Petition — Leesona Corp. v. United States
Supreme Court brief1979
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MICHAEL RODAK, JR.
IN THE EAR, JR. CLERK |
Supreme Court of the United States
OcTOBER TERM, 1979
—%9-529g
No. ————
LEESONA CoRPORATION, Petitioner,
V.
THE UNITED STATES OF AMERICA, Respondent.
PETITION FOR A WRIT OF CERTIORARI TO THE
UNITED STATES COURT OF CLAIMS
ALFRED W. BREINER
727 - 23rd Street, South
. Arlington, Virginia 22202
Attorney for Petitioner
Of Counsel:
B. W. Norton
333 Strawberry Field Road
Warwick, Rhode Island 02887
Harvey E. BUMGARDNER, JR.
1230 Sixth Avenue
New York, New York 10020
Press oF Byron S. ADAMS PRINTING, INC., WASHINGTON, D. C.
INDEX TO PETITION
Page
ee 1
EE, ee 2
RI I uy cece ec cescvacccccccccccecs 2
CoNSTITUTIONAL Provisions, StaTuTES AND Ru tes In-
Ne lke k tbe scs's eee eoncee 4
STATEMENT OF THE CASE .. 12... ccccccccccccccccees 4
eee +
Special Findings Of The Trial Judge on Account-
DUR PUREENGMERNN ada Ge seeecnceccencccces H)
The Decision Of The Court of Claims Sitting
ee ce ceacscescscccccs 9
REASONS FOR GRANTING THE WRIT ............e0e000. 11
ds cwsncsccccsccccces 11
I. The Court Of Claims In Holding That The
United States Can Indiscriminately Take A
Compulsory License Under A Patent; Is Less
Liable Than A Private Citizen When In-
fringing A Patent And Giving Authoriza-
tion And Consent For A Private Citizen To
Infringe; That 28 U.S.C. § 1498 Cannot Com-
pensate For A Patentee’s Loss Of Exclu-
sivity, And That 28 U.S.C. § 1498 Provides
Less Than The Patent Laws, Title 35,
Renders 28 U.S.C. § 1498 Unconstitutional In
Violation Of Article I, Section 8, And The
Fifth Amendment Of The Constitution .... 14
The Relevant Decisions Of This Court .. 14
The Decision Of The Court Of Claims .. 20
ii index to Petition Continued
Page
II. Court Of Claims Holding That 28 U.S.C.
§ 1498 Indiscriminately Permits The United
States Gevernment To Take A Compulsory
License Lider A Patent As An Exception To
35 U.S.C. §154 Brings The Two Statutes
BE EE hob Sodio n ci eennacankewnesces 27
III. Court Of Claims Assertion That The United
States Has A Legal Right To Use Invention
Of Any United States Patent For Reasonable
Royalty Is In Conflict With Fifth Amend-
ment And Patent Laws: The Comptroller
General’s Directives On Procurement Cannot
Ignore A Constitutionally Conferred Right
Se i I hn 54 ca0o Guan s sek asage eet 28
IV. The Holding Of The Court Of Claims As To
A Compulsory License For A Reasonable
Royalty Only Is In Conflict With Interna-
OE SN a 6 5a e kab k cna eatedses cee es 32
on CERES BIR Aas Se te P OIC OR ema sR pe Da ae Sy Are te 34
INDEX TO APPENDIX
Appendix A—Opinion Of Trial Judge, U.S. Court Of
Claims, On Accounting, Decided May 1, 1978 .... la
Appendix B—Opinion, U.S. Court of Claims, On
Accounting, Decided May 16, 1979 ............. 47a
Appendix C—Per Curiam Opinion, U.S. Court of
Claims, Liability Phase, Decided January 28, ,
SN ee rr ee ter me rer ee eee 95a
Appendix D—Per Curiam Opinion, U.S. Court Of
Claims, re Attorney Fees, Decided March 4,
Oe i vik ck ke POE IEE Ea Eh 12la
Appendix E—Constitutional Provisions, Statutes and
ee ee we tey was 125a
Constitution Of The United States:
pg NS FEET PTET TTC RT ETE TCT T 125a
ee a a 125a
Index to Appendix Continued ili
Page
STATUTES:
United States Code, Title 35—Patents .............. 126a
Be ee Ee is oe ws ni es SA AG Re een 126a
Re OE sdek ban korea es kd kee eee e skeen 126a
i Bh chak cUikes ois tern PKS 127a
ee ee ern er re 127a
ee HE oe hv OE Ea pee eShinesokends 127a
Ra a a re mL rer ere ere a 127a
United States Code, Title 28—Judiciary and Judicial
ea ee rere Pena Saree ere 128a
i Se ee errr ree rer ret er 128a
International Convention, Articles 2&5 A.......... 128a
Appendix F—Excerpts From May 16, 1979 Opinion Of
if Seg! gt ere oriraere re 13la
Appendix G—Letter From Acting Secretary Of The
Navy To Senator Tillman dated April 20, 1918 ...135a
Alas
IN THE
Supreme Court of the United States
OcToBER TERM, 1979
No.
LEESONA CoRPORATION, Petitioner,
Ve
THE UNITED STATES OF AMERICA, Respondent.
PETITION FOR A WRIT OF CERTIORARI TO THE
UNITED STATES COURT OF CLAIMS
ooo
Petitioner, the plaintiff below, prays that the Court
issue a writ of certiorari to review the judgment and
opinion of the United States Court of Claims entered
on May 16, 1979.
OPINIONS BELOW
The opinion of the trial judge on accounting is re-
ported at 198 U.S.P.Q. 4 (Appendix A to this Peti-
tion). The opinion of the Court of Claims on account-
ing, sitting en banc, is reported at —— Ct.Cl. ——; 599
F.2d 958; 202 U.S.P.Q. 424 (Appendix B). The opin-
ion of the trial judge on the liability phase of this case
is reported at 185 U.S.P.Q. 156, affirmed with a per
curiam opinion at 208 Ct.Cl. 871; 530 F.2d 896; 192
U.S.P.Q. 672 (Appendix C). An interlocutory opinion
of the Court of Claims on the issue of attorney fees is
2
reported at 213 Ct.Cl. 722; 197 U.S.P.Q. 737 (Appen-
dix D).
JURISDICTION
The judgment of the Court of Claims was dated and
entered on May 16, 1979. Each of the petitioner’s and
respondent’s timely petitions for rehearing was denied
on June 29, 1979; and this Petition for certiorari was
filed within ninety days of that date. Petitioner invokes
the jurisdiction of this Court under 28 U.S.C.
§ 1255(1). .
QUESTIONS PRESENTED
I. As to money damages for the infringement of a
United States patent, is the United States any less
liable to a patent owner than a private citizen would
be to that patent owner under the Patent Laws, Title
35, when the United States infringes a patent and also
gives authorization and consent to a private citizen to
infringe that patent ?
II. Is the United States, as held by the Court of
Claims, exempt from the provisions of Article I, Sec-
tion 8, of the Constitution, and the Patent Laws, Title
35, Section 154, granting a patentee an exclusive right
under the patented invention in apparent conflict with
the holding of this Court in James v. Campbell, 104
U.S. 356 (1881), where this Court stated that to exempt
the United States from a patentee’s exclusivity would
preclude the patentee’s right of exclusivity ?
IIT. Can the United States, under its power of emi-
nent domain, destroy a patentee’s right of exclusivity
in the patentee’s patented invention by consenting to
and authorizing the infringement of the patentee’s
rights by another private citizen, and as the indemni-
fier, pay as damages to the patentee less than the mone-
3
tary remedies available to the patentee against the pri-
vate citizen in an action against the private citizen un-
der the Patent Laws, Title 35, Sections 271; 281; 283-
285, contrary to the fifth amendment to the Constitu-
tion ?
IV. Is the holding of the Court of Claims that the
United States, under the provisions of 28 U.S.C. § 1498,
has a legal right to take a compulsory license to in-
fringe any United States patent and authorize any pri-
vate citizen to infringe any United States patent at any
time for at most a reasonable royalty in conflict with
the decisions of this Court in William Cramp & Sons
Ship & Engine Building Co. v. International Curtis
Marine Turbine Co. et al, 246 U.S. 28 (1918); and
Richmond Screw Anchor Company v. United States,
275 U.S. 331 (1928) ?
V. Are the Patent Laws, Title 35, Sections 154; 281;
284 and 285, which grant a patentee exclusivity under
his patented invention in consideration for a full dis-
closure of his invention and which grant a remedy by
civil action with a full measure of damages for unlaw-
ful use by another of the patented invention; and 28
U.S.C. § 1498, as interpreted by the Court of Claims to
permit indiscriminate use by the United States and
indiscriminate use by contractors of the United States
through authorization and consent of the United States
for at most a reasonable royalty, in conflict?
VI. Does the holding of the Court of Claims that the
United States can take a compulsory license, including
the right to authorize and consent to infringement of a
patentee’s right by another private citizen, violate
treaties entered into by the United States government
with foreign governments to protect United States and
foreign inventors and those taking title from those in-
ventors ?
a
+
CONSTITUTIONAL PROVISIONS,
STATUTES AND RULES INVOLVED
The questions presented by this Petition require in-
terpretation of the Constitution of the United States,
Article I, Section 8, and the fifth amendment to the
Constitution; the Patent Laws, Title 35, Sections 154,
271, 281, 283-285; 28 U.S.C. § 1498(a) ; and the Inter-
national Convention on Patents as amended at Stock-
holm on July 14, 1967, Articles 2 and 5 A., all of which
are set forth at length in Appendix E to this Petition.
STATEMENT OF THE CASE
Overview
Petitioner, Leesona, pursuant to Title 28, Section
1498(a), on April 20, 1970 filed suit in the Court of
Claims to recover from the United States for the in-
fringing use by the United States and for the authori-
zation and consent by the United States to a private
citizen, Eagle-Picher, Inc., to infringe United States
patents owned by Leesona. The Leesona patents are
directed to metal/air batteries developed and milita-
rized by Leesona.
The Court of Claims adopted per curiam the opinion
and findings of fact of Trial Judge Cooper on the lia-
bility phase * of the case holding certain of the Leesona
patents valid and infringed (Appendix C hereof).
Trial Judge Browne on the accounting or damages
phase of the case held that this was a first of its kind,
exceptional case and held that.in determining reason-
able and entire compensation under 28 U.S.C. § 1498,
*Cases before the Court of Claims under 28 U.S.C. § 1498 are
normally bifureated, first deciding liability of the United States
government and, after establishing liability, determining damages.
4)
i.c., damages, the provisions of the Patent Laws, Title
35, applied to the United States government. The trial
judge made an award of damages to Leesona in excess
of $3.5 million including increased damages under 35
U.S.C. § 284 and attorney fees of $100,000 under 35
U.S.C. § 285 (Appendix A hereof).
The United States excepted to the trial judge’s find-
ings and the Court of Claims on review reversed the
trial judge and held that the provisions of the Patent
Laws, Title 35, do not apply in determining reasonable
and entire compensation under 28 U.S.C. § 1498, and.
that the correct measure of reasonable and entire com-
pensation is a reasonable royalty only (Appendix B
hereof).
Petitioner requests a review of the holding of the
Court of Claims on an issue critical to all United
States patentees—United States citizens and foreigners
alike. The determination of a patentee’s rights with
respect to the United States for its use of a patented
invention, and against a private citizen infringing un-
der the cloak of the authorization and consent of the
United States has not been treated by this Court for
fifty years and is of critical concern to all patent
holders.
Special Findings Of The Trial Judge On Accounting
Trial Judge Browne, in awarding damages, found
that Leesona, an established and highly reputable man-
ufacturer of textile machinery, as a part of a program
of diversification, acquired the Leesona-Moos Labora-
tories. Leesona developed with its own funds a unique
mechanically rechargeable metal/air battery and ob-
tained patents on the development. Leesona with its
battery set out to solve the problems of the then-existing
6
batteries (BB-451/U) used by the military (Marine
Corps) in powering certain military radios. Leesona,
under contract with the United States government,
initially produced twenty-two batteries for a contract
price to the United States government of $300,000.
In addition to the $300,000, Leesona expended at least
$100,000 of its own money in producing the twenty-two
batteries. The Leesona-produced batteries were tested
by the Marine Corps (the Pendleton tests) and as a
result of the superior performance demonstrated at the
Pendleton tests the Marine Corps concluded that it
would replace all of its BB-451/U rechargeable bat-
teries with the Leesona battery, designated by the Ma-
rine Corps as the BB-626/U. It was estimated by the
Marine Corps that its annual procurement of the BB-
626/U would be in excess of $25 to $30 million. The
Army requirements for a similar-type battery would
be substantially greater.
In anticipation of receiving government contracts for
large quantities of its BB-626/U batteries, Leesona’s
management made a decision to commit $3 million of
its own funds to establish a full-time production and
manufacturing facility for its battery. Concurrently
with this decision Leesona decided to concentrate on
the military market and forego exploitation of the
non-military or commercial potential of its unique
battery.
The United States, through the Mar’ ie Corps, ini-
tially offered a sole source contract to Leesona for the
production of certain BB-626/U batteries and com-
ponents. The letter contract was accepted and signed
by Leesona, and was promptly returned to the Marine
Corps Supply Activity in Philadelphia, Pennsylvania.
The Marine Corps, however, did not ratify the letter
7
contract, but instead informed Leesona that a formal
contract would not be executed since a decision had
boen made to place the item for procurement under
competitive bid procedures in lieu of sole source pro-
curement.
The trial judge found that two battery manufactur-
ers who had not previously built a BB-626/U battery
or any other successful mechanically rechargeable or
reconstructable battery learned of the issuance of the
letter contract for a sole source procurement and assert-
ed that tiey had the capability of manufacturing the
item and wanted to have a chance to bid on the pro-
curement.
The trial judge found that the Marine Corps was
aware of Leesona’s patents and was aware that Lee-
sona would not license the manufacture of its metal/
air batteries in the United States. Leesona wanted to
maintuin its exclusive manufacturing rights within the
United States as a means or springboard into a new
field.
The Marine Corps sent out requests for bids in the
manner prescribed for a competitive bid procurement
using in its bid package drawings and specifications
obtained from Leesona. Pursuant to the competitive
bid procedure, Contract No. MOO150-70-C-0113 (the
Eagle-Picher contract) was awarded to Eagle-Picher,
Inc., the lowest of five bidders, on November 6, 1969.
The trial judge concluded, based on the evidence at
trial, that the entire conduct of the Marine Corps tn tts
dealings with Leesona and in the United States’ taking
of the fruits of Leesona’s efforts in the manner done,
and the willful infringement of the Leesona patents,
was despicable, and that the government’s despicable
conduct made this an exceptional case.
8
The trial judge acknowledged that the measure of
damages against the government was based on 28
U.S.C. § 1498, which in part states—
‘*Whenever an invention described in and cov-
ered by a patent of the United States is used or
manufactured by or for the United States without
license of the owner thereof or lawful right to use
or manufacture the same, the owner’s remedy shall
be by action against the United States in the Court
of Claims for the recovery of his reasonable and
entire compensation for such use and manufac-
ture.’’ (Emphasis added)
The trial judge then expressly held that all of the legal
remedies provided in an action under the Patent Laws,
Title 35, are applicable in determining reasonable and
entire compensation in actions in the Court of Claims
under 28 U.S.C. §1498(a), and that the Court of
Claims can grant entire relief to a damaged patentee
within the provisions of the Patent Laws in the form
of a money judgment.
In response to contentions by the United States that
a patentee at best is entitled to a reasonable royalty as
reasonable and entire compensation, the trial judge
stated that it would be—
‘‘absurd to conclude that the United States is less
liable to a patent owner than a private citizen when
a patent is infringed.’’ [Opinion, App. A, p. 14a]
Based on the exceptional nature of the case as deter-
mined by the substantial trial record and subsequent
post-trial activity, the trial judge awarded damages to
Leesona, including delay compensation, increased dam-
ages and attorney fees, of $3,534,753.52. Additional de-
lay compensation at the rate of $470.51 per day for
WMdaticciisce dx
9
each day from January 1, 1978 to date of payment of
the judgment was assessed.
The Decision Of The Court Of Claims Sitting en banc
The full Court of Claims, sitting en bane, substan-
tially rejected the determination of damages made by
the trial judge. The court substituted its own determi-
nation of damages for the determinations of the trial
judge and reduced the trial judge’s award as accrued on
May 16, 1979 from $3,770,479.03 to $445,902.79, i.e., to
less than 12 percent of the trial judge’s award or a
decrease of $3,324,576.24!
The court made this drastic reduction in the damages
awarded by the trial judge to Leesona although it sub-
stantially agreed with the critical findings of fact made
by the trial judge including that Leesona in its patents
had made a significant technical contribution; had
placed special value on its patents, and had maintained
its exclusivity to manufacture within the United
States; and although it separately found that Leesona’s
patents had a special value to Leesona and that Lee-
sona had suffered great damage through the govern-
ment’s taking of its exclusivity. Indeed, the court in
its opinion on no less than’sixteen occasions recognized
and commented on the unique Leesona battery; the
unique position of Leesona and of the unique value of
the Leesona patents to Leesona. The court on nine occa-
sions recognized that Leesona had maintained its ex-
clusivity to manufacture in the United States, and/or
that its patents were to be used as a springboard into a
new venture—the classic function and value of a patent
(see Appendix F).
