Westinghouse Electric & Mfg. Co. v. Wagner Electric & Mfg. Co.

RINER, District Judge. This was a bill in equity filed by the appellant, Westinghouse Electric & Manufacturing Company, in the Circuit Court of the United States for the Eastern District of Missouri. The bill charges the appellee, Wagner Electric & Manufacturing Company, with infringement of letters patent of the United States, No. 366,362, dated July 12, 1887, issued to George Westinghouse, Jr., and by him assigned to the appellant. The patent relates to improvements in electrical converters or transformers, and the bill prayed for an injunction and an accounting. The general nature and object of the invention is thus stated by the patentee: — 362 — “The invention relates to the construction of a class of apparatus employed for transforming alternating or intermittent electric currents of any required character into currents differing therefrom in certain characteristics. Such apparatus are usually termed ‘induction coils’ or ‘converters.’ The object of this invention is to provide a simple and efficient converter, which will not become overheated when employed for a long time in transforming currents of high electric motive force, and which will be thoroughly ventilated.” The following drawings, copied from the patent, show a cross-section and a longitudinal section of appellant's transformer: Having reference to the above drawings, the patentee, in describing the invention, says: “Referring to the figures, A represents the core of the converter, and Gl- and O2 the respective coils. The core is preferably composed of thin plates of soft iron, a, a, separated individually or in pairs from each other by thin sheets' of paper or other insulating material. This insulating material is preferably applied to one surface of the plates by being glued or pasted thereto, and these surfaces may lie all in the same direction, thus separating the irlates individually, or alternate plates may have their covered surfaces in one direction and the intervening plates have their covered faces in the opposite direction, thus magnetically separating the plates in pairs. The pilates are preferably constructed with two rectangular openings, e* and e2, through which the wires pass. For convenience in inserting the coils, or rather in applying the plates to the coils after the latter have been wound, a cut is made from each opening, as shown at b, b. By bending the eríds, e, c, upward, the plates may then be thrust into position, and the ends, c, c, then close about the coils. The tongues, es, of succeeding plates, are preferably inserted from opposite sides. I do not, however, herein broadly claim an induction coil having its core constructed of thin plates formed in the manner just described; but such invention is claimed in an application of even date herewith, filed by Albert Schmid. Each group of — say five or six — plates thus applied is preferably separated from the succeeding group by air-spaces. These may be produced by passing tubes, fi, fi, which may be of soft iron or other metal, or of vulcanized fiber,.along the lengths of the plates. It may be sufficient in other instances to block the group of plates apart at intervals, instead of extending the tubes the entire length. Preferably, also, the primary and secondary coils, Ci, C2, are separated from each other in a similar manner^ In this instance blocks or tubes, f2, of nonconducting materials, are used. The tubes may be perforated, as shown at f=, fs. Where the converter is to he used in open air, the tubes, fi and f2, would permit a free circulation of air, and thus aid in keeping the converter cool. It may be preferred in some instances to surround, the converter with some oil or paraffine, or other suitable material, which will assist in preserving insulation and will not be injured by heating. This material, — 363 — when ill a liquid form, circulates through the tubes and the intervening spaces of the coils and plait's, mid preserve's the insulation, excludes the moisture, and cools die converter. The entire converter may be sealed into an inclosing case, II. which may or may not contain a nonconducting fluid or a gas.” The patent contains five claims, but the bill charges infringement of claim -1 only, which reads: “The combination, substantially as described, of an electric converter constructed with ojien spaces in its core, an inclosing ease, and a nonconducting fluid or gas in said ease adapted to circulate through said spaces and about the converter.'’ This claim was adjudged valid in Westinghouse Electric & Mfg. Co. v. Union Carbide Co. (C. C.) 112 Fed. 417, and 117 Fed. 495, 55 C. C. A. 230, hereafter referred to as the Carbide Case, and in Westinghouse Electric & Mfg. Co. v. American Transformer Co. (C. C.) 130 Fed. 550, and its validity was also recognized by the Circuit Court in this case. In the foregoing cases it was decided that most, if not all, of the elements of the combination of claim 4 were old in the art; but, the combination being new, it was held patentable, and in this view we concur. The appellee manufactured and sold two types of transformers — the device invotyed in the carbide suit, which was there held to he an infringement of claim 4 of appellant’s patent, and the device referred to in the record as “Type AI.” Both are claimed by appellant to be infringements of claim 4 of its patent. The court below found that áppellee’s type AT device did not infringe claim 4 of appellant's patent, and referred the cause to a master to take and state an account of the “profits, gains, and advantages” received by the appellee, together with all damages suffered by the appellant by reason of the manufacture and sale by the appellee of the transformer held in the Carbide suit to be an infringement of claim 4 of the patent. Upon the incoming of the master’s report, exceptions were filed thereto by the appellee, the exceptions sustained, and a decree awarding appellant nominal damages only was entered. Two questions are presented for decision: First. Did appellee’s transformer, type M, infringe claim 4 of appellant’s patent? Second, what is the proper measure of recovery upon the accounting? These questions will be considered in the order stated. The appellee’s transformer, decided in the Carbide suit to be an infringement of the appellant’s patent, had open spaces, not only between the coils and between the coils and the core, but also open spaces in the core, and as to that device it is admitted in the answer that the decision in that case is res adjudicata and that a permanent injunction should be granted; but the answer denies that the other type of transformer involved in this suit, known as “Type AI,” is an infringement of claim 4 o f plaintiff’s patent, and the appellee insists that, while its transformer, type AT, the only one manufactured by it since the decision in the Carbide suit, has open spaces between the coils, and between the coils and the core, it lias no open spaces in the- core, within the meaning of claim 4 of appellant’s patent, and that the open spaces in the core are one of the principal elements of the combination of the claim in suit, and therefore its type AI device is not an infringement. Thus the question is presented whether the open spaces between the — 364 — coils, and between the coils and the core, found in appellee’s device, type M, can be said to be open spaces in the core, within the meaning of claim 4 of appellant’s patent. It is not contended that the rectangular openings in the core for the purpose of admitting the coils come within the claim; but it is insisted by appellant that the open spaces between the coils, and between the coils and the core, are open spaces in the core, within the meaning of the claim we are now considering. That claim is for a combination, and the rule by which we are to be governed in the determination of the question presented is clearly stated in Water Meter Co. v. Desper, 101 U. S. 332, 25 L. Ed. 1024, as follows: “It is a well-known doctrine of patent law that the claim of a combination is not infringed if any of tbe material parts of the combination are omitted. It is equally well known that if any one of the parts is only formally omitted, and is supplied by a mechanical equivalent, performing the same office and producing the same result, the patent is infringed.” And again, in the same case, the court said: “Our law requires the patentee to specify particularly what he claims to be new, and, if he claims a combination of certain elements-or parts, we cannot declare that any one of these elements is immaterial. The patentee makes them all material by the restricted form of his claim. We can only decide whether any part omitted by an alleged' infringer is supplied by some other device or instrumentality, which is its equivalent.” In Westinghouse Electric & Mfg. Co. v. American Transformer Co., supra, the Circuit Court for the District of New Jersey, in contrasting the several claims of the patent, one with another, for the purpose of more certainly ascertaining the meaning of claim 4, said: “ * * * The ‘spaces’ of claim 4 are ‘open spaces in its core.’ The ‘open space’ of claim 1 is that intervening between ‘parallel primary and seeondary coils.’ The combination of claim 2 has as its elements, first, primary and secondary coils; second, a core composed of laminae of soft iron arranged in groups; and, third, ‘open spaces’ separating said groups. This claim, aside from the coils, specifically refers to the construction of the core, but lacks the elements of ‘an inclosing case’ and ‘a nonconducting fluid or gas in said case adapted to circulate through said spaces and about the converter,’ included in the combination of claim 4. The elements of the combination of claim 3 are, first, a core composed of soft iron plates arranged in groups and, second, ‘open tubes,’ intervening. This claim specifically refers to a particular construction of the core, but, like claim 2, lacks two of the elements of claim 4. Claim 5 includes the following elements: First, primary and"secondary coils; second, a core composed of magnetically separated lamín® of soft iron arranged in 'groups; third, ‘air spaces’ separating the different groups from each other; and, fourth, the arrangement of the lamin® of the several groups in different parallel planes. This claim also specifically refers to a particular construction of the core, but, like claims 2 and 3, lacks the same two elements of claim 4. In the combination of claim 4 ‘open spaces in its core’ as well as an ‘inclosing case’ and ‘a nonconducting fluid or gas’ therein, are ‘substantially as described.’ No doctrine of equivalency can dispense with the open spaces in the core of the transformer, for they are a necessary element of the combination. Without them the claim cannot be satisfied. Open spaces might be produced in the core, other than those specifically set forth in the drawings or description, which would be the equivalent of the latter. The core itself might, for instance, be cut into in various directions in such manner as to expose what may be termed internal heat-dissipating surfaces to the oil or other medium surrounding the transformer, and in such case, the other requirements of the combination being satisfied, infringement could be found. But the essence of — 365 — the first element of the claim insisted on is that the open spaces of the transformer must be ‘in its core.’ ” And, in passing upon this question in the present case, Judge Adams, then presiding in the Circuit Court, said: “These numerous parallel open spaces so shown in the drawings and model, and any other open spaces, whether parallel or not, cutting through the body of the surrounding core and extending into the interior opening containing the coils, are, in my opinion, the ‘open spaces in its core’ contemplated by claim 4. The purpose of these open spaces, as disclosed by the patent and the evidence of experts, is to permit the oil to so bathe the heat-producing surfaces of the transformer, and to so circulate throughout the parts of the transformer, as to preserve the Insulation of the coils, and radiate the heat generated by the transformer's action. The use of oil or paraffine in a tank inclosing the transformer for the purposes just specified has been long known to the art, and is recognized by at least two patents prior in date to complainant’s patent. Accordingly. the' invention has for its main purpose only the physical means for effectually securing this circulation of oil. It deals with the core itself, and divides it up into groups of plates, each group separate from the other in such way as to make numerous parallel open spaces in the core leading from its outer surface on all its four sides into the interior opening made for the introduction of the coils. This interior opening, called in the patent ‘two rectangular openings, ei and ea, through which the wires pass,’ is not, in my opinion, ‘an open space in its core,’ within the meaning of claim 4. I adopt the views of Prof. Cipher with respect to this rectangular opening. He says: ‘The core is not the core of a transformer or converter*until these rectangular openings are made through it’ He says further: ‘These openings give character to the core.’ ‘It is not a core until they exist there.’ ‘The core is in fact given such a form that it surrounds the coil in a certain sense, and the space so surrounded by the core might be called a coil opening.’ Tlie core of a transformer is the iron part of it. It must be so constructed as to permit the introduction of the coils of wire approximately through its center. The wire coil must be put in to make a transformer. I cannot understand how this space left in the inside of the iron for this purpose can be tm opon space hi the core. It might be as well said that the space left on the outside of the iron, between it and the incasing tank, is an open space in the core. The defendant’s device has a space between the coils, and has also this rectangular opening for the introduction of the coils into the core; but, for the reasons above expressed, these are not ‘open spaces in its core,’ within tlie meaning of the patent in suit.” 129 Fed. 604. As already suggested, if we understand appellant’s contention, it is that the term “open spaces in the core,” in claim 4 of its patent, includes and means spaces between the coils, and between the coils and the core, or that such spaces are the equivalent of spaces in the core. But the trouble with this suggestion is that the claim in suit describes no such spaces, and by its particularization impliedly excludes them. In that claim the patentee describes a combination consisting of certain enumerated elements, and by that enumeration he is bound. The Circuit Court held that the open spaces in the core, as described in claim 4, and the open spaces between the coils and between the coils and the core, were physically different things; and that this is so is apparent, we think, from an examination of the patent as a whole. As we fully concur in the conclusion reached by the Circuit Court, that the appellee's device, type M, does not infringe