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HEMSTREET v. BANCTEC

October 16, 1990

HAROLD S. HEMSTREET, Plaintiff,
v.
BANCTEC, INC., a Delaware Corporation, Defendant



The opinion of the court was delivered by: ASPEN

 MARVIN E. ASPEN, UNITED STATES DISTRICT JUDGE

 Harold S. Hemstreet holds two patents relating to "character recognition device" technology. When put to practical effect, this technology permits a machine to automatically read and sort written documents. BancTec, Inc. ("BancTec"), for example, sells its character recognition devices to major banks for use in processing checks and other commercial paper. Hemstreet filed suit against BancTec on August 3, 1989, alleging an infringement of his patents. BancTec now moves for summary judgment based on laches and estoppel. It argues that even if Hemstreet's claims are valid, he is too late to bring this suit. We find that the memoranda, affidavits, exhibits, and other evidence submitted by the parties clearly demonstrate that BancTec is entitled to summary judgment on each of Hemstreet's claims.

 BancTec was founded in 1972. It started developing its character recognition equipment in 1975, and first sold that equipment two years later. Since then, BancTec has ambitiously expanded, both through internal growth and external acquisition. In 1983, it acquired Input Business Machines, Inc. ("IBMI"). In 1984, it acquired the reader/sorter division of Magnetic Peripherals, Inc. ("MPI"), a "joint venture" company started by Honeywell Corp. ("Honeywell"), NCR Corp. ("NCR"), and Control Data Corp. ("CDC"); it also acquired Scan Data Corp. ("Scan Data"). In 1989, BancTec acquired Computer Entry Systems Corp. ("CES"). From 1975 to 1989, BancTec invested over $ 127 million in the development of its character recognition business.

 Two similar suits involving the Hemstreet patents have recently been adjudicated in the Northern District of Illinois. In both instances, summary judgment on laches and estoppel was granted against Hemstreet. See Hemstreet v. Lundy Elecs. & Sys., Inc., No. 89 C 5940 (N.D. Ill. July 23, 1990) [ 1990 U.S. Dist. LEXIS 9180]; Hemstreet v. Computer Entry Sys. Corp., 741 F. Supp. 1308, 16 U.S.P.Q.2D (BNA) 1204 (N.D. Ill. 1990). This latest suit, with one easily resolved twist, is identical to those cases, and we adopt the reasoned opinion set forth by Judge Brian Barnett Duff in Hemstreet v. Computer Entry Systems Corp., and followed by Judge James B. Zagel in Hemstreet v. Lundy Electronics & Systems, Inc.

 Like the defendants in those earlier cases, BancTec and Scan Data received the same July 1, 1983 letter from Hemstreet's attorney alleging infringement, offering to negotiate a licensing agreement, and advising it of ongoing litigation against another corporation. This is insufficient to excuse Hemstreet's delay of more than six years in filing suit; "that letter gave rise to no more than an inference that Mr. Hemstreet intended to sue to enforce his rights under the patents, either during, or after the close of, the [other] litigation." Hemstreet v. Computer Entry Systems, 741 F. Supp. at 1311. Thus, Hemstreet's delay of more than six years constitutes unreasonable and inexcusable delay.

 The twist that makes this suit somewhat different from the two earlier infringement cases involves Hemstreet's communication with IBMI and the MPI corporations (Honeywell, NCR, and CDC). *fn1" Hemstreet understandably directs the court to focus on these letters, which, unlike the aforementioned communications with BancTec and Scan Data, explicitly announce his intent to sue to enforce his patent rights. Hemstreet reasons that because BancTec's predecessors knew that he would litigate to protect his rights, BancTec must also have known.

 
We represent Harold S. Hemstreet, owner of U.S. Patents Nos. 3,713,099 and 3,713,100 granted January 23, 1973, both of which are entitled "METHOD AND APPARATUS FOR IDENTIFYING LETTERS, CHARACTERS, SYMBOLS, AND THE LIKE."
 
On information and belief, your company manufactures equipment which infringes the above patents.
 
Mr. Hemstreet stands ready to negotiate a reasonable settlement and to license you under the patents.
 
At present we are litigating an action for infringement of said patents in the United States District Court for the Northern District of Illinois. That case filed by us on September 26, 1977, is entitled " Harold S. Hemstreet vs. Spiegel, Inc., No. 77C 3576." The action was assigned and is pending before Judge George N. Leighton of that Court.
 
If we have not settled our claim against you by the time we conclude the above litigation, we intend to institute an ...

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