Searching over 5,500,000 cases.

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

Checkpoint Systems, Inc. v. Check Point Software Technologies

July 12, 2000


The opinion of the court was delivered by: Simandle, District Judge.

Findings of Fact and Conclusions of Law


In this action alleging trademark infringement and unfair competition in violation of the Lanham Act, 15 U.S.C. §§ 1114 & 1125(a), plaintiff Checkpoint Systems, Inc. ("Checkpoint") alleges that the defendant, Check Point Software Technologies, Inc. ("CPS") has used the marks "CHECKPOINT," "CheckPoint," and "Check Point" in violation of plaintiff's registered trademark for "Checkpoint." Plaintiff Checkpoint is a leading company in the field of retail security, manufacturing and distributing products under the Checkpoint mark designed to help retailers prevent losses caused by theft of merchandise and also to help manage the inventory and supply chain of products or merchandise. Defendant CPS is a leading company in the Internet-related field of protecting the electronic data flow in computer networks from electronic intrusion and monitoring the flow of data between the Internet and private intranets of its customers. Defendant markets its network security products as "Check Point Software Technologies" and has also used the names "Check Point" and "CheckPoint." The companies are not competitors.

Plaintiff seeks to enjoin defendant from any further use of the Checkpoint name, including any of its similar variations, and this Court, having conducted a non-jury trial, must decide whether plaintiff has proved entitlement to such relief. Plaintiff's request for monetary damages is no longer before the court, having been denied by summary judgment, there having been no evidence of financial loss or willful infringement.

The principal issue to be decided is whether defendant's use of the mark (Checkpoint, CheckPoint, or Check Point) to identify its goods and services is likely to create confusion. Although the similarity in corporate names is clear, and such similarity is an important factor in determining whether consumers are likely to be confused about the origin of these non-competing products, this similarity is only the first factor in the analysis required by cases such as Scott Paper Co. v. Scott's Liquid God, Inc., 589 F.2d 1225, 1229-31 (3d Cir. 1978) and Fisons Horticulture, Inc. v. Vigoro Industries, Inc., 30 F.3d 466, 473 (3d Cir. 1994). These Scott/Fisons factors are the considerations regarding the context in which the mark is used in the marketplace which must be weighed to answer the central question of whether plaintiff has proved, by a preponderance of the evidence, that consumers viewing the mark would probably assume that the product or service it represents is associated with the source of a different product or service identified by a similar mark. This Court will examine the evidence, and lack of evidence, regarding likelihood of confusion with respect to likelihood that a consumer viewing defendant's mark would probably assume that it is associated with plaintiff, and also the "reverse confusion" issue of whether a consumer viewing plaintiff's mark would probably assume that it is associated with the defendant.

For the reasons stated herein, the Court concludes that plaintiff has not demonstrated the likelihood of actionable confusion, nor of reverse confusion, with respect to defendant's use of the contested marks, and that the plaintiff is therefore not entitled to relief under the Lanham Act.


Plaintiff Checkpoint Systems, Inc. ("Checkpoint") filed its Complaint against defendant Check Point Software Technologies, Inc. ("CPS") alleging trademark infringement and unfair competition on July 5, 1996. The parties engaged in several rounds of motion practice. First, on May 26, 1998, this Court issued an Opinion and Order denying the parties' cross-motions for summary judgment. Second, on May 17, 1999, this Court entered an Opinion and Order granting plaintiff's motion in limine to exclude the testimony of defendant's expert Dr. Dov Frishberg and denying defendant's motion in limine to exclude the testimony of plaintiffs' experts Ira Somerson, Dr. Robert D. McCrie, David L. Johnston, Peter E. Ohlhausen, and Dr. Sanford Sherizen. Third, on May 17, 1999, the Court also entered an order granting plaintiff's motion for leave to renew its motion for summary judgment. Thereafter, the parties filed renewed cross-motions for summary judgment, supplementing their earlier motions with new exhibits. On October 28, 1999, this Court denied the plaintiff's motion for summary judgment and granted in part and denied in part defendant's motion for summary judgment, precluding plaintiff from seeking damages and attorneys' fees.

