Appendix — Amperex Electronic Corp. v. New York Racing Ass'n

In THE

Supreme Court of the United

Octosper TERM 1976

Amperex Exvectronic Corp.,

Petitioner,

—Vi—

Tue New York Racine Association, Inc., AUTOMATIC

Torauisators (U.S.A.) Lrp., Automatic ToTaLisaTors

Lrp., and Premier Equipment PRopRieTaRy Ltp.,

Respondents.

APPENDIX TO

PETITION FOR WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

S. C. Yurer

122 East 42nd Street

Suite 3601

New York, N. Y. 10017

212-986-1221

Counsel for Petitioner

Of Counsel

Yutrer & Roser

Danret M. Rosen

INDEX TO APPENDIX

PAGE

Opinion of the United States

Court of Appeals for the Second

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Memorandum and Order of the

United States District Court

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Findings of Fact and Order

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Judgment filed September 22, 1975 A255

Memorandum and Order of the

United States District Court

Dated January 13, 1976 .......6-. A257

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UNITED STATES COURT OF APPEALS

For tHe Sgconp Crecuit

Ss

Nos. 338, 339—-September Term, 1976.

(Argued January 3, 1977 Decided April 4, 1977.)

Docket Nos. 76-7063, 76-7085

oo

Diattronics Corp., Now Amperex Execrronic Corp.,

Plaintiff-A ppellant-Cross-Appellee,

v.

Tae New York Racine Association, Inc. Avtomatic

Toratisators (U.S.A.) Lrp., Avromatic ToraLrsaTors

Lrp., and Premier Equipment Proprietary Lrp.,

Defendants-Appellees-Cross-Appellants.

tO.

Before:

Moors, Oakes and Trmsers,

Circuit Judges.

a

Appeal from judgment of the United States District

Court for the Eastern District of New York, John F.

Dooling, Jr., Judge, holding invalid for obviousness, under

35 U.S.C. § 103, United States Patent No. 3,252,149, which

claims improvements in a solid state electronic system for

processing data from ticket issuing machines, such as those

used in racetrack totalisator systems.

Affirmed.

Se nee

Al

S. C. Yurer, New York, N.Y. (Daniel M. Rosen,

Wallace E. J. Collins, and Yuter & Rosen,

New York, N.Y., of counsel), for Plainttff-

Appellant-Cross-A ppellee.

Rosert E. Isner, New York, N.Y. (Charles N.

J. Ruggiero, and Nims, Howes, Collison &

Isner, New York, N.Y., of counsel), for

Defendants-A ppellees-Cross-A ppellants.

——

Oakes, Circuit Judge:

This appeal involves a patent issued for a data processing

system that, when used in place of the prior art in pari-

mutuel wagering equipment, is said to produce speedier,

more accurate and more versatile paraphernalia for the

placing of wagers at race tracks by those interested in the

ancient and honorable art of improvement of the breed. The

United States District Court for the Eastern District of

New York, John F. Dooling, Jr., Judge, in a 216-page

opinion with 52 formal findings and conclusions, supple-

mented by explanatory appendices, held the patent invalid

for obviousness under 35 U.S.C. § 103. He also held that

appellees’ counterclaim for attorney fees could not be

sustained, since the case was not sufficiently “exceptional”

to permit the discretionary award of attorney fees under

35 U.S.C. § 285. Part of the extensive opinion has been

published at 187 U.S.P.Q. 602 (E.D.N.Y. 1975). On both

the appeal from the judgment of invalidity and the cross-

appeal from the denial of the counterclaim for attorney

fees, we affirm the judgment.

Judge Dooling also found the patent invalid under 35 U.S.C. § 102

for lack of novelty and held that certain data processing systems of

the appellees did not infringe the patent. In view of our agreement

with the judge that the patent is obvious, we need not reach these issues.

A2

L

This action was brought by appellant’s predecessor,

Digitronics Corp., which squght an injunction and damages

from the New York Racing Association, Inc., Automatic

Totalisators (U.S.A.) Ltd. (ATUSA), Automatic Total-

isators Ltd. (Amtote), and Premier Equipment Proprietary

Ltd., for alleged infringement of U. S. Patent No. 3,252,149,

issued on May 17, 1966, to Digitronics as assignee of five

named inventors. The invention, according to papers filed

with the Patent Office, “pertains to data processing systems

and more particularly to systems for processing data

received from ticket issuing machines,” one of the most

common of which is “a parimutuel system employed for

servicing transactions or wagers made by spectators at

sporting events.” The patent contains 33 claims, but only

claims 20-27 are in issue here. A considerable portion of

Judge Dooling’s opinion is devoted to developing for the

reader a reasonably simplified, albeit unavoidably difficult

to follow, primer of knowledge regarding the data process-

ing circuitry and “logic” here involved, including, inter

alia, explanations of the meaning and operation of the

components used.’ The patent itself frequently refers to

2 The judge, for example, explained that one such component, a “mem-

ory” core, contains a very large number of tiny “toroids”, each of which

has the capacity to represent a one or a zero (a binary number system)

and in turn represents part of the numerically encoded information

that is im “storage” or is being brought out of “storage.” He referred

to the “address” of the information in storage in the “memory” and

discussed how each toroid is individually accessible to wire-conveyed

impulses that impress upon it a clockwise or counterclockwise magnetic

field and give it thereby a significance of one or zero. To read out the

meaning, @ current is applied that alters the polarity of magnetization

if the toroid is in one state but not if it is in the other state, thus

extracting the “bit” of information from the toroid. The judge expli-

cated also how sections of the memory may store instructions, duly coded

in binary numerical form, to govern the steps in the functioning of the

device, so that the machine literally operates upon itself. And he ex-

A3

R. K. Richards, Arithmetic Operations in Digital Com-

puters (1955), which discloses many of the fundamentals

of computer logic applicable in the field of data processing

generally.

The patent is entitled a patent on a “Data Processing

System,” and each of the claims in question is one for a

“system comprising” a plurality of ticket issuing machines

(TIMs) or a TIM followed by a combination of particular

means. As Judge Dooling found, the system is primarily

an aggregator system, aggregating the number of wagers

placed on each entry in two separate aggregators: the

central memory register, which aggregates the wagers on

each horse in each of the pools, and the TIM aggregator,

where the number of wagers at that particular TIM on each

horse in each of the pools is similarly (and simultaneously)

aggregated. These are updated by a “unit adder” every

time an additional wager is registered by any TIM. The

computer draws from the central memory register the

total wagers in each of the three pools and on each horse

in the pool and uses those sums to compute the odds on each

entry and to feed to the output display boards the results of

the odds changes every 70 seconds. While elaborate

circuitry is required to accomplish this, the circuitry itself

is unimportant for our purposes; Judge Dooling’s finding,

that “there is no novel circuitry involved as is clear from

the face of the patent and from the trial evidence,” is not

disputed here.

Appellant characterized below the subject of Claims 20

through 22 as the “totalisator system” invention, Claim 23

as the “nonallowed runner subsystem” invention, Claims

24 and 25 as the “TIM scanning subsystem” invention, and

plained how each toroid is wired with two “impulse” wires and one

“inhibit” wire, the last to prevent the loss of information stored upon

“reading” the “bit.”

A4

Claims 26 and 27 as the “erroneous data subsystem” in-

vention. Claim 20 consists of the combination of a plurality

of conventional TIMs, means of collecting from them and

dispatching into the system the betting data on each entry

and identifying those data to the original TIM, and means

of aggregating the wagering data and sending an acknowl-

edgment signal to the TIM so that it will stamp up and

issue a ticket to the bettor with the wagering data on it.

The system is composed of a set of commercially available,

fairly standardized TIMs, an electronic linkage between

them, an aggregator, a unit adder, and an “acknowledg-

ment signal amplifier” between the unit adder and the TIM

so that aggregating the wager effects an electromechanical

release of the betting ticket. The purpose of the system is

to aggregate wagers without losing track of the horse on

which and the pool in which the wager was placed or the

TIM at which the wager was placed. Tudge Dooling found

that each component was common in the prior art, existing

in various forms, and performed its familiar role in a

familiar way, all as basically described in Richards,

Arithmetic Operations in Digital Computers, supra.

As to Claim 21, the court found that it added nothing to

the combination, merely particularizing Claim 20. 187

U.S.P.Q. at 624. Claim 22, the court below found, like

Claim 21, furnished particulars of Claim 20, adding the

circumstance that the data passes from the “storage ad-

dress generator” so as also to register simultaneously in

the TIM memory. Put another way, the same data was

being accumulated in the memory of each TIM as to that

machine as well as in the central memory register. Judge

Dooling found that Claim 22 really disclosed that the TIM

memory and its immediately associated components are

simply a conventional memory and unit adder used as a

simple aggregator.

A5

Claim 23, the “scratch” subsystem, is independent of

Claim 20, and prevents betting on a “scratched” or with-

drawn horse by using “a conventional equality comparator”

to generate a “scratch signal” in the TIM and to prevent

the TIM from operating to produce a ticket, “stepping”

the “scan” to the next TIM. Put another way, a switch de-

vice emits a set of steady scratch signals and a comparison

device matches those scratch signals with signals for at-

tempted wagers on scratched entries, resulting in a rejec-

tion signal to the TIM. Judge Dooling found this not to go

beyond “the obvious teaching of the use of a comparator”

as a guard against taking wagers on scratches. As he said,

a “comparator” exists to compare signals for identity or

differences in a variety of ways, some of which can be

gleaned from British Patent 749,836, cited by the Patent

Office below.

Claim 24 was outlined by the patentee with reference to

TIM scanning when no wagering transaction was being

conducted at the TIM. Claim 24 and its dependent claim,

Claim 25 (involving the converse situation where a trans-

action was being conducted or sought to be conducted) are

the only ones of the claims in issue in which the plurality

of TIMs is particularly significant to the claim. The object

of the system is to provide a high-speed scanning means

for interrogating a plurality of relatively slow operating

TIMs. According to the patent itself, even absent a finding

by the court below, the device which does the scanning—

the “scan counter”—is a “chain of conventional cascaded

binary counters,” as discussed in Richards’ Arithmetic

Operations in Digital Computers, supra. The output of the

scan counter is fed to the “scanner,” which decodes the data

from the scan counter and feeds it to the “interface” of the

TIM. When depressed, the keys of the TIMs close switches,

and when this is not done the scanner “steps” along to the

A6

next TIM or, if a key for a scratched or other wrong entry

has been depressed, “the scratch circuitry” previously out-

lined (Claim 23) “steps” the scan to the next TIM. But

when a wager has been processed and error-tested the de-

pressed wager key is unlatched, and the bet ticket is

printed and issued to the bettor. Judge Dooling found

that the subsystem claim combined conventional components

to perform a familiar assignment in a conventional way.

Both the binary counter and the scanner themselves being

conventional in data processing, the circuitry he found to

be “pedestrian,” with a very simple goal of furnishing a

pulse tracking through a system and on completion to

origin ticking a binary counter.

Dependent Claim 25, Judge Dooling found, added noth-

ing, simply covering the alternative that a wager had been

made. In that case, as we have said, there is no “step,” and

the “selected entry transaction” signal is simply processed.

The claim covers delaying the stepping of the scan over the

transacting TIM to the next TIM until the selected trans-

action signal is checked out or confirmed and permitted to

proceed. Judge Dooling found this to be “detailed and un-

inspired circuitry doing the routine routinely,” “not even

approaching the versatility of [a prior patent known as]

Schrimpf No. 3029414.”

Claims 26 and 27 parallel Claim 23 in that their purpose

is to constitute error checks incorporated in the total de-

vice. Judge Dooling found both claims to consist of “‘pains-

taking articulation of familiar means to perform simple

error checks through use of circuitry suggested by the

nature of the task to be performed and the natare of the

conventionally appropriate components that the tasks them-

selves pointed out.”

The findings as to these seven claims formed the basis

for Judge Dooling’s decision that the patent was obvious.

We, of course, may not disturb those findings unless we

A7

find them to be “clearly erroneous.” Fed. R. Civ. P. 52(a).

With regard to obviousness, the statute establishes a legal

standard relating to whether

the subject matter sought to be patented and the prior

art are such that the subject matter as a whole would

have been obvious at the time the invention was made

to a person having ordinary skill in the art to which

said subject matter pertains.

35 U.S.C. § 103. We are to apply this statute by first as-

sessing the scope of the prior art and then determining

whether an ordinarily skilled worker conversant with it

would think appellant’s claims obvious in light of it. See

Graham v. John Deere Co., 383 U.S. 1, 12-17 (1966) ; Hotch-

kiss v. Greenwood, 52 U.S. (11 How.) 248, 267 (1851).

Il.

Appellant’s major argument on appeal is that Judge

Dooling erroneously considered the prior art in data pro-

cessing generally, rather than limiting his consideration to

the totalisator business. It purports to find support for

this theory in Dann v. Johnston, 425 U.S. 219 (1976), which

held invalid for obviousness a patent claim involving an

application of data processing in the banking industry.

From the discussion in Dann of practices in that industry,

appellant deduces that banking, rather than data processing

generally, was held to be the relevant prior art. But central

to the Dann Court’s conclusion was one “Dirks” patent,

which made a use of data processing analogous to that of

the patent there in suit but was intended for use in any

“large business organization,” 425 U.S. at 228, not just

banking. Because of the existence of the “Dirks” patent,

“Tt]here [was] no need to make the obviousness determina-

tion in [Dann] turn solely on the nature of the current use

A8

of data processing . . . in the banking industry.” Id. As

Mr. Justice Marshall concluded:

While computer technology is an exploding one, “[i]t

is but an evenhanded application to require that those

persons granted the benefit of a patent monopoly be

charged with an awareness” of that technology.

Id. at 229, quoting Graham v. John Deere Co., supra, 383

U.S. at 19. Thus the relevant prior art in Dann was held

to be that of computer technology generally rather than

the art of the banking industry.

Since the analogy of this case to Dann is so close, we

might not be amiss to decide the question of relevant prior

art simply by reference to that case. But in the absence of

an explicit statement on this point in Damn, we think it

preferable to articulate the rule of law guiding our deci-

sion here. In determining the scope of the relevant prior

art with which the hypothetical ordinarily skilled person

must be presumed to be familiar, we hold simply that the

court must look, in light of hoth the training of the patentee

and the elements in the claimed invention which give it its

novel quality, at what arts the patentee could reasonably.

be expected to consult in doing the inventing. See In re

Ellis, 476 F.2d 1370 (C.C.P.A. 1973) (claimed invention of

floor gratings; prior art included shoe scrapers); In re

Antle, 444 F.2d 1168, 1171 (C.C.P.A. 1971) (claimed inven-

tion for mobile produce packing; prior art included pro-

duce preserving and plastic film wrapping) ; Metallurgical

International, Inc. v. Kawecki Berylco Industries, Inc., 348

F. Supp. 825, 835 (E.D. Pa. 1972) (claimed invention for

pneumatically pulverizing material: prior art included

sandblasting).

Here, as Judge Dooling found, the inventors were trained

in data processing, not merely in totalisators. They worked

A9

for a company that applied techniques of solid state elec-

tronic data processing to any industry which would hire

them to do so. The patent was granied as a patent on a

data processing system. And the elements of the inven-

tion for which novelty is claimed relate to solid state elec-

tronic data processing generally, not merely to totalisators.

Thus the scope of the prior art in this case, in which the

hypothetical reasonable person must be ordinarily skilled,

and hence which the inventors here could reasonably be

expected to have consulted, encompasses data processing

generally and is not restricted to the totelisator business.’

Il.

Once the art in which the ordinarily skilled person must

be said to have knowledge is widened to include not only

totalisators, but all of data processing, it is manifest that

the patent claims here are obvious. They do not perform

functions that differ from prior art in the totalisator busi-

ness; they achieve those functions through means that,

wh'le rev to the tctalisator business, were well established

in the wider data processing field: and the improved per-

formance that resulted when solid-state electronic means

were applied to perform the totalisator function, far from

being unusual, was just what could have been predicted

when those means were applied to perform that function.

A. The Totalisator Function

Parimutuel betting is, of course, a system of wagering

for multi-entrant events, involving the accumulation of

wagers in separate pools with betting odds and consequent

8 Onr holding on this point diposes of appellant’s subsidiary claim that

the court below erred in not allowing it to examine the witness Fosse

on the level of ordinary skill in the totalisator art, Since the applicable

art wee far broader than the totalisator business, the court was well

within its discretion in barring the requested examination.

A10

payoffs being determined by the comparetive totals in such

pools after deducting therefrom a predetermined percent-

age based upon the state’s and the establishment’s statutory

shares of the pools. Parimutuel machines replaced book-

makers through the application of technology. ATUSA,

an Australian concern, developed a practical mechanical

and electromechanical totalisator in 1917, a multiple pool

“tote” in 1923, and an automatic odds tote in 1927, install-

ing its first system at Hialeah, Florida, in 1932, a system

later sold to the group that formed Amtote. Amtote in-

stalled its first totalisator with a public display of betting

figures accurate to the dollar in 1933 at Arlington Park in

Chicago, and by 1962 it had almost monopolized the Amer-

ican totalisator business, although ATUSA had a few in-

stallations in the United States.

