It's an entrepreneur's dream: striking it rich without actually having to make, or market, any product. 

Call it the intellectual-property game. You dream up, and patent, a product. Then wait for a company to start using it. After that, you just sit back and collect royalties while somebody else does the hard work. 

That's the way it's supposed to go, anyway. But often it doesn't. Consider the struggles of Marvin E. Marshall, a 57-year-old entrepreneur in Centreville, Va. 

 Mr. Marshall claims to hold U.S. patent rights to technology that he says is widely used by companies that make telephone calling cards. Mr. Marshall, who oversees an upstart venture named Alpha 2010 LLC, maintains that he's entitled to an annual fee of at least 1% of many card companies' revenue. And that could mean a huge pay-out: Prepaid cards alone are estimated to reach $3.2 billion in sales this year. If the patent applies to only half that sector, a 1% royalty would be $16 million a year. 

But nobody is rushing to pay Mr. Marshall any money, much less a fortune. It took him two years to win his first patent, then seven more years to pursue the potentially lucrative stronger version that he finally obtained in August. Now he is learning that winning the patent was, for all the time and trouble, probably easier than the task he now faces to enforce it -- a process that could mean millions of dollars in legal fees and assorted lawsuits.

"If you invent something big, you may as well figure on going to war," says Mr. Marshall, a ruddy-faced, gray-haired man who still wears the gold medallion he won shooting pool in South Dakota 31 years ago. "You have to be prepared for a long struggle." 

Head Games 

It's a truth faced by growing numbers of inventors and small companies as intellectual-property rights, including patents, assume rising significance in the U.S. economy. Increasingly, manufacturing skill counts for little; overseas competitors can produce just about anything, and cheaply. What counts is the fight to control the underlying ideas.

U.S. patents give inventors a fixed period -- traditionally 17 years, but now sometimes shorter or longer -- to enjoy exclusive U.S. rights to their inventions. Patent holders can stop others from using their ideas, or can collect money in exchange for permitting such use. "Without the rewards of a strong intellectual-property regime, an innovator has no incentive to create new products and an investor has little incentive to pour capital into new ideas," Bruce A. Lehman, the highest-ranking U.S. patent official, told an American Bar Association audience in June. 

For winners, of course, the incentives can prove huge. Jerome Lemelson, an engineer who died last year in Nevada at age 73, amassed more than 500 patents, including a group covering so-called machine vision -- bar-code reading, for instance. It took more than 30 years to win and start enforcing the machine-vision patents, says Gerald D. Hosier, a Las Vegas lawyer who enforces those patents. But the bottom line, he says, has been nearly $1 billion -- and still counting -- in royalties. 

Even Mr. Hosier, however, is quick to caution against over exuberance by patent holders. "A lot of inventors get a patent and immediately think it's a road to riches," he says. "But you are inevitably going to meet a lot of resistance when you ask people for compensation." 

To be legally entitled to money, a patent holder needn't demonstrate that anybody knowingly copied the invention or even knew about it. So-called submarine patents can sneak up on companies long after they developed their business. That's because U.S. patents are kept secret while they are under consideration in the Patent and Trademark Office, often for years. 

In the interim, others might come up with the same invention independently, only to learn that they owe money to someone else who had the idea first. The cruel truth may be that the subsequent inventors, not the first, actually expended the blood, sweat, tears and capital to build a new industry. "There can be a mismatch between what a person has really contributed to an industry and the size of the reward," says Jerry Cohen, a Boston intellectual-property lawyer. 

Chasing a Prize 

Of course, an outsized reward is one problem that Marvin Marshall would love to have. He has spent most of his life chasing money, without notable success. The chase began when Mr. Marshall, still a teenager, ran away from his parents' beef farm in Michigan in 1958 with less than two dollars to his name, as he tells it. Hungry for more spending money than his parents had been forking over, he obtained a $1.45-an-hour job as a roofer in Lincoln, Neb. 

After returning to finish high school, he took off again. Avoiding college, he instead took a series of mostly farm-related blue-collar jobs. Then, in 1977, while living in Goshen, Ind., he bought an IBM minicomputer and, like many in the PC generation to follow, became totally fascinated with pixels and bytes. "It was like exploring the globe in the days of the Vikings," he says. "There was a whole world inside the computer, and it was all virgin territory." 

He says he used the computer for his first creative work: software to help farmers mix animal rations most efficiently. Then trouble struck. Mr. Marshall says a Florida dairyman pirated his rationing software and divulged it to others, ruining the market. A state and federal court fight in Tampa ensued, with mixed results; Mr. Marshall says he retrieved the rationing program but lost a second product. When next he developed intellectual property, an attorney advised him to seek a patent, a protection that he had never even thought about previously. 

So, in 1991, Mr. Marshall, who had moved from the dairy industry to telecommunications, all the while honing his self-taught computer-programming skills, obtained U.S. Patent No. 5,068,891. It covers a "Credit Control System for Long Distance Telephone Services."

