UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
CIVIL ACTION, FILE NO. 4-67 CIV. 138
HONEYWELL INC., Plaintiff,
SPERRY RAND CORPORATION
and ILLINOIS SCIENTIFIC DEVELOPMENTS, INC., Defendants
FINDINGS OF FACT, CONCLUSIONS OF LAW AND
ORDER FOR JUDGMENT
- This case is a consolidation of two actions which were commenced simultaneously on May 26, 1967 before this Court and the District Court for the District of Columbia:
- Honeywell Inc. (hereinafter Honeywell or plaintiff) is a Delaware corporation with its principal office and place of business in Minneapolis, Minnesota.
- Sperry Rand Corporation (hereinafter SR) is a Delaware corporation with its principal office and place of business in New York, New York, and is authorized to do and does business in Minnesota.
- Illinois Scientific Developments, Inc. (hereinafter ISD) is an Illinois corporation with its principal office and place of business at that of SR. ISD is a wholly owned subsidiary of SR.
- Honeywell's Complaint in the Minnesota action as originally filed raised two causes of action:
- ISD's Complaint in the District of Columbia action charged infringement by Honeywell of the ENIAC patent. Injunctive relief and damages were sought.
- On March 5, 1968, the District of Columbia action was transferred to the District of Minnesota and consolidated by order of Judge Nordbye on May 1, 1968, with the Minnesota action as a counterclaim by ISD, which was realigned as a defendant.
- On May 1, 1968, Honeywell filed its First Amended Complaint, in the consolidated action, adding expanded allegations that SR and ISD's conduct had violated Section 1 as well as Section 2 of the Sherman Act, and adding Count Three charging that the acquisition of the ENIAC patent was a violation of Section 7 of the Clayton Act.
- On August 29, 1969, Honeywell filed its Second Amended Complaint, adding a paragraph 30A under which other patents and pending patent applications, in addition to the ENIAC patent, were alleged to be subject to the same infirmities as those with respect to the ENIAC patent, and their procurement, licensing, and attempted enforcement were alleged to constitute a further part of a pattern of conduct of defendants in restraint of trade in violation of the Sherman Act.
- Based upon statements of claims as presented by the parties, the Court's pre-trial understanding of the issues to be tried was expressed to counsel for the parties at a hearing on July 1, 1970 to the following effect:
- Honeywell claims that the basic issue as far as it is concerned is whether the activities of SR and ISD and their predecessors in obtaining, maintaining, and enforcing their EDP patent portfolio, including know-how, violate the antitrust laws particularly Sections 1 and 2 of the Sherman Act and Section 7 of the Clayton Act.
- Honeywell claims that SR and ISD engaged in illegal activities as follows:
- Honeywell claims that if it prevails on any of the foregoing that it is then entitled to damages and injunctive relief.
- Honeywell states further that if its allegations of conspiracy and combination in violation of the antitrust laws are not sustained, then certain subsidiary issues must be reached:
- SR and ISD take the position that this is basically a lawsuit by ISD charging Honeywell with infringement of the ENIAC patent, and a suit by Honeywell against SR and ISD for a declaratory judgment that the ENIAC patent is invalid.
- SR and ISD claim that Honeywell has admitted the infringement of the ENIAC patent is valid, but will nevertheless select a limited number of claims to litigate this question.
- In response to the ENIAC patent infringement claim, SR and ISD claim that Honeywell has raised a number of affirmative defenses:
- With respect to the antitrust issues, SR and ISD claim that the issues relate to:
- In response to the Count Three claim of Honeywell's complaint, SR and ISD claim that a private party does not have standing under Section 7 of the Clayton Act, and also that the statute of limitations has run.
- At the close of plaintiff's case, defendants moved to dismiss Counts One and Three of the Amended Complaint. The motion was denied as to Count One, but granted as to Count Three with entry of judgment stayed until final decision or otherwise ordered.
- Pursuant to pretrial order on March 29, 1971, trial was set on the issues of liability under Honeywell's claims of antitrust violation and ISD's claim of patent infringement.