The totalisators or “totes” automatically permit the

issuance of tickets to the bettors at the location of ticket

issuing machines; aggregators accumulate the amounts

wagered on each race and on each entry in a race for each

of the available possible betting combinations (win, place

or show, daily double, quinella, ete.); a scanner connects

the ticket issuing machines to the aggregators; electrically

operable display boards at various locations display entry,

odds and payoff information, time of day, time of race,

fractional times in the race and the like; checks are made

for purposes of accuracy of the displayed information; a

calculator determines the probable odds and payoffs; and

all components are interconnected so as to provide for

information transfer between the components and periodic

updating and display of necessary information.

As of 1961, the time when the alleged invention here in

suit began to take shape, the state of the totalisator art

was epitomized by the Amtote Model 7J, in use both at

Aqueduct and Roosevelt Raceway. The Model 7J involved

the various functions mentioned above: its ticket issuing

All

JN

machines, or TIMs, were of standardized construction and

generally manufactured by an independent concern; its

aggregators and scanner were electromechanical in opera-

tion and the display boards electrically operable ; an analog

computer was used for calculating probable odds, and a

solid state electronic digital price computer for calculating

payoffs. The Model 7J included provisions for automat-

ically rejecting wagers on scratched horses and for checking

input data for other errors, as well as incorporation of

individual TIM devices for recording the bets made on each

entry in each race so as to keep a permanent record thereof.

The principal prior totalisator art consisted of a series

of patents acquired by Amtote on (a) a system including a

stepping switch collector or scanner operating only on

signal from the TIM (Levy, No. 2,182,875 (1939)); (b) an

electromechanical system featuring a “jumping jack” col-

lector or scanner (Levy et al., No. 2,179,698 (1939)); (¢)

an electromechanical and electronic tote using a vacuum

tube non-binary counter and pulse commutators, with

stepping “relay” aggregators (Klein, No. 2,557,384 (1951)) ;

(d) an electromechanical tote system with multichannel

adding machines (Johnston, No. 2,563,041 (1951)); (e) an

analog odds computer for use as a component of a tote

system (No. 2,652,977); and (f) the Lange tote system

(No. 3,051,384 (Aug. 28 1962)) and its improvement (No.

3,080,114). The prior art also included a patent for an

electromechanical totalisator issued to Handley (No.

2,479,681 (1949)), and its improvement (No. 2,680,561

(1954) ), which was also an electromechanical patent involv-

ing aggregation of TIM data, means of picking up the

wagers or sales or the “handle” of the machines, adding

them by classes, performing other calculations on them, and

acknowledging or confirming to the ticket issuing machine

that the calculation had been made. A switch device per-

mitted the emission of a set of steady scratch signals, and a

Al2

conventional comparator matched scratch signals with

signals for attempted wagers on scratched entries, the

signal circuitry effectuating a guard against taking wagers

on scratches and other error checks. It is evident from the

foregoing description that the patent claims here in suit

are meant to perform the same function as this plethora

of prior electromechanical data processing art.‘

B. The Solid State Electronic Means

Appellant’s contribution to the totalisator business in-

volved simply the upgrading of a well-defined, existing

data processing system by converting some components of

the tote system from electromechanical to solid state

electronic data processing. Specifically, Digitronics’ total-

isator, the First Tote, differed from prior totalisators in

using electronic solid state aggregators for accumulating

wagers and total amounts, an electronic scanner for

sequentially connecting the ticket issuing machines to the

aggregators, digital solid state computing devices for

calculating probable odds and payoffs, and an electronic

solid state memory for recording the bets made on each

TIM.

While these devices were new to totalisators, they were

not new to data processing. The court below found the

testimony of appellees’ expert witness, Highleyman, per-

suaSive in this regard. Judge Dooling also mentioned six

United States patents on these subjects; certain pages from

a British patent on Univac; three publications (Functional

4 Judge Dooling also held that a prototype that Digitronics constructed

as a testing and advertising device, before producing the fully operable

“First Tote,” its all-electronie totalisi.tor, had to be considered part of

the prior art. Whether this is so depends on whether the prototype was

“commercially marketable” under Timely Products Corp. v. Arron, 523

F.2d 288, 302 (2d Cir. 1975). We need not decide this question, because

we conclude that here the prior art apart from the prototype indicates

performance of the same functions.

Al3

Description of the EDVAC, The System Organization of

MOBIDIC, and Project Mercury Real-Time Computational

and Data Flow System); and the standard text, Richards,

Digital Computer Components and Circuits (1957). These

together describe all of the solid state electronic means

used by appellant. 187 U.S.P.Q. at 620-22. Further, Judge

Dooling quoted the statement of Digitronics’ chief executive

officer to the effect that “there is virtually nothing in our

device which has not already been incorporated in other

machines which we have installed for other purposes in such

companies as .. .,” naming a railway and three large

industrial concerns. The judge specifically found that

Digitronics had previously supplied, for example, a medical

access and analysis system for the Schering Drug Company

“which involved the electronic scanning of a plurality of

lever operable data input stations, the collection and

storage of data obtained therefrom on magnetic tape units

and the return of selectively generated signals to the data

input stations.” Thus we have here the routine seeking of

business by a qualified data processing “system” house,

followed by the routine application of then-current state of

the art data processing technology to the updating of an

existing data processing system of known and defined

functional characteristics.

C. The Predictable Result

If the application of obvious means to an obvious func-

tion has “synergistic” results that would not be obvious to

one of ordinary skill in the art, a patent still may issue.

Sakraida v. Ag Pro, Inc., 425 U.S. 273, 282 (1976) ; Ander-

son’s-Black Rock, Inc. v. Pavement Salvage Co., 396 US.

57, 61 (1969); Great Atlantic & Pacific Tea Co. v. Super-

market Equipment Corp., 340 U.S. 147, 152 (1950) ; Roan

well Corp. v. Plantronics, Inc., 192 U.S.P.Q. 65, 45 U.S.L.W.

Al4

3414 (U.S. Dec. 6, 1976) (White, J., joined by Brennan, J.,

dissenting from denial of certiorari). Here, however, the

benefits that accrued from the replacement of electro-

mechanical by solid state electronic means—increased

accuracy, speed, compactness, flexibility, reliability, and

economy—were, as Judge Dooling found, nothing more

than the recognized advantages of electronic upgrading

of a data processing system. Once the prior art is expanded

to include all of data processing, appellant’s only claim

of “synergistic” results is based on its “multi-function TIM

number signal generation means” (Claim 20b). But the

court specifically found that this claim was nothing more

than semantics, because in electronic data processing any

system is energized from a common source and ordered in

real time by a common step signal. Thus, once two different

memories are used, here one central and one at each TIM,

not to have simultaneous storage in the central memory

register and in the TIM memory would require “a special

ingenuity of indirection.” 187 U.S.P.Q. at 632. Based as

this finding is on expert testimony and voluminous prior

art references, we cannot hold it clearly erroneous.

Mr. Leonard of Digitronics, Judge Dooling found, had

“no doubts or reservations” as to Digitronics’ ability to

provide an electronic data processing system to perform the

totalisator function. There was good reason for his

confidence. As Judge Dooling put it:

The demands of a racetrack parimutuel system on

data processing resources are modest: the arithmetic

calculations required are rudimentary; the range of

input data is narrow, and the data are simple and

easily translated into binary terms; no elaborated

long-term memory is requisite; programming is simple

and direct, and much of it is reducible to permanent

wiring of system components; pre-existing electro-

Al5

mechanical circuitry readily supplies patterns which

are in considerable part directly adaptable to solid

state electronic data processing; the service demands

on data processing systems of a racetrack parimutuel

system present no identifiable difference of technical

significance from those of other multiple input situa-

tions.

187 U.S.P.Q. at 643. This finding seems compelled by the

evidence. Having found that the function, means, and

results of appellant’s claims are fully anticipated by the

prior art, we hold that they would have been obvious to

one ordinarily skilled in data processing at the time the

invention at issue was made.

D. Secondary Considerations

Perhaps foreseeing our agreement with Judge Dooling’s

conclusion that appellant’s claims are obvious in light of

the prior art, appellant argues strenuously that the true

test for obviousness is not the court’s evaluation of the

patentee’s inventiveness, but rather such objective, often

called “secondary,” considerations as long-felt need, im-

mediate copying, and commercial success. Despite the

persuasive advocacy of Judge Learned Hand, Reiner v. I.

Leon Co., 285 F.2d 501 (2d Cir. 1960); Lyon v. Bausch €&

Lomb Optical Co., 224 F.2d 530 (2d Cir. 1955), this view

does not represent current law. Any theory that “secon-

dary” considerations must be given weight before a deter-

mination of obviousness can be made was laid to rest in

Sakraida v. Ag Pro, Inc., supra, 425 U.S. at 282-83, where

Mr. Justice Brennan concluded for a unanimous Court:

Though doubtless a matter of great convenience, pro-

ducing a desired result in a cheaper and faster way, and

enjoying commercial success, [the invention] “did not

Al6

produce a ‘new or different function’. . . within the

test of validity of combination patents.” Andersou’s-

Black Rock v. Pavement Co., supra, at 60. These

desirable benefits “without invention will not make

patentability.” Great A & P Tea Co. v. Supermarket

Corp., 340 U.S., at 153.

Accord, Timely Products Corp. v. Arron, 523 F.2d 288, 295

(2d Cir. 1975); Julie Research Laboratories, Inc. v. Guild-

line Instruments, Inc., 501 F.2d 1131, 1135 (2d Cir. 1974) ;

Formal Fashions,Inc. v. Braiman Bowe,Inec., 369 F.2d 536,

539 (2d Cir. 1966). See also Maclaren v. B-I-W Group, Inc.,

535 F.2d 1367, 1376 (2d Cir.) (citing Julie Research and

Formal Fashions for proposition that objective criteria

“are of distinctly secondary importance”), cert. denied, 45

U.S.L.W. 3416 (U.S. Dee. 6, 1976). Only in a close case,

in which application of the subjective criteria of non-

obviousness in 35 U.S.C. § 103 does not produce a firm con-

clusion, can these objective or secondary considerations be

used to “ ‘tip the scales in favor of patentability.” Roan-

well Corp. v. Plantronics, Inc., supra, 45 U.S.L.W. at 3415

(White, J., joined by Brennan, J., dissenting from denial

of certiorari),’ quoting Goodyear Tire & Rubber Co. v.

Ray-O-Vac Co., 321 U.S. 275, 279 (1944). Because we hold

that the claims made here are clearly obvious, we need not

examine secondary considerations. Compare U. S. Philips

Corp. v. National Micronctics Inc., No. 76-7134, slip op.

5 In Roanwell, the Supreme Court was considering certiorari in a Second

Cireuit case. Plantronics, Inc. v. Roanwell Corp., 403 F. Suop. 138

(S.D.N.Y. 1975), aff'd, 535 F.2d 1397 (2d Cir. 1976) (per curiam).

The pane) decision there is not inconsistent with the above analysis;

the court said: “In view of the ample evidence of obviousness, plain-

tiff’s arguments concerning secondary factors are not persuasive.” 535

F.2d at 1398. It was the district court opinion, which relied on secondary

considerations, with which Justices White and Brennan took issue in

their dissent from denial of certiorari.

Al7

1323 (2d Cir. Jan. 12, 1977) (secondary considerations

important because claim not clearly obvious).

Moreover, these secondary considerations are markedly

less accurate as guides to nonobviousness in this case than

might be the situation in another case. This is due to the

domination of the totalisator business by one large com-

pany, Amtote. Thus any “long-felt need” for the improve-

ment to which the Digitronics patent related, converting

electro-mechanically operated totalisators into electron-

ically operated ones, and its immediate use and commercial

success do not necessarily mean that no one else could have

made a similar improvement. On the contrary, it very likely

was simply a reflection of the fact that the dominant com-

pany had no incentive to make the change because its for-

mer system, exemplified by the Model 7J, was good enough

to dominate the market, and no one else was willing to

make the needed investment further to upgrade its opera-

tion, in view of that domination. Once the improvement

was introduced into the market, the dominant company,

Amtote, was quick to introduce electronic tote to maintain

its dominant market position.

IV.

Appellees counterclaimed for attorney fees under 35

U.S.C. § 285, which permits a discretionary award in “ex-

ceptional” cases, as where there is fraud in obtaining al-

lowance of the patent by the Patent Office or other signifi-

cant misconduct. See Timely Products Corp. v. Arron,

supra, 523 F.2d at 305; Kramer v. Duralite Co., 514 F.2d

1076 (2d Cir.) (per curiam), cert. denied, 423 U.S. 927

(1975); Kahn v. Dynamics Corp. of America, 508 F.2d 939,

945 (2d Cir. 1974) (“unclean hands” render case excep-

tional), cert. denied, 421 U.S. 930 (1975). Appellees argue

that Digitronics at least had unclean hands, since in the

A18

Patent Office proceeding it knew of but did not refer to the

existence of the demonstrator prototype of the First Tote,

see note 4 supra, or to its demonstration and attempted

commercial exploitation.

But the court found as fact that there was no “conscious”

participation by patentees and their draftsman, who was

himself not told about the prototype and who drafted the

application hurriedly (between january and March 28,

1963) in view of an intended sale or license of the patent.

At another point the judge stated: “{I]t cannot be said

that the case was pursued in bad faith, or was so wholly

devoid of substance that plaintiff could not fairly be sup-

posed to be proceeding in good faith.” Although the court

alluded rather darkly to the lack of “any satisfactory and

reasonable explanation” for the disappearance of the proto-

type drawings and to the fact that they were “uniquely

missing,” reflecting “a discontinuity in the files,” the court

went on to conclude as a matter of law that “[i]ssuance

of the patent was not procured through fraud or conceal-

ment or culpable nondisclosure,” and hence that the case

was not “exceptional” within 35 U.S.C. § 285. The weight

of the evidence supports this conclusion.

Judgment affirmed.

Al9

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF NEW YORK

DIGITRONICS CORPORATION, NOW

AMPEREX ELECTRONIC CORPORATION,

Plaintiff,

~against- 67 ¢c 1119

THE NEW YORK RACING ASSOCIATION,

INC., AUTOMATIC TOTALISATORS

(U.S.A.) LTD., AUTOMATIC

TOTALISATORS LTD. and PREMIER

EQUIPMENT PROPRIETARY LTD.,

Defendants.

MEMORANDUM and ORDER

Appearances:

S.C. YUTER, Esq., (Messrs. YUTER

& ROSEN, of Counsel for

plaintiff

ROBERT E. ISNER, Esq. (Messrs.NIMS,

HOWES, COLLISON & ISNER, of

Counsel) for defendants.

FILED

in Clerk's Office

U.S. District Court E.D.N.Y.

SEPTEMBER 16, 1975

A20

The tria! of this action based on alleged

infringements of Weida patent No.

3,252,149 has been long. The specification

of the pater ‘s not easy to read, the figures

are not communicative, and the field of the

patent at firs: blush appears complex. But

the lengthy trial and the discursive manner

of presentation have put in very nearly the

whole background against which the patent

can be evaluated. Now in suit are claims 20

through 27 of the 33 claims of the patent and

the question of infringement, oddly,

becomes very largely a question of the true

nature, genuine scope and ultimate validity

of the claims. If the devices accused do not

infringe, it can only be because the claims,

for all the seeming breadth of such claims as

claim 20, must be narrowly read. The points

of difference upon which non-infringement

turns appear trivial unless the claims in-

volved are so very narrowly read that prac-

tical effect escapes them; yet contracting

them into an area of validity destroys their

claim to unobviousness.

Nominally the patent is for im-

provements in a data processing system and

particularly in systems for processing data

received from ticket issuing machines. The

patent application was largely drawr froma

set of totalisator components and their

linkage designed for installation at the

raceway at Westbury, Roosevelt Raceway,

A21

or the raceway at Monticello, or both. It is

suggested, therefore, that the patent should

be reviewed against the background of the

totalisator art (Class 235-92), and that, so

viewed, the argument for the validity of the

present patent includes credit for extending

to the totalisator field the art of the data

processing field, and that the standard man

of ordinary skill put up by Section 103 must

therefore be the men who were and had for

years been working on totalisators and in

the totalisator field rather than those men

who had the skills ordinary in the data

processing field. Regrettably, that cannot be

the case. The patent was granted as a patent

on a data processing system in Class

340-172.5; it was a patent of a company

which evidently worked exclusively in the

electronic data processing field, and the

patentees were men and women working in

that field, and, in the years here in question,

very naturally working in the newest branch

of it, the solid state dovwende data process-

ing arts, invoking the use of transistors and

other semiconductors.

