Thank you for sharing!

Your article was successfully shared with the contacts you provided.
After Soviet �migr� Anatoly Sverdlin alleged investors had swindled him out of patents and the company he founded when he came to America, a Houston jury found in his favor, awarding approximately $1.5 billion in damages-the nation’s largest verdict in 1998. But a Texas appeals court on Sept. 4 threw out the jury’s verdict, including its finding that the value of patents assigned as collateral for a loan really added up to $26.4 million in interest, the basis for the trial court’s usury judgment against the investors. Swank v. Sverdlin, No. 01-99-00428-CV (Texas App.-Houston [1st Dist.]). Sverdlin, an engineer, moved to Houston after defecting from the Soviet Union in 1974. He founded Automated Marine Propulsion Systems Inc. (AMPS) and later developed and obtained a series of patents for an injection system to improve the efficiency of marine engines. Needing capital to market the company and the invention, AMPS hired new officers, who, in turn, recruited investors. Those investors created LDE Associates, which then loaned AMPS $2 million. The loan agreement gave LDE two of three seats on AMPS’ board, limited rights to the patents, AMPS stock options and interest. In time, however, Sverdlin claimed that the new board was ruining AMPS, and that he did not understand the terms of the agreement giving LDE control of the company. Claiming Sverdlin had become hostile to employees and customers, the board fired him. AMPS and LDE obtained an injunction barring Sverdlin from publicly criticizing the company. When Sverdlin counterclaimed individually and on behalf of AMPS, a trial court appointed a receiver for AMPS and realigned the parties, making Sverdlin and AMPS the plaintiffs. The jury’s ensuing $1.5 billion verdict was twice reduced by trial judges-first to $235 million, then to $180 million. The appeal cut it to zero. The jury had found that the patent assignment, which it had valued at $26.4 million based on the full value it placed on the patents, constituted interest on the $2 million loan, leading to a $74 million usury judgment. Rejecting this analysis, the appeals court said that the value of the patent assignment was based on the value received by LDE. Because LDE did not have the right to sell or even use the patents, it did not benefit from the full value placed on them.

Want to continue reading?
Become a Free ALM Digital Reader.

Benefits of a Digital Membership:

  • Free access to 1 article* every 30 days
  • Access to the entire ALM network of websites
  • Unlimited access to the ALM suite of newsletters
  • Build custom alerts on any search topic of your choosing
  • Search by a wide range of topics

*May exclude premium content
Already have an account?

Reprints & Licensing
Mentioned in a Law.com story?

License our industry-leading legal content to extend your thought leadership and build your brand.


ALM Legal Publication Newsletters

Sign Up Today and Never Miss Another Story.

As part of your digital membership, you can sign up for an unlimited number of a wide range of complimentary newsletters. Visit your My Account page to make your selections. Get the timely legal news and critical analysis you cannot afford to miss. Tailored just for you. In your inbox. Every day.

Copyright © 2021 ALM Media Properties, LLC. All Rights Reserved.