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STRATEGY

Blood Feud

The story of a biomedical start-up sued by an industry giant for theft of trade secrets, and how the start-up triumphed.
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David Deetz's upstart company devised a $2 technology that holds the key to a $3-billion medical-equipment market. Trouble was, the Fortune 100 conglomerate he had once worked for wanted it, too. Using litigation as a strategic weapon, the big company almost won

The stock was hot. On Monday it had gone public at $13. By Tuesday morning it was pushing $15. David Deetz was getting richer by the hour.

The offering would produce $28 million for the company Deetz had cofounded: Diametrics Medical, in St. Paul, Minn. But then came Wednesday -- August 11, 1993, the day the offering was to close. Deetz was heading into a meeting when a reporter from the St. Paul Pioneer Press called, requesting a comment on the just-filed lawsuit.

Lawsuit? It was true: Pittsburgh Paint Glass, one of America's Fortune 100, had sued Diametrics for patent infringement and theft of trade secrets. The timing couldn't have been more devastating. Deetz recalls having "this sick feeling that just wouldn't go away." Dread overwhelmed anger.

Diametrics had $28 million of other people's money, and Michael Connoy, its president and chief executive, knew that when the news hit the wires on Thursday the market would chop the stock in half, triggering shareholder lawsuits. Connoy worked late into the night, talking by phone with key investors about what to do. At 3:30 a.m. on Thursday he called NASDAQ's emergency hot line and told officials not to open the trading of Diametrics' shares that morning.

On Friday Diametrics began "unwinding" the initial public offering and returning all the money raised. What didn't come back was the $501,000 spent on underwriting fees. "Going public" had netted Diametrics Medical a negative half-million dollars. And that was just the ante.

Over the next eight months the lawsuit would push Diametrics to the edge of extinction. It scared away would-be customers and employees. It diverted the company's scientific talent to the legal defense. And in legal costs, deferred business, and money lost from the public offering, the suit cost Diametrics, a promising development company with no revenues, more than $20 million.

Most people know $8-billion conglomerate Pittsburgh Paint Glass (PPG Industries Inc.) as a leading producer of paint, glass, and chemicals. But in the deindustrializing 1980s, the company made a strategic decision to offset its cyclical core businesses with a segment that offered purer growth. PPG created a biomedical division, and in 1987 it eagerly hired David Deetz, a brilliant young scientist, to start up a business unit to develop a radically new type of blood analyzer.

What PPG and Deetz pursued -- first in concert and later in competition -- was no less than a commercial-scientific equivalent of the Holy Grail -- a four-pound "black box" that would transform the business of analyzing blood. It could be used at hospital bedsides; it held considerable promise for use in ambulances and outpatient clinics. Over the past 20 years major health-care companies have spent upwards of $200 million trying to develop a portable, point-of-care device to measure vital blood characteristics: oxygen, carbon dioxide, and pH levels. The annual sum currently spent on such diagnostic tests is $3 billion worldwide, one half of that in the United States alone. Moving a test that is now performed by a costly, cumbersome benchtop machine to a lightweight portable device confers an invaluable advantage -- speed. Today doctors send blood samples from critically ill patients to a hospital laboratory and need to wait 20 minutes for results. Patients, meanwhile, can be brain-dead in four minutes for lack of oxygen. Doctors must gauge condition and needs by relying on such basic signs as the color of the patient's skin, tongue, or eyes.

Deetz's idea was to develop a portable device that would measure vital gases in less than two minutes. But of all blood tests, the one for blood gases is the toughest, because oxygen and carbon dioxide are notoriously unstable. That makes it hard to calibrate the analyzer -- to establish a reliable baseline for each test. And yet Diametrics, after three years of hard labor and $22 million in venture capital, had technically succeeded where PPG was still struggling. Moreover, Diametrics had done so by doing precisely what Deetz had urged PPG to do -- and PPG had discouraged and forbidden him from doing.

* * *

Beyond the fundamental dispute over technology, the case of PPG versus Diametrics highlights an increasingly hazardous phenomenon of the free-market jungle -- the use of the law as a business tool. Robert Mnookin, the Williston professor of law at Harvard Law School, says, "There appears to be a substantial increase in the number of commercial disputes that are taken to court" with the sole purpose of intimidating competitors. "It's quite possible to use the expected cost of a defense as a strategy to extract a settlement."