A non-jury trial in the matter was held November 1-4, 8-10, and 23, 1999. Plaintiff Checkpoint presented the testimony of Kevin Dowd (plaintiff's Chief Executive Officer), Steven Wagner (plaintiff's V.P. of Access Control), John Thorne (plaintiff's former Director of Product Management), Craig Knick (Sales Engineer for plaintiff), and Thomas Upshur (plaintiff's Senior Director of RFID Marketing and Product Management, as well as expert testimony of Ira Somerson (security management), Peter Ohlhausen (corporate security), Dr. Sanford Sherizen (information security), Dr. Robert McCrie (corporate security), and David Johnston (corporate security). The Court then denied, on November 4, 1999, defendant's application for a judgment on partial findings pursuant to Fed. R. Civ. P. 52(c).

Defendant CPS presented testimony of Kin Mitra (a CPS Regional Director of Sales), Kelly O'Connor (CPS's Director of Marketing Communications), Schlomo Kramer (CPS's former Director and founder), Rakeesh Loonkar (a CPS value added reseller ("VAR")), Charles Breed (V.P. of Kroll-O'Gara's Information Security Group), William Lavelle (a CPS Territorial Manager), Deborah Rieman (CPS's former Chief Executive Officer), and Gary Fish (a CPS VAR), as well as the expert testimony of Philip Stern (corporate security) and John Morency (computer networking).

Additionally, both parties submitted into evidence deposition designations and responses to written discovery requests. The parties submitted proposed findings of fact and conclusions of law, and final argument was heard on January 14, 2000. The Court now issues its final ruling.


A. Plaintiff and its business

1. History and founding of company

Plaintiff Checkpoint is a Pennsylvania corporation having its principal place of business at 101 Wolf Drive, Thorofare, New Jersey 08086. (DX-9). *fn1 Since 1967, plaintiff and its predecessors have been engaged in the manufacture and sale of electronic security equipment and systems for retail and other commercial applications and computer-based access control systems for commercial applications. (DX-10.) The essence of Checkpoint's business is to help retailers protect against theft of merchandise from stores, as discussed below. Plaintiff claims that it provides comprehensive corporate security solutions. (Dowd Tr. 34; McCrie Tr. 755; Olhausen Tr. 476.) A public company, its stock was traded on NASDAQ from 1977 through 1993 and on the N.Y. Stock Exchange from October 29, 1993 to the present, under the symbol "CKP." (Dowd Tr. 37.)

Plaintiff has earned an excellent reputation and has achieved commercial success in the field of retail corporate security, including primarily the detection of pilferage of merchandise from retail stores by patrons or employees, in which it is one of two dominant players. (Thorne Tr. 267; DX-9 - 11.)

Checkpoint has used the "CHECKPOINT" mark and name since at least early as May 8, 1967. (Dowd Tr. 34, 90.) It owns U.S. Trademark Registration Nos. 845,817 and 844,752 for "CHECKPOINT;" these registrations are valid, subsisting, incontestable, and renewed. (Dowd. Tr. 90; PX-1-2.) Indeed, defendant has not challenged the validity of these registrations or plaintiff's ownership of them.

Checkpoint has grown over the years, largely by acquiring other companies. As it has acquired other companies, it has consistently changed their names so that the acquired companies employ the "CHECKPOINT" mark and name, thereby underscoring for the relevant public that companies plaintiff's business using the "CHECKPOINT" mark and name are part of a corporate family. (Dowd Tr. 40-41.) The "CHECKPOINT" family includes Checkpoint Systems, Inc. and Checkpoint Security Systems Group, Inc. (formerly Alarmex), and those companies purchased by Checkpoint and subsequently operated within Checkpoint, such as Sielox. (Dowd Tr. 49, 125.) Checkpoint is currently in negotiations to acquire Meto AG to further expand Checkpoint's capabilities in the radio frequency identification devices ("RFID") market, again in the field of retail security. (Dowd Tr. 41-42.) Additionally, Checkpoint has acquired companies in Europe to expand geographic reach. (Dowd Tr. 38-40.) It has had a presence in Israel since at least early 1980. (McCrie Tr. 757.)

