.. 1 McCUTCHEN, DOYLE, BROWN & ENERSEN 2 Thomas J. Rosch Robert L. Ebe 3 Daniel M. Wall Three Embarcadero Center 4 San Francisco, CA 94111 Telephone: (415) 393-2000 5 NEUMAN, WILLIAMS, ANDERSON & OLSON 6 Theodore W. Anderson James T. Williams 7 77 West Washington Street Chicago, IL 60602 8 Telephone: (312) 346-1200 9 Attorneys for Plaintiffs The Magnavox Company and 10 Sanders Associates, Inc. 11 United States District Court For The 12 Northern District Of California 13 THE MAGNAVOX COMPANY, a corporation, ) 14 and SANDERS ASSOCIATES, INC., ) a corporation, ) 15 ) No. C 82 5270 JPV Plaintiffs, ) .,. 16 ) PLAINTIFFS' STATEMENT ~ v. ) OF FACTUAL ISSUES • 17 ) ACTIVISION, INC., a corporation, ) 18 ) Defendant. ) 19 20 1. This case is an action for infringement of United 21 States Letters Patent Re. 28,507 (hereinafter "the '507 patent''). 22

23 PLAINTIFFS' STATEMENT OF FACTUAL ISSUES 24 25 26 27 28 1 2. The '507 patent is a reissue patent. It was 2 originally issued on April 25, 1972 as United States patent 3 3,659,284 entitled "Television Gaming Apparatus" to the plaintiff 4 Sanders Associates, Inc., as assignee of the named inventor 5 William T. Rusch from application Serial No. 828,154 filed on May 6 27, 1969. The application for reissue, Serial No. 464,256, was 7 filed on April 25, 1974. The '507 patent, upon reissue, has the 8 same effect as if it had been originally granted on April 25, 1972 9 in its amended reissue form. 10 3. The '507 patent relates in general to apparatus for 11 playing games on television receivers. 12 4. The plaintiffs in this action are The Magnavox 13 Company {hereinafter "Magnavox") and Sanders AssocJ.ates, Inc., 14 (hereinafter "Sanders"). At all times relevant here Sanders is 15 and has been a corporation of the state of Delaware and the owner 16 ~- of the '507 patent and corresponding patents in foreign countries. 17 At all times relevant here· Magnavox is and has been a corporation 18 of the state of Delaware and the exclusive licensee of Sanders 19 under the '507 patent and the corresponding patents in foreign 20 countries. 21 5. This is the third action for infringement of the 22 '507 patent to be litigated and decided. The opinions in the two 23 previously decided actions are The Magnavox Co. v. Chicago Dynamic 24 Industries, 201 U.S.P.Q. 25 {N.D. Ill. 1977) and The Magnavox Co: 25 v. Mattel, Inc., 216 U.S.P.Q. 28 (N.D. Ill . 1982). There have 26 27 28 -2- PLAINTIFFS' STATEMENT OF FACTUAL ISSUES 1 10. At the trial of the Matte! case, Judge Leighton 2 received factual and expert testimony offered by the parties on 3 the issue of infringement of the '507 patent as well as memoranda 4 of the parties on the issues. The testimony was both live, trial 5 testimony and by deposition. 6 11. At the conclusion of the trial of the Mattel case, 7 Judge Leighton entered an opinion, findings of fact, conclusions 8 of law, and judgment holding the '507 patent to be enforceable and 9 to have been infringed by all of the games accused in that action. 10 Judge Leighton found that the subject matter of that patent was 11 neither shown nor suggested by the prior art. 12 12. The defendant Activision, Inc., (hereinafter 13 "Activision") is a corporation of the state of California. 14 13 . Activision is in the business of designing, 15 manufacturing, and selling television game cartridges. ~ 16 ~ 14. A television game cartridge is a device which is 17 used in combination with a television game console to permit the 18 playing of a television game. The nature and play of the game is 19 defined by the configuration of and information contained in the 20 television game cartridge. 21 15. Activision has manufactured and sold in the United 22 States the television game cartridges known by the titles Tennis, 23 Ice Hockey, Boxing, Fishing Derby, Stampede, Pressure Cooker, 24 Dolphin, Grand Prix, Barnstorming, Sky Jinks, Enduro, Keystone 25 Kapers, and Decathlon, among others. 26 27 28 -4- PLAINTIFFS' STATEMENT OF FACTUAL ISSUES 1 16. Plaintiffs allege that the manufacture, use, and/or 2 sale of the combination of any one of the Activision television 3 game cartridges listed in the following table and a television 4 game console capable of using that cartridge constitutes an act of 5 infringement of the stated claims of the '507 patent, and 6 plaintiffs further allege that the sale of any one of said 7 cartridges listed in the following table constitutes an act of 8 contributory infringement of, and inducement to infringe, the 9 stated claims of that same patent: 10 Cartridge Title Claims 11 Tennis 25,26,51,52,60,61,62 12 Ice Hockey 25,26,51,52,60,61,62 13 Boxing 25,26,51,52,60 14 Fishing Derby 25,26,51,52,60,61 15 Stampede 25,51,60 16 ~- Pressure Cooker 25,26,51,52,60 17 Dolphin 25,51,60 18 Grand Prix 60 19 Barnstorming 60 20 Sky Jinks 60 21 Enduro 60 22 Keystone Kapers 60 23 Decathlon 60 24 25 26 27 28 - 5 -

