Swan Carburetor Co. v. Nash Motors Co.

• Decision Date: 05 February 1943
• Docket Number: No. 5026.,5026.
• Parties: SWAN CARBURETOR CO. v. NASH MOTORS CO.
• Court: U.S. Court of Appeals — Fourth Circuit

133 F.2d 562 (1943)

SWAN CARBURETOR CO. v. NASH MOTORS CO.

No. 5026.

Circuit Court of Appeals, Fourth Circuit.

February 5, 1943.

F. O. Richey and Blythe D. Watts, both of Cleveland, Ohio (H. F. Schneider and Richey & Watts, all of Cleveland, Ohio, and Edwin F. Samuels, of Baltimore, Md., on the brief), for appellant and cross-appellee.

Charles H. Walker, of New York City (Fish, Richardson & Neave, of Boston, Mass., and Venable, Baetjer & Howard, of Baltimore, Md., on the brief), for appellee and cross-appellant.

Before PARKER, SOPER and DOBIE, Circuit Judges.

SOPER, Circuit Judge.

The appeal in this case was taken from a judgment of the District Court whereby the Swan Carburetor Company was awarded the sum of $138,711.48 for infringement by the Nash Motors Company of United States patents Nos. 1,536,044 and 1,636,721, kindred inventions relating to the inlet manifold in an internal combustion engine. We considered patent No. 1,536,044 in Swan Carburetor Co. v. Nash Motors Co., 4 Cir., 98 F.2d 115 and in Nash Motors Company v. Swan Carburetor Co., 4 Cir., 105 F.2d 305, wherein it was noted that validity and infringement of the patent had been established by the prior decision in the Sixth Circuit in Reeke-Nash Motors Co. v. Swan Carburetor Co., 88 F.2d 876. In that case, certain manifolds, called in this litigation the first group of manifolds, were held to infringe the patent; and the holding was binding on the Nash Motors Company because it was in privity with the defendant, the Reeke-Nash Motors Company. When the case came before us we held that the patent was not infringed by a second group of manifolds used by the Nash Company which had not been passed upon in the prior suit in the Sixth Circuit. We remanded the case to the District Court for an accounting with respect to the first group of manifolds.

Proceedings were then had before W. Ainsworth Parker as special master, whose findings of profits and damages were approved in every respect by the District Judge except that interest at 6% was added to the amount of damages ascertained. The amount awarded by the decree of the District Court was comprised of the following items:

                  Profits on 1614 unmounted manifolds
                    separately sold ..................... $  2,031.01
                  Interest thereon from February
                    9, 1942, the date of the master's
                    report, to July 20, 1942
                    the date of the court's decree              54.50
                  Damages on 349,019 mounted
                    manifolds sold as part of motor
                    cars ...............................    80,250.20
                  Interest thereon from November
                    5, 1930 to July 20, 1942 ...........    56,375.77
                                                          ___________
                                                          $138,711.48
                

In addition the court decreed that the plaintiff recover its taxable costs incurred in the determination of the issues with respect to the defendant's first group of manifolds prior to the accounting, and that the defendant recover its taxable costs incurred in determination of the issues in respect to the defendant's second group of manifolds, and that each party pay one-half of the costs incurred in connection with the accounting except that the costs incurred in connection with a motion by plaintiff to amend its complaint be taxed in favor of the defendant.

Both parties appealed from this judgment, the plaintiff on the ground that the award was grossly inadequate; the defendant on the ground that only a nominal recovery should be allowed either as profits or damages. The plaintiff concedes that it is not entitled to both profits and damages on the same manifolds but maintains that it has the option to use that method of calculation which produces the larger return. See, Tilghman v. Proctor, 125 U.S. 136, 8 S.Ct. 894, 31 L.Ed. 664; Baseball Display Co. v. Star Ballplayer Co., 3 Cir., 35 F.2d 1; Goodyear Tire & Rubber Co. v. Overman Cushion Tire Co., 6 Cir., 95 F.2d 978, certiorari dismissed 306 U.S. 665, 59 S.Ct. 459, 83 L.Ed. 1061; Expanded Metal Co. v. General Fireproofing Co., D.C.N.D.Ohio E.D., 247 F. 899; Krentler-Arnold Hinge Last Co. v. Leman, D.C.Mass., 24 F.2d 423; Riverside Heights Orange Growers Ass'n v. Stebler, 9 Cir., 240 F. 703. With respect to the defendant's sale of 1614 infringing unmounted manifolds the plaintiff is satisfied with the allowance of $2,031.01, the total profits earned by the defendant with interest from the filing of the master's report; but with respect to the sale of 349,019 infringing manifolds sold as part of motor cars, the plaintiff claims that it should not be limited to the recovery of the sum of $80,250.20 calculated on an established royalty basis, with interest from November 5, 1930, but should be allowed a much larger sum for profits with interest from the date of the master's report.

