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It might have been just another squabble over patents. But the timing of PostX Corp.’s infringement suit against e-mail encryption rival Sigaba didn’t sit well with the company. Sigaba claims the suit, filed right after it won a big contract from Bank of America in 2002, was designed to derail its deal. While antitrust counterclaims are not uncommon in patent disputes, lawyers say they are hard to prove and that judges have become less willing to grant summary judgment when they crop up. But Sigaba thinks it can buck that trend. “In Silicon Valley there’s been a lot of talk of companies using intellectual property [claims] to keep competitors out of the market,” said Sigaba attorney Jeffrey Fisher, a partner at Farella Braun & Martel. This case “sends a message that there’s a downside in bringing litigation that doesn’t have merit.” PostX, based in Cupertino, says that what lacks merit is the Sigaba counterclaim. “They have a very high burden in asserting their antitrust claim to prove that the patent case is objectively baseless,” said William Abrams, a partner in Pillsbury Winthrop’s Palo Alto office. “There is a strong policy to allow a patent owner to protect its patent rights. The facts they have pleaded here are incorrect, and their antitrust claims are meritless.” Sigaba, which also goes by the name Secure Data in Motion Inc., is basing its case on the timing of the litigation and testimony from a former PostX employee who now works for Sigaba. Sigaba says it disclosed its technology to PostX in August 2000 when the two were discussing a potential business agreement. At that time PostX did not complain that Sigaba’s products were infringing its patents, Sigaba said; instead, it waited until the Bank of America transaction came through. PostX’s lawsuit “was intended to retaliate against Sigaba for its success in obtaining the Bank of America contract, to disrupt Sigaba’s contract with Bank of America and its ongoing negotiations with potential customers and investors,” Sigaba states in its suit. Last year U.S. District Judge Susan Illston found that Sigaba did not infringe PostX’s patents and granted the company summary judgment in two separate orders. PostX recently appealed the rulings, PostX Corp. v. Secure Data In Motion, 03-0521 and 02-4483, to the Federal Circuit U.S. Court of Appeals. The antitrust complaint is stayed pending the Federal Circuit’s decision on the patent cases. There is yet a third strand of litigation between the two companies. PostX filed a trade secrets complaint against Sigaba, claiming it misappropriated proprietary information when it hired PostX’s former senior vice president of sales and marketing, Jim Reid. But Illston dismissed that suit Tuesday, saying that PostX had failed to specify what trade secrets were revealed to Sigaba. “PostX’s purported disclosures have been vague and overgeneralized,” Illston wrote. “They amounted to little more than traditional business rules-of-thumb: Know your customer, explore your market, plan your steps.” It’s uncertain how Sigaba will fare in its antitrust claims, particularly since courts have set a high bar for proving such violations. “Antitrust claims for about the last 10 years have been disfavored and viewed with a high degree of skepticism by district courts,” said Henry Bunsow, a partner at Howrey Simon Arnold & White. Even when a patent suit is tossed on summary judgment, Bunsow said a company claiming an antitrust action “will need something more.” For instance, it would require that the patent holder is a monopolist, or is engaging in patent pooling or predatory pricing, or has pursued an infringement claim to prevent a competitor from getting a license. The fact that a patent suit has economic repercussions “normally won’t be sufficient for an antitrust claim,” said Patricia Thayer, co-chair of Heller Ehrman White & McAuliffe’s IP practice group. “It’s going to depend a lot on whether the case is close, whether it was brought in good faith, if there is a colorable argument.” A company has a better shot at claiming a competitor violated antitrust law if a court finds the patent is invalid, Thayer said. A finding of no infringement would be harder to link to antitrust actions, she added. “You have to climb a big hurdle” and show there were no grounds for bringing the patent suit. But Sigaba’s lawyers say it can clear that high hurdle. The claim was groundless, they say, and was solely aimed at gaining a marketing edge. Fisher said the e-mail encryption business is expected to explode in the next few years as companies comply with federal laws and regulations requiring that medical and financial information be transmitted securely over the Internet. “Whoever gets in the door first,” Fisher said, “will set the industry standard.”

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