The mortal struggle between two young companies for control of a revolutionary technology
Brett Kingstone could have been the entrepreneur to save a potential $30-billion industry from Asian domination. Instead, his high-flying start-up has been shut down -- the victim, he claims, of a conspiracy among a Colorado judge, a ruthless competitor, and a Japanese conglomerate. What's really happening? -- E.O.W.
On March 22 of this year Brett Kingstone testified on Capitol Hill before the House Committee on Science, Space, and Technology. Seated at the witness table next to the chairman of Zenith Electronics Corp., Kingstone proceeded to lay out the promise -- and the challenge -- of high-definition television (HDTV). "I do not believe it's a foregone conclusion that the United States has lost the war in HDTV development before the first battle has been fought," Kingstone said. "In our small company our goal is to take on the world's TV giants in the hopes of providing an American innovation that will leap over the existing technologies."
Kingstone unveiled a three-by-four-foot fiber-optic display screen. Made by his 10-month-old company, FiberView Corp., in Boulder, Colo., it dazzled the committee. He announced that he was ready to commercially produce six-by-eight-foot screens, surpassing in quality whatever the industry leaders, Sony and Mitsubishi, currently offered.
The committee room was packed that day. In the audience were representatives from AT&T Bell Laboratories, from the Commerce Department, and from the Defense Advanced Research Projects Agency (DARPA), the Pentagon's R&D arm. Here was Kingstone with a forum at the highest levels of government, commanding attention in the sort of setting where issues of profound economic consequence often take shape. Kingstone's session was no different from those that determined import quotas or the fate of the B-2 bomber or funding for superconductivity research. The legislators sat enrapt, presented with the energy and conviction of an entrepreneur who believed he could change the world. Brett Kingstone was all of 29 years old.
Startling as it seemed, Kingstone's presence on Capitol Hill that day was perhaps not a total surprise. By the time he had graduated from Stanford, he had already written a best-selling book on entrepreneurship and cofounded a company that made fiber-optics display signs, grossing $500,000 a year. Now, with FiberView less than a year old, the company had been chosen by Microelectronics & Computer Technology Corp. to join an eight-company consortium bidding for DARPA contracts in high-definition systems. The group included such blue-chip stalwarts as Harris, National Semiconductor, LTV Missiles & Electronics Group, and Eastman Kodak.
Kingstone's message was visionary. Fiber-optic screens would eventually replace every cathode-ray tube in use -- every computer screen on every desktop, every TV in every home. Signs, billboards, and scoreboards would one day soon be made of fiber optics, too. This was an industry America couldn't afford to lose. Yet that peril was all too real, epitomized by the VCR, the technology that America invented -- and then abandoned to Asian manufacturers. What would prevent HDTV from suffering the same fate? The answer, thought the listeners in Washington that day, lay with the likes of Brett Kingstone. With entrepreneurs such as Kingstone in the vanguard, maybe we had a chance.
Five days later, on March 27, Kingstone was back in Boulder. At 9:00 a.m. officers of the U.S. marshal burst into his offices and flashed badges. Anyone getting in the way risked arrest. The officers, bearing a seizure-and-impoundment order signed by a federal judge in Denver, proceeded to rifle through FiberView's files. Documents went out of the building by the cartload and into a large truck. Parts and machine tools followed. When Ed Payne, FiberView's vice-president of sales and marketing, protested that FiberView was entitled to have a lawyer present, the reply came that he had 10 minutes to get one. "A lot of good that did us," Payne recalls. "Our law firm is in San Francisco." Payne grabbed the telephone book and started calling local lawyers.
Behind the bust was Advance Display Technologies Inc. (ADTI), a competitor in nearby Golden. Claiming misappropriation of its trade secrets by FiberView, ADTI had persuaded a federal judge to issue an order without first allowing FiberView to respond to the complaint. In civil cases this type of order, a so-called ex parte temporary restraining order including seizure of assets, is almost unheard of.
Kingstone was incredulous. He had duly licensed two patents from the New York Institute of Technology (NYIT) and based his processes on them. The patents' assignee -- the inventor -- was a William E. Glenn, director of research at NYIT's telecommunications lab. Glenn, holder of more than 100 patents, was an Ãminence grise in HDTV. What really galled Kingstone was that ADTI appeared to be everything that FiberView was not. It represented the sort of industrial complacency he had been warning against in Washington less than a week before.
