Petition — United States v. Pitcairn

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MICHAPL ROBAK, JR.CLERK

Supreme Court, U. &

No. EILEQ |

In the Supreme Court of the Un |

OCTOBER TERM, 1977

77-665 !

UNITED STATES OF AMERICA, PETITIONER

Vv.

STEPHEN PITCAIRN, Agent for Shareholders of

Autogiro Company of America

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF CLAIMS

WADE H. McCREE, JR.,

Solicitor General,

BARBARA ALLEN BABCOCK,

Assistant Attorney General,

STUART A. SMITH,

Assistant to the Solicitor General,

Vito J. DIPIETRO,

B. FREDERICK BUCHAN, JR.,

THOMAS J. SCOTT, JR.,

Attorneys,

Department of Justice,

Washington, D.C. 20530.

_ OOOO Om————

INDEX

Page

LILI 1

I oe 2

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a ascertains 3

Es 3

Reasons for granting the writ | . 10

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CITATIONS

Cases:

Autogiro Company of America v. United

States, 384 F.2d 391 - 4

Calhoun v. United States, 453 F. 2d 1385. 12

Crozier v. Krupp, 224 U.S. 290 —s«d*'AL -12

Irving Air Chute Co. v. United States, 93

F. Supp. 633 - i Le 12

Rude v. Westcott, 130 U.S. 152 - ae 13

Sharp v. United States, 191 U.S. 341 _.. 18,16

Waite v. United States, 282 U.S. 508 11

Statute:

28 U.S.C. 1498 ' cal 15

28 U.S.C. 1498 (a) 2, 3, 4, 10, 11, 16

Iu the Supreme Court of the United States

OCTOBER TERM, 1977

No.

UNITED STATES OF AMERICA, PETITIONER

Vv.

STEPHEN PITCAIRN, Agent for Shareholders of

Autogiro Company of America

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF CLAIMS

The Solicitor General, on behalf of the United

States of America, petitions for a writ of certiorari

to review the judgment of the United States Court

of Claims in this case.

OPINIONS BELOW

The opinion of the trial judge of tne Court of

Claims (App. A, infra, pp. la-3la) is not officially

reported. The opinion of the Court of Claims (App.

B, infra, pp. 32a-108a), as amended on rehearing

(App. C, infra, pp. 109a-112a), is reported at 547

F.2d 1106.’

1 We have not reproduced the trial judge’s findings of fact

or his two opinions on remand concerning the computation

of the damages because they do not bear upon the questions

(1)

JURISDICTION

The Court of Claims announced its opinion with

respect to the questions presented here on Decem-

ber 15, 1976, and, except for amendments to its orig-

inal opinion, denied both parties’ motions for re-

hearing on March 4, 1977 (App. C, infra, pp. 109a-

112a). The final judgment of the Court of Claims was

entered on July 12, 1977 (App. D, infra, pp. 113a-

115a). By order dated October 6, 1977, the Chief

Justice extended the time for filing a petition for a

writ of certiorari to and including November 9, 1977,

without prejudice to the Court’s consideration of

whether the application was timely filed. The ju-

risdiction of this Court is invoked under 28 U.S.C.

1255(1).

QUESTIONS PRESENTED

This case raises two interrelated questions concern-

ing the determination of “reasonable and entire com-

pensation” due to a patent holder as a result of the

government’s use of his patents under 28 U.S.C.

1498 (a):

1. Whether such compensation may be measured

solely by licensing offers that were not accepted and

by a licensing agreement’s royalty provision that was

never implemented.

2. Whether amounts actually paid under a licens-

ing agreement (and, inferentially, the patent holder’s

low rejected sales offers) may be disregarded on the

presented. However, for the convenience of the Court, we

have lodged with the Clerk copies of the trial judge’s find-

ings and of the opinions on remand.

theory that the government’s ability to use the pat-

ented invention without a license, subject to later

payment of statutory compensation, placed the patent

holder in a weak bargaining position vis-a-vis poten-

tial nongovernmental licensees or purchasers.

STATUTE INVOLVED

28 U.S.C. 1498(a) provides in pertinent part:

Whenever an invention described in and cov-

ered by a patent of the United States is used or

manufactured by or for the United States with-

out license of the owner thereof or lawful right

to use or manufacture the same, the owner’s

remedy shall be by action against the United

States in the Court of Claims for the recovery of

his reasonable and entire compensation for such

use and manufacture.

For the purposes of this section, the use or

manufacture of an invention described in and

covered by a patent of the United States by a

contractor, a subcontractor, or any person, firm,

or corporation for the Government and with the

authorization or ~ nsent of the Government, shall

be construed as use or manufacture for the

United States.

STATEMENT

Respondent is an agent for the former shareholders

of Autogiro Company of America.* In Autogiro

* Autogiro Company of America was liquidated in 1973 and

all of its assets, including the claims against the government

that are the subject of this case, were transferred to its share-

holders (App. B, infra, p. 34a). We therefore use the term

“respondent” to refer interchangeably to the agent and to the

corporation.

Company of America v. United States, 384 F.2d 391,

the Court of Claims upheld the validity of 59 patent

claims respecting 11 patents owned by respondents

covering various inventions pertaining to autogiros

or helicopters. The court further held that the ¢ov-

ernment had infringed certain of these patents as a

result of the manufacture of seven helicopter models

by contractors on behalf of the government (App. B,

infra, p. 34a).

The present phase of the litigation involves the

computation of the “reasonable and entire compensa-

tion” due to respondent under 28 U.S.C. 1498(a).

The recovery period runs from November 1946, when

the government first infringed one of the patents, un-

til May 1964, when the last patent expired (App. B,

infra, p. 43a).

1. Effective January 1, 1947, respondent entered

into a licensing agreement with United Aircraft Cor-

poration, the largest helicopter manufacturer at that

time. The agreement called for payment to respond-

ent of a royalty of $500 per aircraft for the period

ending December 31, 1948,° with the royalty to

change to two percent of the total retail sales

price as of January 1, 1949. The agreement could

be terminated at any time after December 31, 1948,

upon six months’ written notice (App. B, infra,

pp. 45a-46a and n. 7; Tr. 8614; see also App. B,

*The agreement provided that for the period before 1949

the minimum annual royalty would be $10,000 (App. B, infra,

pp. 538a-54a n. 16).

infra, p. 97a). After the United agreement was

executed, respondent proposed similar licenses to the

other major manufacturers of helicopters. However,

these companies refused to take licenses from

respondent (App. B, infra, p. 46a).

In 1948, United expressed its unwillingness to per-

mit the two percent rate to become effective and its in-

tent to cancel the agreement as of January 1, 1949.

United advised respondent, however, that it would be

willing to accept a paid-up license for $325,000,

less royalties previously paid. Respondent and United

thereupon commenced several months of negotiations,

in which respondent proposed that United purchase

the patents outright for $750,000 (App. B, infra,

p. 46a; Def. Ex. 17-3, pp. 7-10; Def. Exs. 19-8, 19-9,

19-10, 19-11 (offers of proof)).‘ Ultimately, re-

spondent accepted United’s offer to accept a fully

paid-up license for $325,000. Toward this purchase

price, United received a credit for the $294,261.26

in royalties it already had paid. Thus, in January

1949, United paid respondent the difference of $120,-

738.74 for the paid-up license (App. B, infra, pp.

95a-96a; Def. Ex. 17-6). The 1947 and 1949 United

licenses were the only ones actually granted by re-

* Respondent did not challenge the authenticity of the docu-

ments supporting the existence of its offer to sell the patents

and did not deny that the evidence established that it made

such an offer (see App. B, infra, p. 95a). However, over the

government’s objection, the trial judge excluded such evidence

on the ground that respondent’s offer was not evidence of the

value of the patents (see Tr. 8121-8124).

spondent from November 1946 until expiration of

the last patent in May 1964 (App. B, infra, p. 46a).

At trial, the government’s chief witness was Law-

rence Glassman, who had extensive experience in the

field of patents. In determining the “reasonable and

entire compensation” due respondent, Glassman com-

puted the actual and projected sales of licensed heli-

copters by United for the recovery period to be

$141,801,852. The total royalties paid by United to

respondent for this period under the two license agree-

ments was $184,238.74. Glassman then divided the

amount of royalties by the projected and actual sales

to arrive at a royalty rate of 0.1299 percent. Since

the government’s total helicopter procurement during

the recovery period was $639,243,969, Glassman con-

cluded that respondent was entitled to royalty com-

pensation of $830,377.92 ($639,243,969 x .001299)

(App. B, infra, pp. 102a-106a n. 3).

2. The trial judge rejected the relevance of the

. two operative United license agreements in determin-

ing the “reasonable and entire compensation” due re-

spondent. In his view, these negotiated agreements

were not material because they were concluded after

the date upon which the infringement began (App.

A, infra, p. 15a). Pursuant to the trial judge’s analy-

sis, the initial infringement was a taking of respond-

° After working as a Patent Examiner for four years, Glass-

man performed patent work for the Army Material Command,

including the negotiation of license agreements and settle-

ment of infringement claims (App. B, infra, pp. 10la-102a).

ent’s entire property (App. B, mfra, p. 43a). He

thereafter concluded that the appropriate measure of

royalty compensation was $24,570,525, i.e., approxi-

mately 3.85 percent of the total procurement cost of

$639,243,969 (App. A, infra, p. 16a).

3. In a per curiam opinion, the Court of Claims

upheld the compensation award to the extent of

$14,440,772 (App. B, infra, pp. 32a-72a; App. D,

infra, p. 114a). The court held that the trial judge

was wrong in failing to consider the 1947 licensing

agreement between respondent and United in fixing

the compensation due respondent. As the court ex-

plained, the fact that this agreement was entered into

after the date of the first infringement did not de-

tract from its evidentiary value in computing the

compensation, since the infringements occurred con-

tinuously throughout the recovery period from No-

vember 1946 to May 1964 (App. B, infra, pp. 42a-

43a).*

The court based its $14,440,772 compensation

award on the two percent royalty provision of the

1947 licensing agreement. Although the court ac-

knowledged that no royalties were ever paid at two

®*The court’s per curiam opinion was joined by only three

judges—Chief Judge Cowen and Judges Davis and Skelton

(App. B, infra, p. 40a n. 3). Judges Nichols and Kunzig con-

curred in the result (ibid.). In their view, “the Royalty Com-

pensation should be at leasi as much as the conclusions stated

in * * * [the per curiam opinion] * * * and, indeed, consider-

ably larger yet” (App. B, infra, p. 72a). They would have

awarded $20 million in royalty compensation (App. B, infra,

p. 77a).

percent because that rate never became effective, it

concluded that the two percent figure was “highly

probative” (App. B, infra, p. 49a) of the value of

the patents because “[respondent] proposed similar

licenses to other majo’ manufacturers of helicopters,

in effect announcing its post-war rate to be 2%”

(App. B, infra, p. 46a). In the court’s view, the

refusal of the aircraft companies to enter into license

agreements with respondent on a two percent basis

was outweighed by the “significant fact * * * that

* * * Trespondent| made the offer and made it widely”

(App. B, infra, p. 46a). The court rejected the rele-

vance of the subsequent paid-up license agreement as

an indicium of value, because it viewed that agree-

ment as the product of “one-sided litigation pressure”

by United upon respondent (App. B, infra, p. 52a).

Accordingly, it ruled that “the 2% rate should be

accepted for all infringements” (App. B, infra, p.

5la).’

Judges Kashiwa and Bennett dissented (App. B,

infra, pp. 83a-108a). They would have limited re-

spondent’s royalty compensation to $830,377.92, in

accordance with the analysis of the government’s ex-

pert. In their view, respondent’s two percent arrange-

ment with United was not a reliable gauge of the

patents’ market value because no royalties were ever

paid under that agreement. Since the two percent

’ For the period prior to January 1, 1949, the court applied

the $500 per aircraft royalty and the $10,000 minimum annual

royalty of the 1947 agreement. From January 1, 1949, it ap-

plied the two percent rate (App. B, infra, pp. 53a-54a n. 16).

formula was superseded by a paid-up license, the dis-

senting judges concluded that the lower rate of that

paid-up license placed a ceiling on the amount of

respondent’s recovery. As Judge Kashiwa stated, “To

view the case otherwise is simply to ignore the market

value which * * * [respondent] itself placed on a

license under its patents” (App. B, infra, p. 97a).°

* After the Court of Claims announced its opinion on De-

cember 15, 1976, both parties filed timely motions for rehear-

ing. Pursuant to these motions, the court modified its opinion

on March 4, 1977, in two important respects. At respondent’s

request, it enlarged the procurement base from total airframe

price to total retail sales value so as to include helicopter en-

gines and standard equipment in the procurement base. At

the government’s request, it clarified respomdent’s inability

to claim $1.6 million of attorneys’ fees, witness’ fees, and ex-

penses (App. C, infra, pp. 109a-112a; see also Xpp. B, infra,

pp. 60a-61a). As provided in the court’s original opinion, the

case was remanded to the trial judge for computation of the

amount of the recovery (App. C, infra, p. 101a).

In a memorandum opinion of March 30, 1977, the trial judge

held that the retail sales value against which the royalty rate

was to be applied should be increased 40 percent to take into

account the value of the engines and standard equipment. The

government excepted to this decision. On June 21, 1977, the

Court of Claims held that the trial judge’s 40 percent increase

was wrong and that the proper increase was 10 percent in

accordance with the government’s submission. On June 24,

1977, the trial judge entered a second memorandum opinion

setting forth a proposed judgment. The government further

excepted to the trial judge’s second opinion on the ground that

the two percent royalty rate did not apply to some of the pro-

curement. On July 12, 1977, the Court of Claims rejected the

government’s second exception and entered final judgment

(App. D, infra, pp. 113a-115a).

REASONS FOR GRANTING THE WRIT

In awarding respondent $14.4 million—the largest

judgment ever rendered in favor of a patent holder

under 28 U.S.C. 1498(a)—the Court of Claims de-

parted from the longstanding rule, well established

by prior decisions of this Court, that unaccepted offers

and other indicia that have not met the test of the

marketplace may not be used as affirmative evidence

of the value of property taken or used by the govern-

ment. The Court of Claims held that the value of

the patents at issue here was not less than the value

placed upon them by respondent’s rejected licensing

offers and by the royalty provision of a licensing

agreement that never became effective and under

which no royalties were ever paid. In so ruling, the

court rejected, on grounds that will be present in

almost every action under 28 U.S.C. 1498(a), the

value of the patents established by a licensing agree-

ment that did become effective, and it ignored the

fact that respondent had unsuccessfully attempted to

sell its entire rights in the patents for approximately

five percent of the value the court placed upon the

government’s mere nonexclusive use of the patented

inventions.

The decision below threatens to increase drastically

the amounts of judgments against the government in

patent infringement and cognate eminent comain

suits. Its logic will permit claimants to prove value

on the basis of unaccepted offers and unimplemented

contracts, and will require substantial discounting

of the evidence afforded by arm’s length agreements

between nongovernmental parties. In particular, the

holding below exposes the government to respondent’s

claims for almost $100 million in additional compen-

sation arising out of similar facts.

Since the Court of Claims is the only forum em-

powered to hear patent infringement suits against

the government under 28 U.S.C. 1498(a), no square

conflict of decisions will ever arise among the lower

federal covrts. This Court therefore should review

this case ii’ order to reaffirm the prior settled under-

standing that the proper measure of damages in such

cases is established by operative licensing agreements

to which the patent holder is a party, and thereby to

assure that the government is not required substan-

tially to overpay for its lawful use of patented in-

ventions.

1. The use or manufacture by or for the govern-

ment of a device or machine embodying any invention

protected by a United States patent is a taking of

property under its power of eminent domain. The

nature of the property taken is a license in the patent,

which continues throughout the life of the patent or

the period of the infringing procurement, whichever

is shorter. Thus, the appropriate measure of damages

in a suit by a patent holder against the government

under 28 U.S.C. 1498(a) for “reasonable and entire

compensation” is the royalties that would have been

payable under a comparable license of the patent, so

as “to accomplish complete justice as between the

plaintiff and the United States.” Waite v. United

States, 282 U.S. 508, 509. See also Crozier v. Krupp,

224 U.S. 290, 305-308; Calhoun v. United States, 453

F.2d 1385, 1391 (Ct. Cl.); Irving Air Chute Co. v.

United. States, 93 F. Supp. 633 (Ct. Cl.).

Here, the recovery period ran from November 1946

to May 1964. During that period, respondent re-

ceived royalties under two different licensing agree-

ments with United Aircraft Corporation. Under the

first agreement, effective as of January 1, 1947,

United paid respondent a royalty of $500 per «ir-

craft manufactured to and including December 31,

1948. Although the parties had provided in that

agreement for a two percent royalty from and after

January 1, 1949, that provision was subject to termi-

nation upon prior notice; United never permitted the

provision to go into effect but instead obtained a

paid-up license from respondent for a net price of

approximately $120,000, which was equivalent to a

royalty rate of 0.1299 percent. The two percent roy-

alty provision thus was akin to an option that United

chose not to exercise.

