Okay, there may be one or two guys here who are interested in this story. It features a rogue’s gallery of characters and has more intrigue than
The Wolf of Wall Street.
In the late 90s I was a junior partner in a firm called Total Source Financing. I know, the term “junior partner” sounds like something straight out of Mad Men, right? Well, the managing director, Desmond, would have fit right in with Don Draper. He could knock back three bottles of Merlot at lunch and still close a big deal in the afternoon. He barely knew how to turn on a computer. Any time we had a business meeting with clients he made everyone wear those nametags that say, “Hello, my name is…” And rather than utilizing Powerpoint, he used flip charts and drawings. He was also a very optimistic guy and he could find merit in even the wackiest ideas.
So it was no surprise when he called me into his office to meet a couple of guys who supposedly owned patents that would control the future of micro-computing. Naturally, I was skeptical. My skepticism often sent Desmond into a fury, but it was usually warranted. Desmond had known one of the two guys a long time. His name was Bill Dunnam, a former executive at Bell & Howell and a real no nonsense guy. The other guy was a wacky professor from St. Louis named Michael Saigh. He had on a threadbare blazer and his hair was unruly and looked like it wouldn’t take a comb. His uncle had owned the St. Louis Cardinals before tax issues had forced him to sell to the Busch family. Supposedly, Michael was the genius behind the patents this business was based on.
These guys were looking to raise about $2.5 million. I had to do some due diligence on these patents, but tech was hot, the markets were roaring, and I figured it was doable. First, I had to negotiate our end. Right away things got contentious between Dunnam and me. I wanted $50,000 for $2 million off the top plus a 2% equity stake in the company. Bill seemed to find this absurd. I was a cocky young punk at the time. I told Bill he should just go find the $2 million himself. We went back and forth and I think I may have said something close to “go fuck yourself”. We took a break and Bill told Desmond I was one of the biggest pricks he had ever met. Desmond said, “You want him on your side then, don’t you?” Finally, we struck a deal. I don’t remember the exact terms, but I got our 50 grand. I think we took slight less in stock, maybe 1.25%. Plus I worked out a strong deal for my investors. I had Saigh tied up six ways ‘til Sunday. He was reluctant, but that was the price of doing business. If he didn’t like it, he could find the dough somewhere else.
I started to research the patents right away. I ran them by a federal judge I knew and a couple IP attorneys. The bottom line was, they appeared to be legitimate, but you never know until you get a court ruling. That wasn’t a concern for me because Dunnam’s business model was to find a big player to form a strategic partnership. For example, we would license the patents to Motorola for a relatively small annual fee. That would legitimize the patents. We would set the licensing fee low enough that it wouldn’t be worth it for others to fight us, and we would have the power of a Motorola, or whoever, behind us. Michael and Bill already had a tentative agreement with Muzak. The idea was that companies would fall like dominoes.
Of course, there was something Bill and Michael hadn’t mentioned. The company was in bankruptcy. I was fuming. I had already lined up the first $500,000, and that was a pretty big thing not to mention. I was ready to walk away, but Desmond calmed me down. He brought in a pugnacious little Irish attorney named Gary Green. Gary was a good guy. He did a workout with the creditors and got the thing out of bankruptcy. He also got me to agree not to take the entire $50,000 fee from that first round. My guy wired the cash and IPDN paid us $25,000. I wasn’t really happy because money I thought would be working capital was now going to pay off douchebags I had never met. There were all these guys who had worked for the precursor to IPDN, Microtome, who had claims. At the time I thought these guys were scumbags. It was only in retrospect that I realized Doug Brockhouse and Keaton Treece were just previous versions of Bill Dunnam and me who Michael had jerked off.
