author: DAVIS, Judge

text:
    LING-TEMCO-VOUGHT, INC. v. The UNITED STATES.
    No. 417-69.
    United States Court of Claims.
    March 16, 1973.

      Harold Hoffman, Dallas, Tex., of record, for plaintiff; Wynne Jaffe & Tinsley, Washington, D. C., of counsel.
    Thomas W. Petersen, Washington, D. C., with whom was Asst. Atty. Gen. Harlington Wood, Jr., for defendant.
    Before COWEN, Chief Judge, and DAVIS, SKELTON, NICHOLS, KASHIWA, KUNZIG and BENNETT, Judges.
   OPINION

DAVIS, Judge

Plaintiff Ling-Temco-Vought, Inc. (“LTV”), sues the defendant in this action for $1,022,973.27, representing the amount which the plaintiff expended out of its own funds in completing a project that was originally undertaken by a corporation known as Frederick Fenski & Miller Electronics, Inc. (“FF & M”), under a 1961 contract between that corporation and the defendant, acting though the Bureau of Ships (“BuShips”), Department of the Navy. The suit is for breach not “under the contract.”

In the early 1960’s, the Navy had a need for a large-screen display system on which could be displayed, for the benefit of the personnel in the Combat Information Center (“CIC”) of a warship, data revealed by the ship’s radar concerning changes in the location of moving targets (such as aircraft, missiles, and vessels on the surface of the sea). FF & M’s business included the manufacture and sale of large-screen display systems for commercial applications. One of FF & M’s large-screen display systems employed an electro-mechanical technique and was sold under the trade name of Ieonorama. Of all the workable large-screen display systems that were in existence during the early 1960’s, FF & M’s Ieonorama was the only one that was available for shipboard use. However, the Navy regarded the commercial-type Ieonorama as incapable of keeping track adequately of the movement of the large number of high-speed targets (jet aircraft and missiles) involved in an anti-air warfare environment.

In order to study FF & M’s Iconorama in a shipboard environment, and, if possible, to develop it into a satisfactory large-screen display system for CIC use aboard warships, the Navy Department (acting through BuShips): (1) purchased a commercial-type Iconorama “off the shelf” and installed it aboard the U.S.S. Randolph for experimentation and observation; and (2) entered into a 1961 contract with FF & M, which basically required FF & M to adapt its Iconorama to military standards and requirements, and to produce two prototypes of the system thus revised. The device which FF & M contracted to produce was to be called a Taetical/Navigational Display System (“Tae/Nav”). At the time when the contract was entered into, both contracting parties knew that the two Tac/Nav’s were being purchased by the Navy for evaluation purposes.

After the contract was entered into, FF & M was acquired by and merged into LTV; and LTV, the plaintiff in the present case, was substituted for FF & M as the contractor under the contract. The effective date of this substitution was December 31, 1961.

The contract required the plaintiff to design, fabricate, test, and furnish two Tac/Nav’s to the Navy, together with preliminary drawings, working drawings, preliminary technical manuals, final technical manuals, various reports, and 60 man-days of engineering services to assist in the installation and checkout of the devices. The work was to be done on a cost-plus-a-fixed-fee basis; and all work (except the furnishing of the reports and the engineering services) was to be completed by June 30, 1962.

The contract contained an estimated cost schedule in the amount of $464,753, and the fixed fee was to be $27,097. Thus, the estimated cost and the fixed fee totaled $491,850.

With respect to the estimated cost schedule, the contract contained a provision under the heading of “Limitation of Cost” which stated in part as follows:

(b) The Government shall not be obligated to reimburse the Contractor for costs incurred in excess of the estimated cost set forth in the Schedule, and the Contractor shall not be obligated to continue performance under the contract or to incur costs in excess of the estimated cost set forth in the Schedule, unless and until the Contracting Officer shall have notified the Contractor in writing that such estimated cost has been increased and shall have specified in such notice a revised estimated cost which shall thereupon constitute the estimated cost of performance of this contract.

At a conference between the plaintiff and BuShips that was held on March 28, 1962, the plaintiff asked that the estimated cost figure in the contract be increased by $590,000. BuShips told the plaintiff that it had not budgeted for or anticipated any cost overrun of such magnitude, and that it was not prepared to fund such an overrun. BuShips also stated that it would like to continue the contract, but not at the cost indicated, and asked what changes could be made to reduce the projected expenses. Possible areas of cost reduction were discussed. The conference was then recessed until the next day, so that the plaintiff could recompute the estimated overrun.

On March 29, 1962, the parties conferred again. At this conference, the plaintiff made a written submission listing certain changes that could be made to reduce the proposed increase in the estimated cost of the contract from $590,000 (the figure proposed by the plaintiff on March 28, 1962) to $358,-028.

By means of a telegram dated March 30, 1962, BuShips notified the plaintiff that “the contract is hereby modified to increase the total estimated cost * * * by $358,028 * * Modification No. 3 was signed by the contracting officer on April 18, 1962, and by the plaintiff on April 24, 1962. It increased the estimated cost of the contract by $358,028 to a new total of $822,781, and it extended the completion date (except for the furnishing of the reports and the engineering services) to August 15, 1962.

During April of 1962, the plaintiff concluded that the cost of completing the contract would exceed by some $250,000 the then-current estimated cost of $822,781. At about the end of April 1962, the plaintiff asked for a conference with BuShips; and it was held on May 3, 1962. The plaintiff’s purpose in asking for a conference was to request a further increase of $250,000 in the estimated cost of the contract. At the conference, however, the conferees did not discuss the dollar amount of any additional increase in the estimated cost of the contract. Instead, the plaintiff was given what it characterized as a “stern lecture” by BuShips on overruns, and was told that BuShips would terminate the contract rather than fund or accept an overrun. On the other hand, Bu-Ships pointed oui to the plaintiff various factors which indicated that it would be a good business risk on the part of the plaintiff if the plaintiff would complete the performance of the contract at its own expense.

The principal spokesman for BuShips at the conference on May 3, 1962, was Captain Francis H. Cunnare, the head of Code 665 in BuShips. Code 665 had entered into and was administering the contract for BuShips and the Navy Department. It was Captain Cunnare who pointed out the factors which indicated that it would be a good business risk on the part of the plaintiff if the plaintiff would complete the performance of the contract at its own expense. Captain Cunnare’s representations in this respect are detailed in the findings. From the standpoint of the present litigation, the most significant of these representations will be outlined in the next two paragraphs.

Captain Cunnare told the plaintiff at the conference on May 3, 1962, that the Navy was not then considering any technique or concept other than Tac/Nav for accomplishing the large-screen display of information for CIC purposes.

Captain Cunnare also told the plaintiff that there was a “fantastic” market potential for the large-screen display system, which would justify the plaintiff in investing its own funds for the completion of the performance of the contract. In this connection, Captain Cunnare stated that the Navy had firm requirements for production quantities of a large-screen display system similar to the Tac/Nav system that was being developed by the plaintiff under the contract, that these requirements were already programmed by the Navy, and that the Navy planned to put large-screen display systems on a large number of ships. Captain Cunnare’s presentation showed a requirement for the installation of large-screen display systems aboard 14 aircraft carriers over a period of approximately 5 or 6 years, an immediate requirement for 74 large-screen display systems aboard destroyers, and a total requirement for 350 large-screen display systems aboard destroyers over a period of from 5 to 8 years.

Promptly after the conference on May 3, 1962, the plaintiff’s personnel who had participated in the conference outlined Captain Cunnare’s presentation to the plaintiff’s top management. One of the persons who participated in the conference with BuShips and also in the conference with the plaintiff’s top management was the assistant comptroller of the plaintiff. He estimated for the benefit of the plaintiff’s top management, on the basis of an anticipated selling price of $150,000 per Tac/Nav per destroyer and $250,000 per Tac/Nav per aircraft carrier, that the Navy’s requirements indicated sales in the amount of approximately $56,000,000 and, before taxes, a profit of approximately $5,600,-000.

Another conference between the plaintiff and BuShips was held on May 8, 1962. The plaintiff’s vice-president in charge of the military electronics division was in the plaintiff’s group on that occasion. BuShips again told the plaintiff that it would not fund or accept an overrun; and that if overrun funds were requested, it would terminate the contract. However, BuShips also pointed out again the factors which indicated that it would be a good business risk on the part of the plaintiff if it would complete the performance of the contract at its own expense.

After these conferences, the plaintiff agreed to complete the performance of the contract with its own funds, and signed a letter to that effect under the date of May 8, 1962. This letter stated in part as follows:

* * -a [T]he contractor agrees to complete the program * * * without requesting additional overrun relief above and beyond the anticipated overrun funds of $358,028 included in * * * Modification Number 3.

