INDUSTRY APPLAUDS SCAN CASE DECISION 2004-02-09 (2)

Michael Garry

LAS VEGAS -- A legal victory in a case filed by seven bar-code scanner manufacturers is being described also as a victory for retailers who scan bar-coded products and manufacturers who apply bar codes to their products.

However, a final resolution for retailers would be delayed if the case is appealed as expected.

The ruling in the case, made on Jan. 24 by a U.S. District Court here, held that 14 scanning-related patents claimed by the Lemelson Medical, Education & Research Foundation, Portland, Ore., are "invalid, unenforceable, and not infringed by current scanners."

If upheld, the ruling is expected to undercut, if not terminate, several other cases filed by the Lemelson Foundation against retailers and hundreds of other companies seeking royalties based on usage of bar-code scanning systems.

The plaintiffs in the Las Vegas case, launched in 1999, include Symbol Technologies, PSC, Accu-sort Systems, Intermec Technologies, Metrologic Instruments, Teklogix, Zebra Technologies and Cognex. All of the companies market scanning systems except Cognex, which markets a system known as "machine vision."

"This decision is a victory for common sense and fairness," said Tim Hammonds, president and chief executive officer, Food Marketing Institute, Washington. "It could save companies millions of dollars in needless litigation and nuisance licensing fees. We fully expect the decision to be affirmed if appealed."

"This is a very positive development, a victory for the entire industry," said Stephen A. Brown, senior vice president and general counsel, Uniform Code Council, Lawrenceville, N.J., the organization that helped make the bar code the universal product identifier in retail and other industries. "Lemelson's claims were always a cloud over scanning, so anything that can remove them is beneficial. We're very pleased."

Brown cautioned that an appeal by the Lemelson Foundation would delay the final disposition of cases filed by the Foundation against retailers and other companies. The Lemelson family issued a release suggesting it would appeal, and Lemelson's attorney, Gerald Hosier, was quoted in published reports saying an appeal would be launched. In USA Today, Hosier was quoted as acknowledging the appeal would be "an uphill battle."

The Lemelson Foundation was founded by Jerome Lemelson, who held numerous patents and pursued many patent suits prior to his death in 1997. In regard to bar-code scanning, Lemelson's patents were originally filed in the mid-1950s, well before the development of bar-code scanning, and have been considered by many observers to be unrelated to bar-code scanning -- a position upheld in the Symbol case.

TAKING ON RETAILERS

One pending case filed in the U.S. District Court in Arizona, Lemelson v. CompUSA Inc., et al., named a wide range of other retailers. Among those named were the following food distributors: Albertsons, Bashas', Fred Meyer, Kroger, Nash Finch, Shaw's Supermarkets, Smart & Final, Supervalu, Unified Western Grocers, Wal-Mart Stores and Whole Foods Market. Bashas' and Supervalu had no comment on the case.

A separate pending case, Lemelson v. Alcon Laboratories, et. al., also filed in Arizona, named a host of food manufacturers, including General Mills, Quaker Oats and Tyson Foods.

Another major scanner manufacturer that did not participate in the Symbol case, NCR, Atlanta, reached a licensing agreement in 1999 with Lemelson intended to immunize NCR's retail customers from patent infringement claims by Lemelson. Lemelson subsequently attempted to rescind the agreement, an effort NCR was able to prevent through legal proceedings.

Following the ruling in the Symbol case in Nevada, NCR issued the following statement: "At present, we have no plans to pursue a claim or lawsuit against the Lemelson Foundation in connection with NCR's license to its patents. Historically, a high percentage of patent infringement decisions are reversed on appeal. We will reevaluate our alternatives when the Symbol case is finally concluded, following any appeals that may be taken."

UCC's Brown noted that the judge in the Symbol case, U.S. District Judge Philip Pro, "closed the door in a number of ways" to future appeals. However, he added, the ruling did not mean that companies that had struck licensing or financial deals with the Lemelson group to avoid litigation would get anything back or could void their current contracts.

In addition to NCR, many other companies, including some food retailers, are known to have agreed to licensing arrangements with Lemelson's group, observers said. The total amount Lemelson's organization reportedly derived from such agreements has been reported as around $1.5 billion.

Los Angeles-based patent attorney Cheryl Johnson described the effect of the Symbol ruling as "effectively putting an end to [Lemelson's] ability to assert these [scanning-related] patents against retailers and others as he has done." Johnson's firm, Squire Sanders, Cincinnati, represents 40 to 50 companies in the eight pending Lemelson cases taking place in Arizona, including the CompUSA case involving retailers. The firm has filed briefs for UCC, Grocery Manufacturers of America and Food Distributors International (now part of FMI) in Lemelson cases.

Frank MacMurray, general counsel for PSC, noted that the Symbol case was prompted by "outrage" that the Lemelson group sought licenses from the vendors' retail customers, the end-users of scanning technology, often companies who were "the least able to defend themselves." PSC is defending some retailers in the pending Arizona cases.

Brown and Johnson said Lemelson's legal strategy was based on the concept of "submarine patents." That is, he would file patent applications and then repeatedly file continuations, keeping the process private as he observed industry developments.

The patents did not issue "until other people came up with [similar ideas] and implemented them," said Brown. "Then his right to claim would go back to when he originally filed."

The Symbol ruling invalidating the Lemelson patents cited Lemelson's use of delays in asserting its patents. "As the U.S. District Court judge noted," said FMI's Hammonds, "if ever there was a case where voiding a claim was warranted because of an unreasonable filing delay, this is it."

In 1996, U.S. patent law was reformed to require that filed patents would become public after a period of time, even if still in the patent office, noted Brown.

Attempts by SN to reach Gerald Hosier, attorney for the Lemelson Foundation, were unsuccessful. However, in a prepared statement, the Lemelson family said, "Jerome Lemelson's career as an inventor spanned more than four decades, and resulted in nearly 600 patented technological innovations in fields as diverse as electronics, computers, industrial processes, medical devices and toys.

"While we respectfully disagree with the trial court's decision in the recent Symbol Technologies case," the statement continued, "those issues will ultimately be resolved in the court system."