In fixing the compensation award on the basis of

the unimplemented royalty provision of the 1947

agreement, the Court of Claims relied upon the fact

that respondent “proposed similar licenses to other

major manufacturers of helicopters, in effect announc-

ing its post-war rate to be 2%” (App. B, infra, p.

46a). The court further observed, “These companies

all refused to take licenses but the significant fact is

that * * * [respondent] made the offer and made it

widely” (ibid.).

It requires little citation of authority to demon-

strate the error of the court’s reasoning. If the gov-

ernment exercises its power of eminent domain to

take property having a fair market value of $1,000,

the fact that the owner, anticipating that he will be

compensated for the taking, has offered the property

for sale widely at $1 million must have no significance

if no one is willing to pay such a price.’ A determi-

nation of the market value of property taken or used

by the government cannot rest upon unaccepted offers

or unexercised options. See Sharp v. United States,

191 U.S. 341, 349.

Moreover, ihe decision below conflicts with the rule

established by this Court almost a century ago in

Rude v. Westcott, 130 U.S. 152, 165, that “[i]n order

that a royalty may be accepted as a measure of dam-

ages against an infringer, who is a stranger to the

license establishing it, * * * it must he paid by such

a number of persons as to indicate a general acquies-

cence in its reasonableness by those who have occasion

to use the invention * * *.” Under this test, respond-

ent’s mere offers of a two percent royalty for its pat-

ents are irrelevant to the measure of its “reasonable

and entire compensation,” since the entire industry

refused to accept such a licensing agreement. Indeed,

®In most cases, of course, an owner’s rejected sale offer in-

dicates the maximum value that may be attributed to the

property and thereby serves to place a ceiling upon permis-

sible compensation. Here, respondent offered to sell the pat-

ents for $750,000, a price that should have set an approximate

ceiling on the compensation payable for their use. See pp. 14-

16, infra.

United, which had secured the option of licensing at

such a royalty rate from and after January 1, 1949,

chose not to exercise that ontion and terminated its

licensing agreement before that royalty provision be-

came effective. Since the two percent royalty provision

never became effective, and no one ever paid re-

spondent that royalty during the recovery period, the

presence of that provision in the contract with United

is no more probative of value than are respondent’s

many unaccepted offers.

2. The Court of Claims further erred in rejecting

the implemented paid-up licensing agreement between

respondent and United as the proper measure of

compensation. Apart from the 1947 agreement, which

provided for a royalty of $500 per aircraft for the

period ending December 31, 1948, the only operative

licensing agreement to which respondent was a party

during the recovery period was the paid-up license it

granted United for approximately $120,000. Since

respondent gave United a license covering all of the

patents in issue for only $120,000, and had been will-

ing to sell the patents outright for $750,000 (see

App. B, infra, p. 95a), the $14.4 million judgment

awarded by the court bears no reasonable relation-

ship to the actual market value of the government’s

use of the patented invention through procurement

from unlicensed manufacturers.

The court attempted to dismiss the probative value

of the paid-up license agreement (and, inferentally,

of respondent’s offer to sell) by characterizing it as a

product of United’s “strong insistence” and ‘one-sided

litigation pressure” and respondent’s “hobbled posi-

eet wee

tion” (App. B, infra, p. 52a). In the court’s view, re-

spondent’s “situation was unusual in that the Govern-

ment was the dominant consumer of the articles em-

bodying the patents, and this put * * * [respondent]

to a disadvantage since it was very unlikely that an

injunction could be obtained against United (or other

infringers)” (App. B, infra, p. 51a).

But the government’s position as the dominant con-

sumer, and the fact that, with respect to sales to the

government by unlicensed manufacturers, respondent

was limited to the remedy of an action for compensa-

tion under 28 U.S.C. 1498, do not justify the court’s

conclusion that respondent was placed in a weakened

bargaining position. Actually, the opposite conclu-

sion is required. That the government is the dominant

user of a patented invention and may use it without

a license actually strengthens a patent holder’s hand

in dealing with potential licensees. In such circum-

stances, the patent holder knows that being a hard-

nosed bargainer entails little risk that refusal of his

offer will result in nonuse of the patent; the patent

will be used, and he will receive “reasonable and

entire compensation,” even if he refuses to grant a

license. Such a patent holder therefore has little to

lose from holding out for the last dollar in his nego-

tiations with potential licensees, especially since he

knows that the price established by such negotiations

may govern the measurement of compensation pay-

able by the government.” In this case, the basis for

‘© Indeed, the Court of Claims itself implicitly recognized

these considerations when it noted, in connection with the

earlier agreement between respondent and United, “The rec-

the reduced price established by the 1949 agreement

was both parties’ realization that the value of the

patents was declining (see App. B, infra, pp. 48a and

49a n. 11), not any “hobbled position” in which re-

spondent found itself.

3. The decision below invites claimants in patent

infringement and eminent domain suits against the

government to introduce self-serving evidence of un-

accepted offers and unimplemented contracts as proof

of value. The potential for abuse is obvious. Unac-

cepted offers, as this Court observed in Sharp v.

United States, supra, 191 U.S. at 349, “do not tend

to show value, and they are unsatisfactory, easy of

fabrication and even dangerous in their character as

evidence upon this subject.” Moreover, in a very high

proportion of cases under 28 U.S.C. 1498(a), the gov-

ernment will be a dominant or substantial user of the

patented invention at issue, thus triggering the court’s

disregard for actual market value as established in

arm’s length bargaining between the patent holders

and third persons.

The decision in this case therefore augurs vastly

larger judgments in patent compensation actions. In-

deed, in two other infringement actions, brought by

respondent invelving other helicopter patents, respond-

ord does not show that the 1947 United License was a one-

sided effort by United to force * * * [respondent] to compro-

mise its true position or face years of grinding litigation in

this court under 28 U.S.C. § 1498” (App. B, infra, p. 47a).

Nothing occurred between 1947 and 1949 to alter the essen-

tial bargaining positions of respondent and United as willing

seller and buyer.

ent has asserted the unused two percent royalty rate

approved by the decision below as res judicata in

support of its further claims with respect to a poten-

tial procurement base of $4.5 billion. Pitcairn v.

United States, Nos. 22-60 and 188-63. If the patents

in those cases are found to be valid and infringed,

the two percent rate will result in an award of $90

million, excluding delay compensation. The immedi-

ate impact of the decision below upon the govern-

ment’s ability to defend those actions, and its poten-

tial fiscal impact in other cases, warrants review by

this Court.

CONCLUSION

The petition for a writ of certiorari should be

granted.

Respectfully submitted.

WADE H. McCCREE, JR.,

Solicitor General.

BARBARA ALLEN BABCOCK,

Assistant Attorney General.

STUART A. SMITH,

Assistant to the Solicitor General.

Vito J. DIPIETRO,

B. FREDERICK BUCHAN, JR.,

THOMAS J. ScoTt, JR.,

Attorneys.

NOVEMBER 1977.

APPENDIX A

IN THE UNITED STATES COURT OF CLAIMS

TRIAL DIVISION E

No. 50328

(Filed: November 13, 1975)

STEPHEN PITCAIRN, AGENT

(Substituted for Autogiro Company of America)

THE UNITED STATES

J. Edward Shinn, attorney of record for plait.tiff,

John J. McAleese, Jr., of counsel.

B. Frederick Buchan, Jr., with whom was Assistant

Attorney General Rex E. Lee and Thomas J. Scott,

Jr., for defendant.

OPINION *

LANE, Trial Judge: ** In Autogiro Company of

America v. United States, 181 Ct. Cl. 55, 384 F.2d

* The trial judge’s recommended decision and conclusion of

law are submitted in accordance with Rule 134(h).

** Associate Judge, United States Court of Customs and

Patent Appeals, sitting by designations pursuant to 28 U.S.C.

§ 293(a) and 28 U.S.C. § 2505.

391, 155 USPQ 697 (1967), rehearing denied, 184

Ct. Cl. 801 (1968), some 59 patent claims in 11

patients owned by plaintiff were held to be valid and

specific patent claims were held to be infringed by

seven different models of helicopters manufactured

under contracts for defendant by Vertol, Hiller, Bell,

Kaman or McCulloch. In 1973, the Autogiro Com-

pany of America was liquidated, and all of its assets,

including its claims against the United States, one of

which is the subject matter of this action, were trans-

ferred to its stockholders who appointed Stephen Pit-

cairn as their Agent. Pursuant to motion filed Janu-

ary 30, 1974, unopposed by defendant, Stephen Pit-

cairn, Agent, was substituted for Autogiro Company

of America by the court’s order filed February 12,

1974.

The parties to this suit agreed that during the ac-

counting phase, both parties would have the right to

present evidence as to the similarity or non-similarity

between any model of rotary-wing aircraft or part

thereof on which no proofs of infringement were of-

fered at the original trial and those models of rotary-

wing aircraft on which proofs were offered and which

the court in its decision noted above found to infringe

any of the patents remaining in suit. The parties have

presented such proofs and have presented proof on

various methods of computing the reasonable and en-

tire compensation due plaintiff.

The main issues in the current phase of this litiga-

tion are (1) the similarity of non-similarity of some

89 models of rotary-wing aircraft to any of the seven

ao lt ere

Pere te ed SE eS OP ae

a ee ee ae ee ere TS

models which the court has already held to infringe

one or more valid patent claims, and (2) how to com-

pute the amount of the reasonable and entire com-

pensation which plaintiff is to recover under 28 U.S.C.

§ 1498, for defendant’s unauthorized use of plaintiff’s

inventions. After over 20 years of litigation, includ-

ing some 62 trial sessions for the testimony of 57 wit-

nesses on the two present issues, the parties are still

poles apart on the end result. Examination of the

voluminuous record shows that there is little the

parties can agree upon except that defendant spent

over $639 million, engine costs excluded, in the recov-

ery period, 1946-64, for over 2,200 rotary-wing

aircraft.

Defendant now contends that the maximum amount

of compensation which this court should allow is

$532,279. This represents compensation at a rate of

less than one percent, i.e., 0.0832 percent, on the total

procurement cost of $639,257,969. Defendant con-

tends that delay compensation (if any) should be com-

puted at the rates at which the defendant might have

borrowed money by hypothetical long term Govern-

ment bonds, the estimated rates varying from 2.4 per-

cent to 4.6 percent per annum, the average being 3.33

percent for the period 1947-75.

Plaintiff contends that “reasonable and entire com-

pensation” which this court should adopt should in-

clude royalties at established rates amounting to

$24,600,525, plus delay compensation amounting to

$27,851,192 through 1973, plus upward adjustment

by $15,034,439 of the royalties to compensate for

auoN

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(Z9-08-L/Sb-T8-L)

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(19-L2-8/F-82-2)

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(19-L2-8/bb-82-2)

996'brS'Z

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9886882

(09-F1-9/8F-ST-9)

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inflation, plus additional delay compensation for the

period 1974 to date of payment, a total of some

Spo Aepars

peyueselg

dem SJoolg AZlTe[IWIS

YY 07 eaneey jepow

SulSulszuy payoipn(py

swTeID

(uorjeridx gy /enssy

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The amount sought by plaintiff

y compen-

represents royalty compensation at a rate of 3.85 per-

cent o” the total procurement cost, and de

per annum, the average being 6.07 percent for the

period 1947-73. The patents, patent claims, and

models of rotary-wing aircraft now involved in this

litigation are identified in the following table.

sation at rates varying from 4 percent to 9 percent

$67,500,000 plus.

x ‘ , dt-HH ® (¥9-92-S/LP-LZ-S)

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(Z9-08-L/SP-18-L)

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I-duH (Z9-08-L/SP-18-L)

(¥S2-H) &-dOH 8 2-d NH PReseid/oueA = T-d DH PPPSBI /[OHPA G9 ¥ ¥9 ‘09 ‘6S ‘9S ess‘0se's

I-MZOH uewey =, {1 Z-H PPeseld/[O49A ¢ Pe ‘st »

8-NSG PI-NSC eusporsAy =—«s_- {13-1 PHP@SVI /[OWPA 0% ¥ 6I ‘ST ‘9T ‘S-T "

OI-HO P IP-HA BUSSAD «= I Z-H PH@SPIG/[OHPA 0% ¥ 61 ‘S-T »

at-AHA

9 €I-NH ‘VI-NH ‘TAH ‘OF-HA 9A = AT 2-H PHOSITA /[OHEA 02 ¥ 61 ‘S-T a

02 3 6T

& (V9F-HO) I-AUH ‘VI-OHA PRestig/PMeA = A 1Z-H PH9P8BI /[OHPA ‘ST ‘LI ‘OT ‘GS ‘b ‘eT -

(pP-A) 1Z-H ®

IZ-H ‘V1Z-H ‘1Z-HA PRe8BId/[OM9A = ATZ-H PPPS /[OHPA IZ-9T ‘ET ‘ZI ‘6-L “S-T -

(VLP-HO) Al-OH 02 ¥ 6L

‘(WLP-OHA) @T-OHA PP8StId/OMPA = T-d 1H PHP*SVIG /[OMPA ‘SI ‘LI ‘gt ‘e ‘pS ‘T o

1Z ¥ 02 ‘6t

2-dUH PPeseig/lOMeA = T-d NH PHPPSPIG/[OWPA ‘ST ‘OT ‘ZI ‘8 ‘L ‘S-T 0

Tz ¥ ‘02 ‘61 ‘9T ‘ST

T-duH Peserg/fOMeA = T-d 1H PPPSEIG/[OHPA ‘a1 ‘6 ‘8 ‘L‘S ‘8 ‘oT 0

(Z9-08-L/Sb-T8-L)

(¥S2-H) &-dNH ¥ 2-doH Ppeserd/foweA Td OH TydasVld /[OWIA 1Z-9T ‘SI ‘ZI ‘6-L “S-T Z89'088'%

S[epoyy ABlMUIS poyueseig swIe[) (uorjesidxg /anss]

a1aM Sjooig Ayaepiwig jo sayep pue)

YITYM 0} GAIPLTAY [EPOW JeqUINN jUIzeq

Susutsjuy payoipn(py

Findings of fact based on the evidence of record

accompany this opinion. Certain findings of fact con-

tained in the original trial report filed in 1965, as

listed in present finding 418, have been readopted

since they were not included in the court’s opinion.

These are reproduced as an appendix hereto for con-

venience.

Similarity

The order of the trial judge filed April 17, 1969

provided :

(1) In the proceedings herein under Rule 47

minations of infringement, the validity, or the

scope as construed by the court, of any claim

found by the court to be valid and infringed in

Autogiro Company of America v. United States,

181 Ct. Cl. 55, 384 F.2d 391 (1967), and

(2) The decision whether “other specified types

or models of aircraft or parts thereof, procured

by defendant” are infringing aircraft or parts

for which defendant is liable shall be based on

proofs of “similarity or non-similarity” of con-

struction and mode of operation between (a) such

other aircraft or parts and (b) those found by

the court to infringe. Marconi Wireless Tele-

graph Co. v. United States, 99 Ct. Cl. 1 (1942) ;

Fauber v. United States, 112 Ct. Cl. 302 (1948).

Neither party requested review or modification of that

order.

The evidence relating to the similarity or the iden-

tity between adjudicated infringing models and the

additional assertedly similar models consisted of com-

parison of the pertinent structures and the operation

of the adjudicated infringing helicopters with cor-

responding structure and the operation of the assert-

edly similar models. That proof-procedure is in ac-

cord with the principles enunciated by this court in

Marconi Wireless Telegraph Co. v. United States, 99

Ct. Cl. 1, 53 USPQ 246 (1942), modified, 320 U.S.

1 (1943).

Plaintiff’s similarity proofs could have been limited

to the subject matter of but a single claim of each of

the patents in suit found valid and found to be in-

fringed by the adjudicated models, thereby establish-

ing the required proof of similarity in reference to

the subject matter. The plaintiff’s proofs were not

so limited. The patent claims in suit are of varying

scope and it is not required that “similarity” be estab-

lished as to a given structure in respect to all claims

of varying scope as found to be infringed. By the

same token, the scope of the royalty base for the vari-

ous patent claims in suit varies in accordance with

the scope of the claimed subject matter. In view of the

unchallenged and uncontradicted evidence establish-

ing similarity, and in most instances the identity, as

to the assertedly similar structures, and in view of

the paucity of any credible evidence of non-similarity,

plaintiff’s assertions on similarity are found to be

fully supported by the record.

16a

Royalty Compensation

The use or manufacture by or for the Government

of a device or machine embodying any invention pro-

tected by a United States patent, is a taking of prop-

erty by the Government under its power of eminent

domain. The nature of the property thus taken is a

license in the patent, the claimed invention of which

is used or manufactured by or for the government,

and such a license continues throughout the life of

the patent, or the period of the infringing procure-

ment, whichever is shorter.

