IBM’s oddest-ever trade secrets victory

February 17, 2012

There’s a really important lesson in IBM’s summary judgment victory in a trade secrets case that could have exposed the company to more than $100 million in claims. IBM’s lawyers at Paul Hastings amassed all kinds of evidence to undermine the allegations of Bruce Bierman, who said the company stole his technology to create the Rapid Resume feature embedded in millions of IBM personal computers. But the case ended up turning on a weird little technicality about — of all things — what Bierman’s mother knew about IBM’s software before she died in 1998. The lesson? Even when you’ve got what you think are great facts, the quickest route to victory may be in relatively obscure law. It’s less psychically satisfying, but it gets the job done.

Here’s a highly abbreviated version of the backstory, courtesy of U.S. District Judge Phyllis Hamilton‘s 15-page summary judgment ruling. Back in the 1980s, according to Bierman, he created a data protection system he called Bookmark, which automatically saved the work of PC users in the event of a power failure, system shutdown, or hardware malfunction. Bierman founded a company, Intellisoft, to market and license the software. He and the programmer who actually wrote the code for Bookmark jointly applied for a patent; Intellisoft applied for a copyright on the code, listing the programmer as the sole author.

Bierman subsequently assigned all of Intellisoft’s rights and interests in Bookmark to himself. Over the next 10 years, according to him and his lawyers at Arias Ozzello & Gignac and Stolpman Krissman Elber & Silver, he engaged in licensing talks with IBM. Bierman said he entered into non-disclosure agreements with the software company and had no fewer than 65 conversations with IBM officials about Bookmark.

During that time he ran into some financial difficulties. Intellisoft entered bankruptcy in 1988. Bierman eventually founded a successor company with the same rights to Bookmark. But in 1991 — pay attention here — he sold and transferred all rights to Bookmark to his mother, Sonia Bierman, for $80,000. In 1994 he bought back the assets for $1.

There were many additional twists and turns in the saga of Bierman’s personal finances and their intersection with Bookmark IP rights, but for the purposes of the IBM litigation, the next important development came in 2010, when Bierman allegedly learned of a Toshiba patent that apparently made use of his prior art. He asserted that when he investigated, he discovered that IBM had also patented technology to store user data and resume operations after an unexpected shutdown, and was including it on personal computers under the name Rapid Resume. Bierman alleged that the inventor listed on IBM’s patent application had been his contact at the company in Bookmark licensing talks. In September 2010 he filed a complaint in federal court in San Francisco that accused IBM of trade secret theft.

As the judge noted in her opinion, there were huge factual holes in Bierman’s story. He produced no evidence, for instance, of the talks he supposedly held with IBM — no confidentiality or non-disclosure agreements, which he said he had disposed of, nor any other evidence that he’d ever met with anyone at IBM aside from his own statements. Moreover, an IBM expert testified that Bierman’s purported copyright could not have been issued by the U.S. Copyright Office only two days after Intellisoft applied for it, which is what Bierman asserted. That expert testimony cast significant doubt on a 1987 document in which Bierman supposedly transferred the Bookmark copyright to himself. IBM called the document a fraud.

Its lawyers at Paul Hastings, led by Peter Stone, also questioned why Bierman didn’t list his purported IP rights in Bookmark when he declared personal bankruptcy in 1993 and 2005. It’s clear from Hamilton’s opinion that Bierman would have had quite a lot of explaining to do if the case had gone to trial.

That’s not going to happen (absent a successful appeal by Bierman), but not because of the lies IBM alleges Bierman told. Instead, IBM won the case because Bierman couldn’t prove that his dead mother didn’t know about its 1993 introduction of Rapid Resume software.

IBM argued that, putting aside the merits of his trade secrets claim, Bierman waited too long to sue. Its Rapid Resume feature was used in personal computers beginning in 1993, more than 15 years before Bierman filed a complaint. Bierman said he didn’t know about the technology until 2010. But at the time Rapid Resume was introduced, Sonia Bierman actually owned IP rights to the allegedly stolen technology. IBM asserted — and the judge agreed — that Bierman had to produce evidence that his mother didn’t know about Rapid Resume in order to get around the statute of limitation.

Bierman said his statement should suffice, since he was the source of all of his mother’s information about computers. Hamilton said that wasn’t enough. “Bierman’s statement about his mother’s interest or lack of interest in aspects of the computer world say nothing about what she actually knew about any accrued claims, or whether she did or did not act diligently during the time she owned the intellectual property,” the judge wrote.

As a result, she concluded, Bierman’s case is time-barred — and IBM won’t have to go to the trouble and expense of testing the rest of Bierman’s assertions.

Bierman counsel Thomas Stolpman of Stolpman Krissman said the judge failed to consider the 75-year life of copyrights. “Under this ruling, all you have to do is steal it and hide the theft until somebody dies and you’re home free,” he said. Stolpman said Bierman will appeal Hamilton’s ruling.

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