Court Opinion

ID: 9466393
Source: CourtListenerOpinion
Date Created: 2023-08-05 01:14:32.248777+00
Date Added: 2024-06-11T17:39:42.511372
License: Public Domain

*1362ALDISERT, Circuit Judge,
dissenting.
Over twenty years ago, Professor Charles Alan Wright published an incisive article entitled The Doubtful Omniscience of Appellate Courts,1 in which, quoting Dean Leon Green,2 he observed that appellate courts have drawn unto themselves practically all the power of the judicial system. Professor Wright explained:
Subtle rules about presumptions and burden of proof, elaborate concepts of causation and consideration and the rest, have been devised in such a way that unless the appellate judge handling the case is a dullard, some doctrine is always at hand to achieve the ends of justice, as they appear to an appellate court.
Within the last decade the appellate judges have become bolder. No longer do they hide their assumption of power beneath an elaborate doctrinal superstructure. Instead today’s appellate courts are inventing new procedural devices by which their mastery of the litigation process can be made direct rather than devious.
[One such device is] review by the appellate court of the size of verdicts. .
Wright, supra note 1, at 751.
The present appeal, like Trio Process Corp. v. L. Goldstein’s Sons, Inc., 533 F.2d 126 (3d Cir. 1979) (Trio Process III), is a review of the size of a verdict, albeit an award made by a judge, and verdicts have traditionally been the sole responsibility of a fact-finder.3 In Trio Process III, this court, in my view, improperly trespassed upon the fact-finding authority of District Judge John P. Fullam by vacating his award and employing what Professor Wright labeled an “elaborate concept of causation.” This was done solely for the purpose of inducing the fact-finder to award what my colleagues would have awarded had they been the fact-finders in the district court.4
Upon remand, Judge Fullam, one of the most able and experienced trial judges in the federal system, evaluated the factors set forth in Georgia-Pacific Corp. v. United States Plywood Corp., 318 F.Supp. 1116 (S.D.N.Y.1970), modified, 446 F.2d 295 (2d Cir.), cert. denied, 404 U.S. 870, 92 S.Ct. 105, 30 L.Ed.2d 114 (1971), made new findings of fact, and fashioned a new award, which he explained with a statement of reasons.5 In short, he conscientiously respected the letter and spirit of this court’s 1976 mandate. But upon this appeal — the fourth in a dreary history of unnecessarily protracted litigation — this court, speaking through the present majority, has again disagreed with his factual findings. But this time, instead of snipping at the facts by contriving artificial legal precepts, we have invaded the district courtroom and set ourselves up as a rump fact-finding authority. Because there is neither reason nor empowerment for this action, I dissent.
My colleagues in the majority, I regret to say, have now tossed the Anglo-American tradition of appellate review to the four *1363winds. They claim a new prerogative as an appellate court that goes beyond even Professor Wright’s concerns in 1957; they have simply found the facts that are to their liking. Whatever legitimacy this procedure might have in the French cour d’appel, the Italian corte d’appello, or the German Ober-landesgerichte, all courts of the second instance that have the right to find facts anew, the practice is foreign and inappropriate to our common law tradition of appellate review.
My disagreement with the majority in this case, and with the panel in Trio Process III, arises from a fundamental philosophical difference about the role of the United States Court of Appeals vis a vis the United States District Court. I do not believe that we circuit judges are ministers of justice armed with warrants of authority permitting us to substitute our notions of fact for those of district judges. Our commissions authorize us to sit in a court that is “higher” only because our judicial system is arranged as a hierarchy. The commissions do not endow us with a more sophisticated understanding of economics, a more profound exposure to the tensions and circumstances of the marketplace, or a superior ability to find facts.
In a transparent effort to substitute their view of a just factual result for that of Judge Fullam and to dress a purely factual issue in the tinsel and glitter of a legal precept, the majority state that “[w]e are again unable to discover any support for the district court’s conclusion that the existing license rate was depressed by Gold-stein’s infringement.” Maj.Op., at 1359. But in the law, the term “conclusion” is a word of art; it is the inferred result of a syllogism, or other form of argument, indicating the logical relationship of legal precepts to the facts found by the fact finder. A court does not conclude as to facts, it finds the facts. On the question whether the existing license rate was depressed, the district court did not reach a legal conclusion, which would raise a question of law duly subject to review. Rather, it made a finding of fact:
[T]he Court finds that the license fee the parties would have agreed upon absent defendant’s infringement would to a large extent have been determined by the economic benefits that were obtained through the use of plaintiff’s patented process. See Tights, Inc. v. Kayser-Roth Corp., [442 F.Supp. 159, 163 (M.D.N.C. 1977)].
Defendant obtained the following benefits from using plaintiff’s process to remove insulation from scrap wire; (a) a reduction in labor costs; (b) an increased recovery of copper from the scrap wire; (c) lower fuel consumption per ton of processed material; and (d) the ability to attract more electrical scrap for processing by advertising the advantages of plaintiff’s process. It should be noted that defendant was clearly aware of these benefits when it commenced infringement of plaintiff’s patent since it had previously used plaintiff’s process under two properly purchased licenses. Thus, if defendant had negotiated for additional licenses instead of infringing plaintiff’s patent, defendant would have been willing to pay substantially more than it had paid for the initial licenses since the process had proven its worth and the defendant would have assumed little or no risk in purchasing the additional licenses.
Appendix, infra, at 1366.