The plaintiff thereafter completed the performance of the contract. BuShips reimbursed the plaintiff for its expenditures in performing the contract, up to the amount specified in the estimated cost schedule of the contract, as revised, and paid the plaintiff the amount of the fixed fee specified in the contract, as revised. These payments fully discharged the financial obligation of BuShips to the plaintiff under the “Limitation of Cost” provision of the contract. However, the plaintiff, in completing the performance of the contract after May 8, 1962, expended $1,022,973.27 of its own funds, over and above the amount for which it received reimbursement from the Navy under the estimated cost schedule of the contract.

The Navy accepted the two Tac/Nav’s that were delivered under the contract and evaluated them in a shipboard environment. In 1963, the Tac/Nav system was subjected to an evaluation testing program aboard the U.S.S. Essex-, and the report issued subsequent to this evaluation indicated that Tac/Nav was unable to keep up satisfactorily with the large number of high-speed targets involved in an anti-air warfare (“AAW”) environment. Thereafter, in order to determine whether Tac/Nav could perform satisfactorily in an anti-submarine warfare (“ASW”) environment- — which involves slower targets than those involved in the AAW situation — another evaluation testing program for the Tac/Nav system was performed in 1964, this one aboard the U.S.S. Wasp. Subsequent to the 1964 evaluation test, which was critical of the Tac/Nav system and indicated that it did not perform satisfactorily in an ASW environment, the Chief of Naval Material issued an order that no further procurements of the Tac/Nav system would be undertaken by the Navy. Therefore, the plaintiff never made any of the Tac/Nav sales which it anticipated at the time when it agreed in May 1962 to complete the performance of the contract at its own expense.

The plaintiff contends that it should be reimbursed for the $1,022,973.27 which it expended out of its own funds in completing the performance of the contract, because it was misled by misrepresentations which were made by Captain Cunnare at the conferences on May 3 and 8, 1962.

The evidence shows that Captain Cunnare made an incorrect statement at the conferences on May 3 and 8, 1962, when he said that the Navy was not then considering any technique or concept other than Tac/Nav for accomplishing the large-screen display of information for CIC purposes. It is true that Tac/Nav was the only such system that the Navy had contracted to purchase as of May 1962. However, the record shows that Code 685 — which was an organization in BuShips separate and apart from Code 665, which Captain Cunnare headed and with which the plaintiff was working under its Tac/Nav contract — had begun work in early January of 1962 on the development of a performance-type specification for a large-screen display system which would be designed for use in the CIC’s of warships and which would utilize an electronic or photochromic technique, as distinguished from the scribing concept used by the plaintiff’s equipment. By May 8, 1962 — the date on which the plaintiff agreed to complete the performance of the Tac/Nav contract at its own expense — a substantial amount of the work on Code 685’s proposed specification had been completed. Later, in April of 1963, BuShips awarded a contract to the Budd Company for the development of a large-screen display system in accordance with Code 685’s specification, which had been completed in the meantime. As of February 1971, the large-screen display system developed by the Budd Company had been placed in the characteristics of two amphibious command ships by the Navy.

The evidence also shows that none of the plaintiff’s personnel was aware as of May 1962 that the Navy was considering a technique different from Tac/Nav for large-screen displays to be used in CIC’s aboard warships. In addition, the trial commissioner found that “the evidence warrants the inference that if the plaintiff had known as of May 8, 1962, that another group in Bu-Ships, not under the supervision of Captain Cunnare, was working on a specification for a large-screen display system using a technique different from the scribing technique (on which the plaintiff held the necessary patents), the plaintiff would not have agreed to fund, and would not have funded, the completion of the project under the contract.”

The plaintiff invokes these findings of reliance and misrepresentation as the foundation of its claim that the Government improperly interfered, by misrepresenting the existing facts, with LTV’s privilege under the “Limitation of Cost” clause, supra, to discontinue its performance when the United States refused to fund the work any further. The contention, in legal phrasing, is that the United States breached the contract by wrongfully inducing the plaintiff, through these misrepresentations, to give up an important contract right.

Defendant attacks the finding of reliance as unwarranted, and also challenges the characterization of defendant’s conduct as “misrepresentation.” However, for the purposes of the case, and without determining these issues one way or the other, we accept arguendo the commissioner’s conclusion that plaintiff relied on Captain Cunnare’s erroneous statements when it agreed to fund by itself the completion of the project. We also assume arguendo that these statements constituted affirmative and actionable misrepresentation. The court makes these hypothetical assumptions because we are persuaded that, even on those premises, plaintiff is barred from recovery by its own conduct after it discovered, in September 1962, the competing project which had been undertaken by Code 685.

On September 6, 1962, Code 685 published an advertisement in the Commerce Business Daily which plainly revealed the existence of this other project and called upon firms interested in research and development connected with such a project'to make themselves and their experience known to the Navy. It was indicated that formal proposals might be requested later. The record shows that at that time — just four months after plaintiff had agreed to continue its own project with its own funds — plaintiff became quite aware that Code 685 was interested in procuring a large-screen display system utilizing an electronic or photochromic technique, and also that work along those lines was going forward.

Nevertheless, LTV did not stop work, nor did it protest to the Navy that the latter had misled plaintiff into issuing the letter of May 8, supra. Neither did the contractor reserve its right to bring suit or to file a claim. Apparently without any intimation to the Navy of dissatisfaction or unhappiness, LTV simply continued to the end to perform its contract and to spend its own funds on the overrun portion of the contract, knowing all the time that the Navy did not intend to reimburse it for such expenses and that the Navy thought and continued to think that the plaintiff fully agreed to that course.

More than that, plaintiff permitted the Government, after September 6th, to spend considerable federal money on this Tac/Nav contract. After May 8, both parties proceeded on the understanding that the plaintiff’s undertaking to complete the agreement at its own expense extended only to the in-scope work (as modified before May 8th). Both understood that LTV’s promise did not cover the contract as it might thereafter be changed. Therefore, after May 8th, whenever BuShips changed the contract by exercising options, adding out-of-scope work, or making changes in the in-scope work, it provided increased federal funds to cover the additional costs of such changes. This post-September 6th increase amounted to over $312,000, and added $2,205 to plaintiff’s fixed fee. (The contract continued into 1963 and 1964, the last modification being in August 1964.) Moreover, LTV, without any suggestion that its rights had been invaded, permitted the Navy to undertake field evaluations of plaintiff’s Tac/Nav system in both 1963 and 1964.

We have been given no adequate justification or explanation for this total silence, during the performance of the contract, by LTV after it learned about Code 685’s project in September 1962, and knew that the representations on which it says it relies were incorrect. The stark fact is that nothing was said until well after it became clear that the Navy would not purchase LTV’s product, and no cue was given at any prior time that plaintiff thought the Government had breached its obligation under the contract. Not only was performance continued normally, but no reservation of rights was made known and the defendant was permitted to incur some $315,000 in additional costs of its own, and to pursue evaluation tests, though it might well have terminated the contract at once and stopped all performance if it had been told that plaintiff was thinking of holding it liable for all expenses after May 8.

With respect to this very type of situation we recently said: “There is, of course, venerable authority that, wherever a contract not already fully performed is continued in spite of a known breach, the wronged party cannot avail himself of that excuse * * *. As a general proposition, one side cannot continue after a material breach by the other * * *, act as if the, contract remains fully in force (although stopping performance would be fair and convenient), run up damages, and then go suddenly to court.” Northern Helex Co. v. United States, 455 F.2d 546, 551, 197 Ct.Cl. 118, 125-126 (1972). In Northern Helex we found “particular circumstances [centering on the need to prevent wastage of helium] justifying further performance in the specific case” 455 F.2d at 551-552, 553, 197 Ct.Cl. at 125-127, 129, but even then we rested, equally, on the significant facts that that contractor had made an express reservation of its rights when it continued performance, 455 F.2d at 552-553, 197 Ct.Cl. at 128-130, and that the “Government was not hurt and it did not change its position.” 455 F.2d at 554, 197 Ct.Cl. at 130-137. The court was at pains to spell out the “special aspect” and the “special facts” of that case, 455 F.2d at 551, 553, 197 Ct.Cl. at 126, 130, which permitted the contractor to continue performance while at the same time claiming total breach. Analogous facts are not present here, as we have already pointed out and discuss again below.

An earlier decision in which a contracting party was held barred from enforcing a material breach it had for too long allowed to go unprotested is Acme Process Equip. Co. v. United States, 347 F.2d 509, 515-518, 171 Ct.Cl. 324, 334-339 (1965), rev’d on other grounds, 385 U.S. 138, 87 S.Ct. 350, 17 L.Ed.2d 249 (1966). The contractor had breached its covenant-against-contingent-fees but, said the court, “the crucial point is that the defendant, after obtaining knowledge of the facts, waited until over a year later before canceling the agreement. Could an election to cancel be delayed for such a time? We hold not. In our view, an election to annul the contract had to be made with reasonable promptness after the Government gained knowledge of the facts; by putting off its decision for an inordinately long period, the defendant lost the right it earlier had to terminate the contract without incurring any cost. * * * The sanction of contract cancellation is too drastic to permit a long delay. Beyond the time reasonably necessary to determine if there has been a misrepresentation or a violation of the covenant, the defendant cannot allow an unwary contractor to continue performance and thus incur large expenses, all of which the Government will refuse to reimburse if and when it decides to cancel the contract on the ground of the violation.” 347 F.2d at 515-516, 171 Ct.Cl. at 335-336 (footnotes omitted).

