TRW Financial Systems, Inc. v. Unisys Corp.
| Decision Date | 19 October 1993 |
| Docket Number | No. 90-CV-71252-DT.,90-CV-71252-DT. |
| Citation | 835 F. Supp. 994 |
| Parties | TRW FINANCIAL SYSTEMS, INC., Plaintiff and Counter-Defendant, v. UNISYS CORPORATION, Defendant and Counter-Plaintiff, v. TRW, INC., Counter-Defendant. |
| Court | U.S. District Court — Western District of Michigan |
COPYRIGHT MATERIAL OMITTED
Robert C. Kahrl, Cleveland, OH, J. Thomas Lenga, Detroit, MI, for plaintiff and counter-defendant.
Douglas E. Whitney, Wilmington, DE, David A. Etlinger, Detroit, MI, for defendant and counter-plaintiff.
This patent infringement action is presently before the Court on three Motions for summary or partial summary judgment and dismissal. Defendant Unisys has moved for summary or partial summary judgment pursuant to Fed.R.Civ.Proc. 56 on two issues: (1) statutory "on-sale bar", and (2) "inequitable conduct" predicated on the alleged withholding of "on-sale bar" information from the patent examiner. TRW has cross-moved for summary judgment on the issue of statutory "on-sale bar", and has also moved, pursuant to Fed.R.Civ.Proc. 12(c), for dismissal on the pleadings of Unisys's antitrust counterclaim.
Having reviewed and considered the parties' respective motions, briefs and supporting documents, and having heard the oral arguments of counsel at the hearing held on July 26, 1993,1 the Court is now prepared to rule on these pending dispositive motions. This Opinion and Order sets forth that ruling.
This case involves a patent for a video document processing system2 which was originally applied for by Emmett Burns and Morris Ho of Teknekron, Inc., the predecessor-in-interest of Plaintiff TRW, on March 21, 1977.3 That March 1977 parent application was subsequently declared abandoned following the filing of a "continuation-in-part" application ("CIP") on July 3, 1978.
In the summer of 1974, Teknekron was engaged by Crocker National Bank as a consultant to evaluate the bank's remittance processing "lockbox" operation.4 After Teknekron's team completed its two-month study of the Crocker operation, and after having visited and analyzed the lockbox processing utilized by five other banks and the alternative automated systems then available on the market, on August 1, 1974, Teknekron issued a 79-page report recommending that Crocker retain Teknekron to design, implement, install, and train personnel in the use of an automated video-enhanced system that would meet the bank's lockbox needs.
Crocker accepted Teknekron's proposal, and on December 19, 1974, Teknekron and Crocker entered into a written contract for the development and installation of an automated lockbox system. The agreement called for a three-phase development of the system over 13 months. The three-phase task included a projected 2-month "system design phase", a 10-month "fabrication and implementation phase", and a 1-month "installation and training phase." This agreement was subsequently amended several times extending the period of performance and modifying the payment terms. In one of the amendments to the Crocker Bank contract, Crocker Bank agreed "to support and assist Teknekron's marketing program for the Lock Box System by participation in demonstrations, responding to inquiries and similar sales activities as may be determined by the parties." See April 18, 1975 Amendment, DDX 87.
Teknekron's development and assembly of the automated lockbox system for Crocker Bank was, for the most part, done at Teknekron's Berkeley, California facility. The system was not physically delivered to Crocker Bank until May 20, 1976, and was not put into operation at the Bank until June 17, 1976. See Plaintiff's Ex. E. However, the system was actually operational at Teknekron's facility well before the May 20, 1976 delivery to Crocker. Inventor Emmett Burns advised Crocker Bank and Teknekron staff involved in the lockbox project early in December 1975 that "one of everything (in the system) was working" as of December 9, 1975. See DDX 153, Minutes of Meeting held at Crocker December 9, 1975, p. 1. By mid-December, the system with substantially all of its integrated components working together was operational. Emmett Burns, in fact, took the Crocker group to Teknekron's facility on December 17, 1975 to view the system developed for Crocker in operation. See DDX 154, Minutes of Meeting held at Teknekron on December 17, 1975, p. 1.5
In late April 1975, Teknekron approached a number of banks throughout the country about purchasing from Teknekron a lockbox system similar to the Crocker Bank system. One of the banks approached was Philadelphia National Bank ("PNB"). Teknekron proposed to develop for PNB a lockbox system similar to the one developed for Crocker Bank, but tailored for PNB's particular environment and requirements. In an April 30, 1975 letter to the vice-president of Philadelphia National Bank, Teknekron described its Crocker Lock Box System as follows:
Teknekron has been working for over a year with Crocker National Bank in order to develop an innovative and cost effective system for lock box automation. In this effort we have used both our hardware engineering and software development expertise. We have been successful and are implementing a system that will lower retail and wholesale costs while providing excellent production statistics to monitor both individual productivity and cost by account, outputs tailored to the needs of clients, easy expandability for increasing volume, and improved personnel morale.6
Teknekron further proposed to produce a similar system for PNB:
The Teknekron-PNB discussions culminated in the execution of a written agreement in October 1975 for Teknekron to conduct an evaluative study for PNB similar to that conducted for Crocker Bank in the summer of 1974. See DDX 49. The PNB study was completed, and on January 19, 1976, Teknekron submitted its study report with a proposal to sell PNB an automated lockbox system similar to the Crocker Bank system on January 19, 1976.
On July 29, 1977, PNB sent Teknekron a "letter of intent" to purchase the automated remittance processing lockbox system described in Teknekron's January 1976 proposal.7 A formal agreement regarding PNB's purchase of the system was ultimately executed between the parties on September 27, 1977.
Edward Maker of Flehr, Hohbach, Test, Albritton & Herbert was the patent attorney retained to prosecute the Burns/Ho/Teknekron patent. On December 30, 1975, Maker wrote to David Fain, Teknekron's project manager on the Crocker Bank system project, and Allen Gould, Teknekron's in-house counsel, stating that the "invention was offered for sale during the month of April 1975 and therefore has a statutory bar date of April 1976". A week later, on his office file opening form, Maker indicated "April 18, 1975" in the space marked "STATUTORY BAR DATE MAY BEGIN TO RUN".
However, six weeks later, with Maker's initial April 1976 deadline date rapidly approaching, Maker re-evaluated his original "on-sale bar" determination. In a March 30, 1976 Conference Memo regarding a conference between Maker and Aldo Test, another attorney with Flehr, Hohbach, Maker notes:
Then, in a letter the next day, March 31, 1976, to inventor Emmett Burns, which was copied to David Fain and Donald Gould, Maker explained his reconsideration of the on-sale bar date:
After learning during a December 1, 1976 meeting with Emmett Burns that Teknekron had shipped the system to Crocker National Bank on May 20, 1976 see Conference Memo at DDX-698, Maker revised his patent filing...
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