The district court found that the significant economic benefits to the infringer from use of the patented process would have been reflected in the license fee the parties would have negotiated but for the infringement. The basis for the finding of economic benefit is in the record and I cannot say that the trial court was clearly wrong in finding that that benefit would have been reflected in the license fee. Therefore, the majority’s statement that “the thrust of the evidence . . . indicates the absence of a depressing effect” on the value of a license and its statement that there is no “permissible evidentiary basis to the contrary,” Maj.Op. at 1359, files in the face of Judge Fullam’s meticulous discussion of the economic benefits obtained by *1364the appellant. I believe that a fair reading would show that Judge Fullam’s opinion illustrates the “permissible evidentiary basis” of his findings. I am satisfied that given the record evidence of benefits derived by the infringer, it was permissible for the fact finder to draw the inference that these benefits are relevant to a determination of lost royalties. The majority utilize an interesting technique to avoid the significance of the record facts. They would sweep the findings of benefits to the infringer under a rug, for the trial court found that Goldstein had realized labor savings of $52,791 per furnace per year, yet the majority avoids this critical fact with “we need not address this issue in view of our disposition of the case.” Maj.Op. at 1358, note 7. Yet their “view of . the case” is that there is no evidence to support the trial court’s findings.
Although today’s decision of the court and the previous decision in Trio Process III involve only one case, they reflect a point of view in this court, with which I am in strong disagreement. It is a point of view reflecting a belief that an appellate court has the right to encroach upon the prerogatives of a fact finder. Today’s decision, in particular, constitutes a dangerous extension of a line of cases that I believe were wrongly decided because they tampered with fact-finding orthodoxy. See, e. g., Harganreder v. Califano, 575 F.2d 434 (3d Cir. 1978); N. L. R. B. v. Armcor Industries, Inc., 535 F.2d 239 (3d Cir. 1976). My view is reflected in the following passage:
The entire responsibility for deciding doubtful fact questions in a nonjury case should be, and we think it is, that of the district court. The existence of any doubt as to whether the trial court or this Court is the ultimate trier of fact issues in nonjury cases is, we think, detrimental to the orderly administration of justice, impairs the confidence of litigants and the public in the decisions of the district courts, and multiplies the number of appeals in such cases.
Pendergrass v. New York Life Insurance Co., 181 F.2d 136, 138 (8th Cir. 1950).
To the extent an appellate court strays from its traditional role of reviewing the choice, interpretation, and application of legal precepts, and unnecessarily intrudes upon the rights and privileges of the trial courts, there is a corresponding impairment in the confidence of litigants and the public in the decisions of the trial courts, and a broadcast of an unwarranted belief that appellate courts are better qualified than trial judges to decide what justice requires. I believe the court’s decision today does precisely that.
Accordingly, I would affirm the judgment of the district court in all respects, for the reasons more specifically set forth by Judge Fullam in the appendix to this opinion.
APPENDIX
Trio Process Corp. v. L. Goldstein’s Sons, Inc., Civil No. 38,166 (E.D.Pa. Sept. 22, 1978) (memorandum opinion):
FULLAM, District Judge.
The history of this patent case is long and complicated. It has been fully discussed in Opinions issued by the United States Court of Appeals for the Third Circuit,1 and, therefore, it will be mentioned here only when it is relevant to the issue with which this Opinion is concerned, the determination of damages.
Once before, on April 18, 1975, this Court issued an Order awarding plaintiff damages for infringement of United States Patent No. 3,076,421. The sum awarded was based, in part, on the conclusion that the reasonable royalty to which plaintiff was entitled increased after the Third Circuit held in 1972 that plaintiff’s patent was valid. That conclusion was in error. When the Order of April 18, 1975, was appealed, *1365the Third Circuit held that a patent holder is entitled to a single reasonable royalty for infringement whether that infringement occurs before or after judicial approval of the patent. 533 F.2d at 129-30. The Third Circuit, therefore, remanded this case for a redetermination of damages with instructions that this Court should (a) determine the single reasonable royalty applicable throughout the infringement period; and (b) explain how the figure chosen is related to the submitted evidence analyzed in terms of the factors that can affect the reasonable royalty rate.
A reasonable royalty is the license rate that plaintiff and defendant would have agreed upon at the time infringement began had they been reasonably and voluntarily negotiating the license agreement. Tights, Inc. v. Kayser-Roth Corp., 442 F.Supp. 159, 162 (M.D.N.C.1977); Georgia-Pacific Corp. v. United States Plywood Corp., 318 F.Supp. 1116, 1120 (S.D.N.Y. 1970), modified, 446 F.2d 295 (2d Cir.), cert. denied, 404 U.S. 870, 92 S.Ct. 105, 30 L.Ed.2d 114 (1971). In a frequently cited Opinion, the United States District Court for the Southern District of New York lists several factors to be considered in establishing a reasonable royalty. Of those factors, the following have significance in the instant case:
[1] [T]he existing value of the [patented process] to the licensor as a generator of sales of his non-patented items; and the extent of such derivative or convoyed sales.
[2] The duration of the patent and the term of the license.
[3] The established profitability of the product made under the patent; its commercial success; and its current popularity.
[4] The utility and advantages of the patent property over the old modes or devices, if any, that had been used for working out similar results.
[5] The nature of the patented [process] . . . and the benefits to those who have used the [process].
