Reed Roller Bit Co. v. Hughes Tool Co. ( 1926 )

12 F.2d 207 (1926)

REED ROLLER BIT CO. et al.
v.
HUGHES TOOL CO.
REED et al.
v.
CADDO ROCK DRILL BIT CO.

Nos. 4514, 4615.

Circuit Court of Appeals, Fifth Circuit.

March 25, 1926.

In No. 4514:

B. F. Louis, of Houston, Tex., and William F. Hall, of Washington, D. C., for appellants.

C. R. Wharton and John A. Mobley, both of Houston, Tex. (Jesse R. Stone, of Houston, Tex., on the brief), for appellee.

In No. 4615:

B. F. Louis, of Houston, Tex., and William F. Hall, of Washington, D. C., for plaintiffs in error.

John A. Mobley and W. L. Cook, both of Houston, Tex. (Jesse R. Stone, of Houston, Tex., on the brief), for defendant in error.

Before WALKER, BRYAN, and FOSTER, Circuit Judges.

BRYAN, Circuit Judge (after stating the facts as above).

In the first of these cases, No. 4514, appellee's claim of infringement has already been upheld. 282 F. 807.

The only question before us is whether the damages awarded on an accounting are excessive. We have no difficulty in sustaining the finding of the master and the District Judge that the appellants were willful infringers. During the time he was an employee and officer of the appellee company, Reed must have had knowledge of the injunction obtained in 1913 against the Caddo Company restraining the use of the Hughes lubricator. After he left the employment of Hughes, and had been enjoined from infringing several of the Hughes patents, and after unsuccessfully attempting to compete by the use of an oil lubricator holding only a gallon of oil, he deliberately began and continued to manufacture and sell as an essential part of his machine a lubricator which infringed that of the Hughes patent.

It is not contended that there was any substantial difference. It is apparent from the evidence that he was not led by the advice of counsel to believe that he would not be infringing if he should make use of the Hughes patents. Under R. S. § 4919, (Comp. St. § 9464), it was within the discretion of the court to assess the expense of auditors, as a punishment for infringement.

Appellants contend that at most recovery should have been limited to the reasonable profits appellee would have made on sales of its lubricator, and that appellee was not entitled to recover loss of profits on complete outfits or spare parts, for the reason that they were not included in the Hughes patent. While it is true that nominally the Hughes patent was only for the improvement of drills, it was in reality an improved drill. Claim 19, quoted above, is for the completed tool and spare parts. Although some of the parts were old, the Hughes device as a whole was new. Manufacturing Co. v. Cowing, 105 U.S. 253, 26 L. Ed. 987. It was the lubricator that gave value to the completed device and made the cutters salable.

In Westinghouse Co. v. Wagner Mfg. Co., 225 U.S. 604, 32 S. Ct. 691, 56 L. Ed. 1222, 41 L. R. A. (N. S.) 653, it is said: "Where profits are made by the use of an article patented as an entirety, the infringer is liable for all the profits `unless he can show — and the burden is on him to show — that a portion of them is the result of some other thing used by him.'" See, also, Putnam v. Lomax (C. C.) 9 F. 448; Covert v. Sargent (C. C.) 38 F. 237; Pressed Prism Glass Co. v. Continuous Glass Prism Co. (C. C.) 181 F. 151; Bredin v. National Metal Co. (C. C.) 182 F. 654; Bemis v. Brill, 200 F. 749, 119 Cow. C. A. 229; Walker on Patents, § 565.

Dowagiac Mfg. Co. v. Minnesota Plow Co., 235 U.S. 641, 35 S. Ct. 221, 59 L. Ed. 398, relied on by appellants, does not announce a different rule. In that case the patent was for an improvement in grain drills, the objects being to make the drill usable on uneven ground, and to provide means whereby the shoes and covering wheels could be raised from the ground, when the implement was not in use or when it was being transported from one field to another. Other parts were required to complete the machine, and its value was not entirely attributable to the invention.

