Patlex to Get Long-Sought Laser Royalties : Spectra-Physics Pact May Double License Revenue

Times Staff Writer

Patlex Corp. said Wednesday that Spectra-Physics Inc., the world’s biggest laser manufacturer, has agreed to pay it royalties on its long-disputed laser patents. The deal represents a major financial boost for the $17-million-a-year Chatsworth company.

Patlex receives 64% of the royalty income from laser patents held by Gordon Gould, a laser pioneer and Patlex vice chairman. The company shares the royalties with Gould because it helped finance his legal effort to secure the patents, which he accomplished in 1987 after a struggle of nearly 30 years.

Now, Patlex and Gould are using the threat of patent-infringement suits to coax laser producers and users to sign licensing pacts and pay royalties for employing Gould’s technology.

Spectra-Physics, a San Jose-based unit of Ciba-Geigy Ltd. of Switzerland, is their biggest catch. It’s also a triumph for Frank Borman, the former astronaut and Eastern Airlines chief executive who was named Patlex’s chairman in June.


Borman, who lives in Las Cruces, N.M., was hired to speed Patlex’s licensing efforts and to find ways to invest the royalties. Since Borman’s arrival, Patlex has also signed a licensing pact with Coherent Inc., a Palo Alto concern that’s the world’s second-biggest laser maker.

Although the Spectra-Physics and Coherent licenses “were both in the pipeline” when Borman was hired, he “played a critical role in closing the deal” with Spectra-Physics, Patlex President Richard Samuel said.

Big Increase Expected

Patlex, which was formed in 1979, said the agreement calls for Spectra-Physics to pay a one-time back royalty payment in addition to royalties on future laser sales. No specific terms were disclosed.


However, Samuel reiterated a forecast he made in July that once Patlex signed up Spectra-Physics and Coherent, Patlex’s ongoing revenue from patent licenses--excluding one-time back payments made by new licensees--would roughly double from its current level to about $6 million a year.

That figure includes higher royalties that some of Patlex’s existing licensees must now pay because of Spectra-Physics’ license. Patlex’s typical royalty is 5% of sales involving the Gould technology, but some companies initially got a temporary discount because Spectra-Physics and Coherent had yet to sign.

“Now we’re going to be sending a notice out raising everyone to 5%,” Samuel said.

In announcing the Spectra-Physics pact, Patlex also said it signed licenses with nine other laser producers or users and has now signed up 78 of the 200 companies that it figures are subject to paying royalties on the Gould patents. The company expects to have 180 or more companies signed by next June. And once all 200 are signed, Patlex’s annual royalty income could reach $10 million a year, Samuel said.


Patlex’s common stock closed Wednesday at $12 a share, up 25 cents, in over-the-counter trading.