[6] The extent to which the infringer has made use of the [patented process]; and any evidence probative of the value of that use.
[7] The portion of the realizable profit that should be credited to the invention as distinguished from non-patented elements, the manufacturing process, business risks, or significant features or improvements added by the infringer.
[8] The opinion testimony of qualified experts.
Georgia-Pacific Corp. v. United States Plywood Corp., supra, at 1120.2 I have analyzed the evidence in light of these factors and have concluded, for the reasons outlined below, that plaintiff is entitled to a reasonable royalty of $15,000 for each furnace year that defendant wrongfully used plaintiff’s patented process for the removal of insulation from scrap wire. The damages evidence in this case was presented to a Special Master.3 Although I have not adopted the Master’s conclusions of law, I have determined that his findings of fact are not clearly erroneous and, therefore, I have accepted them as I did in my earlier Opinion of April 18, 1975.
The first two of the above factors can be disposed of quickly since they have had only a minimal effect on my decision concerning the appropriate reasonable royalty. Plaintiff’s ownership of the patent involved in this case did generate furnace sales for *1366plaintiff since plaintiff’s practice was to sell to a furnace purchaser a license to use the process for the life of the furnace, approximately five years. Since the patent could generate furnace sales, it can be assumed that plaintiff might have been willing to negotiate a somewhat lower price for a license than the maximum obtainable. However, the second factor, the term of the patent, had the opposite effect. Plaintiff’s patent ran from February 5,1963, to February 5, 1980. Defendant's infringement of that patent began by early 1965 and continued for over eight years. Since a reasonable royalty is the license fee that would have been freely negotiated at the time infringement began, it can be assumed that defendant would have been willing to pay more for a license purchased, as this one hypothetically was, near the beginning of the patent period than for a license sought at a later time.
The remaining factors, including the opinion testimony of the experts in this case, all touch upon the benefits obtained by defendant through its infringing use of plaintiff’s patented process. At first glance, this may seem strange since damages in a patent infringement case are measured by the patent holder’s loss, not the infringer’s gain.4 However, the Court finds that the license fee the parties would have agreed upon absent defendant’s infringement would to a large extent have been determined by the economic benefits that were obtained through the use of plaintiff’s patented process. See Tights, Inc. v. Kayser-Roth Corp., supra, at 163.
Defendant obtained the following benefits from using plaintiff’s process to remove insulation from scrap wire; (a) a reduction in labor costs; (b) an increased recovery of copper from scrap wire; (c) lower fuel consumption per ton of processed material; and (d) the ability to attract more electrical scrap for processing by advertising the advantages of plaintiff’s process. It should be noted that defendant was clearly aware of these benefits when it commenced infringement of plaintiff’s patent since it had previously used plaintiff’s process under two properly purchased licenses. Thus, if defendant had negotiated for additional licenses instead of infringing plaintiff's patent, defendant would have been willing to pay substantially more than it had paid for the initial licenses since the process had proven its worth and the defendant would have assumed little or no risk in purchasing the additional licenses.
Unfortunately, the available evidence does not permit the Court to assign a dollar value to each of the benefits defendant obtained. In fact, largely because of the condition of defendant’s records, the only dollar figure available is the value of the direct and indirect labor savings achieved by defendant. An expert, whose opinion was credited by the master who heard the damages evidence, testified that defendant had labor savings of $52,791 per furnace per year in 1973 dollars.5 Since the defendant operated a varying number of infringing furnaces over an 8V2-year period, I have reduced this figure to $41,652 to reflect the wages prevailing in 1969, the mid-point in defendant’s period of infringement.6 In voluntary royalty negotiations untainted by defendant’s infringing practices, defendant might well have been willing to split this saving with plaintiff and paid plaintiff a royalty of approximately $20,000 for each furnace year, but two factors lead me to conclude that the reasonable royalty should be further reduced to $15,000 per furnace year. First, as noted earlier, plaintiff was a seller of furnaces and thus would have been willing to accept somewhat less than the maximum royalty negotiable in order to promote its sales. And second, plaintiff *1367was unaware before this lawsuit of the exact extent of the labor savings that were obtainable through the use of its process.
The following table details the damages to which plaintiff is entitled. The number of infringing furnaces is based on the findings of the Master. As I did in my earlier Opinion of April 18, 1975, I have awarded plaintiff interest of 6 percent from the end of each infringing year to the present. I have also doubled the primary damages for the reasons given in that Opinion which were found by the Third Circuit not to be erroneous. 533 F.2d at 181.
CALCULATION OF DAMAGES
Year $15,000 x Number of Number of Years at Infringing Infringing 6% Furnaces Furnaces Interest Interest Due Primary Damages • Multiplied Multiplied Damages Plus Interest
1965 3 45,000 11% $ 44,268 90,000 $ 134,268
1966 7 105.000 10% 91,502 210,000 301,502
1967 7 105.000 9% 80,379 210,000 290,379
1968 9 Vi 142,500 8% 94,844 285.000 379,844
1969 11 165.000 7% 94,263 330.000 424,263
1970 10 150.000 6% 72,352 300.000 372,352
1971 10 150.000 5% 59,766 300.000 359,766
1/1/72 to 5/22/72 3.889 58,335 4Vi 70,084* 466,680 536,764
5/22/72 to 7/20/73 11.667 175,005
Totals 73.056 $1,095,840 $608,458 $2,191,680 $2,799,138
*For purposes of calculating interest, the amount for the period January 1, 1972-July 20, 1973, totaling $233,340, is considered to have been due on April 1, 1973.

