The Wall Street Journal -- May 26, 1999
Eye Shadow:
Patent Challenges Face
Leader in Laser Surgery
For Nearsightedness
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Federal Actions, Litigation
May Threaten Dominance
Of the Business by Visx
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Case of the Backdated Notes
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By Laura Johannes
Staff Reporter of The Wall Street Journal
Vision-correcting laser surgery is one of medicine's most lucrative recent developments. It will be used on 850,000 eyes in the U.S. this year, at about $2,500 an eye.
The dominant company in the field is Visx Inc., which sells the pulsating lasers for up to $500,000 each and gets a $250 royalty from doctors every time one is used. Reflecting its pre-eminence, Visx carries a stock-market value of $3.5 billion, a lofty 21 times its annual revenue.
Anchoring Visx's franchise are patents it acquired from two Columbia University professors, Stephen Trokel and Francis L'Esperance, who are now big names in ophthalmology.
But long-simmering disputes over the true developer of the surgery have cast doubt on Visx's position:
A U.S. Patent Office examiner has rejected a key Visx patent that is held in Dr. Trokel's name, saying his claimed invention was "obvious" in light of earlier discoveries.
A Federal Trade Commission administrative-law judge has heard testimony and is expected to rule soon on an FTC staff allegation that Visx and Dr. Trokel committed fraud by failing to tell the Patent Office about such prior discoveries.
An Air Force scientist has sued Visx and Dr. Trokel, claiming that Dr. Trokel stole his ideas over an amicable glass of brandy in 1983.
And in a nearly forgotten past embarrassment being revived by a Visx rival, Dr. L'Esperance's lawyers acknowledged in 1990 that he submitted a backdated document to the Patent Office to defend one of his discovery claims.
Visx is appealing the rejection by the Patent Office examiner, and the law permits the
company to continue receiving royalties until the case is finally resolved, which could take
years. Visx says the FTC complaint and that of the Air Force scientist are groundless. Dr.
L'Esperance declines to discuss the document backdating. Dr. Trokel didn't return calls
seeking comment.
Visx's chief executive, Mark Logan, says that the company stands by all of its patents and
that in any case, its portfolio of 50 U.S. patents is broad enough to defend it against
attackers even if any single patent collapses. He also says Visx, which is based in Santa
Clara, Calif., has a strong reputation for good equipment and customer service that will
help it stay on top of any competition.
Still, competition is forming. Nidek Co., a closely held Japanese company, has begun selling competing lasers that doctors use royalty-free. Visx has reacted by suing Nidek and its doctor customers for patent infringement, seeking triple damages, and also contending
they owe it the $250-per-use royalties no matter whose machine they use. Fighting back, Nidek offers to pay doctors' legal bills.
Visx has also asked the International Trade Commission to bar Nidek imports, on patent-infringement grounds. The ITC is investigating.
The patents under attack include two of the broadest and most fundamental in Visx's portfolio, one in Dr. Trokel's name and one in Dr. L'Esperance's. Ruling them invalid or forcing them to be shared with others would make it harder for Visx to keep competitors
out of the market and collect its royalties. Optical-industry giant Bausch & Lomb Inc. is seeking Food and Drug Administration approval to introduce its own vision-correcting laser, as is an Orlando, Fla., company called LaserSight Inc. "Success attracts a crowd," says Mr. Logan.
So does invention. The story of laser sight repair has had many actors, going way back to 1979. That history is at the heart of the disputes now affecting Visx.
John Taboada, a physicist at Brooks Air Force Base in San Antonio, began 20 years ago to study the safety of a new kind of laser called the excimer, which generates invisible light in high-energy pulses. When he proposed training it on rabbits' eyes, colleagues warned he
would bore a hole through the cornea, the clear outer lens of the eye. Instead, a sketch in his laboratory notebook dated Nov. 14, 1980, shows the beam made only a small crater in the cornea.
"My thoughts started rolling," recalls Dr. Taboada, who says he realized then that the laser could be useful in vision correction, an assertion backed up by the FTC testimony of colleagues. Some common vision defects, including nearsightedness, are caused by misshapen corneas.
At about the same time, an International Business Machines Corp. scientist named Rangaswamy Srinivasan was testing the excimer for making semiconductors. He noticed it caused biological tissue to chemically decompose rather than burn away, without causing collateral damage.
