The customer was Microsoft – see this posting by Mark Radcliffe, general counsel of the Open Source Initiative.

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One Franz A. Wakefield has supposedly filed a lawsuit claiming that, in 1989, he made a deal with Sarah Jessica Parker to commercialize what became the iPod, iTunes, and iPhone, but she stole his secrets and sold them to Steve Jobs.

According to a report, Mr. Wakefield is now demanding from Apple the 2% royalty he claims he agreed to with Ms. Parker.

[UPDATE: The complaint can be downloaded via RECAP; it's worth reading.]

Evidently this is not Mr. Wakefield’s first lawsuit alleging misappropriation of his intellectual property — he previously (and unsuccessfully) sued his employer Cordis Corporation, and separately, Walt Disney Co..

The Democrats in Congress who want to enact legislation overruling the Supreme Court’s 2008 Iqbal holding should think about cases like this — it’s an edge case of (in the Court’s words) “a plaintiff armed with nothing more than conclusions” seeking to “unlock the doors of discovery,” that is, seeking to be able to force the defendant to produce documents, provide witnesses for depositions, etc.

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A federal appeals court has ruled that, at least under Massachusetts law, a company that acquired another company’s technology assets, for cash plus an earn-out, was obligated to use reasonable efforts to promote the tech­nology, so that the seller would have a shot at the earn-out payments. See this Law.com article about the First Circuit’s Sonora Scanners case, re­vers­ing and remanding a summary judgment in favor of the acquiring company (discussed on another point in this posting).

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According to Womble Carlyle’s Trade Secrets blog, “Reuters is reporting that Silicon Valley start-up company Spring Design has sued Barnes & Noble and the lawsuit asserts Barnes & Noble misappropriated trade secrets and violated the parties’ non-disclosure agreement when it copied Alex’s features into its recently announced Nook e-book.”

Read the rest.

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“[A] recent California case delivered a blow to a tax preparation franchisor, finding the franchisor liable for its franchisees’ deceptive advertising and related activities.” Vicarious Liability Risks Continue, by Kimberly L. Sikora Panza and Robert A. Smith (Oct. 29, 2009, accessed Nov. 3, 2009).

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If you ever sign a nondisclosure agreement (NDA) to talk about licensing someone’s technology, but then decide to go it alone and develop your own version, you could be setting yourself up for a rough time in court. Stamps.com has been learning this the hard way.

Stamps.com signs an NDA with Kara Technology, but then decides to go it alone

Stamps.com signed an NDA with a company called Kara Technology. The companies discussed the possibility of Stamps.com’s licensing Kara’s technology to allow users to print secured documents, like stamps or airline tickets, at home using preprinted label sheets.

A couple of months later, however, Stamps.com said they weren’t interested in proceeding further with Kara — and then a year after that, brought out its own product.

Kara sues for breach of the NDA

Kara sued for patent infringement and for breach of the NDA. The trial court granted summary judgment in favor of Stamps.com, on grounds that there was no infringement of the patent, and that Kara had waited too long to file suit for breach of the NDA.

Last week, though, a federal appeals court reversed the summary judgment on both counts. See Kara Technology Inc. v. Stamps.com, Inc., Nos. 2009-1027, -1028 (Fed. Cir. Sept. 24, 2009) (reversing and remanding summary judgment).

Concerning the NDA, the appeals court ruled that Kara was entitled to have a jury decide whether Kara waited too long — as well as whether Stamps.com breached the agreement by using its knowledge of Kara’s confidential information in developing its own product.

Cases like this can go badly for the defendant in a jury trial

Now, Stamps.com gets to experience the expense and the management distraction of preparing for a jury trial.

And then, it gets to roll the dice about which witnesses the jurors will believe on these hotly-disputed fact questions.

Doubling the pleasure for Stamps.com, the non-technical jurors — usually the only kind left on the jury after the lawyers have exercised their strikes — may well be biased in favor of a small-company plaintiff like Kara. This is especially true, given that Kara’s lawyers will no doubt wave the company’s U.S. patent around to convince the jury that they are groundbreaking innovators who had their ideas stolen.

And doubling the fun, in American trial practice the plaintiff, in this case Kara, gets to bat first and last: Kara’s lawyers will have the right to go first in presenting their opening statement and to put on their witnesses first, thus creating the jury’s first impression of the case. Then at the conclusion of the trial, Kara’s lawyers will get the last word in the closing arguments.

This kind of case can turn out very badly for the defendant. I have some personal experience on that score: Years ago, I was assistant trial counsel for a big corporate defendant that got hit with a $57 million verdict in a very similar situation. My firm’s client was accused of misappropriating confidential information that it had received under a nondisclosure agreement. The client’s technical people testified that they had developed their technology without using the plaintiff’s confidential information, but the jurors simply didn’t believe them. On appeal, the appellate court held that the jurors weren’t clearly wrong on that point — more precisely, that the record contained substantial evidence, that is, non-trivial evidence, in support of the jury’s verdict — and that was the ball game.

