UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 8-K

                                 CURRENT REPORT
                         Pursuant to Section 13 or 15(d)
                     of the Securities Exchange Act of 1934

                                 March 20, 2000
                   ------------------------------------------
                                (Date of Report)

                                  IMATEC, LTD.
             ------------------------------------------------------
             (Exact name of registrant as specified in its charter)

           Delaware                    0-21752                  11-3289398
(State or other jurisdiction         (Commission              (IRS Employer
      of incorporation)              File Number)           Identification No.)

                 150 East 58th Street, New York, New York 10155
         --------------------------------------------------------------
                    (Address of principal executive offices)

                                 (212) 826-0449
         --------------------------------------------------------------
              (Registrant's telephone number, including area code)

                                      None
         --------------------------------------------------------------
         (Former name or former address, if changed since last report.)

<PAGE>

Item 5. Other Events.

      In February 1998, the Company and Dr. Hanoch Shalit, the Company's chief
executive officer and president, filed a patent infringement complaint against
Apple Computer Corp. ("Apple") in the United States District Court for the
Southern District of New York. The complaint alleges that Apple infringed on the
Patents (as defined below), which were licensed exclusively by Dr. Shalit to the
Company, by making, using and selling its ColorSync color management systems.
The "Patents" are US Letter Patent No. 4,939,581, entitled, "Method and System
in Video Image Hard Copy Reproduction"; Patent No. 5,115,229, entitled "Method
and System in Video Image Reproduction"; and Patent No. 5,345,315, entitled
"Method and System for Improved Tone and Color Reproduction of Electronic Images
on Hard Copy Using for a Closed Loop Control." Apple filed a motion to dismiss
and motion for summary judgment in April and February 1999.

      In January 2000, the Court granted Apple's motions. The Court held that
the inventions which are the subject of the Company's claim had been previously
assigned to a former employer of Dr. Shalit. The Court also held that Apple's
ColorSync system does not infringe any of the patents.

      The Company and Dr. Shalit have appealed the decision to the United States
Court of Appeals for the Federal Circuit. The Company beleives that the District
Court erred in determining that the inventions encompassed by the Patents were
previously assigned and also believes that the District Court incorrectly
construed the claims of the Patents, resulting in an erroneous infringement
analysis.

      Apple has filed a motion to recover attorney's fees of approximately $1.7
million. The Company has vigorously contested the motion and believes that it is
without merit.


Item 7. Exhibits

Exhibit No.             Exhibit
-----------             -------
20 (i)                  United States District Court, Southern District of New
                        York, Opinion and Order, dated 1/17/00

<PAGE>

                                   SIGNATURES

      Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.

                                                  IMATEC, LTD.


                                                  /s/ Hanoch Shalit
Date: March 20, 2000                              ------------------------------
                                                  Dr. Hanoch Shalit
                                                  Chairman, President and Chief
                                                  Executive Officer

<PAGE>

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK

-------------------------------

IMATEC, LTD. and HANOCH SHALIT,

                Plaintiffs,                98 Civ. 1058 (JGK)

      - against -                          OPINION AND ORDER
                                           -----------------
APPLE COMPUTER, INC.,

                Defendant.

-------------------------------

JOHN G. KOELTL, District Judge:

            The plaintiffs, Imatec, Ltd. ("Imatec") and Hanoch Shalit ("Dr.
Shalit"), bring this action alleging that the defendant, Apple Computer, Inc.
("Apple"), has infringed a series of patents owned by Dr. Shalit and, for a
period, exclusively licensed or assigned to Imatec. Now pending before the Court
are two motions brought by the defendant: a motion to dismiss for lack of
standing, and a motion for summary judgment.

                                       I.

                                       A.

            The technologies at issue in this action concern "color matching."
Color matching technologies are intended to ensure that an image displayed by
one electronic output device (such as a computer monitor) appears identically,
or as close thereto as possible, when displayed by another electronic output
device


                                     - 1 -
<PAGE>

(such as a laser printer). Such technologies are necessary because different
output devices have different color characteristics. Color characteristics vary
across classes of output devices, and across particular devices within any given
class. Laser printers, for example, produce colors differently than do computer
monitors, and one laser printer may render a given source image differently from
another laser printer. See Declaration of Maureen C. Stone, dated April 12, 1999
("Stone Decl."), Paragraphs 7-9, 14; see also U.S. Patent No. 5,345,315, col.
3:5-25.

            Perceived color is produced in two fundamentally different ways.
"Additive color" is produced when a light source is caused to glow with a
combination of the primary colors red, green, and blue. Devices that generate
additive color, such as computer monitors, are referred to as "RGB" devices
because they combine the primary colors red, green, and blue to produce a given
color. "Subtractive color" is produced when light from a light source is
reflected by a surface whose pigments absorb certain wavelengths but not others.
Devices that generate subtractive color, such as laser printers, are referred to
as "CMYK" devices because they combine the primary colors cyan, magenta, and
yellow, as well as black, to produce a given color. See Stone Decl., Paragraphs
9-11.

            Every electronically generated image comprises many "pixels," much
as a pointillist painting comprises many discrete brush stokes. Each individual
pixel is characterized by a


                                     - 2 -
<PAGE>

particular combination of red, green and blue, or, depending on the output
device, cyan, magenta, yellow and black. The relative amounts of red, green and
blue or cyan, magenta, yellow and black describe the color of a given pixel as
generated by a particular output device. Such descriptions, however, are
"device-dependent," describing how the color is generated by a particular output
device, not how the color is perceived by a viewer. Thus, a particular
combination of red, green and blue values displayed on one monitor may appear
differently when displayed on another monitor. See id., Paragraphs 10-12.

            In contrast to device-dependent values, which describe how a color
is generated by a particular device, "device-independent" values describe how a
color is perceived by a standard, hypothetical viewer. Device-independent color
values are expressed as points in a three-dimensional coordinate system known as
a "color space." One such device-independent color space is called "CIE XYZ,"
where "CIE" refers to the Commission Internationale de l'Eclairage, the
scientific organization that sponsored its development, and "XYZ" refers to the
three axes of the coordinate system. See id., Paragraphs 15-17.

            No electronic output device can generate all of the colors
perceptible to the human eye. Moreover, the range of colors that an output
device is capable of producing, known as the device's color "gamut," varies
across devices. RGB devices, such as monitors, are incapable of generating all
of the colors that CMYK devices can produce; conversely, CMYK devices, such as


                                     - 3 -
<PAGE>

printers, are incapable of generating all of the colors that RGB devices can
produce. Because of each device's inherent limitations, a given source image may
not be fully reproducible on a given output device. As a result, certain colors
in the source image may have to be approximated, through a process known as
"gamut mapping," when displayed on certain output devices. See id., Paragraph
13.

                                       B.

            The pending action involves three patents: U.S. Patents Nos.
4,939,581 (the "'581" patent), 5,115,229 (the "'229" patent), and 5,345,315 (the
"'315" patent). In each instance the plaintiff Hanoch Shalit is listed as the
sole inventor. The '229 and '315 patents are each a continuation-in-part of the
'581 patent. See U.S. Patents Nos. 4,939,581, 5,115,229, and 5,345,315.

            The '581 patent, entitled "Method and System in Video Image Hard
Copy Reproduction," was filed on November 23, 1988 and granted on July 3, 1990.
According to the patent, an objective of the claimed invention is "to provide a
more accurate black-white photographic image taken from the image on a video
screen in which the photographic image more accurately maintains the relative
and absolute (for luminance reproduction) tonal scale of gray tones." U.S.
Patent No. 4,939,581, col. 3:61-66.

            The '229 patent, entitled "Method and System in Video Image
Reproduction," was filed on June 26, 1990 and granted on May 19, 1992. According
to the patent, an objective of the


                                     - 4 -
<PAGE>

claimed invention is "to provide a more accurate black-white video image on a
second video monitor from the image on a first video screen in which the second
image more accurately maintains the relative and absolute (for luminance
reproduction) tonal scale of gray tones." U.S. Patent No. 5,115,229, col.
3:8-13.

            The '315 patent, entitled "Method and System for Improved Tone and
Color Reproduction of Electronic Image on Hard Copy Using a Closed Loop
Control," was filed on March 20, 1992 and granted on September 6, 1994.
According to the patent, an objective of the claimed invention is "to provide a
more accurate black-white and color hard copy taken from the image on an
original video monitor screen in which the hard copy reproduced image more
accurately maintains the relative and absolute tonal scale of gray tones . . .
regardless of the distortions or inaccuracy of that original screen image as
compared to an ideal image or the object from which the image is taken." Patent
No. 5,345,315, col. 3:50-58.

            Claim 13 of the '315 patent, the only claim pressed in the briefs
and at argument, is typical of the patent claims allegedly infringed by the
defendant.(1) See Plaintiffs' Memorandum in Opposition to Defendant's Motion for
Summary

----------

            (1) The plaintiffs acknowledge that the "date and place of the
conception of the each of the patents-in-suit is the same." Plaintiffs' Hanoch
Shalit and Imatec, Ltd.'s Supplemental Responses to Apple Computer's
Interrogatory Nos. 21 et seq., at 3. The plaintiffs also acknowledge that "the
actual reduction to practice of the '581 and '315 Patents was in November 1987."
Plaintiffs' Supplemental Responses to Defendant's Interrogatory No. 79, at 1.


                                     - 5 -
<PAGE>

Judgment, at 11. Claim 13 of the `3l5 patent claims a "method of producing a
series of color hard copy images which are accurate reproductions of the colors
of video images on a video monitor screen without affecting the video monitor
screen images." Id., col. 17:58-61. Claim 13 of the '315 patent includes the
steps of:

      forming a test video image on the screen of the video monitor, measuring
      the colors of the test image on the monitor screen using an electronic
      meter to provide a set of monitor screen color values, and entering the
      set of monitor screen values into a computer;

      forming a test image on the hard copy using a hard copy printing system,
      said printing system including electronic means to vary the control
      signals to control the color intensity printed by said printing system on
      a dot-by-dot basis, the hard copy test image having predetermined colored
      areas including defined areas differing color intensities; [and,]

      printing said hard copy test image to produce a color printed image of
      said hard copy test image using the same batch of hard copy color
      reproduction materials as will be thereafter used by the printing system
      to print the images from the video monitor; sensing the color differences
      on the hard copy test image using a photoelectric densitometer and
      entering the sensed color differences into the computer; comparing said
      entered hard copy color difference values with the set of monitor color
      values stored in computer memory; using the computer to calculate and
      generate a set of corrections to said control signals for each color value
      for each dot printed by said printing system based on the said comparison,
      and altering the colors printed by said printing system according to said
      set of computer produced corrections using the electronic means of said
      printing system.

Id., cols. 17:63-18:25.

            Under the heading "Summary of the Invention," the '315 patent
provides further description of the claimed invention. According to this
description, after the hard copy test pattern


                                     - 6 -
<PAGE>

is printed, the hard copy test pattern is measured by a densitometer. The
densitometer's output is then

      entered into the computer. The computer, using its look-up table memory,
      will determine the required compensation on a dot-by-dot basis. . . The
      computer memory includes a 'standard' set of density values corresponding
      to the luminance values for each tone. That 'standard' set is obtained by
      measuring the luminances on the original monitor screen using a spot
      photometer, of a tonal test pattern. . . Those standard values are
      compared to the actual values, from the densitometer, to provide the
      required compensation.

Id., cols. 4:55-5:15. The comparison used to generate the "required
compensation" is, according to the specifications, a subtractive function. See
id., cols. 9/10:40-64 (stating that corrected pixel value is "obtained from"
"calc. col. 7 minus 5"). The specifications also disclose that when the claimed
invention is used to correct a color (as opposed to black-and-white) image, the
three primary color components--red, green, and blue--are "separately
corrected." Id., col. 15:62-63; see also id., figs. 8A-C.

            The '315 patent discloses subject matter not previously disclosed in
either the parent '581 patent or the '229 patent. In particular, the
specification of the '315 patent discloses in detail the method by which color,
as opposed to black-and-white, images are to be matched. See id. cols.
14:61-16:6, figs. 8A-C, 9; see also Defendant Apple Computer, Inc.'s Revised
Supplemental Statement Pursuant to S.D.N.Y. Civ. R. 56.1(a), Paragraphs 51-52;
Plaintiffs' Response to Defendant Apple Computer, Inc.'s Supplemental Statement
Pursuant to S.D.N.Y. Civ. R. 56.1(a), Paragraphs 51-52; compare U.S. Patent No.
5,345,315, cols. 14:61-16:6,


                                     - 7 -
<PAGE>

figs. 8A-C, 9, with U.S. Patent No. 4,939,581, col. 11:15-35.

            In order to obtain the patents-in-suit, Dr. Shalit was required by
the United States Patent and Trademark Office ("PT0") to amend his claims and to
distinguish his claimed invention from prior art. The PTO initially rejected
what was to become the '581 patent on the grounds that the claimed invention was
anticipated by U.S. Patent No. 4,757,334 (the "Volent" patent). See Rejection,
Ser. No. 07/275,218 (Sept. 11, 1989), at 4-7. In response, Dr. Shalit amended
his claim. Whereas his original application compared the density values of the
hard copy test image with "predetermined numerical correction values," the
amended application compared the density values of the hard copy test image with
"monitor gray scale luminance values." Amendment, Ser. No. 07/275,218 (Dec. 5,
1989), at 3.

            The PTO also initially rejected what was to become the '315 patent,
citing among other grounds the prior art disclosed by U.S. Patent No. 4,794,460
(the "Shiota" patent). See Rejection, Ser. No. 07/855,619 (May 21, 1993), at 5.
In response, Dr. Shalit distinguished his invention from the Shiota patent,
noting that: (i) "Shiota compares his hard copy with a standard--not with the
monitor gray scale luminance values"; (ii) "Shiota points away from applicant's
use of the monitor screen as the target--by using another standard for both the
screen and the hard copy"; and, (iii) "applicant's system is completely
objective, measurement alone determines the output of the system based on the
absolute (not operator manipulated) constant image


                                     - 8 -
<PAGE>

characteristics at the time of the monitor image (original) measurements."
Amendment, Ser. No. 07/855,619 (Sept. 21, 1993), at 10, 14 (emphasis in
original).

                                       C.

            Prior to applying for the patents-in-suit, Dr. Shalit was employed
by FONAR Corporation ("FONAR"), a manufacturer of magnetic resonance imaging
("MRI") equipment. Dr. Shalit began working for FONAR on June 29, 1987 as head
of FONAR's Photographic Physics Department. See Letter from Jeanne F. Riviezzo,
dated August 1, 1988. Dr. Shalit was an employee of FONAR until November 14,
1988, when he became president of Fonar Photographic Services, a service entity
legally distinct from FONAR. See Letter from Carin Andersen Perez, dated
December 3, 1988. After leaving FONAR's direct employ, Dr. Shalit remained a
consultant to FONAR until December 26, 1989. See Letter from Carin Andersen
Perez, dated September 26, 1989; Deposition of Dr. Hanoch Shalit ("Shalit
Depo."), at 24.

            FONAR hired Dr. Shalit to help FONAR develop a system that would
produce an accurate photographic reproduction of an MRI-generated image as that
image appeared on a video monitor. See Deposition of Anthony Giambalo ("Giambalo
Depo."), at 48:5-13; see also Deposition of Dr. Raymond Damadian ("Damadian
Depo."), at 10:6-25. While employed at FONAR, Dr. Shalit developed the "Perfect
Image System." See Shalit Depo., at 24:7-16; see also Declaration of Hanoch
Shalit, dated February 11, 1999, Paragraph 9. According to literature produced
by FONAR, the


                                     - 9 -
<PAGE>

Perfect Image System was "designed to produce film images identical in tone
reproduction to images displayed on your display system." Perfect Image System
User Guide Supplement, at 1.

            As a condition of his employment by FONAR, Dr. Shalit was required
to enter an "Agreement with Respect to Assignment of Inventions and Confidential
Information" ("Inventions Agreement"). The Inventions Agreement signed by Dr.
Shalit provides as follows:

      I agree to assign, and hereby do assign, to FONAR . . . all my rights to
      inventions which I have made or conceived or which I may hereafter make or
      conceive, either solely or jointly with others, in the course of [my]
      employment [by FONAR], or with the use of the time, material or facilities
      of FONAR, or relating to any product, method, substance, machine, article
      of [ ] manufacture or improvements therein within the scope of the
      business of said FONAR . . . .