While it's common, Mnookin adds, to blame an ever-growing population of lawyers, "the initiative usually comes from businesspeople who are increasingly willing to use litigation as an element of corporate strategy." That impulse dovetails, says Mnookin, with the "increasing impermanence of intellectual property." In today's information-based economy, intangible property can involve substantial investments and create enormous values -- but can be cheap to copy. Litigation thus becomes a form of reasonably priced insurance.

While the growth of commercial litigation in absolute and relative terms is not easy to measure, a mosaic of excess seems to present itself. Consider:

· Size has its advantages. According to a study by Joel Rogers, a professor of law at the University of Wisconsin, Fortune 1,000 companies were plaintiffs in almost 123,000 federal court cases between 1971 and 1990, about 27% of the total examined. They won 79% of the cases in which they were plaintiffs and 65% in which they were defendants.

· Lack of merit makes no difference. Tom Metzloff, a professor of law at Duke University, has examined medical malpractice cases over the past eight years. In 40% of the cases, says Metzloff, "the plaintiff doesn't win or there is no settlement." His research leads him to conclude that between 10% and 15% of those cases should never have been filed.

· The smell of blood draws a crowd. According to Securities Class Action Alert, a Cresskill, N.J., newsletter, shareholder class-action lawsuits have grown by 57% in the past four years -- while the number of companies sued has risen just 4.6%. Meanwhile, National Economic Research Associates notes that between July 1991 and June 1993, 253 of 300 class-action shareholder suits were settled -- often so the targeted company could just get on with its business.

* * *

"Look at this! we've put this whole machine on a card." Excitement rises in Dave Deetz's voice as he appraises a benchtop blood-gas analyzer in the back of Diametrics' building. The machine is a welter of pumps, valves, tubes, tanks, and dials. It weighs more than 100 pounds and costs up to $30,000. "A hospital laboratory might have 30 machines like this," says Deetz incredulously. Labs need so many, he adds, because the mechanical devices break down.

Deetz, 38, is a chemist, and his vision of the technology foresaw chemistry displacing the bulky, fallible benchtop machines. That vision materialized in the form of IRMA, shorthand for Immediate Response Mobile Analyzer. IRMA weighs just 3.8 pounds -- about equal to the operating manual of the benchtop machine. Its vital sensor function has been distilled to a one-by-three-inch plastic-and-ceramic card that costs less than $2 to manufacture. IRMA retails for $5,000 -- about the cost of the benchtop machine's annual maintenance contract. It takes five minutes to learn how to operate IRMA. It takes five days of training at the manufacturer's facility to learn how to run a benchtop machine.

The quest to bring IRMA to life began 12 years ago, when Deetz was an electrocardiogram technician on the emergency-response team at the University of Minnesota Medical Center -- awake at times for 20 hours, scrubs on, beeper tuned. In his three years there, Deetz figures he saw 150 people die, some of whom might have been saved if doctors had had immediate, accurate readings on the state of patients' vital blood gases. That's when Deetz first had the vision of a bedside device. It assumed urgency because his father had once had a heart attack. "I kept thinking, 'Boy, I'd hate that to be my father and have doctors guessing wrong."

That led Deetz to learn everything he could about sensor technology. He took a 50% pay cut to go to work for Honeywell, where he began by soldering personal-computer boards. Soon he was writing grant proposals, even though he lacked one necessary credential. "I was told, 'You can't do that; you don't have a Ph.D." Deetz was working on his doctorate at the time and went to the chief scientist, who signed off on Deetz's proposals, telling him, "We'll assign the money to someone else, but you can run the program." Within two years Deetz was running a lab with 14 researchers, many of them Ph.D.'s.

In 1986 Honeywell sold one of its European divisions to PPG. Deetz, already well known to the managers at PPG's biomedical division, came into increasing contact with them after that deal. "They liked my passion," he recalls. "I'm idealistic. This is a quest for me." PPG, which was then considering buying a sensor business, invited Deetz to its Pittsburgh headquarters and asked him to lay out his thoughts on where sensor technology was headed. Deetz spoke off-the-cuff for two hours on his deeply felt view that chemistry would revolutionize the technology. PPG offered Deetz a job on the spot.

PPG eventually decided to start its own sensor unit rather than acquire one. The company sent Deetz to La Jolla, Calif., where it had an association with Scripps Hospital, to set up a sensor unit. Deetz got it up and running in June 1988. The team produced a prototype analyzer in seven months -- after a consultant told PPG it couldn't be done in less than a year. That won the unit PPG's Gold Focus award, which recognizes unusual effort in research. Deetz was invited back to Pittsburgh to address all 600 managers who worked in research and development at the company. "We were hailed as the wave of the future," he recalls.

