Complaints: Schlafly's complaint against RSA & PKP

[Anonymous User <nobody@c2.org>]

-- Schlafly's complaint against PKP and RSA --------------------------------

Roger Schlafly, Pro Se 
PO Box 1680 
Soquel, CA 95073 
telephone: (408) 476-3550 
 
In the United States District Court for the Northern District of California 
 
Civil Action File No. C-94 20512 
	 
Assigned to Judge 
Category 410, Antitrust 
 
ROGER SCHLAFLY, an individual, Plaintiff 
v. 
PUBLIC KEY PARTNERS, 
and 
RSA DATA SECURITY INC., Defendants.  
 
 
Complaint Against Unfair Business Practices 
 
Plaintiff makes complaint against defendants for unfair business practices, 
including libel, interference with contractual relationships, patent 
misuse, fraud, monopolization, and racketeering, and demands remedies 
available under federal law, including jury trial, declaratory judgment, 
monetary damages, and injunctive relief. Jurisdiction. The Federal Court 
has jurisdiction because it is based on Federal law, including antitrust 
and patent law. Venue is proper because defendants and plaintiff reside in 
this Judicial District.  
 
For its complaint against defendants, plaintiff alleges as follows: 
 
1. This is an action for unfair business practices, libel, fraud, 
monopolization, and racketeering by Public Key Partners ("PKP"), which is 
managed by Mr. Robert Fougner, Director of Licensing, 310 North Mary 
Avenue, Sunnyvale, CA 94086 and by RSA Data Security Inc. ("RSADSI"), which 
does business at 100 Marine Parkway, Redwood City, CA 94065. 
 
2. Plaintiff Roger Schlafly is a resident of the County of Santa Cruz, 
State of California. 
 
3. Plaintiff is in the cryptography business, and develops computer 
software for customers. He is also a member of the IEEE Pl363 working 
group, a committee charged with adopting a public key standard. 
 
4. Defendant PKP is a partnership between Defendant RSA and Caro-Kann Corp. 
of Sunnyvale. Their partnership agreement is attached as Exhibit A. Mr. Jim 
Bidzos is the president of both RSADSI and PKP. Cylink Corp. of Sunnyvale 
was also a partner in the formation of PKP. 
 
5. Federal jurisdiction is based on antitrust law (title 15), patent law 
(title 35), and racketeering law (18 USC 1341, 1951, 1961-1965). Request 
for relief is also based on 28 USC 1331, 1337(a), 1338(a), 1338(b), 2201, 
and 2202. 
 
6. Defendant RSADSI is the dominant U.S. vendor of cryptography software, 
and has monopoly power in that market. It is engaged in a significant 
amount of interstate commerce, totaling at least 55 million per year. 
 
7. Defendants have engaged in tortious interference with business 
relationships between plaintiff and plaintiff's clients, including 
Information Security Corp. ("ISC") and AT&T. 
 
8. Defendants claim to control certain patents related to public key 
cryptography. These are the following U.S. patents and their foreign 
equivalents. 
 
	Diffie-Hellman	4,200,770 
	Hellman-Merkle	4,218,582 
	RSA		4,405,829 
	Hellman-Pohlig	4,424,414 
	Schnorr		4,995,082 
 
These PKP patents, as issued in the U.S., are attached as Exhibit B. (There 
may also be foreign patents for Hellman 
Merkle and Schnorr.) 
 
9. There is a substantial and continuing justiciable controversy between 
plaintiff and defendant PKP as to PKP's 
right to threaten or maintain suit for infringement of the PKP patents, and 
as to the validity, scope, and enforce 
ability thereof, and as to whether any of plaintiff's work infringes any 
valid claim thereof. 
 
10. Plaintiff has not infringed these patents. 
 
11. Plaintiff has signed a consent agreement with defendant RSADSI, 
attached as Exhibit C. He agreed not to sell a 
product infringing the RSA patent, except under license from RSADSI or the 
U.S. Government. (The U.S. Government 
funded the RSA invention, and retains certain rights.) The agreement also 
allows plaintiff to design and manufacture 
products using the RSA patent. 
 