Michael Saigh was the kind of guy who was the product of the last person he talked to. Somehow, this professor from Southern Illinois got ahold of him. That was Pierre Barrette. Pierre was the kind of guy who starts sentences with “Know this…” My general response to “know this” is “fuck you”. Pierre loved to talk about his multiple degrees, his fucking PhD, and all his accomplishments. We had a meeting with Henry Yeun, the CEO of Gemstar/TV Guide, a really serious guy. Pierre embarrassed himself and me by telling Henry how he built a radio when he was five years old. Henry started giggling and turned to his assistant and said, “That guy right there? He built a radio when he was only five!”
Anyway, once Pierre came in, Dunnam was on his way out. Now you had these two academic dopes spouting off about their “vision” rather than moving ahead with a cogent plan to monetize the fucking patents. The inmates were running the asylum. Dunnam and I had had our differences, but at least I could talk to him. We both liked money. I don’t know what motivated Michael and Pierre. Michael could live off his uncle’s trust fund. I guess they were more interested in academic reputation than cold hard cash. That didn’t work for me. Or my investors.
Things started going bad in a hurry. I had raised the balance of the money, but I was afraid I wasn’t going to get paid. I had the investors wire the cash to Total Source and withheld the $25,000 I was due before sending the balance on to IPDN. In the meantime, these guys were down in DuQuoin burning through cash. They wanted us to raise more capital. I wasn’t sure I wanted to do that, but I already had a bunch of guys in this thing and I didn’t want it to fail either.
The last straw came when Michael and Pierre sued Iomega. This as the exact opposite of the business model we were supposed to be following. And they needed Board approval to do something like that. Pierre tried to claim he attempted to contact all Board members and as President made the emergency decision upon failing to reach anyone. Desmond and I were in the office all day and quite easy to reach. These goofs had gone too far. Now they were begging for more money to fund the lawsuit. Armstrong Teasdale doesn’t work cheap. They could no longer meet the terms of the deal with my investors. The pressure was on.
So Michael did what he had done before we got involved. He threw the company into bankruptcy. But I had him tied up tight. My guys were preferred creditors. We were going to wind up with the patents. This sent Michael into a rage. But there wasn’t shit he could do about it. He tried though. Remember the 25 large I held back as my fee? Michael claimed that the investors hadn’t fully met their obligation since they were $25,000 short. That didn’t fly and the trustee went about the business of trying to liquidate the company’s assets.
The company still owed me a little money, but all I really cared about was that my investors came out whole. The trustee decided to hold a blind auction of the patents and take bids. My biggest investor and I were holding our collective breath on the day the bids were opened. I think there were three. I believe Sony bid $1.5 million. But the winner was Charter Communications/Digeo at over $4.1 million. Awesome! My guys were going to get out and I might even put a few more bucks in my pocket.
At the final hearing in bankruptcy court the judge offered Michael a chance to speak. He kept vacillating between rage and sadness and came close to weeping several times as he compared himself to Philo T. Farnsworth. “The cathode ray tube!!!!! And RCA just stole it!!!!!”
There’s a little more to the story though. Once Digeo had the patents they went after a company called Audible, Inc. There were four original patent holders on the Microtome e-book patent, Michael Saigh, Doug Brockhouse, and the Chang brothers, Oliver and Edward. When they transferred the patents to IPDN everyone had signed except Edward Chang. Oliver Chang had signed as executor of his brother’s estate which suggests Edward was deceased. But Audible was claiming that Edward Chang had licensed the patents to them. Suddenly, Edward was alive! Which now called into question the transfer of the patents to IPDN in the first place.
As you might expect, Digeo was livid. They attempted to reopen the bankruptcy for an adversarial proceeding. My main investor told me he wasn’t giving his money back no matter what. I was nervous for a little while, but the courts found that the bankruptcy had been discharged and it was too late for an adversarial proceeding. Also, that Audible and Digeo both had a right to use the patent. Digeo had pretty much paid over $4.1 million for nothing.
I couldn’t make this shit up if I tried.
http://www.patenthawk.com/blog/2007/11/ ... _dead.html
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They should be suing the entire interwebz
