Summary
In Columbia Broadcasting System, Inc. v. Zenith Radio Corp., 537 F.2d 896 (7th Cir. 1976), the Seventh Circuit upheld a judgment for royalties based upon the plaintiff's license grants, settlements of litigation, and an offer to settle with other American tube manufacturers.
Summary of this case from Sunstar, Inc. v. Alberto-Culver Company, Inc.Opinion
No. 75-2157.
Argued April 8, 1976.
Decided June 30, 1976. Rehearing and Rehearing En Banc Denied August 17, 1976.
Dugald S. McDougall, Francis W. Crotty, Chicago, Ill., for defendants-appellants.
Herbert P. Kenway, Boston, Mass., James R. Sweeney, Chicago, Ill., for plaintiff-appellee.
Appeal from the United States District Court for the Northern District of Illinois.
This action seeking damages for infringement of U.S. Letters Patent Nos. 2,690,518 and 3,179,836 concerning the design of color television picture tubes was brought by Columbia Broadcasting System, Inc. against Zenith Radio Corp. and its subsidiary The Rauland Corp. The district court, after a bench trial, held the patents in issue valid and infringed by devices made by the defendants. The court awarded CBS total damages in the amount of $3,809,544.00 together with interest from the date of the award. These damages included an award of $2,860,037.00 for infringement of patent No. 2,690,518, an award of compensatory damages on this infringement in the form of interest at 6% from February 2, 1970 (the date of finality of a prior suit holding the '518 patent valid) totaling $898,420.00, and an award of $51,087.00 for infringement of patent No. 3,179,836. The district court made these awards on the findings of fact and conclusions of law contained in two memorandum opinions, one published as Columbia Broadcasting System, Inc. v. Zenith Radio Corp., 391 F. Supp. 780 (N.D.Ill. 1975) and the other unpublished and attached hereto as an Appendix (along with the final judgment order). We affirm this cause on the basis of, and adopt as our own, the excellent opinions of the late Judge McLaren in this cause, except to the extent that they awarded pre-judgment interest. On this subject, for the reasons stated below, we reverse.
The award of pre-judgment interest in the district court was made on the basis of exceptional and unusual circumstances. The court found that after denial of certiorari in Sylvania Electric Products, Inc. v. Columbia Broadcasting System, 396 U.S. 1061, 90 S.Ct. 755, 24 L.Ed.2d 755 (1970), "Zenith was faced with a prior finding of validity and industry-wide acceptance of licensing agreements including an early license with RCA, the major developer of color TV innovations." And it held that "Zenith should have been on notice at that date that it could be liable to CBS."
We have held (as the district court recognized) that under the present statutory scheme 35 U.S.C. § 284 allows a grant of interest running only from the date damages are liquidated unless exceptional circumstances are present. Union Carbide Corp. v. Graver Tank Mfg. Co., 282 F.2d 653, 677 (7th Cir. 1960). Judge Tone reconsidered this position and reaffirmed the holding in Wahl v. Carrier Mfg. Co., 511 F.2d 209 (7th Cir. 1975). We realize that this view is inconsistent with at least the view taken by the Second Circuit on this question, Georgia-Pacific Corp. v. U.S. Plywood-Champion Papers, Inc., 446 F.2d 295 (2d Cir. 1971), but decline, as did Judge Tone, to change the law of the circuit.
Exceptional circumstances justifying an award of prejudgment interest have been found in relatively few cases. In this circuit, the definition of "exceptional circumstances" has developed in cases considering 35 U.S.C. § 285, the section which allows the award of attorney's fees in "exceptional cases." In Sarkes Tarzian, Inc. v. Philco Corp., 351 F.2d 557, 560 (7th Cir. 1965), this court held that exceptional circumstances were present only where there was "gross injustice and where fraud and wrong-doing are clearly proved." Technograph Printed Circuits, Ltd. v. Methode Electronic, Inc., 484 F.2d 905 (7th Cir. 1973). This high standard has been modified slightly so that exceptional circumstances are not limited strictly to the fraud category. L. F. Strassheim Co. v. Gold Metal Folding Furniture Co., 477 F.2d 818, 824 n. 9 (7th Cir. 1973). In Strassheim, Justice (then Judge) Stevens held that "the patentee's failure to verify or disclose critical facts at the time of application" clearly constituted an "exceptional oversight" of critically important information which "resulted in an erroneous judgment and put plaintiff to legal expenses that would otherwise have been unnecessary." Id. Thus, exceptional circumstances require a clear showing of bad faith or fraud, which would constitute a gross injustice if not remedied. Here, the district court found that:
In other circuits, exceptional circumstances usually involved wilful and wanton infringement, fraudulent copying or use of another's inventions, Chesapeake Ohio Ry. Co. v. Kaltenbach, 124 F.2d 375, 377 (4th Cir. 1941) or malicious infringement used to destroy competition from the patent owner, Mathey v. United Shoe Machinery Co., 54 F. Supp. 694, 700-701 (D.Mass. 1944). In all cases, the infringer's actions show a lack of good faith.
See also, Shelco, Inc. v. Dow Chemical Co., 466 F.2d 613, 618 (7th Cir. 1972) where we held that "Fraud on the patent office or bad faith in asserting the validity and infringement of a patent is ample justification for [finding] an exceptional [case]."
Zenith corporate officials held a bona fide and reasonable belief that its tubes did not infringe the '518 patent. Moreover, Zenith presents several bona fide defenses to validity and enforcement requiring a full airing of the facts surrounding the '518 patent. The Court has rejected these defenses but finds they were made in good faith.
The "unusual commercial circumstances" relied on by the district court to support an award of pre-judgment interest do not constitute exceptional circumstances.
The cause is affirmed in all respects except as to the award of $898,420.00 in prejudgment interest, which is reversed.
AFFIRMED in part; REVERSED in part.