Carson v. American Smelting & Refining Co.

NETERER, District Judge. In response to an order of the master in chancery to file a detailed statement of account in form of' debtor and creditor under equity rules 62 and 63, showing profits accrued to the defendant from the patent infringement, the defendant filed a statement purporting to show expenses by use of infringing furnaces in its several plants and expenses in use of four other types of furnaces which, it claims, were open to defendant’s use and each capable of producing the same result, and which, it assorted, are proper* standards of comparison, showing gain by saving from the use of the invention, if any. The statement (side-charging patent in suit) and the statement of one of the four types of center-charged furnaces, follow: Statement of Account. American Smelting & Refining Company, in Account with George Campbell Carson, John Henry Miller, Trustee, and Carson Investment Company. American Smelting & Refining Company, Debtor. To profits, gains, benefits and advantages realized by and/or accrued to defendant herein by reason of using side-charged reverberatory furnaces, of the character declared to be infringing by the Interlocutory Decree herein, by smelting in said furnaces ores and concentrates, as follows: Period of Operation. Location of Furnaces. ♦Number of Furnaces. Adjudged Infringing Tonnage. Amount of Profits, etc. April 1, 1916, to May 4, 1925. Tacoma i 1,725,562 Nil. June 1, 1923, to Feb. 28, 1927. Garfield 6 2,350,193 Nil. November 14, 1915, to May 27, 1926. Hayden 4 2,347,562 Nil. February 1, 1925, to December 2, 1925. El Paso 2 134,381 Nil. Total adjudged infringing tonnage 6,557,698 Total profits, gains, benefits and advantages................ Nil. ♦See paragraph 18 of preceding statement of facts. American Smelting & Refining Company — Tacoma Plant. Reverberatory Furnace Operations on Side Feeding. Adjudged Infringing Tonnages, Itemized Costs and Costs per Ton, within Alleged Infringing Period, as Shown by Books and Records of Account, April 1, 1916, to May 4, 1925. Description. Year 1916(9 Months). Year 1917. Year 1918. Year 1919. Year 1920. Total. Per Ton. Total. Per Ton. Total. Per Ton. Total. Per Ton. Total. Per Ton. Tons ................ Operating labor..... Repairs ............. Tools and supplies.. Fuel................. Power............... Slag metal loss...... Total............ Waste heat credit... Grand total...... 102,062 $ .0971 .0832 .0287 .4927 .0096 1.0734 139,796 $ .1119 ,1(»75 .0230 .4999 .0110 .9545 $¿7078 .22j4 169,186 $ 23,29050 21,532.53 5,434.03 132,932.98 2,075.34 173,340.66 $ .1377 .1273 .0321 .7857 .0123 1.0246 181,066 $ .1448 .1342 .0230 1.1629 .0262 .8084 215,434 $27^93 29,317.96 2,768.82 247,794.37 6,109.91 154,499.30 $ .1268 .1361 .0129 1.3502 .0284 .7172 $ 9,906.88 8,487.52 2,928.78 50,288.47 980.29 109,555.54 $ 15,6iS.54 15,031.19 3,211.04 69,888.80 1,530.75 133,437.67 $ 26,216.98 24,296.13 4,165.51 210,558.38 4.740.22 146,370.78 $182,147.48 22,811.35 $1.7847 .2235 $1.5612 $238,747.99 30,804.19 $358,612.04 46,101.83 $2.1197 .2725 $18472 .>416,348.00 69,042.09 $2.2995 .3813 $467,817.29 78,084.96 $389/73^33 $2.1 atí .3625 $159,336.13 $207,943.80 $1.4874 $312,510.21 ,>->47,305.91 $1.9182 $1.8091 Year 1921. Year 1922. Year 1923. Year 1924. Year 1925 ( 4mo.4days). Description. Per Per Total. Ton. Total. Ton. Total. Ton. Total. Ton. Total. Ton. Tons .............. 198,338 178,786 212,657 ' 240,889 87,348 Operating labor... $ 17,387.31 $ .0877 $ 16,907.57 $ .0946 $ 19,241.49 $ .0905 $ 20,160.12 $ .0837 $ 6,857.26 $ .0785 Repairs ........... 31,082.46 .1567 27,513.64 .1539 31,663.87 .1489 35,054.19 .1455 12,910.74 .1478 Tools and supplies 2,695.45 .0136 • 2,190.15 .0123 1,568.16 .0074 696.16 .0029 325.78 .00*7 Fuel............... 271,553.76 1.36.91 223,100.63 1.2478 168,777.60 .7936 165,003.13 .6850 64,731.11 .7411 Power............. 3,660.60 .0185 4,427.87 .0248 4,899.50 .0230 4,253.02 .0176 1,223.69 .0140 Slag metal loss.... 103.245.97 .5206 115,682.17 .6470 126,864.61 .5966 132,784.31 .5512 47,808.55 .5473 Total.......... $429,625.55 $2.1662 $389,822.03 $2.1804 $353,015.23 $1.6600 $357,950.93 $1.4859 $133,857.13 $1.5324 Waste heát credit 84,925.72 .4282 76,374.04 .4272 63,981.90 .3009 58,830:22 .2442 22,510.24 .2577 Grand total.... $344,699.83 $1.788» $313,447:99 $1.7532 $289,033.33 $1.3691 $299,120.711 $1.2417 $111,346.89 $1.2747 “ [118] American Smelting <5 Refining Company — Tacoma Plant. Summary of Reverberatory Furnace .Operations, Adjudged Infringing Tonnages, Total Itemized Costs and Total Average Cost per Ton on Side-Charged Reverberatory Furnaces, in Comparison with Four Types of Center-Charged Reverberatory Furnaces (Standards of Comparison), Together with Cost Differentials in Total and Per Ton, for Period April 1, 1916, to May 4, 1925. ' Total Tonnage Smelted by Side-Charged Furnaces. Total Costs on Side-Charged Furnaces. Total Costs on Center-Charged Furnaces by Standards of Comparison. Description. No. 1 Basic. No. 2 Fettled. No. 3 Heggie Manger. No. 4 Water-Jacketed. 