The next chapter belongs to Dr. Trokel, who was then practicing medicine and teaching at Columbia. He was fascinated with a different type of laser then showing promise for post-cataract-surgery problems. Hearing that Dr. Taboada had worked on this type, Dr. Trokel asked him in 1982 to write a chapter for a book.
In March 1983, Dr. Taboada visited Dr. Trokel in New York. As they sipped cognac in Mr. Trokel's apartment after dinner, Dr. Taboada says, he outlined how the excimer laser could correct vision defects faster and more safely than surgery with a scalpel. "I had developed a great deal of confidence in Stephen Trokel and thought he could be an
associate to take my idea one step further," Dr. Taboada says.
In testimony before an FTC administrative-law judge about five months ago, Dr. Trokel said he was already thinking about correcting vision with the laser and merely quizzed Dr. Taboada that evening on some technical details.
Dr. Taboada never filed for a patent. He says his research funding had dried up by then, leaving him with no easy access to a laser. He also said he had no money for a patent lawyer.
But Dr. Trokel started working the phones. He eventually learned that IBM's Thomas J. Watson laboratory in Yorktown Heights, N.Y.-Dr. Srinivasan's terrainhad an excimer laser. He visited Dr. Srinivasan, showed him copies of Dr. Taboada's research and asked to use the laser.
Soon, Dr. Trokel brought some calves' eyeballs to the IBM lab and fired up the beam. The pattern was by now familiar: clean cuts and no surrounding damage. Such precision would be invaluable in vision-correction surgery, an extremely delicate matter of trimming
off a tiny bit of the cornea.
"I was just awe-struck by the results," Dr. Trokel testified to the FTC. "I accurately foresaw that this would be the next great laser in ophthalmology."
He was so excited he canceled appointments and flew to Europe, where he spent a day with engineers at Lambda Physik, the German maker of IBM's laser. Two days later, back in the U.S., he visited Dr. Srinivasan again and, according to Dr. Trokel's testimony, said
he wanted to publish the "epic-making discovery."
Dr. Srinivasan was "extraordinarily gracious" and insisted that Dr. Trokel get top billing on the paper, the testimony says. A month later, according to this account, Dr. Srinivasan declined Dr. Trokel's offer to share patent rights and told him "this was your idea. You
should file the patent."
But Dr. Srinivasan also dropped a bombshell: IBM had already filed for a patent on surgical applications of the excimer laser.
Dr. Srinivasan's own testimony to the FTC couldn't be obtained. He declines to comment, saying that he is a consultant in a related legal matter. He refers questions to lawyers at Nidek, the Japanese company, who had little to say about him.
Later in 1983, Dr. Trokel got his own excimer laser, and on Dec. 14 he mailed in his patent application. The next day, a joint article by him and Dr. Srinivasan appeared in the American Journal of Ophthalmology. It said the excimer could be a vision correcter.
The first clue of what IBM's U.S. patent application contained came in 1985, when its application in Europe became public. It broadly covered use of the excimer on biological tissues but, crucially, it didn't specifically mention eyes.
Still, Dr. Trokel worried that the U.S version of IBM's patent, when it was issued, might
make his own work unpatentable. "The IBM patent was like a cloud hanging over the
entire patent-application process," he testified.
Closer to home, a more immediate threat arose. Dr. Trokel learned that a fellow Columbia ophthalmology professor, Dr. L'Esperance, had filed a competing patent application in November 1983-a few weeks before he did. Dr. Trokel testified to the FTC that he hadn't even known Dr. L'Esperance was working in the area, and felt blindsided.
Dr. L'Esperance, in an interview, says he was unaware of Dr. Trokel's work, and thought up the idea for laser eye surgery after reading scientific literature in the library at Columbia, including early work by IBM scientists.
According to Dr. Trokel's testimony, Dr. L'Esperance invited him for breakfast at the Regency Hotel in New York in late 1985 or early 1986, handed him a list of patents pending, and offered him a position as a consultant at a company he was helping to found, Taunton Technologies Inc. "I told him that I had pictured myself as the inventor,"
Dr. Trokel testified. "We did not come to an amicable conclusion." Dr. L'Esperance says he doesn't remember the meal.
Dr. L'Esperance's first patent was issued on May 19, 1987, in the U.S. Dr. Trokel realized that fighting Dr. L'Esperance would be expensive. So in 1988, he assigned his patent rights to a new company called Visx, founded by a laser physicist named Charles Munnerlyn who sought to get into the vision-correction business.