PLAINTIFFS' STATEMENT OF FACTUAL ISSUES 1 screen. Each human player manipulated his corresponding player 2 symbol to intercept the path of the ball as it moved across the 3 screen. When the player symbol intercepted the ball symbol, i.e., 4 two symbols appeared to be coincident on the screen, the motion of 5 the ball was changed. 6 22. In the television game apparatus operated in 7 January, 1968, and embodying some of Rusch's work, upon 8 interception the horizontal motion of the ball was reversed so 9 that it traveled back toward the other player. Each player had an 10 "English" control which permitted him to alter the vertical motion 11 of the ball after he had intercepted it. 12 23. Apparatus such as described in paragraphs 21 and 22 13 hereof is described in the '507 patent. 14 24. From 1968 through 1971, Sanders demonstrated under 15 agreements of confidence television game apparatus using various 16 pieces of equipment and playing various games to parties it -- 17 thought might be interested in entering into some type of 18 arrangement to further develop and commercialize the work it had 19 done. Demonstrations of that work were made to representatives of 20 21 22 23 24 25 26 27 28 -7- PLAINTIFFS' STATEMENT OF FACTUAL ISSUES 1 Teleprompter Corporation, RCA Corporation, Zenith Radio 2 Corporation, General Electric Company, Motorola, Inc., Warwick 3 Electronics, Inc., The Magnavox Company, and others . 4 25. In March, 1971, Sanders and Magnavox entered into 5 an agreement under which Magnavox received an option for an 6 exclusive license under the pending United States patent 7 application which eventually resulted in the '507 patent, other 8 Sanders United States patent applications relating to television 9 games, and corresponding applications in foreign countries. 10 26. Magnavox made a limited number of television games 11 and market tested them at a few locations around the country 12 following the March, 1971 agreement. After these market tests, 13 Magnavox commercially introduced the product. 14 27. By an agreement effective January 27, 1972, 15 Magnavox exercised its option and became the exclusive licensee of 16 ~- Sanders under the United States patent application which 17 eventually resulted in the '507 patent, other Sanders United 18 States patent applications relating to television games, 19 corresponding applications in foreign countries, and the patents 20 to issue therefrom. 21 28. Since entering into the exclusive license agreement 22 referred to in paragraph 27 hereof, Magnavox has manufactured and 23 sold television games in the United States under the trademark 24 "ODYSSEY . " The ODYSSEY television games are intended for use by 25 consumers with their home television receivers. 26