1,725,562 $ 182,949.58$ 162,652.80 $ 201,237.45 $ 185,755.33 $ 162,652.80 236,890.23 289,798.53 266,045.07 270,443.66 286,990.50 25,983.88 1,604,629.23 33,901.19 12,057.42 12,057.42 12,057.42 12,057.42 Fuel ....................................».............. 1,397,441.02 34,147.66 1,419,576.28 34,147.66 1,419,576.28 34,147.66 1,397,441.02 55,758.23 Slag metal loss........................................ 1,243,589.56 553,466.54 1,091,904.78 511,523.45 1,091,904.78 514,309.43 1,091,904.78 514,309.43 1,091,904.78 511,523.44 Cost Corrections: 4,464.54 4,464.54 4,464.54 4,464.54 Flue dust — Handling, roasting, and smelting— 11,093.03 7,806.02 11,098.03 7,806.02 11,093.03 7,806.02 11,003.03 7,806.02 Matte launder shells — Handling, roasting, and 6,108.10 6,108.10 6,108.10 6,108.10 Foul slag — Handling, roasting, and smelting..... Fettling material — Roasting........................ 12,768.05 60,202.62 12,768.05 41,882.07 12.768.05 41.8821.05 12,768.05 60,202.62 $2,774,477.13 $2,541,168.82 $2,557,028.74 $2,545,925.19 $2,559,971.37 Total cost per ton................................... $1.6079 $1.4727 $1.4819 $1.4754 $1.4836 Differential in total cost In íavor ol center-$233,308.31 $217,448.39 $228,551.94 $214,505.76 Differential in cost per ton o£ charge smelted.... $0.1352 $0.1260 $0.1325 $0.1243 Tlie other three are of like form. The statement also contains the claim that producing matte in the furnace is one of many steps in producing copper, etc., from ore; that in carrying out the numerous steps of the process in the producing of blister and refined copper, the defendant has used, and used throughout all the time, a large number of machines and devices patented either in whole or in part, and processes and steps in the processes, patented or open to the public, and apparatus, tools, instruments, appliances, and the like, which are patented. It sets out the following, as a partial list, either in whole or in part: Vibrating screens of various types, crushers of various types, grinders of various types, rolls of various types, conveyers of various types, electric motors, electric generators, sampling machines and apparatus, roasters, roaster arms, air seals for roaster feed chutes, coal feeders, coal burners, oil burners, features of reverberatory furnace construction, convertors, convertor linings, and methods of applying, turbine pumps and engines, air compressors, silica guns, locomotive and traveling cranes, electric dust precipitators or various types, elevators, recording pyrometers, thermo couples, stack testers, gauges of various kinds, coal pulverizers, coal dryers, casting machines, pressure recorders of various kinds, meters of various kinds, valves and gates of va rious kinds. That in the Garfield smelting plant there are upwards of 150 different machines and devices, either marked patented or known to be patented in whole or in part, used in the production of blister copper, and a correspondingly large number in each of the other copper smelting plants, and many improvements are used which are open to the public, and the statement shows there was no profit. At bar it was stated that there was an actual loss in the operation by use of the side-charging furnace over that shown by the proper standards of comparison. The plaintiff moved an order that defendant furnish a supplemental statement with respect to all its plants, setting forth in detail by figures, first, the cost of converting the matte produced in the blister copper; seeond, the cost of refining the blister copper and other values in the saleable form; third, all receipts and returns from treatment of ores for customers, and other values, where the defendant did not sell the copper, but returned and delivered the same to said customers; fourth, all receipts and returns, etc., from all sales or other dispositions by defendant of all copper and other values resulting from the matte produced in the infringing furnaces by the infringing process. The plaintiff also, by oral