In 1834, McCormick obtained a patent for a reaping machine. This
patent expired in 1848.
In 1845, he obtained a patent for an improvement upon his
patented machine, and in 1847 another patent for new and useful
improvements in the reaping machine. The principal one of these
last was in giving to the raker of the grain a convenient seat upon
the machine.
In a suit for a violation of the patent of 1847, it was
erroneous in the circuit court to say that the defendant was
responsible in damages to the same extent as if he had pirated the
whole machine.
It was also erroneous to lay down as a rule for the measure of
damages the amount of profits which the patentee would have made if
he had constructed and sold each one of the machines which the
defendants constructed and sold. There was no evidence to show that
the patentee could have constructed and sold any more than he
actually did.
The acts of Congress and the rules for measuring damages
examined and explained.
The manner in which the suit was brought, and the charge of the
circuit court, which was excepted to, are stated in the opinion of
the Court. The reporter passes over all other questions which were
raised and decided except those upon which the decision of this
Court turned.
Page 57 U. S. 485
MR. JUSTICE GRIER delivered the opinion of the Court.
The plaintiff below, Cyrus H. McCormick, brought this action
against the plaintiffs in error, Seymour & Morgan, for the
infringement of his patent right. The declaration consisted of two
counts.
The first alleged that the plaintiff was the true and original
inventor of certain new and useful improvements in the machine for
reaping all kinds of small grain, for which he obtained letters
patent on the 21st of June, 1834. And moreover that the plaintiff
was the inventor of certain improvements upon the aforesaid
patented reaping machine for which he obtained letters patent on
the 31st day of January, 1845. And it charged that the defendant
had made three hundred reaping machines which infringed the
inventions and improvements, fourthly and fifthly claimed in the
schedule or specification of the last-named letters patent.
The second count alleged that the plaintiff was the first
inventor of certain other improvements upon his said reaping
machine before patented, for which he obtained letters patent on
the 23d day of October, 1847. And that the defendant manufactured
and constructed three hundred machines embracing the principles of
the last-named invention and improvements. The defendants pleaded
not guilty, and the case being called for trial in October, 1851,
they prayed a continuance of the cause on account of the absence of
certain witnesses material to their defense against the charge laid
in the first count, to-wit, the infringement of the patent of
1845.
The court intimated an opinion that the affidavit was sufficient
to put off the trial of the cause, whereupon the plaintiff's
counsel stated to the court that rather than have the trial put
off, they would not on said trial seek to recover against the
defendant on account of any alleged infringement or violation by
the defendants of the plaintiff's rights under his letters patent
bearing date January 31, 1845, set forth in his declaration, but
would proceed solely for a violation of the rights secured to him
by his letters patent bearing date October 23, 1847, set forth in
his declaration, under the last claim specified in that patent
relating to the seat for the raker.
The trial then proceeded on the last count in the declaration
for the infringement by defendants of this last patent, and
Page 57 U. S. 486
testimony offered to show that the plaintiff was not the
original and first inventor of the reaping machine as described in
his patents of 1834 and 1845 was rejected.
Numerous exceptions were taken by defendants in the course of
the trial and to various instructions contained in the charge of
the court. Most of these involve no general or important legal
principle, and could not be understood without prolix statements
with regard to the facts of the case and the structure of the
peculiar machines. To notice them in detail would be both tedious
and unprofitable. We deem it sufficient, therefore, to say that the
defendants have failed to support their exceptions as to the
rulings of the court concerning the testimony and that the charge
of the learned judge is an able and correct exposition of the law
as applicable to the case, with the exception of the points which
we propose now to examine, and which are contained in the following
portion of the charge.
"The only remaining question is that of damages. The rule of law
on this subject is a very simple one. The only difficulty that can
exist is in the application of it to the evidence in the case. The
general rule is that the plaintiff, if he has made out his right to
recover, is entitled to the actual damages he has sustained by
reason of the infringement, and those damages may be determined by
ascertaining the profits which in judgment of law he would have
made, provided the defendants had not interfered with his
rights."
"That view proceeds upon the principle that if the defendants
had not interfered with the patentee, all persons who bought the
defendants' machines would necessarily have been obliged to go to
the patentee and purchase his machine. That is the principle on
which the profits that the patentee might have made out of the
machines thus unlawfully constructed present a ground that may aid
the jury in arriving at the damages which the patentee has
sustained."
"It has been suggested by the counsel for the defendants that
inasmuch as the claims of the plaintiff in question here are simply
for improvements upon his old reaping machine, and not for an
entire machine and every part of it, the damages should be limited
in proportion to the value of the improvements thus made, and that
therefore a distinction exists in regard to the rule of damages
between an infringement of an entire machine and an infringement of
a mere improvement on a machine. I do not assent to this
distinction. On the contrary, according to my view of the law
regulating the measure of damages in cases of this kind, the rule
which is to govern is the same whether the patent covers an entire
machine or an improvement on a machine. Those who choose to use the
old machine have a right to use it
Page 57 U. S. 487
without incurring any responsibility, but if they engraft on it
the improvement secured to the patentee and use the machine with
that improvement, they have deprived the patentee of the fruits of
his invention the same as if he had invented the entire machine,
because it is his improvement that gives value to the machine on
account of the public demand for it. The old instrument is
abandoned and the public call for the improved instrument, and the
whole instrument, with the improvement upon it, belongs to the
patentee. Any person has a right to use the old machine, and if an
inventor engrafts upon an old machine, which he has a right to use,
an improvement that makes it superior to anything of the kind for
the accomplishment of its purposes, he is entitled to the benefit
of the operation of the machine under all circumstances with the
improvement engrafted upon it to the same degree in which the
original inventor is entitled to the old machine."
