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IN THE UNITED STATES DISTRICT COURTFOR THE EASTERN DISTRICT OF NORTH CAROLINAWESTERN DIVISIONNO. 5:10-CV-101-HSAS INSTITUTE, INC.,Plaintiff,v.FINDINGS OF FACT, CONCLUSIONSOF LAW AND ORDERAKIN GUMP STRAUSS HAUER &FELD, LLP and MICHAEL rabenchtrialconducted during its civil term of court beginning December 15,2014.Plaintiff,SAS Institute,suffered injuriesresultingInc.("SAS"),from constructivecomplains that itfraudand breachof contract by defendants, Akin Gump Strauss Hauer & Feld ("AkinGump")and Michael L.Kiklis.Margolis Dagger, and Mr.SAS.Mr.R.Mr.PaulK.Sun,Jr.,Ms.KellyDonald H. Beskind appeared on behalf ofDaniel Boyce,Mr.William W.Wilkins,Ms.KirstenElena Small,and Mr.Andrew Mathias appeared on behalf of AkinGump and Mr.Kiklis.Representatives from the corporate partiesas well as Mr.Kiklis were present at the trial.After carefulCase 5:10-cv-00101-H Document 325 Filed 02/06/15 Page 1 of 55
review of the pleadings,pretrial order,stipulations,and theevidence, the court makes the following:FINDINGS OF FACT1.SAS is a privately held software corporation organizedand existing under the laws of the State of North Carolina withits principal place of business in Cary, North Carolina.2.andAkin Gump is a limited liability partnership itsoftheprincipal place of business in Dallas, Texas.Mr.3.isKiklisacitizenandresidentCommonwealth of Virginia.Mr.4.theStateKiklis is an attorney licensed to practice law gton, ton, D.C. office.SAS6.companyinengaged Akin Gump("government affairs")monthlyaffairsgovernmentretainerininJuly 2006andpublictorepresentpolicythemattersfor which SAS agreed to pay Akin Gump atheamountoffifteenthousanddollars(" 15, 000. 00").2Case 5:10-cv-00101-H Document 325 Filed 02/06/15 Page 2 of 55
7.SAS,Ms. Katherine Hahn, the Director of Federal Affairs atwas responsible for engaging Akin Gump for the eresponsiblepartner at Akin Gump for public policy representation,and Ms.Amita Poole were Ms. Hahn's primary contacts at Akin Gump duringthe course of its government affairs ts,retainer easetwenty thousand dollarsitstomonthly(" 20,000.00")inJanuary presentation of SAS, Akin Gump regularly solicited Ms. Hahn tosecure more work forthelawfirm from SASin other areasofpractice.10.In January 2007, Mr. Michael O'Shea, who was a partnerat Akin Gump from November 2004 through July 2008, was contactedby a friend at General Patent Corporation,Gump'srepresentationofJuxtaCommInc.to solicit AkinTechnologies,Inc.("JuxtaComm") in a patent monetization ingunder the laws of Canada with its principal place of business inCalgary, Alberta,Canada.JuxtaComm is the owner of U.S.No. 6,195,662 ("the '662 patent").3Case 5:10-cv-00101-H Document 325 Filed 02/06/15 Page 3 of 55Patent
a from disparate computer systems, transforms the data into asingle format,and downloads the data to a computer system foranalysis thetransfer of rights to the patent to third parties by licensingagreements or otherwise;or(2)the prosecution and enforcementof claims against potential patent infringers.14.In February 2007, Mr. Kiklis was hired by Akin Gump asa capital partner in its fJuxtaComm,D.C. office and assigned isofAkin Gump.15.In early 2007, Akin Gump began a three-step process todetermine the prospect of its representation of JuxtaComm in thecompany's patent monetization efforts.16.theAkin Gump's three-step evaluation process to aim isasfollows:a. Determineparticipants 1inthemarketthatthepatent impacts;1Although SAS argues that a significant distinction must be made between"market participants" and "targets" or "potential targets," the court isunpersuaded that "target" can only refer to actual infringers within the4Case 5:10-cv-00101-H Document 325 Filed 02/06/15 Page 4 of 55