ADTI had been in business for five years. It had spent close to $10 million and struggled mightily just to produce a prototype of a fiber-optics display screen. FiberView had spent $400,000; it had simply relied on a U.S. scientist's patents and the hard work of its 12 employees. ADTI was backed by a Japanese behemoth, Mitsubishi Rayon Co., which had poured some $5 million into the company and in return received access to its fiber-optic technology.
Within a few hours, FiberView, a pioneering company in a potentially crucial industry, had been shut down by an aggressive competitor and a judge's decree. Recalls Ed Payne of the bust that Monday morning in March, "I hate to use the term, because it's so violent, but this was rape. It really was." That was FiberView's story.
Shocking as it was, the bust merely reflected a prevailing reality. Promising technologies attract predators. The payoffs are too huge for the rules of fair play always to apply. The chain of events that led to this nightmare for Brett Kingstone began six years earlier in deceptively innocent fashion, when a man named Steven R. Sedlmayr took his niece to the Ice Capades in Denver. There he bought her a small wand that glowed in the dark.
In 1977 Sedlmayr had founded a company that maintained display screens for sporting arenas. Advertisers began asking if their images could be displayed at lower cost and higher resolution. Sedlmayr studied various technologies. It was the wand, though, made of random rows of light-transmitting fibers, that really got him thinking. What if he could order those random fibers, make them "behave," as he put it? The result would be, he believed, a fiber-optic screen that could display a bright, undistorted, or coherent image.
Sedlmayr's quest led to the U.S. Patent Office, where he turned up two interesting-looking patents -- assigned to a William E. Glenn. Sedlmayr visited Glenn at his lab in Dania, Fla., in the fall of 1983, and the two men discussed the inventor's patents. Glenn says of Sedlmayr's visit, "I showed him the screens and described a way to make them. He said he was interested in licensing and would get back to me. That was the last I heard from him."
In September 1983 Sedlmayr sold his company. With money from the sale, he started Advance Display Technologies. His search, like that of others before him, was for a way to mass-produce fiber-optic display screens. No one, as yet, had done it. People had built screens by hand, but the task was unbelievably labor intensive. The only way these screens could ever become commercially viable, the only way this technology might one day make HDTV feasible, was if someone could automate the assembly process.
On March 5, 1986, ADTI raised $4.5 million in an initial public offering. This followed $1 million of capital the company had already raised privately. That money was soon consumed by Sedlmayr's many experiments, causing unease among his backers. Jeff Robinson, a major investor in ADTI, describes Steve Sedlmayr as "bizarre" and "a little goofy." He adds, "He's not a businessman."
At 16 Sedlmayr had won a National Science Foundation grant for arctic and alpine research and related solar studies. Sedlmayr went on to the Colorado School of Mines, where Fs and incompletes littered his transcript. "Knowledge was more important to me than grades," he says. By the age of 22 he was working on theoretical math and space-flight mechanics problems for Martin Marietta Corp.
Steve Sedlmayr is a nocturnal creature, given to turning up at the office late at night and working until dawn. He also has a weakness for electronic tools and gadgets. One former employee recalls him leaving the office late one day and returning a couple of hours later with $15,000 worth of personal-computer equipment. ADTI spent $1 million developing a laser as a light source for its screens. Its shop sported such exotica as a $50,000 diamond-bladed saw.
Ironically, one such binge proved fortunate. In late 1985 ADTI placed an order for plastic fiber with Mitsubishi Rayon. The order, six times larger than any other the company had received, aroused Mitsubishi's curiosity. It asked ADTI what it needed all that fiber for. Sedlmayr replied that that was ADTI's business. Mitsubishi persisted, eager for a glimpse of the young company's inner workings. Sedlmayr finally relented, charging Mitsubishi $500,000 just for the right to negotiate with ADTI. Mitsubishi paid.
That pricey overture led to a licensing agreement signed on December 31, 1986. ADTI received $5 million from Mitsubishi. Mitsubishi, it appeared, gained access to a valuable American technology of the twenty-first century. The price seemed a steal.
But even Mitsubishi's largess couldn't keep Steve Sedlmayr in lasers and diamond-bladed saws. By mid-1987 ADTI was laying people off and scratching around for cash. ADTI's Denver underwriter, R. B. Marich Inc., knew of a young entrepreneur who had experience in fiber optics. Kingstone says, "They came to me and said, 'Brett, why don't you take a look at this company as a possible turnaround?' "
When Kingstone arrived at ADTI on a December day in 1987, his impressions of a top-heavy company were affirmed. ADTI, with its marbled lobby and overstuffed boardroom, struck him as a free-spending outfit. The product it was working on, though, tempered his response. "They did seem to have an interesting technology," Kingstone muses.
