US Court rejects TransCore complaint against ETC on open road tolling

US District Court in Dallas has dismissed with prejudice a lawsuit by TransCore against ETC alleging infringement of open road tolling patents in the E-ZPass area. TransCore alleged in their suit that ETC improperly used methodologies they owned through patents for open road tolling with the IAG's Mark IV transponders and readers.

The case arose when ETC gained the contract to convert some 20 mainline toll plazas on the Illinois Tollway system to open road tolling in mid-2005.

TransCore maintained that ETC should have negotiated a license agreement with them.

Legal wipeout

A judgment by US District Judge Ed Kinkeade issued Thursday in Dallas orders that the plaintiffs "take nothing" that their claims are "dismissed with prejudice" and awards ETC's costs against the plaintiffs, TransCore.

The main thrust of the judgment in favor of ETC is that TransCore entered into a Covenant Not to Sue with Mark IV for which Mark IV paid $4.5m in June 2001. This was in settlement of a case in US District Court in Southern California where TransCore had sued Mark IV alleging infringement of three patents which TransCore had acquired from John J Hassett when his AT/Comm sold TransCore its failing active transponder business for a song.

AT/Comm of Marblehead MA had toll systems in Illinois, Maine and Australia, but in their final years they put more effort in law suits against competitors and their customers than into servicing their customers, developing their product or gaining new sales.

TransCore gained title to AT/Comm's litigated patents as part of a purchase of the near-bankrupt company whose only remaining tangible asset, as we heard the story at the time, was a service contract with the Maine Turnpike to maintain its toll system. Illinois had already decided to scrap its AT/Comm electronic toll system in favor of a Mark IV system.

The part of the Hassett patent 5,805,082 ('082) of September 8, 1998 acquired by TransCore and relevant to open road tolling reads:

"In particular, at least one stationery transceiver unit is positioned above one lane of a multi-lane roadway. The transceiver includes a highly directional antenna that transmits a radio-frequency signal. The signal is directed along the roadway and in the direction of oncoming traffic. The directional signal broadcast from the antenna sets up a field pattern within one lane of the multi-lane roadway. By encoding the signal with information that identifies the lane in which the antenna is directed, a radio-frequency field can be set up that uniquely identifies one lane of the roadway.

"A vehicle equipped with a transceiver made in accordance with the present invention can determine its lane of travel and its distance from the stationery transceiver by receiving and processing the antenna field pattern. The mobile transceiver, fixed within a vehicle such as an automobile, receives signals generated by the stationery transceivers. The mobile transceiver then decodes these signals and determines from which lane the signal was broadcast. The mobile transceiver then associates with each lane identity a signal strength that can be compared to the known field pattern of the stationery transceiver directional antenna. The mobile transceiver processes the signal strength and signal identity and determines its location relative to the stationery transceiver.

"Subsequently, as the vehicle passes the stationery transceiver units, it transmits its vehicle identification number and its lane position so that the stationery transceivers know which vehicle is passing in which lane." END QUOTE

[Throughout the AT/Comm patent writer wrote 'stationery' as in writing materials while obviously meaning 'stationary' as in at rest, or stable. Redneck lawyer! TOLLROADSnews.]

An identical passage relevant to open road tolling is included in a further Hassett patent 6,653,946 ('946) obtained by TransCore Nov 25 2003, 29 months after the Mark IV-TransCore settlement.

ETC wins Illinois

ETC in competition with TransCore, won a hotly contested contract to convert all the mainline toll plazas on the Illinois Tollway system to open road tolling in June 2005. This was quite a surprise since TransCore was a longtime system integrator and supplier to the Illinois Tollway.

In November that year TransCore filed the claim against ETC in US Court in Dallas TX asserting infringement of the Settlement Agreement patents 5,805,082 and two others plus infringement of 6,653,946 subsequent to the Settlement Agreement.

Right granted to vendor must carry through to customers of the vendor - judge

The judge found that TransCore's Covenant Not to Sue that cost Mark IV $4.5m in effect conceded Mark IV a license to the patented methodology. TransCore's argument that the implicit license did not extend to customers of Mark IV such as ETC was also rejected by the judge:

"The law is well settled that an authorized sale of a patented product places that product beyond the reach of the patent... Further, the purchaser of such licensed products is also free to use and/or resell the products, and such further use of those products is beyond the reach of the patent statutes. An authorized sale of a patented product exhausts the patent monopoly as to that product... the settlement between TransCore and Mark IV would be meaningless if TransCore could prevent Mark IV from manufacturing and selling the toll products by suing Mark IV's customers.... TransCore's argument that it can now sue Mark IV's customers is disingenuous, as it would render the rights granted to Mark IV in the Covenant Not to Sue commercially worthless and rob Mark IV of the benefits of its bargain."

The judge rejected as not legally relevant TransCore's argument that at one point in negotiating the settlement Mark IV tried to get explicit recognition of customers' rights.

TransCore also failed to persuade the judge that ETC was infringing patent 6,653,946 ('946) issued in 2003 after the implicit license granted to Mark IV in the $4.5m settlement of June 2001. He said: "a party may not assign a property right in exchange for consideration (money), and subsequently circumvent the assignment... The buyer has an implied license under any patents of the seller that dominate the product or any uses of the product to which the parties might reasonably contemplate the product will be put."

The judge said that TransCore accepted that patent '946 was only an expansion of '082 which was covered by the Covenant Not to Sue and the court concluded that the TransCore infringement claim was barred by legal estoppel.

AT/Comm never built any open road toll installation

To a non-lawyer the amazing thing about these old AT/Comm patents is that they were never deployed in any real world open road tolling installation. AT/Comm only built single lane roll through electronic toll lanes.

We never even heard of any AT/Comm testing of open road tolling along the lines of their patent. They seemed to be spending so much of their shareholders money on law suits that they had nothing left for any real engineering of open road tolling.

It was left to all their competitors and successors to do the real development work on open road tolling - Hughes/Raytheon, Lockheed/ACS, InTrans, Combitech/Kapsch, WorldCom/MFS, United Toll Systems, and TransCore. Everyone except the people who claimed the patents.

Here is the judgment:

http://www.tollroadsnews.com/sites/default/files/Judgment.pdf

No word on whether TransCore will appeal the judgment.

TOLLROADSnews 2008-05-23