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Perkins Coie and Bracewell are facing allegations in New York state court that they allowed an electronic securities trading platform developer, Electron Trading LLC, to sign onto an unfavorable technology licensing agreement with Morgan Stanley & Co. LLC, costing Electron tens of millions of dollars.

Electron, represented by Rachel Fleishman and Jeffrey Gross of Reid Collins & Tsai, lodged a legal malpractice complaint against the two firms late last week, alleging that Perkins Coie and Bracewell repeatedly failed to advise the company properly in connection with the Morgan Stanley contract. Under the deal, Electron granted Morgan Stanley the rights to the intellectual property on a technology system for “spread trades,” a form of trading in which investors simultaneously buy and sell related securities to try to capture price differences between multiple financial instruments.

The malpractice suit alleged that before signing the licensing pact, Electron and Morgan Stanley agreed to terms that would have limited Electron’s potential liability for any intellectual property claims made by third parties. Electron also alleged that it intended to retain its right to sue Morgan Stanley if the bank breached the licensing agreement, and that Morgan Stanley agreed to that term before the deal was finalized.

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Scott Flaherty

Scott Flaherty, based in New York, covers the business of law with a focus on legal ethics, lawyer misconduct, conflicts-of-interest and litigation involving law firms. He can be reached at [email protected] On Twitter: @sflaherty18

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