Pair of Patent Stars Sidelined by DQ Motions as 'Playbook Theory' Gains Ground

Pair of Patent Stars Sidelined by DQ Motions as 'Playbook Theory' Gains Ground Jason Doiy / The Recorder

SAN FRANCISCO — Clients don’t take it well when they are sued by a former lawyer. Especially when the lawyer is Matthew Powers or Morgan Chu.

The iconic patent litigators have both been disqualified in recent weeks after taking aim at companies they once represented. Networking firm Radware Ltd. knocked Chu out of its patent battle with A10 Networks Inc. on March 5, howling that Irell & Manella was trying to depose executives it had once counseled. Powers was ousted on March 7 from a case in which he stood adverse to Samsung Electronics Co., a company he represented for more than a decade at Weil, Gotshal & Manges and his new firm, Tensegrity Law Group.

Motions for disqualification have long been a feature of big-ticket patent litigation. But as the barrier between lawyers in plaintiffs and defense camps erodes, the motions have been headlined by some of the biggest names in the business, IP litigators say. Powers is among the seasoned defense lawyers who have crossed over to the plaintiffs side in recent years and positioned themselves for a bigger payday—and many more potential conflicts. Chu, for his part, has long toggled between championing plaintiffs and defendants.

Clients take their opponents’ legal firepower into consideration as they mull over whether to file a motion for disqualification, IP litigators say. Chu and Powers have targets on their backs.

“Getting Morgan off a case is a win,” said Nagendra “Nick” Setty, an IP litigation partner at Orrick, Herrington & Sutcliffe.

Neither Chu nor Powers responded to requests for comment.

Generally, lawyers are permitted to sue former clients if they did not gain confidential information or if the old matter was not substantially related to the new one. But as IP litigation grows more routinized, with many companies setting guidelines for when they will sue and when they will settle, another philosophy is gaining traction in the U.S. District Court for the Northern District of California, said John Steele, a Palo Alto solo who specializes in legal ethics.

The so-called playbook theory holds that a lawyer can’t go up against a former client if he gained key insights into the company’s litigation strategy. The increasingly popular school of thought poses a special threat for patent gurus like Chu and Powers, who sometimes help clients write their playbooks in the first place, IP litigators say.

“Because there’s an economic model for patent litigation, both large defendants and nonpracticing entities have begun to think that they have a formula for doing it,” Steele said. “It’s a formula they want to protect.”

WHEN ADVOCATES TURN

Samsung’s campaign to disqualify Powers had a decidedly personal flavor.

Last September, Powers sued Samsung in the Northern District of Texas on behalf of Micrografx Inc., an entity launched three months before the suit was filed. Micrografx claims that Samsung’s Galaxy smartphones and tablets step on three of its patents for graphics.

Represented by Quinn Emanuel Urquhart & Sullivan, Samsung Electronics Co. noted in its motion for disqualification that Powers and his partner at Tensegrity, Steven Cherensky, had represented the company in 13 patent matters during their days at Weil. But Samsung cast Powers as more than a go-to lawyer, claiming that he had helped its South Korean executives navigate the American legal system.

“Samsung respected Powers as a top patent litigator and, more importantly, considered him a teacher, trusted adviser and friend,” Quinn Emanuel partner Kevin P.B. Johnson wrote in the motion. “Samsung feels that its trust has been betrayed.”

Powers amassed a stable of giant corporate clients during his time at Weil. They are just the deep-pocketed defendants he needs to go after at Tensegrity, a plaintiffs firm he launched in 2011, IP litigators say. Tensegrity’s first suit targeted Amazon.com Inc., a company he represented at Weil, and Powers has also sued former clients Microsoft Corp. and Sony Corp. Samsung is the only one that has sought to disqualify him.

Powers and Cherensky protested they should not be disqualified because they had not represented Samsung in any similar matters. They suggested their familiarity with Samsung was beside the point.

“Even if Mr. Powers or Mr. Cherensky had knowledge of the inner workings of Samsung’s litigation department, which they do not, their lack of confidential knowledge that is specific to Micrografx is fatal to Samsung’s motion,” Tensegrity argued in court papers.

But U.S. District Judge David Godbey of the Northern District of Texas found the case had too much in common with Powers’ past work for Samsung.

Radware executives also played up their reliance on Chu in their bid to disqualify him from their patent suit with A10 Networks, a rival networking firm. Irell represented Radware in two matters.

Radware stressed the suits concern technology they discussed in depth with Chu and his colleagues. They added the lawyers had intimate knowledge of their products, financing and decision making. Chu countered there was no conflict because the case involved different patents.

U.S. District Judge Ronald Whyte of the Northern District of California found the Irell team must be disqualified, noting they presumably had access to key decision makers at Radware and may have gained information that would be relevant to damages calculations.

Although the playbook theory has resonated on California’s Northern District bench, companies must be careful not to abuse it, Steele said. He noted companies must show judges that their former lawyers were privy to something more than a run-of-the-mill approach.

“The difficulty with the theory is that sometimes the special sauce that they think is unique to them is: win discovery, get a good result in the Markman hearing and if that doesn’t work, go to JAMS for a full day of mediation,” he said. “If that’s the playbook, it’s not theirs, and the motion should be denied.”

A MUST-WIN MOTION

Few lawyers ask for permission to sue a former client.

Although firms can ask former clients to sign waivers, the request essentially concedes there is a conflict, IP litigators say.

“Normally the thought is that if you need to ask, you probably have to live with the answer,” Steele said. “And the answer is probably no.”

So most lawyers who want to go after a former client roll the dice and take their chances on a disqualification motion. Godbey noted in his order that Tensegrity had not notified Samsung of the potential conflict. What’s more, Radware executives claimed Irell never notified them that it was no longer representing the company.

The lawyers are mindful that moving for disqualification is not a no-brainer for their former clients. Many companies that would likely win a motion for disqualification do not make them because they are concerned about perceptions, IP litigators say.

Motions must be made early, when judges are still forming their impressions of cases. And some on the bench view them skeptically, said Ragesh Tangri, a partner at Durie Tangri who has litigated disqualification motions.

“Judges divide between viewing them as tactical maneuvers designed to deprive someone of their choice of counsel or as an act of side-switching by lawyers who shouldn’t turn on a former client,” Tangri said.

Powers stressed that Samsung had unrealistic expectations about how long he should be loyal.

“The logical endpoint of Samsung’s position is that Tensegrity should be precluded from ever taking a patent case against Samsung,” Tensegrity argued in court papers.

IP litigators say they too must think long and hard about whether they are willing to be known as a lawyer who will sue a former client, even if the money has moved in a different direction.

“Some lawyers just don’t do it,” Steele said. “Other lawyers think that if it’s not forbidden by the law, then there’s no reason not to.”

Contact the reporter at jlove@alm.com.

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