claim 4 of appellant's patent, we pass to the second question, namely, the measure of recovery upon the accounting for the admitted infringement which is predicated upon the type of transformer involved in the Carbide Case. — 366 — ■ At the conclusion of the appellant’s case the appellee demurred to the evidence, on the ground that, under the showing then made, appellant was entitled to nominal damages only. The demurrer was overruled by the master. The appellee then introduced evidence, and the cause was submitted. The master found that each and every part of claim 4 of appellant’s patent was old, with the exception of the air-tight inclosing case; that the patentee made a wholly new combination described in claim 4 of his patent; that this new combination constituted an entirely new transformer, complete in itself; that it was infringed in its entirety by appellee’s transformer; that the entire commercial value of the infringing transformers manufactured and sold by the appellee during the time concerned in the accounting was due to the presence therein of the combination described in claim 4 of appellant’s patent;' that the profits made by the appellee on the infringing transformers were merged in the profits of its general business, so that it was impossible to separate them ;■ that the appellee kept no separate account of the manufacture of the infringing transformers, and did not know and could not furnish the cost of the manufacture of them, nor even an estimate of such cost; that the business of the manufacture and sale of the infringing transformers was so intermingled .and confused with appellee’s general business that approximate results only would be possible; that the profits realized by the appellee- from the manufacture and sale of the infringing transformers, as nearly as it could be reached through “estimates, comparisons, and apportionments,” were approximately 25 per cent, on the net amount of sales of the .infringing transformers; that the-gross sales, after deducting commissions, amounted to $874,060.15; that the labor and material amounted to $529,733.43; that the factory cost amounted to $211,893.37; that the profits realized were $134,433.35; and he recommended that a decree be entered in favor of appellant and against the appellee for that amount. Exceptions were filed to the findings and recommendation of the master, and upon final hearing the court disapproved the report of the master, sustained the exceptions to his findings and recommendation, and in lieu of the decree recommended by the master entered one allowing appellant nominal damages only. The opinion, to which reference was made in the decree, discloses that the court was of opinion that the patented combination of the appellant was only a part of the infringing transformer manufactured and sold by the appellee; that the appellant was not entitled to the entire profits realized by the appellee from that transformer, but only to so much of the profits as was due to the presence in that transformer of the patented combination; that the burden was upon the appellant to show by competent evidence how much of the entire profits was due to the use of its combination; that the appellant had failed to sustain the burden so resting upon it, and the evidence for the appellee threw no light upon the subject; and that the master’s findings and recommendation proceeded upon the erroneous theory that, in- that situation, the appellant could recover the entire profits realized by the appellee from the infringing transformer,, regardless of what portion of those profits arose from the — 367 — use of the appellant’s patented combination. We are unable to concur in the master’s findings. We think claim 4 is a limited detailed claim —open spaces in the core being one of its chief or distinguishing features. This was the view entertained by Judge Amidon upon an application for a temporary injunction, and by Judge Adams at the hearing upon which the case was referred to the master. 129 Fed. 604. See, also, Westinghouse Electric & Mfg. Co. v. Union Carbide Co., 117 Fed. 495, 55 C. C. A. 230; Westinghouse Electric & Mfg. Co. v. American Transformer Co. (C. C.) 121 Fed. 560, 130 Fed. 550. The evidence clearly shows, we think, that the thing principally to be desired in the construction of a transformer is to keep the coils, rather than the core, from becoming overheated. The appellant's patent, claim 1. seems to have proceeded upon the idea that the thing principally to be accomplished was to keep the core from becoming overheated, and to that end it provided that one element of the combination covered by claim 4 was to be the open spaces in the core; nothing whatever being said in that claim about open spaces between the coils, or about, open spaces between the core and the coils. Bearing-in mind that the thing desired is to prevent the overheating of the coils, it will he seen that appellant’s combination, claim 4, operates to ¡hat end only in so far as (lie core, if becoming overheated, would have a tendency to heat the coils. The