motion, sought [119] to strike out parts of the defendant’s state-, ment, and propounded special interrogatories to be answered by the defendant, also moved that the defendant he required to file with the master its various annual statements to its stockholders, showing receipts and disbursements, and net profits realized during tbe infringing period. Tho master held that the issue to be determined is: “What advantage did the defendant derive from using the complainant’s invention over what he had in using the other processes then open to the public and adequate to produce an equally beneficial result? The fruits of that advantage are his profits.” And, so determining, he held that the defendant can only be required to account for the savings or advantages, if any, to tho defendant derived from using the infringing furnace as compared with the use of some other type of furnace, or means adequate to produce the same result, and open to its use at the time of the infringement, and that the account filed, on its face, meets the requirements, when the relative cost of using the infringing furnace is shown, as compared with other standard types of furnaces whieh weré open to the defendant, and adequate. The master denied the plaintiff’s motion to require the filing of a supplemental statement with respect to all its plants; also denied the motion to strike those parts of the defendant’s statement of account whieh relate to the proposed standards of comparison, except waste heat credit; denied the motion on special interrogatories; also denied the motion requiring it to produce and file its published annual statements to its-stockholders showing its receipts and disbursements. This was denied with a reservation that, should subsequent developments show materiality, tbe motion might be renewed. Exceptions were taken to all of the rulings, and on plaintiff’s motion the records were certified to this court for review and direction to .the master in chancery as to the course of procedure. On behalf of the plaintiff it is asserted that all proofs offered should be taken, so that the appellate court may render a final decree and not remand the ease for a new trial. The rule of procedure in this court is, and has been, in equity or admiralty trials, to receive all offered proofs, if under any theory they may be material, even under the new equity rule 46, whieh says: “The trial court shall pass upon the admissibility of all evidence offered as in actions at law.” But when it clearly appears that the evidence is not within the issue, it should not be taken. First Nat. Bank v. Abbott (C. C. A.) 165 F. 852. See, also, Dowagiac Mfg. Co. v. Lochren (C. C. A.) 143 F. 211, 6 Ann. Cas. 573; Western Union Tel. Co. v. Amer. Bell Tel. Co. (C. C. A.) 203 F. 785; Vacuum Cleaner Co. v. Platt (C. C. A.) 196 F. 398. Rule 62: “The master shall * * * have authority * * * to require production of all books, papers, writings, vouchers, and other documents. * * * ” Rule 63: “All parties accounting before a master shall bring in their respective accounts in tho form of debtor and creditor, * * * and the other party may examine the accounting party by viva voce or upon interrogatories as the master may elect.” Tho issue before the court rests upon the relation of the tendered statement to equity rule 63. If this rule is satisfied, the motion to strike, and the interrogatorios, and tho demand for annual statements to the stockholders must fail. The first inquiry is: Did the defendant make profit from the use of the invention, as compared with other means then adequate and open to the publie to obtain equally beneficial results (Dunkley Co. v. Central Cannerie Co. [C. C. A.] 7 F.[2d] 972; Mowry v. Whitney, 81 U. S. 620 [14 Wall.] 20 L. Ed. 860; Tilghman v. Proctor, etc., 125 U. S. 136, 8 S. Ct. 894, 31 L. Ed. 664), or did the defendant save itself from loss by the use of the invention. Cawood Patent, 94 U. S. 695, at 710, 24 L. Ed. 238. The record is replete with evidence of the intelligent conscientious and painstaking attention given by Judge Ellis, the master, who has had long and creditable judicial experience as Justice and Chief Justice of the Supreme Court of the state, to the determination of the issue before the court. He has analyzed, distinguished, and applied all of the cases cited by the respective parties in the exhaustive oral arguments, supplemented by written briefs. The statement discloses the number of furnaces operated at the several places and infringing tonnages, and in the profit column