* * *

Deetz saw the prototype as a worthy first step. "I thought, 'Now it's time to dig down," he recalls. And that meant cracking a critical technological riddle that had vexed many others -- calibration.

Calibration is akin to tuning a piano. The analyzer goes out of tune and must be calibrated prior to every use. There were ways to calibrate the PPG point-of-care device modeled on the large benchtop devices, but those techniques were mechanical, inexact, and inelegant. They did not square with Deetz's vision that chemistry would supplant mechanics and make calibration automatic and transparent to users.

Deetz's inspiration came from Walt Sembrowich, 13 years his senior. Back in 1982 Sembrowich, a Ph.D. chemist, had founded Arden Medical Systems, in Minneapolis. Arden made equipment to analyze electrolytes in the blood. While Deetz was still at Honeywell, somebody brought in one of Arden's sensor "cards" and an accompanying plastic pouch of water, technically called a water-vapor battery, used to calibrate Arden's analyzer. Honeywell's scientists, used to working with state-of-the-art laboratory tools, considered the Arden device primitive. Deetz recalls them "sitting around laughing at this thing." Deetz, who knew otherwise, called Arden immediately. He and Sembrowich subsequently met over several lunches, with Deetz telling his newfound soul mate, "Someday you and I have to find a way to work together."

At PPG, Deetz believed he could use Sembrowich's sensor card and battery as his conceptual building blocks. To calibrate the blood-gas analyzer, Deetz needed to devise a carbon dioxide version of Arden's water-vapor battery. But because blood gases are chemically more complex than electrolytes, creating a carbon dioxide "gas" battery would prove more challenging than producing the water-vapor battery.

Deetz fixated on the technology. "My feeling was, 'We have to do this. We can't compromise on this." Unlike him, claims Deetz, many managers "feel pressure to release products too early, and they get hurt doing that." He adds, "This is a life-and-death test. It's like a pacemaker. It's got to be right."

Meanwhile, Deetz had hired Sembrowich as a consultant in April 1988, soon after Sembrowich left Arden, which had been sold to Johnson & Johnson a year and a half earlier. Deetz, as head of R&D, recruited another consultant, Doug Hillier, to write the business plan for the new division and subsequently persuaded him to become the sensor unit's general manager. In effect, Hillier became Deetz's boss in La Jolla. Meanwhile, Hillier was quickly proving to be a deft corporate player. His earlier consulting work for PPG gave him standing among managers in the corporation's marketing department. Hillier had initially resisted coming to work full-time for PPG until Deetz filled him in on his plans. "His eyes really lit up. He said, 'This may be the product of the decade," recalls Deetz.

* * *

In early 1989 in the wake of the successful prototype development, Hillier wrote a glowing performance review of Deetz, noting that he had done "an outstanding job in setting up the sensor facility." Giving Deetz a raise and a bonus, Hillier concluded that Deetz was "working at greater than 100%."

As head of R&D for the unit, Deetz proved to be a maverick manager. He ran the unit like a family, buying a $165 grill for the deck at the office, something around which team spirit could flourish. When managers in Pittsburgh called and on more than one occasion were informed that Deetz's unit was "out grilling on the deck," eyebrows were raised.

Deetz's unorthodox style did not sit well with everyone. "He's probably one of the five top guys in the world in his field. He's a star. He's quick -- for some people almost too quick," says one observer. Deetz's cause in La Jolla was the carbon dioxide battery, and he did not shrink from championing it. But as he began to push, corporate inertia pushed back. Getting into production, not crafting breakthrough technology, was PPG's priority. Moreover, Deetz met with skepticism from his fellow scientists. No one else believed that the gas battery could be developed. Even Kee Van Sin, a scientist on the team who would later follow Deetz to Diametrics, says, "The gas battery was not in the mainstream. I was the one closest to it, and I didn't think it would work."

Those doubts and pressure from PPG to produce clashed with Deetz's commitment to the gas battery and resulted in nothing less than mutiny in late April 1989, when Hillier sent Deetz out of town to a symposium. In Deetz's absence, the scientific team met and took a secret vote on what calibration technique to pursue. The members chose a more conservative approach that they believed they could make work.

