Versata v. SAP was one of the biggest patent cases of 2011, producing a $345 million verdict for Versata Software Inc. A year later, patent lawyers are still talking about the case, but the topic of conversation has shifted from the giant payoff to whether offshore litigation consultants, like the ones hired by Versata’s lawyers at McKool Smith, can be trusted with confidential documents.
A judge in Tyler ruled on June 12 that offshore litigation consultants can review confidential documents produced in an unrelated patent infringement suit that Eon Corp. brought against manufacturers of electrical grid technology. The ruling by U.S. Magistrate Judge John Love sheds new light on allegations that an offshore litigation services company breached the confidentiality of documents produced in the Versata case, attracting U.S. Justice Department scrutiny.
Eon, which is represented by the Austin firm Reed & Scardino, brought suit in June 2011, alleging that eight “smart grid” companies infringe its patents relating to wireless network technology (the defendants include Landis & Gyr, Elster Solutions LLC and Trilliant Networks Inc). As the case moved into discovery, Reed & Scardino sought to outsource some of the work to litigation services companies in India. The defendants, represented by firms including King & Spalding and SNR Denton, raised the alarm. Citing a data breach in the Versata case, they urged Love to impose a protective order that prohibits Reed & Scardino from mailing confidential documents outside the United States.
“The risks of offshore review are real,” they wrote in a May 5 motion for a protective order. “In [Versata v. SAP] . . . an incident occurred and the Karnataka state police in Bangalore, India and the U.S. Department of Justice initiated investigations,” the motion stated. “The experience highlights the fact that overseas review of protected material (no matter what safeguards are erected) places the security of the information at risk.”
Love wasn’t swayed and issued a more lax protective order that allows confidential documents to be sent overseas as long as certain procedures to protect confidentiality are followed. “Although the Court is mindful of Defendants’ concerns regarding the disclosure of confidential or highly confidential information, it is not persuaded that one unfortunate incident that occurred in an unrelated case amounts to a ‘clearly defined and serious harm’ such that all transactions of confidential material outside the United States should be forbidden,” he wrote.
So what happened in Versata v. SAP that has defense lawyers so worried? Many of the court documents are under seal, and a DOJ spokesperson did not offer comment. Versata’s lead counsel, Scott Cole of McKool Smith, says the DOJ investigation focused on an alarming incident at a document review company the firm hired in India. According to Cole, the document review company was dissatisfied with an employee and fired him. The ex-employee then sent an email to SAP executives, posing as his former boss and offering to sell confidential documents relating to Versata’s trial strategy. SAP alerted the judge overseeing that case, Cole says, so no confidential documents were ever leaked.
Animesh Kumar is co-founder and “chief solutioning officer” of iRunway India Private Ltd, a technology analysis company based in the United States and India. IRunway engineers worked alongside McKool Smith in the Versata case, reviewing millions of lines of source code and reverse engineering SAP’s software products. “This was an isolated, one-off incident,” Kumar says. “The defendants [in the Eon case] are trying to blow it of proportion.”
Kumar stresses that iRunway was not investigated for any alleged wrongdoing. He says he knows the identity of the offshore document review company that was investigated, but he declines to identify it.
Because of the incident, then-U.S. Magistrate Judge Charles Everingham, who oversaw Versata v. SAP, ruled in September 2011 that Versata violated the language of a 2008 protective order in that case. Everingham stayed pending appeal an injunction he had granted Versata blocking SAP from selling the infringing software. (Injunctions often are stayed pending appeal in high-stakes patent cases anyway, so it’s possible Everingham would have done so anyway).
Gillam & Smith’s Melissa Smith, who represents Landis & Gyr in the Eon case, was in trial and not available for comment. Smith’s co-counsel, King & Spalding partner Holmes Hawkins, could not be reached for comment. Reed & Scardino partner Daniel Scardino, who represents Eon, was out of the office and not available for comment.