Brief for the United States — Waite v. United States

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No. 103

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Inthe Supreme Court of the United States

OcToBER TERM, 1930

Hakry F. WaAIrtre, PETITIONER

v.

THE Unirep STATES

ON WRIT OF CERTIORARI TO THE COURT OF CLAIMS

BRIEF FOR THE UNITED STATES

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INDEX

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Conclusion

CITATIONS

Cases:

Brooks-Scanion Corp. v. United States, 265 U. S. 106___-__-

Consolidated Rubber Tire Co. vy. Diamond Rubber Co., 226

PG. GG, GG: Bee SU Clin ncn mecvcncousenssinoseene

Crosby Steam Gage & Valve Co. v. Consolidated Safety

TOG Th Bee Ue ee Ren eke sence cutenensee

Cente Fi Bee Os 0. Bowe nsccnneneneaenma

Dallas Brass & Copper Co. vy. Faries Mfg. Co., 1 F. (2d)

Farmers’ Handy Wagon Co. v. Beaver Silo & Bor Mfg.

ei eee es aa ew ecestn ts be po aec t meetnaia alae eee

Goodrich Company, B. F., v. Consolidated Rubber Tire Co.,

ies trees ean ae een naa Mn einiede

Ignition Company, K. W., y. Tamco Electric Motor Co., 283

II Siete beacon excise viouesss tnesmercilcensgspideacgy tavdigttbeebdee daenidhebsapeetianiahitas dada

Illinois Central R. R. Co. v. Turrill, 110 U. S. 301_----_-__

Imperial Machine & Foundry Corp. vy. United States, 69 C.

INR, AP iv erispssinion’otdicp sara ins sien oan dls ap eccenidnadadabeneai cen inaaelde adaware eee

Liggett & Myers v. United States, 274 U. S. 215_-.-______

Merrell Soule Co. vy. Powdered Milk Co. of America, 7 F.

SR I sie ces nu es kavvalgnt ur ccas ces ecaceeiah tates cccencantsasrealis sia eaaictaehsesckeai

Metallic Rubber Tire Co. v. Hartford Rubber Works Co.,

Se es, Greet cake canta ee eae aaa

National Tube Co. v. Mark, 10 F. (2d) 4380

Pheios v. United Giates, 274 U. By Sb... son...

PR vy. TOO, TT TP. Cs vein t sense

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Seaboard Air Line Ry. v. United States, 261 U. 8S. 299____

Tilghman v. Proctor, 125 U. S. 136

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Statute: Page

Act of July 1, 1918, c. 114, 40 Stat. 704, 705, amending the

act of June 25, 1910, c. 423, 36 Stat. 851 (U.S. C., title

a Si i ee tei nce asangidaeeddacibcadeelaabpaiminnaninelinide 8-9

Miscellaneous:

Walker, Patents, 6th Ed., sec. 607 6

Authe Supreme Court of the United States

OctToBER TERM, 1930

No. 103

Harry F. WAITE, PETITIONER

v.

THE UNITED STATES

ON WRIT OF CERTIORARI TO THE UNITED STATES COURT

OF CLAIMS

BRIEF FOR THE UNITED STATES

OPINION BELOW

The opinion of the Court of Claims (R. 22) hold-

ing that the petitioner’s patent had been infringed

is reported in 63 C, Cls. 438. The court’s memo-

randum as to damages (R. 31) is reported in 69 C.

Cls. 153, but its decision refusing to allow interest

(R. 33) is not yet reported.

JURISDICTION

The judgment sought to be reviewed was entered

on February 10, 1930. (R. 33.) A motion for new

trial was overruled on April 7, 1930. (R. 30.)

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The petition for certiorari was filed on Mav 7, 1930

(R. 33), and the writ was granted October 13, 1930

(R.35). The jurisdiction of this Court is invoked

under Sectfon 3 (b) of the Act of February 13, 1925.

QUESTION PRESENTED

In determining ‘reasonable and entire compensa-

tion’’ recoverable under the Act of July 1, 1918,

e. 114, 40 Stat. 704, by a patent owner against the

United States for the use or manufacture by or for

the United States of his invention, must interest

be added to an allowance of profits which the patent

owner would have received if the infringing devices

had been purchased from him ?

STATUTE INVOLVED

The Act of July 1, 1918, ec. 114, 40 Stat. 704, 705,

is set forth in the Appendix, infra, pp. 8-9.

