United States. Congress. Senate. Committee on the.

The Industrial reorganization act. Hearings, Ninety-third Congress, first session [-Ninety-fourth Congress, first session], on S. 1167 (Volume pt. 7) online

. (page 121 of 140)
Online LibraryUnited States. Congress. Senate. Committee on theThe Industrial reorganization act. Hearings, Ninety-third Congress, first session [-Ninety-fourth Congress, first session], on S. 1167 (Volume pt. 7) → online text (page 121 of 140)
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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.
0.2 Based upon statements of claims as presented by the partie.s, 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 :

0.2.1 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 Sectionsl and 2 of the Sherman Act and Section 7 of the Clay-
ton Act.

0.2.2 Honeywell claims that SR and ISD engaged in illegal activities as follows :
.1 The fraudulent procurement and enforcement of ENIAC, EDVAC, and
other patents and patent applications.

.2 The illegal acquisition of the ENIAC patent application.
.8 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 defendants' EDP patents.

.4 Irrespective of the ENIAC patent's validity, the entering into of a
total cross-license of EDP patents and EDP know-how with IBM in 10.')6.

..5 The attempted enforcement of the ENIAC patent known by defendants
to be subject to infirmities.

.6 Demanding discriminatory royalties for the ENIAC patent lice.nse.
0.2.3 Honeywell claims that if it prevails on any of the foregoing that it is
then entitled to damages and injunctive relief.



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0.2.4 Honeywell states further that if its allegations of conspiracy and com-
bination in violation of the antitrust laws are not sustained, then certain sub-
sidiary issues must be reached :

.1 Whether or not the ENIAG patent is valid under the technical aspects
of the Patent Laws.

.2 If the ENIAO patent is technically valid, has Honeywell infringed.
.3 If infringement is proved, what damages has ISD sustained.
0.2.5 SR and ISD take the position that this is basically a lawsuit by ISD
charging Honeywell with infringement of tlie ENIAO patent, and a suit by Honey-
well against SR and ISD for a declaratory judgment that the ENIAC patent is
invalid.

0.2.6 SR and ISD claim that Honeywell has admitted the infringemnet if the
ENIAC patent is valid, but will nevertheless select a limited number of claims
to litigate this question.

0.2.7 In response to the ENIAC patent infringement claim, SR and ISD claim
that Honeywell has raised a number of affirmative defenses :

.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.
0.2.8 With respect to the antitrust issues, SR and ISD claim that the issues
relate to :

.1 Fraudulent procurement which has been raised by Honeywell as a de-.
fense, 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.
0.2.9 In response to the Count Three claim of Honewell'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.

0.2.10 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.

0.3 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.

0.3.1 Pending determination of the issues of liability, Honeywell's testimony
as to damages on its antitrust claims, and ISD's testimony as to patent infringe-
ment damages or accounting, were deferred.

0.3.2 Honeywell's evidence as to impact or injury was received in the trial
on the liability issues.

0.4 Trial commenced before the Court without a jury on June 1, 1971 and con-
tinued 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.

0.4.1 Seventy-seven witnesses presented oral testimony in the courtroom, and
the testimony of an additional eighty witnesses was presented by deposition
transcripts.

0.4.2 The Court's attention was directed to 25,086 exhibits marked by Honey-
well as Plaintiff's Trial Exhil)its (PX).

0.4.3 The Court's attention was directed to 0.96S exhil)its marked bv SR and
ISD as Defendants' Trial Exhibits (DX).

0.4.4 Many of the exhibits were extremely voluminous, including both docu-
ments 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 col-
lection 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.



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0.4.5 About 500 additional exhibits were marked and referred to during the
trial.

0.4.G The trial transcript extends to over 20,067 page.s.

0.5 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.

0.5.1 The Court was aided by extensie tutorial testimony and demonstrative
exhibit presentations. The courtroom demonstrations included the copious use
of charts, photographs, slides, physical devices, mechanical and electronic ma-
chines operated in the courtroom, and a movie tilm.