In Heyer v. Duplicator Mfg. Co., 263 U.S. 100, 44 S. Ct. 31, 68 L. Ed. 189, also relied on by appellants, the patentee sold his own device to purchasers who bought gelatine bands from the defendant. This case is distinguishable from that, for here appellants were not selling parts to those who had bought complete machines from appellee, but were selling spare parts of their own device, which could never have been sold, but for appellee's lubricator. Reed did not have a license to manufacture or sell spare parts of the Hughes drill, and therefore was an infringer, and liable for profits Hughes would have made. Union Tool Co. v. Wilson, 259 U.S. 107, 42 S. Ct. 427, 66 L. Ed. 848.

It does not make any difference that the Pickin patent called for slush water, instead of oil, as a lubricator, for during the accounting period it was not known that such a device could enter into competition with the Hughes device. Turrill v. I. C. R. R. (C. C.) 20 F. 912; Brennan v. Dowagiac Mfg. Co., 162 F. 472, 89 Cow. C. A. 392. Reed does not claim that he knew there was another method of lubrication. His discovery came about as a result of his infringement, and not because of the existence of the Pickin patent.

A patentee is bound by prior patents and the prior art, irrespective of his actual knowledge. R. S. § 4886 (Comp. St. § 9430). Because of this it is argued that an infringer can escape liability by showing that he might have chosen to use a competing device, if he had known of it, although as a matter of fact he was not aware of its existence. A patent is a contract, and the patentee does not acquire any rights previously granted by the government. Among the rights not granted are those that the government has theretofore conveyed, or that have been acquired by the public. Actual knowledge by a patentee of those rights is immaterial.

There is no contract relation between a patentee and an infringer, but the latter is invading property rights acquired by the former from the government, and therefore is liable for damages. Such damages are not affected by a showing of the existence of a state of facts which, so far as the parties are concerned, might as well have had no existence. During the accounting period the Pickin patent was unknown to Reed, and during that period Hughes was deprived of profits he otherwise would have made. We are of opinion that the award of damages by the District Court was sustained by the evidence.

In No. 4615, defendants do not deny that the judgment correctly represents the royalty interest of plaintiff, but they contend that the court should have sustained their pleas of set-off, and allowed them credit for the expenses and fees of attorneys incurred in defending the two suits brought to cancel the royalty contract, and in defending the infringement suit in the appellate courts after final decree of infringement by the District Court, and also for the amount awarded on accounting in the infringement suit. The opinion of the District Court before whom the case was tried without a jury is reported in 4 F. (2d) 136.

Paragraph 5 of the royalty contract provides that the Caddo Company would defend any actions and afford protection from infringement of the patent; but it did not undertake to protect Reed against suits brought by the Caddo Company itself in the protection of its own interests. The District Court allowed the expenses and attorney's fees incurred in No. 4514 up to the final decree of infringement of that court, because some of the claims of infringement of the Hughes patents were rejected. The refusal to allow expenses and fees of attorneys incurred on appeal was clearly right, as the royalty contract did not authorize Reed to engage in the infringement of other patents. Defendants did not acquire any right from plaintiff to use the lubricator of the Hughes patent.

The right to set off the decree in 4514 against plaintiff's claim for 15 per cent. of the sales under his contract with Reed is based upon the proposition that Hughes is the owner of all the stock in the plaintiff corporation and in the Hughes Tool Company, and to allow both judgments to stand would be to permit him to reap a double benefit. It is to be remembered that Hughes never consented to the royalty contract, and that he attempted to have it canceled after he was in position to control the actions of the Caddo Company. In addition, the plaintiff company as such has the right to recover what is legally due to it, and that right is not to be taken away merely because Hughes as an individual would derive benefits which he is entitled to by reason of his ownership of stock for which presumably he paid full value.

The amounts awarded in these two suits are large, but, as it clearly appears that Reed and his company made themselves liable in spite of all efforts to stop them, it is but just that they should be held responsible.

The decree in No. 4514 is affirmed.

The judgment in No. 4615 is affirmed.