Bar-Code License Covers Customers

Stephanie A. Weiss

NCR Corp. retail store customers can use the company's bar-coding equipment without individual licenses from the Lemelson Medical, Education and Research Foundation, a federal judge has decided.

US District Judge Sidney Stein of the Southern District of New York agreed with NCR and a magistrate's opinion that the Dayton, Ohio, company's license of Jerome Lemelson's bar-coding patent also covers its customers' use of related equipment.

NCR sued the foundation on April 26, 1999, claiming that it had signed a license agreement with the foundation on March 31, 1999. That agreement grew out of a mid-1998 agreement between Lemelson and General Motors, Ford and Chrysler, in which Lemelson agreed to license its technology to the automakers' suppliers. NCR supplies equipment to Ford.

Retail stores do not need individual license agreements to use patented bar-coding technology, a federal court judge has ruled. Courtesy of NCR Corp.

NCR said its license allowed it, among other things, to use the patented technology to manufacture and sell or lease bar-code scanners to retail stores. Furthermore, the company said the license included a covenant in which the foundation agreed not to sue or to assert a claim against NCR or its customers for infringing the patent.

However, the lawsuit said, some NCR retail store customers received letters from the foundation, suggesting that the equipment from NCR violated its patents and asserting that NCR's license did not cover its customers.

On April 14, 1999, the foundation sued 438 retailers and manufacturers in the "ABC lawsuits," so named after the first letter of the first defendant companies in each of three lawsuits filed that day.

Stein's May 10 order in the NCR case grants summary judgment to NCR, affirming that the license agreement does cover NCR's retail customers and that Lemelson cannot rescind NCR's license.

"The main impact will be for the affected customers to reassess their litigation strategies or negotiation strategies," said Greg Smith, a partner in the Competition Law Group in Chicago. "I don't think the Lemelson Foundation has ever refrained from negotiating for royalties based on an acceptance of NCR's interpretation of the license."

The foundation is continuing to negotiate with many companies for royalty payments, but the ABC lawsuits, filed in Arizona, are on hold pending the resolution of a lawsuit in which Cognex Corp. alleges that the Lemelson patents are invalid.

Cognex officials declined to comment on whether the decision in the NCR case would have any effect on its litigation.

Inventor Lemelson applied for patents in the 1950s but extended them and added claims for more than 30 years before the US Patent and Trademark Office granted them. Lemelson and, after his death, a foundation set up in his name, approached machine-vision and bar-code users for license fees, claiming they were violating his patents. Legal experts estimate that the foundation has more than 600 licensees and revenues of about $1 billion as a result of these actions.