Opinion
Nos. 3507, 3530.
June 30, 1926. Rehearing Denied September 29, 1926.
Appeals from the District Court of the United States for the Eastern Division of the Northern District of Illinois.
Patent infringement suit by the Alvey-Ferguson Company against the Peter Schoenhofen Brewing Company. Decree overruling exceptions to master's report on accounting, and both parties appeal. Affirmed.
See, also, 245 F. 762; 257 F. 314, 168 C.C.A. 398.
Paul N. Critchlow, of Pittsburgh, Pa., for plaintiff.
George A. Chritton, of Chicago, Ill., for defendant.
Before ALSCHULER, PAGE, and ANDERSON, Circuit Judges.
The Alvey-Ferguson Company brought suit against the Peter Schoenhofen Brewing Company upon three patents. One was withdrawn before the hearing, one was held invalid as to the claims sued on, and the third was held valid and infringed. This last patent was issued May 23, 1905. The parties will be referred to as they appeared in the court below.
Before the defendant installed the first infringing device, plaintiff received information of its intention to do so, and on January 28, 1907, notified defendant that it would be sued as an infringer if it did. Nevertheless the infringing device was installed, and altogether 15 of such devices were put in and used during the accounting period. The suit was brought June 8, 1908. The decree adjudging the patent valid and infringed was entered November 9, 1917. On appeal to this court the decree was affirmed January 7, 1919, and the mandate issued March 3, 1919. The accounting before the master began April 3, 1919, and the master's report was filed January 29, 1923. The claim made before the master was for savings only. Exceptions were filed to the master's report by both parties. These were overruled by the court, and the decree now appealed from was entered September 15, 1924.
On the 3d day of April, 1919, the master called upon the defendant to file an account under equity rule 63. On May 8, 1919, the defendant filed with the master a statement to which exceptions were filed. Thereupon the plaintiff procured the services of a public accountant, Greene, who examined the books, records, and papers of defendant company, and made statements purporting to show the savings made by the defendant through the use of the infringing conveyors. The defendant also procured an accountant, Grant, who examined the books and records and stated the account for it. The conclusions reached by these accountants differed largely. The defendant's officers were examined for the purpose of ascertaining facts upon which to base a more accurate accounting. The conditions encountered were difficult. It does not appear that the defendant gave much assistance in the endeavor to get at the facts. The master in his report says:
"The defendant put forth no effort to assist the plaintiff in reaching conclusions as to whether savings had been made, and, if so, to what extent. The account filed under equity rule 63 gave no information of any value to the plaintiff or to the master. Instead of stating facts and furnishing figures upon which an account might be stated, it dealt in conclusions and arguments, and asserted that it was difficult to state gains, profits, and advantages derived from the infringing conveyors, and that it was exceedingly questionable whether any gains, profits, or advantages had been derived. The failure of the defendant to furnish an account and the conditions hereinafter stated made it necessary for plaintiff to arrive at the gains and savings as near as possible without defendant's aid, and Greene was employed for that purpose. He encountered conditions that rendered his work difficult."
After stating what those conditions were — the state of the records of the bottling department; the fact that certain pay rolls had been destroyed while the suit was pending, some after the case had been referred to the master — the master in his report gave the history of the efforts made on the part of the plaintiff to develop the facts upon which a proper accounting could be made. Some tangible evidence having been extracted from the defendant, plaintiff's accountant submitted two schedules of the account, one called A and the other B. Under A the accountant stated the savings as $98,350.02, under B the amount was stated to be $49,588.25. The master concluded the larger amount was the proper one and recommended it in his report. The court differed from the master, took the smaller amount, and entered its decree for that sum. Exceptions were filed to the report, which were overruled by the court, and the master's report was approved, except as to the amount of the decree as above stated.
The defendant has assigned 15 errors. To notice them all would unduly extend this opinion, and we can only notice those which were particularly stressed upon the hearing and are insisted upon in the brief. The defendant insists that a certain construction which it introduced in evidence to furnish a standard of comparison, the Tidewater construction, is an anticipation of the patent, and urges it as a ground for now holding the patent invalid as to claims 1, 2, and 3. This Tidewater construction was known to the defendant prior to February 16, 1921, as a stipulation was that day filed showing that it was installed in the packing room of the case department of the Tidewater Oil Company in May, 1920. The defendant first presented this question in its brief filed here December 15, 1925. Thus about five years passed from the time of its discovery by the defendant and the presentation of it to the court for consideration. The practice in such case is well settled. But, whatever form it takes, it is after all essentially an application for a rehearing for newly discovered evidence. In such case, a party must move promptly after the discovery of the evidence, and an unexplained delay of five years precludes its consideration now. We know of no practice, such as is sought to be invoked here, of bringing the matter to the attention of the court upon an appeal from an accounting. It cannot, therefore, receive favorable consideration.
