They Saved Small Business When corporate America tried to seize the patent system from independent inventors, this Boston couple came to the rescue.
(FORTUNE Small Business) – Robert H. Rines is no stranger to complex topics or to controversy. An MIT-trained physicist and inventor, he holds dozens of patents on advances in fields as diverse as radar and fish farming. A patent lawyer, he has refereed scores of legal squabbles. Even his hobbies are treacherous voyages into the unknown. For the past 30 years, Rines has devoted much of his free time to a search for Nessie, the mythic beast said to live in the murky depths of Scotland's Loch Ness. Rines' last expedition--probing the lakebed in a minisub--earned him a couple of fuzzy photos and the dubious distinction of being lampooned in Garry Trudeau's comic strip, Doonesbury. But none of those experiences fully prepared him for the perils he found lurking in the movement to reform the nation's patent system.
Since the early 1990s, the patent wars have been raging. Archaic and slow, the country's 210-year-old system was in desperate need of an overhaul, but no one could agree on how to do it. Ford, IBM, Intel, and other big corporations wanted to speed the patent process and reduce litigation. Inventors and small businesses feared losing valuable protections and royalties for their work. Ten years of brawling came to a head last summer when a bill that would have radically changed the patent system came up for a vote in Congress. That's when the phone rang chez Rines in Boston. It was a frantic Congressman asking for the inventor's help. Rines flew to Washington, D.C., and in the final hours before the vote, he helped rewrite the bill, erasing key measures that would have hurt small business and the independent inventor. As proposed, those changes would have stripped small companies of critical rights they use in defending their patents. The new bill was signed into law in November.
But there's no peace in this war yet--even for the peacemaker. Controversy still rages over Rines' role in patent reform and that of his wife, Joanne. She owns an influential trade magazine for inventors, and her endorsement of the bill helped make it law. But Beverly Selby, who thinks the Rineses compromised too much, is furious. "This law is a disaster," says the executive director of the Alliance for American Innovation (AAI), a 3,000-member inventors' group in Washington, D.C. "It never would have passed if Bob and Joanne Rines hadn't stuck their noses where they didn't belong." Yet many other inventors and small business folk hail the Rineses as saviors for protecting their interests. Corporate America is grateful that they agreed to a compromise that satisfies many of their concerns. Only one thing is certain: For decades to come, the U.S. patent system will bear the indelible stamp of Robert and Joanne Rines.
And what that new system will look like? Answer: not much like the one last renovated in 1952. The 1999 American Inventors Protection Act (see the box on page 78 for details) calls for dramatic changes in the way patents are filed, granted, challenged, and defended. The most important changes for small business: Applications will be made public sooner and will be easier to challenge. In certain instances, big companies that choose to develop advances in secret will be free to continue to use them even if someone holds or secures a patent on the same advance. Even more important, they won't have to pay royalties to the patent holder. Q. Todd Dickinson, commissioner of the U.S. Patent and Trademark Office (PTO), believes the law will "reduce litigation and improve the quality of patents" issued by his office. The new provisions will be phased in this year.
For Rines, a starring role in a legislative drama caps a career of uncommon pursuits and extraordinary successes. The 77-year-old inventor is one of those rare people with the ability to pursue his quests wherever they lead and return with something tangible to patent. Fascinated by microwave technology and sound waves as a student at MIT, Rines helped develop radar systems during World War II as an Army Signal Corps officer. Much of his work still underpins the military's early-warning attack systems.
A talented violinist and composer, Rines once played a duet with Albert Einstein back in the 1930s, when the great physicist paid a visit to a boys' camp in Maine where Rines was spending part of his summer. Rines also scored an off-Broadway play, the 1960s hit Drums Under the Windows, and composed a ballet, which was performed last year at New York City's Lincoln Center. When he was in his 50s, Rines became consumed with proving the existence of the Loch Ness monster. Using advanced sonar technology of his own design, Rines embarked on an intense quest for the aquatic beast. His photos from the deep are blurry--he thinks he can make out a flipper and a long neck--but he still believes the truth is out there.
Yet his greatest love was at the workbench. Raised in Brookline, Mass., the son of a patent lawyer, Rines recalls a home filled with inventors passionately discussing their work around the kitchen table. Rines was awarded his first patent at age 19, and the wonder of it hasn't waned yet. He holds more than 80 patents--and he's not finished. Rines, who bears a resemblance to actor Robert Duvall, is hard at work developing a process to convert the oils from plants such as sagebrush into nutrients to strengthen the immune system in other plants. He also operates a busy patent-law practice and lectures on patents at MIT. (In addition, Rines founded the Franklin Pierce Law Center in Concord, N.H.)
To Rines, the American patent system is an inspired work of genius that has spurred innovation since patent rights were enshrined in the Constitution. "Patents go all the way back to the Magna Carta," he says matter-of-factly. On the wall of his office is a reproduction of the first patent ever granted in the U.S., signed by Thomas Jefferson and George Washington in 1790.
