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December 2, 2008 9:00 AM

The Am Law Litigation Daily: December 2, 2008

Posted by Ed Shanahan

Edited by Andrew Longstreth

IP
Qualcomm (Mostly) Loses Again: In Mixed Ruling, Federal Circuit Affirms Finding for Broadcom but Orders New Remedy

The most celebrated battle in the multifront war between Qualcomm and Broadcom has been the Big Q's suit alleging that Broadcom infringed its patents on video compression technology. That's the case in which San Diego federal district court judge Rudi Brewster (who has since retired) ruled that Qualcomm had deliberately failed to disclose patents to a standards-setting body--so that it could later demand licensing fees from companies seeking to use its applicable technology. Throughout the 2007 trial before Judge Brewster, Qualcomm's witnesses, as well as its lawyers from Day Casebeer Madrid Batchelder, maintained that Qualcomm had only a passing involvement with the standards body. But Brewster didn't buy it, especially when e-mails that showed Qualcomm's involvement with the standards body suddenly turned up. In a ruling that received quite a bit of attention, the judge said Qualcomm had committed "gross litigation misconduct" by withholding evidence. He ordered the Big Q to pay about $8.6 million in Broadcom attorneys fees and disqualified two Qualcomm patents.

Yesterday the U.S. Court of Appeals for the Federal Circuit affirmed Judge Brewster's finding that Qualcomm breached its duty to disclose its patents to the standards-setting body. It also upheld his award of attorneys' fees to Broadcom.

But the news wasn't all bad for Qualcomm. The appellate panel also found that the scope of Brewster's remedy--an order that several Qualcomm patents were unenforceable--was too broad. The appellate ruling vacated the judge's order and remanded the case back to federal district court with instructions that the unenforceability remedy be limited to products that use the video compression standard.

As usual, William Lee of Wilmer Cutler Pickering Hale and Dorr argued for Broadcom. Carter Phillips of Sidley Austin argued for Qualcomm. Among the many attorneys joining him on the brief were Evan Chesler of Cravath, Swaine & Moore; William Boggs of DLA Piper; and David Salmons of Bingham McCutchen.

SECURITIES
Eighth Circuit Affirms Summary Judgment for UnitedHealth in Bondholder Case

It's no secret that hedge funds use litigation--or the threat of it--as an investment strategy. But yesterday the Eighth Circuit issued an important opinion that seems to undermine one of their favorite plays. The appellate panel affirmed a ruling by Minneapolis federal district court judge James Rosenbaum that barred a group of hedge funds from pushing for an accelerated payment on UnitedHealth Group bonds after the company failed to file a 10-Q on time.

The case stems from an August 2006 notice of default that the bond trustee sent to UnitedHealth on behalf of a group of hedge funds that collectively owned more than 25 percent of the outstanding notes. The notice claimed that United had violated the terms of the trust indenture when it failed to file its 2006 second-quarter 10-Q on time. United had a good reason to miss the deadline: Under scrutiny for its options backdating policies, it was undergoing a review of its stock options grants and their financial impact on the company. But the hedge funds pressed on, sending United another notice in October 2006 that sought an acceleration of payment on the bonds by 28 years.

United, represented by Sullivan & Cromwell, filed an action against the trustee (at the time, the Bank of New York) seeking a declaratory judgment that it had not violated terms of the indenture. Here's Judge Rosenbaum's decision granting that judgment.

Sullivan & Cromwell partner Robert Giuffra, Jr., who represented United, told us yesterday that the Eighth Circuit's affirmance is the first time an appellate court has rejected the reasoning of a 2006 New York Supreme Court decision known as BearingPoint, which held that when an issuer's 10-Q or 10-K is delayed, bondholders have a right to accelerate payment.

Jeff Ross of Anthony Ostlund Baer Louwagie & Ross, who represented the trustee, was not available for comment.

ALIEN TORTS
Chevron Cleared in Nigerian Human Rights Case

We confess to being a bit confused by the e-mails that landed in our inbox late yesterday afternoon. The first came from EarthRights International, one of the public interest firms representing plaintiffs in a landmark San Francisco federal district court Alien Tort Claims Act case alleging that Chevron was complicit in the death and injury of protesters at a Chevron oil platform off the Niger Delta. The first e-mail seemed straightforward enough: "Chevron Found Not Liable for Killings, Shootings, and Torture," it said. But then came a second e-mail, this one from Justice in Nigeria Now: "Jury Finds Chevron Guilty of Human Rights Abuses in Nigeria."

Huh?

Turns out the folks at Justice in Nigeria Now (JINN) were taking rather extreme liberties in their press release. As Daphne Eviatar reports at The Am Law Daily, Chevron was indeed exonerated by the San Francisco jury, which deliberated for less than two days after a four-week trial. Even JINN conceded as much in the body of its release, though the group insisted that the case  "showed there is a legal foundation for corporations to be held liable in U.S. courts for human rights abuses committed overseas." How that can be read as "Jury Finds Chevron Guilty," we're still not sure. But the plaintiffs have said they plan to appeal the jury's verdict. Meanwhile, they're taking heart in having had their day in court. "The fact that this case went to trial at all is a victory for human rights and a tribute to the courage and persistence of these plaintiffs," said Richard Herz, an attorney at EarthRights.

