
    375 F. 2d 822
    ALEXIS E. USHAKOFF AND STANLEY A. BARON v. THE UNITED STATES
    [Nos. 2-58 and 297-64.
    Decided April 14, 1967]
    
      
      'William H. K. Donaldson, attorney of record in No. 2-58, and of counsel in No. 297-64. L. William Bertelsen, attorney of record in No. 297-64, and of counsel in No. 2-58. Kenway, Jenney c& Hildreth, of counsel.
    
      Louise O'Neil, with whom was Assistant Attorney General Barefoot Sanders, for defendant.
    Before CoweN, Chief Judge, Laramore, Durfee, Davis, ColliNS, SkeltoN and Nichols, Judges.
    
   Per Curiam:

This case was referred to Trial Commissioner Donald E. Lane with directions to make findings of fact and recommendation for conclusions of law. The commissioner has done so in a report and opinion filed on August 18, 1966. Exceptions were filed by the parties and the case has been submitted to the court on the briefs of the parties and oral argument of counsel. Since the court agrees with the trial commissioner’s findings of fact, opinion and recommended conclusion of law, with minor modifications in the findings, it hereby adopts the same, as modified, as the basis for its judgment in this case, as hereinafter set forth. Plaintiffs are therefore entitled to recover compensation for the 1952-1964 period with reasonable and entire compensation in these cases to be recovered by plaintiffs in the sum of $125,000 and judgment is entered for plaintiffs in this amount.

OPINION OF COMMISSIONER

Lane, Commissioner:

These are patent suits under Title 28 U.S.C. § 1498 for reasonable and entire compensation for the unauthorized use of plaintiffs’ patented invention relating to an inflatable solar still for converting salt water to drinking water -through utilization of radiant energy from the sun. In an earlier opinion, the court held in case 2-58 that patent 2,455,835 was valid and infringed, and that defendant is liable. (Opinion per curiam, 164 Ct. Cl. 455, 327 F. 2d 669, 140 USPQ 341 (1964).) Plaintiffs filed a second petition, case 297-64, similar to the original petition, to cover further unauthorized use. The two cases were consolidated by the commissioner for an accounting of reasonable and entire compensation. In April 1966, the court denied defendant’s motion for a new trial. These cases are now before the court for determination of the compensation to be recovered by plaintiffs.

As indicated in the accompanying findings of fact, during the 1952-1964 period defendant procured for its use 225,522 infringing solar stills at a total cost of $2,027,544.60, at an average cost of $8.99 per still. The issues include the recovery period and the amount of compensation.

There is no question that the petition in case 2-58 covers the 6-year period January 2, 1952, to January 2, 1958, and that the petition in case 297-64 covers the 6-year period September 8, 1958, to September 8, 1964. Defendant contends that plaintiffs should not be allowed to recover for the 8-month interim period, January to September, 1958.

On February 5, 1965, the court denied without prejudice plaintiffs’ motion to vacate a commissioner’s order which denied discovery to the plaintiffs for the 8-month interim period. The subsequent accounting trial has included said period and the parties have stipulated that the defendant procured some 21,113 solar stills costing $200,573.50 during that period.

It is concluded that in the circumstances of the present consolidated cases, plaintiffs must be awarded compensation for defendant’s unauthorized use of the patented invention during said 8-month interim period. This conclusion is not based upon stretching the 6-year statute of limitations backward from the start of the 6-year period in case 297-64. It is based upon the court’s jurisdiction under Title 28 U.S.C. § 1498 to grant “reasonable and entire” compensation in case 2-58. It would be unreasonable to require a patent owner to file a new petition each time the defendant procured another identical solar still, or to require the patent owner to file a new and identical petition every 6 years.

Entire compensation for defendant’s unauthorized use of a patented invention may include compensation for use between the date of filing of the patent owner’s petition and the date of judgment unless the patent expires sooner. In case 2-58, the court’s judgment that defendant is liable was dated January 24, 1964. The petition in case 2-58 alleged in paragraph (6) that “the Department of the Air Force and the Navy Department have refused to pay the Petitioners any compensation whatsoever, and are continuing to 'procure and use the Petitioner Ushakoff’s Solar Still without paying compensation to the Petitioners for such use and manufacture.” [Emphasis added.] Defendant has stipulated the number and cost of stills it procured in the interim period. Petitioners’ compensation will not be entire unless it covers the stills procured in the interim period.

