Court Opinion

ID: 9470839
Source: CourtListenerOpinion
Date Created: 2023-08-05 03:17:15.575147+00
Date Added: 2024-06-11T17:42:07.695728
License: Public Domain

DAVIS, Circuit Judge,
dissenting in part.*
1. Unlike the court, I think the District Court never treated Deere’s offer to IH and Deere’s license to White as other than wholly inadmissible (and therefore not to be considered at all) — and never decided, even alternatively, that that offer and license were of little or lesser probative value (and therefore outweighed by the other evidence in the case). The court’s findings of fact and legal conclusions show that this was the trial judge’s position. Footnote 5 says squarely that the facts of the IH offer and White license “are considered irrelevant, and evidence thereof is held to be inadmissi*1560ble under Rule 408, Federal Rules of Evidence.” As the majority rules (and I agree), the holding of inadmissibility under Rule 408 was erroneous. As for “irrelevance” (or the synonym “not relevant”1), Rule 402 of the Rules of Evidence provides that “Evidence which is not relevant is not admissible.” I conclude therefore that the District Court simply held these two circumstances — the IH offer and the White license — to be entirely inadmissible, i.e., not to be weighed at all. Nothing else in the court’s findings or conclusions of law persuades that, although the court used (apparently deliberately) the accepted legal term “irrelevant,” it really meant “of little probative value.” The fact that the court said in footnote 5 that it found those particular facts because a reviewing court might “disagree on the admissibility of the evidence supporting same and/or relevance thereof on the issue of damages herein” means no more than a statement that the appellate court should know the facts if it considered the trial court’s legal holdings erroneous and therefore wished to consider reversing.
2. The IH offer and the White license should have been considered. On the error of excluding under Rule 408 the IH offer and the White license I need add nothing to the majority opinion. Relevance under Rule 402 is also plain. The Court of Claims held that “one or more” licenses (even in settlement with others) furnish a relevant component for determining recovery. Bendix Corp. v. United States, 676 F.2d 606, 616 (Ct.C1.1982); Pitcairn v. United States, 547 F.2d 1106, 1118, 212 Ct.Cl. 168, 192 USPQ 612, 622 (Ct.C1.1976), cert. denied, 434 U.S. 1051, 98 S.Ct. 903, 54 L.Ed.2d 804 (1978); Saulnier v. United States, 314 F.2d 950, 161 Ct.Cl. 223, 137 USPQ 222 (Ct.C1.1963). See also Columbia Broadcasting Systems, Inc. v. Zenith Radio Corp., 537 F.2d 896, 898, 192 USPQ 68, 70 (7th Cir.1976); Beatty Safway Scaffold Co. v. Up-Right, Inc., 306 F.2d 626, 632, 134 USPQ 379, 384 (9th Cir.1962), cert. denied, 372 U.S. 934, 83 S.Ct. 881, 9 L.Ed.2d 766 (1963). Pitcairn, supra, also ruled that a deliberate prelitigation offer by the patentee is to be taken into account.
3. The District Court’s error in failing to consider the IH offer and the White license was not insignificant. These were the only offers or licenses by Deere (with respect to this patent) that were before the court below. They clearly had a substantial bearing on the reasonable compensation to which Deere was entitled for infringing use of the invention. See Trio Process Corp. v. L. Goldstein’s Sons, Inc., 612 F.2d 1353, 1358, 204 USPQ 881, 884 (3rd Cir.), cert. denied, 449 U.S. 827, 101 S.Ct. 91, 66 L.Ed.2d 30 (1980). I do not say that they demonstrated the upper limit of Deere’s recovery, or that Deere was restricted to the specific rate provided in that offer and license. Cf. Tektronix, Inc. v. United States, 552 F.2d 343, 347-351, 213 Ct.Cl. 257, 193 USPQ 385, 390-93 (1977), cert. denied, 439 U.S. 1048, 99 S.Ct. 724, 58 L.Ed.2d 707 (1978); Panduit Corp. v. Stahlin Bros. Fibre Works, Inc., 575 F.2d 1152, 1158, 197 USPQ 726, 731 (6th Cir.1978). I do say that that evidence was pertinent and should have formed an important basic factor in the trial court’s evaluation of the proper compensation.
4. Another important error of the District Court was its loading into its determination of the 15% royalty rate of a “very substantial percentage of net sales royalty, even exceeding [IH’s] expected profit in corn heads, to protect its combine sales and profits” (emphasis added). (Fdg. 29).2 Since neither Deere’s nor IH’s combines *1561was at all covered by the Schreiner patent (which pertained only to corn heads), this amounts to holding that IH would have foregone all of its profits on the patented article — and even eaten into its corn head costs, thus incurring a loss on the patented article — in order to save its own combine business. Conceivably, IH might in fact have voluntarily (though possibly without legal basis) agreed to such a drastic arrangement, but to me it seems improper for a court to impose that component in a “willing buyer-willing seller” analysis. Deere could not explicitly condition a license under the corn head patent upon IH’s paying such tribute to Deere either on IH’s combine sales or on Deere’s loss of combine sales. Zenith Radio Corp. v. Hazeltine Research, Inc., 395 U.S. 100, 136-37, 89 S.Ct. 1562, 1583, 23 L.Ed.2d 129 (1969); Rex Chainbelt, Inc. v. Harco Products, Inc., 512 F.2d 993, 1000-1003, 185 USPQ 10, 14-16 (9th Cir.), cert. denied, 423 U.S. 831, 96 S.Ct. 52, 46 L.Ed.2d 49 (1975). But what the District Court did here was, in effect, to mandate just such an improper tieing relationship, in the guise of assuming that IH would agree to it. See Velo-Bind, Inc. v. Minnesota Mining & Mfg. Co., 647 F.2d 965, 972, 211 USPQ 926, 933 (9th Cir.), cert. denied, 454 U.S. 1093, 102 S.Ct. 658, 70 L.Ed.2d 631 (1981). The court either allowed Deere to recover in this suit a good portion of its own lost combine sales or the court gratuitously transferred from IH to Deere a portion of the former’s combine profits — each factor being forbidden to the patentee under our law.
5. For these reasons, I would reverse the judgment below in No. 83-565 and remand for a determination, on the proper basis, of Deere’s compensation for infringement of its corn head patent. See Bandag, Inc. v. Gerrard Tire Company, Inc., 704 F.2d 1578 (Fed.Cir.1983). As indicated above (footnote *), I join in reversal as to No. 83-566 (pre-judgment interest).

