(FORTUNE Small Business) – Fourteen years ago, on a spring afternoon at GM's testing facility in Detroit, Jack Evans parked and locked a gleaming black Corvette. Under the hood was a high-performance cooling system Evans had developed, which he was planning to demonstrate for GM engineers. The tests would be grueling--conducted in an automotive torture chamber called the hot tunnel, where temperatures of 115 degrees stress cars to the breaking point. Still, Evans was confident. At 44, he was a respected inventor with six patents, including several for devices used in race cars. He'd been recruited by GM's engineering gurus to work on one of the most coveted assignments in the auto world: the next-generation Corvette engine. He thought that by the time he left Detroit, he'd have made his fortune.

For GM, the stakes were even higher. By the late 1980s, the Corvette had lost much of its allure. Sales had been dropping for four years, and the car badly needed an upgrade. Though Corvette sales were only about 24,000 of the 5.1 million vehicles that GM sold in 1989, the 'Vette was the pride of its fleet, the muscle car that lured buyers into showrooms. GM was investing $100 million in the engine alone, trying to wring out more power and better mileage. But there was evidence that the new cooling system was problematic.

Exactly what happened in the hot tunnel over the next 24 hours would become the subject of a costly legal battle that has dragged on for nearly a decade so far. Evans claims that GM employees broke into the car sometime during the night and stole the secrets of his breakthrough design, and that the company tried to drive him out of business so that he wouldn't have the heart or money for a fight. GM, in the ensuing trial, painted Evans as a desperate, down-on-his-luck car buff trying to take credit for the company's invention.

Meanwhile, the trade secret under dispute--a vent no larger than a pinhole--has helped GM sell nearly 280,000 Corvettes since 1992, and Evans says it's now in ten million cars and trucks. In his lawsuit, he asked for $600 million in damages.

In late August, a Connecticut state court judge ruled for the automaker on a key legal issue, saying that Evans effectively gave away rights to his trade secret when he signed a release in 1989 to obtain partial payment on a disputed bill. "We're pleased that the Connecticut court ruled in our favor," a spokeswoman for GM says. "The court agreed with our claim." But the case isn't over yet; Evans vows to appeal and still has 150 investors behind him. Fish & Richardson, a respected patent law firm, is confident enough to continue fighting his case on a partial contingency basis.

Regardless of how the lawsuit is resolved, it represents a cautionary tale for inventors, entrepreneurs, and the big companies with whom they do business. Intellectual property can be a small business's biggest asset, but the people who come up with those ideas often must play a cat-and-mouse game with potential corporate partners--showing just enough to create interest without giving away the secrets behind it. And in a legal dispute, the eureka moment can be hard to prove. Still, even after a wearying decade of litigation--to date his legal costs have come to about $3 million--Evans remains undaunted. "GM stole what was mine," he says. "I will never stop fighting until I win."

At the Track

The relationship between GM and Evans started out in the mid-1980s at a small racetrack in Lime Rock, Conn., where Detroit's engineering executives scout for talent and innovations. Evans was renowned for an innovative oil sump he'd designed for race cars. Soon he joined the hundreds of small contractors who take on design and engineering projects for GM. By the late 1980s, Evans's shop was billing the automaker about $70,000 a month, mostly for work on cooling systems.

The GM work was a lucky break for a guy who seemed to have had few in his life. Evans was in college when his father died, and he had to drop out to help his family. He later served as a Marine in Vietnam. During a mortar attack, Evans suffered serious head and back injuries, and spent eight months in a military hospital.

Back home, he enrolled at Yale, but on a campus aflame with antiwar protests, he lasted only a few months. "It was lonely being an ex-Marine at Yale in 1968," he says. He got a job working for an engine designer in New Jersey, then set up his own shop behind his home, within earshot of the roaring engines of Lime Rock, where he would test his inventions.