is “nil.” Objection is made to the employment of “nil,” because it is not a designation in dollars and cents. This is supercritical, because it expresses “nothing,” and is as fully within the intent and meaning of rule 63 as “$0,000. Following this statement is a statement of account for operating on side-feeding furnace (infringing patent), disclosing tho tonnage treated, cost of labor, repairs, tools and supplies, fuel, power, slag metal loss, and waste heat credit (waste heat credit is stricken) from April 1, 1916, to May 4, 1925, [120] followed by a statement of the several furnaces as standards of comparison, covering the same furnaces and the same period of time. The form of the statement, I think, is within the intent and meaning of rule 63. The plaintiff can recover only the difference between the standards of comparison which the defendant had a right to use, and the infringing process, which he did use. If there was no profit from the use of the patent over and above the profit on the standards of comparison, no profit or gain could be noted in the statement. Plaintiff, at bar, admitted that, if the defendant used some process not infringing, which accomplished the same results, it would be entitled to show the cost under that process, and the profit which the defendant must account for is the difference between what it would have cost it under the standards of comparison and what it did cost under the patent; that is conceded to be the law. This information is disclosed by the statement. . Equity rule 63 does not change substantive law, and the substantive law must control; and the fact that no credit'or gain is disclosed by the statement over the gain without infringement, cannot alter .the form of the statement, and if the defendant gained nothing from the use of the plaintiff’s invention, there can be no decree for profits; and the plaintiff’s remedy is by an action at law for damages. Tilghman v. Proctor, supra. The many cases cited by the plaintiff can be classified, and have application: When the profit can only be produced by the sale of such patented means, the entire profits from the sale are material, because recoverable (Carborundum Co. v. Electric etc. Co. [C. C. A.] 203 F. 976; Byerly v. Sun. Co. [D. C.] 226 F. 759; Western Glass Co. v. Schmertz Wire Glass Co. [C. C. A.] 226 F. 730; Expanded Metal Co. v. Gen. Fireproofing Co. (D. C.) 247 F. 899-908; Hemolin Co. v. Harway, etc., Co. (C. C. A.) 166 F. 434; Producers’, etc., Corp. v. Lehmann [C. C. A.] 18 F.[2d] 492-496); and where all profits resulted and could only be produced by combination of several patented devices, profits are material because they must be accounted for and apportioned (Kintner v. Atl. Com. Co. et al. [D. C.] 294 F. 136); or where the total commercial value is derived from the unlawful use of a patented process, the entire profits from the sale thereof are material, because such profits are attributable to the invention (Phila Rubber Works Co. v. U. S. Rubber, etc., Co. (D. C.) 276 F. 600, affirmed [C. C. A.] 277 F. 171; Elizabeth v. Paving Co., 97 U. S. 126, 24 L. Ed. 1000); or when the total value of a device as a marketable article is attributable to a patented invention of an essential part of such device, the entire profits from the sale are material, because profits must be accounted for as essentially attributable to the invention (Comp. Scales Co. v. Toledo Comp. Scales Co. [C. C. A.] 279 F. 648; Crosby Steam Gage & Valve Co. v. Consol., etc., Co., 141 U. S. 441, 12 S. Ct. 49, 35 L. Ed. 809; Wales v. Waterbury Mfg. Co. [C. C. A.] 101 F. 126); or where a distinct part of a mechanism is covered by patent, the entire profits derived from the sale of such infringing mechanism are material, because they must be apportioned, and the patentee is entitled to the part attributable to his invention (Seeger Refrig. Co. v. Am. Car & Found. Co. [C. C. A.] 219 F. 565; Beckwith v. Malleable Iron Range Co. [D. C.] 207 F. 848; Coffield Motor Washer Co. v. Wayne Mfg. Co. [C. C. A.] 255 F. 558; Starr Piano Co. v. Auto-Pneumatic Action Co. [C. C. A.] 12 F.[2d] 586; Westinghouse, etc., Co. v. Wagner, etc., Co. [C. C. A.] 281 F. 453; Dowagiac Mfg. Co. v. Minnesota, etc., Co., 235 U. S. 641, 35 S. Ct. 221, 59 L. Ed. 398; Taylor v. Steuernagel [C. C. A.] 19 F.