appellee, in our view, improved upon appellant’s device by providing, in addition to spaces in the core, for spaces between the coils and spaces between the core and the coils, through which the oil or other cooling medium could circulate and thereby much more certainly and efficiently accomplish the purpose desired, viz., keeping the coils at a proper state of temperature. This, we think, was a material and substantial improvement on appellant's combination, claim 4. It must, of course, be conceded that while appellant’s combination, claim 1, all hough really designed to keep the core from becoming overheated, also tended to keep the coils from becoming overheated; but the appellee’s transformer much more efficiently accomplished the result desired by providing for a circulation o£ oil or other cooling- medium through the open spaces between the coils, and between the core and the coils, as well as through the open spaces in the core. We conlude, therefore, that the master was in error in finding that the entire commercial value of the infringing transformers manufactured and sold by the appellee during the time concerned in the accounting was due to the combination described in claim 4 of appellant’s patent. And to the extent that the appellee lias improved upon that which was covered by appellant's patent, claim 4, the appellant cannot demand the appellee’s profits, because the only right of the appellant to complain of the appellee is in the use by the appellee of the patented combination, claim 4, and the only right which the appellant has to profits realized by the appellee is confined to such profits as resulted solely from the use of appellant’s combination, claim 4; the profits resulting from the improvement made by the appellee being something in which the appellant has no interest. The evidence shows, we think, that the open spaces between the coils, and between the core and the — 368 — coils, performed a very substantial office, and that if added to spaces in the core would, as already suggested, necessarily accomplish the desired result more certainly and more efficiently. The patented device covered by claim 4, being, as we view it, a limited detailed claim, and not being generally for a circulatory system throughout the heat producing parts of the transformer, and the appellee’s infringing transformer embracing something of value not covered by that claim, viz., open spaces between the coils, and between the coils and the core, we are of opinion that the appellant, whose patent covered only part of the infringing device, is not entitled to recover all the profits made by the appellee, but only such as resulted from the patented invention. Stirrat v. Excelsior Mfg. Co., 61 Fed. 980, 10 C. C. A. 216; Baker v. Crane, 138 Fed. 60, 70 C. C. A. 486; Robertson v. Blake, 94 U. S. 728, 24 L. Ed. 245; Garretson v. Clark, 111 U. S. 120, 4 Sup. Ct. 291, 28 L. Ed. 371. The master’s report shows that appellant offered no evidence upon the question of damages, but relied entirely upon the position that the amount which it was entitled to recover could be based upon the profits realized by the appellee from the sale of the infringing device. The master found that the appellee kept no separate account of its profits realized from its infringing device, but, on the contrary, that the profits made by appellee on the infringing transformers were merged with the profits of its entire business, so that it was impossible to separate them, and that the appellee did not know and could not furnish the cost of the manufacture of the infringing transformers, or even an estimate thereof. We do not think the mere failure to keep separate the profits derived from the infringing device, under the circumstances disclosed by the record, warrants the application of the equity rule that where one wrongfully 'mingles his goods with those of another, so that they are indistinguishable from the mass, the party injured is entitled to take the whole. This rule has been applied in cases of the invasion of a copyright, where the drongdoer has mingled in the book matter to which a copyright does not properly extend with matter covered by the copyright, “the two necessarily going together, when the volume is sold as a unit, and it being impossible to separate the profits on the°one from the profits on the other, and the lawful matter being useless without the unlawful.” Callaghan v. Myers, 128 U. S. 617, 9 Sup. Ct. 177, 32 L. Ed. 547. There is no evidence tending to show that the appellant’s failure to show how much of the appellee’s profit resulted from the infringed combination and how much from the presence of the other elements of the infringing transformer was due to any refractory or deceitful conduct on the part of the appellee, such as destruction or hiding of the books, or refusal to produce them for the use of the appellant. The mere failure on the part of the appellee to'keep an account separating the profits prior to the sustaining of appellant’s patent and at a time when, as the record shows, appellee