Sinclair Refining Co. v. Jenkins Petroleum Process Co.

delivered the opinion of the Court.

A bill of discovery in aid of an action at law was dis^ missed by the ^District Court, 56 F., (2d) 272 , but upheld upon appeal by the Circuit Court of Appeals. 62 F. (2d) 663 . The question is whether the bill is good upon its face.

The respondent, Jenkins Petroléum Process Company, loaned to the petitioner, Sinclair Refining Company, then known as the Cudahy Refining Company, an experimental still for cracking petroleum oils to produce gasoline. By written agreement, any improvements developed as the result of the work of the petitioner’s engineers and experts in making themselves familiar with the Jenkins apparatus or process were to belong to the respondent. The petitioner, or its predecessor, undertook, so far as it was able, to cause its employees to execute applications for patents in the United States and elsewhere in order to protect such improvements, and to assign the applications to the petitioner together with the improvements affected thereby.

In January, 1921, the respondent filed a bill in equity for specific performance. Isom, an employee of the peti

The action at law is now at issue, and the plaintiff prays for a discovery. It alleges in its bill that the evidence of the facts to be discovered is contained in voluminous books and documents which could not be inspected or proved upon a trial at law for damages without confusion and delay. Discovery is demanded as to the number of cracking stills constructed by the defendant under the Isom patent; as to the extent and time of operation; and as to the amount of gasoline and other petroleum products yielded thereby, with an inspection of the relevant designs and drawings. The District Court granted a motion to dismiss the bill, placing its decision upon two grounds, (1) that a bill of discovery will not lie when the facts to be discovered relate to damages only, and (2) that the value of the patents has no relation to the sales of the patented device, and that evidence of such sales

Help for the solution of problems of this order is not to be looked for in restrictive formulas. Procedure must have the capacity of flexible adjustment to ¡changing groups of facts. The law of discovery has been, invested at times with unnecessary mystery. There are few fields where considerations of practical convenience should play a larger role. The rationale of the remedy, when used as an auxiliary process in aid of trials at law, is simplicity itself. At times, cases will not be proved, or will be proved clumsily or wastefully, if the litigant is not permitted to gather his evidence in advance. When this necessity is made out with reasonable certainty, a bill in equity is maintainable to give him what he needs. Equity Rule 58. There were other reasons in times past, when parties were not permitted to be witnesses, and when there was no compulsory process for the production of books or documents. Carpenter v. Winn, 221 U.S. 533 ; Pressed Steel Car Co. v. Union Pacific R. Co., 240 Fed. 135 , 136. Today the remedy survives, chiefly, if not wholly, to give facility to proof. In the practice of many states there is a summary substitute by an order for examination before trial or for the inspection of books and papers. The substitute has never found its way into the procedure of the federal courts. Ex parte Fisk, 113 U.S. 713 . The remedy in those courts is still by bill in equity as in days before the codes. Colgate v. Compagnie Francaise, 23 Fed. 82 ; Pressed Steel Car Co. v. Union Pacific R. Co., supra.

To state the function of the remedy is to give the password to its' use. There are times when a suit is triable in separate parts, one affecting the right or liability, and the other affecting the measure of recovery. In suits of

A different situation is presented where the action is at law and is triable by judge and jury. There interlocutory judgments are unknown, at all events where the defendant has answered generally and not by special plea, and the verdict establishing the right establishes at the same time the amount tó be recovered. The answer being general, the case according to common la--.- practice must be tried as a unit and nqt broken into parts. In such circumstances damages may be proved with the aid of a discovery, if the complication of accounts or other practical impediments make it necessary that the evidence be sifted in advance. Pape v. Lister, L.R. 6 Q.B. 242; Saunders v. Jones, L.R. 7 Ch. Div. 435, 452; Elkin v.

Munger v. Firestone Tire & Rubber Co., 261 Fed. 921 , is cited by the petitioner as supporting a general rule that the necessity of proving damáges is never a sufficient ground for a discovery in equity. If confined to its special facts, the decision may not be wrong. Very likely the bill was insufficient to make out a prima facie showing of right or liability. If the case stands for more than that, as the opinion indicates it does, it does not have our approval. The point is made in it that damages are not párt of the “ issues ” in a lawsuit, and that the interrogatories to be answered by a defendant under a bill of discovery are to be directed to the issues and not to anything else. There is indeed a rule of common law pleading that the statement of general damages in the ad damnum clause of a complaint is not an issuable allegation. McClelland v. Climax Hosiery Mills, 252 N.Y. 347 , 356; 169 N.E. 605 ; Howell v. Bennett, 74 Hun 555 , 558; 26 N.Y.S. 627 . This does not mean, however, that the plaintiff will not have to prove his damages if he wishes to get more than a nominal verdict. Quite to the con

The petitioner is not helped by our decision in United States v. Bitter Root Development Co., 200 U.S. 451 , 472. The complainant in that suit did not seek a discovery in aid of an action at law for the recovery, of damages. The suit, was for general relief as well as for discovery, the prayer for discovery being merely incidental. The complainant was attempting to transfer to a court of equity the control of a suit that was triable at law. Cf. Colgate v. Compagnie Francaise, supra, p. 85 ; Whittemore v. Patten, 81 Fed. 527 ; Wigram, supra, § 10. The incident fell with the fall of the principal.