By late 1988, Evans had come up with two reverse-flow cooling systems. One used chemicals as coolant, instead of water, and had been funded by GM and patented by Evans. But he was also working on another project with his own money, a reverse-flow system that used ordinary coolant (water and antifreeze). He says that he mentioned the water-based system to GM, but that its engineers weren't interested.

Despite his technical talents, Evans was admittedly naive when it came to running a business. GM was his only customer, yet he had no contract and little paperwork outlining the relationship. Virtually all the work was based on telephone and racetrack conversations. (According to H. Douglas Robinson, Evans's chief advocate among the GM engineers, this was common at the Corvette group in those days, until the company's purchasing department cracked down on such arrangements.)

By February 1989 Evans had let GM run up a big bill, $804,000, and he was getting anxious to collect. The company had been slow to pay him in the past, he says, but it always came through in the end. To keep his business going until payday, he'd taken out a loan secured by his house and shop. His bankers were also getting nervous. Then, just weeks before his chemical-based cooling system was to be tested in the hot tunnel, Evans says he got an odd request from Detroit. A group of engineers wanted a demonstration of his water-based system too.

Evans balked. GM had not funded that research, and he hadn't patented the system yet. He believed it had a breakthrough design, a hole the size of a pinprick that allowed hot gases to escape. "It was counterintuitive," he says. "Everyone else was using a big hole, figuring it would allow more vapor to escape faster. I made it smaller, and it worked."

But a demo was risky. Every automotive inventor knows the rules in Detroit: Don't show anything unless it's patented. Evans says that Robinson, the GM executive, told him a demo would grease the wheels for payment of the outstanding bill. (Robinson, who retired in 1994, says in an interview that he doesn't recall that discussion.) Ultimately, Evans says, he reluctantly agreed to a "black box" test, in which the inventor demonstrates an innovation without allowing onlookers to see the technology up close. As in the past, Evans says, the arrangements were all oral.

Overnight Delay

In the hot tunnel on march 16, 1989, after demonstrating his chemical-based cooling system, Evans says he installed the water-based system on the same car. But, he says, he was told by a hot-tunnel technician that a glitch would delay the demo overnight. Evans locked the car and left. (The glitch was not documented; that same technician later testified that he did not recall any problems.)

When Evans returned the next morning, he says, he noticed immediately that an access panel under the car had been moved. Concerned, he says he asked a technician if anyone had touched the car. Just routine maintenance on the tunnel, he says he was told. After what he believed was a successful demo of both systems, he packed up and went home.

For the next few months, Evans's relationship with the automaker was cordial. GM still had not paid the $804,000 bill, but he thought the money would come in eventually. As a banker later testified, GM finance executives had repeatedly assured Evans's bank that the bill was valid and would be paid.

Five months after the hot-tunnel tests, GM told Evans that it intended to audit his bill. But Evans had very little paperwork. "It had all been done on a handshake," he says, "the same way we'd done it for years." Robinson, the retired GM executive, says, "We had gotten into this element where projects weren't documented, and that's part of what got messy with Jack."

GM's auditors showed up at his shop that fall and made him an offer: They would pay the bill in full if he would grant royalty-free rights to all his cooling technologies. Evans refused. A few months later, GM made him a second offer: $150,000 and a release that Evans thought was inconsequential. By that time, bill-collectors were hounding his wife, and his investors were howling. Pressured by his bankers to accept, he took GM's offer and signed the release. "I was angry and I didn't want to do any more work for GM," he says, "but I was still waiting for the day they'd come back to me for my nonaqueous technology"--the cooling system that used chemicals instead of water and antifreeze. He still thought it was in the running for the new Corvette, and because he held a patent on it, he felt he was safe.

But the phone never rang. By 1991, his business was close to bankruptcy. His bank tried to foreclose on his house and shop. Evans laid off all but one of his workers--he'd had ten when things were bustling--and started to sell off his belongings to raise money. "We sold the racing equipment, pawned my wife's engagement ring, whatever we could to keep the lights on," he says.