 I agree with (1) the court’s discussion upholding the admissibility under Rule 408, Federal Rules of Evidence, of Deere’s offer to International Harvester (IH) and of Deere’s license to White Motor Company (White), and (2) the court’s discussion and disposition of Deere’s appeal on pre-judgment interest (No. 83-566).

. Conclusion of Law No. 5 declares that the White license is “not relevant.”

. In finding 10, the District Court found the following with respect to the relationship between sales of com heads and of combines:
The substantial reduction in revenue from com head sales that IH faces is self-evident from its own projections. However, their full significance can only be appreciated by placing them [corn head sales] in the context of the relationship between corn head and combine sales. Com being by far the largest crop in the United States, corn heads made possible the harvesting of com with a combine and thus created a vast additional mar-
*1561ket for combines. To be a viable supplier of combines, it is absolutely essential for an agricultural equipment manufacturer to have desirable com heads to go with them, because the com crop is harvested primarily by combines fitted with com heads. In IH’s case, some 70% of its combines are sold with com heads, and if unable to supply acceptable com heads, IH’s combine production would have to be reduced by about 60%. Because the profit realized from combine sales is about three times that derived from com head sales, there is a powerful economic incentive to protect combine sales. IH’s Vice President of Harvesting Technology, Mr. Wells, agreed that whoever is going to sell combines must have an acceptable corn head, and that it would have been an “absolute disaster” for IH not to have been able to sell its combines.