0.5.2 The Court had a view of both Honeywell and SR electronic data processing
systems in computing operation at their respective Twin City facilities.

0.5.3 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.

0.5.4 The Court had the benetit of excellent and well documented briefs of
both parties.

0.5.4.1 Pursuant to a pretrial conference held on July 1, 1070, the Court
suggested and counsel adopted the format of Sample Pretrial Onler No. 5 of
the Manual for Complex and Multidistrict Litigation for the submission of final
pi'etrial briefs.

0..5.4.2 The pretrial briefs submitted by the parties set forth, in sepai-ately
nmubered 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 adver.se
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.

0.5.4.3 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").

0.5.4.4 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.

0.5.4.5 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.

0.5.5 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 :

0.5.5.1 Glossary of Principal Terms, Appendix A to Volume I of Plaintiff's Trial
Brief.

0.5.5.2 General Information Concerning Patents, Appendix B to Volume I of
Plaintiff's Trial Brief.

0.5.5.3 Plaintiff's Exhibit 21755.7, Abstract of the Patent Office Historv, U.S.
Patent Application Serial Number 757.158 [the ENIAC patent application], and
defendants' response thereto in their Appendix to Request for Findings.

0.6 On April 9, 1973, the Court advised counsel for the parties of ultimate
Findings made i;pon the evidence of record. The decision reached is a mixefl
one, and the aid of both parties has been sought through the submission of
more detailed Findings on those issues where plaintiff or defendants have
prevailed.



5802

0.6.1 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.

0.G.2 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.

0.6.3 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.

0.6.4 Findings 1 through 12 below are concerned "primarily with the validity
and enforceability of defendants' electronic data processing (EDP) or so-called
"computer" patent rights against plaintiff. Findings 13 through 23 below deal
more particularly with the anti-trust 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.

0.6.5 All legal citations which support the Findings and Conclusions herein

are located in the Appendix hereto at the corresponding decimalized number.

0.6.6 In i-eaching 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 :

0.6.6.1 the history of technical evolution of automatic electronic digital com-
puting from the earliest mechanical aids to the modern day computer ;

0.6.6.2 the history of development of her 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;

0.6.6.3 the history of design and construction of the earliest automatic elec-
tronic digital computers and. particularly, the so-called "ABC" (Atanasoff-Berry
Computer) at Iowa State College, and the "ENIAC" machine (Electronic Nu-
merical Integrator and Computer) of Army Ordnance at the Moore School of the
University of Pennsylvania ;

0.6.6.4 the work of Dr. John W. Mauchly (Mauchly or sometimes simply M),
J. Prosper 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 Eckert-Mauchly
Computer Corporation (EMCC) and Remington Rand, Inc. (RR), as predeces-
sors of SR ;

0.6.6.5 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 Ofiice, including interference proceedings,
controversies with IBM, and litigation with Bell Telephone Laboratories, Inc.
(BTL) ;

0.6.6.6 the history of 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 suijersonic
airfoils and projectiles ;

0.6.6.7 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 Com-
puter) 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 EDVAC, BINAC,
and UNIVAC machines ;

0.6.6.8 the procurement and continuing prosecution of patents and applications
(referred to at Paragraph 30A of the Second Amended Complaint) on develop-
ments arising out of the commercialization and further business activities of
Eckert and Mauchly based on the work on the ENIAC and EDVAC machines ;

0.6.6.9 a detailed technological, financial and economic survey of the EDP in-
dustry'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, Honey-
well, Radio Corporation of Amercia (RCA), National Cash Register Company
(NCR), Burroughs Corporation (Burroughs), General Electric Company (GE),



5803

Control Data Corporation (CDC), and Philco-Ford Corporation (PMlco-Ford) ;
and

O.tj.G.lO the convergence of all of these historical and evolving forces upon the
extraordinary automatic electronic digital computer and the EDP industry to-
day : an industry producing EDP systems which perform an 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 (nano-
second) and of persisting in the work for hours on end, and thus completing tasks
beyond the capacity of human bodies and minds.

0.7 The Findings, as an amalgamation as 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.

0.8 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.

0.9 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.

