Pitcairn v. United States

Nichols, Judge, with whom Kunzig, Judge, joins,

concurring in the result:

I concur in the decision of the court and in the Per Curiam opinion except for part II, Royalty Compensation. As to that, I concur in the result, because I believe the Royalty Compensation should be at least as much as the conclusions stated in that part will lead to, and, indeed, considerably larger yet. The opinion is correct so far as it rejects the further cuts in Royalty Compensation proposed in Judge Kashiwa’s dissent.

The court’s decision will slash almost in half the trial judge’s proposed decision, which would have awarded $50,926,278, of which $24,570,525 was the principal amount of reasonable and entire compensation, and the remainder was compensation in the nature of interest for delay in payment. The change serves to reward a cynical exploitation of the cost and delay of suing in this court, and its inevitable effect upon a claimant’s valuation of his claim.

I would not quarrel with some reduction in the above figures, but I would make it for different reasons and to a lesser extent. It is normal in valuation proceedings to reject the testimony of retained experts on both sides and to award something in between. The trier of fact is not helpless if the testimony is all unacceptably high or low. The Conqueror, 166 U.S. 110, 131 (1897); United States v. Northern Paiute *201Nation, 183 Ct. Cl. 321, 346, 393 F. 2d 786, 800 (1968). When we have fully in effect the utopia of court-appointed experts under the Federal Rules of Evidence, Rule 706, as adapted in Pub. L. 93-595, this kind of splitting of differences may become less respectable.

Here however, the court has rejected one error only to embrace another. The trial judge unfortunately held that the taking occurred all at once on the occasion of the first infringement by or on behalf of the 'Government. The court rightly holds that takings occurred from time to time over the years, as helicopters were built. But it wrongly holds that the 1947 royalty agreement with United Aircraft Corporation and the offers by plaintiff to other companies are binding on it, as admissions, and necessitate a royalty reduction to 2% from the trial judge’s 3.85%.

After the end of World War II hostilities the wartime .85 rate lapsed though the Royalty Adjustment Act was, as the court admits, at least technically in effect. The Government apparently made no effort to rely on it; rather, it required indemnity agreements from suppliers. This relegated the plaintiff to making the best deal it could with manufacturers amid all the dog eat dog atmosphere of private patent controversy, but without the injunction relief normally available to wronged patentees, because the greater part of the sales were to be to the Government, and the remedy by suit in this court under 28 U.S.C. § 1498 was exclusive. The general expectation was that 'after many years of costly litigation, some patents would be held valid and some invalid.

The court describes the two agreements with United Aircraft Corp. It professes to derive support for its position from the fact that United’s letter, quoted in its fn. 11, was written a year after the 1947 agreement. However, the letter discusses and characterizes that 1947 agreement as purely 'and simply, on its side, a resultant of assessing the royalty plaintiff demanded against the projected outcome of litigation. No reason appears why the lapse of a year would make that assessment less valid. It is, in my view, a telling letter and vividly portrays the predicament that Autogiro was placed in. Plaintiff’s patent counsel testified that plaintiff’s assessment of *202the situation was the same. This is why plaintiff cut its demands from 5% to 2%. If it had done this because its inventions were not salable, we would have a different case. It knew its inventions were not only salable but indispensable; that manufacturers could not build helicopters “around them,” in the patent lawyers’ term, i.en they could not build helicopters without infringement. It also knew that whether manufacturers procured licenses or not, they would build helicopters in the same manner, infringing or not, and would defy any lawsuits that might be brought.

What is any claim worth, in present value, if one knows one must sue in the Court of Claims for 25 years to recover anything upon it? Is it fair to take the fellow who would settle it at the outset for 40$ on the dollar, and assess his claim at 40$, though he has not got the quid fro quo his sacrifice of 60$ would have obtained if accepted ?