As this court recently stated in Calhoun v. United

States, 197 Ct. Cl. 41, 51, 453 F.2d 1385, 1391, 173

USPQ 438, 443 (1972):

_.. The theory underlying a patent suit in this

court pursuant to that section [1498] is that the

Government, when a patented device or invention

is made or used by or for the United States, ipso

facto takes by eminent domain a compulsory

compensable license in the patent; the patentee

obtains his Fifth Amendment just compensation

for that taking through his action here under

§ 1498. See Crozier v. Krupp, 244 U.S. 290, 305,

307, 308 (1912); Waite v. United States, 282

U.S. 508, 8 USPQ 121 (1931); Irving Air Chute

Co. v. United States, 117 Ct. Cl. 799, 802-03, 93

F.Supp. 633, 87 USPQ 246 (1950).

With respect to the basis for determining the patent

owner’s reasonable compensation where the evidence

shows an established royalty rate used by the patent

lla

owner in commercial licensing, the court went on to

Say:

Thus, the patentee established a royalty which

he deemed to be appropriate for the use of his

invention; and that royalty should form the basis

for determining the compensation due plaintiffs

[197 Ct. Cl. at 56, 453 F.2d at 1394, 172 USPQ

at 445].

A leading authority for determining “reasonable”

compensation under section 1498, where there is found

to be an “established royalty,” is Marconi, supra,

wherein this court clearly announced the procedure

to be followed in such cases:

. The courts look with favor toward the estab-

lishment of a reasonable royalty as a measure of

compensation in a patent accounting. This method

usually obviates many difficulties connected with

the establishing of such items as costs, profits,

apportionments, expense of doing business, etc.,

all of which are matters frequently difficult to

ascertain in a legal procedure.

If the plaintiff has already established a roy-

alty by a license or licenses, he has himself fixed

the average of his compensation, and if this has

been established prior tc the infringement, the

task of the court then becomes easy. [99 Ct. Cl.

at 49, 53 USPQ at 250-51. ]

The mandate of Marconi, namely, that it is the

royalty which “has been established prior to the in-

fringement” that determines the compensation to be

awarded as reasonable royalty in eminent domain

actions under section 1498, is in accord with the gen-

12a

eral law of eminent domain that the relevant value

of the property taken is its value at the time of the

taking.

Pursuant to Marconi, supra; Crozier v. Krupp, 224

U.S. 290 (1912); and Calhoun, supra, in determining

the compensation due plaintiff in this action, and par-

ticularly in ascertaining that portion of such compen-

sation to be assessed as royalty for a license to use

the inventions, and in ascertaining the fair and rea-

sonable value to plaintiff the court must examine the

licensing history of plaintiff’s patented property pre-

dating the first unlicensed use or manufacture by or

for the Government of any of the inventions thereof.

That examination here reveals an established royalty

at that point in time. For such a purpose a royalty is

established when it or its substantial equivalent has

been used in a significant number of licenses granted

prior to the time the infringing procurement began.

In the present case, the infringement began with the

first unlicensed use or manufacture by or for the

Government of any helicopter which embodied any

inventions of plaintiff’s patented property, and which

use or manufacture is within the scope of this account-

ing proceeding. The infringement by the defendant

began with the completion on or about November 8,

1946 of the first Piasecki model XHRP-1 manufac-

tured for the defendant. Thus, in accord with Cal-

houn, supra, and Crozier, swpra, on or about Novem-

ber 8, 1946, the Government took from the plaintiff’s

“a license to use the inventions” of plaintiff’s patented

property.

en att in hl

13a

As developed in the accompanying findings, the

record reveals a comprehensive 16-year licensing pro-

gram prior to November 1946 for plaintiff’s patented

property, including all the patents in suit, and that

licensing program encompassed all the United States

makers of rotary-wing aircraft manufactured for or

sold to the Government, or manufactured for sale

commercially. That licensing history and the royalty

provisions thereof meet fully the test for an estab-

lished royalty. In 1930, plaintiff ticensed Kellett Air-

craft Corp. at the rate of 6 percent of retail sale price

of the complete aircraft. This rate was changed to

5 percent during 1932-45. The Government procured

rotary-wing aircraft from Kellett in the period prior

to World War II and approved payment of the 5 per-

cent royalty thereon to Autogiro. Pitcairn Autogiro

Company was licensed during 1936-41 at the 5 percent

rate. Pitcairn-Larsen Autogiro Company was licensed

in 1941 at the rate of 5 percent of the retail sale

price of the complete aircraft or at 7 percent of the

sale price if sold without engine or standard equip-

ment. A.G.A. Aviation Corporation was licensed

1941-43 at the same 5 percent and 7 percent rates.

The Firestone Tire and Rubber Company was licensed

by the plaintiff 1943-46 at the same 5 percent and

7 percent rate subject to a sliding scale. Firestone

was again licensed about March 12, 1946, as of Sep-

tember 1, 1944, at the rate of 10 percent of the retail

sale value of the patent components, i.e., a per patent

royalty, but with a royalty ceiling of 5 percent of the

total retail sale value of the complete aircraft and

l4a

spare parts, and subject to a sliding scale which re-

duced the rate as royalties exceeded stated amounts.

The sliding scale provided that for the first $50,000

of royalties, the sum of the per patent royalties

applicable to each such complete helicopter and spare

parts therefor but not to exceed 5 percent of the total

sale value; for the next $45,000 of royalties 9/10ths

of the initial rate; for the next $40,000 of royalties

8/10th of the initial rate; and thereafter 7/10ths of

the initial rate. The license taken by Firestone in

March of 1946 was offered at the same rates to other

manufacturers of rotary-wing aircraft. The terms of

that license established the license policy of the plain-

tiff at a time shortly prior to the start in late 1946

of the defendant’s unauthorized use of plaintiff’s pat-

ented inventions. The defendant could have and

should have taken a license at those rates, but refused.

The evidence shows that Autogiro received patent

royalties under nine licenses during the 1932-46

period, some at the 5 percent rate, some at the 7 per-

cent rate, and some at .85 percent nominal wartime

rate.

In 1943, the plaintiff unilaterally selected and prof-

fered to the Government and to the industry a nominal

wartime royalty rate of .85 percent of the contract

price of the aircraft. The nominal rate for the dura-

tion of World War II plus 6 months was plaintiff’s

contribution to the war effort and was not plaintiff’s

established license policy. Plaintiff granted wartime

licenses, which covered all of plaintiff’s patents in-

cluding the patents here in suit, to Nash-Kelvinator

ee tee eee

15a

Corporation, United Aircraft Corporation and Kellett

Aircraft Corporation. These wartime licenses were

at the rate of .85 percent of the contract price for

rotary-wing aircraft made for and sold to the Govern-

ment and these licenses expired on March 2, 1946,

i.e., 6 months after the cessation of hostilities.

Each and every license granted by plaintiff during

the period 1930-46 comprehended all of plaintiff’s

patented property including but not limited to the

patents remaining in suit, and each specified that

royalties were te be paid if any of the licensed prop-

erty was used in the licensed aircraft.

In 1946 after the cessation of hostilities, the Gov-

ernment declined plaintiff’s offer of a regular license

apparently because the Government intended to re-

quire patent indemnity clauses in procurement con-

tracts with its helicopter manufacturers.

Defendant urges that plaintiff did not have in effect

an established royalty rate since plaintiff later granted

United Aircraft Corporation a license in 1947 con-

taining a separate royalty for each patent licensed

including the patents in suit, with a 2 percent ceiling,

and still later granted United a paid-up license in

1949. These negotiated licenses as well as certain

license communications between plaintiff and Piasecki,

Bell and McDonnell, as a matter of law, are not mate-

rial in this proceeding because they all took place

after the date on which infringement by the defend-

ant began. Defendant’s suggestion that certain of

plaintiff’s licenses are “tantamount to misuse” is with-

out merit. The mere accumulat‘ yn of patents is not in

16a

and of itself illegal. The payment of royalties accord-

ing to a percentage of the sale price is not unreason-

able. What plaintiff’s licensees obtained was the privi-

lege of using any or all of plaintiff’s patents and

developments if and as they desired to use them.

Plaintiff’s licensing policy did not constitute misuse.

Automatic Radio Co. v. Hazeltine, 339 U.S. 827

(1950). This court has already determined in its

decision of October 13, 1967, that defendant is liable

to the plaintiff.

The plaintiff’s established royalty rates immediately

prior to the commencement of infringement justify the

method utilized by plaintiff in finding that reasonable

royalty compensation totals $24,570,525, which sum

is about 3.85 percent of the total dollar cost of the

infringing procurement. It is noted that compensation

at such average rate is below compensation recom-

mended as reasonable in the trial judge’s report filed

September 4, 1975 in Tektronix, Inc. v. United States,

No. 79-61, where the recommended rate is 27.5

percent.

Defendant asserts that the royalty bases selected

by plaintiff are “outrageous, incredible, totally inac-

curate, excessive, vastly inflated,” ete. The evidence

fails to support such blatant assertions either as facts

or conclusions. The royalty bases selected by plain-

tiff’s expert witnesses for representative patent claims

are found to be reasonable and based on the best evi-

dence available. The base used for each claim in suit

is limited to those portions of the helicopter mecha-

nisms that are encompassed by specific patent claim

17a

recital. The provisions of plaintiff’s established per-

patent royalty are satisfied by the embodiment of the

invention recited in a: one claim of a patent in the

defendant’s constructively 'icensed helicopters or spare

parts therefor. Other intringed claims of the respec-

tive patents either do not involve other components

or in some instances would not afford as broad a

royalty base as the representative claims selected. A

patent is infringed even if only one claim of the patent

is infringed. Marconi, supra, 99 Ct. Cl. at 62-71, 53

USPQ at 257-61.

Defendant proposes royalty rates that produce roy-

alty compensation which is about 1/48th of that re-

sulting from the application of plaintiff’s established

royalty rates. Defendant’s witness on royalty rates

proposed initial royalty rates of 1 percent or less for

most of the patents in suit and scaled these rates

downward because of alleged Government contribu-

tions to the development of a practical military heli-

copter and alleged Government contribution to the

creation of a market for helicopters. The record

shows that said witness lacked both the qualifications

and the information necessary for a technological

evaluation of the patents in suit. There is no evidence

of record to support either the royalty base or the

royalty rates proposed by defendant’s witness. He

testified that he had not negotiated any licenses re-

garding rotary-wing aircraft and that “reasonable-

ness” of royalties was not a factor which he consid-

ered. There is no competent evidence of record to

support the royalty rates proposed by the defendant.

18a

The computation of the royalty compensation by

application of plaintiff’s established per-patent royalty

rates to the royalty bases is set forth in detail in the

accompanying findings. The average percentage is

somewhat less than the alternative 5 percent rate

specified in many of plaintiff’s licenses. Defendant

has urged that plaintiff’s determination of the esti-

mated cost of parts and their installation is based on

early cost proposals and makes no allowance for any

changes in actual cost experience. However, defend-

ant admits that no firm evidence of installed costs is

available. After considering all the circumstances in-

volved in this litigation, it is concluded that royalty

compensation in the amount of $24,570,525 is reason-

able and justified.

Contribution

Defendant’s requested findings of fact assert that

the order of magnitude of the contribution of each

of the patents in suit to the rotary-wing aircraft in-

dustry is “zero, minimal, or negative.” Defendant

bases such requested findings primarily on a rehash

of the several patent application files and the prior

patents cited therein. The court has already consid-

ered in detail the patent application files and the

many prior patents cited by defendant and has found

specific patent claims valid and infringed by one or

more of seven helicopter types procured by defendant.

The weight of the evidence previously considered by

the court shows that such prior art items are either

totally irrelevant to the subject matter of the patent

_——e

ee ee

19a

claims in suit or are fundamentally deficient, imprac-

tical and/or inoperative. There is no credible evidence

that the helicopters made for or used by the defendant

might have been more satisfactory if plaintiff’s pat-

ented inventions had not been incorporated therein.

Defendant’s contention that royalty compensation

should be computed at rates of less than 1 percent

based on its contention that plaintiff’s contributions

to the industry were minimal, is without merit.

Spare Parts

The Firestone license defines “Licensed Aircraft”

as not only “aircraft with sustaining rotors . . . em-

bodying or manufactured or operating according to

any or all of the inventions covered by Patents of

Autogiro,” but also “parts and assemblies of parts

embodying or manufactured or operating according

to any or all of said inventions for use in such air-

craft... .” With regard to spare-part rotor hub

assemblies for the HUP-1 helicopter, in accord with

plaintiff’s established per-patent royalty the royalty

base for claim 14 of the ’457 patent is each spare-part

HUP-1 rotor hub assembly, and the royalty therefor

would be 10 percent of its retail sale value. However,

spare-part rotor hub assemblies which embody or

which are manufactured according to the subject

matter of claim 14 of the ’457 patent are, per se,

Licensed Aircraft, i.e., parts “for use in” the Govern-

ment’s infringing helicopters for which such spare-

part hub assemblies are procured; and in accord

20a

with the 5 percent royalty ceiling provision of plain-

tiff’s established royalty for Licensed Aircraft, the

total royalty for such spare-part hub assemblies may

not exceed 5 percent of their retail sale value. The

foregoing comments are equally applicable in respect

to the effective 5 percent royalty for spare-part rotor

hub assemblies for the HRP-1 arid HRP-2 helicopters.

Plaintiff has limited its requests for royalties on

all spare-part Vertol, Kaman, and Gyrodyne rotor

blades which are within the scope of this accounting,

to the subject matter of claim 60 of the ’583 patent

as held to be infringed by either the HUP-1 or the

H-21B rotor blades. and that subject matter is also

the basis for plaintiff’s requests for royalties on the

rotor blades as installed on the Gyrodyne DSNs. De-

fendant’s contentions concerning claim 65 of the ’583

patent and the various features thereof, with respect

to recovery of royalties for spare-part rotor blades

are completely moot at this point. The various fea-

tures of claim 65, none of which are included in claim

60, and to which defendant has referred, are totally

immaterial to the determination of plaintiff’s right

to recover royalties for spare-part rotor blades with

respect to the subject matter of claim 60 as held to be

infringed. Defendant’s contention that plaintiff is not

entitled to royalties for spare-part hub assemblies and

rotor blades is without substance.

Delay Compensation

The “reasonable and entire compensation” due

plaintiff under 28 U.S.C. § 1498 includes not only

2la

reasonable royalties but also an appropriate amount

which compensates plaintiff for defendant’s delay in

payment of those royalties. This additional amount

has been referred to as “delay compensation.” As

stated by Justice Holmes in Waite v. United States,

282 U.S. 508, 509 (1931), the “reasonable and entire

compensation” provided by the statute “was intended

to accomplish complete justice as between plaintiff and

the United States.” The amount due as delay com-

pensation is determined by multiplying the annually

accrued royalties by an appropriate annual percentage

rate. The periods of time covered by the computation

of that additional amount extend from the dates of

defendant’s procurements until the date of payment

of the court’s judgment herein.

The amounts heretofore awarded as delay compen-

sation by this court in eminent domain cases, includ-

ing cases under 28 U.S.C. § 1498, have been computed

at various rates. From 1927-37 the rate was 6 per-

cent. During 1937-44 the rate was 5 percent and after

1944 the rate of 4 percent has been used. In the

court’s decisions in those earlier cases there is little

or no discussion of the theory or basis upon which a

particular percentage rate of delay compensation

was chosen.

The rates used by the court in the past to cal-

culate delay compensation have generally followed

trends of changes in investment yield rates during

the 1920’s, 1930’s and 1940’s. The rate to be used

during the delay compensation periods involved in this

suit, i.e., from 1946 until payment of the court’s judg-

ment herein, should also follow the changes in yield

rates. These may be determined by reference to an

established, well recognized, widely used and authori-

tative index of investment yields. Plaintiff urges that

the court use for this purpose Moody’s Composite In-

dex of Yields on Long Term Corporate Bonds.

Defendant has urged that the court should estab-

lish, as the rate of delay compensation due plaintiff,

an amount equal to the average annual yields on a

series of hypothetical long term Government bonds

which defendant constructs subjectively. Both plain-

tiff and defendant thus urge that a varying rate of

delay compensation should be established by the court

in this case. However, defendant’s position is that the

various rates of delay compensation should be estab-

lished without reference to the court’s own varying

rates of delay compensation in prior periods, and

defendant ignores any relationship between the rates

it now proposes and the rates of delay compensation

which this court has used just prior to the beginning

of the accounting period in this case. Both parties

recognize that the 4 percent annual rate of delay

compensation which was applied by this court after

1944 should not arbitrarily be continued in this case.

Both parties agree that the court should establish a

varying annual percentage rate for delay compensa-

tion which is appropriate under the facts and circum-

stances in this case. The parties disagree on the prin-

ciples which determine an appropriate varying rate,

and on the varying rate itself. The amount due as

delay compensation in this case involves a determina-

ee ee ee eee

23a

tion by this court of an appropriate base or yardstick

by which to measure and thereby establish the award

for delay compensation. The method of determining

delay compensation should be justified by the evidence,

and the rate should be responsive to the ends of jus-

tice. The ultimate test, of course, is that plaintiff

must receive just compensation.