This court has recently held that a petitioner was entitled to an accounting for any Government use or manufacture that occurs between the filing date of the original petition and the expiration of the patent or the entry of final judgment, whichever occurs first. (Opinion by Chief Judge Cowen, Calhoun v. United States, 173 Ct. Cl. 893, 354 F. 2d 337, 148 USPQ, 12 (1965).) In the Oalhoim case, the patent expired 1 year and 3 days after the petition was filed. The court affirmed a commissioner’s order extending the recovery period for that period of time. In the instant case, the recovery period will include the 8-month period subsequent to the filing of the petition in case 2-58.

Defendant argues that the court erred in its opinion in the Calhoun case, supra, that the doctrine of continuing claims as applied in pay cases is inapplicable to patent cases, and that the court went beyond the letter of the statute, Title 28 U.S.C. § 1498, in holding that a petitioner may be entitled to an accounting for any Government use that occurs between the filing of the original petition and the expiration of the patent or the entry of final judgment, whichever occurs first. These arguments do not restrict the jurisdiction conferred on the Court of Claims by § 1498 to enter judgment for “reasonable and entire compensation” for unauthorized use of a patented invention. As stated above, it would be unreasonable to require a patent owner to file a new action every time the defendant purchases another solar still or to require the patent owner to file a new action every 6 years for the life of his patent. The patent owner’s compensation would not be “entire” if admitted uses subsequent to the filing date of his petition are noncompensable.

Computation of the amount of reasonable and entire compensation for the present consolidated actions is difficult. Plaintiffs contend that compensation should be calculated upon three factors, the first being the improvement of the ease, convenience, and simplicity of operation of the patented solar still, the second being the actual dollar savings to defendant due to lower cost, and the third being the indirect savings arising from greater water productivity per still. The patented still is essentially a military item which has not been produced or licensed commercially. There is no established royalty for this patented invention. Defendant contends that the amount of reasonable and entire compensation should be between the 2-3 percent rates adopted by the court in Badowski v. United States, 150 Ct. Cl. 482, 278 F. 2d 934, 125 USPQ 656 (1960). The difference between plaintiffs’ and defendant’s contentions is the difference between $1,062,749.87 and $54,808.14, a difference in excess of one million dollars.

Plaintiffs specifically contend that compensation should be at a rate of about 25 percent of the estimated savings in cost to the defendant. In 1944 the Air Corps was authorized to purchase 100,000 stills of the Gallowhur type at $11.00 each. In 1945 the defendant contracted with Higgins Industries, Inc. for 172,678 stills of the Ushakoff type at $7.82 each. Plaintiffs urge that the total saving was $11.00 less $7.82 plus $11.00, since one patented still produced twice as much water as two Gallowhur stills. On this basis the total saving is $14.18 per still. Plaintiffs ask that compensation be set at $3.57 per still, which amount is about 25 percent of $14.18. Plaintiffs ask for interest as part of their compensation, to be computed from the middle of the 1952-1964 period, i.e., from 1958 to 1966, roughly 8 years. At plaintiffs’ $3.57 rate for each of 225,522 stills plus interest at 4 percent for 8 years, compensation would amount to $1,062,749.87. This total sum is about 39.7 percent of the defendant’s actual cost of the stills plus interest. It is concluded that such a rate is far in excess of a royalty rate the defendant or any other possible user of stills would have been willing to pay for a license under the Ushakoff patent in 1952.

Defendant contends that compensation should not exceed the 3 percent rate adopted in the Badowski case, supra, in view of defendant’s expense in testing models of the Ushakoff stills. It is not possible to determine from defendant’s termination settlement of its contract with Higgins or from defendant’s added expense in operating a PT boat assigned to other duties just what expenses might be attributed to solar still tests, nor is it ascertainable that all tests made by defendant were necessary. Defendant’s desire to set-off test expenses against any compensation is not clear enough to warrant further consideration. At defendant’s rate of no more than 3 percent on solar stills costing the defendant $2,027,544.60, compensation would amount to $60,826.34. It is concluded that this rate is somewhat less than the defendant might have been willing to pay for a license in 1952.