That fall, the U.S. Patent Office began an "interference," or dispute proceeding, over Dr. L'Esperance's main patentbased on a complaint from Dr. Trokel. Visx's Dr. Munnerlyn also complained to the patent office, leading to interference proceedings on three other
patents Dr. L'Esperance had obtained. The stakes were high for both companies and also for the professor-inventors, each of whom had received hundreds of thousands of shares in the company he worked with.
A turning point came when Dr. Trokel's lawyers asked the Patent Office examinerin-chief to let an expert in falsified documents examine Dr. L'Esperance's scientific notes, including a diary, calendar pages and a large black notebook. Each professor claimed he had come up with the idea of laser eye surgery first, and "to put it bluntly," Dr. Trokel's lawyers asserted, "somebody is lying."
They apparently were right. Several weeks later, Dr. L'Esperance's lawyers filed a declaration stating that a diary page dated Jan. 22, 1983 -- and submitted to the Patent Office by Dr. L'Esperance as evidence of his early invention -- was actually written "sometime in 1989."
Louisiana ophthalmologist Marguerite McDonald, an acquaintance of Dr. L'Esperance, says that he told her in 1987 his laser-surgery idea came from Dr. Trokel, and that she so testified to the Patent Office. Dr. L'Esperance "told me he was watching what Steve Trokel was doing," Dr. McDonald says in an interview. "I was thunderstruck." Dr. L'Esperance,
asked specifically about Dr. McDonald's assertions, declines to discuss them.
About the time in 1990 that L'Esperance lawyers told the Patent Office of the backdating, Visx and Taunton requested a suspension of the proceedings because of settlement negotiations; these quickly led to a merger of the two small companies. The surviving entity was called Visx, and under Patent Office policy had the right to determine whose name went on each patent.
Among other patents, Dr. Trokel emerged with No. 5108388, a critical patent covering use of the excimer to change optical properties of the eye. Dr. L'Esperance was left with a trimmed-down version of No. 4665913, which also covers vision correction with the instrument. The men assigned to Visx their commercial rights under these patents.
Although the merger settled the matter then, the dispute has come back to haunt Visx in its patent-infringement claim against Nidek, its Japanese competitor. In its reply to the complaint, Nidek argues that because Dr. L'Esperance and Taunton made misrepresentations to the Patent Office, those two key Visx patents and six others are unenforceable.
Visx contends that Dr. L'Esperance's falsification of a diary page is irrelevant because it was withdrawn from the Patent Office's files before the office ever ruled.
Nidek also claims Visx's predecessor companies made broader misrepresentations to the Patent Office. It alleges that Dr. Trokel derived at least part of his inventions from IBM's Dr. Srinivasan yet failed, with "deceptive intent," to name him as a co-inventor. That case is pending in federal court in San Francisco.
Visx also faces a suit by Dr. Taboada, the Brooks Air Force physicist who says he discussed lasers over cognac with Dr. Trokel in 1983. In that suit, now wending its way toward trial in federal court in San Antonio, Dr. Taboada seeks to have his name substituted for Dr. Trokel's as the inventor on patent 5108388, and to have Visx to pay
him $80 million in past royalties. If he wins, he says, some of these royalties, plus future rights, will go to Physicians Resource Group Inc., a Dallas practice-management firm that pays his legal bills.
In the FTC case, the commission staff lawyers are seeking to prove that Dr. Trokel and Visx, aware of the importance of the IBM patent and other "prior art," deliberately withheld it from the patent examiner. The FTC staff, alleging that Visx has enforced a
monopoly based on the patent, seeks to have Dr. Trokel's broad invention patent declared unenforceable.
Visx's Mr. Logan says his company doesn't have a monopoly. A smaller company, Summit Technology Inc. in Waltham, Mass., sells lasers in competition with Visx under a patent cross-licensing deal. Mr. Logan says Visx's failure to file the "prior art" was merely an oversight.
In April, however, the Patent Office's chief examiner rejected Dr. Trokel's fundamental patent, concluding that the idea of applying an excimer laser to eye correction was "obvious" in light of the IBM patent and other work. Visx can ask the examiner to reconsider, appeal to a panel of nine Patent Office administrative law judges, and ultimately appeal to a federal court. |