The genesis of the patent was in the work

that Digitronics undertook with and for the

Roosevelt Raceway trotting track. The first

contact of Digitronics with Raceway people

was in the first part of 1959, and at a fairly

A22

early date Digitronics was, after receiving a

description of the parimutuel betting system

then used at the raceway, prepared to and

did propose a reasonably detailed specifica-

tion for an essentially solid state electronic

system covering the functions of a

parimutuel system. The preliminary

proposal presented to Roosevelt Raceways

under date of May 11, 1959 (Exhibit F)

helps to outline the requirements of a

parimutuel system at a working racetrack,

and at the same time the aunealte system

which Digitronics was proposing at this

relatively early date. It should however be

noticed that a year earlier (Ex.74) Roosevelt

Raceway had raised with American

Totalisator Company (Amtote) the

possibility of using “electronic computing

machines and techniques now available “‘to

increase betting time and expedite delivery

of pay-off information in daily-double bet-

ting. Although the Digitronics 1959

proposal presupposed the use in the main of

solid state circuitry, the proposal to use elec-

tronics in a totalisator system was at least a

decade old. That is made clear from the

Moerman patent, applied for in January

1948 and issued in June 1949 (No.

2,472,542); Moerman proposed the use of

vacuum tubes and thyatrons; the system of

his patent is far from a complete system;

A23

moreover, apparently some kind of ex-

perimental installation was unsuccessfully

tried out with Amtote participation at the

Raceway in 1947 (Ex. 70). And there were

patent application filings for electronic

(vacuum tube) totalisators in 1945 (No.

2,557,384, Amtote; partially electronic), in

1949 (No. 2,652,977, Amtote; partially elec-

tronic; analog odds computer subsystem),

in 1952 (No. 2,837,281, totalisator equip-

ment; some solid state diodes, evidently

used as rectifiers), and in 1954 (No.

2,987,250; electronic totalisator). The

Digitronics 1959 proposal outlined the func-

tion of the equipment as, One, to issue bet-

ting tickets at each of the windows (through

ticket issuing machines, referred to

throughout as TIMs) on which would be

rinted out at the moment of issuance at

east the number of the horse, the date the

ticket issued, and the race for which the

ticket was issued; 7wo, to gather the betting

data continuously from up to 300 windows

for each of 9 races and from each of up to

150 daily double windows, the TIMs to be

adaptable to be assigned to win or place or

show bets in any denomination by means of

interchangeable plug boards; Three, to total

all the bets on a race for up to a stated max-

imum number of horses entered in separate

pools for win, place and show, to subtract

the state’s and club’s share of each pool,

A24

‘compute the win, etc. odds for each entry in

the race, to compute the pay off for win and

place and show at the end of each race, to

show the totals bet at each TIM for each

race, to show the daily double net pool, to

compute the payoffs for every combination

of first and second race winners rounded off

at $0.10, to adjust the pool and odds data in

the case of late scratches, and to make provi-

sion for computations in the event of ties of

up to three-horse ties; Four, to display on a

tote board every 70 seconds the totals bet in

each race on each horse for each of win,

place and show finishes, the tentative odds

on each horse and the daily double net pool;

after every race to display within five

seconds of the judge’s decision the exact

payoffs and at the end of the first race, the

ssible daily double payoffs on each horse

in the second race; and, Five to ney at

the central monitoring station and/or

calculating room all the information covered

in the computations in Three above.

Pages 2 through 5 of the preliminary

proposal, Exhibit F outline the components

of the system visualized by the proposal;

they may be compared with the great!

simplified block diagrams, Exhibits BL, B

and BT and the more specific and detailed

block diagrams of the accused devices as

shown in Exhibits 49 and 61, and the device

A25

of the patent as portrayed in its Figures, and

a, as outlined in heavy ink in Ex-

hidits 14 through 16A.

The system as proposed was visualized as

comprising TIMs, the data collection

system, the computer and the display com-

ponents. First, the ticket dispensers or ticket

issuing machines — the TIMs; these would

incorporate ticket rolls and a printing

mechanism for imprinting the bet data on

each ticket as issued. The TIMs were to be

provided with interlocks to prevent

erroneous or duplicative reporting of an

operation, and each TIM was to have a

counter to accumulate total transactions,

which could be checked against the central

data collection system. ond, the data

collection system was to embrace interroga-

tion of each TIM sequentially ten times a

second, each TIM to respond with a standby

sign if it had no transaction or with a tran-

saction signal (when a ticket sale was oc-

curring) which would indicate the number

of the horse on which the bet was being

placed, and each betting datum would be

registered in ‘“‘memory;”’ it was, further, to

embrace wiring connecting each TIM to the

central data collection system to carry the

information elicited from each TIM as it

was interrogated in turn and to convey a

signal from the central station in effect to

unlock the TIM to enable it to operate only

A26

if the system and signals were in order. The

central unit of the data collection system

was to be the data accumulator, which was

to have four principal parts, the scanner, the

plugboard, the “‘interpreter,’’ and the

“memory,” connected by appropriate mis-

cellaneous circuitry. The scanner was con-

tinuously to send out in sequence various

code combinations to interrogate the TIMs

in such manner that the information

collected identified the originating TIM.

The scanner was to make a complete circuit

of all the TIMs in one-tenth of a second.

The plugboard was to make it possible to set

up any of the 300 regular TIMs for win,

a or show bets in any denomination.

€ interpreter was both to store in the

‘memory’ data received from the TIM

response wires and the plugboard and also

to indicate any failure of these signals to

conform to the rigid criteria of correct

operation. Interpreter control of the

‘*memory”’ was to provide signals to indicate

when the TIM was locked because engaged

in a sale, or because betting was closed for

the race so that nothing would be added by

error to the “memory, ' and a combination

of signals to report to the memory a ticket

sc!d on a particular horse, and for a par-

ticular finish position and in a particular wet

denomination, the latter two elements b >

A27

derived from the plugboard classification of

the TIM. Once the bet had been registered

in the memory, (or on receiving a standby

signal from a TIM that had no transaction),

the interpreter was to signal the TIM to

“unlock.” If such a signal did not follow im-

mediately upon the scan cycle, the TIM was

to ‘lock up.’ The “unlock” signal was to in-

dicate registration of the bet (or simply to

act as an added check in the case of the TIM

with no transaction). The interpreter was

also to make several types of checks against

malfunction or erroneous betting.

The fourth element in the data ac-

cumulator was to be the memory whose

function was to store information required

for computations and for print-out or visual

display. One section of the memory was to

store the total wagers on each horse entered

in the race in the appropriate win or place or

show pool. A second section of the memory

was to store the total for each TIM using the

same dollar figures that were added to make

up the pool totals for each horse. A detailed

rint-out of the TIM was to be automatical-

ly available.

The fourth major component comprised

in che totalisator system proposed was the

computer. It was to compute and recompute

the odds at the completion of each scan of

the TIMs and store the odds data for

posting at frequent intervals. At the end of

A28

the race the pay off was to be computed and

available for posting within five seconds.

The computer memory was to store the data

needed for pay off results as well as other

constants required to determine the odds.

The fifth major component comprised in

the totalisator system was to be the display

equipment. It was to exhibit the amounts

bet on each horse for win, place and show,

the total win, place and show pools, and the

odds. The display material was to be

brought up to date every 70 seconds. A local

display panel was to be provided for

re the data before it was fed to the

main display board (usually in the infield).

After each race the payoffs were to be dis-

a po as soon as they had been computed

and monitored.

Discussions between Digitronics and

Roosevelt Raceway continued over a

protracted period and by November of 1959

the parties were talking in terms of first

building a prototype or “simulator” on a

small scale to demonstrate how the actual

system of ticket dispensing, computation

and display would function for both daily

double and regular operations. A sort of

specification was then prepared (Ex.94-A)

and later incorporated in Ex.Ap but it dealt

essentially in what the prototype would do

A29

and show and how it would differ from the

production model that was also in con-

templation, and it did not give any specifica-

tion of its components and system.

However, enough appears from it to indicate

that it was at least roughly compatible with

the May 11, 1959, outline of the preliminary

proposal so far as the system envisioned was

concerned. |

The outline for the demonstrator was in-

cluded as the first of the exhibits or —

dices annexed to the agreement (Ex.AP) ul-

timately made between Westbury Elec-

tronics Corp. and Digitronics which was un-

der discussion from December 1959 and

which was in form dated January 31, 1961

but which in fact was signed somewhat

later, and after the failure of a protracted ef-

fort to secure the participation in the ven-

ture of Yonkers Raceway, Inc., ‘Exhibit B,

(Ex.94B), incorporated in that agreement

(Exhibit AP), was pease prepared in

February of 1960. Exhibit 94B visualized a

470 TIM installation about a quarter of

which would be daily double TIMs. Exhibit

94B visualized a plan which would provide

for a scan of each TIM four times per sec-

ond. A scan sequence in terms of win, =

and show by denominations was assumed,

and it was slonned that each TIM should be

scanned even if locked and unused, the effect

of such a scan being a zero accumulation.

A30

f ° ° ° °

The scanner was to feed its information into

the central unit. The central memory for ac-

cumulating information was to be of two un-

its, one to be called the ‘“‘window” memory,

which would accumulate the total transac-

tions for each horse at each window,

—— information to an_ individual

igh-speed printer. The second unit of the

memory was the parimutuel memory which

was to accumulate the betting deen hee each

of the win, place and show pools for each of

the horses (Ex. 94B, Figure 3-A). In the cen-

tral unit both parimutuel calculation com-

ponents would be duplicated, each com-

putation would be done twice, and the

results would be compared with a previous

computation on that machine as well as the

computation on the cuplicate machine. In

addition the data would be checked into and

out of the memory. The operator of the en-

tire machine by operating an appropriate

control on the central panel could bypass

any defective section of the dual machine for

repair while the rest continued to operate.

The ‘‘window’’ memory (i.e., TIM

memory) would serve as an additional

spare, since the amounts bet could be

calculated, if need were, from the individual

TIM accumulation of transactions for each

Post-position in each race by the bettin

denomination and finish-classification o

A31

that TIM. “Exhibit B’’ annexed to Exhibit

AP (i.e., Ex. 94-B) visualized that the basic

unit for the entire machine would be the

“timer unit,’’ which was to “enable’’ data

into and out of the memory, and cause the

selection of the appropriate window

imachine for interrogation during the TIM

scan; during the computation the timer

would arrange for a different sequence of

accesses to the memory, as required by the

computational procedure. In the system of

Ex. 94-B during a scan, as a TIM is examin-

ed, the selected horse number will include a

check signal which the central unit would

examine; if satisfactory, and if the resultant

computation in the central unit is satisfac-

tory, a “confirm” signal would be sent back

to the TIM. Receipt of that ‘‘confirm’”’

signal would permit the TIM to issue the

betting ticket. Absent a ‘“‘confirm”’ signal the

TIM would lock up — a result that either

mechanical defect or the “‘scratching”’ of a

horse could precipitate.

Under the proposed system ‘“‘memory”’

would be of the ‘‘coincident current

magnetic core type.’’ The memory arrange-

ment would accommodate a total of 12 bits

(that is a magnetic imprint on a tiny an-

nulus), eleven to be used for data ard one as

a parity check. Each time a total came from

the memory it was to be checked for an odd

number of bits as well as for identity with

A32

the quantity being read out of the duplicate

memory. Once every 70 seconds during the

constant scanning of the memory an odds

computation would be performed. The bets

were to be translated into dollars as the

computation occurred. Since the TIMs

would be identified and their denomination

and win, place or show classification known,

the raw storage element would be the

number of bets at each TIM, but in the

memory they would be grouped by their

classes and as so accumulated multiplied by

their appropriate dollar amounts to give the

total of the pool for each finishing position.

At the end of the betting the output of the

TIM memory was to control a high speed

printer. This was to print-out the number of

wagers at each TIM on each of the max-

imum of 10 horses that can be entered in a

race at Roosevelt Raceway. Calculating

room and infield displays were to be provid-

ed in considerable detail.

The part of Exhibit. 94B (page 7, et seq.),

dealing with the operation of the system,

gives a clearer idea of the circuitry and its

relation to the demonstrator. To initiate the

betting, an operator at the central control

must press the “‘start bet’’ contro] button

and, by so doing, allow the issuance of

tickets by the TIMs. Depressing the start

A33

bet control button clears the memory and

initiates the scanning of all the TIMs. (This

is the initial clear signal (ICL) of the patent,

which originates at the console as shown in

plaintiff’s Exhibit 4 which combines Figures

1A and 1B of the patent). Probable odds

and money totals are we and the

operation continues until the end-bet con-

trol button is pushed. Whenever a horse is

scratched, the operator depresses the

“scratch” button for that horse number,

and that prevents any TIM from issuing a

ticket on the scratched horse. (This is in-

dicated in Exhibit 4 at the console in the

series of SKW keys or levers which are

numbered from 1 to N.) At each TIM at the

end of the race, a printout of the individual

horse transactions at that TIM is effected.

When the winner has been determined, the

control operator can press the Win button

and the button for the appropriate horse (or

— in the case of a dead heat — horses) and

the “‘calculate’’ button; the result is to dis-

play in the calculating room the payoff on

the winning horses. Similarly, the calcula-

tion and display are made for the show and

place horses. A complete breakdown of the

central system is backed up by the

accessibility of the individual paper tapes of

all transactions kept at each TIM as the

wagers are made. These are fed into an

offline window totalizer which is in effect a

A34

high speed paper tape reader and an ac-

cumulation facility.

Under the ‘“‘physical description” portion

of Exhibit 94B, the presentation explains

that electronic data gathering, calculation

and control units, as well as the display and

printout units, will be at the central loca-

tion, and that the electronic memory and

calculation circuits would be housed in ten

racks, one of the racks including the

plugboard, which could be arranged to

determine the wager denomination and

nature (as between win, place and show) of

the TIMs. Scanning is to be by a central

electronic scanning unit, and a control con-

sole would give the operator control of the

displays and printouts; the console would

include switches, buttons and associated in-

dicators arranged for convenient operation.

In addition, there are to be at the central

control location (as noted above) a high

speed 48 column printer to provide the prin-

touts, earlier described; the printer would

operate at 600 lines per minute; a pair of

lister type printers would provide a 10

column, 3 line per second printout. These

listers could also function as standby equip-

ment for the high speed printer above

described. There would also be included a

perforated-tape reader to read the tape and

A35

cause the printout on the listers during off-

line totalizing.

The presentation describes also, at page

14, the types of errors that the system would

be able to detect and make provision

against. It notes that two processes occur

simultaneously as the system operates: first,

accumulation of the number of bets at each

betting denomination for each horse and in

each of the win, place or show pools and,

second, the accumulation of the number of

bets for each horse at each TIM (the

MEMA and WM of the patent). It describes

a four way check on the first process con-

sisting in performance of the process by two

computing sections, each of which checks

both against itself and against the other.

The second process is subject to only a two

way check since it does each operation twice

and thus checks against itself. Tne first

rocess is used to determine the parimutuel

etting operation and cannot permit error

or down time. Transient error is to be in-

stantly detected and signalled to the

operator, but the machine must

automatically select the section which is

providing the correct answer and establish

the correct answer in both of the duplicating

sections. Hence, a transient error, it is

rovided, might be detected and corrected

7 the computer and thus be classed as a

detected and corrected error. If in the first of

A36

the two processes one side fails to operate at

all, it would report ‘‘error’’ to the operator

and could be om a out of action by operator

intervention. Such an event is described as

an ‘“‘outage”’ error. During such an outage

the parimutuel section will be operating es-

sentially on the same basis as the TIM sec-

tions, that is, it will do each calculation

twice and check the second result against

the first. Any detected error is reported in

detail to the operator while the TIM scan-

ning process continues. Detected and

reported errors take the shape of printouts

on the lister of the TIM and horse number

involved in the error. Since an error transac-

tion is never entered in the totalizing

memory, a TIM with a defective machine

can continually report defective data which

will not be acceptable to the computer, and

such a window will be automatically locked

up at each scan regardless of the ticket

seller's efforts. This type of error would be

classed as a “‘window-lockup”’ error.

Exhibit AP was not actually signed until

over a year after its Exhibits A and B (Ex-

hibits 94A and 94B respectively in the pres-

ent suit) were prepared. Meanwhile there

was a protracted effort to bring Yonkers

Raceway into the transaction and a good

deal of discussion within Roosevelt

A37 —|BEST GOPY AVAILABLE

Raceway’s organization about how to han-

die the Amtote situation. The Raceway con-

tract with Amtote was to expire at the end of

the 1960 racing season, and Roosevelt

Raceway was anxious to change that rela-

tion materially. At the same time that

Roosevelt was considering trying to work

out radical changes in its relation with Am-

tote, it was gg Be possibility of an

arrangement with Western Totalizator

Company, apparently a subsidiary of

American Dryer Corporation and identified

with Joseph Lease as its principal negotiator

and perhaps a principal in the firm. At the

same time, negotiations with Digitronics

were pushed along in the general framework

of spending something like $100,000 for a

prototype to be followed by a complete in-

stallation at a cost approximating

$1,100,000. Roosevelt Raceway’s ideas em-

braced, as the draft agreement indicates, a

visualization that it would itself get into the

totalizator providing business. Digitronics

was not unaware that it was at least possible

that Roosevelt Raceway was ri, playing

it off against Amtote, and Digitronics

prepared itself in some circumstances to see

whether it could not form some kind of

alliance or other with Amtote, providing

Amtote with electronic know-how for the

modernization of its equipment and taking

advantage of Amtote’s position and ex-

perience as well as its specific skills and of

A38

Amtote’s access to the Bell-Punch TIMs,

the TIMs successfully used by Amtote in its

electromechanical installations. By late

March 1960, Digitronics was becoming con-

vinced that Roosevelt Raceway might well

decide on the prototype at least, and near

the end of March, 1960 Roosevelt Raceway

had an experienced man in effect go over the

Digitronics materials. His report approved

the Exhibit 94B proposal as satistactory for

acceptance but he had criticisms of details,

particularly with respect to error frequency.

