"So DM dropped the ball in regards to the correct prior art regarding the encryption patent and produced it too late for consideration "

Not really, the origination of this application(first application 2004) goes back to other problems of which DM had no involvement. That cost time...like 3 years...

A second application 2006 was subsequently initiated that was not by DM. The prosecution was on going when DM took over the case.

They then caught up with the problem as things were progressing under prosecution ....calumniating to were it is now.

The examiner would know this, however he made the comments as if he is entirely unknowing of the history of the applicationS.

doni