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Power Specialty Co. v. Connecticut Light & Power Co.

January 6, 1936

POWER SPECIALTY CO.
v.
CONNECTICUT LIGHT & POWER CO. ET AL



Appeal from the District Court of the United States for the District of Connecticut.

Author: Manton

Before MANTON, L. HAND, and CHASE, Circuit Judges.

MANTON, Circuit Judge.

The decree appealed from, entered after confirmation of the master's report, made an award to the appellee of $209,612.18, with interest and costs. The patent sustained and held infringed in Power Specialty Co. v. Connecticut Light & Power Co. (D.C.) 27 F.2d 928, affirmed (C.C.A.) 31 F.2d 1018, was for a steam generating plant, the specific improvement being an economizer. The damages awarded below were made up of damages for sales lost to the plaintiff by the defendant's installation of 23 infringing economizers. Profits which the appellee would have made had it sold these economizers were allowed in the sum of $154,866.36. On one installation, which admittedly would not have been made by the appellee in any event, the appellant's profits of $16,565.43 were allowed. An allowance was also made for each of four installations in which the court found the appellee had been obliged to reduce its prices to meet appellant's competition. This damage amounted to $38,180.39.

As to the lost sales items, appellant contends the evidence does not establish that appellee would have made the sales in 22 of these installations. It admits responsibility for one lost sale. It argues that an allowance of a reasonable royalty, and not lost sales profits, is the proper measure of damages. Further, it argues there was no wanton or willful conduct in the infringements; also that the appellee did not, because of the appellant's competition, reduce its prices in selling its economizers in three of the four sales where this is claimed.

What a patentee would have made had not the infringer interfered with his right to his patent monopoly is, not what speculatively he may have lost, but what he actually did lose. Seymour v. McCormick, 16 How. (57 U.S.) 480, 14 L. Ed. 1024. What one claiming infringement would have made if an infringer had not made the sales cannot be left to inference, conjecture, or speculation. See Dobson v. Hartford Carpet Co., 114 U.S. 439, 444, 5 S. Ct. 945, 29 L. Ed. 177; Dobson v. Dornan, 118 U.S. 10, 6 S. Ct. 946, 30 L. Ed. 63. The holder of the patent must show that he would have made the sales if the infringer had not. McSherry Mfg. Co. v. Dowagiac Mfg. Co., 160 F. 948 (C.C.A.6). It may not be assumed that, if the appellant did not make the sale the owner of the patent necessarily would. Underwood Typewriter Co. v. E. C. Stearns & Co., 227 F. 74 C.C.A.2). Although appellant and appellee were the only manufacturers of the patented economizer, it does not follow that, if the sales had not been made by the appellant, the appellee would have made them. Other manufacturers were selling economizers suitable for steam plants. The court below found that one installation claimed as an infringement would probably have been awarded to a manufacturer other than appellee if the appellant had been unsuccessful, and that in this instance there were economizers other than appellant's and appellee's available to those desiring to use them. Moreover, most operators of steam plants did not use economizers. An economizer is a device which uses the hot waste gases from a boiler furnace to preliminarily heat the water before it goes to the boiler. To justify its installation, it must be purchased within a certain maximum cost. Not over 15 per cent. of the power plants are so equipped. There are other ways of effecting economies than by the use of an economizer, as by boiler design or an air heater.

In 22 of the installations claimed, the evidence does not justify the conclusions reached below. In installations 11, 12, 15, and 24, appellee made no bids, nor indeed ever heard of the opportunity to bid. No claim of loss or profits would be justified unless the customer had to ahve an economizer of a kind which it must have bought from the appellee if not from the appellant. It appears in these instances that the buyers might have purchased devices other than the appellant's economizers or might not have bought any. Moreover, the utility of an economizer is directly related to its cost. For two of these installations, it is not shown that the standard prices were effective and there is no way of knowing what the appellee might have bid. The Wyman-Gordon installation (No. 2) was a bid for appellant's economizer erected with all auxilliary apparatus for $18,000. Appellee's bid was $17,280 with some, but not most, of the auxiliary equipment and without erection. The additional costof this equipment and of erecting would be $13,000, making a comparable total bid of about $30,000. The plant engineer for the customer testified that the reason why the contract was awarded to the appellant was the fact that the appellant would do a complete job, and said: "I do not think we could have got the money appropriated for the Power Speciality job at $30,000. We would have had to go to cast iron which would have given us the same results for $10,000 less." It is not established that the appellee would have made this installation but for the appellant's bid.