Sedlmayr claims Kingstone reacted differently. "He flipped out over the technology. He said, 'Congratulations. You've done it. You've got it.' " Kingstone, like Sedlmayr, had built screens by hand when he was at Stanford. But what Sedlmayr had was a fiber-optic display screen built by machine -- not by hand.
Kingstone offered his services in various forms to Sedlmayr. He offered to sell him his contact list for $10,000. He offered to consult for the company -- at $10,000 a month. (At that rate he would have been making more than Sedlmayr.) He offered to sell screens for ADTI on commission, but appropriate terms could not be reached. Kingstone then offered to help Sedlmayr raise more capital. Recalls Sedlmayr, "I had been meeting with a lot of people who said they could raise money for us. None of them came through. At the time he just looked like another guy. I didn't put a lot of credence in what he said."
Brett Kingstone grew up in Long Beach, on Long Island, N.Y., where his father owned a mattress company. To educate his son, Kingstone's father sent him out on deliveries through the roughest neighborhoods. His mother hated that. "She wanted to read Hans Christian Andersen to me," Kingstone remembers. "My father said, 'Fairy tales? I want him to learn about the real world.' My mother wanted me to have culture." On weekends she took her son to the Metropolitan Museum of Art. During the week the boy was back on the mattress truck, heading through Bedford Stuyvesant, Harlem, and the South Bronx.
Kingstone's parents ultimately divorced. That devastated his father, which led, Kingstone believes, to his premature death when Kingstone was only 17. "I think he had a premonition that he was going to die early. So he raised me as tough as he could. 'Brett, I'm preparing you for life. I'm preparing you to be self-sufficient.' "
The search for a surrogate father began at Stanford, where Kingstone sought out Nobel Prize-winning economist Milton Friedman, who wrote a glowing blurb for the dust jacket of Kingstone's book. Also at Stanford, Kingstone met Philip Rollhaus, the chairman of Quixote Corp., a Chicago-based miniconglomerate, who told the fledgling entrepreneur that maybe one day they could do business together.
Kingstone remembered Rollhaus's offer, and in December 1987 he contacted him. The subject was ADTI. "The company's technology is excellent, the management is not," he wrote to Quixote, specifically pointing out the "unjustifiable salaries" of the company's managers -- a curious comment given his compensation demand of Sedlmayr. Perhaps, though, this could be a worthy speculative investment for Quixote. In early 1988 Quixote hired Kingstone, at $6,000 per month, to look deeper into ADTI.
Kingstone's research turned up a patent belonging to Steve Sedlmayr. The patent cited other patents as so-called prior art. Two of those belonged to William E. Glenn. The file on Sedlmayr's patent revealed that the patent office initially contended that Sedlmayr's invention was an insufficient advance over Glenn's.
In February Kingstone and Jim DeVries, a vice-president at Quixote, went to Florida to visit Glenn and learn more about his work. Glenn was surprised to learn that Sedlmayr had gone into business. Kingstone grew suspicious. He recalls being told, " 'Brett, people don't usually lie to you just once. There's a pattern of repeated behavior.' "
In late March Quixote declined to invest in ADTI. "My conclusion at the time was that the light source was not bright enough," says DeVries. On March 30, 1988, Quixote terminated its formal relationship with Kingstone. Kingstone responded, according to his notes of a phone call, "I will continue to pursue this project on my own."
In March, back in Colorado, Kingstone invited Sedlmayr out to a nearby cafÃ. Over iced tea, Sedlmayr claims, Kingstone told him Quixote was prepared to put $5 million into the company except that it had serious problems with the management. Kingstone proposed they get rid of ADTI's "deadwood"; the two of them would in effect start a new company. Sedlmayr protested that he had a fiduciary responsibility to shareholders and a moral obligation to employees. Recalls Sedlmayr, "He then said, 'I wish you the best of luck, but I don't think you're going to make it.' " He assumed that was the last he would see of Brett Kingstone.
Some two weeks earlier, on March 18, Kingstone had secretly sent a sketch to William Webb, Quixote's lawyer in Chicago. Entitled ADT Method of Making Fiber Screen, the sketch had been made by Kingstone following a visit to ADTI, where he had signed a visitor's pass agreeing not to disclose to outsiders any ADTI trade secrets. Kingstone asked if the process might infringe on Glenn's patents. On April 11 Webb wrote back that it did.