. Wright, The Doubtful Omniscience of Appellate Courts, 41 Minn.L.Rev. 751 (1957).

. L. Green, Judge and Jury 380 (1930).

. The traditional view was expressed by Judge Goodrich in Scott v. Baltimore & Ohio R. Co., 151 F.2d 61, 64-65 (3d Cir. 1945) (footnotes omitted):
The members of the Court think the verdict is too high. But they also feel very clear that there is nothing the Court can do about it. A long list of cases in the federal courts demonstrates clearly that the federal appellate courts, including the Supreme Court, will not review a judgment for exces-siveness of damages even in cases where the amount of damage is capable of much more precise ascertainment than it is in a personal injury case.

. The specific directive in Trio Process III was:
On remand, the district court should give proper regard to the rule that the extent of the deviation of existing license fees from a reasonable royalty must be determined solely on the basis of the submitted evidence and upon an evaluation of the factors that could affect the reasonable royalty rate, not upon mere conjecture.
533 F.2d at 130 (footnote omitted).

. The full text of the district court opinion upon which this appeal is based is set forth as an appendix to this opinion.

. See Trio Process Corp. v. L. Goldstein’s Sons, Inc., 533 F.2d 126 (3d Cir. 1976); Trio Process Corp. v. L. Goldstein’s Sons, Inc., 493 F.2d 1401 (3d Cir. 1974); Trio Process Corp. v. L. Goldstein’s Sons, Inc., 461 F.2d 66 (3d Cir.), cert. denied 409 U.S. 997, 93 S.Ct. 319, 34 L.Ed.2d 262 (1972).

. I have not included the first factor mentioned in the Georgia-Pacific Opinion, the license fees received by the patentee, since they did not show that there was an established royalty and since the fees received were artificially depressed by defendant’s ongoing infringement. 533 F.2d at 129. I have, however, been mindful of the Third Circuit’s admonition that deviation of the reasonable royalty from existing license fees must be based on the evidence. Id. at 130. I think that the evidence discussed in this Opinion demonstrates that a royalty negotiated in the absence of defendant’s infringement would have been several times higher than the license fees actually received by plaintiff.

. Although there was a hearing on the issues, no new evidence concerning damages was submitted after the Third Circuit’s remand of this case.

. 533 F.2d at 129.

. Since defendant made no improvements in plaintiffs process, these savings are completely attributable to the use of that process.

. This reduction was accomplished by applying the Master’s factual finding as to the extent that the prevailing 1969 wage rates differed from the wage rates prevailing in 1973.