author: WILLIAM E. DOYLE, Circuit Judge.

text:
    AMOCO PRODUCTION COMPANY, Petitioner, v. FEDERAL POWER COMMISSION, Respondent, Phillips Petroleum Company, Intervenor.
    No. 72-1680.
    United States Court of Appeals, Tenth Circuit
    Argued and Submitted Sept. 13, 1973.
    Decided Nov. 12, 1973.
    Rehearing Denied Dec. 3, 1973.

      William H. Emerson, Tulsa, Okl. (J. P. Hammond, Tulsa, Okl., H. 0. Hickman, Denver, Colo, and Carroll L. Gilliam of Grove, Jaskiewicz & Gilliam, Washington, D. C., on the brief), for petitioner.
    John H. Burnes, Atty., Federal Power Commission (Leo E. Forquer, General Counsel, and George W. McHenry, Jr., Acting Solicitor, FPC, on the brief), for respondent.
    John L. Williford, Bartlesville, Okl. (Kenneth Heady and Thomas M. Blume, Denver,.Colo., on the brief), for intervenor.
    Before PHILLIPS, HILL and d0YLE, Circuit Judges..
   WILLIAM E. DOYLE, Circuit Judge.

The matter before the court is a petition for review, under the provisions of the Natural Gas Act, 15 U.S.C. § 717 et seq. The ruling complained of is the rejection by the Federal Power Commission of certain gas rate increases proposed by Amoco Production Company. The proposed increases relate to the price paid to Amoco by Phillips Petroleum Company for purchase of natural gas produced in the Hugoton gas field in the panhandle portions of Texas and Oklahoma. At issue in addition to the order mentioned is a question as to the meaning and effect of the Commission’s decision and order in an earlier decision, FPC Opinion No. 586, Area Rate Proceeding (Hugoton-Anadarko Area), September 18, 1970, 44 FPC 761; also the effect of that decision and order on previously existing contractual arrangements between Amoco and Phillips. Essentially Amoco maintains that the area rate order when considered with its 1945 contract with Phillips gives rise to their receiving an increase of the rate paid by Phillips to it in payment of gas at the wellhead.

The pertinent facts and genesis are detailed as follows:

This controversy goes back to December 1945 at which time Phillips contracted to supply large quantities of natural gas from the Hugoton gas field to Michigan Wisconsin Pipe Line Company, for further transport to and sale by Michigan Wisconsin in north-central United States.

To insure that it could supply adequate quantities of gas to Michigan Wisconsin, Phillips contracted to purchase some gas from wells operated by other producers in the Hugoton gas field, one such producer being Amoco’s contract predecessor, Stanolind Oil and Gas Company. Phillips collected at central points for processing the gas acquired through such purchases, as well as the gas produced on its own leases. The residue gas after processing was then sold to Michigan Wisconsin. This off-lease transportation of gas, together with the compression, treatment and liquid hydrocarbon extraction incident thereto, is known as substantial off-lease gathering.

The purchase contracts between Phillips and Stanolind (now between Phillips and Amoco) were to run as long as the gas leases on the acreage subject to the contracts remained in effect and gas continued to be produced from the leases. These contracts, we are told, also contain provisions governing the price to be paid by Phillips to Stanolind (Amoco) for gas produced. These provisions are not directly in issue here. There is no dispute that both Amoco’s wellhead sales to Phillips and Phillips’ sales after substantial off-lease gathering to Michigan Wisconsin are subject to rate regulation by the FPC under the Natural Gas Act.

In 1970, the FPC established an updated system of rate regulation for sales of natural gas produced in the Hugo-ton-Anadarko area. Opinion No. 586, Area Rate Proceeding (Hugoton-Anadarko Area), September 18, 1970, 44 FPC 761. In that proceeding, the FPC established certain Base Area Rates which it considered “just and reasonable” for wellhead sales of gas by producers in the Panhandle and Hugoton Fields, such as were being made by Amoco to Phillips. The Commission also provided for certain adjustments to these Base Area Rates, one of which involved the situation in which sale of the gas was made after substantial off-lease gathering (the situation in which Phillips sells to Michigan Wisconsin). The Base Area Rates, subject to adjustment where appropriate, were in effect ceiling rates for sales of natural gas, since the Commission determined that any contracts calling for rates in excess of the applicable rates were “in that respect unjust and unreasonable.” The Commission also established a schedule of minimum rates for sales of gas produced in the Hugoton-Anadarko Area, also providing for a rate adjustment when substantial off-lease gathering had taken place. The Commission specifically provided that parties making sales of gas under contracts which were below the minimum rates established could apply for and would receive approval of price increases up to the minimum price level regardless of their contractual obligations to sell at a lower rate. 44 FPC at 789.

Based upon the area rate schedules propounded by the Commission in Opinion 586, Phillips proposed and received approval from the FPC for an increase in its rates for gas sales to Michigan Wisconsin. Phillips’ new sale price to Michigan Wisconsin was approximately 16.22 cents/Mcf, to become effective on July 1, 1972. Amoco then filed, on May 26 and June 9, 1972, proposed changes in its gas rate schedules which governed its sales to Phillips. The proposed changes, also to become effective on July 1, 1972, would have raised Amoco’s sales rates to Phillips to approximately 13.94 or 13.95 cents per Mcf. (Record, pp. 1-12). In essence, Amoco stated to the Commission that these proposed price increases were based on the contention that under Opinion No. 586 Phillips was only entitled to collect an off-lease gathering fee of 2.5 cents per Mcf and that because Phillips was collecting a sales price of 16.22 cents per Mcf, it was obligated to pay a wellhead purchase price to Amoco of approximately 13.95 cents per Mcf.

The Commission rejected Amoco’s proposed rate increases by letters dated July 5 and July 21, 1972, stating that the increases were neither contractually provided for, nor required by the provisions of Opinion 586. (Record, pp. 19-22). Amoco’s Application for Rehearing was denied by the Commission on August 24, 1972 (Record, pp. 40-42). Amoco now seeks review by this Court, under 15 U.S.C. § 717r, of the Commission’s rejection of the proposed rate increases.

AMOCO’S ARGUMENTS:

The Commission’s denial of Amoco’s proposed rate increases was erroneous because:

I. (a). In the Hugoton-Anadarko Area Rate Decision, the FPC limited off-lease gatherers to a maximum charge of 2.5 cents per Mcf (after July 1, 1972) for the service they performed. Therefore,

(b). Since Phillips is allowed by the Commission to charge 16.22 cents per Mcf for gas sales to Michigan Wisconsin, Phillips must now also be required to pay at least 16.22 minus 2.5 cents per Mcf to Amoco for wellhead purchases of gas, regardless of the fact that the contract between Phillips and Amoco calls for a lower wellhead purchase price.

II. The Hugoton-Anadarko Area Rate Decision must be construed in the manner stated in I.(a), above, since any other construction would make that decision unlawful. This conclusion is reached because it would then appear that Opinion 586 had failed to regulate the price charges of the middleman-off-lease gatherer, and the statute requires that the Commission insure that all rates are just and reasonable.

III. Even if Opinion 586 does not require it, the Commission should have treated Phillips’ conduct in (a) agreeing to the Amended Settlement Proposal which formed the basis for the FPC decision in Opinion 586, and (b) subsequently requesting and obtaining a rate increase from the FPC for its sales to Michigan Wisconsin, as implying in fact or law a contractual change between Phillips and those from whom Phillips purchases wellhead gas, such as Amoco. This implied . contractual change would require Phillips to pay wellhead prices to Amoco and other producers which would operate to insure that Phillips received no more than 2.5 cents per Mcf for its off-lease gathering activities.

IV. Amoco finally contends that reversal of the Commission’s determination is required because the administrative record before the court is not sufficiently complete to permit judicial review.

INTERPRETATION OF OPINION 586.

The essential problem is as previously noted one of interpretation and construction, the salient question being whether Opinion 586, which expressly adopted the Proposed Settlement Agreement, intended ceiling prices after off-lease gathering to be computed by adding the requisite 2.5 cents to the actual wellhead prices or, rather, to the previously designated wellhead ceiling rates. We conclude that the latter was the intention of Opinion 586.

Amoco contends that the drafters of the settlement agreement have intended the computation to be based upon actual wellhead prices since the key word “ceiling” was omitted from the disputed phrase. In addition, Amoco argues that a contrary interpretation would render the Opinion unlawful as violative of sections 4(a) and 4(b) of the Natural Gas Act. The Commission has construed the Opinion to require ceiling price after off-lease gathering to be based upon the wellhead ceiling price plus 2.5 cents. The FPC’s interpretation is entitled to great weight, since a presumption of validity attaches to a Commission’s exercise of its expertise. Permian Basin Area Rate Cases, 390 U.S. 747, 767, 88 S.Ct. 1344, 1360, 20 L.Ed.2d 1312 (1968).

We have concluded that the Commission’s interpretation is the proper one. The questionable language immediately follows a provision concerning wellhead ceiling prices. The disputed phrase states simply: “ [A] dd 2.50 cents to the applicable wellhead prices.” (Emphasis added). Although the adjective “ceiling” is omitted, the word “applicable” is sufficiently descriptive to denote a reference to the varying wellhead ceiling prices enumerated in the paragraph preceding it. The term “applicable” refers to the fact that the ceiling rates differ among Kansas, Oklahoma and Texas gas fields.

