Patent Fending

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Stac Electronics v. Microsoft Corp.
Few companies can say that they went up against Microsoft Corp. and won. But in 1994, Stac Electronics, a small software company, was awarded $120 million for infringement of its patent for data-compression technology. Microsoft was awarded $13.6 million for trade-secret misuse. Ultimately, the two companies signed a cross-licensing agreement. Stac received $43 million in cash from Microsoft, and Bill Gates's software behemoth invested $39.9 million in nonvoting Stac stock (about 15% of the company's shares)--a total payout of $83 million. "Most observers saw that as Microsoft's essentially writing an $83-million check," says Constance Bagley, who teaches at Stanford Business School. These days the two former litigants are the coziest of buddies. "On the software side and on the hardware side, we've been working with Microsoft, and we're quite happy with the relationship we've had," says Gary Clow, CEO of the San Diego-based company. "The settlement has been very beneficial to us."

Peter Roberts v. Sears Roebuck & Co.
In 1965, Sears paid Peter Roberts, a 20-year-old former clerk in one of its Massachusetts stores, $10,000 for the rights to license his patented design for a "quick release" socket wrench. At the time, Roberts later argued, Sears suggested that the tool's marketability was limited. Over the next 10 years, some 19 million wrenches were sold, with revenues on the product topping $44 million. Roberts filed a suit in 1969 to rescind the original agreement. A series of legal victories from 1978 to 1982 culminated when a federal judge awarded Roberts $8.2 million, but that decision was overturned on appeal. The scenario ended with an out-of-court settlement in 1989, the terms of which remain confidential. "I'm right; they're wrong," Roberts reportedly said during the litigation. "I've wrapped up a majority of my life around the thing. I'm just trying to get what is justly and rightly mine."

Intex Plastic Sales Co. v. Charles Hall
According to lead counsel Jack Slobodin, Charles Hall was provoked into pursuing his patent-infringement claim. The California inventor had devised and built the first "modern" water bed in 1968, as part of a master's degree program at San Francisco State University. Years later Intex Plastic Sales Co., a subsidiary of a Taiwanese company, sued Hall in an attempt to declare his patent invalid. Hall countersued on the grounds of infringement. "The case is famous because a group of investors acquired part of Hall's right to enforce the patent," notes cocounsel Edward Wright. In March 1991 a six-person federal jury ruled that from 1982 to 1988, Intex had infringed on Hall's 1971 patent. The jury awarded Hall $4.8 million, about 9.5% of the $50.6 million in revenues Intex had derived from water-bed sales. Ultimately, the damages paid totaled $6.8 million, including interest. One high point of the trial: lawyer Slobodin showed the jury a tape of Hall bouncing on his water bed on an episode of The Dinah Shore Show, circa the late 1970s, in an effort to prove that Hall was indeed recognized as the official inventor of the water-bed design.

Mike Hofman is a reporter at Inc.

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Mike Hofman

Mike Hofman was previously editor of Inc.com and a deputy editor at Inc. magazine, which he joined in 1996. The site was nominated for a National Magazine Award for Digital Media in 2010, and was named the best business website by Folio Magazine. In 2006, Hofman was part of a team of writers nominated for a Webby Award for best business blog. He lives in New York City.

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