# Petition — United States v. Pitcairn > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385005_0023%3A1 ## Record - **Collection:** Supreme Court brief - **Document type:** Petition - **Published:** January 1, 1978 - **Citation:** 434 U.S. 1051 ## Text -- wit 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 en 2 a ascertains 3 Es 3 Reasons for granting the writ | . 10 I ics ecnerceccrssnsaee ” 17 I ag ee la BI TD“ nicisceusccoesituionssisdabennishaesssiakansineekedinens 32a INI OE aan nrsnsbtarndaiinissdienienaneinacomsecnaeenemces a ae: 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) 2 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. 3 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. 4 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). 5 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). 6 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). 7 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). 8 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). 9 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). 10 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 11 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, 12 224 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.). 13 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. 14 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 15 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- 16 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. 17 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. la 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) v. 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. 2a 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 3a 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 5a 4a auoN aéh-H ¥ VEb-H ‘T-MOH ‘I-¥.LH uewey a&b-H ¥ Vet-H ‘I-MOH ‘I-MLH ueury a&v-H ¥ VEr-H ‘I-MOH ‘I-M.LH uewey a&>-H ¥ VEb-H ‘T-MOH ‘I-M.LH uewey T-ISH ll? TMLH uvuey dH 8 3-dUuH ‘I-duH Ppeserg/joy12, Ta.LH 2°(!H ; , ast-H ¥ G&I-H : aét-H VE&I-HA ‘8T-HA ‘@21-HA S~1LLH “11H ‘2~1LH ‘T~1.LH 1°d o-duH PF I-duH Ppeseig/jozze, @-duH ¥ I-ddH Ppeserg/joyse, 08-HA Yonpjow T~ISH Il? T-HOH uvuey T-MOH Ueuey T-MOH uvwey T-MOH uvuey T-HOH uvurey T-MOH uewey T-d DH Ppeseig /joqz8, V&e-H 2° ('H b~LLH 1a T-d OH Ppeseig /joq12 4 T-d NH Ppeseig/joyse, OF-OW Yornpew LUV OL ‘ST ‘ZI ‘6-9 SI Vel ‘be ‘2 ‘T T T 62 ¥ 82 ‘6 ‘8 699'S'T 6989'S‘ ‘ZT &I POT ‘L ‘9 ‘eT 97 9PF ¥ SI PPI ‘St ‘ZI ‘6 TZ-9T ‘ST ‘SI ‘6-2 ‘G-T (Z9-08-L/Sb-T8-L) o8S‘08E'Z (19-L2-8/F-82-2) L96‘bPS'Z (19-L2-8/bb-82-2) 996'brS'Z (19-bZ-1/Fb-SZ-T) 9886882 (09-F1-9/8F-ST-9) ZLS'IZE's (9S-02-8/98-12-2) SIZ‘Ist'z (ZS-8T-£/68-12-8) COPb66'T (Z9-b-%/SE-S-) 162‘066'T (TS-61-2/b8-02-2) LOv'Sh6'T Se 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 JO sazep pur) JeqUNN juezeg 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) a&e-H Ver-H T-MNH ‘I-MLH Ueuey T-MOH ueury Ch FY PP ‘EE FOL IZ T-HZ0H uewey OF-OW WoOTRD?W 29 ” OT-HO F IP-HA ®ussed ‘0g-HA YPoTNDIW OF-OW Yo ND IW 29 0 OT-HO P Th-HA BUSSAQ)=—s_« {1 Z-H Pyoeseig/jow9A 09 "” Ss €-NSC PI-NSC euAporAy =, GI Z-H Poeseig/[owe, 09 ” (Z9-08-L/SP-18-L) aeb-H ¥ VEr-H ‘I-MNH ‘I-MOH UeMey «@1Z-H Pasig /[OVeA 09 ¥ 6S es¢‘ose'z S]apoyy AvypIWig poyuesel J suITe[D (uoneiidxg /anss] a19M SJooIg ApLIe[IWIS jo sayep pus) YY 07 PANLey [apo qequin SulSulsjuy peyeoipn(py hits _ —~ Na + ETI 8 I EO I TO (VLP-HO) @T-OH 3 (WLP-OHA) AT-OHA ‘(V¥9P-HO) 1-H ‘VI-OHA ‘(VbP-A) 12-H ‘OIZ-H ‘VIZ-H ‘TZ-HA PPestid/loHeA = ATS Tysaseld /[OW2A C9 F 9 ‘09 ‘6S ‘9° "9 Z-dUH Poesetg/}oweA = T-d DH PPOESPIG/ [OPA Sg ¥ ¥9 ‘09 ‘9S o 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 8a 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 (c) (2), neither party shall challenge the deter- 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 9a 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 : : 3 i : : 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 en 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- 2a 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 ‘ ad 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 ‘I-M2OH uswvy ‘€-NSd ® I-NSd eadporky ‘OI-HO ¥ I#-HA vussep ; CI-N HA 7 dI-NH ‘VI-NH ‘I-OH ‘OF-HA IPA “(VOP “HO) I-@Un ‘VI-ONA = Pyoasvrg/joqi0,4 ; *“(b-A) 1Z-H ® OIZ-H ‘VIZ-H ‘IZ-HA Pyoaserg/joq04, ‘(VLZP-HO) aI “OH ‘(VLP-OHA) GI-OHA Pyoosvig/joy0,4 ‘B-d UH Ppoosvrg/[owo, ; ‘I-d UH Ppesvig/[oy104, (VEZ-ID €-dOH ¥ 2-dAH Pyoasvig/jowe, ‘OETA Yooyngoyw “OUON “MAEb-H PF VEF-H 'I-MON ‘I-MLH Uewry “dee- Y VEV-H ‘I-MON ‘I-MLH veuvy “Meo-H ® VEb-H ‘I-MO NM ‘I-MLIT Usury det-1l ¥ VEV-H ‘I-MOH ‘I-MLI uvuey ‘IWISH IPa ‘I-MLIT Ucury ‘t-d OH ® 2-duUH ‘I-dUH Pyeesvig/jow0, ‘I-V.LH 2TH : ; _ del-Il ® GeI-iI jASI-H (VEI-HA , ‘SI-HA ‘GZI-HA S-ILIT ‘8-1LM ‘CLI ‘IATL Wat ‘S-AUMIL VY TA UIT PY99suL A /[Oz.10 A, SrA ULL Y LA UL PESTA /[OVVA, 1 -A IL 9sULf/[OpA sp pour sopiusss) 36a TA1-H Post g /[oWI9A, ~" =~ = == < R y Sieamennpmamernncneisennen od _ AlS-H Pascig/fowea ~~" ti & & & ~ Sepeeecesmeesenss od Ale-H Pj90seig/foya,y ~~" "ooo" C6 PEI GE Co °°or oreo oe eeeeo= od “"A1S-H Ppeesvig/fowwoa ~~ "oo GE PER YuG Setter ororoecccece~ oct 02 “"A1S-H P9seiq/[Ow9A. PST‘ ‘LT ‘OLS ‘BRST TTT tT tren nn od ~“QTS-H PPesvrg/fowo, “12-91 ‘et ‘ZI ‘G-2 ‘C-1 "ttt og “0% ~ Td AE Pst /fow9A PGI ‘SI ‘21 ‘OL ‘S ‘bE ST TOOT noon od Lae "1% ¥ 02z I-d NH PPesuig/fowog “GT ‘BI ‘OL ‘ST ‘8 '2 ‘G-T "77 t ttt rte ol “I-d DH Ppestrg/[ow9A “ET wi BS oreo ( / ) f ~I-d AH Pysoserg /fors ‘6 ‘eB ‘T ~ (@9-08-2/Cb-18-2) 739" ~T-d OIL PRMSUVLT/POWOA ~“1Z-O1 ‘ET ‘ZT ‘6-2 ‘O-T TS = non ae ee Tn “UR-OE BE SE Gk Bed Orne eeen oc eh ia ha IW ISIE Weel ~~ 21 POT “Sl “Si “6-9 ~(Z9-O8-2/er-1e-2) asc‘ose'z os . |... DP aepiarnnamapedenicrmae T ~(19-L6-£/b-S2-#) 996'PhE'S mens . Rees TT C9-bo-[/bb-"o-1) 9es6Ee's wide Roe I-MOH Uwury 62 Y 8Z ‘6 'S ~(O9-FI-9/Eh-C 1-9) 226 1ze'S RNIN aon , Pabernpagapage > p Bestngmepececummma:. Ke - = 6 VS ‘9's ‘E'S ‘T ~(98-0%-£/6E-12-Z) SIZ‘ IST'S “I-d. AH Pl9svig/jow9A ~~~ -~-ET POT ‘LZ ‘9 ‘ST ~(Zo-ST-€/Se-GI-£) COFF66'T ————V— CO eee od Sep, a ne eee re wee ks qemabipetegebaivantcistessiea. ImA AT P4WEVET/OIIWA “~~ w— www mn = ene: b ~ "(GE -¥-Z/ee--2) 167'066'T vida 81 PHL “El ‘ZI ‘6 ~(1G-G1-%/42-02-Z) Lo'she'T vagustoad 249n bfooadl sujnjID (Wor Daud ry /anesy AypsDpucis yorym 0) aarmjra 02 pou Gujornjpyuy pawapn{py PED PES) ENE OE to 4.6% per annum, as4 sf 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- vy ( 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.. of 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 w 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 A. 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 parti [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385005_0023%3A1. Public record. Not legal advice.