The Court of Claims’ rejection of the determination
of damages by the trial judge is based on the court’s
conclusion that—
10
“The theory for recovery against the govern-
ment for patent infringement is not analogous to
that in litigation between private parties. When
the government has infringed, it is deemed to have
‘taken’ the patent license under an eminent domain
theory, and compensation is the just compensation
required by the fifth amendment.” [Opinion, App.
B, p. 52a]
The Court of Claims for this conclusion relied on this
Court’s decision in Crozier v. Krupp, 224 U.S. 290;
and ignored William Cramp & Sons Ship & Engine
Building Co. v. International Curtis Marine Turbine
Co. et al, 246 U.S. 28.
The court further concluded that 28 U.S.C. § 1498—
‘‘does not provide compensation for the loss of
exclusivity, only for the manufacture or use of an
item by or for the government.’’ [Opinion, App.
B, p. 88a]
and that—
‘‘A complete congruence between § 1498 and
Title 35 would grant plaintiff a reccvery in excess
of the just compensation required by the fifth
amendment, ....’’ [Opinion, App. B, p. 61a]
The Court of Claims further noted—
‘“‘The trial judge justified a doubling of damages
here due to ‘the despicable conduct of defendant
* * * [indicating] utmost bad faith on the part of
the Government.’ To whatever extent the trial
judge may have based his conclusion of bad faith
on the government’s knowing or willful infringe-
ment of the patents, the answer is, as we have
noted, that the government had the legal right to
take the patents.’’ [Opinion, App. B, p. 63a |
11
and that—
‘The trial judge seemed to have difficulty with the
idea that the law accorded the United States rights
not conferred on private parties.” [Opinion, App.
B, p. 64a]
REASONS FOR GRANTING THE WRIT
Summary Of Argument
The trial judge in a well-reasoned and progressive
opinion, fully documented and supported by the trial
record, for the first time in over fifty years and pos-
sibly the first time ever within the Court of Claims
dealt fully with the meaning of reasonable and entire
compensation to a patentee under 28 U.S.C. § 1498.
—The trial judge recognized the unique nature of
patent property as derived from the Constitution
and that the only true value of patent property is
the patentee’s exclusivity.
—The trial judge recognized that the United
States not only infringed Leesona’s patents by its
unlawful use of items or articles covered by the
patents, but that it took the positive action of giv-
ing authorization and consent to Eagle-Picher to
infringe Leesona’s patents, which action destroyed
Leesona’s exclusivity, to Leesona’s very substan-
tial damage.
—The trial judge recognized that the govern-
ment’s authorization and consent to any private
citizen to knowingly and willfully infringe a
United States patent takes from the patentee
vested property rights against the infringing pri-
vate citizen conferred by the Constitution, Article
I, Section 8; and the Patent Laws, Title 35, Sec-
tions 154, 281, 283-285.
12
—The trial judge, fully aware of the entire back-
ground and the facts of this case, recognized the
deliberate and willful nature of the infringement
by the United States of Leesona’s patents and its
despicable conduct in dealing with Leesona and
found this to be a first of its kind, exceptional case.
Because it was an exceptional case, the trial judge
awarded increased damages under the Patent Laws,
Title 35, Section 284, and included an award of attor-
ney fees, available in an exceptional case under the
Patent Laws, Title 35, Section 285. The determinations
of the trial judge are fully consistent with this Court’s
holding in Cramp & Sons v. Curtis Turbine Co., supra;
Richmond Screw Anchor Company v. United States,
275 U.S. 331; and Waite v. United States, 282 U.S. 508.
The Court of Claims, sitting en banc, ignored pre-
vious dictates of this Court in Cramp, supra; Richmond
Screw, supra, and Waite, supra; and held that at most
a patentee is entitled to a reasonable royalty for de-
fendant’s taking of a compulsory license which in-
eluded authorization of a private citizen to infringe.
The Court of Claims in its decision totally ignored the
undisputed fact that the United States, in giving au-
thorization and consent to another private citizen to
infringe the Leesona patents, took from Leesona a
cause of action under the Patent Laws, Title 35, Sec-
tions 281, 283-285, against that private citizen for pat-
ent infringement.
The Court of Claims in its opinion, while recogniz-
ing the value of exclusivity to a patentee, and the mean-
ing of this exclusivity as established in the Constitu-
tion and in the Patent Laws, Title 35, Section 154,
flatly stated that loss of exclusivity could not be a factor
in determining damages.
13
It is now the law of the land, based on the decision of
the Court of Claims, sitting en banc, that the United
States can indiscriminately infringe any United States
patent, irrespective of treaty rights, and can give au-
thorization and consent to any private citizen to in-
fringe a patentee’s rights which ean lead to the de-
struction of a patentee’s exclusivity and pay to the
patentee after the very substantial expense of litigation
against the United States at most a reasonable royalty
—the minimum award available under the Patent Laws,
Title 35, Section 284. Attorney fees, no matter how
gross and despicable the conduct of the United States,
and how exceptional the case, are not recoverable in
contradistinction to the Patent Laws, Title 35, Section
285.
This Court has not considered the meaning of 28
U.S.C. § 1498 since Richmond Screw, supra, 1928; and
Waite, supra, 1931. Both of these cases, in accord with
Cramp, supra, support the holding of the trial judge.
The decisions of this Court were ignored or glossed over
by the Court of Claims in stating what unfortunately
is the law of the land unless reviewed by this Court.
As a matter of public policy, in order to establish
the firm principles of United States patent law as toa
patentee’s right to exclusivity as established by the
Constitution, it is essential that this Court review the
decision of the Court of Claims.
14
I. The Court Of Claims In Holding That The United States Can
Indiscriminately Take A Compulsory License Under A Patent;
Is Less Liable Than A Private Citizen When Infringing A Patent
And Giving Authorization And Consent For A Private Citizen
To Infringe: That 28 U.S.C. § 1498 Cannot Compensate For A
Patentee’s Loss Of Exclusivity, And That 28 U.S.C. § 1498 Pro-
vides Less Than The Patent Laws, Title 35, Renders 28 U.S.C.
§ 1498 Unconstitutional In Violation Of Article I, Section 8, And
The Fifth Amendment Of The Constitution.
The Relevant Decisions Of This Court
“The Constitution gives to Congress power ‘to pro-
mote the progress of science and useful arts by
securing for limited times to authors and inven-
tors the exclusive right to their respective writings
and discoveries,’ ... .’’ (Emphasis added)
James v. Campbell, 104 U.S. 356 (1881), at 358. This
exclusivity applies to the United States as well as to
private citizens since exclusivity—
‘‘could not be effected if the government had a re-
served right to publish such writings or to use such
inventions without the consent of the owner.”’
James v. Campbell, supra, at page 358. This grant of
exclusivity, the only positive attribute of a patent, is
the consideration for the patentee’s full disclosure to
the public of his invention. Without this grant of ex-
clusivity there would be no consideration for the dis-
closure.
This Court has also long recognized that the rights—
‘‘secured under the grant of letters patent by the
United States were property and protected by the
guarantees of the Constitution and not subject
therefore to be appropriated even for public use
without adequate compensation.’”? (Emphasis
added)
:
4
15
Cramp & Sons v. Curtis Turbine Co., supra, at pages
39-40. This Court, in Cramp, was reviewing the fore-
runner to 28 U.S.C. § 1498 as it appears today which
was passed by the Congress in 1910 (the 1910 Act).
This Court recognized that before the passage of the
1910 Act there was no clear or uniform mode available
to a patentee for recovery of compensation for the un-
authorized use by the United States of a patentee’s in-
vention. In Cramp, faced with the contention of the
United States that an injunction was no longer avail-
able to a patentee for infringement by a government
contractor in view of the 1910 Act, this Court held that
the only purpose of the 1910 Act was to provide a uni-
form mode to patentees for obtaining compensation for
the government’s tortious use, i.e., without license, of
a patent. The Court expressly held that under the 1910
Act a patentee retained all of its rights conferred by
the Patent Laws against an infringing contractor of the
United States, including injunctive relief. This right
against the infringing contractor was property, con-
ferred by the Constitution, and could not be taken with-
out returning equal value.
At the time of the Cramp decision in 1918, therefore,
this Court has made it clear that a patentee had a right
against the United States with a means provided for
recovery for the United States’ unauthorized use of his
invention, and, additionally, had separate and distinct
rights, as conferred by the Patent Laws derived from
the Constitution, against an infringing contractor of
the United States.
The 1918 amendment to the 1910 Act, presently 28
U.S.C. § 1498, added to the ‘‘reasonable compensation’”’
available to a patentee under the 1910 Act for the
United States’ tortious use, ‘‘entire’’ compensation.
16
The amendment of 1918, in turn, took from a patentee
its vested right against an infringing (tortious) pri-
vate citizen under contract to the United States, includ-
ing the patentee’s right of injunctive relief against the
private citizen. The government took, therefore, a prop-
erty right conferred by the Constitution and under the
Patent Laws.
This Court in Richmond Screw Anchor Company Vv.
Umited States, supra,’ in interpreting the 1918 amend-
ment, at pages 343-344 stated—
2 The facts of Richmond Screw are as follows: A patent issued
to Lenke prior to 1918 was assigned on September 29, 1920 to
Thomas E. Chappell, who in turn on March 7, 1921 assigned the
patent to Richmond Screw. Richmond Screw brought suit pursuant
- 28 US.C, § 1498(a), as amended in 1918, against the United
tates for infringement of the Lenke patent. The Court of Claims
ultimately held that the suit by Richmond Screw was barred by
the Anti-Assignment Act, Rev. Stat., Section 3477, basing its deci-
sion on this Court’s holding in Brothers v. United States 250 U.S
88. In Brothers the Supreme Court held that there could be no
assignment to Brothers of any unliquidated claim against the gov-
ernment prior to the time Brothers became owner of a patent
noting Rev. Stat., Section 3477. The Brothers case involved the
1910 Act which authorized an action against the United States to
recover reasonable compensation for the unauthorized use by the
beatles - a patent. However, under the 1910 Act, the
retained its ri i i iti in,
sds A Gates — against a private citizen making or
This Court on review concluded that Richmon
barred from damages which occurred prior to the a Pr 1918 re
rationale being that prior to July 1, 1918 and the 1918 amendment
to 28 U.S.C. § 1498(a), the patentee had a cause of action against
en United States to recover reasonable compensation for use by
= United States, and also a cause of action against the contractors
0 the United States for manufacture and sale. The prohibition
against the assignment of unliquidated claims applied to the suit
against the government, but obviously for infringement which oc-
17
“The purpose of the amendment was to relieve
the contractor entirely from liability of every
kind for the infringement of patents in manufac-
turing anything for the government, and to limit
the owner of the patent and his assigns and all
claiming through or under him to suit against the
United States in the Court of Claims for the re-
covery of his reasonable and entire compensation
for such use and manufacture. The word ‘entire’
emphasizes the exclusive and comprehensive char-
acter of the remedy provided. As the Solicitor
General says in his brief with respect to the act,
it is more than a waiver of immunity and effects
an assumption of liability by the government.”
(Emphasis added)
Thereafter, this Court, continuing to refer to the
amendment of 1918, at page 345, stated—
“Tf now section 3477 applies, and these assign-
ments are rendered void, the effect of the act of
1918 is to take away from the assignee and present
owner, not only the cause of action against the
government, but also to deprive it of the cause of
action against the infringing contractor for wn qury
by his infringement. The intention and purpose of
Congress in the act of 1918 was to stimulate con-
tractors to furnish what was needed fur the war,
without fear of becoming liable themselves for in-
fringements to inventors or the owners or assign-
ees of patents. ... Zo accomplish this governmental
eurred before July 1918 Richmond Screw retained its cause of
action against the infringing contractor.
This Court further concluded that damages which accrued sub-
sequent to July 1, 1918 caused by the infringing manufacturer and
seller were not barred by Revised Statute, Section 3477, since to
bar such damages in view of the 1918 amendment to 28 U.S.C.
§ 1498(a) which took a patentee’s claim against a private citizen
for infringement would take from the patentee and his assignee
the value of the property right expressly provided by Article I,
Section 8, and by the fifth amendment to the Constitution.
18
purpose, Congress exercised the power to take
away the right of the owner of the patent to re-
cover from the contractor for infringements. This
is not a case of a mere declared immunity of the
government from liability for its own torts. It is
an attempt to take away from a private citizen his
lawful claim for damage to his property by an-
other private person, which but for this act he
would have against the private wrongdoer. This re-
sult, if section 3477, Rev. Stat., applies and avoids
the assignment, would seem to raise a serious ques-
tion as to the constitutionality of the act of 1918
under the Fifth Amendment to the Federal Consti-
tution. We must presume that Congress in the pas-
sage of the act of 1918 intended to secure to the
owner of the patent the exact equivalent of what
it was taking away from him.’’ (Emphasis added)
Accordingly, this Court in 1928 made it clear that
the United States government’s unauthorized use of a
patent, including under the 1910 Act, rests in tort. By
the 1918 amendment to the 1910 Act the Congress took
from the patentee, under the eminent domain power of
the United States, the right of the patentee for his
lawful claim for damage to his patent property by the
infringement by another private person, i.e., the con-
tractor to the government, also a tort. The taking un-
der or through the 1918 amendment was not the mere
taking of a ‘‘license’’ for the government’s use, it was
for the contractor’s tortious use as well. This Court,
therefore, presumed that Congress intended to provide
the owner of the patent the exact equivalent of what
was taken away from him, i.e., the damages sustainable
for the contractor’s tortious act. In interpreting 28
U.S.C. § 1498, this Court stated—
‘It is our duty in the interpretation of federal
statutes to reach a conclusion which will avoid
So ~~
19
serious doubt of their constitutionality. ... This is
in aceord with general rules of interpretation, as
shown in these authorities, and reconciles the sec-
tion 3477, Revised Statutes, and the act of 1918, if
we hold, as we do, that section 3477 does not apply
to the assignment of a claim against the United
States which is created by the act of 1918, in so far
as the act deprives the owner of the patent of a
remedy against the infringing prwate contractor
for infringements thereof and makes the govern-
ment indemnitor for its manufacturer or contrac-
tor in his infringements.’’ (Emphasis added)
[Richmond Screw, supra, at page 346]
This Court, therefore, in 1928 made it clear that a
patentee’s rights against the United States after the
amendment of 1918 to the Act of 1910 were twofold. It
included a right to compensation for the government’s
tortious (unauthorized) use of his patent and, in addi-
tion, a right against the United States equal to the
right, taken from him by the United States, for dam-
ages from a private citizen (the government’s con-
tractor) for the private citizen’s tortious acts. The
‘‘just compensation’’ for the taking of such right must
be measured by the damages sustained to the patentee
by the contractor’s tortious act and must be measured
by damages available under the Patent Laws against a
private party.’
*The only other decision of this Court found by petitioner
directly treating the meaning of the term ‘‘entire’’ as it appears
in 28 U.S.C. § 1498 is Waite v. United States, 282 U.S. 508 (1931).
In reversing a holding of the Court of Claims that interest could
form no part of just compensation, this Court stated—
‘‘The statute grants ‘recovery of his reasonable and entire
compensation for such use.’ We are of opinion that interest
should be allowed in order to make the compensation ‘entire.’
In addition to the purpose of the word adverted to in Rich-
mond Serew Anchor Co. v. United States, 275 U.S, 331, 343,
48 S.Ct. 194, 72 L.Ed. 303, we cannot doubt that it was in-
20
The Decision Of The Court Of Claims
The Court of Claims in its May 16, 1979 decision as-
serting that the trial judge erred in his conclusion that
the remedies of Title 35 are embraced within the term
‘‘entire’’ compensation of 28 U.S.C. § 1498 ignored the
holdings of this Court in Cramp, supra, and Richmond
Screw, supra. Rather than looking to the clear holdings
of this Court in Cramp and Richmond Screw, the Court
of Claims cited this Court’s decision in Crozier v.
Krupp, supra, decided in 1912, six years before Cramp
and the 1918 amendment to the 1910 Act, and 16 years
before Richmond Screw, as support for its view that
the 1910 Act is based on the eminent domain power of
the United States; that an injunction against infringe-
ment by a government contractor was no longer avail-
able as a result of the 1910 Act; and that just com-
pensation under the 1910 Act can only, even in an ex-
ceptional case, provide for reasonable compensation or -
a reasonable royalty for use of a patented item by or
for the government, and for granting authorization and
consent to a private party to infringe.
The Court of Claims did not look to the discussion
and interpretation of Crozier by this Court in Cramp,
supra. In Cramp, after holding that the 1910 Act was
to enlarge the rights of a patentee by providing a uni-
form mode to patentees in obtaining compensation for
the government’s unauthorized use of a patent, in spe-
cifically referring to Crozier v. Krupp, supra, at page
45, this Court stated—
~
tended to accomplish complete justice as between the plaintiff
and the United States.’’
Waite, as each of the other decisions of this Court, supports the
award of damages made by the trial judge.
ig
4
rc
|
z
aid
&
21
‘‘But the use of the word ‘license’ affords no room
for holding that it was decided that the statute
provided for the appropriation by anticipation
and automatically of a license to the United States
to use the rights of all patentees as to every patent.
