Technology in 2014, Part 4: Is China Calling The Shots?
Read Part 3: IPOs Galore
Read Part 2: M&As To Make Or Break Companies
Read Part 1: Collaborations Rule The Day
Technology companies fought hard in court all through the year, defending themselves against patent infringements, illegal actions, dishonoring agreements, wage-fixing charges and regulatory pressure.
HP-Autonomy
In 2011, Hewlett-Packard Company (HPQ – Analyst Report) bought British company Autonomy, which makes software that can search through unstructured corporate data files with great accuracy, for $11 billion. But the following year, it wrote down $8.8 billion, claiming that Autonomy had inflated sales figures (through fake deals, subsidized transactions and misclassified sales), which it claimed made it impossible for H-P to realize the synergies and growth it expected at the time of sale. So it took the case to the SEC, FBI and Britain's Serious Fraud Office.
Investors smelled a rat and sued the company and insiders for breach of fiduciary duty. In the increasingly public display of antagonism that ensued, three possibilities came to light: first, that Autonomy had inflated sales figures and misrepresented the situation to H-P executives; second, that H-P insiders were hand in glove with Autonomy executives with both making a profit; and third, that Autonomy insiders weren't involved in any wrongdoing and H-P was spinning a story to reduce the amount it needed to pay the aggrieved shareholders.
The increasingly illustrious and influential Mike Lynch, who is now advising the British Parliament on technology and meeting with the Queen of England, is the former Autonomy CEO. Lynch has recently given a public statement to the effect that documents gleaned from inside H-P showed that its own investigations revealed no fraud but instead pointed to differences in accounting practices in the U.S. and U.K.
He reiterated that the write-down was necessitated by H-P's own miscalculations and mismanagement. H-P responded by saying he had a “fertile imagination” and would benefit from spending more time with the authorities.
In June, H-P proposed a settlement with the concerned shareholders according to which it agreed to pay the shareholder leading the lawsuit $25,000 and the two law firms representing the shareholders $18 million as retainer fees. It was also agreed that if the law firms agreed to lead H-P to a victory in its legal battle with Autonomy, they could earn up to $30 million from the proceeds thus generated.
The settlement was challenged by executives on the Autonomy side on clauses that limited their legal rights, and earlier this month, U.S. District Judge Charles Breyer agreed that it was too lenient on H-P executives while the huge payment to attorneys (in excess of the amount proposed to be paid to shareholders) aroused further suspicions.
apple-Samsung
Apple (AAPL – Analyst Report) and Samsung have spent many hours in court suing and counter-suing each other as the Korean phone maker rose to become the leading smartphone maker in the world. Samsung blatantly copied Apple technology and then came out with new alternatives every time Apple took it to court. It also brought fresh charges against Apple most of which were found to be without merit.
This year started on the same note, but in April, Apple finally asked for $2 billion in damages with respect to patents that were related to the Android OS instead of Samsung hardware. Samsung produced email messages in court that showed that Google (GOOGL – Analyst Report) was indemnifying it for a couple of the patents in question. With Google directly entering the picture, so did the consortium Rockstar. Apple was the leading player behind the creation of Rockstar, which also included Microsoft, Ericsson and Sony (SNE).
The group got together to buy the Nortel patents when Nortel went bankrupt with sole intention of preventing Android from taking share in smartphones. So it went about suing not just Samsung, but also other Android licensees like HTC and Huawei. But 2014 saw Google settling and Rockstar being wound down, so all could finally be well.
