Alison Frankel

With a single ruling this week, U.S. District Judge James Robart of Seattle federal court may have fundamentally altered the balance of power between Motorola Mobility and the leading opponents of Motorola’s soon-to-be-parent Google, Microsoft and Apple.

In another indication that the smartphone war is shifting away from individual infringement suits, Robart granted Microsoft’s motion for a temporary restraining order, which effectively bars Motorola from acting to enforce whatever relief it’s granted in an ongoing German patent case. In that case, before a court in Mannheim, Motorola has claimed Microsoft Windows and Xbox products infringe German patents that are part of Motorola’s standard-essential portfolio. The Seattle judge, according to this transcript of the order he issued in open court, agreed with Microsoft that the German patents are already at issue in Microsoft’s case before him, which accuses Motorola of breaching its obligation to offer standard-essential patents on fair and reasonable licensing terms.

Robart granted the TRO under the Anti-Suit Act, which is intended to restrict forum-shopping and harassing litigation. That’s how Microsoft and its counsel at Sidley Austin described Motorola’s German suit. According to Microsoft, Motorola first tried to extract exorbitant licensing fees for a portfolio of about 100 worldwide standard-essential patents. Then, after Microsoft filed a Seattle federal-court suit asserting that Motorola’s licensing demand was a breach of its contract with a European standard-setting body, Motorola sued Microsoft in Germany for infringing German patents that were part of the portfolio at issue in Seattle.

The judge agreed that Motorola appeared to have run to Germany to obtain an injunction there before he could decide the merits of Microsoft’s contract case. Microsoft’s U.S. suit, he said, included the same patents Motorola was asserting in Germany, because those German patents were part of the portfolio for which Motorola demanded allegedly improper licensing fees. Robart concluded that under the Anti-Suit Act, he has the power to block Motorola from enforcing whatever relief it wins in Germany until he rules on the larger question of reasonable licensing fees for standard-essential patents. Here’s what the judge said at Wednesday’s hearing:

The battleground in this… is whether the United States action, or resolution of it, would be dispositive of the foreign action to be enjoined… And I will add, for the edification of the Court of Appeals, so it knows where I’m coming from, that I consider the preservation of my ability to resolve this dispute to be something that needs to be carefully guarded, otherwise we run into the possibilities of conflicting resolutions, duplicative litigation, and unfortunate results that don’t follow appropriate law.

Litigation is frequently likened to poker, but there’s actually a big difference. Poker ends with a winner and a loser. In litigation, there’s a third option: settlement. In the overwhelming majority of cases, lawyers and their clients eventually conclude that it’s more sensible to compromise than to test your hand with winner-take-all stakes.

Not Bank of America in its three-pronged litigation with the bond insurer MBIA.

MBIA has said publicly and repeatedly that it’s eager to make deals to resolve accusations that its 2009 restructuring, which split the bond insurer’s healthy muni-bond business from its ailing structured-finance division, was a $5 billion fraud. On Wednesday, the hedge fund Aurelius Capital became the latest plaintiff to reach a deal with MBIA. (Kudos to my colleague Karen Friefeld, who broke news of the settlement.) Aurelius had filed a purported class action in Manhattan federal court on behalf of MBIA policy holders, and its lawyers at Simpson Thacher & Bartlett were litigating that case alongside a group of banks that filed similar fraud claims — as well as a separate regulatory challenge to the restructuring — in New York State Supreme Court. Aurelius’s departure from the litigation means that the bank group, which began with 18 members but has dwindled to Bank of America and two French banks, loses a powerful, well-capitalized ally. (In fact, Aurelius was scheduled to depose MBIA CEO Jay Brown this week; now the banks will depose him next week.)

