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October 15, 2008 9:30 AM

The Am Law Litigation Daily: October 15, 2008

Posted by Ed Shanahan

Edited by Andrew Longstreth

IP
With A Little Help from A Lot of Friends, Carter Phillips Wins One for Qualcomm at the Federal Circuit
When the U.S. Court of Appeals for the Federal Circuit heard arguments in the case of Kyocera Wireless v. International Trade Commission back in July, the courthouse's ceremonial courtroom was packed to the rafters. "I've never seen it more crowded," said Sidley Austin's Carter Phillips, who was there representing Qualcomm, the chip maker. There were so many lawyers jockeying for a place at counsel's table that Gregory Castanias of Jones Day, who made arguments on behalf of a group of cell phone companies, volunteered to give up his spot and sit with the spectators. It took the Federal Circuit a full two-and-a-half pages to list all of the lawyers in the case in yesterday's 36-page ruling.

For Phillips and Castanias (as well as Kenneth Starr of Kirkland & Ellis and Claudia Frost of Pillsbury Winthrop, with whom they split arguments), the ruling was worth braving the crowd. The appellate judges vacated an ITC order barring the importation of products containing Qualcomm technology that infringed a patent held by its bitter rival, Broadcom. In so doing, Castanias and Carter told us, the appeals court reaffirmed a couple of principles that should make it tougher for patent holders to block the sale of what are known as downstream products.

Downstream products were the reason for the big crowd at the courthouse. Here's why. In this case--yet another battle in the sprawling IP war between Qualcomm and rival chip maker Broadcom--Broadcom sued the Big Q for patent infringement at the ITC. The Commission found that Qualcomm had infringed a Broadcom patent. But Qualcomm didn't make any products with the infringing technology; instead, it licensed the technology to wireless devices makers. The ITC ruled that Qualcomm had induced its licensees to indirectly infringe Broadcom's patent. It banned the importation of all products containing the infringing technology--even though none of the companies that manufactured and imported the wireless devices at issue were named in Broadcom's ITC complaint. All of those companies, along with Qualcomm, promptly appealed the ITC ruling.

And all of them hired counsel. The list of firms involved on the Qualcomm side of the appeal (take a deep breath): Sidley; Jones Day; Kirkland; Pillsbury; Howrey; Cooley Godward; DLA Piper; Covington & Burling; Katten Muchin; Fish & Richardson; Gibson, Dunn; Crowell & Moring; Adduci, Mastriani & Schaumberg; H.C. Park & Associates; Townsend & Townsend; Dickstein Shapiro; Morgan & Finnegan; and White & Case.

Their appellate arguments were two-pronged. Qualcomm asserted that the ITC used the wrong standard when it determined that Qualcomm had induced the cell phone companies to infringe Broadcom's patent. (The ITC said Qualcomm had shown a general, but not specific, intent.) The cell phone companies, meanwhile, argued that they shouldn't be subject to an exclusionary order in a case they weren't parties to. The appeals court agreed with both arguments and remanded the case to the ITC. "The protection for downstream products is hugely important," Phillips told us.

We called Broadcom's counsel, Robert Keker of Keker & Van Nest, to find out, among other things, if he had been lonely at the Federal Circuit with just the ITC lawyers to keep his team company during oral arguments. He referred us to Broadcom, which sent us a statement saying it was gratified the Federal Circuit affirmed that Qualcomm's customers had infringed a valid Broadcom patent; and that it looked forward to rearguing Qualcomm's intent before the ITC.

Thanks to the tech-savvy Federal Circuit, you can hear the oral arguments in two parts, here and here. And for more analysis of the court's ruling, check out this Patently O blog entry.

--Alison Frankel

M&A
Wells Fargo Seeks Judgment Declaring Citigroup-Wachovia Deal Unenforceable
Yesterday, there was more news on the Wells Fargo/Wachovia/Citigroup mess. Wells Fargo filed a complaint in the Southern District of New York asking for a judgment declaring unenforceable the exclusivity agreement between Citigroup and Wachovia dated September 29, 2008. (That's the deal that Citigroup had claimed barred Wachovia from negotiating a merger with another party.) Wells says the agreement is unenforceable because it's "contrary to public policy" as laid out in the government's bailout.

Wells also seeks to enjoin Citigroup from holding it liable for claims based on any alleged breach of the agreement. A Citigroup spokesperson told Reuters that the suit "adds nothing to the issues already joined by the parties" and that "Citigroup believes strongly that the deplorable conduct of Wachovia and Wells Fargo here gives rise to substantial legal liability, and we look forward to contesting this case fully and vigorously."

Read the complaint here. Friedman, Kaplan, Seiler, & Adelman, a firm known for being able to take on banks in court, is representing Wells.

