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Rounding Up the 10 Biggest IP Litigation Wins of 2011
Note: This article has been updated to include the name of a law firm involved in one of the cases mentioned.
Intellectual property litigation may be recession-proof. According to a survey by PricewaterhouseCoopers, patent holders brought 2,892 U.S. infringement lawsuits in 2010—an increase of more than 5 percent over the year before. Similarly, the number of reported trade secrets cases increased by 13 percent in 2010, according to research by blogger Russell Beck, a partner at the Boston law firm Beck Reed Riden. Another recession-proof phenomenon is Apple Inc., known lately for must-have mobile gadgets—and now, apparently, for employing legions of IP lawyers in its battle to take down Google Inc.'s Android operating system.
In light of the ever-increasing importance of IP to not just Apple, but seemingly every modern business, Corporate Counsel presents this list of the top ten IP litigation wins of 2011:
1. Jobs's Job One . . .
The smartphone market moves fast, so a court order forcing a manufacturer to sit out a product cycle can be devastating. That's part of the reason the International Trade Commission has become a red-hot forum for smartphone patent disputes. The trade body can't award money damages, but it can impose costly "import bans" on foreign products sold in the United States. Smartphone manufacturers have brought a slew of ITC actions in hopes of securing such bans against rivals.
In November, Apple and its outside lawyers at Orrick, Herrington & Sutcliffe scored a major defense win in one of the first smartphone disputes on the ITC's docket. S3 Graphics, Inc., a Fremont, California–based graphic chipmaker, had filed an ITC action against Apple in May 2010, claiming Apple's iPhone infringed four of its patents. In July an administrative judge ruled for S3 Graphics. But in November, a six-judge panel reversed, ruling that Apple did not infringe any of the asserted patents.
The loss for S3 Graphics was also a loss for Taiwan-based HTC Corporation, the leading maker of Android phones. It announced in July that it would acquire S3 Graphics for $300 million in a bid to bolster its ammunition in patent fights. HTC told The Wall Street Journal in November 2011 that it was considering canceling the acquisition in light of the ITC's ruling.
2. . . . And One More Thing
That ITC decision wasn't the only one involving HTC. On December 19 the ITC issued an order banning the importation of some HTC phones and, by extension, Google and its Android operating system. (It won't be the last. Apple's now-deceased CEO Jobs told his biographer Walter Isaacson, "I will spend every penny of Apple's $40 billion in the bank, to right this wrong. I'm going to destroy Android, because it's a stolen product.")
A six-judge panel of ITC judges ruled that HTC infringed one of Apple's patents relating to a data formatting feature. The trade body imposed a ban on the importation of HTC phones that use the feature, which will go into effect April 19. HTC pledges a work-around.
The ruling is far from an all-out victory for Apple, however. The company originally sued HTC over claims relating to ten patents, but later dropped six of them from the case. In a July ruling, an ITC administrative law judge found that HTC infringed two of the remaining patents. By partially reversing the ALJ, the six-judge panel's order whittled the case down even further to claims relating to just one patent.
3. They Didn't Want to Pay
In February, hard drive manufacturers Hitachi Global Storage Technologies Inc. and Shenzhen Excelstor Technology Ltd. brought a forceful end to an industry-wide litigation campaign by upstart rival MagSil Corporation.
Less than two months before a scheduled patent infringement trial, Hitachi's lawyers at Kasowitz Benson Torres & Friedman convinced a Delaware judge to invalidate a patent MagSil asserted against Hitachi in 2008. The ruling got Hitachi off the hook for more than $100 million in claimed damages.
The ruling also earned Hitachi and Excelstor some bragging rights over rivals Western Digital Corporation and Seagate Technologies, which both played it safe and settled similar suits with MagSil and co-plaintiff Massachusetts Institute of Technology, which exclusively licenses the patent to MagSil.
4. A Bulletproof Secret
The same week the much-debated patent reform bill went into law, E.I. du Pont de Nemours and Company reminded companies about the value of trade secrets.
A Richmond jury awarded DuPont $919 million in September in its trade secrets case against South Korean rival Kolon Industries. DuPont sued Kolon in 2009, alleging it hired away a former DuPont engineer and pumped him for confidential information relating to Kevlar, a material used in bulletproof vests. DuPont's lawyers at Crowell & Moring and McGuireWoods helped seal victory by winning a pretrial ruling that Kolon execs intentionally destroyed crucial evidence. Federal district court judge Robert Payne instructed jurors that they could infer that the missing evidence would have hurt Kolon's case.
The verdict delivered a loud wake-up call to foreign companies, says Jonathan Lagarenne, a partner at Fox Rothschild who didn't work on the case. "There's a cultural component," he says. "Many companies in Europe and Asia don't know what's kosher in the American discovery process."
