Inventor sues would-be investors

April 22, 1994|By David Conn | David Conn,Sun Staff Writer

Build a better mousetrap and the world will beat a path to your door. But first you've got to find the financing.

That's one of the lessons Baltimore inventor Carle D. Klupt spells out in a lawsuit he and his company filed on Wednesday against some of Baltimore's most prominent businessmen, including top officers of Alex. Brown Inc. and W. B. Doner & Co.

Mr. Klupt is seeking at least $500 million in compensatory and punitive damages against the men he had hoped would finance his invention: a cardboard, disposable videotape cassette that was supposed to revolutionize the advertising world -- the "KlupTape."

Those would-be financiers this week sued Mr. Klupt as well, alleging he lied to them about his failed efforts to patent the video. By concealing his repeated rejections at the hands of the U.S. Patent Office, the suit maintains, Mr. Klupt induced his financiers into making more than $100,000 in advance payments to him.

Mr. Klupt's case is "a magnificent exercise in stringing together as many respectable citizens as could be imagined to blame for his own business failure," said attorney Arnold M. Weiner. His clients, in a suit filed Tuesday in Baltimore County Circuit Court, include Alvin B. Krongard, chief executive officer of Alex. Brown; Herbert D. Fried, chairman of W. B. Doner; and Hanan Y. Sibel, chairman of Chaimson Brokerage Co., a food wholesaler.

The three are among the defendants in Mr. Klupt's suit, which was filed in Baltimore City Circuit Court. Mr. Klupt also alleges that Baltimore County businessman Stewart J. Greenebaum, attorney Howard A. Janet, the Washington law firm of Williams & Connolly and a Pittsburgh businessman were all in on a conspiracy to keep him from creating the company that would make and market his videos.

Those cassettes, according to a 1990 story in the Wall Street Journal, "could immensely broaden the use of videocassette premiums among advertisers." They are designed to cost as little as $1.15 apiece and would wear out after only five or 10 plays, making them ideal for short promotional pitches sent as direct mail advertising.

After several aborted attempts to strike a development deal with companies in Baltimore and California, Mr. Klupt met in July 1990 with Mr. Krongard, according to both lawsuits. Mr. Klupt's business plan estimated the product's potential earnings at $64.6 million a year.

"Krongard indicated that Alex. Brown was interested . . ." Mr. Klupt's lawsuit states, "but that it would take Alex. Brown six months to perform due diligence on the deal."

Based on Mr. Krongard's indications, and persuaded by Mr. Greenebaum that he could get Alex. Brown to move forward much sooner than six months, Mr. Klupt turned down another possible financier, according to his suit. He ultimately determined that his new partners were stringing him along, unable to come up with the financing, his lawsuit says, and the deal collapsed.

The suit against Mr. Klupt, however, indicates that Mr. Krongard and the others were reluctant partners at best. After they found out about the repeated patent application rejections, they canceled the deal, according to their lawsuit. Mr. Klupt has no right to pursue damages against Mr. Krongard and the others, Mr. Weiner said, because his contract was with a "yet-to-be-formed corporation" that never was formed.

Mr. Klupt finally received a U.S. patent for his invention last fall, and he since has won patents in China and Australia. But Mr. Weiner said those patents won't hold up in court because they clearly infringe on earlier patents.

Neither Mr. Klupt nor his attorney, Charles C. Piven, would comment yesterday.

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