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National Brake & Electric Co. v. Christensen

February 26, 1930


Appeals from the District Court of the United States for the Eastern District of Wisconsin.

Author: Evans

Before EVANS, PAGE, and SPARKS, Circuit Judges.

EVANS, Circuit Judge.

Cross-appeals have been taken from a final decree which awarded Christensen et al. the sum of $105,756.88 together with interest thereon from the date of the report of the master. The plaintiffs in the court below will be here called appellants, while the defendant in the lower court will be here called appellee.

The suit has long been before the courts, and numerous opinions have been written respecting various contentions raised by appellee. See National Brake & Electric Co. v. Christenson (C.C.A.) 229 F.564; Id., 241 U.S. 659, 36 S. Ct. 447, 60 L. Ed. 1225; Id. (C.C.A.) 258 F. 880; Id., 250 U.S. 638, 39 S. Ct. 495, 63 L. Ed. 1184; Id., 254 U.S. 425, 41 S. Ct. 154, 65 L. Ed. 341; Id. (C.C.A.) 278 F. 490; Id. (D.C.) 10 F.2d 856; Id. (D.C.) 18 F.2d 981.

Appellants' patent has been consistently sustained in the District and this court. The final decree from which appellee has appealed was predicated upon the report of a master who made findings both on the theory of profits and of damages sustained. The latter being the larger amount, the decree was for the sum found to be appellants' damages. Appellee attacks the decree on two grounds: (a) That no recovery against it should have been granted because of a decree in a suit brought in the Third Circuit and which was decided adversely to appellants. This decree, appellee argues, is a bar to any recovery herein. (b) It further contends that even though appellants be entitled to recover, the amount awarded them was in excess of the damages by them sustained.

Appellants contend that numerous items should be added to their award of damages if damages be the basis of recovery, and that if recoverable profits be the basis of recovery, two or three items should be radically changed, which would materially enlarge their recovery.

Appellee's first point must be separately considered; otherwise the assignments of error on both appeals dealing with the same ruling will be considered together.

To better ascertain the extent and nature of the holding of the court in the decree which is presented as a bar to any recovery in this court, reference is made to Christensen v. Westinghouse Traction Brake Co. (D.C.) 235 F. 898; Id. (C.C.A.) 243 F. 901, and Westinghouse Traction Brake Co. v. Orr (C.C.A.) 252 F. 392. On a previous hearing, National Brake & Electric Co. v. Christenson, 278 F. 490, this court considered the effect of the decree of the District Court of Pennsylvania and disposed of the application adversely to appellees. That ruling on that issue thereupon became the law of the case.

The institution of appellee's proceedings to secure a modification of the original mandate of this court is conclusive proof of the necessity of the proceedings which resulted adversely to appellee in this last cited decision.

If, however, there had been no decision of this court upon this question, we would have no hesitancy in reaching the same conclusion as was expressed in 278 F. 490. We are satisfied there was no final decree on the merits entered in the Pennsylvania court which disposed of the patent upon which appellants rely in this suit. The parties in the two suits were not the same, and their relationship was not so disclosed as to make the decrees in the Pennsylvania case binding here. We therefore conclude that the decree in the District Court of Pennsylvania was not a bar to the successful prosecution of the instant suit.

Damages. Appellee's criticism of the court's award. It is contended that the award based upon computations which allowed appellants 5 per cent. royalty is excessive. This criticism is, in part, directed to the evidence which showed express royalties less than this amount. It is also argued that the invention was an extremely narrow one, of small consequence, and would have been of no practical value had appellee not brought its engineering and mechanical skill to its aid and made it a saleable, workable product. The royalty finding of 5 per cent. (except for parts) apparently was always considered by those who secured licenses from appellants as a reasonable one. Not only did the appellant Allis-Chalmers Company pay such a royalty, but appellants' predecessors paid such a royalty. There is evidence to justify the conclusion that this license by appellants' predecessor was considered a most valuable one and because of this license of the Christensen patent. True, there appeared other provisions in each of the license agreements, and rather persuasive arguments are made, on the one hand to the effect that the patent in suit furnished only part of the consideration for the fixation of the 5 per cent. royalty and on the other hand, that the patent in suit was carrying a heavy load in securing the insertion in the license agreement of other less valuable patents for which 5 per cent. was an excessive royalty. Under all the circumstances, in view of the master's finding, his unusual opportunity to familiarize himself with the nature of the business and the value of the patent, the fact that the District Court approved of the finding, the 5 per cent. royalty basis will not be disturbed.

The confirmation of the 5 per cent. royalty as the basis of computation in determining damages disposes of the second group of errors assigned by appellee.

Appellants argue that they should have been allowed interest upon the total amount allowed them as damages from a date that went back some 21 years beyond the date of the master's report. The facts are hardly in dispute. The extent of appellee's business in the infringing product each year is disclosed ...

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