Chevron, which was represented by Jones Day, adopted an appropriately somber tone in its statement on the win. "It was never Chevron Nigeria Ltd.'s intent that anyone on the platform be harmed, and we deeply regret the loss of life and injuries that occurred," the company said.

Postscript: About 45 minutes after JINN's first release--as we were wrapping up this edition of the Litigation Daily--we received a correction. "Corporate Accountability Advocates Claim Victory, Despite Verdict in Human Rights Case Against Chevron," it said. Now that makes more sense.

REGULATORY
Manhattan Institute Issues New Study on Loser-Pays Rules

In the midst of a recession, and with Democrats soon to be in control of both Congress and the White House, we suspect tort reform won't be a top priority for policy makers in Washington, D.C., any time soon. But that hasn't stopped the Manhattan Institute from issuing a new study proposing so-called loser-pays rules as a way to reign in the excesses of litigation. It's called "Greater Justice, Lower Cost: How a 'Loser Pays' Rule Would Improve the American Legal System."

The study, authored by Manhattan senior fellow Marie Gryphon with a foreword by Rudy Giuliani, trots out some gaudy statistics in making the case for reform. From 1951 to 2006, Gryphon says, the cost of litigation increased at an average annual rate of 9.2 percent (compared to a rise in GDP of 7 percent during the same period), reaching a total of $247 billion in 2006. Gryphon also makes hay out of possibly the most egregious example of litigation abuse--the $54 million suit that Washington, D.C., administrative judge Roy Pearson, Jr., brought against his local dry cleaner for failing to make alterations on his pants and return them to his satisfaction. (The outcome of the pants case--the universally ridiculed Pearson lost both the case and his judicial appointment--suggests that some losers are already paying.)

Gryphon writes that loser-pays rules would reduce frivolous suits because "defendants would be unwilling to pay as much to settle them as they currently do." The same effect would also apply to mass-tort claims, Gyrphon argues. "Under the American rule, mass-tort lawyers have an incentive to recruit thousands of plaintiffs with dubious claims, since they know that the cost to defendants of ferreting out the weak or even fraudulent cases and taking them to trial is prohibitively high," she writes. "Under loser-pays, mass-tort lawyers would be less able to force settlements by pointing to the enormous transaction costs of conducting thousands of individual trials. Without this leverage, mass-tort lawyers would have less incentive to include weak claims in their portfolios."

Of course, tort reformers have pushed similar arguments for years, without much success. And that makes us wonder: Under loser-pays doctrine, should groups like the Manhattan Institute have to pay for the trial bar's lobbying efforts against loser-pays initiatives?

IP
Maker of Frisbee and Hula Hoop Seeks Declaratory Judgment Against Competitor

In the age of the Xbox and Wii, toys like the Hula Hoop, the Slip 'N Slide, and the Frisbee seem almost prehistorically quaint. But the litigation surrounding those fabled brands is anything but. Over the last few years, Wham-O, the manufacturer of those hallowed Boomer relics, has been engaged in a game of whack-a-mole against a competitor called Manley Toys. According to Wham-O's lawyers at Goodwin Procter, Manley and its related companies "have repeatedly engaged in willful infringement of Wham-O's registered trademarks on a massive scale." Last year a jury found that one of Manley's alter egos had infringed Wham-O's Slip 'N Slide trademark and awarded Wham-O $6 million in damages. Wham-O says it has recently received two other favorable judgments against Manley in infringement cases involving its Frisbee and Wave Rider marks.

Manley, however, has some slinky moves of its own. It has allegedly avoided payment of the judgments against it and is challenging Wham-O's trademark registrations of Slip 'N Slide, Frisbee, and Hula Hoop at the Patent and Trademark Office, arguing that the brand names have become generic. Wham-O has retaliated with a complaint in the Western District of California that seeks a declaratory judgment affirming its trademarks.

Wham-O is represented by Goodwin attorneys Ira Levy and Parker Bagley. Lawyers for Manley have not yet made an appearance.

IP
European Court Ruling Weakens Protection for Major Brands in Intel Case

As The Recorder noted in a story last month, Intel protects its brand like Shaq protects the paint. The semiconductor company doesn't let any potential trademark infringer, no matter its industry or size, slip by its lawyers. Apparently Intel has even hired lawyers across the Atlantic to go on the attack--but its European offensive may have backfired.

In an action filed in the U.K,. Intel had sought to block a marketing company from using the brand name "Intelmark." However, in a decision handed down Thursday, when we were stuffing ourselves with turkey and cranberry sauce, the European Court of Justice established principles that will make it harder for companies like Intel to prevent other businesses from applying for a trademark that merely resembles an established brand. The ECJ referred the case back to the United Kingdom's Court of Appeal, where the merits of the application will be addressed. Find the ECJ's Intel ruling here, and read a story from the Times in London here.

The ruling puts the burden on brand-name companies to show that they have suffered a loss or will likely suffer a loss in the future as a result of the other brand's alleged infringement. "In a case like Intel and Intelmark, where the two companies operate in different sectors, it is going to be very difficult for the existing brand to prove it has lost out specifically because another company is using a similar brand," Lovells IP attorney Sahira Khwaja told the Times.

Intel is represented by James Mellor QC and the law firm Cameron McKenna. CPM, the applicant for Intelmark, is represented by barrister Mark Engleman and registered trademark attorney Michael Bilewycz.

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