In the Acme Cement installation, appellee's bid stated that it would guarantee no performance of this economizer against corrosion if the water was admitted to it at a temperature below 150 degrees F. The customer's vice president saw appellant's lead-coated economizer guaranteed against corrosion for five years, and stated that it seemed to exactly meet his problem; and the Babcock-Wilcox Company bought appellee's economizer and furnished it to the customer as a part of its contract. This circumstance sufficiently negates the probable purchase by this customer from the appellee.

The Raton installation required for some of the banks of economizers feed water temperature of 90 degrees. The appellee's bid gave no guaranty against corrosion for this low temperature. Appellant and another company bid; the latter for a noninfringing economizer. The customer in making the selection said that, as between the Green Company's economizer with a guaranty of performance and appellant's economizer with no guaranty of performance, "we would have to take the Green Company's with the guaranty." And he said that "it (the Green Company's economizer) would have satisfied the requirements of the job," and "we would not have felt justified in taking the Power Specialty economizers at the prices shown in their bids with no guaranty of performance."

In the Consolidated Paper installation, appellant's bid and a third company's bid on a noninfringing economizer were lower than the appellee's. The appellant was awarded the contract. The customer's consulting engineer stated that the appellee's bid was too high and that the economizer at that price "would not have shown a return high enough to justify the requirements * * * the matter of economically justifying an economizer at the prices mentioned in the different bids was taken into consideration at the time I gave my approval to the Sturtevant bid." The appellee's bid "would have been economically unjustified under the circumstances, we could not have justified that expenditure * * * it would be cheaper to get along without an economizer at all."

In the Youngstown installation, the customer decided to ask appellee for a bid which when received contained "certain" features with this that we did not think would fit our plan," so they asked the appellant to bid. The final responsibility for the purchase rested upon the customer's chief engineer, who said that, as between the appellee and a third company's bid, "if the defendant had not bid we had a certain amount of money we could use and we could have put the Heine in for that amount. We could not have put Power Specialty in for that amount." From this record it seems clear that the customer would have purchased the Heine had the appellant not bid.

In the Worcester Salt installation, the economizer offered by the appellee was a single group, and, in order to get it into the building, it would have to occupy a room directly back of the boiler. "It was practically impossible or impracticable to put an economizer in that space. We had to situate it above our tube line." This apparently was the reason for not buying from the appellee. As the official of the buyer, whose duty it was to select the equipment to be purchased, said, "If the Sturtevant Company had not offered us this economizer, I do not know what the probabilities are as to our having accepted the Power Specialty's bid for their economizer. * * * I do not think we could have put it in the way it was offered to us."

In the city of Cleveland installation, the customer had two of appellant's noninfringing economizers in which the space between some of the tubes had become clogged due to negligence in operation. Instead of replacing the old tubes, the appellant offered to put in new tubes of the infringing design; the old castings, old fittings, and their equipment were undisturbed except for the tubes and the washing apparatus. Appellee was advised as to the details, and was invited to bid. Itdid not do so, and probably could not have done so successfully. The court below found that, if the appellant had not replaced the old tubes, the appellant would have sold two complete economizers for$30,300. This assumption may not be indulged in.

In the Gates Rubber Company installation, the appellee made two bids; the second at a reduced figure in view of the customer's ability to pay. The consulting engineer said that it could not afford to pay the price offered in either bid, and that, in the event that other economizers had not been available, "we would have increased the boiler surface, probably made the boiler a three-pass boiler instead of a two-pass boiler, and employed such engineering ways which we could [not?] do without sacrificing too much in ...


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