Jeffrey Gundlach, who was fired from TCW Group Inc. and started his own firm, won a $66.7 million jury award against his former employer for unpaid wages.
Gundlach, who has to share the money with three of his colleagues, was also found Sept. 16 to have breached his fiduciary duty to TCW and misappropriated its trade secrets. The Los Angeles jury awarded the company no damages on the breach claim. A judge will determine damages on the trade-secret claim.
Susan Estrich, a lawyer for TCW, said the company will ask the judge to award it $89 million on the trade-secret claim. The company also won a claim for intentional interference with contractual relations. The jury awarded no damages.
TCW, the Los Angeles-based unit of Societe Generale (GLE) SA, sued Gundlach, 51, in January 2010, after more than half of its fixed-income professionals joined DoubleLine Capital LP, the asset-management firm Gundlach started within weeks after TCW fired him. TCW sought as much as $566 million in damages.
Brad Brian, a lawyer for DoubleLine, said it could be months before the judge rules on the “reasonable royalty” for TCW’s trade-secret claim.
The jury found that Gundlach and DoubleLine didn’t act willfully and maliciously in misappropriating trade secrets.
Michael Cahill, TCW’s general counsel, said in an e-mailed statement that the verdict “speaks directly to the principles at the heart of this case -- integrity, honesty and trust. The jury found that each of the defendants violated these principles.”
Gundlach, who had worked at TCW for 25 years and was named Morningstar’s Fixed Income Manager of the Year in 2006, countersued, saying TCW fired him to avoid having to pay management and performance fees for the distressed-asset funds his group managed and that went “through the roof.” Gundlach sought about $500 million.
The jury heard more than six weeks of testimony as the two sides provided conflicting views of Gundlach’s falling out with TCW Chief Executive Officer Marc Stern in 2009, which ended with Stern’s buying Metropolitan West Asset Management LLC to run TCW’s fixed-income group and firing Gundlach in December 2009.
Stern testified that he became suspicious of Gundlach after a series of September 2009 meetings and instructed TCW’s in- house lawyer to start monitoring the e-mail of Gundlach and others in his group. The investigation showed Gundlach’s people were downloading TCW’s proprietary information and looking for office space, Stern said.
Gundlach denied that DoubleLine used any of TCW’s proprietary software systems and data.
DoubleLine’s lawyers argued that Stern started looking to replace Gundlach as early as June 2009, about the time Stern returned to active management. Gundlach and other senior managers at TCW had opposed Stern’s return out of retirement and wanted the firm to be run by a management committee instead.
Gundlach had negotiated for him and his group to receive 60 percent of the performance fees for the distressed-asset funds he set up in 2007 and 2008.
As the funds performed better than expected, Paris-based Societe Generale and TCW wanted to replace Gundlach with a less expensive asset manager, DoubleLine’s lawyers said.
The case is Trust Co. of the West v. Gundlach, BC429385, California Superior Court, Los Angeles County (Los Angeles).
Craigslist May Have ‘Lobbied’ for EBay Subpoena, Lawyer Says
EBay Inc. (EBAY)’s lawyer said Craigslist Inc. may have “lobbied” for a criminal subpoena issued in a federal probe into allegations the online auctioneer stole confidential information from Craigslist.
The criminal subpoena issued earlier this month and served on EBay means the exchange of documents and information in Craigslist’s lawsuit against EBay should be put on hold, EBay lawyer Mark Lambert said at a hearing Sept. 15 in state court in San Francisco.
The online classified company claims in the lawsuit that San Jose, California-based EBay used proprietary information from Craigslist to start a competing online ad site when the two companies were negotiating over EBay buying a stake in Craigslist. After winning two rulings that the case can proceed, Craigslist is seeking to move ahead with discovery, where the two sides exchange documents and interview witnesses.
“We believe they lobbied for” the subpoena and put it in newspapers, Lambert said at the hearing.