In its 1998 Annual Report to shareholders, plaintiff reported its corporate "Vision" as follows: "To establish Checkpoint Systems, Inc., as the premier worldwide radio frequency technology supply chain management solutions provider." (DX-55.) Plaintiff used similar terminology to describe the rationale for its $300 million acquisition of Meto AG, a European-based competitor. (DX 110: "global retail supply chain management provider.") Similarly, plaintiff described its "Mission" as "provid[ing] retailers, commercial and industrial businesses, and systems integrators with comprehensive radio frequency technology-based supply chain management and security solution that move goods effectively and efficiently, control shortage losses, improve sales and profitability, and ensure the accuracy and security of assets." (Id.) In that same report (DX-55 at 15), in language largely unchanged over the last several years (Dowd Tr. 118-19), plaintiff described the essence of its business as helping retailers protect against theft and to thereby improve the display options for merchandise:

§ "Checkpoint is a designer, manufacturer, and distributor of integrated electronic security systems...designed primarily to help retailers prevent losses caused by the theft of merchandise."

§ "The Company's diversified product lines are designed to help retailers prevent losses caused by theft (both by customers and employees) and reduce selling costs through lower staff requirements."

§ "The Company's products facilitate the open display of consumer goods, which allow the retailer to maximize sales opportunities." Id.

1. Products sold

Throughout its over 30 year history, Checkpoint has expanded and diversified its business and product lines both through internal development and by acquiring other companies in the corporate security industry. (Dowd Tr. 38-42.) Its security systems consist essentially of four types of products: (i) electronic article surveillance ("EAS") systems, including point of sale monitoring systems (introduced in libraries in 1967), (ii) access control systems ("EAC") (introduced in 1986), (iii) closed circuit television ("CCTV") systems (introduced in 1995), and (iv) radio frequency identification device ("RFID") products (introduced in 1999). (DX-55 at 16-17; Dowd Tr. 34, 38, 39.) Despite this diversification, Checkpoint's name and reputation is primarily associated with its traditional strength in electronic article surveillance ("EAS") systems, comprising about 90% of its revenues, as discussed below. Each product line is now described.

a. EAS (Electronic Article Surveillance) Systems

Checkpoint's EAS systems are comprised of three components: tags or labels having circuitry, electronic sensors, and deactivation equipment. (Thorne Tr. 249, 251; PX-3; DX-9.) The EAS systems alert users to unauthorized removal of merchandise from stores, books from libraries, and software and hardware from data centers. (Dowd Tr. 39; Thorne Tr. 249-50; PX-3.) Such tags are placed on items of merchandise and they are read and deactivated when the customer transacts the item. If the customer or employee attempts to take the item from the store without paying for it, an antenna, usually at an exit, will detect the tag and will sound an alarm so that the event can be checked by store security personnel. While plaintiff's EAS systems are typically installed in retail establishments, they are also used in non-traditional settings, such as in nuclear plants by placing EAS tags in proprietary documents in a secured area. (Thorne Tr. 274-75.) Checkpoint's EAS products are integrated with other security systems, including POS and CCTV systems (described below); that integration capability provides a key competitive advantage. (Thorne Tr. 250-51.)

b. EAC (Electronic Access Control) Systems

Of far lesser importance in Checkpoint's sales line, plaintiff's electronic access control systems prevent unauthorized access to restricted areas. (Wagner Tr. 148, 208.) These software-driven lines feature dial-in networking capabilities and prevent loss of an organization's assets. (Wagner Tr. 148-49; Dowd Tr. 51.) Checkpoint's EAC software products reside on a CD-ROM so the system can be implemented on an organization's server. (Wagner Tr. 149.) The EAC systems not only keep track of persons accessing buildings, but also persons accessing equipment and items including software within restricted areas. (Wagner T. 156-57.)