12. Defendant PKP sent a letter dated Jan. 12, 1994 to plaintiff's client, 
AT&T, alleging that Digital Signature, of which plaintiff is a partner, has 
breached the above consent agreement. The letter is attached as Exhibit D. 
In fact, no such breach has taken place. This letter was written without 
any notification to plaintiff or Digital Signature. 
 
13. Defendant PKP's letter to AT&T stated: 
	... to the extent any of AT&T's products are tainted by ISC's 
violation of this injunction, we hereby demand that AT&T cease their 
further distribution and sale. 
The alleged violation is based on ISC's use of Digital Signature software. 
This is a tort for PKP to send such a letter, as no violation has taken 
place. PKP knew that there was no violation because AT&T has the 
appropriate patent licenses. Evidence that AT&T already had a license is in 
Exhibit E, a letter from Jim Bidzos to the editor of Scientific American.  
 
14. Defendants' allegations have damaged plaintiff's reputation, hindered 
his ability to sell his services, and interfered with his business 
relationships. 
 
15. Defendant PKP has mailed a letter dated April 4, 1994 to ISC referring 
to the "apparent breach of the November 15, 1988, Consent Judgment [sic]". 
The letter is attached as Exhibit F. Plaintiff denies any such breach. 
 
16. Plaintiff sent a letter to PKP protesting its libelous actions and 
demanding a retraction. The letter was sent on April 4, 1994 and attached 
as Exhibit G. 
 
17. In a letter from PKP dated April 18, 1994 and attached as Exhibit H, 
PKP refused to retract its earlier libel. The letter also states that: 
	The practice of the DSA is described in the Hellman-Diffie, Hellman-
Merkle and Schnorr patents ...  
This statement is obviously false, since the DSA patent application was 
filed after all of those other patents issued. Plaintiff's response is 
attached as Exhibit I. 
 
18. Defendants have negotiated in bad faith, claiming to offer licenses but 
giving the run-around on terms and details. Plaintiff relied on defendants' 
promises that patent licenses would be available, and then lost business 
when PKP reneged on those promises. Copies of some correspondence with PKP 
on licensing is attached as Exhibit J. Plaintiff has never able to 
determine even what the PKP licensing policy is. 
 
19. Defendants have fraudulently induced standards-making bodies, including 
American National Standards Institute ("ANSI") and Institute of Electrical 
and Electronics Engineers ("IEEE"), to draft standards based on the RSA and 
Diffie-Hellman patents by promising a reasonable and nondiscriminatory 
licensing policy, when in fact no such policy exists. ANSI and IEEE require 
such a policy, and would not have drafted RSA standards if PKP had not 
misrepresented its intentions. 
 
20. Defendant PKP sent a letter dated March 15, 1991 to the American 
Bankers Association (in affiliation with ANSI) stating that "PKP has not 
denied a license to any party." A copy is attached as Exhibit K. Plaintiff 
was denied a license in 1990. 
 
21. Plaintiff is informed and believes and on that basis alleges that ISC 
and other parties were also denied PKP licenses. Numerous users of Pretty 
Good Privacy ("PGP"), a widely used cryptography program, have complained 
about being denied PKP licenses. 
 
22. A letter from PKP to ISC denying it an RSA license is attached as 
Exhibit F. 
 
23. Plaintiff is informed and believes and on that basis alleges that 
defendant RSADSI attempted to rescind licenses granted for use of RSAREF, 
one of its products, even though the license agreement clearly states that 
the license is perpetual. 
 
24. By getting their technology to be declared a draft standard, RSADSI has 
unfairly monopolized the cryptography market. Plaintiff has been damaged 
because competing technologies are regarded as nonstandard by the public. 
 
25. Defendants' patent threats and fraudulent promises have prevented ANSI 
and IEEE from adopting public key standards, to the detriment of all others 
in the industry, including plaintiff. 
 
26. Plaintiff and others on standards committees have invested valuable 
time and effort to develop a public Key standard, but have been thwarted by 
defendant PKP's patent threats and fraudulent promises. 
 
27. Plaintiff is informed and believes and on that basis alleges that 
defendants have made hostile and unwarranted threats against potential 
customers and clients of plaintiff, including representatives of the U.S. 
Army. These threats have included false assertions that ISC software is 
illegal because of patent problems. (Even if the defendants' patent claims 
were valid, the U.S. Army has a license to use the patents anyway.) 
 
