Court Opinion

ID: 9476106
Source: CourtListenerOpinion
Date Created: 2023-08-05 05:47:19.384187+00
Date Added: 2024-06-11T17:45:07.548697
License: Public Domain

FRIEDMAN, Circuit Judge
(with whom BENNETT, Senior Circuit Judge, joins), dissenting in part.
I disagree with the court’s holding that the district court’s finding that Dresser projected a profit of 60 percent of its sales prices of certain bits is clearly erroneous. I also would hold that the district court improperly denied prejudgment interest for the period during which the ’928 patent was considered invalid and unenforceable following the district court’s decision so holding, which the Court of Appeals for the Ninth Circuit reversed more than two years later. In all other respects I agree with and join the court’s opinion.
I
In setting aside the finding that Dresser projected a profit of 60 percent of sales, the court refers to four items of evidence. The strongest is Hughes’ request No. 11 for admission and Dresser’s response:

REQUEST NO. 11

During the year 1973, defendant, Dresser Industries, anticipated that its incremental future sales of Insert Rock Bits with Journal Bearings would provide defendant with profits, on an earnings before tax basis, of not less than 60% of dollar sales of such Rock Bits.

RESPONSE TO REQUEST NO. 11

Denied. During the year 1973, for the purposes of capital appropriations only, personnel of Defendant at one time forecast that its incremental future sales ascribable to that particular appropriation request of insert Rock Bits with Journal Bearings would provide Defendant with profits, on an earnings before tax basis, of not less than 60% of dollar sales of such Rock Bits.
Although Dresser denied this request, the reason for the denial was not disagreement with the figure of “not less than 60% of dollar sales of such rock bits,” but disagreement over whether during 1973 Dresser had “anticipated” such earnings, as the request stated. Dresser denied the request and set forth its position that during 1973 its personnel, “for purposes of capital appropriations only, ... at one time forecast that its incremental future sales ascribable to that particular appropriation request” would be “60% of dollar sales.”
In other words, Dresser’s disagreement was not with whether the percentage of dollar sales was 60 percent, but whether this profit was “anticipated” or merely *1560“forecast” by some of Dresser’s personnel for the purpose of making capital appropriations. Dresser's response adopted Hughes’ language that the earnings forecast by Dresser personnel on sales of “Insert Rock Bits with Journal Bearings [was] ... of not less than 60% of dollar sales of such Rock Bits.”
The court also quotes from plaintiff’s exhibit 93, a Dresser 1973 internal document which projected a 60.1 percent “return on investment” on recommended increases in plant and equipment to be used in manufacturing bits. The court apparently views PX 93 as inconsistent with the response to request No. 11, and therefore may have assumed that when Dresser stated in that response that it forecast earnings of “60% of dollar sales,” it meant 60 percent “on” the additional “investment.”
Even if this were the only evidence in the record, the court would not be justified in reversing the finding as clearly erroneous. Despite plaintiff’s exhibit 93, Dresser’s unequivocal admission that it forecast earnings of not less than 60 percent of “dollar sales,” which it made in a carefully considered response to the request, justified the district court’s acceptance of that figure. See Fed.R.Civ.P. 36(b). Furthermore, the unambiguous language of Dresser’s response to request No. 11 is not the only evidence in the record that supports the 60 percent of dollar sales figure. In fact, testimony showed that Dresser’s response in terms of a percentage of “dollar sales,” rather than a percentage of such items as “capital appropriations” or “additional investment” was correct, not erroneous.
In its operations, one division of Dresser, “P & M Manufacturing” (P & M), manufactured the insert journal bearing bits, and another division, “Security,” sold them. After P & M manufactured the bits, it “sold” them to Security at a fictitious price that included a “profit” for P & M based on the “sale” price less manufacturing costs (including materials and labor) and overhead allocation. Security sold the bits to customers, and a “profit” was attributed to Security based on the selling price less Security’s purchase “cost” (from P & M) and Security’s own selling costs and overhead allocation. The overall profit to Dresser was the sum of the profits thus allocated to P & M and Security.
The 1973 internal appropriations request report (PX 93), upon which the majority relies, does state that 60.1 percent is the projected return on the investment of $4.6 million for new equipment for the rock bit manufacturing plants. However, further examination shows that the internal report covers capital appropriations involving the manufacture and sale of seven different bits, only one of which was the infringing insert friction bit at issue here. In discussing the report with respect to the sales projections for only the insert friction bit, Mr. Munnerlyn, Dresser’s comptroller, stated that P & M was projected as manufacturing and selling 1,750 insert friction bits to Security for $908,000, on which P & M anticipated a profit of $89,000 (9.8 percent). Mr. Munnerlyn also testified that Security anticipated sales of the same bits for $2,713,000, of which $1,559,000 was expected profit. The following colloquy then occurred:
