Technitrol, Inc. v. Memorex Corporation, 70 C 2916 and 71 C 1083.

• Decision Date: 17 May 1974
• Docket Number: No. 70 C 2916 and 71 C 1083.,70 C 2916 and 71 C 1083.
• Citation: 376 F. Supp. 828
• Parties: TECHNITROL, INC., Plaintiff, v. MEMOREX CORPORATION and the National Cash Register Company, Defendants.
• Court: U.S. District Court — Northern District of Illinois

376 F. Supp. 828

TECHNITROL, INC., Plaintiff, v. MEMOREX CORPORATION and the National Cash Register Company, Defendants.

Nos. 70 C 2916 and 71 C 1083.

United States District Court, N. D. Illinois, E. D.

May 17, 1974.

S. C. Yuter, Yuter & Fields, New York City, Robert L. Harmon, Hume, Clement Hume & Lee, Ltd., Chicago, Ill., for plaintiff.

Alfred H. Plyer, Jr., Parker, Plyer & McEachran, Chicago, Ill., for Memorex.

Theodore W. Anderson, Neuman, Williams, Anderson & Olson, Chicago, Ill., for NCR.

MEMORANDUM OPINION AND ORDER

McLAREN, District Judge.

This matter is before the Court on the motions of the defendants, the National Cash Register Co. (NCR) and Memorex Corp. (Memorex), for summary judgment. For the reasons set forth below, NCR's motion is granted, and Memorex's motion is denied. This action is one for infringement of U.S. Patent No. 2,611,813 (Sharpless). Both defendants assert that the doctrine of laches bars this action. This motion calls into question the activities of the parties dating back over twenty years. The facts, as culled from affidavits and exhibits, provide an interesting insight into the development of the computer industry.

On September 23, 1952, the Sharpless patent was issued. It related to a magnetic data storage system whereby information was conveyed by electrical impulses from many remote terminals. The system would allow persons at the remote access terminals to insert or withdraw information. One purpose was to allow for storage of information concerning reservations on public carriers. Prior to the issuance of the patent, the defendant, NCR, through its predecessor, Computer Research Corporation (CRC), began marketing products, CRC 101 and 102, which plaintiff contends infringe its patent. NCR, after acquiring CRC, continued marketing the products.

On June 16, 1955, almost three years after the patent's issuance, Technitrol first attempted to license the patent to NCR. Prior to this, on March 4, 1954, NCR obtained an opinion from outside counsel that the CRC 101 and 102 systems did not infringe the Sharpless patent. On July 27, 1955, after some negotiations, NCR tentatively agreed to accept a license. However, this agreement was never consummated and on April 4, 1956, NCR declared that it was not then producing any infringing products (despite the fact that the CRC 101 and 102 systems were being produced) and had no present interest in a license. No further communication took place between Technitrol and NCR for two and one-half years.

On October 12, 1958, over six years from the patent's issuance, Technitrol again attempted to license NCR. Negotiations took place and a license was once again rejected. There were no further communications between NCR and Technitrol regarding a license from December 1958 until December 1963.

In December 1963, Technitrol once again sought to license NCR. NCR conducted some studies, reviewed its file and concluded that the patent was invalid. In June 1964, plaintiff's counsel wrote NCR and stated that he was desirous of receiving an answer to his proposal very soon. On October 13, 1966, NCR wrote Technitrol and denied any infringement and rejected the license offer. It did offer a possible cross-license in order to protect itself in any future product development. There was no further communication between the parties until April 1969.

In April 1969, Technitrol informed NCR of the pendency of a Court of Claims action against the United States Government, which it had begun in 1965. In May 1969, Technitrol informed NCR that it would be included as a class defendant in a proposed infringement action in Maryland. The class action was denied. The patent expired on September 23, 1969. Suit against NCR was filed on November 20, 1970.

While these events were occurring, other relevant events were taking place. The computer industry as a whole grew and developed. Technitrol followed this growth with a fairly successful licensing program of the Sharpless patent. IBM was licensed in 1954. Letters offering other licenses were sent out in 1955. Sperry Rand was licensed in 1962, General Electric in 1963, RCA, Burroughs and General Precision in 1964, and North American Aviation and Bunker Ramo in 1965.

In addition to the licensing program, Technitrol was involved in several lawsuits. The first suit, against Sperry Rand, was filed in October 1958, over six years after the patent was issued. That case was finally settled, with a license being issued in 1962. Next, the United States was sued in 1964, Control Data in 1966, Honeywell in 1967, and S. D.S. in 1968. In 1969, Technitrol attempted to establish a class action in the Control Data case. It was after this was denied that suit was brought against NCR in 1970, as noted above.

