Rixon Inc. v. Racal-Milgo, Inc.

• Decision Date: 02 July 1982
• Docket Number: Civ. A. No. 78-18.
• Citation: 551 F. Supp. 163
• Parties: RIXON INC., Plaintiff, v. RACAL-MILGO, INC., Defendant.
• Court: U.S. District Court — District of Delaware

551 F. Supp. 163

RIXON INC., Plaintiff, v. RACAL-MILGO, INC., Defendant.

Civ. A. No. 78-18.

United States District Court, D. Delaware.

July 2, 1982.

Robert K. Payson, Peter M. Sieglaff, Potter, Anderson & Corroon, Wilmington, Del., David W. Plant, Laurence S. Rogers, Norman H. Beamer, Albert E. Fey, Robert C. Morgan, Kevin J. Arquit, Fish & Neave, New York City, for plaintiff.

James L. Holzman, Michael Hanrahan, Prickett, Jones, Elliott, Kristol & Schnee, Wilmington, Del., Harold L. Jackson, Stanley R. Jones, Albin H. Gess, Larry K. Roberts, Jackson, Jones & Price, Tustin, Cal., for defendant.

OPINION

STAPLETON, District Judge:

Rixon, Inc. here seeks a declaratory judgment that certain United States patents held by Racal-Milgo, Inc. ("Milgo") are invalid, unenforceable and uninfringed. Milgo has counterclaimed for relief against alleged infringements by Rixon, Inc. For present purposes our focus is on three patents — No. 3,524,023 ("Whang '023"), issued to Sang Whang; No. 3,643,023 ("Payne '023"), issued to Paul Payne and Robert Ragsdale; and No. 3,590,381 ("Ragsdale '381") issued to Robert Ragsdale. All involve electronic circuits used in devices known as "modems."

A modem, short for modulator/demodulator, is a device used to permit communication between computers at different sites, or between a computer and remote terminals, by converting binary digital computer data¹ into analog signals which can pass over telephone lines. The modem circuits encode or translate a digital output by modulating the phase, frequency, or amplitude of a carrier pulse. Each digital "word", or sequence of digital bits, modulates the carrier in a different way, so that the demodulator at the receiving end can reconstruct the original word in accordance with a pre-selected convention.²

The goal of modem designers in the mid-1960s was to increase the speed and reliability of data transmission. Computers process information much more rapidly than it was possible to transmit that information over telephone lines.³ One obstacle to higher speeds was the variation in delay and amplitude distortion on telephone lines. Not only did phone lines delay different frequencies more than others, and reduce the amplitude of some frequencies more than others, these differences also varied from one line, or combination of lines needed to complete a call, to the next. Some users, in search of high speed reliable data transmission, leased telephone lines and conditioned them so that their frequency response was more uniform and predictable. Another solution was the use of "variable equalizers" which could be adjusted to minimize distortion over any combination of lines. The leased line system was expensive and impractical for computer systems which did not communicate with any single remote location continuously. Variable equalizers were unreliable. So, engineers continued to search for something better.

In the burgeoning market for data communications equipment of the early 70s, Milgo⁴ enjoyed considerable success with a line of modems, including Model 4400/48. Milgo manufactured these modems under patents acquired by assignment from Milgo engineers, including the three involved in this case.⁵ Whang '023 claims an 8 phase modem using a "narrow" passband. The Payne '023 patent involves a detector circuit used to convert the transmitted signal pulses back into digital form. Ragsdale's patent covers an improved detector which is more resistant to noise interference because it embodies what is known as a phase lock loop.

In July 1971, Milgo filed suit against United Telecommunications, Inc. ("United"), and its subsidiary United Business Communications, Inc. ("UBC") in the United States District Court for the District of Kansas. Milgo alleged that UBC had infringed the Whang, Ragsdale and Payne patents by offering for sale the DS 4800 modem, manufactured by UBC's subsidiary, Rixon Electronics, Inc. Milgo did not join Rixon Electronics as a party; subsequently, UBC dissolved Rixon Electronics and transferred its assets to a new entity, Rixon, Inc., formed in a joint venture with Sangamo Electric Company ("Sangamo"). The Court held that Rixon Electronics was UBC's agent and alter ego. Milgo obtained a judgment in the Kansas Court against UBC;⁶ the Court awarded damages and an injunction against future infringement of the Milgo patents. The Tenth Circuit affirmed.⁷

Rixon, Inc. commenced this action in January 1978. Milgo's position is that the Kansas judgment binds Rixon, Inc. by principles of res judicata and collateral estoppel and precludes it from pursuing its claims in this Court.