Agreement with Respect to Assignment of Inventions and Confidential Information,
dated April 29, 1987, at 5-6. By its terms, the Inventions Agreement excludes
certain inventions from its reach, thereby leaving to Dr. Shalit the rights to
those inventions. In particular, the Inventions Agreement excludes patents
issued prior to Dr. Shalit's employment by FONAR and such inventions as Dr.
Shalit listed in a blank space provided for the purpose. See id., at 6. In the
space provided for the listing of excluded inventions, Dr. Shalit wrote:
"photographic video recording for keeping records of video tape content."(2) Id.

----------
            (2) Although the last word of the handwritten exclusion is difficult
to decipher, the parties agree that it is "content." In the same space, Dr.
Shalit also wrote "single step laser


                                     - 10 -
<PAGE>

            The plaintiffs admit that the inventions claimed in the '581 and
'315 patents were reduced to practice in November 1987, while Dr. Shalit was
employed by FONAR. See Plaintiff's Supplemental Responses to Defendant's
Interrogatory No. 79 ("Pl. Supp. Resp. Def. Inter. 79"), at 1. The plaintiffs
further admit that the inventions claimed in the '581 patent, and some of those
claimed in the '315 patent, were reduced to practice at FONAR. See Plaintiffs
Imatec Ltd. and Hanoch Shalit's Responses to Defendant Apple Computer, Inc.'s
Third Set of Requests for Admission to Plaintiffs ("Pl. Resp. Def. 3d Req.
Ad."), Paragraphs 64, 66.

            While he was a FONAR employee, Dr. Shalit wrote a "Summary
Description of Invention" entitled "Optimum Tone, Luminance and Color
Reproduction of an Object," which Dr. Shalit describes as a description of the
three patents-in-suit. See Summary Description of Invention, dated November 8,
1987; Shalit Depo., 261:9-22. Dr. Shalit admits that he was "involved in
writing" the patent applications that culminated in the '581, '229, and '315
patents while employed at FONAR, but he denies that the patents were written on
behalf of FONAR. See Shalit Depo., 64:24-65:15. The '581 patent was filed on
November 23, 1988, which is nine days after Dr. Shalit left FONAR's direct
employment. See U.S. Patent No. 4,939,581.

                                       D.
----------
printing." The parties agree that the latter exclusion has no bearing on this
case.


                                     - 11 -
<PAGE>

            Plaintiff Imatec, Ltd. is a Delaware corporation with its principal
place of business in New York. Complaint Paragraph 1. Dr. Shalit has been
Imatec's president and chairman since Imatec's founding. See Shalit Depo., at
110. In 1994, Dr. Shalit assigned his rights in the '581 patent and in any
continuation-in-part of the '581 patent to Imatec. See Assignment, dated
February 16, 1994. In 1995, Imatec reassigned its rights in the '581, '229, and
'315 patents back to Dr. Shalit in exchange for $1 and an exclusive licensing
agreement. See Assignment, dated July 10, 1995; Exclusive License Agreement,
made as of June 25, 1995.

                                       E.

            The defendant, Apple Computer, Inc., manufactures and sells the
accused technology, ColorSync. ColorSync is software that is "used as part of a
color management system to match color images on various peripheral devices
(e.g., scanners, monitors, printers) connected to a computer." Declaration of
Steve Swen, dated April 12, 1999 ("Swen Decl."), Paragraph 5; see also
Complaint, Paragraph 10. ColorSync is incorporated into Apple's operating
system, which is in turn sold separately or in conjunction with an Apple
computer. See Swen Decl., Paragraph 6.

            ColorSync employs so-called "device profiles," which "are computer
files of data that contain information about a device's color capability." Id.,
Paragraph 9. These device profiles "correlate device-dependent control levels of
an imaging device to an objective, three-dimensional, device-independent color


                                     - 12 -
<PAGE>

space." Defendant Apple Computer, Inc.'s Revised Supplemental Statement
Pursuant to S.D.N.Y. Civ. R. 56.1(a), Paragraph 15; see also id., Paragraphs
11-14; Plaintiffs' Response to Defendant Apple Computer, Inc.'s Supplemental
Statement Pursuant to S.D.N.Y. Civ. R. 56.1(a), Paragraphs 11-14, 15; Stone
Decl., Paragraphs 72-73; Swen Decl. Paragraph 16-19. That is to say, device
profiles enable the translation of the device-dependent RGB or CYMK values
associated with a given electronic output device to and from device-independent
values such as those defined by the CIE XYZ color space.

            ColorSync is shipped with "default" device profiles. Swen Decl.,
Paragraph 12. A default device profile "provides color information for a device
model, not for a particular device." Id. (emphasis in original). Default device
profiles, at least those for computer monitors, are usually generated from "the
manufacturer's specification, not from measurement." Id., Paragraph 25.
However, a ColorSync user can also create device profiles using third party
measurement instruments. Id., Paragraphs 13-14. When a user creates a device
profile for a monitor by making actual measurements of a particular device, the
"measurements are not input into a monitor profile directly but instead are
subject to transformations and normalizations." Id., Paragraph 26.

            Although device profiles enable the translation of device-dependent
values into and out of device-independent color space, the actual translation is
performed by a so-called Color Matching Module ("CMM") that is embedded within
ColorSync. See id., Paragraphs 8-9, 28. Using the information that is contained
within


                                     - 13 -
<PAGE>

the device profile of the output device displaying the source image, the CMM
translates that device's device-dependent representation of the image into a
device-independent representation of the image. Then, using the information that
is contained within the device profile of the destination output device, the CMM
translates the device-independent representation of the image into a
representation expressed in terms of the device-dependent values of the
destination output device. See id., Paragraph 28.

            ColorSync is designed such that "all components of a color in a
picture (e.g., RGB, CMYK)" are transformed simultaneously, not separately. Id.,
Paragraph 24; see also Stone Decl., Paragraph 69. By allowing users to select
from among alternative "rendering intents," ColorSync permits a user to
subjectively control how a given source image will ultimately appear when
displayed on an electronic output device. See Swen Decl., Paragraph 29.

                                       II.

                                       A.

            The defendant, Apple, moves to dismiss the action on the grounds
that the plaintiffs lack standing. As the United States Court of Appeals for the
Federal Circuit has stated, "[t]he question of standing to sue is a
jurisdictional one." Rite-Hite Corp. v. Kelley Co., 56 F.3d 1538, 1551 (Fed.
Cir. 1995) . See also In re Gucci, 126 F.3d 380, 387-88 (2d Cir. 1997) ("Whether
a claimant has standing is 'the threshold question in


                                     - 14 -
<PAGE>

every federal case, determining the power of the court to entertain the suit.'")
(quoting Warth v. Seldin, 422 U.S. 490, 498 (1975)). Because it is they who seek
to invoke federal jurisdiction, the plaintiffs bear the burden of establishing
standing. See Lujan v. Defenders of Wildlife, 504 U.S. 555, 561 (1992); see also
Jaghory v. New York State Dept. of Educ., 131 F.3d 326, 329 (2nd Cir. 1997)
("The party seeking to invoke the jurisdiction of the court bears the burden of
establishing that he has met the requirements of standing."); Ortho
Pharmaceutical Corp. v. Genetics Institute, Inc., 52 F.3d 1026, 1032-33 (Fed.
Cir. 1995).

            In general, the district court must accept the allegations contained
in the complaint as true for purposes of deciding a motion to dismiss. See Cohen
v. Koenig, 25 F.3d 1168, 1172-73 (2d Cir. 1994). When a motion to dismiss
challenges the court's jurisdiction, however, the district court may look beyond
the allegations of the complaint. "Fact-finding is proper when considering a
motion to dismiss where the jurisdictional facts in the complaint . . . are
challenged." Moyer v. United States, 190 F.3d 1314, 1318 (Fed. Cir. 1999). See
also Reynolds v. Army and Air Force Exch. Serv., 846 F.2d 746, 747 (Fed. Cir.
1988) ("If a motion to dismiss for lack of subject matter jurisdiction . . .
challenges the truth of the jurisdictional facts alleged in the complaint, the
district court may consider relevant evidence in order to resolve the factual
dispute."). Indeed, the district court may be required to consider evidence
outside the complaint


                                     - 15 -
<PAGE>

when a party challenges the court's jurisdiction. The Court of Appeals for the
Second Circuit has recently stated that "[w]here jurisdictional facts are placed
in dispute, the court has the power and obligation to decide issues of fact by
reference to evidence outside the pleadings, such as affidavits." LeBlanc v.
Cleveland, No. 97-9389, 1999 WL 1138523, at *2 (2d Cir. Dec. 9, 1999). See also
Filetech S.A. v. France Telecom S.A., 157 F.3d 922, 932 (2d Cir. 1998) ("In view
of the foregoing factual disputes, it was error for the district court to accept
the mere allegations of the complaint as a basis for finding subject matter
jurisdiction.").

            Regardless of whether such fact-finding is obligatory or merely
permissible, it is clear that the district court "may dismiss a facially
sufficient complaint for lack of subject-matter jurisdiction if the court finds,
based on affidavits or other evidence outside the complaint, that the asserted
basis for federal jurisdiction is not sufficient." RAD Data Communications, Inc.
v. Patton Electronics Co., 882 F. Supp. 351, 352 (S.D.N.Y. 1995) (dismissing
patent infringement action on grounds that plaintiff did not have legal title to
patent-in-suit at time of alleged infringement).

            Under certain limited circumstances, not alleged to be present here,
the exclusive licensee of a patent may have standing to bring an infringement
action. See Textile Productions, Inc. v. Mead Corp., 134 F.3d 1481, 1483 (Fed.
Cir. 1998) In general, however, only the owner of a patent has


                                     - 16 -
<PAGE>

standing to sue for infringement of the patent. See Rite-Hite, 56 F.3d at 1551
("Generally, one seeking money damages for patent infringement must have held
legal title to the patent at the time of the infringement."); see also Arachnid,
Inc. v. Merit Industries, Inc., 939 F.2d 1574, 1579 (Fed. Cir. 1991). Thus, to
establish standing, the plaintiffs must demonstrate that Dr. Shalit or Imatec
hold title to the patents-in-suit.

            The present assignment of a future invention divests the
inventor-assignor of ownership of the invention and automatically vests
ownership of the invention, when invented, in the assignee. See FilmTec Corp. v.
Allied-Signal, Inc., 939 F.2d 1568, 1573 (Fed. Cir. 1991) (where contract grants
rights in any future inventions to assignee, "[o]rdinarily, no further act would
be required once an invention came into being" because "the transfer of title
would occur by operation of law"); cf. Arachnid, 939 F.2d at 1580-81
(distinguishing between present assignment of expectant interest in future
invention and mere promise to assign rights in future invention).

            Once an inventor has assigned the rights in a future invention,
neither the inventor nor a subsequent assignee of the inventor has standing to
sue for infringement of a patent arising from the assigned invention. In
FilmTec, the plaintiff, who was suing for patent infringement, had been assigned
the rights in the patent by the inventor. The inventor had, however, been
employed by a third party at or near the time of the invention. It was, on the
record before the court, unclear whether the


                                     - 17 -
<PAGE>

inventor had, prior to his invention (and prior to his assignment of his rights
therein to the plaintiff), already assigned the rights in his invention to his
employer. Although the case was remanded for further fact-finding, the court
held that "if [the employee-inventor] granted [the employer] rights in
inventions made during his employ, and if the subject matter of the
[patent-in-suit] was invented by [the employee-inventor] during his employ with
[the employer], then [the employee-inventor] had nothing to give to [the
plaintiff] and his purported assignment to [the plaintiff] is a nullity." See
FilmTec, 939 F.2d at 1572. Were that the case, the court concluded, the
plaintiff "would lack both title to the [patent-in-suit] and standing to bring
the present action."(3) Id.

            (3) The plaintiffs attempt to distinguish FilmTec on the grounds
that there was an allegation that the inventor's employer had granted to the
Government rights in any future invention. However, that was not the
determinative issue in the case. As the Court of Appeals explained: "[T]he issue
here is not whether title lies in the Government or some other third party; it
is rather whether [the plaintiff] has made a sufficient showing to establish
reasonable likelihood of success on the merits, which includes a showing that
title to the patent and the rights thereunder are in [the plaintiff]." FilmTec,
939 F.2d at 1573.
            The plaintiffs' effort to distinguish FilmTec on the basis of
FilmTec Corp. v. Hydranautics, 982 F.2d 1546 (Fed. Cir. 1992) ("Hydranautics"),
is also misplaced. The Hydranautics Court held that the plaintiff could not
maintain its infringement action because, on the facts of the case, ownership of
the claimed invention rested with the United States Government, not the
plaintiff. The court found that the claimed invention had been conceived while
the inventor was employed by an entity under contract to the Government. The
contract, governed by particular federal statutes, assigned all rights to
inventions conceived in the course of the contract to the Government. The
inventor's subsequent assignment of the invention to the plaintiff was therefore
ineffective. Hydranautics neither calls the FilmTec rule into question nor
limits its application to situations involving assignments to the Government.


                                     - 18 -

<PAGE>

                                       B.

            Apple contends that title to the patents-in-suit rests with FONAR,
and that the plaintiffs therefore lack standing to bring this action. There can
be no doubt that the Inventions Agreement between Dr. Shalit and FONAR
constituted a present assignment by Dr. Shalit to FONAR of future inventions.
The agreement states: "I agree to assign, and hereby do assign, to FONAR ...
all my rights to inventions which I have made or conceived or which I may
hereafter make or conceive ..." Inventions Agreement, at 5. This language is
that of a present assignment, not of a mere promise to assign. The rights to any
invention covered by the Inventions Agreement therefore vested in FONAR rather
than Dr. Shalit, and neither Dr. Shalit nor Imatec, as a subsequent assignee,
has standing to enforce a patent that arises from a covered invention. See
FilmTec, 939 F.2d at 1572-73. Thus, whether the plaintiffs have standing depends
upon whether the patents-in-suit are subject to the Inventions Agreement.

            The Inventions Agreement covers: all inventions "made or conceived
or which [Shalit] may hereafter make or conceive ... in the course of [Shalit's]
employment [by FONAR];" all inventions made or conceived "with the use of the
time, material or facilities of FONAR;" and all inventions "relating to any

----------

            Similarly, the history of FilmTec after remand and another appeal
does not change the law as explained in the original FilmTec decision. The
subsequent opinion by the Court of Appeals has been designated as not citable as
precedent.


                                     - 19 -
<PAGE>

product, method, substance, machine, article of [] manufacture or improvements
therein within the scope of the business of said FONAR." Inventions Agreement,
at 5-6. There is no dispute that the `581 patent relates precisely to the work
for which Dr. Shalit was hired by FONAR. See Damadian Depo., 34:14-16; Giambalvo
Depo., 48:5-13; Shalit Depo., 47:22-49:10, 247:20-25, 256:12-18; Imatec, Ltd. v.
Apple Computer. Inc., No. 98 Civ. 1058, Hearing, at 8 (S.D.N.Y. December 16,
1999). Nor is there any dispute that the `58l and `3l5 patents were reduced to
practice while Dr. Shalit was a FONAR employee. See P1. Supp. Resp. Def. Inter.
79, at 1. Moreover, Dr. Shalit acknowledges that the invention protected by the
'58l patent was reduced to practice at FONAR with the assistance of another
FONAR employee. See P1. Resp. Def. 3d Req. Ad., Paragraph 64; Shalit Depo.,
24:7-20, 47:7-48:22. Thus, because it was made in the course of Dr. Shalit's
employment by FONAR, at FONAR, and with the assistance of another FONAR
employee, and because it is within the scope of FONAR's business, there can be
no doubt that the invention described in the `581 patent is covered by the
Inventions Agreement. Similarly, it is clear that the invention described in the
`3l5 patent is also covered by the Inventions Agreement: The invention described
in the `315 patent, which is a continuation-in-part of the `58l patent, was
reduced to practice while Dr. Shalit was employed at FONAR and relates to
improvements in a product within the scope of FONAR's business. The `229 patent,
which is also a continuation-in-part of the `581


                                     - 20 -
<PAGE>

patent and also relates to improvements in the products and methods that were
within the scope of FONAR's business, is likewise covered by the Inventions
Agreement.

