Good Move, Monty
In some aspects of technology, it is not so much what the dog has to say, but that the dog speaks at all. The fact that a microcomputer can play even a feeble round of Scrabble is remarkable enough, given the complexity of the popular crossword game. To be sure, for some time now machines that appear to think have beaten all but the grandest of chess masters, but in many ways chess is less of a programming challenge. For example, there are 225 squares on a Scrabble Brand Crossword Game, versus 64 in chess. A Scrabble program has to keep track of 100 pieces whose values can vary depending on where they are placed on the board, as opposed to only 32 chessmen with six fixed values. A chess player is used to waiting 10 minutes or longer for an opponent to move; few serious Scrabblists possess such patience; thus a computer ought to respond in 2 or 3 minutes. A Scrabble-playing device must also examine bonus-point opportunities, review the combinations of the seven letters in its rack, decide what letters to use for the game's blanks, randomly pick new tiles, monitor the remaining available letters, total up the score of individual moves, and keep a running score of the contestants. At the same time, to make itself a tough opponent, it has to contain and be able to refer to a vocabulary even more extensive than that of an articulate adult.
Indeed, the frustrating permutations involved in Scrabble that can produce mayhem among human competitors also led Byte magazine to conclude in late 1981 that, given the present limitations of speed and memory in microcomputer technology, a legitimate Scrabble program was pretty near impossible.
Certainly it would not be the first time in the annals of invention that the concept of a technical advance was being dismissed on one side of the street while some iconoclastic scientist was putting together a working model across the way. Sure enough, squeezed into an obscure corner of Chicago's Consumer Electronics Show this past June was the fruit of three years' research and development: a hand-held computer only 10 1/4-inches long, playing -- and shamelessly beating -- an expert Homo sapiens. The electronic instrument (its maker had named it Monty to give it product recognition) may not have been the biggest hit of the sprawling show, but his ability to speak at all earned the little fellow mention in The Wall Street Journal and The New York Times; a passing IBM programmer, appreciating the feat of technology, became an investor; and an admiring Nolan Bushnell, grandee of gadgeteers, was heard to comment, "They're going to make lots of money." If so, then for the two founders and early-to-join R&D people who cranked up tiny Ritam Corp. in equally tiny Fairfield, Iowa, the abstemious years at $3,000 salaries will have been worth it.
Although a state slogan proclaims "Iowa -- a place to grow," it may seem curious that sophisticated technology is sprouting in the middle of cornfields. But Fairfield, seat of Maharishi International University, is a mecca of Transcendental Meditation (it is claimed that there are more TMers there than in any other place in the country). Not a few computer programmers and engineers -- including several of the dozen who were at Ritam at the beginning of this year -- are drawn to the clarity of mind and creative energies that TM is said to evoke.
And, as Bushnell predicts, it looks like Ritam is going to make a triple-word score. With only the prototype to show, Ritam's Monty Plays Scrabble already has been selected for inclusion in the American Express Christmas catalog and the JS&A catalog (whose creator, Joe Sugarman, is well known for an uncanny ability to pick hot mail-order gadgets). Four thousand units have been sold to Saks Fifth Avenue in New York and 6,000 to Bloomingdale's, which had to get the approval of the chairman of the board for so large an order. I. Magnin & Co. and Bullock's have ordered it on the West Coast. For Ritam ("intuition" in Sanskrit), any one of these retailers can lead to nirvana. The American Express catalog alone, for instance, has a circulation of some 3.5 million, with a "key" price (the average amount of an individual order) of close to $150 -- handily, at $149.95, Monty's retail cost.
But Ritam's breathless rush to success (the company is predicting sales of over 100,000 units in calendar 1983, for revenues close to $10 million and pretax profits of $3 million) cannot be credited to the usual convoluted business plans, exploitation of marketing niches, and large infusions of venture capital. Rather, it will have come about more from old-fashioned doggedness than anything else, a rarity in technology these days.
