EDD: Issues, Law, and Solutions: Razorsight Forks out $4.5M to Settle TEOCO Suit

Thursday, May 22, 2008

Razorsight Forks out $4.5M to Settle TEOCO Suit

Razorsight Corp. will pay $4.5 million to rival TEOCO Corp. to end a patent infringement lawsuit.

The settlement, announced yesterday, comes approximately nine months after TEOCO accused Razorsight and its founder of stealing intellectual property. Another, unnamed defendant was included in the suit. Razorsight said on Wednesday it chose to settle as “purely a business decision.”

“It would’ve cost us another $2.5 million to go all the way to trial, and although we were confident of our prospects at a trial, we really wanted to put this behind us,” said Razorsight CEO Charlie Thomas. “The settlement was an economic decision on behalf of senior management and our investors and eliminates a huge distraction.”

The $4.5 million, Thomas added, “amounts to a single customer contract for Razorsight.”

Razorsight said none of its customers has been, or will be, affected by the suit; executives also said the billing and OSS company isn’t licensing any technology from TEOCO, nor paying any royalties.

“We continue to have unfettered rights to sell our full portfolio of solutions in the marketplace,” Thomas said.

For its part, TEOCO said the federal court handling the case has barred Razorsight from further using TEOCO intellectual property; Razorsight must remove TEOCO’s technology from its systems by Sept. 1, 2008, TEOCO said. The settlement also includes a future audit.

"We have built our business and reputation on ethics and integrity in the marketplace,” said Atul Jain, TEOCO chairman and CEO. “We felt this action was necessary to protect the intellectual property we develop to serve our valued customers and we believe that justice has been served."

The suit arose after Sundeep Sanghavi left TEOCO to start Razorsight. At first, Thomas said, the two companies shared a “positive, joint marketing relationship” – that is, until they started competing in 2003. Then, in mid-2007, TEOCO said it was “made aware” that Razorsight was using its intellectual property. It filed suit in September and the discovery process revealed even more infringement than initially believed, TEOCO said in a statement; TEOCO filed more claims against Razorsight after that.

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Sedona Principles 2nd ed.

1. Electronically stored information is potentially discoverable under Fed. R. Civ. P. 34 or its state equivalents. Organizations must properly preserve electronically stored information that can reasonably be anticipated to be relevant to litigation.
2. When balancing the cost, burden, and need for electronically stored information, courts and parties should apply the proportionality standard embodied in Fed. R. Civ. P. 26(b)(2)(C) and its state equivalents, which require consideration of the technological feasibility and realistic costs of preserving, retrieving, reviewing, and producing electronically stored information, as well as the nature of the litigation and the amount in controversy.
3. Parties should confer early in discovery regarding the preservation and production of electronically stored information when these matters are at issue in the litigation and seek to agree on the scope of each party’s rights and responsibilities.
4. Discovery requests for electronically stored information should be as clear as possible, while responses and objections to discovery should disclose the scope and limits of the production.
5. The obligation to preserve electronically stored information requires reasonable and good faith efforts to retain information that may be relevant to pending or threatened litigation. However, it is unreasonable to expect parties to take every conceivable step to preserve all potentially relevant electronically stored information.
6. Responding parties are best situated to evaluate the procedures, methodologies, and technologies appropriate for preserving and producing their own electronically stored information.
7. The requesting party has the burden on a motion to compel to show that the responding party’s steps to preserve and produce relevant electronically stored information were inadequate.
8. The primary source of electronically stored information for production should be active data and information. Resort to disaster recovery backup tapes and other sources of electronically stored information that are not reasonably accessible requires the requesting party to demonstrate need and relevance that outweigh the costs and burdens of retrieving and processing the electronically stored information from such sources, including the disruption of business and information management activities.
9. Absent a showing of special need and relevance, a responding party should not be required to preserve, review, or produce deleted, shadowed, fragmented, or residual electronically stored information.
10. A responding party should follow reasonable procedures to protect privileges and objections in connection with the production of electronically stored information.
11. A responding party may satisfy its good faith obligation to preserve and produce relevant electronically stored information by using electronic tools and processes, such as data sampling, searching, or the use of selection criteria, to identify data reasonably likely to contain relevant information.
12. Absent party agreement or court order specifying the form or forms of production, production should be made in the form or forms in which the information is ordinarily maintained or in a reasonably usable form, taking into account the need to produce reasonably accessible metadata that will enable the receiving party to have the same ability to access, search, and display the information as the producing party where appropriate or necessary in light of the nature of the information and the needs of the case.
13. Absent a specific objection, party agreement or court order, the reasonable costs of retrieving and reviewing electronically stored information should be borne by the responding party, unless the information sought is not reasonably available to the responding party in the ordinary course of business. If the information sought is not reasonably available to the responding party in the ordinary course of business, then, absent special circumstances, the costs of retrieving and reviewing such electronic information may be shared by or shifted to the requesting party.
14. Sanctions, including spoliation ﬁndings, should be considered by the court only if it finds that there was a clear duty to preserve, a culpable failure to preserve and produce relevant electronically stored information, and a reasonable probability that the loss of the evidence has materially prejudiced the adverse party.
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