            The inventions described in the patents-in-suit are thus plainly
within the scope of the terms of the Inventions Agreement. The plaintiffs argue,
however, that the inventions are in fact exempt from the Inventions Agreement by
virtue of the handwritten exclusion of "photographic video recording for keeping
records of video tape content." Inventions Agreement, at 6. This exclusion,
however, does not describe the inventions covered by the patents-in-suit. On its
face, the exclusion applies to keeping records of video tape content. The
patents-in-suit are neither about record keeping nor about video tape content.
Rather, the patents make clear that they concern a method and system for the
accurate reproduction of the tone and luminance of a monitor display. Dr.
Shalit's employer testified that he would not have excluded from the Inventions
Agreement the very work that Dr. Shalit was hired to perform, which is in fact
the subject of the patents-in-suit. See Damedian Depo., 11:2-9, 14:13-24. It is,
however, unnecessary to rely on this testimony because the plain language of the
exclusion does not cover the patents-in-suit.

            The patents-in-suit make only passing reference to video tape
content. The inventions described by the patents-insuit match a hard copy
reproduction `581 and `315) or a secondary monitor image (`229) to an image on a
primary monitor.


                                     - 21 -
<PAGE>

The source of the primary image may or may not be video tape.(4) See U.S. Patent
No. 4,939,581, col. 4:47-49 ("The system, in one embodiment, uses a video
source, such as a computer graphics output, VCR or video camera to produce an
image on a CRT monitor."); see also U.S. Patent No. 5,115,229, col. 3:63-66;
U.S. Patent No. 5,345,315, col. 4:48-50. But even where video tape is the source
of the video image on the primary monitor, each patent-in-suit is concerned with
matching a hard copy reproduction or secondary monitor image to the image on the
primary monitor, not to the underlying source of the primary monitor image.
Thus, in substantially the same language, every asserted claim involves a system
for producing either "accurate tone reproductions of the luminance ratios of the
video images on a video monitor" or "accurate reproductions of the colors of
video images on a video monitor screen." See. e.g., U.S. Patent Nos. 4,939,581,
col. 13:3-6; 5,345,315, col. 17:58-61.

            Under the heading "Objectives and Features of the Invention," the
`315 patent states:

----------

      (4) Indeed, although each patent-in-suit describes (under the heading
"Background of Invention") various situations in which the claimed invention is
applicable, none mentions record keeping of video tape content as such a
situation. See U.S. Patent Nos. 4,939,581, col. 1:12-44; 5,115,229, col.
1:19-40; 5,345,315, col. 1:22-56. That the nature of the video source is
irrelevant to the claimed inventions is underscored by the fact that: (i) the
diagrams accompanying the patents refer only to a generic "video source,"
without specifying the nature of that video source; and, (ii) the detailed
descriptions of the inventions make no reference to the video source at all. See
U.S. Patent Nos. 4,939,581, figs. 1, 3, col. 5:64-9:47; 5,115,229, figs. 1A-B,
col. 5:19-8:38; 5,345,315, figs. 1, 3, 9, col. 6:34-11:28.


                                     - 22 -
<PAGE>

      It is an objective of the present invention to provide a more accurate
      black-white and color hard copy taken from the image on an original video
      monitor screen in which the hard copy reproduced image more accurately
      maintains the relative and absolute tonal scale of gray tones as in the
      original video screen[] regardless of the distortions or inaccuracy off
      that original screen image as compared to an ideal image or the object
      from which the image is taken.

U.S. Patent No. 5,345,315, col. 3:50-58 (emphasis added). The italicized passage
makes clear that the patented invention matches an output image to the image
displayed on a monitor rather than to the underlying source of the monitor
display. The inventions described in the patents-in-suit, to the extent they
involve record keeping at all, involve keeping records of monitor displays, not
of video tape content.

            Because the inventions described in the patents-in-suit do not
involve "keeping records of video tape content," they do not fall under the
exclusion to the Inventions Agreement between Dr. Shalit and FONAR. The
inventions described in the patents-in-suit, therefore, fall under the
Inventions Agreement and are not excluded from it, and all rights in the
inventions were assigned by Dr. Shalit to FONAR in the Inventions Agreement.
Because Dr. Shalit assigned his rights in the inventions to FONAR, neither he
nor Imatec, which claims its rights through Dr. Shalit, have standing to
maintain the current infringement action. See FilmTec, 939 F.2d at l572-73.(5)

----------

      (5) The plaintiffs also assert that the defense of lack of standing is
barred by the statute of limitations. That argument has no merit. First, the
defendant asserts a defense of lack of standing because the plaintiffs have no
legal title to the


                                     - 23 -
<PAGE>

                                      III.

                                       A.

            Even if the plaintiffs had standing, the defendant is still entitled
to summary judgment dismissing the action on the ground that the defendant's
system does not infringe the asserted claims. Infringement analysis is a
two-step process: "The first step is determining the meaning and scope of the
patent claims asserted to be infringed. The second step is comparing the
properly construed claims to the device accused of infringing." Markman v.
Westview Instruments, Inc., 52 F.3d 967, 976 (Fed. Cir. 1995) (en banc)
(citation omitted), aff'd 517 U.S. 370 (1996)

            Claim construction, the first step in infringement analysis, is a
matter of law. "The interpretation and construction of patent claims, which
define the scope of the patentee's rights under the patent, is a matter of law
exclusively for the court." Id., at 970-71. When the court interprets a patent,
"[c]laims are to be read and construed in

----------

patents-in-suit. The plaintiffs cite no viable authority for the proposition
that such a defense is limited by any statute of limitations; a statute of
limitations generally applies to claims and counterclaims, not to a defense of
lack of standing. The issue of any limitations on FONAR's rights to the patents
should be decided in a suit in which FONAR sought to assert its rights to any
inventions that Dr. Shalit assigned to it. Second, FONAR's rights have not in
fact lapsed since there is no allegation that FONAR has exercised its rights to
require Dr. Shalit to execute the necessary documents to obtain the patents. The
statute of limitations on FONAR's rights would only begin to run at that point
if Dr. Shalit refused to assign the patents. See Goldwasser v. Smith Corona
Corp., 817 F. Supp. 263, 271-72 (D. Conn. 1993), aff'd 26 F.3d 137 (Fed. Cir.
1994).


                                     - 24 -
<PAGE>

light of the specification and the prosecution history of the patent." ACS Hosp.
Systems, Inc. v. Montefiore Hosp., 732 F.2d 1572, 1577 (Fed. Cir. 1984). See
also Markman, 52 F.3d at 980. When possible, claims should be construed in a
manner that sustains their validity. See ACS Hosp. Systems, 732 F.2d at 1577. In
particular, "claims should be read in a way that avoids ensnaring prior art if
it is possible to do so." Harris Corp. v. IXYS Corp., 114 F.3d 1149, 1153 (Fed.
Cir. 1997). When construing a patent claim, a court may consider extrinsic
evidence, including "expert and inventor testimony, dictionaries, and learned
treatises," so that the court may come "`to a correct conclusion' as to the
`true meaning of the language employed' in the patent." Markman, 52 F.3d at 980
(quoting Seymour v. Osborne, 78 U.S. (11 Wall.) 516, 546 (1871)).

            The plaintiffs allege that the defendant is liable for patent
infringement under several theories. First, the plaintiffs allege that the
defendant has directly infringed the patents at issue. Direct infringement is
barred by 35 U.S.C. ss. 271(a), which provides that "whoever without authority
makes, uses, offers to sell, or sells any patented invention, within the United
States ... during the term of the patent therefor, infringes the patent." To be
liable for literal, direct infringement, a defendant must duplicate each element
of a patent claim exactly. "Literal infringement requires that the accused
device contain each limitation of the claim exactly; any deviation from the
claim precludes a finding of literal


                                     - 25 -
<PAGE>

infringement. "Litton Systems, Inc. v. Honeywell, Inc., 140 F.3d 1449, 1454
(Fed. Cir. 1998). See also Johnston v. IVAC Corp., 885 F.2d 1574, 1580 (Fed.
Cir. 1989) ("Where a claim does not read on an accused device exactly, there can
be no literal infringement.").

            In the alternative, the plaintiffs rely on the judicially created
"doctrine of equivalents." "A device that does not literally infringe a claim
may nonetheless infringe under the doctrine of equivalents if every element in
the claim is literally or equivalently present in the accused device." Sage
Products, Inc. v. Devon Industries, Inc., 126 F.3d 1420, 1423 (Fed. Cir. 1997)
(citing Pennwalt Corn. v. Durand-Wayland, Inc., 833 F.2d 931, 934-35 (Fed. Cir.
1987) (en banc)). To infringe under the doctrine of equivalents, the accused
device must "contain each limitation of the claim or its equivalent." Overhead
Door Corp. v. Chamberlain Group, Inc., 194 F.3d 1261, 1269 (Fed. Cir. 1999)
(citing Warner-Jenkinson Co. v. Hilton Davis Chem. Co., 520 U.S. 17, 40 (1997)).
"An element in the accused product is equivalent to a claim element if the
differences between the two are 'insubstantial' to one of ordinary skill in the
art." Id., 194 F.3d at 1269 (quoting Warner-Jenkinson, 520 U.S. at 39-40).

            In order that patents retain their public notice function, certain
limits have been placed on the doctrine of equivalents. See K-2 Corp. v. Salomon
S.A., 191 F.3d 1356, 1366-67 (Fed. Cir. 1999); Sextant Avionique, S.A. v. Analog
Devices,


                                     - 26 -
<PAGE>

Inc., 172 F.3d 817, 831 (Fed. Cir. 1999); Ethicon Endo-Surgery, Inc. v. U.S.
Surgical Corp., 149 F.3d 1309, 1316 (Fed. Cir. 1998) . Thus, under the so-called
"all-elements" rule, "the doctrine of equivalents must be applied to individual
elements of the claim, not to the invention as a whole." Warner-Jenkinson, 520
U.S. at 29. Similarly, the concept of prosecution history estoppel limits the
range of possible equivalents. "Prosecution history estoppel prevents operation
of the doctrine of equivalents from expanding a claim limitation to include
subject matter surrendered during the patent's prosecution." Elkay Mfg. Co. v.
Ebco Mfg. Co., 192 F.3d 973, 981 (Fed. Cir. 1999).

            By force of prosecution history estoppel, "a patentee is estopped
from recovering through equivalency that which was deemed unpatentable in view
of the prior art." Pall Corp. v. Micron Separations. Inc., 66 F.3d 1211, 1219
(Fed. Cir. 1995). "In other words," the Court of Appeals has explained,

      when an applicant, in response to an examiner's prior art rejection,
      amends a claim by substituting one limitation for another, the applicant
      cannot later assert that the original limitation is an equivalent of the
      substituted limitation. Thus, the doctrine prevents the applicant from
      completely recapturing the subject matter rejected by the examiner. In
      addition, when an applicant narrows a claim element in the face of an
      examiner's rejection based on the prior art, the doctrine estops the
      applicant from later asserting that the claim covers, through the doctrine
      of equivalents, features that the applicant amended his claim to avoid....
      In addition, ... an applicant's arguments may constitute a clear and
      unmistakable surrender of subject matter. Such arguments preclude
      recapture of that subject matter.

Litton Systems, 140 F.3d at 1462. "Whether estoppel applies is a question of
law." Wang Laboratories, Inc. v. Mitsubishi


                                     - 27 -
<PAGE>

Electronics America, Inc., 103 F.3d 1571, 1578 (Fed. Cir. 1997).

            The plaintiffs also allege contributory infringement. See 35
U.S.C.ss.271(c). But, direct infringement, whether literal or by equivalence,
must be proven before a defendant can be held liable for contributory
infringement or inducement to infringe. "Absent direct infringement of the
patent claims, there can be neither contributory infringement, nor inducement of
infringement." Met-Coil Systems Corp. v. Korners Unlimited, Inc., 803 F.2d 684,
687 (Fed. Cir. 1986) (citations omitted). See also Carborundum Co. v. Molten
Metal Equipment Innovations, Inc., 72 F.3d 872, 876 n.4 (Fed. Cir. 1995).

            Because prior art can invalidate a patent, see 35 U.S.C.ss.102, the
date on which a patent application is filed can be a significant fact in
determining the validity of a patent. Where an application is a
continuation-in-part ("CIP") of an earlier application, some claims in the CIP
application may receive different effective filing dates than other claims
therein because the CIP application may contain additional matter not disclosed
in the prior application. See Augustine Medical, Inc. v. Gaymar Industries,
Inc., 181 F.3d 1291, 1302 (Fed. Cir. 1999) . "Subject matter that arises for the
first time in the CIP application does not receive the benefit of the filing
date of the parent application." Id. When judging whether subject matter was
sufficiently disclosed in the parent application such that a claim contained in
an CIP application is entitled to the filing date of the parent application,
"[t]he fact finder must


                                     - 28 -
<PAGE>

determine if one skilled in the art, reading the original specification, would
immediately discern the limitation at issue in the parent" application. Waldemar
Link v. Osteonics Corp., 32 F.3d 556, 558 (Fed. Cir. 1994).

            Summary judgment may not be granted unless "the pleadings,
depositions, answers to interrogatories, and admissions on file, together with
the affidavits, if any, show that there is no genuine issue as to any material
fact and that the moving party is entitled to a judgment as a matter of law."
Fed. R. Civ. paragraph 56(c); see also Celotex Corp. v. Catrett, 477 U.S. 317,
322 (1986); Anderson v. Liberty Lobby. Inc., 477 U.S. 242, 247-48 (1986);
University of Colorado Foundation, Inc. v. American Cyanamid Co., Nos. 97-1468,
98-1113, 1999 WL 1045095, at *3 (Fed. Cir. 1999); Gallo v. Prudential
Residential Servs., Ltd. Partnership, 22 F.3d 1219, 1223 (2d Cir. 1994). In
determining whether summary judgment is appropriate, a court must resolve all
ambiguities and draw all reasonable inferences against the moving party. See
Matsushita Elec. Antis. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587
(1986) (citing United States v. Diebold, Inc., 369 U.S. 654, 655 (1962)); see
also University of Colorado Foundation, 1999 WL 1045095, at *3; Gallo, 22 F.3d
at 1223. Summary judgment is improper if there is any evidence in the record
from any source from which a reasonable inference could be drawn in favor of the
nonmoving party. See Chambers v. TRM Copy Ctrs. Corp., 43 F.3d 29, 37 (2d Cir.
1994). "In considering the motion, the court's responsibility is not to resolve
disputed


                                     - 29 -
<PAGE>

issues of fact but to assess whether there are factual issues to be tried."
Knight v. U.S. Fire Ins. Co., 804 F.2d 9, 11 (2d Cir. 1986).

            On a motion for summary judgment, once the moving party meets its
initial burden of demonstrating the absence of a genuine issue of material fact,
the nonmoving party must come forward with specific facts to show there is a
factual question that must be resolved at trial. See Fed. R. Civ. paragraph
56(e); see also Cornett v. Sheldon, 894 F. Supp. 715, 724 (S.D.N.Y. 1995)
("[T]he plaintiff, to avoid summary judgment, must show a genuine issue by
presenting evidence that would be sufficient, if all reasonable inferences were
drawn in his favor, to establish the existence of that element at trial.")
(citing Celotex, 477 U.S. at 322-23). The non-moving party must produce evidence
in the record and "may not rely simply on conclusory statements or on
contentions that the affidavits supporting the motion are not credible." Ying
Jing Gan v. City of New York, 996 F.2d 522, 532 (2d Cir. 1993). See also Applied
Companies v. United States, 144 F.3d 1470, 1475 (Fed. Cir. 1998) ("It is well
settled that `a conclusory statement on the ultimate issue does not create a
genuine issue of fact.'") (quoting Imperial Tobacco Ltd. v. Philip Morris, Inc.,
899 F.2d 1575, 1581 (Fed. Cir. 1990)); Scotto v. Almenas, 143 F.3d 105, 114-15
(2d Cir. 1998) (collecting cases).