The same over-all principle was applied in DeVito v. United States, 413 F.2d 1147, 1151-1154, 188 Ct.Cl. 979, 986-991 (1969), in which the Government, without any reservation of rights, permitted a defaulting contractor to continue performance for a considerable time before issuing a notice of default termination. “Where the Government elects to permit a delinquent contractor to continue performance past a due date, it surrenders its alternative and inconsistent right under the Default clause to terminate, assuming the contractor has not abandoned performance and a reasonable time has expired for a termination notice to be given. * * * The election is sometimes express, but more often is to be inferred from the conduct of the non-defaulting party. * * * The necessary elements of an election by the non-defaulting party to waive default in delivery under a contract are (1) failure to terminate within a reasonable time after the default under circumstances indicating forbearance, and (2) reliance by the contractor on the failure to terminate and continued performance by him under the contract, with the Government’s knowledge and implied or express consent.” 413 F.2d at 1153-1154, 188 Ct.Cl. at 990-991.

Acme and DeVito cannot rightly be distinguished as involving an effort by the non-defaulting party to cancel, annul, or terminate the whole contract, while LTV merely seeks damages for a breach. Even on that technical formulation, this case is fully comparable. Since plaintiff seeks all of its unreimbursed costs after May 8, its claim is the exact equivalent of a demand that the contract be deemed ended as of that date. LTV wishes to be placed in the same position as if it had terminated all performance and all obligations at that time — just as the defendant unsuccessfully sought to do in Acme and DeVito.

More fundamentally, we think that plaintiff does not meet the general standard which the law has been developing for a non-defaulting party, aware of a material breach, who desires to maintain the contract alive and functioning. Acme, DeVito, Northern Helex, and the provisions of the Uniform Commercial Code discussed in the Helex opinion, are but illustrations of the basic principle calling for fair treatment of both parties — weighing the advantages to the injured side of continuing performance (with or without reservation of rights) against the disadvantages to the defaulter, and requiring that due opportunity be given the latter to make use of the options then lawfully available to him. However the legal conclusion be framed, in terms of “waiver” or “election” or “estoppel”, that is the core concept.

In this instance, LTV made its calculation entirely in its own favor, without proper consideration of the defendant’s position. If plaintiff had stopped performance in September claiming a breach, the Navy would then know that the United States might be liable for plaintiff’s costs from May 8 to that time, but it would also be free of any costs from September forward (including the $315,000 the Government itself expended thereafter). If plaintiff had continued performance but at the same time reserved its right to claim a breach, the defendant would have had the choice whether to terminate the contract entirely at that time (which it still had the right to do, cf. Nolan Bros., Inc. v. United States, 405 F.2d 1250, 1253-1255, 186 Ct.Cl. 602, 606-610 (1969)) or to continue at the risk of having to pay greater damages and incurring additional costs. The record suggests the probability that, if plaintiff had then uttered such a reservation, this government right to terminate would have been exercised since the Navy was adamant against funding an overrun. In any event, if the United States had been timely warned, it would have been able to make its own choice whether or not to end performance at once, and it is this choice of which the defendant was deprived.

By omitting both of these steps, the contractor in effect retained all options for itself. Not aware of the undisclosed claim of a breach, the defendant allowed the contract to continue to completion (under the arrangement the Navy thought it had) and did not terminate. Thus, if LTV’s Tae/Nav system survived the Navy’s tests and the contractor sold enough of the product to the Government, plaintiff would be reimbursed for all its expenses and make a profit. It could then forget about the breach claim which would be mooted for practical purposes. On the other hand, if the product failed (as it did), the contractor would be in a position to seek reimbursement through a breach suit. The result would be to protect LTV in all eventualities, at the expense of the Government’s rightful interests. It makes no difference that plaintiff may not actually have had this conscious design from September 1962 on. The patent inequity to defendant flows from LTV’s overt conduct in the way it shaped events, not from any subjective bad faith. The short of it is that, whatever its intentions, plaintiff did not act reasonably and fairly toward the Government when it continued performance after early September, without giving any indication of its misrepresentation claim. For that reason we hold it precluded from recovering on that demand.

There is an alternative claim of mutual mistake, on which little need be added. Though we assume arguendo a mutual mistake in May 1962 that plaintiff’s Tac/Nav system was the only available and viable one, we cannot read the record as showing that, if the truth had then been known, the Navy would have agreed at the time to pay for the over-run. Government resistance to further federal funding was too strong to permit any such inference nunc pro tunc; the more likely result would have been termination by mutual consent in May. Cf. Evans Reamer & Machine Co. v. United States, 886 F.2d 873, 879-881, 81 Ct.Cl. 539, 550-553 (1967), cert. denied, 390 U.S. 982, 88 S.Ct. 1102, 19 L.Ed.2d 1279 (1968); Southwest Welding & Mfg. Co. v. United States, 373 F.2d 982, 989-991, 179 Ct.Cl. 39, 51-54 (1967); Chernick v. United States, 372 F.2d 492, 496-497, 178 Ct.Cl. 498, 506-507 (1967). Furthermore, plaintiff’s silence after September 6 militates against this reformation-rescission claim, as well as against the breach count. If the defendant had then been told that the contract was bottomed on a mistake and that LTV wished reformation or rescission, the option of immediate termination (or of rescission) would have been available to the Government and probably would have been exercised. A very large amount of government money and effort would have been saved. “We are rightly admonished, in the region of mutual mistake, to seek just solutions.” National Presto Industries, Inc. v. United States, 338 F.2d 99, 111, 167 Ct.Cl. 749, 768 (1964), cert. denied, 380 U.S. 962, 85 S.Ct. 1105, 14 L.Ed.2d 153 (1965) (emphasis added). It is plainly inequitable to reform or rescind the agreement in 1973 at defendant’s expense when plaintiff foreclosed the Navy in 1962 from freeing itself at that time from the mistaken bargain.

The same reasons doom LTV’s suggestion that it be at least awarded a quantum meruit recovery; there is no way to balance the detriment to the Government occasioned by plaintiff’s silence after September 6th against any benefit the Navy may have obtained from plaintiff’s development work under the contract. In addition, the trial commissioner found, and we agree, that' this record “does not contain any evidence on the basis of which the value which the Navy derived from the plaintiff’s developmental work under the contract could be expressed in financial terms.” Cf. Boyajian v. United States, 423 F.2d 1231, 1244, 191 Ct.Cl. 233, 254 (1970).

The plaintiff is not entitled to recover and its petition is dismissed.

       We are indebted to Trial Commissioner Mastín G. White for his opinion, the first section of which we incorporate. We reach the same port through a different channel.

      . The petition asked for a recovery in the amount of $1,110,900, but the claim was later reduced by the plaintiff to $1,022,973.27.

      . Unknown to plaintiff, one of the Navy participants (other than Captain Cunnare) at the conferences on May 3 and 8, 1962, was aware at the time that Code 685 was working on the development of a specification of a display system with an electronic or photochromic technique.

      . Plaintiff’s main argument on this aspect of the case is that there is no evidence that, when the plaintiff learned about the Code 685 program on September 6, it also knew (or learned) that that information had been withheld from it early in May 1962 — it says that, for all it knew, Code 685’s project might not have been in existence in May — and therefore that plaintiff did not know in September that the Navy had made a misrepresentation four months earlier. However, Code 685’s September advertisement shows on its face that the Navy had obviously been thinking for some time about that project, and we cannot believe that an easy inquiry by LTV, a very knowledgeable Navy contractor, would have failed to disclose that the other project was underway in May. If plaintiff did not actually learn this fact in September, it could and should have done so, and cannot now make a virtue of the blinders it chose to don.
      Plaintiff’s only other excuse for not ceasing performance in September is that, if it had done so, that would have been in breach of the post-May 8th modifications to the contract. Even if this were so, it would not excuse LTV’s failure to protest and make overt reservation of its rights. But, in any event, plaintiff’s legal position is incorrect; the Government’s material breach would have relieved the contractor of all its obligations under the contract and permitted it to elect to claim a total breach and to end all performance. Cf. Northern Helex Co. v. United States, 455 F.2d 546, 550-551, 197 Ct.Cl. 118, 124-125 (1972).

