Legal Pad

Facebook GC Cleans Up Nice, Talks About Online Privacy

Famous general counsel gathered to discuss the issues of the day at GC West at the Fairmont Hotel, an event put on by our beneficent corporate parent ALM. Relatively new Facebook GC and former Bush White House lawyer Ted Ullyot, looking remarkably un-Facebooky in a crisp jacket shirt and tie and impeccably combed hair, was there to talk about Internet privacy. Facebook, of course has faced its share of privacy “challenges,” including the infamous targeted advertising program Beacon that creeped everyone out and led to litigation and a settlement.

But Ullyot said that non-Internet companies are more likely to get in trouble with privacy these days. He spoke at length about the FTC case against Sears (yes, the company that sells you washing machines) for spying on customers' Internet surfing with a software download. Ullyot explained that although users agreed to the terms and conditions, the box where they could be read was only big enough for 10 lines and the clause about spying was somewhere around line 73.

At this point, James Basile, a fellow panelist and former colleague of Ullyot’s at Kirkland & Ellis, jumped in to say that although the Sears case was widely publicized, the FTC is actually quite active in cracking down on companies that are invading the privacy of web surfers. Comparing the FTC to Tony Soprano, who quietly comes around demanding payment, he said these enforcement efforts rarely reach the public.

— Zusha Elinson

Arguedas Reps Valley Exec in Galleon Insider Trading Case

A big insider trading case involving highfalutin executives in the Bay Area? You knew that Chris Arguedas would be involved eventually.

Arguedas turns out to be representing Ali Hariri, an executive at Atheros Communications who has been implicated in the sprawling insider trading case surrounding the Galleon Group hedge fund.

The SEC is accusing Hariri of passing inside tips about Atheros to San Jose hedge funds Spherix Capital and Far & Lee, which traded on the information. More specifically, it’s alleged that Hariri told Ali Far, a hedge fund manager who also has a JD from Santa Clara University, about an earnings pre-announcement and earnings announcement at Atheros. Arguedas declined to comment beyond confirming that she is representing Hariri, who was a vice president at Atheros.

The Galleon insider trading case, which has netted a grip of hedge fund managers and tech executives, has been a boon to the local white collar bar. And everyone who hasn’t already scored some work in the case is trying.

— Zusha Elinson

TSMC-SMIC Trade Secret Case Settles for $200 Million

The bitter trade secrets case between TSMC and its lawyers at Keker & Van Nest and SMIC and its lawyers at Wilson Sonsini settled!

SMIC has agreed to pay TSMC $200 million and an undisclosed amount of stock and warrants, Keker partner Jeff Chanin told Legal Pad just now.

TSMC and Keker had won resoundingly during the liability phase with the jury finding that SMIC stole trade secrets and broke a previous settlement agreement. Chanin said that pursuant to stipulations by both parties a judgment was entered in favor of his client TSMC on all claims and counterclaims.

The two sides were in the midst of the damages phase when the court announced the settlement this morning, which you can see for yourself on the handy dandy Courtroom View Network, which was carrying the trial live.

It’s a big win for Keker and TSMC, especially considering that SMIC agreed to pay TSMC $175 million in 2005 to settle trade secret claims. The current suit was brought when TSMC accused SMIC of breaching the settlement agreement by continuing to use the trade secrets in question.

At the same time, $200 million is a lot less than $2 billion, the damages number that was bandied about by TSMC earlier on in the case. Of course, the $200 million doesn’t include the value of the SMIC stock and warrants. We’ll have a full story on this in Tuesday’s Recorder, and online at CalLaw.

— Zusha Elinson

Was Lawsuit Hype to Shake eBay Down for a Bite of Skype?

EBay settled a copyright lawsuit against Skype today and, oh my god, it turns out it was just filed as leverage in deal negotiations. What has the legal profession come to when lawsuits are no longer filed for the love of the law and actual grievances?

