Dep. at 13-14, 266), the parties appear otherwise to have used the terms interchangeably. ( Plaintiff's Exh. 1 P 8 (prior Complaint using both terms); Gross Dep. at 13, 258 (Fourth Dimension counsel referring to INFOPAC)). Fourth Dimension's counsel stressed that "if I use the term INFOPAC, I am referring to INFOPAC-RDS." (Gross Dep. at 13; Miller Dep. at 110 (customer testifies terms used interchangeably)).
On May 17, 1993, counsel for Mobius sent a draft of a settlement agreement to counsel for Fourth Dimension. (Defendant's Exh. B). Yossie Hollander, Fourth Dimension's Chief Executive Officer who was responsible for approving the settlement agreement, (Tr. 135 (Hollander)), had two principal objections to that draft. First, the draft would have prohibited Fourth Dimension from making certain statements "or their equivalent." (Tr. 132 (Hollander); Defendant's Exh. B at 3). Hollander objected to this because he felt that no person could understand what an "equivalent" statement was. (Tr. 132 (Hollander 132)). Second, the draft had no provision permitting Fourth Dimension to make truthful statements. Hollander would not sign an agreement unless it contained a provision permitting truthful claims. (Tr. 141 (Hollander)). This "truthful claims provision" was included as paragraph 7 of the agreement to assure that Fourth Dimension would be free to make truthful comparative statements about Mobius products.
Fourth Dimension also expressed concern about agreeing to bar statements about products that were subject to evolving technology. This concern was addressed by limiting the life of the Agreement to three years through what is commonly referred to as a "sunset clause." (Tr. 47-48 (Gross)).
The action finally was settled pursuant to a Stipulation and Agreement of Settlement dated June 7, 1993 (Plaintiff's Exh. 3; Tr. 25-27 (Gross)). The agreement included, among other things, the truthful statements provision (paragraph 7), the three year sunset provision, and a list of 65 statements that could not be said by Fourth Dimension because the parties had determined that they were false (Appendix 2). The overwhelming weight of the evidence establishes that the parties understood, agreed and intended (a) that the Appendix 2 Statements applied to the RDS product, (b) that the Appendix 2 statements were false, (c) that the intent of the Agreement was to bar Fourth Dimension from repeating those statements not just as applied to INFOPAC products generally but also and more particularly as applied to INFOPAC-RDS. (Tr. 42-45, 331-33 (Gross)).
C. The Second Advertisement
In late 1993, Mobius and Fourth Dimension were competing for the business of M&I Data Services, Inc. ("M&I"), a Wisconsin company that processes customer statements and other data for banks. M&I signed a contract on December 31 to purchase INFOPAC-RDS, subject to an "acceptance clause" permitting it to test the product for 60 days and reject it if not satisfied. Starting in late 1993 and continuing into early 1994, M&I ran tests on both INFOPAC-RDS and CONTROL-D. (Tr. 50-53 (Gross)).
Fourth Dimension sent a letter to M&I on or about December 16, 1993, listing a series of purported advantages of CONTROL-D over INFOPAC-RDS that closely tracked the Appendix 2 Statements, but were phrased to avoid express mention of INFOPAC. After hearing Fourth Dimension's witnesses Michael Anderson and Thomas Trogdon testify about the origination of this letter, I find that Fourth Dimension understood both that the substance of the Appendix 2 Statements applied to the RDS product and that making such statements about INFOPAC-RDS would violate the Agreement. (Tr. 169, 175-76 (Anderson); Tr. 245-49 (Trogdon)).
On or about January 6, 1994, Charles Miller, an M&I employee principally involved with the testing of CONTROL-D and in favor of M&I's purchasing the Fourth Dimension product, telecopied to Thomas Trogdon, Fourth Dimension's Vice-President in charge of marketing in the Midwest, a two-page document purporting to reflect one set of results emanating from the testing. (Defendant's Exh. L (the "January 6 Chart")). Mr. Miller did not Create the document, and was only involved to a minor extent in the underlying testing of the INFOPAC product. No Fourth Dimension representatives were directly involved in the INFOPAC testing. (Miller Dep. at 20-21, 35-36, 57; Tr. 214 (Anderson)).
The January 6 Chart -- which was the sole basis offered at trial by Fourth Dimension for the truth of its statements (Tr. 169 (Anderson)) -- does not indicate many important variables underlying the testing, does not reflect changes in subsequent testing leading to different results, and does not establish the basic functional abilities of either product. (Tr. 334-41 (Gross)). It provided, at best, a snapshot of certain results of the testing being conducted at that point. (Tr. 219 (Anderson)).
