Surprise Attack

Rising Tide

Now that you have this bit of historical background, I'll explain the emergence of the submarine patent. Before 1995, when a patent was filed with the PTO, there was a possibility the issuance of that patent could be delayed for many years. Once the patent was granted, however, the inventor had 17 years of protection from the patent issue date. There are documented cases where patents were pending for more than 40 years before finally being issued.

Now, I'm sure most of you are thinking you'd like your patent to be issued as soon as possible to protect your idea. However, let's say you came up with an idea in 1970 for a "computer on a chip," and for various reasons, your patent wasn't issued until 1990. In the meantime, companies such as Texas Instruments (TI), Intel and others had also developed this technology and were selling it. Then, like a submarine, your patent finally emerged--with a filing date preceding their development. According to the former patent laws, TI and Intel would be violating your idea, and you'd be entitled to sue them for patent infringement.

The above example is actually a true one. Gilbert P. Hyatt was granted a patent in 1990 for the rights to the single-chip microcontroller that he filed a patent application for back in 1970. Although TI also had a patent for a single-chip microcontroller, because Hyatt's patent was filed before TI's, he now had the rights to the idea for the next 17 years. No one in the semiconductor industry had even heard of Hyatt or his patent until its 1990 issue. According to a June 1996 New York Times article, Hyatt had collected $70 million in royalties by 1992. But in 1996, a court decision overturned his patent.

The most notable inventor to benefit from submarine patents is Jerome H. Lemelson. An engineer who never manufactured any of his ideas and rarely even made prototypes, Lemelson accumulated nearly 500 U.S. patents throughout his life. Because he never personally tried to commercialize any of his ideas, his critics argue that he unfairly manipulated the patent system. He is criticized for coming up with ideas, then purposely delaying the issue of patents on them. In the meantime, companies would unwittingly spend their time and money developing the idea--only to have Lemelson's secret patents get issued, stealing their profits.

According to press reports, by 1994, Lemelson had collected more than $500 million in royalty fees from his patents, including those for bar-code scanning and the "machine vision" method used in assembly-line manufacturing. According to American Lawyer magazine, Lemelson's attorney, Gerald Hosier, made $150 million in fees in a single year from lawsuits resulting from Lemelson's submarine patents. Since Lemelson's death in October 1997, his heirs have continued the legal battles to collect more royalty money. Just this past June, the Lemelson Foundation reached an undisclosed settlement with Ford, General Motors and Chrysler over a patent battle that had been raging since 1989.

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This article was originally published in the November 1998 print edition of Entrepreneur with the headline: Surprise Attack.

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