"There are some data, furnished by the counsel on both sides,
which it is proper the jury should take into view in ascertaining
the damages, provided they arrive at this question in the case. It
is conceded that just three hundred machines have been made by the
defendants of the description to which I have called your
attention, and testimony has been gone into on both sides for the
purpose of showing the cost of the machines and the prices at which
they sold. In order to ascertain the profits accruing to the party
who makes machines of this description, you must first ascertain
the cost of the materials and labor and the interest on the capital
used in the manufacture of the machines. You must also take into
account the expenses to which the manufacturer is subjected in
putting them into market, such as that of agencies and
transportation, also of insurance, and where the article is sold on
credit, a deduction must also be made for bad debts. All these
things must be taken into account in order to bring into the cost
every element that properly goes to constitute it in the hands of
the manufacturer. When you have ascertained the aggregate sum of
the cost, deduct it from the price paid by the purchaser and you
have the net profit on each machine. By this process you are
enabled to approximate to something like the actual loss that the
patentee sustains in a case where his right has been violated by
persons interfering with him and putting into market his
improvement."
The plaintiffs in error complain that these rules with regard to
damages, as thus laid down by the court, are incorrect, and have
produced a verdict for most ruinous damages far beyond anything
justified by the facts of the case. 1. Because the jury were
instructed that it is a legal presumption that if
Page 57 U. S. 488
defendant had not made and sold machines, all persons who bought
the defendant's machines would necessarily have been compelled to
go to the patentee and purchase his machines. That this principle
was enunciated as a binding principle of law, although the
plaintiff below had given no evidence to show that he could have
made and sold a single machine more than he did or was injured in
any way by the competition of the defendants or hindered from
selling all he made or could make. And secondly because the jury
were instructed that the measure of damages for infringing a
patented improvement on a machine in public use is the same as if
the defendant had pirated the whole machine and every improvement
on it previously made, and as a consequence that the plaintiff
below had a right to recover as great damages for the infringement
of the patent in his second count as if he had proceeded on both
counts of his declaration and shown the infringement of all the
patents claimed, and that in consequence of these instructions they
have been amerced in damages to the enormous sum of $17,306.66, and
with costs to nearly the round sum of $20,000.
We are of opinion that the plaintiffs in error have just reason
of complaint as regards these instructions and their consequent
result.
The first patent act of 1790 made the infringer of a patent
liable to "forfeit and pay to the patentee such damages as should
be assessed by a jury, and, moreover, to forfeit to the person
aggrieved the infringing machine."
The act of 1793 enacted
"That the infringer should forfeit and pay to the patentee a sum
equal to three times the price for which the patentee has usually
sold or licensed to other persons the use of said invention."
Here, the price of a license is assumed to be a just measure of
single damages, and the forfeiture by way of penalty is fixed at
treble that sum. But as experience began to show that some
inventions or discoveries had their chief value in a monopoly of
use by the inventor, and not in a sale of licenses, the value of a
license could not be made a universal rule as a measure of damages.
The Act of 17 April, 1800, changed the rule, and compelled the
infringer "to forfeit and pay to the patentee a sum equal to three
times the actual damage sustained by such patentee." This act
continued in force till 1836, when the act now in force was
passed.
Experience had shown the very great injustice of a horizontal
rule equally affecting all cases, without regard to their peculiar
merits. The defendant who acted in ignorance or good faith,
claiming under a junior patent, was made liable to the same penalty
with the wanton and malicious pirate. This rule was manifestly
unjust. For there is no good reason why taking a
Page 57 U. S. 489
man's property in an invention should be trebly punished, while
the measure of damages as to other property is single and actual
damages. It is true, where the injury is wanton or malicious, a
jury may inflict vindictive or exemplary damages not to recompense
the plaintiff, but to punish the defendant.
In order to obviate this injustice, the Patent act of 1836
confines the jury to the assessment of "actual damages." The power
to inflict vindictive or punitive damages is committed to the
discretion and judgment of the court within the limit of trebling
the actual damages found by the jury.
It must be apparent to the most superficial observer of the
immense variety of patents issued every day that there cannot, in
the nature of things, be any one rule of damages which will equally
apply to all cases. The mode of ascertaining actual damages must
necessarily depend on the peculiar nature of the monopoly granted.