Kingstone returned to Florida in April. Glenn was happy to see an entrepreneur so willing to breathe life back into his ideas. In Glenn, Kingstone found a man "who treated me like a son." Kingstone believed Glenn, like his father, had been shortchanged by life. "He was unhappy that ADTI had raped his technology."
Glenn's two patents relating to the making of fiber-optic screens had lain dormant for almost a decade. Now, Kingstone sought to license them. The patents, however, were not owned by Glenn but by his employer, the New York Institute of Technology. NYIT, in Old Westbury, on Long Island, relies on licensing income from discoveries made by its faculty.
In early May, NYIT chancellor Alexander Schure received a signed letter of intent from Glenn seeking an exclusive licensing of his patents to FiberView, a company Kingstone was in the process of forming. In addition, Glenn wrote enthusiastically of Kingstone's abilities. Schure thought this odd. "Usually our patent counsel has a lot of input [on license negotiations]," he recalls. "In this case, all of that was done by Dr. Glenn." Stranger still, Schure continues, "Dr. Glenn tends to be low key; he's a taciturn man. But this was an unusually enthusiastic portrayal of Kingstone."
But Glenn's endorsement carried weight at NYIT, his employer since 1975. The institute had set him up with his own lab in Florida. He earned a salary substantially more than $100,000, in addition to a healthy cut of the royalties his patents generated. The license agreement stipulated an initial $15,000 payment to FiberView. That was paltry. But this was a huge technology; the payoff lay down the road, Glenn and Kingstone persuaded Schure. The agreement was signed, effective the first week of May. Schure himself would later invest $50,000 in FiberView, assigning the shares to NYIT. "I thought," recalls Schure, "here was a wonderful chance to exploit this technology -- for Glenn, for the institute. Maybe it could be a big bonanza."
By May 1988 morale at ADTI had hit bottom. Those not already laid off were not drawing salaries. Brett Kingstone, meanwhile, was forming FiberView -- and contacting ADTI employees. One of them was Douglas Gordon, ADTI's director of international affairs.
In early May Gordon approached two ADTI engineers and a technician and asked them if they wanted to work for FiberView. They declined. Gordon also announced to management that he believed an industrial spy had recently visited the company. He volunteered to review all visitor passes to ferret out the spy. A number of employees recall the odd sight of Gordon, a high-level employee, doggedly moving through the building inquiring if all passes had been recovered.
"He seemed pretty intent on getting to these," says Rebecca McCall, ADTI's vice-president of administration. "This was not an off-the-wall request. It was very deliberate. He kept asking me where any other passes might be filed."
Brett Kingstone had visited ADTI about half a dozen times. Each time he had signed a visitor pass agreeing not to disclose or misappropriate any confidential information developed by ADTI. After Doug Gordon left ADTI, a stack of visitors' passes was found in his office bookcase. A subsequent search revealed that all of those signed by Kingstone were gone.
All, that is, except one that had been missed.
Brett Kingstone incorporated FiberView for the purpose of making fiber-optic display screens on May 25, 1988. His business plan listed Douglas Gordon among the founding management. But Gordon was still on the payroll at ADTI, whose employ he would not leave until June 15.
Four other employees came over from ADTI. All had signed confidentiality agreements with ADTI. The group included Michael O'Rourke, who would serve as FiberView's vice-president of marketing; Michael Cuypers, a mechanical engineer; Robert Vela, a draftsman; and Al Pelehowski, a machinist.
During 1988 Brett Kingstone raised $1.3 million to capitalize FiberView. Kingstone, as a cofounder of FiberView, took three quarters of the company's stock in exchange for what he saw as one and a half years' service to a brand-new company. Jeff Robinson, a major investor in ADTI who would later have cause to look into FiberView, was stunned that Kingstone could get so much for so little. "It was awesome. That's the strongest raise I've ever seen -- and on just a license. That might happen in Silicon Valley with a guy who had done four or five deals before. You have to remember, Kingstone did not put a nickel in. He spent other people's money."
If his investors had been more prudent, they might have asked Brett Kingstone, 28 at the time, why he advertised himself as a man with some 10 years' experience in fiber optics. Actually, for the previous 5 years, Kingstone had been a stockbroker. In fact, the National Association of Securities Dealers had filed a complaint against him alleging the improper sale of restricted securities. He was fined $4,000. He did not pay it. The NASD then revoked his registration.
