Electrodes inserted in small spongy pads were placed on the skin in places where large peripheral nerve bodies were located near the surface. When 20 to 80 milliamperes of electricity were fed into the nerve bodies they sent a tingling sensation down the nerve path, blocking out the signals emanating from the source of pain. Sometimes the pain would be relieved for minutes, sometimes for days, sometimes forever.

''We went to the University of Minnesota Hospital,'' Mr. McDonald recalled in an interview last week, ''and tried the device out on a man who had lost his leg and was suffering from so-called phantom limb pain. When a person loses a leg, for instance, the nerves that connected the leg to the brain don't disappear. The surviving nerves bunch together in the stump. Those nerves can send off confusing signals, telling an amputee his leg is on fire or freezing or itching, even though he has no leg.

''When we tried it out on this man,'' Mr. McDonald continued, referring to his device, ''it relieved his pain for the first time without drugs. He said: 'What is this thing? Where can I buy one? How much does it cost?' We said, 'Well, we really don't know.' ''

They did not take long to find out. Mr. McDonald and Mr. Hagfors took in another partner, Clayton Jensen, and formed a company in 1971 to manufacture the device. They called their small black box with the spongy electrodes a ''transcutaneous electrical nerve stimulator'' - or TENS for short - and named their company Stimulation Technology Inc., also known as Stimtech.

According to their testimony, in testing out their black box they soon discovered that it could be used to relieve not only phantom limb pain but all kinds of pains resulting from cancer, back problems, muscle aches, surgery, sports accidents and even some headaches. Importantly, they testified, it was nonaddictive and had none of the side effects of drugs.

Doctors who learned of the device began prescribing TENS treatment for their patients at a clinic set up by Stimtech. At the clinic, patients learned how to use the device, which they then took home. An aching pass receiver on the Dallas Cowboys football team even had a battery-operated TENS device strapped on to keep him in a key game. Size of a Man's Hand

In the meantime, several other American and Japanese companies joined the market, but Stimtech's product remained the market leader. Sales approached $1 million by 1974, but profit margins were slim on the complex units. The devices, then about the size of a man's hand, sold by prescription only at a price ranging from $300 to $500.