Examination of evidence of record relating to the

trends indicated by Moody’s Composite Index of Yields

on Long Term Corporate Bonds leads to the conclusion

that in view of all the circumstances involved in this

prolonged litigation, it is reasonable to divide the de-

lay period into several periods and to utilize a rate of

4 percent for the period 1947-55, a rate of 414 per-

cent for 1956-60, a rate of 434 percent for 1961-65,

a rate of 614 percent for the period 1966-70, and a

rate of 71% percent for the period 1971-75. It is

noted that Pub. L. No. 93-625, § 7, 88 Stat. 2108,

signed by the President on January 3, 1975, now pro-

vides for the payment of interest by the Government

at the rate of 9 percent per annum on overpayments

of federal internal revenue taxes, effective July 1,

1975. Said law also provides for annual adjustment

of the interest rate when the prime rate charged by

banks during September is at least a full point more

or less than the Government interest rate then in

effect. The Congress thus gives statutory sanction to

tne use of a commercial rate index or indicator in de-

termining the rate of interest to be paid by the

Government.

24a

Plaintiff has urged that the delay compensation

should run from the mid-point of each year during

the accounting period since the actual procurement

dates for the many aircraft involved in this case are

scattered throughout each calendar year. In Calhoun,

supra, the court selected August 15, 1954, mid-point

of the period from April 29, 1954 to November 21,

1956, for the start of delay compensation. In Amerace

Esna Corp. v. United States, 172 USPQ 305 (1972),

the trial judge selected March 8, 1955, mid-point of

the period September 8, 1952 to September 8, 1958,

for start of delay damages. The court adopted that

computation in a per curiam opinion reported at 199

Ct. Cl. 175, 462 F.2d 1377, 174 USPQ 517 (1972).

In Breese Burners, Inc. v. United States, 140 Ct. Cl.

9, 115 USPQ 179 (1957), the court decided that in-

terest would run from December 31 of each year in-

volved until date of payment. In Badowski v. United

States, 150 Ct. Cl. 482, 278 F.2d 934, 125 USPQ 656

(1960), the court held that reasonable and entire com-

pensation should include interest to date of payment

to compensate plaintiff for the delay in payment. In

van Veen v. United States, 181 Ct. Cl. 884, 386 F.2d

462, 156 USPQ 403 (1967), the court held that plain-

tiff was entitled to recover interest as part of just

compensation from January 1, 1967 to the date of

payment. Defendant objects to the allowance of in-

terest from the mid-point of each calendar year and

asserts that the acceptance date of each infringing

aircraft is available. Plaintiff’s license agreement

with Firestone in 1946 provided for the payment of

25a

royalties semi-annually within 45 days after June 30

and December 31 of each year on all licensed aircraft

sold, leased or put into use during the preceding 6-

month period. In view of all the circumstances in-

volved in this litigation, it is concluded that reason-

able delay compensation herein should be computed on

a calendar year basis with interest starting on Janu-

ary 1 of each year on the royalties accrued during

the preceding calendar year. Delay compensation is

part of reasonable and entire compensation and is not

considered as interest per se.

Defendant’s debtor theory that delay compensation

should be based on the yields on a series of hypotheti-

cal Government bonds was recently rejected by one of

the court’s trial judges in Arcata National Corp. v.

United States, No. 771-71, report filed July 25, 1974.

The trial judge in that case concluded that delay com-

pensation should be paid for the period involved at

the rate of 6.6 percent simple annual interest, a rate

based on his reference to corporate AAA bond interest

rates and prime interest rates. A stipulated settlement

based thereon was confirmed by order of the court on

January 3, 1975, Arcata National Corp. v. United

States, 206 Ct. Cl. 819. The court’s order entered

judgment for Arcata in the sum of $35,382,251.50 to-

gether with simple interest thereon at the rate of 6.6

percent per annum until date of payment.

After considering all the circumstances involved in

the present protracted litigation it is concluded that

delay compensation computed at the varying rates for

varying periods set out above, amount to $26,355,753

26a

through December 31, 1975, is both reasonable and

justified. The determination of a proper amount of

delay compensation is a judicial function. The dis-

charge of that function requires the exercise of

judgment.

Plaintiff has presented evidence of the expenditure

of $1,669,658 during the period 1951-73 for attorneys’

fees, witness fees and other expenses allocable to the

11 patents which the court has held valid and in-

fringed. This incomplete total is about 3.28 percent

of the recommended royalty and delay compensation

combined. In a recent case involving the taking of

flowage easements over farmlands, this court allowed

attorneys’ fees at 25 percent of the total compensation.

King et al. v. United States, 205 Ct. Cl. 512, 504 F.2d

1138 (1974). In the present litigation, plaintiff has

not included attorneys’ fees in his requested reason-

able and entire compensation. Therefore, no recom-

mendation with respect to attorneys’ fees, witness fees

and expenses is made.

Experimental Use

The order of the court filed July 12, 1973, Autogiro

Company of America v. United States, 202 Ct. Cl.

1105, permitted the defendant to make “offers of

proof” with respect to the manufacture and use of

accused helicopters by the defendant “for testing and

experimental purposes.” At the accounting trial, de-

fendant presented such offers of proof through the

testimony of 13 witnesses and 147 documentary ex-

27a

hibits pertaining to about 93 of the 2,237 rotary-wing

aircraft involved in this litigation. Defendant has re-

quested 153 detailed findings of fact relative to ex-

perimental use, all based on its offers of proof. No

findings of fact are or need be made on the testing

and experimental use of accused aircraft. It may be

noted, however, that at least one of defendant’s wit-

nesses testified that the testing of helicopters “was

use of those helicopters for the Government.”

Defendant contends that under this court’s decisions

in Ordnance Engineering Corp. v. United States, 84

Ct. Cl. 1 (1936), cert. denied, 302 U.S. 708 (1937)

and 96 Ct. Cl. 278 (1942), and Chesterfield v. United

States, 141 Ct. Cl. 838, 159 F.Supp. 371 (1958),

devices of an infringing construction which were used

for experimental or test purposes are to be excluded

from the computation of compensation under 28

U.S.C. § 1498. That siatute provides:

Whenever an invention described in and cov-

ered by a patent of the United States is used or

manufactured by or for the United States with-

out license of the owner thereof or lawful right

to use or manufacture the same, the owner’s

remedy shall be by action against the United

States in the Court of Claims for the recovery of

his reasonable and entire compensation for such

use and manufacture.

Defendant’s interpretation and attempted expan-

sion of the court’s decisions in the two Ordnance

cases supra, pertaining to what those decisions refer

to as “ballistic shell” and “experimental shell,” are

28a

erroneous; and those decisions are inapplicable to

the present case. Although in Ordnance the court did

exclude from the accounting the so-called “experimen-

tal shell,” there is no discussion in the opinion in

either of those cases as to the rationale for their

exclusion. The only statement in the Ordnance deci-

sions on “experimental” is one sentence: “Experi-

mental shell are shell built for experimental pur-

poses.” There is no elucidation as to the determinants

of “experimental purposes.” Thus, the Ordnance de-

cisions provide no rationale for, or guidance for de-

termining the propriety of, excluding from an ac-

counting so-called “experimental” devices except that

they are devices “Built for experimental purposes.”

In the present case there is no evidence in defendant’s

offer of proof that any of the helicopters to which

defendant’s “experimental use” contentions pertain

were built solely for experimental purposes. For that

reason alone, the Ordnance decisions are inapposite.

Defendant’s reliance on the court’s opinion in

Chesterfield, supra, is likewise without merit. The

court’s statement in its opinion there that experimen-

tal use does not infringe constituted pure obiter dic-

tum. The court’s opinion specifically stated:

Where the court finds as a fact that the patent

claims in suit are clearly invalid... it may not

be necessary to consider the issue of infringe-

ment.

The court’s reference to experimental use was clearly

unnecessary to the disposition reached in Chesterfield.

29a

It is also noted that in Chesterfield the defendant pro-

cured by purchase, not by manufacture by or for the

Government, certain alloys which had been developed

and used for supercharged buckets and blades. In

Chesterfield, the claim arose from defendant’s use of

purchased alloys. In the present case, the infringing

aircraft were clearly manufactured for the defendant.

Plaintiff has excluded from its present claim static

test mechanisms manufactured for defendant. Numer-

ous research and development contracts were entered

into by the defendant and various manufacturers for

the design, development and manufacture of experi-

mental helicopters and none of those specific heli-

copters are the subject of this litigation.

Defendant urges the court to exclude from compen-

sation any aircraft used by the defendant for testing,

evaluational, demonstrational or experimental pur-

poses. Use for such purposes is use by or for the

Government and is compensable. Obviously every new

helicopter must be tested for lifting ability, for the

effect of vibration on installed equipment, flight speed

and range, engine efficiency, and numerous other fac-

tors. Tests, demonstrations, and experiments of such

nature are intended uses of the infringing aircraft

manufactured for the defendant and are in keeping

with the legitimate business of the using agency. Ex-

perimental use is not a defense in the present liti-

gation.

Defendant has also referred to the experimental

use portion of Trial Judge Cooper’s opinion and re-

port to the court in Douglas v. United States, 181

30a

USPQ 170 (1974). The court’s opinion in that litiga-

tion, 206 Ct. Cl. 96, 510 F.2d 364, 184 USPQ 613

(1975), cert. denied, October 6, 1975, did not rule

on experimental use since the patent claim was held

to be invalid. While the trial judge’s discussion of the

experimental use rule in various courts is not the law

of the case in Douglas, it is a well reasoned and

historical analysis. In Douglas, the testing of the

Kestrel aircraft conducted by the Army, Navy and

Air Force, to evaluate the aircraft was found by the

trial judge to be use of the aircraft which served a

valuable governmental purpose.

Royalty Adjustment Compensation

Plaintiff seeks royalty adjustment compensation in

the amount of over $15 million to compensate for the

gradual decrease in the purchasing power of the

dollar between 1947 and 1973. No cases are cited

which would require the defendant to assume plain-

tiff’s risk of any inflation in eminent domain actions.

There is no express or implied contract that the risk

of inflation was to be assumed by the United States.

There was no royalty escalation clause in plaintiff’s

license agreements. Plaintiff is not entitled to an ad-

justment in the size of compensation by reason of

inflation occurring subsequent to the date of infringe-

ment. Plaintiff, like everyone else, must bear the risk

of change in the value of its property by reason of

inflation or deflation. The inclusion of royalty ad-

justment compensation for inflation is a part of rea-

ee ‘

nm —

3la

sonable and entire compensation would place plain-

tiff in a much better position than those who can do

nothing about inflation. The Government may do

many things, but has not yet reached the point of

compensating one citizen or all citizens who have

suffered losses from the effects of inflation.

32a

APPENDIX B

IN THE UNITED STATES COURT OF CLAIMS

No. 50328

(Decided December 15, 1976)

STEPHEN PITCAIRN, AGENT (SUBSTITUTED FOR

AUTOGIRO COMPANY OF AMERICA)

Vv.

THE UNITED STATES

J. Edward Shinn, attorney of record for plaintiff,

John J. McAleese, Jr., of counsel.

B. Frederick Buchan, Jr. and Thomas J. Scott, with

who was Assistant Attorney Genegal Rex E. Lee, for

defendant.

Before COWEN, Chief Judge, DAVIS, SKELTON,

NICHOLS, KASHIWA, KUNZIG, and BENNETT, Judges.

OPINION

PER CURIAM: This case comes before the court on

plaintiff’s and defendant’s exceptions to the recom-

mended opinion, findings of fact and conclusion of

ee eee nee we ret eee eet —-

33a

law, submitted by Judge Donald E. Lane, Associate

Judge, United States Court of Customs and Patent

Appeals, sitting by designation as Trial Judge in this

case, pursuant to 28 U.S.C. § 293(a) and § 2505, in

accordance with United States Court of Claims Rule

134(h). In an earlier decision, Autogiro Company

of America v. United States, 181 Ct. Cl. 55, 384 F. 2d

391, 155 USPQ 697 (1967), rehearing denied, 184

Ct. Cl. 801 (1968), the court held that some 59 patent

claims in 11 patents owned by plaintiff were valid and

specific claims were infringed by seven different

models of helicopters manufactured for defendant

under contracts by Vertol, Hiller, Bell, Kaman and

McCulloch. The case is before the court now on (1)

the similarity or non-similarity of some 39 models of

rotary-wing aircraft to any of the representative

models which the court has already held to be infring-

ing, and (2) computation of the reasonable and entire

compensation which plaintiff is entitled to recover

under 28 U.S.C. § 1498."

The case has been submitted to the court on the

briefs and oral arguments of counsel. Upon considera-

tion thereof, since the court agrees with several por-

tions of the trial judge’s recommended decision, it

adopts (with minor modifications) Part I, Similarity;

Part III, Contribution; Part IV, Spare Parts; Part V,

Delay Compensation; and Part VI, Experimental Use.

The court also adopts with modification the trial

‘We shall refer to the Autogiro Company as plaintiff, al-

though Stephen Pitcairn, Agent, has been substituted.

34a

judge’s findings of fact, except with respect to royalty

compensation, and has made its own findings on that

subject. We have deleted those parts of the trial

judge’s recommended decision entitled Royalty Com-

pensation, Part II, and Royalty Adjustment Compen-

sation, Part VII, and have substituted our own Part

II, Royalty Compensation, in the modified trial judge’s

opinion which follows. We have also added our own

discussion of Delay Compensation to Part V, infra, in

supplementation of the trial judge’s consideration of

that subject. The conclusion of law has been changed

to reflect our different view of Royalty Comp-nsation.

The opinion and conclusion of law of the trial judge,

as modified and supplemented by the court, follow:

In Autogiro Company of America v. United States,

181 Ct. Cl. 55, 384 F. 2d 391, 155 USPQ 697 (1967),

rehearing denied, 184 Ct. Cl. 801 (1968), some 59

patent claims in 11 patents owned by plaintiff were

held to be valid and specific patent claims were held to

be infringed by seven different models of helicopters

manufactured under contracts for defendant by Ver-

tol, Hiller, Bell, Kaman and McCulloch. In 1973, the

Autogiro Company of America was liquidated, and all

of its assets, including its claims against the United

States, one of which is the subject matter of this

action, were transferred to its stockholders who ap-

pointed Stephen Pitcairn as their Agent. Pursuant

to motion filed January 30, 1974, unopposed by de-

* Though the findings, as modified, are adopted by the court,

they are not printed with this opinion because they are so

voluminous.

35a

fendant, Stephen Pitcairn, Agent, was substituted for

Autogiro Company of America by the court’s order

filed February 12, 1974.

The parties to this suit agreed that during the ac-

counting phase, both parties would have the right to

present evidence as to similarity or non-similarity be-

tween any model of rotary-wing aircraft or part

thereof on which no proofs of infringement were of-

fered at the original trial and those models of rotary-

wing aircraft on which proofs were offered and which

the court in its decision noted above found to infringe

any of the patents remaining in suit. The parties

have presented such proofs and have presented proofs

on various methods of computing the reasonable and

entire compensation due plaintiff.

The main issues in the current phase of this litiga-

tion are (1) the similarity or non-similarity of some

39 models of rotary-wing aircraft to any of the seven

models which the court has already held to infringe

one or more valid patent claims, and (2) how to com-

pute the amount of the reasouable and entire compen-

sation which plaintiff is to recover under 28 U.S.C.

§ 1498, for defendant’s unauthorized use of plaintiff’s

inventions. After over 20 years of litigation, includ-

ing some 62 trial sessions for the testimony of 57 wit-

nesses on the two present issues, the parties are still

poles apart on the end result. Examination of the

voluminous record shows that there is little the parties

can agree upon except that defendant spent over $639

million, engine costs excluded, in the recovery period,

1946-64, for over 2,200 rotary-wing aircraft.

37a

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Defendant now contends that the maximum amount

of compensation which this court should allow is

less than 1%, i.e., 0.0832°%, on the total procurement

cost of $639,257,969. Defendant contends that delay

compensation (if any) should be computed at the rates

at which the defendant might have borrowed money

by hypothetical long term Government bonds, the esti-

Plaintiff contends that “reasonable and entire com-

pensation” whic this court should adopt should in-

clude royalties at established rates amounting to

$24,570,525, plus delay compensation amounting to

$27,851,192 through 1973, plus upward adjustment by

$15,034,439 of the royalties to compensate for infla-

mated rates varying from 2.4

the average being 3.33‘. for the period 1947-75.

$532,279. This represents compensation at a rate of

to 9% per annum, the average being

6.07" for the period 1947-73. The patents, patent

claims, and models of rotary-wing aircraft now in-

(

tion, plus additional delay compensation for the period

ing from 4°

1974 to date of payment, a total of some $67,500,000

plus. The amount sought by plaintiff represents roy-

alty compensation at a rate of 3.85%. of the total pro-

curement cost, and delay compensation at rates vary-

volved in this litigation are identified in the follow-

ing table

H-21C,

II-21A,

| HRB-1 (CH-

Shailar models

Vertol/Piasecki ITUP-2 & HUP-3 (H-25A) &

H-21 (V-44A), YHC-1A

IIRP-1.