The plaintiff realized that the entire profit gained by the defendant on the sale of its motor cars did not flow from the patented device and therefore endeavored to ascertain by apportionment the part of the profit fairly attributable to the manifold. Three methods of computation were submitted, based on the finding of the master that the infringing T-shaped Swan manifold produced 14.70% more horse power than the island manifold previously used by the defendant. In these computations the profits from the infringement were calculated by applying this percentage to the profits (1) from the manufacture and sale of motors; (2) from the manufacture and sale of power plants, assuming that the profit on a power plant was proportionate to its part of the cost of the car; and (3) from the manufacture and sale of power plants, assuming that half of the profit from the sale of the car was attributable to the power plant. According to the first method the profit was $944,017.01; according to the second, $1,590,410.57, and according to the third, $4,190,143.19. The special master rejected all of these computations and his findings and opinion were approved by the District Judge. In his opinion the special master said:

"Considering these exhibits from a purely theoretical point of view and without any conscious or subconscious desire to figure the profits up or down, there seems to be no reason to prefer any one of these three methods over another. All seem equally logical. Plaintiff's attorney selected Exhibit 264 (the third method) as most accurately stating the profits which the defendant received from the sale of the manifolds. He, however, gave no satisfactory reasons for his preference, and the accountant who made up the exhibits expressed no preference of one over another. There is nothing in the testimony which would justify a decision in favor of one rather than another of the three exhibits. This fact alone casts serious doubt on the propriety of selecting any one of them, since a theory which leads to such diverse results on equally logical grounds is obviously of doubtful validity.

"There is, moreover, a compelling reason for disregarding the results arrived at in all three exhibits. They are all based on the assumption that the profit which the defendant derived from the manufacture and sale of the infringing manifolds is to be determined with reference to their efficiency as compared with that of the island manifold previously used by defendant. There is no sufficient proof that this increase in efficiency increased the number of cars sold or the amount of profits per car received. There was an increase in defendant's production following the adoption of the infringing manifolds but it is not shown that it was caused thereby. Presumably this increased efficiency, to the extent that it was known to the public, operated, in connection with a number of other factors, to increase the sale of the cars, but there is no evidence which would justify the assumption that the profit on the cars increased in the same ratio (or even in any substantial degree), as the increase in efficiency, even assuming that the island manifold should be accepted as the standard of comparison. For this reason I am unable to accept as even approximately accurate the profits shown by plaintiff's Exhibits 259, 261 and 264.

"Plaintiff's Exhibit 262 purports to show the savings which resulted to the defendant from the use of the infringing manifold. The exhibit indicates savings of $3,862,229.20 from the use of manifolds sold with cars. The exhibit apparently is based on the theory that the defendant's manufacturing cost of the cars containing the infringing manifold was reduced to the extent shown by reason of the increased horsepower resulting from the use of the infringing manifolds. There is nothing in the testimony to show that the defendant in fact made any savings by the use of the infringing manifolds. The computation apparently assumes that the defendant, if it had not used the infringing manifolds, would have been forced to increase the horsepower of its cars to an equivalent extent by other means. There is no basis for this assumption in the evidence.

"I find and conclude, therefore, that the plaintiff has not established the profits, if any, which the defendant made from the infringing manifolds sold integrally with automobiles."

This finding is supported by conclusions reached in litigation over the patent. In our prior decisions we found that the first group of manifolds, that infringed the patent, produced no better results than the second group that did not infringe; and the decision in a more recent case, Swan Carburetor Co. v. Chrysler Corp., 6 Cir., 130 F.2d 391, seems to be in accord with the view we have taken that the earlier Matheson manifold, upon which the defendant's second group of manifolds was based, was not a failure but a substantial success. Moreover, the manufacture and sale of Swan manifolds under license has been abandoned to a large extent and it seems clear that the invention did not actually have the merit which it was formerly supposed to possess. Our conclusion is that the...