Home · Articles · News · News Stories · Son of Invention
August 25th, 2004 Janine Robben | News Stories
 

Son of Invention

Oregon winemaker Eric Lemelson uses his dad's cash to support inventors. Why do critics say the money comes from legalized extortion?

     
Tags:
In the hills near Dundee, where the best vineyard land can run more than $20,000 an acre, sits one of Oregon's most impressive wineries.

Built by a New Jersey transplant, Lemelson Vineyards is hardly Oregon's biggest winery. In terms of volume, it ranked 30th in production among the 115 Oregon vintners that released wine into the commercial market in 2003, according to the Oregon Liquor Control Commission.

But what Lemelson Vineyards lacks in size, it makes up for in quality. Owner Eric Lemelson--a graduate of Reed College and Lewis & Clark Law School--is producing some of this state's finest pinot noir, with some vintages earning 90-plus grades from Wine Spectator. Says Heidi Yorkshire, the author of Simply Wine (and a restaurant reviewer for WW): "They've established an outstanding winery."

For most people, a reputation as a maker of fine wine would be enough for one lifetime. But outside of wine circles, Eric Lemelson is known for something else altogether.

An heir to one of America's larger fortunes, Lemelson is a member of a family that is revered for its philanthropic contributions: The nonprofit Lemelson Foundation is the third-largest family foundation in Oregon.

"By most accounts," The New York Times reported in April, Lemelson and his brother "have proven to be thoughtful stewards of their father's many millions."

But at the same time the family name is loathed for what its critics say is its practice of legalized extortion.

"I don't want readers to believe it is a charitable enterprise," says Robert Shillman, president of an East Coast high-tech firm. "It's not a charitable enterprise. It gives a small percentage to charity to paint a veneer of kindness and philanthropy on top of what is a rotting piece of material."

At 44, Eric Lemelson is a short, muscular man who seems more at home in jeans and Teva sandals than the dress suit in which he recently was pictured in The New York Times. He drives a Honda electric-gas hybrid car and usually flies coach.

Yet--with his brother, Robert, and their mother, Dorothy--he exerts control over a significant fortune. And despite his reputed low-key lifestyle, Lemelson has enjoyed his inherited wealth. According to county property-tax records, he owns more than $6 million of real estate in Oregon, including an $834,000 condominium in the Pearl District. He is also a substantial donor to the Democratic Party and the Oregon League of Conservation Voters, on whose board he sits.

"Eric is interested in being a good grape grower and winemaker," says Alan Graf, a Portland lawyer who went to Lewis & Clark with Lemelson and has remained friends with him. "He's just into living a private life, and making really good wine."

"His dad," says Graf, "was more driven."

Lemelson's father, Jerome Lemelson, was an inventor. But calling him an inventor is like calling Michael Phelps a swimmer. According to the U.S. Patent and Trademark Office, only one person holds more patents than Jerome Lemelson: Thomas Edison.

By the time his first son, Eric, was born in 1959, the father had quit his job--as a safety engineer for a copper-smelting company in New Jersey--to become a full-time inventor.

"The story in my family was that he woke up one day and said, 'I'm not going to do this [engineering] anymore,'" says Eric Lemelson. "'I'm going to do something I love.'"

Jerome Lemelson became so prolific an inventor that he even attracted the attention of writer Tom Wolfe: "He was irrepressible," Wolfe wrote of Lemelson in his award-winning essay "Land of Wizards." "He was thinking up new inventions at the rate of one a month, a pace that he managed to keep up for the next 30 years."

"My dad just kind of burned with this fire of invention," adds Eric Lemelson. "We'd go on vacation, to a sunny area, and he'd lie on a beach while we were swimming, writing on long legal pads. He'd do this all the time."

By the time Jerome Lemelson died in 1997, he had received more than 550 patents from the U.S. Patent Office, for everything from camcorders, cassette players, compression springs and cordless telephones to crying baby dolls, inflatable toys and Velcro darts.

But, while Jerome Lemelson was granted all those patents, here's the interesting thing: He didn't actually bring his inventions to market. He left that for others to do. And that's where the charge of "legalized extortion" comes in.

