Uniform Product Code Council, Inc. v. Kaslow

460 F. Supp. 900, 203 U.S.P.Q. (BNA) 264, 1978 U.S. Dist. LEXIS 15261
CourtDistrict Court, S.D. New York
DecidedSeptember 28, 1978
DocketNo. 78 Civ. 2373 (WCC)
StatusPublished
Cited by2 cases

This text of 460 F. Supp. 900 (Uniform Product Code Council, Inc. v. Kaslow) is published on Counsel Stack Legal Research, covering District Court, S.D. New York primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Uniform Product Code Council, Inc. v. Kaslow, 460 F. Supp. 900, 203 U.S.P.Q. (BNA) 264, 1978 U.S. Dist. LEXIS 15261 (S.D.N.Y. 1978).

Opinion

OPINION AND ORDER

CONNER, District Judge:

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 relevant facts

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 [902]*9021976, 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 received his letter of June 3, 1976. Neale replied that he had not.

9. The next day, May 25, 1977, defendant wrote Neale again, sending him a copy of the earlier letter. In the covering letter, defendant stated:

“What is important is your announced plan to conduct further tests utilizing a system for which a United States patent has been awarded to me. Please be advised that I intend to take all necessary steps to protect my patent position." (Emphasis added).

Neale (quite understandably) construed this as a threat of suit for patent infringement, and so notified the others who had cooperated in the tests. As a direct result of defendant’s action, NAB discontinued its efforts to test and promote a system employing UPC-coded discount coupons in newspaper advertisements.

10. Defendant also contacted a number of manufacturers of products on which the UPC symbols are used and attempted to interest them in using UPC discount coupons in conjunction therewith, but without success. Partly because of such contacts and defendant’s other activities described above, it has become widely understood in the trade that defendant has a patent broadly covering the UPC-coded discount coupon system.

11. Plaintiff has submitted affidavits of officials of several major manufacturers of products employing UPC symbols, each stating that they have not yet put into operation a UPC discount coupon system as proposed in Guideline 22 only because they fear an action for infringement of defendant’s patent and that if and when the patent is ruled invalid or not infringed by such a system, they will proceed promptly to implement Guideline 22. The adoption of such a system would require merely that the existing UPC computer equipment at the check-out stands be reprogrammed — a change requiring no new hardware.

Defendant’s Contentions

Defendant argues that there is no justiciable controversy between the parties for the following reasons:

1. Plaintiff has no standing to bring this action because it has not itself infringed the patent in suit nor has it any intention to do so, or even the capability of doing so.

2. Defendant could not have sued any of plaintiff’s member companies because none of them has yet committed an infringing act. Indeed, at the time this action was filed, defendant did not know who the members of the plaintiff corporation were, had never seen plaintiffs Guideline 22, and did not know whether any of the member companies had any plans to implement it.

3. It would be unfair to permit plaintiff to sue for a declaratory judgment respecting defendant’s patent because there is no mutuality of risk. A judgment in defendant’s favor would not bind plaintiff’s member companies, who are not parties to the action, while a judgment against defendant would estop him, under the doctrine of Blonder-Tongue Laboratories, Inc. v. University of Illinois Foundation, 402 U.S. 313, 91 S.Ct. 1434, 28 L.Ed.2d 788 (1971), from suing those companies or anyone else for infringement of the patent.

DISCUSSION

Standing

By publishing and distributing Guideline 22, plaintiff has urged its members to put into practice a UPC discount coupon system and instructed them how to do so.

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460 F. Supp. 900, 203 U.S.P.Q. (BNA) 264, 1978 U.S. Dist. LEXIS 15261, Counsel Stack Legal Research, https://law.counselstack.com/opinion/uniform-product-code-council-inc-v-kaslow-nysd-1978.