Tektronix, Inc. v. United States

552 F.2d 343, 23 Cont. Cas. Fed. 81,128, 213 Ct. Cl. 257, 193 U.S.P.Q. (BNA) 385, 1977 U.S. Ct. Cl. LEXIS 18

• Court: United States Court of Claims
• Decided: March 23, 1977
• Docket: No. 79-61
• Status: Published

Opinions

Davis, Judge,

delivered the opinion of the court:

In Tektronix, Inc. v. United States, 195 Ct. Cl. 53, 445 F.2d 323, 170 U.S.P.Q. 100 (1971), claims in eight patents owned by plaintiff were held to be valid and infringed. The present task is to fix the reasonable compensation to which plaintiff is entitled under 28 U.S.C. § 1498, including a sum for the delay in payment. Former Trial Judge Cooper concluded that Tektronix should recover the basic amount of $4,831,773, plus compensation for delay computed at simple interest (varying from 4.60% in 1960 to 6.59% in 1969) on the amounts allocable to the individual years in which infringement occurred, such interest to be paid until the principal sum is satisfied. Both sides have sought review, both as to the principal amount and as to delay compensation. Though we agree with, and borrow from, much of the trial judge’s reasoning, we come to different results on both the basic compensation and the delay payments.

I.

The patents in suit relate to oscilloscopes and their electronic circuitry. Since defendant now concedes that all of the oscilloscopes here accused are covered by one or more claims of one or more of the patents, it is unnecessary to discuss in detail either the patents or the accused devices. However, it is pertinent to note the importance of the patents in suit and the impact they have had on the industry.

Plaintiff was organized in 1946, specifically to manufacture oscilloscopes designed by its then-president Howard Vollum. Research and development, funded by plaintiff, ultimately led to the model 516, 535, 535A, 545, and 545A oscilloscopes, all of which embody the patents in suit.¹ These oscilloscopes (or scopes) met with resounding success upon entering competition with those manufactured by nationally known competitors. They were deemed at the time to be superior in engineering and performance to all other scopes in their class and defendant purchased them in substantial numbers.

In 1958, apparently desirous of having alternative sources of supply and not wishing to pay plaintiffs price,² defendant issued an invitation for bids, inviting manufacturers to submit bids on an oscilloscope which was to consist of "one each . oscilloscope subassembly MX-2330( )/G; Tektronix, Inc. Model 535,” and "one each preamplifier AN-1839( )/USM; Tektronix, Inc. type 53/54C.” The Hickok Electrical Instrument Company responded to the invitation and agreed to furnish a "Tektronix, Inc. Model 535 as manufactured by Hickok.”

To fulfill this contract, Hickok purchased a 535 oscilloscope from Tektronix and began to manufacture copies. Subsequently, two other companies, Jetronic Industries and Lavoie Laboratories, Inc.,³ were awarded contracts to manufacture competing copies of the Tektronix scopes. It is clear from the evidence that defendant, unable to obtain comparable, noninfringing scopes from alternative sources, tailored its procurement specifications in such a way as to make infringement of plaintiffs patents a virtual prerequisite for obtaining the Government contracts. By essentially copying plaintiffs instruments, and without incurring the costs of engineering and developing the instruments, the third-party defendants (Hickok, Jetronic, Lavoie) were able to underbid plaintiff on contracts for the procurement of these scopes. This, of course, resulted in substantial savings to defendant, both on the purchase of the scopes and on the purchase of the related, but unpatented, plug-ins used with the scopes. Defendant realized these savings while at the same time taking advantage of plaintiffs extensive service and field organization to help with the training of its employees in the use and servicing of the infringing scopes.

The period of infringement extended from 1959 to 1969 and involved the procurement by defendant of 17,542 scopes at a net cost (for scopes only) of approximately $16,944,840. The infringing scopes bear the model designations 1805, 1805A, USM/81, LA261, LA265, LA265A, LA545, AN/USM-105, AN/USM-140, and AN/USM-141.

With the exception of the last three models, each of those scopes was supplied to the Government in direct competition with plaintiffs commercial scopes. The remaining three scopes, comprising 8,437 of the total, although embodying the circuits of the patents in suit, were militarized or more rugged versions developed by the Hewlett-Packard Company which had attempted to design around plaintiffs patents but, finding it could not, had requested and was granted a cross-license arrangement with plaintiff. Plaintiff did not market, and did not seek to bid on, scopes of this type, choosing to restrict its efforts to the commercial scopes. Hickok and Lavoie did, however, bid on and receive contracts for supplying these militarized scopes and, in so doing, extended their infringing activities.

