Citations
- 95 F. Supp. 771
Full opinion text
BONDY, District Judge.
This is an application for the determination of a reasonable royalty for a nonexclusive, non-assignable license to make, use and vend semi-rimless spectacle mountings under United States Letters Patent Reissue No. 21,255 (hereinafter called the Gagnon patent). The application is made by American Optical Company (hereinafter called American), owner of the Gagnon patent, at the request of Shuron Optical Company, Inc. (hereinafter called Shuron), applicant for a license under that patent, pursuant to provisions of the final judgment entered September 17, 1948, on consent, in this civil anti-trust action. The judgment cancelled a number of patent licenses and agreements and ordered compulsory licensing of numerous patents, including the Gagnon patent, on a uniform and reasonable royalty basis.
Article VI(D) of the judgment provides: “Upon application for a license under the provisions of this Section, the defendant to whom application is made shall state the royalty which it deems reasonable for the patents to which the application pertains. If the parties are unable to agree upon a reasonable royalty, the defendant may apply to this Court for the determination of a reasonable royalty, giving notice thereof to the applicant and the Attorney General, and he shall make such application forthwith upon request of the applicant. In any such proceeding, the burden of proof shall be upon the defendant to whom application is made to establish by a fair preponderance of evidence, a reasonable royalty, and the Attorney General shall have the right to be heard thereon * *
Upon the application of Shuron for a license under the Gagnon patent, American proposed a royalty of 40 for each mounting covered thereby. This rate not being acceptable to Shuron, it called upon American to apply to the court for the determination of a reasonable royalty. American thereupon instituted this proceeding. The Attorney General, having been notified, stated that the government did not wish to take any position with respect to the royalty controversy between American and Shuron.
American contends that 40 per mounting has become the “established” royalty for a license under the Gagnon patent because it has been “paid by such a number of persons as to indicate a general acquiescence in its reasonableness by those who had occasion to use the invention.” Rude v. Westcott, 130 U.S. 152, 165, 9 S.Ct. 463, 468, 32 L.Ed. 888. Whether established or not, however, American further contends that 40, representing 1.4 per cent, of the selling price of the mounting to wholesale distributors ($2.85), is a reasonable royalty. Shuron denies that any royalty has been established for a license under the Gagnon patent and asserts that a reasonable royalty for such a license is zero.
Shuron has conceded for purposes of this proceeding that the Gagnon patent is valid and covers “Numont” mountings manufactured by it. Its claim that the patent is worthless is predicated on its contention that Gagnon’s invention did not make any contribution whatever to the practical spectacle art but was “of the most trifling character * * * the shadow of a shade.” Columbia Machine & S. Corp. v. Adriance Machine Works, 2 Cir., 79 F.2d 16, 18. See also U. S. v. National Lead Co., 332 U.S. 319, 349, 67 S.Ct. 1634, 91 L.Ed. 2077. It is agreed, however, that evidence as to the scope and nature of the Gagnon patent becomes a relevant consideration only in the event that there is not any established royalty for a license under the patent.
Shortly after the consent judgment can-celled all outstanding licenses under the Gagnon patent (other than a paid-up license issued some years before to the Bausch & Lomb Optical Company), nine of fifteen potential Gagnon licensees accepted the royalty rate of 4