Other events also occurred during these years. NCR expanded its total gross sales in electronic data processing equipment from $3,366,004 in 1961 to $125,504,157 in 1971.¹ NCR developed various new systems, including the "315" in 1960, the "395" in 1964 and the "615" in 1968. Also, several people important to the litigation have died or are incapacitated. T. K. Sharpless, the co-patentee and inventor, died in 1967. NCR's principal outside counsel, John Hoxie, died in 1971. NCR's chief internal patent counsel, Louis Kline, who was involved in almost all of the negotiations, suffered a heart attack in 1972 and is incapable of testifying or participating in NCR's defense. Professor Howard Aiken, a pioneer in computer development and developer of certain important prior art died in 1973. Further, records relating to early computer developments are no longer available.

I.

The first question is whether summary judgment is appropriate. F. R.Civ.P. 56(c) provides, inter alia, that judgment should be rendered if "there is no genuine issue as to any material fact and . . . the moving party is entitled to a judgment as a matter of law." Also, the evidence should be construed in a light most favorable to the opposing party. The Court is aware that it is unusual to grant summary judgment based upon laches, a doctrine whose history is rooted in the ancient chancery practice; however, this Court believes that the evidence in this case is clear, that there are no genuine issues of material fact and that summary judgment is appropriate. See Continental Coatings Corp. v. Metco, Inc., 325 F.Supp. 165-166 (N.D. Ill.1971), aff'd, 464 F.2d 1375, 1377-1379 (7th Cir. 1972).

II.

In order to effectively assert the defense of laches, two elements must be present. First, there must be a lack of diligence on the part of the plaintiff. Second, there must be injury to the defendant due thereto. Baker Mfg. Co. v. Whitewater Mfg. Co., 430 F.2d 1008, 1012 (7th Cir. 1970), quoting Rome Grader & Mach. Corp. v. J. D. Adams Mfg. Co., 135 F.2d 617, 619 (7th Cir. 1943).

Mere delay is not sufficient; there must be disadvantage to another. Universal Coin Lock Co. v. American Sanitary Lock Co., 104 F.2d 781, 782 (7th Cir. 1939), quoting George J. Meyer Mfg. Co. v. Miller Mfg. Co., 24 F.2d 505-507 (7th Cir. 1928).

When the delay in prosecuting a claim appears unreasonable, the burden is on the patentee to excuse it. Baker Mfg. Co. v. Whitewater Mfg. Co., supra, at 1009. In patent cases, the burden is placed upon the plaintiff after a six year period has passed (this is analogous to the statute of limitations, 35 U.S.C. § 286). Id. at 1010. Injury to the defendant is presumed and plaintiff must justify the delay. Id. In the instant case, the patent issued in September 1952, and suit was not brought until November 1970, a delay of 18 years. Plaintiff urges several reasons for the inapplicability of the laches doctrine and gives a number of excuses for the delay; however, the Court believes that the undisputed facts require granting of defendant NCR's motion as a matter of law.

Plaintiff first asserts that laches is inapplicable in a patent action which seeks only damages for past harm, the patent having expired two years before suit was filed. It offers no cases in support of this proposition. Several courts have applied the doctrine of laches to patent actions where the patent had expired. See Whitman v. Walt Disney Prods., Inc., 263 F.2d 229, 230 (9th Cir. 1958); Dock & Terminal Engng. Co. v. Pennsylvania R. R., 82 F.2d 19 (3d Cir. 1936). Courts have also applied the doctrine of laches to the portion of the case which sought retrospective relief. See, e. g., Baker Mfg. Co. v. Whitewater Mfg. Co., supra. The Court therefore believes that the doctrine of laches may be appropriate in the instant case. Cf. F.R.Civ.P. 8(e)(2); F. James, Civil Procedure §§ 8.2, 8.6 (1965); 2A J. Moore, Federal Practice ¶ 8.32, at 1892 (2d ed. 1974).

There can also be no serious question that NCR has been harmed. First, there is the presumption of harm to the defendant after a six year delay. See Baker Mfg. Co. v. Whitewater Mfg. Co., supra at 1010; see also General Electric Co. v. Sciaky Bros., Inc., 304 F. 2d 724, 727 (6th Cir. 1962); Whitman v. Walt Disney Prods., Inc., supra at 231. In addition, the following uncontroverted events have taken place. NCR's investment and sales have increased many times, thereby resulting in its substantially changing its position. See, e. g., id.; Continental Coatings Corp. v. Metco, Inc., 325 F.Supp. 165, 167 (N.D.Ill.1971), aff'd, 464 F.2d 1375 (7th Cir. 1962); see also Brennan v. Hawley Prods. Co., 182 F.2d 945 (7th Cir. 1950); Rome Grader & Mach. Corp. v. J. D. Adams Mfg. Co., 135 F.2d 617 (7th Cir. 1943); George J. Meyer Mfg. Co. v. Miller Mfg. Co., 24 F.2d 505 (7th Cir. 1928). Three key witnesses; (the inventor, T. K. Sharpless; NCR's trial counsel, Hoxie; and an inventor of certain prior art, Aiken) have died. In addition, NCR's house counsel, Kline, is incapacitated. Many documents relating to the early development of computers have been destroyed or are missing. This certainly impairs NCR's ability to defend the action. See Brennan...