Court Opinion

ID: 6853690
Source: CourtListenerOpinion
Date Created: 2022-07-23 20:39:27.388102+00
Date Added: 2024-06-11T16:05:07.159466
License: Public Domain

MORTON, Circuit Judge.
This is a bill for discovery in aid of an action at law brought by the Jenkins Com*664pany against the Sinclair Company. The District Court sustained a motion to dismiss and dismissed the bill; and the plaintiff appealed. The first question is whether on its face the bill states a ease for discovery.
The first point is whether bills for discovery still lie in the federal courts, or whether they have been superseded by Rev. St. § 724 (28 USCA § 636). In Carpenter v. Winn, 221 U. S. 533, at pages 539, 540, 31 S. Ct. 683, 685, 55 L. Ed. 842, it is said: “The statute-may therefore be well regarded as affording a short and quick way of obtaining documentary evidence for use ‘in the trial’ of an action at law, leaving the parties to a bill of discovery if they desire the production before the trial for the purpose of preparing for it.” See, too, Pressed Steel Car Co. v. Union Pac. R. Co. (D. C.) 240 F. 135; Id. (D. C.) 241 F. 964, and Colgate v. Compagnie Francaise du Telegraphe de Paris a N. Y. (C. C.) 23 F. 82, an able opinion by Judge Wallace. It devolves upon the party filing such a bill to show that there is real need of it and that the desired evidence cannot be obtained in a practically useful way under section 724. If these requirements are met, such a bill is still maintainable. The decision in Carpenter v. Winn, that under section 724 the production of evidence could not be ordered in advance of trial, rather enlarges the field of bills for discovery. It is highly desirable, as Judge Wallace suggests, that such evidence be sifted out before the jury trial.
The next point is whether such bills may be brought to obtain evidence relevant only on the amount of damages. In Munger v. Firestone Tire & Rubber Co., 261 F. 921 (C. C. A. 2), and Loose v. Bellows Falls Pulp Plaster Co., 266 F. 81 (C. C. A. 2), it was decided that bills for discovery could be used only to obtain facts bearing on the “issues,” i. e., on questions of liability, and not to obtain evidence of damage. The opposite result was reached in Guyot v. Hilton (C. C.) 32 F. 743, cited with approval in Carpenter v. Winn, supra, and in Colgate v. Compagnie Francaise du Telegraphe de Paris a N. Y., supra, where apparently no such distinction between liability and damages was suggested.
In the state courts, while the question is generally affected by statutory provisions, discovery has been allowed with respect to damages. McKinnon-Young Co. v. Stockton, 55 Fla. 708, 46 So. 87; Wells v. Holman, 115 S. C. 443, 106 S. E. 224, 225; Sherwood Bros., Inc., v. Yellow Cab Co., 283 Pa. 488, 129 A. 563, 564. In the South Carolina case, supra, the statute permitted discovery of evidence “relating to the merits [italics mine] of the action or defense.” In the Pennsylvania ease, supra, the statute permitted “discovery of facts material to a just determination of issues.” (Italics' mine.) Both these statutes opened the way to the distinction between liability and damages on which the Munger and Loose Cases, supra, turned; and in neither was the distinction recognized.
In England also discovery is now regulated by statutes. Irrespective of them, however, the right to it does not appear to have been limited by the technical “issues” presented in the action at law, but to have been allowed as to facts, bearing on any “question,” presented in that action. The present ease is fully covered by Saunders v. Jones, [1877] L. R. 7 Ch. 435. The texDwriters -are to the same effect. “As all the points in the cause will come on for trial simultaneously, the right of the plaintiff to discovery will of necessity attach upon them all.” Points in the Law of Discovery, by Wigram, 1 Am. Ed. p. 80. “Where the questions of liability generally, and of damages, were severable [italics mine], discovery'which was material to the latter question only, would not be given before the hearing.” The Law and Practice of Discovery, by Peile, page 29. See, too, Principles and Practice of Discovery, by Bray, chapter II, and see Péile, supra, chapter IV, discussing this question and citing eases where discovery as to damages was allowed, and 11 Halsbury Laws of England, p. 52.
There is a practical distinction, as above noted between eases in which the plaintiff will be compelled to present all his evidence, .both on liability and on damages, at the same hearing, and eases in which the assessment of damages can be postponed until the question of liability has been determined. The English law and the weight of American decisions appear to be that in eases of the former sort discovery will be ordered on damages as well as on liability.
. We think this much the sounder view. Damages are an important element in litigation; they are the reason why an action is brought. There is no good reason why discovery should not be ordered as to damages, except that, if the defendant wins on liability, the evidence on damages will go for nothing. This is always true of evidence of damages in actions at law; it always goes for nothing if the defendant prevails. But this has never been thought a sufficient reason for splitting a jury trial; and it does not seem *665to us a sufficient reason for refusing discovery. We are not impressed by the distinction—for which no authority is cited—between “issues” and questions of fact, made in the Munger Case.