Kingstone's investors might also have asked why, with such a research-intensive technology, he planned to hire only one "R&D machinist" at an annual salary of $12,000, why he had only one electrical engineer on staff, why he had allotted only four to six weeks for design and six weeks to fabricate fiber-optic screens. These would have been appropriate questions. The American Electronics Association, after all, had told Congress it believed that a national R&D investment of $600 million over the next three years was required if the United States were to prevail against Japan and Europe in the race to commercially produce HDTV.
Instead, perhaps the focus was on Kingstone's ardent insistence that ADTI was infringing on the Glenn patents -- rightfully licensed by FiberView. Kingstone recently said in an interview, "The only reason we didn't sue ADTI was that they were close to Chapter 7. There was nothing to get out of them. Everything about these two companies shows you what's right and what's wrong with American industry. We decided not to sue. We decided to invest in the business and in the product. They decided to sue us."
In fact, during the fall of 1988 Kingstone asked NYIT to sue ADTI "many times," Schure claims. His appeals concluded with an all-day visit to Schure's home on December 4, during which he importuned Schure to sue. Schure said no.
Kingstone also contacted Mitsubishi, warning it was infringing on the Glenn patents. But instead of suing, he then sought to do business with Mitsubishi and supplant ADTI as the licenser of the technology. His business plan notes: "We have made Mr. Nogami [of Mitsubishi] aware of the fact that both ADTI and Mitsubishi are currently infringing on patents that we control. . . . Mr. Nogami flew to Colorado to indicate his interest in discussing the possibilities of sublicensing this technology from FiberView and/or obtaining an investment position in the company."
By September 1988 ADTI's officers hadn't paid themselves a salary for 11 months. The company seemed headed for bankruptcy. FiberView's existence seemed equally tenuous -- but in a different sense. Its reason for being rested on one issue: ADTI's infringement of the Glenn patents. Thus, any of ADTI's purported "trade secrets" would actually belong to FiberView.
Was there infringement?
Glenn held two patents. One described the device; the other described the method of making it.
The devices clearly varied. Sedlmayr's screen had a long, flexible tail of fibers protruding out the back. The tail on the Glenn screen was stubby and inflexible.
The different configurations, in turn, dictated different methods of assembly. Glenn's concept was to build a single solid screen. Sedlmayr's intent was to build modules -- pieces of screen measuring six by six inches -- and then assemble them mosaic-like into the larger screen. In addition, while both Sedlmayr and Glenn intended a process of "wrapping and winding" fibers to build their devices, Sedlmayr had developed a unique apparatus to wrap and wind that was never mentioned in Glenn's or any other patent.
In starting ADTI, Sedlmayr had consulted with his patent attorney, Ancel W. Lewis Jr., about the Glenn patents -- to ensure that he would avoid conflict with Glenn.Lewis, a former U.S. patent examiner, emphasizes this is part and parcel of the process. "When you present your patent it must clearly be beyond the prior art." If Sedlmayr's concept was not a clear advancement of what Glenn had in mind, Lewis argues, he never would have received his patent in the first place.
Glenn, meanwhile, had worked off and on for almost 10 years trying to make a fiber-optic screen. In that time how many had he made? Two -- by hand. Glenn had even told Steven Sedlmayr he had gone to around 10 major U.S. corporations trying to interest them in his method. They all told him that under his patents the screen was "not manufacturable."
Mitsubishi, a research leader in plastic fiber optics, had spent seven years and untold millions trying -- unsuccessfully -- to mass-produce a screen. "Before we bought the technology from ADTI, our R&D people reviewed all technologies worldwide," says Yuichiro Nogami, until recently Mitsubishi Rayon's representative in the United States. "We reviewed the Glenn technology. They make a screen, but it's not practical. That's the key point. Everybody can make a screen. The important thing is that ADTI's is very unique. It's mass-producible."
Why would Mitsubishi spend $5 million for a technology if it felt it belonged to someone else? Even Quixote's attorney, William Webb, when asked in a deposition if he considered the sketch of ADTI's method sent him by Kingstone a possible trade secret, replied yes. He had asked Kingstone about it. Kingstone had replied it was not a trade secret. This denial apparently satisfied him.
The issue, as far as they were concerned, was not patent infringement.
The path of technological development rarely describes a straight line. Dead ends and blunders interplay with hard work and dumb luck, leading sometimes to fitful, expensive progress. By the time Brett Kingstone met him, Steve Sedlmayr had spent $10 million and four years trying to construct fiber-optic screens by machine. The breakthrough process -- which was not even imagined by Sedlmayr when he set out -- was the third that the company had tried.
