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PRINCETON GRAPHICS v. NEC HOME ELEC.

February 22, 1990

PRINCETON GRAPHICS OPERATING, L.P., PLAINTIFF,
v.
NEC HOME ELECTRONICS (U.S.A.), INC., DEFENDANT.



The opinion of the court was delivered by: Stewart, District Judge:

MEMORANDUM DECISION

Plaintiff Princeton Graphics Operating, L.P. ("Princeton") brought this action against defendant NEC Home Electronics (U.S.A.), Inc. ("NECHE"), alleging false advertising claims in violation of section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a).*fn1 By Stipulated Order dated May 24, 1988, the action was bifurcated between liability and relief for both discovery and trial purposes.*fn2 A non-jury trial was held as to liability between August 15, 1989 and August 30, 1989. After considering the evidence, we find for the plaintiff. The following constitutes our findings of fact and conclusions of law as mandated by Rule 52 of the Federal Rules of Civil Procedure.

Factual Findings

Plaintiff and defendant are competitors in the color video computer monitor field. The background to the instant action is the introduction of the PS/2 computer in the spring of 1987 and defendant's advertising claims with respect to PS/2 compatibility of its product, the MultiSync monitor (the "MultiSync").

In late 1986, rumors began circulating in the trade that the International Business Machines Corporation ("IBM"), the pacesetter and leader in the personal computer for business use arena, would introduce a new personal computer line, the PS/2. It was also rumored that the PS/2 would utilize a new "video standard," later known as "VGA" (for "Video Graphics Array"), that would utilize a 70Hz. "vertical frequency" which was higher than any then existing video standard.*fn3 Any new video standard introduced by IBM would have an obvious effect on computer monitor manufacturers since to obtain images in a particular IBM video standard one needed a monitor capable of displaying such images in that standard.*fn4 Therefore, we find that in the spring of 1987, a monitor's PS/2 compatibility was a major market issue in the computer trade. See Trial Transcript at 605-06; Trial Transcript at 937.

In early April of 1987, IBM introduced its new PS/2 computer. The PS/2 generated video signals in three VGA modes: a 400 line mode with a vertical frequency of 70Hz. and a horizontal frequency of 31.5 KHz which was used to display text; a 480 line mode used to display graphics with a vertical frequency of 31.5 KHz. and a vertical frequency of 60Hz.; and a 350 line mode with a horizontal frequency of 31.5 KHz. and a vertical frequency of 70Hz.

Defendant shortly thereafter obtained a few PS/2 computers for testing with its monitor, the MultiSync. It found that a 9-pin to 15-pin adapter cable was necessary to allow the MultiSync to connect with the PS/2. It is undisputed by the parties and we so find that although when connected by the adapter cable the MultiSync displayed images generated by the PS/2, manual adjustments were required under certain conditions. When the program switched between the 60Hz. and 70Hz. modes the picture displayed would vertically roll. This required the user to utilize the vertical hold knob on the monitor to stabilize the image each time the modes switched or locate a setting on the vertical hold knob which would simultaneously accommodate both modes. The second manual adjustment required that the user manipulate the MultiSync's vertical sizing control to compensate for a distorted image which could result if there was switching between the various VGA modes.*fn5

It is also undisputed, and we so find, that NECHE in mid-April 1987 issued a press release and other correspondence claiming that after "extensive testing" the MultiSync had been determined to be "fully compatible" with the PS/2 with the addition of an adapter cable. In July of 1987 NECHE placed a full page ad in the Wall Street Journal which asserted that the MultiSync was "compatible" with the PS/2 when used with the cable adapter. We find and it is undisputed by the parties that this advertising was aimed at relatively sophisticated and knowledgeable consumers such as distributors, wholesalers, retailers, retail chains, and corporate purchasing personnel (the "retail channel"). See, e.g., Defendant's Pretrial Memorandum at 12; Post Trial Memorandum of Plaintiff Princeton Graphics Operating, L.P. ("Pltf's Brief") at 3. These advertising claims were made despite the possibility that the above-discussed manual adjustments to the MultiSync might be necessary when it was connected by the adapter cable to the PS/2.*fn6 It is these claims which form the basis for the present action.*fn7

At trial plaintiff argued that NECHE's claims of the MultiSync's compatibility with the PS/2 were false as the term was commonly understood within the "retail channel" and such claims were made by defendant intentionally and willfully. Further, plaintiff charged that NECHE's claim of the MultiSync's PS/2 compatibility was false because the MultiSync with the cable adapter exceeded Federal Communication Commission ("FCC") radiation requirements and thus was not legally qualified for sale in the U.S. market.

Defendant countered that plaintiff had failed to prove that its definition of compatibility was uniformly accepted within the "retail channel" and that the MultiSync was in fact compatible with the PS/2. In addition, defendant contended that plaintiff had no standing to bring the Lanham Act action, and that plaintiff had no valid FCC regulation claim since the MultiSync did not violate FCC regulations and even if it did, the violation would not create a Lanham Act claim.

Defendant argues that the term "compatible" in the computer trade had a broad meaning. It is defendant's view that "compatible" essentially is understood to mean "works with" or the ability of one device "to function with" another. To support its expansive definition, defendant introduced into evidence numerous articles and dictionary definitions as well as expert testimony.

Plaintiff argues that within the "retail channel," the term "compatible" was commonly understood to mean that when there is an established standard known throughout the industry, a computer product claimed to be "compatible" with it must perform at or beyond the standard's requirements. In support of its definition, plaintiff offered expert testimony.

We find that within the "retail channel," the term "compatible" does not have the broad and flexible meaning as suggested by defendant when, as here, there is a possibility that a more precise definition may be applied.*fn8 Indeed, if there was one over-arching impression left on this court after the testimony given in this case it was that the computer industry is concerned with and depends upon accuracy. Thus, the testimony confirms our view that in an industry which depends upon accuracy, a lack of precision in the use of common terms, particularly in circumstances where those terms have the potential to be specific, would be an anomaly.

Moreover, we find that even if the "retail channel" had the broad and flexible definition of "compatibility" as pressed by defendant, the MultiSync under certain conditions, although not in all, would be unable to "work with" the PS/2 making it incompatible with the PS/2 even under defendant's definition.

Plaintiff's witness Bernard Lechner, an electrical engineer and display systems consultant, testified that products were compatible when one product met the specific performance requirements of the standard set forth by the other product to which it was being compared — in this case whether the MultiSync met the performance requirements of the IBM VGA standard. Trial Transcript at 175. This narrow approach was echoed by plaintiff's other expert witness Paul Spindel, an engineer and computer consultant, who defined an IBM compatible monitor as one which when connected to an IBM computer "does everything that IBM intends a monitor to do." Trial Transcript at 375. We find both definitions consistent with each other since they are practical equivalents. Although defendant presented articles which it contended illustrated that the ...


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