SHARING AMERICA'S TECH NEWS FROM THE VALLEY TO THE ALLEY
by Joe Mullin (courtesy arstechnica)
When a company called FlatWorld Interactives LLC filed suit against Apple just over a year ago, it looked like a typical “patent troll” lawsuit against a tech company, brought by someone who no longer had much of a business beyond lawsuits.
Court documents unsealed this week reveal who’s behind FlatWorld, and it’s anything but typical. FlatWorld is partly owned by the named inventor on the patents, a Philadelphia design professor named Slavko Milekic. But 35 percent of the company has been quietly controlled by an attorney at one of Apple’s own go-to law firms, Morgan, Lewis & Bockius. E-mail logs show that the attorney, John McAleese, worked together with his wife and began planning a wide-ranging patent attack against Apple’s touch-screen products in January 2007—just days after the iPhone was revealed to the world.
Jennifer McAleese reached out to numerous “troll patent” companies, as she called them, convinced that she and Milekic had an “excellent position against Apple” if and when they chose to sue. She e-mailed top patent lawyers at Google and Nokia, competitors known to be in patent clashes with Apple.
The whole time she was advised by her husband, a lawyer who had access to reams of confidential Apple data—but who says he never touched it. (Apple doesn’t see it that way.) Together, the McAleeses created “an indirect and covert pipeline” of information pumped to FlatWorld’s attorneys according to Apple lawyers. Now Apple wants FlatWorld’s law firm, Seattle-based Hagens Berman Sobol Shapiro, kicked off the case.
Meanwhile, the pressure has surely started to mount at Morgan Lewis, which has been a key firm handling sensitive patent matters for Apple since 2003. The venerable firm has reaped huge rewards from assisting more than half the Fortune 100; partners at the 1,300-lawyer firm make around $1.5 million in profit each year.
It’s an exclusive club and one where John McAleese is apparently no longer welcome. He appears to have been ousted, thrown into a BigLaw “memory hole.” McAleese’s bio page was deleted late Thursday, and his direct phone line now goes straight to an automated answer: “John McAleese is no longer with Morgan Lewis and Bockius,” says a deadpan female voice.
“Yeah, unfortunately, I can’t comment,” said Jennifer McAleese, reached by Ars on Friday. “I’m sorry.” As for her husband, an environmental law litigator who didn’t specialize in patents, “he can’t comment either.”
FlatWorld Interactives sued Apple in April 2012, naming just about every gadget in Apple’s arsenal as a product that infringed its two related patents. FlatWorld’s patents are said to cover swiping gestures on a touch screen. During the next three months, the company filed similar lawsuits against LG Electronics and Samsung aimed at a wide array of smartphones made by those companies.
But Apple apparently didn’t know about John McAleese until February. That’s when opposing lawyers sent Apple a “privilege log,” a kind of spreadsheet explaining why certain documents are not going to be handed over during the discovery phase of litigation. FlatWorld listed all the e-mails between the company’s founder and the various lawyers he communicated with about possibly filing suit together. There have been many and one of the lawyers listed was McAleese. In fact, that name showed up more than any other lawyer. Even more eye-opening was his identification in a “key” to the privilege log: “Attorney at Morgan Lewis & Bockius LLP.”
This got the attention of an Apple in-house lawyer, Jeff Risher, who rang the first alarm bell in Cupertino. On February 25, Risher fired off an e-mail to a Morgan Lewis partner named Scott Garner. That e-mail is redacted in the public court record, but Risher couldn’t have been happy. Garner forwarded the whole thing to his McAleese at 12:48am, asking “Do you know what this is about?”
“Yes, I do,” McAleese responded the next morning. His wife started FlatWorld in 2007 “and we (my wife and I) contributed capital in connection with the start-up,” he explained. McAleese told Morgan Lewis’ general counsel at the time about the lawsuit. “I am happy to talk to you about this at your convenience,” concluded McAleese, seemingly with a no-big-deal tone.
McAleese’s involvement has become a very big deal, though, and it could get bigger. Apple fired off subpoenas to Morgan Lewis, and the firm—likely desperate to save its relationship with a premier client—worked quickly to get the evidence Apple wanted. Morgan Lewis handed over McAleese’s relevant e-mails and files. When Apple had questions about metadata in a letter signed by Jennifer McAleese, Morgan Lewis gave Apple the confirmation it needed. (That letter, seeking to license a patent to someone named “Michael,” had been edited by John McAleese, user MCAL5094.)
That’s when Apple started its all-out effort to argue that McAleese’s connection to Morgan Lewis should halt the FlatWorld case, at least until FlatWorld gets new lawyers. By early May, Apple assembled a motion with hundreds of pages of evidence, highlighted slides of key portions, and declarations from key Apple employees—including Risher, who interrupted some Hawaiian travel to sign a declaration on May 7. The motion and associated exhibits were unsealed earlier this week.
