(Reuters) - A New York state judge has blocked a legacy firm of Hunton Andrews Kurth from recovering more than $9.3 million from a former client that invented a system for internet music and film downloads.
The 31-page ruling from New York County Supreme Justice Andrea Masley harkens back to an era when now-defunct Kenyon & Kenyon was still a functioning intellectual property firm, and plucking music and film from the internet was still a novelty.
The dispute between Kenyon, its former client SightSound Technologies and the General Electric Co dates back to 1999, when Kenyon began representing SightSound in IP litigation. SightSound racked up $1.77 million in unpaid attorney fees, leading the company to strike a deal with Kenyon, according to Masley's opinion Monday.
Under their agreement, Kenyon retained a security interest in SightSound's IP, requiring the firm's sign-off to transfer the patents. In 2004, SightSound sued Napster for patent infringement, but the lawsuit was stalled for years at the U.S. Patent and Trademark Office.
SightSound was running out of money to continue the Napster fight, the decision said. As a result, it struck a deal with GE in 2005 with Kenyon's blessing to ensure GE would fund SightSound's patent litigation efforts.
The Napster litigation didn't restart until 2011, and the companies struck a $3.1 million settlement a year later. SightSound informed Kenyon that the settlement proceeds would be channeled to GE, but the law firm didn't raise any objections until 16 months later.
Kenyon & Kenyon sued SightSound, GE and DMT Licensing LLC, the GE-owned entity that funded SightSound's Napster litigation, in 2014, claiming its unpaid fees had grown to $9.3 million.
The 16-month gap between the notification and Kenyon's payment demand ultimately proved fatal to the firm's lawsuit.
"The evidence surrounding Kenyon's conduct raises an unsettling question: if a business believes it should be paid $3.1 million, and is informed that it will not be paid, why wait 16 months to demand payment?" Masley wrote.
Masley found that Kenyon did not act for 16 months because it believed GE was entitled to be repaid first. She cited Kenyon's internal communications about the Napster settlement, including one PowerPoint presentation she said was "damning." That presentation stated that the first settlement payment would go to GE, not Kenyon, Masley wrote.
Even though Kenyon collapsed and was partially absorbed by Andrews & Kurth in 2016, the litigation, which began in 2014, has continued under its name. In 2018, Andrews Kurth Kenyon merged with Hunton & Williams to become Hunton Andrews Kurth.
Attorneys for Kenyon and the defendants did not respond to requests for comment.
The case is Kenyon & Kenyon LLP v. SightSound Technologies LLC, New York County Supreme Court, Index No. 650795/2014.
For Kenyon & Kenyon: Louis DeLucia of Ice Miller
For SightSound Technologies Holdings LLC: Howard Reiss and Matthew Sheppe of Reiss Sheppe
For SightSound Technologies LLC, DMT Licensing LLC and GE: Joseph Clasen and Brian Wheelin of Robinson & Cole
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