II.

The parties⁴ are in agreement that plaintiff has no established licensing program or royalty applicable to the patents in this accounting. Beyond that, however, they have urged wholly divergent theories of recovery in the Trial Division and before the court on review. The polar nature of their respective views is revealed by a comparison of the end result each party arrives at as to what constitutes reasonable and entire compensation. Not including delay damages, defendant’s sum is on the order of $185,445, while plaintiffs sum is set at $12,094,638. The disparity in their positions also extends to the issue of delay damages where plaintiff contends for damages up to $25,005,090, while defendant proposes a much more modest $91,590.

Defendant’s basic theory, premised on Badowski v. United States, 150 Ct. Cl. 482, 278 F. 2d 934, 137 U.S.P.Q. 656 (1960), and Saulnier v. United States, 161 Ct. Cl. 223, 314 F. 2d 950, 137 U.S.P.Q. 222 (1963), lumps all the infringing devices into one category and leads to a reasonable and entire compensation equivalent to a nominal sliding-scale royalty based on the selling price of the oscilloscope only, without regard to any unpatented ancillary equipment sold with the scope. As a guide for selecting a suitable royalty rate, defendant relies on the licensing practices of RCA and Western Electric, both of which granted licences in the commercial electronics field at rates ranging from 2% down to 1%, the latter rate being applicable to sales to the Department of Defense. Defendant suggests that a sliding scale of 1.5% on the first $2 million, 1.2% on the next $3 million, and 1% on the remainder, would be appropriate here.

Plaintiff, on the other hand, divides the contracts for the procurement of infringing scopes into two categories, the first being those contracts that, in its view, would have been awarded to plaintiff "but for” the infringement, while the second consists of those contracts for the rugged or militarized scopes on which plaintiff did not bid and which it could not have supplied. With respect to the first category, plaintiff asks for an amount that would place it in as good a pecuniary position as it would have been had it received the infringing procurement. In short, plaintiff seeks lost profits, its authority consisting principally of two cases: Imperial Machine & Foundry Corp. v. United States, 69 Ct. Cl. 667, 5 U.S.P.Q. 332 (1930), and Waite v. United States, 69 Ct. Cl. 153, 4 U.S.P.Q. 387 (1930), rev’d on other grounds, 282 U.S. 508 (1931). As to the second category, plaintiff concedes a lost-profit theory is inapplicable and contends that compensation must be determined by adopting a reasonable royalty based on a willing-buyer/willing-seller concept as enunciated in Georgia-Pacific Corp. v. U.S. Plywood-Champion Papers, Inc., 446 F. 2d 295 (2d Cir. 1971), 170 U.S.P.Q. 369, cert. denied, 404 U.S. 870 (1971).

III.

It is settled that recovery of reasonable compensation under § 1498 is premised on a theory of an eminent domain taking under the Fifth Amendment. Calhoun v. United States, 197 Ct. Cl. 41, 51, 453 F. 2d 1385, 1391, 172 U.S.P.Q. 438 (1972); Pitcairn v. United States, 212 Ct. Cl. 168, 547 F. 2d 1106 (1976). The Supreme Court has in many cases emphasized that basic equitable principles of fairness are ' the governing consideration in determining just compensation for an eminent domain taking. In Almota Farmers Elevator & Warehouse Co. v. United States, 409 U.S. 470 (1973), it was stated, at 473-74:

The Fifth Amendment provides that private property shall not be taken for public use without "just compensation.” "And just compensation means the full monetary equivalent of the property taken. The owner is to be put in the same position monetarily as he would have occupied if his property had not been taken.” United States v. Reynolds, 397 U.S. 14, 16 (footnotes omitted). See also United States v. Miller, 317 U.S. 369, 373. To determine such monetary equivalence, the Court early established the concept of "market value”: the owner is entitled to the fair market value of his property at the time of the taking. New York v. Sage, 239 U.S. 57, 61. See also United States v. Reynolds, supra, at 16; United States v. Miller, supra, at 374. And this value is normally to be ascertained from "what a willing buyer would pay in cash to a willing seller.” Ibid. See United States v. Virginia Electric & Power Co., 365 U.S. 624, 633.