28. Plaintiff is informed and believes and on that basis alleges that 
defendants have vindictively harassed competitors, including trying to 
promote a federal criminal investigation of the author of PGP. 
 
29. The U.S. Dept. of Commerce has made a determination that practice of 
the Digital Signature Algorithm ("DSA") does not infringe PKP patents. 
Public notice to that effect has appeared in Federal Register vol. 56, no. 
169, August 30, 1991, pp. 42980-42982, and Federal Register vol. 59, no. 
96, May 19, 1994, pp. 26208-26211. Copies are attached as Exhibits L and M. 
A copy of the DSA patent is attached as Exhibit N. 
 
30. Defendant PKP wrote a letter to the National Institute of Standards of 
Technology ("NIST") claiming that the DSA infringes PKP patents. The letter 
was dated Nov. 20, 1991 and attached as Exhibit 0. No PKP argument 
regarding the nature of the infringement was ever made public. U.S. patent 
5,231,668 was issued and assigned to the United States on July 27, 1993. 
 
31. When the DSA was adopted by NIST as the federal Digital Signature 
Standard, defendants publicly threatened to sue anyone who uses it. These 
threats were conveyed to the news media for the purpose of intimidating 
competitors, and the threats were widely disseminated. A copy of a typical 
story in the trade press is attached as Exhibit P. 
 
32. Defendants have attempted to intimidate ANSI and IEEE not to adopt a 
DSA standard, based on patent claims they know to be invalid. A copy of a 
PKP letter is attached as Exhibit Q. They hoped to kill a DSA standard in 
order to monopolize the market with an RSA standard. 
 
33. Defendant PKP has pooled patents in an attempt to monopolize public key 
technologies. The Hellman patents were originally issued to Stanford 
University and exclusively licensed to Cylink. Cylink apparently controls 
Caro-Kann Corp., a partner in defendant PKP. The RSA patent was originally 
issued to Massachusetts Institute of Technology and exclusively licensed to 
RSADSI. The Schnorr patent was issued to Klaus Schnorr, a German citizen 
who had no connection with PKP. The patents are not blocking. All are now 
under the exclusive licensing control of PKP. 
 
34. Defendants have exaggerated the scope of their patents. In a publicly 
distributed letter dated April 20, 1990, PKP claimed: 
	These patents cover all known methods of practicing the art of Public 
Key, including the variations collectively known as E1 Gamal [sic]. The 
letter is attached as Exhibit R. PKP knows that this claim is false, but 
makes it anyway to intimidate competitors. 
 
35. Defendant PKP sent a threatening letter, attached as Exhibit S, to ISC 
claiming that any use of public key technology must necessarily infringe 
PKP patents. 
 
36. The idea of public key cryptography and digital signatures is disclosed 
in a paper titled "Multiuser cryptographic techniques" by Whitfield Diffie 
and Martin E Hellman, National Computer Conference, vol. 45, 1976. The 
paper was presented at a public conference in mid-June 1976, and published 
as part of the conference proceedings shortly thereafter. This was more 
than one year before any patents were filed, and therefore in the public 
domain according to 35 USC 102(b). A copy of the paper is attached as 
Exhibit T. 
 
37. Another paper by Diffie and Hellman, "New Directions in Cryptography", 
IEEE Transactions on Information Theory, vol. IT-22, no. 6, Nov. 1976, was 
submitted on June 3, 1976. It discloses the public key distribution system 
of the DiffieHellman patent. A copy of the paper is attached as Exhibit U. 
 
38. A survey paper, "The First Ten Years of Public-Key Cryptography", was 
published by Diffie in Proceedings of the IEEE, vol. 76, no. 5, May 1988. A 
copy of the paper is attached as Exhibit V. It states on p. 563 that 
Exhibit U was publicly distributed in June 1976 and publicly disclosed at 
the National Computer Conference, also in June 1976. The Diffie-Hellman 
patent was filed on Sept. 6, 1977. This was more than one year later, and 
hence the patent is invalid and unenforceable according to 35 USC 102(b). 
 
