Great story, even if not true :). www.snopes.com is one of my two favorite places for verifying stories like this. The true story follows the initial story posted here. This is just for the inquiring minds that populate the newsgroup, I know that Rob said he thought the story might be false. :)
ZERO GRAVITY When NASA first started sending up astronauts, they quickly discovered that ball-point pens would not work in zero gravity. To combat this problem, NASA scientists spent a decade and $12 billion developing a pen that writes in zero gravity, upside down, on almost any surface including glass and at temperatures ranging from below freezing to over 300 C. The Russians used a pencil.
Origins: The lesson of this anecdote is a valid one, that we sometimes expend a great deal of time, effort, and money to create a "high-tech" solution to a problem, when a perfectly good, cheap, and simple solution is right before our eyes. The anecdote offered above isn't a real example of this syndrome, however. Fisher did ultimately develop a pressurized pen for use by NASA astronauts (now known as the famous "Fisher Space Pen"), but both American and Soviet space missions initially used pencils, NASA did not seek out Fisher and ask them to develop a "space pen," Fisher did not charge NASA for the cost of developing the pen, and the Fisher pen was eventually used by both American and Soviet astronauts. Here's how Fisher themselves described it: NASA never asked Paul C. Fisher to produce a pen. When the astronauts began to fly, like the Russians, they used pencils, but the leads sometimes broke and became a hazard by floating in the [capsule's] atmosphere where there was no gravity. They could float into an eye or nose or cause a short in an electrical device. In addition, both the lead and the wood of the pencil could burn rapidly in the pure oxygen atmosphere. Paul Fisher realized the astronauts needed a safer and more dependable writing instrument, so in July 1965 he developed the pressurized ball pen, with its ink enclosed in a sealed, pressurized ink cartridge. Fisher sent the first samples to Dr. Robert Gilruth, Director of the Houston Space Center. The pens were all metal except for the ink, which had a flash point above 200°C. The sample Space Pens were thoroughly tested by NASA. They passed all the tests and have been used ever since on all manned space flights, American and Russian. All research and developement costs were paid by Paul Fisher. No development costs have ever been charged to the government. Because of the fire in Apollo 1, in which three Astronauts died, NASA required a writing instrument that would not burn in a 100% oxygen atmosphere. It also had to work in the extreme conditions of outer space: In a vacuum. With no gravity. In hot temperatures of +150°C in sunlight and also in the cold shadows of space where the temperatures drop to -120°C (NASA tested the pressurized Space Pens at -50°C, but because of the residential [sic] heat in the pen it also writes for many minutes in the cold shadows.) Fisher spent over one million dollars in trying to perfect the ball point pen before he made his first successful pressurized pens in 1965. Samples were immediately sent to Dr. Robert Gilruth, Manager of the Houston Space Center, where they were thoroughly tested and approved for use in Space in September 1965. In December 1967 he sold 400 Fisher Space Pens to NASA for $2.95 each. Lead pencils were used on all Mercury and Gemini space flights and all Russian space flights prior to 1968. Fisher Space Pens are more dependable than lead pencils and cannot create the hazard of a broken piece of lead floating through the gravity-less atmosphere.