On March 31, 1960 the executive committee

of Roosevelt Raceway was told that an in-

vestigation of Digitronics’ installations at

Bache & Co., Merrill Lynch, Pierce, Fenner

& Smith and other brokerage firms had

been made and that the installations were

said to operate to complete satisfaction. It

was also reported that the electrical

engineer who had been hired to check up on

Digitronics had discussed with Digitronics

engineers ‘‘the method and system which

they intend to initiate in the manufacture of

the machines to be designed and offered,”

that he had checked on their ability to

produce and their time table for completin

the prototype, and that apparently he ha

found nothing wrong with them; it was

reported to the executive committee that the

A39

retained expert had explained the “‘tremen-

dous advantages”’ of electronic computa-

tion, and expressed his belief that an elec-

tronic installation was capable of much

greater reliability than an electrical installa-

tion. It was thought that the equipment

could be installed at Roosevelt Raceway for

a sum not to exceed $1,200,000, indepen-

dent of the prototype, which was not to ex-

ceed $190,000 in cost; the executive com-

mittee recognized that the investment

would be depreciable for tax purposes and

would, in addition, eliminate the cost for

commission and rental incurred with Am-

tote which amounted to $473,000 for 1959.

In light of all this, it was recommended to

the committee that the president of the

Raceway be authorized to negotiate with

Digitronics for the best possible terms. At

the next Directors’ meeting, on April 19,

1960, there was an authorization to contract

with Digitronics on the basis of the

proposals submitted by Digitronics; under

these, Roosevelt would acquire a 47 2% in-

terest in a distributing company, Yonkers

would acquire another 47%% and

Digitronics the remaining 5%.

The negotiations dragged on in the con-

templation that a new company, Westbury

Electronics Corporation, would be the vehi-

cle of acquisition of the electronic equip-

ment and act as a means of entry into the

A40

distribution of such equipment, and it was

emphasized that, after the building of a

paw. and subject to its being approved

y the New York Racing Commission, or by

Raceway itself, there would then be an un-

dertaking to build and complete the first

totalizator by December 31, 1962 at a cost of

$1,215,000. As nothing had come to a head,

finally, at the last part of May, Roosevelt in

effect requested Digitronics to proceed on a

letter-of-intent basis (because of the impor-

tance of Digitronics’s proceeding im-

mediately to place the necessary orders for

components of the prototype); in its letter to

Digitronics, Roosevelt Raceway undertook

to save Digitronics harmless from any

liability under a contract made by

Digitronics and American Electronics for

the production of prototype TIMs and such

other expenses as Digitronics might incur

through its engineering and other work per-

formed for the benefit of the contract and in

anticipation of its execution. It was un-

derstood that the indemnity would cease

and terminate upon execution of the master

contract.

Evidently, work did proceed at that time.

On June 1, Digitronics reported to its direc-

tors that the formal contract to be executed

with Westbury Electronics Corporation was

A41

being delayed because of difficulties en-

countered with Yonkers, but that

Digitronics was proceeding on the basis of

the letter of intent with the building of the

prototype for Westbury Electronics, to be

ready by December 1960. By the time of the

publication of its year end report to its

stockholders on June 30, 1960, Digitronics

felt able to characterize the work on the

Roosevelt Raceway prototype as “Among

the more spectacular systems designed dur-

ing the year.’’ The prototype was described

as ‘“‘an electronic totalizator which should

demonstrate, at greatly accelerated speeds

and accuracy (and at sharply lower cost),

the electronic recording and computing of

bets at the harness and thoroughbred race

tracks throughout the world.”

It will have been noted that the letter of

intent referred to the acquisition of TIMs

from American Electronics, Inc.; however,

Digitronics was also, through the ubiquitous

Joseph Lease, put in touch with Bell Punch

Company, Ltd. in London with a view to

working something out to wed the TIMs of

Bell Peach and the electronics of

Digitronics; and work was going forward

also with Taller & Cooper on the produc-

tion of Hohmann TIMs (two of which were

in the end used with the prototype).

While the work was going forward at

A42

Digitronics, Joseph Lease, for Western

Totalizator, continued to put forward to

Roosevelt Raceway his competing equip-

ment and to disparage Digitronics.

Meanwhile, + eibioes Racew2,'s efforts to

negotiate effectively with Amtote had pretty

much failed, and, bs the end of September,

Roosevelt Raceway, although encouraged

by Digitronics’s reports of progress with the

prototype, had .questions in its own mind

about whether the equipment could be fully

operable and able to serve the raceway by

May 1961. Accordingly Roosevelt Raceway

reconciled itself to negotiating the best

terms it could with Amtote looking toward a

five year contract with Amtote for equip-

ment at the raceway. Still negotiations were

being conducted with the Yonkers

Raceway, and nominally with Digitronics,

while (at the end of September) it was ex-

pected that by November 15 the prototype

would be ready for demonstration.

In this period in which work was getting

underway on the actual building of the

rototype, after the pre aration of the “‘Ex-

hibit A” and “Exhibit B,"’ (Exs. 94A, 94B)

specifications annexed to the contract Ex-

hibit AP, the work at Digitronics was under

the direction of Kiehlson; the overall logic

was apparently in large part, if not entirely,

supplied by Shaw of Electronics.

A43

The connection of Mr. Weida with the

project at Digitronics (where « was iden-

tified as Job 4726) dates from shortly after

Labor Day of 1960. Shaw was an experienc-

ed system and logic design man who had

worked on one of the historic computers, the

ENIAC; he had been in computer

technology from the late '40s. The logic was

well in hand, and Weida got a lengthy logic

write-up from Shaw when the work was

turned over to him; much of the construc-

tion of the prototype was complete, and

much of the wiring done; it was essentially

Weida’s job to follow through to get

operability. The equipment was complete as

a first go-around, but it had certainly not

been debugged. It was first powered-up in

mid to late September, but it did not at once

work. There was at least one specific

blunder in the system as it then existed — in

the odds computation and payout part —

and that had to be planned around. The

first demonstration of the prototype was in

mid November (see Exhibits CP, 89, 89A,

and AQ). The first demonstration, planned

for mid-November 1960, was not to include

demonstrating the daily double, but only

the regular betting capabilities of the

prototype.

By January 18, 1961, Digitronics was tak-

ing the view that production of the

A44

prototype was then virtually completed but

that, because of the difficulties with the

Taller & Cooper TIMs, the completion of

which cp had had to take over,

costs of the prototype would be closer to

$150,000 than to $100,000; it was also in-

dicated that the anticipated cost of the first

totalizator would be $1,500,000 rather than

$1,215,000. At this time Digitronics was

becoming impatient with the delay in sign-

ing the contract and sought to threaten

Roosevelt Raceway with abandoning the

transaction after ye of and payment for

the prototype; that threat was met with

Roosevelt Raceway's insistence that

Digitronics could not expect payment for

the prototype on contract terms if it aban-

doned the undertaking to complete the first

totalizator.

Finally, on January 30, 1961, Westbury

Electronic me. was organized. At the

same time, the Digitronics-Westbury agree-

ment was put in substantially final form, ex-

cept that it still assumed and provided for

the participation of Yonkers. It was dated at

January 31, 1961, and was signed by

wis ohn and Westbury, although,

perhaps not until some days after its date. It

continued to have as its “Exhibits A’’ and

“B”, respectively, the November 1959

specification for the prototype (Ex. 94A)

A45

and the February 1960 specification for the

first totalizator (Ex. 94B). There was also

preperse and ultimately signed by West-

ury and Digitronics a guarantee by West-

bury to Digitronics of one half of the

amounts payable by Westbury under the

totalizator agreement and service

agreements between Westbury and

Digitronics. It had been contemplated that

Yonkers would also give a 50% guarantee,

but with the later withdrawal of Yonkers

from the matter, that portion of the agree-

ment was stricken out.

_A copy of the a i was sent to the

New York State Harness Racing Commis-

sion under date of February 12, 1961, and

about February 23, 1961, Roosevelt arrang-

ed to put $150,000 into Westbury —

$99.000 of it as a loan and the balance as the

tie for 51% of the stock — the $150,000 to

used to pay for the prototype.

The agreement of January 31, 1961,

provided in paragraph 2 that Digitronics

agreed ‘to design. manufacture, sell and

deliver to Westbury, and Westbury agrees

to purchase from Digitronics, a Prototype,

meeting the specifications set forth in Ex-

hibit ‘A’ hereto, and the First Totalizator

meeting the specification set forth in Exhibit

B’* * *.” There was prepared a proposed

modification of the contract which would

A46

have altered paragraph 2 to provide that

Digitronics agreed ‘‘to design and produce a

Prototype meeting the specifications * * *

and agrees to design, manufacture, sell and

deliver to Westbury, and Westbury agrees

to purchase from Digitronics, the First

Totalizator, etc.’’ Paragraph 3 of the agree-

ment, which referred to delivery of the

prototype and satisfactory completion of the

acceptance test, would have been modified

to strike out the reference to ‘“‘delivery.”

Similarly in paragraph 4 a reference to

delivery of the prototype would have been

stricken out, leaving simply references to

completing the prototype. There is no com-

petent evidence that amendatory agreement

was executed by the parties. One copy of it

was, indeed, signed by the president of

Digitronics, but it does not appear that

Westbury ever signed it. If the agreement

had any purpose, it was apparently to make

the formal point that there was not a “‘sale”’

of the prototype. The prototype was, in fact,

first set up and demonstrated at Digitronics.

Somewhere at or about the end of March

1961, Digitronics prepared ane sent to

Westbury a bill for $150,000 for the

rototype showing total material cost and

abor charges of $158,478.31 whereof

$150,000 was invoiced to Westbury. The

prototype was moved to Roosevelt Raceway

A47

in early September 1962. Demonstrations of

the prototype after that date took place at

Roosevelt under the supervision of

Digitronics personnel. Ultimately the

prototype was stored at Roosevelt Raceway

and is still there. In April 1961, when

Yonkers Raceway had fairly clearly retired

from the transaction, Digitronics in effect

took up the Yonkers share of the stock of

Westbury for an agreed price of $49,000.

At the April 18, 1961 meeting of the

stockholders of Roosevelt Raceway, the

president of the raceway advised the

stockholders that Digitronics had completed

a prototype of an electronic totalizator for

Roosevelt Raceway and added, “It operates

to the fullest extent we would require. At the

moment it is custom built.” Later, in the

meeting, commenting on Digitronics (and in

the context of justifying the Rescear invest-

ment in Westbury) the president advised the

stockholders that Digitronics ‘‘have

deveioped an electronic totalizator that will

revolutionize the tote business.”

The actual payment of money into West-

bury Electronic did not take place until on

or about May 1, 1961; at that date formal

financing agreements were executed

between Digitronics and Roosevelt

Raceway. About May 2, 1961 the Westbu

Electronic Corp. formally opened its ban

A48

account with Morgan Guaranty. On May

10 Westbury drew its check on Morgan

Guaranty to the order of Digitronics for

$149,000 apparently in payment ‘‘on ac;

count, for design, development and produc-

tion” of an invoice of Digitronics dated

March 31, 1961 which set up total

chargeable production costs per contract of

$158,478.31.

Evidently, at this time, it was recognized

that the Hohmann TIM would not do, and

in late May, Lease of Western Totalizator

Co. undertook to send one of his used TIMs

to Digitronics; he pointed out certain of its

differences from the Digitronics-Hohmann

TIM; these he attributed to the fact that the

circuitry of the Digitronics system required

the TIM sensing unit to be in constant rota-

tion so that the circuit would be open and

waiting for the next operation. He

volunteered the comment that, “Your cir-

cuit, like most electronic circuits, is not like-

ly to be patentable and follows the usual

electronic computer intricacies.”

At the May 26, 1961 directors’ meeting of

Westbury, consideration was given to the

TIM question, the possible availability of

Bell Punch TIMs and the alternative of

using different manufacturers to make the

Hohmann type TIM. At the same meeting,

A49

Westbury considered the question of

producing a totalizator system for testing

and demonstration, and Haight, president

both of Westbury and of Digitronics,

suggested that a 100 window machine (75

regular and 25 daily double windows) be

produced by Digitronics for delivery and in-

stallation at Roosevelt Raceway at the end

of the spring season in 1962 when it could be

vigorously tested and demonstrated to possi-

ble customers. Haight estimated the cost at

$800,000 including TIMs, of which

$200,000 would represent necessary

development costs. Westbury resolved to

place an order for such a First Totalizator

(hereinafter the First Tote), the order for the

TIMs to be delayed for the present. This did

not fit the terms of the agreement of January

31. 1961, which contemplated that the First

Tote would be manufactured and completed

in accordance with Exhibit “‘B’’ (Exhibit

94B). provided the required approval had

been obtained on the basis of the prototype.

Obviously, the First Tote in contemplation

at the May 26 meeting was not the 470 TIM

installation of Exhibit ‘““B” (Exhibit 94B) at-

tached to Exhibit AP which was to cost not

more than $1,500.000 and which was to be

delivered by June 30, 1962 provided the re-

uired approvals had been given, or the

Firs Tote ordered by not later than June 30,

1961.

A50

In the early days of June 1961 Haight

tried to interest NYRA in the electronic

tote. On July 1, 1961 Alvin Weil, in his

capacity as an officer of Westbury, offered to

a French race-track entrepreneur a

prototype demonstration and solicited an

order for electronic aggre ating and related

equipment for parimutuel betting in France

on a large scale, indicating the need for

some developmental time for particular re-

quests that went beyond the prototype, and

stating that “‘At present we are merely

attempting to prove that existing techniques

now utilized in other fields, may be adapted

to the needs of a multiple issuer.”

On July 21, 1961 an employee of

Digitronics furnished to Haight, its presi-

dent and an officer of Westbury, the presen-

tation that the employee had used in seeking

to interest an Italian group in the all-elec-

tronic Totalizator. The presentation stated

that the pone had been produced and

successfully demonstrated, and that the

all-electronic parimutuel system consisted

of a — tote center, TIMs, and infield

display board, and other remote display

boards around the track, and that the tote

center consisted of a scanner, aggregator,

odds computer, payoff computer, tote center

display panel, and printout facilities.

A51

Describing the functioning of the system,

the presentation stated that as wagers are

made at the TIMs, tickets are issued by the

TIMs and that, as each ticket is issued, the

wager data are automatically transmitted to

the tote center (including the amount of the

wager, the number of the horse and the

designated pool). It was stated that at ihe

tote center the data are entered in the

“memory” and checked for accuracy. The

data then enter the aggregator, which ac-

cumulates all transactions, and thence go on

to the odds computer. The computer, it was

said, translated all transactions into dollars

and calculated the probable odds. The odds

computations and totals wagered on each

horse in each pool are then transmitted to

and displayed at the tote center display pan-

el, the infield display board, and remote dis-

play boards around the track. At the same

time, the figures are printed out on paper,

including the totals wagered on each horse

in each category. After each race the payoff

computer calculates the payoff for win,

place and show and the amounts due the

state for tax and to the track for breakage.

The presentation noted that all this was

done electronically, ‘‘and the heart of the

entire system is the tiny magnetic memory

core. It is this tiny element which permits

the computers and other equipment to func-

tion so rapidly, accurately and depen-

dably.” The tote center, it was said, would

A52

cope with scratches, dead heats and other

variables. The TIMs were described as

specifically designed to function with an

all-electronic totalizator and to perform

more functions than their counterparts used

in electromechanical systems. basic

function of the aggregator was described as

being to accept all details of all transactions

from the ‘IIMs, and to reject unacceptable

wagers, for example, an attempted wager on

a scratched entry, interdicting the issuance

by any TIMs of a ticket on a scratch. The

aggregator accepts data from the TIMs,

stores them in the magnetic memory cores,

keeps all data by number of horse,

denomination of wager and win or place or

show pool, and duplicates the records kept

at each sales window by its TIM. The com-

puters make all required calculations in-

cluding odds and daily doubles and payoff

data. Accuracy in transmitting data from

TIM to tote center is assured through use of

a special checking code. Two computers are

used to check every step in each calculation,

with the totals of each computer being

checked against those of the other. Each

computer can also do its computations twice

further to reduce the risk of error, and both

computers have internal checking features.