39. The Hellman-Merkle patent is invalid and unenforceable because it is 
inoperative as disclosed. Claims 1-6 and 1417 require a quantity 
computationally infeasible to generate from a public key. Claims 1-3 and 6-
17 require secure communication over an insecure channel. There are no 
other claims. While the inventors probably believed that their invention 
met these requirements at the time they filed their patent application, it 
was later proved that the invention does not meet the requirements. 
According to Exhibit V pp. 565-566, it turned out to be feasible to compute 
the secret key from the public key. It follows that the claimed 
computational infeasibility is not achieved, and the communication is not 
secure. In fact, according to Exhibit V, the inventor had to pay a $100 bet 
when the invention was proved to be useless. 
 
40. RSADSI has known the Hellman-Merkle invention to be worthless since at 
least 1985, and have not used it in its commercial products for that 
reason. 
 
41. The Hellman-Merkle invention is not useful because of the flaws cited 
in Exhibit V, and therefore fails to satisfy the 35 USC 101 requirements 
for patent protection. 
 
42. The Hellman-Pohlig patent is not even a public key patent. PKP 
deceptively cites it to bolster their claim to own all public key 
technology. 
 
43. Defendants have claimed that ElGamal encryption, as described in T. 
ElGamal, A Public Key Cryptosystem and a Signature Scheme 8ased on Discrete 
Logarithm, IEEE Transactions on Information Theory, IT-31 (no. 4, July 
1985) pp. 469-472, or as implemented in SecretAgent (a product of ISC which 
uses software licensed from plaintiff), or as currently being considered by 
the IEEE P1363 committee, infringes PKP patents. Plaintiff asserts that 
there is no infringement, even if the PKP patents are valid. 
 
44. ISC had kept SecretAgent out of the commercial (non-government) market 
for a couple of years because of PKP patent claims on ElGamal encryption. 
 
45. Plaintiff has suffered lost royalties as a result of defendants 
claiming that SecretAgent infringes PKP patents. 
 
46. The RSA patent claims preempt a mathematical formula, and hence fail to 
pass the Freeman-Walter-Abele two-step test for statutory subject matter 
under 35 USC 101. While such a rejection had been made by the examiner, it 
was traversed with the disingenuous argument that the apparent formula is 
not a mathematical formula because it uses an equivalence relation. The 
argument from the RSA patent file wrapper is attached as Exhibit W. 
Plaintiff alleges that this argument is mathematically incorrect. 
 
47. Defendants have demanded licenses for use of the "RSA algorithm" even 
though such a demand is prohibited by the doctrine of file wrapper 
estoppel. Exhibit W emphatically says, 
	However, there are no mathematical algorithms in the applicants' 
claims. 
An example of a statement that the RSA algorithm is patented can be found 
in Bidzos's letter of Sept. 16, 1986, included in Exhibit J. 
 
48. Cylink has filed court papers, attached as Exhibit X, stating that it 
believes the RSA patent to be invalid. If so, PKP has knowingly extracted 
license fees and sued competitors based on an invalid patent. 
 
49. According to item 13 of Exhibit X, it appears that RSADSI has denied an 
RSA license to Cylink. 
 
50. Plaintiff will seek leave of court to amend this complaint to assert 
such additional grounds for invalidity as may be ascertained and shall give 
notice prior to trial as may be required by 35 USC 282 of the matters 
specified herein. 
 
51. Defendant PKP acquired the Schnorr patent in a willful attempt to 
maintain its monopoly over public key technology. When use of the DSA 
appeared to be a non-infringing use of public key, RSADSI publicly attacked 
DSA technology as inferior, showed little interest in marketing DSA 
products, but acquired the Schnorr patent anyway in a predatory attempt to 
deter others from using the DSA. An example of Bidzos's public 
disparagement of the DSA (where it is referred to as the DSS) is attached 
as Exhibit Y. 
 
52. Plaintiff is informed and believes and on that basis alleges that PKP 
ties licensing of its patents to the purchase of software and services from 
RSADSI, in an attempt to broaden the scope of its patents and monopolize 
the market for certain related software and services. 
 