The United States District Court for the District of Massachusetts recently filed an Amended Opinion holding that Whang '023 patent invalid and awarding attorneys' fees against Milgo for its inequitable conduct with respect to that patent. Codex Corp. v. Milgo Electronic Corp., 534 F.Supp. 418 (D.Ma.1982). Relying upon principles of non-mutual collateral estoppel,⁸ Rixon has supplemented its complaint to allege that Milgo is precluded from asserting the validity or enforceability of Whang '023 here. A final judgment was entered in the Codex action on June 16, 1982. The parties to this action have not yet been heard on the issues raised by Rixon's supplemental complaint, however, and they are not ripe for resolution.

This Court severed for trial the issues relating to whether Rixon, Inc. is bound by the Kansas judgment and whether Milgo has engaged in inequitable conduct which renders one or more of the patents in suit unenforceable.

I. BACKGROUND.

In 1928, Harry Nyquist published his discovery that an information carrying pulse of duration T (T is also known as the period) required a bandwidth of 1/T Hz⁹ for accurate transmission.¹⁰ This relationship forms the basic constraint upon the speed of telephonic data transmission. Nyquist also described criteria for a filter which would enable the accurate transmission of data without interference between successive pulses.¹¹ The ideal, or "brick wall", Nyquist filter passes only signals within a range of ± ½T Hz around the carrier frequency:¹²

Because it is not possible to create such a brick wall filter, practical filter design requires the use of "raised cosine" filters:

The portions of the curve which extend beyond the limits of the brick wall are known as the "skirts". The "rolloff" of the filter is defined by the ratio of the width of the skirts to the width of the Nyquist ideal. Thus, a 50% rolloff filter is one in which the sum of the skirts is equal to one-half 1/T.

Another factor which governs the rate of data transmission, along with the range of frequency available, is the modulation scheme. An engineer can convey information by modulating a signal in three basic ways:

One can design a system to encode data using any modulation scheme.

Transmission speeds depend both upon how many impulses can be transmitted over a given bandwidth and how many "bits" of data are communicated in each impulse. The number of available "codes" depends upon the ability of detection circuitry to distinguish one modulation pattern from another in the presence of random "noise" and phase jitter which can be reduced, but not entirely eliminated, from the transmission line.¹³

As noted, a third constraint on transmission was the ability of the demodulator portion of the system to translate the transmitted analog signals back into a sequence of 1s and 0s. Accurate recovery of data required the model designer to "read" the signal pulse at its most stable point. In some systems, this most reliable point was at the center of the period. By transmitting a constant pulse at a rate equal to 1/T, an engineer could maintain a constant sampling rate, timed to coincide with the center of the interval. To do this, however, the demodulator had to recover an accurate "clock", or timing signal, from the transmitted data to maintain synchrony.

Once the receiver detected the phase of the incoming signal, the task of translation remained. One method, that was employed in the Payne '023 patent, involved the comparison of the phase of the incoming signal at time t1 with the last signal received at time t0. In this scheme, the detector obtains the transmitted data by calculating the difference, or change in phase between the t1 and t0 signals. This is known as differential phase detection. "Coherent" phase detection, used in the Ragsdale '381, "phase locks" the carrier wave to a higher frequency wave which yields a more stable and therefore reliable point of comparison.

Milgo successfully marketed 8 phase modems which operated at 2400 and 4800 bps and labeled those modems with the Whang, Payne and Ragsdale patents. Rixon, Inc. argues that each of those patents are invalid and unenforceable. According to Rixon, Whang '023 is invalid because it is an old combination of elements already established in the prior art, and it is unenforceable because Whang and Milgo concocted, and successfully urged upon the Kansas Court, a theory of validity they knew to be untrue. Payne '023 is invalid, in Rixon's view, because it is obvious from the prior art; it is unenforceable because Milgo took a position in the Kansas litigation with respect to the scope of the Payne patent which was logically irreconcilable with one it was taking simultaneously in a foreign patent proceeding. Rixon attacks Ragsdale '381 as invalid because it is anticipated in the prior art, or obvious from it, and unenforceable because Milgo suppressed evidence that it had made a commercial use or sale of the Ragsdale invention more than one year prior to filing the patent application.

II. THE EFFECT OF THE KANSAS JUDGMENT.

Rixon was not a party to the Kansas action, but "by the usual formulation of the rule, the effects of res judicata also extend to those in privity with the parties to an action." Note, Developments in the Law — Res Judicata, 65 Harv.L.Rev. 818, 855 (1952). See Regal...