b. Perform aninternalconflictscheck onthelistof market participants to determine whether any of thefirmfromwiththebecominglawfirmadversetothem; andc. Analyze and compare market products to the patentto determine whether thereisagood faith basisforaclaim of patent infringement.17.GumpAlthough Mr.whohasLarry Macon,practicedlawoversignificant litigation experience,acapitalforty-fourpartneryearsat Akinandhaswas formally lead counsel inAkin Gump's representation of JuxtaComm, he assigned significantoversight and supervisory responsibilities to others,includingMr. rmingand supervising the due diligence conducted by Akin Gump beforeentering into a retention agreement with JuxtaComm.19.In March 2007, Mr. Kiklis retained the consulting firmPrecedia Associates LLC("Precedia")perform a patent study related to theon behalf of Akin Gump to'662 patent in conjunctionwith Akin Gump's internal three-step evaluation.crosshairs of litigation.Within the course of ordinary conversation,especially amongst law office colleagues and clients, it would be unfair todisregard the context and limit the definitional scope of "targetu in casualconversation to the requested extent. Consequently, the court interprets"targetu broadly to include either a market participant or an actualinfringer subject to litigation as the context permits.5Case 5:10-cv-00101-H Document 325 Filed 02/06/15 Page 5 of 55
20.otherDuring the due diligence period, Mr.attorneys,including Mr.WesFerrebee,Kiklis supervisedat AkinGump whoconducted web-based research on market participants who could bepotential '662 patent bee'sMr.based upon public information,were manufactured bythe marketparticipantsincludedanof products thattodeterminethescope of claims for possible infringement of the '662 millionMr.inawasseriesinaor marketdollarsKiklisleaderconsideredtechnology productstwenty-four2007,oftheETLtarget.SASshare(" 224M")totaledfrom2003through aretainedsubmitted a report to Akin Gump that identified SASas a potential infringer of the '662 patent.24.Akin Gump and Mr.Kiklis were made aware of specificSAS products that rely upon ETL technology. Although the extentoftheresearchconductedondiligence period by Akin s,leastduringthedueand their agents isidentifiedaparticular6Case 5:10-cv-00101-H Document 325 Filed 02/06/15 Page 6 of 55
collection of SAS products that utilized ETL technology and mayhave been infringing the '662 patent.25.SAS did not present sufficient evidence to warrant afinding that Akin Gump,Mr.Kiklis,or their agents performed amore extensive investigation into the operation and function nfringement during the due diligence period in early 2007.2 ledge no later than May 23, 2007 that:a. SASwasacurrentclientofAkinGumpandhadintheETLbeen since July 2006;b. SASwasasignificantparticipanttechnology market; andc. SASmanufacturedproductsthatpotentiallyinfringed the '662 patent.27.Oneof these potentially infringing products wasthesubject of JuxtaComm's claims against SAS in JuxtaComm 11. 228.Later on May 23, 2007, Mr. Kiklis sent an email to Mr.Ferrebee thatinstructed him,"PleasetakeSASoff thetargetlist."29.By the end of the due diligence period, Mr. Kiklis andAkin Gump had expended substantial resources in the analysis and2JuxtaComrn-Texas Software,Tex. Filed Jan. 21, 2010).LLC v.Axway,Inc.,et al.,No.6:10-cv-3597Case 5:10-cv-00101-H Document 325 Filed 02/06/15 Page 7 of 55(E.D.