Our interpretation is corroborated in the text of Opinion 586 which approved and incorporated the settlement proposal. The Opinion uses the term “base area rates” when referring to wellhead ceiling prices. Appropriate adjustments to the base area rates are made for substantial off-lease gathering. The Opinion states unequivocally that “the applicable area rate shall be adjusted upward.” Thus, under this provision, it is indeed the wellhead ceiling price (designated the “base area rate”) to which the 2.5 cent adjustment is added. Since Opinion 586 expressly adopted the substantive provisions of the proposed settlement agreement, the final language in the Opinion may be deemed a proper clarification of the ambiguities left lurking in the agreement.

As further corroborative evidence, we need only turn to other provisions within the Settlement Proposal itself. There, under Part V, a minimum rate is established, both for sales at the wellhead and for sales made after substantial off-lease gathering. The latter rate is determined by adding the 2.5 cents gathering charge to the minimum wellhead rate. It strikes us as inconsistent to treat the minimum price for sales after gathering by adding the gathering charge (2.5 cents) to the minimum wellhead price, and at the same time to compute the ceiling price for sales after gathering by adding the 2.5 cents gathering charge to any wellhead price. It is more logical to approach the minimum and maximum rates for sales after gathering as parallels. Together, they should delineate the limits of a lawful rate structure, each being based upon the respective minimum or maximum wellhead price.

Having determined that Amoco’s construction of Opinion 586 was erroneous, we now take up Amoco’s contention that the interpretation which we adopt renders Opinion 586 violative of sections 4(a) and 4(b) of the Natural Gas Act. Whether Amoco’s contention is meritorious is beyond the scope of the present inquiry. Amoco is not before this court to question whether Phillips’ resale price is “unreasonable”. Amoco is here only to appeal a denial of its own proposed rate increase. If in fact Phillips’ delivery price to the Michigan Wisconsin Pipe Line Company is not “just and reasonable” under section 4, then this is a matter which is to be raised by parties “aggrieved” within the meaning of section 19 of the Natural Gas Act.

Amoco has here attempted to avoid its contractual obligations. The sale price to which Amoco agreed in its long-term contract with Phillips must be given deference by the FPC and also by this court. The Supreme Court has specifically held that the Natural Gas Act was not intended to abrogate private contract rights. United Gas Pipe Line Co. v. Mobile Gas Service Corp., 350 U.S. 332, 76 S.Ct. 373, 100 L.Ed. 373 (1956). The FPC is empowered to change a negotiated contract rate only when it is so low or so high as to adversely affect the public interest. FPC v. Sierra Pacific Power Co., 350 U.S. 348, 76 S.Ct. 368, 100 L.Ed. 388 (1956). No such facts exist in this case. The contract price at which Amoco sells to Phillips is neither below the minimum nor above the ceiling established by the FPC. Amoco has also sought, as we have noted, to expand the letter and spirit of Opinion 586.

Nor is there merit in Amoco’s argument that judicial precedent requires Phillips’ resale rates to be based upon the actual purchase price paid by Phillips. Cities Service Gas Co. v. FPC, 424 F.2d 411 (10th Cir. 1969), does not govern. That decision was concerned with the validity of an FPC order to reduce the jurisdictional rates charged by a particular gas company and to require a refund of excess collections. The issue was whether, in arriving at the rates to be charged, the Commission should have looked to the company’s costs or, rather, to the price fixed by contract. We held that the FPC did not abuse its discretion in pricing the gas on the basis of the gas company’s cost of service. At bar, we are concerned with the interpretation of an FPC order concerning area rates, not rates charged by an individual company. When area rate regulation is at issue, the FPC is not obligated to guarantee each company a fixed profit on its particular cost basis. Permian Basin Area Rate Cases, supra; California v. FPC (In re Hugoton-Anadarko Area Rate Case), 466 F.2d 974 (9th Cir. 1972). Moreover, as we have here said, Amoco is not in a position to complain that Phillips is receiving an excessive rate of return.

ALLEGED MODIFICATION OF THE CONTRACT

Amoco’s contention that Phillips’ conduct in (a) entering into a settlement agreement calling for a 2.5 cent off-lease gathering differential, and then (b) applying to the FPC for a rate increase in its sales to Michigan Wisconsin in effect modifies the Amoco-Phillips contracts merits little discussion. Even if this theory were not such a strained one under the fact situation presented, it would still be premised upon Amoco’s contention that the settlement agreement, as well as Opinion 586, imposes a maximum amount of 2.5 cents per Mcf which an off-lease gatherer can obtain for the service he renders. As noted above, this contention is erroneous. Under our reading of the settlement agreement, as clarified by Opinion 586, the argument that a contract modification is to be implied in law makes no impact whatever.

ALLEGED INADEQUACY OF THE RECORD

Amoco finally contends that the record before us is insufficient to permit judicial review. This is also without merit. It should be emphasized that we are not here reviewing the reasonableness of rates established by the Commission in Opinion 586. That decision has already been judicially reviewed and affirmed by the Ninth Circuit Court of Appeals. California v. FPC, supra. Our responsibility here is to determine whether, under a proper reading of Opinion 586 and the pertinent provisions of the Phillips-Amoco gas sales contracts, the Commission’s rejection of Amoco’s proposed rate increases was correct and reasonable. We do have an adequate record before us to make that determination.

The petition for review is denied.

      . Phillips entered into its purchase contracts with Stanolind on December 5 and December 7, 1945. The sales contract to Michigan Wisconsin was signed on December 11, 1945.

      . “(c) The Base Area Rates. The following base area rates per Mcf (at 14.65 psia) are hereby established and subject to the adjustments provided in paragraphs (d), (e) and (f) :
      (1) Gas sold under contracts dated prior to November 1, 1969:
      (i) For all gas produced in the Panhandle and Hugoton Fields:
      (aa) Prior to July 1, 1972:
      12.50 cents in Kansas ;
      13.25 cents in Oklahoma;
      13.50 cents in Texas.
      (bb) On and after July 1, 1972:
      13.50 cents in Kansas;
      14.25 cents in Oklahoma;
      14.50 cents in Texas.” 44 FPC at 786.

      . “(e) Adjustment for Substantial Off-Lease Gathering. Where delivery of the gas is made after substantial off-lease gathering by the producer, whether at a plant . tailgate or at a central point, the applicable area rate shall be adjusted upward above the base area rate:
      (1) For gas produced in the Panhandle and Hugoton Fields:
      (i) Prior to July 1, 1972, 2 cents per Mcf.
      (ii) On or after July 1, 1972, 2.5 cents per Mcf.” 44 FPC at 788.

      . Opinion 586, 44 FPO at 785.

      . “(B) Minimum Rates

      (1) Minimum rates per Mcf for natural gas produced in the Hugoton-Anadarko area are hereby established (at 14.65 psia) as follows:
      10.0 cents in Kansas ;
      10.5 cents in Oklahoma;
      10.75 cents in Texas.
      For sales made after substantial off-lease gathering by the producer, or at a plant tailgate, the applicable minimum rate shall be adjusted by adding the applicable amount of adjustment provided for substantial off-lease gathering.” 44 FPC at 789.

      . Opinion 586 was the culmination of long administrative consideration. An initial Hearing Examiner’s decision establishing rates in the Hugoton-Anadarko area was issued on September 16, 1968. Exceptions were filed by numerous participants to the hearings. On May 24, 1968 a “settlement proposal” was filed by a group of producers in the area, but several other concerned parties opposed that proposal. After more hearings, another settlement proposal was filed by a number of the participants on January 29, 1970. It was also opposed by several interested parties. However, the Commission considered that final settlement proposal on its merits, and after taking into account objections to it, decided that its provisions were just and reasonable and expressly adopted the provisions of the proposal. 44 EPC at 781.
      The important consideration in such adoption of the proposal’s provisions is the Commission’s understanding of the meaning of those provisions. The intent of the Commission is found in the Commission’s discussion of the provisions, and in the final order in Opinion 586. To our way of thinking this is to be given great weight.

      . Under 15 U.S.C. § 717c, no natural gas company subject to the Natural Gas Act may make any changes in its rates or contracts relating thereto, unless it has first given notice to the Commission and to the public. The Commission then has the authority to suspend the implementation of the proposed rates, to hold hearings, and to determine that the proponent has not justified the change in rates or contracts. Such a Commission determination is eventually subject to judicial review. 15 U.S.C. § 717r.

      . The differential between Phillips’ sale price to Michigan Wisconsin and Amoco’s proposed sale price to Phillips does not appear to be exactly 2.5 cents per Mcf because certain minor tax reimbursements and adjustments have not been mentioned here.