27 28 -8- PLAINTIFFS' STATEMENT OF FACTUAL ISSUES 1 29. The first model ODYSSEY television game 2 commercially introduced by Magnavox was the Model 1TL 200i the 3 Model 1TL 200 ODYSSEY television game was first placed on sale by 4 Magnavox in the Spring of 1972. 5 30. In the 1972 Magnavox ODYSSEY television game, the 6 display shown on the television picture tube screen included a 7 white rectangular symbol on the right side of the screen 8 representing a first player, a white rectangular symbol on the 9 left side of the screen representing a second player, and a symbol 10 which moved across the screen representing a playing piece such as 11 a ball, which for convenience will be called the "ball symbol". 12 Player controls were provided so that each human player could move 13 his corresponding player symbol on the face of the television 14 screen both horizontally and vertically. Each human player 15 manipulated his corresponding player symbol to intercept the path 16 ~- of the ball as it moved across the screen. When the player symbol - 17 intercepted the ball symbol, i.e . , two symbols appeared to be 18 coincident on the screen, the motion of the ball was changed and, 19 in particular, the horizontal motion of the ball was reversed so 20 that it traveled back toward the other player. Each player had an 21 "English" control which permitted him to alter the vertical motion 22 of the ball after he had intercepted it. 23 31. The 1972 Magnavox ODYSSEY television game could be 24 made to play one of several different games by inserting a game 25 card for the particular game selected into the game unit. Thus, 26 it was a programmable game. 27 28 - 9- PLAINTIFFS' STATEMENT OF FACTUAL ISSUES 1 38. Prior to August 21, 1969, Bushnell had no knowledge 2 of the existence of any apparatus using a cathode ray tube display 3 for simulating the playing of the game table tennis or ping pong. 4 39. On May 24, 1972, while employed by Nutting 5 Associates, Inc., Mountain View, California, Bushnell attended the 6 demonstration of the Magnavox ODYSSEY television game in 7 Burlingame, California, and saw a demonstration of the game. 8 Bushnell went to that show for the specific purpose of seeing the 9 Magnavox ODYSSEY television game. 10 40. At the May 24, 1972 show, Bushnell saw the ODYSSEY 11 television game in use to play a game simulating ping pong and 12 actually played that game. 13 41 . During the Summer of 1972 Atari was formed and some 14 time after June 26, 1972, Allen Alcorn became an employee of Atari 15 and Bushnell gave Alcorn the assignment of developing a video game

~ 16 ~ which would simulate a tennis game . 17 42. The arcade video game Pong resulted from the 18 efforts at Atari and was first manufactured and sold by Atari in 19 1973. 20 43. In the Pong television game, the display shown on 21 the picture tube screen included a white rectangular symbol on the 22 right side of the screen representing a first player, a white 23 rectangular symbol on the left side of the screen representing a 24 second player, and a symbol which moved across the screen repre- 25 senting a ball. Player controls were provided so that each human 26 player could move his corresponding player symbol on the face of 27 28 -11-

PLAINTIFFS' STATEMENT OF FACTUAL ISSUES 1 48. In 1975, Magnavox commercially introduced the 2 ODYSSEY 100 and ODYSSEY 200 home television games, the Models 3 YF7010 and 7015, respectively. 4 49. In 1976, General Instrument Corporation, New York, 5 New York (hereinafter "General Instrument") commercially 6 introduced an electronic integrated circuit component which 7 included in a single integrated circuit device the great majority 8 of electrical components previously needed to manufacture a 9 television game . That integrated circuit component was designated 10 by General Instrument as the AY- 3-8500 component. 11 50. The presence on the market of the General 12 Instrument AY- 3-8500 integrated circuit component permitted the 13 manufacture of television games with many fewer· components, and, 14 thus, at a much lower cost, than was previously possible. 15 51. The General Instrument AY- 3-8500 integrated circuit 16 ~- component included within i t a read only memory. The read only - 17 memory was used in part to define the size and shape of the 18 symbols which were displayed on the television screen. A read 19 only memory is generally referred to as a ROM. 20 52. The television games which could be constructed 21 using the General Instrument AY-3-8500 integrated circuit 22 component were capable of playing multiple ball and paddle games. 23 53. In 1976, Magnavox commercially introduced the 24 ODYSSEY 300, ODYSSEY 400, ODYSSEY 500, and ODYSSEY 3000 television 25 games, the Models BG 7500, BG 7516, BG 7520, BH 7514, 26 27 28 - 13- PLAINTIFFS' STATEMENT OF FACTUAL ISSUES 1 respectively, and the Model BG 4305, a television receiver having 2 a built-in television game. Each were capable of playing multiple 3 ball and paddle games. 4 54. In 1977, Magnavox commercially introduced the 5 ODYSSEY 2000 and ODYSSEY 4000 television games, the Models BG 7510 6 and BH 7511, respectively. Each were capable of playing multiple 7 ball and paddle games. 8 55. The Magnavox ODYSSEY 300, ODYSSEY 2000, ODYSSEY 9 3000, and ODYSSEY 4000 television games utilized the General 10 Instrument AY-3-8500 component. The Magnavox ODYSSEY 300 is a 11 typical one of the games using that component. 12 56. Prior to the commercial introduction of television 13 games including microprocessors, most of the television games sold 14 for use in the home were of the type known as "ball and paddle" 15 games. The 1972 ODYSSEY, ODYSSEY 100, ODYSSEY 200, ODYSSEY 300, 16 ~ ODYSSEY 400, ODYSSEY 500, ODYSSEY 2000, ODYSSEY 3000, ODYSSEY 17 4000, and Atari's consumer Pong television games are examples of 18 such games. 19 57. Ball and paddle television games formed the basis 20 for the establishment of the home television game industry and 21 this occurred prior to the commercial introduction of home 22 television games incorporating microprocessors. 23 58. Commencing in 1977, various manufacturers 24 commercially introduced television games which included 25 microprocessors. Those manufacturers included Atari, Fairchild, 26 and Bally. 27 28 -14- PLAINTIFFS' STATEMENT OF FACTUAL ISSUES 1 59. The use of a microprocessor in conjunction with 2 plug-in ROM cartridges in a television game permitted construction 3 of a television game console which could be readily made to play a 4 wider variety of television games. Cartridges are provided which 5 can be plugged into the television game console and thereby 6 connected to the circuitry within the console. Different 7 cartridges are provided for different games.. Each cartridge 8 contains a ROM. 9 60. The ROM included within a television game cartridge 10 includes a particular configuration and information used by the 11 circuitry of the television game console to define the game to be 12 played when that cartridge is plugged into the console . The 13 cartridge manufacturer defines the game to be played when using a 14 particular cartridge by the ·configuration and information placed 15 into the ROM used in that cartridge when the cartridge is 16 .,.~ manufactured . ~ 17 61. The consumer user of a television game console is 18 unable to alter the configuration of or the information stored in 19 the read only memory of the game cartridge and thus is unable to 20 alter the definition of the game which is played when that 21 cartridge is placed in use. 22 62. Atari was a party in the Chicago Dynamic Industries 23 action which carne to trial in 1976 and 1977 and has taken a 24 license under the '507 patent. 25 26 27 28 -15-

