Vanessa Blum writes for The Recorder, an American Lawyer affiliate.
SAN FRANCISCO — They've tried every defensive maneuver in the accused infringer playbook, from filing a declaratory judgment action to disqualifying opposing counsel to seeking an eleventh hour stay.
Now after three years of scorched-earth litigation, lawyers for TransPerfect Global Inc. have just one more gambit — persuading a jury their client did not infringe four patents in the field of website translation or that the patents are invalid.
Barring a last-minute settlement, rivals TransPerfect and MotionPoint Corp. will face off next week in a patent trial before U.S. District Chief Judge Claudia Wilken in Oakland. The case pits two of the region's most fearsome patent litigators — Douglas Lumish of Latham & Watkins for TransPerfect and Charles Verhoeven of Quinn Emanuel Urquhart & Sullivan for MotionPoint.
While the recent focus on the patent system has centered on suits brought by so-called patent trolls, the translation case highlights the fall-out when business competitors declare legal Armageddon.
Neither company has the same lawyers it started with. MotionPoint sued its initial counsel at McDermott, Will & Emery for more than $3.5 million. And the patent case is going to trial in the Northern District even as all five patents at issue have been provisionally rejected by the U.S. Patent & Trademark Office.
Last week, Wilken denied a last-minute plea from TransPerfect to delay trial until the completion of inter partes re-examination proceedings before the PTO.
TransPerfect's lawyers had argued it was pointless to go to trial on "patents that now stand rejected by the same governmental agency that issued them." So long as the patents are in limbo, they are presumptively valid for purposes of the trial.
Verhoeven and his team accused TransPerfect of attempting to derail the case.
"TransPerfect brought this case yet now ironically wants to delay it," the Quinn lawyers wrote. "TransPerfect's motion is an attempt to game the system, is an abuse of the re-examination process, and should be denied outright."
PARALLELS TO APPLE-SAMSUNG
TransPerfect and MotionPoint are no Apple Inc. and Samsung Electronics Co., though the cases have similarities. In both, the parties are leveraging patents to knock out their competition and have pursued parallel courses in district court and the PTO.
Plus there's the heavy legal artillery. TransPerfect lists 10 lawyers from Latham & Watkins and Kasowitz, Benson, Torres & Friedman as counsel of record. For MotionPoint, there are eight, including Verhoeven, who gave the opening statement for Samsung in last year's San Jose showdown.
Neither company or their lawyers were willing to discuss the case. But court filings reveal a three-year history of move and countermove, mounting legal bills and unfruitful mediation sessions. The companies are even feuding over which side will present its claims first at trial.
"MotionPoint's infringement claims remain the original and overriding issue in dispute," wrote MotionPoint's lawyers in a bid for the position that usually goes to the plaintiff. "TransPerfect's efforts to deprive MotionPoint of its choice of forum do not change this fact. To the contrary, TransPerfect's rush to file a declaratory action actually favors MotionPoint presenting its counterclaims first."
TransPerfect, which is headquartered in New York, may be familiar to some lawyers for providing translation in the legal industry. The privately held company offers a wide range of translation-related services and claims annual revenues of more than $350 million. In 2008 TransPerfect launched GlobalLink OneLink, a new service that would enable companies to make their websites available in multiple languages with a mere mouseclick.
But MotionPoint, a smaller company based in South Florida, was already marketing a similar service and obtained patents on its systems, which it accuses TransPerfect of infringing.
TransPerfect maintains the patents are invalid based on prior art and improperly assert protection over translation functions performed by humans. As to one MotionPoint patent, TransPerfect's lawyers contend in a legal brief that the asserted claim "amounts to little more than directions on how a human being should translate content retrieved from the Internet. Indeed the claim itself specifically requires the mental step of human translation."
Both businesses offer what is known as a cloud- or proxy-based service, where their computers act as an intermediary between a client's website and the Internet user seeking translated content. Both use software to detect changes in the client's site and employ a combination of automated and human translation to update the foreign language proxy site.
In late 2009, MotionPoint's lawyers at McDermott, Will & Emery informed TransPerfect that MotionPoint intended to "enforce its intellectual property rights aggressively." The dispute escalated and TransPerfect filed a declaratory judgment action in June 2010.
At times, the gamesmanship has been heated and the balance of the case has shifted considerably — and repeatedly — since its inception. In May 2011, days before a scheduled mediation, TransPerfect purchased two patents from inventor David Lakritz that had come up in the case as prior art in the field of website translation.