A53

A little later in July 1961, Auerbach, as

then president of Digitronics, wrote Bell

Punch Co. in London referring to his visit

there in 1960 and to a discussion on that

visit of the application of electronic tech-

niques to building parimutuel equipment.

letter stated that Digitronics had con-

structed a prototype electronic totalizator to

demonstrate the feasibility of digital elec-

tronic technique as an economical solution

to race track problems. Stating that the

prototype system had been demonstrated

seneeaaindiy to many interested groups,

Auerbach said that the company had com-

pleted arrangements to sell its first 100 win-

dow system, that the system was under con-

struction, and that Digitronics was

repared, but indisposed, to make its own

rh Is. Auerbach, therefore, inquired

whether Bell Punch would quote him on

100. 300 and 500 unit quantities of Bell

Punch TIMs with provision for up to 15

runners, plus a second quotation on the

same quantities for only 10 runners or

trotiers.

Meanwhile. Lynch of Roosevelt Raceway

visited Aqueduct on July 28, 1961 to see the

Clary solid state computer, IBM printout

unit, programming arrangement, and con-

trols the calculation procedure there in use.

A54

The equipment was embodied, Lynch said,

in a desk sized console which contained con-

trols for the runners and for odds in connec-

tion with the infield display board. The

Clary computer was being operated for ex-

hibition purposes in parallel with the

original model Burroughs computer; it

differed from the Burroughs in being more

compact and somewhat faster; it had

simpler inputs for the race finish, and the

ability to accept a ‘“‘new call” in place or

show finishes without recalculating the en-

tire finish. Lynch timed the equipment at 1

minute and 25 seconds and at 1 minute and

20 seconds for two finishes; that, he said,

compared with Roosevelt’s best manual

time of 1 minute 15 seconds; however, he

thought that the Aqueduct system had

much better capacity for recalculating when

there was a change in calls. Lynch conclud-

ed that, while not basically much faster than

the best manual showings, the automatic

equipment would be consistently quicker,

not so variable, and would require con-

siderably less personnel, making possible a

savings in payroll of $130.75 a day (plus

fringe emits) for a rental price of about

$110 per day.

Ur der date of August 15, 1961, Westbury

formaily authorized Digitronics to go ahead

with the 100 window First Tote for $800,000

or 130% of production costs, whichever was

A55

lower. The TIM to be used in the system

was to be chosen by Westbury on or before

January 1, 1962.

On October 14, 1961 Alvin Weil for West-

bury answered an inquiry about electronic

equipment by stating that ‘‘the Totalisator

system about which you inquire is In proto-

type and has not as yet been developed for

sale.” The letter continued by saying that

Weil wondered about the inquiry since the

system was an “extremely specialized

system which would be of interest to race

track operators.”

Apparently, Digitronics was having dif-

ficulty arranging for satisfactory TIMs. A

trip was made to Montreal, there to ex-

amine certain TIM equipment, drawings

and tooling of Joly Mfg. Co. The result was

a report that they apparently had neither

the tooling, the drawings, nor the personnel

to do a job of producing Bell Punch type

TIMs. foned on the back of this com-

munication was a note to the effect that Bell

Punch had told Auerbach that Digitronics

would buy Bell Punch TIMs directly from

Amtote, which, apparently, was believed to

control any distribution of Bell Punch TIMs

in the United States. An approach to Am-

tote is reflected in a letter of January 12.

1962 (Exhibit CW) in which Digitronics

A56

acknowledged receipt from Amtote of one

Bell Punch double machine, noted the

absence of certain reject mechanisms from

it, and asked whether it could be purchased

without the wiring and relays but with the

motor, all solenoids, takeoff switches, etc.

and (since it would be without those

wirings) at a reduced price.

Meanwhile, and certainly in advance of

February 27, 1962, when completed copies

of the brochure were mailed out to Kambex

Corporation in New York (Exhibit CX),

Westbury had prepared a brochure entitled

“Westbury Electronic Corp. presents the

world’s first ALL-ELECTRONIC

TOTALIZATOR.” The 14 page booklet

was illustrated with certain pictures of the

prototype taken in June 1961. Among other

things, the pictures showed the Hohmann

TIMs, and four cabinets opened so that

their contents could be seen; the cabinets

were indicated as being, from left to right,

the scanner, the aggregator, the odds com-

puter, and the payoff computer. An elec-

tronic module card was also pictured, one of

the very large number of such cards used in

the Totalizator. Also included were pictures

of the cabinets located at the central control

area closed and partly open. The equipment

was said to be all-electronic parimutuel

system equipment consisting of a complete

tote center, TIMs, an infield tote display

A57

board and other remote display boards

around the track. The tote center was said

to consist of a scanner, aggregator, odds

computer, payoff computer, a tote center

display panel, and printout facilities. In the

all-electronic Totalizator, the brochure

stated, all totalizing and calculating was ac-

complished with pure electronic digital

solid-state equipment with no moving parts.

The elements, it was said, were small and

compact and utilized electronic module

cards, the same as those used in rockets,

satellites, and space vehicles; they offered

compactness, durability and dependability,

virtually never wearing out, according to the

brochure. The brochure stated that

although the all-electronic totalizator per-

formed many more functions than the elec-

tromechanical system, it occupied only 1/3

the space, the use of solid-state electronic

components — such as module cards, diodes,

transistors and magnetic memory cores to

replace large, bulky stepping switches and

other electro-mechanical equipment,

resulting in a much more compact system.

The flow sheet of the system was described

thus: As regular and daily double wagers

are made at the TIMs, tickets are issued;

before a ticket is issued, the transaction is

automatically transmitted to the tote center,

and, only when the wager has been

registered, does the TIM emit the betting

A58

ticket; the data on the wager consist of the

amount of the bet, the horse’s number, and

the win, place or show pool to which the bet

will go; in the tote center the data are

entered into the fully electronic memory and

are checked for accuracy. The data then go

into the aggregator which accumulates all

transactions. [hence the data go to the odds

computer, which translates all transactions

into dollars and calculates the probable

odds, and this information is then

transmitted to and displayed on the tote

center display panel, the infield tote display

board, and the remote display boards

around the track. For pore race, the

brochure continued, there is a continuous

display of the total win, place and show

pools and of the individual horse totals for

each pool, the. display cycling every 70

seconds. Updating takes pi one second

to complete. After the first race, possible

payoffs for the daily double are displayed.

After the TIMs are closed, the information

is printed out on paper, the print-out in-

cluding the number m poked, ste for each

horse in each wager category, the dollar

totals wagered on each horse in each

category, and the number of wagers on each

horse at each TIM. At the end of each race,

the payoff computer calculates the payoff; it

also computes the possible daily double

A59

payoffs, the final daily double port. and

the amounts due to track and state, in-

cluding breakage. All these operations are

done electronically ‘‘and the heart of the en-

tire system is the tiny magnetic memory core.

It is this tiny element which permits the

computers and other equipment to function

so rapidly, accurately and dependably.

The brochure explained that each TIM can,

from the tote center, be redesignated so as to

change it from a window of one denomina-

tion to another, or so as to render it in-

operative. The tote center is also to cope

with scratches, dead heats and other

variables. In the case of a scratch, the tote

center instructs the TIMs not to accept bets

on the scratch. The operation of a single

scratch button will remove the total pool in-

volving that horse from the probable odds

computation or payoff computation. The

brochure continued: each TIM takes slight-

ly more than half a second to report the

details of the wager to the tote center and

issue a ticket to the bettor regardless of how

many wagers are being made. All machines

are scanned four times every second whether

the installation is small, or one of 1,000 win-

dows. The brochure stated: in addition to

reporting transactions to the tote center, a

record is kept of all transactions for each

race, for each TIM for each window, and

that for the regular machines, a counter is

A60

used to record the number of wagers passing

through the machine in each race, and, for

the daily double machines, a perforated

paper tape is punched to record each tran-

saction so that if the entire tote center is

destroyed, wagering can continue, and

records of all transactions can be obtained

from the TIM records to permit hand

calculation of the payoff. The brochure ex-

plained: the basic function of the aggregator

is to accept all the details of all transactions

from the TIMs; it accumulates the number

of wagers in each denomination for each

horse and for each finish-position pool. The

data are subject to a four way check through

the duplex operation where each computer

checks both against itself and against the

other. The aggregator accumulates the

number of wagers for each horse at each

TIM subject to a two way check internal to

itself. The aggregator rejects unacceptable

wagers — for example, a wager sought to be

placed on a scratch — and does not allow

the TIM to issue a ticket on such an

attempted wager. As the aggregator accepts

data from the TIMs, it stores the data in the

magnetic memory cores; in maintaining

these data, it alicome the records kept at

each window by the ticket issuing by the

TIMs. The brochure stated: the basic func-

tion of the computers is to do all of the re-

A61

uired calculations, translating them into

ilies. Totals for all race wagers and

probable odds are calculated instantly with

the probable odds calculation being done

every 70 seconds. After each race, the com-

puters calculate the public payoff within 15

seconds after the order of finish is punched

into the central control units and in the case

of the daily double, in about 10 seconds. Ac-

curacy of transmission of the data from TIM

to tote center is assured through use of a

special checking code, and accuracy of

calculation is assured by using two com-

puters to check each step in calculation, the

results being compared to make sure they

are accurate. In addition, each computer

can do its own calculations twice — further

to reduce the risk of error — and additional

internal checking features are built in. (Ex-

hibit U and Exhibit 120)

At the March 7, 1962 meeting of the

Directors of Digitronics, Auerbach reported

on the Italian totalizator situation; he in-

dicated that preliminary talks pointed to a

10 year contract with a 2% of gross handle

being Westbury’s income.

At the Roosevelt Raceway stockholder’s

meeting of April 17, 1962, Alvin Weil, then

president of Roosevelt Raceway, devoted an

extended part of the cnn, 6 discussion ou!

Digitronics, Westbury Electronic, the

A62

prospects of the use of completely electronic

parimutuel betting at Roosevelt, and ex-

ploitation of the market for such equipment

through Westbury Electronic Corp., in

which Roosevelt was a majority stockholder.

Apparently display cards were used at the

meeting to explain the new tote system, and

Mr. Weil used the familiar statement that

“the heart of this equipment is a little cir-

cular thing that could lie right in the center

of the palm of your hand * * *. This is the

memory, this is — or a number of these, of

course, is what takes together all of this in-

formation, holds it, sorts it and then puts it

out when needed.”

In the latter part of May and the first days

of June 1962, the plans of Digitronics and

Westbury Electronic Corp. took the direc-

tion of completing the First Tote as an in-

stallation - 100 TIM system at Mon-

ticello Raceway about March 15, 1963,

following a demonstration of adequacy at

the Digitronics plant about February 1,

1963. The Monticello installation was to be

utilized as well for taking bets at Vernon

Downs and at Buffalo through some sort of

long lines connection, while the control

center remained at Monticello. That first in-

stallation was to be followed by the comple-

tion of a large installation at Roosevelt

Raceway by March 1, 1964, and the transfer

A63

at that time of the central control and com-

puter units from Monticello to Westbury. It

was visualized that Aqueduct, too, would be

added to the system in March 1964. The

whole program, it was thought, might cost

as much as $4 million, and, if extended to

off-track betting in New York City (provid-

ed such betting was legalized), would also

include facilities for that operation at

another $400,000 of cost. At this point. the

cost estimates assumed Bell Punch TIMs on

the first installation with Westbury Elec-

tronic TIMs to be used thereafter. The am-

bitious program was keyed to approval by

the New York State Racing Commission of

the Westbury Electronic equipment at the

time of the initial demonstration at

Digitronics in February 1963. Haight was in

the course of going to England to negotiate

with Bell Punch for 165 TIMs for use in the

First Tote. To assure Bell Punch of pay-

ment, Westbury Electronic Corp.’s thin

capitalization was to be supported by a

Morgan Guaranty Trust Company

yooescamge backed up by Roosevelt

aceway. (See Exhibits 122, CZ and BE)

In early August the problem of getting

hold of Bell Punch TIMs was still, as a prac-

tical matter, quite unsolved. There was dis-

cussion of maintaining pressure on Amtote

to get Bell Punch TIMs from it, speculation

A64

about the possibility of getting them from

Joseph Lease via Canada, and the possibili-

ty that, at least for the hoped-for Italian in-

stallation, London .- be persuaded to

— Bell Punch TIMs directly for

delivery in Italy, despite the risk that they

might be diverted from Italy to the United

States. By the end of August, however,

—— was in touch with Australian

ote.

Australian Tote indicated a willingness

and ability to supply 190 TIMs by the year

end of 1962, poss iad was interested

in trying to work out some arrangement

with Australian Tote to supply it with elec-

tronic components for its Tins: Australian

Tote seemed to be concerned only with see-

ing to it that Digitronics did not ng | its

devices. At the same time, Australian Tote

indicated that IBM wanted to discuss not

only the design of Australian Tote’s

machines but also the buying of IBM’s TIM

requirements from Australian Tote.

By early September 1962, the planning,

somewhat changed, was tending to be that

final assembly and erection of the First Tote

might be at Roosevelt (rather than Mon-

ticello). Delivery of the First Tote was

scheduled for February 1963.

Still in the early part of September 1962,

the negotiation with Australian Tote was

A65

pressed, and it appeared that a satisfactory

arrangement could be worked out between

Digitronics and Australian Tote, starting

with the loan of one machine to Digitronics,

to be followed by the delivery of two un-

modified machines, all three to be used with

the prototype for test purposes. Beyond

that, the discussion was over ordering 165

additional machines that would be modified

by substituting for their standard “‘selector

arm mechanism” a push-button system and

the addition of a relay and adjustment for

use with 120 volt direct current rather than

50 volt current. It was visualized that the

orders for the Australian Tote TIMs would

fulfill the requirements at Monticello, the

deliveries being staggered between the par-

tial requirements for the February

demonstration and the complete re-

quirements for the March installation,

presumably at Monticello. At the same

time, however, discussions continued with

Joseph Lease for the delivery from Joly Mfg.

Co. in Montreal of 200 regular and 60

quinella TIMs of the Bell Punch type, 148 of

which were said already to have been

assembled for another race track which had

failed to complete the purchase. These were

supposed to be deliverable by the end of

January 1963. Digitronics wondered

whether the person behind the Lease offer

A66

might not be Bell Punch itself, acting

through Lease. In any event, the negotiation

with Australian Tote (which will hereafter

be referred to as Atusa, indicating

Automatic Totalisators (U.S.A.) Ltd.,) was

em ot to the point where, at the end of

eptember, Digitronics and Atusa were dis-

cussing specific contract terms, and

Digitronics was expressing a preference for

the Atusa TIMs over the Hohmann TIMs

which it had worked out with Taller &

Cooper. By October 10, 1962, Westbury,

and presumably Digitronics, were

proceeding on the assumption that Atusa

would make J10 push-button TIMs available

in time for the demonstration in February

1963. One type of J10 apparently could be

switched from regular to daily double bet-

ting very simply, and it was the view that

only 120 machines would be needed, 40 of

these to be converted to and from daily

doubles operation. That circumstance, it

was reckoned, wouid bring the cost of the

Atusa TIMs within the projected budget for

the project.

Amtote, apparently, had becn given some

sort of an order for 152 Bell Punch TIMs,

but it was understood that Amtote had not

unequivocally accepted the order, and

Westbury determined to terminate the order

for all except 13 Bell Punch machines to be

delivered in October 1962. Apparently there

A67

was also under consideration a proposed

development contract with an outside firm

for an on-track and off-track TIM, with, ap-

ey, some expectation that the on-track

IM might be “more important to the

February demonstration than the off-track

devices.”

At length, under the date of October 30,

1962, a letter agreement was signed between

Westbury Electronic and Atusa covering

122 J-10 TIMs ordered for Westbury Elec-

tronic Corp. by Digitronics Corp. at a total

cost of $246,226 FOB Sidney, Australia.

Twenty of the machines were to be shipped

not later than January 15, 1963 and 101

machines were to be shipped not later than

March 31, 1963. The carrier was to be

designated by Westbury (which was, of

course, to pay the freight).

Meanwhile, at the beginning of

November, it was, in light of certain finan-

cing which Digitronics was trying to arrange

for itself, more or less agreed between West-

bury and Digitronics that the January 31,

1961, agreement had become obsolete

because of the later conduct of the parties,

and that they needed a new agreement.

However, without any new agreement, the

parties were working along on the comple-

tion of the First Tote. At a meeting in

A68

Phoenix in late November 1962, held to dis-

cuss technological advances, the contract

between Atusa and Digitronics was disclos-

ed, that the Atusa TIMs were being

modified or adapted to the new Digitronics

tote, and that there would be a complete dis-

play of the Digititronics Tote in mid

ebruary at Roosevelt Raceway, which all

were invited to attend. The representative

from the New York Racing Association

(NYRA) indicated that the meeting had

produced a lot of interesting talk, but

nothing concrete; he stated, however, that if

someone really came forward with

something, NYRA would go anywhere to

inspect it.