Meanwhile, in MBIA’s insurance fraud and mortgage-backed securities put-back case against Countrywide and BofA, New York State Supreme Court Justice Eileen Bransten on Wednesday denied the bank’s motion to bar MBIA from deposing BofA CEO Brian Moynihan. As I’ve explained, MBIA’s lawyers at Quinn Emanuel Urquhart & Sullivan want to question Moynihan to help establish Bank of America’s successor liability for Countrywide’s MBS failings. MBIA argued that Moynihan’s public statements about BofA assuming responsibility for Countrywide’s wrongdoing are key to the question of successor liability; Bank of America’s counsel at O’Melveny & Myers countered that MBIA was trying to harass Moynihan, who has no unique knowledge of BofA’s corporate structure or decision-making on Countrywide. Bransten said Moynihan’s public statements are “undoubtedly relevant,” and only the CEO can explain what he meant when he made them. Billions of dollars hang on how Bransten — the leading N.Y. judge on bond insurers’ claims against MBS issuers — decides the question of BofA’s successor liability.

The newly-filed Justice Department complaint against Apple and five major publishers is an incalculable boon to Hagens Berman Sobol Shapiro and Cohen Milstein Sellers & Toll, the firms that won the intense competition to lead the multidistrict e-books antitrust class action. There hasn’t yet been discovery in the class action, which the defendants have moved to dismiss or send to arbitration, so the specific details in the Antitrust Division’s complaint, including emails and meetings between Apple and publishing executives, are powerful evidence of the conspiracy the class action alleges. The Justice Deparment’s same-day settlement with Hachette Books, Simon & Shuster, and Harper Collins also increases the likelihood that those publishers will also move to resolve the class action and improves the class’s case against Apple and the remaining publishers, Macmillan and Penguin.

There’s another gift to the private lawyers in the DOJ case as well: The Justice Department is not asking for any money damages of its own. Its complaint seeks only a decree that the defendants engaged in an unlawful price-fixing conspiracy, an injunction against such collusive conduct, and costs. The Antitrust Division — which filed its case in Manhattan federal court as a related proceeding to the multidistrict litigation — seems to be leaving money damages entirely in the hands of Hagens Berman and Cohen Milstein.

Steve Berman of Hagens Berman told me in an email that it’s not unusual for the Justice Department “to leave damages to private lawyers.” He also said there had been no discussions between class counsel and the DOJ on what sort of damages the Justice Department would seek. But his firm’s official statement makes clear that the private lawyers also noticed the distinction between what they want and what the Antitrust Division is after:

The eminent white-collar defense boutique Brune & Richard has spent the last few months in the uncomfortable and unaccustomed position of defending itself. The firm is under scrutiny for its decision not to disclose the results of its pretrial research on prospective jurors until a month after the verdict, when it joined other defense counsel in requesting a new trial based on juror misconduct. This is a cautionary tale. The facts of this particular ethical pickle are so specific as to be almost unbelievable, but the issues raised in the Brune & Richard case are going to become increasingly universal as Internet jury research becomes the rule rather than the exception: How much must lawyers tell judges about their findings? And what are the implications for the jury system if lawyers are required to report mere suspicions about a prospective juror’s past?

Here’s the back story, laid out in a brief filed Friday by Brune & Richard’s counsel at Dechert. At the beginning of jury selection in last spring’s trial in Manhattan federal court of five white-collar defendants accused of marketing illegal tax shelters, Brune & Richard, which was representing a former Deutsche Bank broker, came across some intriguing information. A lawyer at the firm Googled the names of prospective jurors who were part of the jury selection pool. When she searched for Catherine Conrad, she found a 2010 order by a New York appeals court suspending an attorney named Catherine Conrad for alcohol abuse. It wasn’t clear whether the suspended lawyer was the same woman as the prospective juror, so after discussing the problem, Brune & Richard lawyers, including lead counsel Susan Brune, resolved to pay close attention to the juror’s answers in voir dire.

Juror Catherine Conrad said she’d gone no further in school than college, where she earned a degree in literature. She also said she was a stay-at-home wife who had never appeared before a licensing authority. Based on those answers, Brune & Richard decided that the juror and the suspended lawyer were different people who both happened to be named Catherine Conrad.

Distressed debt investors don’t have much credence as victims. These are, after all, hedge funds that buy up bonds in or near default, typically at a steep discount, in the hope they’ll be able to boost the value of the debt through the bankruptcy process or litigation in U.S. courts. Right now, for instance, distressed bond funds are preparing for battle over billions of dollars worth of Greek sovereign debt that they snatched up in anticipation of that country’s default in March. Distressed debt funds quite literally feed off the flesh of moribund companies and foreign economies, which is why they’re frequently called vulture funds. Vultures flanked by crafty lawyers aren’t entitled to a whole lot of sympathy.

