Clone Or Own? p. 54

By: MARK FITZGERALD Clone Or Own? p. 54

IN ONLY ITS third year as a press manufacturer, Tensor Group is on pace towards $20 million in revenues this year ? selling units and folders in markets as disparate as California and Egypt.
But while success is coming quickly in the small and medium-sized newspaper press market, Willowbrook, Ill.-based Tensor finds itself still struggling to emerge from the shadow cast by another suburban Chicago manufacturer of single-width presses ? the now-defunct DEV Industries.
""We are not DEV ? this is a new company, new ownership. It's different from DEV,"" Tensor Chairman Martin Hozjan said in an interview earlier this year.
DEV was probably the best-known manufacturer of clones of Rockwell Graphic Systems' Goss Community ? a printing press first developed in the late 1950s that has become one of the most popular presses worldwide ever built by any company. And a printing press, Rockwell complains, that has become among the most-copied worldwide.
(In May, Rockwell International announced it had sold its Graphic Systems company to Stonington Partners Inc., a New York private investment firm. The company will be known as Goss Graphic Systems and will be headed by Robert M. Kuhn, the current president of Rockwell Graphic Systems. The corporate change is not expected to affect continuing litigation against Tensor and a former DEV officer.)
DEV became well-known because, in 1984, Rockwell sued the company and its top officers, alleging that they had used stolen design drawings and other trade secrets to build a clone of the Goss Community DEV marketed as the Horizon 1400 and Goss Urbanite clones DEV called the Horizon 2300 and 2400.
After more than eight years of protracted litigation, a federal jury in December 1992 found DEV and its officers guilty of misappropriating trade secrets, unfair competition and unjust enrichment.
Rockwell was awarded $2,675,000 in damages, much less than it sought ? but enough to force DEV out of business within six months.
This is where Tensor comes in.
In a bankruptcy liquidation auction of DEV's assets, a new entity known as Tensor Group paid $150,000 for the company's parts inventory, its customer lists ? and the nonexclusive rights to use a set of engineering drawings that did not include drawings Rockwell contended were trade secrets.
Working from those auction drawings ? and, it says, lawfully reverse-engineering about four dozen key parts ? Tensor quickly began marketing and building presses that are comparable to the Goss Community and Urbanite models. Tensor retained the DEV numbers, referring to them as the Tensor Series 1400 and Series 2400.
Hitting the market at a time when the single-wide press is getting a new look from all kinds of users, Tensor quickly found customers by pitching the 1400 as an affordable press with good quality color capabilities and scalability.
Recent customers for its four-high tower press and two-high units include Dala-Demokraten, a daily in Falun, Sweden; Glamdalen, a daily in Kongsvinger, Norway; and Signature Graphics, the Portland, Ore., commercial printer that specializes in newspaper inserts.
""Our goal is to be the value-leader in the newspaper industry,"" Tensor's vice president of administration, John Regan, declared in an interview.
Tensor is now stepping up its visibility in the newspaper industry. Internationally, it is expanding its sales network.
In the U.S., it has hired a Chicago public relations firm to tell its story more professionally and it is expanding its appearances at industry trade shows. At Nexpo, Tensor is located at booth 4500.
However, if the ruins of DEV provided the foundations for a new press manufacturer, they also spawned continuing litigation from Rockwell.
In lawsuits now ready for a ruling by the U.S. District Court of Appeals for the 7th Circuit in Chicago, Rockwell contends that Tensor is essentially DEV with a different owner ? and that it is marketing virtually the same Community and Urbanite clones that DEV did.
""There are at least a half-dozen Goss wannabes floating around,"" Rockwell Graphic's top legal officer, Paul Eck, said in an interview ? making it clear that he considers Tensor to be among them.
So far, Rockwell has been losing in its legal battle to apply the injunctions it won in the DEV case against Tensor.
U.S. District Court Judge Ann Claire Williams ruled last summer that Tensor was not a successor company to DEV (E&P, July 29, 1995, p. 29).
But Rockwell's Eck says that is only because Judge Williams would not permit Rockwell to demonstrate the links between the top executives of Tensor and the defunct DEV.
At the center of this latest battle is the chairman of Tensor Group, Martin Hozjan.
Hozjan, 47, learned to be a machinist as a teenager apprenticing in Ljubljana, the capital of Slovenia. Immigrating to the United States in 1971, Hozjan worked as a machinist until he and his wife, Anna, established their own machine shop six years later in the Chicago suburb of Cicero, Ill.