ADTI established elaborate security procedures within its facility, believing it had something to protect. What did it have? It had common tools of the trade: spacers, clamps, glues. These seemed to fall into the public domain. But ADTI had done much of its own tooling, altering, and customizing of these parts as the technical task intensified. In time, the company produced proprietary variations on common themes. More to the point, it was these parts and processes, used in concert, that produced a unique result -- and moved Mitsubishi to fork over $5 million.
The fruit of ADTI's labor was embodied in the six-by-six-inch modules that make up its larger screen. One such module found its way through ADTI security and into the trunk of Doug Gordon's car. From there it went to presentations given by Kingstone to potential investors. One such investor was Panasonic. Its representatives met with Kingstone in early August 1988. Here was Kingstone, who would later assert that ADTI had sold out a valuable technology to the Japanese, trying to sell that same technology to the Japanese. Here was Kingstone, holding up the Glenn patents as the basis for the module's existence, while Glenn's patents called for an altogether different device.
The Panasonic presentation was too much for FiberView's marketing vice-president, Michael O'Rourke. He was upset. He had followed Kingstone over from ADTI because three days before he got married he had learned that ADTI, short of funds, was going to lay him off. He'd worked for two months without pay. Moreover, Brett Kingstone appealed to him. "This guy's a doer," says O'Rourke. "Brett's ambitious; I wanted to work for a guy like that."
But O'Rourke began having second thoughts. In December he left FiberView, and the following month he sent a copy of FiberView's business plan in a plain brown envelope to ADTI. The plan detailed Kingstone's efforts to do business with Mitsubishi or other receptive parties. It read: "If we are not able to reach an amicable agreement with Mitsubishi, we intend to approach their competition, namely Asahi and Toray, who have already indicated a strong interest in bidding for the technology."
Rumors had been swirling all summer that Kingstone had formed a company. But this exceeded ADTI's worst fear. Kingstone, it appeared, had disclosed ADTI's trade secrets to major competitors of Mitsubishi -- companies not bound by a license agreement. ADTI knew it had to go after Kingstone. But would it ever get the chance? By fall the company was all but broke.
Desperate, ADTI negotiated an accelerated royalty payment of $350,000 from Mitsubishi and got $1 million in working capital from a large investor. Still, Sedlmayr resisted suing. "I decided that if I was going to sign off on the lawsuit I had to go see for myself." Late one night in January 1989 Sedlmayr drove to Boulder and shone a flashlight through a window in FiberView's building. "My jaw dropped. I could have been looking at the back of our shop." Sedlmayr saw a host of parts and assemblies he instantly recognized. He had to restrain himself from breaking into the building. He then climbed into a nearby dumpster, where he found drawings of ADTI parts and a payroll listing ex-ADTI employees.
Sedlmayr collected four bags of garbage and drove back to ADTI. He stayed up all night sorting through it on his office floor. His first move after daybreak was to call his lawyer. "My adrenaline was running at that point. I was really mad. I couldn't believe that anyone would be so stupid as to copy exactly what we do."
The weight of such evidence brought the unusual seizure and impoundment of March 27 down on FiberView. On April 19 a four-day hearing -- which amounted to a trial -- began. The U.S. marshal found what the garbage had only hinted at. The search produced a complete assembly line for making fiber-optic screens. It turned up engineering drawings made by FiberView that contained parts remarkably similar to ADTI's parts. It turned up an ADTI title block excised from ADTI drawings. FiberView's master list of drawings also was strikingly similar to ADTI's. Steve Sedlmayr had chosen an unorthodox numbering system for his drawings -- five digits based on the date the drawing was done. FiberView did likewise.
There was more: sketches of ADTI parts and a list, which could be traced to Sedlmayr's computer, that broke down costs associated with manufacturing screens. And the search yielded a file of correspondence with Japanese multinational Olympus Optical Co. as well as letters to potential investors claiming that Olympus was interested in negotiating a license and making an equity investment in FiberView.
The judge in the case, Lewis T. Babcock of the U.S. District Court in Colorado, issued a temporary order enjoining FiberView from using any of ADTI's trade secrets. The order essentially put FiberView out of business. In concluding that FiberView had used the Glenn patents as a cover to steal trade secrets, Babcock wrote: "I find Mr. Kingstone to be 100% incredible. I don't believe a thing he says." He then added, "I find as a matter of fact, Mr. Kingstone set out to and did, in fact, misappropriate ADTI's entire process. . . . [FiberView] literally picked up the process, lock, stock, and barrel, and took it from ADTI's shop and put it in FiberView's shop."