Loose v. Bellows Falls Pulp Plaster Co., supra, also cited by the petitioner, has a dictum approving the decision in Munger v. Firestone Tire & Rubber Co., supra, but the point was not involved, for the plaintiff was not asking for discovery as an auxiliary remedy in furtherance of his remedy at law, but was attempting, like the complainant in the Bitter Root cáse, to subject the entire suit to the jurisdiction of equity

To hold that the plaintiff in an action at law may have discovery of damages is not to say that the remedy will be-granted as of-course, or that protection will not be given to his adversary against impertinent intrusion. Wigram, supra, § 115. The court may decline to open

■The decree under review protects the petitioner with sedulous forethought against an oppressive inquisition. Only the most general facts are to be discovered in advance- of trial. The bill is to be retained, however, to be available in case of need. If the occasion for fuller scrutiny shall afterwards develop, there may thus be an inspection of the records without the delay that would be inevitable if a new bill had to be filed with a new opportunity to the defendant to answer or demur. Presumably the jury could be held together in the interval, and the trial at law adjourned. This relief may have been less than the plaintiff should have had. It was certainly not more.

The use that has been made of the patented device is a legitimate aid to the appraisal of the value of the patent at the time of the breach.

This is not a case where the recovery can be measured by the current prices of a market. A patent is a thing unique. There can be no contemporaneous sales to express the market value of an invention that derives from its novelty its patentable quality. Cf. United States v. Swift & Co., 270 U.S. 124 ; Todd v. Gamble 148 N.Y. 382 ; 42 N.E. 982 . But the absence of market value does not mean that the offender shall go quit of liability altogether. The law will make the best appraisal that it can, summoning to its service whatever aids it can command. United States v. Swift & Co., supra; U.S. Frumentum

Ithaca Trust Co. v. United States, 279 U.S. 151 , does not commit us tó a different holding. The problem there before the court was one as to the appraisal Of a life estate for the púrpose of the assessment of a tax. The intention of the lawmakers was held to be that the computation of the tax should be made as of the death of the testator on the basis of a law of averages: Cf. Matter of Wagner v. Wilson & Co., 251 N.Y. 67 , 71; 167 N.E. 174 . A different question would have been here with a different result if we had been measuring the damages for a. breach of contract of a tort. To correct uncertain prophecies in such circumstances is not to charge the offender with elements of value non-existent at the time of his offense. It is to bring out and expose to light the elements of value that were there from the beginning. Brightson v. Claflin Co., 180 N.Y. 76 , 83, 84; 72 N.E. 920 ; Wakeman v. Wheeler & Wilson Mfg. Co., 101 N.Y. 205 , 217; 4 N.E. 264 ; cf. City of New York v. Sage, 239 U.S. 57 ; Cincin

Value for exchange is not the only value known to the law. of damages.- There are times 'when heed must be given to value for use, if reparation is to be adequate. Barker v. Lewis Storage & Transportation Co., 78 Conn. 198 ; 61 Atl. 363 ; Green v. Boston & Lowell R. Co., 128 Mass. 221 ; Citizens Bank v. Fitchburg Fire Ins. Co., 86 Vt. 267 ; 84 Atl. 970 ; McAnarney v. Newark Fire Ins. Co., 247 N.Y. 176 , 184, 185; 159 N.E. 902 ; Sedgwick, supra, pp. 504-507. An imaginary bid by an imaginary buyer, acting upon the information available at the moment of the breach, is not the limit of recovery where the subject of the bargain is an undeveloped patent. Information at such a time might be so scanty and imperfect that the offer would be nominal. The promisee of the patent has less than fair compensation if the criterion of value is the price that he would have received if he ; had disposed of it at once, irrespective of the value that would have been uncovered if he had kept it as his own. Formulas of measurement declared alio intuitu may be misleading if wrested from their setting and applied to new conditions. See, e.g., Standard Oil Co. v. So. Pac. Co., 268 U.S. 146 , 155. The market test failing, there must be reference to the values inherent in the thing itself, whether for use or for exchange. Industrial General & Trust Co.,v. Tod, supra. These will not be known by first imagining a forced sale, and then accepting as a measure its probable results. The law is not so tender to sellers in default.

Section 724 of the Revised Statutes permitting the use of a subpoena duces tecum for the production of books and papers has not superseded the remedy of dis

The court did not exceed the bounds of a legitimate discretion in holding that these embarrassments might reasonably be expected to follow if discovery were refused.

The decree should be

Affirmed.