And clearer yet is it that the use of the word ‘li-
cense’ affords no ground for the proposition that
the statute invested every person contracting with
the United States for the furnishing of material
or supplies or for doing works of construction with
public powers and transferred to them the assumed
license to violate patent rights to the end that they
might be relieved of the obligations of their con-
tracts and entail upon the United States unenu-
merated and undetermined responsibility upon the
assumption that the United States would be ulti-
mately liable for the patent rights which the con-
tractors might elect to take. Through abundance
of precaution, however, we say that if any support
for such contentions be susceptible of being de-
duced from the use of the word ‘license’ in the
passage referred to, then the word must be and tt
is limited, as pointed ovt by the context of the
opinion and by what we have said in this case, to
the nature and character of use which was con-
templated by the statute and which 1s consonant
with the execution of its limited though beneficient
purpose and not destructive of the same.”’ (Km-
phasis added) [Cramp, supra, at 45]
The limited, though beneficient purpose was, as above
stated, to provide all patentees with a uniform mode of
recovery for the government’s infringing use.
Accordingly, the Crozier case as interpreted by this
Court in Cramp cannot support the Court of Claims’
view that an injunction against the infringer was no
longer available after the Act of 1910—an injunction
was approved six years later in Cramp—or that ‘‘rea-
sonable and entire’’ compensation of the 1918 statute
22
cannot include more than a reasonable royalty where
before the 1918 amendment to the 1910 Act a patentee
was entitled to a reasonable royalty for the United
States’ tortious use only and by the 1918 amendment
the United States additionally took a vested property
right, i.e., a right under the Patent Laws for infringe-
ment by another private party.
The Court of Claims asserted that the legislative his-
tory of the amendment of 1918 to the 1910 Act supports
the government’s view that ‘‘entire’’ added by the 1918
amendment was meant to underscore the exclusivity of
the remedy of suits in the Court of Claims, reversing
in effect the decision of this Court in Cramp. This
assertion is inconsistent with the arguments of the
United States before this Court in Richmond Screw,
supra. As stated in this Court’s opinion in Richmond
Screw, the United States acknowledged that the 1918
amendment was more than a waiver of sovereign im-
munity and was an assumption of liability by the gov-
ernment for the tortious acts of its contractor. The
acknowledgment by the United States before this
Court is consistent with the letter of the Acting Secre-
tary of the Navy requesting the amendment as quoted
in part in Richmond Screw and at length in Appendix
G hereof. The acknowledgment by the United States
is also consistent with the arguments of the United
States before this Court in Richmond Screw as follows:
‘‘So far as § 3477 is concerned, there is no rea-
son to distinguish as to’ the assignability of unli-
quidated claims against the United States between
those arising through infringement by the United
States ana those based on the assumption of lia-
bility by the United States for infringement by
others.’’ (Emphasis added) [275 U.S. 331, at 335]
23
Note also the argument made to this Court on behalf
of Richmond Screw as follows:
‘‘To construe the Act of 1918 as relieving the
contractors from all liability to the then owner of
the patent or to his assignee, and substituting
therefor a liability of the United States to the then
owner of the patent only and (under Rev. Stats.
§ 3477) not to his assignee, would appear to be tak-
ing private property for public use without due
process of law or just compensation, and certainly
would not give the owner of the patent an addi-
tional remedy, as the Act of 1918 purports to do,
but a substantially curtailed remedy. It is certainly
not clear that the Act of 1918 intended this curtail-
ment of remedy. * * *
; ‘While, in so far as concerns the contractors’
infringing acts, the suit is, by virtue of the Act of
1918, one against the United States, the claim was
not against it, but against the contractors. The Act
of 1918 changed the defendant and the forum, but
oe not change the nature or the incidents of the
claim.
“The history of the Act of 1918 shows the legis-
lative intent to relieve the contractor from all
liability and from all apprehension of liability, by
substituting the liability of the United States.”’
(Emphasis added) [275 U.S. 331, at 333]
From the argument before the Court, it is clear that in
December of 1927, the time of the argument before
this Court in Richmond Screw, everyone concerned
was aware that the United States had assumed liability
for the infringement of its contractors. The measure
of the assumed liability could only be the rights. taken
by the defendant from plaintiff, i.e., damages for the
tortious act of the contractor’s infringement.
24
The government’s view that the meaning of ‘‘entire’”’
in the 1918 amendment underscores the exclusivity of
the remedy only is in direct conflict with this Court’s
statement in Richmond Screw at page 343 that—
‘‘The word ‘entire’ emphasizes the exclusive and
comprehensive character of the remedy provided.”’
(Emphasis added)
and this Court’s view in Waite v. United States, supra,
stating that ‘‘entire’’ was intended to accomplish com-
plete justice as between the patentee and the United
States.
The Court of Claims dismissed the holding of this
Court in Richmond Screw by referring to the ‘‘trouble-
some retroactive changes’’ facing the Supreme Court
in Richmond Screw.‘ It is submitted that there is no
* Decisions of lower courts which give the words of this Court in
Richmond Screw broad and, it is submitted, the proper construc-
tion, are: Pierce v. Submarine Signal Co., 25 F.Supp. 862, District
Court, District of Massachusetts (1939), the court stating—
‘*While it may have deprived the plaintiff of a right previous-
ly given to bring suit against the manufacturer in the District
Courts, nevertheless, when it withdrew such right, it provided
an equal right in the form of an action against the United
States in the Court of Claims for the recovery of his reason-
able and entire compensation for such use and manufacture.
There has been no taking of the plaintiff’s property, either
without due process of law, or without adequate compensation.
It is presumed that Congress in passing this statute intended
to give the owner the equivalent of what it took away. Rich-
mond Serew Anchor Co. v. United States, 275 U.S. 331, 48 S.
Ct. 194, 72 L.Ed. 303.’’ (Emphasis added) [25 F.Supp. 862,
at 863]
Western Electric Co. v. Hammond, 135 F.2d 283, at 285, Cireuit
Court of Appeals, First Circuit (1943), the court stating—
‘*As bearing both on the question of jurisdiction and on the
propriety of its exercise in the situation here disclosed, the
Act of July 1, 1918, 35 U.S.C.A, § 68, needs to be considered.
This act disables Hammond from suing Western Electric either
25
basis for the court’s distinction and refusal to accept
the holding of this Court as expressed in Richmond
Screw. The ‘‘retroactive changes’’ were not argued by
either of the parties in Richmond Screw. The rights
of a patentee are based on the Patent Laws as derived
from the Constitution. There have been no changes in
the substantive patent laws as they relate to a pat-
entee’s rights vis-a-vis the government before or after
the Act of 1918.
The Court of Claims also asserted that—
‘*The trial judge progressed from the conclusion
that reasonable and entire compensation meant
that the United States was assuming liability for
more than the fifth amendment’s mandated just
compensation, to the view that reasonable and en-
tire compensation included more than a reasonable
royalty,....’’ [Opinion, App. B, p. 60a]
The trial judge did not hold that petitioner under ‘‘rea-
sonable and entire compensation’’ was entitled to more
than ‘‘just compensation.’’ The trial judge held, how-
ever, that just compensation in this exceptional case
for monetary damages or for an injunction on account of the
alleged infringement. Broome v. Hardie-Tynes Mfg. Co., 5
Cir., 1937, 92 F.2d 886. Its, purpose and legislative history are
set forth in Richmond Serew Anchor Co. v. United States 1928,
275 U.S. 331, 48 S.Ct. 194, 72 L.Ed. 303. In order that the
United States may not be delayed in obtaining needed mate-
rials and equipment through the reluctance of manufacturers
to take government contracts which might involve them in
expensive litigation with patentees, the Act, in such cases,
confers immunity upon the manufacturer and gives the paten-
tee an exclusive remedy in the Court of Claims against the
United States, whereby the patentee may recover full compen-
sation for any proven patent infringement.’’ (Emphasis added)
The patents involved in the noted cases were not in existence prior
to the Act of July 1918 and, accordingly, the courts were not deal-
ing with ‘‘troublesome retroactive changes.’’
26
was more than a reasonable royalty. At no time has
petitioner asserted that it was entitled to more than
just compensation, and still does not. However, peti-
tioner maintained, and the trial judge found, that ‘‘just
compensation’’ as mandated by the fifth amendment
includes damages inflicted by the ‘‘taking’’ in order to
place Leesona in as good a pecuniary position as it had
been in before its property had been taken, i.e., damages
for the willful taking of its exclusive right under its
patents. Seaboard Air Line Roilway Company et al v.
United States, 261 U.S. 299. %
Contrary to the implications of the Court of Claims,
under 28 U.S.C. § 1498 there can be no concern with
regard to the sovereign’s consent to be sued, or a waiver
of the sovereign’s immunity. This Court clearly held in
Richmond Screw that the government had done more
than waive its sovereign immunity against suit; it as-
sumed liability for the actions of its infringing con-
tractors.
The trial judge was fully correct in holding, based
on this Court’s interpretation of 28 U.S.C. § 1498 in
Cramp, supra; Richmond Screw, supra; and Waite,
supra, that reasonable and entire compensation in-
cluded all of the provisions of Title 35. Indeed the
rights conferred by Title 35 are the very rights which
were taken from the petitioner by the government’s
eminent domain taking of petitioner’s cause of action
against a private infringer which destroyed petition-
er’s right to exclusivity. The holdings of the Court of
Claims are in conflict with the holdings of this Court,
and the holdings of the Court of Claims render 28
U.S.C. § 1498 unconstitutional. It is respectfully sub-
mitted that review by this Court is essential.
27
II. Court Of Claims Holding That 28 U.S.C. § 1498 Indiscriminately
Permits The United States Government To Take A Compulsory
License Under A Patent As An Exception To 35 U.S.C. § 154
Brings The Two Statutes Into Conflict.
The Court of Claims holding that 28 U.S.C. § 1498 is
an exception to a patentee’s exclusivity conferred by
35 U.S.C. §154 renders the two statutes in con-
flict. 35 U.S.C. § 154 was enacted in 1952. 28 U.S.C.
§ 1498 for all intent and purposes to the present case
was enacted in 1918. Even though the Congress ex-
pressly modified the terminology of the grant to a pat-
entee in the 1952 Act,’ no exemption was given to the
United States government. This is in accord with this
Court’s decision in James v. Campbell, supra.
The 1918 amendment to the Act of 1910 came at a
time when the United States was at war. The right to
infringe patents was believed essential to pertuit the
United States to obtain needed war supplies without
disruption. There is nothing in the legislative history
of the 1918 amendment or of Title 35 which suggests
that Congress intended to exempt the United States
government from the exclusivity conferred by the Pat-
ent Laws derived from the Constitution. If the Con-
gress had intended that the United States government
be exempt by the act of 1918, it is submitted that the
exemption would have been reflected in the subsequently
enacted Patent Laws, Title 35, and provision made
therein to provide the patentee with ‘‘just compensa-
tion’’ for its loss and/or to put a prospective patentee
* The wording of the grant in the statute prior to the 1952 Act
was—
‘‘of the exclusive right to make use and vend the invention or
discovery . . . throughout the United States... .’’
The wording of the grant under the 1952 Act is—
‘“‘of the right to exclude others from making, using, or selling
the invention throughout the United States... .’’
————————
28
on notice as to the limitations of the exclusivity con-
ferred by a patent.
The Court of Claims holding that a patentee’s right
of exclusivity does not include the United States gov-
ernment is in direct conflict with the Constitution of the
United States; is in direct conflict with the holding of
this Court in James v. Campbell, supra; and causes 28
U.S.C. § 1498 and 35 U.S.C. § 154 to be in direct conflict.
It is respectfully submitted that review by this Court
is essential.
III. Court Of Claims Assertion That The United States Has A Legal
Right To Use Invention Of Any United States Patent For
Reasonable Royalty Is In Conflict With Fifth Amendment And
Patent Laws: The Comptroller General's Directives On Pro-
curement Cannot Ignore A Constitutionally Conferred Right
Of A Patentee.
This Court expressly held in Cramp, supra, that the
Act of 1910 was enacted to give all patentees a uniform
means for recovering reasonable compensation, i.e., a
reasonable royalty; for the United States’ tortious use
of a patentee’s invention. This Court, in Cramp, also
expressly held that the Act of 1910 did not give the
United States a license to use any and all United States
patents indiscriminately.
In Cramp counsel for the United States argued, re-
ferring to the 1910 Act, that—
corn
he act meets the situation by writing what is
in effect a license agreement between the Govern-
ment and the patentee. It gives an additional rem-
edy to the patentee—a substantial remedy; it
provides that he shall recover compensation, where-
as before he could not do so. An object of equal
emportance was to insure that the Government
should be free and uninterrupted in its use of pat-
29
ented inventions.’? (Emphasis added) [246 U.S.
28, at 32]
In expressly rejecting this contention by the United
States this Court, in emphasizing that the 1910 Act did
not give the government a license, but rather enlarged
the patentee’s rights by giving to all patentees a uni-
form mode for recovering damages equal to reasonable
compensation or a reasonable royalty for the govern-
ment’s tortious use, expressly held that the patentee
retained its rights against the infringing contractor, in-
cluding his right for injunctive relief.
The 1918 amendment to the 1910 Act could not take
more from the patentee than the 1910 Act for this rea-
sonable compensation or reasonable royalty without
giving just compensation for any additional taking.
This Court in Richmond Screw, supra, in interpreting
the 1910 Act, as amended in 1918, after noting that the
word ‘‘entire” as added by the amendment of 1918 em-
phasizes the exclusive and comprehensive character of
the remedy, stated that the 1918 amendment was more
than a waiver of the sovereign immunity and effects
an assumption of liability by the government for the
tortious acts of the private wrongdoer, i.e., the infring-
ing contractor. ;
Accordingly, the unauthorized use by the government
is a tort; the unauthorized manufacture and sale to
the government by the infringing contractor is a tort,
and the measure of damages for the torts are, respec-
tively, reasonable compensation for the government’s
use and, additionally, the actual damages of the in-
fringing contractor as determined under the Patent
Laws, Title 35, § 284, and no less than a reasonable
royalty. The damages for the tortious acts of the in-
30
fringing contractor are not and cannot be wiped out
by 28 U.S.C. § 1498. The damages are assumed by the
United States government. The parties and the forum
change, but the damages remain the same. To hold
otherwise is to render 28 U.S.C. § 1498 unconstitu-
tional as taking property without just compensation
under the fifth amendment. As expressed by this Court
in Richmond Screw, the reasonable and entire compen-
sation under section 1498 must be equal to what was
taken from the patentee. This is what the trial judge
found and what was erroneously rejected by the Court
of Claims.
There is nothing in the 1910 Act as amended in
1918, presently 28 U.S.C. § 1498, which can be inter-
preted as taking from the patentee a compulsory com-
pensable license to the extent that the compulsory com-
pensable license is construed other than as an individu-
alized taking of a patentee’s rights measured by the
actual damages to the patentee for both the govern-
ment’s tortious use and the contractor’s tortious manu-
facture and sale. To hold otherwise is tantamount to
saying that the license to the government occurs ab
initio with the grant of a patent. This leads to the un-
avoidable conclusion that each United States patentee,
whether a United States citizen or a foreigner, at the
time the United States patent is granted has a cause of
action against the United States for loss of his exclu-
sivity conferred under a patent grant.
The Comptroller General by issuing directives stat-
ing that procurements are to be made irrespective of
patents cannot ignore the rights of a patentee, the
same as he cannot ignore the property rights of any
other citizen. The Comptroller General in issuing his
directives must suffer the consequences of providing
31
reasonable and entire, or just compensation, as dictated
by the Constitution and, we submit, by this Court. How-
ever, based on the Court of Claims decision in this case,
which will be the law of the land unless reviewed by
this Court, the patentee will have no recourse against
an infringing contractor, and the only recovery from
the United States is a reasonable royalty, obtainable
only after expensive litigation in the Court of Claims,
with recovery of attorney fees now clearly precluded by
the Court of Claims even in an exceptional case, and
regardless of even despicable conduct engaged in by
the government procurement agents.°
* The plight of a United States patentee is vividly illustrated by
a note in the September 13, 1979 BNA’s Patent, Trademark &
Copyright Journal at pages 5 and 6 as follows:
‘‘PATENTS CAN BE IGNORED
IN GOVERNMENT CONTRACTS
‘‘Summarily dismissing a patentee’s protest that the award of a
iovernment contract to one of its competitors will lead to infringe-
ment, the Comptroller General makes clear that all potential sup-
pliers are permitted to compete ‘regardless of possible patent in-
fringement.’ (In re Beckman Instruments, Inc., GAO B-195193,
8/14/79)
Background
‘‘Beckman Instruments protested the award of a contract to
Bachem, Inc. As the exclusive licensee of a patent that allegedly
covers the subject matter of the contract, Beckman maintains that
the award may result in patent infringement.
Decision
‘“‘The Comptroller General, in an opinion by General Counsel
Socolar, summarily dismisses the protest. Beckman’s sole remedy,
he says, is a suit for compensation in the Court of Claims pursuant
to 28 U.S.C. § 1498. In effect § 1498 is ‘an eminent domain statute,
which vests in the Governinent the right to use any patent granted
by it upon payment of reasonable compensation to the patent
holder.’
‘“‘{Text] Considering [§ 1498] and its purpose, our Office has
concluded that Government contracts should not be restricted to
32
Clearly, with its decision in this case, the Court of
Claims has destroyed the rights of a patentee without
just compensation in violation of the fifth amendment.
It is respectfully submitted that review by this Court
is essential.