But they earned some from me when I read the Justice Department’s new amicus brief, filed last week at the 2nd Circuit Court of Appeals in the long-running battle between The Republic of Argentina and NML Capital, Aurelius, and other holders of defaulted Argentine bonds. The brief suggests that the Justice Department believes the foreign policy objectives of the executive branch trump the obligations of a foreign sovereign to comply with U.S. court directives. That’s an argument the government clearly feels conflicted about, based on the brief. And its support of Argentina, at the expense of the power of the U.S. court system, could roil the vulture-dominated secondary market for distressed sovereign debt in the midst of the Eurozone crisis.

Usually, the United States wouldn’t get involved in a dispute over contract interpretation, which is at the heart of the cases at the 2nd Circuit. But the Justice Department believes Argentina’s appeal implicates a “cornerstone” foreign economic policy. Last December, U.S. District Judge Thomas Griesa of federal court in Manhattan issued a series of orders in various bondholder cases against Argentina concluding that under the standard contract provision known as pari passu (or “equal footing”), Argentina must pay the vulture funds in full before making payments to investors who agreed to participate in two rounds of restructurings that followed Argentina’s 2002 bond default. In February, Griesa issued injunctions based on those orders, which meant that Argentina could not make any payment to investors who were issued new debt in the 2005 and 2010 restructurings until it paid the holdouts everything it owes them.

I was surprised back in June 2010 when U.S. District Judge Louis Stanton of federal court in Manhattan granted summary judgment to YouTube and Google in a pair of copyright infringement actions by Viacom and soccer’s Premier League. The case record, after all, was replete with email evidence suggesting that YouTube executives salted their site with videos they knew were illegal, even after they’d received notice that the videos infringed copyrights. YouTube, meanwhile, had alleged that Viacom secretly uploaded its own videos to the site to entrap YouTube. Either way, it seemed to me that the factual allegations demanded an airing, but Stanton instead ruled that YouTube was protected under the safe harbor provisions of the Digital Millennium Copyright Act because (among other things), it had insufficient knowledge of specifically infringing material. The decision was regarded as a boon to Internet content-sharing sites and a powerful endorsement of the DMCA’s safe harbor protection.

Too powerful, according to a two-judge panel of the 2nd Circuit Court of Appeals. On Thursday, Judges Jose Cabranes and Debra Ann Livingston agreed with Stanton that to get past the safe harbor provision, plaintiffs must show a defendant has “actual knowledge or awareness of specific infringing activity.” But they said that a reasonable jury in this case could find YouTube had such knowledge. The judges pointed in particular to YouTube officials’ emails about Viacom and Premier League-owned content, and said a reasonable juror could conclude from that evidence that YouTube “was at least aware of facts or circumstances from which specific infringing activity was apparent.” As Jon Stempel reported for Reuters, the appellate panel remanded the case to Stanton to determine whether YouTube knew infringing material was posted on the site.

The most significant aspects of the ruling, according to Premier League counsel Charles Sims of Proskauer Rose, are the 2nd Circuit’s consideration of willful blindness — an issue of first impression, according to the appeals court — and a defendant’s “right and ability to control” infringing content under the DMCA. The plaintiffs had asserted that YouTube had to be willfully blind to ignore allegedly infringing material on its site. The 2nd Circuit noted that the DMCA doesn’t mention willful blindness, but applied its own precedent from trademark cases to conclude that “the willful blindness doctrine may be applied, in appropriate circumstances, to demonstrate knowledge or awareness of specific instances of infringement.” Whether the doctrine applies in this case, the 2nd Circuit said, is a question for Stanton on remand.