STATEMENT

In 1920 letters patent were issued to the peti-

tioner upon a transformer for the production of

suitable currents for the operation gf a Coolidge

X-ray tube. (R. 10, 29.) In ser Bnd 1918 the

petitioner’s company had sold to the United States

transformers of two different grades on which it

had realized an average profit of $59.42 per trans-

former. (R. 29, 30.) In 1921 and 1922 the Wap-

pler Electric Company, at the request of the United

States, manufactured and sold 101 similar trans-

formers to the Government. (R. 28.) In a de-

cision rendered May 2, 1927, the Court of Claims

3

held that the use of these transformers by the

United States was an infringement of the peti-

tioner’s patents. (R. 22.) After further submis-

sion of the case as to the amount recoverable, the

Court of Claims gave judgment for the petitioner

for $6,001.42, representing the estimated profits of

$59.42 per transformer lost by the petitioner be-

cause of the use by the United States of the Wap-

pler transformers. (R. 32.) On February 25,

1930, the plaintiff filed a motion for a new trial

contending that the court erred in not allowing

interest from the date of the commencement of the

use. (R. 33.) On April 7, 1930, the Court of

Claims entered an order overruling the motion and

refusing to award interest. (R. 33.)

The findings of fact do not show the existence of

a fixed royalty or the determination of a reasonable

royalty. There was a finding as to the actual

profit realized by the contractor (R. 29), but this

was not used as the measure of plaintiff’s loss (R.

32). The court was of the opinion that the plain-

tiff would have been in a position to make sales to

the Government if the infringement had not taken

place (R. 32), and it accordingly based its judg-

ment on an estimate of the profits lost by the plain-

tiff as a result of the infringement (R. 30).

ARGUMENT

The petitioner’s claim for interest is predicated

on the theory that by reason of the Act of July 1,

1918, ec. 114, 40 Stat. 704, 705 (infra, pp. 8-9), the

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infringement of his patent rights amounted to an

appropriation of private property for public use

as in eminent domain (Crozier v. Krupp, 224 U.S.

290) and that under various decisions of this Court,

of which Seaboard Air Line Ry. v. United States,

261 U.S. 299, is a typical example, just compensa-

tion includes interest on the value of the property

from the date of the taking.

In its memorandum acquiescing in the petition

for certiorari, the Government said (p. 3):

If the phrase ‘‘reasonable and entire com-

pensation,’’ as used in the Act of 1918, has

the same meaning as the phrase ‘‘just com-

pensation,’’ as used in the Fifth Amendment

of the Constitution, it would seem that the

court should have allowed interest.

This statement was based on the prior decisions

of this Court holding that interest was recover-

able as part of the compensation required by the

Fifth Amendment.

The applicability of this rule to cases involving

infringement of patent rights by the United States

has not been passed upon by this Court and it may

well be that in patent cases interest should be al-

lowed or disallowed in accordance with the rules

governing recovery between private litigants. In

order that the plaintiff be fully compensated, it is

necessary that he recover at least the equivalent of

what would be recoverable at law or in equity in a

suit for infringement pursuant to R. S. 4921 or

R. S. 4919. |

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In equity recovery may be had of the infringer’s

profits. Such profits are not liquidated until the

court, or a master appointed by the court, has com-

puted them. Illinois Central R. R. Co. v. Turrill,

110 U. 8. 301; Tilghman v. Proctor, 125 U.S. 136;

Crosby Steam Gage & Value Co. Vv. Consolidated

Safety Valve Co., 141 U. 8, 441. Accordingly, in-

terest is not added unless it appears that the in-

fringement was deliberate and wanton. See Me-

tallic Rubber Tire Co. v. Hartford Rubber Works |

Co., 275 Ked. 315 (C. C. A. 2d).

Damages for infringement, recoverable either at

law or in equity, are compensatory and have no re-

lation to the defendant’s gain. If such damages

are computed on the basis of a fixed royalty for the

use of the invention, interest from the date when

the royalty was due is recoverable. K. W. Ignition

Company v. Temco Electric Motor Co., 283 Fed.

873 (C. C. A. 6th).

Interest is also included as a part of the damages,

either as a matter of right or in the discretion of

the court when damages are computed on the basis

of a reasonable royalty. B. F. Goodrich Company

v. Consolidated Rubber Tire Co., 251 Fed. 617 (C.

