendants Town and Country and Hawkes have sold only a limited number of the devices manufactured by Service Parts, each of these defendants have contested the issues of infringement, validity and damages throughout the ten-year course of this litigation.
5. Between the time the litigated patent issued and the time that the defendants were enjoined from further infringement, the defendant Service Parts manufactured and sold a total of 325,989 infringing devices: 18,088 were sold during 1971 (September through December); 132,971 were sold during 1972; 171,269 were sold during 1973; and, 3,661 were sold during January of 1974 (PX-31.1).
6. Prior to issuance of the litigated patent, the defendant Service Parts sold at least 193,922 devices which embodied the plaintiff's invention: 4,989 were sold during the last half of 1969; 97,727 were sold during 1970; and, 91,206 were sold prior to September 1, 1971 (PX-31.1). As to these devices, the plaintiff has asserted a claim for damages based upon the prior ruling that Service Parts is liable for unfair competition due to its misappropriation of plaintiff's trade secrets and its interstate use of a mark confusingly similar to plaintiff's common law trademark "Coolant Recovery System" (PTO-12, 13).
7. During the years 1969 through 1974 (January), the average selling prices charged by the plaintiff for its patented devices and by the defendant for its infringing devices were as follows (PX-30.2, 31.1, 31.2, 34.1):
| ------------|----------------|---------------|
| Accounting | Plaintiff's | Defendant's |
| Year | Selling Price | Selling Price |
|-------------|----------------|---------------|
| 1969 | $5.45 | $4.02 |
| 1970 | 4.57 | 3.51 |
| 1971 | 3.20 | 3.11 |
| 1972 | 3.01 | 2.99 |
| 1973 | 2.70 | 2.91 |
| 1974 | 2.58 | 2.93 |
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8. The average costs per unit incurred by plaintiff in the manufacture and sale of its patented products for each of the years 1969 through 1974 were as follows (PX-30.-2):
--------------------------
| Accounting | Plaintiff's |
| Year | Cost/Unit |
|------------|-------------|
| 1969 | $2.02 |
| 1970 | 2.07 |
| 1971 | 2.32 |
| 1972 | 1.94 |
| 1973 | 1.49 |
| 1974 | 1.29 |
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9. The total per unit cost incurred by the plaintiff in the manufacture and sale of its patented devices includes all of its variable costs for: materials, packaging, assembly labor, sales commissions, cash discounts, freight charges, bad debts, payroll taxes, advertising, public relations, promotion expenses, contributions, sales expenses and employee benefits (PX-30.2, 30.3). These are costs which were directly related to the number of devices sold by the plaintiff. The plaintiff would have incurred substantially the same variable costs had it, rather than the defendant, sold the infringing devices. However, these variable costs may have been lower had plaintiff's manufacturing volume been higher. The plaintiff's fixed overhead expenses for items such as rent, executive salaries, utilities, subscriptions, etc. are not properly considered in calculating the costs which the plaintiff would have incurred had it manufactured the additional devices sold by the defendant. These fixed overhead expenses were actually paid by the plaintiff as they were incurred during the years 1969 through 1974. These fixed overhead expenses would have neither increased nor decreased had plaintiff's production incorporated the defendant's additional sales. Plaintiff's fixed overhead expenses had already been amortized over and paid out of plaintiff's actual sales. To include these fixed expenses as an element of the plaintiff's cost in this proceeding would essentially require that the same fixed costs be reamortized over the defendant's infringing units. This would result in a windfall to the defendant in the form of a credit against plaintiff's profits, a credit which would have the effect of retroactively increasing the plaintiff's rent, property taxes, executive salaries and utility bills in proportion to the number of infringing devices sold by the defendant. The unrebutted testimony in this case indicates that none of the plaintiff's fixed overhead expenses would have increased had the plaintiff's production been expanded to incorporate the infringing devices.
10. The testimony and record in this case indicate that the corporate plaintiff sought to exercise its exclusive right to manufacture under the litigated patent and did not grant licenses to others. Accordingly, the plaintiff and its customers were the only sources from which the patented devices could be lawfully purchased. Throughout the period in question, the plaintiff manufactured and sold only radiator accessory devices of the type described and claimed in the litigated patent and conducted no other substantial business ). The devices manufactured by the plaintiff were distributed through major firms such as Sears, J. C. Penney's, General Motors, Ford, American Motors and numerous others (FOF-38, 39, 40). The unrebutted testimony of plaintiff's former president, ...
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