But the documents in the public record thus far may just be the tip of the iceberg, and big questions remain. Why didn’t Morgan Lewis—which knew the lawsuit was coming before it was filed—see an ethical problem in letting one of its partners invest in a patent troll, especially one specially designed to target one of the firm’s big clients? And how many other big-firm lawyers are entwined with “start-ups” that are actually holding companies, created to attack the very corporations they are supposed to be defending?
FlatWorld Interactives formed in August 2006. While Jennifer McAleese and inventor Milekic gave marketing their products a shot, e-mail logs show there was a patent infringement backup plan on their minds from the beginning.
Seeing Steve Jobs get up on stage and show off the “magical” iPhone touchscreen must have made plan B look even better. On January 15, 2007—just six days after the iPhone was revealed—the McAleeses and their lawyer were exchanging e-mails about “potential infringement” and “potential litigation,” according to the privilege logs.
After seeing the iPhone, the McAleeses worked with Milekic to file a follow-up patent application in mid-2007. The goal of that “reissue” application, Jennifer McAleese later stated, was to “tailor it more closely to iPhone claims.”
At the same time that McAleese was fine-tuning her company’s patent, she and Milekic were trying to get into the touchscreen software business. In 2008, they built three large touchscreen displays for the Philadelphia Flower Show—although two of them ended up breaking down. “Any information displayed is touchable, movable, grab-able,” Milekic told a reporter from the Philadelphia Business Journal at the time.
Courtesy Philadelphia Business Journal
The following year, FlatWorld got its second deal—and what appears to be its last—doing a large touchscreen installation for the Philadelphia Zoo. Milekic had never written a line of code or taken a programming class. He told a Philly tech publication that his touchscreen software was built with a program called RunTime Revolution, which says it “makes programming learnable by anyone who can use a computer.”
“Since [Milekic] is a psychologist, he really designs for children,” McAleese said in the 2009 interview. “There’s no directions or instruction, people just know what to do because it’s simple and intuitive.”
As intuitive as it might have been, the company only finalized two deals in two and a half years. It never launched ShowMe Tools, a program it said was 80 percent done in 2008. So McAleese and Milekic doubled down on that potentially more lucrative project: who would help them sue Apple?
Five months after the iPhone launch, the McAleeses were looking for help suing Apple on multiple fronts. John McAleese e-mailed Daniel Golub, a fellow partner at Morgan Lewis, asking him for a name that slipped his mind.
“Dan, about six months ago, you told me about a firm in Bala Cynwyd that will purchase patents to enforce against infringers,” McAleese wrote in an e-mail. “I have forgotten the name of the firm, but my wife and her partner would like to talk with them. Do you remember the name?”
It was Rembrandt IP, a company that has made heaps of cash suing US corporations over patents in federal courts. (Golub now works there.) The McAleeses spent much of 2007 e-mailing with Rembrandt but ultimately didn’t partner with the firm. Several litigation-related e-mails had the subject heading “RE: iPhone” or “RE:iPhone [Redacted].”
E-mail logs and exhibits show the discussion with Rembrandt was the first of many explorations with so-called patent trolls and Apple competitors that Jennifer McAleese thought might buy FlatWorld.
“We have developed proprietary technology that allows an individual to interact with a computer simply by touching a computer-generated image on a touch sensitive media. This same technology is at the core of Apple’s highly-acclaimed iPhone and other competing telephone/personal entertainment devices.
“We are currently in development of an interactive presentation tool using our technology for use in computer-based presentations…[W]e believe that the most successful market will be individual [sic] who use PowerPoint.
“Our business is also based on the marketing and enforcement of our ‘throwing mechanism’ software patent. This patent, first issued in 200_ [sic] and currently going through re-issue, is being used by Apple in the ‘swiping’ mechanism utilized in its iPhone and iPod touch products. According to legal counsel and troll patent companies, we have an excellent position against Apple if we decide to take that course. We are also interested in licensing our patented technology to those companies who want to acquire the swiping technology used by Apple.”
In the fall of 2009, Jennifer McAleese was exchanging e-mails with Jonathan Taub at Acacia Research Corp., the largest publicly-traded patent assertion company. The e-mails, and an attached chart, were forwarded to her husband.
In March 2010, Jennifer sent an e-mail to Kulpreet Rana, then head of intellectual property at Google. McAleese suggested her patent could be useful in patent battles with Apple and that it was even being “tailored” to be ideally suited for an infringement suit against the iPhone. The evidence shows no response from Google. McAleese wrote:
“The patent link below may be of interest to Google regarding Apple’s swiping mechanism. Our inventor, Slavko Milekic was granted this patent in 2005. In 2007, we placed the patent in reissue to tailor it more closely to iphone claims. We have been told by many law firms that the patent is extremely valuable even without the reissue possibilities… If you are interested in discussing the patent please let us know. I think it could be an important asset for your ongoing ‘talks’ with Apple.”
