The opinion of the court was delivered by: CONNER
This is an action for a declaratory judgment of invalidity and non-infringement of U.S. Patent No. 3,959,624 which was issued May 25, 1976 to defendant Walter Kaslow and which covers a system and method of electronically "reading" a coded symbol on a discount coupon presented by a retail customer, verifying that the coupon applies to one of the items actually purchased by the customer and, if so, deducting the discount from the customer's bill. The action is before the Court on defendant's motion for summary judgment dismissing the complaint on the ground that there is no justiciable controversy between the parties.
The following facts are either agreed by the parties or asserted in affidavits submitted by plaintiff which, for purposes of determining the existence of an issue of fact, must be accepted as true; see Sticker Industrial Supply Corp. v. Blaw-Knox Co., 367 F.2d 744, 746 (7th Cir. 1966):
1. Plaintiff is a tax-exempt membership corporation whose members include manufacturers of products marked with symbols embodying a Uniform Product Code (UPC) identifying the manufacturer, product and retail price. In participating retail stores, the check-out stands are provided with equipment which optically "reads" the coded symbols on the items selected by each customer and electronically computes the total price of such items.
2. As early as 1973, plaintiff had contemplated the use of similar coded symbols on discount coupons, such as are included in newspaper advertisements, with such symbols being presented for scanning by the same reading equipment at the check-out stand to verify that the customer presenting the coupon has actually selected for purchase the item to which the discount was intended to apply and, if so, to deduct the discount from the total bill. The purpose, of course, was to prevent "misredemption" crediting the discount to a customer who had not purchased the item to which the discount applied which had resulted in losses estimated to amount to millions of dollars annually.
3. During 1975, while his application for the patent in suit was pending in the Patent and Trademark office, defendant was in communication with plaintiff concerning the application, and plaintiff, through its counsel, notified defendant that plaintiff had no interest in it.
4. During early 1976, plaintiff, the Newspaper Advertising Bureau (NAB) and certain manufacturers and retailers cooperated in a field test of a UPC discount coupon system, with the coupons being included in newspaper advertisements.
5. The May 10, 1976 issue of Sales and Marketing Management contained an article describing these tests.
6. On June 3, 1976, defendant wrote to Mr. Richard L. Neale, Vice President of NAB, referring to the article and stating:
"It is important for the NAB to know that this UPC scheme is original with me and that a patent was recently awarded (copy enclosed) which Essentially covers the UPC cents-off system described in the article. * * * My purpose in calling this patent to your attention is to advise you that it is available for licensing on reasonable royalty terms." (Emphasis added).
Neale did not reply to this letter.
7. During the summer of 1976, plaintiff retained counsel to study the patent in suit and was advised that the patent was invalid and/or unenforceable. In September of 1976, plaintiff, in reliance on this opinion, issued to its members its Guideline 22, describing a UPC discount coupon system and recommending its adoption.
8. In May 1977, Neale spoke at a workshop of the Association of National Advertisers and discussed the UPC discount coupon system. Defendant heard Neale's presentation and, at its conclusion, approached Neale, told him of his patent and asked him whether Neale had ...