I would venture to guess that the saying "There is nothing new under the sun" itself wasn't very new when some scribe long ago penned the biblical Book of Ecclesiastes. Some version of or variation on the saying probably has existed in many cultures over the ages, including the 1974 song by Peter Allen and Carole Bayer Sager to which I allude in the title to today's blog post (memorably performed in the classic 1979 film All That Jazz
). Anyway, I was thinking about the saying and the song yesterday as I read Judge Learned Hand's opinion in Cincinnati Car Co. v. New York Rapid Transit Corp.
, 66 F.2d 592 (2d Cir. 1933) (hat tip to Professor John Golden, for calling this case to my attention). The technology at issue, which relates to railway cars, seems rather dated, as does Judge Hand's indulgence in the occasional use of Latin adages (U.S. courts generally don't do that anymore.) But the opinion is surprisingly prescient in its discussion of issues that continue to bedevil the law of patent remedies, to the extent that it almost seems it could have been written yesterday (if only we had judges of the caliber of Learned Hand to write them). To wit:
1. Should courts ever stay an injunction to provide the infringer with a period of time to design around? Yes:
The plaintiff sued the defendant for infringement of patent No. 1,501,325,
issued on July 15, 1924, to Thomas Elliott, and included two others in
the bill. We held the patent just mentioned, and one of the others
infringed; the third, not infringed. Cincinnati Car Co. v. New York Rapid Transit Co., 35 F.(2d) 679. Later we suspended the injunction to allow the defendant to substitute another device. 37 F.(2d) 100. It did so, and when the new structure came before us, we held that it escaped the claims of the patent. 52 F.(2d) 44.
For some previous posts on the subject, see here
2. Calculating damages for the infringement of one patent or a handful of patents in a complex device (say, a smartphone) is very difficult. But are the core issues we're facing today anything new and different? Maybe not:
The situation was . . . one so common in
accountings, in which the invention is not of the article as a whole,
but of a small detail. The difficulty of allocating profits in such
cases has plagued the court from the outset, and will continue to do so,
unless some formal and conventional rule is laid down, which is not
likely. Properly, the question is in its nature unanswerable. It is of
course possible to imagine an invention for a machine, or
composition, or process which is a complete innovation, emerging, full
grown, like Athene, from its parent's head. It would then be easy to say
that profits were to be attributed wholly to the invention. Such
inventions are however mythological. All have a background in the past,
and are additions to the existing stock of knowledge which infringing
articles embody along with the invention. It is generally impossible to
allocate quantitatively the shares of the old and the new . . . .
course, Judge Hand liked to say that various other issues in IP law were
unanswerable too, before proceeding to attempt an answer.
3. Patent infringement is a strict liability offense, arguably for good reasons; but in the typical case, is it also a moral offense akin to stealing someone else's property? I don't think so, and neither did Judge Hand:
Before Westinghouse Co. v. Wagner Co., 225 U.S. 604, it was generally
assumed that the burden lay with the patentee, though
there were exceptions even then. That case has at times been thought to
lay down a different rule, treating the infringer in all cases as a
trustee ex maleficio, and therefore subject to the severe standard
imposed upon malversators. A rigid insistence upon this would cast him
for full profits in all cases except those in which by artificial and
unreal distinctions courts should come to satisfy themselves that they
could dissect the contribution of the prior art from that of the
invention. This would be as unsatisfactory a result as that which
imposed upon the patentee the same duty, and, while it might be answered
that he is a victim, and the infringer a tort-feasor, the character of
the tort ought not really to have such sanguinary results. Patent
infringement often involves nice and casuistical questions which it is
artifice to treat as involving moral delinquency.
4. The calculation of reasonable royalties is hardly an exact science:
In Dowagiac Manufacturing Co. v.
Minnesota Moline Plow Co., 235 U.S. 641, the situation was reversed, the
invention being itself for an avowed
improvement upon an earlier reaper, and the new parts structurally
distinguishable. There the court refused to impose the burden upon the
infringer, though he had indubitably created the confusion by his wrong,
and might, if he was caput lupinum, be held for the whole consequences.
The patentee was required to make the division, and because he could
not, was relegated to a reasonable royalty, the only satisfactory
solution; perhaps because it abandons the appearance of rationalizing
Again, the last phrase is the kicker. Judge Hand goes on to say:
The whole notion of a reasonable royalty is a device in aid of justice,
by which that which is really incalculable shall be approximated, rather
than that the patentee, who has suffered an indubitable wrong, shall be
dismissed with empty hands. It is no more impossible to estimate than
the damages in many other torts, as for example, personal injuries with
their accompanying pain and mutilation.
5. Can expert witnesses at least help us to sort things out? Well . . .
Though the testimony of experts
was recognized as competent in Dowagiac Mfg. Co. v. Minnesota Plow
Co., it is generally of small help.
But then Hand had been saying
that at least ever since the Parke-Davis case in 1911.
6. Finally, towards the end of the opinion, Judge Hand relies on comparables and doubles the award the special master had recommended. Along the way, he notes the disagreement between the parties about what the
appropriate royalty base should be (entire market value rule, anyone?), and whether licenses entered into in settlement are
competent evidence (an issue the Federal Circuit recently addressed, see here
). On this last point, Judge Hand grasped the idea that the
risk of incurring further attorneys' fees in the absence of settlement is symmetric and therefore (all else being equal) irrelevant:
Here it is true that the witnesses agreed within limits as to the
percentage upon cost which might be taken, though some spoke in terms of
a percentage on profits. But the base used was widely different, the
plaintiff's witnesses taking the whole cost of the cars; the defendant's
the cost of the articulations alone. We are thrown back therefore upon
very little that is tangible, and while any conclusion must inevitably
be somewhat speculative, we must find some basis in the evidence; we
cannot conjure figures from our own minds. Though the payments were not
established royalties, we need not disregard them, any more than the
master did. It is true that they were settlements for infringements, but
both parties may have been influenced by a wish to be done with
litigation; that consideration is a sword with two edges.
By the way, if you're ever looking for a good biography of a famous judge, I'd recommend Gerald Gunther's classic Learned Hand: The Man and the Judge, which I remember reading shortly after it came out, right before I started work as a law professor in 1994. I believe there's a second edition with a foreword by Justice Ruth Bader Ginsburg that came out in 2010.