Vertol/Piasecki HI P-2.

Vertol/Piasecki YII-21,

Adjudicated infringing model

relative to which similarity

proofs were presented

_-----. Vertol/Pinasecki IfUP-1..

..-. Vertol/Piasecki H-21B.-

Claims

0, 64 & G5_-

9, 60, 64 & 65..

2,380,583" (7-31-45/7-30-62). 56, 59, 60, 64 & 65...... Vertol/Piasecki HUP-1..

«mber (and dates

Issuce/ Expiration)

eee

Se +

Pater? x

38a 39a

(2) The decision whether “other specified

ae kL @

72 § 2 I. Similarity

se es T

aa. ae The order of the trial judge filed April 17, 1969

<2 5 ¢ provided :

T =P @a@ & , .

2 45g (1) In the proceedings herein under Rule 47

ol 15 : (c) (2), neither party shall challenge the determi-

a = oF Pa nations of infringement, the validity, or the scope

o ash Mo as construed by the court, of any claim found by

ReOSr, BEd the court to be valid and infringed in Autogiro

seSas ‘get Company of America y. United States, 181 Ct.

SOEETOCE SE Cl. 55, 384 F. 2d 391 (1967), and

OA Mid

= 7

types or models of aircraft or parts thereof, pro-

---------.-- Vertol/Piasecki H-21B.. Kaman HOK-1,

we eee----e-------- Vertol/Piasecki H-21B.. Gyrodyne DSN-1 & D

#g 9 | cured by defendant” are infringing aircraft or

32 OF parts for which defendant is liable shall be based

oe a | on proofs of “similarity or non-similarity” of

aS sé | construction and mode of operation between (a)

85 SE such other aircraft or parts and (b) those found

SA As by the court to infringe. Marconi Wireless Tele-

Pity graph Co. v. United States, 99 Ct. Cl. 1 (1942);

7 ! ; Fauber v. United States, 112 Ct. Cl. 302 (1948).

i ! ! Neither party requested review or modification of

itt ts that order.

: ? : : - | The evidence relating to the similarity or the iden-

essa ag | tity between adjudicated infringing models and the

Pets te | additional assertedly similar models consisted of com-

rida oat parison of the pertinent structures and the operation

ait i of the adjudicated infringing helicopters with the

? | : i corresponding structure and the operation of the

Pitt i assertedly similar models. That proof-procedure is in

ddd 2 3 accord with the principles enunciated by this court in

— a Marconi Wireless Telegraph Co. v. United States, 99

40a

Ct. Cl. 1, 53 USPQ 246 (1942), modified, 320 U.S. 1,

order on remand, 100 Ct. Cl. 566 (1943).

Plaintiff’s similarity proofs could have been limited

to the subject matter of but a single claim of each of

the patents in suit found valid and found to be in-

fringed by the adjudicated models, thereby establish-

ing the required proof of similarity in reference to the

subject matter. The plaintiff’s proofs were not so lim-

ited. The patent claims in suit are of varying scope

and it is not required that “similarity” be established

as to a given structure in respect to a// claims of

varying scope as found to be infringed. By the same

token, the scope of the royalty base for the various

patent claims in suit varies in accordance with the

scope of the claimed subject matter. In view of the

unchallenged and uncontradicted evidence establishing

similarity, and in most instances the identity, as to

the assertedy similar structures, and in view of the

paucity of any credible evidence¢of non-similarity,

plaintiff’s assertions on similarity are found to be

fully supported by the record.

II. Royalty Compensation *

The use or manufacture by or for the Government

of a device or machine embodying any invention pro-

tected by a United States patent, is a taking of prop-

* This part has been substituted for the similarly titled por-

tion of Judge Lane’s opinion. Only the Chief Judge, Judge

Davis and Judge Skelton join in the discussion contained in

this part II of the opinion. However, Judges Nichols and

Kunzig concur in the result of this part of the opinion.

4la

erty by the Government under its power of eminent

domain. The nature uf ‘he property thus taken is a

license in the patent, the claimed invention of which

is used or manufactured by or for the Government,

and such license continues throughout. the life of the

patent, or the period of the infringing procurement,

whichever is shorter.

As this court recently stated in Calhoun v. United

States, 197 Ct. Cl. 41, 51, 453 F.2d 1385, 1391, 172

USPQ 438, 443 (1972):

* * * The theory underlying a patent suit in

this court pursuant to that section [1498] is that

the Government, when a patented device or in-

vention is made or used by or for the United

States, ipso facto takes by eminent domain a

compulsory compensable license in the patent;

the patentee obtains his Fifth Amendment just

compensation for that taking through his action

here under § 1498. * * *

See, Waite v. United States, 282 U.S. 508 (1931);

Crozier v. Krupp, 244 U.S. 290 (1912); Irving Air

Chute Co. vy. United States, 117 Ct. Cl. 799, 93

F.Supp. 633, 87 USPQ 246 (1950).

The first step in determining reasonable compensa-

tion is to ascertain when the “taking” occurred. We

are guided in this by our prior decision in /rving

Air Chute Co., supra. The Government there urged

that if it manufactured or used any devices covered

by any of plaintiff’s patents more than six years be-

fore the petition was filed, the cause of action should

be barred by the statute of limitations. The Govern-

42a

ment argued that by using or manufacturing a

patented article, it acquired a license to continue to

manufacture or use the article for the duration of

the patent, that the taking occurred once and for all

with this first unauthorized use. Plaintiff urged that

it should be able to recover for articles manufactured

within six years of the date of the filing of its peti-

tion, even as to patents covering devices manufac-

tured by or for the Government more than six years

before the petition was filed. We explained that ‘The

statute, 28 U.S.C. § 1498 * * * does not tell us, ex-

pressly, whether only one cause of action, or several

will accrue from a succession, perhaps with long in-

tervals between, of manufactures or uses by the Gov-

ernment.” 117 Ct. Cl. at 804, 93 F.Supp. at 636, 87

USPQ at 248. Since it was not possible to ascertain

the scope and duration of the interest taken at the

time of the first unauthorized use, we held in /rving

Air Chute that the cause of action did not accrue at

the first taking for all future acquisition by the Gov-

ernment. See also, Coakwell v. United States, 178 Ct.

Cl. 654, 372 F.2d 508, 153 USPQ 307 (1967) ; Regent

Jack Mfg. Co. v. United States, 167 Ct. Cl. 815, 337

F.2d 649, 143 USPQ 136 (1964); Gage v. United

States, 122 Ct. Cl. 160, 103 F.Supp. 10922, 93 USPQ

103, cert. denied, 344 U.S. 829 (1952). So too in the

instant case.

The trial judge refused to consider transactions oc-

curring after November 8, 1946, in establishing the

reasonable royalty because he deemed that they were

not material, as a matter of law, since they took place

43a

after the date of the first infringement by defendant.

The trial judge determined that the defendant’s first

unauthorized use of plaintiff’s patents, on or about

November 8, 1946, constituted a taking, all at once,

of plaintiff’s entire property. This analysis runs con-

trary to /rving Air Chute, which we think was cor-

rectly decided. The takings occurred whenever the

Government procured or used a device covered by any

of plaintiff’s patents without a license. Our an-

alysis accords, not only with Jrving Atr Chute but al-

so with the terms of 28 U.S.C. 1498, which provides

in part: “Whenever an invention described in and

covered by a patent of the United States is used or

manufactured by or for the United States without

license of the owner thereof or lawful right to use or

manufacture the same, the owner’s remedy shall be

by action against the United States in the Court of

Claims for the recovery of his reasonable and entire

compensation for such use and manufacture.” (Em-

phasis added.)

The recovery period runs from November 1946,

when the Government first infringed one of the pat-

ents in suit, until late in May 1964, the expiration date

of the last patent involved. It is not easy to fix upon

appropriate royalties for the takings during that long

time-span, but we think it can be done with fairness

to both parties.

The evidence shows that Autogiro received patent

royalties under some nine licenses during the period

(1932-1946) before the years not at issue. Some were

44a

ata 5% rate, some at 7% and some at an .85% nom-

inal wartime rate.‘

We put aside the wartime rate, both because it pre-

ceded the years with which we are here concerned, and

also because the particular circumstances of the war-

time procurement of patent licenses make it very

difficult to equate the very low-level wartime rate with

* In 1930, plaintiff licensed Kellett Aircraft Corp. at the rate

of 6° of retail sale price of the complete aircraft. This rate

was changed to 5% during 1932-45. The Government pro-

cured rotary-wing aircraft from Kellett in the period prior to

World War II and approved payment of the 5% royalty

thereon to Autogiro. Pitcairn Autogiro Company was licensed

during 1936-41 at the 5% rate. Pitcairn-Larsen Autogiro

Company was licensed in 1941 at the rate of 5% of the retail

sale price of the complete aircraft or at 7% of the sale price

if sold without engine or standard equipment. A.G.A. Aviation

Corporation was licensed 1941-43 at the same 5% and 7%

rates. The Firestone Tire and Rubber Company was licensed

by the plaintiff in 1943-46 at the same 5% and 7% rate sub-

ject to a sliding scale. Firestone was again licensed about

March 12, 1946, as of September 1, 1944, at the rate of 10%

of the retail sale value of the patent components, i.e., a per

patent royalty, but with a royalty ceiling of 5% of the total

retail sale value of the complete aircraft and spare parts, and

subject to a sliding scale which reduced the rate as royalties

exceeded stated amounts. The sliding scale provided that for

the first $50,000 of royalties, the sum of the per patent royal-

ties applicable to each such complete helicopter and spare parts

therefor but not to exceed 5% of the total sale value; for the

next $45,000 of royalties 9/10s of the initial rate; for the next

$40,000 of royalties 8/10s of the initial rate. The license

taken by Firestone in March of 1946 was offered at the same

rates to other manufacturers of rotary-wing aircraft.

45a

fair market value for the post-war period or with an

established post-war license policy.’

Likewise, we reject the pre-war rates as proper

guidelines for the post-war period because, in our

view, plaintiff itself established, roughly contempor-

aneous with the beginning of the recovery period,

a new post-war rate, for general use, which it deemed

satisfactory to it.’ Effective as of January 1, 1947,

*In 1943, the plaintiff unilaterally selected and proffered to

the Government and to industry a nominal wartime royalty

rate of .85% of the contract price of the aircraft. Since the

Royalty Adjustment Act of 1942 (Act), 56 Stat. 1013, later

codified as 35 U.S.C. §§ 89-96 (1946 ed.), was in effect at that

time, the Government could have reduced the rates by order if

plaintiff had not been cooperative. Pursuant to that Act, any

department or agency which ordered the manufacture or use

of an invention could fix royalty rates which were deemed

fair and just, taking into account the conditions of wartime

production, if it believed that the rates provided by existing

licensing agreements were unreasonable or excessive. The

licensor’s sole remedy was a suit to recover the difference be-

tween the royalties fixed and specified by the agency and the

royalties found by the court to be fair and just compensation.

Act §§ 1-2. Further, the head of any Government agency was

authorized to enter into agreements and settlements in com-

promise of any claim by any inventor or licensor. Act § 3.

Plaintiff granted wartime licenses, which covered all of plain-

tiff’s patents including the patents here in suit, to Nash-

Kelvinator Corporation, United Aircraft Corporation and

Kellett Aircraft Corporation. These wartime licenses were at

the rate of .85% of the contract price for rotary-wing aircraft

made for and sold to the Government and these licenses ex-

pired on March 2, 1946, i.e., 6 months after the cessation of

hostilities.

* We include in the war and pre-war category the Firestone

agreement, made in March 1946 as of September 1944 (see

note 4, supra), since very early in the recovery period that

46a

Autogiro entered into an agreement with United

Aircraft Corporation for a royalty of $500 an air-

craft for 1946-1948, with the $500 ceiling to change

to 2‘, of the air-frame price on and after January

1, 1949." After this United agreement was executed,

the plaintiff proposed similar licenses to other major

manufacturers of helicopters, in effect announcing

its post-war rate to be 2‘. These companies all re-

fused to take licenses but the significant fact is that

plaintiff made the offer and made it widely. In 1949,

after some months of negotiation triggered by

United’s disinclination to let the 2% rate go into ef-

fect, plaintiff granted United a paid-up license at con-

siderably less than 2‘ per aircraft. These two

United licenses were the only ones actually made by

Autogiro during the recovery period from November

1946 to May 1964. But as we have said plaintiff did

make a general offer in 1947, at the 2°. figure, to

other manufacturers, That proffered rate was neither

increased nor lowered before suit was brought here

in 1951 (after which everyone concerned awaited

the end of the litigation).

It has been suggested on behalf of the plaintiff that

the 2%, figure cannot serve as an established royalty

rate used by the patentee in commercial licensing (see

license (which predated the recovery period) was definitely

superseded, as plaintiff’s general policy, by the 1947 United

Aircraft agreement. See the text immediately infra.

’ The agreement could be terminated at any time after De-

cember 31, 1948, upon the giving of a six-months written

notice.

47a

the test set forth in Calhoun v. United States, 197 Ct.

Cl. 41, 55-56, 453 F.2d 1385, 1393-94 (1972) ) because

(a) the first (1947) United agreement was mainly

the product of compromise to avoid litigation, and

(b) mere offers by the patentee are inadmissible to

prove value. We can accept neither premise.

The record does not show that the 1947 United

License was a one-sided effort by United to force

Autogiro to compromise its true position or face years

of grinding litigation in this court under 28 U.S.C

§ 1498." Whatever it may now say,’ plaintiff does not

seem at all to have made that evaluation of the United

agreement at the time it was signed. In a letter of

October 1948 to Harold Pitcairn (president of Auto-

giro), one of Autogiro’s patent counsel (Raymond

Synnestvedt) wrote about a recent visitor whose

“main purpose was to sound me out on whether the

Autogiro Company might grant him a license—and

what the current licensing terms are. Since written

outlines of the present licensing terms have been dis-

tributed fairly widely, I saw no reason why I should

not orally outline the terms to [the visitor], which I

did. He had not heard of the reduction from the pre-

vious ceiling of 5% to the postwar ceiling of 2%, and

* The defendant was by far the largest consumer of products

enbodying plaintiff’s inventions and had refused in 1947 to

enter into license agreements, preferring to rely on indemnity

agreements from its suppliers.

® At trial, Autogiro’s patent counsel testified that the cost,

trouble and worry of litigation were factors in reducing the

royalty rate to 2% in 1947.

48a

I think he was quite interested.” Again (as indicated

above), Autogiro gave an outline of a proposed license

agreement with a 2% ceiling to three manufacturing

companies, with the royalty rates described as “bcing

quite representative of what is currently beiag of-

fered.” *’ These statements give not the slightest

hint that Autogiro felt that the United agreement (or

the like agreements proffered to the other manufac-

turers) was unfair or afforded it less than its due in

the period now at issue.

It is a truism that patents can change or decline

in value, and that seems to have been the case for

Autogiro, even in its own eyes, during the post-war

years. It wanted a package deal for any and all of

its patents, and some of these were expiring from

time to time. Engineering data for Autogiro (man-

ufactured in the pre-war era) were not useful for

helicopters (the article made after the war). The

post-war procurement of devices using plaintiff’s in-

ventions was bound to be very much larger than the

pre-war purchases—and the royalty rates could there-

fore decline significantly. Nor is it a sign of in-

validating compromise that, especially where a packet

of patents is involved, there may have been some

doubts as to the validity of some of the claims." Auto-

1° 4 Nichols, Eminent Domain (3d ed. rev. 1975), § 12.311

[2], declares that statements made in the process of making

an offer concerning facts in the controversy which are not

mere concessions made for the purpose of such offer are

admissible against the party making them.

1 After the 1947 agreement but before the 1949 paid-up

license, a United official wrote (in July 1948) to the president

of Autogiro:

49a

giro probably had some of those doubts itself and ad-

justed its demands accordingly. For these reasons the

% United agreement seems to us highly probative

under the rule we reiterated in Calhoun v. United

States, 197 Ct. Cl. 41, 55-57, 453 F. 2d 1385, 1393-

94 (1972). Calhoun teaches that the mere surmise

that a bargained license may possibly include some

“The agreement as concluded provided, however, for an in-

crease in royalty ceiling to 2 perecnt of retail sales value for

the calendar year 1949 and succeeding years. United signed

the license agreement with the expressed intention of review-

ing the entire situation, with special reference to royalty

rates, prior to assuming any obligation for royalties in 1949

or subsequent years.

“From the beginning, United’s problem has been to deter-

mine what royalty, if any, it was warranted in paying under

the Autogiro patents, in order that United might be free from

possible litigation from that source in carrying forward its

research, experimental and manufacturing programs. In this

connection, since by far the greater part of our sales of heli-

copters for some time to come will be to the Government, any

suit involving such sales would have to be brought against

the Government in the Court of Claims.

