A start-up's true tale

BY PETE CAREY
Mercury News

Founding legends are a specialty of Silicon Valley, and none is more appealing than that of Cisco Systems: i/In the 1980s a young Stanford University couple invent the multiprotocol router and starts Cisco in their living room, using their own credit cards for financing.

Repeated for years by Cisco's marketers and the news media (including the Mercury News), the story of the couple, Leonard Bosack and Sandy K. Lerner, mirrors the Silicon Valley dream: Come up with a breakthrough, found a company and become a millionaire.

But the Cisco legend is incomplete. It omits many people who helped develop the multiprotocol router, a device critical to the early Internet. It omits a battle with Stanford that almost killed Cisco at birth over charges that the founders used technology that belonged to Stanford to start their business.

Perhaps most important, legends like Cisco's obscure the true collective nature of the innovation that built Silicon Valley long before the hype and froth of the Internet bubble. A good idea is followed by hundreds of major and minor improvements; the entrepreneur in the group forms a company around the idea, and makes still more improvements.

``One can't define who did what, because it was pretty much of a cooperative effort,'' said Nick Veizades, one of many Stanford staff members who worked on the router. ``People tried to improve certain things so they worked better, and in this way they propagated.''

But Silicon Valley legends are hard to kill. Even a Stanford Web site still credits Bosack and Lerner with developing the device ``that allowed computer networks to talk intelligently to one another'' in a description of a Cisco-endowed professorship.

Pieces of the full story have slowly emerged, beginning with an exchange of Web postings that followed a 1998 PBS documentary, ``Nerds 2.0.1,'' that gave Bosack and Lerner sole credit. Since then, several books have tried to unravel the true story. Cisco spokeswoman Jeanette Gibson now says: ``Obviously it was a team of people.'' Lerner also acknowledges the many contributors, saying in an e-mail to the Mercury News, ``The only person I'm certain had nothing to do with it is Al Gore.''

Yet the legend lives on, retold again and again.

TANGLED HISTORY
Work for university winds up at Cisco

Cisco was to become one of the nation's fastest growing companies by providing the networking equipment that connected the Internet. But its early history was bound up with the networking of the Stanford campus. That began informally in 1980-81 after the Xerox Palo Alto Research Center gave Stanford some of its Alto workstations and Ethernet networking boards.

The Alto was far in advance of other workstations (it would soon show Apple the way to the Macintosh), but it was the Ethernet technology that inspired Stanford staffers.

In a warren of offices under Margaret Jacks Hall and the Stanford Quad that one veteran described as ``straight out of the Hobbit,'' staff members and graduate students developed the technology to link the computer systems in Stanford's schools and departments so they could all talk to one another.

Their crowning creation was a small box that functioned as a multiprotocol router, so named because it enabled computers of varied make, with different protocols, to communicate and to access the early Internet. They called it the ``Blue Box'' for the color of its case. Inside was a collection of parts that reflected the genius of the basement beneath Margaret Jacks Hall and several other departments on campus.

The box evolved from a request by Ralph Gorin, director of computer facilities from 1979 to 1983, for a ``network extension cord,'' something that could increase the distance between networked computers. ``And it evolved,'' Gorin recalled. ``I wanted an extension cord; they gave me a multiple outlet strip.''

The box's computer board was one that a graduate student, Andy Bechtolsheim, had designed for a network workstation for engineers (he went on to found Sun Microsystems). The box contained networking boards developed by several staff members and graduate students, including Bosack.

The box's software -- a crucial component -- was written at Stanford's medical school by William Yeager, a staff research engineer.

Yeager had already written a small routing program to connect computers at the medical center with those in the computer science department. That multiprotocol network linked Alto workstations, mainframes, mini-computers and printers.

Now he was assigned to write an enhanced version for the Blue Box. The result was a program that could route several protocols including the burgeoning Internet protocol, permitting data to be exchanged among workstations, mainframe terminals, printers and servers.