C. A. 7th); Consolidated Rubber Tire Co. v. Dia

mond Rubber Co., 226 Fed. 455 (S. D. N. Y.),

aff’d, 232 Fed. 475 (C. C. A. 2d) ; Merrell Soule Co.

v. Powdered Milk Co. of America, T F. (2d) 297

(C. C. A. 2d); National Tube Co. Vv. Mark, 10 F.

(2d) 430 (C. C. A. 6th).

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In the case at bar recovery was measured by ‘‘the

sum of the profits which the patentee would have

derived from the sales which tlie infringer’s course

prevented the patentee from making.’’ JWalker,

Patents, 6th Ed., Sec. 607; Dallas Brass & Copper

Co.v. Faries Mfg. Co., 1 F. (2d) 930 (C. C. A. Tth) ;

see Philp vy. Nock, 17 Wall. 460; Farmers’ Handy

Wagon Co.v. Beaver Silo & Bow Mfg. Co., 259 Fed.

270, 271 (C. C. A. 7th).

We have found but two cases involving the com-

putation of damages on this basis in which the ques-

tion of interest was raised. In Rose y. [irsh, 94

Fed. 177 (C. C. A. 38d), and in Imperial Machine &

Foundry Corp. v. United States, 69 C. Cls. 667,.the

rule in Tilghman v. Proctor, supra, was followed

in computing damages upon the basis of profits lost

to the owner of the patent, and interest was allowed

only from the date of the filing of the master’s re-

port. There was no discussion of the question in

either of these cases. Profits lost by the patent

owner are in quite a different category from profits

gained by the infringer. Tilghman v. Proctor,

supra, merely holds that the infringer’s profits are

unliquidated until judicially determined, and ac-

cordingly interest runs only from the date of the

master’s report. Where there is a recovery of

damages on the basis of profits lost by the owner of

the patent, there would seem to be quite as much

reason for an allowance of interest as when such

damages are computed upon the basis of an esti-

mated reasonable royalty. There is, indeed, less

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certainty in determining reasonable royalties than

in computing lost profits, when, as in this case, com-

putation is based upon actual costs and established

selling prices of similar machines. Accordingly,

we believe that Rose v. Hirsh, supra, and Imperial

Machine & Foundry Corp. v. United States, supra,

ave of doubtful authority, and that in this case

interest should have been allowed upon profits lost

to the patent owner. Sucha result will accord with

the decisions of this Court in Seaboard Air Line

Ry. v. United States, 261 U. S, 299, Brooks-Scanlon

Corp. v. United States, 265 U. S. 106, Liggett &

Myers v. United States, 274 U.S. 215, and Phelps

vy, United States, 274 U.S. 341.

CONCLUSION

We believe that the court below erred in failing

to allow interest.

Respectfully submitted.

/THomaS D. THACHER,

Solicitor General.

J CHaRLEs B. Rvae,

Assistant Attorney Geyeral.

* H. Brian froeate, ©

Attorney.

JANUARY, 1931.

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APPENDIX

The Act of July 1, 1918, ¢. 114, 40 Stat. 704, 705,

amending the Act of June 25, 1910, ¢. 423, 36 Stat.

851 (U.S. C., Title 35, See. 68) provides in part as

follows:

' The Act entitled ‘‘An Act to provide ad-

ditional protection for the owners of patents

of the United States, and for other pur-

poses,’ approved June twenty-fifth, nine-

teen hundred and ten, shall be, and the same

is hereby, amended to read as_ follows,

namely :

‘*That whenever an invention described in

and covered by a patent of the United States

shall hereafter be used or manufactured by

or for the United States without license of

the owner thereof or lawful right to use or

manufacture the same, such owner’s remedy

shall be by suit against the United States in

the Court of Clatins for the recovery of his

reasonable and entire compensation for such

use and manufacture: Provided, however,

That said Court of Claims shall not entertain

a suit or award compensation under the pro-

visions of this Act where the claim for com-

pensation I&based on the use or manufacture

by or for the United States or any article

heretofore owned, leased, used by, or in the

possession of the United States: Provided

further, That in any such suit the United

States may avail itself of any end all de-

fenses, general or special, that might be

pleaded by a defendant in an action for in-

fringement as set forth in Titie Sixty of the

(8)

9

Revised Statutes, or otherwise: And pro-

vided further, That the benefits of this Act

shall not inure to any patentee who, when he

makes such claim, is in the employment or

service of the Government of the United

States, or the assignee of any such patentee ;

nor shall this Act apply to any device dis-

covered or invented by such employee during

the time of his employment or service.”’

we

U.S. GOVERNMENT PRINTING OFFICE: 193!

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