On January 10, 1994, Mr. Trogdon sent to Mike Hayford, a Senior Vice-President of M&I, a two page letter accompanied by an eight page memo outlining purported cost savings of nearly $ 5.6 million that would accrue to M&I if it chose CONTROL-D over INFOPAC-RDS. (Defendant's Exh. K (the "Second Advertisement")). Michael Anderson, a Fourth Dimension technical manager who assisted in preparing the Second Advertisement, defended its truth only as applied to testing data contained in the January 6 Chart, and disclaimed any knowledge of subsequent testing. (Tr. 219 (Anderson)). Mr. Anderson never saw the INFOPAC-RDS User's Manual, never saw the product's source code, had no regular experience running the product, and thus admitted that he did not know all the things INFOPAC-RDS can do. (Tr. 211-13 (Anderson)).
Mr. Anderson conceded that much of the Second Advertisement would be false, or its truth or falsity would be beyond his knowledge, if the document were read as applying to the overall functions and capabilities of INFOPAC-RDS. (Tr. 219-25 (Anderson)). However, the Second Advertisement on its face purports not to summarize particular testing but to "prove" that CONTROL-D will provide savings over INFOPAC in actual use. (Defendant's Exh. K, p. 2 of 8). Indeed, Mr. Trogdon confirmed that the Second Advertisement was meant to contrast the basic capabilities of the two products. (Tr. 249 (Trogdon)). In fact, despite some attempt at the inclusion of a disclaimer, Fourth Dimension made blanket statements about the capabilities of Mobius's product -- statements that were untrue, indeed, some of which that had been demonstrated false during the previous litigation.
D. Specific Statements in the Second Advertisement
1. Statements Regarding Dynamic Space Allocation
The Second Advertisement purported to contrast the abilities of CONTROL-D and INFOPAC-RDS to store data efficiently:
VSAM datasets require a pre-defined allocation of DASD space, and this pre-allocation of space for each job/report must be at least large enough to handle the largest output from a job for any given day/week/month/year. The tests conducted by M&I Data used optimal VSAM parameters for the number of lines done in the test. If at any time during the year, there will be more lines in the report than in the test, the job will abend on B37. In reality, M&I Data Services will probably allocate the VSAM file as large as the largest annual report! Because its [sic] not possible to free the space at the end of the job, the actual compression rate of Infopac will be 0 or even larger than the non-compressed allocation (on regular daily runs).
(Defendant's Exh. K, p. 5 of 8).
As explained by Mr. Gross, this paragraph claims (1) that INFOPAC-RDS requires users to determine in advance the amount of disk space to be allocated to each "dataset," or file; (2) that the system will malfunction if reports containing more than the pre-allocated amount of space are processed, because additional space cannot be allocated dynamically (i.e., at the time of need); and (3) that to avoid this result, INFOPAC requires over-allocation of space that cannot be reclaimed, with a negative result in "compression," or storage efficiency. (Tr. 60-62, 65-70 (Gross)).
These claims repeat two of the Appendix 2 Statements: "INFOPAC provides for pre-allocated VSAM datasets" (Item 8), and "INFOPAC does not provide for dynamic allocation of required space" (Item 9). Fourth Dimension has offered no meaningful distinction between these statements on the one hand and the statements that INFOPAC's VSAM datasets "require a pre-defined allocation of DASD space" and a "pre-allocation of space" on the other. (Defendant's Exh. K at p. 5 of 8). I credit Mr. Gross's testimony that the statements are indistinguishable. (Tr. 60-62 (Gross).
Mr. Gross further explained, and Mr. Anderson agreed, that INFOPAC does not require pre-allocation of DASD storage space. To the contrary, INFOPAC provides for dynamic allocation of disk space -- i.e., automatic allocation of space at the time of need, rather than in advance. (Tr. 33-36, 65-75 (Gross); Tr. 197, 222 (Anderson)). Mr. Miller confirmed this in his deposition. (Miller Dep. at 63-73).
Mr. Anderson testified that the statement about space allocation in the Second Advertisement was meant only to suggest that INFOPAC required the pre-determination of certain parameters according to which space is later dynamically allocated in portions known as "extents":
Q: Your intended statement was that INFOPAC requires the parameters of the extent to be predetermined, not that the actual space needed to be allocated?