The router running Yeager's software became the standard at Stanford, with about two dozen Blue Boxes scattered across campus. There was growing demand for more, from not only Stanford but other universities. The staff struggled to keep up with demand.

In 1985, Stanford undertook a more formal project to network the campus. It was to use only the new Internet protocol. That spring, Yeager recalls, two support staff members, Bosack and Kirk Lougheed, asked him for his original program so they could modify it for the new system. Bosack and Lougheed removed its ability to route non-Internet protocols, keeping its network operating system and related features and improving its Internet capabilities. Later, they added back other protocols.

Yeager said he didn't know that Bosack had recently incorporated Cisco and asked Stanford for permission to sell the Blue Box commercially. He had been denied.

Yeager, looking back, says that Bosack and Lougheed were refining the product that Cisco ultimately sold. ``They did this on Stanford time, and thus, debugged what were to be Cisco routers,'' he said.

Despite Stanford's ``no,'' by late 1985 Bosack and his wife, Lerner, were assembling routers in their living room in Atherton. According to former and current Stanford support-staff members, their design was strikingly similar to an updated Blue Box that had been sketched out in Margaret Jacks Hall during a networking group meeting.

``There was no difference'' between the Stanford router and the Cisco router, said Nick Veizades, who worked with Yeager at the medical center. ``The software changed a little bit, but not very much.''

Yet at the time, Veizades recalls, he thought Bosack's plan to sell routers was quixotic at best. ``We thought he was out of his cotton-pickin' mind to start Cisco,'' he said. ``We didn't think it was going to fly whatsoever. Those are the early things of the Internet.''

But Cisco was selling software and the hardware to run it on, something like a personal computer, that people were comfortable paying for. ``Cisco cleverly sold software that plugged into the wall, had a fan and got warm,'' Gorin said. ``People had a long history of buying things that plugged into the wall, made noises and got warm.''

By then, many improvements had been made to Yeager's software. ``The real value of the Yeager software was the basic operating system,'' Lougheed wrote years later. ``It wasn't particularly sophisticated, but it was quite usable and served as an excellent starting point.''

Yeager has watched with some unhappiness as newspapers and magazines, echoing one another, ignored his contributions and credited all the work to Bosack and Lerner.

TUG OF WAR
School, staff fight over ownership

Earnest investigated and says he found that Bosack, in Cisco's name, had sold Xerox some networking boards made at Stanford expense and nine months later hadn't repaid Stanford. Bosack denied doing anything wrong, Earnest said, but by that May, he had ``enough evidence of misconduct'' to go to the dean's office. Eventually, Bosack was asked to decide whether to work at Stanford or Cisco.

Coincidentally, in the electrical engineering department, Lougheed, who had worked with Bosack on Yeager's routing software, was confronted by his boss, Steve Hansen. Hansen demanded that Lougheed return tape copies of his work on the software, saying they belonged to Stanford as ``work for hire.''

Hansen, who now is Stanford's computer security officer, says he told Lougheed to return the tapes or resign.

On July 11, Bosack and Lougheed resigned. They were joined at Cisco by three others from Stanford: Lerner, who had left Stanford long before, Greg Satz, a programmer, and Richard Troiano, who handled Cisco sales.

Bosack declined to comment for this article. Gorin, who hired him for Stanford's computer support staff and who now works for a Bosack company, said Bosack isn't interested in commenting on the Cisco story ever again.

``For Len this is ancient history, and he sees no particular reason to rehash it,'' he said.

In a book based on the PBS series ``Nerds 2.0.1,'' Sandy Lerner commented that Stanford was holding the technology ``hostage, and that's why we started the company.''

A tug of war began between Stanford's networking group and Cisco.

Cisco viewed the code that Hansen wanted as a descendant of Lougheed's work, rather than Yeager's. Looking back, Hansen acknowledges that ``software was this funny thing'' in the mid-'80s.

