Yesbera v. Hardesty Mfg. Co.

• Decision Date: 23 December 1908
• Docket Number: 1823,1824.
• Citation: 166 F. 120
• Parties: YESBERA v. HARDESTY MFG. CO. HARDESTY MFG. CO. v. YESBERA.
• Court: U.S. Court of Appeals — Sixth Circuit

166 F. 120

YESBERA v. HARDESTY MFG. CO.

HARDESTY MFG. CO. v. YESBERA.

Nos. 1823, 1824.

United States Court of Appeals, Sixth Circuit.

December 23, 1908

Almon Hall, for Yesbera.

Wilbur Owen, for Hardesty Mfg. Co.

Before LURTON, SEVERENS, and RICHARDS, Circuit Judges.

SEVERENS Circuit Judge.

These are cross-appeals taken from the final decree of the Circuit Court in a patent case which has been twice before this court, first on appeal from a decree dismissing the bill on demurrer, upon the ground that the patent was invalid, 111 F 386, 49 C.C.A. 397, when the decree was reversed, and again on appeal from a decree dismissing the bill at the hearing on pleadings and proofs on the same ground as before, 133 F 916, 67 C.C.A. 210, when the patent was held valid and the decree reversed.

The cause was remanded with directions to enter a decree for the complainant, and an ascertainment of the profits and damages to which the complainant was held entitled in consequence of the infringement of which the defendant was adjudged guilty. The decree which we ordered was entered, and a reference to the master to take an account of profits and damages was included in the decree. The result of the reference was a report from the master filed May 28, 1907, and a supplemental and final report filed June 7, 1907, from which it appears that the master found the complainant entitled to recover profits in the amount of $2,673.42, but nothing for damages. Exceptions to the report were taken by each of the parties all of which were overruled by the court, as was also a motion made by the complainant, upon the provision of the statute in that regard, for an increase of the sum which should be found due by the court for damages. A decree was passed conforming to the master's report. The complainant's contentions are, in substance, that the court below erred in that it did not decree an adequate sum for profits; that the court erred in allowing an excessive commission to defendant's agents for making sales; and that the court erred in not allowing the complainant substantial damages, and in not awarding an increase thereof. The defendant complains that the court allowed any profits whatever to be recovered. The contention of the defendant is related to that of the complainant that the allowance for profits was too small; and they make but one topic.

By the order of reference, the defendant, his attorneys, agents, clerks, etc., were directed to attend before the master, and to produce before him such account or business books, papers, vouchers, and documents as the master should require. It appears from the master's report that upon the opening of the proceedings before him the master, on motion of counsel for the complainant, ordered the defendant to produce the books and papers mentioned in the court's order. The order not being complied with, a subpoena duces tecum issued directed to the defendant requiring him to appear forthwith and bring with him 'all books, papers, and cards and written records then existing, involving in any wise automatic stools made and sold in infringement of the complainant's patent. ' The defendant did not appear, but instead his bookkeeper came, and produced a package of account cards, and a statement of sales, all relating to sales made during the first 10 months of 1904; and he testified that these were all the records they had of the infringing sales, and that they could find no records going back of 1904. The infringement complained of extended from the year 1898 to the end of 1904. This suit was begun on April 12, 1899. And, there being no restraining order against him, the defendant continued the business until the final decree was pronounced by this court sustaining the patent. Notwithstanding the representations made and sworn to by the defendant and his bookkeeper that the account cards produced as above showed all the sales made during the 10 months of 1904, and that they amounted to only 565 stools, the complainant's counsel was able from these and other sources to prove that during that year there had been actual sales to the number of 1,171, and the master so finds, adding that 'there may have been a much greater number of such stools made and sold in 1904 and each of the preceding years, but, on account of the nonproduction of the books and accounts of defendant or other satisfactory evidence, no accurate statement can be made by the master.'