"The Lakritz patents claim the fundamental technology in this space, predate MotionPoint's patents-in-suit by more than five years and are now owned by TransPerfect," the company crowed in court papers filed the following day. A few months later TransPerfect purchased a third patent.
The acquired patents may not have been as effective a weapon as TransPerfect anticipated, however. On summary judgment, Wilken sided with MotionPoint that it did not infringe the Lakritz patents, leaving one patent in TransPerfect's offensive case.
More dramatic than changes in patents have been the shake-ups in representation on both sides. In 2011 TransPerfect chose to replace its initial legal team from Orrick, Herrington & Sutcliffe with a group led by Lumish and Jeffrey Homrig, both former Weil, Gotshal & Manges partners, who at the time had opened a new Silicon Valley office for Kasowitz. Lumish and Homrig's subsequent move to Latham & Watkins within weeks of trial led to a fused trial team with attorneys from both firms. Okey Onyejekwe Jr. heads the Kasowitz faction.
MotionPoint had no choice about hiring new primary counsel two years into the litigation.
In May 2012 Lumish called to the court's attention that a partner at McDermott, Will & Emery, MotionPoint's lead law firm, had been representing TransPerfect and its two principals for roughly a year.
The partner, Carlyn McCaffrey, head of McDermott's private clients practice in New York, lateralled to the firm in 2011, taking as clients TransPerfect's co-owners Elizabeth Elting and Phil Shawe, whom she had represented in estate planning and personal financial matters. The firm's conflicts check did not identify a problem, according to court papers.
Lumish insisted Elting and Shawe's personal finances were inextricably linked to TransPerfect, giving McDermott access to the company's confidential corporate data. McDermott claimed it had no attorney-client relationship with TransPerfect, and if there were a conflict, it should be resolved in favor of MotionPoint, the earlier client.
Moreover, Elting and Shawe waived any conflict of interest upon receiving an engagement letter from McDermott, the firm argued, though the letter was never signed and returned.
After U.S. Magistrate Judge Joseph Spero granted TransPerfect's motion, MotionPoint hired Quinn Emanuel for the patent case and sued McDermott in San Mateo County Superior Court to recover more than $2 million in legal fees.
Those costs were just the beginning, MotionPoint's lawyers contend.
"As a result of MWE's disqualification, MotionPoint was forced to pay the cost to bring its replacement counsel up to speed regarding the litigation against TransPerfect — filed two years prior to Quinn Emanuel's initial involvement in the matter — in addition to all costs associated with the continuance of the trial date and the controversy," the complaint states.
The TransPerfect-MotionPoint trial will open in an awkward posture: Every claim in every patent asserted in the case has been invalidated, at least temporarily. Final action from the PTO will come long after the trial ends, opening the door to conflicting holdings.
That's nothing new in the patent world. Just this past week, the agency's Patent Trial and Appeal Board rejected a business method patent on post-grant review, though the same patent had been upheld in district court case against SAP America Inc., resulting in a $345 million verdict.
Reforms in the Leahy-Smith American Invents Act of 2011 could force courts to grapple more frequently with inconsistent outcomes in patent proceedings, several lawyers said.
"These new proceedings are specifically intended to be an alternative to litigation," said Stuart Meyer, an IP partner at Fenwick & West in Mountain View. "Of course, that's going to lead to situations where you may have patents being upheld in one forum as valid and being rejected in another as invalid."
For the process to work as envisioned, judges will need to stay proceedings in district court, said Joseph Palys, a former patent examiner and partner at Finnegan, Henderson, Farabow, Garrett & Dunner in Reston, Va. Stricter deadlines in the new law should make judges more comfortable. In most cases, inter partes reviews will be completed in less than 18 months.
"Courts can now look at a motion for stay and say 'I will know when I'm going to have a decision,'" said Palys, who was part of SAP's legal team in the PTO review. "Now courts may start to really consider these types of proceedings at the patent office as a means to help resolve disputes."
In TransPerfect's motion, Lumish defended the timing of his client's request for a stay and raised the specter of inconsistent outcomes.
"Not until the court issued its summary judgment order did it become clear that the jury trial would focus only on patents the patent office has rejected," Lumish wrote, adding: "While the stage of this action does not favor granting a stay, it does not present sufficient grounds to deny it."
Wilken denied the request without comment, which came as little surprise to area litigators.
"If you want a stay for any reason, you better not ask for it on the eve of trial," said Kurt Calia, a patent litigation partner in the Silicon Valley office of Covington & Burling, "because you're not going to get it."