The plaintiffs’ and defendant’s contentions on compensation are far apart and neither is convincing under all the facts of the present cases. The court may utilize its own judgment in this matter. After considering the facts and the contentions of the parties, it is concluded that plaintiffs’ reasonable and entire compensation for defendant’s unlicensed use of the patented solar still invention during the full period from January 2, 1952, to September 8, 1964, should be the sum of $125,000.00. This sum provides a royalty at a rate slightly below 5 percent of defendant’s actual purchase costs and includes interest at 4 percent per year for 8 years to compensate for delays.

FINDINGS or Fact

30. On January 24, 1964, the court’s opinion on liability in case 2-58 held that plaintiffs’ patent No. 2,455,835 was valid, that the invention covered by the patent was used by defendant without license, and that plaintiffs are entitled to recover reasonable and entire compensation for defendant’s unauthorized use of the invention. (Opinion per curiam, 164 Ct. Cl. 455, 327 F. 2d 669, 140 USPQ 341.) On September 8, 1964, plaintiffs filed a second petition, case 297-64, similar to the original petition, to cover unauthorized use subsequent to the filing date, January 2, 1958, of the original petition. On September 24,1964, the commissioner consolidated the two cases for an accounting. On February 5, 1965, the court denied without prejudice plaintiffs’ motion to vacate an order by the commissioner which denied discovery for the 8-month interim period. The amount of procurement during this period has been stipulated. After a trial, proofs on the accounting were closed November 29, 1965. On January 26, 1966, defendant moved for a new trial, and on April 15, 1966, the court entered its order denying defendant’s motion for a new trial.

31. The normal 6-year accounting periods extend from January 2, 1954, to January 2, 1958, and from September 8, 1958, to September 8, 1964. The patent in suit expired December 7, 1965. The accounting trial has included defendant’s unauthorized use during the 8-months’ gap from January 2, 1958, to September 8,1958.

312. The patent which is the subject of this litigation relates to an inflatable solar still for converting salt water to drinking water through utilization of the sun’s radiant energy.

33. Since prior to 1943, the Army Air Corps had been experimenting with the development of sea water distillation equipment operating on a solar energy as a source of fresh water to maintain human life under rescue conditions as sea. Prior to the development of solar stills, the only known sources of fresh water for life raft use were canned water, chemical desalting kits, and rain. Each of the first two could supply only a limited amount; neither was capable of producing fresh water indefinitely. The first acceptable equipment was that developed by Delano, commonly referred to as the Gallowhur still, which was standardized for procurement in 1944. The still invented by Ushakoff was standardized for procurement in place of the Gallowhur still in mid-1945. The plaintiffs’ still is essentially a military item and has not enjoyed any non-Governmental commercial success.

34. In the discovery to date, the defendant has reported procurement of a total of 225,522 solar stills, costing about $2,027,544.60, between 1952 and August 1964. Of this total, 21,113 stills, costing $200,573.50, were procured between January 2, 1958, and September 8, 1958. The average cost per still on the entire procurement is $8.99 each.

35. Plaintiffs did not manufacture stills embodying the teachings of the patent in suit. There is no license of record from plaintiffs to any manufacturer to manufacture and sell the device of the patent in suit. There is no established royalty rate available for consideration in connection with the determination of the value to plaintiffs of the patent in suit. Plaintiff, Ushakoff, organized Thermold Company, which jointly with the Arnot Company of Baltimore and the Stanton Reid Company of California, bid for a contract to manufacture the stills for the Government in 1945 but they did not get a contract. Early in 1945 plaintiff Ushakoff told personnel of the Procurement Office of the Air Corps that he would be willing to give a free license to the Government if he received a contract to manufacture the stills.

36. Plaintiffs’ patented solar still was an improvement over the prior Gallowhur still in that it produced substantially salt-free water at a rate at least twice that of the Gallowhur still. Plaintiffs’ patented still did not have to be purged or rinsed to remove residual sea water, it did not have to be oriented toward the sun, and it required less space and less attention.

