The Supreme Court Monday let stand a $14.4 million award against the government for infringing upon patents owned by the defunct Autogiro Co. of America.
The award - the largest ever made against the government for patent infringement - is exclusive of $17 million in interest, for delay in compensation, that also must be paid to Autogiro's stockholders.The government must pay additional interest at a rate of $2.967 a day starting with a court-imposed payment deadline of last June 30.
The case involved claims by the stockholders for patent infringements from 1946 to 1964 in more than 2,200 helicopters procured by the government from five manufacturers.
The government acknowledged infringements but said it owed Autogiro no more than $532,279 - less than 1 per cent of the $639 million paid for the helicopters (excluding engines). In contrast, the stockholders argued that they were owed $67.5 million.
The U.S. Court of Claims appointed a judge to try the dispute. He proposed an award of $24.6 million plus $26.3 million compensation for delay in payment.
In December 1976, however, a divided Court of Claims sought to end a quarter-century of litigation with the $31.4 million award that the Supreme Court now has left standing.
Judge Philip Nichols Jr. joined in the 1976 decision, but protested that the Claims Court's drastic reduction of the basic award "serves to reward a cynical exploitation of the cost and delay of suing in this court." He went on to say:
"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 at the outset for 40 cents on the dollar, and assess his claim at 40 cents, though he has not got the quid pro quo his sacrifice of 60 cents would have obtained if accepted?"
The majority based the $14.4 million award on a 1947 agreement under which United Aircraft Corp., then the largest helicopter manufacturer, agreed to pay Autogiro 2 per cent on the sales price of each ship it built.
As it turned out, United paid no royalties under the agreement, which was replaced by a licensing arrangement substituting a 0.13 per cent rate. Partly because United had paid no royalties, two dissenting judges would have reduced the $14.4 million to $830,378, in line with the government assessment.
The licensing arrangement put a ceiling on the recovery the stockholders could claim, said one dissenter, Judge Shiro Kashiwa. "To view the case otherwise is simply to ignore the market value which [Autogiro] itself placed on a license under its patents."
In the government brief, Solicitor General Wade H. McCree told the Supreme Court that the $14.4 million award "threatens to increase drastically the amounts of judgments against the government in patent infringements . . . "
Merely in the Autogiro case, the decision exposes the government to "claims for almost $100 million in additional compensation arising out of similar facts," McCree wrote.
The brief said that when the government uses a device or machine embodying a patented invention, it takes property - a license in the patent - under the power of eminent domain. Thus the "appropriate" damages would be the fees payable under a comparable license, McCree said.
Autogiro offered the 2 percent rate in licensing proposals to four other manufacturers. All declined it. Because they did, McCree said, the Court of Claims should have not taken the offer into account.
Two of the manufacturers, Textron's Bell Helicopter Division and Eltra Corp. (successor to Hiller Helicopters) filed friend-of-the-court briefs warning that the Court of Claims decision, if left standing, could have adverse effects on military contractors who use others' patents.