Employees are given security cards with integrated circuits that allow them access to certain areas. (Wagner Tr. 159.) Such cards, also used in connection with Checkpoint's CCTV products (described below), are a type of "smart card," as intelligence can be written onto the card. (Wagner Tr. 237.) In the future, such cards could enable log-on access to computers. (Wagner Tr. 238.) No such products are currently in development by plaintiff, however. These systems allow the integration of third party software packages to enhance the basic EAC system. (Wagner Tr. 154-55.) Checkpoint developed for January 2000 introduction a product that will track the movement of assets throughout an organization, and permit or deny physical movement of those assets (including personnel) based upon authorization. (Wagner Tr. 165.)

The EAC products (like the POS and CCTV systems described below) are integrated with a customer's computer system, ranging from the single workstation of a "mom and pop" store to a computer network or network of networks utilized by major national retail chains. (Wagner Tr. 149, 155-56.) Checkpoint's Value Added Resellers ("VARs") build the proprietary networks that carry Checkpoint's EAC products, or can integrate Checkpoint's products into a pre-existing network. (Wagner Tr. 210-11.)

The EAC products reside on a LAN (local area network) or WAN (wide area network) and process the systems' signals based on privileges allowed by the network manager under the network's protocol. (Wagner Tr. 240-41.) Under these protocols, network managers place restrictions on who can access information contained in certain directories. (Knick Tr. 330, 380.) The information contained in the EAC products and generated by the EAC products is maintained in a database, and may include an employee's job title, vehicle license numbers, address, or similar information. (Knick Tr. 388-39.) Levels of authority may be assigned to managers or users of the EAC system, thereby allowing only persons of certain assigned levels to have access to proprietary information. (Knick Tr. 389.)

Among plaintiff's EAC products are the "THRESHOLD" products, software-driven, multi-tasking, multi-operator systems. (Wagner Tr. 151-53; PX-23; PX-23(a).) This includes "THRESHOLD NT," which may be run on the Internet. The product brochure for these products indicates that with these products, CCTV, ID imaging, time, attendance, activity management, air conditioning controls, and lighting controls can all be integrated, allowing "pinpoint precise data management...." (PX-23(a).) The THRESHOLD products have the capability to encrypt the data generated by Checkpoint's EAC systems. (Knick Tr. 354.)

c. CCTV (Closed Circuit Television) Systems

Checkpoint's closed circuit television systems and point of sale (POS) systems generate data at the point of sale in video and electronic form and transfer the data which is subsequently integrated and electronically sent to remote locations to be used for employee audit and inventory management and control. Such systems currently transfer such information over traditional telephone lines, but will, in the near future, transfer such information over customers' LAN or WAN. (Dowd Tr. 35; Wagner Tr. 206-07, 212.) One such CCTV product is VIEWPOINT, a total transaction monitoring system and computerized point of sale scanning system that has remote dial-in capabilities. (Dowd Tr. 35; Thorne Tr. 265; PX-26.) VIEWPOINT electronically records and stores point of sale transactions from multiple point of sale locations via CCTV surveillance and cash register scanners. A relational database and report generation allows for identification of suspicious transactions. (Id.)

The latest developments in plaintiff's line of POS and CCTV products establish the foundation for a POS system that transmits secure digital images to remote locations, so security managers can monitor facilities from remote locations. This monitoring depends on a secure computer network connection such as that which network security software provides. (Dowd Tr. 35.)

