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RealNetworks Inc., the Seattle-based provider of online audio and video services, recently bought San Francisco’s Listen.com Inc. for $36 million in cash and stock. Attorneys in the Kirkland, Wash., Palo Alto and San Francisco offices of Wilson Sonsini Goodrich & Rosati represented RealNetworks in the transaction. Lawyers in the Mountain View office of Fenwick & West represented Listen.com. RealNetworks is getting Listen.com’s Rhapsody digital music subscription business, which it will add to its own MusicNet service. Rhapsody gives subscribers who pay a fee access to a library of digital music. The company has agreements with record labels including EMI, Sony Music Entertainment and Universal to use their music on the site. But dealing with the record companies also made getting the deal done more challenging for both companies. Fenwick partner Mark Leahy, who led the transaction for Listen.com, said the company had to get consent from the record companies before a merger could occur. In addition, RealNetworks is a publicly traded company, while Listen.com is private. “One of the most interesting sets of issues to work through when a private company is purchased involves the allocation of the merger proceeds among the shareholders,” Leahy said. “If the company has preferred shareholders, their existing liquidation preferences must be addressed.” Listen.com’s employees will remain in San Francisco. Wilson partner Patrick Schultheis led the deal. In addition, Wilson corporate partner Christian Montegut and corporate associates Lisa Wakida and Jennifer Ball worked on the deal in Kirkland. Tax partner David Gerson worked out of San Francisco, and tax associate Eileen Marshall worked out of Palo Alto. Employee benefits associate Jason Borrevik worked on the deal out of Palo Alto, and intellectual property associate Parag Gheewala worked on the deal out of Kirkland. In addition to Leahy, Fenwick corporate associates Thomas “T.J.” Hall and Jonathan Stueve; tax partner Ronald Schrotenboer; and employee benefits partner Scott Spector also worked on the deal. Zahavah Levine served as an in-house counsel to Listen.com. Tracy Daw worked in house for RealNetworks. NEOSCALE SYSTEMS INC. Milpitas-based NeoScale Systems Inc., a maker of data storage security hardware and software, has secured a $12 million second funding round. Attorneys in the Menlo Park office of O’Melveny & Myers represented NeoScale in the transaction. While funding for technology startups has dwindled in the past few years, companies that make network security products have continued to fare well. “The terrorist attacks and an overall concern with security these days has created more of a demand for their products,” said Paul Sieben, an associate at O’Melveny who worked on the funding round. “Storage area networking and security are a hot space, and [NeoScale] is a hybrid of the two.” This round brings NeoScale’s total investments to $25.5 million from venture capital firms Bay Partners, Lightspeed Ventures and Seven Rosen Funds. O’Melveny partner Warren Lazarow led the deal. Associate Todd Bissett also worked on the transaction.

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