37. An Air Corps “Authority for Purchase,” defendant’s exhibit 29, indicates that the 1944 price on 33,334 Gallowhur solar still kits of 3 stills per kit was $33.00 per kit, or $11.00 per still. Another Air Corps “Authority for Purchase,” defendant’s exhibit 32, indicates that the 1944 price on 15 Gallowhur flat pad solar stills for comparative or service testing was $60.00 per still, and that the price on 15 Higgins Industries, Inc. spherical pad solar stills for such testing was $25.00 per still. This latter exhibit in Attachment A indicates that it was understood then that the production model still would retail for $8.00 to $10.00 each. An Air Corps order, defendant’s exhibit 25A, dated May 15, 1945, for 172,678 sea water solar distillation kits, 3 stills each, type XLL-2, from Higgins Industries, Inc., authorizes the expenditure of $1,350,514.64 which resolves to $2.61 per still. A War Department contract, defendant’s exhibit 25B, dated June 21, 1945, with Higgins Industries, Inc., for said 172,678 solar still kits indicates a total cost of $4,051,025.88 which resolves to $7.82 per still.

38. Plaintiffs contend that compensation in this case should be based on the estimated saving to defendant at $14.18 per still, this figure being computed at a cost saving of $3.18 ($11.00 less $7.82) per still plus $11.00 per still because the patented still produces twice the output of one Gallowhur still. Plaintiffs ask for compensation at the rate of $3.57 per still plus interest. This rate is approximately 25 percent of the alleged $14.18 saving, and is at the rate of approximately 39.7 percent of the actual cost ($8.99) of the infringing stills. At the rate of $3.57 per still on 225,522 stills, plaintiffs seek the sum of $805,113.54 plus interest.

39. Plaintiffs contend that interest should be computed from the mid-point, May 20,1958, of the 1952-1964 recovery period, but do not specify an interest rate. Interest at 4 percent for 8 years, 1958-1964, on $805,113.54 amounts to $257,636.33. Adding these figures, plaintiffs apparently seek $1,062,749.87 as reasonable and entire compensation.

40. The War Department contract, defendant’s exhibit 25B, noted in finding 37, was terminated by settlement agreement dated in June 1946. The settlement agreement indicates that Higgins Industries, Inc. received the sum of $74,172.50 “on account of work and services, or articles delivered” under the contract. Defendant assumes that this sum paid by defendant was for the development of the Ushakoff solar still, and that it should be deducted from any compensation due plaintiffs. The court has already found in finding 19 that the employment of Ushakoff by Higgins Industries, Inc. did not give Higgins the right to license the use of the Ushakoff invention. The evidence does not support defendant’s assumption that defendant paid the major expense of development. Ushakoff engaged in overtime work and incurred personal expenses in developing his solar still for defendant’s Air Corps, and cooperated with defendant’s personnel with regard to the testing of solar stills.

4L Defendant contends that in view of the circumstances, a reasonable royalty would be no more than between 2 percent and 3 percent of the total cost of procurement by-defendant during the accounting period, that the amount should be $36,539.43 but no more than $54,808.14.

42. Defendant states in its brief to the commissioner at page 31, that “there is no evidence of record that defendant ever reaped any advantage from the use of the still of the patent in suit over rain water or canned water or chemicals or any of the more recently developed alternative devices it might have installed in its inflatable rafts during the accounting period.” However, it is the fact that defendant obtained for its use 225,522 infringing solar stills at a cost of $2,027,544.60.

43. It is concluded as an ultimate fact that, in view of all of the above findings, plaintiffs’ reasonable and entire compensation for the defendant’s unlicensed use of the patented solar still invention should be $125,000.00. This amount includes a royalty rate of less than 5 percent plus interest at 4 percent for 8 years.

Conclusion op Law

The court concludes as a matter of law that plaintiffs are entitled to recover compensation for the 1952-1964 period, and that plaintiffs’ reasonable and entire compensation in these cases is the sum of $125,000, and judgment is entered in plaintiffs’ favor for said amount. 
      
      The opinion, findings of fact, and recommended conclusion of law are submitted under the order of reference and Rule 57(a).
     