Opinion ID: 286288
Heading Depth: 1
Heading Rank: 5

Heading: Damages for Unfair Competition

Text: 46 The district court awarded appellee damages for unfair competition for appellants' sales of machines and die assemblies prior to June 24, 1952, i.e. during the pre-infringement period. Appellants contend that this award, based on appellee's lost profits, is speculative, is not supported by the evidence, and should be disallowed. In turn, appellee contends that it is entitled to additional awards for damages for the patent infringement and post-infringement period. 47 a. Award for Pre-Infringement Period 48 In an action for unfair competition the aggrieved party may recover profits of the offender, provided they are 'derived from unfair competition' or are damages by way of lost profits of the plaintiff if the losses can be 'directly attributed to the unfair acts' of the defendant. An accounting is not justified where proof of the profits would be speculative. Ronson Art Metal Works, Inc. v. Gibson Lighter Mfg. Co., 1957, 3 A.D.2d 227, 159 N.Y.S.2d 606. 49 In our prior opinion this court held that appellants had committed acts of unfair competition by reason of their fraudulent marketing of the Chinese copies of appellee's machine and directed an 'assessment of damages sustained    by reason of the fraudulent practices   ' (269 F.2d at p. 277). In computing damages for unfair competition the master limited the award to loss of profits from the sale of appellee's 'simulated Amco A-type machines,' noting that this court had referred to these machines as constituting unfair competition by virtue of their detailed simulation of the Amco machine in conjunction with the fraudulent marketing practices. 50 Appellants argue that any lost profits from unfair competition are speculative, that it may not be assumed that appellee would have made the sales actually made by appellants, and there is no evidence that any purchaser of appellants' machines was under the impression or misled into believing he was buying one of appellee's machines. This contention was answered in part in our opinion where it was said: 'Nor are we, in view of the deliberate plan to poach unjustifiably on Amco's goodwill, disposed to debate in detail the probabilities of confusion' (269 F.2d at 276). The contention was answered further by the district court as follows: 51 'From February, 1952, through June, 1952, defendants produced slavish copies of plaintiff's machines and die assemblies, 269 F.2d at 262, and this period marked the inception of their scheme of willful pirating. During this period defendants, as plaintiff's sole competitor, serviced the same general geographical areas as plaintiff and, it appears, made sales to many who were customers of plaintiff.    52 'On these facts, it is a fair inference that defendants' acts of unfair competition were responsible for the particular sales and that if defendants had not made these sales, plaintiff would have made them together with its usual profits' 14 (63a). 53 We agree with the master and district court that an award of $3,884.07 for damages for the period January through June, 1952, was proper. 54 b. Failure to Award Damages for Unfair Competition During Infringement Period 55 Appellee argues that even though the claims for patent infringement and unfair competition arise from the same infringing acts of appellants, they are separate and distinct causes of action and justify separate awards. They rely upon paragraphs 4 and 5 of the interlocutory judgment of April 26, 1961, paragraph 4 providing for an accounting for 'damages adequate to compensate plaintiff for the infringement' and paragraph 5 providing for 'damages sustained and the profits lost by plaintiff on account of the unfair trade practices' by the appellants. 56 We agree with the district court that appellee 'has proved no damages resulting from defendants' acts of unfair competition during the patent infringement period for which plaintiff has not been compensated by the award of damages for infringement' (58a), and that the additional claim for damages for unfair competition during this period accordingly was properly denied. An award for unfair competition during the patent infringement period would in effect allow a double recovery. 57 The rule here applicable was well stated in Henry Hanger & Display Fixture Corp. v. Sel-O-Rak Corp., 5 Cir. 1959, 270 F.2d 635, 644: 58 'Where a patent is held valid and infringed a claim for damages from unfair competition arising from the infringement may be joined with the cause of action for infringement (citing cases).    The two claims, the one for infringement and the other for unfair competition, may differ somewhat in the theory of legal liability. The acts of the defendants which the plaintiff says constituted unfair competition were acts of patent infringement or were so directly related to infringement as to constitute a part of it.    We think there was no evidence of any injury sustained by the plaintiff by reason of unfair competition from the defendants for which the plaintiff is not compensated by the court's judgment. The denial of a separate award for unfair competition is not erroneous.' 59 c. Failure to Award Damages for Unfair Competition During Post-Infringement Period 60 Appellee seeks an additional award for alleged acts of unfair competition subsequent to the expiration of the patent in 1954. This claim is predicated upon appellant's continued manufacture and sale of the Amco-type assemblies which incorporate the Amco-yoke and the sale of (R) remodeled and (C) converted assemblies. 61 The master and district court found that appellee had failed to show a continuation of any unfair trade practices subsequent to the expiration of the patent and interpreted the prior decision of this court as permitting appellants to deal in remodeled die assemblies which were considered 'parts.' The master found further that after the patent had expired the 'remodeled' and 'converted' die assemblies, as well as new die assemblies sold as parts, were properly identified (31a). 62 In holding that a complete assembly is a 'part' within the meaning of the interlocutory judgment, as modified by this court, the district court said in part: 63 'Although not entirely free of ambiguity, the modification in the court's view conveys that complete assemblies are to be considered 'parts.' A combination of factors support this construction. The Court of Appeals, 287 F.2d at 419-20, noted that it intended no departure from the basic principles of the law of unfair competition; that the patent in suit had expired; that defendants then manufactured a machine which functioned as well as plaintiff's but was markedly distinguishable; and that defendants after expiration of the patent would have been entitled to copy plaintiff's patent but for their fraudulent marketing. It thus seems fair to hold that the court did not intend to unreasonably perpetuate plaintiff's monopoly beyond the expiration date of the patent, but only to enjoin defendants from the sale of unidentified A-type assemblies and the use of A-type assemblies in their new machines. A construction of the term 'parts' so as to exclude complete die assemblies would perpetuate plaintiff's monopoly' (61a, 62a). 64 We agree with the district court's construction of the interlocutory judgment as modified by this court and hold that the proof was insufficient to justify an award for unfair competition in the post-injunction period. 65 Judgment affirmed.