David V. Goliath Inventors invent. Big companies steal. And you can't fight it because you don't have the money to win--or can you?
By Ellen Paris
Opinions expressed by Entrepreneur contributors are their own.
Big companies stealing inventors' ideas isn't news. Butlone inventors winning large judgments against those companiesis.
Historically, individual inventors don't sue majorcorporations for one reason: They don't have deep enoughpockets to pay for protracted and expensive legal battles.
Litigation, of course, is expensive. But suing a big company forpatent infringement or misappropriation of trade secrets is averitable wallet-buster. Cases drag on for years. Hundreds, if notthousands, of hours are spent in discovery, resulting in mountainsof paper. According to the AIPLA, litigation costs in a patentinfringement 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 cametime to sue for his patent. But the inventor was willing to takethe risk. It took Chasteen and his partner, John Balch, severalyears, a lot of money and five different law firms before theyfound one that agreed to take the case on a contingent-fee basis."They were all happy to just take our money with no end insight," Chasteen says. "We got nowhere--just a lot ofbills."
Chasteen is one of a growing number of lucky inventors who,thanks to increased contingent-fee litigation, where a law firmgets paid only if its client wins, now have the opportunity to goafter corporate giants and win sizable judgments.
"Contingent-fee litigation is for individual inventors andsmall- to medium-size businesses who would have trouble affordingnormal patent or trade-secret litigation," explains JoeHosteny, a partner in the Chicago law firm of Niro, Scavone, Haller& Niro, which has tried and won several patent and trade-secretcases, including Chasteen's. "Without con-tingent-feelitigation, big corporations could steal solo inventors' ideaswith no one to stop them."
Chasteen was awarded his patent for a fuel-injection system forsnowmobiles in the late 1980s. He and his partner approachedPolaris Industries of Roseau, Minnesota, about a deal. "Whenwe first met with their head engineer, he told us we had made amassive leap in technology," says Chasteen, 47. Initially,Polaris wanted to buy Chasteen's system outright. But theinventor didn't want to sell. Eventually a deal was struck, andPolaris agreed to buy the systems from Chasteen. After about a yearof development, Polaris pulled the plug, claiming it was going tohold off on selling fuel-injected snowmobiles.
Chasteen was dumbfounded when, a short time later, Polarisintroduced a fuel-injected snowmobile. He immediately bought oneand tore it apart...and found it used the very tech-nology he haddeveloped. "We were furious," Chasteen says."They'd simply cloned ours." Chasteen decided to suePolaris as well as Fuji Heavy Industries, which was supplyingPolaris with the fuel-injection system.
After almost 11 years, Chasteen finally got the justice--$70million worth of it--he deserved. And his isn't an isolatedcase. "We're seeing more law firms taking onpatent-infringement contingent-fee cases," explains MegBoulware, an intellectual property attorney and a former presidentof the Alexandria, Virginia-based American Intellectual PropertyLaw Association (AIPLA). "It's a function of strong patentlaw, increased awareness of intellectual property and more firmswith 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 caseon a contingent fee basis, make sure you have a case worthpursuing. "Contingent fee litigation weeds out frivolouslawsuits, because a case has to be good enough for a law firm totake, since they heavily invest their manpower on it," saysMeg Boulware of the American Intellectual Property LawAssociation.
Take a look at attorney Joe Hosteny's checklist to seewhether you have a "winnable" contingent fee case:
- The infringing party has used your product for a long time, andintends 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 toexplain 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 75Greatest Management Decisions Ever Made . . . 21 of the Worst(Amacom) by Stuart Crainer:
Matsushita
In the 1920s, Matsushita was struggling. Its latest product, abicycle light, was unsuccessful. Then Konosuke Matsushita orderedhis salespeople to leave a light in each store they visited. Salestook off, and so did the company.
Lesson: Seeing is believing.
Mattel
In 1961 the world's best-selling toy got a playmate. Kenbecame Barbie's partner for life and Mattel has been extendingthe brand ever since.
Lesson: Brand extensions allow companies to get moremileage out of ideas and keep products fresh.
Coca-Cola
The New Coke fiasco of 1985 was one of the worst decisions onrecord. So, wherein lies the greatness? The decision to go back tothe original recipe was brave and (relatively) speedy. We all screwup. The brave thing to do is to hold your hands up and admitit.
Lesson: Learn, don't blame.
The Grateful Dead
The Grateful Dead established immense customer loyalty inthe1980s 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 ischeap; 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 themedia.
Lesson: React coolly and positively to crises. Don'tplay them down.
Dell
Michael Dell decided to sell PCs direct to consumers and builtto order. Now everybody in the industry is trying to imitateDell's strategy--too late.
Lesson: Get close to customers. Cut out theintermediaries.
Hoover
William Hoover placed an ad offering a free 10-day trial of hisnew sweeper. Rather than send the sweeper direct, Hoover sent thesweeper to a store near the requester's home. Hoover included anote, asking the store to deliver it and telling the store to keepthe commission if a sale was made. This not only secured directsales--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 whatwas basically the PC," Gordon Moore of Intel admits. "Ipersonally didn't see anything useful in it, so we never gaveit another thought."
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