But the U.S. system needed an overhaul. Getting a patent involved a seemingly endless wait, or so it appeared to more firms whose core technologies were changing at warp speed. A record 270,000 patent applications were filed last year, more than 65% above the number a decade ago. But companies were waiting as long as two years to push an application through the bureaucracy of the PTO. Patent delays were keeping new products from the market for as long as a year, manufacturers complained. They feared they would lose ground to competitors in Europe and Japan, who had more streamlined patenting procedures. The outcry was especially loud in such hotbeds of innovation as Silicon Valley and Boston's Route 128.
But delays weren't the only problem. Patent litigation had exploded in recent years. Savvy inventors were abusing the system, squeezing settlements out of companies that had developed products or technologies that, it turned out, were very similar to concepts the inventors had applied to patent years earlier. Manufacturers were spending millions to fight these so-called submarine patents, labeled that way because a few ingenious individuals had perfected the legal trick of keeping patent applications submerged in the archives of the patent office for decades. By constantly amending the applications, which were kept secret until patents were granted, inventors could keep them pending indefinitely. Then, after a company took the time to develop the technology or product, the inventor would surface and claim to have had the original idea. The object: to wring a fat settlement out of the company.
The most infamous of those inventors in corporate circles was the late Jerome Lemelson, who lived near Reno and obtained more than 500 patents in his lifetime. In 1992, he pocketed more than $100 million in settlements from Japanese automakers after he claimed to have invented the technology behind bar-code labels, which the automakers were using to track parts in the factory. Lemelson had filed a patent application on the idea in 1954. He had managed to keep it pending for almost 40 years. Fearing a prolonged court battle, the Japanese paid up. (Ford was to be his next target, but in 1996 a federal judge threw out his "abusive" suit against the automaker.) But Lemelson wasn't the only submariner. Many others were taking up the dark art.
Big business finally rose up and demanded patent reform in the early 1990s. Giants of the Fortune 500 joined forces with a number of trade associations to lobby for a retooling of the entire system. After all, they argued, they were bearing the brunt of the patent mess; four out of five patents are granted to big companies. The cost of securing and protecting patents had also soared--patent-related litigation spiked up more than 43% between 1993 and 1998. In all, the companies were a formidable force: well-funded, well-organized, and fighting mad.
But the corporate campaign for change bumped up against an unexpected and powerful foe, the nation's independent inventors. What a quirky bunch. They were impassioned, geeky, and disdainful of politics. But they were also loud and persistent and amazingly effective in stalling the movement for patent reform. They launched a grassroots campaign and lobbied lawmakers. They invoked the fathers of U.S. invention: Thomas Edison, Benjamin Franklin, the Wright brothers. "The government was tampering with something sacred," says Stan Mason, the Weston, Conn., inventor of the squeezable ketchup bottle and holder of more than 60 patents. Their pleas tugged at the heartstrings of patriotic lawmakers--and made them cautious about upending a system that protected the work of geniuses.
And so the battle dragged on for years. Rines threw himself into the fray on the side of the independents, and it changed his life in a way he never imagined. In 1993, the widower was attending a convention when he met another passionate advocate for independent inventors, divorcee Joanne Hayes. Joanne, 53, had entered the esoteric world of inventions through the back door. A supervisor of a group of 7-11s in Colorado Springs, she was looking for something more challenging when she answered a classified ad for a writing and editing job at a small magazine called Inventors' Digest. Joanne quickly realized she had a knack for translating technical mumbo jumbo into readable copy.
This cool new job was transformed into a passion two years later at an inventors expo in Washington. Joanne was seated with some seasoned patent lawyers. She was arguing against some proposed changes to the patent laws, and her comments were dismissed as foolish. "I know what they were thinking: 'Who does this woman with her little newsletter think she is?' " Joanne recalls, still sore. "I have too much Irish and 1960s feminism in me to be treated like that." That's when she threw herself into her work, and before long she emerged as a leading advocate for independent inventors.
Rines met Hayes at a conference to discuss patent reform--he was the keynote speaker--and love bloomed at the lectern. The couple married in 1996 and quickly became the most influential tag team in the independent inventors' community. Joanne had bought Inventors' Digest, which had a circulation of about 15,000, and she'd become a champion of independent inventor rights. Together, the two became leaders in the crusade to fight patent reform, jetting around the U.S., speaking at conventions, giving interviews to the press, and buttonholing other influential inventors to enlist their aid in the battle.
The climax of their decade-long fight came last summer when the couple got a call from U.S. Rep. Donald Manzullo, a Republican from Illinois. Like the Rineses, Manzullo was concerned that the reform bill would harm small business. Various versions of the legislation had percolated in committees for years, so few had expected a speedy resolution. Then, in late July, the bill was suddenly scheduled for a vote without any debate. Manzullo managed to delay the vote briefly. But in doing so he'd provoked the ire of the famously cantankerous Rep. Henry Hyde, chairman of the Judiciary Committee. Hyde's committee had unanimously voted for the bill. And Hyde wanted it approved quickly, before the traditional congressional recess in August. Manzullo pleaded with Rines to come to Washington to help him defang the bill.