IV. The Holding Of The Court Of Claims As To A Compulsory
License For A Reasonable Royalty Only Is In Conflict With
International Treaties.
The United States government through treaties with
countries throughout the world and specifically the
Paris Convention of March 29, 1883, effective July 7,
1884, referred to as the International Convention on
Patents as amended at Stockholm on July 14, 1967,
agrees to recognize the rights of inventors of the other
countries of the world. Inventors of other countries of
the world, in accordance with Article 2 of the Interna-
tional Convention, are to have the same rights under
a United States patent as a United States citizen.
These published rights are the rights conferred under
the Patent Laws, Title 35, which, inter alia, gives to
the patentee the exclusive right to his invention. Title
35 does not state any exception to the right of exclu-
sivity.
patent holders and their licensees. Instead, all potential sources
should be permitted to compete regardless of possible patent in-
fringement. 46 Comp. Gen, 205 (1966). Therefore, the patent
holder or licensee’s sole remedy for any potential infringement of
its rights in this respect is by suit in the United States Court of
Claims against the Government for money damages. Controlled
Environment Systems, Inc., B-191851, August 15, 1978, 78-2 CPD
119.
‘* Accordingly, a protest that patent or license infringement may
result from performance under a contract awarded to another firm
is not for consideration by our Office. See Miltope Corporation,
B-191322, July 7, 1978, 78-2 CPD 20, [End Text]’’
}
33
To permit as the law of the land the holding of the
Court of Claims that the government can take a com-
pulsory license under any United States patent at any
time, regardless of whether the United States patent
is owned by a United States citizen or a foreign in-
ventor, for the procurement of any item, regardless of
its need to strategic defense, is in violation of the agree-
ment as expressed in the International Convention.
Accordingly, the holding of the Court of Claims in
the present case abrogates commitments of the United
States under its treaties. It is submitted that the hold-
ing of the Court of Claims must be reviewed.
34
CONCLUSIONS
The Court of Claims in the present case has rendered
a decision in conflict, or in apparent conflict, with
earlier decisions of this Court; and/or this case pre-
sents, as an important question of federal law, the in-
terpretation of the Patent Laws, Title 35 vis-a-vis 28
U.S.C. § 1498 which as a matter of public policy must
be clarified.
The decision of the Court of Claims, in apparent con-
flict with the earlier decisions of this Court, will be the
law of the land unless reviewed and modified by this
Court since, but for review by this Court, the Court of
Claims has exclusive jurisdiction over the subject mat-
ter of this case.
For the reasons expressed in this Petition, a writ of
certiorari should issue to the Court of Claims.
Respectfully submitted,
ALFRED W. BREINER
727 - 23rd Street, South
Arlington, Virginia 22202
. Attorney for Petitioner
Of Counsel:
B. W. Norton
333 Strawberry Field Road
Warwick, Rhode Island 02887
Harvey E. BUMGARDNER, JR.
1230 Sixth Avenue ;
New York, New York 10020
September 27, 1979
APPENDIX
la
APPENDIX A
Opinion of Trial Judge, U.S. Court of Claims,
On Accounting, Decided May 1, 1978
U.S. Court of Claims, Trial Div.
LEESONA CoRPORATION
V.
Unitep STATES
No. 130-70
Decided May 1, 1978
Browne, Trial Judge.
Opinion *
The court held in Leesona Corp. v. United States, 208
Ct. Cl. 871, 530 F.2d 896, 192 USPQ 672 (1976) that certain
claims of three patents’ owned by plaintiff, Leesona Cor-
poration (Leesona), are valid and infringed by defendant,
the United States of America (the Government). The case
is now before the trial judge for further proceedings under
Rule 131(c) to determine the quantum of reasonable and
entire compensation to which plaintiff is entitled under 28
U.S.C. § 1498 for the manufacture or use, by or for the
Government, of the inventions described in and covered by
the patents, without license or lawful right thereto.
* Rules 131(c¢) ; 1384(h).
1Claim 9 of Moos Patent No. 3,276,909 issued October 4, 1966;
claims 4 and 7 of Elmore et al. Patent No, 3,419,900 issued Decem-
ber 31, 1968; and claims 1, 2, 3, 5 to 8, 10, 16 and 17 of Oswin
et al. Patent No. 3,436,270 issued April 1, 1969.
2a
Inasmuch as the three patents in suit are still in force,
the determination made herein is applicable only to manu-
facture or use of the inventions by the Government up to
and including the date on which trial on the proceedings
under Rule 131(¢c) commenced.
It is found that plaintiff is entitled to judgment in the
amount of $3,534,753.52 as reasonable and entire compensa-
tion, including delay compensation, to and including Decem-
ber 31, 1977, plus additional delay compensation at the rate
of $470.51 per day for each day from January 1, 1978 to
the date of payment of the judgment. The determination is
based on the evidence of record, in the light of the applica-,
ble law, due consideration also having been given to the
pretrial and posttrial submissions of the parties.
I. The Patents
The infringed patents relate to “electrochemical devices
for the generation of electrical energy by chemical proc-
esses, such devices being commonly referred to as batteries
or cells.” * More specifically, the devices to which the pat-
ents relate are activated initially, and reactivated as re-
quired, by mechanical (as distinguished from electrical)
construction or reconstruction of the devices. Each of the
infringed claims of each of the patents calls for the combi-
nation of three indispensable elements, namely, two elec-
trodes (i.e., an anode and a cathode) and an electrolyte.
The claims of Oswin et al. Patent No. 3,436,270 (the ’270
patent) are the only claims which specify that the construc-
tion is such that one of the electrodes (e.g., the anode) is
replaceably positioned with respect to the other electrode
(e.g., the cathode) in the battery or cell.
Each claim must be considered as a definition of the in-
vention as a whole. The omission of any one of the three
2 Leesona Corp. v. United States, 208 Ct. Cl. 871 at 897 (finding
2) (1976).
3a
indispensable elements would not define the invention em-
bodied in the patented device. In the patented device the
anode is a replaceable element which, by its nature and func-
tion, becomes consumed before the other elements of the
battery or cell. The anode by itself, however, has no utility.
It is constructed, both mechanically and chemically, to func-
tion only in the manner contemplated by the claims.
II. The Infringement
The initial taking of Leesona’s patent rights in this case
springs from the procurement by the Government of certain
batteries, including electrodes, casings, covers and associ-
ated items from Eagle-Picher, Inc., of Joplin, Missouri
(Eagle-Picher), under a contract awarded on the basis of
competitive bidding. The Government’s use of the infring-
ing batteries and associated elements does not give rise to
liability in addition to its liability for manufacture of the
batteries by Eagle-Picher, since the right of the Government
to use the batteries is derived from its eminent domain
taking of the license to manufacture. Thus, construction or
reconstruction (as distinguished from repair) of the bat-
teries by disassembling the battery and installing a com-
plete new set of electrodes (i.e., anodes) constitutes manu-
facture by the Government under its eminent domain li-
cense to manufacture.
III. Leesona’s Business Background
A. Leesona’s Development Work
In the early 1960’s Leesona, an established and highly
reputable manufacturer of textile machinery, embarked on
a program of diversification. As part of that program it
acquired Moos Laboratories, a small company engaged in
the research and development of electrical devices, includ-
ing “mechanically” reconstructible zinc/air batteries. A di-
vision of Leesona was established as Leesona-Moos Labora-
tories to conduct the battery business of Leesona.
4a
Leesona set out to overcome the deficiencies of the BB-
451/U high performance “electrically” rechargeable battery
(hereinafter referred to as the ’451 battery) then being
used by the Government as a standard issue battery in its
military field operations. Leesona submitted an unsolicited
proposal to the United States Marine Corps in 1965, offer-
ing to provide a newly-developed field reconstructible (me-
chanically) metal/air battery (the Leesona battery) which
would serve as a replacement for the conventional field re-
chargeable (electrically) °451 metal/air battery. Having
demonstrated the advantageous characteristics of its me-
chanically reconstructible metal/air battery and its poten-
tially superior military capabilities, Leesona entered into
a contract * with the Government to manufacture a mili-
tarized version of its reconstructible metal/air battery
which it had developed for commercial use. Militarization
of the Leesona battery required more rugged and heavier
construction than the commercial form which Leesona had
produced as a prototype. The Government agreed to pay
Leesona $300,000 for 22 metal/air batteries, 10 of which
were to be reconstructible versions of the Leesona battery.
Leesona expended at least $100,000 of its own money, in
addition to the contract price of $300,000, in producing the
22 batteries called for by the contract.
In October of 1967 the reconstructible batteries were de-
livered to the Government and were field tested at Camp
Pendleton, California. As a consequence of the success of
these tests (referred to generally as the “Pendleton tests”),
the Marine Corps adopted the Leesona battery as its stand-
ard for future procurement and field use, and identified it
by the symbol BB-626()/U (hereinafter the ’626 battery).
3 Contract No. DA28-043-AMC-02082(E) dated March 21, 1966.
This was a ‘‘negotiated procurement’’ contract for property under
10 U.S.C. § 2304(a)(1), as distinguished from a contract for re-
search and development services,
4
5a
After the Pendleton tests, the Marine Corps decided to
replace all of the "451 rechargeable batteries, already in the
field, with the Leesona-developed reconstructible 626 bat-
teries. It was estimated that the Marine Corps’ annual pro-
curement of the 626 batteries would be in excess of $25 to
$30 million and Army requirements would be far in excess
of that amount.
B. Leesona’s Commitment to Manufacture Government
Requirements
In anticipation of receiving a Government contract for
such large quantity, iong-range production of the ’626 bat-
teries, Leesona made a management decision to commit $3
million of its corporate funds to the establishment of full-
scale production and manufacturing facilities. Concurrently
therewith, Leesona decided to concentrate on the military
market for the batteries and, consequently, to forego fur-
ther efforts to exploit the non-military (civilian or commer-
cial) potential for its unique battery, the essential features
of which were the subject of issued patents or pending ap-
plications for patents in the United States and abroad.
Leesona sold some additional 626 batteries to the Marine
Corps in 1968 for field testing in Viet Nam under actual
combat conditions. The Leesona 626 batteries thus fur-
nished were also found to be satisfactory for use in combat
and substantially outperfqarmed the standard 451 electri-
cally rechargeable battery.
C. Leesona’s Loss of Profits
Having decided to procure the Leesona-developed ’626
batteries in quantity for field use, the Marine Corps issued
Letter Contract No. MOO150-C-0363 to Leesona as a “sole
source” procurement on May 12, 1969.* The contract called
*The Letter Contract was issued less than 2 months after the
Oswin et al. Patent No. 3,436,276 had issued (on April 1, 1969)
on the field reconstructible battery.
6a
for delivery of 2,500 end items (batteries including associ-
ated components), together with 753,456 anodes (22 anodes
per reconstruction kit), 3,000 cathode units, and 575 blower-
type covers. The total contract price was set at a maximum,
not to exceed $3,700,000.°
The Letter Contract, in the usual form, requested accept-
ance of the contract by Leesona and signified the intent of
the Government to thereafter substitute for the Letter Con-
tract a formal contract containing the various additional
clauses required by law and procurement regulations. It
also contained a clause limiting expenditures by the con-
tractor to $1,000,000 in preparation for performance of the
contract and a liquidated damages clause limiting liability
of the Government to $1,800,000 in the event of termination.
The Letter Contract was accepted and signed by Leesona,
and was promptly returned to the contracting officer at the
Marine Corps Supply Activity in Philadelphia, Pennsyl-
vania. The contracting officer, however, did not ratify the
Letter Contract but, instead, informed Leesona that a for-
mal contract would not be executed since a decision had
been made to place the item for procurement under com-
petitive bidding procedures in lieu of sole source procure-
ment.
The record indicates that two battery manufacturers who
had not previously built any of the 626 batteries (or any
other metal/air mechanically rechargeable or reconstructi-
ble batteries) learned of the issuance of the Letter Contract
for sole source procurement and asserted that they had the
capability of manufacturing the item and wanted to have a
chance to bid on the procurement.®
5 The maximum was predicated on a price of not more than $500
per complete 626 battery, $66 per anode kit of 22 anodes, $35 per
eathode unit, and $135 per blower cover.
*It further appears that the purchase price set in the Leesona
Letter Contract became known to one or more of the prospective
bidders prior to submission of their bids.
7a
The Marine Corps sent out requests for bids in the man-
ner prescribed for competitive bid procurement, using in its
“bid package” drawings and specifications obtained from
Leesona. Pursuant to the prescribed competitive bidding
procedures, contract No. MOO150-70-C-0113 (hereinafter
referred to as the Magle-Picher contract) was awarded to
Kagle-Picher, Ine., the lowest of five bidders, on November
6, 1969.7
The contract awarded Eagle-Picher called for manufac-
ture and delivery, according to a prescribed schedule, of
2,138 batteries, 68,182 anode kits (22 anodes per kit), 2,948
cathodes, and 732 blower-type covers. The contract included
an option for the Government to increase the quantities.
The contract also contained provisions which required de-
livery of the 2,138 batteries both within the United States
and overseas, deliveries being scheduled between April 14,
1970 and February 1, 1971. The original contract was
amended to provide for additional quantities of the associ-
ated components in accordance with the option provisions
in the contract. The final t:-tal dollar amount of the procure-
ment from Kagle-Picher was $3,633,056.43.
IV. Elements of Reasonable and Entire Compensation
A. Application of Title 35 U.S.C. to Actions Under Title
28 U.S.C. § 1498.
Liability of the United States for infringement * of a
United States patent is specifically established in 28 U.S.C.
7 The respective bids were:
Eagle-Picher, Ine. $2,711,348.40
Leesona-Moos Laboratories 3,301,179.32
Yardney Electrie Co. 3,951,354.00
Gould, Ine. 4,965,555.48
Eleetrochimica Corp. 7,533,969.00
®’ The terms ‘‘infringement’’ and ‘‘infringes,’’ as used in Title
35 U.S.C. and in this opinion, as well as in many opinions of this
court, is intended to be synonymous with the phrase ‘‘used or
8a
§ 1498. That section of the Code provides that the owner’s
remedy for the infringement is limited, as to personal juris-
diction, to an action against the United States and, as to
venue, to an action in the United States Court of Claims. In
such an action the owner is entitled to recover reasonable
and entire compensation for such infringement. No factors,
indicia, or other criteria are expressed in this section of the
Code for evaluation or determination of the quantum of
compensation which will be both reasonable and entire. In-
junctive relief, being equitable in nature, is excluded as an
alternative or additional remedy since the Court of Claims
has no equity jurisdiction. It can, however, grant entire re-
lief in the form of a money judgment.
In a recent case, this trial judge stated in an opinion filed
pursuant to Rule 54(b), that “No ruling is made at this
time as to the defenses available to defendant in actions
brought under the fifth amendment to the Constitution and
28 U.S.C. § 1498(a) for the taking of patent rights granted
under article I, section 8, of the Constitution of the United
States and Title 35 U.S.C.” Hale Bros. Associates, Inc. v.
United States, Order of April 26, 1977, adopting trial
judge’s opinion of November 24, 1976, 213 Ct. Cl. 757, 192
USPQ 114. The time has now come for this court to make
a determination of the remedies available to patentees vis
a vis the Government.
The Act of June 25, 1910, infra, conferred exclusive juris-
diction on the Court of Claims for recovery of “compensa-
tion” for the taking of the rights of a patentee. In the
course of codification of the laws of the United States in
1940, the Act of June 25, 1910, ch. 423, 36 Stat. 851 (as
amended by the Act of July 1, 1918, ch. 114, 40 Stat. 705)
was incorporated in Title 35 U.S.C. (Patents) as section 68.
The text, including a proviso giving the Government the
manufactured by or for the United States without license of the
owner [of the invention] or lawful right to use or manufacture
the same’’ as the latter phrase appears in 28 U.S.C. § 1498(a).
9a
right to assert the same defenses as private litigants, was
unchanged. However, in 1948, in the course of revision of
Title 28, U.S.C., section 68 was transferred from Title 35
(Patents) to Title 28 (Judiciary and Judicial Procedure)
as section 1498 of that title (Act of June 25, 1948, ch. 646,
62 Stat. 941).
The Reviser’s Note appended to 28 U.S.C. § 1498 (1970)
explains that the aforementioned proviso was omitted from
the text of the recodification of section 68 of Title 35 U.S.C.
as section 1498 of Title 28 U.S.C. since it was “unneces-
sary.”
When Title 35 U.S.C. was recodified to reflect the changes
brought about by the Patent Act of July 12, 1952 (Pub. L.
No. 82-593, ch. 950, 66 Stat. 792), section 68 of the “re-
pealed” Title 35 was referred to as having been “repealed”
by the Act of June 25, 1948, supra.
Except for the inclusion of a provision which extends the
6-year statute of limitations (35 U.S.C. § 286) in suits
against the Government, in a specific situation not here
pertinent, nowhere else in Title 35 U.S.C. does there appear
to he anything which bears directly on the rights of pat-
entees against the Government or the defenses available to
the Government in actions brought for reasonable and en-
tire compensation for use of patented inventions by or for
the United States under 28 U.S.C. § 1498.