Ritam's president, Robert J. Walls, 33, a chemical engineer by college education and a programmer by self-teaching, started laying out an attack on Monty in June 1980, together with cofounder and vice-president Jonathan P. Isbit, 33, a trained microcomputer programmer. They were joined later by another programmer, C. David Matt, 30. Before that, Walls had been absorbed by board games because, as an only child growing up in Detroit (he later went to Fairfield to become a professor of business at MIU), he played a lot of them with what had to be one of the most patient fathers in the nation. As sort of a gift to other only children, Walls decided to program electronic players of family games And why not tackle thel biggest first? Within a few months of its founding in 1979, Ritam had a crude floppy-disk version of Monopoly, the world's best-selling proprietary board game, running on the company's sole asset, an Apple computer. The computer rolled the dice, put up houses and hotels, and bartered with players for property. It also found a way to steer around the licensing problem: Parker Bros.'s board was used to lay out the flow of the game; Monty participated strictly as a player. The Apple performed well enough to attract the attention of another Transcendental Meditationist, Rogers Badgett Jr., a then-36-year-old teacher of finance at the nearby university. Badgett, who had made considerable gains in the stock market through the exercise of TM business principles, put $17,500 into Ritam's near-empty coffers -- an exemplary case of finance in itself, since the stock he then acquired is now estimated to be worth some 21 times that sum (and likely far exceeds the rate of appreciation of Rogers Badgett Sr.'s investment in the Boston Red Sox).
With that money, they began selling the item, named Monty Plays Monopoly, by mail-order. No one stopped to ask why games manufacturers bigger than upstart Ritam had apparently eschewed the wide-open electronic board game market in which, Ritam was demonstrating, you didn't need a license. The postman brought the answer soon enough: Placing modest ads in technical magazines, Ritam received responses from every continent and 33 countries -- plus one from Parker Bros. of Beverly, Mass. Parker Bros. owned the Monopoly trademark, Ritam was sternly advised. Although that status has since been affected by last winter's action of the U.S. Supreme Court, which, in refusing to review a lower court's decision, effectively held the name Monopoly to have become "generic" and available to general use (see INC., September, page 28), the decision came too late to spare Ritam's having to hire a high-powered trademark attorney.
Ritam "tried very hard" to get Parker Bros. to review its computer form of the game, hoping to interest the people there in doing the marketing for it, or purchasing the units as a dedicated game and paying royalties to Ritam. "But we couldn't get permission to speak to anyone other than several layers of secretaries," Walls complains. "Their attorneys said they're sorry, but they can't listen to us."
A company can use the trademark of another, Walls understood, so long as it is done in a proper manner. The manner they devised was to have the machine act as a player of the game -- not be the game itself. Hence "Monty Plays Monopoly" rather than, say, "Electronic Monopoly." Explains Walls, "If we didn't confuse people into thinking Monopoly was our trademark, and if the product was of high enough quality that we didn't hurt the image of [Parker Bros.'s] product, we would only be helping them, we felt." Ritam's lawyer agreed, advising them to add the registered trademark symbol to "Monopoly" and a notice that Ritam was not sponsored or endorsed by Parker Bros.
Parker Bros.'s counsel responded, Walls relates, by citing 13 points where Ritam was infringing on its rights. Ritam countered by denying all 13. "To prove it," Walls offered, "we invite you buy a copy for yourselves." But Parker Bros. declined the invoiceable offer. One day, however -- six months after Walls's initial contact -- in the batch of mail responses was a typical order penned by hand with a personal name, a personal address, and a personal check. "They made one mistake," recalls Walls. "They put it through the company mail system, so the postage meter read 'Famous Parker Games.' We knew they finally wanted to see a copy of our program." Even so, Parker Bros. continued to snub them and their mustachioed Monopoly player. Ritam didn't hear from the company again on the matter, and was never sued.
