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Summary:

A conspiracy theory is not enough to force corporations to pay up in a lawsuit. One law firm found this out the hard way in a failed case over a patent auction.

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Giant tech companies don’t usually cut sympathetic figures in court but, on Thursday, a federal judge in decided that the lawyers who had been harassing them with a frivolous lawsuit deserved to be punished.

In a decision issued in San Jose, U.S. District Judge Lucy Koh — last seen overseeing the Apple-Samsung patent damages trial — found that a lawsuit that accused AOL and Microsoft of cooking up a bogus patent auction with the help of Goldman Sachs was “frivolous” and “utterly lacking” in facts.

The lawyers in question will have to pick up AOL’s legal tab, and Judge Koh is also preparing to set out other punishments, which could include fines and disciplinary measures.

The case in question came about after AOL sold a portfolio of patents at auction to Microsoft for over $1 billion in April 2012, causing AOL’s share price to soar. One month later, the Rosenfarb Law Firm hit AOL with a class-action lawsuit that alleged that the auction was a “sham” and that the two companies had decided to do the deal months earlier.

The point of the purported “sham” and “secret deal” was to depress the price of AOL’s shares, allowing the company to buy them back before they popped on the news of the auction.

The court initially threw out the claim when it learned the allegations were based on a single, pseudonymous blog post. The lawyers then tried to claim that a Reuters news story pointed to a conspiracy, but the court found the story described nothing of the sort.

You can read Koh’s order here, which was spotted by the SDNYblog.

AOL Dismissal

  1. looks like lucy koh is the favorite judge amongst the corporate rednecks

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