In Wednesday's editions, The Washington Post inadvertently omitted the size of the award involved in the story of Louis G. Davidson, a former Sears Roebuck & Co. clerk, who sued the company for patenting a wrench he had designed after telling him it was worthless. By refusing to accept the case, the Supreme Court this week let stand a $1 million jury award that had been upheld by the U.S. Court of Appeals.
Did the world's largest retailer defraud a trusting teen-age employee, paying him a relative pittance for a stunningly successful invention on which it made millions of dollars in profits?
Or was it the other way round: did Sears, Roebuck & Co. pays $10,000 to Peter M. Roberts for what it termed "a legally valueless" patent?
Unusually bitter charges and countercharges mark the dispute, which saw the Supreme Court act this week in favor of the young inventor.
Sears has "outrageously" misrepresented the case, engaged in "grossly improper conduct" and "made serious mis-statements of fact," charges Louis G.Davidson Roberts' lawyer, in papers filed in the court.
Not so, says Burton Y.Weitzenfeld, counsel for Sears. Davidson's so-called factual statement is a mixed bags of innuendo, arguments and conclusion totally unsupported by the record," he counter-charges also in court papers. "These mis-statements and erroneous conclusions permeate each of plaintiff's arguments as well."
Sears brought the case to the court after losing a lawsuit brought by Roberts, first in a jury trial in U.S. District Court in Chicago, and then in the 7th U.S. Circuit Court of Appeals. In the opinion for a three-judge panel last April, Circuit Judge Latham Castle said that the following facts "initiated the unfortunate events":
While working as a sales clerk in the Sears store in Gardenr, Mass.,in 1963, when he was 18, Roberts began work on a new type of ratchet or socket wrench. His aim was to develop a means of easy removal of sockets from the wrench. signed and constructed a phototype with a quick-release to permit users-mainly automobile mechanics and do-it-yourselfers-to change sockets with one hand. He applied for a patent.
But because he worked for a company that was selling more than 1 million wrenches annually, and because he had only a high school education and no business experience, Roberts decided to show his invention to the store manager.
The upshot was that in May 1964 Roberts completed a company "suggestion" form andsent it, along with the prototype, to Sear's headquarters in Chicago. He then quit Sears to move with his parents to Tennessee (where he now owns a grocery in Red Banks).
Persuaded that the invention was valuable, Sears had its custom manufacturer of wrenches, Moore Drop Forg Co., conduct two tests. One, done in July 1964, showed that the wrench worked normally without weakining of its structure by the quick-release, the second, done in May 1965, showed that mechanics liked the quick-release.
Sears then began gearing up to incorporate the device in wrench models constituting 74 percent of all of the wrenches it sold. Meanwhile, Moore reported that the unit cost of the quick-release, 44 cents in a prototype it built, could be reduced to 20 cents.
By early 1965, consequently, Sears knew that the invention was "very useful," relatively inexpensive to manufacturer," and "probably would be quite profitable" Judge Castle wrote.
Also by early 1965, Charles Fay, who at the time was Roberts' lawyer, told Sears that he believed the device was patentable. During negotiations about the posibility of Sears buying rights to the inventions, Fay talked with Sears attorney Leonard Schram about doing work for the company.
"In fact," the Judge noted. Fay "did perform a couple of routine matters for Sears, thus raising some doubt about the independence of his advice to plaintiff" (Roberts).
Later, when a patent was issued, Fay gave the news to Sears months before he gave it to his client.
In an April 1965 letter to Roberts, Schram made representations that would become the principal basis of the lawsuit the incentor ultimately would file:
The invention was not new. A patent, if granted, would be "quite limited" in scope. The quick-release wouldcost 40 to 50 cents. The device would sell only to the extent that Sears would promote it. For all of these reasons, the rights were worth only $10,000.
In what the judge found perhaps the more ironic part of the letter, Schram wrote, "Once we had paid off the royalty expenses, then we would probably take the amount previously allocated to said expenses and use it for promotional expenses if we desire to maintain sales on the item!" (Emphasis supplied by Castle).
Based on a letter, Roberts agreed on July 29, 1965, to assign all of his patent rights-foreign as well as domestic-to Sears, in exchange for a royalty of 2 cents per unit up to a maximum of $10,000.
To enchance an impression that the product might flop, the contract provided for the possibility that sales might not reach 50,000 in a given year, Castle said.
Actually, he said, Sears had known before signing the contract "that it planned to sell several hundred thousand wrenches. . ." Indeed, within days after signinig, it was making 44,000 a week, within nine months had sold more than 500,000, and by 1975 had sold in excess of 19 million.
Because no commercial rival was able to market a comparable product for several years, Sears sold "many of the 19 million wrenchat a premium of $1 to $2 profit," Castle said.
Another contract provision allowed for the contingency that a patent might not issue, although "Sears already knew, and theplaintiff did not, that the patent had been granted," Castle said.