© 2015 The Texas Lawbook.
By Natalie Posgate
(June 5) – Charles Schwartz is widely considered one of the smartest corporate trial lawyers in Texas. This week, the Houston-based Skadden, Arps, Slate, Meagher & Flom partner proved it when he and his colleagues scored a $69 million win for his client the morning the trial was set to begin.
The $69 million final judgment, secured Tuesday, was for JPMorgan Chase Bank.
The win was the end – or at the very least, a significant jump toward the finish line – of a 13-year legal battle with Plano-based DataTreasury Corp.
JPMC sued DataTreasury in 2012, claiming that DataTreasury breached their license agreement that they entered so that JPMC could use DataTreasury’s electronic check imaging and processing patents.
Texarkana U.S. District Judge Michael Schneider’s ruling occurred after the two parties entered an agreed stipulation in which DataTreasury decided that it was unable to “raise a genuine dispute as to any material fact” related to the remaining legal issue at trial, which involved the damages JPMC was owed, the stipulation agreement says.
Schwartz declined to comment on the case. Derek Gilliland of Nix Patterson & Roach, who led the case for DataTreasury, could not be reached for comment.
JPMC and DataTreasury’s 2005 licensing agreement was the result of a lawsuit settlement from the first string of the parties’ 13-year litigation. DataTreasury sued JPMC in 2002 for infringing its patents, and the parties settled in July 2005 for $70 million – the price JPMC paid for the licensing agreement. DataTreasury has sued other large banks on the same claims, but the settlement with JPMC was one of the first and one of the biggest.
The $70 million lump-sum payment gave JPMC access to unlimited use of DataTreasury’s patents.
Since JPMC brought this litigation, the U.S. Patent and Trademark Office’s Patent Trial and Appeal Board has invalidated the two check-imaging patents at issue, ruling in April that the patents are too abstract.
The licensing agreement contained a “most favored nations” (MFN) clause, which stated that JPMC was entitled to a notice by DataTreasury if it licensed any of the same patents to another party. The clause also stated that if the other licensing agreement was established under more favorable terms, DataTreasury must match the policy for JPMC.
DataTreasury then entered into several other licensing agreements with other banks for the same patents, according to court documents. One of the agreements was from October 2012 with Cathay General Bancorp, in which Cathay paid DataTreasury $250,000. Cathay also agreed to pay additional costs for any additional entities the bank later acquired.
JPMC sued DataTreasury the next month for failing to notify JPMC of the licensing agreements it had entered with other banks and requested a balance refund for the difference between JPMC’s $70 million price tag and Cathay’s $250,000 price tag – the licensing agreement JPMC found most favorable, court documents say.
DataTreasury countersued on statute of limitations and affirmative defense of the waver claims, and disputed the applicability and breach of the MFN clause. Judge Schneider denied them in his Feb. 5 memorandum opinion and order.
“Chase now wants the court to insert language into the contract that’s not there,” DataTreasury attorney Andrew Wright argued, according to a transcript of a July 2014 hearing. “Throughout all of this case, including the other issues besides contract interpretation, they want the court to ignore the circumstances surrounding the execution of the license and Chase’s actions leading up to the settlement of the lawsuit.”
Throughout the legal battle, JPMC prevailed on multiple summary judgment rulings. The game-changer occurred in Judge Schneider’s Feb. 5, 2015 ruling, in which he dismissed all of DataTreasury’s counterclaims and determined that the only dispute left for trial was damages.
“Even viewing the facts in the light most favorable to [DataTreasury], there is no genuine dispute as to any material fact,” Judge Schneider wrote.
Once damages remained as the only dispute in the picture, DataTreasury stipulated on trial day that it could not dispute before a jury why JPMC was entitled the $250,000 Cathay License price term, so the parties agreed that “there are no outstanding issues that would prevent the court from entering a final and appealable judgment,” according to the June 2 agreed stipulation.
Judge Schneider entered his final judgment the same day.
In addition to Schwartz, JMPC’s Houston-based Skadden team included partner Noelle Reed and associates Daniel Mayerfeld and Sarah Grossnickle. The team also worked with partners Daniel DeVito and Anthony Sammi and associate Andrew Gish from Skadden’s New York office. Texarkana attorney Darby Doan served as JPMC’s local counsel.
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