Such products can and have been integrated. For example, Rite Aid Corporation acquired a company named SASSY to build its IS and POS systems for its drug store chain. The SASSY group developed a POS monitoring system so that Rite Aid's Chief Information Officer ("CIO") could remotely monitor sales activity occurring in other parts of the country. (Thorne Tr. 282.) Rite Aid approached plaintiff to assist with developing this system so that other applications, such as heating, air-conditioning, attendance, and security applications could be integrated on a single network. (Thorne Tr. 282.) Such a program is currently in "alpha" testing. (Thorne Tr. 283.)

d. RFID (Radio Frequency Identification Device)

In 1997, plaintiff began Diamond Checkpoint Development Group, a joint research and development relationship with Mitsubishi Materials Corporation of Japan. (Dowd Tr. 51-51; DX-10.) The research and development aims at combining radio frequency ("RF") security tags with integrated circuits. (Dowd Tr. 51-52.) The resulting "intelligent tags" carry, among other things, information about a product's history from initial manufacturing through distribution, sale, and, ultimately, consumer record keeping. (Thorne Tr. 251-53.) Such tags surpass traditional bar codes in their ability to store and communicate information concerning specific items and do not have bar coding's line of sight limitations on data capture. (Thorne Tr. 251-52; Upshur Tr. 392.) The proprietary information generated is entered into a database server and can be transmitted virtually anywhere that the user wishes via computer. (Dowd Tr. 45, 49; Thorne Tr. 253.) In early 2000, plaintiff plans to introduce a "read and write" tag that will allow users to add or delete information contained in a RFID tag. (Dowd Tr. 52.) The RFID products are not only directed to retail applications, but also to libraries and commercial and industrial applications. (Upshur Tr. 392-93.)

Plaintiff's acquisition of Meto AG would further expand Checkpoint's capabilities in the RFID field throughout the world. (Dowd Tr. 41-42.)

Plaintiff's products, as with many commercial products and services, are thus becoming more computer-driven. They are also structured such that they can perform non-security functions, such as monitoring inventory and the movement of equipment. They also continue to serve crucial functions in the world of corporate security, focusing on physical security of products and personnel, for which plaintiff is known.

e. Use of the Checkpoint mark on these products

Checkpoint's "CHECKPOINT" trademark is prominently displayed on Checkpoint's products, including tags and sensors, access control cards, product specification sheets, and computer screens. (PX-3; PX-4; Wagner Tr. 160, 163; Thorne Tr. 257, 259-60, 262, 288.) Approximately 30-40,000 antennae for retail merchandise security with the CHECKPOINT mark were sold in 1998. (Thorne Tr. 257.) There are approximately 350,000 antennae bearing the mark in the marketplace. (Thorne Tr. 258.) Often these antennae are placed as detection devices at the exits of retail stores. Approximately 500,000 Checkpoint hard tags in circulation bear the CHECKPOINT mark. (Thorne Tr. 262-63.) In 1997 and 1998, Checkpoint sold 150,000 and 200,000 access control cards, respectively, each of which bears the CHECKPOINT mark. As of the time of trial, plaintiff expected that it would sell in excess of 300,000 access control cards in 1999. (Wagner Tr. 160.) The CHECKPOINT mark is also displayed briefly on a user's computer screen when the access control system is loading. (Wagner Tr. 163.)

3. Percent of revenues

Plaintiff, a growing company, has experienced substantial financial success. (Dowd Tr. 37.) Gross revenues increased from approximately $50 million in 1990 to over $360 million in 1998. Fortune magazine identified plaintiff as one of America's fastest growing companies in 1996. (Dowd Tr. 67; PX-9.)

The electronic article surveillance business represents far and away the largest part of plaintiff's business, about 90%. (Thorne Tr. 271.) EAS products are sold primarily to retail, industrial, institutional, and government users. (Dowd Tr. 34-36, 54; Wagner Tr. 172; Thorne Tr. 251, 276.) Checkpoint's projected 1999 revenues for its EAS systems are in the range of $365-380 million. Checkpoint has many thousands of accounts for its EAS systems throughout the U.S. (Thorne Tr. 272.) Representative end users of Checkpoint's EAS products include: Circuit City, Target, Rite-Aid, Eckerd Drug, Barnes & Noble, Staples, Giant Foods, and Burlington Coat Factory. (Dowd Tr. 34-36, 134-135; Thorne Tr. 251, 269. Checkpoint also sells its EAS products to smaller companies and smaller regional and local retailers. (Dowd Tr. 64; Thorne Tr. 275.)