“In each appraisal of the patent situations, royalty rates

have been opposed to the poss‘ble results, both favorable and

unfavorable, of litigation should *e proceed without a license.

Each successive appraisal has resulted in a lesser value to be

placed upon Autogiro’s patents, and we would fully expect

this trend to continue in the future. As you know, United has

never felt the need of engineering assistance from Autogiro

and it has never received, nor does it contemplate receiving

in the future, any such assistance.”

It is to be noted that this letter was written over a year

after the 1947 agreement became effective, and cannot retro-

actively turn that 1947 pact into a mere compromise-to-avoid-

litigation, especially in view of Autogiro’s clear acceptance of,

and satisfaction with, the 1947 agreement.

50a

discount for litigation-avoidance does not per se pre-

clude use of an accepted commercial rate as establish-

ing reasonable and entire compensation. Earlier,

Saulnier v. United States, 161 Ct. Cl. 223, 314 F. 2d

950 (1963), took heavy account, in setting compensa-

tion, of the plaintiff’s previous settlement of infringe-

ment claims against the British government where

that settlement appeared to be satisfactory and rea-

sonable. See 161 Ct. Cl. at 226-27, 314 F.2d at

951-52.

As for the offers not translated into actual agree-

ments, the authorities which reject such use (see the

cases cited in 4 Nichols, Eminent Domain (3d rev.

1975), §§12.311[2] and 12.3113[3]) concern at-

tempts by the condemnee to seek a higher award on

the basis of offers made by or to him (or to utilize

a third-party offer with respect to comparable prop-

erty to gain a higher award). They do not involve an

effort by the condemnor to rely on an offer made by

the condemnee as proof of the value of the property.

It is obvious that, although the inherent defects of

offers made by condemnee-owners prevent the opposite

party, the condemnor, from being bound by such

offers, there is no reason why the owner himself

should not be held to his own offer. In this instance,

the post-1946 offers were not casual or ad hoc but

were circulated “fairly widely” in the industry. It

is appropriate to take them into account and to give

them great weight.”

2 There is no support for the view that, until six months

after the Japanese Peace Treaty in April 1952, the plaintiff's

5la

All this means that the post-1946 United agreement

at 2% as well as the post-1946 offers made by Auto-

giro at that same level—plaintiff’s own position delib-

erately taken in 1947 and 1948—have a prima facie

title to acceptance as the reasonable royalty for

1946-1964. The question remains whether the roy-

alty should be set at a still lower figure, as defendant

requests. This is not a simple skein to unravel, but

our conclusion is that the 2% rate should be accepted

for all infringements (after 1948, see note 16). The

main reason is that, quite unlike the 2% figure, there

is no indication from Autogiro that any lesser roy-

alty was ever satisfactory, acceptable, or offered gen-

erally. The patentee’s situation was unusual in that

the Government was the dominant consumer of the

articles embodying the patents, and this put the plain-

tiff to a disadvantage since it was very unlikely that

an injunction could be obtained against United (or

other infringers).'* We therefore discount, in the ab-

licensing terms would be influenced by the Goverment’s theo-

retical right to fix war-time royalties under the Royalty Ad-

justment Act of 1942. Plaintiff’s own statements give no in-

timation of this nor does the record suggest that this theo-

retical power had any real impact after the actual end of the

World War II hostilities in 1945-1946. It should also be added

that the Adjustment Act’s standard was fair and just com-

pensation, and it cannot be assumed without proof that the

mere naked existence of that statute had such a depressing

effect. Cf. United States v. Commodities Trading Corp., 339

U.S. 121 (1950).

18 We refer to the fact that a patentee cannot obtain an

injunction against a government-supplier or government-

contractor and is confined, for his exclusive remedy, to a suit

52a

sence of any expression of contentment, Autogiro’s

granting to United, at the latter’s strong insistence, of

a paid-up license in 1949." No offers to other com-

panies, stemming from this paid-up license, were made

by plaintiff.’° The theoretical constructions of defend-

ant’s expert—who reached a figure which was only a

fraction of 2%—were based in largest part on the

paid-up license; the expert did not consider plaintiff’s

hobbled position in trying to determine what the “par-

ties might well have agree upon” (Saulnier v. United

States, swpra, 161 Ct.Cl. at 227 (1963)) if Autogiro

had been relatively free of this one-sided litigation

pressure. For the present case, in which there was

only one actual license during almost the entire span

of the infringement years, and this suit began early

in the recovery period, the best that we can do is to

accept the only royalty rate “offered freely [by Auto-

giro] to everyone” in the industry during that period,

a rate actually agreed to, for a time by United, the

for “reasonable and entire compensation” (i.e. monetary

compensation) against the United States under 28 U.S.C.

§ 1498. These suits generally take a long time to come to

their conclusion and the patentee, even if he prevails, normally

obtains no compensation until the litigation is at an end.

(The reference is not to the Royalty Adjustment Act, see note

12, supra.)

* See note 11, supra.

‘’ Suit was brought here in 1951, and it seems clear that

after that date the problem of plaintiff’s compensation would

be, and was, left to the result of the litigation.

53a

largest manufacturer. See Culhoun v. United States,

supra, 197 Ct. Cl. at 56, 453 F. 2d at 1394."

III. Contribution

Defendant’s requested findings of fact assert that

the order of magnitude of the contribution of each of

the patents in suit to the rotary-wing aircraft in-

dustry is “zero, minimal, or negative.” Defendant

bases such requested findings primarily on a rehash

of the several patent application files and the prior

patents cited therein. The court has already found

specific patent claims valid and infringed by one or

more of seven helicopter types procured by defend-

ant. The weight of the evidence shows that such

prior art items are either totally irrelevant to the

subject matter of the patent claims in suit or are

fundamentally deficient, impractical and/or inopera-

tive. There is no credible evidence that the helicop-

ters made for or used by the defendant might have

been more satisfactory if plaintiff’s patented inven-

tions had not be incorporated therein. Defendant’s

contention that royalty compensation should be com-

puted at rates of less than 1%, based on its conten-

tion that plaintiff’s contributions to the industry were

minimal, is without merit.

‘For the period before 1949, the 1947 United agreement

provided that the royalty on any one aircraft should not exceed

$500, and also that from 1947 onward the minimum royalty

per year should be $10,000. We consider these provisions of

that agreement to be applicable to this case, though the only

54a

IV. Spare Parts

The United license defines “Licensed Aircraft” as

not only “aircraft with sustaining rotors * * * em-

bodying or manufactured or operating according to

any or all of the inventions covered by Patents of

Autogiro,” but also “parts and assemblies of parts

embodying or manufactured or operating according

to any or all of said inventions for use in such air-

craft. * * *” With regard to spare-part rotor hub as-

semblies for the HUP-1 helicopter, in accord with

plaintiff’s per-patent royalty the royalty base for

claim 14 of the ’457 patent is each spare-part HUP-

1 rotor hub assembly, and the royalty therefor would

be 10°, of its retail sale value. However, spare-part

rotor hub assemblies which embody or which are man-

ufactured according to the subject matter of claim

14 of the ’457 patent are, per se Licensed Aircraft,

i.e., parts “for use in” the Government’s infringing

helicopters for which such spare-part hub assemblies

are procured; and in accord with the 2% royalty

ceiling provision of plaintiff’s established royalty for

Licensed Aircraft, the total royalty for such spare-

part hub assemblies may not exceed 2% of their retail

sale value. The foregoing comments are equally ap-

plicable in respect to the effective 2% royalty for

spare-part rotor hub assemblies for the HRP-1 and

HRP-2 helicopters.

one that is likely to be operative is the $500 ceiling for air-

craft used by or manufactured for the defendant prior to

January 1, 1949. From January 1, 1949, the 2% rate applies.

55a

Plaintiff has limited its requests for royalties on all

spare-part Vertol, Kaman and Gyrodyne rotor blades

which are within the scope of this accounting, to the

subject matter of claim 60 of the ’583 patent as held

to be infringed by either the HUP-1 or the H-21B

rotor blades, and that subject matter is also the basis

for plaintiff’s requests for royalties on the rotor

blades as installed on the Gyrodyne DSNs. Defend-

ant’s contentions cencerning claim 65 of the °583

patent and the various features thereof, with respect

to recovery of royalties for spare-part rotor blades are

completely moot at this point. The various features

of claim 65, none of which are included in claim 60,

and to which defendant has referred, are totally im-

material to the determination of plaintiff’s right to re-

cover royalties for spare-part rotor blades with re-

spect to the subject matter of claim 60 as held to be

infringed. Defendant’s contention that plaintiff is not

entitled to royalties for spare-part hub assemblies and

rotor blades is without substance.

V. Delay Compensation

The “reasonable and entire compensation” due

plaintiff under 28 U.S.C. § 1498 includes not only

reasonable royalties but also an appropriate amount

which compensates plaintiff for defendant’s delay in

payment of those royalties. This additional amount

has been referred to as “delay compensation.” As

stated by Justice Holmes in Waite v. United States,

56a

282 U.S. 508, 509 (1931), the “reasonable and entire

compensation” provided by the statute “was intended

to accomplish complete justice as between plaintiff

and the United States.” The amount due as delay

compensation is determined by multiplying the an-

nually accrued royalties by an appropriate annual

percentage rate. The periods of time covered by the

computation of that additional amount extend from

the dates of defendant’s procurements until the date

of payment of the court’s judgment herein.

The amounts heretofore awarded as delay compen-

sation by this court in eminent domain cases, includ-

ing cases under 28 U.S.C. § 1498, have been com-

puted at various rates. From 1927-37 the rate was

6%. During 1937-44 the rate was 5% and after 1944

the rate of 4% has been used. In the court’s decisions

in those earlier cases there is little or no discussion

of the theory or basis upon which a particular per-

centage rate of delay compensation was chosen.

The rates used by the court in the past to calculate

delay compensation have generally followed trends of

changes in investment yield rates during the 1920’s,

1930’s and 1940’s. The rate to be used during the

delay compensation periods involved in this suit, 2.e.,

from 1946 until payment of the court’s judgment

herein, should also follow the changes in yield rates.

These may be determined by reference to an estab-

lished, well recognized, widely used and authoritative

index of investment yields. Plaintiff urges that the

court use for this purpose Moody’s Composite Index

of Yields on Long Term Corporate Bonds.

57a

Defendant has urged that the court should estab-

lish, as the rate of delay compensation due plaintiff,

an amount equal to the average annual yields on a

series of hypothetical long term Government bonds

which defendant constructs subjectively. Both plain-

tiff and defendant thus urge that a varying rate of

delay compensation should be established by the court

in this case. However, defendant’s position is that

the various rates of delay compensation should be es-

tablished without reference to the court’s own vary-

ing rates of delay compensation in prior periods, and

defendant ignores any relationship between the rates

it now proposes and the rates of delay compensation

which this court has used just prior to the beginning

of the accounting period in this case. Both parties

recognize that the 4% annual rate of delay compen-

sation which was applied by this court after 1944

should not arbitrarily be continued in this case. Both

parties agree that the court should establish a vary-

ing annual percentage rate for delay compensation

which is appropriate under the facts and circum-

stances in this case. The parties disagree on the prin-

ciples which determine an appropriate varying rate,

and on the varying rate itself. The amount due as

delay compensation in this case involves a determina-

tion by this court of an appropriate base or yardstick

by which to measure and thereby establish the award

for delay compensation. The method of determining

delay compensation should be justified by the evi-

dence, and the rate should be responsive to the ends

58a

of justice. The ultimate test, of course, is that the

plaintiff must receive just compensation.

Examination of evidence of record relating to the

trends indicated by Moody’s Composite Index of

Yields on Long Term Corporate Bonds leads to the

conclusion that in view of all the circumstances in-

volved in this prolonged litigation, it is reasonable to

divide the delay period into several periods and to

utilize a rate of 4% for the period 1947-55, a rate of

4,% for 1956-60, a rate of 494% for 1961-65, a

rate of 614% for the period 1966-70, and a rate of

714,% for the period 1971-75. It is noted that Pub. L.

No. 93-625, § 7, 88 Stat. 2108, signed by the Presi-

dent on January 3, 1975, now provides for the pay-

ment of interest by the Government at the rate of

9% per annum on overpayments of federal internal

revenue taxes, effective July 1, 1975. Said law also

provides for annual adjustment of the interest rate

when the prime rate charged by banks during Sep-

tember is at least a full point more or less than the

Government interest rate then in effect. The Con-

gress thus gives statutory sanction to the use of a

commercial rate index or indicator in determining

the rate of interest to be paid by the Government.

Plaintiff has urged that the delay compensation

should run from the mid-point of each year during

the accounting period since the actual procurement

dates for the many aircraft involved in this case are

scattered throughout each calendar year. In Calhoun,

supra, the court selected August 15, 1954, mid-point

of the period from April 29, 1954 to November 21,

59a

1956, for the start of delay compensation. In Amerace

Esna Corp. v. United States, 172 USPQ 305, 308

(1972), the trial judge selected March 8, 1955, mid-

point of the period September 8, 1952 to September

8, 1958, for start of delay damages. The court adopt-

ed that computation in a per curiam opinion reported

at 199 Ct. Cl. 175, 462 F. 2d 1877, 174 USPQ 5i7

(1972). In Breese Burners, Inc. v. United States,

140 Ct. Cl. 9, 115 USPQ 179 (1957), the court de-

cided that interest would run from December 31 of

each year involved until date of payment. In Badow-

ski v. United States, 150 Ct. Cl. 482, 278 F. 2d 934,

125 USPQ 656 (1960), the court held that reasonable

and entire compensation should include interest to

date of payment to compensate plaintiff for the delay

in payment. In van Veen v. United States, 181 Ct.

Cl. 884, 386 F. 2d 462, 156 USPQ 403 (1967), the

court held that plaintiff was entitled to recover inter-

est as part of just compensation from January 1,

1967 to the date of payment. Defendant objects to

the allowance of interest from the mid-point of each

calendar year and asserts that the acceptance date of

each infringing aircraft is available. Plaintiff’s li-

cense agreement with United in 1947 provided for the

payment of royalties semi-annually within 45 days

after June 30 and December 31 of each year on all

licensed aircraft sold, leased or put into use during

the preceding 6-month period. In view of all the cir-

cumstances involved in this litigation, it is concluded

that reasonable delay compensation herein should be

computed on a calendar year basis with interest start-

60a

ing on January 1 of each year on the royalties ac-

crued during the preceding calendar year. Delay com-

pensation is part of reasonable and entire compensa-

tion and is not considered as interest per se.

Defendant’s debtor theory that delay compensation

should be based on the yields of a series of hypotheti-

cal Government bonds was recently rejected by one

of the court’s trial judges in Arcata National Corp.

v. United States, No. 771-71, report filed July 25,

1974. The trial judge in that case concluded that

delay compensation should be paid for the period in-

volved at the rate of 6.6% simple annual interest, a

rate based on his reference to corporate AAA bond

interest rates and prime interest rates. A stipulated

settlement based thereon was confirmed by order of

the court on January 3, 1975, Arcata National Corp.

v. United States, 206 Ct. Cl. 819. The court’s order

entered judgment for Arcata in the sum of $35,882,-

251.50 together with simple interest thereon at the

rate of 6.6% per annum until date of payment.

After considering all the circumstances involved in

the present protracted litigation it is concluded that

delay compensation computed at the varying rates for

varying periods set out above is both reasonable and

justified. The determination of a proper amount of

delay compensation is a judicial function. The dis-

charge of that function requires the exercise of judg-

ment.

Plaintiff has presented evidence of the expenditure

of $1,669,658 during the period 1951-73 for attorneys’

fees, witness fees and other expenses allocable to the

6la

11 patents which the court has held valid and in-

fringed. In a recent case involving the taking of flow-

age easements over farmlands, this court allowed at-

torneys’ fees at 25% of the total compensation. King

v. United States, 205 Ct. Cl. 512, 504 F. 2d 1138

(1974). In the present litigation, plaintiff did not

include attorneys’ fees in his requested reasonable

and entire compensation before the trial judge. There-

fore, no determination with respect to attorneys’ fees,

witness fees and expenses is made.

B.""

As indicated in subpart A, supra, the trial judge

has recommended delay compensation based on a

stepped percentage rate varying from 4% for the

years 1947-55 up to 714% for the years 1971-75.

The trial judge determined these percentages after

examining the trends in investment yields, as in-

dicated by Moody’s Composite Index of Yields on

Long Term Corporate Bonds. The trial judge noted

that in many cases the court awarded delay com-

pensation at a rate of 6% during the period 1927-

37, 5% during the period 1937-44 and 4% during the

period 1945-48, which rates were about 1 to 2 per-

centage points higher than the long term corporate

bond yields during the same periods. The Govern-

ment urged the trial judge and the court to calculate

delay damages based on the average annual yields of

‘* This subpart B of Part V of the opinion has been added

by the court.