•In June and July of 2010, FlatWorld discussed selling the patent to a brokerage company, ICAP Ocean Tomo LLC, to list FlatWorld’s patent in an upcoming patent auction. An acquaintance of the McAleeses e-mailed an ICAP Ocean Tomo executive, saying:
“Tom, I talked to Slavko yesterday. Jennifer’s husband is reviewing the docs. They probably won’t go for the [redacted] buy-now price. And they are still thinking about the reservation price. What are your thoughts on this?
I’ll see Slavko tomorrow at a party. Anything else we can offer them to close the deal?”
•In April 2011, Jennifer McAleese contacted Nokia’s head of IP, again suggesting the McAleese/Milekic patent could help with suing Apple.
“Given your various patent litigations with apple, I strongly encourage you to take a look at this patent as a potential patent for your portfolio. We filed in 1998 and the patent was granted in 2005. It has also gone through reissue with a final reissue decision expected very soon.”
A Nokia employee responded:
thanks for approaching Nokia on this offer.
Your email has been forwarded to me… I will take a close look at this opportunity and may approach you for further clarification. For now, I am interested in hearing if you have a bidding deadline and a target price in mind.”
Jennifer McAleese showed the response to her husband. “Let’s talk before you reply to this, okay?” She responded, “Yes, definitely. Why coming from cpenhagen [sic] headquarters??? It is a us patent…”
“idk [I don’t know]. but it definitely got someone’s attention,” responded her husband.
None of those negotiations came to fruition for reasons that aren’t clear from the public record. Ultimately, the McAleeses and Milekic decided to sue Apple on their own in 2012. The timing of the suit was certainly no coincidence; they waited until a few days after their carefully-crafted reissue patent, with three extra claims in it, was granted by the US Patent & Trademark Office.
Now, Apple is arguing that the Seattle law firm the McAleeses hooked up with, Hagens Berman Sobol Shapiro LLP, has to be kicked off the FlatWorld case. That’s because Apple argues John McAleese was effectively an extra lawyer—one with access to mounds of its confidential data. That contaminates the Hagens Berman firm, says Apple.
McAleese will now have to make his case that he wasn’t working for the other side. He and FlatWorld will have to respond by June 11, and the issue will be argued in court in July. McAleese maintains he never gave his wife any litigation advice and never had any access to any confidential Apple information. Apple disputes that, saying that even the one e-mail he received on February 26 should have been kept as confidential by Morgan Lewis and wasn’t.
Apple also claims that “well over 100 e-mails” that should have shown up on Hagens Berman’s privilege log weren’t there. The missing e-mails were clearly relevant and about Apple and the iPhone according to the subject lines. “Apple does not yet know whether these e-mails were destroyed or simply not logged by Hagens Berman.”
Neither Morgan Lewis nor Apple responded to requests for comment on this story. While FlatWorld’s law firm is the focus of the immediate motion, it remains to be seen what kind of additional consequences could play out for McAleese and the giant law firm that once employed him. One thing that is clear: some at Morgan Lewis knew what McAleese was doing. He told the firm’s then-general counsel that the company he invested in was going to sue Apple, and he sent a follow-up note after the lawsuit was filed.
Underneath the FlatWorld fiasco is an important question: just how many lawyers at huge law firms—which compete to defend Silicon Valley icons like Apple from patent litigation—have “gone rogue” and become implicated in patent trolling themselves, either as investors like McAleese or as inventors?
In 2007, a top-billing Fish & Richardson partner named Scott Harris was fired when a patent he invented was used to sue Google. That affair exploded into litigation between Harris and his former firm.
Other big-firm lawyers who created so-called “patent troll” companies haven’t been punished; they’ve prospered. Irah Donner was a partner at WilmerHale when he was asked to shut down his patent licensing campaign, which previously earned him hundreds of thousands of dollars in settlement payouts from car companies like Honda, Toyota, and Ford. But his patents continue to be held by companies connected to some of the most controversial trolling in the country, including the infamous MPHJ “scanner trolls.” Meanwhile, Donner has moved from one prestigious large law firm to the next.
Michael Powell was a young associate at Quinn Emanuel Urquhart & Hedges in 2008. That year, he took a patent on an “online idea marketplace” from his defunct dot-com and used it to sue Microsoft, Gannett, McClatchy, Monster.com, and CareerBuilder.com. His firm, a go-to patent defense firm for Google and Samsung, didn’t fire him. Instead, he made partner.
Thank you. TiA.