      . There may be exceptions or qualifications for such situations, governed by countervailing factors, as payments illegally made by the Government. See Acme Process Equip. Co. v. United States, supra, 347 F.2d at 516, 171 Ct.Cl. at 336; Acme Process Equip. Co. v. United States, 347 F.2d 538, 551-553, 171 Ct.Cl. 251, 272-275 (1965).

      . In the circumstances it would not be proper to allow plaintiff’s claim even if shaved down to the costs incurred between May 8, and September 6, 1962. Because of the contractor’s conduct, the defendant incurred very substantial expenses after the latter date and undertook the test evaluations. If plaintiff had alerted the Navy on time, the Government might have chosen to expend that money and effort in other, more productive, ways. There is no practicable method of assessing the net gains and losses. See also infra.

      . See note 5, supra.


source: Caselaw Access Project

author: KUNZIG, Judge.

license: Public Domain

text:
    Arthur R. GUARRIELLO v. The UNITED STATES.
    No. 738-71.
    United States Court of Claims.
    March 16, 1973.
    Roger P. Kaplan, Washington, D. C., of record, for plaintiff.
    Karen A. Berndt, Washington, D. C., with whom was Asst. Atty. Gen. Harlington Wood, Jr., for defendant.
    Before COWEN, Chief Judge, and DAVIS, SKELTON, NICHOLS, KASHIWA, KUNZIG and BENNETT, JJ.
   ON DEFENDANT’S MOTION AND PLAINTIFF’S CROSS MOTION FOR SUMMARY JUDGMENT

KUNZIG, Judge.

This is a civilian pay case in which plaintiff claims entitlement to environmental differential pay for hazardous duty, over and above a 12% annual premium already being received. Jurisdiction is conferred upon this court pursuant to 28 U.S.C. § 1491 (1970). Whether plaintiff is entitled to the additional differential pay is the issue.

We hold he is not so entitled.

The facts in this case are quite simple. Plaintiff, a Wage Grade-12 (WG-12) National Guard Technician employed at a NIKE missile site, already receives 12% premium pay per year. On December 7, 1970, he performed work while exposed to adverse high winds and chilling conditions for 5 and % hours. Claiming that this duty must be compensated in excess of the 12% premium pay, plaintiff now seeks environmental differential pay. This claim was returned by the Adjutant General without action as a result of an opinion by the Comptroller General of the United States adverse to such recovery.

Plaintiff now comes before this court with the same claim, praying that we enter judgment in his behalf in the total amount of $5.98. Motions for summary judgment have been filed by both parties, there being no genuine issues of material fact.

We hold for the defendant.

Unfortunately for plaintiff in this case, he is beset by unanswerable, statutory problems which surround him on all sides like rocks surrounding a ship in distress. Any way he turns, he can advance his argument just a short distance before it founders. Upon careful screening, the statutes on which he must rely just do not support his position.

In 1968 the National Guard Technicians Act was enacted into law. 32 U.S.C. § 709 (1970). The overall purpose of the statute was to give “federal employee” status to National Guard Technicians. It authorized the appropriate Secretary to prescribe the hours of duty and rates of pay. The statute provides in pertinent part:

(g)(1) Notwithstanding sections 5544(a) and 6102 of title 5, United States Code, or any other provision of law, the Secretary concerned may, in the case of technicians assigned to perform operational duties at air defense sites—
(A) prescribe the hours of duties;
(B) fix the rates of basic compensation; and
(C) fix the rates of additional compensation ; to reflect unusual tours of duty, irregular additional duty, and work on days that are ordinarily nonworkdays. Additional compensation under this subsection may be fixed on an annual basis and is determined as an appropriate percentage, not in excess of 12 percent, of such part of the rate of basic pay for the position as does not exceed the minimum rate of basic pay for GS-10 of the General Schedule under section 5332 of title 5, United States Code.

Notwithstanding the above quoted statute, plaintiff contends that pursuant to Federal Personnel Manual Supplement 532-1, Appendix J, he is entitled to an additional hazardous duty pay above the 12% premium.

Appendix J of the Federal Personnel Manual Supplement 532-1 was promulgated by the Civil Service Commission pursuant to the Coordinated Federal Wage System. This system was created to coordinate the pay schedules of all wage grade employees of the federal government. This section of the Personnel Manual sets out environmental differential rates that would be paid to wage grade employees performing hazardous duty. On the face of this regulation it would appear that plaintiff would be entitled to the environmental differential for the undisputed hazardous work that he performed. However, 32 U.S.C. § 709 (g)(1) supersedes this provision.

Although the Federal Personnel Manual does provide additional pay for hazardous duty, Congress clearly intended that this should be included in the 12% premium stated in § 709(g)(1). The plain language, “notwithstanding . any other provision of law”, leaves no doubt that this statute is intended to be the controlling factor regarding pay schedules of National Guard Technicians.

Assuming, arguendo, that § 709(g)(1) may be controlling as far as it goes, plaintiff argues that hazardous duty is not to be included under the 12% maximum because it was not intended to be included in the category of “additional compensation” as it is used in § 709(g) (1).

“Additional compensation” is an all comprehensive term. Yet plaintiff argues that the words should be narrowly defined as to mean only compensation for overtime. This court has long recognized that judicial tribunals must be careful in departing from statutory terms. As far as possible, violence should not ordinarily be done to the words chosen by the Congress. Crawford v. United States, 376 F.2d 266, 272, 179 Ct.Cl. 128, 138 (1967), cert. denied, 389 U.S. 1041, 88 S.Ct. 781, 19 L.Ed.2d 831 (1968). Plaintiff’s attempt to deviate from the normal meaning of “additional compensation” would do just that.

It would seem that when a statute provides for basic compensation, then separately provides for additional compensation, notwithstanding any provision of law, it has, so to speak, “covered the waterfront” in re compensation. And to make plaintiff’s position even more untenable, 32 U.S.C. § 709(g)(1) even goes so far as to single out technicians assigned to perform operational duties at air defense sites.

Plaintiff argues further that, should defendant’s position be successful, discrimination and gross inequities would result. He points out that a technician on hazardous duty would get a 12% premium and a technician performing normal, non-hazardous duty would also receive 12%. This, he claims, is unfair and inequitable.

We concede that plaintiff may well be right. There may be inequities in the rates of pay for hazardous versus nonhazardous duty for air defense technicians. But under 32 U.S.C. § 709(g) (1) the remedy, correctly, does not lie within the power of the judiciary; it lies with Congress. To achieve what he desires, plaintiff must obtain appropriate statutory amendments from the only body so empowered .... Congress.

As an additional argument plaintiff contends that since hazardous duty is not specifically listed in the statute as are unusual tours of duty, irregular additional duty, and work on the days that are ordinarily nonworkdays, it is not intended to be included in the term “additional compensation”. The mentioning of a few specific examples of types of duty cannot be read to preclude additional specific types of duty. Indeed, the very words “additional compensation” in the same sentence are clearly so broad as to encompass other types of duties. Similarly when plaintiff argues that 32 U.S.C. § 709(g)(1) does not specify that environmental differential pay is included in the 12% premium, he ignores the normal meaning of the words of the statute. Plaintiff has the burden of persuading the court that the language means something other than what normal usage gives it. Williams v. United States, 117 F.Supp. 189, 127 Ct.Cl. 167, 168 (1953).

Finally, plaintiff urges that the legislative history of 32 U.S.C. § 709(g) (1) in no way discusses “hazardous duty”. He infers that if the 12%- annual premium pay were meant to cover hazardous duty, it somehow had to be discussed in the legislative history. Clearly, this argument is untenable. This court has held that it is “the statutes themselves which must be construed, and legislative materials are important only to the extent that they shed light on ambiguities in the statutes”. Merrill v. United States, 105 F.Supp. 379, 382, 122 Ct.Cl. 566, 577 (1952).

In summary, plaintiff may receive up to a 12% annual premium, but not in excess of 12%. Defendant’s interpretation is clear and unambiguous. Section 709 (g)(1) is the controlling statute; it totally governs plaintiff’s pay; there is no possible way he can receive, under the statute, more than the 12% premium he now receives.

Accordingly, defendant’s motion for summary judgment is granted; plaintiff’s cross motion for summary judgment is denied; and the petition is hereby dismissed.

      . New Jersey Air National Guard.

      . 50 Comp.Gen. 847 (1971).

      . As of December 31, 1972, there were 2,682 air defense technicians in the United States.

      . 3 U.S.Code Cong. & Admin.News, p. 3318 (1968).


author: BALDWIN, Judge.

text:
    CONWOOD CORPORATION by change of name from Hot Shot Quality Products, Inc., Appellant, v. The J. B. WILLIAMS COMPANY, INC., Appellee.
    Patent Appeal No. 8929.
    United States Court of Customs and Patent Appeals.
    March 29, 1973.
    Lewis S. Garner, Washington, D. C., attorney of record, for appellant.
    Edward G. Fenwick, Jr. (Mason, Fen-wick & Lawrence), Washington, D. C., attorneys of record, for appellee,
    Before MARKEY, Chief Judge, RICH, BALDWIN, and LANE, Judges, and ALMOND Senior Judge,
   BALDWIN, Judge.