[2d] 298); but where the thing produced, or partially produced, by the use of the infringing means is not patented, or can be produced, or has been long produced, by means and methods open to the public, and not embodying the patented means, the profits are immaterial, because the infringer’s profits from the use of the infringing means consists of the fruits of the advantage in saving or expenses or gains in efficiency as compared with the use of other non-infringing means adequate and producing the same result and open to use during the time of infringement, and this brings us to the issue at bar. Mowry v. Whitney, 81 U. S. (14 Wall.) 620, 20 L. Ed. 860; Cawood Patent Case, 94 U. S. 695, 24 L. Ed. 238; Tilghman v. Proctor, 125 U. S. 136, 8 S. Ct. 894, 31 L. Ed. 664; Sessions v. Romadka, 145 U. S. 29, 12 S. Ct. 799, 36 L. Ed. 609; Webster Loom Co. v. Higgins (C. C.) 43 F. 673; Columbia Wire Co. v. Kokomo Steel & Wire Co. (C. C. A.) 194 F. 108; Coupe v. Royer, 155 U. S. 565, 15 S. Ct. 199, 39 L. Ed: 263; McCreary v. Pa. Canal Co., 141 U. S. 459, 12 S. Ct. 40, 35 L. Ed. 817; Brown v. Lanyon Zinc Co. (C. C. A.) 179 F. 309; Morgan Const. Co. v. Forter-Miller Eng. Co. (C. C. A.) 234 F. 324; Cambria Iron Co. v. Carnegie Steel Co. (C. [121] C. A.) 224 F. 947; Minerals Sep. Co. v. Butte Superior, etc., Co. (D. C.) 274 F. 878; Southern Textile Mch. Co. v. Fay Stocking Co. (C. C. A.) 259 F. 243-246; Amer. Pneumatic Serv. Co. v. Snyder (D. C.) 241 F. 274; Empire Rubber & Tire Co. v. De Laski, etc., Co. (C. C. A.) 281 F. 1; Dunkley v. Cent. Cal. Canneries (C. C. A.) 7 F.(2d) 972 (9th Circuit). And this conclusion disposes of the question here presented. The statement of account, of itself, is • not evidence, nor does it establish the propriety of the standards used. The propriety of the standards is not before the court. That is an issue of fact to be determined by evidence. The true standard must be determined upon competent evidence. The tendered statement of account performs only the functions of a pleading. Armstrong v. Belding Bros. & Co. (D. C.) 280 F. 895. The account here is in striking contrast with that in the Schoenhofen Brewing Co. v. Alvey-Ferguson Co. (C. C. A.) 14 F.(2d) 945, where no fact was stated, but rather conclusions and arguments expressing doubt as to whether there were profits, and the contingency in that ease is not present here. Nor is the doctrine of confusion of profits (Westinghouse v. Wagner, 225 U. S. 604, 32 S. Ct. 691, 56 L. Ed. 1222, 41 L. R. A. [N. S.] 653) now before the court. The change to the furnace in issue by defendant’s engineers at large expense in the many smelting plants of the defendant, over known appliances, and operation for more than 10 years, may be very persuasive against the contention of defendant’s experts who prepared the account, but that is not now before the eourt. The truth must be sought, and the master will enforce any rule or permissible method to produce it. Penn Steel Co. v. N. Y. City (C. C.) 182 F. 155, clearly has no application, nor does Beckwith v. Malleable Iron Range Co. (D. C.) 207 F. 848, illuminate the applicability of equity rule 63 to the issue before the court. The question of examination of books and records under rule 62, although referred to in argument, is not before the court. It has been definitely disposed of by the master at page 326 of the record, in which he says: “I do think he has the right to examine every book that bears upon the statement as filed, of the account as compiled by the defendant; and not only totals that are shown there; but everything that bears upon eveiy item that goes into that.” It is thus apparent that the master has the light conception of equity rule 62 and has made application thereof. The master has likewise left open the question of the statements to stockholders to be again considered when the proper occasion arises. I think, in view of the statement filed and announcement at bar that defendant lost upwards of $877,000 by reason of the use of plaintiff’s patent, that the statements to stockholders or the records and documents of the defendant disclosing the result of operation for two years immediately before and two years immediately after installation of plaintiff’s patent at each plant, should be now produced for counsel’s information and guidance in examination of the experts who prepared the account of debtor and creditor. While the court is not concerned with ultimate profits, this is fact evidence and may bear upon the credibility or weight to be given to the contention now presented by the defendant. Whether further statements shall be produced will be disposed of by the master in the manner already indicated. With this qualification, the ruling of the master is affirmed.