Opinion ID: 361048
Heading Depth: 2
Heading Rank: 1

Heading: The Use of the Words Working Prototype

Text: 24 Much testimony was devoted to what the words working prototype used in the memorandum meant or would mean to the average investor. Despite defendants' position that the trial judge misdefined working prototype and reached into the wild blue yonder for its meaning, we find there was a sound evidentiary basis for the definition used by the trial court. 25 I find that the word working signifies that it does work, not simply feasible in the sense that it can be made to do so. I do, however, accept, indeed, I expressly find, that a prototype with missing parts may still be described as working if the missing parts manifestly would work. But this means would work readily in fact, not merely in the subjective good faith expectation of the speaker. 26 Leaving aside the self-interested testimony of the plaintiffs, all of whom explained what the word working prototype meant, the testimony of Richardson, Maurais, Mann, or Wemple, standing alone, was sufficient to securely anchor the court's definition; and the court, of course, was free to pick and choose from all the evidence for a definition that would fit the context of the case. We note that Laura, in answer to a question from the court, admitted that there was no working prototype of an automatic retrieval Risar. The one used in the shows was handloaded. But the district court had more than trial testimony on which to based its finding that Laura and Eng deliberately misrepresented the production stage of the FM 390 and the Risar. As noted, Supra, the confidential memorandum went through seven drafts before it was deemed satisfactory by the company lawyers. The first four drafts used the word design to describe the Risar: The Company has a Design for a Tisar which stores only written records such as business files called a Risar. (emphasis added). Attorney Gotkin testified that Laura and Eng insisted that the company had a working prototype of the Risar and that the word design be changed to working prototype. Moreover, in June of 1970, the company prepared a prospectus for the SEC preparatory to a stock offering that never materialized. In its second amendment to the registration statement, there was the following statement: 27 However, although the company has completed a laboratory prototype of its FM 390 and its first production model of a Risar there is no assurance that either system will withstand industry time tests. 28 Attorney Honig equated laboratory prototype with working prototype, but the district court could and did find that laboratory prototype meant a lesser advanced stage of development than a working prototype. The first draft of the SEC filing used the words engineering prototype. It was well within the district court's discretion to determine that working prototype meant the most advanced stage of development when compared with laboratory and engineering prototypes.