This appeal is from the decision of the Trademark Trial and Appeal Board dismissing an opposition to the registration of the mark HOT SHOT by appellee, J. B. Williams Co., for shave cream. The opposition was based on the use and registration of the mark HOT SHOT for a liquid insecticide. The sole issue is whether the use of the mark on the respective products of the parties would be likely to cause confusion, mistake or deception.

The board adequately described and dealt with appellant’s main contention as follows:

Opposer contends that the products of the parties are well-known household products which are normally advertised, displayed and sold in the same type stores; that the products of the parties “are normally often sold in containers of similar shape and size, often of the aerosol type”; that “the public well knows that companies that market household articles like insecticides, and companies that market toilet articles like shaving cream are the type of company that usually puts out a wide variety of differing household consumer goods”; and that “consumers are aware that diversified companies sometimes use the same trademark for the different items in their line”.
Applicant points out that opposer has not taken any testimony and that opposer’s assumptions have not been established.
There can be little doubt that the products of the parties would be available for sale to the general public, and it appears from some of the advertisements that shaving cream and insecticides are advertised for sale by a single entity. The opposer’s affidavit indicates that shaving cream and an insecticide were purchased in a single store. The other assumptions made by opposer concerning knowledge by consumers of marketing practices of companies are without foundation in the record and do not constitute matters of which judicial notice may be taken.
Opposer has shown that the same company puts out an insecticide and a shaving cream but under entirely different trademarks. If any assumptions can be made on the basis of the proofs presented, then the obvious assumption is that albeit a manufacturer may well be the source of insecticides and shaving cream, such goods are ordinarily sold under different trademarks and that the public is aware of such practice.

The last quoted parargraph refers to an affidavit by appellant’s attorney that he purchased AERO SHAVE shaving cream and BLACK FLAG insecticide in the same drugstore. The board also found HOT SHOT to be suggestive, stating that it is “a slang term, connoting a skilled performer; a highly skilled, fast working or showy person.”

Appellant cites Eastern Industries, Inc. v. Waterous Co., 289 F.2d 952, 954, 49 CCPA 701, 703 (1961), as support for the contention that we can take judicial notice that “many companies put out a wide variety of products, often under the same trademark.” Accepting that broad proposition for the sake of argument, it does not convince us of reversible error in the decision below. Considering the differences in the products and the somewhat laudatory nature of the mark, we are of the opinion that one familiar with HOT SHOT insecticide would not be likely to attribute HOT SHOT shaving cream to the same manufacturer.

The decision of the board is affirmed.

Affirmed.

      . Abstracted at 168 USPQ 122 (1970).

      . Application Serial No. 290,793, filed February 9, 1968.

      . Registration No. 619,268, issued January-17, 1956.


author: MARKEY, Chief Judge.

text:
    Application of Adrien J. HOTTE.
    Patent Appeal No. 8852.
    United States Court of Customs and Patent Appeals.
    March 29, 1973.
    Walter S. Zebrowski, Big Flats, N. Y., attorney of record, for appellant.
    S. Wm. Cochran, Washington, D. C., for the Commissioner of Patents; Jere W. Sears, Washington, D. C., of counsel.
    Before MARKEY, Chief Judge, RICH, BALDWIN arid LANE, Judges, and WATSON, Judge, United States Customs Court, sitting by designation.
   MARKEY, Chief Judge.

This appeal is from the decision of the Patent Office Board of Appeals affirming the rejection of claims 1-7 of appellant’s application entitled “Electrical Capacitor and Method,” Serial No. 688,556, filed December 6, 1967, as unpatentable over the prior art (35 U.S.C. § 103).

THE INVENTION

Appellant’s invention relates to a method of simultaneously manufacturing a plurality of electrical capacitors and to the capacitors produced thereby. Figs. l and 5 illustrate the method and the product:

In Fig. 1, a glass film 10 separates a plurality of electrically conductive plate elements which comprise end portions of the teeth 16 and 18 of comb-like structures 12 and 14. Glass covers 20 and 22 complete the stacked unit. The unit is subjected to heat and pressure to form an integral mass. Portions of the teeth 16 and 18 forming the capacitor plates are embedded in the fused block portion 24 and the remainder extends from the block a distance at least twice the plate length to form leads. The illustrated unit is separated into individual capacitors by removing the transverse or “back” portion of each comb member and severing the individual capacitors from the unit as shown in Figure 5. By reducing the amount of overlap of an aligned pair of plates, capacitors may be produced with a capacitance value of 30 picofarads or less.

Claim 1 is directed to the capacitor and defines the plate and lead as “integral.” Claim 5 is drawn to the method just described and specifies each comb-like structure as formed of a single metallic sheet. Claims 2 and 3 are dependent on claim 1 and claims 6 and 7 are dependent on claim 5 and include limitations to teeth that are in overlapping and non-overlapping relationship, respectively. Claim 4 is directed to the intermediate product existing just prior to removal of the “back” portion of the comb and separation into individual capacitors.

Nine references were relied upon by the examiner and board in various alternative combinations. However, we find five, the patents to Rhodes, Bair, Delloye, Freeburg, and Bareiss sufficient to determine the appeal and limit our discussion thereto.

Rhodes relates to a method of simultaneously manufacturing a plurality of capacitors of a type he describes as shown in prior patents and consisting of:

* -» * a plurality of thin glass sheets separated by thin metal foils which either alternately project beyond two opposite edges of the glass sheets and are embedded therebetween or have separate thin metallic ribbons or lead wires attached to said thin metal foils, which ribbons or wires project beyond said opposite edges while the metal foils are wholly embedded between said glass sheets.

In Rhodes’ illustrated example, separate metal foil plate elements with wire leads spot welded thereto are disposed on each side of an intermediate glass strip. Additional outer strips of glass and glass covers complete the assembly. The stacked elements are then subjected to heat 'and pressure to fuse them into an integral block with the two leads for each capacitor extending from opposite sides of the block. The block is then separated into individual capacitors.

Bair is one of the prior patents referred to by Rhodes in the passage quoted above. Bair employs metallic foil plate elements and teaches that the capacitance varies with the extension of those elements inwardly from the edge of the glass block.

Delloye discloses a condenser which includes overlapping plate forming sheets that are fused within a mass of glass. Delloye states that “[t]he metallic sheets, networks, or conducting deposits are provided with terminal lugs,” which lugs extend out of the mass and serve as leads.

Freeburg discloses a method of manufacturing a plurality of wafer-like capacitors wherein leads are attached to a carrier wire in spaced relationship to form an integral comb-like structure and the carrier wire is later severed from the leads.

Bareiss relates to forming grid assemblies for thermionic tubes. Thin metallic sheets are stamped to provide a plurality of spaced parallel grid elements held together by uncut back portions at both ends. A number of the sheets are then mounted in alignment in spaced parallel relationship and the elements are secured together by fusing spaced support sheets of glass to their respective ends. The back portions of the sheets are then sheared off to leave an integral grid assembly of spaced and aligned elements.

OPINION

Appellant argues that the requirement that the leads be “integral” with the plate elements distinguishes from any structure requiring the attachment of leads. We do not agree. Appellant’s specification does not expressly restrict the meaning of “integral” to “one piece” and such a meaning is wholly irreconcilable with the recitation in claim 1 of “a vitreous case surrounding and integrally united with the capacitor unit so formed” (emphasis added). As indicated by the board, “integral” is sufficiently broad to embrace constructions united by such means as fastening and welding. See Henderson v. Grable, 339 F.2d 465, 52 C.C.P.A. 920 (1964). Turning to Delloye, we think that a person skilled in the art would interpret that reference as disclosing that each plate and its lead is made from a single sheet. Moreover, that the art makes no such distinction as appellant urges is apparent from the above quote from Rhodes referring to “thin metal foils which project beyond the glass sheets” as an alternative to “separate thin metallic ribbons or lead wires attached to thin metal foils.”

Appellant further relies on his variance of overlap of the capacitor plates, including zero overlap, the provision of a lead portion twice the length of the plate portion, and the use of a comb-like structure with later removal of the “back” of the comb. However, the disclosure in Bair of the effect of varying the positioning of plate elements on capacitance clearly suggests that the overlap be varied to adjust the capacitance. Appellant cites no different or unexpected result in the selection of a particular length for the leads which thus appears to be no more than an obvious matter of choice. Freeburg and Bareiss disclose the employment of a transverse carrier or “back” as a common expedient to insure maintenance of spaced relationships. While Bareiss discloses a grid rather than a capacitor, its intermediate product (Fig. 14) includes one-piece metallic sheets, which in effect are “comb-like” with the addition of a second back portion at the ends of the teeth, mounted for subsequent severance of the “back” portions.