 'Stop Fraud' 

Like others who apply for patents, Mr. Marshall had to provide details of his technology and persuade a government examiner of, for starters, its novelty and utility. 

But Mr. Marshall didn't invent any components -- he figured out how to link them together. What he patented was a system letting telephone switches talk to computers so companies could track usage on telephone calling cards in real time, rather than monthly, as calls then were routinely billed. He envisioned the system as a fraud detector: If, for example, a card was stolen, suspicious usage patterns would show up much quicker. "I came along with a system that could absolutely stop fraud in its tracks," Mr. Marshall says. 

While the patent was pending, he lined up investors, raised about $400,000 and formed Real-Time Services Inc. in Tampa. At that time, Mr. Marshall wanted to make and market the cards himself; in manic moments, he envisioned a start-up as wildly successful as Federal Express had been. 

But after achieving about $1 million in sales -- and no earnings -- in 18 months, the company ceased operating in 1992. Both the company and Mr. Marshall went through bankruptcy-law proceedings in federal court in Tampa. 

Real-Time's failure dashed Mr. Marshall's hope of developing an exclusive market himself, which is the way that most patent holders try to get rich. He still had another possibility, however: licensing his technology to others.

But there was a hitch. While running Real-Time, Mr. Marshall had determined that he needed a stronger patent. For one thing, the exact patent language told of capturing phone-use data "at the completion of a call," rather than during calls, as Mr. Marshall came to realize was both possible and desirable. As a rule, a patent covers what is literally described, as well as "equivalent" activity, but not anything deemed much different. 

So, in 1991, while in the middle of operating his company, he had applied for further patent protection. But, even after Real-Time flopped the following year, he was waiting for word on his application. 

"I thought I was home free," Mr. Marshall says. "Little did I know that this would take seven years." 

The Patent and Trademark Office says its average turnaround time overall is 22.9 months, but many applications take much longer. Mr. Marshall's application was complicated, in part, by his own refilings of certain information, says Brigid Quinn, a spokeswoman for the agency. (Mr. Marshall says certain papers had to be reworded before the examiner would accept them.) 

The process took so long, in fact, that Alpha 2010 Inc., a company that Mr. Marshall had formed in 1994 with investors -- friends and relatives, initially -- to exploit his technology ran short of funds. 

He had raised about $80,000 in cash; needing a car, he had also swapped a 2% interest in the company for a used gray Infiniti. To save money, he moved from a rented house to a two-bedroom apartment, then to a one-bedroom apartment. Eventually, unable to pay for any home, Mr. Marshall says he lived with a series of friends, spread over Michigan, Florida, Iowa and California, during a three-year period. 

"I felt terrible," says Mr. Marshall. "It was horrible not to be able to have a home." He says he asked his investors for $1,000 a month for a modest apartment, only to be rebuffed. "They were losing faith, that's for sure," he says. "I had to go find new blood." 

In the Ring 

Early in 1997, Mr. Marshall did enlist new allies, including Mario L. Herman, a Washington, D.C., lawyer who saw him as underexploited asset. "I've decided to try to develop Marvin, the way you might develop a prizefighter," Mr. Herman says. 

The attorney leased a one-bedroom apartment in Centreville for Mr. Marshall's use; it doubles as his office. Mr. Herman also helped the entrepreneur retain his first big-firm patent attorney, Arland T. Stein of Reed Smith Shaw & McClay, based in Pittsburgh. That helped Alpha 2001, a subchapter-S corporation, raise an additional $300,000, Mr. Marshall says. He also formed a new licensing entity, Alpha 2010 LLC, with a legal structure designed to attract more and larger investors. 

The second patent, covering a "Telephone Travel Card System Under the Control of Its Customers," finally came in August. (By "customers," the patent, No. 5,790,636, means issuers of calling cards.) 

Alpha 2010 rapidly attempted to get out word of the patent, beginning with issuers of prepaid telephone cards. The cards had sprung up in the mid-1990s. Mr. Marshall thought the prepaid cards couldn't succeed in the U.S. without his work. How, he asks, could you sell cards that give you only a certain amount of usage if there were no way to measure exactly how much a caller was eating up? The Marshall patent not only permitted accurate measuring, but provided an inexpensive way of doing it compared with installing telephone switches with built-in tracking ability. 

Winning Notice 

To win quick attention, Mr. Marshall and allies marched into a September 1998 trade show, the Telecard World Conference & Exposition, at New York's Jacob K. Javits Convention Center, and held a press conference touting the patent. They also talked it up with industry leaders. 

Alpha, a company nobody had heard of, certainly was noticed. Mr. Marshall "didn't just show up by himself; he showed up with a guy [Mr. Stein] from a pretty big law firm standing next to him," notes David S. Tobin, president of the International Telecard Association, a trade group based in Washington. 

