TechWeb

Financial Meltdown May Result In Tech Litigation

Oct 24, 2008 (10:10 AM EDT)

Read the Original Article at http://www.informationweek.com/news/showArticle.jhtml?articleID=211600485


The current financial and economic meltdown will blow another ill wind -- increased litigation costs -- according to a comprehensive survey of litigation trends released Friday.

The survey, by law firm Fulbright & Jaworski, predicts mixed results for U.S. high-technology companies.

While noting new lawsuits and regulatory proceedings fell in the past two years, Fulbright predicted an uptick in new legal actions and government probes over the next year based on the survey, which canvassed 358 in-house lawyers in the spring and summer.

"This year's survey appears to mark an inflection point for American business, between the end of a prolonged period of prosperity and the start of a period of economic challenge that is likely to fuel litigation over who is to blame and who should pay for the consequences," said Stephen C. Dillard, Fulbright's global litigation practice chair, in a statement.

"Given that we were polling in-house counsel on the cusp of that transition," Dillard continued, "it's no wonder that this year's findings highlight both the evident calm before the storm, as well as the sense that disputes are on the rise."

The survey found that technology and communications firms reported the fewest lawsuits of business sectors surveyed, with just 30% confronted with six or more litigation suits. By comparison, two-thirds of insurance companies faced at least six lawsuits and 55% of retailers faced the same number of lawsuits.

Technology and communications companies, however, paced all business sectors in IP disputes. Fulbright reported that litigation in high-tech firms was even more prevalent than personal-injury cases, which are high in all business segments. Some companies, like Qualcomm with its massive patent portfolio, seem to be perpetually involved in IP litigation, although the company settled its most onerous case -- with Nokia -- earlier this year.

A bright spot that appeared in this year's Fulbright survey was the decline in litigation and regulatory action involving stock options backdating. Observing that hundreds of companies, including many in the technology/communications sector, were charged with options irregularities, Fulbright said the survey showed that shareholder and government class actions involving stock options dropped sharply in the past year.

"Only 7% of U.S. companies," Fulbright said, "conducted an internal investigation related to backdating, compared with 26% that said they had been forced to consider an options review a year earlier."