3-D without glasses

(FSB Magazine) -- HinesLab is open for business, but you'd never know it. It is tucked away in a corner of a dreary industrial park in Glendale, Calif. The front door is bolted and covered with a black shroud. Inside, the dimly lit workshop is cluttered with tools, duct tape, and half-assembled projects. "I don't like to be bothered while I'm working," says Steve Hines, an inventor who often haunts his dark lair until midnight. "My privacy is very important to me."

And that may be why almost no one has heard of Hines, who looks to be in his early 60s, or of his remarkable invention, the Holo-Box. A hulking enclosure about the size of two ATMs, the Holo-Box uses light and mirrors to project a crisp, three-dimensional image into space. Although the basic technology is not new, Hines is a talented optical engineer who has found a way to produce stunningly vivid projections that seem to float magically in the air. Although Hines is extremely protective of his technology and would not open the hood for FSB, he claims that his patented light-filtering mechanism is the key to the Holo-Box's superb image quality.

The commercial potential for these images--in advertising, in-store marketing, and museums--is huge. Yet the Holo-Box has been languishing in the lab for seven years, much to its inventor's frustration. "I don't understand why this invention isn't in every mall and every museum in the world," Hines laments. "In a perfect world I would be rich and famous by now."

Part of the problem is that Hines has not been able to establish profitable licensing relationships. Two U.S. companies hold licenses to the technology, but only one has rung up any sales. Prices for the Holo-Box range from $5,000 for a desktop model to $12,000 for a standalone device. Hines believes that some 200 devices based on Holo-Box technology may have been sold since 1999, but he isn't sure because his licensing contracts are so loosely structured that he has no way to audit the numbers.

TO HELP THIS INVENTOR CRAFT A NEW BLUEPRINT for commercializing his Holo-Box, FSB performed a small-business makeover on HinesLab. Three top advisors recently squeezed into the workshop to brainstorm with Hines. Howard Morgan, 60, is a director of Idealab, the high-tech incubator in Pasadena, and a former professor of decision sciences at the University of Pennsylvania's Wharton School. Frank Porcelli, 58, is an expert in patent law and protection of intellectual property with Fish & Richardson in Boston. Kathleen Allen, who, like Hines, declined to reveal her age, is the director of the Marshall Center for Technology Commercialization at the University of Southern California and the co-founder of four companies, including a medical-device venture.

The consultants know that Hines has serious credentials as an inventor. He was trained in industrial design at North Carolina State University in the 1960s. He spent 11 years developing and researching optical technology for Eastman Kodak before joining Walt Disney Co. in 1980. There he worked on displays for the company's Epcot Center theme park in Orlando. He left Disney in 1984 and opened his design and engineering shop. He holds 16 patents on various inventions, including a 3-D movie camera and a cordless computer mouse that doesn't use batteries or electricity. His blue-chip client list includes Sony, NASA's Jet Propulsion Laboratory, and Apple Computer. But to date not one of Hines's inventions has been successfully commercialized.

Hines is both technically adept and socially clueless. Tall and gangly, the inventor projects a childlike innocence and awkwardness that can be both annoying and endearing. He fumbles with chairs when the experts arrive at his lab. His company website (hineslab.com) opens with a decade-old photo of him eating an ice-cream cone. It features detailed descriptions of almost every item he has designed, including a transistor radio built in the 1950s when he was 14. "Edison is my role model," Hines tells the assembled consultants. "I like a nice, clean, quiet work environment. I want to develop technologies and license them. I don't want to deal with people. I don't want to run a company."

As the experts settle in, Hines flicks a switch and the Holo-Box projects an image of a cherry-red toy car, its silver bumpers gleaming in the dark. Almost any object smaller than a breadbox can be projected, spinning slowly in space: A diamond, dazzling from every facet. A bouquet of bright-yellow flowers. "Amazing," whispers Allen, clearly awed.

HINES CLEARLY HAS LITTLE IDEA HOW TO SELL HIS REMARKABLE technology. "What is your target market?" Morgan asks. Hines answers that he sees uses for the device in theme parks, trade shows, stores, and museums, especially to display items such as rare jewels and ancient manuscripts that are too valuable or too fragile to be out in the open or sometimes even in a glass case. Hines adds that an advertising agency recently placed a display using his technology in an upscale shopping mall in Boca Raton, then videotaped the amazed reactions of shoppers as they gathered around the three-dimensional image--a video of a new sneaker--floating in space.

Morgan is not impressed. "Retailers don't buy technology for the sake of technology," he says. "They buy solutions for problems, and it's not clear what problem you are solving here. Clearly you've shown the device has crowd-stopping ability, but does it generate more sales for retailers?" Hines responds, somewhat sheepishly, "That wasn't being measured." Morgan points to the bulky Holo-Box. "Your invention takes up about eight square feet of retail space, and that's a big loss for any retailer," he says. "Retailers are conservative people, and they don't give up real estate without a fight. You will have to prove that your invention will increase sales by a very significant percentage."

Allen offers a suggestion: Recruit a team of MBA students at the University of Southern California or UCLA to conduct a market-feasibility study for the Holo-Box. "They're young, they're energetic--and they're free if the project is approved by the university," she says. "I could put a team on it this fall."

Morgan seems skeptical that such a study would help Hines's device penetrate the retail market. After all, shopping is a sensual sport. Many shoppers want to touch, smell, and try on the merchandise, whether it be a silky negligee or a sparkling diamond ring. In that regard, the Holo-Box is the antithesis of the retail experience. "Three-D has been around since the 1950s, but it has never been a mainstream technology for retail, maybe because it seems so unnatural," says Morgan. "No one has figured out how to show a meaningful ROI for retailers."

