Maverick Takes on Inventor’s Legal Team
The Story So Far
The U.S. Patent and Trademark Office issued more than 600 patents to Jerome Lemelson. His were drawing-board inventions, but when companies produced products that he felt used his ideas he sued for compensation -- and received more than $1 billion. Then one company, insisting its inventions were original, decided to try to shut down Lemelson’s legal machine.
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Robert Shillman knew that Ford Motor Co. would never let some skinny, lone inventor take it for millions. Ford was tough, tougher than Jerome Lemelson.
Shillman was founder, chairman and chief executive of Cognex Corp., a leader in machine vision technology, and he had watched as one company after another crumbled before Lemelson’s lawyers.
Lemelson would claim that he had invented machine vision and held the patents; when he threatened to sue, companies would pay him off.
When Ford decided to take on Lemelson and prove he hadn’t invented the technology car makers have used for decades to build vehicles, Shillman exulted.
Ford won at trial -- only to see the judge reverse himself a year later.
Once a higher court declined to hear its appeal, Ford buckled, joining Chrysler and GM in deciding to settle and pay royalties to Lemelson.
“You have to do what’s right from a business standpoint,” Roger May, Ford’s lawyer, said. “You can’t just spend money because it’s the cause celebre.”
Shillman disagreed.
“Ford caved,” he said. “Let’s call it what it is. They gave in to extortion.”
Of the 979 companies that Lemelson’s lawyer Gerald Hosier would win royalties from, 800 came after the Ford case concluded.
Lemelson was a hero in the tight-knit community of inventors.
“He was kicking their butts,” said Ronald Riley, Lemelson’s friend and a fellow inventor.
“He had this huge litigation hammer hanging over their head. They knew he would chew them up and spit them out if they didn’t ante up.”
By 1998, when Ford settled, Lemelson was dead. But the legal machine that made him a supremely wealthy and much feared inventor rolled on.
Hosier was sending letters to Cognex’s clients, the companies that used machine vision technology, accusing them of infringing on Lemelson’s patents.
These companies wanted Cognex to protect them against Hosier’s claims, a costly proposition for a company with about $122 million in revenue at the time.
This, Shillman could not abide.
Against the advice of his most trusted associates, Shillman decided to go forward with a lawsuit in September 1998. The suit, filed in Massachusetts, said the Lemelson patents were invalid, unenforceable and not being infringed by Cognex.
“If evil is being acted upon in the world, everybody has an obligation, especially if only you had the power. Only we understood the technology. Only we could defeat this guy,” Shillman said.
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Three weeks after Cognex filed suit, Hosier, an accomplished pilot, flew one of his private jets to New York City for a meeting at the Fish & Neave law firm.
The parties gathered in a narrow conference room overlooking the city. Hosier, who came to the meeting with one of his associates, sat at the long table with his back to the window.
This was the first time Hosier had laid eyes on the garrulous Shillman, an ebullient man, prone to jumping, fidgeting and gesticulating when illustrating points. His excitability masks a deep intelligence -- he earned his doctorate in machine vision and artificial intelligence from the Massachusetts Institute of Technology.
Hosier, on the other hand, is staid and very fit from his time spent skiing on the slopes near his Aspen mountaintop home. He is deliberate. His words are calculated and delivered carefully. He’s a lawyer’s lawyer.
“A brilliant but evil genius,” Shillman said.
The meeting turned confrontational almost immediately. Voices were raised, expletives were used.
Hosier was perplexed.
Why was Cognex suing the Nevada-based, for-profit foundation that was created in 1993 to license Lemelson’s patents? He had never gone after Cognex, only its clients. The companies that made the technology were not worth suing -- their revenues were too small. The companies that used it, however, had much deeper pockets.
If Cognex lost the case, he could bankrupt it. Cognex had more to lose than gain by taking on the Lemelson machine.
“Nobody rational would have made the decision,” Hosier said. “I think the man is certifiably insane.”
Shillman explained his demands. Hosier had to stop asking for royalties from its customers, and put $30 million in escrow so Cognex could protect itself against the liability claims that its clients were threatening.
Nobody gave Hosier ultimatums. It was as if the mouse were taunting the cat.
Hosier’s face reddened. Later, he would say he considered reaching across the table, grabbing Shillman by the throat and telling him, “We’re going to destroy you.”
Instead, he walked out.
In March 2000, U.S. District Judge Philip M. Pro in Las Vegas joined the Cognex lawsuit with one filed by Symbol Technologies and six other manufacturers of bar code technology, another invention Lemelson laid claim to and that had inspired many lawsuits.
The high-stakes court battle to decide Lemelson’s legacy would be played out not far from the casinos of Las Vegas.
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The media paid little attention when the trial started on Nov. 18, 2002. The hordes of reporters that usually accompany sensational cases were absent from the federal courthouse in downtown Las Vegas.
But lots of people were watching. Hosier had filed suit against about 400 companies for patent infringement in Phoenix, Ariz., in 2000. If Hosier failed, he would lose those cases, which had been put on hold, and perhaps $1 billion in royalties.
Hosier said it wasn’t about the money. He was protecting Lemelson’s name.
Cognex said it was fighting for something else.
“Everybody felt pressure,” said Bill Silver, Cognex’s chief of technology.
“Everybody wanted to win. [Lemelson’s] legacy was on the line, and Cognex’s very existence was on the line.”
There would be no jury. The decision was left in the hands of Judge Pro.
The trial came down to the testimony of 20 witnesses, more than 1 million legal documents and a staggering 1,300 exhibits. Over 27 days, the two sides hammered each other.
More than a year would pass before Pro issued his decision, and when he did, it sent shock waves through the patent world.
Lemelson -- and the for-profit partnership that carried on his business -- had lost. Resoundingly.
The court found that 14 crucial patent claims made by Lemelson were unenforceable under a rare defense called “prosecution laches” -- when there is an unreasonable delay or negligence in pursuing a right.
The judge also ruled that the claims were invalid for lack of a written description, and that a person of ordinary skill could not build the inventions using Lemelson’s patents as his own experts had asserted. He added that “Symbol and Cognex products do not work like anything disclosed and claimed by Lemelson.”
The companies did not demonstrate that Lemelson had “intentionally stalled” getting the patents, the judge ruled.
But he did say that “decades of delay preceded the assertion of patent claims, and Lemelson has offered no adequate explanation for that delay.”
Hosier was skiing in Canada when he received word he had lost. He couldn’t believe it.
He would later deride the judge’s decision as superficial; the lawyers have since filed an appeal, and the United States Court of Appeals for the Federal Circuit heard oral arguments in June.
“I think he basically said that this thing [the patent infringement claims] took too ... long and they made a lot of money on it,” Hosier said.
For the family it was a wrenching loss. They received condolences from friends, one of whom said Lemelson must surely be turning in his grave.
“He wasn’t even around to defend himself,” said his son, Robert.
But this was a great victory for Shillman. He had long made Lemelson’s defeat a personal crusade.
When his alma mater, MIT, accepted a huge Lemelson gift to endow a professorship and a $500,000 award for inventors, he vowed he would never give the school another cent.
Now, he was ecstatic. He threw a party at his office in Massachusetts, and he sent out a flurry of e-mail messages, crowing about Lemelson’s defeat.
One found its way to the inventor’s family.
“Your worst nightmare has just come true!” Shillman wrote. “The gravy train has come to a full stop. And, it’s only a matter of time before your victims [oh, excuse me, licensees] come after you.
“God Bless America!”