But nobody so far has acknowledged owing any money under Mr. Marshall's patents. Mr. Tobin says telecard companies are skeptical, in part because they list Mr. Marshall as at least the third inventor to claim a basic patent on technology used by the industry. (He lists the other two as Ronald A. Katz, a Los Angeles inventor, and Zvi Kamil, an Israeli.) Unable to tell quickly if Mr. Marshall's patent would withstand a challenge, the trade group has assigned a task force to study it, Mr. Tobin says. A report may come next month. 

The existence of rival patent claims doesn't necessarily mean that any of the patents will fail to hold up. While not commenting on the Marshall patents, Mr. Katz, of Ronald A. Katz Technology Licensing L.P., notes that "it isn't uncommon for operators of companies to be liable to more than one patent holder" if it can be proved that the company is using aspects of each holder's technology. 

Individual telecard companies are saying little publicly about the Marshall patents. AT&T Corp., for one, declines to comment. Neither will PT One Communications Inc., a small New York concern that Mr. Marshall's company has approached as a potential licensee. But Marc Ostrofsky, publisher of Telecard World Magazine, a trade journal based in Houston, says many telecard companies are chagrined at the possibility of having to pay royalties. Profits are already low or nonexistent for some players, he says. "It would be a devastating blow to the prepaid phone-card industry if the patent is proved to be valid," he adds. 

In the end, Mr. Marshall might have to sue some company for patent infringement -- and do so successfully -- before the industry takes his rights seriously. Mr. Marshall "had better be prepared to spend more than $1 million on prosecution, because that's what would be required," says Gerald J. Weinberger, president of Rates Technology Inc., a Hauppauge, N.Y., company that says it has gone to court six times to prosecute patents in the telecommunications field. Mr. Weinberger says an aggressive stance in court is crucial to any enterprise based on patent licensing. "You don't get any licensees unless the parties become convinced that you will litigate," he says. 

Firm Settles 

Indeed, in October, Aerotel Ltd., an Israel company that controls the Kamil technology, agreed to settle a patent-infringement case it had filed in 1995, in federal court in New York, against one small maker of telephone-switching equipment, NACT Telecommunications Inc. in Provo, Utah. NACT, now a unit of Atlanta-based World Access Inc., said it agreed to provide funds "to cover past royalty fee claims through July 31, 1998." 

As for future royalties, Aerotel must try to get them directly from NACT's customers, which issue telephone cards. "The road is now clear for negotiations with other important players in the market, and we expect to conclude several license agreements in the months ahead," Mitchell Knisbacher, director of licensing for Aerotel's U.S. arm, said in a an October statement. 

Craig Madson, a Salt Lake City attorney for NACT, says, "It was a business decision to settle; it's extremely expensive to litigate." He says NACT made no admission that the patent was valid or infringed. It helped Aerotel that AT&T had signed a license agreement, lending some credibility to the Kamil patent. "That put another arrow in their litigation quiver," Mr. Madson says of Aerotel. 

Rather than reach settlements, of course, many companies faced with licensing demands would rather fight as defendants to patent actions. Indeed, defendants often can prove that a disputed patent was issued without adequate consideration of so-called prior art -- that is, the accumulated body of previous developments in the field. Defendants also sometimes can prove that even if patents are valid, they don't cover the situations at issue. 

Litigation and Lyrics 

If companies are using the Kamil technology, to the exclusion of Mr. Marshall's, that is bad news for him, of course. But his allies are putting a positive spin on Aerotel's apparent progress. "The industry is starting to recognize that it will have to pay intellectual-property rights," says Mr. Herman, now vice president and general counsel of Alpha 2010. 

Mr. Marshall and allies now are attempting to mount a war chest for what possibly will be a lengthy legal battle. In late October, Alpha 2010 was drawing up private-placement papers, in hopes of raising $2 million by year end. Mr. Marshall says the venture will need $5 million before long. 

If it materializes, the money may give the company the stick it needs -- a credible legal threat -- to sign on licensees. "There are zero people signed up currently," says Doyal Bryant, a Charlotte, N.C., consultant to Mr. Marshall. "They are all wondering if we really will litigate." 

Meanwhile, Mr. Marshall hopes to give himself a source of earnings unrelated to his patents, lest investors fail to come through sufficiently. For several years now, he has spent great chunks of time entering information about songs and lyrics into a database that he calls Lyric Magic and aims to make available on the Internet. 

His plan: earn commissions from Internet music retailers when browsers use his site to identify songs, then click through to vendors of the recordings. 

While his lawyers and consultants press the licensing effort, Mr. Marshall spends most of his time on Lyric Magic. He says he tries not to think very much about "the rich scenario," the one in which the calling-card patent alchemizes into gold.

He vows, however, to stick with the fight as long as it takes. "If I live long enough, I will see it through," he says. "I'll finally get the recognition that I invented something meaningful."

-- Mr. Tannenbaum is a senior special writer in The Wall Street Journal's New York bureau.