Brett Kingstone is a stocky, red-haired man of medium height and of persuasive mien. Broad shouldered yet lithe, he conveys a sense of energy barely contained -- a portrait of order forever flirting with chaos. Leaning back in his desk chair one minute, Kingstone leaps to his feet and paces the room with leonine urgency the next. Cool seminars on fiber-optic technology can unravel into a string of venomous oaths against an adversary, real or imagined. With Kingstone, one does not so much conduct an interview as listen, hoping for an interlude.
Kingstone is adamant in proclaiming his innocence -- nothing was stolen. "Anything that could be construed as proprietary was either Glenn's or common knowledge," he says. Moreover, he asserts, some items were removed from ADTI deliberately so as to gather evidence for a possible patent-infringement suit. Removal of ADTI's module, for example, amounted not to a theft of a trade secret but "an insurance policy." He adds, "We should have been the plaintiff, not the defendant." The facts suggest otherwise.
What about the disappearance of the visitor passes assuring confidentiality? "Why would I steal nine and leave one?" Kingstone responds, if his intent was to show he had never entered ADTI. Back in August 1988 ADTI warned Kingstone that he had signed a number of these passes. Sedlmayr reports that Kingstone asked his attorney to challenge ADTI to produce any confidentiality agreement he had ever signed. ADTI finally did find one in January or February, and Kingstone ultimately admitted that he had signed a pass every time he visited.
Why was the U.S. marshal able to seize so much evidence from FiberView that appeared a direct knockoff of ADTI's work? Kingstone asserts it was the Glenn technology that was being copied by ADTI. "We retrieved this knowledge....These SOBs used a judge's order to yank the technology out from under us."
But if Kingstone was retrieving Glenn's technology then it would stand to reason that Glenn would recognize it when he saw it. In the April hearing, one of ADTI's lawyers showed 17 of FiberView's drawings to Glenn. Glenn testified that he had never seen the drawings before, had had no hand in their creation, and did not furnish them to FiberView. Brett Kingstone sees himself as a victim in this case, a pawn of a corrupt system. "We're dealing with an incredibly ignorant judge here," he says. Kingstone labels Steven Sedlmayr --whom he once sought as a partner -- "an idiot, an absolute buffoon."
The true conspiracy lies here, Kingstone maintains -- with a conniving competitor, a witless federal judge, and the ultimate dark force, a technology-hungry Japanese multinational. In a memo to his shareholders after his setback in court, Kingstone noted that Mitsubishi owned 25 percent of ADTI. In fact, it owns 2.5 percent.
"I guarantee you that if we lose this case, five years from now you'll go into Macy's and buy a flat-panel TV set, and it will not be made in America," says Kingstone, pounding his desk for emphasis. "It will be made by Mitsubishi. It's going to be like the VCR industry all over again."
ADTI has forged an 11-year license that excludes Mitsubishi from North America and Europe. Moreover, ADTI's fiber-optic screens incorporate a technology that is a crude forerunner of HDTV. Years of research stand in the way between this product and HDTV.
With the judge's May ruling enjoining FiberView from using its trade secrets, ADTI had its technology back. It could concentrate on working the bugs out of its first commercial product, two large display screens placed back-to-back in the Las Vegas airport. ADTI was devoting much of its efforts to marketing the screens to advertisers in an attempt to increase cash flow.
In May, NYIT terminated its licenses with Kingstone, charging him with fraud. In a letter on May 15, Schure wrote: "The events delineated by the Court clearly indicate that the patent was licensed and intended to be used in bad faith."
Over the course of the next few months, the fraud deepened. NYIT discovered that Glenn, who had been touting Kingstone's virtues, had been a director of FiberView. Glenn also had been secretly promised about one third of the stock in a new company to be formed by Kingstone if Glenn was successful in getting NYIT to sell his laboratory to them.
In June, FiberView changed its name to FiberMedia Corp. -- because the Colorado court had found FiberView to be a trademark of ADTI.
Later that month, FiberMedia sued NYIT to get the licenses back. The month before, it had sued Mitsubishi Rayon in Los Angeles, claiming patent infringement. But with no license in hand, Kingstone would have had little if any basis for filing a suit against Mitsubishi.
In August, FiberMedia filed two motions in Colorado, aimed at undoing Judge Babcock's injunction.
