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16. SR — IBM Settlement of Interferences

  1. Plaintiff claims that the settlement of the interferences violated Sections 1 and 2 in that SR and IBM each knew of the invalidity of the ENIAC and SSEC applications and other patents and applications.
  2. IBM repeatedly took the position that the ENIAC application was invalid and did file another petition with the Patent Office in 1959.
    1. See 15.24.2, 15.24.13, 15.24.21, and 15.24.30.
    2. The following lists the Patent Office interferences which were settle by IBM and SR pursuant to the 1956 Agreement, the subject, the application number, the filing date, the applicants, and the SR "EM" file number for each SR application involved in the interferences settled:
    3. Interference No.

      Subject of

      Application

      Application No.

      Date Filed

      SR

      Applicants

      EM

      No.

      86,576

      ENIAC

      757,158

      06/26/46

      Eckert

      Mauchly

      EM-6

      86,997

      Information Storage System

      97,178

      06/10/49

      Eckert

      EM-8

      Lukoff

      86,998

      Information Storage System

      98,178

      06/10/49

      Eckert

      EM-8

      Lukoff

      87,203

      Information Storage System

      98,178

      06/10/49

      Eckert

      EM-8

      Lukoff

      87,230

      ENIAC

      757,158

      06/26/46

      Eckert

      Mauchly

      EM-6

      87,231

      BINAC

      179,158

      08/16/50

      Eckert

      Et al

      EM-22

      87,388

      ENIAC

      757,158

      06/26/46

      Eckert

      Mauchly

      EM-6

      87,779

      ENIAC

      757,158

      06/26/46

      Eckert

      Mauchly

      EM-6

      87,872

      ENIAC

      757,158

      06/26/46

      Eckert

      Mauchly

      EM-6

      87,957

      Magnetic Reading Device

      253,189

      10/25/51

      Rubens

      ERA-30

      88,118

      ENIAC

      757,158

      06/26/46

      Eckert

      Mauchly

      EM-6

    4. In the August 21, 1956 Agreement, IBM reserved the right to proceed with a challenge to the ENIAC patent application on the public use ground.
    5. In 1958, IBM became concerned because it feared that, for antitrust purposes, it might be argued that IBM's 1956 attempt to institute a public use proceeding against the ENIAC patent application was insufficient since the petition had been denied on a procedural matter and not on the merits.
    6. In 1958, IBM was aware that there could be antitrust ramifications if it did not proceed further and that it could charge in a renewed petition that Eckert and Mauchly committed a fraud on the Patent Office by not disclosing public use information to the Office at the time they executed their oaths in 1947.
    7. IBM, with SR's knowledge, never raised the question of the commission of fraud on the Patent Office by Eckert and Mauchly in its petitions for institution of public use proceedings.
    8. On February 20, 1959, IBM renewed its previously filed petition for the institution of a public use proceeding against the ENIAC application and did not bring out all of the public use information it had nor the information concerning inventive derivations by Mauchly from Atanasoff which was then in IBM's possession.
    9. Furthermore, both parties knew that the Patent Office had a long established policy of refusing to process public use petitions.
    10. IBM had more to lose than to gain by establishing invalidity of the ENIAC patent application once the 1956 cross-license had been executed because IBM knew that once it had agreed to pay $10,000,000, its competitors would be financially burdened by the ENIAC patent application only if it issued; furthermore, IBM knew that any of the claims of its SSEC application common to ENIAC claims would be similarly invalid.
    11. When IBM renewed its public use petition in 1959, a patent attorney representing SR wrote a letter to Army Ordnance asking the Ordnance not give IBM access to evidence which might establish the fact that ENIAC had been in public use before the critical date; however, no effort was made by IBM to subpoena the records.
    12. The foregoing acts and non-acts are consistent with conspiracy.
  3. In 1960, the Assistant Commissioner declined to order a hearing on the claim of public use and IBM took no further legal action.
    1. On May 26, 1960, the Commissioner of Patents by Assistant Commissioner Crocker advised IBM and the ENIAC applicants that the IBM petition to institute public use proceedings had been denied on the ground the affidavits and exhibits submitted on behalf of IBM failed to make a prima facie showing that the subject matter of the ENIAC application was in public use or on sale more than one year prior to its filing; thus, the question of public use of the ENIAC was never considered on the merits by the Patent Office.
    2. After the Patent Office denied IBM's petition for institution of public use proceedings in 1959, IBM made an internal report to state that it had pursued the public use proceeding in good faith even though any direct benefit to IBM to be obtained from the public use proceeding was eliminated and even though IBM and SR knew the Patent Office proceeding was essentially a sham.
    3. IBM and SR were both aware that further appeals were available on the public use issue and that the Patent Office decision not to hold a public use hearing was not binding on the courts; however IBM concluded that it could claim to have leaned over backwards to appear to act in an ethical manner and that nothing further could be expected of it.
    4. IBM made no further formal attack on the validity of the ENIAC patent application or patent despite its possession of evidence of and belief in the invalidity.
  4. Settlements are, of course, to be encouraged unless in the process the antitrust laws are violated and the public interest harmed.
  5. I find no violation of the antitrust laws and find lack of proof as to injury.
    1. On August 21, 1956, IBM and SR entered into an agreement providing, inter alia, for a non-exclusive patent cross-license in the EDP field.
    2. Also on August 21, 1956, IBM and SR entered into procedural agreements to dispose of eleven outstanding Patent Office interferences between patents and patent applications of the two companies. Six of these interferences and agreements involved the ENIAC patent application and five involved other SR patent applications.
    3. A Honeywell witness characterized these 1956 IBM-SR interference procedure agreements as "very conventional," and Honeywell itself (through Datamatic, which it controlled) later joined in certain of them.
    4. Honeywell has not proven any fraud in connection with the patents and patent applications involved in the eleven IBM-SR procedural interference agreements.
    5. Honeywell has not shown that the 1956 IBM-SR agreements on interference procedures alone constituted an unreasonable restraint on trade or were otherwise improper.
    6. Honeywell has proven no injury to its business or property caused by the 1956 IBM-SR agreements on interference procedure.
    7. Honeywell has not shown that the 1956 IBM-SR agreements on interference procedures provide any grounds for declaring the ENIAC patent, or any other SR patent, invalid or unenforceable.
    8. There was suppression of the facts concerning the 1956 IBM-SR interference agreements.

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