From the November 1999 issue of Entrepreneur

Big companies stealing inventors' ideas isn't news. But lone inventors winning large judgments against those companies is.

Historically, individual inventors don't sue major corporations for one reason: They don't have deep enough pockets to pay for protracted and expensive legal battles.

Litigation, of course, is expensive. But suing a big company for patent infringement or misappropriation of trade secrets is a veritable wallet-buster. Cases drag on for years. Hundreds, if not thousands, of hours are spent in discovery, resulting in mountains of paper. According to the AIPLA, litigation costs in a patent infringement suit, from discovery through appeal, can range from $793,000 to about $2.5 million.

That's exactly what Ron Chasteen was facing when it came time to sue for his patent. But the inventor was willing to take the risk. It took Chasteen and his partner, John Balch, several years, a lot of money and five different law firms before they found one that agreed to take the case on a contingent-fee basis. "They were all happy to just take our money with no end in sight," Chasteen says. "We got nowhere--just a lot of bills."

Chasteen is one of a growing number of lucky inventors who, thanks to increased contingent-fee litigation, where a law firm gets paid only if its client wins, now have the opportunity to go after corporate giants and win sizable judgments.

"Contingent-fee litigation is for individual inventors and small- to medium-size businesses who would have trouble affording normal patent or trade-secret litigation," explains Joe Hosteny, a partner in the Chicago law firm of Niro, Scavone, Haller & Niro, which has tried and won several patent and trade-secret cases, including Chasteen's. "Without con-tingent-fee litigation, big corporations could steal solo inventors' ideas with no one to stop them."

Chasteen was awarded his patent for a fuel-injection system for snowmobiles in the late 1980s. He and his partner approached Polaris Industries of Roseau, Minnesota, about a deal. "When we first met with their head engineer, he told us we had made a massive leap in technology," says Chasteen, 47. Initially, Polaris wanted to buy Chasteen's system outright. But the inventor didn't want to sell. Eventually a deal was struck, and Polaris agreed to buy the systems from Chasteen. After about a year of development, Polaris pulled the plug, claiming it was going to hold off on selling fuel-injected snowmobiles.

Chasteen was dumbfounded when, a short time later, Polaris introduced a fuel-injected snowmobile. He immediately bought one and tore it apart...and found it used the very tech-nology he had developed. "We were furious," Chasteen says. "They'd simply cloned ours." Chasteen decided to sue Polaris as well as Fuji Heavy Industries, which was supplying Polaris with the fuel-injection system.

After almost 11 years, Chasteen finally got the justice--$70 million worth of it--he deserved. And his isn't an isolated case. "We're seeing more law firms taking on patent-infringement contingent-fee cases," explains Meg Boulware, an intellectual property attorney and a former president of the Alexandria, Virginia-based American Intellectual Property Law Association (AIPLA). "It's a function of strong patent law, increased awareness of intellectual property and more firms with enough resources to take [these cases] on."

Do You Have A Case?

Before you rush off to find a law firm willing to take your case on a contingent fee basis, make sure you have a case worth pursuing. "Contingent fee litigation weeds out frivolous lawsuits, because a case has to be good enough for a law firm to take, since they heavily invest their manpower on it," says Meg Boulware of the American Intellectual Property Law Association.

Take a look at attorney Joe Hosteny's checklist to see whether you have a "winnable" contingent fee case:

  • The infringing party has used your product for a long time, and intends to use it in the future.
  • The infringing party has the ability to pay damages.
  • Your patent and its file history show no obvious problems.
  • The subject matter is fairly simple, and therefore easy to explain to a jury.

For more information, go to Hosteny's Web site at http://www.hosteny.com.

Decisions, Decisions

Seven great decisions . . . and one of the worst

What a difference a decision can make. Excerpts The 75 Greatest Management Decisions Ever Made . . . 21 of the Worst (Amacom) by Stuart Crainer:

Matsushita

In the 1920s, Matsushita was struggling. Its latest product, a bicycle light, was unsuccessful. Then Konosuke Matsushita ordered his salespeople to leave a light in each store they visited. Sales took off, and so did the company.

Lesson: Seeing is believing.

Mattel

In 1961 the world's best-selling toy got a playmate. Ken became Barbie's partner for life and Mattel has been extending the brand ever since.

Lesson: Brand extensions allow companies to get more mileage out of ideas and keep products fresh.

Coca-Cola

The New Coke fiasco of 1985 was one of the worst decisions on record. So, wherein lies the greatness? The decision to go back to the original recipe was brave and (relatively) speedy. We all screw up. The brave thing to do is to hold your hands up and admit it.

Lesson: Learn, don't blame.

The Grateful Dead

The Grateful Dead established immense customer loyalty in the1980s when they decided to allow fans to tape their concerts. The result? In 1996, merchandise sales were around $50 million.

Lesson: Give respect where it's due. Loyalty is cheap; its dividends are enormous.

Johnson & Johnson

In 1982, Johnson & Johnson pulled Tylenol from the shelves, putting customer safety before corporate profit--and Johnson & Johnson CEO Jim Burke provided a lesson in openness with the media.

Lesson: React coolly and positively to crises. Don't play them down.

Dell

Michael Dell decided to sell PCs direct to consumers and built to order. Now everybody in the industry is trying to imitate Dell's strategy--too late.

Lesson: Get close to customers. Cut out the intermediaries.

Hoover

William Hoover placed an ad offering a free 10-day trial of his new sweeper. Rather than send the sweeper direct, Hoover sent the sweeper to a store near the requester's home. Hoover included a note, asking the store to deliver it and telling the store to keep the commission if a sale was made. This not only secured direct sales--it helped Hoover quickly establish a network of dealers.

Lesson: Get retailers on your side.

Intel:

One Bad Decision

"In the mid-1970s, someone came to me with an idea for what was basically the PC," Gordon Moore of Intel admits. "I personally didn't see anything useful in it, so we never gave it another thought."

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