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Lemelson News Roundup

Cognex Corporation

Here is an update on developments in the Lemelson patent area.

Patent License 'Close Out Sale.'  The Lemelson Partnership has announced that as of August 1, 2001, the Lemelson licensing program as we know it will be terminated.  Details vary depending on who the Partnership is talking to, but the crux of the message appears to be that after August 1, licenses will be more difficult to obtain, and the terms will be less favorable to those now available.  For example, licenses will no longer be offered for the entire portfolio of Lemelson patents, but only for specific patents.  In addition, the methods for calculating the royalty payment will change as well, making a license more expensive.  Some defendants in the pending cases have been told that as of August 1, a license will no longer be available, and that if the Partnership wins its case, a jury's damage award could be 1,000 times the licensing fee currently being offered. 

In other words, the message is 'Act now; these low low prices won't last forever.'  Apparently, many companies have halted licensing negotiations with Lemelson while awaiting the outcome of suits brought by Cognex and Symbol Technologies challenging the validity of the Lemelson machine vision and bar code patents.  This latest announcement could be a tactic by the Lemelson Partnership to get more licensees on board by raising the stakes of waiting.  It also could signal a concern by the Partnership that further developments in those cases could adversely affect the licensing program.

The Cognex Case.  All signs indicate that Cognex remains bullish on its prospects for a victory in its litigation in Reno against the Lemelson Partnership seeking to invalidate the Lemelson machine vision patents.  Among the more significant motions now pending before the trial court is Cognex's motion for partial summary judgment.  If successful, that motion could invalidate some or all of the patents in the suit.  Argument to the court on that motion is set for June 15, 2001.

Also pending is Cognex's appeal to the Federal Circuit Court of Appeals seeking to reinstate its defense of 'prosecution history laches.'  This defense argues that Lemelson should not be allowed to enforce his 'submarine' patents after having kept the applications secret for decades while everybody else actually developed the technology in the real world.  All of the appeal briefs have been submitted, and the parties are awaiting a date for the oral argument.

Summary Judgment for NCR in NCR v. Lemelson.  Meanwhile on the bar code front, NCR's suit against Lemelson concerning the so-called bar code patents recently produced a significant development.  NCR, a supplier of bar code equipment, holds a license under the Lemelson patents.  In the lawsuit, NCR argued that its license extended to its customers and gave them the right to use NCR bar coding equipment without obtaining a separate license from Lemelson.  On May 10, 2001, Judge Sidney H. Stein of the United States District Court for the Southern District of New York agreed, and issued an order granting summary judgment to NCR on this issue.

The NCR ruling is good news for NCR and its customers.  If it holds up (the ruling is, of course, appealable), that would eliminate Lemelson licensing concerns for this group.  The impact of this ruling on other companies or other industries, however, is probably limited, because very few manufacturers have obtained Lemelson licenses.  For example, in the machine vision field, the Partnership's licensing strategy has avoided the manufacturers and instead focused on vision users.

GREG SMITH is a principal and co-founder of Competition Law Group LLC, a Chicago-based law firm focusing in intellectual property litigation and trials.  Competition Law Group has established a web site containing information about the Lemelson patent situation, which can be found at www.lemelsonpatents.com.  For information about Competition Law Group, go to www.competelaw.com.

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