If I had to bet, I’d say Stamps.com likely will decide that discretion is the better part of valor, and will settle before trial.

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The finger-pointing from Monday-morning quarterbacks is in full swing about eBay being sued for copyright infringement by the founders of Skype, who sold it to eBay for $3.1 billion a few years back.

We won’t know for awhile why eBay chose to take just a license for some of the under-the-hood technology, instead of insisting on getting outright ownership.

I can’t help but wonder again, though, whether eBay might have been able to avoid its current troubles, while leaving “ownership” of the technology in the founders. Perhaps eBay might have negotiated an option provision in the acquisition agreement, along these lines:

If we [eBay] ever elect to pay you guys an aggregate of X dollars, over and above the $3.1 billion you’re getting now — with X increasing by Y percent per year as long as it remains unpaid — then our license to use your technology will automatically become irrevocable, and we’ll be entitled to retrieve a copy of the source code from escrow.

This is all still 20-20 hindsight, of course. Still, I imagine eBay wouldn’t mind having this possibility available as an option right now.

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In his NY Times “Bits” blog, Steve Lohr writes today of Netflix’s $1 million contest to improve its software that predicts what movies customers will like. The winner and runner-up were both multi-national alliances of 7 and 30 people, respectively. One of the leaders of the runner-up team had an interesting observation:

Yet the sort of sophisticated teamwork deployed in the Netflix contest, it seems, is a tricky business. Over three years, thousands of teams from 186 countries made submissions. Yet only two could breach the 10-percent hurdle. “Having these big collaborations may be great for innovation, but it’s very, very difficult,” said Greg McAlpin, a software consultant and a leader of the Ensemble. “Out of thousands, you have only two that succeeded. The big lesson for me was that most of those collaborations don’t work. ” [Emphasis added.]

Of course, that was then — in future contests, such as the new one Netflix is starting, we can expect teams to try to glean lessons from the successes and failures of the first one.

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It’s hard to know without more facts, but eBay may be wishing it had insisted on an irrevocability clause in a key Skype license agreement — perhaps with irrevocability being conditioned on paying certain amounts to the licensor.

It seems that, back when eBay bought Skype, it licensed certain core technology from Skype’s founders instead of buying that part outright. That could come back to haunt eBay big time.

Here’s what eBay says on page 15 of its latest quarterly report on SEC Form 10-Q, which it filed earlier this week:

Skype licenses peer-to-peer communication technology from Joltid Limited [controlled by Skype's founders - DCT] pursuant to a license agreement between the parties.

The parties had been discussing a dispute over the license. In March 2009, Skype Technologies S.A. filed a claim in the English High Court of Justice (No. HC09C00756) against Joltid Limited.

Following the filing of the claim, Joltid purported to terminate the license agreement between the parties. In particular, Joltid has alleged that Skype should not possess, use or modify certain software source code and that, by doing so, and by disclosing such code in certain U.S. patent cases pursuant to orders from U.S. courts, Skype has breached the license agreement. Joltid has brought a counterclaim alleging that Skype has repudiated the license agreement, infringed Joltid’s copyright and misused confidential information.

On the basis of, among other things, the parties’ mutual dealings since the execution of the license agreement, Skype asked the English High Court for declaratory relief, including findings that Skype is not in breach of the license agreement, that Joltid’s notice of breach and subsequent notice of termination are invalid, and that Joltid has certain indemnity obligations in relation to the U.S. patent proceedings. Trial is currently scheduled for June 2010.

Although Skype is confident of its legal position, as with any litigation, there is the possibility of an adverse result if the matter is not resolved through negotiation. Skype has begun to develop alternative software to that licensed through Joltid. However, such software development may not be successful, may result in loss of functionality or customers even if successful, and will in any event be expensive.

If Skype was [sic; were] to lose the right to use the Joltid software as the result of the litigation, and if alternative software was [sic; were] not available, Skype would be severely and adversely affected and the continued operation of Skype’s business as currently conducted would likely not be possible.

(Emphasis and extra paragraphing added.)

With 20-20 hindsight, this awkward situation might have been avoided by providing that, if Joltid were ever to be paid an aggregate of X dollars or euros or whatever — and X could have been a moving target that increased over time until ‘caught’ — then the license would become irrevocable.

(Hat tip: The Age, via Hacker News)

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A lot of contracts provide that Party A must obtain the prior written consent of Party B if it wishes to assign the agreement to a third party.

This can cause serious problems for Party A down the road if it wants to assign the agreement in connection with a corporate change of control or other M&A deal: Party B might try to ‘extract’ a big payment or other concession in return for giving its consent.

I’ve just posted an extended discussion of such provisions and some of their various permutations and combinations. The discussion includes a recap of the 2006 Dubai port deal, in which an assigning party was forced to come up with millions of dollars to buy the other side’s consent.

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