PLAINTIFFS' STATEMENT OF FACTUAL ISSUES 1 63. Bally and Fairchild were defendants in the Mattel 2 action but settled out prior to trial. Fairchild took a license 3 under the '507 patent. Bally, having stopped manufacturing and/or 4 selling the television games which formed the basis for the charge 5 of infringement of the '507 patent, settled for its past 6 infringements and took an option for a license under the '507 7 patent if it should resume those activities. Judgments on consent 8 of the parties thereto were entered as to both Fairchild and Bally 9 that television games that they manufactured and that included a 10 microprocessor infringed the '507 patent, and that the patent was 11 valid. 12 64. In 1978, Magnavox commercially introduced the 13 2 ODYSSEY television game which included a microprocessor. 14 65. The 13 Activision television game cartridges 15 alleged to be covered by the '507 patent have no substantial use 16 other than to be combined with a television game console and a 17 television receiver to play the television game for which that 18 cartridge is programmed and configured. Activision knew this 19 throughout the period it designed, used, manufactured, andjor sold 20 each of such television game cartridges. 21 66. Each of the 13 Activision television game 22 cartridges alleged to be covered by the '507 patent is especially 23 made and configured and especially adapted by Activision to be 24 combined with a television game console and a television receiver 25 to play the television game for which that cartridge is programmed 26 27

28 -16- PLAINTIFFS' STATEMENT OF FACTUAL ISSUES 1 and configured. Activision knew this throughout the period it 2 designed, used, manufactured, and/or sold each of such television 3 game cartridges. 4 67. None of the 13 Activision television game 5 cartridges alleged to be covered by the '507 patent is a staple 6 article or commodity of commerce. Activision knew this throughout 7 the period it designed, used, manufactured, and/or sold each of 8 such television game cartridges. 9 68. Activision has used each of the 13 Activision 10 television game cartridges alleged to be covered by the '507 11 patent in combination with a television game console and a 12 television receiver to play the game programmed into that 13 cartridge within the United States. 14 69. Activision has demonstrated each of the 13 15 Activision television game cartridges alleged to be covered by the 16 ..-~ '507 patent in combination with a television game console and a 17 - television receiver to prospective customers within the United 18 States. 19 70. Activision has demonstrated and shown each of the 20 13 Activision television game cartridges alleged to be covered by 21 the '507 patent both in combination with a television game console 22 and a television receiver to prospective customers at Consumer 23 Electronic Shows held in Las Vegas, Nevada and Chicago, Illinois. 24 71. In each of the Activision television games Tennis, 25 Ice Hockey, Boxing, Fishing Derby, Stampede, Pressure Cooker and 26 Dolphin, a human player manipulates a symbol on the television 27 28 -17-

PLAINTIFFS' STATEMENT OF FACTUAL ISSUES