The game went on to enjoy a modest success under the distributorship of VisiCorp. Ritam "didn't make hundreds of thousands of dollars off Monopoly," says Walls, but it was enough to encourage the company to go on and develop another game player. This time, Scrabble was selected. Scrabble, Walls felt, was even better to make a computer opponent for, since it didn't have so much randomness as Monopoly. The decision might also have been influenced through a now market-wise Walls (who holds an MBA), by the fact that there are some 33 million Scrabble players in the United States almost all of them affluent adults, and that sometime in the next couple of years, Selchow & Righter Co. will have sold its 100 millionth Scrabble set. (With revenues estimated at $20 million to $30 million last year, private Selchow & Righter has been Scrabble's trademark holder since 1947 and its manufacturer since 1953; the game was invented in the Depression by one Alfred Butts, now 84.) "After our experience with Parker Bros., I thought all the game companies would be like that, so I didn't even contact Selchow & Righter," says Walls.
Ritam first developed Scrabble play on diskettes for the Apple (and later for the Radio Shack TRS-80). "I assumed we'd have to do it in the same manner," reIates Walls, "making it an opponent. We didn't really require the rights. We could have designed it so that you'd need their board to play against Monty as before." To obtain a "very nice" working advance, Ritam entered into another distribution agreement with VisiCorp, and promised delivery of an Apple version by October 1980. Based on this date, an advertising campaign was undertaken. But the program did not yield as readily as planned, and like many another overoptimistic software writer, Ritam was late with product. Meanwhile, Walls relates, Parker Bros. spotted the new advertising and notified Selchow & Righter that Ritam was now up to the same business with Scrabble that it had been with Monopoly. Inevitably, the letter from Selchow & Righter's attorneys came: Inform us of what you are doing; it sounds like a possible infringement our trademark.
The hoary company (Selchow & Righter was founded in 1867) has been involved in trademark suits in the past. It lost one involving a card game called Flinch, and had to give some ground on Parcheesi, a trademark it has held since 1874 and the oldest game trademark in the country still being marketed. (In 1944, a court allowed other manufacturers to spell the game's name difously, and, so far, the company has been successful in keeping that trademark from falling into general use; it wasn't about to let Ritam pilfer its bread and butter without strong objection.
As fortune would have it, however, an occasion for strong objection never arose. The gap between Ritam's advertising and the availability of its product gave the parties time to warily sniff each other out. "For a long while there was correspondence between the two attorneys," says Walls. "Selchow & Righter was willing to wait to see a copy of our product. They were much more cordial [than Parker Bros.] in that they didn't assume we had done something wrong. They felt there was a possibility that what our attorney was telling them was valid."
Nonetheless, Selchow & Righter's attorney refused to let Ritam negotiate with management until Ritam had tangibly satisfied them not only of the conformity, but of the very existence of the product. Selchow & Righter itself had vainly tried to develop an electronic version of Scrabble six years back, and reportedly it had spent several hundred thousands of dollars on outside consultants. Yet here were a couple of kids from Iowa telling them they were about to achieve the same spectacular breakthrough for $10,000 all told.
When, at last, Selchow & Righter president Richard P. Selchow viewed the presentation, "he was very impressed," recalls Walls. Ritam had proved that it could make a micro play a reasonable round of Scrabble. But what enticed Selchow & Righter further was the prospect of the console -- a portable, Scrabble-playing demon that could give every one of those 33 million players a run for his or her money -- even if the player lacked electricity.
Although Ritam might have something that Selchow & Righter badly wanted, Walls understood that the company still wouldn't hesitate to take Ritam to court, "even though their Washington attorney never cited one point of law to our Chicago attorney by which we had infringed on their rights." Recognizing that Ritam's imminent ability to come up with a diskless, fast-acting, smart-talking, nonsmoking, hand-held, Scrabble-playing computer was something to be reckoned with, Walls held his negotiating ground. In the course of the discussions, Selchow & Righter insisted on inserting a clause that essentially asserted that Ritam's conducting business without a license had been wrong and made Ritam promise never to do it again. "We refused that," says Walls, "because we knew what we did was not wrong."