ANTITRUST
Discover Settles Antitrust Suit Against Visa, MasterCard for Undisclosed Amount
Publicly, Discover Financial Services was always bullish about its antitrust suit against much-bigger competitors Visa and MasterCard. After American Express secured a $2.25 billion settlement from Visa last year in a parallel case, Discover Financial's CEO reportedly told analysts that he "was a little surprised that AmEx settled as early or cheap as it did."

Yesterday, on the day that jury selection was to begin in Discover's trial, the credit card company agreed to a settlement with MasterCard and Visa, which it accused of bullying banks that wanted to offer Discover cards. According to Bloomberg, which broke the story, the credit card companies confirmed the existence of a settlement, but said that the terms would not be available until the deal was completed. Bloomberg came up with an amount, however. It cited a UBS analyst who told his clients that, according to "industry sources," Discover settled for $2.8 billion--$900 million from MasterCard and about $1.9 billion from Visa.

While that's substantially less than the $18 billion Discover had sought--and less than the total $4 billion that AmEx collected in its suits against Visa and MasterCard--$2.8 billion is still an impressive figure. Morgan Stanley, which spun off the Discover unit last year and will share in the settlement, certainly won't sneeze at it.

Constantine Cannon's Jeffrey Shinder and Matthew Cantor and Kirkland & Ellis's William Pratt and Jennifer Selendy represent Discover. Kevin Arquit of Simpson Thacher & Bartlett represents MasterCard; Visa has John Keker of Keker & Van Nest and David Gersch, Mark Merley, and M. Sean Laane of Arnold & Porter.

WHITE-COLLAR
Federal Prosecutors Argue Against New Trial For Terry Christensen
Since Los Angeles attorney Terry Christensen was convicted in August on wiretapping charges, his lawyers have been feverishly trying to rewrite the script. They claim that prosecutors abused the discovery process and that a juror was inappropriately dismissed the day before the jury reached a verdict. The National Law Journal reports that prosecutors have filed papers this month denying any wrongdoing and opposing Christensen's request for a new trial.

Christensen, the former managing partner of the firm now known as Glaser, Weil, Fink, Jacobs & Shapiro, was convicted on charges that he paid Hollywood private investigator Anthony Pelicano to wiretap the phone of Lisa Bonder Kerkorian, the ex-wife of Christensen's major client, billionaire Kirk Kerkorian. (Sounds like a legal thriller, doesn't it?) At trial, Christensen was represented by his law partner of many years, Patricia Glaser, as well as Terree Bowers of Howrey.

On the day before the jury found Christensen guilty, Los Angeles district court judge Dale Fischer dismissed juror No. 7 for failing to deliberate. Christensen's lawyers claim No. 7 was pushed out because he didn't go along with the others. In their response, prosecutors argued that there was sufficient reason to dismiss the renegade juror, including statements he made to other jurors such as: "If it's okay for the government to wiretap and not get caught, then it's okay for him."

Christensen is scheduled to be sentenced on November 17.

IN-HOUSE
Obama or McCain: Who Do Your Clients Support?
Like many of you, we'll be watching the presidential debate tonight. But we wanted to issue you all a warning: Before you start chit-chatting with your clients about how well your candidate did, make sure you know where their allegiances lie. In the November issue of Corporate Counsel, reporter Amy Miller did some of the groundwork for you. She dug into Federal Election Commission data to learn who's giving to whom. If you represent Citigroup, American Express, Costco Wholesale, FedEx Corp. or a bunch of other companies, you might want to check out this story.

Not mentioned in the article is David Drummond, chief legal officer for Google. But don't worry, we've got you covered: Yesterday The Recorder reported that Drummond was planning to attend an Obama event on Tuesday night with San Francisco Mayor Gavin Newsom and District Attorney Kamala Harris.

BANKRUPTCY
W.R. Grace Escapes $130 Million in Asbestos Liability
After seven years in bankruptcy, the finishing line is finally in sight for W.R Grace. The company expects to exit Chapter 11 next year. And a ruling from a Delaware bankruptcy judge should help that process along.

When W.R. Grace filed for bankruptcy, it was not only weighed down with suits from individuals who claimed they were victims of the asbestos contained in the company's fire-proofing products, but also faced claims from property owners who alleged that asbestos in Grace products damaged their buildings. California government agencies had 15 such claims, worth an estimated $130 million. On Monday Judge Judith Fitzgerald dismissed California's claims, ruling they were time-barred. Steven Mandelsberg of Hahn & Hessen, who served as counsel to the California agencies, was not immediately available for comment.

W.R. Grace is not out of the woods yet. Kirkland & Ellis partner David Bernick, who has been representing W.R. Grace since it filed for bankruptcy, told us yesterday that the company still has outstanding disputes with unsecured creditors and additional property owners.

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