McKool Strikes Out in Latest Patent Trial for Versata

, The Litigation Daily

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McKool Smith could be in line for a huge payday for bringing patent infringement claims on behalf of Versata Software Inc. But on Tuesday the firm and its client suffered a big defeat in their case against Autodata Solutions Inc. and related company Internet Brands Inc., which owns carsdirect.com and a slew of other brands.

In a 46-page order, U.S. District Judge William Bryson in Marshall, Tx., denied McKool Smith's bid for a new trial in the case, rejecting arguments that a jury erred when it found that Autodata doesn't infringe Versata's patents. To make matters worse for Versata, the judge ordered the company to pay $2 million on defense counterclaims that it misappropriated trade secrets.

If the name Versata sounds familiar, it's probably because McKool Smith won a $391 million verdict for the company against the global software giant SAP AG in May 2011. That verdict, combined with the $290 million McKool Smith won for i4i Inc. against Microsoft Corporation in 2009, helped cement the 177-lawyer firm's place as a patent juggernaut.

McKool Smith and Versata hoped to keep that winning streak alive in June, when they squared off against Autodata and Internet Brands in a one-week jury trial. Versata alleged that the defendants, which make software for buying cars online, infringe on two patents relating to methods and systems of comparison-shopping on the Web. Versata also alleged breach of contract and tortious interference, on the grounds that the defendants misrepresented the terms of a licensing deal with Versata to potential customers. Those misrepresentations allegedly allowed the defendants to lure away one of Versata's clients, Chrysler Group LLC. Autodata and Internet Brands counterclaimed for trade secrets theft and breach of contract, alleging that Versata misused confidential proprietary information that Autodata divulged during partnership talks in the late 1990s.

The trial ended in a near-clean sweep for the defendants, who were jointly represented by Winstead PC, Moldo Davidson Fraioli Seror & Sestanovich, and Gillam & Smith. The jury not only ruled that the defendants didn't infringe, but awarded them $2 million on their trade secrets misappropriation counterclaims. The case wasn't a total rout, however. The jury only awarded Autodata and Internet Brands $1 in nominal damages on their breach of contract claim. And in Tuesday's order, Bryson rejected their bid for more than $4 million in attorney fees and costs.

Winstead shareholder Michael Adams did not immediately return a call seeking comment.

We asked McKool Smith principal Scott Cole, who also handled Versata’s case against SAP, why the jury trials came to such divergent results. "[Autodata] was not your typical patent case," he said. With so many allegations flying back and forth, "it was more like a typical dispute between competitors." In those kinds of cases, Cole said, "it becomes pretty hard to figure out how a jury is going to react."

Cole said Versata would contest the judge's ruling on the defendants' counterclaims. In the meantime, McKool Smith is already fighting to preserve its big win for Verstata in the SAP case. (Cole confirmed to Texas Lawyer last year that his firm has a contingency arrangement with Versata, though he wouldn't provide specifics.) Oral argument on SAP's appeal is set for early 2013 before the U.S. Court of Appeals for the Federal Circuit, with McKool Smith founding partner Mike McKool slated to argue for Versata. He'll be squaring off against J. Michael Jakes of Finnegan Henderson Farabow Garrett & Dunner--the same firm McKool usually brings on to get verdicts affirmed on appeal, as The American Lawyer reported here.

McKool Smith also has a nascent infringement case for Versata against Toyota Motor Company pending in East Texas.

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