* * * * *

And, at 478:

"The constitutional requirement of just compensation derives as much content from the basic equitable principles of fairness, United States v. Commodities Trading Corp., 339 U.S. 121, 124 (1950), as it does from technical concepts of property law.” United States v. Fuller, post, at 490. It is, of course, true that Almota should be in no better position than if it had sold its leasehold to a private buyer. But its position should surely be no worse.

Those same principles have long guided this court in its assessment of reasonable compensation. For example, in Olsson v. United States, 87 Ct. Cl. 642, 659-60, 25 F. Supp. 495, 499 (1938), 37 U.S.P.Q. 767, 770, cert. denied, 307 U.S. 621 (1939), it was said:

* * * The rule to be applied in measuring the compensation depends upon the facts and circumstances of each case, but the end to be obtained in every case is always the same, namely, the determination and allowance of just compensation to the patentee for the value to him of the right or license to use appropriated by the Government. Richmond Screw Anchor Company v. United States, 275 U.S. 331; * * * The Berdan Fire-Arms Manufacturing Company v. United States, 26 C. Cls. 48, 82. * *

Where an established royalty rate for the patented inventions is shown to exist, that rate will usually be adopted as the best measure of reasonable and entire compensation. See, e.g., Carley Life Float Co. v. United States, 74 Ct. Cl. 682 (1932). But where no such royalty is shown, alternative methods must be employed.⁵

IV

In this case, it is necessary to adopt a method other than reliance on an established royalty for ascertaining what would be reasonable. However, neither defendant’s nominal sliding-scale royalty nor plaintiffs lost-profit theory provides a satisfactory basis on which to base a decision in this case.

A.

The Government’s proposal is rejected because the evidence on which it is premised is not at all analogous to the facts here. Defendant relies on the licensing programs of RCA and Western Electric but it seems clear that plaintiff — which was not a company comparable in size to those corporate giants, nor possessed of either a comparable patent portfolio or a comparable product line, nor under the spur of an anti-trust decree — should not be governed by the same considerations. Items such as transistors, tubes, and similar electronic components are comparatively simple in structure, have a relatively low per-unit cost, and are sold and used in very large quantities. Plaintiffs oscilloscopes, on the other hand, are much more complex, have a much higher per-unit cost, and the quantities sold are much lower.⁶ Moreover, the evidence is that during the 1960’s, plaintiff was realizing on its commercial sales an average profit of 23.7% on the 535 scope and 27.7% on the 545 scope, those figures reflecting plaintiffs margin on these products after both direct and indirect costs had been considered. In view of those figures, defendant’s suggestion that plaintiff should be forced to accept a declining royalty starting at 1%% for its inventions could not, without the greatest difficulty, be accepted as just compensation for use of the patents.

B.

With respect to plaintiffs lost-profit contention, there is no doubt that plaintiff was ready, willing, and able to supply defendant’s needs for commercial scopes. But even if we assume that lost profit is still a viable measure of recovery under 28 U.S.C. § 1498, we cannot adopt that standard in this case because it has not been sufficiently shown by clear and convincing evidence that plaintiff would actually have supplied all the "commercial” scopes the Government bought from the third-party respondents, or that if plaintiff had been the source of those items it would have made and kept the profits it now demands. For one thing, Tektronix had granted a paid-up cross-license under the patents in suit to Hewlett-Packard which was legally competent to bid against plaintiff for the sale of "commercial” scopes to the Government. Hewlett-Packard did not in fact bid against the third-party defendants with their low prices, but it is too much of a leap to assume that it would not have competed with plaintiff if the latter had alone been bidding, at its much higher prices, for the Government business. As evidenced by the scale of plaintiffs earnings on its non-Government sales, the profits to be made by an authorized seller, at the high prices legally available to it, may very well have lured Hewlett-Packard to enter the field. There is, in short, inadequate proof that, if the Government business had had to be confined to authorized sellers, plaintiff rather than Hewlett-Packard would have gotten it. By the same token there is no adequate proof that any share taken by plaintiff would have been at the level of prices or profit to which plaintiff was accustomed. The potential competition of Hewlett-Packard may have forced or induced Tektronix to cut its profits on Government sales — or the impact of the Renegotiation Act may have reduced the profits it now says it would have made. If lost profits are ever to be awarded under § 1498, it should be only after the strictest proof that the patentee would actually have earned and retained those sums in its sales to the Government. That kind of demonstration does not exist in this case.