tentclaims. Akin Gump made a representation within its July 13, edtoeighthundred thirty-five thousand dollars (" ASwasanwasformallyengagedtoinfringer of the '662 patent.31.InJuly2007,Akinrepresent JuxtaComm in itsthepartiesexecutedGump'662 patent enforcement t to the terms of the agreement, Akin Gump would receivean initial retainer of ten million dollars(" wentyAkinpercentGumpduringthein ,SundefendantsThe JuxtaComm I retention agreement expressly othethescopeofJuxtaCommpotentialIlawsuit.This kind of exclusionary provision was not commonly inserted inretention agreements drafted by Akin Gump.3JuxtaComm Techs., Inc. v. Ascential Software Corp., et al., No. 2:07-cv-359(E.D. Tex. Filed Aug. 17, 2007).8Case 5:10-cv-00101-H Document 325 Filed 02/06/15 Page 8 of 55
inst JuxtaComm by the excepted parties.34.The JuxtaComm IandJuxtaComm understoodGumpwas"anecessarystepretention agreement reveals that nforcingandlicensing the Patents 4 to realize their full economic frameworklitigationuponwhichembark on a program of enforcing the patentsagainst other infringing parties . vided that Akin Gump would be entitled to 20% of "all valuereceivedfromPatents.any personevenorwhen volved withobtaining such value" ("20% provision").36.Macon,the(3)theexecuted the20%firm;Because Akin Gump knew at the time that its agent, Mr.( 2)provisionJuxtaComm Ithat:( 1)retention agreementSASwasacurrentcontainingclientoftheSAS was a significant participant in the ETL market;SAS manufactured particular products that may be infringing'662patent;( 4)JuxtaCommbelievedthatSAS4wasan"Patents" is defined in the JuxtaComm I retention agreement and includes "the'662 patent as well as any related patents . "9Case 5:10-cv-00101-H Document 325 Filed 02/06/15 Page 9 of 55
infringer of thewas"a'662 patent; and penseprobableandstepinalargerpatent]possibilitySAS wasreasonablytoofnotthe JuxtaComm I [its]fullfinancialeconomicbenefitand speculative butforeseeablebyAkinandGumpatratherwhenitexecuted the agreement.37.wasAlthoughMr.included in theMaconJuxtaComm Idisincentivefor" [AkinGump]would rueagreement:nothing more,tothat20%provisiontakenGumpandthatany deposition"thetheretention agreement only morefairlyJuxtaCommwhattheyIsay,nothing less. And so trying to expand it or changeit is just not right."38.The 20% provision,however,in addition to securing apecuniary interest in favor of Akin Gump adverse to s ainitsknowinglyandlitigation efforts after completing JuxtaComm cutedadversethetoSAS,aJuxtaCommIretention letter that contained the 20% provision.10Case 5:10-cv-00101-H Document 325 Filed 02/06/15 Page 10 of 55
40.Akin Gump did not disclose and transmit in writing toSAS the transaction and termson which it acquired an onIagreement.41.seekAkin Gump did not give SAS a reasonable opportunity adverseregardingpecuniaryAkininterestGump' sintheJuxtaComm I retention agreement.42.anSAS did not give Akin Gump informed consent to acquireadversepecuniaryinterestbyexecutingthe JuxtaCommIretention agreement.43.RuleWashington,acquire.1. lConduct 5not.forknowingly[a] pecuniary interest adverse to a client unless:(1)The transaction and terms on which thelawyeracquirestheinterestarefairandreasonable to the client and are fully disclosedand transmitted in writing to the client in amanner which can be reasonably understood by theclient;(2) The client is given a reasonable opportunityto seek the advice of independent counsel in thetransaction; and(3) The client gives informed consent in writingthereto.5Although this Rule and others contained within the findings of fact are fromthe Rules of Professional Conduct for Washington, D.C., corresponding rulesfrom the ABA Model Rules of Professional Conduct and the North Carolina Rulesof Professional Conduct were presented as evidence by exhibit, testimony,reference, or otherwise and contain no material distinction.11Case 5:10-cv-00101-H Document 325 Filed 02/06/15 Page 11 of 55