                                       B.

            Claim 13 of the `315 patent is the only asserted claim


                                     - 30 -
<PAGE>

that has been pressed in the briefs and at argument. Claim 13 of the `315 patent
requires "measuring the colors of the test image on the monitor screen using an
electronic meter to provide a set of monitor screen color values, and entering
the set of monitor screen values into a computer." U.S. Patent No. 5,345,315,
col. 17:64-69. Claim 13 of the `315 patent also requires "forming a test image
on the hard copy using a hard copy printing system" and then "sensing the color
differences on the hard copy test image using a photoelectric densitometer and
entering the sensed color differences values into the computer." Id., col.
18:1-16. Claim 13 of the `315 patent further requires "comparing said entered
hard copy color difference values with the set of monitor color values stored in
computer memory" and then using the computer "to calculate and generate a set
of corrections ... for each color value for each dot printed by said printing
system based on the said comparison." U.S. Patent No. 5,345,315, col. 18:16-22.

            These elements are to be construed in light of their language, the
specification, and the prosecution history. Markman, 52 F.3d at 980. By its
terms, the claim instructs a person practicing the invention to enter measured
values into a computer. The specification does not disclose any transformation
that is to be performed on the measured values.(6) The patent's

----------

      (6) The specification does teach that the measurement results should be
expressed in terms of a log function:

      An accurate reproduction of the ratio of luminance values (gray scale)
      would occur when the density units


                                     - 31 -
<PAGE>

prosecution history underscores the importance of actual measurement in the
claimed method: Before obtaining the `315 patent, Dr. Shalit was required by the
PTO to distinguish his claimed invention from the prior art disclosed in the
Shiota patent. See Rejection, Ser. No. 07/855,619 (May 21, 1993), at 5. In so
doing, Dr. Shalit emphasized that actual measurements rather than transformed
values lay at the heart of his claimed method. Thus, Dr. Shalit noted that
"Shiota compares his hard copy with a standard--not with the monitor gray scale
luminance values" and that "applicant's system is completely objective,
measurement alone determines the output of the system based on the absolute (not
operator manipulated) constant image characteristics at the time of the monitor
image (original) measurements." Amendment, Ser. No. 07/855,619 (Sept. 21, 1993),
at 10, 14 (emphasis in original). Given the clear language of the claim, the
prosecution history, and the fact that the specification does not disclose any
transformation that is to be performed on the measured values prior to their
comparison, the "values" that are compared in the `315 method are, as a matter
of

----------

      on the hard copy directly correspond (linear relationship) to the gray
      scale on the monitor screen. The density units on the hard copy is a
      measure of the blackness of the printing (toner) on the hard copy. Density
      is defined as the log 1/reflectance of an opaque substrate, in this case
      the xerographic paper copy. The "screen luminance" is the brightness of
      the CRT screen ... and is measured in terms of "log screen luminance" to
      directly correspond to density which is also a log function.

U.S. Patent No. 5,345,315, col. 6:53-64.


                                     - 32 -
<PAGE>

law, actual measurement values.

            Furthermore, the specification of the `315 patent reveals that the
claimed comparison of the "hard copy color difference values with the set of
monitor color values" is performed by subtracting the first set of color values
from the second. See U.S. Patent No. 5,345,315, cols. 9/10:40-64 (stating that
corrected pixel value is "obtained from" "calc. col. 7 minus 5") . Thus, as a
matter of law, "comparing" in the asserted claim means subtracting.

            ColorSync, the accused product, does not compare by subtraction or
otherwise. Rather, ColorSync employs "device profiles" to translate the
representation of an image from the device-dependent values associated with one
electronic output device into device-independent values defined by CIE XYZ color
space, and then again to translate the device-independent representation of the
image into the device-dependent values associated with another electronic output
device. See Defendant Apple Computer, Inc.'s Revised Supplemental Statement
Pursuant to S.D.N.Y. Civ. R. 56.1(a), Paragraph 15; see also id. Paragraphs
11-14; Plaintiffs' Response to Defendant Apple Computer, Inc.'s Supplemental
Statement Pursuant to S.D.N.Y. Civ. R. 56.1(a) Paragraphs 11-14, 15; Stone Decl.
Paragraphs 72-73; Swen Decl. Paragraphs 16-19, 28. The device-dependent values
of the second output device, which may well be expressed in CMYK terms, are
never subtracted from or otherwise directly related to the device-dependent
values of the first output device, which may be expressed in RGB terms. Thus,


                                     - 33 -
<PAGE>

the method of subtractive comparison between the original source and the
destination device that is disclosed in the `315 patent is not used by
ColorSync.

            Moreover, unlike the method disclosed in the `315 patent, ColorSync
does not use actual measurement values without transformation. The default
device profiles that are shipped with ColorSync, at least those for computer
monitors, are usually generated from manufacturers' specifications rather than
from actual measurement. See Swen Decl., Paragraph 25. Even when a user creates
a device profile by making actual measurements, the "measurements are not input
into a monitor profile directly but instead are subject to transformations and
normalizations." Id., Paragraph 26.

            As noted above, Claim 13 of the `315 patent involves "using the
computer to calculate and generate a set of corrections ... for each color value
for each dot printed." U.S. Patent No. 5,345,315, col. 18:19-22. The
specifications reveal that "[e]ach color--red, green, and blue--"is separately
corrected." Id., col. 15:62. See also id., figs. 8A-C. Thus, as a matter of law,
"corrections ... for each color value" means the separate correction of each
primary color. Unlike the method of separate correction disclosed in the `315
patent, ColorSync transforms all of the colors in a source image simultaneously,
and not separately. See Swen Decl., Paragraph 24; ae.g also Stone Decl.,
Paragraph 69.


                                     - 34 -
<PAGE>

            Notwithstanding a few immaterial disagreements,(7) there is no
genuine dispute as to any of these material facts. In light of the undisputed
differences between the claims in the 315 patent and the ColorSync system, the
asserted claim "does not read on [the] accused device exactly" and therefore
"there can be no literal infringement." Johnston, 885 F.2d at 1580.

            There also is no infringement by equivalence. To overcome the PTO's
initial rejection of what ultimately became the `315 patent, Dr. Shalit
distinguished his invention from that claimed in the Shiota patent.(8) See
Rejection, Ser. No. 07/855,619 (May 21, 1993), at 5; Amendment, Ser. No.
07/855,619 (Sept. 21, 1993), at 10-14. In particular, Dr. Shalit emphasized that
"Shiota points away from applicant's use of the monitor screen as the target--by
using another standard for both the

----------

      (7) For example, in its 56.1 Statement, Apple states: "Color management
systems that use ColorSync perform a multidimensional transformation between a
source's device-dependent control levels and a destination's device-dependent
control levels." Defendant Apple Computer, Inc.'s Revised Supplemental Statement
Pursuant to S.D.N.Y. Civ. R. 56.1(a), Paragraph 12. The plaintiffs do not agree
with this statement on the grounds that there is "no agreed definition of
`multidimensional transformation.'" Plaintiffs' Response to Defendant Apple
Computer, Inc.'s Supplemental Statement Pursuant to S.D.N.Y. Civ. R. 56.1(a),
Paragraph 12. The plaintiffs do agree that color management systems like
ColorSync use an intermediate device-independent color space such as CIE XYZ or
CIE LAB. See Defendant Apple Computer, Inc.'s Revised Supplemental Statement
Pursuant to S.D.N.Y. Civ. R. 56.1(a), Paragraph 11; Plaintiffs' Response to
Defendant Apple Computer, Inc.'s Supplemental Statement Pursuant to S.D.N.Y.
Civ. R. 56.1(a), Paragraph 11.

      (8) Dr. Shalit similarly amended what became the `58l patent in response
to the PTO's initial rejection of that application. See Rejection, Ser. No.
07/275,218 (Sept. 11, 1989), at 4-7; Amendment, Ser. No. 07/275,218 (Dec. 5,
1989), at 3.


                                     - 35 -
<PAGE>

screen and the hard copy." Amendment, Ser. No. 07/855,619 (Sept. 21, 1993), at
10. This distinction underscores the fact that the asserted claim involves the
direct comparison of destination and source images without the mediation of
device-independent color space.(9) In light of this prosecution history, the
plaintiffs are, as a matter of law, now estopped from claiming that ColorSync's
transformation of an image through device-independent color space(10) is
equivalent to the subtractive

----------

      (9) In response to this motion, the plaintiffs argued that the
patents-in-suit, without using the exact term, disclose the use of device
profiles for the transformation of device-dependent values into
device-independent color space. But they fail to show where in the patents this
is described or how it could be derived from the patents. See Imatec. Ltd. v.
Apple Comnuter, Inc., No. 98 Civ. 1058, Hearing, at 34-39 (S.D.N.Y. December 16,
1999).

      (10) In their 56.1 Statement, the plaintiffs concede that "[c]olor
management systems that use ColorSync use an intermediate device-independent
color space." See Defendant Apple Computer, Inc.'s Revised Supplemental
Statement Pursuant to S.D.N.Y. Civ. R. 56.1(a), Paragraph 11; Plaintiffs'
Response to Defendant Apple Computer, Inc.'s Supplemental Statement Pursuant to
S.D.N.Y. Civ. R. 56.1(a), Paragraph 11. Similarly, at argument, plaintiffs'
counsel acknowledged that ColorSync uses CIE XYZ color space. See Imatec, Ltd.
v. Apple Computer, Inc., No. 98 Civ. 1058, Hearing, at 39 (S.D.N.Y. December 16,
1999) ("they are using XYZ"). However, in their brief, at another point at oral
argument, and in a letter dated January 11, 2000, the plaintiffs assert the
opposite, stating, for example, that "[i]n ColorSync, the CIE XYZ space is not
used in the processing of the image pixel values." Letter from Joseph Diamante
and Eliot S. Gerber, dated January 11, 2000, at 7 (emphasis in original). See
also Plaintiffs' Memorandum in Opposition to Defendant's Motion for Summary
Judgment, at 13 ("In both Shalit and ColorSync, the image pixel values pass from
the device-dependent monitor color space directly to the device-dependent
printer color space without going through a device-independent color space.");
Imatec, Ltd. v. Apple Computer, Inc., No. 98 Civ. 1058, Hearing, at 33-34
(S.D.N.Y. December 16, 1999) ("ColorSync is like the Shalit patents. There is no
transformation of the image pixels into XYZ space and then a second
transformation out of that space ...") One party's assertion of inconsistent
positions does not


                                     - 36 -
<PAGE>

comparison method disclosed in the `315 patent. See Elkay Mfg., 192 F.3d at 981;
Pall Corp., 66 F.3d at 1219.

            Were the `315 patent construed so as to claim the transformation of
images through device-independent color space, it would be rendered invalid by
prior art. See. e.g., U.S. Patent No. 4,941,038, cols. 2:9-31, 7:15-8:18 (the
"Walowit" patent). The Walowit patent, entitled "Method for Color Image
Processing," describes "a method for forming a full color image such that input
data relating to an original color image is processed so that an observer of the
output image will perceive close color correspondence between the two images."
Id., col. 1:11-15. In one embodiment, the Walowit patent discloses a method

      of converting input, preferably RGB, color data to output, preferably CMY,
      color data, wherein an input device is calibrated in a first calibration
      to an intermediate and preferably uniform color space. An output device is
      calibrated in a second calibration to the same uniform color space. The
      input RGB color data from the input device is collected, and is converted
      to uniform color space data in accordance with the first calibration. The
      uniform color space data is then converted to output CMY color data in
      accordance with the second calibration. Finally, the output CMY color data
      is outputted to the output device.

Id., col. 2:19-31. In light of the prior art," an

----------

create a genuine issue of fact that would preclude summary judgment,
particularly when the 56.1 Statements and other evidentiary submissions show
that there is no such issue.

      (11) The application for the Walowit patent was filed on January 13, 1989
as a continuation-in-part of a patent application filed on May 11, 1987. The
application for the `58l patent was filed on November 23, 1988. The application
for the `315 patent, which is a continuation-in-part of the `581 patent, was
filed on March 20, 1992. Thus, the application for the


                                     - 37 -
<PAGE>

interpretation of the `315 patent that was so expansive as to include the
transformation of images through device-independent color space would violate
the principle that patents are to be construed, if possible, in a way that
sustains their validity. See ACS Hosp. Systems, 732 F.2d at 1577; see also
Marquip, Inc. v. Fosber America, Inc., Nos. 99-1025, 99-1120, 1999 WL 1101387
(Fed. Cir. Dec. 6, 1999) ("Based on the fundamental principle that no one
deserves an exclusive right to technology already in the public domain, this
court has consistently limited the

----------

Walowit patent was filed after the application for the `58l patent but before
the application for the `315 patent.

            It is not possible from the submission to the Court to determine
what portion of the Walowit patent should receive the benefit of the filing date
of May 11, 1987 for the parent patent. However, it is undisputed that the `315
patent discloses matter not previously disclosed in the `58l patent. In
particular, the `315 patent "adds new disclosure about how color values are
measured, compared and corrected." Defendant Apple Computer, Inc.'s Revised
Supplemental Statement Pursuant to S.D.N.Y. Civ. R. 56.1(a), Paragraph 52. See
also Plaintiffs' Response to Defendant Apple Computer, Inc.'s Supplemental
Statement Pursuant to S.D.N.Y. Civ. R. 56.1(a), Paragraph 52. The new material
discloses, among other things, the use of color filters and the separate
correction of each primary color. This additional disclosure is not discernable
from the `581 patent. See Waldemar Link, 32 F.3d at 558. Because Claim 13 of the
`315 patent relies on the matter that is newly disclosed in the `315
application, the effective filing date for Claim 13 of the `315 patent is
therefore March 20, 1992, the date on which the application for the `315 patent
was filed. Because this is after the date on which the application for the
Walowit patent was filed, the Walowit patent constitutes prior art with respect
to Claim 13 of the `315 patent.

            However, even if Claim 13 of the `315 patent were entitled to the
November 23, 1988 filing date of the parent `581 patent, prior art would still
preclude an interpretation of Claim 13 that was so expansive as to include the
transformation of images through device-dependent color space. See, e.g., U.S.
Patent No. 4,500,919; Maureen C. Stone et al., Color Gamut Mapping and the
Printing of Digital Color Images, 7 ACM Transactions on Graphics 249-92 (October
1988).


                                     - 38 -
<PAGE>

doctrine of equivalents to prevent its application to ensnare prior art.").

            Thus, the undisputed facts make clear that no reasonable fact-finder
could find either literal infringement or infringement by equivalence. Because
there is no direct infringement, there can be no contributory infringement or
inducement to infringe. See Met-Coil Systems, 803 F.2d at 687. The defendant is
therefore entitled to summary judgment.(12) See University of Colorado
Foundation, 1999 WL 1045095, at *3; Sage Products, 126 F.3d at 1423.

                                   CONCLUSION

            For the foregoing reasons, the defendant's motion to dismiss for
lack of standing is granted. In the alternative, the defendant's motion for
summary judgment is granted. The Clerk is directed to enter judgment dismissing
the action and closing the case.

SO ORDERED.

Dated:       New York, New York
             January 17, 2000

                                        /s/ John G. Koeltl
                                        ----------------------------
                                        John G. Koeltl
                                        United States District Judge

----------

      (12) All of the plaintiffs' arguments have been considered, including
those raised in the plaintiffs' letter of January 11, 2000. Those arguments not
expressly addressed above are without merit.