We are constrained to point out, in addition, that in any event plaintiffs "lost profits” (assuming that they were absolutely certain) would be so high as to amount to excessive compensation, rather than the just compensation payable under the Fifth Amendment. See Part V, infra.

V.

Like the trial judge we conclude that the best method of computing compensation in this case is to adopt the approach of establishing a reasonable royalty for both the commercial and the militarized scopes. That method, exemplified by the Georgia-Pacific case, supra, involves a willing-buyer/willing-seller concept, in which a suppositi-tious meeting between the patent owner and the prospective manufacturer of the infringing item is held to negotiate a license agreement.⁷ In Georgia-Pacific, the court reasoned that had the infringer taken a license rather than infringe, the infringer would have been willing to pay as a royalty the sale price of the patented article as sold by the infringer, minus the cost of manufacture of the article and minus the infringer’s usual profit. In that case, the infringer’s usual profit was 9% so that 9% of the selling price was deducted from the profit pool generated by the sale of the patented article and awarded to the infringer, while the remainder of the profit constituted the royalty to be remitted to the patentee. On the facts in that case, the royalty, expressed as a percentage, was 22.36% of the infringer’s sale price.

Defendants object to employing a willing-buyer/willing-seller. approach, asserting that plaintiff has never been willing to grant any of the defendants a license under these patents. Of course, whether this is the fact or whether, as plaintiff contends, defendants were never willing to pay a reasonable royalty, is irrelevant. The willing-buyer-/willing-seller concept is, as Judge Learned Hand termed it, "a device in aid of justice,” Cincinnati Car Co. v. New York Rapid Transit Corp., 66 F. 2d 592, 595, 19 U.S.P.Q. 40 (2d Cir. 1933). As such it is employed by the court as a means of arriving at reasonable compensation and its validity does not depend on the actual willingness of the parties to the lawsuit to engage in such negotiations.

Although we accept the trial judge’s general approach, we depart from his application of the willing buyer/willing seller criterion. We reconstruct, as he did, a hypothetical negotiation in 1959 between Hickok, the first prospective infringer, and plaintiff; the subject of the negotiation would be the patent rights to the oscilloscope Hickok intended to supply to defendant. The negotiation formula which the trial judge borrowed from Georgia-Pacific is, as already mentioned, to start with the infringer’s selling price, deduct its costs in order to find its gross profit, then allocate to the infringer its normal profit, and end up with the residual share of the gross profit which can be assigned to the patentee as its royalty. We utilize the same formula as the beginning of our supposititious negotiation, and likewise start with Hickok’s proposed selling price — but thereafter our calculation differs from the trial judge’s:

Hickok’s proposed selling price $1,137

Costs:

Direct or variable manufacturing 486⁸

Fixed burden, marketing, administration, etc. 533⁹

Costs subtotal 1,019

Gross profit 118

Hickok Profit 31¹⁰

Residual Share (7.65% of unit price) 87

The trial judge’s computation (using the above format but different figures, as explained in notes 8-10) resulted in a residual share of 27.5% of the unit price, all of which he allocated to plaintiff as its reasonable royalty. We disagree with that result (as indicated in the above notes) principally because it understates the indirect costs of manufacture and thus inflates the residual share.

The defendant’s recomputation leads to a residual share of 4.6% of unit price which it is willing to give to plaintiff (if defendant’s primary contention based on the Western Electric-RCA-Raytheon licenses is rejected, as we have in Part IV, B, supra,). That conclusion we also reject because, in our view, it assigns a larger profit to the potential infringer (Hickok) than the latter actually experienced over the infringement period and would be willing (in our view) to anticipate; defendant’s computation therefore leaves too small a residual share for plaintiff. Hickok would be satisfied, we think, with a relatively low profit because the product to be made by it under plaintiffs patents would not involve any unusual risks or require large-scale investments in marketing, advertising, or tooling.