“This is something that they took to the authorities, it’s of their making,” Lambert told Superior Court Judge Richard Kramer, who is presiding over the civil case.
The Sept. 7 grand jury subpoena to Craigslist seeks information pertaining to “incidents where EBay employees engaged in alleged criminal activities and misconduct focused around the misappropriation of proprietary/confidential information from Craigslist.”
It lists a February 2005 incident in which EBay founder Pierre Omidyar allegedly requested information from EBay and instructed employees to use Craigslist metrics to compare its growth rates with those of EBay’s competing website called Kijiji.
Michael Clyde, an attorney for Craigslist, told Kramer that the criminal subpoena should have no impact on the civil case.
The subpoena “will not cause complete cessation of anything,” Kramer said. The judge scheduled the next hearing in the case for Oct. 18.
EBay said Sept. 13 that the company is cooperating with the U.S. Justice Department investigation.
“We will cooperate with any inquiry related to the disputes between EBay and Craigslist,” Amanda Miller, an EBay spokeswoman, said in an e-mail.
The civil case is Craigslist v. EBay, 475276, Superior Court of California (San Francisco).
Samsung Claims Apple IPad, IPhone Infringe Australian Patents
Samsung Electronics Co. accused Apple Inc. (AAPL) of patent infringement in Australia, adding to multiple lawsuits across at least four continents involving the two companies’ dispute over smartphone technology.
The cross claim filed with the Federal Court of Australia alleges Apple’s iPhone and iPad infringe seven patents related to wireless communications standards, Samsung said in an e-mail Sept. 16. It also seeks to invalidate and revoke Apple patents that have been asserted against Samsung’s Galaxy phones and tablets.
Apple, based in Cupertino, California, and Samsung have been embroiled in a global battle over market share for both phones and tablet computers. Apple has accused Samsung of “slavishly” copying the iPad and iPhone and has had success in curtailing Galaxy sales in Australia and Germany. There are also lawsuits in the U.S. and Asia.
“Samsung has a proud history of innovation in the mobile industry,” the Suwon, South Korea-based company said. “It has invested continuously in R&D, design and technology to produce our innovative and cutting-edge mobile devices.”
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Apple Gets Seizure of Fakes, Name Change of ‘Apple Story’ Shop
Apple Inc., maker of the iPhone and iPad, succeeded in getting operators of two stores in Flushing New York that sold fake Apple items to turn the items over to the Cupertino, California-based company for destruction.
Apple sued the proprietors of the two stores for trademark infringement in federal court in Brooklyn July 25, after the company’s representatives visited the stores and bought items improperly using Apple trademarks.
Even though neither of the stores was an authorized outlet, one was named “Apple Story,” and, as part of the settlement, that name may no longer be used.
The two stores will also deliver Apple any promotional material bearing the California company’s marks without authorization. In the future, should any products with false Apple marks come into the store’s possession, they are required to “promptly segregate, quarantines and maintain any and all such products and business records,” notify Apple’s counsel and delivery the items to the company, according to the court filing signed Sept. 15 by counsel from both sides.
The case is Apple Inc., v. Apple Story Inc., 1:11-cv-03550- KAM-MDG, U.S. District Court, Eastern District of New York (Brooklyn).
Google EU Antitrust Probe Checks Company’s ‘Gate-Keeper’ Role
The European Union antitrust probe into Google Inc. (GOOG) focuses on whether the world’s largest Web search company has a dominant position that allows it to influence the “behavior of Internet users.”
“Google is the browser of choice for very many of us; but dominance is not the same as abuse of dominance,” Joaquin Almunia, the EU competition commissioner, said in a speech in Florence, Italy, Sept. 16. “Abuse is a conduct that protects or extends dominance by illegitimate means, and we still have to conclude whether this is the case for Google.”