      . The relevant portions of the Settlement Agreement state:
      “2. Ceiling Price for Wellhead Deliveries. The applicable wellhead ceiling prices per Mcf at 14.65 psia, including all state taxes effective on the date of this proposal, shall be:
      Kansas 12.50 cents
      Oklahoma 13.25 cents
      Texas 13.50 cents
      3. Ceiling Price for Deliveries Made After Substantial Off-Lease Gathering by a Producer, Whether at a Plant Tailgate or at a Central Point. Before July 1, 1972, add 2 cents per Mcf to the applicable wellhead prices. On and after July 1, 1972, add 2.50 cents to the applicable wellhead prices. Attached hereto as Exhibit A-l is a list of deliveries by operator, known to the undersigned, to which this paragraph applies.” Although contained in the Proposed Settlement Agreement, this provision was expressly approved in the Commission’s Opinion. 44 FPC at 781.

      . Section 4(a) All rates and charges made, demanded, or received by any natural-gas company for or in connection with the transportation or sale of natural gas subject to the jurisdiction of the Commission, and all rules and regulations affecting or pertaining to such rates or charges, shall be just and reasonable, and any such rate or charge that is not just and reasonable is hereby declared to be unlawful.
      Section 4(b) No natural-gas company shall, with respect to any transportation or sale of natural gas subject to the jurisdiction of the Commission, (1) make or grant any undue preference or advantage to any person or subject any person to any undue-prejudice or disadvantage, or (2) maintain any unreasonable difference in rates, charges, service, facilities, or in any other respect, either as between localities or as between classes of service.

      . See notes 2 and 3, supra, -which set out the relevant portions of the Opinion.

      . The minimum rate per Mcf at 14.65 psia for sales at the wellhead to interstate pipeline companies shall be:
      Kansas 10.0 cents
      Oklahoma 10.50 cents
      Texas 10.75 cents
      For deliveries made after substantial off-lease gathering or at a plant tailgate, the minimum rate shall be determined by adding the applicable gathering charge set forth above to the minimum wellhead rate. (Emphasis added.)

      . See note 10, supra.

      . Its standing to do so is questionable.


source: Caselaw Access Project

author: WISDOM, Circuit Judge: CLARK, Circuit Judge CLARK, Circuit Judge

license: Public Domain

text:
    HUGHES TOOL COMPANY, Plaintiff-Appellant-Cross Appellee, v. G. W. MURPHY INDUSTRIES, INC., Defendant-Appellee-Cross Appellant.
    No. 72-3143.
    United States Court of Appeals, Fifth Circuit.
    Dec. 27, 1973.
    Rehearing Denied March 12, 1974.

      Clinton F. Morse, Houston, Tex., Edward A. Haight, Britton A. Davis, Chicago, Ill., for appellant.
    A. H. Evans, W. R. Robins, J. Vincent Martin, Houston, Tex., for appellee.
    Before WISDOM, GEWIN and CLARK, Circuit Judges.
   WISDOM, Circuit Judge:

In this patent infringement suit we face questions of liability and the proper measure of damages. Hughes Tool Company, the plaintiff-appellant, sued to recover damages for infringement of its patent covering a steel and rubber seal which protects the bearings of rotating drill bits used in drilling oil wells. The district court found that G. W. Murphy Industries, Inc., the defendant-cross appellant, had infringed the patent in suit and should compensate Hughes Tool by paying a reasonable royalty. On appeal Murphy challenges the finding of liability; Hughes challenges the adequacy of the award. We affirm on both issues.

I. Facts

The patent in suit, U. S. Patent No. 3,075,781, covers a bearing seal used in rock bits.

The district court found:

“7. The bearing seal of the patent was designed to function in rock bits having a roller cone construction. Such bits include a head section, which can be threaded onto the lower end of the drill stem, and rotatable conical shaped cutters mounted on bearings at the lower end of the head. In operation the bit is lowered into the hole and the drill stem is rotated causing the conical cutters to roll upon the bottom of the hole with great force, and thus disintegrate the rock formation. Such a bit will continue to drill until either (1) the cutting structure on the surface of the cones has broken down, or (2) the bearings on which the cutters turn have worn out, at which time the effective life of the bit is ended.”

The life of the bearings is to a large degree dependent on lubrication, and as early as 1918 unsuccessful attempts were made to seal the bearings to prevent the escape of lubricant and to retard the entrance of foreign particles. Since the 1920’s Reed Roller Bit Company (Murphy’s predecessor), Hughes, and others competed to find an effective rock bit seal. For years however, this goal eluded them. Finally, in the late 1950’s Hughes developed the seal—the subject of the patent in suit. The first sealed bearing bits embodying the invention became commercially available in 1960.

The subject of the patent in suit is a seal shaped like the outside rim of a dinner plate, that is, like the frustrum of a shallow cone. It is one piece, steel encased in rubber. The rubber exterior is contoured to form sealing pressure pads at the opposite faces of the inner and outer diameters. To provide a sealing engagement with the bit shaft, over which the seal is mounted, a rubber bead may be provided at the inner diameter of the seal. In operation, a conical cutter, positioned over the bit shaft, is forced upon the seal, partially flattening it. As the seal flattens, its pressure pads are pushed against the opposing circular faces of the bit shaft and the conical cutter. To protect the life of the seal, there is some clearance provided between the inner diameter of the steel interior of the seal and the bit shaft. The rubber bead, which may be provided to fill this space, does not prevent the seal from moving radially and rotating slightly on the shaft. These capabilities are termed “radially floating” and “sliding and sealing engagement” in the patent. The point of least resistance to rotation, and the point where the primary movement occurs, is the interface between the outer diameter of the seal and the conical cutter.

Particularly in hard rock formations, seals covered by the patent in suit have significantly reduced bearing wear, and in so doing have increased up to five times the effective life of bits. The district court found that even “[i]n less dramatic situations, the driller can expect at least a thirty to fifty percent increase in overall effectiveness”.

The Hughes seal proved so successful commercially that in May 1960 Reed’s research department feared that “it is only a matter of time before our worthy competitor perfects their grease seal to a point where we will be virtually out of the insert bit business”. Reed began testing a two-piece seal consisting of two metal cores encased in rubber and held in compression by a separate metal spring. The two-piece seal is not charged with infringement. Although the two-piece seals were never fully satisfactory and were never put into actual production, Reed sold approximately 40 bits containing two-piece seals made by its research department. The district court found that the two-piece seal was a commercially viable noninfringing alternative to the one-piece seal. In late 1962 Reed began experimenting with the one-piece seal later found by the district court to infringe patent no. 3,075,781. In 1963 Reed put the one-piece seal into production.

The Reed one-piece seal is virtually identical to the Hughes seal. Hughes and Reed had differing theories, however, of how to mount the seals on the bit shafts. The Hughes seal was mounted with grease between the seal and the shaft to permit “radial floating” and a “sliding and sealing engagement” with the shaft. In Reed bits, on the other hand, the seal was mounted in a tight rubber-to-metal engagement, called an “interference fit”, in an attempt to eliminate any movement between the seal and the shaft. The dry friction between the rubber of the seal and the steel of the shaft was intended to, and did in fact, inhibit rotation and radial floating. But even with their “interference fits” the Reed seals rotated on their shafts during their effective lives. Robert A. Cunningham, one of the inventors of the patented seal, testified that he had retrieved and examined 33 one-piece seals from Reed bits. Each seal had effectively protected the bearings. Of these seals, 32 showed positive signs of rotation. Charles Robert Frederick, Murphy’s witness, reported that he had found evidence of rotation in 75 to 80 percent of the Reed one-piece seals he had examined.'

Rotation of the Reed seals on their shafts proved highly injurious to the seals; indeed, ultimately rotation destroyed the seals. Reed recognized this fact early and, in order to minimize the damage to the seals, in 1965 Reed began polishing its bit shafts. Although this practice reduced the wear on the seals, it also eased rotation.

Neither Murphy nor Hughes sold seals separately from bits. From 1963 through 1969 Murphy (and its predecessor, Reed) sold 19,463 bits containing one-piece seals for a total sales price of $9,745,998. The great majority of the defendant’s sales during this period, however, were of nonsealed bits, which sold for approximately $110 less than the sealed bits. The total premium that Murphy gained by including the infringing one-piece seals in its bits was $2,143,980.

Approximately 31 percent of the bits Murphy sold containing infringing seals were covered under a Hughes patent on the complete drill bit and cutters. In accordance with a license agreement, the defendant paid Hughes a royalty of six percent of the selling price of the entire drill bit. The total royalty amounted to approximately $266,000.

The district court found that Murphy’s one-piece seal infringed the patent in suit, and awarded Hughes damages representing 1.25 percent of the selling price of the bits containing infringing seals. The total amount of the award was $121,824.98.

II. Liability

Murphy argues that the district court should have held, as a matter of law, that there was no infringement of the patent in suit. Murphy bases this contention on two theories; first, that Hughes is estopped from asserting that Murphy’s seal infringed, and second, that even if literal infringement occurred, Murphy is not liable because any infringement was inadvertent, detrimental, and the result of malfunctioning. Neither of these theories has merit in this case.

