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To: Jon Koplik who wrote (5906)	2/12/2010 11:31:18 AM
From: Art Bechhoefer	1 Recommendation Read Replies (3) \| Respond to of 9129

Jon, the Flarion investment may turn out to be valuable, as you suggest. But it represents some $800 million of capital, and after quite a few years little or no return on the investment. I happen to believe that both Flarion and Mirasol could generate considerable future profits, but after how long a wait? Suppose Flarion took something like 8 years before it generated respectable royalties, even in combination with other existing patents. Then you have to calculate a reasonable rate of return on the $800 million investment if the money had been invested elsewhere. I suggested in my letter to PJ that an appropriate rate of return would be 6 percent. The real cost of Flarion, therefore, is the initial expenditure at 6 percent compound annual interest. My point is that NO COMPANY should plow money into an idea just because it's a neat thing and might some day produce a nice return. You have to be more specific and be able to quantify a reasonable expected return, based on what the product or patent will do, and how widely it will be used. In the late 1940's, a group of engineers at a small company in Rochester, NY grew enthusiastic over a process that could place an electrostatic charge on paper, transfer black powder to the paper, and fuse the black powder to produce a permanent image. The xerographic process transformed the tiny Haloid Corp., a producer of specialty films for lithography and other uses, into Xerox, and changed the way business was conducted. The original engineers, one of whom was a close friend, knew exactly what they were doing, and how momentous would be the ability to duplicate text images on ordinary paper, without going through a photographic or chemical process, and at a fraction of the cost of other methods. Haloid Corp. put every dollar they could find into the new invention, and it paid off resoundingly. Art