The current statute under which the Government may be
sued for patent infringement (28 U.S.C. § 1498(a) (1970) )
does not specify any increase or limitation on damages com-
parable to that set forth either in 35 U.S.C. § 284, § 286, or
§ 287 (1970), nor does it enumerate any defenses which are
available to the United States comparable to those enumer-
ated in 35 U.S.C. § 282 (1970) as being available in a civil
action under 35 U.S.C. § 281 (1970) between private parties
in the United States District Courts. ‘
Whereas the remedies available to patentees in suits be-
tween private parties specified in 35 U.S.C. §§ 283, 284, and
10a
285 include injunctive relief as well as recovery of damages
and attorney fees, the sole remedy available to patentees in
suits against the Government is specified in 28 U.S.C. § 1498
(a) as the recovery of “reasonable and entire compensa-
tion” from the United States. It appears, therefore, that the
specific provision for reasonable and entire compensation
under 28 U.S.C. § 1498(a) is intended by Congress to be a
total replacement of the specific provision dealing not only
with damages within 35 U.S.C. § 284, but also attorney fees
within 35 U.S.C. § 285.° Thus, I am forced to conclude that
the Government, if it infringes a plaintiff’s patent rights,
can be assessed up to treble damages and attorney fees since
the Government, if it avails itself of the defenses afforded
by Title 35 U.S.C., must also be subject to the liabilities
*In Regent Jack Mfg. Co. v. United States, 155 Ct. Cl, 222, 292
F.2d 868, 130 USPQ 235 (1961), the opinion of the Commissioner
(which was adopted per curiam by the majority) rejected plain-
tiff’s claim for damages under 35 U.S.C. § 284 and attorney fees
under 35 U.S.C. § 285. The Commissioner concluded that the court
‘‘is not authorized to award specific damages and/or attorney fees
as such’’ under 28 U.S.C. § 1498 since that statute does not speci-
fically authorize the court to award anything other than ‘‘reason-
able and entire compensation.’’ The words ‘‘reasonable and entire’’
are certainly not specific in terms of what elements are properly
includable. The Commissioner’s view is not reconcilable with the
eases in this court which allow ‘‘delay compensation,’’ ‘‘ reasonable
royalty,’’ and ‘‘lost profits’’ to be included in the computation of
reasonable and entire compensation. There was no finding in Regent
Jack, id., as there is in the present case, that it was an exceptional
case. Plaintiff, in subsequent proceedings, Regent Jack Mfg. Co.,
179 Ct. Cl. 924 (1967), sought interest on the amount of recovery
and the costs of seeking interest on the recovery, but the court
sidestepped the issue on the ground that the amount of recovery
was stipulated by settlement and the settlement did not provide
for the payment of interest. If the court was convinced that interest
could not be included in reasonable and entire compensation, it
could have based its denial of plaintiff’s claim for interest and
costs on that basis. As it now stands, it appears that the question
of what is includable in reasonable and entire compensation is still
open ended,
lla
specified therein. The only exception is the injunctive re-
lief available under section 283 since this court has no juris-
diction to grant equitable relief. Calhoun v. United States,
197 Ct. Cl. 41, 52 n. 7, 453 F.2d 1385, 1391 n. 7, 172 USPQ
438, 443 n.7 (1972).
While the Government should be unrestrained in its law-
ful exercise of its fifth amendment eminent domain power,
multiplication of damages, in this case, would not inhibit
this exercise. The increase of damages, if authority is found
to exist, is primarily to inhibit the willful and deliberate
taking in bad faith of a patentee’s rights, not the mere tak-
ing, itself, by the United States. I hold that the damages
can be increased by the court pursuant to 35 U.S.C. § 284.
Moreover, I hold that there exists sufficient bad faith on the
part of the Government to justify a finding that this is an
exceptional case warranting the award of reasonable attor-
ney fees to plaintiff either as part of plaintiff’s reasonable
and entire compensation (damages) or as provided by
statute in 35 U.S.C. § 285.
1. Reasonable Royalty as Minimum
Title 35 U.S.C. § 281 provides that a patentee shall have
remedy for infringement by a member of the private sector
in a civil action in a United States District Court of compe-
tent jurisdiction and venue. Upon a finding for the patent
owner in such a case, the court shall award ‘‘damages”’
adequate to compensate for the infringement but in no
event less than a reasonable ‘‘royalty’’ for the use made
of the invention by the infringer (together with interest
and costs as fixed by the court). 35 U.S.C. § 284.
The word ‘‘reasonable’’ as it appears in 28 U.S.C.
§ 1498(a) is synonymous with that word as used in the
phrase ‘‘reasonable royalty’’ which appears in 35 U.S.C.
§ 284. Thus, as a minimum, the owner of a patent is entitled
to recover a sum of money not less than a reasonable roy-
alty when the patent is infringed by the United States. In-
12a
deed, this court has equated the term ‘‘reasonable’’ to the
term ‘‘reasonable royalty’’ by using the latter term as but
one element of reasonable and entire compensation. See,
e.g., Carley Life Float Co. v. United States, 74 Ct. Cl. 682,
13 USPQ 112 (1932); Tektronik, Inc. v. United States, 213
Ct. Cl. 257, 552 F.2d 343, 193 USPQ 385 (1977).
The question remains, however, as to what other elements
of compensation which, when added to a ‘‘reasonable roy-
alty,’’ will make the compensation both reasonable and
entire.
There is no statutory basis for a contention that the
remedy to which a successful plaintiff is entitled in an
action in the Court of Claims is limited to a ‘‘reasonable
royalty.’’ The conjunctive use of the word ‘‘entire’’ in 28
U.S.C. § 1498(a) affords a statutory basis for the inclusion
of more than a ‘‘reasonable royalty’’ in the money judg-
ment awarded. The legislative history of the statute in
question lends support to this interpretation. In 1910, after
considerable debate, the antecedent of 28 U.S.C. § 1498 was
enacted. The 1910 statute, in waiving sovereign immunity,
provided patent owners a limited remedy for infringement
of patents by the United States. Specifically, the statute
allowed such owners to recover only reasonable compensa-
tion for such infringement. (Emphasis added). Ch. 423, 36
Stat. 851 (1910). In 1918, however, the statute was
amended to provide that the patent owner could recover
not only reasonable but reasonable and entire compensa-
tion for such infringement. Ch. 114, 40 Stat. 705 (1918).
(The terms of the amended statute, in this respect, are
substantially identical to the wording of the present text
of 28 U.S.C. § 1498(a)). The reason for the amendment is
not established by the legislative history of the public law
in which it was incorporated.” The language of the statute
*°56 Cong. Rec. 5334-61, 5365-91, 7955-85, 8012-24 (1918). 56
Conga. Rec. 6886-910 (1918).
cise AI Sp 8
13a
is clear that the preexisting measure of recovery was ex-
panded to include something more than mere reasonable
compensation. Thus, the word ‘‘entire’’ is all-encompas-
sing.
2. Multiplication of Damages
A further issue, therefore, is what compensation, in addi-
tion to a reasonable royalty, should be awarded Leesona to
provide entire compensation as mandated by 28 U.S.C.
§1498? In resolving this issue the only other statutory
source to which the court may resort is Title 35 of the
United States Code, which is the only title of the United
States Code which deals with the fundamentals of patent
law. In the same section of that title which provides for
payment of a reasonable royalty to a claimant (i.e., § 284),
Congress has provided that the court may increase the
damages found or assessed up to three times the amount
found or assessed. In civil actions between private parties,
courts have frequently increased the recovery beyond a
‘‘reasonable royalty’? by taking into consideration the
willfulness and deliberateness of the infringement and/or
bad faith of the infringer. See, e.g., Trio Process Corp. v.
L. Goldstein’s Sons, Inc., 533 F.2d 126, 189 USPQ 561 (3d
Cir. 1976) ; Saf-Gard Products, Inc. v. Service Parts, Inc.,
532 F.2d 1266, 190 USPQ 455 (9th Cir. 1976).
In the absence of any other express statutory criteria to
aid the court in determining reasonable and entire compen-
sation pursuant to 28 U.S.C. § 1498, the provisions of Title
35 must be relied upon to ascertain the intent of Congress
as to the extent to which the United States, as well as any
private party, may be held liable for the usurpation of the
exclusive right of a patentee. The applicable provisions of
Title 35, therefore, fill an apparent gap in 28 U.S.C.
§ 1498(a) with respect to the elements which, when added
to a reasonable royalty, provide entire compensation for
use of a patented invention by the United States when it
exercises its right of eminent domain by a taking of patent
l4a
property under the fifth amendment. It would be absurd
to conclude that the United States is less liable to a patent
owner than a private citizen when a patent is infringed.”
Accordingly, all legal remedies (as distinguished from
equitable remedies) provided in actions under Title 35 are
applicable in determining reasonable and entire compensa-
tion in actions in the Court of Claims under 28 U.S.C.
§ 1498(a).
The nature of relief to be granted is not limited by any
specific language of 28 U.S.C. § 1498. By implication, how-
ever, the statute precludes injunctive or other equitable
relief since the remedy is limited to recovery of reasonable
and entire compensation. 28 U.S.C. § 1498(a). Only com-
pensation in the form of monetary damages may be
awarded to the owner of a patent which is infringed by the
United States.”
11 The United States, as defendant, has often argued before this
court that the defenses of Title 35 are applicable to suits brought
under 28 U.S.C. § 1498. The Government’s argument is based on
a proviso of the predecessor of 28 U.S.C. § 1498, i.e., 35 U.S.C. § 68,
which’ proviso established the right of the United States to assert
in an action in the Court of Claims any general or special defenses
available to defendants in patent infringement suits in private
actions in the United States District Courts and Cireuit Courts of
Appeals, Upon recodification, this proviso was eliminated on the
ground that the revisers thought it ‘‘unnecessary.’’ The Govern-
ment has recently argued that the section of Title 35 dealing with
the limitation of damages, 35 U.S.C. § 286, is also available to the
United States in its attempts to defend an action brought under
28 U.S.C. § 1498. The Government cannot eat its cake and have it,
too. If the United States is entitled to employ all of the defenses
of Title 35, then it must also be subject to all of the liabilities of
Title 35 (injunctive relief being excluded by virtue of its equitable
character, which this court is without jurisdiction to grant). To
paraphrase an axiom of antitrust law, the defendant cannot use
28 U.S.C. § 1498 both as a shield and as a sword.
2 Courts have consistently refused to grant injunctive relief
against the sovereign, notwithstanding the patentee’s right of ex-
clusivity as to infringers generally. See, e.g., City of Milwaukee v.
ee
15a
No express or implied statutory limitation exists in 28
U.S.C. § 1498 with regard to the award by this court of
any given multiple of damages if the court is convinced
thet the increase of damages is warranted by the facts of
the case. By reading the second paragraph of 35 U.S.C.
§ 284 into 28 U.S.C. § 1498, the court may assess damages
up to three times the amount found or assessed. This per-
mits the court to increase the quantum of compensation
above a ‘‘reasonable royalty’’ in order that the compensa-
tion will be not only reasonable, but also entire.
3. Attorney Fees m Exceptional Cases
In Tektronix, Inc. v. United States, supra, the court held
that attorney fces were not to be included in arriving at the
entire compensation to be awarded plaintiff in that case.
The court, in a ruling in the instant case on March 4, 1977,
again held that attorney fees are not allowable as part of
entire compensation under section 1498 since ‘‘. . . Con-
gress has passed no such statute awarding attorneys’ fees
and litigation expenses in a 28 U.S.C. § 1498 action.’’ It is
resepectfully submitted that the court did not consider the
fact that Congress has provided for recovery of attorney
fees ‘‘in exceptional cases’’ in section 285 of Title 35.
There had been no finding in this case, prior to the court’s
ruling, that this is an ‘‘exceptional case’’ warranting the
award of attorney fees as contemplated in 35 U.S.C. § 285.
Such a finding has now been made and, on the theory that
Activated Sludge, Inc., 69 F.2d 577, 593, 21 USPQ 69, 85 (7th
Cir.), cert. denied, 293 U.S. 576 (1934). See also Stelma, Ine. v.
Bridge Electronics Co., 287 F.2d 163, 128 USPQ 373 (3d Cir.
1961) ; Nerney v. New York, N.H. & H.R. Co., 83 F.2d 409 (2d
Cir. 1936); North American Philips Co. v. Stewart Engineering
Co., 319 F.Supp. 335, 166 USPQ 477 (N.D. Cal. 1970) ; Foundation
Co. v. Underpinning & Foundation Co., 256 F. 374 (S.D.N.Y.
1919). The law is well settled that a patentee is entitled to an
injunction against infringement if the suit is between private
parties. 35 U.S.C. § 283.
l6a
all relief (except injunction) available under section 285
of Title 35 is also available, in an action under section 1498
of Title 28, it is within the power of this court to include
attorney fees in this unique case.*
B. Savings to the Government
The court also pointed out in Tektronix, supra, that by
avoiding the costs of engineering and developing an item,
a contractor is often able to underbid a patent owner under
competitive bidding procedures by the amount saved and
thus pass such savings on to the Government. The Leesona
bid of $3,301,179.32 (the second lowest bid) is presumed
to have included at least a portion of Leesona’s develop-
ment costs, whereas the lowest bid (Eagle-Picher) was pre-
sumably reduced since Eagle-Picher was able to take ad-
vantage of the development costs borne by Leesona. The
saving to the Government resulting therefrom is deemed
to be the difference between Leesona’s bid if it had been
awarded the contract and Eagle-Picher’s total receipts
under the Government contract. This difference is equal to
$768,719.10. Accordingly, that amount will be included as
part of Leesona’s recovery under 28 U.S.C. § 1498(a).
It cannot be said that Leesona’s bid was inflated or un-
realistic since the prices quoted by the other unsuccessful
bidders were substantially higher than those submitted by
either Leesona or Eagle-Picher (see note 7 supra for com-
parison of bids).
C. Recovery of Investment by Leesona
Leesona seeks just compensation in an amount which will
place it in the same economic position it would have held
if defendant had not taken Leesona’s exclusive right to
18 As will be seen hereinafter, the present case is ‘‘exceptional’’
and, based on that distinction, attorney fees have been included in
arriving at the quantum of entire compensation to which Leesona
is entitled in this case.
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17a
make the’626 batteries, anodes, covers and associated com-
ponents. Leesona maintains that ‘‘but for’’ defendant’s
taking of Leesona’s patent rights, plaintiff would have ex-
ercised its right of exclusivity, and therefore Leesona is
entitled to recover $5,660,000, the total amount of its viable,
pre-taking investment (including research and develop-
ment costs) as well as capital expenditures made in antici-
pation of production of long-range Government projected
requirements. That is to say, Leesona maintains that “but
for’’ the defendant’s eminent domain taking, plaintiff
would have remained in the business of manufacturing
metal/air batteries, not only to satisfy defendant’s require-
ments, but also to be in a position to supply the non-mili-
tary market in the event it elected to exploit that market
as well and thereby recover its total investment over a
shorter period of time.
Leesona’s theory is that even though the total amount of
compensation it seeks under this theory is significantly
greater than the total procurement of the cost of the in-
fringing items to the defendant, the total provable eco-
nomic loss suffered by Leesona must, nevertheless, be borne
by defendant. Plaintiff cites no precedent in support of its
novel theory of recovery, and the trial judge is not per-
suaded by it. Therefore the amount of pre-taking invest-
ment is excluded, reasonable and entire compensation being
determined by other criteria. .
This court has held that costs incurred by an unsuccess-
ful bidder in anticipation of an award of future Govern-
ment contracts are not recoverable. General Dynamics
Corp. v. United States, 202 Ct. Cl. 347(1973). Where, how-
ever, costs and expenses are incurred by a party in re-
liance upon -eceipt of a Letter Contract in which a pre-
performance investment of $1,000,000 was authorized, it
should be permissible to include proven pre-performance
investment in the computation of reasonable and entire
compensation where the Government reneges on its com-
mitment and, instead, takes that party’s patent rights and
gives the contract to an unlicensed party. It is immaterial
18a
that the Government utilized competitive bidding proced-
ures in awarding the contract to the unlicensed party. The
patent owner, thus, is entitled to have its relevant costs
and expenses of preparation to perform included, in some
way, in the amount of compensation to be recovered under
28 U.S.C. § 1498 for infringement of its patent by the Gov-
ernment.
Where, as in this case, the Government has exhibited the
utmost bad faith not only by willfully and deliberately in-
fringing plaintiff’s patents, but also by furnishing the fruits
of plaintiff’s development to its competitors in the bidding
process, the patent owner is entitled to recover more than
the actual amount of its loss. Title 35 U.S.C. § 284 author-
izes the court to allow up to three times the amount of dam-
age found. In addition, where the Government proceeds in
such reckless disregard for plaintiff’s legal rights and
equities, there is still further basis for holding this to
be an ‘‘exceptional case’’ warranting award of attorney
fees under the congressional intent expressed in 35 U.S.C.
§ 285. (See discussion of attorney fees at page 19, supra.)
By increasing plaintiff’s damages to twice the amount
found in this case, its compensation will be not only reason-
able but also sufficient to compensate it for part of its pre-
taking investment and part of its attorney fees.