In 1962, after receiving notice that the patent for its seal had been allowed, Hughes filed to amend the patent. Hughes desired to strike the references to “radially floating” and “sliding” in an effort to assure patent protection of seals “fitted interferingly on the shaft or bearing pin of a rock bit”. The amendment was disallowed for procedural reasons. Hughes thereafter filed for a separate patent. Murphy now contends that in filing for the amendment Hughes made admissions which estop it from asserting that the Murphy seal, which rotates only a small amount on the shaft, is an infringement of the patent in suit. The primary basis for Murphy’s argument is the following statement, made by an attorney for the applicants :

“1) The amendment is needed because Applicants and their assignee-employer have been manufacturing and marketing assemblies and seal rings in accordance with the amended claims, i. e., with the seal ring fitted interferingly on the shaft or bearing pin of a rock bit. As all 10 of the allowed claims presently contain limitations negating such interference fit, they would not protect all structures actually being manufactured.”

We disposed of this estoppel argument five years ago in a case dealing with the same Hughes patent. In Smith Industries International v. Hughes Tool Co., 5 Cir. 1968, 396 F.2d 735, Smith Industries attempted to avoid liability for infringing Hughes patent no. 3,075,781 by contending, as Murphy does here, that admissions made by Hughes’ attorneys when applying for an amendment to the patent in suit estopped it from complaining of infringement. We held in Smith Industries that the Hughes’ admissions established only that its patent did not cover “an ‘interference fit’ so tight as to anchor the seal to the shaft and prevent it from independent rotation”. Id. at 739. Hughes’ admissions did not speak to an “ ‘interference fit,’ where the inner diameter of the seal is smaller than the outer diameter of the shaft, with some independent rotation of the seal possible.” This holding was echoed by the findings of the district court in the instant ease.

There is no question but that Reed’s one-piece seals were not anchored to the shaft in such a manner that rotation was prevented. The evidence conclusively established that rotation of the Murphy seals on the shaft was the rule, not the exception; the two witnesses at trial who had studied the matter agreed that at least 75 percent of the Reed seals examined after use in a drill bit in the field showed signs of rotation. Thus, as in Smith Industries, we hold that Hughes is not estopped from claiming an infringement of its patent.

This Court stated in Smith Industries that the rotation of Smith’s seals on the shaft was “critical” to the question of infringement. 396 F.2d at 740. If the seal had not rotated, it would not have infringed. Like the Smith seal, the Reed one-piece seal is substantially identical to the Hughes seal in appearance and function. Infringement, therefore, is largely a question of rotation. Murphy does not strenuously contest on appeal the district court’s findings that its seals rotated and thus literally infringed the patent in suit. Rather, Murphy maintains that because any rotation of its seal was unintended, yielded no benefit, and in fact was detrimental to the seal and consequently to the bit, literal infringement should not carry with it liability.

We recognize that there may be times where literal infringement should be overlooked. This is not an instance, however, where the allegedly infringing device only occasionally strays across the patent boundary. See Pratt v. United States, 1942, 43 F.Supp. 461, 476, 95 Ct.Cl. 608. Rotation was a fact; it was “typical” of field operation. Nor is this an instance where what is literally wrong is too trifling to justify judicial intervention. See Condenser Corp. v. Mieamold Radio Corp., 2 Cir. 1944, 145 F.2d 878, 880. There was, in the early 1960’s, no way to seal bearing bits without some rotation of the seal on the shaft. Indeed, Reed discovered that it must accept rotation, and, to reduce seal wear, Reed polished the steel shafts of its commercial sealed bearing bits, thereby reducing friction and actually facilitating rotation. But regardless of Reed’s concession to rotation, the fact that an infringer has attempted to avoid infringement and failed does not alter his basic liability. He has unlawfully deprived the patent holder of the fruits of his invention, and he must make compensation. That the infringer cannot easily accomplish the same ends as the patentee without infringement, of course is a reflection of the value of the patent. Whether or not Reed desired or intended that its seal rotate, therefor, is irrelevant.

Murphy’s argument that because rotation is detrimental to its seal the infringement should be ignored is also without substance. To establish liability for patent infringement it is not necessary to show the benefit to the patented device of each of the points of similarity between it and the infringing device. It is enough that “the two devices do substantially the same work in substantially the same way and accomplish the same result”. Stearns-Roger Manufacturing Co. v. Ruth, 10 Cir. 1932, 62 F.2d 442, 448.

III. Damages

The defendant sold 19,463 bits containing infringing seals. During the period that the defendant was manufacturing and selling these bits, 1963-1969, the defendant continued to sell bits, otherwise the same, without seals for a lower price. The parties stipulated below that the total premium received for the presence of the infringing seals in the bits was $2,143,980. Of the premium, $163,-834 represented profit. The bits sold for a total price of $9,745,998, of which $1,469,903 was profit. The crucial question with regard to damages on appeal concerns the proper measure of sales and profit. Did the plaintiff suffer damages from the loss of the premium or from the loss of the total price of the bits?

Arguing that the total price of the bits is the proper standard, Hughes employs a variation of the “entire market” rule. Under this rule, where the patented feature, although a small part of an article, gives the article its entire commercial value, the value of the entire article may be considered in computing damages. See Garretson v. Clark, 1884, 111 U.S. 120, 121, 4 S.Ct. 291, 28 L.Ed. 371; Electric Pipe Line, Inc. v. Fluid Systems, Inc., 2 Cir. 1957, 250 F.2d 697, 700; National Rejectors, Inc. v. A.B.T. Manufacturing Corp., 7 Cir. 1951, 188 F.2d 706, 709, cert. denied, 342 U.S. 828, 72 S.Ct. 51, 96 L.Ed. 626. Hughes concedes that the seals did not provide the entire commercial value of the bits, but argues that the seals were the “motivating cause” of the purchase, that the seals “induced” the purchase. Thus, Hughes insists, had the purchasers not been able to obtain sealed bits from the defendant, they would have obtained sealed bits from the other manufacturers in the industry, and Hughes would have gotten its share of the sales.

Superficially, Hughes’ argument has appeal. Whether or not the article would have some commercial usefulness without the patented feature is irrelevant where it is clear that the patentee would have made the sale of the article had not the defendant infringed. See Graham v. Jeoffroy Manufacturing, Inc., 5 Cir. 1958, 253 F.2d 72, cert. denied, 358 U.S. 817, 79 S.Ct. 28, 3 L.Ed.2d 59. But where the article has commercial value independent of the patented feature, establishing that the infringer would not otherwise have made the sale of the article becomes particularly difficult. This problem is especially severe where, as here, the defendant sold substantially the same article, minus the patented feature, at a discount. We cannot assume that those purchasers who bought sealed bits from the defendant for a premium would have bought sealed bits from the plaintiff (at a premium) rather than buying unsealed bits at a lower price from the defendant. Certainly, as the district court observed, other factors such as “price reliability, versatility, service after sale, [and] company reputation” might have influenced purchasers. And we must agree with the district court that the evidence is lacking that such factors did not play a role. The question whether the defendant would have made all or some of the sales of bits without the seals is one of fact, and the burden of proof was on the plaintiff to show that it would not have. We do not find that the district court was clearly erroneous in its finding that the plaintiffs failed to meet this burden. Thus, we hold that the district court properly limited damages to the seals.

We turn to the question of the proper measure of damages. Hughes contends that it should have been awarded lost profits on that percentage of the defendant’s sales which, by market share analysis, the plaintiff could expect to have gained. But for the defendant’s infringement, Hughes argues, the defendant’s sales of sealed bits would have been made by the remaining firms in the sealed-bits industry in the proportion their sales bore to those of their competitors, except the defendant. Based on its share of the sealed-bits market, Hughes share of the defendant’s profits would have been $138,654.

In order to recover lost profits in a patent infringement action the patentee must prove that “in all reasonable probability, the Patent Owner would have made the sales which the Infringer has made”. Livesay Window Co. v. Livesay Industries, Inc., 5 Cir. 1958, 251 F.2d 469, 471. Although the patentee need not establish lost profits with scientific accuracy, neither may lost profits be arrived at by conjecture. See Electric Pipe Line, Inc. v. Fluid Systems, Inc., 2 Cir. 1957, 250 F.2d 697, 699. The district court here found that the plaintiff “failed to demonstrate with ‘reasonable probability’ what portion of defendant’s infringing sales it would have made”. We do not view this finding as clearly erroneous.

Whether proof of market shares may ever be sufficient to pass the “reasonable probability” test for damages is an interesting question; we reserve it for future consideration. In this instance the market itself is inadequately defined. Hughes assumes, but does not prove, that the proper market for consideration is the market for sealed bits. Hughes did not satisfy the district court, however, and does not satisfy us, that had the defendant’s customers not been able to purchase sealed bits from the defendant they would nevertheless have purchased sealed bits from another company. As we have stated, we cannot assume that the purchasers would not have substituted unsealed bits (at a discount) from the same manufacturer for sealed bits (at a premium) from another. Thus, we are left without anchor. Without some firm basis for determining the relevant market, we cannot explore further the merits of the market-share contention. And with no definite market, clearly the variables are too many and the speculative nature of lost profits too great to form a basis for recovery. .