- Pending determination of the issues of liability, Honeywell's testimony as to damages on its antitrust claims, and ISD's testimony as to patent infringement damages or accounting, were deferred.
- Honeywell's evidence as to impact or injury was received in the trial on the liability issues.
- Trial commenced before the Court without a jury on June 1, 1971, and continued with few interruptions until it closed on March 13, 1972, consuming over 135 days or parts of days. During this long course of trial, the Court heard and received extensive evidence. The statistics are impressive.
- Seventy-seven witnesses presented oral testimony in the courtroom, and the testimony of an additional eighty witnesses was presented by deposition transcripts.
- The Court's attention was directed to 25,686 exhibits marked by Honeywell as Plaintiff's Trial Exhibits (PX).
- The Court's attention was directed to 6, 968 exhibits marked by SR and ISD as Defendant's Trial Exhibits (DX).
- Many of the exhibits were extremely voluminous, including both documents of great length and also collections of multiple documents designated as single exhibits. For example, PX-1 is a 496 page book describing the 19th century work of Charles Babbage relating to early digital computing, and DX-2 is a collection of documents relating to the ENIAC patent application, occupying a four-drawer legal filing cabinet; DX-1, the ENIAC patent itself, comprises 91 sheets of drawings and 232 columns of closely printed text.
- About 500 additional exhibits were marked and referred to during the trial.
- The trial transcript extends over 20,667 pages.
- The trial afforded the Court a comprehensive view of complex technical and economic evidence involving the electronic data processing industry and relevant history before and about automatic electronic digital computing and computers.
- The Court was aided by extensive tutorial testimony and demonstrative exhibit presentations. The courtroom demonstrations included the copious use of charts, photographs, slides, physical devices, mechanical and electronic machines operated in the courtroom, and a movie film.
- The Court had a view of both Honeywell and SR electronic data processing systems in computing operation at their respective Twin City facilities.
- The Court had the assistance of explanatory courtroom testimony by knowledgeable fact and expert witnesses called by both parties in the course of the trial and in the presentation of demonstrative and physical exhibits.
- The Court had the benefit of excellent and well documented briefs of both parties.
- Pursuant to a pretrial conference held on July 1, 1970, the Court suggested and counsel adopted the format of Sample Pretrial Order No. 5 of the Manual for Complex and Multi-district Litigation for the submission of final pretrial briefs.
- The pretrial briefs submitted by the parties set forth, in separately number declarative sentences, the narration of facts relied upon in support of each claim for relief. Legal contentions and authorities in support of the claims for relief which were the subject of the narrative statement of facts were separately stated in separately numbered paragraphs. Similarly, opposing briefs set forth separate factual statements admitting or denying those of the adverse party, or presenting affirmative matters of a factual nature, and a statement of legal contentions and authorities in defense against the claim for relief to which the response was made.
- Honeywell found that the separately numbered factual sentence format of the pretrial briefs lent itself to a computerized data storage and retrieval system. In this way, Honeywell's numbered narrative statement, with designated supporting evidence, and SR and ISD's admissions or denials, together with designated opposing evidence or affirmative narrative statement, were available in computer printout form (sometimes referred to by the parties as Honeywell's Computerized Brief or "CB")/
- During the course of the trial, Honeywell's computerized data storage and retrieval enabled the up-dating and annotating of its narrative statement in accordance with the trial evidence. In addition, cumulative lists and indices of exhibits and testimony were also subject to this computerized data storage and retrieval and were made available after the close of the trial.
- After trial, extensive and comprehensive post-trial briefs of both parties were submitted, following the narrative statement format of the pretrial briefs but further supplemented by so-called "conventional" briefs containing strong advocacy by which counsel have been less than kind to each other. The Court has not lacked for thorough presentation by both parties on all issues in their pretrial and post-trial briefs.
- The Court further had the benefit of numerous documentary aids in dealing with the special terminology and content of complex electronic and financial evidence, as well as rules and customs of patent practice, involved in the reconstruction of over three decades of past history underlying the modern day computer industry. For example:
- Glossary of Principal Terms, Appendix A to Volume I of Plaintiff's Trial Brief.
