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Even by the exacting standards of Las Vegas, where he lives part of the year, Gerald Hosier has enjoyed an amazing 14-year run. Representing a controversial inventor named Jerome Lemelson, Hosier has parlayed his client’s patents on bar code and related technology into more than $1 billion in licensing fees. The lawyer had a simple strategy — betting that corporate defendants would rather pay up than risk the wrath of a jury — and a taste for raising the stakes. Six years ago Hosier made a bet he may live to regret, suing Wal-Mart Stores Inc., and more than 400 other companies, charging that they violated Lemelson’s patents. Enter the Cooler. Unassuming, friendly, comfortable speaking both English and Techno, Jesse Jenner, 56, waited a decade for his shot at icing Hosier. He had tried once before and watched in frustration as his client folded: Ford Motor Co. chose to settle rather than fight through discovery. This time, however, Jenner represented a small group of manufacturers who literally couldn’t afford to settle or lose; with some of their largest customers looking to them for indemnification, they went after Lemelson’s empire. At trial Jenner and his colleagues at Fish & Neave attacked Lemelson’s primitive science and the patent process itself. Lemelson was a master at building “submarine patents,” a since banned practice of keeping patent applications alive in the patent office for years — or even decades — in order to torpedo unsuspecting companies with licensing fees when the patent eventually issued. In January a federal district judge in Las Vegas ruled that Lemelson’s patents were invalid. Barring a successful appeal, the most lucrative IP streak built on clever lawyering rather than scientific achievement came to a quick end. “It’s now essentially terminated,” Jenner says, coolly. The litigation that signaled the beginning of the end of the Lemelson empire began in 1998, the year after Lemelson’s death. That year, with Hosier as chief outside strategist and litigator, the Lemelson Medical, Education, and Research Foundation began filing a hefty new batch of infringement suits in federal district court in Arizona. Besides Wal-Mart, the foundation named retailers Target Corp. and RadioShack Corp., but also Hershey Foods Corp., FedEx Corp., Broadcom and Apple Computer Inc. “It represented a big, broad swath of the American economy,” says Kenyon & Kenyon partner Edward Colbert, who has been defending several companies named in the suits. “Essentially, it hit the entire GNP.” Hosier’s strategy had always been to go after the largest users of bar codes and factory automation techniques known as machine vision rather than the much smaller manufacturers of this technology. His six airplanes and homes in Aspen and Las Vegas attest to the success of this plan. By 1998 corporations started to demand indemnification from the companies that sold them bar-coding and machine vision systems. Cognex Corp., a leading maker of machine vision systems, and Symbol Technologies Inc., a top producer of bar code scanning devices, decided it was time to test Lemelson’s patent claims in court. “These patents were pure science fiction,” says Michael Steir, legal director for the Natick, Mass., based Cognex. “They never should have been issued.” When Cognex and Symbol hired Jenner, he was already immersed in the Lemelson legacy. Although the Ford case eventually settled, Jenner developed a theory that would prove pivotal in the Cognex and Symbol cases. By fall 1999 Jenner had filed two separate suits (one on behalf of Cognex, the other on behalf of the bar code manufacturers) against the Lemelson foundation. The cases were consolidated in federal district court in Nevada, while the Lemelson foundation litigation in Arizona was stayed. Jenner decided to attack the Lemelson patents with the doctrine of prosecution laches. The theory held that Lemelson took an unreasonable amount of time in actively obtaining patents, rendering them unenforceable. Lemelson had submitted his original patent applications for the technology in 1954. His first patent issued in 1963. But Lemelson was able to keep receiving related patents well into the early 1990s. Lemelson would file so-called continuation applications that kept his claims alive in the patent office. He would amend his applications, according to Jenner, based on technological breakthroughs made by others. At the time, a patent lasted 17 years from the day it was issued. So Lemelson was able to start demanding royalties decades after he had originally applied for a patent. Jenner believed Lemelson was manipulating the patenting process. “There was something wrong with the way Lemelson seemed to have gamed the system,” says Jenner. “He’d watch what real companies were doing, and craft these claims. Then 30 years later these submarine [patents] would pop out of the water.” In the Ford case, Jenner won a key ruling from a magistrate who found that Lemelson’s use of continuation applications was abusive; he recommended that the patents be declared unenforceable. In early 1996 Nevada federal District Court Judge Lloyd George initially adopted that magistrate’s recommendation, but George later reversed himself when another federal judge ruled that a patent applicant should not be penalized for exploiting the rules. After the U.S. Court of Appeals for the Federal Circuit declined to hear Ford’s appeal, the company