The Business of Patent Claim Litigation - 40% Contingent Fee Held Reasonable and Patent Malpractice Claims Should Be In Federal Court

Here (but subscription required) is a Chicago Daily Law Bulletin article regarding an interesting ruling on two aspects of entrepreneurial claiming. The opinion holds that a 40% contingent fee is a reasonable fee for contingent patent fee claims. The case also holds that since patent law claims arise under federal law, the federal courts also are the proper place for legal malpratice claims involving patent law.

The article also is pasted below, in part:

By Pat Milhizer
Law Bulletin staff writer

When law firms are hit with legal-malpractice claims involving patent disputes, those claims should be handled in federal courtrooms — instead of state courts — since that's where the underlying patent dispute began, the 1st District Appellate Court has held in a ruling that's the first of its kind in Illinois.

In the same opinion issued this week, the appellate justices also said that a law firm that prosecuted several patent claims for one client on the condition that the attorneys would get 40 percent of all of the potential settlements and verdicts was being reasonable and didn't violate any rules of professional conduct.

*****

When they were hired, the attorneys inked a contingency fee agreement with Premier that they would bill for reasonable and necessary expenses. In addition, the contract stated that the lawyers would get 40 percent of any payments that the company received as a result of licenses, settlements, judgments and other related court decisions through the life of the patents.

The deal included a termination clause for either party, and if that happened, the lawyers would be eligible for quantum meruit pay, meaning a judge or jury would decide how much they would be paid for unfinished work.

The lawyers secured several settlements and millions of dollars for Premier, according to an attorney who represented the firm on appeal in the malpractice claim.

In one of the cases, the company hired the lawyers to prosecute a patent claim against Lucent Technologies regarding a system that amplifies telephone signals.

But that lawsuit got shot down.

A federal judge granted summary judgment to Lucent, and the decision was affirmed by a federal appeals panel in an unpublished opinion.

Premier then sued the law firm for legal-malpractice, saying that the lawyers failed to use scientific evidence that it was provided with to rebut a claim made by Lucent. Premier said that if the lawyers had used the information, it would have won the federal lawsuit.

The law firm filed a motion to dismiss the malpractice suit with prejudice due to a failure to state a cause of action, and Cook County Circuit Judge Kathy M. Flanagan did dismiss it — but on the basis that she lacked jurisdiction.

Flanagan also found that the contingent fee was valid and enforceable.

Both sides filed appeals, and in a 12-page opinion released Tuesday, an appellate panel affirmed the circuit court decisions. The decision was written by Appellate Justice Joy V. Cunningham; Justices Thomas E. Hoffman and Themis N. Karnezis concurred.

Premier alleged that the contingent fee deal with the law firm violated the Illinois Rules of Professional Conduct, which requires that attorney fees be reasonable. The appellate justices also read Premier's complaint to say that the law firm violated the conduct rules by entering into a business transaction with the company.

The justices held that there was no business transaction and that the agreed-upon fee wasn't unreasonable.

"The facts of the underlying case suggest the need for highly skilled legal representation in a very technically narrow area of patent practice," Cunningham wrote. "Premier obviously had confidence in Stadheim's ability to represent its interests in this narrow, technical area of patent law."

The panel then addressed the question of whether legal-malpractice actions must yield to federal jurisdiction when the malpractice action requires a resolution of patent law issues.

The court relied on three cases in other states to reach its conclusion, ruling that "because the federal court has exclusive jurisdiction over patent cases, this jurisdiction also extends to cases in which the plaintiff's right to relief necessarily depends upon the resolution of a substantial question of patent law."

The case is Premier Networks Inc. v. Stadheim and Grear Ltd., et al., No. 1-08-1133.

Pictures of Asbestos Snow and Much More on flickr

One learns many things at asbestos litigation conferences. This year's learning includes being told about a collection on flickr of well over 500 pictures of asbestos-containing products. Here is a picture of a box of asbestos snow. The related collection will appear to the right if you pull up that link. Or go here for an overview of the collection.

Example of Why It May Pay to Give Effective Global Notice in Asbestos Bankruptcies

Here is an article from Japan this week that reports on finding Libby Mines vermiculite in buildings in Japan. The article claims the material was installed Zonolite. How can Judge Fitzgerald's orders in the WR Grace case bind these building owners if they were not given effective notice in a language they understand ?

Note also that the article indicates SEM (scanning electron microscopy) is now being used overseas to find fiber types.

_________________________________________________________________

Highly toxic asbestos found in four buildings across Japan; current testing flawed

A widely-used building material has been found to contain asbestos in Tokyo, Hokkaido and Kagawa, in the first discovery of amphibole asbestos, the rarer and more dangerous variety of the toxic mineral, in buildings in Japan.