ting, or execution of the JuxtaComm I retention agreement.45.DuepecuniarytoAkininteresttoretention odiscloseexecutedtheanadverseJuxtaCommISAS was foreclosed from making an n of Akin Gump for government affairs iscuss the possibility of executing a cross-licensing agreement("IBM cross-licensing matter").IBM owns the rights to "tens ofthousands" of patents.Mr.4 7.Timothy Wilson is,and wasat alltimesrelevantto this action, Senior Intellectual Property Counsel at SAS.In48.responsetocross-licensing agreement,IBM'sMr.approachtoSAStodiscussaWilson immediately contacted Mr.Kiklis to discuss representation in the matter.Although hoWilson and both attended tMr.OracleCorporation.50.WilsonAfterlearning about Mr.contactedWashington,D.C.Mr.KiklisAlthough Mr.atKiklishisfrom Mr.formerPrasad,lawWilson did not hire Mr.firmMr.inKiklis to12Case 5:10-cv-00101-H Document 325 Filed 02/06/15 Page 12 of 55
tters adverse to IBM.51.AkinWhenGump,Mr.heKiklistransi tionedemailed mployment.52.SASAkin Gumpsummerofdidnotrelated to2007whenhavetheaformalretentionagreementwithIBM cross-licensing matter during cant attoldSASwasMr.Wilsonalreadyaduringclientof AkinGumpand that he was SAS' lawyer.and54.During the course of conversations between Mr.Mr.Kiklisthroughoutdisclosed sonartinhowever,presentsufficient evidence related to the details of the prior artdisclosed to Mr.suchdisclosuresKiklisor Akin Gump to warrantmateriallyrelatedtotheaitsitfinding thatsubstanceJuxtaComm's claims in JuxtaComm II.13Case 5:10-cv-00101-H Document 325 Filed 02/06/15 Page 13 of 55of
55.Despitetheabsenceduring the summer of 2007,ofMr.aKiklisinanretentionWilson and Mr.the terms of a formal engagement.notified Mr.formalOn July 14,emailthatagreementKiklis discussed2007,his managerMr.Wilsonrequested atwo-hour limitation on Akin Gump's representation of SAS in theIBM cross-licensing matter.56.Upon learning of the two-hour limitation request,Mr.Kiklis emailed at least one partner at Akin Gump and commented,"What ajoke,"referring to his appraisal of therequest.Mr.Kiklis testified that "two hours of work isn't enough to scratchthe surface or really do snewsandlookinfringement case that he was filing.informedforMr.aWilsonthatsubstantialKiklis washepatentreferringto JuxtaComm I but did not expressly communicate the parties orcase name to Mr. Wilsonexpressedwasconcernwould haveKiklis assured mplicationsinquiredforSAS.Wilson that "SAS was a client" and that"SAS had nothing to worry about with respect to that lawsuit."Mr.Wilson testified that he relied upon this representation byMr. Kiklis.14Case 5:10-cv-00101-H Document 325 Filed 02/06/15 Page 14 of 55
59.Mr.Kiklisinfringementsubsequently ndants who participated in the ETL market,Ipatenttwenty-onebut the lawsuitdid not name SAS as a defendant.60.NeitherMr.Wilsonfurther inquiry to Mr.orpotentialofanyotheragentofSASmadeKiklis or Akin Gump related to an sion.61.articleLatertoin I,emailed aandMr.newsWilsonexpressed relief that SAS had not been named a defendant.62.findingwasSAS did not present sufficient evidence to warrant athatthemateriallysubject matter of AkinGump'sgovernment affairs representation on behalf of SAS.63.IBM'sinitialdemand regarding the IBM cross-licensing matter with Mr.Kiklis,and .legalpriorWilsonadvicediscussedto rse to IBM.64.A formal retention agreement related to the IBM cross-licensing e 5:10-cv-00101-H Document 325 Filed 02/06/15 Page 15 of 55
agreement")wasdrafted by SASandexecuted by Mr.Kiklisonbehalf of Akin Gump.65.The SAS/IBM retention agreement established the termsof Akin Gump's representation of SAS for services related to theIBM cross-licensing usebefore completion of the rmingservices for[SAS]" and to "notify [Mr. Wilson] of any potentialconflictinterestofwhich becomesapparent"beforeorduringthe Mknewshould have known that:16Case 5:10-cv-00101-H Document 325 Filed 02/06/15 Page 16 of 55or
a. SAS was a current client of Akin Gump since July2006; andb. Akin Gump had secured a pecuniary interest, whichwas more than atoSASwhenremoteitor speculative ement.70.Mr.Kiklis and Akin Gump did not notify Mr. Wilson orany other agent of SAS that a potential or current conflict ofinterest existed when Mr.Kiklis executed the SAS/IBM retentionagreement on behalf of Akin est ethical standards in performing services for SAS when red by the JuxtaComm I retention agreement,whichwasbefore or afterMr. Kiklis' execution of the SAS/IBM retention agreement.72.anDue to Mr.adverseKiklis and Akin Gump's failure to disclosepecuniaryinterestSAS/IBM retention agreement,toSASbeforeSASSAS was foreclosedexecutedthefrom making aninformed decision regarding its retention of Akin Gump for theIBM cross-licensing r.Danielsenior counsel at Akin Gump who was practicing atfirm's heregarding an ethics matter thatphaseoftheJuxtaComm17Case 5:10-cv-00101-H Document 325 Filed 02/06/15 Page 17 of 55I