Instead, Walls took the offense, asking to have a clause by which Selchow & Righter agreed to grant "whatever rights exist to Ritam under law or at equity." In negotiations that dragged on about as long as the French and Indian Wars, Selcho & Righter stubbornly refused. "That was incredible," says Walls. "We deserved that phrase. So there was this battle that lasted a year and a half, with thousands of dollars spent on each side." At last, Ritam won out. One of the reasons Walls was insistent is that "since we knew they were threatening to sue us, we had to have on our side the response that 'we don't care, we are in the right, and we are going to come out with this product whether you support us or not. We can't put ourselves at your mercy in that you tell us when we can market it and when we can't, or if we can and if we can't."
Although Walls concedes he didn't want to be in an adversary relationship with Selchow & Righter, nonetheless Monty was designed to be able to fly without a license, if need be. To avoid treading on the trademark, Ritam kept the point values off the letters on the key pad and was prepared not to include an official Scrabble scorecard with the set. But Walls really didn't care to make that bold a move. "We felt these two elements were important, because then you have a completely self-sufficient Scrabble set. It's many, many times a better product. The rules are all right there. If someone else came out with a similar product, it couldn't have the same portability. That's what we would gain by the granting of a license.
All this became academic when at last the two parties agreed to a licensing deal by which royalties would be paid to Selchow & Righter on gross console sales: 5% for the first 20,000 units, 6% for the next 30,000, and 7% thereafter. Walls has no regrets that Ritam didn't go it alone again. "Scrabble is a magic name. I always wanted to work cooperatively with the company, because to have the endorsement, to have their backing -- they located a package design outfit for us, and we're using their PR agency to get a mutually supportive relationship -- is much more desirable to me and certainly worth the price of a royalty." Besides, Walls decided, "we want to be in an exclusive position with any popular game we do."
Ritam hoped to begin production at a rate of 7,000 units a week this summer, using an electronic assembly house in California for Monty's innards and installing the key board and LCD unit in Fairfield. But even in the bright light of nirvana, business has its dark corners: The production line suffered delays and cost pressure. A manufactured-chip shortage struck the country, and some delicate eIectronics that Monty needed -- 128K, read-only memory chips and CMOS operating chips -- were in short supply. Ritam's original cost estimate of $40 each for materials and labor leapt 12.5% to $45 even before the first unit came off the line. Worse, the margin-squeezing trend seemed not about to abate. But Walls is determined to hold the wholesale price and is developing an integrated circuit that Ritam itself can manufacture, eliminating dependence on outside vendors. If Ritam goes into production with this chip as well, the company will expand to over 50 employees, up more than 400% within a year.
Despite Monty's coming of age and a concomitant line of credit obtained from a bank in Des Moines, Ritam is still run almost as tightly as in the old days. Even though orders are piling up, Walls refuses to carry inventory, and customers may have to wait. "If there's anything wrong with the product," he reasons, "then we don't want thousands of them hanging around." (Ritam already has found that one critical measurement was off by .05 inches and had to be corrected by hand.) And salaries are around $20,000 for an engineer. That may be well below Silicon Valley scale, but in Iowa an electronics company can get away with it. Says one Ritam refugee from New York City "I like the nice, quiet pace in Fairfield."
Looking at projected sales of $20 million for 1984, Walls feels both proud and redeemed. "This misunderstanding with Parker Bros. was a mistake," he insists. " All I needed to do was talk to somebody there and explain the situation. It isn't as if we were doing cheap work. We were taking our time and coming out with the best quality product we could. But I also understand we're a new company, and it takes a while to establish our reputation. So it took longer for them to be convinced that we were a good bet."
But Parker Bros. remained unconvinced. The two companies met in June to explore possible joint ventures. Six weeks after the initial discussion, Walls had yet to get anyone to return a telephone call.