When Deetz returned he was told by Hillier that he had to fall in line and support the alternative approach. "I was unwilling to go along with the consensus that we were done," says Deetz. "Why all of a sudden were all those people just marching blindly into this project?" Hillier subsequently brought in an industrial psychologist who did exhaustive interviews -- up to four hours in length -- of the scientific team to determine the psychological makeup of its members and their ability to get along with one another. That was a ploy, claims Deetz, simply to marshal more evidence to show that Deetz was not a team player. Hillier subsequently moved up Deetz's performance review from January to October. That review gave Deetz the lowest marks possible except for a category dubbed "takes responsibility for his actions." Finally in December Hillier fired Deetz, claiming he was dividing the scientific team.

* * *

Deetz returned to Minnesota in January 1990 and reconnected with Walt Sembrowich, who had started another company to build glucose analyzers. In April they joined forces and incorporated Diametrics Medical. Sembrowich was a believer in the carbon dioxide battery -- mainly because he was a believer in Deetz. "I have a lot of confidence in Dave's ability to think things through. If he tells you he thinks he can make something work scientifically, it's going to work."

Sembrowich had witnessed Deetz's brilliance -- and his tenacity -- firsthand. He recalls Deetz's persistence in persuading him to be a consultant at PPG. "I had just called Dave. I told him I was leaving Arden Medical. He flew out from San Diego. I drove home from work on my last day, and he was parked in my driveway. He said, 'We gotta talk.' I told him I was burned out. I was gonna take the summer off and play golf. The next Monday I was in San Diego."

Diametrics would go on to raise $22 million in venture capital. It set to work on developing the technology. Deetz hired a Ph.D. chemist, Russ Morris, who developed a computer model of the battery's complex chemistry. "There are 30 different chemical activities taking place at any one time in the battery," says Morris. "It's not Einstein stuff. It's puzzle work."

The puzzle took more than two years to solve. The U.S. Patent Office issued Deetz and Morris a patent for the carbon dioxide battery on July 27, 1993. The patent ran to 200 pages and described a humble-looking device, a sealed plastic pouch of water about two inches square. The battery -- the "enabling technology" -- contained as much carbon dioxide as the air on one floor in a good-sized office building. It made it possible to calibrate the analyzer, and made IRMA reliable and easy to use.

The gas battery that Deetz had fought for in vain at PPG would cost Diametrics less than 2¢ to manufacture. And it would unlock a $3-billion market.

* * *

While Diametrics was breaking through, PPG was struggling, the trial transcript reveals. In December 1991, it introduced a portable analyzer, called Statpal I, that featured a manual calibration system. PPG projected sales of the device in 1992 at $9.8 million. The Statpal I actually produced $400,000 in revenues in 1992 before PPG withdrew it from the market.

PPG replaced the machine in December 1992 with Statpal II, projecting $10 million in sales for 1993. Through July 1993, sales of the Statpal II amounted to less than $500,000. An internal PPG report from marketing to Doug Hillier noted that "failure rates appear to be greater than 15%." Referring to the calibration process, the report further stated that "some characterize our procedure as a step backward from the highly automated conventional systems."

PPG headquarters, eager for profits, seemed to be losing its stomach for investing in the business. When scientists left the company, it often did not replace them. By early October PPG had decided to sell off parts of the biomedical division. A June 1992 memo from PPG's D.R. Wallace, head of business development, to its chief financial officer pegged the sensor unit's value at $10 million. A May 1993 memo from the CFO to Wallace suggested "exiting sensors," noting, "the overall business can't continue to support annual losses of $8 million. Sell license to cut losses and keep participation in future profits."

Meanwhile, Diametrics was readying to go public, looking to raise nearly $28 million -- on top of the $22 million it had already attracted from private sources.

* * *

When PPG sued Diametrics, it had never seen or touched IRMA. That stunned Deetz and Sembrowich. "It's like accusing someone of a crime before you've made a reasonable effort to find out if a crime has been committed," says Deetz. He continues, "We worked hard to keep away from PPG's domain. Anytime we thought we were close to their patents, we talked to our lawyers." That happened, he adds, "four or five times."

In filing its suit, PPG, pleading grave injury to a business that was going nowhere, had gotten a Minnesota federal judge, Diana Murphy, to sign a temporary restraining order (TRO) without notifying Diametrics or its lawyers. That was a breach of the federal rules of civil procedure. PPG hadn't even served Diametrics with the complaint before filing it with the court -- a few days into Diametrics' IPO but three years after Deetz and Sembrowich had started the company.