When actual damages are not proved, the plaintiff is entitled to a “reasonable royalty”. See Wallace & Tiernan Co. v. City of Syracuse, 2 Cir. 1930, 45 F.2d 693; 35 U.S.C. § 284. In determining a reasonable royalty, the trial court attempted to discover “what a manufacturer desiring to use the patented device would be willing to pay as a royalty for its use”. Randolph Laboratories, Inc. v. Specialties Development Corp., 3 Cir. 1954, 213 F.2d 873, 875, cert. denied, 348 U.S. 861, 75 S.Ct. 91, 99 L.Ed. 678. See also Faulkner v. Gibbs, 9 Cir. 1952, 199 F.2d 635, 639; Reynolds Spring Co. v. L. A. Young Industries, Inc., 6 Cir. 1939, 101 F.2d 257, 261. In effect, the court adopted the fiction that the parties negotiated for a license. The court assumed that there was a “willing seller” and a “willing buyer”. Georgia-Pacific Corp. v. United States Plywood-Champion Papers, Inc., 2 Cir. 1971, 446 F.2d 295, 296, cert. denied, 404 U.S. 870, 92 S.Ct. 105, 30 L.Ed.2d 114. Employing this standard, the district court found that, had the parties negotiated for a license in 1963 for the patented seal, they would have agreed on a royalty amounting to 1.25 percent of the gross sales price of all bits carrying the seal.

What is a reasonable royalty is a question of fact. Faulkner v. Gibbs, supra, 199 F.2d at 639; United States Frumentum Co. v. Lauhoff, 6 Cir. 1914, 216 F. 610, 625. And the trial court’s determination must be upheld unless clearly erroneous. See F.R.Civ.P. 52(a). We are unable to say that the district court’s award failed to meet this test. Before 1963 the defendant had paid a royalty of less than one percent of the sales price of a drill bit for use of a patent covering a device—a nozzle—to be included in the bit. There is little reason to suspect that to gain use of the one-piece seal Reed would have departed from this practice of paying a minimum royalty for less than a complete drill bit.

Hughes points to evidence adduced at trial that seals may increase the life of drill bits two to five times, and that the search for an effective seal had continued unsuccessfully for 40 years until the development of the Hughes seal. But the district court' found, supported by the evidence, that the non-infringing Reed two-piece seal was available as a viable alternative. To be sure, the two-piece seal was less efficient than the one-piece seal and cost more to manufacture and install. Moreover, the two-piece seal was never put into actual production. Nevertheless, Reed’s two-piece seals were marketable; Reed sold approximately 40 bits containing the two-piece seals made in its research department. The existence of a non-infringing alternative reduces the value of the patent and thus the damages from infringement. See Union Carbide Corp. v. Graver Tank & Manufacturing Co., 7 Cir. 1960, 282 F.2d 653, 670-671, cert. denied, 365 U.S. 812, 81 S.Ct. 692, 5 L.Ed.2d 691; Columbia Wire Co. v. Kokomo Steel & Wire Co., 7 Cir. 1911, 194 F. 108, 110. We agree with the district court that the availability of the two-piece seal would have enhanced the defendant’s bargaining position in license negotiations with Hughes in 1963.

An examination of the award from the perspective of the premium received for the seals reinforces our belief that the district court’s determination that the award represents a reasonable royalty is not clearly erroneous. The damages awarded by the trial court, $121,824.98, equal 5.68 percent of the premium, $2,143,980, the defendant gained by including the patented seals in its drill bits. The royalty awarded by the district court, therefore, approaches the six percent royalty the defendant paid Hughes from 1960 for use of the design of a complete drill bit. And again, the availability of the noninfringing two-piece seal diminishes damages payable for infringement. Finally, it should be noted that the six percent royalty was on the total selling price of the bits, including the premium. Consequently, the 5.68 percent royalty on the selling price of the seal awarded by the court is in addition to the six percent that Hughes has already received on approximately 31 percent of the defendant’s bits which contained infringing seals. In short, we find that the district court’s award was eminently fair.

Affirmed.

CLARK, Circuit Judge

(concurring in part and dissenting in part):

I concur in the affirmance of the district court’s finding that the defendant’s predecessor, Reed, infringed Hughes’ patent for drill bit seals. However, I respectfully dissent from the affirmance of the district court’s damage award.

The trials of liability and of damages in this case were separated by over one year and three months. On April 2, 1971 following discovery and a full hearing, the district court made extensive written findings as to liability. No judgment was then entered. Instead, the parties proceeded with an accounting and submitted the damage issue on depositions and a stipulation, with the expressed but unfulfilled hope that the final damages decision might obviate this appeal. The court’s memorandum opinion reasoning its resolution of the damage issue was not entered until July 14, 1972. In several significant respects this memorandum is at variance with the prior findings. The original findings are more compatible with the record evidence and with logic. The majority opinion states the crucial issue on damages depends upon whether the patented seal which Reed infringed gave the drilling bits in which it was installed their entire commercial value. Hughes, it says, must lose this issue on a failure-of-proof basis, largely because unsealed drilling bits have substantial commercial value. This determination does not turn on proof of market shares but on Hughes’ inability to satisfy the trial court that purchasers of sealed bits would not have bought unsealed bits from Reed in preference to buying sealed bits from one of the other three competitors. This reasoning targets my disagreement.

The problem is one that may be better understood by moving the reader’s attention from the mechancially esoteric field of drilling bits to the more commonplace markets for television sets. The question would then be posed as follows. Assume four companies manufacture all television receivers. Assume further that three of the companies offer both black and white and color sets and that the fourth infringes a patent of the third in order to compete in the color set market. Assume the company whose patent is infringed proves infringement. Must it also prove that customers who paid the premium over the price of a black and white set to buy an infringing color set would not have bought a black and white set from the infringer rather than purchasing a color set of another make? Of course not. The reason such proof is unnecessary is because of the clearly separate and distinct markets involved. The same is true here. Sealed bits cost more. Sealed bits do more. Drillers who want sealed bits do not want unsealed bits. Proof of the divided markets for these two products was all that should have been required of the patent holder. The impossible burden ascribed in this case denies to the inventor the fruit of its exclusive rights in the patented seal it discovered.

Both the district court’s damage memorandum and the damage portion of this court’s opinion conclude that Hughes adduced insufficient evidence to prove that the sole cause of Reed’s sealed bit sales was the presence of the infringing seal. Both courts surmised that other factors such as price, reliability, versatility, service after the sale, company reputation, etc. “might” have been at work in these sales. Such conjecture seems to me to be clearly contrary to the following findings relating to infringement liability:

Following their introduction in 1960, sealed bearing bits embodying the invention of the patent in suit have been extremely successful in reducing the problem of bearing wear. The effective life of these bits, particularly in adverse drilling areas such as West Texas and Oklahoma, is often two to three, or even five, times longer than that of similar “slush lubricated” bits drilling under the same conditions. In less dramatic situations, the driller can expect at least a thirty to fifty percent increase in overall effectiveness. In instances, one sealed bearing bit will replace several of the previous conventional bits.
Such increases in bit life are of critical economic importance in the drilling of wells. When the life of a rock bit has expired, the entire string of drill pipe must be raised, uncoupled and stacked; a new bit substituted; and the string relowered into the hole. Such “round trips” of the drill string require substantial time . and effort of the drilling crew, during which no actual progress is made in the drilling operation. In typical wells of two to five miles in depth, 8 hours, to a day or more may be required to change a bit. Since the operating cost of a drill rig—ranging upwards from $2,000.00 per day depending on the size of the rig—continues regardless of whether the bit is drilling or en-route in a round trip, the expense of replacing a worn bit is substantial. Round trips are expensive, sometimes hazardous to the equipment and crew, and nonproductive to the driller.
The introduction of the sealed bearing bit in 1960 has resulted in longer bit life and the reduction of round trips necessary to change bits. Wells are being drilled in less time, and at less cost. Wells not previously drilled because of prohibitive economic considerations, are now being drilled.
After Hughes Tool Company began testing its sealed bearing bits in the field, other rock bit manufacturers instituted specific programs to develop a competitive product. Smith Tool Company began in 1958. Security Engineering Division of Dresser Industries started in 1959. The defendant Reed’s interest in seals was also reawakened.
Reed’s concern over the competition from the new Hughes sealed bearing bits grew, and field testing of new designs was stepped up; in May of 1960, Reed’s research department wrote: “Please try to run all of these grease seal experiments as quickly as you can. I believe it is only a matter of time before our worthy competitor perfects their grease seal to a point we will be virtually out of the insert bit business.”
Hughes has sustained irreparable injury as a result of defendant’s infringement, and will continue to sustain such injury unless defendant is enjoined from making, using or selling the seals hefe found to infringe.

The record reflects that unsealed drilling bits of the type here involved had been marketed in one form or another since 1909 and continued to be marketed during the entirety of the infringement period here involved. The approximate price of such an unsealed bit was 390 dollars. Sealed bits enjoyed a selling price of 500 dollars. The reason customers were willing to pay this premium for bits with sealed bearing surfaces was that in drilling hard rock formations the longer useful life of the more expensive sealed bit made it a money- and time-saving device. Unsealed bits not only were useful but were preferred for many less demanding drilling applications. It just could not be plainer to me that the market for sealed bits and the market for unsealed bits were separate. This being so, the case was made. Customers desiring thoroughbred horses don’t buy mules. But for Reed’s decision to become an infringer, the market for sealed bits then belonged to Hughes and the other two competitors.

