Westinghouse Elec. Co. v. Wagner Elec. Co. - 225 U.S. 604 (1912)
U.S. Supreme Court
Westinghouse Elec. Co. v. Wagner Elec. Co., 225 U.S. 604 (1912)
Westinghouse Electric and Manufacturing Company
v. Wagner Electric and Manufacturing Company
Argued March 1, 1912
Decided June 7, 1912
225 U.S. 604
Where the infringer has sold or used a patented article, the patentee is entitled to recover all of the profits.
Where a patent, though using old elements, gives the entire value to the combination, the patentee is entitled to recover from an infringer all the profits.
Where profits are made by using an article patented as an entirety, the infringer is liable for all the profits unless he can show, and the
burden is on him, that the profits are partly the result of some other things used by him. Elizabeth v. Pavement Co., 97 U. S. 126.
Where the patent admittedly creates only a part of the profits, the patentee is only entitled to that part, and he must apportion the infringer's profits and show by reliable and satisfactory evidence either what part of the profits are attributable to his patent or that the entire value of the infringing article is attributable to his patent. Garretson v. Clark, 111 U. S. 120.
Congress has legislated, Rev.Stat., § 4921, with a view to affording the patentee ample redress against the infringer, but the general rule of law that the burden is on the one suing for profits to show that they had been made applies.
The patent itself is evidence of the utility of the claim, and an infringer is estopped from denying that it is of value.
Where the plaintiff patentee shows that profits have been made by the use of his patent, but defendant proves that there were other elements contributing to the profits, it then devolves upon the plaintiff to apportion the amount of profits attributable to the use of his patent.
Where the infringer, however, by commingling the elements, renders it impossible for the patentee to meet the requirement of apportionment, the entire inseparable profit must be given to the patentee. In such a case, as in that of a trustee ex maleficio confusing gains, the loss should fall on the guilty, and not on the innocent.
This rule applies even if the patented device infringed did not preponderate the creation of profits. The owner of a small part of a fund is equally entitled to protection as the owner of a larger share.
While the rule applied may ultimately shift the burden so as to cast it on the defendant, it is justly cast upon one who should bear it, as he wrought the confusion.
Where, on reversal, a decree for appellant would deprive appellee of the right to ruling on exceptions taken by him to the master's report which were not passed on by the court, and it appears that other questions of law were not passed on below, and also that material evidence was omitted, the case will be remanded with power to hear and determine on new testimony and for further proceedings not inconsistent with the opinion.
173 F. 361 reversed.
The current produced by an electric generator is of relatively low pressure, and for that reason it is impracticable to utilize it, for power purposes, more than five or
six miles from the central station. It was found, however, that this pressure, or voltage, could be increased by the use of a transformer or converter, consisting of a metal core, through and around which are wound primary insulated wires leading from the generator. Secondary wires, also insulated, are wound through and around the same core, and carried thence to the point of application. The voltage is increased or decreased according as the secondary wires are wrapped around the core more or less frequently than the primary wires.
One of the consequences of thus transforming the current is the generation of heat. In small machines, this is corrected by radiation, but in large ones, the heat "ages" the iron, lessens the efficiency of the transformer, and, in time, deteriorates the insulation around the wires. This latter result causes short circuits, makes it impracticable to take advantage of the increased voltage, and thus again restricts the area in which currents of more than 10 K.W. can be used for producing light and power. 112 F. 418.
Many efforts were made to overcome this difficulty, but without success until July 12, 1887, when George Westinghouse, Jr., secured patent 366,362 for an "Electrical Converter" which, his application stated, was intended to prevent the converter's becoming "overheated when employed for a long time in transforming currents of high electromotive force." Extracts from the specification and claims are copied in the margin. *
Referring specially to the specifications and Claim 4, which is here involved, and speaking generally, rather than technically, it will be seen that the transformer consisted of a core, composed of groups of thin metal plates, so plugged apart as to leave (a) open spaces in the core. The primary and secondary wires were wound through rectangular openings near the ends of these plates. The entire apparatus was then placed in a case filled with nonconducting oil, which, when heated, circulated in and around the transformer, being cooled by contact with the exterior surface of the enclosing box or receptacle. This invention proved to be of immense value, and made it possible (112 F. 418, 117 F. 498) to transmit and apply powerful currents so as to produce power and light at a great distance from the generating plant. The patent was utilized by the Union Carbide Company, and on May 10, 1900, the Westinghouse Electric & Manufacturing Company, as assignee of George Westinghouse, sued that company for infringing Claim 4. The transformers which the Carbide Company was using had been sold by the Wagner Company. As vendor and
warrantor, the latter therefore defended, and admits that the decree (112 F. 417) of November 11, 1901, sustaining the validity of Claim 4, is, as to it, res judicata. That decree was affirmed May 29, 1902 (117 F. 495), and on June 24, 1902, the Westinghouse Company brought this suit (129 F. 604) against the Wagner Company, praying for damages and profits, and also for an injunction against further infringement.
