After Several Lean Years, Patlex Begins Its Big Roll

Four months ago Richard I. Samuel, chairman of Patlex Corp., estimated that in the next two or three years the Chatsworth company would triple in size. He was wrong. After last week’s events, it now seems likely that Patlex will triple in size this year.

Although Patlex is a tiny laser company, its main business is in helping Gordon Gould, 65, a laser pioneer and the company’s vice chairman, get laser patents that he applied for in the late 1950s. In return for a share of the licensing fees, Patlex also helps Gould collect fees from the manufacturers and users of his technology.

For years the effort yielded little. Gould’s patent applications have been challenged by the U.S. Patent Office and by laser companies that would have to pay royalties if Gould won the patents. As the fight dragged on, what licensing income Patlex received was overwhelmed by its legal bills, leaving the company with $9 million in losses over the past six years.

That situation is rapidly changing. Last week the U.S. Patent Office awarded Gould the second of three key laser patents. And in Orlando, Fla., a federal court jury agreed with Patlex’s contention that Control Laser International, an Orlando-based laser concern, infringed on one of those patents.

Company Yields Control

With Control Laser facing the possibility of having to pay a multimillion-dollar damage award to Patlex at a time when its business is floundering, it agreed to cede control of the company to Patlex.

Patlex also announced last week that three other companies--3M Corp., Quantronix and Laser Industries--have joined such corporations as International Business Machines and General Motors, and signed agreements with Patlex to pay royalties for using Gould’s technology.

The result: Patlex expects its revenue this year to top $17 million, compared to $6 million in 1986, and Samuel expects the firm to earn its first full-year profit. The company did not disclose its estimated earnings, however.

Patlex now has a lock on two lasers that, analysts said, account for between 80% and 90% of the $500 million of non-military lasers that will be sold in the United States this year. How much money Patlex actually receives depends on how many laser manufacturers it licenses, and what royalty payments the companies negotiate.

According to the company’s deal with Gould, Patlex receives 64% of any licensing income from his patents, Gould gets 20% and Refac Technology Development, Patlex’s biggest stockholder, gets 16%.

“They’re in a very strong position” following the recent events, said Christopher A.H. Lewis, managing director of MacKay-Shields Financial Corp., a New York money manager that owns about 330,000, or 6.6%, of Patlex’s 5 million common shares outstanding.

The Control Laser case in particular “sends a signal,” Lewis said, that if users of Gould’s patented technology refuse to pay royalties, Patlex “can take you to court with more muscle.”

Not surprisingly, Patlex’s stock has jumped. After dropping to $5.75 a share during the stock market crash three weeks ago, it has more than doubled, closing Monday at $12.50, down $1.25.

‘Gas Discharge’ Laser

The patent Gould won last week involved a so-called “gas discharge” laser. He already owned the patent on the other major type of laser, the optically pumped laser. The names refer to a laser’s power source; one uses light, and the other uses an electrical discharge in a gas.

The patents Gould has won thus far apply to the manufacture of lasers. But Casey Heeg, Patlex’s litigation counsel, said Gould also is fighting in U.S. District Court in Washington to secure a “use” patent, which covers certain uses of lasers that Gould claims to have pioneered. If Gould wins his case, anyone using a laser in those ways would be subject to the patent.

Gould was issued a use patent in 1979, but challenges have forced Patlex to go to court to uphold the patent. Heeg said the company is confident of winning the case.

Gould also is seeking a fourth patent for a type of laser technology used in holography, which is a method of making three-dimensional images. The Patent Office rejected Gould’s application, so Patlex took the issue to the office’s appeals board.

On Friday, Samuel and three other Patlex representatives took charge of Control Laser’s seven-member board of directors. Control Laser’s chairman, Robert D. van Roijen Jr., resigned at Patlex’s urging and was replaced by J. Alan Krul, head of Control Laser’s main operating unit, which mainly makes industrial lasers.

Control Laser also gave Patlex warrants, convertible debt and voting power of some existing shares that, if all were exercised, would give Patlex 54% of its stock, worth more than $2.5 million.

Control Laser agreed to those terms because the company, which lost $4.5 million on revenue of $14.7 million last year, “was not in a financial position” to pay the $2 million-plus in damages, said J. Richard Crowley, Control Laser’s controller.