Plaintiff's EAC, POS monitoring, and CCTV products, however, constitute less than a 10% component of Checkpoint's business. (Dowd Tr. 35; Wagner Tr. 147.) Revenues for Checkpoint's EAC products were expected to be $15 million in 1999 (Wagner Tr. 234), which constitutes three percent of Checkpoint's gross revenues but at least five percent of Checkpoint's profits. (Wagner Tr. 244.) Access control sales are estimated in 1999 at $15 million annually, a tiny fraction of plaintiff's total post-merger sales. (Wagner Tr. 164, 234-35.)

4. Major competitors and relative market shares

In the article surveillance (EAS) area, plaintiff's market share of domestic EAS sales is 30% (Dowd Tr. 38.), but it dominates the drug store segment with over 70% of that market. (Thorne Tr. 267.) Plaintiff's biggest competitor in the U.S., Sensormatic Electronics Corporation ("Sensormatic"), has 45% of the market. In the access control (EAC) area, on the other hand, Checkpoint has at least 25 competitors, and its market share is small. (Wagner Tr. 192.) Plaintiff also sells access control products through independent distributors. (Wagner Tr. 171.) Plaintiff has many tens of thousands of customers. (Dowd Tr. 108.) Its alarm business alone has 50,000-60,000 customers. (Upshur Tr. 406.)

5. Marketing techniques, advertising and trades shows

Checkpoint promotes its products primarily through direct mailings to security systems dealers, trade shows, advertisements, its direct sales force, and its Internet website. (Dowd Tr. 53; Wagner Tr. 185; Thorne Tr. 285.) Plaintiff spends approximately eight million dollars annually on advertising and marketing (Thorne Tr. 275, 285), which is over two percent of its 1998 revenues. All of its advertising and promotional materials prominently display the CHECKPOINT mark and are for products and systems under the CHECKPOINT mark and name. (Dowd Tr. 53; PX-3; PX-4; PX-23; PX-26; PX-27.) Checkpoint uses its name in, inter alia, press releases and promotional materials to further Checkpoint's business among the relevant public. (Dowd Tr. 53.)

Plaintiff's employees attend hundreds of trade shows each year, including Comdex, the annual American Society of Industrial Security ("ASIS") trade show and conference, and ScanTech. (Dowd Tr. 53; Knick Tr. 335.) Plaintiff also promotes its products at the National Retail Federation Show, the FMI Technology Show (for food marketers), and the International Security Conference. (McCrie Tr. 776; PX-90.) Checkpoint attends trade shows where it is not necessarily exhibiting its products to collect information on market trends, determine what products are of interest to potential customers, and determine what products Checkpoint might be able to integrate into its own products. (Thorne Tr. 286.)

Plaintiff has employed a public relations firm for the last eleven years. (Dowd Tr. 59-60.) Checkpoint sends public relations mailing to approximately forty (40) publications, including publications of general interest, financial-related magazines, and publications concerned with both physical and computer corporate security. (Dowd Tr. 59-60.) The two magazines in which Checkpoint concentrates the majority of its advertising are Security and Today's Facility Manager. (Wagner Tr. 187; PX-13.) With the introduction of Checkpoint's RFID products, Checkpoint is advertising in Automatic ID News (Upshur Tr. 396-97; PX-129), the primary information resource for automated data capture and communications (ADC) decision-makers who make technology decisions to enable the seamless collection of data and its integration into software applications and the enterprise computing infrastructure. (Upshur Tr. 397.) Plaintiff also advertises in publications targeted to specific vertical retail markets, such as Modern Mass Merchandiser and Supermarket News. (Wagner Tr. 187-88.)