1. Public Use

1.1 The claimed invention disclosed in the ENIAC ('606) patent was in public
use prior to the critical date.

1.1.1 The ENIAC patent, No. 3,120,606, discloses and claims the ENTAC ma-
chine constructed at the Moore School of Electrical Engineering of the University
of Pennsylvania.

1.1.1.1 The ENIAC machine was an electronic computer of monstrous size,
built during wartime with government funds by a team of Moore School em-
liloyees. It employed some 18,000 vacuum tubes, hundreds of switches, thousands
of relays, and nules of wiring. Defendants contend that the ENIAC machine is
properly regarded as the pioneer electronic computer from which all others
evolved.

1.1.1.2 The ENIAC machine is described in a Final Report which was prepared
by the Moore School team, transmitted to and accepted by Army Ordnance by
about June 6, 1946. There are no significant differences between the ENIAC ma-
chine as constructed and placed in operation, and the ENIAC machine as described
in the Final Report.

1.1.1.3 The descriptive content of the ENIAC patent disclosure was extracted
from and based upon corresponding portions of the Final Report description of the
ENIAC machine. There are no significant differences between the subject matter
described in the Final Report and the claims of the ENIAC patent.

1.1.1.4 The patentees of the ENIAC patent state therein that the ENIAC ma-
chine "embodies our invention" and are bound thereby. Conduct with respect to
that ENIAC machine is, therefore, conduct with respect to "the invention."

1.1.1.5 SR and ISD have further characterized the subject matter of the ENIAC
patent as "the invention of the Automatic Electronic Digital Computer," and are
bound thereby. Conduct with respect to an automatic electronic digital computer
is, therefore, conduct with respect to "the invention."

1.1.1.6 Each of the claims of the ENIAC patent reads on the ENIAC machine
as it was constructed and placed in operation at the Moore School and described
in the Final Reports.

1.1.1.7 The ENIAC machine which was represented by Eckert and Mauchly
to be that which "embodies our invention" is identical with the ENIAC invention,
however claimed.

1.1.1.8 Counsel for defendants did not object to the Court's statement at trial
that there was no dispute about the fact that Eckert and Mauchly claimed to
be the two sole joint inventors of the ENIAC, from input all the way through
to output.

1.1.1.9 For the foregoing reasons, there is no necessity to make specific reference
to the individual claims of the ENIAC patent where conduct barring the valid
issuance of a patent is conduct involving either the same ENIAC machine (as
will be set forth hereinafter with respect to the bars of public use and on sale),
or involving a prior automatic electronic digital computer (as will be set forth



5804

hereinafter with respect to the bars of derivation from Atanasoff and prior pub-
lication by von Neumann) .

1.1.1.10 Where an additional bar to less than the all-inclusive entirety of "the
invention" has also been found herein, specific selected claims of the EXIAC
patent have been applied and essentially cumulative further findings particular-
ized by claims are also hereinafter included.

1.1.1.11 The entire subject matter of the EXIAC machine, represented by Eckert
and Mauchly to be that which "embodies our invention," is barred from valid
patentability since that machine was in public use in this country more than
one year prior to the date of the application for patent on June 2G, 1947. The
one-vear-prior or statutory bar date is referred to as the "critical date," and is
June 26, 1946.

1.1.2 The ENIAC machine was constructed by mid-X^ovember, 1945.

1.1.2.1 The design for the EX'IAC machine was frozen prior to the end of
1944 so that the construction of the machine could be completed as rapidly as
possible to confirm the usefulness of electronic computation with such large
machines.

1.1.2.2 By mid-1945, the construction of the various EX^'IAC units was com-
plete and testing of the completed units had commenced.

1.1.2.3 The EXIAC was placed in operation as a system in mid-Xovember, 1945.

1.1.2.4 Moore School and Army Ordnance representatives considered that the
EX'IAC machine was being operated rather than tested after December 1. 1945.

