A federal judge in Trenton last Monday enforced a $300,000 settlement in a patent suit against Sony over technology that provides vibration in its PlayStation, granting Sony’s motion to enforce the deal over opposition from plaintiffs Craig Thorner and his company, Virtual Reality Feedback Corp. of Brick.
U.S. District Judge Mary Cooper found that the parties reached an agreement in e-mail exchanges and phone calls and that Thorner subsequently reneged.
She also found lawyers at Chicago’s Niro Haller & Niro had authority to bind Thorner and Virtual Reality in negotiations despite a retainer provision that gave Thorner the final say.
In Thorner v. Sony Computer Entertainment America, 09-cv-1894, Thorner accused Sony of infringing his patents for “tactile sensation generators” — devices used in the consoles, headphones and seats of computer video game systems to produce vibrations that correspond to events on a video-game screen — such as vibrations during a crash in a car-racing game.
Chief District Judge Garrett Brown Jr. narrowly construed the patents, leading Thorner to stipulate to a judgment of noninfringement and to reserve the right to challenge the ruling. The Federal Circuit Court of Appeals reversed on Feb. 1, 2012, reviving the action.
Settlement negotiations began last June between Daniel Johnson Jr. of Morgan, Lewis & Bockius in San Francisco for Sony and Raymond Niro of Niro Haller for Thorner.
The Niro Haller retainer stated that the firm “will evaluate, give advice and make recommendations … on any amount that is offered” while Thorner “will approve and have complete authority over the terms and conditions of any license, sale or settlement.”
Thorner opened with a $1.2 million demand and Sony with a $100,000 offer. The parties went back and forth by e-mail and phone. By early August, Thorner was down to $325,000 and Sony was up to $275,000.
They struck a deal last Aug. 7 after U.S. Magistrate Judge Douglas Arpert called Johnson asking whether Sony would pay $300,000. The Niro firm summarized the terms in an e-mail to Johnson that day and asked him to confirm that Sony found them acceptable.
Upon payment, all claims that were or could have been brought would be dismissed with prejudice, Sony would get a full paid-up license and Thorner would “grant Defendants full releases and covenants-against-suit with respect to the patents-in-applications.”
A day later, however, Sony demanded covenants-not-to-sue Sony or its related entities for 10 years with a “liquidated damages provision that must encompass payment of all fees paid plus an amount to be agreed upon.”
Niro sent back a draft settlement and license agreement but called the liquidated damages provision “unworkable,” saying it was never mentioned or discussed in negotiations and Sony was fully protected by the license and covenant not to sue sellers of PlayStations or other devices that relied on the patents.
After Sony’s concerns about possible indemnity obligations stemming from suits against its customers were allayed, it declared itself satisfied.
But on Aug. 13, Niro e-mailed that Thorner was canceling the agreement.
Both sides’ motion papers were sealed, and Cooper did not discuss why Thorner backed out.
Cooper concluded that an enforceable settlement existed and that Niro had authority to bind Thorner.
She said there was actual authority because Thorner “submitted no sworn statements or other evidence that he objected to the terms of the agreement proposed by the Niro Firm prior to the parties accepting it.”
Apparent authority existed, too, “because Thorner knowingly placed his attorneys in such a situation that Sony, Sony’s counsel, and the Magistrate Judge were justified in believing that Thorner’s attorneys had actual authority to bind [him],” Cooper added.
Sony had requested its fees and costs as sanctions against Thorner but Cooper denied them, stating there was no evidence Thorner held up the settlement to get more money or engaged in other bad-faith conduct.
Sony lawyer Michael Carr of Morgan Lewis & Bockius in Palo Alto, Calif., declines comment.
Allen Harris and Peter Frazza at Budd Larner in Short Hills, who represent Thorner, did not return calls. Neither did Raymond Niro.
The settlement also released claims against the other defendants, including two law firms: Westfield’s Lerner David Littenberg Krumholz & Mentlik and Los Angeles’ Russ August & Kabat.
Thorner claimed they conspired with their clients — Sony and PDP Electro/Source, respectively — to take advantage of his inexperience and lack of resources to obtain a patent license from him on extremely favorable terms and get him to testify against another company, Immersion Corp., which had sued Sony and PDP for infringing its own vibration-technology patents.
Claiming that Lerner David represented him in some dealings with Sony and PDP, Thorner sued it for malpractice, fraud and breach of fiduciary duty.
Marc Gross of Greenbaum, Rowe, Smith & Davis in Roseland, Russ August’s lawyer, says he is “thrilled but not surprised that my clients have been released from all these claims here by Mr. Thorner.”
Frederick Dennehy of Wilentz, Goldman & Spitzer in Woodbridge, counsel for Lerner David, did not return a call.