                                     - 39 -
<PAGE>

Copies to:

for the plaintiffs:            Eliot S. Gerber, Esq.
                               Wyatt, Gerber, Meller & O'Rourke, LLP
                               99 Park Avenue
                               New York, NY 10016
                               fax: (212) 681-0810

for the defendant:             Daniel Johnson, Jr., Esq.
                               Fenwick & West, LLP
                               Two Palo Alto Square
                               Palo Alto, CA 94306
                               fax: (650) 494-1417


                                     - 40 -
[{"type": "8-K", "sequence": "1", "description": "FORM 8-K", "secsgml_size_bytes": 74405}]
{"company-data": {"conformed-name": "IMATEC LTD", "cik": "0001004913", "assigned-sic": "3861", "irs-number": "113289398", "state-of-incorporation": "DE", "fiscal-year-end": "1231"}, "filing-values": {"form-type": "8-K", "act": "34", "file-number": "000-21603", "film-number": "574028"}, "business-address": {"street1": "150 EAST 58TH ST", "street2": "900 THIRD AVE", "city": "NEW YORK", "state": "NY", "zip": "10155", "phone": "2122236700"}, "mail-address": {"street1": "150 EAST 58TH ST", "city": "NEW YORK", "state": "NY", "zip": "10155"}}
UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 8-K

                                 CURRENT REPORT
                         Pursuant to Section 13 or 15(d)
                     of the Securities Exchange Act of 1934

                                 March 20, 2000
                   ------------------------------------------
                                (Date of Report)

                                  IMATEC, LTD.
             ------------------------------------------------------
             (Exact name of registrant as specified in its charter)

           Delaware                    0-21752                  11-3289398
(State or other jurisdiction         (Commission              (IRS Employer
      of incorporation)              File Number)           Identification No.)

                 150 East 58th Street, New York, New York 10155
         --------------------------------------------------------------
                    (Address of principal executive offices)

                                 (212) 826-0449
         --------------------------------------------------------------
              (Registrant's telephone number, including area code)

                                      None
         --------------------------------------------------------------
         (Former name or former address, if changed since last report.)
Item 5. Other Events.

      In February 1998, the Company and Dr. Hanoch Shalit, the Company's chief
executive officer and president, filed a patent infringement complaint against
Apple Computer Corp. ("Apple") in the United States District Court for the
Southern District of New York. The complaint alleges that Apple infringed on the
Patents (as defined below), which were licensed exclusively by Dr. Shalit to the
Company, by making, using and selling its ColorSync color management systems.
The "Patents" are US Letter Patent No. 4,939,581, entitled, "Method and System
in Video Image Hard Copy Reproduction"; Patent No. 5,115,229, entitled "Method
and System in Video Image Reproduction"; and Patent No. 5,345,315, entitled
"Method and System for Improved Tone and Color Reproduction of Electronic Images
on Hard Copy Using for a Closed Loop Control." Apple filed a motion to dismiss
and motion for summary judgment in April and February 1999.

      In January 2000, the Court granted Apple's motions. The Court held that
the inventions which are the subject of the Company's claim had been previously
assigned to a former employer of Dr. Shalit. The Court also held that Apple's
ColorSync system does not infringe any of the patents.

      The Company and Dr. Shalit have appealed the decision to the United States
Court of Appeals for the Federal Circuit. The Company beleives that the District
Court erred in determining that the inventions encompassed by the Patents were
previously assigned and also believes that the District Court incorrectly
construed the claims of the Patents, resulting in an erroneous infringement
analysis.

      Apple has filed a motion to recover attorney's fees of approximately $1.7
million. The Company has vigorously contested the motion and believes that it is
without merit.

Item 7. Exhibits

Exhibit No.             Exhibit
-----------             -------
20 (i)                  United States District Court, Southern District of New
                        York, Opinion and Order, dated 1/17/00
SIGNATURES

      Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.

                                                  IMATEC, LTD.

                                                  /s/ Hanoch Shalit
Date: March 20, 2000                              ------------------------------
                                                  Dr. Hanoch Shalit
                                                  Chairman, President and Chief
                                                  Executive Officer
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK

-------------------------------

IMATEC, LTD. and HANOCH SHALIT,

                Plaintiffs,                98 Civ. 1058 (JGK)

      - against -                          OPINION AND ORDER
                                           -----------------
APPLE COMPUTER, INC.,

                Defendant.

-------------------------------

JOHN G. KOELTL, District Judge:

            The plaintiffs, Imatec, Ltd. ("Imatec") and Hanoch Shalit ("Dr.
Shalit"), bring this action alleging that the defendant, Apple Computer, Inc.
("Apple"), has infringed a series of patents owned by Dr. Shalit and, for a
period, exclusively licensed or assigned to Imatec. Now pending before the Court
are two motions brought by the defendant: a motion to dismiss for lack of
standing, and a motion for summary judgment.

                                       I.

                                       A.

            The technologies at issue in this action concern "color matching."
Color matching technologies are intended to ensure that an image displayed by
one electronic output device (such as a computer monitor) appears identically,
or as close thereto as possible, when displayed by another electronic output
device

                                     - 1 -
(such as a laser printer). Such technologies are necessary because different
output devices have different color characteristics. Color characteristics vary
across classes of output devices, and across particular devices within any given
class. Laser printers, for example, produce colors differently than do computer
monitors, and one laser printer may render a given source image differently from
another laser printer. See Declaration of Maureen C. Stone, dated April 12, 1999
("Stone Decl."), Paragraphs 7-9, 14; see also U.S. Patent No. 5,345,315, col.
3:5-25.

            Perceived color is produced in two fundamentally different ways.
"Additive color" is produced when a light source is caused to glow with a
combination of the primary colors red, green, and blue. Devices that generate
additive color, such as computer monitors, are referred to as "RGB" devices
because they combine the primary colors red, green, and blue to produce a given
color. "Subtractive color" is produced when light from a light source is
reflected by a surface whose pigments absorb certain wavelengths but not others.
Devices that generate subtractive color, such as laser printers, are referred to
as "CMYK" devices because they combine the primary colors cyan, magenta, and
yellow, as well as black, to produce a given color. See Stone Decl., Paragraphs
9-11.

            Every electronically generated image comprises many "pixels," much
as a pointillist painting comprises many discrete brush stokes. Each individual
pixel is characterized by a

                                     - 2 -
particular combination of red, green and blue, or, depending on the output
device, cyan, magenta, yellow and black. The relative amounts of red, green and
blue or cyan, magenta, yellow and black describe the color of a given pixel as
generated by a particular output device. Such descriptions, however, are
"device-dependent," describing how the color is generated by a particular output
device, not how the color is perceived by a viewer. Thus, a particular
combination of red, green and blue values displayed on one monitor may appear
differently when displayed on another monitor. See id., Paragraphs 10-12.

            In contrast to device-dependent values, which describe how a color
is generated by a particular device, "device-independent" values describe how a
color is perceived by a standard, hypothetical viewer. Device-independent color
values are expressed as points in a three-dimensional coordinate system known as
a "color space." One such device-independent color space is called "CIE XYZ,"
where "CIE" refers to the Commission Internationale de l'Eclairage, the
scientific organization that sponsored its development, and "XYZ" refers to the
three axes of the coordinate system. See id., Paragraphs 15-17.

            No electronic output device can generate all of the colors
perceptible to the human eye. Moreover, the range of colors that an output
device is capable of producing, known as the device's color "gamut," varies
across devices. RGB devices, such as monitors, are incapable of generating all
of the colors that CMYK devices can produce; conversely, CMYK devices, such as

                                     - 3 -
printers, are incapable of generating all of the colors that RGB devices can
produce. Because of each device's inherent limitations, a given source image may
not be fully reproducible on a given output device. As a result, certain colors
in the source image may have to be approximated, through a process known as
"gamut mapping," when displayed on certain output devices. See id., Paragraph
13.

                                       B.

            The pending action involves three patents: U.S. Patents Nos.
4,939,581 (the "'581" patent), 5,115,229 (the "'229" patent), and 5,345,315 (the
"'315" patent). In each instance the plaintiff Hanoch Shalit is listed as the
sole inventor. The '229 and '315 patents are each a continuation-in-part of the
'581 patent. See U.S. Patents Nos. 4,939,581, 5,115,229, and 5,345,315.

            The '581 patent, entitled "Method and System in Video Image Hard
Copy Reproduction," was filed on November 23, 1988 and granted on July 3, 1990.
According to the patent, an objective of the claimed invention is "to provide a
more accurate black-white photographic image taken from the image on a video
screen in which the photographic image more accurately maintains the relative
and absolute (for luminance reproduction) tonal scale of gray tones." U.S.
Patent No. 4,939,581, col. 3:61-66.

            The '229 patent, entitled "Method and System in Video Image
Reproduction," was filed on June 26, 1990 and granted on May 19, 1992. According
to the patent, an objective of the

                                     - 4 -
claimed invention is "to provide a more accurate black-white video image on a
second video monitor from the image on a first video screen in which the second
image more accurately maintains the relative and absolute (for luminance
reproduction) tonal scale of gray tones." U.S. Patent No. 5,115,229, col.
3:8-13.

            The '315 patent, entitled "Method and System for Improved Tone and
Color Reproduction of Electronic Image on Hard Copy Using a Closed Loop
Control," was filed on March 20, 1992 and granted on September 6, 1994.
According to the patent, an objective of the claimed invention is "to provide a
more accurate black-white and color hard copy taken from the image on an
original video monitor screen in which the hard copy reproduced image more
accurately maintains the relative and absolute tonal scale of gray tones . . .
regardless of the distortions or inaccuracy of that original screen image as
compared to an ideal image or the object from which the image is taken." Patent
No. 5,345,315, col. 3:50-58.

            Claim 13 of the '315 patent, the only claim pressed in the briefs
and at argument, is typical of the patent claims allegedly infringed by the
defendant.(1) See Plaintiffs' Memorandum in Opposition to Defendant's Motion for
Summary

----------

            (1) The plaintiffs acknowledge that the "date and place of the
conception of the each of the patents-in-suit is the same." Plaintiffs' Hanoch
Shalit and Imatec, Ltd.'s Supplemental Responses to Apple Computer's
Interrogatory Nos. 21 et seq., at 3. The plaintiffs also acknowledge that "the
actual reduction to practice of the '581 and '315 Patents was in November 1987."
Plaintiffs' Supplemental Responses to Defendant's Interrogatory No. 79, at 1.

                                     - 5 -
Judgment, at 11. Claim 13 of the `3l5 patent claims a "method of producing a
series of color hard copy images which are accurate reproductions of the colors
of video images on a video monitor screen without affecting the video monitor
screen images." Id., col. 17:58-61. Claim 13 of the '315 patent includes the
steps of:

      forming a test video image on the screen of the video monitor, measuring
      the colors of the test image on the monitor screen using an electronic
      meter to provide a set of monitor screen color values, and entering the
      set of monitor screen values into a computer;

      forming a test image on the hard copy using a hard copy printing system,
      said printing system including electronic means to vary the control
      signals to control the color intensity printed by said printing system on
      a dot-by-dot basis, the hard copy test image having predetermined colored
      areas including defined areas differing color intensities; [and,]

      printing said hard copy test image to produce a color printed image of
      said hard copy test image using the same batch of hard copy color
      reproduction materials as will be thereafter used by the printing system
      to print the images from the video monitor; sensing the color differences
      on the hard copy test image using a photoelectric densitometer and
      entering the sensed color differences into the computer; comparing said
      entered hard copy color difference values with the set of monitor color
      values stored in computer memory; using the computer to calculate and
      generate a set of corrections to said control signals for each color value
      for each dot printed by said printing system based on the said comparison,
      and altering the colors printed by said printing system according to said
      set of computer produced corrections using the electronic means of said
      printing system.

Id., cols. 17:63-18:25.

            Under the heading "Summary of the Invention," the '315 patent
provides further description of the claimed invention. According to this
description, after the hard copy test pattern

                                     - 6 -
is printed, the hard copy test pattern is measured by a densitometer. The
densitometer's output is then

      entered into the computer. The computer, using its look-up table memory,
      will determine the required compensation on a dot-by-dot basis. . . The
      computer memory includes a 'standard' set of density values corresponding
      to the luminance values for each tone. That 'standard' set is obtained by
      measuring the luminances on the original monitor screen using a spot
      photometer, of a tonal test pattern. . . Those standard values are
      compared to the actual values, from the densitometer, to provide the
      required compensation.

Id., cols. 4:55-5:15. The comparison used to generate the "required
compensation" is, according to the specifications, a subtractive function. See
id., cols. 9/10:40-64 (stating that corrected pixel value is "obtained from"
"calc. col. 7 minus 5"). The specifications also disclose that when the claimed
invention is used to correct a color (as opposed to black-and-white) image, the
three primary color components--red, green, and blue--are "separately
corrected." Id., col. 15:62-63; see also id., figs. 8A-C.

            The '315 patent discloses subject matter not previously disclosed in
either the parent '581 patent or the '229 patent. In particular, the
specification of the '315 patent discloses in detail the method by which color,
as opposed to black-and-white, images are to be matched. See id. cols.
14:61-16:6, figs. 8A-C, 9; see also Defendant Apple Computer, Inc.'s Revised
Supplemental Statement Pursuant to S.D.N.Y. Civ. R. 56.1(a), Paragraphs 51-52;
Plaintiffs' Response to Defendant Apple Computer, Inc.'s Supplemental Statement
Pursuant to S.D.N.Y. Civ. R. 56.1(a), Paragraphs 51-52; compare U.S. Patent No.
5,345,315, cols. 14:61-16:6,

                                     - 7 -
figs. 8A-C, 9, with U.S. Patent No. 4,939,581, col. 11:15-35.

            In order to obtain the patents-in-suit, Dr. Shalit was required by
the United States Patent and Trademark Office ("PT0") to amend his claims and to
distinguish his claimed invention from prior art. The PTO initially rejected
what was to become the '581 patent on the grounds that the claimed invention was
anticipated by U.S. Patent No. 4,757,334 (the "Volent" patent). See Rejection,
Ser. No. 07/275,218 (Sept. 11, 1989), at 4-7. In response, Dr. Shalit amended
his claim. Whereas his original application compared the density values of the
hard copy test image with "predetermined numerical correction values," the
amended application compared the density values of the hard copy test image with
"monitor gray scale luminance values." Amendment, Ser. No. 07/275,218 (Dec. 5,
1989), at 3.

            The PTO also initially rejected what was to become the '315 patent,
citing among other grounds the prior art disclosed by U.S. Patent No. 4,794,460
(the "Shiota" patent). See Rejection, Ser. No. 07/855,619 (May 21, 1993), at 5.
In response, Dr. Shalit distinguished his invention from the Shiota patent,
noting that: (i) "Shiota compares his hard copy with a standard--not with the
monitor gray scale luminance values"; (ii) "Shiota points away from applicant's
use of the monitor screen as the target--by using another standard for both the
screen and the hard copy"; and, (iii) "applicant's system is completely
objective, measurement alone determines the output of the system based on the
absolute (not operator manipulated) constant image

                                     - 8 -
characteristics at the time of the monitor image (original) measurements."
Amendment, Ser. No. 07/855,619 (Sept. 21, 1993), at 10, 14 (emphasis in
original).

                                       C.

            Prior to applying for the patents-in-suit, Dr. Shalit was employed
by FONAR Corporation ("FONAR"), a manufacturer of magnetic resonance imaging
("MRI") equipment. Dr. Shalit began working for FONAR on June 29, 1987 as head
of FONAR's Photographic Physics Department. See Letter from Jeanne F. Riviezzo,
dated August 1, 1988. Dr. Shalit was an employee of FONAR until November 14,
1988, when he became president of Fonar Photographic Services, a service entity
legally distinct from FONAR. See Letter from Carin Andersen Perez, dated
December 3, 1988. After leaving FONAR's direct employ, Dr. Shalit remained a
consultant to FONAR until December 26, 1989. See Letter from Carin Andersen
Perez, dated September 26, 1989; Deposition of Dr. Hanoch Shalit ("Shalit
Depo."), at 24.

            FONAR hired Dr. Shalit to help FONAR develop a system that would
produce an accurate photographic reproduction of an MRI-generated image as that
image appeared on a video monitor. See Deposition of Anthony Giambalo ("Giambalo
Depo."), at 48:5-13; see also Deposition of Dr. Raymond Damadian ("Damadian
Depo."), at 10:6-25. While employed at FONAR, Dr. Shalit developed the "Perfect
Image System." See Shalit Depo., at 24:7-16; see also Declaration of Hanoch
Shalit, dated February 11, 1999, Paragraph 9. According to literature produced
by FONAR, the

                                     - 9 -
Perfect Image System was "designed to produce film images identical in tone
reproduction to images displayed on your display system." Perfect Image System
User Guide Supplement, at 1.