That shop, MAH Machine, would come to have a history with Rockwell. MAH first specialized in making parts for the printing industry. In 1986, it began to assemble printing presses and manufacture folders ? for DEV Industries.
MAH was so close to DEV, Rockwell's Eck says, that ""we never attacked Tensor [in the courts] because we thought we had adequate protection from the DEV order.""
In court documents, Rockwell has claimed that former DEV President Toshio Yamagata helped create Tensor ? an allegation Tensor vigorously disputes.
MAH, Rockwell's Eck added, ""had dirty hands"" in the DEV affair.
That accusation hurts, says the man who along with his wife gave the initials to MAH.
""Personally, I've never been called a thief in my life. I never stole anything from anybody,"" Hozjan said.
He adds that Tensor from the start tried to be upfront with Rockwell and developed the presses in a completely open and lawful manner.
At one point, Hozjan says, Tensor even offered to let Rockwell personnel oversee the reverse-engineering process for the key printing press components.
Eck says he is not aware of any such offer, and that, in any case, Rockwell probably would have declined to ""be swamped into"" cooperating with Tensor in that manner.
Just how Tensor created its 1400 and 2400 presses is at the heart of the Rockwell/Tensor dispute.
Eck is dismissive of Tensor's explanation that Castle Engineering was able to accomplish the reverse-engineering of the critical components of the DEV presses in a relatively quick manner.
""What we demonstrated [at the DEV trial] was that these 53 parts were the heart and lungs of the press and that to reverse-engineer them [would take] six to eight years,"" Eck said.
Referring sarcastically to a ""wonder engineer"" at Castle, Eck added, ""You've got a firm with no experience in graphic arts equipment, not any, and in less than two months they reverse-engineer [the press]?
Tensor refuses to subject that to the glare of the court.
Rockwell wants the opportunity to demonstrate that its stolen trade secrets must have been used in developing the Tensor press, Eck says.
""We wish to argue that that conclusion is compelling by both the inference that this is impossible to do with those drawings [bought at the DEV liquidation auction] and . . . [without] substantially more time than they had,"" Eck said.
But Tensor says the reverse-engineering process was far less complex than Rockwell is trying to make it.
For example, Tensor notes that the 53 parts that needed to be reverse-engineered to build the 1400 amount to just 10% of all the parts in the press. More than half the parts, 52%, are simple, off-the-shelf parts, and the lawfully purchased DEV drawings account for another 39% of the components.
And while Rockwell argues it is impossible to quickly reverse-engineer tolerances of critical parts, Tensor's manager for engineering and product development, Richard Prochut, counters that those tolerances are simple to calculate. In fact, much of the time spent on reverse-engineering, Prochut says, actually involved upgrading the 1400. The drive train and roller adjustments, he says, were significantly improved as a result of the reverse-engineering.
Then, too, Tensor says, new computer technology has dramatically increased the speed of reverse-engineering and press design.
'It's easy, "" Hozjan said. ""Sometimes you don't even have to be an engineer to do it.""
In March, Tensor bought exclusive rights to the DEV drawings-and used the opportunity to assert opposition to cloning.
"As part of the acquisition,"" a Tensor press release said, ""Tensor will be able to legally enforce its exclusive ownership of the DEV drawings.""
"We believe in every company's right to benefit from their intellectual property, and we will aggressively protect our rights to the newly acquired DEV drawings, said [vice president of administration John] Regan.""
A ROckwell spokesman said the company would have no comment on the Tensor purchase.
Both Rockwell and Tensor are awaiting a decision from the U.S. Court of Appeals in Chicago on Rockwell's litigation against Tensor and former DEV president Yamagata. Oral arguments were heard in February. The decision could come at any time.
Rockwell is hoping for a blow against what it characterizes as one of several company's preying on the success of the Goss Community press.
"It was the single most successful printing press in the world, "" Paul Eck said. There are at least 1,200 units out there. That machine was a huge,huge market over a long period of time.""
Tensor's Hozjan, for his part, says he is not worrind.
"The facts are on our side,"" Hozjan said. ""With right, there is might. I always beleive that. So even if it gets kicked back [to trial court], were going to win that.""
?(A Tensor Series 1400, four-high tower press in Dala-Demokraten, a daily newspaper in Falun, Sweden ) [Photo & Caption]
?(The Swedish newspaper Dagbladet/Nya Samh?llet is printed on a Tensor Series 1400 press.) [Photo & Caption]

# Editor & Publisher n June 15, 1996