Gerald Hosier is a patent lawyer. A very good one. In 2000, the business magazine Forbes reported he was the best-paid lawyer in America, with an income of $40 million. ("Forty million: That was a bad year," Hosier told WW in July, pointing out that in 1993, The American Lawyer had reported his annual take at $150 million.)

Hosier has offices in Aspen and Las Vegas. He owns six planes, including a Falcon 2000, a wide-body jet whose price tag, he says, "runs in the low $20 millions."

For many years, Hosier has had essentially one client: the interests of the Lemelson family.

What Hosier has done for 15 years is sue--or threaten to sue--for patent infringement corporate users of products whose technology Jerome Lemelson says he invented.

In December 1989--four months after Jerome Lemelson hired him--Hosier won a $24.8 million jury verdict against Mattel for allegedly infringing Lemelson's patent rights with its Hot Wheels race tracks. The case had been kicking around the court system for years.

Hosier also went after Japanese automakers. The allegation? That they had infringed Lemelson's patents on bar-code technology--the ubiquitous bar code that has replaced the price tag on almost every retail item in the world--and "machine vision," the use of computers that can "see" to take the place of costly human beings in almost every aspect of production. In 1992, the Japanese automakers settled for $450 million.

Then, it was the American automakers' turn. In June 1998, Ford, Chrysler and General Motors reached an undisclosed settlement with Hosier--whose amount totaled many millions.

All told, according to Hosier, more than 950 companies have paid licensing fees totaling $1.5 billion since he began representing Lemelson. Says Hosier, "Nobody ever, in the history of this country, has collected anything approaching that sum."

To Jerome Lemelson's fans, this represents a victory for the inventor over big business, an acknowledgement that the fellow who came up with the idea first ought to receive recognition for it.

Says Eric Lemelson: "Inventions, for inventors, are like their kids. They're their creative product. You feel protective if you feel your invention is being used by someone else without acknowledgement."

"There are an awful lot of corporate patent lawyers who really hated my dad," he continues. "Individual inventors have had very little success against corporations. That's why [my dad] and Gerry [Hosier] are heroes to independent inventors."

Although Jerome Lemelson died in 1997, Hosier continues to collect licensing fees, suing, if necessary, under the auspices of the Nevada-based, for-profit company that inherited Lemelson's patent rights.

In addition to the Lemelson family, another benefactor of Hosier's efforts has been the Portland-based Lemelson Foundation.

In 2002, the foundation's tax reports show, it had assets of $273 million. According to the Oregon Department of Justice, that makes it Oregon's third-largest family foundation, behind only the (Fred) Meyer Memorial Trust and the Ford Family Foundation, created out of the estate of a southern Oregon timber magnate.

Eric Lemelson, his brother, their wives and Jerome Lemelson's widow are the sole directors of the Lemelson Foundation, whose Pearl District office is located in the Ecotrust Building, just a stone's throw from Eric Lemelson's condominium at the Riverstone.

The foundation's focus is on invention and innovation.

"Technological innovation drives economic progress," explains Eric Lemelson. "It was probably the single most important factor in the [American] prosperity of the 20th century. But it's up to us to maintain our edge in technological innovation."

In 2002, the foundation's gifts totaled more than $8 million. Most of the money went to out-of-state recipients like the Smithsonian National Museum of American History, which boasts a Lemelson Center for the Study of Invention and Innovation, and the Massachusetts Institute of Technology. But the foundation also makes smaller awards, like the $12,500 it gave to a team at the University of Portland that included then-student, now-entrepreneur Vail Horton. Horton, who was born without legs, and his team used the money to develop a shock-absorbing crutch.

The foundation's biggest splash comes with the annual award of the $500,000 Lemelson-MIT Prize. Past award winners have included the inventors of the DNA Sequencer, the Segway Human Transporter scooter and the first reading machine for the blind.

The foundation has clearly been a way not only to donate to worthy causes but to add to the luster of Jerome Lemelson and diminish the controversy over the source of the Lemelson family's fortune.