A man who invents or discovers a new composition of matter, such as
vulcanized India rubber or a valuable medicine, may find his profit
to consist in a close monopoly, forbidding anyone to compete with
him in the market, the patentee being himself able to supply the
whole demand at his own price. If he should grant licenses to all
who might desire to manufacture his composition, mutual competition
might destroy the value of each license. This may be the case also
where the patentee is the inventor of an entire new machine. If any
person could use the invention or discovery by paying what a jury
might suppose to be the fair value of a license, it is plain that
competition would destroy the whole value of the monopoly. In such
cases, the profit of the infringer may be the only criterion of the
actual damage of the patentee. But one who invents some improvement
in the machinery of a mill could not claim that the profits of the
whole mill should be the measure of damages for the use of his
improvement. And where the profit of the patentee consists neither
in the exclusive use of the thing invented or discovered nor in the
monopoly of making it for others to use, it is evident that this
rule could not apply. The case of Stimpson's patent for a turn-out
in a railroad may be cited as an example. It was the interest of
the patentee that all railroads should use his invention, provided
they paid him the price of his license. He could not make his
profit by selling it as a complete and separate machine. An
infringer of such a patent could not be liable to damages to the
amount of the profits of his railroad, nor could the actual damages
to the patentee be measured by any known ratio of the profits on
the road. The only actual damage which the patentee has suffered in
such a case is the nonpayment of the price which he has put on his
license, with interest, and no
Page 57 U. S. 490
more. There may be cases, as where the thing has been used but
for a short time, in which the jury should find less than that sum,
and there may be cases where, from some peculiar circumstance, the
patentee may show actual damage to a larger amount. Of this a jury
must judge from the evidence, under instructions from the court
that they can find only such damages as have actually been proved
to have been sustained. Where an inventor finds it profitable to
exercise his monopoly by selling licenses to make or use his
improvement, he has himself fixed the average of his actual damage,
when his invention has been used without his license. If he claims
anything above that amount, he is bound to substantiate his claim
by clear and distinct evidence. When he has himself established the
market value of his improvement as separate and distinct from the
other machinery with which it is connected, he can have no claim in
justice or equity to make the profits of the whole machine the
measure of his demand. It is only where, from the peculiar
circumstances of the case, no other rule can be found that the
defendant's profits become the criterion of the plaintiff's loss.
Actual damages must be actually proved, and cannot be assumed as a
legal inference from any facts which amount not to actual proof of
the fact. What a patentee "would have made, if the infringer had
not interfered with his rights" is a question of fact, and not "a
judgment of law." The question is not what speculatively he may
have lost, but what actually he did lose. It is not a "judgment of
law" or necessary legal inference that if all the manufacturers of
steam engines and locomotives who have built and sold engines with
a patented cut-off or steam whistle had not made such engines, that
therefore all the purchasers of engines would have employed the
patentee of the cut-off or whistle, and that consequently such
patentee is entitled to all the profits made in the manufacture of
such steam engines by those who may have used his improvement
without his license. Such a rule of damages would be better
entitled to the epithet of "speculative," "imaginary," or
"fanciful" than that of "actual."
If the measure of damages be the same whether a patent be for an
entire machine or for some improvement in some part of it, then it
follows that each one who has patented an improvement in any
portion of a steam engine or other complex machines may recover the
whole profits arising from the skill, labor, material, and capital
employed in making the whole machine, and the unfortunate mechanic
may be compelled to pay treble his whole profits to each of a dozen
or more several inventors of some small improvement in the engine
he has built. By this doctrine, even the smallest part is made
equal to
Page 57 U. S. 491
the whole, and "actual damages" to the plaintiff may be
converted into an unlimited series of penalties on the
defendant.
We think, therefore, that it is a very grave error to instruct a
jury "that as to the measure of damages the same rule is to govern,
whether the patent covers an entire machine or an improvement on a
machine."
It appears from the evidence in this case that McCormick sold
licenses to use his original patent of 1834 for twenty dollars
each. He sold licenses to the defendants to make and vend machines
containing all his improvements to any extent for thirty dollars
for each machine, or at an average of ten dollars for each of his
three patents. The defendants made and sold many hundred machines,
and paid that price and no more. They refused to pay for the last
three hundred machines under a belief that the plaintiff was not
the original inventor of this last improvement, whereby a seat for
the raker was provided on the machine so that he could ride and not
be compelled to walk, as before. Beyond the refusal to pay the
usual license price, the plaintiff showed no actual damage. The
jury gave a verdict for nearly double the amount demanded for the
use of three several patents in a suit where the defendant was
charged with violating one only, and that for an improvement of
small importance when compared with the whole machine. This
enormous and ruinous verdict is but a corollary or necessary
consequence from the instructions given in that portion of the
charge of the court on which we have been commenting, and of the
doctrines therein asserted and to which this Court cannot give
their assent or concurrence.
The judgment of the circuit court is
Reversed with a venire de novo.
Order
This cause came on to be heard on the transcript of the record
from the Circuit Court of the United States for the Northern
district of New York, and was argued by counsel. On consideration
whereof it is now here ordered and adjudged by this Court that the
judgment of the said circuit court in this cause be, and the same
is hereby reversed with costs, and that this cause be, and the same
is hereby remanded to the said circuit court with directions to
award a venire facias
de novo.