D. Loss of Profits
In Tektronix, Inc. v. United States, supra, 213 Ct. Cl. at
267, 552 F.2d at 349, 193 USPQ at 390-391 (1977), the court
stated that lost profits may be awarded the plaintiff in an
action based on 28 U.S.C. § 1498 ‘‘only after the strictest
proof that the patentee would actually have earned and
retained those sums in its sales to the Government.’’ Tek-
tronix failed to sustain the prescribed burden because it
did not show by clear and convincing evidence that it would
have supplied the ‘‘commercial’’ scopes which were pro-
cured from third parties or that it would have made and
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19a
kept the profits if zt had supplied the items. Leesona, on
the other hand, was not only ready, willing and able to
supply the batteries which the Government ultimately pro-
cured from Eagle-Picher, but also it had previously been
awarded a Letter Contract for those batteries. Since there
was no history of production or sale of such batteries by
anyone, Leesona was not able to establish an average per-
centage of profit on the manufacture and sale of such bat-
teries. Even if the profit actually realized by Eagle-Picher
in performance of the contract was established, it would
not be a proper measure of the amount of profit lost by
Leesona. See Tektronix, supra. There is evidence that Lee-
sona used a 15 percent profit margin in computation of its
projections. Since there is no evidence to establish an actual
profit, and the 15 percent figure is reasonable, that per-
centage is used in computation of Leesona’s loss of profits
directly attributable to the taking of Leesona’s patent
rights by defendant. Leesona’s lost profits should be com-
puted on the theory that the total dollar procurement would
have been $4,401,572.42 if Leesona’s bid had been accepted
and if it also supplied the additional optional quantities
actually furnished by Eagle-Picher. Accordingly, Leesona’s
lost profit is $660,235.85 **
E. Computation of Equivalent of Reasonable Royalty
Various criteria may be employed in determining the
amount which the owner of an infringed patent should re-
ceive as the equivalent of a ‘‘reasonable royalty.’’ If there
is evidence of an existing license under the patent or pat-
ents in suit, that license may be used as a starting point to
determine whether the rate should be higher or lower in
light of the circumstances of the case. Only if there is no
history of licensing, either by the patent owner or others
in the field to which the patents pertain, is there justifica-
* The profit lost by Leesona if based on the contract awarded to
Eagle-Picher would be only $544,958.46.
20a
tion for resorting to the willing seller/willing buyer ap-
proach taken in cases such as Georgia-Pacific Corp. v. U.S.
Plywood Champion Papers, Inc., 446 F.2d 295 (2d Cir.
1971), 170 USPQ 369, cert. denied, 404 U.S. 870, 171 USPQ
322 (1971). There is evidence in this case that Leesona
granted licenses under the patents in suit but only for
manufacture outside the United States under its foreign
patents. Before discussing Leesona’s licensing practices
and royalty rates, a review of the defendant’s contentions
is desirable.
1. Compensation Rate
The royalty rate which RCA established in its licenses
to manufacturers of batteries is entitled to little weight in
determining the compensation rate to be applied in this
case. RCA was not a battery manufacturer, did not want to
be a battery manufacturer, and had no desire to exercise
its exclusive right to manufacture batteries under its pat-
ented inventions. The only conclusion that can be drawn
from the testimony of the RCA witness who dealt with
commercial licensing of RCA patents is that the range of
royalty rates for its extensive variety of patented electronic
items is from a minimum of about 114 percent to a maxi-
mum of 10 percent of the net selling price of the products
in which the inventions were utilized.
Leesona, in contrast to RCA, would only have accepted
a relatively high royalty rate from a domestic licensee due
to its often-expressed intent to retain its exclusive right to
manufacture its batteries within the United States.
Defendant asserts that the RCA minimum average roy-
alty rate of 114 percent is reasonable and should be applied
in this case since the 5 percent to 714 percent royalty rate
established in plaintiff’s licenses includes other patents,
know-how, trade secrets and trademarks.
I find that a royalty rate of 114 percent is not sufficient
to constitute the equivalent of a reasonable royalty in
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light of the established advantages and superiority of the
patented invention over the standard batteries being used
by the military prior to Leesona’s entry into the field. It is
significant that plaintiff invested in excess of $5 million
in its research, development, and preparation for produc-
tion of its patented battery. Clearly, it would not be willing
to accept a minimal royalty figure in return for its for-
feiture of its exclusive right to manufacture the patented
battery within the United States.
While plaintiff’s licenses did not prohibit others from
selling the patented batteries in the United States, it never
was willing to grant the right to others to manufacture them
within the United States.
Leesona’s license agreements all required the payment
of an initial license fee as well as a minimum annual roy-
alty regardless of the number of units actually manufac-
tured during the applicable royalty period. The agreements
with Hitachi Maxell, ECL, and Crompton-Parkinson
granted, at most, the implied right to sell within the United
States such batteries as may have been manufactured out-
side the United States. The minimum royalty rate for bat-
teries manufactured under these agreements was 5 percent
of the net selling price. This is the minimum from which a
reasonable royalty rate may be extrapolated from the evi-
dence in this ease. It is clear that Leesona would not be will-
ing to license another party to manufacture batteries within
the United States at a royalty rate less than the rate it had
established for the manufacture of batteries abroad under
its patents in those countries. Accordingly, the 5 percent
royalty rate established under its foreign patents must be
adjusted upwardly to constitute the equivalent of a ‘‘rea-
sonable royalty’’ in this case.
Under the facts and circumstances of this case, I hold
that a reasonable compensation rate (i.e., the equivalent of
a ‘‘reasonable royalty’’) would be 10 percent of the market
price of the batteries and associated components. A poten-
22a
tial licensee, if reasonable, would recognize that plaintiff,
who took substantial risks and bore the huge expenses of
developing the batteries and creating a market for them,
was entitled to adequate compensation for those efforts and
for its ingenuity in creating this important and effective
battery. Tektronix v. United States, supra, 213 Ct. Cl. at
270, 522 F.2d at 350, 193 USPQ at 392-393.
This compensation rate further appears to be reasonable
since it does not exceed the maximum royalty rate estab-
lished by RCA between 114 percent and 10 percent under
patents covering electronic items, many of which RCA does
not manufacture.
The 10 percent compensation rate certainly is not exces-
sive in light of the fact that plaintiff probably would not
have accepted a lower figure for domestic manufacture in
order to recoup its substantial monetary investment in the
domestic battery market. Royalty rates established on the
basis of Government procurement are frequently lower
than the rates established in private industry since Govern-
ment procurement normally exceeds that of private indus-
try by many fold.
Additionally, the 10 percent figure is not considered to
be out of line when one realizes that the parties who were,
in fact, licensed to manufacture abroad, were not precluded
from selling the subject batteries to the United States Gov-
ernment for use in the United States or elsewhere. Plain-
tiff was virtually certain, as evidenced by an internal mem-
orandum, that the defendant would be willing to give at
least a 114 percent royalty to plaintiff as a matter of
course. It would be unconscionable to impose such a low
royalty rate upon plaintiff in this case. It would be tanta-
mount to establishing defendant as the sole arbiter and
dictator of the amount of reasonable and entire compensa-
tion to be allowed a successful plaintiff after long and ex-
pensive litigation.
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23a
Plaintiff’s objection to the ‘‘ willing buyer/willing seller”’
approach in determining a reasonable royalty is well taken
in the present case, for this approach is resorted to merely
as a ‘‘device in aid of justice’’ (Cincinnati Car Co. v. New
York Rapid Transit Corp., 66 F.2d 592, 595, 19 USPQ 40,
43 (2d Cir. 1933)), not as an inflexible measuring stick. In
any event, the ‘‘willing buyer/willing seller’’ charade does
not depend on the actual willingness of the parties to a
lawsuit to engage in such negotiations, but upon a hypo-
thesis applied to theoretical or assumed conditions. Since
plaintiff was not willing to grant to anyone a license to
manufacture the batteries within the United States, there
is no tangible evidence available to indicate what a willing
buyer was willing to pay and what Leesona was willing to
accept under the specified conditions. The evidence shows,
however, that plaintiff would have disposed of its entire
battery business, including its patent rights throughout the
world, at a negotiated but prefigurative sum if, after it lost
out on the ’626 contract and after this litigation was com-
menced, a willing buyer came along. That figure was $8
million. Although plaintiff’s evaluation is not binding, it is
entitled to substantial weight since:
** * The rule to be applied in measuring the compen-
sation depends upon the facts and circumstances of
each case, but the end to be obtained in every case is
always the same, namely, the determination and allow-
ance of just compensation to the patentee for the value
to him of the right or license to use appropriated by
the Government. Richmond Screw Anchor Company v.
United States, 275 U.S. 331; * * * The Berdan Fire-
Arms Manufacturing Company v. United States, 26
C. Cls. 48, 82. * * * [Emphasis supplied. ]
Tektronix v. United States, supra, 213 Ct. Cl. 257 at 265;
552 F.2d 343 at 347, 193 USPQ at 389-390.
Plaintiff, on the other hand, would have been willing to
grant an exclusive license merely under its patent rights
24a
throughout the world for a lump-sum payment of $1 million.
That, however, was only after the Government had seized
a nonexclusive license under Leesona’s United States pat-
ents for the Government’s own use.
I conclude that a royalty rate of 10 percent of the con-
tract price of the batteries and accompanying components
is reasonable and will be applied.
2. Compensation Base
Each of plaintiff’s patent claims, previously found to be
valid and infringed, recites an electrochemical cell compris-
ing an anode, a cathode and an electrolyte. Inherently the
components require a casing or receptacle, together with
the necessary connecting wires and terminals to provide a
complete and operative device. The compensation base
should include all of those elements of the device which
form an operable structure, since it is only on the basis of
such a structure that an ‘‘entire market value’’ of the de-
vice can be established. Additionally, the compensation
base should include those associated items procured by the
defendant which satisfy a two-pronged test, i.e., functional
symbiotic dependence and economic dependence between
the patented items and the associated items. The test is
based on the view, stated in Tektronix, supra, that normally
the patentee can anticipate the sale of patented or unpat-
ented components separately as well as in the patented
combination. Id., 213 Ct. Cl. at 272; 552 F.2d at 351, 193
USPQ at 393.
Conversely, the compensation base may be diminished by
an amount equal to the priee of items which are ordinary
staple articles of commerce or incidental repair parts for
the patented article, if the patented article is procured from
the patent owner or a licensed source.
The contract awarded to Eagle-Picher, Inc., not only re-
quired the delivery of a specified number of ‘‘batteries’’ as
one line item, but also called for separately identified com-
25a
ponents which are within the ambit of the infringed claims,
namely ‘‘anode kits,’’ ‘‘eathode cells,’’ and special ‘‘bat-
tery covers.’’ The ‘‘anode kits,’’ each of which ts made up
of 22 separate anodes, were required to operate the bat-
teries throughout their expected lives of 50 ‘‘eycles’”’ or
more.'® The separate cathodes were required as original
equipment spares. The special covers were provided for
use in lieu of standard covers, at the option of the user. The
total original bid price for all items in the contract with
Kagle-Picher, Inc., including packaging, manuals and other
matter, for which no specific price was stated, was $2,711,-
348.40. The total Government procurement was increased
by $921,708.03 to $3,633,056.43 by the defendant’s exercise
of its options since the original quantity of anode kits and
cathodes called for by the contract was only sufficient to
maintain the batteries in operation through approximately
30 cycles. Defendant’s purchase of approximately 50 per-
cent more anode kits and cathode cells enabled defendant
to maintain the batteries throughout their expected lives
of about 50 ‘‘eyeles.’’ (By analogy, those components are
the equivalent of the ‘‘plug-ins’’ and ‘‘spare parts’’ which
were included in the compensation base in Tektronix, supra,
and Pitcairn v. United States, 212 Ct. Cl. 168, 547 F.2d
1106, 192 USPQ 612 (1976), as amended on rehearing, 212
Ct. Cl. 224 (1977), cert. denied, 434 U.S. ,215 Ct. Cl,
196 USPQ 864 (1978). The compensation base in this case,
therefore, is $3,633,056.43. ~
The ‘‘anode kits’’ called for by the contract are the
subject of Moos United States Patent 3,531,327 (the ’327
patent) which the Court of Claims previously held is li-
censed to the United States. Defendant contends, therefore,
**The battery in evidence is provided with a label upon which
the successive dates of replacement of anodes is to be entered.
There are consecutively numbered spaces for 50 such entries. Thus
it is clearly indicated that each battery is expected to have a useful
life of at least 50 ‘‘eycles.’’
26a
that the portion of the contract price attributable to the
‘*anode kits’’ (item 0002) should be excluded from the com-
pensation base.
The Moos ’327 patent, essentially, relates to a novel type
of packaging of consumable metal anodes in an imperme-
able envelope which contains some electrolyte to keep the
anodes moist. Although defendant has a license to use the
claimed invention in the packaging and shipment of the
anodes, liability for infringement of the claims of the un-
licensed Leesona patents is not avoided. The ’327 Moos
patent is but an improvement oi the inventions covered by
the infringed claims and is, therefore, subordinate to and
dominated by those claims. Hence, the license to use the
improvement does not carry with it a license to use the
inventions covered by the infringed, unlicensed claims of
the other Leesona patents. The anode kits, therefore, are
properly included in the compensation base. Notwithstand-
ing defendant’s license to package and ship anodes in ac-
cordance with the 327 Moos patent, the license under that
patent does not permit defendant to use th. anodes thus
packaged in reconstructing the patented combination pro-
cured from a source which is not licensed under the claims
of the infringed patents. Stukenborg v. United States, 178
Ct. Cl. 738, 747, 372 F.2d 498, 504, 153 USPQ 292, 297-298
(1967).
The fact that a person, by purchasing a device from a
licensed source, has an implied license to use that device,
does not, ipso facto, give him a license to use that device in
combination with other elements or structures if the result-
ing product infringes the claims of an unlicensed patent.
Id. 178 Ct. Cl. at 748, 372 F.2d at 504, 153 USPQ at 297-
298. Accordingly, defendant cannot, without liability, use
anodes procured from Eagle-Picher to reconstruct or repair
batteries which have not been procured from Leesona or a
source licensed under Leesona’s patents.
27a
The additional anodes procured by defendant from
Eagle-Picher were not, in reality, procured as mere repair
parts for the batteries. Rather, the additional anodes were
procured to eliminate the necessity for supply of a whole
new battery where the power of the original battery would
fall below the minimum necessary for operation. Replace-
ment of original anodes one at a time was clearly not con-
templated. The rationale of procurement of the anodes in
“kits” of 22 each is directly related to the inventive con-
cept embodied in the infringed claims. The very crux of the
present invention is the feature of mechanical “recharge-
ability’? by total replacement of all 22 of the original
anodes with 22 new anodes. Thus, each time an ‘‘anode kit”’
is used, the resulting product is virtually a new battery.
Under the doctrine of repair or reconstruction, a device is
reconstructed if it takes on the nature of a new infringing
device, whereas, if the device is merely repaired, it does
not take on the nature of a new device. Id. 178 Ct. Cl. at
747, 372 F.2d at 503, 153 USPQ at 296-297.
In conclusion, I hold on the facts in this case that whole-
sale replacement of the anodes of the claimed batteries by
use of the anode kits procured from Eagle-Picher consti-
tutes total reconstruction of the batteries with unlicensed
components. Therefore, the cost of the anode kits will be
included in the compensation base.
The cathode cells procured in substantial quantity by the
defendant are also totally useless without the anodes and
electrolyte of the claims covering the infringing batteries.
Likewise, the patented batteries are useless without prop-
erly functioning cathodes. It will be noted that the batteries,
as procured, are provided with a complete set of operating
cathodes. The purpose of procuring additional cathodes at
the time of procuring the complete batteries and additional
anodes is to provide for continuous service of the batteries
throughout their expected lives. Economic dependence of
the cathodes upon the batteries, and vice versa, is obvious;
aS
28a
the sale of batteries necessarily entails the reasonable ex-
pectation of the sale of cathodes. Accordingly the cost of
the cathodes is includable in the compensation base. Stuken-
borg v. United States, supra.
This court, in Calhoun v. United States, supra, recog-
nized that the eminent domain foundation of an action un-
der 28 U.S.C. § 1498 is revelant to the distinction made by
the Supreme Court between Aro I (Aro Mfg. Co. v. Con-
vertible Top Replacement Co., 365 U.S. 336, 128 USPQ 354
(1961) ), and Aro II (Aro Mfg. Co. v. Convertible Top Re-
placement Co., 377 U.S. 476, 141 USPQ 681 (1964)). The
distinction that the Supreme Court drew was that the li-
censee of a patented combination has the privilege of pre-
serving the combination for use until the combination, as
such, is defunct, and thus can repair (but not reconstruct)
it. However, the unlicensed infringer, having no such right,
is liable for repair as well as reconstruction. Id., 377 U.S.
at 483-485, 497-99, 141 USPQ at 684-686, 690-691.
The present case is distinguishable from General Electric
Co. v. United States, Ct. Cl. No. 81-70, slip op. filed Febru-
ary 22, 1978. The court pointed out in that case that the
components used by the Government to reconstruct or re-
pair the devices in suit were already licensed by virtue of
procurement thereof from General Electric, the patent
owner. On this distinction, the court reversed the holding
of the trial judge. In the present case the original articles
and all components procured by defendant were obtained
from an infringer, namely Eagle-Picher. At no time did
defendant ever pay Leesona for the items which are in-
cluded within the compensation base in this case. Accord-
ingly, there cannot possibly be a double recovery by Lee-
sona since it has not even been compensated for the initial
taking.