settled. “The sheer magnitude of the discovery costs of going forward was mind-boggling,” recalls Roger May, former assistant general counsel at Ford, who’s now retired. Cognex and Symbol had less incentive to settle. Their businesses were on the line. “This was the first time that manufacturers of the [bar code and machine vision] technology were involved,” says Jenner. “There was a real possibility that they would go the distance.” Fish & Neave received an early break when the Lemelson side filed a countersuit charging Cognex, Symbol and the other bar code makers with infringement. Hosier did not ask for damages, which meant he could not request a jury trial. “We thought it was important to keep this from a jury,” who might be swayed by the success of Lemelson’s licensing operation, says Jenner. “There would have been a natural inclination to think that this guy had done something important.” Still, Judge Philip Pro didn’t seem especially sympathetic to some of Fish & Neave’s arguments. Pro shot down three summary judgment motions. “We were a little worried that we were not getting our message through to the court,” says Jenner. Pro also balked when the Fish & Neave team attempted to redeploy the laches argument. Fortunately for Jenner, the judge agreed to certify the matter for immediate appeal to the Federal Circuit. This time the appellate court took the case, and in 2002 ruled that prosecution laches could be used. “That was a gigantic victory,” recalls Fish & Neave partner Steve Cherny, who worked on the trial. “If [the laches argument] ever applies anywhere, it applies in this case.” Jenner had more than just laches up his sleeve. At trial Jenner would eventually argue that his clients did not infringe Lemelson’s patents and that those patents did not enable anyone to build a workable system — and therefore should be found invalid. “There wasn’t any way to make a Lemelson bar code scanner,” says Jenner. “It wouldn’t know a bar code from a piece of tree bark.” The 27-day trial opened in November 2002. Six Fish & Neave partners and five associates took over a wing of Las Vegas’ Venetian Hotel. They used four suites just to hold case documents. Each morning, the Fish & Neave team would make their way past the bleary-eyed, all-night gamblers in the lobby. “There’d be people standing around with ice clinking in their glasses of scotch,” Jenner says. “Here we were, all the suits trudging out at 7 a.m.” Fish & Neave opened testimony by giving Judge Pro a crash course on Cognex’s and Symbol’s technology. The lawyers even set up a miniconveyor belt to show how Cognex’s machine vision system works. Jenner called Symbol’s first chief executive, Jerome Swartz, who testified about how he had started the company in his garage and how he had never heard of Lemelson, despite trying to keep tabs on other inventors in the field. Fish & Neave called on other machine vision and bar code pioneers. The “hall of fame of real inventors,” as Jenner calls them, included George Lauer, a now retired IBM engineer who devised the Universal Product Code that bar code scanners read. The Lemelson foundation had also tried to hire Lauer as an expert witness. After analyzing Lemelson’s patents, Lauer recalled, he turned the foundation down, telling them that his “integrity wasn’t for sale.” The Lemelson side did manage to get some shots in — especially during their cross of Fish & Neave machine vision expert Dr. Berthold Horn, who had reviewed Lemelson’s patent claims. During a cross, Lemelson attorney Steve Lisa drove home the point that Horn had mischaracterized the patents in some respects. Still, Hosier faced an uphill battle. His best witness — namely Jerome Lemelson — was dead. He put Lemelson’s widow, Dorothy, on the stand, but to little effect. “I must have gotten up 100 times” to object, says Cherny, who contends much of the testimony was either “hearsay or irrelevant.” Some of Hosier’s expert witnesses also got a rough ride. Lemelson’s final witness, Bobby Ray Hunt, a former University of Arizona electrical engineering professor, acknowledged under cross that he had never built a bar code system using Lemelson’s patents. “That was the end of the case,” says former Symbol in-house lawyer Mark Koffsky. Of course, the real denouement came a year later, with Pro’s decision: He sided with Jenner’s team on three key defenses, finding that the Lemelson patents in question were invalid and unenforceable (based on prosecution laches) and that the plaintiffs hadn’t infringed. Jenner’s immediate response was to take the trial team to a restaurant across the street from Fish & Neave’s office in New York and order up champagne. Hosier says Pro’s ruling has avenues for appeal. As a legal matter, Lemelson is not obligated to have built his inventions or to have developed a robust version of them. “What happened here is the judge philosophically said, ‘It’s primitive, it’s early, I’m going to read in limitations,’” says Hosier. “Yes, his inventions were primitive, but so was Bell’s telephone, so was the Wrights’ airplane.” Hosier is not complaining too loudly. “The judge ruled the way he did, and you’ve gotta live with it and move forward with life,” he says. And he certainly is not about to start handing out refunds to the 900 or so companies that have paid the foundation licensing fees. “These were eyes-open deals,” he says. “You pay your money and you take your chances.”

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