53. Defendants have organized an illegal secondary boycott of competitors. 
RSADSI has publicly distributed a "Sink Clipper" poster which urges people 
to boycott companies selling products based on a cryptographic technology 
other than that sold by RSADSI. It says: 
	What you can do ... Boycott Clipper devices and the companies which 
make them exclusively: Don't buy anything with a Clipper chip in it. 
A copy of the text on the poster is attached as Exhibit Z. 54. Plaintiff 
has been developing software for the Tessera card, a device with Clipper 
chip technology. Plaintiff stands to suffer injury from RSADSI's secondary 
boycott if it kills the market for Tessera cards. 
 
55. Defendants' conduct and tactics with regard to the PKP patents 
constitute patent misuse. 
 
56. Plaintiff is informed and believes and on that basis alleges that 
defendants charge different royalties to different licensees, and use price 
discrimination to bolster their monopoly. 
 
57. Defendants are in violation of antitrust laws with their monopolization 
tactics. 
 
58. Defendants have defamed plaintiff by making allegations of patent 
infringement to third parties, in violation of libel laws and laws against 
unfair business practices. 
 
59. Defendants concocted a joint scheme to fraudulently exaggerate the 
scope of their patents and deceive standards making bodies into drafting an 
RSA standard on or about April 6, 1990, the day the PKP partnership 
agreement in Exhibit A was consummated. Defendants formed an association -
in-fact that constituted an "enterprise" within the meaning of 18 USC 
1961(4). 
 
60. Defendants intended to use the exaggerated patents and phony license 
promises to monopolize the public key cryptography market, with full 
knowledge of the ANSI and IEEE patent policies-and of the invalidity of the 
Hellman-Merkle patent. 
 
61. Several of defendants' threats and fraudulent patent claims and threats 
were transmitted through the U.S. Mail, thus constituting mail fraud in 
violation of 18 USC 1341. One such letter, Exhibit R, was sent by 
registered mail on or about April 20, 1990. 
 
62. PKP also sent Exhibits K and Q through the U.S. mail system. 
 
63. Defendants have interfered with commerce, in violation of 18 USC 1951, 
with their predatory tactics, unwarranted threats, and other unfair 
business practices. 
 
64. Plaintiff is informed and believes and on that basis alleges that 
defendants have engaged in extortion by using the threat of lawsuit to 
extract patent licensing fees, when in fact they knew the patent to be 
invalid. 
 
65. Plaintiff has been damaged, as have others, by defendants' fraud, 
extortion, and interference with commerce. 
 
66. Defendant PKP has conspired with defendant RSADSI to engage in a 
pattern of racketeering, in violation of the Racketeer Influenced and 
Corrupt Organizations (RICO) Act. 
 
67. Plaintiff damages, in lost sales, contracts, and royalties, are 
estimated at $2 million. Much of this would have been interstate commerce, 
including royalties from ISC in Illinois. 
 
 
WHEREFORE, plaintiff prays for judgment as follows: 
 
1. That defendants, defendants' agents, partners, servants, employees, and 
all others acting in concert or participating with them, be enjoined during 
the pendency of this action and permanently from further interference with 
plaintiff's business. 
 
2. That defendants pay plaintiff $2 million in real and punitive damages, 
and that damages be trebled according to antitrust and RICO laws. 
 
3. That defendants be required to comply with the ANSI and IEEE patent 
policies. 
 
4. That defendants' patent claim on all public key technology be declared 
invalid. 
 
5. That practice of ElGamal encryption does not infringe any PKP patents, 
whether those patents are valid or not. 
 
6. That practice of the DSA does not infringe any PKP patents, whether 
those patents are valid or not. 
 
7. That the Diffie-Hellman patent be declared invalid and unenforceable.  
 
8. That the Hellman-Merkle patent be declared invalid and unenforceable. 
 
9. That defendants be estopped from enforcing the RSA patent. 
 
10. That defendants be enjoined from further libeling plaintiff. 
 
11. That defendants supply a complete list of persons and businesses that 
they have given false or libelous information, and that they send written 
retractions to each party. 
 
12. That defendant partnership PKP be dissolved, and its patent pool be 
divided and returned to each patent's rightful owner. 
 
13. That plaintiff be compensated for court costs and legal fees. 
 
14. That plaintiff have such other and further relief as is just and 
proper. 
 
Dated: July 26, 1994 
By: Plaintiff, Roger Schlafly, Pro Se 
 
Roger Schlafly 
P0 Box 1680 
Soquel, CA 95073 
telephone: (408) 476-3550

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