``Nobody understood it, that it had real value,'' Hansen said. ``It was, `I put a lot of time in on it, I worked evenings and nights.' I'm sure he felt that with all these enhancements, it was really his.''

The two sides also battled over artwork, called photomasks, used to make their almost identical networking boards. At the job shop that made the computer science department's boards, its photomasks would turn up in folders marked Cisco, according to Earnest, Veizades and a third staff member.

``They put `cisco' labels on the artwork as if it were theirs,'' Earnest said. ``Then we swiped it back.''

But Cisco had to come to terms with Stanford, because Bosack, Lougheed and the others had worked on the router as Stanford employees; at least some of their work did belong to the university.

``Cisco was trying really hard to find a way to get a license that would make them credible to buyers,'' said Bill Yundt, who supervised the 1985 networking project. ``Without it, they would have been dead. Everybody in the world who knew anything, knew this stuff had been done at Stanford.''

Yeager said Stanford's lawyers asked him to review a copy of Cisco's software. He found his own work in it.

Stanford officials in charge of licensing debated what to do. ``Cisco mess'' was the heading of one e-mail discussing the issue.

Earnest urged a lawsuit and even raised the idea of criminal charges against Bosack. He e-mailed colleagues: ``The fundamental problem is: how do you negotiate an equitable agreement with crooks?''

Yundt favored licensing the technology to Cisco, collecting royalties and buying some of its routers. ``It was debatable in the first place whether any wrongdoing had been committed,'' he said.

In the end, that's what was done. Stanford, as a non-profit, couldn't legally get into the router business, and didn't want to -- even if it did own the software.

``A university is not supposed to be in the manufacturing business,'' Gorin said, and ``a lot of people saw the advent of Cisco as a godsend.''

The head of the technology licensing office, Niels J. Reimers, outlined Stanford's alternatives and explained its decision in a March 1987 e-mail: ``1. Do nothing. 2. Go to court. 3. Try to make the best of a bad situation. None of the three are palatable; the first isn't even digestible. The second may make us feel good but would accomplish little else. So that left us with the third course of action.''

On April 15, 1987, Stanford licensed the router software and two computer boards to Cisco; the agreement allowed Stanford to use several of Cisco's groundbreaking software improvements made after Cisco's founders had left Stanford.

For the software, Cisco gave Stanford $19,300 in cash and agreed to royalties of $150,000 and product discounts. Yeager apportioned the royalties, giving his 80 percent share to his department.

Stanford was offered equity in Cisco, but the licensing office turned it down as a matter of policy.

Earnest said the irregular transactions he investigated, which he figured were worth more than $50,000, were settled later by Cisco for $7,000 in cash and two routers valued at $4,000 each. No charges or lawsuit were filed.

Lerner, who left Cisco with Bosack in 1990, said she feels uncomfortable discussing details of the negotiations. The lawsuit ``was only a threat,'' she said. ``The result was that Stanford got some money, as well as Cisco maintaining their Internet for three years. Good deal all round.''

But as negotiations drew to a close, the intense feelings of several people who had helped develop the router were summed up by Yeager's former boss, Tom Rindfleisch. ``There is so much evidence of concealment, bad faith, or worse on the part of some Cisco principals,'' he wrote to his colleagues, ``that we should not count on preserving a long-term working relationship.

``I fear the Cisco experience has done unseen damage to Stanford in the form of creating inhibitions against sharing ideas, information and developments with possible commercial value among our groups which have need to benefit from each other's work,'' he concluded.

INDEBTED
Company, school try to mend rift

In 1995, Morgridge gave a talk at the Xerox Palo Alto Research Center in which he ran through the origins of the company, relying heavily on the legend of Bosack and Lerner's role. In the back, a man stood and declared Morgridge's account ``almost entirely a fabrication.'' It was Les Earnest. He added, ``Bosack's resignation was not entirely voluntary.''

``We have been remorseful,'' said Morgridge, drawing a laugh from the audience. ``We know that we owe a considerable debt to that institution.''