We do not, however, stop with the 7.65% of unit price which our own calculation produces for plaintiffs residual share. We think that a reasonable patentee in the position of plaintiff, which was realizing a profit in excess of 25% on its own non-Government sales of oscilloscopes, would have insisted on a somewhat higher royalty than 7.65%, and that a- reasonable potential licensee would have agreed, in order to be able to sell the item without legal question— even if at a somewhat higher price than if no royalty were to be paid. Such a potential licensee, if reasonable, would recognize that plaintiff, which took the risks and bore the expense of developing the scopes and creating a market for them, was entitled to substantial compensation for those efforts and for its ingenuity in creating this important and effective instrument. But we do not believe that such a reasonable potential licensee would be willing, or could be expected to be willing, to pay as a royalty the 25% or so plaintiff was making in profit on its own non-Government sales of scopes.¹¹ A portion of that 25% profit represented compensation, not for the patented idea itself, but for the efficiencies and risks of manufacture as well as the investment of other capital. Certainly that portion of plaintiffs profit is separate, and apart from any compensation due it for use of its patents. In any event, a royalty of 25% is very high and unlikely to be paid by a willing licensee which is content to make a very low profit for itself.

We select 10% as the proper royalty rate. This represents our best judgment, on the material we have before us, of what reasonable "parties might well have agreed upon” (Saulnier v. United States, supra, 161 Ct. Cl. at 227, 314 F.2d at 952, 137 U.S.P.Q. at 224), "what the parties would have agreed upon, if both were reasonably trying to reach an agreement” (Amerace Esna Corp. v. United States, supra, 199 Ct. Cl. at 182, 462 F.2d at 1380, 174 U.S.P.Q. 517). One may label this as akin to a "jury verdict” but, in the absence of hard proof warranting the use of more precise standards, the "whole notion of a reasonable royalty is a device in aid of justice, by which that which is really incalculable shall be approximated. * * * It is no more impossible to estimate than the damages in many other torts * * Cincinnati Car Co. v. New York Rapid Transit Corp., supra, 66 F.2d at 595, 19 U.S.P.Q. at 43.

In our view no rate higher than 10% is called for. As already indicated, plaintiffs profit in excess of 25% on its non-Government sales¹² does not mean that the royalty for the patents alone should equal or approach that figure which encompasses the gain on the whole item. Tektronix did not manufacture or sell the scopes here involved and is not entitled to a profit on their fabrication and vending.¹³ For a comparable reason, it is not conclusive that non-Government purchasers paid plaintiff prices which enabled it to make such profits on manufacture and. sale of the scopes. In addition, royalty rates higher than 10%, though not unknown, seeni to be relatively unusual, particularly in the electronics field.

Nor should it be forgotten, when plaintiffs high profits are brought forward for comparison, that the standard of 28 U.S.C. § 1498 — "reasonable and entire compensation”— was designed "to accomplish complete justice as between the plaintiff and the United States” under the just compensation clause of the Fifth Amendment. Waite v. United States, 282 U.S. 508, 509 (1931). That goal of "complete justice” implies that only a reasonable, not an excessive, royalty should be allowed where the United States is the user — even though the patentee, as a monopolist, might be able to exact excessive gains from private users. Much of the content of the constitutional requirement of just compensation derives from the basic equitable principles of fairness as between the Government and its citizens. See Almota Farmers Elevator & Warehouse Co. v. United States, 409 U.S. 470, 478 (1973); United States v. Fuller, 409 U.S. 488, 490 (1973); United States v. Commodities Trading Corp., 339 U.S. 121, 124 (1950). It is equally a fundamental component of fairness to avoid excessive compensation to the condemnee as it is to be sure not to pay him too little.

VI

With respect to the base to which the royalty is to be applied, it appears that the plug-ins are useless without the scopes and that the scopes require a plug-in before they have any utility. It also appears that the plug-ins are financially dependent on the market created by the patented scopes. Normally the patentee (or its licensee) can anticipate sale of such unpatented components as well as of the patented scopes. On these facts, there is sound authority for including the plug-ins in the base on which the royalties are calculated, even though the plug-ins are physically separate. See e.g., American Safety Table Co. v. Schreiber, 415 F.2d 373 (2d Cir. 1969), 163 U.S.P.Q. 129, cert. denied, 396 U.S. 1038 (1970); Shearer v. United States, 101 Ct. Cl. 196, 218, cert. denied, 323 U.S. 676 (1944). Plaintiffs patents were of such paramount importance that they substantially created the value of the plug-ins, and therefore the "entire market value rule” applies. See Marconi Wireless Telegraph Co. v. United States, 99 Ct. Cl. 1, 46-49, 53 U.S.P.Q. 246, 249-50 (1942), modified on other grounds, 320 U.S. 1 (1943).