"The foundation's received a lot of good press," says Portland patent lawyer Craig Bachman. "To my way of thinking, it wouldn't be the first business enterprise in the U.S. with questions about where they got their money--Carnegie and Rockefeller come to mind--but they do good things with it."

Like Carnegie and Rockefeller, business smarts and philanthropy are not the only words used in connection with Jerome Lemelson.

"There are some people who use words like 'extortionist' and 'freeloader' to describe Lemelson," says Chicago patent attorney Greg Smith, who has written about Lemelson in industry newsletters, "people who say that he didn't really contribute anything of value to these industries and technologies from which he pulled $1 billion in royalties."

Criticism of the origins of the Lemelson family's wealth goes like this:

Jerome Lemelson abused then-existing law by filing applications for patents that contained deliberately vague descriptions of his inventions.

Over the course of many years--even decades--he would continue to refine his descriptions so they described valuable technology or products, that others, not Lemelson, were introducing into the marketplace.

Meanwhile, his descriptions, like those contained in all patent applications at that time, would be kept secret.

When the time was ripe, Lemelson's critics say, he would surface like a submarine, going after the companies that were using products or technology that, he argued, were covered by his patents. Because patent rights, at that time, ran back to the date of the original application, not the date the patent was granted, those companies were not in a good position to fight back.

Such patents came to be called "submarine patents" and even "Lemelson patents," regardless of whether they had been issued to Lemelson.

Says Portland patent lawyer Peter Heuser: "He would be very vague. The fact is, the patent office let him have those claims."

Eric Lemelson disputes that the delays were the result of anything except the patent office's bureaucratic process. "Using that 'submarine' thing to define my father's career is very unjust," he argues. "The idea that he deliberately delayed his patent applications for 20 years requires a level of prescience [about the market] that nobody has."

Regardless of whether it was a deliberate strategy, it worked.

In September 1989, just one month after Lemelson hired him, Hosier added new claims to Lemelson's pending applications for patents on bar-code technology, then promptly sent out letters to hundreds of electronic, semiconductor and automobile companies, explaining that they were infringing those patents. The vast majority of these companies chose to pay Lemelson licensing fees rather than risk expensive, and highly unpredictable, litigation over whether his claims were valid.

Ten years later, in April 1999, Forbes was reporting that Hosier was "picking his way through blue-chip firms, looking for patent infringements and enriching Lemelson's family, his scientific causes and himself. Among those on his current hit list: Intel [which Hosier's associates had sued in July 1998 for allegedly infringing Lemelson's bar-code and machine-vision patents], Texas Instruments and United Technologies. Despite shows of bravado, Big Business looks like it's seen a ghost. What are these corporations afraid of? For one thing, of never breaking the Lemelson curse, which has haunted some of them for decades."

Adds patent lawyer Smith: "You get a lot of anger, a lot of disdain [among employees of the companies that paid royalties to Lemelson]. Through the '50s, '60s and '70s, there were engineers and scientists who really spent their lives developing this technology. Of all the resources they used, and all the giants on whose shoulders they stood, Jerome Lemelson was not among them."

Robert Shillman, president of the Massachusetts-based company Cognex, uses stronger language.

"It was legalized extortion," says Shillman. "Everyone who's bought anything in the last five years has paid a Lemelson tax and not known it."

In 1999, Shillman and others made a decision that may have inalterably changed the course of the Lemelson family's fortunes. Cognex, a leading supplier of machine-vision systems, joined forces with other manufacturers and sued, in Las Vegas, to challenge Lemelson's patent rights.

On Jan. 23, 2004, the federal judge who presided over that trial invalidated Lemelson's valuable bar-code and machine-vision patents on multiple grounds.

Cognex's law firm trumpeted the victory, taking out a full-page advertisement in the Corporate Legal Times that boasted of "Slaying the Lemelson dragon."

"For years, hundreds of the world's top companies had paid over a half a billion dollars to Lemelson rather than take their chances in a courtroom," the ad said. "But we and our clients saw an opportunity. The patents, we argued, were unenforceable, invalid, and not infringed. And in the end, the court agreed."