The principal assignments of error insisted upon by the defendant are those which relate to what it calls its standards of comparison. The complaint is that the master and the court below disregarded this proof of the defendant entirely. The ground of this insistence appears to be the fact that the master and the court put more reliance upon other evidence and based their findings upon it. Much argument is indulged in, in the briefs, and many authorities are cited upon the law, as to standards of comparison; the principal dispute being whether the standard should be in existence at the date of the patent or at the time of the infringing acts. It is not necessary to decide this dispute. It is enough to say that in this case the evidence upon the standards is not sufficiently clear and definite to warrant the inference sought to be drawn from it. The circumstances under which the infringement was begun and carried on do not put the defendant in a favorable position to urge this defense. As the master said in his report:
"The defendant was aware of plaintiff's patent, and had been warned by the letter of January 28, 1907, before any infringing conveyors had been installed, that if it should install the conveyor it then contemplated, and afterwards did install, it would thereby infringe plaintiff's patent and would be held responsible. The defendant knew about some or all of the conveyors now set up as standards of comparison before purchasing the first infringing conveyor, and might have selected any of them, instead of what it actually did select; but the engineers and those in control of defendant's affairs, knowing its necessities and limitations, the lay-out of its plant, the space to be used for such conveyors, the other apparatus in the plant with which the conveyors must be connected and co-operate, and all the other conditions that must be considered in settling a question of this kind, regardless of the warning and knowledge in that respect, declined to accept any other than the infringing conveyor. The first infringing conveyor was installed towards the end of the fiscal year 1907, and defendant thereafter gradually increased the number until at least 15 were installed and in operation in the plant; and all, except the first infringing conveyor, were installed after this suit was begun. These conveyors were kept in repair and when worn out were replaced.
"It is fair to assume that the defendant regarded the infringing conveyor as more desirable than any other conveyor on the market, and was willing to take the chance of litigation with the plaintiff, rather than to change from the infringing conveyor to others that are now suggested as standards of comparison."
The defendant further complains that the accountant in his report, and the master and the court in reviewing the evidence, not being able to segregate the savings attributable to the particular elements of the invention, took the savings in the department in which the invention was used, and thus included savings that could not in any proper sense be attributable to the use of the invention. If this be true, the authorities warrant it. Westinghouse v. Wagner, 225 U.S. 604, 32 S. Ct. 691, 56 L. Ed. 1222. The defendant, with notice that it was about to infringe in the beginning and with the suit pending against it, and in defiance of the decree of the trial court finding the patent valid and infringed and ordering an accounting, continued the infringement, and after the affirmance by this court destroyed certain records, failed to comply with rule 63, denied that there were any savings, and threw obstructions in the way of the accounting. Under such circumstances the defendant cannot complain of the inability of the plaintiff to accurately segregate the savings attributable to the invention alone from those shown in the department in which it was used. This was the view taken by the master in adopting the larger amount as shown by schedule A, but the court favored the defendant by adopting the smaller amount.
The plaintiff also complains of the decree and has filed seven assignments of error. Upon the hearing Nos. 3, 4, and 6 were withdrawn, and plaintiff's counsel then stated that his only contentions were that the court should not have lowered the amount which the master found and should have allowed punitive damages. The court took the amount shown in schedule B, because he thought it was an approximate apportionment of the savings. This view is supported by the fact that, while in other respects B is substantially identical with A, there is included in A and left out of B two considerable items which appear to have no necessary relation to savings attributable to the use of the particular device. From the history of this case recited above, it appears that more than 18 years have elapsed since the litigation commenced. For some reason the interlocutory decree by which the validity and infringement of the patent were adjudged was not entered until more than 9 years after the beginning of the suit. In the absence of certain records efforts were made to search the memories of witnesses. Many uncertainties entered into the calculations of the accountants due to the situation and the delays, and we cannot now say that the court erred in choosing the smaller instead of the larger amount.
The assessment of punitive damages is a matter of discretion, and it is not clear, everything considered, that the court abused its discretion in refusing to assess such damages.
The decree is affirmed.