A PPG spokesperson and PPG's Doug Hillier reply that PPG sued as soon as it became aware of Diametrics' technology and was "confident" that trade secrets had been violated. However, the discovery process revealed that PPG had actually gotten hold of Diametrics' private-placement documents describing its technology in mid-1992 -- a full year before the IPO. Even more striking, claims Ron Eibensteiner, an early investor and cofounder of Diametrics, "Doug Hillier called me to have dinner the month we started the company. He said, 'I'd like to be an investor as well as a director." Eibensteiner adds, "He was extremely intrigued by our concept for a blood-glucose product, and he was aware we were going the blood-gas route."

Those issues raise a critical question. Was PPG's lawsuit timed to coincide with the IPO and do Diametrics maximum damage? Certainly PPG's law firm, Brown and Bain, with an office in Silicon Valley that does a great deal of trade-secrets and corporate-finance work, knew that a well-timed suit could torpedo a nascent stock offering.

When PPG's lawyers filed their complaint and got Judge Murphy to sign a temporary restraining order, they neglected to tell her that Diametrics was in the midst of its IPO. When Murphy learned about the IPO, she was angry. "In the fourteen and a half years I've been here I've granted a TRO without notice twice," Murphy says. "As soon as I found out about the initial public offering, I dissolved the TRO."

* * *

Diametrics had to get to court fast. After returning investors' money from the aborted IPO, the company had just $7.1 million in the bank. Still in product development, it was burning up $800,000 a month. In short order, four lawyers would be working on the defense. A case of this complexity takes 18 to 24 months to prepare. Diametrics' management figured if it couldn't get to trial in 90 days, the company would be out of business.

During the discovery process, PPG unloaded 200,000 pages of documents on Diametrics. By the same token, recalls Sembrowich, "they wanted us to produce every document in the company. We had to bring in additional computer printers, and we set up a war room here." From Labor Day until the trial started, in late November, Sembrowich put in 12-hour days helping lawyers prepare the case.

The trial started in federal district court in Minneapolis on November 22 -- and ran for all of one day. It would not resume until January 10. Time, as much as PPG, was now Diametrics' enemy.

Today's crowded court calendars only intensify the impact of litigation, with the big and the strong benefiting by delay. "As a result, people who are sued often settle just to get it over with even though they have no liability," comments Richard Willard, a partner in the Washington, D.C., law firm of Steptoe & Johnson.

Theodore Eisenberg, a law professor at Cornell who has studied the clogged-calendar phenomenon, says, "It's now harder to get a federal civil trial date because of the growth of criminal cases." (Criminal cases take priority over civil cases.)

Even though Judge Murphy claims that the Diametrics case was put on a fast track, it still was bumped three times by criminal cases. Murphy adds that at any time the court is juggling 350 complex cases. These days she presides over not just elaborate drug-conspiracy cases but labyrinthine white-collar crimes that previously went to state court.

* * *

In early January, Diametrics, running low on cash and hung up in court, had to raise more money from investors. The founders sold 1.3 million shares of stock at $6.21 each -- shares that had fetched twice as much in the public market six months earlier. "That diluted us even further," says Sembrowich. The management, preparing for the worst, drew up a plan reducing salaries between 10% and 40% and projecting layoffs.

Judge Murphy, meanwhile, assigned a mediator to try to broker a solution. The mediator told Diametrics' CEO, Michael Connoy, "You have an 800-pound gorilla sitting on you, and it's not about to move." PPG first wanted $58 million and the technology, which it would consider licensing back to Diametrics. Connoy recalls, "We told them, 'Are you nuts? The technology is not about to change hands.' That was the only thing that could have added value back to their business." PPG never budged from its demand for the technology, and negotiations died that day after eight grinding hours.

In late January the court calendar opened up again, and the trial resumed. By month's end the trial was half over. The judge threw out one of PPG's three claims -- that Diametrics' device copied PPG's design. (PPG's patent lawyer couldn't even identify the novel features of PPG's machine.) Diametrics also appeared to be scoring points on the more central claims, regarding ownership of the sensor card and the gas battery. Suddenly, PPG wanted to settle. Diametrics, which had filed a counterclaim against PPG looking for damages from what it deemed a frivolous lawsuit, refused.

But then came February and March, when there were no court dates. Diametrics was running out of money, and in the words of one of its attorneys "needed a result." The court system could not ensure that. The management decided to settle.

CEO Connoy recalls, "I had told Dave and Walt they might have to make personal sacrifices in favor of a sound business decision. Early on they were mad, and they wanted to countersue. But they needed to consider the company's health." Connoy told them the longer they stayed in court, the sooner they'd be out of business.