For the foregoing reasons, we affirm the decision of the board.

Affirmed.

      . Patent No. 3,310,392, issued March 21, 1967.

      . Patent No. 2,526,704, issued October 24, 1950.

      . Patent No. 887,598, issued May 13, 1908.

      . Patent No. 2,953,840, issued September 27, 1960.

      . Patent No. 2,395,835, issued March 5, 1946.

      . Appellant introduced affidavits of two experts in the employ of Corning Glass Works, the apparent assignee of the present application, interpreting the Bair patent and urging that plate elements described as of “metal foil” in that patent would be only 250 micro-inches thick and extend from the block only %2 of an inch in actual practice. Neither Bair’s disclosure nor appellant’s claims, however, are limited to any particular thickness for the plates or leads.


author: RICH, Judge.

text:
    60 CCPA
    NORTHAM WARREN CORP., Alltransport, Inc., et al., Appellants, v. The UNITED STATES, Appellee.
    Customs Appeal No. 5455.
    United States Court of Customs and Patent Appeals.
    March 22, 1973.

      Barnes, Richardson & Colburn, New York City, Attys. of Record, for appellants. E. Thomas Honey, David O. Elliott, New York City, of counsel.
    Harlington Wood, Jr., Asst. Atty. Gen., Andrew P. Vance, Chief, Customs Section, Herbert P. Larsen, New York City, for United States.
    Before MARKEY, Chief Judge, RICH, BALDWIN, and LANE, Associate Judges, and CLARK, Justice, (Ret.), sitting by designation.
   RICH, Judge.

This appeal is from the decision and judgment of the United States Customs Court, First Div., 65 Cust. Ct. 584, C.D. 4142 (1970), overruling a protest against the classification of certain importations from the Netherlands of “pearl essence” pigment, containing 0.15 percent of a coal tar derivative known as “Tinopal PCRP,” pursuant to paragraph 27(a)(4), (5) of the Tariff Act of 1930, as modified by T.D. 52739, which provides for mixtures in part of any of the coal tar products provided for in paragraph 27(a). We affirm.

The importation consists primarily of “pearl essence,” a pigment which has been extracted from fish and fish scales and is used to give opacity and brightness to certain types of paint, varnish, lacquer, and cosmetics. The imported merchandise was used in making nail polish. Appellants concede that Tinopal is a coal tar derivative useful as an optical brightener. Tinopal, in the form used in the importation here, Tinopal PCRP, contains a phthalic ester derived from the coal tar derivative “phthalic acid” identified in paragraph 27(a)(1) of the Tariff Act of 1930.

Paragraph 27(a)(4), (5), as modified by T.D. 52739, reads:

All mixtures, including solutions, consisting in whole or in part of any of the products provided for in subdivision (1), (2), or (3) of paragraph 27(a), Tariff Act of 1930 (except sheep dip and medicinal soaps, and except products chiefly used as assistants in preparing or finishing textiles) . . . 3%^ per lb.
and 25% ad val.

Paragraph 28(i) reads:

Any article or product which is within the terms of paragraph 1, 5, 37, 39, 60, 66, 82, or 1687, as well as within the terms of paragraph 27, 28, or 1651, shall be assessed for duty or exempted from duty, as the ease may be, under paragraph 27, 28, or 1651.

Appellants claim that the small amount of Tinopal in the importations ought not to require classification of the goods within paragraph 27(a)(4), (5), basing their argument upon the maxim de minimis non curat lex. Without this small amount of Tinopal the classification would be provided for eo nomine as “pearl essence” under paragraph 66 of the Tariff Act of 1930, as follows:

Paragraph 66, as modified by T.D. 54108:

Pigments, colors, stains, and paints, including enamel paints, whether dry, mixed, or ground in or mixed with water, oil or solutions other than oil, not specially provided for: •» a * * * -x-
Pearl essence . . . 11% ad val.

Appellants contend that the importations should be as “pearl essence” within paragraph 66 despite the small amount of the coal tar derivative therein. Appellants summarize their argument by stating the issue narrowly as follows:

Did the very small amount of a coal tar derivative present in the imported mixture, in the quantity of a fraction of a percent, fulfilling no commercial function, not affecting the character or use of the mixture, not detected by the importer, and not called for by the importers’ specifications, operate to affect the tariff classification of the imported merchandise?

The Customs Court held that the de minimis doctrine did not operate to take the importations out of the strict wording of paragraph 27(a)(4), (5) because the amount of Tinopal present in the imported merchandise, albeit very small, was shown by the evidence to be “sufficient to perform a function as an optical brightener” in the pearl essence and the evidence “does not permit any conclusion other than that its introduction in the importation was deliberate.” As the Customs Court saw it, the cases which deal with the de minimus rule provide that these factors are determinative of the legal issue.

Appellants quarrel not so much with the legal basis for the Customs Court decision as with the question whether there is substantial evidence to support the findings that Tinopal performs a functional role as an optical brightener and was present in the importation in a quantity sufficient to perform a useful function. We find that the evidence fully supports these findings by the Customs Court, which are not clearly contrary to the weight of the evidence. United States v. F. W. Myers & Co., Inc., 45 CCPA 48, C.A.D. 671 (1958).

Appellants rely upon the following testimony of one Dr. Lauffer, a retired cosmetic chemist then serving as a consultant (emphasis ours):

Q. In your opinion, Doctor, could that have added any desirable property to the pearl essence that Bonda sold to Northam? A. No.
Q. Would it contribute to the product, or in any way improve the product that it ultimately was used in? — namely, the nail polish. A. No.
Q. Doesn’t that addition enhance the commercial quality of a product? A. No, not in our application, in my opinion. We didn’t ask for Tinopal to be used, and we never saw the need of it in the nail polish.
Q. Was not this particular merchandise ordered pursuant to specific specifications? A. Yes, there were specifications, but none of them called for addition of any optical brightener. •x- -x- -x- -x- -x- *
Q. What function, if any, would it have performed in the nail polish? A. I assume from information I have on Tinopal that it would increase the whiteness of the film produced by the lacquer.
Q. In the product, in the final product? — I am speaking now of the product that you made: the nail polish. A. Yes, Yes. If it had any effect whatever, it would be a brightening of the, of the white appearance of the lacquer — but that was not an effect that we were particularly desirous of producing. We were buying the pearl for its scintillation, not for its whiteness. If we wanted to make a white lacquer we would have used an opaque white pigment.

Dr. Lauffer also testified, in reviewing his earlier testimony when recalled for redirect, that the small quantity of Tinopal “would be functioning for its purpose of being an “optical brightener” and stated (emphasis ours):

A. * * * I didn’t intend to say that it couldn’t act as an optical brightener. What I did say, I believe, was that we did not ask to have an optical brightener included, and we didn’t especially want that effect in our lacquer.
Q. Isn’t it possible, sir that that is what you got? A. Oh, it may be, but I don’t know why it was added', I don’t know why it would have been added for any other reason, but we did not ask for it to be added for that reason.

We find the evidence supports the Customs Court’s findings that Tinopal functioned as an optical brightener and was present in a quantity sufficient to perform a useful function. The testimony is replete with assertions that the Tinopal was neither requested as an addition to the imported pearl essence nor needed to produce the particular nail polish product which was made using the imported material, but customs duty is assessed upon ingredients of the goods imported, not according to the motives of the originators of the merchandise abroad or the usefulness of the properties imparted by those ingredients to the importer.

In the Customs Court, as well as here, appellants alleged that E. Fougera & Co. v. United States, 49 Treas. Dec. 986, C.D. 41632 (1926) is support for their proposition that the language “in part of” in paragraph 27(a)(4), (5) is not intended to encompass so insubstantial an ingredient as the 0.15 percent Tinopal. The Customs Court accepted “that case as authority for excluding from consideration minute quantities of coal tar derivative ingredients which do not participate in the primary functional role of the mixture” but distinguished the case on its facts because in Fougera the coal tar derivative ingredient present as 0.07 or 0.44 percent of the imported medicinal preparations did not perform a medicinal function, whereas in “the instant case * * * the coal tar derivative ingredient performed a function affecting the appearance of a product whose appearance is part of its functional role and in which said ingredient is present in a quantity sufficient to do its work.” We agree with this distinction.

Appellants argue before this court that the language of Fougera that the phrase “in part of” means “to a substantial part in a commercial sense” (emphasis ours) requires a different result when the commercial quality of the ultimate nail polish produced from the pearl essence is not enhanced by the Tinopal. We do not find this argument persuasive.

The decision and judgment of the Customs Court is affirmed.