In early December 1962, Amtote was

pressing Monticello to renew its Amtote

contract emphasizing Amtote’s im-

provements in its equipment over the years,

including its use of solid-state or tran-

sistorized computer elements, and warning

Monticello that any new device would re-

quire far more testing than non-technical

people appreciated, and that this was par-

ticularly true of equipment intended for

racetrack use because of the sharp contrast

between laboratory or office conditions and

actual operating conditions at a race track.

Amtote closed by giving Monticello until

December 31, 1962 to sign up for a new con-

tract.

A69

About the middle, or a little after the mid-

dle, of December 1962, Amtote delivered to

Westbury through customs, 13 Bell Punch

machines for $20,839, ten of them regular

machines and three of them daily double

machines.

During the year 1962 construction of the

First Tote was progressing under the

superintendence of the patentee, Robert L.

Weida, and in December 1962 it was moved

to Roosevelt Raceway. By February 12,

1963, the work was so far complete that 20

TIMs could be in use and accept bets, odds

could be computed, payouts calculated and

readouts set up visibly. It had already been

decided that the First Tote would be given

an essentially public demonstration on

March 6, 7 and 8 at Roosevelt Raceway.

The demonstration contemplated would,

again, have used 20 TIMs and there appears

to have been little doubt in the minds of the

people at Digitronics that the demonstration

would be successful. For example, in a letter

written on February 12, 1963, to a London

insurance broker, Westbury or Digitronics,

or both, expressed interest in finding out

whether they could offer, with the

Totalizators that they were to market, in-

surance against losses incurred wing

breakdowns in the electronic Totalizator. In

A70

describing the Totalizator, Haight (then

functioning both in Digitronics and in West-

bury Electronic) said that while it was

believed that this first electronic totalizator

would obsolete existing electromechanical

machines, ““* * * there is virtually nothing

in our device which has not already been in-

corporated in other machines which we have

installed for other purposes in such com-

panies as * * *’’— and he named arailway

and three large industrial companies. His

letter continued that, as applied in race

tracks, the electronic Totalizator did repre-

sent a new departure, and hence it seemed a

logical service in advancing the art to

provide, if possible, an insurance policy that

would cover race track owners against loss.

The prototype had, of course, been

demonstrated while it was at Digitronics,

and had been used in the attempts to

promote sales to NYRA and to the Italians;

it was, after it was moved to Roosevelt

Raceway in September 1962, demonstrated

there. However, the demonstration of the

First Tote, which did take place on March

7, 1963, was a spectacular success.

The patent application was prepared

Starting in January 1963 and it was com-

pleted and filed by March 28, 1963. The

draftsman of the application was Camil P.

Spiecens. He made use of the logic diagrams

and of interviews with the various people

A71

concerned in the construction of the First

Tote to get the material for the application

itself and for the figures used in it; the

application was drafted rapidly because it

was anticipated that there might be a sale to

the Italian group and it was imperative that

the patent application be on file in the

United States before any sale was made, for

otherwise, there could have been no filing

for a patent in Italy.

Mr. Spiecens was not told anything about

the prototype, and he did not see it or any

materials connected with it. He was not _

shown the brochure written around the

prototype (Exhibit U), and he did not know

of it. He blocked out the drawings annexed

to the patent application, which became the

figures of the i as issued. They were

not prepared from detailed working

drawings for the equipment itself, but from

plant block diagrams and Mr. Spiecens

worked with the engineers to come up with

block diagrams for the application. Mr.

Spiecens also drafted the response to the

first office action. There was no interview

with the Examiner before the application

was granted. The petition for a certificate to

corrections was not prepared by Mr.

Spiecens.

Spiecens did not see the February 1960

A72

specification of Digitronics for a Fully Elec-

tronic Totalizator, but he did recall that at

some time he saw Figure 1 of “Exhibit A”’

(Ex. 94-A) attached to the “January 31,

1961” agreement, Exhibit AP.

The relation between the prototype and

the First Tote remains most uncertain. Mr.

Weida did not commence to work on the

prototype until after Labor Day in 1960,

and, although it had been powered up and

tried out earlier, as early as late September

1960, perhaps, it was first ‘“demonstrated”’

in mid November 1960. Mr. Weida replaced

Kielsohn on the prototype job (Job No.

4726), and, as found above, when Mr.

Weida took over, the equipment was partly

wired, he was given the logical design

drawings to write up and check, he got the

apparently lengthy logic write-up from

aie. one of the designers, and he talked to

Shaw about it, and — in a word — much of

the construction was already done and the

logic was in hand. Mr. Weida’s job was

simply to follow through to get operability:

the system was complete as a first

go-around.

As it happened, none of the people who

had worked on the prototype before Mr.

Weida took it over worked on the First Tote.

Mr. Weida said that the prototype did not

“interrogate” the TIMs, nor electronically

signal an ‘“‘unlatch”’ for rejection, and that

A73

the prototype had little peripheral equip-

ment. The prototype, he recalled, could not

handle regular and daily double betting

concurrently. The prototype, Mr. Weida

thought. did not have reject signal respon-

sive means, and error detection resulted

simply in shutting the operation down until

the central control started it up again. The

prototype, Mr. Weida said, did not put out

a bid signal and it had no false entry or scan

test.

It is all but impossible to understand how

the prototype could have left so dim and un-

certain an image after it. Mr. Weida was

able to recall that when he took on the job of

finishing the prototype, he got 15 to 20

pages of carbon-copy material respecting

the operation of the logic and about 20 logic

drawings (Tr. 1247-1249), and that he kept

these papers for a year or two but cannot say

where they went thereafter. There were at

least circuit schematic drawings and struc-

tural working drawings of some sort, but

Mr. Weida does not recall having seen the

Exhibit A (Ex. 94-A) annexed to Exhibit

AP. The drawings available to him were in

the drafting room files.

Whatever the differences, Mr. Weida

agreed that Claim 20 of the patent could be

read on a mental reconstruction of the

A74

prototype but for the requirement that it

contain a plurality of TIMs. However, the

evidence warrants the finding and it is

found, that in fact the prototype had been

demonstrated with two Hohmann TIMs in

service, and the simulators, while not

genuinely TINs, would appear from the

point of view of their model or demonstra-

tion roles to qualify as valid models of

“plurality’’; their existence is not otherwise

justifiable. Mr. Weida appeared to agree

that Claim 21 could likewise be read on the

prototype. with the same limitation

presumably.

The great difficulty was that the drawings

for the prototype had completely dis-

appeared, except for one irrelevant drawing,

and disappeared without any satisfactory

and reasonable explanation of their dis-

appearance. A number of drawings related

to Job No. 4726 are listed in Exhibit R but

the evidence was that they were missing

from the drawer in which they would have

been stored. They were uniquely missing;

the absence of the drawings reflected a dis-

continuity in the files.

When the prototype was transferred to

Roosevelt Raceway, a set of the drawings

went with it, and perhaps the originals,

although that is not at all clear; they were

not produced from that source, and perhaps

they were not available from that source.

A75

The prototype itself remained in storage at

Roosevelt ewan , but it appears to be

more or less agreed that the task of trying to

determine from it at this date the circuitry

and capabilities of the device would be enor-

mous because of the multiplicity of com-

ponents and the quantity of circuit wiring in

any such device.

The continuity of conception evinced in

the succession of the May 11, 1959, presen-

tation (Ex.F), the November 1959 outline of

the planned prototype (Ex. 94A), and the

February 1960 specification for the fully

electronic totalizator (Ex.94B); the com-

plete change in personnel assigned to the

completion of the prototype at Labor Day

1960; the disappearance of all drawings and

of all material relating to the logic of the

prototype as the prototype and its logic ex-

isted in incompleteness at Labor Day 1960;

the unexecuted modification of the

Digitronics-Westbury contract of January

31, 1961, which would have eliminated the

‘sale’ and ‘“‘delivery’’ language as applied

to the prototype and preserved it as to the

First Tote; the continuity of conception

evinced from the May 11, 1959, presentation

to the February 1960 specification, and

found in persistence in the Italian presenta-

tion of 1961 (Ex. CX), the brochure of 1962

(Ex. U), and the patent itself (Ex. 1); the

A76

patent solicitor’s | a oo of the existence

of the prototype. of the brochure (Ex. U), or

of the early logic writeup of Shaw; Mr.

Weida’s assent to the idea that, but for the

“plurality” of TIMs point, Claims 20 and

21 could be read on the prototype; these are

circumstances that, notwithstanding the un-

shrinking frankness of Mr. Weida’s

testimony, preclude a finding that the pat-

ent presents a conception of the subject

matter of the claims of the patent that is of

the patentees’ invention.

The named patentees, then, had no role

in the preparation of Exhibits AP, 94A and

94B; none of them had a role in evolving the

design, logic or choice of components of the

Demonstrator or prototype; and only the

named patentee Weida had any part in the

final preparation of the prototype for start-

up and demonstration; the contributions of

the named patentee Weida to the prototype

were at best corrective of blunders in logic

detail or implementation and did not either

change the controlling logical schemata of

the prototype or the plan of tangible em-

bodiment that his predecessors on the proj-

ect had developed; plaintiff is solely respon-

sible for the substantively unexplained

failure to preserve and produce any block

diagrams, circuit diagrams or detailed

drawings of the prototype or any exegesis of

A77

its logic; and the patent solicitor who

drafted the patent specification, claims and

the single response to the first office action

had no access to those responsible for Ex-

hibits 94A and 94B and for the design, the

logic and the supervision of construction of

the prototype, did not see the prototype or

any demonstration of its operation, did not

learn of Exhibit 94A of November 1959 nor

of Exhibit 94B of February 1960 (although

the latter was directly related to the First

Totalisator which was the subject of the pat-

ent application he was a and did

not know of the printed and published sales

brochure of March 1962, Exhibits U, 120

(although a hoped-for Italian sale oc-

casioned the hurried ch gape of the pat-

ent application on which he was engaged).

The testimony of the named patentee Weida

leaves no doubt that Claims 20-22 read on

the prototype and that the attempt to dis-

tinguish the claims made at the trial as not

speaking to a plurality of TIMs (Tr.

1814-1893) is wholly unsubstantial. Denied

access to everything except the First

Totalisator and to those persons named in

the patent as patentees, the draftsman of the

patent specification and claims had not the

means to and did not disclose to the Patent

Office examiner or refer in the patent

application to the prototype or the publish-

ed advertising brochure.

A78

Inevitably, the prototype or demonstrator

is prior art of other inventors against the

pen in suit. It cannot be said that a cura-

le omission of joint patentees is all that is

present; 35 U.S.C. 116, 256 countenances no

such procedure. The named patentee Weida

cannot be treated as a joint inventor both of

the prototype and of whatever, if any, im-

provement on the prototype may have been

represented in the disclosure of the patent in

suit and embodied in the First Totalisator.

Rival Mfg. Co. v. Dazey Products., W.D.

Mo. 1973, 358 F.Supp. 91, 102, 177 USPQ

432, 440. It is no answer to point out the fact

that ali the Digitronics personnel involved

had alike signed agreements entitling

Digitronics to claim from them assignments

of their patents and patent rights growing

out of their work for or related to the

business of Digitronics.

The prototype was repeatedly and

successfully demonstrated more than a year

before the patent application was filed. It

was delivered to Roosevelt Raceway in 1962

and has since remained there, and the costs

of its manufacture were paid for by West-

bury. However, the demonstrator or

prototype was not practically operable as a

racetrack totalisator; it was a demonstrator

only; not a toy, not a model; it was a full

A79

scale demonstrator and it was meant to be

used and was used first as a demonstration

to Roosevelt Raceway and, later, as a

demonstrator for Westbury in its sales ef-

forts; it had been hoped it might be used to

get state approval of the full sized totalisator

of Exhibit 94B (Exhibit AP, Exhibit B), but

that was not accomplished. But neither such

“sale’’ as there was of the prototype (and

nothing turns on the inept effort to rewrite

the contract, Exhibit AP), nor such use as

was made of the prototype as a

demonstrator, reached the disabling level

that 35 U.S.C. 102 marks as being “in

public use or on sale in this country.” The

sale was not on commercial terms for the ul-

timate use to which the projected finished

product would be devoted, nor was the use,

if public, a use of the article of the patent

rather than a use of an illustrative but com-

mercially incompetent prototype of the arti-

cle of the patent, and it was not a use for the

purposes to be served by the article of the

patent but a use in order to demonstrate the

validity of the scheme of the article of the

atent. Cf. Cali v. Eastern Airlines, Inc., 2d

ir. 1971, 442 F.2d 65, 70-71, 169 USPQ

753, 756-758; In re Yarn Processing Patent

Validity Litigation, 5th Cir. 1974, 498 F.2d

271, 277, 282-285, 183 USPQ 65, 72-75;

ack Winter, Inc. v. Koratron Co. Inc.,

..D.Cal. 1974, 375 F.Supp. 1, 37, 181

USPQ 353, 373-374.

A80

ef

The printed and published brochure,

Exhibit U, has a two-fold importance. First,

within Section 102(b) it is beyond question

a printed publication in this country; if it

discloses an invention. whether that of the

atentees or that of Shaw and Kielsohn,

that is final: it is either (or both) prior art

against the patent (Section 102(a)), ora dis-

abling printed publication (Section 102(b)).

Second, it relates, — with Exhibit 94B, to

the sale of the First

relation to the prototype, viewed as a reduc-

tion to practice of the invention of the patent

(although it is rather a reduction to practice

of the invention of Shaw and Kielsohn. the

redecessors of Weida, et al.), relates to the

idea that there can be a sale of future goods

that is disabling under Section 102(b) if the

article is one that in ordinary trade would be

sold as future goods to be built and if. at the

time of contracting, it is sufficiently defined.

provided, at minimum. it has been reduced

to practice in some reliable, complete

manifestation. Can it fairly be said that the

First Totalisator was on sale a year before

the filing of the patent application drawn

from the First Totalisator as it was com-

pleted and before it was publicly

demonstrated? Cf. Jack Winter, Inc. v.

A81

Otalisator.-and, by its - —

Koratron Co., Inc., supra, 375 F.Supp. at

37, 183 US at 72-75; Kalvar Corp. v.

Xidex Corp., N.D.Cal. 1973, 384 F.Supp.

1126, 1130-1138, 182 USPQ 533, 535-542;

Philco Corp. v. Admiral Corp., D.Del. 1961,

199 F.Supp. 797, 814-818, 131 USPQ 413.

Contrast Burke Electric Co. v. Independent

Pneumatic Tool Co., 2d Cir. 1916, 232 Fed.

145, 146-147, 234 Fed. 93. Robbins Co. v.

Lawrence Mfg. Co. 9th Cir. 1973, 482 F.2d

426, 431-433, 178 USPQ 577, 580-581 may

be taken to suggest that in the case of a sale

of future goods to be built to specification,

where there is no fully operative device in

existence, a finding that the article of the pat-

ent had been put on public sale could rarely

be warranted. The history of the ‘“‘sale”’ of

the First Totalisator does not reach any of

the uncertain benchmarks that the cases

seem to limn. Roosevelt Raceway’s

shilly-shallying, the cutback in scale, the

grouping for cost savings and for a ceiling on

costs that kept running out of hand, these

fluid factors combine to preclude a finding

that there was an August 1961 contract to

sell the First Totalisator as an article com-

plete in design, specification and detailed

drawings and adequately exemplified as a

feasible device by the prototype. Without

such a finding, it cannot be held that there

was a disabling contract to sell within the

meaning of 35 U.S.C. 102(b).

A82

Il

Untangling the patent from the bramble

of unfamiliar terminology is not very easy,

but the 25 day trial illuminated the dar-

ker corners and, it is believed, made

possible a reliably simple explanation of

the teaching of the patent against the

background of the prior art. Analysis

leads inevitably to the conclusion that

the claims of the patent now in suit,

claims 20 through 27, are not valid claims.

Yo start at the beginning, data proces-

Sing, whether mechanical, electromechani-

cal, electronic, or solid state electronic,

takes advantage of the facts that numbers

can be reduced from decimal or whatever

other number base is used to binary nota-

tion in which the only digits are zero and

1, and that the steps or stages of mathe-

matical reasoning can be starkly expressed

in algebraic form, not so far removed as

might at first seem from Aristotle's use

of letters in, for example, the Prior and

the Posterior Analytics. As will be seen,

the patent refers to a Boolean equations

(Columns 11-15); the reference is to George

Boole and to his epochal alegebra of clas-

ses. In his book, An Investigation of the

Laws of Thought, on which are founded the

mathematical Theories of Logic and Proba-

bilities, he says:

"Hence, instead of determining the

measure of formal agreement of

the symbols of Logic with those

of Number generally, it is more

immediately suggested to us to

compare them with the symbols of

quantitiy admitting only of the

values 0 and 1. Let us conceive,

A83

then, of an Alegebra in which

the symbols x, y z, &C. admit

indifferently of the values of

0 and 1, and of these values

alone. The laws, the axioms,

and the processes, of such an

Algebra will be identical in

their whole extent with the

laws, the axioms, and the pro-

cesses of an Alegebra of Logic.

difference of interpretation

will alone divide the." (Boole,

The Laws of Thought, Dover Re-

print of the 1854 edition, pages

37-38.)