The Rineses flew to the capital three days later and went to Manzullo's office. The couple learned that a two-thirds majority in favor of the bill had already been counted. Then Hyde called. "We need to chat--be in my office in 15 minutes," he ordered. With Rines at his side, Manzullo marched to Hyde's chambers, where they were joined by Mitchell Glazier, the legal counselor to the Judiciary subcommittee on intellectual property. Clearly, the bill was going to the floor for a vote and would do so under a parliamentary procedure that did not permit debate. The debate would be right then and there.
Spotting his cue, Rines decried the bill as a violation of everything the patent system was meant to be. In particular, he tore into a provision termed "prior use." It would have allowed any company using a technology or manufacturing process in secret, sans patent, to be inoculated from lawsuits should another inventor later patent that process independently. That provision would have encompassed virtually every kind of patent. It also would have encouraged more companies to keep technologies under wraps and, thus, discouraged innovation. And, lacking the carrot of royalties, independent inventors would have had less incentive to create and patent their creations. "You will destroy the little guy with this bill, Mr. Chairman," said Rines.
Glazier countered that the bill was a long-needed upgrade that would benefit small companies as much as large ones. Back and forth they went, and the debate grew heated. Suddenly, Manzullo hurled a hardball. He asked Glazier why his name, title, and phone number were posted on a contact list for the 21st Century Patent Coalition, the leading corporate lobbying organization behind the bill. The office went silent. No staff member of a congressional committee should ever be listed among the members of a lobbying organization; it signals a clear conflict of interest. While Hyde was already prepared to compromise, this development made him angry. He turned to Manzullo and Rines. "Fix this bill," he said. They had 48 hours. (Coalition spokeswoman Ada Barnes states that Glazier's appearance on the list was a "horrible clerical error." Glazier himself says he has never been a member of that or any lobbying organization.)
Rines, Glazier, and Manzullo went to work with the coalition's lobbyists, watching over their shoulders every step of the way. A key change Rines made was in reworking the crucial prior use section. He rephrased that section to restrict companies' "prior user protection" solely on "methods of doing or conducting business." This is a new, controversial type of patent that dot-com companies have begun using to lock up innovative business models or e-commerce transactions (see the box on page 82). "I believe this patent class is too broad and will be found unconstitutional," Rines says. "So it was an easy giveaway."
Then he turned to a section on a procedure called reexamination. Companies use this procedure to challenge inventors' rights to a patent. Rines deftly added a clause that barred companies from asking the federal courts to retry patent cases they already lost in the PTO. Inventors feared lengthy court challenges would hobble their efforts to market their advances.
Corporate lobbyists, however, retained a favorite provision: Patent applications will be made public 18 months after being filed. In the past, applications were published only after the patent had been granted. Now companies could see whether a technology they want to develop has already been invented, which should help them curb wasteful research and development spending and finally wipe out the accursed submarine patent. Independent inventors, though, aren't wild about having sensitive data in their applications revealed. "It's like someone comes in, flicks on the lights, and you don't have your pants on," says Steve Hines, an optical systems engineer in Glendale, Calif., who creates high-tech cameras for Hollywood. Hines worries that unscrupulous companies will rip off his ideas before he has the full force of a patent in place to protect them.
The new bill passed in the House, with Joanne's endorsement. Manzullo praised Bob on the floor of the House for his work. Other inventors have sung his praises too. "He couldn't stop the law from being passed," says Don Costar, an inventor in Reno. "But at least he got in his licks." The corporate lobbyists take a more philosophical view. Says Herbert Wamsley, executive director of the Intellectual Property Owners Association in Washington, a lobbying organization that represents most of the FORTUNE 500: "We didn't get everything we wanted, but this is the way legislation is made--with compromise."
Anti-Rines sentiment still runs high in some quarters. Beverly Selby, the AAI executive director and a former ally of Joanne's, believes that big companies will exploit the new reexamination rules to tie up small firms in PTO hearings, regardless of Bob's changes. (Selby and Joanne are no longer speaking.) And John Trudel, a management consultant and another antireform partisan, contends the couple were "suckered into a trap" set by impatient members of Congress eager to push the bill through at all costs. Congressional staffers call that comment uninformed claptrap.
But that's all past now, and the Rineses have embarked on new projects. Joanne is moving the magazine's office out of the spare room in the condo and down to a larger space she rents on the waterfront. As for Bob, well, he once again hears the cry of the lonely leviathan of Loch Ness. With his 25-year-old son, Justice, Rines has overseen the installation of a rig with a video camera, lights, and sonar beam 80 feet below the surface of the lake to look for the monster. He hopes to Webcast images of the Nessie on the Internet.
Not so fast, Dad. Justice has called from Scotland to say that the rig's lights are so dim he can't see eels that swim past the camera. A problem? Bob Rines is intrigued--and delighted. "Back on the hunt," he says with a grin. He's off to the Highlands this spring.
www.fortunesb.com Have a great product idea? Log on to fortunesb.com/articles/0,2227,482,00.html for our guide to patenting your invention. For a copy of the new law, go to uspto.gov.