            As a condition of his employment by FONAR, Dr. Shalit was required
to enter an "Agreement with Respect to Assignment of Inventions and Confidential
Information" ("Inventions Agreement"). The Inventions Agreement signed by Dr.
Shalit provides as follows:

      I agree to assign, and hereby do assign, to FONAR . . . all my rights to
      inventions which I have made or conceived or which I may hereafter make or
      conceive, either solely or jointly with others, in the course of [my]
      employment [by FONAR], or with the use of the time, material or facilities
      of FONAR, or relating to any product, method, substance, machine, article
      of [ ] manufacture or improvements therein within the scope of the
      business of said FONAR . . . .

Agreement with Respect to Assignment of Inventions and Confidential Information,
dated April 29, 1987, at 5-6. By its terms, the Inventions Agreement excludes
certain inventions from its reach, thereby leaving to Dr. Shalit the rights to
those inventions. In particular, the Inventions Agreement excludes patents
issued prior to Dr. Shalit's employment by FONAR and such inventions as Dr.
Shalit listed in a blank space provided for the purpose. See id., at 6. In the
space provided for the listing of excluded inventions, Dr. Shalit wrote:
"photographic video recording for keeping records of video tape content."(2) Id.

----------
            (2) Although the last word of the handwritten exclusion is difficult
to decipher, the parties agree that it is "content." In the same space, Dr.
Shalit also wrote "single step laser

                                     - 10 -
The plaintiffs admit that the inventions claimed in the '581 and
'315 patents were reduced to practice in November 1987, while Dr. Shalit was
employed by FONAR. See Plaintiff's Supplemental Responses to Defendant's
Interrogatory No. 79 ("Pl. Supp. Resp. Def. Inter. 79"), at 1. The plaintiffs
further admit that the inventions claimed in the '581 patent, and some of those
claimed in the '315 patent, were reduced to practice at FONAR. See Plaintiffs
Imatec Ltd. and Hanoch Shalit's Responses to Defendant Apple Computer, Inc.'s
Third Set of Requests for Admission to Plaintiffs ("Pl. Resp. Def. 3d Req.
Ad."), Paragraphs 64, 66.

            While he was a FONAR employee, Dr. Shalit wrote a "Summary
Description of Invention" entitled "Optimum Tone, Luminance and Color
Reproduction of an Object," which Dr. Shalit describes as a description of the
three patents-in-suit. See Summary Description of Invention, dated November 8,
1987; Shalit Depo., 261:9-22. Dr. Shalit admits that he was "involved in
writing" the patent applications that culminated in the '581, '229, and '315
patents while employed at FONAR, but he denies that the patents were written on
behalf of FONAR. See Shalit Depo., 64:24-65:15. The '581 patent was filed on
November 23, 1988, which is nine days after Dr. Shalit left FONAR's direct
employment. See U.S. Patent No. 4,939,581.

                                       D.
----------
printing." The parties agree that the latter exclusion has no bearing on this
case.

                                     - 11 -
Plaintiff Imatec, Ltd. is a Delaware corporation with its principal
place of business in New York. Complaint Paragraph 1. Dr. Shalit has been
Imatec's president and chairman since Imatec's founding. See Shalit Depo., at
110. In 1994, Dr. Shalit assigned his rights in the '581 patent and in any
continuation-in-part of the '581 patent to Imatec. See Assignment, dated
February 16, 1994. In 1995, Imatec reassigned its rights in the '581, '229, and
'315 patents back to Dr. Shalit in exchange for $1 and an exclusive licensing
agreement. See Assignment, dated July 10, 1995; Exclusive License Agreement,
made as of June 25, 1995.

                                       E.

            The defendant, Apple Computer, Inc., manufactures and sells the
accused technology, ColorSync. ColorSync is software that is "used as part of a
color management system to match color images on various peripheral devices
(e.g., scanners, monitors, printers) connected to a computer." Declaration of
Steve Swen, dated April 12, 1999 ("Swen Decl."), Paragraph 5; see also
Complaint, Paragraph 10. ColorSync is incorporated into Apple's operating
system, which is in turn sold separately or in conjunction with an Apple
computer. See Swen Decl., Paragraph 6.

            ColorSync employs so-called "device profiles," which "are computer
files of data that contain information about a device's color capability." Id.,
Paragraph 9. These device profiles "correlate device-dependent control levels of
an imaging device to an objective, three-dimensional, device-independent color

                                     - 12 -
space." Defendant Apple Computer, Inc.'s Revised Supplemental Statement
Pursuant to S.D.N.Y. Civ. R. 56.1(a), Paragraph 15; see also id., Paragraphs
11-14; Plaintiffs' Response to Defendant Apple Computer, Inc.'s Supplemental
Statement Pursuant to S.D.N.Y. Civ. R. 56.1(a), Paragraphs 11-14, 15; Stone
Decl., Paragraphs 72-73; Swen Decl. Paragraph 16-19. That is to say, device
profiles enable the translation of the device-dependent RGB or CYMK values
associated with a given electronic output device to and from device-independent
values such as those defined by the CIE XYZ color space.

            ColorSync is shipped with "default" device profiles. Swen Decl.,
Paragraph 12. A default device profile "provides color information for a device
model, not for a particular device." Id. (emphasis in original). Default device
profiles, at least those for computer monitors, are usually generated from "the
manufacturer's specification, not from measurement." Id., Paragraph 25.
However, a ColorSync user can also create device profiles using third party
measurement instruments. Id., Paragraphs 13-14. When a user creates a device
profile for a monitor by making actual measurements of a particular device, the
"measurements are not input into a monitor profile directly but instead are
subject to transformations and normalizations." Id., Paragraph 26.

            Although device profiles enable the translation of device-dependent
values into and out of device-independent color space, the actual translation is
performed by a so-called Color Matching Module ("CMM") that is embedded within
ColorSync. See id., Paragraphs 8-9, 28. Using the information that is contained
within

                                     - 13 -
the device profile of the output device displaying the source image, the CMM
translates that device's device-dependent representation of the image into a
device-independent representation of the image. Then, using the information that
is contained within the device profile of the destination output device, the CMM
translates the device-independent representation of the image into a
representation expressed in terms of the device-dependent values of the
destination output device. See id., Paragraph 28.

            ColorSync is designed such that "all components of a color in a
picture (e.g., RGB, CMYK)" are transformed simultaneously, not separately. Id.,
Paragraph 24; see also Stone Decl., Paragraph 69. By allowing users to select
from among alternative "rendering intents," ColorSync permits a user to
subjectively control how a given source image will ultimately appear when
displayed on an electronic output device. See Swen Decl., Paragraph 29.

                                       II.

                                       A.

            The defendant, Apple, moves to dismiss the action on the grounds
that the plaintiffs lack standing. As the United States Court of Appeals for the
Federal Circuit has stated, "[t]he question of standing to sue is a
jurisdictional one." Rite-Hite Corp. v. Kelley Co., 56 F.3d 1538, 1551 (Fed.
Cir. 1995) . See also In re Gucci, 126 F.3d 380, 387-88 (2d Cir. 1997) ("Whether
a claimant has standing is 'the threshold question in

                                     - 14 -
every federal case, determining the power of the court to entertain the suit.'")
(quoting Warth v. Seldin, 422 U.S. 490, 498 (1975)). Because it is they who seek
to invoke federal jurisdiction, the plaintiffs bear the burden of establishing
standing. See Lujan v. Defenders of Wildlife, 504 U.S. 555, 561 (1992); see also
Jaghory v. New York State Dept. of Educ., 131 F.3d 326, 329 (2nd Cir. 1997)
("The party seeking to invoke the jurisdiction of the court bears the burden of
establishing that he has met the requirements of standing."); Ortho
Pharmaceutical Corp. v. Genetics Institute, Inc., 52 F.3d 1026, 1032-33 (Fed.
Cir. 1995).

            In general, the district court must accept the allegations contained
in the complaint as true for purposes of deciding a motion to dismiss. See Cohen
v. Koenig, 25 F.3d 1168, 1172-73 (2d Cir. 1994). When a motion to dismiss
challenges the court's jurisdiction, however, the district court may look beyond
the allegations of the complaint. "Fact-finding is proper when considering a
motion to dismiss where the jurisdictional facts in the complaint . . . are
challenged." Moyer v. United States, 190 F.3d 1314, 1318 (Fed. Cir. 1999). See
also Reynolds v. Army and Air Force Exch. Serv., 846 F.2d 746, 747 (Fed. Cir.
1988) ("If a motion to dismiss for lack of subject matter jurisdiction . . .
challenges the truth of the jurisdictional facts alleged in the complaint, the
district court may consider relevant evidence in order to resolve the factual
dispute."). Indeed, the district court may be required to consider evidence
outside the complaint

                                     - 15 -
when a party challenges the court's jurisdiction. The Court of Appeals for the
Second Circuit has recently stated that "[w]here jurisdictional facts are placed
in dispute, the court has the power and obligation to decide issues of fact by
reference to evidence outside the pleadings, such as affidavits." LeBlanc v.
Cleveland, No. 97-9389, 1999 WL 1138523, at *2 (2d Cir. Dec. 9, 1999). See also
Filetech S.A. v. France Telecom S.A., 157 F.3d 922, 932 (2d Cir. 1998) ("In view
of the foregoing factual disputes, it was error for the district court to accept
the mere allegations of the complaint as a basis for finding subject matter
jurisdiction.").

            Regardless of whether such fact-finding is obligatory or merely
permissible, it is clear that the district court "may dismiss a facially
sufficient complaint for lack of subject-matter jurisdiction if the court finds,
based on affidavits or other evidence outside the complaint, that the asserted
basis for federal jurisdiction is not sufficient." RAD Data Communications, Inc.
v. Patton Electronics Co., 882 F. Supp. 351, 352 (S.D.N.Y. 1995) (dismissing
patent infringement action on grounds that plaintiff did not have legal title to
patent-in-suit at time of alleged infringement).

            Under certain limited circumstances, not alleged to be present here,
the exclusive licensee of a patent may have standing to bring an infringement
action. See Textile Productions, Inc. v. Mead Corp., 134 F.3d 1481, 1483 (Fed.
Cir. 1998) In general, however, only the owner of a patent has

                                     - 16 -
standing to sue for infringement of the patent. See Rite-Hite, 56 F.3d at 1551
("Generally, one seeking money damages for patent infringement must have held
legal title to the patent at the time of the infringement."); see also Arachnid,
Inc. v. Merit Industries, Inc., 939 F.2d 1574, 1579 (Fed. Cir. 1991). Thus, to
establish standing, the plaintiffs must demonstrate that Dr. Shalit or Imatec
hold title to the patents-in-suit.

            The present assignment of a future invention divests the
inventor-assignor of ownership of the invention and automatically vests
ownership of the invention, when invented, in the assignee. See FilmTec Corp. v.
Allied-Signal, Inc., 939 F.2d 1568, 1573 (Fed. Cir. 1991) (where contract grants
rights in any future inventions to assignee, "[o]rdinarily, no further act would
be required once an invention came into being" because "the transfer of title
would occur by operation of law"); cf. Arachnid, 939 F.2d at 1580-81
(distinguishing between present assignment of expectant interest in future
invention and mere promise to assign rights in future invention).

            Once an inventor has assigned the rights in a future invention,
neither the inventor nor a subsequent assignee of the inventor has standing to
sue for infringement of a patent arising from the assigned invention. In
FilmTec, the plaintiff, who was suing for patent infringement, had been assigned
the rights in the patent by the inventor. The inventor had, however, been
employed by a third party at or near the time of the invention. It was, on the
record before the court, unclear whether the

                                     - 17 -
inventor had, prior to his invention (and prior to his assignment of his rights
therein to the plaintiff), already assigned the rights in his invention to his
employer. Although the case was remanded for further fact-finding, the court
held that "if [the employee-inventor] granted [the employer] rights in
inventions made during his employ, and if the subject matter of the
[patent-in-suit] was invented by [the employee-inventor] during his employ with
[the employer], then [the employee-inventor] had nothing to give to [the
plaintiff] and his purported assignment to [the plaintiff] is a nullity." See
FilmTec, 939 F.2d at 1572. Were that the case, the court concluded, the
plaintiff "would lack both title to the [patent-in-suit] and standing to bring
the present action."(3) Id.

            (3) The plaintiffs attempt to distinguish FilmTec on the grounds
that there was an allegation that the inventor's employer had granted to the
Government rights in any future invention. However, that was not the
determinative issue in the case. As the Court of Appeals explained: "[T]he issue
here is not whether title lies in the Government or some other third party; it
is rather whether [the plaintiff] has made a sufficient showing to establish
reasonable likelihood of success on the merits, which includes a showing that
title to the patent and the rights thereunder are in [the plaintiff]." FilmTec,
939 F.2d at 1573.
            The plaintiffs' effort to distinguish FilmTec on the basis of
FilmTec Corp. v. Hydranautics, 982 F.2d 1546 (Fed. Cir. 1992) ("Hydranautics"),
is also misplaced. The Hydranautics Court held that the plaintiff could not
maintain its infringement action because, on the facts of the case, ownership of
the claimed invention rested with the United States Government, not the
plaintiff. The court found that the claimed invention had been conceived while
the inventor was employed by an entity under contract to the Government. The
contract, governed by particular federal statutes, assigned all rights to
inventions conceived in the course of the contract to the Government. The
inventor's subsequent assignment of the invention to the plaintiff was therefore
ineffective. Hydranautics neither calls the FilmTec rule into question nor
limits its application to situations involving assignments to the Government.

                                     - 18 -
B.

            Apple contends that title to the patents-in-suit rests with FONAR,
and that the plaintiffs therefore lack standing to bring this action. There can
be no doubt that the Inventions Agreement between Dr. Shalit and FONAR
constituted a present assignment by Dr. Shalit to FONAR of future inventions.
The agreement states: "I agree to assign, and hereby do assign, to FONAR ...
all my rights to inventions which I have made or conceived or which I may
hereafter make or conceive ..." Inventions Agreement, at 5. This language is
that of a present assignment, not of a mere promise to assign. The rights to any
invention covered by the Inventions Agreement therefore vested in FONAR rather
than Dr. Shalit, and neither Dr. Shalit nor Imatec, as a subsequent assignee,
has standing to enforce a patent that arises from a covered invention. See
FilmTec, 939 F.2d at 1572-73. Thus, whether the plaintiffs have standing depends
upon whether the patents-in-suit are subject to the Inventions Agreement.

            The Inventions Agreement covers: all inventions "made or conceived
or which [Shalit] may hereafter make or conceive ... in the course of [Shalit's]
employment [by FONAR];" all inventions made or conceived "with the use of the
time, material or facilities of FONAR;" and all inventions "relating to any

----------

            Similarly, the history of FilmTec after remand and another appeal
does not change the law as explained in the original FilmTec decision. The
subsequent opinion by the Court of Appeals has been designated as not citable as
precedent.

                                     - 19 -
product, method, substance, machine, article of [] manufacture or improvements
therein within the scope of the business of said FONAR." Inventions Agreement,
at 5-6. There is no dispute that the `581 patent relates precisely to the work
for which Dr. Shalit was hired by FONAR. See Damadian Depo., 34:14-16; Giambalvo
Depo., 48:5-13; Shalit Depo., 47:22-49:10, 247:20-25, 256:12-18; Imatec, Ltd. v.
Apple Computer. Inc., No. 98 Civ. 1058, Hearing, at 8 (S.D.N.Y. December 16,
1999). Nor is there any dispute that the `58l and `3l5 patents were reduced to
practice while Dr. Shalit was a FONAR employee. See P1. Supp. Resp. Def. Inter.
79, at 1. Moreover, Dr. Shalit acknowledges that the invention protected by the
'58l patent was reduced to practice at FONAR with the assistance of another
FONAR employee. See P1. Resp. Def. 3d Req. Ad., Paragraph 64; Shalit Depo.,
24:7-20, 47:7-48:22. Thus, because it was made in the course of Dr. Shalit's
employment by FONAR, at FONAR, and with the assistance of another FONAR
employee, and because it is within the scope of FONAR's business, there can be
no doubt that the invention described in the `581 patent is covered by the
Inventions Agreement. Similarly, it is clear that the invention described in the
`3l5 patent is also covered by the Inventions Agreement: The invention described
in the `315 patent, which is a continuation-in-part of the `58l patent, was
reduced to practice while Dr. Shalit was employed at FONAR and relates to
improvements in a product within the scope of FONAR's business. The `229 patent,
which is also a continuation-in-part of the `581

                                     - 20 -
patent and also relates to improvements in the products and methods that were
within the scope of FONAR's business, is likewise covered by the Inventions
Agreement.