The electrodes in the present case are analogous to the
cylinder and piston in Calhoun, supra, but not to the ‘‘o”’
rings. The batteries in the present case are reconstructed
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29a
each time one or more electrodes is installed in the batteries
since the electrodes are, in effect, the batteries.’* Thus the
Government must pay fully for its right to ‘‘use of the
whole’’ of the combination, including ‘‘replacement of a
spent, unpatented element’’ until the combination, as such,
is defunct. Id. See also Aro Mfg. Co., supra, 365 U.S. at
342-43, 346, 128 USPQ at 357-58, 359; 377 U.S. at 510, 512-
13, 141 USPQ at 695, 696. Therefore, all cathodes and
anodes, whether incorporated in the batteries as manufac-
tured or furnished as additional line items under the con-
tract, are the equivalent of the claimed combination and
must be included in the compensation base.
Defendant contends that the value of the ‘‘spacers’’ em-
ployed to separate the cathode cells from one another in
the batteries, as manufactured, should be excluded from
the compensation base. The spacer is the subject of Ro-
sanky Patent No. 3,378,406, which has been held invalid by
the court in this case. While the spacers represent unpat-
entable components of the batteries as manufactured, they
are nevertheless an integral and indispensable element of
the cathodes of the batteries procured by the Government,
whether patented or unpatented, licensed or unlicensed.
The spacers, accordingly, will not be excluded in computing
the compensation base.
The costs of packaging, manuals and other miscellane-
ous costs are excludable from the compensation base. The
burden of proof of the amount of these costs, however, is
upon the infringer. Westinghouse Electric & Mfg. Co. v.
Wagner Electric & Mfg. Co., 22% U.S. 604 (1912). In the
Westinghouse case, the Court placed on the infringer the
1° In fact, each ‘‘cell’’ consisting of a cathode, an anode, and an
electrolyte, is a ‘‘battery.’’ The infringing devices, therefore, are
made up of 22 ‘‘batteries’’ interconnected to provide the desired
total power. If more power would be desired, the battery would be
designed for more cells. If less power would be desired, fewer cells
would be provided.
30a
burden of separating out profits attributable to noninfring-
ing items from profits attributable to the infringing sales.
The Court reasoned that since the wrongdoer had main-
tained his records in such a way that the source of his
profits could not be distinguished, he would be liable for
all profits resulting from his operations. As no proof was
offered by the United States in the present case with re-
spect to the cost of packaging, manuals, or other miscel-
laneous items, no exclusion from the compensation base will
be undertaken for such items.
2. Reductions in Compensation Base
Two cost reductions in its bid price were offered by
Eagle-Picher and accepted by the defendant. One item was
a reduction of $306.22 in the total contract price of item
0001, the battery. The second item, in the amount of $50,
was also attributable to cost savings on item 0001. Defend-
ant accepted 50 percent of the $306.22 cost saving, namely
$153.11, and 100 percent of the $50 saving, for a total re-
duction of $203.11. That amount will be deducted in com-
puting the compensation base even though the amount is
virtually de minimis.
4. Use of Batteries by the United States
Defendant does not object to the inclusion of complete
batteries, per se, within the compensation base. It urges,
however, that the base should be limited to the-number of
batteries which were actually put into use. All batteries are
included within this accounting since they infringe plain-
tiff’s claims as a consequence of the manufacture of the
batteries in the United States for the United States Gov-
ernment, regardless of use or non-use thereof. Thus, the
compensation base is not diminished by any amount due
to the exclusion of batteries or components which were
manufactured for defendant but may not have been used
prior to the date of trial of this phase of the litigation.
3la
The defendant further maintains that of the 2,138 bat-
teries procured by the United States, 572 were shipped to
Okinawa and therefore were never used within the United
States nor intended for such use. Defendant desires this
court to exclude the cost of the 572 exported batteries from
the compensation base. Although 28 U.S.C. § 1498(c) spe-
cifically provides that ‘‘the provisions of this section shall
not apply to any claim arising in a foreign country,” I am
constrained to point out that plaintiff’s claim does not
arise in a foreign country but, rather, arose in the United
States as a direct result of the defendant’s procurement as
well as its acts of inducing and contributing to the infringe-
ment of Leesona’s United States patents, all of which oc-
curred within the United States. The fact that the batteries
were delivered to defendant or used abroad by defendant
does not result in exclusion of the batteries from the com-
pensation base. The batteries shipped abroad were not only
manufactured for but also were used by the United States,
within the scope of 28 U.S.C. § 1498. It matters not that
some of the batteries were never actually used within the
political boundaries of the United States. It is a fact that
the batteries were not only manufactured in the United
States for the United States, but were also available for
use, and were capable of being used by and for the United
States.
In the present case, all of the parts of the patented com-
bination were manufactured by one unlicensed contractor,
assembled and packaged in a single box, and shipped pur-
suant to defendant’s instructions. It is clear, however, that
the shipping destination of the batteries and components
cannot serve as a valid distinction to determine whether or
not units come within or without the compensation base.
The facts are undeniable that defendant procured the bat-
teries pursuant to a contract executed within this country;
the contractor was located within this country; all of the
components were packaged within a single carton for de-
livery to defendant, and all items were thus manufactured
32a
and available for use within the United States. I hold that
there was sufficient control exercised by the United States
over the use of the infringing batteries ultimately shipped
to Okinawa to justify the conclusion that there has been use,
as well as manufacture, by or for the United States. Olsson
v. United States, 87 Ct. Cl. 642, 25 F.Supp. 495, 37 USPQ
767 (1938), cert. denied, 307 U.S. 621, 650, 41 USPQ 799
(1939). See also Decca Ltd. v. United States, 210 Ct. Cl.
546, 566, 544 F.2d 1070, 1081, 191 USPQ 439, 448 (1976).
The use contemplated by the statute is an appropriation
by the United States of a right or license secured to a pat-
entee and the employment of the invention to a public pur-
pose or the embodiment of the invention in articles de-
signed and intended for the promotion of a public purpose
or undertaking. Olsson, supra, 87 Ct. Cl. at 657, 25 F. Supp.
at 498, 37 USPQ at 769. I hold, therefore, that all of the
batteries and components procured by defendant were pro-
cured by or for the United States and therefore are prop-
erly subject to this accounting.
Defendant asserts that if 28 U.S.C. § 1498(c) means any-
thing, it stands for the proposition that if the manufacture
of a patented device by or for the United States occurs in
the United States but use thereof is intended to be in a
foreign country, no remedy is available under § 1498(a). To
support its view, defendant relies on Deepsouth Packaging
Co. v. Laitram Corp., 406 U.S. 518, 173 USPQ 769 (1972),
wherein the Supreme Court held that the making and sell-
ing of unpatented parts which were shipped overseas and
there assembled into a patented combination was not an
infringement of a United States patent under U.S. patent
laws. Defendant maintains that the Deepsouth case, supra,
stands for the statement of law that a patented combina-
tion does not exist until it is assembled, and therefore the
making or selling of separately unpatented components
could not constitute infringement. Defendant maintains
that in this case the patented combination is not operative
PE LEE ST PE
33a
in its unassembled shipping condition. Finally, the defend-
ant insists tuat the Court of Claims decision in Olsson v.
United States, supra, ‘s not a decision to the contrary.
Plaintiff asserts that the Deepsouth doctrine is inappli-
cable since it was concerned with the application of 35
U.S.C. §271(a) which uses the words ‘‘makes, uses, or
sells any patented invention, within the United States,’’
while the statute presently before the court (28 U.S.C.
§ 1498) employs the words ‘‘is used or manufactured by or
for the United States.’’ The plaintiff further argues that
the court in Deepsouth held that ‘‘makes’’ requires the
complete assembly, while ‘‘manufactured for’’ covers the
manufacture of the component parts of a patented device
for assembly, i.e., it is not necessary that the parts of the
device actually be assembled to satisfy the terminology of
the statute.
In the present case, the solicitation for bids was made
by defendant in the United States. The individual items
were manufactured in the United States, for use by the
United States, wherever the need might arise. This must
be contrasted with Deepsouth where the order originated
abroad, and the parts were manufactured within the United
States and then shipped to a foreign concern located in a
foreign country for subsequent assembly and use there. In
the present case the salient fact remains that the batteries
were manufactured im the United States and for the
United States. The final destination of the shipment of the
infringing items or the addition of water to activate the
electrolyte is of no consequence when the purchase has been
by the United States, for the beneficial use of the United
States, and where the manufacturing of the components
occurred within the United States.
Neither plaintiff nor defendant appears to have compre-
hended the basic rationale of the majority of the court in
Deepsouth, supra. The majority sought to protect the right
of a putative infringer to compete with the patent owner
34a
in the foreign market, uninhibited by the existence of a
valid United States patent. In the present case, defendant
has taken from Leesona its domestic market by awarding
a contract for the infringing batteries to a domestic com-
pany without any intent to market the batteries in a foreign
country.
I hold that all of the batteries and associated components
procured by the Government from Eagle-Picher, irrespec-
tive of the final destination or use, were manufactured by
or for the United States. All such batteries and related
components are, therefore, included within the compensa-
tion base. Thus Leesona is entitled to recover the sum of
$358,883 as the equivalent of a sum which is ‘‘not less than
a reasonable royalty.’’ This does not, however, constitute
‘‘entire’’ compensation.
V. Multiplication Factor
As previously stated in this opinion, the despicable con-
duct of defendant leading up to and including the ultimate
granting of the procurement contract to an unlicensed
manufacturer, with wanton and reckless disregard for Lee-
sona’s legal and equitable rights, indicates utmost bad faith
on the part of the Government. The plaintiff invented the
battery, spent enormous sums of money in successful at-
tempts to militarize the battery, prepared itself for full-
scale production at the behest of defendant, and in fact
submitted the next-to-lowest bid in the competitive bidding
procurement. While the contracting officer may lawfully
award a contract to the lowest bidder without regard to
patent ownership (a policy which, in and of itself, is
counterproductive to the constitutional intent to promote
the progress of science and the useful arts), I find that the
Government’s actions, in other respects, constituted a dis-
graceful and reprehensible display of bad faith. The offer
for competitive bids was issued after plaintiff had executed
the sole source Letter Contract and had divulged therein
the total procurement price which it would accept. That
35a
price became known thereafter to at least one of the bid-
ders who participated in the competitive bidding. As in
Tektronix, supra, the ultimate contractor was able to un-
derbid plaintiff on the contract for the patented items since
the successful bidder did not find it necessary to include in
its bid costs of engineering and development of the battery
which Leesona had brought to the quantity production
stage.
Statutory authority clearly exists for the increase of
damages up to three times the amount found or assessed in
civil suits. Where the defendant has knowledge of and
copies plaintiff’s patented device, infringement of the pat-
ent is willful and wanton, and the plaintiff is entitled to
have its damages increased up to three times the amount
assessed, as prescribed by 9 U.S.C. § 284. Corometrics
Medical Systems, Inc. v. Berkeley Bio-Engineering, Inc.,
193 USPQ 467, 479 (N.D.Cal. 1977) ; Feed Service Corp. v.
Kent Feeds, Inc., 185 USPQ 745 (N.D. Il. 1975). It has
also been held that where infringement has been intentional
and deliberate, damages may be increased under 35 U.S.C.
§ 284. Big Four Automotive Equipment Corp. v. Jordan,
184 USPQ 80 (N.D. Ohio 1974); Jenn-Air Corp. v. Penn
Ventilator Co., 394 F.Supp. 665, 185 USPQ 410 (E.D. Pa.
1975). In the present case there can be no doubt that de-
fendant has exercised the utmost bad faith in its dealings
with plaintiff, in addition to its willful and deliberate in-
fringement. In Trio Process Corp. v. L. Goldstein’s Sons,
Inc., supra, 533 F.2d 126, 189 USPQ 561 (3d Cir. 1976), a
case initially tried by a special master, the district judge
reduced the damage multiplier from three to two. The
plaintiff asserted that the damage multiplier should not
have been reduced from three to two since defendant ex-
hibited a substantial degree of bad faith in its infringement
of the patent. The Court of Appeals for the Third Circuit
gave a literal interpretation to 35 U.S.C. § 284 and held
that the court is not bound to treble damages found, but
may, within its sound discretion, increase damages up to
36a
three times the amount found or assessed. Id. 533 F.2d at
131, 189 USPQ at 565. Hartford-Empire Co. v. Shawkee
Mfg. Co., 163 F.2d 474, 74 USPQ 252 (3d Cir. 1947). Thus,
it is clear that bad faith in infringing a plaintiff’s patent
can result in multiplication of damages by any factor, not
greater than three times the amount found or assessed,
within the sound discretion of the court. See also American
Safety Table Co. v. Schreiber, 415 F.2d 373, 163 USPQ
129 (2d Cir. 1969).
Defendant maintains that it cannot be bad faith for a
Government employee to act in accordance with law or
regulations. Defendant’s argument misses the mark. While
the contracting officer, in applying current regulations, was
obligated to ignore plaintiff’s patent rights in awarding the
competitive bid procurement contract of the lowest bidder,
defendant’s entire course of conduct in all other respects
was permeated with bad faith from the moment it declined
to ratify the Letter Contract awarded to Leesona. The facts
speak for themselves. Defendant relies on Milton Beatty v.
United States, 144 Ct. Cl. 203, 168 F.Supp. 204 (1958), a
congressional reference case, in support of the proposition
that there is no impropriety in the Government’s doing or
threatening to do what it had a legal right to do. The facts
of that case, however, clearly establish that, at all times, the
Government was acting in good faith. The court specifically
noted that they (the Government agents) at least ‘‘tried to
act fairly.’’ The court there held that it was not duress or
bad faith for the Government representatives to threaten
to institute civil suits where the threat to do so was made
in the honest belief that a good cause of action existed. Id.
144 Ct. Cl. at 206, 168 F.Supp. at 206. That statement is a
far cry from defendant’s actions in the present case. With-
out doubt the Government has a right to take plaintiff’s
patent rights under the fifth amendment in the course of
awarding contracts under competitive bidding procedures.
Yet, it was the steps leading up to the taking which es-
tablishes bad faith on the part of the defendant in this case.
AE Mie SS SASS Tt
DECITRIERES. <
37a
The constant ‘‘leading on”’’ of the plaintiff with the knowl-
edge of plaintiff’s financial reliance thereon, the issuance
of the sole source Letter Contract and defendant’s subse-
quent, albeit legal, refusal to ratify the Letter Contract
and use of the fruits of plaintiff’s good-faith development
of the product, all establish the Government’s bad faith in
its dealings with Leesona. The bidding process was less
than bona fide or fair to Leesona in view of the fact that
Leesona’s pricing was disclosed in the Letter Contract be-
fore the competitors submitted their bids. This should not
have been allowed to happen. The contracting officer could
have stuck to his original commitment and ratified the
Letter Contract without voiding any law or regulation. A
determination had been made that sole source procurement
was in the best interests of the Government. There was no
rational basis for reversal of that determination.
A significant hurdle exists, however, before this court
can multiply the damages found in an action brought under
28 U.S.C. § 1498(a), even assuming, arguendo, a positive
and undeniable showing of the existence of willful, inten-
tional, deliberate, and bad-faith infringement by the Gov-
ernment. The hurdle is surmountable, however, by reading
into 28 U.S.C. § 1498(a) the provisions of 35 U.S.C. § 284,
which section provides that the court may increase damages
up to three times the amount found or assessed.
Stated more succintly, the section constitutes a congres-
sional authorization for an increase in damages where the
constitutional and statutory patent rights of a party are
taken by an act of infringement. The Government is no less
an infringer than a private party merely because the Gov-
ernment employs the shield of sovereign power to seize
the patent rights and proceed with the infringement, at the
same time maintaining its immunity to injunctive relief to
prevent infringement. Calhoun v. United States, supra,
197 Ct. Cl. at 51, 453 F.2d at 1391, 172 USPQ at 443, in
discussing the issue of the relationship between Title 35
38a
U.S.C. and section 1498 of Title 28, U.S.C., states that:
‘‘ Although § 1498 resembles, in several ways [footnote 6
omitted], the statutory scheme dealing with the private in-
fringer, it is not wholly on all fours with that other pat-
tern.'’’ Footnote 7 gratuitiously, and as obiter dictum,
implies that nothing in Title 35 U.S.C. may be asserted by
any party in an action under 28 U.S.C. § 1498 unless there
is a ‘‘counterpart’’ expressly stated in section 1498. Using
as an example section 284 of Title 35 (which section was
not in issue in Calhoun, supra), the footnote states: ‘‘For
instance, 35 U.S.C. § 284 allows an increase of damages up
to three times the amount found or assessed; there is no
counterpart under 28 U.S.C. §1498.’’ Since the issue of
applicability of 35 U.S.C. § 284 to actions under 28 U.S.C.
§ 1498 has not been decided directly by the court in an ac-
tion in which that section was in issue, the dictum quoted
above is not considered to be binding in the present case.
Therefore, it is concluded that defendant must bear the
brunt of the definitions of, and criteria to be applied to, in-
fringers as set forth in Title 35 if it is to also have the
benefit of the defenses recited therein.
Knowledge by potential contractors of the ‘‘ballpark’’
bid of another potential contractor, prior to submission of a
‘‘competitive’’ bid, is an extreme and improper advantage.