Affirmed.


text:
    In re Dale M. KOHLER and Martin F. Littmann.
    Patent Appeal No. 8871.
    United States Court of Customs and Patent Appeals.
    April 12, 1973.
    Rehearing Denied July 26, 1973.
    John W. Melville, Charles H. Melville, Gibson R. Yungblut, Cincinnati, Ohio, Melville, Strasser, Foster & Hoffman, Cincinnati, Ohio, of record, for appellant.
    S. Wm. Cochran, Washington, D. C., for the Commissioner of Patents; Raymond E. Martin, Washington, D. C., of counsel.
    Before MARKEY, Chief Judge, and RICH, ALMOND, BALDWIN and LANE, Judges.
   MARKEY, Chief Judge.

This appeal is from the decision of the Board of Appeals, adhered to on reconsideration, affirming the rejection of all the claims of appellants’ application, serial No. 583,459, filed September 30, 1966, for “Production of Cube-on-Edge Oriented Silicon-Iron,” as unpatentable under 35 ILS.C. § 103. We reverse.

THE INVENTION

The invention relates to a method of producing cube-on-edge oriented silicon-iron sheet or strip for magnetic purposes. Claim 1 is illustrative:

1. In a method for producing cube-on-edge silicon-iron having a silicon content of from about 1.8% to about 4% and processed by steps including hot rolling to intermediate gauge, cold rolling to final gauge, decarburizing and annealing whereby to effect secondary recrystallization favoring growth of cube-on-edge nuclei by grain boundary energy, the improvement comprising in combination therewith the step of heating said silicon-iron having an oxygen content no greater than .0045% to a temperature of from 2100° F. to not more than 2400° F. immediately prior to said hot rolling step.

At the time of this invention, use of the well-known procedure outlined in the preamble of claim 1 entailed heating the slab or ingot of silicon-iron to temperatures as high as 2550° F. prior to the hot rolling step. It was disclosed by Littmann (co-inventor here) and Heck in U. S. Patent 2,559,340 that improved magnetic properties resulted from heating at this point to the highest temperature possible without “burning,” i. e. from 2300° to 2550° F. Use of these extremely high temperatures, however, was attended by serious disadvantages. As pointed out in appellants’ specification, the most significant was slag formation at temperatures above about 2400° F., requiring periodic shutdown of the furnace for slag removal.

Appellants’ contribution lies in the discovery of a relationship between the initial oxygen content of the silicon-iron and the requisite temperature in this heating step prior to hot rolling. They have found that if the oxygen content is no greater than .0045% (preferably .0030%), the heat treatment can be conducted at a temperature of from 2100° to 2400° F. (preferably 2300° to 2400° F.) and result in an end product having magnetic properties equivalent to those previously attained by the use of the highest possible temperatures.

Appellants have agreed that all of the claims must stand or fall with claim 1, wherein this basic concept is set forth. Accordingly, we confine our review to the rejection of claim 1.

THE DECISION BELOW

The prior art relied upon consists of Littmann et al. (Littmann) and Boni et al. (Boni) . Both patents are the property of the assignee of the present application.

As mentioned, Littmann is directed to processes for producing cube-on-edge oriented silicon steel wherein heating prior to hot rolling involves the use of temperatures up to 2550° F. The various processes to which this preliminary treatment is said to be applicable include those having the present combination of hot rolling, cold rolling, decarburizing and annealing steps. Appropriate starting materials are described simply as “silicon steel in general having a silicon content of about 2.5 to 4.0%.” No particular oxygen content is disclosed. The key to the patentees’ invention is stated thusly:

* * yye have found that excellent results may be attained by heating the slabs to temperatures lying substantially between 2300° F. and about 2550° F. with the emphasis on the higher temperatures for better results.

Those results are specified as an “enhancement of the perfection of the preferred orientation and hence a higher permeability in the rolling direction.” Permeability is a measure of effectiveness as a path for magnetic lines of force.

Boni discloses a method for the production of silicon-iron having a low oxygen content, i. e., .0040% or less. It is further taught that said silicon-iron can “by known rolling and annealing steps” be converted into cube-on-edge oriented stock with “improved magnetic properties.” The present specification readily acknowledges the Boni process as a means for obtaining the required starting material.

Claim 1 was rejected as unpatentable under 35 U.S.C. § 103 over Littmann in view of Boni. From the combined teachings of the references, the examiner considered it “ * * * obvious to one of ordinary skill in the art to process the silicon steel of Boni et al. according to the process of Littman et al. * * Appellants’ use of temperatures of 2100° to 2400° F. was not found to be “patentably inventive” because of the explicit teaching of Littmann that temperatures in the range of 2300° to 2400° F. were operable, although higher temperatures were preferred. The absence of a teaching of any relationship between oxygen content and heating temperature was considered “not relevant to the issue of obviousness.” Nor was the case for patentability found to be given any support “where the new or improved results clearly appear to be due solely to the quality of the material used.”

In sustaining the rejection, the board stressed that:

* * * The fact that commercial use of the Littmann et al. process has been carried out at the upper end of the 2300-2550° F. range in no way affects the disclosure of this reference * * *.

OPINION

We find it appropriate to combine the teachings of Littmann and Boni, in view of the specific statement in the latter that this low oxygen content material could be processed by known methods for producing cube-on-edge oriented stock. Hence it would be at least prima facie obvious to subject such a starting material to a heat treatment employing temperatures of 2300° to 2550° F. prior to hot rolling. Anticipated advantages inherent in the use of this particular silicon steel in the Littmann process would not suffice to overcome the oN viousness of the combination.

But we cannot adopt the position taken by the Patent Office that treatment of the Boni product by the Littmann process is all that is involved in the present invention. Due consideration must be given to the relationship set forth in claim 1 between the oxygen content of the starting material and the temperature required in the heat treatment prior to hot rolling. Appellants have presented objective evidence in the specification (Table 1) indicating that products having substantially equivalent permeability values can be obtained whether the heat treatment is carried out at 2100° F., 2400° F. or 2500° F., provided the oxygen content is very low. This evidence cannot be ignored. There is nothing in the record before us to contradict it. The possibility of avoiding slag formation without affecting the quality of the final product is indeed significant and makes the present invention more than merely a treatment of the Boni product by the Littmann process.

The only question remaining is whether such a relationship would have been obvious to one of ordinary skill in view of the teachings in the cited prior art. All the disclosure in a reference must be evaluated for what it fairly teaches, not just the preferred embodiments. See In re Snow, 471 F.2d 1400 (CCPA 1973); In re Boe, 355 F.2d 961, 53 CCPA 1079 (1966). Yet we find no suggestion in either Littmann or Boni of appellants’ invention. The entire Littmann disclosure is directed toward the correlation of improved permeability with the highest possible temperature prior to hot rolling. No teaching in Boni has been pointed out by the Patent Office which would cause one to question the applicability of this correlation to a low oxygen content material. We agree with appellants that the obvious treatment of the Boni material would be at the highest possible temperature without burning according to the Littmann process. Accordingly, it was error to hold the claimed subject matter obvious in view of the prior art.

The decision of the board is reversed.

Reversed.

      . “Burning” is defined in the patent as “a progressive intergranular disintegration probably due to oxidation or to the migration of intergranular substances or both, and usually occurs in the neighborhood of 2600° F. in an oxidizing atmosphere.”

      . U.S. 2,599,340, issued June 3, 1952.

      . U.S. 3,305,354, issued February 21, 1967 (filed December 17, 1964).


text:
    60 CCPA
    ASSOCIATED HOBBY MFRS., INC., Appellant, v. The UNITED STATES, Appellee.
    Customs Appeal No. 5500.
    United States Court of Customs and Patent Appeals.
    April 5, 1973.
    Allerton deC. Tompkins, New York City, of record, for appellant.
    Harlington Wood, Jr., Asst. Atty. Gen., Andrew P. Vance, Chief, Customs Section, Joseph I. Liebman, New York City, for the United States.
    Before MARKEY, Chief Judge, RICH, BALDWIN and LANE, Associate Judges, and CLARK, Justice, retired, sitting by designation.
   BALDWIN, Judge.

This appeal is from the decision and judgment of the United States Customs Court, dismissing appellant’s protest concerning the classification of imported sets containing miniature plastic figures and certain accompanying items. The court’s description of appellant’s Exhibit 1 sufficiently conveys the nature of the merchandise:

Exhibit 1, identified as the “Guards Band,” has on the front of the cardboard box an illustration of five marching bandsmen of the British Guard’s Band dressed in ceremonial uniform. On the back of the box is an illustration of the band leader, and next to that a statement that “[t]his set consists of 44 [¶] and OO scale figures, suitable for use with the Air-fix [¶] & OO Trackside series, and are completely finished with the exception of painting.” The contents of the box consist of 44 miniature figures of uniformed musicians playing various * * * musical instruments.2 These figures are complete except for the drummers for whom eight miniature drums are included — each of which can be snapped into place on the appropriate drummer figure.

The court’s footnote 2 pointed out that “[a]s imported, the individual pieces contained in each set are attached in groups of 9 to 13 to a plastic bar called a ‘sprue’!”

