Payoff Appears Near for Patlex in Battle Over Laser Patents
“As a patent attorney,” said Richard I. Samuel, “you get calls once or twice a year from someone who invented fire, or someone trying to patent the wheel.”
The calls usually don’t amount to much. But that wasn’t the case with an inventor named Gordon Gould, who maintained he was entitled to a patent for the laser.
In 1975, Gould met Samuel, who was then practicing patent law in New Jersey. The eventual result was Patlex, a Chatsworth laser concern whose main goal is to win the patents Gould has been seeking for 27 years, thereby profiting from the booming laser industry.
Just who invented lasers is not clear. The basic patent was obtained by Bell Laboratories in 1960 for work done by Charles Townes and Arthur Schawlow, both of whom later won Nobel prizes for laser research.
But for close to 30 years, Gould has claimed the laser as his invention. He says he came up with the idea in 1957, but didn’t try to patent it until 1959 because he misunderstood his lawyer’s advice.
In any case, the U.S. Patent Office decided Townes and Schawlow were entitled to a patent and Gould was not. He appealed but never got very far with his claims until he met Samuel, who now is Patlex’s chairman.
Successful Effort
In 1977, Samuel succeeded in obtaining Gould’s first laser patent, for a species of the device known as an optically pumped laser. Subsequent legal challenges kept Patlex and Gould from getting much money for the invention, but recent favorable rulings make it probable that now they will.
Patlex has had varying degrees of success in trying to obtain two more key Gould patents, including a sweeping “use patent” that, among other things, would cover the use of laser light beams to cut, pierce or chip materials.
Conceivably, that could apply to everything from laser surgery to compact-disc technology to President Reagan’s proposed Star Wars program. And Patlex owns a 64% interest in the income from any patents it manages to secure for Gould.
Just how valuable that interest is depends on the size of the laser market, the extent to which any Gould patents might apply and the royalty or licensing agreements Patlex works out.
All of those variables are hard to assess. Carol Black, publisher of Lasers & Applications, a Torrance-based trade journal, said the non-military laser market in the Western World is projected at $537 million for 1987. But, she said, because lasers are often only a small part of the value of a device or system, the estimated laser-based non-military systems market in the West is projected to be $5.5 billion.
The military-laser market in this country is estimated to be another $2.7 billion for the federal government’s fiscal 1987, she added. It is unclear, however, if the Gould patents would cover lasers used by the government.
Jerry Black, Carol Black’s husband and a lawyer who writes a patent column for the magazine, estimated that laser makers might have to pay 4% to 6% of their sales to Patlex under all the Gould patents.
$20 Million Yearly Foreseen
Samuel said that estimates of the laser industry vary widely, but that he foresees annual revenue of $20 million if Patlex is entirely successful, not including military lasers. If Patlex obtains the Gould patents and they are judged to cover the military, the projected annual revenue could more than double, he said.
A spokesman for the company, which had revenue of $3.7 million for the first nine months of this year, said Patlex’s income should climb next year and hit a plateau in 1988 or 1989.
A 1959 government contract awarded to a firm that Gould worked for may have exempted government contractors from any fees on Gould laser patents. The Pentagon says so, Samuel said, but Patlex disagrees. The matter will probably be resolved in the U.S. Court of Claims in Washington, which hears such cases.
Surviving Long Struggle
The problem for Patlex has been how to stay alive while it wages its protracted struggle. The company lost $1.7 million over the first nine months of this year and $6.1 million over the previous four years. The deficits largely represent the cost of Patlex’s investment in patents.
The company has long known adversity. Founded in 1972 as a building products company called Panelrama, it flopped at first and was transformed into a publicly held holding company with few assets. In 1979, it took on its present name and became a vehicle for pursuing Gould’s patents.
To get into manufacturing and gain cash, Patlex in June, 1985, bought a little Chatsworth concern called Apollo Lasers from Allied Corp. for about $3.4 million of Patlex stock. Patlex got $700,000 in cash and $500,000 in guaranteed receivables on Apollo’s balance sheet.
Allied had paid $9.8 million for Apollo in 1981, hoping it would make and market a new Allied laser technology. But the technology didn’t sell, and Apollo’s losses mounted, enabling Patlex to buy it cheap.
Patlex has diversified into laser manufacturing and research through Apollo, which has formed a joint venture with an Israeli research institute to produce advanced laser products. Patlex also bought Oram Electric Industries, an Israeli maker of transformers for the computer telecommunications, defense and laser industries, for $1 million, and recently announced it would acquire full ownership of Reshef Defense Technologies, a privately held Israeli armaments concern, in a stock deal valued at about $11 million.
Patlex acquired its 64% stake in Gould’s laser patent rights partly from Samuel’s former law firm, partly from Gould and partly from New York-based Refac Technology Development Corp., which had been Gould’s licensing agent.
Patlex moved to Chatsworth this year from Westfield, N.J., where Samuel had his law practice. Samuel, 46, who dropped his practice to join Patlex as its chairman in 1983, has been the driving force behind the company, giving Gould’s seemingly quixotic efforts a real chance for success.
“Dick Samuel was a student of mine,” said Irving Kayton, a patent expert and professor at the George Washington University Law Center. “He’s an outstandingly good lawyer.”
Samuel also holds a bachelor’s degree in electrical engineering and worked in that field before attending law school at Boston College. His engineering expertise came in handy when he met Gould: after reviewing the documentation for Gould’s inventions and the related court rulings, Samuel decided he had a good case.
In his younger days, Samuel was a liberal political activist, and even managed to get arrested at the 1968 Democratic National Convention in Chicago, to which he was a delegate from New Jersey.
Gould’s three patent efforts are at different stages.
Gould’s optically pumped laser patent is faring the best. The patent was issued to Gould on Oct. 11, 1977, and was just upheld by the U.S. Board of Patent Appeals and Interferences in September. The board is an administrative body that hears patent appeals, and its rulings can be challenged in court, but Patlex does not expect any further appeals.
The optically pumped laser patent covers about 40% of the laser equipment market, according to a Patlex lawyer, Casey Heeg.
Another possible patent is for the gas-discharged laser, which the U.S. District Court in Washington ordered the Patent Office to issue to Gould last December. The Patent Office is challenging that ruling in the U.S. Court of Appeals in Washington, and meanwhile, the patent has been stayed.
Heeg said gas-discharged lasers constitute about 40% or 50% of the laser-equipment market, and are used in surgery and industrial cutting and drilling.
The third key patent Gould wants is the use patent. It was issued to Gould by the Patent Office in 1979 but was delayed by challenges from General Motors and Lumonics, a Canadian company.
Then, in September, the patent was rejected by the Board of Patent Appeals and Interferences. Patlex said it plans to appeal today in U.S. District Court in Washington, D.C.
Patlex also owns or has an interest in several other patents or licensing rights. These include a fourth Gould patent application still pending for something known as the Brewster Angle Window, which is a way to let light out of the laser while minimizing power loss.
Heeg said this application was rejected by the Patent Office, a decision that Patlex is appealing to the Board of Patent Appeals and Interferences. PATLEX AT A GLANCE Patlex is based in Chatsworth, where it has a research and manufacturing business called Apollo Lasers. The company also is litigating to secure laser patent rights for inventor Gordon Gould. Patlex, which employs 55 people, would receive 64% of the revenue from any patents it wins for Gould.
