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January 10, 1983

TEXTRON, INC., Plaintiff,
TELEOPERATOR SYSTEMS CORP. and Carl R. Flatau, Defendants

The opinion of the court was delivered by: BRAMWELL


 BRAMWELL, District Judge.

 On October 29, 1982, plaintiff commenced the instant action by the filing of a summons and complaint along with an application for a temporary restraining order and preliminary injunctive relief. The application for a temporary restraining order was granted conditioned upon the posting of a one million dollar security bond. On November 10, 1982 the court denied defendants' application to modify the temporary restraining order and continued it in full force and effect.

 The hearing on the preliminary injunction was convened on November 17-20, 1982 during which documentary evidence and the testimony of several witnesses was received. Today, pursuant to Rule 52(a) of the Federal Rules of Civil Procedure, the court disposes of that application.


 1. Plaintiff, Textron Inc., is a corporation organized under the laws of the State of Delaware, having its principal place of business at 40 Westminster Street, Providence, Rhode Island. Plaintiff conducts its operations in the United States through a number of Divisions. One of these Divisions is the Bridgeport Machines Division (hereinafter referred to as Bridgeport), having its principal place of business located at 500 Lindley Street, Bridgeport, Connecticut. (complaint, para. 2 and Jahnke affidavit, para. 2).

 2. Defendant, TeleOperator Systems Corp. (hereinafter referred to as T.O.S.) is a corporation organized under the laws of the State of New York, having its principal place of business at 45 Knickerbocker Avenue, Bohemia, New York. (complaint, para. 3).

 3. Defendant Carl R. Flatau (hereinafter referred to as Flatau), a recognized expert in the field of robotics, is the president and principal stockholder of T.O.S. (complaint, para. 4; 323; 388-91,* D.Ex. K** ).

 4. For many years Bridgeport has been in the business of making and selling machine tools, such as vertical milling machines. Over the past ten years, it has been making and selling milling machines provided with computer numerical control units (hereinafter referred to as CNC units). Bridgeport manufactures its milling machines at facilities in Bridgeport, Connecticut. It has an operating facility in Horsham, Pennsylvania that develops, designs and manufactures CNC units that are subsequently integrated with various mechanical machines or tools, such as milling machines, at Bridgeport's manufacturing facilities in Bridgeport, Connecticut. (28-31).

 5. In 1980, Bridgeport became interested in large scale or volume production and sale of robots for industrial uses, such as in the automotive industry. In that regard, Bridgeport became aware of the functional performance requirements or specifications of General Motors Corporation for industrial robots called the PUMA system (programmable universal machine for light assembly). (31-34, 36, 87-88, 259-61; Pl.Ex. 13*** ).

 6. In furtherance of this goal and, more specifically, in order to ascertain the names of robotics specialists, Gerald McCaul (hereinafter referred to as McCaul), Vice President for Strategic Planning of Bridgeport/Machines travelled around the United States visiting major manufacturers and buyers of robots, attending conferences on robotics and conferring at research universities working in the field. (Tr. 260-61, 264-65, 307-08; D.Ex. J).

 7. During the course of these visits faculty members at the Massachusetts Institute of Technology recommended Flatau to McCaul as an outstanding expert in the design of manipulators and robots. (261).

 8. Based on these recommendations, McCaul decided to approach T.O.S. and Flatau because of his expertise in the field. In June of 1980 McCaul wrote to Flatau. (261, 265, 307-09, 312-13, 317, 398, 403; Pl.Ex. 1, 28, 29).

 9. Prior to any contact with Bridgeport, T.O.S. was already involved to a considerable degree in the designing of so-called manipulators or manipulator arms adapted for remote but direct operation by human beings in special environments and applications, as distinguished from design work relating to industrial robots that are programmable for automatic operation in connection with the commercial manufacture of other products. (221-22, 262-63, 399, 310).

 10. In July 1980, in response to McCaul's letter, Flatau met with McCaul at T.O.S.'s office. At that meeting, Flatau showed McCaul a film about the robotics technology already developed by T.O.S. (398; D.Ex. M).

 11. The technology displayed in the film and described in finding of fact number 9 was not directly applicable to what Bridgeport was looking for -- that is inapplicable for use with industrial robots automatically programmed to engage in the commercial manufacture of other products. (262-63, 310-12, Pl.Ex. 28, 29).