Here’s what happened: eBay was in the midst of selling Skype to some private investors, including Andreeson Horowitz and Silver Lake Partners, because the online auction company actually never figured why in the world it bought the Internet telephone service. Then, the guys who came up with Skype in the first place -- and have since formed a company called Joltid — sued everyone involved in the deal, claiming that Skype didn’t have a license for some of the essential technology and IP. An injunction was threatened. And then today, the folks from Joltid agreed to drop the suit, and in exchange were allowed to buy a 14 percent stake in Skype. As one of the lead investors, Marc Andreeson, told The Wall Street Journal: "There is fighting, and then there is negotiation … We believe it is as a plus to have founders involved. They now have a complete alignment of interest." That about sums it up.

A bunch of local lawyers were involved with the “lawsuit.” Lawrence Hadley of L.A.’s Hennigan Bennett & Dorman represented the jilted at Joltid. Irell & Manella represented Skype. Weil Gotshal’s Matt Powers represented eBay. WilmerHale’s Mark Selwyn from Palo Alto represented investor Silver Lake Partners. Diana Marie Torres of Kirkland & Ellis in L.A. represented Marc Andreeson’s venture fund, Andreeson Horowitz. And O’Melveny & Myers S.F. IP lawyer Darin Snyder had the Canada Pension Plan Investment Board, another investor.

— Zusha Elinson

Litigator Takes Over King & Spalding's Silicon Valley Office

Recent big law Bay Area immigrant King & Spalding has got some new leadership in Silicon Valley and San Francisco.

Veteran litigator Tim Scott, who came on board from Sidley & Austin when the firm opened the office last year, is the new managing partner of the Redwood Shores office.

“The plan is to continue recruiting quality partners, and we’re in the process of doing that,” Scott said. “We went from zero to 25 or 30 in the last eight months.”

There was no party, although a toast was raised at the firm’s Halloween party where at least one King & Spalding lawyer was elaborately disguised as the late King of Pop, according to people familiar with the party.

The former MP Courtland L. Reichman had moved from Atlanta, the hometown of the firm, to run the two new offices. In San Francisco, Reichman is ceding his power to Fritz Zimmer, a product liability lawyer who joined the firm when it opened up its office here. Reichman also runs the firm’s IP practice and the firm decided to hand over the offices to local lawyers.

— Zusha Elinson

Skadden to Rep Intel Exec in Insider Trading Scandal

Rajiv Goel, the Intel executive caught up in the Galleon insider trading scandal, has finally hired himself some lawyers — and they’re not from the Bay Area.

Goel is being represented by two Skadden Arps white collar lawyers, David Zornow and David Meister, as well as veteran solo Martin Auerbach.

Zornow appeared in New York federal court where the case is proceeding, and released this statement to Legal Pad: “Mr. Goel looks forward to having his day in court and fully addressing these charges.”

Goel was an executive in Intel’s treasury department, who the SEC says passed inside information to hedge fund mogul Raj Rajaratnam.

Local lawyers have gotten some of the work generated by the wide-ranging insider-trading case. Orrick is doing the internal investigation at Intel and Wilson Sonsini is conducting a probe at Polycom, another source of leaked information. But with the case pending in New York, all of the individuals targeted have hired Big Apple lawyers, including the two defendants from the Valley: Goel and Anil Kumar, a McKinsey & Co director who lives in Saratoga, Calif. Kumar is using Chuck Clayman of Clayman & Rosenberg.

— Zusha Elinson

Dorsey & Whitney Help Diapers.Com Bag $30 Million

The success is no accident, according to Ted Hollifield, the Silicon Valley Dorsey & Whitney partner who represents the online diaper retailer.

Hollifield just helped close the Series E round, which was led by New Enterprise Associates and closed on Oct. 21. NEA was represented by Wilson Sonsini. Bessamer Ventures, which was also in on the deal brought in its lawyers from King & Spaulding. We assume that there was a lot of document changing going on.

The Diapers.com founders, Marc Lore and Vinit Bhara, who have their cute little baby pictures on the company's Web site, came to Hollifield through a referral from another Dorsey partner. Hollifield said he had an open mind and was quickly convinced. After all, as an MBA student Hollifield had come up with what he thought was a fail-proof Internet business plan: adult diapers, since no one wants to be seen in the store buying those.