According to tradition (see Exhibit K)

it was in 1938 that C.E. Shannon demon-

strated that a Boolean algebra could be

adapted to the presentation of data pro-

cessing circuitry, and could be used in

evolving and simplyfying data processing

circuitry. The principles of the Boolean

algebra involved turn on the limitation

of values to 0 and l, the recognition

that the Boolean algebra involved is

essentially an algebra of classes, and the

fact that a system limited to the values

0 and 1 could nevertheless also be used

for limitless enumeration as the digits

of a binary (or base 2) system of numbers.

In Boolean algebra as a logical system

the rules of operation take an unusual

form (as explained in Exhibit K, Chapter

2 of Richards, Arithmetical Operations in

Digital Computers). The familiar plus

sign has the meaning of “or"; the multi-

plication sign (indicated by the x, the

dot, or simply by writing two letters

close together without punctuation or

separation) has the meaning of "and"; with

the logical reading that 0 plus 0 equals

0, as always; 0 plus 1 equal 1, as always;

A84

ad

and 1 plus 1 equals 1, because, in the

logic of this Boolean algebra, the ex-

pression means that 1 or 1 equals l, or,

to put it another way, it states that

if there is a class of 2 members either

or both having a certain defining charac-

teristic, then a statement that one or

the other or both members of the class

have the defining characteristic is true,

otherwise it is not. Mr. Weida (one of

the patentees) in Exhibit 149 put the

ideas of this arithmetic in essentially

truth table form; using instead of 1 and

0, or "true" and "false," 1 volt and 5

volts where 5 volts represented the crit-

ical voltage required in the circuit,

he essentially was using truth table

analysis of what is meant by disjunction.

That is, treating the plus sign as the

sign of dijunction, then A plus B equals

C would yield the following truth table:

A or Vv + B or Vv = €C or V

F fe) F O F 0

T 5 F O T 5

F 0 T 5 T 5

T 5 T 5 T 5

In Figures 2, 3 and 4 of the patent,

Exhibit 1 and in the specification, if it

is intended to show or state that two

input wires are to energize a third wire

beyond a certain gating point if either

or both of the input wires bears a signal

at the critical voltage level but not

otherwise, the input wires are shown en-

tering a square labelled "0" (the symbol

A85

for an "or" gate) and one wire is shown

emerging from that gate. The circuitry

Significance is that if either or both

input wires are energized to the critical

voltage level, then the "or" gate will

permit the energization of the efferent

wire; it will interdict energization of

the emerging wire if, but only if, neither

of the input wires is energized to the

critical voltage. In the figures of the

patent, conspicuously figures 3 and 4, the

"or" gates are numbered as well as iden-

tified as "or" gates by the letter 0. So

in figure 3 at the very top towards the

center will be seen a square box with the

identification 01. It is illustrated

with four input wires along which signals

could proceed. In the logic of the device

that means that if any one or all of the

inputs to the "or" gate "01" is energized,

it will send an energizing signal to the

next component, in this case the step

pulse generator. Other "or" gates will

be seen in figure 3, conspicuously, "or"

gate "03" at the lower left which has

five input and one efferent wire, again

signifying that if any one or more or

all of the input wires carries energy at

the critical voltage level then the

efferent wire will be energized.

In the Boolean algebra of this cir-

cuitry the multiplication sign is identi-

fied as “and," with the immediate Boolean

algebraic significance that 0 times 0

equals 0, 0 times 1 equals 0, and 1 times

l equals 1. The multiplication, or "and,

function in the Boolean algebra of com-

puters means that if, and only if, all of

the inputs are 1 will the output of the

"and" gate be 1. Mr Weida illustrated

this in exhibit 149, and, again, extended

A86

the form of the truth table to gather in

the “and" gate function. Put in true/

false truth table form, and in parellel

with A times B equal C, the table would

be as follows:

A or V X¥ B or V #® C or V

F 0 F 0 F 0

T 5 F 0 F 0

F 0 T 5 F 0

T 5 T 5 T 5

Referring to figures 3 and 4 of the

patent, Exhibit 1, the "and" gates will

be seen to be those which are identified

by an "A" followed by a numeral inside a

square. In figure 3 at the upper left

hand corner is "and" gate 1. It is shown

with two input and one efferent signal

wire and has the effect that if, and only

if, both input wires are energized to the

critical voltage will the "and" gate ener-

gize the output wire leading to the next

gate, which is “or" gate 1, mentioned

above. In figure 4 at the extreme left

and near the top of the figure will be

seen "and" gates A8 and A9, each shown

with three input wires and one output

wire. The significance in each case is

that if, and only if, all three input

wires are appropriately energized will

the output wire leading to the "or" gate

05 be energized. It will be seen here

that “or" gate 05, which receives its

input from "and" gates 8 and 9, will ener-

gize its output wire if the gate's input

is energized from either or both of "and"

gates A8 and A9. (It will be noticed that

A87

all the signals shown as entering A8

have a capital A in their identification.

This reflects the fact that, as figures

1A and 1B illustrate, the system of the

patent has duplicate units identified as

A and B.) The sense of the A8, A9, 05

gating is that if either the A or the B

side is energized at the required level,

or both sides are so energized, the "or"

gate 05 will send a signal to "and" gate

Al0O, which in turn, will emit signal

SCNI if, and only if, it receives signals

from all of "or" gate 05, “flip-flop”

CONA, and "or" gate 017. Only if neither

the A side nor the B side signals are

sufficient to energize their respective

"and" gates A8 and A9 will "or" gate 05

fail to send on a signal to "and" gate

Alo.

The logic of the Boolean algebra em-

ployed contains the idea of negation with

the necessary consequence that the nega-

tion of 0 is 1 and the negation of 1 is 0,

Since they are the only digits or values

used in the symbology. The negation of

any variable is indicated by putting a

bar over it or using a prime mark to the

right of the letter or letters identifying

the variable. In the specification of the

patent the prime mark is used. The logical

principle of the Boolean algebra that

1 + 0 = 1 requires the conclusion that,

using A as the variable, A plus A‘ equals

1. Similarly, A times A‘ equals 0, since,

as above, 1X 0= 0. And, finally, A" = A.

That is, a negation of a negation is’ the

equivalent of an assertion, and this will

be true whether A is 0 or 1, since the

negation of 0 is 1 and the double negation

of 0 is 0 and the negation of 1 is 0 and

the double negation of 1 is 1. The

A88

negation function is employed in computer

algebra and is illustrated in the circuit-

ry of the patent by a square box in which

there is a letter I, meaning inverter,

followed by a number. The effect of the

inverter is that if the input is a critic-

ally, positive voltage, then the output

negates the functional significance of

that critical input voltage. More gener-

ally if the input is 1 then, for circuit

purposes, the output is 0, and vice versa.

The negation function is illustrated in

figure 3 of the patent at the upper left

as square boxes 1l and 12.

The specification repeatedly refers to

flip-flops, best seen at the right side

of figure 3; the five large squares each

with a "0" near the top and a "1" near

the bottom, and with identifying letters

"TFBF," etc., inscribed in the middle of

the box, are flip-flops. In the middle

lower left of figure 3 there is a box

that has inside it the identification

"ERAF"; it is a flip-flop, but, apparently

through error, the 1 was not inscribed in

it.

The flip-flop function is explained at

pages 47-49 of Exhibit K. Very broadly

it is a "bistable" function which has the

capacity to store a 0 or al until it re-

ceives a new pulse (of appropriate volt-

age) which changes its state to the oppo-

Site. That is, if it is in 0 stable state,

the impulse will change it to l, and if

it is in the stable state 1, the impulse

will change it to the stable state 0.

Finally, in the figures of the patent,

Exhibit 1, there appear a number of "delay"

units symbolized by a square box in which

there is a letter D together with an

A89

identifying number. One such is shown

in figure 3, at the bottom center, as

D4. Two other delay units will be seen

higher up in figure 3 just below the mid-

line; others will be seen at the right

of the figure.

The specification and figures of the

patent are largely written in the lan-

guage and using the symbols exhibited and

discussed in Exhibits K, M, N and L, all

excerpts from Richards, Arithmetic Opera-

tions in Digital Computers, which is re-

ferred to in the patent at column 12,

lines 3 to 5, lines 10 through 21 and lines

32 through 36; at column 13, lines 53 to

56; and at column 15, lines 26 to 3l and

lines 58 through 60. It will be seen

particularly in Exhibit K that Richards,

a 1955 publication, conducts much of the

discussion in terms of the logical dia-

grams without reference to the particular

means of performing the logical function,

and that he explains their use with either

solid state diodes, or vacuum tubes, or

electromechanical relays.

Two other preliminary matters are needed

for a good reading of the patent. The

patent repeatedly refers to memory, and

memory is manifestly a basic part of data

computing and solid state electronic data

processing. The individual building

block of the memory or core memory is a

tiny toroid or anulus which can be polar-

ized, in the sense of establishing the

direction around the periphery of its mag-

nectic field, either in a clockwise or

counterclockwise direction; it can maintain

the direction of polarity of its magnetic

state until the polarity is reversed by a

fresh impress of current upon it. The

A90

toroids used in the memories here involved

are apparently 1/16 inch or less in out-

side diameter and can each store only one

"bit" or information datum, since they

have only two states, counterclockwise

and clockwise magnetic fields. AS the

system is aimed at the use of a binary

logic, inevitably the two states are read

as one and zero. A memory core to be use-

ful, then, must have a very large number

of toroids in it, and, since each one of

them has only the capacity to represent

either al or 0 that is either a part of

a binary number or part of some numeric-

ally encoded information that is in stor-

age, Or is being brought out of or re-

stored to storage, it must be locateable

and accessible. In the language of the

patent and the art, it must have an

address. Physically, the memory may be

a cube or other rectangular solid in

which the toroids are stacked like poker

chips in row and column. A memory might

measure 64x64x25 toroids, each at a fixed

and permanent location in the memory, and

each individually accessible to wire con-

veyed impulses that impress on it a clock-

wise or counterclockwise magnetic field,

and, therefore, a 1 or 0 significance.

To determine, and by determining to "read

out," its 1 or 0 meaning, a current is

applied to it which will alter its polar-

ity of manetization (and in so doing emit

an output signal) if it is in one state

but not if it is in the other state, thus

extracting its "bit" of information from

it. For whatever purpose, that bit has

been retrieved. See Exhibits 13 and BN,

BO and BP. Since every such bit will have

been "read out” from and restored to an

identifiable location on a specific mag-

netic toroid in the same or altered state,

A91

a change of its state between pre-read-

out and post~-restoration, from 1 to 0

or 0 to l, reflects the alteration of the

binary number-place which it represents;

that is, it reflects an addition or sub-

traction. For example, if a toroid re-

presented the first number-place at the

right end of a binary number, and had

been 0, and upon restoration, it is l,

then it will be plain that one wager (or

whatever) has been added to the "word"

in the memory of which that toroid's

bit of information formed a part. The

same thing will be true whether the posi-

tion of the toroid is at the extreme

right number-place or any of the other

number-places along the row of a binary

number. It will reflect either a change

in the quantity represented by that num-

ber-place or a retention of it, for not

every addition to a binary number changes

the state of every number-place in the

number. The number 101 is binary nota-

tion, when it has one added to it, be-

comes 110, the number-plave at the left

remaining unchanged. In the memory illus-

trated in Exhibit 13, the “words" stored

are represented by stacks of 25 toroids,

a "long" enough word to accomodate a very

large number together with keying data

necessary to the effective handling and

processing of the number.

Sections of the memory can also store,

coded in binary numerical form, instruc-

tions to govern the steps in the function-

ing of the device, so that no human oper-

ator is needed to take the results of one

step in the process and set in motion the

next operation, as is required with calcu-

lators. The stored instructions are drawn

from the memory and entrained with the data

A92

being processed so that they can perform

their roles as active signals operating

on the data through the circuitry provided

in the device.

As Exhibit 13 illustrates, each magnet-

ic toroid is reached for its bit of in-

formation by being found at the intersec-

tion of two wires which traverse its open

center. Advantage is taken of the fact

that each magnetic core toroid can be

magnetized to saturation so that added

current in the same sense will not change

its magnetic polarization, and that if it

has one polarity, it will take a critical

amount of current to switch its polarity

reading from 1 to 0 or from 0 to l.

Since it takes an intersection of two

wires to locate the toroid in the memory,

less than the critical current is applied

on each of the "select" wires that range

the memory from two directions to inter-

sect at the toroid. Since neither wire

has the critical amount of current on it,

they will not change the state of any of

the toroids they traverse until they meet

at the toroid of choice; there the union

of the two less than critical currents,

summing to a more than critical current,

will change the polarity of the toroid if

it is opposite to that of the select cur-

rents or leave it unchanged if it is of

the same polarity. The change in polarity

is read out on a sense wire as a wave form

pulse, leaving the core toroid bereft, but

receptive to restoration of the same or a

different magnetic polarity after the oper-

ation is complete. The read-out of a pulse

or of no pulse is, of course, equally com-

municative of the toroid's stored bit of

information.

A93

Such a read-out is "destructive."

To restore the "word" to its "address"

in the same or altered form requires the

regeneration of the location by fresh

Signals.

A second aspect of the reading of the

patent involves the interpretation of the

lines drawn on the figures and the progess

of signals from one to another place.

Signals, that is, data communicating sig-

nals which will communicate 1 or 0 from

one point. another can, evidently, be

a sequence of timed electronic events

speeding along a single wire, or the sig-

nals can proceed along parallel wires,

and, plainly, the latter is, in a sub-

world of blindingly fast travel, much

quicker, since all the data are communi-

cated in the lapse of time required for

communicating a single impulse. Hence,

while most if not all of the wired con-

nections in the figures of the patent are

shown as single wires, that is schematic.

In many cases the single wire is really a

bundle of distinct strands each capable

of transferring one bit simultaneously

with the transfer of other bits on other

strands of the same "wire."

As stated above, the patent is not easy

to read and the reading is complicated by

the fact that the specification is written

around the daily double capability of the

system and its use substantially through-

out of duplicate components and duplicate

processing of the critical signals, neither

of which aspects of the patent is involved

in claims 20 through 27, the only claims

here involved. Plaintiff introduced the

case by having the first named patentee,

Robert L. Weida, testifying as an expert,

A94

explain the system from the patent's

summary, and then take a wagering trans-

action through the system. That involved

something more and different from what

he did later in applying claims 20 to 27

to the figures of the patent to show the

Significance of the means specified in

each of the claims and how they functioned.

These approaches require a reading of the

specification of the patent, and the

reading becomes important in part because

of plaintiff's reliance on so much of Sec-

tion 112 of the Patent Law as provides

that

"An element in a claim for

a combination may be expressed

as a means or step for perform-

ing a specified function with-

out the recital of structure,

material, or acts in support

thereof, and such claim shall

be construed to cover the

corresponding structure, mater-

ial, or acts described in the

specification and equivalents

thereof."

In an effort to make the specification

more readable, sketches of the figures of

the patent (Annex B, C and D) have been

prepared which, so far as is possible,

are restricted to the matter necessary to

the reading of the claims in issue and

can yet indicate the working of the whole

system as a "simplex" rather than a "dup-

lex" system, eliminating daily-double

circuitry where possible.

Annexes B through D present versions

of the Figures of the patent (1A, 1B, 2,

3, and 4) from which have been eliminated

A95

the "B" elements, those elements limited

in their use to the dual aspect of the

system or to daily double betting, and

elements not germane to the claims, and

Annex A presents a versions of a block

diagram showing, in the main, the com-

ponents germane to the claims in a form

that seeks to stay close in usage to the

Figures of the patent.

IIl

The patent is entitled a patent ona

"Data Processing System" and each of the

claims in suit is a claim upon a "system

comprising" a plurality of TIMs or a TIM

followed by a combination of particular

means. The specification then continues

- and so much of it is paraphrased as

relates to the claims and is needed to

explain the role of the matter covered

by the claims:

The invention pertains to data pro-

cessing systems and more particularly to

systems for processing data received from

TIMs, one of the commonest of which is a

parimutuel system for servicing wagers on

sporting events. Existing systems are

Slow operating, of only average reliabil-

ity, are dependent on must human assist-

ance and have limited versatility. Such

systems, however, can neither tolerate

down time during the wagering nor errors

in processing wagers. A general object

of one aspect of the invention relates to

down time and reliability.