The trial judge recognized this principle but ruled that the plug-ins should be included only in the base for the "commercial” scopes, not the "militarized” ones.¹⁴ We see no valid basis for this distinction and cover the plug-ins into the base for both types of oscilloscopes. As did the trial judge, we exclude packaging and other miscellaneous costs which plaintiff sought to include at trial.

VII

Accepting the 10% rate set in Part V, supra, and the base-including-plug-ins, as discussed in Part VI, supra, we conclude that the royalty base for the "commercial” scopes is $9,740,385, and for "militarized” scopes it is $11,557,695. The total is $21,298,080. Applying the royalty rate of 10% to this base, we reach $2,129,808 as reasonable and entire compensation under 28 U.S.C. § 1498 (to which delay compensation must be added, see Part VIII, infra).15

VIII

As for the delay compensation which is a component of "reasonable and entire compensation” (Waite v. United States, supra), the parties agree that it is appropriately computed at something more than the traditional 4% employed in the past. Both sides have presented evidence to support their varying theories. The trial judge, basing his determination on the yield of Aaa corporate bonds and actual Treasury securities, concluded that a separate rate should be set for each of the infringement years (1960-1969).¹⁶ This rate was to be applied (at simple interest) to the royalties accruing in that year (at the beginning of the next year) and thereafter held constant to the date of payment.

Very recently in Pitcairn v. United States, 212 Ct. Cl. 168, 547 F. 2d 1106 (1976), Part V of that opinion, we adopted a series of interest rates in a comparable patent suit under 28 U.S.C. § 1498, the rates to be applied each year, at simple interest, to the sums then owing to the plaintiff.¹⁷ We hold that these rates should be applied (from now on) to just compensation cases, without need of proof in the individual instance, unless and until it is affirmatively demonstrated that under the theory of the Pitcairn opinion the rate for years after 1975 should differ from the 7Vz% rate set for 1971-1975. The old 4% rate¹⁸ is now hopelessly antiquated and it is too burdensome to require parties to make specific proof in every case as to the appropriate interest rate. Until just the other day, the then current rate was mechanically used, without any evidence or proof that it was proper in the particular case. We follow the same course. It will further the goal of equal justice, reduce the costs and complexity of litigation, and facilitate decision (as well as settlement) to accept and establish the

Pitcairn rates and method, for the years through 1975, for all pending just compensation cases and those to be brought in the future.¹⁹ Accordingly, in the present case we substitute the Pitcairn rates and method for the formula adopted by the trial judge.

Our conclusion is that plaintiff is entitled to recover $2,129,808 as the principal sum of its compensation under 28 U.S.C. § 1498, plus delay compensation. The amount of delay compensation will be determined (under Part VIII of this opinion) by the Trial Division under Rule 131(c).

1 Patent No. 2,883,619 is concerned with electrical probes used with these scopes. The evidence is insufficient to make any determinations regarding reasonable compensation for use of that particular patent.

2 Plaintiffs catalog prices remained constant at $1,400 for the model 535 and $1,550 for the model 545 scopes, respectively, from 1959 to 1968. Throughout this period, plaintiff maintained a volume discount policy on its sales.

3 Lavoie is now bankrupt and has not participated in these accounting proceedings.

4 The third parties have, for all practical purposes, embraced the position of defendant, so it is unnecessary to discuss their individual views.

5 Even an established royalty may be modified upward, Meurer Steel Barrel Co. v. United States, 85 Ct. Cl. 554, 34 U.S.P.Q. 123, cert. denied, 302 U.S. 754 (1937), or downward, Fauber v. United States, 112 Ct. Cl. 302, 81 F. Supp. 218, 79 U.S.P.Q. 410 (1948), cert. denied, 337 U.S. 906 (1949), depending on the circumstances of the case. Where no established royalty is found, one may be selected on the basis of royalty rates for related patents, Breese Burners, Inc. v. United States, 140 Ct. Cl. 9, 115 U.S.P.Q. 179 (1957). A settlement rate may be considered, Saulnier v. United States, 161 Ct. Cl. 223, 314 F. 2d 950, 137 U.S.P.Q. 222 (1963), or other contracts between the parties may be used as a guide, Barlow v. United States, 87 Ct. Cl. 287, 34 U.S.P.Q. 127 (1937). Savings realized by the defendant as a result of the infringement are sometimes used as a measure of compensation, Shearer v. United States, 101 Ct. Cl. 196, 60 U.S.P.Q. 414, cert. denied, 323 U.S. 676 (1944); Olsson v. United States, 87 Ct. Cl. 642, 25 F. Supp. 495, 37 U.S.P.Q. 767 (1938), cert. denied, 307 U.S. 621 (1939), and lost profits have been awarded. Imperial Machine & Foundry Corp. v. United States, 69 Ct. Cl. 667, 5 U.S.P.Q. 332 (1930); Waite v. United States, 69 Ct. Cl. 153, 4 U.S.P.Q. 387 (1930), rev’d on other grounds, 282 U.S. 508 (1931).