62a

a series of hypothetical long term Government bonds,

in effect, the cost to the Government of borrowing

money. This measure of damages is contrary to the

established rule of eminent domain that damages

should be determined by what the condemnee has lost,

not what the taker has gained. 3 Nichols, Eminent

Domain, (3rd Ed. Rev. 1975), § 8.61:

The just compensation to which an owner is

entitled when his property is taken by eminent

domain is regarded in law from the point of view

of the owner and not of the condemnor. In other

words, just compensation in the constitutional

sense is what the owner has lost, and not what

the condemnor has gained.

(Fn. omitted citing, e.g. Boston Chamber of Com-

merce v. Boston, 217 U.S. 189 (1910, per Holmes,

J.)) The yield on a series of hypothetical Govern-

ment bonds is not relevant in ascertaining the injury

plaintiff has suffered. It measures compensation only

according to the point of view of the taker without

reference to that of the owner since he is hardly

likely to be able to borrow money at the rates the

Government can." King v. United States, 205 Ct.

* Blankenship v. United States of America, 9th Cir., Nos.

75-1704, 75-3722, decided October 15, 1976, is not to the con-

trary. It dealt with relatively short-term, actual Treasury

securities-—not with hypothetical long-term Government bonds

never actually issued. The Court of Appeals held that the

trier had to consider and take into account such short-term

actual Government obligations (not that the trier was bound

by those rates). In the present case, in contrast, the defend-

ant emphasized and emphasizes hypothetical very-long-term

securities, “constructed” by the defendant for the purposes of

63a

Cl. 512, 504 F. 2d 1138 (1974), does not require a

different result. King turns on its facts and we do

not extend that decision here. The parties in King

stipulated that the interest rate awarded should be

commensurate with the rates of interest paid by the

Government in the market for its own borrowing

purposes. Plaintiffs urged an interest rate of 6%,

whereas the Government proposed a rate of 4%. The

trial judge, in view of the special circumstances of

the case, that is, the parties’ stipulation described

above, recommended an award based on the annually

fluctuating rate on long-term United States Govern-

ment bonds, which ranged from 3.95% in 1962 to

5.70% by the end of 1970. The court adopted the

trial judge’s recommended award in a per curiam

opinion. It is clear that the use of the rate of in-

terest on long-term Government bonds as a method

of determining interest as part of just compensation

this litigation. Judge Lane had before him, in addition to

defendant’s construction of hypothetical long-term Govern-

ment bonds, record evidence of shorter-term, actual Govern-

ment obligations of the type dealt with in Blankenship—and

he clearly took these laiter into account. See the last three

sentences of court finding 478 (trial judge finding 526);

“One-year Government bonds produce an annual average

simple interest equivalent rate of 6.91 percent average for

the period 1946-1975. An average equivalent rate of 6.28

percent is produced by using 4-year Government bonds (the

average of yield statistics for 3- to 5-year Government bonds).

The delay compensation asserted by defendant, an average

equivalent rate, from defendant’s hypothetical long term

Government bonds, of 3.10 percent, is both inadequate and

improper.”

64a

rests on the stipulation and not on the independent

determination of the court.

The court has considered Arcata National Corpora-

tion v. United States, (order reported) 206 Ct. Cl.

819 (1975), for two reasons: first, Judge Lane men-

tions it in his recommended decision (supra, sub-

part A) as a case in which the trial judge rejected

defendant’s theory that delay compensation should

be based on the yields of a series of hypothetical

Government bonds, and, second, that trial judge

awarded a 6.6% covering a period for part of which

Judge Lane awarded 7.5%. The trial judge in Arcata

recommended an award which included 6.6% for de-

lay damages (No. 777-71 decided July 25, 1974),

but the court subsequently, by order, accepted a stipu-

lation of the parties that plaintiff’s written offer of

settlement with 6.6% interest had been accepted.

Arcata is not a judgment of the court, but a com-

promise settlement, and as such, it is not an appropri-

ate measure of just compensation. 4 Nichols, Emi-

nent Domain, (3rd Ed. Rev. 1975) § 12.8113[2].

In Arcata, the Government urged that interest at

a rate of 6%, the statutory rate, 16 U.S.C. § 79¢(b)

(2), satisfied the requirements of just compensation,

relying on the fact that on or about October 2, 1968,

the taking date, the Government was paying 6% on

its debt obligations. Plaintiff sought to recover inter-

est at a rate of 7.36%, representing the average

rate of interest it actually incurred on its debt ob-

ligations from the date of taking to a date just be-

fore trial. The parties recognized that ascertainment

65a

of just compensation was a judicial function and thus

the court was not limited to the statutory figure of

6%, in effect, that the statutory 6% figure in the

Redwood National Park Act, 16 U.S.C. § 79a-79j,

was not binding. The trial judge rejected defend-

ant’s method as being too narrow and restricted in

failing to consider other relevant data. We also re-

ject such an approach.

The Arcata trial judge did not accept the plain-

tiff’s method per se, but concluded that on the basis

of the entire record, 6.6% was a fair rate of in-

terest. In reaching this conclusion, the trial judge

consolidated the prime interest rate for the period

September 1968 through March 1973 (6.56%) with

plaintiff's computed average on its borrowings for

the same period (7.36%), achieving an average of

6.86%. The trial judge reconstructed plaintiff’s in-

terest computations to account for compensating bal-

ances and recognized that plaintiff did receive signifi-

cant interest payments for 1969 and 1971. Prior to

1969, plaintiff was a prime customer at various banks

and lending institutions and was able to negotiate

loans at very favorable rates. After 1969, plaintiff

had to pay higher rates. It is clear that the rate used

by the trial judge was based in part on the actual

cost to plaintiff of borrowing money. The court does

not approved of this actual cost method. Plaintiffs

are not usually in the business of borrowing money

and thus costs based on their own borrowing rates

are highly speculative. A plaintiff with a poor credit

rating could theoretically receive an award of just

66a

compensation at very high interest rates because its

actual cost of borrowing money might be very high,

while another might be penalized for having a good

credit rating. Neither the cost to the Government

nor to the plaintiff of borrowing money is an ap-

propriate measure of just compensation, and there-

fore, we are not bound by the 6.6% rate used in

Arcata.

The court agrees with the method used by Judge

Lane in this case. As the trial judge explained in

the findings of fact, long-term corporate bond yields

are an indicator of broad trends and relative levels

of investment yields or interest rates. They cover

the broadest segment of the interest rate spectrum.

The corporate bond market is large, substantially in

excess of long-term Government bonds and long-term

corporate yields measure basic trends and relative

levels of interest rates from one period to another.

It is true that the court has computed interest in

eminent domain cases at a rate of 4% since 1944.

It should be noted that the prime interest rate was

below 4% during the years 1944-1956. From 1956

through 1960, the prime rate fluctuated between 3%

and 5%. Our awards covering that period allowed

a rate, as we think they should have, higher than the

prime rates and the rates at which the Government

could then have borrowed money. The prime rate

increased steadily, from 4.5% in 1960 to 8.5% in

1969. During the period 1971-72, the prime rate

ranged from 434% to 6%. Most recently, in 1973-

76, the prime rate has varied from 6.75% to 12%.

67a

When the prime rate or Moody’s Corporate Index

increased, the court failed to increase its interest

award, not because of any affirmative determination

that such an increase was improper or unwarranted,

but rather because it was not confronted with a case

that presented the necessary evidence properly. See,

Amerace Esna Corporation v. United States, 199 Ct.

Cl. 175, 462 F.2d 1877, 174 USPQ 517 (1972), (no

evidence offered to prove requested 6% rate); Drakes

Bay Land Co. v. United States, 198 Ct. Cl. 506, 459

F.2d 504 (1972), (no proof offered other than stipu-

lated fact that defendant paid 6% interest on dis-

trict court judgment condemnation cases involving

land which became part of the same National Park) ;

Confederated Salish & Kootenai Tribes v. United

States, 193 Ct. Cl. 801, 437 F.2d 458 (1971), (statis-

tical data offered to court, but not to trial judge) ;

Carlstrom v. United States, 147 Ct. Cl. 297, 177 F.

Supp. 245 (1969), (no special circumstances war-

ranted award higher than 4%).

The parties in this case have briefed the issue and

presented sufficient evidence to the trial judge to al-

low an informed and reasoned determination as to

the appropriate measure of just compensation, just as

we said they should have done in Confederated Salish,

if they wanted the time-honored rates to be recon-

sidered in light of new economic conditions. Accord-

ingly, the court adopts Part V of the trial judge’s

recommended decision as its own in addition to these

added comments.

68a

Plaintiff has not shown any basis for recovery of

further delay compensation on account of inflation,

and its claim for this is denied.

VI. Experimental Use

The order of the court filed July 12, 1973, Autogiro

Company of America v. United States, 202 Ct. Cl.

1105, permitted the defendant to make “offers of

proof” with respect to the manufacture and use of

accused helicopters by the defendant “for testing and

experimental purposes.” At the accounting trial, de-

fendant presented such offers of proof through the

testimony of 13 witnesses and 147 documentary ex-

hibits pertaining to about 93 of the 2,237 rotary-

wing aircraft involved in this litigation. Defendant

has requested 153 detailed findings of fact relative to

experimental use, all based on its offers of proof. No

findings of fact are or need be made on the testing

and experimental use of accused aircraft. It may

be noted, however, that at least one of defendant’s

witnesses testified that the testing of helicopters “was

use of those helicopters for the Government.”

Defendant contends that under this court’s de-

cisions in Ordnance Eng’r Corp. v. United States,

84 Ct. Cl. 1 (1936), cert. denied, 302 U.S. 708 (1937)

and 96 Ct. Cl. 278 (1942), and Chesterfield v. United

States, 141 Ct. Cl. 838, 159 F.Supp. 371 (1958), de-

vices of an infringing construction which were used

for experimental or test purposes are to be excluded

from the computation of compensation under 28

U.S.C. § 1498. That statute provides:

69a

Whenever an invention described in and cov-

ered by a patent of the United States is used

or manufactured by or for the United States

without license of the owner thereof or lawful

right to use or manufacture the same, the

owner’s remedy shall be by action against the

United States in the Court of Claims for the re-

covery of his reasonable and entire compensation

for such use and manufacture.

Defendant’s interpretation and attempted expan-

sion of the court’s decisions in the two Ordnance cases

supra, pertaining to what those decisions refer to as

“ballistic shell” and “experimentai shell,” are er-

roneous; and those decisions are inapplicable to the

present cast. Although in Ordnance the court did

exclude from the accounting the so-called “experi-

mental shell,” there is no discussion in the opinion

in either of those cases as to the rationale for their

exclusion. The only statement in the Ordnance de-

cisions on “experimental” is one sentence: “Experi-

mental shell are shell built for experimental pur-

poses.” There is no elucidation as to the determi-

nants of “experimental purposes.” Thus, the Ord-

nance decisions provide no rationale for, or guidance

for determining the propriety of excluding from an

accounting so-called “experimental” devices except

that they are devices “built for experimental pur-

poses.’ In the present case there is no evidence in

cefendant’s offer of proof that any of the helicopters

to which defendant’s “experimental use” contentions

pertain were built solely for experimental purposes.

70a

For that reason alone, the Ordnance decisions are in-

apposite.

Defendant’s reliance on the court’s opinion in Ches-

terfield, supra, is likewise without merit. The court’s

statement in its opinion there that experimental use

does not infringe constituted pure obiter dictum. The

court’s opinion specifically stated:

Where the court finds as a fact that the

patent claims in suit are clearly invalid * * * it

may not be necessary to consider the issue of

infringement. 141 Ct. Cl. at 840.

The court’s reference to experimental use was clearly

unnecessary to the disposition reached in Chesterfield.

It is also noted that in Chesterfield the defendant

procured by purchase, not by manufacture by or for

the Government, certain alloys which had been de-

veloped and used for supercharger buckets and blades.

In Chesterfield, the claim arose from defendant’s use

of purchased alloys. In the present case, the infring-

ing aircraft were clearly manufactured for the de-

fendant.

Plaintiff has excluded from its present claim static

test mechanisms manufactured for defendant. Nu-

merous research and development contracts were en-

tered into by the defendant and various manufac-

turers for the design, development and manufacture

of experimental helicopters and none of those specific

helicopters are the subject of this litigation.

Defendant urges the court to exclude from com-

pensation any aircraft used by the defendant for

testing, evaluation, demonstrational or experimental

Tla

purposes. Jse for such purposes is used by or for

the Government and is compensable. Obviously every

new helicopter must be tested for lifting ability, for

the effect of vibration on installed equipment, flight

speed and range, engine efficiency, and numerous

other factors. Tests, demonstrations, and experi-

ments of such nature are intended uses of the in-

fringing aircraft manufactured for the defendant

and are in keeping with the legitimate business of the

using agency. Experimental use is not a defense

in the present litigation.

Defendant has also referred to the experimental

use portion of Trial Judge Cooper’s opinion and re-

port to the court in Douglas v. United States, 181

USPQ 170 (1974). The court’s opinion in that litiga-

tion, 206 Ct. Cl. 96, 510 F.2d 364, 184 USPQ 613

(1975), cert. denied, 423 U.S. 825, did not rule on

experimental use since the patent claim was held to

be invalid. While the trial judge’s discussion of the

experimental use rule in various courts is not the law

of the ease in Douglas, it is a well reasoned and his-

torical analysis. In Douglas, the testing of the Kes-

trel aireraft conducted by the Army, Navy and Air

Force, to evaluate the aircraft was found by the trial

judge to be use of the aircraft which served a valu-

able governmental purpose.

Upon the foregoing opinion and on the findings of

fact which are made part of the judgment herein, the

court concludes that the plaintiff is entitled to recover

from the United States in accordance with the

opinion. Judgment is entered for plaintiff to that ef-

72a

fect. The amount of recovery, including both the ba-

sic amount of compensation and the delay compensa-

tion, will be determined pursuant to Rule 131(c)

under the opinion.

NICHOLS, Judge with whom KUNZIG, Judge, joins,

concurring in the result:

I concur in the decision of the court and in the

Per Curiam opinion except for part II, Royalty Com-

pensation. As to that, I concur in the result, because

I believe the Royalty Compensation should be at least

as much as the conclusions stated in that part will

lead to, and, indeed, considerably larger yet. The

opinion is correct so far as it rejects the further cuts

in Royalty Compensation proposed in Judge Ka-

shiwa’s dissent.

The court’s decision will slash almost in half the

trial judge’s proposed decision, which would have

awarded $50,926,278, of which $24,570,525 was the

principal amount of reasonable and entire compensa-

tion, and the remainder was compensation in the na-

ture of interest for delay in payment. The change

serves to reward a cynical exploitation of the cost

and delay of suing in this court, and its inevitable

effect upon a claimant’s valuation of his claim.

I would not quarrel with some reduction in the

above figures, but I would make it for different rea-

sons and to a lesser extent. It is normal in valuation

proceedings to reject the testimony of retained ex-

perts on both sides and to award something in be-

73a

tween. The trier of fact is not helpless if the testi-

mony is all unacceptably high or low. The Conqueror,

166 U.S. 110, 131 (1897); United States vy. Northern

Paiute Nation, 183 Ct. Cl. 321, 346, 393 F.2d 7386,

800 (1968). When we have fully in effect the utopia

of court-appointed experts under the Federal Rules

of Evidence, Rule 706, as adopted in Pub.L. 93-595,

this kind of splitting of differences may become less

respectable,

Here however, the court has rejected one error

_ only to embrace another. The trial judge unfortun-

ately held that the taking occurred all at once on the

occasion of the first infringement by or on behalf of

the Government. The court rightly holds that takings

occurred from time to time over the years, as heli-

copters were built. But it wrongly holds that the 1947

royalty agreement with United Aircraft Corporation

and the offers by plaintiff to other companies are bind-

ing on it, as admissions, and necessitate a royalty re-

duction to 2% from the trial judge’s 3.85%.

After the end of World War II hostilities the war-

time .85 rate lapsed though the Royalty Adjustment

Act was, as the court admits, at least technically in

effect. The Government apparently made no effort to

rely on it; rather, it required indemnity agreements

from suppliers. This relegated the plaintiff to making

the best deal it could with manufacturers amid all

the dog eat dog atmosphere of private patent contro-

versy, but without the injunction relief normally

available to wronged patentees, because the greater

part of the sales were to be to the Government, and

74a

the remedy by suit in this court under 28 U.S.C.

§ 1498 was exclusive. The general expectation was

that after many years of costly litigation, some pa-

tents would be held valid and some invalid.

The court describes the two agreements with United

Aircraft Corp. It professes to derive support for its

position from the fact that United’s letter, quoted in

its fn. 11, was written a year after the 1947 agree-

ment. However, the letter discussed and character-

izes that 1947 agreement as purely and simply, on its

side, a resultant of assessing the royalty plaintiff de-

manded against the projected outcome of litigation.