Asbestos fibers were found in at least four buildings: three community centers, one in Hokkaido and two in Kagawa Prefecture, and the ceiling of a private building in Tokyo. The latter three all used a vermiculite-based insulation called Zonolite. Measures to prevent the asbestos from scattering have already been taken at all the four buildings.

The findings were made by the Tokyo Occupational Safety and Health Center (TOSHC). Examining vermiculite containing relatively low-toxic serpentine asbestos using scanning electron microscopes, they found amphibole asbestos at concentrations of 0.1 to 1.5 percent -- enough to designate it an asbestos-containing material.

The center also found that trace impurities of aluminum and sodium matched those of a vermiculite sample taken from a mine in Libby, Montana. A study there found that 18 percent of residents of Libby tested after complaining about various health problems were suffering from chest-lining abnormalities.

A standard method of testing for asbestos used in construction materials was introduced in June last year, which local governments and other organizations have used to conduct their own studies. However, center expert Naoki Toyama points out, "We detected (asbestos) using the ISO method. Under the standard method, however, asbestos could be overlooked."

Australia Signing on To Hague Convention on Service of Process

Australian law firm Clayton Utz explains the situation here.

Would US Auditors Prefer to Litigate Securities Issues in India or the US ?

Here is a Law.com article by Andrew Longstreth regarding the defense view on whether a major securities class action should be litigated in the US or India. What outcome would you want as GC?

The article explains that PwC and others would prefer to litigate in India. A key excerpt is set out below:


"The Satyam scandal may have worsened India's already poor reputation for corruption, but Satyam's auditors--PricewaterhouseCoopers and Lovelock & Lewes--would still like to see the case handled in India rather than the U.S. Their motion, filed by Wilmer Cutler Pickering Hale and Dorr, argues that virtually all of the key evidence, witnesses, and defendants are located in India. But it also claims that Indian courts, "which have a history of expediting legal matters of national significance," are more than prepared to take on the case. They say India has a securities fraud statute in which victims of a fraud on the market can be compensated. And since the matter of Satyam--in which more than $1 billion in assets were misstated--is India's Enron, it will get be a top priority.

"Quite simply, what is arguably the highest-profile legal matter in India, will command the attention of the Indian judiciary and proceed swiftly," wrote the Wilmer lawyers. "This case belongs in India." (The lawyers have also filed a separate motion to dismiss the case on more traditional grounds.)

Mayer Brown Weighs in On Medical Monitoring Claims in Illinois

Mayer Brown includes Herbert Zarov and other well regarded defense lawyers focused on toxic tort claims. Mr. Zarov and his colleagues recently published this DePaul Health Care Law Review article that sets out a defense perspective on the issues regarding medical monitoring claims in Illinois.

The outcome in Illinois will matter because Illinois holds an outsized role in the world of tort litigation in the United States. Why ? Two Illinois venues - Madison County and Cook County. Madison County is especially famous/infamous for processing hundreds of asbestos trial settings per year, a process loved by the plaintiff's bar because trial dates result in outcomes and payments.

Securities Law - Global Claiming - Are US Judgments Actually Binding ?

So, where and when are US tort and securities judgments binding on persons who live outside the US, and why should does it matter? Let's start with the latter question - why does it matter. Suppose, for example, a US bankrupcty court purports to enter a global injunction that bars future asbestos claims that anyone in the world might hold against particular entities? Is that injunction really enforceable if challenged in other nations or even here? Or, suppose global res judicata issues arise because of securities claims involing stocks sold around the world to persons from many nations?

As usual, the answers are going to emerge first in securities claims because the amounts at issue in any one case are enough that squadrons of lawyers are deployed to argue the issues. Answers are starting to arrive and indeed one could say the pot is boiling in the world of securities and D & O litigation as lawyers ponder and argue about various current lawsuits.

For example, some wonder and argue about whether the U. S. Supreme Court will or or should consider a discretionary appeal from a 2d Circuit ruling on jurisdictional issues in the context of alleged global securities fraud. This AmLaw article by Andrew Longstreth presents the issues and links to the Justice Department's brief invited by the Court in the Morrison case. The government urged the Court NOT to take the case (one wonders how that will view will sit at the Court when considered in the light of Chief Justice Robert's expressed interest in building the legacy of his court by reaching out to decide business cases).


The topic also is addressed on the excellent D & O Diary blog by Kevin LaCroix, in a recent guest post (here) from a Cozen & O'Connor lawyer, who, presumably, represents insurance companies. Another example arises from the ongoing more or less global Vivendi securities fraud trial, which is covered in general here by Mr. LaCroix, with many helpful links to source documents, with links to undelrying rulings on the global class action issues. The Vivendi class action opinion is here, and provides a helpful discussion on what courts in overseas countries might have to say about the res judicata nature of a US judgment on the securities law issues in the context of a purported class action.

Conclusion ? Concrete answers will take many years to evolve. But plainly some of the judgments entered to date will never be enforced because overseas claimants were not given anything close to adequate notice or representation.