1.1.3 The ENIAC machine which embodied "the invention" claimed by the
ENIAC patent was in public and non-experimental use for the following purposes,
and at times prior to the critical date :

Los Alamos calculations December, 1945-rebruary, 1946
International publicity

1. Press demonstration use February 1, 1946

2. Newsreel use February 8, 1946

3. Formal dedication use February 15, 1946

4. Open house use February 16, 1946
Hartree calculations April, 1946-July, 1946
Constant practical use December, 1945-June, 1946
Commercial solicitation uses February, 1946-April, 1946

1.1.3.1 The Court finds that PX 4245, a March 19, 1946 letter from Major
W. Stephens, Jr., to Mr. A. Borbeck, Artillery Branch, which was never pre-
viously called to the attention of either the Patent Ofl3ce or the late Judge
Archie O. Dawson in the case of Sperry Rand Corporation et al. v. Bell Telephone
Laboratories, Inc. hereinafter SR v. BTL) before the Southern District of X^ew
York, cleai'ly indicates that prior to March, 1946 the EXIAC machine was "com-
pleted with the performance of research and experimental work in connection
with the development of an Electronic N^umerical Integrator and Computer."

1.1.3.2 SR and ISD contend that the correspondence of November, 1946, be-
tween the Moore School and the Army Ordnance patent section responsible for
preparation of the ENIAC patent application (referred to by the names of the
writers as the "Sharpless/Libman letters") has no probative value. Despite an
error in the date of the press demonstration as recited in PX 5374, the Sharpless/
Libman letters othei-wise have great probative value and clearly indicated to
Army Ordnance attorney Max L. Libman, who was then preparing the EX'IAC
patent application, that the completed EX'^IAC machine was first put to work
for practical purposes on December 10, 1946, on a set of partial differential
equations for the jNIanhattan Engineering District (hereinafter "the Los Alamos
calculations or problem"). That initial work was not considered experimental
since the letter states that "when the first problem was put on the machine it
was the first time that tlie machine as a whole was being used, it was fully
expected that the problem would be solved and it was."

1.1.4 The Los Alamos calculations which commenced December 10. 1945, were
the first problem placed on the ENIAC machine. Wlien the first problem was put
on the machine it was the first time that the machine as a whole was being used.
It was fully expected that the problem would be solved. It was.

1.1.4.1 The EXIAC machine, and hence any invention claimed in the ENIAC
patent, was reduced to practice no later than the date of commencement of the
machine for the Los Alamos calculations, December 10. 1945.

1.1.4.2 The ENIAC project for the development of a high-speed electronic
computer was made known to Dr. John von Neumann Army Ordnance scientific
consultant) by Dr. Herman H. Goldstine (Army Ordnance liaison oflScer on the
ENIAC project) in the summer of 1944, after the ENIAC design had been frozen.



5805

Von Neuiuann visited the Moore School in July, 1944, and witnessed two EXIAC
accumulator units and a cycling unit wired to function as a small ENIAC
machine. By early 1945, von Neumann had begun consideration of how the ENIAC
machine could be organized and operated to solve complex problems.

1.1.4.3 By the summer of 1945, Dr. Edward Teller, Dr. Stanislaw Ulam and
other scientists of the Los Alamos Laboratory had already recognized the urgent
need for large-scale numerical calculations designed to certify the feasibility of a
hydrogen bomb design concept having several parameters including various mix-
tures of deuterium and tritium. Teller discussed his computational needs with
von Neumann who indicated his belief that the ENIAC machine would be suitable
for performing certain calculations regarding the feasibility of the hydrogen
bomb, called the "Super."

1.1.4.4 The calculations to be performed were complex and required a large
number of arithmetical computations. They were not intended to provide a
particular numerical answer or series of answex'S, but rather were contemplated
to provide, and did provide, the basis for a yes or no answer on the utility of
continued scientific exploration of the "Super."

1.1.4.5 Useful results could be and were obtained from such calculations on the



Online LibraryUnited States. Congress. Senate. Committee on theThe Industrial reorganization act. Hearings, Ninety-third Congress, first session [-Ninety-fourth Congress, first session], on S. 1167 (Volume pt. 7) → online text (page 121 of 140)