Beth Kaswan of Scott + Scott has the fervor of a pioneer when she talks about the implications of U.S. District Judge William Pauley‘s ruling Tuesday that her client, a Chicago police officers’ pension fund, can proceed with some claims that Bank of New York Mellon violated its duty to Countrywide mortgage-backed securities investors under the federal Trust Indenture Act. “Judge Pauley is the first judge to say the Trust Indenture Act, in existence since 1939, does apply in this type of circumstance to mortgage-backed securities,” Kaswan told me Wednesday. “That means investors can sue trustees, even if they can’t cobble together 25 percent” of the voting rights in any particular trust — a prerequisite to suing under the pooling and servicing agreements governing most MBS trusts.

Kaswan, who said her firm was the first to assert the federal law against an MBS trustee, believes Pauley’s 19-page decision offers a significant new route to damages for MBS investors. The Manhattan federal judge ruled that the Chicago fund only has standing to bring claims for the trusts in which it invested, reducing the number of Countrywide MBS trusts in the case from 530 to 26. But he also said that investors in those 26 trusts can sue BNY Mellon for allegedly failing to notify certificateholders that Countrywide and Bank of America supposedly breached their obligations to the trusts and for failing to take action on those breaches.

Kaswan said the ruling means that even investors who sold their Countrywide mortgage-backed notes at a loss — who are not slated for recovery under Bank of America’s proposed $8.5 billion global settlement with Countrywide MBS holders — have a viable cause of action. The federal law also imposes duties on the trustee beyond those specified in MBS pooling and servicing agreements, Kaswan said, which means investors have a better chance to show BNY Mellon failed certificateholders.

In a really smart piece last month, my Reuters pal Dan Levine wrote that Steve Jobs’ promise to kill Google’s Android operating system has not been fulfilled. Instead, wrote Levine and co-author Poornima Gupta, Apple’s patent war against Android users Motorola, Samsung, and HTC had become “a costly global war of attrition.” Both sides have won skirmishes, but no battle has been decisive. The Reuters story quoted Judge Richard Posner of the 7th Circuit Court of Appeals, who is overseeing a Motorola case in U.S. District Court in Chicago. “You’re not going to shut down the smartphone,” Posner told Apple’s lawyer. “[And] they’re not going to shut down the iPhone.”

The exact same thing could be said of Microsoft’s patent war with Google and its Android acolytes. When the smartphone patent infringement cases launched in 2009 and 2010, maybe it was feasible that one or two of the big three could kill off another of them. But since then, with Apple and Microsoft teaming up to buy Nortel patents and Google countering with its purchase of Motorola Mobility, this war has become a standoff that can only be resolved with cross-licensing deals.

That’s why antitrust arguments — as opposed to patent infringement claims — have been creeping into the spotlight over the last few months. On Tuesday, the European Union announced that it has opened antitrust investigations of Motorola’s demands for licensing fees on standard-setting patents, following complaints by both Microsoft and Apple. (Google’s Android partners, of course, have lobbed similar allegations of patent extortion at Microsoft.) The goal of such claims is to drive down the cost of licensing one another’s patents. In other words, if you can’t beat ‘em, pay as little as possible to join ‘em.

George Fountas, an out-of-work accountant from Lynn, Massachusetts, profoundly mistrusts the healthcare system. Get him started, and he’ll reel off stories about how death rates decline when doctors go on strike and burial societies are the biggest fans of hospitals. Before 2007, according to Fountas, he had never paid a penny for healthcare coverage. He saw no reason why he should start, despite a then-new law in Massachusetts that said he’d be subject to a fine if he refused to join a health insurance plan. He refused to join a health plan, and refused to report that information on his 2007 tax return.

Fountas has no more regard for lawyers than doctors — “I’m kind of antisocial,” he told me — but he’s a U.S. Constitution buff. So instead of simply surrendering his $60 tax refund to the state as a penalty for failing to comply with the new law (and also giving up the right to claim a personal tax exemption worth about $219), Fountas filed a complaint in Essex County Superior Court claiming that the Massachusetts mandate violated his due process rights under both the state and federal constitutions.

Fountas’ amended suit was a scant five pages, but it raised some of the same fundamental questions that the U.S. Supreme Court weighed last week in an unprecedented three days of oral arguments on President Barack Obama’s nationwide healthcare law. Does a legislative body have the power to compel an individual to purchase health insurance? And does it have the power to impose a penalty on anyone who refuses to comply with that directive?