Q. And so, the total expected profit from the manufacture and sale by Dresser of insert journal bearing bits, in 1973, was 60 cents of each sales dollar, wasn’t it?
A. If you add those two together, that’s what you would get.
Q. Wasn’t that the expected profit?
A. Yes.
Thus, the two divisions of Dresser projected a combined profit of $1,648,000 on annual sales of $2,713,000 for an anticipated profit of 60.7 percent relative to annual dollar sales, which is the figure admitted by Dresser in response to Request No. 11. (These estimated profits apparently did not include anything for “capital fee,” but the appropriations report did take into account some allocations for “capacity costs.”)
As the Supreme Court recently pointed out, the “clearly erroneous” standard in Federal Rule of Civil Procedure 52(a)
does not entitle a reviewing court to reverse the finding of the trier of fact *1561simply because it is convinced that it would have decided the case differently. The reviewing court oversteps the bounds of its duty under Rule 52(a) if it undertakes to duplicate the role of the lower court.
Anderson v. City of Bessemer City, 470 U.S. 564, 573, 105 S.Ct. 1504, 1511, 84 L.Ed.2d 518 (1985). The district court’s finding in this case cannot be clearly erroneous.
II
Although the district court noted in this case that “prejudgment interest should be awarded under 35 U.S.C. § 284 unless there is some justification for withholding such an award,” the only explanation the court gave for its denial of prejudgment interest for the period from November 30, 1979 to February 22, 1982, was that the ’928 patent “was considered invalid and unenforceable by the California federal court” (amended judgment, paragraph 5). The majority holds that this ruling was within the district court’s discretion, “[b]ut to the extent that decision was based on the misunderstanding that prejudgment interest can never be awarded in such a circumstance, it is contrary to law and should be reconsidered on remand. See General Motors Corp. v. Devex Corp., 461 U.S. 648, 657, 103 S.Ct. 2058, 2063, 76 L.Ed.2d 211, 217 USPQ 1185, 1188 (1983).” For the following reasons, I cannot agree.
In the General Motors case, the Supreme Court stated that “[bjecause we hold that prejudgment interest should ordinarily be awarded absent some justification for withholding such an award, a decision to award prejudgment interest will only be set aside if it constitutes an abuse of discretion.” 461 U.S. at 657, 103 S.Ct. at 2063, 217 USPQ at 1189. I disagree with the court’s ruling that a decision not to award prejudgment interest is reviewable only for an abuse of discretion. Where prejudgment interest is denied, a reviewing court must first determine if the justification the district court gave is sufficient as a matter of law to support the limitation or elimination of such interest, and then must further review the factual findings supporting the justification to determine if they are clearly erroneous. See Bio-Rad Laboratories, Inc. v. Nicolet Instrument Corp., 807 F.2d 964, 968, 1 USPQ2d 1191, 1194 (Fed.Cir.1986). In my view, the district court in the present ease was not warranted in denying prejudgment interest for the interim period that the patent was considered invalid.
Recently, this court in Bio-Rad reiterated its view “that a district court’s justification for limiting prejudgment interest ‘must have some relationship to the award of prejudgment interest.’ ” Id. at 967, 1 USPQ2d at 1193 (citing Radio Steel & Mfg. Co. v. MTD Prod., 788 F.2d 1554, 1557-58, 229 USPQ 431, 434 (Fed.Cir.1986)). The purpose of awarding prejudgment interest is “to afford the plaintiff full compensation for the infringement.” General Motors, 461 U.S. at 654, 103 S.Ct. at 2061, 217 USPQ at 1188. As the Supreme Court explained:
In the typical case an award of prejudgment interest is necessary to ensure that the patent owner is placed in as good a position as he would have been in had the infringer entered into a reasonable royalty agreement. An award of interest from the time that the royalty payments would have been received merely serves to make the patent owner whole, since his damages consist not only of the value of the royalty payments but also of the forgone use of the money between the time of infringement and the date of the judgment.
Id. at 655-56, 103 S.Ct. at 2062-63, 217 USPQ at 1188 (footnote omitted).
The district court awarded Hughes damages for the entire period of Dresser’s infringement, including the period during which the ’928 patent “was considered invalid and unenforceable by the California federal court.” Since the purpose of prejudgment interest is to compensate the patentee for the “forgone use of the money between the time of infringement and the date of the judgment” that it would have received had the defendant entered into a royalty agreement instead of infringing, I think the prejudgment interest should cover the entire period of infringement, as the *1562damages do. The fact that during part of the time the patent was considered invalid does not constitute a sufficient “justification for withholding such an award” which, under the dictum in General Motors, may make it “appropriate not to award prejudgment interest.” Id.
Accordingly, I would reverse the district court’s denial of prejudgment interest for the period from November 30, 1979, to February 22,1982. Since the district court has already exercised its discretion in setting the rate of prejudgment interest and the method of compounding, see Bio-Rad, 807 F.2d at 869, 1 USPQ2d at 1194-95 (and cases cited therein), a remand on the prejudgment interest is not necessary.