Downtime and reliability aspect: A

data processor is provided for processing

transactions having a plurality of pairs

of units, each unit duplicating the func-

tion of the other, but one being the master

A96

and the other the slave unit. Disregard-

ing the pairing aspect, checking means

are included in each separate unit for

checking for erroneous transaction sig-

nals so as to transmit an erroneous-trans-

action indicating signal to the master

selecting means. The invention includes

various checking means for detecting

erroneous transaction signals, for deacti-

vating the data processor when the check-

ing means in both paired units detect

erroneous transaction signals in them,

and for rendering ineffective the unit

which detected erroneous transaction sig-

nals. A general object of another aspect

of the invention is to provide a high

speed scanning means for interrogating a

plurality of relatively slow operating

TIMs for transactions.

High speed scanning aspect: Scanning

means are atoviaed tor sequentially and

peroidically selecting each TIM for inter-

rogation. Interrogating means transmit

an interrogation signal to the selected

TIM. If the selected TIM is prepared to

make a transaction, it will transmit a

selected transaction signal. Means sense

for transmission of the selected trans-

action signal which, if not sensed, causes

the scanning means immediately to step to

another TIM for interrogation of it.

A feature of this aspect of invention

insures that succeeding attempted inter-

rogations by the scanning means of a TIM

which has had its transaction either con-

firmed or rejected do not cause the trans-

mission of redundant selected transaction

Signals.

Daily-double etc. versatility: An ob-

ject of another aspect of the invention

A97

is to provide a more versatile system by

providing for processing sequential

multi-entry transactions such as daily

double wagers.

The system includes a plurality of

TIMs which accept transactions on entries

in a horse race (for example). The trans-

actions are operated upon by a data pro-

cessor. The data processor includes

common units such as a Console, a Scanner,

Buffers la to NA (there being one buffer

for each horse running in the race), a

transaction processor MRA (all seen in

Fig. 1-A) and a transaction calculator

TCA seen enclosed in dotted lines at the

lower left of Figure 1B. The transaction

calculator TCA includes a plurality of

registers (MEM A), a portion of which are

aggregator registers; aggregated trans-

action updating means (UAA); a computer

(COMA); ("Error Unit" ERCA) and an acknow-

ledge unit (AKA).

The system of the patent is described

operating in the dual mode with the A

Side as the master. The left hand units

in Figures 1A and 1B have reference char-

acters ending in the letter A. To para-

phrase the patent in its simplex mode,

using the A side, requires some references

to the A master signal means and signals.

A switch in the console C will generate

the AMST and AMSTC signals fed respect-

ively to the transaction processor MRA and

the transaction calculator TCA, indicating

that they are the masters. The AMST sig-

nal is fed also to all the interfaces IFl

to IFN (there being an interface for each

TIM) so that scanner SCA will control the

sequential and periodic interrogation of

the TIMs from TIM 1 to TIM N. The

A98

transaction processor MRA will process a

transaction, that is, it will check for

erroneous transactions and other inter-

nally generated errors, and generate

storage addresses for the memory positions

in the TIM memory (WM, Fig. 1-B), the

contents of which are to be updated, and

also the addresses of the aggregator re-

gisters in the transaction calculator TCA,

the contents of which (the aggregated

transactions) are to be updated. The

transaction information processed from

the transaction processor MRA is fed to

the transaction calculatcr TCA. The

transaction calculator TCA operates on

the processed transaction information to

calcualte odds, pools, payoffs and simi-

lar information.

All units are connected by signal lines

which transfer signals between the units.

Signal lines bear the same reference char-

acters as the signals on the lines, and

this terminology is used interchangeably.

Mention of the signal, the, implies the

Signal line, and vice versa. Furthermore,

some signais are shown in a single line

for convenience sake, but they are in fact

a plurality of lines in a cable. The

lines AADR, WADR, MOA, MIA, SKNA and SKRN

are typical examples. Moreover, the lines

shown indicate only one polarity of the

Signal line in some instances a parallel

line carries the opposite polarity of the

Signal, indicated as BID1'(the prime mark

being used to represent a negation often

indicated by a bar over each letter being

negated).

Switches on the console C determines

which side (A or B) is master. Console

Switches also initially clear the system

(by dispatching the ICL signal) through

momentarily depressing the "initial clear"

A99

switch SIC, and console switches also

indicate the entries (horses) upon which

no transactions will be allowed

("scratches") by positioning the "non-

transaction" switches SKWN which generate

the associated non-transaction signals

SKRN.

The console also includes a three-

position mode switch SFS which, when in

the "D" position, indicate the dual mode,

when in the "A" position, causes the

generation of the FSA signal indicating

the simplex mode with "A" the master,

and when in the "B" position, generates

the FSB signal indicating simplex mode

with "B" the master.

The AMST signal fed to the interfaces

IFl ... IFN (and there is an interface

for each TIM) sensitizes these units to

interrogating signals such as the SCNNA

Signal from the scanner SCA (see Annex

B). The AMST signal fed to the trans-

action processor MRA insures that storage

address signals are fed only from the

transaction processor MRA to register

MEMA and TIM memory WM (probably "WM"

means “Window Memory," that is TIM mem-

ory). Similarly, the AMSTC signal fed to

the transaction calculator TCA insures

that only its data are fed to the output

line (OUA).

The ICL signal fed to the transaction

processor MRA presents to its initial

count of one the scan counter SKA, which

is a typical chaim of conventional cas-

caded binary counters in which each binary

counter has an output both from its "1"

and "0" sides, (Annex C, extreme right,

lower half of page). The output of scan

counter SKA is fed as the SKNA signal from

transaction processor MRA to the scanner

A100

SCA, which is a typical decoder which

decodes the combinations of "ls" and

"Os" from scan counter SKA. The SKNA

signal is decoded by the scanner SCA

and becomes the SCNNA signal which goes

only to interface IFN, the interface of

TIM N (see Annex B). If TIM N wishes to

make a transaction, then one of its

transaction keys will have been depressed

and IDN signals will be received by the

interface IFN, but will have no effect

unless and until the scan is at TIM N for

interrogation.

When the scan is ready to interrogate

TIM N for the wagering transaction, the

SCNNA signal passes (via IFN) to TIM N

as an SCNN signal, which is fed to the

common side of all the transaction-selec-

tion switches of TIM N (see Annex B,

Annex D). This signal will pass through

to the other side of the closed trans-

action-selection switch and be fed out

as a selected-transaction HIN signal to

buffer 1A (see Annex B: the 1 in the

Signal designation HIN and in the buffer

designation 1A indicates the horse, or

"entry," numbered "1." No matter how many

TIMs there are, and the TIMs are thought

of as being an indefintely large set,

TIM 1, TIM 2, ... TIM n, all wagers on

starting horse No. 1 will feed from the

N TIMs to buffer 1, all wagers on horse

No. 2 will feed to buffer 2, and so on

through the N starting horses; the start-

ing gate capacity sets the maximum number

of horses that can contest any race.)

For example, if the entry is being inserted

as a wager on horse 1 (see Exhibits ll, 14

and 15), entry key 1 of the TIM N would

have been depressed, causing the associated

transaction-selection switch to close and

latch, and an HIN signal would feed through

Al0l

buffer 1A to become the particular entry

HIA signal fed to transaction processor

MRA (See Annex B). The HIA signal is

stored in the entry register 1 HRA in the

transaction processor MRA (see Annex C).

At the same time, Control KA (see

Annex B, C; KA is in the transaction pro-

cessor MRA) transmits a test-for-trans-

action-made TFB signal, generated by

flip-flop TFBF (Fig. 3, upper right), to

probe the transaction-made unit BMA (An-

nex C, lower half). (The lettering

signifies "TFB" - test for bet signal;

"TFBF" - test for bet flip-flop; and

"BMA" - bet made unit. The A indicates,

again, the A side of the dual system.

The F at the end of TFBF is the indicator

of a flip-flop, seen best in Fig. 3 at

the fight where the large squares, arranged

one above the other, are all flip-flops.

Similarly, in Annex C, upper half, the

bottom row of symbols includes flip-flops

ERAF and REJF. In Annex D are seen the

flip-flops CONAF and REJAF.) If a trans-

action has been made, as indicated by the

presence of a signal on one (and ideally

one only) of the HI1A to HNA lines from

one of the buffers 1A to NA, a BMD signal

is fed back to control KA from BMA to

start an error-test routine. If no BMD

Signal is fed back, control KA generates

a STEP signal to scan counter SKA (Annex

C, lower half) which steps to the count

of n + 1 to initiate the transaction-in-

terrogation of the next TIM in sequence.

Note that the HI1A signal (of HNA signal,

as the case may be) results from the SCNN

Signal's passing through a latched trans-

action switch, and, if this switch was

not latched, the STEP signal was generated.

Therefore, this is the method for stepping

over TIMs which are not ready with a trans-

action.

A102

If, however, a transaction-selection

switch is latched, and, therefore, one

of the H1A to HNA signals is present, it

causes a BMD signal to go to control KA,

and, as noted just above, an error-test

routine starts. The presence of the

BMD signal at an input of "and" unit A2

(Fig. 3, upper right) passes a pulse to

the “set to 1" input terminal of flip-

flop TFTF ("test-for-two" flip-flop),

which generates the TFT signal and simul-

taneously passes the pulse to the "set

to 0" terminal of flip-flop TFBF. The

first test of the error-test routine

after the test-for-bet-made process step

is a two-entry transaction test; that is,

a test is made to insure that the signals

from entry register 1HRA (Annex C,lower

half) indicate that only one entry is

stored in it. The error risks are that

e.g., TIM N faultily transmitted both

HIN and HNN signals (see Ex. 16) simul-

taneously (i.e., one $2 wager on two

horses in the same race), or that through

a failure in the buffers LA and NA both

wagers in a daily-double transaction are

transmitted to the first-race entry re-

gister, l1HRA (in transaction processor

MRA, Annex C). In such case, the two

entry transaction test unit THBA (Annex

C, lower half) will reply with a THBI

(two horses bet input) signal in response

to the TFT (test for two) signal from

control unit KA (Fig. 3). If that is the

case, control KA, sets the error flip-

flop ERAF (annex C, upper half) generating

the ERA signal and generates the REJA sig-

nal (Annex C, Ex. 16A; the TFT and THBI

signals reach "and" gate A7; if both are

present, they energize the "or" gate 03,

which in turn energizes the flip-flop ERAF,

which in turn energizes the "or" gate 04,

which in turn energizes the flip-flop REJF

A103

and the delay unit D4, from which the

REJA signal emanates.) The REJA signal

results in unlatching the latched trans-

action-selection key in TIM N_ and the

ERA signal will make the “message regis-

ter" MRA ineffective.

If no such error is detected, a THBI'

signal is fed to the "set to 0" input of

flip-flop TFTF and to the “set to 1" in-

put of flip-flop TFSF, which generates

the TFS signal (test-for-scratch) to test

for the selection of an entry upon which

no transaction will be accepted, that is,

a "scratch." The signal representing the

entry stored in the entry register l1HRA

(Annex C, lower half) is fed as one of

the 1HRN signals to the test for non-

allowed transaction unit TFSA (Annex C)

and compared withthe non-transaction

("Scratch") signal SKRN from console C.

The TFS signal from control KA probes the

TFSA unit (a conventional equality com-

parator) for equality between the 1HRN

and SKRN signals and, if it exists, causes

the return of an SKRI signal to control

KA, which generates a REJA signal. It

also causes the generation of a STEP sig-

nal fed to scan counter SKA, for stepping

the scan to the next TIM.

If no non-allowed transaction is de-

tected, the next error processing step is

performed. An SKRI' signal is fed to one

input of "and" unit A4 (Fig. 3), the out-

put of which is fed to the "set to 0" in-

put of flip-flop TFSF and the "set to 1"

input to flip-flop RSCF which generates

the RSCNA' signal; this starts the false

entry test which insures that the signal

on one of the lines HI1A to HNA truly re-

sulted from the depressing of an entry

key. The signal RSCNA’ (meaning that the

entry is real, not false) is fed from the

Al04

transaction processor MRA to all the inter-

faces (see Annex D). [The specification

clearly, and twice, says that signal

RSCNA' (the negation or inversion of RSCNA)

is fed from MRA to IFl to IFN. However,

Figure 3 shows the "1" output of RSCF as

RSCNA and the "0" output as RSCNA', and

Figure 1A as corrected pursuant to cor-

rection request allowed October 27, 1965

(Ex. 2, p. 105) shows the signals from

MRA and MRB to IFl and IFN corrected from

the negative to the positive signals

RSCNA and RSCNB. Figure 4, however, shows

the negation signal ("no false bet")

reaching the interfaces IFl to IFN (at

A8 and A9) to generate, with SCNA and the

"A" master signal, via "or" gate 05 and

"and" gate Al0O the SCNN signal to TIM N.

The inference is that the drawing Fig. 1A

should not have been corrected. The text,

reading it as saying RSCNA', must be

taken to mean that RSCF generates RSCNA'

later, from the input to its "0" side,

from possibly, CONF via "or" unit 02.]

However, since the scan is at TIM N (the

SCNNA signal), it passes through the inter-

face IFN, where is terminates the genera-

tion of the SCNN signal (see Annex D).

It will be recalled that the SCNN signal

was the interrogating signal was which

passed through the latched transaction-

selection switch causing transmission of

signals through buffers 1A to NA to in-

dicate which horse ("entry") a transaction

was being made upon. Therefore, none of

the lines H1A to HNA should carry a sig-

nal when the SCNN signal is absent. After

a delay [at Dl, Fig.3] to permit the

passage of signals through the loop in-

cluding TIM N, the RSCNA signal (meaning

a false bet indication is present in sig-

nal form) is fed to the transaction-made

unit BMA (Annex C lower half). At this

time, if no signals are generated on the

A105

lines H1A to HNA, a BMD signal is not

generated. If, however, the BMD signal,

indicating one of the H1A to HNA signals

must be present, is generated, control

KA - since this is an error - will re-

ceive this signal, which causes the set-

ting of the error flip-flop ERAF and the

generation of the ERA and REJA signals

in the usual way (See Annex C, upper half

of page, at "and" unit A6, indicated in

dotted lines).

[Note that the BMD signal just des-

cribed as occasioning the ERA signal is

the BMD signal referred to above as being

produced when the TFB signal probed unit

BMA. That BMD is fed, in control KA, to

"and" unit A2 and the output of unit A2

initiates the set of tests of the BMD

Signal itself for errors.]

When the transaction processor MRA

completes a test routine, it generates

a signal indicating this fact. For

example, after tests are made for "test

for bet made," for "test for two-entry

transaction" and for “test for non-allowed

transaction," concurrent with the "test

for a false-entry transaction," the "test-

finished" signal TFA is generated by con-

trol KA (Fig. 3, Fig. 2, line from KA to

SYNA; in Fig. 3 at bottom right the PROA

Signal to A5 of KA is generated by the

coincidence of TFA and TFB signals in

SYNA in dual operation).

If an error occurs in the transaction

processor MRA, it will be rendered in-

effective, it will not generate succeed-

ing test or step-finished signals, but,

Since it generates an error signal, this

signal replaces the test-finished signal

(TFA, supra). For example, if transaction

processor MRA detected an error, it would

A106

eR ree Oe ERNE ACT SS Ne I Se reer oe pee a

“shut down" and generate the ERA signal,

as above. The ERA signal would then re-

place the TFA signal, the test finished

signal, generated by control KA.

After all these error tests have been

completed, a GERF flip-flop is set (Fig.

3, lower right). In particular, the

coincidence of the BMD' signal (indicating

that there has been no false entry) and

the RSCNA signal from the "1" out of

flip-flop RSCF, delayed [at Dl[, as inputs

to “and" unit A5 set the GERF flip-flop

to "1"; the "1" output of the flip-flop

GERF (passing via "and" unit A4l and not

via “and" unit A40 since the daily double

is not involved) becomes the GERA signal

(Fig.3).

The GERA signal "strobes" the storage

address generator SAGA (Annex C, lower

half, dotted line). The storage address

generator SAGA is a plurality of "and"

units each having one of its inputs

connected to the GERA signal line and .

other inputs connected to various combi-

nations of the 1HR1 to 1HRN and DKN signal

lines from decoder DEC (Annex C, lower

half).

The storage address register SAGA, in

response to the GERA signal, transmits

tow groups of signals. The first group

AADRAl1 to AADRAM is assocaited with entry

transactions; the second group, AADRAM+1

to AADRAN, is associated with the TIMs.

These signals are grouped into a cable

generalized as an AADRA signal (Annex C,

lower half).

The control KA generates the "send

address" signals SADD (Fig.2,3). The

SADD signal is received by the aggregator

address transmitter AATA and TIM address

A107

transmitter WATA (Fig. 2). The first

and second groups of the storage address

Signals AADRA pass through the aggre-

gator address transmitter AATA to become

the aggregator AADR signals; likewise,

the second group of AADRA signals passes

through the TIM address transmitter

WATA to become the memory position address

WADR signals (Fig.2). Since single wagers,

and not daily double wagers, are here

considered, only the 1HR1 to 1HRN signals

and the DKN signals (from the entry re-

gister 1HRA and the decoder DEC)

This text is long and has been trimmed here. Open the source document for the complete record.