It is evident that the master believed, what no one else could help believing, that the defendant's books, if produced, would prove what number of stools the defendant had sold, or that, if no record of any kind had been kept, it must have been for the purpose of concealment and making the proof of the extent of the infringement difficult, if not impossible. It was shown by those in the employment of the defendant, among them a bookkeeper, that books had been kept, but were lost or had been destroyed; but no one testifies how or when they could have been lost or destroyed. The guarded and vague replies of the defendant and his bookkeeper to questions put to them in regard to the books and records kept in the business must have been unsatisfactory to the master, for though in his first report he was charitable enough to say that he was not disposed to charge them with dishonesty, yet in his final report he says:

'Since the filing of my draft report, I have re-read all the testimony and reconsidered it. At the time I filed the report, I was desirous of arriving at a conclusion that would not reflect upon the honesty and integrity of witnesses, but I am now forced to the conclusion that the books, cards, and records that would be the best evidence of the number of automatic stools sold and the prices received have been willfully withheld. Mr. Ellsworth, the bookkeeper protests that he does not know of any destruction of such evidence, and very adroitly avoids an opinion as to the whereabouts of the books; but I am convinced, and so find, that if he does not know where these documents are, he knows the name of the person who does know, and that their production was possible at any time during the inquest as to profits, if Mr. Yesbera had so ordered.'

And if the books had not been lost or destroyed, in proof of which there was nothing but the vague suggestions of these witnesses, no one who reads this record could fail to agree with the master in his final conclusion. The master's report of the proceeding before him fills 230 or more pages of the printed record, and shows a long but unavailing endeavor to elicit from the defendant the proof which would have made it easily possible for the master to make a right and just report upon the subject of the reference. It may be that more stringent measures might have been taken to enforce the order of the court, if, as the master believed, the defendant had the control of the missing books and records. But the defendant cannot complain of that. His failure or refusal to produce the most satisfactory evidence leaves his case exposed to the presumption that if produced it would tell against him, and compels the court to rely on the less definite and certain evidence which the record may supply. This is a rule by which the courts are governed. If they fail to observe it, the rights of parties may utterly fail of protection.

Authority for these views is found in many decisions. In Rubber Company v. Goodyear, 9 Wall. 788, 19 L.Ed. 566, the manner of doing business by the infringer is described by the court at 9 Wall. 802, 19 L.Ed. 570, where it is said:

'The Providence Company manufactured articles covered and not covered by the patent in question. No separate account was kept as to their respective cost and profit. The business as to both was so intermingled and confused that approximate results only were possible; and these were attainable by but one process.'

And the process approved was based upon the assumption that the profits on the patented articles were the same as those on the unpatented articles. There was no proof that they were exactly the same, but that afforded the best basis for an approximation that could be found in the record. Then (9 Wall. 803, 19 L.Ed. 571) the court, by Mr. Justice Swayne, referring to the defendant's contention that there should be a deduction of the profits on unpatented articles, said:

'He (the master) refused to allow the profits due to elements not patented which entered into the composition of the patented articles. There may be cases in which such an allowance would be proper. This is not one of them. The manner in which the books of the Providence Company were kept renders such an account impossible as to the business done in their name. The conduct of the defendants in this respect has not been such as to commend them to the favor of a court of equity. Under the circumstances, every doubt and difficulty should be resolved against them. The allowance was properly denied'-- citing Lupton v. White, 15 Ves. 432, and other cases.

Lupton v. White was also cited as one of the authorities on which Chancellor Kent affirmed the same principle in Hart v Ten Eyck, 2 Johns.Ch. 62, 108. We have applied it to cases of accounting for profits in patent infringements in which there had been inequitable conduct in the management of the infringer's business or in withholding the evidence in his control which would most certainly prove the extent of his infringement. P.P. Mast & Co. v. Superior Drill Co., 154 F. 45, 57, 83 C.C.A. 157; Brennan & Co. v. Dowagiac Mfg. Co. (C.C.A.) 162 F. 472; Dowagiac Mfg. Co. v. Superior Drill Co. (C.C.A.) 162 F. 479. To the same point is Wales v. Waterbury, 101 F. 126, 41 C.C.A. 250, of the Second Circuit, a patent case. Other cases decided upon the...