Electronic Assistance Corp. v. City of New York

• Decision Date: 31 August 1973
• Docket Number: No. 71 Civ. 3781.,71 Civ. 3781.
• Parties: ELECTRONIC ASSISTANCE CORPORATION, Plaintiff, v. CITY OF NEW YORK et al., Defendants.
• Court: U.S. District Court — Southern District of New York

362 F. Supp. 755

ELECTRONIC ASSISTANCE CORPORATION, Plaintiff, v. CITY OF NEW YORK et al., Defendants.

No. 71 Civ. 3781.

United States District Court, S. D. New York.

August 31, 1973.

Wyatt, Gerber & Shoup, New York City, for plaintiff.

Norman Redlich, Corp. Counsel, City of New York, for defendants City of New York and New York City Off-Track Betting Corp.

Shea, Gould, Climenko & Kramer, New York City, for defendant Computer Sciences Corp.

Rogers, Hoge & Hills, New York City, for defendant Control Data Corp.

James & Franklin, New York City, for defendant American Totalisator Co., Inc.

MEMORANDUM

BAUMAN, District Judge.

Plaintiff is the holder of a patent covering the use of electronic data processing systems in off track betting. It alleges that New York City, its Off-Track Betting Corporation (OTB) and various companies providing the OTB operation with computerized data processing systems are infringing upon its patent. Jurisdiction is asserted pursuant to 28 U.S.C. § 1338. Each of the defendant computer companies is charged with infringement by reason of the particular system it has provided OTB. OTB and New York City are claimed to have infringed plaintiff's patent by creating a design for such electronic data processing as well as for using the systems supplied by the other defendants.

Before the court is a motion by defendant Computer Sciences Corporation (CSC), in which the City and OTB have joined, as have Control Data Corporation (CDC) and American Totalisator Company (ATC) with certain reservations, for bifurcation of the trial pursuant to Rule 42(b) of the Federal Civil Rules. Defendants seek a separate trial of the issue of the validity of plaintiff's patent to be followed, if necessary, by a trial on the question of infringement. They also move to limit discovery to validity until that issue is determined at trial. For the reasons that follow, CSC's motion is denied.

As defendants recognize, such a motion is addressed to the sound discretion of the district court. They advance several arguments in support of their position but, I think it fair to say, rely principally on the seminal case of Woburn DeGreasing Co. v. Spencer Kellogg & Sons, 37 F.Supp. 311 (W.D.N.Y.1941).¹ There the defendants contended that the patent sued on was invalid because the same invention had been patented in Germany on an application filed more than twelve months before the filing in the United States.² That court noted that a decision under Rule 42(b) "must be based on considerations of convenience and prejudice as respects the several parties." The defendants vigorously assert that such considerations compel a favorable decision here.

They argue that validity is the only issue common to all defendants; that each of their systems is completely unique; and that this court will, in effect, be presented with four separate infringement trials which might be obviated by a determination of invalidity after a single trial on that question. They also point out that plaintiff and defendants CDC, CSC, and ATC are all in the data processing industry and are direct competitors in the development of electronic data processing systems for off track betting. Extensive discovery on the issue of infringement, the argument continues, might involve disclosure of trade secrets developed "at the cost of thousands of man hours and millions of dollars."³ Such danger could be removed, they urge, if discovery were limited to the single issue of validity.

Although these arguments are not wholly lacking in merit, they cannot prevail against what I perceive to be the established practice in this circuit of joining the issues of validity and infringement for consideration in a single trial. Although we have no square holding by the Court of Appeals mandating such procedure, there exists what is best described as a broad hint to that effect. In Ling-Temco-Vought, Inc. v. Kollsman Instrument Corp., 372 F.2d 263 (2nd Cir. 1967), the district court found the patent sued upon to be invalid and not infringed. Our Court of Appeals reversed the finding of patent invalidity and noted "it is fortunate, however, that Judge Rosling followed the approved procedure of deciding the question of alleged infringement", even though such a decision was unnecessary given his resolution of the invalidity question. This procedure has since been widely followed in this circuit. Reeves Brothers, Inc. v. U. S. Laminating Corp., 282 F.Supp. 118 (E.D.N.Y.1968); Thomson Industries, Inc. v. Nippon Thomson Co. Ltd., 298 F.Supp. 466 (E. D.N.Y.1968); Trimble Products, Inc. v. W. T. Grant Co., 283 F.Supp. 707 (S.D. N.Y.), affd., 404 F.2d 344 (2nd Cir. 1968); SCM Corporation v. Radio Corporation of America, 318 F.Supp. 433 (S.D.N.Y.1970). See also Sonobond Corp. v. Uthe Technology, Inc., 314 F. Supp. 878 (N.D.Cal.1970); Smith v. J. H. Smith Co., 315 F.Supp. 1059 (D. Mass.1970). Its advantage is obvious: if the question of validity is tried alone and a finding of invalidity is then reversed, an entire trial on infringement awaits. If both questions are tried together, the Court of Appeals can pass on the entire range of issues presented by the suit and, as in Ling-Temco-Vought, affirm a finding of noninfringement even if it reverses a finding of invalidity. Such a procedure helps avoid piecemeal litigation, an especially desirable goal given the duration and expense of much patent litigation. See generally Switzerland Cheese Association, Inc. v. Horne's Market, 385 U.S. 23, 87 S.Ct. 193, 17 L.Ed.2d 23 (1966).

Hence defendants' assumption that a separate trial of validity will shorten and simplify the litigation is valid only if the district court finds the patent invalid and this finding is affirmed by the Court of Appeals. Given any other contingency, the course of the litigation will be just as long and, in most cases, longer than if a single unified trial is held. Furthermore, defendants' suggested procedure ignores the frequent overlap in the issues of validity and infringement. The resolution of both issues, for example, often involves inquiry into the prior art, and the affidavit of CSC's counsel indicates that such will be the case here. It reveals that CSC plans to interpose invalidity defenses based on anticipation, obviousness, and indefiniteness.

It is particularly significant that the district judge in Woburn granted a separate trial on the explicit assumption that no inquiry into the prior art would be necessary at the trial of the validity question. The Woburn court was confronted, as it acknowledged, with one of those rare instances in which the validity issues could be completely segregated from those of infringement. That validity trial presented the relatively neat and precise question of whether a previous patent application had been filed in Germany. The instant case is not comparably tidy. Defendants attack the validity of the patent on a number of grounds, which mandate a far broader inquiry than was required in Woburn. Hence duplication of issues and of proof at the first and second trials would be inevitable and, in my view, would necessitate an unwarranted expenditure of the time of all concerned.

The likelihood of overlap is virtually conceded by two of the defendants. CDC, in...