That fall, an acquaintance faxed Evans a magazine article about the new Corvette engine, describing a reverse-flow, water-based cooling system that Evans says he recognized. "As the paper peeled out of the machine, I felt like my life was flashing before my eyes," he says. "I saw my design in that engine." Evans quickly moved to secure a patent on his system in order to go after GM for royalties, and was awarded that patent in 1993. (According to Evans, GM never patented the cooling system used in the Corvette, though it takes out about 400 patents a year; the company declined to comment.)

In 1994, Evans sued GM for patent infringement and theft of a trade secret. The patent half of the case seemed like a long shot, and in 1996, his patent was declared invalid because of a legal doctrine known as "on sale": GM had offered a Corvette containing the cooling system more than a year before Evans filed for his patent. But the trade secret case was still pending, and this past spring--intellectual-property cases are notoriously slow--it finally went to trial in Connecticut Superior Court.

In the Courtroom

The litigation lasted more than four weeks, and GM's defense was broad and aggressive. First, the automaker said it had no record of a "black box" test by Evans. GM's lead attorney, John T. Hickey Jr., a ferocious litigator who handles some of GM's toughest product-liability suits, belittled Evans on the stand for his penchant for secrecy and his thrifty habits. After coming home from Detroit, the inventor had recycled the cooling system parts, and during cross-examination, Hickey asked sarcastically: "Your $600 million invention is in the garbage. Is that right? Do I understand that correctly?"

Both sides submitted evidence contending that they had come up with the vent restrictor first. Evans had his lab notes and inventor's log, while GM turned in thousands of pages of documents. Among the most crucial were three memos written by John Juriga, a lead engineer on the Corvette, which showed detailed drawings of the pinhole vent and were dated 1988, a year before Evans showed his system to GM. But Evans's lawyers found that those memos had been faked. A forensic test showed faint indentations of the memo above Juriga's that bore the date 1992.

When questioned in a deposition, Juriga broke down crying and admitted he'd faked the memo because "it just wasn't our habit to keep documents like this," he said. Evans's lawyers argued that that contention was questionable, given how obsessively GM documents its research. Juriga also said he'd been under pressure from GM's lawyers. "It's been a lie that I've lived with these eight or nine years," he said. "I just couldn't find the documentation." But, he added, "I knew in my heart of hearts that we had done the work on this." Juriga had also faked two other memos, "to make it seem more plausible," he explained. He was fired by GM after his admission. (Juriga's machinist, also involved in the deception, pleaded the Fifth more than 200 times during a deposition; in criminal trials the refusal to testify can't be inferred as evidence of guilt, but in civil trials it can.) GM conceded the fake memo was "absolute misconduct" but it asserted that "it did not infect the case." Once the memos were thrown out, Hickey conceded at trial, GM scrambled to show other proof that it had the venting system first--four blueprints from 1988 to 1989 with vents similar to Evans's.

In his ruling in late August, the judge said that the R&D evidence, faked or otherwise, didn't matter, because Evans effectively gave away his rights to the cooling system--twice. The first instance was when he signed a release accepting GM's $150,000 in December 1989. Evans thought the release covered only work he had done explicitly for GM, while the water-based system was a pet project of his own; the judge disagreed.

And in 1990, he'd signed a second waiver. GM's truck division had expressed interest in his technology, and as part of an agreement he'd signed paperwork that granted GM rights to his "prior submissions." Evans's lawyers contended that the water-based system in the black box test wasn't a formal submission, just a demonstration, but again, the judge disagreed.

Now Evans vows to appeal. His investors--among them several members of the wealthy du Pont family--say they will continue funding his challenge. But at 59, Evans is an outcast in Detroit. "We were blackballed as soon as we sued GM," he says. Surviving on a shoestring, his company doesn't have the money to develop or market his other innovations. "Maybe I'm not the best at business," he says. "But I've learned to be cautious. No more handshakes. Get the patents filed before you take anything out of the shop."