Security is directed to the security industry, generally, and contains advertisements for the products of Checkpoint and others that manufacture physical security systems, and, to a much lesser extent, for companies manufacturing information security products. (Wagner Tr. 189-90; Olhausen Tr. 520; PX-13; PX-118.) Security magazine covers such topics of interest to security managers as security hardware, security managerial issues, and training. It also contains articles on information security, at times mentioning firewalls. (Somerson Tr. 426; PX-118 at 17; PX-124 at 7.)

As a result of Checkpoint's efforts, there is strong brand recognition in the "CHECKPOINT" mark and name in connection with physical retail security products. (See Dowd Tr. 91.) The "CHECKPOINT" mark and name are, along with plaintiff's proprietary information, among plaintiff's most valuable corporate assets. (Dowd Tr. 91.)

1. Sophistication of purchasers, sales modes, time cycles, and end-user interaction

In selling its products, Checkpoint sells almost entirely through its own sales personnel and independent representatives. In marketing its electronic article surveillance ("EAS") systems, its principal product, plaintiff relies on its internal sales force, which consists of approximately 160 sales representative throughout the United States. (DX-22.) Plaintiff's access control products are sold mostly through a system of approximately 150 distributors around the country that sell a wide array of physical security products, such as closed circuit television and alarm systems. (Thorne Tr. 276; Wagner Tr. 171.) Plaintiff's newly launched RFID product is being sold through independent distributors, or VARs. (Upshur Tr. 404-05.) End users often call Checkpoint with support questions. (Wagner Tr. 170-71; Knick Tr. 332-33.) Checkpoint also cross-sells its product lines to existing customers, allowing Checkpoint to build upon already established relationships. (Dowd Tr. 69; Thorne Tr. 286.)

Plaintiff's products tend to serve specialized needs and are often quite costly. The prices and time cycles for sales vary depending on the product and the customer. For example, EAS systems cost, at the lowest level, between $2,000 to $5,000, plus the cost of necessary tags. (Thorne Tr. 260-61, 289.) In the small secondary market, the pricing of used EAS systems ranges from one-fifth to one-half of the original price. (Thorne Tr. 289-90.) Large retailers, such as Dayton Hudson, might spend upwards of $20 million per year on plaintiff's EAS products. (Dowd Tr. 63-64.) The typical sales cycle for plaintiff's EAS products can be relatively brief for small, single stores, but "months, if not years" for large corporations. (Thorne Tr. 277.) The typical sales cycle for an access control system, on the other hand, is 3-4 months, and runs up to a year, though it may occasionally be much shorter. (Wagner Tr. 177.) RFID product projects typically run between $80,000 and $140,000, and the typical sales cycle for plaintiff's RFID products is 3-6 months. (Upshur Tr. 410.)

Checkpoint's Sales Engineer accompanies dealers in meetings with end users of Checkpoint's EAC products. (Knick Tr. 331.) In such meetings, Mr. Knick meets with corporate security directors, but "increasingly, MIS personnel will be in that meeting because we're now working across the customer's LAN with our Windows based products." (Knick Tr. 331.) Members of MIS groups often question Mr. Knick on the bandwith Checkpoint's products take up on a network and whether the systems can be deployed remotely. (Knick Tr. 334.)

In marketing and selling its products, Checkpoint has few dealings of importance with the information security personnel of a customer. Checkpoint may deal with MIS personnel when there is the occasional need to integrate Checkpoint's computer-based products with the other systems of the end user. (Dowd Tr. 62; Wagner Tr. 217; Thorne Tr. 279.) Additionally, when the sales cycle is slightly longer because of the need to discuss ability to integrate Checkpoint's product with pre-existing products, there is discussion with a customer's MIS department, loss prevention department, operations department, and finance department, all of whom are impacted by the deployment of a security system. (Thorne Tr. 277-78.) The MIS personnel typically become involved with the purchasing decision later in the sales cycle, after plaintiff has been identified as a vendor. (Knick Tr. 353; Wagner Tr. 169-70; Thorne Tr. 278-81.) MIS personnel are sometimes seen as a nuisance and potential disruptor of the sales cycle. (Thorne Tr. 280; Wagner Tr. 169.) MIS personnel are not the ones who "opened the door to Checkpoint to get [them] in...." (Thorne Tr. 306.) As a rule, Checkpoint is not directing its sales pitch toward information security personnel. The customer's concern is instead merely to assure that plaintiff's product, if purchased, does not interfere with the existing computer network.