ermissible for Akin Gump attorneys to review for privilege edpotential infringement by Sun Microsystems, SAP, and SAS.74.couldMr.reviewJoseph advised Mr.Macon that Akin Gump onduct review "for substantive questions about . whether sinfringedthethat,the[ '662patent] . "Mr.Josephfirm "could not either do analysis orifcorrect,wouldbeharmfuleitherto[SAS'] interests or JuxtaComm's."7 5.findingSAS did not present sufficient evidence to warrant athatprovided lateddeterminationtoSASregardingprivilege.76.In March 2008, Mark Evens, an attorney for Sybase, oneof the defendants in JuxtaComm I, contacted Mr. Wilson to obtainprior artfromSASthatcould beused tosupportitsdefensethat the '662 patent was 2008, and provided materials that Sybase later submitted to AkinGump in JuxtaComm Idefense.as prior artin support of itsBefore the meeting was concluded, Mr.invalidityWilson requested18Case 5:10-cv-00101-H Document 325 Filed 02/06/15 Page 18 of 55
forthcoming meeting.78.Although Akin Gump and SAS hoped for divergent resultsin the JuxtaCornrn I litigation while SAS was a current client ofAkin Gump, SAS was never a defendant in JuxtaCornrn onalConductforD.C. states, "A lawyer shall not advance two or ohibiting a lawyer from representing a client with respect toa matter if:(1) That matter involves a specific party orparties and a position to be taken by thatclient in that matter is adverse to a positiontaken or to be taken by another client in thesamemattereventhoughthatclientisunrepresented or represented by a differentlawyer;( 2) Such representation will be or is likely tobeadverselyaffectedbyrepresentationofanother client;( 3) Representation of another client will be oris likely to be adversely affected by suchrepresentation; and(4) The lawyer's professional judgment on behalfof the client will be or reasonably may beadverselyaffectedbythelawyer'sresponsibilities to or interests in a thirdparty or the lawyer's own financial, business,property, or personal interests.This rule is subject to an exception if:(1) Each potentially affected client providesinformed consent to such representation after19Case 5:10-cv-00101-H Document 325 Filed 02/06/15 Page 19 of 55
full disclosure of the existence and nature ofthe possible conflict and the possible adverseconsequences of such representation; and(2)The lawyer reasonably believes that thelawyer will be able to provide competent anddiligent representation to each affected client.8 0.CommentConductfor13toRuleWashington,1. 7 of dvocating a legal position on behalf of one client might createprecedentadversetotheinterestsof aclientrepresented bythe lawyer in an unrelated matter does not, without more, createa conflict of interest." A conflict may exist in this situationifthe"lawyer'smatter. . wyer'sinagiveneffectivenessinrepresenting another client in the same or different matter."81.findingSAS did not presentthatMr.Kiklisorsufficient evidence to warrant aAkinGump'sactiononbehalfofJuxtaComm in JuxtaComm I adversely affected their heIBMcross-licensing matter.82.Evens,Ashorttimehe contacted Mr.beforeMr.Wilson'sKiklis on March 10,meetingwith2008 to discuss theprogress of the IBM cross-licensing matter.Mr.Kiklistwenty-fourthatdollarsIBM( Wilson told Mr.Kiklismillionfor20Case 5:10-cv-00101-H Document 325 Filed 02/06/15 Page 20 of 55his