Google, based in Mountain View, California, is under growing pressure from global antitrust agencies probing whether the company uses its position in Web searches to thwart competition. While Microsoft Corp. (MSFT) and partner Yahoo! Inc. have about a quarter of the U.S. search market, Google has almost 95 percent of the traffic in Europe, Microsoft said in a blog post in March, citing data from regulators.
One aspect of the 27-nation EU probe “is determining whether Google holds a position of gate keeper and is able to influence the behavior of Internet users,” Almunia said.
Al Verney, a spokesman for Google in Brussels, declined to comment on Almunia’s speech.
The digital market is becoming part of “sophisticated strategic interactions” between companies, also in the form mergers, said Almunia. An “interesting” case in this field for the commission will be the proposed merger between Microsoft and Skype Technologies SA.
Microsoft in May agreed to buy Luxembourg-based Skype for $8.5 billion, to gain the world’s most popular Web-calling service and help it catch up in online and mobile advertising. The Brussels-based commission set an Oct. 7 deadline to rule on the deal.
“The real challenge for us in these markets is separating the potential for innovation from the potentially excessive market power a company can acquire,” said Almunia.
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Google Won’t Face Some Oracle Copyright Claims, Judge Rules
Google Inc., the largest Internet search company, won’t have to face part of Oracle Corp. (ORCL)’s claim that it infringed copyrights for the Java programming language.
U.S. District Judge William Alsup in San Francisco ruled Sept. 16 that some of the material Oracle claimed was infringed isn’t protected by copyright.
The copyright claim is part of Oracle’s lawsuit against the search-engine company alleging that the Android operating system for mobile devices infringes patents that Oracle owns after acquiring Sun Microsystems Inc.
Oracle accused Google of infringing 12 lines of code and 37 “specifications” for programming interfaces. Alsup said in his ruling that the names of the specifications that Google copied aren’t protected by copyright and ruled that the Mountain View, California-based company must face infringement claims on the other material.
Oracle, based in Redwood City, California, seeks billions of dollars in damages and a court order for the destruction of all products that violate its copyrights.
The case is Oracle America Inc. v. Google Inc., 10-03561, U.S. District Court, Northern District of California (San Francisco).
Hotfile Answers Complaint, Claims Warner Bros. Abuses DMCA
Hotfile.com, a Panamanian company that offers its users “cyberlockers” to store digital content, has responded to a copyright infringement suit by Time Warner Inc. (TWX)’s Warner Bros Entertainment unit by accusing the company of copyright abuse.
Warner, together with the Walt Disney Co. (DIS), and three other studios, sued Hotfile.com in federal court in Miami in February. They accused the company of acting as a “commercial online hub for distributing popular entertainment content without authorization.” Users of Hotfile pay a monthly fee to download content, including movies playing in theaters, from the company’s servers, the studios said in their complaint.
In a Sept. 12 court filing, Hotfile said that before the suit was filed, it had already complied with the studios’ requests made under the Digital Millennium Copyright Act to remove infringing material. The company said it designed a special tool that enabled Warner to delete or disable “an unlimited number of files” that Warner “believes in good faith infringes its copyrights.”
Instead, Hotfile said, Warner used the tool -- a “Special Rightholder Account” -- to remove “thousands of files” without ever viewing them, including some for games and free software that had no connection to the studio’s content.
Automated search is part of the problem, Hotfile said in its filing, giving the example of the removal of any file with “The Box” in its name despite the fact that many of them had nothing to do with the Warner movie by that name. Some of the files removed were actually for an audio book on alternative cancer treatments titled “Cancer: Out of the Box,” according to Hotfile.
Warner’s actions resulted in “a large number of wrongful take-downs,” Hotfile said, accusing the studio of violating the DMCA. The company asked the court for money damages, and an order barring removal of any additional files without verification of their content.
The case is Disney Enterprises Inc. v. Hotfile Corp., 1:11- cv-20427-KMW, U.S. District Court, Southern District of Florida (Miami).
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