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Two of the world’s largest military defense contractors, which have been battling for five years on two fronts over allegations of antitrust violations and misappropriation of trade secrets associated with an anti-submarine bomber, have resolved their differences in a confidential, out-of-court settlement. But in a reflection of the bitterly fought litigation, attorneys for Lockheed Martin Corp. and L-3 Communications Integrated Systems Inc. took issue with how their counterparts described the few terms of the settlement agreement they were willing to discuss publicly. On Nov. 16, U.S. District Judge Charles A. Pannell Jr. dismissed Lockheed’s trade secret misappropriation suit against L-3, after counsel notified the court that they had settled the case. The settlement was reached seven months after Pannell tossed out a $37.3 million jury verdict for Lockheed and dismissed Lockheed’s request for more than $16 million in legal fees. Pannell overturned the trade secrets verdict and ordered a new trial after finding that Lockheed had failed to turn over to L-3 key e-mails that he said likely would have affected the trial’s outcome if they had been presented to the jury. On Nov. 8 in Dallas, U.S. District Court Judge Jane J. Boyle dismissed L-3′s antitrust suit against Lockheed stemming from the same high-stakes feud that had led to the trade secrets litigation in Atlanta. A trial in that case was set to begin in January. In 2005, in a race to the courthouse, Lockheed sued L-3 in Atlanta over what it claimed was a misappropriation by L-3 of Lockheed trade secrets associated with the design and construction of Lockheed’s P-3 series anti-submarine bomber, which is used by navies around the world. Lockheed has large aircraft plants in Marietta and Warner Robins. L-3, in turn, filed the antitrust litigation against Lockheed in Dallas, claiming that Lockheed had sued to keep L-3 from competing against it in a growing international market—the refurbishment of military aircraft, many of them originally designed and built by Lockheed, that are owned by governments around the world. L-3 and its predecessor firms (military contractor Raytheon foremost among them) had, with Lockheed’s consent for more than two decades, contracted with governments, including the U.S., to repair and refurbish the Lockheed bombers. In settling the two cases, both sides agreed to foot the bill for their own legal fees and expenses. “It’s over with. We are all holding hands and singing ‘Kum Bay Ya,’” L-3′s lead counsel, Marty Rose of the Dallas firm Rose Walker , told the Daily Report. He described the terms of the joint settlement as “extremely confidential.” “It is completely resolved,” he added, “and the parties are looking forward to a productive working relationship in the future.” In a written statement, L-3 spokeswoman Jennifer Barton said that the settlement included an agreement that Lockheed and L-3 would “cross-license” from each other data associated with the design, engineering and construction of Lockheed’s P-3 aircraft. Lockheed’s lead counsel in Atlanta, William H. Boice of Kilpatrick Stockton, also offered few details of the settlement. But he described L-3′s use of the term “cross-licensing” as “cosmetic.” “All I guess I can say is the case settled with L-3 paying for a license to use Lockheed’s proprietary P-3 data, which is what the case was all about,” he said. Lockheed’s Atlanta suit, he said, “was about L-3 using without authorization Lockheed Martin’s P-3 data. Whatever L-3 has in the way of P-3 data is not significant enough to justify any lawsuit. The lawsuit was against L-3 for using Lockheed Martin’s P-3 data. We settled that, and L-3 is paying for a license to use that data. Lockheed Martin is not paying anything.” Rose later took issue with Boice’s characterization of the agreement, saying, “His statements are gross mischaracterizations of the provisions of the settlement document.” Rose declined to offer specifics because, he said, the confidential terms of the settlement prohibit him from doing so. The underlying dispute in the Atlanta litigation stemmed from allegations that L-3—a subsidiary of L-3 Communications Corp., the sixth-largest defense company in the U.S.—had misappropriated proprietary information belonging to Lockheed while L-3 was a subcontractor for Korea Aerospace Industries on a contract to refurbish eight Lockheed P-3 planes for the South Korean government. Lockheed had bid unsuccessfully for that contract. L-3′s suit in Dallas against Lockheed claimed that Lockheed was using the Atlanta litigation to stifle competition in violation of federal antitrust laws. Shortly after the Atlanta jury verdict awarding Lockheed $37 million, L-3 lawyers sought to have it thrown out, claiming that Lockheed had strategically withheld from the defense internal corporate e-mails that contradicted testimony by Lockheed witnesses. Pannell sided with L-3, overturned the jury verdict and ordered a new trial, finding that the withheld information was critical to L-3′s defense. L-3 had argued that it had not misappropriated Lockheed’s trade secrets because the information was publicly available and that Lockheed had allowed at least one competitor to use proprietary data without a license, stripping it of protection as a trade secret. The withheld information was crucial to the case, according to court pleadings, because Pannell had instructed the jury that “Once trade secret status is lost, it is lost forever.” In addition to the loss of the $37.3 million verdict and the dismissal of its motion for more than $16 million in legal fees, Lockheed faced other setbacks in the months leading up to the settlement agreement. In Atlanta, Pannell had allowed L-3 to reopen discovery so the company could determine how and why Lockheed had failed to produce the missing information. Lockheed also was facing new allegations by L-3 that the aircraft company either had failed to gather, intentionally withheld or had permitted the destruction of additional information that L-3 had requested prior to the 2009 Atlanta trial. Meanwhile, in Dallas, Lockheed had lost a string of motions, including one that would have excluded testimony by an L-3 expert about Lockheed’s market power, profit margins and relative pricing abroad. But a special master appointed by the Dallas judge had excluded testimony from two of Lockheed’s expert witnesses. The special master also had left open the possibility, over Lockheed’s sealed objections, that L-3 could pursue previously unpleaded claims and present expert testimony and reports to bolster them when the case went to trial in January. Those motions were filed under seal and, as a result, do not appear on public docket in the Northern District of Texas where the case was being litigated. In Atlanta, by contrast, Pannell—after an inquiry by the Daily Report—had twice issued orders unsealing dozens of documents and hundreds of exhibits that had originally been submitted under seal in the case. The cases are, in Atlanta, Lockheed v. L-3 Communications Integrated Systems, No. 1:05-cv-00902 (N.D. Ga) and in Dallas, L-3 Communications Integrated Systems v. Lockheed, No. 3:07-cv-00341 (N.D.Tx). Staff Reporter R. Robin McDonald can be reached at [email protected]

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