Although the verdict is on appeal, even Hosier concedes that it is likely to be upheld. If so, while experts believe it's unlikely that any of the millions already collected will have to be returned, Lemelson's patent-licensing income stream will slow to a trickle.

One of the companies most directly affected by the verdict is Intel, which Hosier's associates sued for allegedly infringing a set of Lemelson patents that is virtually identical to those invalidated by the Cognex verdict. Intel, whose lawsuit has been stayed by the Cognex action, declined to comment. But Shillman estimates that Intel would have faced more than $1 billion in licensing fees, plus untold millions in legal fees, if his company had not stepped in.

As for Eric Lemelson, he'd rather not focus on the recent court decision, other than to say that, even if it receives no additional patent licensing fees, the Lemelson Foundation's endowment is sufficient to keep it in operation.

Shillman, for one, will not mourn if it has to fold.

"It's not nice to talk about the dead," he says of Jerome Lemelson. "I predict the Lemelson Prize will fade into history at MIT. I hope the Smithsonian follows suit. [Lemelson and Hosier] did a tremendous disservice to the patent system and every consumer in the world."

In Eric Lemelson's view, this portrayal of his father as an "evil semi-genius" is grossly unfair.

"That's not the man we grew up with," says Lemelson, his face flushing bright red below his curly, sandy-blond hair. "That's not the man I knew."

"My father wasn't motivated to invent by a desire to get rich," Lemelson elaborates. "It was the core of his being to improve people's lives by making things work better."

Eric Lemelson is particularly loath to talk about his money, or its source. He points out that he is somewhat distanced from the actual legal activities that have benefited his family. He is not on the board of the company that holds the patent rights and, he says, "I don't have anything to do with the stuff Hosier does. Ultimately, my mom is the client. I'm not saying we [the family] don't discuss it. But I'm not a decision maker."

He does say that his wealth has not gone to his head.

"I live in a nice house, but it's because it's an old farmhouse," he says. "I don't wear fancy clothes; I don't have fancy cars. My neighbors know me as a farmer on a tractor."

And, while his assets have certainly allowed him to indulge his passion for wine, few dispute his talent.

Robert Wolfe, head of the Oregon Pinot Noir Club, says that when Lemelson first starting building his winery, he attracted a lot of attention.

"There was a lot of interest in this guy who was throwing out millions," says Wolfe. "Could he make a product as good as the [winery] building?

"Other people in the valley have come in, made a big deal about how much money they had and have not made good wine," he says, diplomatically not naming names. "The good news is [Lemelson Vineyards] has done very well with their wine. Every year is better. Perhaps it's about the power of money to get where you want quickly," Wolfe muses. "But a lot of it is the vision of Eric Lemelson."


Eric Lemelson's brother, Robert, is a lecturer in anthropology and psychology at UCLA.

Robert Lemelson runs a separate nonprofit foundation that supports research in the neurosciences.

"Is there any more feverish dream of glory in the world, outside of Islam, than the dream of being an inventor?" --Author Tom Wolfe in his essay on Jerome Lemelson, "Land of Wizards"

"Even after Sony and IBM, I remember [my father] driving across town to save two cents on a gallon of gas. You do the math." --Eric Lemelson

"Once I bought a $19 bottle of Moen to celebrate something, and [my parents] both blew up at me: 'What are you doing, spending that kind of money on alcohol?'" --Eric Lemelson

Lemelson Vineyards' Pinot Noir Jerome Reserve, named for winery owner Eric Lemelson's father, sells for $45.99 a bottle.

In 1995, American patent law was reformed to make it very difficult for anyone to benefit from delaying the patent application process.

The changes were a response to the Lemelson situation and an attempt to bring American patent law in line with international regulations.

For a complete list of Jerome Lemelson's patents, go to www.si.edu/lemelson/lemelson/jlpatents.html

 
  • Currently 3.5/5 Stars.
  • 1
  • 2
  • 3
  • 4
  • 5
 
 
 

 

comments powered by Disqus
 

Web Design for magazines

Close
Close
Close