As if to confirm Morgan's doubts, Hines produces an e-mail from a couple who had hoped to license the Holo-Box earlier this year. Sebastian and Stephanie Giovanni of Los Angeles told Hines they had bought a device and taken it to a variety of trade shows, trying to gauge whether coin dealers, jewelers, auto dealers, or gift shop owners might be interested. They didn't have a single customer--even when they slashed the $12,000 list price by more than 50%. Did Hines want to buy back their Holo-Box?

The gloom brightens at least briefly as Allen and Morgan simultaneously think of a potential Holo-Box market where unnatural displays are commonplace: Vegas. "The gaming industry has lots of money," Allen observes, "and it is very willing to experiment with new technologies." Their sudden enthusiasm is infectious. Hines lights up too. "I can see money billowing in midair," he says. "A cyclone of dollar bills!"

But the image also reminds Hines of a nagging concern: licensing fees. Hines charges an annual fee of $40,000 to license the Holo-Box. In addition, licensees are supposed to pay Hines a 6% royalty on all Holo-Box sales. "Are my fees reasonable?" he asks. The three consultants squirm in uncomfortable silence for a moment.

"The $40,000 is not the issue here," Morgan explains gently. "You are at the mercy of your licensees." And that's the rub. Neither of Hines's two licensees has found a market of any significant size for the Holo-Box. Provision Interactive Technologies of Chatsworth, Calif., has held a Holo-Box license since 1999, according to Hines. (Provision, a developer of display technologies, declined to comment on its relationship with HinesLabs. "We license a lot of technologies," says Bob Ostrander, Provision's vice president for marketing.) Holo-Deem of Kirkland, Wash., has held a Holo-Box license for two years. The two brothers who run Holo-Deem, Tim and Dan McFall, hope to sell 3-D displays to supermarkets. But the McFall brothers are both financial planners with little experience in supermarkets or even retail. Under grilling by the consultants, Hines admits that he didn't investigate either of his two licensees thoroughly to determine whether they were capable of marketing the Holo-Box successfully.

Nor do Hines's contracts contain performance clauses that would require licensees to achieve key benchmarks in marketing and selling the device in order to renew their contracts. "You need to do more due diligence before you let someone walk out of here with a license for the Holo-Box," Porcelli admonishes the inventor. "Someone else's wishful thinking doesn't mean money in the bank for you," Allen adds.

Although Hines holds several U.S. patents on the Holo-Box, Porcelli advises him to seek trademark protection in the U.S. and patent protection in foreign markets, such as Europe and Japan. Don't brush off potential Asian licensees, the three counseled, though it is likely that the device eventually will be copied illegally by an overseas competitor. "Understand that any deal is a short-term deal," Allen says, "and as soon as someone can figure out the technology and cut you out of the equation, they will." Knowing that, Morgan says, "charge an initial licensing fee of $100,000. That will separate the men from the boys."

Still, finding qualified new licensees will be a challenge for Hines. He could start by building a slick, standalone website for the Holo-Box, one that isn't cluttered with photos and descriptions of other inventions. Hines probably can't afford to enter the increasingly expensive search-term advertising market, but he could hire a specialist to optimize the new site so that it pops up on the first page of free results when web surfers search under "3-D displays" and similar terms.

LAST, PORCELLI SUGGESTS THAT the inventor continue improving the performance of the Holo-Box. Only viewers standing almost directly in front of the device can see the 3-D image. Shift a few feet to one side or another, and the image is lost. The Holo-Box is a bear to install or move. And it is costly. Hines estimates the cost of building a prototype at about $7,500, not including his labor. But he hasn't even calculated the cost of manufacturing his invention in volume. He acknowledges that viewers have a narrow window in which to see an image, but insists that the clarity of the three-dimensional projection makes up for that shortcoming. The experts seem unimpressed. "Everyone will agree this is an exciting technology," Porcelli says flatly. "But someone is going to run far with this ball, and you want to make sure that it is you."

Hines can't afford to hire sales and marketing specialists to help him commercialize the Holo-Box. And it's clear that marketing interests this inventor far less than the workbench. "I've started on a new invention, a cleaning device," he told FSB a few weeks after his makeover. "It's like a vacuum, only better! I'm so excited by this new discovery that I've been working on it night and day."

Hines did ask his lawyer to restructure his standard licensing agreement, adding performance clauses and other requirements. He invited an interested group from South Korea to view the Holo-Box, though on the advice of the experts he will raise his initial licensing fee to $100,000. In the fall, Allen's MBA students plan to conduct a feasibility study to identify potential new markets. And Hines intends to contact companies that make gaming machines for casinos. Stay tuned--FSB will keep in touch with Hines and report on his progress from time to time.

The Experts

INVENTOR Steve Hines needed help commercializing the Holo-Box, his innovative 3-D display technology. So we flipped through FSB's Rolodex and found three of the world's leading experts on intellectual property and startup incubation.

FRANK PORCELLI, a lawyer at Fish & Richardson in Boston, specializes in patent law. (fr.com)

KATHLEEN ALLEN runs USC's Center for Technology Commercialization in Los Angeles. (usc.edu/org/techalliance)

HOWARD MORGAN is a director at Idealab, a technology-business incubator in Pasadena. (idealab.com)

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