The findings on liability, which have never been modified or reversed, demonstrate that the incorporation of the, infringing seal in 19,463 bits produced by Reed between 1963 and 1969 was the motivating cause of every one of the sealed bit sales which Reed made during this period, because the seals converted Reed’s bits from an unwanted product to one that sold at a premium. No one disputes that there were only four competitors in this field during the period in question—Hughes, Reed and two other companies. The exact shares of the total sealed bit market of each company was stipulated for every relevant period. It is also stipulated that Reed’s sealed bit sales—every one of which incorporated Hughes’ seals—netted Reed a profit of 1,469,903 dollars, and that Hughes’ profits would have been at least equal to the profits made by Reed. Thus Hughes’ losses due to the infringement were shown to be 1,234,565 dollars.

Arguendo, I would advance one other difference with the majority’s damage verdict affirmance. Here again my position does not depend upon an appellate conclusion that trial court findings were clearly erroneous. Rather, it too is premised upon trial court findings which are fully accepted here.

The majority affirms the award to Hughes of a “reasonable royalty”. They find that a token royalty of 1.25% of the total sealed bit price, i. e., six dollars and twenty-five cents for each 500 dollar bit, is reasonable. This is based upon a determination that a 2-piece seal, used on an experimental basis by Reed in 40 bits before infringement began, was a commercially viable alternative to infringing Hughes’ patented seal. This conclusion is contrary to the following findings of the trial court in the liability phase of this litigation:

In the latter half of 1960, Reed began field testing its so-called “two-piece” seals comprised of two metal cores encased in rubber and held in compression in the bit by a separate metal spring. Variations of this design continued to be produced in 1961 and 1962. They were reported to be not competitive. In May of 1961, Reed’s field engineer advised that the Reed sealed bearing bits run in the past four months—“have been very disappointing. I feel that many times we would have done much better on footage, hours and conditions of the dull [bit] had we run a non-grease seal type bit. The Hughes grease seal bits have set the pace and it is a fast one.”
In the latter part of 1962, Reed turned to the “one-piece” seal here accused of infringement. Field testing was initiated; the new bits were found to be competitive; the response from Reed’s field representatives was enthusiastic: “This is the run we’ve been looking for.” Two and a half months later, Reed came out with its first production sealed bearing bit.

Logic further dispels any assumption that a party having perfected a viable non-infringing device which the industry had sought for fifty years would suddenly quit its use of this discovery and substitute an infringing one. I agree with the trial court’s first findings and from them conclude it is entirely implausible that Reed’s 2-piece seal was ever considered a viable alternative even by Reed.

I am so strongly compelled to the conclusion that the damage award here allows a deliberate infringer to pocket profits of one and a half million dollars and, when called to account, to tip the patent owner a paltry 120,000 dollars, that I must dissent.

CLARK, Circuit Judge

(dissenting):

I dissent from the refusal to grant rehearing on the issue of damages for the reasons stated in my dissent to the panel’s opinion.

      . The patent, issued to Hughes Tool Company on January 29, 1963, was held valid by the district court and by courts in earlier litigation. Hughes Tool Co. v. Smith Industries International, W.D.Tex.1966, 284 F.Supp. 908, aff’d, 5 Cir. 1968, 396 F.2d 735.

      . The district court found :

        “13. There are special and difficult problems associated with designing an effective rock bit seal. In the first place, the seal must be small in order to be accommodated in the very limited space available in a rock bit, and to avoid sacrificing the bearing capacity and other structures which occupy such space. Secondly, the seal must be capable of withstanding the adverse environment in which the rock bit operates. Drilling at depths of several miles or more, the bit is subjected to an atmosphere of abrasive fluid at temperatures of up to 340 degrees. Fluid pressures of from 3,000 to 20,000 pounds per square inch, average mechanical loading on the bits of from 30,000 to 75,000 pounds, and rotary motion varying between 30 and 300 revolutions per minute are common.
      14. Under these conditions, the seal must possess a combination of strength and resiliency suitable to permit it to maintain sealing engagement with surfaces on the rotating cutter and bit leg. In operation, these surfaces only rotate with respect to each other, additional complex and rapid movements occur. Because of the inherent looseness of rock bit bearings, and the extreme stresses produced by running on the rough patterned surfaces at the bottom of the hole, the cones are forced into axial, radial, and compound wobbling movements relative to the shaft. Such movements occur with great rapidity. To be effective, the seal must not only follow this erratic motion, it must endure it.
      15. Lastly, the compound movements of the cutters with respect to the shaft cause rapid volumetric changes within the bearing cavities of the bit. These volumetric changes result in abrupt pressure differences between the hot grease inside the bearing cavity and the hot, abrasive drilling fluid on the outside, and produce alternately “pumping” and “suction” forces across the seal. Pressure differences up to 100 psi, occur as rapidly as 1,800 cycles per minute. The seal must continue to function under such hostile conditions.”

      . Insert bits contain teeth made of very hard steel inserted into the steel roller cones.

      . The only difference is that the Hughes seal has a radially corrugated core, while the Reed seal’s core is plain.

      . In 1969, within three months of notice of infringement, the defendant converted all its sealed bits to noninfringing “glued-on” seals, cemented, as the name implies, to the shaft. The defendant does not contend, however, that the process of gluing the seals to the bit shafts was available earlier.

      . Judge Clark in his dissent, infra, p. 931, quotes extensively from findings of the district court which chronicle the importance of the invention of effective rock bit seals. We do not dispute the significance of the seals. Indeed, the seals proved their value in the market place; their presence in Murphy’s bits permitted a price hike of $110, more than 25 percent of the selling price of the bits without seals. But the findings quoted by Judge Clark do not show that the market for sealed bits was independent of the market for unsealed bits, and that, if Murphy had not sold sealed bits, its customers would have bought them from other manufacturers. We rely on the clear finding by the trial court, stated in its opinion, that “there is little evidence in the .record which would reveal whether purchasers of ‘sealed bearing bits’ were motivated solely by a desire for the sealed feature or whether other influences were at work”.

      .
      Year Defendant's Profit Plaintiff's % share of total sealed-bits mkt. (without Defendant) Plaintiff's share of Defendant's Profits
      1963 (last half) $ 1,502 X $ 1,502
      1964 11,034 93.2 10,284
      1965 15,436 98.1 15,143
      1966 473 97.4 461
      1967 26,407 93.9 24,796
      1968 91,515 80.8 73,944
      1969 (1st Qtr.) 17,467 71.7 12,524
      $138,654

      . 35 U.S.C. § 284 provides, in pertinent part:
      “Upon finding for the claimant the court shall award the claimant damages adequate to compensate for the infringement, but in no event less than a reasonable royalty for the use made of the invention by the infringer. . . . ”

      . Judge Clark quotes in his dissent, infra, at p. 933, findings by the district court indicating that the one-piece seal was superior to the two-piece seal. Of course it was. If it were not, Murphy would have put into production the two-piece seal, instead of the one-piece seal. The critical fact, however, is that Murphy sold approximately 40 bits containing two-piece seals. We view this fact as adequate support for the finding of the trial court, stated in its opinion, that the two-piece seal represented a “commercially viable alternative” to the infringing one-piece seal,

      . The arithmetic calculation of lost profits is as follows:


author: PEE CURIAM: WIDENER, Circuit Judge

text:
    SAFEWAY MOVING AND STORAGE CORPORATION, a Virginia corporation, Plaintiff-Appellant, v. AETNA INSURANCE COMPANY, Defendant-Appellee, and United States of America, Intervenor-Appellee.
    No. 73-1719.
    United States Court of Appeals, Fourth Circuit.
    Argued Nov. 9, 1973.
    Decided Feb. 6, 1974.

      Eobert E. Manuel and A. Andrew Giangreco, Alexandria, Va. (Giangreco, Seay & Manuel, Alexandria, Va., on brief), for plaintiff-appellant.
    Norman F. Slenker, Arlington, Va. (Slenker, Brandt & Jennings, Arlington, Va., on brief), for defendant-appellee.
    Before BOEEMAN, Senior Circuit Judge, and WINTEE and WIDENEE, Circuit Judges.
   PEE CURIAM:

Safeway Moving and Storage Corporation (Safeway) was engaged in the moving and storing of household goods, primarily, if not exclusively, for employees of the United States. In 1965, it suffered an extensive fire loss. Ultimately it was determined to be liable to the government for $147,566.69 for the loss of goods owned by government employees. In previous litigation, it recovered $100,-000, the face value of two fire liability policies, for the benefit of the government employees whose property was destroyed in the fire, as well as its attorney’s fees in defending itself in administrative proceedings where the insurers should have provided representation but failed to do so. Safeway Moving & Storage Corp. v. Aetna Insurance Co., 317 F.Supp. 238 (E.D.Va.1970), aff’d, 452 F.2d 79 (4 Cir. 1971). All of the goods were destroyed by the fire in the warehouse; none of the goods was on trucks.