6 Defendant also puts forward the Raytheon licensing program, but Raytheon’s subminiaturized tubes are very different from oscilloscopes and hardly comparable.

7 This willing-buyer/willing-seller technique in determining a reasonable royalty has not been a stranger to the Court of Claims. Oisson. v. United States, supra; Badowski v. United States, 150 Ct. Cl. 482, 485, 278 F.2d 934 (1960); Ushakoff v. United States, 179 Ct. Cl. 780, 785-86, 375 F.2d 822, 825, 153 U.S.P.Q. 410 (1967); Amerace Esna Corp. v. United States, 199 Ct. Cl. 175, 462 F.2d 1377, 174 U.S.P.Q. 517 (1972). For cases from other courts, see, e.g., Jenn-Air Corp. v. Penn Ventilator Co., 394 F.Supp. 665, 185 U.S.P.Q. 410 (E.D. Pa. 1975).

8 This figure is the same as the trial judge’s and is based on plaintiff’s 1959 direct cost, Hickok’s cost not being available.

9 The trial judge based his figure ($256) on an estimate of plaintiff’s indirect costs for 1959 (plaintiffs actual indirect costs for 1959 are not available) but did not include the amounts paid to employees under the profit-sharing program. Our figure of $533 includes the profit-sharing expenses (treated as wages) and is based on extrapolation backward from plaintiffs 1961 actual cost. In the absence of acceptable cost data from Hickok, we use (as did the trial judge) plaintiffs more accurate cost data for 1959 and 1961, but unlike the trial judge we assume that the 1961 indirect costs increased over 1959 in the same proportion as did the direct costs.

10 Based on Hickok’s average profit from 1960 to 1968 of 2.7%. The trial judge’s number of $82 was based on the profit rate of 7.23%, taken from Hickok’s figures for the particular contract which was the basis of the calculation and adjusted for profit-sharing. The defendant would use $65, Hickok’s actual profit under the particular contract used as the initial basis of the calculation.

11 In the trial judge’s opinion plaintiffs profits could go as high as 60% but plaintiff insists that, if its overhead were properly distributed over all sales, profits would be in the range of 25-27%.

12 As we have pointed out (see note 11), the trial judge thought Tektronix’ profits could even rise to the 60% level if the volume was high enough, though plaintiff disputes that figure.

13 Plaintiff would undoubtedly have insisted on, and would have made, an acceptable profit if there had been no patents or if the patents had expired.

We have already held, supra, that plaintiff has failed to prove that it would necessarily have supplied the scopes if the defendant had limited its procurement to authorized manufacturers, or that it would have made the "lost profits” it now claims.

14 The only grounds he gave for the differentiation were "the royalty rate [which he had set at 27.5%], the magnitude of the procurement involved, and other factors present in this case.” The royalty rate we fix (10%) is considerably lower than the trial judge’s.

15 Trial Judge Cooper’s figure for reasonable and entire compensation (aside from delay compensation) was $4,831,773.

16 The trial judge recommended the following rates:

Year Percentage

1960 4.60

1961 4.37

1962 4.45

1963 4.21

1964 4.37

1965 4.70

1966 4.74

1967 5.70

1968 6.20

1969 6.59

17 The rates established in Pitcairn were:

1947-1955 4%

1956-1960 4-‘/2%

1961-1965 4-%%

1966-1970 6-M¡%

1971-1975 7-‘/2%

18 Beginning in 1944 the rate of 4% was automatically used until somewhat over a year ago.

19 Except where the parties stipulate otherwise or in other special cases, which we do not now pass upon, such as where Congress has established a different rate.