No reason appears why the lapse of a year would

make that assessment less valid. It is, in my view,

a telling letter and vividly portrays the predicament

that Autogiro was placed in. Plaintiff’s situation was

the same. This is why plaintiff cut its demands from

5% to 2%. If it had done this because its inventions

were not salable, we would have a different case. It

knew its inventions were not only salable but in-

dispensible; that manufacturers could not build heli-

copters “around them,” in the patent lawyers’ term,

i.e., they could not build helicopters without infringe-

ment. It knew that whether manufacturers procured

licenses or not, they would build helicopters in the

same manner, infrinnging or not, and would defy any

lawsuits that might be brought.

What is any claim worth, in present value, if one

knows one must sue in the Court of Claims for 25

years to recover anything upon it? Is it fair to take

the fellow who would settle it at the outset for 40¢

75a

on the dollar, and assess his claim at 40¢, though he

has not got the quid pro quo his sacrifice of 60¢ would

have obtained if accepted?

Nobody ever actually paid any royalties at the 2%

rate. Plaintiff would have obtained under its 1947

United agreement, if not superseded, and under its of-

fers to others, if accepted, an immediate cash flow.

It would also have obtained from anyone who accepted

a license, an estoppel to challenge the patents, as the

law was before Lear Inc. v. Adkins, 395 U.S. 653

(1969), which overruled Automatic Radio Mfg. Co. v.

Hazeltine Research Co., 339 U.S. 827 (1950). Most

valuable of all, it would have saved 25 years of liti-

gation. Plaintiff finally sold a paid up license at an

even cheaper rate to United, to obtain these blessings.

Defendant, and its indemnitors, did not furnish any

of the quid pro quo that United furnished, and yet

now they want the discount that United got. Even the

court can see that the under 1% rate is not “rea-

sonable and entire compensation” but somehow the

2% rate is different.

The court’s decision not only violates the most ele-

mentary notions of reason and justice, but also estab-

lished law. The general rule in eminent domain is

that a landowner’s right to recover just compensa-

tion may not be measured by the amount another land-

owner received as a settlement of possible litigation.

4 Nichols On Eminent Domain, (8d Ed. Rev. 1975),

12.3113 [2].

Cathoun v. United States, 197 Ct. Cl. 41, 453 F.2d

1385 (1972), does not require a different result, but

76a

by implication indicates we should disregard the

post-1946 transactions. In Calhoun, plaintiff licensed

the patent throughout the industry at a rate of

twenty-five cents per unit. The trial judge increased

this commercial royalty by one-third since he felt the

rate was set by plaintiff with a view to avoiding liti-

gation and since defendant’s failure to keep records

increased plaintiff’s costs in litigation. The court re-

fused to accept the trial judge’s figure because:

* * * There [was] nothing in the evidence to

show or to suggest, that the 0.25 cent rate was

set beneath fair market value with a view toward

avoiding litigation. This license rate was used

widely and offered freely to everyone; there were

many “takers” at that price. * * * We must as-

sume, in the absence of contrary evidence, that

it represented full and fair market value, i.e., the

going price. (197 Ct. Cl. at 56-57, 453 F. 2d at

1394).

Considering the casualties that patents suffer by in-

validity determinations in the Federal Courts, a bar-

gained license under any patent not yet litigated

would possibly show some discount for litigation

avoidance, but the teaching of Calhoun is that this

mere surmise does not per se preclude use of a widely

accepted commercial rate to establish reasonable and

entire compensation. That is all Calhoun teaches to

me.

The case before us is very different from Calhoun.

There is conclusive evidence in the record that the

parties considered the costs of litigation in negotiat-

77a

ing the license agreements. There were not many

“takers” of Autogiro’s patents after 1946, only Unit-

ed. Further, post-1946 manufacture of helicopters

was primarily for the Government, not commercial

sales. We can properly infer from the record that

the 1947 and 1949 agreements with United were not

valid reflections of the patents’ fair market value.

I agree with the remainder of the court’s decision,

as to which, therefore, I need not spell out my views.

The amount the trial judge would have awarded is

large, perhaps unprecedented. Even this court’s meat

axed award will be substantial. Large as the involved

sums are, here, as always, the precedential effect of

our decision is even more important. Do we really

want to tell litigants that we have so little concern

about the cost and delay of suing in this court, that

we will take as the full value of a claim herein the

discounted value which a desperate claimant must

accept, if he is to realize anything at all before 25

years of litigation? If that is our position, we have a

self-activating mechanism for reducing awards, which

the defendant will know how to make the best use of.

It is not my idea of justice.

Plaintiff’s offers in 1947 do establish that the 5%

royalty rate was abandoned. I would consider them

to that extent. The situation appears to me to be

appropriate for one vf those miscalled “jury ver-

dicts” (cf. A. C. Ball Co v. United States, 209 Ct. Cl.

223, 531 F. 2d 993 (1976)). I would come up

with a $20,000,000 figure for the royalties, to which

78a

should be added the compensation for delay in pay-

ment,

As a parting shot, I will add I fail to see why this

Jarndyce v. Jarndyce of a case has got to be further

prolonged with Rule 131(c) proceedings. Could not

the court, by a few minute’s work with a pencil,

calculate the amount of the award to which its reason-

ing leads, and convert this claim at long last into a

money judgment?

SKELTON, Judge, concurring in part and dissenting

in part:

I concur in all the per curiam opinion, except the

award of interest of 614 percent for the period 1966-

1970 and the award of interest of 714% percent for the

period 1971 to date of payment. I think the interest

awarded for these years is too high and should be

reduced to six percent for the entire period of 1966

to date of payment. This would be in line with 16

U.S.C. § 79¢(b) (2) (1970) which provides in perti-

nent part:

The United States will pay just compensation

to the owner of any real property taken * * *

including interest at the rate of 6 per centum per

annum from the date of taking the property to

the date of payment therefor; * * *

It is true that this statute refers to the taking of

real property for the Redwood National Park, never-

theless, it deals with a fifth amendment taking of

79a

property by the Government and provides the pay-

ment of an appropriate rate of interest.

Also, the Declaration of Taking Act, 40 U.S.C.

§ 258a (1970), 46 Stat. 1421, provides in pertinent

part with reference to just compensation for a taking

by the United States of any land or easement or right

of way in land for public use:

* * * [AJjnd the said judgment shall include, as

part of the just compensation awarded, interest

at the rate of 6 per centum per annum * * *.

These two statutes establish guidelines for the pay-

ment of interest in fifth amendment takings of real

property by the United States. While the instant case

does not involve real property, it does involve fifth

amendment takings by the Government. I think that

in the absence of adequate and convincing proof other-

wise, we should follow the above statutes and award

six percent interest for the above-indicated period.

In the case before us, the majority approves the

decision of the trial judge in awarding 61% and 71/,

percent interest for the designated period based on

Moody’s Composite Index of Yields on Long Term

Corporate Bonds. In my opinion, this is not a proper

yardstick to measure or determine the amount of in-

terest to be awarded in a fifth amendment taking by

the Government. We are not dealing with corporate

bonds, which may be speculative as to yield as well

as to ris!: of default, but with an obligation of the

United States which usually bears a lower interest

80a

rate than that applicable to other borrowers, is not

speculative as to yield and bears no risk of default.

The Ninth Circuit Court of Appeals discussed this

very point in United States v. Blankinship, Nos. 15-

1704 and 75-3722 (decided October 15, 1976), in

considering the proper way to determine the amount

of interest to be paid for a fifth amendment taking

by the Government under the Declaration of Taking

Act cited above. The court held:

However, we also hold that the trial court in

this case, acting as the trier of fact, did not con-

sider evidence we believe to be of great impor-

tance in establishing the proper and reasonable

rate. Specifically, the trial court did not have

before it certain highly relevant evidence with

the result that the rates selected may have been

improperly skewed. The evidence before it was

inadequate to establish, the rate of interest that

would have been available to the person from

whom the property has been taken had he, at

the date of taking, invested the total amount of

any deficiency in the original deposit in a mar-

ketable public debt security issued by the United

States Treasury having a duration commencing

with the date of taking and ending with the de-

posit in the registry of the court of the entire

deficiency with proper interest. Evidence tend-

ing to establish such a rate is necessary to fix

fairly the just compensation to which the per-

son deprived of his land is entitled. Without

evidence of such a rate the rates selected very

lightly may have been unduly influenced by rates

8la

applicable to loans more speculative than one to

the United States. * * *

* * * * ”

*“* * * [W]e are convinced that the proper

interest rate applicable to an obligation of the

United States may well be lower than that ap-

plicable to other borrowers. Moreover, this lower

rate is particularly relevant here because the ob-

ligation to pay the deficiency is an obligation

of the United States, a creditor whose obligation

embodies no risk of default. Seizure of land

under the Declaration of Taking Act is an act by

the United States by which it substitutes for

ownership of land, together with the risks at-

tendant thereto, an obligation of the United

States which is free of the risk of default. * * *

* * * We believe that the trial court should

have focused more on that type of marketable

public debt security which constitutes a direct

obligation of the United States Treasury having

a duration approximating the period during

which the deficiency was unpaid. Data of this

type appears in the Treasury Bulletin‘ and the

Federal Reserve Bulletin.

‘Of particular significance is the table setting forth

“Yields of Treasury Securities” which appears regularly

in the monthly Treasury Bulletin. £.g., TREAS. BULL.,

July, 1976 at 79.

I agree with the decision of the Ninth Circuit Court

in the above case. The method of determining the

rate of interest in that case was not the procedure

followed by our trial judge. It does not appear that

there was any evidence at the trial of the yield of

82a

public securities of the United States during the des-

ignated period. It is true that the defendant sug-

gested at the trial that the interest rate should be

‘an amount equal to the average annual yields on a

series of hypothetical long term Government bonds

which defendant constructs subjectively.” Of course,

such a yardstick is speculative and is not the proper

way to establish the correct interest rate.

It does not appear that there was any evidence at

the trial showing the rate of interest that would have

been available to the plaintiff if it had invested, on

the dates of taking, the total amounts due it in mar-

ketable public debt securities issued by the United

States Treasury during the periods involved here.

Without such evidence, we are not justified in award-

ing interest of more than six percent as specified in

the two statutes cited above.

The case of Arcata National Corp. v. United States,

No. 771-71, report filed July 25, 1974, wherein the

court approved interest of 6.6 percent in a taking

case, is not applicable here, because the parties agreed

to the 6.6 rate and the court merely approved their

agreement. The majority agrees that this is true.

Neither is Pub. L. No. 93-625, § 7, 88 Stat. 2108

of January 3, 1975, providing for payment by the

Government of interest of nine percent per annum on

overpayments of internal revenue taxes, cited by the

majority, controlling in this case. There is not the

slightest evidence or indication that Congress intended

the Act to apply in any way to eminent domain cases.

Besides, there is a big difference between interest on

83a

an overpayment of taxes and interest in a taking case.

An overpayment of taxes allows the Government to

use the taxpayer’s money until a refund is made and

the nine percent interest is payment by the Govern-

ment for such use. Whereas, in a taking case, inter-

est is not paid for use of money belonging to the party

whose property is taken, but is awarded to him as a

part of his damages in the form of delayed compensa-

tion.

KASHIWA, Judge, concurring in part and dissenting

in part:

I concur with the views expressed in the majority

opinion regarding: I. Similarity, III. Contribution,

IV. Spare Parts, V. Delay Compensation and VI. Ex-

perimental Use. But with relation to the portion of

the opinion entitled II. Royalty Compensation, I con-

cur in part and dissent in part as hereinafter shown.

The majority found, relative to II. Royalty Com-

pensation, that:

* * * Effective as of January 1, 1947, Autogiro

entered into an agreement with United Aircraft

Corporation for a royalty of $500 an aircraft

for 1946-1948, with the $500 ceiling to change

to 2% of the airframe price on and after Jan-

uary 1, 1949. After this United agreement was

executed, the plaintiff proposed similar licenses

to other major manufacturers of helicopters, in

effect announcing its post-war rate to be 2%.

* * * [Footnote omitted] [At page 11.]

84a

It is on these offers by plaintiff, made in 1947-1948,

to other manufacturers of aircraft, mainly Piasecki,

McDonnell and Bell, of licenses similar to that of

United Aircraft Corporation’s (United) license agree-

ment effective January 1, 1947, that the majority de-

cided on the post-war rate of 2%. A careful reading

of the majority opinion shows that the opinion is not

clear as to whether it meant that the 2% rate was

only a maximum rate or whether the 2% rate was a

flat rate with no downward, lower rate permitted. As

to these offers, the majority states:

All this means that the post-1946 United

agreement at 2% as well as the post-1946 offers

made by Autogiro at that same level—plaintiff’s

own position deliberately taken in 1947 and

1948—have a prima facie title to acceptance as

the reasonable royalty for 1946-1964. * * * [Em-

phasis supplied.] [At page 14.]

The phrase “prima facie title to acceptance” is am-

biguous. The ambiguity is made more apparent when

one reads the majority’s footnote 16. It reads as

follows:

“ For the period before 1949, the 1947 United

agreement provided that the royalty on any one

aircraft should not exceed $500, and also that

from 1947 onward the minimum royalty per year

should be $10,000. We consider these provisions

of that agreement to be applicable in this case,

though the only one that is likely to be operative

is the $500 ceiling for aircraft used by or manu-

factured for the defendant prior to January 1,

85a

1949. After January 1, 1949, the 2% rate ap-

plies. [Emphasis supplied.] [At page 15. ]

The record in this case shows that United’s $500

ceiling per aircraft at that time amounted to a .66%

rate." A rate of .66% is only one-third of the 2%

rate. Since the majority allows this lower rate of

.66% for the 1947-1948 period, a careful reader of

the opinion may conclude that the phrase “prima

facie title of acceptance” is interpreted to mean that

the 2% rate is only a maximum rate and so lower

rates are permitted. But in the same paragraph to

‘The 1947 United license agreement provided as follows:

“In respect of royalties accrued under the foregoing pro-

visions of this Section within the three calendar years ending

December 31, 1948, the royalty on any one aircraft shall not

exceed Five Hundred Dollars ($500.). As to any such air-

craft, if the royalty so paid by Licensee equals $500., there

need be no determination (for the purposes of this Section)

as to which Patents of Autogiro are employed therein. For

the calendar year 1946, the royalty as calculated under the

foregoing provisions of this Section, on any aircraft made by

Licensee and sold and delivered to and accepted by the Govern-

ment in 1946 shall in no event exceed the royalty which would

have been payable thereon had such aircraft been made, sold,

delivered and accepted under the License Agreement between

the parties dated as of the 24th day of March 1944.” * * *

[Emphasis supplied.] [At 10, section 5.]

By reason of the last sentence, some aircraft license pay-

ments only amounted to $445.82 per aircraft (1946 for Navy

aircraft). But the $500 figure was the predominant measure

used. The 2% rate provided in an earlier paragraph of the

agreement was not used at all.

The .66% rate is computed by using a fraction, $500 over

$75,212. The average cost per helicopter in 1948 was $75,212.

It is interesting to note that the wartime rate was .85%.

86a

which footnote 16 aforequoted belongs, the majority

again makes a broad, strong statement:

« * * The question remains whether the roy-

alty should be set at a still lower figure, as de-

fendant requests. This is not a simple skein to

unravel, but our conclusion is that the 2% rate

should be accepted for all infringements. The

main reason is that, quite unlike the 2% figure,

there is no indication from Autogiro that any

lessor royalty was ever satisfactory, acceptable,

or offered generally. [Emphasis supplied.] [At

page 14. ]

So one can only conclude that there is an inconsistency

at this very important point of the majority opinion.

This inconsistency caused the majority a problem in

setting its post-1949 rate. The 1949 fully paid-up

license to United was less than 2%. The majority

answered defendant’s argument for a lower than 2%

rate for the post-1949 rate as follows:

* * * The patentee’s situation was unusual in

that the Government was the dominant consumer

of the articles embodying the patents, and this

put the plaintiff to a disadvantage since it was

very unlikely that an injunction could be obtained

against United (or other infringes). We there-

fore discount, in the absence of any expression

of contentment, Autogiro’s granting to United,

at the latter’s strong insistence, of a paid-up li-

cense in 1949. No offers to other companies,

stemming from this paid-up license, were made

by plaintiff. The theoretical constructions of de-

fendant’s expert—who reached a figure which

87a

was only a fraction of 2%—were based in largest

part on the paid-up license; the expert did not

consider plaintiff's hobbled position in trying to

determine what the “parties might well have

agreed upon” (Saulnier v. United States, supra,

161 Ct. Cl. at 227 (1963) ) if Awtogiro had been

relatively free of this onesided litigation pres-

sure. * * * [Emphasis supplied. Footnotes omit-

ted.] [At pp. 14-15.]

Since the majority first refers to dominant Govern-

ment consumption, injunctions and one-sided litiga-

tion pressure, the majority was referring to Govern-

mental actions under 35 U.S.C. §§ 89-96, popularly

known at the Royalty Adjustment Act of 19

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