OPENING
STATEMENTS
Shareholder Attorneys Look for Fresh Meat
IP cases may be on the menu. —By Zusha Elinson
The open nature of the patent at Synopsys,” says Jeff Westerman, a
system has traditionally meant veteran securities lawyer with Mil-that aggrieved shareholders berg in Los Angeles who represented
haven’t launched many class Magma shareholders. Lawyers for
action suits on patent issues. Magma in the securities case, led
In general, “it would be pretty hard to by O’Melveny & Myers’s Meredith
make a case that [managers] withheld Landy, said in court papers that
information from the market,” says van Ginneken had been threatened
Alan Cox, a senior vice president with by Synopsys with claims of more
NERA Economic Consulting, which than $100 million, and only agreed
studies litigation trends. “The patents to sign the declaration after Syn-you have are public knowledge.” opsys promised to drop him as a
But if a recent case in California defendant in the case, which it did.
A California technology company agrees
to pay $13.5 million to shareholders, after
a disclosure about its technology in patent
litigation makes its stock plummet.
is any guide, there may be more
such suits on the horizon. This summer U.S. district court judge Charles
Breyer in San Francisco gave preliminary approval for Magma Design
Automation, Inc., a San Jose–based
chip design software company, to pay
$13.5 million to settle a securities
class action lawsuit. The suit centered
over a 40 percent drop in the price of
Magma’s stock in the spring of 2005.
The plunge came in the midst
of an intense patent fight between
Magma and rival Synopsys, Inc.,
which cost Magma a separate $12.5
million to settle last year. Synopsys’s
lawyers at Dechert had filed a declaration in which Magma chief scientist Lukas van Ginneken admitted
that he developed the patents in
question as a Synopsys employee,
meaning that the patents belonged
to Synopsys, not Magma. “What set
this case apart was, the guy who was
responsible for technology at Magma
said that his supervisors knew that
he’d come up with the inventions
The O’Melveny lawyers also argued
that the declaration was “deliberately
misleading” and that the stock recovered once the full picture came to
light. But Magma shareholders who
filed the securities suit claimed that
Magma hadn’t been forthright about
the origin of the patents, causing
them to lose money when the truth
came out. Another settlement in a
related derivative case is being hammered out in state court.
In their quest for new playing
fields, plaintiffs lawyers may be looking more closely at how companies
are disclosing the risks related to
their patents, says Jonathan Shapiro,
a securities litigator with Wilmer
Cutler Pickering Hale and Dorr in
Palo Alto. “In the absence of accounting problems and earning problems,
the plaintiffs have to look elsewhere,”
he said. “One of them is potential or
actual risks to a patent portfolio.”
A version of this article appeared previously
in sibling publication The Recorder.
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