* * *

It cost Diametrics $5.25 million to settle with PPG. (For a breakdown of the costs, direct and indirect, see "De Facto Injunction," page 7.) For that sum PPG relinquished all claims to the technology. Diametrics, in effect, bought back its freedom.

Walt Sembrowich asserts that Diametrics' innocence was blindingly obvious. To begin with, the technology traces back to the early 1980s and Sembrowich's former company, Arden Medical. The conceptual building blocks for the technology were the sensor cartridge and the liquid battery, both developed at Arden, and much of which was in the public domain. "We spent three years and $22 million developing that technology," says Sembrowich. "If we stole PPG's technology, we must be the dumbest thieves of all time."

Sembrowich asserts that to take a shortcut to the market, "PPG took a giant step backward by taking a mechanized function and manualizing it." Diametrics, in contrast, took a step forward because it transformed a mechanical step into an elegant chemical one. When PPG realized that Diametrics had actually solved the calibration issue and would raise a lot of money from investors, it set out to steal the technology under the guise of a lawsuit alleging trade-secrets and intellectual-property theft.

CEO Connoy says, "Just because you worked on something doesn't mean you developed it. You can't own an idea. PPG couldn't claim ownership of the concept just because they did a couple of flawed experiments." In the language of patent law, a concept must be "reduced to practice" for ownership to be assigned. PPG couldn't patent the technology because it couldn't master it, claims Connoy.

Diametrics' investors and employees were adamant about not settling with PPG, but the management, when faced with the obliteration of the company, saw no choice. Deetz says, "It makes you sick. All your friends in church see that you settled, and they wonder, 'You paid them millions. That's a lot of money. You must have taken something.' " Deetz's response to that is emphatic. The settlement was nothing more than a ransom payment. "If someone kidnaps your child, you'll pay to get the child back," he says. "You know it's not right, but you have no choice."

* *

Doug Hillier, general manager of PPG's sensor unit and Deetz's former boss, points to the settlement as evidence of Diametrics' guilt. "Diametrics took something of ours, and it had value." And yet the trial transcript notes that PPG scientists' notebooks revealed that PPG had spent just five person-days running experiments on the gas battery. Diametrics spent three years, creating a device so complex that the patent description runs to 200 pages.

If PPG felt that the technology had so much "value," why didn't it push more to develop it? "We found a better way to do calibration," responds Hillier, who adds, "I wouldn't trade our product today for theirs." (Asked where the gas battery came from, Hillier replies, "It may have come from Deetz.")

On a related note, one overture from PPG during the litigation was to merge the two companies. Isn't that evidence that PPG was trying to gain access to something that Diametrics, not PPG, had developed? "I was not privy to the possible marriage of the two companies," Hillier replies. That seems unlikely given Hillier's position as head of the sensor unit.

Finally, PPG seems to be admitting failure or lack of interest in the biomedical business. It has already sold off its other units. The sensor unit forms the bulk of what remains, but the company adds that it, too, will likely be sold.

* * *

It is tempting to ascribe the case of PPG versus Diametrics to corporate skulduggery, but that is really a subplot. Beneath the high science and legal intrigue lie baser motives that explain the costly litigation and waste of resources. At the core of this tale are such inevitable human failings as envy, pride, and spite.

When asked if this case really boils down to one of professional jealousy, Hillier concedes that "there's an element of that." He refers to Arden Medical -- which PPG once tried to buy -- as a "hoax." He labels Deetz deceptive, claiming that once, meeting him at a trade show, Deetz told him Diametrics was working in the "agricultural area" -- even though Hillier learned early on about Diametrics' objectives through one of its cofounders, Ron Eibensteiner.

Hillier insists that PPG's calibration technology is superior to Diametrics' and says a major flaw in Diametrics' product is that it is not "cost-effective" -- even though investors and analysts seem to cite that very feature as a rationale for sinking millions into Diametrics. Diametrics can already manufacture its sensor card for about $2 and sell it for more than $10. Several companies have sought to license the technology, and dozens have inquired about distributing IRMA.

The tenor of Hillier's remarks ultimately reflects the pressures for profit and the hunger for glory. "Doug's a very opportunistic and vindictive person," asserts Ron Eibensteiner. He claims that the suit was kindled by Hillier's jealousy of Deetz's technical acumen and Deetz's resentment at having to submit his technical judgm

Last updated: Nov 1, 1994




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