believed in good faith that it was not invading any right of the appellant, is not conduct which would render the appellee liable as a confuser of goods within the rule just stated, nor such conduct as would relieve appellant from the necessity of carrying the prescribed burden of proof. Seymour, et al. v. McCormick, 57 U. S. 480, 14 L. Ed. 1024. In Keystone Mfg. Co. v. — 369 — Adams, 151 U. S. 139, 14 Sup. Ct. 295, 38 L. Ed. 103, the Supreme Court, discussing a similar question, said: “While it is undoubtedly established law that complainants in patent cases may give evidence tending to show the profits realized by defendants from use of ihe patented devices, and thus enable the courts to assess the amounts which the complainants are entitled to recover, yet it is also true that great difficulty has always been found, in the adjudicated cases, in applying the rule that the profits of the defendant afford a standard whereby to estimate the amount which the plaintiff is entitled to recover, and in defining the extent and limitations to which this rule is admittedly subject. Such a measure of damages is of comparatively easy application, where the entire machine used or sold is the result of the plaintiff’s invention; but when, as in the present case, the patented invention is but one feature in a machine embracing other devices 1hat contribute to the profits made by the defendant, serious difficulties arise. It is unnecessary, in this opinion, to review the numerous cases, some at law, others in equity, wherein this court has considered various aspects of this question. It is sufficient to say that the conclusions reached may be brieffy stated as follows: It is competent for a complainant, who has established the validity of his patent and proved an infringement, to demand, in equity, ail account of the profits actually realized by the defendant from his use of the patented device; that the burden of proof is on the plaintiff; that where the infringed device was a portion only of defendant’s machine, which embraced inventions covered by patents other than that for the infringement of which the suit was brought, in the absence of proof to show how much of that profit, was due to such other patents, and how much was a manufacturer’s profit, the complainant is entitled to nominal damages only” — citing Seymour v. McCormick, 16 How. 480, 14 L. Ed. 1024; Rubber Co. v. Goodyear, 9 Wall. 788, 19 L. Ed. 566; Mowry v. Whitney, 14 Wall. 620, 20 L. Ed. 860; Elizabeth v. Pavement Co., 97 U. S. 126, 24 L. Ed. 1000. In Garretson v. Clark, 111 U. S. 120, 4 Sup. Ct. 291, 28 L. Ed. 371, the Supreme Court quoted with approval a statement of the rule announced by the Circuit Court, as follows; “The patentee must in every case give evidence tending to separate or apportion the defendant's profiis and the patentee’s damages between the patented feature and the unpatented features, and such evidence must be reliable and tangible, and not conjectural or speculative.” And upon this question the burden of proof is upon the complainant. If he fails to carry this burden, he is entitled only to nominal damages. In Tilghman v. Proctor, 125 U. S. 136, 8 Sup. Ct. 894, 31 L. Ed. 664, the court, in the course of its opinion, said: “The infringer is liable for actual, not for possible, gains. The profits, therefore, which he must account for, are not those which he might reasonably have made, but those which he did make, by the use of the plaintiff’s invention; or, in other words, the fruits of the advantage which he derived from the use of that invention over what he would have had in using other means than open to the public and adequate to enable him to obtain an equally beneficial result. If there was no such advantage in his use of the plaintiff’s invention, there can he no decree for profits, and the plaintiff’s only remedy is by an action at law for damages.” Here the appellant failed to prove by reliable or tangible evidence , that the entire value of the infringing transformer as a marketable artide was properly and legally attributable to appellant’s patented combination embodied therein, and so, in the light of the decisions above cited, and many others, which we have examined, announcing the same rule, we think that the appellant is entitled to recover nominal damages only; in other words, that as part only of the profits made by the — 370 — appellee are attributable to the appellant’s combination, the balance being attributable to the presence in the infringing device of elements not included in that combination, and as the appellant failed to make proof of how much of the total profits was due to the presence of its combination in the infringing device, there is nothing upon which more than a nominal recovery could be grounded.' The conclusion reached is that the decree finding that the' device, type M, without open spaces in the core, now manufactured by the appellee, does not infringe appellant’s patent, and that the appellant is entitled to nominal damages only on account of the infringing device, must be affirmed.