 12. In the latter half of 1980, Bridgeport initiated discussions with T.O.S. and Flatau about the design capabilities of T.O.S. in the remote manipulator field and possible application of that capability to industrial robot design. During those discussions Bridgeport provided T.O.S. with a copy of the specifications for the aforesaid PUMA system and requested T.O.S. to prepare a proposal for the design of the mechanical features of an industrial robot that would be integrated with a CNC unit developed by Bridgeport to automatically control and program its operation as desired. (36-37, 261-63, 266-67, Pl.Ex. 1).

 13. Flatau prepared such a design proposal for T.O.S. and submitted it to Bridgeport on January 30, 1981. That proposal expressly contemplated the design of an industrial robot and the fabrication of one prototype, with the specific stated goal of large scale or volume production by Bridgeport. On pages 2 and 3 of the T.O.S. design proposal, Flatau discussed the then "existing state of the art" in the industrial robot field. No mention was made therein of any prior work done by him or T.O.S. in that field. In addition, the T.O.S. design proposal estimated that the design phase would require 600 hours of engineering time, 1600 hours of design time, and 600 hours of drafting time while 2600 hours of machine shop time were estimated for prototype fabrication. The estimated cost was about $250,000. (41-46; Pl.Ex. 2, 2A).

 14. On pages three and four of the January 30 design proposal, under the heading of "CONTRACTUAL REQUIREMENTS" appeared the following:

1. T.O.S. will perform the work on a cost plus basis.
2. A Progress Report arrangement is required.
3. A Proprietary Technology Agreement is required. This must address and define the rights of Bridgeport Machines in the design. It also must define the rights of T.O.S. in its own technology.
4. A Hold Harmless Agreement with respect to product liability of Bridgeport Machines sales on the design will be required.
5. T.O.S. also desires other participation in the sale efforts. This would include furnishing of application engineering services where required. In addition, we seek an arrangement enabling "TOS" to use the production hardware for devices equipped with more advanced features; e.g. force transducers, or intelligent controls for the University Research Market. This could take the form of a Dealership in the Robotics segment of Bridgeport equipment. The main advantages of such an arrangement to Bridgeport Machines would be that a continuous dialogue with advanced developments in the field would be created. As it is expected that the field of Robotics will mature quite rapidly, such a procedure would allow Bridgeport Machines to stay ahead of technological developments in the industrial sector.

 (Pl.Ex. 2A).

 15. At a meeting held on February 9, 1981, Bridgeport advised T.O.S. to proceed with the program as outlined in the January 30 design proposal. The substance of this meeting was embodied in a February 10, 1981 letter of intent from Bridgeport to T.O.S. (Pl.Ex. 3).

 16. This letter addressed each of the "CONTRACTUAL REQUIREMENTS" embodied in the January 30 T.O.S. design proposal. With respect to requirement Nos. 3 and 5, quoted above, it specifically provided that:

3. TOS will have rights to apply developed technology to noncompetitive applications. Namely, manipulator, this will receive a more finite definition in the future."
5. As discussed, we have a general agreement that TOS participation in some form of the sales effort will be beneficial to both TOS and Bridgeport/Textron. This matter will also receive further definition in the future."

 (Pl.Ex. 3)

 17. On February 16, 1981 Flatau wrote back to Mr. William R. Jahnke (hereinafter referred to as Jahnke), Vice President of Engineering for Textron/Bridgeport acknowledging the February 10 letter and detailing the costs involved in executing the design proposal. The letter indicated the work would be done at cost plus 20 per cent. (Pl.Ex. 5).

 18. The February 16 letter from T.O.S. contains no language disagreeing with paragraph 5 of the February 10 Bridgeport letter of intent. Had defendants so disagreed at that time, plaintiff indicated that it would have cancelled the project. (Pl.Ex. 5, 49, 52, 222-23, 338, 413-14).

 19. As a result of the agreements embodied in the foregoing exchange of correspondence, Bridgeport issued, and T.O.S. accepted, its March 16, 1981 Purchase Order, No. 24881, stating in pertinent part:

"Design 5 KG Industrial Articulated Manipulator Arm in general accordance with G.M. specification for programmable universal machine for light assembly, attached, and T.O.S. design proposal dated 30 January 1981. Bridgeport will design a ...

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