In the litigation before us in this appeal, Safeway sought recovery on a third Aetna policy—one allegedly required as a condition of Safeway’s doing business with the government, the existence of which was claimed to be unknown to Safeway at the time of the earlier litigation. It is a so-called Motor Truck Cargo Policy which insured Safeway against its legal liability for the property of others if damaged or destroyed while in or on trucks, or held in or on a dock, depot or terminal used by Safeway at the location where the fire occurred. Safeway obtained judgment for $10,000 entered upon a general jury verdict, and it appeals, contending principally that it was entitled to greater recovery. The United States was not a party to the instant litigation until plaintiff recovered judgment. When plaintiff recovered judgment, the district court impressed it with a trust for the benefit of the United States, Aetna paid the amount into court, and the United States intervened, but for the limited purpose of protecting the fund in which it had thus acquired an interest.

We see no reversible error and affirm the judgment.

I.

At trial, the principal controversy between the parties revolved around the construction to be placed upon the insurance policy, i. e., whether the policy, in insuring against fire loss of goods in transit, applied to goods in the warehouse or in temporary storage, or whether it applied only to goods on the way to somewhere else with respect to which a bill of lading has been issued.

The pertinent provisions of the policy affording insurance coverage follow:

2. Covering. This policy covers the liability of the Assured as a carrier . for direct loss or damage from [fire and lightning] . on land shipments of . household goods while loaded for shipment on and in transit in or on all vehicles operated by the Assured . . . $10,-000, as respects the contents of any vehicle.
3. Terminal Coverage With Limits. This policy also covers the liability of the Assured . . . while the said goods are unloaded held pending transfer in or on the . . . terminals] 1325 Wilkes Street, Alexandria, Va. . ’Limit of Liability $10,000.-00.

By “Military Traffic Management Agency Endorsement,” the limit of liability for “any loss or damage ... occurring at any one time and place,” was raised to $100,000, except when the loss occurred on a vehicle, in which event the original limit of $10,000 was maintained. However, the endorsement also provided that:

The insured [Safeway] agrees to reimburse the Company [Aetna] for any payment made by the Company on account of any loss or damage resulting in any payment that the Company would not have been obligated to make under the limits and provisions of the policy, except for the agreement contained in this endorsement.

II.

As we view the policy, irrespective of the construction placed upon it with regard to the type of coverage it afforded, plaintiff could recover no more than $10,000. Stated otherwise, in a suit between insured and insurer, Safeway had no right to recover more than the original policy limit of $10,000 for loss by fire at any terminal. This is so because it would be obligated under the provision of the endorsement, previously quoted, to reimburse Aetna for any greater recovery. Of course, in a suit by a third person on the policy, recovery for fire loss at a terminal could exceed $10,-000, depending upon the construction placed on the policy with respect to the type of coverage the policy afforded and the nature of the loss. But the suit here was only by Safeway, the insured; and the third person, the United States, intervened only after judgment solely to protect its interest in the res.

III.

Thus, we are impelled to the conclusion that Safeway has in fact recovered the most that it could possibly recover under the policy, irrespective of any errors on the part of the district court with regard to the theory of recovery, the construction to be placed on the policy, or in the conduct of the trial. Safeway, therefore, has nothing to complain about with regard to coverage. Aetna, of course, could have raised issues about the meaning of the policy, because, if the position it took at trial was well founded, it would have been entitled to judgment. But Aetna has not appealed; it paid the $10,000 proceeds of the policy into the registry of the district'court after judgment; and it expressly disclaims any request for relief on its part other than affirmance of the judgment and termination of the litigation.

IV.

We see no merit in Safeway’s other contentions. Neither the policy nor the endorsement obligated Aetna to defend Safeway in any suit or administrative proceeding for damages against the latter by any third person. Safeway thus has no claim for damages for breach of any agreement to defend.

In our view, the district court properly allowed interest only from the date of judgment. Since Safeway recovered all that was due it under the policy, we agree that it had no basis to claim loss of earnings.

Affirmed.

WIDENER, Circuit Judge

(dissenting) :

While I may be in general agreement with the reasoning of the majority, in that the net money result to Safeway is the same (not considering attorneys’ fees in this or the previous case), either on affirmance or after remand and an assumed successful prosecution of the action, I am of opinion we have not taken the proper action in affirming. As things now stand, Safeway will be left owing the United States. Had it been allowed to prosecute its action to a conelusion, assuming success, it would have been left owing Aetna the same amount. This is a business alternative open to Safeway of which I do not believe it should be deprived. I would remand for a new trial on proper instructions with a special verdict as to the issues.


author: JOHN W. PECK, Circuit Judge.

text:
    Everett NOACK, Plaintiff-Appellee, v. AMERICAN STEAMSHIP COMPANY, Defendant-Appellant,
    No. 73-1326.
    United States Court of Appeals, Sixth Circuit.
    Argued Oct. 9, 1973.
    Decided Feb. 1, 1974.

      William S. Busch, New York City, for defendant-appellant; Cadwalader, Wickersham & Taft, New York City, Marshall, Melhoim, Bloch & Belt, Toledo, Ohio, on brief; John A. Sullivan, New York City, Arnold F. Bunge, Jr., Toledo, Ohio, of counsel.
    Merritt W. Green, II, Green & Lackey, Toledo, Ohio, on brief, for plaintiff-appellee.
    Before PECK and McCREE, Circuit Judges, and ALLEN, District Judge.

       Honorable Charles M. Allen, United States District Judge for the Western District of Kentucky, sitting by designation.

   JOHN W. PECK, Circuit Judge.

In this action charging negligence under the Jones Act, 46 U.S.C. § 688, and unseaworthiness under the General Maritime Law, the seaman plaintiff sought damages for injuries that he suffered when he slipped into a deck opening while helping to clean out the bilges in the lower engine room of the defendant-shipowner’s vessel. The jury returned a verdict in the amount of $150,000 which was reduced by half because the jury found that the plaintiff had been fifty percent contributorily negligent. This appeal by the defendant-shipowner followed.

Defendant-appellant owned and operated a Great Lakes self-unloading bulk cargo vessel. Due to the cold and ice, Great Lakes vessels do not sail during the winter months and at the time of the accident the vessel had been laid up for the winter and was being fitted out for the 1971 sailing season. The plaintiff-appellee, a veteran of 25 years service with the appellant, was employed as a “wiper” aboard the vessel, which job includes wiping up grease and oil from the decks of the vessel.

The threshold question in this case is whether the appellee is a seaman within the meaning of the Jones Act. The test to determine that question was set forth in Nelson v. Greene Line Steamers, Inc., 255 F.2d 31 (6th Cir. 1958), cert. denied, 358 U.S. 867, 79 S.Ct. 100, 3 L.Ed.2d 100, and requires that (1) the vessel on which the claimant is employed be in navigation, (2) the claimant have a more or less permanent connection with the vessel, and (3) the claimant be aboard primarily to aid navigation. Appellant maintains that the first element of the test should have been determined as a matter of law and should not have been presented to the jury as a question of fact. As to the third element, appellant assumes the vessel was not in navigation as a matter of law and argues the impossibility of aiding the navigation of such a vessel. Since we conclude that the question of “in navigation” is properly one of fact and that the jury’s findings are not clearly erroneous, we need not further consider this latter claim.

To support its contention that the first element is a question of law, the appellant relies on Antus v. Interocean Steamship Co., 108 F.2d 185 (6th Cir. 1939); Desper v. Starved Rock Ferry Co., 342 U.S. 187, 72 S.Ct. 216, 96 L.Ed. 205 (1952); and Nelson v. Greene Line Steamers, supra. Antus involved a situation similar to that before us in which we held that as a matter of law an employee working aboard a ship during a winter lay-up period was not a seaman. However, Antus was not the last word on the subject. Twelve years later, in Desper, which involved sight-seeing boats which were laid up during the non-summer months, the Supreme Court held that a boat operator who was hired to overhaul the boats during the spring was not, as a matter of law, a seaman within the purview of the Jones Act and cited Antus with approval. However the Court interestingly pointed out that:

“The many cases turning upon the question of whether an individual was a ‘seaman’ demonstrate that the matter depends largely on the facts of the particular case and the activity in which he was engaged at the time of the injury.” 342 U.S. at 190, 72 S.Ct. at 218.

It is the later case of Butler v. White-man, 356 U.S. 271, 78 S.Ct. 734, 2 L.Ed.2d 754 (1958), that we find dispositive. In Butler, the owner of a wharf on the Mississippi River moored a barge to the wharf and lashed a tug to the barge. For some ten months the tug had been lashed and at the time of the accident was undergoing rehabilitation preparatory to Coast Guard inspection. During this period the ship had neither captain nor crew. The decedent had been employed as a laborer on an hourly wage scale and on the morning of the accident had been engaged in cleaning the tug’s boiler. Decedent’s death was attributed to drowning although there were no witnesses to either the death or the circumstances leading to the death. The District Court directed a verdict for the defendant-shipowner and the Court of Appeals affirmed on the grounds that the vessel was a dead ship, the decedent was not a seaman or member of the crew and there was no evidence on which negligence could be predicated. The Supreme Court remanded the case for trial on the grounds that there was an- evidentiary basis for jury findings as to whether the tug was in navigation, whether the decedent was a seaman and whether employer negligence was a factor in the death.