- General Information Concerning Patents, Appendix B to Volume I of Plaintiff's Trial Brief.
- Plaintiff's Exhibit 21755.7, Abstract of the Patent Office History, U.S. Patent Application Serial Number 757,158 [the ENIAC patent application], and defendants' response thereto in their Appendix to Request for Findings.
- On April 9, 1973, the Court advised counsel for the parties of ultimate Findings made upon the evidence of record. The decision reached is a mixed one, and the aid of both parties has been sought through submission of more detailed Findings on those issues where plaintiff or defendants have prevailed.
- The Court's ultimate Findings are grouped under twenty-five numbered topics, substantially in the order treated by counsel in their briefs. The ultimate and detailed supportive Findings are set forth below under these topics by decimal sub-numbering.
- The nature and complexity of the issues upon which the facts have been found has resulted in an intermingling, where appropriate, of related conclusions of law under ultimate Finding topics.
- The Findings are therefore both an amalgamation of findings of fact and conclusions of law, and an amalgamation of the supportive contributions of each party as to the respective issues upon which they have prevailed in whole or in part.
- Findings 1 through 12 below are concerned primarily with the validity and enforceability of defendant's electronic data processing (EDP) or so-called "computer" patent rights against plaintiff. Findings 13 through 23 below deal more particularly with the antitrust issues arising out of the procurement, licensing, and enforcement of those patent rights, and other business conduct of SR in the EDP industry. Findings 24 through 26 pertain to legal matters and relief.
- All legal citations and citations to the record, where appropriate, which support the Findings and Conclusions herein, are located in the Appendix hereto at the corresponding decimalized number.
- In reaching these Findings, the Court has weighed the evidence relating to defendant's patent rights and business activities against the background evidence which was presented to show:
- The history of technical evolution of automatic electronic digital computing from the earliest mechanical aids to the modern day computer;
- The history of development of the EDP industry, from the early business efforts of SR's predecessors, and of International Business Machine Corporation (IBM) and others, including Honeywell, to the time of this lawsuit;
- The history of design and construction of the earliest automatic electronic digital computers and, particularly, the so-called "ABC" (Atanasoff-Berry Computer) at Iowa State College, and the "ENIAC" machine (Electronic Numerical Integrator and Computer) of Army Ordnance at the Moore School of the University of Pennsylvania;
- The work of Dr. John W. Mauchly (Mauchly or sometimes simply M), J. Presper Eckert Jr., (Eckert or sometimes simply E) and many others in connection with the ENIAC machine, and in connection with their subsequent business activities for Electronic Control Company (ECC) and Ekert-Mauchly Computer Corporation (EMCC) and Remington Rand, Inc., (RR), as predecessors of SR;
- The procurement of a patent describing and claiming "the invention" embodied in the ENIAC machine (the ENIAC patent), and the history of its lengthy prosecution before the Patent Office, including interference proceedings, controversies with IBM, and litigation with Bell Telephone Laboratories, Inc. (BTL);
- The history of the use of the ENIAC machine, including such important use as: calculations for the Los Alamos Scientific Laboratory of the University of California (Los Alamos Laboratory) and Dr. Edward Teller relating to the hydrogen bomb and calculations by Dr. Douglas R. Hartree relating to supersonic airfoils and projectiles;
- The history of commercialization and further evolution of the ENIAC and computer machine work, including: the activities of the Moore School in the development of an "EDVAC" (Electronic Discrete Variable Automatic Computer) machine, and the description of a design for such a machine by Dr. John von Neumann; and the activities of Eckert and Mauchly and the ECC and EMCC, RR business enterprise predecessors of SR in the development of the EDVAC, BINAC, and UNIVAC machines;
- The procurement and continuing prosecution of patents and applications (referred to at Paragraph 30A of the Second Amended Complaint) on developments arising out of the commercialization and further business activities of Eckert and Mauchly based on the work on the ENIAC and EDVAC machines;
- A detailed technological, financial and economic survey of the EDP industry's major or so-called "main frame" manufacturers who are the producers of full EDP systems, including such matters as gross dollar values of EDP sales, rentals and research and development expenditures by SR, IBM, Honeywell, Radio Corporation of America (RCA), National Cash Register Company (NCR), Burroughs Corporation (Burroughs), General Electric Company (GE), Control Data Corporation (CDC), and Philco-Ford Corporation (Philco-Ford); and
- The convergence of all of these historical and evolving forces upon the extraordinary automatic electronic digital computer and the EDP industry today: an industry producing EDP systems which perform and almost limitless variety of electronic data processing operations at the seemingly incredible speed of a millionth of a second (microsecond) or even a billionth of a second (nanosecond) and of persisting in the work for hours on end, and thus completing tasks beyond the capacity of human bodies and minds.
