Tom Melsheimer and a team of Winston & Strawn lawyers began their week with a favorable ruling in a Sherman federal court for Dallas Cowboys running back Ezekiel Elliott that will allow him to continue playing in the current season despite the legal battle surrounding his suspension.
But Monday’s win was just icing on the cake for Melsheimer and a separate team of Winston colleagues who scored a mostly favorable defense verdict on Friday in the same courtroom for a trio of clients in an intellectual property case.
In a three-week trial before U.S. District Judge Amos Mazzant, a jury found that Plano-based AlixaRx Services did not infringe patents of Tech Pharmacy Services, steal its trade secrets or commit fraud against the Houston-based competitor.
Despite that, Tech Pharmacy Services’ legal team is also calling the verdict a win. Jurors did find that AlixaRx and its two partners, Golden Living Centers and Fillmore Capital Partners, breached a nondisclosure agreement they signed with Tech Pharmacy Services in 2009. As a result, the jury awarded Tech Pharmacy Services $15 million in damages. The court also awarded Tech Pharmacy $2 million in attorneys’ fees.
Even though his clients are out $17 million, Melsheimer still considers the outcome a victory. He said the amount Tech Pharmacy Services was awarded is $1 million shy of what it paid in legal fees for the case, and galaxies short of the $350 million it had originally sought.
“Tech Pharmacy’s attempt to spin the result positively for them is akin to Monty Python’s Black Knight describing his injuries as a ‘flesh wound,’” he said.
Melsheimer said his clients considered the trial a bet-the-company case because $350 million could have easily ballooned to nearly $1 billion had the jury found that the defendants committed willful patent infringement and slapped on punitive damages – which is always a possibility when trade secret claims are involved.
“Whenever you have a trade secret issue and patent case in one, that is the most difficult intellectual property dispute you can have,” Melsheimer said. “Those claims are on the opposite side of the spectrum. You have to keep them separate, prevent the plaintiff from confusing them and you have to argue about them very differently.”
Though jurors did not find the defendants had infringed on Tech Pharmacy’s patents, jurors rejected their request to invalidate the patents.
“This is helpful to the extent that we can continue to enforce our patents [if] they are infringed on in the future,” said Hogan Lovells partner Maria Wyckoff Boyce, the lead attorney for Tech Pharmacy.
Boyce said her client has not yet determined whether it plans to appeal the jury’s decision to clear the patent infringement, trade secret and fraud claims.
AlixaRx and Tech Pharmacy are both in the business of producing automated dispensing of pharmaceuticals in long-term care facilities. Melsheimer said Golden Living Centers and Fillmore Capital at one time were in negotiations with Tech Pharmacy to possibly acquire part or all of the company, but they ultimately decided to “go their own way,” and created AlixaRx in 2012.
Tech Pharmacy sued the three companies in November 2015 after one of its inventors, Jim Moncrief, attended a presentation made by the defendants at an industry gathering that revealed “the defendants were in fact doing what [Tech Pharmacy does],” Boyce said.
“It was a concern because of the confidentiality agreement that had been entered in 2009,” she added. “It had been a concern that our information had been used.”
Melsheimer painted a different picture. He said Tech Pharmacy went several years without saying a word to his clients “about anything we were doing, and we were open and obvious about it.” He said his clients only heard from Tech Pharmacy after it was acquired by a northeastern nursing facilities operator in 2015.
“I feel like when this investor took over, it saw an opportunity to make a splash in the courthouse,” Melsheimer said.
But Boyce argued at trial that Tech Pharmacy did not learn about what the defendants were up to until the early 2015 industry gathering. Though they didn’t side with Tech Pharmacy on the patent infringement, fraud and trade secrets claims, jurors did rule that the statute of limitations deadline for Tech Pharmacy to discover a breach of contract of the 2009 confidentiality agreement had not expired. This allowed them to award Tech Pharmacy the $17 million.
“It was a hard-fought, long case,” Boyce said. “We are pleased with the jury’s verdict.”
The remainder of the Houston-based Hogan Lovells team representing Tech Pharmacy at trial included partners Cristina Rodriguez, Jeff Whittle, Jay Yates and associate Jennifer Fleury. Tech Pharmacy’s local counsel was Mike Jones of Potter Minton.
The defense team assisting Melsheimer, managing partner of Winston & Strawn’s Dallas office, included Dallas partners Brett Johnson and Michael Bittner and associates Rex Mann and Grant Schmidt; Charlotte partner Danielle Williams; and Chicago partner Samantha Lerner. Wesley Hill and Andrea Fair of Ward, Smith & Hall served as the defendants’ local counsel.
Expert witnesses for the plantiff included Dr. Michael Metzker (breach of contract, invalidity and infringement); Dr. Sam Russ (software); Karyl Van Tassel (trade secrets); David Cabello (attorneys’ fees and willfulness); and Dr. Keith Ugone (damages).
The defenses’s expert witnesses included Christopher Thomsen (invalidity and infringement), Mark Frappier (software), Greg Smith (trade secrets), Clyde Seibman (attorneys’ fees) and Roger Carlile (damages).
Elliott case
On Sept. 5, as the IP trial entered its second week, Melsheimer experienced a first in his 31-year career.
Winston and Melsheimer also represent Cowboys running back Ezekiel Elliott in his battle with the NFL regarding his six-game suspension.
During a break in the patent infringement trial, Melsheimer switched from defense to offense to help represent Elliott to argue in an emergency hearing (led by New York partner Jeff Kessler) that Judge Mazzant should issue a temporary restraining order preventing the suspension from being enforced. Judge Mazzant granted the injunction and TRO last Thursday.
“The other side in my patent and trade secret trial raised the concern with the judge several times of their fear that the jury did not find out that I was involved in the Elliott case,” Melsheimer said.
NFL Commissioner Roger Goodell issued a six-game suspension on Elliott in August that is related to an investigation on domestic abuse allegations made by Elliott’s ex-girlfriend. An NFL-appointed arbitrator upheld that suspension. The NFL requested Judge Mazzant to stay his order that halted Elliott’s suspension, but he denied to do so Monday.
Judge Mazzant based his opinion granting the TRO and injunction on the fact that the NFL deprived the NFL Player’s League, which is working on behalf of Elliott, to present adequate evidence to the arbitrator that argues Elliott’s side of the story.
The NFL is currently appealing the case in the U.S. Court of Appeals for the Fifth Circuit, which could issue a decision as early as this week.
Dallas Akin Gump partner Eric Gambrell, the lead attorney for the NFL, did not return a request for comment on Monday’s ruling.