            The inventions described in the patents-in-suit are thus plainly
within the scope of the terms of the Inventions Agreement. The plaintiffs argue,
however, that the inventions are in fact exempt from the Inventions Agreement by
virtue of the handwritten exclusion of "photographic video recording for keeping
records of video tape content." Inventions Agreement, at 6. This exclusion,
however, does not describe the inventions covered by the patents-in-suit. On its
face, the exclusion applies to keeping records of video tape content. The
patents-in-suit are neither about record keeping nor about video tape content.
Rather, the patents make clear that they concern a method and system for the
accurate reproduction of the tone and luminance of a monitor display. Dr.
Shalit's employer testified that he would not have excluded from the Inventions
Agreement the very work that Dr. Shalit was hired to perform, which is in fact
the subject of the patents-in-suit. See Damedian Depo., 11:2-9, 14:13-24. It is,
however, unnecessary to rely on this testimony because the plain language of the
exclusion does not cover the patents-in-suit.

            The patents-in-suit make only passing reference to video tape
content. The inventions described by the patents-insuit match a hard copy
reproduction `581 and `315) or a secondary monitor image (`229) to an image on a
primary monitor.

                                     - 21 -
The source of the primary image may or may not be video tape.(4) See U.S. Patent
No. 4,939,581, col. 4:47-49 ("The system, in one embodiment, uses a video
source, such as a computer graphics output, VCR or video camera to produce an
image on a CRT monitor."); see also U.S. Patent No. 5,115,229, col. 3:63-66;
U.S. Patent No. 5,345,315, col. 4:48-50. But even where video tape is the source
of the video image on the primary monitor, each patent-in-suit is concerned with
matching a hard copy reproduction or secondary monitor image to the image on the
primary monitor, not to the underlying source of the primary monitor image.
Thus, in substantially the same language, every asserted claim involves a system
for producing either "accurate tone reproductions of the luminance ratios of the
video images on a video monitor" or "accurate reproductions of the colors of
video images on a video monitor screen." See. e.g., U.S. Patent Nos. 4,939,581,
col. 13:3-6; 5,345,315, col. 17:58-61.

            Under the heading "Objectives and Features of the Invention," the
`315 patent states:

----------

      (4) Indeed, although each patent-in-suit describes (under the heading
"Background of Invention") various situations in which the claimed invention is
applicable, none mentions record keeping of video tape content as such a
situation. See U.S. Patent Nos. 4,939,581, col. 1:12-44; 5,115,229, col.
1:19-40; 5,345,315, col. 1:22-56. That the nature of the video source is
irrelevant to the claimed inventions is underscored by the fact that: (i) the
diagrams accompanying the patents refer only to a generic "video source,"
without specifying the nature of that video source; and, (ii) the detailed
descriptions of the inventions make no reference to the video source at all. See
U.S. Patent Nos. 4,939,581, figs. 1, 3, col. 5:64-9:47; 5,115,229, figs. 1A-B,
col. 5:19-8:38; 5,345,315, figs. 1, 3, 9, col. 6:34-11:28.

                                     - 22 -
It is an objective of the present invention to provide a more accurate
      black-white and color hard copy taken from the image on an original video
      monitor screen in which the hard copy reproduced image more accurately
      maintains the relative and absolute tonal scale of gray tones as in the
      original video screen[] regardless of the distortions or inaccuracy off
      that original screen image as compared to an ideal image or the object
      from which the image is taken.

U.S. Patent No. 5,345,315, col. 3:50-58 (emphasis added). The italicized passage
makes clear that the patented invention matches an output image to the image
displayed on a monitor rather than to the underlying source of the monitor
display. The inventions described in the patents-in-suit, to the extent they
involve record keeping at all, involve keeping records of monitor displays, not
of video tape content.

            Because the inventions described in the patents-in-suit do not
involve "keeping records of video tape content," they do not fall under the
exclusion to the Inventions Agreement between Dr. Shalit and FONAR. The
inventions described in the patents-in-suit, therefore, fall under the
Inventions Agreement and are not excluded from it, and all rights in the
inventions were assigned by Dr. Shalit to FONAR in the Inventions Agreement.
Because Dr. Shalit assigned his rights in the inventions to FONAR, neither he
nor Imatec, which claims its rights through Dr. Shalit, have standing to
maintain the current infringement action. See FilmTec, 939 F.2d at l572-73.(5)

----------

      (5) The plaintiffs also assert that the defense of lack of standing is
barred by the statute of limitations. That argument has no merit. First, the
defendant asserts a defense of lack of standing because the plaintiffs have no
legal title to the

                                     - 23 -
III.

                                       A.

            Even if the plaintiffs had standing, the defendant is still entitled
to summary judgment dismissing the action on the ground that the defendant's
system does not infringe the asserted claims. Infringement analysis is a
two-step process: "The first step is determining the meaning and scope of the
patent claims asserted to be infringed. The second step is comparing the
properly construed claims to the device accused of infringing." Markman v.
Westview Instruments, Inc., 52 F.3d 967, 976 (Fed. Cir. 1995) (en banc)
(citation omitted), aff'd 517 U.S. 370 (1996)

            Claim construction, the first step in infringement analysis, is a
matter of law. "The interpretation and construction of patent claims, which
define the scope of the patentee's rights under the patent, is a matter of law
exclusively for the court." Id., at 970-71. When the court interprets a patent,
"[c]laims are to be read and construed in

----------

patents-in-suit. The plaintiffs cite no viable authority for the proposition
that such a defense is limited by any statute of limitations; a statute of
limitations generally applies to claims and counterclaims, not to a defense of
lack of standing. The issue of any limitations on FONAR's rights to the patents
should be decided in a suit in which FONAR sought to assert its rights to any
inventions that Dr. Shalit assigned to it. Second, FONAR's rights have not in
fact lapsed since there is no allegation that FONAR has exercised its rights to
require Dr. Shalit to execute the necessary documents to obtain the patents. The
statute of limitations on FONAR's rights would only begin to run at that point
if Dr. Shalit refused to assign the patents. See Goldwasser v. Smith Corona
Corp., 817 F. Supp. 263, 271-72 (D. Conn. 1993), aff'd 26 F.3d 137 (Fed. Cir.
1994).

                                     - 24 -
light of the specification and the prosecution history of the patent." ACS Hosp.
Systems, Inc. v. Montefiore Hosp., 732 F.2d 1572, 1577 (Fed. Cir. 1984). See
also Markman, 52 F.3d at 980. When possible, claims should be construed in a
manner that sustains their validity. See ACS Hosp. Systems, 732 F.2d at 1577. In
particular, "claims should be read in a way that avoids ensnaring prior art if
it is possible to do so." Harris Corp. v. IXYS Corp., 114 F.3d 1149, 1153 (Fed.
Cir. 1997). When construing a patent claim, a court may consider extrinsic
evidence, including "expert and inventor testimony, dictionaries, and learned
treatises," so that the court may come "`to a correct conclusion' as to the
`true meaning of the language employed' in the patent." Markman, 52 F.3d at 980
(quoting Seymour v. Osborne, 78 U.S. (11 Wall.) 516, 546 (1871)).

            The plaintiffs allege that the defendant is liable for patent
infringement under several theories. First, the plaintiffs allege that the
defendant has directly infringed the patents at issue. Direct infringement is
barred by 35 U.S.C. ss. 271(a), which provides that "whoever without authority
makes, uses, offers to sell, or sells any patented invention, within the United
States ... during the term of the patent therefor, infringes the patent." To be
liable for literal, direct infringement, a defendant must duplicate each element
of a patent claim exactly. "Literal infringement requires that the accused
device contain each limitation of the claim exactly; any deviation from the
claim precludes a finding of literal

                                     - 25 -
infringement. "Litton Systems, Inc. v. Honeywell, Inc., 140 F.3d 1449, 1454
(Fed. Cir. 1998). See also Johnston v. IVAC Corp., 885 F.2d 1574, 1580 (Fed.
Cir. 1989) ("Where a claim does not read on an accused device exactly, there can
be no literal infringement.").

            In the alternative, the plaintiffs rely on the judicially created
"doctrine of equivalents." "A device that does not literally infringe a claim
may nonetheless infringe under the doctrine of equivalents if every element in
the claim is literally or equivalently present in the accused device." Sage
Products, Inc. v. Devon Industries, Inc., 126 F.3d 1420, 1423 (Fed. Cir. 1997)
(citing Pennwalt Corn. v. Durand-Wayland, Inc., 833 F.2d 931, 934-35 (Fed. Cir.
1987) (en banc)). To infringe under the doctrine of equivalents, the accused
device must "contain each limitation of the claim or its equivalent." Overhead
Door Corp. v. Chamberlain Group, Inc., 194 F.3d 1261, 1269 (Fed. Cir. 1999)
(citing Warner-Jenkinson Co. v. Hilton Davis Chem. Co., 520 U.S. 17, 40 (1997)).
"An element in the accused product is equivalent to a claim element if the
differences between the two are 'insubstantial' to one of ordinary skill in the
art." Id., 194 F.3d at 1269 (quoting Warner-Jenkinson, 520 U.S. at 39-40).

            In order that patents retain their public notice function, certain
limits have been placed on the doctrine of equivalents. See K-2 Corp. v. Salomon
S.A., 191 F.3d 1356, 1366-67 (Fed. Cir. 1999); Sextant Avionique, S.A. v. Analog
Devices,

                                     - 26 -
Inc., 172 F.3d 817, 831 (Fed. Cir. 1999); Ethicon Endo-Surgery, Inc. v. U.S.
Surgical Corp., 149 F.3d 1309, 1316 (Fed. Cir. 1998) . Thus, under the so-called
"all-elements" rule, "the doctrine of equivalents must be applied to individual
elements of the claim, not to the invention as a whole." Warner-Jenkinson, 520
U.S. at 29. Similarly, the concept of prosecution history estoppel limits the
range of possible equivalents. "Prosecution history estoppel prevents operation
of the doctrine of equivalents from expanding a claim limitation to include
subject matter surrendered during the patent's prosecution." Elkay Mfg. Co. v.
Ebco Mfg. Co., 192 F.3d 973, 981 (Fed. Cir. 1999).

            By force of prosecution history estoppel, "a patentee is estopped
from recovering through equivalency that which was deemed unpatentable in view
of the prior art." Pall Corp. v. Micron Separations. Inc., 66 F.3d 1211, 1219
(Fed. Cir. 1995). "In other words," the Court of Appeals has explained,

      when an applicant, in response to an examiner's prior art rejection,
      amends a claim by substituting one limitation for another, the applicant
      cannot later assert that the original limitation is an equivalent of the
      substituted limitation. Thus, the doctrine prevents the applicant from
      completely recapturing the subject matter rejected by the examiner. In
      addition, when an applicant narrows a claim element in the face of an
      examiner's rejection based on the prior art, the doctrine estops the
      applicant from later asserting that the claim covers, through the doctrine
      of equivalents, features that the applicant amended his claim to avoid....
      In addition, ... an applicant's arguments may constitute a clear and
      unmistakable surrender of subject matter. Such arguments preclude
      recapture of that subject matter.

Litton Systems, 140 F.3d at 1462. "Whether estoppel applies is a question of
law." Wang Laboratories, Inc. v. Mitsubishi

                                     - 27 -
Electronics America, Inc., 103 F.3d 1571, 1578 (Fed. Cir. 1997).

            The plaintiffs also allege contributory infringement. See 35
U.S.C.ss.271(c). But, direct infringement, whether literal or by equivalence,
must be proven before a defendant can be held liable for contributory
infringement or inducement to infringe. "Absent direct infringement of the
patent claims, there can be neither contributory infringement, nor inducement of
infringement." Met-Coil Systems Corp. v. Korners Unlimited, Inc., 803 F.2d 684,
687 (Fed. Cir. 1986) (citations omitted). See also Carborundum Co. v. Molten
Metal Equipment Innovations, Inc., 72 F.3d 872, 876 n.4 (Fed. Cir. 1995).

            Because prior art can invalidate a patent, see 35 U.S.C.ss.102, the
date on which a patent application is filed can be a significant fact in
determining the validity of a patent. Where an application is a
continuation-in-part ("CIP") of an earlier application, some claims in the CIP
application may receive different effective filing dates than other claims
therein because the CIP application may contain additional matter not disclosed
in the prior application. See Augustine Medical, Inc. v. Gaymar Industries,
Inc., 181 F.3d 1291, 1302 (Fed. Cir. 1999) . "Subject matter that arises for the
first time in the CIP application does not receive the benefit of the filing
date of the parent application." Id. When judging whether subject matter was
sufficiently disclosed in the parent application such that a claim contained in
an CIP application is entitled to the filing date of the parent application,
"[t]he fact finder must

                                     - 28 -
determine if one skilled in the art, reading the original specification, would
immediately discern the limitation at issue in the parent" application. Waldemar
Link v. Osteonics Corp., 32 F.3d 556, 558 (Fed. Cir. 1994).

            Summary judgment may not be granted unless "the pleadings,
depositions, answers to interrogatories, and admissions on file, together with
the affidavits, if any, show that there is no genuine issue as to any material
fact and that the moving party is entitled to a judgment as a matter of law."
Fed. R. Civ. paragraph 56(c); see also Celotex Corp. v. Catrett, 477 U.S. 317,
322 (1986); Anderson v. Liberty Lobby. Inc., 477 U.S. 242, 247-48 (1986);
University of Colorado Foundation, Inc. v. American Cyanamid Co., Nos. 97-1468,
98-1113, 1999 WL 1045095, at *3 (Fed. Cir. 1999); Gallo v. Prudential
Residential Servs., Ltd. Partnership, 22 F.3d 1219, 1223 (2d Cir. 1994). In
determining whether summary judgment is appropriate, a court must resolve all
ambiguities and draw all reasonable inferences against the moving party. See
Matsushita Elec. Antis. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587
(1986) (citing United States v. Diebold, Inc., 369 U.S. 654, 655 (1962)); see
also University of Colorado Foundation, 1999 WL 1045095, at *3; Gallo, 22 F.3d
at 1223. Summary judgment is improper if there is any evidence in the record
from any source from which a reasonable inference could be drawn in favor of the
nonmoving party. See Chambers v. TRM Copy Ctrs. Corp., 43 F.3d 29, 37 (2d Cir.
1994). "In considering the motion, the court's responsibility is not to resolve
disputed

                                     - 29 -
issues of fact but to assess whether there are factual issues to be tried."
Knight v. U.S. Fire Ins. Co., 804 F.2d 9, 11 (2d Cir. 1986).

            On a motion for summary judgment, once the moving party meets its
initial burden of demonstrating the absence of a genuine issue of material fact,
the nonmoving party must come forward with specific facts to show there is a
factual question that must be resolved at trial. See Fed. R. Civ. paragraph
56(e); see also Cornett v. Sheldon, 894 F. Supp. 715, 724 (S.D.N.Y. 1995)
("[T]he plaintiff, to avoid summary judgment, must show a genuine issue by
presenting evidence that would be sufficient, if all reasonable inferences were
drawn in his favor, to establish the existence of that element at trial.")
(citing Celotex, 477 U.S. at 322-23). The non-moving party must produce evidence
in the record and "may not rely simply on conclusory statements or on
contentions that the affidavits supporting the motion are not credible." Ying
Jing Gan v. City of New York, 996 F.2d 522, 532 (2d Cir. 1993). See also Applied
Companies v. United States, 144 F.3d 1470, 1475 (Fed. Cir. 1998) ("It is well
settled that `a conclusory statement on the ultimate issue does not create a
genuine issue of fact.'") (quoting Imperial Tobacco Ltd. v. Philip Morris, Inc.,
899 F.2d 1575, 1581 (Fed. Cir. 1990)); Scotto v. Almenas, 143 F.3d 105, 114-15
(2d Cir. 1998) (collecting cases).