The next point is whether the evidence sought to he obtained is relevant on the issues presented in the action at law. In substance the declaration therein alleges that the Sinclair Company was under a contractual obligation to cause to be assigned to the Jenkins Company a certain application for a patent made by one Isom employed by the Sinclair Company; that the Sinclair Company did not cause the application to be so assigned; that, instead, the application was assigned by Isom to the Sinclair Company, to which company the patent granted on the application was issued; that the Sinclair Company used the invention in a large way with great success in its business.
The plaintiff’s damages are the loss which it sustained by being deprived of the application and the resulting patent. The Sinclair Company contends that the grant of the patent and the commercial use of the invention are not admissible on the value of the application and are therefore irrelevant on the question of damages.
An application for a patent, being a thing sui generis, has no “market” value in the strict use of that term. Standard Oil Co. v. So. Pacific Co., 268 U. S. 146, 45 S. Ct. 465, 69 L. Ed. 890; United States Frumentum Co. v. Lauhoff, 216 F. 610 (C. C. A. 6). Its money value may be estimated from the nature of the invention disclosed, its place in the art to which it relates, the step which the inventor took, and the change which it effected in the practice of the art. These facts, and other relevant circumstances, may be supplemented by opinion evidence of value, as in the case of real estate. Montana R. Co. v. Warren, 137 U. S. 348, 11 S. Ct. 96, 34 L. Ed. 681.
We do not think that a court, valuing in judicial proceedings an invention described in an application for a patent, is obliged to shut its eyes to the result of the application, nor to_ the commercial utility of the invention as shown by the use of it in the art or industry to which it relates, but may take evidence on those points up to the time of trial. Willis-ton on Contracts, p. 2394.
Such evidence is not for the purpose of showing increase in value or new uses, which as is well settled with regard to the valuation of land taken by eminent domain, would not be admissible, but to show the inherent character and place of the invention in question. It is analogous to evidence of successful commercial use of a patent on the question of invention, and of the actual results of a physical injury for which damages are sought. Hetzel v. B. & O. R. Co., 169 U. S. 26, 18 S. Ct. 255, 42 L. Ed. 648; Cincinnati Siemens-Lungren Gas. I. Co. v. Western S. L. Co., 152 U. S. 200, 14 S. Ct. 523, 38 L. Ed. 411. Of course commercial success of an invention may be due less to its own merit than to the ability with which it was exploited. The weight to be given such evidence rests in the discretion of the jury or trier of the faet. We cannot say that no evidence of that sort ought to be received in the action at law to which this bill of discovery relates, and that therefore discovery of it ought not to be ordered.
The profits if any which the Sinclair Company made by using the Isom invention have no relevancy on the question of damages, and no discovery should be ordered in respect to them. The plaintiff is not suing as the equitable owner of the patent. Our previous decision precludes it from that position. Jenkins Petroleum Process Co. v. Sinclair Ref. Co. (D. C.) 32 F.(2d) 247.
Nor is the precise extent to which the defendant made use of the Isom invention material on the plaintiff’s case in chief. Non constat that the defendant would have used the invention as it did if the plaintiff had owned the patent. The plaintiff is entitled to show the general facts about the Isom invention, not specific instances of profitable use by this person or that. The probative value of such evidence is outweighed by the extent and complexity of the collateral inquiries which it involves. If, however, the defendant should deny the utility and commercial success of the invention, evidence of the defendant’s use of it might be highly significant; and under those circumstances the plaintiff would be entitled to discovery of them. The bill should be retained for this purpose. If such a situation shall develop at the trial prompt discovery can then be ordered.
On the facts stated in the bill, we think the plaintiff has made out a case warranting discovery along the lines above indicated.
Some question is raised as to the point of time at which the defendant’s breach of contract occurred. The correct date will depend on the facts proved at the trial. If there was no repudiation of the contract of which notice was given to the plaintiff, the contract may be regarded as broken when the defendant finally disabled itself from performing it. *666The defendant, after having taken the assignment of the application from Isom, could have reassigned it to the plaintiff with the same effect as if originally so assigned hy Isom. The contract would have been complied with by such an assignment. The interposition of the mesne assignment would not affect the plaintiff’s rights; and it was open to the defendant to carry out the contract in that way if it saw fit to do so. It was therefore within the power of the defendant to perform the contract at any time until the application,had become merged into the patent. While the defendant could still have transferred the patent after it had been issued, the transfer of a patent is substantially different from the assignment of the application for it; the value of the patent can be greatly affected for better or worse by the way in which the application is handled in the Patent Office. On the facts alleged, the contract appears to have been broken on the date when the application became merged into the patent.
 We think the questions presented were properly raised by the motion to dismiss. It may be that the defendant has weighty defenses on the facts. That circumstance, if it be true, has nothing to do with the present questions. For the present purposes we take the case as stated in the plaintiff’s bill.
It follows that the judgment dismissing the bill must be reversed and the case remanded to the District Court for further proceedings in accordance with this opinion.
The decree of the District Court is reversed, and the case is remanded to that court for further proceedings not inconsistent with this opinion; the appellant recovers costs of appeal.