Brett Kingstone, meanwhile, deplored what he saw as ADTI's capricious use of the courts. "Everyone wants to get rich in this country by winning a lawsuit that sets them up for life rather than go out and produce something that adds value." Yet Kingstone had spent more than $350,000 of his investors' money on legal fees. He had chosen to live by litigation. Now, he would die by it.
On August 28, NYIT filed a shareholder suit against Kingstone, Glenn, and others, charging fraud, securities violations, and corporate waste and mismanagement. Less than two weeks later FiberMedia's executive committee removed Kingstone from the board and his position as president. He retired most of his stock to the company treasury, and his remaining shares can be put into a voting trust at the discretion of the executive committee. The executive committee took over operation of what was left of the company. It fell to Ted Taylor, chairman of the committee and acting president of FiberMedia, to pick up the pieces. "We're now working with Glenn to be in the large-screen fiber-optics business in a way that will not infringe on anybody's patents or use any trade secrets. We're using technologies from expired patents only."
In September Steve Sedlmayr started a new company. Its mission is to make the world's brightest projector, to be used as a light source for ADTI's fiber-optic screens.
Back in the first week of May 1988 FiberView submitted bids to build two large fiber-optic display screens for the Detroit Pistons of the National Basketball Association. That was three weeks before FiberView had even incorporated, a month before FiberView had access to Glenn's technology. How could Kingstone have possibly made this bid if he didn't have access to Steven Sedlmayr's technology?
When he appeared before Congress last March showing off a screen made using another company's trade secrets, Kingstone said, "We have the potential to create thousands of jobs for Americans....Let's help establish the words 'Made in the U.S.A.' as a standard of competitive fact in the world market." Yet his business plan detailed a manufacturing agreement with China that "will assure us of having the lowest labor cost production facility in the world."
The larger issue with people like Brett Kingstone is not so much their brazenness, not so much the yawning disparity between their words and deeds. It is rather what they reflect about the temper of the times. People like Brett Kingstone thrive in a nation anxious for the quick fix. They appeal to our greed. They appeal to our carelessness.
We eagerly buy their stories because we want to believe. But the buying and the believing are not always innocent impulses. They have repercussions. They create victims.
ADTI worked hard to develop a difficult technology. The company almost went out of business. If that had happened, who would have gone after FiberMedia and its stolen technology? Probably no one.
Why did William Glenn suddenly resign from and sue NYIT, thus ending a fruitful, 14-year relationship with the institute?
For all his talk about competing in the marketplace, Brett Kingstone's actions have created -- and fed -- a small army of lawyers. The total legal bill in this case now approaches $1 million.
For all his talk about ADTI selling out vital technology to the Japanese, it was Kingstone's actions -- showing that technology to Japanese companies not bound by a license agreement -- that threatened that very result.
In June of this year Brett Kingstone returned to Washington. He called on a dozen members of Congress, asking for legal help. Sen. John D. Rockefeller IV (D-W. Va.) cited FiberMedia in a speech introducing legislation calling for better protection of U.S. patents in foreign markets. ADTI got angry calls from the offices of Sens. Tim Wirth (D-Col.) and Connie M. Mack III (R-Fla.) demanding to know why ADTI and Mitsubishi had ganged up on FiberMedia.
Kingstone also paid a visit to the Commerce Department. There he met with Michael Skarzynski, the assistant secretary for trade development, and Juan Benitez, the deputy assistant secretary for science and electronics, to express his concern that Mitsubishi, with access to ADTI's technology, would engage in unfair trade practices.
Juan Benitez remembers Kingstone as "a very committed professional." He called the commercial attaché at the Japanese Embassy, inquiring on Kingstone's behalf. Benitez recalls, "Mitsubishi was a concern to Kingstone, and of course, so was losing his company, for pete's sake."
In Kingstone, Benitez saw a persuasive young man, conjuring up potent symbols: cutting-edge technology, the Japanese, the judge. Benitez and others in government remained believers -- well after Kingstone had played his final card. By now, the judge had found him a trade-secrets thief, NYIT had alleged fraud, and FiberMedia had sought final refuge in the courts. None of this really mattered in Washington -- where symbols count for so much.
Kingstone's continuing his charade in Washington would merely be ironic if danger did not lurk so evidently in this disjunct between perception and reality. The story of Brett Kingstone frames larger questions. Do important policy matters get made on all the wrong information, for all the wrong reasons? Would those in power rather succumb to the appeal of Brett Kingstone's tale than examine its fabric? Would they rather embrace, on face, a popular cause than delve to find the complex truth that lies beneath the story of Brett Kingstone and ADTI?