                                       B.

            Claim 13 of the `315 patent is the only asserted claim

                                     - 30 -
that has been pressed in the briefs and at argument. Claim 13 of the `315 patent
requires "measuring the colors of the test image on the monitor screen using an
electronic meter to provide a set of monitor screen color values, and entering
the set of monitor screen values into a computer." U.S. Patent No. 5,345,315,
col. 17:64-69. Claim 13 of the `315 patent also requires "forming a test image
on the hard copy using a hard copy printing system" and then "sensing the color
differences on the hard copy test image using a photoelectric densitometer and
entering the sensed color differences values into the computer." Id., col.
18:1-16. Claim 13 of the `315 patent further requires "comparing said entered
hard copy color difference values with the set of monitor color values stored in
computer memory" and then using the computer "to calculate and generate a set
of corrections ... for each color value for each dot printed by said printing
system based on the said comparison." U.S. Patent No. 5,345,315, col. 18:16-22.

            These elements are to be construed in light of their language, the
specification, and the prosecution history. Markman, 52 F.3d at 980. By its
terms, the claim instructs a person practicing the invention to enter measured
values into a computer. The specification does not disclose any transformation
that is to be performed on the measured values.(6) The patent's

----------

      (6) The specification does teach that the measurement results should be
expressed in terms of a log function:

      An accurate reproduction of the ratio of luminance values (gray scale)
      would occur when the density units

                                     - 31 -
prosecution history underscores the importance of actual measurement in the
claimed method: Before obtaining the `315 patent, Dr. Shalit was required by the
PTO to distinguish his claimed invention from the prior art disclosed in the
Shiota patent. See Rejection, Ser. No. 07/855,619 (May 21, 1993), at 5. In so
doing, Dr. Shalit emphasized that actual measurements rather than transformed
values lay at the heart of his claimed method. Thus, Dr. Shalit noted that
"Shiota compares his hard copy with a standard--not with the monitor gray scale
luminance values" and that "applicant's system is completely objective,
measurement alone determines the output of the system based on the absolute (not
operator manipulated) constant image characteristics at the time of the monitor
image (original) measurements." Amendment, Ser. No. 07/855,619 (Sept. 21, 1993),
at 10, 14 (emphasis in original). Given the clear language of the claim, the
prosecution history, and the fact that the specification does not disclose any
transformation that is to be performed on the measured values prior to their
comparison, the "values" that are compared in the `315 method are, as a matter
of

----------

      on the hard copy directly correspond (linear relationship) to the gray
      scale on the monitor screen. The density units on the hard copy is a
      measure of the blackness of the printing (toner) on the hard copy. Density
      is defined as the log 1/reflectance of an opaque substrate, in this case
      the xerographic paper copy. The "screen luminance" is the brightness of
      the CRT screen ... and is measured in terms of "log screen luminance" to
      directly correspond to density which is also a log function.

U.S. Patent No. 5,345,315, col. 6:53-64.

                                     - 32 -
law, actual measurement values.

            Furthermore, the specification of the `315 patent reveals that the
claimed comparison of the "hard copy color difference values with the set of
monitor color values" is performed by subtracting the first set of color values
from the second. See U.S. Patent No. 5,345,315, cols. 9/10:40-64 (stating that
corrected pixel value is "obtained from" "calc. col. 7 minus 5") . Thus, as a
matter of law, "comparing" in the asserted claim means subtracting.

            ColorSync, the accused product, does not compare by subtraction or
otherwise. Rather, ColorSync employs "device profiles" to translate the
representation of an image from the device-dependent values associated with one
electronic output device into device-independent values defined by CIE XYZ color
space, and then again to translate the device-independent representation of the
image into the device-dependent values associated with another electronic output
device. See Defendant Apple Computer, Inc.'s Revised Supplemental Statement
Pursuant to S.D.N.Y. Civ. R. 56.1(a), Paragraph 15; see also id. Paragraphs
11-14; Plaintiffs' Response to Defendant Apple Computer, Inc.'s Supplemental
Statement Pursuant to S.D.N.Y. Civ. R. 56.1(a) Paragraphs 11-14, 15; Stone Decl.
Paragraphs 72-73; Swen Decl. Paragraphs 16-19, 28. The device-dependent values
of the second output device, which may well be expressed in CMYK terms, are
never subtracted from or otherwise directly related to the device-dependent
values of the first output device, which may be expressed in RGB terms. Thus,

                                     - 33 -
the method of subtractive comparison between the original source and the
destination device that is disclosed in the `315 patent is not used by
ColorSync.

            Moreover, unlike the method disclosed in the `315 patent, ColorSync
does not use actual measurement values without transformation. The default
device profiles that are shipped with ColorSync, at least those for computer
monitors, are usually generated from manufacturers' specifications rather than
from actual measurement. See Swen Decl., Paragraph 25. Even when a user creates
a device profile by making actual measurements, the "measurements are not input
into a monitor profile directly but instead are subject to transformations and
normalizations." Id., Paragraph 26.

            As noted above, Claim 13 of the `315 patent involves "using the
computer to calculate and generate a set of corrections ... for each color value
for each dot printed." U.S. Patent No. 5,345,315, col. 18:19-22. The
specifications reveal that "[e]ach color--red, green, and blue--"is separately
corrected." Id., col. 15:62. See also id., figs. 8A-C. Thus, as a matter of law,
"corrections ... for each color value" means the separate correction of each
primary color. Unlike the method of separate correction disclosed in the `315
patent, ColorSync transforms all of the colors in a source image simultaneously,
and not separately. See Swen Decl., Paragraph 24; ae.g also Stone Decl.,
Paragraph 69.

                                     - 34 -
Notwithstanding a few immaterial disagreements,(7) there is no
genuine dispute as to any of these material facts. In light of the undisputed
differences between the claims in the 315 patent and the ColorSync system, the
asserted claim "does not read on [the] accused device exactly" and therefore
"there can be no literal infringement." Johnston, 885 F.2d at 1580.

            There also is no infringement by equivalence. To overcome the PTO's
initial rejection of what ultimately became the `315 patent, Dr. Shalit
distinguished his invention from that claimed in the Shiota patent.(8) See
Rejection, Ser. No. 07/855,619 (May 21, 1993), at 5; Amendment, Ser. No.
07/855,619 (Sept. 21, 1993), at 10-14. In particular, Dr. Shalit emphasized that
"Shiota points away from applicant's use of the monitor screen as the target--by
using another standard for both the

----------

      (7) For example, in its 56.1 Statement, Apple states: "Color management
systems that use ColorSync perform a multidimensional transformation between a
source's device-dependent control levels and a destination's device-dependent
control levels." Defendant Apple Computer, Inc.'s Revised Supplemental Statement
Pursuant to S.D.N.Y. Civ. R. 56.1(a), Paragraph 12. The plaintiffs do not agree
with this statement on the grounds that there is "no agreed definition of
`multidimensional transformation.'" Plaintiffs' Response to Defendant Apple
Computer, Inc.'s Supplemental Statement Pursuant to S.D.N.Y. Civ. R. 56.1(a),
Paragraph 12. The plaintiffs do agree that color management systems like
ColorSync use an intermediate device-independent color space such as CIE XYZ or
CIE LAB. See Defendant Apple Computer, Inc.'s Revised Supplemental Statement
Pursuant to S.D.N.Y. Civ. R. 56.1(a), Paragraph 11; Plaintiffs' Response to
Defendant Apple Computer, Inc.'s Supplemental Statement Pursuant to S.D.N.Y.
Civ. R. 56.1(a), Paragraph 11.

      (8) Dr. Shalit similarly amended what became the `58l patent in response
to the PTO's initial rejection of that application. See Rejection, Ser. No.
07/275,218 (Sept. 11, 1989), at 4-7; Amendment, Ser. No. 07/275,218 (Dec. 5,
1989), at 3.

                                     - 35 -
screen and the hard copy." Amendment, Ser. No. 07/855,619 (Sept. 21, 1993), at
10. This distinction underscores the fact that the asserted claim involves the
direct comparison of destination and source images without the mediation of
device-independent color space.(9) In light of this prosecution history, the
plaintiffs are, as a matter of law, now estopped from claiming that ColorSync's
transformation of an image through device-independent color space(10) is
equivalent to the subtractive

----------

      (9) In response to this motion, the plaintiffs argued that the
patents-in-suit, without using the exact term, disclose the use of device
profiles for the transformation of device-dependent values into
device-independent color space. But they fail to show where in the patents this
is described or how it could be derived from the patents. See Imatec. Ltd. v.
Apple Comnuter, Inc., No. 98 Civ. 1058, Hearing, at 34-39 (S.D.N.Y. December 16,
1999).

      (10) In their 56.1 Statement, the plaintiffs concede that "[c]olor
management systems that use ColorSync use an intermediate device-independent
color space." See Defendant Apple Computer, Inc.'s Revised Supplemental
Statement Pursuant to S.D.N.Y. Civ. R. 56.1(a), Paragraph 11; Plaintiffs'
Response to Defendant Apple Computer, Inc.'s Supplemental Statement Pursuant to
S.D.N.Y. Civ. R. 56.1(a), Paragraph 11. Similarly, at argument, plaintiffs'
counsel acknowledged that ColorSync uses CIE XYZ color space. See Imatec, Ltd.
v. Apple Computer, Inc., No. 98 Civ. 1058, Hearing, at 39 (S.D.N.Y. December 16,
1999) ("they are using XYZ"). However, in their brief, at another point at oral
argument, and in a letter dated January 11, 2000, the plaintiffs assert the
opposite, stating, for example, that "[i]n ColorSync, the CIE XYZ space is not
used in the processing of the image pixel values." Letter from Joseph Diamante
and Eliot S. Gerber, dated January 11, 2000, at 7 (emphasis in original). See
also Plaintiffs' Memorandum in Opposition to Defendant's Motion for Summary
Judgment, at 13 ("In both Shalit and ColorSync, the image pixel values pass from
the device-dependent monitor color space directly to the device-dependent
printer color space without going through a device-independent color space.");
Imatec, Ltd. v. Apple Computer, Inc., No. 98 Civ. 1058, Hearing, at 33-34
(S.D.N.Y. December 16, 1999) ("ColorSync is like the Shalit patents. There is no
transformation of the image pixels into XYZ space and then a second
transformation out of that space ...") One party's assertion of inconsistent
positions does not

                                     - 36 -
comparison method disclosed in the `315 patent. See Elkay Mfg., 192 F.3d at 981;
Pall Corp., 66 F.3d at 1219.

            Were the `315 patent construed so as to claim the transformation of
images through device-independent color space, it would be rendered invalid by
prior art. See. e.g., U.S. Patent No. 4,941,038, cols. 2:9-31, 7:15-8:18 (the
"Walowit" patent). The Walowit patent, entitled "Method for Color Image
Processing," describes "a method for forming a full color image such that input
data relating to an original color image is processed so that an observer of the
output image will perceive close color correspondence between the two images."
Id., col. 1:11-15. In one embodiment, the Walowit patent discloses a method

      of converting input, preferably RGB, color data to output, preferably CMY,
      color data, wherein an input device is calibrated in a first calibration
      to an intermediate and preferably uniform color space. An output device is
      calibrated in a second calibration to the same uniform color space. The
      input RGB color data from the input device is collected, and is converted
      to uniform color space data in accordance with the first calibration. The
      uniform color space data is then converted to output CMY color data in
      accordance with the second calibration. Finally, the output CMY color data
      is outputted to the output device.

Id., col. 2:19-31. In light of the prior art," an

----------

create a genuine issue of fact that would preclude summary judgment,
particularly when the 56.1 Statements and other evidentiary submissions show
that there is no such issue.

      (11) The application for the Walowit patent was filed on January 13, 1989
as a continuation-in-part of a patent application filed on May 11, 1987. The
application for the `58l patent was filed on November 23, 1988. The application
for the `315 patent, which is a continuation-in-part of the `581 patent, was
filed on March 20, 1992. Thus, the application for the

                                     - 37 -
interpretation of the `315 patent that was so expansive as to include the
transformation of images through device-independent color space would violate
the principle that patents are to be construed, if possible, in a way that
sustains their validity. See ACS Hosp. Systems, 732 F.2d at 1577; see also
Marquip, Inc. v. Fosber America, Inc., Nos. 99-1025, 99-1120, 1999 WL 1101387
(Fed. Cir. Dec. 6, 1999) ("Based on the fundamental principle that no one
deserves an exclusive right to technology already in the public domain, this
court has consistently limited the

----------

Walowit patent was filed after the application for the `58l patent but before
the application for the `315 patent.

            It is not possible from the submission to the Court to determine
what portion of the Walowit patent should receive the benefit of the filing date
of May 11, 1987 for the parent patent. However, it is undisputed that the `315
patent discloses matter not previously disclosed in the `58l patent. In
particular, the `315 patent "adds new disclosure about how color values are
measured, compared and corrected." Defendant Apple Computer, Inc.'s Revised
Supplemental Statement Pursuant to S.D.N.Y. Civ. R. 56.1(a), Paragraph 52. See
also Plaintiffs' Response to Defendant Apple Computer, Inc.'s Supplemental
Statement Pursuant to S.D.N.Y. Civ. R. 56.1(a), Paragraph 52. The new material
discloses, among other things, the use of color filters and the separate
correction of each primary color. This additional disclosure is not discernable
from the `581 patent. See Waldemar Link, 32 F.3d at 558. Because Claim 13 of the
`315 patent relies on the matter that is newly disclosed in the `315
application, the effective filing date for Claim 13 of the `315 patent is
therefore March 20, 1992, the date on which the application for the `315 patent
was filed. Because this is after the date on which the application for the
Walowit patent was filed, the Walowit patent constitutes prior art with respect
to Claim 13 of the `315 patent.

            However, even if Claim 13 of the `315 patent were entitled to the
November 23, 1988 filing date of the parent `581 patent, prior art would still
preclude an interpretation of Claim 13 that was so expansive as to include the
transformation of images through device-dependent color space. See, e.g., U.S.
Patent No. 4,500,919; Maureen C. Stone et al., Color Gamut Mapping and the
Printing of Digital Color Images, 7 ACM Transactions on Graphics 249-92 (October
1988).

                                     - 38 -
doctrine of equivalents to prevent its application to ensnare prior art.").

            Thus, the undisputed facts make clear that no reasonable fact-finder
could find either literal infringement or infringement by equivalence. Because
there is no direct infringement, there can be no contributory infringement or
inducement to infringe. See Met-Coil Systems, 803 F.2d at 687. The defendant is
therefore entitled to summary judgment.(12) See University of Colorado
Foundation, 1999 WL 1045095, at *3; Sage Products, 126 F.3d at 1423.

                                   CONCLUSION

            For the foregoing reasons, the defendant's motion to dismiss for
lack of standing is granted. In the alternative, the defendant's motion for
summary judgment is granted. The Clerk is directed to enter judgment dismissing
the action and closing the case.

SO ORDERED.

Dated:       New York, New York
             January 17, 2000

                                        /s/ John G. Koeltl
                                        ----------------------------
                                        John G. Koeltl
                                        United States District Judge

----------

      (12) All of the plaintiffs' arguments have been considered, including
those raised in the plaintiffs' letter of January 11, 2000. Those arguments not
expressly addressed above are without merit.

                                     - 39 -
Copies to:

for the plaintiffs:            Eliot S. Gerber, Esq.
                               Wyatt, Gerber, Meller & O'Rourke, LLP
                               99 Park Avenue
                               New York, NY 10016
                               fax: (212) 681-0810

for the defendant:             Daniel Johnson, Jr., Esq.
                               Fenwick & West, LLP
                               Two Palo Alto Square
                               Palo Alto, CA 94306
                               fax: (650) 494-1417

                                     - 40 -