Nobody ever actually paid any royalties at the 2% rate. Plaintiff would have obtained under its 1947 United agreement, if not superseded, and under its offers to others, if accepted, an immediate cash flow. It would also have obtained from anyone who accepted a license, an estoppel to challenge the patents, as the law was before Lear Inc. v. Adkins, 395 U.S. 653 (1969), which overruled Automatic Radio Mfg. Co. v. Hazeltine Research Co., 339 U.S. 827 (1950). Most valuable of all, it would have saved 25 years of litigation. Plaintiff finally sold a paid up license at an even cheaper rate to United, to obtain these blessings. Defendant, and its indemnitors, did not furnish any of the quid fro quo that United furnished, and yet now they want the discount that United got. Even the court can see that the under 1% rate is not “reasonable and entire compensation” but somehow the 2% rate is different.

The court’s decision not only violates the most elementary notions of reason and justice, but also established law. The general rule in eminent domain is that a landowner’s right to recover just compensation may not be measured by the amount another landowner received as a settlement of possible litigation. 4 Nichols On Emi/nent Domain, (3d Ed. Eev. 1975), 12.3113 [2].

*203Calhoun v. United States, 197 Ct. Cl. 41, 453 F. 2d 1385 (1972), does not require a different result, but by implication indicates we should disregard the post-1946 transactions. In Odlhoun, plaintiff licensed the patent throughout the industry at a rate of twenty-five cents per unit. The trial judge increased this commercial royalty by one-third since he felt the rate was set by plaintiff with a view to avoiding litigation and since defendant’s failure to keep records increased plaintiff’s costs in litigation. The court refused to accept the trial judge’s figure because:

* * * There [was] nothing in the evidence to show or to suggest, that the 0.25 cent rate was set beneath fair market value with a view toward avoiding litigation. This license rate was used widely and offered freely to everyone; there were many “takers” at that price. * * * We must assume, in the absence of contrary evidence, that it represented full and fair market value, i.e., the going price. (197 Ct. Cl. at 56-57, 453 F. 2d at 1394).

Considering the casualties that patents suffer by invalidity determinations in the Federal Courts, a bargained license under any patent not yet litigated would possibly show some discount for litigation avoidance, but the teaching of Calhoun is that this mere surmise does not per se preclude use of a widely accepted commercial rate to establish reasonable and entire compensation. That is all Gdlhou/n teaches to me.

The case before us is very different from Odlhoun. There is conclusive evidence in the record that the parties considered the costs of litigation in negotiating the license agreements. There were not many “takers” of Autogiro’s patents after 1946, only United. Further, post-1946 manufacture of helicopters was primarily for the Government, not commercial sales. We can properly infer from the record that the 1947 and 1949 agreements with United were not valid reflections of the patents’ fair market value.

I agree with the remainder of the court’s decision, as to which, therefore, I need not spell out my views. The amount the trial judge would have awarded is large, perhaps unprecedented. Even this court’s meat axed award will be substantial. Large as the involved sums are, here, as always, the precedential effect of our decision is even more important. *204Do we really want to tell litigants that we have so little concern abont the cost and delay of suing in this court, that we will take as the full value of a claim herein the discounted value which a desperate claimant must accept, if he is to realize anything at all before 25 years of litigation ? If that is our position, we have a self-activating mechanism for reducing awards, which the defendant will know how to make the best use of. It is not my idea of justice.

Plaintiff’s offers in 1947 do establish that the 5% royalty rate was abandoned. I would consider them to that extent. The situation appears to me to be appropriate for one of those miscalled “jury verdicts” (cf. A. C. Ball Co. v. United States, 209 Ct. Cl. 223, 531 F. 2d 993 (1976)). I would come up with a $20,000,000 figure for the royalties, to which should be added the compensation for delay in payment.

As a parting shot, I will add I fail to see why this Jamdyce v. Jarndyce of a case has got to be further prolonged with Rule 131(c) proceedings. Could not the court, by a few minute’s work with a pencil, calculate the amount of the award to which its reasoning leads, and convert this claim at long last into a money judgment ?