- The Findings, as an amalgamation of the aforesaid, are nonetheless the result of as careful and detailed attention as could be given to a most fascinating, albeit burdensome lawsuit. Where conflicts existed in the testimony, facts have been found on the basis of close observation of the appearance, conduct and demeanor of the witnesses and to contemporaneous documentation or exhibits, wherever available.
- Hence, the Findings, hereinafter set forth, represent the final culmination of an extraordinary part of history such as this Court has seldom confronted; the Findings are an effort at summation of a truly complex lawsuit in a relatively condensed form.
- The Findings which follow, therefore, constitute the Court's decision in compliance with Rule 52, and all applicable provisions of the Rules of Civil Procedure and of law.
Honeywell Inc. v. Sperry Rand Corporation, U.S. District Court for the District of Minnesota, File No 4-67 Civ. 138 (hereinafter the Minnesota action).
Illinois Scientific Developments, Inc. v. Honeywell Inc., U.S. District Court for the District of Columbia, Civil Action No. 1373-67 (hereinafter the District of Columbia action).
.1 Count one charged SR with violation of Section 2 of the Sherman Act by reason of the maintenance and enforcement of an allegedly fraudulently procured patent (the so-called "ENIAC patent"). The ENIAC patent was alleged to have the exclusionary power to effectively dominate the entire electronic data processing industry. Injunctive relief and damages were sought.
.2 Count Two sought declaratory judgment of invalidity and unenforceability of the ENIAC patent for the antitrust misconduct complained of in Count One, and for failure to comply with the legal prerequisites of the Patent Stature.
.1 The fraudulent procurement and enforcement of ENIAC, EDVAC, and other patents and patent applications.
.2 The illegal acquisition of the ENIAC patent application.
.3 The use of the claimed illegal patent portfolio to induce IBM and BTL to give up meritorious attacks on the validity of the ENIAC patent and other of defendant's EDP patents.
.4 Irrespective of the ENIAC patent's validity, the entering into of a total cross-licensing of EDP patents and EDP know-how with IBM in 1956.
.5 The attempted enforcement of the ENIAC patent known by defendants to be subject to infirmities.
.6 Demanding discriminatory royalties for the ENIAC patent license.
.1 Whether or not the ENIAC patent is valid under the technical aspects of the Patent Laws.
.2 If the ENIAC patent is technically valid, has Honeywell infringed.
.3 If infringement is proved, what damages ISD has sustained.
.1 Public use prior to the critical date of June 26, 1946.
.2 That Mauchly and Eckert were not the sole inventors of the ENIAC patent.
.3 Derivation from Dr. John V. Atanasoff.
.4 Fraudulent procurement.
.5 Fraudulent conduct to delay the issuance of the ENIAC patent.
.1 Fraudulent procurement which has been raised by Honeywell as a defense, but has also been raised by Honeywell as an affirmative antitrust allegation.
.2 Discriminatory licensing by SR in making IBM its favored licensee.
.3 SR's acquisition of title to the ENIAC patent application alleged in Count Three of the Complaint in 1955, which Honeywell claims substantially lessened competition.