The merchandise was classified as other toy figures of animate objects (except dolls), not having a spring mechanism, and not stuffed, under item 737.40, TSUS, as modified, T.D. 68-9. Appellant contends that the proper classification of the merchandise should have been as “ [construction kits or sets with construction units prefabricated to precise scale of the actual article,” under item 737.09, or as articles of plastic, not specially provided for, under item 774.60.

Upon consideration of the record in this ease and appellant’s arguments, we are in complete agreement with every aspect of the Customs Court’s opinion save one.

The court pointed out that appellant’s witness testified that “the sets are made as precisely to [¶] scale, which is in the ratio of 87 to 1, as present-day technology makes possible.” After determining that the merchandise did not fit within the meaning of the term “construction kits or sets" as it is used in item 737.09, the court stated:

Also militating against classification of the imports as “construction kits or sets with construction units prefabricated to precise scale of the actual article” is that plaintiff failed to establish that the imported articles were, in fact, made to the “precise scale” of the actual articles. Indeed, examination of the samples indicates to the contrary. For example, checking a few of the samples, the Japanese infantrymen in plaintiff’s exhibit 6 measure approximately Nieth of an inch — which would mean that at the [¶] scale of 87:1 the actual Japanese infantrymen so depicted would be 6’9y%" tall! And although plaintiff’s witness testified that the Japanese figures were slightly smaller than the American figures, many of the American paratroop figures in plaintiff’s exhibit 8, as illustrated, likewise measure %th of an inch, thus depicting American paratroopers of the same heights as the Japanese infantrymen, i.e., 6'9%".

It may well be that the actual scale of the figures is significantly different from 87 to 1. But considering the fact that an error in measurement of the figures of i/leth of an inch would result in a calculated error of the height of the original subject of well over 5 inches, we are not convinced that the figures are not made on some “precise scale” within the meaning of the statute. As appellant points out, “[u]nder TSUS 737.09 there is no specific scale required for classification thereunder — [¶] or otherwise — so long as it is made to a ‘precise scale.’ ”

In our view, the remaining findings of the Customs Court are fully supported by the record, and its conclusion that appellant had failed to establish the correctness of either of its claimed classifications is clearly correct. Accordingly, the decision and judgment are affirmed.

Affirmed.

      . 67 Cust.Ct. 391, C.D. 4302 (1971).


text:
    INCOME TAX SERVICE COMPANY, Appellant, v. E. Bruce FOUNTAIN, dba Income Tax Services Company, Appellee.
    Patent Appeal No. 8863.
    United States Court of Customs and Patent Appeals.
    April 5, 1973.

      Ronald A. Jacks, Washington, D. C., attorney of record, for appellant.
    Harris Zimmerman, Oakland, Cal., attorney of record, for appellee.
    Before MARKEY, Chief Judge, RICH, BALDWIN and LANE, Judges, and ALMOND, Senior Judge.
   RICH, Judge.

This appeal is from the decision of the Patent Office Trademark Trial and Appeal Board, abstracted at 166 USPQ 285 (1970), granting appellee’s petition to cancel appellant’s registration No. 848,369, issued April 30, 1968, for the service of preparing income tax statements. Appellant’s registered mark consists of “ITS” on a green oval background and claims a date of first use of December 1, 1965.

The petition to cancel under 15 U.S.C. § 1064, filed Dec. 16, 1968, was predicated upon the damage to appellee as prior user of the mark “ITS” and a design for income tax accounting services. We affirm.

Facts

Appellee, E. Bruce Fountain, has himself been in the business of preparing income tax returns in California and Oregon under the name of Income Tax Services Company since January 1, 1964, when he acquired the business from one Ziegelhofer. Ziegelhofer acquired the business from MacNeil in 1950. Mae-Neil had a registration of a dissimilar mark containing the “ITS” logo, No. 534,122, issued November 28, 1950, which was allegedly conveyed to Zigelhofer with the business, although no reference was made to the mark in the bill of sale, nor any assignment recorded under the provisions of 15 U.S.C. § 1060. In 1956, MacNeil’s registration was can-celled for failure to file an affidavit of continuing use under 15 U.S.C. § 1058.

Appellant, Income Tax Service Company, a Michigan corporation, in the business of preparing income tax returns throughout several states, obtained the registration of the trademark “ITS” which is the subject of this appeal, claiming first use of the mark Dec. 1, 1965. Appellant’s witness, Rizik, who signed the application for registration as president of appellant, testified that he had been using the mark for “at least another five or seven, ten years before that” date of claimed first use, but no evidence was proffered to establish such earlier use.

The Board’s Decision

The board granted the petition to cancel appellant’s registration, noting that

The testimony for the petitioner is clear, documented and convincing of the fact that, through a predecessor-in-title, petitioner has used the “ITS” logo since as early as 1950. On the other hand, respondent’s testimony is vague and lacking in conviction and on the basis thereof, respondent is entitled, at best, to a date of December 1, 1965, as the earliest use of its mark.

The board then answered appellant’s contention that appellee “has been derelict because he failed to file a notice of opposition after publication” of appellant’s mark, waiting instead until seven and one half months after the registration issued, noting that giving effect to any such waiver would be inconsistent with the specific statutory provision that a petition to cancel may be filed within five years from the date of registration of the mark. (15 U.S.C. § 1064). In answer to appellant’s assertion that it was “now the owner of a registered mark in which it has made a substantial investment” and it would be unjust to cancel the registration, the board expressed the opinion that any such investment was made after appellant had notice of appellee’s assertion of prior rights in the mark and was thus made at its peril.

Appellant’s Arguments Here

Appellant’s arguments before this court are more equitable than legal. (See 15 U.S.C. § 1069). No challenge is made to the facts found by the board, such as appellant’s right to rely, at best, upon the date of first use alleged in his application, or the legal conclusion that there is a likelihood of confusion when the marks are applied to income tax services. Appellant tells us in its brief that the “ultimate issue” is whether appellee’s petition for cancellation “is barred by the equitable defenses of estoppel or abandonment.”

Abandonment came about, appellant asserts, because, among other things, appellee Fountain acquired from his predecessor, Zigelhofer, only the common law right in the mark because no assignment of MacNeil’s original registration was ever recorded and the registration was later cancelled for failure to file an affidavit of continuing use, thus at least implying appellee’s intent to abandon the mark. Estoppel, appellant claims, bars appellee’s petition to cancel because, coupled with the alleged abandonment stemming from the above facts, appellee or his predecessor failed to protect the common law right they acquired, neither applying for a new registration nor taking other affirmative action within a reasonable time, whereas, appellant took “every measure required of a reasonable man, including a diligent search for similar marks and ultimate registration” and “expended substantial sums to expand the' business throughout the country.” Appellant complains that business dealings between the parties, shown by Rizik’s testimony, were such that appellee first “deluded appellant into thinking that he was interested in becoming a franchisee” of appellant, “then offered to sell its mark and business name” to appellant, and only instituted the cancellation action “after appellant refused to ‘bargain’ by paying tribute in this manner * *

OPINION

We must disagree with appellant’s arguments insofar as they ask us to apply the equitable factors of abandonment and estoppel. Apart therefrom, there is an unchallenged legal basis for the board’s decision. It is unchallenged that appellant is entitled at best to a date of December 1, 1965, as the earliest date of use of the mark “ITS” and also unchallenged is the board’s finding that since 1964 Fountain “actively engaged in the business of tax consultant services under the ‘ITS’ logo * * * ” This prior use of the mark “ITS” is sufficient basis for the granting of the petition to cancel, such use being almost two years prior to the earliest use of the mark proved by appellant.

As to the equitable considerations, we do not find appellant’s argument based upon abandonment to be appropriate since all of the facts which allegedly resulted in appellee’s having abandoned the mark took place prior to the earliest date of use relied upon by appellant and there is no question that appellee was continuously using the mark from a time at least two years before the filing of the petition to cancel.

Appellant’s estoppel argument is based in part upon the conduct of appellee’s predecessor in title with respect to the prior mark and in part on the allegedly unfair business treatment it received from appellee who dickered with appellant in September, 1968, without telling appellee about his right to seek cancellation of appellant’s trademark, coupled with appellant’s alleged reliance thereon, to its detriment, in having “expended substantial sums to expand the business throughout the country.” With respect to the latter, the board pointed out that insofar as the record shows, any investment which appellant may have made was after it had notice of appellee’s assertion of prior rights in its mark. Appellant has pointed to no testimony or evidence in the record which would controvert this finding by the board and we have been unable to find any. Accordingly, the appellant has not proved any reliance which would support the application of the principles of estoppel. See Ralston Purina Co. v. Midwest Cordage Co., Inc., 373 F.2d 1015, 54 CCPA 1213 (1967). The judgment of the Trademark Trial and Appeal Board is affirmed.

Affirmed.