Opinion ID: 1475251
Heading Depth: 1
Heading Rank: 2

Heading: Method of Stating Account.

Text: The defendants stated the account by deducting the total of the costs and expenses incurred in the manufacture of laminated glass during the entire accounting period from the total receipts from the sale of laminated glass for the same period. They thus treated the infringement as one continuing course of conduct and offset the profits derived from some sales by losses sustained from others. The master adopted this method and was sustained by the District Court. The plaintiff assigns this as error. It contends that proper patent accounting procedure requires that, where the infringement of a product claim is being accounted for, each sale constitutes a separate infringement; that the profit derived from each sale must be accounted for and turned over to the owner of the patent; and that if some sales result in losses, the infringer must bear those losses and may not offset the loss-incurring sales against the profitable sales. The plaintiff submitted an independent account in which it enumerated the individual sales made by Duplate, giving the name of the customer, the number of square feet of glass sold, and the net sales price. It set out the cost of material and labor of each sales unit on a monthly average basis computed by the same method as that used by the defendants in keeping their books, and allocated a proportion of the factory and general overhead to each sales unit. It offset the monthly average cost per square foot of laminated glass against the specific price per square foot for which the laminated glass was sold. It thus determined which sales were made at a profit and which at a loss. The master refused to adopt this method because of his conclusion that average costs do not reflect specific costs. The plaintiff's method of separating the sales into profitable and unprofitable sales has been approved by us in McKee Glass Co. v. H. C. Fry Glass Co., 248 F. 125, 128, wherein Judge Woolley, speaking for this court, said: The subject-matter of the reference to the master was injuries sustained by the complainant arising directly from infringing sales. These were measured by profits earned and damages inflicted. As the infringing sales were of two classes, those creating profits and those carrying losses, the master's inquiry was directed to the amount of profits on the former, and the measure of damages on the latter, or on both. Against the defendants' contention that the complainant was entitled only to net profits on all sales after deducting losses on some from profits on others, the master held, we think correctly, that, as the complainant was not a quasi partner of the infringers, losses incurred by the defendants through their wrongful invasion of the complainant's patent were not chargeable to the complainant (Crosby Steam Gage & Valve Co. v. Consolidated Safety Valve Co., 141 U.S. 441, 12 S.Ct. 49, 35 L.Ed. 809), and, therefore, the complainant was entitled to all profits realized by the defendants without deduction of any losses they had sustained. We find no error in either the theory or amount of this finding. See, also, Electrical Engineers Equipment Co. v. Champion Switch Co. (D.C.) 49 F.(2d) 359. The reason assigned by the master for refusing to follow this method is that in the instant case average costs do not reflect specific costs. We do not find any substantial factors in the instant case on this issue which differentiate it from the cited cases. The account must be restated in accordance with the plaintiff's method.