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In the early 1990s, big cell phone companies were turning away thousands of potential customers because they couldn’t pass credit checks. Freedom Wireless Inc. founder Douglas Fougnies saw an opportunity. His idea: a cellular service that offered “credit challenged” individuals a way to prepay for their calls. Fougnies and co-inventor Daniel Harned received two patents for the idea, and Fougnies tried to build a business buying wireless minutes from cellular companies and reselling them to consumers. But Fougnies couldn’t make it work: Boston Communications Group Inc. jumped into the prepaid cell phone market and began striking deals with cellular companies. Left with nothing but patents, Freedom Wireless filed suit against BCGI, Cingular Wireless and a few other cell phone carriers, alleging infringement. The case went to trial in February before a federal jury in Boston, with William Price, a partner at Los Angeles’ Quinn Emanuel Urquhart Oliver & Hedges, representing Freedom. Price launched his case with Fougnies’ story, and capped off the trial with a $128 million verdict. Price first called Harned to the stand. The inventor met Fougnies in late 1993 through a mutual friend at their Phoenix church. At the time, Harned was working full-time as a defense industry software engineer. He recalled spending nights and weekends trying to devise a seamless prepaid wireless system. The solution, which the Freedom trial team helped illustrate through the use of animated graphics, was a database that enables the switching stations of cellular carriers to recognize calls from prepaid customers, then route them to a prepaid service system, which would track user minutes and account balances — and cut off calls when the balances ran out. “We wanted the jury to know what the invention was and get into the mind of the inventor,” says Price. During discovery, Price’s team had found a stack of documents that it believed showed clear evidence of infringement. After Harned testified, the team began putting on witnesses from BCGI and other defendant companies to get them to respond to the documents. “We thought it was a way to get the jury on our side quickly,” says Price, who concedes that calling witnesses from the other side was a slightly unusual strategy. Price pressed BCGI’s chief technology officer, William Wessman, to explain why BCGI’s manuals, as well as brochures sent to customers, used language that was nearly identical to the language in Freedom’s patents. “He was reduced to saying time and time again that the [BCGI] documents were not accurate,” says Price. Price then confronted Judy Espejo, a system engineer for BCGI customer Cingular with a 100-page manual she wrote detailing how BCGI’s prepaid system worked. Under repeated questioning from Price, she finally conceded that the words she used in the manual matched the language in Freedom’s patents. To help prove that the infringement was willful, the Freedom team also played jurors a videotape of its deposition of Lawrence Rybar, a former engineer with Bell Atlantic Mobile. In January 1995, Fougnies had shown Rybar the prepaid system he and Harned developed, in hopes of striking a deal to resell Bell Atlantic minutes. Shortly after that meeting, Rybar drafted a memo in which he praised the system as groundbreaking, but noted that at the very least Bell Atlantic would have to pay Freedom a licensing fee. He suggested that Bell Atlantic explore the boundaries of its nondisclosure agreement with Fougnies, and find another vendor. A month or so later, Bell Atlantic met with BCGI, and the two companies struck a deal. “We thought it was a smoking gun on willfulness,” says Price, who contends that Bell Atlantic shared information on Freedom’s technology that helped BCGI develop a better prepaid service. (Verizon, which acquired Bell Atlantic, had been a defendant, but wound up settling with Freedom for an undisclosed amount two weeks before the trial.) BCGI, represented by Boston’s Foley Hoag, countered by calling on Brian Boyle, the former head of the company’s wireless services division. He testified that he started developing a prepaid phone service in 1994, well before BCGI’s deal with Bell Atlantic. As proof, he pointed to a chart showing how calls would flow under his system, which he claimed was put together in the fall of that year. On cross, however, Price pointed out that there was no verifiable date on the chart, or any other way to prove when Boyle had actually produced it. What’s more, Price noted that internal BCGI documents from mid-1994 showed that at that point the company still hadn’t figured out how to provide a seamless prepaid system. “The best solution they had was dialing into an 800 number first,” says Price, who notes that BCGI’s design also wouldn’t allow incoming calls. In June the jury found that Freedom’s patents had been willfully infringed, and ordered BCGI and Cingular — which now owns almost all the carriers named as defendants in the suit — to pay $128 million in damages. (BCGI and Cingular are jointly liable under the verdict, so Freedom can collect from either company.) The defense immediately tried to knock out that verdict by claiming Freedom had failed to disclose prior art to the Patent and Trademark Office when it secured its patents. But on September 1, district court judge Edward Harrington ruled that there was no clear and convincing proof of inequitable conduct. BCGI’s lead lawyer, Foley Hoag’s Michael Keating, did not return repeated calls. But the company has already announced plans to appeal. “Our fight is far from over,” said BCGI president and chief executive E.Y. Snowden in a prepared statement. Cingular lawyer Denis Salmon, a partner in Gibson, Dunn & Crutcher’s Palo Alto, Calif., office, declined to comment. Larry Day, Freedom’s current chief executive, says he’s confident that the jury’s award will stand, and credits the Quinn Emanuel trial team. “I’m just a guy who’s enforcing my patents,” says Day.
CASE: Freedom Wireless, Inc. v. Boston Communications Group. Inc. et al. WINNER:Freedom Wireless AT ISSUE:Patents on prepaid cellular phone service AT STAKE:If their appeal fails, BCGI and Cingular will be jointly liable for at least $128 million. And BCGI could be forced to pay treble damages. In addition, Freedom plans to seek an injunction to force BCGI and Cingular to stop using its technology. LESSON LEARNED:Maximize the impact of incriminating documents by forcing witnesses from the defense side to respond to them early in the trial.

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