By definition, this knowledge renders the bid ‘‘noncompeti-
tive.’’ At the very least, the Government is guilty of bad
faith in changing its method of procurement after ‘‘letting
the cat out of the bag.’’ The Government’s bad faith was
also evidenced by its issuance of the sole source contract to
plaintiff, expressing its then-existing desire to procure the
goods from plaintiff and its subsequent withdrawal of the
Letter Contract in order that the defendant might gain the
benefit of a competitive bid. On these facts I hold that this
case is exceptional. Although trebling of damages is per-
missible, the circumstances surrounding the eminent do-
main taking by the Government, in this case, are such that
39a
doubling the damages, together with the other relief ac-
corded herein, is sufficient to provide entire compensation
to Leesona. It is ordered that the damages be so increased.
VI. Attorney Fees
Having held that this is an exceptional case and that
attorney fees should be allowed to Leesona,” there remains
for determination the amount which should be awarded. At
the trial of the case, plaintiff proffered, in the form of a re-
capitulation, figures showing the amounts paid by plaintiff
as attorney fees for each calendar year from 1970 through
1976. The sum of those figures is $315,866.47. Inasmuch as
the court sustained defendant’s objection to the trial
judge’s ruling on admissibility of that evidence at that
stage of the proceedings, the accuracy of validity of the
recapitulation was not challenged. Accordingly, it would -
not be proper to accept the figures at face value in arriving
at an amount which would be the equivalent of reasonable
attorney fees. Since in all civil cases involving the award
of attorney fees the amount is left for determination of the
trial judge in the exercise of his sound discretion, a de-
termination is made in this case by only allowing approxi-
mately one-third of the amount claimed, i.e., $100,000.
The amount awarded is arrived at from a review of the
file of the present case to obtain some feeling for the
amount of attorneys’ time spent in preparing pleadings
filed herein and obtaining the necessary information to pre-
pare the pleadings. Consideration has also been given to the
amount of time spent in the separate trials on the issues of
liability and accounting.
The petition was filed on April 20, 1970. Answer was
filed August 5, 1970. Thereafter protracted pretrial pro-
ceedings, including negotiations relating to possible settle-
ment, were conducted. It was not until June 18, 1973 that
17 See discussion of award of attorney fees in exceptional cases
herein at page 19, supra.
40a
trial was commenced. In the interval of almost 3 years
several pretrial conferences were held, and hardly a month
went by without a plethora of papers being filed by both
parties. The 21-day trial held on the liability issue con-
cluded on July 24, 1973. The order closing proof was filed
October 10, 1973 after considerable controversy over the
contents of the record. Plaintiff’s brief and requested find-
ings of fact were filed December 26, 1973. Defendant’s brief
and requested findings of fact were filed April 1, 1974.
Plaintiff’s replies were filed July 1, 1974. The opinion, find-
ings, and report of the trial judge were filed February 27,
1975.
Exceptions were taken to the trial judge’s opinion and
findings, and the case was argued before the court on De-
cember 2, 1975. Judgment on the issue of liability was en-
tered in favor of plaintiff on January 28, 1976, and the case
was remanded to the Trial Division for determination of
the amount of recovery.
In the ‘‘accounting’’ phase, times were set for the par-
ties to file their pretrial submissions after it was ascer-
tained that settlement negotiations were fruitless. Trial
was set to commence December 6, 1976. Intensive pretrial
discovery was conducted in the fall of 1976, and commence-
ment of trial was postponed to January 4, 1977 to allow
for completion of discovery. The trial lasted 4 days. The
order closing proof was filed February 3, 1977, and the final
posttrial briefs were filed June 27, 1977. A posttrial settle-
ment conference was called by the trial judge to explore
the possibility of stipulating the amount of recovery in
view of the record and posttrial submissions. The confer-
ence was held, but to no avail.
If it is assumed that for each day of trial (25 days) the
equivalent of 10 days was spent in preparing pleadings,
conducting pretrial discovery, briefing before and after
trial, and doing all other things necessary to comply with
the Rules and rulings of the court, it will be seen that the
4la
equivalent of about 250 man-days has been spent by counsel
for each side. Dividing plaintiff’s figure of $315,000 by 250,
a quotient of approximately $1,260 per day is computed.
Although $1,260 per day is not considered to be excessive,
as patent litigation goes, to avoid any appearance of gen-
erosity, a per diem rate of one-third of $1,260, or about
$420, would be at least a token award. For convenience in
computation, therefore, the sum of $100,000 (approximately
one-third of $315,000) is awarded as attorney fees.
VII. Delay Compensation
A. Rate
The “reasonable and entire compensation” due plaintiff
under 28 U.S.C. § 1498 is based not only on an amount which
is not to be less than a reasonable royalty, but may also in-
clude an appropriate amount, in the nature of damages, to
compensate plaintiff for defendant’s delay in payment of
the just compensation. This additional amount is referred
to as “delay compensation.” Pitcairn v. United States,
supra. As established in Pitcairn, the delay compensation
rate for the years 1966-70 is 614 percent while the rate for
the years 1971-75 is 74% percent.*®
Leesona asserts that delay compensation should be ecal-
culated at a delay compensation rate of 10 percent. This is
the interest rate that it paid on money borrowed at the time
of the Government’s taking. Leesona maintains that it is
not a novice in the field of borrowing money. Therefore, it
contends that the fear of the court (expressed in Pitcairn,
supra) that plaintiff did not get the lowest prevailing in-
terest rate on the borrowed money, is not warranted.
18The rate for the years succeeding 1975 is also 74% percent
unless a different rate is affirmatively established by plaintiff. In
Tektronix, Ine. v. United States, Ct. Cl. No. 79-61, decided April
19, 1978 (slip op. at 6), the court affirmed the trial judge’s con-
clusion insofar as he set the rate for the years 1975-80 at 8 percent
on the basis of the affirmative showing made therein.
42a
Defendant, on the other hand, asserts (as it did, unsuc-
cessfully, in Pitcairn, supra) that the proper measure of
delay compensation is the yield on Government bonds
traded in the public market place. This rate, the Govern-
ment claims, is not what the Government would gain from
the transaction, but is a measure of the expectation of the
amount of gain expected by a trader, such as Leesona, in
the market place. Defendant disregards the fact that Lee-
sona was not in the market for the purchase of Government
bonds. To the contrary, it was in the borrower’s market.
Even if it had money to invest, it is not likely that it would
seek out Government bonds when freely and competitively
marketed AAA corporate bonds were available at higher
yields.
The Court of Claims utilized the yield of long-term AAA
corporate bonds as the indicator of the delay compensation
rate in Pitcairn, supra. I hold that the delay compensation
rate should be those rates set down by the court in Pitcairn
for the appropriate periods. Furthermore, for all of the
years spanning the 1976-80 quinquennium, I hold that the
delay compensation rate should be 8 percent. This rate is
reasonable in the light of the affirmative showing of the
recent yields of AAA bonds. Although the average yield
on the AAA corporate bonds during the years 1971-75 (for
which period a 714 percent rate was established in Pitcairn,
supra) was only slightly less than 8 percent, the rate rose
thereafter and has remained well above 8 percent to the
present time. For the purposes of simplified computation
and in light of the current rate, I hold that the 8 percent
delay compensation rate is the rate iv be applied for the
years 1976-80. See Tektronix, Inc. v. United States, Ct. Cl.
No. 79-61, decided April 19, 1978 (slip op.).
B. Period of Computation of Delay Compensation
Leesona maintains that delay compensation should be
computed from the date of execution by the Government of
43a
the contract with Eagle-Picher. Leesona’s argument
stresses the fact that as of the date the competitive bid con-
tract was awarded to Eagle-Picher, defendant had willfully
and knowingly authorized, contributed to, consented to, and
actively induced infringement of the claims of plaintiff’s
patents by the successful bidder. According to precedents
Leesona could have sought an injunction to prevent the
manufacture of the infringing batteries at that point of
time if the infringements had not been on behalf of the
United States Government. Defendant, however, being im-
mune from injunction, proceeded with impunity, subject
only to the liability imposed under section 1498 of Title 28
U.S.C. Since plaintiff could not have maintained a suit in
a district court to enjoin the infringement, the date from
which the liability of defendant runs is the date of award
of the contract.
By analogy to land-taking cases, the taking of the patent
rights of Leesona in this case corresponds to the filing of
condemnation proceedings in land-taking cases. It is not
analogous to inverse condemnation cases where the time of
taking is not easily ascertainable or may be different from
the time of actual entry or taking possession by the Gov-
ernment. The issuance of a contract calling for the manu-
facture of an item for which the specifications spell out a
clearcut case of infringement or where the construction of
the patented device is to be copied, constitutes actual taking
of the patent rights as of the date the contract becomes
binding on both parties unless it can be shown that the
items actually delivered did not conform to the specifica-
tions upon which the holding of infringement is based.”*
The facts in this case are distinguishable from those in Tek-
tronix, Ine. v. United Siates, supra n. 18, 193 USPQ 385 n.18, in
that there is but one contract and one supplier involved, and the
drawings and specifications (which were prepared by Leesona in
anticipation of bidding on the contract) left no uncertainty about
the scope of the interest taken by the Government. There were no
change orders to exacerbate the infringement, and Leesona had
44a
The Government contends for a series of later dates from
which delay compensation should be computed. More speci-
fically, the Government claims that delay compensation
should be computed from the dates the procured items were
individually delivered to the Government, relying on the
method used in Pitcairn, supra. While that may be a feasi-
ble basis for computing liability in the case of long-term,
multi-supplier and multi-contract procurement, it is not
applicable where, as here, there was a ‘‘one-shot’’ procure-
ment and the scope of the interest taken by the Government
was certain in all respects as of the date of award of the
contract to Eagle-Picher.
I hold as a matter of law that the first taking occurred
on November 6, 1969, the date defendant authorized and
consented to the infringement of plaintiff’s patents by exe-
cuting the contract awarded to Eagle-Picher and thereby
contributed to and actively induced infringement. It should
be clearly pointed out that the issue of the date of taking
was decided in Pitcairn, supra, for the purpose of fixing the
date from which the statute of limitations was to run, since,
as in Irving Air Chute Co. v. United States, 117 Ct. Cl. 799,
93 F.Supp. 633, 87 USPQ 246 (1950), ‘‘it was not possible
to ascertain the scope and duration of the interest taken
at the time of the first unauthorized use.’’ Pitcairn, supra,
212 Ct. Cl. at 181, 547 F.2d at 1115, 192 USPQ at 616-617
(emphasis added). The multiple dates from which delay
compensation was computed in Pitcairn were consequently
controlled by the principle which is applicable only where
‘‘the scope and duration of the interest taken at the time
of the first unauthorized use’’ cannot be ascertained. In the
present case, the only taking was that which occurred on
the date the contract with Eagle-Picher was signed. Incre-
mental computation based on delivery dates which are not
actual notice of the award of the contract to the infringer at the
time the award was made. From that date on, Leesona suffered
loss even to the extent of having to abandon its battery business.
45a
ascertained until after the fact of infringement is like cut-
ting off the dog’s tail inch-by-inch so it won’t hurt so much.
The scope and duration of the interest taken was accurately
measurable as of a single date in the present case. There
is, therefore, no distinction between the date of taking for
the purposes of the computation of delay compensation and
the date of taking for determining the date from which the
statute of limitations begins to run in the present case.
Where, as in the present case, a one-time procurement is
tantamount to a confiscation of all of the plaintiff’s patent
rights, the date of taking is the date of execution of the
contract which actively induces infringement of the patents.
In other words, the showing in this case is such that in-
junctive relief would have been warranted as of the date
of award of the contract to Eagle-Picher if the issue arose
between private litigants under Title 35 U.S.C.”
VIII. Conclusion
What might have appeared, at first blush, to be a run-of-
the-mill patent accounting case actually is a first-of-its-kind
case. While it is not unusual for the Government to barge
ahead and award contracts with total disregard for the
rights of patent owners, it is, to say the least, reprehensible
and inexcusable for the Government to lead a patent owner
up to the point of issuing a Letter Contract and then, at
20In the event the court, on review, holds that the present case
is not distinguishable from Tektronix, Inc. v. United States, supra
n.18, 193 USPQ 385 n.18, and that its holding therein is controlling
in this case, the computation of delay compensation based on
weighted average delivery dates would be $1,183,379.93. The com-
putation of delay compensation using the weighted average delivery
date is sufficiently complex to warrant our setting forth the basis
for the computation in Appendix C attached hereto. For purposes
of compensation, delay ccmpensation computations have also been
made on the basis of plaintiff’s expected payment schedule had the
parties entered into a license of the kind that plaintiff had entered
into with others (Appendix A) ; and on the basis of actual delivery
dates (Appendix B).
46a
the very last moment, betray the mutual faith by putting
the item out for competitive bidding while divulging the
patentee’s pricing information to prospective bidders and
awarding the contract to an underbidding infringer. This
conduct is what makes the infringement willful and deliber-
ate to the extent that damages equivalent to those provided
for in 35 U.S.C. § 284 are warranted.
The case is also complicated by the nature of the item
procured and the relationship of the infringed claims to
the components of that item. This case is comparable to
Pitcairn, supra, in that the compensation base in Pitcairn
included not only the engines and airframes, i.e., ‘‘ready to
fly’’ aircraft, but also included the indispensable spare
parts required for continuity of operation of the aircraft.
The compensation base in the present case, therefore, in-
cludes sufficient anode sets to last for the life of the battery
as a ‘‘ready to use’’ item, ie., up to approximately 50
cycles.
Furthermore, this case presents such a unique display of
bad faith on the part of the Government that (as hereby
distinguished from Tektronix, supra, and the facts as they
existed in the present case at the time of the court’s ruling
herein on March 4, 1977), Leesona is entitled to recover at
least a portion of its attorney fees.
47a
APPENDIX B
Opinion, U.S. Court of Claims, On Accounting,
Decided May 16, 1979
U.S. Court of Claims
LeEsona CORPORATION
Vv.
Unitep STATES
No. 130-70
Decided May 16, 1979
NicuHots, Judge.
In Leesona Corp. v. United States, 208 Ct. Cl. 871, 530
F.2d 896, 185 USPQ 156 (1976), this court held that cer-
tain claims of three patents owned by plaintiff Leesona were
valid and infringed by the defendant United States. The
issue in this case is the determination of “reasonable and
entire” compensation due plaintiff for that infringement
under 28 U.S.C. § 1498, i.e., what is called in these cases
the “accounting phase.” Trial Judge Browne, to whom this
phase was assigned under our Rule 131(c), determined that
Leesona was entitled to judgment in the amount of $3,534,-
753.52, which included attorneys’ fees of $100,000 and delay
compensation for the period of November 6, 1969, up to and
including December 31, 1977. He also ordered additional de-
iay compensation at the rate of $470.51 per day from Janu-
ary 1, 1978, until payment on the judgment. The govern-
ment has excepted to the trial judge’s determination of
what items constitute “reasonable and entire” compensa-
tion, and to much of the accounting used in the opinion.
Our conclusion is that the trial judge’s award is largely
excessive because of his erroneous assumption that he was
adjudicating a tort claim for patent infringement under
48a
various provisions of Title 35 of the Code. We do not adopt
the opinion of the trial judge, although we do adopt the
trial judge’s findings of fact except as stated. These findings
are not printed herein, as the facts necessary to our ultimate
determination are incorporated in the opinion. We have
made our own determination in the amounts that will ap-
pear below. We state by separate order what findings we
reject without replacement, and what findings we adopt as
corrected by us. Any fact statements not having counter-
part in the findings may be taken as additional findings of
the court.
I
A.
The infringed patents relate to mechanically rechargeable
metal-air batteries termed BB-626/U’s. Each BB-626/U
consists of a battery box, a cover, attendant hardware,
twenty-two cathode envelope structures, and a can contain-
ing twenty-two zine anodes.
The designs for which a patent has been found to be valid
and infringed are (a) a cathode structure with an admix-
ture of catalyst and Teflon binders (patent 3,419,900), (b)
a specified arrangement of the cathode, using a Teflon-
backed electrode (patent 3,276,909), and (c) a specified
relationship of the replaceable anode to the cathode, requir-
ing a minimum volume of electrode; this is the “cathode
envelope” concept (patent 3,436,270). In the liability trial,
Trial Judge Cooper determined, and we agreed, that the
three infringed patents were of substantial importance to
the success of the BB-626/U battery, making them lighter,
capable of handling more power and at higher power levels,
and greatly reducing recharging time. 208 Ct. Cl. at 895,
530 F.2d at 910, 185 USPQ at 166-167.
The operation of the battery is as follows: when packed
for shipment, the BB-626/U’s have “dummy anodes” in
their cathode envelopes; the real anodes are separately
49a
packed in a hermetically sealed envelope. An electrolyte is
formed in the cells when the battery is filled with water.
Then the real anode is taken out of the storage envelope
and replaces the dummy anode, and only when all twenty-
two anodes replace the dummy anodes is the battery op-
erative. The battery is recharged by replacing the anodes,
and the government anticipated that it would require 50
“recharges,” i.e., replacement of the twenty-two anodes, for
the battery to be militarily useful. The method of packaging
the anodes comes within the scope of a patent to which the
United States has a royalty-free, nonexclusive license. Lee-
sona Corp. v. United States, supra, at 894-95, 530 F.2d at
910, 185 USPQ at 166-67.
Leesona, through the Leesona-Moos Laboratories division
of the company, was engaged in the development of me-
chanically reconstructible batteries (the BB-626/U’s). It
determined to overcome the deficiencies of the then stand-
ard electronically “rechargeable” batteries (the B
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