By comparison, the facts of the instant case present a much stronger case for jury submission than did the Butler case. For example, although Butler was a casual employee, a laborer performing odd jobs around the wharf, Noack was a seaman with appropriate papers and union membership who had been permanently employed by the appellant-shipowner for over twenty-five years and who worked only on the vessel. In this regard, it is noted that Noack had been hired by the appellant through the seaman’s union as a wiper for the 1971 season and that barring the injury he would have worked as a wiper during that upcoming season. Also, in Butler the tug had been undergoing rehabilitation and had been inoperable for at least ten months, while here the vessel had stopped operating only because of the ice and cold condition and would resume operations when the ice thawed. In addition, the work that Noack was performing at the time of the injury was seaman’s work of the type that is often accomplished at sea.

In the case of Nelson v. Greene Line, supra, decided one month after Butler we decided a case involving an excursion steamer which was tied up for winter at a wharf in Cincinnati. Nelson, a regular employee during the excursion season, was employed during this winter period to make repairs and to get the steamer ready for the coming season. The District Court found as a matter of fact that the steamer was not in navigation and that the injured plaintiff Nelson was not a seaman within the Jones Act. Citing Antus and Desper, but not Butler, we concluded that it is the extraordinary ease where the evidence permits only one conclusion concerning the claimant’s status as a seaman. In Nelson, we affirmed the District Court’s findings as not being clearly erroneous.

From our review, we conclude that each case must be evaluated on its own facts, thus leaving to the developing case law to draw the determining criteria into sharper focus. We recognize that while courts in the past have applied a technical, narrow view of what constitutes a vessel in navigation or the status of a seaman, today the courts are applying a broad view consistent with the trend to provide a liberal interpretation to remedial legislation such as the Jones Act. See, e. g., Gianfala v. Texas Co., 350 U.S. 879, 76 S.Ct. 141, 100 L.Ed. 775 (1955); Senko v. La Crosse Dredging Corp., 352 U.S. 370, 77 S.Ct. 415, 1 L.Ed.2d 404 (1956); Grimes v. Raymond Concrete Pile Co., 356 U.S. 252, 78 S.Ct. 687, 2 L.Ed.2d 737 (1958); Keymon v. Tennessee Towing Co., 296 F.2d 785 (6th Cir. 1961).

It is of course true that in the strict sense the lay-up of this Great Lakes vessel effectively took the vessel out of navigation. However, it is also true that the routine of lay-up had been established because the vessels could not operate in the ice and cold. Barring such weather obstacles to a year-round sailing season, it appears that many tasks typically accomplished during the lay-up period could well be accomplished at sea without interruption to regular scheduling for major repairs. Thus under the circumstances it seems clear that the lay-up and fit-out activities are complete parts of the total Great Lakes sailing season. Crew members perform the lay-up and fit-out tasks under the same labor contract that applies during the sailing season. The same discipline and functional management also applies. In view of these facts, we cannot say that there was clear error in the District Court’s finding that the plaintiff was properly entitled to the protection afforded by the Jones Act and the general laws of admiralty.

As a second issue, the appellant contends that the District Court’s instructions to the jury were erroneous, particularly urging that the instructions as to the vessel’s status were contrary to law. However, as previously indicated, under the facts presented we conclude that the Court properly left to the jury the question as to whether the vessel was in navigation. As a second point, appellant claims that the District Court failed to properly specify the criteria which the jury was to use in determining the vessel’s status as well as in measuring the appellant’s duties under the Jones Act at the time of the accident. We note, however, that defense counsel’s only objection to the relevant portion of the charge was, “Defendant will object to that part of the charge which indicated that fitting out may be an act of navigation.” This objection not only does not meet the requirements for specificity as stated in Rule 51, Fed.R.Civ.P., but is not germane to the issue raised here. Without a proper objection before the trial court, we may not here consider the matter.

Appellant also contends that the Court improperly instructed as to Noack’s contributory negligence. Specifically, appellant claims that “. if there were oil or grease or mud on the deck which made the deck unsafe to walk on, and if the plaintiff [Noack] knew about such conditions, it was his independent duty as a wiper to clean those conditions up, and that if his injuries were occasioned by his failure to perform his duties as a wiper, he cannot properly recover against [appellant].” Citing Reinhart v. United States, 457 F.2d 151 (9th Cir.' 1972) as authority, appellant maintains that a seaman may not recover against his employer for injuries occasioned by his own neglect of some independent duty arising out of the employment relationship, such as here, where his duties as a wiper were to keep the decks clean and free of slippery conditions. In this regard, the appellant concedes that such a proposition is an exception to the general rule in maritime personal injury cases that contributory negligence is not a complete bar to the injured seaman’s recovery against his shipowner employer.

To respond to this contention, we first turn to the facts of this case. As mentioned previously, Noack and another seaman, Chapman, were cleaning the bilges at the time of the accident. To explain the task of cleaning the bilges, testimony at the trial indicated that there is a 4-foot space between the bottom of the ship and a deck area. The deck area is essentially composed of steel plates. Over a period of time the area collects such debris as dirt, grease and oil. A bilge pump is located at one end of the area and pumps out any accumulated liquid. At intermittent periods, someone is required to go into the bilge area and scrape the solid accumulations, put it in pails and dispose of the matter. Chapman did the scraping and filled the pails which were passed to Noack who in turn emptied them into the cargo hold area. Previously the men had removed one deck plate in Noack’s pathway and the accident occurred when he slipped on the deck and fell into the opening created by the plate removal. The testimony of both Chapman and Noack indicated that the deck area was more slippery than normal, with the apparent reason for the condition being the spillage from the pails as they were being carried to the hold area.

We conclude that the appellant’s arguments regarding contributory negligence are not well taken. Evidence was introduced at trial from which the jury could have reasonably concluded that at the time of Noack’s injuries his duties did not require him to clean up the grease and other foreign substances. For example, Chapman testified that he would respond to specific orders but would not usually self-initiate work. Consequently, he testified that although he observed the accumulations on the deck, he would not interrupt his work in the bilge area to clean up the floor in the absence of a specific order to that effect. The record does not reveal that this deviated from the usual practice or that a greater degree of care was expected of the appellee.

In addition, the appellant had submitted special interrogatories to which the jury responded that Noack’s injuries were not caused by his’ failure to perform his duties as a wiper. We also note that evidence was introduced that the deck plates were worn smooth and were at the time of the accident slippery. On the other hand, appellant’s counsel points out that the open hole into which Noack fell was dangerously close to the pathway he used in emptying the pails and that Chapman’s testimony clearly indicated that he had no reason for not replacing the deck plate when he finished his work in that area. Of course, these considerations were undoubtedly a factor that led to the jury’s finding that Noaek was fifty percent contributorily negligent.

Appellant also contends that the jury’s findings that the injuries were caused by Noack’s failure to properly perform his duties as a wiper and that the vessel was in navigation was against the weight of the evidence. This contention is without merit.

Appellant’s final contention regards the testimony and calculations of appellee’s economic expert. It claims that the expert erroneously calculated the loss of future earnings by applying labor contract wage rates to the average number of days which Noack worked over the past five year period. Citing our recent decisions in what are referred to as the Cedarville cases (United States Steel Corp. v. Lamp, 436 F.2d 1256 (6th Cir. 1970), cert. denied, 402 U.S. 987, 91 S.Ct. 1649, 29 L.Ed.2d 153, and United States Steel Corp. v. Fuhrman, 479 F.2d 489 (6th Cir. 1973), cert. denied, 414 U.S. 859, 94 S.Ct. 71, 38 L.Ed.2d 110 (1973)), appellant claims that not only is the use of a labor contract to achieve such computations prohibited but also that the record of past earnings must be the benchmark to calculate any loss of future earnings.

The governing principles establishing future earnings capacity were stated in Cedarville, 436 F.2d at 1270, wherein we stated:

“The claimant must first establish his normal annual earning capacity, which, in the absence of evidence of special circumstances indicating an ability to rise beyond his prior level of employment, would consist of a projection of claimant’s earnings history, taking into account all available data relevant to wage adjustment.”

We conclude that the District Court did not erroneously apply these principles. Although our discussion in Cedarville impliedly acknowledged that earnings may not always increase from year to year, we were not treating with the unusual situation here presented wherein a seaman was- hired at a lower job rating and pay scale than he had held during his previous years of employment with the same company, and the record does not disclose an ability to rise above that lower level. Consequently, having little empirical data from which it could establish a normal earning capacity at the new level, the trial court in the present case properly allowed testimony using current wage earnings information and projections therefrom. In addition, we do not find that the figures used were clearly erroneous.

All other contentions, we conclude, are without merit and accordingly the judgment of the District Court is affirmed.

      . In response to appellant’s special interrogatory, the jury found that the vessel was in navigation.

      . The appellee was doing such work at the time of the accident.