arranged a telephone conference for March 14, r.wouldWilson,becomemoreinvolved in the IBM cross-licensing matter.Kiklis sent to his partner, Mr.Davis,wentitforward with the project,Mr.KikliswassubstantiallyIn an email that Mr.he disclosed that if SAS"could besubstantial." Mr.Davis responded, "Congratulations! Touchdown."84.Mr.In March 2008, Mr. Wilson believed that SAS would needKi ofinSAS'IBM'sdemandsDespiteMr.subsequent conversations with theandAkinGumpwerenottoIBMbeliefandKiklis regarding the scope ofAkin Gump's potential increased role in the create proof packages on behalf of SAS in its effort to resolvethe IBM cross-licensing billed work on behalf of SAS in the IBM cross-licensing matter.The total billed time amounted to 2.4 hours,Gumponethousand,(" sand SAS paid Akinandfor14/100dollarsrepresentationrelated to the IBM cross-licensing matter.21Case 5:10-cv-00101-H Document 325 Filed 02/06/15 Page 21 of 55
86.InlitigationAprilasserted2008,twotheir invalidity martaspartIofincluding SAS Warehouse Administrator,which was identified by JuxtaCornm and Akin Gump or its agents asone of the potential infringing products during Akin Gump's duediligence period in early 2007.87.Consultants for Mr.Kiklis and Akin Gump analyzed theSAS products which were asserted by JuxtaCornm Iprior art in order to assist Mr.defendantsasKiklis and Akin Gump in theirresponse to the invalidity assertions.88.Wilson,On April 23, 2008, Mr. Kiklis asked in an email to Mr."What'slicensing matter.theMr.status?"inreferencetotheIBMWilson responded later that day,cross"We arepushing some other buttons before taking any additional steps onportfolio review. I don't expect anything new in the near ed terrupted from July 2006.90.For services rendered by Akin Gump to SAS related togovernment affairs representation from July 13, 2007 through May30,2 008,SAS paid Akin Gump two hundred twelve thousand,hundred fifty-eight and 06/100 dollars (" 212,258.06")6two 6This figure was calculated based upon the amount of money paid by SAS to AkinGump for the government affairs representation over the dates specified at22Case 5:10-cv-00101-H Document 325 Filed 02/06/15 Page 22 of 55
91.On August 21,still ongoing,and Mr.the email he stated,IBMsituation2008, the IBM cross-licensing matter wasworkedKiklissent an email to Mr."Hi Tim,outWilson.InI hope you are well and that theforyou.I'mreachingouttoyoubecause I would like to talk with you about what opportunitiesthere may beforusto work together . " Mr.Wilson respondedthe next day,Hi Mike, we are still actively working on theIBM situation. I hope that we will be able toresolve the situation without significant issuesarising, but that depends on how reasonable IBMremains. I suspect that at some point, we mayneed your help again - even if it is only duringthe agreement phase.I would be happy to speak with you aboutopportunities for working together. Nothing hasreally changed since the last time we spokeabout it, but I appreciate you thinking of me. Ihave been pretty limited in new things that Ican do here .92.On October 15,2008,Mr.Kiklis submitted a businessplan to Steve Zager, a superior within the intellectual propertypractice group at Akin Gump.stated,In the business plan,Mr.Kiklis"Other clients include . SAS" and "I have begun workingwith SAS on a pre-litigation matter that is adverse to IBM.expectsturnthis to heat up by theintoafullblownend of the year,litigationin'09.IfSASand this mayitdoes,thethe rate of 15,000.00 per month including a pro rata share for the month ofJuly 2007.23Case 5:10-cv-00101-H Document 325 Filed 02/06/15 Page 23 of 55
billingstoSASin'09couldreachwellinexcessof 1.5million."93.wouldAlthough ssthattestified hisplan,wasatohis"belief tenonethelesscurrentclientonOctoberSASIBM executed a15,2008.94.OnlicensingDecember gh Mr. Wilson did not advise Mr.theSAS/IBMcross-licensingcross-agreement") .Kiklis or Akin Gump thatagreementhadbeenexecuted,theevidence was not sufficient to warrant a finding that Mr. Wilsonattempted to conceal that fact from Mr. Kiklis or Akin ASand IBM resolved and completed the IBM cross-licensing matter.Akin96.licensingGump' /IBMIBM crossretentionagreement, concluded no later than December 23, 2008 because thematter was complete.97.OnFebruary9,2009,Mr.Kikliscomple
partner at Akin Gump for public policy representation, and Ms. Amita Poole were Ms. Hahn's primary contacts at Akin Gump during the course of its government affairs representation. 8. Upon request of Akin Gump and as a consequence to increasing work requests, SAS agreed to increase its monthly January 2007. 9.