It appeared that, after the decree in the Carbide case, the Wagner Company had instructed its experts to build a transformer that would not infringe the Westinghouse patent. They thereupon devised one, referred to herein as Type M, which omitted the (a) open spaces in the core, but substituted (b) spaces between the coil, and (c) spaces between the coil and the core.
The court held that these Type M transformers, eliminating spaces in the core, were not an infringement of Claim 4, and thereupon refused the injunction. 129 F. 604. But the defendant, in its answer, admitted that it had infringed Claim 4 by the manufacture of transformers which, as it subsequently developed, contained openings (a) in the core, and also (b) openings between the coils, and (c) between the coil and core. The case was therefore referred to a master to state an account of damages and profits arising from the infringement of Claim 4 prior to June 24, 1902.
On the hearing, it appeared that the Wagner Company manufactured various electrical appliances that had been made in the same shop, by the same workmen, and under the same general superintendence as that employed in making the transformers. No account had been kept which would show the cost of labor and shop expenses attributable to these transformers. Nor was there anything on the books indicating what, if any, profit had been realized from their sales.
The gross receipts of $2,314,744.75 were mingled. The
books only showed a gross profit of about eight percent, but it appeared that the plant had grown and the business had extended during the period covered by the accounting. There was testimony that the company had the general policy of fixing prices at a figure which would net twenty-five percent. The master made an elaborate analysis of the data as to flat cost of labor and material, shop expenses, and commissions applicable to the transformers. From this data and the policy of the company, he ultimately reached the conclusion that the company had made a profit of $132,433 on the $955,271.76 which the books showed had been received from the sale of several thousand infringing transformers. But, at the close of the plaintiff's testimony, the defendant demurred to the evidence on the ground that it failed to show that any profit had been made in the sale of the infringing transformers. The demurrer was overruled. The defendant then claimed that the infringing transformers contained elements of the patent which were not embraced in Claim 4, for which alone this suit was proceeding, and that no profit due to those elements could be recovered in this case unless the plaintiff apportioned the gains due solely to Claim 4. It also offered evidence, including a heat test, tending to support its contention that a transformer containing only the elements covered by Claim 4 was of little utility; that it operated mainly to reduce the heat in the core, when it was much more important to keep the coils cool; that the infringing transformers contained spaces (b) between the coils and (c) between coil and core which, it contended, were additions and noninfringing improvements, contributing to the profits, if any had been made.
In reply and to disprove the defendant's contention, the plaintiff relied, among other things, on the fact that, upon the hearing of the application to enjoin the defendant from manufacturing transformers containing only (b)
spaces between the coil and (c) between coil and core, the Wagner Company had contended that these grooves or channels had been used to avoid infringement, although they "crippled the coils" and actually "lessened the electrical efficiency of the transformers."
At the conclusion of the lengthy testimony, the substance of which is barely outlined above, the master found from the evidence and under the decision in 117 F. 498, binding on defendant, that Claim 4 was an entirety, covering not only open spaces in the core, but the use of the oil in a closed receptacle for cooling the transformer; that all the commercial value of those sold by the defendant was due to the use of Claim 4 of plaintiff's patent, and not to additions made by the defendant. He recommended that a decree should be entered against the defendant for $132,433.35,
"being approximately 25 percent on the net amount of the sales of infringing transformers after deducting commissions and fixing the factory cost at 40 percent."
The defendant filed many exceptions, among others:
"That the complainant has not shown what was the profit made by defendant on its transformers, due to the patented invention of Claim 4, as distinguished and segregated from the other features contained in said transformers."
There were also numerous exceptions as to the master's method of stating the account. These and others were not specifically passed on, because the circuit court and the circuit court of appeals (one judge dissenting) held (173 F. 361) that Claim 4 was a limited, detailed claim; that the additions made by the defendant were noninfringing and valuable improvements which contributed to the profits; that the burden of apportionment was upon plaintiff, and, having failed to separate profits, it was only entitled to a decree for nominal damages. The court (one judge dissenting) also affirmed
the decree that Type M was not an infringement of Claim 4.