Nonetheless, Checkpoint occasionally deals with the customer's CIO or MIS personnel (Dowd Tr. 63; Wagner Tr. 217), particularly when Checkpoint's products are used to collect data or transfer the data back to a remote location. (Thorne Tr. 279-80.) For example, Checkpoint recently completed a sale with Kroeger Company. The key negotiator for Kroeger was its CIO. (Dowd Tr. 62-63.) Checkpoint has dealt with the CIO for Dayton-Hudson Corporation (Dowd Tr. 63-64) and has interfaced with the Vice President of Store Information Security for Target (Thorne Tr. 281). Checkpoint also works with other companies to ensure that its product may be integrated with third party products. (Thorne Tr. 290-91.) Two of these companies are NCR (an OPSEC partner of defendant) and IBM. (Id.)

Plaintiff also interfaces with end users of its products by providing classes to help them understand how Checkpoint's product is incorporated across corporate networks for purposes of data integrity production, data backup, and integration with other products. (Knick Tr. 328-29.) Craig Knick has recently taught classes as Exodus Communications in California, Bomabardia Financial in Florida, and Alliance Capital and KBC Bank in New York City. (Knick Tr. 329.) The attendees of the classes include security personnel and MIS personnel. (Id.)

Additionally, there is a "secondary market" or "after market" for Checkpoint's retail store physical security systems. (Thorne Tr. 272.) There is no evidence of an aftermarket for Checkpoint's other products.

B. Defendant and its business

1. History and founding of company

Defendant Check Point Software Technologies, Inc. ("CPS") is a Delaware corporation with its principal place of business at Three Lagoon Drive, Suite 400, Redwood City, CA 94065, although, like Checkpoint, it has regional offices throughout the United States. (Mitra Tr. 940.) It is a wholly-owned subsidiary of Check Point Software Technologies, Ltd. ("Check Point Software Ltd."), an Israeli company headquartered in Ramat-Gan, Israel. (DX-54 at 2.) The Israeli parent's stock is publicly traded on NASDAQ. Today, Check Point Software Ltd., which is not a defendant in this case, manufactures products that deliver policy-based solutions for network security, traffic control, quality of service ("QoS"), and IP address management. (DX-54 at 11.)

As explained below, defendant CPS designs and sells a firewall product which promotes and controls the transmission of electronic data from, to, and over the Internet, performing functions such as protecting a local computer network from electronic intrusion by unauthorized users. Such an electronic firewall is a sophisticated and expensive software application which must usually be bought, installed, and maintained by computer network information specialists.

Check Point Software Ltd. was founded in Israel in 1993. (Kramer Tr. 1148.) Two of the founders, Gil Schwed and Shlomo Kramer, had served together in the Israeli army. (Id.) The company's first office was located in a room in Mr. Kramer's grandmother's home. (Id.) Financing opportunities were extremely limited at that time because of skepticism that the Internet would have any serious commercial application. (Id.)

From its inception, the company used the name "Check Point Software." (Kramer Tr. 1158-59.) Mr. Kramer testified that the name was selected in the spring of 1993 in a brain-storming session at which those present were looking for an appropriate name for what they were doing, selecting "Check Point" because, as Kramer testified, "essentially what we are doing is we [scanned] the network, we controlled the traffic, we are sort of the check point. . . ." (Kramer Tr. 1159.) To Kramer, the name suggested ...

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.