Hollifield says venture capitalists were eager to invest: the latest round of financing took just 25 days from start to finish, about one-third of the normal time.

Although Hollifield has no kids to order diapers for, his paralegal is a devoted customer, he said. Hollifield said that he likes working with the company's founders ... who aren't ones to make rash decisions

— Zusha Elinson

IP Roundup: Nokia Needs New Lawyers to Sue Apple, and more

Want some juicy patent news before you take off for the weekend?

Our colleague Joe Mullin reports on how much money a convicted felon can make as a patent troll. Let’s just say its more than enough to post bond. (If you need additional inducement to click through to the story, the settlement amount that said felonious patent troll negotiated with the always buzzworthy Apple is revealed!)

Speaking of Apple, Steve Jobs got his precious little iPhone sued by Nokia for patent infringement. And the Am Law Daily notes that Quinn Emanuel, a firm that Nokia had used in the past, is not working on the case. Instead Nokia is using Alston & Bird, an Atlanta-based firm that’s not afraid to sue Apple. Alston is also working on a patent case for Elan, which claims that some widget or another that Steve Jobs invented is infringing its patents.

And finally, the aggressive campaign by memory stick maker SanDisk to beat everyone over the head with its patents ran into some trouble today, as Bloomberg reports. The ITC found that four companies, Silicon Motion Technology Corp., Phison Electronics Corp., Skymedi Corp and Imation Corp., aren’t infringing. Wilson Sonsini and Jones Day were on the business end of the ITC decision Friday, but had previously won or settled against some other companies that SanDisk sued.

— Zusha Elinson

Big Insider-trading Case Touches Valley Execs

Authorities arrested a group of high-powered hedge fund moguls and tech executives in an insider trading ring today, the Wall Street Journal reports. They were tripped up after an informant came to the FBI. Phone taps followed. Today, the U.S. attorney and the SEC in New York charged the six with insider trading.

The man at the center is hedge fund manager Raj Rajaratnam, founder of Galleon Group, a New York fund that has $3.7 billion under management. But Silicon Valley executives were also caught up in the alleged conspiracy: Rajiv Goel, an executive in chip giant Intel’s treasury department, was charged, as was Anil Kumar, a consultant at McKinsey who lived in Saratoga, Calif.

The SEC alleges that the ring made off with $25 million in illicit gains by trading on inside information. In the case of Goel, the SEC alleges that:

Goel provided inside information to Rajaratnam about certain Intel quarterly earnings and a pending joint venture concerning Clearwire Corp., in which Intel had invested. Rajaratnam then used this information to trade on behalf of Galleon. As payback for Goel’s tips, Rajaratnam, or someone acting on his behalf, executed trades in Goel’s personal brokerage account based on inside information concerning Hilton and PeopleSupport, which resulted in nearly $250,000 in illicit profits for Goel.

And about Kumar, the SEC says:

Kumar obtained inside information about pending transactions involving AMD and two Abu Dhabi-based sovereign entities, which he shared with Rajaratnam. Rajaratnam then traded on the basis of this information on behalf of Galleon.

With a more aggressive SEC, it’s back to the 1980s, as the WSJ notes, when a huge insider trading scandal centered around hedge fund manager Ivan Boesky shook Wall Street.

— Zusha Elinson

Paul, Hastings Picking up IP Partners for Palo Alto

Paul, Hastings is beefing up its Silicon Valley office with IP talent, having recently pulled over a handful of laterals from MoFo and Skadden.

The firm’s Palo Alto office has again added to its ranks of intellectual property lawyers with a corporate lateral from Morrison & Foerster’s Tokyo office.

Matt Berger is a corporate transactions lawyer who advises on the IP aspects of complex technology transactions. His clients include Atmel, Fujitsu, Goldman Sachs, Seiko Epson Corp., Teijin Pharma, Toshiba and Zeon Corp.

Adding Berger to other recent lateral moves, after the jump.