5. David 2, Goliath 0
The U.S. Supreme Court doesn't hear many patent cases. And when it does, it rarely affirms the second-highest patent court in the land, the U.S. Court of Appeals for the Federal Circuit. So when the justices agreed to hear Microsoft Corporation's appeal of a 2009 patent infringement trial, the patent bar paid close attention.
At oral argument, Microsoft urged the justices not only to vacate a $290 million jury award it lost to a Canadian software developer called i4i Limited Partnership, but also to change a long-standing principle of patent law. Federal judges, like the one that first heard the i4i case, require "clear and convincing" evidence to invalidate a patent. Microsoft urged the justices to lessen that standard to "a preponderance of the evidence." Because the Court hinted in a past opinion that it might be open to liberalizing the standard, many patent litigators thought Microsoft could win, says Ken Liebman, a partner at Faegre & Benson who did not work on the case.
Instead, the justices issued a decision in June unanimously affirming i4i's win and maintaining the status quo for patent invalidation.
6. Never Mind
One of our top IP litigation results of 2009 was the $1.67 billion patent infringement verdict Centocor Ortho Biotech Inc. (now known as Janssen Biotech, Inc.) won against Abbott Laboratories in a dispute over Abbott's arthritis drug Humira. So it's only fair that we now give Abbott credit for getting the staggering verdict tossed on appeal.
The Federal Circuit issued an opinion in June reversing Centocor's verdict—the biggest ever in a patent case. The court invalidated Centocor's patent, which it developed jointly with New York University, on the grounds that its patent application did not adequately describe the claimed invention.
The case is a testament to Abbott's faith in its outside lawyers at Wilmer Cutler Pickering Hale and Dorr. After a Marshall, Texas, jury returned the devastating verdict, lead Wilmer partner William Lee offered to step down for the appeal. Instead Abbott associate general counsel Jose Rivera asked him when he could get to work, Lee says.
7. Toy Story
In April, MGA Entertainment, Inc., won a stunning reversal in its long-running spat with rival Mattel, Inc., over rights to the Bratz dolls franchise.
Back in 2008, a California jury found that MGA's Bratz dolls infringed Mattel's copyrights and awarded the Barbie manufacturer $100 million in damages. But the U.S. Court of Appeals for the Ninth Circuit vacated the verdict in 2010, setting the stage for a new trial in early 2011. After a three-month trial and eight days of nail-biting deliberation, a jury found on April 21 that Mattel does not own rights to the Bratz empire and that it stole MGA's trade secrets. Mattel had to pay $310 million in damages, attorney's fees, and other costs.
8. Another Door Opens
Talk about making lemonade out of lemons. In January, Versata Software Inc. and its lawyers at McKool Smith saw a $138.6 million patent infringement verdict against the U.S. subsidiary of German software giant SAP AG thrown out because the Federal Circuit formulated a new rule for calculating reasonable royalty rates in patent trials.
In a May retrial on damages, Versata ended up more than doubling its original verdict, winning $345 million from a jury in Marshall, Texas. Versata was awarded $260 million in lost profits and $85 million in reasonable royalties. The jury also found SAP, a leading maker of business software, has continued to infringe the patent, which relates to pricing technology.
9. It Makes No Stents
No list of top IP litigation results would be complete without the biggest patent verdict of the year. In 2011, that honor went to Bruce Saffran, a 50-year-old radiologist in Philadelphia and his lawyers at Dickstein Shapiro.
A jury in Texas in January awarded $482 million to Saffran in a patent case against Johnson & Johnson subsidiary Cordis Corporation and Boston Scientific Corporation. A judge later tacked on $111 million in interest, bringing the total to $593.4 million. The case involves three patents relating to drug-coated stents that Saffran registered in the 1990s during his residency at Massachusetts General Hospital.
Saffran is no stranger to victory in patent litigation. In 2008 a jury ordered Boston Scientific to pay him $431 million in a similar patent case. The company, which appealed the verdict, eventually settled with Saffran for $50 million.
10. Share This Video
The U.S. Court of Appeals for the Ninth Circuit gave Google subsidiary YouTube LLC an early Christmas present on December 20. The appeals court ruled that a similar Web site can't be sued for copyright infringement under the Digital Millennium Copyright Act.
A division of Universal Music Group, Inc., sued Veoh Networks, Inc., in 2007, claiming Veoh had an affirmative duty to remove infringing content uploaded by users of Veoh.com, a now-defunct video-sharing site. The Ninth Circuit disagreed, ruling that rights holders (like UMG) are better situated to identify and flag pirated content. That ruling deals a blow to media conglomerate Viacom Inc., in its pending appeal to the Second Circuit of a similar copyright infringement ruling it lost to YouTube in 2010.